SHOKEEN CONSTRUCTION CO. ,DELHI V. DCIT, CENTRAL CIRCLE-30 , DELHI

ITA 5972/DEL/2024

AI Insights

The case involves Shokeen Construction Co., which appealed against the orders passed by the Commissioner of Income Tax (Appeals) for the assessment years 2018-19 to 2020-21. These orders were based on the assessments made under section 153C read with section 143(3) of the Income Tax Act, following a search and seizure operation. The primary contention of the appellant was that the notice under section 153C and the subsequent assessments were invalid as they were not based on a properly recorded satisfaction by the Assessing Officer of the assessee but were merely a reproduction of the satisfaction note from the Assessing Officer of the person searched. The Tribunal, after examining the satisfaction notes and relevant legal precedents, agreed with the appellant and quashed the assessments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 788159 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: misc
• Appeal Filed On: 23-12-2024
• Other Referred Cases: Canyon Financial Services Ltd. vs ITO, PCIT(Central)-3 vs Ridgeview Construction Pvt.Ltd., Saksham Commodities Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAHESH KUMAR
• Assessee Lawyers: AMIT GOEL; PRANAV YADAV
• Keywords: Document seized; Documents seized; Search and seizure; Assessment record
• Section: 143(3); 132; 153A; 37

Judgement Text

"ITA No.5971 to 5973/Del/2024 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “G” BENCH: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.5971 to 5973/Del/2024 [Assessment Year : 2018-19 to 2020-21] Shokeen Construction Co. D-688, Upper Ground Floor, Pitampura, Saraswati Vihar, North West Delhi-110034. PAN-ACKFS7795J vs DCIT, Central Circle-30, Delhi APPELLANT RESPONDENT Appellant by Shri Amit Goel, CA & Shri Pranav Yadav, Adv. Respondent by Shri Mahesh Kumar, CIT DR Date of Hearing 06.11.2025 Date of Pronouncement 27.11.2025 ORDER PER MANISH AGARWAL, AM : The captioned appeals are filed by assessee against the different orders, all dated 16.12.2024 passed by Ld. Commissioner of Income Tax (A)-30, New Delhi [“Ld. CIT(A)”] in Appeal No. 30/10343/2017-18; Appeal No.30/10575/2018-19; and Appeal No. 30/10736/2019-20 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment orders, all dated 20.03.2023 passed u/s 153C r.w.s. 143(3) of the Act pertaining to assessment year 2018-19 to 2020-21 respectively. Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 2 2. As these captioned appeals filed by the assessee have similar issues which are inter-linked, inter-connected and this fact has been admitted by both the parties during the course of hearing before us, therefore, these three appeals filed by the assessee are decided by a common order. ITA No.5971/Del/2024 [Assessment Year : 2018-19] 3. First we take up the appeal of assessee in ITA No. 5971/Del/2024 for Assessment Year 2018-19. 4. Brief facts of the case are that assessee company filed its original return of income on 31.10.2018, declaring income of INR 80,37,460/-. A search and seizure operation u/s 132 of the Act was carried out on 26.10.2020 in the cases of Sanjay Jain & Mehta Group at various residential and business premises. During the course of search two sets of books under tally software were found and seized from the office premises of Shri Sanjay Jain. On the basis of information available, a satisfaction note was prepared by the AO of person searched i.e. DCIT, Central Circle-30, New Delhi proposing for initiation of proceedings u/s 153C of the Act in the case of the assessee. Thereafter, notices u/s 153C was issued on 24.08.2022 by the AO of the assessee. After considering the submissions of the assessee and the documents seized during the course of search in the case of third person, the AO computed the income of the assessee company at INR 1,09,71,991/- vide Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 3 assessment order dated 20.03.2023 passed u/s 153C r.w.s. 143(3) of the Act. 5. Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 16.12.2024, dismissed the appeal of the assessee. 6. Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:- 1. \"On the facts and circumstances of the case and in law, the notice u/s 153C issued by the assessing officer is bad-in-law, barred by limitation and without jurisdiction and, therefore, the said notice along with the assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so. 2. On the facts and circumstances of the case and in law, the notice u/s 153C issued by the assessing officer is illegal and without jurisdiction. The assessing officer has not complied with the provisions of section 153C and other allied provisions for issuance of such notice. Accordingly, the notice u/s 153C along with the assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so. 3. On the facts and circumstances of the case and in law, the satisfaction note(s) recorded u/s 153C of the Act are bad-in-law and without jurisdiction and, accordingly, the assessment proceedings initiated on the foundation of such satisfaction note(s) and also the consequent assessment order passed are liable to be quashed and CIT(A) erred in not holding so. 4. On the facts and circumstances of the case and in law, the addition of Rs. 20,34,531/- made by the assessing officer on account of disallowance of purchases u/s 37 of the Act, is beyond the scope/jurisdiction of provisions of section 153C read with section 153A of the Income Tax Act, 1961 and CIT(A) erred in not holding so. Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 4 5. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition made by the assessing officer of Rs. 20,34,531/- on account of disallowance of purchases u/s 37 of the Act. 6. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is non-est as it does not have DIN on the body of the assessment order and CIT(A) erred in not holding so. 7. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 153D of the Income Tax Act, 1961 and CIT(A) erred in not holding so.” 7. Ground of appeal Nos. 1 to 3 raised by the assessee are with respect to the initiation of proceedings u/s 153C without following the due procedure as prescribed under the Act and further without recording proper satisfaction by the AO of the assessee after due application of the mind on the material supplied by the AO of the person searched. 8. Before us, Ld. AR for the assessee submits that file of the assessee was inspected and it was time and again requested to supply the copy of “Satisfaction Note” recorded by the AO of the assessee before initiating the proceedings u/s 153C of the Act which was neither available in the assessment folder nor was ever supplied to the assessee. A search was carried out on 06.10.2020 and AO of the searched person has recorded his satisfaction note on 16.08.2022 that certain documents containing certain entries of income pertained to the assessee were found in the seized material. Ld. AR further submits that proceedings u/s 153C were initiated in the case of the assessee on the basis of satisfaction note of the person searched i.e. AO, Central Circle, New Delhi and no separate Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 5 satisfaction was recorded by the AO of the assessee after receiving the seized material and satisfaction note from the AO of the person searched. He, therefore, submits that the proceedings initiated u/s 153C of the Act are bad in law and consequent order passed be quashed. 9. Per contra, Ld.CIT DR for the Revenue supports the order of the lower authorities and submits that he will file a written submission after making factual verification of the assessment records of the AO. Thereafter, ld. CIT DR filed submission alongwith documents containing total 09 pages, wherein it is observed that a satisfaction note was prepared by the AO of the assessee on 22.08.2022 and thereafter, notice u/s 153C was issued for the impugned year on 24.08.2022. He also filed a copy of the satisfaction note so recorded by the ITO, Ward-59(6), Delhi who is AO of the present assessee. 10. Since we have heard the case on the issue of non-recording of satisfaction by the AO of the assessee therefore, the case was fixed for further hearing and finally heard on 06.11.2025 wherein both the parties have made submissions on the grounds of appeal taken by the assessee in its appeal. 11. In support of Ground of appeal Nos.1 to 3 with respect to the validity of the satisfaction recorded, Ld.AR of the assessee submits Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 6 that satisfaction note now submitted, stated to have been recorded by ITO, Ward-59(6), Delhi on 22.08.2022 clearly suggests that no proper satisfaction was recorded and it is a carbon copy of the satisfaction note prepared by the AO of the person searched. Ld.AR submits that AO of the assessee should apply his mind on the material supplied by the AO of the person searched and then reached to the conclusion that such seized material belongs to or pertains to the assessee and has bearing on the determination of the income of the assessee. Ld. AR submits that from the perusal of the satisfaction note it could be observed that it is a carbon copy of the satisfaction note prepared by the AO of the person searched where para No. 5 to para 7 of the satisfaction note recorded by the DCIT, Central Circle-30 are verbatim copied in para No. 1 & 2 of the satisfaction note prepared by the AO of the assessee on 22.08.2022. Ld.AR submits that the AO in para 2 of his satisfaction note has recorded the satisfaction on unaccounted receipt and payment of INR 5,05,23,880/-. however, no year-wise satisfaction of income found recorded in the documents found/seized from the possession of third person, was recorded. Ld. AR, therefore, submits that consequent proceedings u/s 153C of the Act based on such mechanical satisfaction note of the AO of the assessee deserve to be hold bad in law. In this regard, ld.AR placed reliance on the following judicial precedents:- (i) Canyon Financial Services Ltd.v s ITO [399 ITR 202]; (ii) PCIT(Central)-3 vs Ridgeview Construction Pvt.Ltd. 2025 (2) TMI 869 (Delhi High Court); (iii) Saksham Commodities Ltd. [2024] 464 ITR 1 (Delhi High Court) Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 7 12. On the other hand, Ld.CIT DR submits that there is no prescribed format provided under Act for recording satisfaction by the AO of the assessee. Once the AO of the assessee has recorded his satisfaction upon receipt of the seized material and satisfaction note from the AO of the person searched and held the same as pertained to or belonged to the assessee and therefore, the procedure as prescribed for initiation of proceedings u/s 153C of the Act has duly been complied with. Ld. CIT DR thus prayed for the confirmation of the initiation of proceedings u/s 153C of the Act. 13. Heard the contentions of both parties and perused the material available on record. The satisfaction note recorded by the AO of the searched person for initiating the proceedings u/s 153C of the Act is reproduced as under for ready reference:- “Assessment of income of any other person. 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 8 Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 9 assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. (3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021.” 14. The satisfaction note recorded by the AO of the assessee which is filed as Annexure-2 by the Revenue before us is as under:- Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 10 15. From the perusal of the para 5 & para 6 of the satisfaction note of the AO of the person searched and para 1 & 2 of the satisfaction note of the AO of the assessee, it is seen that both are verbatim copy and in the satisfaction note recorded by the AO of the assessee, nowhere satisfaction is recorded that it contained entries which has direct bearing on the determination of income on year to year basis and simply reproduced the satisfaction note of the AO of person searched. This clearly shows that he had not applied his mind and acted in mechanical manner before initiating proceedings u/s 153C of the Act in the case of the assessee. The Hon’ble Delhi High Court in the case of Canyon Financial Ltd. (supra) under identical circumstances in para 19 of the order made following observations:- \"19. As a result, the Court holds that the satisfaction note prepared by the AO of the searched person does not fulfil the legal requirement spelled out in Section 153C(1) of the Act. The satisfaction note of the AO of the Assessee, being a carbon copy of the satisfaction note of the AO of the searched person also fails to fulfil the jurisdictional requirement. No reasons are recorded for the identical conclusion in either satisfaction note that the seized documents mentioned therein belong not to the searched person but to the Assessee.\" 16. Further, in the case of Saksham Commodities Ltd. (supra), the Hon’ble Delhi High Court has held that AO of the person searched should record his satisfaction that the entries found in the papers from the possession of the persons searched belong to the assessee and has bearing on determination of the income of such person to whom it relates. The relevant observations are in para 51 are as under:- Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 11 51. “Ultimately Section 153C is concerned with books, documents or articles seized in the course of a search and which are found to have the potential to impact or have a bearing on an assessment which may be undergoing or which may have been completed. The words \"have a bearing on the determination of the total income of such other person\" as appearing in Section 153C won, necessarily have to be conferred pre- eminence. Therefore, and unless the AO is satisfied that the material gathered could potentially impact the determination of total income, it would be unjustified in mechanically reopening' or assessing all over again all the ten A Ys' that could possibly form part of the block of ten years.” 17. Further, the Co-ordinate Bench of the Tribunal in the case of Rajiv Aggarwal vs ACIT, Central Circle-20, new Delhi in ITA No.2818/Del/2023 by following the aforesaid judgements of hon’ble Delhi high court, has held that where the satisfaction note of the AO of the person searched and the AO of the assessee are identically worded then there is no independent application of mind by the AO of the assessee. The relevant observations are as under:- 6. “The interpretation that comes out on a plain reading of the Section is that the recording of satisfaction is a mandatory requirement before the issuance of notice under section 153C of the Act in order to assume jurisdiction to make assessments for the assessment years prescribed in this section. Further, whenever a satisfaction note is drawn by the Assessing Officer of the other person i.e. the Jurisdictional Assessing Officer of the assessee in the present case, he must necessarily specify the material for each assessment year that belongs to/pertains to/ relates to the other person and also has a bearing on the determination of the total income of the other person for that year. Meaning thereby that whichever year is sought to be reopened out of the six years, the Assessing Officer of the other person must necessarily mention the incriminating material for that year and also must specify how the income declared by the assessee in its return of income under Section 139(1) will be affected and to what extent by virtue of the said incriminating material. It is also a settled law that the recording of satisfaction note is not mere a formality. The satisfaction must reflect an application of mind by the jurisdictional Assessing officer of the other person that he has examined the seized material that belongs to/pertains to/relates to the other person and also Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 12 state the reasons on the basis of which he reached to a conclusion that the seized material belonging to/pertaining to/relating to the other person, has a bearing on the determination of the total income of such other person. 11. In the aforesaid context, when we examine the facts of the case, what immediately strikes is that the satisfaction note recorded by the AO of the searched person u/s 153C of the Act, copy of which is available at pages 72-77 of the paper book, when read along with the satisfaction note recorded by the AO of the appellant u/s 153C of the Act, the copy of which is available at pages 78-82 of the paper book, the two are similar in content. The narration of facts of search and seizure operation, details of documents allegedly pertaining to the assessee are mirror images except for the fact that in the satisfaction note recorded by the AO of searched person, the said AO uses the words that the allegedly the seized documents 'pertain' to a person other than the person searched and the AO of the assessee before us record the satisfaction that the documents pertain to an information contained in the said documents 'related to Shri Rajiv Agarwal, i.e., a person other than the person searched u/s 132 of the Income-tax Act, 1961. 12. In the case of Canyon Financial Services Ltd. Vs. ITO [399 ITR 202] the Hon'ble Delhi High Court has held that where satisfaction notes recorded by Assessing Officer of assessee and Assessing Officer of searched person were identically verdict carbon copy proceeding could not be initiated against assessee u/s 153C of the Act. While holding so the Hon'ble High Court held as under: \"19. As a result, the Court holds that the satisfaction note prepared by the AO of the searched person does not fulfil the legal requirement spelled out in Section 153C(1) of the Act. The satisfaction note of the AO of the Assessee, being a carbon copy of the satisfaction note of the AO of the searched person also fails to fulfil the jurisdictional requirement. No reasons are recorded for the identical conclusion in either satisfaction note that the seized documents mentioned therein belong not to the searched person but to the Assessee.\" 13. The situation in the present case also identical. Both the satisfactions recorded by the Assessing Officer of the searched person as well as the assessee or almost identically worded and in fact the Assessing Officer merely relied on the satisfaction note recorded by the Assessing Officer in the searched person. Therefore, the ratio of the decision of the Jurisdictional High Court in the case of Canyon Financial Services Pvt. Ltd. Vs. ITO (supra) applies in the circumstances of the facts of the case.” Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 13 18. In view of the above discussion, we are of the considered view that in the instant case, AO of the assessee has not recorded proper satisfaction by applying his mind on the information and material supplied by the AO of the person searched and simply carbon coped the satisfaction note recorded by the AO of the person searched therefore, by respectfully following the judgement of Hon’ble Delhi High Court in the case of Canyon Financial Ltd. (supra) we hold that proceedings initiation u/s 153C of the Act are without recording proper satisfaction by the AO of the assessee and therefore, the proceedings initiated u/s 153 of the Act are bad in law and the consequent order passed is hereby quashed. Accordingly, legal grounds of appeal Nos. 1 to 3 of the assessee are allowed. 19. In the result, appeal of the assessee is allowed. ITA No.5972/Del/2024 [Assessment Year : 2019-20] 20. Now we take up the appeal of assessee in ITA No. 5972/Del/2024 for Assessment Year 2019-20. 21. Heard the contentions of both parties and perused the material available on record. In this appeal, facts are similar and identical to the facts of assessee’s appeal in ITA No.5971/Del/2024 for Assessment Year 2018-19 where we have already held the proceedings initiated u/s 153C as bad in law in absence of proper Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 14 satisfaction recorded by the AO of the assessee before issuance of notice u/s 153C of the Act. In this year also the facts are the same and the proceedings u/s 153C of the Act were initiated on the basis of common satisfaction note, thus, by respectfully following the observations made in assessee’s appeal for AY 2018-19 herein above, which are applied Mutatis Mutandis to the facts of case under consideration, appeal filed by the assessee is allowed. Accordingly, legal grounds of appeal Nos. 1 to 3 of the assessee are allowed. 22. In the result, appeal of the assessee is allowed. ITA No.5973/Del/2024 [Assessment Year : 2020-21] 23. Now we take up the appeal of assessee in ITA No. 5973/Del/2024 for Assessment Year 2020-21. 24. Heard the contentions of both parties and perused the material available on record. In this appeal, facts are similar and identical to the facts of assessee’s appeal in ITA No.5971/Del/2024 for Assessment Year 2018-19 where we have already held the proceedings initiated u/s 153C as bad in law in absence of proper satisfaction recorded by the AO of the assessee before issuance of notice u/s 153C of the Act. In this year also the facts are the same and the proceedings u/s 153C of the Act were initiated on the basis of common satisfaction note, thus, by respectfully following the Printed from counselvise.com ITA No.5971 to 5973/Del/2024 Page | 15 observations made in assessee’s appeal for AY 2018-19 herein above, which are applied Mutatis Mutandis to the facts of case under consideration, appeal filed by the assessee is allowed. Accordingly, legal grounds of appeal Nos. 1 to 3 of the assessee are allowed. 25. In the result, appeal of the assessee is allowed. 26. In the final result, all the appeals filed by the assessee in ITA Nos. 5971 to 5973/Del/2024 [AY 2018-19 to 2020-21] are allowed. Order pronounced in the open Court on 27.11.2025. Sd/- Sd/- (ANUBHAV SHARMA) JUDICIAL MEMBER Date:- 27.11.2025 *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "