NAVAL KISHOR AND SONS HUF,NEW DELHI vs. ACIT CENTRAL CIRCLE , NEW DELHI

ITA 3130/DEL/2026Status: DisposedITAT Delhi25 September 2026AY 2018-197 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the proceedings initiated under Section 153C of the Income Tax Act, 1961, are invalid and the assessment order passed under this section is quashed. The Tribunal noted that while the search on the Alankit Group occurred on October 18, 2019, the satisfaction note for the assessee was recorded on June 24, 2022. Crucially, the Tribunal referred to the amendment to Section 153C, specifically sub-section (3), which states that the section shall not apply in relation to a search initiated under Section 132 on or after April 1, 2021. Although the search predates April 1, 2021, the satisfaction and subsequent initiation of proceedings under Section 153C occurred after this date. The Tribunal found that the assessment was completed under Section 153C despite the search action falling under the amended provisions, and therefore, Section 148 should have been invoked. This view was supported by the judgment of the Hon'ble Madras High Court in Harigovind vs. CIT. Consequently, grounds of appeal No. 1(i), 1(ii), and 2 were allowed, rendering other grounds academic. The Tribunal did not decide on the validity of the satisfaction note itself, as the primary issue of the applicability of Section 153C was decided in favor of the assessee.

What were the facts?

The assessee, Naval Kishor and Sons HUF, filed its return of income for Assessment Year (AY) 2018-19 declaring a total income of Rs. 20,90,760. A search action was conducted on M/s Alankit Group on October 18, 2019. Subsequently, the Assessing Officer (AO) of the assessee recorded satisfaction on June 24, 2022, based on material seized from the laptop of Sh. Sunil Kumar Gupta, indicating cash transactions totaling Rs. 8,00,000 related to the assessee for the AY under appeal. Proceedings under Section 153C of the Income Tax Act, 1961, were initiated, and a notice was issued on August 30, 2022. The AO alleged that Rs. 8,00,000 paid in cash for accommodation entries constituted unexplained expenditure under Section 69C, and an additional Rs. 44,000 was added as commission, leading to a total addition of Rs. 8,24,000. The assessee's appeal to the CIT(A) was dismissed. The present appeal is before the ITAT.

What were the issues?

1. Whether the initiation of proceedings under Section 153C of the Income Tax Act, 1961, is legally valid, considering the date of satisfaction note and the amendments to Section 153C effective from April 1, 2021? The assessee argued that the satisfaction note was recorded on June 24, 2022, which is after April 1, 2021. Therefore, proceedings should have been initiated under Section 148, not Section 153C, citing the Supreme Court's decision in CIT vs. Jasjit Singh and the Delhi High Court's ruling in CIT vs. RRJ Securities Ltd. regarding the date of search, and the Madras High Court's judgment in Harigovind v. ACIT. The revenue contended that the search on Alankit Group occurred on October 18, 2019, prior to April 1, 2021, making Section 153C applicable. 2. Whether the satisfaction note recorded by the AO is defective and incomplete, failing to establish that the seized documents pertain to the assessee and have a bearing on the determination of their total income, as required by Section 153C? The assessee relied on the Delhi High Court's decision in Saksham Commodities Ltd Vs. ITO. The revenue argued that the AO, being common to both the searched person and the assessee, recorded satisfaction that the documents related to the assessee and had a bearing on their total income.

Which sections of the Income-tax Act were involved?

Section 153C,Section 69C,Section 148,Section 132,Section 139,Section 147,Section 149,Section 151,Section 153,Section 142,Section 143

AI-generated summary — verify with the full judgment below

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

Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL

For Appellant: Shri Arun Kumar Jain, CA
For Respondent: Shri Virender Singh, CIT-DR
Hearing: 21/07/2026Pronounced: 25/09/2026

PER MANISH AGARWAL, AM: This appeal is filed by the assessee against the order of the Ld.

Commissioner of Income Tax (Appeals)-25, Delhi [‘CIT(A)’ in short] in Appeal No. CIT(A), Delhi-30/10406/2017-18 dated 21.01.2026 passed u/s 250 of the Income Tax Act, 1961 (the Act, in short) arising out of the assessment order dated 31.03.2024 passed u/s 153C of the Act for Assessment Year 2018-19. 2. Brief facts of the case are that the assessee filed his return of income on 03.07.2018 declaring total income of Rs.20,90,760/- which includes profit from commodity transaction of Rs.13,94,673/- carried out through broker M/s Alankit Imaginations Ltd. A search and seizure action was carried in the case of M/s Alank

The order continues below.

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