Case Law Details
Mukesh Chandra Agrawal Vs DCIT (ITAT Delhi)
Section 153C Assessment Invalid Because AO Failed to Record Proper Satisfaction; ITAT Delhi Cancels 153C Assessments Over Absence of ‘Bearing on Total Income’ Finding; Improper Satisfaction Note Vitiates Section 153C Proceedings; ITAT Delhi Says Section 153C Cannot Be Invoked Through Mechanical Recording of Satisfaction; Section 153C Proceedings Set Aside Because Satisfaction Note Lacked Mandatory Findings.
The appeals before the ITAT Delhi related to Assessment Years 2015-16, 2016-17, and 2020-21 and arose from orders passed by the Commissioner of Income Tax (Appeals), Delhi dated 30.01.2025 in proceedings under Section 153C of the Income Tax Act, 1961.
During the hearing, the Tribunal identified the primary legal issue as the validity of the Section 153C proceedings and assessments framed on 31.03.2023. The assessee challenged the proceedings on the ground that there was no valid satisfaction recorded by the lower authorities before initiating action under Section 153C.
The satisfaction note recorded by the Assessing Officer stated that a search and seizure operation had been conducted in the Alankit Group cases on 18.10.2019 and that certain documents related to the assessee were found during assessment proceedings under Section 153A. The seized documents included copies of sale deeds relating to residential properties at Agra, Delhi, and Mathura, allegedly connected with the assessee. The satisfaction note concluded that assessment proceedings were required to be initiated under Section 153C because warrants had been issued in the names of the searched parties belonging to the Alankit Group.
The Revenue defended the satisfaction note and argued that it had been properly recorded based on incriminating material seized during the search. According to the Revenue, the Assessing Officer of the searched party had satisfied himself that the documents belonged or pertained to the assessee, which justified initiation of proceedings under Section 153C. The Revenue further argued that the satisfaction note should be read as a whole and not from a hyper-technical perspective.
The Tribunal, however, observed that the satisfaction note did not expressly state whether the seized material had any “bearing on the determination of the total income” of the assessee, which is a statutory requirement under Section 153C(1) of the Act. The Tribunal noted that there was no dispute between the parties regarding the absence of such clarification in the satisfaction note recorded by the Assessing Officer.
In reaching its conclusion, the Tribunal relied upon the Delhi High Court decision in Saksham Commodities Ltd. Vs. ITO (2024) 464 ITR 1 (Delhi), which held that recording of satisfaction under Section 153C is not a mere mechanical exercise. Applying the principles laid down in that judgment, the Tribunal held that the Assessing Officer had erred both in law and on facts by recording an improper satisfaction before initiating proceedings under Section 153C.
The Tribunal concluded that failure to record proper satisfaction regarding the bearing of the seized material on the assessee’s total income vitiated the very initiation of proceedings under Section 153C and consequently invalidated the assessments framed pursuant thereto.
As the Tribunal quashed the Section 153C proceedings on the legal issue itself, all remaining arguments and pleadings between the parties were treated as academic and were not adjudicated further. The assessee’s three appeals were accordingly allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These assessee three appeals ITA Nos. 1786, 1787 86 1788/Del/2025 for assessment years 2015-16, 2016-17 86 202021, arises against the Commissioner of Income Tax (Appeals) [in short, the “CIT(A)”], Delhi’s-25 orders, all dated 30.01.2025, having DINs and orders no. ITBA/APL/S/250/2024-25/1072719525(1), ITBA/APL/S/250/2024-25/1072727224(1) and ITBA/APL/S/250/2024-25/1072731846(1), involving proceedings under section 153C of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), respectively.
Heard both the parties. Case files perused.
2. It emerges during the course of hearing that there arises the first and foremost legal issue of validity of the impugned section 153C proceedings/assessments framed on 31st March, 2023 itself between the parties; for want of a valid satisfaction recorded by the learned lower authorities. There is hardly any dispute that the learned Assessing Officer of the assessee (who happens to be a person other than the searched party) had set into the motion section 153C proceedings herein reading as under:
“Reasons for satisfaction for issuing notice u/s 153C of the Income Tax Act, 1961 in the case of Sh. Mukesh Chandra Agrawal (PAN: ABWPA8709M)
A search and seizure operation was carried out in the Alankit Group of cases on 18.10.2019 subsequently the said group was centralized to the jurisdiction of the undersigned. Accordingly, during the course of assessment proceedings u/s 153A of Alankit Group, material/ documents related to your case have been found.
1. Annexure A-1, MCAR, page 1 to 17:- found and seized at 173, Sita Ram Apartments, IP Extension, Delhi wherein copy of Sale deed dated 26.08.2015 in favour of Shri Mukesh Chandra Agrawal found Residential Plot Sale deed made in Agra, Uttar Pradesh, Plot no. 21, Area 166.47 Sq. Mtr. Located in Swapn Lok Kaloni Kakua, Agra by Vishal Infra Pvt Ltd for Sale to Shri Mukesh Chandra Agrawal, Total Value of Property Rs.6,00,000/ -.
2. Annexure A-1, MCAR, page 30 to 46:- found and seized at 173, Sita Ram Apartments ,IP Extension, Delhi wherein copy of Sale deed dated 30.05.2019 of Residential flat in favour of Shri Mukesh Chand Agrawal found copy of Sale Deed in case of Residential Plot Area 138.28 Sq. Mtr Flat no.173, Sitaram Apartment, I P Extention Delhi-92 in favour of Shri Mukesh Chand Agarwal and Smt Neeta Agarwal, by Shri Ajay Tiwari, F14/ 118, Krishna Nagar, Delhi-51.Total Value of Property Rs.1,80,00,000/ -.
3. Annexure A-1, MCAR, page 51 to 65:- found and seized at 173, Sita Ram Apartments, IP Extension, Delhi wherein copy of Sale deed dated 21.04.2014 of Residential Plot in favour of Shri Mukesh Chand Agrawal found copy of Residential Plot Sale deed made in Mathura, Uttar Pradesh, Plot Area 166.44 Sq. Mtr. Located in Mauja Bakal pur, Mathura by Agrawal Developers for Sale of Plot 44, Agrawal developers, Mauja Bakalpur, Mathura Total Value of Property Rs. 16,00,000/ -.
The assessment proceedings are required to be taken u/ s 153C of the Income Tax Act, 1961 as the warrant issued in the names of Sh. Alok Agarwal, Sh. Ankit Agarwal, M/s Alankit Ltd. And M/s Alankit Assignment.”
3. That being the case, learned CIT(DR) strongly supports the above satisfaction note inter alia that the same had been properly recorded in light of the relevant incriminating material found/seized during the course of search dated 18.10.2019 which led the Assessing Officer of the said searched party to satisfy himself that the same belonged or pertained or related to the assessee; as the case may be, leading to the Assessing Officer’s satisfaction note finally culminating in the impugned assessment framed in its hands.
4. Faced with this situation, the tribunal invited the Revenue’s attention to the clinching fact that the learned Assessing Officer’s above extracted satisfaction note has nowhere made it explicitly clear as to whether the relevant seized material had a “bearing on the determination of the total income of such other person”. Learned CIT(DR) seeks to buttress the point herein that such a satisfaction note has to be read in totality than after adopting a hyper technical approach.
5. We find no reason to accept the Revenue’s stand. We make it clear that there is no quarrel between the parties about the learned Assessing Officer of the assessee/third person not having clarified as to whether the relevant seized material had any “bearing………………… ” as stipulated in section 153C(1) of the Act. Hon’ble jurisdictional high court’s recent landmark decision in Saksham Commodities Ltd. Vs. ITO (2024) 464 ITR 1 (Delhi)(HC) has settled the law in the assessee’s favour and against the department that such recording of section 153C satisfaction is not a mere mechanical exercise. We thus draw strong support therefrom to conclude that the learned assessing authority in the assessee’s cases had erred in law and on facts in recording an improper satisfaction before initiating section 153C proceedings which vitiates the assessment itself in above terms. Ordered accordingly.
All other remaining pleadings between the parties stand rendered academic.
6. These assessee’s three appeals 1786, 1787 861788/De1/2025 are allowed in above terms. A copy of this common order be placed in the respective case files.
Order pronounced in the open court on 8th December, 2025
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