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Judgment
PER MANISH AGARWAL, AM :
The captioned appeals are filed by the assessee against the orders, both dated 11.09.2025 by Ld. Commissioner of Income Tax (A)-25, New Delhi [“Ld. CIT(A)”] in Appeal No. 10777/2016-17 & 10658/2017-18 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the different assessment orders, both dated 19.02.2024 passed u/s 153C of the Act pertaining to Assessment Year 2017-18 and 2018-19 respectively.
The issues involved in both captioned appeals are common, therefore, they have been heard together and accordingly, adjudicated by a common order.
First we take appeal of the assessee in ITA No.7249/Del/2025 for Assessment Year 2017-18.
ITA No.7249/Del/2025 [Assessment Year 2017-18]
Brief facts of the case are that the assessee has e-filed its return of income on 31.10.2017, declaring a total income of INR 16,14,510/-. A search and seizure action was carried out in the case of Alankit Group etc. on 18.10.2019 and proceedings in the case of the assessee were initiated based on the satisfaction note recorded by the AO of the assessee on 28.06.2022. Thereafter, based on the statements of the various persons of Alankit Group, AO alleged that the assessee has entered into bogus transactions of INR 15 Lakhs and made the addition for the same. AO further added a sum of INR 45,000/- being 3% commission given for obtaining the accommodation entries of INR 15 Lakhs. Further interest paid on such loan of INR 1,04,548/- was disallowed u/s 69C of the Act.
Against the said order, the assessee filed an appeal before Ld. CIT(A) who vide impugned order dated 11.09.2025 has dismissed the appeal of the assessee.
Aggrieved by the order of Ld. CIT(A), the assessee is in appeal before the Tribunal by taking various Grounds of appeal mentioned in the appeal memo.
Ground of appeal No.1 is general in nature hence, not adjudicated.
Ground of appeal Nos. 2 & 3 raised by the assessee wherein assessee has challenged the satisfaction recorded before issue of notice u/s 153C of the Act.
Ld.AR for the assessee submits that the AO has recorded common satisfaction for all the Assessment Years and no year-wise bifurcation of income/ entries found recorded in the documents seized from the possession of the person searched was made. Ld.AR further filed the satisfaction note of the AO of the assessee and submits that the satisfaction was recorded by the ITO, Ward-34(1), Delhi wherein he has not recorded satisfaction that the information found has a bearing on the determination of the total income of the assessee. It is further submitted that nowhere in the satisfaction note, AO of the assessee recorded the satisfaction that documents filed by the assessee found during the course of search of Alankit Group are pertained to the assessee. He therefore, submits that initiation of proceedings u/s 153C based on incorrect satisfaction recorded, deserved to be held as bad in law and consequent order be quashed. For this, reliance is placed on the judgment of Pal Mineral Industries (P.) Ltd. in ITA Nos. 105 & 106/DDN/2025 order dated 12.03.2026 and the Hon’ble Delhi High Court in the case of Saksham Commodities Ltd. reported in 161 taxmann.com 485 (Delhi HC) and certain other judgments which are placed in the Paper Book.
On the other hand, Ld. CIT DR for the Revenue vehemently supported the orders of the lower authorities and submits that satisfaction is recorded with respect to the income based on the documents found as a result of search. Therefore, AO has rightly recorded the satisfaction and requested for the confirmation of the proceedings initiated u/s 153C of the Act.
Heard the contentions of both the parties at length and perused the material available on record. The satisfaction note recorded by the AO of the assessee is filed before us is reproduced as under:-
From the perusal of the same, it is observed that nowhere in the satisfaction note, the AO of the assessee has recorded his satisfaction of the documents pertained to the assessee and further “has a bearing on the determination of the total income of the assessee”. It is further observed that the AO has not recorded his satisfaction about the year-wise breakup of income nor any such figure of any income based on the seized documents is referred in the satisfaction note. The Hon’ble jurisdictional High Court in the case of Saksham Commodities Ltd. (supra), under these circumstances has held as under:-
G. CONCLUSIONS
63.On an overall consideration of the structure of Sections 153A and 153C, we thus find that a reopening or abatement would be triggered only upon the discovery of material which is likely to "have a bearing on the determination of the total income" and would have to be examined bearing in mind the AYs' which are likely to be impacted. It would thus be incorrect to either interpret or construe Section 153C as envisaging incriminating material pertaining to a particular AY having a cascading effect and which would warrant a mechanical and inevitable assessment or reassessment for the entire block of the "relevant assessment year".
64.In our considered view, abatement of the six AYs' or the "relevant assessment year" under Section 153Cwould follow the formation of opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs' that may form part of the block of ten AYs'. Abatement would be triggered by the formation of that opinion rather than the other way around. This, in light of the discernibly distinguishable statutory regime underlying Sections 153A and 153C as explained above. While in the case of the former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to "have a bearing on the determination of the total income". It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case maybe.
65.We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an evaluation and examination of their contents and an assessment of the potential impact that they may have on the total income for the six AYs' immediately preceding the AY pertaining to the year of search and the "relevant assessment year". It is only once the AO of the non-searched entity is satisfied that the material coming into its possession is likely to "have a bearing on the determination of the total income" that a notice under Section 153C would be issued. Abatement would thus be a necessary corollary of that notice. However, both the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity.
66.Therefore, and in our opinion, abatement of the six AYs' or the "relevant assessment year" would follow the formation of that opinion and satisfaction in that respect being reached.
67.On an overall consideration of the aforesaid, we come to the firm conclusion that the "incriminating material" which is spoken of would have to be identified with respect to the AY to which it relates or may belikely to impact before the initiation of proceedings under Section 153C of the Act. A material, document or asset recovered in the course of a search or on the basis of a requisition made would justify abatement of only those pending assessments or reopening of such concluded assessments to which alone it relates or is likely to have a bearing on the estimation of income. The mere existence of a power to assess or reassess the six AYs' immediately preceding the AY corresponding to the year of search or the "relevant assessment year" would not justify a sweeping or indiscriminate invocation of Section 153C.
68.The jurisdictional AO would have to firstly be satisfied that the material received is likely to have a bearing on or impact the total income of years or years which may form part of the block of six or ten AYs' and thereafter proceed to place the assessee on notice under Section 153C. The power to undertake such an assessment would stand confined to those years to which the material may relate or is likely to influence. Absent any material that may either cast a doubt on the estimation of total income for a particular year or years, the AO would not be justified in invoking its powers conferred by Section 153C. It would only beconsequent to such satisfaction being reached that a notice would be liable to be issued and thus resulting in the abatement of pending proceedings and reopening of concluded assessments.
H. OPERATIVE DIRECTIONS
69.When tested in light of the aforesaid principles, we find that except for a few exceptions which were noticed in the introductory parts of this judgment, the writ petitions forming part of this batch, impugn the invocation of Section 153C in respect of AYs' for which no incriminating material had been gathered or obtained. The Satisfaction Notes also fail to record any reasons as to how the material discovered and pertaining to a particular AY is likely to "have a bearing on the determination of the total income" for the year which is sought to be abated or reopened in terms of the impugned notices. The respondents have erroneously proceeded on the assumption that the moment any material is recovered in the course of a search or on the basis of a requisition made, they become empowered in law to assess or reassess all the six AYs' years immediately preceding the assessment correlatable to the search year or the "relevant assessment year" as defined in terms of Explanation 1 of Section 153A. The said approach is clearly unsustainable and contrary to the consistent line struck by the precedents noticed above.
This view is further supported by the judgement of Co-ordinate Bench of Delhi Tribunal in the case of Deepak Builders & Engineers India Ltd. in ITA No.875/Del/2025 vide order dated 01.12.2025 and followed by Co-ordinate Bench in the case of Pal Mineral Industries Ltd. (supra).
Thus, by respectfully following the judgement of Hon’ble Delhi High Court in the case of Saksham Commodities (supra) and decisions of Co-ordinate Bench of Tribunal in aforesaid judgements, it is held that the satisfaction note recorded without having satisfied that the documents have bearing on the determination of the total income of the assessee is invalid satisfaction. Accordingly, based on such invalid satisfaction the initiation of proceedings u/s 153C is invalid and the consequent assessment order passed u/s 153C is quashed. Accordingly, Ground of appeal Nos. 2 & 3 raised by the assessee are allowed.
Since we have already allowed Ground of appeal Nos. 2 & 3 raised by the assessee, the remaining Grounds of appeal became academic hence, not adjudicated.
In the result, appeal of the assessee is allowed.
ITA No.7250/Del/2025 [Assessment Year 2018-19]
Before us, both the parties fairly agreed that the facts in the present appeal are similar to the facts in ITA No. 7249/Del/2025 for AY 2017-18, thus, by following the aforesaid observations in ITA No. 7249/Del/2025 for AY 2017-18 which are Mutatis Mutandis applicable to the facts of this case also, the assessment proceedings initiated u/s 153C are held as invalid and the consequent order passed u/s 153C of the Act is hereby quashed. Accordingly, all Grounds of appeal raised by the assessee in the captioned appeal, are allowed.
In the result, appeal of the assessee is allowed.
In the final result, both captioned appeals of the assessee in ITA No.7249 & 7250/Del/2025 for Assessment Year 2017-18 & 2018-19 respectively, are allowed.