DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(1), KOLKATA, KOLKATA vs. SIDDHARTH BANKA, KOLKATA

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ITA 1150/KOL/2026Status: DisposedITAT Kolkata30 October 2026AY 2019-209 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal decided to first address the legal issue raised by the assessee regarding the validity of the assessment proceedings. The Tribunal found merit in the assessee's contention that the proceedings should have been initiated under Section 153C of the Act, rather than Section 147/148, because the basis for reopening was incriminating documents seized during a search on a third party (Sanwaria and Kasera Group). The Tribunal reasoned that Section 153C provides an exclusive code for assessments arising from third-party searches and overrides other provisions. Citing several decisions, including those from the Karnataka High Court, Rajasthan High Court, Bombay High Court, and the Supreme Court, which held that assessments based on third-party search materials must be framed under Section 153C, the Tribunal quashed the reopening of the assessment and the consequential assessment framed by the AO as invalid. Consequently, the addition of ₹2,54,50,000/-, along with consequential additions of interest and commission, was deleted. The ground raised under Rule 27 by the assessee was allowed.

What were the facts?

The Revenue filed an appeal against the order of the CIT(A) for Assessment Year 2019-20, challenging the deletion of an addition of ₹2,54,50,000/-. This addition was made by the Assessing Officer (AO) on account of alleged unrecorded cash loan transactions through a finance broker of Sanwaria Group, based on documents seized during a search on 30.11.2018. The AO treated these loans as unaccounted income under Section 69D of the Income Tax Act, 1961, and also added interest and commission. The CIT(A) deleted the addition, finding that the AO failed to prove the assessee's involvement in cash loan transactions and that the adverse inference was based on surmises. The assessee, in a cross-objection under Rule 27, challenged the validity of the assessment proceedings initiated under Section 147/148 of the Act.

What were the issues?

1. Whether the assessment proceedings initiated under Section 147/148 of the Income Tax Act, 1961, are valid, or whether they should have been initiated under Section 153C of the Act, considering that the basis for reopening was incriminating documents seized during a search on a third party (Sanwaria Group). Assessee's contention: The assessee argued that since the reopening was based on documents seized during a search on a third party, the proceedings should have been initiated under Section 153C, which is a special provision, and not under Section 147/148. They relied on various High Court and Supreme Court decisions, including DCIT vs. Nawal Kumar Kanodia, Sri Dinakara Suvarna vs. DCIT, Shyam Sunder Khandelwal vs. ACIT, Sejal Jewellary vs. Union of India, and ACIT vs. Pramod Jain. Revenue's contention: The Revenue's appeal was against the deletion of the addition by the CIT(A). The judgment does not explicitly record the Revenue's arguments regarding the validity of the Section 147 proceedings, but their appeal implies they supported the AO's assessment.

Which sections of the Income-tax Act were involved?

Section 132,Section 147,Section 148,Section 153C,Section 69D,Section 133A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, KOLKATA

For Appellant: Shri Soumitra Choudhury, Ms. Nandini Sureka
Hearing: 15.09.2026Pronounced: 30.10.2026

Per Rajesh Kumar, AM:

This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), Kolkata- 20 [hereinafter referred to as the “Ld. CIT(A)”] dated 23.07.2025 for the AY 2019-20.

2.

At the outset, we observe from the appeal folder that there is a delay of 178 days in filing the appeal by the department in support of which a condonation petition was filed. It was stated in the condonation petition that the delay has occurred due to obtaining the administrative approvals from the

ITA No. 1150/KOL/2026 Siddharth Banka; A.Y. 2019-20 competent authorities, which took quite a long time and accordingly, the delay may kindly be condoned. The ld. AR, on the other hand, did not oppose the condonation of delay. Considering the reasons cited before us, we are inclined to condone the delay and admit the appeal for hearing.

3.

The issue raised in ground number 1 is against the order of the Ld. CIT(A) deleting the addition of ₹2,54,50,000/- by Ld. CIT(A) as made by the Ld. AO on account of unrecorded cash loan transactions through a finance broker of Sanwaria Group, on the basis of the incriminating documents seized from the office premises of Sanwaria Group during the course of search on 30.11.2018.

4.

The facts in brief are that the assessee filed the return of income on 28.08.2019, declaring total income of ₹72,53,970, which includes salary income of the assessee from KSC Electrical Private Limited of ₹75,79,100/-. The return was processed under section 143(1) of the Act. Thereafter a search action under section 132(1) of the Act was conducted on the business and residential premises of the finance broker, Sanwaria & Kasera Group, on 30.11.2018, and on subsequent dates by DDI(T) Investigation, Kolkata, during which incriminating documents were seized, including Rukas. The Ruka is a confirmatory document with the signature of the receiver (operator) as a guarantee to repay the lender. It was noted that as per the practice prevalent in the market that the two zeros are suppressed in the documents prepared in relation to cash loan transactions, which were extracted by Shri Praveen Kumar Kasera, in his statement recorded under Page 2 of 9

ITA No. 1150/KOL/2026 Siddharth Banka; A.Y. 2019-20 section 132(4) of the Act recorded at the time of search. The Ld. AO thereafter, extracting the statement and also some material, came to the conclusion that the assessee has entered into cash loan transactions of ₹2,50,00,000, which were to be assessed under the provisions of the Act under section 69D of the Act. The assessee was accordingly given a show-cause notice, and after taking into account the reply to the show-cause notice, the entire alleged cash loans were treated as unaccounted income under section 69D of the Act and added to the income of the assessee.

5.

Besides, the Ld. AO also added interest at the rate of 6%, which comes to ₹4,50,000, and the same was added to the income of the assessee in the assessment framed under section 147 of the Act dated August 30, 2023. The Ld. AO also added the commission and brokerage at the rate of 1%, thereby making an addition of ₹2,50,000 to the income of the assessee.

6.

In the appellate proceedings, the Ld. CIT allowed the appeal of the assessee on merit, whereas the legal issue raised by the assessee was not decided. The Ld. CIT(A), while deleting the addition on merit, noted that the AO could not prove that the assessee was involved in loan transactions in cash by bringing some material on record. The Ld. CIT(A) noted that the main basis for drawing adverse inference was the statement of Shri Jai Bhagwan Agarwal and Praveen Kumar Kasera, in which the name of the assessee was not there, nor the concern in which the assessee is one of the directors, i.e. KSE Electrical Private Limited, was appearing in any part of Page 3 of 9

ITA No. 1150/KOL/2026 Siddharth Banka; A.Y. 2019-20 the statement. The Ld. CIT(A) noted that the mere fact of KSE appearing in the seized documents also lacked credibility. Thus, the Ld. CIT(A) held that the addition made by the Ld. CIT is based on mere surmises and conjectures, and thus deleted the addition.

7.

Similarly, the Ld. CIT(A) deleted the other additions being consequential in nature of ₹4,50,000/- in respect of interest and ₹2,50,000 in respect of commission.

8.

The Revenue is in appeal before us challenging the deletion of addition, whereas the assessee has challenged under rule 27 the order of Ld. CIT(A) in not deciding the legal issue raised before him that the proceeding initiated under section 147/148 of the Act, were void ab initio.

9.

We are therefore inclined to decide first the legal issue raised by the assessee challenging the validity of assessment under section 147 of the Act. We note that the case of the assessee was reopened on the basis of search conducted on Sanwaria and Kasera Group on 30.11.20218 by DIT (Investigation) Kolkata, during which certain documents were found and seized. Therefore, we find merit in the contention of the assessee that the proceeding should have been initiated under section 153C of the Act and not under section 147 read with section 148 of the Act. In our opinion, there exists an exclusive code/section in the Act dealing with such type of assessment arising out of the third-party search. Therefore, we are inclined to quash the reopening of assessment as well as the consequential assessment framed by the AO as being

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ITA No. 1150/KOL/2026 Siddharth Banka; A.Y. 2019-20 invalid in the eyes of law. The case of the assessee is squarely covered by a series of decisions namely i) in DCIT vs. Nawal Kumar Kanodia (ITA No. 1952/Kol/2025, A.Y. 2019-20) ii) Sri Dinakara Suvarna vs. DCIT, [2022] 143 taxmann.com 362 (Karnataka) (special leave petition dismissed, [2023] 151 taxmann.com 489) iii) Shyam Sunder Khandelwal vs. ACIT, [2024] 161 taxmann.com 255 (Rajasthan) iv) Sejal Jewellary vs. Union of India, [2025] 171 taxmann.com 846 (Bombay) and ACIT vs. Pramod Jain, [2025] 163 taxmann.com 762 (SC). The same view has since been taken by this Hon'ble Tribunal in Maan Steel & Power Limited vs. DCIT, Central Circle-1(2), Kolkata, ITA Nos. 1167, 2354, 1096 & 2609/Kol/2025, order dated 26.06.2026.

• The co-ordinate Bench in case of DCIT Vs. Nawal Kumar Kanodia(supra), wherein it has held as under:-

“5. After hearing the rival contention and perusing the material available on record, we find that incriminating material on the basis of which proceeding u/s 147/148 of the Act were initiated apparently on the basis of said incriminating material found and seized during the course of search on Kasera and Sanwaria Group on 30.11.2018. Therefore proceeding have been initiated to assess the escaped income u/s 153C of the Act which is the special provisons provided under the Act as it overrides the other provisions of the Act. Therefore, the Ld. CIT(A) has rightly annulled the assessment framed by the AO. The case of the assessee is squarely covered by the decision as discussed by the Ld. CIT(A) in the appellate order. Beside the case is squarely covered by decision in the case of Shyam Sunder Khandelwal Vs. ACIT (supra) which was duly approved by the Hon’ble Apex Court in the case of ACIT Vs. Promod Jain (2025) 163 taxman.com 762 (SC). Thus we do not find any infirmity in the appellate order which a very reasoned and speaking order. We are inclined to uphold the order of CIT(A) and dismissed the appeal of the revenue. The appeal of the revenue is dismissed6. Upon hearing the submission of the counsel of the respective parties and on perusal of the impugned order, we find that Assessing Officers in the assessment order has stated that information”.

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ITA No. 1150/KOL/2026 Siddharth Banka; A.Y. 2019-20 • Further, in case of DCIT Vs. Ajay Jalan(supra), the coordinate bench held the issue as under:-

“6. Upon hearing the submission of the counsel of the respective parties and on perusal of the impugned order, we find that Assessing Officers in the assessment order has stated that informationin the case of assessee was received on insight portals stating that as per ceased materials found in search at the premises of KaseraGroup,the assessee Shri Ajay Jalan has given cash loan amount to Rs. 3,50,00,000/- through the finance broker Kasera and has earned interest income on the said loan.The Assessee in his submission has clearly stated that other than search U/s 132(1) on 30.11.2018 at the premises of Kasera, search U/s 132(1) was also conducted at the premises of assessee Shri Ajay Jalan and its other group concern on 07.12.2020. Consequent to the search on the assessee, the case of the assessee for the assessment year 2019-20,was assessed u/s 153(A)/143(3) on 28.03.2022. It is pertinent to mention here that search in the case of finance brokers Kasera was conducted on 30.11.2018 much prior to the assessment order passed U/s 153(A)/143(3) dated 28.03.2022 and the AO was in possession of the alleged incriminating material relating to cash loan and the same was not considered for making addition in the case of the Assessee. So, the further reopening of the assessment in some information by issuing notices u/s 148 on 06.04.2023 as nothing but change in the opinion of the AO. It is further important to mention here that addition made of cash loan of Rs. 6,65,00,000 and Rs. 5,95,00,000 u/s 69A based on the same information in the assessment year 2016-17 and 2017-18 had been deleted by the CIT(A). It is important to mention here that in case of search at the premises of a person if certain incriminating documents relating or belonging to an assessee is found and ceased the Section to open the case of the assessee is Section 153C of the Act. It is further important to mention here that during the assessment proceeding by filing an affidavit assessee has submitted that he does not know any person by the name of any person Sri. Prabhat Kumar Kasera. 7. On perusal of the impugned order and finding of the CIT(A), we find that CIT(A) has discussed the legality of the issuance of the notices u/s 147, discussed the case of the assessee on merit and thereafter allow the appeal of the assessee on legal ground as well as on merit also.We do not find any infirmity in the impugned order.” • In case of DCIT Vs. Suresh Kumar Banthia (supra), the coordinate bench held as under:-

“3.4. After hearing the rival contentions and perusing the materials available on record, we find that a search action u/s 132 of the Act was conducted on finance brokers Kasera and Sanweria on 30.11.2018. We note that during the course of said search, certain documents/ papers were impounded and seized. The statements ofthe finance brokers were also recorded u/s 132(4) Page 6 of 9

ITA No. 1150/KOL/2026 Siddharth Banka; A.Y. 2019-20 of the Act with regard to the modus operandi of arranging loans. We note from the said statements that though the brokers admitted to have engaged in the business of arranging cash loans but the none of the brokers in the statements named the assessee as loan provider or loan receiver nor the documents seized during the course of search contained the name of the assessee. We note that the assessee was surveyed u/s 133A of the Act on 19.02.2020, along with group concerns Citizen Umbrella Mfg Co. Ltd. and during the course of search, the some documents marked as SKB/1 and 2 of the assessee and CUML/1 and 2 of Citizen Umbrella Mfg. Co. Ltd. were impounded. The statement u/s 133A of the Act was recorded on 20.02.2020, wherein the assessee admitted to have given some initial loan of ₹1.60 crores during the financial year 2016-17, which was only rotated periodically. However, the assessee made disclosure by ₹50 crores during the course of survey in the statement recorded on 20.02.2020. We note that the said surrender/ disclosure was withdrawn on 24.02.2020, within three days by filing an affidavit before ADIT and therefore, statements were retracted. The case ofthe assessee was reopened on 26.03.2021, after recording the reasons to believe which stated that during the course of search operation on finance brokers Sanwaria and Kasera group on 31.11.2018, certain incriminating material/ documents were seized pertaining to the assessee group in which the assessee Suresh Kumar Bathia alias Jain is main person of Citizen Group and abbreviated as SK Jan/ Citizen. The ld. AO further noted that thereafter a survey was carried out on the assessee. The ld. AO also noted that there was a low profitability vis a vis the high turnover and high cash loan transactions and thus, the ld. AO noted that theassessee Shri Suresh Kumar Banthia was involved in unaccounted cash transactions. The ld. AO bifurcated the year wise loan transactions and for the year under consideration the ld. AO computed the loan transactions at 36.65 crores by relying on the statement of Shri Pravin Kumar Kasera and concluded that the same was accepted by the assessee in the statement recorded on 20.02.2020 that he used to lend cash through Praveen Kasera. 3.5. We have perused the rival contention material before us as well as the appellate order and find that the source of incriminating material/ documents on the basis of which the assessment was reopened was the documents seized during the course of search and the finance brokers Kasera and Sanwaria on 30.11.2018. Therefore, the proceedings u/s 153C of the Act should have been initiated as there exists separate code for assessing such incomes which starts with non-abstante clause overriding the other provisions of the Act. Therefore, the ld. CIT (A) has correctly passed the order that the proceedings u/s 147 of the Act as well as the consequent assessment proceedings were invalid and void ab initio. The same have been initiated under the wrong provisions of the Act. We note that the ld. CIT (A) while passing the order relied on several decisions asextracted above. Therefore, we do not find any occasion to interfere with the said appellate order which is very reasoned and speaking order. Consequently, we uphold the order of ld. CIT (A) on this issue by dismissing the ground no.1 of Revenue’s appeal.” Page 7 of 9

ITA No. 1150/KOL/2026 Siddharth Banka; A.Y. 2019-20 10. In case of Shyam Sunder Khandelwal Vs. ACIT(supra), the Hon'ble’ High Court has held that in case of third-party search, the assessment has to be framed u/s 153C of the Act. The SLP filed by the Revenue against the said decision is dismissed by the Hon'ble Apex Court.

11.

The case of the assessee is also squarely covered by the decision of Hon'ble Karnataka High Court in the case Sri Dinakara Suvarna Vs. DCIT (supra) wherein the Hon'ble Court has held that where the AO on the basis of search conducted at the premises of third party reopened the assessment of the assessee and if no proceedings were initiated u/s 153C of the Income-tax Act, 1961 (the Act) then same is not sustainable. The SLP filed by the Revenue against the above decision has been dismissed by the Hon'ble Supreme Court.

12.

Therefore, considering the facts of the case in the light of the above decisions, we are inclined to quash the proceedings initiated under section 147/148 of the Act as well as the assessment framed as nullity and invalid in the eyes of law. The ground raised under rule 27 is allowed.

13.

In the result, the appeal of the Revenue is dismissed.

Order pronounced on 30.10.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 30.10.2026 Digitally signed by Sudip Sudip Sarkar Sarkar Sudip Sarkar, Sr.PS Date: 2026.11.03 13:32:37 +05'30' Page 8 of 9

ITA No. 1150/KOL/2026 Siddharth Banka; A.Y. 2019-20

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

Dy. Registrar Income Tax Appellate Tribunal, Kolkata

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