Shirish Chandrakant Shah Vs DCIT (ITAT Mumbai)
The Mumbai ITAT partly allowed appeals filed by the assessee for AYs 2013-14 to 2018-19 arising from assessments under Section 143(3) read with Section 153C of the Income-tax Act, 1961. For AY 2013-14, the Assessing Officer had initiated Section 153C proceedings following a search in the case of Shri Naresh Manakchand Jain, alleging that incriminating documents pertaining to the assessee had been found. The assessee challenged the jurisdiction under Section 153C, absence of satisfaction notes, approval under Section 153D, and additions based on accommodation-entry transactions. The Assessing Officer had made commission additions by applying a 1.75% rate to transactions allegedly facilitated through conduit entities, including M/s Secunderabad Healthcare Ltd., M/s L.N.Polyesters Ltd., M/s Lakeview Land Private Ltd. and M/s Sally Real Estate Pvt Ltd.
Before the Tribunal, the assessee argued that the jurisdictional requirements under Section 153C had not been fulfilled and that the additions were not based on incriminating documents seized during the search of Shri Naresh Manakchand Jain. Reliance was placed on Abhisar Buildwell Pvt. Ltd. (149 Taxmann.com 399) and U.K.Paints (Overseas) Ltd. (150 Taxmann.com 108). The assessee also sought application of the 0.47% commission rate adopted by the Tribunal in its own case for AYs 2015-16 to 2018-19.
The CIT(A) had rejected the jurisdictional objections, observing that proceedings under Section 153C had been initiated pursuant to seized documents and that subsequent investigation-wing information could also be considered during assessment. The CIT(A) also noted specific approval under Section 153D by the Addl. CIT, Central Range-2, Mumbai, vide letter dated 23.04.2021. On merits, the CIT(A) sustained the 1.75% commission estimation.
The ITAT upheld the validity of the Section 153C proceedings. It noted that the CIT(A) had found that the proceedings were initiated pursuant to incriminating documents and that approval under Section 153D had been obtained. The Tribunal also held that the assessee’s assertion regarding absence of a satisfaction note was unsupported by cogent evidence. It further held that once jurisdiction had been validly assumed, subsequent information received from the investigation wing could be considered by the Assessing Officer. Accordingly, the legal grounds challenging jurisdiction were dismissed.
On the merits of the commission additions, however, the Tribunal followed its earlier order in the assessee’s own case for AYs 2015-16 to 2018-19, ITA Nos.5799-5802/Mum/2025 common order dated 16.03.2026, in which a commission rate of 0.47% had been estimated. Since the Assessing Officer had applied 1.75% in the present proceedings, the Tribunal directed the Assessing Officer to apply 0.47% on the aggregate transaction values adopted in the assessment order. Grounds relating to the commission additions were therefore partly allowed.
For AYs 2014-15 to 2016-17, the Assessing Officer had similarly applied a 1.75% commission rate and made additions of ₹5.16 lakh and ₹1.18 lakh for AY 2014-15, ₹1.28 lakh for AY 2015-16 and ₹56.55 lakh for AY 2016-17. Applying its AY 2013-14 adjudication, the Tribunal directed the 0.47% rate for these years and dismissed the legal grounds.
For AY 2017-18, the Assessing Officer had made commission additions of ₹159.13 lakh at 0.80% and ₹3.32 lakh at 1.75%. The Tribunal directed application of the 0.47% rate. A separate addition of ₹93.62 lakh under Section 68 relating to cash deposited during the demonetization period was restored to the CIT(A) for fresh consideration. The Tribunal noted that cash of ₹124.83 lakh had been found in bank lockers, of which ₹93.62 lakh was subsequently deposited, and that the assessee had not provided a cogent explanation regarding its source. Nevertheless, considering the assessee’s stated 25% ownership and to provide an opportunity to defend the claim, the issue was remanded to the CIT(A).
The Tribunal also upheld the ₹11.66 lakh addition under Section 69A for the assessee’s proportionate share of jewellery and foreign currency found in family lockers. It held that the assessee had failed to provide cogent or plausible evidence establishing the disclosed source of those assets. For AY 2018-19, commission additions of ₹18.22 lakh at 0.80% and ₹2.06 lakh at 1.75% were similarly directed to be recomputed using the 0.47% rate, while the legal grounds were dismissed. All appeals were ultimately partly allowed.
Cases Discussed
- Shirish Chandrakant Shah’s own case, ITA Nos.5799-5802/Mum/2025 common order dated 16.03.2026
- Abhisar Buildwell Pvt. Ltd., 149 Taxmann.com 399
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. Aforesaid appeals by assessee for captioned assessment years have identical facts and issues. First, we take up appeal for Assessment Year (AY) 2013-14 which arises out of an order of learned Commissioner of Income Tax (Appeals)-48, Mumbai [CIT(A)] dated 13.11.2025 in the matter of an assessment framed by Ld. AO u/s 143(3) r.w.s. 153C of the Act on 29.04.2021. The grounds of appeal as filed along with Form No.35 dated 24.12.2025 read as under: –
1. That the orders passed by Ld. AO u/s 153C of the Act is bad in law and is passed in contravention of prevailing law as well as facts of the case, therefore liable to be annulled.
2. That the additions made by Ld. AO to the income of assessee in order passed u/s 153C of the Act are not tenable under the law as no additions were made to the income of assessee relying on alleged incriminating documents found and seized during the course of search and seizure action carried out in the case of Shri Naresh Manakchand Jain which were claimed to be pertaining to assessee.
3. That the assessment order passed by Ld. AO u/s 153C of the Act is further illegal and not tenable under the law as no satisfaction note was recorded either by AO of searched person or AO of assessee prior to issue of notice u/s 153C of the Act.
4. That the appellate order passed by Ld. CIT(A) and the assessment order passed by Ld. AO are perverse as the proceedings are completed both by Ld. AO as well as Ld. CIT(A) without providing satisfaction note recorded u/s 153C of the Act and requisitioned incriminating material for rebuttal.
5. That the assessment order passed by Ld. AO u/s 153C of the Act is also not sustainable under the law no valid approval u/s 153D of the Act was availed prior passing of order u/s 153C of the Act.
6. That the Ld. AO grossly erred in making additions of Rs.6,73,750/- on account of assumed commission from transactions on account of alleged accommodation entries through M/s Secunderabad Healthcare Limited.
7. That the Ld. AO grossly erred in making additions of Rs. 92,17,2001- on account of assumed commission from transactions in bank account of M/s LN Industries India Limited despite the fact that the bank contained inter-group transactions and additions on the basis of seized material have already been made.
8. That the further addition made by Ld. AO of Rs. 7,63,178/- on account of assumed commission through M/s Lakeview Land Private Limited is also not tenable being made only on presumptions and duplicate in nature
9. That the further addition made by Ld. AO of Rs.78,652I- on account of assumed commission through M/s Sally Real Estate Private Limited is also not tenable being made only on presumptions and duplicate in nature.
2. The Ld. AR advanced arguments on legal grounds as well as on merits and assailed the impugned additions. Reference has been made to the decisions of Tribunal in assessee’s own case having similar facts. The Ld. AR contended that the jurisdictional requirements of Sec.153C were not fulfilled and since no addition was made relying on alleged incriminating documents found in the case of third-parties, no further addition could be made in the hands of the assessee. On merits, Ld. AR pleaded for applying profit rate of 0.47% as applied by Tribunal in assessee’s own case for AYs 2015-16 to 2018-19 (ITA Nos.5799-5802/Mum/2025 common order dated 16.03.2026). The copy of the order has been placed on record. The Ld. CIT-DR also advanced arguments and supported the orders of lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under.
Assessment Proceedings
3.1 The assessee filed return of income on 31.07.2014 at Rs.1.94 Lacs. Pursuant to search action, an assessment was framed on the assessee u/s 143(3) r.w.s. 153A on 19.12.2019 at Rs.48.76 Lacs. Subsequently, present proceedings u/s 153C were initiated by Ld. AO on the ground that incriminating documents pertaining to the assessee were found and seized during the course of search and seizure action carried out by the department in the case of Shri Naresh Manakchand Jain. Accordingly, the case of the assessee was covered u/s 153C and a notice u/s 153C was issued by Ld. AO to the assessee on 24.12.2020. In response, the assessee filed return of income on 10.02.2021 at Rs.1.94 Lacs. During the course of assessment proceedings, notices u/s 142(1) were issued calling for various details from the assessee.
3.2 The first additionas made by Ld. AO was on the basis of accommodation entries allegedly provided through M/s Secunderabad Healthcare Ltd. (SHL). The same was pursuant to information as received from investigation wing shared on 05.04.2021 regarding search action at the premises of Shri Nishant Niyati and recovery of several incriminating documents related to various persons. A document was recovered in respect of M/s Secunderabad Healthcare Ltd. (SHL) in which this entity was one of the buyers and paid Rs.195 Lacs Bayana amount to Shri Prateek Sanghvi. Since SHL was conduit company of the assessee, it was concluded by Ld. AO that all the transactions were caried out by this entity at the instance of the assessee only. The real income was to be assessed in the hands of the assessee. Shri Nishant Niyati, in recorded statement, stated that total cash amount of Rs.3.85 Crores was received and the assessee admitted commission rate of 1.75% on total value of transactions. Accordingly, Ld. AO proceeded to assess commission income of 1.75% on total transaction value of Rs.3.85 Crores and show-caused the assessee. However, the assessee did not respond to show-cause notice and largely remained non-compliant.
3.3 It was observed by Ld. AO that the assessee facilitated tax free capital formation by advancing bayana amount to Shri Prateek Sanghvi and thereafter cancelling the deal. The forfeiture of bayana amount would become tax-free capital of the beneficiaries. The amount of bayana as well as commission amount would be transferred in cash through unaccounted means. The assessee’s conduit entity facilitated such transactions to the extent of Rs.3.85 Crores on which Ld. AO applied commission rate of 1.75% to make addition of Rs.6,73,750/-.
3.4 The second addition was of commission income on similar accommodation entries provided through M/s L.N.Polyesters Ltd. (LNPL). This was also pursuant to information received from investigation wing on 25.03.2021 indicating that this entity also facilitated similar payments. The Ld. AO applied commission rate of 1.75% to transaction value of Rs.52.66 Crores to make addition of Rs.92.17 Lacs.
3.5 Similar facilitation was allegedly provided by another conduit entity M/s Lakeview Land Private Ltd. (LLPL). The Ld. AO applied commission rate of 1.75% on transaction value of Rs.436.06 Lacs to make addition of Rs.7.63 Lacs.Similar estimation was made for M/s Sally Real Estate Pvt Ltd. to make addition of Rs.78,652/-. Finally, the assessment was framed after adding estimated commission @1.75% in the aforesaid manner. Aggrieved, the assessee preferred further appeal against the same.
Appellate Proceedings
4.1 The assessee raised a pertinent legal argument that no satisfaction note of Shri Naresh Manakchand Jain or satisfaction note of AO of the assessee was on record of Ld. AO. The said document was not provided to the assessee. The assessee also stated that no addition was made on the basis of documents found during search on Shri Naresh Manakchand Jain and therefore, impugned additions could not be made in the hands of the assessee in the absence of incriminating documents found during search on Shri Naresh Manakchand Jain. Reference was made to the decision of Hon’ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. (149 Taxmann.com 399) and subsequent decision in U.K.Paints (Overseas) Ltd. (150 Taxmann.com 108) to support the arguments.
4.2 The Ld. CIT(A) rejected the legal ground on the logic that proceedings were initiated by Ld. AO u/s 153C pursuant to incriminating documents found and seized during search on Shri Manakchand Jain. During the ensuing assessment proceedings, further information was received which indicated that the assessee was providing accommodation entries through conduit entities as mentioned by Ld. AO. Therefore, the jurisdiction was valid. On the issue of approval u/s 153D, Ld. CIT(A) observed that the order was obtained with specific approval of Ld. Addl. CIT, Central Range-2, Mumbai vide letter dated 23.04.2021. The same was clear and unambiguous statement on record. Therefore, this legal ground was rejected. On the legal grounds that no satisfaction note was recorded by Ld. AO u/s 153C, Ld. CIT(A) observed that the assessment order and subsequent approval u/s 153D confirm that the jurisdictional facts were duly examined by Ld. AO as well as by the supervisory authority. The statutory requirement of approval u/s 153D, which was duly met, provides the necessary safeguard and oversight for Sec.153C proceedings. In yet other legal ground that the assessment was invalid because the additions were not based on documents seized in the search of Shri Naresh Manakchand Jain but on the other information received subsequently, Ld. CIT(A) held that once jurisdiction was validly assumed, Ld. AO was not barred from considering other material that comes to his notice during the course of assessment proceedings. The information received from the other investigation wing was incriminating material in its own right and Ld. AO was duty bound to consider the information received from investigation wing. Therefore, the proceedings were valid. Finally, the legal grounds as urged by the assessee were rejected.
4.3 On merits, the assessee sought exclusion of intra-group transactions. However, the benefit of the same was not granted by Ld. CIT(A) for want of supporting evidences and the estimation of 1.75% was held to be reasonable rate for such activities. Finally, the appeal was dismissed against which the assessee is in further appeal before us.
Our findings & Adjudication
5. So far as the issue on merits is concerned, we find that the same is covered by earlier order of Tribunal in assessee’s own case for AYs 2015-16 to 2018-19 (ITA Nos.5799-5802/Mum/2025 common order dated 16.03.2026). The co-ordinate bench, at para-13 of the order, estimated commission rate of 0.47% on the turnover of this very assessee. In the present case, Ld. AO has estimated commission rate of 1.75%. Therefore, following the aforesaid estimation of co-ordinate bench, we direct Ld. AO to apply commission rate of 0.47% on aggregate value of transactions as taken by Ld. AO in the assessment order. Ground Nos. 6 to 9 stand partly allowed.
6. Ground Nos.1 to 5 are legal grounds assailing the jurisdiction of Ld. AO. We find that all these issues have adequately been dealt with by Ld. CIT(A) in the impugned order. As rightly noted by Ld. CIT(A), the present proceedings were initiated by Ld. AO u/s 153C pursuant to incriminating documents found and seized during search on Shri Manakchand Jain. During ensuing assessment proceedings, further information was received which indicated that the assessee was providing accommodation entries through conduit entities as mentioned by Ld. AO. On the issue of approval u/s 153D, it has been observed by Ld. CIT(A) that the order was passed with specific approval of Ld. Addl. CIT, Central Range-2, Mumbai vide letter dated 23.04.2021. The same was clear and unambiguous statement on record. On the legal grounds that no satisfaction note was recorded by Ld. AO u/s 153C, Ld. CIT(A) observed that the assessment order and subsequent approval u/s 153D confirm that the jurisdictional facts were duly examined by Ld. AO as well as by the supervisory authority. The statutory requirement of approval u/s 153D, which was duly met, provides the necessary safeguard and oversight for Sec.153C proceedings. We concur with the same. Upon perusal of assessment order, we find that all the jurisdictional requirements have duly been fulfilled by Ld. AO. The assertion of Ld. AR that there was no satisfaction note u/s 153C is bald assertion which are not supported by any cogent evidence on record. The onus is on assessee to support this assertion. In the absence of any such evidence on record, this argument could not be accepted. Another argument that impugned addition could not be made in the absence of any addition based on documents seized in the search of Shri Naresh Manakchand Jain is also to be rejected since once jurisdiction was validly assumed, the subsequent information received from investigation wing could very well be considered by Ld. AO in the present assessment proceedings. We concur with the adjudication of Ld. CIT(A) on this aspect. Ground Nos. 1 to 5 stand dismissed. The appeal stands partly allowed.
Assessment Years 2014-15 to 2016-17
7. In AY 2014-15, an assessment was framed against the assessee u/s 143(3) r.w.s. 153A on 19-12-2019. Referring to search in the case of Shri Naresh Manakchand Jain, Ld. AO initiated fresh proceedings u/s 153C. As in AY 2013-14, Ld. AO made twin additions of Rs.5.16 Lacs & Rs.1.18 Lacs respectively by estimating commission rate of 1.75%. Similar are the facts in AYs 2015-16 & 2016-17 wherein Ld. AO made addition of Rs.1.28 Lacs & Rs.56.55 Lacs respectively by applying commission rate of 1.75%. Aggrieved, the assessee is in further appeals before us in all these years.
8. Facts being pari-materia the same as in AY 2013-14, our adjudication therein would, mutatis mutandis, apply to all these years. The Ld. AO is directed to apply commission rate of 0.47%. The legal grounds stand dismissed. All these appeals stand partly allowed.
9. Assessment Year 2017-18
9.1 In similar assessment u/s 143(3) r.w.s. 153C order dated 29.04.2021, Ld. AO made addition of Rs.159.13 Lacs being estimated commission @0.80%. Another addition of Rs.3.32 Lacs was made by applying commission rate of 1.75%. These additions stood confirmed by Ld. CIT(A) and the same has been agitated before us. Taking the consistent view, we direct Ld. AO to apply rate of 0.47% on these transactions. The corresponding grounds stand partly allowed.
9.2 The Ld. AO has made another addition of Rs.93.62 Lacs which is based on information received fromTax recovery officer indicating cash deposit of Rs.93,62,250/- during demonetization period in assessee’s Bank Account No.13100100007119 held with Bank of Baroda Branch. In the absence on any explanation from the assessee, the said amount was added as unexplained cash credit u/s 68.
During first appeal, the assessee urged that the bank statement would reveal that there was no such cash deposit as alleged by Ld. AO and further, these deposits stood already assessed in AY 2016-17. The Ld. CIT(A) noted that cash of Rs.124.83 Lacs was found in the bank lockers. After assessee’s father was allowed to withdraw 1/4th of the share, the remaining amount of Rs.93.62 Lacs (representing the share of the assessee and other two defaulters were deposited in the bank account). The issue was source of cash as found in the locker which belong to assessee’s family which was subsequently been deposited by the authorities. The assessee failed to explain the source of the same and accordingly, the same was rightly added in the hands of the assessee.
We find that this cash was found in the bank lockers. The complete onus to prove the source of the same was on the assessee. However, the assessee has failed to furnish any cogent or plausible explanation as to the source of the same. Keeping cash in the locker, by itself, would indicate that the cash was sourced out of unexplained sources. However, it would appear that the assessee is owner to the extent of 25% only. The Ld. AR has also contended that this income has been assessed during AY 2016-17 which is not borne out of the records. Nevertheless, to provide fair opportunity to the assessee to defend its stand, we restore this issue to Ld. CIT(A) for fresh consideration with a direction to the assessee to plead and prove its case forthwith. The corresponding grounds stand allowed for statistical purposes.
9.3 The Ld. AO made another addition of Rs.11.66 Lacs which was pursuant to SEBI action on various lockers held by assessee’s family with Saraswat Bank and Bank of Baroda wherein valuables in the shape of Jewellery, cash & foreign currency was found. As per SEBI order, the assessee was owner to the extent of Ils. The proportionate share of the assessee for Rs.11.66 Lacs was accordingly added in the hands of the assessee u/s 69A. The Ld. CIT(A) upheld the addition on the ground that the onus was on assessee to prove that the assets were acquired out of disclosed sources. The assessee failed to do so and therefore, the addition was justified. Aggrieved, the assessee is in further appeal before us. We concur with the adjudication of Ld. CIT(A) since these assets viz. jewellery and foreign currency were found from the bank locker and it was the onus of the assessee to explain the source of the same. In the absence of any cogent or plausible evidence on record to support the possession, this addition has rightly been made by lower authorities. We order so.
9.4 The legal grounds, as in earlier years, stand dismissed. The appeal stands partly allowed.
10. Assessment Year 2018-19
In similar assessment u/s 143(3) r.w.s. 153C order dated 29.04.2021, Ld. AO made addition of Rs.18.22 Lacs being estimated commission @0.80%. Another addition of Rs.2.06 Lacs was made by applying commission rate of 1.75%. These additions stood confirmed by Ld. CIT(A) and the same has been agitated before us. Taking the consistent view, we direct Ld. AO to apply rate of 0.47% on these transactions. The legal grounds, as in earlier years, stand dismissed. The appeal stands partly allowed.
Conclusion
11. All the appeals stand partly allowed.
Order pronounced u/r 34(4) of ITAT Rules, 1963.
