Facts of the Case

The present appeals were filed by the Revenue challenging the order dated 11 January 2022 passed by the Income Tax Appellate Tribunal (ITAT) for Assessment Years 2009-10 and 2010-11.

The Assessing Officer had made additions under Section 153A of the Income Tax Act, including disallowance of deductions under Section 80IB. However, these additions were not based on any incriminating material found during the search proceedings.

The ITAT upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)] and deleted the additions on the ground that no incriminating material was found during the search.

Issues Involved

  1. Whether additions under Section 153A can be made without any incriminating material found during search proceedings.
  2. Whether completed assessments (non-abated) can be disturbed in absence of incriminating evidence.
  3. Whether ITAT was justified in deleting additions made under Section 80IB.

Petitioner’s Arguments (Revenue)

  • The ITAT erred in law by holding that additions under Section 153A cannot be made without incriminating material.
  • There is no statutory requirement mandating discovery of incriminating material during search for making additions.
  • The ITAT wrongly relied on the judgment in CIT vs Kabul Chawla (380 ITR 573) despite the issue being pending before the Supreme Court.
  • The deletion of additions relating to Section 80IB deductions was incorrect.

Respondent’s Arguments (Assessee)

  • The assessments for the relevant years had already been completed and were not pending at the time of search.
  • No incriminating material was found during the search to justify additions under Section 153A.
  • Established judicial precedents clearly prohibit interference with completed assessments in absence of incriminating material.

Court’s Findings / Order

  • The High Court observed that the ITAT correctly upheld the findings of CIT(A) that no incriminating material was found during the search.
  • It reaffirmed the legal position laid down in:
    • CIT vs Kabul Chawla (380 ITR 573)
    • PCIT vs Meeta Gutgutia (2017)
    • PCIT vs Bhadani Financiers Pvt. Ltd. (2021)
  • The Court held that:
    • Completed assessments cannot be interfered with under Section 153A in absence of incriminating material.
    • The law laid down in Kabul Chawla continues to hold the field as there is no stay by the Supreme Court.
  • Accordingly, no substantial question of law arose, and the appeals were dismissed.

Important Clarifications

  • Section 153A does not permit arbitrary additions; there must be a nexus with seized material.
  • Distinction clarified:
    • Abated assessments (pending): Can be reassessed fully
    • Non-abated assessments (completed): Can only be disturbed if incriminating material is found
  • Pending SLP before Supreme Court does not dilute binding precedent unless stayed.

Sections Involved

  • Section 153A – Assessment in case of search or requisition
  • Section 80IB – Deduction in respect of profits and gains
  • Section 132 – Search and seizure
  • Section 143(1) & 143(3) – Assessment provisions

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH17112022ITA4582022_103253.pdf

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