Mumbai ITAT: 19 Search Appeals Restored for 153A, 153D Approval & Limitation Review

Victory Sales Private Limited Vs DCIT (ITAT Mumbai)

Mumbai ITAT: Section 153A Additions, Mechanical U/s 153D Approval & Limitation Challenge Require Examination of Assessment Records – 19 Search Appeals Restored to CIT(A)

The Mumbai ITAT dealt with 19 appeals of three connected assessees – Victory Sales Pvt. Ltd., Vikrant Marketings and Vipul Vidur Bhatt – arising from the same search proceedings, covering various AYs from 2010-11 to 2016-17.

A search under Section 132 was conducted in the Gurnani Group on 04.02.2016 in connection with alleged penny-stock/accommodation-entry transactions involving Sunrise Asian Ltd. The AO subsequently rejected the books under Section 145(3) and made various additions relating to Sections 40A(3), 40(a)(ia), 37(1), 68 and 69A, besides estimating commission income in the case of Vipul Vidur Bhatt.

Before the Tribunal, the assessees raised crucial jurisdictional grounds contending that additions for unabated assessment years under Section 153A could not survive in the absence of incriminating material found during search, relying principally upon the Supreme Court judgment in Abhisar Buildwell Pvt. Ltd. They also challenged the Section 153D approval as mechanical and without application of mind.

A further challenge was raised under Section 153B. Though the assessment orders purported to have been passed on 08.08.2018, the assessees contended that they were dispatched only on 11.08.2018 and received on 13.08.2018, and were therefore barred by limitation.

The Tribunal held that the grounds concerning absence of incriminating material and validity of Section 153D approval went to the root of the assessments and deserved admission. However, proper adjudication required examination of the seized material, year-wise nexus between such material and each addition, assessment records, the AO’s Section 153D proposal and the approval actually granted. These records had not been produced before the Tribunal despite repeated opportunities to the Revenue.

Accordingly, instead of deciding these jurisdictional issues conclusively, the ITAT set aside the CIT(A)’s orders and restored all appeals for fresh adjudication. Importantly, it specifically directed the AO to identify, assessment-year-wise and addition-wise, the seized material relied upon for every addition and to produce both the proposal seeking Section 153D approval and the approval granted thereon.

The CIT(A) was directed to furnish the remand report and Revenue material to the assessees and decide the jurisdictional grounds through a speaking order. The substantive additions would be reconsidered only if they survive after determination of the jurisdictional grounds.

The Section 153B limitation issue was also restored for reconsideration after examining the assessment records and evidence regarding the actual dates of passing and dispatch of the orders. The Tribunal expressly refrained from expressing any view on the merits of either the jurisdictional grounds or the additions. All 19 appeals were allowed for statistical purposes.

Key takeaway: In a Section 153A search assessment, the Revenue may have to demonstrate the year-wise and addition-wise nexus with incriminating material, while a challenge to mechanical approval under Section 153D requires scrutiny of the AO’s approval proposal and the approving authority’s record. Where those foundational records are unavailable before the Tribunal, the issues may appropriately be restored for factual verification rather than decided merely on assertions of either side.

Cases Discussed

• Eager Corporation v. DCIT (ITAT Mumbai), ITA Nos.5220, 5221, 5257 and 5258/Mum/2024, dated 12.02.2026
• Shipra Fabrics Private Limited and connected appeals (ITAT Mumbai), ITA No.4721/Mum/2024 and 27 other appeals
• Principal Commissioner of Income Tax v. Abhisar Buildwell Private Limited (SC), Civil Appeal No.6580 of 2021, judgment dated 20.04.2023
• Principal Commissioner of Income Tax, Central-2 v. Meeta Gutgutia (Delhi High Court), (2017) 395 ITR 526 (Delhi)
• Commissioner of Income Tax (Central)-III v. Kabul Chawla (Delhi High Court), (2016) 380 ITR 573 (Delhi)
• Commissioner of Income Tax II, Thane v. Continental Warehousing Corporation (Nhava Sheva) Ltd. (Bombay High Court), (2015) 374 ITR 645 (Bom.)

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These nineteen appeals preferred by three connected assessees are directed against the respective orders passed under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], by the learned Commissioner of Income Tax (Appeals). Since the appeals arise from the same search action, involve substantially common facts and overlapping issues, and the revised additional grounds are materially identical, they were heard together and are being disposed of by this common order.

2. In case of the assessee, Victory Sales Private Limited, all the following appeals arise from the orders of the learned CIT(A)-53, Mumbai, dated 31.01.2024:

3. For AYs 2010-11 to 2015-16, the assessment orders were passed on 08.08.2018 under section 153A read with section 144 of the Act. For AY 2016-17, the assessment order was passed on 08.08.2018 under section 144 of the Act. The learned CIT(A) disposed of the appeals for AYs 2009-10 to 2016-17 by a common order, whereas the present batch contains the appeals for AYs 2010-11 to 2016-17.

4. In case of the assessee, Vikrant Marketings, the following appeals arise from the orders of the learned CIT(A)-50, Mumbai, dated 27.01.2023:

5. The assessment orders for all the above assessment years were passed on 08.08.2018 under section 153A read with section 144 of the Act. The learned CIT(A) passed a common order covering AYs 2010-11 to 2016-17. The present batch is, however, confined to AYs 2010-11 to 2014-15.

6. In case of the assessee, Shri Vipul Vidur Bhatt, all the following appeals arise from the orders of the learned CIT(A)-53, Mumbai, dated 31.01.2024:

7. For AYs 2010-11 to 2015-16, the assessment orders were passed on 08.08.2018 under section 153A read with section 144 of the Act. The assessment for AY 2016-17 was completed on 08.08.2018 under section 144 of the Act. The common order of the learned CIT(A) also covered AY 2009-10, which is not part of the present batch of appeals.

8. Common facts in brief

8.1. Briefly stated, a search action under section 132 of the Act was conducted in the case of the Gurnani Group on 04.02.2016. Survey proceedings under section 133A were also carried out in the case of M/s Sunrise Asian Limited and certain entities alleged to have acted as exit providers in transactions relating to the shares of M/s Sunrise Asian Limited. The proceedings were initiated on the basis of information received from the Directorate of Income Tax (Investigation), Kolkata, concerning alleged manipulation of the price of penny-stock scrips for providing accommodation entries in the nature of long­term capital gains.

8.2. During the course of the survey proceedings conducted at the premises of M/s Shipra Fabrics Private Limited, the statement of Shri Prateek Vidur Bhatt, brother of Shri Vipul Vidur Bhatt, was recorded under section 131 of the Act. Thereafter, a consequential search warrant under section 132 was issued in the name of Shri Vipul Vidur Bhatt on 05.02.2016. His statements were recorded under section 132(4) on different dates during February 2016. A further statement was recorded under section 131 on 12.05.2016.

8.3. According to the Assessing Officer, Shri Vipul Vidur Bhatt stated that he was engaged in providing accommodation entries and that a number of concerns, including Victory Sales Private Limited and Vikrant Marketings, were controlled or managed by him for that purpose. The Assessing Officer relied upon the statements, seized material, financial transactions and the findings recorded in the special audit report. Shri Vipul Vidur Bhatt subsequently retracted his statements through an affidavit dated 02.09.2016. The validity and evidentiary effect of the statements and the subsequent retraction constitute part of the controversy in these appeals.

8.4. Notices under section 153A were issued for the relevant assessment years. During the assessment proceedings, having regard to the volume and alleged complexity of the accounts, the Assessing Officer directed a special audit under section 142(2A) of the Act. The special auditor submitted the report on 11.06.2018. After considering the special audit report and the replies furnished by the respective assessees, the Assessing Officer rejected the books of account under section 145(3) and completed the assessments on a best judgment basis.

8.5. In the cases of Victory Sales Private Limited and Vikrant Marketings, the additions, depending upon the relevant assessment year, were made on account of cash payments under section 40A(3), non-deduction of tax at source under section 40(a)(ia), expenditure treated as non-genuine under section 37(1), unsecured loans and other credits under section 68, and negative cash balances under section 69A. In the case of Shri Vipul Vidur Bhatt, the Assessing Officer further estimated commission income at 4 per cent of the accommodation entries allegedly provided by him and made year-wise additions on account of unsecured loans, repayments, suspense amounts and amounts found recorded in the seized material.

8.6. The assessees carried the matters in appeal before the learned CIT(A). During the first appellate proceedings, revised and additional grounds were filed. Common remand reports were also called for from the Assessing Officer. The learned CIT(A), for the reasons recorded in the respective common orders, upheld the assessments and dismissed the appeals. The assessees are, therefore, in further appeal before us.

9. During the pendency of the present appeals, the assessees filed separate applications dated 22.12.2025 seeking modification of the earlier additional grounds in a concise form. The revised additional grounds, as filed in the case of Victory Sales Private Limited, read as under:

i. That on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding the all the impugned additions, made in the assessment orders when no incriminating documents qua the unabated assessment years were found during the search operation in the premises of the assessee to justify the impugned additions in line with the settled principle of law that additions in an order u/ s 153A of the Income tax Act, 1961 for an unabated assessment year is to be strictly made on the basis of evidence found in the course of the search, or other post search material or requisition of documents and assets pertaining to the searched person or person in whose case requisition has been made, categorially with regards to the assessment years in question.

ii. Further that on the facts and in the circumstances of the case and in law, decision of the ld. CIT(A) to uphold all the additions made by the learned Assessing Officer in absence of any incriminating documents qua the unabated AYs found during the course of search & seizure operation in the case of the appellant is contrary to the decision dated 20th April, 2023 of the Hon’ble Supreme Court of India in Civil Appeal No 6580 of 2021 in the case of Pr. CIT Central-3 Vs Abhisar Buildwel Put Ltd and the decision of Delhi High Court in the case of Commissioner of Income Tax (Central)-III Vs. Kabul Chawla (2016) 380 ITR 573 (Delhi) & Principal Commissioner of Income Tax, Central -2, New Delhi Vs. Meeta Gutgutia (2017) 395 ITR 526 (Delhi) and the decision of Jurisdictional Bombay High Court in the case of Commissioner of Income Tax-II, Thane Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bombay).

iii. That on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact that the approval of the Additional Commissioner u/s 153D of the Act for AY 2010-11 was obtained and granted within constrained time limit in a mechanical way without due application of mind by not referring to to relevant seized materials and issues involved in the proposed addition vis-a-vis the submission made by the assessee.

iv. That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in ignoring the contention of the appellant that the orders passed u/ 144 read with section 153A of the Act for AY : 2010-11 to AY 2016-17 was time barred u/s 153B of the Act as the order was received on 13.08.2018, beyond 08.08.2018, the last date by which the order was to passed and served upon the appellant u/s 153B of the Act, being dispatched from the office of the Assessing officer on 11.08.2018 as supported by the speed post tracking trails of India Post which was utilized to make the service of the order.

10. The revised additional grounds filed by Shri Vipul Vidur Bhatt are identical to the grounds reproduced above and pertain to AYs 2010-11 to 2016-17. The revised additional grounds filed by Vikrant Marketings are also identical, except that Ground No. iv refers to AYs 2010-11 to 2014-15.

11. The aforesaid revised additional grounds constitute modifications of the earlier additional grounds.

12. During the course of hearing before us, the learned Departmental Representative (DR)sought adjournmentin the appeals. It was stated therein that the comments of the Assessing Officer on the revised and additional grounds raised by the assessee had not yet been received and that the Assessing Officer had sought at least fifteen days’ further time for furnishing the same. On this basis, the learned DR sought a short adjournment of the hearing.

13. The learned Authorised Representative (AR) vehemently opposed the adjournment sought by the Revenue. He submitted that the appeals had already been listed on twenty-five earlier occasions and that the present listing constituted the twenty-sixth hearing. According to him, sufficient opportunities had already been afforded to the Department to obtain instructions from the Assessing Officer, but further time was being sought repeatedly. He further pointed out that, on 04.03.2026, the Bench had granted a final opportunity to the learned DR to argue the appeals and had made it clear that the matters could thereafter be proceeded with on the basis of the material available on record, irrespective of whether instructions from the Assessing Officer were received. The learned AR, therefore, submitted that any further adjournment would unduly prolong the proceedings and requested that, in the interest of justice, the appeals be heard and disposed of on the basis of the material already placed on record.

14. The learned AR thereafter referred to the revised additional grounds filed by the assessees in concise form. He submitted that the principal additional ground challenged the additions made in the assessments under section 153A of the Act for the unabated assessment years on the ground that no incriminating material pertaining to the respective assessees or the concerned assessment years was found during the course of search. According to him, the additions in an unabated assessment could not be sustained merely on the basis of the books of account, statements, special audit report or material already available with the Department, unless the additions had a direct nexus with incriminating material found during the search.

15. In support of this contention, the learned AR relied upon the decision of the Hon’ble Supreme Court in Principal Commissioner of Income Tax v. Abhisar Buildwell Private Limited, Civil Appeal No.6580 of 2021, judgment dated 20.04.2023, and specifically referred to paragraph 14(iv) thereof. He also relied upon the decisions in Commissioner of Income Tax (Central)-III v. Kabul Chawla (2016) 380 ITR 573 (Delhi), Principal Commissioner of Income Tax, Central-2 v. Meeta Gutgutia (2017) 395 ITR 526 (Delhi), and Commissioner of Income Tax II, Thane v. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom.).

16. The learned AR further relied upon the order of the Co­ordinate Bench in Eager Corporation v. DCIT, ITA Nos.5220, 5221, 5257 and 5258/Mum/2024, dated 12.02.2026, particularly paragraphs 17, 18, 20 and 21 thereof. He submitted that the said matter arose from the same search proceedings and the same panchnama and involved similar additions, though the amounts differed. It was contended that the Co-ordinate Bench had deleted the additions made for the unabated assessment years in the absence of incriminating material and, therefore, the ratio of the said decision squarely applied to the present appeals.

17. The learned AR, by way of written submission placed on records, referred to the paper books filed by the assessees and submitted that the panchnama, the list of cases in which assessment orders were passed on 08.08.2018, the common letters through which the Assessing Officer sought approval under section 153D, and the approval granted by the Additional Commissioner were placed on record. He contended that neither the proposal submitted by the Assessing Officer nor the approval under section 153D referred to any assessment year-wise incriminating material. It was further submitted that a common approval was granted in a large number of cases without any year-wise examination of the seized material, the proposed additions, or the replies furnished by the assessees. On this basis, the learned AR contended that the approval under section 153D was mechanical and had been accorded without due application of mind.

18. On the question of limitation, the learned AR reiterated that the assessment orders purportedly dated 08.08.2018 were dispatched on 11.08.2018 and served upon the assessees on 13.08.2018. He referred to the postal tracking material placed in the paper books and contended that the assessments were not completed within the prescribed period under section 153B of the Act. He accordingly submitted that the assessment orders were barred by limitation.

19. The learned AR also drew our attention to the replies furnished by the assessees during the assessment proceedings and to the observations of the learned CIT(A) acknowledging that submissions had been filed in the first appellate proceedings. He submitted that the assessments were framed under section 144 consequent to the rejection of the books of account, notwithstanding the replies and supporting material furnished by the assessees. He, therefore, urged that the jurisdictional and legal grounds be adjudicated first and that, in view of the absence of incriminating material, the alleged mechanical approval under section 153D and the bar of limitation under section 153B, the impugned additions be deleted.

20. The learned DR brought to our notice the common order dated 27.11.2025 passed by the Co-ordinate Bench in Shipra Fabrics Private Limited and connected appeals, ITA 4721/Mum/2024 and 27 other appeals, which included ITA No.4923/Mum/2024. He submitted that the said appeals pertained to certain connected group concerns for AYs 2010-11 to 2016-17. The Co-ordinate Bench, having regard to the legal grounds challenging the validity of the assessment proceedings and the necessity of examining the assessment records, restored those appeals to the file of the learned CIT(A) for de novo adjudication. The learned DR placed the said common order on record and submitted that the course adopted therein may also be taken into consideration while disposing of the present appeals.

21. On examining the grounds and the written submissions forming part of the proceedings before the learned CIT(A), we find that the plea that the assessment orders were barred by limitation under section 153B of the Act had already been raised before the learned CIT(A). The assessees had specifically contended that, though the assessment orders purported to have been passed on 08.08.2018, the postal consignments were booked on 11.08.2018 and the orders were received on 13.08.2018. The learned CIT(A) considered and rejected the said contention. Therefore, to this extent, the ground raised before us is not an additional ground. However, the grounds challenging the additions made in the unabated assessment years for want of incriminating material and challenging the validity of the approval granted under section 153D of the Act were not raised before the learned CIT(A) and have been raised for the first time before us.

22. We have considered the rival submissions and perused the material placed on record. The assessees have raised additional grounds challenging the validity of the assessments, inter alia, on the ground that the additions made in the unabated assessment years are not based upon any incriminating material found during the course of search and that the approval contemplated under section 153D of the Act was granted mechanically, without due application of mind. These grounds go to the root of the validity of the assessments and are, therefore, admitted for adjudication.

23. We find that the aforesaid grounds were not raised before the learned CIT(A). Their proper adjudication requires examination of the seized material, the year-wise nexus of such material with each of the additions, the assessment records, the proposal forwarded by the Assessing Officer for approval under section 153D of the Act and the approval granted by the competent authority. None of these records has been placed before us. The learned DR also sought time to obtain the comments of the Assessing Officer on the additional grounds. However, despite repeated opportunities, neither the comments of the Assessing Officer nor the relevant assessment records were produced before us.

24. The learned AR strongly opposed any further adjournment and submitted that the appeals had already been listed on 25 earlier occasions and that the present hearing was the 26th hearing. Having regard to the prolonged pendency of the appeals, we are not inclined to adjourn the hearing once again merely to enable the Revenue to obtain the comments of the Assessing Officer. At the same time, in the absence of the seized material and the relevant assessment records, it would not be appropriate to adjudicate the additional grounds conclusively at this stage.

25. We have also perused the common order dated 27.11.2025 passed by the Co-ordinate Bench in Shipra Fabrics Private Limited and connected appeals, ITA No.4721/Mum/2024 and 27 other appeals. In those connected group matters, the assessees had challenged the validity of the assessment proceedings and had also raised a ground that the assessment orders were barred by limitation, besides contesting the additions on merits. Having regard to the necessity of examining the assessment records, the Co-ordinate Bench restored the appeals to the file of the learned CIT(A). The relevant observations of the Co-ordinate Bench read as under:

“In our considered opinion, the legal issues deserve to be verified by Ld. CIT(A) having regards to the assessment records. In the interest of justice, we, therefore, remit all the appeals to the Ld. CIT(A) to consider it de novo in accordance with law. Assessee is at liberty to furnish all evidence in support of its claim on legal issue as well as on merits. The Ld. CIT(A) is directed to investigate upon the evidence furnished by the assessee in accordance with law.”

The aforesaid common order does not adjudicate the jurisdictional grounds on merits but supports the procedural course of restoration where their proper adjudication requires examination of the assessment records. In the present appeals also, the assessment records, the complete seized material and the comments of the Assessing Officer on the additional grounds are not available before us. We, therefore, consider it appropriate to adopt a similar course, subject to the specific directions recorded hereinafter.

26. In view of the foregoing circumstances, and having regard to the course adopted by the Co-ordinate Bench in the connected group matters referred to above, we consider it appropriate, in the interest of justice, to set aside the impugned orders of the learned CIT(A) and restore all these appeals to his file for fresh adjudication. The learned CIT(A) shall adjudicate the additional grounds relating to the absence of incriminating material in the unabated assessment years and the validity of the approval granted under section 153D of the Act after calling for the relevant assessment records and a specific remand report from the Assessing Officer. The Assessing Officer shall identify, assessment year-wise and addition-wise, the seized material, if any, relied upon for making each addition. The Assessing Officer shall also produce the proposal submitted for obtaining approval under section 153D of the Act and the approval granted thereon.

27. The learned CIT(A) shall furnish to the respective assessee copies of the remand report and of such documents or material as may be relied upon by the Revenue and shall afford an effective opportunity to submit objections and supporting evidence. Thereafter, the learned CIT(A) shall decide the additional grounds by a speaking order in accordance with law. Since the determination of these jurisdictional grounds may have a bearing on the substantive additions, all the substantive grounds are also restored to the learned CIT(A) for adjudication afresh, if they survive after deciding the jurisdictional grounds.

28. We clarify that the ground relating to limitation under section 153B of the Act had already been raised and adjudicated before the learned CIT(A) and is, therefore, not an additional ground raised for the first time before the Tribunal. Nevertheless, as the impugned orders are being set aside in their entirety, the learned CIT(A) shall reconsider this ground also after examining the assessment records and the evidence concerning the date of passing and dispatch of the assessment orders.

29. We have not expressed any opinion on the merits of the jurisdictional grounds or the substantive additions. All the contentions of both sides are left open. The assessees are directed to cooperate in the proceedings and to furnish the requisite details and evidence before the learned CIT(A).

30. Accordingly, all the 19 appeals are allowed for statistical purposes.

Order pronounced in the open court on 14.08.2026