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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
ORDER PER SATBEER SINGH GODARA, JM These assessee’s and Revenue’s cross appeals and 2100/Del/2025 for assessment year 2020-21, arises against the Commissioner of Income Tax (Appeals)-30 [in short, the “CIT(A)”], Delhi’s order dated 20.12.2024 passed in case no. 30/10740/2019-20, involving proceedings under section 153C r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case files perused.
2. It emerges during the course of hearing that there arises the first and foremost legal issue of validity of the impugned section 153C proceedings/assessments framed on 26th March, 2023 itself between the parties; for want of a valid satisfaction recorded by the learned lower authorities. There is hardly any dispute that the learned Assessing Officer of the assessee (who happens to be a person other than the searched party) had set into the motion section 153C proceedings herein reading as under: “Satisfaction Note for initiating proceedings under section 153C read with section 153Aof the Income Tax Act, 1961 in the ease of M/s. DEEPAK BULDERS & ENGINEERS INDIA PVT. LTD. A search n/s 132 of Income Tax Act was conducted on an Entry operator Sanjay Jain along with his facilitators and some of his beneficiaries who were found to be generating cash against bogus billing of cement and other such items on 2 | P a g e 28.10.2020. Proposal for centralization of the group cases was made vide letter No. PDIT(Inv.)-1/Delhi/Centralization/SJAM/2030-31/854 dated 08.03.2021. The Group is centralized with the DCIT Central Circle-30, New Delhi under the charge of Pr. UIT (Central)-3, New Delhi by the order of Chief Commissioner of Income Tax (Central), circulated vide file no. F. No. COIT(C)/Del/CD-305/2020-21/1181 dated 18.03.2021.
1. The entire web of transaction mounted through a maze of bank accounts Initiated by the receipt of willing beneficiaries and the trail right up-to the withdrawal of the cash for the beneficiary is seen. Digital records, whatsapp chats were liberally used by the racketeers for inward communication and quick access. Sharing of a unique ID of pictures bank note serial numbers were utilized by the entry operators and the band of cash handlers and the recipients of the entries to mask the fraudulent transactions.
The beneficiaries have been found to have made huge investments in real estate properties in prime cities to the tune of crores of rupees. The personal staff/employees/associates of entry operators had been made dummy directors/partners of these shell entities and all bank accounts were managed and controlled by these entry operators. Statements of such entry operators, their dummy partners/employees, the cash handlers as well as the covered beneficiaries have also been recorded clearly validating the entire modus operandi.
Search and seizure operation u/s 133 of the Income Tax Act, 1961 dated 26.10.2020 by Unit-5, Delhi lead to seizure of approx. Rs 62 Crores of cash from the premises of beneficiaries who have benefitted from entry operator.
Apart from issuance of bogus billing, Sanjay Jain is also involved in arranging cash against RTGS. These transactions would be different than previously discussed bogus transactions in following ways:- • No invoice would be raised by Sanjay Jain against these transactions • There would be no GST ITC received by the beneficiary in such transactions • Commission charged by Sanjay Jain on these transactions would be less than • what he would charge for with-bill transactions • Sanjay Jain would use his firms who do not get audited • Beneficiaries taking this facility would normally take billis from some other entity and bank entries will be provided by Sanjay Jain • M/L. DEEPAK BUILDERS & ENGINEERS INDIA PVT. LTD. (AAGCD34790) • Beneficiaries nught tise this to clear the outstanding bogus purchases/loans/liabilities by issuing RTGS and receiving cash back • Such entries in the books of the beneficiaries is carried out through settling the outstanding creditors and debtors across different financials years Sanjay Jaln would not necessarily withdraw cash from his own accounts, He had many sources in the market that used to arrange the same for him, viz, Rajeav Jain, Kumar Pankaj and Deepak Gupta. At times, Sanjay Jain would forward the RTGS entries to Rajeev Jain, Kumar Pankaj, etc. and they will withdraw the money and send it back to Snajay Jain and Sanjay Jain would forward that cash to the end beneficiary. Before, introduction of TDS on cash withdrawal, Sanjay Jain used to withdraw cash through variona benami firma of his associates.
3 | P a g e However, since the applicability of TDS of 0.1% u/s 1947, the charges for arranging such cash increased from 30 paisa to 100 paisa. The difference between billing amount and the bank credit entries is on account of such RTGS to cash entries.
During the course of search dated 26.10.2030 on the entry operator, Mr. Sanjay Jain, 2 sets of books of tally were found and seized from the office premise of Sh. Sanjay Jain i.a. 87, First Floor, Dharamvir Mann Marg, Sabri Market, Hari Nagar Ashram, New Delhi, which were annexurized as Annexure-A31. The set of tally data which contains the receipt and expenditure in cash. This data is compiled as List of beneficiary and named as R- 1.
List of beneficiaries who have received benefits out of Rs 1590,94,68,436 in total, as bogus purchases from Sanjay Jain is appended to this report as Annexure-R1, for necessary action/ intimation. The said list is derived in the following format: - S. No. PAN Name of entity 2019-20 Total 1. AAGCD3470Q M/s. DEEPAK 9,79,66,801 9,79,66,801 BUILDERS & ENGINEERS INDIA PRIVATE LIMITED The list of all the beneficiaries (including entities in the above list) identified were confronted to Sanjay Jain in his statement dated 25/12/2020 1/3 132(4) of IT Act as well as on statement dated 11/06/2021 u/s 131 of IT act, 1961, in which he agreed to the quantum of entries as discussed.
6. Satisfaction: The above facts/information states that the assessee M/s. DEEPAK BUILDERS & ENGINEERS INDIA PVT. LTD. is involved in the above transactions of unaccounted receipts and payments with respect to of Rs. 9,79,66,801/-, which has escaped assessment, which nature and source of fund, genuineness are required to be verified.
7. The above seized documents/material give details of transactions in suspicious nature (as appear) undertaken by the assessee, which are recorded below as satisfaction & seized documents as discussed above at Para 5 of such transactions.
8. Genuineness of those transactions indicating their nature, sources of fund, their treatment in books of accounts and their effect with respect to taxability on the assessee are required to be examined in this case.
9. In view of the above, I have reasons to believe that the assessee may he issued notice u/s 153C of the IT Act 1961.”
3. That being the case, learned CIT(DR) strongly supports the above satisfaction note inter alia that the same had been properly recorded in light of the relevant incriminating material found/seized during the course of search dated 26th October, 2020 which led the Assessing Officer of the said searched party to satisfy 4 | P a g e himself that the same belonged or pertained or related to the assessee; as the case may be, leading to the Assessing Officer’s satisfaction note finally culminating in the impugned assessment framed in its hands.
4. Faced with this situation, the tribunal invited the Revenue’s attention to the clinching fact that the learned Assessing Officer’s above extracted satisfaction note has nowhere made it explicitly clear as to whether the relevant seized material had a “bearing on the determination of the total income of such other person”. Learned CIT(DR) seeks to buttress the point herein that such a satisfaction note has to be read in totality than after adopting a hyper technical approach.
5. We find no reason to accept the Revenue’s stand. We make it clear that there is no quarrel between the parties about the learned Assessing Officer of the assessee/third person not having clarified as to whether the relevant seized material had any “bearing………………….” as stipulated in section 153C(1) of the Act. Hon’ble jurisdictional high court’s recent landmark decision in Saksham Commodities Ltd. Vs. ITO (2024) 464 ITR 1 (Delhi)(HC) has settled the law in the assessee’s favour and against the 5 | P a g e department that such recording of section 153C satisfaction is not a mere mechanical exercise. We thus draw strong support therefrom to conclude that the learned assessing authority in the assessee’s case had erred in law and on facts in recording an improper satisfaction before initiating section 153C proceedings which vitiates the assessment itself in above terms. Ordered accordingly. All other remaining pleadings between the parties stand rendered academic.