RAJESH KUMAR AGARWAL ,KANPUR V. DCIT, , KANPUR

ITSSA 82/LKW/2022

AI Insights

This case involves an appeal by Rajesh Kumar Agarwal against the order of the Commissioner of Income Tax (Appeals) which upheld the additions made by the Assessing Officer under sections 68 and 69C of the Income Tax Act, 1961, following a search and seizure operation. The main legal contention was whether additions could be made in the absence of incriminating material during the search, particularly when no assessment proceedings were pending at the time of the search. The Tribunal examined the applicability of recent Supreme Court decisions and relevant ITAT rulings, which clarified that in such cases, no additions could be legally made.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 827796 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 25-04-2022
• Other Referred Cases: PCIT Vs. Abhisar Buildwell (P.) Ltd, Smt. Shashi Agarwal vs. DCIT, Ocean Dream Infrastructures Pvt. Ltd. vs. DCIT, Kabul Chawla vs. CIT, U. K. Paints (Overseas) Ltd. vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.K. AGARWAL
• Assessee Lawyers: P.K. KAPOOR
• Keywords: Principle of natural justice; Search and seizure; Block assessment; Opportunity of cross examination
• Section: 132; 153A; 68; 69; 69C; 133A

Judgement Text

"I.T.(SS)A. No.82/Lkw/2022 Assessment Year:2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘A’, LUCKNOW BEFORE SHRI KUL BHARAT, VICE PRESIDENT AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER I.T.(SS)A. No.82/Lkw/2022 Assessment Year: 2014-15 Rajesh Kumar Agarwal 120/839, 203 Charanpaduka Apartment, Lajpat Nagar, Kanpur-208005 PAN:AEAPA1394M Vs. Dy.C.I.T., Central Circle-1, Kanpur. (Appellant) (Respondent) O R D E R PER ANADEE NATH MISSHRA:A.M. (A) This appeal has been filed by the assessee pertaining to assessment year 2014-15 against impugned appellate order dated 15/02/2022 of Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. In this appeal, the assessee has raised the following grounds: “1. BECAUSE the Learned CIT(A) has erred in law & on facts in confirming the assessment order passed by AO u/s 153A of the Act even though the same was not in consonance with the settled position of law vis-a-vis search cases. 2. BECAUSE the learned CIT(A) has erred in law and on facts in upholding the assessment ignoring the settled position of law Appellant by Shri P. K. Kapoor, C. A. Respondent by Shri R. K. Agarwal, CIT (D.R.) Printed from counselvise.com I.T.(SS)A. No.82/Lkw/2022 Assessment Year:2014-15 2 that provisions of section 153A, in a case where assessment proceedings are not pending, could not be applied in absence of any incriminating material. 3. BECAUSE as per 4he material and information on record and as borne out from the assessment order no incriminating material was found during the course of search and seizure operation in the case of the assessee and no assessment proceedings were pending on the date of search, consequently no assessment u/s 153A of the Act making the impugned addition could have legally been made. 4. BECAUSE in the absence of opportunity of cross examination of the persons giving statement of culpable nature, as had been sought by the appellant, the assessment stood wholly vitiated and consequently the addition made deserved to be deleted as held by the Apex Court in umpteen number of cases. 5. BECAUSE the ld. CIT(A) has erred in law and on facts in holding that no opportunity to cross examine the persons giving statement of culpable nature was required to be given as all the relevant seized incriminating material and statements were shown to the appellant during the course of assessment proceedings. 6. BECAUSE the reliance on 'reports of investigation wing' etc. did not constitute 'material' relevant for the purpose of assessment in this case, as the 'appellant' had never been confronted with the same in proper perspective and consequently the addition of Rs.46,81,973/- made on the basis of such ex-parte information and reports etc. is wholly vitiated. 7. BECAUSE the computation of income was not even relevant for the purpose of assessment and the same is vitiated, as during the course of search (even in pursuance of joint warrant of Authorisation), no incriminating material was found which could impinge upon the genuineness of the unsecured loan taken during the year and the interest paid thereon. 8. BECAUSE the learned CIT(A) has erred in law and on facts in confirming the following addition made by the AO u/s 68 of the Act :- I- Amount of loan added u/s 68: Printed from counselvise.com I.T.(SS)A. No.82/Lkw/2022 Assessment Year:2014-15 3 S.No. Name of the company Amount of loan adeed u/s 68 Interest paid on loan added u/s 69 Addition made in assessment order 1. M/s Success Vyapar Limited 45,00,000/- 1,81,973/- 46,81,973/- without appreciating the supporting documentary evidences & explanation of the appellant placed on record. 9. BECAUSE the learned CIT(A) failed to appreciate that with respect to the unsecured loan of Rs.45,00,000/- obtained from Successs Vyapar Ltd., the assessee had duly discharged the onus of proving all the three vital ingredients of section 68 of the IT Act, namely identity and creditworthiness of the lender and genuineness of the loan transaction and that such loans in the case of various family members and their business associates had been accepted in the orders passed earlier u/s 143(3)/153A/153C of the Act. 10. BECAUSE the addition of Rs.46,81,973/- made by AO and upheld by CIT (A) is not only based on irrelevant considerations but is also based on whims, presumption, surmises and conjectures and the judicial decisions relied upon by the authorities below are distinguishable from the facts of the present case. 11. BECAUSE the lower authorities have failed to appreciate various case laws & also the guidelines issued by CBDT relating to the procedure to be adopted by AO in respect of addition under section 68 of the Act and the case laws relied upon by the authorities below are distinguishable from the facts of the present case. 12. BECAUSE various adverse observations and allegations made by the lower authorities are contrary to the facts, material & evidences available on record. Moreover, such observations did not pertain to the appellant as no questionnaire or show cause notice was issued by AO in the name of the appellant. 13. BECAUSE in relation to various Grounds of Appeal, the appellant relies upon the averments made in the statement of facts attached with the Memo of Appeal. Printed from counselvise.com I.T.(SS)A. No.82/Lkw/2022 Assessment Year:2014-15 4 14. BECAUSE the order passed by the Ld. CIT(A) is wholly erroneous, against the principles of natural justice, hence not tenable in law or on facts.” (B) In this case, a search & seizure operation under section 133A of the Income Tax Act, 1961 (hereinafter referred as “I.T.Act”) was conducted in the case of the assessee, in pursuance whereof assessment order, dated 30/12/2019 was passed under section 153A of the I.T. Act and additions amounting to Rs.45,00,000/- under section 68 of the Act and Rs.1,81,973/- on account of interest paid by the assessee against the loan under section 69C of the Act were made. The assessee filed appeal against the aforesaid assessment order in the office of the Ld. CIT(A). During appellate proceedings, the assessee took the ground, inter-alia, that the Assessing Officer erred in law as well as on facts in making addition to the returned income without any incriminating documents being found during the course of search. However, the learned CIT(A) did not consider this submission favourably, and dismissed the appeal of the assessee. Aggrieved, the assessee has filed the present appeal in Income Tax Appellate Tribunal (“ITAT” for short). (C) At the time of hearing, the Ld. A.R. for the assessee submitted that the issue as to whether addition can be made in a search assessment in the absence of any incriminating material is now well settled in favour of the assessee by the order of the Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell (P.) Ltd (2023) 149 taxmann.com 399 (SC)/(2023) 293 Taxman 141 (SC)/(2023) 454 ITR 212 (SC). He further submitted that the Lucknow Bench of ITAT in the case of Smt. Shashi Agarwal (2024) 167 taxmann.com 687 (Lucknow Trib.), considered aforesaid decision of Hon'ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd (supra) and decided the issue in favour of the assessee relying on the same. He also submitted that moreover, in the case of Ocean Dream Infrastructures Pvt. Ltd. vs. Printed from counselvise.com I.T.(SS)A. No.82/Lkw/2022 Assessment Year:2014-15 5 DCIT (Order dated 21/01/2025 in I.T.A. No.146 and 147/Lkw/2023) also, identical issue has been decided by Lucknow Bench of Income Tax Appellate Tribunal in favour of the assessee. He further submitted that in the present appeal also, the addition made by the Assessing Officer is not based on any incriminating documents found in the course of search. Relying on the aforesaid cases of Abhisar Buildwell (P.) Ltd (supra), Smt. Shashi Agarwal (supra) and Ocean Dream Infrastructures Pvt. Ltd. (supra), learned A.R. for the assessee contended that the additions made in the assessment order should be deleted. The Ld. Departmental Representative supported the order of the Assessing Officer as well as Ld. CIT(A) and relied on the same. However, he admitted that the addition made by the Assessing Officer was not based on any incriminating material found during the course of search & seizure action u/s 132 of the I. T. Act. He also drew our attention to his letter dated 30/06/2025 filed on 30/06/2025, confirming the same. (D) We have heard the rival parties and have gone through the material placed on record. In the case of Smt. Shashi Agarwal (supra), co-ordinate bench of ITAT Lucknow has decided the matter in favour of the assessee, relying in the case of Abhisar Buildwell (P.) Ltd (supra), on the issue whether additions can be made in a search assessment in the absence of any incriminating material found during search. The relevant portion of the order of Smt. Shashi Agarwal vs. DCIT (supra) is reproduced as under: - “(C) We have heard both sides. We have perused materials on record. There is no dispute regarding relevant facts. It is not in dispute that no incriminating materials were found in the course of search u/s 132 of the IT Act in respect of the various additions made by the Assessing Officer. Further it is also not in dispute that no assessment proceedings were pending in the cases of the assessee at the time of search conducted on 08/07/2016 in the case of the assessee, u/s 132 of the IT Act. Further, as no assessment proceedings were pending at the time of search & seizure operation u/s 132 of the Act on 08/07/2016, the case of the assessee falls in the category of unabated/completed Printed from counselvise.com I.T.(SS)A. No.82/Lkw/2022 Assessment Year:2014-15 6 assessments within the meaning of orders passed by Hon'ble Supreme Court in the cases of Principal Commissioner of Income- tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) and within the meaning of order passed in the case of Kabul Chawla 380 ITR 573 (Delhi), which stands approved by Hon'ble Supreme Court by dint of orders of Hon'ble Supreme Court in the case of Principal Commissioner of Income- tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra). Further, in paragraph 14 of the aforesaid order of Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra), the Hon'ble Supreme Court concluded as under: “14. In view of the above and for the reasons stated above, it is concluded as under: (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 fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. Printed from counselvise.com I.T.(SS)A. No.82/Lkw/2022 Assessment Year:2014-15 7 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.” (C.1) Hon'ble Supreme Court in the case of U. K. Paints (Overseas) Ltd. (supra) widened the application of the order in the case of Abhisar Buildwell (supra) to assessments conducted u/s 153C of the IT Act also. In both orders of Hon'ble Supreme Court i.e. in Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra), the Hon'ble Supreme Court held that in respect of the completed/unabated assessments, no additions can be made in assessment order passed u/s 153A or passed u/s 153C of the IT Act in respect of which incriminating materials were not found in the course of search action u/s 132A of the Act; although Hon'ble Supreme Court held that the completed/unabated assessments can be reopened by the Assessing Officer in exercise of powers u/s 147/148 of the IT Act subject to fulfillment of the conditions as envisaged/mentioned u/s 147/148 of the IT Act. Thus, although the powers of the Assessing Officer u/s 147/148 of the IT Act were saved by Hon'ble Supreme Court in the cases of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra), subject to fulfillment of conditions envisaged u/s 147/148 of the IT Act; it has been categorically held that in respect of completed/unabated assessments, no additions can be made u/s 153A or under section 153C of the Act if incriminating material was not found / unearthed during the course of search u/s 132 of the IT Act in respect of the additions made. (C.2) The issue whether additions can be made in assessment orders passed u/s 153A or u/s 153C of IT Act in cases falling under unabated/completed assessments, when no incriminating material was found at the time of search u/s 132 of the IT Act, was a disputed issue in the past. While a view in favour of assessee was taken, for example, in cases such as CIT vs. Kabul Chawla (supra), Pr. CIT vs. Saumya Construction 387 ITR 523 (Guj), CIT vs. Continental Warehousing 374 ITR 645 (Bom.), Smt. Jami Nirmala vs. Pr.CIT 437 ITR 673 (Orissa), CIT vs. Veerprabhu Marketing Ltd. 388 ITR 574 (Cal.), Pr.CIT vs. Delhi International Airport (P.) Ltd. 443 ITR 574 (Kar.), Pr.CIT vs. Meeta Gutgutia 395 ITR 526 (Delhi), Dr. A. V. Sreekumar vs. CIT 404 ITR 642 Printed from counselvise.com I.T.(SS)A. No.82/Lkw/2022 Assessment Year:2014-15 8 (Ker.), Pr. CIT vs. Smt. Daksha Jain 2019 (8) TMI 474 (Rajasthan), etc.; courts took a view in favour of Revenue in cases reported as CIT vs. Rajkumar Arora (supra), CIT vs. Mahndipur Balaji 447 ITR 517 (All.), CIT vs. K. P. Ummer 413 ITR 251 (Ker.), Sunny Jacob Jewellers and Wedding Centre vs. DCIT 362 ITR 664 (Ker.), E. N. Gopakumar 75 taxmann.com 215 (Kerala), etc. The issue has now been finally settled by decisions of Hon'ble Supreme Court in the aforesaid cases of Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) wherein view in favour of assessee has been taken. (C.2.1) In the present appeals before us, the additions have been made by the Assessing Officer in assessment orders passed u/s 153A of the IT Act. Further, we have already noted earlier that the relevant facts are not in dispute. It is not in dispute that no incriminating materials were found in the course of search u/s 132 of the IT Act in respect of the various additions made by the Assessing Officer. Further it is also not in dispute that no assessment proceedings were pending in the cases of the assessee at the time of search conducted on 08/07/2016 in the case of the assessee, u/s 132 of the IT Act. Furthermore, as no assessment proceedings were pending in the case of the assessee at the time when (on 08/07/2016) search u/s 132 of the IT Act was conducted, the case of the assessee in the present appeals before us, falls in the category of completed/unabated assessments within the meaning of orders passed by Hon'ble Supreme Court in the case of Principal Commissioner of Income- tax vs. Abhisar Buildwell (supra) and in the case of CIT vs. Kabul Chawla (supra) which was approved by Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax vs. Abhisar Buildwell (supra). In view of the foregoing, and having regard to the relevant facts and circumstances of the present case before us, and further, as representatives of both sides are in agreement with this, we are of the view that the issue in dispute is squarely covered in favour of the assessee by the orders of Hon'ble Supreme Court in Principal Commissioner of Income-tax vs. Abhisar Buildwell (supra) and Dy. CIT vs. U. K. Paints (Overseas) Ltd. (supra) and by the aforesaid instruction No. 1 of 2023 of CBDT, which is binding on Revenue authorities. Accordingly, we direct the Assessing Officer to delete the additions made amounting to a total of Rs.2,24,81,900/- for assessment year 2015-16 and addition amounting to Rs.44,25,000/- for assessment year 2016-17. Printed from counselvise.com I.T.(SS)A. No.82/Lkw/2022 Assessment Year:2014-15 9 (C.2.2) Since we have directed that the aforesaid additions be deleted, the other issues regarding merits of the additions made in the aforesaid two years, become merely academic in nature and do not require any adjudication. Therefore, we decline to make any order with regard to the merits of the various additions made.” (D.1) Identical view, in favour of the assessee, has also been taken by Lucknow Bench of ITAT, in the case of Ocean Dream Infrastructures Pvt. Ltd. (supra). (E) In view of the foregoing, and respectfully following the orders of the Hon'ble Supreme Court in the cases of Abhisar Buildwell (P.) Ltd (supra) and DCIT vs U.K. Paints (Overseas) Ltd (2023) 150 Taxmann.com 108 (SC), and further, on due consideration of aforesaid Instruction of Central Board of Direct Taxes (CBDT) [Instruction No.1 of 2023 (F. No.279/Misc./M-54/2023- IT)] directing the field authorities to implement the aforesaid orders of Hon'ble Supreme Court in the cases of Abhisar Buildwell (P.) Ltd (supra) and U.K. Paints (Overseas) Ltd (supra), in uniform manner; we direct the Assessing Officer to delete the aforesaid additions of Rs.65,80,250/- and Rs.1,81,973/-. (F) In the result, all the appeals of the assessee are allowed for statistical purposes. (Order pronounced in the open court on 05/01/2026) Sd/. Sd/. (KUL BHARAT) (ANADEE NATH MISSHRA) Vice President Accountant Member Dated:05/01/2026 *Singh Printed from counselvise.com I.T.(SS)A. No.82/Lkw/2022 Assessment Year:2014-15 10 Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. Concerned CIT 4. D.R. ITAT Printed from counselvise.com "