DCIT vs Vivek Gahlaut

“28.

The material on records, seized documents, paper books, contents of the assessment order, statements recorded in cross examination and detailed submissions of the assessee as above have been considered anxiously and carefully by me. The core issue in the present matter is that after relying upon the statement of Shri. Rajiv Saxena, the AO has held that some unauthorized favours were given to M/s Uralkali regarding import of fertilisers by Indian Companies and in turn, M/s Uralkali paid secret commission through one Shri Pankaj Jain, Shri Rajiv Saxena etc., to entities controlled by or connected with various persons including Shri VivekGahlaut. As per AO, the commission was actually meant for the benefit of the assessee. Protective additions on account of the very same secret commission were made in the hands of the assessee Shri Vivek Gahlaut, and substantive in the hands of father of appellant Shri PS Gahlaut. The ITAT, New Delhi has since decided appeals of Shri Amol Awasthi by quashing those orders, holding that no information incriminating Shri Amol Awasthi was found in the search on Shri Saxena to initiate any assessment proceedings u/s 153C of the Act, based on the same, specific directions were issued by this office to the AO in terms of the said order and in pursuance to the same cross examination of Shri Saxena and Shri A. D. Singh have been conducted. The entire record/ statements / material has been considered with utmost care, as warranted by the facts of the case. I based on the said information have already quashed the assessment orders passed u/s 153C of the Act on identical facts and legal position, in the case of Shri U S Awasthi. I have also, based on the averments by Shri P S Gahlaut in his appellate proceedings, have quashed the substantive assessment orders for the AY 2014-15, 2015-16 and 2017-18 and also deleted the substantive additions made in the AY 2016-17 vide appellate orders dated 14.10.2025 as I am of the view that there was no material on record to support the additions made in the assessment orders which were made on presumptions and hearsay. The entire information relied by the AO in the assessment orders were some internal unauthenticated documents the veracity of which is completely unproven even as per Shri Rajiv Saxena. Apparently the said excel sheet was never made in the regular course and was drawn for some specific reasons as doubted by the assessee. The said sheet nowhere demonstrates the actual movement of funds but are just entries got made for an oblique purpose by Saxena after he was deported from Dubai. Such excel sheet cannot transpire any confidence as to its correctness much less truthness in any manner. Thus, the same has to be disregarded in totality.

29.

The core issue is whether the assessee did accord undue favours to Uralkali and in turn, received some secret commission from Uralkali, after layering the receipts. The matter began with the income-tax searches upon Shri. Rajiv Saxena and as a consequential search on the assessee. The appellant has challenged the evidentiary value of the seized documents, statements recorded u/s 132(4), the satisfaction notes recorded for the purpose of assessments u/s 153C etc. In my considered opinion, the first and foremost question for consideration is whether the Appellant was involved in any manner in the impugned receipts from Uralkali Gibraltar by Rajiv Saxena and whether payments were made in quid pro basis for providing undue benefits to Uralkali Russia. A statement of Shri Saxena u/s 132(4) was recorded on 02.07.2019 and vide Q 4 to Q 8 it was stated that certain commission was payable by Uralkali to some Shri Pankaj Jain / Shri Sanjay Jain brothers which was due in connection with the imports made by one Indian company M/s Indian Potash Ltd. and that Shri Pankaj Jain could not have received directly the said commission from Uralkali Russia and therefore, the receipts were routed through a group of entities of Shri Saxena. Later on, vide Q 13, Shri Saxena stated that a substantial part of the commission receipts by his group companies were subsequently transferred to entities controlled by AmolAwasthi and VivekGahlaut who were sons of persons holding key decision- making positions in IFFCO and IPL. The appellant was roped in solely on the basis of this part of the statement of Shri Saxena which allegation of receipt of amounts overseas is not proved otherwise from the information on record.

30.

In my considered view, firstly, the matter must be decided on merit in law and the first consideration has to be whether any evidence exists which links the appellant with the alleged receipts from Uralkali by Shri Saxena. However, after considering the material relied by the AO, it transpires that the same does not demonstrate any evidence/ material adverse to the Appellant. Uralkali Russia has also issued a written statement on 23.06.2023, declaring in unambiguous terms that no commission was paid outside India to any person, related to imports by any Indian entity. The said letter is copied herein above and is a part of the cross-examination statement dated 09.01.2025 of Shri A D Singh and reproduced in my appellate order dated 07.05.2025 in the case of Shri U S Awasthi, which has also been relied herein by the assessee. It has been stated that “Further, PJSC Uralkali has never paid any consideration outside India to any person or entity pertaining to our potash exports to India Market’. One thing is patent from this statement that the alleged payments in Dubai through entities of Shri Saxena had no connection with the imports made by IPL and therefore, no direct connection with appellant can be made in respect thereof.

31.

I find force in the submission of the assessee that when no material belonging to the assessee or information pertaining to him as such was found in the seized material, initiation of proceedings u/s 153C of the Act was bad in law ab initio. The Hon’ble jurisdictional Delhi High Court in a recent judgment in IshitaVarshney Jain- DoJ: 22.11.2024 in W.P.(C) 15477/2024 & CM APPL. 68370/2024 has also quashed the proceedings-initiated u/s 153C of the Act when neither any books of account nor documents, either belonging to the petitioner or containing information pertaining to the petitioner, were found.

32.

Further, Shri A D Singh retracted his statement way back in 29.07.2019 and which does not find place in the assessment orders, Uralkali has also denied vide its letter dated 23.06.2023 to have paid any such amount to anyone much less to the assessee.

33.

Thus, it appears that the AO has no material or positive material to link the assessee with the payments made by Uralkali. A list of FT & TR references, total 37, as per the remand report send by the AO in the case of Shri U S Awasthi on the identical facts, arising from thesame statement of and information gathered from Shri Rajiv Saxena and were proposed by department to various countries and it appears, no information adverse to the Appellant has been received so far even after lapse of several years. I agree with the submission of the assessee that thus, when the Hon’ble jurisdictional Delhi High Court has categorically held that statements, evidences given by Shri Rajiv Saxena or any other evidence in the possession of the ED, Income-tax Department prima facie do not show involvement of Shri Sanjay Jain in any wrong doing, then how the assessee who has not been named at all in the alleged evidences nor any information about the assessee being involved in the said transaction is on record, be charged of receiving secret commission overseas. I am in agreement with submission of the AR that a bald statement that Shri VivekGahlaut was beneficiary is meaningless and of no consequence in absence of any evidence to support the allegation.

34.

I am also in agreement with the assessee that the statements of Shri Rajiv Saxena cannot be relied in any manner nor the information as handed over by him besides also seized by the income-tax department in the search as was in his laptop as has been relied in the assessment order are of no help to the AO as those are neither supporting each other nor supported by any other corroborative evidence. The said Excel Sheet was never prepared in the regular course nor has any reference to the actual transactions. The assessee has pointed several infirmities challenging the authenticity of the said sheet as has been detailed by the assessee in his submissions as above. It is also surprising that when the department was seeking information on day-to-day basis in the year 2019 from him and he was bringing it from his working office in Dubai, then why he was not directed to bring the actual books of account with supporting evidence to give credence to his statements and the excel sheet relied in the assessment order. This supports the contention of the assessee that he gave false information by concealing the facts which is also an allegation made against him by the ED in the Hon’ble jurisdictional Delhi High Court.

35.

There is no attempt by the AO to get the forensic verification of the said laptop which Shri Rajiv Saxena claimed to have been brought from Dubai. Leave aside, even it was never verified whether the same was really brought from Dubai or was bought in India when there are conflicting versions about the manner of the said information coming from Dubai either in laptop or in a pen drive by the son of Shri Saxena. No evidence is on record to rely the statement of Shri Saxena in any manner otherwise besides that he always seemed to shift his responsibility on others. Even, to the extent he did not give any bank account showing the transactions as per the Excel Sheet or never gave names of the entities including his where each of those amounts were received by him on behalf of the assessee and others named by him in his statement recorded u/s 132 nor the said information was ever collected by the AO from him to establish correctness of his one after the other statements which were normally at variance. Thus, none of his statements and the Excel Sheet can be relied in any manner to hold anything adverse to the assessee.

29.

Pertinently, in the statement recorded in course of search and seizure operation, Sh. Rajiv Saxena has repeatedly stated that the commission from Uralkali was received in the accounts of the entities controlled by him and thereafter transferred to three sets of beneficiaries. The first beneficiary being entities controlled by Sh. Pankaj Jain; the second set of beneficiary is entity controlled and managed by assessee and the third set of beneficiary is entities held and controlled by Sh. VivekGehlot, s/o Sh. Parvinder Singh Gahlaut, MD of IPL. These observations have been made by the Assessing Officer in paragraph 51 of the assessment order. Thus, as could be seen from the aforesaid observations, the alleged commission income came directly to the entities controlled by Sh. Rajiv Saxena and thereafter, as alleged, were transferred to entities controlled by various beneficiaries. Thus, it is very much clear that even as per the statement of Sh. Rajiv Saxena, alleged commission did not come directly to the assessee.

30.

The identity of the entities allegedly controlled by the assessee as not been disclosed by the Assessing Officer. Who are the promoters of those entities have not been discovered. Even, what is assessee’ s relationship and stake in the said entities have not been discussed at all. Though, the Assessing Officer has observed that information has been collected through FT&TR, however, what is the nature of such information and whether such information contained the details of entities, which received the alleged commission income and their relationship with the assessee have not been established. If the Assessing Officer had in his possession specific information in relation to the identity and status of the entities receiving commission from the entities controlled by Sh. Rajiv Saxena, he should have identified such entities and initiated proceedings under section 153C read with section 153A of the Act against them. It appears, without undertaking any exercise to identify the entities, who according to Sh. Rajiv Saxena had received the commission income from entities controlled by him, has picked up the assessee as a soft target to make the addition.

31.

A reading of the assessment order would reveal that though the Assessing Officer at more than one place has stated that commission income has come to the assessee through entities controlled by him, however, he has contradicted himself by saying that the assessee is merely a pass-through entity and not the real beneficiary. This is the specific reason, why the Assessing Officer has made the additions on protective basis. In other words, the Assessing Officer was more or less convinced that the income does not belong to one of the two assessees at whose hands additions were made. Even though, the Assessing Officer has alleged that the commission is meant for the real beneficiaries in India, however, he has failed to establish the money trail. The Assessing Officer has not brought on record any material to even demonstrate that the alleged commission received in the accounts of the entities allegedly controlled by the assessee have been transferred to India in any manner and if so, to which accounts they have been transferred and such accounts were controlled by whom. Nothing in this regard has been discussed by the Assessing Officer in the assessment order. …….

40.

Viewed in the context of observations made by the Hon’ble Jurisdictional High Court and the Coordinate Bench in the decisions referred to above, the Assessing Officer assuming jurisdiction under section 153C of the Act in case of a non-searched person, though has power to initiate proceedings under section 153C of the Act upon receipt of incriminating material from the Assessing Officer of the searched person, however, he has to complete theassessment under section 153C read with section 153A of the Act. An assessment order passed in any other manner, in our view, may not muster judicial scrutiny.

41.

Thus, on overall consideration of facts and materials on record and keeping in view the principles laid down in the judicial precedents cited before us by both the parties we hold that not only the additions are unsustainable, but, the assumption of jurisdiction under section 153C of the Act, itself, is invalid. We order accordingly.

AY 2015-16

AY 2016-17

AY 2017-18

“1.

On Facts and in Law, the 1.d. CIT(A) has erred in quashing the assessment order passed u/s 1530/143(3) for AYs 1 2014-15 to 2017-18, holding as void ab initio, without appreciating the correct legal position and material available on record.

2.

That the Id. CIT(A) failed to appreciate that the addition of Rs. 27,14,88,360/-was made based on cogent evidences and legitimate inference from material seized during search.

3.

That the Lal. CIT(A) has crred in holding that no incriminating material existed for invoking section 153C, despite the fact that the seized documents and the statements recorded 3 u/s 132(4) of Shri Rajiv Saxena clearly establish that monies received from Uralkali were related to imports made by IPL/IFFCO and were intended for the beneficial use of the assessees father Sh. P.S. Gahlaut (MD of IPL).

4.

That the L.d. CIT(A) has erred in treating the seized material as having no evidentiary value, ignoring that Shri Rajiv Saxena admitted on oath that no services were rendered to Uralkali and the invoices were only for routing funds, which is corroborated by the seized ledgers showing fund flow to entities controlled by Shri Vivek Gahlaut.

5.

The ld. CIT(A) has erred in law in relying on the ITAT decision in the case of Shri Amol Awasthi, without appreciating that the present case contains independent, specific incriminating evidence relating to the assessee, including beneficiary ledgers and remittance proofs not present in that case.

6.

The ld. CIT(A) has erred in ignoring incriminating WhatsApp chats found during the search on Sanjay Jain and others, which demonstrate the involvement of the assessees 6 father Sh. P.S. Gahlaut (as MD of IPL.) in the manipulation of fertilizer procurement pricing, forming the very basis for the commission/kickback arrangements routed through Shri Rajiv Saxena.

7.

The L.d. CIT(A) has erred in holding that the proceedings were initiated on hearsay, whereas the AO had relied upon multiple independent evidences: seized books of account of Shri Saxena, statements under oath, fund-flow records, WhatsApp chats, and FT&TR verifications all of which independently point to the assessees involvement.

8.

The Ld. CIT(A) has erred in law in holding the 153C initiation as time-barred, without correctly applying the statutory 8 provisions and ignoring that the satisfaction note and seized material were duly received and examined before issuing notice u/s 153C.

9.

The Ld. CIT(A) has erred in deleting the protective addition made in the hands of Shri P.S. Gahlaut despite clear evidence that funds originating from Uralkali reached entities beneficially owned by him, for his fathers benefit, as reflected in seized beneficiary ledgers and the admission of Shri Rajiv Saxena.

10.

The Revenue craves leave to add, alter, amend OR withdraw any ground at the time of hearing.”