Section 153C arises only upon timely recording of satisfaction. If this foundational step is delayed without justification, subsequent actions lose legal validity: Gujarat HC
The recent judgment of the Gujarat High Court in Parag Rameshbhai Gathani vs. Income-tax Officer (18 November 2025) is an important reaffirmation of the procedural discipline required in search-related proceedings under Section 153C of the Income-tax Act.
In this matter, a search was conducted in October 2019 on a third party. Material allegedly relating to the assessee was found during the search. Despite this, the assessment of the searched person was completed in August 2021 without any corresponding action under Section 153C. The satisfaction note-an indispensable jurisdictional requirement-was eventually recorded nearly two years later: first by the Assessing Officer of the searched person in June 2023 and subsequently by the Assessing Officer of the assessee in October 2023. The Section 153C notice followed thereafter.
The Court held that such a prolonged gap is wholly inconsistent with the directions of the Supreme Court in CIT v. Calcutta Knitwears, which clarified that the satisfaction note must be recorded at a clearly identifiable stage and, where the assessment of the searched person is completed, it must be done “immediately thereafter.” This principle has also been expressly reiterated through CBDT Circular No. 24/2015. A delay of 22 months, the Court observed, cannot by any measure be considered “immediate,” nor can it be reconciled with the intent of the law, which requires prompt action in search-based assessments.
The Revenue’s justification citing the pandemic and administrative changes under the faceless assessment regime was found unconvincing. The High Court noted that the assessment of the searched person itself was completed during the pandemic period, and that proceedings under Sections 153A and 153C do not fall within the faceless assessment mechanism. As such, there was no valid reason for the delayed satisfaction.
By setting aside the notice, the Court emphasized that the jurisdiction to invoke Section 153C arises only upon timely recording of satisfaction. If this foundational step is delayed without justification, subsequent actions lose legal validity.
This ruling serves as a reminder that adherence to procedural timelines is not a mere formality but a substantive safeguard built into the statutory framework. For taxpayers and professionals, it highlights that delays in recording satisfaction offer strong grounds to challenge the jurisdiction of Section 153C proceedings.
The copy of the order is as under:
