VIMALARJUN TRUST,LUCKNOW vs. ACIT, CENTRAL CIRCLE-2, DELHI

“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts.

2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that initiation of assessment proceedings under section 153C and consequent reassessment order is illegal and invalid being barred by limitation.

3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the additions made by the AO under Section 153C of the Act are bad in law in the absence of any incriminating material belonging to the assessee being found during the course of the search. 3

4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the proceedings initiated under section 153C against the assessee and the assessment framed under section 153C are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed.

6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO despite the fact that proceedings initiated under Section 153C of the Act and the assessment framed under the said section is bad and liable to be quashed in the absence of any valid satisfaction being recorded by the assessing officer of the searched person as well as the assessing officer of the assessee.

7. On the facts and circumstances of the case, the learned CIT(A) has erred in confirming the action of the AO despite the fact that notice issue under section 153C of the Act and completing the assessment on the basis of satisfaction recorded by the assessing officer of the searched person and the assessing officer of the assessee are invalid and non-est as no Document Identification Number (DIN) has been quoted in the body of the said satisfaction notes in violation of the instructions issued by the CBDT Circular No. 19/2019. 8. On the facts and circumstances of the case, leamed CIT (A) has erred, both on facts and in law, in confirming the action of the AO despite the fact that the proceedings initiated against the assessee and the assessment framed under section 153C of the Act are in violation of mandatory provisions of Section 153D of the Act and as such the same is bad in eyes of law. The purported approval u/s 153D of 4 the Act is illegal, bad in law and also without any application of mind. 9. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 10,00,000/- made by the AO on account of loan received from M/s Rolta Management Services under section 68 read with section 115BBE of the Income Tax Act. (ii) That the abovesaid addition has been confirmed rejecting the detailed submissions and explanations along with the evidences brought on record by the assessee in this regard. 10. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 55,00,000/- made by the AO on account of corpus donation under section 68 read with section 115BBE of the Income Tax Act. (ii) That the abovesaid addition has been confirmed rejecting the detailed submissions and explanations along with the evidences brought on record by the assessee in this regard.

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5. Learned Authorized Representative for the appellant/assessee submitted that Ld. AO made the impugned addition solely on the basis of a document found during search proceedings at a third party's premises. The document was not recovered from the premises of the assessed. No effort was made by the Ld. AO to decode or explain the nature of the document. 5 No statement of the person from whose possession the document was recovered was recorded to establish its nature, authorship, or contents. Apart from the impugned document, no other adverse material has been brought on record against the assessee.

5.1 It is well settled that an addition cannot be made merely on the basis of loose papers or documents found at a third party's premises, unless corroborated by independent evidence linking the assessee. In support, reliance was placed on following citations: a) CIT v. S. M. Aggarwal (293 ITR 43, Delhi HC): Loose papers are not sufficient evidence by themselves unless supported by other material. b) CIT v. Girish Chaudhary (163 Taxman 608, Delhi HC): Notings on loose sheets are not substantive evidence; they require independent corroboration. c) CIT v. P. V. Kalyanasundaram (294 ITR 49, SC): Addition cannot be made merely on the basis of a third party's statement/document unless corroborated. C d) Common Cause v. Union of India (394 ITR 220, SC): Documents seized from third parties (e.g., "Sahara Diaries") without further investigation or corroboration cannot be the sole basis for making additions. 5.2 Even assuming the document has some evidentiary value, the following facts emerge: a) The document contains the narration with name "Vimalarjun" written which prima facie establishes that this document is not maintained or written by the Assessee. It pertains to some other entity, not the assessee. b) If the document truly belonged to the assessee, it is implausible that the assessee would record transactions in his own name. c) No enquiry has been made by the Assessing Officer to ascertain the authorship of the document, its purpose, or the identity of the person maintaining such noting. d) Assessing Officer without making any effort to find out who has written/maintained this, what are the nature of transactions, to whom does it pertain to, simply by indulging into surmises assumed that something wrong has been done. The least the AO could have done was to ask the person from whom this document was found about the nature of the document and to explain the contents. 5.3 Ld. AO had made independent enquiry by issuing notice under section 133(6) of the Act. In said enquiry nothing adverse came out. On the contrary the donor duly confirmed having paid the amount. If the AO was not still satisfied with the reply so received or was having doubts, he could have investigated further. As is evident from the assessment order the AO has simply made an assumption himself and made the addition. There is absolutely nothing on record to support the assumption of Ld. AO.

5.4 The burden lies on the Department to prove that the impugned document belongs to the assessee and relates to undisclosed income of the assessee. Mere suspicion, howsoever strong, cannot substitute legal proof. This being an unabated assessment, the burden is on Ld. AO to first establish that the document found is incriminating.

5.5 Donation received by the Charitable Trust is considered as income. Hence an addition of the donation can't be made again as it will tantamount to adding the same income twice.

5.6 The satisfaction recorded by AO is not sustainable in law in the absence of any reasoning how the document has bearing on determination of income. As is evident from page 3 of the assessment order where Ld. AO of person other than the searched person has verbatim repeated the satisfaction as recorded by Ld. AO of the searched person without any whisper what is wrong in the information so received which can have impact on determination of that income of the assessee.

5.7 A satisfaction note under section 153C of the Act is the foundational document for assuming jurisdiction over a person other than the searched person. It must not only state that certain seized documents or assets pertain to such person, but also demonstrate a clear application of mind by the AO and also specifying the precise assessment year to which the incriminating material relates. A general satisfaction note covering multiple years without identifying the material year-wise is legally unsustainable. The law requires that the Assessing Officer classify the seized documents or assets assessment year- wise and establish their nexus with the income of the assessee for that year. Absence of such year-wise linkage renders the satisfaction note vague, cryptic, and non-speaking, thereby invalidating the consequential proceedings.

5.8 It is a well-settled legal principle that the satisfaction note must clearly spell out the link between the seized material and the income of the person. A vague or mechanical reference to documents, without demonstrating how they bear upon the determination of total income of the assessee, renders the assumption of jurisdiction under Section 153C invalid. In the case of [2023] 154 taxmann.com 144 (Bombay), Ashok Commercial Enterprises v. Assistant Commissioner of Income Taxation, the Bombay High Court has held:-

"19.... ….. (d) The question of whether any material found during the course of proceedings under section 132 of the Act in the 9 case of Hubtown Limited is incriminating or otherwise has to be tested based only on the satisfaction note recorded by the Assessing Officer/s. The contents of the said satisfaction note are the only item/material to be looked at in this regard and respondent cannot seek to augment, supplement or add to materials recorded to support the claim that incriminating material has been found. Further respondent cannot refer to any other documents or material to establish such a claim. We find support in (i) Ananta Landmark (P.) Ltd. (supra) and (ii) Jainam Investments (supra), where the Courts have held that the question of the Assessing Officer's jurisdiction to undertake proceedings has to be tested/examined only on the basis of reasons recorded at the time of issuing a notice under section 148 of the Act seeking to reopen an assessment. These reasons cannot be improved upon and/or supplemented.”

5.9 On plain reading of satisfaction note recorded under Section 153C of the Act, it is evident that the Assessing Officer has merely reproduced certain entries and references to Excel sheets and hard disk data allegedly seized from the premises of the searched person. However, the note does not demonstrate or establish as to how such entries have a direct and live nexus with the determination of income of the assessee (i.e., the "other person).

5.10 In the present case, the Additional Commissioner of Income Tax granted a single consolidated approval vide letter dated 21.06.2021 covering multiple assessment years of the assessee. Such omnibus approval is contrary to the express mandate of section 153D which contemplates approval for each assessment year separately. The requirement of law is not satisfied if one composite approval is granted for a block of years. Hon'ble ITAT Delhi Bench in the case of Taran Pal Wadhawan, D-1/24, Vasant Vihar Vs. ACIT, Central Circle-08, Delhi in & 2688/DEL/2025, Dated-29.08.2025. Relevant para is held as under-

"7. It could be seen that the Learned Additional Commissioner of Income Tax, Central Range -2, New Delhi had accorded approval under Section 153D of the Act for assessment years 2013-14 to 2019-20, which constitute a consolidated approval for all the assessment years, which (0:48) in our considered opinion, is not in consonance with the requirement of provisions of Section 153D of the Act. The plain reading of provisions of Section 153D of the Act makes it very clear and the section mandates approval under Section 153D of the Act to be given for each assessment year for each assessee. Here the approval has been given for various assessment years for one assessee, which is not in accordance with provisions of Section 153D of the Act. Hence, the search assessments framed based on this invalid approval under Section 153C of the Act deserves to be quashed. Accordingly, the assessments for assessment years 2018-19 and 2019-20 are quashed on this limited count itself"