M. YUVARAJ,CHENNAI vs. ACIT, CENTRAL CIRCLE-1(1), CHENNAI

PDF · subscribers
ITA 1569/CHNY/2026Status: DisposedITAT Chennai04 August 2026AY 2010-118 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that for unabated assessment years, additions under Section 153C can only be made if based on incriminating material found during the search. Since no such material was found linking to the additions, the assessment was quashed.

What were the facts?

A search was conducted on the assessee's father, and documents related to the assessee were found. Proceedings under Section 153C were initiated for Assessment Year 2010-11, which was an unabated assessment. The Assessing Officer made additions based on the return of income and disclosures, not on incriminating material found during the search.

What were the issues?

Whether additions made under Section 153C for an unabated assessment year are valid in the absence of incriminating material found during the search.

Which sections of the Income-tax Act were involved?

Section 153A,Section 153C,Section 143(3),Section 68,Section 54F

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI MANU KUMAR GIRI & SHRI S. R. RAGHUNATHA

For Respondent: Shri. Shiva Srinivas, CIT
Hearing: 08.07.2026Pronounced: 04.08.2026

आयकर अपीलीय अधिकरण, ‘बी’ न्यायपीठ, चेन्नई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI श्री मनु कुमार गिरर, न्याययक सदस्य एवं श्री एस. आर. रघुनाथा, लेखा सदस्य के समक्ष BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1569 /Chny/2026 ननिाारण वर्ा / Assessment Year: 2010-11 Muralidharan Yuvaraj The Assistant Commissioner of 12, Korattur Chennai, vs. Income-tax, Central Circle – 1 Tamil Street, K.R.Nagar Chennai. Tiruvallur – 600 080. [PAN:ABQPY7608B ] (अपीलाथी/Appellant) (प्रत्यथी/Respondent) अपीलाथी की ओर से/Appellant by : Shri. Y.Sridhar, FCA प्रत्यथी की ओर से/Respondent by : Shri. Shiva Srinivas, CIT

सुनवाई की तारीख/Date of Hearing : 08.07.2026 घोर्णा की तारीख/Date of Pronouncement : 04.08.2026 आदेश /O R D E R PER S. R. RAGHUNATHA, AM : The present appeal has been preferred by the Assessee against the order dated 20.01.2026 passed by the Learned Commissioner of Income Tax (Appeals), Chennai – 18 [hereinafter referred to as “the Ld. CIT(A)”], arising from the assessment order dated 30.03.2013 passed by the Deputy Commissioner of Income-tax, Central Circle - IV(1), Chennai [hereinafter referred to as “the AO”], u/s.153A r.w.s. 153C r.w.s. 143(3) of the Income-tax

:-2-: ITA. No.1569/Chny/2026 Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2010- 11.

2.

The brief facts of the case emanating from the records are that the assessee is an individual, filed his return of income declaring a total income of Rs.6,54,660/-. A search was conducted u/s.132 of the Act on 15.03.2011 in the case of assessee’s father Shri.S.Muralidharan. During the course of search, documents relating to assessee also found and accordingly the proceedings were initiated by issue of notice u/s.153C of the Act on 12.03.2013 calling for the return of income for the AYs 2005-06 to 2010-11 requiring the assessee to file the return of income on or before 20.03.2013. In response, the assessee submitted a letter dated 26.03.2013 stating that the return of income already filed on 31.01.2011 for the AY 2010-11 and the same may be treated as return of income filed in response to notice u/s.153C of the Act. Subsequently, the AO issued statutory notices along with questionnaire calling for the details in support of the return filed. In response, the assessee filed the details and on perusal of the information filed by the assessee, the AO concluded the assessment u/s.153C r.w.s. 143(3) of the Act dated 30.03.2013 by making following additions :- (i) The credit shown in the capital account of the assessee of Rs.50,000/-, the gift received from relatives as unexplained credit u/s.68 of the Act. (ii) In the absence of details, lack of evidence to substantive the claim of sec.54F of the Act, the entire capital gain offered has been treated as short term capital gain by denying the deduction u/s.54F of the Act of Rs.42,57,6741/- instead of long term capital gain of Rs.5,07,513/-. (iii) Disallowed deduction of Rs.96,000/-, which has been claimed as salary expenditure under the head income from other sources. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee filed fresh evidences, which were sent to AO for verification and obtained a remand report. Further, the remand report was forwarded to the assessee for his comments and the rejoinder has been filed by the assessee. On considering the entire details filed

:-3-: ITA. No.1569/Chny/2026 bv the assessee and the remand report submitted bv the AO and the corresponding rejoinder by the assessee, the ld.CIT(A) partly allowed the appeal of the assessee by deleting the addition of gift from relatives of Rs.50,000/-. Further, the ld.CIT(A) accepted the long term capital gain declared by the assessee in the return of income, however, the deductions claimed of Rs.16,60,000/- on account of vacating the illegal occupants on the said immovable property for the reason that the said payments were supported by an unregistered document and no further evidences have been placed on record to show that there was encroachment on the said immovable property. Further, the ld.CIT(A) allowed the deduction claimed u/s.54F of the Act. Lastly, the issue in respect of disallowance of salary of Rs.96,000/- has been confirmed, by passing an order dated 20.01.2026. 4. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us. The ld.AR for the assessee assailing the action of the ld.CIT(A), submitted that the ld.CIT(A) has erred in sustaining the additions on account of long term capital gain as well as the disallowance under the head income from other sources. The ld.AR raised a legal issue before this Tribunal and submitted that the impugned AY 2010-11 is completed / unabated assessment. Further, the AO made all the three additions in his assessment order based on the existing information / details available in the return of income without identifying any of the undisclosed income based on the incriminating material belonging to the assessee found during the search conducted in the premises of assessee’s father Shri S.Muralidharan on 15.03.2011. Consequently, the ld.AR submitted that the assumption of jurisdiction u/s.153C of the Act is invalid as the additions are based on the return of income filed but not based on the incriminating material. The ld.AR further submitted that in the absence of incriminating material, no additions could have been made in the assessment proceedings carried out u/s.153C of the Act. 5. In support of the arguments, the ld.AR relied on the decision of the Hon’ble Supreme Court in the case of PCIT v. Abhisar Buildwell Private Limited

:-4-: ITA. No.1569/Chny/2026 454 ITR 2012 (SC), wherein Their Lordships have decided that where the assessment has already been attained finality on the date of search (in this case the handing over of the documents to the AO of the assessee was 12.03.2013 – AY 2013-14) as an unabated / completed assessment, no additions can be made u/s.153C of the Act, unless it is based on incriminating material found during the course of search or requisition. Further, the AO cannot review or reassess the completed assessments merely because a search taken place. Further, the ld.AR submitted that in the similar circumstances and facts, the assessee’s mother’s case arising out of the very same search proceedings, the ld.CIT(A) has accepted the legal ground and quashed the assessment by following the decision of the Hon’ble Supreme Court in the case of Abshisar Buildwell Private Limited (supra) and DCIT v. U.K.Paints (Overseas) 454 ITR 441 (SC), holding that in the absence of incriminating material, additions u/s.153C of the Act cannot survive. In view of the above arguments, the ld.AR prayed for quashing the order of the AO by setting aside the order of the ld.CIT(A) and allow the appeal of the assessee. 6. Per contra, the ld.DR relied on the orders of the authorities and submitted that the ld.CIT(A) has already given a relief to the assessee by considering the additional evidences filed and confirmed the addition of Rs.16,60,000/- for want of evidences for unauthorized occupation of the immovable property and corroborative documents for having paid the compensation. 7. We have heard the rival submissions and perused the material available on record and carefully gone through the orders of the authorities. The legal position governing assessments under sections 153A and 153C in respect of completed or unabated assessment years is now settled. In the case of an assessment which has abated on account of the pendency of assessment proceedings on the relevant date, the AO is empowered to make an assessment of the total income on the basis of the material already available as well as the material found during the course of search.

:-5-: ITA. No.1569/Chny/2026 8. However, in the case of a completed or unabated assessment, the jurisdiction to make an addition in proceedings u/s.153A or section 153C is restricted to undisclosed income unearthed on the basis of incriminating material found during the course of search. Thus, in respect of an unabated assessment, the Assessing Officer cannot reassess issues arising merely from the return of income or the regular books of account unless such issues are connected with incriminating material found during the search.

9.

In PCIT v. Abhisar Buildwell (P.) Ltd., the Hon’ble Supreme Court held, inter alia, that in respect of completed or unabated assessments, no addition can be made by the AO in the absence of incriminating material found during the search u/s.132 or requisition u/s.132A of the Act. The Hon’ble Supreme Court further held that completed assessments cannot be reopened or reviewed in proceedings u/s.153A of the Act merely because a search has taken place. Where no incriminating material is found, the completed assessment is required to be reiterated. The said principle applies with equal force to proceedings u/s.153C of the Act in the case of a person other than the person searched.

10.

In the present case, the proceedings u/s.153C of the Act were initiated by notice dated 12.03.2013. The Revenue has not shown that any assessment or reassessment proceeding relating to the A.Y.2010-11 was pending on the relevant date. The regular return of income had been filed on 31.01.2011. Nothing has been brought on record to establish that a notice u/s.143(2) of the Act had been issued and that regular scrutiny assessment proceedings remained pending when jurisdiction u/s.153C of the Act was assumed. Therefore, the assessment for the A.Y.2010-11 had attained finality and constituted an unabated assessment for the purpose of section 153C of the Act. Once the assessment year is found to be unabated, it is necessary to examine whether the additions made by the AO were based upon any incriminating material found during the search.

:-6-: ITA. No.1569/Chny/2026 11. On examination of the assessment order, we find that the addition of Rs.50,000/- u/s.68 of the Act was made with reference to the gift credited in the assessee’s capital account. The relevant credit was already recorded in the books and disclosed in the information accompanying the return of income. Similarly, the issue relating to the nature and computation of capital gains, the claim u/s.54F of the Act, the expenditure of Rs.16,60,000/- allegedly incurred for removing unauthorised occupants and the salary expenditure of Rs.96,000/- arose from the return of income, computation statement and documents furnished during the assessment proceedings. The assessment order does not refer to or identify any seized document, books of account or other material found during the search which revealed undisclosed income relating to these issues.

12.

Further, we also observe that, in the case of the assessee's sister Smt.Thenmozhi for the Assessment Year 2010-11, arising out of the very same search proceedings and involving identical facts and circumstances, the ld.CIT(A), vide Order No. ITBA/APL/S/250/2025-26/1086415257(1) dated 23.02.2026, has quashed the assessment order passed by the AO u/s. 153C of the Act. The aforesaid order lends further support to the assessee's contention that the assumption of jurisdiction u/s.153C of the Act in the present case is not sustainable in law.

13.

The mere fact that some documents relating to the assessee were found during the search is not sufficient. To sustain an addition in an unabated assessment, there must be incriminating material which has a direct or discernible nexus with the addition made by the AO. Neither the assessment order nor the order of the ld. CIT(A) identifies such incriminating material. The Revenue has also not placed before us any satisfaction note, seized document or other search material to demonstrate that: 1. the assessee had received any undisclosed gift;

:-7-: ITA. No.1569/Chny/2026 2. the computation of capital gains disclosed in the return was false or incomplete; 3. the expenditure claimed for obtaining vacant possession was detected as a result of the search; or 4. the salary expenditure claimed against income from other sources was connected with any undisclosed transaction revealed during the search. The additions have therefore been made by revisiting items already disclosed in the regular return of income and not on the basis of any undisclosed income detected during the search.

14.

We are unable to accept the contention of the ld. DR that the validity of the additions can be sustained merely because the ld.CIT(A) admitted additional evidence, called for a remand report and granted partial relief on merits. The jurisdictional requirement of incriminating material in an unabated assessment goes to the root of the additions made u/s.153C of the Act. An addition which is otherwise beyond the permissible scope of an unabated assessment cannot be validated merely because the first appellate authority examined its merits. Similarly, the sufficiency or insufficiency of evidence supporting the expenditure of Rs.16,60,000/- or salary payment of Rs.96,000/- would become relevant only if the AO possessed jurisdiction to examine and reassess those issues u/s.153C of the Act.

14.

The ld.CIT(A) adjudicated the surviving issues substantially on merits without examining the legal consequence arising from the absence of any incriminating material in respect of an unabated assessment. In our considered opinion, such an approach cannot be sustained in view of the settled legal position laid down by the Hon'ble Supreme Court. It is now well settled that, in the case of an unabated assessment, no addition can be made u/s.153C of the Act unless the same is based upon incriminating material unearthed during the course of the search and having a direct nexus with the addition sought to be made. In the present case, although the proceedings u/s.153C of the Act were

:-8-: ITA. No.1569/Chny/2026 initiated pursuant to certain documents found during the course of the search, the Revenue has failed to identify any incriminating material having a live and proximate nexus with the additions made in the assessment for the A.Y.2010- 11. The impugned additions, therefore, travel beyond the permissible scope of assessment u/s.153C of the Act in respect of an unabated assessment and are consequently unsustainable in law. Accordingly, we uphold the legal ground raised by the assessee and quash the assessment order passed u/s.153C of the Act. Having held that the impugned assessment itself is liable to be quashed on the foundational legal issue, the grounds raised by the assessee challenging the additions on merits, namely the disallowance of expenditure amounting to Rs.16,60,000/- and salary expenditure of Rs.96,000/-, have become merely academic and, therefore, do not call for any separate adjudication.

15.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 04th August, 2026 at Chennai.

Sd/- Sd/- (मनु कुमार गिरर) (एस. आर. रघुनाथा) (MANU KUMAR GIRI) (S. R. RAGHUNATHA) न्याययक सदस्य/Judicial Member लेखासदस्य/Accountant Member

चेन्नई/Chennai, ददनांक/Dated, the 04th August, 2026 Devadas आदेश की प्रनतललपप अग्रेपर्त/Copy to: 1. अपीलाथी/Appellant 2. प्रत्यथी/Respondent 3.आयकर आयुक्त/CIT– Chennai/Coimbatore/Madurai/Salem 4. पवभागीय प्रनतननधि/DR 5. गार्ा फाईल/GF DEVADAS Digitally signed by DEVADAS GOPALANACHARY GOPALANACHARY Date: 2026.08.06 09:04:54 +05'30'

More judgments on Section 153A

All 18,957 judgments and leading authorities on Section 153A →

Recent GST High Court judgments

Search GST case law →