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Judgment
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals), Delhi – 25 [“Ld. CIT(A)”, for short] dated 27.01.2026 for the AY 2020-21.
Brief facts of the case are, a search and seizure action under section 132 of the Income-tax Act, 1961 (for short ‘the Act’ was carried out on the Alankit group of cases on 18.10.2019. Documents/incriminating material found during search related to the person other than searched person were found and accordingly, the cases of the Alankit group was centralized to the jurisdiction of the AO, by centralization order passed under Section 127 of the Act. Based on the notices issued, assessee filed its original return of income declaring an income of Rs.6,81,320/- and the same was processed under Section 143(1) of the Act. Subsequently, notices under Section 143(2) and 142(1) were issued and served on the assessee. In response, assessee filed its reply on 13.12.2021, in which assessee has requested for the copy of satisfaction note recorded under Section 153C, other supporting documents for recording the satisfaction under Section 153C and copy of panchnama. The AO issued further notices to the assessee under Section 142(1) of the Act. Based on the incriminating material found during the search conducted in group cases in the form of hard and soft data were seized and impounded from different premises. It was noticed that the main person, Shri Alok Kumar Agarwal was involved in providing accommodation entries to various persons/entities in lieu of cash payment. Based on the digital evidences of Shri Sunil Kumar Gupta recovered from his residential premises, it was noticed that parallel books of account were maintained by him on behalf of Shri Alok Kumar Agarwal. Accordingly satisfaction was recorded and proceedings were initiated. Based on the incriminating material and satisfaction recorded year-wise, the assessment was initiated and completed u/s 153C of the Act on the basis of cash credits in the books of the assessee, and accordingly addition under Section 68 was made to the extent of rupees Rs.44,46,054/-.
Aggrieved with the above order, assessee preferred an appeal before the ld. CIT(A), Delhi 25, and filed detailed submissions. After considering the detailed submissions, ld. CIT(A) sustained the addition made by the AO.
Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :-
“1.That the notice issued under Section 143(2) of the Act and the assessment order passed under Section 143(3) read with Section 153C of the Income Tax Act, 1961 ('the Act') by the Assessing Officer ('AO') are fundamentally flawed, being without jurisdiction, barred by limitation, and passed in violation of the statutory framework governing such proceedings, thereby rendering them legally unsustainable.
2.The notice issued under Section 143(2) of the Act and the consequent assessment proceedings are illegal, void ab initio, and without jurisdiction, as the statutory preconditions for completions proceedings under Section 143(3) read with section 153C of the Act were not satisfied, rendering the proceedings bad in law and liable to be quashed.
3.That on the facts and circumstances of the case and in law, the learned Assessing Officer has erred in not issuing a notice under Section 153C of the Act despite having admittedly recorded a satisfaction note for the year under consideration, and therefore the initiation of proceedings under any other provision of the Act is illegal, without jurisdiction and bad in law.
4.On the facts and circumstances of the case and in law, the impugned proceedings are bad in law as the seized material neither has any bearing on the determination of the total income of the assessee nor is there any valid and detailed satisfaction recorded by the Assessing Officer to this effect.
5.That the approval granted under Section 153 D of the Act for passing the assessment order under Section 153C is invalid, as it has been granted in a mechanical manner, without independent application of mind, rendering the assessment order bad in law.
6.That on the facts and in law, the approval under section 153D stands vitiated due to non-application of mind, as both the proposal and the approval are mere carbon copies across years and group entities, issued in the fag end, in breach of the statutory mandate.
7.That the approval under Section 153D of the Act is bad in law as both the proposal and the approval under Section 153D were invalid being issued without a Document Identification Number (DIN) in violation ofCBDT Circular No. 19/2019 dated 14.08.2019.
8.On the facts and in law, Excel sheets and tally data retrieved from electronic devices are inadmissible as evidence due to non-compliance with Section 65B of the Indian Evidence Act, 1872, and the CBDT Manual, rendering the additions made by the AO liable to be deleted.
9.On the facts and circumstances of the case and in law, the AO has erred in relying upon the retracted statements and material seized from the residential premises of Mr. Sunil Kumar Gupta without providing an opportunity to cross-examine, despite a specific request.
10.On the facts and circumstances of the case and in law, the AO erred in passing the assessment order without generating, allotting, quoting, and communicating a valid DIN, in contravention of Circular No. 19 of 2019 dated 14.08.2019, rendering the entire proceedings and assessment order invalid.
11.That the CIT(A) erred in upholding the validity of the notice, assessment order and in sustaining the additions, without independent application of mind and without properly considering the detailed submissions filed, rendering the order arbitrary and legally unsustainable.
12.On the facts and circumstances of the case, the CIT(A) failed to appreciate the fact that the additions/disallowances made by the AO are beyond the scope of the satisfaction note.
13.On the facts and circumstances of the case and in law, the AO erred in making illegal additions and completing the assessment at income of Rs.51,27,376/-.
14.On the facts and circumstances of the case, AO has wrongly invoked the provisions of Section 68 of the Act, and the CIT(A) has erred in upholding the same.
15.On the facts and circumstances of the case and in law, the addition of Rs.44,46,054/- made by the assessing officer on account of alleged unexplained credit under Section 68 of the act is erroneous and without jurisdiction.
16.On the facts and circumstances of the case and in law, the AO/CIT(A) has erred in passing the impugned orders without giving the Appellant a reasonable opportunity of being heard and the same is in clear violation of principles of natural justice.
17.On the facts and circumstances of the case and in law, the evidence filed and materials available on record have not been properly construed and judiciously interpreted, hence the additions made are uncalled for.
18.On the facts and circumstances of the case and in law, the observation and the additions made are unjust, illegal, arbitrary, bad in law and based on surmise and conjecture.
19.On the facts and circumstances of the case and in law, the AO has erred in initiation of penalty proceedings under section 271AAB(1A) of the Act.
20.On the facts and circumstances of the case and in law, the AO has erred in charging interest as per applicable provisions of S. 234A/234B/234C/234D.”
At the time of hearing, ld. AR of the assessee brought to our notice page 79 of the paper book, which is the satisfaction note recorded by the AO of the assessee, and he brought to our notice, the satisfaction was recorded year-wise and on the basis of bank-wise, details found from the seized material. He submitted that the case of the assessee was initiated to assess under section 153C of the Act on the basis of cash transactions found in Anarkali Complex specifically for cash withdrawal of Rs.7,00,000/- only. Further he brought to our notice page 69 of the paper book, which is the assessment order wherein the AO has observed that from the perusal of seized material and statement of the assessee, huge amount of Rs.44,46,054/- has been taken by the assessee from accommodation entry providing company, Newwave Commercials Pvt. Limited. Accordingly, assessee was show-caused as to why an amount of Rs.44,46,054/- should not be added to the total income of the assessee as per the provisions of section 68 of the Act being unexplained credits. He submitted that how the above said observation of the AO was based on the seized material of such amount was taken by the assessee as accommodation entry, in contrary the AO has recorded the satisfaction that during the year under consideration cash withdrawal of Rs.7,00,000/- as the incriminating material. In this regard, he brought to our notice decision of Hon'ble Delhi High Court in the case of PCIT vs. Nahid Finlease Private Limited in ITA 1483/2018 order dated 13.5.2019. He submitted that the decision of Hon'ble High Court is exactly the same on the issue, which is exactly similar to the facts in the present case. He submitted that Hon’ble High Court held that the addition made by the AO was not based on the satisfaction note prepared for the purpose of initiation of proceedings against the assessee under section 153C of the Act. The so-called incriminating material have to have some nexus with the addition ultimately made. He submitted that in the present case also, the satisfaction note clearly indicates that there is transaction of Rs.7,00,000/-, which relates to withdrawal in the bank, whereas the addition was made by the AO as cash credit on the basis of the accommodation entries based on the statement recorded during the search. Further, he brought to our notice decision of coordinate bench in the case of Alok & Co. LLP vs. DCIT in ITA Nos.2735 & 2736/Del/20225 order dated 11.03.2026. He submitted that this decision is relating to same search and he relied on the same.
On the other hand, ld. DR of the Revenue brought to our notice pages 12 to 24 of the appeal set, wherein ld. CIT(A) has relied on the seized material. He submitted that material found during the search clearly indicates that assessee has taken accommodation entries. In this regard, he relied on the decision of Saksham Commodities Limited vs. ITO - 464 ITR 1 (Del) of the Hon’ble jurisdictional High Court and further relied on the decisions of PCIT vs. NRA Iron & Steel (P) Ltd. (2019) 412 ITR 161 (SC), Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC) and CIT vs. Durga Prasad More (1969) 72 ITR 807 (SC).
Considered the rival submissions and material placed on record. We observed that it is fact on record that the satisfaction was recorded by the AO of the assessee under section 153C of the Act based on the material found during the search undertaken on Alankit Group from Anarkali Complex. Based on the tally data found from the laptop of Sunil Kumar Gupta that in Axis Bank – AIL 826 wherein assessee has made cash deposit and withdrawal from financial years 2014-15 to 2019-20. Since the proceedings are for the present assessment year 2020-21, the satisfaction was recorded by the AO that during the year under consideration, assessee has withdrawn Rs.7,00,000/- as per the satisfaction recorded by him on 24.02.2021. Based on the satisfaction, proceedings were initiated by the AO under section 153C. After considering the submissions of the assessee and material available on record, he proceeded to make the addition under section 68 on the basis of modus operandi as explained by Sunil Kumar Gupta. Based on the observation, he concluded that assessee has taken huge amount of Rs.44,46,054/- as accommodation entry from Newwave Commercial Pvt. Limited and accordingly, concluded the assessment on the above basis. We noticed that the proceedings were initiated by the AO on the basis of satisfaction that assessee has made huge cash transactions as per the ledgers found during search. As per the above satisfaction, assessee has withdrawn cash during the year under consideration of Rs.7,00,000/-, which is the part of the transaction unearthed during the search conducted in Alankit Group, whereas the AO has not made any addition based on the above satisfaction recorded to initiate proceedings under section 153C. Rather he proceeded to make addition on the basis of statement of Sunil Kumar Gupta and the same was concluded as accommodation entry from Newwave Commercial Pvt. Limited. From the above facts, it is clear that the addition made by the AO has no connection to the satisfaction recorded to initiate proceedings. We noticed that Hon'ble Delhi High Court in the case of Nahid Finlease Pvt. Ltd. held as under :-
“4.The ITAT has deleted the said addition for the simple reason that the above addition was not based on the satisfaction note prepared for the purposes of initiation of proceedings against the Assessee under Section 153C of the Act. The so-called incriminating material had to have some nexus with the addition ultimately made. That not having been established, the ITAT was justified in upholding the order of CIT (A) deleting the addition. No substantial question of law arises. The appeal is dismissed.”
Similarly, in the case of Alok & Co. LLP (supra), the coordinate Bench held as under :-
“9.Considered the rival submissions and material placed on record. We observed that the satisfaction recorded to initiate the proceedings u/s 153C was on the basis of incriminating material found during the search that the assessee had withdrawn cash and in order verify the source of the same, the proceeding was initiated. Accordingly, the information was collected from the banks for the block period. From the above information, it was noticed that the assessee had credits and debits in its bank account. Since the assessee is part of Alankit Group, they used for providing accommodation entries. The AO came to the conclusion that the assessee must have charged 1.5% commission on the various entries provided by it on both the credit and debits. Accordingly, the assessment were completed. From the above facts on record, we observed that the satisfaction note was recorded on the basis of material supplied by the AO of the searched person, as per which the assessee had withdrawn cash. On careful verification of the satisfaction note, we observed that there is no bearing to the total income of the assessee. The AO had not established how the cash withdrawal will have bearing on the total income of the assessee. Therefore, in our considered view, the satisfaction recorded had any bearing to the total income of the assessee.”
Respectfully following the above decision in the given case also, there is no connection with the satisfaction recorded by the AO and as recorded in the satisfaction note, there is no bearing to the total income of the assessee and the AO had not established how the cash withdrawal will have bearing on the total income of the assessee as recorded in the satisfaction note. Therefore, we are inclined to allow the grounds raised by the assessee in this regard.
We have gone through the orders relied upon by the ld. DR of the Revenue and found that they are distinguishable to the facts of the present case.
In the result, the appeal filed by the assessee is allowed.