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Judgment
PER AMITABH SHUKLA, AM,
This appeal by the assessee is directed against the order of Ld. Commissioner of Income Tax(Appeals)-30, New Delhi, [hereinafter referred to as ‘ld. CIT(A)] dated 22.09.2025 arising out of assessment order dated 13.03.2025 passed under section 147 r.w.s. 143(3) of the Income Tax Act, 1961, for the Assessment Year 2019-20. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.On the facts and in the circumstances of the case Ld. CIT(A) has erred both on facts and in law in assumption of jurisdiction u/s 148, where he has not fulfilled the jurisdictional conditions stipulated under the Act and partly sustained the impugned order passed by the Ld. ACIT illegally, violating the principles of natural justice, without fair and objective application of mind to the facts of the case and the law applicable and without being guided by the binding decisions of courts and tribunals and hence liable to be aside and quashed and declared non est in law.
2.That under the facts and circumstances and in view of the evidences place on record the Ld. CIT(A) erred in law as well as on merits by sustaining addition of Rs.1,40,00,000 as unexplained cash credits under Section 68 of the Income Tax Act. It is submitted that the unsecured loan in question was fully repaid through the banking channel, the payment of loan was with interest and deducting the TDS. Once repayment is established, the addition under Section 68 is unwarranted. The appellant has also provided all the documents and evidences to prove the ingredients of section 68 i.e identity, creditworthiness genuineness of transactions. The appellant has proved his onus as per the act.
3.The Ld. Assessing Officer is required to provide the "relevant material" in possession of the department, which led to the issuance of the notice under Section 148. This would include any documents or evidence procured during a search or investigation relevant to the case. That under the facts and circumstances of the case during the course of assessment proceedings Ld. A.O has never provided copies of any documents or statements in his possession that suggest the existence of the alleged transaction. The Assessing Officer had provided the new material directly in assessment order without confronting the same to the appellant during assessment proceedings This is violation of the principles of natural justice, as outlined under Section 142(3) of the Income Tax Act. On the basis of the principle of opportunity of being heard also, the addition was liable to be deleted.
4.On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have deleted the addition simply on the ground that the whatsapp messages relied upon by Assessing Officer is totally unrelated and irrelevant to the appellant.
5.The Ld.AO erred by disallowing an interest payment of Rs. 2,46,845 on an arbitrary manner, even that this addition was not the part of the show Cause Notice and presumption basis, without considering the factual matrix and the genuineness of the unsecured loans.
6.The Ld. AO erred in making an addition on ad-hoc basis of Rs. 5,70,000 as unexplained expenditures under Section 69C, based on presumption, while ignoring the factual matrix and the genuineness of the unsecured loan.
7.The objections filed by the appellant were not taken into account as per the correct procedures. The AO did not follow the process as mandated, and the issues raised were not properly addressed as direct by the apex court in GKN Driveshafts reported in 259 ITR 19.
8.The AO failed to provide the appellant an opportunity for cross-examination of the revenue's witnesses and to confront the material on the basis of which the case was reopened. This omission again violates the principles of natural justice, as outlined under Section 142(3) of the Income Tax Act.
9.The application of Section 115BBE of the Income Tax Act is erroneous, given the facts and circumstances of the case.
10.That the provisions of section 234A, 234B, and 234C of the Act are not at all applicable.
11.The initiation of penalty under Section 271AAC of the Income Tax Act is unjustified and legally incorrect.
12.The appellant reserves the right to add, alter, amend, modify, or supplement any of the grounds of appeal stated herein above, either before or at the time of hearing.
13.That each ground is independent and without prejudice to each other.
The appellant has contested the assessment order under section 147/143(3) dated 13.03.2025 both on legal jurisdictional ground as well as merits of the case. As the legal jurisdictional ground go to the root of the matter, we would like to consider the same first. As per brief factual matrix of the case are that the Return of Income declaring income of Rs.77,64,744/- was filed by the appellant on 23.10.2019. Subsequently, as a sequel to search operations u/s 132 of the Act, in the case of Galaxy Group, proceedings u/s 148 were initiated in the case of the assessee. In the reasons recorded by the ld. AO dated 21.03.2024, the ld. AO held that, post receipt of information from the Investigation Wing, it is inferred that the assessee is a beneficiary of accommodation entries provided by, Shri Deepak Agarwal and Shri Himanshu Verma. The ld. AO accordingly held the assessee guilty of indulgence in unaccounted transactions and proceeded to bring to tax an amount of Rs.19 Crores. The ld. AO accordingly re-assessed the taxable income of the assessee u/s 147 r.w.s 143(3) at Rs. 2,75,81,590 along with invocation of the provisions of section 115BBE of the Income Tax Act, 1961.
The principal argument taken by the ld. Counsel for the assessee is that there was no seized material available in its case and therefore the re-assessment order under section 147 r.w.s. 143(3) dated 13.03.2025 was void-ab-initio. It was argued that in a reasons recorded, it was premised by the Revenue that the reassessment proceedings are on account of availability of searched material found in case of the assessee whereas in realty, there was none. The ld. Counsel submitted that this position is clearly evident from the reasons recorded by the ld. AO on 21.03.2024, it was further submitted that even the show-cause notice dated 13.02.2025 issued by the ld. AO to it during the re-assessment also referred to transactions recorded in the regular books of accounts and that the addition was made by the ld. AO considering the transactions which were already recorded by the assessee in its books of accounts. In support of its argument, the ld. Counsel placed on records a voluminous paper book comprising reasons recorded, objections of assessee to the 148 proceedings, show-cause notices issued as well as ledger extracts of the entities in assessee’s books of accounts qua which the AO had made the impugned additions treating them as Sham transactions. The ld. Counsel vehemently argued that since there was no seized material on records belonging to the assessee, the re-assessment order per se was patently illegal and deserves to be quashed.
The ld. DR placed heavy reliance upon the order of the lower authorities.
We have heard the rival submissions in the light of material available on records. We have noted that from the paper book provided by the assessee, that the ld. AO has recorded following reasons dated 21.03.2024 for reopening the assessment proceedings.
“In this case, information was received from the DDIT/ADIT (Investigation)-2(1), New Delhi. As per the information, a search operation was conducted u/s 132 of the Income-tax Act, 1961 was carried out on 17.11.2021 by Unit-2(1), New Delhi on Galaxy Group, Shri Pradeep Indra Prasad Agrawal (Founder of Galaxy Group), and entry providers Shri Deepak Agarwal & Shri Himanshu Verma. The both of them were involved in providing various type of accommodation entries to large number of beneficiaries through non-descript entities managed and controlled by them with the help of dummy directors and professional. It was established by the Investigation wing that Shi Deepak Aggarwal and Sh. Himanshu Verma have provided the accommodation entries in various forms ie unsecured loan, share capital, share premium, advance against property etc..
2.Further, the assessee company is one of the beneficiaries of the accommodation entries from , the non-descript entities controlled and managed by Shri Deepak Agarwala and Shri Himanshu Verma during the year under consideration. The undersigned was satisfied that the instant case of the assessee company squarely covered within the proviso (iv) of Explanation 2 to the section 148 of the Income Tax Act. In view of provisions of proviso (iv) of Explanation 2 to the section 148, the prior approval of the Ld. Principal Commissioner of Income Tax, Delhi-07, New Delhi was taken for the same.
2.1Further, the provisions of section 148A of the Income Tax Act are not applicable in the present case in view of proviso (c) of section 148A as the case is covered within the proviso (iv) of explanation 2 of the section 148 of the Act,
3.In the instant case, the transactions related to accommodation entry in the form of unsecured loan, share capital, share premium or advance against property are represented in the form of an entry or entries in the books of account. Therefore, conditions laid down in Section 149(1)(b) of the Income Tax Act, 1961 are squarely applicable in the case of the assessee for year under consideration.
3.7Keeping in view of the above facts and circumstances of the case, I of the opinion that income chargeable to tax amounting to Rs.19000000/-has escaped assessment relevant to AY 2019-20 within the provisions of Section 147 of the Income Tax Act, 1961. Hence, there is income chargeable to tax, represented in the form of an entry or entries in the books of account, which has escaped assessment which amounts to rupees fifty lakhs or more for AY 2019-20. Hence it is fit case for issuance of notice u/s 148 of the Income Tax Act 1961. In view of the above discussion and in view of the provisions of section 151 of the Income Tax Act, the kind approval of Ld. Chief Commissioner of Income Tax, Delhi-02, New Delhi (as more than three years have elapsed from the end of the relevant assessment year), is solicited to issue the notice u/s 148 of the Income Tax Act 1961 in the aforesaid case.”
We have further noted from the show-cause notice issued to the assessee by the ld. AO dated 13.02.2025, which clearly shows that the ld. AO is not referring to any seized material in the case of the assessee but that seized from entry operators of M/s Galaxy Group. We have also considered the ledger accounts from the alleged accounts of impugned entry providing entities which shows that the transactions qua which addition was made were appearing in regular books of accounts. We concur with the arguments of ld. AR of the assessee that when no seized material was found belonging to it, there was no case for making any addition under section 148 in its case as its case was one of completed assessment.
In this regard, we draw support from the order of this Tribunal in the case of JSP Projects in ITA No.3594/Del/2020 dated 09th January, 2026, wherein, the following was concluded:
“5.In support of her contentions, the ld. Counsel placed reliance upon the decision of Hon’ble Apex Court in Abhisar Buildwell (454 ITR 212) holding that where no incriminating material found during search, no addition can be made in respect of completed assessment. Thus, it was held that
"14.In view of the above and for the reasons stated above, it is concluded as under: iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.
The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs."
6.It was submitted that Hon’ble Supreme Court following the ratio of Abhisar Buildwell (supra) has applied the same ratio to section153C of the Act vide SC order in the case of DCIT Central Circle 20 V. M/S U.K. Paints (Overseas) Ltd. [2023] 454 ITR 441 (SC), dated April 25, 2023.
"In this batch of appeals, the assessments in case of each Assessee were under Section 153-C of the Income Tax Act, 1961 (for short, 'the Act'). As found by the High Court in none of the cases any incriminating material was found during the search either from the Assessee or from third party. In that view of the matter, as such, the assessments under Section 153-C of the Act are rightly set aside by the High Court. However, Shri N Venkataraman, learned ASG appearing on behalf of the Revenue, taking the clue from some of the observations made by this Court in the recent decision in the case of Principal Commissioner of Income Tax, Central -3 Vs. Abhisar Buildwell P. Ltd., Civil Appeal No. 6580/2021, more particularly, paragraphs 11 and 13, has prayed to observe that the Revenue may be permitted to initiate re-assessment proceedings under Section 147/148 of the Act as in the aforesaid decision, the powers of the re-assessment of the Revenue even in case of the block assessment under Section 153-A of the Act have been saved.
As observed hereinabove, as no incriminating material was found in case of any of the Assessees either from the Assessee or from the third party and the assessments were under Section 153-C of the Act, the High Court has rightly set aside the Assessment Order(s). Therefore, the impugned judgment and order(s) passed by the High Court do not require any interference by this Court.
Hence, all these appeals deserve to the dismissed and are accordingly dismissed."
7.Further, reliance was placed upon the decision of Hon’ble jurisdictional High Court in the case of CIT v. Kabul Chawla 2015 SCC On Line Del 11555, holding that the information/material which has been relied upon for assessment has to relate with the assessee.
"(iv)Although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this section only on the basis of the seized material."
8.Per Contra, ld. DR placed reliance upon the orders of authorities below.
9.We have heard rival submissions in the light of materials placed on record. We have noted from the order of the ld. CIT(A) that the same concerns raised by the assessee have not been adequately handled. The decision of the ld. CIT(A) is primarily based upon lukewarm response to appellate proceedings. The facts of the case have not been properly analyzed by the First Appellate Authority. As regards, non-availability of incriminating document, we have found sufficient force in the arguments raised by the appellant. Perusal of the assessment order alludes that the ld. Assessing Officer has primarily made the addition on the basis of search and seizure operation carried out in the residential premises of one Shri Sunil Kumar Gupta an alleged close confidant of the Alankit Group and its Directors as well as information available in the seized HP laptop of Shri Gupta. Heavy reliance has also been placed upon the sworn statement of Shri Gupta under section 132(4) dated 18.10.2019. There is nothing substantial in the reasons recorded or the order under section 153C which allude towards any incriminating material found qua the assessee. The judicial precedents on the subject pronounced by Hon’ble Apex Court and Hon’ble Delhi High Court are categorically clear in laying down that no addition under section 153C can be made in cases where no incriminating material has been found. Accordingly, in respectful compliance to the decision of Hon’ble Apex Court in Abhisar Buildwell, U.K. Paints (Overseas) Ltd., and of Hon’ble Delhi High Court in Kabul Chawla (supra), it is held that the order under section 153C passed by the ld. AO in the case of the assessee is bad in law and therefore the order of lower authorities is set-aside and the order under section 153C is quashed. The ground of appeal no.1 raised by the assessee is allowed.
10.The assessee has succeeded on its legal grounds qua jurisdictional sufficiency, all the other grounds of appeal raised by the assessee nos. 2 to 10 on other legal grounds as well as the merits of the addition, have become academic in nature and hence left open.
11.In the result, the appeal of the assessee is allowed.
We have noted that the facts of the present case are identical to those existing in the case of JSP Projects (supra). Accordingly, in respectful compliance to the decision in the said order, we set-aside the impugned appellate order and quash the assessment order under section 147 r.w.s. 143(3) dated 13.03.2025 and allow the appeal of the assessee on its legal jurisdictional grounds.
The assessee has succeeded on its legal grounds qua jurisdictional sufficiency, all the other grounds of appeal raised by the assessee on other legal grounds as well as the merits of the addition, have become academic in nature and hence left open.
SA No.554/Del/2025
Since, we have quashed the entire assessment order and allowed the appeal of the assessee, the Stay Application of the assessee has become infructuous and therefore, dismissed.
In the result, the appeal of the assessee is allowed and Stay Application of the assessee is dismissed.