Span Developers Vs DCIT (ITAT Mumbai)
Summary: The Mumbai Income Tax Appellate Tribunal considered appeals concerning AYs 2012-13 to 2014-15 arising from search proceedings under Section 153A/Section 153C. A search under Section 132 was conducted on the assessee group on 12.01.2021 and notices under Section 153A/153C dated 12.02.2022 were issued for assessment years falling beyond six years from the assessment year relevant to the previous year in which the search was conducted. In the lead case, the Assessing Officer made an addition of Rs. 15,99,340/- by estimating 15% of alleged ‘on money’ of Rs. 1,06,62,267/- based on certain notings in seized material. The assessee raised an additional legal ground contending that the extended period under the fourth proviso to Section 153A(1) could not apply because the escaped income was not represented in the form of an “asset” contemplated by Explanation 2. The Tribunal admitted the additional ground as purely legal in nature. Referring to Viraj Profiles Limited Vs DCIT, Smart Chip (P.) Ltd. Vs ACIT and other coordinate Bench decisions, the Tribunal held that the extended period requires the statutory conditions concerning escaped income represented in the form of an asset to be satisfied. Explanation 2 to the fourth proviso includes immovable property, shares and securities, loans and advances and deposits in bank accounts. The Tribunal found that the Assessing Officer had nowhere established that the alleged income from ‘on money’ was represented by an asset of the specified nature. It therefore held that the reopening beyond six years was invalid and the consequential assessment orders were void-ab initio. The additional ground was allowed, the assessment order for AY 2012-13 was quashed, and the other grounds became academic. Appeals for AYs 2013-14 and 2014-15 were also allowed on the same basis. The appeals concerning Span Realtors and Span Construction were likewise allowed following the same reasoning and the principle of consistency. The order was pronounced on 24.08.2026 under Rule 34 of the Income Tax (Appellate Tribunal) Rules, 1963.
‘On-Money’ Not an “Asset” for Extended 10-Year Search Assessment: Mumbai ITAT Quashes Section 153A/153C Proceedings Beyond Six Years
The Mumbai ITAT held that assessments falling beyond the normal six-year period cannot be reopened under the fourth proviso to Section 153A(1) unless the escaped income of ₹50 lakh or more is represented in the form of a specified “asset.”
A search under Section 132 was conducted on the Span Group, engaged in real-estate development. Pursuant to the search, notices under Sections 153A/153C were issued for AYs 2012-13 to 2014-15, which fell beyond the six assessment years ordinarily covered by the search provisions.
The AO made additions based on seized notings allegedly showing receipt of unaccounted “on-money” from purchasers. In the lead case, the AO estimated profit at 15% of the alleged on-money and made an addition of approximately ₹15.99 lakh. However, the assessment order did not establish that the alleged escaped income was represented by any specified asset.
The Tribunal explained that invocation of the extended period of up to ten assessment years requires fulfilment of two essential conditions: the escaped income must amount to ₹50 lakh or more, whether for the relevant year or in aggregate, and such income must be represented in the form of an “asset.”
For this purpose, Explanation 2 to the fourth proviso to Section 153A(1) includes assets such as immovable property, shares and securities, loans and advances, and deposits in bank accounts. Mere rough notings concerning alleged cash receipts or “on-money” do not, by themselves, establish that the escaped income was represented by a specified asset.
The AO had nowhere recorded that the alleged on-money was converted into or represented by an identifiable asset of the prescribed nature. Consequently, the fundamental jurisdictional requirements for reopening assessments beyond six years were not satisfied.
Following Viraj Profiles Ltd. v. DCIT and other coordinate Bench decisions, the Tribunal held that the reopening of AYs 2012-13 to 2014-15 was invalid and void ab initio. The consequential assessment orders were quashed, making the remaining grounds concerning additions, Section 153D approval and DIN academic.
List of Cases Discussed / Relied Upon
- National Thermal Power Corporation Vs CIT,229 ITR 383 (SC) — relied upon for admission of the additional legal ground.
- Jute Corporation of India Limited Vs CIT,187 ITR 688 (SC) — relied upon for the jurisdiction to entertain an additional ground.
- Ahmedabad Electricity Company Vs CIT,199 ITR 352 (Bom) — relied upon in support of admission of the additional ground.
- Smart Chip (P.) Ltd. Vs ACIT,[2025] 476 ITR 389 (Delhi) — considered on the requirement that escaped income be represented in the form of an asset for the extended period under the fourth proviso to Section 153A(1).
- Goldstone Cement Limited Vs ACIT,ITA Nos. 126 to 131/Gau/2020 dated 10.12.2021 — cited in support of the assessee’s contention concerning the extended period under Section 153A.
- Shairul Impex Vs ITO,ITA No. 6613/Mum/2025 — cited in support of the assessee’s contention concerning the extended period under Section 153A.
- Viraj Profiles Limited Vs DCIT,ITA No. 1771/Mum/2023 dated 26.04.2023 — relied upon for the proposition concerning escaped income being represented in the form of an asset.
- DCIT Vs Midas Golden Distilleries Private Limited,ITA Nos. 408, 409 & 420/Chny/2023 dated 20.10.2023 — cited as following the Mumbai Tribunal view on the issue.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This group of eight appeals is filed by the three group entities / assessee(s) against the separate order of Ld. CIT(A)for the Assessment Year 2012-13 to 2014-15. In all appeals, the respective assesses have raised similar ground of appeal, facts in all appeals are almost similar except variation certain additions. Thus, with the consent of parties all the appeals were clubbed, heard together and are decided by common order to avoid the conflicting decision. With the consent of party’s appeal in ITA No. 6897/M/2024 (Spam Developers vs DCIT in AY 2012-13) is treated as lead case. The Assessee has raised the following grounds of appeal:
1) The Ld. CIT(A) has erred in confirming the order passed by the Assessing Officer u/s 143(3) r.w.s. 153(A) of the Income Tax Act, 1961 (“the Act”) which is bad in law, illegal and void.
2) The Ld. CIT(A) has erred in not holding that the assessment order is bad in law for want of approval u/s. 153D of the Act.
3) The Ld. CIT(A) has erred in not holding that the assessment order is bad in law as the DIN was not mentioned on the approval granted u/s. 153D of the Act as per the CBDT Circular No. 19/2019 dated 14 August 2019.
4) The Ld. CIT(A) has erred in not holding that the assessment order is bad in law considering the fact that approval obtained u/s. 153D of the Act is without application of mind.
5) The Ld. CIT(A) erred in upholding the order passed by the AO which is without DIN.
6) The Ld. CIT(A) has erred in confirming addition of Rs. 17,27,629/-, being alleged profit on alleged on-money of Rs. 1,15,17,524/-.
2. Vide application dated 09.07.2025, the assessee has raised following additional ground of appeal;
(1) The ld. CIT(A) has ought to have held that the notice issued u/s 153C of the Act, which is beyond the six-year period, is in contravention to fourth proviso to sub-section (1) of section 153A as there is no undisclosed income which is represented in the form of an “asset”. The notice and the consequential assessment order passed u/s 153C of the Act is bad in law and void ab initio.
3. Rival submissions of both the parties have been heard and record perused. The learned authorised representative (ld AR) of the assessee submits that the assessee has raised additional ground of appeal, which is purely legal in nature. No new facts are required to be brought on record for adjudication of such additional ground of appeal. All facts necessary for adjudication of such additional grounds of appeal are emanating from the orders of the lower authorities or the material available on record. To support his submissions, the ld AR of the assessee relied on the decision of Hon’ble Supreme Court in National Thermal Power Corporation Vs CIT (229 ITR 383 SC), Jute Corporation of India Limited Vs CIT (187 ITR 688 SC) and Bombay High Court in Ahmedabad Electricity Company Vs CIT (199 ITR 352 Bom).
4. In support of additional grounds of appeal, the ld AR of the assessee the assessee and its group entities are engaged in the construction and development of residential properties. A search action under section 132 was carried out on assessee group on 12.02021. Consequent on search action notice under section 153A/ 153C dated 12.02.2022 was issued to the assessee for filing revised return of income. Thus, admittedly notice for AY 2012-13, 2013-14 & 2014-15 were issued beyond six years in which assessment years the search took place. The AO was not having jurisdiction, unless the AO was in possession of incriminating evidence / material which could reveal that income of value of more than Rs. 50.00 lacs or more represented in the form of ‘asset’ has escaped from assessment / discovered during the search. In response to notice under section 153A the assessee filed return of income on 20.02.2022 declaring income of Rs. 11,710/-. Assessment under section 153A was completed on 30.03.2022. The assessing officer (AO) while passing assessment order made addition of Rs. 15,99,340/- on account of ‘on money’. The AO made such addition on estimation basis being 15% of entire alleged on money of Rs. 1,06,62,267/-. The AO made / estimated such addition on the basis of certain noting on the seized material. Though, the assessee denied of having received such ‘on money’. The ld CIT(A) confirmed the action of AO.
5. Theld AR of the assessee submits that the alleged cash transactions of ‘on money’ do not fall in the definition of ‘asset’ as provided under Explanation 2 to forth proviso to section 153A(1) of the Act. As per the said explanation, “asset” shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. The definition of ‘asset’ is an inclusive definition and it does not include ‘cash’. However, the A.O. was not in possession of any document which reveals that the income, represented in the form of ‘asset’, which has escaped assessment amounts to or is likely to amount to fifty lakhs rupees or more. The rough noting’s on the alleged seized material cannot be termed as ‘asset’. Thus, the basic conditions for issuing for issuing notice under section 153A/ 153C the Act do not satisfy in the facts of the present case. Thus, the notice dated 22.02.2022 issued under section 153A is barred by limitation/ without jurisdiction and bad in law. The consequential assessment order passed under section 153A is also bad in law being void-ab initio. To support his submissions, the ld AR of the assessee relied on the following case laws;
- Delhi High Court in Smart Chip (P.) Ltd. Vs. ACIT [2025] 476 ITR 389 (Delhi),
- Goldstone Cement Limited Vs ACIT in ITA No. 126 to 131/Gau/2020 dated 10.12.2021,
- Shairmul Impex Vs ITO in ITA No. 6613/Mum2025,
- Viraj Profiles Limited Vs DCIT in ITA No. 1771/Mum/2023dated 26.04.2023.
- Chennai Tribunal in DCIT Vs Midas Golden Distilleries Private Limited in ITA No 408,409 & 420/Chny/2023. Dated 20.10.2023.
- List of cases wherein it has been held that provisions of section 153C cannot be initiated on or after 01.04.2021 in respect of search conducted prior to 01.04.2021.
6. On the other hand, the ld CIT-DR for the revenue submits that no specific ground of appeal was raised before ld CIT(A). The ld CIT-DR for the revenue also filed his written submissions on record running into 17 pages. While opposing the plea of ld AR of the assessee on additional ground of appeal, the ld AR of the assessee submits that contention raised by the assessee is wholly misconceived, contrary to the statutory scheme governing search assessments and unsupported either by the facts of the present case or by the judicial precedents relied by the assessee. The validity of the search proceedings under section 153A/ 153C cannot be determined merely on the basis of abstracted interpretation of the “asset” without determining statutory frame work. The applicability of fourth proviso to section 153A is not pure question of law but mixed question of fact and law, which necessarily require examination of seized material, satisfaction recorded by AO and factual finding emerging from the search action. In the search action substantial incriminating documents including systematic record maintained outside regular books was found and seized. The AO examined the seized documents and the regular books of accounts and gave his findings. The requirement of fourth proviso is stand satisfied in the present case. On money receipt was detected during the search action which is substantially more than fifty lakhs in the relevant assessment years. Thus, all present appeals falls within ambit of fourth proviso to section 153A and assumption of jurisdiction by AO is in accordance with law. Section 2(14) of Income Tax Act define “capital asst” which mean property of any kind whether connected with the business of profession. Though, in fourth proviso the definition of ‘asset’ is for limited purpose. The case law of Delhi High Court in Smart Chip (P) Limited Vs ACIT (supra)relied by ld AR of the assessee is entirely misplaced as it is based on peculiar facts on the context of section 148.Similarly, the ratio of other decisions relied by assessee also is not applicable on the specific facts of the present appeals.
7. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by ld AR of the assessee. Firstly, we are considering the admission of additional ground of appeal. We find that the additional ground raised by the assessee purely legal in nature and goes to the root of the matter. We also find that before ld CIT(A) the assessee has raised general ground of appeal against validity of assessment completed under section 153A. Considering the nature on additional ground of appeal being purely legal and the facts that no new facts are to be brought on record and all the facts necessary for adjudication are emanating from the assessment order itself, hence, additional ground of appeal raised by the assessee is admitted for adjudication. Now adverting to adjudication of additional ground of appeal.
8. We find that there is no dispute that search action under section 132 was carried out on 12.01.2021 on the assessee and its group companies. The AO reopened the case for AY 2012-13 to AY 2014-15 by issuing notice under section 153A dated 12.02.2022. Thus, AY 2012-13, 2013-2014 & 2014-15 is beyond the six years from the assessment year in which search action was conducted. We find that Hon’ble Delhi High Court in Smart Chips (P) Limited Vs ACIT (2025) 476 ITR 389 (Delhi), while considering the similar contention of the petitioner (assessee in the said case) held that in terms of the fourth proviso to Section 153A(1) of the Act, no notice for the relevant assessment year or years could be issued unless the AO had in his possession books of account or other documents or evidence which revealed that income represented in the form of an asset has escaped assessment. Thus, the extended period of limitation beyond the six years preceding the assessment year relevant to previous year in which a search was conducted, would be applicable only in cases where the AO had evidence, which discloses that the escaped income was represented by an asset. It was contended that, in the said case, the income which is alleged to have escaped assessment is on account of an expenditure, which the AO had disallowed and not on account of any asset which represent such income. The Hon’ble High Court after considering factual basis of additions in para – 16 onwards held that the AO believed that the petitioner’s income had escaped assessment for AY 2016-17 on essentially three grounds. First, the petitioner had deducted expenses relating to amounts paid to certain persons who had not filed their income tax returns and the AO thus doubted the genuineness of the said transactions. Secondly, the petitioner had booked expenses, which according to the AO, were personal expenses of its directors and had not been incurred wholly and exclusively for the purpose of the petitioner’s business. And thirdly, that the petitioner had paid certain amounts as expenses for availing contractual manpower services and the AO doubted the genuineness of the said payments. It is clear from the above that there is no allegation that the income which has escaped assessment was represented in the form of an ‘asset’. Therefore, the conditions as stipulated in Clause (a) of the fourth proviso to Section 153A(1) of the Act are not satisfied. The AO does not have the possession any books of account, other documents or evidence, which reveals that the petitioner’s income that is represented in the form of an asset has escaped assessment. In terms of Explanation 2 to Section 153A(1) of the Act, the term ‘asset’ is defined to include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank accounts. The AO seeks to disallow expenses on account of doubting the genuineness for the reason that the same were not incurred wholly or exclusively for the purpose of the petitioner’s business. In absence of any further material to establish that such expenses had resulted in the acquisition of any asset, the conditions stipulated in the fourth proviso to Section 153A(1) of the Act would remain unsatisfied. In the aforesaid view, the period of limitation for issuing a notice under Section 153A of the Act, in the given facts of this case, would necessarily have to be confined to a period of six assessment years immediately preceding the assessment year relevant to the previous year in which the search under Section 132 of the Act was conducted. The search in question was conducted in financial year 2022-23; thus, the relevant block of six assessment years would be the six assessment years preceding AY 2023- 24, being the assessment year relevant to the previous year in which the search was conducted. Accordingly, the High Court held that AY 2016-17 falls beyond the block of six years.
9. We find that Mumbai Tribunal in Viraj Profiles Limited Vs DCIT (supra), while considering the similar grounds of appeal against validity of reopening beyond six years by invoking fourth proviso to section 153A, the bench held as under;
“4.3 We have heard rival contentions on this legal issue and perused the record. We have extracted the fourth proviso to sec. 153A of the Act in the preceding paragraph. A careful perusal of the above said proviso would reveal that, in order to invoke the fourth proviso to sec.153A, it is required to be shown by the AO that (a) the books of account or other documents or evidence in his possession reveal that the income which has escaped assessment for the relevant assessment year is “in the form of asset” (b) the quantum of income so escaped amount to fifty lakhs or more in the relevant assessment year or in aggregate in the relevant assessment years. (c) the said income should have escaped assessment for such year or years. (d) the search is initiated on or after 1st day of April, 2017. (e) the relevant assessment year is the year preceding the year of search which falls beyond six preceding assessment years but not later than ten assessment years. Hence, it is required to be shown by the AO that the escaped income was “in the form of asset” and further the value or aggregate value of assets has exceeded Rs.50.00 lakhs. The corollary is that, if the escaped income is not represented “in the form of asset”, the fourth proviso to sec. 153A of the Act cannot be invoked in order to reopen the assessment of a year falling beyond six assessment years preceding the year of search. 4.4 In the instant case, we notice that the AO has not shown that the alleged income escaped for assessment is represented “in the form of an asset”. What is assessed in this year u/s 153A of the Act is the addition towards alleged bogus purchases and disallowance of salary/professional fee u/s 37 of the Act. It is not shown that the income, if any, generated out of these two disallowances is represented in the form of asset. Hence, we are of the view that the AO could not have invoked the fourth proviso to sec. 153A of the Act in order to reopen the assessment of AY 2011-12 and accordingly hold that the said reopening is not in accordance with the law and is liable to be quashed. Accordingly, we quash the orders passed by the tax authorities for AY 2011-12.”
10. We further find that Chennai Tribunal in DCIT Vs Midas Golden Distilleries Private Limited (supra) followed the Mumbai Tribunal on similar issue. Similar view was taken by Gauhati bench of Tribunal in Goldstone Cements Ltd Vs ACIT (supra) and Mumbai Tribunal in Shairul Impex Vs ITO (supra). Now again adverting to the facts of the case in hand, we find that the AO in the entire assessment order has nowhere mentioned that any income represented from the ‘asset” has escaped from assessment. The sole allegation in the entire assessment is about the accepting the ‘on money’ from the buyers in the projects of the assessee.
11. Thus, in view of the aforesaid factual and legal position and on our independent appreciation of facts, we find the additions made by AO is not from income represented from an ‘asset’ of specific nature as define in fourth proviso to section 153A. Hence, reopening beyond period of six years are clearly in violation of provisions of section 153A /153C as stood on 31.03.2021 and is invalid. Therefore, reassessment order passed thereto has become void-ab initio. We do not find convincing force in the submissions of ld CIT-DR for revenue that ratio of decisions relied by ld AR of the assessee are based on different facts or that same is not applicable on the facts of the case in hand. In our considered view the ratio of the decisions relied by ld AR of the assessee is directly applicable on the facts of the present appeal. In the result, the additional ground of appeal raised by the assessee is allowed.
12. Considering the facts that we have allowed additional ground of appeal and quashed the assessment order, therefore, consideration and adjudication on other grounds of appeal have become academic.
13. In the result, the appeal of the assessee for AY 2012-13 is allowed.
14. In appeal for AY 2013-14 & 2014-15, the assessee has raised similar grounds of appeal as raised in appeal for AY 2012-13, considering the facts that we have allowed appeal for AY 2012-13 on similar set of facts, thus following the principal of consistency, the appeal for AY 2013-14 & 2014-15 is also allowed with similar observation.
Span Realtors
ITA No. 6890/Mum/2024 (AY: 2012-13)
ITA No. 6896/Mum/2024 (AY: 2013-14)
ITA No. 6888/Mum/2024 (AY: 2014-15)
15. Considering the facts that the assessee in all these appeals have raised similar additional grounds of appeal, which we have allowed in ITA No. 6887/Mum/2024 in Span Developers in appeal for AY 2012-13, thus following the principal of consistency, all these appeals are also allowed with similar direction.
Span Construction
ITA No. 6903/Mum/2024 (AY: 2012-13)
ITA No. 6904/Mum/2024 (AY: 2013-14)
16. Considering the facts that the assessee in all these appeals have raised similar additional grounds of appeal, which we have allowed in ITA No. 6887/Mum/2024 in Span Developers in appeal for AY 2012-13, and in appeals Span Realtors for AY 2012-13 to 2014-15, thus following the principal of consistency, these two appeals are also allowed with similar direction.
17. In the result, all the appeals of the assessee are allowed.
Order pronounced on 24.08.2026 as per Rule 34 of Income Tax (Appellate Tribunal) rules-1963
