Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(ITAT) 3513

INCOME TAX APPELLATE TRIBUNAL (CHENNAI BENCH)
Shri S.S. Viswanethra Ravi, J, Shri S. R. Raghunatha, AM
Smt. Prema Devi, L/R. of Late. Shri. Dharmichand Jain – Appellant
Versus
The Deputy Commissioner of Income Tax, Central Circle 2(1), Chennai – Respondent
Income Tax Appeal/ITA Nos.: 563 to 567/Chny/2023

Advocates:
For the Appellants/Petitioners: Shri. D. Anand
For the Respondents: Ms. E. Pavuna Sundari, C.I.T.

The absence of a valid satisfaction note under Section 153C renders assessments void and time-barred, as established by the Supreme Court's interpretation of jurisdictional requirements.

Headnote:(A) Income Tax Act, 1961 - Section 153C - Jurisdictional requirements for assessment of income of a person other than the person searched - The Tribunal quashed assessments for AYs 2008-09 to 2012-13 due to lack of valid satisfaction note and because the assessments were barred by limitation. The satisfaction note recorded was deemed insufficient and not in compliance with statutory requirements. (Paras 39, 62)

(B) Legal Principles - The recording of satisfaction is a jurisdictional prerequisite for invoking Section 153C; any assessment made beyond the six-year limit from the date of satisfaction is illegal. (Paras 40, 62)

Facts of the case:
The appellant, represented by his legal heir, challenged the assessment orders made under Section 153C for several assessment years, asserting that the assessments were based on insufficient evidence and barred by limitation. The assessments were initiated following a search and seizure operation that yielded a diary, alleged to be incriminating.

Findings of Court:
The Tribunal found that the satisfaction note was not adequately substantiated and did not fulfill the necessary legal requirements, leading to the conclusion that the assessments were void ab initio.

Issues: The main issues included whether the assessments were barred by limitation and if there was a valid recording of satisfaction as required under Section 153C.

Ratio Decidendi: The Tribunal held that the assessments were invalid due to lack of proper jurisdictional satisfaction and that the assessments for AY 2008-09 were time-barred.

Result: Appeals allowed.

Table of Content
1. appeals filed against common order. (Para 1 , 2)
2. background of the assessee's business and family. (Para 3 , 4 , 5)
3. details of the search and seizure operation. (Para 6 , 7 , 8)
4. jurisdictional grounds raised by the assessee. (Para 10 , 11 , 12 , 13)
5. limitations and requirements for invoking section 153c. (Para 14 , 15 , 16 , 17 , 18)
6. lack of proper recording of satisfaction. (Para 19 , 20 , 21 , 22 , 23 , 24)
7. court's analysis and observations on jurisdiction. (Para 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62)
8. final conclusion on the appeals. (Para 63)

आदेश / ORDER

PER S. R. RAGHUNATHA, AM:

These five appeals filed by the assessee are directed against the common order passed by the learned Commissioner of Income Tax (Appeals)-19, Chennai, dated 14.02.2023 and pertains to assessment years 2008-09 to 2012-13. Since, facts are identical and issues are common, for the sake of convenience, the appeals filed by the assessee are being heard together and disposed off, by this consolidated order.

2. The assessee has raised the following common grounds of appeal:

1. The order of the learned Commissioner of lncome Tax (Appeals)-19, is wrong, illegal and is opposed to law.

2. The Ld. Commissioner of Income Tax (Appeals)-19 erred in upholding the order of assessment which is based only on suspicion and surmise and not on the basis of any material evidence.

3. The learned CIT(A) ought to have seen that the assessment order is hopelessly barred by limitation.

4. The Ld. Commissioner of Income Tax ought to have seen that apart from the Diary which was seized from the premises of the appellants son there is no other documentary evidence such as pronotes, books of account or mortgage document were seized which could lead to a conclusion that the appellant was engaged in money lending activity. The ld. Commissioner failed to see that due to frailing health which ultimately leads to the appellant’s death, the appellant was not actively engaged in any business more so the alleged money lending activity.

5. The learned CIT(A) ought to have seen that the addition cannot be made purely on the basis of statement which was ultimately retracted. The learned CIT(A) ought to have seen that proceedings under section 153C can be initiated only after objective satisfaction is reached by the assessing officer of the searched person and connected person on the basis of seized material. In the instant case since the diary is the only seized material no objective satisfaction could be reached by the AO which would vest jurisdiction to invoke 153C proceedings.

6. The learned CIT(A) ought to have seen that an authority granting approval for proceedings under section 153C under section 153D ought to have applied his mind and ought not to have granted approval in mechanical manner. In the instant case there is no such objective application of mind and therefore the said assessment is invalid and bad in Law.

7. The learned CIT(A) erred in confirming the addition of Rs.2,08,27,225/- made by the assessing officer under the head unexplained investment in money lending activity. The said addition is made only on the basis of jottings made in the Diary and is merely based on suspicion and surmise lacking any evidentiary value. The learned CIT(A) failed to see that it is a settled law (Common Cause and Jian Diary case) that addition cannot be made merely based on entries made in the diary in the absence of any corroborative material to support such entries.

8. The learned CIT(A) ought to have seen that assuming without conceding that the seized diary is to be taken as incriminating material the learned AO assessing officer ought to have taken only amounts that indicate to have lent money as unexplained investment.

9. The learned CIT(A) failed to see that the appellant does not have resources to lend such huge amounts alleged to have been lent by the appellant.

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