Tax / Income Tax : High Court Quashes Notice Issued by Income Tax Department

 Tax / Income Tax : High Court Quashes Notice Issued by Income Tax Department

In a recent Judgment, High Court has quashed the notice issued by Tax Department. 

In this case, the proceedings under Section 153C of the Income-tax Act, 1961 have been initiated almost four years after the search and almost two years after framing of assessment of the searched person, i.e., Suresh R. Thakkar.

It was observed that CBDT has issued Circular No.24/2015 in light of the provisions of Section 153C of the Act clarifying the recording of the satisfaction note at 3 stages.

It was held that recording of the satisfaction note in three stages apply to the proceedings under Section 153C of the Act.

Though in this case, the Assessing Officer had an opportunity to record the satisfaction note at two stages i.e stage (a) and (b) as specified in the Circular, the same was not done by the AO. The next state which was available was stage (c) on immediate completion of proceedings of the searched person in August 2021, however, the satisfaction note was recorded on 6th June, 2023, after a period of 22 months. The satisfaction note was drawn by the Assessing Officer of the petitioner on 17th October, 2023. The satisfaction note of 17th October, 2023 of the petitioner (paragraph No.2.7) mentions that during the course of the assessment proceedings under Section 153C of the Act in the case of Shri Rushisinh Thakor and Shri Randhirsinh Thakor, concluded in March 2023, the transactions pertain to the sale, i.e., purchase of land by one Smt.Bharti Dharmesh Gathani, w/o. Dharmesh Gathani, vide sale deed dated 24th July, 2020, for a registered value of Rs.3,80,00,000/-. Thus, the Assessing Officer of the searched person prepared the satisfaction note on 6th June, 2023, after completion of the assessment in August 2021, i.e., almost after a period of 22 months.

In the instant case, there has been a delay of 22 months in recording the satisfaction. 

The second reason given by Tax Department of workload due to Faceless Scheme is also a lame excuse, since indubitably the exercise under sections 153A and 153C of the Act falls outside the purview of the said scheme. Hence, both the reasons assigned appear to be an afterthought, hence the same were rejected. 

High Court held that the expression “immediate”, though is impossible to quantify in period, however, the same cannot be extended to such an extent which defeats the purpose of cost effective, efficient and expeditious completion of search assessments. The intention of using such term is to reduce and avoid long drawn proceedings and to bring certainty to the assessment.

Case reference is Parag Rameshbhai Gathani v. ITO [2025] GCtR 1729 (Gujarat).