ACIT, CENTRAL CIRCLE-2(3), PUNE, PUNE vs. SUBHASH JIVRAJ JAIN, PUNE

However, during the course of post search enquiry Shri Yuvraj Dhamale and M/s. Welbuild Merchants Pvt. Ltd. claimed that the investment entries as mentioned on the page are recorded in the books of account while interest portion is not recorded. It was further stated that the investment as mentioned on the page is received by two entities namely M/s. Welbuild Merchants Pvt. Ltd. and M/s GM Rajdhan Buildcon. Further, these investments were recorded as ‘unsecured loan’ in the books of M/s. Wellbuild Merchants Pvt. Ltd. and as “partner’s capital” in the books of M/s. GM Rajdhan Buildcon. He noted that subsequently M/s. Wellbuild Merchant Pvt. Ltd. and Shri Yuvraj Dhamale have approached before the Settlement Commission and claimed that the entire amount as mentioned on pages 36 to 38 of Bundle No.55 seized from the residence of Shri Pravin Gawali has been received by cheque. Rejecting the various explanations given by the assessee and observing that the assessee has received interest of Rs.2,11,00,000/- in assessment year 2017-18. The Assessing Officer made substantive addition of Rs.1,05,50,000/- in the hands of assessee as ‘income from other sources’ and also another addition of Rs.1,05,50,000/- on protective basis by observing as under: “09. To sum up the things, the seized documents vide Page Nos.38 of Bundle No.55 found at the Pravin Gawali residence contains the names of (1) Subhash Jain and (2) Ajit Jain. As mentioned in the preceding paras Shri. Yuvraj Dhamale had submitted the details of investments made by the parties mentioned on these pages in the project "Rajgruhi Residency” developed by M/s. Wellbuild Merchants Pvt Ltd. as per Annexure-4 (being part of his statement) and had stated that though 23 investors appear in the Annexure, they actually are from certain families and groups. The said proposition was also accepted by the Hon'ble ITSC in the order passed u/s. 245D(4) of the Act. Accordingly, as per Annexure-4, the above Assessees are grouped headed by Shri. Subhash Jain. 9.1 Further, the supportive documents seized vide Page No.9 of Bundle No.11 and Page No.17 of Bundle No.1 from the residential premise of Shri. Umakant Kuwar, Page No. 12 & 14 of Bundle No.5 seized from Camp office and Page No. 27 of Bundle No.14 seized from residence of Shri. Pravin Gawali, all have the noting in the name of Shri. Subhash Jain. Even, in his statement recorded during the Search proceedings and in the Statement of Fact (SOF) submitted before the ITSC, Shri Yuvraj Dhamale had stated that, he had handed over the money to a single representative of each group so as to avoid dealings with the multiple persons and the resultant confusion arising out of it. Further, both these brothers have made investments either in M/s. Wellbuild Merchants Pvt Ltd, M/s. Rajdhan Buildoon or directly with Shri. Yuvraj Dhamale through cheques only thereby justifying their claim on the aforesaid amount received in the hands of Shri. Subhash Jain. 9.2 Therefore, it can be fairly concluded that, these group members (1) Subhash Jain and (2) Ajit Jain have received their returns on investments in cash from Dhamale Group through the hands of Shri. Subhash Jain. This further backs the statement of Shri. Yuvraj Dhamale that this group/family was represented by Shri. Subhash Jain.

Thus, in the absence of any supporting evidences as well as any satisfactory explanation furnished thereto, the amount i.e., Rs.1,05,50,000/- is treated to be the income of Assessee under head 'income from other source’ for A.Y. 2017-18. [Protective Addition of Rs.1,05,50,000/- as income from other sources]”

In appeal, the Ld. CIT(A) following his order for assessment year 2016-17 deleted the addition. A perusal of the order for assessment year 2016-17 shows that the Ld. CIT(A) deleted similar addition for assessment year 2016-17 by relying on the decision of the Pune Bench of the Tribunal in the case of Bharat M. Jain and others vs. ACIT vide to 905/PUN/2022, order dated 05.10.2023. The relevant observations of the Ld. CIT(A) read as under: “6.4 I have considered the facts of the case and the submission made by the appellant. During the appellate proceedings, the appellant stated in his submission that the copy of the breakup of cash expenditure allowed by the ITSC in the case of Yuvraj Dhamale Group, based on which the AO made additions in the hands of the appellant, was not a seized material. Instead, it was prepared during the proceedings of third party before the Hon'ble ITSC. This indicates that the AO made additions in the appellant's hands, based on third-party proceedings in which the appellant had no role or participation. Consequently, the alleged payment of interest in cash to the appellant is not based on seized material but is based on the submission of Yuvraj Dhamale group in third-party proceedings before another authority. Therefore, the purported cash expenditure sanctioned by the Income Tax Settlement Commission (ITSC) in the case of Yuvraj Dhamale Group, upon which the AO made additions in the hands of the appellant, is unjustified. The appellant also contended that the AO is not justified in making additions solely based on documents seized from the premises of a third party Yuvraj Dhamale Group. The entries contained in the bundle 1, 5, 11 and 14 does not mention any purpose of payment or the nature of transaction mentioned so as to make addition adversely in the hands of the appellant. 6.5 In this regard, the appellant has relied upon the latest decision of jurisdictional Hon'ble ITAT Pune in the case of Bharat M. Jain and others vs ACIT, vide ITS Nos. 898 to 905/PUN/2022 dated 05.10.2023, which is on identical facts and same alleged incriminating documents found from the search action of Dhamale group wherein Hon'ble ITAT has allowed appellant's appeal and deleted similar additions. The Hon'ble ITAT held in favor of the appellants as under:

While adjudicating the appeal for assessment year 2017-18, the Ld. CIT(A) had observed as under: “11.1 Vide these grounds of appeal, the appellant contended that the AO has erred in making addition of Rs.1,05,50,000/- on account of alleged cash receipt from the builder in connection with the providing of the funds is without any evidence found with the appellant and therefore the additions so made be deleted. The appellant also contended that the additions made on protective basis of Rs.1,05,50,000/- is also not in accordance with the provisions of the Act and the facts and circumstances prevailing in the case. The additions so made be deleted. These grounds raised by the appellant are identical to the grounds no.3 to 4 for A.Y. 2016-17 and the facts mentioned for these grounds are also similar. Therefore, the findings given for the grounds no.3 to 4 for A.Υ. 2016-17 would apply mutatis mutandis to these grounds raised by the appellant. Accordingly, considering the findings given for the grounds No.3 to 4 for A.Y. 2016-17 above, thus, grounds no.3 & 4 raised by the appellant are hereby allowed.”

Aggrieved with such order of the Ld. CIT(A) the Revenue is in appeal by raising the following grounds: 1) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the appeal of the assessee relying upon the decision of Hon'ble ITAT, Pune in to 905/PUN/2022 dated 05/10/2023 in the case of Bharat M. Jain/Mahaveer M. Jain/Anand T. Jain/Chirag G. Jain Vs ACIT wherein it was held that information by way of seized loose papers in case of third party cannot be said to be tangible material without a further enquiry, by ignoring the provisions of section 153C of the Income Tax Act, 1961. 2) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in not appreciating the fact that addition was made on account of cash interest received by the assessee from Yuvraj Dhamale Group after detailed analysis of all the incriminating seized material, statements recorded u/s 132(4) of the Act in said group which clearly mention the name of the assessee and the cash transactions he had entered into and the assessee failed to submit any submission or denial in respect of the incriminating material relevant to his case inspite of sufficient opportunities granted to him.

The assessee in his CO has raised the following grounds: 1] The respondent submits that in the instant case a consolidated satisfaction note has been prepared for A.Y. 2012-13 to 2018-19 and as the consolidated satisfaction note is not in accordance with the provisions of the law, the asst. order passed u/s 153C r.w.s. 143(3) be declared null and void. 2] The respondent submits that the learned A.O. had no jurisdiction to issue notice u/s 153C to the assessee since the conditions mentioned therein have not been fulfilled and accordingly, the notice issued u/s 153C and the consequential asst. order passed u/s 153C r.w.s. 143(3) be declared null and void. 3] The respondent submits that in the present case, no addition has been made in respect of the seized paper referred in the satisfaction note and accordingly, the asst. order passed u/s 153C r.w.s. 143(3) be declared null and void. 4] The respondent craves leave to add, alter, amend or delete any of the above cross objections.

The Ld. Counsel for the assessee at the outset referring to the satisfaction note by the JCIT (OSD), Central Circle 2(3), Pune on 30.04.2021, copy of which is placed at pages 1 to 2 of the paper book submitted that the Assessing Officer has passed a consolidated satisfaction note for various assessment years.

Referring to the decision of the Hon’ble Karnataka High Court in the case of DCIT v. Sunil Kumar Sharma reported in 159 taxmann.com 179 (Kar.), he submitted that the satisfaction u/s 153C ought to be on a year-to-year basis and absence of year-by-year satisfaction vitiates the proceedings.

Referring to the decision of the Coordinate Bench of the Tribunal in the case of Shri Rajendra Rameshlal Gugale vs. PCIT vide for assessment year 2017-18, order dated 30.12.2024, he submitted that the Tribunal in the said decision has held that the assessment framed u/s 153C of the Act is void being not in accordance with law on account of combined satisfaction note for assessment years 2012-13 to 2018-19. He submitted that the Revenue challenged the order of the Hon’ble Karnataka High Court in the case of DCIT vs. Sunil Kumar Sharma (supra) and the Hon'ble Supreme Court dismissed the SLP filed by the Revenue.

The Ld. DR on the other hand heavily relied on the order of the Assessing Officer.

So far as the argument of the Ld. Counsel for the assessee that the Assessing Officer has passed a consolidated satisfaction note for which the assessment has to be quashed is concerned, he submitted that practicality and administrative burden has to be kept in mind. He submitted that issuing separate satisfaction notes for each assessment year especially when dealing with a single search operation that reveals material relevant to multiple years creates an undue administrative burden on the tax authorities. It is more efficient and practical to consolidate the satisfaction regarding the relevance of seized material across all affected assessment years if the underlying search is common. Further, the spirit of section 153C is to assessee income that has escaped assessment based on seized material. If the material clearly relates to multiple years, focusing excessively on the form of the satisfaction note rather than the substance of the satisfaction can hinder the legitimate collection of taxes. Further, there is no explicit prohibition in the statute for such common satisfaction note.

Referring to the decision of the Hon’ble Delhi High Court in the case of Indian National Congress vs. DCIT (2024) 463 ITR 431 (Del), he submitted that the Hon’ble High Court in the said decision has held that satisfaction note merely forms foundation for initiation of action which would enable to evaluate whether an opinion has been validly formed and as long as it rests on incriminating material, which pertains to assessment years in question, same would qualify requirement of section 153C.

As regards the issue of reliance on the decision favourable to the assessee when two conflicting decisions on the same issue are available is concerned, he submitted that the Hon’ble jurisdictional High Court in the case of CIT vs. Thana Electricity Supply Ltd., reported in 206 ITR 727 (Bom) has held that it is satisfaction of the Court interpreting the law, in that the language of the taxing provision is ambiguous or reasonably capable of more meanings than one which is material. If the court does not think so, the fact that two different opinions have been expressed by the parties or accepted by some Tribunal or High Court by itself will not be sufficient to attract the principle of beneficiary interpretation.

Referring to the decision of the Hon'ble Supreme Court in the case of M/s. A.P. Electrical Equipment Corporation vs. The Tahsildar & Ors. etc. vide Civil Appeal Nos.4526-4527 of 2024, judgment dated 27.02.2025, he submitted that the Hon'ble Supreme Court in the said decision has held that if two decisions of this Court appear inconsistent with each other, the High Courts are not to follow one and overlook the other, but should try to reconcile and respect them both and follow the decision whose facts appear more in accord with those of the case at hand. He accordingly submitted that on the issue of combined satisfaction also, assessments cannot be quashed.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of both sides. We have also considered the various decisions cited before us by both sides. We find the Assessing Officer in the instant case, on the basis of information obtained that certain documents / loose papers pertaining to or information contained in papers / documents related to the assesse Subhash Jivraj Jain were found during the course of search on 26.09.2017 in the case of Yuvraj Dhamale group of cases, issued notice u/s 153C of the Act on the basis of satisfaction note dated 30.04.2021. We find the Assessing Officer completed the assessment determining the total income of Rs.201,38,624/- by making addition of Rs.2,11,00,000/- the details of which are already given in the preceding paragraphs. We find the Ld. CIT(A) 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 153C proceedings are not valid on account of combined satisfaction note issued for different assessment years and therefore the CO filed by the assessee should be allowed.

A perusal of the satisfaction note issued by the Assessing Officer dated 30.04.2021, copy of which is placed at pages 1 and 2 of the paper book shows that the Assessing Officer has recorded the satisfaction note as under: “Satisfaction note for initiating proceedings u/s 153C of the IT Act, 1961 in case of Shri Subhash Jivraj Jain A. The search and seizure action u/s 132 of act was conducted in case of Shri Yuvraj Sitaram Dhamale and M/s Wellbuild Merchants Pvt Ltd at residential premise of at residential premise of Shri Pravin Gawali at 35/10, Shivajirao Kadam nagar, Ambegaon pathar, near Raje chowk, Pune. During the search proceedings, several incriminating materials and documents were seized. While examining the documents and seized material at the time of finalizing the assessment in case of Shri Yuvraj Sitaram Dhamale and M/s Wellbuild Merchants Pvt Ltd, it was noted that the certain documents/loose papers pertain to or the information contained in papers/documents related to Assessee i.e. Shri Subhash Jivraj Jain. B. A satisfaction note was drawn by the AO during the proceeding's u/s 153A in case of Shri Yuvraj Sitaram Dhamale and M/s Wellbuild Merchants Pvt Ltd that Information contained in documents/papers/ materials relates to Shri Subhash Jivraj Jain. The details of seized documents are as below: The loose papers containing noting regarding the investment, interest and total amount against the name of some persons has been seized as per page no 38