DCIT, CENTRAL CIRCLE, GHAZIABAD, GHAZIAABAD V. M/S FRIENDS CHARITABLE SOCIETY , GHAZIABAD

ITA 4643/DEL/2025

AI Insights

The case involves the Revenue's appeal against the CIT(A)'s decision which annulled the proceedings initiated under section 153C for the assessment year 2010-11 against M/s Friends Charitable Society. The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 2,12,74,000 made by the AO, which was based on incriminating documents related to another person found during search proceedings. The Tribunal examined whether the CIT(A) correctly annulled the proceedings under section 153C, considering the legal provisions and the facts of the case, including the timing and content of the satisfaction notes related to the search and seizure operation conducted on M/s Alankit Group.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840112 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 29-07-2025
• Other Referred Cases: PCIT v G. Lakshmi Aruna, Ratna Sagar Pvt Ltd. ITA No. 169 & 170/Del/2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: RAJ KUMAR; J P SHARMA
• Keywords: Set aside; Unexplained expenditure; Search and seizure
• Section: 132; 153A; 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’, NEW DELHI Before Sh. Sudhir Kumar, Judicial Member AND Sh. Manish Agarwal, Accountant Member ITA No. 4643/Del/2025 :Asstt. Year : 2010-11 DCIT, Central Circle, Ghaziabad Room No. 229, 2nd floor, CGO Complex-1, Hapur Chungi, Ghaziabad, Vs M/s Friends Charitable Society, 95, Katori Mill, Loni Road, Near Hindon Air Force, Mohan Nagar, Ghaziabad- 201007 (APPELLANT) (RESPONDENT) PAN No. AAATF0997R Assessee by : Sh. Raj Kumar, CA & Sh. JP Sharma, CA Revenue by : Ms. Pooja Swaroop, CIT(DR) Date of Hearing: 11.02.2026 Date of Pronouncement: 25.2.2026 ORDER Per Sudhir Kumar, JM: This appeal by the Revenue is directed against the order dated 15.5.2025 of the Ld. Commissioner of Income Tax (Appeal-3), Noida pertaining to assessment year 2010-11 on the following grounds:- 1.Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs. 2,12,74,000 made by the AO by ignoring the facts that the addition made by the AO on the basis of incriminating documents related to other person found during search proceedings. 2. Whether on facts and circumstances of the case and in law, the CIT(A) has erred in allowing the appeal of assessee and annulling the action of the AO i.e. initiation of proceedings u/s. 153C for AY 2010-11 without considering the facts that substitution of date of handing over of seized material in place of date of initiation of search as mentioned in the First Proviso under Section 153C was only a limited purpose to determine the years of abatement of assessment proceedings as provided in Second Proviso to Section 153A and not at all with reference tro Printed from counselvise.com 2 | P a g e powers of AO to make assessment under section 153C, which was separately provided under Section 153C(1) itself b using the phrase for the relevant assessment year or years referred to in Sub Section (1) of Section 153A. 3. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has erred by not considering the fact that even after amendment brought under section 153C(1) w.e.f. 1.4.2017 by inserting the expression ‘six assessment years immediately preceding the assessment year relevant to the previous year in which search conducted’. The First proviso has still not been amended. This forties the view that First proviso to Section 153C never dealt with the period of reckoning of six assessment years for the purposes of making assessment under section 153C(1). 4. Whether on facts and circumstances of the case and in law, the CIT(A) has erred in allowing the appeal of assessee and annulling the action of the AO i.e. initiation of proceedings u/s. 153C for AY 2010-11 without considering the facts that under Second proviso to Section 153A only the abatement of proceedings in case of searched person was provided as on date of initiation of assessment under section 153A or Section 153C could be made due to initiation of search. Further, the act of abatement and the act of assessment are two different functions, having different connotations and purpose and hence the two cannot be equated / interchanged by any stretch of interpretation. The power to make assessment after initiation of search is separately provided in Section 153A(1) itself and not in Second Proviso to Section 153A. Therefore, First Proviso of Section 153C was entirely in different context and it clearly referred to section. 5. Whether on facts and circumstances of the case and n law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,58,00,000 without appreciating the facts that the assessee has taken accommodation entry of Rs. 1,58,00,000 in the form of unsecured loan and said loan was deposited in the bank account of the assessee, which is covered under the definition of assets in view of the provisions of Explanation 2 to section 153A(1) of the Act. It is worthy to mention that the escaped amount i.e. Rs. 1,58,00,000 is for the year under consideration which is much above Rs. 50 lacs in aggregate in the relevant assessment years. Thus, the case of the assessee for the year under consideration is also covered under the fourth proviso r.w.s. Explanation 1 to Section 153A of the Act. Further, the period under consideration is beyond six assessment years but not later than then assessment years and also covered Explanation 1 r.w.s. Explanation 2. 6. That the order of the CIT(A) being erroneous in law and facts be set aside and order of the AO be restored. Printed from counselvise.com 3 | P a g e 2. Brief facts of the case are that a search and seizure operation u/s. 132 of the Act was conducted on 18.10.2019 at the residential as well as business premises of the persons / parties comprising M/s Alankit Group of cases. During the course of search and seizure operation, various incriminating documents / material belonging to the assessee company were found and seized. In this case satisfaction note was recorded and proceedings u/s. 153C of the Act have been initiated with the approval of the Ld. PCIT, Kanpur. Subsequently, notice u/s. 153C of the Act was issued to the assessee company on 2.3.2024 for the year under consideration. In response to notice u/s. 153C of the Act, the assessee filed its ITR on 8.3.2024 manually declaring income of Rs. NIL. Consequently, notice u/s. 143(2) of the Act was issued to the assessee company on 8.3.2024. AO noted that assessee obtained the accommodation entry of Rs. 1,58,00,000 and during the statement recorded on oath, Sh. Sunil Kumar Gupta accepted that commission was charged @3% for providing accommodation entry and the same was received in cash. AO noted that the assessee paid commission of Rs. 4,74,000/- for taking the above accommodation entry was treated as unexplained expenditure u/s 69C of the Act and added to the income of the assessee. AO further noted that during the assessment proceeding the assessee was requested to furnish source of repayment of Rs. 50,00,000/- alongwith supporting documents, however the assessee failed to explain the source of above. Accordingly, the assessment was completed at Rs. 2,12,74,000/- u/s. 153C/143(3) of the Act by making the additions of Rs. 1,58,00,000/-; Rs. 4,74,000/- and Rs. 50,00,000/-. Against the above, assessee appealed before the Ld. CIT(A), who vide his order dated 15.5.2025 has noted that proceedings u/s. 153C are barred by limitation in this case as AY 2010-11 would fall outside the block of 10 assessment years as the date of transfer of satisfaction note by the AO of the searched person to the AO of the non-searched person i.e. 24.6.2022 (AY 2023-24) and by following the various decision of the higher courts, he Printed from counselvise.com 4 | P a g e held that action of the AO in initiating proceedings u/s. 153C for AY 2010-11 is annulled. Aggrieved, Revenue is in appeal before us. 3. Ld. DR relied upon the order of the AO. She submitted that CIT(A) has erred in deleting the addition of Rs. 2,12,74,000 made by the AO by ignoring the facts that the addition made by the AO on the basis of incriminating documents related to other person found during search proceedings. It was further submitted that CIT(A) has erred in allowing the appeal of assessee and annulling the action of the AO i.e. initiation of proceedings u/s. 153C for AY 2010-11 without considering the facts that substitution of date of handing over of seized material in place of date of initiation of search as mentioned in the First Proviso under Section 153C was only a limited purpose to determine the years of abatement of assessment proceedings as provided in Second Proviso to Section 153A and not at all with reference to powers of AO to make assessment under section 153C, which was separately provided under Section 153C(1) itself by using the phrase for the relevant assessment year or years referred to in Sub Section (1) of Section 153A. It was further submitted that CIT(A) has erred by not considering the fact that even after amendment brought under section 153C(1) w.e.f. 1.4.2017 by inserting the expression ‘six assessment years immediately preceding the assessment year relevant to the previous year in which search conducted’. The First proviso has still not been amended. This forties the view that First proviso to Section 153C never dealt with the period of reckoning of six assessment years for the purposes of making assessment under section 153C(1). She further submitted that it was not considered by the CIT(A) that under Second proviso to Section 153A only the abatement of proceedings in case of searched person was provided as on date of initiation of assessment under section 153A or Section 153C could be made due to initiation of search. Further, the act of abatement and the act of assessment are two different functions, having different connotations and purpose and hence the two cannot be equated / interchanged by any stretch of interpretation. The power to make Printed from counselvise.com 5 | P a g e assessment after initiation of search is separately provided in Section 153A(1) itself and not in Second Proviso to Section 153A. Therefore, First Proviso of Section 153C was entirely in different context and it clearly referred to section. She further submitted that Ld. CIT(A) has erred in deleting the addition of Rs. 1,58,00,000 without appreciating the facts that the assessee has taken accommodation entry of Rs. 1,58,00,000 in the form of unsecured loan and said loan was deposited in the bank account of the assessee, which is covered under the definition of assets in view of the provisions of Explanation 2 to section 153A(1) of the Act. It was further submitted that the aped amount i.e. Rs. 1,58,00,000 is for the year under consideration which is much above Rs. 50 lacs in aggregate in the relevant assessment years. Thus, the case of the assessee for the year under consideration is also covered under the fourth proviso r.w.s. Explanation 1 to Section 153A of the Act. Further, the period under consideration is beyond six assessment years but not later than then assessment years and also covered Explanation 1 r.w.s. Explanation 2. In the last he submitted that CIT(A) being erroneous in law and facts be set aside and order of the AO be restored. 4. Ld. AR for the assessee submitted that in the absence of satisfaction note by the AO of searched person, no 153C proceedings can be done and also the impugned assessment year is of 14th year earlier starting from deemed search year u/s. 153C which is AY 2023-24. He submitted that a search u/s 132 on Alankit Group on 18.10.2019 (AY 2020-21) and on the basis of said search, proceedings u/s. 153C initiated on assessee. He further submitted that assessee is a charitable society in the name of Friends Charitable Society, which runs two charitable college institutions namely, Krishna Engineering College and Krishna Dental College. He relied upon the decision of the Hon’ble Supreme Court in the case of PCIT v G. Lakshmi Aruna [2024] 159 taxmann.com 183 (SC) dated 1.12.2023 and the Delhi Tribunal decision in the case of Ratna Sagar Pvt Ltd. ITA No. 169 & 170/Del/2025 dated 21.11.2025. Another contention of Printed from counselvise.com 6 | P a g e the Ld. AR is that the assessment is bared by limitation i.e. 14th year earlier, starting from deemed search year u/s. 153C which is AY 2023-24. Hence, he requested to quash the assessment and revenue’s appeal may be dismissed. 5. We have heard both the sides and perused the records alongwitht the paper book containing pages 1-16 having the copy of Satisfaction note in the name of Krishna Engineering College and Krishna Dental College, satisfaction note by the AO of assssee undated and submissions before the CIT(A). We find that search u/s. 132 on Alankit Group was conducted on 18.10.2019 (AY 2020- 21); the satisfaction note in the name of Krishna Engineering College by the AO of searched party – Alankit on 24.6.2022; satisfaction note in the name of Krishna Dental College by the AO of searched party – Alankit on 24.6.2022; Satisfaction note in the name of Krishna Engineering College by AO of Krishna Engineering College on 26.4.2022 and Satisfaction note in the name of Krishna Dental College by the AO of Krishna Dental College n 26.4.2022. It is noted that no Satisfaction note by the AO of Alankit in the name of the assessee i.e. Friends Charitable Society. It is settled law that in the absence of satisfaction note by the AO of search party, no proceedings u/s. 153C can be made on the assessee. We note that the Hon’ble Karnataka High Court in the case of PCIT vs. G. Laxmi Aruna affirmed the decision of the Tribunal and held that recording of satisfaction note by the AO of searched person is pre-requisite and the same must be prepared by the AO before the transmits records to other AO who has jurisdiction over such other person u/s. 153C and since in the case of the assessee before the Hon’ble Karnataka High Court, satisfaction note was not recorded by the AO of searched person it was held that the Tribunal had rightly quashed assessment on account of lack of jurisdiction. The SLP filed by the Revenue against this decision in the case of PCIT vs G. Laxmi Aruna by the Revenue was dismissed by the Hon’ble Supreme Court in the case of PCIT v G Laxmi Aruna. The Delhi Tribunal in the case of Ratna Sagar (P) Ltd. vs. DCIT in ITA No. 169 & 170/Del/2025 AYrs. 2018-19 & 2019-20 vide order dated Printed from counselvise.com 7 | P a g e 21.11.2025 on identical facts, by following the aforesaid decision of the Hon’ble Supreme Court has quashed the assessment order and allowed the appeal of the assessee. Hence, in our considered view the ratio of the above decisions squarely applies to the facts of the assessee’s case. Thus, respectfully following the above decisions, we hold that assessment made u/s. 153C in the case of assessee is bad in law and without jurisdiction and accordingly, assessment order deserve to be quashed on this count. 6. With regard to other contention of the Ld. AR relating to assessment is barred by limitation is concerned, we find that satisfaction note of AO of Alankit in Krishna Engineering and Krishna Dental was on 24.6.2022 (AY 2023-24) The satisfaction note of the AO of assessee is in the name of assesse is undated. Obviously, it has been recorded after 24.6.2022 i.e. the date of Satisfaction note by the AO of Alankit, hence, stands recorded in AY 2023-24. As a result thereof, the instant assessment year 2010-11 will be 14th year w.e.f. AY 2023- 24 is barred by limitation. Various recent judicial precedents CIT-7 Vs. RRJ Securities Ltd. (2016) 380 ITR 612 (Del), PCIT Vs. Ojjus Medicare (P) Ltd., (2024) 465 ITR 101 (Del) and CIT Vs. Jasjit Singh (2024) 465 ITR 101 (SC) have already settled the issue against the department that the date of satisfaction u/s 153C(1) first proviso which has to be construed as the date of search for the purpose of computing the corresponding assessment years in question as the case herein. Further, it is noted that the date of satisfaction recorded by the JAO is the date of handing over of the documents as held by the Jurisdictional High Court in the case of Pr. CIT, Central-1 vs. OjjusMedicar Pvt. Ltd. ITA 52/2024 dated 03.04.2024 and other connected matters. Hence, following the above ratio, the assessment deserve to be quashed. 7. In view of the aforesaid factual matrix and respectfully following the precedents, we are of the considered view that Ld. CIT(A) has passed a well reasoned order, which does not need any interference on our part, hence, we uphold the same and accordingly, we thus hold that the impugned assessment Printed from counselvise.com 8 | P a g e order dated 30.3.2024 is not sustainable in law in very terms, hence, the same is quashed. All other pleadings between the parties stand rendered academic. Accordingly, the Revenue’s appeal is dismissed. Order Pronounced in the Open Court on 25/2/2026. Sd/- Sd/- (Manish Agarwal) (Sudhir Kumar) Accountant Member Judicial Member Dated: 25/2/2026 *SR BHATNAGGAR* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR Printed from counselvise.com "