Landmark Cases on Search and Seizure Assessments

Proceedings under section 153A of the Income Tax Act, 1961, which deal with search and seizure assessments, are a complete code in themselves and cannot be invoked for the benefit of the Revenue alone.

Fresh material or information received after a search and seizure, without any assessment pending or incriminating material found during the search, is insufficient to reopen assessment under Section 153A.

Notices issued under section 153C are liable to be quashed if the search was conducted at third-party premises and the seized materials were handed over to the assessee's Assessing Officer after April 1, 2021, as the date of initiation of the search would be the date of handing over the materials.

Search actions, being intrusive enforcement measures, must strictly comply with all relevant legal provisions. Such actions cannot be validated casually or loosely.

Assessments under Section 153A or 153C require the existence of incriminating material found as a result of a search.

An addition on account of unexplained investment in property, solely based on a DVO's report, is not justified when no incriminating material was found during a search.

Unexplained jewellery found during a search can be added to income, even if the assessee claims it was received back against purchase bills, especially when part of the unaccounted cash is deposited in the bank.

The limitation period for completing a search and seizure assessment must be calculated from the date of the final panchanama, which signifies the conclusion of the search proceedings. Multiple visits or temporary suspensions during search operations do not extend this period.

A copy of the search warrant authorization does not need to be provided to the assessee before proceedings under section 153A can commence. The law only requires the warrant to be produced before the search begins.

Additions under section 153C cannot include items from a regular assessment; only undisclosed income found during a search can be added. Estimating gross profit ratios without incriminating material is not permissible.

Assessment proceedings initiated under Section 153A(1)(a) can result in additions against the assessee, even without incriminating material found during a search under Section 132, provided the notice under Section 153A(1)(a) was validly issued.

When computing undisclosed income, the Assessing Officer must consider the correct income shown in books of account and seized materials, not just an assessee's admission.

Additions made to income for completed assessments where no incriminating material was found during a search under section 132 are without jurisdiction.

This case stands for the proposition that evidence gathered during a search under section 132, particularly statements recorded under section 132(4), can be used in subsequent assessment proceedings.

No addition can be made under Section 153A of the Income-tax Act if the assessment had attained finality prior to the search and no incriminating documents or materials were found during the search.

The validity of search proceedings under section 132 cannot be examined in an appeal before the Income Tax Appellate Tribunal against a block assessment. The remedy for challenging the search lies under Article 226 of the Constitution.

Assessments finalized under Section 153A based on search and seizure operations under Section 132 must consider seized documents and statements collected during the search for determining undisclosed income.

The notice issued under section 153A of the Income-tax Act, 1961, is invalid if no search warrant was issued in the name of the assessee. A notice under section 153C can only be assumed by the AO if incriminating material relevant to the assessee was found during a search and seizure operation in another case and there was no search warrant in the assessee's name.

A restraint order under Section 132(3) of the Income Tax Act, 1961 can only be issued if the authorised officer reasonably believes that the property represents undisclosed income, and seizure is impracticable due to the nature, location, or peculiar circumstances of the property. It cannot be used to avoid seizure until statements under Section 132(4) are verified.

An assessment under section 153A can only be made based on incriminating material found during a search, and no other issues can be considered.

An order under section 132(3) of the Income Tax Act can only be passed if the authorized officer believes a specific asset found during a search represents undisclosed income. It cannot be used to ascertain if transactions in accounts represent undisclosed income, nor is an order under section 132(8A) automatic.

A statement recorded under section 132(4) can be relied upon not only in the assessment proceedings for which it was recorded but also in other pending proceedings, provided the statement is not retracted.

Additions under section 153A cannot be made in respect of issues that do not arise from incriminating documents found during a search.

The reasons to believe or suspect for a search or seizure under section 132 or section 132A shall not be disclosed to any person, authority, or appellate tribunal, due to the insertion of Explanation 1 to section 132(1A) by the Finance Act, 2017, with retrospective effect.

A statement recorded under section 132(4) during search proceedings cannot be considered a voluntary admission of undisclosed income for the purpose of assessment under section 153A if it was made under duress, recorded at odd hours, or subsequently retracted. Such statements require corroborating evidence to be reliable.

Undisclosed income unearthed during search and seizure operations can only be calculated to the extent of the seized material.

An assessee is not obligated to disclose in their income tax return monies received that are not taxable income, such as gifts from relatives or agricultural income. Non-disclosure of such amounts does not attract provisions related to search and seizure.

The assessee engaged in infrastructure development made a surrender of ₹34.50 crores mainly due to inflated wages, later revised to ₹9.50 crores for wages and ₹25 crores for unbilled revenue.

When a prohibitory order under section 132(3) is lifted after 60 days, it contravenes section 132(8A).

Jurisdiction under section 153C of the Income Tax Act cannot be assumed unless material seized during a search suggests undisclosed and incriminating income.

Proceedings under Section 153C of the Income Tax Act, prior to its amendment on June 1, 2015, could only be initiated against an assessee if seized documents during a search belonged to that assessee, not merely if a statement implicated them.

A statement recorded under section 132(4) by a third party, without any corroborating incriminating material, cannot be the sole basis for making additions under section 153A or 153C.

Evidence found during a search and seizure operation under section 132(4) can be used to make additions under sections 68, 69, and 69A, even if the assessee's statement is retracted.

Where no incriminating material is discovered during survey proceedings pertaining to the assessee, additions cannot be made under section 153C.

A statement on oath under section 132(4) of the Income-tax Act, 1961, can itself define the 'specified manner' for paying tax on surrendered income, especially when the assessee files returns accounting for these assets.

The Assessing Officer must consider the status, customs, and traditions of a family when appreciating the source of jewellery found during a search.

Additions made under Section 153A are invalid if no incriminating material was found during the search. The assessee can challenge such additions on this ground before the CIT(A).

Assessments under section 153A can only be based on material found during the search of the assessee; material seized from third parties during simultaneous searches cannot be used against the searched person. A restraint order under section 132(3) does not impact the calculation of the limitation period.

In block assessments, the Assessing Officer is justified in making best judgment assessments based on available evidence, especially when the assessment pertains to the entire block period. This includes situations involving under-invoicing of sale bills.

The conclusion of a search under Section 132 of the Income-tax Act, 1961, depends on the proper recording of actions taken in the presence of the assessee, as outlined in the panchnama.

Additions can be made in search assessments even without incriminating material. This principle allows for assessments based on information gathered during searches, even if it doesn't directly reveal undisclosed income or assets.

Seized materials belonging to a third party and having a bearing on the determination of the total income of that third party are required to be transmitted by the Assessing Officer who conducted the search to the Assessing Officer having jurisdiction over the third party, for the purpose of invoking Section 153C.

A prohibitory order under Section 132(3) of the Income-tax Act, 1961, is not sustainable if issued without forming a belief or having material to conclude that the amounts in bank accounts represent undisclosed income.

Prohibitory orders issued under Section 132(3) are invalid if mandatory legal conditions are not complied with, and such invalid orders cannot extend the period of limitation for assessment. The power under Section 132(3) cannot be exercised to circumvent Section 132(1) read with Section 132(5).

Section 153A assessment proceedings can only be initiated if a valid search under section 132 has been conducted against the assessee. If no valid search is conducted, the initiation of assessment proceedings under section 153A is invalid, bad in law, and without jurisdiction.

Seized cash can be adjusted against advance tax liability, as the judgment in Ramjilal Jagannath does not prohibit this. The relevance of the judgment is linked to the period when Section 132(5) was in effect.

The Income Tax Appellate Tribunal (ITAT) has the power to examine all aspects of a search and seizure, and a valid search is essential for initiating block assessment proceedings. Materials seized from an invalid search cannot be used in block assessments but may be used in other assessment proceedings.