AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 119
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....ear 2018-19 are reproduced as under: "1. The Hon. Commissioner of Income Tax (A) (for short-Hon. CIT-A) erred both in fact and law in confirming addition made by the Assessing Officer (AO), and therefore, all such additions are liable to be deleted. 2. The Hon. CIT(A) erred in deciding that the impugned assessment was not barred by time limit specified under s. 153B by placing wrong reliance on the decision of the Apex Court and without appreciating that the Court is disabled to enact law which is the function of the Legislature. 3. The Hon. CIT(A) erred in deciding that the learned AO had jurisdiction under Sec.153C of Income tax Act without appreciating the legal position as advocated by the appellant. 4. The Hon CIT(A), despite deleting the addition, erred in concurring with the action of the learned AO in assuming that an amount of Rs. 33,97,939/-(representing assumed commission 1% of certain turnovers) could have been earned by the appellant by acting as a conduit for an unknown party by assumption without marshalling in an iota of evidence in the order. 5. The Hon. CIT(A) erred in confirming the addition of Rs. 7,32,95,000/- based ....
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....assessee "M/s. Expressway Services Private Limited" is engaged in the business of civil construction activities and supplying manpower to civil construction companies and filed its return of income for A.Y. 2018-19 on 12.10.2018 admitting total income at Rs. 5,53,43,355/-. A search and seizure operation under Section 132 of the Income Tax Act, 1961 was conducted in the case of M/s. Prathima Infrastructure Pvt. Ltd. and its associate entities, including the assessee company, on 06.02.2020 and the assessee was also covered under the search proceedings. Subsequent to the search, the case of the assessee was centralized with Central Circle-2(4), Hyderabad. 4. Consequent to the search, notice under Section 153C of the Income Tax Act, 1961 dated 12.11.2021 was issued and served upon the assessee calling for return of income. In response, the assessee filed return of income. During the course of assessment proceedings, it was noticed that the assessee had received several sub-contract work from M/s. Prathima Infrastructure Pvt. Ltd. and further sub-contracted most of the work to various sub-contractors in amounts ranging from Rs. 1.70 crores to Rs. 1.95 crores. However, on verification....
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....s were either employees or persons connected with Prathima Group of companies and that the income-tax returns of many of the sub-contractors were filed from common IP addresses which belonged to the Prathima group. The Ld. CIT(A) also observed that the work orders issued by the assessee to the sub-contractors did not contain specific details regarding quantity of work executed and that the running bills and measurement bills were uniformly dated, indicating that the sub-contract arrangements were not genuine. 7. The Ld. CIT(A) further observed that, statements recorded from certain sub-contractors clearly indicated that payments received by them were withdrawn in cash and returned back to the assessee through the accountant of the assessee company. The Ld. CIT(A) also took note of the sworn statement of the accountant of the assessee company wherein it was admitted that cash was received from sub-contractors on behalf of the assessee. Considering the above facts, the Ld. CIT(A) held that the assessee had merely acted as a conduit for routing the funds and providing accommodation entries to the main contractor. Accordingly, the Ld. CIT(A) confirmed the addition of Rs. 7,32,95,000....
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....zation for search under Section 132 after or requisition under Section 132A of the Act, was executed. Further, in case of assessment under section 153C, twelve months from the end of financial year in which last of warrant of authorization was executed or 12 months from the end of the financial year in which the seized material relating to the other person is handed over to the AO of such other person whichever expires later. The alternate condition for working out limitation period is not applicable in the case of the jurisdiction of principal party and the other person lies with the same A.O. 11. The learned counsel for the assessee further submitted that, Section 153B(2) clarifies that, an authorization shall be deemed to have been executed, in the case of search, on the conclusion of search as recorded in the last panchanama drawn in relation to any person in whose case the warrant of authorization has been issued. Thus, the statutory test is the date on which the search is concluded as recorded in the last panchanama drawn in relation to the concerned person. Since the search was finally concluded in the case of the assessee on 12.02.2020 and twelve months from the end of t....
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....mitation and liable to be quashed. 13. The Ld. CIT-DR, Dr. Narendra Kumar Naik, on the other hand, supporting the order of the Ld. CIT(A) submitted that, search and seizure operation under Section 132 of the Income Tax Act, 1961 was conducted in the case of the assessee on the basis of joint warrant of authorization issued in the case of assessee, Sri B. Srinivasa Rao and Smt. Usha Rani and the search was finally concluded on 23.07.2020 at the residence of Sri B. Srinivasa Rao and Smt. Usha Rani after revocation of restraint order issued in respect of particular place, which is evident from the relevant panchanama drawn on the date of search on 23.07.2020 where certain jewellery and other material was found and seized. Therefore, the search in the case of the assessee and other associated persons was finally concluded on 23.07.2020 and as per the provisions of Section 153B(1), twelve months from the end of the financial year in which the last of the authorizations was executed will be up to 31.03.2022 and therefore, the assessment order passed by the A.O. under Section 153C of the Act, dated 28.03.2022 is within the time limit prescribed under Section 153B of the Act, and thus, ....
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.... reported in (2024) 160 taxmann.com 606 (Delhi). 3. K. Krishnamurthy Vs. DCIT reported in (2025) 171 taxmann.com 413 (SC). 4. Smt. Pavithra Sugichandran Vs. DCIT reported in (2024) 168 taxmann.com 413 (Madras). 5. Jankhit Chandulal Prajapati Vs. DCIT (CC-1(3), Ahmedabad) in IT(SS)A Nos. 121 & 122/Ahd/2023 dated 08.08.2025. 6. In Re: Cognizance for Extension of Limitation, Suo Motu Writ Petition (C) No. 3 of 2020, MA Nos. 21-29 of 2022 & MA No. 665 of 2021 dated 10.01.2022 (SC). 16. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered relevant provisions of Section 153B and Section 292CC of the Income Tax Act, 1961. The appellant is 'other person' covered u/s 153C of the Act. The A.O. of the searched person and the appellant is one and the same, i.e. DCIT, Central Circle -2(4), Hyderabad. These cases were centralized with the same AO under section 127 of the Act. Thus, in the case of the assessee, the Assessing Officer of the searched party and appellant was the same jurisdictional Assessing Officer. Further, the present assessments for a....
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....sistant Commissioner of Income-tax [2025] 181 taxmann.com 21 (Bombay) in which it was held that: since Assessing Officer of searched party as well as Assessing Officer of third party, i.e. petitioner, was one and the same, time limit provided by first limb of clause (ii) of third proviso to section 153B(1) was to be applied, which was 12 months from end of financial year in which search took place. It was further held that since said time limit expired on 31-3-2021 and in light of TOLA and Notification No. S.O. 966(E) dated 27-2-2021, aforesaid time limit stood extended till 30-9-2021, thus, assessment under section 153C for relevant assessment years should have been completed by 30-9-2021. The interpretation by the Court fully applies to the case of the appellant. Therefore, it is necessary for us to decide the issue in light of above facts and legal position. 18. The provisions of Section 153B governs the time limit for completion of assessment or reassessment under Section 153A of the Income Tax Act, 1961. As per Section 153B, notwithstanding anything contained in Section 153, the A.O. shall make an order of assessment or reassessment in respect of each assessment year fallin....
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....3.07.2020, which is evident from the relevant panchanama drawn on 23.07.2020 where it was clearly stated that the search was finally concluded on 23.07.2020 after revocation of restraint order dated 08.02.2020 issued under Section 132(3) of the Act during the course of search operation at the closet of the guest room at the north-west portion of the first floor situated at the residence of Shri B. Srinivas Rao. 20. The learned CIT-DR for the revenue, referring to the provisions of Section 292CC of the Act, submitted that, if a joint warrant of authorization was issued in the case of multiple persons, although the assessment has to be framed independently in the case of each assessee, but for the purpose of computing limitation as referred to under Section 153B, the last of the authorization executed in the case of any person in whose case search was conducted as referred to in the joint warrant of authorization has to be considered. If we consider the provisions of Section 292CC and Section 153B of the Act, it is undisputedly clear that, the search was finally concluded in the case of the assessee and other associated entities/persons on 23.07.2020 which falls in the financial y....
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....rately in the name of each person and in case, more than one person is mentioned in the authorization, it shall not be deemed to construe that, it was issued in the name of associated persons or body of individuals consisting of such person and notwithstanding that an authorisation under Section 132 of the Act, has been issued mentioning therein the name of more than one person, the assessment or re-assessment shall be made separately in the name of each person mentioned in the name of authorisation or requisition. Therefore, from the provisions of Section 292CC of the Act, it is very clear that joint warrant of authorization can be issued mentioning more than one person and premises to be searched, however, when it comes to assessment, each one of the persons referred to in the joint warrant of authorization should be assessed separately and thus, in our considered view, once the assessment or reassessment has to be made separately on each person referred in the joint warrant of authorization, then for the purpose of computing limitation as prescribed under Section 153B of the Act, the execution of warrant in the case of each person and recording of panchanama indicating commencem....
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....e COVID-19 outbreak up to 30.09.2021. Therefore, in view of the provisions of Section 153B read with the TOLA Act, 2020 and the relevant notifications issued by the CBDT, the time limit available for the A.O. to complete the assessment in the present case was up to 30.09.2021, whereas the A.O. has passed the assessment order for A.Ys. 2018-19 to 2020-21 on 28.03.2022, which is beyond twelve months from the end of the financial year in which the last of the authorisations was executed. Therefore, in our considered view, the assessment order passed by the A.O. is barred by limitation and liable to be quashed. 23. Insofar as the arguments of the learned CIT-DR for the Revenue, in light of the decision of the Hon'ble Supreme Court in the case of In Re: Cognizance for Extension of Limitation in MA No. 21 of 2022 in MA No. 665 of 2021 in Suo Motu W.P. (C) No. 3 of 2020 dated 10.01.2022 that the limitation provided for completion of assessment has been finally extended up to 31-05-2022, in our considered view, the order of the Hon'ble Supreme Court is applicable to filing of suits, petitions or other judicial or quasi-judicial proceedings and therefore, the above limitation ext....
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....9 to 2020-21. 25. Coming to ground No.3 of the assessee's appeal, which challenges validity of the assessment order in light of common satisfaction notes recorded by the A.O. for Assessment Years 2014-15 to 2020-21. 26. The learned counsel for the assessee, Shri K.C. Devdas and Shri Poorna Chander, C.A., submitted that, the satisfaction recorded by the A.O. for initiation of proceedings under section 153C is generic, non-specific with regard to specific assessment-year, undisclosed income relating to each assessment year and without any reference to specific incriminating evidence and thus, the same is liable to be quashed at the threshold level. In this regard, they relied upon plethora of judicial precedents, including the decision of Hon'ble Delhi High Court in the case of Saksham Commodities Ltd vs. ITO (2024) 161 Taxmann.com 485 (Delhi). 27. The Ld. CIT-DR, Dr. Narendra Kumar Naik, submitted that, at the time of recording satisfaction note, the A.O. is not required to prove undisclosed income qua each assessment year with reference to incriminating materials. But what is required is prima facie existence of seized materials indicating or reference of undisclosed incom....
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....ting materials found during the course of search and records that the materials found during the course of search in the case of searched person belongs to or relates to the other person and has a bearing on the determination of total income for relevant assessment years, the A.O. cannot proceed to initiate and issue notice u/s 153C to other person. Therefore, in our considered view, the satisfaction note must indicate undisclosed income qua incriminating materials to each assessment year separately. This contention of the appellant is supported by the decision of Hon'ble ITAT in the case of M/s. MSN Institute of Medical Sciences Pvt. Ltd., Hyderabad Telangana vs. The PCIT-(Central), Hyderabad, ITA. Nos: 1324 & 1325/Hyd/ 2024] and in Para 18 of the order the Hon'ble ITAT observed that the satisfaction note in the case was recorded in a sweeping manner without co-relating the seized material to each of the assessment years involved. It was held that such a satisfaction note does not constitute a legally valid satisfaction for the assessment years and consequently, the assumption of jurisdiction u/sec. 153C for the impugned assessment years is bad in law and unsustainable. Th....
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....the initial stage is bad in law, then all further proceedings consequent thereto will be void. A right in law exists only and only when it has a lawful origin as held in the cases of Mangal Prasad Tamoli v. Narvedoshwar Mishra (AIR 2005 SC 1964); and Ritesh Tiwari v. State of U.P. (AIR 2010 SC 3823). 31. The reliance of the Ld. CIT-DR on judgment in the case of Indian National Congress Vs. Deputy Commissioner of Income-tax [2024] 160 taxmann.com 606 (Delhi) is not relevant in the case of the appellant. The essence of the decision in that case was that satisfaction note merely forms foundation for initiation of action which would enable to evaluate whether an opinion has been validly formed and as long as it rests on incriminating material which pertains to assessment years in question, same would qualify requirement of section 153C of the Act. The case never held that recording of satisfaction and presence of incriminating evidence is not a requirement. Rather the decision emphasized the presence of incriminating evidence. It never dealt with the decision in Calcutta Knit Ware case (supra) of the hon'ble Apex Court to hold a contrary view that prima facie quantification of undis....
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....r people connected with Prathima Group of companies. The A.O., further observed that, amounts credited to the accounts of certain sub-contractors were withdrawn in cash and returned back, indicating that the sub-contracts were accommodation entries created to reduce taxable income. Accordingly, the A.O. estimated commission income at 1% of the gross receipts of Rs. 33,97,93,935/- and made an addition of Rs. 33,97,939/-. The A.O. has also made addition of Rs. 7,32,95,000/- towards cash received from sub-contractors and treated the same as income of the assessee. 34. We have heard both the parties, perused material available on record and had gone through orders of the authorities below. The A.O. made additions towards 1% commission income on total sub-contract works received by the assessee. The Ld. CIT(A) deleted this addition. Although, the assessee challenged findings of the ld. CIT(A) on this issue, it becomes academic, because finally addition has been fully deleted by the ld. CIT(A). Therefore, we are not going to adjudicate the ground related to this issue. The A.O. had also made addition towards alleged cash received by the assessee from sub-contractors on the ground that....
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....his notice as there was none discovered or in the possession of Department. 36. An assessment under section 153C of the Act is required to be based on tangible evidence pointing to undisclosed income for which the case was reopened. As stated above, nothing comes out of the satisfaction note. Hence, any addition on suspicion or surmise or in a general manner is not sustainable in an assessment made under section 153C of the Act, which should be incriminating evidence specific and undisclosed income specific. The provisions of section 153C of the Act, cannot enlarge the scope of addition, going beyond the reasons for which the case was reopened under section 153C. In the course of comprehensive search of the premises of Prathima group, including the appellant and the Directors, no evidence was found incriminating the appellant. Consequently, the jurisdiction to assess or reassess should be read in a restricted manner in such circumstances, i.e., the jurisdiction to assess or reassess ought to be restricted to only incriminating material unearthed during the course of search after following the due procedure. It is also relevant to refer to the decision in the case of PCIT, Centra....
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.... no addition can be made u/s 68 on the basis of a statement by a third party which was not confronted to the assessee along with other supporting evidence. A similar view has been taken in the case of CIT v. Concorde Capital Management Co. [2009] 334 ITR 346 (Del)). The case of Addl. CIT v. Miss Lata Mangeshkar [1974] 97 ITR 696 (Bom) is a landmark ruling on the use of third-party evidence in tax assessments. The court held that entries in a third party's books of accounts. statements, or loose papers cannot form the sole basis for an addition unless corroborated by primary or direct evidence. It emphasized that unverified oral testimony is unreliable. Furthermore, the Court stressed the importance of affording the assessee an opportunity to cross-examine third parties whose statements are relied upon, reinforcing the principles of fair play and due process in tax proceedings. In our considered view, the Revenue has got a tendency to make an addition on the basis of entries appearing in the books of a third party or a statement recorded from a third party or loose papers seized from a third party. In all such cases, it is imperative to afford an opportunity for the assessee to ....