Section 132A of the Income Tax Act
Income-tax Act, 2025: ss.248, 251
Section 132A of the Income-tax Act, 1961 corresponds to section 248 (Powers to requisition) 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 248 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 132A is CIT v. Kabul Chawla (380 ITR 573), cited in 3,235 of the 569 judgments on BharatTax that turn on this section.
Leading authorities on Section 132A
In a search assessment under Section 153A, additions can only be made for completed or non-abated assessment years if incriminating material relevant to those years is found during the search, although notice under Section 153A(1) is mandatorily issued for six assessment years preceding the search.
Assessments under Section 153A cannot be sustained without any incriminating material found during the search that substantiates the additions. This principle applies even to completed assessments where no additional income is disclosed.
If no incriminating material is found during a search operation regarding a particular issue, then no addition can be made concerning that issue in an assessment under section 153A of the Income-tax Act.
A statement made by an assessee under Section 131 during search proceedings, without any corroborating incriminating material found during the search, cannot solely constitute incriminating evidence for making additions in assessments under Section 153A or 153C.
The Supreme Court holds that circulars issued by the Central Board of Direct Taxes (CBDT) are binding on all officers and persons employed in the execution of the Income-tax Act. These circulars are binding even if they deviate from the provisions of the Act, particularly when issued to relieve hardships.
Recording satisfaction under Section 153C for initiating proceedings against a third person is not a mechanical exercise; it requires a finding that seized material has a direct bearing on the third person's income, and improper satisfaction vitiates the assessment. Abatement under the second proviso to Section 153A is an inevitable consequence of a search, irrespective of the Assessing Officer's opinion on the material's impact.
When an assessee has sufficient interest-free own funds available to make interest-free advances or investments, it is presumed that such advances or investments are made from these interest-free funds, thereby preventing the disallowance of interest expenditure under Section 36(1)(iii).
