DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, NASHIK, NASHIK vs. ABHAYRAJ FATTEHRAJ CHORDIYA, C/O LAXMI OIL MIL

Facts of the case, in brief, are that the assessee is an individual and derives income from salary as a Director of Abhay Kumar Le Fin Investment Pvt. Ltd., Jalgaon, income from house property, income from business and income from other sources. He filed his return of income on 31.07.2014 declaring total income of Rs.17,01,810. A search and seizure action u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was conducted in the case of M/s. C & M Farming Ltd. (C&M Group cases) on 21.02.2020 by the ADIT(Inv)-1, Nashik. As a part of this search action, the residential premises of Mr. Rudolph Lima, Nashik was searched. During the course of search certain incriminating documents pertaining to the assessee i.e. Shri Abhayraj F. Chordiya were found from the searched premises. This information was forwarded to the juri ictional Assessing Officer i.e. ACIT, Circle-1, Jalgaon. Based on information received, the Assessing Officer of the assessee issued notice u/s 153C of the Act after recording satisfaction on 25.01.2022 for assessment years 2014-15 to 2020-21. The assessee in response to the said notice issued u/s 153C filed the return of income on 01.07.2022 declaring total income of Rs.17,01,810/-. Subsequently the Assessing Officer issued notice u/s 143(2) of the Act which was duly served on the assessee. Thereafter, notice u/s 142(1) of the Act was issued to the assessee along with an Annexure in response to which the assessee filed various details from time to time.

The Assessing Officer noted that during the search action at residential premises of Mr. Rudolph Lima, Nashik, various documents / notings relating to land transactions were found and seized. In these documents there were some loose papers showing details of amounts received from Dhumal in respect of sale

The assessee in response to the same submitted that he has no personal relation and transaction with C&M Farming Pvt Ltd. However, it was submitted that C&M Farming Pvt Ltd has mortgaged its land to Abhaykumar Lea Fin and Investment Pvt Ltd as per registered mortgage deed executed on 29.04.2013 for Rs.3,59,01,741/- and the assessee is a Director in the said company. It was submitted that Mr. Richard Marshal Dishoza, Director of C&M Farming Pvt Ltd died in a car accident on 21.10.2013. Therefore, the money advanced by the company was in danger. As a result of his death, in order to safeguard the money advanced by the company, an MoU was signed between M/s. Supreme Capinfra Pvt Ltd, company of Andheri for Rs.3,59,01,741/-. This company has provided

However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. According to him, the seized documents are written in coded form which can be substantiated with ledger extract of Mrs. Shailaja Dhuma, Shri Akshay Dhumal and Shri Anil Dhumal, directors of Dhumal Industries as appearing in the books of M/s. C&M Farming Pvt Ltd. Similarly, the cheque amounts deposited can be substantiated from the ledger extract of Dhumal Industries for financial year 2014-15. Although the cheque amount of Rs.50.00 lakh tally, however, cash payment of Rs.3,50,00,000/- and Rs.1,59,00,000/- respectively totaling to Rs.5,09,00,000/- which is reflected on page No.9 noted in coded form as 350.00 cash and 159.00 cash is not reflected on the said ledger account extract. Further, page 10 which contains the notings in coded form under the head ‘utilization of money’ shows that an amount of Rs.2 crore and Rs.1.59 crore appear below the name of Mr. Abhayraj. In view of the above, the Assessing Officer rejecting the various explanations given by the assessee, made addition of 5 CO No.36/PUN/2024

Before the Ld. CIT(A) the assessee apart from challenging the addition on merit, challenged the validity of notice issued u/s 153C of the Act and the order passed u/s 153C of the Act. The Ld. CIT(A) called for a remand report from the Assessing Officer on the basis of submissions filed before him. The Assessing Officer submitted his remand report which was confronted to the assessee. After considering the contents of the remand report and the rejoinder of the assessee to such remand report, the Ld. CIT(A) dismissed the grounds challenging the validity of assessment order u/s 143(3) r.w.s. 153C of the Act by observing as under: under. “Ground No.1:

4 The appellant has raised the ground that the order is barred by limitation and hence the order should be annulled. In this regard the appellant has relied on the decision of the Hon'ble Supreme Court in the case of Jagjit Singh (Supra) wherein it was held that the period of limitation should be taken from the date on which the assessing officer receives the books of accounts and material from the assessing officer of the person searched. This ground of appeal is not tenable since after the order passed by the Hon'ble Supreme Court, the Act has been amended and it is now specifically provided that the period of limitation should be from the date on which the search was conducted. I am, therefore, unable to accept the argument of the appellant since there is specific unambiguous provision in the Act, the same has to be considered as it is and therefore, the Ground no.1 of appeal are dismissed.”

He however, deleted the addition of Rs.3,59,00,000/- made by the Assessing Officer by observing as under:

Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal by raising the following grounds: 1. Whether on the facts and in the circumstances of the case, the Ld.CIT(A), Pune-12 was justified in deleting the addition made by AO of Rs.3,59,00,000 on account of unexplained income u/s 69A of the IT Act, 1961?

Whether on the facts and circumstances of the case, the Ld.CIT(A), Pune- 12 was justified in deleting the addition made by the AO and not duly appreciating the facts of the case?

Whether on the facts and circumstances of the case and in law, the Ld.CIT(A), Pune-12 has erred in law and in facts by not appreciating the facts that the documents seized from Mr Rudolf Lima in which cash transactions have direct reference to the assessee as there is transaction of same amount by the assessee.

The appellant prays to adduce such further evidence to substantiate his case.

The assessee has filed the CO by raising the following grounds: 1. Under the facts and circumstances of the case and in law CIT (A) is erred in dismissing appellant's plea that the order passed by the Assessing officer being barred by limitation as per the decision of supreme court in case of CIT vs Jagjit Singh SLP 6644 of 2016. 2 Under the facts and circumstances of the case and in law CIT(A) is erred in not deliberating ground no 3 raised before him.

On the facts and circumstances of the case and in law, the approving authority i.e. Addl CIT has accorded approval u/s 153D of IT Act, only mechanically merely as formalities, without understanding correct facts and provision of law and hence, assessment order is bad in law and deserve to be annulled. Thus, assessment order may please be annulled.

The appellant craves the permission to add, amend, modify alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal.

The Ld. DR submitted that the Ld. CIT(A) was not justified in deleting the addition made by the Assessing Officer without appreciating the findings given by the Assessing Officer. He submitted that when the documents seized from Mr. Rudolf Lima shows the cash transactions have direct reference to the assessee as there is transaction of the same amount by the assessee, therefore, the Ld. CIT(A) should not have deleted the addition.

The Ld. Counsel for the assessee on the other hand heavily relied on the order of the Ld. CIT(A) in deleting the addition. He submitted that no independent or corroborative material exists on record to prove that any cash transaction has ever taken place with the assessee. The documents so seized are merely dumb documents and there is no proof of any actual payment. The Assessing Officer has failed to produce even an iota of evidence such as bank statement, withdrawal, third party confirmation etc that any cash was ever paid by or to the assessee. He submitted that there is nothing on record such as PAN, address, identification, statement or any link to establish that the loose sheets belong to or refers to the assessee Abhayraj F. Chordiya.

Referring to the satisfaction note, copy of which is placed at pages 28 to 37 of the paper book, he submitted that when the cheques themselves were returned and the entire transaction stood cancelled, no cognizance can be taken of loose sheets allegedly recording notional or cancelled cash transactions. Further, neither the searched person nor any other person has ever stated that any cash was paid or received. He submitted that even the writer of the document has never admitted

Referring to the copy of the satisfaction note, he submitted that the same is a verbatim reproduction / cut paste of the report of the Assessing Officer of the searched person. There is no independent application of mind by the Assessing Officer and he has completely ignored the crucial fact of repayment / return of cheques. Further, there is no date in the satisfaction note. He submitted that the loose sheets do not represent any asset or incriminating material. Mere notings in loose papers without any corresponding asset, payment or transaction being found cannot be treated as incriminating material and therefore, invocation of section 153C of the Act is wholly without juri iction and bad in law. He accordingly submitted that the order of the Ld. CIT(A) / NFAC is based on correct and well reasoned speaking order. He has given a finding that the Assessing Officer has not produced any corroborative evidence to prove that the alleged transaction has ever taken place. He accordingly submitted that the order of the Ld. CIT(A) / NFAC

The Ld. Counsel for the assessee while arguing the grounds taken in the CO submitted that these are independent legal grounds each of which is fatal to the validity of assessment order and sufficient by itself to quash the assessment independently. The Ld. Counsel for the assessee submitted that there is a common satisfaction note recorded by the Assessing Officer for assessment years 2014-15 to 2020-21, copy of which is placed at page 6 of the paper book. He submitted that a common satisfaction note u/s 153C of the Act without making year-wise allegation of income escapement, thereby failing to establish a direct nexus between the seized material and specific assessment years undermines the validity of proceedings making them unsustainable in law.

Referring to the decision of Hon’ble Karnataka High Court in the case of DCIT vs. Sunil Kumar Sharma reported in (2024) 469 ITR 197 (Karnataka), he submitted that the Hon’ble High Court in the said decision has held that the satisfaction note is required to be recorded under section 153C for each assessment year, therefore, where a consolidated satisfaction note has been recorded for different assessment years the same vitiates the entire assessment proceedings. He submitted that the SLP filed by the Revenue against the above decision has been dismissed by the Hon’ble Supreme Court as reported in (2024) 68 taxmann.com 77 (SC).

Referring to the decision of Hon’ble Supreme Court in the case of CIT vs. Sinhgad Technical Education reported in (2017) 397 ITR 344 (SC), he submitted that the Hon’ble Apex Court in the said decision has held that the Assessing Officer is required to make year-wise analysis of the incriminating seized material. However, in the instant case no such year-wise analysis has been done.

Referring to the decision of the Co-ordinate Bench of the Tribunal in the case of Chitra Narendra Parmar vs. ACIT and batch of appeals vide ITA Nos.1262 to 1272/PUN/2024, order dated 14.07.2025 for assessment years 2016-17 and 2017-18, he submitted that the Tribunal, following the decision of the Hon’ble Karnataka High Court in the case of DCIT vs. Sunil Kumar Sharma (supra) has held that the satisfaction note is required to be recorded u/s 153C of the Act for each assessment year and a consolidated satisfaction note recorded for different assessment years would vitiate the entire assessment proceedings. He submitted that similar view has been taken by the Co-ordinate Bench of the Tribunal in the case of Shri Rajendra Rameshlal Gugale vs. PCIT vide ITA No.1676/PUN/2024. He accordingly submitted that since a consolidated satisfaction note has been recorded u/s 153C of the Act for assessment years 2014-15 to 2020-21, therefore, such satisfaction note vitiates the entire assessment proceedings.

In his next plank of argument the Ld. Counsel for the assessee referring to the approval granted by the JCIT, copy of which is placed at page 38 of the paper book, submitted that he has also given a common approval for assessment years 2014-15 to 2020-21. He submitted that the JCIT in its approval u/s 153D of the 14 CO No.36/PUN/2024

Referring to various decisions, he submitted that the approval u/s 153D of the Act is not a mere formality, but a substantive requirement mandating due diligence, independent application of mind and reasoned consideration of the entire assessment record before according the sanction.

Referring to the decision of Hon’ble Delhi High Court in the case of PCIT vs. Shiv Kumar Nayyar reported in 163 taxmann.com 9, he submitted that the Hon’ble High Court, following the decision of Hon’ble Allahabad High Court in the case of PCIT vs. Sapna Gupta reported in 2022 SCC OnLine All 1294, has held that the authority granting the approval has to apply his mind for each assessment year separately.

Referring to the decision of Hon’ble Delhi High Court in the case of PCIT vs. Anuj Bansal (2024) 165 taxmann.com 2 (Delhi), he submitted that the Hon’ble High Court in the said decision has held that where the Addl.CIT granted approval u/s 153D of the Act without noticing the discrepancy in assessment order or search material, such mechanical approval without application of mind would be invalid in the eyes of law. He submitted that the Revenue filed SLP against the order of 15 CO No.36/PUN/2024

Referring the decision of the Hon’ble Orissa High Court in the case of ACIT vs. Serajuddin & Co. reported in (2023) 150 taxmann.com 146 (Orissa), he submitted that the Hon’ble High Court has held that the requirement of proper approval of superior officer before an order of assessment or re-assessment is passed pursuant to search operation is a mandatory requirement of section 153D of the Act and that such approval is not meant to be given mechanically and while elaborate reasons need not be given, there has to be some indication that the approving authority has examined the draft orders and finds that it meets the requirement of the law. He submitted that the SLP filed by the Revenue against the order of Hon’ble Orissa High Court has been dismissed by the Hon’ble 360 (Delhi-Trib.), he submitted that the Tribunal in the said decision has held that where the Additional Commissioner has granted approval under section 153D mechanically, without application of mind and that too without assigning any reason, such approval was invalid and, thus, the assessment orders were vitiated and liable to be quashed. The Tribunal further held that where the Additional Commissioner has granted one approval for all the six years, such approval granted by the Addl. Commissioner is bad in law.

The Ld. Counsel for the assessee in his another plank of argument submitted that the order passed by the Assessing Officer is barred by limitation. He submitted that a common satisfaction note has been recorded for assessment years 2014-15 to 2020-21 without making year-wise allegation of income escaping the assessment. The satisfaction note for initiation of proceedings u/s 153C of the Act does not bear any signature. However, a perusal of the information forwarded by the Assessing Officer of the searched party is dated 16.09.2021, therefore, if the same is presumed to be the date of handing over of the seized material, the date of search in the case of the assessee will be considered as 16.09.2021 in view of plethora of decisions. He submitted that the 6 years from the year ending 31.03.2021 ends on 31.03.2016 meaning thereby 6 assessment years for which the Assessing Officer could have issued notice u/s 153C of the Act is assessment year 2016-17 to 2021-22. However, the assessment year involved in the instant case is assessment year 2014-15. Therefore, such notice issued by the Assessing Officer is barred by limitation.

Referring to the decision of Hon’ble Delhi High Court in the case of PCIT vs. Ojjus Medicare Pvt. Ltd. reported in (2024) 465 ITR 101 (Delhi), he submitted that the Hon’ble High Court in the said decision has held that in case of a search assessment undertaken u/s 153C, the previous year of search would stand substituted by the date or the year in which the books of account / documents and assets seized are handed over to the juri ictional Assessing Officer as opposed to the year of search which constitutes the basis for an assessment u/s 153A of the Act. Thus, the block period for proceedings u/s 153C of the Act has to be 17 CO No.36/PUN/2024

So far as the observations of the CIT(A) that in view of the amended provisions, the Assessing Officer can issue notice upto a period of 10 years is concerned, he submitted that for invoking the extended period of 10 years the evidence found during the course of search should relate to the undisclosed transaction in the form of assets. In this case, the Assessing Officer has found loose paper with some figures which has nothing to do with the assessee and neither constitute as asset. Therefore, the same does not constitute an asset as defined in the fourth proviso to section 153A(1) and Explanation-2 to section 153A of the Act which is sine qua non for issuing notice u/s 153C for the relevant assessment year as amended by the Finance Act, 2017. He submitted that to invoke juri iction for such extended period i.e. assessment years falling beyond

The Ld. Counsel for the assessee in his yet another plank of argument submitted that the provisions of section 153C pertain to the assessment of income for a non-searched person referred to as the "other person". In the instant case from the bare perusal of the satisfaction note given at the time of hearing, it can be 19 CO No.36/PUN/2024

Referring to the decision of Hon’ble Delhi High Court in the case of Saksham Commodities Ltd. Vs. ITO reported in (2024) 161 taxmann.com 485 (Del), he submitted that the Hon’ble High Court has clarified that the initiation of proceedings u/s 153C of the Act must be founded on the Assessing Officer’s satisfaction that the seized material has a specific bearing on the determination of the total income of the ‘other person’.

The Ld. Counsel for the assessee in his another plank of argument submitted that the alleged material found from the residential premises of Rudolph Lima, Nashik cannot be used against the assessee without establishing a relationship of the assessee with him and bringing corroborative evidence on record. He submitted that the assessee, in the instant case, has not entered into any transaction

Referring to various decisions, he submitted that the loose sheets, diaries and entries in loose sheets and impounded from any third party cannot be the basis for 21 CO No.36/PUN/2024

Referring to the decision of Hon’ble Bombay High Court in the case of Underwater Services Company Ltd. Vs. ACIT vide WP Nos.2838 of 2019 with batch of Writ Petitions, order dated 21.10.2021, he submitted that the Hon’ble High Court in the said decision has held that the notice u/s 153A of the Act without mentioning the details of incriminating material found during the course of search makes such notice invalid. It has been held in the said decision that issuance of show cause notice is a preliminary step which is required to be undertaken. The purpose of show cause notice is to enable a party to effectively deal with the case made out by the respondent. Therefore, when the notice does not contain the nature of alleged incriminating material found / seized during the course of search based on which notice has been issued, such notice has to be quashed.

The Ld. DR submitted that the common satisfaction or common approval is a procedural aspect and it cannot make the assessment invalid. Further the search

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the order passed u/s 153C dated 27.03.2023 made addition of Rs.3,59,00,000/- on the basis of certain notings found from the premises of Mr. Rudolph Lima, Nashik during the course of search which contains cash payment of Rs.2 crore and Rs.1.59 crore respectively paid to the assessee. We find the Ld. CIT(A) on the basis of various submissions made by the assessee, remand report of the Assessing Officer and the rejoinder of the assessee to such remand report, deleted the addition, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that there exists no corroborative / independent material on record

Before adjudicating the issue on merit, first we would like to consider the arguments of the Ld. Counsel for the assessee challenging the validity of the notice issued u/s 153C of the Act on account of common satisfaction note and the common approval. A perusal of the satisfaction note recorded for initiation of proceedings u/s 153C of the Act in the case of the assessee shows that the same has been issued for assessment years 2014-15 to 2020-21 which reads as under:

We find the Hon’ble Karnataka High Court in the case of DCIT vs. Sunil Kumar Sharma (supra) has held that the satisfaction note is required to be recorded under section 153C for each assessment year. The relevant observations of Hon’ble High Court read as under:

We find when the Revenue filed the SLP against the decision of Hon’ble Karnataka High Court, the Hon’ble Supreme Court dismissed the same as reported in DCIT vs. Sunil Kumar Sharma reported in (2024) 68 taxmann.com 77 (SC) delivered on 21.10.2024 vide Civil SLP Diary in 23406 of 2024. 38. We find the Hon’ble Supreme Court in the case of CIT vs. Sinhgad Technical Education has held that the Assessing Officer is required to make year- wise analysis of the incriminating seized material. However, in the instant case no such year-wise analysis has been done. Similar view has been taken by the Co- ordinate Bench of the Tribunal in the case of Chitra Narendra Parmar vs. ACIT and batch of appeals (supra) holding that the notice issued u/s 153C on the basis of consolidated note is bad in law. We, therefore, hold that since the Assessing Officer has recorded a common satisfaction note for all 7 years instead of year-

Even otherwise also we find the JCIT has given a common approval u/s 153D of the Act for assessment years 2014-15 to 2020-21, copy of which is placed at page 38 of the paper book and which reads as under:

We find the provisions of section 153D of the Act read as under:

We, therefore, find merit in the arguments of the Ld. Counsel for the assessee that the approval u/s 153D of the Act has to be given separately for each assessment year and not on a combined basis for assessment years 2014-15 to 2020-21. However, in the instant case the JCIT has give one common approval for all the years which is not in accordance with the provisions of section 153D of the Act.

We find an identical issue had come up before the Hon’ble Allahabad High Court in the case of PCIT vs. Sapna Gupta (supra). The Hon’ble High Court at paras 19 and 20 of the order observed as under:

Further, we find the Delhi Bench of the Tribunal (Third Member) in the case of Dheeraj Chaudhary vs. ACIT (supra) has also held that where the Additional Commissioner has granted one approval for all the six years, such approval granted by the Addl. Commissioner is bad in law. The relevant observations of the Tribunal read as under:

We find the Hon’ble Delhi High Court in the case of PCIT vs. Shiv Kumar Nayyar (supra), following the decision of Hon’ble Allahabad High Court in the case of PCIT vs. Sapna Gupta (supra) has held that the approval u/s 153D has to be granted for “each assessment year” referred to in clause (b) of sub-section (1) of section 153A of the Act”.

In view of the above decisions cited (supra), we hold that the common approval given by the Ld. JCIT being not in accordance with law, therefore, the same is liable to be quashed. Accordingly, the assessment order is liable to be quashed for such invalid approval u/s 153D of the Act.

We further find in the present case notice u/s 153C of the Act was issued beyond a period of 6 years. A perusal of the satisfaction note shows that there is no date on which the Assessing Officer has recorded his satisfaction. However, a perusal of information forwarded by the Assessing Officer of the searched person

We find the Hon’ble Delhi High Court in the case of PCIT vs. Ojjus Medicare Pvt. Ltd. vide ITA No.52/2024 order dated 03.04.2024 and batch of other appeals at pages 173 and 175 has observed as under:

Since in the instant case the Assessing Officer has not recorded any satisfaction regarding the existence of undisclosed asset of Rs.50 lakhs or more, therefore, such assumption of juri iction u/s 153C of the Act for assessment year 2014-15 is also not in accordance with law.

In view of the above discussion, we hold that the notice issued u/s 153C of the Act on the basis of consolidated satisfaction note is bad in law and therefore, the consequential assessment order is invalid. Similarly, on account of common approval given u/s 153D of the Act, we hold that such approval is not in accordance with law and therefore, the same is liable to be quashed and accordingly the assessment order is also liable to be quashed. Further, in absence of any satisfaction recorded by the Assessing Officer of any income represented in the form of asset which has escaped the assessment amounting to or is likely to an amount of Rs.50 lakhs or more, the issue of notice u/s 153C beyond a period of 6 assessment years is also not in accordance with law. Therefore, the assessment order is quashed being not in accordance with law. Since the assessee succeeds on 36 CO No.36/PUN/2024

Even otherwise on merit also, we find no independent or corroborative material exists on record to prove that any cash transaction has ever taken place with the assessee. The Assessing Officer has failed to bring on record any iota of evidence such as bank statement, withdrawal, third party confirmation etc that any cash was ever paid by or to the assessee. There is nothing on record such as PAN, address, identification, statement or any link to establish that the name Abhayraj mentioned in the loose sheets belongs to or refers to the assessee Abhayraj F. Chordiya. A perusal of the satisfaction note shows that the cheques themselves were returned and the entire transaction stood cancelled. Therefore, we find merit in the argument of the Ld. Counsel for the assessee that no cognizance can be taken of the loose sheets allegedly recording notional or cancelled cash transactions. Further, neither the searched person nor any other person has ever stated that any cash was paid or received. We find there is no existence on record that the writer of the document has never admitted that cash was paid against the entries. We further find from a perusal of the loose sheets that there are no dates against the entries for the alleged payment and there is no evidence that the payments were actually paid or received by the assessee. Since the documents do not bear the assessee’s handwriting, signature or any acknowledgement of their veracity, therefore, the addition cannot be made on the basis of some dumb

In the result, the appeal filed by the Revenue is dismissed and the CO filed by the assessee is allowed.

अपील र्थी / The Appellant; 2. प्रत्यर्थी / The Respondent

4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. ग र्ड फ ईल / Guard file.