The Income Tax Appellate Tribunal (ITAT), Surat Bench, has quashed four assessment orders passed under Section 153C of the Income Tax Act, 1961, holding that an unexplained delay of approximately 17 months in recording the mandatory satisfaction note was contrary to the procedure prescribed for assuming jurisdiction against a person other than the searched person.
The Bench of Suchitra Kamble (Judicial Member) and B.M. Biyani (Accountant Member) Followed the Gujarat High Court’s ruling in Parag Rameshbhai Gathani v. Income-tax Officer, which was subsequently affirmed by the Supreme Court through the dismissal of the Revenue’s Special Leave Petition on July 27, 2026.
The dispute originated from a search and seizure operation conducted under Section 132 of the Income Tax Act against Praveen Jivrajbhai Tarpara on January 23, 2018.
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During the search proceedings, the Income Tax Department allegedly recovered certain incriminating documents pertaining to the assessee, Sarang Devshibhai Kapuriya.
The assessment proceedings against the searched person were completed under Section 153A on June 7, 2021. However, the satisfaction note for initiating proceedings under Section 153C against the assessee was recorded only on November 23, 2022—approximately 17 months after completion of the searched person’s assessment.
Based on the satisfaction note, the Assessing Officer completed assessments under Section 153C read with Section 144 on December 30, 2022, for four assessment years and made various additions to the assessee’s income.
The Commissioner of Income Tax (Appeals)-4, Surat, upheld the assessments through separate orders dated September 17, 2025. The assessee consequently approached the ITAT.
Before considering the jurisdictional issue, the Tribunal dealt with a delay of 131 days in filing the appeals.
The assessee submitted applications and affidavits explaining the circumstances that prevented the appeals from being filed within the prescribed period. The Revenue left the issue of condonation to the Tribunal’s discretion.
After examining the explanation and noting the absence of any contrary material, the ITAT held that the assessee had demonstrated “sufficient cause” for the delay.
The Tribunal referred to Section 253(5), which empowers the ITAT to admit a delayed appeal when sufficient cause is established. It also relied upon the Supreme Court’s ruling in Collector, Land Acquisition v. Mst. Katiji and Others, which held that when substantial justice and technical considerations are in conflict, a justice-oriented approach must be adopted.
Accordingly, the ITAT condoned the delay and admitted all four appeals.
The assessee argued that the satisfaction note required for invoking Section 153C had not been recorded within the legally permissible stage.
It was pointed out that the search took place on January 23, 2018, while the searched person’s assessments were completed on June 7, 2021. Despite this, the satisfaction note against the assessee was prepared only on November 23, 2022.
The assessee contended that the delay of around 17 months violated the principles laid down by the Supreme Court in CIT v. Calcutta Knitwears and adopted by the Central Board of Direct Taxes through Circular No. 24/2015 dated December 31, 2015.
Under the principles laid down in Calcutta Knitwears, the satisfaction note may be recorded at any of the following stages:
- At the time of, or along with, initiation of proceedings against the searched person;
- During the assessment proceedings against the searched person; or
- Immediately after completion of the searched person’s assessment proceedings.
The assessee maintained that recording the satisfaction note 17 months after the assessment could not be regarded as action taken “immediately” after completion of the proceedings.
The assessee placed substantial reliance on the Gujarat High Court’s decision in Parag Rameshbhai Gathani v. Income-tax Officer.
In that case, the satisfaction note had been recorded approximately 22 months after completion of the searched person’s assessment. The Gujarat High Court held that such a delay was contrary to the Supreme Court’s ruling in Calcutta Knitwears and CBDT Circular No. 24/2015.
The High Court had observed that while the word “immediate” could not be quantified through a fixed number of days or months, its meaning could not be extended to such an extent that it defeated the objective of efficient, expeditious and cost-effective completion of search assessments.
It had consequently quashed the notices issued under Section 153C.
The ITAT also noted that the Revenue’s challenge to the Gujarat High Court judgment was dismissed by the Supreme Court on July 27, 2026.
Examining the undisputed chronology, the Tribunal recorded that the searched person’s assessment was completed on June 7, 2021, whereas the satisfaction note against the assessee was prepared only on November 23, 2022.
The ITAT found that the facts were directly covered by the Gujarat High Court’s ruling in Parag Rameshbhai Gathani. While the delay before the High Court was approximately 22 months, the delay in the present case was around 17 months.
Following the binding judgment of the jurisdictional High Court, as affirmed by the Supreme Court, the Tribunal held that the satisfaction note had been recorded after an inordinate delay.
It concluded that the delayed recording of satisfaction was contrary to the procedure prescribed in law for assuming jurisdiction under Section 153C.
The assessment orders passed under Section 153C read with Section 144 for Assessment Years 2015-16 to 2018-19 were accordingly quashed.
Since the assessments themselves were annulled on the jurisdictional ground, the ITAT held that the remaining grounds raised by the assessee had become academic and did not require adjudication.
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