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Facts
The assessee challenged the addition made under Section 153C and Section 69A based on a photocopy of an agreement to sell, which was seized during a search from a third party. The assessee argued that the photocopy lacked evidentiary value and that the satisfaction note for initiating proceedings was consolidated for multiple assessment years.
Held
The Tribunal held that the initiation of assessment proceedings under Section 153C was bad in law because the Assessing Officer did not record proper satisfaction for each assessment year and relied on a photocopy of an agreement to sell, which is not a valid document in the absence of the original.
Key Issues
Whether assessment proceedings initiated under Section 153C are valid when based on a consolidated satisfaction note for multiple years and a photocopy of an agreement to sell lacking original evidence.
Sections Cited
153C, 69A
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Income Tax Appellate Tribunal, DELHI BENCH ‘A’: NEW DELHI
PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER :
This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)-26, New Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 06.06.2023 for Assessment Year 2016-17 raising following grounds of appeal :-
1. That on the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in holding initiation of assessment proceedings u/s 153C of the Act by the Ld. AO as valid being mandatory AO of the appellant as envisaged u/s 153C has not been complied and therefore, the assessment is bad in law and deserves to be quashed.
2. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in confirming addition made of Rs.6,00,00,000/- as unexplained money u/s 69A of the Act without appreciating the fact that provision of section 69A of the Act is not applicable being the appellant is not found to be owner of said alleged amount of cash as envisaged under said section of the Act.
3. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law. and on facts in confirming addition of Rs 6,00,00,000 u/s 69A of the Act merely on the basis of un-substantiated photocopy of Agreement to' sell found & seized from the premises of third person without appreciating the fact that "photocopy of agreement to sell" is not admissible evidence as per the provisions of Indian Evidence Act, 1872.
4. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in confirming addition of Rs.6,00,00,000 u/s 69A of the Act in arbitrary and mechanical manner without rebutting the claim of the appellant that the alleged property has not been purchased and no such alleged cash was paid by him by adducing any cogent and substantive material on record by conducting independent enquiry which could prove the contrary.
5. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in confirming addition of Rs.6,00,00,000 u/s 69A of the Act in arbitrary and mechanical manner without appreciating the fact that the appellant has duly discharged his onus by furnishing Affidavit of sellers of the property confirming that the alleged property was not sold to the appellant and no amount of cash was received by them from the appellant.
6. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in confirming addition of Rs.6,00,00,000 u/s 69A of the Act made by Ld. AO without getting valuation of said property by Government approved valuer and without making enquiry directly from the Sellers of the property about alleged cash payment even the appellant has made specific request for the same.”
Brief facts brought to our notice by the ld AR of the assessee during the course of hearing that the alleged agreement to sell dated 13.07.2015 found during the course of search and seizure action on 20.07.2018, the above said agreements were found from the residence of Third Party Yash Pal Mendiratta, the sole premise of making addition. He further submitted that the document found during the search is a photocopy and not an original agreement. The addition on the basis of said alleged photocopy of agreement was also made in the case of Yash Pal Mendiratta, from whom the said alleged agreement was found. In his case, Ld CIT(A) has deleted the proposed addition and further the same decision was affirmed by ITAT (ITA No.1863 & 1864/Del/2021). The Ld. AR further argued that original agreement to sell has not been brought on record during the whole assessment proceedings. Ld. AR has brought to our attention the recent decision of Hon’ble Delhi High Court in the case of PCIT v Smt. Rashmi Rajiv Mehta [2024] 160 taxmann.com 723, wherein it was held as under: “7. As stated above, both the appeals have been decided by the impugned common order. The Revenue has challenged the order passed in both the appeals under Section 260A of the Act. The instant appeals propose the following common substantial question of law for our consideration:- "A. Whether the photocopy of a document, some part of information/facts recorded on it found to be correct in verification, could be treated as a valid document or not in the absence of the original?"
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Further, the Hon'ble Supreme Court in the case of Moosa S. Madha & Azam S. Madha v. CIT [(1973) 4 SCC 128] was of the opinion that photostat copies have very little evidentiary value.
Admittedly, the entire foundation is laid on the basis of the photocopy of the alleged agreement to sell dated 5 March 2010. The original copy of the said document has not seen the light of the day. Further, there is no other evidence to support the veracity of the recitals made in the aforesaid alleged agreement. Therefore, under the facts of the present case, the same cannot be construed to be a sustainable ground for making addition to the income of the assessee.
We, thus, find that these appeals do not raise any substantial question of law. The ITAT has rightly opined that under the facts of the present cases, sustaining an addition on the basis of photocopy of alleged agreement to sell would be completely unwarranted and unjustifiable. The appeals are, therefore, dismissed. Pending application(s), if any, are also disposed of, accordingly.”
Further, Ld.AR during hearing, raised legal ground which is as under :- “That on the facts and circumstances of the case, the initiation of the assessment proceedings u/s 153C of the Act by recording consolidated satisfaction note for all six assessment years i.e. 2013 – 14 to 2018 – 19 is in violation of settled law laid down by the Hon’ble Supreme court in the case of Commissioner of Income Tax (Appeals) v. Sunil Kumar Sharma [2024] 165 taxmann.com 846 (SC), that satisfaction note is required to be recorded u/s 153C for each assessment year and where a consolidated satisfaction note had been recorded for different assessment years, it would vitiate entire assessment proceedings.”
In this regard, Ld AR submitted that as per the Supreme Court decision in the case of Commissioner of Income tax v Sunil Kumar Sharma [2024] 165 taxmann.com 846 a consolidated satisfaction note for all six assessment years i.e. 2013 – 14 to 2018 – 19 has been recorded which is bad in law and would vitiate entire assessment proceedings as a separate satisfaction note is to be recorded for different assessment years.
On the other hand, learned DR of the Revenue has relied upon the order of lower authorities.
Considered the rival submissions and material placed on record. We observed that there is force in the arguments of Ld. AR that photocopy of agreement to sell could not be treated as valid document in the absence of original agreement to sell as affirmed by the Hon’ble High Court of Delhi in the case of PCIT v Smt. Rashmi Rajiv Mehta (supra).
Further, with regard to legal issue raised by the assessee, we observed that satisfaction note was issued for all the assessment years under consideration, however, as per the provisions of the Act, for initiation of proceedings u/s 153C of the Income-tax Act, 1961 (for short ‘the Act’) a separate satisfaction note is to be recorded for different assessment years instead of consolidated satisfaction note otherwise it would vitiate entire assessment proceedings as held in the case of DCIT v Sunil Kumar Sharma [2024] 165 taxmann.com 846 (SC),wherein it was held as under: “Section 153C, read with sections 132, 153 and 153A, of the Income- tax Act, 1961 and seizure - Assessment of any other persons (General principles) - Assessment years 2012-13 to 2018-19 - High Court by impugned order held that satisfaction note is required to be recorded under section 153C for each assessment year - It further held that where a consolidated satisfaction note had been recorded for different assessment years, it would vitiate entire assessment proceedings -
Respectfully following the above decisions, we are inclined to decide the issue in favor of assessee holding that Assessing Officer has not recorded proper satisfaction for initiation of assessment proceedings as per the provisions of the Act and also heavily relied on the photocopy of agreement to sell on the basis of which consolidated satisfaction note has been recorded is not a valid document in the absence of original agreement. Therefore, initiation of proceedings u/s 153C and the consequential assessment proceedings is bad in law and are hereby quashed.
We are refrained from adjudicating the other grounds of appeal
and at this stage, we keep the other grounds of appeal open.
10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 23rd day of July, 2025.