A Single Consolidated Satisfaction Note Cannot Cover More Than One Assessment Year: ITAT

The ITAT Delhi has quashed the revision order passed by the tax authorities under Section 263 of the Income Tax Act, holding that the original assessment proceedings initiated under Section 153C were invalid because they were based on a single consolidated satisfaction note covering multiple assessment years. Accordingly, it is held in favour of Worldfa Exports Private Limited. The case pertains to Assessment Year 2018-19.

The dispute arose when the income tax authorities received information that during the year in consideration the assessee had made certain transactions with entities allegedly involved in providing accommodation entries through fake purchase and sales bills. Initially, the reassessment proceedings in the case of the assessee were initiated under Section 148. Later, the department carried out a search operation on the Alankit Group, Sh. Alok K. Agarwal, his son Ankit Agarwal and some of the close associates and key employees of Sh. Alok K. Agarwal. As a result of the search findings, the assessee’s case was also opened under Section 153C and the proceedings under Section 148 were diminished.

Later, the PCIT (Principal Commissioner of Income Tax) set aside the initial assessment order dated February 13, 2024, passed under Section 153C of the Income Tax Act, treating the same as erroneous and prejudicial to the interests of the tax authorities. Thereafter, the case was remanded to the Assessing Officer (AO) for fresh adjudication.

The aggrieved assessee filed an appeal before the ITAT Delhi, claiming that the entire assessment was invalid and illegal because the satisfaction note was prepared jointly for multiple assessment years instead of separately for each year. The tribunal accepted this claim and cited earlier judgements of the Delhi High Court and Karnataka High Court in cases based on a similar issue. In these cases, the high courts have held that a consolidated satisfaction note for multiple years is not admissible under the law.

The tribunal further noted the tax authorities had failed to identify year-wise material or separate reasons for reopening each assessment year. Since the original assessment proceedings themselves were held to be invalid, the Tribunal ruled that the revision order passed under Section 263 could not survive independently. Accordingly, the ITAT set aside the Section 263 order and ruled in favour of the assessee.