Loading judgment…
Facts
A search was conducted on M/s. Jainco Ltd. leading to a revelation of an agreement for sale of property at a higher consideration than what was registered. The assessee's involvement was discovered through data from a mobile phone belonging to a searched person. The addition of Rs. 62,00,000/- was made to the assessee's income on account of alleged undisclosed cash received.
Held
The Tribunal held that the assessment for AY 2021-22 should have been completed under Section 153C of the Income Tax Act, not Section 143(3), based on the date of receipt of documents by the AO. The assessment order passed under Section 143(3) was deemed bad in law and quashed.
Key Issues
Whether the assessment for AY 2021-22 was correctly framed under Section 143(3) or should have been under Section 153C, considering the date of search and satisfaction recording. Whether the addition on account of alleged undisclosed cash received was justified.
Sections Cited
250, 143(3), 45, 153C, 153A, 132, 143(2), 139, 147, 148, 149, 151, 153, 127, 142, 234B, 54
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, DELHI “C” BENCH: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI MANISH AGARWAL
Year : 2021-22] Shri Jai Shankar vs DCIT, Maheshwari, B-14, 2nd Floor, Central Circle-31, Preet Vihar, Delhi-110092. New Delhi PAN-AAUPM3199E APPELLANT RESPONDENT Appellant by Dr.Rakesh Gupta, Adv. Respondent by Shri Om Parakash, Sr.DR Date of Hearing 14.05.2025 Date of Pronouncement 06.08.2025 ORDER
PER MANISH AGARWAL, AM :
The present appeal is filed by the assessee against the order dated 31.01.2024 of Ld. Commissioner of Income Tax (A)-30, New Delhi [“Ld.CIT(A)”] in Appeal No.10146/2020-21 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 30.12.2022 passed u/s 143(3) of the Act pertaining to assessment year 2020-21.
Brief fact of the case are that the assessee is an individual, having income from salary and interest income and filed his return of income on 10.01.2022, declaring income of INR 5,46,580/-. The assessment was selected for scrutiny by way of issue of notice on 30.06.2022 and after considering the submissions of the assessee and also placing reliance on the material found during the course of search carried out on M/s. Jainco Ltd. on 06.01.2021, an addition of INR 62,00,000/- is made to the total income of the assessee by holding that the same as undisclosed sales consideration received in addition to the agreed consideration received on the sale of 50% of shares in the property at G-174, 2nd Floor, Preet Vihar, New Delhi-110092.
3. Against this order, an appeal filed by the assessee before Ld.CIT(A) wherein the assessee has challenged the assessment order on merits of the additions which has been dismissed by the Ld.CIT(A) in terms of impugned order dated 31.01.2024.
4. Aggrieved by the said order, the assessee is in appeal before Tribunal wherein following grounds of appeal are taken:-
1. “That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment order and that too without assuming jurisdiction as per law and without following the due procedure in accordance with law.
2. That having regard to the facts and circumstances of the case. Ld. CIT(A) has erred in law and on facts in not quashing the impugned assessment order passed by Ld. AO u/s 143(3) as the same was ought to have been passed u/s 153C and not u/s 143(3) for the reason that it was based upon the search on Jainco Ltd.
3. That in any case and in any view of the matter, action of Ld. CIT(A) in not quashing the impugned assessment order inter alia on the ground that the same was to be passed u/s 153C and not u/s 143(3), is illegal. bad in law and against the facts and circumstances of the case.
4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AD in making addition of Rs.62,00,000/- on account of alleged cash received on sale of property and that too by recording incorrect facts Page | 2 and findings and without considering the submissions filed by the assessee and without following the principles of natural justice and without providing the entire adverse material on record and without providing the opportunity of cross examination of the deponents.
5. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs.62,00,000/-on account of alleged cash received, is bad in law and against the facts and circumstances of the case.
6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in not allowing the deduction of Rs. 1,05,00,000/- as claimed by the assessee u/s 54 and that too without any basis and without appreciating the facts and circumstances of the case.
7. That in any case and in any view of the matter, Ld. CIT(A) has erred in law and on facts in confirming the addition made by Ld. AO is beyond jurisdiction and illegal, also for the reason that such order could not have been made since no Incriminating material has been found as a result of search.
8. That in any case and in any view of the matter, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making the impugned addition and passing the impugned appellate order dated 31.01.2024 is illegal, bad in law, void ab-initio and against the facts and circumstances of the case and in gross violation of principles of natural justice and barred by limitation also.
9. That having regard to the facts and circumstances of the case, Ld. CIT(A) ought to have quashed the impugned assessment order passed by Ld. AO as the same was passed without obtaining valid approval in accordance with law.
10. Without prejudice to the above grounds, that in any case and in any view of the matter, the impugned order passed by Ld. AO is illegal. bad in law as the same has been passed without following due procedure and complying the conditions laid down u/s 1530 of Income Tax Act, 1961 and the same is not sustainable on various legal and factual grounds.
11. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 2348 of the Income Tax Act, 1961.
12. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
5. During the course of hearing in terms of letter dated 31.05.2024, the assessee has taken one more additional ground of appeal wherein assessment order was challenged as the same was passed without DIN however, this Ground was not pressed before us therefore, the same is hereby, dismissed.
In regular Grounds of appeal
, the assessee has taken Ground 6. Nos.1 to 3 which are legal grounds and were not taken before Ld.CIT(A) however, since they are the legal grounds therefore, they are admitted for adjudication.
7. Before us, Ld.AR submits that the sole addition is based on the information found during the course of search carried out in the case of Hans Group wherein in the mobile phone of one, Shri Praveen K. Jain’s chat with Shri Sanjay Bhuttan according to which an agreement for the sale of the property executed by assessee alongwith his wife Smt. Neelam Maheshwari was found and it is alleged that the said property was sold by the assessee alongwith wife for a consideration of INR 1.85 crores as against the declared consideration in the Sale Deed at INR 62 Lakhs. The AO of the persons searched i.e. Shri Praveen K. Jain has recorded his satisfaction and handed over the seized material to the AO of the assessee on 28.06.2022 and upon receiving the intimation and the material, the AO of the assessee i.e. ITO, Ward-60(7), New Delhi recorded his satisfaction on 30.06.2022 and the proceedings u/s 153C r.w.s. 153A were initiated for AYs 2015-16 to 2020-21 and notice u/s 143(2) was issued for AY 2021-22. Ld.AR submits that since the satisfaction in the case of the assessee is recorded on Page | 4 30.06.2022, the search year should be taken as AY 2023-24 and not the AY 2021-22 as has been done in the instant case. In this regard, reliance is placed on the judgement of Hon’ble Supreme Court in the case of CIT vs Jasjit Singh [2023] 458 ITR 437 (SC) and requested that the assessment framed for the impugned year u/s 143(3) is bad in law which should have been completed u/s 153C of the Act and therefore, the order deserves to be quashed. He prayed accordingly.
8. On the other hand, Ld.Sr. DR for the Revenue supported the orders of the lower authorities and submits a factual report filed by the AO in this regard which is reproduced as under:-
“Kindly refer to your mail dated 04.10.2024, the information sought via this mail is as under: 2. In this connection, it is submitted that a search and seizure action u/s 132 of Income-tax Act, 1961 was carried out on HANS group on 06.01.2021. In this search action, residence of Sh. Parveen Kumar Jain C-42, C-Block, Preet Vihar, Delhi was also covered.
3. During search, data of Praveen Jain's mobile phone was cloned and seized as Annexure A-5 from the premise at C-42, C-Block, Preet Vihar, Delhi. An agreement to sell dated 26.11.2020 regarding sale of second floor, G-174, Preet Vihar, Delhi was recovered from the Whatsapp chat of Parveen Kumar Jain with Architect Bhuttan (contact no. of Sanjay Bhuttan saved in Praveen Jain's mobile).
4. On perusal of this agreement to sell, it is observed that Jai Shankar Maheshwari and his wife Smt. Neelam Maheshwari are the sellers of property at second floor, G-174, Preet Vihar, Delhi and Sanjay Bhuttan is buyer. As per agreement to sell the actual sale consideration of the property is Rs. 1,85,00,000/-.
5. During the course of search, the registered deed dated 26.02.2021 pursuant to above mentioned evidence was found and pursued. As per registered deed, Jai Shankar Maheshwari and his wife Neelam Maheshwari are sellers and Sanjay Bhuttan and his wife Ritu Bhuttan are buyers of the property. On perusal of registered deed, it is observed that the sale consideration of this property is Rs. 61,00,000/- while the actual sale consideration was Rs. Page | 5 1,85,00,000/- as per the agreement to sell found from the phone of Parveen K Jain.
From the above discussion, it was observed that sellers received Rs. 1,24,00,000/- (Rs. 1,85,00,000/-as per agreement to sell -Rs. 61,00,000/- as per registered deed) in cash from buyers. Thus, assessee received Rs. 62,00,000/- (1,24,00,000/2) in lieu of sale of property in cash.
Further, the assessee was also summoned during post search proceedings. However, assessee did not comply with summons and did not provide any explanation in this regard.
Further, this office recorded "Proforma for recording of satisfaction about seized assets belonging to person other than the searched person" and sent to than JAO Income Tax Officer, Ward-60(7), New Delhi. The than JAO issued the notices u/s 153C of the Act were issued by than JAO for A.Ys 2015-16 to 2020-21 and notice u/s 143(2) of the Act dated 30.06.2022 was issued for A.Y 2021-22 after obtaining approval from PCIT-20, New Delhi.
9. Thereafter, the case of the assessee was centralized to this office vide order u/s 127 of the Act bearing DIN & Order No. ITBA/COM/F/17/2022-23/1045517528(1) dated 15.09.2022.
10. Further, assessment order in the case for A.Y 2021-22 was passed u/s 143(3) of the Act on 30.12.2022 making addition of Rs. 62,00,000/- u/s 45 of the Act as long term capital gain after making necessary inquiries.
11. The assessment order in the instant case was passed u/s 143(3) of the Act instead of 153 C of the Act for A.Y 2021-22 (year of search) due to following reasons: i. The search in this case was conducted on 06.01.2021 i.e in F.Y 2020-21 pertaining to A.Y 2021-22. ii. Firstly, it is pertinent to mention provisions of section 153C of the Act which are as under: "153C. Not withstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that, (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 1534, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Page | 6 Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 1534, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 1324 in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person:"
12. From above it is clear that proceedings u/s 153C can be initiated for other person than the person referred in section 153A of the Act for six assessment years which are immediately preceding the assessment year relevant to the previous year, in which search is conducted. In the instant case Sh. Jai Shankar Maheshwari is other person than person referred in section 153A (Parveen Jain) and year of search is 06.01.2021 (A.Y 2021-22 relevant to previous year 2020-21). Hence, six assessment year immediately preceding the year of search (A.Y 2021-22) are from A.Y 2015-16 to A.Y 2020-21 in which proceedings u/s 153C was initiated. The assessment proceedings for year in which search was conducted (A.Y 2021-22 in the instant case) can not be initiated u/s 153C of the Act. Therefore, assessment proceedings for the year of search A.Y 2021-22 was completed u/s 143(3) of the Act which are initiated by issuing notice u/s 143(2) of the Act after obtaining the necessary approval from PCIT.
Further, it is pertinent to mention provisions of section 143(2) and section 143(3) of the Act which are as under: "(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or hast computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of three months from the end of the financial year in which the return is furnished." (3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment:.......
14. In view the above, the proceedings in the instant case for A.Y 2021- 22 were initiated by issuing notice u/s 143(2) of the Act & the assessment in the instant case was completed u/s 143(3) of the Act instead of section 153C of the Act.
Further, you have asked to produce the relevant assessment folder for A.Y 2021-22. The original assessment folder for A.Y 2021-22 is being sent to your office with this report for your reference. The original assessment folder contains pages 01 to 246 including noting.”
Heard the contentions of both the parties and perused the material available on record. It is an admitted fact that the case of assessee is taken up only because of the material found in the mobile phone of Shri Praveen K.Jain during the course of search carried out on 06.01.2021. From the perusal of the satisfaction note supplied to the assessee in terms of the letter dated 21.12.2022 available at page 125 to 127 of the Paper Book, it could be seen that the satisfaction was recorded by the AO of Shri Praveen K.Jain i.e. person searched on 28.06.2022. Further, from the perusal of satisfaction note recorded by the AO of the assessee available at page 128, it is seen that the satisfaction is recorded by the AO of the assessee on 30.06.2022. The relevant extract of the satisfaction note is as under:-
It is further seen that under identical circumstances, in the case of wife of the assessee and co-owner of the property, Smt. Neelam Maheshwari, the matter was came up before the Tribunal wherein the Co-ordinate Bench of Tribunal in in terms of order dated 21.03.2025 has quashed the order passed u/s 143(3) instead of section 153C of the Act. The relevant observations of the Co-ordinate Bench as contained in para 3 to 6 of the order are as under:-
“The Id. DR has although defended the assumption of jurisdiction, however, what we find is a search was conducted u/s 132 of the Act at the premises of Shri Parveen K. Jain on 06.01.2021 and the mobile phone of Shri Parveen K. Jain was seized. On the basis of his whatsapp chat, a transaction of sale of property was found which was relevant to the present assessee and that evidence was relied for making an addition on account of receipt of on money of Rs.62 lakhs. As a matter of admitted fact, on 19.09.2022, the record of the assessee was handed over by the jurisdictional AO of the searched person, Shri Parveen K. Jain to the AO of the present appellant and on 22.09.2022, a satisfaction was recorded by the AO of the present appellant.
It is now settled provision of law that as for the purpose of search assessments, the period of six years immediately preceding the assessment year relevant for the previous year in which search was conducted has to be reckoned from the date of receipt of documents by the AO of the assessee (other person) which in the case in hand is 19.09.2022. The search year in the case of the present assessee, thus, has to be construed as AY 2023-24. Reliance for the aforesaid proposition of law can be placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. Jasjit Singh, 458 ITR 437 (SC).
Thus, the year under consideration, i.e., AY 2021-22 falls within the block period of assessment to be framed w/s 153C of the Act whereas the Id. AO has completed this assessment u/s 143(3) of the Act based on the original date of search of 06.01.2021. 6. In the light of the aforesaid, we are inclined to decide the grounds No.1 to 3 in favour of the assessee. Consequently, the appeal of the assessee is allowed and the impugned assessment is quashed.”
In view of the above facts and considering the admitted position in the present case that satisfaction note of the AO of assessee was recorded only on 30.06.2022 after receiving the documents from the AO of persons searched on 28.06.2022 therefore, as per the ratio laid down by the Hon’ble Supreme Court in the case of Jasjit Singh (supra), the search year in the case of person other than person searched should be the year in which documents were handed over by the AO of the person searched to the AO of the assessee.
In the instant case, the same should be FY 2022-23 relevant to AY 2023-24 and therefore, assessment for AY 2021-22 must be completed u/s 153C of the Act and not u/s 143(3) of the Act. Accordingly, the order so passed u/s 143(3) is bad in law and is hereby quashed. Thus, legal Ground of appeal Nos. 1 to 3 raised by the assessee are allowed.
13. The remaining Grounds raised by the assessee became academic hence, not adjudicated.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 06.08.2025.