DCIT, CENTRAL CIRCLE-32, NEW DELHI, DELHI vs. NIRMAL KUMAR SARDA, RAJASTHAN

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI BEFORE SH. SATBEER SINGH GODARA, JUDICIAL MEMBER AND SH. NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA Nos. 8348 & 8349/Del/2025 (Assessment Years : 2012-13 & 2013-14) DCIT Vs. Nirmal Kumar Sarda Central Circle-32 N Sarda and Associates, New Delhi Behind State Bank of India, Ganga Sahar Road Bikaner – 334 001 Rajasthan PAN No. AXGPS 5107 F (APPELLANT) (RESPONDENT) And Cross Objection Nos. 58 & 59/Del/2026 (Arising out of ITA Nos. 8348 & 8349/Del/2025) (Assessment Years : 2012-13 & 2013-14) Nirmal Kumar Sarda Vs. DCIT N Sarda and Associates, Central Circle-32 Behind State Bank of India, New Delhi Ganga Sahar Road Bikaner – 334 001 Rajasthan PAN No. AXGPS 5107 F (APPELLANT) (RESPONDENT) Assessee by -None- Revenue by Ms. Kranti, CIT-D.R. Date of hearing: 14.05.2026 Date of Pronouncement: 06.07.2026

ITA Nos. 8348 & 8349/Del/2025 CO Nos.58 & 59/Del/2026 (In ITA Nos. 8348 & 8349/Del/2025) [A.Ys 2012-13 & 2013-14] DCIT vs. Nirmal Kumar Sarda ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :

The above captioned appeals by the Revenue and Cross Objections by the assessee is preferred against order of the ld. Commissioner of Income Tax (Appeals)–30, New Delhi dated 30.08.2025 under section 250 of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) arising from the assessment orders dated 25.06.2024 & 26.06.2024, passed by the Assessing Officer, ACIT, Central Circle–32, New Delhi (hereinafter referred to as ‘the AO’) under section 153A r.w.s. 144 of the Act for the Assessment Years 2012-13 & 2013-14, respectively. 2. Since the underlying facts are common in the cross objections of the assessee and in appeals of the Revenue and pertain to same assessee, they were heard together and are disposed of by this common order for the sake of convenience and brevity. ITA No.8348/Del/2025 for AY 2012-13 3. First we take up as AY 2012-13 as the lead case. Brief facts of the case are that the assessee is a professional Chartered Accountant and partner in Firm M/s N. Sarda & Associates. Original return in this case was filed on 25.03.2013 declaring income of Rs.2,40,100/- which was processed u/s 143(1) of the Income Tax Act, 1961. A search and seizure

Page 2 of 13

ITA Nos. 8348 & 8349/Del/2025 CO Nos.58 & 59/Del/2026 (In ITA Nos. 8348 & 8349/Del/2025) [A.Ys 2012-13 & 2013-14] DCIT vs. Nirmal Kumar Sarda operation was carried out at the various premises of Bajaj Group and its associates including the assessee and its directors and others on 20.04.2017. Various documents/Books of A/c, etc. were found and seized and statements of various persons were recorded. Thereafter, final assessment order was completed by the AO and protective additions of Rs 12,06,13,509/- on account of accommodation entries u/s 69; Rs 12,06,135/- on account of commission and Rs.40,67,500/- on account of bank deposit was made to the income of the assessee under section 69A of the Act as unexplained money during the year under consideration. 4. Aggrieved, the assessee preferred an appeal before the CIT(A) in which CIT(A) has given partial relief to the assessee. Now the aggrieved Revenue is in appeal before us with the following grounds in ITA No.8348/Del/2025 for A.Y. 2012-13 : 1. “That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the protective addition of Rs 12,06,13,509/- made u/s 69 of the Income Tax Act, 1961, ignoring the detailed findings of the Assessing Officer establishing that the assessee was controlling and operating shell entities used for providing accommodation entries to RNB Overseas Pvt. Ltd., one of entities of the Bajaj Group. 2. That the Ld. CIT(A) has erred in holding that the protective addition cannot survive merely because the substantive addition in the case of M/s RNB Overseas Pvt. Ltd. was deleted by the ITAT, without appreciating that incriminating evidences and statement recorded on oath u/s 131 clearly establish the assessees role as entry operator. 3. Ld. CIT(A) erred in not deciding on the merits of case regarding even if substantive addition is deleted by ITAT in the case of RNB Overseas Ltd. for AY 2012-13, then protective addition can be made intact in hands of Nirmal Kumar Sarda for providing accommodation entries through his controlled entities i.e. Shree Chamunda Enterprises, Page 3 of 13

ITA Nos. 8348 & 8349/Del/2025 CO Nos.58 & 59/Del/2026 (In ITA Nos. 8348 & 8349/Del/2025) [A.Ys 2012-13 & 2013-14] DCIT vs. Nirmal Kumar Sarda Innovative Tradevision Pvt. Ltd and M/s K.G. Enterprises to RNB Overseas Ltd. 4. Ld.CIT(A) erred in deleting protective addition in the case of assessee by relying on substantive addition in case of RNB Overseas Ltd. deleted by Hon’ble ITAT for AY 2012-13 without properly considering provisions of Income-tax Act, 1961 and the principles governing protective assessment. 5. Ld.CIT(A) erred in not considering the fact that during search and seizure action and survey action in the case of various premises of assessee & his controlled entities, it was established that Nirmal Kumar Sarda through his controlled entities i.e. Shree Chamunda Enterprises, Innovative Tradevision Pvt. Ltd and M/s K.G. Enterprises provided accommodation entries to RNB Overseas Ltd. 6. Ld.CIT(A) erred in deleting the commission income earned of Rs. 12,06,135/- by assessee even assessee himself stated on oath during search & seizure action regarding earning of commission income of 1 percent for providing bogus accommodation entries. 7. Ld. CIT(A) erred in relying on judgement of Honable Supreme Court in PCIT V Abhisar Buildwell P Ltd. and deleting addition of Rs. 10,00,000/- and Rs. 30,67,500/- of deposits including cash in bank accounts of assessee as various incriminating material were found during course of search and seizure action in Bajaj Group like tally data which shows transactions of assessee-controlled entities with RNB Overseas Ltd. 8. That the Ld. CIT(A) has erred in deleting the additions of Rs 10,00,000/- and Rs 30,67,500/- made u/s 69A of the Act on account of unexplained bank deposits, without appreciating that cheque books, passbooks and other banking documents of these accounts were found and seized during search, which constitute incriminating material within the meaning of section 153A. 9. That the Ld. CIT(A) has failed to appreciate that mere reliance on the judgment of the Honable Supreme Court in PCIT v. Abhisar Buildwell (P) Ltd. (2023) is misplaced, as the present additions were based on material seized during search clearly linking the assessee with the impugned bank accounts. 10. That the order of the CIT (A) is perverse, erroneous and is not tenable on facts and in law. 11. The grounds of appeal are without prejudice to each other. 12. That the appellant craves to add, amend, after or modify any grounds of appeal at the time of hearing.” 5. The first issue is the protective addition of Rs.12,06,13,509/- made u/s 69 as unexplained investment. The AO held that transactions of wool trading through M/s RNB Overseas Pvt. Ltd. were accommodation entries and, therefore, made a protective addition in Page 4 of 13

ITA Nos. 8348 & 8349/Del/2025 CO Nos.58 & 59/Del/2026 (In ITA Nos. 8348 & 8349/Del/2025) [A.Ys 2012-13 & 2013-14] DCIT vs. Nirmal Kumar Sarda assessee's hands on the ground that the purchase/sale transaction of wool by M/s RNB Overseas Pvt. Ltd. was not genuine. The Assessing Officer also made an addition of Rs.12,06,135/- under Section 69A as commission income for providing accommodation entries on the transaction of wool trading.

Page 5 of 13

ITA Nos. 8348 & 8349/Del/2025 CO Nos.58 & 59/Del/2026 (In ITA Nos. 8348 & 8349/Del/2025) [A.Ys 2012-13 & 2013-14] DCIT vs. Nirmal Kumar Sarda 6.2. The ld AR further stated that a statement recorded in Income Tax proceedings, by itself, does not constitute incriminating material, and no addition can be sustained solely on the basis of such a statement. Reliance can be placed on the judgment of the Delhi High Court, in PCIT vs. Pavitra Realcon Pvt. Ltd. [2024 (5) TMI 1408] and CIT vs. Harjeev Aggarwal [2015 (3) TMI 329.

6.3. It is stated that the assessee later retracted the statement, and it is a settled legal principle that a retracted statement cannot form the basis of any addition. This position has been authoritatively upheld by the Delhi High Court in Principal Commissioner of Income Tex (Central)-3 vs. Pavitra Realcon Pvt. Ltd. [2024 (5) TMI 1408).

6.4. Further, it is submitted regarding the protective assessment, that substantive additions made in the Bajaj Group cases have already been deleted by the appellate authorities, both on merits as well as for want of Incriminating material. Consequently, once the substantive additions do not survive, the protective addition made in the appellant's hands under Section 69 automatically falls to the ground, as a protective addition cannot stand independently. It is a well-settled principle of law that a protective addition can be sustained only in situations where there exists a genuine ambiguity regarding the person in whose hands the income is liable to be assessed. In the present Page 6 of 13

ITA Nos. 8348 & 8349/Del/2025 CO Nos.58 & 59/Del/2026 (In ITA Nos. 8348 & 8349/Del/2025) [A.Ys 2012-13 & 2013-14] DCIT vs. Nirmal Kumar Sarda case, there is no such ambiguity, and therefore, the protective addition made in the appellant's case is devoid of any legal foundation and deserves to be deleted in toto.

6.5 The ld AR stated that the Assessing Officer has relied on Tally data and other digital evidence recovered from the premises of the Bajaj Group (a third party). However, under the law, any material found in the possession of a third party that relates to the assessee can only be used after initiating proceedings under Section 153C. The AO's failure to follow this procedure constitutes a fundamental jurisdictional defect.

The 2nd issue is with regard to Addition on account of Bank 7. Deposits Rs. 40,57,500/- u/s 69A of the Act. The ld AR submitted that the Assessing Officer erroneously made additions of Rs 40,67,500/- u/s 153A, relying solely on the appellant's bank records, and merely on the ground that the assessee was a joint holder of the account, without proving beneficial ownership of the deposits. It was submitted that the bank statements relied upon were not part of seized material. Hence, they cannot be considered incriminating material found during search. The Hon'ble ITAT, in connected search cases of Bajaj Group, has deleted similar additions:

Page 7 of 13

ITA Nos. 8348 & 8349/Del/2025 CO Nos.58 & 59/Del/2026 (In ITA Nos. 8348 & 8349/Del/2025) [A.Ys 2012-13 & 2013-14] DCIT vs. Nirmal Kumar Sarda o Shri Inder Chand Bajaj (ITA No. 2871/Del/2022): Addition based on bank statement produced during assessment deleted, following Abhisar Buildwell. o Pushpa Devi Bajaj (ITA No. 628/Del/2022): Addition of ₹1,50,000/- towards cash deposit in bank account deleted, as there was "not even a whisper of any incriminating material."

“7. Protective Addition u/s 69-Rs.12,06,13,509/- (Ground 23) The AO held that transactions of wool trading through M/s RNB Overseas Pvt. Ltd. were accommodation entries and, therefore, made a protective addition in assessee's hands after elaborate discussion in the order. 7.1 The appellant relied upon the jurisdictional ITAT, Delhi 'F' Bench decision in RNB Overseas Pvt. Ltd. (ITA Nos. 285 & 286/Del/2022, order dated 06.11.2023). The ITAT after examination, recorded the following categorical finding on merit:

Page 8 of 13

ITA Nos. 8348 & 8349/Del/2025 CO Nos.58 & 59/Del/2026 (In ITA Nos. 8348 & 8349/Del/2025) [A.Ys 2012-13 & 2013-14] DCIT vs. Nirmal Kumar Sarda *There is no dispute in so far as movement of goods is concerned... Stock details have been accepted... Therefore, we fail to understand how the AO could invoke section 68 for the impugned addition." 7.2 Further, on CIT (A)'a order, the ITAT noted: "14. We further fail to understand that when the Ld. CIT(A) has accepted the profit margin for rest of the sales, then why he has applied a different profit margin in respect of sales made to the three parties mentioned elsewhere. Considering the underlying facts, not only the assessment order is erroneous but the order of the first appellate authority is also erroneous. Accordingly, the appeals of the assessee are allowed on merits and those of the Revenue are dismissed." The substantive addition in RNB's hands was thus deleted on merits. Thus, once the substantive addition has been deleted on merits in the hands of RNB Overseas Pvt. Ltd. by the jurisdictional ITAT, the protective addition in the present case cannot be sustained. It is settled law that a protective addition survives only so long as the substantive addition is in place. With the substantive addition having failed on merits, no protective addition can stand. Accordingly, the protective addition of ₹12,06,13,509/- is deleted. 8. Commission Income Rs.12,06,135/- (Ground 22) This addition was premised on the assumption that the assessee facilitated accommodation entries in wool trading for commission. Since the very foundation of this allegation (i.e., RNB Overseas transactions being bogus) has been found unsustainable on merits, the consequential addition for commission also tails. As the substantive transaction has been held genuine by the jurisdictional ITAT and followed above, no commission income can be presumed. Accordingly, the commission addition of ₹12,06,135/- is deleted. 9. Bank Deposits Rs.40,57,500/- (Grounds 24-25) The AO made additions of ₹10,00,000/ and ₹30,67,500/ u/s 69A relying on bank statements in which the assessee was a joint holder. The appellant argued that these bank accounts and statements were not seized during the search; hence, the additions are beyond the scope of s.153A. 9.1 The Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (P) Ltd. (2023) has held that in respect of completed/unabated assessments, no addition can be made u/s 153A in absence of incriminating material found during search.

Page 9 of 13

ITA Nos. 8348 & 8349/Del/2025 CO Nos.58 & 59/Del/2026 (In ITA Nos. 8348 & 8349/Del/2025) [A.Ys 2012-13 & 2013-14] DCIT vs. Nirmal Kumar Sarda In the present case, the AO has not demonstrated that the impugned Bank deposits were discovered as incriminating material during search. The additions are based merely on bank statements obtained otherwise. Following the binding law in Abhisar Buildwell, the additions cannot be sustained. Accordingly, the bank deposit additions of ₹10,00,000/- and ₹30,67,500/- aggregating to Rs. 40,67,500/- are deleted.

Page 10 of 13

ITA Nos. 8348 & 8349/Del/2025 CO Nos.58 & 59/Del/2026 (In ITA Nos. 8348 & 8349/Del/2025) [A.Ys 2012-13 & 2013-14] DCIT vs. Nirmal Kumar Sarda Buildwell (P) Ltd. (2023), the additions are beyond the scope of section 153A of the Act. Grounds are dismissed.

ITA No.8349/Del/2025 for A.Y. 2013-14 : 12. The facts being identical, the decision taken for AY 2012-13 applies mutatis mutandis to the facts of the AY 2013-14. The appeal is dismissed. CO Nos.58 & 59/Del/2026 for A.Ys. 2012-13 & 2013-14 : 13. The Revenue appeal has been dismissed herein above. The assessee CO is accordingly rendered infructuous and is accordingly dismissed as infructuous. 14. In the result, the appeal of the Revenue in ITA Nos. 8348 & 8349/Del/2025 are dismissed and the appeal of the assessee in Cross Objection Nos.58 & 59/Del/2026 are also dismissed. Order pronounced in the open court on 06.07.2026

Sd/- Sd/- (SATBEER SINGH GODARA) (NAVEEN CHANDRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Date:- 06.07.2026 Priti Yadav, Sr. Ps* Copy forwarded to: 1. Appellant 2. Respondent

Page 11 of 13

ITA Nos. 8348 & 8349/Del/2025 CO Nos.58 & 59/Del/2026 (In ITA Nos. 8348 & 8349/Del/2025) [A.Ys 2012-13 & 2013-14] DCIT vs. Nirmal Kumar Sarda 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI

Page 12 of 13