January 2023

Search and seizure Assessment of undisclosed income Notice u/s 153A should be based on material seized u/s 132 or documents requisitioned u/s 132A.

K. B. Bhujle, Advocate

71. Underwater Services Co. Ltd. and Anr. vs. ACIT
[2022] 448 ITR 691 (Bom.)
A.Y.: 2012-13
Date of order: 21st October, 2021
Sections: 132, 132A and 153A of ITA, 1961

Search and seizure Assessment of undisclosed income Notice u/s 153A should be based on material seized u/s 132 or documents requisitioned u/s 132A.


The assessee filed a writ petition and challenged the validity of the notice dated 29th November, 2018 issued u/s 153A of the Income-tax Act, 1961 on the grounds that the notice has been issued without jurisdiction. The assessee-petitioner contended that there is no incriminating material in possession of the AO and any notice u/s 153A can be issued only on the basis of incriminating material discovered during the course of the search.

The Bombay High Court allowed the writ petition and held as under:

i) Although section 153A of the Income-tax Act, 1961, 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 Assessing Officer 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.

ii) Obviously, an assessment has to be made u/s. 153A only on the basis of seized material. Issuance of a showcause notice is the preliminary step which is required to be undertaken. The purpose of a show-cause notice is to enable a party to effectively deal with the case made out by the respondent. Section 153A provides that an assessment has to be made under the section only on the basis of the seized material, and hence the notice should mention whether the seized material was u/s. 132 or books of account, other documents or any assets requisitioned u/s. 132A.

iii) The Department did not indicate in its notice what were the seized material u/s. 132 or books of account or other documents or any assets requisitioned u/s. 132A. The notice was bereft of any material. The Department had not mentioned in the notice the basis for issuing the notice u/s. 153A so that the assessee could comply with it as prescribed. The notice issued u/s. 153A was not valid.

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