Color Bar Cosmetics Pvt. Ltd. vs DCIT

“1.

That on the facts and in law, the impugned assessment order dated 07.03.2024 passed u/s 153C r.w.s. 143(3) of the Income-tax Act, 1961 ("the Act") for Assessment Year 2019-20, making an addition of Rs. 1,70,00,000/- ("First impugned order"), and the consequent order dated 23.12.2025 passed by the Learned Commissioner of Income-tax (Appeals)- 26 ["CIT(A)"] u/s 250(6) ofthe Act ("Second impugned order"), affirming the assessment order, are ex facie illegal, untenable, and bad in law.

2.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has wrongly upheld the assessment framed u/s 153C of the Act vide order dated 07.03.2024, whereby the total income has been determined at Rs. 32,21,78,810/- as against the returned income of Rs. 30,51,78,810/-.

3.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the action of the Ld. AO in assuming jurisdiction u/s 153C of the Act was without satisfying the mandatory statutory conditions.

4.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) improperly sustained the protective addition of Rs. 1,70,00,000/- made by the Ld. AO, which is beyond the scope and ambit of assessment permissible u/s 153C of the Act and is therefore unsustainable in law.

5.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) wrongly affirmed the addition of Rs. 1,70,00,000/- in gross disregard of established jurisprudence regarding protective and substantive additions.

6.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the additions made by the Ld. AO were beyond the settled scope of jurisdiction u/s 153A r.w.s. 153C of the Act, when admittedly no incriminating material was found or seized from the premises of the appellant.

7.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) improperly sustained the additions made by the Ld. AO in gross violation of the principles of natural justice, without providing an opportunity of cross-examination of the person whose statement formed the basis of adverse inference against the appellant.

8.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) wrongly upheld the protective addition of Rs. 1,70,00,000/- u/s 69 of the Act, even though, as per the findings of the AO himself, the alleged unaccounted investments did not pertain to or belong to the appellant.

9.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the protective addition of Rs. 1,70,00,000/- u/s 69 of the Act was contrary to the AO's own findings regarding the source of the alleged unaccounted investment in the property.

10.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) improperly sustained the initiation of penalty proceedings u/s 271AAC of the Act by the Ld. АO.

11.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) wrongly affirmed the levy of interest 234B, 234C, and 234D of the Act by the Ld. АО.

12.

The aforesaid grounds of appeal are without prejudice to each other, and the appellant craves leave to add, amend, alter, vary, or withdraw any of the above grounds at or before the time of hearing.”

“ I. That the notice dated 07.11.2022 issued by the Ld. Assessing Officer under section 153C(1) of the Income-tax Act, 1961 is void ab initio for want of jurisdiction, as the date of initiation of search as per the first proviso to section 153C(1) is 03.11.2022, being the date of issuance of the satisfaction note, as held in PCIT vs. Ojjus Medicare (P.) Ltd. [2024] 465 ITR 101 (Delhi).

II. That the issuance of the impugned notice dated 07.11.2022 grossly contravenes section 153C(3) of the Act, rendering the said provision inapplicable in relation to searches initiated on or after 01.04.2021, read with the first proviso to section 153C(1) of the Act, as held in Harigovind vs. ACIT [2025] 180 taxmann.com 197 (Madras) and Smt. Geetanjali Bhayana vs. DCIT [2026] 183 taxmann.com 95 (Delhi - Trib.).

III. That section 153C of the Act, being a machinery provision, is to be construed so as to effectuate the object and purpose of the statute, and amendments brought therein with a cut-off date shall apply even to searches prior thereto.

IV. That on the facts and circumstances of the present case, the impugned assessment proceedings u/s.153C of the Act is void ab initio as separate satisfaction notes u/s.153C of the Act have not been prepared for each of the assessment years 201112 to 2021-2022 which itself would render the impugned proceedings void-ab-initio vide DCIT vs. Sunil Kumar Sharma., [2024] 159taxmann.com 179 (Karnataka High Court).”

“As per first proviso to Section 153C(1), the date of initiation of search u/s 132 or making requisition u/s132A in terms of second proviso to Sub Section (1) of Section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. As observed above, in the present case, the AO of the assessee has recorded the satisfaction on 04.11.2022 after taking the seized material thus the date of search in the case of appellant should be 04.11.2022. This view is supported by the judgement of Hon'ble Jurisdictional High Court in the case of Ojjus Medicare (P.) Ltd. (supra), the headnote reads as under:

"Section 153C of the Income-tax Act, 1961 - Search and seizure-Assessment of any or person (Block assessment) - Assessment years 2010-11 to 2013-14-Whether first proviso to section 153C, and which has been consistently recognized to also embody commencement point for reckoning six or ten assessment years', shifts relevant date from date of initiation of search or a requisition made to date of receipt of books of account or documents and assets seized by jurisdictional Assessing Officer of non-searched person Held, yes Whether furthermore where date of handing over of documents was not available, date of issuance of satisfaction Note by Assessing Officer under section 153C would be pertinent for purpose of First Proviso to section 153C-Held, yes - Whether significant difference between computation of relevant assessment year for identification of six assessment years and to construct a block of ten assessment years is that while six assessment years' hinge upon phrase "immediately preceding" assessment year pertaining to search year, ten assessment years' are liable to be computed or reckoned from end of assessment year relevant to year of search - Held, yes - Whether thus, in instant case where satisfaction note were issued between 1-4-2021 and 31-32022, relevant assessment year would be 2022-23 and assessment years' 2010-11, 2011-12 and 2012-13 would clearly fall outside block period of ten assessment years as provided under section 153C read with section 153A-Held, yes [Paras 85, 86, 96 and 97] [In favour of assessee]."

Now coming to the sub-section (3) of section 153C of the Act which provides that provisions of section153C are not applicable to the search initiated on or after 1st day of April, 2021. Since in the present case, date of search is to be taken as 04.11.2022 i.e. the date when the satisfaction note was recorded by the AO of the assessee and, such date (04.11.2022) had fallen after 01.04.2021, therefore, as per sub-section (3) of section153C, provisions of section 153C would not be applicable and the initiation of proceedings u/s 153C and subsequent assessment order passed us/153C of the Act is invalid and without jurisdiction.

Consequently, in view of the statutory bar contained in section 153C(3), no proceedings under section 153C could have been initiated against the appellant. The Assessing Officer could have proceeded, if at all, only in accordance with the provisions of section 148 of the Act, as amended by the Finance Act, 2021.

In these facts and circumstances, it is respectfully submitted that the initiation of proceedings under section 153C and the consequent assessment order passed under section 153C of the Act are invalid, without jurisdiction, and liable to be quashed.”