No Addition Permissible in Unabated AY Without Incriminating Material Found During Search: ITAT Deletes Rs. 7.25 Crore Addition [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) deleted ₹7.25 crore addition under Section 68, holding that no addition can be made in an unabated assessment year without incriminating material found during search. Thus, the Tribunal found that seized Tally data reflected regular business activity and was not incriminating.

The Revenue’s appeal and Assessee's cross-objection was filed against an order dated 16.05.2025 passed by the CIT(Appeals), Mumbai for assessment year 2013-14.

The Assessee, Yardley Investment and Trading Company Pvt. Ltd., an investment and trading company, filed its return for AY 2013-14 on 30.08.2013 declaring income of Rs. 6,19,520/-, which was not selected for scrutiny. A search under Section 132 was conducted on 17.04.2018 at Jatia Group and other related entities including the assessee's premises. Following the search, notice under Section 153A was issued on 23.10.2019, and the assessee filed its return declaring the same income of Rs. 6,19,520/-.

The AO made an addition of Rs. 7,25,00,000/- under Section 68 by treating the unsecured loan received from Uttam Value Steels Ltd. as bogus accommodation entry. The AO alleged that the searched entities, including the assessee, were involved in back-to-back purchase and sale transactions without actual movement of goods with Topworth, Uttam Galva and Lloyds Group entities.

The Assessee's business consisted solely of investment and trading in shares and securities, earning revenue of Rs. 3,63,495/- from sale of shares and dividends, and interest income of Rs. 6,54,925/-. The CIT(A) upheld the addition, holding that seized Tally data constituted incriminating material as it allegedly reflected bogus transactions.

The Revenue appealed against the deletion of the addition, while the assessee filed cross-objection challenging the validity of the search warrant and jurisdiction under Section 153A in absence of incriminating material.

Section 153A of the Income Tax Act, 1961, explained that: Assessment in case of search or requisition.

“Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [but on or before the 31st day of March, 2021], the Assessing Officer shall—

(a)issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;

(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years :”

The Assessee was represented by Counsel Snehal Shah and Revenue was represented by Departmental Representative, Arun Kanti Datta.

The Tribunal consisted of Judicial Member, Sandeep Singh Karhail and Accountant Member, Prabhash Shankar, heard and reviewed the matter.

The Tribunal, after considering the material on record, held that AY 2013-14 was an unabated assessment year as the original return was not selected for scrutiny and no assessment proceedings were pending on the search date (17.04.2018). Relying on the Supreme Court's decision in Abhisar Buildwell Pvt. Ltd., additions in unabated years under Section 153A required incriminating material found during search.

Further, the Tribunal observed that the assessee was engaged exclusively in investment and trading of shares and securities, earning revenue of Rs. 3,63,495/- from share sales and dividends, and interest income of Rs. 6,54,925/-. The seized Tally data merely reflected the assessee's regular business of share trading and did not constitute parallel books showing involvement in other unrecorded transactions. Since relief was granted to the assessee on the jurisdictional issue, the other grounds in the cross-objection were rendered academic and left open.

Accordingly, the Tribunal allowed the assessee's cross-objection and dismissed revenue’s appeal. The Order was pronounced in the open Court on 02/01/2026.

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