TaxTMI 
TaxTMI 
TaxTMI 
2026 (3) TMI 164
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....ed against the assessee by confirming the order passed u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 ["the Act"] dated 28.09.2021. 4. Brief facts of the case are that a search and seizure operation was carried out u/s 132 of the Act on 11.10.2018 at PMC Group of cases and office and residential premises of the assessee were also covered. Thereafter, case of the assessee was centralized in terms of order passed u/s 127 of the Act by Ld. Pr. CIT-18, New Delhi dated 13.03.2020. Consequently, notice u/s 153A of the Act was issued on 31.08.2020, in response to which return of income was filed on 29.10.2020, declaring total income of INR 3,40,08,520/- i.e. the same income as was declared in the original return of income filed u/s 139 of the Act on 31.07.2013. Thereafter, notice u/s 143(2) was issued followed by notices u/s 142(1) alongwith questionnaires issued from time to time and the same were duly replied by the assessee alongwith the necessary evidences. Thereafter, assessment was completed in terms of order passed u/s 153A r.w.s. 143(3) of the Act dated 28.09.2021 wherein following additions were made:- (i) Addition u/s 69A of the Act r.w.s 115BBE of INR 7,09,84,78....
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....taining alleged. 6. That the Ld.A.O. in complete ignorance of the documentary evidence submitted by Assessee on merits, further erred in disallowing the deduction of Rs. 10,00,000-being the cost of purchase of shares of M/s PMC Fincorp Ltd from its sale value erroneously holding that the same unaccounted income of the Assessee. 7. That the Ld. AO has erred in holding that right of Assessee to cross-examine such third party(ies) whose statement(s) the Ld. AO has placed reliance upon is not an absolute right and can be dispensed with despite the categorical request made by Appellant for the same. General Ground 8. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds." 7. In Grounds of appeal Nos. 1 & 2, assessee has challenged the action of AO in assuming jurisdiction and making additions in the order passed u/s 153A without referring to any incriminating material found and seized as a result of the search from the possession of the assessee. 8. The facts leading to these grounds of appeal are that the AO observed that assessee has received LTCG of INR 7,09,84,78....
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....for making addition in the hands of the assessee. 11. Ld. AR submits that it was submitted before the AO that the transactions of LTCG were duly recorded in the books of accounts maintained by the assessee and was declared in the return of income filed u/s 139(1) of the Act where the profit was claimed as exempt u/s 10(38) of the Act. Ld.AR further submits that as no incriminating paper whatsoever was found from the possession of the assessee as a result of search indicating any evidence to hold that such transactions of LTCG is bogus and not the genuine transaction. Ld. AR drew our attention to the panchnama prepared during the course of search at the residential and business premises of the assessee which are available in common Paper Book Volume-2 at pages 70 to 78 and submits that they contained various loose papers and none of such documents so found and seized during the course of search was referred in the assessment order for making the additions in the hands of the assessee on account of LTCG or cost thereof. 12. Ld.AR further submits that under identical circumstances, additions were made on account of bogus capital gain in the case of the assessee for AY 2015-16 wh....
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....f cases. During the course of search, it was found that Shri Raj Kumar Modi was indulged into providing accommodation entries of unsecured loans and bogus LTCG through various companies controlled and managed by him including PMC Fin Corp Ltd. Ld.CIT DR submits that during the course of search, Shri Raj Kumar Modi in his statement recorded u/s 132(4) of the Act, had accepted this fact that he was providing bogus LTCG after charging commission and the family of the assessee is one of the beneficiaries of such bogus LTCG. 16. Ld.CIT DR submits that though no incriminating material was found at the business/ residential premises of the assessee however, the corroborative material was found from the possession of Shri Raj Kumar Modi in the shape of WhatsApp Chat etc. and further categorical admission that LTCG under the scrip of PMC Fin Corp Ltd is bogus and managed by him for providing accommodation entries to the beneficiaries after charging commission. Ld. CIT DR submits that such statement of Shri Raj Kumar Modi and his associates are the incriminating material and as such the same can be used against the assessee for making additions in the order passed u/s 153A of the Act. Ld.....
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....thout the discovery of incriminating material. In contrast, for completed assessments, commonly referred to as unabated years, the settled law is that the jurisdiction of the Assessing Officer under section 153A is conditioned upon the seizure of incriminating material belonging to the assessee that has a live nexus with the assessment year in question. 13. This distinction has been repeatedly emphasized in binding precedents, notably in Commissioner of Income-tax v. Kabul Chawla, (2016) 380 ITR 573 (Delhi High Court), and reaffirmed by the Hon'ble Supreme Court in Principal Commissioner of Income-tax v. Abhisar Buildwell (P.) Ltd., [2023] 149 taxmann.com 399/454 ITR 212 (SC). 14. The binding legal ratio is categorical in the absence of incriminating material found during search, completed/unabated assessments cannot be disturbed under section 153A. Application to the Present Appeals 17. The search in the present group took place on 11-12th October 2018. The assessment year under appeal in all three cases is A.Y. 2013-14. 18. On the date of search, the returns of income for A.Y. 2013-14 had already been processed/assessed. Consequent....
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....;.Υ. 2013-14), ITAT Delhi, Order dated 16.04.2025, dealt with an identical fact situation arising out of the same PMC scrip. The Tribunal, applying Abhisar Buildwell, categorically held that * Statements of Shri R.K. Modi and Shri J. Purohit recorded in other searches, even if relied upon by the AO, cannot qualify as incriminating material against a different assessee unless section 153C satisfaction and hand-over procedure is followed (11.4-11.6); * Later-year WhatsApp chats and generalised modus operandi findings are irrelevant to the concerned assessment years under appeal (14.8); * Since no incriminating material was seized from the assessee's own premises, additions made under section 153A for unabated years are without jurisdiction (14.8) 31. Likewise, in Deputy Commissioner of Income-tax v. Bajrang Lal Bamalwa & Ors., ITA Nos. 51-66/GAU/2023, ITAT Gauhati, Order dated 01.09.2023, the Tribunal deleted additions where the A.O. had relied only on Investigation Wing reports and third-party statements, holding that in the absence of seized incriminating material from the assessee's premises, additions in unabated years could not....
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....l records the material in support of the A.O.s allegation (13) A.O.'s basis Third-party statements (R.K. Modi 12/13.10.2018; J. Purohit 21.01.2015), Investigation Wing reports, SEBI Order (31.05.2021) |third-party statements (25) Investigation Wing reports + Year-wise nexus mapping Absent Absent - reliance on generic modus operandi noted (35) Later-year material relied upon AO extrapolates from later whatsapp communications Absent - reliance on generic modus operandi noted (35) Applicability of 153A to unabated years Invoked without seized incriminating material unabated years require seized Not permissible - additions in incriminating evidence (27, 28) Section 153C satisfaction/transfer Not followed Not deliberated. Factual Issues Present Appeals (Anoop Jain & Ors.) Bajrang Lal Bamalwa & Ors. - Tribunals holdings (paras) Third-party statements as foundation Relied upon by A.O. in the present case. Held insufficient absent seized corroboration; cannot sustain 153A additions (] 35) Later-year material/whatsapp chats extrapolated Relied upon by A.O. in the present case. Not delibrated. Finding ....
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....ges 316 to 322 in Paper Book filed by the assessee. Since such order of SEBI was quashed therefore, no cognizance of the same could be taken against the assessee and has no legs to stand. 20. Now coming to the issue that whether additions could be made without any incriminating material found and seized during the search in the case of assessee in the year which is unabated assessment year. First it is to be seen whether the year under appeal is unabated year or not? The year under appeal is AY 2013- 14 and date of search is 11.10.2018 when no proceedings were pending in the case of the assessee, thus it is an abated assessment year. As observed above, that in the instant case, AO has based his findings solely on the inquiries and investigation carried out in post-search investigation in PMC Group and no material is referred as found and seized from the possession of the assessee. The Hon'ble High Court of Delhi in the case of DCIT, Central-1 vs Oxygen Business Park (P.) Ltd. [2023] 157 taxmann.com 175 (Delhi) has held as under:- "that no assessment was pending on the date of search and no incriminating material was found during the search, fresh material, information r....
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....ction note alongwith copy of incriminating material, AO of the assessee should record his satisfaction and then, only the proceedings u/s 153C of the Act could be initiated in the case of such third person. In the instant case, when no incriminating paper found from the possession of the assessee and all the material relied upon by the AO was found/seized from the possession of third party, AO must followed the procedure as provided by the hon'ble Supreme court in the case of Calcutta Knitwears (supra) after initiating the proceedings u/s 153C of the Act. More particularly, when there was no direct link with tangible or intangible material discovered from the possession of the assessee nor any statements of the assessee were referred or link is proved therefore, no addition could be made without having any direct nexus as has been held by the hon'ble Delhi High Court in the case of DCIT vs Best Infrastructure Pvt.Ltd. [2017] 84 taxmann.com 287 (Del). 25. Identical issue has been came up before our consideration in the case of Gulshan Investment Pvt. Ltd. vs JCIT in ITA No.3872/Del/2024 & Others wherein vide order dated 16.04.2025, it is held that the additions could not be made ....
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....he incriminating material found from the person searched during the course of search. As such, their Lordships has held as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect assessments/unabated of assessments. Meaning thereby, in respect of completed completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, ....
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....n the instant case, as observed above, the statements of two independent and non-related parties i.e. of Sh. Raj Kumar Modi and Sh. Jagdish Purohit were used by the AO for making additions in the order passed u/s 153A in the hands of the assessee company. These two persons are neither the servants of the assessee company as they were not the employees nor the Director nor related to the assessee company in any manner, therefore, the ratio laid down by Hon'ble Allahabad High Court in the case of Tapasya Projects (supra) is not applicable to the instant case. 14.7. The Hon'ble Punjab & Haryana High Court in the case of PCIT vs. M3M India Holdings in ITA No.97/2023 has held as under: "14. Further contention of the appellant with regard to as assertion section of incriminating material being found in the premises of the respondent, however, is without any basis. We have carefully gone through the Satisfaction Report and found that only incriminating material which has been made the basis for initiating proceedings under Section 153 A of the Act is the so called laptop of one Bina Shah recovered from Mumbai. We also noticed that recovery of the said Laptop is not from ....
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....under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs." 27. In view of the above discussion, in our considered opinion since no proceedings were pending as on the date of search for the year and appeal and no incriminating material whatsoever was found from the possession of the assessee therefore, no addition could be made in the order passed u/s 153A on the basis of material found from the possession of third party. Under these circumstances, we hold that the orders passed u/s 153A by making additions by placing reliance on the material found from third party is against the law as has been held by the hon'ble Supreme court in the case of Abhisar Buildwell (supra) and other cases of various High Courts as referred herein above, the consequent order passed is hereby, quashed. Accordingly, Ground of appeal Nos. 1 & 2 raised by the assessee are allowed. 28. Since we have already allowed legal Grounds of appeal Nos. 1 & 2 raised by the assessee, other Grou....