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Judgment
PERSHRI ANUBHAV SHARMA, JUDICIAL MEMBER:
These appeals preferred by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-26, Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in appeals filed before him against the orders of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short) passed u/s 153C r.w.s 153A 143(3) & u/s 271D of the Income-tax Act, 1961 (hereafter referred to as ‘the Act’). Further details of the orders of the lower authorities are as under: -
| ITA No. & AY | Ld. FAA who passed the appellate order | Appeal No. & Date of order of the Ld. FAA | AO who passed the assessment order & Date of order |
| 2705/D/26 2019-20 | CIT(A)-26, Delhi | DIN & Order No : ITBA/APL/S/250/2025-26/1087137026(1) Dated 10.03.2026 | JCIT, (OSD) CC-14, New Delhi Dated 18.03.2025 |
| 2726/D/26 2019-20 | CIT(A)-26, Delhi | DIN & Order No : ITBA/APL/S/250/2025-26/1087345065(1) Dated: 13.03.2026 | DCIT, CC-14, New Delhi Dated 25.09.205 |
Heard and perused the records. Consequent to a search action dated 03.02.2021 conducted in the case of Sh. Samir Modi &Smt. Shivani Modi Group of cases and in pursuant to a arrant of authorization issued by the PDIT (Inv.)-01, New Delhi, a search operation u/s 132 of the Income Tax Act, 1961 was carried out on 03.02.2021 and on subsequent dates at different business and residential premises of Sh. Samir Modi & Smt. Shivani Modi Group of cases. Allegedly various incriminating papers/documents were found and seized related to assessee during the course of search & seizure operation. The Assessing Officer of Samir Modi and Shivani Modi, in whose cases the action under Section 132 was carried out, recorded his satisfaction that the seized documents found during the search pertain to and contain information related to Sh. Gautam Sehgal a person other than the searched individual. The AO of the searched person who is the AO for both the searched person and the other person) recorded his satisfaction on 05.07.2023 and handed over the seized material to the AO of the other person, i.e., the AO of Sh. Gautam Sehgal.
Ld. AO observes that on analysis of the data, an excel workbook “BOSS -DEC 18 onwards” was found. In which it was found that cash transaction made with Shri Gautam Sehgal was also present in the said excel sheet containing record of cash transactions. In the said records, it was mentioned that cash amounting to Rs. 1,55,00,000.00 and Rs. 15,00,000.00 was paid to Shri Gautam Sehgal (aggregating to Rs. 1.70 Cr.). In relation to these entries, the details were also found from the hand written diary/ kachi parchis found from the premises of Shri Anil Kumar Upreti, Shri Anil Upreti in his statement accepted that total amount Rs.1.55 Cr in Cash has been paid to Shri Gautam Sehgal against the property bought by the Colorbar Cosmetics Pvt Ltd at Sukhdev Vihar. Screen shot of hand written kachi parchi of Rs. 30 Lakhs found and seized as Annexure A1,2 during the course of search proceedings, related to the part payment of cash transaction for the above said property. Allegedly, from the chat between Shri Anil Upreti and Shri Gautam Sehgal, it is evident that Shri Anil Upreti specified the cash amount paid to Shri Gautam Sehgal as “50,50,20,5,30=155.” This indicates that the total Rs. 1.55 Cr was given to Shri Gautam Sehgal in installments of Rs. 50 Lakhs, Rs. 50 Lakhs, Rs. 20 Lakhs, Rs. 5 Lakhs, and Rs. 30 Lakhs on different dates as mentioned earlier (16-01-2019, 23-01-2019, 25-01-2019, and 01-02-2019). Allegedly, in the chats, Shri Samir Modi and Ms. Aparna Malhotra discuss the second payment to Shri Gautam Sehgal/Ms. Preeti Sehgal on 22.01.2019 (the same date as mentioned earlier). In chats, Shri Modi told Ms. Aparna that he had given the same amount as the last time, which is also reflected from above as first two payments on 16.01.2019 & 22.01.2019 were of Rs. 50 Lakhs each. Allegedly, in the said chats, Ms. Aparna Malhotra confirms that Shri Gautam Sehgal received the first four installments of Rs. 50 Lakhs, Rs. 50 Lakhs, Rs. 20 Lakhs, and Rs. 5 Lakhs, which was acknowledged by Shri Samir Modi. Therefore, a total of Rs. 1.70 Crores was paid in cash by Shri Samir Modi in relation to the purchase of a property located in Sukhdev Vihar, jointly owned by Shri Gautam Sehgal and his wife, Ms. Preeti Sehgal.
Thus based on the above discussion, it is clear that Rs. 1.70 Crores were paid by Shri Samir Modi for the purchase of the property located in Sukhdev Vihar, which was jointly owned by Shri Gautam Sehgal and his wife, Ms. Preeti Sehgal, in the name of Colorbar Cosmetics Pvt. Ltd. Hence, the amount of Rs. 1,70,00,000/- represents out-of-books cash receipts for the financial year 2018-19 in the hands of Shri Gautam Sehgal. In light of the facts discussed above, ld. AO called for submission of assessee but not satisfied concluded that it is established that Rs. 1.70 Crores were paid in cash by Shri Samir Modi for the purchase of the property located in Sukhdev Vihar, jointly owned by Shri Gautam Sehgal and his wife, Ms. Preeti Sehgal. Ld. CIT(A) has sustained the same for which assessee is in appeal and has raised the following grounds of appeal in the ITA No. 2705/Del/2026 which is the quantum appeal challenging the assessment order passed u/s 153C/153A of the Act:
1.The impugned assessment order passed u/ss 153C/153A/143(3) of the Act is void ab initio as it is based on illegal and void ab initio proceedings initiated and must be quashed at the threshold.
2.The CIT(A) erred in confirming recording of a consolidated satisfaction note us 153C of the Act in respect of the 7 AYs from AY 2015-16 to 2021-22 though the impugned information mentioned therein as claimed by theAO pertained to only two assessment years and the amount has been assessed in this AY only. Thus, the impugned assessment order is void ab initio, needs to be quashed based on an illegal void ab initio satisfaction note, as has been passed on a borrowed satisfaction without even looking into the facts on record of the revenue.
3.The CIT(A) erred in law and on facts in sustaining proceedings initiated on the basis of satisfaction notes recorded on 18/11/2023 and 05/07/2023respectively by the AO in the two respective capacities were grossly delayed, mechanical, non-speaking and recorded beyond a reasonable period, rendering the initiation of proceedings u/s 153C barred by limitation and contrary to law. Thus, the same must be quashed.
4.The impugned satisfaction notes were recorded mechanically to initiate proceedings in the hands of the assessee though admittedly as per the seizedmaterial and accepted by the CIT (A), 25 per cent of the property was owned by Mrs.Preeti Sehgal, wife of the assessee, and in whose case no such proceedings were initiated, showing complete lack of application on facts on record, which vitiates the satisfaction notes and consequently the assessment order.
5.The impugned satisfaction note date 05/07/2023 recorded by the AO of the person searched Mr. Samir Modi to transmit the seized information to theAO of the assessee is patently illegal and time barred as it violates the mandate u/s 153C of the Act given to the AO of the person searched to deal with the information/ material found at the time of search by recording satisfaction which the AO undisputedly exceeded resulting into the entire assessment proceedings null and void ab initio by directing the AO of the assessee to initiate proceedings u/s 153C of the Act. Thus, the same must be quashed.
6.The impugned assessment order is vague, illegal ab initio as the AO failed to provide any evidence of handing over the said satisfaction note with the impugned incriminating material seized in original to the then AO of the assessee on 05/07/2023 as the assessment jurisdiction of the assessee was centralised with the present AO vide order dated 05/09/2023 passed u/s 127(2) of the Act.
7.The CIT(A) erred in law and on facts in confirming an addition of Rs. 1,16,25,000/- out of Rs.1,70,00,000/- added by the AO u/s 69A r.w.s.115BBE of the Act despite the undisputed allegation made by the AO in the assessment order that the said amount was undisclosed sale consideration of SukhdevVihar, New Delhi property. Thus, the addition made with the adverse finding must be reversed.
8.Without prejudice to the other grounds of appeal, the authorities below erred in law and on facts in confirming/making the addition in this AY in respect of the alleged cash consideration received on sale of the property which was sold through a registered conveyance deed dated 31/10/2019 falling in the period relevant to the AY 2020-21 as has been admitted by both the authorities below. Thus, no addition could be made in this AY in any case.
9.The CIT (A) erred in law and on facts in confirming the action of the AO of not providing copies of the assessment order of Mr. Samir Modi, Ms.Shivani Modi, M/s Colorbar Cosmetics Pvt. Ltd. and Mr. Anil Upreti for the relevant AYs when their assessment proceedings are relevant to the proceedings of the assessee to initiate action u/s 153C of the Act and allowing their cross examination, specifically demanded. Thus, the impugned assessment order is void ab initio.
10.The CIT (4) erred in law and on facts in confirming the action of the 40 in concluding that the actual sale consideration of the property was not Rs. 1.60 crores but was Rs.3.30 crores without referring the same to the DVO, particularly when the property sold as per registered conveyance deed was at a value higher than the local stamp duty valuation rates prescribed by the local authority duly mentioned in the sale deed itself. Unless the Revenue has any evidence that the actual sale price was Rs.3.30 crores, no such presumption can be made by the AO to make the addition and which must be deleted.
11.The CIT(A) erred in law and on facts in ignoring the false statement of theAO, mentioned in the assessment order that he gave any opportunity to cross-examine any of the persons but factually the same categorically demonstrates that never any such opportunity was granted and also that all responses were properly and timely filed. Thus, the assessment order is void ab initio and must be quashed.
12.The authorities below erred in law and on facts in not appreciating that WhatsApp chats cannot be relied as an incriminating information in an assessment proceedings-initiated u/s 153C unless parties in their statements confirm those in any manner against the assessee.
13.Without prejudice to the above grounds of appeal, the CIT(A) erred in law and on facts in confirming the action of the AO in charging tax at the rate 60 per cent us 115BBE of the Act on the said amount instead of tax as per rate chargeable in respect of LTCG at the rate 20 percent on sale of any property purchased from the declared sources earlier and also levying surcharge u/s 115BBE of the Act.
14.The CIT (A) erred in law and on facts in confirming the action of the AO in stating that the assessee had filed his return of income u/s 139(5) of the Act on 20/07/2019 whereas it was filed u/s 139(1) of the Act within time and therefore, recording of incorrect facts vitiates the entire assessment order as passed mechanically and must be quashed.
15.The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.
The primary contention of ld. Counsel of the assessee was that no WhatsApp chats relied in the assessment order was from the mobile phone of the assessee. He contended that on the request of the assessee, ld. AO did not afforded any opportunity of cross-examination of various parties. He submitted that Mr Anil Upreti, whose statement and seized material are actually relied in the assessment was never issued any notice to appear in the assessment. The ld. Counsel also submitted that the assessment order for the subsequent AY 2020-21 in which the questioned property was actually sold on 31/10/2019 after receiving the entire sale consideration through single payment only on 25/10/2019 and no part of the same earlier and the share of the assessee therein of the resultant LTCG was offered for taxation by the assessee in the AY 2020-21, a period relevant in which the sale deed was registered on 31/10/2019, was also passed u/ss 153C/153A of the Act simultaneously without taking any adverse cognizance in any manner of the same. Further, legal ground was raised that the impugned consolidated satisfaction note is illegal as it refers to the alleged transactions of a period just relevant to two assessment years but has been mechanically recorded for the Seven AYs to reassess income for the seven AYs and therefore, is void ab initio and cannot be put into force even for one assessment year for which the addition has been made which is in this appeal. The Hon'ble jurisdictional Delhi High Court in the case of Saksham Commodities Ltd vs ITO [2024] 161 taxmann.com 485 (Delhi) dated 09/04/2024 and SLP of the revenue dismissed as SLP (C) Diary No. 51947/2024 (SC) dated 16/12/2024, was relied. The ld. Counsel relied the Hon'ble Madras High Court judgment dated 28/10/2025 in Harigovind vs ACIT (2025) 180 taxmann.com 197 (Mad) to contend that the impugned assessment proceedings could not at all be initiated u/s 153C of the Act and thus, must be quashed as illegal. The decisions of the coordinate benches in (i) GeetanjaliBhayana vs DCIT [2025] 186 taxmann.com 95 (Delhi-Trib) dated 27/01/2026 (ii) ANS Dhivyam Jewells vs DCIT in ITA Nos. 3743-3746/Chny/2025 dated 26/02/2026 (iii) Minoti Malhotra vs DCIT in ITA No. 6405/Del/2025 dated 25/03/2026 (iv) Nalli Trust vs DCIT in ITA Nos. 3072-3076/Chny/2025 dated 17/03/2026 (v)AttolVyapaar (P) Ltd vs DCIT in ITA Nos. 5664-5670/Del/2025 dated24/03/2026, (vi) Rasraj Marketing (P) Ltd vs DCIT in ITA Nos. 8952-8958/Del/2025 dated17/06/2026, were relied.
The Ld. DR relied the impugned orders and contended here is sufficient digital evidences of chats and other evidences found in search. He contended that assessee himself had failed to appear in the assessment so cannot claim of any prejudice of not given opportunity to cross examine the witnesses. He defended the satisfaction note and the conduct of proceedings u/s 153C of the Act.
We have given thoughtful consideration to the contentions and the material on record, and we would like to preface our reasoning to the grounds on the basis of certain relevant facts coming up from the assessment order and the same as reproduced below;
“In view of the above cited judgements and in view of the fact that reliance is not placed solely on the statement of Shri Anil Upreti &Shri S P Gupta but there are other multiple evidences including excel sheets/kachhiparchis etc.
7.3Without prejudice to the above, a summon under section 131 was issued to the assessee, clearly stating that it was issued in relation to the ongoing assessment proceedings for the assessment year (A.Y.) [2015-16 to 2021-22], and an opportunity was provided to confront the evidence and cross examination. However, the assessee failed to comply, which indicates that the assessee has no explanation regarding the evidence gathered during the search and post-search investigation. Similarly, summons were also issued to Sh. Samir Kumar Modi, Ms. Aparna Malhotra and Ms. Preeti Sehgal to confront the evidence, but they failed to appear.
7.4Given the non-compliance by the assessee under sections 153C and 142(1), including the failure to file the Income Tax Return (ITR) and not availing the opportunity of cross examination or respond adequately to the issues raised throughout the assessment process, I am left with no option but to complete the time-barred assessment proceedings based on the available material on record. As per the provisions of sections 144(1)(a) and 144(1)(b) of the Income Tax Act, 1961, if the assessee fails to file the required return under section 139(1) or fails to comply with a notice issued under section 142(1), the Assessing Officer is empowered to gather the relevant material and make an assessment to the best of his judgment.
The aforesaid observations of the learned assessing officer, when examined in the light of the nature of evidence, primarily being the WhatsApp chat between several persons, which do not specifically make any admissions except referring to certain figures, if the assessing officer intended to rely on any of the chats and the corresponding incriminating material which, according to the assessing officer, indicated payment of on-money, then it was essential for the assessing officer to have examined these persons on oath and also give the assessee an opportunity to cross-examine these persons.
However, what appears from the record and the assessment order itself is that the assessing officer had attempted to summon Samir Modi, Aparna Malhotra and Preeti Sehgal during the assessment proceedings, and the assessee was also issued notice. Very apparently, the dates of notices to the assessee for appearance and to Samir Modi, Aparna Malhotra, and Preeti Sehgal were different, with different dates of appearances being fixed consequent to summons under Section 131 of the Act.
It further comes up that no summons at all were issued to Mr. Anil Upreti, whose statement and the documents allegedly recovered from him were primarily the basis for all the inferences of payment of ‘on money’.
It appears that the assessing officer, unaware of the consequences of not examining these persons and not giving the assessee reasonable opportunity to cross-examine these persons, by not giving a reasonable opportunity of ensuring their presence together, has done a formality and which to our mind, prejudices the case of the assessee as in cases of the present nature, where the vital evidences are whatsapp chats which have little reference to the context in which the messages are sent and same are sought to be corroborated on the basis of incriminating material, which also do not carry complete and enforceable agreement of payment of on money, then it is essential that the statements of persons, part of the agreement or from whom the chats were recovered should be examined at some stage of the search, post-search, or during the assessment, at least. If that is not done, the assessee certainly is prejudiced, and the department cannot assert that the right to cross-examination is not a absolute right. Rather, to our mind, in such circumstances, depending upon the nature of the evidence, the department's effort should be to give the assessee an adequate opportunity to lay hands on the statements which completely explain the incriminating documents or the chats. If that is not done, the inferences drawn cannot be considered to be conclusively based on relevant and admissible evidence, but become more of suspicious circumstance and thus not sufficient to sustain the addition of nature of ‘on-money payments’.
At the same time we find that it is now a settled law that a consolidated satisfaction note, particularly including the assessment years for which there was no alleged incriminating material gets vitiated. In this context we find substance in the contention of ld. Counsel, from the record and reasons as recorded, copy of which is available at page 579-585 of the PB, that in regard to property allegedly purchased by two persons, if there was an allegation of receipt of on-money, and the evidence and incriminating materials also reflected that the on-money was received by them in different stretches running into different and multiple financial years, then it is essential to record as to how the incriminating materials relied upon, have a bearing on the determination of the income of the assessee, only, for the years for which search assessment is being taken up and the satisfaction is being drawn. The decision relied by ld. Counsel in the case of Saksham Commodities Ltd. (supra) thus helps the assessee.
Thus on merits as well as aforesaid legal issue, the corresponding gorunds deserve to be sustained and accordingly we allow the quantum appeal and the penalty appeal being only consequential, too deserves to be allowed. Accordingly ordered. The impugned assessment and penalty stands quashed.