No Income Tax Addition Permissible in Unabated Assessment Without Incriminating Material Found During Search u/s 132: ITAT [Read Order]

The Pune Bench of the Income Tax Appellate Tribunal ( ITAT ) has ruled that no addition can be made under Section 153A in an unabated assessment where no incriminating material has been found during a search under Section 132 of the Income Tax Act, 1961.

The assessee’s premises were searched on 6th November 2019, after the expiry of the time limit to issue notice under Section 143(2) for AY 2018-19. The original return had already been filed on 30th October 2018, and the assessment was thus considered “unabated.”

The Assessing Officer had estimated and added a commission income of ₹11.36 lakh, based on alleged accommodation entries linked to BVG India Ltd., relying largely on the statement of a third party, Shri Madhuchandra Kalaskar, AGM (Finance) of BVG India Ltd.

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The AO presumed that the assessee, by routing funds through banking channels and returning cash, was engaged in providing accommodation entries and had earned a commission of 1% on the said transactions. This estimate was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], despite the assessee’s contention that no incriminating evidence was found during the search and that the entire addition was based on uncorroborated third-party statements.

Before the Tribunal, the assessee had contended that the addition was not sustainable in law, relying on the Supreme Court's  ruling in PCIT v. Abhisar Buildwell Pvt. Ltd. (2023). The apex court held that in respect of completed assessment / unabated assessment, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search under section 132 of the Act or requisition under section 132A of the Act.

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The Tribunal concurred with the view of the assessee, found that the addition, based solely on an estimated commission from a third-party report without any corroborating material found during the search, was not legally sustainable.

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The bench of Astha Chandra ( Judicial Member) and R K Panda ( Accountant member) observed that “Since the addition in the instant case has been made in absence of any incriminating material found during the course of search and since the assessment is an unabated assessment and the addition is based mainly on the basis of third party statement without any supporting evidence and that too on estimate basis, therefore, respectfully following the decisions cited (supra), we hold that the addition made by the Assessing Officer by estimating the commission income in 153A assessment is not in accordance with law. We, therefore, set aside the order of the Ld. CIT(A) and direct the Assessing Officer to delete the addition.”

Accordingly, the ITAT allowed the appeal and directed the deletion of the addition, stating that estimated additions based on statements alone, without corroborating evidence, cannot be sustained in cases of unabated assessments.

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To Read the full text of the Order CLICK HERE

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