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Facts
The appeals arose from search and seizure operations. Material seized from a third party was used to initiate proceedings under Section 153A against the assessee. The assessee also declared gold jewellery and a gold bar found in their locker.
Held
The Tribunal held that material found in a third-party search cannot be the basis for assessment under Section 153A/143(3) of the Act; it should be under Section 153C. Regarding the gold bar, the addition was made without properly considering the assessee's explanation and supporting documents. The addition regarding the gold bar was also not sustained.
Key Issues
Whether material found in a third-party search can be used for assessment under Section 153A, and whether the addition for the gold bar was justified.
Sections Cited
132, 153A, 153C, 143(3), 69A, 132(4A)
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Income Tax Appellate Tribunal, DELHI BENCH, ‘G’: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI KRINWANT SAHAY
Date of Hearing 12.11.2025 Date of Pronouncement 14.11.2025 ORDER PER KRINWANT SAHAY, AM:
This bunch of five appeals are directed against the orders of the Ld. Commissioner of Income Tax(Appeals)-26, Delhi, dated 16.08.2022 for Assessment Year 2013-14 dated 08.07.2022 for Assessment Years 2014-15, 2015-16, 2016-17 and 2017-18 respectively.
2. Since, the issues are common and connected, hence, the appeals were heard together and are being consolidated and disposed of by this common order for the sake of convenience.
3. First, we shall take up the appeal in for Assessment year 2013-14 as a lead case. The assessee has raised following grounds of appeal in this case:-
1. That under the facts and circumstances, the issue of addition of Rs.31,53,600/-u/s.69 Aarising out of the printout taken from seized power point presentation (PPT) named "Kautilya Airbus Proposal" found and seized from email of Deepak Talwar, being the material seized from a 3rd party in search undertaken on said 3rd party, could had been examined only in proceedings u/s.153C, hence the proceedings on this issue u/s.153A are illegal and without jurisdiction.
2. That in the absence of recording of satisfaction note in the case of person searched from whom the said seized material was found and seized, the said seized material cannot be used in asstt. of assessee.
3. That in the absence of satisfaction note being recorded in the case of assessee in respect of material found and seized in search of a 3rd person and in the absence of any mentioning for the said material to be of incriminating nature, such material cannot be used in the impugned asstt. of the assessee.
4. That under the facts and circumstances addition of Rs.31,53,600/ - u/s.69A as undisclosed salary income alleged to have been earned from "Kautilya PTE Ltd." Singapore is absolutely illegal and unjustified in law as well as on merits. 4.1. That under the facts and circumstances, Sec.69A could not had been applied for addition of Rs.31,53,600/-. 4.2 That without prejudice, under the facts and circumstances, as the date of relevant email is 14.10.15 (A.Y.16-17), hence under no circumstance, the contents of this PPT can be taken as applicable for A. Y.13-14.
Act was carried out at the business/ residential premises of Deepak Talwar Group on 22.06.2016 and during the course of search certain documents belonging to the assessee were seized. On the basis of documents seized, proceedings u/s 153A were initiated in the case of the assessee. Subsequently, notice u/s 153A of the I.T. Act was issued vide speed post no. EDS73808070IN on 19.09.2017 which was duly served upon the assessee requiring the assessee to file her return of income within 15 days of the service of the notice. The return of income in response to notice u/s 153A of the Act. 196l was filed by the assessee on 05.10.2017 declaring a total income of Rs.1,90,67,670/-.
During the proceedings before us, the ld. Counsel for the assessee pressed ground no.1, which is legal in nature that the assessment framed u/s 153A at returned income of Rs.1,90,67,670/- is unsustainable in law because the assessment order was passed u/s 153A/143(3) of the Act, while material used in the assessment order was something that was found in third party search. The ld. Counsel for the assessee brought it on record that In the absence of satisfaction of the A.O. of Deepak Talwar Group and thereafter in the absence of satisfaction of A.O. of assessee, the seized document from Deepak Talwar Group cannot be used for assessment u/s 153A. The additions have been made on the basis of document found and seized from a 3rd party. No satisfaction of the A.O. of Deepak Talwar Group as A.O. of Deepak Talwar Group has been recorded to the effect that the said document / information pertains to assessee.
Also no satisfaction of the A.O. of assessee as A.O. of assessee has been recorded that the said document/information has a bearing on the determination on the total income of assessee. At the outset, the A.O made the assessment off assessee u/s 153A and not in section 153C of the Act. Section 153C(1) clearly provides that when a document found in search pertains to some other person, then before it can be used in the assessment of such other person. Firstly satisfaction of A.O. of searched person is needed, Secondly, such material is to be handed over to the A.O. of such other person who is having jurisdiction on such other person, Thirdly, the A.O, of such other person has to record satisfaction that such document/information has a bearing on the determination on the income of such other person. Only then, such material can be used for the assessment of such other person. Here, in the case of assessee. The case laws clearly provides that even if the A.O, of searched person and such other person is the same, then also, such satisfactions by both the AOS as A.O. of searched person and as A.O. of such other person has to be recorded in the files of respective assesses. This legal position has been cleared even by the CBDT in circular No.24/2015 Dtd.31.12.15. Unless and until this mandatory legal aspect is complied with, such papers cannot be used for assessment Of such other person. In the present case, neither any satisfaction has been recorded by the A.O. of Deepak Talwar Group as A.O. of said group nor there is any evidence that such document has been handed over to the A.O. of the assessee. as A.O. of the assessee. There is no satisfaction recorded by the A.O, of the assessee as A.O. of the assessee to the effect that this information / document has a bearing on determination of total income of the assessee.
In support of his arguments, the ld. Counsel has brought on record various case laws such as an order passed by the Co-ordinate Bench of in the case of Trilok Chand Chaudhary vs ACIT. In this order, the Co-ordinate Bench of the Tribunal have held as under:-
“In our opinion, the finding of the Ld. CIT(A) is not based on correct appreciation of law. The reasoning of the Ld. CIT(A) is that there cannot be two simultaneous assessment under section 1534 and other under section 153C of the Act. This reasoning is faulty. The assessment under section 153C could have been made after completion of the assessment under section 153A of the Act. The Act has provided separate provisions for making assessment in case of material found in the course of the search from the premises of the assessee as well as the material found in the course of search at the premises of the third party. The Assessing Officer is required to follow the procedure laid down in the Act for making the assessment and he cannot devise his own procedure for shortcut methods. In our considered opinion, when the case of the assessee is covered under the provision of section 153 of the Act and if reliance is placed on the incriminating material found during the course of search of third-party, then provision of section 153C of the Act would be applicable and have to be adhered to. Thus, in the instant case, the Assessing Officer was required to first complete the proceedings under section 153A in hand, which were initiated by way of notice dated 30/06/2014 and thereafter, he was at liberty to take action under section 153C of the Act for bringing the material found from the premise of Sh. Ashok Chaudhri to tax in the hands of the assessee. Copy of order Attached. Similar view also held in following cases: * DCIT Vs. Smt. Shivani Mahajan [ITA No.5585/Del/2015] (pronounced on 19.03.2019) * DCIT Vs. Vikas Jain [TTA No.4075/Del/2014] (pronounced on 19.03.2019)
* Pavitra Realcon (P) Ltd. Vs. ACIT [2017] 87 taxmann.com 142 (Del.- Trib.) * Krishna Kumar Singhania Vs. DCIT [2017] 88 taxmann.com 259 (KolTrib) * CIT Vs. Pinaki Misra [2017] 88 taxmann.com 521 (Delhi-HC).”
The ld. Counsel for the assessee also brought on record the case law of CIT vs Radico Kaitan (2017) 83 taxmann.com 375 (Delhi). In this case, Hon’ble Delhi High Court held that Section 132 no doubt mandates a presumption in respect of search and seizure operations; yet textually the presumption relates to material documents and books of account seized from the assessee's premises and not from materials seized and statement recorded of third parties. Thus, the presumption given in sec. 132(4A) could be applied only to the materials found with the searched person. If any material is found from some other person, the above said presumption could not be extended to the assessee.
Per Contra, the ld. DR relied upon the orders of the authorities below.
We have considered the findings given by the Assessing Officer in the assessment order as well as the order of the ld. CIT(A) on this issue. We find that there is a plethora of the judgment on this issue by various Benches of the Tribunal as well as by various Hon’ble High Courts. In all such cases, it is very clearly and categorically held that material found in the search of third party cannot be the basis for assessment order passed u/s 153A/143(3) of the Act. If the Assessing Officer wants to use the material found during search of third party, on which the Assessing Officer thinks fit for using against the assessee then at best the assessment order is to be passed u/s 153C of the Act and not u/s 153A of the Act.
Assessment order u/s 153A is to be passed only in case where search has been conducted on the assessee itself and during the search, some incriminating documents have been found. On the basis of incriminating documents found during the search on the assessee itself/assessee’s premises, order u/s 153A may be passed.
But, if the material used for assessment has been recovered in search conducted on some third party, then in that case, the assessment order has to be passed u/s 153C of the Act. In this case, the Assessing Officer has passed the assessment order u/s 153A/143(3) of the Act that in our considered view is not as per the provisions of law. Therefore, we are not inclined to accept the arguments explained on this issue by the Assessing Officer as well as by the Ld. CIT(A). Accordingly, we held this assessment as invalid assessment order and accordingly it is quashed.
Since, the assessment order itself has been quashed on legal ground, the other grounds of appeal on merits requires no adjudication.
In the result, the appeal of the assessee for Assessment Year 2013-14 is allowed.
Ground Nos.1 raised by the assessee on legal ground for AY 2013-14 are identical as those raised Ground no.1 in AYs 2014-15, 2015-16, 2016-17 and 2017-18 and hence, the decision rendered hereinabove for AY 2013-14 shall apply mutatis mutandis for all the Assessment years also except with variance in figures.
Later on a search and seizure operation was conducted on assessee’s premises also. On the basis of seizure made from the locker of the assessee, an addition of Rs.3,08,890/- was made u/s 69A of the Act in the assessment year 2017-18.
Now we shall take up the ground of appeal for Assessment Year 2017-18 in ITA No..
1. That under the facts and circumstances, the issue of addition of Rs.78,30,000/-u/s.69A arising out of the printout taken from seized power point presentation (PPT) named "Kautilya Airbus Proposal" found and seized from email of Deepak Talwar, being the material seized from a 3rd party in search undertaken on said 3rd party, could had been examined only in proceedings u/s.153C, hence the proceedings on this issue u/s.153A are illegal and without jurisdiction.
That in the absence of recording of satisfaction note in the case of person searched from whom the said seized material was found and seized, the said seized material cannot be used in asstt. of assessee.
That in the absence of recording of satisfaction note by the A.O. of the assessee, in the case of assessee, in respect of material found and seized in search of a 3rd person and in the absence of any finding in the said note for the said material as being incriminating in nature, such material cannot be used in the impugned asstt. of the assessee.
That under the facts and circumstances addition of Rs. 78,30,000/ - u/s.69A as undisclosed salary income alleged to have been earned from "Kautilya PTE Ltd." Singapore is absolutely illegal and unjustified in law as well as on merits.
5. That under the facts and circumstances, Sec.69A could not had been applied for addition of Rs. 78,30,000/- 6. That under the facts and circumstances, addition of Rs.3,08,890/- u/s.69A for alleged unexplained 01 piece gold-bar (24 Ct.) of 100.780 Grm. found from the locker is illegal, unjustified and unsustainable in law/as well as on merits.
There is another grounds of appeal against the addition of Rs.3,08,890/- u/s 69A of the Act for alleged unexplained one piece gold-bar (24 Ct.) found from the locker of the assessee.
During the search on assessment some gold jewellery as well as one gold-bar of 100 grams of 24 Ct. purity was found from the locker of the assessee. Keeping in view the CBDT Circular No.1916 dated11.05.1994, the ornaments were found but not seized but one gold bar of 24 Ct. purity of 100.78 grams was found from the locker of the assessee, the Assessing Officer did not accept the submission filed by the assessee and made the addition of Rs.3,08,890/-. The ld. CIT(A) confirmed the addition made by the Assessing Officer.
During the proceedings before us, the ld. Counsel submitted that the assessee during the assessment proceedings, explained to the Assessing Officer that this gold-bar was received as gift from his father out of natural love and affection during first week of April of 2015. The assessee during the assessment proceedings as well as before the Ld. CIT(A) furnished documents in support of his submissions. He filed a copy of letter dated 26.11.2018 and 29.11.2018 and a declaration of the father of the assessee dated 29.11.2018 along with affidavit from his father on this issue. The ld. Counsel further explained that father of the assessee in his declaration and affidavit has also explained the source and the period of retention by him in the declaration. The Assessing Officer did not rebut the declaration as well as the affidavit but he has simply rejected the claim without bringing any adverse material/finding on record. The ld. Counsel also submitted that the ld. CIT(A) has also not gone into the merits of the declaration and affidavit filed by the father of the assessee rather he has also confirmed the addition made by the Assessing Officer. Same documents have been filed before us by the assessee and we have gone through both the documents and we find that authorities below have made addition despite the fact that the source of purchase of gold-bar by the father of the assessee has been clearly mentioned in the declaration and affidavit filed by him before the Assessing Officer. We also found that this addition has been made without considering the submission made by the assessee and without going into the details on merit. Even during the proceedings before us, the Revenue could not rebut the documents and facts mentioned therein. Therefore, we are of the considered view that this addition without rebutting the facts brought on record by the assessee cannot be sustained. Accordingly, on this issue, the confirmation made by the ld. CIT(A) cannot be sustained.
Accordingly, this ground of the assessee is allowed.
Finally, all the appeals of the assessee are allowed.
Order pronounced in the open court on 14TH November, 2025.