SOUZA CASHEW INDUSTRIES ,PUTTUR vs. ACIT, CENTRAL CIRCLE-2, MANGALORE

PDF · subscribers
ITA 2765/BANG/2025Status: DisposedITAT Bangalore08 July 2026AY 2007-0812 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 held that assessments under Section 153C are only valid if based on incriminating materials seized during a search. Additions made based on regular books of accounts, without such materials, are not sustainable.

What were the facts?

A search operation led to the issuance of notices under Section 153C to the assessee, a cashew processing firm. The Assessing Officer made additions to the income based on documents found, which the assessee challenged.

What were the issues?

Whether additions made under Section 153C are valid without incriminating materials seized during search, and whether the six-year period for such assessments was correctly computed.

Which sections of the Income-tax Act were involved?

Section 153C,Section 132,Section 139,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE

Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K.

For Respondent: Shri Subramanian S., JCIT-DR

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE

BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER

ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025 Assessment Years : 2007-08 to 2009-10 & 2011-12 to 2013-14

M/s. Souza Cashew The Assistant Industries, Commissioner of Souza Industries, Income Tax, Main Building, Central Circle – 2, Puttur – 574 201. Mangaluru. Vs. PAN: AAFFS1824F APPELLANT RESPONDENT

: Shri V. Narendra Sharma, Assessee by Advocate Revenue by : Shri Subramanian S., JCIT-DR

Date of Hearing : 16-04-2026 Date of Pronouncement : 08-07-2026 ORDER PER BENCH

These are the six appeals filed by the assessee challenging the separate orders of Ld.CIT(A)-2, Panaji all dated 29/09/2025 in respect of the A.Ys. 2007-08 to 2009-10 and 2011-12 to 2013-14.

2.

The issues are common in all the appeals and for the sake of convenience, the appeal in ITA No. 2765/Bang/2025 for A.Y. 2007-08 is taken as the lead the case and the facts for A.Y. 2007-08 are as follows:

Page 2 of 12 ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025 3. The brief facts of the case are that the assessee is a firm and engaged in the business of cashew processing. The assessee filed their return of income on 31/07/2007. A search and seizure operation was carried out in the case of M/s. Plama Developers Ltd. and also in the case of Shri Wilfred ‘D’ Souza on 09/01/2013. The said Shri Wilfred ‘D’Souza was also a partner of the assessee firm. It was alleged that several documents relating to assessee were found during the course of search operation. Thereafter the case of the assessee was centralized and notice u/s. 153C was issued to assessee on 21/01/2015. The assessee also in response to the said notice filed a return of income on 02/02/2015 and declared a total income of Rs. Nil after adjusting the loss of the current year and showing a carry forward business loss of Rs. 15,50,498/-. Thereafter the AO called for certain details which was duly provided by the assessee. The AO without considering the facts of the case. had made the assessment order assessing a total income of Rs. 20,63,289/- u/s. 153C of the Act, on 30/03/2015.

4.

As against the said order, the assessee filed an appeal before the Ld.CIT(A). The assessee had also raised legal issues and also raised the issue on merits. The Ld.CIT(A) had not accepted the grounds raised by the assessee and dismissed the appeal.

5.

As against the said order, the assessee is in appeal before this Tribunal.

6.

At the time of hearing, the Ld.AR submitted that the assessments made in respect of the A.Ys. 2007-08 and 2008-09 are not in accordance with the provisions since the said two years falls outside the six previous years for which the AO has jurisdiction to reopen the assessment u/s. 153C of the Act. In respect of the A.Y. 2013-14, it is the contention of the Ld.AR that the assessment year falls within the six previous years from the date on which the satisfaction note was prepared by the AO and therefore the assessment has to be necessarily made u/s. 153C of the Act and not u/s.

Page 3 of 12 ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025 143(3) of the Act. The Ld.AR also submitted that in respect of the A.Ys. 2009-10, 2011-12 and 2012-13, it is the contention that the assessments made u/s. 153C are not correct since no incriminating materials were seized and additions were not made on that score. The Ld.AR also submitted that the documents seized in one year cannot be relied on for making the additions in respect of the other years. The Ld.AR also relied on the copy of the remand report dated 04/05/2017 given by the AO in which the various facts were admitted by the AO and which are all in favour of the assessee to the proposition that the assessment orders passed for 2007-08 and 2008-09 are not within the six year period preceding the assessment year relevant to the search conducted. The Ld.AR relied on para no. 4.1 of the remand report in which the AO had clearly mentioned that the satisfaction note was prepared on 21/01/2015 and therefore the assessment year being 2015-16 and the six previous assessment years eligible for issuing notice u/s. 153C are 2014-15 to 2009-10. The Ld.AR also relied on the remand report para 2 in which the documents seized at the time of search was mentioned as the memorandum of understanding and some other documents connected with the said memorandum of understanding and therefore the said documents could not be taken as incriminating materials and therefore no additions could be made. The Ld.AR also relied on the judgment of the Hon’ble Supreme Court reported in (2023) 454 ITR 212 in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. and also the order of the Coordinate Bench of this Tribunal in ITA Nos. 251 to 257/Bang/2025 dated 05/08/2025.

7.

Insofar as the exclusion of the two assessment years 2007-08 and 2008-09 are concerned, the Ld.AR relied on the judgment of the Hon’ble Supreme Court reported in (2023) 155 taxmann.com 155 in the case of CIT vs. Jasjit Singh and the order of the Coordinate Bench of this Tribunal in ITA No. 882 to 887/Bang/2025 dated 02/02/2026.

8.

The Ld.AR also relied on the order of the Coordinate Bench of this Tribunal in ITA No. 763/Bang/2025 dated 16/02/2026 in support of his

Page 4 of 12 ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025 contention that the assessment order passed u/s. 143(3) for the A.Y. 2013- 14 instead of u/s. 153C is not sustainable.

9.

The Ld.AR also filed paper books for all the A.Ys. and prayed that the appeals may be decided on the basis of the legal plea and if required, the grounds on merits can be adjudicated.

10.

The Ld.DR submitted that the AO had elaborately discussed the issue in his remand report and therefore the assessment orders are in order. The Ld.DR further submitted that at the time of search, the incriminating materials were seized and based on that only, the further clarifications was sought for and additions were made and therefore the contention that no incriminating material was seized and therefore addition could not be made on the unabated assessments are not correct. Similarly, the Ld.DR submitted that the assessments for A.Ys. 2007-08 and 2008-09 are within the period of the six assessment years and therefore he prayed to dismiss the appeals.

11.

We have heard the arguments of both sides and perused the materials available on record.

12.

We will take up the appeals by issue-wise.

13.

In ITA Nos. 2765 & 2766/Bang/2025, the main contention of the assessee is that the assessment orders for the respective assessment years 2007-08 and 2008-09 are not falls within the six previous A.Ys. as stated in the provision and therefore they are outside the purview of the AO to initiate proceedings u/s. 153C of the Act. We have considered the said plea. As seen from the copy of the remand report there was a search on 09/01/2013 in the places of M/s. Plama Developers Ltd. and Shri Wilfred ‘D’Souza and based on that, the AO of the searched person had concluded that the documents pertaining to the assessee, who is a third party, were also seized

Page 5 of 12 ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025 and based on the satisfaction that the seized documents pertained to the assessee, a satisfaction note was prepared on 21/01/2015 for issuing the notice u/s. 153C of the Act. That means the six year period should be calculated from the end of the A.Y (2015-16) in which the satisfaction note was prepared by the AO. In the present case, the satisfaction note was prepared on 21/01/2015 and therefore the six year period commences from the A.Ys. 2014-15 and ends during the A.Y. 2009-10. Therefore the assessment years 2007-08 and 2008-09 falls beyond the permissible period for initiating proceedings u/s. 153C of the Act. We have also gone through the judgment of the Hon’ble Supreme Court in the case of Jasjit Singh and the order of the Coordinate Bench of this Tribunal in ITA Nos. 882 to 887/Bang/2025 dated 02/02/2026 in which the Hon’ble Supreme Court had held that the six year period was to be reckoned from the date when materials were forwarded to the jurisdictional assessing officer. The said principle was followed by the Coordinate Bench of this Tribunal in the above referred order and held that the relevant date for the purpose of computing the six assessment years is the date of recording of satisfaction or the date of issuance of notice u/s. 153C of the Act. As rightly contended by the Ld.AR, in the present case, as per the remand report dated 04/05/2017, the satisfaction note has been prepared on 21/01/2015 in the A.Y. 2015-16 and therefore the previous six A.Ys. are 2014-15 to 2009-10. Respectfully following the judgment of the Hon’ble Supreme Court cited supra, we hold that the assessment orders made u/s. 153C of the Act in respect of the A.Ys. 2007-08 and 2008-09 are outside the permissible period prescribed under the Act to make an assessment u/s. 153C of the Act and therefore we allow the appeals filed by the assessee in respect of the A.Ys. 2007-08 and 2008-09 in ITA Nos. 2765 & 2766/Bang/2025.

14.

In ITA No. 2771/Bang/2025, the assessee had raised a plea that the assessment for the A.Y. 2013-14 falls within the prescribed period of six years and therefore the assessment has to be made u/s. 153C of the Act and not u/s. 143(3) of the Act. Admittedly, the satisfaction note was

Page 6 of 12 ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025 prepared on 21/01/2015 and therefore the disputed A.Y. falls under the prescribed period of six years and therefore necessarily, the assessment has to be made only u/s. 153C of the Act. We have also gone through the order of the Coordinate Bench of this Tribunal relied on by the Ld.AR in ITA No. 763/Bang/2025 dated 16/02/2026 in the case of Thippareddy Govindareddy Malli Reddy vs. DCIT wherein in similar circumstances, the Tribunal had set aside the assessment made u/s. 143(3) of the Act. The relevant finding of the Tribunal is extracted below for reference. “16. We have carefully considered the rival contention and perused the orders of the learned lower authorities. In this case the search took place in case of M/s. R K Cortina on 10 September 2018. The assessee was found to be the ‘other person’ as some documents found from premises of partnership which pertained to the assessee. therefore, the first notice under section 153C of the Act was issued on 16 March 2020 for assessment year 2017-18. If we take that date itself of first recording the satisfaction by the learned assessing officer, who is same in the case of partnership firm as well as the assessee, therefore, the income of the assessee can be assessed for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. The first proviso to that section provides that in case of the ‘other person’ the date of receiving the books of accounts or documents or assessee is or requisition by the assessing officer having jurisdiction over the other person shall be the date of the search. Therefore in this case, the first notice issued under section 153C is on 16th of March 2020, therefore this impugned assessment year 2019 – 20 is also required to be made under section 153C of the Act. In the present case, the learned assessing officer has passed an assessment order in the case of the assessee despite recording the fact that assessee is "the other person", has passed an assessment order under section 143 (3) of the Act. According to that, the impugned assessment order passed under section 143 (3) of the Act cannot be sustained as it should have been passed under section 153C of the Act. Therefore the assessment order deserves to be cancelled and hence cancelled and quashed.”

Page 7 of 12 ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025 15. In view of the above said legal proposition, we are also setting aside the order of the Ld.AO which was made u/s. 143(3) of the Act and in the result, we are allowing the appeal filed by the assessee.

16.

In respect of the appeals in ITA Nos. 2767, 2769 & 2770/Bang/2025, the main contention made by the Ld.AR is that, in all the A.Ys. additions were made after the search has been completed but no incriminating materials were seized and additions are not made on the basis of the incriminating materials and therefore the assessments made u/s. 153C are liable to be set aside. The another alternate submission made by the Ld.AR is that, the additions could not be made in respect of the other A.Ys. when there are no material evidences seized in the other A.Ys.

17.

We have considered the said submissions and also the documents furnished by the assessee including the remand report furnished by the AO to the Ld.CIT(A). In the said remand report, the AO had, in paragraph no. 2, mentioned the documentary evidences seized at the time of search. The report of the AO reads as follows: “2.0 Details of seized documents: The documentary evidences in the form of memorandum of understanding has been found and seized from the residence of Shri Wilfred D’ souza and placed and is at page no. 6 to 8 of the Document no. A/WDS(O)/2). Further, some more documents in continuance of the MoU was also seized from the office of Plama Developers Limited and is at page no. 67 to 69 of Document A/PDL- 2/2.”

18.

Again in paragraph number 3, the AO had given the details of the scrutiny assessments made u/s. 153C r.w.s. 143(3) of the Act by way of a statement, which for the easy reference, extracted below: Returned Assessed A.Y. Basis of additions Income Income Disallowance of Additions are 2007-08 Nil 20,63,289 claim of on the basis of proportionate interest findings from

Page 8 of 12 ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025 on loan the details furnished the 7,95,503/- assessee during the scrutiny u/s 153C Additions are Disallowance of on the basis of business findings from loss claimed the details furnished by 28,02,828/- the assessee during the Scrutiny u/s Disallowed set 153C off the business loss Long Term capital gain 15,69,46,840/-

Long term capital gain 2,23,72.,344/- Additions are on the basis of findings from Long term capital the details gain from Plama furnished by Mall 2008-09 41,78,790 16,09,25,308 the assessee 13,50,28,346/- during the scrutiny u/s 153C Short term capital gain 79,666/-

Disallowance of business loss 28,45,926/-

Page 9 of 12 ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025

Income from Other sources 20,28,179/-

Disallowed set off the business loss. Additions are Addition on account on the basis of of short term findings from capital gains from the details sale of flats 2009-10 3,25,800 9,92,955 furnished b the received in Plama assessee Icon during the scrutiny U/s 9,32,805/- 153C 1) Addition on Additions are account of short term capital gain on the basis 14,49,40,000/- of findings 2) Addition on vide Search 2010-11 8,51,460 15,23,36,776 account of short term ref no. capital gain from A/WDS(O)/2). sale of flats 22,29,783/-

Addition on account of short term capital gain from sale of flats received in Additions are Plama Icon on the basis of findings from 11,98,313/- the details 2011-12 2,16,180 21,000/- furnished by the assessee Disallowed set off during the the business loss scrutiny U/s with that of the 153C income from house property and income from other sources. Disallowance of Additions are business loss on the basis of 2012-13 Nil 84,000/- findings from 2,45,083/- the details

Page 10 of 12 ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025 furnished by the assessee Disallowed the set during the off the business loss scrutiny u/s with that of the 153C income from house property as well as income from other sources. Disallowance of business loss Additions are claimed on the basis of findings 2,12,460/- from the details furnished by 2013-14 Nil 84,000/- Disallowed the set the assessee off the business loss during the with that of the scrutiny U/s income from house 153C property as well as income from other sources.

19.

In the said remand report in paragraph 4(i), the AO had accepted that the additions were made based on the verification of the books of accounts and other financial statements produced by the assessee during the scrutiny. The AO further stated that the AO is going only by the provisions of section 153A as he has to determine the total income. Finally, the AO had stated that when the assessing officer found that the assessee is wrong in claiming the losses related to the A.Y. under scrutiny, he has rightly disallowed the same.

20.

In the concluding paragraph of the remand report, it was stated that the AO had passed the orders making certain additions mentioned earlier after due verification of books of accounts. It was further stated that the AO has to assess or reassess the income in the case of the person where search u/s. 132 has been initiated for six assessment years preceding the search assessment year. From the above said report, it is manifest that the additions are made based on the books of accounts and not on the basis of

Page 11 of 12 ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025 the seized incriminating materials. Further, in paragraph 2, the AO had stated about the seized documents which are all not the incriminating materials and additions are also not made on the basis of the said materials. Even in the statement given in paragraph no. 3, in the last column the AO had stated that the additions are on the basis of findings from the details furnished by the assessee during the scrutiny u/s. 153C of the Act.

21.

We have also perused the assessment orders and found that in all the cases, the assessee had filed their return of income u/s. 139 and therefore it is a fact that the assessments could have been completed. In such circumstances, the said assessments can be reopened u/s. 153C of the Act if any incriminating materials were seized at the time of search and additions were made based on such incriminating materials. As stated earlier, there is no seizure of any incriminating materials and also the additions are not made based on such incriminating materials and in such circumstances, we are of the view that the AO has no jurisdiction to invoke section 153C of the Act for making additions based on the books of accounts.

22.

We have also considered the judgment of the Hon’ble Supreme Court reported in (2023) 454 ITR 212 in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. wherein it was held that no addition can be made in respect of the completed assessments in absence of any incriminating material.

23.

We have also considered the order of the Coordinate Bench of this Tribunal in ITA Nos. 2512 to 2517/Bang/2025 dated 05/08/2025 wherein this Tribunal had followed the judgment of the Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. and deleted the additions.

24.

The facts in the present appeals are similar to the facts in the judgments of the Hon’ble Supreme Court as well as the Tribunal and therefore by following the principles laid down in the judgment, we also

Page 12 of 12 ITA Nos. 2765 to 2767 & 2769 to 2771/Bang/2025 concluded that the additions made by the AO in the proceedings u/s. 153C of the Act, when there is no incriminating materials seized during the search operations, are not sustainable. We, therefore, allow the appeals filed by the assessee in respect of the A.Ys. 2009-10, 2011-12 and 2012-13.

25.

In all the appeals, we have decided the legal issues and on that basis, the appeals are allowed and therefore we are not adjudicating the other issues including the grounds on merits.

26.

In the combined result, all the appeals filed by the assessee are allowed.

Order pronounced in the open court on 08th July, 2026.

Sd/- Sd/- (WASEEM AHMED) (SOUNDARARAJAN K.) Accountant Member Judicial Member

Bangalore, Dated, the 08th July, 2026. /MS /

Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order

Assistant Registrar, ITAT, Bangalore

More judgments on Section 153C

All 9,619 judgments and leading authorities on Section 153C →

Recent GST High Court judgments

Search GST case law →