TECHNO POWER,KOLKATA vs. D.C.I.T., CC - 4(1),, KOLKATA

ITSSA 9/KOL/2026Status: DisposedITAT Kolkata22 April 2026AY 2015-20167 pages
AI SummaryAllowed

What were the facts?

The assessee, Techno Power, a partnership firm engaged in trading and job work, filed its return of income for AY 2015-16. The assessment for this year had attained finality as no notice under Section 143(2) was issued. Subsequently, a search was conducted on a third party, Shri Dinesh Kumar Tawania, under Section 132(1) on March 5, 2021. During post-search inquiries on July 8, 2021, Shri Tawania's statement was recorded, where he was unable to recall commission income of ₹8 lakh from Techno Power. Based on this statement, the Assessing Officer (AO) initiated proceedings under Section 153C against the assessee by issuing a notice on March 7, 2022. The assessee filed a return under Section 153C, declaring the same income. The AO made an addition of ₹1,67,708/- on account of disallowance of festival expenses. The Commissioner of Income-tax (Appeals) upheld the AO's order. The appeals before the Tribunal pertain to AYs 2015-16 and 2016-17.

What did the Tribunal hold?

The Tribunal held that the proceedings against the assessee under Section 153C were initiated based on the statement of Shri Dinesh Kumar Tawania recorded on July 8, 2021. It noted that the search on Shri Tawania was conducted on March 5, 2021, and admittedly, no incriminating material relating to the assessee was found during that search. The Tribunal relied on the decision of a coordinate bench in MANI Square Ltd. v. ACIT, which held that a statement recorded under Section 132(1) or 131 of the Act cannot be treated as incriminating material for the purpose of Section 153C. Therefore, the addition made by the AO was set aside, and the AO was directed to delete the addition. Regarding the applicability of Section 153C(3) for searches initiated on or after April 1, 2021, the Tribunal, following the decisions of the Supreme Court in CIT vs. Jasjit Singh and the Madras High Court in Harigovind vs. Assistant Commissioner of Income-tax, held that the date of search for the purpose of Section 153C in the case of other persons is the date of handing over of the seized material to the AO of the other person. In this case, the statement recorded on July 8, 2021, which is after April 1, 2021, was considered the relevant date for initiating proceedings under Section 153C. Consequently, the provisions of Section 153C were held to be not applicable. The notice issued under Section 153C and the consequent assessment were quashed. The issue for AY 2016-17 was similar and decided accordingly.

What were the issues?

1. Whether proceedings under Section 153C of the Income-tax Act, 1961, can be initiated against the assessee based on a third party's statement recorded post-search, when no incriminating documents relating to the assessee were found during the search? (Question of law and fact, turning on Section 153C). 2. Whether Section 153C(3) of the Act, which states that Section 153C shall not apply to a search initiated on or after April 1, 2021, bars the current proceedings, considering the date of the search on the third party and the subsequent recording of the statement? Assessee's contentions: The proceedings under Section 153C were invalid because no incriminating documents relating to the assessee were found during the search on the third party; the statement recorded under Section 132(4) or 131 cannot be considered incriminating material for Section 153C. Furthermore, the date of search for the purpose of Section 153C(3) should be considered as the date of handing over of material, and since the relevant statement was recorded after April 1, 2021, Section 153C is not applicable. The assessee relied on MANI Square Ltd. v. ACIT (2020) and decisions of the Supreme Court in Principal Commissioner of Income-tax vs. Shalimar Town Planners (P.) Ltd. and Commissioner of Income-tax vs. Jasjit Singh, and the Madras High Court in Harigovind vs. Assistant Commissioner of Income-tax. Revenue's contentions: The judgment records no specific contentions for the revenue.

Which sections of the Income-tax Act were involved?

Section 153C,Section 132(1),Section 132(4),Section 131,Section 153C(3),Section 143(1),Section 139(1),Section 143(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRIPRADIP KUMAR CHOUBEY, JM

For Appellant: Shri S.K. Tulsiyan&, Ms. Lata Goyal, ARs
For Respondent: Shri Sanat Kumar Raha, DR
Hearing: 16.04.2026Pronounced: 22.04.2026

Per Rajesh Kumar, AM:

These are appeals preferred by the assessee against the orders of the Commissioner of Income-tax (Appeals)(hereinafter referred to as the “Ld. CIT(A)”], Kolkata-27, dated 26.12.2025 for the AY 2015-

16.2.

The issue raised in Ground No.1 is against the order of the Ld. CIT(A) upholding the proceedings u/s 153C of the Income-tax Act, 1961 (the Act) initiated against the assessee on the basis of search and seizure action conducted on third party in spite of the fact that the no incriminating documents relating to the assessee were found except the statement recorded under section 132(4) of t

The order continues below.

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