Recording consolidated satisfaction note for various assessment years is fatal to the very assumption of jurisdiction under section 153C – ITAT
In a recent judgment, ITAT Delhi has held that recording consolidated satisfaction note for various assessment years instead of recording independent and individual satisfaction note for each year is fatal to the very assumption of jurisdiction under section 153C of the Income Tax Act.
ABCAUS Case Law Citation:
4864 (2025) (11) abcaus.in HC
In the instant case, the assessee had challenged the order passed by the CIT(A) confirming order of assessment passed u/s 153C r.w.s. 143(3) of the Income-tax Act, 1961 (the Act).
The Tribunal observed that Assessing Officer (AO) had recorded Consolidated satisfaction note for all seven assessment years in one go instead of recording independent and individual satisfaction note for each assessment year which is the requirement of the law.
Therefore, the moot question before the Tribunal was as to whether recording of consolidated satisfaction note for various assessment years and assuming jurisdiction under section 153C of the Act would be fatal to the very assumption of jurisdiction under section 153C of the Act or not?
The Tribunal observed that this issue is no longer res integra in view of the decision of the Hon’ble Karnataka High Court wherein it was held that satisfaction note is required to be recorded under section 153C of the Act for each Assessment Year and a consolidated satisfaction note recorded for different Assessment Years, vitiates the entire assessment proceedings. The Hon’ble High Court had dismissed the Revenue’s appeal being without any substance for seeking intervention. The Tribunal further observed that the Special Leave Petition (SLP) preferred by the revenue against this order had been dismissed by the Hon’ble Supreme Court.
However, the Reveue relied upon the judgment of the Hon’ble Jurisdictional High Court in which their Lordships held that the provision only requires the AO to be satisfied that the material collated and handed over is likely to have an impact on the total income for the relevant AY or AYs’. While an assessment would necessarily have to be made in respect of each of the relevant AY or AYs’, Section 153A or 153C do not mandate separate Satisfaction Notes being drawn for each assessment year. The notice could be composite and based on a common satisfaction note which encapsulates the incriminating material pertaining to the AYs’ in question, it is only returns which must and mandatorily be filed separately.
Placing reliance on the above judgment, the Revenue argued that recording of consolidated satisfaction note for various assessment years put together would not be fatal to the assumption of jurisdiction and framing of assessment under section 153C of the Act.
However, the Tribunal noted that in a subsequent judgment, the Hon’ble Jurisdictional High Court (judges of equal strength) had passed an order in favour of the assessee on the very same issue.
In the said decision, the Hon’ble High Court opined that merely because Section 153C confers jurisdiction upon the AO to commence an exercise of assessment or reassessment for the block of years which are mentioned in that provision, the same alone would not be sufficient to justify steps in that direction being taken, unless the incriminating material so found is likely to have an impact on the total income of a particular AY forming part of the six AYs. Unless the AO is satisfied that the material gathered could potentially impact the determination of total income, it would be unjustified in mechanically reopening or assessing all over again all the AYs’.
The Hon’ble High Court observed that unless the material gathered and recovered is found to have relevancy to the AY which is sought to be subjected to action under Section 153C, it would be legally impermissible for the respondents to invoke those provisions. Consequently, the AO would be bound to ascertain and identify the year to which the material recovered relates. The years which could be then subjected to action under Section 153C would have to necessarily be those in respect of which the assessment is likely to be influenced or impacted by the material discovered. Section 153C neither mandates nor envisages a mechanical or an en blanc exercise of power.
In the said case, the Hon’ble High Court observed that the Revenue had erroneously proceeded on the assumption that the moment any material is recovered in the course of a search or on the basis of a requisition made, they become empowered in law to assess or reassess all the six AYs’ years immediately preceding the assessment correlatable to the search year or the “relevant assessment year” as defined in terms of Explanation 1 of Section 153A. The said approach is clearly unsustainable and contrary to the consistent line taken in several decisions.
The Hon’ble High Court opined that abatement of the six AYs’ or the “relevant assessment year” under Section 153C would follow the formation of opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs’ that may form part of the block of ten AYs’. Abatement would be triggered by the formation of that opinion rather than the other way around.
Accordingly, in the light of decisions of Hon’ble Supreme Court and following the decision of the Hon’ble Jurisdictional High Court and the decision of the Hon’ble Karnataka High Court the Tribunal held that recording of consolidated satisfaction note for various assessment years by the Learned AO would become fatal to the very assumption of jurisdiction and consequential framing of assessment under section 153C of the Act for all the assessment years
As a result, all the assessments framed under section 153C of the Act were quashed.Â
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