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Judgment
PER MANISH AGARWAL, A.M.:
The captioned appeals are filed by different assessees against the separate orders all dated 10.02.2026 passed by Ld. Commissioner of Income Tax (A), Delhi-25 [“Ld. CIT(A)”] u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of different assessment orders tabulated as under:-
| S. No. | Appeal Nos. | Asstt. Year | CIT(A)’s Order dated | Assessment Order dated | Assessment Order passed u/s |
|---|---|---|---|---|---|
| 1. | 3838/Del/2026 | 2014-15 | 10.02.2026 | 21.03.2024 | 153C of the Act |
| 2. | 3839/Del/2026 | 2015-16 | 10.02.2026 | 21.03.2024 | 153C of the Act |
| 3. | 3844/Del/2026 | 2019-20 | 10.02.2026 | 28.03.2024 | 153C of the Act |
| 4. | 3846/Del/2026 | 2019-20 | 10.02.2026 | 28.03.2024 | 153C of the Act |
| 5. | 3840/Del/2026 | 2013-14 | 10.02.2026 | 31.03.2014 | 153C of the Act |
| 6. | 3841/Del/2026 | 2014-15 | 10.02.2026 | 31.03.2014 | 153C of the Act |
| 7. | 3842/Del/2026 | 2015-16 | 10.02.2026 | 31.03.2014 | 153C of the Act |
| 8. | 3843/Del/2026 | 2017-18 | 10.02.2026 | 31.03.2014 | 153C of the Act |
The issues involved in all captioned appeals filed by the different assessees 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.3838/Del/2026 for Assessment Year 2014-15.
ITA No.3838/Del/2026 [Assessment Year 2014-15]
[Suman Technomech Pvt.Ltd. vs DCIT]
Brief facts of the case are that the case of the assessee, proceedings u/s 153C were initiated in terms of satisfaction note recorded on 26.05.20222 by the AO of the person searched which is placed at page 4 of the Paper Book and thereafter, satisfaction was recorded by the AO of the assessee on 23.01.2024 which is placed at page 5 of the PB and proceedings were initiated u/s 153C of the Act from AY 2010-11 to AY 2020-21. The assessment was completed in terms of the order passed u/s 153C of the Act on 21.03.2024 by making additions of INR 15,50,000/- u/s 68 of the Act based on the information alleged as found during the course of search in the case of Alankit Group on 18.10.2019.
Against the said order, the assessee preferred an appeal before the ld. CIT(A) who vide impugned order dated 10.02.2026, 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 Nos. 1 to 3 raised by the assessee are with respect to the initiation of proceedings u/s 153C being barred by limitation and based on the mechanical and defective satisfaction therefore, they are taken first.
Before us, ld.AR for the assessee submits that in the case of the person searched, satisfaction was recorded on 26.05.2022 that certain documents found and seized during the course of search in the case of Alankit Group pertained to the assessee and the copy of the seized material was handed over to the AO of the assessee who has recorded the satisfaction on 23.01.2024. As per the ld. AR, there was no reason given for the inordinate delay of more than 18 months in recording the satisfaction by the AO of the assessee from date of the satisfaction recorded by the AO of the persons searched and handing over the seized material. He, therefore, submits that as per the judgements of Hon’ble Supreme Court in the case of CIT vs. Calcutta Knitwears in Civil Appeal No. 3958 of 2014 vide order dated 12.03.2014 the proceedings initiated u/s 153C after lapse of such a long period deserves to be hold bad in law. Ld. AR further drew our attention to the CBDT Instruction No. 24 of 2015 dt. 30.12.2015 issued wherein it was stated that the proceedings u/s 153C are of similar nature as of section 153BD and therefore, the field officers were advised to take necessary action u/s 153C of the Act within the reasonable time period from the receipts of the seized material. Ld. AR further placed reliance on the judgment of Hon’ble Gujarat High court in the case of Parag Rameshbhai Gathani vs ITO reported in (2025) 180 Taxmann.com 662 (Guj.).
It is further submitted by ld.AR that satisfaction was recorded by the AO of the persons searched on 26.05.2022 however, from the records, it is not apparent as to when the said documents were handed over to the AO of the assessee. The Ld. AR submits that since the satisfaction was recorded on 26.05.2022, therefore, in terms of the order of Hon’ble Supreme Court in the case of CIT Vs. Jasjit Singh reported in (2025) 173 Taxmann.com 575 (SC) and of the hon’ble Delhi high court CIT vs. RRJ Securities Ltd. reported in [2015] 62 taxmann.com 391 (Delhi HC) wherein it is held by the hon’ble courts that in the case of other person, date of search would be reckoned from the date when the seized material has been handed over by the AO of the person searched to the AO of the assessee. As per ld. AR, in the instant case, the satisfaction was recorded on 26.05.2022, therefore for the purposes of section 153C of the Act, the same should be taken as the date of search and the period of six years should be taken from that date. Accordingly, the year of search would be AY 2023-24 and period of six preceding assessment years would be from AY 2017-18 to AY 2022-23 and the year under appeal is beyond the period of Six preceding years from the end of the year of search.
Ld. AR further submits that the satisfaction recorded by the AO of the assessee was defective and it does not contain the satisfaction that the documents are “pertain to” the assessee and “have bearing on the determination of the total income of the assessee”. For this reliance is placed on the judgement of hon’ble Delhi high court in the case of Saksham Commodities Ltd reported in (2024) 161 Taxmann.com 485 (Delhi).
On the other hand, ld. CIT DR for the Revenue supported the orders of the lower authorities.
Heard the contentions of both the parties and perused the material available on record. We find support from the judgements of Hon'ble Supreme Court of India in the case of CIT vs. Calcutta Knitwears in Civil Appeal No. 3958 of 2014 vide order dated 12.03.2014 has settled the law with regard to timeline for initiation of assessment u/s 153C of the Act and in Para 44 has observed as under:
"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."
That Hon'ble Delhi High Court in the case of CIT v. Bharat Bhushan Jain reported in [2015] 61 taxmann.com 89 (Delhi), by following the aforesaid judgement of Hon'ble Supreme Court in the case of Calcutta Knitwears (supra), vide order dated 08.01.2015 held as under:
"6.Having regard to the intent of the Supreme Court in paragraph 44 of the Calcutta Knitwears (supra), where it was indicated that the Revenue has to be vigilant in issuing notice to the third party under section 158BD, immediately after the completion of assessment of the searched person, this court is of the opinion that a delay ranging between 10 months of one-and-half years cannot be considered contemporaneous to assessment proceedings. We are of the opinion that notices were not issued in conformity with the requirements of section 158BD, and were unduly delayed. The appeals of the Revenue, accordingly, fail and are dismissed.”
The Hon'ble Delhi High Court has specified the time limit beyond which, the issuance of notice u/s 158BD of the Act will be considered as time barred, the said timeline of delay has been specified as ranging between 10 months to one & a half year, meaning thereby that if any notice u/s 158BD of the Act is issued beyond 10 months' time from the date of assessment order framed in the case of person searched, the same will be considered as delayed and accordingly, the said notice will be time barred. The CBDT also issued Circular No. 24/2015 dated 31.12.2015 wherein it is clarified that 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 Apex Court in case of Calcutta Knitwears (supra), are applicable to the proceedings u/s 153C of the Act, for the purposes of assessment of income of other than the searched person. Accordingly, any delay in issuance of notice u/s 158BD squarely applies to issuance of notice u/s 153C of the Act as well.
In the instant case, as observed above, the notice u/s 153C was issued after the inordinate delay of Seven months from the date of recording the satisfaction and though such delay is less than 10 months however, still no reason was stated by the AO for such delay thus, the notice issued u/s 153C cannot be sustained on account of delay. For clarification of facts as discussed in above paras, the satisfaction note dated 26.05.2022 of the searched person and satisfaction note dated 23.01.2024 for non-searched person are reproduced as under:-
Further, in the satisfaction note, AO has not recorded the satisfaction that the seized material relates to the assessee, as has been provided in section 153C(1)(b) of the Act. Further in the satisfaction note, the AO has not recorded the satisfaction that they have “bearing on the determination of the total income of the assessee”. The Hon’ble Jurisdictional High Court in the case of Saksham Commodities Ltd reported in (2024) 161 Taxmann.com 485 (Delhi) wherein the Hon’ble Court by following the judgement of RRJ Securities Ltd. (supra) 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.
The Hon’ble Jurisdictional Delhi High Court in the case of Saksham Commodities (supra) in clear terms held that for initiation of proceedings u/s 153C of the Act, the AO should satisfy that books of accounts or documents or assets seized or requisition must be ‘pertained to’ the assessee and the entries contained therein must “have bearing on the determination of the total income of such other person”. Considering the above, we are of the opinion that the AO of the assessee has recorded the incorrect and mechanical satisfaction that the documents found during the course of search relate to the assessee and therefore, such satisfaction is defective satisfaction and vitiated the entire proceedings and thus the consequent order passed is hereby quashed. The, Grounds of appeal Nos. 1 to 3 raised by the assessee are thus, allowed.
Since we have allowed the legal grounds of appeal taken by the assessee, the other grounds of appeal become academic and not adjudicated.
In the result, appeal of the assessee is allowed.
ITA No.3839/Del/2026 [Assessment Year 2015-16] In the case of Suman Technomech Pvt. Ltd.
In this year also, facts are identical as existed in ITA No.3838/Del/2026 for Assessment Year 2014-15 which fact is fairly admitted by both the parties. Therefore, by respectfully following the observations made in AY 2014-15 in above-mentioned appeal which are applied Mutatis Mutandis, we hereby, quash the order passed u/s 153C of the Act and accordingly, allowed the Grounds of appeal Nos. 1 to 3 raised by the assessee.
Since we have allowed the legal grounds of appeal taken by the assessee, the other grounds of appeal become academic and not adjudicated.
In the result, appeal of the assessee is allowed.
Now we take appeal of the assessee in ITA No.3844/Del/2026 for Assessment Year 2019-20.
ITA No.3844/Del/2026 [Assessment Year 2019-20] [CSL Food Products Pvt.Ltd. vs DCIT ]
Heard the contentions of both the parties and perused the material available on record. In this appeal, the facts are identical as existed in ITA No.3838/Del/2026 for Assessment Year 2014-15 in the case of M/s Suman Technomech Pvt. Ltd. Vs. DCIT, wherein while deciding the appeal of the assessee, we have held the satisfaction note recorded by the AO of the assessee as defective and based on such defective satisfaction note quashed the assessment order passed u/s 153C of the Act by respectfully following the order of hon’ble Delhi High court in the case of Saksham Commodities Ltd reported in (2024) 161 Taxmann.com 485 (Delhi). For clarification of facts, the satisfaction note dated 26.05.2022 of the searched person and satisfaction note dated NIL for non-searched person are reproduced as under:-
As no satisfaction was recorded by the AO of the assessee that the documents “pertain to” the assessee and “have a bearing on the determination of the total income” which is the preconditions for invoking the provisions of section 153C of the Act. Therefore, by respectfully following the observations made in AY 2014-15 in ITA No. 3838/Del/2026 in the case of Suman Technomech Pvt. Ltd. herein above which applies Mutatis Mutandis to the facts of the present case, we hold the proceedings initiated u/s 153C of the Act based on such defective satisfaction note as invalid and consequent order passed is hereby, quashed. The, Grounds of appeal Nos. 1 to 3 raised by the assessee are thus, allowed.
Since we have allowed the legal grounds of appeal taken by the assessee, the other grounds of appeal become academic and not adjudicated.
In the result, appeal of the assessee is allowed.
Now we take appeal of the assessee in ITA No.3846/Del/2026 for Assessment Year 2019-20.
ITA No.3846/Del/2026 [Assessment Year 2019-20] [Ashish Aggarwal vs DCIT]
Heard the contentions of both the parties and perused the material available on record. In this appeal, facts are identical as existed in ITA No.3838/Del/2026 for Assessment Year 2014-15 in the case of M/s Suman Technomech Pvt. Ltd. Vs. DCIT, wherein while deciding the appeal of the assessee herein above, we have held the satisfaction note recorded by the AO of the assessee as defective and based on such defective satisfaction note, assessment order passed u/s 153C of the Act was quashed by respectfully following the order of hon’ble Delhi High court in the case of Saksham Commodities Ltd reported in (2024) 161 Taxmann.com 485 (Delhi). For the clarification of facts, satisfaction note dated 26.05.2022 of the searched person and satisfaction note dated 24.06.2022 for non-searched person are reproduced as under:-
As no satisfaction was recorded by the AO of the assessee that the documents found from the possession of the person searched “have a bearing on the determination of the total income” which is the preconditions for invoking the provisions of section 153C of the Act. Therefore, by respectfully following the observations made in AY 2014-15 in ITA No. 3838/Del/2026 in the case of Suman Technomech Pvt. Ltd. herein above which applies Mutatis Mutandis to the facts of the present case, we hold the proceedings initiated u/s 153C of the Act based on such defective satisfaction note as invalid and consequent order passed is hereby, quashed. The, Grounds of appeal Nos. 1 to 3 raised by the assessee are thus, allowed.
Since we have allowed the legal grounds of appeal taken by the assessee, the other grounds of appeal become academic and not adjudicated.
In the result, appeal of the assessee is allowed.
Now we take appeals of the assessee in ITA No.3840 to 3843/Del/2026 for Assessment Years 2013-14 to 2015-16 & 2017-18 respectively, in the case of Manisha Agarwal.
ITA No.3840 to 3843/Del/2026 [Assessment Year 2013-14 to 2015-16 & 2017-18] [Manisha Agarwal vs DCIT]
Facts are similar in all four captioned appeals mentioned herein above. Therefore, all the four captioned appeals are decided together as under:-
Heard the contentions of both the parties and perused the material available on record. In this case also for all the three years the facts are identical in nature as existed in ITA No. 3838/Del/2026 for Assessment Year 2014-15 in the case of Suman Technomech Pvt. Ltd. Where we have held that the proceedings initiated u/s 153C based on the defective satisfaction note recorded by the AO of the assessee are invalid and quashed the order passed. For the clarification of facts, satisfaction note dated
13.05.2022 for non-searched person, which is common for all the four years, is reproduced as under:-
As is observed from the above satisfaction note that no satisfaction was recorded by the AO of the assessee that the documents found from the possession of the person searched “have a bearing on the determination of the total income” which is the preconditions for invoking the provisions of section 153C of the Act. Therefore, by respectfully following the observations made in AY 2014-15 in ITA No. 3838/Del/2026 in the case of Suman Technomech Pvt. Ltd. herein above which applies Mutatis Mutandis to the facts of the present case, we hold the proceedings initiated u/s 153C of the Act based on such defective satisfaction note as invalid and consequent order passed is hereby, quashed. The, Grounds of appeal Nos. 1 to 3 raised by the assessee in all the four appeals are thus, allowed.
Since we have allowed the legal grounds of appeal taken by the assessee, the other grounds of appeal taken in all the four captioned appeals become academic and not adjudicated.
In the result, all the four captioned appeals of the assessee are allowed.
In the final result, appeals of the assessee in ITA Nos. 3838 & 3839/Del/2026 for Assessment Years 2014-15 to 2015-16 in the case of M/s Suman Technomech Pvt. Ltd.; ITA No.3844/Del/2026 for Assessment Year 2019-20 in the case of M/s CSL Food Products Pvt. Ltd.; ITA No.3846/Del/2026 for Assessment Year 2019-20 in the case of Ashish Agarwal; and ITA Nos.3840 to 3843/Del/2026 for Assessment Years 2013-14 to 2015-16 & 2017-18 respectively in the case of Manisha Agarwal, all are allowed.