Facts of the Case

  • The Revenue filed an appeal against the order of ITAT dated 31 July 2020.
  • The case pertained to Assessment Year 2010–11.
  • ITAT deleted additions made by the Assessing Officer on the ground that:
    • No incriminating material was found during the search.
    • The assessment was non-abated (completed assessment).
  • The Revenue challenged reliance on judicial precedents like CIT vs Kabul Chawla.

Issues Involved

  1. Whether additions under Section 153A can be made without incriminating material found during search.
  2. Whether completed (non-abated) assessments can be disturbed in absence of such material.
  3. Whether reliance on Kabul Chawla principle is justified despite pending SLPs before the Supreme Court.

Petitioner’s Arguments (Revenue)

  • ITAT erred in deleting additions without examining merits.
  • Section 153A allows reassessment, and additions should not be restricted only to incriminating material.
  • Reliance on Kabul Chawla was improper as the issue is pending before the Supreme Court.

Respondent’s Arguments (Assessee)

  • No incriminating material was found during search.
  • The assessment had already attained finality (non-abated).
  • As per settled law, no additions can be made in such circumstances.

Court’s Findings / Order

  • The High Court upheld ITAT’s order and dismissed the Revenue’s appeal.
  • Key findings:
    • Both CIT(A) and ITAT recorded concurrent findings of fact that no incriminating material was found.
    • The case falls under non-abated assessment, hence no addition permissible.
    • Relied on:
      • CIT vs Kabul Chawla (2016)
      • PCIT vs Meeta Gutgutia (2017)
      • PCIT vs Bhadani Financiers Pvt. Ltd. (2021)
  • Held that:

Completed assessments can only be interfered with under Section 153A if incriminating material is found during search.

  • The Court concluded that:
    • No substantial question of law arises.
    • Appeal is dismissed.

Important Clarification by Court

  • Even though SLPs against Kabul Chawla are pending before the Supreme Court:
    • There is no stay on the judgment, hence it remains binding.
  • Legal position reaffirmed:
    • No addition in completed assessments without incriminating material.
    • Distinction between:
      • Abated assessments (pending at time of search)
      • Non-abated assessments (completed)

Sections Involved

  • Section 153A, Income Tax Act, 1961
  • Section 68, Income Tax Act, 1961
  • Section 132 (Search & Seizure provisions)

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH18102022ITA4102022_192519.pdf

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