AI Structured Summary
Not yet generated for this judgment
Judgment
This is a batch of 11 appeals pertaining to the same business group and all these appeals are being disposed of through a single order. These cases can be grouped as under:
Aastha Apparels Pvt. Ltd. (AYs 2013-14 to 2019-20);
JBB Apparels Pvt. Ltd. (AYs 2018-19 to 2019-20);
JBN Apparels Pvt. Ltd. (AYs 2018-19 & 2019-20)
For the sake of convenience, the batch of appeals pertaining to Aastha Apparels Pvt. Ltd. bearing ITA Nos. 4720, 4721, 4657, 4658, 4659, 4660 & 4661 shall be taken as lead cases. It may be mentioned that all these appeals have been filed by the Revenue.
All the appeals pertaining to Aastha Apparels arise from a common order dated 30.04.2025, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by Ld. CIT(A)-31, New Delhi.
Briefly the facts are that there was a search and seizure operation on the Shri Vikas Chowdhary Group on 6.2.2019. The satisfaction note (pertaining to searched persons) was recorded by that AO on 2.2.2021. The date of satisfaction note of non-searched persons for initiating proceedings u/s 153C of the Act is also seen to be recorded on 2.2.2021 by concerned AO. Thereafter, the Ld.AO passed an assessment order making additions allegedly on the basis of documents and other material seized during the course of the said search and seizure action. The assessees approach the Ld. CIT(A) whereby they could succeed on the basis of technical/jurisdictional issues, namely the erroneous passing of orders u/s 153C, where the same could not have been passed under this section and also erroneously passing orders u/s 143(3) of the Act when the same should have been dealt with u/s 153C of the Act. The assessees concerned got relief from Ld. CIT(A) also on account of the fact that the additions in group cases were allegedly not made on the basis of material seized during the course of search and seizure action.
The Revenue is aggrieved with this action of Ld. CIT(A) and for the sake of reference the grounds for AY 2013-14 (Appeal No.4720/Del/2025) are extracted as under: -
“Grounds of appeal:
a. Whether on the facts, circumstances and law of the case the Ld. CIT(A) has erred in allowing the appeal of the assessee only on technical ground and not considering the merit of the assessment order.
b. Whether on facts and in circumstances of the case, Ld. CIT(A) is legally justified to deleting the additions made by the AO without any legality and merit of the case.
c. Whether on the facts and under the circumstances of the case and in law, the Ld. CIT(A) was justified in relying upon the judgment of Hon'ble Delhi High Court in the case of PCIT, Central-1, Delhi va Ojjus Medicare Pvt. Ltd. (17A No. 52 of 2024), even when the Revenue has filed a SLP against this decision of the Hon'ble Delhi High Court?
d. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that block periods for assessment u/s 1530 of the Income-tax Act, 1961, have to be calculated from the date of receipt of the books of accounts, documents or assets seized, by the jurisdictional AO of the non-searched person or from the date of issue of Notice u/s 153C of the Act and not from the date of initiation of search?
e. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A),following the direction of Hon'ble High Court was justified in holding that block periods for assessment u/s 153C of the Income-tax Act, 1961, have to be calculated from the date of receipt of the books of accounts, documents or assets seized, by the jurisdictional AO of the non-searched person or from the date of Issue of Notice issued u/s 153C of the Act and not from the date of initiation of search by relying on First Proviso to Section 1530, even when this Proviso cannot override the main provision of Section 153C(1), which clearly mentions that calculation of block period has to be done from the year of search?
f. Whether on the facts and under the circumstances of the case and in law, Ld. CIT(A), following the direction of Hon'ble High Court was justified in holding that block periods for assessment u/s 153C of the Income-tax Act, 1961, have to be calculated from the date of receipt of the books of accounts, documents or assets seized or date of Notice issued u/s 153C of the Act, by the jurisdictional AO of the non-searched person, even when the position of law is clarified after the amendment introduced by Finance Act, 2017, that the block period of 6AYs and 10AYs as mentioned in sub-section (1) of Section 1530 and Section 153A have same meaning and have to be calculated from the "assessment year relevant to the previous year in which search is conducted"?
g. Whether on the facts and circumstances of the case and in law, Hon'ble High Court and consequently, the Id. CIT(A) justified in relying on the judgment of Hon'ble Supreme Court in the case of CIT vs. Jasjit Singh (2023 SCC Online SC 1265) and of Hon'ble High Court in the Case of CIT vs. RR.J Securities Ltd. (2015 SCC Online Del 13085), even though the facts of the instant case are different from that of Jasjit Singh case and RRJ Securities case, since the decisions rendered by the Court in Jasjit Singh as well as in RRJ Securities had dealt with a pre-2017 position (i.e. for search conducted before 1st April, 2017) and hence are clearly distinguishable?
h. Whether on the facts and under the circumstances of the case and in law, the Hon'ble High Court and consequently the Ld. CIT(A) was justified in holding that the ten-year period would have to be reckoned from the 31st day of March of the AY relevant to the year of search and not from the AY immediately preceding the year of search, even when this is a settled position of law that ten-year period for assessment u/s 153C of the Income-tax Act, 1961 has to be reckoned from AY before the year of search?
i.That the case falls under exception "c" of Para 3 of the Circular No. 5/2024 dated 15.03.2024 as the case is pending before the Department of Revenue Intelligence(DRI).
j. Whether, the ld. CIT(A) is justified in holding that block periods for assessment u/s 153C of the Income-tax Act, 1961, have to be calculated from the date of satisfaction note of non-searched person's A.O. i.e. 02.02.2021(date of satisfaction note) and thereon the year 2020-21 (Assessment year 2021-22) and not from the date of initiation of search 1.e. 06.02.2019. The date of Assessment year, in the present case should be reckoned from Assessment year 2019-20 (previous year 2018-19 1.c. date of search 06.02.2019) and hence, the relevant 06 assessment block period should be effective from A.Y 2013-14 to 2018-19.
k. That the order of the CIT (A) is perverse, erroneous and is not tenable on facts and in law.
l. The grounds of appeal are without prejudice to each other.
m. That the appellant craves to add, amend, after or modify any grounds of appeal at the time of hearing.”
Before us the Ld. DR argued on the basis of the findings of Ld.AO and stated that the Ld. CIT(A) should have considered the merit of the case and should have deliberated upon the issues of tax evasion which was clearly visible on the basis of Ld. AO’s findings. Regarding the reliance of Ld. CIT(A) on the case of Ojjus Medicare Pvt. Ltd. reported in 465 ITR 101 (Del), it was stated that the said case had not been accepted by the Department and an SLP had been filed before the Hon’ble Supreme Court. The Ld. DR argued that the calculation of block period has to be done from the year of search as per section 153C(1) of the Act. It was the submission that the Ld. CIT(A) also wrongly relied on the judgment in the case of Jasjeet Singh reported in 458 ITR 437 (SC), even when these judgments deal with the pre-2017 position. It was the submission that the Ld. AO conducted enquiries on the basis of material available with him and only thereafter made the impugned additions.
The Ld. AR argued with the help of written submissions and detailed paper books which have been filed for our perusal. Broadly in respect of three entities before us it was the argument that as per proviso to section 153C of the Act, for taking action u/s 153C of the Act the date of search would be substituted by the date of receiving the books of account, documents or assets belonging to the assessee. It was argued that the satisfaction note was recorded on 02.02.2021 by the AO of the searched person. It was pointed out that the satisfaction note recorded by the AO of the assessee is also dated 2.2.2021. Thus, the material gathered in the course of search and treated as allegedly belonging to the non-searched person happened between 1.4.2020 to 31.3.2021, relating to FY 2020-21 and thereby pertaining to AY 2021-22. It was pointed out that AY 2021-22 would constitute the relevant year for identifying the six years u/s 153C of the Act. Accordingly, the six years would be AY 2015-16 to AY 2020-21. On this basis, AY 2013-14 & 2014-15 [ITA 4720 & 4721/Del/2025] of Aastha Apparels is to be considered as out of the block on the basis of the cases of Jasjit Singh (supra) and Ojjus Medicare (supra). Thus, the notices u/s 153C for AY 2013-14 & 2014-15 would be invalid in the eyes of law. The Ld. AR enlarged the scope of his arguments by stating on the basis of the block of six years lying between AY 2020-21 and 2015-16, that the notice u/s 143(2) of the Act for AY 2019-20 being issued instead of u/s 153C of the Act would not be in accordance with law and thus, the proceedings for AY 2019-20 in the case of Aastha Apparels [4461/Del/2025]; JBB Apparels [4462/Del/2025]; & JBN Apparels [5278/Del/2025] would be rendered illegal since assessments have been passed u/s 143(3) of the Act and not through proceedings initiated u/s 153C of the Act. Regarding the surviving appeals for AYs 2015-16 to 2018-19, in the case of Aastha Apparels and AY 2018-19 in both JBB Apparels and JBN Apparels, it was the submission that the Ld. CIT(A) has given a detailed finding that the additions made in the assessment order were not based on incriminating material found and seized in the case of searched person. For this proposition the Ld. AR read from the synopsis of arguments prepared and submitted by him as under: -
“5.2It is submitted that the additions made are not based on any incriminating material found as a result of search on the searched person as stated in the satisfaction note. It is submitted that assessment years under consideration are 2013-14 to 2019-20 and are non abated assessments on the date of satisfaction note recorded by AO of the assessee, as a result of search on the searched person, as would be evident from chart hereunder:
S.No. Assessment years Date of filing of original return of income Assessmentu/s Date of order of assessment Status on the date of the satisfaction note dated 2.2.2021 as recorded by AO of the searched person who is also AO of Assessee i.e. date of handing over i) 2013-14 30.09.2013 143(3) 23.03.2016 Non abated ii) 2014-15 29.11.2014 143(3) 30.12.2016 Non abated iii) 2015-16 30.09.2021 143(3) 29.12.2017 Non abated iv) 2016-17 17.10.2016 143(1) ----- Non abated v) 2017-18 30.10.2017 143(3) 20.12.2019 Non abated vi) 2018-19 03.09.2018 143(1) 10.04.2019 Non abated vii) 2019-20 31.10.2019 143(1) 11.05.2020 Non abated 5.3It is well settled law that in case of non-abated assessment additions made u/s 153C of the Act have to be confined to incriminating material found as a result of search on the searched person as referred in the satisfaction note. According to the satisfaction note the seized material which is alleged to be incriminating material is as under: (page 134-135 of Paper Book-I)
“6 Identification of the seized asset/papers which in the opinion of AO of the searched person (S.No. 2), belongs to the other person (S.No.4) As per Annexure A-2 i) Details of panchnama & Annexure through which relevant asset/document was seized/requisioned* Annexure A-2, Team KG-9 (Phone Vikas Chowdhary) Panchnama dated 05.04.2019 ii) Date of above Panchnama 05.04.2019 iii) Address of the place/premises from where asset/paper was seized As per panchnamas enclosed iv) Description of relevant asset/paper(s) These documents contain details of GST refunds, ROSL, Focus, duty drawback and Export receivable etc. v) The brief reason on the basis of which the AO reached to the conclusion that the relevant seized asset/paper belong to the other person (use Annexure if required) The details of the documents mentioned above have been seen by me. On the basis of the available details regarding nature of business of the assessee and the modus operandi brought into use, the documents mentioning/bearing the name of the assessee and the report received from an Investigation Wing. I am of the opinion that there is a substantial loss of revenue shown by the assessee and it needs a thorough and proper verification. I am further of the opinion and satisfied that the incriminating seized documents/soft data belongs to the assessee M/s Aastha Apparels Pvt. Ltd., which is other than the person searched in whose case a detailed scrutiny assessment required to be made, therefore, I have reason to believe that a notice u/s 153C of the Act be issued immediately under the provisions of the Income Tax Act, 1961. 7 Assessment year involved 2013-14 to 2019-20” 5.4Reliance is placed on the following judicial pronouncements:
i)454 ITR 212 (SC) Pr. CIT vs. Abhisar Buildwell (P) Ltd.
ii) 454 ITR 441 (SC) DCIT vs. M/s U.K. Paints (Overseas) Ltd.
iii) 397 ITR 344 (SC) CIT vs. Sinhgad Technical Education Society
iv) 464 ITR 1 (Del) Saksham Commodities Ltd. vs. ITO
v)W.P. (C) 6162/2023 (Del) dated4.9.2024 Mukesh Chandra Agarwal vs. DCIT
vi) 157 DTR 20 (Del) PCIT vs. Index Securities (P) Ltd.
vii) 380 ITR 612 (Del) CIT vs. RRJ Securities.”
The Ld. AR stated that all the impugned assessment orders were either illegally initiated or were based on material which did not have any connection with the search and seizure action.
We have considered the rival submissions and have gone through the records before us. Right at the outset, it deserves to be mentioned that the Ld. CIT(A) has correctly treated AYs 2013-14 & 2014-15 as being out of the block of six years following the cases of Jasjit Singh (supra) and Ojjus Medicare (supra). We do not deem it necessary to discuss in detail the findings at pages 194 to 200 of the impugned order whereby this issue has been clearly laid out. Accordingly, ITA Nos. 4720 & 4721 are treated as being out of the block period and therefore are hit by an illegality in the assumption of jurisdiction. Similarly, AY 2019-20 pertaining to all the three entities under consideration (Aastha Apparels; JBB Apparels; & JBN Apparels) are also hit by an illegal assumption of jurisdiction because the assessments therein have been completed u/s 143(3) of the Act instead of through proceedings u/s 153C of the Act. Thus, here also, we support the findings of Ld. CIT(A) in pages 200 to 204 at paras 22 to 30 and affirm his action. Accordingly, this issue renders the appeals bearing ITA Nos. 4661, 4662 & 5278/Del/2025 deserving to be held against the Revenue.
Regarding the remaining six appeals [ITA 4657, 4658, 4659, 4660, 5261 & 5277/Del/2025] pertaining to the three assessees before us, we need to examine whether there was any live nexus between the impugned additions and the materials seized during the course of search and seizure action on the Vikas Chowdhary Group. On this issue it is found that the allegedly incriminating material recovered during the course of search and seizure action pertained to details of GST refund, duty drawback, export receivables etc. It is clear that the so-called incriminating documents are part of Government records and would certainly be part of any computation of income tendered by the assessees under consideration. We find that on pages 212 to 226 there is a detailed finding of fact in the impugned order (in the case of Aastha Apparels) that the additions have not been made on the basis of materials seized during the course of search and seizure. It is recorded by the Ld. CIT(A) that the only material considered in the satisfaction note were documents containing details of GST refund, ROSL, Focus, Duty drawback and export receivables which are, admittedly, declared under the respective Acts and even in the Income tax return. The Ld. CIT(A) further mentions that this fact has been admitted by the Ld. AO in the remand report dated 24.07.2024. It is seen that the Ld. CIT(A) has dealt this issue at length, which for the sake of brevity, we may mention in an illustrative manner. In para 43 of the impugned order the addition of Rs.97,91,594/- as cash purchases has been made on the basis of various documents and pictures from the digital devices of one Shri Sudhir Gulati. It is a finding that the addition under consideration has not been made on the basis of material referred to in the satisfaction note recorded by the Ld. AO, as found and seized during the course of search on the searched person. Similarly, the addition of Rs.970,84,276/- made under the heading of claim of fraudulent incentives and duty drawback, has been made on the basis of letter from DRI, letter from Customs Department found during survey proceedings and an e-mail sent by one Shri Ankit Sharma and one Shri Shailesh. Here again the Ld. CIT(A) has given a finding (para 48 at page 222) that the addition has been made d’hors any incriminating material seized during the course of search and seizure. We find that the Ld. CIT(A) has discussed all the additions made in a similar manner and has come to the conclusion that none of the additions made pertained to any seized material during the course of search and seizure. We find that the Ld. CIT(A) has correctly relied on the cases of Abhisar Buildwell reported in 454 ITR 212 (SC); Sinhgad Technical Education Society reported in 397 ITR 344 (SC) and Saksham Commodities Ltd. reported in 464 ITR 1 (Del). A reading of these judgments makes it amply clear that there has to be a live nexus between the additions made and material seized during the course of search and seizure. We find that for AYs 2015-16, 2016-17, 2017-18 & 2018-19 for M/s Aastha Apparel; AY 2018-19 for M/s JBB Apparels; and AY 2018-19 for JBN Apparels would be hit by the judgments mentioned herein wherein any sustainable addition through the provisions of section 153C of the Act can be made only if there is a visible and demonstrable nexus between the material seized during the course of search and seizure and the addition thereon. We find that this is not the case and thus, the Revenue’s appeals fail for these assessees and the assessment years mentioned against them as well.
In the result, all the appeals of Revenue are dismissed on the basis of reasons recorded for each assessee and each assessment year in the body of this order. While the case of Aastha Apparels has been taken as the lead case but since the proceedings and the documents relied on are common, hence, the findings would apply for JBB Apparels and JBN Apparels with equal force.