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Facts
A search and seizure operation was conducted on entities related to the assessee, leading to the issuance of notices under Section 153A. The Assessing Officer (AO) made additions to income across several assessment years, which were confirmed by the CIT(A). The assessee argued that additions in unabated assessment years require incriminating material found during the search.
Held
The Tribunal noted that the assessee did not represent before the lower authorities and raised legal contentions for the first time. For assessment years 2010-11 to 2015-16, the Tribunal remitted the appeals to the CIT(A) to decide the issue of incriminating material and other legal propositions. For assessment year 2016-17, the appeal was also remitted for verification.
Key Issues
Whether additions made under Section 153A for unabated assessment years are valid without incriminating material found during search. Whether the assessee was denied proper opportunity for cross-examination and evidence submission.
Sections Cited
153A, 144, 40a(ia), 37(1), 68, 145(3), 132(4), 131, 142(2A), 132(4), 153B, 133A, 143(2), 153C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI ARUN KHODPIA
Per Bench: Present appeals filed by the assessee arise out of common order dated 31/01/2024 passed by Ld.CIT(A)-53, Mumbai for assessment years 2010-11 to 2016-17.
It is submitted that the issue alleged in all these appeals are common and identical, arising out of similar facts. Accordingly, ground raised by the assessee for Assessment Year 2010-11 are reproduced as under:
“1. That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in confirming the addition of Rs. 3,00,000/- on account of non-deduction of TDS on the sum amounting to Rs. 3,00,000/- debited to the profit & loss account treated as disallowable u/s 40a(ia) of the Income tax Act, 1961 (hereinafter to be referred as the Act) made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act , in the case of the assessee for AY: 2010-11.
2. That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in confirming the addition of Rs.4,69, 98,892/-on account of disallowance of expenses towards salary and purchases of shares & goods debited to the Profit and Loss Account as unexplained expenditure u/s 37(1) of the Act made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 without appreciating the fact that expenses were linked with the business.
That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in confirming the addition of Rs.14,29,92,416/- on account of receipt of unsecured loan, amount of sundry credits and other payables converted into unsecured 3 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited loans through journal entries and repayment of unsecured loan, aggregating to Rs.14,29,92,416/- treated as unexplained cash credit u/s 68 of the Act, made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 without appreciating the fact that the genuineness of the transactions, identity of the lenders and their credit worthiness with regards to receipt of unsecured loan along with journal entries converted into unsecured loan were prima facie proved by the appellant through documents before the learned Assessing Officer Further that on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in confirming the addition of repayment of loan which by no stretch of imagination was to be treated as unexplained cash credit u/s 68 of the Act.
That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in upholding the addition of 3,00,000/- on account of non-deduction of TDS on the sum amounting to Rs. 3,00,000/- debited to the profit & loss account treated as disallowable u/s 40a(ia) of the Act; addition of Rs.4,69,98,892/ on account of disallowance of expenses towards salary & purchase of shares & goods debited to the Profit and Loss Account treated as bogus in the nature of unexplained expenditure u/s 37(1) of the Act, addition of Rs.14,29,92,416/- on account of receipt of unsecured loan, amount of sundry credits and other payables converted into unsecured loans through journal entries and repayment of unsecured loan, aggregating to Rs.14,29,92,416/- treated as unexplained cash credit u/s 68 of the Act, at page 78- 79 of the assessment order and at pages 54-65 of the appellate order when no incriminating documents qua the unabated assessment year 2010-11 were found during the search operation in the premises of the assessee to justify the impugned additions in line with the settled principle of law that additions in an order u/s 153A of the Income tax Act, 1961 for an unabated assessment year is to be strictly made on the basis of evidence found in the course of the search, or other post search material or requisition of documents and assets pertaining to the searched person or person in whose case requisition has been made, categorially with regards to the assessment year in question. Further that on the facts and in the circumstances of the case and in law, decision of the Id. CIT(A) to uphold all the additions made by the learned Assessing Officer in absence of any incriminating 4 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited documents qua the unabated AY 2011-12 found during the course of search & seizure operation in the case of the appellant is contrary to the decision dated 20th April, 2023 of the Hon'ble Supreme Court of India in Civil Appeal No 6580 of 2021 in the case of Pr. CIT Central-3 Vs Abhisar Buildwel Pvt Ltd and the decision of Delhi High Court in the case of Commissioner of Income Tax (Central)-III Vs. Kabul Chawla (2016) 380 ITR 573 (Delhi) & Principal Commissioner of Income Tax, Central -2, New Delhi Vs. Meeta Gutgutia (2017) 395 ITR 526 (Delhi) and the decision of Jurisdictional Bombay High Court in the case of Commissioner of Income Tax-II, Thane Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bombay).
That on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding the rejection of books of accounts of the assessee u/s 145(3) of the Act by the learned AO while passing the assessment order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 without appreciating that the facts and circumstances of the case did not warrant the rejection of the books of account. Further in this regard that on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in upholding the order passed by the learned AO u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 which entailed additions in respect of entries in the books of accounts of the appellant which had already been rejected u/s 145(3) of the Act.
That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not offering opportunity to produce the evidence in support of the retraction of the earlier admission made by Sri Vipul V. Bhatt in earlier statements recorded on oath u/s 132(4) of the Act and u/s 131 of the Act which had been used against the assessee, through a statement on 02/09/2016 through affidavit submitted before the CIT(A)-50, Mumbai. Further that on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in concurring with the decision of the learned AO to hold that the retraction of statement through an affidavit by Sri Vipul Vidur Bhatt on 02.09.2016 retracting the deposition made by him in his earlier statements made between 04.02.2016 to 12.05.2016 was beyond "reasonable period" with regards to filing of the retraction and there was no conclusive evidences to prove that the statements during 5 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited summon/survey/search actions were recorded under force and coercion by the departmental authorities and as such not maintainable while rejecting the validity of the retraction made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010- 11.
That on the facts and in the circumstances of the case and in law, the Id.CIT(A) has erred in upholding the order passed by the learned AO u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 which was based on the special audit conducted under section 142(2A) of the Act without appreciating that the facts and circumstances of the case warranting a special audit did not exist as there was no such complexity in the accounts of the Appellant.
8. That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in upholding the additions made in the assessment order passed by the learned AO u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 based on the statements of third parties without appreciating the fact that the Appellant was not granted an opportunity of cross examination of the third parties.
That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in appreciating the fact that without any incriminating material found at the premises of the Appellant during the course of search, the statements recorded under section 132(4) did not have any evidentiary value.
That on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact that the approval of the Additional Commissioner was obtained and granted in a mechanical way without any application of mind and the assessment order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2010-11 was passed on the very same day along with other cases in sizeable number. In addition to above further that on the facts and in the circumstances of the case and in law, the CIT(A) erred in ignoring the contention of the appellant that the orders passed u/ 144 read with section 153A of the Act for AY: 2010-11 was time barred u/s 153B of the Act as the order was received on 13.08.2018, beyond 08.08.2018, the last date by which the order was to passed and 6 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited served upon the appellant u/s 153B of the Act, being dispatched from the office of the Assessing officer on 11.08.2018 as supported by the speed post tracking trails of India Post which was utilized to make the service of the order.
The appellant craves leave to add alter amend and or vary any of the above grounds of appeal
relief claimed at any time before the decision of the appeal.”
3. The appeal was fixed for hearing on 28/08/2025 before this Tribunal. However on 28/08/2025 neither any authorised representative, nor anyone else appeared on behalf of the assessee. The appeals were thus adjourned to 01/09/2025 as last opportunity. On 01/09/2025 also none appeared before this Tribunal. It is noted that on earlier dates none appeared on behalf of the assessee, and no vakalatnama was filed. 3.1 Therefore, one more opportunity was granted by this Tribunal and the appeals were taken as heard on 01/09/2025. Subsequently, the assessee filed vakalatnama and a request was made by the authorised representative vide letter dated 08/09/2025 seeking opportunity of hearing. The Ld.AR in the said letter submitted that, due to certain mistake on behalf of his office, the date was not informed to him. Accordingly the appeals were fixed for clarification on 28/09/2025, where the ld. AR appeared virtually.
4. Brief facts of the case are as under :- On 04/02/2016 and 05/02/2016 a search action u/s 132 of the Act along with survey u/s 133A of the Act, 1961 was carried out on the premises of Gurnani Group to which the assessee belongs. Thereafter, consequential search operations were carried out on the premises of the assessee along with other 7 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited so-called exit providers to the beneficiaries in the scrips of M/s Sunrise Asian Limited on 05.02.2016. 4.1. During the survey operation in the business premises of M/s Shipra Fabrics Private Limited, the statement of Sri Prateek Vidur Bhatt, brother of Sri Vipul Vidur Bhatt was recorded u/s 131 of the Act and he testified that the company was operated by Sri Vipul Vidur Bhatt and was not privy to the affairs of the company as well as those of M/s Sunrise Asian Limited which was operated by his brother. 4.2. During the consequential search operation in the premises of Sri Vipul Vidur Bhatt and eleven other entities alleged to be controlled by him including M/s Dolex Commercial Private Limited (the assessee before this Tribunal), Sri Vipul Vidur Bhatt accepted that he was an entry operator involved in providing various bogus accommodation entries to various beneficiaries for earning commission and furnished names of 347 bogus entities including the assessee which were controlled/operated by him for providing bogus accommodation entries to the various beneficiaries. He also accepted that he controlled the entire affairs of these companies including the assessee that were incorporated by him for providing bogus accommodation entries only. 4.3. On 10/01/2017 notice u/s 153A of the Act was issued to the assessee. In response, on 11/02/2017 the assessee filed return of income to notice u/s 153A of the Act declaring total income at Rs. 3,21,170/-. Subsequently on 24/03/2017 notice u/s 143(2) of the Act issued to the assessee.
8 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited 4.4. It is noted that on 08/08/2018 assessment orders were passed u/s 144 read with section 153A of Act for assessment years 2010-11 to 2016-17 by assessing total income in the hands of the assessee as under :- Assessment year Total income assessed Income declared in (Rs.) ROI 2010-11 19,07,37,558/- 4,46,250/- 2011-12 26,64,66,436/- 3,21,170/- 2012-13 77,18,17,851/- 12,930/- 2013-14 53,60,16,252/- Nil 2014-15 1,13,21,13,035/- 16,40,930/- 2015-16 2,35,75,02,255/- 17,68,050/- 2016-17 1,45,04,25,500/- 9,23,270/- Additions during the assessment years were made on account of :-
1. 1. Disallowance of expenses 2. Addition on account of non deduction of TDS 3. Addition on account of salary & purchase of shares 4. Addition on account of receipt of unsecured loans Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld.CIT(A) for all the years under consideration.
5. The Ld.CIT(A) confirmed the additions made by the Ld.AO on the ground that neither the assessee nor any representative appeared to file any documentary evidences to assail the additions made by the Ld.AO.
9 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited Aggrieved by the orders passed by the Ld.CIT(A) the assessee is in appeal before this Tribunal in all the assessment years under consideration. For assessment year 2010-11 to 2015-16 6. The Ld.AR submitted that assessment years 2010-11 to 2015-16 are unabated, and unless there are any incriminating materials/evidences that was found during the course of search and seizure operation, it was not upon to the Ld.AO to make additions based on the return of income filed by the assessee. 6.1 In other words, he submitted that the Ld. AO, in respect of unabated assessment years, cannot make additions/ disallowances of various expenses and treat unsecured loan as unexplained cash credits, or any other issue emanating from verification of accounts, as done in normal assessment, without making reference to any incriminating material that belonged to the assessee having direct nexus to relevant assessments that was found and seized during the search operation u/s 132 of the Act or requisitioned u/s 132A of the Act in the case of the assessee. He submitted that, assessment under section 153A of the Act entails that additions should be strictly made on the basis of evidence found in the course of the search, or other post search material or requisition of documents and assets pertaining to the searched person or person in whose case requisition was made, qua the assessment years in question. 6.2 In support of this proposition, the Ld.AR placed reliance on the following decisions of various High Courts including the decision of the Hon'ble Jurisdictional High Court:
10 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited a) Commissioner of Income Tax (Central)-III Vs. Kabul Chawla (2016) 380 ITR 573 (Delhi) b) Principal Commissioner of Income Tax, Central -2, New Delhi Vs. Meeta Gutgutia (2017) 395 ITR 526 (Delhi) c) Chintels India Ltd. Vs. Deputy Commissioner of Income Tax- Circle -8, Delhi (2017) 397 ITR 416 (Delhi) d) Principal Commissioner of Income Tax-4 Vs. Saumya Construction (2016) 387 ITR 529 (Gujarat) e) Principal Commissioner of Income Tax, Ahmedabad Vs. Dipak Jashvantlal Panchal 2017 (2) TMI 862(Gujarat) f) Principal Commissioner of Income Tax-2 Vs. Jay Infrastructure and Properties Pvt. Limited 2016 (10) TMI 1022 (Gujarat) g) Commissioner of Income Tax-II, Thane Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bombay) h) Smt. Jami Nirmala Vs. Principal Commissioner of Income Tax (2021) 437 ITR 573(Orissa) i) Smt. Smruti Sudha Nayak Vs. Union of India (2021) 439 ITR 193 (Orissa) j) Commissioner of Income Tax, Kolkata Vs. Veerprabhu Marketing Limited (2016) 388 ITR 574 (Calcutta) k) Principal Commissioner of Income Tax-2, Kolkata Vs. M/s Salasar Stock Broking Ltd.2016 (8) TMI 1131 (Calcutta)
6.3 The Ld.AR further submitted that the above legal position with regard to the assessments u/s 153A/153C as enunciated by various High Courts, now been affirmed by the Hon'ble Supreme Court in the decision in case of PCIT-Central-3 Vs Abhisar Buildwel Pvt Ltd reported in (2023) 149 taxmann.com 399laying down the following clear and unambiguous position of law:
11 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited "9. While considering the issue involved, one has to consider the object and purpose of insertion of Section 153A in the Act, 1961 and when there shall be a block assessment under Section 153A of the Act, 1961.9.1 That prior to insertion of Section 153A in the statute, the relevant provision for block assessment was under Section 158BA of the Act, 1961. The erstwhile scheme of block assessment under Section 1588A envisaged assessment of 'undisclosed income' for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to assess the 'undisclosed income' and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the 'undisclosed income' was chargeable to tax at a special rate of 60% under section 113 whereas income other than 'undisclosed income' was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under Section 153A are triggered by conducting of a valid search under Section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under Sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search." 6.4 The Ld.AR also raised various other legal proposition challenging the validity of the proceedings, of which the submissions are placed in the paper book at page 6-29. 6.5 On the contrary, the Ld.DR submitted that, the assessee has raised all legal contentions for the first time before this Tribunal.
12 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited 6.6 He emphasised that, the authorities below were never represented by the assessee and therefore, of the legal pleas raised now for the first time could not have been considered/verified by the authorities below. The Ld. DR in respect of the main plea raised by the Ld.AR reproduced here in above submitted that whether there was any incriminating material qua each assessment year needs to be verified, without which the argument of Ld.AR cannot be appreciated. He thus submitted that the appeals may be remanded to the Ld.CIT(A) for necessary verification on the legal issues that are raised by the assessee for the first time before this Tribunal. We have perused the submissions advance by both sides in the light of record placed before us. 7.1. The Ld.AR at the outset, submitted that, assessment year 2010-11 to 2015-16 falls within the search period. He submitted that, assessment year 2016-17 is the year in which search took place and therefore, falls outside the preview of provision of section 153A.
7.2. It is noted that, the assessee filed voluminous paper books in support of the grounds raised. On perusal of the same, it is noted that, none of the submissions in respect of the legal grounds/merits were filed before the authorities below. It is further noted that, the paper book primarily contains submissions of the assessee assailing against the action of the Ld.CIT(A) confirming the addition made by the Ld.AO. The assessee filed bank statements which were never subjected to verification by the authorities below.
13 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited 7.3. At the outset, it is noted that, the orders passed by the Ld.CIT(A) for all years under consideration are ex-parte orders. It is also noted that, the assessment orders passed were also u/s. 144 read with 153A of the Act. The assessee had not responded to the notices issued by the authorities below. 7.4. We further agree with the contention advanced by Ld.AR that in absence of any incriminating materials unearthed during the course of search no additions can be made in the hands of the assessee in respect of assessment years that attained finally and had not abated as on the date of search. However, it is noted that the assessee never represented before the Ld.AO and Ld.CIT(A) and, therefore, the facts on merits were not verified. The legal propositions raised by the assessee are for the first time before this Tribunal. In the interest of justice, we remit appeals for assessment years 2010-11 to 2015-16 back to the file of the Ld.CIT(A) to adjudicate legal issue raised by the assessee regarding incriminating materials being present or not, qua the additions, qua these assessment years. The Ld.CIT(A) is directed to verify the same from the assessment records. In the event it is found that there are no incriminating materials qua the additions qua the assessment years, the same deserves to be deleted in light of the principles laid down by Hon’ble Supreme Court in case of Pr. CIT Central-3 Vs Abhisar Buildwel Pvt Ltd (supra).However, in the even the incriminating materials are available, other legal prepositions raised by the assessee are to be adjudicated and the merits also need to be verified. The Ld.CIT(A) is also then directed to pass a detailed order on merit by granting proper opportunity of being heard to the assessee.
14 ITA1595 to 1598&1618 to 1620/Mum/2025; A.Y. 2010-11 to 2016-17 Dolex Commercial Private Limited Accordingly, all grounds raised by the assessee for assessment year 2010-11 to 2015-16 stands partly allowed for statistical purposes.
For assessment year 2016-17
Assessment Year 2016-17 is the year in which search took place. It is noted that identical additions are made in preceding assessment years. As the assessee has not represented before the authorities below, in the interest of justice, we remit this appeal to the Ld.CIT(A) to carry out necessary verification of the evidence/documents filed by the assessee against each addition. The Ld.CIT(A) is directed to carry out proper verification and to consider the issues in accordance with law. The Ld.CIT(A) is directed to pass detailed order on merits.
Needless to say that proper opportunity of being heard must be granted to the assessee.
Accordingly the grounds raised by the assessee for A.Y. 2016- 17 stands allowed for statistical purposes. In the result the appeals filed by the assessee for A.Y. 2010- 11 to 2016-17 stands partly allowed for statistical purposes. Order pronounced in the open court on 31/10/2025 Sd/- Sd/- (ARUN KHODPIA) (BEENA PILLAI) Accountant Member Judicial Member Mumbai: Dated: 31/10/2025 Poonam Mirashi, Stenographer