ITAT Raipur annuls assessment framed solely on undisclosed third‑party search material
Overview of the decision
The Income Tax Appellate Tribunal, Raipur Bench, in Jeewan Kukreja v. DCIT, has categorically held that an assessment order cannot stand when additions are founded exclusively on search material, electronic data, and investigation reports obtained from third parties, without supplying such material to the concerned assessee.
In this case, an amount of ₹89,97,950 was brought to tax as unexplained income on the footing that it represented accommodation entries traced through a system referred to as the “JSK Server”, unearthed in a search conducted in the J.M. Jain Group. The Assessing Officer claimed that the assessee was reflected in that parallel system under the code name “ROSHAN”. However, the underlying data and supporting documents were never furnished to the assessee at any stage of the assessment.
The Tribunal concluded that this omission amounted to a serious breach of the principles of natural justice, especially the rule of audi alteram partem, and therefore the assessment for AY 2022-23 was liable to be quashed in its entirety.
Central question before the Tribunal
The core issue examined by the Tribunal was:
Can an addition of ₹89,97,950, alleged to be unaccounted income from accommodation entries routed through the J.M. Jain Group, be sustained where all the relied‑upon material—JSK Server data, search documents, and Investigation Wing screenshots—was never supplied to the assessee for rebuttal?
The ITAT answered this in the negative and held that such an assessment is fundamentally flawed and unenforceable in law.
Factual matrix
Business profile of the assessee
- The assessee was engaged in the garment trade through a proprietary concern, M/s Utkal Mens Zone.
- Routine business activities were being carried out and regular books of account were maintained.
- No search or survey operation was carried out on the assessee directly under the Income Tax Act 1961.
Search in J.M. Jain Group and discovery of “JSK Server”
- The Revenue carried out a search and seizure operation in the J.M. Jain Group.
- During this action, the authorities claimed to have discovered a parallel unaccounted system of recording transactions, referred to as the “JSK Server”.
- This server allegedly captured both cheque and cash components of various transactions, including accommodation entries and unrecorded turnover of multiple concerns.
According to the Investigation Wing, the name “ROSHAN” appearing in the JSK Server data corresponded to the assessee carrying on business as M/s Utkal Mens Zone.
Basis for the addition of ₹89,97,950
The Assessing Officer treated an amount of ₹89,97,950 as unexplained income of the assessee on the ground that it represented unaccounted transactions recorded in the JSK Server. For this purpose, the AO claimed reliance upon the following material:
- Extracts from the JSK Server
- Seized documents and electronic records found during the search in the J.M. Jain Group
- Statements of employees and persons connected with that group
- Copies of emails and internal electronic correspondences
- Bank account analysis and trail of alleged accommodation entries
- Screenshots and analysis reports forwarded by the Investigation Wing
However, none of the above items were actually provided to the assessee during the assessment proceedings.
Proceedings before the Assessing Officer and CIT(A)
Actions taken by the Assessing Officer
The AO completed the assessment by making two major additions:
- ₹89,97,950 – treated as unexplained and unaccounted income, allegedly representing accommodation entries linked to the JSK Server.