Time-Barred and Vague Satisfaction Note: ITAT Quashes Assessments Beyond Six-Year Limit u/s 153C [Read Order]

In a consolidated ruling covering multiple assessment years, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has invalidated reassessments initiated under Section 153C of the Income Tax Act, 1961. The Tribunal held that the proceedings were barred by limitation and unsupported by a valid satisfaction note.

The AO had recorded a consolidated “Satisfaction Note” dated 23 March 2018 and proceeded to issue notices under Section 153C to the assessee for six preceding years, covering AYs 2010-11 to 2015-16. The matter was further complicated by an appeal filed by the Revenue challenging the deletion of additions under Sections 68 and 69C for AY 2010-11.

The assessee, 3D Tradex P.Ltd, challenged the assumption of jurisdiction on multiple grounds, arguing that the assessments for AYs 2010-11 and 2011-12 were barred by limitation and also argued that the “Satisfaction Note” recorded by the AO was vague and non-specific, failing to identify incriminating material for each assessment year individually.

On the limitation aspect, the assessee submitted that the six years under Section 153C should be counted from the assessment year in which the AO of the non-searched person received the seized material from the AO of the searched person.

Your Ultimate Guide to India’s Latest Income Tax Laws, Click Here

The core issue before the Tribunal was whether the AO’s initiation of proceedings under Section 153C was within the prescribed time limit and whether the satisfaction recorded complied with statutory and legal requirements.

The two-member bench of Sudhir Kumar (Judicial Member) and Pradip Kumar Kedia (Accountant Member) observed that the amendment extending the limitation period to ten years applied prospectively from AY 2018-19 and had no retrospective effect on searches conducted before 1 April 2017.

As a result, the assessments for AYs 2010–11 and 2011–12 were quashed as barred by limitation, rendering the proceedings null and void.

For the remaining AYs 2012–13 to 2015–16, the tribunal observed that the AO’s note referred to undisclosed income in a blanket manner across multiple years, without tying the material to any particular AY. Relying on Dev Technofab Ltd. v. DCIT (2024) and Sakham Commodities Ltd. v. ITO (2024), the ITAT held that a vague satisfaction note does not satisfy the legal threshold required to invoke jurisdiction under Section 153C.

Consequently, the assessments for AYs 2012-13 to 2015-16 were also declared invalid and set aside. The Tribunal further addressed the Revenue’s appeal challenging the deletion of INR 11.95 crore under Sections 68 and 69C for AY 2010–11.

It also observed that since the foundational assessment itself was void due to limitations and defective jurisdiction, the merits of the additions became irrelevant. The Revenue’s appeal was accordingly dismissed.

The tribunal ruled that both limitation and jurisdictional defects vitiated the entire set of assessments under Section 153C. The Tribunal allowed all six appeals of the assessee for AYs 2010-11 to 2015-16 and dismissed the Revenue’s appeal for AY 2010-11.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates