ITAT Delhi Invalidates Section 153C Assessment for Lack of Year-Specific Satisfaction

The Income Tax Appellate Tribunal, Delhi Bench, in the case of Sh. Sudesh Gahlot Vs DCIT, has annulled an assessment framed under Section 153C of the Income Tax Act, 1961 for AY 2016-17. The Tribunal held that the very foundation of jurisdiction under Section 153C was defective because the Assessing Officer relied on a consolidated satisfaction note spanning multiple assessment years, instead of recording a distinct satisfaction for each individual year.

This decision reinforces the judicial view that Section 153C cannot be invoked mechanically for an entire block of years merely because some material is found during a search; the Assessing Officer must link the seized material to specific years and record satisfaction separately.

Background of the Case

Return Filing and Search Action

  • The assessee, an individual, filed his return of income on 30.03.2017 declaring total income of ₹45,30,940.
  • A search and seizure operation under Section 132 was conducted on 10.10.2018 in the cases of:
    • M/s CIFSL
    • M/s BIDPL
    • Shri Harish Gahlot group

During the course of this search, certain documents were stated to pertain to the assessee.

Initiation of Section 153C Proceedings

  1. The Assessing Officer of the searched entities recorded a satisfaction that some documents seized during the search "pertained to" the assessee.
  2. The seized material along with this satisfaction note was handed over to the Assessing Officer having jurisdiction over the assessee.
  3. Upon receipt of the material, the assessee’s Assessing Officer recorded his own satisfaction on 09.06.2021 and issued notice under Section 153C for AY 2016-17.
  4. After issuing statutory notices and considering submissions, the AO passed an assessment order under Section 153C dated 18.03.2021:
    • Made an addition of ₹8,80,000 as alleged bogus commission expenditure under Section 69C.
    • Assessed total income at ₹54,10,940.

First Appeal Before CIT(A)

  • The assessee challenged the Section 153C assessment order before the Commissioner of Income Tax (Appeals), Delhi-23.
  • The CIT(A), vide order dated 28.06.2025, upheld:
    • The validity of Section 153C proceedings, and
    • The addition of ₹8,80,000 under Section 69C.

The assessee then preferred a second appeal before the ITAT, Delhi.

Grounds Raised Before the Tribunal

The assessee raised multiple grounds before the Tribunal; the key jurisdictional challenge was:

  • The Assessing Officer had recorded a single common satisfaction note covering Assessment Years 2009-10 to 2019-20.
  • As per the assessee, Section 153C requires separate, year-wise satisfaction for each assessment year sought to be reopened.

Other grounds related to:

  • Absence of incriminating material for AY 2016-17,
  • Legality of addition under Section 69C,
  • Validity and application of approval under Section 153D, and
  • Levy of interest under Sections 234A, 234B, 234C and 234D.

However, the core issue before the Tribunal was whether the jurisdiction under Section 153C could be validly assumed on the basis of a consolidated satisfaction note.

Assessee’s Arguments

Challenge to Consolidated Satisfaction Note

The assessee’s Authorised Representative contended as follows: