ITAT Delhi Quashes Section 153C Assessments for Lack of Proper Satisfaction; Seven Appeals Allowed

Key Facts and Tribunal Findings

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, allowed seven appeals filed by M/s Atoll Vyapaar Pvt. Ltd. for Assessment Years 2013–14 to 2020–21, quashing assessments framed under Section 153C read with Section 143(3) of the Income-tax Act.

The case arose from a search conducted on the Alankit Group on 18 October 2019, during which certain material was alleged to pertain to the assessee. Based on this, proceedings under Section 153C were initiated against the assessee. The jurisdictional Assessing Officer recorded a common satisfaction note on 24 December 2021 for all relevant years.

Before the Tribunal, the assessee challenged the validity of the proceedings on the ground that the satisfaction note did not establish that the seized material had any “bearing” on determination of its total income.

The Revenue contended that there is no statutory requirement for the Assessing Officer to explicitly use the term “bearing” in the satisfaction note.

The Tribunal rejected the Revenue’s contention. On examination of the satisfaction note, it found that there was no indication that the alleged incriminating material had any nexus with determination of the assessee’s taxable income for the relevant years.

Relying on the Delhi High Court ruling in Saksham Commodities Ltd. v. ITO (2024) 464 ITR 1, the Tribunal held that the satisfaction note must clearly demonstrate that the seized material has a bearing on the assessee’s income. In absence of such satisfaction, the assumption of jurisdiction under Section 153C is invalid.

Accordingly, the Tribunal quashed all the impugned assessments. All other issues on merits were rendered academic.