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Judgment
The above captioned appeals in ITA Nos. 2747, 2748, 2775 & 2776/Del/2025 are preferred by the assessees against the order dated 25.01.2024 & 29.01.2024, passed by Ld. CIT(A)-29, New Delhi and as many appeals in ITA Nos. 2572 & 2649/Del/2025 are preferred by the assessee against the order dated 14.02.2025 & 18.02.2025, passed by Ld. CIT(A)-31, Delhi u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for A.Y. 2010-11, respectively.
The assessees has raised following grounds of appeal:
ITA No. 2572/Del/2025
1.That the Appellant denies his liability to be assessed at total income of Rs.5,74,71,390/- as against the returned income of Rs. 15,25,410/- and accordingly denies his liability to pay tax, interest, cess and surcharge demanded thereon.
2.That having regard to the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) [‘Ld. CIT(A)’] has erred in law and on facts in confirming the action of Ld. Assessing Officer [‘Ld. AO’] in framing the impugned assessment order under section 153 A of the Act and that too without assuming jurisdiction as per law and without obtaining valid approval as prescribed under law for passing the impugned assessment order.
3.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law in not quashing the assessment order on the ground that no valid prior approval as prescribed under section 153D of the Act was received by the Ld. AO and in any case purported approval was without proper application of mind and therefore the impugned assessment order is invalid.
4.That having regard to the facts and circumstances of the case and in law, the action of Ld. CIT(A), in upholding the addition of Rs.3,91,65,937/- on account of profit from sale of agricultural land and that too by treating the same as business income and without providing the benefit of cost of acquisition, is bad in law and against the facts and circumstances of the case and deserves to be quashed.
5.That having regard to the facts and circumstances of the case and in law, the action of Ld. CIT(A) in upholding the addition of Rs.35,36,500/- on account of various land parcels purchased treating the same as unexplained investment under section 69 of the Act in complete disregard of the fact that no incriminating material was found as a result of search and no benefit of cost of acquisition has been provided, is bad in law and against the facts and circumstances of the case and deserves to be deleted.
6.That having regard to the facts and circumstances of the case in law, the action of Ld. CIT(A) in confirming the addition of Rs. 1,00,36,717/- on account of unexplained money under section 69A of the Act credited in bank accounts of the Appellant as per para 6.3 and 6.4 of the order, is bad in law and against the facts and circumstances of the case and deserves to be quashed.
7.That having regard to the facts and circumstances of the case in law, the action of Ld. CHYA) in upholding the addition of Rs.21,70,000/- claimed as exempt agricultural income more so when no incriminating material was found as a result of search, is bad in law and against the facts and circumstances of the case and deserves to be deleted.
8.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the disallowance of commission expenses of Rs.5,21,000/- more so when no incriminating material was found as a result of search.
9.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the ad-hoc addition of interest income of Rs.85,480/- on loan advanced to parties that too without any cogent material on record and without providing an adequate opportunity of being heard.
10.That having regard to the facts and circumstances of the case, Ld. CTH(A) has erred in law and on facts in upholding the addition of deduction claimed under Chapter VI amounting to Rs. 1,04,311/- that too without providing sufficient opportunity of being heard and by recording incorrect facts and findings, and accordingly the action of Ld. CIT(A) is legally and factually incorrect and deserves to be deleted.
11.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the addition of deduction of Rs.2,74,457/- claimed under section 24(a) of the Act and deduction of Rs.51,488/- claimed under section 24(b) of the Act (aggregating to Rs. 3,26,035/-) under the head "Income from House Property"1 that too without providing sufficient opportunity of being heard and by recording incorrect facts and findings.
12.That having regard to the facts and circumstances of the case, Ld. CIT(A) has failed to appreciate that the addition cannot not be initiated only on the basis of statement recorded during the course of search proceedings.
13.That in any case and without prejudice to the above grounds, additions made in the impugned order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search warranting impugned addition.
14.That in any case and in any view of the matter, action of Ld. CIT(A) in upholding the impugned order passed by Ld. AO, while completely ignoring the detailed explanation filed by the Appellant, is in complete violation of the principles of natural justice.
15.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest under sections 234A, 234B, 234C and 234D of the Income Tax Act, 1961."
ITA No. 2775/Del/2025
"1.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the penalty of Rs. 1,50,000/- under section 271B of the Income Tax Act, 1961.
2.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has further erred in law and on facts in confirming the action of Ld. AO in imposing penalty of Rs. 1,50,000/- and that too without assuming jurisdiction as per law and the impugned penalty order being illegal and void-ab-intio.
3.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the impugned penalty order passed by the Ld. AO under section 27 IB of the Act on the ground that the assessee has failed to get his accounts audited as required under the provisions of the Act, and has further erred in considering the sale proceeds of rural agricultural land amounting to Rs. 3,91,65,937/- as income, from business and profession, without appreciating the facts, submissions, and legal position of the case.
4.That having regard to the facts and circumstances of the case, Ld. CIT(A) has failed to appreciate that the sale of rural agricultural land does not fall within the ambit of business and profession' under the Act, and therefore, the provisions of section 44AB requiring audit of accounts are not applicable in the facts and circumstances of the case.
5.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. AO in passing the impugned penalty order, which is bad in law, beyond jurisdiction, and void ab initio, as the assessment order framed under section 153A dated 31.03.2022 itself is bad in law; and further erred in mechanically imposing the penalty solely on the basis of the findings recorded in the said assessment order without independent application of mind.
6.That in any view of the matter and in any case, the action of the Ld. CIT(A) in confirming the penalty of Rs. 1,50,000/- imposed under section 271B is bad in law, illegal, beyond jurisdiction, contrary to the principles of natural justice, based on incorrect facts and findings, and is otherwise unsustainable both on legal and factual grounds.
7.The Ld. AO has grossly erred on the facts and in the circumstances of the case and in law in passing the penalty order under section 271B of the Act, without taking note of the fact that section 27 IB itself was not applicable to the Appellant."
ITA No. 2776/Del/2025
'1. That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the penalty of Rs. 25,000/- imposed under section 271A of the Income Tax Act, 1961.
2.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has further erred in law and on facts in confirming the impugned penalty imposed under section 271 A, which is bad in law and void ab initio, without proper assumption of jurisdiction and without appreciating the facts and circumstances of the case.
3.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the penalty imposed by the Ld. AO under section 271A of the Act on the ground that the assessee has not maintained books of accounts as required under the provisions of the Act, without appreciating the facts and explanations submitted by the assessee.
4.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has further erred in law and on facts in confirming the action of Ld. AO in passing the impugned penalty order being contrary to the law as the assessment order framed under section 153A dated 31.03.2022 is also bad in law and is beyond jurisdiction and void-ab-intio.
5.That having regards to the facts and circumstances of the case, the Ld. CIT(A) has further erred in law and on facts in confirming the action of Ld. AO in mechanically imposing the penalty on the basis of the findings of the assessment order dated 31.03.2022 under section 15 3A of the Act.
6.That in any view of the matter and in any case, the action of the Ld. CTT(A) in confirming the penalty of Rs. 25,000/- imposed u/s 271A is bad in law, illegal, beyond jurisdiction, contrary to the principles of natural justice, based on incorrect facts and findings, and is otherwise unsustainable both on legal and factual grounds."
ITA No. 2649/Del/2025
"1.That the Appellant denies his liability to be assessed at total income of Rs. 4,66,37,086/- as against the returned income of Rs. 3,00,070/- and accordingly denies his liability to pay tax, interest, cess and surcharge demanded thereon.
2.That having regard to the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) ['Ld. CIT(A)'] has erred in law and on facts in confirming the action of Ld. Assessing Officer ['Ld. AO'] in framing the impugned assessment order under section 153 A of the Act and that too without assuming jurisdiction as per law and without obtaining valid approval as prescribed under law for passing the impugned assessment order.
3.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law in not quashing the assessment order on the ground that no valid prior approval as prescribed under section 153D of the Act was received by the Ld. AO and in any case purported approval was without proper application of mind and therefore the impugned assessment order is invalid.
4.That having regard to the facts and circumstances of the case and in law, the action of Ld. CIT(A), in upholding the addition of Rs. 2,28,12,500/- on account of profit from sale of agricultural land and that too by treating the same as business income and without providing the benefit of cost of acquisition, is bad in law and against the facts and circumstances of the case and deserves to be quashed.
5.That having regard to the facts and circumstances of the case in law, the action of Ld. CIT(A) in confirming the addition of Rs. 2,33,96,104/- on account of unexplained money under section 69A of the Act credited in bank accounts of the Appellant, is bad in law and against the facts and circumstances of the case and deserves to be quashed.
6.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the addition of deduction of Rs. 1,28,412/- claimed under section 24(a) of the Act under the head "Income from House Property" that too by recording incorrect facts and findings.
7.That having regard to the facts and circumstances of the case, Ld. CIT(A) has failed to appreciate that the addition cannot not be initiated only on the basis of statement recorded during the course of search proceedings.
8.That in any case and without prejudice to the above grounds, additions made in the impugned order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search warranting impugned addition.
9.That in any case and in any view of the matter, action of Ld. CIT(A) in upholding the impugned order passed by Ld. AO, while completely ignoring the detailed explanation filed by the Appellant, is in complete violation of the principles of natural justice.
11.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest under sections 234A, 234B, 234C and 234D of the Income Tax Act, 1961."
ITA No. 2747/Del/2025
1.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the penalty of Rs. 25,000/- imposed under section 271A of the Income Tax Act, 1961.
2.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has further erred in law and on facts in confirming the impugned penalty imposed under section 271 A, which is bad in law and void ab initio, without proper assumption of jurisdiction and without appreciating the facts and circumstances of the case.
3.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the penalty imposed by the Ld. AO under section 271A of the Act on the ground that the assessee has not maintained books of accounts as required under the provisions of the Act, without appreciating the facts and explanations submitted by the assessee.
4.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has further erred in law and on facts in confirming the action of Ld. AO in passing the impugned penalty order being contrary to the law as the assessment order framed under section 153A dated 31.03.2022 is also bad in law and is beyond jurisdiction and void-ab-intio.
5.That having regards to the facts and circumstances of the case, the Ld. CIT(A) has further erred in law and on facts in confirming the action of Ld. AO in mechanically imposing the penalty on the basis of the findings of the assessment order dated 31.03.2022 under section 15 3A of the Act.
6.That in any view of the matter and in any case, the action of the Ld. CIT(A) in confirming the penalty of Rs. 25,000/- imposed u/s 271A is bad in law, illegal, beyond jurisdiction, contrary to the principles of natural justice, based on incorrect facts and findings, and is otherwise unsustainable both on legal and factual grounds."
ITA No. 2748/Del/2025
"1.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the penalty of Rs. Rs. 1,14,062/- under section 27 IB of the Income Tax Act, 1961.
2.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has further erred in law and on facts in confirming the action of Ld. AO in imposing penalty of Rs. Rs. 1,14,062/- and that too without assuming jurisdiction as per law and the impugned penalty order being illegal and void-ab-intio.
3.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the impugned penalty order passed by the Ld. AO under section 27IB of the Act on the ground that the assessee has failed to get his accounts audited as required under the provisions of the Act. and has further erred in considering the sale proceeds of rural agricultural land amounting to Rs. 2,28,12,500/- as income from business and profession, without appreciating the facts, submissions, and legal position of the case.
4.That having regard to the facts and circumstances of the case, Ld. CIT(A) has failed to appreciate that the sale of rural agricultural land does not fall within the ambit of 'business and profession' under the Act, and therefore, the provisions of section 44AB requiring audit of accounts are not applicable in the facts and circumstances of the case.
5.That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. AO in passing the impugned penalty order, which is bad in law, beyond jurisdiction, and void ab initio, as the assessment order framed under section 153A dated 31.03.2022 itself is bad in law; and further erred in mechanically imposing the penalty solely on the basis of the findings recorded in the said assessment order without independent application of mind.
6.That in any view of the matter and in any case, the action of the Ld. CIT(A) in confirming the penalty of Rs. 1,14,062/- imposed under section 27IB is bad in law, illegal, beyond jurisdiction, contrary to the principles of natural justice, based on incorrect facts and findings, and is otherwise unsustainable both on legal and factual grounds.
7.The Ld. AO has grossly erred on the facts and in the circumstances of the case and in law in passing the penalty order under section 27IB of the Act, without taking note of the fact that section 27IB itself was not applicable to the Appellant."
ITA No. 2572/Del/2025
Brief facts are that search and seizure operations were conducted on Sh. Mahesh Nagar and his associates on 04.03.2020. Last warrant of authorization was executed in assessee's case on 05.11.2020. Thereafter, the case was centralized and notice u/s 153A was issued on 24.08.2021 requiring the assessee to file return of income for A.Y. 2010-11 bearing one of the ten assessment years preceding the A.Y. in which search was conducted.
Original return in his case was filed on 15.03.2011 declaring income of Rs.15,25,410/-. In response to notice u/s 153A dated 24.08.2021 no return was filed. However, subsequently in response to notice u/s 142(1), the assessee filed return on 03.02.2022 declaring income of Rs.15,25,410/-. Subsequently, assessment was completed at an income of Rs.5,74,71,390/- vide order u/s 153A dated 31.03.2022. Aggrieved, the assessee filed appeal before Id. CIT(A), who dismissed the same vide order dated 18.02.2025. Further aggrieved, the assessee has filed an appeal before the Tribunal.
At the outset, Id. AR has submitted that the impugned assessment year is outside the block period of 10 assessment years. Since, the A.Y. relevant to search in A.Y. 2021-22, the period of 10 years commences from A.Y. 2011-12 and thus the proceedings u/s 153A for A.Y. 2010-11 are illegal and liable to be quashed. Ld. AR has placed reliance on the decision of the Hon’ble jurisdictional High Court in the case of PCIT vs. Ojjus Medicare Pvt. Ltd. (2024) 465 ITR 101 (Del.) whereby, the issue regarding assessment year relevant to search year and method of counting the 10 years block period has been decided as under:
“84.As would be evident from the above, although the decisions in Sarwar Agency and RRJ Securities were cited, the learned Judge chose to observe that the section 153C(1) Proviso would only be liable to be construed as relevant for the purposes of abatement. We find ourselves unable to sustain that line of reasoning since both Sarwar Agency as well as RRJ Securities have struck a line which is in consonance with the view taken in SSP Aviation and which has since come to be affirmed by the Supreme Court in Jasjit Singh. In any case, the law as enunciated in RKM Powergen would not sustain bearing in mind the express enunciation of the legal position by the Supreme Court as is manifest from a reading of paragraph 9 of Jasjit Singh.
85...
86...
87...
88.Section 153A replicates the basis on which the six AYs’ are to be identified and computed with the solitary distinction being that in the case of the searched person, the six AYs’ are liable to be computed from the AY pertaining to the FY in which the search was conducted. The starting point for the purposes of identifying the six AYs’ in the case of section 153A would thus turn upon the year of search as opposed to the handover of material which is spoken of in the First Proviso to section 153C. If one were to therefore assume that a search took place on a person between 01 April 2021 to 31 March 2022, the pertinent AY would become AY 2022-23 and the corresponding six AYs’ would be as follows:-
Computation of the six-year block period as provided under section 153C of the Act No. of years AY 2021-22 1 AY 2020-21 2 AY 2019-20 3 AY 2018-19 4 AY 2017-18 5 AY 2016-17 6 89.That takes us then to the issue of identifying the "relevant assessment year" for the purposes of computing the ten year block. Explanation 1 to section 153A specifies the manner in which the entire ten AY period is to be computed. While the computation of six AYs' follows the position as enunciated and identified above, Explanation 1 prescribes that the ten AYs' would have to be computed from the end of the AY relevant to the FY in which the search was conducted or requisition made. The ten AY period consequently is to be reckoned from the end of the AY pertaining to the previous year in which the search was conducted as distinct from the preceding year which is spoken of in the case of the six relevant AYs'.
90.Viewed in that light, and while keeping the period of 01 April 2021 to 31 March 2022 as the constant, the relevant AY would be AY 2022-23. The ten AYs' would have to be computed from 31 March 2023 with the said date indubitably constituting the end of the AY relevant to the previous year of search. Viewed in light of the above, the block period of 10 AYs' would be as follows:-
Computation of the ten-year block period as provided under section 153C read with section 153A of the Act No. of years AY 2022-23 1 AY 2021-22 2 AY 2020-21 3 AY 2019-20 4 AY 2018-19 5 AY 2017-18 6 AY 2016-17 7 AY 2015-16 8 AY 2014-15 9 AY 2013-14 10 She has, therefore, argued that the proceedings u/s 153A being invalid, the impugned order deserves to be quashed.
Ld. AR, on the other hand has submitted a written request for adjournment on the ground that the Revenue is in the process of appointing a special counsel in these group cases.
We have heard the rival submissions. We note that at the time of last hearing on 13.01.2026, final opportunity was given to the Revenue to appoint the special counsel before the next date of hearing and it was made clear that no further opportunity for this purpose would be given. Moreover, we note that the issue raised by the assessee is purely legal and therefore the same is being decided in the light of relevant provisions of the Act and the decision of the Hon’ble jurisdictional High Court in the case of PCIT vs. Ojjus Medicare Pvt. Ltd. (supra).
Admittedly, the search u/s 132 was conducted on 04.03.2020 and the last warrant of authorization was executed on 05.11.2020. Notice u/s 153A was issued to the assessee for the ten preceding assessment years on 24.08.2021. We note that in terms of the provisions of section 153A as interpreted in the case of PCIT vs. Ojjus Medicare Pvt. Ltd. (supra), the period of 10 assessment years is to be counted backwards from A.Y. 2020-21. Thus A.Y. 2010-11 would clearly fall outside the block of ten assessment years. Accordingly, we hold that the notice u/s 153A being invalid, the assessment proceedings are liable to be quashed.
Since the notice u/s 153A and consequent assessment order have been quashed, the other grounds raised by the assessee are rendered academic and hence not being adjudicated upon. In the result, the appeal ITA No. 2572/Del/2025 is allowed.
The remaining two appeals ITA Nos. 2775/Del/2025 and ITA No. 2776/Del/2025 filed by the assessee relate to penalty levied u/s 271B and u/s 271A, respectively.
ITA No. 2775/Del/2025 pertains to penalty u/s 271B of Rs.1,50,000/- for A.Y. 2010-11 after considering the sale proceeds of land amounting to Rs.3,91,65,937/- as income from business and profession and thereafter holding that assessee was required to get his accounts audited. Since the assessment order for A.Y. 2010-11 has been quashed, the penalty u/s 271B imposed on its basis is also liable to be quashed.
Similarly, in the ITA No. 2776/Del/2025, the assessee has challenged the levy of penalty of Rs.25,000/- u/s 271A for non-maintenance of books of a/c for A.Y. 2010-11. For identical reasons as in ITA No. 2775/Del/2025, we hereby quash the penalty u/s 271A of the Act.
In the result, all the three appeals i.e. ITA Nos. 2572, 2775 & 2776/Del/2025 of the assessee are hereby allowed.
The another three appeals i.e. ITA No. 2649, 2747 & 2748/Del/2025 by Smt. Rekha Nagar also pertains to assessment u/s 153A for A.Y. 2010-11 as well as levy of penalties u/s 271A and 271B, respectively.
Since the facts and circumstances in these appeals are identical, the above decisions will apply mutatis mutandis in these cases as well.
In the result, these three appeals of the assessee Smt. Rekhas Nagar are hereby allowed.