Section 153C search assessment, electronic evidence and third-party vouchers: jurisdiction upheld, but additions deleted for lack of admissible proof.

Section 153C remained applicable because the search under section 132 had begun before 1 April 2021, so the amended search assessment regime under the Finance Act, 2021 did not invalidate the notice or consequential assessment. Additions based on pen drive data and printouts were deleted because the electronic material lacked the mandatory section 65B certificate under the Indian Evidence Act and was unsupported by independent corroboration. The addition founded on a third-party voucher was also deleted because the voucher did not bear the assessee's signature, had no corroborative verification, and contained internal inconsistency as to whether it recorded receipt or payment.

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Issues: (i) Whether the notice under section 153C and the consequential assessment were invalid because the search assessment regime introduced by the Finance Act, 2021 was said to apply; (ii) Whether the addition of Rs. 1.55 crore based on pen drive data and printouts was sustainable; (iii) Whether the addition of Rs. 55 lakh based on a third-party voucher was sustainable.

Issue (i): Whether the notice under section 153C and the consequential assessment were invalid because the search assessment regime introduced by the Finance Act, 2021 was said to apply?

Analysis: The search under section 132 was initiated before 01.04.2021 and the seized material was handed over before the amendment became effective. The applicability of section 153C depended on the date of initiation of the search under section 132, not on the date of issuance of notice to the other person. The amended regime was therefore held inapplicable.

Conclusion: The challenge to jurisdiction failed, and the notice under section 153C was upheld.

Issue (ii): Whether the addition of Rs. 1.55 crore based on pen drive data and printouts was sustainable?

Analysis: The addition rested on electronic data seized from a pen drive and its printouts. The coordinate Bench in the searched group had already held that the same electronic record was inadmissible for want of a valid certificate under section 65B of the Indian Evidence Act, 1872. In the absence of independent corroboration, the electronic material could not by itself sustain the addition.

Conclusion: The addition of Rs. 1.55 crore was not sustainable and was deleted.

Issue (iii): Whether the addition of Rs. 55 lakh based on a third-party voucher was sustainable?

Analysis: The addition was founded on a single voucher seized from the searched party. The voucher did not bear the assessee's signature and was not supported by independent verification or corroborative material. A third-party document, standing alone, could not justify the addition. The assessment order also contained an internal inconsistency as to whether the voucher recorded a receipt or a payment.

Conclusion: The addition of Rs. 55 lakh was not sustainable and was deleted.

Final Conclusion: The assessee succeeded on the merits of the two additions, while the jurisdictional challenge under section 153C was rejected. The overall result was a partial success for the assessee and the Revenue's appeal failed.

Ratio Decidendi: Electronic evidence seized from a pen drive cannot be treated as admissible or relied upon for addition unless the mandatory requirements of section 65B are satisfied, and a third-party document unsupported by independent corroboration cannot, by itself, sustain an income addition.

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