Satisfaction Note u/s 153C – term immediate cannot be extended to unreasonable delay

Satisfaction Note u/s 153C – term “immediate” cannot be extended to defeats the purpose of cost effective, efficient and expeditious completion of search assessments.

In a recent judgment the Hon’ble Supreme Court dismissed the SLP of the Revenue against the judgment of the High Court holding that the term “immediate” used for preparation of satisfaction note u/s 153C cannot be extended to defeats the purpose of cost effective, efficient and expeditious completion of search assessments

ABCAUS Case Law Citation:
5099 (2026) (04) abacus.in SC

Important Case Laws relied upon by Parties:
Commissioner of Income-Tax vs. Calcutta Knitwears

In the instant case, the Revenue had challenged the judgment of the Hon’ble High Court holding that notice issued under Section 153C of the Income Tax Act, 1961 (“the Act”) were time barred.

A search action under Section 132 of the Act was carried in the case of a broker and financier group of assessees, during which the residential premises of a third party were also covered. Certain incriminating material, including WhatsApp chat images, was found and seized during the course of the said search.

A notice u/s 153C was issued by the AO calling upon the petitioner to furnish a return of income. The AO of the respondent assessee also supplied copies of the “satisfaction note” recorded and the satisfaction not recorded by the Assessing Officer of the “searched person”, for the purpose of invoking jurisdiction under Section 153C of the Act.

As per the satisfaction notes jurisdiction under Section 153C of the Act had been invoked primarily on the ground that the petitioner allegedly made an “on-money” payment for the purchase of a property.

The assessee filed a Writ Petition objecting to the initiation of proceedings under Section 153C of the Act for the year under consideration.

It was submitted that the satisfaction note for initiating proceedings under Section 153C of the Act was recorded nearly four years by the Assessing Officer after the search and almost two years after the assessment of the searched person had been completed. It was contended that there was an inordinate delay in the initiation of proceedings under Section 153C of the Act, and hence the impugned Notice was required to be quashed.

The Hon’ble High Court observed that proceedings under Section 153C of the Act had been initiated almost four years after the search and almost two years after framing of assessment of the searched person.

The Hon’ble High Court observed that the Hon’ble Supreme Court while examining the provisions of Section 158BC of the Act (now Section 153A of the Act), has held that a satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the other Assessing Officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act, (b) along with the assessment proceedings under Section 158BC of the Act; and (c) immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person.

The Hon’ble High Court further observed that in view of the aforesaid decision of the Supreme Court, the CBDT issued Circular No. 24/2015 dated 31.12.2015. In the said Circular, the Board accepted the guidelines of the Hon’ble Supreme Court and confirmed that these would also apply to proceedings u/s 153C of the Act, for the purposes of assessment of income of other than the searched person. It was also directed that pending litigation with regard to recording of satisfaction note under section 158BD 1153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.

The Hon’ble High Court noted that in the instant case, there had been a delay of 22 months in recording the satisfaction, which ran contrary to the decision of Hon’ble Supreme Court as provision ‘(c)’ of Circular No.24/2015 dated 31.12.2015, which uses the expression “immediately after the assessment procedure is completed”.

The Hon’ble High Court noted the decision of the Coordinate Bench wherein placing reliance on the judgment of the Apex Court, it was held that satisfaction recorded after 09 months could not be said to be immediate action and hence, the Coordinate Bench of the Court set aside the notices issued under Section 158BD of the Act.

The Hon’ble High Court held that the expression “immediate”, though is impossible to quantify in period, however, the same cannot be extended to such an extent which defeats the purpose of cost effective, efficient and expeditious completion of search assessments. The intention of using such term is to reduce and avoid long drawn proceedings and to bring certainty to the assessment.

In view of the above, the Hon’ble High Court quashed and set aside the notices issued under Section 153C of the Act.

Not satisfied with the judgment of the High Court, the Department challenged it before the Hon’ble Supreme Court by way of filing a Special Leave Petition. However, the Apex Court dismissed the SLP with the following observations,

“Having heard the learned counsel appearing for the petitioner and having gone through the materials available on record, we do not find any good ground to interfere with the impugned order passed by the High Court. The Special Leave Petition is, accordingly, dismissed”.

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