Section 292C’s presumption applies only to person from whom documents seized

Sanmati Jewellers Vs DCIT (ITAT Delhi)

ITAT Delhi order on presumptions u/s 292, absence of corroborative evidence of cash transactions, delay in recording of proceeding note u/s 153C in case of search u/s 132

Summary: In the case of Sanmati Jewellers Vs DCIT (ITAT Delhi), the assessee challenged additions made under Section 69A of the Income Tax Act. M/s Sanmati Jewellers, engaged in trading bullion and jewelry, was implicated based on digital data seized during a search of Jindal Bullion Ltd. (JBL). The Assessing Officer (AO) added ₹67.16 lakh as peak balance for alleged unaccounted cash payments and ₹19.37 lakh as assumed gross profit from cash purchases. The Commissioner of Income Tax (Appeals) upheld the additions citing the presumption of accuracy under Section 292C. The ITAT ruled that Section 292C’s presumption applies only to the person from whom the documents were seized (JBL) and not to third parties like Sanmati Jewellers. The tribunal emphasized the lack of corroborative evidence to substantiate the alleged cash transactions, noting that no invoices, stock registers, or corroborating records linked the assessee to the entries. ITAT also addressed the significant delay of four years in recording the satisfaction note under Section 153C, deeming it beyond reasonable limits. However, it acknowledged that the COVID-19 lockdown partially justified the delay. Citing precedents like CIT vs. Girish Chaudhary and CIT v. D.K. Gupta, ITAT deleted the additions of ₹86.54 lakh due to insufficient evidence and procedural lapses.

Brief facts:

The assessee, M/s Sanmati Jewellers, a partnership firm engaged in trading bullion, jewelry, and silverware, originally declared an income of ₹45,17,630/- in its income tax return.

• A search under Section 132 was conducted on 05.01.2017 at the premises of Jindal Bullion Ltd. (JBL).
• During the search, digital data from Hazir Johri Software was seized from Mr. Kushagra Jindal (promoter of JBL), which allegedly recorded both accounted (pakka) and unaccounted (kaccha) transactions.
• The ledger “Sanmati 1586”, purportedly related to the assessee, contained both banking and cash transactions.
• The AO recorded satisfaction on 04.02.2021 and issued a 153C notice on 05.02.2021.

2. Additions Made by AO and CIT(A)

1. ₹67,16,600/- added as peak balance of alleged unaccounted cash payments made by the assessee to JBL.

2. ₹19,37,985/- added as assumed 2% gross profit margin from alleged cash purchases of bullion from JBL.

The CIT(A) upheld these additions, stating that:

• Since banking transactions in the ledger were correct, cash transactions should also be considered valid.
• The seized data enjoys presumption of truth under Section 292C.
• Cross-examination of Ms. Parul Ahluwalia (JBL employee) was denied, as her statement was not primary evidence.

ITAT Observation & Key Legal Issues:

A. Presumption under Section 292C Limited to JBL

ITAT Observation:

• The Hazir Johri software was seized from JBL’s premises, not the assessee’s.
• Presumption under Section 292C applies only to the person from whom the document is seized (JBL), not a third party (Sanmati Jewellers).
• Without corroborative evidence, data from JBL’s software cannot be used to make additions against the assessee.

Supporting Case Laws:

1. Rajeshwar Singh Yadav vs. DCIT (ITA Nos. 1909 & 1910/Del/2022, ITAT Delhi)

• Section 292C presumption is restricted to the searched party.

2.CIT vs. Babu Mohan Arya Smarak Educational Trust (42 taxmann.com 255, Allahabad HC)

• Documents found in a third-party search do not automatically implicate another person.

B. No Corroborative Evidence for Cash Transactions

ITAT Observation:

• The assessee denied cash transactions and explained that entries were wrongly recorded under its name due to its introduction of a broker (Subodh Kumar Jain) to JBL.
• No bills, vouchers, stock registers, or invoices were found linking the alleged cash purchases to the assessee.
• Revenue failed to prove that transactions in the ledger exclusively pertained to the assessee.

Supporting Case Laws:

1.CIT v. D.K. Gupta (308 ITR 230, Delhi HC)

• Dumb documents without external corroboration cannot be used for additions.

2.CIT vs. Girish Chaudhary (296 ITR 619, Delhi HC)

• Unverified notings in seized material cannot be the sole basis for additions.

3.Ashwani Kumar vs. ITO (39 ITD 183, ITAT Delhi)

• Absence of independent verification invalidates additions based on loose papers.

C. Unjustified Delay in Recording Satisfaction Note – 153C Proceedings Invalid

ITAT Observation:

The search on JBL was conducted on 05.01.2017, but satisfaction note was recorded after 4 years (04.02.2021).

Courts have ruled that a delay of more than 9-10 months in recording satisfaction is beyond reasonable limits, leading to annulment of 153C proceedings.

Supporting Case Laws:

CIT vs. Bharat Bhushan Jain (370 ITR 695, Delhi HC)

• Satisfaction recorded beyond 10 months held invalid.

2. PCIT vs. Jitendra H Modi HUF (403 ITR 110, Gujarat HC)

• Delay of 9 months made 153C proceedings untenable.

3. Radhey Shyam Bansal (337 ITR 217, Delhi HC)

Long delays in 153C satisfaction notes are impermissible.

ITAT Decision/ Ruling:

• Additions of ₹67,16,600/- and ₹19,37,985/- were deleted due to lack of corroborative evidence.
• the challenge of initiation of proceedings under section 153C of the Act belatedly was well met by the Ld. DR before us, as in our considered opinion, majority of the time was covered by the period of Covid 19 nationwide lockdown and hence we hold that the department was prevented from sufficient cause in not initiating the proceedings under section 153C of the Act on the assessee within reasonable time. Accordingly, the additional Ground No.2 raised by the assessee is hereby dismissed.

FULL TEXT OF THE ORDER OF ITAT DELHI

1. The appeal in ITA No.3031Del/2022 for AY 2016-17, arises out of the order of the Commissioner of Income Tax (Appeals)-24, New Delhi [hereinafter referred to as ^„ CIT(A)’, in short] in Appeal No. 24/10729/2015-16 dated 06.12.2022 against the order of assessment passed u/s 153C r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ^„the Act’) dated 30.12.2021 by the Assessing Officer, DCIT, Central Circle-7, New Delhi (hereinafter referred to as ^„ld. AO’).

2. The assessee has raised the following original grounds and additional grounds of appeal before us:-

“1. That on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) 24, Delhi [Ld. ‘CIT (A)] has erred in confirming the order dated December 30, 2021 passed u/s.153C r.w.s.143(3) of the Income Tax Act, 1961 (‘Act‘) passed by the DCIT, CC-7, Delhi [‘AO’], in complete violation of the principles of natural justice and also without fair and objective application of mind to the facts of the case and law and hence liable to be quashed.

2. On the facts and circumstances of the case and in law, the CIT (A) erred in sustaining the action of AO in completion of proceedings u/s 153C of the IT Act, solely on the basis Unverified/unconfirmed statement recorded under section 132(4) of the Act of the employees Jindal Bullion Limited who have searched under section 132 of the Act on 04.01.2017.

3. On the facts and circumstances of the case and in law, the Ld. CIT (A)/AO erred in not appreciating that no addition could be made in the hands of the appellant merely on the alleged statements of the employees of the Buyer recorded under section 132(4) of the Act without having any corroborating evidences without having any incriminating material belongs to the appellant found during the search on Buyer.

4. On the facts and in the circumstances of the case Ld. CIT (A) erred both on facts and in law, in sustaining the action of AO violating the principle of natural justice by not providing opportunity for cross-examination of persons, whose statements have been relied upon by the AO/CIT(A), in spite of specific submission of the appellant.

5. On the facts and in the circumstances of the case Ld. CIT (A)/AO is erred in law and not justified in making additions of Rs. 86,54,585/- under section 69A of the Act on arbitrary basis without having any evidence, tangible and valid material on record. The additions have been made on surmises and conjectures and have no merit. Thus the said addition is liable to be quashed.

6. On the facts and circumstances of the case and in law, the CIT (A) erred in sustaining addition of Rs. 86,54,585/- made by AO under section 69A of the Act on the basis of alleged cash transactions on the basis of dumb documents, on arbitrary basis without having any evidence, tangible and valid material on record.

7. On the facts and circumstances of the case and in law, the CIT (A) erred in sustaining addition of Rs. 86,54,585/- made by AO under section 69A of the Act on the basis of alleged cash transactions without rejecting Books of Accounts of the appellant.

8. That on the facts and circumstances of the case and in law the Ld. CIT(A)/AO erred on facts and in law in making additions on the basis of dumb document as the Digital Dongal (Book) “Hazir Johri” as seized from the premises of Buyer has no legal validity in the absence of any independent valid supportive documents.

9. That on the facts and circumstances of the case and in law the Ld. CIT(A)/AO failed to appreciate that there was no validity of entries mentioned in the Digital Dongal (Book) “Hazir Johri” as seized from the premises of Buyer in the absence of any independent valid supportive documents, thus the addition is merely based upon surmises, conjectures and based upon the forceful admission in statement u/s 132(4) of the Act and without any material or evidence.

10. That on the facts and circumstances of the case and in law the assessing officer erred and went wrong to levy interest under section 234A, 234B and234C of the Act.

11. That the Ld. AO / Ld. CIT(A) has erred on the facts and circumstances of the case and in law in initiating the penalty proceedings under section271(1)(c) of the Act. ”

Additional Grounds of Appeal

“1. That on the facts and circumstances of the case and in law, the assessment order dated 30.12.2021 (hereafter ‘the assessment order) passed under section 153C rws 143(3) of the Income Tax Act, 1961 (hereafter ‘the Act’), is illegal and invalid in the eyes of law, since the same was issued without quoting DIN on the body of the assessment order as well as without providing the reasons or obtaining necessary prior approval for such issuance in violation of the CBDT Circular No. 19/2019 dated 14.08.2019.

2. That on the facts and circumstances of the case and in law the assessment order is illegal and beyond jurisdiction, since the satisfaction dated 04.02.2021 recorded by the Respondent before initiating proceedings u/s. 153C of the Act, after a laps of more than a year from the date of conclusion of assessment proceedings in the case of ‘searched person’, was barred by limitation.

3. That on the facts and circumstance of the case and in law, the assessment order is illegal and beyond jurisdiction, since the approval obtained from the Additional Commissioner of Income Tax, Central Range – 2, New Delhi u/s. 153D of the Act was mechanical in nature and without any independent application of mind. ”

3. The assessee is a partnership firm engaged in trading of bullion, jewellery and silverware. It had filed its original return of income declaring total income of Rs. 45,17,630/-. A search and seizure operation was conducted u/s 132 of the Act on 05.01.2017 in the case of Jindal Bullion Ltd (JBL). During this search, digital data stored in software called ‘Hazir Johri’ was seized from the residence of Mr. Kushagra Jindal, promoter of JBL. The said software purportedly contained parallel books maintained by JBL where both transactions through the banking channel and cash transactions were found recorded. While the transaction undertaken through banking channel were recorded in regular books of accounts maintained in tally software, however, certain cash transactions were not recorded in the regular books of accounts, which were alleged by the Ld. AO to be unaccounted. The Ld. AO observed that a statement of Ms. Parul Ahluwalia, Director and former employee of JBL, was recorded under Section 132(4) of the Act, wherein, she confirmed that both ‘pakka’ (entries recorded in regular books of account) and ‘kaccha’ (unaccounted) transactions undertaken by JBL were documented in the ‘Hazir Johri’ software.

4. On perusal of seized data, among others, a ledger named ‘Sanmati 1586’ allegedly pertaining to assessee was found. In the said ledger, the transactions made in cash as well as through banking channel were found recorded. The AO of the searched person (who also happens to be the AO of the assessee herein) recorded his satisfaction note on 04.02.2021, that the said ledger account pertain to the assessee since banking transactions recorded therein related to it and therefore the said ledger had bearing on computation of total income of the assessee. Accordingly, notice under section 153C of the Act stood issued to the assessee on 05.02.2021.

5. Assessment was completed u/s 153C of the Act in the hands of the assessee by making the following additions:-

a) Addition of Rs. 67,16,600/- being peak balance of alleged cash payment made by assessee firm to JBL.

b) Addition of Rs. 19,37,985/- being 2% gross profit margin assumed to be earned by the assessee firm from selling of gold/bullion purchased in cash from JBL.

6. The Ld. CIT(A) affirmed the additions made in the assessment order by observing that since the bank transactions found recorded in the seized ledger were correct and pertained to the assessee firm, it will not be appropriate to accept that the cash transaction mentioned in the same account did not pertain to the assessee. The Ld. CIT(A) in his order stated that the data of Hazir Johri software was found during search and in view of section 292C of the Act, the same is presumed to be true and correct. Further, the Ld. CIT(A) also rejected the request for providing the complete copies of statement and cross examination of Parul Ahluwalia as the said statement was not the primary evidence on the basis of which additions were made, which also got corroborated with the seized material found during the search. The relevant findings and order of the Ld. CIT(A) are reproduced as under:-

“4.1.20 As held by the Assessing Officer, these transactions indicate the purchase of bullion from M/s Jindal Bullion Ltd. No effective and convincing explanation of these cash transactions have been provided during the course of assessment and subsequent appellate proceedings. The correctness of the Hazir Johri data have already been discussed above and the cash transactions have been correctly considered as have been made by the appellant only. In such a situation, the appellant has been carrying out regular trading of bullion with M/s Jindal Bullion Ltd in cheque and cash both. The cash transactions highlighted above have not been disclosed in the final accounts of the appellant. The appellant was in possession of undisclosed cash which was paid to M/s. Jindal Bullion Ltd. which is required to be brought under the ambit of tax. Similarly, the gross profit @2% on the total transaction is also required to be taxed as out of books profit earned by the appellant on the sale of this gold in the open market. These are the only two additions made by the Assessing Officer in the assessment order. The Assessing Officer carried out the analysis of cash paid to JBL and the cash received from the sale proceeds of gold in the open market. On the basis of analysis the peak of unexplained cash available with the Assessing Officer at any point of time during the assessment year, which was used for the purpose of business was Rs. 67,16,600/-. The Assessing Officer made the addition of peak of unexplained cash used by the appellant for payment to JBL amounting to Rs. 67,16,600/- as unexplained money u/s 69A. Further, gross profit @ 2% on these gold sale transactions amounting to Rs. 19,37,985/- has been added as out of books profit earned by the appellant. This is the gross profit on the unexplained and unrecorded cash transactions of sale of bullion by the appellant during the year. In my considered opinion the additions made by the Assessing Officer are correct and does not require any interference at this stage. Accordingly, the additions made by the Assessing Officer are confirmed and the Ground Nos. 1, 2.1, 2.2, 2.3, 2.4 & 2.5 of the appeal are dismissed. ”

7. The Ld. AR before us argued that the assessee did not enter into any cash transactions with JBL. According to the Ld. AR, all transactions conducted between the assessee and JBL were undertaken through proper banking channels and were duly recorded in the audited books of accounts of the assessee. The Ld. AO, however, relied on entries from the seized ledger ‘Sanmati 1586’, which was not maintained by the assessee, and the statement of Ms. Parul Ahluwalia, a Director and former employee of M/s. JBL. In her statement, however, Ms. Ahluwalia made no mention of any cash transactions involving the assessee, nor was she specifically questioned about such transactions. Given that the ‘Hazir Johri’ ledger was neither maintained by nor recovered from the assessee, the presumption under Section 292C read with section 132(4A) of the Act does not apply to the assessee. Thus it was argued that no presumption could be drawn against the assessee on the basis of seized material found in the search of third party, when no corroborative evidence in related to such transactions was found implicating the assessee. Reliance was placed on the following case laws in support of this proposition:-

a) ITAT Delhi decision in Sh. Rajeshwar Singh Yadav Vs DCIT in ITA Nos. 1909 & 1910/Del/2022, which limits such presumptions to persons from whom documents are actually seized.

b) Hon’ble High Court of Allahabad in the case of CIT vs. Babu Mohan Arya Smarak Educational Trust reported in 42 com 255 (Allahabad).

c) ITAT Mumbai decision in the case of Straptex India P Ltd. v Dy. CIT reported in 84 ITD 320 (Mum).

d) ITAT Chandigarh decision in the case of ACIT v Kishore Lal Balwant Rai reported in 17 SOT 380 (Chd.).

e) ITAT Ahmedabad decision in the case of Sheth Akshay Pushpavadan Vs. DCIT reported in 130 TTJ 42 (Ahdbd Trib)

8. The Ld. AR also pointed out that from the perusal of the seized ledger named ‘Sanmati 1586’ of Hazir Johri software, it can be seen that it not only contains entries pertaining to assessee firm but some other parties as well namely ‘Rishab Trading Co.’, Kls (JHS)’ and ‘MT’ etc. with whom assessee firm had no relation whatsoever. The Ld. AR submitted that this fact was acknowledged by the Ld. AO in page 9 of his order as under:-

“Analysis of the accounts maintained by JBL on Hajir Johri in case of ‘Sanmati (1586)’

……………….

………………..

………………

Further, not all the entries in the ledger pertains to M/s Sanmati Jewellers. Some of the entries pertains to other companies as well like M/s Rishab Trading Company as evident from the entries maintained in the ledger. These persons / entities are close associate of Sanmati Jewellers and he acted as a facilitator for sale/ purchase of gold / silver or getting accommodation entries from JBL. These entries are not considered I the case of Sanmati Jewellers and deemed to pertain to the respective persons / entities.

9. Still the additions were made by the Ld. AO providing an erroneous finding that Rishab Trading Co. was a close associate of assessee firm without bringing on record any evidence to support the same. Further, no comments were offered by the Ld. AO on other parties like ‘Kls (JHS)’ and ‘MT’. The Ld. AR also pointed out that a statement of Ms. Ekta Soni (employee of JBL) was recorded under section 132(4) of the Act wherein in response to Question No. 22, admittedly mentioned the name of ‘Telwale’, among others, being a party who purchased goods in cash from JBL. In the seized ledger ‘Sanmati 1586’, the name of said party also appears, which proves that the entry related to other parties were also present in the said ledger which cannot be relied to make addition in the case of assessee, especially when no evidence of cash purchases made by the assessee was brought on record.

10. The Ld. AR invited our attention to relevant pages of the seized material attached in the paper-book where the instances of transactions of third parties were included, illustratively some of the transactions are reproduced hereunder:-

Ankit – Given 29.489 kg silver to JBL on 19.10.2015 (enclosed in Page 33 of Paper Book)

Kls (Telwale) – Given 88.7490 kg silver to JBL on 19.10.2015 (enclosed in Page 33 of Paper Book)

Kamty – Rs 6,12,027.14/- given by JBL to this party on 16.12.2015 (enclosed in Page 34 of Paper Book)

11. The Ld. AR also drew our attention to the seized ledger in which against the bank payments, name of the respective party i.e., Assessee firm or other parties were mentioned. However, against the alleged cash payment, no names are mentioned. Therefore, even if one believes that the cash payment to be true it cannot be said how much cash is attributable to which party. This pattern of recording the entries raises a serious concern whether while making the entries, the accountant of JBL have posted the cash entries in the wrong ledgers or deliberately, the cash entries were posted in the ledgers of genuine parties, like Assessee firm, for concealing the identity of the actual cash buyers and to reflect the correct profitability.

12. Ld. AR also pointed out that out of the non-cash transaction mentioned in the seized ledger, only 56% of the transactions were pertaining to the Assessee, while the balance 44% of the transactions were belonging to third parties unrelated to the Assessee.

13. In view of the above pointed deficiencies, it was argued that the seized ledger is a dumb document, in as much as it makes no accounting sense to merge the entries of unrelated parties into one ledger, to state that it is trite law that no addition can be made on the basis of dumb documents, more so when no corroborative evidence of cash sales i.e., sales invoices/vouchers, stock register etc. were found during search. In support of this, the Ld AR placed reliance on the following decisions:-

a) Hon’ble Jurisdictional High Court in the case of CIT v. D.K. Gupta reported in 308 ITR 230 (Del)

b) Hon‟ble Jurisdictional High Court in the case of CIT vs. Girish Chaudhary reported in 296 ITR 619 (Del)

c) Co-ordinate Bench of Delhi Tribunal in the case of Ashwani Kumar vs ITO reported in 39 ITD 183

d) Co-ordinate Bench of Indore Tribunal in the case of Saaras Agro

Industries vs. ACIT reported in 197 ITD 567.

14. In so far as statements of Ms. Parul Ahluwalia and Ms. Ekta Soni (employee of JBL group) referred by the Ld. AO in the assessment order, the Ld. AR pointed out that even the Ld. AO also did not rely upon the said statements, while making the impugned additions in the assessment order. The Ld. AR pointed out that the Assessee had time and again sought for cross examination of relevant persons, of those, who had deposed against the assessee, but the Ld. AO failed to provide the same. In view of the said failure, the Ld. AO itself held that there was no necessity to place reliance upon such statements, since, according to him, the seized ledger was conspicuously pointed against the Assessee.

15. Our attention was invited to the decision of Co-ordinate Bench of Delhi Tribunal in the case of Anoop Kumar Soni vs. DCIT in ITA No. 1641/Del/2021 dated 2.8.2023, wherein while adjudicating almost similar facts related to search on JBL, the Tribunal held that since the ledger found during the search ^„AP‟ contains the entries of parties other than assessee, then said ledger cannot be said to be belonging to assessee and addition made on the basis of assumption was deleted.

16. It was further argued that the Ld. AO or the Ld. CIT(A) grossly failed to bring on record any corroborative evidence like sales bills/vouchers, stock register showing the cash sales etc. to prove that the alleged cash sales belong to Assessee firm. Reliance in this regard is placed on recent decision of Co-ordinate Bench of Delhi Tribunal in the case of Surender Kumar Jain in ITA No. 1314/Del/2023 dated 07.03.2024 arising out of search in the JBL, wherein it was held that entries in the Hajir Johri ledger of M/s. JBL, supposedly involving M/s. S.K. Impex, do not prove actual transactions without corroborative evidence such as bills or invoices. The additions are based on conjecture and the statement of Mr. Parul Ahluwalia lacking supporting evidence was deleted.

17. Ld. AR further drew our attention to the additional grounds raised vide application filed in 16.08.2023 contending that only jurisdictional grounds were taken for which facts were on record not warranting any further investigation therein placing reliance upon the decision of Hon’ble Supreme Court in the case of NTPC Ltd vs. CIT reported in 229 ITR 383 (SC). Out of the 3 grounds taken, the Ld. AR argued upon additional ground no. 2, dealing with limitation of satisfaction recorded to initiation the proceedings under section 153C of Act. Other grounds were not argued holding them to be academic in nature. In support of the aforesaid additional ground no. 2, the Ld. AR argued that the perusal of the satisfaction note recorded by the AO of the searched person, dated 04.02.2021, shows that the assessment in the case of the person searched (JBL) was completed in December 2019, therefore, the satisfaction note drawn on 04.02.2021 after a delay of more than 13 months was inordinately late rendering the proceedings initiated under section 153C to be barred by limitation. In this connection, he drew our attention to the CBDT circular No. 24 of 2015 dated 31.12.2015 issued after considering the decision of Hon’ble Apex Court in the case of Calcutta Knitwears [Civil Appeal No.3958 of 2014 dated 12.03.2014], wherein it was opined that the satisfaction recorded by the AO of the searched person is sine-qua-non and must be handed over to the AO of the other person (other than searched person) at any of the following stages:-

a. At the time of initiation of assessment proceedings on the searched person; or

b. During the course of assessment proceedings in the case of searched person; or

c. Immediately after the assessment proceedings are completed in the case of searched person.

18. Reliance were placed on following decisions where the assessment proceedings under section 153C of the Act were annulled due to delay in recording of satisfaction note by the AO of the searched person:-

a) Hon’ble Jurisdictional High Court in the case of CIT vs Bharat Bhushan Jain reported in 370 ITR 695 (Del) – held that satisfaction recorder after delay of beyond 10 months was beyond reasonable limit.

b) Hon’ble Gujarat High Court in the case of PCIT vs. Jitendra H Modi HUF reported in 403 ITR 110 (Guj) – held that satisfaction recorder after delay of 9 months was beyond reasonable limit.

c) Hon’ble Jurisdictional High Court in the case of Radhey Shyam Bansal reported in 337 ITR 217 (Del).

d) Pune bench of Tribunal in the case of Kewal Kumar Jain in ITA Nos. 1384 and 1385/ Pun/2016 – held that satisfaction recorded after delay of approximately 1 year was beyond reasonable limit.

19. In view of the above, it was argued that the present satisfaction recorded after lapse of 13 months, more particularly, when the same was recorded by the same AO who was seized of the entire record of JBL, right from beginning and had completed assessment of JBL, there was no reason to sit on the file for over 13 months to record satisfaction against third parties and therefore, the same was barred by limitation in terms of mandatory CBDT guidelines.

20. Per contra, the Ld. DR vehemently relied on the orders of the lower authorities and argued that the Hazir Johri Software, the accounting data of which was seized during the search on JBL, was full fledged database which was meticulously prepared to record the banking transactions as well the unaccounted cash transactions. Further, it was also argued that the persons belonging to JBL in their statement recorded under section 132(4) of the Act during the search admitted that accounted (genuine transaction disclosed in the regular books of accounts) as well as unaccounted cash entries were recorded in the Hajir Johri software. The said statements were never retracted by the said persons. Ld. DR also highlighted an instance in seized ledger, i.e., transaction dated 16.12.2015, where the cash of Rs. 6,12,028/- was received by JBL against which the name of Assessee ‘sanmati gold 25435‟ was mentioned to support that the cash transaction in the seized material pertains to the Assessee to justify the impugned additions. Further, the transaction dated 20.02.2015 was also referred to, where against the cash of Rs. 59,000/-was recorded to be received from the Assessee i.e., ‘Sanmati Jewellers‟. Therefore, the Ld. DR supported the action of the lower authorities to assume transactions other than banking transactions as undisclosed transactions of the Assessee and making corresponding addition on that account.

21. The Ld. DR also referred to the affidavit filed by the partner of the Assessee firm where he had admitted having introduced a third person Sh. Subodh Kumar Jain to enter into transactions with JBL and had also admitted to have given guarantee on his behalf. Thus, relation of Assessee with third parties whose name was recorded in the seized ledger cannot be ruled out.

22. With regard to the Additional Ground No.2 raised by the assessee, the Ld. DR rebutting the delay of 13 months in recording the satisfaction note dated 04.02.2021 submitted that the assessment in the case of JBL (searched person) was completed in the month of December 2019 and the delay in recording the satisfaction note was due to lockdown imposed by the Central Government due to nationwide outbreak of Covid 19. The officers of the department were not working at that time out of fear of they catching up with the virus. Ld. DR also argued that at the time of search on JBL, the PAN of the Assessee was with Circle 47(1), Delhi and the centralization of PAN/Jurisdiction of the Assessee with that of the searched person (JBL) also took time, which disabled the Ld. AO (Central Circle – 7, New Delhi) to draw the satisfaction immediately after the conclusion of the assessment of searched person (JBL). It was further argued that as per the decision of Hon‟ble Supreme Court in the case of Calcutta Knitwears (supra) and CBDT Circular No. 24 of 2015 which required the recording of satisfaction note ^„immediately after the assessment proceedings are completed in the case of searched person‟ which is to be construed in the light of prevailing circumstances which in present case lies in favour of the Revenue due to Covid Lockdown and other circumstances discussed supra. Accordingly, he submitted that the case laws relied upon by the Ld. AR are factually distinguishable as in those cases, there was no crisis situation like Covid 19 outbreak which were prevailing.

23. Rebutting to the arguments of the Ld. DR, it was argued that the instance in the seized ledger dated 16.02.2015 wherein the alleged cash received by the JBL is attributed to the Assessee solely on the basis that the name of the Assessee ‘Sanmati gold 25435’ was found mentioned in the said ledger. Ld. AR argued that no evidence in the form of bill/voucher was ever produced which proves that the cash payment mentioned belongs to the Assessee. Further, Ld. AR referred to the said entry of the seized material and pointed that the delivery of 240.624 grams of gold against the alleged cash payment was made to a party named ‘Kamty’ which is not related to the Assessee, therefore, the reference to the said entry itself proves that the seized ledger in which the cash payment which is said to have received from the Assessee against which the delivery of gold/silver were made to some other person completely unrelated to the Assessee, is a dumb document on the basis of which no addition can be made in the hands of the Assessee.

24. Similarly, the other entry dated 20.02.2016 also was a wrong entry in as much as, while cash was stated to be received from the assessee but on the same date corresponding contra entry of same amount of Rs. 59,000/- was entered as paid by cheque to the Assessee, which in the submission of the Counsel was incomprehensible or did not match with the entire case built up by the Ld. AO that the Assessee was making undisclosed purchases from JBL. This entry which was a pure contra entry did not reflect the alleged transaction of undisclosed purchases, pointing out to inaccuracy in maintaining the said ledger, thereby rendering it to be a dumb document.

25. As regards, the reference made by Ld. DR to affidavit filed by the partner of the Assessee firm, introducing a broker namely sh. Subodh Kumar Jain, the same was not going against but supporting the case of the assessee, corroborating that, the JBL may have recorded transactions of independent third parties having direct or indirect relation with the assessee by way of introduction or otherwise, in the seized ledger maintained in the name of the Assessee, which further got corroborated with the presence of banking and other transactions of third parties in the aforementioned seized ledger, elaborated in his arguments earlier.

26. Further, rebutting to the argument of the Covid Lockdown it was argued that the Ld. AO of the searched person and the Assessee were same then the delay of 13 months in recording the satisfaction note dated 04.02.2021 after the conclusion of assessment proceedings in the case of searched person (which got completed in December 2019) is beyond the phrase ^„immediately’ used in the decision of Hon’ble Supreme Court in the case of Calcutta Knitwears (supra) and CBDT circular No. 24 of 2015. It was also pointed out that the word ‘immediately’ is the outer time limit for the recording of satisfaction note and CBDT Circular and the decision of Calcutta Knitwears also provided the guideline for the recording of satisfaction note at the time of initiation and during the course of assessment proceedings in the case of searched person, which was possible in the present case, the AO of the searched person and Assessee was common. Therefore, even the delay of 3 months (from December 2019 to March 2020, when Lockdown was imposed) can be seen as delayed recording of satisfaction rendering the consequent assessment proceedings initiated under section 153C barred by limitation.

27. We have heard the rival submissions and perused the materials available on record. At the outset, we find that a search and seizure operation was conducted u/s 132 of the Act on 05.01.2017 in the case of Jindal Bullion Ltd (JBL). During this search, digital data stored in software called ^„Hazir Johri’ was seized from the residence of Mr. Kushagra Jindal, promoter of JBL. The said software purportedly contained parallel books maintained by JBL where both transactions through the banking channel and cash transactions were found recorded. The Ld. AO observed that a statement of Ms. Parul Ahluwalia, Director and former employee of JBL, was recorded under Section 132(4) of the Act, wherein, she stated that both ‘pakka’ (entries recorded in regular books of account) and ‘kaccha’ (unaccounted) transactions undertaken by JBL were documented in the ‘Hazir Johri’ software. On perusal of seized data, among others, a ledger named ‘Sanmati 1586’ allegedly pertaining to Assessee was found. In the said ledger, the transactions made in cash as well as through banking channel were found recorded. But it is pertinent to note that the Hazir Johri Software was found and seized from the premises of JBL at the time of its search under section 132 of the Act. Hence the presumption under section 292C of the Act would apply to JBL and not to the assessee. Eventhough the proceedings stood initiated under section 153C of the Act on the assessee, the basic presumption under section 292C of the Act would only be on JBL. The assessee on its part had categorically denied the transactions reflected in the said Hazir Johri Software by clearly stating that the entries found thereon contains transactions of various other unrelated parties with the assessee and that since assessee has introduced Shri Subodh Kumar Jain (Broker) to JBL, Ekta Soni (Executive Assistant of JBL) had recorded all the transactions against assessee’s name. Admittedly, the entries reflected in the said software pertains to other unrelated parties with the assessee. Admittedly, the said ledger is a combined ledger account of various transactions pertaining to other unrelated parties with the assessee and contains few transactions pertaining to the assessee. However, there is no concrete material brought on record by the lower authorities to implead assessee with all those transactions. Even for the transactions where assessee’s name was mentioned, the revenue was not able to bring any corroborative evidence to prove the nature of such transaction. Hence it could be safely concluded that the assessee had given a plausible explanation about the contents of the said software. Further more , as rightly pointed out by the Ld.AR, there is no corroboration of those entries with the bills / vouchers , sales, stock registers etc, showing the cash sales to prove that the alleged cash sales belong to the assessee firm. Hence those entries cannot be relied upon for making an addition in the hands of the assessee.

28. We also find that the Co-ordinate Bench of this Tribunal in the case of Anoop Kumar Soni vs. DCIT in ITA No. 1641/Del/2021 dated 2.8.2023, wherein while adjudicating almost similar facts related to search on JBL, the Tribunal held that since the ledger found during the search ^„AP‟ contains the entries of parties other than assessee, then said ledger cannot be said to be belonging to assessee and addition made on the basis of assumption was deleted. The relevant observations made by the Tribunal in this regard are as under:-

“30. The banking transactions pertaining to other entities such as Aarthav Gems & Jewels Pvt. Ltd., Surasti Overseas Pvt. Ltd., M/s Saumya Bullion &Jewellers were also recorded in the account AP whereas it had nothing to do with the assessee. In the Remand Report dated 02.08.2021 the Assessing Officer verified all these banking transactions and accepted the contentions of the assessee. In other words, it was verified by the Assessing Officer that some of the banking transactions recorded in the account AP pertain to other entities and not the assessee. Only 23% of the total banking transactions pertain to assessee and remaining 77% are between JBL and other parties. In the facts of the assessee’s corroboration is missing. It is for the searched party i.e. JBL to explain the contents of material recovered from his premises. In case the searched party states that the material belongs to a third party there has to be some connect or corroboration with the third party. On the facts of the present case there is no direct evidence to establish that the account AP belongs to Anoop Soni. The entire action is based on presumptions made by the A.O. Notably, simultaneous search action on 05.01.2017 on Anoop Soni did not detect any material or evidence to establish or even suggest that he was engaged in unaccounted and undisclosed transactions involving sale/purchase of gold in cash outside books of accounts.

31. The entire addition by treating the account AP as belonging to Anoop Soni has been made on the basis of presumption drawn and the statement of Shri Parul Ahluwalia. However, statement of the assessee has not been recorded on this issue either at the time of search, post search inquiries or even during the assessment proceedings. A careful examination of the account AP as reproduced in the assessment order would reveal that in the remarks column various acronyms have been used against different transactions such as JD, KCX, RBG Overseas, KMTY, Oven AJ, JBL Coins, Oppo Mobile, Satia, Ishaan, Anshul, Vinod 8676, Guddu etc. These abbreviations show that the transaction recorded is neither through bank nor cash because since specific acronyms have been used, these transactions cannot be inferred to be pertaining to the assessee even if it is presumed with account AP belongs to the assessee.

32. Hence, keeping in view, the entire factual matrix of the case, we hold that no addition is warranted in the case of the assessee. In the result, the peak credit theory set out by the ld. CIT(A) would also become infructuous. The appeals of the assessee on this ground are allowed and accordingly the appeals of the revenue are liable to be dismissed.”

29. Similar view was taken by this Tribunal in the case of Surender Kumar Jain in ITA No. 1314/Del/2023 dated 07.03.2024 arising out of search in the JBL, wherein it was held that entries in the Hajir Johri ledger of M/s. JBL, supposedly involving M/s. S.K. Impex, do not prove actual transactions without corroborative evidence such as bills or invoices. The additions are based on conjecture and the statement of Mr. Parul Ahluwalia lacking supporting evidence was deleted. The relevant findings of the said decision are as under:-

“9. We have given our careful thought to the submission of the parties and perused the records. The facts are not in dispute. During assessment proceedings the common plea of the assessee in both the AY(s) was that merely entries found in the Hajir Johri ledger of M/s. JBL supposedly in the name of M/s. S.K. Impex, the proprietary concern of the assessee does not tantamount to actual transactions having taken place in the absence of any corroborative evidence such as bills, invoices, challans etc. There is no linking in the order of the Ld. AO/CIT(A) that the alleged cash transactions are substantiated by any supporting evidence as claimed by the assessee. On the contrary, the impugned additions are based purely on conjectures and surmises solely relying on the statement of Ms. Parul Ahluwalia, Director and former employee of M/s. JBL, the entity subjected to search operation during which her statement was recorded. The Ld. AR submitted before us that Ms. Parul Ahluwalia nowhere in her statement identified that alleged cash transactions related to the assessee. No specific questions in this regard were asked from her. Nothing is forthcoming from the side of the Revenue to controvert the above pleadings of the assessee. ”

30. In view of the above observations and respectfully following the judicial precedents relied upon hereinabove, we hold that no addition could be made in the hands of the assessee by placing any reliance on Hazir Johri Software. Accordingly, the grounds raised by the assessee are allowed.

31. We find that the additional grounds raised by the assessee go to the root of the matter and facts relevant for its adjudication are already on record. Hence the same are hereby admitted. We find that the challenge of initiation of proceedings under section 153C of the Act belatedly was well met by the Ld. DR before us, as in our considered opinion, majority of the time was covered by the period of Covid 19 nationwide lockdown and hence we hold that the department was prevented from sufficient cause in not initiating the proceedings under section 153C of the Act on the assessee within reasonable time. Accordingly, the additional Ground No.2 raised by the assessee is hereby dismissed. Since no arguments were advanced by the Ld. AR with regard to the other additional grounds, the same are hereby dismissed as not pressed.

32. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 28/02/2025.