NAVAL KISHOR RAJGARHIA,DELHI vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 32, DELHI, DELHI

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ITA 3101/DEL/2026Status: DisposedITAT Delhi18 August 2026AY 2019-207 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that the AO's satisfaction note failed to demonstrate that the seized material had a bearing on the determination of the assessee's total income, as mandated by Section 153C. Relying on the Delhi High Court's decision in Saksham Commodities Ltd. v. ITO, the Tribunal held the satisfaction note to be invalid.

What were the facts?

The assessee's income was assessed under Section 153C of the Income Tax Act based on material seized during a search operation on a third party. The assessee argued that the satisfaction note recorded by the Assessing Officer (AO) was invalid as it did not establish a bearing of the seized material on the assessee's total income.

What were the issues?

Whether the satisfaction note recorded by the AO for initiating proceedings under Section 153C was valid and whether the assessment order passed under Section 153C was sustainable in law.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153D,Section 69A,Section 69C,Section 148,Section 150(1),Section 115BBE,Section 234A,Section 234B,Section 234C,Section 234D,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI

Before: SHRI SATBEER SINGH GODARA & SHRI NAVEEN CHANDRA

For Appellant: Shri Gaurav Jain, Adv, Shri Tarun Chanana, Adv
For Respondent: Shri Rajesh Chandra, CIT(DR)
Hearing: 18.08.2026Pronounced: 18.08.2026

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER And SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA Nos.3097, 3098, 3099, 3100, 3101/Del/2026 [Assessment Years : 2014-15, 2015-16, 2016-17, 2018-19 & 2019-20] Naval Kishor Rajgarhia Vs The ACIT C-1/52, Rajasthali Aptt. Central Circle – 32 Madhuban Chowk, Delhi Pitampura, New Delhi-34 PAN : AAVPR 4991 A (APPELLANT) (RESPONDENT) Assessee by Shri Gaurav Jain, Adv. Shri Tarun Chanana, Adv. Revenue by Shri Rajesh Chandra, CIT(DR) Date of Hearing 18.08.2026 Date of Pronouncement 18.08.2026 ORDER PER NAVEEN CHANDRA [ACCOUNTANT MEMBER]: The above-captioned five appeals are preferred by the assessee against the order dated 20.01.2026, passed by the Learned Commissioner of Income Tax (Appeals), Delhi-25 (hereinafter referred to as ‘ld. CIT(A)’) under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), arising from the same assessment orders dated 31.03.2024 passed by the Assessing Officer, DCIT/ACIT, Central Circle-32, New Delhi (hereinafter

ITA Nos.3097, 3098, 3099, 3100 and 3101/Del/2026 [for A.Ys 2014-15, 2015-16, 2016-17, 2018-19 & 2019-20] Naval Kishor Rajgarhia v ACIT referred as ‘the AO’) under section 153C of the Act for the A.Y. 2014-15, 2015-16, 2016-17, 2018-19 and 2019-20; respectively.

2.

Since the above captioned five appeals were heard together and the facts in issues are identical, both the appeals are being disposed of by this common order for the sake of convenience and brevity.

3.

The grounds of appeal raised by the assessee in ITA Nos. 3097 to 3101/Del/2026 are identical mutatis mutandis, except for the change in figures. The grounds read as under: 1. That the Commissioner of Income Tax (Appeals) ['CIT(A)'], vide order dated 20.01.2026 has erred both on facts and in law in not quashing the assessment order dated 31.03.2024 passed under Section 153C of the Income-tax Act, 1961 ('the Act') by the Assessing Officer ('AO') on the ground of being illegal, bad in law, without jurisdiction, barred by time limitation and not in accordance with the provision of the Act. 2. The notice issued under Section 153C of the Act and the consequent assessment proceedings are illegal, void ab initio, barred by time limitation and without jurisdiction, as the statutory preconditions for invoking Section 153C of the Act were not satisfied, rendering the proceedings bad in law and liable to be quashed. 3. That on the facts and circumstances of the case and in law, the CIT(A) erred in uplolding the validity of proceedings initiated under section 153C of the Act, without appreciating that the AO had already issued a notice under section 148 on the very same issue. The subsequent initiation of proceedings under section 153C on the identical cause of action amounts to an impermissible assumption of jurisdiction and is therefore illegal, without authority of law and liable to be quashed. 4. That on the facts and in the circumstances of the case, the AO has erred in failing to record the requisite satisfaction as mandated under law, thereby rendering the impugned proceedings invalid, bad in law, and without jurisdiction. 5. That the approval granted under Section 153D of the Act for passing the assessment order under Section 153C is invalid, as it has been granted in a mechanical manner, without independent application of mind, rendering the assessment order bad in law. 6. That on the facts and in law, the AO/CIT(A) failed to appreciate that, in the absence of incriminating material found during the search, the

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ITA Nos.3097, 3098, 3099, 3100 and 3101/Del/2026 [for A.Ys 2014-15, 2015-16, 2016-17, 2018-19 & 2019-20] Naval Kishor Rajgarhia v ACIT interference with a completed assessment and additions under Section 153C of the Act are unsustainable and without jurisdiction. 7. That on the facts and circumstances of the case and in law, the CIT(A) has erred in upholding the total income of the Appellant at Rs. 14,04,330/- as against the returned income of Rs. 3,40,930/-. 8. That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in upholding the addition of Rs. 9,45,000/- made by the AO under Section 69A of the Act as unexplained money, on the alleged ground of cash receipt by the Appellant and by treating the same as an accommodation entry, without appreciating that no such cash was in fact received by the Appellant. 9. That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in upholding the addition of Rs. 28,350/- made by the AO under Section 69C of the Act on the alleged account of commission expenditure at 3% purportedly paid by the Appellant on the aforesaid addition of Rs. 9,45,000/-, without appreciating that the Appellant had not undertaken any such transaction. 10. That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in invoking the provisions of Section 150(1) of the Act by directing the AO to protect the interest of revenue by exploring the possibility or feasibility of taking remedial action to tax alleged escaped income arising from accommodation entry transactions, contingent upon the non-survival of assessments in the relevant years, which is arbitrary, beyond jurisdiction, and bad in law. 11. That on the facts and circumstances of the case and in law, the AO has erred in wrongly invoking the provisions of Section 115BBE of the Act. 12. That the documents and the material available on record have not been properly considered and judicially interpreted and have been wrongly ignored. 13. On the facts and circumstances of the case and in law, the AO has erred in charging the interest under Section 234A/234B/234C/234D of the Act. 14. On the facts and circumstances of the case and in law, the AO has erred in initiating the penalty proceedings against the Appellant under Section 271(1)(c) of the Act.”

4.

Brief facts of the case are that the assessee is engaged in the business of trading in Timber under the name & style of 'M/s Rama Krishna Timber' which is a proprietary firm besides the assessee engaged in the business of commodity speculation trading. The assessee had filed his Return of Income for the A.Y 2014-15 u/s 139 declaring taxable Total Income of Rs.4,30,980/- on 30.06.2014. A search & seizure operation u/s 132(1) of the Act on

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ITA Nos.3097, 3098, 3099, 3100 and 3101/Del/2026 [for A.Ys 2014-15, 2015-16, 2016-17, 2018-19 & 2019-20] Naval Kishor Rajgarhia v ACIT 18.10.2019 was carried out on Alankit Group. During the search action various documents in the form of tally data were seized and statement of various persons were recorded. The assessee has received a notice dated 28.06.2021 issued u/s 148 of the Act under the un-amended provision of section 148. In compliance of the same, the assessee has filed his ITR u/s 148 of the Act on 01.07.2021 declaring income of Rs.4,30,980/- as declared in the original ITR. The assessee was subsequently issued notice under section 153C dated 10.11.2022 on the basis of satisfaction note recorded by the AO of the non-searched person. Thereafter, the Ld AO passed order dated 31.03.2024 u/s 153C whereby he made addition of Rs.9,45,000/-u/s 69A and of Rs.28,350/- u/s 69C of the Act and assessed the income at Rs.14,04,330/-. 5. Aggrieved, assessee was in appeal before the ld. CIT(A) who upheld the AO’ order. Aggrieved, assessee is now in appeal before us. 6. Before us, learned Counsel for the assessee vehemently questioned the validity of satisfaction note u/s 153C. Per contra, the ld DR relied on AO/CIT(A). 7. We have heard the rival submissions and perused the material available on record. To adjudicate the issue at hand, it would be relevant to reproduce the satisfaction Note dated 10.11.2022 recorded by the AO of the assessee, as under:

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ITA Nos.3097, 3098, 3099, 3100 and 3101/Del/2026 [for A.Ys 2014-15, 2015-16, 2016-17, 2018-19 & 2019-20] Naval Kishor Rajgarhia v ACIT

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ITA Nos.3097, 3098, 3099, 3100 and 3101/Del/2026 [for A.Ys 2014-15, 2015-16, 2016-17, 2018-19 & 2019-20] Naval Kishor Rajgarhia v ACIT 8. From the reading of the above satisfaction note dated 10.11.2022, as recorded by the AO of the assessee, the non-searched person, we find that the AO has not recorded that the seized material found during the course of search, have a bearing on determination of the total income of the assessee, as statutorily mandated in the provisions of section 153C of the Act. Consequently, we apply the decision of Hon’ble Delhi High Court in the case of Saksham Commodities Ltd. v. ITO (2024) 464 ITR 1/ 338 CTR 418/161 taxmann.com 485 (Delhi), which held as under: “48.**********However, the spectre of abatement insofar as the "other person" is concerned would arise only after the jurisdictional AO has formed the requisite satisfaction of the material having "a bearing on the determination of the total income of such other person" and having formed the opinion that proceedings under Section 153C are liable to be initiated. 50. What we seek to emphasise is that merely because Section 153C confers jurisdiction upon the AO to commence an exercise of assessment or reassessment for the block of years which are mentioned in that provision, the same alone would not be sufficient to justify steps in that direction being taken, unless the incriminating material so found is likely to have an impact on the total income of a particular AY forming part of the six AYs' immediately preceding the AY pertaining to the search year or for the "relevant assessment year".

In such facts and circumstances therefore, we hold that the satisfaction note is invalid which vitiates the assumption of jurisdiction u/s 153C of the Act. Consequently, the notice u/s 153C as well as order under section 153C is not sustainable in law. We, accordingly, quash the order under section 153C of the Act for both the years. The appeals are allowed in aforesaid terms.

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ITA Nos.3097, 3098, 3099, 3100 and 3101/Del/2026 [for A.Ys 2014-15, 2015-16, 2016-17, 2018-19 & 2019-20] Naval Kishor Rajgarhia v ACIT 9. In the result, all the five appeals filed by the assessee in ITA Nos.3097, 3098, 3099, 3100 and 3101/Del/2026 are allowed. Order pronounced in the open court on 18.08.2026.

Sd/- Sd/- (SATBEER SINGH GODARA) (NAVEEN CHANDRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 21.08.2026 Priti Yadav, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi

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