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Judgment
PER MANISH AGARWAL, AM :
The present appeal is filed by the assessee against the order dated 14.07.2025 by Ld. Commissioner of Income Tax (A), Delhi-31 [“Ld.CIT(A)”] in Appeal No. CIT(A), Delhi-8/10152/2018-19 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 08.12.2018 passed u/s 153C/143(3) of the Act pertaining to Assessment Year 2012-13.
Brief facts of the case are that the assessee company has e-filed its return of income on 30.09.2012, declaring income of INR 12,85,810/-. The assessee company is engaged in the business of manufacturers, importers and exporters, wholesale and retail dealers of men’s, women’s and children clothing and wearing apparel of every kind. A search and seizure operation was carried out in the case of Tirupati Sunworld Group of companies on 11.11.2014. During the course of search, it was found that Tirupati Sunworld Group of companies are engaged in huge generation of cash in their real estate and other businesses. Thereafter, notice u/s 153C r.w.s. 153A issued to the assessee company on 30.03.2018. The assessee company filed return of income on 04.04.2018, declaring income of INR 12,85,810/-. Thereafter notice u/s 143(2) followed by statutory notices u/s 142(1) were issued. After considering the submission of the assessee, income of the assessee was assessed at INR 22,85,810/- vide assessment order dated 08.12.2018 passed u/s 153C/143(3) of the Act.
Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 14.07.2025, dismissed the appeal of the assessee.
Aggrieved by the order of Ld.CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:-
“The appellant respectfully submits the following grounds of appeal against the order passed by the Learned Commissioner of Income Tax (Appeals)-31, dated 14.07.2025, for the Assessment Year 2012-13:
1.Issue of notice u/s 153C r.w.s 153A is bad as there is no incriminating material for issue of notice for AY 2012-13. Only one satisfaction have been recorded and the documents seized are from the regular book of accounts of the assessee and there is no incriminating documents.
2.The CIT(A) -31 has erred on law and facts of the case by confirming addition of Rs 10,00,000 on account of advance given to M/s Image Dresses Pvt Ltd on 20.07.2011 through cheque no 287516 in the absence of any incriminating material.”
Before us, Ld.AR submits that the provision of section 153C of the Act were initiated in the case of the assessee on the basis of the documents allegedly found and seized during the course of search of Tirupati Group on 11.11.2014. Ld.AR submits that from the perusal of the assessment order, it is evident that additions were made on account of advance given to M/s. Image Dresses Pvt. Ltd. which is duly recorded in the regular books of accounts of assessee company and no reference of any seized material is made by the AO for holding that the advance given to M/s. Image Dresses Pvt. Ltd. is bogus entry. Ld. AR further submits that said transaction once recorded in the books of accounts cannot be held as incriminating material. Further, reliance is placed on the judgement of Hon’ble Delhi High Court in the case of RRJ Securities Ltd. reported in 128 DTR 57 (Del.) and also on the judgement of Hon’ble Supreme Court in the case of PCIT v. Abhisar Buildwell P. Ltd. (2023) reported in 454 ITR 212 (SC) and on the judgment of Hon’ble Delhi High Court in the case of Kabul Chawla reported in (2016) 380 ITR 573 (Del).
Ld. AR for the assessee also drew our attention to the satisfaction note recorded for initiating the proceedings u/s 153C of the Act wherein a reference is made of the ledger account of the assessee in the books of M/s. Image Dresses Pvt. Ltd. seized during the search which is part of the regular transaction and therefore, submits that satisfaction recorded in the case of the assessee is not based on any incriminating material and thus incorrect satisfaction. Ld. AR thus, prayed that no addition could be made dehorse the incriminating material and requested for quashing the order passed by the AO.
On the other hand, Ld.CIT DR for the Revenue submits that in the satisfaction note that a reference of the ledger account of assessee in the book of M/s. Image Dresses Pvt. Ltd. is made which constitute incriminating material based on which satisfaction was recorded by the AO of the assessee. Therefore, it is requested that proceedings have rightly been initiated in the case of the assessee u/s 153C of the Act and prayed for the confirmation of the same.
Heard the contentions of both the parties at length and perused the material available on record. At the outset, from the assessment order, it is seen that AO has reproduced the copy of the ledger account of the assessee as appearing in the books of accounts of M/s. Image Dresses Pvt. Ltd. which is alleged as the incriminating material by the lower authorities. The said ledger account clearly shows that it is part of the regular books of accounts and the payments of INR 10 Lakhs was made by the assessee for supply of material through banking channel which is also verifiable from the Bank accounts of both the companies. Except this Ledger account, no incriminating material whatsoever was brought on record beside alleging the company M/s. Image Dresses Pvt. Ltd. had not carried out any business activity in the year under consideration therefore, such advance is bogus. However, the fact remained that in the Assessment proceedings u/s 153C/153A, no addition could be made without referring to any incriminating material found/seized in the case of the assessee or in the case of third party and satisfaction must be recorded that such incriminating material pertained to the assessee.
As observed above, expect the ledger account of the assessee appearing in the books of accounts of M/s. Image Dresses Pvt. Ltd., no other material which could be terms as incriminating material was found/seized nor referred in the assessment order therefore, no addition could be made in the case of the assessee u/s 153C of the Act dehorse the incriminating material.
Hon’ble Supreme Court in the case of PCIT vs Abhisar Buildwell (P.) Ltd. supra) has held as under:-
"14.In view of the above and for the reasons stated above, it is concluded as under:
i)that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A;
ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and
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."
In the light of the above discussion and by respectfully following the judgement of Hon’ble Supreme Court in the case of the Abhisar Buildwell (Supra), the order passed u/s 153C of the Act without referring to any incriminating material is hereby, held as invalid and accordingly, the same is quashed. Ground of appeal No.1 raised by the assessee is thus allowed.
Since we have already allowed Ground of appeal No.1 raised by the assessee, the other Grounds of appeal raised by the assessee became academic hence, not adjudicated.
In the result, the appeal of the assessee is allowed.