Satisfaction Note Lacked Reference of Income Escapement in the Form of Assets Worth ₹50 Lacs: ITAT quashes Reassessment Beyond 6 Yrs [Read Order]

The Chennai Bench of the Income Tax AppellateTribunal (ITAT) ruled that the AO must record a "Satisfaction Note" expressly stating that they possess evidence of escaped income which was represented in the form of an asset, worth ₹50 lakhs or more for those specific years.

Subramaniam Kathiresan (assessee) against whom the AO initiated proceedings under section 153C of the Income Tax Act. This was initiated due the search operation conducted at the premises of Shri G.N. Anbuchezhian on February 5, 2020.

Based on loose sheets and documents seized during this search, the AO initiated proceedings under Section 153C against "the other person," which was the assessee. The AO prepared a Satisfaction Note and alleged that the assessee had entered into various cash loan transactions and repayments with the searched person.

The Satisfaction Note was recorded in late 2022, AY 2014-15 was categorized as the 9th assessment year preceding the search year for the purpose of Section 153C of the Income Tax Act.

Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of the Income Tax (appeals) [CIT(A)]. The assessee challenged the jurisdiction and argued that the mandatory legal requirements for reopening an assessment beyond six years had not been met.

The CIT(A) granted relief to the assessee both on merits by deleting addition and the legal issue raised by the assessee. Aggrieved by the CIT(A)’s relief to the assessee, the revenue filed appeal before the ITAT.

The two-member bench comprising Aby T. Varkey (Judicial Member) and Jagadish (Accountant Member) observed that while the note mentioned "cash transactions" and "repayment of cash loan along with interest," it contained nothing regarding the escaped income being in the form of an asset worth ₹50 lakhs or more.

The tribunal noted that to assume jurisdiction for the 7th to 10th years, the AO must be satisfied that the escaped income is represented in the form of an "asset" as defined by the Act and the value of such assets must amount to, or be likely to amount to ₹50 lakhs or more.

Relying on the precedent set by the GauhatiHigh Court in Goldstone Cements Ltd., the tribunal concluded that the Satisfaction Note did not meet the essential jurisdictional facts required for the 9th year.

The bench upheld the order of the CIT(A) and quashing of the assessment was confirmed. The appeal of the Revenue was dismissed.

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