Gujarat High Court Sets Aside Section 153C Notice Due to Absence of Dated Satisfaction Note and Unjustified Delay in Communication
Introduction
The Gujarat High Court recently delivered a significant judgment addressing procedural compliance requirements for initiating proceedings under Section 153C of the Income-tax Act, 1961. In the matter concerning Virat Alloys Private Limited Vs ACIT, the Court examined whether assessment proceedings could be sustained when the mandatory satisfaction note lacked a date and was communicated to the assessee with an unexplained delay spanning nearly two years.
The bench addressed multiple writ petitions that contested a notice issued under Section 153C for the assessment year 2015-16, alongside all subsequent proceedings that emerged from such notice. The ruling reinforces the fundamental principle that procedural safeguards enshrined in tax legislation are not mere formalities but substantive requirements that protect assessees' rights.
Background Facts
Filing of Return
The assessee-company had submitted its revised return of income for assessment year 2015-16 on 09.03.2017, declaring nil income. The company was conducting its regular business operations without any indication of irregularity at that stage.
Search Operation
On 25.06.2018, the Income Tax Department conducted a search operation under Section 132 of the Income-tax Act, 1961 at the premises of M/s World Window Group. This search formed the basis for subsequent actions against several entities allegedly connected with the said group.
Assessee's Position
The assessee-company maintained a clear stance that it had not engaged in any business dealings or transactions whatsoever with M/s World Window Group during the financial years 2012-13 through 2018-19. This assertion became crucial in evaluating the legitimacy of invoking Section 153C proceedings against the assessee.
Issuance of Notice
Despite the assessee's position, a notice dated 24.06.2022 under Section 153C of the Act was issued to the company for assessment year 2015-16. The assessee promptly responded to this notice on 22.07.2022, contesting the basis for its issuance.
Primary Contentions Raised
Assessee's Arguments
The assessee's legal counsel, Mr. Jaimin Dave, advanced the argument that the impugned notice warranted quashing based on established judicial precedents. He specifically referenced the Supreme Court's authoritative ruling in CIT v. Calcutta Knitwears [2014] 362 ITR 673 and the clarificatory CBDT Circular No. 24 of 2015 dated 31.12.2015.
The counsel emphasized that the satisfaction note, which constitutes a jurisdictional prerequisite for initiating Section 153C proceedings, was first communicated to the assessee on 31.05.2024—an inordinate delay that violated principles of natural justice and procedural fairness. The satisfaction note pertaining to the searched entity M/s World Window Group was recorded on 06.05.2022, yet the assessee received the relevant documentation only on 30.05.2024, extending beyond any reasonable limitation period.
To buttress his submissions, the counsel cited a recent decision of the Gujarat High Court dated 18.11.2025 in Special Civil Application No. 3734 of 2025 along with connected matters, which dealt with similar procedural infirmities.
Revenue's Position
Ms. Maithili D. Mehta, learned Senior Standing Counsel representing the Revenue, presented the department's timeline of events. According to her instructions, the satisfaction note concerning the assessee was purportedly recorded on 17.05.2022.
She explained that following the search conducted against M/s World Window Group on 25.06.2018, the Assessing Officer handling the searched person's case recorded a satisfaction note on 06.05.2022. Subsequently, the relevant materials were transmitted to the jurisdictional Assessing Officer responsible for the assessee's case, who allegedly recorded his satisfaction note on 23.06.2022.
However, in a significant concession, the learned Senior Standing Counsel candidly admitted that upon scrutinizing the satisfaction note prepared by the assessee's Assessing Officer, it conspicuously lacked any date notation. She further acknowledged that this undated satisfaction note was eventually communicated to the assessee only on 30.05.2024.
Judicial Analysis
Established Factual Matrix
The Court noted that certain facts remained undisputed between the contesting parties. The chronology established that:
- The search operation against M/s World Window Group occurred on 25.06.2018
- A satisfaction note concerning the searched entity was recorded on 06.05.2022
- The Assessing Officer of the searched person allegedly forwarded materials to the jurisdictional Assessing Officer of the assessee-company on 17.05.2022
- The jurisdictional Assessing Officer purportedly recorded his satisfaction note on 23.06.2022
- The satisfaction note reached the assessee only on 30.05.2024