JINESH MANSUKHLAL DODHIA,BHIWANDI vs. DCIT-CC-3, THANE, THANE

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ITSSA 789/MUM/2025Status: DisposedITAT Mumbai28 May 2025AY 2017-185 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 the addition of Rs. 1,20,00,000 on account of 'Hundi' loans made under Section 153A was invalid. The Tribunal noted that the material relied upon by the Assessing Officer (AO) for the addition under Section 69D was not found from the assessee's premises. Instead, it was seized from the premises of third parties during a search conducted in their cases. The Tribunal emphasized that for an unabated assessment year, an addition could only be made if incriminating material was found from the assessee's premises. In cases where incriminating material related to a third party is found during the search of an assessee, the addition in the hands of the third party can only be made by invoking Section 153C read with Section 153A. The Tribunal found that the AO had not followed the procedure prescribed under Section 153C, which requires the AO of the searched person to record satisfaction that the seized material belongs to or pertains to the third person and has an impact on their income. Since this procedure was not followed, the addition made in the hands of the assessee based on material seized from another person could not be sustained. Accordingly, the Tribunal deleted the addition. As the appeal was allowed on legal grounds, the grounds raised on the merit of the addition were rendered academic and not adjudicated.

What were the facts?

The assessee, Jinesh Mansukhlal Dodhia, filed a return of income for Assessment Year 2017-18 declaring a total income of Rs. 22,90,610. A search and seizure action under Section 132 of the Income Tax Act, 1961, was conducted on the 'Dodhia Group' of cases, including the assessee, on November 27, 2019. Subsequently, a notice under Section 153A was issued, and the assessee filed a revised return on January 29, 2021, declaring the same total income. During the assessment proceedings, the Assessing Officer (AO) observed documents indicating receipt of 'Hundi' loans amounting to Rs. 1,20,00,000. The AO added this amount to the total income under Section 69D read with Section 115BBE, along with interest of Rs. 23,31,000, resulting in a total addition of Rs. 1,43,31,000. The assessee appealed to the CIT(A), challenging the addition on legal grounds and merit. The CIT(A) dismissed both grounds.

What were the issues?

1. Whether the addition of Rs. 1,20,00,000 on account of 'Hundi' loans made in assessment proceedings under Section 153A of the Income Tax Act, 1961, is valid, considering the seized material was found from the premises of a third party and not the assessee's premises, in light of the provisions of Section 153C read with Section 153A of the Act. Assessee's contention: The material relied upon by the AO for the addition under Section 69D was not found from the assessee's premises. Therefore, the addition could only be made by invoking Section 153C. The seized papers (1, 2, 3, and 4 of Bundle No. 5, Party No. AB-3) were found from premises at Flix Tower, Bhandup (West), Mumbai, during a search in the cases of M/s Dodhia Synthetic Ltd. and others. The AO failed to follow the procedure prescribed under Section 153C, including recording satisfaction that the seized material belonged to or pertained to the assessee and had an impact on the assessee's income. Thus, the addition made on the basis of material seized from another person cannot be sustained. Revenue's contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 153A,Section 153C,Section 69D,Section 115BBE,Section 132,Section 143(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI

Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY

For Appellant: Mr. Rajendra Chandekar, CIT-DR
Hearing: 28/05/2025

PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 30.12.2024 passed by the Ld. Commissioner of Income-tax (Appeals), Pune-11 [in short ‘the Ld. CIT(A)’] for assessment year 2017-18. In the grounds raised, the assessee has challenged the validity of the addition made in proceedings u/s 153A of the Income-tax Act, 1961(in short the Act) as well as addition on merit.

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2.

Briefly stated, facts of the case are that the assessee filed its Briefly stated, facts of the case are that the assessee filed its Briefly stated, facts of the case are that the assessee filed its return of income for the year under consideration on 08.03.2018 return of income for the year under consideration on 08.03.2018 return of income for the year under consideration on 08.03.2018 declaring total income declaring total income at Rs.22,90,610/-. Subsequently, a search . Subsequently, a search and seizure action u/s 132 and seizure action u/s 132 of the Act was carried out on the was carried out on the business as well as residential premises of the business as well as residential premises of the “Dodhia Group Dodhia Group” of cases including the assessee on 27.11.2019 cases including the assessee on 27.11.2019. Consequent to the onsequent to the search action, notice u/s 153A of the Act was issued. In response, search action, notice u/s 153A of the Act was issued. In response, search action, notice u/s 153A of the Act was issued. In response, the assessee again filed the return of income on 29.01.2021 the assessee again filed the return of income on 29.01.2021 the assessee again filed the return of income on 29.01.2021 declaring total income at Rs.22,90,610/ eclaring total income at Rs.22,90,610/-. In the course of . In the course of assessment proceedings, the Assessing Officer observed that in the assessment proceedings, the Assessing Officer observed that in the assessment proceedings, the Assessing Officer observed that in the documents found during the course of search of Party No. AB-3 documents found during the course of search of Party No. AB documents found during the course of search of Party No. AB indicate receipt of ‘Hundi Hundi’ loans amounting to Rs.1,20,00,000/ loans amounting to Rs.1,20,00,000/-. The Ld. Assessing Officer asked the assessee to explain Ld. Assessing Officer asked the assessee to explain whether Ld. Assessing Officer asked the assessee to explain entry of said Hundi/ Hundi/cash loan was recorded in books of accounts recorded in books of accounts but the assessee but the assessee neither filed any detail nor provided d any detail nor provided any explanation. In view of facts and circumstances, the Assessing n view of facts and circumstances, the Assessing n view of facts and circumstances, the Assessing Officer held the said amount of ld the said amount of ‘Hundi’ loan of Rs.1,20,00,000/ loan of Rs.1,20,00,000/- as part of the total income under the provisions of section 69D of the part of the total income under the provisions of section 69D of the part of the total income under the provisions of section 69D of the Act r.w.s. 115BBE of the Act and also added interest @ 1.85% per Act r.w.s. 115BBE of the Act and also added interest @ 1.85% per Act r.w.s. 115BBE of the Act and also added interest @ 1.85% per month on such cash month on such cash/Hundi loan, which was computed at which was computed at Rs.23,31,000/-. In this manner, the Assessing Officer made total . In this manner, the Assessing Officer made total . In this manner, the Assessing Officer made total addition of Rs.1,43,31,000/ addition of Rs.1,43,31,000/-.

3.

On further appeal, the assessee challenged the assessment On further appeal, the assessee challenged the assessment On further appeal, the assessee challenged the assessment proceedings on legal ground and also challenged the addition on proceedings on legal ground and also challenged the addition on proceedings on legal ground and also challenged the addition on

Jinesh Mansukhlal Dodhia Jinesh Mansukhlal Dodhia 3 IT(SS)A No. 789/MUM/2025 IT(SS)A No. 789/MUM/2025

merit. The Ld. CIT(A) dismissed both the grounds challenging merit. The Ld. CIT(A) dismissed both the ground merit. The Ld. CIT(A) dismissed both the ground validity of the addition made under 153A addition made under 153A assessment as well as assessment as well as ground raised on the merit. Aggrieved, the assessee is in appeal ground raised on the merit. Aggrieved, the assessee is in appeal ground raised on the merit. Aggrieved, the assessee is in appeal before the Tribunal by way of challenging the finding of the Ld. before the Tribunal by way of challenging the finding of the Ld. before the Tribunal by way of challenging the finding of the Ld. CIT(A).

4.

We have heard rival submissions of th We have heard rival submissions of the parties and perused e parties and perused the relevant materials on record the relevant materials on record. The Ld. counsel for the assessee . The Ld. counsel for the assessee referred to ground No. 1 of the appeal challenging validity of the referred to ground No. 1 of the appeal challenging validity of the referred to ground No. 1 of the appeal challenging validity of the addition of Hundi loan made in addition of Hundi loan made in assessment completed u/s 153A of assessment completed u/s 153A of the Act and submitted that the mater the Act and submitted that the material relied upon by the ial relied upon by the Assessing Officer for making addition u/s 69D was not found from Assessing Officer for making addition u/s 69D was not found from Assessing Officer for making addition u/s 69D was not found from the premises of the assessee and therefore, no addition on the basis the premises of the assessee and therefore, no addition on the basis the premises of the assessee and therefore, no addition on the basis of said material could be made in the hands of the assessee of said material could be made in the hands of the assessee of said material could be made in the hands of the assessee otherwise then by way of invoking secti otherwise then by way of invoking section 153C of the Act. In the on 153C of the Act. In the instant case, the Ld. CIT(A) has referred that addition made on the instant case, the Ld. CIT(A) has referred that addition made on the instant case, the Ld. CIT(A) has referred that addition made on the basis of the seized paper No. 1, 2, 3 and 4 of Bundle No. 5 Party No. basis of the seized paper No. 1, 2, 3 and 4 of Bundle No. 5 Party No. basis of the seized paper No. 1, 2, 3 and 4 of Bundle No. 5 Party No. AB-3. Before us, the Ld. counsel for the assessee has filed 3. Before us, the Ld. counsel for the assessee has filed a copy of 3. Before us, the Ld. counsel for the assessee has filed the Punchnama of the the Punchnama of the said premises. According to the said said premises. According to the said punchnama, said material has been seized from the premises 1001, said material has been seized from the premises 1001, said material has been seized from the premises 1001, Flix Tower, Opposite Asian Paints, LBS Marg, Sonapur Bhandup Flix Tower, Opposite Asian Paints, LBS Marg, Sonapur Bhandup Flix Tower, Opposite Asian Paints, LBS Marg, Sonapur Bhandup (West), Mumbai while executing (West), Mumbai while executing search warrant in case of M/s warrant in case of M/s Dodhia Synthetic Ltd., M/s Dodhi Dodhia Synthetic Ltd., M/s Dodhia Chem Tex Pvt. Ltd., M/s a Chem Tex Pvt. Ltd., M/s Vasupujya Filaments and M/d Kemox Corporation. The year under Vasupujya Filaments and M/d Kemox Corporation. The year under Vasupujya Filaments and M/d Kemox Corporation. The year under consideration is unabated assessment year as no on is unabated assessment year as no proceedings were proceedings were

Jinesh Mansukhlal Dodhia Jinesh Mansukhlal Dodhia 4 IT(SS)A No. 789/MUM/2025 IT(SS)A No. 789/MUM/2025

pending as on the date of the search and limitation for issuing pending as on the date of the search and limitation for issuing pending as on the date of the search and limitation for issuing notice u/s 143(2) of the Act also expir notice u/s 143(2) of the Act also expired on 30.09.2018 ed on 30.09.2018.In case of the unabated assessment the unabated assessment, addition could have been made if any addition could have been made if any incriminating material is found from the premises of the assessee. incriminating material is found from the premises of the assessee. incriminating material is found from the premises of the assessee. Undisputedly, the material relied upon for making addition u/s 69D Undisputedly, the material relied upon for making addition u/s 69D Undisputedly, the material relied upon for making addition u/s 69D has not been found from the prem has not been found from the premises of the assessee ises of the assessee. In the circumstances, when incriminating material related to third party is when incriminating material related to third party is when incriminating material related to third party is found from the search of an assessee found from the search of an assessee, then addition in the hands then addition in the hands third party can only be made by way of section 153C r.w.s. 153A of third party can only be made by way of section 153C r.w.s. 153A of third party can only be made by way of section 153C r.w.s. 153A of the Act. For initiating pr or initiating proceedings u/s 153C of the Act, the oceedings u/s 153C of the Act, the Assessing Officer of the searched person Assessing Officer of the searched person is required to record s required to record satisfaction that the satisfaction that the relevant seized material either belongs to the seized material either belongs to the third person or it pertains to third person then the Assessing Officer third person or it pertains to third person then the Assessing Officer third person or it pertains to third person then the Assessing Officer of the third person is required to record satisfaction to the effect n is required to record satisfaction to the effect n is required to record satisfaction to the effect that said seized material that said seized material is having impact or bearing on the is having impact or bearing on the income of the third person, but in the instant case, the Assessing Officer but in the instant case, the Assessing Officer has not followed the procedure prescribed u/s 153C of the Act and has not followed the procedure prescribed u/s 153C of the Act and has not followed the procedure prescribed u/s 153C of the Act and therefore, the addition made in the hands of the assessee on the refore, the addition made in the hands of the assessee on the refore, the addition made in the hands of the assessee on the basis of the material found/seized during the search of another basis of the material found/seized during the search of another basis of the material found/seized during the search of another person cannot be sustained sustained. Accordingly, we delete the addition. . Accordingly, we delete the addition. The ground no. 1 of appeal of the assessee is accordingly allowed of appeal of the assessee is accordingly allowed. of appeal of the assessee is accordingly allowed

4.1 Since we have already allowed the appeal Since we have already allowed the appeal on on legal ground therefore, the grounds raised on the merit of the addition are therefore, the grounds raised on the merit of the addition are therefore, the grounds raised on the merit of the addition are

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rendered merely academic and therefore, we are not adjudicating rendered merely academic and therefore, we are not adjudicating rendered merely academic and therefore, we are not adjudicating upon at this stage.

5.

In the result, the appeal of the assessee In the result, the appeal of the assessee is allowed. is allowed.

Order pronounced Order pronounced under Rule 34(4) of the ITAT Rules, under Rule 34(4) of the ITAT Rules, 1963 by way of placing 1963 by way of placing result on notice board on 28.05.2025 result on notice board on 28.05.2025.

Sd/- Sd/- Sd/ (RAHUL CHAUDHARY) (RAHUL CHAUDHARY (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 28/05/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai

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