Facts of the Case

The present appeal was filed by the Revenue challenging the order dated 8 April 2021 passed by the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2007–08.

The Assessing Officer had made an addition of ₹33,91,35,982/- under Section 68 of the Income Tax Act, 1961 on account of unexplained credits. The addition was made during assessment proceedings initiated under Section 153A pursuant to a search.

However, the ITAT deleted the said addition on the ground that no incriminating material or documents were found during the search to justify such addition.

Issues Involved

  1. Whether an addition under Section 68 can be sustained in proceedings under Section 153A in the absence of incriminating material found during search.
  2. Whether completed/unabated assessments can be reassessed without any new material.
  3. Whether reliance on judicial precedent restricting Section 153A powers is justified.

Petitioner’s (Revenue) Arguments

  • The ITAT erred in deleting the addition made under Section 68.
  • The Assessing Officer is empowered to frame assessment under Section 153A even without the existence of incriminating material.
  • The condition of existence of incriminating material is not expressly stated in Section 153A.
  • Reliance placed by ITAT on judicial precedent was incorrect as the Revenue has challenged the same before the Supreme Court.

Respondent’s Arguments

  • None appeared on behalf of the respondent before the High Court.

Court’s Findings / Order

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

  • The Court relied on its earlier judgment in Commissioner of Income Tax vs Kabul Chawla (2016) 380 ITR 573, which held that:

In absence of incriminating material, completed assessments cannot be interfered with under Section 153A.

  • The Court observed that although the said judgment has been challenged before the Supreme Court, there is no stay on its operation.
  • Applying the principle laid down in:
    • Kunhayammed & Others vs State of Kerala (2000) 6 SCC 359
    • Shree Chamundi Mopeds Ltd. vs Church of South India Trust Association (1992) 3 SCC 1

the Court held that binding precedent must be followed unless stayed or set aside.

  • Consequently, the appeal was dismissed as being covered by binding precedent.

Important Clarification

  • Section 153A does not permit reassessment of completed/unabated assessments without incriminating material.
  • Mere search proceedings do not grant unfettered powers to reassess concluded matters.
  • Judicial precedents remain binding unless stayed by a higher court.

Sections Involved

  • Section 68 – Unexplained Cash Credits
  • Section 153A – Assessment in Case of Search or Requisition

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:1611-DB/MMH28042022ITA1322022_121148.pdf


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