ITAT Mumbai on Section 153A, Interest Additions and Unexplained Money: Detailed Analysis of Bechar Raghvji Patel Vs ACIT

1. Background of the Search and Group Assessments

A search under Section 132 was conducted on 08.08.2019 in the case of Patel RPL Realty Group. Pursuant to this action, the Assessing Officer (AO) framed assessments under Section 143(3) read with Section 153A for various group entities and individuals, including:

  • Mr. Bechar R. Patel
  • Mr. Hiren Patel
  • Mr. Ankit B. Patel

The central controversy before the Income Tax Appellate Tribunal (ITAT) Mumbai related to:

  • Validity of Section 153A assessments for an unabated year where no incriminating material was allegedly found;
  • Taxability of interest receipts and interest payments discovered through seized Tally extracts;
  • Applicability of Section 69A and Section 69C to such interest entries; and
  • Sustainability of a small addition based on alleged differences in loan figures.

Multiple appeals by the assessees and one by the Revenue arose from common search and assessment proceedings, prompting the Tribunal to dispose them through a consolidated order.

Note: The assessment for AY 2012-13 in the case of Mr. Bechar R. Patel was treated as the lead matter for the Section 153A issue, and the appeals for AY 2019-20 in the case of Mr. Hiren Patel and Mr. Ankit B. Patel were considered lead cases for interest and loan reconciliation issues.

2. AY 2012–13 – Unabated Year and Jurisdiction under Section 153A

2.1 Grounds Raised by the Assessee

For AY 2012-13, the assessee, Mr. Bechar R. Patel, challenged:

  1. The very validity of the block assessment under Section 143(3) r.w.s. 153A, alleging violation of natural justice and lack of jurisdiction.
  2. An addition of Rs. 50,00,000 made under Section 68 r.w.s. Section 115BBE in respect of Olender Manufacture & Credit Ltd, on the basis that no incriminating material was found during search.

2.2 CIT(A)’s View on “Incriminating Material”

The CIT(A) examined what constitutes “incriminating material” in the context of Section 153A. While the Income Tax Act 1961 does not define the phrase, the CIT(A) laid down broad characteristics:

  • It must be a document or evidence unearthed during search;
  • It should indicate that what is recorded in regular books is not real or not complete;
  • It must prima facie reveal that the true nature of a transaction differs from its recorded form;
  • Material gathered during a detailed search investigation that exposes a scheme of tax evasion or illegal modus operandi, and which has a bearing on total income, would qualify as incriminating.

On that basis, the CIT(A) broadly justified the AO’s power to invoke Section 153A where such incriminating material exists.

2.3 Reliance on Earlier ITAT Decision in J.S. Infrastructure

The assessee pointed out that the same search in Patel RPL Realty Group had already been dealt with by ITAT Mumbai in M/s J.S. Infrastructure vs. ACIT, IT(SS)A No. 3120/Mum/2025, order dated 23.12.2025. In that case, the Tribunal had held:

  • The only seized material was a ledger account already part of regular books;
  • No new incriminating document was discovered;
  • The assessee had fully explained unsecured loans through:
    • Confirmations
    • Bank statements
    • Financials
    • Return details of counterparties

Relying on Abhisar Buildwell (P.) Ltd. (2023) 149 taxmann.com 399 (SC), ITAT held in J.S. Infrastructure that for completed/unabated assessments, no addition can be made under Section 153A in the absence of incriminating material.

2.4 ITAT’s Ruling for AY 2012–13

The Tribunal observed:

  • The search was on 08.08.2019;
  • AY 2012–13 was an unabated (completed) year;
  • No incriminating document pertaining to the assessee was found in the search;
  • The addition of Rs. 11,77,110/- was not founded on any seized material.

Applying the ratio of Abhisar Buildwell (P.) Ltd. and following its own decision in M/s J.S. Infrastructure (same search group), the ITAT held:

  • Jurisdiction under Section 153A cannot be validly exercised for an unabated year in the absence of incriminating material;
  • The assessment under Section 153A for AY 2012–13 was bad in law;
  • Consequently, the addition made was quashed in entirety.

Thus, the assessee’s appeal for AY 2012–13 was allowed.

3. AY 2019–20 – Interest Receipts and Payments Based on Tally Seizures

For later years (particularly AY 2019-20), the controversy shifted from jurisdiction to quantum and character of income, based on seized Tally records.

3.1 Nature of Seized Material and AO’s Additions

During the search, certain pages (pages 3 to 6 of bundle no. 10, party no. AB-3) were seized, reflecting:

  • Party-wise interest computations;
  • Entries with the notation “booked” against various names;
  • Data linking to figures in the assessee’s balance sheet and TDS claims.

The AO concluded that these represented:

  • Unaccounted interest receipts of Rs. 92,63,035/-, taxable as unexplained money under Section 69A;
  • Unaccounted interest expenditure of Rs. 87,96,911/-, taxable under Section 69C as unexplained expenditure.