TaxTMI 
TaxTMI 
2026 (1) TMI 1567
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....ake of convenience. 3. With the consent of both the parties, the appeal of the assessee in the case of Mr. Vidur Chharia Vs. ACIT in ITA No. 209/Del/2025 for AY 2017-18 is taken up for adjudication first. 4. The assessee has raised the following grounds:- 1. Because learned ld. Commissioner of Income Tax (Appeals) further erred in upholding the validity of notice and u/s 153C as:- a. Notice u/s 153C is based on consolidated satisfaction note for AY 2014-15 to AY 2020-21 contrary to law of land as pronounced by apex court. b. Notice u/s 153C is issued beyond the parameters of that provisions whereby neither ld. AO had any seized material which could have any bearing on the income of the assessee nor he demonstrated so thus notice is without requisite satisfaction. c. Notice is based on satisfaction note not bearing any DIN as mandated. 2. Because notice u/s 153C is void ab initio thus, assessment proceedings and consequent order is illegal as a. No satisfaction note/ notice u/s 153C is issued by JAO to whom the seized material was handed over i.e. DCIT, Cir-2(1)(1), GZb in terms of Section 153C(1) of the Act. ....
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....ds go to the root of the matter and are purely legal in nature and the facts relevant for its adjudication are already on record, hence, these additional grounds are admitted and taken up for adjudication along with original grounds. 6. The ld. AR before us stated that Ground Nos. 1(c) and 2(b) are not pressed by the assessee for which necessary endorsement has duly been made in our file. Accordingly, Ground Nos. 1(c) and 2(b) are hereby dismissed as not pressed. 7. We have heard the rival submissions and perused the material available on record. The return of income for AY 2017-18 was filed by the assessee declaring total income of Rs.21,34,900/- on 24/07/2017. A search and seizure action u/s 132 of the Act was conducted on 18.10.2019 in the case of Alankit Group. According to the revenue, various incriminating materials belonging to the assessee were found and seized. Subsequently, the case of the assessee was centralized and proceedings u/s 153C of the Act were initiated on the assessee herein. Satisfaction note for initiating proceedings u/s 153C of the Act was recorded for AYs 2014-15 to 2020-21 on 26.06.2022 by the Assessing Officer of the searched person. The....
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....ssed to income tax by DCIT, Circle-2(1)(1), Ghaziabad, who was the Jurisdictional Assessing Officer (JAO) of the assessee. b. The regular return of income for AY 2017-18 was filed by the assessee with JAO. c. The assessee had borrowed loans of Rs.70 lakhs from DCPL and repaid the same with interest of Rs.5,35,932 to DCPL during the FY 2016-17 relevant to AY 2017-18. d. The loans were borrowed through regular banking channels and repaid through regular banking channels. e. The regular assessment was completed u/s 143(3) of the Act for AY 2017-18 on 19.12.2019, determining the total income at Rs.36,61,566/- after making an addition of Rs.15,26,666/- on account of loan transaction from Mr. Rakesh Chharia. It is pertinent to note that while framing this scrutiny assessment, the loan received by the assessee from DCPL was duly subjected to examination and enquiries by the AO and the ld. AO was convinced about the same and accepted the loan from DCPL as genuine to have fulfilled all the three necessary ingredients of Section 68 of the Act, which is evident from the fact that no addition was made by the AO u/s 68 of the Act in respect of loan received f....
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....DCPL had disclosed net profit before tax of Rs.1.55 crore for the year ended 31.03.2017 as against Rs.9.68 lakhs for the year ended 31.03.2016. We also find that the loans has been advanced to the assessee company in the regular course of lending business of DCPL through banking channels and DCPL had indeed earned an interest income of Rs.5,35,932/- from assessee . DCPL had also given a confirmation dated 01.04.2017 to the assessee confirming the loan transaction given by them, repayment of loan receipt from assessee during the financial year 2016-17 itself with interest and that the said confirmation/ledger account was indeed found at the time of search of Alankit Group on 18.10.2019 in the laptop of Shri Sunil Kumar Gupta. All these documents clearly established that assessee had duly proved the 3 ingredients of Section 68 of the Act with regard to loan received from DCPL and repayment made thereon, duly explaining the nature and source of credit thereon, within the meaning of Section 68 of the Act. Hence, there is absolutely no reason for the revenue to treat the said loan transaction with the DCPL as accommodation entry warranting addition u/s 68 of the Act. Hence, we have no h....
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.... Mr. Alok Agarwal thereon etc. However, he did not mention any involvement of cash transaction with regard to Diwakar Commercial Private Limited in the said reply. He only said that he had been made a namesake Director in DCPL. Further, even in the response to Question No. 13, in respect of the above companies, Shri Sunil Kumar Gupta had only spoken about transaction for acquisition of shares of companies and not about any loan transactions. Hence, there is absolutely nothing incriminating or adverse from the statement on oath from Shri Sunil Kumar Gupta, wherein he had alleged any wrong doing either by DCPL or by assessee herein qua their loan transactions. But the ld. AO in page 11 para 12 concludes that the cash is received from DCPL for acquisition of shares. This is contrary to the actual statement reflected by Sunil Kumar Gupta. In any event, we find that the entire statement of Shri Sunil Kumar Gupta stood retracted by him on 02.11.2019 by way of notarized affidavit, which is enclosed in pages 162 to 167 of the paper book within 13 days from the date of giving the original statement. This retraction statement was sent by post to the Income Tax Department and the copy of....
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....ssessing officer of the searched person to the assessing officer of the third party. Hence, construing from that date of search i.e. 3.8.2023, assessment year 2017-18 would become an unabated assessment qua the assessee. Hence, in order to disturb the assessment already framed for assessment year 2017-18, there should be some incriminating material found in the course of third party search, which has a bearing on determination of total income of the assessee herein for AY 2017-18. The above observations clearly establishes that there is no such material. We hold that the statement of Shri Sunil Kumar Gupta dated 19.10.2019 did not alleged any wrong doing in respect of loan transactions of DCPL with assessee and hence cannot be construed to have any incriminating material. In any event, statement recorded u/s 132(4) cannot be construed as incriminating material as held by the Hon'ble Jurisdictional High Court in the case of Pr. CIT v. Best Infrastructure (India) Pvt. Ltd reported in 397 ITR 82(Del). Hence, it could safely be concluded that there is no incriminating material available with the AO for making this addition on account of loan transaction with the DCPL. By placing Relian....
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....Court which is reported in 165 taxmann.com 846 (SC) by observing as under:- "ORDER 1. Delay condoned. 2. Heard the learned Senior Counsel appearing for the appellants. 3. We are not inclined to interfere with the impugned judgment and order passed by the High Court of Karnataka at Bengaluru in Writ Appeal No. 831/2022 (T-IT) dated 22-01-2024/ Deputy Commissioner of Income-tax v. Sunil Kumar Sharma [2024] 159 taxmann.com 179 (Karnataka) . 4. The Special Leave Petition is dismissed. 5. Pending application(s), if any, shall stand disposed of. 8. The Learned DR before us vehemently relied on the decision of the Hon'ble Jurisdictional High Court in the case of Indian National Congress vs DCIT reported in 463 ITR 431 (Del) dated 22-03-2024 wherein it was held as under:- "24. The provision only requires the AO to be satisfied that the material collated and handed over is likely to have an impact on the total income for the relevant AY or AYs'. While an assessment would necessarily have to be made in respect of each of the relevant AY or AYs', we find ourselves unable to read Section 153A or 153C as mandat....
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.... the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income" of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six assessment years "in which both the disclosed and the undisclosed income would be brought to tax". (iv) Although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this section only on the basis of the seized material." (v) In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word "assess" in section 153A is relatable to abated proceedings (i.e., those pending on the date of s....
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....aring in Section 153C would necessarily have to be conferred pre-eminence. Therefore, and unless the AO is satisfied that the material gathered could potentially impact the determination of total income, it would be unjustified in mechanically reopening or assessing all over again all the ten AYs' that could possibly form part of the block of ten years. 53. Sinhgad Technical Education Society also constitutes a binding precedent in respect of the aforesaid proposition as would be evident from the Supreme Court noticing that the material disclosed pertained only to AY 2004-05 or thereafter and that consequently the Section 153C action initiated for AYs' 2000-01 to 2003-04 would not sustain. It was this position in law as enunciated in that decision which came to be reiterated by our Court in Index Securities. 55. Take for instance a case where the material gathered in the search is contemplated to have an adverse impact on the declarations and disclosures made by an assessee pertaining only to AYs' 2016-17 and 2017-18. What we seek to emphasise is that pending assessments for those two years could validly form subject matter of action under Section 153C....
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....only to such AYs' where the jurisdictional AO is satisfied and has incriminating material for those AYs' and which may be concerned with disclosed and undisclosed income. 60. Before concluding, we also deem it imperative to briefly notice certain aspects which emerge from a reading of the Satisfaction Notes themselves. As is manifest from a reading of the Satisfaction Note drawn by the jurisdictional AO of the assessee in W.P. (C) 1459/2024, after noticing the material which was recovered during the search and related to FYs' 2009- 10, 2010-11 and 2011-12 [corresponding AYs' thus being AYs' 2010-11, 2011-12 and 2012-13], it has proceeded to observe that the assessments which were liable to abate or be reopened would be AYs' 2010-11 to 2020- 21. A similar note appears in W.P. (C)1117/2024. Here again, after referring to the material pertaining to FY 2009-10 [and thus relating to AY 2010-11], the AO proceeded to seek approval for initiating action under Section 153C in respect of AYs' 2010-11 up to 2020-21. 61. A reading of the aforesaid Satisfaction Notes would establish that jurisdictional AOs' appear to have proceeded on t....
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....eached 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 ....
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....line struck by the precedents noticed above." 10. Hence respectfully applying the construction that is favourable to the assessee by taking shield from the decision of the Hon'ble Supreme Court in the case of Vegetable Products reported in 88 ITR 192 (SC), we would like to follow the decision of the Hon'ble Jurisdictional High Court supra in the case of Saksham Commodities Ltd reported in 464 ITR 1 (Del) and the decision of the Hon'ble Karnataka High Court in the case of Sunil Kumar Sharma supra and hold that recording of consolidated satisfaction note for various assessment years by the Learned AO would become fatal to the very assumption of jurisdiction and consequential framing of assessment under section 153C of the Act for the assessment years 2015-16 and 2016-17 in the instant case. Accordingly the assessments framed under section 153C of the Act for the assessment years 2015-16 and 2016-17 are hereby quashed." 16. Respectfully following the decision, we hold that the assumption of jurisdiction u/s 153C of the Act by recording a consolidated satisfaction note for various AYs is flawed and accordingly the consequential search assessment framed u/s 153C of the Act i....
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....dverse inference thereon. Further, the very same AO in the search assessment completed u/s 153C of the Act dated 18.03.2024 for AY 2011-12 had accepted the transaction with DCPL as genuine. The ld. AR duly placed on record the assessment orders for AY 2018-19 dated 26.03.2024 and for AY 2011-12 dated 18.03.2024 to prove the aforesaid facts. In this case also, the ld. AO had recorded combined satisfaction note u/s 153C of the Act for AYs. 2011-12, 2013-14 to 2020-21 on 03.08.2023. In this case also, the assessee had duly furnished the bank statement of the lender, ITR of the lender, audited financial statement of the lender, confirmation from the lender, NBFC registration with RBI of the lender, PAN of the lender and bank statement of the assessee. Hence the decision rendered hereinabove in the case of Vidur Chharia in ITA No. 209/Del/2025 shall apply mutatis mutandis for this assessee also in ITA No. 207/Del/2025. Hence, the appeal of the assessee in ITA No. 207/Del/2025 is allowed. ITA No. 205/Del/2025- Rakesh Chharia & Sons HUF for AY 2017-18 20. Both the parties fairly stated that the facts prevailing in this case are identical to facts that prevailed i....