No additions permissible in unabated assessments under S.153A/153C without incriminating material.

आदशे/ORDER

PER ABY T. VARKEY, JM:

These are appeals preferred by the Revenue against the order of the Learned Commissioner of Income Tax (Appeal)/NFAC, (hereinafter referred to as ‘Ld.CIT(A)‘), Chennai-18, dated 24.09.2025 for the Assessment Year (hereinafter referred to as ‘AY‘) 2014-15. Both the parties agreed that the issues permeating in both the appeals of the Revenue are similar/identical except in the figures and therefore, the appeal for AY 2013-14 is taken as the lead case, the decision of which will be applicable mutatis-mutandis for AY 2014-15 also. By passing the impugned orders, the Ld CIT(A) is noted to have allowed the legal ground raised by the assessee, that since both captioned AYs, are unabated assessments, the AO couldn’t have made any additions without support of incriminating material; and the Ld CIT(A) finding that there was no incriminating material qua assessee warranting any additions/adjustment by Transfer Pricing Officer (TPO), has held the action of TPO/AO to have made additions/adjustment to be without jurisdiction by relying on the decision of the Hon’ble Supreme Court in the case of PCIT v. Abhisar Buildwell (P) Ltd., reported in [2023] 149 taxmann.com 399 (SC).

2. Grounds of appeal raised by the Revenue for AY 2013-14/AY 2014- 15 are noted to be identical, which reads as under:

The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law.

(i) The Ld.CIT(A) has erred while adjudicating the appeal in favour of the assessee without dwelling in to the merits of the addition made on account of transfer pricing adjustment.

(ii) The Ld.CIT(A) has failed to appreciate that satisfaction is recorded based on the incriminating material and that during the assessment, material other than the incriminating material, can also be considered for assessing the income of the assessee.

(iii) The Ld.CIT(A) has failed to consider that the assessee, during the assessment proceedings, had expressed no objection for referring the case to Transfer Pricing Officer for determination of Arm's Length Price of all the international transactions entered in to by the assessee company including the transaction reported in form 3CEB.

For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.

3. The main grievance of the Revenue is against the action of Ld CIT(A) allowing the legal issue raised by the assessee without going in to the merits of the addition/adjustment made by TPO/AO.

4. Brief facts are that the Assessee, M/s. Orchid Pharma Limited, is engaged in the business of manufacturing drugs and pharmaceuticals. For the relevant AY 2013-14, the Assessee had filed its return of income on 30.11.2013 declaring total income of Rs.29,51,39,990/-. Subsequently, revised return was filed on 12.03.2014 declaring a loss of Rs.206,06,52,191/-

5. On 23.11.2015, search u/s 132 of the Act was conducted in the case of M/s. Sri Ramachandra university Trust Group, pursuant to which, assessee was also searched. Thereafter, the AO is noted to have recorded ‘satisfaction note’ u/s.153C of the Act qua assessee on 20.11.2017 and issued notice u/s.153C of the Act on the same date. Pursuant to it, the assessee filed a return declaring total loss of Rs. 2,66,04,86,669/-. The AO having noted that assessee had entered into international transactions (reported in Form 3CEB) during the subject year, referred the said transaction to Tra