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Income Tax Appellate Tribunal, DELHI “G” BENCH: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
As these three appeals are having the issues which are inter- linked, inter-connected and this fact has been admitted by both the parties during the course of hearing before us, therefore, they all are decided by a common order. [Assessment Year : 2013-14] 3. First we take up the appeal of Ritu Jain in for Assessment Year 2013-14 which is arising out of order of Ld. CIT(A) dated 20.05.2025 decided against the assessee by confirming the order passed u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 [“the Act”] dated 28.09.2021.
Brief facts of the case are that a search and seizure operation was carried out u/s 132 of the Act on 11.10.2018 at PMC Group of cases and office and residential premises of the assessee were also covered. Thereafter, case of the assessee was centralized in terms of order passed u/s 127 of the Act by Ld. Pr. CIT-18, New Delhi dated 13.03.2020. Consequently, notice u/s 153A of the Act was issued on 31.08.2020, in response to which return of income was filed on 29.10.2020, declaring total income of INR 3,40,08,520/- i.e. the same income as was declared in the original return of income filed u/s 139 of the Act on 31.07.2013. Thereafter, notice u/s 143(2) was issued followed by notices u/s 142(1) alongwith questionnaires issued from time to time and the same were duly replied by the assessee alongwith the necessary evidences. Thereafter, assessment was completed in terms of order passed u/s 153A r.w.s. 143(3) of the Act dated 28.09.2021 wherein following additions were made:-
(i) Addition u/s 69A of the Act r.w.s 115BBE of INR 7,09,84,787/- towards Long Term Capital Gain (“LTCG”) holding as bogus and unaccounted income of the assessee; (ii) Addition of INR 21,29,543/- was made u/s 69C on account of alleged commission paid for obtaining bogus LTCG and further invoked section 115BBE; and (iii) Addition of INR 10,00,000/- was made u/s 69A by treating the cost price of the purchase of share as unaccounted income of the assessee and further invoked section 115BBE of the Act.
Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 20.05.2025, has dismissed the appeal of the assessee.
Aggrieved by the order of Ld.CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:-
1. “That on facts and in law, the impugned assessment order dated 28.09.2021 and the impugned order dated 20.05.2025 is arbitrary, erroneous, without jurisdiction and justification and hence unsustainable in law.
2. That the Ld. A.O and the Ld. CIT(A) have erred in ignoring the mandate of Sec. 153A of the Act (as it existed on the date of search) and the settled position of law that categorically requires additions for unabated assessment years to be made solely on the basis of "incriminating material" unearthed during the course of the Assessee's search.
That the Ld. A.O and the Ld. CIT(A) have erred in ignoring the mandate of Sec. 142 of the Act, by failing to conduct such independent investigation, enquiry and/or recording of statements on his own u/s 142(2) of the Act, to thereafter put such adverse material gathered u/s 142(2) to the Assessee u/s 142(3) of the Act, which is consonance to the Appellant's right to cross examination under the principles of Natural Justice.
4. That the Ld.A.O. has erred in making impugned addition of Rs.7,09,84,787/- disallowing Long-Term Capital Gain (LTCG) by erroneously treating the LTCG obtained from sale of scrip of M/s PMC Fincorp Ltd. to be bogus in genuine, in complete ignorance of the submissions and the documentary evidences placed on record establishing the ingredients of identity, genuineness and creditworthiness of the transaction.
5. That the Ld.A.O. and the Ld.CIT(A) have consequentially also erred in adding back / sustaining Rs.21,29,543/- (being 3% of as the alleged bogus LTCG) as alleged commission paid by the Appellant towards obtaining alleged.
6. That the Ld.A.O. in complete ignorance of the documentary evidence submitted by Assessee on merits, further erred in disallowing the deduction of Rs. 10,00,000-being the cost of purchase of shares of M/s PMC Fincorp Ltd from its sale value erroneously holding that the same unaccounted income of the Assessee.
7. That the Ld. AO has erred in holding that right of Assessee to cross- examine such third party(ies) whose statement(s) the Ld. AO has placed reliance upon is not an absolute right and can be dispensed with despite the categorical request made by Appellant for the same. General Ground 8. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds.”
In Grounds of appeal Nos. 1 & 2, assessee has challenged the action of AO in assuming jurisdiction and making additions in the order passed u/s 153A without referring to any incriminating material found and seized as a result of the search from the possession of the assessee.
The facts leading to these grounds of appeal are that the AO observed that assessee has received LTCG of INR 7,09,84,787/- from the sale of shares of PMC Fin Corp Ltd. which is not genuine and pre-arranged affair in connivance with one Shri Raj Kumar Modi who was the key person, controlling and managing various companies including M/s PMC Fin Corp Ltd. and used the said company for providing accommodation entries of bogus LTCG. As per the AO, in the statements recorded during the course of search u/s 134(2) of Shri Raj Kumar Modi, he had accepted that he was engaged in the activity of providing accommodation entries and further evidences were found from the possession of Shri Raj Kumar Modi which suggests that there were transactions carried out by him where cash was handled against the transfer of cheques in the shape of accommodation entries of capital gains/unsecured loans. Accordingly, AO held that LTCG earned by the assessee from the sale of shares of PMC Fin Corp Ltd. is bogus and unaccounted income of the assessee and further made the additions towards cost price of said shares as well and further by alleging that assessee has paid commission to obtain such bogus LTCG and made the addition towards such commission also.
9. Before us, Ld. AR submitted that during the course of search carried out in the case of assessee on 11.10.2018, no incriminating material whatsoever was found and seized containing any entry/evidences leading to belief that assessee has earned undisclosed income pertaining to the year under appeal. Ld. AR submits that in the case of assessee, return of income was filed u/s 139(1) on 31.07.2013 and the time limit for issue of notice u/s 143(2) had already been expired and thus, the assessment for the year under appeal i.e. AY 2013-14 has attained finality and unless any incriminating material is found and seized as a result of search from the possession of the assessee, no addition could be made dehorse the incriminating material.
10. Ld. AR submits that the year under appeal is unabated year and the additions were made solely on the basis of statement of third parties, report of the Investigation Wing with respect to the penny stock transaction and the adjudication order dated 31.05.2021 passed by SEBI in the case of PMC Fin Corp Ltd, which cannot be termed as incriminating material. Ld. AR submits that the adjudication order passed by SEBI was set aside by the Securities Appellate Tribunal, Mumbai on 12.09.2023, thus same cannot be made basis for making addition in the hands of the assessee.
11. Ld. AR submits that it was submitted before the AO that the transactions of LTCG were duly recorded in the books of accounts maintained by the assessee and was declared in the return of income filed u/s 139(1) of the Act where the profit was claimed as exempt u/s 10(38) of the Act. Ld.AR further submits that as no incriminating paper whatsoever was found from the possession of the assessee as a result of search indicating any evidence to hold that such transactions of LTCG is bogus and not the genuine transaction. Ld. AR drew our attention to the panchnama prepared during the course of search at the residential and business premises of the assessee which are available in common Paper Book Volume-2 at pages 70 to 78 and submits that they contained various loose papers and none of such documents so found and seized during the course of search was referred in the assessment order for making the additions in the hands of the assessee on account of LTCG or cost thereof.
12. Ld.AR further submits that under identical circumstances, additions were made on account of bogus capital gain in the case of the assessee for AY 2015-16 which were deleted by Co-ordinate Bench of Tribunal, Delhi Benches which is reported in 181 ITD 218.
13. Ld.AR further submits that based on the statements of Shri Raj Kumar Modi recorded in the course of search, various additions were made on account of bogus accommodation entries of unsecured loans in the case of M/s. Gulshan Investment Pvt. Ltd. wherein Co-ordinate Bench of the Tribunal in terms of order dated 16.04.2025 in held that no addition could be made in absence of any incriminating material in the order passed u/s 153A of the Act by following the judgements of Hon’ble Supreme Court in the case of PCIT vs Abhisar Buildwell [2023] 149 taxmann.com 399 (SC) and further relied upon the judgement of Hon’ble Jurisdictional High Court in the case of Kabul Chawla [2016] 380 ITR 573 (Delhi).
14. In the last, Ld.AR submits that since no incriminating material was found/seized from the possession of the assessee during the course of search carried out at her business/residential permission nor any reference is made of any document whatsoever of the papers seized during the search nor any admission was made by the assessee with respect to the LTCG declared in the regular return of income filed u/s 139(1) of the Act, no addition could be made for such capital gain by treating the same as bogus in the order passed u/s 153A of the Act by relying upon the statements and other material found from the possession of the third party. Ld.AR submits that in such scenario, the action could be taken u/s 153C in the hands of the assessee which has not been taken by the Revenue and additions were made in the order passed u/s 153A of the Act which is against the provision of the Act where separate section i.e. section 153C is provided for such circumstances. In this regard, reliance is placed on the judgement of Hon’ble Delhi High Court in the case of PCIT vs Anand Jain HUF in and others. He, therefore, prayed that order passed/s 153A by making additions for the LTCG treating it as bogus deserves to be hold bad in law and consequent additions made be deleted.
On the other hand, Ld.CIT DR for the Revenue vehemently supported the orders of the lower authorities and submits that in the instant case, search was simultaneously carried out at the business and residential premises of the assessee and Shri Raj Kumar Modi and PMC group of cases. During the course of search, it was found that Shri Raj Kumar Modi was indulged into providing accommodation entries of unsecured loans and bogus LTCG through various companies controlled and managed by him including PMC Fin Corp Ltd. Ld.CIT DR submits that during the Page | 8 course of search, Shri Raj Kumar Modi in his statement recorded u/s 132(4) of the Act, had accepted this fact that he was providing bogus LTCG after charging commission and the family of the assessee is one of the beneficiaries of such bogus LTCG.
Ld.CIT DR submits that though no incriminating material was found at the business/ residential premises of the assessee however, the corroborative material was found from the possession of Shri Raj Kumar Modi in the shape of WhatsApp Chat etc. and further categorical admission that LTCG under the scrip of PMC Fin Corp Ltd is bogus and managed by him for providing accommodation entries to the beneficiaries after charging commission. Ld. CIT DR submits that such statement of Shri Raj Kumar Modi and his associates are the incriminating material and as such the same can be used against the assessee for making additions in the order passed u/s 153A of the Act. Ld.CIT DR also drew our attention to the assessment order wherein AO has very elaborately discussed all the material / evidences found during the course of search and the statement of various persons recorded which indicate that LTCG as declared by the assessee is bogus and therefore, he requested for the confirmation of the orders of lower authorities.
In re-joinder, Ld.AR for the assessee submits that admittedly no incarnating material was found and seized from the possession of the assessee and the sole basis for making addition is the so- called statement of Shri Raj Kumar Modi and his associates and further some material stated to have been found indicating that the LTCG earned by the assessee from the sale of shares of scrip of PMC Fincorp Ltd is bogus. Ld. AR further submits that since the proceedings in the case of the assessee were carried out in terms of notice u/s 153A of the Act and therefore, the additions should be confined to incriminating material found from the possession of assessee and if the Revenue has proceeded to use the material found from the possession of the third party against the assessee, the due procedure was to initiate proceedings u/s 153C of the Act after recording the satisfaction in the case of the persons searched and also by the AO of the assessee and therefore, such material could be used against the assessee. For this, Reliance is placed on the judgement of Hon’ble Apex Court in the case of Calcutta Kneatwears [2014] 43 taxmann.com 446 (SC). He thus, submits that the order passed u/s 153A wherein additions were made on the basis of the material found from the possession of third party is against law and therefore, the said order deserves to be quashed. He prayed accordingly. Ld.AR further placed reliance on the written submissions in this regard which reads as under:-
Statutory Scheme of Section 153A 11 “Section 153A of the Act empowers the Assessing Officer, consequent to a search under section 132, to assess or reassess six assessment years preceding the search year. The provision, however, contains a built-in distinction between (1) assessments which are pending on the date of search, and (ii) assessments which stand completed.
Assessments which are pending on the date of search are deemed to abate. For such abated years, the Assessing Officer is entitled to proceed de novo, even without the discovery of incriminating material. In contrast, for completed assessments, commonly referred to as unabated years, the settled law is that the jurisdiction of the Assessing Officer under section 153A is conditioned upon the seizure of incriminating material belonging to the assessee that has a live nexus with the assessment year in question.
This distinction has been repeatedly emphasized in binding precedents, notably in Commissioner of Income-tax v. Kabul Chawla, (2016) 380 ITR 573 (Delhi High Court), and reaffirmed by the Hon'ble Supreme Court in Principal Commissioner of Income-tax v. Abhisar Buildwell (P.) Ltd., [2023] 149 taxmann.com 399/454 ITR 212 (SC).
The binding legal ratio is categorical in the absence of incriminating material found during search, completed/unabated assessments cannot be disturbed under section 153A. Application to the Present Appeals 17. The search in the present group took place on 11-12th October 2018. The assessment year under appeal in all three cases is A.Y. 2013-14.
On the date of search, the returns of income for A.Y. 2013-14 had already been processed/assessed. Consequently, AY 2013-14 in the case of each of the Appellants is an unabated year. The Assessing Officer, therefore, could have assumed jurisdiction under section 153A only upon demonstrating the discovery and seizure of incriminating material belonging to the Appellants during the search and mapping such material to the relevant assessment year. As established in the factual narration, no such material exists.
19. As set out in the factual matrix, the Panchnamas in the Appellants' own names record no incriminating seizure no books, documents, valuables or electronic devices were taken that could suggest unaccounted income for A.Y. 2013-14. The Assessing Officer's imougned additions thus rest on: Statement of Shri Raj Kumar Modi recorded under section 132(4) on the night of 12/13.10.2018, subsequently retracted by affidavit dated 22.10.2018; Statement of Shri Jagdish Purohit recorded under section 132(4) on 21.01.2015 and later dates, unrelated to the Appellants' search: Statement of Shri Dhirendra Kumar Gupta on 12.10.2018 and Shri Manish Gupta's 133(6) reply dated 29.01.2021; Investigation Wing reports and modus operandi charts, and SEBI adjudication order dated 31.05.2021, which was subsequently quashed by the Securities Appellate Tribunal on 12.09.2023 20. None of these constitutes incriminating material seized from the Appellants in the search. At best, they are third-party statements and post-search findings, and in law, such reliance solely on third-party material/statements in the case of unbated Assessment Years is impermissible. Third-party statements, unless accompanied by seized
corroborative material from the assessee's premises and properly transferred under section 153C, cannot be elevated to incriminating material against the assessee. Investigation reports or quasi-judicial orders passed after the search also cannot fill the void. Settled Law/Precedents in support: 21. For unabated years, Abhisar Buildwell (SC, 2023) and Kabul Chawla (Del HC, 2016) hold that additions are permissible only if incriminating material is found in the assessee's search qua each A. Y. that has been reopened. The coordinate Bench of this Hon'ble Tribunal in Gulshan Investment Pvt. Ltd. & Ors. v. Joint Commissioner of Income-tax, (Α.Υ. 2013-14), ITAT Delhi, Order dated 16.04.2025, dealt with an identical fact situation arising out of the same PMC scrip. The Tribunal, applying Abhisar Buildwell, categorically held that Statements of Shri R.K. Modi and Shri J. Purohit recorded in other searches, even if relied upon by the AO, cannot qualify as incriminating material against a different assessee unless section 153C satisfaction and hand-over procedure is followed (11.4-11.6); Later-year WhatsApp chats and generalised modus operandi findings are irrelevant to the concerned assessment years under appeal (14.8); Since no incriminating material was seized from the assessee's own premises, additions made under section 153A for unabated years are without jurisdiction (14.8) 31. Likewise, in Deputy Commissioner of Income-tax v. Bajrang Lal Bamalwa & Ors., ITAT Gauhati, Order dated 01.09.2023, the Tribunal deleted additions where the A.O. had relied only on Investigation Wing reports and third-party statements, holding that in the absence of seized incriminating material from the assessee's premises, additions in unabated years could not be sustained The Tabulated Charts to the said effect, demonstrating the applicability of these decisions to the facts of the Appellants' both on a factual as well as legal footing are as follows:
Gulshan Investment Pvt. Ltd. & Ors. v. JCIT, ITAT Delhi:
He thus, requested to hold the order passed u/s 153A of the Act as invalid and the consequent additions made be deleted.
18. Heard the contentions of both parties and perused the material available on record. In the instant case, from the perusal of the order of the AO as well as of Ld. CIT(A), it is seen that AO has made the addition solely by relying upon the material found from the possession of the third party i.e. Shri Raj Kumar Modi and no material whatsoever, found and seized from the possession of the assessee was referred in the assessment order. This fact is further fortified from the observations of Ld. CIT(A) in para 4 of the appellate order.
In the instant case, a search and seizure action was carried out by the Department at the business and residential premises of the assessee on 11.10.2018. During the course of search, various panchnamas were prepared according to which certain loose papers were found and seized besides seizure from computer hard discs. From the perusal of the assessment order, we find that not a single document whatsoever found and seized as tabulated in the panchnamas prepared at the business and residential premises of the assessee were referred by the AO for alleging that the capital gain declared by the assessee as bogus accommodation entries. It is further seen that AO has based his findings on the basis of the statement of Shri Raj Kumar Modi who was the person controlling and managing various companies including PMC Fincorp Ltd. and used this company for providing accommodation entries of long term capital gains. It is further seen that AO in his order has referred the order of SEBI passed in the case of assessee PMC Fin Corp Ltd. which was set aside by the Securities Appellate Tribunal, Mumbai vide its order dated 12.09.2023. In the said order, the Hon’ble Tribunal has quashed the order of SEBI by placing reliance on the judgment of the Tribunal in the case of Shiv Darshan in Appeal No.603/2021 dated 28.08.2023. It is relevant to state that this order also contained the cases of family members of the assessee wherein SEBI has held that those companies were involved in price rigging. The copy of the said order of Tribunal is available at Pages 316 to 322 in Paper Book filed by the assessee. Since such order of SEBI was quashed therefore, no cognizance of the same could be taken against the assessee and has no legs to stand.
Now coming to the issue that whether additions could be made without any incriminating material found and seized during the search in the case of assessee in the year which is unabated assessment year. First it is to be seen whether the year under appeal is unabated year or not? The year under appeal is AY 2013- 14 and date of search is 11.10.2018 when no proceedings were pending in the case of the assessee, thus it is an abated assessment year. As observed above, that in the instant case, AO has based his findings solely on the inquiries and investigation carried out in post-search investigation in PMC Group and no material is referred as found and seized from the possession of the assessee. The Hon’ble High Court of Delhi in the case of DCIT, Central-1 vs Oxygen Business Park (P.) Ltd. [2023] 157 taxmann.com 175 (Delhi) has held as under:-
that no assessment was pending on the date of search and no incriminating material was found during the search, fresh material, information received after date of search would not be sufficient to re- open assessment u/s 153A of the Act.
As observed above, AO has made the additions by placing reliance on the material found during the course of search in the case of Shri Raj Kumar Modi and PMC Group of cases and further statement of Shri Raj Kumar Modi recorded u/s 132(4) and other persons during the course post-search investigation. It is settled law that third party statements cannot be considered as incriminating material against an assessee in income tax proceedings unless it is corroborated by material seized from the assessee during a search. In other words third-party documents or third-party statements only qualify as "incriminating material" when it is corroborated by any material seized from the possession of the assessee which in the instant case is absent.
After analyzing various judgements, the incriminating material can be categorized as under : The material found from Assessee's possession carried out (i) as a result of search in his own case u/s 132 of the Act; Such material must contain entries representing (ii) undisclosed income from unrecorded transactions or undisclosed assets; Such material should be related to assessee's own affairs (iii)
In the case of Pr. CIT v. Ankush Saluja reported in [2019] 449 ITR 431 (Delhi), the Hon'ble High Court, by relying the established judicial precedence held that even though Section 153A allows scrutiny of returns spanning six preceding AYs (or up to ten years under "relevant assessment year") reassessments are strictly limited to those years for which "incriminating material" has been found and is linked to the non-searched entity's total income. The invoked incriminating material must have a direct, logical connection to the AY being reassessed. Merely possessing incriminating material does not permit opening other years; and each assessment year must be individually justified by relevant evidence.
The Hon’ble Supreme Court in the case of Calcutta Kneatwears (supra) has prescribed the procedure according to which if the documents found during the possession of third persons are required to be used against the assessee, necessary satisfaction should be recorded on the basis of such incriminating material by the AO of the person searched and after handing over such satisfaction note alongwith copy of incriminating material, AO of the assessee should record his satisfaction and then, only the proceedings u/s 153C of the Act could be initiated in the case of such third person. In the instant case, when no incriminating paper found from the possession of the assessee and all the material relied upon by the AO was found/seized from the possession of third party, AO must followed the procedure as provided by the hon’ble Supreme court in the case of Calcutta Knitwears (supra) after initiating the proceedings u/s 153C of the Act. More particularly, when there was no direct link with tangible or intangible material discovered from the possession of the assessee nor any statements of the assessee were referred or link is proved therefore, no addition could be made without having any direct nexus as has been held by the hon’ble Delhi High Court in the case of DCIT vs Best Infrastructure Pvt.Ltd. [2017] 84 taxmann.com 287 (Del) .
Identical issue has been came up before our consideration in the case of Gulshan Investment Pvt. Ltd. vs JCIT in & Others wherein vide order dated 16.04.2025, it is held that the additions could not be made dehorse the incriminating material found and seized from the possession of the Page | 19 assessee. The relevant observations as made are reproduced as under:-
“14.1. In the instant case, as could be seen from the conclusions drawn by the AO as summarized by ld. CIT(A), it is an admitted position that no loose paper or document or any money bullion, jewellery valuable article or thing was found and seized from the possession of the assessee based on which additions could be made in the order passed u/s 153A of the Act in the hands of assessee company. The entire additions made can be bifurcated in three categories which are: A. Addition of Rs. 8.75 Crores and Rs. 35.00 lacs as commission and disallowance of interest paid at Rs.10.01,590/- based on the statement of Sh. Raj Kumar Modi recorded during the course of search in the case of PMC group wherein Shri Raj Kumar Modi admitted to have been engaged in providing accommodation entry in the shape of LTCG/STCG/ unsecured loans. B. Addition of Rs. 2.65 crores and of Rs. 10.60 lacs as 4% commission were also made towards unsecured loan taken from one company namely M/s Unisys Software & Holdings Industries Ltd. which was alleged as controlled and managed by Sh. Jagdish Purohit, whose statement were also recorded u/s 132(4) during the course of search carried out in his case independently in the year 2015 and made sole basis for making addition in the hands of the assessee company. C. Further an addition of Rs.75.00 lacs was also made for unsecured loan received from M/s Sukuma Infosolutions Pvt. Ltd. by holding that the loner has no creditworthiness without referring to any incriminating material found as a result of search in the case of the assessee. 14.2. Under the category “C” above, an addition of Rs.75.00 lacs was made by holding the unsecured loan received from M/s Sukuma Infosolutions Pvt. Ltd. as unexplained however, from the perusal of the assessment order or the appellate order, it is seen that in nowhere the lower authorities had referred any incriminating material found as a result of search in the case of assessee indicating this loan as bogus. The order passed u/s 153A of the Act is for Ay 2013-14 which is unabated and completed year. The Hon’ble Supreme Court in the case of Abhisar Buildwell (supra) has held that the addition u/s 153A should be made based on the incriminating material found from the person searched during the course of search. As such, their Lordships has held as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect assessments/unabated of assessments. Meaning thereby, in respect of completed completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re- opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. 14.3. Since in the present case no incriminating material was found from the possession of the assessee company and its directors with regard to the unsecured loan of Rs. 75.00 lacs from M/s M/s Sukuma Infosolutions Pvt. Ltd., therefore, by respectfully following the ratio laid down by Hon’ble Apex Court in the case of Abhisar Buildwell (supra) we hold that no addition could be made in the order passed u/s 153A of the Act. Accordingly, the addition of Rs.75.00 lacs is hereby deleted. 14.4. Under category “A” & “B” above, the additions were made on the basis of the statements of Shri Raj Kumar Modi and Shri Jagdish Purohit, recorded u/s 132(4) during the course of search carried out in their own cases by the department. It is also relevant to state that such statements were retracted by both Sh. Raj Kumar Modi and Shri Jagdish Purohit within a short period of time during the post search investigation proceedings. 14.5. It is also seen that both Shri Raj Kumar Modi and Shri Jagdish Purohit are not at all related to the assessee company in any manner and therefore, they are foreign parties with respect to the assesse company. The Ld. CIT(A) confirming the action of the AO in using such statements in the hands of the assessee company for making addition in the order passed u/s 153A.
The ld. CIT(A) relied upon the judgments of Hon’ble Allahabad High Court in the case of Tapasya Projects Ltd. Vs. ACIT [2009] Tax LR 30, wherein the Hon’ble Court has held as under "The word person as used in Section 153A cannot be given a restricted interpretation so as to exclude the servants and agents of that person because of the obvious undesirable result to which such strict interpretation would lead. Thus, the search conducted on the premises of the directors has to be treated to be a search initiated in respect of the petitioner company.” 14.6. From the perusal of the observations of the Hon’ble High Court, we find that the Hon’ble High Court has held that the company could be considered as searched in case where the search was carried out on its servant and agents such as Director of the company. In the instant case, as observed above, the statements of two independent and non-related parties i.e. of Sh. Raj Kumar Modi and Sh. Jagdish Purohit were used by the AO for making additions in the order passed u/s 153A in the hands of the assessee company. These two persons are neither the servants of the assessee company as they were not the employees nor the Director nor related to the assessee company in any manner, therefore, the ratio laid down by Hon’ble Allahabad High Court in the case of Tapasya Projects (supra) is not applicable to the instant case. 14.7. The Hon,ble Punjab & Haryana High Court in the case of PCIT vs. M3M India Holdings in has held as under: “14. Further contention of the appellant with regard to as assertion section of incriminating material being found in the premises of the respondent, however, is without any basis. We have carefully gone through the Satisfaction Report and found that only incriminating material which has been made the basis for initiating proceedings under Section 153 A of the Act is the so called laptop of one Bina Shah recovered from Mumbai. We also noticed that recovery of the said Laptop is not from the office belonging to the assessee. The search operation in which the laptop was recovered was of different firm and it was not during the course of search operation conducted against the respondent-firm respondent firm or its partners that incriminating DB material was recovered. If there was any indication of violation of provisions of the Act or suppression of income or any other incriminating material, which may have been recovered from the premises, the proceedings under Section 153-A can be said to be justified and legal. However, since no such material was collected or found from the premises of the respondent-assessee, assessee, we are unable to sustain the proceedings initiated under Section 153-A of the Act.”
Hon’ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. (supra) has held that additions in the order passed u/s 153A could be made only on the basis of the incriminating material found from the possession of the person searched, the relevant observations of the Hon’ble Supreme Court are as under:-
"14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re- opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs."
In view of the above discussion, in our considered opinion since no proceedings were pending as on the date of search for the year and appeal and no incriminating material whatsoever was found from the possession of the assessee therefore, no addition could be made in the order passed u/s 153A on the basis of material found from the possession of third party. Under these circumstances, we hold that the orders passed u/s 153A by making additions by placing reliance on the material found from third party is against the law as has been held by the hon’ble Supreme court in the case of Abhisar Buildwell (supra) and other cases of various High Courts as referred herein above, the consequent order passed is hereby, quashed. Accordingly, Ground of appeal Nos. 1 & 2 raised by the assessee are allowed.
Since we have already allowed legal Grounds of appeal Nos. 1 & 2 raised by the assessee, other Grounds of appeal taken by the assessee on merits of the additions became academic.
In the result, appeal of the assessee is allowed.
& 4043/Del/2025 [Assessment Year : 2013-14]
In both captioned appeals, during the course of hearing, both the parties have agreed that facts involved are common and common submissions were made before us. In the case of Ritu Jain in [AY 2013-14], we have already hold that no addition could be made dehorse the incriminating material found from the possession of the assessee in the order passed u/s 153A of the Act which observations are Mutatis Mutandis applied to the facts of both cases under consideration. Accordingly, by respectfully following the observations and decision taken in the case of Ritu Jain in [AY 2013-14], we hereby quashed the orders passed in respect of both the assessee in their respective appeals. Accordingly, legal grounds of appeal taken in both appeals are allowed.
In the result, both appeals of the assessee are allowed.
In the final result, all three captioned appeals in in the case of Ritu Jain; in the case of Anoop Jain HUF, all for AY 2013-14, filed by the assessee are allowed.
Order pronounced in the open Court on 29.10.2025.