SAUDA SECURITIES PVT. LTD.,FARIDABAD V. DCIT, CENTRAL CIRCLE- II , FARIDABAD

ITA 2653/DEL/2018

AI Insights

The case involves appeals by M/s. Sauda Securities Pvt. Ltd against the orders of the Commissioner of Income Tax (Appeals)-2, Gurgaon, which confirmed the actions of the Assessing Officer in issuing notices and making additions under sections 153A and 153C of the Income-tax Act, 1961. The Tribunal examined whether the jurisdiction was correctly assumed and whether the additions made were justified. The Tribunal concluded that the proceedings were initiated improperly as they relied solely on survey material from a third party, not on any incriminating material directly related to the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 36889 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Other Referred Cases: Principal Commissioner of Income-Tax v. Abhisar Buildwell P. Ltd., DCIT Vs. UK Paints (Overseas) Ltd, CIT Vs. Jasjit Singh
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Search and seizure
• Section: 143(3); 143(2); 153A; 153C; 14A

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND MS MADHUMITA ROY, JUDICIAL MEMBER ITA Nos. 2652 & 2653/Del/2018 (Assessment Years: 2011-12 & 2012-13) M/s. Sauda Securities Pvt. Ltd, (merged with and now known as M/s. Akriti Global Traders Ltd), Shop No. E-40, Nehru Ground, Faridabad Vs. DCIT, Central Circle-II, Faridabad (Appellant) (Respondent) PAN: AACCN8212C Assessee by : Dr. Rakesh Gupta, Adv Ms. Shilpa Gupta, CA Shri Saksham Agrawal,CA Revenue by: Shri Surender Pal, CIT DR Date of Hearing 20/02/2025 Date of pronouncement 19/03/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeals in ITA Nos. 2652 & 2653/Del/2018 for AYs 2011-12 and 2012-13, arises out of the order of the Commissioner of Income Tax (Appeals)-2, Gurgaon [hereinafter referred to as „ld. CIT(A)‟, in short] dated 19.01.2018 against the order of assessment passed u/s 153A(1)(b) r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 30.03.2015 by the Assessing Officer, DCIT, Central Circle-II, Faridabad (hereinafter referred to as „ld. AO‟). ITA Nos. 2652 & 2653/Del/2018 M/s. Sauda Securities Pvt. Ltd Page | 2 2. Identical issues are involved in these appeals, hence, they are taken up together and disposed of by this common order for the sake of convenience. 3. The assessee has raised the following grounds of appeal for AY 2011-12:- “1. That having regard to the fact and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction and issuing of notice u/s 153A r.w.s. 153C of the Act, more so when the notice was issued in the name of non- existing entity. 2. That in any case and in any view of the matter, the assessment framed under section 153A(1)(b) of the Act, is bad in law and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. A.O. in making an addition of Rs. 3,68,750/- on account of alleged interest paid on alleged cash deposits and that too in the proceedings u/s 153C of the Act. 4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs. 3,68,750/- is bad in law and against the facts and circumstances of the case. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. A.O. making disallowance of Rs. 36,573/- out of expenses u/s 14A of the Income Tax Act, 1961, that too in the proceedings u/s 153C of the Act. 6. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making disallowance of Rs. 36,573/- u/s 14A is bad in law and against the facts and circumstances of the case. 7. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned order without giving adequate opportunity of being heard. ITA Nos. 2652 & 2653/Del/2018 M/s. Sauda Securities Pvt. Ltd Page | 3 8. That the appellant craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other.” 4. We have heard the rival submissions and perused the material available on record. A search and seizure operation was conducted u/s 132 of the Act at the residential as well as business and office premises of M/s. SRS Group of cases on 09.05.2012. Pursuant to the search, the case of the assessee was centralized vide order u/s 127 of the Act passed by the ld CIT, Faridabad vide order 08.02.2013. During the year under consideration, the assessee was deriving income from business and profession. A survey operation was carried at the premises C-429, 100 Ft Road, Chajjupura, Shahdara, Delhi in SRS Group company and it was found that SRS Group company had received huge money from various individuals / companies in cash on account of “Term Deposits”. Further, these documents also showed that interest was being paid to these parties at regular intervals in cash. Accordingly, the said documents were impounded under various Annexures during the course of survey from SRS Ltd and SRS Real Estate Ltd on 09.05.2012. Notice u/s 153A read with Section 153C of the Act was issued to the assessee on 18.09.2014 requiring the assessee to file return of income for AY 2011-12. The assessee filed its return of income on 21.10.2014 declaring loss of Rs. 3,39,46,206/-. Ultimately the assessment was completed u/s 153A read with Section 143(3) of the Act on 30.03.2015 for the assessee for AY 2011-12 determining the total loss of Rs. 3,35,40,883/-. 5. Before the ld CIT(A), the assessee challenged the very assumption of jurisdiction and issuance of notice u/s 153A read with Section 153C of the Act and claimed that the assessment order framed pursuant to that as void ab initio on the ground that basic jurisdictional condition of Section 153C of the Act were not complied by the ld AO. This ground ITA Nos. 2652 & 2653/Del/2018 M/s. Sauda Securities Pvt. Ltd Page | 4 was dismissed by the ld CIT(A) on the ground that the year under consideration being a abated assessment year and hence, the decision of Hon'ble Delhi High Court in the case of Kabul Chawla would not be applicable. 6. At the outset, it is not in dispute that survey material has been utilized by the ld AO to initiate proceedings on the assessee u/s 153C of the Act on 18.09.2014. In our considered opinion, only a 3rd party search material could be utilized for initiating proceedings u/s 153C of the Act even if the survey and search operation on the 3rd party were carried out simultaneously on the same day. From the page 2 para 3 of the assessment order, it is categorically clear that only a survey material has been utilized for proceedings on the assessee u/s 153C of the Act. This itself proves that very assumption of jurisdiction by the ld AO of the assessee in terms of Section 153C of the Act is legally flawed. 7. Further, we find that the notice u/s 153C of the Act was issued on 18.09.2014. Hence, that date becomes the date of search qua the assessee. Accordingly, the year under consideration becomes unabated assessment order. As stated supra, since there was no incriminating search material which was utilized for the purpose of making assessment on the assessee, and more especially the year under consideration being unabated assessment, addition made by the ld AO would have no legs to stand in view of the decision of the Hon'ble Supreme Court in the case of Principal Commissioner of Income-Tax v. Abhisar Buildwell P. Ltd. reported in [2023] 454 ITR 212 (SC) and DCIT Vs. UK Paints (Overseas) Ltd in Civil Appeal No. 6634/2021 dated 25.04.2023. 8. In view of the aforesaid observations and respectfully following the judicial precedents, the search assessment proceedings framed on the ITA Nos. 2652 & 2653/Del/2018 M/s. Sauda Securities Pvt. Ltd Page | 5 assessee are hereby quashed both on law and the additions made thereon are deleted on law. Accordingly, grounds raised by the assessee are allowed for AY 2011-12. 9. The assessee has raised the following grounds of appeal for AY 2012-13:- “1. That having regard to the fact and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming Jurisdiction and issuing of notice u/s 153A r.w.s. 153C of the Act, more so when the notice was issued in the name of non- existing entity. 2. That in any case and in any view of the matter, the assessment framed under section 153A(1)(b) of the Act, is bad in law and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. A.O. in making an addition of Rs. 7,46,250/- on account of alleged interest paid on alleged cash deposits and that too in the proceedings u/s 153C of the Act. 4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs. 7,46,250/- is bad in law and against the facts and circumstances of the case. 5. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned order without giving adequate opportunity of being heard.” 10. We have heard the rival submissions and perused the material available on record. Original return was filed for AY 2012-13 on 17.09.2012. The time limit for issuance of notice u/s 143(2) of the Act of the Act expired on 30.09.2013. It is not in dispute that the notice u/s 153C of the Act stood issued to the assessee on 18.09.2014. A copy of the said notice is also enclosed in page 4 of the Paper Book. Hence, the date of search qua the assessee would be 18.09.2014 as per the decision of the Hon'ble Supreme Court in the case of CIT Vs. Jasjit Singh reported ITA Nos. 2652 & 2653/Del/2018 M/s. Sauda Securities Pvt. Ltd Page | 6 in 458 ITR 437 (SC). Since, only survey material of a 3rd party were sought to be used in Section 153C proceedings of the assessee, it could be safely concluded that there was no 3rd party incriminating search material available with the ld AO. Hence, in view of decision of Hon'ble Supreme Court in the case of Principal Commissioner of Income-Tax v. Abhisar Buildwell P. Ltd. (supra) and DCIT Vs. UK Paints (Overseas) Ltd referred supra, the assumption of jurisdiction u/s 153C of the Act is legally flawed and deserves to be quashed as was done for AY 2011-12 supra. 11. In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 19/03/2025. -Sd/- -Sd/- (MADHUMITA ROY) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 19/03/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "