ITAT Delhi Sets Aside Section 153C Assessment for Mechanical Satisfaction in Alankit Group Matter

Background of the Dispute

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has annulled an assessment framed under Section 153C of the Income Tax Act, 1961 in the case of Kiran Agarwal Vs DCIT for Assessment Year (AY) 2019-20. The Tribunal held that the satisfaction note recorded by the Assessing Officer (AO) in relation to the assessee was purely mechanical and did not reflect any genuine application of mind, thereby failing the jurisdictional test required under Section 153C.

The assessment proceedings stemmed from a search and seizure operation carried out on Alankit Group on 18.10.2019. During this search, certain ledger records and documents were stated to have been found, which the Revenue claimed contained information relating to the assessee. On this basis, proceedings under Section 153C were initiated.

The assessee contested the very assumption of jurisdiction, arguing that the satisfaction note:

  • Did not identify any specific incriminating material relatable to her, and
  • Did not demonstrate how any such material had a bearing on her total income for the relevant assessment years.

Procedural History

  • A search under Section 132 was conducted on 18.10.2019 in the case of Alankit Group at premises connected with Sh. Alok Kumar Agarwal, Sh. Ankit Agarwal, M/s Alankit Limited and M/s Alankit Assignments Limited located at 3584/4, Narang Colony, Gali No. 4, Tri Nagar, Delhi.
  • The Alankit Group cases were centralized to Central Circle-28, New Delhi.
  • During the course of assessments under Section 153A for the Alankit Group, the Department claimed to have come across materials purportedly relevant to the income determination of Smt. Kiran Agarwal.
  • Relying on these materials, the AO of the searched person recorded a satisfaction note under Section 153C, and thereafter, the AO having jurisdiction over the assessee (a non-searched person) also recorded a separate satisfaction note and issued notice for AYs 2014-15 to 2020-21.
  • For AY 2019-20, an assessment order under Section 153C dated 02.03.2024 was passed by the DCIT, CC-25, New Delhi.
  • The assessee’s appeal before the Ld. Commissioner of Income Tax (Appeals)-25, New Delhi, was dismissed by order dated 15.10.2024.
  • Aggrieved, the assessee filed an appeal before the ITAT Delhi.

Grounds Raised Before the ITAT

The assessee raised multiple grounds; however, the Tribunal focused primarily on:

  • Ground No. 2 and Ground No. 11 – challenging the validity of the assumption of jurisdiction under Section 153C on the basis that:
    • The satisfaction note failed to specify any incriminating material belonging to or relating to the assessee, and
    • There was no indication that such material had any bearing on the determination of her total income.

The assessee’s counsel argued that the satisfaction note was drafted as a mere ritual, without any real analysis or reasoning.

The Departmental Representative (Ld. DR) countered that:

  • The satisfaction note recorded in the assessee’s case must be read together with the satisfaction note recorded in the case of the searched person.
  • According to the Revenue, when both notes are seen collectively, they provided sufficient basis to invoke Section 153C.

Factual Matrix as Noted by the Tribunal

The Tribunal recorded that: