The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) held that additions under Section 153A of the Income Tax Act, 1961 cannot be made in respect of completed assessments unless incriminating material is found during a search, and accordingly deleted the addition made to Saurabh Agrotech Pvt. Ltd.’s income on account of Dharmada (charity collections).
Saurabh Agrotech Pvt. Ltd., the assessee, engaged in the business of oil manufacturing and trading, filed its return for Assessment Years 2010-11 and 2012-13, declaring income that was assessed under scrutiny proceedings. A search was later conducted on the Data Group, of which the assessee was a part, on 14.10.2015. Following the search, assessments were reopened under Section 153A and additions were made, including Rs. 6.52 lakh in AY 2010–11, treating Dharmada collections as part of the assessee’s taxable income.
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The Assessing Officer concluded that the Dharmada amounts collected on sales invoices were not spent on charitable purposes, remained under the assessee’s control, and earned interest income. The AO further noted that the assessee was neither a registered trust nor a society eligible for exemption, and treated the charity collection as part of business receipts. These findings were upheld by the CIT(A), who also relied on the Supreme Court’s decision in Amritsar Transport Co. Pvt. Ltd. to support the addition.
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On appeal before the ITAT, the assessee’s counsel argued that the original assessments for both years were already completed before the search, and the additions made under Section 153A were not based on any incriminating material found during the search. They relied on the Supreme Court’s ruling in PCIT v. Abhisar Buildwell Pvt. Ltd. (2023) 293 Taxman 141 (SC), which held that no additions can be made in respect of completed assessments under Section 153A unless supported by incriminating material found during the search.
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The assessee’s counsel further argued that the statement recorded from a group entity director, Mr. Vijay Data, during the search did not mention the assessee company, nor was there any seized document on it. The Dharmada receipts were reflected in the regular books of account and invoices, and therefore were not hidden or undisclosed.
The two-member bench comprising Dr. S. Seethalakshmi (Judicial Member) and Shri Rathod Kamlesh Jayantbhai (Accountant Member) observed that there was no material seized during the search that could be treated as incriminating against the assessee. It held that the addition made solely based on general statements related to other group companies, without any evidence against the assessee, was not sustainable under law.
The tribunal held that the legal position laid down by the Supreme Court in Abhisar Buildwell Pvt. Ltd. was squarely applicable and binding. Since the assessments were completed and there was no incriminating material found during the search in the case of the assessee, the additions made under Section 153A were unsustainable.
The tribunal allowed both appeals, deleted the additions on account of Dharmada, and ruled that no further adjudication on merits was necessary.
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