RAJENDRA RAMESHLAL GUGALE,PUNE vs. PRINICIPAL COMMISSIONER OF INCOME TAX (CENTRAL), PUNE, PUNE

PER RAMA KANTA PANDA, V.P. :

This appeal filed by the assessee is directed against

the order dated 19.02.2024 of the learned PCIT (Central), Pune

passed u/sec.263 of the of the Income Tax Act, 1961 (in short

"the Act"), for assessment year 2017-2018.

the assessee for which the assessee has filed a condonation

application along with an affidavit explaining the reasons for

such delay. After considering the contents of the condonation

application filed along with the affidavit and after hearing the

2 ITA.No.1676/PUN./2024

Learned DR, the delay in filing of the instant appeal is

condoned and the appeal is admitted for adjudication.

an individual and engaged in the business of land

development and real estate broking. He filed his return of

income on 28.07.2017 declaring total income of Rs.8,08,880/-.

A search action u/s.132 of the Act was conducted in Yuvraj

Dhamale Group of cases on 26.09.2017. During the search in

the above mentioned group, residential premises of Shri

Umakant S Kuwar [Accountant of Yuvraj Dhamale Group] at

Flat No.201, Alka Uttam Enclave, Mundhawa, Pune as well as

office premise of Dhamale Group at 158, Wellesley Road,

Besides Lal Deval, Camp, Pune were covered from where

certain documents pertaining to Shri Rajendra Ramesh Gugale

were found and seized. Therefore, the Assessing Officer of the

searched-party having possession of the seized material

recorded the satisfaction that the information contained on

Page No.57 of Bundle No.4 seized from residential premises of

Shri Umakant Kuwar and Page No.5 of Bundle No.4 seized

from the office premises of Dhamale Group at Camp, Pune

relates to Shri Rajendra Ramesh Gugale. The case was

centralized u/sec.127 of the I.T. Act, 1961. Thereafter, by

recording a satisfaction dated 01.03.2021 as per the

provisions of Section 153C of the Act in the case of the present

3 ITA.No.1676/PUN./2024

assessee, notice u/s.153C of the Act was issued for

assessment years 2012-2013 to 2018-2019 on 27.05.2021.

3.1. In response to the notice u/sec.153C, the assessee

filed return of income for the assessment year 2017-2018 on

13.12.2021 disclosing total income of Rs.8,08,880/-.

Thereafter, statutory notices u/s. 143(2) and 142(1) of the Act

were issued and served on the assessee, in response to which,

the assessee filed requisite details from time to time. The

Assessing Officer completed the assessment u/sec.143(3)

r.w.s.153C of the Act on 26.12.2021 accepting the returned

income.

3.2. Subsequently, the learned PCIT on perusal of the

assessment record noted that assessee is engaged in the

business of land development and real estate broking and the

main source of income of the assessee is commission receipts.

Further the assessee has shown closing balance of unsecured

loan taken from others of Rs.62,17,000/- for the captioned

year; whereas proceedings revealed that assessee has taken

unsecured loan in cash through Shri Sachin Nahar of

Rs.1,56,00,000/- against which he had paid interest of

Rs.18,64,800/- in cash during the F.Y. 2016-2017 relevant to

A.Y. 2017-2018. Therefore, the assessee has not correctly

declared all the particulars of his income. By accepting cash

loan of Rs.1,56,00,000/- the assessee had violated the

provisions of section 269SS of the Act. Further, the source of

4 ITA.No.1676/PUN./2024

interest paid in cash of Rs.18,64,800/- was also not examined

by the Assessing Officer in view of the provisions of section

69C of the Act. Since the Assessing Officer has not examined

these issues by calling for relevant details and thereafter

verified the same, the learned PCIT issued a show cause notice

under section 263 of the Act dated 31.01.2024 to the assessee,

the contents of which, are as under:

“02. In the above mentioned case, on verification of

case records for A.Y. 2017-18 it has been observed that

the assessee had filed original return of income for AY

2017-18 on 28.07.2017 declaring total income at

Rs.8,08,880/-. A search action u/s.132 of the Income Tax

Act, 1961 (hereinafter referred as the Act') was conducted

in Yuvraj Dhamale Group of cases on 26.09.2017 wherein

incriminating documents pertaining to the assessee were

found and seized. Thereafter proceedings u/s.153C of the

Act were initiated and the scrutiny assessment was

completed u/s.153C r.w.s 143(3) of the Act on 26.12.2021

by accepting the returned income.

information available with this office, it is seen the

assessee is engaged in the business of land development

and real estate broking and the main source of the income

of the assessee is commission receipt. Further, it is

5 ITA.No.1676/PUN./2024

observed that the assessee had shown closing balance of

unsecured loans taken from others of Rs.62,17,000/- for

the captioned year whereas proceedings revealed that the

assessee had taken unsecured loan in cash through Shri

Sachin Nahar of Rs.1,56,00,000/- against which he had

paid interest of Rs.18,64,800/- in cash during the F.Y.

2016-17 relevant to A.Y. 2017-18. The AO failed to

ascertain whether the assessee had has correctly

disclosed all the particulars of his income for the year

under consideration.

0.4. In view of the above, it is found that the no

verification on the aforesaid issue has been done in the

assessment proceedings by the AO. As per explanation (2)

to section 263(1) of the Act an order without making

inquiries or verification which should have been made is

deemed to be erroneous in so far as it is prejudicial to the

interest of revenue.

seen that the AO had not examined and verified the above

issue and therefore income has been under assessed.

Therefore, assessment order u/s.153C r.w.s 143(3) of the

Act dated 26.12.2021 passed by the AO for A.Y. 2017-18

appears to be erroneous in so far as it is prejudicial to the

interest of revenue.

6 ITA.No.1676/PUN./2024

mentioned above, the assessment order passed u/s.153C

r.w.s 143(3) of the Act in the case of Shri Rajendra

Ramesh Gugale for A.Y. 2017-18 prima facie appears to be

erroneous in so far as it is prejudicial to the interest of

revenue in terms of the provisions of Explanation-(2)(a) to

Section 263(1) of the Income Tax Act. I, therefore, intend to

set aside/modify the assessment order within the

meaning of section 263 of the I.T. Act, 1961. An

opportunity of being heard is therefore, given to you. You

are requested to attend in person or through your

authorized representative оn 02.02.2024 at 03:30 PM in

my office.

attend on your behalf, please ensure that the Power of

Attorney with proper court fee stamp is filed on or before

the date of hearing. If you do not wish to attend in person

or through your authorized representative, you may file

written submission along with necessary evidence in

support of your contention before the due date of hearing.

Further, it may be noted that no adjournment will be

provided and in case on non appearance/non submission

of reply, order will be passed on merits.”

7 ITA.No.1676/PUN./2024

3.3. The assessee, in response to the same, submitted

that the relevant seized documents or statements recorded if

any, which are relied upon while issuing the notice may please

be provided to him so that detailed and point-wise submission

can be filed. The learned PCIT provided the details to the

assessee. However, the assessee did not make any compliance

to the statutory notice issued by him. Since the assessee had

not filed any details/explanatory submission as asked for to

explain his case, the learned PCIT rejecting the various

explanations given by the assessee, set-aside the order of the

Assessing Officer holding the same to be erroneous in so far as

it is prejudicial to the interest of Revenue with a direction to

frame the assessment afresh. The relevant observations of the

learned PCIT read as under :

“5. I have carefully considered the issues raised in the

show cause notice issued u/s.263 of the Act and on

perusal of the records and facts of the case, it is clear that

the assessee had taken unsecured loan in cash through

Shri Sachin Nahar of Rs.1,58,00,000/-against which he

had paid interest of Rs.18.64,800/- in cash during the F.Y.

2016-17 relevant to A.Y. 2017-18. The Assessing Officer

had failed to ascertain whether the assessee had correctly

disclosed all the particulars of his income for the year

under consideration. No verification on the aforesaid issue

had been done in the assessment proceedings by the

8 ITA.No.1676/PUN./2024

Assessing Officer and therefore income has been under

assessed. Therefore, it is clear that the Assessing Officer

had not examined and verified the above issue having tax

implications during the course of assessment proceedings.

Thus, issues discussed in the show-cause notice were not

at all examined by the Assessing Officer in the course of

assessment proceedings.

as discussed in para 2 above have not been property

examined, verified and enquired by the Assessing Officer

in the course of assessment proceedings. It has been held

by various Courts that lack of enquiry on the germane

issue renders assessment order being erroneous and

prejudicial to the interest of revenue. In this connection the

following judicial pronouncements are very much relevant :

• The Hon. Supreme Court in Rampyari Devi Saraogi v

CIT 67 ITR 84 while taking note of the fact that the

AO had concluded the assessment in "undue hurry"

by passing a short, stereotyped assessment order,

without making any inquiries, upheld the revision

done by the CIT. • In the case of Deniel Merchants Pvt. Ltd. vs ITO dated

29.11.2017, the Hon'ble Supreme Court upheld the

law as laid down by the High Courts in Subhlakshmi

Vanijya Pvt. Ltd vs. CIT 155 ITD 171 (Kol), Rajmandir

9 ITA.No.1676/PUN./2024

Estates 386 ITR 162 (Cal) etc. and held that the CIT

is entitled to revise the assessment order u/s 263 on

the ground that the AO did not make any proper

inquiry while accepting the explanation of the

assessee insofar as receipt of share application

money is concerned. • In the case of Malabar Industrial Co. Ltd. Vs CIT

(2000) 109 Taxman 66 (SC)/[2000] 243 ITR 83

(SC)/(2000) 159 CTR 1 (SC) Hon'ble Supreme Court

held that where Assessing Officer had accepted entry

in statement of account filed by assessee, in absence

of any supporting material without making any

enquiry, exercise of jurisdiction by Commissioner

under section 263 was justified. • In the case of Vedanta Ltd. Vs CIT [2021/124

taxmann.com 435(Bombay)/[2021] 279 Taxman 358

(Bom) it has been held that where assessment was

completed without proper inquiries, Commissioner

was competent to invoke revisional jurisdiction and

direct Assessing Officer for fresh assessment. • In the case of Nagal Garment Industries Pvt Ltd Vs

CIT [2020] 113 taxmann.com 4 (Madhya Pradesh)

[03-04-2017] it has been held that where Assessing

Officer issued detailed questionnaire, in reply to

which records were filed, but Assessing Officer did

10 ITA.No.1676/PUN./2024

not apply his mind nor did he conduct an enquiry

while accepting claim of assessee although he

recorded in note-sheet that reply filed by appellant

was not satisfactory and did not explain all facts,

assessment order was to be revised. • The Hon'ble Delhi High Court in the case of CIT Vs

Shri Braham Dev Gupta in ITA no 907/2017 and

1162/2017 has clearly decided that Pr.

Commissioner of Income tax can invoke the provision

of section 263 of Income Tax Act where AO has not

made adequate enquiry and verification. In this

matter, SLP of the assessee has also been dismissed

by Hon'ble Apex Court. • The Hon'ble ITAT Delhi in the case of Ankush Garg v

CIT, Rohtak in ITA No 2287 & 2288/Del/2015 dated

21.05.2019, upheld the Pr.CITs action u/s 263 by

holding that the order of the AO was cryptic, and

was not passed after due examination and

verification of certain issues and therefore, there was

an error on the part of AO which led to a correct

conclusion of the CIT that the order of the AO was not

only erroneous but also prejudicial to the interest of

Revenue. • In the case of Pooja Gupta in ITA No 4057/Del/ 2018

dated 31.01.2019, the ITAT Delhi has discussed the

11 ITA.No.1676/PUN./2024

validity of action under section 263 in respect of

penny stock matters. The Tribunal has referred to the

detailed SOP issued by the CBDT, CBDT Instruction

dt 16.03.2016 on penny stock/ LTCG, and other

specified parameters in this order, and held that the

order u/s 263 was justified since there was complete

lack of inquiry with regard to the perspective for

which the case was selected for scrutiny, and that

the AO had merely relied on the assessee's

submissions. • The decision of the ITAT Delhi Bench in the case of

Bhushan Steel Ltd., New Delhi vs ACIT dated 30

March, 2015 is relevant to note as it relates to the

aspect of lack of inquiry at the end of the AO for valid

initiation of proceedings under Section 263 of the Act. • Hon’ble High Court of Karnataka in the case of CIT

vs. Infosys Technologies Ltd. 341 ITR 293 dated

04.01.2012 has held that section 263 is a section

which enables the Commissioner to have a look at

the orders or proceedings of the lower authorities and

to effect a correction, if so needed, particularly if the

order or proceeding is erroneous and prejudicial to

the interest of the revenue. It is also held that the

Commissioner can regard the order as erroneous on

the ground that in the circumstances of the case, ITO

12 ITA.No.1676/PUN./2024

should have made further inquiries before accepting

the statements made by the assessee in his return. • Hon’ble ITAT Delhi Bench in the case of Ramesh

Kumar, ITA.No.1982/Del/2018 for A.Y. 2014-15

order dated 25.01.2019 has observed as under -

“On going through the facts, it can be observed

that the Assessing Officer has not conducted any

enquiry and this is a clear case of lack of enquiry not

a case of inadequate enquiry. Further non application

of mind by the Assessing Officer can be easily

gauzed from the fact that the information available

with the Assessing Officer has not been utilised

during the assessment proceedings which makes the

case fit for applying the provisions of explanation 2

(a) of section 263.”

• Hon’ble Delhi High Court in the case of Gee Vee

Enterprises vs Addl. CIT, 99 ITR 375 has clearly held

that the Commissioner can regard the order as

erroneous on the ground that in the circumstances of

the case, ITO should have made further inquiries

before accepting the statements made by the

assessee in his return.

precedents, it is seen that Assessing Officer has not properly

13 ITA.No.1676/PUN./2024

examined and verified the issues discussed in para 2 above

and there was lack of enquiry on the same. Provision of

Explanation 2 of Section 263 (1), are reproduced here under:

Explanation 2. - For the purposes of this section, it is

hereby declared that an order passed by the

Assessing Officer shall be deemed to be erroneous in

so far as it is prejudicial to the interests of the

revenue, if, in the opinion of the Principal

Commissioner or Commissioner, -

a. the order is passed without making inquiries or

verification which should have been made;

b. the order is passed allowing any relief without

inquiring into the claim;

c. the order has not been made in accordance with

any order, direction or instruction issued by the

Board under section 119; or

d. the order has not been passed in accordance

with any decision which is prejudicial to the

assessee, rendered by the jurisdictional High

Court or Supreme Court in the case of the

assessee or any other person.

In view of the above facts and circumstances, I find

that the Assessing Officer has failed to make

necessary examination and verification of the issues

14 ITA.No.1676/PUN./2024

stated above while completing the assessment. I,

therefore hold that assessment order for A.Y. 2017-

18 dated 26.12.2021 passed by the Assessing

Officer u/s 153C r.w.s 143(3) of the Act to be

erroneous in so far as it is prejudicial to the interest

of revenue. Accordingly, the said assessment order

dated 26.12.2021 is hereby set aside to the file of

Assessing Officer for examining the above issues in

detail while framing the fresh assessment order. The

Assessing Officer shall make necessary examination,

verification and enquiries in respect of the above

referred issues after giving adequate and reasonable

opportunity of being heard to the assessee.”

is in appeal before the Tribunal by raising the following

grounds :

“The following grounds are taken without prejudice to each

other -

On facts and in law,

1) The appellant requests for condonation of delay of 133

days in filing of the appeal since there was reasonable

cause on his part in not filing the appeal within prescribed

time limit.

15 ITA.No.1676/PUN./2024

2) The Ld. Pr. CIT erred holding that the assessment order

passed u/s.153C r.w.s.143(3) was erroneous and

prejudicial to the interest of the revenue and thereby erred

in setting aside the assessment order for fresh verification

to the file of the ld. A.O.

3) The learned Pr.CIT failed to appreciate that the

assessment order under section 153C r.w.s.143(3) was

passed by the learned Assessing Officer after taking

approval of Additional Commissioner of Income Tax and

hence, he had no power to revise the said assessment

order under section 263 of the Income Tax Act.

4) The ld. Pr.CIT erred in holding that the Id. A.O. had failed

to verify the issue regarding unsecured loan taken in cash

through Shri Sachin Nahar and the payment of interest

thereon and hence, the assessment order passed was

erroneous and prejudicial to the interest of the revenue.

5) The ld. Pr.CIT failed to appreciate that the appellant had

not taken any loan in cash through Shri Sachin Nahar and

had not paid any interest thereon and hence, thus, there

was no reason to hold that the assessment order passed

u/s.153C was erroneous and prejudicial to the interests of

the revenue. 6) The ld. Pr.CIT erred in not appreciating that there was no

evidence with the Assessing Officer while passing the

assessment order that the assessee had taken any

16 ITA.No.1676/PUN./2024

unsecured loan in cash through Shri Sachin Nahar and

accordingly, there was no reason to hold that the

assessment order was erroneous and prejudicial to the

interest of the revenue.

7) The appellant craves leave to add, alter, amend or delete

any of the above grounds of appeal.”

grounds of appeal no.3, for which, the Learned DR has no

objection. We, therefore, dismiss ground no.3 as not pressed.

Learned Counsel for the Assessee strongly challenged the

order of the PCIT in invoking provisions of sec.263 of the Act.

He submitted that the Assessing Officer in the instant case on

the basis of search in the premises of Yuvraj Dhamale Group

of cases from where certain incriminating material pertaining

to the assessee were found, issued notice u/sec.153C of the

Act to the assessee and thereafter, completed the assessment

u/sec.153C r.w.s.143(3) of the Act on 26.12.2021 accepting

the returned income of Rs.8,08,880/-. He submitted that the

learned PCIT in the order passed u/sec.263 has set-aside the

order of the Assessing Officer on the ground that assessee had

taken unsecured loan in cash through Shri Sachin Nahar of

Rs.1,56,00,000/- which was found from the premises of Shri

Sachin Nahar during the course of search at his place on

17 ITA.No.1676/PUN./2024

04.08.2017. Learned Counsel for the Assessee submitted that

this is a case of unabated assessment and addition, if any, can

be made only on the basis of incriminating material found

during the course of search. Referring to Pages-11 to 20 of the

paper book, the Learned Counsel for the Assessee drew the

attention of the Bench to the satisfaction recorded u/sec.153C

of the Act in the case of the assessee on the basis of search

conducted on Yuvraj Dhamale Group of cases on 26.09.2017.

He submitted that no satisfaction u/sec.153C was recorded in

the case of Shri Sachin Nahar on the basis of the other search

that took place on 04.08.2017. He submitted that once there

is no satisfaction recorded in the case of Shri Sachin Nahar

and that there is no evidence or material belonging or

pertaining to the assessee were found, the Assessing Officer

could not have made any addition in the hands of the

assessee. Further the addition, if any, could have been made

either by issuing notice u/sec.153C(1) or resorting to the

provisions of sec.148. Therefore, once there is no satisfaction

recorded in the case of Shri Sachin Nahar that certain entries

or documents belong to the assessee, the Assessing Officer

could not have made any addition merely on the basis of an

email dated 19.03.2021.

6.1. Referring to the decision of Bangalore Bench of the

Tribunal in the case of Sree Lakshmi Venkateshwara Minerals

vs. DCIT, Central Circle-2(1), Bangalore reported in [2021] 123

18 ITA.No.1676/PUN./2024

taxmann.com 255 (Bangalore-Trib.); Learned Counsel for the

Assessee submitted that the Tribunal in the said decision has

held that where assessment proceedings had already been

completed prior to date of search under section 132, scope of

making assessment under section 153C would be limited only

to undisclosed income of assessee detected during search of

some other person.

6.2. Referring to the decision of Hon’ble Karnataka High

Court in the case of DCIT vs. Sunil Kumar Sharma reported in

[2024] 159 taxmann.com 179 (Karnataka); he submitted that

the Hon’ble Karnataka High Court in the said decision has

held that satisfaction note is required to be recorded

u/sec.153C for each assessment year and consolidated

satisfaction note recorded for the different assessment years

would vitiate the entire assessment proceedings. He submitted

that the Revenue has filed SLP against the said decision of

Hon’ble Karnataka High Court and the Hon’ble Supreme Court

has dismissed the same on 20.08.2024 as reported in [2024]

165 taxmann.com 846 (SC) vide CIT(A) vs. Sunil Kumar

Sharma.

6.3. He submitted that the documents found from Shri

Sachin Nahar group of cases belong to Shri Sachin Nahar and

therefore, provisions of Sec.153C is outside the purview in the

case of the assessee. He also relied on the decision of the

19 ITA.No.1676/PUN./2024

Hon’ble Supreme Court in the case of CIT vs. Sinhgad

Technical Education Society reported in [2017] 397 ITR 344

(SC). He submitted that since there are two searches i.e., in

the case of Yuvraj Dhamale Group of cases and another in the

case of Shri Sachin Nahale and there is only one satisfaction

note recorded on the basis of search at Dhamale Group of

cases that too a combined satisfaction note for all the years

which itself is invalid. Therefore, in absence of separate

satisfaction note in the case of Shri Sachin Nahar, the

Assessing Officer could not have made any addition in the

case of the assessee without resorting to either a separate

153C notice or through sec.148. He accordingly submitted

that the order of the learned PCIT is not in accordance with

law and has to be set aside and the grounds raised by the

assessee should be allowed.

supported the order of the PCIT and submitted that when the

Assessing Officer has received an email dated 19.03.2021 that

assessee had taken unsecured loan in cash through Shri

Sachin Nahar of Rs.1,56,00,000/-, against which, he paid

interest of Rs.18,64,800/-, the Assessing Officer should have

made due verification and made addition of the same, which

he has failed to do. Therefore, the order of the learned PCIT

being in accordance with law, should be upheld. The Learned

20 ITA.No.1676/PUN./2024

DR also relied on the following decisions in support of his

contention :

Malabar Industrial Co. Ltd., vs. CIT reported in [2000]

243 ITR 83 (SC);

(Bom.) (HC);

(HC);

taxmann.com 4 (Madhya Pradesh) (HC);

1529 (HC);

Delhi ‘B’ Bench, New Delhi ITA.No.2287 &

2288/Del./2015, Order dated 21.05.2019.

the sides and perused the material available on record. We

find the Assessing Officer in the instant case, on the basis of

the information obtained that certain documents pertaining to

the assessee were found from the premises of Yuvraj Dhamale

Group of cases during the course of search on 26.09.2017,

issued notice u/sec.153C on the basis of satisfaction note

dated 01.03.2021. The assessee in response to the same filed

21 ITA.No.1676/PUN./2024

his return of income disclosing total income of Rs.8,08,880/-

which was accepted by the Assessing Officer in the order

passed u/sec.143(3)/153C of the Act on 26.12.2021. We find

the learned PCIT invoked the provisions of sec.263 of the Act

on the ground that assessee had taken unsecured loan in cash

through Shri Sachin Nahar of Rs.1,56,00,000/- against which

he paid interest of Rs.18,64,800/- in cash during the

assessment year 2017-2018 which was found during the

course of search at the premises of Shri Sachin Nahar on

04.08.2017 and an email to this effect was sent to the

Assessing Officer on 19.03.2021. However, the Assessing

Officer has failed to consider the same and therefore, the order

has become erroneous in so far as it is prejudicial to the

interest of Revenue. He, therefore, set aside the order passed

by the Assessing Officer with a direction to frame the

assessment afresh, the reasons of which, have already been

reproduced in the preceding paragraphs.

8.1. It is the submission of the Learned Counsel for the

Assessee that on the basis of search at the premises of Yuvraj

Dhamale Group of cases, a combined satisfaction note

u/sec.153C of the Act has been prepared for assessment years

2012-2013 to 2018-2019 which itself is not in accordance with

law in view of the decision of Hon’ble Karnataka High Court in

the case of DCIT vs. Sunil Kumar Sharma reported in [2024]

159 taxmann.com 179 (Karnataka), according to which,

22 ITA.No.1676/PUN./2024

satisfaction note is required to be recorded u/sec.153C for

each assessment year separately and a consolidated

satisfaction note recorded for different assessment years would

vitiate the entire assessment proceedings. It is also his

submission that on the basis of search at the premises of Shri

Sachin Nahar no satisfaction note has been recorded.

According to him, the provisions of sec.153C have to be

resorted to where any books of account or documents seized or

requisitioned pertains or pertain to or any information

contained therein relates to the assessee. Therefore, no

addition could have been made merely on the basis of an email

dated 19.03.2021 without resorting to the provisions of

sec.153C or sec.148.

8.2. We find some force in the arguments of Learned

Counsel for the Assessee. On a pointed query by the Bench to

find-out as to whether any penalty proceedings u/sec.271D

has been initiated for the contravention of sec.269SS of the

Act in respect of unsecured cash loan received by the

assessee, the Learned DR filed the following report before the

Bench, the details of which are as under :

GOVERNMENT OF INDIA OFFICE OF THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3),PUNE Aaykar Sadan, 6th Floor, Room No.632, Bodhi Tower, 548/2B, Salisbury Park, Gultekdi, Pune-411037. Phone No. 020-24263632 Email Id:pune.dcit.cen2.3@incometax.gov.in

No. PN/ACIT CC-2(3)/ITAT/Rajendra R. Gugale/2024-25 Date 21.10.2024

23 ITA.No.1676/PUN./2024

To The Commissioner of Income Tax(DR), ITAT-11, Pune. Pune.

Sir,

Sub:- Appeal in the case of Rajendra Ramesh Gugale (PAN: ABFPG6929E) for AY 2017-18 in ITA No.1676/PUN/2024-reg.

Ref:- Your office e-mail dated 18/10/2024 (03:23 PM)

***

Kindly refer to the above.

directed to send the assessment record in the above mentioned

case to clarify whether any penalty proceedings u/s 271D of

the Act has been initiated for the contravention of section 269SS

of the Act in respect of unsecured cash loan received by the

assessee.

mentioned case is enclosed herewith (2 Volumes, Vol-1 36

Pages & Vol-11-70 Pages).

proceedings u/s.153C of the Act for A.Yrs. 2012-13 to 2018-19

were initiated on the basis of information contained in the

incriminating material seized during the search action u/s.132

of the Act conducted on 26/09/2017 in Yuvaraj Dhamale group

of cases. The said proceedings u/s.153C of the Act for

A.Y.2017-18 was completed on 26/12/2021 by accepting the

24 ITA.No.1676/PUN./2024

returned income of the assessee. Further, information of cash

loan of Rs.1,56,00,000/-received by the assessee along with

interest payment of Rs.18,64,800/- made by the assessee, had

been received through e-mail dated 19/03/2021 from the DCIT,

Central Circle-1(1), Pune on the basis of incriminating materials

seized during another search action u/s.132 of the Act

conducted on 04/08/2017 in the case of Sachin Nahar,

However, the said information of cash loan of Rs.1,56,00,000/-

and interest payment of Rs.18,64,800/- was not considered by

the AO during the course of the assessment proceedings

u/s.153C of the Act. Since the above information of cash loan of

Rs.1,56,00,000/- and interest payment of Rs. 18,64,800/- was

not looked into the assessment proceedings u/s.153C of the Act

by the AO, the order dated 26/12/2021 was erroneous and

prejudicial to the interest of the revenue. Thereafter, the

Pr.CIT(Central), Pune vide order u/s.263 of the Act dated

19/02/2024 set-aside the order u/s.153C of the Act passed on

26/12/2021 as erroneous and prejudicial to the interest of the

revenue and directed the AO to examine the issue of cash loan

of Rs.1,56,00,000/- received by the assessee and interest

payment of Rs.18,64,800/- made by the assessee based on the

incriminating documents seized in the case of Sachin Nahar.

The set-aside proceedings are in progress as on date.

analysis of the incriminating materials seized during another

25 ITA.No.1676/PUN./2024

search action u/s.132 of the Act conducted on 04/08/2017 in

the case of Sachin Nahar, it is very clear that the assessee has

received cash loan of Rs.1,56,00,000/- and made interest

payment of Rs.18,64,800/- for the period under consideration

as per the evidences seized during the search proceedings in

the case of Sachin Nahar, forwarded to this office by the DCIT,

Central Circle-1(1), Pune vide mail dated 19/03/2021. Hence,

the necessary proposal for initiating penalty proceedings

u/s.271D of the Act for contravention of provisions of section

269SS of the Act will be submitted by this office after completion

of this set-aside proceedings currently in progress.

Yours faithfully, Encl: as above. (Sd/-Merwyn Paes) Asst. Commissioner of Income Tax, Central Circle-2(3), Pune.”

8.3. A perusal of the satisfaction note recorded in the

case of Shri Rajendra Ramesh Gugale on the basis of search at

the premises of Yuvraj Dhamale Group of cases shows that a

combined satisfaction note u/sec.153C of the Act has been

recorded vide satisfaction note dated 01.03.2021 by recording

as under :

“PROFORMA FOR RECORDING SATISFACTION UNDER SECTION 153C OF THE INCOME TAX ACT, 1961. (To be filled by the Assessing Officer of the person referred to in section 153A) 1. Name of the group Yuvraj Dhamale Group searched

26 ITA.No.1676/PUN./2024

1) Shri Yuvraj Sitaram Dhamale

Plot no 24, Sameer cooperative Housing Name and PAN of the society, Dhankovwadi Pune 411043 (PAN 2. AHKPD2553) person referred to in 2) M/s Wellbuild Merchants Pvt Ltd. Section 153A 5 No 63, Rajgruhi residency, Kondha Budruk, Pune 411048 (PAN AAACW6566C) Date of initiation of 3. 26/09/2017 and subsequent dates. search in the case of the person referred to in Section 153A Name, address and Shri Rajendra Ramesh Gugale (Prop of M/s PAN of the person in 4. R R Developers) whose case action Address: 685/3, Kothari colony, B-12. under section 153C is Bibvewadi, Pune – 37 PAN : ABFPG6929E proposed. 5. -- -- 6. -- -- 7. -- -- 8. Assessment Years Different Assessment Years involved.

… … ….

… … …

“Hence, in view of the provision of section 153C of the Income Tax

Act, 1961 it is necessary to initiate proceedings u/s.153C

r.w.s.153A of the Income Tax Act, 1961 for A.Yrs 2012-13 to A.Y.

2018-19.

Date : 01/03/2021 Sd/-(Swapnil Sharadrao Patil) Place : Pune Joint Commissioner of Income Tax (OSD), Central Circle-2(3), Pune.”

8.4. Thus, a common satisfaction note has been

recorded for assessment years 2012-2013 to 2018-2019 on the

basis of search at the premises of Dhamale Group of cases.

27 ITA.No.1676/PUN./2024

Admittedly, there is no satisfaction recorded on the basis of

search at the premises of Shri Sachin Nahar.

8.5. We find the Hon’ble Karnataka High Court in the

case of DCIT vs. Sunil Kumar Sharma (supra) has held that

satisfaction note is required to be recorded u/sec.153C for

each assessment year and hence, a consolidated satisfaction

note recorded for different assessment years would vitiate the

entire assessment proceedings. The relevant observations of

Hon’ble High Court reads as under :

“53. Further, satisfaction note is required to be

recorded under section 153C of the IT Act for each

Assessment Year and in the impugned proceedings, a

consolidated satisfaction note has been recorded for

different Assessment Years, which also vitiates the entire

assessment proceedings. In view of all these findings, it is

said that the appeals do not have any substance for

seeking intervention as sought for by the appellant/

Revenue.”

8.6. We find when the Revenue challenged the above

order of the Hon’ble Karnataka High Court in the case of DCIT

vs. Sunil Kumar Sharma (supra), the Hon’ble Supreme Court

in SLP (Civil) Diary No.21526 of 2024 vide order dated 20th

August, 2024 dismissed the SLP filed by the Revenue.

28 ITA.No.1676/PUN./2024

8.7. Since in the instant case a consolidated satisfaction

note has been prepared for assessment years 2012-2013 to

2018-2019, therefore, the consolidation satisfaction note being

not in accordance with law, therefore, the entire assessment

proceedings is liable to be quashed. We hold accordingly and

quash the assessment.

8.8. Further, there is also no dispute to the fact that two

searches have taken place i.e., one in the case of Yuvraj

Dhamale Group of cases on 26.09.2017 and another in the

case of Shri Sachin Nahar on 04.08.2017. There is only one

satisfaction note i.e., a combined satisfaction note in the case

of Yuvraj Dhamale Group of cases has been recorded, on the

basis of which, notice u/sec.153C was issued to the assessee.

However, no separate satisfaction note was recorded in the

case of Shri Sachin Nahar that any books of account or

documents seized or requisitioned pertains or pertain to or any

information contained therein relates to the assessee.

Therefore, no addition could have been made in the hands of

the assessee without resorting to the provisions of either

sec.147/148 or sec.153C of the Act.

8.9. Once the assessment framed u/sec.153C

r.w.s.143(3) dated 26.12.2021 is held to be void being not in

accordance with law on account of a combined satisfaction

note for assessment years 2012-2013 to 2018-2019 instead of

29 ITA.No.1676/PUN./2024

separate satisfaction note, no addition could have been made

in the hands of the assessee on the basis of the email dated

19.03.2021 without issuing a separate notice u/sec.153C or

resorting to provisions of sec.148. Therefore, we do not find

any error in the order of the Assessing Officer.

8.10. It is the settled proposition of law that for invoking

the provisions of sec.263 of the Act, the twin conditions i.e.,

the assessment order must be erroneous and the order is

prejudicial to the interest of Revenue must be satisfied as held

by the Hon’ble Supreme Court in the case of Malabar

Industrial Co. Ltd., vs. CIT (supra). In the instant case, the

order is certainly not erroneous, even though it may be

prejudice to the interest of the Revenue. Therefore, the twin

conditions are not satisfied and the PCIT, in our opinion,

cannot invoke the provisions of sec.263 of the Act. In this view

of the matter, we set aside the order of the PCIT and the

grounds raised by the assessee are allowed.

Order pronounced in the open Court on 30.12.2024.

Sd/- Sd/- [MS. ASTHA CHANDRA] [RAMA KANTA PANDA] JUDICIAL MEMBER VICE PRESIDENT Pune, Dated 30th December, 2024 VBP/-

30 ITA.No.1676/PUN./2024

Copy to 1. The appellant 2. The respondent 3. The JCIT, Central Range-2, Pune. 4. D.R. ITAT, “B” Bench, Pune. 5. Guard File.

//By Order//

//True Copy //

Sr. Private Secretary, ITAT, Pune Benches, Pune.