THE ACIT, CENTRAL CIRCLE-1(3), AHMEDABAD vs. SHRI SURESHBHAI U GADHECHA,, AHMEDABAD

Per Sanjay Garg, Judicial Member:

The captioned cross appeals, one by the Revenue and the other by the assessee have been filed against the order of the Ld. Commissioner of Income Tax (Appeals)-11, Ahmedabad, (hereinafter referred to as “CIT(A)”), dated 10.08.2021 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2017-18. Since, the facts and issue involved in both the appeals are common, hence, the same were heard together and are being disposed of by this common order. The Revenue’s appeal IT(SS)A No.190/Ahd/2021 is taken as lead case for the purpose of narration of facts.

IT(SS)A No.190/Ahd/2021

“1. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition made u/s 68 on account of amount received in bank accounts of Rs.5,82,99,500/- for the funds transferred from the bank account No.519400210000228 of SVP Corporation to Anmol Traders Prop. concern of Shri Suresh U Gadhecha without appreciating the fact that the transaction entered into with the web of concerns run by Mahendra Shantilal Patel were all proved to be bogus and merely for accommodative entries and the same has been confirmed by the first appeal in the case of MSP. 2. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition on account of amount received in bank accounts for Rs 12,45,70,000/- for the funds transferred from the bank account No. 60245155120 of SVP Corporation post demonetization to Anmol Traders Prop concern of Shri Suresh U Gadhecha without

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appreciating the fact that the transaction entered into with the web of concerns run by Mahendra Shantilal Patel were all proved to be bogus and merely for accommodative entries and the same has been confirmed by the first appeal in the case of MSP. 3. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs. 17,79,29,500/- for the funds received by Anmol Traders Prop. concern of Shri Suresh U Gadhecha as per seized MS Excel File 'Final k RTGS DETAILS(4).xlsx', without appreciating the fact that the transaction entered into with the web of concerns run by Mahendra Shantilal Patel were all proved to be bogus and merely for accommodative entries and the same has been confirmed by the first appeal in the case of MSP. 4. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs.7,64,72,428/- u/s 68 towards unexplained cash credit, on the basis of impounded documents and seized material, without appreciating the fact that the transaction entered into with the web of concerns run by Mahendra Shantilal Patel were all proved to be bogus and merely for accommodative entries and the same has been confirmed by the first appeal in the case of MSP. 5. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs.7,23,64,650/- made u/s 68 towards the unexplained cash deposits in bank accounts of the assessee without appreciating the fact that the transaction entered into with the web of concerns run by Mahendra Shantilal Patel were all proved to be bogus and merely for accommodative entries and the same has been confirmed by the first appeal in the case of MSP. 6. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs.234,58,80,132/- made u/s 68 towards unexplained credit entries in respect of Gold Jewellery without appreciating the fact that the transaction entered into with the web of concerns run by Mahendra Shantilal Patel were all proved to be bogus and merely for accommodative entries and the same has been confirmed by the first appeal in the case of MSP. Moreover the assessee could not substantiate the so claimed sale transactions with corroborative evidences. 7. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in allowing the additional ground raised by the assessee that the additions made in the assessment order. cannot be brought within the ambit of section 69A, 69B or 69C for taxing the same u/s 115BBE of the Act, as the same are pertain to business transactions of the assessee, without appreciating the fact that all the transaction entered into with the web of concerns run by Mahendra Shantilal Patel were all proved to be bogus and

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merely for accommodative entries and the same has been confirmed by the first appeal in the case of MSP. 8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 9. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.”

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the assessee after analysing the said documents observed that there were various transactions of transfer of amount by Benefit Group Concerns and Concerns in the name of Vishal D Pandya in the account of proprietorship concern of the assessee i.e. Anmol Traders amounting to Rs.17,79,29,500/-, the genuineness of which was required to be verified and that the same will have bearing on the income of Anmol Traders. The AO of the assessee further noted that a survey action u/s 133A of the Act was also carried out in the case of the assessee, namely, Suresh U Gadhecha. During the survey, it was found that the assessee had deposited huge cash in his bank accounts. In his statement recorded u/s 131 of the Act, the assessee stated that the cash deposit in his bank account were out of proceeds of cash sale of bullion. The AO, however, doubted the said sale and purchase transactions in bullion. He observed that the cash deposited by the assessee during demonetization period was not apparently from sale proceeds, but unexplained cash which will have bearing on the determination of total income of the assessee. He, therefore, invoked the provisions of Section 153C of the Act and recorded his satisfaction to the effect that the documents / material seized during the course of search action from the residence-cum-office of Shri Bharat P. Popat, Benefit Tradelink Ltd & Eliegance Reality Ltd. pertained to, and information contained therein related to Anmol Traders, which was proprietorship concern of the assessee and that the said seized material was having bearing on determination of the total income of the assessee. He, therefore, recorded his satisfaction u/s 153C of the Act vide satisfaction note dated 29.08.2019 and proceeded to reopen the assessment of the assessee in respect of six assessment years preceding the assessment year relevant to the previous year in which the search was conducted in the case of Benefit Group Concerns i.e.

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for A.Y. 2011-12 to A.Y. 2016-17. Thereafter, the assessment proceedings were conducted in the case of the assessee for A.Y. 2011-12 to A.Y. 2016-17 u/s 153C of the Act. So far as the assessment year under consideration i.e. A.Y. 2017-18 is concerned, the AO treated the same as search year and initiated assessment proceedings u/s 143(3) r.w.s. 153B(1)(b) of the Act and made the impugned additions, which however, were deleted by the CIT(A) except the confirmation of addition to the extent of Rs.1,14,69,475/- by estimating the gross profits at Rs.1,33,71,516/- as against Rs.19,02,041/- disclosed by the assesse. Now we proceed to discuss the each ground of appeal taken by the Revenue.

Ground Nos. 1 & 2:

4.1 The AO further noted that an amount of Rs.12,45,70,000/- was also found transferred from another bank account of SVP Corporation to the

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proprietorship concern of the assessee. The AO observed that the assessee had failed to explain the nature of the transaction. He, therefore, treated the said amount also as unexplained income of the assessee and added the same u/s 68 of the Act.

5.1 So far as the addition of Rs.58299500/- in respect of funds transferred from bank account of SVP Corporation to Anmol Traders was concerned, the Ld. CIT(A) observed that the observation of the AO, that the assessee had not furnished the requisite details, was factually incorrect. He observed that the assessee had duly demonstrated during the course of appellate proceedings that information called for had duly been furnished and that the AO had simply brushed aside the submissions and other material/ furnished. He observed that merely by not taking into cognizance, all the evidences furnished by the assessee, cannot permit the AO to make such additions. That the AO was duty bound to consider the material which had been placed before him, analyse the same and thereafter, give detailed reasons for rejecting the evidences before proceeding to make the additions. He observed that the AO had simply ignored the material placed before him and chosen to make addition on account of the funds transfer from the account of SVP Corporation and placing reliance on the loose paper comprising of page No.121 of Annexure A-14 seized from the residence cum office of Bharat Popat (Searched party). He further observed that even for the time being assuming that the paper in question was incriminating in nature, the transactions

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identified therein were to the extent of Rs. 65,84,500/-(5,00,000 + 5,84,500 + 40,00,000+ 15,00,000). However, the AO had completely ignored the paper and extrapolated contents thereof and proceeded to treat the transfers from the bank account of SVP Corporation as unexplained in the hands of the assessee, which was not justified. He observed that the amounts in question were, in fact, the receipts against the sales made to SVP Corporation. He observed that when the AO had not doubted the sales or not consequentially reduced these sales from the trading account, then treating the sale proceeds as unexplained cash credits would not be justifiable. He noted that the case of the AO was not that the sales made to SVP Corporation were not genuine. The total sales affected to SVP Corporation were Rs. 25,59,67,144/-. He held that to carve out sale proceeds to the extent of Rs.5,82,99,500/- out of the accepted sales would not be permissible to be considered as unexplained cash credit. The Ld. CIT(A) further noted that the deposits made in the bank account of SVP Corporation have already been treated as unexplained in the hands of Vishal Pandya. Once the aforesaid amount has already been treated as unexplained, further transfer of the said amount to the assessee’s accounts cannot be considered as unexplained and there cannot be double taxation of the same amount. He in this respect referred to various case laws also. He, therefore, deleted the addition so made by the AO.

5.2 So far as the addition of Rs.12,45,70,000/- on account of amount transferred from the another bank account of SVP Corporation was concerned, the Ld. CIT(A) made the similar observations and observed that the issue was identical to that have been discussed above. He further observed that a perusal of assessment order passed in the case of Vishal Pandya revealed that an

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addition of Rs.33,86,63,250/- was made in the hands of Vishal Pandya in respect of funds deposited in the bank account of SVP Corporation, out of which, funds of Rs.124570000/- have been transferred to the bank account of the assessee. Therefore, the source of the same stood explained in the hands of the assessee. Moreover, the assessee had explained that the said amount was on account of sales made of bullion by the assessee to the said SVP Corporation. The Ld. CIT(A), therefore, deleted the addition of the said amount of Rs.12,45,70,000/-.

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Ground No.3:

7.1 The AO observed that during the course of search action in the case of Bharat P. Popat and others, an MS Excel File Final K RTGS Details (4).xlsx was also recovered from the computer. This file contained various sheets / entries. As per the said sheet, there were transfer of funds to Anmol Traders amounting to Rs.17,79,29,500/-. Since, the assessee could not satisfactorily explain the nature and genuineness of the said transaction, therefore, the AO added the said amount of Rs.17,79,29,500/- into the income of the assessee u/s 68 of the Act as unexplained cash credits.

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Benefit Tradelink and the same was already considered by the AO by making addition of the amount received from SVP Corporation as discussed above. He, observed that the remaining addition of Rs.69,00,000/- was in respect of the amount received from Benefit Tradelink Pvt. Ltd. He in this respect observed that the assessee received this amount between the period 05.12.2016 to 07.12.2016. As against the same, the assessee on 15.12.2016 had sold gold of Rs.9 Lakhs and the balance amount of Rs.60,00,000/- had been returned by account payee cheque. He observed that the source of the payment had not been questioned or doubted by the AO. Further, the sales made to Benefit Tradelink by the assessee have not been questioned by the AO. He, therefore, deleted the entire addition of Rs.17,79,29,500/-.

Ground NO.4:

10.1 The AO noted that during the course of survey action in the case of the assessee, various books and documents were impounded. The AO noted that

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the transactions amounting to Rs.7,64,72,428/- remain unexplained. He, therefore, added the said amount into the income of the assessee.

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transactions had also been recorded in the books of accounts maintained which were subject to audit. It was also submitted that shroff through whom the cheques had been discounted was also summoned during the post survey proceedings and the declaration was filed by him in support of the transaction undertaken, which is also contained in the satisfaction note. The Ld. CIT(A) further noted that Shri Naimesh Shah, Proprietor of Shreeji Corporation (Shroff) had admitted to being in the business of shroff and doing discounting of cheques since last 10 to 12 years and had undertaken the discounting of cheques issued by the assessee. The Ld. CIT(A) noted that these evidences have not been discredited by the AO at the time of assessment proceedings. The Ld. CIT(A) further observed that Annexure A-2 comprising of page 1 to 52 contained the copies of the sales bills for the period 24th October, 2016 to 27th October 2016. The assessee had submitted before him that all the sales as reflected in this invoices had been duly entered into the regular books of accounts maintained which were subject to audit. Further, bullion trading was subject to VAT @ 1% which has been duly discharged. The assessee had also filed the returns of VAT and assessments had come to be completed, the copies of which were placed on file. He observed that no adverse inference had been drawn by the VAT authorities with reference to the bullion transactions undertaken by the assessee. The sales had been made out of the available stocks and the stock registers had also been placed on record at the time of assessment. No defect or shortcoming was pointed in the stock registers furnished. The sales invoices contained the name of the customers and the address as made available. Further, that the invoices were not in violation of Rules 114B of the I.T. Rules, 1962. Regarding the non availability of PAN of the customers, it was submitted that the sales invoices being less

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than Rs.2,00,000/-, there was no mandatory requirement for obtaining such PAN. It was also submitted that the total cash sales affected by the assessee were to the extent of Rs.3.72 Crores as against total turnover of Rs.234.58 Crores. Therefore, the total proportion of cash sales to total sales was Rs.1.58% which cannot be termed as unreasonable or abnormal. The copy of the statement indicating the cash sales to total sales had also been placed on the file.

11.1 The Ld. CIT(A) further coming to Annexure A-3, noted that the said Annexure comprises of sale invoices for the period 16.11.2016 to 24.01.2017. Further, the loose paper on page 36 to 38 were, in fact, unsigned cheques which have issued by Anubhuti Engineering P. Ltd and not by the assessee. That the said cheques had nothing to do with the assessee and the same have not been encashed. Ld. CIT(A) observed that these facts have not been considered by the AO while making addition in the case of the assessee inspite of the same having brought to his attention. The Ld. CIT(A) observed that the AO had completely disregarded the reply of the assessee and had not taken cognizance of the same while completing the assessment. He observed that none of the evidences which have been furnished have been discredited by the AO, though, he had ample opportunity before him to do so. He observed that the assessee had furnished credible evidences in support of the transactions undertaken. He goes on to observe that the action of the AO smacks of arbitrariness while disregarding the evidences and placing blind reliance on the impounded material without countering the fact that the transactions as reflected in the impounded records have been duly reflected in the books of accounts. He observed that the AO had completely lost sight of the fact that

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nearly 50% of the total turnover of the assessee had been conducted prior to demonetization period. Further, the proportion of cash sales to total sales was negligible (1.59%) and it cannot be inferred that the same had been used as a gimmick to introduce cash in the books of accounts. He noted that the books of accounts have been audited and placed before the AO and no specific defect or shortcoming has been pointed out therein. That there was sufficient stock to effect the sales. Further, the sales had already been admitted as revenue receipt and therefore, there was no case for making addition u/s. 68 of the Act and taxing the same u/s. 115BBE of the Act. The AO has not doubted the availability of stock for conducting the sales. He noted that the transactions as appearing in Annexure A-2 and A-3 comprising of sales have been admitted as revenue receipts in the books of the assessee. Further, the purchases as reflected in the impounded purchase invoices as per Annexure A-1 have also been duly reflected in the books of accounts maintained. He observed that during the course of survey operation, no discrepancy in stocks has been found vis-à-vis that was recorded in the books of accounts. He, therefore, held that all these facts cannot be ignored or brushed aside while examining the issue holistically. He, therefore, further relying upon various case laws, deleted the impugned addition of Rs.76472428/-.

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Ground No.5:

13.1 The brief facts relevant to the issue are that the AO noted that the assessee had deposited huge amount of cash in his various bank accounts. The AO summarized the financial year wise deposits and noted that the assessee had made a total cash deposit for the assessment year under consideration of Rs.72364650/-. Since, the assessee failed to explain the source of the said deposits, the AO treated the said deposits as unexplained cash credits and added the same into the income of the assessee u/s 68 of the Act.

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that, during the course of survey proceeding, cash had duly been reconciled with the books of accounts. Neither any excess cash nor cash deficit was reported during the survey action. The Ld. CIT(A) after duly taking note of the details of cash deposits vis-à-vis the cash book of the assessee observed that there was no discrepancy found and, accordingly, deleted the addition made by the AO.

Ground No.6

16.1 The brief facts relevant to the issue are that during the course of assessment proceedings, the AO asked the assessee to produce the cash book, bank book, sale register, purchase register, stock register, copies of sale bills and copies of purchase bills for the financial year under consideration. On verification of details, the AO observed from the P&L account that the assessee had made total sales of Rs.2,34,58,80,132/-, out of which, there were

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certain cash sales also. The AO further noted that cash sales during the financial year 2016-17 especially during the demonetization period, were more than that of the corresponding period of F.Y. 2015-16. The AO also observed that the assessee had made sales to the entities, namely, Jyoti Jweller, Kansara Navnitlal Jagjivandas, SVP Corporation. The AO asked the assessee to produce the principal persons of the said concerns for verification of the sales. However, the assessee did not produce the said persons. The AO further noted that the assessee had also shown huge purchase stock during July to September 2016, which was sold as retail cash sales in October 2016 and cash so earned was deposited in the bank account in November 2016. The AO further noted that the payments in case of all sellers were received by M/s. Shreeji Enterprise on behalf of the sellers. Further that, the proprietor of the said concern, namely, Shri Nainesh N Shah had stated that he had made RTGS Transfers on directions of the assessee and received commission. He had not done business of gold and bullion. The AO after detailed analysis of the accounts book, sale register, cash book, bank account, stock register and purchase and sale invoices etc. observed that the sale and purchase activity shown in books of account was not genuine, but merely a trick to channelise black money into white. The AO, therefore, rejected the books of accounts of the assessee and added the entire turnover of Rs.2,34,58,80,132/- as unexplained cash credits u/s 68 of the Act.

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CIT(A) discussed about the various discrepancies and objections noted by the AO and observed that the same were not tenable. He observed that the AO had noted that information was called for by issuing letters u/s 133(6) to three parties, however, they had not responded to the notice. However, the assessee had requested vide letter dated 20.12.2018 to issue summons to the said parties. It was also submitted that the assessee was conducting regular transactions with the said parties in subsequent years also. The Ld. CIT(A) after discussion in detail observed that during the course of assessment proceedings, the assessee had furnished purchase bills, sales bills, sales registers, purchase registers, stock registers, cash book, bank book etc. That nothing has been brought on record by the AO on the basis of which it can be established that the transactions were not genuine. Further that the transactions have been generally undertaken through normal banking channel. While referring to cash deposits made during the entire year, the Ld. CIT(A) observed that the same was hardly amounting to Rs.3.67 Crores, which was extrapolated to consider the entire sales as non-genuine. He further observed that the reason assigned for making the addition of the entire turnover was on the basis of documents impounded during the survey action, for which, separate additions have already been made, which, as discussed above, were not found sustainable by the CIT(A). The Ld. CIT(A) further observed that VAT authorities had accepted the trading transactions. Having observed so, the Ld. CIT(A), however, noted that ‘however convincing the arguments forwarded by the assessee may be, but one cannot overlook the fact that survey operations u/s. 133A of the Act had been undertaken in the case of the assessee on 06.02.2017.’ He observed that during the course of survey operations, it was found that the assessee had made huge cash deposits in his

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bank accounts during the post demonetization period. In his statement recorded u/s. 131 of the Act, the assessee had informed that the cash deposits in the bank account were in fact the sale proceeds of cash sale of bullion. The Ld. CIT(A) in this respect noted that though, the assessee was a trader and dealer in bullion since last many years, however, the purchases made were from questionable sources i.e. URD purchase. He noted that though, payments may have been made for the purchase of bullion through account payee cheques, but that did not grant it the cloak of genuineness. He observed that the payments made for the purchase of bullion has been discounted by all the sellers of the bullion with only one Shroff, namely "Shreeji Enterprise". Further, that the Prop. of Shreeji Enterprise also did not appear in response to the summons during the post survey proceedings. Even, the vouchers which had been impounded during the course of survey proceedings revealed certain peculiarities which were abnormal: 1. All the purchases were shown for a value of less than Rs. 2,00,000/-, 2. Purchases were shown from various persons. However, proper address and contact number of the persons was not available. 3. The vouchers did not contain signatures of the sellers. 4. Though all the 184 persons had sold goods to the assessee, however they had not received payments in their bank accounts. The impounded evidences revealed that one Shreeji Enterprise (Shroff) had received cheques on behalf of the 184 persons. 5. There was no plausible explanation forwarded that all 184 persons sold their own bullion and gave authority to one Shreeji Enterprise who received cheques on their behalf. The Ld. CIT(A) observed that the aforesaid abnormal circumstances cannot be brushed aside while examining the facts of the case. He further observed that if the book results of the assessee are compared with the earlier years there

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was a drastic fall in the G.P., which definitely was a matter which cannot be ignored and suggested leakage of income. The Ld. CIT(A) noted that there was a decline in G.P. rate as compared to earlier years, although there was increase in the NP rate in the year under consideration. He observed that the fall in GP rate by itself was indicative of the possibility of leakage of income. The Ld. CIT(A), therefore, estimated the G.P. at 0.57% as per the earlier year i.e. AY 2016-17 by rejecting the books of account and thereby confirmed an addition to the extent of 0.49% (0.57 - 0.08%) of the declared sales by the assessee. The Ld. CIT(A), accordingly, estimated the gross profits at Rs. 1,33,71,516/- as against Rs. 19,02,041/- disclosed by the assessee and confirmed the addition to the extent of Rs. 1,14,69,475/-.

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infirmity or discrepancy in the same. The AO has totally brushed aside the relevant details and evidences furnished by the assessee. The Ld. CIT(A) having thoroughly discussed and finding merits in the averments made by the assessee and holding that the assessee has been able to prove the genuineness of the transactions, at the end goes on to estimate gross profits of the assessee merely by comparing the gross profits for the year under consideration with the earlier assessment years. When the Ld. CIT(A) has not pointed out any defect or infirmity in the accounts of the assessee, purchase bills, sales bills, sales registers, purchase registers, stock registers, cash book, bank book etc., there was no reason for the CIT(A) to reject the books of accounts of the assessee on flimsy grounds and estimate the gross profit rate by comparing the same with that of earlier years. The Ld. AR of the assessee, on the other hand, has duly explained that in case of bullion trading, the scope of margin is very less. Moreover, such a stock of bullion / gold has standard rates and it cannot be purchased at lower rates from gray market. We agree with the aforesaid submissions made by the Ld. AR. So far as the observation of the CIT(A) that the sellers have discounted their cheques through one party only, namely, Shreeji Enterprise (Shroff), is concerned, the Ld. AR has submitted that the assessee had duly paid the sale consideration through his bank account. He has explained that there is an element of lack of faith among the unregistered sellers of bullion while accepting cheque about its encashment in bank, therefore, the said Shreeji Enterprise offered its services of immediate encashment of the cheque at a marginal commission as said Shreeji Enterprise had faith in the assessee’s creditworthiness and encashment of the cheques by the bank. In this respect, it was a win-win situation for both the sellers and purchaser and the intermediator. Under the circumstances, the action of the

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CIT(A) in estimating the gross profits, specially having held that the assessee had duly proved the genuineness of the various transactions, cannot be held to be justified. Therefore, the impugned addition confirmed by the CIT(A) is ordered to be deleted. The action of the CIT(A) in deleting the addition made by the AO of the entire turnover, however, is upheld.

IT(SS)A NO. 150/Ahd/2021

“1. The Learned Commissioner of Income Tax (Appeals) -11, Ahmedabad has erred in confirming an addition to the extent of Rs.1,14,69,475/- by estimating the G.P. at 57 percent as per order passed for A.Yr.2016-17 on the addition for total sales of Rs.2,34,58,80,132/- made by the Assessing Officer treating the same as alleged unexplained credit entries. 2. The appellant craves leave to add, alter, amend or modify any of the grounds of

“i. The Ld. Commissioner of Income Tax (Appeals) has erred in confirming the action of the AO of passing the order u/s 143(3) r.w.s. 153B(1) without assuming jurisdiction by issuance of the notice u/s 153C of the Act. ii. The Learned Commissioner of Income Tax (Appeals) -11, Ahmedabad has erred in confirming the action of the Assessing Officer in passing an order

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u/s.143(3) r.w.s. 153B(1)(b) of the I.T.Act, 1961 which is illegal and bad in law hence the same should be cancelled. iii. The Learned Commissioner of Income Tax (Appeals) -11, Ahmedabad has erred in confirming the action of the Assessing Officer in initiating the proceedings u/s. 153C of the 1.T.Act, 1961. iv. The appellant craves leave to add, alter, amend or modify any of the grounds of appeal on or before the date of hearing of appeal.”

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“Assessment of income of any other person. 153C(1) "Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A... ...Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person." [Emphasis supplied] 24. As per the first proviso to Section 153C(1) of the Act, the reference to the date of initiation of the search under section 132 in case of the person other than the searched person, shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer of that other person.

24.1 The Hon'ble Supreme Court in the case “Jasjit Singh vs. CIT” (458 ITR 437) has held that the block period of six assessment years must be computed backward from the date of receipt of the seized material by the AO of the other person, and strictly not from the date of the original search. The Hon'ble Delhi High Court in Ojjus Medicare P. Ltd. v. ACIT (465 ITR 101)

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endorsed this view, explicitly rejecting the Revenue's contention that block periods should be reckoned with reference to the date of search. The Hon'ble Madras High Court in Harigovind G. Ravindran (HUF) vs. ACIT (485 ITR 509) extensively clarified that for the "other person", the effective date of search initiation is the date the seized material is handed over. However, in the case in hand, the AO proceeded to reopen the assessment u/s 153C of the Act for the six years preceding the date of search in case of Benefit Group and not from the date of receipt of seized material pertaining to the assessee. In the case in hand, the AO of the searched party had forwarded the seized material in the prescribed Performa on 28.08.2018. Thereafter, the AO of the assessee drew satisfaction note for proceedings u/s 153C of the Act on 29.08.2018, however, instead of proceeding to initiate assessment proceedings u/s 153C of the Act for immediately preceding six assessment years from the said date which would be A.Y. 2013-14 to A.Y. 2018-19, the AO proceeded to initiate proceedings u/s 153C of the Act for A.Y. 2011-12 to 2016-17. Therefore, the AO did not issue any notice u/s 153C of the Act for the assessment year under consideration i.e. A.Y. 2018-19 and proceeded to frame the assessment u/s 143(3) of the Act. The Ld. AR of the assessee, in this respect, has submitted that as the provisions relating to assessment pursuant to search and seizure action is given u/s.153A to u/s.153C of the Act, which in itself is a separate code, and as per the aforesaid statutory provisions, the only course of action available to the AO was to proceed for assessment u/s.153C of the Act and not u/s.143(3) of the Act. He, in this respect, has relied upon various case-laws to contend that the assessment order passed u/s 143(3) of the Act was bad in law. At this stage, it is relevant to reproduce the 2nd proviso of Section 153A of the Act:

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“ Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub- section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.”

Therefore, when we read the aforesaid 2nd Proviso to Section 153A of 24.2 the Act with the 1st Proviso of Section 153C of the Act, the necessary corollary is that the pending assessment on the date of receipt of seized material / recording of satisfaction under Section 153C of the Act, would abate and the only course available to the AO was to proceed u/s 153C of the Act. Therefore, the assessment order passed by the AO u/s 143(3) of the Act without issuing notice u/s 153C of the Act is bad in law and, hence, the same is liable to be quashed. The reliance has been placed in this respect upon the following case laws:

i. D G Land Developers (P) Ltd. v ACIT (2024)166 taxmann.com 620 (Mum.) ii. BNB Investment & Properties (2018) 68 ITR (T) 567 (Del.) iii. Pavitra Realcon Pvt. Ltd. 87 taxmann.com 142 (Del.) iv. Bina Fashions N Foods 77 ITR (T) 68 (Del.) v. DY Patil Sports ITA No.1295/Mum/2021 vi. Shri Bondalapati Shivaji Rao v DCIT ITA No.1044/Chny/2023

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24.3 Therefore, the assessee succeeds on the legal ground. The assessment order passed u/s 143(3) of the Act is without jurisdiction and the same is, therefore, quashed. The appeal of the assessee is allowed.

This Order pronounced on 20/07/2026 under Rule 34(4) of the ITAT Rules

Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 20/07/2026 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT आयकर आयु�(अपील) / The CIT(A)- 4. 5. �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad