Delhi ITAT Validates Section 153C Proceedings, Caps Bogus Sales Addition at 1% Gross Profit Estimation

Case Overview

Background and Genesis of the Dispute

The present batch of appeals arose from a search and seizure operation conducted under Section 132 of the Income-tax Act, 1961 on the M/s. K.K. Spun Group. During the course of this search, the Revenue authorities unearthed material that allegedly pointed to the assessee, Sakshat Jain, having availed bogus sales entries through a structured accommodation entry network. On the strength of this seized material, proceedings were initiated against the assessee under Section 153C of the Income-tax Act, 1961, which ultimately culminated in assessment orders dated 30.03.2024.

The assessee preferred appeals before the Commissioner of Income Tax (Appeals), Delhi-23, who passed common orders dated 09.10.2025. Aggrieved by the outcome, both the assessee and the Revenue filed cross appeals before the Income Tax Appellate Tribunal, Delhi — the assessee through ITA Nos. 8309 to 8312/Del/2025 and the Revenue through ITA Nos. 8682, 8553, 9109 & 8683/Del/2025 — covering assessment years 2018-19 to 2021-22.

Legal Issue No. 1 — Validity of Section 153C Proceedings

Assessee's Challenge

The first and principal ground raised by the assessee was a jurisdictional challenge directed at the very initiation of proceedings under Section 153C. The assessee's counsel argued that the assessments were liable to be quashed as non-est in the eyes of law, primarily on the ground that no proper satisfaction note — a mandatory procedural prerequisite under Section 153C — had been recorded by the Assessing Officer before setting the machinery in motion.

It was contended that the case records placed before the Tribunal did not contain any such satisfaction note, and therefore the entire assessment proceedings were vitiated at the root.

Tribunal's Analysis and Ruling

The Tribunal examined the records carefully and acknowledged that no satisfaction note was separately produced before it. However, it drew critical attention to a significant concurrent factual finding recorded by both the Assessing Officer and the CIT(A) — namely, that the seized material recovered during the search on the K.K. Spun Group specifically pertained to and related to the assessee's alleged bogus sales transactions.

The Tribunal observed that both the lower authorities had independently and unanimously recorded their reasoning that the impugned seized material directly related to the assessee's accommodation entry transactions routed through the searched party group.

Since the material nexus between the seized documents and the assessee's transactions stood established through consistent findings at both levels of adjudication, the Tribunal found no merit in the assessee's legal challenge on this count. The ground was accordingly rejected, and the initiation of Section 153C proceedings was upheld as valid.

Legal Issue No. 2 — Treatment of Sales as Bogus Accommodation Entries

Findings of the Assessing Officer