Satisfaction note u/s 153C should be prepared for each AY mentioning documents seized

Satisfaction note u/s 153C should be prepared for each Assessment Year mentioning the documents seized in respect of each AY.

In a recent judgment, ITAT Bangalore has held that the satisfaction note should be prepared for each Assessment Year mentioning the documents seized in respect of each A.Y. in order to initiate proceedings u/s 153C of the Income Tax Act, 1961.

ABCAUS Case Law Citation:
5065 (2026) (03) abcaus.in ITAT

In The instant case the assessee raised an additional legal ground that whether the Assessing Officer (AO) can issue a notice u/s 153C of the Act based on the common satisfaction note recorded for all the Assessment Years comprised in the block period.

The appellant assessee was a trustee of a Charitable Trust.  The assessee had not filed his return of income.  A search and seizure was carried u/s 132 of the Act on the Charitable Trust.  Simultaneously, search was also conducted in the residential premises of the assessee and incriminating evidences were found and seized. 

The materials seized were related to the assessee and therefore the AO of the assessee after satisfying himself that the documents were related to the assessee, issued notice u/s 153C of the Act. 

The AO made several additions in the assessment which were confirmed by the CIT(A).

Before the Tribunal, assessee raised an additional ground that the common satisfaction note recorded by the AO for issuing the notice u/s. 153C of the Act was not correct in view of the judgment of the Hon’ble Jurisdictional High Court which was confirmed by the Hon’ble Supreme Court by dismissing the SLP filed by the revenue.

The Tribunal observed that the AO had not given any separate satisfaction note for each of the A.Y. based on the materials seized.  The only documents seized was the agreement and the major payments mentioned in the agreement were paid through the banking channel and only a sum of Rs. 6,00,000/- was paid by cash for which the assessee was not able to give the source and therefore the AO had treated the said amount as unexplained money u/s 69 of the Act in respect of one AY.  Apart from the said documents, no other incriminating materials / documents were seized by the authorities at the time of search. 

The Tribunal opined that when there was no incriminating materials seized to make the assessment u/s. 153C of the Act, the AO cannot make the assessment u/s. 153C of the Act.  Further, the satisfaction note should be prepared for each A.Y. mentioning the documents seized in respect of each A.Y. in order to initiate proceedings u/s. 153C of the Act.  The AO without following the procedure had generally issued a satisfaction note for all the A.Ys. by relying on a single document which related to one AY which was also not an incriminating material.  

The Tribunal further noted that the Division Bench of the Hon’ble Jurisdictional High Court had held that satisfaction note is required to be recorded under Section 153C of the IT Act for each Assessment Year and a consolidated satisfaction note recorded for different Assessment Years vitiates the entire assessment proceedings.

The Tribunal further noted that the Division Bench judgment was challenged by the revenue before the Hon’ble Supreme Court and the Hon’ble Supreme Court had also affirmed the Division Bench judgment.  Therefore as on today, the law has been laid down by the Hon’ble Jurisdictional High Court that separate satisfaction note is required to be recorded u/s. 153C of the Act for each A.Y.  The said view was also upheld by the Hon’ble Supreme Court.  

The Tribunal further observed that the judgment of the Hon’ble Delhi High Court relied upon by the Revenue can be distinguished on the ground that in the said judgment, the Hon’ble Delhi High Court had held that the a composite/ consolidated satisfaction note would suffice provided it embodies details of materials covered in course of search and pertaining to A.Ys. forming part of block as a whole. Whereas, the facts involved in the present appeal, were that no material or annexure in respect of all the A.Ys. were seized expect a document which was also not in the nature of incriminating one.

Accordingly, the ITAT set aside the assessment orders as well as the appellate orders for all the assessment years.

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