TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1097
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....eedings were initiated without there being any material found during an income-tax search conducted elsewhere pertaining to the assessee which could incriminate the appellant to initiate the proceedings u/s 153C of the Act. Thus, the impugned assessment order is void ab initio, lacks assumption of a competent lawful jurisdiction, and needs to be quashed at the threshold. 2. The CIT(A) erred in law and on facts in confirming the action of the AO (i) based on some WhatsApp chats, which cannot be considered as reliable information to initiate proceedings u/s 153C of the Act, much less to make any assessment u/s 153C/153A of the Act; and (ii) besides ignoring that the AO has failed to discharge his onus to support the allegation, as admittedly the impugned seized material does not demonstrate the same. Thus, the entire proceedings are bad in law and must be quashed. 3. The CIT(A) erred in law and on facts in not appreciating that the satisfaction u/s 153C of the Act needs to be based only on the information seized as it is and not on any post seizure enquiries conducted by any authority which is beyond the provisions of section 153C of the A....
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....no satisfaction notes u/s 153C of the Act could be recorded at all in the case of the assessee by any of the AOs as whose name nowhere figured in any material relied. Thus, the same must be quashed. 10. The CIT(A) erred in law and on facts in confirming the addition of Rs 65,99,00,000/- holding that the assessee had received cash loans, though from the very much identified entities/persons in the impugned seized material relied where names of the lenders, nature of the transactions and their capacity to lend money itself stood proved. Thus, no addition could be made in respect of those cash loans in any manner which transactions the Revenue itself has proved in the assessment order in favour of the assessee. Thus, the addition should be deleted. 11. The CIT(A) erred in law and on facts in confirming the invocation of the provisions of section 69A r.w.s. 115BBE of the Act in respect of those cash loans without understanding as to the situs of application of the section 69A of the Act which is not to be applied on seized documents but only on detection of valuable assets including money. Thus, the said addition must be deleted as is based on the incorrect appreciati....
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....the said conversation pertain about payment to be made to Shri Gulshan Nagpal. Shri Parveen Jain was confronted about this chat during the course of search and in response to Question No. 101, he stated that the said message is regarding payment of certain sum to Shri Gulshan Nagpal fro Shri Sanjeev Gupta. The relevant question and answer given by Shri Parveen Jain is reproduced below:- Q.No. 101. Please explain your chat dated 21.02.2020 with Sh. Sanjeev Gupta wherein you have forwarded: 'Bhai Ji, I would'nt have written you this message but please Gulshan ji ko 1/- dilwa do. Mujhe unse aage bhi kaam lena hai. Regards' Ans. This is message regarding payment of certain sum to Sh. Gulshan Nagpal from Sh. Sanjeev Gupta. In following message Sh.Sanjeev Gupta has confirmed receipt of this money as well. I can't say with certainty that it is cash transaction or bank transaction. The Statement is temporarily suspended at 11.45 pm on 08.01.2021 for rest. 5. Further the Learned AO noted that an image was found from the phone of Sh. Parveen Jain received from Sh. Vaibhav Jain titled as "Parveen Jain Intt A/c M/o Nove....
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.... channel clearly establishing the genuineness of the image and hisaab found on the phone seized during the course of search. Based on subsequent exchanges of whatsapp chats, the learned AO concluded that during the year under consideration, the assessee company had received amount of Rs 65,99,00,000/- in cash from various clients through broker Sh. Parveen K Jain and paid interest in cash amounting to Rs 4,78,14,240/- during the year under consideration. The assessee in reply to the show cause notice categorically denied all the allegations levelled thereon and stated that there was no receipt of any cash loans from any party to the tune of Rs 65.99 crores and categorically denied the payment of interest of Rs 4,78,14,240/- on loans out of the books. The assessee company requested the learned AO to supply the statement of the persons in whose case the search took place. The assessee also sought for cross examination of the deponents, who had deposed anything adverse to the assessee. It was categorically stated that the alleged documents reproduced in the show cause notice have got nothing to do with the assessee company. The learned AO noted that assessee company had requested for ....
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....an admissible evidence and placed reliance on the decision of Hon'ble Rajasthan High Court in the ccase of Giriraj Pugalia vs ACIT in Civil Writ Petition No. 3152 / 2025 dated 4-3-2025 in support of his contentions. The Learned DR on the issue of combined satisfaction note recorded by the Learned AO for Assessment Years 2015-16 to 2021-22 submitted that eventhough combined satisfaction note was recorded by the Learned AO, the observations made therein pertain only to Assessment Year 2020-21 (i.e. the year under consideration). 11. It is not in dispute that the WhatsApp chats were exchanged between Shri Parveen Jain and Shri Vaibhav Jain. It is not in dispute that in the said WhatsApp chats, only the name of Gulshan Ji was mentioned and the name of the assessee company i.e. Gulshan Homes and Infrastructure Private Limited was not mentioned at all. Hence we are unable to comprehend ourselves to accept to the proposition of the revenue that the said Whatsapp Chats pertain / belong / relate to the assessee company herein. Hence initiation of proceedings under section 153C of the Act on the assessee company is flawed on this material / evidence. 12. Further, handwritten sheet styl....
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....person should have exhausted the legal remedy available to him by confronting the said seized document with Shri Parveen Jain and bring on record cogent evidences as to how Shri Parveen Jain had rebutted such presumption of seized document as not belonging / pertaining / relating to him. After fulfilling this process only, the AO of the searched person could have legally recorded satisfaction note that the seized document does not belong / pertain / relate to Shri Parveen Jain and that it belongs / pertains / relates to the assessee company herein. The genesis of initiating proceedings under section 153C of the Act is just limited to the alleged incriminating material as it was detected with no if and buts and without any enquiry by the AO of the searched person in respect thereof as he did not have any jurisdiction to assess it and could not at all make any comments thereon. Thus, here the AO of the searched person exceeded the legal mandate and foreclosed the objective satisfaction on the part of the AO of another person by recording a definite finding that cash has been exchanged to supress unexplained investments. No addition whatsoever has been made in the hands of the assesse....
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....cause, as per the specific mandate of the section 153C of the Act, the AO of the searched person was only and only required to pass on the alleged seized material/ information without any comment by him thereon. He is not supposed to make any observations except that the said material / information pertains to the particular assessee. Not only this, para 2 of the assessment order states that satisfaction note was issued on perusal of the Appraisal Report which is an opinion of the Investigation wing and is totally irrelevant for this satisfaction note under section 153C of the Act as the same tantamount to a borrowed satisfaction and bad in law ab initio. Further, the cause of action is search in the case of Shri Parveen Jain, C-42 Preet Vihar Delhi and cloned data as per the Annexure A-5 of the Panchnama dated 10-1-2021 and any reference to any assessment proceedings, especially of Jainco Ltd is irrelevant and has no link with issuance of this satisfaction note in any manner. 14. We find that the observations made by the Hon'ble Jurisdictional High Court in the case of Saksham Commodities Ltd vs ITO reported in 161 taxmann.com 458 (Del HC) are very much relevant in this regard ....
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.... that the material received is likely to impact the computation of income for a particular AY or AYs' that may form part of the block of ten AYs'. Abatement would be triggered by the formation of that opinion rather than the other way around. This, in light of the discernibly distinguishable statutory regime underlying Sections 153A and 153C as explained above. While in the case of the former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to "have a bearing on the determination of the total income". It is only once an opinion in that regard is formed that the AO would be legally justified in issuin....
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.... 153C. The power to undertake such an assessment would stand confined to those years to which the material may relate or is likely to influence. Absent any material that may either cast a doubt on the estimation of total income for a particular year or years, the AO would not be justified in invoking its powers conferred by Section 153C. It would only be consequent to such satisfaction being reached that a notice would be liable to be issued and thus resulting in the abatement of pending proceedings and reopening of concluded assessments." (emphasis supplied by us) 14.1. Further we find that the revenue had preferred Special Leave Petition (SLP) before the Hon'ble Supreme Court against the aforesaid decision of Hon'ble Jurisdictional High Court. The SLP was dismissed in the case of ITO vs Saksham Commodities Ltd reported in 170 taxmann.com 87 (SC). The Head Notes and the full order are reproduced hereunder:- "Section 153C, read with section 153A, of the Income-tax Act, 1961 - Search and seizure - Assessment of any other person - Assessment year 2015-16 - High Court by impugned order held that section 153C would apply only to such Assessment Years where jurisdictional....
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....than the person searched, the AO of Shri Parveen Kumar Jain had categorically stated that from the iPhone seized from Shri Parveen Kumar Jain, the contents written thereon pertain to Gulshan Homes and Infrastructure Private Limited reflecting unaccounted receipts on sale of property / advance and unexplained interest expenses as cash advance. In the said proforma, the AO of the searched person had also observed that Shri Parveen Kumar Jain had helped many persons including renowned builders in getting cash loans, purchase of property partly in cash and partly through cheque which was evident from the WhatsApp chat and images found in his mobile. It is pertinent to note that the AO of the searched person had recorded the satisfaction by making factual observations because only Gulshan Ji was mentioned in the WhatsApp chat and Gulshan Homes and Infrastructure Private Limited (assessee herein) name does not figure anywhere in the seized documents from iPhone mobile of Shri Parveen Kumar Jain. Accordingly, it could be seen that the AO of the searched person had indeed recorded factually incorrect satisfaction note while forwarding the same to the Learned AO of the assessee herein. This....
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....t Years, which also vitiates the entire assessment proceedings. In view of all these findings, it is said that the appeals do not have any substance for seeking intervention as sought for by the appellant/Revenue. 17.1. We find that the Special Leave Petition filed by the revenue before the Hon'ble Supreme Court against the aforesaid judgement was dismissed which is reported in 165 taxmann.com 846 (SC). The relevant portion of the Head Notes and the order of Hon'ble Apex Court is reproduced hereunder:- "Section 153C, read with sections 132, 153 and 153A, of the Incometax Act, 1961 - Search and seizure - Assessment of any other persons (General principles) - Assessment years 2012-13 to 2018-19 - High Court held that satisfaction note is required to be recorded under section 153C for each assessment year and where a consolidated satisfaction note had been recorded for different assessment years, it would vitiate entire assessment proceedings - Whether SLP filed against impugned order of High Court was to be dismissed - Held, yes [Para 3] [In favour of assessee] ORDER 1. Delay condoned. 2. Heard the learned Senior Counsel appearing for the appell....
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....teworthy, the name of the assessee was not at all appearing in any seized material. The ld. Counsel further elaborated that the revenue has relied on a WhatsApp chat between Mr Praveen Jain and Mr Sanjeev Gupta as is mentioned in para 4.1 of the assessment order, where Mr Praveen Jain was requesting Mr Sanjeev Gupta to arrange 1/- for some Gulshan ji and not at all for the assessee company. This even does not say what is 1/- or whether it was arranged or not. It also does not at all mention whether it was cheque amount or cash amount. It is also not known whether the same was to be given only to which Gulshan ji (as the name of the assessee is conspicuously absent therein and no presumption at all could be derived that it belonging to the assessee) as loan in cash or for some property to be purchased by Mr Sanjeev Gupta from the assessee or from some other entity belonging to the group of Shri Gulshan Nagpal, if at all, it was he. However, on confrontation by the revenue officer, Mr Sanjeev Gupta categorically stated that he did not know whether it was bank or cash. 19. The Learned AR then submitted that after receipt of the material from the AO of the searched person, the Learn....
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.... material handed over by the AO of the searched person without any reference to any other information or document even if in his possession received from any source. The satisfaction note based upon the appraisal report, data on Insight Portal regarding TDS of third parties, statements of Shri Gulshan Nagpal etc and therefore, is legally untenable and void ab initio. Moreover, this is not a satisfaction note to initiate any proceedings under section 153C of the Act but conclusions regarding undisclosed income drawn in a firm language. The Hon'ble Supreme Court in Oryx Fisheries Pvt Ltd in Civil Appeal No. of 2010 (Arising out of Special Leave Petition (C) No.27615/08) on 29-10-2010 has held that:- "28. It is no doubt true that at the stage of show cause, the person proceeded against must be told the charges against him so that he can take his defence and prove his innocence. It is obvious that at that stage the authority issuing the charge- sheet, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. If that is done, as has been done in this instant case, the entire proceeding initiated by the show cause notice gets vitiat....
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....hey are left open. 23. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 30/09/2025. ============= Document 1 Praveen Jain A/C S.no Name Loan Amt. Intt. Amt. B C Total B Total C 1 Sita Gupta 90.00 610.00 700.00 1.800 C 5.400 7.200 2 Sanjeev Kumar Gupta 400.00 1,525.00 1,925.00 8.000 7.000 15.000 3 Ashok Jain 20.00 73.00 93.00 0.400 0.530 0.930 4 Krishan Kumar Gupta® 10:00 160.00 170:00 1.700 1.700 5 Sanjay Gupta 360.00 360.00 3.600 3.600 6 Sulekh Chand Singhal 45.00 2,245.00 2,291.00 0.450 1.800 2.250 7 Mama -200.00 200.00 2.00 .2.00 8 Seema Jain 900.00 900.00 11.250 11.250 9 Sanjeev Gupta 525.00 525.00 6,562 6.562 Total Amt. 565.00 6,599,00 7,164.00 10.65 39,84 50.49 C 5.400 Document 2 Distinct TAN Party PAN Party Nome Taxpayer Type Last ITE filed by parte 15-1944 1 AAACIO/ 235 IM FINANCIAL CREDIT SOLUTIONS LIMITED PƯƯỚC LAMBEU 32 241115195 00 14171525 00 2010.90 ETOS-1944 1 SHEKHAR KAILASH INFRATECH LLP (INTERES LEP 7 9600000.00 060000.00 2019-20 105-1944 1 AAAÇA 1950G Aalıntı Pulishers PM. Lid - Isbergs! P....