Section 132

Section 132 — the law in short

What the courts have decided on section 132, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Vijay Krishnaswami v DDIT (Investigation) Supreme CourtHelps taxpayer
  The Settlement Commission accepted my disclosure. Can the department still prosecute me for evasion?
  No. Every order of settlement is conclusive under s.245-I, so where the Commission has recorded full and true disclosure the factual foundation for a wilful attempt to evade under s.276C(1) is gone and continuing the prosecution is an abuse of process. The prosecution was quashed and costs of Rs. 2,00,000 were imposed on the Revenue.
• CIT v Jasjit Singh Supreme CourtHelps taxpayer
  A search was made on someone else and my papers were found. From which date are my six years counted - the search, or when my Assessing Officer got the papers?
  From the date your Assessing Officer received the material. The Supreme Court held that the proviso to section 153C(1) does not deal only with abatement: it also fixes the date from which the six year period is reckoned for the person who was not searched. The Revenue's argument that the proviso is confined to abatement, so that the period relates back to the date of the search on the other person, was held insubstantial and without merit. The Court approved the Delhi High Court's reasoning in SSP Aviation and dismissed the Revenue's appeals.
• PCIT v Abhisar Buildwell P Ltd Supreme CourtCuts both ways
  Search assessment for a year already completed, but nothing incriminating was found. Can the officer still add?
  No — not under s.153A. For completed or unabated assessments the addition must rest on incriminating material found in the search. But the Court preserved the department's power to reopen those years under ss.147 and 148 instead.
• ITO v Vikram Sujitkumar Bhatia Supreme CourtHelps department
  The search was before June 2015 but the notice came later. Which version of s.153C applies?
  The amended one. The 2015 amendment, which changed 'belongs to' into 'pertains to', applies to searches conducted before 1 June 2015 as well, because the trigger is when the material reaches the officer having jurisdiction over the other person.
• PDIT (Investigation) v Laljibhai Mandalia Supreme CourtHelps department
  Can I get a search warrant quashed by showing the department's material was too thin?
  No. Forming the reason to believe under s.132 is an administrative act, and a writ court will not weigh whether the material was adequate. It will only ask whether the belief was mala fide, a pretence, or built on extraneous or irrelevant material.
• Super Malls Pvt Ltd v PCIT Supreme CourtHelps department
  What if the same officer holds charge of both the searched person and you?
  Then one satisfaction note is enough, provided it records clearly that the seized documents belong to the other person and not to the searched person. There is nothing to transmit, so no second note is needed.
• CIT v Sinhgad Technical Education Society Supreme CourtHelps taxpayer
  The seized documents say nothing about the years being assessed. Can s.153C still be used for them?
  No. The incriminating material must pertain to the assessment years in question, with a document-wise correlation to each. That is a jurisdictional requirement, and without it the notice for those years cannot stand.
• N.K. Proteins Ltd v DCIT Supreme CourtHelps departmentValidity unconfirmed
  Can the whole of a bogus purchase be added, rather than a percentage?
  On this line of authority, yes. The special leave petitions were dismissed, upholding the High Court, and the effect reported is that the 25% restriction was rejected and the entire fictitious purchase amount fell to be added.
• DGIT (Investigation) v Spacewood Furnishers P Ltd Supreme CourtHelps department
  Can I demand the satisfaction note and the reasons recorded before a search warrant was issued against me, and get the search quashed if they look thin?
  No, not at that stage. The Supreme Court held that reasons for the belief under section 132 must be recorded, but need not be communicated to the person searched when the authorisation is issued; the material is disclosed only when assessment proceedings begin after the search. On a writ challenge the reasons may be placed before the court, and the court may examine their relevance to the formation of belief, but not their sufficiency or adequacy. The Delhi High Court had gone into sufficiency, reproduced the satisfaction notes in detail and suspected the file was manipulated; its order was set aside and the search restored.
• CIT v Calcutta Knitwears Supreme CourtHelps department
  When must the satisfaction note be recorded before proceedings are taken against a third party?
  Before the seized records are handed over. It may be recorded at any of three stages — with the initiation of proceedings against the searched person, during them, or immediately after they are completed — but the note itself is a sine qua non.
• ACIT v A.R. Enterprises Supreme CourtHelps department
  I paid advance tax for the year but had not filed my return when the search took place. Can the department still call that income undisclosed?
  Yes. The Supreme Court held that payment of advance tax is not disclosure of income. Advance tax is paid on an estimate of current income; disclosure of total income happens only in a return. Where the due date under section 139(1) had passed and no return had been filed by the date of search, section 158BB(1)(c) requires the returned income to be taken as nil, and the officer was right to conclude the assessee would not have disclosed the income. Tax deducted at source is no different, being computed on the same estimated basis. The Revenue's six appeals were allowed with costs.
• CIT v Mukundray K. Shah Supreme CourtHelps departmentValidity unconfirmed
  The company and I have a mutual, open and current account with money moving both ways. Is the deemed dividend the closing debit balance, the highest debit balance during the year, or something else? And can the Department tax money that reached me through a firm rather than directly?
  Neither the closing balance nor the peak. The Supreme Court, adopting the Bombay High Court's reasoning in P.K. Badiani, held that the position must be ascertained at the date of each payment: every debit is examined individually, it is a loan only to the extent it exceeds the company's existing debt to the shareholder, and it is taxable only to the extent of accumulated profits existing on that date. The Court also upheld the taxing of money routed to the shareholder through partnership firms used as conduits, as a payment for his individual benefit.
• Manish Maheshwari v ACIT Supreme CourtHelps taxpayer
  What has to happen before a search at someone else's premises can be used against you?
  Three things, in order: satisfaction recorded that the undisclosed income is yours, the seized material handed to your Assessing Officer, and only then proceedings begun against you. They are conditions precedent, not formalities.
• CIT v Vindhya Metal Corporation Supreme CourtHelps taxpayer
  The police seized cash from our employee and the Commissioner issued a section 132A warrant because he had no papers for it — is that authorisation valid?
  No. The Supreme Court declined to interfere with the Allahabad High Court's decision quashing an authorisation under section 132A. All the Commissioner had before him was that Rs 4,63,000 had been seized by the Railway Police from a person carrying it, that the person had no documents of ownership or possession, and that he was not on the General Index Register of assessees at Mirzapur. On that material no reasonable person could have entertained the belief that the money represented income that would not be disclosed. Mere unexplained possession, without anything more, is not enough. The Revenue's appeal was dismissed.
• CIT v Tarsem Kumar Supreme CourtHelps taxpayerSuperseded by amendment
  Customs seized my cash and was ordered to return it. Can the income-tax department issue a search warrant and take it from customs instead?
  No, not under section 132 as it then stood. The Supreme Court held that where the exact location of the money is known and it is in the lawful custody of another government department, there is nothing to search for and nothing to seize. Possession under section 132 follows physical custody, not legal title, so the money was not in the assessee's possession while customs held it. One government department cannot search another. The Court noted that the gap was later filled by section 132A, and left the Department free to approach the appropriate authorities under it.
• Pooran Mal v Director of Inspection Supreme CourtHelps department
  The search on me was illegal. Can I stop the department using what it took?
  No. Indian tax law has no exclusionary rule. The Supreme Court upheld s.132 and rule 112 and held that even if a search contravened the section, the material seized was liable to be used, subject to law, before the income-tax authorities against the person from whose custody it was taken. Illegality in the search goes to relief against the search, not to the admissibility of what it produced.
• ITO v Seth Brothers Supreme CourtHelps department
  The search party carted away all our books. Does the way a search was conducted make it illegal?
  Not by itself. Irregularity in executing a search does not vitiate it where the officers acted bona fide. What does vitiate it is a failure of the conditions precedent: information with the competent authority, a consequent reason to believe, the recording of that belief, and a written authorisation naming the officer.
• K.K. Builders v DCIT High CourtHelps taxpayerValidity unconfirmed
  I argued before the Tribunal that the s.153D approval was mechanical and its order says nothing about it. Can I take that straight to the High Court?
  Not usefully. The Kerala High Court declined to answer any issue affirmatively, set aside the Tribunal's order and remitted the appeal for fresh consideration, because the Tribunal had recorded the s.153D ground as one of three issues before it and had not specifically answered it. Every relevant issue must receive the Tribunal's attention before the High Court can adjudicate on it as an appellate forum.
• Saroj Kumar Sahoo v National Faceless Assessment Centre High CourtHelps departmentValidity unconfirmed
  My scrutiny assessment was still running when they searched me in November 2024. Section 158BA(2) says a pending assessment abates. Can I have the assessment order quashed in a writ on that ground alone?
  Not on that ground alone. The Orissa High Court accepted that a search initiated on or after 1 September 2024 puts the case in the revived block assessment regime of Chapter XIV-B and that s.158BA(2) abates a pending assessment for any year in the block period, but it refused to quash the order because nothing on the record showed that the search had unearthed any undisclosed income of this petitioner, and it relegated him to his appeal.
• M/s Sivasakthi Threads v Deputy Commissioner of Income-tax High CourtHelps taxpayerValidity unconfirmed
  A survey during a search on a connected group threw up excess stock, and it was added for AY 2007-08. The department says my unabsorbed depreciation cannot be set off against it, and now cites section 79A. Is that right?
  No, on both counts, for a year before AY 2022-23. The Madras High Court held that unabsorbed depreciation carried forward takes the character of current year depreciation under s.32(2) and, read with ss.71 and 72, can be set off against income of the current year other than capital gains — including an addition of unaccounted stock in business; and it recorded that s.79A, inserted by the Finance Act 2022 with effect from 1 April 2022, does not assist the Revenue for an earlier year.
• Batukbhai Premjibhai Kalathiya v ITO — a search in May 2024 is neither a section 153A case nor a block assessment: section 152(3) sends it to the old reassessment code High CourtHelps taxpayerValidity unconfirmed
  My client was searched in May 2024 and has a section 148 notice for assessment year 2015-16. Which limitation applies, and is the notice good?
  The Gujarat High Court held that because the search fell between 1 April 2021 and 1 September 2024, section 152(3) required sections 147 to 151 to be applied as they stood immediately before the Finance (No. 2) Act 2024, and that the first proviso to section 149(1) then imports the section 153A and section 153C time limits. Computing the ten-year outer limit from the end of the assessment year relevant to the previous year of search, as Explanation 1 to section 153A(1) directs, assessment year 2025-26 is the first year and the tenth is 2016-17. Assessment year 2015-16 was therefore beyond the ten years, and the notice was quashed.
• Rajesh Gupta v ACIT High CourtHelps departmentValidity unconfirmed
  It is well past 120 days since the search and they still hold my jewellery. Must they release it?
  No. The expiry of the 120-day period in the second proviso to s.132B(1)(i) does not by itself trigger release. The proviso is mandatory in character but operates only once the Assessing Officer has determined the existing liability, so mere lapse of time does not turn the seizure into unlawful detention, and the remedy for delay lies in interest rather than automatic restoration.
• Nagendra Choudhary v Union of India High CourtHelps taxpayerValidity unconfirmed
  The Tribunal deleted the penalty, but the department has filed an appeal under s.260A and it has been admitted. Can they keep the s.276C prosecution alive until that appeal is decided?
  Not without a stay. The Rajasthan High Court quashed a s.276C(1)(i) prosecution after the Tribunal had deleted the s.271AAB penalty, holding that the mere pendency of the department's s.260A appeal, even one admitted on substantial questions of law, does not resurrect factual findings that have been set aside. The Court expressly preserved the department's liberty to seek revival if the Tribunal's exoneration is reversed.
• Raj Kumar Kedia v Income Tax Office High CourtHelps departmentValidity unconfirmed
  My prosecution sanction under s.279(1) was signed by the Principal Director of Income Tax (Investigation), not the Principal Commissioner. Is the sanction bad, and can I say the complaint is premature because no assessment has been made?
  Neither point succeeded. 'Commissioner' in s.279 is read with the definition in s.2(16) and the hierarchy in s.116, so it means and includes the Director and the Principal Director of Income Tax; a sanction by the Principal Director (Investigation) is by a competent authority under a different nomenclature. The complaint is not premature merely because assessment proceedings had not been completed, P. Jayappan being applied.
• Anurag Dalmia v Income Tax Office High CourtHelps taxpayerValidity unconfirmed
  The Tribunal has deleted the additions and the penalty has been cancelled. The criminal complaint is still pending on exactly the same allegations. Does it survive?
  No, where the complaint rests on the same material. The Delhi High Court quashed complaints under s.276C(1)(i), s.277(1) and s.276D, holding that once the Tribunal had set aside the additions on merits and the penalty had been cancelled, no offence survived and quashing of the prosecution followed automatically. It also held that the presumption of a guilty mind under s.278E arises only if a prima facie case is disclosed in the complaint.
• Neeraj Bharadwaj v ACIT High CourtHelps taxpayerValidity unconfirmed
  The seized material shows a cash payment made in an earlier year. Can six later years be reopened under s.153C on the strength of it?
  No. A s.153C notice can be issued for an assessment year only if the Assessing Officer is satisfied that the seized books, documents or assets have a bearing on the determination of the total income for that year. Material about a transaction in one financial year says nothing about the years that follow, and notices for those years cannot stand.
• Pramod Swarup Agarwal v PDIT (Inv) High CourtHelps taxpayerValidity unconfirmed
  The authorised officer who searched us has now summoned us under s.131(1A). Can he?
  No, not after the search is over. The officer who issued the notice was the authorised officer for the s.132 search, and s.131(1A) lets the authorised officer use that power only before he takes action under clauses (i) to (v) of s.132(1). The action having already been taken, the notice was quashed; and the department could not save it by pointing to the same person's substantive designation as Deputy Director.
• Ghanshyam Dalmia v Pr. CIT (Central) High CourtHelps taxpayerValidity unconfirmed
  My 2024 Vivad se Vishwas application was rejected under section 96 as a search case, but the only departmental action in my case was a survey. Can the authority do that?
  No. Section 96(a)(i) of the Direct Tax Vivad se Vishwas Scheme, 2024 excludes an assessment year only where the assessment under section 143(3), 144, 147, 153A or 153C was made on the basis of a search initiated under section 132 or a requisition under section 132A. A survey under section 133A is consciously omitted from section 96, so the embargo does not operate; the Orissa High Court quashed the rejection and remitted the declaration for fresh consideration on merits.
• Saksham Commodities Ltd v ITO High CourtHelps taxpayer
  The satisfaction note points to material for one year, but notices under s.153C have come for the whole block of six. Can they stand?
  No. Section 153C confers a power; it does not compel its use across the block. Before issuing a notice the Assessing Officer must identify the assessment year or years to which the seized material relates or which it is likely to affect, and must be satisfied that it is likely to bear on the total income of those years. The proceedings are confined to those years. Where the material speaks to one year, notices for the remaining years of the block are unsustainable, and if the Revenue says a document is incriminating for several years the satisfaction note must record reasons for saying so.
• PCIT v Forum Sales Pvt Ltd — an estimate cannot be made without first rejecting the books under s.145(3) High CourtHelps taxpayerValidity unconfirmed
  The Assessing Officer has disallowed forty per cent of my client's purchases on an estimate, but has not rejected the books. Is that open to him?
  No. The Delhi High Court held that it is the settled position of law that the books of account have to be necessarily rejected before the Assessing Officer proceeds to a best judgment assessment on fulfilment of the conditions in the Act, and that any pick and choose method of rejecting certain entries while accepting others, without appropriate justification, is arbitrary. Since the additions in question had been made on an estimate basis without rejecting the books, no substantial question of law arose and the Revenue's appeals were dismissed.
• Anurag Bagaria v Income Tax Department High CourtHelps taxpayerValidity unconfirmed
  After a search I filed revised returns giving up a capital gains claim and paid the tax. Can I still be prosecuted under s.276C(1) for wilful evasion?
  Not on those facts. The Karnataka High Court quashed the s.276C(1) prosecution, holding that a claim of deduction which the revenue does not accept is not by itself a wilful evasion of tax — an incorrect or erroneous claim can come from a wrong reading of the law. The department's special leave petition against that order was dismissed.
• PCIT v Jai Maa Jagdamba Flour Private Limited High CourtHelps taxpayerValidity unconfirmed
  After a search on or after 1 July 2012, can the officer levy penalty under s.271(1)(c) instead of s.271AAB?
  No, not for the specified previous year. The Jharkhand High Court held that s.271AAB opens with a non obstante clause and excludes s.271(1)(c) where the undisclosed income relates to the specified previous year. Where the search was on 3 September 2014 the penalty, if any, had to be levied under s.271AAB, and because the assessee had admitted nothing in a s.132(4) statement and paid no tax on admitted income, the case fell under clause (c) of s.271AAB(1). The penalty actually levied under s.271(1)(c) could not stand. The Court also held it immaterial that no incriminating document had been found, because the statute keys the choice of section to the date of the search.
• Ashish Jayantilal Sanghavi v ITO High CourtHelps taxpayerValidity unconfirmed
  I applied within thirty days to have the asset seized in a search released and explained the source, and the Assessing Officer has simply sat on the application. The hundred and twenty days have long gone. Can he keep holding it?
  No. The Gujarat High Court held that the time limit in the proviso to clause (i) of sub-section (1) of section 132B is mandatory and not directory, and that it is not permissible for a court to read it as merely directory, because doing so would dilute the statutory rigour and give the Assessing Officer unbridled power to retain seized assets indefinitely against a possible future liability without ever deciding the application. The Court directed the seized diamonds to be handed over to the writ applicant within four weeks.
• Harsh Dipak Shah v Union of India (Gujarat) High CourtHelps taxpayerValidity unconfirmed
  Is 20% a floor? Can the Commissioner order me to deposit less — 5% or 10% — pending appeal?
  Yes. The Gujarat High Court held there is nothing magical about the figure of 20%: it is a starting point, not a floor, and the authority may direct 5% or 10% instead if the equities so require. The discretion under s.220(6) is coupled with a duty to be exercised judicially on prima facie case, financial stringency and balance of convenience. Note the limits of what that reasoning produced here: of the three writ applications heard together the Court allowed only Special Civil Application No. 19804 of 2021, setting aside the order and remitting it for fresh consideration, and in the two connected applications it expressly declined to interfere having regard to the quantum of the amount involved, leaving those applicants to move the Commissioner (Appeals).
• Bhupendra Harilal Mehta v Pr. CIT High CourtHelps taxpayerValidity unconfirmed
  My Form 3 charges the higher search-case amount because the addition against me came out of a search on somebody else. Is mine a 'search case' under the 2020 scheme?
  Not on these facts. Row (b) of the Table to section 3 of the Direct Tax Vivad se Vishwas Act, 2020 applies only where the tax arrear includes tax, interest or penalty determined in an assessment made on the basis of a search under section 132 or a requisition under section 132A. The Bombay High Court set aside the Form 3 and directed a fresh Form 3 treating the assessee as a non-search case, applying CBDT Circular 4/2021 dated 23 March 2021, which replaced the answer to FAQ 70 of Circular 21/2020 and now requires three cumulative conditions.
• Sundaram Finance Ltd v ACIT High CourtHelps departmentValidity unconfirmed
  The notice did not specify the default, but you clearly understood it. Does the defect still help you?
  In Madras, no. The assessee had understood the purport and import of the notice, and claiming depreciation on machinery that did not exist was inaccurate particulars. The penalty was upheld.
• PCIT v Ritu Singal High CourtHelps departmentValidity unconfirmed
  I told the search party the money was my unaccounted income. Is that enough to escape s.271AAA penalty?
  No, not by itself. The Delhi High Court held that all three conditions in s.271AAA(2) must be fulfilled before the escape route opens. The assessee had said the amounts advanced were her unaccounted income for the year, but did not specify how she had derived that income or what head it fell under - rent, capital gain, professional income, business income out of money lending, or the source of the money. Unless such facts are given with some specificity the requirement of substantiating the manner is not met. The appellate authorities had misdirected themselves and the penalty was restored.
• PCIT v Sandeep Chandak High CourtHelps departmentValidity unconfirmed
  The s.271AAB penalty notice came on the printed s.274 read with s.271 form. Does that by itself kill the penalty?
  Not on these facts. The Allahabad High Court looked past the caption to the body of the notice, which told the assessee that proceedings under s.271AAB were being taken and that his reply would be considered before any order was made under s.271AAB. Because the officer had never initiated any s.271(1)(c) proceeding in the s.143(3) assessment, and because the assessee's own reply showed he had understood the notice as a s.271AAB notice, the Court held the initiation was in accordance with law and restored the penalties the Tribunal had cancelled.
• PCIT v Best Infrastructure (India) P Ltd High CourtHelps taxpayerUnder appeal
  The share capital addition rests on a statement I was never allowed to cross-examine. Does it stand?
  No. Statements under s.132(4) do not by themselves constitute incriminating material; a copy of the statement and an opportunity to cross-examine the deponent must be given, and where the statement is retracted or cross-examination is refused it has to be discarded. The s.68 additions fell.
• PCIT v Mukeshbhai Ramanlal Prajapati High CourtHelps taxpayerValidity unconfirmed
  The officer never asked me how I earned the surrendered income. Can he still levy s.271AAA penalty because I did not substantiate the manner?
  No. The Gujarat High Court held that the requirement in s.271AAA(2)(ii) to substantiate the manner in which the undisclosed income was derived is consequential to, or a corollary of, the base requirement in clause (i) to specify that manner in the s.132(4) statement. The duty to substantiate begins only when the officer recording the statement elicits a response on the point. Where the Revenue failed to question the assessee at all about how the income was derived, it cannot jump to the later requirement, and when the base requirement itself fails the question of denying the immunity does not arise. The Tax Appeal was dismissed and the deletion of the penalty stood.
• PCIT v Meeta Gutgutia High CourtHelps taxpayerValidity unconfirmed
  A search was carried out on us and the department has reopened six years under section 153A. Can it add to a year where nothing incriminating was found?
  No. The Delhi High Court held that the Revenue was not justified in invoking section 153A against the assessee for assessment years 2000-01 to 2003-04, there being no incriminating material for each of those years. It declined the Revenue's invitation to reconsider Kabul Chawla in the light of Dayawanti Gupta, holding that Dayawanti Gupta turned on distinguishing features - an admission under section 132(4) that transactions were not recorded, a year-wise chart of unrecorded transactions, and habitual concealment - none of which was present here. There was no justification for the Assessing Officer to proceed on surmises and estimates. The appeals were dismissed.
• Ganpati Fincap Services Pvt Ltd v CIT High CourtHelps departmentValidity unconfirmed
  The same officer is the Assessing Officer of the searched person and of our client. Does he still have to record a satisfaction note, and does he need two?
  He must record one, and it must exist before the s.153C proceedings are started. He does not have to write two notes. The single note is recorded in his capacity as the Assessing Officer of the searched person, it is a note about the other person, and it is placed in the other person's file. It does not have to say in terms that the documents do not belong to the searched person.
• ARN Infrastructure India Ltd v ACIT High CourtHelps taxpayerSuperseded by amendment
  The document seized is a letter our client wrote to the person searched. Does it belong to our client for s.153C?
  Not under the pre-amendment wording. A letter written by A to B is B's document, and 'belongs to' is not the same as 'relates to'. The words 'pertains to', which would have caught it, were inserted with effect from 1 June 2015 and operate prospectively, so they do not assist a satisfaction note recorded before that date. Note what that limit attaches to: it is the date of the satisfaction note, not the date of the search. In ITO v. Vikram Sujitkumar Bhatia (SC, 2023) the Supreme Court held the amended provision applies even where the search was conducted before 1 June 2015, if the seized material reaches the Assessing Officer of the other person on or after that date. What survives in ARN is the construction of 'belongs to' and the result on its own facts, the satisfaction note there being dated 21 July 2014; what does not survive is any reading of it as making a pre-2015 search enough to keep a case on the narrow 'belongs to' test. Separately, a document relevant only to one year cannot be used to reopen earlier years.
• CIT v RRJ Securities Ltd High CourtHelps taxpayerValidity unconfirmed
  Papers of mine were seized in a search on somebody else and I have got notices under section 153C for six years. Which six years, and can completed assessments be reopened when the papers show nothing?
  It depends, and here the answer was no on both counts. The Delhi High Court held that for a person other than the searched person, the six assessment years under section 153C run from the date the seized material is handed over to his Assessing Officer - here the satisfaction note of 8 September 2010 - not from the date of the search. Assessment years 2003-04 and 2004-05 were therefore outside the section. It further held that completed assessments cannot be reopened where the seized documents have no bearing on those years. The Revenue's appeals were dismissed.
• CIT v Kabul Chawla High CourtHelps taxpayer
  A search was carried out at my premises and the Assessing Officer has reopened six years under section 153A — can he add to years already assessed when nothing incriminating was found?
  No. The Delhi High Court held on 28 August 2015 that a completed assessment can be interfered with in a section 153A assessment only on the basis of incriminating material unearthed in the search, or undisclosed income or property discovered in it, which was not produced or disclosed in the original assessment. Where an assessment for a year is not pending on the date of the search it does not abate, and in the absence of such material the completed assessment can only be reiterated. Here the assessments for 2002-03, 2005-06 and 2006-07 stood completed, nothing was found, and the deemed dividend and other additions fell.
• Pepsi Foods Pvt Ltd v ACIT High CourtHelps taxpayerSuperseded by amendment
  The satisfaction note says the officer is satisfied and nothing else. Is that enough to found a s.153C notice?
  On s.153C as it stood before 1 June 2015. No. Anything found during a search is presumed by law to belong to the person searched. Before the Assessing Officer of the searched person can say a document belongs to somebody else, he must rebut that presumption on cogent material, and the satisfaction note itself must show the reasons. A note that only recites the word 'satisfied' fails the first step, and everything built on it goes. Read the decision only against that older wording: with effect from 1 June 2015 s.153C was widened to cover books or documents that 'pertain to' the other person or contain information 'relating to' him, and in ITO v. Vikram Sujitkumar Bhatia (SC, 2023) the Supreme Court held the amended provision applies even where the search was conducted before that date. The 'belongs to' analysis in this case is therefore not the current test.
• CIT v Satya Narain Patni High CourtHelps taxpayer
  The search party left our jewellery alone but the AO has still added part of it. Can he do both?
  No, on these facts, and the reason is wider than the seizure decision. The Rajasthan High Court held that once the Board has expressed the opinion in Instruction No. 1916 that jewellery up to 500 grams for a married lady, 250 grams for an unmarried lady and 100 grams for a male member is not to be seized, it should normally follow that jewellery within those quantities will not be questioned as to its source and acquisition either. Here the family's entitlement was 2,700 grams against 2,202.464 grams found, the authorised officer had seized nothing, and the Assessing Officer's later addition on part of the same jewellery had no basis — he gave no reason for fixing 1,600 grams as the reasonable quantity. The Court preserved the department's power over the excess: jewellery beyond those weights can be questioned and, if not properly explained, treated as unexplained investment.
• Dipen Laljibhai Mandalia v DGIT High CourtHelps taxpayer
  The department is justifying my search warrant with discrepancies it discovered after the satisfaction note was recorded. Can material found later prop up the authorisation?
  No. The Gujarat High Court held that material collected after the satisfaction note is recorded and the search authorisation issued cannot be pressed into service to support that authorisation. The Court read the satisfaction note itself, found that the department already knew of the gold, had the lease documents and the assessee's books before it, and that the explanation offered was corroborated by the goldsmiths' statements. There was therefore no material on which a reasonable belief under section 132(1)(c) could be formed. The petitions were allowed and the search and seizure operations were quashed.
• CIT v Anil Kumar Bhatia High CourtHelps departmentValidity unconfirmed
  I was searched, and my earlier returns had only been processed under section 143(1). Can the Assessing Officer reopen all six years under section 153A and add things that have nothing to do with the search?
  Yes, section 153A is validly invoked. The Delhi High Court held the Tribunal was wrong to say section 153A cannot be used where the six years' returns had only been processed under section 143(1). Section 153A opens with a non obstante clause that removes the fetters of sections 147, 148, 149, 151 and 153, and it empowers the Assessing Officer to assess or reassess the total income - disclosed and undisclosed - for each of the six years. Pending proceedings abate; completed ones do not, and are simply reopened. The Court expressly left open what happens where no incriminating material at all is found.
• SSP Aviation Ltd v DCIT High CourtHelps departmentValidity unconfirmed
  A search was carried out on someone else and my agreements were seized. Can the department open six years of my assessments under section 153C when everything was already in my audited books?
  Yes, it can start the enquiry. The Delhi High Court dismissed the writ petition and held that section 153C(1) requires the searched person's Assessing Officer to be satisfied only that the seized document belongs to another person - not that it discloses undisclosed income of that person. Unlike section 158BD, section 153C does not mention undisclosed income at all. The section is only the first step: the documents go to the other person's Assessing Officer, who then follows the section 153A procedure, and if the returns show the income was accounted for, the proceedings must be closed. Inconvenience is not a ground to strike the machinery down.
• CIT v Ratanlal Vyaparilal Jain High CourtHelps taxpayer
  Does the jewellery instruction explain the source of the gold, or only stop the department seizing it?
  It explains the source, to the extent of the quantities in it. The Gujarat High Court held that the Board's circular proceeds on recognised customs prevailing in Hindu society, so possession of jewellery within those quantities is taken to be explained unless the Revenue shows otherwise.
• CIT v S.K. Katyal High CourtHelps taxpayer
  The last panchnama only records the seals being broken and my keys being handed back. Does that date start the limitation clock?
  No. The panchnama that fixes limitation is the one that records the conclusion of a search, and a document drawn up only to give effect to the revocation of a s.132(3) restraint order records no search at all. The Delhi High Court agreed with the Tribunal that such a panchnama is "merely a release order", so the search had concluded on the earlier date and the block assessment was out of time.
• Kailashben Manharlal Chokshi v CIT High CourtHelps taxpayer
  I disclosed a large sum in the search statement and retracted two months later. Will the retraction hold?
  Partly, and only for what the department cannot corroborate. An admission is evidence but not conclusive, so additions for house property, gold and furniture that rested only on the retracted statement were deleted, while the amount matched by unaccounted cash actually found was upheld.
• D. Komalakshi v Dy. CIT — no money, no appeal: the section 249(4) bar bites even where the whole search and the block assessment are challenged High CourtHelps departmentValidity unconfirmed
  My client wants to challenge the search itself and the jurisdiction to make a block assessment. He has filed a block return but has no funds to pay the tax on the returned undisclosed income. Can the Commissioner (Appeals) refuse to admit the appeal?
  Yes. Where a return has been filed, s.249(4)(a) makes payment of the tax due on the returned income a condition of admission, and a challenge to the search or to the jurisdiction under s.158BC does not displace it. The Karnataka High Court upheld the Commissioner (Appeals) and the Tribunal in refusing to admit the appeals, answering the questions of law against the assessees — but, on the assessees' counsel undertaking that they would pay, gave them four weeks to make good the admitted tax and directed that if they did, the Commissioner (Appeals) must hear the appeals on merits uninfluenced by the earlier proceedings.
• L.R. Gupta v Union of India High CourtHelps taxpayer
  I did not return a receipt because I believe it is not taxable yet. Can the Department search me on the footing that I have undisclosed income?
  No, not on that basis alone. The Delhi High Court quashed a search authorisation and everything done under it. Undisclosed income means income liable to tax which the assessee has kept back in an effort to escape assessment, knowing it to be taxable. A failure to file a return or to disclose what the Department believes is taxable is not enough. The satisfaction note said only that the family had not been disclosing their true income and wealth, which answers neither clause (b) nor clause (c) of section 132(1). The cash, jewellery and documents seized were ordered returned within two weeks.
• Ghanta Srinivas v DCIT, Central Circle-1, Guntur ITATHelps taxpayerValidity unconfirmed
  After a search I admitted the cash as professional receipts in a revised computation during the assessment and paid the tax. The AO has now levied penalty under s.270A(9) for misreporting AND a second penalty under s.271AAD(1)(ii) for omitting entries from my books. Can he do both?
  The Tribunal deleted both. The s.270A penalty fell because the s.274 notice never said which of the six sub-clauses of s.270A(9) was alleged, and the s.271AAD(1)(ii) penalty fell because once the assessee had brought the receipts on record in a revised statement of total income filed during the assessment and paid the tax, there was no longer an omitted entry to penalise.
• Dinesh Chandra Das v ITO — s.44AD(6) shuts out the agent and the s.44AA(1) professional, but the whole receipt is still not income ITATCuts both waysValidity unconfirmed
  The Assessing Officer says my client, who runs a pathology sample collection centre, cannot use s.44AD at all and has added the entire understated receipt. Is that right?
  On the first point the department was upheld: s.44AD(6) excludes a person carrying on a profession referred to in s.44AA(1), a person earning income in the nature of commission or brokerage, and a person carrying on any agency business, and the Tribunal agreed the assessee was a commission agent so that s.44AD did not apply. On the second point the assessee got relief: the entire differential receipt could not be treated as income because expenses had to be incurred, and the Tribunal directed a net profit rate of forty-five per cent on the gross receipts the Assessing Officer had worked out.
• Pavai Varam Educational Trust v PCIT (Central), Chennai ITATHelps taxpayerValidity unconfirmed
  The PCIT cancelled my registration under s.12AB(4) for a specified violation resting entirely on an addition made in assessment. The Tribunal has since deleted that addition. Does the cancellation survive?
  No. Where the order under s.12AB(4) is founded entirely on the outcome of another proceeding, its fate depends on the sustainability of that foundational finding; once the Tribunal reversed the quantum findings on which the alleged specified violation rested, the cancellation could not survive independently. The Tribunal set aside the cancellation and directed restoration of the registration.
• Arakere Channappa Vishwanath v ITO ITATHelps taxpayerValidity unconfirmed
  The Assessing Officer has taxed the gross winnings figure the online gaming platform reported for me, refusing to look at my buy-ins because s.58(4) allows no deduction. My buy-ins actually exceeded my winnings. Is that assessment sustainable?
  No. The Bangalore Bench held that s.58(4) operates only after there is income by way of winnings; it does not authorise the Department to treat gross wallet credits or recycled gaming funds as income in the first place. Since the very information obtained from the platform showed buy-ins of Rs 2,61,51,624 against gross winnings of Rs 2,33,52,271 — a net loss — there was no taxable income under s.115BB and the whole addition was deleted.
• Kimaya Buildtech LLP v DCIT ITATHelps taxpayerValidity unconfirmed
  The addition against me rests on a WhatsApp chat found on someone else's phone in his search, and on his statement under s.132(4). Does the presumption in s.132(4A) and s.292C apply to me?
  No. The presumption runs against the person from whose possession or control the material was found, not against a third party named in it. Without corroborative material the assessee is not even required to explain the contents, and the Rs 4 crore on-money addition was deleted.
• Vasavi Developers v ACIT, Central Circle 3(2), Hyderabad ITATHelps taxpayerValidity unconfirmed
  After a search the Additional Commissioner has levied a s.271DA penalty equal to the whole of the cash the Department says we received on flat bookings. Nobody has identified a single payer or a single receipt over Rs 2,00,000. Can the penalty stand?
  No. The Tribunal held that s.269ST is not attracted merely because cash exists or because a cash receipt has been broadly admitted — the Revenue must prove the precise statutory violation, person-wise and transaction-wise, and where it has not, the s.271DA penalty cannot survive. It also held that the AO must record a clear satisfaction of the s.269ST violation in the assessment order itself, failing which the foundational jurisdiction to initiate s.271DA is absent.
• Arun Pratap Singh v ITO, New Delhi ITATHelps departmentValidity unconfirmed
  The Assessing Officer has disallowed my s.80GGC deduction and, on top of that, added five per cent of the donation under s.69C read with s.115BBE as commission I am presumed to have paid. Will the Tribunal delete at least the commission?
  Not necessarily. The Delhi Bench dismissed the appeal in its entirety, holding that where a search under s.132 on the recipient party produced sworn statements of the President and key office bearers admitting that donations received through banking channels were returned to donors in cash after deducting commission, the payment through NEFT and a valid donation receipt do not save the deduction. The order does not separately deal with the s.69C addition; it upholds the impugned order as a whole.
• Diach Chemicals and Pigments P Ltd v DCIT ITATHelps taxpayerValidity unconfirmed
  The department says my purchases are bogus. Do the suppliers' returns and the input credit allowed on those invoices count for anything in the income-tax assessment?
  They are part of the record, but they are not what carried this case. The addition was deleted on a much wider evidentiary base: notices the Assessing Officer himself issued under s.133(6) came back with direct confirmations from every supplier, the primary documents were complete, the books had been audited four ways with no defect pointed out, and actual production marginally exceeded the standard yield, so the raw material bought had demonstrably gone into the goods sold. The suppliers' returns and the input credit allowed on the purchases sit in that list of supporting facts; the operative paragraph rests on the addition being estimation and surmise with no substantive basis, and does not mention them.
• ACIT v Md. Illyas Hussain — the section reads "issue", not "serve": the Revenue's side of the section 143(2) point in a block assessment ITATHelps departmentValidity unconfirmed
  The Commissioner (Appeals) annulled the block assessment because no section 143(2) notice was served. Can the department save it by showing the notice was issued?
  The Patna Tribunal held that it could. It read section 158BC as requiring only the ISSUE of a notice under section 143(2) and not its service, found on the record that a notice had been issued on 20 August 1999 and received at the assessee's address, and added that in any event the assessee's block return, filed after the time allowed, was an invalid return so that no section 143(2) notice was required at all. It set aside the annulment and restored the appeal to the Commissioner (Appeals) to be decided on the merits.
• Sonaj And Company v DCIT — a belated block return under the 1995 Chapter is still a valid return, and the 2024 amendment proves it ITATHelps taxpayerValidity unconfirmed
  The block return was filed after the time given in the section 158BC notice and the notice under section 143(2) came more than twelve months later. The department says the return was non est. Is it?
  For a search governed by the 1995 Chapter XIV-B, no. The Pune Tribunal held that there was no provision in the erstwhile section 158BC making a block return filed beyond the time specified in the notice non est, so the belated return was a valid return, the notice under section 143(2) had to issue within twelve months of the end of the month in which it was filed, and a notice issued later made the block assessment null and void. The Tribunal reached that conclusion partly BECAUSE the amended section 158BC, applicable from 1 September 2024, now says expressly that a return furnished beyond the period allowed shall not be deemed to be a return under section 139 — a provision it treated as absent from the earlier law.
• DCIT v ACE Infracity Developers P Ltd ITATHelps taxpayer
  My lenders are NBFCs that make hundreds of loans. How much of their own affairs do I have to prove?
  Not their internal affairs. Where the lender is a non-banking finance company and lending is its regular business, identity is not in doubt, and creditworthiness is tested against its share capital, reserves and long-term advances rather than its turnover for the year. Allegations that the lender's directors were dummies do not touch the borrower unless the borrower is shown to be connected to them.
• Ashokkumar Gokulchand Sananda v ACIT, Akola Circle ITATHelps taxpayerValidity unconfirmed
  The CBDT cancelled my donee's s.35(1)(ii) approval with retrospective effect two years after I donated, and the reassessment has taken away my 175 per cent weighted deduction and added a notional commission. Does the deduction survive?
  Yes, on these facts. The Explanation in s.35(1) says in terms that the deduction shall not be denied merely because the approval granted to the institution has been withdrawn after the payment, so a retrospective cancellation is by itself no ground for disallowance. A general Investigation Wing report about the donee, never furnished to the donor and never linked to his particular transaction, will not carry the disallowance either, and the consequential s.69C commission addition falls with it.
• ACIT, Circle-1(1), Bilaspur v Anuj Prakash Gupta ITATHelps taxpayerUnder appeal
  The Assessing Officer disallowed my s.80GGC deduction purely because the political party was named in a search on registered unrecognised political parties. He has no evidence that I got anything back. Is that enough to sustain the disallowance?
  No. The Commissioner (Appeals) deleted the disallowance and the Tribunal upheld the deletion, holding that a disallowance in the hands of each donor requires primary evidence establishing that the particular transaction was not genuine — a bank trail, a statement or a confirmation linking that donor to the refund. General findings from a search in third-party cases, without confrontation or cross-examination, will not do.
• CMR Engineering Educational Society v DCIT ITATHelps taxpayerValidity unconfirmed
  After a search the PCIT (Central) has cancelled my society's registration under s.12AB(4) for a 'specified violation', relying on loose sheets and statements. Does he have to prove one of the listed violations, or is a general finding of misuse enough?
  He has to prove one of the listed violations. Section 12AB(4) as amended by the Finance Act 2022 is not a general power to withdraw registration: cancellation can follow only on the occurrence of one or more of the 'specified violations' defined in the Explanation to that sub-section, and the onus of establishing that occurrence lies on the Department. Suspicion, however strong, will not do.
• Garware Technical Fibres Ltd v DCIT ITATCuts both waysValidity unconfirmed
  The addition rests on a pen drive seized in the search and no s.65B certificate was drawn at the time. Does that kill it?
  No, not on these facts, and the reason is narrower than the headlines. The Commissioner (Appeals) called for a remand report, the Assessing Officer produced a certificate under s.65B(4) for the pen drive, and the assessee - which had never taken the point before the Assessing Officer - made no counter-comment when the certificate was put to it. On the record as the Commissioner (Appeals) found it the certificates had been drawn at the time of the search and were merely produced late. In the absence of any contrary material the addition based on the pen drive was upheld, for all eight years. The order was not otherwise against the assessee: on quantum it confined the tax to the profit element in the unrecorded receipts and directed year-by-year percentages, and on the weighted deduction it allowed the whole of the revenue expenditure for one year.
• Statutory position — which regime governs a search: the four dating windows and the revived Chapter XIV-B from 1 September 2024 CBDT Circulars & InstructionsCuts both ways
  A search was carried out at my client's premises in March 2025 and the notice quotes section 158BC. My whole file of authority is on section 153A. Which law actually applies to him?
  Chapter XIV-B, as substituted by section 49 of the Finance (No. 2) Act 2024 with effect from 1 September 2024. Section 158BA(1) applies the revived Chapter to every search initiated under section 132, and every requisition under section 132A, on or after 1 September 2024, and to nothing earlier. Section 153A cannot apply to him at all: sub-section (1) of that section is by its own words confined to a search initiated after 31 May 2003 but on or before 31 March 2021.
• Statutory position — section 158B: how the block period is built, and what "undisclosed income" now means CBDT Circulars & InstructionsCuts both ways
  The search on my client began on 12 February 2025 and the last panchnama is dated 9 April 2025. What exactly is the block period, and which date ends it?
  The block period has two limbs. It is the previous years relevant to six assessment years preceding the previous year in which the search was initiated, PLUS the period starting on 1 April of the previous year in which the search was initiated and ending on the date of execution of the last of the authorisations. On your facts the search was initiated in the previous year 2024-25, so the second limb runs from 1 April 2024 to 9 April 2025 — the date of the last panchnama, not the date the search began and not 31 March 2025.
• Statutory position — section 158BD: the person who was not searched, and the two things that have changed for him CBDT Circulars & InstructionsCuts both ways
  Material seized in someone else's search has been passed to my client's Assessing Officer, who has issued a section 158BC notice. What is my client's block period, and from when does the department's time run?
  Your client's block period is not computed from his own affairs at all — it is the block period of the searched person. Where there is one specified person relevant to him, the first proviso to section 158BD makes his block period the same as that person's; where there is more than one, it is that of the specified person whose block period ends on the later date. Time for the department runs under section 158BE(3): twelve months from the end of the quarter in which the section 158BC notice was issued to your client.
• Statutory position — section 158BA(2) to (6): what abates on a search, what revives if the block order falls, and why the search year is assessed twice CBDT Circulars & InstructionsCuts both ways
  A search took place in November 2024 while my client's scrutiny assessment for an earlier year was pending. What happens to that assessment, and what happens if the block assessment is later annulled?
  The pending assessment abates. Section 158BA(2)(a) provides that any assessment, reassessment or recomputation under provisions other than Chapter XIV-B, pertaining to any assessment year falling in the block period and pending on the date of initiation of the search or the making of the requisition, shall abate and be deemed to have abated on that date. If the block proceeding or the block order is later annulled in appeal or other legal proceedings, section 158BA(5) revives the abated proceeding from the date the Principal Commissioner or Commissioner receives the order of annulment — and the revival itself ceases if the annulment is set aside.
• Statutory position — section 139(8A) and section 140B: the updated return, its five provisos, and the additional tax CBDT Circulars & InstructionsCuts both ways
  My client never declared his crypto gains. Can he still put them right by an updated return, how long has he got, and what will it cost him?
  An updated return under s.139(8A) may now be furnished at any time within FORTY-EIGHT months from the end of the relevant assessment year — the Finance Act 2025 substituted 'forty-eight' for 'twenty-four' with effect from 1 April 2025 — but only if none of five provisos bars it. It cannot be used at all if the updated return would be a return of a loss, or would decrease the total tax liability determined on the earlier return, or would produce or increase a refund; it cannot be used where a search under s.132, a requisition under s.132A or a survey under s.133A other than s.133A(2A) has taken place, or where seized assets or books of another person have been notified as belonging or pertaining to the assessee; and it cannot be used where an updated return has already been furnished for that year, or where ANY proceeding for assessment, reassessment, recomputation or revision is pending or has been completed for that year, or where SAFEMA, Benami, PMLA or Black Money Act information or information under a s.90 or s.90A agreement has been communicated to the assessee, or where prosecution under Chapter XXII has been initiated, or where the person is notified by the Board. A fourth proviso, inserted by the same Finance Act 2025, bars an updated return altogether where a show-cause notice under s.148A has been issued after thirty-six months from the end of the relevant assessment year, and a fifth proviso disapplies that bar where an order under s.148A(3) has determined that it is not a fit case to issue a notice under s.148. The price is set by s.140B: additional income-tax of twenty-five per cent of the aggregate of tax and interest if filed within twelve months of the end of the assessment year, fifty per cent within twenty-four months, sixty per cent within thirty-six months and seventy per cent within forty-eight months, over and above the tax, interest and fee otherwise payable.
• Statutory position — section 79A: no set-off against undisclosed income found in a search, requisition or survey, from AY 2022-23 CBDT Circulars & InstructionsCuts both ways
  A search threw up unaccounted stock and cash and the Assessing Officer has added it. I have a large brought-forward loss and unabsorbed depreciation sitting there. Can I set them off against the addition?
  For AY 2022-23 and every later year, no. Section 79A, inserted by the Finance Act 2022 (Act No. 6 of 2022) with effect from 1 April 2022, says that where, consequent to a search under s.132, a requisition under s.132A or a survey under s.133A other than s.133A(2A), the total income of any previous year includes undisclosed income, no set-off of any loss — brought forward or of the current year — and no set-off of unabsorbed depreciation under s.32(2) shall be allowed against that undisclosed income under any provision of the Act.
• CBDT letter of 18 December 2014 — coercion in recording statements CBDT Circulars & InstructionsHelps taxpayer
  What is the department's own position if you were pressured into an admission?
  That it will be viewed adversely. The Board directed strict compliance with its earlier instructions, told officers to avoid obtaining admissions under pressure, and repeated that the focus must be on gathering evidence.
• CBDT Instruction of 10 March 2003 — no confessions in search or survey CBDT Circulars & InstructionsHelps taxpayer
  Are officers allowed to press you for an admission during a search or survey?
  No. The Board's own instruction says no attempt should be made to obtain a confession as to undisclosed income. Officers are to collect evidence instead, because confessions without credible evidence get retracted and achieve nothing.
• CBDT Instruction No. 1916 of 11 May 1994 — jewellery that is not to be seized CBDT Circulars & InstructionsHelps taxpayer
  The search party found my family's gold. Is there a quantity the department is not supposed to touch?
  Yes, for seizure. The Board's instruction tells the authorised officer not to seize gold jewellery and ornaments up to 500 grams per married lady, 250 grams per unmarried lady and 100 grams per male member of the family where the person is not assessed to wealth-tax, and to leave more than that where the status of the family and the customs of the community justify it. It is written as a seizure instruction, and whether it also bars an addition is a separate fight.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.