Income Tax: ITAT Crushes Section 153C Reassessments Based on Dead Man’s Diary

The assessee, being the legal heir, was subjected to reassessment under Section 153C for AYs 2008-09 to 2012-13. A diary found during a search of her son’s home, which the Revenue said contained documents of her late husband’s unrecorded money lending, served as the reason for reassessment. The AO made various additions based only on this diary, like unexplained credits, estimated interest income, and unexplained investments.

The assessee preferred an appeal against the assessment order before the CIT(A), challenging the same on the grounds of both jurisdiction and merits, the ld. CIT(A), dismissed the said appeal. Aggrieved, the assessee approached the ITAT, reiterating that the proceedings were barred by limitation (for AY 2008-09) and that no valid satisfaction note or incriminating material existed to justify reassessment under Section 153C.

Issue Raised: The legality of reevaluating under Section 153C based only on a faulty satisfaction note and unconfirmed diary entries.

ITAT’s Ruling: The ITAT held that the reassessment for AY 2008-09 was barred by limitation, as the satisfaction note was recorded on 23.09.2014, which allowed reassessment only for six years before AY 2009-10 onwards. Thus, the notice and order for AY 2008-09 were beyond the jurisdiction and quashed accordingly.
For AYs 2009-10 to 2012-13, the Tribunal found that the satisfaction note was vague and mechanical and failed to demonstrate how the diary was incriminating or related to the undisclosed income of the assessee. There was no independent evaluation by the AO, no clear link between the seized material and the assessee, and no corroborative evidence. Citing Calcutta Knitwears, Jasjit Singh, and other precedents, the Tribunal held the reassessments to be void ab initio and quashed them for all years.

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