Section 132(1) of the Income Tax Act
Income-tax Act, 2025: ss.247, 249, 251
Section 132(1) falls under section 132 of the Income-tax Act, 1961, which corresponds to section 247 (Search and seizure), section 249 (Reasons not to be disclosed) and section 251 (Copying, extraction, retention and release of books of account and documents seized or requisitioned) of the Income-tax Act, 2025.
Read section 247 of the 2025 ActRead section 249 of the 2025 ActRead section 251 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 132(1) is ACB India Ltd. v. ACIT (374 ITR 108), cited in 364 of the 846 judgments on BharatTax that turn on this section.
Leading authorities on Section 132(1)
When computing disallowance under Section 14A of the Income-tax Act using Rule 8D of the Income-tax Rules, only investments that have actually yielded exempt income during the relevant previous year are to be considered for the calculation.
If the Assessing Officer has not conducted any investigation and thus has not discharged their burden of proof, any addition made by the AO is unsustainable and must be deleted.
Proceedings become fatal if principles of natural justice are violated, such as when seized material is not provided to the assessee or cross-examination of a person whose statement the Assessing Officer relies upon is denied.
Section 153C of the Income-tax Act is invoked only when it is established that seized documents do not belong to the searched person, or if the searched person disclaims them; the satisfaction note must specifically indicate this fact.
An assessee cannot be asked to explain the source of the source for cash credits, particularly share capital or share application money, once they have discharged the initial onus regarding the identity, genuineness of the transaction, and creditworthiness of the immediate investor.
If an assessee possesses sufficient interest-free own funds to cover investments yielding exempt income, it is presumed that such investments are made from these own funds, precluding any disallowance of interest expenditure under Section 14A, even when borrowed funds are also available.
An assessment under section 153A of the Income-tax Act is not solely restricted to the evidence found during the search; the Assessing Officer can also consider other post-search material or information available that relates to the search evidence.
The scope of assessment under Section 153A is not limited solely to seized material but includes any other information provided by the assessee in the return of income filed in response to a Section 153A notice. It also applies principles for estimating undisclosed income, such as from on-money receipts, even if there is material for only some transactions.
A penalty levied under Section 271(1)(c) is not sustainable if the notice issued under Section 274 fails to specifically mention whether the charge relates to concealment of income or furnishing inaccurate particulars of income. The Assessing Officer must specify the exact charge for the penalty to be valid.
