Additions in Search Assessments (Section 153A) are Legally Unsustainable Without "Incriminating Material" Specifically Seized from the Assessee

Additions in Search Assessments (Section 153A) are Legally Unsustainable Without “Incriminating Material” Specifically Seized from the Assessee

The Legal Issue

Whether the Income Tax Department can make additions to an assessee’s income under Section 153A based on documents found during a search on third parties, especially when no “incriminating material” was found during the search of the assessee’s own premises.

Facts of the Case

The Search: A search was conducted on certain third parties. During this search, documents were found that allegedly suggested a cash component in property transactions involving the assessee.
Assessee’s Search: A warrant of authorization was also issued for the assessee. However, the Panchnama (the official record of the search) showed that only jewellery was found at the assessee’s premises—no documents related to the property transaction were seized.
The Assessment: The Assessing Officer (AO) initiated proceedings under Section 153A and made additions for “unaccounted cash receipts” based on the third-party documents. The AO vaguely claimed incriminating material was found from the assessee but failed to identify the specific documents or the exact premises searched.

The Decision

Jurisdictional Prerequisite: For an assessment under Section 153A to be valid for “completed” (unabated) assessment years, the presence of incriminating material found during the search of the assessee’s own premises is a sine qua non (an essential condition).
Third-Party Material: If incriminating material is found with a third party, the proper legal route is Section 153C, not Section 153A. Under Section 153A, the AO cannot rely on “borrowed” evidence from another person’s search if the assessee’s own search yielded nothing.
Failure of Proof: Since the Panchnama did not record the seizure of any property-related documents from the assessee, and the AO could not specify the material in the order, the addition was deemed to be based on mere suspicion and not on search-seized evidence.
Conclusion: In the absence of incriminating material found from the assessee, the jurisdiction under Section 153A fails. The additions were deleted. [In favour of assessee]

Key Takeaways & Landmark Precedent

The “Abhisar Buildwell” Rule: This ruling aligns with the landmark Supreme Court judgment in PCIT v. Abhisar Buildwell Pvt. Ltd. (2023), which settled that if no incriminating material is found during a search, the AO cannot disturb completed assessments under Section 153A.
Check the Panchnama: The Panchnama is the most vital document in a search case. If a document isn’t listed there, the Revenue cannot legally claim it was “seized” from you later to justify a Section 153A addition.
Section 153A vs. 153C: * 153A: For material found in your search.
- 153C: For material found in someone else’s search that “belongs to/pertains to” you. The AO must follow a specific “Satisfaction Note” procedure for 153C; failing to do so and using 153A instead makes the assessment void.

IN THE ITAT DELHI BENCH ‘A’

ACIT

Neena Jain^*

ANUBHAV SHARMA, Judicial Member
and Manish Agarwal, Accountant Member

IT Appeal No. 4450 (Delhi) of 2025
CO. No.163 (Delhi) of 2025
[Assessment years 2017-18]

FEBRUARY 20, 2026

Pawan Ved, Adv., Mohit Gupta, FCA and Mirza Muhiuddin Baig, CA for the Appellant. Jitender Singh, CIT DR for the Respondent.

ORDER

Anubhav Sharma, Judicial Member.- This appeal and Cross Objection preferred by the Revenue and the Assessee against the order dated 24.03.2025 of the Ld. CIT(A)-29, New Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in Appeal No : CIT(A), Delhi-29 10580/2016-17 arising out of the assessment order dated 23.04.2021 u/s 153A r.w.s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the DCIT, CC-25 for AY: 2017-18.

2. At the time of hearing ld. Counsel has pointed out that in the Cross Objection assessee has taken a ground that assessment order passed u/s 153A while the impugned assessment order is based on material seized during the course of search action initiated in case of some third party and not in case of assessee, therefore, the assessment order initiated. Ld. DR has however, relied the impugned order of assessment and has submitted that this ground has not been raised at proper stage before ld. tax authorities below. At the same time ld. Counsel has submitted that the approval granted u/s 153D is mechanical for which also ground in cross objection has been raised which too has been defended by ld. DR by submitting that the approval is a administrative act and otherwise during assessment the Assessing Officer apprised the senior officers of all the questionnaire raised and incriminating material.

3. As with regard to the first ground we find that CIT(A) has dealt with the same in para 6.1 & 6.2 and has given a conclusive findings in para 6.5. Now, before us the ld. DR could not pointed out as to what incriminating material was actually relied by the Assessing Officer which pertain to assessee and which was found during the search on the premises of assessee. In para 3 Assessing Officer mentions that during the course of search operation whereas incriminating material was found and seized from the premises of the assessee and in para 3.1 observes that during the post search proceeding various seized annexures were examined wherein various properties have been found to be in the name of either Sanjay Jain or his family members and various agreement to sale were found involving cash transactions. Assessee was taxed with regard to alleged unaccounted cash received on sale of property. Throughout the assessment order there is no detail as to which premises of the assessee was searched on 06.02.2019. No evidence is on record from the department to show that there was no search warrant in the name of assessee which was executed on 06.02.2019 in which any incriminating evidence was seized which have been relied by the Assessing Officer to impute receipt of cash component on the sale of property. At the same time, ld. CIT(A) has reproduced the Warrant of Authorization and Punchnama which show that search action was effected on third party namely Avtar Singh Kochar, Gagandeep Singh Kochar, Hari Singh Kochar & M/s H.L. Forex Pvt. Ltd. The punchnama prepared in the name of assessee does not reflect any incriminating material qua the alleged property transaction but mentions of jewellery items only. Thus, finding recorded by the Ld. CIT(A) require no interference.

4. On the aforesaid facts and circumstances when we examined the issue of approval we find that the competent authority granted approval on 22.04.2021 on the basis of a letter dated 22.04.2021 of the Assessing Officer. Though Assessing Officer mentions that the draft assessment orders has amended are being approved and that after detailed discussion with Assessing Officer and on the basis of facts mentioned in the appraisal report and after considering relevant seized documents the draft assessment orders are being approved. However, it appears that the approving authority has not applied its mind at all to the facts and circumstances of the case to have escaped even such a fundamental aspects. The reassessment was framed u/s 153A in the hands of assessee on the basis of document not seized from the premises of assessee. Thus, we find no error in the finding of ld. CIT(A) the ground raised by the department have no substance, at the same time Cross Objection raised by the assessee deserves to be sustained.

5. The appeal of the revenue is dismissed and Cross Objection raised by the assessee is allowed.