SANDIP SATISH TAYAL,SURAT, GUJARAT vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1), MUMBAI, PRATISHTHA BHAVAN, MUMBAI

The Assessee has raised the following grounds of appeal:

Briefly stated, the assessee is an individual engaged in the business of manufacturing textiles and wholesale/retail trade at Surat. For A.Y. 2019-20, the assessee filed his return of income on 25.10.2019 declaring total income of Rs.6,41,780/-. The said return was processed and the assessment stood completed prior to the search proceedings.

A search and seizure action under section 132 of the Act was conducted on 06.02.2020 in the case of the “Shree Kuberji Group”, Surat. The assessee was not subjected to search and was proceeded against as an “other person” under section 153C of the Act.

During the financial year 2018-19, the assessee purchased two commercial units, being Shop Nos. 6030 and 6031 situated in the project “Shree Kuberji Textile World”, Saroli, Surat, from M/s Shree Kuberji Leisure & Infrastructure LLP. The purchases were evidenced by registered Sale Deed Nos. 694 and 695, both dated 12.02.2019, for a declared consideration of Rs.22,00,000/- per shop. It is stated that the declared consideration was paid through banking channels and was duly reflected in the books of account/return of income of the assessee.

Proceedings under section 153C of the Act were initiated against the assessee by the Deputy Commissioner of Income Tax, Central Circle 2(1), Mumbai, by issuing notice dated 03.05.2023. In response thereto, the assessee filed a return of income on 16.05.2023 declaring the same income of Rs.6,41,780/- .

During the course of assessment proceedings, the Assessing Officer (“AO”) issued a show-cause notice proposing an addition of Rs.1,01,62,000/- on account of alleged payment of on-money in respect of the aforesaid purchase of commercial units. The assessee denied having made any payment over and above the registered consideration and requested an opportunity to cross-examine the persons/material relied upon by the AO.

The AO thereafter completed the assessment under section 153C read with section 143(3) of the Act vide order dated 22.02.2024, making an addition of Rs.65,62,000/- under section 69A read with section 115BBE of the Act, treating the same as unexplained on-money investment.

Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A), vide order dated 13.11.2025, dismissed the appeal and sustained the impugned addition. Hence, the present appeal.

Before us, the Ld. AR submitted that the assessment for the year under consideration was a completed/unabated assessment as on the date of search. It was contended that, in the absence of incriminating material found during the course of search relatable to the assessee and the assessment year under consideration, no addition could be made under section 153C of the Act.

The Ld. AR further submitted that the documents referred to by the AO in paragraphs 4.1 to 4.10 of the assessment order relate to different shop units and third parties. According to the Ld. AR, such material does not bear the name of the assessee or refer to Shop Nos. 6030 and 6031. It was submitted that the AO had merely adopted a rate of Rs.4,200/- per sq. ft. appearing in certain unrelated documents and extrapolated the same to the assessee's purchases.

As regards the Excel sheet referred to by the AO in paragraph 4.11 of the assessment order, the Ld. AR submitted that the said sheet was retrieved from a backup of the computer of Shri Laxmikant Radhakrishna Agarwal and did not constitute a contemporaneous record of actual receipt of cash. It was submitted that the sheet merely contained particulars of the registered transactions and a mathematical computation based on an assumed rate of Rs.4,200/- per sq. ft. The Ld. AR pointed out that the document did not contain dates of payment, details of instalments, mode of payment, acknowledgement of receipt, signatures or any other independent evidence demonstrating actual payment of cash by the assessee.

Reliance was placed by the Ld. AR, inter alia, on the decisions of the Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (P.) Ltd. [2023] 454 ITR 212 (SC), CIT v. Kabul Chawla [2015] 380 ITR 573 (Delhi), PCIT v. Saumya Construction (P.) Ltd. [2016] 387 ITR 529 (Gujarat), CBI v. V.C. Shukla [1998] 3 SCC 410 and P.R. Metrani v. CIT [2007] 287 ITR 209 (SC), as well as the decision of the Mumbai Bench of the Tribunal in Anil Jaggi v. ACIT [2018] 89 taxmann.com 266 (Mumbai-Trib.).

The Ld. AR also placed before us copies of orders passed by the Ld. CIT(A)-4, Surat, in the cases of Naresh Sajanaram Bishnoi and Chandan Sajan Ram Bishnoi, stated to have arisen from the same search proceedings and relating to the same project, wherein similar additions based on the alleged rate of Rs.4,200/- per sq. ft. were deleted.

The Ld. Departmental Representative (“DR”), on the other hand, relied upon the orders of the AO and the Ld. CIT(A). He submitted that the digital material recovered during the course of search contained the assessee's name, PAN and particulars of Shop Nos. 6030 and 6031 and, therefore, constituted incriminating material. According to the Ld. DR, the material corroborated the practice of collection of on-money in respect of the project and justified the addition sustained by the Ld. CIT(A).

We have heard the counsels for both the parties, perused the material placed on record, the judgments cited before us, and the order passed by the Revenue Authorities. The first issue for our consideration is whether, in the facts of the present case, the impugned addition could be made in the assessment framed under section 153C of the Act.

It is an undisputed position on record that the assessee filed his return of income for A.Y. 2019-20 on 25.10.2019 and that the search under section 132 was conducted on 06.02.2020. Thus, the assessment year under consideration was not 5 pending on the date of search and was, therefore, a completed/unabated assessment year.

The Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (P.) Ltd. [2023] 454 ITR 212 (SC), after considering the law relating to assessments pursuant to search proceedings, has held that in the case of completed/unabated assessments, the jurisdiction to make an addition under the search assessment provisions is dependent upon the existence of incriminating material found during the course of search relatable to the concerned assessment year and assessee.

The said principle has also been consistently applied in the context of section 153C, where the assessment of an “other person” is sought to be made on the basis of material seized during the search of another person. Therefore, in the case of an unabated assessment, the material relied upon by the Revenue must have a live and rational nexus with the assessee and the relevant assessment year.

In the present case, the assessment order refers, in paragraphs 4.1 to 4.10, to various loose papers, rate charts and other documents concerning different shop units and persons. As noted from the material placed before us, the said documents relate, inter alia, to Shop Nos. 3001, 3002, 65-75, 1058-1062 and G-123 to G-125 and to third parties, including Shri Dhirajbhai D. Gangani. None of these documents, as described in the assessment order, specifically identifies the assessee or Shop Nos. 6030 and 6031.

The AO appears to have relied upon the rate of Rs.4,200/- per sq. ft. reflected in certain such documents and applied the same to the assessee's two shops. The addition was accordingly worked out by comparing the resultant figure with the registered consideration.

We now turn to the Excel sheet referred to in paragraph 4.11 of the assessment order. The computation relied upon by the Revenue is essentially as follows: the area of Shop Nos. 6030 and 6031, aggregating to 2,610 sq. ft., was multiplied by Rs.4,200/- per sq. ft., and the registered consideration of Rs.44,00,000/- was deducted therefrom, resulting in the figure of Rs.65,62,000/-.

The mere existence of such a mathematical computation, however, cannot by itself establish that the difference between the assumed value and the registered consideration was actually paid by the assessee in cash. The material, as placed before us, does not record the date or dates of alleged cash payments, the number of instalments, the mode of payment, the identity of the recipient of such cash, or any acknowledgement evidencing actual receipt of the alleged on-money.

Significantly, the particulars of the registered transactions appearing in the Excel sheet, such as the names, PAN, shop numbers, area, sale deed numbers and registered consideration, correspond to the registered documents. The disputed figure is generated by applying the assumed rate of Rs.4,200/- per sq. ft. to the area and deducting the registered consideration.

In these circumstances, the crucial question is whether the said Excel sheet, by itself, constitutes incriminating material establishing actual payment of unaccounted consideration by the assessee. In our considered view, it does not.

The presumption under sections 132(4A) and 292C of the Act is a statutory presumption concerning the document or asset found in the course of search and the person contemplated by the statutory provisions. The Hon'ble Supreme Court in P.R. Metrani v. CIT [2007] 287 ITR 209 (SC) has considered the scope of such presumptions. In the present case, the document in question was not found from the possession of the assessee. Consequently, the Revenue cannot, in the absence of independent corroborative material, rely upon such presumption to establish actual payment of on-money by the assessee.

We also find substance in the submission of the Ld. AR that the material relating to other purchasers cannot, merely by adopting a common rate or ratio, be extrapolated to the assessee's transaction without corroborative evidence establishing that the assessee in fact paid the alleged amount.

The fact that similar material arose in proceedings concerning other purchasers of units in the same project is also relevant. The Ld. AR has placed on record orders of the Ld. CIT(A)-4, Surat, dated 03.03.2026 in the cases of Naresh Sajanaram Bishnoi and Chandan Sajan Ram Bishnoi, stated to relate to the same search proceedings and the same project, wherein additions based on similar material were deleted. While each assessment has to be decided on its own facts and material, the reasoning contained in those orders supports the proposition that a project-level rate, by itself, cannot establish actual payment of unaccounted consideration by an individual purchaser.

In the present case, therefore, we find that the material relied upon by the AO does not establish actual payment of Rs.65,62,000/- by the assessee outside the books. More importantly, since the assessment year was a completed/unabated assessment year, the absence of incriminating material relatable to the assessee and the assessment year goes to the root of the jurisdiction to make the impugned addition under section 153C.

In view of the above discussion and respectfully following the ratio laid down by the Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (P.) Ltd. (supra), the addition of Rs.65,62,000/- made under section 69A read with section 115BBE of the Act cannot be sustained.

Accordingly, the addition of Rs.65,62,000/- is deleted. Grounds Nos. 1, 2 and 6 are allowed.

Ground No. 3 challenges the jurisdiction of the DCIT, Central Circle 2(1), Mumbai, to issue the notice under section 153C of the Act dated 03.05.2023. Since we have already deleted the impugned addition on the ground that the condition relating to incriminating material, as applicable to a completed/unabated assessment, is not satisfied, the adjudication of the assessee's further challenge concerning the territorial/jurisdictional competence of the particular Assessing Officer is rendered academic. Accordingly, Ground No. 3 is dismissed as infructuous.

By Ground No. 4, the assessee has sought restoration of the matter to the file of the AO/CIT(A) on the ground that adequate opportunity was not granted. Since we have adjudicated the substantive issue and deleted the impugned addition, no useful purpose would be served by restoring the matter for a fresh adjudication. Ground No. 4 is accordingly dismissed as infructuous.

Ground No. 5 relates to initiation of penalty proceedings under section 271AAC of the Act. The challenge to initiation of penalty proceedings in an appeal against the quantum assessment is premature. Further, the addition giving rise to the consequential penalty proceedings has itself been deleted by us. Accordingly, Ground No. 5 is dismissed as premature.

Ground No. 7 is general in nature and does not call for separate adjudication.

In the result, the appeal filed by the assessee is partly allowed.