Unexplained investment addition under section 69 deleted as assessment wasn't abated under section 153C jurisdiction

ITAT Hyderabad allowed the assessee's appeal against addition of Rs. 17 lakhs under section 69 for unexplained investment in Batchmix plant purchase. The tribunal found that since the original return was filed on 27.10.2018 and section 153C notice was issued on 25.02.2022, the assessment for AY 2018-19 was not abated on search date or notice issuance. Following SC precedent in Abhisar Buildwell case, ITAT held that for non-abated assessments under section 153C, additions can only be made based on incriminating material found during search. Since the AO's addition was not based on seized material referenced in the satisfaction note, it lacked jurisdiction and was unsustainable.

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ISSUES:

Whether an addition under section 69 of the Income Tax Act for unexplained investment can be sustained when no seized material relates to such investment.Whether the notice issued under section 153C of the Income Tax Act is valid when the addition made is not based on incriminating material found during search.Whether additions can be made under section 153C in a non-abated (completed) assessment year without reference to seized incriminating material.

RULINGS / HOLDINGS:

The addition of Rs. 17 lakhs under section 69 towards unexplained investment in batchmix plant is not sustainable as it is not based on any seized material or satisfaction note and is therefore "without jurisdiction".The notice issued under section 153C is valid only to the extent that additions are based on incriminating material found during search; additions not supported by such material cannot be upheld.In a non-abated assessment, no addition can be made under section 153C unless it is "based on incriminating material seized during search," following the binding precedent of the Supreme Court.

RATIONALE:

The Court applied the statutory provisions of sections 69 and 153C of the Income Tax Act, 1961.The Court relied on the Supreme Court's decision in PCIT v. Abhisar Buildwell Pvt. Ltd., which held that for completed assessments, additions under section 153C must be based on incriminating material seized during search.The Court emphasized that the satisfaction note and seized documents pertained only to Rs. 10 lakhs receivable, whereas the addition was made for Rs. 17 lakhs unexplained investment with no nexus to the seized material.No dissent or doctrinal shift was noted; the Court strictly adhered to established precedent limiting the scope of section 153C additions in non-abated assessments.

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