Income Tax Act | Incriminating Material Found During Search Needed For Section 153A Additions : Bombay High Court
Deekshitha Sharmile
The High Court of Bombay Division Bench of Justice G.S. Kulkarni and Justice Aarti Sathe dismissed the Revenue’s appeal and sustained the ITAT’s decision deleting additions of about ₹27.99 crore made against the assessee. The dispute arose from search-related proceedings where the Revenue relied on information received from foreign authorities in a “base note” alleging the assessee’s beneficial interest in undisclosed HSBC Bank (Suisse) SA, Geneva accounts, and treated alleged peak balances as unexplained money. The Bench said that, for completed assessments, no addition can be made under Section 153A unless incriminating material is found during the search, and that post-search information such as the base note cannot substitute for such seized material.
The dispute arose from an appeal filed by the revenue under Section 260A of the Income Tax Act, 1961, challenging an order of the Income Tax Appellate Tribunal. The assessee had filed a return of income for the relevant year declaring a small taxable income. Subsequently, a search and seizure action was conducted under Section 132 on the assessee and related entities following information received from French authorities regarding undisclosed overseas bank accounts in HSBC Bank, Geneva.
The Assessing Officer relied on a “base note” received from French authorities, which contained details of account holders and balances, and concluded that the assessee was a beneficial owner of certain accounts held by Sulay Trading Ltd. and Laptis Trading Ltd. Despite the assessee’s denial and production of a letter from HSBC Bank confirming no connection with the accounts, the Assessing Officer added substantial amounts as unexplained money under Section 69.
The assessee challenged the additions before the Commissioner of Income Tax (Appeals), who upheld the assessment. On further appeal, the Tribunal held that no incriminating material was found during the search and that reliance solely on the base note was unsustainable. The revenue then approached the High Court.
The Court observed: “It appears to be an undisputed position that no incriminating material in the search proceedings was found against the assessee.” The Court stated: “HSBC Bank (Suisse) SA Geneva also confirmed the position by issuing a letter granted in favour of the assessee, that the assessee had no connection whatsoever with the said bank accounts being considered by the department to have a concern with the assessee.”
The Court recorded: “Unless a clear and unimpeachable nexus was brought about on acceptable materials to justify the contentions and that too establishing a basis to link the assessee to the accounts which were held by the said entities with HSBC Bank (Suisse) SA Geneva, in our opinion, it was certainly not acceptable for the Assessing Officer to nonetheless derive a nexus or any relation of the assessee in regard to the said bank accounts.”
The Court observed: “The base note on which the revenue sought to place reliance was in fact a document available post-search and admittedly was not a document recovered under the search action.” The Court stated: “Further the assessment proceedings in the present case had also stood completed, hence, the base note being a document available post-search could not be considered to be any incriminating document to assess or re-assess the assessee's income.”
The Court referred to the Supreme Court decision in Abhisar Buildwell and recorded: “When no incriminating material was unearthed during the search, the Assessing Officer cannot assess or reassess income taking into consideration other materials in respect of completed assessment / unabated assessments.” The Court further quoted: “In case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments.”
The Court directed: “In the light of the aforesaid discussion, no question of law as raised by the Revenue falls for consideration in the present proceedings. The appeal needs to fail. It is, accordingly, dismissed. No costs. We clarify that except examining the aforesaid issue, we have not delved on any other issue or any other pending proceedings. All contentions of the parties in that regard are expressly kept open.”
Advocates Representing the Parties
For the Petitioners: Mr. Suresh Kumar, Advocate for Appellant
For the Respondents: Mr. Atul Jasani, Advocate for Respondent
Case Title: Commissioner of Income Tax-Central-1 Vs. Milan Kavin Parikh
Neutral Citation: 2025:BHC-OS:22860-DB
Case Number: Income Tax Appeal No. 1827 of 2022
Bench: Justice G. S. Kulkarni, Justice Aarti Sathe
