2025 (7) TMI 1309 - AT - Income Tax

Assessment u/s 153C - Addition u/s 69 - unexplained investment in purchase of Batchmix plant - Whether assessment abated on the date of search or issuance of notice? HELD THAT - It is a settled law that in case of a non-abated assessment under section 153C of the Act the scope of addition is confined only to the material incriminating in nature found during the course of search. The Hon ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. 2023 (4) TMI 1056 - SUPREME COURT has held that in respect of completed assessments no addition can be made unless it is based on incriminating material found during search. In the present case we find that the original return of income was filed on 27.10.2018 and the notice under section 153C of the Act was issued on 25.02.2022. Hence the assessment for A.Y. 2018 19 was not abated on the date of search or issuance of notice. We also note that the addition of Rs. 17 lakhs made by the Ld. AO is not based on the seized material referred to in the satisfaction note. Therefore the addition made by the AO without reference to any incriminating material cannot be sustained. Accordingly we hold that the impugned addition made u/s 69 of the Act is without jurisdiction - Assessee appeal allowed.

Summary

ISSUES:

Whether an addition under section 69 of the Income Tax Act for unexplained investment can be sustained when no seized material relates to such investment.Whether the notice issued under section 153C of the Income Tax Act is valid when the addition made is not based on incriminating material found during search.Whether additions can be made under section 153C in a non-abated (completed) assessment year without reference to seized incriminating material.

RULINGS / HOLDINGS:

The addition of Rs. 17 lakhs under section 69 towards unexplained investment in batchmix plant is not sustainable as it is not based on any seized material or satisfaction note and is therefore "without jurisdiction".The notice issued under section 153C is valid only to the extent that additions are based on incriminating material found during search; additions not supported by such material cannot be upheld.In a non-abated assessment, no addition can be made under section 153C unless it is "based on incriminating material seized during search," following the binding precedent of the Supreme Court.

RATIONALE:

The Court applied the statutory provisions of sections 69 and 153C of the Income Tax Act, 1961.The Court relied on the Supreme Court's decision in PCIT v. Abhisar Buildwell Pvt. Ltd., which held that for completed assessments, additions under section 153C must be based on incriminating material seized during search.The Court emphasized that the satisfaction note and seized documents pertained only to Rs. 10 lakhs receivable, whereas the addition was made for Rs. 17 lakhs unexplained investment with no nexus to the seized material.No dissent or doctrinal shift was noted; the Court strictly adhered to established precedent limiting the scope of section 153C additions in non-abated assessments.