Ratna Sagar Pvt. Ltd. Vs DCIT (ITAT Delhi)
In these two appeals filed by Ratna Sagar Pvt. Ltd. for AYs 2018-19 & 2019-20, Tribunal examined a pure jurisdictional challenge to assessments framed u/s 153C. Assessee contended that no Satisfaction Note was recorded by the AO of the searched person, which is a mandatory jurisdictional pre-condition for triggering proceedings against “other person” u/s 153C. Assessee relied on an RTI reply dated 28.01.2025 where AO categorically stated that the satisfaction recorded by AO of searched person “is not available with this office”. Assessee therefore argued that initiation of 153C proceedings was void ab initio following binding judicial precedents.
Assessee strongly relied on the judgment of Karnataka High Court in PCIT Vs G. Laxmi Aruna (150 taxmann.com 107) wherein it was held that recording of satisfaction by AO of searched person is a sine-qua-non before any record can be transmitted to AO of other person. This view has attained finality as the SLP filed by Revenue was dismissed by Supreme Court (159 taxmann.com 183). Based on this, Assessee maintained that lack of such satisfaction vitiates jurisdiction itself & the assessment orders deserve to be quashed. Assessee also raised several additional legal grounds including invalidity of consolidated satisfaction note for multiple years, lack of incriminating material, absence of certificate u/s 65B relating to WhatsApp chats, non-supply of appraisal report & statements, and incorrect invocation of s.69A for alleged cash addition of ₹6,34,500/-.
Revenue on the other hand supported the orders & relied on the Delhi High Court ruling in Indian Youth Congress (463 ITR 431).
Tribunal, after examining pleadings, Paper Book & the RTI reply, held that the foundation of 153C proceedings—i.e., satisfaction by AO of searched person—was missing. Tribunal observed that the Karnataka High Court judgment in G. Laxmi Aruna (affirmed by Supreme Court) squarely applies. Since AO of the searched person did not record any Satisfaction Note, jurisdiction to proceed against Assessee u/s 153C was absent. Tribunal therefore quashed the entire assessment for AY 2018-19 as being bad in law & without jurisdiction.
Since the issue was purely jurisdictional, Tribunal refrained from adjudicating the remaining technical grounds. For AY 2019-20, Tribunal applied the same reasoning mutatis mutandis & quashed that assessment as well. Accordingly, both appeals were partly allowed to the extent of quashing the assessments.
FULL TEXT OF THE ORDER OF ITAT DELHI
These two appeals are filed by the Assessee against different orders of the Ld. CIT(Appeals), Delhi-23 dated 20.12.2024 for the assessment years 2018-19 and 2019-20. Assessee has raised the following common grounds of appeal for the assessment years 2018-19 & 2019-20 except for the figures:
1. “That under the facts and circumstances, SAT Note being fatally defective including single consolidate SAT Note for A.Y.14-15 to A.Y.20-21, makes the impugned proceedings U/s.l53C illegal and unsustainable in law.
2. That under the facts and circumstances, the approval of Addl. CIT U/ S.153D is not as per law, hence the asstt. order is not sustainable.
3. That under the facts and circumstances, in the absence of mandatory certificate U/s 65B of the Indian Evidence Act, 1872 and further in the absence of providing the same before using the material allegedly taken out from electronic devices, the whatsapp chat taken from the mobile of Sh. Niraj Kr. cannot be used for impugned asstt. proceedings.
4. That under the facts and circumstances, in the absence of providing the relevant material used for asstt. adversely which also includes appraisal report and statements of various persons recorded U/s132(4) etc. etc., no such material can be used for taking any adverse view in impugned asstt. proceedings.
5. That under the facts and circumstances, the adverse inference taken from 02 Pgs. of whatsapp chat of Sh. Niraj Kr. and consequential addition of Rs.6,34,500/- U/s.69A is illegal and unsustainable in law as well as on merits.
6. That under the facts and circumstances, Sec.69A is not applicable for addition of Rs.6,34,500/-.”
2. Ld. Counsel for the assessee, at the outset, submits that no satisfaction note recorded by the Assessing Officer in the case of the searched person and therefore the AO lacks jurisdiction to complete the assessment in the case of the assessee who is the other person wherein assessment was completed u/s 153C of the Act. Ld. Counsel for the assessee invited our attention to page 4 of the Paper Book which is the order u/s 7 of RTI Act passed by the Assessing Officer in response to query raised by the assessee seeking copy of satisfaction note recorded in the case of the person searched, the AO stated in reply that copy of satisfaction note recorded by AO of searched person is not available with his office. Therefore, Ld. Counsel for the assessee submits that in the absence of satisfaction note recorded in the case of the searched person the AO has no jurisdiction to complete the assessment in the case of the assessee u/s 153C of the Act and reliance was placed on the decision of the Hon’ble Karnataka High Court in the case of Pr. CIT vs. Smt. G. Laxmi Aruna (2023) (150 taxmann.com 107). Ld. Counsel further submitted that the SLP filed by the Revenue against this judgment of the Hon’ble Karnataka High Court was also dismissed by the Hon’ble Supreme Court in PCIT vs. G. Laxmi Aruna (2024) (159 taxmann.com 183) (SC).
