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Facts
A search action led to the seizure of documents related to the assessee's cash lending business. The Assessing Officer (AO) issued a notice under Section 153C of the Income Tax Act, alleging unexplained investments and interest income based on the seized material and statements.
Held
The Tribunal set aside the impugned orders and remitted the case back to the CIT(A) to adjudicate the additional ground regarding jurisdiction and the merits of the case, including the issue of cross-examination. The appeals were allowed for statistical purposes.
Key Issues
Whether the assessment order passed under Section 153C was without jurisdiction due to lack of proper satisfaction recorded by the AO, and whether the assessee was denied the opportunity for cross-examination.
Sections Cited
143(3), 153C, 153A, 132, 131, 69, 115BBE, 250(6), 147, 148
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Income Tax Appellate Tribunal, PUNE BENCHES “A”, PUNE
Before: DR.MANISH BORAD & SHRI VINAY BHAMORE
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeals at the instance of assessee pertaining to A.Yrs. 2017-18 and 2018-19 are directed against the orders dated 07.11.2024 of Ld.CIT(A), Pune-11 passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of Assessment orders dated 27.12.2021 passed u/s.143(3) r.w.s.153C r.w.s.153A of the Act.
Assessee has raised following grounds of appeal :
“1. The learned CIT(A) erred in law and on facts in not complying with the principle of natural justice by - - not providing the opportunity of cross examination and in confirming that proper opportunity of hearing was provide by the AO. - by not considering the elaborate submission made before him and merely glossing over the same.
2. The learned CIT(A) erred in law and on facts in confirming the addition of Rs. 1,95,000/- made by the AO towards alleged interest earned by the appellant on cash loans alleged to be given by the appellant in the earlier year.
The appellant craves leave to add to or amend any of the grounds of appeal, if considered necessary.
3. Assessee has also raised the following additional ground for both the assessment years under consideration :
"The assessment order passed is without jurisdiction and needs to be quashed as the necessary satisfaction an envisaged by Section 153C(1) is not forthcoming from the satisfaction recorded by the Assessing Officer."
We will first take up the legal issue raised in the additional Ground. By way of this additional ground, it is pleaded that the Assessment order is passed without jurisdiction and needs to be quashed as necessary satisfaction as envisaged u/s.153C(1) of the Act has not been recorded. The above additional ground raised by the assessee is purely legal one and does not require any new facts to be investigated and therefore the same is admitted by virtue of judgment of Hon’ble Apex Court in the case of NTPC Vs. CIT reported in 229 ITR 383 (SC)
Brief facts of the case relating to A.Y. 2017-18 are that the assessee is an individual and income of Rs.55,66,430/- declared in the return furnished on 31.10.2017. Return processed u/s.143(1) of the Act on 05.12.2017. Search and seizure action u/s.132 of the Act carried out in the case of Ashok Bhosale and Others Group on 01.08.2017 by the Investigation Wing, Pune. Various incriminating documents were seized which included the documents seized from Mr. Sachin Nahar and he confirmed to be engaged in the business of Commission and Brokerage as Financial Broker and works as a middleman between the borrower and lender and provides platform for investors having surplus funds and borrowers who are in need of funds. Apart from banking transactions, unaccounted business through cash is also carried out which is not recorded in the regular books of account. Since some documents pertaining to unaccounted cash transactions were related to the assessee, ld. Assessing Officer (AO) issued notice u/s.153C of the Act on 29.03.2021 and prior to issuance of the said notice, satisfaction was recorded by both the ld. AO of the searched person as well as the ld. AO other than the searched person and the same is reproduced below :
“Shri Nikhil Rameshchand Ranka SATISFACTION NOTE (AO of "Other Person") A search action u/s 132 of the Income Tax Act, 1961 was conducted on Ashok Bhosale & Others Group on 01-08-2017. Shri Sachin Nahar is one of the party of searched group and the residence premise at Flat No. 07, Awiskar Apartment, Sr. No. 568/19, Bibwewadi Kondhwa Road, Pune 411037, of Shri Sachin Nahar was covered under section 132 of the Act. Shri Sachin Nahar is a financial consultant cum broker. He is a middleman between the borrower and lenders. He provides platform for investors having surplus fund and borrowers who are in need of funds. For this work, he gets brokerage on the interest paid by the borrower on loan taken. During the course of search proceedings, it was seen that the following documents/Bundles belongs to Shri Nikhil Rameshchand Ranka, which are having substantial financial implications:-
Sr.No. Description Bundle Bundle Bundle No. 1 to 11, out of which Bundle No. 9 is the No.1 to most important, seized from the residential premise of Shri 11 Sachin Nahar at Flat No. 07, Awiskar Apartment, Sr. No. 568/19, Bibwewadi Kondhwa Road, Pune 411037. Bundle No. 9 is final register, which is basically the ledgers of borrowers wherein each ledger of the depositors along with amounts are also mentioned.
The seized documents containing details of his money lending business in cash and the notings therein are related to principal amount lent by lenders & borrowed by borrowers, names of lenders & borrowers, interest component etc.
Further, Bundle no. 9 which is a final register in which complete ledgers of various borrowers containing name of depositors, due date of interest and amount of cash loan are written.
During Post search enquiry, a statement of Shri Sachin Nahar was recorded u/s 131 of the Act on 17-11-2017 wherein he was asked to submit details of all the investors whose short names are mentioned in seized documents. In response, he submitted an excel sheet. The said excel sheet contains coded name of depositors, amount deposited by them which is mentioned in thousands, full name of depositors, address, mobile number and PAN available.
From seized documents, total amounts lent cumulatively comes approximately Rs. 113 Cr., which includes cash deposit given by Shri Nikhil Rameshchand Ranka at Rs. 4,13,00,000/- in F.Y. 2016-17 to the various parties through Shri Sachin Nahar. Further the assessee has also received interest on this cash deposit of Rs. 44,85,000/- for A.Y. 2017-18 and Rs. 1,95,000/-in Α.Υ. 2018-19. Here, it is important to note that seized documents in the case of Shri Sachin Nahar consists of details of various depositors which pertain to unaccounted income for FY 2016-17
During search action, it was found that coded words “A Raka” & “Rakaji” mentioned in seized documents are short form for Nilkil Rameshchand Ranka. He has given cash to Sachin Nahar which was further advanced by him to different persons.
During the course of assessment proceedings before the AO of the searched person, the said AO has satisfied that the documents mentioned in the table above belong to Shri Nikhil Rameshchand Ranka, a person other than the person referred to in Section 153A and will have a bearing on the determination of the total income of such other person. Accordingly he has recorded his satisfaction u/s 153C of the Act.
I have received the said satisfaction drawn in the case of Shri Nikhil Rameshchand Ranka along with the seized material mentioned in table above.
I am also the jurisdictional Assessing Officer of Shri Nikhil Rameshchand Ranka as the case has been centralized to this charge by the Pr. CIT-2, Nagpur's order u/s 127(2) F.No. PCIT- 2/NGP/Tech/127/2017-18/dt. 07/03/2018. On perusal of seized material under reference and the satisfaction drawn by the ACIT Central Circle 1(1), Pune, I am satisfied that said documents have bearing on the determination of the total income of Shri Nikhil Rameshchand Ranka for the A Ys 2012-13 to 2018-19. Hence, in view of provisions of S. 153C of the Income Tax Act, 1961 it is necessary to initiate proceedings u/s 153C of the Act for A Ys 2012-13 to 2018-19 in the case of such other person namely Shri Nikhil Rameshchand Ranka.”
Subsequently, ld. AO concluded the assessment proceedings making addition for unexplained investment u/s.69 of the Act r.w.s.115BBE of the Act at Rs.4.13,00,000/-. He also made addition for the interest income on the alleged investments at Rs.44,85,000/- and assessed the income at Rs.5,13,51,430/-.
So far as the A.Y. 2018-19 is concerned, against the returned income of Rs.1,22,49,500/- declared in the return filed on 30.11.2018 ld. AO made addition only for the interest earned on alleged unexplained investment at Rs.1,95,000/- and assessed the income at Rs.1,24,44,500/-.
Ld. Counsel for the assessee fairly admitted that the legal issue raised in the additional ground has been raised for the first time before this Tribunal and therefore there was no occasion of dealing of this legal issue by ld.CIT(A).
Ld. DR on the other hand supported the orders of ld.CIT(A).
We have heard the rival submissions and perused the record placed before us. It is an admitted fact that against the additions made for A.Y. 2017-18 and 2018-19, assessee has preferred appeals before ld.CIT(A) on merits of the case. However, the additional ground raised before us challenging the jurisdiction assumed by ld. AO for carrying out the assessment proceedings u/s.153C of the Act on the ground that proper satisfaction has not been recorded by the ld. AO, has not been raised before ld.CIT(A).
The issue of Tribunal’s power to adjudicate the ground raised
before it in second appeal which did not pass through first appeal came for consideration before the Hon’ble Delhi High Court in the case of ‘Divine Infracon Pvt. Ltd. Vs PCIT’ [2025, 171 taxmann.com
92. (Del)], wherein their Hon’ble Lordship vide para 13 have categorically held that, the Tribunal has no jurisdiction to proceed to decide the ground which did not arise from the impugned order passed by first appellate authority, irrespective of such ground was raised in first appeal or not.
For the aforestated reason, we deem it fit to set-aside the impugned orders to the file of Ld. CIT(A) to adjudicate the legal issue raised in the additional ground and decide in accordance with law and pass a speaking order as contemplated u/s.250(6) of the Act. Needless to mention that in the set aside proceedings ld.CIT(A) shall afford reasonable opportunity of hearing to the assessee. Assessee is also directed to remain vigilant and not to take adjournment unless otherwise required for reasonable cause. Additional ground raised by the assessee is allowed for statistical purposes.
So far as merits of the case are concerned, even though dealing with the same would be merely academic in nature as the issue raised in the additional ground for the first time before this Tribunal has already been remitted to the file of ld.CIT(A) for necessary adjudication, we find that the same has been on the basis of seized material appearing on pages 6 to 20 of the paper book wherein at few places name of “Rakhaji”, “A. Raka”, “Amit Raka” are mentioned. During the course of assessment proceedings, assessee vide letter dated 07.12.2021 requested for an opportunity to cross examine Mr. Sachin Nahar because on the basis of the statement given by Mr. Sachin Nahar u/s.132(4) of the Act alongwith incriminating material seized during the course of search, ld. AO alleged that the assessee has made unexplained investment with Mr. Sachin Nahar. Ld. AO after considering the assessee’s request vide letter dated 07.12.2021 for providing opportunity to cross examine Mr. Sachin Nahar issued summon to Mr. Sachin Nahar asking him to attend the office on 15.12.2021 and also informed the assessee to be present on 15.12.2021. Only on 15.12.2021, Mr. Sachin Nahar attended the office of the AO but the assessee failed to attend. Thereafter, assessee stated that the summon only provides the date and not the time and requested for another opportunity. We note that in the assessment order which is running into 21 pages, ld. AO has dealt with the issue of cross examination at length at pages 6 to 13 of the order. Even in the impugned order also, this issue of cross examination has been dealt elaborately by ld.CIT(A). Under these given facts and circumstances, since the legal issue has already been remitted to the file of ld.CIT(A) for necessary adjudication as discussed (supra), we deem it proper that on merits of the case also ld.CIT(A) shall adjudicate it afresh and if found necessary a remand report may be called for from the Jurisdictional Assessing Officer on the issues relating to providing of cross examination and also regarding the names of the assessee /other person namely A. Raka appearing in the seized material for which necessary enquiry may be conducted by ld. JAO along with providing cross examination of the assessee with Mr. Sachin Nahar and based on such remand report ld.CIT(A) shall deal with merits of the case in accordance with law for both the impugned assessment years. Impugned orders are set aside and the all the grounds of appeal raised in the instant appeals on merits are also allowed for statistical purposes.
In the result, both the appeals of the assessee are allowed for statistical purposes.
Order pronounced on this 10th day of October, 2025.