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August 2023

Search and seizure — Assessment of third person — Condition precedent — Satisfaction note by AO of searched person — Limitation where no satisfaction is recorded will be taken as year of search.

By K B Bhujle | Ritu Punjabi
Advocates
Reading Time 5 mins
33. PCIT vs. Gali Janardhana Reddy
[2023] 454 ITR 467 (Kar)
A. Y. 2011-12    
Date of order: 31st March, 2023
Sections 132, 132A, 153A and 153C of ITA 1961

Search and seizure — Assessment of third person — Condition precedent — Satisfaction note by AO of searched person — Limitation where no satisfaction is recorded will be taken as year of search.

On 25th October, 2010, a search was carried out in the case of R and others under section 132 of the Income-tax Act, 1961. During the course of search proceedings, certain incriminating materials belonging to the assessee were found and seized. Consequently, the AO of the searched person issued notice under section 153C against the assessee for the A. Ys. 2005-06 to 2010-11 and a notice under section 143(3) for the A. Y. 2011-12. Accordingly, assessments were completed.

The Tribunal set aside the assessment orders and held that there was no satisfaction recorded by the AO of the search person, which was mandatorily required for issuing a notice under section 153C.

On appeal by the Revenue, the Karnataka High Court upheld the decision of the Tribunal and held as under:

“i)     In CIT v. Gopi Apartment [2014] 365 ITR 411 (All), the Allahabad High Court observed that in the case of an assessment u/s. 153C of the Income-tax Act, 1961, there are two stages: (1) The first stage comprises a search and seizure operation u/s.
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