Top Stories Assessment Invalid due to Defective Satisfaction Note: ITAT Sets Aside PCIT’s Revisionary Order [Read Order] The ITAT found that the satisfaction note under Section 153C was issued in a consolidated manner for multiple years, which was legally incorrect By Sneha Sukumaran Mullakkal – On March 9, 2025 10:04 am – 3 mins read The Pune Bench of Income Tax Appellate Tribunal(ITAT) set aside the Principal Commissioner of Income Tax’s (PCIT) revisionary order under Section 263 of Income Tax Act,1961 ruling that the assessment was invalid due to a defective satisfaction note. Rajendra Rameshlal Gugale,appellant-assessee,involved in land development and real estate broking, filed a return on July 28, 2017, declaring ₹8,08,880. A search on the Yuvraj Dhamale Group on September 26, 2017, led to the seizure of documents linked to him. Based on this, a notice under Section 153C was issued on May 27, 2021. In response, he filed a return for AY 2017-18 on December 13, 2021, declaring the same income. The Assessing Officer (AO) completed the assessment on December 26, 2021, accepting the returned income. Later, the PCIT found that Gugale had taken ₹1,56,00,000 in cash loans and paid ₹18,64,800 in cash interest, which the AO had not examined. This raised concerns about violations under Sections 269SS and 69C. TDS Mistakes Cost You More Than You Think – Stay Compliant with This Handbook!, Click Here

On January 31, 2024, the PCIT issued a show cause notice under Section 263, stating that the assessment lacked proper verification and was prejudicial to revenue. Gugale was asked to respond by February 2, 2024. The assessee requested copies of seized documents, which the PCIT provided, but no response was made to the statutory notice. Due to this, the PCIT rejected the explanations and set aside the Assessing Officer’s order, considering it erroneous and prejudicial to revenue. Read More: Validity of Revision Order Post-CIRP Approval: ITAT Quashes PCIT Revision Order The PCIT found that the assessee had taken an unsecured cash loan of ₹1.58 crore and paid ₹18.64 lakh in cash interest in FY 2016-17. The AO had not verified the details, leading to underassessment. Citing legal precedents, the PCIT held that the lack of inquiry made the order erroneous. Using Section 263, the PCIT ordered a fresh assessment. The assessee appealed before the tribunal. The two member bench comprising Rama Kanta Panda(Vice President) and Astha Chandra (Judicial Member) found that the AO issued a notice under Section 153C based on documents found during a search on the Yuvraj Dhamale Group.

The assessee filed a return declaring ₹8,08,880, which the AO accepted in the final order. TDS Mistakes Cost You More Than You Think – Stay Compliant with This Handbook!, Click Here Later, the PCIT invoked Section 263, stating that the assessee had received an unsecured cash loan of ₹1.56 crore through Shri Sachin Nahar and paid ₹18.64 lakh in cash as interest. This information came from a search at Shri Sachin Nahar’s premises and was shared with the AO via email. The PCIT held that the AO failed to consider this, making the order erroneous and prejudicial to the Revenue’s interest, and directed a fresh examination. The appellate tribunal noted that the satisfaction note under Section 153C was recorded in a consolidated manner for multiple years instead of separately for each year, which was legally incorrect. Citing a Karnataka High Court ruling upheld by the Supreme Court, it held that this defect invalidated the assessment. It also found that no incriminating material directly linked the assessee, and an email alone was insufficient for additions. Since the assessment itself was invalid, the tribunal ruled that the AO’s order was not erroneous and set aside the PCIT’s revisionary order under Section 263 of the Act. In short,the appeal filed by the assessee was allowed