2025 (12) TMI 1705 - AT - Income Tax

153A assessment after alleged search-no 132 authorization, search, panchnama, or incriminating material; 68 addition deleted, order quashed.

Assessment u/s 153A was held invalid because no search authorization u/s 132 was issued, no search was conducted, and no panchnama was executed in the ... Validity of assessment u/s 153A - addition in the hands of the assessee u/s 68 assessment year is unabated - as submitted no search was conducted in the name of the assessee and no Panchnama executed in its name - HELD THAT:- As decided in Ramesh D. Patel [2014 (2) TMI 29 - GUJARAT HIGH COURT] assessment under section 153A of the Act is not maintainable when no search was conducted or search authorization under section 132 of the Act was issued or any Panchnama executed in the name of the assessee. On perusal of the assessment order dated 28.09.2021, we note that no reference whatsoever, taken in the said order with reference to conducting search in the case of the assessee and seizure of any incriminating material. We note that it is only stated that the assessee’s premises also covered under section 132 of the Act, but, nothing else concerning the incriminating material. Therefore, we find force in the arguments of the ld. AR that the Panchnama is the result of search when there is Panchnama executed and no search was conducted in the case of the assessee, we can conclude safely that no search was taken place in the case of the assessee to make assessment under section 153A of the Act. Addition is made based on the incriminating material found at the searched premises of the NKV group. Since, there is no Panchnama executed in the name of the assessees, it can be concluded that the addition are made only based on the audited books of accounts and financials of the assessee. Further, the impugned assessment year is unabated and the addition made without any incriminating material is not tenable in the eyes of law. See Abhisar Buildwell (P.) Ltd [2023 (4) TMI 1056 - SUPREME COURT] AO has erred in making the addition for the impugned assessment year being unabated. Otherwise also, on perusal of the balance sheets placed we note that the current liabilities remains same as on 31.03.2018 with that of as on 31.03.2019 i.e., the year under consideration and therefore, the addition made by the AO does not lie as there was no unexplained cash credit reflecting in the books of accounts - Appeal filed by the assessee is allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether an assessment framed under section 153A was maintainable when no search was conducted on the assessee and no panchnama/search authorisation existed in the assessee's name. (ii) Whether, for an unabated assessment year, an addition under section 68 could be sustained in section 153A proceedings without incriminating material seized from the assessee, and when the addition was essentially based on statements/material found in another searched person's premises. (iii) Whether, on the assessee's financial statements, the impugned addition for 'unexplained credit' was factually untenable where the relevant liabilities position remained unchanged year-to-year, indicating no fresh unexplained credit in the books. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Maintainability of section 153A assessment without search/panchnama in assessee's case Legal framework (as discussed by the Court): The Court examined section 153A as a special assessment provision triggered only where a search is initiated under section 132 (or requisition under section 132A) in the case of the person to be assessed, and noted the relevance of search authorisation/panchnama as indicia of a search in that person's case. Interpretation and reasoning: The Court found, on the assessment order itself, that search action was conducted in another group's premises, and that no panchnama was executed and no search and seizure operation was carried out in the assessee's case. The assessment order merely asserted that the assessee was 'covered' by the other search, without demonstrating a search in the assessee's case or any search documentation evidencing the same. Since the foundation for invoking section 153A was absent, the jurisdictional assumption under section 153A failed. Conclusion: The Court held that, in the absence of a search/panchnama/search authorisation in the assessee's name, the assessment under section 153A and the consequential addition were not justified and could not be sustained. Issue (ii): Addition in unabated year under section 153A without incriminating material of the assessee; reliance on statements/material from another searched person Legal framework (as applied by the Court): The Court treated the principle as applicable that for an unabated year, additions in section 153A proceedings must be supported by incriminating material (and relied on the Supreme Court decision cited in the order to that effect). Interpretation and reasoning: The Court recorded that the addition under section 68 was made only on the basis of statements recorded during search in another person's case and the alleged seized material found there, and not on the basis of any material seized from the assessee. It further found that, because no panchnama existed in the assessee's name, the addition effectively proceeded without any incriminating material attributable to the assessee's own search. The Court therefore held that, for the impugned unabated assessment year, such an addition was not tenable in law. Conclusion: The Court concluded that the section 68 addition made in section 153A proceedings for an unabated year, without incriminating material in the assessee's case and based on statements/material from another searched party, was unsustainable. Issue (iii): Factual sustainability of section 68 addition on the books-no increase in current liabilities Legal framework (as used by the Court): The Court considered section 68 in the context of whether there was a credit reflected in the assessee's books warranting treatment as 'unexplained credit'. Interpretation and reasoning: Independently of the jurisdictional defect, the Court examined the balance sheets referred in the record and found that the assessee's current liabilities remained the same as at 31.03.2018 and 31.03.2019. On this factual finding, the Court reasoned that the impugned addition did not 'lie' because there was no unexplained cash credit reflecting in the books for the relevant year as alleged. Conclusion: On merits as well, the Court held the addition to be factually untenable; accordingly, the appellate order sustaining/restricting the addition was quashed and the addition was deleted.