Case Law Details
Bhartiya International Ltd. Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, allowed appeals filed for Assessment Years 2018-19 and 2019-20 challenging assessments framed under Section 153C read with Section 143(3) of the Income Tax Act. The assessees argued that the assessments were invalid because the Assessing Officer had failed to record proper satisfaction as required under Section 153C.
The dispute arose after a search under Section 132 was conducted in the cases of M/s K.K. Spun Group on 23.03.2021. Following the search, the departmental authorities recorded satisfaction stating that the seized documentary evidence “belonged to” the assessees, who were treated as third parties for proceedings under Section 153C.
The assessees contended that after the amendment to Section 153C(1) by the Finance Act, 2015 with effect from 01.06.2015, documents seized during search could not merely be described as “belonging to” a third party. It was argued that the Assessing Officer was required to record satisfaction that the seized documents either “pertained to” or “related to” the third party.
The Tribunal relied on its earlier decisions, including Narender Nath v. DCIT and Prashant Premchand Bafana v. ACIT, where similar issues had been decided in favour of assessees. ITAT observed that Section 153C distinguishes between assets such as money, bullion or jewellery “belonging to” a person and documents or information that should “pertain to” or “relate to” such person. The Tribunal held that the Assessing Officer failed to properly record satisfaction in accordance with the amended statutory requirement.
Finding no distinguishing facts or legal exception in the Revenue’s case, the Tribunal adopted judicial consistency and quashed all three assessments framed under Section 153C. Consequently, all other issues raised in the appeals were treated as academic and the appeals were allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
These twin assessees M/s Bhartiya International Ltd. and M/s Avni Polymers Pvt. Ltd. have filed their respective three appeals i.e. ITA Nos. 5413, 5414 & 5415/Del/2025 for Assessment Years 2018-19 & 2019-20, arising against the CIT(A)-23, Delhi’s DIN & order Nos. ITBA/APL/S/250/2025-26/1078363618(1), 1078449587(1) & 1078450327(1) dated 10.07.2025 & 14.07.2025, in proceedings u/s 153C of the Income Tax Act, 1961 (in short “the Act”), respectively.
2. Heard both these assessees as well as the department at length. Case files perused.
3. It transpires during the course of hearing at the outset that both these assessee’s raise their first and foremost legal ground/argument challenging validity of the three impugned section 153C r.w.s. 143(3) assessments itself for want of a proper satisfaction recorded by the learned Assessing Officer. We make it clear that there is no dispute between the parties that the learned departmental authorities had infact carried out the relevant section 132 search in question in relation to M/s K.K. Spun Group cases on 23.03.2021. There is further no denial to the fact that the learned assessing authority(ies) thereafter recorded their identical section 153C satisfaction that the corresponding documentary evidence found/seized during the course of the above search infact “belonged to” both these assessees so as to proceed against them.
4. It is at this stage that the learned counsel vehemently submits that going by the statutory amendment in section 153C(1) of the Act vide Finance Act 2015 w.e.f. 01.06.2015, no such document could be held as “belonging” to a third party whereas the Revenue seeks to justify the same on the ground that it is not the grammatical expressions used in section 153C satisfaction but overall facts and circumstances which ought to be considered whilst deciding the instant legal issue.
5. We have given our thoughtful consideration to the assessee’s and the Revenue’s respective vehement submissions. We find no reason to sustain the impugned assessments in light of the tribunal’s earlier order in Narender Nath Vs. DCIT, ITA No. 4990/Del/2025 decided on 08.01.2026; reading as under:
“3. We advert to the assessee’s first and foremost substantive ground/legal arguments herein that both the learned lower authorities have erred in law and on facts in framing the impugned section 153C r.w.s. 143(3) assessment dated 30.03.2024; in furtherance to the searched party’s Assessing Officer’s satisfaction dated 25.03.2023 and his assessing authority on the very date, as the case may be, which has been wrongly upheld in the lower appellate discussion.
4. That being the case, learned CIT-DR vehemently argues that the impugned twin satisfactions herein had been properly recorded by the Assessing Officer(s); be it that of the searched assessee or appellant third party herein. Her case accordingly is that we ought to uphold the same in very terms.
5. We have given our thoughtful consideration to both the party’s foregoing rival pleadings. There is hardly any dispute that the learned departmental authorities had carried out the impugned search on 23.03.2021 in M/s KK Spun Group. And that the said searched party’s learned Assessing Officer recorded his section 153C satisfaction dated 25.02.2023 for proceeding against assessee/appellant before us. The said learned Assessing Officer appears to have recorded that the corresponding seized document during the course of search “belonged to” the assessee/appellant who happens to be the third party u/s 153C of the Act.
6. Faced with this situation, the Revenue could once again not dispute that section 153C(1)(a) stipulates the category of the seized material as “any money, bullion, jewellery .. …”which could be held as belonging to a third person and such documents etc. could only be treated as pertaining to or in formation therein as relating to such a person. Meaning thereby that the learned Assessing Officer has not properly recorded his satisfaction that the impugned seized documents either pertained to or related to the assessee which forms a conditioned precedent before proceedings him/third person. This tribunal’s recent decision in Prashant Premchand Bafana Vs. ACIT IT(SS)A No. 119 & 120/Pun/2022 decided on 08.04.2025 has already settled the very issue in the assessee’s favour and against the department. We thus conclude in this backdrop that the impugned assessment dated 30 .03.2024deserves to be quashed since based on an imp roper section 153C satisfaction. Ordered accordingly.”
6. We adopt judicial consistency to quash all these three impugned section 153C assessments in very terms for want of any exception pinpointed at the Revenue’s behest in law or on facts, as the case may be. Ordered accordingly.
7. All other remaining pleadings between the parties stand rendered academic.
8. These twin assessees three appeals ITA No. 5413, 5414 & 5415/Del/2025 are allowed. A copy of this common order be placed in the respective case files.
Order Pronounced in the Open Court on 22/04/2026.
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