KOMAL RAVJI CHHEDA,MUMBAI vs. DCIT, CIRCLE 42(1)(1), MUMBAI, BANDRA KURLA COMPLEX

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 4661/MUM/2025 Assessment Year: 2011-12 Komal Ravji Chheda vs DCIT, Circle 42(1)(1), Office No. 105, Mumbai New Krishna Niwas, Roshan Nagar, Chandawarkar Lane, Borivali West, Mumbai - 400092 (PAN: AABPC0356N) Appellant Respondent Present for: Assessee : Shri Dharan Gandhi, Advocate Revenue : Smt. Sujatha Iyyanger, Sr. DR Date of Hearing : 16.06.2026 Date of Pronouncement : 31.08.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by assessee is against the order of the Ld. CIT (A) 51, Mumbai, Order No. ITBA/APL/S/250/2025-26/1076452176(1) dated 26.05.2025 passed against the assessment order by ACIT, 32(2), Mumbai, u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 (‘the Act’) dated 27.12.2018 for Assessment Year 2011-12.

ITA No. 4661/Mum/2025 Komal Ravji Chheda AY 2011-12 2. Assessee has raised the following grounds of appeal: (1) The Learned CIT(A) failed to appreciate that reopening of assessment u/s 147 in the facts and circumstances of the case is bad in law. (2) The Learned CIT(A) failed to appreciate that reopening of assessment u/s 147 is bad in law as same is done beyond four years and there is no new tangible material and reopening is done on the basis of information received (sharing of information) in the form of letter from DDIT (Inv.)-Unit 5(4), Mumbai, and there is no independent satisfaction of AO that income has escaped assessment and hence reopening is bad in law and liable to be quashed. (3) The Learned CIT(A) failed to appreciate that reopening of assessment u/s 147 is bad in law as same is done on the basis of third-party statement not supported by any corroborative evidence and thus there existed reason to suspect and not reason to believe that income has escaped assessment and hence reopening is bad in law and liable to be quashed. (4) On the facts and circumstances of the case, the Learned CIT(A) failed to appreciate that reopening of assessment u/s 147 is bad in law and void ab initio as reopening is without jurisdiction as in the present case assessment is sought to be made on the basis of information received w.r.to Assessee from third party search and as such Assessment can be made u/s 153C and hence reopening u/s 147 is bad in law and liable to be quashed. On Merits: (5) On facts and Circumstances of the case and in law, the Learned CIT(A) erred in confirming addition of Rs, 4,10,00,000/- made u/s 69 of the Act in the assessment order passed u/s. 143(3) r.w.s 147 of the Act without appreciating that – (a) the appellant has not paid any cash to either M/s. Evergreen Enterprise or Shri Nilesh Bharani, as alleged in the reassessment order & that provisions of sec.69 do not apply; (b) no such evidence or material is found proving any such cash is paid and it is not known as to how the figure of Rs.4.10 cr. is derived; (c) Shri Nilesh Bharani (i.e. Third Party) in cross examination before the Assessing Officer has denied any cash transaction with the appellant and; (d) the conclusion drawn in the reassessment order is merely allegation and suspicion without establishing the same with any conclusive evidence or material;

ITA No. 4661/Mum/2025 Komal Ravji Chheda AY 2011-12 (6) The Learned CIT(A) erred in confirming addition of Rs, 4,10,00,000/- made u/s 69 of the Act being alleged cash loan received by Shri Nilesh Bharani from appellant without appreciating that such addition is made on the basis of statement of Mr. Nilesh Bharani and the statement of Mr. Nilesh Bharani (i.e. third party ) do not state that he has received cash loan from appellant and hence the addition of Rs 4,10,00,000/- may be deleted. 3. Brief facts as culled out from the records are that assessee filed the return of income on 18.05.2011, reporting total income at Rs.4,66,060/-. A search and survey action u/s.132/133A of the Act was carried out on 11.10.2017 at the premises of M/s. Evergreen Enterprises (an unrelated third party) in the course of which a green colour lender ledger, allotment sheets and a telephone diary were seized. Statements of Shri Nilesh Bharani, partner of M/s. Evergreen Enterprises and of Shri Ashwin Rathod, accountant, were recorded u/s.132(4), explaining a coding methodology by which entries in the ledger could be decoded and traced to particular lenders through cross-reference with the telephone diary. On the strength of information shared by DDIT(Inv.)-Unit 5(4), Mumbai, which formed the basis, notice u/s.148 was issued to assessee on 29.03.2018 and assessment was completed u/s.143(3) r.w.s.147 on 27.12.2018, making an addition of Rs.4,10,00,000/- u/s.69 on the footing that the coded entry "C/28/K" represented cash loans advanced by assessee to Shri Nilesh Bharani.

3.1. Ld. Counsel for the assessee submitted that it is not in dispute that the search u/s.132 was conducted on 11.10.2017 at the premises of M/s. Evergreen Enterprises and Shri Nilesh Bharani, a third party qua assessee and the green colour lender ledger, the allotment sheets and the telephone diary, on which the entire edifice of reopening and addition rests, were found and seized in the course of the said search, the statement(s) explaining the modus operandi and the coding methodology, relied upon 3

ITA No. 4661/Mum/2025 Komal Ravji Chheda AY 2011-12 by ld.AO to decode the entry "C/28/K" as pertaining to assessee, were recorded u/s.132(4) during the course of the said search, the reasons recorded for reopening, in the order of ld.CIT(A), themselves record that the basis of reopening was "information received from DDIT, Investigation relating to the appellant, found in the documents seized in the search action conducted on M/s. Evergreen Enterprises and Shri Nilesh Bharani".

3.2. With the above in perspective, it was submitted that section 153C begins with a non-obstante clause, "Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153…" and mandates that where, in the course of a search u/s.132 on one person, books of account, documents or other material are found which belong or pertain to, or contain information relating to, a person other than the person searched, such material is to be handed over to the AO having jurisdiction over such other person, who alone can proceed to assess or reassess the income of such other person and that too only in accordance with s.153A r.w.s.153C, and not under the general reassessment machinery of ss.147/148.

3.3. Ld. Counsel placed reliance on the decision of the Coordinate Bench of ITAT, Mumbai in the case of Leshark Global in ITA 3177/Mum/2025, order dated 31.07.2025, wherein, on facts arising out of the very same search action in the case of Shri Nilesh Bharani/Evergreen Enterprises, it has been held that any incriminating information relating to a person not searched, found during the course of a search on another person, can be brought to tax in the hands of such non-searched person only through the mandatory route of s.153C r.w.s.153A; that a reassessment framed u/s.147/148 in respect of such information is illegal and void ab initio; 4

ITA No. 4661/Mum/2025 Komal Ravji Chheda AY 2011-12 and that this position holds good irrespective of whether the Assessing Officer of the non-searched person chooses to invoke s.153C, since it is the character and source of the material, namely, that it emanates from a search u/s.132 on a third party and not the discretion of the Assessing Officer, which determines the applicable machinery provision. The said decision followed the ratio of the Hon'ble Supreme Court in PCIT vs. Vikram Sujitkumar Bhatia [2023] 149 taxmann.com 123 (SC) and of the decision of the Coordinate Bench of ITAT, Mumbai in the case of Nilesh Bharani in ITA 612/Mum/2020 itself rendered in the case of the very person searched in the present matter.

3.4. Ld. AR further relied upon the decision of the Hon'ble jurisdictional High Court of Bombay in the case of Sejal Jewellery and Anr. vs. Union of India and Ors. [2025] 171 taxmann.com 846 (Bom), wherein multiple reassessment notices issued u/s.148, founded on material unearthed in third-party search actions, were quashed by the Hon'ble High Court holding that where the foundation of a reassessment is a search conducted u/s.132, the only permissible route for reopening is s.153C which overrides the general provisions of ss.147 and 148.

ITA No. 4661/Mum/2025 Komal Ravji Chheda AY 2011-12 5. We have carefully considered the rival submissions and perused the material on record. It is significant that ld. CIT(A) while rendering the impugned order had before him a case whose facts were admittedly, founded entirely on the search conducted in the case of Shri Nilesh Bharani/M/s. Evergreen Enterprises. The decision of Hon'ble jurisdictional High Court in Sejal Jewellery (supra) was rendered prior in point of time and was available for consideration. Instead, ld. CIT(A) chose to rely upon a decision of the Hon'ble Delhi High Court, a non- jurisdictional High Court, to hold that resort to s.147/148 was not foreclosed. With respect, once the ratio of the jurisdictional High Court is available and squarely covers the fact situation, it binds the authorities functioning within its territorial jurisdiction and reliance on the view of a non-jurisdictional High Court to the contrary cannot be sustained.

5.1. We further note that the facts of the present case are indistinguishable from those considered by the Coordinate Bench in Leshark Global LLP (supra), being founded on the identical search action in the case of Shri Nilesh Bharani/Evergreen Enterprises. It is not disputed and indeed stands recorded in the assessment order and in the order of ld. CIT(A) itself that the entirety of the material relied upon for reopening, namely the ledger, the allotment sheets, the telephone diary and the statement(s) recorded u/s.132(4), emanates from the search u/s.132 conducted on a third party. In such a situation, the only lawful course open to the ld. AO was to proceed u/s.153C r.w.s.153A of the Act. The invocation of s.147/148 was, in these facts, without jurisdiction.

ITA No. 4661/Mum/2025 Komal Ravji Chheda AY 2011-12 5.2. We accordingly hold that the notice issued u/s.148 dated 29.03.2018 and the consequent assessment order dated 27.12.2018 passed u/s.143(3) r.w.s.147 of the Act, are without jurisdiction, bad in law and void ab initio. Thus, the re-assessment order passed is quashed. Ground no. 4 is allowed. Ground nos.1 to 3 assailing the validity of reopening on other counts are rendered academic and are not separately adjudicated.

5.3. Ground nos. 5 and 6 are in respect to the addition of Rs.4,10,00,000/- u/s.69, dealing with the merits of the case. Although, upon quashing of the reassessment itself, these grounds of appeal do not survive for independent adjudication, we deem it appropriate, given the detailed submissions addressed before us, to record our findings on merits as well.

ITA No. 4661/Mum/2025 Komal Ravji Chheda AY 2011-12 Evergreen Enterprises was an admitted, cheque-based loan of Rs.25,00,000/- advanced on 06.09.2010 and repaid with interest on 11.03.2011, a transaction not disputed by the Revenue and that his name and contact particulars appearing in the telephone diary at serial no.28 were traceable to this very cheque transaction and not to any cash dealing.

6.1. It was further submitted that the green colour ledger and the telephone diary were both written and maintained by Shri Nilesh Bharani and were not in the handwriting of, nor bore the signature of, assessee; that M/s. Evergreen Enterprises, as a partnership firm, was constituted only on 01.04.2012 and was not in existence during F.Y.2010-11 relevant to A.Y.2011-12; and that once the very maker of the seized document and of the statement forming the foundation of the addition has, on oath and on more than one occasion, disowned the transaction qua assessee, the addition cannot survive merely on the strength of a retracted statement and coded entries devoid of any independent corroboration linking assessee to a cash payment.

6.2. Ld. DR supported the order of ld. CIT(A) at para 7.3.1 to 7.3.6, submitting that the retraction of the original statement does not, by itself, extinguish its evidentiary value, particularly where it stands corroborated by the seized ledger and the telephone diary and that mere denial in cross- examination, unaccompanied by any explanation of the corroborating material, cannot dislodge the addition.

ITA No. 4661/Mum/2025 Komal Ravji Chheda AY 2011-12 u/s.132(4) constitutes the very foundation of the addition, Shri Nilesh Bharani has, not once but twice thereafter, on oath, categorically denied having received any cash from assessee; first, in his statement recorded afresh in the course of assessee's reassessment proceedings and again in the cross-examination specifically afforded to assessee. Relevant questions and answers from these statements are reproduced by the ld. AO in para 4, 5 and 6 of the impugned reassessment order.

7.1. This is materially different from a case where addition is made purely on an uncontroverted third-party statement; here, the very person who explained the coding methodology has, when confronted directly on the question of assessee's alleged cash transaction, consistently disowned it. A coded entry in a diary or ledger maintained exclusively by a third party, without any document bearing the signature, handwriting or acknowledgement of assessee, cannot by itself establish a cash transaction of this magnitude, more so when the very maker of that entry denies the transaction on oath. The admitted cheque loan of Rs.25,00,000/-, duly repaid with interest within the same year, sufficiently explains the presence of assessee's particulars in the telephone diary, without requiring recourse to any further, unproved cash dealing. It is well settled that suspicion, however strong, cannot take the place of proof. We also find that on identical facts arising from the same search action, the Coordinate Bench in Shah in ITA 5568 to Rajeshkumar Rameshchandra 5573/Mum/2024 order dated 31.01.2025 has taken a similar view in favour of assessee.

ITA No. 4661/Mum/2025 Komal Ravji Chheda AY 2011-12 7.2. In view of the above, even on merits, the addition of Rs.4,10,00,000/- made u/s.69 of the Act does not survive and is deleted. Ground nos. 5 and 6 are allowed.

Order pronounced in the open court on 31st August, 2026.

Sd/- Sd/- [Amit Shukla] [Girish Agrawal] Judicial Member Accountant Member

Dated: 31st August, 2026 MP, Sr. PS Copy to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai