EXPRESSWAY SERVICES PVT LTD,HYDERABAD vs. DCIT., CENTRAL CIRCLE-2(4), HYDERABAD

1. 5. Jankhit Chandulal Prajapati Vs. DCIT (CC-1(3), Ahmedabad) in IT(SS)A Nos. 121 & 122/Ahd/2023 dated 08.08.2025.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered relevant provisions of Section 153B and Section 292CC of the Income Tax Act, 1961. The appellant is ‘other person’ covered u/s 153C of the Act. The A.O. of the searched person and the appellant is one and the same, i.e. DCIT, Central Circle -2(4), Hyderabad. These cases were centralized with the same AO under section 127 of the Act. Thus, in the case of the assessee, the Assessing Officer of the searched party and appellant was the same jurisdictional Assessing Officer. Further, the present assessments for all the three assessment years are framed under Section 153C of the Act, in pursuant to search action conducted in the case of M/s. Prathima Infrastructure Limited, and the A.O., of the searched person has recorded his satisfaction under Section 153C of the Act, that incriminating material found during the course of search in the case of M/s. Prathima Infrastructure Limited, have a bearing on the determination of the total income of the assessee for the relevant assessment years. Therefore, for the purpose of limitation for passing assessment order and Section 153B of the Act, and third proviso provided thereon, the last of the authorizations for search under Section 132 of the Act, was executed in the case of M/s. Prathima Infrastructure Limited should be considered. Therefore, it is necessary for us to decide the grounds taken by the to 486/Hyd/2025 Expressway Services Pvt. Ltd.

The provisions of Section 153B deals with time limit for passing assessment order in pursuant to search under Section 132 or requisition under Section 132A of the Act. As per the provisions of section 153B(1)(b) of the Act, read with third proviso, which is applicable to search conducted on or after 01.04.2019, notwithstanding anything contained in Section 153, the A.O. shall make an order of assessment or reassessment in respect of each assessment year falling within six assessment years referred to in Section 153C r.w.s. Section 153A(1)(b) within a period of twelve months from the end of the financial year in which the last of the authorization for search under Section 132 after requisition under Section 132A of the Act was executed. Further, in case of assessment under section 153C, twelve months from the end of financial year in which last of warrant of authorization was executed or 12 months from the end of the financial year in which the seized material relating to the other person is handed over to the AO of such other person whichever expires later. The alternate condition for working out limitation period is not applicable in the case of the jurisdiction of principal party, and the other person lies with the same A.O. In this regard, reference may be made to the case of Vijay Bihari Kandhari Vs. Assistant Commissioner of Income-tax [2025] 181 taxmann.com 21 (Bombay) in which it was to 486/Hyd/2025 Expressway Services Pvt. Ltd.

The provisions of Section 153B governs the time limit for completion of assessment or reassessment under Section 153A of the Income Tax Act, 1961. As per Section 153B, notwithstanding anything contained in Section 153, the A.O. shall make an order of assessment or reassessment in respect of each assessment year falling within six assessment years referred to in clause (b) of sub- section (1) of Section 153A within a period of twelve months from the end of the financial year in which the last of the authorisations for search under Section 132 or requisition under Section 132A was executed during the financial year commencing on or after the first day of April, 2019. Sub-section (2) of Section 153B explains the execution of authorisation and as per which, the authorisation referred to in clause (a) and clause (b) of sub- section (1) shall be deemed to have been executed, in the case of to 486/Hyd/2025 Expressway Services Pvt. Ltd.

In the present case, there is no dispute with regard to the fact that, the last panchanama was drawn in the case of the searched person on 12.02.2020, which is evident from the relevant panchanama which is available in the paper book filed by the assessee, wherein it has been clearly stated that, the search was finally concluded on 12.02.2020, at the places referred to in the warrant of authorization and panchanama. The learned counsel for the assessee claims that, the assessment orders passed by the A.O. under Section 153C of the Act, on 28.03.2022 for impugned assessment years are barred by limitation as prescribed under Section 153B of the Income Tax Act, because the A.O. has passed the assessment order beyond twelve months from the end of the financial year in which the last of authorization was executed. On the other hand, it was the arguments of the learned CIT-DR present for the Revenue that, the last of the authorization executed as referred to under Section 153B(2) of the Act, is the last of the authorization executed as recorded in the case of any person in whose case, the search was conducted, as recorded in the last panchanama drawn and if we go by the above provisions, in the present case, the last of the authorization was executed on 23.07.2020, which is evident from the relevant panchanama drawn on 23.07.2020 where it was clearly stated that the search was finally concluded on 23.07.2020 after revocation of restraint order dated 08.02.2020 issued under Section 132(3) of the Act during the course of search operation at the closet of the guest room at the north-west portion of the first floor situated at the residence of Shri B. Srinivas Rao.

The learned CIT-DR for the revenue, referring to the provisions of Section 292CC of the Act, submitted that, if a joint warrant of authorization was issued in the case of multiple persons, although the assessment has to be framed independently in the case of each assessee, but for the purpose of computing limitation as referred to under Section 153B, the last of the authorization executed in the case of any person in whose case search was conducted as referred to in the joint warrant of authorization has to be considered. If we consider the provisions of Section 292CC and Section 153B of the Act, it is undisputedly clear that, the search was finally concluded in the case of the assessee and other associated entities/persons on 23.07.2020 which falls in the financial year 2020-21 and twelve months from the end of the financial year 2020-21 would expire on 31.03.2022 and the A.O. has rightly passed the assessment order on 28.03.2022 for all the assessment years. Therefore, it is necessary for us to examine the issue of limitation contested by both the parties in light of facts of the present case and provisions of Section 153B r.w.s. 292CC of the Income Tax Act, 1961.

The time limit for completion of assessment is provided under Section 153B of the Income Tax Act, 1961 and as per Section 153B of the Act, the limitation period is twelve months from the end of the financial year in which the last of authorization was executed in the case of any person in whose case, search was conducted, as recorded in the last panchanama drawn during the course of search, in respect of search conducted on or after 01.04.2019. Section 153B(2) further clarifies that, authorization shall be deemed to have been executed in the case of search, on the conclusion of search as recorded in the last panchanama drawn in relation to any person in whose case, the warrant of authorization has been issued. From the combined reading of Section 153B(1) and 153B(2), it is undisputedly clear that, the A.O. shall get twelve months period from the end of the financial year in which the last of the authorization was executed as recorded in the last panchanama drawn in relation to the person, in whose case the warrant of authorization has been issued. Therefore, in our considered view, it is the date, on which the search was finally concluded, as recorded in the last panchanama drawn in the case of the assessee is relevant for determining the limitation period for completion of assessment as prescribed under Section 153B of the Income Tax Act, but not the last of the authorization executed in the case of any other person in whose case search was also conducted, as recorded in the last panchanama drawn in the case of such other person, merely because the search was conducted on the basis of a joint warrant of authorization. In our considered view, the provisions of Section 292CC of the Act was specifically inserted in the statute to clarify the position of issuance of joint warrant of authorization and assessment in case of search or requisition and as per Section 292CC of the Act, it shall not be necessary to issue an authorization u/s 132 of the Act, separately in the name of each person and in case, more than one person is mentioned in the authorization, it shall not be deemed to construe that, it was issued in the name of associated persons or body of individuals consisting of such person and notwithstanding that an authorisation under Section 132 of the Act, has been issued mentioning therein the name of more than one person, the assessment or re-assessment shall be made separately in the name of each person mentioned in the name of authorisation or requisition. Therefore, from the provisions of Section 292CC of the Act, it is very clear that joint warrant of authorization can be issued mentioning more than one person and premises to be searched, however, when it comes to assessment, each one of the persons referred to in the joint warrant of authorization should be assessed separately and thus, in our considered view, once the assessment or reassessment has to be made separately on each person referred in the joint warrant of authorization, then for the purpose of computing limitation as prescribed under Section 153B of the Act, the execution of warrant in the case of each person and to 486/Hyd/2025 Expressway Services Pvt. Ltd.

In the present case, there is no dispute with regard to the fact that, although the joint warrant of authorization was issued in the name of the searched person and other associated persons/entities, but separate panchanama was drawn in the case of each searched person, indicating places searched, date of initiation of search and date of final conclusion of search and as per the panchanama drawn in the case of the assessee, the search was conducted at the corporate office of the assessee at J-292/III, Road No. 78, Jubilee Hills, Hyderabad, and search was initiated on 06.02.2020 and was finally concluded on 12.02.2020, which is evident from the relevant panchanama available in the paper book filed by the assessee. Since the search was finally concluded on 12.02.2020, in our considered view, for the purpose of computing limitation for passing the assessment in the case of the assessee, should be reckoned from the date referred to in the panchanama drawn in the case of searched person, Prathima Infrastructure Limited i.e., from 12.02.2020, but not from the date of conclusion of search in the case of Sri B. Srinivasa Rao and Smt. B. Usha Rani, as recorded in the last panchanama drawn in their case on 23.07.2020 as canvassed by the learned CIT-DR for the Revenue. Further, the time limit for completion of assessment proceedings in the case of the assessee falls between 20.03.2020 and 31.03.2021. As per the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and the relevant Notification Nos. 10/2021, 38/2021 and 74/2021 issued by the CBDT, the date of completion of proceedings has been extended in view of the COVID-19 outbreak up to 30.09.2021. Therefore, in view of the provisions of Section 153B read with the TOLA Act, 2020 and the relevant notifications issued by the CBDT, the time limit available for the A.O. to complete the assessment in the present case was up to 30.09.2021, whereas the A.O. has passed the assessment order for A.Ys. 2018-19 to 2020-21 on 28.03.2022, which is beyond twelve months from the end of the financial year in which the last of the authorisations was executed. Therefore, in our considered view, the assessment order passed by the A.O. is barred by limitation and liable to be quashed.

Insofar as the arguments of the learned CIT-DR for the Revenue, in light of the decision of the Hon'ble Supreme Court in to 486/Hyd/2025 Expressway Services Pvt. Ltd.

In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that, the to 486/Hyd/2025 Expressway Services Pvt. Ltd.

assessment order passed by the A.O. under Section 153C of the Act, dated 28.03.2022 for the impugned assessment years is clearly barred by limitation as prescribed under Section 153B of the Income Tax Act, 1961, because the time limit available for the A.O., for completion of assessment under Section 153C of the Act, is 12 months form the end of the financial year in which the last of the authorisation for search under Section 132 of the Act, was conducted and in the present case, the last of the authorisation was executed in the case of M/s. Prathima Infrastructure Limited on 12.02.2020 and thus, 12 months form the end of the financial year 2019-20 would be 31.03.2021 and further, because of extension of time limit, in view of TOLA-2020 and relevant notifications issued by the CBDT, the time limit has been extended upto 30th September, 2021, whereas, the A.O. has passed the assessment order on 28.03.2022, which is clearly beyond the 12 months form the end of the relevant financial year in which last of the authorisation was executed. Thus, we quash the assessment order passed by the A.O. under Section 153C of the Act, dated 28.03.2022 for A.Y. 2018-19 to 2020-21.

Coming to ground No.3 of the assessee’s appeal, which challenges validity of the assessment order in light of common satisfaction notes recorded by the A.O. for Assessment Years 2014-15 to 2020-21.

The learned counsel for the assessee, Shri K.C. Devdas and Shri Poorna Chander, C.A., submitted that, the satisfaction recorded by the A.O. for initiation of proceedings under section to 486/Hyd/2025 Expressway Services Pvt. Ltd. 153C is generic, non-specific with regard to specific assessment- year, undisclosed income relating to each assessment year and without any reference to specific incriminating evidence and thus, the same is liable to be quashed at the threshold level. In this regard, they relied upon plethora of judicial precedents, including the decision of Hon’ble Delhi High Court in the case of Saksham Commodities Ltd vs. ITO (2024) 161 Taxmann.com 485 (Delhi).

The Ld. CIT-DR, Dr. Narendra Kumar Naik, submitted that, at the time of recording satisfaction note, the A.O. is not required to prove undisclosed income qua each assessment year with reference to incriminating materials. But what is required is prima facie existence of seized materials indicating or reference of undisclosed income of assessee for relevant assessment years. The moment search takes place and during search materials belong to or relate to the assessee found and the A.O. of the searched person arrives at satisfaction that it relates to other person, the provisions of section 153C triggers. Therefore, arguments of the counsel for the assessee that, consolidated satisfaction note does not indicate undisclosed income for each assessment year and because of this reason entire assessment becomes invalid is an incorrect argument and cannot be accepted. In this regard, he relied upon the decision of Hon’ble Delhi High Court in the case of Indian National Congress vs. DCIT (2024) 160 Taxmann.com 606 (Delhi) and the decision of PCIT vs. Medicare (P) Ltd 161 Taxmann.com 160 (Delhi) and also Hon’ble madras High Court decision in the case of Smt. Pavithra Sugichandran vs. DCIT (2024) 168 Taxmann.com 413 (Madras).

We have heard both the parties, perused relevant material on record and had gone through orders of the authorities below. The A.O. recorded a common satisfaction note for AY 2014-15 to A.Y. 2020-21 and relied upon the same for determination of the income of the appellant. The satisfaction note reads that “In view of the facts mentioned above, I am satisfied that the above seized material belongs to M/s Expressway Services Pvt. Ltd. and that the documents seized have a bearing on the determination of the total income of M/s Expressway Services Pvt. Ltd. for the assessment years 2014-15 to 2020-21”. In the above backdrop, it is necessary for us to decide the issue in light of arguments of the counsel for the assessee and counter arguments of the Ld. CIT- DR.

The satisfaction recorded by the A.O. for initiation of proceedings under section 153C is generic, nonspecific with regard to specific assessment-year, undisclosed income relating to each assessment year and without any reference to specific incriminating evidence it is evident from relevant satisfaction note which is available in paper book filed by the assessee. From the satisfaction note, it is impossible to identify any kind of undisclosed income for each assessment year, and corresponding incriminating materials relied upon by the A.O. Further, satisfaction note recorded by the A.O. is fundamental to the proceedings u/s 153C of the Act. Unless the A.O. arrives at to 486/Hyd/2025 Expressway Services Pvt. Ltd. satisfaction with reference to incriminating materials found during the course of search and records that the materials found during the course of search in the case of searched person belongs to or relates to the other person and has a bearing on the determination of total income for relevant assessment years, the A.O. cannot proceed to initiate and issue notice u/s 153C to other person. Therefore, in our considered view, the satisfaction note must indicate undisclosed income qua incriminating materials to each assessment year separately. This contention of the appellant is supported by the decision of Hon'ble ITAT in the case of M/s. MSN Institute of Medical Sciences Pvt. Ltd., Hyderabad Telangana vs. The PCIT-(Central), Hyderabad, 1324 & 1325/Hyd/ 2024] and in Para 18 of the order the Hon'ble ITAT observed that the satisfaction note in the case was recorded in a sweeping manner without co-relating the seized material to each of the assessment years involved. It was held that such a satisfaction note does not constitute a legally valid satisfaction for the assessment years and consequently, the assumption of jurisdiction u/sec. 153C for the impugned assessment years is bad in law and unsustainable. The ITAT also placed reliance on the decision of the Apex Court in the case of CIT v. Sinhgad Technical Education Society [2017] 84 taxmann.com 290 (SC) wherein it was held that the satisfaction should be assessment year specific and incriminating evidence specific.

Further reliance was placed on the decision in Saksham Commodities Ltd [2024] vs. ITO 161 taxmann.com 485 (Delhi), [SLP rejected in [2026] 182 taxmann.com 591 (SC)] wherein it was held that in Section 153C the expression "have a bearing on the determination of total income" assumes central importance. It mandates that the Assessing Officer must arrive at clear and objective satisfaction that the incriminating material gathered during the search is likely to impact the computation of total income for a specific assessment year falling within the permissible block period. Similarly, in the case of DCIT v. Sunil Kumar Sharma (2024)159 taxmann. com 179 (Karnataka), it was held the satisfaction under section 158BD [Equivalent to provisions of section 153C] should be recorded separately for each assessment year. The Hon’ble High Court found the common satisfaction note as not in accordance with the provisions of law under section 153C. SLP dismissed in [2024)168 taxmann.com 77 (SC). In the case of M/s. Calcutta Knitwears in its detailed judgement in Civil Appeal No.3958 of 2014 dated 12.03.2014 [2014] 43 taxmann.com 446(SC) it was held that the imperative need of writing a correct satisfaction highlighting the undisclosed income of the assessee is a requirement. This decision was accepted by the CBDT as contained in its Circular No. 24/2015 [F.No.279/MISC/140/2015/ITJ/DATED 31.12.2015. In the case of the appellant prima facie undisclosed income has not been specified and the same is contrary to the ratio of the judgment of the Apex Court. The decisions cited above would show that there is commonality in these decisions in as much as the essence of above decisions postulate that the satisfaction must reflect-(1) Application of mind; (2) Identification of seized material (3) Nexus with undisclosed income; and assessment year-wise linkage. It is a settled legal proposition that if an order is bad in its inception, the same does not get sanctified at a later stage. It should be lawful at its inception, for the reason that illegality strikes at the root of order. In other words, if any legal action at the initial stage is bad in law, then all further proceedings consequent thereto will be void. A right in law exists only and only when it has a lawful origin as held in the cases of Mangal Prasad Tamoli v. Narvedoshwar Mishra (AIR 2005 SC 1964); and Ritesh Tiwari v. State of U.P. (AIR 2010 SC 3823).

The reliance of the Ld. CIT-DR on judgment in the case of Indian National Congress Vs. Deputy Commissioner of Income-tax [2024] 160 taxmann.com 606 (Delhi) is not relevant in the case of the appellant. The essence of the decision in that case was that satisfaction note merely forms foundation for initiation of action which would enable to evaluate whether an opinion has been validly formed and as long as it rests on incriminating material which pertains to assessment years in question, same would qualify requirement of section 153C of the Act. The case never held that recording of satisfaction and presence of incriminating evidence is not a requirement. Rather the decision emphasized the presence of incriminating evidence. It never dealt with the decision in Calcutta Knit Ware case (supra) of the hon’ble Apex Court to hold a contrary view that prima facie quantification of undisclosed income is not a requirement. A perusal of the facts of the case of the appellant would show that there is no proper satisfaction at to 486/Hyd/2025 Expressway Services Pvt. Ltd. the threshold level and hence the foundational requirement is wanting. The Court never specifically pronounced that satisfaction note, or the requirement of a common satisfaction note. It is a fundamental principal presence of incriminating evidence is not a requirement. It never dealt with that it is not desirable to pick a word or a sentence from a judgement and treat the same as pronouncement of law. Hence, the contention of Ld. Sr. A.R. is not acceptable. Similarly, reliance on the decision of PCIT v. Medicare (P.) Ltd 161 taxmann.com 160 (Delhi) as relied on by leaned Sr. DR is not relevant to the issues involved in appellant's case. This case related to computation of block period-whether from the date of receipt of the seized material or from the date of recording the satisfaction note. This case never dealt with the issue of recording a common satisfaction note. Reliance of Ld. Sr. A.R. on the case Smt. Pavithra Sugichandran Vs. DCIT [2024] 168 taxmann.com 413 (Madras) is also not relevant to this case. This decision is not relevant as the case never dealt with common satisfaction notes. It dealt with the issue of reckoning of limitation period. Therefore, in our considered view, case laws referred by the ld. CIT-DR/Sr. AR are not applicable to facts of this case and thus, rejected.

In this view of the matter and considering the ratio of various case laws discussed hereinabove, we are of the considered view that the assessment orders passed by the A.O. on the strength of consolidated satisfaction note for Assessment. Years 2014-15 to 2020-21 are bad in law. Thus, on this ground also, the to 486/Hyd/2025 Expressway Services Pvt. Ltd. assessment orders for Assessment Years 2018-19 to 2020-21 are liable to be quashed. We ordered accordingly.

Coming back to the issues on merit. The A.O. noted that the assessee had received several sub-contracts work from M/s. Prathima Infrastructure Pvt. Ltd. and further sub-contracted most of the work to various sub-contractors in amounts ranging from Rs. 1.70 crores to Rs. 1.95 crores. However, on verification of details and statements recorded from certain sub-contractors during the course of search, the A.O. observed that many of the sub-contractors had not executed any work and most of them were employees or people connected with Prathima Group of companies. The A.O., further observed that, amounts credited to the accounts of certain sub-contractors were withdrawn in cash and returned back, indicating that the sub-contracts were accommodation entries created to reduce taxable income. Accordingly, the A.O. estimated commission income at 1% of the gross receipts of Rs. 33,97,93,935/- and made an addition of Rs. 33,97,939/-. The A.O. has also made addition of Rs. 7,32,95,000/- towards cash received from sub-contractors and treated the same as income of the assessee.

We have heard both the parties, perused material available on record and had gone through orders of the authorities below. The A.O. made additions towards 1% commission income on total sub-contract works received by the assessee. The Ld. CIT(A) deleted this addition. Although, the assessee challenged findings of the ld. CIT(A) on this issue, it becomes academic, because finally addition has been fully deleted by the ld. CIT(A). Therefore, we are not going to adjudicate the ground related to this issue. The A.O. had also made addition towards alleged cash received by the assessee from sub-contractors on the ground that it is only accommodation entry. The A.O. made additions solely on the basis of statements of employees and few sub-contractors. Except, statements, no independent evidence with the A.O. to support his findings. Therefore, in our considered view the additions made by the A.O. are not sustainable, because all expenditures were debited in the regular books of accounts and the same was subject matter of statutory audit. The report of the auditor is unqualified. There is no whisper in the assessment order that the statutory report of the C.A., was defective in the light of material omission or commission by the appellant. That audit reports prepared under statutory obligation constitute material which can be taken into consideration by authorities has held in the case of Additional CIT v. Jay Engineering Works Ltd., 113 ITR 389.

Further no addition could be made in a search assessment in the absence of cogent incriminating evidence calling for addition and more particularly in an assessment made under section 153C which is incriminating evidence specific. Further, works executed by the appellant either directly or through subcontract cannot be doubted as these are governmental work subject to various formalities and verification. The appellant also produced proof in this regard. The payments were made by account payee cheques/RTGS. The same is reflected in the books of accounts, bank account of Appellant and the bank accounts of recipient entities. All the sub-contractors are assessed to tax and claimed credit for TDS in their assessments on the basis entries in Form No.26AS. The most relevant provision is Section 114 of The Indian Evidence Act, 1872, which stipulates that the Court may presume that Judicial and official acts have been regularly performed. No evidence was found to show that cash was returned by these entities to Appellant. Mere oral statements by few sub-contractors will not meet the requirements of law. No cash or any undisclosed asset was found from the office of Appellant or its directors or in any other place regarding receipt of cash from these entities. The Director, in his statement, has denied any execution of work through bogus subcontractors. It is imperative to appreciate that except for bringing to his notice the statements of some persons, no documentary evidence regarding receipt of cash from sub- contractors was brought to his notice as there was none discovered or in the possession of Department.

An assessment under section 153C of the Act is required to be based on tangible evidence pointing to undisclosed income for which the case was reopened. As stated above, nothing comes out of the satisfaction note. Hence, any addition on suspicion or surmise or in a general manner is not sustainable in an assessment made under section 153C of the Act, which should be incriminating evidence specific and undisclosed income specific. The provisions of section 153C of the Act, cannot enlarge the scope of addition, going beyond the reasons for which the case was reopened under section 153C. In the course of comprehensive search of the premises of Prathima group, including the appellant and the Directors, no evidence was found incriminating the appellant. Consequently, the jurisdiction to assess or reassess should be read in a restricted manner in such circumstances, i.e., the jurisdiction to assess or reassess ought to be restricted to only incriminating material unearthed during the course of search after following the due procedure. It is also relevant to refer to the decision in the case of PCIT, Central-3 Vs. Abhisar Buildwell P. Ltd. [2023] 149 taxmann.com 399/293 Taxman 141 (SC), no addition could be made in the absence of incriminating evidence. The requirement of presence of incriminating evidence is more pronounced in the case of a 153C proceeding which lays down the boundary of jurisdiction. Merely based on contradicting statements of a few sub-contractors and one accountant against a total of more than 50 sub-contractors and not supported by any kind of incriminating material like unexplained money, bullion, jewelry, books of accounts or other records etc. no addition can be made. It may be relevant to mention here that on the basis of statement recorded under section 132(4) of the Act, no addition can be made without corroboration. There is unanimity among the Courts and Tribunals that a standalone statement admitting income may not fall within the scope of undisclosed income. A statement cannot be equated with a document or asset. It cannot be said that an oral statement was seized during the course of search as held in the case of CIT v. Harjeev Aggarwal [2016] 70 taxmann.com 95 (Delhi).

The assessee has relied upon the decision in the case of Pr. CIT v. Best Infrastructure (India) (P.) Ltd. [2017] 84 taxmann.com 287/397 ITR 82 (Delhi), where it was held that, statements recorded under Section 132(4) of the Act, by themselves do not constitute incriminating material as has been explained in the case of Harjeev Aggarwal(supra). In the case of CIT v. Naresh Kumar Agarwal [2015] 369 ITR 171(AP), the Hon'ble Court held that the provision embedded in sub-section 132(4) of the Act, is based on the well-established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. Unsubstantiated and uncorroborated seized material alone cannot be considered as conclusive evidence to frame assessment as held in the case of ITO v. Ramachandra Setty and Sons [2024] 163 taxmann.com 666 (Bangalore Trib.). In the case of the appellant no evidence except for some third-party statement was available. Therefore, addition made by the A.O. cannot be sustained.

The contents of statements used against the appellant are third party statements. In the case of CIT v. A. L. Lalpuria Construction (P.) Ltd. [2013] 32 taxmann.com 384 (Raj), it was held that no addition can be made u/s 68 on the basis of a statement by a third party which was not confronted to the assessee along with other supporting evidence. A similar view has been taken in the case of CIT v. Concorde Capital Management Co. [2009] 334 ITR 346 (Del)). The case of Addl. CIT v. Miss Lata Mangeshkar [1974] 97 ITR 696 (Bom) is a landmark ruling on the use of third-party evidence in tax assessments. The court held that entries in a third party's books of accounts. statements, or loose papers cannot form the sole basis for an addition unless corroborated by primary or direct evidence. It emphasized that unverified oral testimony is unreliable. Furthermore, the Court stressed the importance of affording the assessee an opportunity to cross-examine third parties whose statements are relied upon, reinforcing the principles of fair play and due process in tax proceedings. In our considered view, the Revenue has got a tendency to make an addition on the basis of entries appearing in the books of a third party or a statement recorded from a third party or loose papers seized from a third party. In all such cases, it is imperative to afford an opportunity for the assessee to cross- examine the said third party. In this case, despite request to give opportunity for cross examination of adverse witnesses, the same was not acted upon. This contradicts the fundamental doctrine of audi alteram partem that no person should be condemned unheard. In this regard, it is relevant to refer to the decisions of the Apex Court in the cases of Kishanchand Chellaram v. CIT 125 ITR 713 (SC) and Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC) (2015) 94 CCH 0187 ISCC. In both cases the assessment was declared void as no opportunity was given to cross-examine the adverse witness.

In this view of the matter and considering the facts of this case, we are of the considered view that, the additions made by to 486/Hyd/2025 Expressway Services Pvt. Ltd. the A.O. towards alleged cash received from the sub-contractors as income from other sources on the basis of statement of third parties without there being any corroborative evidences cannot be sustained. The Ld. CIT(A) without appreciating the relevant facts, simply upheld the addition made by the A.O. Thus, we direct the A.O. to delete the additions made towards alleged cash received from the sub-contractors as income from other sources for all the assessment years.

In the result, the appeals filed by the assessee in to 486/Hyd/2025 for A.Ys. 2018-19 to 2020-21 are allowed.