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Judgment
PER MANISH AGARWAL, AM:
This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-25, Delhi [‘CIT(A)’ in short] in Appeal No. CIT(A), Delhi-30/10406/2017-18 dated 21.01.2026 passed u/s 250 of the Income Tax Act, 1961 (the Act, in short) arising out of the assessment order dated 31.03.2024 passed u/s 153C of the Act for Assessment Year 2018-19.
Brief facts of the case are that the assessee filed his return of income on 03.07.2018 declaring total income of Rs.20,90,760/- which includes profit from commodity transaction of Rs.13,94,673/- carried out through broker M/s Alankit Imaginations Ltd. A search and seizure action was carried in the case of M/s Alankit Group on 18.10.2019 and based on the material found/seized during the course of search, a satisfaction was recorded by the AO of Alankit Group that certain entries are found recorded in the loose papers and documents seized during the course of search which relate to the assessee. The satisfaction was so recorded by the AO of the person search was placed at pages 1 to 2 of PB. Thereafter, the AO of the assessee who incidentally be the same AO as of the person searched, has recorded his satisfaction on 24.06.2022 that certain documents found from the Laptop of Sh. Sunil Kumar Gupta, found and seized from his contained certain transactions in cash totalling to Rs. 8,00,000/- for the year under appeal and therefore, proceedings u/s 153C were initiated for Assessment Years 2014-15 to 2020-21 and, notice u/s 153C was issued on 30.08.2022. In response to the said notice return of income was filed on 03.12.2022 declaring total income at Rs. 20,90,760/- as was decaled u/s 139 of the Act, 1961. The AO alleged that assessee had paid Rs. 8,00,000/- in cash to Alankit Group for obtaining accommodation entries of bogus income and, accordingly, the said cash was held as unexplained expenditure u/s 69C of the Act and addition for the same was made. Besides this the AO made the addition of Rs.44,000/- by holding that the assessee has paid commission @ 3% of total accommodation entry, and accordingly, the total addition of Rs.8,24,000/- was made to the total income of the assessee which was assessed at Rs.29,14,760/-.
Against the said order, an appeal was filed before the Ld. CIT(A) who vide impugned order dated 21.01.2026 has dismissed the appeal of the assessee, thus, the assessee is in appeal before the Tribunal by taking various grounds of appeal as per appeal memo.
Before us, grounds of appeal No.1(iii) has not pressed, thus, the same is dismissed.
In grounds of appeal No. 1(i) &(ii), assessee has challenged the legality of initiation of proceedings u/s 153C of the Act based on the defective satisfaction note.
Before us, Ld. AR for the assessee submits that proceedings u/s 153C of the Act in the case of assessee were initiated after recording satisfaction on 24.06.2022 where satisfaction was reached that cash transactions of Rs. 8,00,000/- between the assessee and Alankit group were found noted in the seized material. Ld. AR submits that besides this a sum of Rs. 90,000/- and 4,64,250 were also alleged as being carried out in cash in Financial Year 2014-15. The Ld. AR submits that since the satisfaction was recorded on 24.06.2022, therefore, in terms of the order of Hon’ble Supreme Court in the case of CIT Vs. Jasjit Singh reported in (2025) 173 Taxmann.com 575 (SC) and of the hon’ble Delhi high court CIT vs. RRJ Securities Ltd. reported in [2015] 62 taxmann.com 391 (Delhi HC) wherein it is held by the hon’ble courts that in the case of other person, date of search would be reckoned from the date when the seized material has been handed over by the AO of the person searched to the AO of the assessee. As per ld. AR, in the instant case, incidentally the AO of the person searched and AO of the assessee is the common and the satisfaction was recorded in both the capacity on 24.06.2022, therefore for the purposes of section 153C of the Act, the same should be taken as the date of search and the period of six years should be taken from that date. Ld. AR submits that the year under appeal i.e. AY 2018-19 though is fallen within the period of Six years, however, the provisions of assessments in the case of search carried out on or after 01.04.2021 has been amended w.e.f. 01.04.2021 and according to which no assessment could be done u/s 153C of the Act and where any document/paper was found from the possession of third persons and proceedings must be initiated u/s 148 read with Explanaiton-2(iv) and after the approval from the competent authority. The Ld. AR submits that in the instant case, since satisfaction was recorded after 01.04.2021, therefore, the assessment should have been completed u/s 148 of the Act and not u/s 153C of the Act. Reliance is placed on the judgement of hon’ble Madras High court in the case of Harigovind v. ACIT reported in [2025] 180 taxmann.com 197 (Madras). He thus submits that the assessment order passed u/s 153C of the Act is invalid order.
Ld. AR further submits that from the perusal of the satisfaction note recorded by the AO of the assessee available at pages 3 of the paper book, it could be observed that no satisfaction was recorded that the said documents pertained to assessee and the entries contained therein “have a bearing on the determination of total income of assessee” as provided in section 153C of the Act. For this reliance is placed on the judgement of hon’ble jurisdictional High court in the case of Saksham Commodities Ltd Vs. ITO reported in 464 ITR 1(Del.). He thus submits that the proceeding initiated u/s 153C of the Act is based on defective / incomplete satisfaction and, accordingly, the same deserves to be held bad in law and consequent order passed be quashed.
On the other hand, the Ld. CIT-DR vehemently supported the orders of the lower authorities and submits that in the instant case, search was carried in the case of Alankit Group on 18.10.2019 which falls prior to 01.04.2021 and, therefore, the AO has rightly initiated the proceedings u/s 153C of the Act and, thus, requested that the with respect to mechanical/incorrect satisfaction. Ld. CIT-DR submits that in the instant case, the AO of the assessee as well as AO of the person searched was the same and in the satisfaction note recorded by the same AO and the capacity of AO of person and searched satisfaction was recorded that the documents related to the assessee and having bearing on the determination of the total income of the assessee and, thus, on this ground also assessee has no case. He prayed accordingly.
Heard the parties and perused the materials available on record. As observed above in the instant case, the AO of the persons searched had recorded his satisfaction handed over the materials to the AO of the assessee (though incidentally both are the same AO on 24.06.2022), therefore, the date of search should be reckoned from the date when the materials is handed over i.e., on 24.06.2022. As per the assessee, the law has been amended w.e.f 01.04.2021 by Finance Act, 2021 and as per the amended law no assessment order could be passed u/s 153C of the Act from the search action carried u/s 132 of the Act on or after 01.04.2021. In this regard, the provisions as contained in Explanation -2 to section 148 reads as under:
Explanation 2- for the purpose of this section:
(i)A search is initiated under section 132 or books of accounts, other documents or any assets are requisitioned on or after 1st day of April 2021 in the case of the assessee or
(ii)a survey is conducted under section 133A, other than under sub-section (2A) [***] of that section, on or after the 1st day of April, 2021, in the case of the assessee; or
(iii)the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or
(iv)the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee where the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.
Further the provisions of section 153C are reproduced as under:
153C. Assessment of income of any other person.
(1)Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,—(a)any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or(b)any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to,a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A :Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person :Provided further that the Central Government may by rules30 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated.(2)Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year—(a)no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or(b)a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or(c)assessment or reassessment, if any, has been made,before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.[(3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021.]
Since, in the instant case, the assessment has been completed u/s 153C, though the search on or after 01.04.2021, therefore, the provisions of section 148 must be invoked and proceedings must not be completed u/s 153C of the Act. This view is supported by the judgment of Hon’ble Madras High Court in the case of Harigovind vs. CIT (supra). Accordingly, we hold that the proceedings initiated u/s 153C of the Act are invalid and the assessment order passed u/s 153C is hereby quashed. Grounds of appeal No. 1(i), 1(ii) & 2 are allowed and other grounds of appeal become academic, thus, require no adjudication.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 25.09.2026.