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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
These captioned two appeals have been filed by the different assessee against the order of the learned Commissioner of Income Tax (Appeals) – 25, New Delhi [‘CIT(A)’ in short] dated 29.01.2025 arising from the assessment orders dated 03.02.2024 and 23.02.2024 passed under Section 153C of the Income Tax Act, 1961 (‘the Act’) by the Assessing Officer, JCIT (OSD), Central Cir – 27, New Delhi and ACIT, Central Cir – 25, Delhi concerning Assessment Year (A.Y.) 2017-18.
Since the captioned appeals pertain to different assessee, for the sake of convenience and brevity they were heard together are disposed of by this common order.
ITA No. 1840/DEL/2025 [Saurabh Maheshwari]
The grounds raised by the assessee are as under :
“1.That in view of the facts and circumstances of the case, the notice issued under section 153C of the Income Tax Act, 1961 ("the Act') and consequent assessment proceedings see illegal, bad in law, without jurisdiction, and barred by limitation since the same has been issued by the Assessing Officer ('AO") in violation to the conditions specified under Section 153C read with section 153A of the Act.
2.That the assessment order dated 03.02.2024 passed under Section 153C of the Act by the AD, and the additions made therein are illegal, bad in law, without jurisdiction, and not in accordance with the provisions of the Act.
3.That, in view of the facts and circumstances of the case, the proceedings initiated under section 153C of the Act are bed, in law, as no incriminating material belonging to the Assessee and having a bring on total income was found during the course of the search.
4.That in view of the facts and circumstances of the case, the proceedings initiated under section 153C of the Act and the assessment framed under section 153D of the Act are bad and liable to be quashed in the absence of any valid satisfaction being recorded as per law.
5.That in view of the facts and circumstances of the case, the issuance of notice under Section 153C of the Act by the Assistant Commissioner of Income Tax (ACTT), 46(1), Delhi, is in direct contravention of Instruction No. 1 of 2011 dated 31.01.2011 issued by the Central Board of Direct Taxes (CBDT).
6.That, in the facts and circumstances of the case, the assessment order passed is without jurisdiction as no valid order under Section 127 of the Act was passed, and as such no valid jurisdiction was assumed by Central Circle-27 Delhi, who has passed the assessment order.
7.That the order passed by the AO is non-est and bad in law in as much as the proceedings have not been conducted in the manner prescribed and in violation of CBDT Circular No. 19/2019 requiring mandatory Document Identification Number (DIN)
8.That, the assessment order dated 03.02.2024 passed under Section 153C of the Act by the Assessing Officer is illegal and had in law as the same is passed without valid statutory approval in terms of Section 153D of the Act as the same was granted mechanically and without any application of mind.
9.That in view of the facts and circumstances of the case, CIT(A) has erred in law and on facts in not appreciating the fact that the approval granted u/s 153D of the LT. Act is mechanical in nature and without proper application of mind, therefore, the same is illegal and non-est and consequential assessment made on the basis thereof is also illegal and deserves to be annulled.
10.That in view of the facts and circumstances of the case, the learned AO has erred, both on facts and in law, in making the above addition on the basis of statements recorded at the back of the Assessee without providing the Assessee the opportunity of cross-examination to rebut the same despite a specific request made by Assessee.
11.That in view of the facts and circumstances of the case, the CIT(A) vide order dated 29.01.2025 has erred in confirming the additions/disallowances made by the Assessing Officer.
12.That in view of the facts and circumstances of the case, the AO/CIT(A) has erred, both on facts and in law, in assessing/upholding the income of the Assessee at Rs. 14,60,980/- as against the income of Rs. 13,32,180/-declared by the Assessee.
13.That in view of the facts and circumstances of the case, the AO/CIT(A) has erred both on facts and in law in making/upholding the addition of Rs.4,60,000/- by treating the professional receipt of the assessee as unexplained money received by invoking the provisions of section 69A of the Act.
14.That in view of the facts and circumstances of the case, AO/CIT(A) has erred both on facts and in law in making/upholding an addition of an amount of Rs. 13,800/-at the rate of 3% on the above addition of Rs. 4,60,000/- holding the same to be the commission paid by the assessee invoking the provisions of section 69C of the Income Tax Act,
15.That in view of the facts and circumstances of the case, the AO has erred in law and on facts in applying the provisions of Section 115BBE of the Act. The provisions of Section 115BBE of the Act are not applicable and have been wrongly and illegally applied.
16.That in view of the facts and circumstances of the case, the learned AO has erred, both on facts and in law, in making the addition on the basis of gross conjecture and surmises without bringing any adverse material on record.
17.That in view of the facts and circumstances of the case, the learned AO has erred both on facts and in law in passing the order without providing adequate opportunity of being heard to the assessee in clear violation of the principle of natural justice.
18.That in the view of the facts and circumstances of the case, the documents, explanations filed by the Appellant, and the material available on record have not been properly considered and judicially interpreted by the Assessing Officer and the same has been wrongly ignored.
19.That the additions/disallowance made by the Assessing Officer are unjust, illegal, arbitrary, bad in law, highly excessive, and based on surmise conjecture.
20.That in view of the facts and circumstances of the case, the learned AO has erred, both on facts and in law, in charging interest under Sections 234A, 234B, and 234C of the Income Tax Act. The interest has been wrongly worked out.
That in view of the facts and circumstances of the case, the appellant craves leave to add, amend or alter any of the grounds of appeal.”
The brief facts of the case are that the assessee is an individual originally filed return of income under section 139 of the Act on 24.10.2017 declaring income of Rs.13,32,180/- for the year under consideration.
A search and seizure proceeding under section 132 of the Act was carried out on the Alankit Group, Sh. Alok K Agarwal, his son Ankit Agarwal and some of the close associates and key employees of Sh. Alok K Agarwal on 18.10.2019 and certain incriminating materials were seized with regard to the assessee. Accordingly notice u/s 153C dated 17.01.2023 was issued to the assessee after recording a satisfaction note dated 16.01.2023. The assessment u/s 153C was made on 03.02.2024making an addition of Rs 4,60,000/- as unexplained receipt u/s 68 of the Act. Upon appeal, the CIT(A) upheld the addition. Aggrieved the assessee is before us.
At the outset, the learned Counsel of the assessee submitted that the Satisfaction note under section 153C dated 16.01.2023 by the Assessing Officer is not recorded on the basis of incriminating material, hence the same is invalid. The ld AR submitted that the receipt of Rs 4,60,000/- in question is a professional receipt from M/s Alankit Assignment Ltd. The ld counsel stated that on this professional receipt, TDS has been deducted and the same is already declared in the assessee return of income. The ld AR argued that as there is no incriminating material, no addition can be made.
Per contra, the the ld DR relied on the orders of the authorities below.
We have heard the rival submissions and have perused the materials on record. For convenience’s sake, we are reproducing the satisfaction note as under:
Proforma for recording satisfaction under section 153C
To be recorded by the Assessing Officer after receiving of seized material from the AO of the searched person referred to in section 153A
1. Name of the group, if any, searched Alankit Group 2. Name, Address and PAN of the assessee in whose case assets (money, bullion, jewellery or other valuable article or thing) or papers (books of accounts or documents) seized u/s 132/ requisitioned u/s 132A Sh. Alok Kumar Agarwal (PAN-AAJPA1283A).
Sh. AnkitAgarwal (PAN-AGAPA5363L). M/s Alankit lamited (PAN-AAACE1288P),
M/s Alankit Assignments Limited (PAN-AAACA9483E)
3. Date of initiation of search in the case of the searched person referred to in section 153A 18.10.2019 4. Name, address and PAN of the other person to whom seized assets / papers/information as in (2) above relates and in whose case action under section 153C is proposed Shri Rahul Maheshwari
AJKPM85338
5. Specific details of the seized material on the basis of which action under section 153C is proposed
(a) Nature of the seized material (money/billion/jewellery/other valuable article or thing/books of account/documents)
(b) Description of the seized material (c) Address of premises/place from where such material was seized
(d) Date of seizure of such material
(e) Particulars of the relevant Panchnama (f) Annexure/S.No./Page Number etc. (particulars to be specified)
Annexure A-31 as HP Laptop was obtained/seized from the premises-3584/4, Narang Colony, Gali No.4, Tri Nagar, Delhi.
Panchanama dated 18.10.2019 and 21.10.2019 prepared in the case of Sh. Alok Kumar Agarwal, Sh. AnkitAgarwal, M/s Alankit Limited and M/s Alankit Assignments Limited at 3584/4, Narang Colony, Gali No.4. Tri Nagar, Delhi.
6. Relationship of the person referred in S.No.4 with the person referred to in S.No.2 As per annexure-B 7. Satisfaction of the Assessing Officer of the other person referred to in section 153C that the seized assets referred to in S.No.5 belong to other person referred to in S.No.4 or any books of account or documents, seized referred to in S.No.5 pertain to or any information contained therein relates to other person referred to in S.No.4. As per annexure-A 8. Assessment years involved. AY 2014-15 to 2020-21 *Copy of relevant Panchnama shall be integral part of satisfaction note.
Sd/-(Narendra Kumar Pareek)
Date 16.01.2023 Income-tax Officer, Ward 30(1).Now Delhi
(AO of the 'any other person' as per Section 153C of the IT Act. 1961)
Annexure-A
Satisfaction Note for initiating proceedings under section 153C read with section 153A of the Income Tax Act, 1961 in the case of Shri Saurabh Maheshwari (PAN-AGAPN2962R)
1.Satisfaction note (F.No.DCIT/CC-28/Misc/2022-23/540) dated 13.06.2022 was received from DCIT. Central Circle-28-informing that a search and seizure action (Date of Search-18.10.2019 and 21-10-2019) u/s 132 has been conducted in the course of assessment proceedings u/s 153A of Alankit Group (searched the case of Alankit Group of cases (searched person). As communicated, during person), material/documents which have bearing on determining the total income of Shri Rahul Maheshwari (PAN- AJKPM85338) were found and seized. The assessing officer of searched person, Central Circle-28, New Delhi has duly the satisfaction note along with related documents (copy in the form of Hard Disk recorded his satisfaction in the case of searched person and further forwarded Annexure A-31, as SUNIL KUMAR GUPTA HP Laptop obtained/seized from the premise 3584/4, Narang Colony, Gali No.-4. Tri Nagar, Delhi) to this office having jurisdiction over Shri Rahul Maheshwari for further necessary action and initiation of proceedings u/s 153C for AY 2014-15 to AY 2020-21. Relevant satisfaction note recorded by assessing office of searched person (DCIT, Central Circle-28) is annexed to this document. (Called as Annexure B).
2.The relevant communications as above received in this regard have been duly analysed by me. PAN AJKPM8633B belongs to Shri Rahul Maheshwan, assessed as Individual with this office. As communicated, during the course of assessment in Alankit Group of cases u/s 153A, consequent upon search and seizure, the assessing officer of the searched person, found certain materials/documents related to Shri Rahul Maheshwari (referred as such other person within the meaning of S.153C, hereinafter). In particular, ledger of Sh. Vinod Kumar Maheshwari has been obtained from laptop of Sh. Sunil Kumar Gupta, found and seized from the residence of Sh. Sunil Kumar Gupta, at 3584/4, Narang Colony, Gali No.-4, Tri Nagar Delhi. (Path-F:\SKGR A-32\SUNIL KIMAR GUPTA HP LAPTOP EXTRACTEDDATA\Tally\[root].1\Local Disk ANARKALI BACKUP DATA24\DATA24).
3.As communicated, document as above have been found and seized during the course of search u/s 132 of the Income Tax Act, 1961 carried in the case of Sh Alok Kumar Agarwal, Sh. Ankit Agarwal, M/s Alankit Limited and M/s Alankit Assignments Ltd. at 3584/4, Narang Colony, Gali No. 4, Tri Nagar, Delhi. In view of the description of the documents AO of the searched person has noted that the documents belonging to Shri Rahul Maheshwari (PAN- AJKPM8833B) i.e. the case belongs to a person other than the person searched. The AO of the searched person has further noted his satisfaction that these documents also contain information which relates to above referred other person Shri Rahul Maheshwari and has a bearing on determination of its total income. Accordingly, these documents have been handed over to the AO of Shri Rahul Maheshwari for necessary action in the case of above referred "other person" under section 153C of the IT Act, 1961
4.As noted by AO, from the analysis of ledgers related to Shri Vinod Kumar Maheshwari, the following beneficiaries are seen to have taken transactions against unaccounted cash or otherwise as tabulated below:
Name of beneficiary F.Y. Transaction done with Amount debited to beneficiary Amount credited to beneficiary Shri Rahul Maheshwari 2014-15 EFL 4,80,000 2015-16 AAL 4,65,000 5.Ledgers of Sh. Vinod Kumar Maheshwari have been obtained from laptop of Sh. Sunil Kumar Gupta found and seized from the residence of Sh. Sunil Kumar Gupta at 3584/4, Narang Colony, Gali No.4, Tri Nagar, Delhi.
6.The accommodation entries provided through Sh. Vinod Kumar Maheshwari against unaccounted cash from various beneficiaries, as determined from his ledgers, are as tabulated below.
Name of beneficiary F.Y. Transaction done with Amount debited to beneficiary Amount credited to beneficiary Shri Rahul Maheshwari 2014-15 EFL 4,80,000 2015-16 AAL 4,65,000 7.Ledgers related to Sh Vinod Kumar Maheshwari have been obtained from laptop of Sh Sunil Kumar Gupta found and seized from the residence of Sh Sunil Kumar Gupta, at 3584/4, Narang Colony, Gali No.4, Tri Nagar, Delhi. (Path-FASKOR A-32 SUNIL KIMAR GUPTA HP LAPTOP EXTRACTEDDATA\Tally [root].1\Local Disk ANARKALI BACKUP DATA24\DATA24).
8. Satisfaction:-
8.1It is worthwhile to discuss provisions of section 153C and Section 153A here :-
"Assessment of income-tax of any other person
Section 153C(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 requitioned, 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 refered 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 provisions of section 153A. if that Assessing Officer is satisfied that the books of and assess or reassess the income of the other person in accordance with the 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]:
Section 153A [(1)]Notwithstanding the Assessing Officer shall-
(a)Issue notice to such person
(b)Assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made fand for the relevant assessment year or years]
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years [and for the relevant assessment year or years]:
8.2On perusal of facts/information received in this regard from the assessing officer of the searched person, there subsequent perusal and examination, and further information available with this office, the undersigned is satisfied that the books of account or documents seized or requisitioned (ledger from laptop of Sh Sunil Kumar Gupta, at 3584/4, Narang Colony, Gali No.-4. Tri Nagar Delhi. (Path-FASKGR A-32 SUNIL KIMAR GUPTA HP LAPTOP EXTRACTEDDATA Tally [root].1\Local Disk\ANARKALI BACKUP DATA24 DATA24), annexurised as A-31 and further analysed by me, have a bearing on the determination of total income of Shri Rahul Maheshwari (PAN- AJKPM8533B), as the transactions made in this regard relate to transactions made in cash or otherwise and therefore, not recorded in regular books of account maintained by assessee. As informed by assessing officer of searched person, transaction as above by assessee have been made with various shell entities controlled by Alok K Aggarwal against un accounted cash or other-wise to take accommodation entries. In particular, an amount debited and credited to assessee Shri Rahul Maheshwari as above shows that aforesaid receipt has not been offered for taxation in the ITR filed by the assessee, Books of accounts/documents seized during the course of search on Alankit Group of cases duly identifies assessee as beneficiary of accommodation entry facilitated by various shell entities controlled by Sh. Alok K Aggarwal. Therefore, in view of documents seized and requisitioned as above and further handed over to me (assessing officer of Shri Rahul Maheshwari (PAN-AJKPM8533B)), I am satisfied that documents seized or requisitioned have a bearing on the determination of total Income of Shri Rahul Maheshwarn (PAN AJKPM8533B).
9.After careful analysis of seized documents and provisions of section 153C of the Act, I am satisfied that the above documents relates to Shri Rahul Maheshwari (PAN- AJKPM8533B) who is assessed with ITO Ward 30(1) New Delhi and have a bearing on its Income. Therefore, I am satisfied that Shri Rahul Maheshwari (PAN- AJKPM8533B) is covered under Section 183C of the Income Tax Act, 1961. Accordingly, notices u/s 153C of the 1.T. Act, 1961, is being issued for AYs 2014-15 to AY 2020-21.
From the perusal of the above satisfaction note, we find that the satisfaction note is recorded solely on the basis of ledger entry, found during the course of search, relating to Vinod Kumar Maheshwari, wherein the assessee is shown to have transactions of Rs 4,60,000/-which the AO has treated the assessee as a beneficiary of accommodation entry. We find that it is an uncontroverted fact that the assessee has declared the receipt of Rs 4,60,000/- as income in his return of income for AY 2017-18. We find that the AO himself has admitted that the assessee has declared the said receipt as professional receipt for AY 2017-18. It is also an admitted fact that the TDS Form 26AS reflects the payment of Rs 4,60,000/- from Alankit Assignment Ltd wherein TDS of Rs 46,000/- has been deducted. In such factual matrix, we conclude that the satisfaction note is not based on any incriminating material. A satisfaction note not based on any incriminating material, found during a search, is void, rendering the subsequent assessment under Section 153C of the Income Tax Act invalid and unsustainable in the eyes of law. On the facts and circumstances of the present case, and in light of the hon’ble Supreme Court decision in PCIT v. Abhisar Buildwell (P.) Ltd., [2023] 454 ITR 212 (SC), the impugned addition made vide impugned assessment order sans incriminating material, is accordingly quashed. The appeal is decided in aforesaid terms.
ITA No. 1844/DEL/2025 [Rahul Maheshwari]
The facts in the instant case is identical to the facts of the case decided above. The decision therefore in the case of ITA 1840/Del/2024 will apply mutatis mutandis to the facts of the instant case.
In the result, the both the appeal of the assessees in ITA 1840 and 1844/Del/2024 are allowed.