Single Satisfaction Note Sufficient u/s 153C When Same Assessing Officer Handles Both Searched Person and Other Party: Madras HC [Read Order]

In a recent ruling, the Madras High Court ruled that a single satisfaction note was sufficient under Section 153C of the Income Tax Act, 1961, when the same assessing officer handles both searched persons and other persons.

The Income Tax Department initiated proceedings under Section 153C of the Income Tax Act, 1961, declaring that the seized documents which included entries from a customized software called “J Pack” related to the petitioner and reflected unaccounted transactions.

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LKS Gold House Private Limited, the petitioner challenged the assessment orders issued under Section 153C of the Income Tax Act, 1961, arguing that the satisfaction note linking them to documents found during a search at the premises of Mohanlal Jewellers Pvt. Ltd. on November 10, 2020, was not validly recorded and time-barred.

The petitioner’s counsel submitted that the satisfaction note required under Section 153C was not validly recorded and failed to establish a clear link between the seized documents and the petitioner’s business operations.

The counsel further submitted that the assessment orders were time-barred, as they should have been passed by March 31, 2022, based on the timeline for proceedings under Section 153C.

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On the contrary, the revenue’s counsel argued that the seized documents and the entries in the "J Pack" software which recorded unaccounted transactions, provided adequate grounds for assessing the petitioners' income.

The revenue’s counsel relied on various precedents and argued that no separate satisfaction note was necessary for the petitioners, as the AO was in possession of the necessary information from the search.

Justice C. Saravanan observed that Section 153C does not require separate satisfaction notes to be recorded when the same Assessing Officer is responsible for both the searched person and the other person.  A single satisfaction note recorded in the capacity of the AO of the searched person is sufficient to initiate proceedings against other parties under Section 153C.

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The court emphasized that the satisfaction note only needs to reflect a prima facie belief that the documents seized during the search related to the income of another person. The court found that the AO had sufficient reason to believe that the seized materials were related to the petitioners, based on the "J Pack" software entries and the statements recorded during the search.

Therefore, the satisfaction note was validly recorded, even though the same Assessing Officer was involved for both the searched person and the petitioners. The court dismissed the petition and upheld the validity of the assessment orders.

To Read the full text of the Order CLICK HERE

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