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Judgment
PER NAVEEN CHANDRA [ACCOUNTANT MEMBER]:
The above-captioned appeals are preferred by the assessee against the order dated 22.12.2025, passed by the Learned Commissioner of Income Tax (Appeals), Delhi - 25 (hereinafter referred to as 'Id. CIT(A)') under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), arising out of the following respective orders: - Assessment Year 2017-18: Assessment order dated 31.03.2024 passed by the Assessing Officer, DCIT, Central Circle-28, Delhi under Section 153C of the Act. - Assessment Year 2018-19: Assessment order dated 29.03.2024 passed by the Assessing Officer, DCIT, Central Circle-28, Delhi under Section 153C of the Act.
Since the above captioned appeals were heard together and the facts in issues are identical, both the appeals are being disposed of by this common order for the sake of convenience and brevity.
The grounds of appeal raised by the assessee in ITA No.655/Del/2026 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 are 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 31.03.2024 passed under Section 153C of the Act by the AO, 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 bad in law, as no incriminating material belonging to the Assessee and having a bearing 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 153C 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 (ACIT), 28(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 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 - 28 Delhi. who has passed the assessment order.
7.That, the assessment order dated 03.02.2024 passed under Section 153C of the Act by the Assessing Officer is illegal and bad 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.
8.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 I.T. 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.
9.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.
10.That in view of the facts and circumstances of the case, the CIT(A) vide order dated 22.12.2025 has erred in confirming the additions/disallowances made by the Assessing Officer.
11.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. 4,45,64,278/- as against the income of Rs. 6,12,940/- declared by the Assessee.
12.That, in view of the facts and circumstances of the case and in law, the necessary ingredients for invocation of Sections 69A of the Act are not present in the present case and as such the assessment framed under the said sections is illegal and bad in law and liable deserved to be deleted.
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. 1,37,19,165/- on account of alleged accommodation entry in lieu of unaccounted cash payment by invoking the provisions of section 69A of the Act.
14.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. 1,99,19,465/- on account of alleged accommodation entry in lieu of unaccounted cash payment by invoking the provisions of section 69A of the Act.
15.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. 10,80,785/- under section 69A of the Act by allegedly treating the payment received by the assessee as unexplained money.
16.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. 89,31,554/- under section 69A of the Act by allegedly treating the payment received by the assessee as unexplained money.
1.17. That, in view of the facts and circumstances of the case and in law, the necessary ingredients for invocation of Sections 69C of the Act are not present in the present case and as such the assessment framed under the said sections is illegal and bad in law and liable deserved to be deleted.
2.18. 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. 32,423/- 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.
3.19. 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. 10,80,785/- holding the same to be the commission paid by the assessee invoking the provisions of section 69C of the Income Tax Act.
4.20. 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. 2,67,946/- at the rate of 3% on the above addition of Rs. 89,31,554/- holding the same to be the commission paid by the assessee invoking the provisions of section 69C of the Income Tax Act.
5.21. 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.
6.22. 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.
7.23. That in view of the facts and circumstances of the case, the learned AO/CIT(A) 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.
8.24. 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.
9.25. That the additions/disallowance made by the Assessing Officer are unjust, illegal, arbitrary, bad in law, highly excessive, and based on surmise conjecture.
10.26. That in view of the facts and circumstances of the case, the learned AO has erred in initiating penalty proceedings under section 271AAC of the Act.
11.27. 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 grounds of appeal raised by the assessee in ITA No.656/Del/2026 are as under:
1.1. “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 are 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.
2.2. That the assessment order dated 29.03.2024 passed under Section 153C of the Act by the AO, and the additions made therein are illegal, bad in law, without jurisdiction, and not in accordance with the provisions of the Act.
3.3. That, in view of the facts and circumstances of the case, the proceedings initiated under section 153C of the Act are bad in law, as no incriminating material belonging to the Assessee and having a bearing on total income was found during the course of the search.
4.4. 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 153C of the Act are bad and liable to be quashed in the absence of any valid satisfaction being recorded as per law.
5.5. 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 (ACIT), 28(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).
6.6. 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 28 Delhi. who has passed the assessment order.
7.7. That, the assessment order dated 03.02.2024 passed under Section 153C of the Act by the Assessing Officer is illegal and bad 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.
8.8. 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 I.T. 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.
9.9. 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 crossexamination to rebut the same despite a specific request made by Assessee. 10.
10.10. That in view of the facts and circumstances of the case, the CIT(A) vide order dated 22.12.2025 has erred in confirming the additions/disallowances made by the Assessing Officer.
1.11. 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. 1,01,79,192/- as against the income of Rs. 4,75,010/- declared by the Assessee.
2.12. That, in view of the facts and circumstances of the case and in law, the necessary ingredients for invocation of Sections 69A of the Act are not present in the present case and as such the assessment framed under the said sections is illegal and bad in law and liable deserved to be deleted.
3.13. 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. 97,04,182/- on account of alleged accommodation entry in lieu of unaccounted cash payment by invoking the provisions of section 69A of the Act.
4.14. 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.
5.15. That in view of the facts and circumstances of the case, the learned AO/CIT(A) 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.
6.16. 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.
7.17. That the additions/disallowance made by the Assessing Officer are unjust, illegal, arbitrary, bad in law, highly excessive, and based on surmise conjecture.
8.18. That in view of the facts and circumstances of the case, the learned AO has erred in initiating penalty proceedings under section 271AAC of the Act.
9.19. *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.”
Brief facts of the case are that 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. Incriminating seized evidences found showed that Sh. Alok Agarwal has received and provided accommodation entries and also facilitated bogus short-term capital loss to set off long-term capital gains to various persons through several entities managed and controlled by him and his associates.
During the course of search and seizure operation carried out on 18.10.2019 at the premise of Sh. Alok K Agarwal, Ankit Agarwal, Alankit Limited and Alankit Assignments Limited, some incriminating documents were found from the premises in the name of the assessee, hence, case of the assessee was centralized to Central Circle-28, New Delhi. Thereafter, the assessee filed return of income on 12.02.2024 declaring income of Rs. 6,12,940/-. Further, notice u/s 142(1) of the Act was also issued to the assessee through on 06.03.2024 and after considering the reply of the assessee, assessment order was framed amounting to Rs.4,45,64,278/-.
Aggrieved, assessee was in appeal before the ld. CIT(A). The ld. CIT(A) dismissed the appeal of the assessee. Aggrieved, assessee is now in appeal before us.
Before us, learned Counsel for the assessee questioned the validity of satisfaction note u/s 153C being recorded mechanically. The ld AR further submitted that the DCIT, Central Circle - 28, New Delhi issued notice under section 153C dated 30.01.2024 before the order under section 127 centralizing the cases of the group with the Assessing Officer, DCIT, Central Circle - 28 and vehemently argued that at the point of issuing notice, the AO did not have the jurisdiction and therefore, the assessment was vitiated. The Id. Counsel also argued that there was unreasonable delay in commencement of proceedings under section 153C of the Act in the case of the assessee. It is stated that the search action under section 132 was carried out on Alankit Group on 18.10.2019 and the satisfaction note, for initiating proceedings under section 153C in the case of the assessee, was recorded on 14.06.2022 by DCIT, Central Circle-28, Delhi. However, the notice under section 153C of the Act was issued with a considerable delay on 30.01.2024, which is in violation of Hon. Supreme Court decision in the case of CIT vs. Calcutta Kniwears [2014] 43 taxmann.com 446 (SC) and the Hon. Gujarat High Court decision in the case of Virat Alloys (P.) Ltd. vs. Office of the ACIT [2026] 182 taxmann.com 105 (Guj.).
We have heard the rival submissions and perused the material available on record. The assessee has in ground no 3 and 4 has raised the issue of invalid proceedings initiated under section 153C of the Act as no incriminating material belonging to the Assessee which has a bearing on total income of the assessee, was found during the course of the search and there being absence of any valid satisfaction being recorded as per law.
For adjudicating the issues at hand, it would be relevant to reproduce the Satisfaction note dated 14.06.2022 recorded by the AO of the assessee, i.e., non-searched person as under:
Annexure
Satisfaction note for initiating proceedings u/s 153C of the Income Tax Act 1961 in the case of Vishal Jewels (PAN- AAAFV4941P)
1.A search and seizure operation was carried out in the Alankit Group of cases on 18.10.2019 subsequently the said group was centralized to the jurisdiction of the undersigned. Accordingly, during the course of assessment proceedings u/s 153A of Alankit Group, material/documents related to case of Vishal Jewels have been found.
2.Ledgers of Pradeep Kumar Gupta 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: F:\SKGR A-32\SUNIL KUMAR GUPTA HP LAPTOP\EXTRACTED DATA\Tally\root].\Local Disk\ANARKAL\BACKUP\DATA24\DATA24).
3.Further from the excel sheets and ledgers related to M/s Vishal Jewels, it is seen that various beneficiaries have cash transactions take is tabulated below.
Date Particulars Debit Credit Balance Opening Balance 0 0 0 23.08.2016 Pratishtha Ag Axis to Krishna Garg 2000000 -2000000 17.09.2016 Cash Recd 4500000 -6500000 22.09.2016 Newwave Axis to Alka ji to NPS 5000000 -1500000 23.09.2016 RTGS from Alka ji to KP Diamond (VM) 1459405 -40595 23.09.2016 RTGS from Sakshi ji to KP Diamond (VM) 472149 431554 01.10.2016 RTGS from Alka ji to Vishal Jewells 1013402 1444956 01.10.2016 RTGS from Alka ji to Vishal Jewells 13348 1458304 01.10.2016 RTGS from Sakshi ji to Vishal Jewells 54035 1512339 24.10.2016 Cash Paid to Vinod Maheshwari ji 2500000 4012339 09.11.2016 Cash Paid to Vinod Maheshwari ji 500000 4512339 09.11.2016 Cash Recd from Sir 4400000 112339 09.11.2016 Cash Recd from Sir 250000 -137661 09.11.2016 Cash Recd from Sir 100000 -237661 09.11.2016 Cash Recd from Alka ji 750000 -987661 28.11.2016 Cash paid to Sir (Rs.2000*38+Rs.100*500) 126000 -861661 02.12.2016 Cash paid to Ankit ji (Rs.2000*250) 500000 -361661 09.12.2016 Cash paid th. Goenka ji (Rs.2000 Note) 2000000 1638339 14.12.2016 Cash Recd (Rs.2K) 2000000 -361661 15.12.2016 Cash Paid (Rs.2K*5 Pkts+Rs.100*5Pkts) 1050000 688339 688339 688339 688339
70 688339 688339 688339 688339 688339 688339 688339 14688339 14000000 688339 Total Transactions during 09 Nov 2016 to 30 Dec 2016
Date Particulars Debit Credit Balance Opening Balance 0 0 0 09.11.2016 Cash Recd from Sir 4400000 -4400000 09.11.2016 Cash Recd from Sir 250000 -4650000 09.11.2016 Cash Recd from Sir 100000 -4750000 09.11.2016 Cash Recd from Sir 750000 -5500000 09.11.2016 Cash Recd from Alka ji 10.11.2016 Cash paid to Sir (Rs.100 Pkts) 60000 -5440000 10.11.2016 Cash paid to Sir 34000 -5406000 11.11.2016 Cash Recd from Sir 158500 -5564500 12.11.2016 Cash paid to Sir (Rs.100 Pkts) 50000 -5514500 14.11.2016 Cash Recd from Sir 35000 -5549500 14.11.2016 Cash paid to Sir (Rs.100 Pkts) 50000 -5499500 16.11.2016 Cash paid to Sir (Rs.100 Pkts) 50000 -5449500 17.11.2016 Cash paid to Sir (Rs.2000*1 Pkt+Rs.100-1 Pkt) 210000 -5239500 22.11.2016 Cash paid to RP Agarwal ji 105000 -5134500 25.11.2016 Cash paid to Mr. Sitesh 300000 -4834500 28.11.2016 Cash paid to Sir (Rs.2000*38+Rs.100*500) 126000 -4708500 28.11.2016 Cash paid to Sir (Rs.500*20) 10000 -4698500 29.11.2016 Cash Recd from Sir 20000 -4718500 01.12.2016 Cash Recd from Mr. Sitesh 100000 -4818500 02.12.2016 Cash paid to Ankit ji (Rs.2000*250) 500000 -4318500 05.12.2016 Mandir Cash (Sir+Alok & Co.) 57465 -4375965 05.12.2016 Cash paid to Sir 37000 -4338965 05.12.2016 Cash paid to Sir 6165 -4332800 05.12.2016 Cash paid to Sir th. Shri RK Bajaj 20000 -4312800 06.12.2016 Cash Recd from Sir (Rs.500 Notes) 11500 -4324300 08.12.2016 Cash deposited in Alok & Co. out of Mandir Cash 60000 -4264300 09.12.2016 Cash paid th. Goenka ji (Rs.2000 Note) 2000000 -2264300 09.12.2016 Cash Recd from Sir 37000 -2301300 14.12.2016 Cash Recd (Rs.2K) 2000000 -4301300 15.12.2016 Cash Paid (Rs.2K*S Pkts+Rs.100*5Pkts) 1050000 -3251300
24.12.2016 Cash paid to Sir 100000 -3151300 31.12.2016 Cash paid to Sir 50000 -3101300 12.01.2017 Cash paid to Sir 100000 -3001300 13.01.2017 Cash paid to Sir (New Pkts) 125000 -2876300 16.01.2017 Cash paid to Sir (Rs.2000*3Pkts+Rs.500*8 Pkts) 1000000 -1876300 16.02.2017 Cash paid to Ankit ji (Rs.500*20 Pkts) 1000000 -876300 13.06.2017 Cash Recd - Old Currency 3158000 -4034300 13.06.2017 Cash paid to Shri Pradeep ji Shalimar - Old 3158000 -876300 09.01.2018 Cash Recd from Sir 1422000 -2298300 09.01.2018 Cash Recd from Alka ji 1966182 -4264482 -4264482 -4264482 -4264482 -4264482 -4264482 -4264482 Total 10201165 14465647 4264482 *(+) To Recd (-) To Pay
4.The assessment proceedings are required to be taken u/s 153C of the Income Tax Act, 1961 as the warrant issued in the name of Sh. Alok Kumar Aggarwal, Sh. Ankit Aggarwal, M/s Alankit Ltd. and M/s Alankit Assignment.
A.Y. involved: A.Y. 2014-15 to A.Y. 2020-21.
Dated: 19/06/22 Place: New Delhi
From the reading of paragraph 3 and 4 of the above satisfaction note dated 14.06.2022, as recorded by the AO of the assessee, the non-searched person, we find that the AO has not properly recorded that the documents seized, pertains or any information contained therein, relates to the assessee, a person other than person searched. More importantly, the AO has not recorded that the seized material found during the course of search, have a bearing on determination of the total income of the assessee, as statutorily mandated in the provisions of section 153C of the Act. Consequently, we apply the decision of Hon’ble Delhi High Court in the case of Saksham Commodities Ltd. v. ITO (2024) 464 ITR 1/ 338 CTR 418/161 taxmann.com 485 (Delhi), which held as under:
“48.***However, the spectre of abatement insofar as the “other person” is concerned would arise only after the jurisdictional AO has formed the requisite satisfaction of the material having “a bearing on the determination of the total income of such other person” and having formed the opinion that proceedings under Section 153C are liable to be initiated.
50.What we seek to emphasise is that merely because Section 153C confers jurisdiction upon the AO to commence an exercise of assessment or reassessment for the block of years which are mentioned in that provision, the same alone would not be sufficient to justify steps in that direction being taken, unless the incriminating material so found is likely to have an impact on the total income of a particular AY forming part of the six AYs’ immediately preceding the AY pertaining to the search year or for the “relevant assessment year”.
In such facts and circumstances therefore, we hold that the satisfaction note is invalid which vitiates the assumption of jurisdiction u/s 153C of the Act. Consequently, the notice u/s 153C as well as order under section 153C is not sustainable in law. We, accordingly, quash the order under section 153C of the Act for both the years. The appeals are allowed in aforesaid terms.
In the result, both the appeals filed by the assessee in ITA Nos.655 & 656/Del/2026 are allowed.
Sd/- (SATBEER SINGH GODARA) JUDICIAL MEMBER
Sd/- (NAVEEN CHANDRA) ACCOUNTANT MEMBER