Income Tax Additions Not Valid Without Incriminating Material Found During Search: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) held that income tax additions are not valid without incriminating material found during a search.

Akshaya Vinimay Pvt. Ltd.,appellant-assessee, filed its return on 27/09/2018 declaring income of Rs. 35,84,000/-, which was processed on 11/04/2019. A search was conducted on 06/01/2021 at the Hans Group premises, leading to assessment proceedings.

On 31/03/2022, the Assessing Officer (AO ) passed an order under section 153A read with section 143(3), making additions of Rs. 42,10,50,000 based on post-search findings. The appeal filed before the Commissioner of Income Tax (Appeals)[CIT(A)] was dismissed on 27/01/2025, prompting the present appeal.

The assessee counsel argued that the additions made by the AO were based on post-search investigation and not on any incriminating material found during the search. Referring to the Supreme Court ruling in PCIT v. Abhisar Buildwell (2023), it was submitted that such additions could not be sustained and deletion was sought.

On the other hand, the departmental counsel supported the findings of the lower authorities and requested dismissal of the appeal.

The two member bench comprising Yogesh Kumar U.S (Judicial Member) and S.Rifaur Rahman (Accountant Member) heard both sides and reviewed the record. On the date of search, 06/01/2021, no assessment proceedings were pending for the year.

The addition made by the AO was not based on any seized material but only on an analysis of the balance sheet and bank statements during post-search investigation. Even in the assessment order, the officer admitted that the addition related to post-search findings and not to any material seized.

The appellate tribunal relied on the Supreme Court’s ruling in Abhisar Buildwell Pvt. Ltd., which held that no addition could be made in completed or unabated assessments without incriminating material found during search, though such cases could be reopened under Sections 147/148 subject to conditions.

Since no incriminating documents were found in the present case, the tribunal held that the addition was invalid. It quashed both the assessment order and the order of the CIT(A). As the assessment itself was set aside, the other issues raised in appeal were not adjudicated.

Accordingly the appeal was partly allowed.

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