Income Tax Appellate Tribunal - Chennai
Shanmugasundaram Monisha,Coimbatore vs Ito Non Corp Ward 3(1), Coimbatore on 7 May, 2026
आयकरअपील यअ धकरण 'बी' यायपीठ,चे नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH: CHENNAI
ी इं तूरी रामा राव लेखासद एवं ी मनु कुमार िग र, ाियक सद
BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND
SHRI MANU KUMAR GIRI, JUDICIAL MEMBER
आयकरअपीलसं. ITA Nos. 3915/Chny/2025
नधारणवष/Assessment Years: 2014-15
Shanmugamsundaram Monisha, v. ITO,
8/113b, Thimampalayam Non Corporate Ward-3(1)
Maruthur,Marudur B.O, Cbe, Coimbatore
Marudur, Coimbatore-641104
[PAN: CJSPM6548Q]
(अपीलाथ /Appellant) ( यथ /Respondent)
आयकरअपीलसं. ITA Nos. 3916/Chny/2025
नधारणवष/Assessment Years: 2014-15
Shanmugamsundaram Kaaviya, ITO,
8/113b, Thimampalayam Non Corporate Ward-3(1)
Maruthur,Marudur B.O, Cbe, Coimbatore
Marudur, Coimbatore-641104
[PAN: BYYPK 5125 R]
(अपीलाथ /Appellant) ( यथ /Respondent)
आयकरअपीलसं. ITA No. 3917 /Chny/2025
नधारणवष/Assessment Years: 2014-15
Subbaian Subbulakshmi, ITO,
8/113b, Thimampalayam Non Corporate Ward-
Maruthur,Marudur B.O, 3(1)Cbe, Coimbatore
Marudur, Coimbatore-641104
[PAN: FIQPS 2704K]
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क!ओरसे/ Appellant by : Mr. S. Sridhar, (Erode),
Advocate
यथ क!ओरसे /Respondent by : Mr. Shiva Srinivas, CIT
सुनवाईक!तार ख/Date of Hearing : 11.03.2026
घोषणाक!तार ख /Date of Pronouncement : 07.05.2026
ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15)
Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs)
ITO NCW 3(1)
:: 2 ::
आदे श / O R D E R
PER MANU KUMAR GIRI, Judicial Member:
The captioned appeals, filed by the respective assessees, are directed against the separate orders passed by the Commissioner of Income Tax (Appeals), Chennai-18 [hereinafter referred to as "the CIT(A)"], all dated 31.10.2025, for the Assessment Year 2014-15.
2. Assessee has raised the following grounds of appeal:
1) The Impugned Order is bad, erroneous and unsustainable in law.
2) The learned First Appellate Authority erred in deciding the issue of SIGNATURE in the satisfaction note by not considering it properly.
3) With respect to the time gap between the satisfaction in the case of the person searched and that in the case of the appellant, the word "IMMEDIATELY" has not been considered in the light of the decision by the Supreme Court in the case of CALCUTTA KNITWAES.
4) The finding by the learned First Appellate Authority with respect to the non- issue of notice under sec. 143(2) is not tenable.
5) In so far as the merits of the addition, the learned First Appellate Authority, while accepting the fact of ownership of the deposits by the person searched, erred in not accepting the very fact that those deposits did appear in the books of account of the person searched and the interest therefrom had also been offered.
And, for other reasons that may be adduced later, the Appellant humbly prays that the present appeal may be admitted, duly considered and justice be rendered.
2.1Since the facts and grounds involved in all three cases are identical, for the sake of brevity we proceed to adjudicate only ITA No.3915/Chny/2025 for AY 2014-15. The findings rendered therein shall apply mutatis mutandis to the other two appeals in ITA Nos.3916 & 3917/Chny/2025 as well.
ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 3 ::
3. The assessee has moved the application for admission of following additional grounds of appeal:
Additional Ground of Appeal No.1:
The Assessment Proceeding initiated by issue of Notice under Section 153C dated 12/05/2017 is null and void and vitiated by lack of independent exercise of discretion, as the issue of notice is with prior approval of some authority, as evident from Satisfaction Note dated 28/04/2017, thereby showing excessive caution, acting under dictation amounting to surrender of quasi- judicial discretion.
Additional Ground of Appeal No.2:
The Impugned Assessment Order dated 29/12/2017 passed under Section 143(3) r.w.s. 153C is null and void, as the Assessing Officer, as appearing in the Assessment Order, did not obtain mandatory approval under Section 153D at the time of passing the order.
4. The assessee submits that these additional grounds of appeal could not be raised before the Assessing Officer because the Satisfaction Note was requested and furnished only during the first appellate proceedings. Further, these grounds were not raised at that stage due to the lack of appropriate advice from the Ld. AR and because the assessee is not well acquainted with the complexities of the Income Tax Act.
The assessee stated that these grounds are of significant importance, as their admission could potentially decide the outcome of the entire appeal, given that they relate to the very validity of the Assessing Officer's jurisdiction to assess the case. 4.1 In view of the above, and placing reliance on the judgment of the Hon'ble Supreme Court in National Thermal Power Corp. Ltd. vs. Commissioner of Income Tax (1998) 229 ITR 383/157 CTR 249 ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 4 ::
(SC), the assessee prays that the Tribunal may admit this application, consider these additional grounds of appeal, and grant appropriate relief.
5. Sans unnecessary details, the facts of the case are that the assessee is an individual who filed her return of income on 09.12.2017 declaring a total income of Rs.2,90,980/-. A search and seizure operation under section 132 of the Income Tax Act, 1961 was conducted on 8.11.2014 in the case of Shri T.R. Shanmugasundaram, who is the father of the assessee. During the course of search, certain Fixed Deposit (FD) receipts aggregating to Rs.10,00,000/- standing in the name of the assessee were found and seized. Based on the seized material, proceedings u/s. 153C of the Act were initiated against the assessee, and notice u/s. 153C was issued on 12.05.2017. In response, the assessee filed return of income. The Assessing Officer (AO), not being satisfied with the explanation regarding the source of the Fixed Deposits, completed the assessment u/s. 143(3) read with section 153C of the Act on 29.12.2017, determining the total income at Rs.12,90,980/- by making an addition of Rs.10,00,000/- as unexplained investment.The AO observed that fixed deposits in the name of the assessee were found during the course of search in the case of Shri T.R. Shanmugasundaram. The assessee failed to satisfactorily explain the source of investment in the said Fixed Deposits. The said investments were neither offered to tax in the hands of the assessee nor in the hands of Shri T.R. Shanmugasundaram. Accordingly, the AO treated the amount of Rs.10,00,000/- as unexplained investment under the provisions of the Act and added the same to ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 5 ::
the income of the assessee. The AO further held that initiation of proceedings u/s. 153C was valid, based on satisfaction recorded and material seized during search.
Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)].
6. The CIT(A), after considering the submissions, upheld the action of the AO with the following findings:
A. Validity of Proceedings u/s. 153C of the Act The search under section 132 resulted in seizure of Fixed Deposits in the name of the assessee, establishing a nexus for initiating proceedings under section 153C. The satisfaction note recorded by the AO was found to be in order. The objection regarding initials instead of signatures was held to be procedural in nature and not fatal to the validity of proceedings. The timing of recording satisfaction (within a reasonable period after completion of search assessment) was held to be in compliance with CBDT Circular No. 24/2015. The contention that notices must be issued for all six assessment years was rejected. It was held that notices under section 153C are required to be issued only for those years where seized material has a bearing on income.
B. Non-issue of Notice under Section 143(2) Relying on the judgment of the Madras High Court in Amec Foster Wheeler Iberia SLU - India Project Office vs DCIT and B. Kubendran vs DCIT, it was held that issuance of notice u/s. 143(2) is not mandatory in proceedings u/s. 153A/153C of the Act. Accordingly, this ground was dismissed.
ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 6 ::
C. Addition on Account of Fixed Deposits Though the father of the assessee admitted during search that the investments were made out of his undisclosed income, he did not offer such undisclosed income in his return. Mere disclosure of Fixed Deposits in the Balance Sheet and offering interest income does not establish the source of investment. Since the Fixed Deposits stood in the name of the assessee, the onus lies on the assessee to explain the source. In the absence of satisfactory explanation, the AO was justified in treating the same as unexplained investment in the hands of the assessee.
The CIT(A) dismissed the appeal of the assessee and upheld the validity of proceedings u/s. 153C and the non-requirement of notice u/s. 143(2), and the addition of Rs.10,00,000/- as unexplained investment.
Now assessee is in appeal before this Tribunal.
7. We admit the additional grounds raised by the assessee, since they involve jurisdictional issues going to the root of the matter and do not require any fresh investigation into facts.
8. Assessee filed dated and events as under:
Date Event
18/11/2014 Search conducted in the case of Shri T.R.
Shanmugasundaram
30/12/2016 Assessment Order passed in case of Shri T.R.
Shanmugasundaram
13/03/2017 Satisfaction Note recorded by Assessing Officer of the Searched Person 28/04/2017 Satisfaction Note recorded by Assessing Officer of the Appellant ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 7 ::
12/05/2017 Notice under Section 153C issued in the case of ShanmugasundaramMonisha 09/12/2017 Return filed by the Appellant in response to Notice under Section 153C 29/12/2017 Assessment Order passed under Section 153C in case of the Appellant
9. Assessee further filed common written submissions as under:
With reference to the above appeals, as the legal issues as well as factual issues are similar and arise from the same search operation, Common Written Submissions are made as under.
GROUND NO.3 RAISED IN FORM 36:
In support of this Ground of Appeal, it is submitted that the entire assessment proceeding under Section 153C is null and void, as the Satisfaction Note was not recorded by Assessing Officer of the Searched Person within the time limit stipulated by the Hon'ble Supreme Court in the case of Commissioner of Income Tax-III vs Calcutta Knitwears [2014] 362 ITR 673 (SC), copy attached in Paper-Book.
According to this decision rendered in the context of Block Assessments under Section 158BC and Section 158BD of the Act, the Assessing Officer of the Searched Person must record his satisfaction at either of the following stages: (i) at the time of initiation of search proceedings against Searched Person, (ii) in the course of assessment proceedings on Searched Person and even (iii) immediately after assessment proceeding is completed of Searched Person.
It may be noted that Section 158BD is parimateria to Section 153C, which is the provision involved in the present appeals and hence, the decision of the Apex Court noted above holds force in the context of Section 153C also. Further, reference is also made to CBDT Circular No. 24/2015 [F.No.279/Misc./140/2015/ITJ] dated 31/12/2015, copy attached in Paper- Book, where it has been stated that the CBDT has accepted that the view taken by the Apex Court in 'Calcutta Knitwears' in respect of Section 158BD is applicable for Section 153C also.
In this regard, coming to the present cases, reference is made to "Dates and Events" appended to Paper-Book, showing that while Search happened in the case of Searched Person on 18/11/2014 and Assessment Proceeding was going on from November 2014 and completed in case of Searched Person on 30/12/2016, Satisfaction Note was recorded by the Assessing Officer of the Searched Person in all the above cases only on 13/03/2017.
From the records available, it is patently clear that Satisfaction Note is not ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 8 ::
recorded either at the time of initiation of Search Proceedings or in the course of conduct of Assessment in case of the Searched Person. The issue to be decided is whether the Satisfaction Note recorded on 13/03/2017 can be regarded as prepared 'immediately after' assessment is completed?
It is submitted that the Dates and Events itself shows that there is 73 days delay in recording the Satisfaction Note even after completion of assessment in case of Searched Person, which, according to the Appellants, cannot be regarded as recorded 'immediately after completion of assessment in case of the Searched Person'.
Pertinent to mention here, the Searched Person, Shri T. R. Shanmugasundaram, in his statement recorded in the course of search under Section 132, while answering Question No.24, clearly stated that FD Receipts found in his residence were invested out his undisclosed income. The search records also show the list of FD Receipts, of which all those relating to Appellants in the present appeals are listed. Hence, even while recording statement in the case of Searched Person, these FD Receipts standing in the name of respective Appellants were unearthed by the Assessing Officer of the Searched Person.
As such, in the facts and circumstances of the present appeals, the Assessing Officer ought to have recorded his satisfaction even based on names of the respective Appellants appearing in the FD Receipts found in the premises of the Searched Person and on the basis of the statement recorded from him. However, the Assessing Officer chose not to record satisfaction at the first and second stages referred to in the Apex Court Judgment.
Even after completion of assessment proceedings in the case of Searched Person vide Order under Section 143(3) r.w.s.153A on 30/12/2016, copy attached in Paper-Book, the Assessing Officer took 73 days to record the satisfaction that FD Receipts found in the search of the Searched Person pertain to and the information therein relates to the Appellants in the present appeals.
It is pertinent to note that the factum of such deposits were already in the know of Assessing Officer of the Searched Person and the same is evidenced in Page No.2 of Assessment Order of the Searched Person in the table appended therein.
In the given facts and circumstances, it is submitted that the action of recording satisfaction after more than 70 days is unjustified, as the FD Receipts by themselves contain the names of the respective Appellants and the amounts invested in each case and that the same would be sufficient to record satisfaction that the information relates to the respective person and would be relevant in determining the income in such case.
On a combined reading of mandate of the Apex Court in 'Calcutta Knitwears Case with the Board Circular dated 31/12/2015, the entire Assessment Proceedings under Section 153C in the case of Appellants herein are vitiated by untimely and belated recording of satisfaction by the Assessing Officer of the Searched Person after lapse of all three stages demarcated by the ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 9 ::
Hon'ble Apex Court. Hence, it is sincerely prayed that the Impugned Assessment Orders under Section 153C be quashed on this violation itself.
GROUND NO.5 RAISED IN FORM 36:
Without prejudice to the above, in support of Ground No.5, it is submitted that the action of the Assessing Officer in making addition of the respective investments made in Fixed Deposits in the hands of the respective Appellants as Unexplained Investments is bad in law and made without considering the totality of facts and circumstances.
In this regard, it is submitted that all the Appellants herein have explained before the Assessing Officer that the Fixed Deposits invested in their names were out of the funds of the Searched Person, Shri T. R. Shanmugasundaram only, who is the relative of all the Appellants [Father of Appellants - Monisha and Kaaviya and Son-in-law of Subbulakshmi]. Admittedly, the PAN details of Shri T. R. Shanmugasundaram are also within the knowledge of the Department, as the impugned proceeding itself emanated from a search undertaken in his case.
Further, the Appellants obtained Confirmation Letter from Shri T.R. Shanmugasundaram and produced before the Assessing Officer itself stating that the Fixed Deposits were made out of his undisclosed income. Notably, in his Return of Income filed by him, the FD Receipts were disclosed in the Balance Sheet and Interest Receipts therefrom were included as part of his Profit and Loss Account, which were available with the Department during scrutiny of his case, pursuant to the Search Operation.
However, the above explanation was also given by the Appellants before the Assessing Officer and the Ld. Commissioner (Appeals), which was not accepted.
It is submitted that the Appellants herein have discharged preliminary onus cast on them by providing PAN details of the person whose funds formed the source of investments and also obtained and furnished Confirmation Letter from him to that effect. Going one step further, the financials of Shri T. R. Shanmugasundaram were also furnished showing that these FD Receipts were shown in his Balance Sheet for the impugned period and Interest Income out of them were offered to tax. Regarding creditworthiness also, the Confirmation Letter clearly says that he has invested his funds in those FDs.
As such, it is for the Revenue to disprove the explanation of the Appellants with evidence so as to make addition as Unexplained Investments. However, without discrediting any of the above explanation, the Assessing Officer directly proceeded to make additions in case of the respective Appellants on the sole ground that these investments were not offered as income in the hands of Shri T. R. Shanmugasundaram.
It may be noted that these investments do not constitute income under any of the traditional heads of income and if at all, it is to be included as income, it is for the Assessing Officer of Shri T. R. Shanmugasundaram to have invoked the relevant deeming provision such as Section 69 in his case and to ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 10 ::
make addition. However, admittedly, in the Assessment Order passed in the case of Shri T. R. Shanmugasundaram, no addition has been made in respect of the investments, although he has stated in the Statement recorded that these FDs were made out of his undisclosed funds and though these FD Investments were expressly recorded in Page No.2 of the Assessment Order in his case.
As such, having omitted to tax these investments in the hands of Shri T. R. Shanmugasundaram, it is not permissible to tax the same in the hands of the Appellant as Unexplained Investment, when the respective Appellants have discharged their burden of proof regarding nature and source of funds, which remains uncontroverted.
In this regard, reliance is placed on decisions of Hon'ble Chennai ITAT in Karunamoorthi Kavitha vs. ACIT [ITA No.1732/Chny/2024 dated 05/12/2024] and in Chinnasaminaidu Chandrasekar vs. ITO [ITA No.3119/Chny/2024 dated 23/07/2025], copy attached in Paper Book, where the Hon'ble Tribunal dealt with similar circumstances, where the Assessee cited the funds of another person as the source by providing PAN and Confirmation Letter.
In ITA No. 1732/Chny/2024, the Revenue had taken specific argument that the person whose funds are claimed to be the source did not disclose adequate income in the ITR. However, the Hon'ble Tribunal held that requirement to prove source for source is applicable only in the context of Section 68, that too, after amendment made with effect from AY 2022-23. As such, the contention of the Assessee was allowed, based on the PAN, Confirmation Letter and explanation offered itself.
Similarly, in ITA No.3119/Chny/2024 also, the Tribunal specifically dealt with Section 69 and held that once the Assessee proved details of source of funds by explaining the identity and genuineness of the transaction, the burden is discharged. The argument of the Assessee that there was no obligation to prove source of source before the amendment made in Section 68 with effect from 01.04.2023 was also considered. As such, addition made towards Unexplained Investment was deleted.
In light of the above facts, it is respectfully submitted that the Assessing Officer has not doubted the Confirmation Letter filed by Shri T. R. Shanmugasundaram. In such case, merely because that person fails to file ITR or fails to disclose the same, no addition can be made in the hands of the Appellants as Unexplained Investments, which is contrary to law.
It may be noted that the Assessment Order passed in the case of Shri T. R. Shanmugasundaram on 30/12/2016 has travelled to various forums and has attained finality. And, this aspect was not agitated in any of the forums by the Revenue. Hence, it is submitted that even if addition is to be made, it is not in the hands of the respective Appellants in this case, but only in hands of Shri T. R. Shanmugasundaram, which the Revenue has failed. Such failure cannot be made good by making addition in the hands of the Appellants, when the deeming fiction under Section 69 fails, in light of the explanation given by the Appellants.
ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 11 ::
In this regard, further reliance is placed on the decision of Hon'ble Madhya Pradesh High Court in the case of CIT vs. Metachem Industries [2000] 245 ITR 160 (Madhya Pradesh), copy attached in Paper-Book, where the Hon'ble High Court held that the responsibility of an Assessee is discharged, when it is established that the investment made in its name is by a particular person and nothing more. It has been further held that if that particular person owns that entry, that is, accepts the claim of the Assessee, then, the burden is discharged.
Most importantly, the Hon'ble High Court has held that it is not the responsibility of the Assessee whether that particular person is a tax payer or the source from which money was brought by that person and it is for the Assessing Officer to make addition in the hands of that person and not the Assessee.
Similarly, the Hon'ble Punjab and Haryana High Court also took very same view in CIT vs. Burma Electro Corp [2001] 252 ITR 344 (Punjab & Haryana), copy attached in Paper Book, where also, under similar circumstances, the High Court upheld the action of the ITAT in deleting the addition made in the hands of the firm, when the partners admitted on record that the firm received the funds from them. It was held that addition, if any, can be made in the hands of the respective partners only and not in the hands of the firm, unless there is any evidence to show that the firm had sufficient source to introduce the same through the partners indirectly.
On consideration of the above case laws, it is clear that addition cannot be made in the hands of the person in whose name the investment stands, when another person admits that the investment was made out of his funds and his identity is also established. Importantly, it is not relevant whether that other person is a tax payer or from where he brought the sum, in so far as addition in the hands of the Assessee is concerned. As such, the additions made by the Assessing Officer in the hands of the respective Appellants on the ground that Shri T. R. Shanmugasundaram did not offer the same as his income is totally unsustainable in law.
Further, it is also submitted that as the Searched Person, Shri T. R. Shanmugasundaram stated even in the Statement recorded from him that the FDs were invested by him from Undisclosed Income, it is relevant to mention that the additions made and sustained by Hon'ble ITAT in his case in ITA Nos.644-650/Chny/2019 dated 14/02/2022 form sufficient source for the impugned investments made in the names of the respective Appellants. For sake of reference, the table shows year-wise total income determined consequent to order of Hon'ble ITAT vide Order Giving Effect dated 28/04/2022. Copy of ITAT Order and Orders Giving Effect are filed in Paper- Book.
ITA Nos.644-650/Chny/2019
AY Income Returned Income Assessed
(ITAT Order)
2009-10 8,19,023/- 15.43,257/-
ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 12 ::
2010-11 3,65,345/- 31,72,293/-
2011-12 8,64,635/- 69,06,081/-
2012-13 16,71,050/- 93,00.421/-
2013-14 38.46,090/- 4,42,75,964/-
2014-15 42,39,690/- 2,41,17,850/-
Total 8,93,15,866/-
From all perspectives, it is clear that the impugned investments were made out of funds of Shri T.R. Shanmugasundaram and that the Appellants herein have discharged the onus on their part to the level required by the provision. Hence, it is sincerely prayed that the addition made as Unexplained Investment be deleted and justice be rendered to the Appellants. ADDITIONAL GROUND NO.1 RAISED BY APPLICATION FOR ADDITIONAL GROUNDS OF APPEAL DATED 27/02/2026:
Without prejudice to the above submissions, the Appellants would refer to the Application for raising Additional Grounds of Appeal dated 27/02/2026, through which two such grounds are raised before the Hon'ble Tribunal for the first time. Referring thereto, following submissions are made in respect of Additional Ground No.1:
As it is evident from the Satisfaction Note of the Assessing Officer of the Appellants dated 28/04/2017, copies attached in Paper-Book, the Assessing Officer requested for the approval of another authority for issuing Notice under Section 153C in all the three cases. Subsequent thereto, Notices under Section 153C were issued. In fact, in the respective Assessment Orders also, the Assessing Officer mentioned that Notice under Section 153C was issued after the approval of Range Head.
It is submitted that when Section 153C mandates the satisfaction of the Assessing Officer of other person (and not any other person such as the Range Head), requesting approval of a higher authority and acting based on such approval amounts to acting under dictation, which is a well-founded ground for quashing quasi-judicial functions performed.
Under Administrative Law, it is clear that Doctrines of Subordination, Acting on Dictation and Excess Caution are often used by Courts of Law to quash actions taken by public offices, which function only based on power conferred under provision of law. When the provision of law contemplates independent discretion and satisfaction of the Assessing Officer alone, the very act of sending it for approval of higher authority, when not contemplated under law, vitiates the very act required to be done on such satisfaction, as ultimately, it is done on the satisfaction of that higher authority and the Assessing Officer, so as to obtain approval of that authority, may not have exercised his independent discretion. Hence, on this count, the entire proceeding is liable to be quashed in the hands of all the Appellants.
ADDITIONAL GROUND NO.2 RAISED BY APPLICATION FOR ADDITIONAL GROUNDS OF APPEAL DATED 27/02/2026:
ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 13 ::
Without prejudice to the above, referring to Additional Ground No.2, it is submitted that the Assessment Orders passed under Section 153C are null and void, as they are completely silent about the prior approval of Specified Authority as per Section 153D, especially when the authority passing the order is an Income Tax Officer, which is below the rank of a Joint Commissioner of Income Tax.
It may be noted that thể mandatory character of Section 153D is clear from the phrase used in the provision, being "No order of assessment or reassessment shall be passed.... Except with the prior approval of the Joint Commissioner". The provision is clearly worded in a negative way prohibiting any contrary order passed. That is, if at all, an order of assessment or reassessment is to be passed, the same is to be done only after complying with the provision.
In this regard, it is submitted that the Income Tax Officer, who obtained approval of the Range Head even at the time of issue of Notice under Section 153C (when the Act did not require and permit such approval) and also mentioned the same in the Assessment Orders, failed to mention anything about the approval obtained under Section 153D, raising presumption that no approval was obtained as contemplated therein.
Reliance is placed on the decision of Hon'ble Gujarat High Court in PCIT vs. Sunrise Finlease (P) Ltd. [2018] 252 Taxman 407 (Gujarat), copy attached, where, relying on Apex Court Orders, it was held that an assessment order passed by an Income Tax Officer (who is below rank of JCIT) without prior approval under Section 153D is null and void, as the statute has couched the requirement of approval in a negative language, showing its mandatory nature and as the statute involved is a taxing one, requiring strict interpretation.
Reliance is also placed on Pune ITAT Order in AkilGulamaliSomaji vs. ITO [ITA Nos. 455-458/Pune/2010 dated 30/03/2012], reported in [2012] 20 ITR(T) 255 (Pune), where the Hon'ble Tribunal held that the requirement to obtain prior approval applies equally to an order passed under Section 153C also and that in the absence of obtaining approval, the order becomes invalid in the eyes of law. On appeal by the Department, Hon'ble Bombay High Court dismissed the appeal vide order dated 15/01/2013 in ITA (L) No.1416-1419 of 2012. Copies of ITAT and High Court Orders are attached in Paper-Book.
Similarly, reliance is placed on Mumbai ITAT Order in Vrushali Sanjay Shinde vs. DCIT [ITA No.198/Mum/2022 dated 08/09/2023] reported in [2023] ITR(T) 274 (Mumbai-Trib.), where also, under similar circumstances, it was held that Assessment Order passed under Section 153C without approval of Specified Authority under Section 153D is bad in law. In that case, the Hon'ble Tribunal held that approval made by ACIT without proper application of mind amounts to no approval at all.
In such circumstances, the Department filed appeal before the Hon'ble Bombay High Court. While deciding the case in ITA (L) No.12683 of 2024 dated 10/12/2025, the Hon'ble High Court held that the issue is covered by ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 14 ::
various High Court Orders that prior approval under Section 153D is mandatory for Assessment Order under Section 153C also and upheld the action of the Hon'ble Tribunal. Copies of ITAT and High Court Orders are attached in Paper- Book. In reliance of the same, it is prayed that the Impugned Assessment Orders passed under Section 153C are liable to be quashed as null and void.
10. The ld.AR for the assessee also referred Q.No.24 (Page 19 of Paper Book) as below:
Q.24) During the Income Tax Survey conducted today, a Fixed Deposit Receipt was found in your house and the same was taken as inventory in Annexure/VN/TRS/FD/S PAGE-1 dated 18/11/2014.As per the Annexure taken as inventory, the FD Receipts which was found in your house amounted to Rs. 1,05,50,000/-. Have you shown this amount in your Income Tax Returns. Please Explain:
A) I saw the Annexure as shown by you. The Fixed Deposit Receipts which was found in my house amounting to Rs. Rs.1,05,50,000/-, is not shown in my Income Tax Returns. I do not maintain any accounts for the said amount.
The said FD amount was invested only from the income which was not shown in my accounts.
11. On merits, the assessee submitted that:
i. During search proceedings, Shri T.R. Shanmugasundaram (father of the assessee) admitted in his statement u/s.132(4) of the Act that the Fixed Deposits standing in the names of the assessee and other related persons were made out of his undisclosed income.
ii. The said Fixed Deposits were subsequently reflected in his books of account and Balance Sheet.
iii. Interest income arising from such FDs was also offered to tax by him in his return of income.
iv. The AO, while completing assessments in the case of Shri T.R. Shanmugasundaramu/s.143(3) read with section 153A for relevant assessment years, did not make any addition with respect to such Fixed Deposits nor rejected the books of account.
ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 15 ::
v. Therefore, once the investments and interest income have been accepted in the hands of the father, the same cannot again be taxed in the hands of the assessee.
It was thus argued that the addition in the hands of the assessee leads to double taxation and is unsustainable.
12. The ld.DR for the Revenue reiterated the findings of the ld. CIT(A) as referred supra and relied upon the orders of authorities below.
13. We have heard the rival submissions, perused the record and submissions filed. Regarding legal issue of delay in recording satisfaction and the validity of proceedings u/s.153C, the chronology of events shows that assessment of searched person completed on 30.12.2016.Satisfaction recordedby the AO of searched person on13.03.2017 and notice u/s.153C was issued to the assessee on 28.07.2017.
We find that there is a delay of 73 days without any prudent reason.As per the law laid down by the Hon'ble Supreme Court in CIT vs. Calcutta Knitwears, satisfaction must be recordedat initiation or during assessment, orimmediately after completion. The expression "immediately" cannot be stretched to include an inordinate delay without justification.
14. In the present case, the seized material (FDRs) clearly contained the names of the assessee. The searched person had already admitted ownership in statement recorded u/s 132(4). The AO had full knowledge during assessment itself. Despite this, satisfaction was recorded after 73 days without explanation.We hold that such delay violates the mandate of law and renders assumption ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 16 ::
of jurisdiction under section 153C invalid. In CBDT Circular No. 24/2015, the CBDT has accepted that the principles of Calcutta Knitwears apply to section 153C. The circular mandates strict compliance.Thus, the delayed satisfaction note is contrary to the following binding instructions:
CBDT CIRCULAR NO. 24/2015 dated 31.12.2015 Subject: Recording of satisfaction note under section 158BD/153C of the Act - reg.- The issue of recording of satisfaction for the purposes of section 158BD/153C 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 of 2014 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 u/s 158BD. The Hon'ble Court held that "the satisfaction note could be prepared at any of the following stages: (a) atthe 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. 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 judgement.
Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.
15. In CIT v. Bharat Bhushan Jain(08.01.2015) in ITA No.648/2009, the Delhi High Court held, in essence that:
6. Having regard to the intent of the Supreme Court in Para 44 of the Calcutta Knitwears (supra), where it was ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 17 ::
indicated that the Revenue has to be vigilant in issuing notice to the third party under Section 158 BD, immediately after the completion of assessment of the searched person, this Court is of the opinion that a delay ranging between 10 months of 1 ½ years cannot be considered contemporaneous to assessment proceedings. We are of the opinion that notices were not issued in conformity with the requirements of Section 158BD, and were unduly delayed. The appeals of the Revenue accordingly fail and are dismissed.
16. In this regard, we may also refer the decision of Hon'ble Gujarat High Court in the case of Pr.CIT Vs. Jitendra H Modi HUF (2018) 403 ITR 110 (Guj) and also the decision of ITAT, Pune Bench in the case of Kewal Kumar Jain Vs. ACIT in ITA Nos.1384 & 1385/PUN/2016 dated 06.11.2018.
17. In view of entire conspectus of the case, we hold the proceedings initiated u/s.153C as invalid. Consequently, impugned orders and assessment orders are set aside. Other issues and on merit become academic and does not require adjudication. Hence, appeal of the assessee in ITA No.3915/Chny/2025 is partly allowed. Our findings rendered in ITA No.3915/Chny/2025 shall apply mutatis mutandis to the other two appeals in ITA Nos.3916 & 3917/Chny/2025 as well. Hence, appeals of the other assessees in ITA No.3916-3917/Chny/2025 are also partly allowed. Order pronounced on the 07th day of May 2026, in Chennai.
Sd/- Sd/-
(इं तूरी रामा राव) (मनु कुमार िग र)
(INTURI RAMA RAO) (MANU KUMAR GIRI)
लेखा सद)य/ACCOUNTANT MEMBER या यक सद)य/JUDICIAL MEMBER
ITA Nos. 3915, 3916 & 3917 /Chny/2025 (2014-15) Shanmugamsundaram Monisha, Subbaian Subbulakshmi & Shanmugamsundaram Kaaviya (Vs) ITO NCW 3(1) :: 18 ::
चे नई/Chennai, *दनांक/Dated: 07th May, 2026.
SNDP, Sr. PS आदे श क! त,ल-प अ.े-षत/Copy to:
1. अपीलाथ /Assessee
2. थ /Respondent
3. आयकरआयु /CIT, Chennai / Madurai / Salem / Coimbatore.
4. िवभागीय ितिनिध/DR
5. गाडफाईल/GF