In a decision that sparked murmurs across Courtroom No. - in Ahmedabad, the Gujarat High Court on Tuesday struck down two Income Tax notices issued under Section 153C, calling the delay “unacceptable” and contrary to Supreme Court-mandated timelines. The bench of Justice A.S. Supehia and Justice Pranav Trivedi delivered a common judgment, noting that the department’s reasons-COVID-19 disruptions and administrative reshuffling-did not justify a 22-month gap between completing the search assessment and recording the crucial “satisfaction note.”
Background
The case revolved around a 2019 search operation on a land broker group. During this search, authorities seized WhatsApp chats and related documents that allegedly hinted at “on-money” transactions in the purchase of land involving individuals connected to petitioner Parag Rameshbhai Gathani. The department later relied on these chats, coupled with a registered sale deed from 2020, to issue a Section 153C notice in February 2024.
But the timeline raised eyebrows. The assessment of the searched person was wrapped up in August 2021. Yet, the satisfaction note-the document that legally links seized material to another person-was recorded only on 6 June 2023. The petitioner’s counsel argued that this delay violated the Supreme Court’s landmark ruling in Calcutta Knitwears, which requires the satisfaction note to be recorded “immediately” at one of three specified stages.
“The entire process was stretched far beyond what the law permits,” Senior Advocate Tushar Hemani submitted, pointing the court to binding CBDT Circular No. 24/2015 that adopts the Knitwears principles.
Court’s Observations
The bench’s analysis moved swiftly but thoughtfully, repeatedly returning to the same center point: timeliness is not optional.
“The delay of twenty-two months cannot be reconciled with the Supreme Court’s mandate of ‘immediately after completion’ of assessment,” the bench observed.
The judges openly questioned the department’s explanations. On the COVID justification, Justice Supehia pointed out that the assessment itself was completed during the pandemic-so why was the satisfaction note impossible to prepare shortly thereafter?
The court also brushed aside the argument that the transition to the Faceless Assessment Scheme slowed things down. The bench noted that proceedings under Sections 153A and 153C were specifically excluded from the faceless framework, making the reason “a lame excuse,” as mentioned in the judgment.
The department attempted to rely on a Punjab & Haryana High Court judgment (Bhupinder Singh Kapur), but the bench rejected the comparison, saying the delay in the present case was far longer and the factual matrix entirely different.
In a subtly sharp moment, the bench remarked that the term “immediately” cannot be stretched so far that it defeats the purpose of “efficient and expeditious” search-related assessments. The observation drew brief nods from advocates seated behind.
Decision
Holding that the department failed to record the satisfaction note within any of the legally permissible windows, the Gujarat High Court quashed the notices issued under Section 153C for the relevant assessment years. “RULE is made absolute,” the bench concluded, bringing the brief but consequential hearing to a close. No costs were imposed.
Case Title: Parag Rameshbhai Gathani (Through POA Holder Dhiren Vinodchandra Shah) vs. Income Tax Officer, Ward 2 International Taxation & Anr.
Case No.: R/Special Civil Application No. 3734 of 2025
With R/Special Civil Application No. 3736 of 2025
Case Type: Writ Petition under Article 226 challenging notice under Section 153C of the Income Tax Act
Reserved On: 11 November 2025
Decision / Pronounced On: 18 November 2025