Keshav Dalal vs DCIT

PER NAVEEN CHANDRA, ACCOUNTANT MEMBER : The above captioned two appeals by the assessee and a cross appeal by the Revenue are preferred against the order of the ld. Commissioner of Income Tax (Appeals), Delhi-25 dated 29.11.2024 pertaining to Assessment Years 2012-13 & 2018-19, respectively.

Since the above captioned appeals were heard together and the facts in issues are identical, all these appeals are being disposed off by this common order for the sake of convenience and brevity. We however note that the Form 36 of the assessee mentions the appeal in ITA SS 5787/Del/2024 pertains to AY 2012-13, the assessee has filed submissions for AY 2017-18. The same has been ignored and the decision is taken on the basis of materials on record.

The assessee has raised the following grounds of appeal:

Brief facts of the case is that assessee is an individual and filed original return u/s 139(1) on 30.03.2013 declaring income of Rs 3,94,300/-. The return was processed u/s 143(1) of Income Tax Act, 1961 on 22.04.2013. Search under section 132 of the Act was conducted on 14.09.2017 at the residential premises of the assessee and various documents were found and seized. The assessee was issued notice u/s 153A on 28.02.2019 requiring the assessee to furnish the return of income for the year under consideration being one of the six assessment years preceding the assessment year in which search was conducted, In response to which return was E-filed on 11.12.2019 declaring income of Rs. 3,94,300/-.

In the course of assessment proceedings, the AO, in absence of supportive evidence, treated the gift of Rs. 13,00,000/- received from assessee’s father Shri Prem Chand Dalal as unexplained receipt and added the same as income from undisclosed sources u/s 68 of the Income Tax Act, 1961. On appeal, the CIT(A) upheld the addition.

Ground 2 with regard to validity of order u/s 153A without DIN is dismissed in view of the amendment in the Act carried out in 2026. The insertion of section 292BA, declares that no assessment under the Act shall be invalid merely because of any mistake, defect or omission in quoting a computer-generated DIN, if the assessment order is referenced by such number in any manner. The Notes on Clauses expressly state that this amendment takes effect retrospectively from 1 October 2019. The Finance Bill also made a parallel change for the Income-tax Act, 2025, under section 522, with effect from 1st April 2026.

With respect to ground 3, the ld counsel of the assessee, challenged the assessment made u/s 153A, as being unabated Assessment Year and is not based on any incriminating material. The assessee relied on the decision of Supreme Court in the case of Abhisar Buildwell Ltd.

Per contra, the ld DR relied on the orders of authorities below.

We have heard the rival submissions and perused the materials on record. We find that the assessee had filed original return u/s 139(1) on 30.03.2013 which was processed u/s 143(1) of Income Tax Act, 1961 on 22.04.2013. At the time of issuance of notice u/s 153A on 28.02.2019, pursuant to search under section 132 of the Act on 14.09.2017, the said AY 2012-13 had become an unabated year.

We further note from the AO’s assessment order that the said addition of gift, emanated from the statement of affairs, filed by the assessee. We also find that the assertion of the assessee that the addition is not based on any incriminating materials, has remained uncontroverted by the ld DR. In such factual matrix, the decision of Abhisar Buildwell Pvt. Ltd 454 ITR 212 of Hon’ble Supreme Court squarely applies which held that in unabated assessment year, no addition can be made in absence of any incriminating materials. Ground 3 is allowed in the aforesaid terms.

The grounds on merits are not adjudicated as they are rendered academic.

Brief facts of the case is that the assessment order dated 29.12.2019 was passed by the AO u/s 143(3) of the Act, wherein the income of the appellant has been assessed at Rs. 1,03,70,757/-, as against the returned income of Rs 2,84,490/-, after making additions of Rs. 1,00,86,267/- on account of unexplained investment in jewellery, unexplained expenditure and income from house property.

A search was conducted on 14.09.2017 at assessee’s residential premises, and during the course of search 2372.17 gms of jewellery of Rs. 75,41,791/- was found, out of which 1072.06 gms of jewellery valuing Rs 31,14,767/- was seized and the remaining 1262.74 gms jewellery worth Rs 36,25,732/- was released in view of CBDT Instruction Number 1916 dated 11.05.1994. The assessee’s explanation that out of the aforesaid seized jewellery of Rs. 31,14,767/-, he had purchased 583 gms jewellery valuing Rs. 23,46,059/- in AY 2017-18, was accepted by the CIT(A). With respect to remaining jewellery valuing Rs. 7,68,708/-, the same was treated as unexplained. The assessee as well as the Revenue is in appeal against the said confirmation/deletion respectively.

We have heard the rival submissions and have perused the relevant material on record. In the instant case, we find that the assessee has attempted to prove the entire source of seized jewellery as being belonging to his mother. Although the assessee, prima facie, appears to have discharged its onus of explaining source of seized jewellery, it’s contentions to prove the source, hardly deserves to be accepted in entirety especially when the fact remains that the assessee was given benefit of exclusion of 1262.74 gms of jewellery as per CBDT Instruction no 1916 which mandates 500 gms of jewellery per married ladies as being exempt from seizure during search. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that seized jewellery belonged to his mother Smt Nirmala Devi, cannot be fully justified especially considering the fact that the Revenue had accepted the veracity of jewellery purchase in the hands of assessee’s mother in AY 2017-18 to the extent of Rs 15,46,601/-. In this factual matrix, there is some element of failure to explain some of the jewellery seized, cannot be ruled out. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum addition of ₹ 1 lakh only would be just and proper with a rider that the same shall not be treated as a precedent, so as to cover all loopholes. Both the ground of appeal no 3 of the assessee and ground 1 of the Revenue are partly allowed.

Ground 2 of the assessee with regard to validity of order u/s 153A without DIN, is dismissed in view of the amendment in the Act carried out in 2026 as discussed above.

Ground 2 and 3 of Revenue appeal is with regard to addition of Rs 69,47,000/- u/s 69 as unexplained expenses as found from the seized documents at page 4,5,6,7,8 and back of Annexure A-1.

Briefly, certain documents were seized during the course of search wherein notings of expenses totaling to Rs 69,47,000/- on Page No. 4, back of Page 5, back of Page 6, Page No. 7 and back, Page No. 8 and back of Annexure A-1, were found and treated as unexplained expenditure by the AO. In the course of assessment proceedings, no explanation was filed but in the appellate proceedings, the assessee explained that notings pertained to the brother of the assessee, Shri Chetan Dalal and that the notings on such pages are not in the handwriting of the assessee, but are in the handwriting of his brother. It was submitted that Shri Chetan Dalal wanted to start a business in the field of home delivery of kiryana items by picking them from traditional Kiryana Stores and the aforesaid pages were rough workings on diary and are related to preparation/budget/estimates to set up a new business in the name of Express Cart LLP, incorporated on 31.12.2015. The assessee explained that the statement of the brother of the appellant, Shri Chetan Dalal, was also recorded during the course of search, wherein in response to question number 7, he admitted having started a company Express Cart dealing in advertisement and grocery delivery. He had further stated that the said company was on trial and since the business was not found workable, the business was closed after 2 to 3 months of trial and Express Cart LLP was also struck off on 12.10.2018.

The CIT(A), admitting the additional evidences, called for a remand report u/r 46A. Upon appraisal of the remand report and the seized material, the CIT(A) held that the seized pages contained rough scribbling and the submissions of the assessee was supported by the statement of assessee’s brother recorded in the course of the same search. Accordingly, he deleted the additions made.

The ld DR relied on the orders of the AO whereas the ld AR of the assessee relied on the order of the CIT(A).

Having heard the rival submissions, we are of the considered view that the documents seized and utilized by the AO, contained rough notings, were in handwriting of the assessee’s brother. The AO completely ignored the statement of assessee’s brother Chetan Dalal and made no further enquiry on the same to discredit the assessee’s explanation. We further note that the AO’s reliance on the said seized materials were not supported by any corroborating evidence/documents. In such factual matrix, we are of the considered view that there is no reason to interfere with the decision of the CIT(A) on this issue. Ground 2 to 4 are accordingly dismissed.

In the result, the appeal of the assessee in IT(SS)A No. 5787/DEL/2024 ITA No. 5824/DEL/2024 are partly allowed whereas the appeal of the Revenue in ITA No. 1095/Del/2025 is also partly allowed. The order is pronounced in the open court on 17.04.2026.