ITAT Quashes 153C Assessments of Alleged Shell Company for Lack of Proper Satisfaction

Nirvaja Enterprises Private Limited was proceeded against under Section 153C pursuant to a search conducted on 13.04.2017 in the case of the Himanshu Verma group. The Revenue alleged that the assessee was one of several shell companies used for providing accommodation entries. A single consolidated satisfaction note dated 23.09.2019 was recorded for AYs 2012-13 to 2018-19, and notices under Section 153C were issued.

For AYs 2017-18 and 2018-19, the assessee filed returns declaring nominal income. The Assessing Officer treated the bank credits as accommodation entries and estimated commission income at 4% of total credits, with an additional 1% based on the statement of the searched person. The CIT(A) upheld both the jurisdiction and the additions, leading to appeals before the Tribunal.

Issue Before Tribunal: Whether proceedings under Section 153C are valid when initiated on the basis of a consolidated satisfaction note without identifying year-wise incriminating material or recording its nexus with the determination of income for each assessment year.

ITAT’s Decision: The Delhi ITAT quashed the assessments for AYs 2017-18 and 2018-19. It held that the satisfaction note failed to satisfy the mandatory jurisdictional requirements of Section 153C, as it contained only general allegations and did not specify any year-wise incriminating material or explain its bearing on the assessee’s total income.

Relying on DCIT v. Sunil Kumar Sharma and ITO v. Saksham Commodities Ltd., the Tribunal held that Section 153C does not permit mechanical or omnibus reopening of multiple years.

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