VAIBHAV JAIN,DELHI vs. DCIT CENTRAL CIRCLE 3, DELHI

Heard and perused the records, the issues involved in the two appeals have common background in context to the facts as well as the law relied, therefore, they are being adjudicated together and the facts and impugned findings for AY 2020-21 shall be considered and narrated wherever relevant.

The first issue raised by the ld. Counsel is challenging the reasons recorded for assumption of search assessment u/s 153C of the Act. The facts are that the assessee had e-filed his ITR on 30.11.2020 declaring a total income of Rs.3530670/- . The AO had issued a notice dt. 3.04.2023 u/s 153C {PB:02}. Thereafter, the AO hadcommenced the assessment proceedings by issuing notice dt. 27.06.2023u/s 142(1) of the Act. The assessee had filed a letter dt. 29.06.2023 to the AO, asking for copies of the satisfaction notes & other connected documentsand e-filed his ITR on 30.06.2023 declaring same total income of Rs.3530670/-. Then vide SCN dt.27.12.2023, fixing compliance for 02.01.2024, the AO had asked the & 4824/Del/2025 Vaibhav Jain (AYs: 2020-21 & 2021-22) assessee to explain as to why an addition be not made u/s 69 of the Act at Rs.78750000/- and u/s 69A at Rs.787500/-. The assessee vide letter dt. 01.01.2024, requested the AO to provide copies of satisfaction notes & other connected documents and thenvide letter dt. 08.01.2024, the AO had provided copies of satisfaction notes & other connected documents.

Assessee went in appeal before ld. CIA(T) and vide letter dt.05.11.2024, the assessee had made submissions before the CIT(A) { copy made available at PB:68-78} alongwith various attachments {copy made available at PB: 02, 03-07, 33-37, 38-43, 174-196, 197-212 & 213- 226}. The CIT(A) had sought report from the AO vide his letter dt.08.11.2024 on the issue relating to loan given {copy made avaialbePB:227} and vide his letter dt.06.12.2024 on the issue relating to images/chats appearing in the assessment order { copy made available at & 4824/Del/2025 Vaibhav Jain (AYs: 2020-21 & 2021-22)

Now what comes up from the contention of ld. Counsel is that in regard to these to AYs, the assessment was not pending hence these are case of unabated assessments. The contention of ld. Counsel is that initiation of the proceedings u/s 153C was not based upon any definite incriminating material. What can be seen is that in the Satisfaction Note dt.20.01.2023, the AO had mentioned the incriminating material to be;

Ld. Counsel contends that such averment of the AO is incorrect, in as much as nothing is mentioned regarding the amount of Rs. 78750000/- having been advanced bySh. Vaibhav Jain (the assessee & 4824/Del/2025 Vaibhav Jain (AYs: 2020-21 & 2021-22) herein). To determine this controversy as to if there was at all incriminating material to form basis of reasoning for assumption of jurisdiction u/s 153C of the Act, and as to how this figure of Rs.78750000/- was surfaced our attention was invited towards the image of the handwritten sheet scanned copied in assessment order in para 4.3 of the assessment wherein a figure of 787500 was appearing against the name Vaibhav Jaindetailed as ‘787500x3 March/April/May2362500’. On thebasis of the said image, the AO had presumed that the assessee had earned interest income of Rs. 787500/- for the month of March 2020 and thereafter by making a reverse working to find out the amount on which the interest of Rs. 787500/- could have been earned, the AO had assumed that the principal amount would be Rs.78750000/- (Rs.787500/-multiplied by 100).

Now admittedly these being a case of unabated assessment, the requirement of existence of third-party incriminating material is sine qua non for valid assumption of jurisdiction u/s 153C of the Act. It is settled law that the material/evidence relied upon by the AO for assuming jurisdiction u/s 153C must be credible, specific, speaking and also that the truthfulness of the same must be accepted/affirmed by the third party. It was pointed out that no addition was made in the case of M/s & 4824/Del/2025 Vaibhav Jain (AYs: 2020-21 & 2021-22)

In this context it comes up that vide the letter dt.08.11.2024 issued by the CIT(A) to the AO {copy available at PB: 227} theCIT(A) had specifically asked the AO to furnish complete details of(i) the amount of loan given; (ii) the date(s) on which loan was given; and (iii) the mode of loan given. Attention was also invited towards the letter dt. 06.12.2024 issued by the CIT(A) to the AO {copy available at PB: 228-229} wherein the CIT(A) had stated-

On the basis of aforesaid communication of ld. CIT(A) itself it is clear that actually at the time of recording the reasons the AO was not aware as to what is the ascertained incriminating material. It is not just the physical evidence in the form of a document but the content of the document that should make out incriminating material found in the search of other person to be made basis of recording reasons and assumption of jurisdiction. Thus formation of belief that the assessee had advanced such amount of Rs. 78750000/- to M/s Mahagun (India)

It further comes up that in the case of Raghav Kumar Versus ACIT, and 3215/DEL/2025 a co-ordinate bench by order dated 15.10.2025 has taken into consideration a similar piece of circumstance in which too the search pertained to HANS group and Shri Praveen K Jain, was also covered. The coordinate bench has held third & 4824/Del/2025 Vaibhav Jain (AYs: 2020-21 & 2021-22) party material must be specific, speaking and must clearly bring out the details of undisclosed transaction. The same set of material relied by AO was not found to be tangible material or incriminating material establishing anything adverse against that assesse. Thus we are of considered view that here too the assumption of jurisdiction u/s 153C of the Act is not backed by any incriminating material.

Connected to the aforesaid issue is the challenge of approval granted u/s 153D of the Act. The ld. CIT(A) has dismissed this ground while stating that "The absence of a prescribed format or explicit reasoning in the assessee in the approval does not invalidate it, as Section 153D does not mandate such formalities" and "Further, the appellant has not furnished any arguments or any evidence in support of the ground of appeal".