AO Must Record Satisfaction Before Case Transfer | HC

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AO Satisfaction On Incriminating Material

Case Details: Paras Chandreshbhai Koticha vs. Income-tax Officer - [2026] 182 taxmann.com 204 (Gujarat)

Judiciary and Counsel Details

  • A.S. Supehia & Pranav Trivedi, JJ.
  • Tushar Hemani, Sr. Adv., S.N. Divatia, B.S. Soparkar, Dhinal Shah, Vijay Patel, Ms. Vaibhavi Parikh, Manish J. Shah, Jimmy Patel & B.S. Soparkar, Advs. for the Petitioner.
  • Varun K. Patel, Dev Patel, Aditya Bhatt, Karan Sanghani, Ms. Maithili Mehta & Maunil G Yajnik, Senior Standing Counsels for the Respondent.

Facts of the Case

The core issue before the Gujarat High Court was
“Whether the Assessing Officer can directly reopen assessments under Sections 147/148 of the Income-tax Act on the basis of material found during a search under Sections 132/132A, without first following the special procedure under Sections 153A/153C (including recording the mandatory satisfaction note), particularly in the case of a person other than the searched person.

High Court Held

The Gujarat High Court held as follows:

a) It is mandatory for the Assessing Officer of a “searched person” (Section 153A of the Act) to record satisfaction on the incriminating material found during the search under Sections 132/132A of the Act and communicate the same to the jurisdictional Assessing Officer of the “other/third person”.

b) In the absence of any satisfaction note recorded by the Assessing Officer of the searched person, the jurisdictional Assessing Officer of the other person cannot assume jurisdiction under Section 153C of the Act solely on the basis of material sent to him by the Assessing Officer of the searched person.

c) In other words, the “other person” cannot be subjected to assessment/reassessment under Section 153C of the Act on the material received by him sans a satisfaction note; hence, such an approach would be illegal, without jurisdiction, and liable to be quashed.

d) The jurisdictional Assessing Officer of the “other/searched person” (Section 153C) can invoke the provisions of Sections 147/148 of the Act only on the basis of material available to him from other sources, other than the incriminating material sent to him.

e) In case a satisfaction note is recorded on the incriminating material and transmitted to him/her, then the only recourse available to the jurisdictional Assessing Officer is to proceed under Section 153C of the Act and not under Sections 147/148 of the Act.

f) In the case of assessees who are subjected to reassessment under the provisions of Section 153A of the Act, the Assessing Officer cannot switch over or invoke the provisions of Sections 147/148 of the Act on the basis of incriminating material found during the search and seizure conducted under Sections 132 or 132A of the Act.

g) However, the Revenue cannot be restricted, barred, or left remediless from invoking the provisions of Sections 147/148 of the Act, subject to fulfillment of the conditions mentioned therein, and the assessment can be reopened on the basis of material collected post-search from any other independent source.

List of Cases Reviewed

List of Cases Referred to

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied