Bombay HC Quashes Rs. 27.99 Cr Addition: No 153A Action Without Incriminating Search Material

The Revenue challenged a 2021 ITAT order that had deleted additions made on the assessee for A.Y. 2006-07 under Section 153A. The case stemmed from information shared by French authorities regarding alleged undisclosed HSBC Bank (Suisse) accounts linked to various Indian residents. Based on this “base note”, a search was conducted in 2011 on Mahendra Brothers group entities, including the respondent, a Director and partner in group concerns. Although the assessee consistently denied any connection with the alleged accounts, the Assessing Officer added over Rs. 27.99 crores as unexplained money under Section 69.

During the assessment, the assessee produced a letter from HSBC Geneva confirming that he had no account or dealings with the bank. Still, the AO proceeded with additions purely based on the base note. The CIT(A) affirmed the additions, following which the assessee succeeded before the ITAT.

Issue Raised: Whether additions could be made under Section 153A when no incriminating material was found during the search, and when the only material relied upon was not recovered during the search itself.

HC’s Ruling: The Bombay High Court upheld the Tribunal’s decision, holding that the Revenue failed to establish any incriminating material against the assessee during the search. The Court emphasised that even the HSBC Bank (Suisse) letter verified by the department confirmed that the assessee had no connection with the foreign accounts. Mere reliance on a post-search base note without any corroborative material found during search could not satisfy the jurisdictional requirement under Section 153A, especially when assessments for the relevant year were already completed. The court noted that the AO’s attempt to link the assessee to the foreign accounts lacked an evidentiary foundation and could not be sustained.

Reiterating the Supreme Court’s ruling in PCIT v. Abhisar Buildwell Pvt. Ltd., the Court held that in cases of completed/unabated assessments, no addition can be made under Section 153A unless incriminating material is actually found during the search. Since the Revenue admitted that no such material was found, the additions were legally unsustainable.  As no substantial question of law arose, the court dismissed the revenue’s appeal.

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