JUDGMENT
A. S. Supehia, J.- At the outset, learned Senior Advocate Mr.Tushar Hemani has submitted that the present writ petition is required to be allowed in terms of the judgment dated 18.11.2025 passed in the case of Parag Rameshbhai Gathani v. ITO, International Taxation (Gujarat). It is further submitted that the assessee in that case was the co-owner of the same land which is the subject matter of this petition, and the petitioner is the sister-in-law of the assessees- Parag Rameshbhai Gathani and the wife of the present petitioner in whose favour the reassessment has been quashed and set aside by the said judgment dated 18.11.2025.
2. Learned Senior Advocate Mr.Hemani, while referring to the facts of the proceedings, after the search action was taken on 15.10.2019 has submitted that, in the present case, in fact, the satisfaction is recorded after almost a period of five years, after the framing of the assessment of the search person, whereas, in the case of Parag Rameshbhai Gathani (supra), the satisfaction was recorded within a period of four years and after a period of almost 22 months from the framing of the assessment. Thus, it is urged that the writ petition may be allowed by quashing and setting aside the impugned notices as well as the order passed under Section 153 C of the Income Tax Act, 1961 (for short ‘the Act’).
3. Learned Senior Standing Counsel Mr.Karan Sanghani appearing with learned Senior Standing Counsel Mr.Varun K. Patel has submitted that the impugned order may not be quashed and set aside, as the reassessment is premised on the incriminating material found during the search conducted at the place of Suresh R. Thakkar on 15.10.2019. He submitted that the reassessment may not be set aside, on the ground of delay in recording the satisfaction note by the Assessing Officer of the present petition.
4. From the pleadings and the facts of the present writ petition, we have noticed that the case of the present petitioner is squarely covered by the decision of this Court rendered in the case of Parag Rameshbhai Gathani (supra), who is the co-owner of the land in question, which was the subject matter of search action under Section 132 of the Act, which was conducted in the case of Suresh R. Thkkar, which is a third party, on 15.10.2019.
5. The facts of Parag Rameshbhai Gathani (supra), as incorporated in the judgment and order dated 18.11.2025 suggest that he was also subjected to the proceedings of reassessment, on the basis of the search action conducted on 15.10.2019 in the case of the very same person, i.e. Suresh R. Thakkar. In the said case, the assessment was framed in the case of the search person in August 2021, which is identical to the present petitioner. However, the satisfaction note was recorded by the Assessing Officer of the search person on 06.06.2023, whereas, in the present case, the satisfaction note has been recorded on 27.01.2025. In the case of Parag Rameshbhai Gathani (supra), the satisfaction note was recorded by his Assessing Officer on 14.07.2023, whereas, in the case of the petitioner, the satisfaction note by his Assessing Officer has been recorded on 26.03.2025 and finally, in the case of Parag Rameshbhai Gathani (supra), the notice under Section 153C of the Act was issued on 09.02.2024 for the Assessment year 2017-18, whereas, in the case of the petitioner, notice under Section 153C was issued on 31.03.2025 for the Assessment year 2017-18.
6. At this stage, we may refer to the relevant observations of the judgment dated 18.11.2025 passed in the case of Parag Rameshbhai Gathani (supra), which is as under:
“15. Keeping in mind the aforenoted established facts, we may, at the outset, refer to the decision of the Supreme Court in the case of Calcutta Knitwears (supra). The Supreme Court in the said case, while examining the provisions of Section 158BC of the Act (now Section 153A of the Act), has held as under:
“44. In the result, we hold that for the purpose of Section 158BD of the Act, a satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the other Assessing Officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act, (b) along with the assessment proceedings under Section 158BC of the Act; and (c) immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person.”
16. In view of the aforesaid decision of the Supreme Court, the respondent-department issued Circular No.24/2015 in light of the provisions of Section 153C of the Act clarifying the recording of the satisfaction note at three stages. The said Circular is incorporated as under:
“CIRCULAR NO.24 of 2015 [F.NO.279/MISC./ 140/ 2015 /ITJ]
Section 153C, READ WITH SECTION 158BD OF THE INCOME TAX ACT, 1961 – SEARCH AND SEIZURE -ASSESSMENT OF INCOME IN CASE OF OTHER PERSON -RECORDING OF SATISFACTION NOTE UNDER SECTION 158BD/153C OF THE SAID ACT CIRCULAR NO.24/2015
[F.NO.279/MISC./140/2015/ITJ], DATED 31-12-2015
The issue of recording of satisfaction for the purposes of section 158BDI153C has been subject matter of litigation.
2. The Hon’ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of2014 dated 12.3.2014(available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person uls 158BD. The Hon’ble Court held that “the satisfaction note could be prepared at any of the following stages:
(a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or
(b) in the course of the assessment proceedings under section 158BC of the Act; or (c)immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person.”
3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon’ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT.
4. The guidelines of the Hon’ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the “other person” is one and the same, then also he is required to record his satisfaction as has been held by the Courts.
5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD 1153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.”
17. Thus, as per the Circular of the respondent-Department, the judgment of the Supreme Court in the case of Calcutta Knitwears (supra) and the recording of the satisfaction note in three stages apply to the proceedings under Section 153C of the Act.
18. Though, the Assessing Officer had an opportunity to record the satisfaction note at two stages i.e stage (a) and (b) as specified in the Circular, the same is not done. The next state which was available was stage (c) on immediate completion of proceedings of the searched person in August 2021, however, the satisfaction note was recorded on 6th June, 2023, after a period of 22 months. The satisfaction note was drawn by the Assessing Officer of the petitioner on 17th October, 2023. The satisfaction note of 17th October, 2023 of the petitioner (paragraph No.2.7) mentions that during the course of the assessment proceedings under Section 153C of the Act in the case of Shri Rushisinh Thakor and Shri Randhirsinh Thakor, concluded in March 2023, the transactions pertain to the sale, i.e., purchase of land by one Smt.Bharti Dharmesh Gathani, w/o. Dharmesh Gathani, vide sale deed dated 24th July, 2020, for a registered value of Rs.3,80,00,000/-. Thus, the Assessing Officer of the searched person prepared the satisfaction note on 6th June, 2023, after completion of the assessment in August 2021, i.e., almost after a period of 22 months. We may, at this stage, refer to the decision of the Coordinate Bench of this Court in the case of Jitendra H. Modi (supra), wherein this Court, by placing reliance on the decision of the Supreme Court in the case of Calcutta Knitwears (supra), has held that satisfaction recorded after 09 months could not be said to be immediate action and hence, the Coordinate Bench of this Court set aside the notices issued under Section 158BD of the Act. In the instant case, there has been a delay of 22 months in recording the satisfaction, which runs contrary to the decision in Calcutta Knitwears (supra) as well as provision ‘(c)’ of Circular No.24/2015 dated 31.12.2015, which uses the expression “immediately after the assessment procedure is completed”.
19. Twin reasons are assigned by the respondents in the affidavit in reply for delay in recording the satisfaction note, (a) COVID-19 pandemic; and, (b) adoption of Faceless Scheme. So far the reason of COVID-19 is concerned, the same runs contrary to the action of the respondents, since the assessment of the searched person was itself done during the pandemic, and in the affidavit-in-reply, the respondent has mentioned that the Omicron variant commenced in December 2021 and continued until February 2022. Thus, even after February, 2022, the satisfaction note has been recorded on 17.10.2023. The second reason of workload due to Faceless Scheme is also a lame excuse, since indubitably the exercise under sections 153A and 153C of the Act falls outside the purview of the said scheme. Hence, both the reasons assigned appear to be an afterthought, hence the same are rejected.
20. The reliance placed by the learned advocate Mr.Patel on the decision of Bhupinder Singh Kapur (supra) will not come to the rescue of the respondents, since in the present case, there is 22 months delay in recording the satisfaction. There was no restricting factor on the Assessing Officer to record the satisfaction earlier. The expression “immediate”, though is impossible to quantify in period, however, the same cannot be extended to such an extent which defeats the purpose of cost effective, efficient and expeditious completion of search assessments. The intention of using such term is to reduce and avoid long drawn proceedings and to bring certainty to the assessment.
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7. It is informed to us that the Special Leave Petition (SLP) filed against the judgment dated 18.11.2025, being Income-tax Officer, International taxation v. Parag Rameshbhai Gathani (SC)/SLP (Civil) Diary No.16191 of 2026 has been dismissed by the Supreme Court on 02.04.2026.
8. We adopt the aforesaid reasoning of the judgment dated 18.11.2025. In the present case, on the contrary, the gap between recording of the Assessing Officer from the search person to the satisfaction note is more than four years, which was comparatively less in the case of Parag Rameshbhai Gathani (supra). Hence, the present writ petition succeeds. The impugned notice dated 31.03.2025 and subsequent order dated 26.03.2026 passed under Section 153C of the Act as well as the demand notice dated 26.03.2026 are hereby quashed and set aside.
9. The writ petition stands allowed. The Civil Application will not survive, in view of the aforesaid order.
