ITAT Delhi Clarifies Use of Third-Party Search Material & Validity of Protective Additions in Section 153A Assessments

The Delhi Bench of the Income Tax Appellate Tribunal in DCIT Vs Rajyog Buildtech Private Limited examined two important issues arising from a group search:

  • whether documents seized from a third party in a coordinated search can be used directly in an assessee’s Section 153A assessment without invoking Section 153C; and
  • whether a protective addition can continue once the substantive addition in another case has been quashed.

The decision, rendered in ITA Nos. 8174 and 8175/Del/2025 (AYs 2015-16 and 2016-17) by order dated 28 September 2026, ultimately upheld the deletion of a ₹7.50 crore protective addition made in the hands of Rajyog Buildtech Private Limited, and similarly dismissed the Revenue’s appeal for AY 2016-17.

Background of the Search and Proceedings

Search Action and Initiation of Section 153A Assessment

A search and seizure operation under Section 132 was conducted on 15.11.2017 in the “Sanjay Singhal Group” of cases. The warrant of authorization covered, inter alia:

  • M/s Rajyog Buildtech Pvt. Ltd.
  • M/s Som Hari Infrastructure Pvt. Ltd.

One of the searched premises was Flat No. 202, 25/33, 2nd Floor, East Patel Nagar, New Delhi. Rajyog Buildtech Pvt. Ltd. (the assessee) had originally filed its return of income under Section 139(1) on 30.09.2015, declaring income of ₹8,90,520/-. This return was processed under Section 143(1) on 30.03.2017.

Following the search, a notice under Section 153A was issued on 04.04.2019. The assessee filed a return on 18.04.2019 declaring the same income of ₹8,90,520/-, without any variation from the earlier Section 139(1) return. Notices under Section 143(2) and Section 142(1) (along with questionnaires) were issued, and the assessee’s authorised representative appeared and filed details as called for.

The Dheerpur Property Agreement and Alleged Accommodation Entries

The Assessing Officer (AO) identified that Rajyog Buildtech Pvt. Ltd. had entered into an Agreement to Sell with M/s OPG Securities Pvt. Ltd. for sale of commercial space located at Dheerpur, Delhi. Key features noted by the AO included:

  • Agreement date stated as 11.03.2015
  • Proposed sale consideration: ₹21.00 crore
  • Advance amount mentioned: ₹15.50 crore

The AO referred to TDS data showing that M/s OPG Securities Pvt. Ltd. had deducted tax of ₹15.50 crore in respect of payments to Rajyog. During post-search investigation, the statement of Sh. Sanjay Singhal was recorded on 04.06.2018 by ADIT, Unit-5(4), New Delhi. He acknowledged entering into an agreement for sale of 14,000 sq. ft. commercial space to M/s OPG Securities Pvt. Ltd. for ₹21.00 crore and receipt of ₹15.50 crore as advance.

However, the AO brought in additional material allegedly indicating that the “advance” payments were only accommodation entries. According to the AO:

  • A cash book and Excel sheets found on the laptop of Sh. Saurabh Gupta (employee and relative of Sh. Sanjay Gupta associated with OPG) reflected cash receipts from “Paandan”/Sh. Sanjay Singhal, which, according to the AO, closely matched the cheques issued by the OPG group to Rajyog as property advance.
  • There was no evidence that the advance had been refunded, nor that the property had in fact been transferred to OPG.
  • There was a close temporal alignment between alleged cash receipts by OPG-related persons and cheque payments to Rajyog.

On this basis, the AO concluded that:

  • the ₹15.50 crore shown as advance against property from M/s OPG Securities Pvt. Ltd. actually represented the assessee’s own unaccounted money, routed as cash from Sh. Sanjay Singhal to the OPG group and then returned to the assessee through banking channels after TDS deduction; and
  • the assessee was a group concern of Sh. Sanjay Singhal, who allegedly controlled and managed it.

For AY 2015-16, the AO treated ₹7.50 crore (out of the total ₹15.50 crore advance received during FY 2014-15) as unexplained cash credit in the hands of Rajyog Buildtech Pvt. Ltd. under Section 68, on a protective basis. Simultaneously, a substantive addition of the same amount was made in the hands of Sh. Sanjay Singhal under Section 69A for AY 2015-16, treating it as his unexplained cash investment. The assessee’s assessed income was thus determined at ₹7,58,90,502/- as against the declared income of ₹8,90,520/-.

Issues Raised in Revenue’s Appeal

The Revenue challenged the order of the Commissioner of Income Tax (Appeals)-24, New Delhi [CIT(A)], who had deleted the protective addition. The grounds essentially covered three issues: