C5 INFRA PRIVATE LIMITED,SECUNDERABAD V. ACIT, CENTRAL CIRCLE-2(3), HYDERABAD

ITA 332/HYD/2023

AI Insights

C5 Infra P Ltd appealed against the order of the CIT (A)-12, Hyderabad, which upheld the additions made by the Assessing Officer on account of unexplained cash expenditure amounting to Rs.16.61 crores during the assessment year 2017-18. The primary legal issue was whether the CIT (A) was justified in upholding these additions in the absence of any incriminating material found or seized during the search when the assessment for A.Y 2017-18 was not pending on the date of the search. The Tribunal examined the legal provisions under sections 132 and 153A of the Income Tax Act, along with relevant case law, and concluded that the additions were not justified as the expenditures were already recorded in the books of account and subjected to scrutiny in the original assessment under section 143(3).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711237 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: Pr. CIT vs. Abhisar Buildwell (P) Ltd, Rakesh Babbar vs. ACIT, CIT vs. Hynoup Food & Oil Industries (P) Ltd, Kabul Chawla vs. CIT, Saumya Construction (P.) Ltd. vs. Principal Commissioner of Income-tax, Abhisar Buildwell (P.) Ltd. vs. Principal Commissioner of Income-tax, Saksham Commodities Ltd. vs. Income Tax Officer, Sinhgad Technical Education Society vs. Commissioner of Income-tax-III, Pune
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K.C.DEVDAS
• Keywords: Additional evidence; Reassessment proceedings; Unexplained expenditure; Block assessment; Fuel Charges
• Section: 143(3); 132; 153A; 69; 69C; 40A(3); 40(a)(ia)

Judgement Text

" ITA No 332 of 2023 C5 Infra P Ltd Page 1 of 38 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘DB-B‘ Bench, Hyderabad Before Shri Vijay Pal Rao, Vice-President A N D Shri Manjunatha, G. Accountant Member आ.अपी.सं /ITA No.332/Hyd/2023 (िनधाŊरण वषŊ/Assessment Year: 2017-18) C5 Infra (P) Ltd Secunderabad PAN:AAFCC2138K Vs. ACIT Central Circle 2(3) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Shri K.C. Devdas, CA Shri C. Maheshwar Reddy, CA राज̾ व Ȫारा/Revenue by:: Shri Narender Kumar Naik, CIT(DR) सुनवाई की तारीख/Date of hearing: 02/07/2025 घोषणा की तारीख/Pronouncement: 25/07/2025 आदेश/ORDER Per Vijay Pal Rao, Vice President This appeal filed by the assessee is directed against the order dated 10/03/2023 of the learned CIT (A)-12, Hyderabad, for the A.Y.2017-18. 2. The assessee has raised the following grounds of appeal: Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 2 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 3 of 38 3. The solitary issue arises in the case of the assessee is whether in the facts and circumstances of the case, the learned CIT (A) is justified in upholding the additions made by the Assessing Officer on account of unexplained cash expenditure while framing the assessment u/s 153A of the Act in the absence of any incriminating material found or seized during the course of search when the A.Y 2017-18 was not pending on the date of search. The assessee is a company engaged in the execution of civil contract works of roads and irrigation. The assessee filed its original return of income u/s 139(1) of the Act on 31/10/2017 declaring total income of Rs.5,21,66,910/-. The case was selected for scrutiny under CASS and scrutiny assessment was completed u/s 143(3) vide order dated 18/12/2019 at a total income of Rs.5,56,77,225/-. Thereafter, a search & seizure action u/s 132 of the Act was carried out in the case of the assessee on 07/01/2021. During the course of search proceedings, some excel sheets named working.xlsx, jmmr25.11.2016.xlsx containing the names and amounts written against them were found from the email of one Shri B. Veeranjaneyulu, Sr. Accountant, of the assessee company i.e. CIPL and the same were seized. The statement of Shri B. Veeranjaneyulu, Sr. Accountant was also recorded in order to get the explanations of the entries in the excel sheets. Accordingly, a notice u/s 153A of the Act was issued by the Assessing Officer in response to which the assessee filed its return of income on 27/11/2021 declaring the total income of Rs.5,21,66,910/-. The Assessing Officer completed the Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 4 of 38 assessment u/s 153A on 28/03/2022 whereby the additions towards unexplained cash expenses of Rs.16.61 crores were made. 4. The assessee challenged the action of the Assessing Officer before the learned CIT (A) and also filed the additional evidence to explain the details of the entries in the excel sheets as the said cash expenditure was duly recorded in the books of account. The learned CIT (A) called for a remand report and then passed the impugned order whereby the additions made by the Assessing Officer is confirmed to the extent of Rs.10,36,03,435/- and thereby granted part relief. 5. Before the Tribunal, the learned Counsel for the assessee submitted that the original assessment was completed u/s 143(3) of the Act on 18/12/2019 and therefore, the assessment for the year under consideration was not pending on the date of search u/s 132 i.e. 7/1/2021. The learned Counsel for the assessee has referred to the details as recorded in the excel sheets found during the course of search from the email ID of Shri B. Veeranjaneyulu, Sr. Accountant and submitted that all these entries as part of the excel sheets are duly recorded in the books of account of the assessee and were subject to examination by the Assessing Officer while passing the assessment u/s 143(3) of the Act. He has pointed out that during the assessment proceedings u/s 143(3), the Assessing Officer has also made disallowance u/s Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 5 of 38 40A(3) of the Act of Rs.31,10,332/- on account of cash expenses. The excel sheets were prepared by the Accountant for the internal purpose and therefore, the same cannot be treated as incriminating material when all the relevant details and material were before the Assessing Officer at the time of assessment u/s 143(3) of the Act. Out of these total expenses, the Assessing Officer has already made a disallowance of Rs.31,10,332/- u/s 40A(3) of the Act and therefore, the genuineness of the expenditure was not doubted by the Assessing Officer during the scrutiny assessment u/s 143(3). Once the entire expenditure was already recorded in the books of account of the assessee and was subject to scrutiny during the assessment u/s 143(3), then the alleged excel sheets cannot be treated as incriminating material. The learned Counsel for the assessee has filed the details of the cash expenditure incurred by the assessee under various heads and part of the expenditure recorded in the books of account duly shown in the ledger account as well as in the profit and loss account and subjected to verification and scrutiny of the Assessing Officer at the time of assessment u/s 143(3) of the Act. Therefore, the said excel sheets do not disclose any undisclosed income of the assessee, relevant to the A.Y under consideration. In support of his contention, he has relied upon the judgment of the Hon'ble Supreme Court in the case of Pr. CIT vs. Abhisar Buildwell (P) Ltd reported in 454 ITR 212 as well as the judgment of the Hon'ble Delhi High Court in the case of Rakesh Babbar vs. ACIT reported in 476 ITR 439. Thus, the learned AR has Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 6 of 38 submitted that when the alleged cash expenditure found in the excel sheet was duly recorded in the books of account of the assessee, then no addition can be made for the A.Y under consideration which was not pending as on the date of search and therefore, the additions made by the Assessing Officer and confirmed by the learned CIT (A) are liable to be deleted. 6. On the other hand, the learned DR has submitted that the assessee has not disputed the correctness of the excel sheets and therefore, the claim of the assessee that all the entries in the excel sheets are also duly recorded in the books of account cannot be accepted until and unless it is reconciled. The assessee has failed to establish that the entries in the excel sheets showing the cash expenditure are duly recorded in the books of account and therefore, it is an incriminating material for the purpose of assessment u/s 153A of the Act. The learned CIT (A) has called for the remand report from the Assessing Officer and then given the findings of the fact. Thus, the learned CIT (A) has sustained the addition to the extent of the cash expenditure not found recorded in the books of account. The learned DR has submitted that the Assessing Officer has made 4 additions of unexplained expenditure u/s 69 total amounting to Rs.16,61,77,796/-. Though the assessee has filed the ledger account of the respective parties, petty cash book, main cash book, bank statement and reconciliation statement during the remand proceedings, however, the learned CIT (A) has given the finding to the extent of additions Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 7 of 38 sustained that the assessee failed to explain the source of the remaining expenditure as recorded in the excel sheets and therefore, the relief was granted by the learned CIT (A) to the extent the entries in the excel sheet was found to be duplicate entries and further the expenditure which are already recorded in the books of account of the assessee. He has relied upon the impugned order of the learned CIT (A). The learned DR has also relied upon the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. Hynoup Food & Oil Industries (P) Ltd reported in 290 ITR 702 (Guj.) and submitted that once the assessee has paid the amounts in cash in contravention of section 40A(3) of the Act, then the Assessing Officer is justified in making the disallowance u/s 40A(3) of the Act. 7. We have considered the rival contentions as well as the relevant material available on record. There is no dispute that initially the scrutiny assessment u/s 143(3) was completed in the case of the assessee on 18/12/2019 whereby the Assessing Officer made 2 disallowances i.e. (i) disallowance u/s 40A(3) of Rs.31,10,332/- and (ii) disallowance u/s 40(a)(ia) of Rs.3,99,982/-. Thus, the disallowance u/s 40A(3) was made by the Assessing Officer after considering the cash expenditure claimed by the assessee. During the search & seizure action, some excel sheets were found and seized from the email ID of Shri B. Veeranjaneyulu, Sr. Accountant which was marked as Annexure-A/CIPL/01. The total sum of the entries in the excel Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 8 of 38 sheets seized during the search & seizure action comes to Rs.15,51,77,796/-. Apart from the excel sheets, a loose sheet containing payments made to Krishna Filling Station to the tune of Rs.1.70 crore was also found and seized from the premises of M/s. Polomy Infra (P) Ltd. In the assessment proceedings of the said company M/s. Polomy Infra (P) Ltd, it was explained by the said company that out of Rs.1.70 crores, only Rs.60 lakhs, which is an RTGS transaction pertaining to it and the cash payment amounting to Rs.1.10 crore pertains to the assessee. During the scrutiny assessment, the assessee has confirmed the said payment of Rs.1.10 crores towards fuel charges. However, the Assessing Officer has made the addition of the total amount of the entries contained in the excel sheets as well as Rs.1.10 crores towards the cash payment to M/s Krishna Filling Station while framing the assessment u/s 153A of the Act. The Assessing Officer has made the additions based on the excel sheets as well as on account of payment to M/s Krishna Filling Station in para 5 to 6.2 as under: Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 9 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 10 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 11 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 12 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 13 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 14 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 15 of 38 8. On appeal, the learned CIT (A) has deleted certain additions which were found to be duplicate entries in the excel sheets, the details of which are reproduced by the learned CIT (A) at page Nos. 55 to 59 of the order as under: Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 16 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 17 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 18 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 19 of 38 9. The learned CIT (A) after considering the facts that the expenditure as found in the excel sheets is actually recorded in Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 20 of 38 the books of account has given a finding that, no addition can be made u/s 69C of the Act. However, since the payment was made in cash in contravention of section 40A(3), therefore, the Assessing Officer was directed to consider the disallowance u/s 40A(3) of the Act as held under page 61 as under: “To Summnarize, ize, the addition made of Rs.7,50,10,000/- by the Assessing Officer on account of unexplained expenditure is directed to be deleted and thus the balance amount of Rs.7,50,00,000/- (excluding one deposit of Rs. 10,000/ - in Canara bank) is hereby has to be disallowed u/s 40A(3) of the Act. It is however seen that the excel sheet also accounts for salary payments of a sum of Rs.25,00,000/-, Rs.3,00,000/-, Rs. 15,00,000/ on 12.08.2016, and BJ Rao salary payment of Rs.1,00,000/-and further site payments of Rs. 10,00,000/- on 19.11.2016. These could be salary payments to various people, in all fairness the appcllant is directed to give the brcakup of the said payents to the AO and the AO may consider he same as per provisions of section 40A(3) accordingly. Further, therc is \"obc deposit\" of Rs.2,50,000/- on 12.07.2016 and Rs.50,000/- on 27.07.2016 which scerms to be an bank deposit, the AO may also consider the same on account of proper filing by the appellant. The AO may also consider any other payments outside the purview of section 40A(3), subjcct to the proper evidences submitted by the appellant. Subject to the above dircctions, out of the said sum out of Rs.7,50,00,000/- has to be disallowed u/s 40A(3) of the Act and the addition of Rs.7,50,10,000/- on the identical sum as unexplained expenditure is deleted.” 10. Thereafter, the learned CIT (A) also considered another excel sheet entries as well as the remand report of the Assessing Officer and then given finding that some of the entries in the excel sheets are inter related and common entries in both the excel sheets and consequently, deleted the additions made by the Assessing Officer to the extent of the amount which are common Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 21 of 38 and duplicate entries in the excel sheets and sustained an addition of Rs.1,98,93,435/- out of the total amount in the first excel sheet of Rs.5,11,01,235/-. The rest of the additions made by the Assessing Officer based on the excel sheets were deleted by the learned CIT (A). 11. As regards the addition towards cash payment to M/s. Krishna Filling Station, the learned CIT (A) has upheld the disallowance made by the Assessing Officer to the extent of Rs.90 lakhs out of Rs.1,10,00,000/-. The learned Counsel for the assessee has took us to the details of expenditure found in the excel sheets as well as the payment made to the Krishna Filling Station and submitted that all these expenditures are already recorded in the books of account of the assessee. He has also submitted the expenditure which are found in the excel sheets and also recorded in the books of account being ledger account as well as profit and loss account. The relevant ledger of the parties concerned are placed in the paper book, the details of which corresponding to each expenditure are summarized as under: Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 22 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 23 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 24 of 38 Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 25 of 38 12. On a closure verification of the details filed by the assessee as well as the expenditure recorded in the books of account of the assessee, we find that the entire fuel expenses of Rs.1.10 crores is duly recorded in the books of account, however, Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 26 of 38 the learned CIT (A) has allowed only Rs.20.00 lakhs which is recorded in the books of account in the name of Krishna Filling Station dated 22/07/2016, whereas the other payments on account of fuel charges are in the name of Shri Venkata Narasimha Filling Station dated 3/11/2016 and 10/11/2016 amounting to Rs.77,00,000/- and because of this name confusion, the learned CIT (A) has given finding that except Rs.20.00 lakhs, the assessee has failed to explain the source of payment which is contrary to the record. Similarly, the other entries are also duly recorded in the books of account and particularly in the relevant ledger account as well as part of the expenditure claimed by the assessee in the profit and loss account. Once the expenditure is already recorded in the books of account and subjected to scrutiny during the assessment u/s 143(3) and the assessment was not pending on the date of initiation of the search, then the Assessing Officer has no jurisdiction in the proceedings u/s 153A to reopen the completed/unabated assessment unless any incriminating material is found with respect to the concerned A.Y falling within such six years preceding the search. The Hon'ble Supreme Court in the case of Pr. CIT vs. Abhisar Buildwell (P) Ltd after discussing the issue elaborately has given the concluding finding in para 14 as under: “14. In view of the above and for the reasons stated above, it is concluded as under: Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 27 of 38 (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) 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. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs. 13. Thus, it is now settled law that in case of no incriminating material is unearthed during the search, the Assessing Officer cannot assess or re-assess taken into consideration the other material in respect of the completed assessment/unabated assessment which means no addition can be made by the Assessing Officer in the absence of any incriminating material found during the course of search u/s 132 or requisition u/s 132A of the I.T. Act. Thus, in the light of the Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 28 of 38 settled proposition of law, the directions of the learned CIT (A) to the Assessing Officer to consider the disallowance u/s 40A(3) is beyond the jurisdiction of the Assessing Officer/learned CIT (A) to make addition in the proceedings u/s 153A of the Act in the absence of any incriminating material. The excel sheet found during the search from the email ID of the Accountant of the assessee cannot be regarded as incriminating material until and unless the entries in the excel sheets are found to be not part of the books of account or reveals undisclosed income of the assessee. In the case in hand, when the entries in the excel sheets are duly recorded in the books of account of the assessee which were subject matter of the scrutiny assessment u/s 143(3), then these excel sheets prepared for the internal purpose by the Accountant cannot be regarded as incriminating material. The Hon'ble Delhi High Court in the case of Rakesh Babbar vs. ACIT (Supra) has considered an identical issue in para 11 to 18 as under: “11. As noted above, the only material found during the search conducted in the case of Rakesh Jain Group, which is stated to have a bearing as far as the Assessee is concerned, is the excel sheet as extracted above. As observed earlier, the same cannot be considered as incriminating material on the basis of which a notice under Section 153C of the Act could be issued to the Assessee. However, the excel sheet has been considered as an incriminating material solely on the basis of the statement of Mr. Rakesh Jain, which was recorded under Section 132(4) of the Act. Thus, one of the issues that arises is whether the statement recorded under Section 132(4) of the Act is required to be taken into account for considering whether the excel sheet is an incriminating material. However, it is not necessary to address this issue for the reason that even if the statement of Mr. Rakesh Jain is taken into account, we find that the AO did not have any Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 29 of 38 incriminating material for issuance of the impugned notice for AY 2018-19. This is for the reason that the statement of Mr. Rakesh Jain had explained that the document in question (the excel sheet) was the latest balance sheet of CCPL as on 17.03.2017. Thus, any amount reflected in the said document pertains to FY 2016-17, which relevant to the AY 2017-18. Since the AO had proceeded on accepting the explanation of Mr. Rakesh Jain in respect of the excel sheet, the same could not in any event be considered as incriminating material having a bearing on the assessment of the Assessee's income for the previous year relevant to AY 2018-19. 12. In Commissioner of Income-tax (Central)-III v. Kabul Chawla : 2015 SCC OnLine Del 11555/[2015] 61 taxmann.com 412/234 Taxman 300/[2016] 380 ITR 573 (Delhi), the Divison Bench of this court (to which One of us - Vibhu Bakhru, J. is a member) had considered the question whether proceedings under Section 153A of the Act could be instituted in absence of any incriminating material unearthed during the search and had summarized the law as under: \"Summary of the legal position 37. On a conspectus of Section 153-A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: (i) Once a search takes place under Section 132 of the Act, notice under Section 153-A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. (iii) The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the \"total income\" of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs 'in which both the disclosed and the undisclosed income would be brought to tax'. Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 30 of 38 (iv) Although Section 153-A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment 'can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.' (v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word \"assess\" in Section 153-A is relatable to abated proceedings (i.e. those pending on the date of search) and the word \"reassess\" to completed assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153-A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. (vii) Completed assessments can be interfered with by the AO while making the assessment under Section 153-A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.\" 13. In Principal Commissioner of Income-tax-4 v. Saumya Construction (P.) Ltd. [2017] 81 taxmann.com 292/[2016] 387 ITR 529 (Gujarat), a Division Bench of the Gujarat High Court had referred to the decision of this court in Kabul Chawla (supra) and concurred with the said view. 14. In Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd. : (2024) 2 SCC 433/[2023] 149 taxmann.com 399/293 Taxman 141/454 ITR 212 (SC), the Supreme Court had considered the following question: \"Whether the jurisdiction of the AO to make assessment is confined to incriminating material found during the course of search under Section 132 or requisition under Section 132-A or not i.e. whether any addition can be made by the AO in absence of any incriminating material found during the Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 31 of 38 course of search under Section 132 or requisition under Section 132-A of the 1961 Act or not.\" And, after referring to various decisions answered the said question in the affirmative. 15. The Supreme Court had also affirmed the view expressed by this court in Kabul Chawla (supra) as well as of the Gujarat High Court in Saumya Construction (P.) Ltd. (supra). We consider it apposite to refer to the following extract of the said decision. The same is set out below: \"28. For the reasons stated herein below, we are in complete agreement with the view taken by the Delhi High Court in Kabul Chawla and the Gujarat High Court in Saumya Construction (P) Ltd., taking the view that no addition can be made in respect of completed assessment in absence of any incriminating material. *** *** *** 33. As per the provisions of Section 153-A, in case of a search under Section 132 or requisition under Section 132-A, the AO gets the jurisdiction to assess or reassess the \"total income\" in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153-A, the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132-A, as the case may be, shall abate. As per sub-section (2) of Section 153-A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the \"total income\" for the entire six years' period/block assessment period. The intention does not seem to be to reopen the completed/unabated assessments, unless any incriminating material is found with respect to assessment Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 32 of 38 year concerned falling within last six years preceding the search. Therefore, on true interpretation of Section 153-A of the 1961 Act, in case of a search under Section 132 or requisition under Section 132-A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the \"total income\" taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under Sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in Sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under Section 153-A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under Sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 34. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153-A of the Act is linked with the search and requisition under Sections 132 and 132-A of the Act. The object of Section 153-A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153-A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 33 of 38 completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, the second proviso to Section 153-A and sub-section (2) of Section 153-A would be redundant and/or re-writing the said provisions, which is not permissible under the law. *** *** *** 36. In view of the above and for the reasons stated above, it is concluded as under: 36.1. That in case of search under Section 132 or requisition under Section 132-A, the AO assumes the jurisdiction for block assessment under Section 153-A; 36.2. All pending assessments/reassessments shall stand abated; 36.3. In case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the \"total income\" taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and 36.4 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. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132-A of the 1961 Act. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under Sections 147/148 of the Act and those powers are saved. 37. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.\" 16. The aforesaid decision was rendered in the context of Section 153A of the Act. However, the said decision would be equally applicable to initiation of assessment / reassessment under Section 153C of the Act. In Commissioner of Income- tax-III, Pune v. Sinhgad Technical Education Society [2017] Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 34 of 38 84 taxmann.com 290/250 Taxman 225/397 ITR 344 (SC), the Supreme Court accepted that the AO would have no jurisdiction to initiate proceedings under Section 153C of the Act absent any incriminating material found in case of a search conducted under Section 132 of the Act or requisition made under Section 132A of the Act. The relevant extract of the said decision is set out below: \"17. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153-C of the Act, incriminating material which was seized had to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co- relation, document-wise, with these four assessment years. Since this requirement under Section 153-C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153-C of the Act. Para 9 of the order of the ITAT reveals that ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, the learned Senior Counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time-barred. 18. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of Assessment Years 2000-01 and 2001-02 was time-barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy.\" 17. It is also relevant to refer the recent decision of this court in Saksham Commodities Ltd. v. Income Tax Officer [2024] Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 35 of 38 161 taxmann.com 485/464 ITR 1 (Delhi) wherein this court had observed as under: \"49. That takes us to the principal question and which pertains to the nature of the incriminating material that may be obtained and the years forming part of the block which would merit being thrown open. Regard must be had to the fact that while section 153C enables and empowers the jurisdictional Assessing Officer to commence assessment or reassessment for a block of six assessment years or the \"relevant assessment year\", that action is founded on satisfaction being reached that the books of account, documents or assets seized \"have a bearing on the determination of the total income of such other person\". We in this regard bear in mind the well settled distinction which the law recognizes between the existence of power and the exercise thereof. Section 153C enables and empowers the jurisdictional Assessing Officer to assess or reassess the six assessment years or the \"relevant assessment year\". The Act thus sanctions and confers an authority upon the Assessing Officer to exercise the power placed in his hands for up to a maximum of ten assessment years. Despite the conferral of that power, the question which would remain is whether the facts and circumstances of a particular case warrant or justify the invocation of that power. It is the aforesaid aspect which bids us to reiterate the distinction between the existence and exercise of power. 50. What we seek to emphasize is that merely because section 153C confers jurisdiction upon the Assessing Officer to commence an exercise of assessment or reassessment for the block of years which are mentioned in that provision, the same alone would not be sufficient to justify steps in that direction being taken, unless the incriminating material so found is likely to have an impact on the total income of a particular assessment year forming part of the six assessment years immediately preceding the assessment year pertaining to the search year or for the \"relevant assessment year\". 51. Ultimately section 153C is concerned with books, documents or articles seized in the course of a search and which are found to have the potential to impact or have a bearing on an assessment which may be undergoing or which may have been completed. The words \"have a bearing on the determination of the total income of such other person\" as appearing in section 153C would necessarily have to be Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 36 of 38 conferred pre-eminence. Therefore, and unless the Assessing Officer is satisfied that the material gathered could potentially impact the determination of total income, it would be unjustified in mechanically reopening or assessing all over again all the ten assessment years that could possibly form part of the block of ten years. 52. The decisions which hold that an assessment is liable to be revised only if incriminating material be found, even if rendered in the context of section 153A, would clearly govern the question that stands posited even in the context of section 153C. It would be relevant to recall that the Division Bench in Kabul Chawla had observed that in the absence of any incriminating material, a completed assessment may be reiterated and the abated assessment or reassessment be concluded. The importance of incriminating material was further underlined in Kabul Chawla with the court observing that completed assessments could be interfered with, only if some incriminating material were unearthed. This aspect came to be reiterated in RRJ Securities when the court held that it would be impermissible to either reopen or reassess a completed assessment which may not be impacted by the material gathered in the course of the search and which may have no plausible nexus. The aforesaid position also comes to the fore when one reads para 17 of ARN Infrastructure and which annulled an action aimed at reopening assessments for years to which the incriminating document which was found did not relate. *** *** *** 54. In any case, Abhisar Buildwell, in our considered opinion, is a decision which conclusively lays to rest any doubt that could have been possibly harboured. The Supreme Court in unequivocal terms held that in the absence of incriminating material, the Assessing Officer would not be justified in seeking to assess or reassess completed assessments. Though the aforesaid observations were rendered in the context of completed assessments, the same position would prevail when it comes to assessments which abate pursuant to the issuance of a notice under section 153C. Here too, the Assessing Officer would have to firstly identify the assessment years to which the material gathered in the course of the search may relate and consequently it would only be those assessments which would face the spectre of abatement. The additions here too would have to be based on material that may have been unearthed in the course of the search or on the basis of material requisitioned. Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 37 of 38 The statute thus creates a persistent and enduring connect between the material discovered and the assessment that may be ultimately made. The provision while speaking of assessment years falling within the block of six assessment years or for that matter all years forming part of the block of ten assessment years, appears to have been put in place to cover all possible contingencies. The aforesaid provisions clearly appear to have been incorporated and made applicable both with respect to section 153A as well as section 153C ex abundanti cautela. Which however takes us back to what had been observed earlier, namely, the existence of the power being merely enabling as opposed to a statutory compulsion or an inevitable consequence which was advocated by the respondents.\" 18. The question whether a notice under Section 153C of the Act can be issued in respect of an assessment year in respect of which no incriminating material is found is no longer res integra. The AO does not have any jurisdiction to issue a notice under Section 153C of the Act if the search on which the said notice is premised, has not yielded any incriminating material having a bearing on the assessment of income of the assessee. The jurisdiction of the AO to issue a notice under Section 153C of the Act is predicated on the search under Section 132 of the Act or a requisition under Section132A of the Act, yielding any incriminating material and the AO of the searched person being satisfied that the assets so unearthed, documents, books of accounts or other material found during the search conducted under Section 132 of the Act or pursuant to a requisition made under Section 132A of the Act, belongs to or pertains to the assessee (other than the searched person) or contains any information relating to the assessee. Once this condition is satisfied, the AO can assume jurisdiction subject to being satisfied that the material has a bearing on the income of the assessee. In the present case, the said jurisdictional condition is not satisfied as the search has not yielded any incriminating material, which could confer jurisdiction to the AO to issue a notice under Section 153C of the Act in respect of AY 2018-19.” 14. Thus, in the facts and circumstances of the case, when the excel sheets found during the search do not reveal any undisclosed income of the assessee for the A.Y under consideration which is unabated and completed assessment, then Printed from counselvise.com ITA No 332 of 2023 C5 Infra P Ltd Page 38 of 38 in the absence of any incriminating material, the additions confirmed by the learned CIT (A) are not sustainable in law and liable to be deleted. We order accordingly. 15. In the result, appeal filed by the assessee is allowed. Order pronounced in the Open Court on 25th July, 2025. Sd/- Sd/- (MANJUNATHA, G.) ACCOUNTANT MEMBER (VIJAY PAL RAO) VICE-PRESIDENT Hyderabad, dated 25th July, 2025 Vinodan/sps Copy to: S.No Addresses 1 M/s. C5 Infra P Ltd, Plot No.554, Road No.92, Opp: Apollo Nursing Hostel, Jubilee Hills, Hyderabad 500096 2 ACIT, Central Circle 2(3) Hyderabad 3 Pr. CIT – Central, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order Printed from counselvise.com "