Validity of order under section 153A where no incriminating material found; additions denied and assessments abated

Order passed under section 153A must be founded on incriminating material discovered in search; absent any document evidencing unexplained or unaccounted payment at acquisition, invocation of unexplained income provisions is unsustainable and additions could not be made, with pending assessments abating on initiation of search. The reasoning relies on precedent, including a Supreme Court authority cited in support, resulting in decision favouring the assessee and negating taxability in respect of the impugned transaction.

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Issues: (i) Whether addition made under Section 56(2)(x) in assessment completed under Section 153A, by adopting an earlier order under Section 143(3) that was annulled/abated on account of search, is sustainable in absence of any incriminating material unearthed during the search.

Analysis: The statutory framework includes abatement of pending assessments on initiation of search under Section 132/132A and the scope of Section 153A to assess total income only to the extent of incriminating material found during the search. Where no incriminating material is unearthed, completed or unabated assessments cannot be reworked in Section 153A proceedings except by valid exercise of reopening powers under Sections 147/148 subject to their conditions. The decision in PCIT v. Abhisar Buildwell (Hon'ble Supreme Court) holds that, in absence of incriminating material from the search, additions in Section 153A cannot be made by relying on earlier completed assessments. Applying these principles, the impugned addition under Section 56(2)(x) in the Section 153A order was made without any discussion of incriminating material and merely by adopting figures from the earlier Section 143(3) order which had been annulled/abated.

Conclusion: The addition under Section 56(2)(x) made in the assessment under Section 153A is deleted; the appeal is allowed in favour of the assessee.

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