DODHIA SYNTHETICS LIMITED,BHIWANDI vs. DCIT-CC-3, THANE, THANE

ITA 2204/MUM/2025Status: DisposedITAT Mumbai17 September 2025AY 2020-2175 pages
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What did the Tribunal hold?

The Tribunal held that for unabated assessment years, additions under Section 153A of the Act cannot be made in the absence of any incriminating material found during the search from the premises of the assessee. Statements of third parties or material found from other premises, not relatable to the assessee's premises, cannot form the basis for additions in Section 153A proceedings for completed assessments, unless separate proceedings under other provisions are initiated. The Tribunal noted that the seized documents (pages 36-38 of Bundle No. 3) were not found from the searched premises of the assessee and were seized from Shri Divyesh Dhanani. In the absence of any incriminating material found from the assessee's premises, no addition can be made for the years under consideration. The Tribunal relied on its own coordinate bench decisions in A One Sizing Works and Arun Amber Silk Mills Private, and the Gujarat High Court decision in Principal Commissioner of Income-tax (Central) v. Hitesh Ashok Vaswani, which held that assessments based on material seized from premises of other persons (covered by simultaneous search) could not be used in the hands of the searched person unless Section 153C proceedings were initiated. The Tribunal found that the warrant of authorization was in the name of Shri Divyesh Dhanani and Smt Kunjal Dhanani, and the assessee company was not covered. Therefore, additions could not be made in the hands of the assessee company without resorting to the process of recording a satisfaction note under Section 153C and initiating separate proceedings under that section. The Tribunal did not explicitly decide on the issues related to Section 68, natural justice, or the reopening of assessment, as the primary ground regarding the absence of incriminating material from the assessee's premises was decisive for the assessment years under Section 153A.

What were the facts?

The appeals involve Dodhia Filaments Pvt Ltd., Dodhia Synthetics Ltd., and Ritesh Mansukhlal Dodhia, challenging orders passed by the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Years (AYs) 2013-14 to 2019-20. The assessee and revenue have filed multiple appeals concerning various impugned orders. The primary issues revolve around the reopening of assessments, additions made under Section 68 for share application money, and additions for alleged undisclosed cash receipts and negative cash balances under Sections 69A and 69C. The appeals were clubbed for consolidated hearing. AY 2013-14 was taken as the lead year for discussion.

What were the issues?

1. Whether the reopening of assessment was bad-in-law, being based on borrowed satisfaction from the Investigation Wing without independent application of mind by the Assessing Officer (AO), especially when the case was previously assessed under Section 143(3), making reopening impermissible under the proviso to Section 147 of the Income Tax Act, 1961. 2. Whether the assessment order was liable to be quashed and additions deleted due to the AO's failure to follow principles of natural justice by not supplying relevant materials, statements, reports, and affording an opportunity for cross-examination, despite specific requests. 3. Whether the addition of Rs. 1,50,00,000/- under Section 68 on account of share application money received from four specific companies was justified, when the assessee contended it had discharged its onus by providing documentary evidence of identity, creditworthiness, and genuineness of transactions. 4. Whether the addition of Rs. 2,76,73,383/- under Section 69A and Rs. 27,15,548/- under Section 69C for alleged undisclosed cash receipts and peak of negative cash balance was valid, particularly when the seized material was from a third party and did not explicitly indicate the assessee's involvement. Assessee's Contentions: - Reopening based on borrowed satisfaction, lack of independent application of mind, and failure to provide reasons and approvals. - Violation of natural justice by withholding information and denying cross-examination. - Discharge of onus under Section 68 with documentary evidence for share application money. - Additions under Sections 69A and 69C unjustified as no incriminating material was found from the assessee's premises, and seized documents were from third parties without explicit involvement of the assessee. - Reliance on ITAT Mumbai decisions in A One Sizing Works vs. ACIT and Arun Amber Silk Mills Pvt. vs. DCIT, and Gujarat High Court in PCIT vs. Hitesh Ashok Vaswani. Revenue's Contentions: - Relied on the CIT(A)'s orders upholding the additions. - Argued that incriminating material need not be found only from the assessee's premises in a group search. - Cited ITAT Rajkot decision in Ahir Salt and Allied Products vs. DCIT.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 68,Section 69A,Section 69C,Section 153A,Section 153C

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IN THE INCOME TAX APPELLATE TRIBUNAL, ‘D’ BENCH MUMBAI BEFORE: SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER

ITA (SS) NO. AY Assessee / Assessee Respondent 795/Mum/2025 2013-14 Dodhia Filaments Pvt Ltd. DCIT, CC -3 Room No. 12, A wing, 6th Floor, Ashar IT Park, Thane (W) 796/Mum/2025 2014-15 797/Mum/2025 2015-16 69/100, New Mavji compound, Narpoli 798/Mum/2025 2016-17 799/Mum/2025 2017-18 Behind Ratan Talkies Bhiwandi 2189/Mum/2025 2013-14 Dodhia Synthetics Ltd., DCIT, CC -3 2190/Mum/2025 2013-14 House No. 98/2, Room No. 12, A wing, 6th Floor, Ashar IT Park, Thane (W) 2200/Mum/2025 2019-20 Dodhia House, Behind Ratan Talkies, narpoli 2201/Mum/2025 2014-15 New Mavji compound 2202/Mum/2025 2016-17 2203/Mum/2025 2017-18 2204/Mum/2025 2019-20 2205/Mum/2025 2018-19 2206/Mum/2025 2015-16 2105/Mum/2025 2014-15 DCIT, CC -3 Dodhia Synthetics Ltd., 2106/Mum/2025 2015-16 Room No. 12, A wing, 6th Floor, Ashar IT Park, Thane (W) Dodhia House, Behind Ratan Talkies, narpoli New Mavji compound 2227/Mum/2025 2016-17 Ritesh Mansukhlal Dodhia DCIT, CC-3 Room No. 12, A wing, 6th Floor, Ashar IT Park, Thane (W) 104, New Mavji Vompad, Dodhia House, Narpoli Assessee by Ms.

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