ITAT Quashes Section 153C Assessments as Proceedings Were Barred by Limitation

Anand Jhalani Vs Central (ITAT Jaipur)

The Income Tax Appellate Tribunal (ITAT), Jaipur, decided four appeals filed by the assessee for Assessment Years 2013-14 to 2016-17 arising from orders of the Commissioner of Income Tax (Appeals). The principal issues related to the validity of proceedings initiated under Section 153C of the Income Tax Act, limitation, additions under Section 69A for alleged unaccounted loans, estimated interest income, and application of Section 115BBE. As the facts were common, the Tribunal disposed of all appeals through a common order.

The dispute originated from a search conducted on the Ramesh Manihar Group on 7 January 2016, during which electronic data, including excel sheets, was seized. Based on these records, the Investigation Wing concluded that the group acted as finance brokers facilitating cash loans. The Assessing Officer identified the code “A. JHALANI” in the seized material and initiated proceedings under Section 153C against the assessee, alleging that he had advanced unaccounted cash loans through the group. The assessee challenged the jurisdiction, contending that the proceedings were based on information received from the Investigation Wing through the Insight Portal, that a single consolidated satisfaction note had been recorded for four assessment years, and that the proceedings were barred by limitation.

The Tribunal rejected the challenge relating to the source of information and the consolidated satisfaction note. It held that where the Assessing Officer exercised concurrent jurisdiction over both the searched person and the other person, physical handing over of documents was only a notional exercise and that a single satisfaction note covering all relevant assessment years did not invalidate the proceedings.

However, on the issue of limitation, the Tribunal held in favour of the assessee. After examining different possible starting points for computing limitation under Sections 153C and 153B, including the date of search, the deemed date of handing over of seized material, the conclusion of proceedings before the Settlement Commission, and the date of recording of satisfaction, the Tribunal concluded that under every possible interpretation the assessments were barred by limitation. It also held that if the date of recording satisfaction in October 2023 were treated as the relevant date, the proceedings would additionally be hit by the sunset clause under Section 153C(3). Accordingly, the Tribunal held that the assessment orders passed under Section 153C were void ab initio and liable to be quashed.

On merits, the Tribunal held that the additions were based solely on uncorroborated excel sheets containing the code “A. JHALANI.” It noted that the Department had earlier initiated reassessment proceedings against another individual with the same name based on the identical seized material and later accepted that it was a case of mistaken identity. The Tribunal observed that the searched person had never specifically identified the present assessee, no independent investigation had been conducted to establish the alleged cash loan transactions, and no opportunity to cross-examine the searched person was provided despite reliance on his statements. It further held that the admission of commission income by the searched person before the Settlement Commission could not, by itself, establish liability in the hands of the assessee without independent corroborative evidence. Relying on earlier Tribunal and High Court decisions arising from the same search, the Tribunal concluded that the additions under Section 69A and the corresponding interest additions were based on surmises and could not be sustained.

Accordingly, the Tribunal quashed the assessment orders for Assessment Years 2013-14 to 2016-17 as barred by limitation and void ab initio. It also held that, even on merits, the additions were unsustainable. All four appeals filed by the assessee were allowed.

FULL TEXT OF THE ORDER OF ITAT JAIPUR

The captioned four appeals have been preferred by the assessee against the separate orders of Ld. Commissioner of Income Tax Appeals, Jaipur-5 (hereinafter referred to as “Ld. CIT(A)”) all dated 29.08.2025 u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “Act”). Since facts and issues involved in all these appeals are common and identical, hence these have been heard together and are being disposed of by this common order. ITA No.1231/JPR/20025 for AY 2013-14 is taken as the lead case.

ITA No.1231/JPR/2025 (For AY 2013-14)

2. The assessee in this appeal have taken the following Grounds of Appeal:

“1. In the facts and circumstances of the case and in law, Id. CIT(A) has erred in confirming the jurisdiction assumed by the Id. AO in the case of the assessee, under Section 153C the Income Tax Act, 1961 (“ITA”). The action confirmed by ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire order, being illegal and void-ab-initio.

2. In the facts and circumstances of the case and in law, Id. CIT(A) has erred in confirming jurisdiction, in the case of the assessee, under Section 153C of the ITA, for the year under consideration, even though the case of the assessee was barred by limitation as per law, for proceedings initiated under Section 153C. The action confirmed by Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief, please be granted by quashing the entire order, passed under Section 153C, being illegal, void-ab-initio and barred by limitation.

3. In the facts and circumstances of the case and in law, Id. CIT(A) has erred in confirming the issuance of notice, in the case of the assessee, under Section 153C of the ITA, for the year under consideration, without recording proper satisfaction as required under the law. The action confirmed by Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief, please be granted by quashing the entire order, passed under Section 153C, being illegal and void-ab-initio.

4. In the facts and circumstances of the case and in law, Id. CIT(A) has erred in confirming the order passed in the case of the assessee, under Section 153C of the ITA, without providing a copy of the satisfaction note, as recorded by the Assessing Officer of the searched person, pursuant to which jurisdiction was assumed in the case of the assessee under Section 153C. The action confirmed by ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief, please be granted by quashing the entire order, passed under Section 153C, being illegal and void-ab-initio.

5. In the facts and circumstances of the case and in law, Id. CIT(A) has erred in confirming the notice issued in the case of the assessee, under Section 153C, in October 2023, whereas, the fact remains that search in the case of Shri Ramesh Manihar, being the searched person, had taken place in January, 2016. Accordingly, after lapse of more than 7.5 years from the time search was conducted in the case of Shri Ramesh Manihar, jurisdiction was assumed in the case of the assessee, under Section 153C, which renders the present proceedings being barred by limitation. The action confirmed by Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief, please be granted by quashing the entire order, passed under Section 153C, being illegal and void-ab-initio.

6. In the facts and circumstances of the case and law, Id. CIT(A) has erred in confirming the addition of Rs. 3,00,00,000, under Section 69A, on account of alleged unaccounted loans. The action confirmed by Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire addition of Rs. 3,00,00,000.

7. In the facts and circumstances of the case and law, Id. CIT(A) has erred in confirming the addition of Rs. 16,00,000 on account of interest on alleged unaccounted loans advanced. The action confirmed by Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire addition of Rs. 16,00,000.

8. In the facts and circumstances of the case and law, Id. CIT(A) has erred in confirming the addition of Rs. 3,16,00,000 without providing the requisite material used against the assessee. The action confirmed by Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire proceedings being illegal and against the principles of natural justice and thereby deleting the entire addition of Rs. 3,16,00,000.

9. In the facts and circumstances of the case and law, Id. CIT(A) has erred in confirming that no opportunity was provided to the assessee to cross-examine the persons whose statements were relied upon by the Id. AO. The action confirmed by Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire proceedings being illegal and against the principles of natural justice and thereby deleting the entire addition of Rs. 3,16,00,000.

10. In the facts and circumstances of the case and law, Id. CIT(A) has erred in confirming the invocation of provisions of Section 115BBE. The action confirmed by Id. CIT(A) is illegal, unjustified, arbitrary, and against the facts of the case. Relief may please be granted by quashing the invocation of provisions of Section 115BBE.

11. The appellant craves the right to add, amend, or alter any of the grounds on or before the date of hearing.”

Brief Facts:

3. The brief facts of the case are that a search and seizure operation was conducted under Section 132 of the Act on the Ramesh Manihar Group (hereinafter referred to as “RMG”) on 07.01.2016. During the course of the search at various premises of the group, certain electronic data contained in 18 pen drives and excel sheets were found on a desktop belonging to a receptionist named Khushboo. Based on the post-search inquiries, the Investigation Wing concluded that the key persons of the group namely Shri Ramesh Chand Maheshwari and Shri Manmohan Krishan Bagla, were operating as finance brokers. It was found that Ramesh Manihar Group and its associates were indulged in providing loans to various persons / entities in lieu of some commission. Most of the loans were provided by this group were out of books received in cash from the lenders and the same were advanced to the borrowers on interest for a period as per the requirement of the borrowers in cash. Statement of Shri Ramesh Manihar was also recorded in which he admitted that these transactions were made by them and amounts were taken in cash from the lenders and the same were advanced to the borrowers in cash, and they earned commission on these transactions as mediator. The key persons of RMG subsequently approached the Income Tax Settlement Commission (ITSC), New Delhi, and surrendered their commission income earned on such unaccounted transactions, accepting the tax liability generated accordingly. The ITSC passed its final order in the year 2018 in the case of RMG (searched person). As per the information available with the AO, “Code: A Jhalani” had advanced unaccounted loans aggregating cash amount of Rs. 3,00,00,000/- through Ramesh Manihar Group in the FY 2012-13, relevant to AY 2013-14 and also earned commission income of Rs.16,00,000/- thereupon through RMG.

4. It is pertinent to mention here that the assessment jurisdiction of the searched person and that of the assessee lied with the same Assessing Officer, i.e. DCIT, Central Circle-4, Jaipur. The Assessing Officer had initially utilized this exact same seized material, specifically the entries referring to the code word “A. JHALANI”, to initiate reassessment proceedings for AY 2013-14 under Section 147 of the Act against a completely different individual bearing the same name, i.e., Shri Anand Jhalani holding PAN: AFOPJ6851R. In those earlier proceedings, the Assessing Officer issued a notice under Section 148 on 24.03.2020 and a subsequent show-cause notice under Section 142(1) on 06.09.2021. In that show-cause notice, the AO specifically alleged that the said namesake of the assessee `Anand Jhalani’ had advanced Rs. 3,00,00,000/- in cash through RMG based on the same dates and code words, which was further advanced on interest by the RMG to other borrowers. In the assessment order dated 24.09.2021 passed u/s 147 r.w.s. 144 of the Act, the AO made the addition of Rs. 3 crores on account of unaccounted cash given into the income of the assessee’s namesake ‘Anand Jhalani’ and further of Rs.16 lakhs on account of interest income earned. However, in the appellate proceedings before the Ld. CIT(A), the Revenue stated that his case was of mistaken identity, the Ld. CIT(A), therefore, vide order dated 21.08.2023 deleted the additions so made by the Assessing Officer in the case of namesake of the assessee.

5. Thereafter, the Assessing Officer initiated assessment proceedings against the present assessee namely Shri Anand Jhalani holding PAN: ADHPJ3900C under Section 153C of the Act for the assessment years under consideration.

The Assessing Officer (DCIT, Central Circle-4, Jaipur) recorded a Satisfaction Note dated 18.10.2023 under section 153C of the Act which was based on information received from the Investigation Wing via the Insights portal. In this note, the AO concluded that the code name “A. JHALANI” appearing in the seized documents conclusively referred to the present assessee, primarily correlating it with a mobile phone number (99290-91585) found in another excel file titled “Excel with Name.xlsx”.

6. Based on this solitary Satisfaction Note covering all four years, the AO issued notices under Section 153C to the present assessee on 18.10.2023. In response, the assessee filed his returns of income declaring total income, identical to the original income declared in the returns filed under Section 139(1) of the Act. The AO passed assessment orders under Section 153C read with Section 144 of the Act on 27.03.2024, holding that the assessee had advanced unaccounted cash loans through RMG. Additions under Section 69A of the Act, read with Section 115BBE, were made for unaccounted loans amounting to Rs. 3,00,00,000/- for AY 2013-14, along with estimated interest income of Rs. 16,00,000/-. Similar proportional additions were made in the subsequent years: Rs. 7,47,00,000/- for AY 2014-15; Rs. 39,54,00,000/- for AY 2015-16; and Rs. 33,90,00,000/- for AY 2016-17. The Ld. CIT(A) upheld the additions made by the AO vide separate orders of even date 29.08.2025. Aggrieved by the said orders of the Ld. CIT(A), the assessee has filed the present appeals before us.

7. We have heard the rival contentions and gone through the record. A perusal of the afore reproduced grounds of appeal would reveal that the assessee has contested the impugned additions on legal/jurisdictional grounds as well as on merits.

Adjudication On Jurisdictional And Legal Grounds

A. Exercise of Jurisdiction u/s 153C of the Act on the basis Information from Investigation Wing:

8. The Ld. AR for the assessee has raised a preliminary legal objection that the Satisfaction Note, on its face, states that information was received from Insight Portal and the Investigation Wing (DDIT Inv.-II, Jaipur) rather than being formally handed over by the AO of the searched person. The Ld. AR vehemently argued that under the scheme of Section 153C, the jurisdictional AO of the searched person must gather material and consciously pass it on to the jurisdictional AO of the other person. It was contended that when information is received solely from the Investigation Wing, the proper recourse is to reopen the assessment u/s 147/148 of the Act and not u/s 153C of the Act, and thus the assumption of jurisdiction by the AO u/s 153C of the Act was not valid.

9. We have heard and considered the rival submissions of the Ld. Representatives of the parties on this issue. The undisputed factual position is that the AO of the searched person (RMG) and the AO of the “other person” (the assessee herein) were one and the same officer, i.e., DCIT, Central Circle-4, Jaipur. It is a well-settled judicial principle that when the Assessing Officer holds concurrent jurisdiction over both the searched person and the other person, the act of “handing over” and “receiving” the documents is a notional and mental exercise. The AO is not required to physically transmit files from one desk to the same desk. The moment the AO applies his mind to the seized material, the statutory requirement of transmission of documents is constructively satisfied. Though, the Hon’ble Delhi High Court in the case of ATS Township Pvt Ltd v. ACIT [W.P.(C) 13790/2024] vide order dated 11.12.2024, has held in certain contexts that merely uploading data on the ‘Insight’ portal by the Investigation Wing is not a substitute for the statutory handing over of material by the AO of the searched person, however, in the peculiar facts of the present case, where the AO holds concurrent jurisdiction, the source of the initial trigger is not fatal to the jurisdiction, provided that the AO applies his mind and records satisfaction which is based on the material seized during the search action carried out in case of the other person. Therefore, this issue is decided against the assessee.

B. Invalidity of a Single, Consolidated Satisfaction Note:

10. The Ld. AR of the assessee has submitted that in this case, the AO has recorded only one single, consolidated Satisfaction Note dated 18.10.2023 u/s 153C of the Act, covering all the four assessment years under consideration (AY 2013-14 to 2016-17). He has further submitted that the legislative scheme of Section 153C of the Act mandates that the AO must apply his mind independently for each assessment year and record a specific finding that the seized material has a bearing on the determination of the total income for that specific year, however, in the impugned proceedings, a consolidated satisfaction note has been recorded for different Assessment Years, which vitiates the entire assessment proceedings.

11. We have considered the rival contentions of the Ld. Representatives of the parties on this issue. We, however, are not convinced with the above arguments of the Ld. Counsel for the assessee. The relevant part of the provisions of Section 153C of the Act, for the sake of ready reference, is reproduced as under: –

“Assessment of income of any other person.

153C (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,—

a. any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or

b. any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to,

a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of accounts or documents or assessed seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted for requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A.”

12. Further, the relevant part of the provisions of Section 153A of the Act is reproduced as under:-

Assessment in case of search or requisition.

153A (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [but on or before the 31st day of March, 2021], the Assessing Officer shall—

(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;

(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years :

Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years….”

13. A perusal of the above reproduced provisions of Section 153C of the Act read with the provisions of Section 153A of the Act, would reveal that in case of a search action u/s 132 of the Act, the AO is mandatorily required to open/reopen and assess/reassess the income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years. Therefore, the contention that the AO must record satisfaction regarding the existence of incriminating material for each specific year within the six years from the year of search is not mandated under the relevant provisions. Therefore, there is no merit in this legal ground raised by the Ld. AR, hence, the same is decided against the assessee.

C. Limitation to initiate/complete assessment proceedings under sections 153C read with 153B of the Act:

14. The Ld. AR of the assessee has dissected this issue from three distinct statutory angles, demonstrating that under any conceivable interpretation of the law, the assessments are hopelessly time-barred. To properly appreciate the contentions of the Ld. AR, we deem it appropriate to reproduce the relevant statutory provisions governing searches, though at the cost of repetition:

Section 153C(1) of the Act dictates the substantive framework for the ‘other person’:

“Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,—

a. any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or

b. any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A…

…Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person.”

[Emphasis supplied]

Section 153C(3) introduces a strict sunset clause:

“(3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021.”

Section 153B of the Act limits the time for passing the final order:

“(1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment,—

(a) in respect of each assessment year falling within six assessment years… within a period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132… was executed;…

Provided that in case of other person referred to in section 153C, the period of limitation for making the assessment or reassessment shall be the period as referred to in clause (a) or clause (b) of this sub-section or nine months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later.”

[Emphasis supplied]

15. A perusal of the above reproduced proviso to Section 153B would reveal that there are two limitation periods provided for making the assessment in case of other person referred to in section 153C of the Act, :

a. within a period of twenty-one months from the end of the financial year in which search under section 132 of the Act was executed; or

b. Nine months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person.

……… whichever is later will be applicable.

16. Now, we proceed to analyze the facts of the present case in the light of the afore reproduced statutory provisions:

Scenario A: If the Date of Search of RMG is taken as the Base Date.

17. If the date of the search in the case of the searched person (RMG) on 07.01.2016 is taken as the relevant date, Section 153B(1)(a) mandates that the assessment must be completed within 21 months from the end of the financial year in which the search was executed. The financial year of the search is FY 2015-16, ending on 31.03.2016. Twenty-one months from 31.03.2016 expired in December 2017. The present assessment orders were passed on 27.03.2024. Therefore, if the original search date is taken as the relevant date for the purpose of counting of limitation period in the case of the assessee, the assessment orders are time-barred by over six years.

Scenario B: If the Date of Handing Over of the seized material is taken as the Base Date.

18. Now, in this case, the AO of the searched person being also the Jurisdictional AO of the assessee, hence, as observed above, the act of “handing over” and “receiving” the documents is a notional and mental exercise. The AO was not required to physically transmit files from one desk to the same desk. Hence, a constructive date of handover of the material has to be assumed. Under such circumstances, such deemed handover can be assumed on the happening of following events:

(A) If the date of constructive handover is taken when the AO applied his mind to the seized material:

19. The Revenue’s case is that since the AO of RMG and the AO of the assessee was the exact same officer, the physical handing over is notional. If so, the seized documents were immediately available with the AO during the assessment proceedings of RMG. The RMG, admittedly approached the Hon’ble Settlement Commission. Therefore, the AO was precluded to proceed further with the assessment of the searched person. Hence, under the circumstances, nothing new was to be gathered by the AO in the case of the present assessee. The seized material was already available with the AO. Therefore, the triggering date for recording of satisfaction would be the date on which the searched person issued notice to the AO of his intention to approach the Settlement Commission, which date obviously was prior to the year 2018. Therefore, the assessment is clearly time-barred by 6 years.

(B) If, the constructive handover is deemed to have occurred on the conclusion of proceedings of the searched person before Settlement Commission:

20. If, the constructive handover is deemed to have occurred in the year 2018, when the proceedings before the Settlement Commission concluded, even then, the 9-month limitation period for passing the order under the proviso to Section 153B(1) expired in the year 2019. The satisfaction in the case of the assessee has, admittedly, been recorded on 18.10.2023 and the assessment order was passed on 27.03.2024 and hence, there is inordinate delay of 4 years from the ITSC order, which is clearly time-barred.

(C) If, the constructive date of handover is taken as the date of recording of satisfaction by the AO:

21. If we take the constructive date of receipt of the material by the assessee’s AO as 18.10.2023 i.e. the date of recording of satisfaction by the AO of the assessee, this date would act as the date of initiation of search for the assessee, then the sunset clause u/s 153C(3) of the Act would come into operation and the very initiation of assessment will be bad in law.

The Hon’ble Madras High Court in Harigovind G. Ravindran (HUF) vs. ACIT (485 ITR 509) extensively clarified that for the “other person”, the effective date of search initiation is the date the seized material is handed over. Since 18.10.2023 falls well after the cut-off date of 01.04.2021, the entire mechanism of Section 153C is extinguished and barred by the strict sunset clause of Section 153C(3). The invocation of Section 153C thus would be void ab initio by operation of law. The issue also came for consideration before the Hon’ble Delhi High Court in the case of “ATS Township Pvt Ltd v. ACIT” (Supra). The Hon’ble Delhi High Court addressed situations where the search (or the handover acting as the deemed search) occurred after the 31.03.2021 i.e. after the sunset clause of Section 153C. The Revenue tried to argue that since 153C was no longer applicable, they should revert to the date of the actual search to save the limitation, however, the Hon’ble High Court rejected the said contention, observing as under:

“While in the case of a search initiated after 31 March 2021 there would be no actual hand over of material to the jurisdictional AO, that does not convince us to revert to section 153A and hold that the block period is liable to be computed from the date of search. That, in our considered opinion, would amount to rewriting section 153C which would clearly be impermissible.” (Para 14)

Scenario C: Date of initiation of assessment proceedings – date of recording of satisfaction- Limitation period thereof.

22. The limitation issue can also be examined from the angle of delay in initiation of the assessment proceedings by way of recording of satisfaction u/s 153C of the Act.

(A) If the date of the recording of satisfaction is to be taken after the completion of the assessment in the case of searched person in the light of the decision of the Hon’ble Supreme Court in CIT vs. Calcutta Knitwears (362 ITR 673):

23. The Hon’ble Supreme Court in CIT vs. Calcutta Knitwears (supra), while dealing with the analogous provision under the erstwhile block assessment regime, clearly laid down the law regarding the period for initiation of such proceedings:

“44. In the result, we hold that for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages:

a. at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act;

b. along with the assessment proceedings under Section 158BC of the Act; and

c. immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person.”

24. Therefore, in the light of the above decision of the Hon’ble Supreme Court, the AO was legally required to record satisfaction “immediately after” the receipt of notice of the assessee intimating that he has approached the Settlement Commission as from that date the AO was precluded to proceed with the assessment in the case of searched person. Even if we take the date of completion of the assessment in the case of searched person as the date of order of the Settlement Commission, i.e. 09.10.2018, the initiation of assessment u/s 153C of the Act and recording of satisfaction in the case of the assessee in the year 2023 is apparently time-barred.

25. As held by the Hon’ble Delhi High Court in Bharat Bhushan Jain v. ACIT (61 com 89) and the Gujarat High Court in Jitendra H. Modi v. ITO (403 ITR 110), satisfaction recorded after an inordinate delay without reasonable explanation makes the assumption of jurisdiction invalid and the consequent assessment void. The AO cannot keep the sword of Section 153C hanging over an assessee’s head indefinitely.

(B) Date of Recording Satisfaction as date of search – Assessment of Six Preceding Years:

27. If we strictly apply the legal fiction contained in the first proviso to Section 153C(1), the date of initiation of the search for the assessee is the date on which the AO received the seized documents. The Hon’ble Supreme Court in the case “Jasjit Singh vs. CIT” (458 ITR 437) has held that the block period of six assessment years must be computed backward from the date of receipt of the seized material by the AO of the other person, and strictly not from the date of the original search. The Hon’ble Delhi High Court in Ojjus Medicare P. Ltd. v. ACIT (465 ITR 101) endorsed this view, explicitly rejecting the Revenue’s contention that block periods should be reckoned with reference to the date of search.

28. Now, in cases of a common AO as in the present case, if we take such date of receipt of documents as the date of the Satisfaction Note, i.e., 18.10.2023, which falls in Financial Year 2023-24 (AY 2024-25), and then analyse the facts of the case in the light of the above referred to decisions of the Hon’ble Supreme Court and that of the Hon’ble High Courts, under such scenario, two possible consequences would arise :

i. Block Period Shift: Taking AY 2024-25 as the base year, the permissible block of six preceding assessment years spans strictly from AY 2018-19 to AY 2023-24. The assessment years currently under appeal (AY 2013-14 to 2016-17) fall completely outside this statutorily permissible block. Furthermore, as held by the Delhi High Court in the case of Karina Airlines International Ltd. v. ACIT (2024) 165 com 421 (Del), the extended 10-year period introduced by the Finance Act 2017 cannot apply retroactively to a search conducted prior to 01.04.2017. Therefore, the AO fundamentally lacked jurisdiction to reopen these years.

ii. Sunset Clause under Section 153C(3): If we take the constructive date of receipt of the material by the assessee’s AO as 18.10.2023 i.e. the date of recording of satisfaction by the AO of the assessee, this date will be taken as the date of initiation of search for the assessee as per the first proviso to Section 153C(1) of the Act. This scenario has already been discussed in paragraph No. 21 above.

28. Thus, under all conceivable interpretations, the assessments framed under Section 153C are barred by limitation, procedurally fatal, and devoid of jurisdiction. The assessment order passed u/s 153C of the Act is, therefore, quashed being barred by limitation.

ADJUDICATION ON MERITS:

Lack Of Corroboration And Mistaken Identity:

29. Even on factual merits, the entire addition of Rs. 3,00,00,000/- (and subsequent years) rests on uncorroborated, third-party electronic excel sheets containing the abbreviated code “A. JHALANI”. The Revenue’s claim that the code “A. JHALANI” conclusively refers to the present assessee is thoroughly dismantled by the Department’s own prior actions. The Revenue had previously used the exact same seized excel sheets to initiate proceedings under Section 147 against a completely different individual bearing the same name (Anand Jhalani, PAN: AFOPJ6851R), alleging that he had advanced the Rs. 3,00,00,000/- in cash. The AO subsequently dropped those proceedings, admitting mistaken identity, and then conveniently shifted to the present assessee (Anand Jhalani, PAN: ADHPJ3900C). This, in itself, creates suspicion about the identity of the actual person mentioned in the alleged seized material from the third parties. Such an action also demonstrates a casual approach by the Department, attempting to tax different individuals based on the same vague code without any corroborative concrete verification. Therefore, additions based on such doubtful identity of the person whose name was allegedly mentioned in the seized material, cannot be legally held to be sustainable.

30. The searched person (Shri Ramesh Manihar) never explicitly named the present assessee in his statements. The AO completely failed to identify, trace, or examine the alleged borrowers to verify the “second leg” of the transactions. The Ld. AR rightly relied upon the decisions in RRJ Securities Ltd. (380 ITR 612 Del) and Sinhgad Technical Education Society (397 ITR 344 SC), which firmly establish that uncorroborated “dumb” documents, loose sheets, and electronic extracts hold no evidentiary value unless backed by independent material establishing a direct nexus with the assessee. Further, no satisfaction was recorded regarding the integrity of the electronic records as per Section 65B of the Evidence Act, as elucidated by the Hon’ble Supreme Court in Anvar P.V. v. P.K. Basheer. Though, the assessment proceedings under the Income-tax Act are summarily in nature and strict rules of Evidence Act are not applicable, however, in the peculiar facts and circumstances of this case, in the absence of any corroborative material and doubtful identity of the person who allegedly carried out the transactions, the applications of these laws of evidence, in our view, will be attracted.

31. The assessee was entirely denied the opportunity to cross-examine Shri Ramesh Manihar, whose statements and documents formed the bedrock of the Revenue’s case. As held by the Hon’ble Supreme Court in Andaman Timber Industries vs. CCE (281 CTR 241), relying upon the statement of a third party without granting the assessee an opportunity to cross-examine them is a fatal breach of the principles of natural justice, rendering the evidence unreliable.

32. The AO relied heavily on the fact that Ramesh Manihar admitted to these transactions before the Settlement Commission and offered the commission income for tax. We find that the very same search on RMG, the identical excel sheets, and the identical Settlement Commission order were the subject matter of exhaustive adjudication by the Coordinate Jaipur Bench of the Tribunal in the case of Shri Prakash Chand Kothari vs. DCIT (ITA No. 1190/JP/2019, 1298/JP/2019 & 66/JP/2020, order dated 12.10.2021). In that case, the AO made massive additions against Shri Prakash Chand Kothari based on the code “PCK” found in the same excel sheets from the RMG search, again relying on the admission made by RMG before the Settlement Commission. The Coordinate Bench, while quashing the additions, made the following observations on the factual matrix which squarely apply to the present case of the assessee also:

“83. … we are not persuaded by the findings of the Assessing officer that merely because Shri Ramesh Chand Maheshwari and his Group has filed an application before the Settlement Commission where they have surrendered their commission income on such unrecorded and unaccounted cash loan financing transactions and due taxes have been paid, the same should by default form the basis for determining the nature and character of transactions by way of cash loans in the hands of the assessee routed through Ramesh Manihar Group as the said admission is a unilateral admission on part of Ramesh Chand Maheshwari and the assessee cannot be compelled to accept the same in absence of any clinching and irrefutable evidence that the money has infact been paid by the assessee and routed through Ramesh Manihar Group for onward lending and without providing an opportunity of cross-examination… mere admission by one person before the Settlement Commission cannot bind the another person in absence of any nexus between the person admitting and the other person.”…….

“85. We therefore find that the Assessing officer has merely relied upon extracts of certain uncorroborated excel sheets, found during the course of search in case of Ramesh Manihar Group. Such excel-sheets do not point out to the fact of assessee having given loans, in cash, to different persons through Ramesh Manihar Group. Nothing concrete is discernible from these excel sheets. The Assessing officer has failed to corroborate the excel sheets with independent evidences. Unless such corroborative evidences were brought on record, the present additions are not justified. Nowhere in the excel-sheets found during the course of search in case of Ramesh Manihar Group and relied upon by the AO, it could be established that “PCK” as mentioned in those documents stand for the assessee only.”

33. The issue on merits, therefore, is squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of “Prakash Chand Kothari” (supra) which is relating to the same search action and the findings are given on the very same seized material which is made basis in the case of the assessee. The position of law is further fortified by the decision of the Hon’ble Gujarat High Court in the case of Kaushik Nanubhai Majithia (Tax Appeal No. 20 of 2024, order dated 06.03.2024). In that case, the Revenue raised the exact same argument that the third party (developer) had admitted to the entries in the seized excel sheet and paid taxes on them before the Settlement Commission. The Hon’ble High Court dismissed the Revenue’s plea, holding that there is no basis for conducting proceedings against the assessee merely because a third party paid tax on amounts shown in an unsigned, uncorroborated excel sheet found from their premises. Similarly, the Hon’ble Delhi High Court in “CIT vs. Vineeta Gupta” (46 taxmann.com 439) has held that declarations or admissions made by a third party (seller) before the Settlement Commission cannot automatically bind the assessee. Furthermore, the Hon’ble Gujarat High Court in “ITO vs. Bharat A. Mehta” (60 taxmann.com 31) and Krishna Textiles vs. CIT (310 ITR 227) has consistently laid down that an assessee cannot be called upon to explain the source of entries found in the books or documents of a third party without independent corroborating evidence. Therefore, an admission of commission income by a third party (RMG) before the Settlement Commission, based on uncorroborated “dumb” excel sheets, cannot fasten tax liability for cash loans onto the present assessee. This is especially true when the identity of “A. JHALANI” is highly disputed and was previously attributed by the Department to another person entirely. With no independent corroboration, the additions made under Section 69A are based on mere surmises, conjectures, and suspicion, and cannot be sustained in the eyes of law.

Conclusion:

34. In light of the detailed factual and legal analysis as above, we hold that the assessments framed under Section 153C are entirely unsustainable. The assessee succeeds on the legal grounds relating to limitation as well as on factual merits of the case.

ITA Nos. 1232, 1233 & 1234/JPR/2025 (AYs 2014-15 to 2016-17)

35. The facts and issue involved in all the captioned appeals are identical and, therefore, our findings given above will mutatis mutandis apply to all the captioned appeals.

36. In the result, the assessment orders passed under Section 153C read with Section 144 for AY 2013-14, 2014-15, 2015-16, and 2016-17 are hereby quashed as void ab initio and barred by limitation. Even otherwise, the additions stand deleted on merits.

37. All the four appeals filed by the assessee are allowed.

Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 08/06/2026.