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Judgment
Per Sudhir Kumar, Judicial Member:
These appeals filed by the Revenue are directed against the separate orders of the Ld. CIT(A)-23, New Delhi relating to assessment years 2017-18, 2018-19 & 2019-20. The issues have been raised in these appeals, except the difference in figures of additions, therefore, we are dealing with the facts of assessment year 2017-18 as a lead case by reproducing only its grounds as under:-
1.The Order of the Ld. CIT(A) is not correct in law and facts.
Whether on the facts and circumstances of the case Ld. CIT(A) is justified in deleting the addition of Rs. 58,73,04,576/- on account of non-genuine losses adjusted from income by the genuine losses adjusted from income by the assessee where the assessee from income by the assessee where the assessee entered into a sham transaction with M/s JM Mutual Fund?
Whether on the facts and circumstances of the case Ld. CIT(A) is justified in deleting the addition of Rs. 58,73,04,576/- on account of non genuine losses adjusted from income by the assessee when such a colourable device as adopted by the assessee is impermissible in law in terms of the principles laid down by the Hon’ble Supreme court in Mc. Dowell 2002-TIOL-40SC-CT?
Whether on the facts and circumstances of the case Ld. CIT(A)is justified in deleting the addition of Rs. 9,69,92,110/- on the basis of the actual profit received where the assessee entered into a sham transaction with M/s JM Mutual Fund?
Whether on the facts and circumstance of the Ld. CIT(A) is justified in deleting the addition of Rs. 9,69,92,110/- on the basis of the actual profit received when such a colourable device as adopted by the assessee is impermissible in law in terms of principles laid down by the Hon’ble Supreme Court in Mc. Dowell 2002 TIOL 40 SC-CT?
Whether on the facts and circumstances of the case Ld. CIT(A) is justified in not treating the transaction of the assessee as sham transaction with M/s JM Mutual Fund when such a colourable device as adopted by the assessee is impermissible in law in terms of principles laid down by the Hon’ble Supreme Court in Mc. Dowell 2002-TIOL-40SC-CT?
Brief facts of the case are that a search and seizure action u/s. 132 of the Income tax act was carried out in the case of the assessee and warrant of authorization issued was executed in the case of assessee on 17.3.2021. The assessee and its premises were covered under the search. Assesse furnished its original return of income u/s. 139(1) of the Act on 31.10.2017 at an income of Rs. 24,84,99,070/- On 21.9.2018 assessee filed its revised return of the income at Rs. 25,25,10,450/-. Later, the case was selected for scrutiny through CASS and assessment was completed on 17.12.2019 at returned income. Since search was initiated in this case, notice u/s. 153A of the Act was issued on 31.01.2022 and duly served on the assessee. In response to the notice u/s. 153A of the Act, the assessee vide letter dated 4.3.2022 stated that it is unable to file the return of the income electronically and requested to consider its 139(1) return of the income as return u/s. 153A. With respect to the ROI dated 4.3.2022 (Intimation vide letter dated 4.3.2022) filed in response to the notice u/s. 153A of the Act, a notice u/s. 143(2) dated 13.5.2022 has been issued and served upon the assessee. Thereafter, a notice u/s. 142(1) of the Act dated 13.5.2022 alongwith a detailed questionnaire was issued and served upon the assessee to furnish details, documents as mentioned therein. In response to these notices, the assessee filed details and documents as per record and the ITBA record. Upon careful consideration, the AO made the additions and assessed the income at Rs. 93,68,07,136/- vide order dated 23.3.2023 passed u/s. 153A of the Act. Against the same, assessee appealed before the Ld. CIT(A), who vide order dated 8.7.2014 has allowed the appeal of the assessee. Aggrieved, the Revenue is in appeal before us. However, at the time of hearing, the Assessee has filed an application under Rule 27 of the ITAT Rules, 1963 in all the appeals by stating the following common contentions:-
“1.The captioned appeal filed by the revenue is fixed for hearing on 1.12.202, however, assessee – respondent seeks to rely upon the order of Ld. CIT(A) deleting the additions on merit, by contending that the order of CIT(A) need be upheld even on the ground that the assessment so framed is without jurisdiction as the same is legal ground, which though was taken before Ld. CIT(A) as well, however the same can be taken at any stage of the proceedings even de-hoarse Rule 27 of I.T. Rules.
2.It is thus prayed, this application be taken as notice of motion to raise the following legal ground, in support of the order of the Ld. CIT(A):
Additional Ground No. 1 That the Ld. CIT(A) has erred in law and on facts in overlooking the basic fact that no incriminating material was found during the course of search and the assessment as contemplated under section 153A is not a de novo assessment and as such, the additions so made by AO are beyond the scope of assessment under section 153A of the Act and are liable to be deleted in totality.
3.It is otherwise well settled proposition of law that the respondent is entitled to raise a legal ground at any stage of the proceedings, even though he may not have filed an appeal against such order. The judicial pronouncements are as under:-
1.83 ITR 223 (Bom) (B.R. Bamsi vs. CIT)
2.129 ITR 475 (All) (Moralia& Sons vs. CIT)
3.220 ITR 398 (Ker) 9CIT vs. Cochin Refinieries Ltd.)
4.176 CTR 406 (Gau) (Assam Company (I) Ltd. vs. CIT)
5.102 ITD 189 (Del) (ITO vs. Gurvinder Kaur)
6.284 ITR 80 (SC) CIT vs. Varas International P. ltd.
7.149 Taxmann 456 (Guj) KharidVechanSangh Ltd. vs. CIT.
8.397 ITR 282 (All) CIT vs. Jindal Polyster Ltd.
The respondent thus prays that it be permitted to urge the aforesaid grounds as raised and mentioned in para 2 above.
At the time of hearing, Ld. DR has submitted that Application under rule 27 of the IT Rules is not maintainable, she placed reliance on the decision of the ITAT, Delhi in the case of Faridabad Presswell Pvt. Ltd. in ITA No. 2801/Del/2024 dated 9.1.2026.
Ld. AR submitted that the application is maintainable because this ground has been raised before the CIT(A) and Ld. CIT(A) without deciding the same gave the relief to the assessee. He also submitted that ITAT, Delhi in assessee’s group case viz. DCIT vs. Maridu Hari Dalmia in ITA No. 4582/Del/2024 vide order dated 23.7.2025 on identical facts, quashed assessment, hence, he requested to follow the ratio of the said decision in the instant appeals of the Revenue also.
We have heard both the parties and perused the records. Because this issue has been raised by the CIT(A) so the assessee has taken the ground under Rule 27 of the ITAT to support the order of the CIT(A). Reliance has been placed by the DR is distinguishable because in this case the Ld. AR raised the issue before the CIT(A). The application filed by the Assesee under Rule 27 of the IT Rules is admitted.
We have heard both the parties and perused the records. Ld. DR relied upon the order of the AO. However, Ld. AR for the assessee reiterated that the addition in this case has been made without any incriminating material found during the course of search. He further submitted that assessment u/s. 153A in the case of completed assessment cannot be done dehors incriminating material found during the course of search. He further stated that in the instant case the addition is not based on any incriminating material. We find force in the contention of the Ld. AR that assessment u/s. 153A of the Act and in case of 153A of the Act, addition has to be made on the basis of incriminating material found during search. In this view of the matter, we find that Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd., CA No. 67580 / 2021 dated 24.4.2023, (2023) SCC Online SC 481, has expounded that no addition can be made when the assessment framed u/s. 153A dehors incriminating material found during the search.
We further find that ITAT, Delhi Bench in assessee’s group case viz. DCIT vs. Maridu Hari Dalmia in ITA No. 4582/Del/2024 vide order dated 23.7.2025 on identical facts, quashed assessment by holding as under:-
“3.It emerges at the outset during the course of hearing that there arises the first and foremost issue of validity of all these section 153A r.w.s. 143(3) r.w.s. 144C assessments; framed on 19.05.2023, by the Assessing Officer in furtherance to the department’s section 132 search action in M/s Dalmia Group of cases. There is no dispute between the parties that all the three impugned assessment years herein A.Ys. 2017-18, 2018-19 and 2019-20 are “unabated” assessments as on the date of search wherein any addition in the assessee’s hands has to be made as to be based upon the contents of the corresponding seized material only as per PCIT Vs. Abhisar Builwell P. Ltd. (2023) 454 ITR 212 (SC).
4.The above being the clinching factual position, there would be again no issue between the parties that the learned Assessing Officer herein had disallowed the assessee’s alleged losses u/s 94(vii) of the Act hereby holding the corresponding transactions with M/s JM Mutual Funds, as sham ones only followed by his yet another estimated actual profit; both involving varying sums, in these three assessment years. We wish to emphasize here that neither the impugned additions is based on the corresponding specific seized material as it forms a mandatory condition in light of their lordships decision. We thus find merit in the assessee’s legal arguments to quash all these assessments herein in very terms. Ordered accordingly. These three Revenue’s appeal fail accordingly.
5.All other pleadings between the parties stand rendered academic.
6.These three Revenue’s appeals ITA Nos. 4582, 4583 & 4586/Del/2024 are dismissed. A copy of this common order be placed in the respective case files.”
In the background of the aforesaid discussions and respectfully following the aforesaid precedents, the additional ground raised by the assessee is allowed and resultantly, the reassessment in the instant case is hereby quashed.
Since we have quashed the impugned reassessment order, as aforesaid, by allowing the additional ground, the Appeal filed by the Revenue has become in-fructuous. Resultantly, the Revenue’s Appeal for assessment year 2017-18 is dismissed as such.
As far as remaining appeals relating to assessment years 2018-19 & 2019-20 are concerned, our aforesaid decision relevant to assessment year 2017-18 will apply mutatis mutandis to these appeals as well. Accordingly, the appeals relating to assessment years 2018-19 & 2019-20 are also dismissed in the aforesaid manner.
In the result, all the three appeals of the Revenue are dismissed in the aforesaid manner.