Sh. Sudesh Gahlot Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, allowed the assessee’s appeal and quashed the assessment framed under Section 153C of the Income-tax Act, 1961 for Assessment Year (AY) 2016-17, holding that the assumption of jurisdiction was invalid because it was based on a consolidated satisfaction note recorded for multiple assessment years. The assessee had filed his return of income declaring a total income of ₹45,30,940. A search and seizure operation under Section 132 was conducted on 10 October 2018 in the cases of M/s CIFSL, M/s BIDPL, and the Shri Harish Gahlot group. During the search, certain documents were allegedly found to pertain to the assessee. The Assessing Officer (AO) of the searched person recorded satisfaction and transferred the material along with the satisfaction note to the AO having jurisdiction over the assessee. Subsequently, the AO recorded satisfaction on 9 June 2021 and initiated proceedings under Section 153C. An assessment order was passed making an addition of ₹8,80,000 as alleged bogus commission expenditure under Section 69C, assessing the total income at ₹54,10,940. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the assessment, leading to the present appeal before the Tribunal.
Before the Tribunal, the assessee challenged the validity of the proceedings under Section 153C on the ground that the AO had recorded a common satisfaction note covering Assessment Years 2009-10 to 2019-20 instead of recording separate satisfaction for each assessment year. The assessee argued that the satisfaction note did not contain year-wise segregation of income, year-specific entries, or identification of incriminating material relating to each assessment year. It was contended that such a consolidated satisfaction note violated the legal requirements governing Section 153C proceedings. Reliance was placed on judicial precedents including DCIT v. Sunil Kumar Sharma and Shaksham Commodities Ltd. v. ITO. The Revenue, on the other hand, argued that a consolidated satisfaction note was legally permissible and relied on the Delhi High Court’s judgment in Indian National Congress v. DCIT, which held that separate satisfaction notes for each year were not mandatory where the note referred to incriminating material pertaining to the relevant assessment years.
