Sarvo Technologies Ltd vs. DCIT
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) quashed the assessment orders passed under Section 153A against Sarvo Technologies Ltd. for AYs 2010–11 and 2011–12. The Tribunal ruled that in the absence of incriminating material found during the search conducted on the assessee itself, the assessment framed under Section 153A was without jurisdiction and bad in law.
Background of the Case
The case arose out of a search operation under Section 132 of the Income Tax Act, 1961, conducted on 18.11.2015 on Shri Sajan Kumar Jain and the Pradeep Kumar Jindal Group. Sarvo Technologies Ltd., a group entity, was issued a notice under Section 153A following this search. The Assessing Officer (AO) made additions to income on the basis of statements recorded during the search, particularly that of accommodation entry provider Pradeep Kumar Jindal.
The AO also relied on statements of Sajan Kumar Jain, the director of the company, and passed orders adding substantial income under Sections 68 and 69C.
Key Grounds Raised by the Assessee
-
Jurisdictional Defect: Assessment was initiated under Section 153A instead of 153C, despite the search material relating to a third party.
-
No Incriminating Material Found: The assessment years were unabated, and no incriminating documents were found during the search on the assessee.
-
Violation of Natural Justice: No opportunity for cross-examination was provided to the assessee.
-
Statements Uncorroborated: Additions were made solely on the basis of third-party statements without corroborative evidence.
Tribunal’s Observations
The Tribunal accepted the assessee’s submissions, holding that:
-
For unabated assessments, additions cannot be made without incriminating material found during search on the assessee itself.
-
Statements recorded during the search on third parties, such as Pradeep Kumar Jindal, do not amount to incriminating material against the assessee unless corroborated with independent evidence.
-
Cross-examination was wrongly denied despite a timely adjournment request.
-
The jurisdictional route of Section 153C was bypassed, which was incorrect.
The ITAT relied on several precedents, including:
-
Abhisar Buildwell SC (459 ITR 212) – No addition in absence of incriminating material.
-
Pavitra Realcon (Del HC) – Statements alone without material cannot justify addition.
-
Divya Exim and Indo Autotech ITAT rulings – Similar facts; assessment quashed.
-
Anand Kumar Jain (Del HC) – Material from third-party search cannot support 153A assessment.
Conclusion and Impact
This judgment reinforces the legal principle that Section 153A assessments must be rooted in incriminating material found during a search on the assessee, especially in cases of unabated years. It also clarifies that mere statements from third parties, without opportunity for cross-examination or corroborating material, do not suffice to justify additions.
As a result, both assessments were quashed, marking a significant win for the assessee and offering a strong precedent for similarly placed taxpayers.