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Facts
The assessee filed an income tax return declaring income of ₹2,36,20,040/- for AY 2019-20. A search and seizure operation was conducted, leading to the discovery of tally books and ledgers indicating alleged bogus purchases. The Assessing Officer (AO) initiated proceedings under section 153C r.w.s 143(3) of the Income-tax Act, leading to an addition of ₹7,15,88,313/-.
Held
The Tribunal held that the satisfaction note for initiating proceedings under Section 153C was recorded within a reasonable time and was based on seized material that directly implicated the assessee. The objection regarding the delay and procedural lapses were dismissed. The Tribunal also found that the assessee failed to provide evidence of delivery of goods and genuineness of purchases, supporting the AO's addition. The approval under Section 153D was also found to be valid.
Key Issues
Validity of proceedings under Section 153C due to alleged delay in satisfaction note, adequacy of satisfaction note, procedural lapses, and genuineness of purchases.
Sections Cited
153C, 143(3), 142(1), 153D, 37, 69C
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Income Tax Appellate Tribunal, DELHI ‘G’ BENCH,
Before: MS. MADHUMITA ROY, & SHRI NAVEEN CHANDRA
[A.Y. 2019-20] Shri Karan Israni Vs. The Dy. C.I.T H-1, Maharani Bagh Central Circle-30 New Delhi New Delhi PAN – AAIPI 6073 R (Applicant) (Respondent) Assessee By : None Department By : Shri Muneesh Rajani, Sr. DR Date of Hearing : 20.01.2026 Date of Pronouncement : 04.02.2026 ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the assessee is directed against the order of the ld. ld. CIT(A) - 30, New Delhi dated 24.01.2025 pertaining to A.Y 2019-20. 2. None appeared on behalf of the assessee. We decided to proceed ex- parte with the assistance of the ld. DR who was heard at length and the case records were carefully perused.
[A.Y. 2019-20]) Karan Israni Vs DCIT 3. Briefly stated, the facts of the case are that original return in this case was filed on 31.10.2019 declaring an income of 2,36,20,040/-. A search and seizure operation u/s 132 of the Income-tax Act, 1961 [the Act, for short] conducted on 26.10.2020 in the cases of Sanjay Jain and Mehta Group at various residential and business premises.
During the course of search, two sets of Jain books of tally were found and seized from the office premises of Shri Sanjay Jain i.e 87, First Floor, Dharamvir Mann Marg, Sabji Market, Hari Nagar Ashram, New Delhi, which were annexed as Annexure -A31. The set of tally contains the receipt and expenditure commission in cash. The details of ledger of the intermediaries as per tally of Sanjay Jain Tally books with the name "Jain Enterprises" maintained by Sanjay Jain were found during the search. On the basis of the information the case of the assessee for the year under consideration was opened u/s 153C r.w.s 143(3) of the Act after recording satisfaction note by Assessing Officer.
5. Notice u/s 153C of the Act was issued on 25.11.2022 and served on the assessee wherein assessee was requested to file his ITR u/s 153C of the within 30 days from the service of notice. Further, notice u/s 142(1) of the Act alongwith detailed questionnaire was issued on 17.01.2O23 wherein
Page 2 of 8 [A.Y. 2019-20]) Karan Israni Vs DCIT assessee was requested to furnish the details with regard to claims made in the ITR for the year under consideration. Copy of Satisfaction note, seized material and incriminating documents were provided to the assessee on 15.02.2023.
The assessee raised the objection with regard to the jurisdiction and validity of the satisfaction note. The assessee’s submission with regard to purchase made from the entities controlled by Sanjay Jain was not found satisfactory. Accordingly, the Assessing Officer made the said addition of Rs. 7,15,88,313/-.
7. Aggrieved, the assessee went in appeal before the ld. CIT(A) who confirmed the addition made by the Assessing Officer.
Now the assessee is aggrieved and has come in appeal before.
We have heard the ld. DR and have perused the relevant material on record. Before us the assessee has raised several jurisdictional issues as well as issues on merits. We find that the CIT(A) has dealt with all these issues as under:
Vide Grounds of Appeal 1 to 5 and 7, the appellant primarily raised the following contention:
Page 3 of Karan Israni Vs DCIT 1. That the proceedings under Section 153C are invalid as satisfaction was recorded after an inordinate delay.
That the satisfaction note is inadequate and fails to establish a nexus between the seized material and the appellant.
That the delay of eight months between the conclusion of the assessment of the searched person and issuance of notice under Section 153C violates judicial principles and statutory mandates.
4. No cross- examination was given and natural justice was not done.
It was argued that procedural lapses rendered the assessment under Section 153C invalid.
7.1 In this case, satisfaction note u/s 153C is recorded, which is undisputed. Section 153C requires the AO of the searched person to record satisfaction that the seized material pertains to a person other than the searched person. In the present case, the satisfaction note recorded by the AO of the searched person and the appellant clearly establishes that the appellant was a beneficiary of accommodation entries from Sanjay Jain controlled entities. Statements of Sanjay Jain and associntes confirmed the systematic issuance of bogus bills. These statements, along with ledger accounts and Tally records (Annexure-A31) scized during the search, directly implicated the appellant in transactions lacking genuineness. In CIT v. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC), the Supreme Court upheld the validity of proceedings under Section 153C where satisfaction was recorded based on scized material directly pertaining to the other person. 7.2 As for inordinate delay issue, it is important to appreciate that In the case of M/s Calcutta Knitwears v. CIT (2014) 43 taxmann.com 446 (SC), the Page 56 of 60 करआका Sh. Keran Israni, A.Y. 2019-20. Appeal No.30/10594/2018-19 Supreme Court emphasized that satisfaction must be recorded contemporaneously during or immediately after the assessment proceedings of the scarched person. It is important to appreciate that Honble Court nowhere defined the meaning of "immediately after". Hon'ble Court held that "In our considered opinion, the reasoning of the learned Judges of the High Court is contrary to the plain and simple language employed by the legislature under Section 158BD ofthe Act which clearly provides adequate flexibility to the assessing officer
Page 4 of 8 [A.Y. 2019-20]) Karan Israni Vs DCIT for recording the satisfaction note after the completion of proceedings in respect of the searched person under Section 158BC." 7.3 Finally, Sum and substance of the judgment was that the satisfaction note must be recorded and it should be recorded in reasonable time period after conclusion of lead Search cases. In this case, satisfaction note was recorded within eight months of the conclusion of the assessment of the searched person. This period does not constitute inordinate delay, as the AO must analyze voluminous data from searches before arriving at a conclusion. The CBDT, in line with the Calcutta Knitwear judgment, clarified that satisfaction must be recorded within a reasonable time to ensure procedural fairness. The department adhered to these guidelines in the present case. The AO of the searched person concluded their assessment on 31.03.2022, and satisfaction was recorded on 25.11.2022. The satisfaction note was prepared contemporaneously and within a reasonable time frame, ensuring procedural compliance. 7.4 As for cross - examination is concerned, Supreme Court in the case of state of J&K vs. Bakshi Ghulam Mohammad held that right of hearing does not include the right of cross-examination and the right must depend upon the circumstances of each case. In this case, apart from statement and tally data, there is non- compliance of critical documents which led to disallowance. Thus, not giving opportunity of cross-examination is not fatal. AO in this case replied to objection raised and supplied satisfaction note along with relied upon incriminating documents to appellant. Notices under Section 142(1)/143(2) were issued. Appellant's submission was perused and after perusal AO has given detailed findings for disallowance in para 5.1 and 5.2 of order which cannot be said to be pre-conceived or without application of mind. In view of above discussion, above grounds of appeal are dismissed.
8. Ground no.8, 9 and 10: Upon careful perusal of records, it is evident that seized documents, such as ledger accounts and Tally data, directly implicate the appellant. The absence of genuine stock registers, transport records, and reconciliations with project sites further supports the AO's conclusion that the purchases were bogus. Merely recording transactions in the books does not establish their genuineness. The Supreme Court in CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) held that tax authorities can look beyond entries in books to assess the substance of Page 5 of Karan Israni Vs DCIT transactions. GST payments and bank transactions are procedural formalities and do not establish that goods were delivered or consumed for business purposes. There was no evidence of material entry at the appellant's premises, such as gate passes, store records, or reconciliations with stock registers. Moot point is that the appellant failed to establish delivery of goods to its premises or project sites. AO also observed that there was no evidence of kachcha parchi seized from the searched premise of Sanjay Jain and associates, which could prove that the bogus purchases have been covered with martial purchase in cash from open market. Further, as held by AO, transport verification from the e-Vahan portal produced negative result for the appellant. Appellant was given an opportunity to rebut findings of AO during appellate proceeding but no credible positive evidences were produced by him. Hon'ble Supreme Court decision the case of NK Proteins Ltd vs DCIT (2017) 292 CTR 354 (SC) is squarely applicable to the facts of assessee case, where the Hon'ble Supreme Court dismissed appeal filed by the assessee and confirmed the findings of Hon'ble Gujarat High Court in respect of bogus purchases, The Hon'ble Gujarat High Court, after analysing necessary facts at para 6 of the order, held that once the Tribunal having come to a categorical finding that the purchases from certain parties are bogus, it was not incumbent on it to restrict the disallowance to the extent of 25% of such purchases. Under Section 37, the appellant must demonstrate that expenses were incurred wholly and exclusively for business purposes. In the absence of delivery proof, the appellant failed to discharge this burden. In view of above discussion, the addition of ₹7,15,88,313/- is upheld in its entirety.
9. Ground no 6: The appellant challenges the assessment as being in violation of section 153D alleging that the approval granted by the Additional CIT was mechanical and lacked application of mind. The AO explicitly stated that the assessment order was passed with the prior approval of the Additional CIT, as documented in F.No.Addl- CIT/CR8/Approval/2022-23/3565. The provisions of section 153D do not require the Additional CIT to record satisfaction in any specific format or language. The appellant has failed to substantiate its claim of mechanical approval. No evidence was provided to demonstrate non- application of mind by the Additional CIT. The approval under section 153D was validly granted. This ground is dismissed.
Page 6 of 8 [A.Y. 2019-20]) Karan Israni Vs DCIT 10. We find that the ld. CIT(A) has dealt with each of the issues at great length and thereafter adjudicated the matter in favour of the Revenue. Also the Revenue reliance on the decision of the Hon'ble High Court of Bombay in the case of Kanak Impex [India] Ltd of 2021 order dated 03.03.2025 wherein entire bogus purchase was considered for addition u/s 69C, is apt. We therefore, find no reason to interfere with the impugned order of the ld. CIT(A). Accordingly, Grounds raised by the assessee stand dismissed.
The order is pronounced in the open court on 04.02.2026.