Facts of the Case

The present appeal was filed by the Revenue challenging the order of the Income Tax Appellate Tribunal (ITAT) dated 16 July 2021 for Assessment Year 2009–10.

A search and seizure operation under Section 132 of the Income Tax Act was conducted on 20 June 2014. By that date, the time limit for issuance of notice under Section 143(2) had already expired.

It was an undisputed fact that no incriminating material was found during the course of the search relating to the relevant assessment year.

The ITAT held that in the absence of incriminating material, no addition could be made under Section 153A. The Revenue challenged this finding before the Delhi High Court.

Issues Involved

  1. Whether additions under Section 153A of the Income Tax Act can be made without any incriminating material found during search.
  2. Whether completed (non-abated) assessments can be interfered with in absence of seized evidence.

Petitioner’s Arguments (Revenue)

  • The ITAT erred in holding that additions under Section 153A must be based only on incriminating material.
  • Section 153A does not explicitly restrict additions only to seized material.
  • Reliance was placed on pending proceedings before the Supreme Court (SLP in Apar Industries Ltd.) involving similar issues.

Respondent’s Arguments (Assessee)

  • No incriminating material was found during the search operation.
  • The assessment had already attained finality before the date of search.
  • Additions under Section 153A cannot be made in absence of seized material for completed assessments.

Court’s Findings / Order

The Delhi High Court dismissed the appeal of the Revenue and upheld the ITAT order.

  • The Court relied on the settled law laid down in:
    • CIT vs Kabul Chawla (2016) 380 ITR 573
    • PCIT vs Meeta Gutgutia (2017)
  • It reiterated that:
    • Completed assessments can be interfered with only on the basis of incriminating material found during search.
    • Assessment under Section 153A cannot be arbitrary and must have nexus with seized material.
  • The Court also relied on:
    • PCIT vs Bhadani Financiers Pvt. Ltd. (2021)
  • Since:
    • No incriminating evidence was found, and
    • The limitation period under Section 143(2) had expired,

No addition could be made under Section 153A.

  • The Court concluded that no substantial question of law arose, and therefore, the appeal was dismissed.

Important Clarifications

  • Section 153A does not allow roving or arbitrary reassessment.
  • For non-abated (completed) assessments, additions are permissible only if incriminating material is found during search.
  • The distinction between:
    • Abated assessments → can be reassessed fully
    • Completed assessments → limited to incriminating material
      is reaffirmed.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3354-DB/MMH30082022ITA2892022_190845.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.