Case Law Details
Narender Nath Vs DCIT (ITAT Delhi)
The ITAT Delhi allowed the assessee’s appeal for Assessment Year 2021-22 and quashed the assessment framed under Sections 153C read with 143(3) of the Income Tax Act. The appeal arose against the order of the CIT(A)-23, Delhi dated 28.07.2025.
The primary issue before the Tribunal was whether the satisfaction recorded by the Assessing Officer under Section 153C was legally valid for initiating proceedings against the assessee, who was a third party to the search proceedings.
A search operation had been conducted on 23.03.2021 in the case of M/s KK Spun Group. Subsequently, the Assessing Officer of the searched party recorded satisfaction dated 25.02.2023 for initiating proceedings against the present assessee under Section 153C. According to the Revenue, the seized documents found during the search “belonged to” the assessee and therefore justified initiation of proceedings.
The assessee challenged the validity of the satisfaction note and argued that the statutory conditions prescribed under Section 153C had not been properly fulfilled.
The Tribunal examined Section 153C(1)(a) and observed that the provision distinguishes between assets such as money, bullion, or jewellery “belonging to” a third person and documents that merely “pertain to” or “relate to” such person. The Tribunal noted that the Assessing Officer had incorrectly recorded satisfaction by stating that the seized documents “belonged to” the assessee, instead of recording that the documents pertained or related to the assessee as required under law for documentary material.
The Tribunal held that proper recording of satisfaction is a mandatory jurisdictional requirement and forms a condition precedent for initiating proceedings under Section 153C against a third party. Since the Assessing Officer failed to record satisfaction in accordance with the statutory requirement, the initiation of proceedings itself was invalid.
The Tribunal also relied upon its earlier decision in Prashant Premchand Bafana Vs. ACIT decided on 08.04.2025, where a similar issue had been decided in favour of the assessee.
Accordingly, the ITAT concluded that the assessment dated 30.03.2024 was based on improper satisfaction under Section 153C and therefore deserved to be quashed. Since the assessment itself was quashed, all other grounds raised in the appeal were treated as academic. The assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This assessee’s appeal for Assessment Year 2021-22, arises against the CIT(A)-23, Delhi’s DIN & order No. ITBA/APL/S/250/2025–26/1078979102(1) dated 28.07.2025, in proceedings u/s 153C r.w.s. 143(3) of the Income Tax Act, 1961 (in short “the Act”)
2. Heard both the parties at length. Case file perused.
3. We advert to the assessee’s first and foremost substantive ground/legal arguments herein that both the learned lower authorities have erred in law and on facts in framing the impugned section 153C r.w.s. 143(3) assessment dated 30.03.2024; in furtherance to the searched party’s Assessing Officer’s satisfaction dated 25.03.2023 and his assessing authority on the very date, as the case may be, which has been wrongly upheld in the lower appellate discussion.
4. That being the case, learned CIT-DR vehemently argues that the impugned twin satisfactions herein had been properly recorded by the Assessing Officer(s); be it that of the searched assessee or appellant third party herein. Her case accordingly is that we ought to uphold the same in very terms.
5. We have given our thoughtful consideration to both the party’s foregoing rival pleadings. There is hardly any dispute that the learned departmental authorities had carried out the impugned search on 23.03.2021 in M/s KK Spun Group. And that the said searched party’s learned Assessing Officer recorded his section 153C satisfaction dated 25.02.2023 for proceeding against assessee/appellant before us. The said learned Assessing Officer appears to have recorded that the corresponding seized document during the course of search “belonged to” the assessee/appellant who happens to be the third party u/s 153C of the Act.
6. Faced with this situation, the Revenue could once again not dispute that section 153C(1)(a) stipulates the category of the seized material as “any money, bullion, jewellery which could be held as belonging to a third person and such documents etc. could only be treated as pertaining to or information therein as relating to such a person. Meaning thereby that the learned Assessing Officer has not properly recorded his satisfaction that the impugned seized documents either pertained to or related to the assessee which forms a conditioned precedent before proceedings him/third person. This tribunal’s recent decision in Prashant Premchand Bafana Vs. ACIT IT(SS)A No. 119 & 120/Pun/2022 decided on 08.04.2025 has already settled the very issue in the assessee’s favour and against the department. We thus conclude in this backdrop that the impugned assessment dated 30.03.2024 deserves to be quashed since based on an improper section 153C satisfaction. Ordered accordingly.
7. All other remaining pleadings between the parties stand rendered academic.
8. This assessee’s appeal is allowed.
Order Pronounced in the Open Court on 08/01/2026.
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