ITAT Delhi Quashes Section 153C Assessment as Satisfaction Recorded After April 2021

Waves Data Management Private Limited Vs DCIT (ITAT Delhi)

Section 153C Assessment Quashed: Satisfaction Recorded After 1 April 2021 Proves Decisive
Delhi ITAT rules on the transition from search assessments to reassessment

In Waves Data Management Private Limited v. DCIT, ITA No. 4556/Del/2026, decided on 13 November 2026, the Delhi Bench of the Income Tax Appellate Tribunal quashed an assessment framed under section 153C. The decisive circumstance was that the Assessing Officer of the non-searched assessee had recorded satisfaction on 1 August 2022, after the transition introduced by the Finance Act, 2021.

The Tribunal accepted the assessee’s contention that proceedings ought to have been undertaken under the reassessment framework of sections 147/148A, instead of section 153C. Having allowed the appeal on this jurisdictional issue, it expressly declined to examine the additions on merits.

Search in Alankit Group led to proceedings against the assessee

The dispute concerned Assessment Year 2014-15. A search and seizure operation under section 132 was conducted in the case of the Alankit Group on 18 October 2019. Certain entries and documentary evidence concerning the assessee were reportedly found during that search.

The Assessing Officer of the searched person recorded a satisfaction note on 23 June 2022 and transferred the relevant information and documents to the Assessing Officer having jurisdiction over the assessee. Thereafter, the assessee’s Assessing Officer recorded satisfaction on 1 August 2022.

An assessment order was subsequently passed under section 153C on 20 February 2024. The Commissioner (Appeals), by order dated 23 March 2026, sustained the assessment, prompting the assessee to approach the Tribunal.

Additions of ₹72.10 lakh were challenged

The assessment included an addition of ₹70 lakh under section 69A, concerning an alleged bogus transaction involving Diwakar Commercial Private Limited.

A further addition of ₹2.10 lakh under section 69C represented alleged commission calculated at 3% of the disputed transaction.

The assessee contested both additions and challenged the jurisdiction assumed under section 153C. Its grounds also questioned the existence of incriminating material supporting the additions, the recording of proper satisfaction, compliance with the notice requirements under section 143(2), and reliance upon third-party statements without an opportunity for cross-examination.

These were grounds raised by the assessee. The Tribunal did not adjudicate them individually, because the principal jurisdictional objection was sufficient to dispose of the appeal.

Why the date of satisfaction became crucial

The assessee argued that, following the amendment effective from 1 April 2021, the applicable procedure had changed. According to its submission, where the relevant satisfaction concerning a non-searched person was recorded after that date, assessment should proceed under the reassessment provisions rather than section 153C.

The chronology was therefore central. Although the original search occurred in October 2019, both satisfaction notes were recorded in 2022. The assessee maintained that the earlier search date did not justify invoking section 153C in its circumstances.

The statutory background requires careful reading. Section 153C(3), inserted by the Finance Act, 2021, excludes the section’s application in relation to searches initiated or requisitions made on or after 1 April 2021. Its wording refers to the search or requisition date; the significance attributed to the later satisfaction date in a non-searched person’s case is an issue of interpretation. 153C
Tribunal accepted the jurisdictional objection

The Tribunal considered the findings of the lower authorities and the coordinate Bench decisions referred to in the assessee’s written synopsis.

It concluded that the Assessing Officer should have proceeded under sections 147/148A, instead of section 153C. Since the assessment had been framed under section 153C, the Tribunal held that it was not in accordance with the amended provisions and deserved to be quashed.

The assessee’s appeal was accordingly allowed.

The operative distinction is important: the assessment was quashed for the jurisdictional defect identified by the Tribunal. The order does not contain a finding that the transaction was genuine, that commission was never paid, or that the explanations supporting the disputed amounts stood established.

Merits remained undecided

After accepting the legal objection, the Tribunal stated that the remaining issues had become academic and did not require findings.

Consequently, this decision should not be cited as a ruling on the substantive requirements of section 69A or section 69C, or as an independent determination concerning third-party statements and cross-examination. Its relevance lies in the choice of statutory procedure during the transition between assessment regimes.

Author’s Comments

This decision demonstrates why jurisdiction must be examined before the merits of an addition. In cases involving material seized from another person, the original search date alone may not complete the analysis. The dates of recording satisfaction, transferring documents, receiving material and issuing notices require close scrutiny.

At the same time, the ruling should be presented with precision. The Tribunal’s reasoning is brief, and its operative discussion does not identify the coordinate Bench authorities individually. It would therefore be excessive to describe this order as conclusively settling every case involving satisfaction recorded after 1 April 2021.

The practical lesson is clear: a disputed addition cannot sustain an assessment framed through a procedure held to be legally inapplicable. The applicable statutory provisions and binding judicial precedents must nevertheless be examined against the chronology of each case.

Cases Discussed

• PCIT Vs Ojus Medicare (P.) Ltd., [2024] 465 ITR 101 (Delhi High Court) — Relied on in the assessee’s synopsis for the deemed date applicable to the other person.
• Shri Harigovind Vs Assistant Commissioner of Income-tax, (2026) 485 ITR 509 (Madras High Court), decided 28 October 2025 — Section 153C transition and deemed search date for the other person.
• Assistant Commissioner of Income-tax Vs Rajendra Kumar, ITA No. 4811/Del/2025, decided 5 June 2026 (ITAT Delhi) — Cited in the assessee’s written synopsis.
• Minoti Malhotra Vs DCIT, ITA No. 6405/Del/2025, decided 25 March 2026 (ITAT Delhi) — Cited in the assessee’s written synopsis.
• Sh. Ashutosh Agarwal Vs DCIT, ITA No. 6624/Del/2025, decided 30 April 2026 (ITAT Delhi) — Cited in the assessee’s written synopsis.
• Lalit Kumar Nagar Vs DCIT, ITA No. 2532/Del/2025, decided 23 May 2026 (ITAT Delhi) — Cited in the assessee’s written synopsis.
• Shri Lekh Raj Versus DCIT, ITA No. 3181/Del/2025, decided 30 March 2026 (ITAT Delhi) — Cited in the assessee’s written synopsis.
• Smt. Geetanjali Bhayana Versus DCIT, [2026] 183 taxmann.com 95 (ITAT Delhi), decided 27 January 2026 — Cited in the assessee’s written synopsis.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal is filed by the assessee against the order passed by the Ld. CIT(A)-25, Delhi dated 23.03.2026 for the Assessment Year 2014-15. Grounds of appeal are as under :-

1. “On the facts and circumstances of the case the order passed by the Commissioner of Income Tax (Appeals), Delhi- 25 Ld. CIT(A) u/s 250 of the Act is bad both in the eyes of the law and on facts and thus, liable to be quashed. Rs. 4878970

2. On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law in confirming the initiation of the proceedings under Section 153C of the Act against the appellant 2 and the assessment framed under Section 153C of the Act which are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eyes of the law and liable to be quashed.

3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred both on facts and in law in confirming the additions made by the Assessing Officer in the assessment order passed u/s 153C of the Act, without any incriminating material having been found during the course of search in relation to additions so made.

4. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the proceedings initiated under Section 153C and the assessment framed under 4 Section 153C which is bad and liable to be quashed in the absence of a proper satisfaction being recorded by the AO of the searched person that the incriminating material belonging to the assessee was found during the course of the search.

5. On the facts and circumstances of the case, Ld. CIT(A) has erred both on facts and in law in confirming the assessment u/s 153C of the Act which was made without issuing and serving mandatory notice u/s 143(2) of the Act within the time limit prescribed under the Act thereby making the assessment order invalid and liable to be quashed.

6. (i) On the facts and circumstances of the case, the Ld. CIT(A) has erred in confirming the addition of Rs. 70,00,000 u/s 69A of the Act alleging the amount paid to Diwakar Commercial Pvt. Ltd. as bogus transaction. (ii) That the aforesaid addition has been confirmed arbitrarily rejecting the explanation and evidences brought on record by the appellant.

7. (i) On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the addition of Rs. 2,10,000 under section 69C of the Act as unexplained expenditure on account of commission at the rate of 3 percent alleged to have been paid by the assessee on the alleged unaccounted transaction paid by the assessee. (ii) That the aforesaid addition has been confirmed arbitrarily rejecting the explanation and evidences brought on record by the appellant.

8. (i) On the facts and circumstances of the case, Ld. CIT(A) has erred both on facts and in law in confirming the assessment by placing reliance on statement of third party recorded during the course of search and as such the assessment so made is bad in law and against facts of the case. (ii) That the admission made during the course of search cannot be deemed as conclusive evidence in order to make the addition without any corroborating evidence in this regard. (iii) That the Ld. AO has erred both on facts and in law in drawing adverse inference against the assessee on the basis of statement recorded without giving assessee an opportunity to cross examine the same.

9. That the appellant respectfully craves for leave to add, amend, 9 alter, omit OR substitute any of the grounds of appeal at any time before OR at the time of hearing of the appeal.”

2. During proceedings before us the ld. Counsel of the assessee filed a brief synopsis which is reproduced as under :-

WAVES DATA MANAGEMENT PRIVATE LIMITED —
AY 2014-15
ITA No. 4556/Del/2026 
SYNOPSIS

1. The assessment in the case of the appellant was completed by the AO u/s 153C of the Income-tax Act, 1961, vide order dated 20.02.2024, wherein the AO made various additions amounting to Rs. 72,10,000/- under sections 69A and 69C of the Act. Aggrieved from the order of the AO, the assessee went into appeal before the Ld. CIT(A) wherein the CIT(A) has passed an order confirming the additions made by the AO.

2. No action u/s 153C can be taken for the Satisfaction Note recorded after 01.04.2021.

The notice u/s 153C of the Act was issued on 01.08.2022 in the case of the appellant on the basis of search conducted on Alankit group of cases on 18.10.2019. Further satisfaction note was recorded by the AO of searched person on 23.06.2022 and the AO of the assessee being the ‘other person’ on 01.08.2022.

Now as per the settled law the date of search in case of other person should be date of recording of satisfaction note i.e. 01.08.2022 as held in PCIT vs. Ojus Medicare (P.) Ltd. [2024] 465 ITR 101 (Delhi). As per the amended law, no action can be taken under section 153C of the Act where search carried out on or after 01.04.2021. Reliance is placed on the following judgments / decisions:

– Shri Harigovind Vs Assistant Commissioner of Income-tax, (2026) 485 ITR 509 (Madras High Court), decided 28 October 2025

– Assistant Commissioner of Income-tax Vs Rajendra Kumar, ITA No. 4811/Del/2025, decided 5 June 2026 (ITAT Delhi)

– Minoti Malhotra Vs DCIT, ITA No. 6405/Del/2025, decided 25 March 2026 (ITAT Delhi)

– Sh. Ashutosh Agarwal Vs DCIT, ITA No. 6624/Del/2025, decided 30 April 2026 (ITAT Delhi)

– Lalit Kumar Nagar Vs DCIT, ITA No. 2532/Del/2025, decided 23 May 2026 (ITAT Delhi)

– Shri Lekh Raj Versus DCIT, ITA No. 3181/Del/2025, decided 30 March 2026 (ITAT Delhi)

– Smt. Geetanjali Bhayana Versus DCIT, [2026] 183 taxmann.com 95 (ITAT Delhi), decided 27 January 2026

3. The Ld. Counsel of the assessee argued on the line of written synopsis filed. The main argument of the Ld. Counsel of the assessee was that there was a search and seizure operation u/s.132 of the Act in the case of Alankit Group on 18.10.2019. During search some entries / documentary evidences were found against the assessee accordingly, the AO of the searched party recorded satisfaction note on 23.06.2022 and transferred such information and documents to the AO of the assessee. Assesse’s AO recorded satisfaction note on 01.08.2022. The Ld. Counsel of the assessee submitted that w.e.f. 01.04.2021 there is an amendment in the income tax Act which requires that if search is conducted on or after 01.04.2021 or the satisfaction is drawn by the non-searched party on or after 01.04.2021 in that case the assessment is to be completed u/s.147/148A and not u/s.153C of the Act. In this case it is clear that the satisfaction was recorded by assessee’s AO on 01.08.2022, therefore, the assessment order should have been passed u/s.147/148A and not u/s.153C of the Act but the AO has passed the order dated 20.02.2024 u/s.153C which is not as per amended provisions of the Act.

4. We have considered the findings given by the authorities below and we have also considered various case laws brought on this issue by different coordinate Benches of the Tribunal as given in the brief synopsis of the assessee. We are of this view that the AO should have passed the order u/s.147/148A of the Act and not u/s.153C of the Act. Since it has not been done, therefore, the order passed by the AO is not as per the amended provisions of the Act. Accordingly, it deserves to be quashed.

6. Since we have allowed the appeal on the legal issue, therefore, we are not inclined to give our findings on issues on merit as they are just academic in nature.

7. In the result, the assessee’s appeal on this is allowed.

Order pronounced in the open court on 13.11.2026.