The absence of incriminating evidence during searches nullifies additions during unabated assessments under Section 153A of the Income Tax Act.

ORDER

Per Bench:

All these captioned appeals by the Revenue and corresponding Cross Objections by the different Assessees and one Appeal by the Assessee (Anuradha Shivkumar Gogia in IT(SS)A No.130/Ahd/2024 for Assessment Year 2019-20) have been directed against the separate orders of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] and pertained to the assessments carried out under Section 153A of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) pursuant to the search action carried out under Section 132 of the Act conducted on the Gogia Group on 15.10.2019. Since the facts in all these appeals are identical and they involve common and overlapping issues, hence the same were heard together and are being disposed of by this common order.

2. FACTUAL BACKGROUND OF THE CASE:

2.1. A search and seizure action was carried out under section 132 of the Income Tax Act, 1961 , (herein after referred to as “the Act”) on the Gogia Group on 15.10.2019. The search operation covered the business and residential premises of the main promoters, Shri Shivkumar Gogia and his family members, as well as various partnership firms and companies associated with the group. The Gogia Group is primarily engaged in the business of real estate development, construction, and allied activities in and around Ahmedabad.

2.2. Consequent to the search, proceedings under section 153A of the Act were initiated against all persons covered by the search. Notices under section 153A of the Act were issued, requiring the assessees to file returns of income for the six assessment years immediately preceding the year of search, as well as for the year of search itself. In compliance with these notices, the assessees filed their respective returns of income. Thereafter, the Assessing Officers (in short, “the AO”) proceeded to frame assessments under the provisions of section 153A read with section 143(3) of the Act.

2.3. In the assessment orders so framed, the AO made multiple additions in the hands of the assessees pertaining to different assessment years. These additions were primarily grouped under the following heads: (i) Undisclosed investment on account of alleged on-money payments in various real estate projects, including the Nana Chiloda Project, the Stellar Project, and Sumel Business Park; (ii) Addition on account of alleged under-invoicing of sales; (iii) Disallowance of exemption claimed on Long Term Capital Gains under section 10(38) of the Act, treating the underlying shares as "penny stocks"; and (iv) Addition on account of alleged on-money received on the sale of property in the Earth Erita project. These additions were made based on material allegedly found during the search action, including digital data like WhatsApp chats retrieved from third-party mobile phones, digital images and loose notings found in the premises of other persons or concerns, as well as inferences drawn by the AO based on such material.

2.4. Aggrieved by the additions made in the assessment orders, the assessees preferred appeals before the Commissioner of Income Tax (Appeals). The Ld. CIT(A), after considering the detailed written submissions, voluminous paper books, and legal arguments of the assessees, proceeded to delete the majority of the additions. A key basis for the deletion, particularly for those assessment years that had already attained finality and were not pending on the date of search (i.e., unabated assessment years), was the legal ground that no additions could be made under section 153A of the Act in the absence of any incriminating material found during the course of search action in case of the specific assessee and in relation to the unabated/completed assessment year/s. For this legal proposition, the CIT(A) placed heavy reliance on the decision of the Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P) Ltd. (2023) 454 ITR 212 (SC). For the abated asses