Section 153C Assessment Quashed: Satisfaction Note Must Establish Income-Bearing Link, Not Just Document Pertaining

Case Overview

Case Name: Dasna Agro Infratech Pvt. Ltd. Vs DCIT (ITAT Delhi Bench)
Assessment Year: 2017-18
Court: ITAT Delhi Bench
Key Provision: Section 153C of the Income Tax Act, 1961

Background and Factual Matrix

Dasna Agro Infratech Pvt. Ltd., a private limited company operating in the agricultural and allied activities sector, had filed its original return of income for AY 2017-18 on 28.10.2017. The company subsequently found itself drawn into search assessment proceedings — not because it was itself searched, but because its name surfaced in documents unearthed during proceedings against an entirely different group.

A search under Section 132 of the Income Tax Act, 1961 was conducted on the Alankit Group and its key managerial persons on 18.10.2019. Following this, assessment proceedings under Section 153A were initiated against those searched parties. In the course of those proceedings, a ledger account referencing Dasna Agro Infratech was discovered. Crucially, this ledger did not relate to any transaction with the Alankit Group or the searched entity — it reflected a loan transaction between the assessee and M/s Diwakar Commercial Pvt. Ltd., an entirely separate company.

The Assessing Officer of the searched entity treated this ledger as incriminating material pertaining to Dasna Agro Infratech, recorded a satisfaction note, and forwarded the documents to the jurisdictional AO of the assessee. This triggered proceedings under Section 153C of the Act against Dasna Agro Infratech.

Additions Made in the Assessment Order

The AO passed an assessment order dated 25.01.2024 under Section 153C, making the following additions:

The assessee challenged this assessment before the CIT(A), but the appeal was dismissed. The matter was then carried to the Income Tax Appellate Tribunal, Delhi Bench.

Grounds Raised Before the Tribunal

The assessee raised the following grounds before the ITAT: