ITAT Mumbai Deletes ₹50 Lakh Section 68 Addition For Want Of Incriminating Material In Section 153C Proceedings
Pranav B Prem
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has allowed the appeal filed by M/s JS Infrastructure, deleting an addition of ₹50 lakh made under Section 68 of the Income Tax Act, 1961, in proceedings initiated under Section 153C, holding that no addition could be sustained in the absence of any incriminating material found during the course of search. A Bench comprising Judicial Member Kavitha Rajagopal and Accountant Member Omkareshwar Chidara was hearing the appeal against an order passed by the Commissioner of Income Tax (Appeals), which had affirmed the addition made by the Assessing Officer for Assessment Year 2017–18.
The assessee, a partnership firm engaged in the business of construction and real estate development, had originally filed its return of income declaring nil income. Subsequently, a search operation was conducted in the case of the Patel RPL Realty Group, pursuant to which notice under Section 153C was issued to the assessee on the allegation that certain documents seized during the search belonged to or pertained to it.
During the assessment proceedings, the Assessing Officer treated an unsecured loan of ₹50 lakh received from Kesari Gems Pvt. Ltd. as unexplained cash credit under Section 68 and made an addition accordingly. The Assessing Officer held that the loan transaction was not genuine and proceeded to add the amount to the assessee’s income. This addition was later upheld by the first appellate authority.
Before the Tribunal, the assessee contended that the addition was unsustainable as no incriminating material pertaining to it had been found during the search. It was argued that the only material relied upon by the Revenue was a ledger account extracted from Tally, which was already part of the assessee’s regular books of account and had been produced during the original assessment proceedings. Such material, it was submitted, could not be treated as incriminating material for the purpose of invoking Section 153C.
The assessee further submitted that it had duly discharged the primary onus under Section 68 by furnishing confirmation from the lender, bank statements evidencing transactions through banking channels, the financial statements and return of income of the lender, and proof of repayment. It was pointed out that none of these documents had been disputed by the Department.
The Tribunal noted that the assessment year in question was a completed or unabated assessment and that no incriminating material relating to the assessee had been seized during the search proceedings. The Bench observed that a ledger account forming part of the regular books of account could not be regarded as incriminating material merely because it was referred to during the search assessment.
Placing reliance on the judgment of the Supreme Court in Abhisar Buildwell (P.) Ltd. v. Assistant Commissioner of Income Tax, the Tribunal reiterated that in respect of completed assessments, no addition can be made under Sections 153A or 153C unless it is based on incriminating material found during the search.
The Bench observed that neither the Assessing Officer nor the Commissioner (Appeals) had recorded any finding to show that the documents furnished by the assessee were false or fabricated. In the absence of any incriminating material seized during the search, the addition under Section 68 was held to be legally unsustainable. In view of these findings, the Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and directed deletion of the ₹50 lakh addition. The appeal filed by the assessee was accordingly allowed.
Appearance
Appearance for Assessee: Shri Vijay Patel
Appearance for Respondent: Shri Vivek Perampurna, CIT-DR
Cause Title: M/s JS Infrastructure Vs. ACIT Central Circle-2
Case No: IT(SS)A No. 3120/Mum/2025 A.Y. 2017-2018
Coram: Judicial Member Kavitha Rajagopal, Accountant Member Omkareshwar Chidara
