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Judgment
PER ANUBHAV SHARMA, JM:
These appeals preferred by the Assessee against the order of the Ld. Commissioner of Income-tax (Appeals)-3 (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in appeals filed before him against the order of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short) passed u/s 271DA/143(3)/153Cof the Income-tax Act, 1961 (hereafter referred to as ‘the Act’). Further details of the orders of the lower authorities are as under:
| ITA No. &AY | Ld. FAA who passed the appellate order | Appeal No. & Date of order of the Ld. FAA | AO who passed the assessment order & Date of order |
| 8390/D/25 2019-20 | CIT(A)-3, Noida | ITBA/APL/M/250/2025-26/1082698143(1) Dated 17.11.2025 | DCIT, CC, Meerut Dated 13.02.2024 |
| 8391/D/25 2020-21 | CIT(A)-3, Noida | ITBA/APL/M/250/2025-26/1082698143(1) Dated 17.11.2025 | DCIT, CC, Meerut Dated 26.02.2024 |
| 8392/D/25 2021-22 | CIT(A)-3, Noida | ITBA/APL/M/250/2025-26/1082698143(1) Dated 17.11.2025 | DCIT, CC, Meerut Dated 26.03.2024 |
| 8393/D/25 2021-22 | CIT(A)-3, Noida | ITBA/APL/M/250/2025-26/1082698143(1) Dated 17.11.2025 | DCIT, CC, Meerut Dated 26.03.2024 |
At the time of hearing ld. Counsel has pointed out towards a legal ground No. 4 raised in ITA Nos. 8390, 8391 & 8393/Del/2025 by which the assessee has challenged the initiation of penalty proceeding and the consequent penalty order passed u/s 271DA of the Act being vitiated for not being in accordance with law.
Similarly in regard to ITA No. 8392/Del/2025 the impugned assessment order passed u/s 153C/143(3) of the Act has been alleged to be vitiated.
As we go through the impugned assessment orderswe find that the allegation against assessee are that consequent to search and seizure operation of Parveen Kumar Jain one of the searched parties in Hans Group on 06.01.2021 some digital data was found to be incriminating with regard to present assessee also and on the basis of same notice u/s 153C was issued on 14.03.2023 and consequent to the same the assessing officer had concluded that in context to a transaction of immovable property, though, the sale consideration was mentioned at Rs.96,00,000/- but the cash component of Rs.1,90,69,000/- was involved. The share of assessee in this consideration was 50% accordingly, for FY: 2020-21 relevant to AY: 2021-22 an addition of Rs.95,34,500/- was made in AY; 2021-22 and correspondingly penalty was levied u/s 2721DA for alleged contravention the provision of Section 269ST which prohibits receiving Rs.2,00,000/- or more in aggregating from a person in respect of single transaction or in respect of single event or occasion otherwise than by an account payee cheque or an account payee bank profit or use of electronic clearance system through a bank account. Assessing Officer also levied penalty in AY: 2019-20, 2020-21 u/s 271DA for the corresponding amount allegedly received in cash under the aforesaid transaction of the sale of immovable property.
Now what ld. counsel has submitted is that the assessment order in AY: 2021-22 is vitiated as the satisfaction recorded by the assessing officer of the assessee is beyond the permissible period as laid down by Hon’ble Supreme Court in case of CIT-III Vs. M/s Calcutta Knitwears, Ludhiana, 2014 (4) TMI 33 dated 12.03.2014 and followed byHon’ble Delhi High Court in CIT Vs. Alka Bhandari, Ashok Kumar & Sons HUF 2015 (1) TMI 748 dated 08.01.2015.
In this contest, it comes up from the paper book a copy of satisfaction note dated 01.11.2022 recorded by the AO of searched person DCIT, Central Circle-31, New Delhi has been provided at page No. 9-10 of the paper book and the same shows that the satisfaction is recorded with regard to Hans Group and the name of person other than the searched is recorded of the present assessee. This is dated 07.11.2022. Then at page No. 13 copy of letter written by assessing officer of the searched person forwarding satisfaction note in case of assessee to the assessing officer of the present assessee has been placed on record and at page No. 14 copy of satisfaction note dated 03.02.2022 recorded by the AO on other person i.e. assessee is placed on record. Assessee has provided page No. 18-33 copy of assessment order dated 29.03.2022 u/s 153A r.w.s 143(3) of the Act in the case of Parveen Kumar Jain.
Thus, there is an apparent delay of over 7 months in recording of satisfaction note by the assessing officer of the searched person, after the assessment proceedings were completed in the case of searched person. Reliance has been rightly placed by the ld. Counsel of assesseeon the judgement of Hon'ble Supreme Court in the case of Commissioner of Income Tax - III Versus M/s. Calcutta Knitwears, Ludhiana [2014 (4) TMI 33] dated 12.03.2014, which holds as under-
"44.In the result, we hold that for the purpose of Section 158BD of the Act 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.
45.We are informed by Shri Santosh Krishan, who is appearing in seven of the appeals that the assessing officer had not recorded the satisfaction note as required under Section 158BD of the Act, therefore, the Tribunal and the High Court were justified in setting aside the orders of assessment and the orders passed by the first appellate authority. We do not intend to examine the aforesaid contention canvassed by the learned counsel since we are remanding the matters to the High Court for consideration of the individual cases herein in light of the observations made by us on the scope and possible interpretation of Section 158BD of the Act."
The above ratio of the Apex Court has been duly accepted by the Central Board of Direct Taxes (CBDT) videits Circular No. 24/2015, dated31.12.2015 wherein it was mentioned as follows:
"The issue of recording of satisfaction for the purposes of section 158BD/153C has been subject matter of litigation.
2.The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014 dated12.3.2014(available in JRS at 2014-LL-0312-51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that "the satisfaction note could be prepared at any 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
3.Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. 4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts."
Now, the above clause (c) as quoted above, the period immediately after completion of assessment proceedings which can be considered as"immediate" or "immediately after" has been interpreted by Hon’ble Jurisdictional Delhi High Court in its judgment dated 08.01.2015 in the case of CIT Versus Alka Bhandari, Ashok Kumar & Sons HUF [2015 (1) TMI 748] strictly as "six months". The relevant extracts of the same is as follows:
3….....It is evident from the narration of the facts discussed above that the satisfaction note was recorded more than six months after the assessment of searched person; the assessment was completed on 29.08.2002 and the satisfaction note was recorded 06.03.2003. This Court recollects that the extended period within which the Revenue has been permitted to issue notice under Section 158BD in such cases is subject to condition of it being "immediate" or contemporaneous to the time when assessment of the searched persons Is completed.
4.Since the limitation period for completion of block assessment, or in the case of searched persons as well as the third party who is issued notice is two years, it is reasonable to assume that the revenue can be given latitude of six months which can be considered as "immediate" or immediately proximate in point of time. In the present case, the six-month period expired on 28.02.2003; the satisfaction note was recorded on 06.03.2003 and the notice was issued more than 3½ months after lapse of the date i.e. 18.06.2003."
In the light of aforesaid discussion we are inclined to hold that the impugned assessmentorder for AY: 2021-22 is vitiated as based upon assumption of jurisdiction which itself was vitiated on the basis of aforesaid judicial pronouncements.
Further, in regard to the penalty proceedings for AY: 2019-20, 2020-21 & 2021-22, we are of the considered view that once the assumption of jurisdiction u/s 153C fails and consequential assessment order is declared to be void-ab-initio, the penalty thereof cannot be sustained as the source of initiation of the proceedings u/s 271D is the assessment order for AY: 2021-22 which stands vitiated. Reliance for this is placed on the decision of Hon'ble Supreme Court in the case of CIT Panchkula V. M/s Jai Laxmi Rice Mills, 2015(11) TMI 1453, dated 20.11.2015, wherein it has been held that-
“As pointed out above, insofar as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under Section 271E of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under Section 271(1)(c) of the Act. Thus, insofar as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied.”
This principle has been reiterated by the Hon'ble Gujarat High Court in the case of PCIT-1 Versus Parivar Television Pvt. Ltd., 2023(10) TMI 707 and Hon’ble Andhra Pradesh High Court in the case of Grandhi Sri Venkata Amarendra Vs. PCIT, 2024(10) TMI 600, Hon’ble Rajasthan High Court in the case of Sunil Agrawal and Others Vs. ACIT, DCIT, 2025 (2) TMI 238, as relied by ld. Counsel.
As a consequence of aforesaid, the appeals of assessee are allowed and the impugned assessment order and consequential penalty orders arequashed.