Case Law Details
Kavita Gupta Vs DCIT (ITAT Delhi)
The ITAT Delhi allowed the assessee’s appeal and quashed assessment framed u/s 153C along with addition of ₹50 lakh made u/s 69 for alleged cash investment in a Noida flat. The Tribunal observed that proceedings were initiated merely on the basis of a loose paper containing the assessee’s name found during search in Hans Group and statements of third parties, without any seized material belonging to the assessee or corroborative evidence. It held that denial of cross-examination of the persons whose statements were relied upon violated principles of natural justice and such untested third-party statements could not sustain addition. Since jurisdiction u/s 153C itself failed and addition was based only on uncorroborated material, the entire assessment was held unsustainable and the appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
Appeal in this case has been filed by the assessee against the order dated 24.02.2025 passed by ld. Commissioner of Income Tax(Appeals)-30, New Delhi, against the assessment order dated 13.02.2024 passed under section 153C of the Income Tax Act, 1961 (hereinafter ‘the Act’) pertaining to Assessment Year 2020-21.
2. Grounds of appeal raised by the assessee are as under:-
01. That the Ld. Commissioner of Income Tax (Appeals)-30, Delhi, New Delhi, has erred both in law and on facts in upholding the assumption of jurisdiction as wrongly made by the Assessing Officer U/s.153C of the Act and framing the assessment U/s.153C r.w.s. 143(3) of the Act.
02. That while upholding the assumption of jurisdiction as made by Assessing Officer, the Ld. CIT (A), has failed to appreciate that since neither money, bullion, Jewellery or other valuable articles or things belonging to the Appellant and nor any books of accounts or documents pertaining to the Appellant were seized as a result of search, the assumption of Jurisdiction U/s.153C of the Act was illegal, invalid and unsustainable.
03. That the Ld. CIT (A), has failed to appreciate that addition made and upheld was without jurisdiction since there was no incriminating, material was detected as a result of reach on the searched person.
04. That on the facts and in the circumstance of the case and in law the Ld. CIT (A) erred in confirming the addition of Rs.50/- Lac made by Assessing Officer U/s.69 of the Act in the total income of the Appellant, whereas all the relevant documents were being duly submitted by the Appellant before Assessing Officer as well as to Ld. CIT (A), Delhi, New Delhi.
05. That CIT (A) grossly erred in confirming the addition made U/s.69 of the Act of Rs.50/- Lac as by Assessing Officer merely on the basis of the statement of Mr. Praveen Kumar Jain and Mr.Vaibhav Jain without providing an opportunity to cross examining them under the facts and circumstances of the case.
06. That on the facts and in circumstance of the case Ld. CIT (A), has erred both on facts and law in confirming the addition U/s.69 of the Act of Rs.50/- Lac, which was made by the Assessing Officer, on the basis of material collected at the back of the Appellant without giving an opportunity to rebut the same even after repeated demand in violation of principles of natural justices.
07. Without prejudicial to ground no.1 to 6, on facts and in the circumstance of the case Ld. CIT (A), has erred in confirming the addition Rs.50/- Lac as made by Assessing Officer on account of investment made in cash for booking of Flat No.1501, in BURJ PROJECT, Nodia, holding it to be unexplained investment, invoking Sector-69. The Appellant prays that the addition of Rs.50/- Lac made U/s.69 of the Act be deleted.
08. Without prejudice to ground no. 1 to 6 above on facts and in the circumstance of the case and in law Ld. CIT (A) has erred in confirming the action of Assessing Officer in levying tax U/s.115BBE(1) of the Act @60% on alleged unexplained money assessed U/s.69 of the Act, which required to be deleted
09. That the Ld. CIT (A), has erred in upholding the order passed by the Assessing Officer by ignoring the vital fact that the order of the Assessing Officer is arbitrary, illegal, bad in law and in violation of Principal of contemporary jurisprudence.”
3. During the course of proceedings before us, the ld. Counsel for the assessee has challenged the assessment made under section 153C on the ground that during the search proceedings no incriminating material/documents pertaining to the assessee was found nor any valuable jewellery, etc belonging to the assessee was found or seized by the search party. Therefore, the assessment proceedings initiated under section 153C and the addition made therein is not as per law given in section 153C of the Act.
4. Per contra, the ld. DR relied upon the orders of the authorities below.
5. The ld. Counsel for the assessee has filed a written submission, which is reproduced as under:-
1. The Appellant is a government-employed surgeon, regularly assessed to income tax, deriving income from salary, interest, and dividends. For AY 2020-21, she filed her return of income on 23.12.2020 declaring an income of RS.40,98,560/-.
2. A search was conducted on 06.01.2021 in the case of Hans Group, a third party. Based on statements of Praveen Kumar Jain and Vaibhav Jain, the jurisdiction was wrongly assumed u/s 153C against the Appellant. There was no seizure of any material belonging to the Appellant during this search.
3. Pursuant to notice u/s 153C dated 13.04.2023, the Appellant filed a return on 18.05.2023 declaring an income of Rs.41,78,060/- Despite full cooperation and explanations, the 40 made an arbitrary addition of Rs.50,00,000/- under Section 69, treating it as unexplained cash investment in Flat No. 1501, Burj Project, Noida, and taxed it @60% under Section 115BBE without proper opportunity.
4. The Appellant denied any knowledge of Praveen Kumar Jain, Vaibhav Jain or M/s Jainco Ltd., and also furnished certificate from Praveen Kumar Jain and Vaibhav Jain clearly confirming both of them that no cash was received from her (Kavita Gupta. Yet, both the AO and the CIT(A) ignored this vital rebuttal.
Il. DETAILED LEGAL SUBMISSIONS
1. Invalid Jurisdiction Assumed under Section 153C of the Act and no seized material “belonging to” the Appellant was found.
In this regard Appellant would like to submits as follows: –
[a] Statutory mandate of Section 153C: – Section 153C of the Income Tax Act961, provides that the Assessing Officer (A.0.) can assumed jurisdiction or a person other than searched person if the following condition are satisfied
“the Assessing Officer satisfied that any money, bullion, Jewellery or other valuable articles or things or books of accounts or documents seized or requisitioned, belongs to or pertains to or relates to a person other than the person referred to in Section 153A of the Act
Thus, there are three core requirements for valid initiation: –
i. Evidence of Material: – The A.O. must possess books of accounts, documents or assets.
ii. Seizure during the Search: – The material must be found or seized during the search Us.132 of the Act or requisition U/s. 132A of the act.
iii. Belongs to / pertains to relates to: – The person against whom action is taken. Further before year 2015 amendment (w.e.f. 01.06.2015) the Section used the phrase belongs to” only. Codes have consistently held that the term belongs to implies ownership and not merely reference to or relating to. The key judicial precedents are as follows: –
In the case of Pepsi Food Private Limited Vs. ACIT (2014) 367 ITR 112 Delhi, held “belongs to” cannot be equated with “relates to or refers to and documents must be shown to be owned by the assessee and mere mention of assessee’s name in documents does not confer jurisdiction.
(ii) In the case of CIT Vs. R.R.J. Securities Limited (2016) 380 ITR 612, Del, it is reiterated that “belong to” means ownership. Unless documents are shown to be owned by the assessee Section 153C of the Act cannot be invoked
(iii) In the case of PCIT Vs. N.S. Software India Pvt. Ltd. 2018) 403 ITR 259, Del, it has been held that if, no documents “belongs to” the assessee was found then jurisdiction U/s.153C of the Act is invalid and satisfaction must be recorded with respect to such documents and be based on objective facts.
(iv) In the case of PCIT Vs. Sarayan Industries Limited (2020) 114 Taxman.Com 257 (All.) it has been reiterated that documents must unequivocally “belongs to” the assessee and not just contain stray reference or loose sheets mentioning their name.
That in the post year 2015 the word “pertains to” or “relates to” added in the said Section: – The law was amended by Finance Act 2015 (w.e.f. 01.06.2015) to substitute “belongs to” with “pertains to or relates to also. However, this amendment is prospective as held in the case of DCIT Vs. Pepsico India Holdings Pvt. Ltd. (2021) 436 ITR 58 [Del] and PCIT Vs. Sarwar Agency Pvt. Ltd. (2020) 423 ITR 20 [Dell.
In view of the above submission and judicial pronouncements, it is absolutely clear that for searches conducted before 01.06.2015, only “belongs to” was applicable and searches conducted after 01.06.2015, the material must at least “pertains to” the assessee and also be incriminating.
(iv) Requirements for valid jurisdiction: – To assume valid jurisdiction U/s.153C of the Act, the following must be proved:
a. The documents was seized during the search of another person.
b. It “belongs to” / “pertains to”/ “relates to” the assessee depending upon the date of search.
c. The A.O. must record a satisfaction note, indicating why he believes the documents belongs to the assessee
d. The A.O. must demonstrate nexus between the seized material and the assessee
e. Seized material must be incriminating for the relevant assessment year.
(v) Application to the present case: – In the instance case the search was conducted in the case of Hans Group, but no documents, books of accounts or assets were found in the possession or ownership of the assessee at the searched premises. Further there was not documents seized that “belongs to” the Appellant in question. Addition is made solely based on third parties statement, which cannot confer jurisdiction and no document indicating ownership, investment, bank or cash trail of flat allotment is on record pertaining to the Appellant in question and satisfaction note also does not refer to any such belonging documents, hence initiation of proceeding U/s.153C of the Act in the instance case is bad in law.
(vi) Legal Position: – That jurisdiction U/s.153C of the Act is not procedural, but substantive and in absence of any seized material belonging to the Appellant, the proceeding are void-ab-initio, hence addition made without valid jurisdiction must be quashed in toto, which has been held in the case of PCIT Vs. Abhisar Buildwell Pvt. Ltd. (2023) 456 ITR 1 SC.
2. Addition is Based on Uncorroborated and Unreliable Third-Party Statements: – Sole reliance on third-party statements without cross examination violates natural justice. In this regard Appellant would like to submit as under: –
(a) Nature of evidence relied upon by 4.0.: – In the instance case entire addition of Rs.50.00 Lac U/s.69 of the Act is based solely on statement made by Mr.Praveen Kumar Jain and Vaibhav Jain during a search proceeding in the case of Hans Group, U/s.132(4) of the Act. As per A.O. these deponents alleged receipt of cash from Appellant in relation to booking of Flat No.1501, in Burj Project Noida, but no statement of the Appellant was recorded during and post search proceeding and Appellant was never confronted with these statement nor was cross examination offered despite repeated request or reminder during the assessment proceeding. However, it is well settled position of the law that statement must be corroborated.
In the case of Andmand Timber Industries Vs. CCE (2015) 281 CTR 241 [SC] it was held that the denial of cross examination amounts to violation of principal natural justices and statement of third parties cannot be relied without granting opportunity to cross examine.
In the case of CIT Vs. Khushlal Chand Nirmal Kumar (2003] 263 ITR 77 (MP) it was held that no addition can be made solely on the basis of third party statement unless it is corroborated by independent evidence.
In the case of CIT Vs. Sunita Dhadda (2018) 404 ITR 288 SC, B it was held that the addition made U/s.69 of the act based on oral statement without corroboration was held to be invalid.
In the case of Kishan Chand Chella Ram V/s. CIT (1980) 125 ITR 713(SC), it was held that statement not confronted to the assessee and made behind his back, cannot not be relied upon to make an addition.
(b) Application to the present case: – In the instance case there is not documents, bank and cash trail, receipt or agreement etc. showing any investment made by Appellant was found or seized during the search proceeding U/s.132 of the Act. Further no allotment letter, booking form and/or payment record linked to the Appellant with the Burj Project Noida, was found and seized at the search premises and statement of third parties is the sole basis of addition U/s.69 of the act which is legally insufficient. However, both deponents ie. Praveen Kumar Jain and Vaibhav Jain has certified and declare in their declaration, stating that neither they have known to the Appellant nor they have booked any Flat in her name in Burj Project, Noida and accordingly no cash was received by them from the Appellant. Further the builder M/s.E-Homes Infrastructures Private Limited has not confirmed any receipt of cash from the Appellant while furnishing the information in response to notice U/s.133(6) of the Act issued by the Assessing Officer. Accordingly, reliance solely on these statement is illegal and unsustainable. In view of the above facts, submissions and relied upon judgements, it is apparent on record that addition made U/s.69 of the Act of Rs.50.00 Lac by the A.0. and confirmed by CIT (A) solely on the basis of third party statement without granting opportunity to cross examine as well as without taking into consideration the certificate of Praveen Kumar Jain and Vaibhav Jain, in the instance case is wrong, unjustified, invalid and against the provisions of the Act and accordingly same is required to be quashed.”
6. We have considered the findings given by the Assessing Officer in the assessment order and the ld. CIT(A) in the appellate order. We find that in paper found during the search in the case of Hans Group Cases, a paper was found on which the name of the assessee was written and on that basis, the statement of one Shri Pravin Kumar Jain and Shri Vaibhav Jain was recorded and on the basis of their statements and the paper on which the assessee’s name was there, proceedings under section 153C was initiated and addition of Rs.50 lakhs was made.
7. The ld. Counsel for the assessee argued that right from the beginning, the assessee has been clearly and categorically stating and informing the Department that she doesn’t know any Hans Group, she doesn’t know any Shri Praveen Kumar Jain or shri Vaibhav Jain and that she has not given any advance of Rs.50 lakhs or purchase of any space/premises in the property developed/being developed by Hans Group builders.
8. We find that the despite the request made by the assessee that the cross examination should be given of persons who claim to have received money from her. No opportunity of examination was provided by the Revenue. We also find that other than paper on which writing by third party of receiving Rs.50 lakhs from the assessee, the Revenue has got no other documents or evidence against the assessee. A simple peace of paper on which the assessee’s name was written, the proceedings cannot be carried on as per the judgment of Hon’ble Supreme Court in the case of Jain Hawala case Apart from that we also find there are many case laws as Kishan Chand Chella Ram vs CIT (1980) 125 ITR 713(SC), CIT vs Sunita Dhadda (2018) 404 ITR 288(SC), CIT vs Kushlal Chand Nirmal Kumar [2003] 263 ITR 77 (MP) and Andmand Timber Industries vs CCE (2015) 281 CTR 241 (SC) and plethora of other judgments which clearly show that statement not confronted to the assessee and made behind his back cannot be relied upon to make an addition.
9. Accordingly, we are the considered view that the addition made by Revenue solely on the basis of third party statement without bringing on record any document clearly pertaining to the assessee is against the spirit of law of section 153C of the Act. Therefore, keeping in view, the facts discussed above and the material brought on record/filed by the ld. Counsel for the assessee, the assessee’s appeal on this issue of assessment under section 153C cannot be sustained. Thus, the assessee’s appeal on this legal/technical issue is allowed.
10. Since, we have allowed the appeal of the assessee on the legal grounds, therefore, we are not inclined to give any finding on other grounds of appeal.
11. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 06th February, 2026.
Author Bio
