TaxTMI 
TaxTMI 
2025 (8) TMI 1426
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....f construction and sale of residential and commercial buildings in Mira and Bhayander areas in the District of Thane. The Revenue carried out the search and seizure action u/s. 132 of the Income Tax Act, 1961 ('the Act') on 12-01-2021 in the business as well as the residential premises of the group including that of the assessee. Consequent thereto, the assessments of both the assessment years under consideration were completed by the AO u/s. 143(3) r.w.s 153A of the Act. 4. The addition made u/s 68 of the Act in respect of peak credit of alleged accommodation loans amounting was Rs. 6,32,65,194/- in AY 2015-16 and Rs. 1,43,05,438/- in AY 2016-17. It is pertinent to note that both these years fall under the category of 'unabated assessment years'. It is well settled proposition of law that the AO is entitled to make addition in the assessment completed u/s 153A of the Act in the unabated assessment years only on the basis of incriminating material found during the course of search. It is also pertinent to note that the AO has not assessed entire amount of loan taken by the assessee, i.e., he has assessed only the peak credit of loans. 5. The facts relating to the same are dis....
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....law in assessing the peak credit balance of loans in these two years in the absence of any incriminating material, since both these years fall under the category of unabated assessment years. 8. It is the contention of the assessee that the search officials did not unearth any incriminating material in order to show that the loans taken by the assessee are bogus and accommodation entries only. On the contrary, the Ld D.R contended that the assessing officer was in possession of 'incriminating information' that the assessee had availed accommodation entries in the form of bogus loans prior to the commencement of search and hence the AO could very well use it for making addition in the unabated assessment years also. 9. We notice that an identical issue has been examined by the Co-ordinate Bench in another group case of the assessee, viz., Annapurna Buildcon Infra Private Ltd. vs. DCIT (ITA Nos.6827 to 6834/Mum/2024 dated 06-03-2025). It has been held by the co-ordinate bench that the incriminating information, if any, available with the AO cannot be the basis for making the addition. For the sake of convenience, we extract below the observations made by the Co-ordinate Bench a....
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....peak balance of loan entries, without there being any incriminating material found during the course of search. In support of this proposition, the Ld.AR placed reliance on the decision rendered by the Hon'ble Supreme Court in the case of Abhisar Buildwell (P) Ltd., [2023] 454 ITR 212 (SC). He submitted that the search officials did not find any incriminating material during the course of search conducted in the hands of the assessee in order to show that the loans taken by the assessee from various companies are in the nature of accommodation entries. 9.4 The Ld D.R, on the contrary, contended that the AO has received 'Incriminating information" regarding accommodation loans taken by the assessee from various paper companies. He also submitted that the enquiries/search conducted in the hands of those paper companies have brought to light that they were providing only accommodation entries to the beneficiaries. He submitted that the revenue has found incriminating materials in respect of on-money receipts for Ay 2015-16 also, which was an unabated assessment year. Hence the AO has validly assumed jurisdiction to assess or reassess the total income. He submitted that the AO....
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....ess "total income" of that year. The Ld A.R submitted that, under the erstwhile scheme of block assessments made u/s 158BA to 158BD of the Act, the AO was required to assess only the "undisclosed income" found during the course of search. However, under the present scheme of assessment u/s 153A of the Act, the AO is required to assess or reassess the 'total income', which can be arrived at by adding the undisclosed income found during the course of search to the total income already assessed by the assessing officer. He submitted that the Hon'ble Supreme Court has used the expression, viz., 'other material available with the AO including the income declared in the returns' only to make it clear that the final total income of an unabated assessment year can be arrived by consolidating the undisclosed income and other income already known to the AO. Accordingly, he submitted that the AO could not get power to consider any other addition in the case of an unabated assessment year, which was not supported by the incriminating material found during the course of search conducted in the hands of the assessee. Accordingly, he submitted that the alleged incriminating information about acco....
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....ted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under section 153A are triggered by conducting of a valid search under section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search." 9.8 The scope of assessments to be framed u/s 153A/153C of the Act has been explained by Hon'ble Delhi High Court in the case of Kabul Chawla (380 ITR 573)(Delhi) and by Hon'ble Gujarat High Court in the case o....
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.... and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 7.2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after considering the entire scheme of block assessment under section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additio....
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....d and the total income of the assessee is required to be determined under section 153A, of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of, the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning From the heading of section 153, the intention of the Legislature is clear, viz, to provide for assessment in case of search and requisition. When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment, should be connected with something found during the search or requisi....
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.... Gujarat High Court in the case of Saumya Constructions(supra) would show that there are two aspects involved while framing assessment u/s 153A of the Act. One is making addition and another one is computing total income. In case of an unabated assessment year, the Hon'ble Gujarat High Court has made it clear that any addition or disallowance can be made only on the basis of material collected during the search or requisition. It was further held that, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (36 taxmann.com 523), the earlier assessment would have to be reiterated. 9.10 The Hon'ble Supreme Court has extracted the submissions made by the assessee in a tabular form in paragraph 4.1 of the order. A perusal of the same would show that the assessees have stated that the addition u/s 153A can be made only on the basis of any incriminating material found during the course of search. It is further contended that, if the AO was having any other information available with him or any other information was found from external sources, then the AO can use those information in a separate proceeding init....
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....nto consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or rewriting the said provisions, wh....
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....f accommodation entries. We noticed earlier that the AO has observed in the assessment order that the search action u/s 132 of the Act was undertaken in the hands of the group on the basis of pre- search information that the assessee group has availed accommodation entries in the form of loans. However, it is no where stated that the revenue could find any incriminating material during the course of search proceedings in order to support the above said view of the revenue/AO. Accordingly, in our view, that the AO has only entertained presumption that the loans taken by the assessee are in the nature of accommodation entries and further, the assessee would have paid equal amount of cash to the lender in order to get the loans through banking channels by way of accommodation entries. 9.14 First of all, the above said suspicion of the revenue cannot be termed as 'incriminating information' as contended by the Ld D.R. Secondly, even if it is accepted as incriminating information, the same was not unearthed during the course of search conducted in the hands of the assessee. Thirdly, the said information would only trigger further investigation and hence it cannot be said to be ....
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....ted that the AO had, in fact, relied upon the information obtained from the search conducted in the cases of "other persons" for making the impugned addition of peak credit of loans. In that case, the AO should have assessed the above said income u/s 153C of the Act only and not in the 153A proceedings. In support of this legal contention, the Ld A.R placed his reliance on the decision rendered by Hon'ble Bombay High Court in the case of Sejal Jewellery & Anr (WP No.3057 of 2019 dated 18-02-2019). Since we have already held that the impugned additions could not have been made by the AO in the absence of any incriminating material, the above said legal issue raised by the Ld A.R shall become academic in nature. 12. In view of the foregoing discussions, we set aside the orders passed by the Ld CIT(A) in both the years on this issue and direct the AO to delete the impugned additions of Rs. 6.32 crores and Rs. 1.43 crores made in AYs. 2015-16 and 2016-17; respectively. 13. In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 01-04-2025 ============= Document 1 Annapurna Buildcon Infra Private Limited Entity wise Cash Flow ....