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Facts
A search operation was conducted on Jindal Bullion Ltd. (JBL), leading to the seizure of digital data. This data indicated systematic cash transactions by JBL with various entities. A ledger account named 'Titu', allegedly pertaining to the assessee, was found.
Held
The Tribunal held that the assessment proceedings were bad in law as the addition was based on assumptions and presumptions without corroborative evidence. Reliance on the Hazir Johri software ledger without direct evidence linking it to the assessee's unaccounted transactions was not permissible.
Key Issues
Whether additions made based on digital data from a third-party search, without direct corroborative evidence and without proper procedure, are sustainable.
Sections Cited
139, 132, 153C, 144, 142(1), 127(2)
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Income Tax Appellate Tribunal, DELHI BENCH “E” NEWDELHI
Date of hearing 24.06.2025 Date of 04.07.2025 pronouncement ORDER
PER SUDHIR KUMAR JM:
The assesseepreferred the appeal, challenging the order dated passed by Commissioner of Income Tax (Appeals)-24, New Delhi (in
2 short CIT(A), passed by theAssessing Officer order dated 21.03.2023 for A.Y. 2015-16. 2. The assessee has raised following grounds of appeal:
1. The CIT(A) erred in law and on facts in confirming the impugned assessment order passed u/ss 153C/144 of the Act which is bad in law and void ab initio as no assessment order can be passed u/s 153C of the Act which governs only to assume jurisdiction to pass an assessment order u/s 153A of the Act. Thus, the impugned assessment order must be annulled as has not been passed under the assessing provision but under a jurisdiction provision.
The impugned assessment order passed u/ss 153C/144 of the Act is bad in law and void ab initio as (i) the satisfaction note to initiate proceedings u/s 153C of the Act in the case of the assessee was recorded by the assessing officer of the person searched beyond reasonable time i.e. almost 15 months after passing the assessment order in the case of the person searched and (ii) then the satisfaction note to issue the notice u/s 153A of the Act to the assessee by taking recourse to section 153C of the Act was recorded almost two years after completion of the assessment u/s 153A of the Act in the case of the person searched.
Thus, the assessment proceedings are bad in law and must be cancelled in view of the settled legal position on this count.
3.The authorities below erred in law and on facts in sing that the assessee did not make any compliance during the impugned assessment proceedings, whereas factually the assessee submitted detailed letters on 13/12/2021, 23/12/2021 and 24/12/2021 seeking information and challenging the impugned notices which were never replied by the AO. Thus, the impugned assessment order passed ex- parte is bad in law and must be quashed. 4. impugned assessment order passed ex-parte is bad in law and must be quashed.
The CIT(A) erred in law and on facts in confirming the assessment order passed without supplying copies of the alleged seized material /copies of the statements recorded during the course of search in the case of a third party and without allowing cross examination of those persons, though specifically demanded by the assessee. Thus, the impugned assessment order passed in violation of the principles of natural justice and fair trial must be quashed.
4 The CIT(A) erred in law and on facts in not appreciating the assessment jurisdiction transfer order passed u/s 127(2) of the Act provided during the appellate proceedings though was also demanded by the assessee vide letter dated 12/12/2021 in the assessment proceedings did not comply with the legal requirements and was thus, bad in law. Thus, the impugned assessment order is non-est and void ab initio.
6.The CIT(A) erred in law and on facts in confirming the estimated addition of Rs 2,18,615/- alleging that the assessee gave some accommodation entries of Rs 1,09,30,725/- to some entity JBI and estimating the said amount as commission earned by assessee without issuing any SCN / questionnaires proposing the said addition and particularly no person who statements were recorded averred so nor any material seized demonstrated the same. Thus, the addition made on surmises and conjectures must be deleted, particularly when an assessment of income by taking recourse to the section 153C of the Act can only be made on definite incriminating material and not on presumptions.
7.The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of 5 3. The brief facts of the case are that the assessee has filed the original return of income u/s 139 of the act on 31-08-2016 declaring total income of Rs. 5,12,860/-.A, search and seizure operation u/s. 132 of the Act, was conducted in the case of Jindal Bullion Ltd. (JBL) Group on 05.01.2017. During the course of the search, Digital data maintained in a software called Hazir Johri, was seized at the residential cum business premise of Mr. Kushagra Jindal, promoter of JBL. The digital data clearly showed that JBL had been systematically engaged in cash transactions with a number of entities, mostly bullion traders and jewelers. The JBL books of accounts as maintained in the Hazir Johri software, contained both cash transactions of JBL as well as its transactions through banking channels. The transactions through banking channels are reflected in the Tally books of accounts of JBL whereas the cash transactions are not reflected in the same. The returns of income have been filed by JBL on the basis of books of accounts maintained on Tally software. The Ld. AO observed that ledger account was found with code name(s) “Titu” wherein some cash / bank transactions permitted to Sh. Virender Verma. On perusal of seized data, among others, the ledger account found with code “Titu” allegedly pertaining to assessee was found. The AO of the searched person has recorded the satisfaction on 19-03-2021 u/s 153C of the Act against the assessee that assessee has made some cash/bank transaction mentioned in ledger namely ‘Titu’ belonged to the assessee Sh. Virender Verma. Accordingly, notice u/s 153C of the Act was issued to the assessee. In the response no return of income was filed by the 6 assessee. Again, notice u/s 142(1) of the Act along with questionnaire were issued. The assessee did not comply with questionnaire and show cause notice.The, AO assessed the income of the assessee u/s 144 of the Act and made the addition of Rs. 2,18,615/- as the 2% commission of the accommodation entry.
Aggrieved the order of the AO the assessee preferred the appeal before the Ld. CIT(A) who vide order dated 04-10-2022 dismissed the appeal. Being aggrieved by the order the assessee is in appeal before the Tribunal.
The Ld. AR has mentioned that no DIN has been mentioned in the assessment order. The Ld. AR has placed the reliance on the decision of Hon’ble High Court of Delhi in the case of CIT Vs. Brandix Mauritius Holdings Limited but this issue has not been pressed. Hence, issue is decided against the assessee as not pressed.
The assessee denied having made any unaccounted cash transactions with JBL. The Ld. AR stated that assessee did not enter into any cash transactions with JBL and the assessment order was passed without supplying the seized material /copies of the statements recorded during the course of search in the case of third party and withoutallowing cross examination of those persons, though specifically demanded by the assessee. The AO has made the addition alleging that the assessee gave some accommodation entries of Rs. 1,09,30,725/- but no persons
7 whose statement were recorded averred this facts. The Ld. AR relied on the co-ordinate bench decisions of Delhi Tribunal In the case of Anoop Kumar Soni vs. DCIT in 2021 dated 2-08- 2023 observed as under :-
The Ld. AR relied on the co-ordinate bench decisions of Delhi Tribunal in the case of Anoop Kumar Soni Vs. DCIT in dated 2.8.2023 = 2023 TIOL – 1571-ITAT-DEL, where while adjudicating almost similar facts related to search on JBL, the Tribunal held that since the ledger found during the search ‘AP’ contains the entries of parties other than assessee, then said ledger cannot be said to be belonging to assessee and addition made on the basis of assumption was deleted. Similarly reliance was placed on yet another decision of Surender Kumar Jain in dated 07.03.2023 = 2024-TIOL-442-ITAT-DEL arising out of search in the JBL, wherein it was held that entries in the Hajir Johri ledger of M/s. JBL, supposedly involving M/s. S.K. Impex, do not prove actual transactions without corroborative evidence such as bills or invoices. The additions are based on conjecture and the statement of Mr. Parul Ahluwalia lacking supporting evidence was deleted.
The Ld. DR relied on the orders of the lower authorities and stated that the Hazi Johri Software, the accounting data of which was seized during the search on JBL was full fledge database which was prepared to record the banking transactions as well the unaccounted cash transactions. He further contented that the person belonging to JBL in 8 their statement recorded under section 132(4) of the Act during the search admitted that accounted and unaccounted cash entries were recorded in the Hazi Johri Software pertaining to the assessee. The said statements were never retracted by the said persons.
We find that the coordinate bench of this tribunal in the case of Sachin vs Deputy Commissioner of Income Tax in & 2614 /Del/ 2022 relying the decision of Anoop Kumar Soni vs. DCIT. In held that while adjudicating almost similar facts related to search on JBL, the Tribunal held that since the ledger found during the search “AP” contains the entries of parties other than assessee, then said ledger cannot be said to be belonging to assessee and addition made on the basis of assumption was deleted. The relevant observations made by the Tribunal in this regard are as under :
The banking transactions pertaining to other entities such as Aarthay Gems & Jewels Pvt. Ltd., Surasti Overseas Pvt. Ltd., M/s Saumya Bullion &Jewellers were also recorded in the account AP whereas it had nothing to do with the assessee. In the Remand Report dated 02.08.2021 the Assessing Officer verified all these banking transactions and accepted the contentions of the assessee. In other words, it was verified by the Assessing Officer that some of the banking transactions recorded in the account AP pertain to other entities and not the assessee. Only 23% of the total banking transactions pertain to assessee and remaining 77% are between JBL and other parties. In the facts of the assessee's corroboration is missing. It is for the searched party le. JBL to explain the contents of 9 material recovered from his premises. In case the searched party states that the material belongs to a third party there has to be some connect or corroboration with the third party. On the facts of the present case there is no direct evidence to establish that the account Ap belongs to Anoop Soni. The entire action is based on presumptions made by the A.O. Notably, simultaneous search action on 05.01.2017 on Anoop Soni did not detect any material or evidence to establish or even suggest that he was engaged in unaccounted and undisclosed transactions involving sale/purchase of gold in cash outside books of accounts.
The entire addition by treating the account AP as belonging to Anoop Soni has been made on the basis of presumption drawn and the statement of Shri Parul Ahluwalia. However, statement of the assessee has not been recorded on this issue either at the time of search, post search inquiries or even during the assessment proceedings. A careful examination of the account AP as reproduced in the assessment order would reveal that in the remarks column various acronyms have been used against different transactions such as JD, KCX, RBG Overseas, KMTY, Oven AJ, JBL Coins, Oppo Mobile, Satia, Ishaan, Anshul, Vinod 8676, Guddu etc. These abbreviations show that the transaction recorded is neither through bank nor cash because since specific acronyms have been used, these transactions cannot be inferred to be pertaining to the assessee even if it is presumed with account AP belongs to the assessee.
Hence, keeping in view, the entire factual matrix of the case, we hold that no addition is warranted in the case of the assessee. In the result, the peak credit theory set out by the id. CIT(A) would also 10 become infructuous. The appeals of the assessee on this ground are allowed and accordingly the appeals of the revenue are liable to be dismissed."
Similar view was taken by this Tribunal in the case of Surender Kumar Jain in dated 07.03.2024 2024-TIOL- 442-ITAT-DEL arising out of search in the JBL, wherein it was held that entries in the Hajir Johri ledger of M/s. JBL, supposedly involving M/s. S.K. Impex, do not prove actual transactions without corroborative evidence such as bills or invoices. The additions are based on conjecture and the statement of Mr. Parul Ahluwalia lackingsupporting evidence was deleted. The relevant findings of the said decision are as under:
"9. We have given our careful thought to the submission of the parties and perused the records. The facts are not in dispute. During assessment proceedings the common plea of the assessee in both the AY(s) was that merely entries found in the Hajir Johri ledger of M/s. JBL supposedly in the name of M/s. S.K. Impex, the proprietary concern of the assessee does not tantamount to actual transactions having taken place in the absence of any corroborative evidence such as bills, Invoices, challans etc. There is no linking in the order of the Ld. AO/CIT(A) that the alleged cash transactions are substantiated by any supporting evidence as claimed by the assessee. On the contrary, the impugned additions are based purely on conjectures and surmises solely relying on the statement of Ms. Parul Ahluwalia, Director and former employee of M/s. JBL, the entity subjected to search operation during which her statement was recorded. The Ld. AR submitted before us that Ms. Parul Ahluwalia nowhere in her statement
11 identified that alleged cash transactions related to the assessee. No specific questions in this regard were asked from her. Nothing is forthcoming from the side of the Revenue to controvert the above pleadings of the assessee."
8.We have heard the rival submissions and perused the materials available on record. We find that a search and seizure operation was conducted u/s 132 of the Act on 05-01-2017 in the case of Jindal Bullion Ltd. During the search, digital data stored in software called Hazir Johri was seized from the residence of Sh. Kushagra Jindal promoter of the JBL. The Ld. AO observed that the statement of Parul Ahluwalia and Kusharg Jindal were recorded and on this basis the identification of Hazir Johri account has been done. Sh. Parul Ahluwalia in his statement u/ 132(4) of the Act stated that loose sheets which details the ‘kachha’ as well as pukka transactions of JBL, were written by Ms. Ekta Soni. On perusal of seized data among others a ledger named ‘Titu’ allegedly pertaining to Assessee was found. The Hazir Johri software was found and seized from the premises of JBL at the time of its search under section 132 of the Act not from the assessee possession. The Hazir Johir software is a combined software and contains various transactions other unrelated parties with the assessee. However, there is no concrete material brought on record by the lower authorities to implead assessee with all those transactions. The revenue has failed to bring the corroborative evidence to prove that the assessee has provided the accommodation entry on which the AO has added the 2% commission in the assessee income. In view
12 of the above observations and respectfully following the judicial precedents relied upon hereinabove we hold that no addition could be made in the hands of the assessee by placing any reliance on Hazir Johri Software. Accordingly, the grounds raised by the assessee are allowed.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 04/07/2025.