Mechanical Satisfaction Note Cannot Sustain Section 153C Proceedings: ITAT Delhi

Anil Chaudhary Vs ACIT (ITAT Delhi)

Summary: ITAT Delhi allowed the appeals of Anil Chaudhary, proprietor of M/s Chaudhary Trading Company, arising from assessments for AYs 2014-15 to 2019-20 under section 153C/143(3). The proceedings originated from a search conducted on 12.05.2019 in the case of M/s Pragati Glass (P) Ltd. (PGPL). The Assessing Officer relied upon documents found in the possession of PGPL’s Managing Director and statements of its Managing Director and accountant to allege that the assessee had made cash purchases from PGPL outside his regular books. Substantial additions were consequently made under section 69C for the six assessment years. The Tribunal first examined the jurisdictional objection concerning the permissible assessment period under section 153C.

The seized material was received by the assessee’s AO on 10.03.2021 and, therefore, AY 2021-22 was treated as the relevant search assessment year for this purpose. Applying the principle in CIT v. RRJ Securities Ltd., the Tribunal held that AY 2014-15 fell outside the permissible six-year period and the assessment for that year was without jurisdiction. More fundamentally, for the remaining years the Tribunal found that the AO’s satisfaction note merely stated that incriminating documents found during search “relates to” the assessee and that it was a fit case for action under section 153C.