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Income Tax Appellate Tribunal, DELHI BENCH ‘G’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI S. RIFAUR RAHMAN
(Assessment Year : 2012-13) Surendra Kumar Arya, vs. DCIT, Central Circle 25, 7, Neelanchal Bandh Road, New Delhi. Chandanhulla Chattarpur, New Delhi – 110 074. (PAN : ACNPA3721H) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Salil Aggarwal, Sr. Advocate Shri Shailesh Gupta, CA Shri Mihir Aggarwal, Advocate Shri Mahir Aggarwal, Advocate REVENUE BY : Shri Mahesh Kumar, CIT DR Date of Hearing : 09.07.2025 Date of Order : 26.09.2025 O R D E R PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. These appeals are filed by the assessee against the order of ld. Commissioner of Income Tax (Appeals)-28, New Delhi [“ld. CIT(A)”, for short] dated 08.03.2024 & 12.03.2024 for Assessment Years 2010-11 & 2012-13 respectively.
& 2339/Del/2024 2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. We take up the assessee’s appeal being AY 2010-11 as lead case.
Brief facts of the case are, search and seizure action under section 132 of the Income-tax Act, 1961 (for short ‘the Act’) was carried out in the case of the assessee on 05.10.2017. Thereafter, the case was centralized and the case was assigned to Circle 13 (1), Delhi. Accordingly, notice u/s 153A dated 21.08.2014 was issued to the assessee to file return of income. In response, assessee filed its return of income on 28.11.2019 declared income of Rs.2,54,69,175/-. Subsequently, notices u/s 143(2) and 142(1) were issued and served on the assessee.
At the time of hearing, ld. AR of the assessee pressed Ground No.2 raised in grounds of appeal
in which assessee has raised the jurisdictional issue, the same is reproduced below :- “2. That having regard to the facts and circumstances of the case and in law Ld. Commissioner of Income Tax (A) has not considered that the assumption of jurisdiction u/s 153A by ld. Assessing Officer and order passed u/s 153A of the Income Tax Act is bad in law, barred by limitation and is against the statutory provisions of Income Tax Act and hence liable to be quashed.”
5. Since the ld. AR has pressed Ground No.2 which is jurisdictional issue, we also restrict ourselves to adjudicate only on this issue.
& 2339/Del/2024 6. In this case, the AO recorded in the assessment order that during the course of search u/s 132 of the Act at the premises of Prashesh Arya who has recorded the statement u/s 132 of the Act wherein he had stated that in order to make payment to the Official Liquidator appointed by Hon’ble Madhya Pradesh High Court, a sum of Rs.2.25 crores was received in cash from the assessee. The AO reproduced the statements recorded on 08.10.2017 in the assessment order. By relying on the abovesaid statement, a show cause was raised to the assessee why the addition should not be made in his hands. In response, assessee submitted that the statement of Prashesh Arya was under mental duress and pressure which cannot be said to be out of free will. The same was signed at the behest of the Investigation Wing under pressure. It was also submitted that assets of the Birla Cotton of India Limited (BCI) were put to auction by the Hon’ble High Court by inviting offers for sale of assets and out of the above bids, assessee has purchased the abovesaid property. The AO rejected the abovesaid submissions of the assessee and proceeded to make the addition u/s 68 of the Act in the hands of the assessee solely relying on the statement of Prashesh Arya.
Aggrieved with the above order, assessee preferred an appeal before the ld. CIT(A)-28, New Delhi and raised specific ground objecting to completing the assessment u/s 153A/143(3) of the Act without there being any incriminating material found in the hands of the assessee and completed the & 2339/Del/2024 assessment without assuming the jurisdiction as per law. After considering the detailed submissions of the assessee, ld. CIT (A) not adjudicated on the assumption of jurisdiction but adjudicated only on the issue of section 153D.
Aggrieved assessee is in appeal before us.
At the time of hearing, ld. AR of the assessee submitted that the search was conducted in the case of the assessee on 05.10.2017 and submitted that it is fact on record that the assessment year under consideration is unabated and no incriminating material was found at the premises of the assessee. However, the AO has assumed the jurisdiction u/s 153A heavily relying on the material found at the place of third party and also relying on his statement. Therefore, he submitted that the assumption should have been initiated and completed u/s 153C and not u/s 153A of the Act. Further he brought to our notice page 5 of the paper book wherein approval was granted u/s 153D and submitted that approval granted was mechanical without applications of mind.
On the other hand, ld. DR of the Revenue submitted that the incriminating material found during the course of search and the same can be applied to make addition u/s 153A of the Act where the search was conducted simultaneously. Even though material found from third parties were held to be found during the course of search. In this regard, he relied on the decision of K. Krishnamurthy (2025) 171 taxmann.com 413 (SC) and brought to our & 2339/Del/2024 notice paras 40 and 41 of the order. Further he relied on the decision of Abhisar Buildwell (P.) Ltd. (2023) 149 taxmann.com 399 (SC) and further relied on the decision of ITAT, Rajkot in the case of Ahir Salt and Allied Products vs. DCIT in IT (SS) A.No.6 & 7/RJT/2022 dated 12.06.2024. He brought to our notice findings of the ITAT at para 18 of the order. He heavily relied on the abovesaid decisions and submitted that the material found during simultaneous search in the case of the other person can be used to complete the assessment u/s 153A of the Act. Accordingly, he relied on the findings of the lower authorities.
Considered the rival submissions and material placed on record. We observe that a search and seizure operation was initiated u/s 132 of the Act in the case of the assessee on 05.10.2017 and simultaneously upon the same authorization dated 04.10.2017 with the other person, namely, Prashesh Arya wherein certain documents were found and on enquiry as well as post search statement, he admitted that he has received some cash from the assessee for certain plot of land/assets wherein certain assets were purchased from BCI which was under liquidation. The company, Shreeaumji Infrastructure and Projects Pvt. Ltd. (SIPPL) have won the abovesaid auction and purchased the same. In order to complete the purchase transaction, the assessee being the Director of SIPPL has paid Rs.2.25 crores in cash. Based on the above statement, the assessment in the case of the assessee was completed u/s 153A & 2339/Del/2024 read with section 143(3) of the Act. The question before us is whether the AO was right in completing the assessment u/s 153A of the Act on the material found during the search in the hands of the third party and based on the statement recorded post search and the same can be treated as incriminating material for the purpose of section 153A of the Act. We observe that ld. DR stressed upon us by relying on the decision of K Krishnamurhty (supra) wherein Hon’ble Supreme Court has observed that the causation for collecting the sale deeds from the Society was the search at the appellant’s premises, it cannot be said that the said documents were not found in the course of the search. We observe that the issue before the Hon’ble Supreme Court was penalty levied u/s 271AAA of the Act wherein the issue was whether the material found during the search is the material found in the course of search or not. The discussion was never on the aspect of whether the assessment should be conducted u/s 153A on the materials found in the hands of third party whether the abovesaid material can be utilized to complete the assessment u/s 153A. Of course the material found anywhere during the search is material found during the search. There is no second thought. This analogy cannot be applied in completing the assessment proceedings when the specific provision applies to the specific situation. Section 153C is very specific on completion of assessment on the material found form the third party. Therefore, the issue under consideration & 2339/Del/2024 is distinguishable to the facts in the above case. Further ld. DR of the Revenue relied on the decision of Abhisar Buildwell (P.) Ltd. (supra) and he brought to our notice para 14 of the order wherein the Hon’ble Court had observed that any incriminating material found even in case of unabated/completed assessment, the AO would assume jurisdiction to assess or reassess the total income taking into consideration the incriminating material unearthed during the search and other material available with the AO including the income declared in the return. Further we observe that no incriminating material is unearthed from the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessment or unabated assessments. Meaning thereby, in respect of completed/unabated assessment, no addition can be made by the AO in the absence of any incriminating material found during the search u/s 132 of the Act. The issue under consideration is never in dispute with regard to material found during the search can be treated as material found during the search. However, whatever material found during the search whether that can be used to assess the income of the assessee, in case it is found in the hands of the assessee itself, the proceedings u/s 153A can be initiated. However, in case such incriminating material is found in the hands of the third party, the addition can be made in the hands of the assessee unless and until proceedings u/s 153C has initiated, without initiating the proceedings u/s & 2339/Del/2024 153C, no addition can be made in the hands of the assessee on the material found in the hands of the third party by completing assessment u/s 153A of the Act. The same was reiterated by the decision of Hon’ble Delhi High Court in the case of PCIT vs. Anand Kumar Jain (2021) 432 ITR 384 dated 21.02.2021 wherein Hon’ble High Court has held as under :- “10. Now, coming to the aspect viz the invocation of section 153A on the basis of the statement recorded in search action against a third person. We may note that the AO has used this statement on oath recorded in the course of search conducted in the case of a third party (i.e., search of Pradeep Kumar Jindal) for making the additions in the hands of the assessee. As per the mandate of Section 153C, if this statement was to be construed as an incriminating material belonging to or pertaining to a person other than person searched (as referred to in Section 153A), then the only legal recourse available to the department was to proceed in terms of Section 153C of the Act by handing over the same to the AO who has jurisdiction over such person. Here, the assessment has been framed under section 153A on the basis of alleged incriminating material (being the statement recorded under 132(4) of the Act). As noted above, the Assessee had no opportunity to cross-examine the said witness, but that apart, the mandatory procedure under section 153C has not been followed. On this count alone, we find no perversity in the view taken by the ITAT. Therefore, we do not find any substantial question of law that requires our consideration.”
Since the above decision of Hon’ble Delhi High Court is staring on us with a clear finding that incriminating material found in the hands of the third party can be added in the hands of the assessee only upon initiation of proceedings u/s 153C of the Act. Further ld. DR also relied on the decision of ITAT, Rajkot in the case of Ahir Salt and Allied Products (supra), however we are inclined to follow the decision of Hon’ble Delhi High Court in the case of & 2339/Del/2024 Anand Kumar Jain (supra). Therefore, we are inclined to set aside the assessment order passed u/s 153A/143(3) of the Act without jurisdiction. Accordingly, ground no.2 raised by the assessee is allowed.
With regard to approval granted u/s 153D is concerned, we are inclined to keep it open and also not adjudicated any other ground, which are also kept open.
In the result, the appeal being is partly allowed. 15. With regard to Ground No.3 in AY 2012-13, since the facts are exactly similar to Ground No.2 in AY 2010-11 our above findings in AY 2010-11 are applicable mutatis mutandis in Assessment Year 2012-13. Accordingly, the appeal filed by the assessee for AY 2012-13 is partly allowed. 16. To sum up : both the appeals filed by the assessee are partly allowed. Order pronounced in the open court on this 26TH day of September, 2025.