ITAT Deletes Additions Due to Unreliable Third-Party Evidence in 153C Proceedings

DCIT Vs Sanjay Jain (ITAT Delhi)

Summary: The ITAT Delhi upheld the order of the CIT(A) deleting additions made under Section 153C, holding that the evidence relied upon by the Assessing Officer lacked credibility and evidentiary value. The case arose from search proceedings alleging receipt of kickbacks and accommodation entries based on electronic chats, third-party statements, and documents obtained from other investigations. The Tribunal noted that key evidence, including statements of a third party and summary sheets, was unreliable, non-contemporaneous, and in some instances created later for investigative purposes. It also emphasized denial of cross-examination and lack of corroborative material directly linking the assessee to alleged transactions. Findings of other authorities and the High Court further weakened the evidentiary basis. The Tribunal concluded that additions cannot be sustained on unverified digital data and doubtful statements, thereby affirming deletion of additions and dismissing revenue’s appeals.

Core Issue: Whether additions made under Section 69A of the Income-tax Act in proceedings initiated under Section 153C—based primarily on alleged incriminating digital evidence, third-party statements (notably of Rajiv Saxena), and materials from Enforcement Directorate and Alankit Group—were legally sustainable, particularly when the assessee denied involvement and challenged the evidentiary credibility and lack of cross-examination.

Facts of the Case

A search and seizure operation was conducted on 30.06.2019 on Sanjay Jain and related persons, wherein certain emails and chat communications were allegedly found indicating manipulation of fertilizer prices and receipt of kickbacks through foreign entities. Initially, proceedings were initiated under Section 153A, but later dropped and replaced with Section 153C proceedings based on additional materials received from searches in the cases of Rajiv Saxena (a Dubai-based intermediary) and the Alankit Group. The Assessing Officer made substantial additions for AY 2010–11 to 2020–21 under Section 69A, alleging undisclosed income in the form of commission/kickbacks routed through complex channels including offshore accounts and accommodation entries.

Assessing Officer (AO) Findings

The AO relied heavily on WhatsApp chats, emails, and digital data allegedly showing collusion between the assessee and officials of fertilizer companies like IFFCO and IPL to manipulate prices. The AO also relied on the statement of Rajiv Saxena recorded under Section 132(4), claiming that large sums received from foreign entities (e.g., Uralkali) were kickbacks ultimately meant for Sanjay Jain. Further, documents like “Uralkali summary sheet” and excel sheets from Alankit Group were used to allege routing of unaccounted money through hawala channels and accommodation entries. Despite the assessee’s request, cross-examination of key witnesses was denied. The AO concluded that the assessee was the ultimate beneficiary of these transactions and made additions accordingly under Section 69A.

CIT(A) Findings

The CIT(A) conducted an extensive evaluation of the evidences and held that the additions were unsustainable. It was observed that the statement of Rajiv Saxena lacked credibility, especially as it emerged that key documents (like the “summary sheet”) were not contemporaneously seized but were later created or produced. The CIT(A) relied on cross-examination in related proceedings, which revealed inconsistencies and admissions that weakened the evidentiary value. Further, reliance was placed on Delhi High Court observations that such documents were not reliable or admissible evidence. The CIT(A) also noted absence of any direct incriminating material found during the assessee’s own search and held that even if any funds were involved, they were linked to separate legal entities, not the assessee personally. Accordingly, all additions were deleted.

ITAT Findings

The ITAT upheld the order of the CIT(A) and dismissed the Revenue’s appeal. It held that the evidences relied upon by the AO—primarily third-party statements and electronic data—were not credible or sufficiently corroborated to justify additions. The Tribunal emphasized that the veracity of digital evidence was not established and no independent inquiry was conducted to substantiate allegations. It also noted that other judicial and quasi-judicial findings (including under the Benami Act) had already rejected similar allegations for lack of evidence. The Tribunal concluded that no conclusive inference could be drawn that the assessee received any unaccounted income or kickbacks, and therefore, no interference with CIT(A)’s order was warranted.

Cases Relied Upon-The decision relied upon:

Coordinate Bench ruling in Sushen Mohan Gupta vs. ACIT (ITA Nos. 2999–3005/Del/2024, dated 20.02.2025), where similar reliance on Rajiv Saxena’s materials was rejected due to lack of evidentiary value.

Findings of the Delhi High Court (Bail Order dated 07.03.2024), which held that documents like the “summary sheet” were not contemporaneous records and lacked admissibility under the Evidence Act.

Tribunal decisions in related cases (e.g., Amol Awasthi), where identical evidence was held unreliable.

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FULL TEXT OF THE ORDER OF ITAT DELHI

These appeals and cross objections preferred by the revenue and the assesseeagainst the common orders of the Ld. Commissioner of Income-tax (Appeals)-23 (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in appeals filed before him against the orders of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short) passed u/s 153C r.w.s. 143(3) of the Income-tax Act, 1961 (hereafter referred to as ‘the Act’). Further details of the orders of the lower authorities are as under:-

2. Heard and perused the records and relevant facts can conveniently be picked from the order of ld.CIT(A) itself, which narrates that a search was conducted by the Deputy Director of Income Tax, [DDIT)-Investigation, Unit 7(3) on Sanjay Jain and others on 30.06.2019. During the search and seizure operation, incriminating evidence in the form of mail and chat communication was found revealing that appellant and his brother Shri Sanjay Jain, in connivance with some other persons, namely, Shri Udai Shankar Awasthi, his son Shri AmolAwasthi, Shri Parvinder Singh Gahlaut, his son Shri VivekGahlaut, Shri AmendraDhari Singh were working with close proximity to Indian Potash Limited (IPL) and Indian Farmers Fertilizer Co-operative Organization (IFFCO) and have been influencing the fair price/market price at which fertilizer/fertilizer products are procured by them and other Indian consumers. Various incriminating chats between the appellant, Shri Parvinder Singh Gahlaut, Managing Director of IPL, manipulation of fertilizer prices.

2.1 As search was conducted on appellant and others, notices u/s 153A were issued on 11.09.2021 and re-assessment proceedings were initiated. During Assessment u/s 153A, it was ascertained by the then Assessing Officer that there was a need to send FT&TR references to get information from certain foreign jurisdictions to ascertain and confirm the facts that have emerged from the perusal of incriminating material seized during search.

2.2 However, during the pendency of 153A proceedings, an information was received from another Assessing officer that a search has been conducted in the case of Sh. Rajiv Saxena on 30.06.2019 (a Dubai based middle-man, who facilitated the receipt of kick-backs by Indians in offshore accounts and also facilitated same to be received in India also through his connection with Indian entities to whom payments were used to be made sans any economic or business rationale. The evidences shared by the AO of Sh Rajiv Saxena and satisfaction note received were perused and it was decided by the AO that the same findings and material need to be considered along with the material available on record related to search on Sanjay Jain and others. Accordingly, it was decided that proceedings pending u/s 153A needs to be abated/dropped and fresh proceedings u/s 153 C needs to be initiated to avoid multiple rounds of assessments.

2.3 Meanwhile, another satisfaction note and seized material was received from another Assessing Officer, who was having jurisdiction over the cases related to search in the case of Alankit Group conducted on 18.10.2019. From the perusal of new material received along with satisfaction note, available on record, it was found that the findings and material shared by the AO of Alankit Group also needs to be considered along with the material already available on record related to search on Sanjay Jain and others and Sh Rajiv Saxena. Already, it has been decided that proceedings pending u/s 153A were to be abated/dropped in view of the received satisfaction note and seized material from the AO of Sh. Rajiv Saxena to initiate fresh proceedings u/s 153C. In view of new satisfaction note and material received it was decided that same would be incorporated in the satisfaction note and same would be considered in same new 153C proceedings.

2.4 Hence effectively, the proceedings were initially initiated u/s 153A in this case but were later dropped to initiate fresh 153C Proceedings in view of satisfaction note and seized materials received from the AOs of search conducted on Alankit Group and Sh. Rajiv Saxena.

2.5 Based on the findings of the Search & Seizure proceedings and the material gathered, proceedings under Section 153C of the Act were initiated for AY 2010-11 to 2020-2021, making additions to the returned income of the appellant for each of these years. The additions made in Assessment year 2010-11 to 2020-21 are tabulated as under:

2.6. Aggrieved by these assessment orders of the Assessing Officer, the appellant filed appeals, which were allowed and department is in appeal.

3. The assessee is an individual and is engaged through partnership firms in the business of fertilizers and other products for the last almost 4 decades.

He has been engaged businesses as sole proprietor and in partnership firms is apparent from his returns of income filed and also when not anything contrary was found during the course of the income-tax search on him conducted on 30/06/2019 where the assessment proceedings u/s 153A of the Act were abated due to no incriminating information found therein and nothing adverse has also been mentioned in these assessment orders for any of the assessment years.

4. It can be observed from the assessment order for AY: 2020-21 that assessing officer has relied alleged incriminating chats between high functionaries of Indian Potash Limited &IFFCO with Sanjay Jain allegedly showing how the fertilizers products/fertilizers price were being artificially inflated. In the assessment order some whatsapp messages extracted from the phone of Sanjay Jain has been reproduced to how that how Sanjay Jain was negotiating with foreign company officials and also Indian counterparts. Based on these alleged conversations assessing officer concluded that there was some nexus of Sanjay Jain and AD Jain with their associates who were buyers of fertilizers and fertilizers products and participating in the tenders floated by Madras Fertilizers Ltd. At several places assessing officer had observed some nexus being formed by Sanjay Jain with Pankaj Jain and Sunil and other named persons. Assessing Officer has also relied some digital data from e-mail of one Archit Jain to conclude about evidences engaging manipulation of prices of fertilizers products. Then, ld. Assessing Officer has relied certain findings of Enforcement Directorate in investigation being conducted with regard to allegation of artificial fixation of prices of fertilizers and fertilizers products in India.

4.1 In regard to issue related to search on Rajiv Saxena ld. Assessing Officer has relied the statement of Rajiv Saxena recorded u/s 132(4) wherein allegedly he had stated that money received from M/s Uralkali in his entities were actually commission income arising out of imports made by M/s IPL and IFFCO from Uralkali. Allegedly this money was actually paid for beneficial use of Shri Sanjay Jain who is Indian agent of various foreign fertilizers companies. The relevant extract of the statement have been reproduced in the assessment order. The contents of one document ‘Uralkali summary sheet’ allegedly seized from the premises of the Rajiv Saxena was made basis to conclude that Rajiv Saxena has made cash payment to the tune of USD 61.18 million to Sanjay Jain in India as instructed by Shri Pankaj Jain.

4.2 The assessing officer also mentioned that the content of summary sheet was corroborated by proof of inward remittance to certain entities in India which had connection with Shri Rajiv Saxena.

4.3 Ld. Assessing officer observed that from reference to FT & TR it was established that entities of Rajiv Saxena received money from the Uralkali Gibralter and the same was subsequently transferred to the entities beneficially owned by Shri Pankaj Jain, Vivek Gahlaut and Shri Amol Awasthi on behalf of and for the beneficial use of Shri Sanjay Jain, PS Gahlaut (MD of IPL) and Shri Uday Shankar (MD of IFFCO) respectively.

4.4 We find that in the assessment order it was mentioned that assessee had demanded right cross examination of key persons and had alleged that as a whole addition is being made on the basis of statement alone therefore, cross examination be granted but this was declined by the assessing officer by relying certain judicial decisions.

4.5 It comes up that assessee had also questioned the basis of making addition in his hand because alleged transaction belong to companies/entities of Shri Pankaj Jain who is an independent legal entity. However, substantive evidence was made in the hands of assessee in the respective years.

5. Then in regard to issue related to search of Alankit Group assessing officer had relied some pages of excel file titled “JPS” to conclude that expenses were being paid by Sanjay Jain to Alok Kumar Agarwal in lieu of which RTGS is being made from various Kolkata based descript companies to Rasraj Marketing. The ledger entry named “LALIT-A/c Com” was relied by assessing officer to assert that it shows that commission is being paid by Sanjay Jain @ 3.70% of Rs.10.83 crores to Shri Lalit against transfer of ownership of Rasraj Marketing to various companies controlled by Shri Sanjay Jain. Another entry was found whereby allegedly commission was paid @ 8% of Rs.8.15 crores to Alok Kumar Agarwal of which commission @ 3.75% is further paid to Shri Alok Kumar Agarwal for transfer of ownership of Atoll Vyaapar to various companies controlled by Shri Sanjay Jain.

5.1 Accommodation entry were also allegedly found being received under the garb of consultancy services by Alok Kumar Agarwal and his son Ankit Agarwal from Dubai based bank account of the entities of the Triton group involving transactions through Hawala channel and this company Triton Trading DMCC is allegedly owned and controlled by Sanjay Jain and Pankaj Jain.

5.2 Statement of one Sushil Kumar Pachisiya is reproduced in the assessment order and same has been relied to conclude that Alok Kumar Agarwal has facilitated the movement of unaccounted funds of Sanjay Jain and trading associates by raising bogus bills from their group entities to Triton BMCC. The money was received in the Alankit Group of companies a/c and later equivalent cash was paid to Shri Sanjay Jain& Others, accordingly, additions were made.

6. Ld. DR has heavily relied these findings to contend that assessing officer has relied of electronic evidence which were duly corroborated and it was asserted on behalf of the department that ld. CIT(A) has far stretched the rule of evidence to doubt the evidences relied by the assessing officer.

7. We find that ld. CIT(A) has very cautiously and very extensively gone through the material which was relied by ld. assessing officer to conclude that the oral statement of witness and documents which were relied by the ld. assessing officer lack sufficient credibility and the veracity stood impeached.

8. We find that ld. CIT(A) has taken into consideration the fact that when Rajiv Saxena was deported from Dubai to India on 31.01.2019 by Enforcement Directorate no laptop or any electronic device was found or seized and it was undisputed that whatever material has been relied by the assessing officer in the form of ‘summary sheet’ was brought from Dubai later on.

8.1 Ld. CIT(A) has extensively examined and relied the statement of Rajiv Saxena by way of cross examination in the case of Mr. U.S. Awasthi, as relied by the present assessee and reproduced in para 9 of the impugned order that the evidences which assessing officer has relied were not credible. We reproduce one particular question to show as to how poor was the credibility of evidence relied by the assessing officer. Ld. CIT(A) has recorded following question in para 9 as reproduced from the relevant question and answers of Mr. Rajiv Saxena;

“Q. 17 by VKB. Did Income-tax Authority anytime seize anything beyond what you have gave, because laptop was seized by ED so there was no seizure by the Income-tax department.

Ans. I tell you, laptop was seized by the ED but because the ED wanted me to work on certain information /correlate certain information of them, a copy of the laptop was given to me on a hard drive which I copied to a new laptop and that laptop was then was with me which was seized by the Income-tax Authorities.”

Q.37 by VKB. So, I take it like that, this was the statement given by you on the basis of what authorities in India said to you. Is it correct?

Ans. After understanding from them.”

Q.58 by VKB. This you could have given to ED also said that this document is there and you said that there is no document.

Ans. ED had my laptop. I was not even be investigated for the IFFCO matter by ED in 2019 and 2020. My entire questioning was related to Moser Bear and Augusta Westland but AD Singh has right to answer any question which they feel like or any information which they have and it is my obligation to answer the question to the best of my knowledge.”

8.2 Then ld. CIT(A) has relied a Coordinate Bench decision in case of Sushen Mohan Gupta Vs. ACIT, ITA No. 2999 to 3005/Del/2024 dated 20.502.2025, who was also searched by the department and in whose case also reliance was placed by the department on the document found from/given by/seized from Mr. Rajiv Saxena and on whose statement, it appears proceedings u/s 153C of the Act in the case of that assessee was initiated. Ld. CIT(A) has relied the Coordinate Bench finding that Rajiv Saxena and his son brought a pen drive and document on 04.03.2019 and handed over the same to ED and based upon the facts it was concluded that the same was not incriminating evidence so far as Sushen Mohan Gupta is concerned as these electronic evidence were already with the department. The relevance of these findings is that Coordinate Bench has concluded that Enforcement Directorate had collected the evidences not in any contemporaneous search or arrest of any person but were procured subsequently and same have been relied by the assessing officer, as sacrosanct.

8.3 Then ld.CIT(A) has observed that all these evidences collected by the Enforcement Directorate were subject matter of an order dated 07.03.2024 of Hon’ble High Court in Bail Application of the assessee and Hon’ble High Court has made categorical observations that statement of Rajiv Saxena was not dependable. At page 31 while reproducing observation of Hon’ble High Court ld. CIT(A) has taken note of the fact as per Rajiv Saxena the evidence which ED was relying and genesis of which has been explained by Rajiv Saxena in his statement dated 05.06.2021 ‘was created by the staff of Rajiv Saxena’ to answer the question by the ED. We consider it appropriate to reproduce the observation of Hon’ble High Court herein below:

“79. The paper/Excel sheet which has been handed over by Rajeev Saxena to the respondent is not a document or regularly kept accounts in the course of business according to a set of rules or system in terms of Section 34 of the Evidence Act but it is simply a paper created by the staff of Rajeev Saxena for the investigating agencies. It is thus, not a contemporaneous document and the entries contained therein are prima facie not admissible.”

9. Thereupon ld. CIT(A) has concluded as follows:

“21. Thus, when the Hon’ble jurisdictional Delhi High Court has categorically held that statements, evidences given by Mr. Rajiv Saxena or any other evidence in the possession of the ED, Income-tax Department do not show involvement of Mr Sanjay Jain, the assessee, then the allegation of the AO that the assessee was the beneficiary falters flat as the AO has also not brought anything more than what was before the Hon’ble Delhi High Court in the above.”

10. We also find that ld. CIT(A) has also benefited the assessee on the basis that if at all any amounts were received the same was received by the company of the assessee.

11. We are of the considered view that the findings of ld. CIT(A) require no interference as alleged incriminating statement and document relied by the assessing officer were not of such credibility that they can be made basis for drawing conclusive inferences that assessee had received any cash in the form of kick back for procuring favour to Uralkali regarding import of fertilizers by Indian companies.

12. Connected to the allegations of receiving secret commission by the assessee, if the issue arising out assessee receiving accommodation entry through Alankit Group entities is examined, we find that ld. CIT(A) has duly appreciated the fact that adjudicating authority under the Prohibition of Benami Property Transaction Act, 1988 in its order dated 28.03.2025 has examined the issue and concluded that there is no evidence to support the allegations of income tax authorities under the said Act against the assessee to have received any amount from Triton through Alankit Group Companies. It was observed that none of the search by various agency including income tax department yielded any evidence of any corresponding consideration in any manner including cash paid in India or overseas by the assessee to Triton Trading DMCC to Alankit Group.

13. Ld. CIT(A) has appreciated the fact that the excel sheet title “JPS” is not a cogent evidence to connect the assessee, with whatever transaction were allegedly recorded in the electronic form. Here itself we will like to observe that ld. AO has heavily relied electronic evidences but made no efforts to show in the assessment order that veracity of these digital devices and evidences was kept intact. Thus the observations made in other proceedings about same set of evidences were rightly considered by ld. CIT(A) to hold electronic evidences not reliable to arrive at conclusive findings.

14. Pertinent to mention is that ld. CIT(A) has also taken into consideration the Tribunal findings in the case of Amol Awasthi which is based on exactly same facts that no evidentiary value can be attached to this material.

15. In the light of aforesaid discussion we have no hesitation to conclude that the findings arrived by the ld. CIT(A) require not interference. As a consequence of aforesaid the ground raised by the department deserves to be rejected. The appeals filed by the assessee become academic and accordingly we dismiss the appeals of department and cross appeals of assessee are also dismissed for statistical purposes.

Order pronounced in the open court on 22.04.2026