3D Tradex Pvt. Ltd. vs ADIT & ACIT (ITA Nos. 2065 to 2070/Del/2022)
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in a recent ruling — 3D Tradex Pvt. Ltd. vs ADIT & ACIT (ITA Nos. 2065 to 2070/Del/2022) — has once again reinforced a critical principle under Section 153C of the Income-tax Act, 1961:
“A valid, specific and year-wise Satisfaction Note is the sine qua non for assumption of jurisdiction under Section 153C.”
The tribunal quashed the assessments for AYs 2012-13 to 2015-16 solely because the Satisfaction Note was vague, generic, and unsustainable in law, without even examining the merits of the additions made.
⚖️ Background of the Case
- A search was conducted under Section 132 of the Act on a third-party group (not on the assessee) on 23.07.2015.
- Certain documents allegedly relating to 3D Tradex Pvt. Ltd. were found.
- A single combined Satisfaction Note was recorded in March 2018 for AYs 2010-11 to 2015-16.
- Based on this Satisfaction Note, proceedings under Section 153C were initiated against the assessee.
📋 What Was Wrong With the Satisfaction Note?
The ITAT observed several critical defects:
- No Specificity for Each Year:
The Satisfaction Note simply referred to some seized documents without linking any specific material to a particular assessment year. - No Identification of Undisclosed Income:
It did not quantify or even narrate what undisclosed income arose for each of the six years. - Composite and Generic in Nature:
The note lumped together multiple years without year-wise differentiation — treating all years as automatically covered. - Violation of Supreme Court Law:
The note ignored the principle laid down in CIT vs Sinhgad Technical Education Society (2017) 397 ITR 344 (SC), which mandates a direct nexus between seized material and assessment year.
🧠 Legal Principle Reaffirmed by ITAT
The Tribunal strongly emphasized:
- In Section 153C proceedings, existence of incriminating material relatable to a particular AY is mandatory.
- One-size-fits-all Satisfaction Notes are not permissible.
- Jurisdiction under 153C fails if the note is vague, even if seized materials exist.
The ITAT followed the Delhi High Court rulings in:
- Dev Technofab Ltd. vs DCIT (2024) 166 Taxmann.com 514 (Del)
- Sakham Commodities Ltd. vs ITO (161 Taxmann.com 485 (Delhi))
🚀 Outcome
✅ The ITAT quashed the assessments for AYs 2012-13 to 2015-16.
✅ It held that vitiated jurisdiction makes the entire assessment void, irrespective of merits.
✅ As a result, the additions made in these years became infructuous.
📌 Key Takeaways
- Satisfaction Note must be precise: Document-wise and year-wise identification is mandatory.
- Jurisdictional defects cannot be cured by later explanations.
- Assumption of jurisdiction is a foundational requirement — and must strictly comply with law.
- Taxpayers have strong defenses if jurisdiction under Section 153C is challenged on factual or technical grounds.