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Facts
A search action was conducted on the Mohini group, during which a diary was seized containing cash transactions related to the assessee for F.Y. 2012-13 (A.Y. 2013-14). Based on this, a notice under Section 153C was issued for A.Y. 2014-15, and an assessment order was passed making an addition under Section 68. The CIT(A) allowed the assessee's appeal on legal grounds, quashing the assessment order, concluding that there was no incriminating material pertaining to A.Y. 2014-15.
Held
The Tribunal upheld the CIT(A)'s decision, confirming that the only seized incriminating material pertained to F.Y. 2012-13 (A.Y. 2013-14), not the assessment year under consideration (A.Y. 2014-15). Citing Supreme Court and High Court judgments, the Tribunal ruled that the AO failed to establish a nexus between the seized material and the A.Y. 2014-15 income, rendering the Section 153C notice and subsequent assessment order invalid. The decision applied to all assessment years involved (2014-15 to 2016-17 & 2018-19).
Key Issues
Whether assessment proceedings initiated under Section 153C were valid when the seized incriminating material pertained to a different assessment year and no such material was found for the year under consideration, and whether the AO established the necessary nexus between the seized material and the income assessed for that year.
Sections Cited
132, 143(3), 153C, 250, 68
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Before: SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL & SMT. RENU JAUHRI
Assessee by: None Revenue by: Shri Aditya M. Rai - SR. DR Date of Hearing 18.07.2025 Date of Pronouncement 29.09.2025 आदेश / O R D E R PER BENCH [A.M.] :- These four appeals are filed by the revenue against the order of the Commissioner of Income Tax, Appeal CIT (A) 50, Mumbai 22.01.2025 passed to 1895 AY 2014-15 to 2018-19 CO No. 160 to 163 AY 2014-15 to 2018-19 u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year: 2014-15 to 2016-17 & 2018-19 and the assessee has filed corresponding cross objections.
i. The revenue has raised the following common grounds in these appeals. “1. Whether ground that the Ld. CIT (A) erred in allowing the appeal of the assessee on the whereas the incrementing material, which was seized, was not available, Officer during the same was available and was duly relied upon by the Assessing the assessment proceedings. 2. Whether under Section the Ld. CIT (A) failed to appreciate that the assessment order passed under section 153C of the Act was based on the incrementing material which was seized, Cleary established the nexus between the seized material and the income assessed.
Whether the Ld. CIT (A) ignored the fact that the assessee failed to provide the any explanation for incrementing material which was seized, clearly indicated in the involvement of the assessee in the unaccounted transactions.
4. Whether the Ld. CIT (A) erred in holding that the assessment order was not based on any material on found or seized during the search, which is contrary to the fact and evidence record. 5. The appellant craves leave to add to, alter, amend, modify and/ or delete any or all of the above said grounds of appeal, the appellant reserves its right to file further submissions in the appeal.” ii. Grounds taken in the cross objection:
CO Ground 1 - The Ld. CIT A has correctly allowed the Assessees appeal by observing that no incriminating material was found during the search that pertained to the Assessee, particularly in relation to the amount of loans and advances which formed the basis of the addition by the Assessing Officer. The seized documents relied upon by the AO neither belonged to the Assessee nor contained any reference indicating that such transactions, Loans and Advances were unaccounted or attributable to the Assessee. The addition made in the assessment was based entirely on presumptions and without support from any seized evidence, which is a pre-requisite under section 153C. The CIT Appeals findings are therefore legally and factually sound and deserve to be upheld. CO Ground 2 - The Ld. CIT A rightly concluded that the seized material, even if assumed to be available with the Assessing Officer, was not incriminating in nature vis-a-vis the Assessee and thus could not be used to support addition in proceedings initiated under section 153C. It is submitted that the ground taken by the appellant - Revenue is factually incorrect as the addition made to 1895 AY 2014-15 to 2018-19 CO No. 160 to 163 AY 2014-15 to 2018-19 by the AO has not been based on the seized material. There is no mention of any loans and advances in the documents seized during the search that the Revenue claims to be related to the Assessee. Hence, the CIT Appeals observation that the assessment is not based on any incriminating material is justified. CO Ground 3 - The Ld. CIT Appeals has correctly rejected the stand of Revenue, which was based on assumptions and conjectures without any credible evidence linking the seized documents to the Assessee. It is emphasized that there was absolutely no seized material that related to the transactions of loans and advances which are the subject mater of the assessment order and the appeal. Furthermore, there is no seized material pertaining to the year under consideration. These facts clearly support the CIT Appeals finding that the assessment order lacked any legal foundation under section 153C. Therefore, the CIT Appeals decision is justified and deserves to be upheld. CO Ground 4 - The finding of the CIT Appeals that the assessment order is not based on any valid incriminating material is well supported by the documents on record. It is critical to highlight that the entire addition made by the AO is not in any way linked to the seized material. Furthermore, it is a mater of fact that no document or evidence seized during the search pertained to the Assessee for the year under consideration, or to loans and advances under which the addition to Income is made. Hence, the foundation of the assessment itself is flawed and the CIT Appeals order rightly invalidated the notice Issued Under Section 153C which is supported by various Judicial Pronouncements. CO Ground 5 Against Appellants General Reservation - The Assessee objects to the general reservation made by the appellant to alter, amend, or delete any grounds of appeal or file further submissions. It is respectfully submitted that such blanket liberty, if not subject to the approval and discretion of the Hon. Tribunal, may prejudice the Assessee and undermine the principles of natural justice and fair hearing. CO Ground 6 - Further we would also like to bring on record, by respectfully submitting that our additional grounds of appeal, viz., Grounds No. 3 and 4 at CIT Appeals stage were not adjudicated by Learned CIT Appeals. We respectfully would like to bring on record, that the Ground No. 3 challenges the entire proceedings as invalid in absence of a Satisfaction note recorded by the AO of the defendant, and Ground No. 4 where the notice has been issued by the AO without application of mind and cogent satisfaction as it was issued just one day after the receipt of seized material. Hence, we humbly pray to hon. Tribunal to consider this submission made during the CIT Appeals Proceedings and which was not adjudicated by the learned CIT Appeals, which goes to the root of the mater, i.e., the notice Issued Under section 153C was bad in law and void-ab-initio as it was Issued by the AO without having a proper satisfaction note on record.
3. As identical issues and facts are involved in all four appeals and corresponding cross-objections, these are being disposed off by a common order and A.Y. 2014-15 is taken up as the lead case. to 1895 AY 2014-15 to 2018-19 CO No. 160 to 163 AY 2014-15 to 2018-19 A.Y. 2014-15 Brief facts of the case are that the assessee filed return declaring income of Rs. 44,98,330/- for A.Y. 2014-15 on 31.03.2015. Assessment u/s. 143(3) was completed on 23.12.2016 by making an addition of Rs. 63,500/-. Subsequently a search and seizure action u/s. 132 of the Act was conducted in Mohini group of cases on 07.05.2018. During the course of this search, certain incriminating documents were found and seized. One such document was a diary containing 17 pages in which certain cash and other transactions were recorded. On one of the pages, name of the assessee ( i.e Shri Piyush Bongirwar) was written and following details of payments were mentioned 8,50,000 20.12.2012 3,00,000 14.01.2013 3,00,000 21.01.2013 1,50,000 24.01.2013 This information was received by the ld. AO from the AO of M/s . Mohini Realtors group. Accordingly, satisfaction was recorded and notice u/s. 153C was issued on 30.09.2020. Thereafter assessment was completed by making addition u/s. 68 in respect of cash credits of Rs. 2,16,50,000/- vide order u/s. 143(3) r.w.s. 153C dated 20.09.2021. Aggrieved, the assessee preferred an appeal before ld. CIT(A). The assessee, besides challenging the addition on merits, also raised legal grounds regarding validity of 153C notice in the absence of any incriminating material and without recording statutory satisfaction. Ld. CIT(A) vide his order dated 22.01.2025 has allowed appeal of the assessee on the legal issue with the following observations: to 1895 AY 2014-15 to 2018-19 CO No. 160 to 163 AY 2014-15 to 2018-19 “24.I find that all the entries appearing on the page on which the name "Piyush Bongirwar" is written are relating to the F.Y. 2012-13, the relevant assessment year being A.Y.2013-14. Thus, there is no incriminating material/document pertaining to the assessment year under consideration (A.Y. 2014-15) referred to in the satisfaction note. As specifically required vide this office letter dated 08/03/2024, the AO has forwarded the copies of the documents pertaining to the appellant found during the search and based on which the notice u/s.153C of the Act were initiated and copies of the statements recorded during the search. In addition to the document (page containing the transactions relating to F.Y. 2012-13) discussed in the satisfaction note, as stated above, the AO has also forwarded a copy of another document, being a computer print-out of Ledger Account of Arun Bongirwar / Piyush Bongirwar MC # 801 in the books of Mohini Sheltors Pvt. Ltd. for the period 01/04/2007 to 31/03/2018. However, it is found that all the transactions reflected in this ledger account are pertaining to F.Y. 2013-14 and prior period and are through banking channels, except one transaction, which is by way of journal entry. Though certain transactions reflected in this ledger account are related to the assessment year under consideration (A.Y. 2014-15), as mentioned above, all these transactions, except for one journal entry, are made through banking channels. Further, the ledger account is in both the names of Arun Bongirwar and Piyush Bongirwar. In any case, most importantly, the AO of the searched person has not referred to this document at all in the satisfaction note recorded by him. Besides, even in the impugned assessment order, either while discussing the facts leading to the initiation of the proceedings u/s. 153C of the Act or while discussing the issue relating to addition u/s. 68 of the Act, the AO has also not referred to any of the transactions reflected in this document. Thus, it is evident that neither the AO of the searched person nor the Assessing Officers who issued the notice u/s.153C and who completed the impugned assessment u/s.153C of the Act had considered this document to be incriminating. Further, the AO has forwarded copy of the statement of Shri Abhijit Arvind More recorded during the search, and I find that there is nothing in his statement which may enable to take any adverse inference in the case of the appellant for the assessment year under consideration.
25. As already discussed hereinabove, before invoking the provisions of Section 153C of the Act, the AO was required to be satisfied that the seized material is likely to have a bearing on the determination of the total income of the appellant for the assessment year under consideration. Further, such satisfaction was also required to be recorded in writing by the AO, before issuing the notice u/s. 153C of the Act. From the satisfaction note recorded by the AO of the searched person and also after considering the documents/material forwarded by the AO in this regard, it is evident that no documents / material pertaining to or containing any information relating to the appellant and having a bearing on the determination of the total income of the appellant for the assessment year under consideration had been found during the search in the case of Mohini Group. As held by the Hon'ble Delhi High Court, even if certain documents, etc. belonging to an assessee (other person) were seized from the primary person, the proceedings u/s. 153C of the Act cannot be initiated in the case of other person for all the six assessment years immediately preceding the year of search, and it is a pre-condition for invoking the provisions of Section 153C of the Act that the AO should be satisfied that the documents/material so seized are also likely to have a bearing on the determination of the total income of the other person for each of the six preceding assessment years. In the present case, it has been found that there is no such document/material.
26. Further, in the impugned assessment order also, the AO has not referred to any incriminating material relating to the appellant and pertaining to the assessment year under consideration found/seized during the search, based on which the proceedings u/s. 153C of the Act for the year were initiated. Further, the addition to 1895 AY 2014-15 to 2018-19 CO No. 160 to 163 AY 2014-15 to 2018-19 made u/s.68 of the Act by the AO in the impugned assessment order is also not based on any incriminating material found/seized during the course of the search. Rather, the addition has been made on the basis of the financial statements of the appellant and details furnished during assessment proceedings. This is evident from the discussion made by the AO in this regard. Hence, it is evident that there was no document/material pertaining to or containing any information relating to the appellant and which was likely to have a bearing on the determination of his total income for the assessment year under consideration found and seized during the search in the case of Mohini Group.
27. In the absence of any incriminating material relating to the appellant and having a bearing on the determination of his total income for A.Y. 2014-15 found and seized during the search and in view of the provisions of Section 153C of the Act and also the above decisions of the Hon'ble Supreme Court and Delhi High Court, the action of the AO in initiating proceedings u/s. 153C of the Act in the case of the appellant for A.Y. 2014-15 and consequently passing the impugned assessment order dated 20/09/2021 u/s. 143(3) r.w.s. 153C of the Act cannot be held to be in accordance with law.
28. In the light of the discussion in the foregoing paragraphs, I hold that the notice issued u/s. 153C of the Act and consequent assessment order passed u/s. 143(3) r.w.s. 153C of the Act in the case of the appellant for A.Y. 2014-15 are invalid. Accordingly, the impugned assessment order dated 20/09/2021 passed by the AO u/s. 143(3) r.w.s. 153C of the Act for A.Y.2014-15 is hereby quashed. The Additional Ground No. 2 taken by the appellant for A.Y.2014-15 is ALLOWED.”
Aggrieved, the revenue has filed appeal before the Tribunal against the CIT(A)’s order while the assessee has filed cross objections supporting the order.
Before us, ld. DR submitted that ld. CIT(A) wrongly held that incriminating material, which was seized, was not available and that the proceedings u/s. 153C were based on incriminating material which was seized during the course of search. A copy of the satisfaction note and photocopy of the relevant page of the seized diary have also been filed by ld. DR during the course of hearing before us.
to 1895 AY 2014-15 to 2018-19 CO No. 160 to 163 AY 2014-15 to 2018-19 5. On the other hand, ld. AR has argued that there was no incriminating material with the ld. AO on the basis of which notice u/s. 153C could be issued for A.Y. 2013-14. The only incriminating material against the assessee is one page of the seized diary wherein the following transactions with the assessee are mentioned. 8,50,000 20.12.2012 3,00,000 14.01.2013 3,00,000 21.01.2013 1,50,000 24.01.2013 Apart from the above, the AO has no other material in his possession and all the above transactions pertain to A.Y. 2013-14 and therefore, cannot form the basis for issuing notice u/s. 153C for A.Y. 2014-15 and subsequent years. In this regard, Ld. AR has placed reliance on the decision of the Hon'ble Apex Court in the case of Abhisar Buildwell Pvt. Ltd. [2023]454 ITR 212 (SC) as well as several other decisions of Hon'ble High Court wherein it has been held that notice u/s. 153C could be issued only in respect of assessment years for which incrimination material had been found. In Saksham Commodities Ltd. Vs. ITO [2024] 161 taxmann.com 485 (Delhi) this issue has been further elaborated in the light of Hon'ble Apex Court’s decision in Abhisar Buildwell Pvt. Ltd.(Supra). Hon'ble High Court has held in that case that since section 153C was invoked in respect of Assessment years for which no incriminating material had been gathered or obtained and satisfaction notes also failed to record any reasons as to how material discovered and pertaining to a particular Assessment year was likely to “have a bearing on the determination of total income” for year to 1895 AY 2014-15 to 2018-19 CO No. 160 to 163 AY 2014-15 to 2018-19 which was sought to be abated or reopened in terms of impugned notices, in such circumstances, proceedings initiated u/s. 153C would not sustain. Relevant portion of the order of Hon'ble Delhi High Court in Saksham Commodities ((Supra)) is reproduced below: “51.Ultimately Section 153C is concerned with books, documents or articles seized in the course of a search and which are found to have the potential to impact or have a bearing on an assessment which may be undergoing or which may have been completed. The words "have a bearing on the determination of the total income of such other person" as appearing in Section 153C would necessarily have to be conferred pre-eminence. Therefore, and unless the AO is satisfied that the material gathered could potentially impact the determination of total income, it would be unjustified in mechanically reopening or assessing all over again all the ten AYs' that could possibly form part of the block of ten years.
The decisions which hold that an assessment is liable to be revised only if incriminating material be found, even if rendered in the hold that section 153A, would clearly govern the question that stands posited even in the context of Section 153C. It would be relevant to recall that the Division Bench in Kabul Chawla had observed that in the absence of any incriminating material, a completed assessment may be reiterated and the abated assessment or reassessment be concluded. The importance of incriminating material was further underlined in Kabul Chawla with the Court observing that completed assessments could be interfered with, only if some incriminating material were unearthed. This aspect came to be reiterated in RRJ Securities when the Court held that it would be impermissible to either reopen or reassess a completed assessment which may not be impacted by the material gathered in the course of the search and which may have no plausible nexus. The aforesaid position also comes to the fore when one reads para 17 of ARN Infrastructure and which annulled an action aimed at reopening assessments for years to which the incriminating document which was found did not relate.
Sinhgad Technical Education Society also constitutes a binding precedent in respect of the aforesaid proposition as would be evident from the Supreme Court noticing that the material disclosed pertained only to AY 2004-05 or thereafter and that consequently the Section 153C action initiated for AYs' 2000-01 to 2003-04 would not sustain. It was this position in law as enunciated in that decision which came to be reiterated by our Court in Index Securities.
In any case, Abhisar Buildwell, in our considered opinion, is a decision which conclusively lays to rest any doubt that could have been possibly harboured. The Supreme Court in unequivocal terms held that absent incriminating material, the AO would not be justified in seeking to assess or reassess completed assessments. Though the aforesaid observations were rendered in the context of completed assessments, the same position would prevail when it comes to assessments which abate pursuant to the issuance of a notice under Section 153C. Here too, the AO would have to firstly identify the AYs' to which the material gathered in the course of the search may relate to 1895 AY 2014-15 to 2018-19 CO No. 160 to 163 AY 2014-15 to 2018-19 and consequently it would only be those assessments which would face the spectre of abatement. The additions here too would have to be based on material that may have been unearthed in the course of the search or on the basis of material requisitioned. The statute thus creates a persistent and enduring connect between the material discovered and the assessment that may be ultimately made. The provision while speaking of AYs' falling within the block of six AYs' or for that matter all years forming part of the block of ten AYs', appears to have been put in place to cover all possible contingencies. The aforesaid provisions clearly appear to have been incorporated and made applicable both with respect to Section 153A as well as Section 153C ex abundanti cautela. Which however takes us back to what had been observed earlier, namely, the existence of the power being merely enabling as opposed to a statutory compulsion or an inevitable consequence which was advocated by the respondents.
Take for instance a case where the material gathered in the search is contemplated to have an adverse impact on the declarations and disclosures made by an assessee pertaining only to AYs' 2016-17 and 2017-18. What we seek to emphasise is that pending assessments for those two years could validly form subject matter of action under Section 153C and pending assessments in that respect would surely abate. However, that by itself would not be sufficient to either reopen or issue notices in respect of AYs' prior to or those falling after those two AYs' and which may otherwise fall within the maximum block period of ten years merely because the statute empowers the AO to do so. Unless the material gathered and recovered is found to have relevancy to the AY which is sought to be subjected to action under Section 153C, it would be legally impermissible for the respondents to invoke those provisions. Consequently, the AO would be bound to ascertain and identify the year to which the material recovered relates. The years which could be then subjected to action under Section 153C would have to necessarily be those in respect of which the assessment is likely to be influenced or impacted by the material discovered. Section 153C neither mandates nor envisages a mechanical or an en blanc exercise of power, or to put it differently, one which is uninformed by a consideration of the factors indicated above.”
It has been submitted by ld. AR that SLP of the revenue against the above order of Hon'ble Delhi High Court has also been dismissed. Further, in a latest decision, Hon'ble jurisdictional High Court in the case of Ashok Khandelwal Vs. UOI [20225]176 taxmann.com 709 (Bombay) has reiterated that notice u/s. 153C could be issued only in respect of assessment years for which incriminating material has been gathered or obtained.