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Facts
A search and seizure operation was conducted, and information was found linking the assessee to a cash payment of Rs. 5,00,000/- for a flat booking. The AO made an addition based on this information, which was confirmed by the CIT(A).
Held
The Tribunal held that the assessment framed under section 153C of the Act for A.Y. 2016-17 was without jurisdiction as no incriminating material pertaining to the assessee was found during the search. The addition was deleted.
Key Issues
Whether the addition made under section 153C/69 is sustainable when no incriminating material was found during the search, and the assessment year was unabated.
Sections Cited
153C, 143(3), 69, 132, 132A, 153A, 250, 142(1)
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Income Tax Appellate Tribunal, JAIPUR BENCH “B”, JAIPUR
Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL
This appeal by assessee is directed against the order of the Ld. CIT(A), Udaipur-2 dated 12.03.2025 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The assessee has raised the following grounds of appeal: -
1. THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER HAS ERRED IN IMPLYING THAT A CASH PAYMENT OF RS. 5, 00,000 HAS BEEN DONE BY THE APPELLANT AS PART PAYMENT FOR FLAT AT PRATHAM COMPLEX, JAIPUR. THE HON'BLE CIT (APPEALS) HAS FURTHER ERRED IN CONFIRMING THE ADDITION OF RS. 5 LACS MADE BY THE LEARNED AO.
2. THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER HAS ERRED IN ISSUING THE NOTICE AND INITIATING THE PROCEEDINGS UNDER SECTION 153C OF THE ACT. THE HON'BLE CIT (APPEALS) HAS FURTHER ERRED IN CONFIRMING THE ACTION UNDERTAKEN BY THE LEARNED AO U/S. 153C OF THE INCOME TAX ACT.
3. THE APPELLANT CRAVES TO ALTER, AMEND AND MODIFY ANY GROUND OF APPEAL
4. NECESSARY COST BE AWARDED TO THE ASSESSEE
The present appeal has been filed by the assessee, a housewife whose primary source of income is interest. For Assessment Year (A.Y.) 2016-17, the assessee declared a total income of Rs. 21,930/-. A search and seizure operation under section 132 of the Income-tax Act, 1961 (“the Act”) was carried out on 02.08.2017 in the case of M/s. Gangwal Commodities, Shri Ajay Gangwal, F-32, Azad Marg, C-Scheme, Jaipur. During the course of the search, certain documents (pages 1 to 7 of Annexure A, Exhibit-4) were seized, wherein Shri Ajay Gangwal admitted cash receipts aggregating to Rs. 1, 15, 74,000/- as his undisclosed income.
In the course of enquiry under section 245D (3) of the Act, Shri Ajay Gangwal furnished details of certain persons alleged to have booked flats in the “PRATHAM Complex” and to have made cash payments. These seized papers contained particulars of flat bookings and cash receipts, which were owned up by Shri Ajay Gangwal as his own undisclosed income. The impugned documents also purportedly contained reference to a cash payment of Rs. 5, 00,000/- said to have been made on behalf of the present assessee for A.Y. 2016-17.
Pursuant thereto, the assessee’s case was centralized to Central Circle, Kota, and a notice under section 153C of the Act was issued on 03.11.2020. The Assessing Officer (AO) thereafter framed an assessment under section 153C read with section 143(3) of the Act vide order dated 06.04.2021, making an addition of Rs. 5,00,000/- under section 69 of the Act, treating the same as unexplained investment in booking of a flat at “PRATHAM Complex, Jaipur.” Aggrieved, the assessee preferred an appeal before the learned Commissioner of Income Tax (Appeals), Udaipur-2 [CIT(A)], who, by order dated 12.03.2025, dismissed the appeal and confirmed the addition of Rs. 5,00,000/-. The grounds challenging both the assumption of jurisdiction under section 153C of the Act and the consequential penalty proceedings were also rejected by the Ld. CIT (A).
The assessee is now before us in further appeal. The assessee has raised two grounds of appeal. Since adjudication of the second ground, relating to the validity of proceedings under section 153C of the Act and the consequent addition, is sufficient to dispose of the appeal, the first ground is taken only for academic consideration and is not relevant for determination of the present dispute. We have carefully considered the rival submissions and perused the material available on record, including the assessment order dated 06.04.2021, the notice issued under section 142(1) of the Act (pages 10-12 of the paper book), and the written submissions of the assessee (pages 1-7 of the paper book).
From the record, it is evident that no document or material belonging to or relating to the assessee was found or seized during the search. The only reference relied upon by the AO is a piece of information found at the premises of Shri Ajay Gangwal, wherein the following particulars were noted:
Amount Mode of Payment & Name of the Party Address A.Y. (Rs.) Remarks M/s. Gangwal Cash (alleged against F-32, Azad 2016-17 Commodities / Ajay Rs. booking of flat in Marg, C- (F.Y. Gangwal (M/s. Star Land 5,00,000/- “PRATHAM Scheme, Jaipur 2015-16) Base Pvt. Ltd.) Complex”)
It is significant to note that the above information is in the name of Star Land Base Pvt. Ltd. and not directly in the name of the assessee. No corroborative seized document or evidence pertaining to the assessee herself was brought on record.
Even if the above reference is assumed to be related to the assessee, such information alone cannot form the basis for invoking section 153C of the Act. The settled legal position is that jurisdiction under section 153C of the Act can be assumed only where books of account, documents, or assets are seized which pertain to or relate to a person other than the searched person, and which have a bearing on determination of his total income. Mere third-party statements or uncorroborated information cannot substitute the statutory requirement of incriminating material found during search. In the present case, A.Y. 2016-17 was a completed assessment year (unabated) on the date of search. It is trite law that in respect of such unabated years, no addition can be made under section 153A/153C of the Act in the absence of incriminating material found during the search.
Similar views are there, expressed by the Hon’ble Supreme Court in PCIT v. Abhisar Buildwell Pvt. Ltd. (2023) 143 taxmann.com 178 (SC) has categorically held that:
“In respect of completed/unabated assessments, no addition can be made by the Assessing Officer in the absence of any incriminating material found during the course of search under section 132 or requisition under section 132A.” Similarly, the Hon’ble Delhi High Court in CIT v. Kabul Chawla (2015) 380 ITR 573 (Del.) held that completed assessments can be interfered with under section 153A of the Act only on the basis of incriminating material unearthed during search.
In the instant case: • The assessment for A.Y. 2016-17 was unabated; • No incriminating document pertaining to the assessee was found during search;
• The impugned addition of Rs. 5,00,000/- has been made solely on the basis of third-party information, which itself does not stand in the name of the assessee and is merely an incidental reference contained in the information furnished by the searched party. It is pertinent to note that even this information was in respect of Star Land Base Pvt. Ltd. and not in the name of the assessee. The Assessing Officer, without any direct evidence, has merely drawn an indirect inference on the premise that the assessee had purchased property from Star Land Base Pvt. Ltd., and thereby sought to connect the assessee with the alleged cash payment. No corroborative material or evidence was found during the course of search or subsequently brought on record by the Assessing Officer to establish that the assessee had, in fact, made any such cash investment. In the absence of any independent incriminating document pertaining to the assessee, the reliance placed on such unverified and indirect information cannot, by itself, form a legally sustainable foundation for invoking jurisdiction under section 153C or for making an addition under section 69 of the Act. Thus, the assumption of jurisdiction under section 153C is itself invalid, and the consequent addition under section 69 is unsustainable in law.”
In view of the above discussion and binding judicial precedents, we hold that the assessment framed under section 153C of the Act for A.Y. 2016-17 is without jurisdiction and is liable to be quashed. The addition of Rs. 5, 00,000/- made under section 69 of the Act is deleted.
In the result, the appeal of the assessee is allowed.
The Order is pronounced in the open court on 15th day of September 2025. Sd/- Sd/- (Dr. S. SEETHALAKSHMI) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Jaipur, िदनांक/Dated: 15/09/2025 Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. आयकर आयु� CIT 3. 4. िवभागीय �ितिनिध, आय.अपी.अिध., Sr.DR., ITAT, 5. गाड� फाइल/Guard file. BY ORDER, //True Copy//