Satisfaction Note without Date Supplied to Petitioner after 2 years : Gujarat HC Quashes Notice u/s 153C of Income Tax Act [Read Order]

The Gujarat high court has quashed notices and associated proceedings under section153c of the Income Tax Act citing that the satisfaction note supplied by the jurisdictional officer doesn’t bear a date and was supplied to the petitioner company after a delay of 2 years.

The Petitioner-company Virat Alloys Private Limited filed its revised return of income for the A.Y 2015-16 declaring its income of Rs. Nil.

A search was carried out in case of M/s.World Window Group, in exercise of powers conferred under Section 132 of the IT Act.

The petitioner said that it has not undertaken any kind of business or transaction with M/s World Window Group more particularly, between the period of F.Y 2012-13 to F.Y. 2018-19.

The petitioner-company was issued notice dated under Section 153(C) of the IT Act and accordingly, the petitioner-company filed its reply.

The company submitted that the impugned notice under Section 153(C) of the IT Act is required to be quashed and set aside, in view of the decision of the Supreme Court in the case of CIT Vs. Calcutta Knitwears [2014] as well as the Central Board of Direct Taxes Circular No.24 of 2015 dated 31.12.2015, since the respondent for the first time on 31.05.2024 has communicated the satisfaction note.

It was also submitted that the satisfaction note of the searched person i.e. M/s.World Window Group was recorded on 06.05.2022 and the petitioner-company conveyed the satisfaction note on 30.05.2024, beyond the reasonable period of limitation.

The counsel for the respondent submitted that after the search was conducted the AO had recorded the satisfaction note on 06.05.2022 and the materials were forwarded to the jurisdictionalAssessing Officer and accordingly, the satisfaction note was recorded on 23.06.2022.

However, it was also contended that upon perusal of the satisfaction note of the AO of the petitioner, the same does not bear any date. She has submitted that the same was communicated to the petitioner-company on 30.05.2024.

The division bench of Justice AS Supehia and Justice Pranav Trivedi referred to the decision of the Supreme Court in the case of Calcutta Knitwears . The Supreme Court in the said case, while examining the provisions of Section 158BC of the Act (now Section 153A of theAct), has held as:

“ A satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the other Assessing Officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act, (b) along with the assessment proceedings under Section 158BC of the Act; and (c) immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person.”

It was observed that the Circular of the respondent- Department, judgment of the Supreme Court in the case of Calcutta Knitwears and the recording of the satisfaction note in three stages apply to the proceedings under Section 153C of the Act.

So in the present case it was established that the satisfaction note of the jurisdictional AO of the petitioner-company doesn’t have any date and over and it was only supplied to the petitioner on 31.05.2024, after passage of more than two years.

And the court set aside the impugned notice and all the consequential proceedings.

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