GULSHAN HOMES AND INFRASTRUCTURE (P) LTD,NEW DELHI vs. DR. MANOJ KUMAR, DCIT, CENTRAL CIRCLE-31, NEW DELHI

We have heard the rival submissions and perused the materials available on record. The assessee company is engaged in real estate development and infrastructure projects. The preliminary facts which leads to the additions in the hands of the assessee are that the original return of income was filed by the assessee company for assessment year 2020-21 on 30-1-2021 declaring total income of Rs 7,45,94,330/-. A search and seizure action under section 132 of the Act was conducted on 6-1-2021 on the premises of Hans Group and one Shri Parveen K Jain, wherein various incriminating materials and papers/ documents/ digital data were seized including certain WhatsApp chats and a hand written ―Interest Account‖ sheet dated November 2019 were extracted from the mobile phone of Mr. Parveen Jain. The income tax department contended that these materials revealed unaccounted cash transactions linked to the assessee‘s business operations. It was submitted that the assessee has been subjected to proceeding u/s 153C of the Act on the strength of a satisfaction note sent by the AO of Shri Parveen Jain (hereinafter referred to as ‗Jain‘) and then, the Learned AO of assessee recorded his satisfaction note , though admittedly, none of the information contains name of the assessee anywhere so as to assume jurisdiction u/s 153C of the Act. For the sake of convenience, the relevant whatsapp chats which is the subject matter of information allegedly belonging to assessee is required to be addressed. The relevant text of the chat dated 21-2-2020 as reproduced in Para 4 of the assessment order is as follows:-

Please explain your chat dated 21.02.2020 with Sh. Sanjeev Gupta wherein you have forwarded: ‗ Bhai Ji, I would‘nt have written you this message but please Gulshan ji ko 1/- dilwa do. Mujhe unse aage bhi kaam lena hai. Regards‘ Ans. This is message regarding payment of certain sum to Sh. Gulshan Nagpal from Sh. Sanjeev Gupta. In following message Sh.Sanjeev Gupta has confirmed receipt of this money as well. I can‘t say with certainty that it is cash transaction or bank transaction. The Statement is temporarily suspended at 11.45 pm on 08.01.2021 for rest.

Further the Learned AO noted that an image was found from the phone of Sh. Parveen Jain received from Sh. Vaibhav Jain titled as ―Parveen Jain Intt A/c M/o November 2019‘. The sheet is reproduced below:-

The learned AO noted that during the course of further analysis of the phone of Sh. Parveen Jain, an additional sheet bearing the name of 9 different individuals was found tabulated and typed giving insight into the account of the month of November 2019. The relevant sheet found is reproduced below:-

The learned AO noted that the interest amount mentioned in Column 7 above is the same as mentioned in the handwritten sheet titled as Intt A/c M/o November 2019. Based on this, the learned AO interpreted that the sheet leads to the conclusion that the loan amount is given through bank (Denoted by ‗B‘) and cash as well (Denoted by ‗C‘) and total is also written on which the interest amount is shown in Bank as well as in Cash (Denoted by B and C respectively). Upon this correlation, various individuals Page | 6 were found and traced on Insights and other Income Tax database and firstly the interest shown as ‗B‘ wsa pursued to ascertain who is the party who is paying the amount. For example, Sita Gupta (PAN AEJPG9162J) was found to have received interest of Rs 10,80,000/- from Gulshan Homes Infrastructure Private Limited along with TDS deduction on the same. Based on this , Gulshan Homes Infrastructure Private Limited was cross checked to see if the name of the other p arties who are paid interest on the loan amounts by Gulshan Homes. The relevant details are highlighted below in the sheet, which establishes all the ‗B‘ interest receipts from Gulshan Homes and Infrastructure Private Limited.

8. It was noted that Raj Kumar Gupta is husband of Sita Gupta, whose name though is not appearing the sheet found from the phone of Sh. Parveen Jain, ut the cumulative interest payments comes to Rs 21,60,000/-. If the same is divided by 12, the payment comes to 1,80,000/- which is the amount mentioned. Thus, establishing the entry no. 1 on the image found for the interest paid through banking channel clearly establishing the genuineness of the image and hisaab found on the phone seized during the course of search. Based on subsequent exchanges of whatsapp chats, the learned AO concluded that during the year under consideration, the assessee company had received amount of Rs 65,99,00,000/- in cash from various clients through broker Sh. Parveen K Jain and paid interest in cash amounting to Rs 4,78,14,240/- during the year under consideration. The assessee in reply to the show cause notice categorically denied all the allegations levelled thereon and stated that there was no receipt of any cash loans from any party to the tune of Rs 65.99 crores and categorically denied the payment of interest of Rs 4,78,14,240/- on loans out of the books. The assessee company requested the learned AO to supply the statement of the persons in whose case the search took place. The assessee also sought for cross examination of the deponents , who had deposed anything adverse to the assessee. It was categorically stated that the alleged documents reproduced in the show cause notice have got nothing to do with the assessee company. The learned AO noted that assessee company had requested for cross examination of Sh. Parveen Jain and Sh. Vaibhav Jain. Summons under section 131 of the Act dated 17-3-2024 were issued to assessee company, Sh. Parveen Jain and Vaibhav Jain to appear in person on 19-3-2024. The authorised representative of the assessee company attended in response to the summons. However, Sh. Vaibhav Jain and Sh. Parveen Kumar Jain did not attend the office on the date of personal appearance and hence they could not be cross examined by the assessee. This fact is duly noted by the learned AO in page 10 para 4.21 of the assessment order. The learned AO however noted that Sh. Sulekh Chand Singhal and Sh. Ashok Jain had accepted the contents of the seized material with regard to the cheque transactions in their assessments and accordingly concluded that the veracity of Page | 8 the seized documents stands established. Accordingly, the learned AO proceeded to treat the cash loans allegedly received by the assessee company in the sum of Rs 65.99 crores from various clients through Sh. Parveen Jain as unexplained money under section 69A of the Act and also added a sum of Rs 4,78,14,240/- on account of payment of interest on loans as unexplained expenditure under section 69C of the Act and completed the assessment under section 153C of the Act in the hands of the assessee company.

The learned CITA upheld the additions made by the Learned AO in the search assessment framed under section 153C of the Act dismissing all the legal grounds and factual grounds raised by the assessee.

The learned DR before us vehemently submitted that the seized document found from the premises of Shri Parveen Jain (searched person) did contain certain handwritten sheets wherein the names of 9 loan creditors of the assessee company were reflected. The loan amounts taken by the assessee company from these 9 loan creditors through regular banking channels duly match with the entries reflected in the books of accounts of the assessee company. Hence the cash transactions reflected in the said seized documents also should be treated as genuine thereby the veracity of the seized documents as belonging / pertaining / relating to the assessee company herein stands established and accordingly the assumption of jurisdiction under section 153 C of the Act in the hands of the assessee company was validly made by the learned AO. He vehemently submitted that whatsapp chat is an admissible evidence and placed reliance on the decision of Hon‘ble Rajasthan High Court in the ccase of Giriraj Pugalia vs ACIT in Civil Writ Petition No. 3152 / 2025 dated 4-3-2025 in support of his contentions. The Learned DR on the issue of combined satisfaction note recorded by the Learned AO for Assessment Years 2015-16 to 2021-22 submitted that eventhough combined satisfaction note was recorded by the Learned AO, the observations made therein pertain only to Assessment Year 2020-21 (i.e. the year under consideration).

It is not in dispute that the WhatsApp chats were exchanged between Shri Parveen Jain and Shri Vaibhav Jain. It is not in dispute that in the said WhatsApp chats, only the name of Gulshan Ji was mentioned and the name of the assessee company i.e. Gulshan Homes and Infrastructure Private Limited was not mentioned at all. Hence we are unable to comprehend ourselves to accept to the proposition of the revenue that the said Whatsapp Chats pertain / belong / relate to the assessee company herein. Hence initiation of proceedings under section 153C of the Act on the assessee company is flawed on this material / evidence.

Further, handwritten sheet styled as Parveen Jain Interest account for the month of November 2019 was also seized from the premises of Shri Parveen Jain during the course of his search. The said sheet contained 9 names and some of the names tallied with the loan creditors list of the assessee company. It is not in dispute that the assessee company had borrowed certain loans from some of the parties mentioned in the said hand written sheet. That alone does not automatically implicate the assessee to have done any wrong doing or to have done some cash transactions with the said loan creditors. We find that Shri Parveen Jain, when confronted with the said seized document during the course of his search, did not mention the name of the assessee company herein. With regard to the transactions reflected with the nine parties and the alleged cash component mentioned, the same could pertain to Shri Parveen Jain and the cash could have been received by him. It is pertinent to note that Shri Parveen Jain never stated that cash loans were given by these nine parties to the assessee company herein. Hence, there is absolutely no evidence to prove that cash was paid by these nine parties to the assessee company. It is also pertinent to note that no additions were made by the revenue in the hands of the lenders in respect of cash loans allegedly given by them to the assessee company. Further the date of receipt of cash loans, if any, is also not emanating from the seized document. While this is so, how the AO of the searched person and the Learned AO of the assessee herein conclude that the said cash loans were received during the year under consideration. Shri Parveen Jain has been engaged by the assessee company only for arranging certain loans through regular banking channels, which has been duly done by him and which fact is also accepted by the department. Hence, even this interest account statement, which has been tabulated by the Learned AO in the assessment order cannot be said to have pertained /belonged /related to the assessee herein so as to warrant initiation of proceedings under Section 153C of the Act in the hands of the assessee herein. We also agree with the argument of Learned AR that the presumption under section 132(4A) read with section 292C of the Act would lie only on Shri Parveen Jain , from whose premises this seized document was found during search. Hence the AO of the searched person should have exhausted the legal remedy available to him by confronting the said seized document with Shri Parveen Jain and bring on record cogent evidences as to how Shri Parveen Jain had rebutted such presumption of seized document as not belonging / pertaining / relating to him. After fulfilling this process only, the AO of the searched person could have legally recorded satisfaction note that the seized document does not belong / pertain / relate to Shri Parveen Jain and that it belongs / pertains / relates to the assessee company herein. The genesis of initiating proceedings under section 153C of the Act is just limited to the alleged incriminating material as it was detected with no if and buts and without any enquiry by the AO of the searched person in respect thereof as he did not have any jurisdiction to assess it and could not at all make any comments thereon. Thus, here the AO of the searched person exceeded the legal mandate and foreclosed the objective satisfaction on the part of the AO of another person by recording a definite finding that cash has been exchanged to supress unexplained investments. No addition whatsoever has been made in the hands of the assessee for suppression of unexplained investments by the Learned AO in the assessment framed under section 153C of the Act. In this regard, the arguments advanced by the Learned AR before us by referring to Para 17 of the Page | 11 judgement of Hon‘ble Jurisdictional High Court in the case of SS Aviation Ltd vs DCIT reported in 2012-TIOL-305-HC-DEL-IT is well founded, wherein it was held that ―the AO who has reached the satisfaction that the document relates to a person other than the searched person can do nothing except to forward the document to the AO having jurisdiction over the other person and thereafter it is for the AO having jurisdiction over the other person to follow the procedure prescribed by section 153A in an attempt to ensure that the income reflected by the document has been accounted for by such other person.‖

The Learned AR submitted before us that it has also been incorrectly stated in para 2 of the forwarding letter that incriminating material in respect of Gulshan Homes and Infrastructure Pvt Ltd was found from the mobile of Shri Parveen Jain, though actually no such material at all was found therein. In the mobile of Shri Parveen Jain, whatever material related to the assessee has been alleged was reference to some hisaab parchi/ draft agreement / agreement to sell etc where the name of the assessee did not at all appear in any manner and which was, thus, beyond the mandate of the section 153C of the Act.The same has also been repeated in the column 7(iv)and(v) of the proforma for recording satisfaction at Page no. 3 of Paper Book. Not only this, alien material like ‗During the course of assessment proceedings in the case of Parveen Kumar Jain and Jainco Ltd, it has been observed which was evident from his WhatsApp chat and images found in his mobile‘ has been mentioned. Further, the AO of the searched person finally concluded that ‗I am satisfied that action u/s 153C is required to be taken against GHIPL. Accordingly, the AO of Gulshan Homes and Infrastructure Pvt Ltd is being intimated to take action u/s 153C…‘. Patently, the AO of the searched person prejudged the issuance of notice under section 153C of the Act and practically, blocked objective consideration by the AO of the assessee herein. Further, the assessment proceedings in the cases of Parveen Kumar Jain and Jainco Ltd are irrelevant consideration at this stage of proceedings because, as per the specific mandate of the section 153C of the Act, the AO of the searched person was only and only required to pass on the alleged seized material/ information without any comment by him thereon. He is not supposed to make any observations except that the said material / information pertains to the particular assessee. Not only this, para 2 of the assessment order states that satisfaction note was issued on perusal of the Appraisal Report which is an opinion of the Investigation wing and is totally irrelevant for this satisfaction note under section 153C of the Act as the same tantamount to a borrowed satisfaction and bad in law ab initio. Further, the cause of action is search in the case of Shri Parveen Jain, C-42 Preet Vihar Delhi and cloned data as per the Annexure A-5 of the Panchnama dated 10-1-2021 and any reference to any assessment proceedings, especially of Jainco Ltd is irrelevant and has no link with issuance of this satisfaction note in any manner.

We find that the observations made by the Hon‘ble Jurisdictional High Court in the case of Saksham Commodities Ltd vs ITO reported in 161 taxmann.com 458 (Del HC) are very much relevant in this regard as under:-

On an overall consideration of the structure of Sections 153A and 153C, we thus find that a reopening or abatement would be triggered only upon the discovery of material which is likely to "have a bearing on the determination of the total income" and would have to be examined bearing in mind the AYs' which are likely to be impacted. It would thus be incorrect to either interpret or construe Section 153C as envisaging incriminating material pertaining to a particular AY having a cascading effect and which would warrant a mechanical and inevitable assessment or reassessment for the entire block of the "relevant assessment year‖.

In our considered view, abatement of the six AYs' or the "relevant assessment year" under Section 153C would follow the formation of opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs' that may form part of the block of ten AYs'. Abatement would be triggered by the formation of that opinion rather than the other way around. This, in light of the discernibly distinguishable statutory regime underlying Sections 153A and 153C as explained above. While in the case of the former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to "have a bearing on the determination of the total income". It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case may be.

We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an evaluation and examination of their contents and an assessment of the potential impact that they may have on the total income for the six AYs' immediately preceding the AY pertaining to the year of search and the "relevant assessment year". It is only once the AO of the non-searched entity is satisfied that the material coming into its possession is likely to "have a bearing on the determination of the total income" that a notice under Section 153C would be issued. Abatement would thus be a necessary corollary of that notice. However, both the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity.

Therefore, and in our opinion, abatement of the six AYs' or the "relevant assessment year" would follow the formation of that opinion and satisfaction in that respect being reached.

On an overall consideration of the aforesaid, we come to the firm conclusion that the "incriminating material" which is spoken of would have to be identified with respect to the AY to which it relates or may be likely to impact before the initiation of proceedings under Section 153C of the Act. A material, document or asset recovered in the course of a search or on the basis of a requisition made would justify abatement of only those pending assessments or reopening of such concluded assessments to which alone it relates or is likely to have a bearing on the estimation of income. The mere existence of a power to assess or reassess the six AYs' immediately preceding the AY corresponding to the year of search or the "relevant assessment year" would not justify a sweeping or indiscriminate invocation of Section 153C.

The jurisdictional AO would have to firstly be satisfied that the material received is likely to have a bearing on or impact the total income of years or years which may form part of the block of six or ten AYs' and thereafter proceed to place the assessee on notice under Section 153C. The power to undertake such an assessment would stand confined to those years to which the material may relate or is likely to influence. Absent any material that may either cast a doubt on the estimation of total income for a particular year or years, the AO would not be justified in invoking its powers conferred by Section 153C. It would only be consequent to such satisfaction being reached that a notice would be liable to be issued and thus resulting in the abatement of pending proceedings and reopening of concluded assessments.‖ (emphasis supplied by us)

Heard the learned counsel for the petitioners.

2. There is a delay of 124 and 127 days in filing the Special Leave Petitions respectively, which has not been satisfactorily explained. Even otherwise, we have gone through the Special Leave Petition and do not find any merit in the same.

Now let us come to the satisfaction note recorded by the Learned AO of the assessee herein. The Learned AO of the assessee herein recorded satisfaction note on 15-12-2022 assuming jurisdiction under section 153C of the Act which is enclosed in Pages 5 to 15 of the Paper Book. It is pertinent to note that the Learned AO of the assessee had recorded single and consolidated satisfaction note for Assessment Years 2015-16 to 2021-22. For the sake of convenience, the last paragraph of the satisfaction note dated 15-12-2022 recorded by the Learned AO of the assessee herein is reproduced below:-

From the above, it could be seen that the Learned AO of the assessee herein had recorded consolidated satisfaction note for the Assessment Years 2015-16 to 2021-22. Whether recording of consolidated satisfaction note for various assessment years would prove fatal to the assumption of jurisdiction of the Learned AO and consequential framing of assessments under section 153C of the Act was subject matter of consideration by the Hon‘ble Karnataka High Court in the case of DCIT vs Sunil Kumar Sharma reported in 159 taxmann.com 179 (Karnataka) dated 22-1-2024, wherein it was held as under:-

Heard the learned Senior Counsel appearing for the appellants.

We are not inclined to interfere with the impugned judgment and order passed by the High Court of Karnataka at Bengaluru in Writ Appeal No. 831/2022 (T-IT) dated 22-01-2024/ Deputy Commissioner of Income-tax v. Sunil Kumar Sharma [2024] 159 taxmann.com 179 (Karnataka) . 4. The Special Leave Petition is dismissed. 5. Pending application(s), if any, shall stand disposed of. The Learned AR before us vehemently argued that the satisfaction note 18. prepared by the AO of the assessee is still more audacious. The imaged messages are reproduced therein and legible copy is reproduced in para 4.2 to para 4.7 of the assessment order and the name of the assessee nowhere figures in these messages. As shown in para 4.2, the impugned images were found from the mobile phone of Shri Parveen Jain received from his son, Shri Vaibhav Jain and it shows nine names, Sita Gupta to Sanjeev Gupta- but name of the assessee is not there at all. Identical is the situation in para 4.4 of the assessment order. The Learned AR stated that it is beyond any sane comprehension that when name of the assessee is not even mentioned in the alleged seized documents, how could, the AO of the searched person, be Page | 19 satisfied that the alleged seized material belonged to the assessee or the alleged information pertained to the assessee. The reasons to rope in the assessee are contained in para 4.5 to para 4.10 of the assessment order. The sheets bearing the names of nine parties therein and definitely not of the assessee, was analysed by the revenue to come to the conclusion that the items denoted with ‗C‘ were cash entries and with ‘B‘ were bank entries. The revenue proceeded to examine the bank entries and certain individuals were found and traced on Insights and other Income-tax Database who were supposedly paying the impugned amount. Now, on examination of the matter related to Ms Sita Gupta, first out of the nine entries, the AO claimed to have detected that she had received interest from Gulshan Homes and Infrastructure Pvt Ltd -the assessee herein. The Investigation Unit thereafter and not the AO of the assessee, collected details etc. from the assessee company and as is mentioned in the para 4.15 of the assessment order, the total amount of the alleged cash receipt/ interest was interpolated which did not at all figure in the impugned seized WhatsApp chat. Noteworthy, the name of the assessee was not at all appearing in any seized material. The ld. Counsel further elaborated that the revenue has relied on a WhatsApp chat between Mr Praveen Jain and Mr Sanjeev Gupta as is mentioned in para 4.1 of the assessment order, where Mr Praveen Jain was requesting Mr Sanjeev Gupta to arrange 1/- for some Gulshan ji and not at all for the assessee company. This even does not say what is 1/- or whether it was arranged or not. It also does not at all mention whether it was cheque amount or cash amount. It is also not known whether the same was to be given only to which Gulshan ji (as the name of the assessee is conspicuously absent therein and no presumption at all could be derived that it belonging to the assessee) as loan in cash or for some property to be purchased by Mr Sanjeev Gupta from the assessee or from some other entity belonging to the group of Shri Gulshan Nagpal, if at all, it was he. However, on confrontation by the revenue officer, Mr Sanjeev Gupta categorically stated that he did not know whether it was bank or cash.

The Learned AR then submitted that after receipt of the material from the AO of the searched person, the Learned AO of the assessee was required to be satisfied that the material sent by the AO of the searched person (cloned data of Shri Parveen Jain‘s mobile vide seized document reference Annexure A-5) or any information therein ever belonged/ pertained to the assessee herein. As against this patent position of law, the AO of the assessee has used data from the Appraisal report (para 2 of assessment order) as below in his satisfaction note:

The Learned AR submitted that that the Learned AO of the assessee was only required to be satisfied vis-a vis the seized material handed over by the AO of the searched person without any reference to any other information or document even if in his possession received from any source. The satisfaction note based upon the appraisal report, data on Insight Portal regarding TDS of third parties, statements of Shri Gulshan Nagpal etc and therefore, is legally untenable and void ab initio. Moreover, this is not a satisfaction note to initiate any proceedings under section 153C of the Act but conclusions regarding undisclosed income drawn in a firm language. The Hon‘ble Supreme Court in Oryx Fisheries Pvt Ltd in Civil Appeal No. of 2010 (Arising out of Special Leave Petition (C) No.27615/08) on 29-10-2010 has held that:-

In view of the aforesaid observations and respectfully following the various judicial precedents relied upon hereinabove, we hold that the Learned AO had invalidly assumed jurisdiction under section 153C of the Act for more than one reason as detailed supra and hence the entire search assessment is hereby declared as void ab initio. Accordingly, the Ground Nos. 1,2,3,4,5,8 & 9 raised by the assessee are allowed.

Since the entire assessment is quashed , the adjudication of other grounds raised by the assessee on merits of the additions and non-granting of cross –examination of the departmental witnesses , become academic in nature and hence need not be gone into. No opinion is hereby rendered on the same and they are left open.

In the result, the appeal of the assessee is partly allowed.