Facts of the Case

The present appeals were filed by the Revenue challenging a consolidated order passed by the Income Tax Appellate Tribunal (ITAT) for Assessment Years 2000–01 to 2003–04.

A search under Section 132 of the Income Tax Act, 1961 was conducted on 22 September 2005 at the premises of the assessee, M/s PGF Ltd. Thereafter, assessments were framed under Section 153A on 28 December 2007.

The Commissioner of Income Tax (Appeals) [CIT(A)] quashed the assessments, and the ITAT upheld the same, holding that no incriminating material was found during the search to justify additions under Section 153A.

Issues Involved

  1. Whether additions/disallowances can be made under Section 153A in absence of incriminating material found during search?
  2. Whether Section 153A allows reassessment of completed assessments even without any seized material?
  3. Whether statements recorded under Section 132(4) can independently constitute incriminating material?

Petitioner’s Arguments (Revenue)

  • Section 153A does not mandatorily require incriminating material for making additions.
  • The provision begins with a non-obstante clause, overriding Sections 139, 147, 148, etc.
  • Reliance was placed on judicial precedents including:
    • CIT v. Kabul Chawla (argued to be misapplied)
    • CIT (Central) Kanpur vs Rajkumar Arora
  • It was argued that:
    • Assessing Officer can reassess total income, not limited to seized material
    • Statements under Section 132(4) can be treated as incriminating evidence
  • Additional reliance was placed on Supreme Court and High Court findings alleging bogus transactions by the assessee

Respondent’s Arguments (Amicus Curiae on behalf of Assessee)

  • All assessment years involved were unabated (completed assessments) prior to search.
  • No incriminating material was found during search proceedings.
  • Additions were based only on:
    • Earlier ITAT orders
    • Recasted accounts
  • Judicial position consistently holds that:
    • No addition can be made under Section 153A without incriminating material, especially for completed assessments
  • Even statements under Section 132(4), without corroborative material, cannot justify additions

Court’s Findings / Order

1. Law Settled – Incriminating Material is Mandatory

The Court reaffirmed the ratio of CIT v. Kabul Chawla (380 ITR 573) that:

  • Completed assessments can be interfered with only on the basis of incriminating material found during search

2. No Material Found During Search

  • No incriminating documents or evidence were found during the search
  • Additions were based on pre-existing material, which is not permissible

3. Statements u/s 132(4) Not Sufficient Alone

  • No statement under Section 132(4) was even produced before the Court
  • Even otherwise, statements alone without corroboration cannot justify additions

4. Subsequent Judgments Cannot Be Treated as Incriminating Material

  • Supreme Court judgment (2013) cannot be treated as incriminating material for a 2005 search

5. No Substantial Question of Law

  • The Court concluded that no substantial question of law arises, hence appeals dismissed

Important Clarifications

  • Section 153A distinguishes between abated and unabated assessments
  • For:
    • Abated assessments → fresh assessment possible
    • Completed (unabated) assessments → only based on incriminating material
  • Judicial consistency across High Courts supports this principle
  • Statements under Section 132(4):
    • Must be backed by evidence
    • Cannot independently justify additions

Sections Involved

  • Section 132 – Search and Seizure
  • Section 132(4) – Statement during search
  • Section 153A – Assessment in case of search
  • Section 147 / 148 – Reassessment provisions
  • Section 143(1), 143(2) – Assessment procedures

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH14112022ITA5282019_104103.pdf

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