Manish Dhariwal Vs DCIT (ITAT Jaipur)
Jaipur ITAT Quashes U/s 153C Assessments: AO Cannot Simply Copy Satisfaction Note; Sunset Clause Bars Proceedings After 01.04.2021
In a significant ruling, the Jaipur ITAT quashed assessments made under Section 153C against three assessees who were alleged to have paid on-money for purchase of flats in the Royal Palm project. The Tribunal held that the Assessing Officer failed to record a legally valid satisfaction under Section 153C and, in any event, the proceedings were barred by the sunset clause contained in Section 153C(3).
The case arose from a search conducted on the Friends SPS Group, Kota, where the Department alleged that certain purchasers had paid part of the consideration for flats in cash. Based on information received from the Assessing Officer of the searched person, notices under Section 153C were issued and additions were made under Section 69 for alleged on-money payments.
The Tribunal observed that the Assessing Officer of the assessees had merely reproduced the contents of the letter received from the Assessing Officer of the searched person and had not independently examined the seized documents. The satisfaction note did not identify any specific seized material relating to the assessees nor did it record how such material had a bearing on determination of their total income. The Tribunal held that recording of such satisfaction is a jurisdictional requirement and cannot be fulfilled through a mechanical reproduction of another officer’s conclusions.
The Tribunal further accepted the assessees’ contention based on the sunset clause under Section 153C(3). Since the seized material was forwarded to the Assessing Officer of the assessees only on 17.01.2023, the deemed date of search for the “other person” fell well after 01.04.2021. Relying on the Supreme Court decision in Jasjit Singh, the Madras High Court decision in Harigovind G. Ravindran (HUF), and the Delhi High Court decision in ATS Township Pvt. Ltd., the Tribunal held that Section 153C itself ceased to operate for such cases after the statutory cut-off date. Consequently, the proceedings were held to be void ab initio, time-barred and without jurisdiction.
Having quashed the assessments on legal grounds, the Tribunal did not adjudicate the merits relating to the alleged cash payment for the flats and left those issues open. All three appeals were allowed.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The captioned appeals have been preferred by the different but related assessees against the separate orders of even date 23.09.2025 of the Ld. Commissioner of Income Tax (Appeals) [hereinafter referred to as “Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “Act”) for the Assessment Year (AY) 2020-21. Since the facts and issue involved in all these appeals are identical and are arising out of the same search action in the case of Friends SPC Group, Kota dated 01.08.2019, hence, these appeals were heard together and are being disposed of by this common order. ITA No.1772/JPR/2025 in the case of Manish Dhariwal is taken as the lead case.
