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Facts
The assessee, Eager Corporation, filed appeals against orders related to assessments framed under section 144 read with section 153A of the Income Tax Act for assessment years 2010-11 to 2013-14. These assessments stemmed from a search and seizure action under section 132 in the case of Gurnani Group. The Assessing Officer made additions based on examination of books, special audit findings, and investigation reports, not on specific incriminating material found during the search.
Held
The Tribunal held that for assessments under section 153A in respect of unabated assessment years, additions can only be made based on incriminating material found during a search. Since the Assessing Officer failed to identify any such material directly relatable to the additions made, and the additions were based on pre-existing books and special audit findings, the jurisdictional condition for invoking section 153A was not satisfied.
Key Issues
Whether additions made under section 153A are sustainable when no incriminating material was found during the search, and the additions are based on other sources of information like books of account and special audit reports.
Sections Cited
153A, 144, 132, 40A(3), 40(a)(ia), 37(1), 68, 69A, 142(2A), 153D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘E’ BENCH
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
(Assessment Year: 2010-11) & & 5258/Mum/2024 (Assessment Year: 2013-14& 2012-13) Eager Corporation Vs. DCIT-CENT-CIR 8(3), 301/3, Gaj Laxmi Apts Mumbai Babhai Naka, Vasant Rao Road Borivali West Mumbai – 400 092 PAN/GIR No.AAAFE7328R (Appellant) .. (Respondent) Assessee by Shri Sharwan Kumar Jha, Adv. (virtually appeared) Revenue by Shri Ritesh Misra, CIT DR Date of Hearing 11/02/2026 Date of Pronouncement 12/02/2026 आदेश / O R D E R PER BENCH:
These appeals have been preferred by the assessee, M/s. Eager Corporation, against the separate but identical and others Eager Corporation appellate orders all dated 27.01.2023 passed by the learned Commissioner of Income Tax (Appeals)-50, Mumbai, arising out of the assessments framed under section 144 read with section 153A of the Income Tax Act, 1961, for Assessment Years 2010-11, 2011-12, 2012-13 and 2013-14. Since the genesis of the impugned assessments lies in a common search action conducted under section 132 in the case of Gurnani Group on 04.02.2016, of which the assessee formed an integral part, and since the assessment orders, the appellate orders, the nature of additions made, and the reasoning adopted by the authorities below are substantially similar and interwoven, these appeals were heard together and are being disposed of by way of this consolidated order. For the sake of convenience and clarity, Assessment Year 2011-12 has been taken as the lead year, and the findings rendered therein shall, except for variation in figures and quantum, apply mutatis mutandis to the remaining assessment years as well.
From a careful consideration of the grounds raised by the assessee, the impugned assessment orders, the appellate findings of the learned CIT(A), and the rival submissions placed before us, it emerges that the controversy involved in the present appeals lies within a well-defined legal framework, and the issues requiring adjudication by this Tribunal stand crystallized as under:
(I) Whether the additions made by the Assessing Officer under sections 40A(3), 40(a)(ia), 37(1), 68 and 69A of the Act in the assessments framed under section 153A read with section 144 are legally sustainable in the absence of any incriminating material found during the course of search relatable to the respective assessment years.
(II) Whether the additions made towards unsecured loans, suspense credits, disallowance of expenses including salary, interest and administrative expenses, and additions made on account of negative cash balances were based upon any seized material discovered during the course of search, or whether such additions were merely predicated upon examination of pre-existing books of account, special audit observations, financial records, and general investigation findings which existed independently of and anterior to the search proceedings.
(III) Whether the Assessing Officer was justified in making additions primarily relying upon statements recorded from third parties, alleged entry operators, and findings of the Investigation Wing without establishing any direct nexus between seized material and the impugned additions in the hands of the assessee for the respective assessment years falling within the jurisdictional scope of section 153A.
(IV) Whether the learned CIT(A) was justified in sustaining and affirming the additions made by the Assessing Officer despite the absence of any specific reference to incriminating material found during the course of search forming the basis of such additions, and whether such confirmation is legally sustainable in light of the settled principles governing the scope, ambit, and jurisdictional contours of assessments framed under section 153A of the Act.
The factual matrix, as borne out from the assessment records, reveals that a search and seizure action under section 132 of the Act was carried out on 04.02.2016 in the case of Gurnani Group, including the assessee firm. Consequent upon such search action, proceedings under section 153A were initiated and notices were issued requiring the assessee to furnish returns of income for the six assessment years falling within the statutory sweep of section 153A. In response thereto, the Assessing Officer proceeded to examine the financial affairs of the assessee, its books of account, and its financial transactions, and thereafter framed assessments under section 144 read with section 153A making various additions under different provisions of the Act. During the course of such proceedings, the Assessing Officer, after recording satisfaction regarding the complexity and volume of transactions and after obtaining approval of and others Eager Corporation the competent authority, invoked the provisions of section 142(2A) and directed special audit of the accounts of the assessee. It was observed by the Assessing Officer that the assessee was engaged in transactions involving multiple financial entries, cash deposits, credits, and fund movements which, in his opinion, warranted detailed and specialized examination through special audit. It was further recorded that the assessee, along with Shri Vipul Vidur Bhatt, was afforded opportunity in respect of such special audit proceedings and that Shri Vipul Vidur Bhatt conveyed that he had no objection to the proposed special audit. Though objections were raised by the assessee, the same were considered and rejected by the Assessing Officer, and the special audit was carried out in accordance with the statutory framework. It was also recorded that approval under section 153D was obtained from the Additional Commissioner of Income Tax after due consideration of facts and material placed on record, and merely because such approval was granted contemporaneously could not be construed as mechanical or without application of mind, since the approving authority had before him the draft assessment order and relevant material and granted approval upon due satisfaction.
In the assessment orders so framed, the Assessing Officer made various additions and disallowances under and others Eager Corporation different provisions of the Act. These included disallowances under section 40A(3) on account of payments made in cash, disallowances under section 40(a)(ia) on account of alleged failure to deduct tax at source on certain payments, disallowances under section 37(1) treating salary, interest and other administrative expenses as non-genuine or unexplained, additions under section 68 treating unsecured loans and suspense credits appearing in the books of account as unexplained cash credits, and additions under section 69A treating negative cash balances reflected in the books as unexplained money. The Assessing Officer observed that there existed sufficient material and circumstances indicating non- genuine business activity and non-genuine claims of expenses such as salary and interest, and that tax had not been deducted at source on certain payments as reported by the special auditor. He further observed that the assessee had failed to establish identity and creditworthiness of creditors and failed to prove genuineness of transactions, and therefore additions under sections 37(1), 40A(3), 40(a)(ia), 68 and 69A were warranted.
The Assessing Officer also placed reliance upon statements recorded during the course of search and investigation, including statements recorded under section 132(4), and referred in particular to the statement of Shri Vipul Vidur Bhatt, who was stated to be engaged in and others Eager Corporation controlling and managing entities allegedly used for providing accommodation entries. It was recorded that such statements were given voluntarily and that the said person admitted to maintaining and controlling financial records, bank accounts, and documentation of various entities. The Assessing Officer relied upon such statements and investigation findings to draw an inference regarding genuineness of transactions recorded by the assessee.
On the basis of such observations, the Assessing Officer made additions in Assessment Year 2010-11 including disallowance under section 40A(3) amounting to Rs.1,34,605/-, disallowance under section 40(a)(ia) amounting to Rs.1,75,616/-, disallowance of salary and interest expenses under section 37(1), addition under section 68 amounting to Rs.52,80,000/- on account of unsecured loans and suspense credits, and addition under section 69A amounting to Rs.1,49,074/- on account of negative cash balance, holding that the assessee failed to explain nature and source of credits and failed to substantiate genuineness of transactions.
Similarly, in Assessment Year 2011-12, the Assessing Officer made additions under section 40A(3) amounting to Rs.83,516/-, disallowance under section 40(a)(ia) amounting to Rs.49,800/-, disallowance under section 37(1), addition
and others Eager Corporation under section 68 amounting to Rs.1,61,96,747/-, and addition under section 69A amounting to Rs.64,154/-, holding that the assessee failed to substantiate genuineness of expenses and credits.
Likewise, in Assessment Year 2012-13 and Assessment Year 2013-14, additions were made under similar provisions and on similar reasoning, treating expenses as non-genuine, credits as unexplained, and negative cash balances as unexplained money.
The learned CIT(A), after considering the assessment orders and submissions of the assessee, affirmed the additions made by the Assessing Officer and dismissed the appeals. The learned CIT(A) observed that the assessee failed to provide sufficient documentary evidence to substantiate genuineness of expenses and credits, failed to establish identity and creditworthiness of creditors, and failed to provide satisfactory explanation regarding negative cash balances. The learned CIT(A) concurred with the reasoning of the Assessing Officer and held that additions were justified.
Before us, the learned counsel for the assessee made detailed submissions and contended that none of the additions made by the Assessing Officer were based upon any incriminating material found during the course of search, and and others Eager Corporation that the Assessing Officer had relied only upon pre-existing books of account, special audit observations, investigation reports, and statements recorded during investigation. It was further submitted that even pursuant to specific directions of this Tribunal, the Assessing Officer furnished a report acknowledging that there was no incriminating material directly relatable to the additions made in the impugned assessment years.
It was further submitted that additions relating to unsecured loans, suspense credits, disallowance of expenses, and negative cash balances were made solely on the basis of examination of books of account and special audit findings, and not on the basis of any seized material discovered during search, and therefore such additions were legally unsustainable under section 153A.
Per contra, the learned CIT-DR strongly relied upon the assessment orders and appellate orders and submitted that additions were justified based upon special audit findings, statements recorded during investigation, and failure of the assessee to substantiate genuineness of transactions, and therefore additions were rightly made and sustained.
In rejoinder, the learned counsel submitted that unless additions were based upon incriminating material found
We have heard the rival submissions at considerable length, carefully perused the assessment orders, the appellate orders, the written submissions filed on behalf of the parties, and the material placed on record, and more particularly the legal plea raised by the assessee which strikes at the very root of the jurisdiction assumed by the Assessing Officer under section 153A of the Act. At the outset, it would be apposite to observe that the jurisdictional objection raised by the assessee, namely that none of the additions made in the impugned assessments are based upon any incriminating material found during the course of search, is not merely a technical plea but goes to the very foundation of the validity of the additions themselves. The assessee has specifically placed on record that the additions in all the years under appeal have been made under section 144 read with section 153A, and that despite detailed assessment proceedings and reference to various sources such as special audit observations, investigation findings, and statements, the Assessing Officer has nowhere identified any seized material or incriminating document relatable to the additions made. The assessee has further placed reliance upon settled principles of law that a pure jurisdictional issue can be raised
and others Eager Corporation at any stage of proceedings, and since the issue relates to the scope and jurisdiction under section 153A, the same deserves to be adjudicated as a threshold issue.
From a careful perusal of the assessment orders and the material placed before us, it is manifest that the Assessing Officer has made additions on account of disallowance under section 40A(3), disallowance under section 40(a)(ia), disallowance under section 37(1), addition under section 68 in respect of unsecured loans and suspense credits, and addition under section 69A on account of negative cash balances. However, the entire reasoning of the Assessing Officer, as borne out from the assessment orders, proceeds on examination of the books of account, financial statements, and special audit observations, coupled with general investigation findings and statements recorded during investigation. Significantly, there is no reference in the assessment orders to any specific seized document, seized paper, seized electronic record, or any other incriminating material found during the course of search which directly evidences undisclosed income or forms the basis of the impugned additions. The narrative of the assessment order proceeds on the premise that the assessee failed to establish genuineness of certain expenses and credits, and that certain financial entries required explanation, but these conclusions are drawn entirely from examination of disclosed books and and others Eager Corporation records and not from any incriminating material discovered during search.
The position becomes even more clear and unambiguous when we examine the report furnished by the Assessing Officer pursuant to the specific direction issued by this Tribunal during the course of appellate proceedings. The record shows that this Tribunal had directed the Assessing Officer to furnish a report clarifying whether the additions made in the impugned assessments were based upon any incriminating material found during the course of search. In compliance with such direction, the Assessing Officer submitted a report dated 21.10.2025. A careful reading of the said report reveals that nowhere has the Assessing Officer identified any seized document or incriminating material relatable to the additions made in the respective assessment years. On the contrary, the tenor of the report clearly indicates that the additions have been made on the basis of statements, special audit findings, and examination of financial records. This factual position assumes decisive significance, because once the Assessing Officer himself, upon being called upon by the Tribunal, has failed to demonstrate that the additions are based upon incriminating material found during search, the very jurisdictional foundation for making such additions under section 153A in respect of unabated assessment years stands fundamentally eroded.
and others Eager Corporation 17. It is by now a well settled principle of law, conclusively laid down by the Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. (2023) 149 taxmann.com 399 (SC) that in respect of unabated or completed assessments, additions under section 153A can be made only on the basis of incriminating material found during the course of search. The Hon’ble Supreme Court, after examining the scheme and legislative intent of section 153A, has held in unequivocal terms that in the absence of incriminating material discovered during search, the Assessing Officer does not possess jurisdiction to disturb concluded assessments or to make additions on issues which had attained finality. The rationale underlying this principle is that the object of section 153A is to bring to tax undisclosed income detected as a consequence of search, and not to provide an unfettered power of review or reassessment of concluded matters in the absence of any incriminating evidence. Thus, the existence of incriminating material found during search constitutes the sine qua non for making additions in respect of unabated assessment years under section 153A.
Applying the aforesaid settled legal principle to the facts of the present case, it becomes abundantly clear that the additions made by the Assessing Officer cannot be sustained. The additions in the present case have been made entirely on the basis of examination of books of account, financial
and others Eager Corporation statements, and special audit observations. These books of account and financial statements were already part of the regular disclosures made by the assessee and were available prior to the search. The special audit conducted under section 142(2A) is only an analytical examination of such disclosed records and does not, by itself, constitute incriminating material discovered during search. Likewise, statements recorded during investigation, in the absence of any corroborative seized material relatable to the assessee and relatable to the impugned additions, cannot be treated as incriminating material so as to justify additions under section 153A for completed assessment years. The Assessing Officer has not brought on record any seized document, any seized ledger, any seized cash record, or any seized electronic evidence which reveals undisclosed income or which forms the direct basis of the additions made.
The report of the Assessing Officer furnished pursuant to the direction of this Tribunal fortifies this conclusion beyond any pale of doubt. When specifically called upon to identify incriminating material, the Assessing Officer has failed to do so. This clearly establishes that the additions have been made not on the basis of incriminating material found during search, but on the basis of examination of disclosed financial records and inferential conclusions drawn therefrom. Such additions fall squarely outside the and others Eager Corporation permissible scope of section 153A in respect of unabated assessment years as explained by the Hon’ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (supra).
The learned CIT-DR has sought to justify the additions by placing reliance upon special audit findings and statements recorded during investigation. However, these factors, in the absence of any incriminating material found during search, cannot confer jurisdiction upon the Assessing Officer to make additions under section 153A. The jurisdiction under section 153A is not a general or plenary jurisdiction to re examine concluded matters. It is a special jurisdiction triggered by search, and its scope is circumscribed by the existence of incriminating material found during search. In the absence of such incriminating material, the Assessing Officer cannot assume jurisdiction to disturb concluded assessments.
In view of the foregoing discussion, and respectfully following the binding principle laid down by the Hon’ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd., (supra) we hold that the additions made by the Assessing Officer under sections 40A(3), 40(a)(ia), 37(1), 68 and 69A in the impugned assessment years cannot be sustained, as the same are not based upon any incriminating material found during the course of search. The jurisdictional condition
and others Eager Corporation precedent for making additions under section 153A in respect of unabated assessment years having not been satisfied, the additions made by the Assessing Officer and sustained by the learned CIT(A) are liable to be deleted.
Accordingly, we direct the Assessing Officer to delete the additions made in Assessment Years 2010-11, 2011-12, 2012-13 and 2013-14. Since the additions have been deleted on the jurisdictional issue itself, adjudication of the additions on merits becomes academic and does not call for separate adjudication.
In the result, the appeals filed by the assessee are allowed.
Order pronounced on 12th February, 2026.