2025 (7) TMI 1360 - AT - Income Tax

Additions under Section 153A must be based on seized incriminating material, failing which assessments are invalid

The ITAT Delhi held that additions under section 153A read with section 143(3) must be strictly based on incriminating material seized during search. For ... Validity of the impugned section 153A r.w.s. 143(3) assessments-additions based on seized incriminating material following a search or not? HELD THAT:- All the impugned assessment years before us from 2008-09 to 2012-13 involve “unabated” assessments wherein any addition in the assessee’s hands ought to be confined to that based on the specific seized incriminating material only. It is in this factual backdrop that the department could hardly dispute the clinching fact that the learned lower authorities have nowhere made it clear in their respective findings that the assessee’s alleged unexplained investments etc. made in its hands, are based on any seized material only. We thus quote PCIT Vs. Abhisar Buildwell Pvt. Ltd. [2023 (4) TMI 1056 - SUPREME COURT] to conclude that the impugned assessments are not sustainable in law once it fails test of validity in the foregoing terms. Assessee appeal allowed. 1. ISSUES:1.1. Whether assessments framed under section 153A read with section 143(3) of the Income Tax Act are valid when additions are not based on seized incriminating material following a search.1.2. Whether the assessee qualifies as a searched entity under the original search warrant.1.3. Whether the approval granted under section 153D of the Act by the prescribed authority complies with legal requirements.2. RULINGS / HOLDINGS:2.1. The assessments framed under section 153A read with section 143(3) are not sustainable in law where the additions are not confined to specific seized incriminating material, failing the 'test of validity' as established by precedent.2.2. The issue of whether the assessee is a searched entity under the original search warrant is rendered academic due to the quashing of the impugned assessments.2.3. The validity of the approval under section 153D is also rendered academic following the quashing of the assessments.3. RATIONALE:3.1. The Court applied the legal framework under sections 143(3), 153A, and 153D of the Income Tax Act, emphasizing that assessments under section 153A must be strictly based on incriminating material seized during the search, as per the Supreme Court ruling in PCIT Vs. Abhisar Buildwell Pvt. Ltd. (2023) 454 ITR 212 (SC).3.2. The Court noted that the lower authorities failed to demonstrate that the additions were based on seized material, thereby violating the statutory requirement and rendering the assessments invalid.3.3. Since the primary assessments were quashed on this ground, other legal issues including the status of the assessee as a searched entity and the procedural compliance of section 153D approval were not adjudicated upon, reflecting no doctrinal shift or dissent in the judgment.