Kiran Mahana Vs DCIT (ITAT Delhi)
No Incriminating Material Found on Assessee—153A Assessment Based Solely on Documents Seized from Third Party Invalid; Proceedings Should Have Been u/s 153C—Assessment Quashed
The Assessee originally filed return for AY 2014-15 declaring income of ₹2,48,330, later revised to ₹8,92,310 in response to notice u/s 153A. Search operations on the LARA Group led to the issue of a warrant only for the Assessee’s lockers, from which no incriminating documents or valuables were found or seized. However, the AO made an addition of ₹21,80,000 u/s 69B alleging unrecorded cash payment towards purchase of property, based entirely on Annexure-6 (sale agreement & sale deed) recovered from the premises of Shri Rahul Mahana, a third party, not from the Assessee.
CIT(A) dismissed the appeal ex-parte, though the Assessee had passed away on 15-09-2022, and no effective communication was made to the legal heirs. ITAT condoned the 56-day delay, finding the explanation reasonable.
On merits, the Tribunal examined the jurisdictional validity of the 153A assessment. It held that when no incriminating material whatsoever is found from the Assessee during search, completed assessments cannot be disturbed, as per the binding ratio of Kabul Chawla (380 ITR 573, Del). Further, where material relied upon belongs to or pertains to a third person, proceedings must mandatorily be initiated u/s 153C, not u/s 153A. The Tribunal relied heavily on the Delhi High Court judgment in PCIT v. Anand Kumar Jain (HUF) (432 ITR 384), where it was held that statements/documents found during search on a third party cannot be used to frame a 153A assessment in the case of another person. The department must strictly follow section 153C and hand over such material to the AO of the “other person”.
In the present case, since the AO did not find any incriminating material from the Assessee’s lockers, and the addition was based solely on documents seized from Shri Rahul Mahana, the entire 153A assessment was held void ab initio. The Tribunal therefore allowed the legal ground and declared the assessment invalid, leaving other grounds open.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order of the Commissioner Of Income Tax (Appeals)-29, New Delhi [hereinafter referred to as “Ld. CIT(A)”] vide order dated 29.01.2025 arising out of the assessment order dated 31-12- 2019 under section 153A of the Income Tax Act (in short “the Act”) pertaining to A.Y. 2014-15.
