Facts of the Case

The present appeals were filed by the Revenue challenging the order of the Income Tax Appellate Tribunal (ITAT) dated 12 July 2021, whereby the appeals of the Revenue were dismissed.

The core issue arose from search and seizure proceedings conducted under Section 132 of the Income Tax Act. During the assessment under Section 153A, the Revenue sought to make additions despite the absence of any incriminating material discovered during the search.

The assessee’s assessments had already attained finality prior to the date of search, thereby categorizing them as non-abated assessments.

Issues Involved

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

Petitioner’s (Revenue) Arguments

  • The ITAT erred in holding that no addition can be made under Section 153A without incriminating material.
  • The Revenue argued that similar issues are pending before the Supreme Court in multiple cases, including appeals arising from decisions like APAR Industries Ltd.
  • Therefore, the issue should be reconsidered and not treated as settled law.

Respondent’s (Assessee) Arguments

  • The issue is already conclusively settled by the Delhi High Court in CIT vs Kabul Chawla (2016) 380 ITR 573 (Delhi).
  • No incriminating material was found during the search.
  • Since the assessments were non-abated, no additions could legally be made under Section 153A.

Court’s Findings / Order

  • The Delhi High Court held that the issue is no longer res integra and is covered by the binding precedent in CIT vs Kabul Chawla.
  • It was observed that:
    • The assessments had attained finality prior to the search.
    • No incriminating material was found during the search.
  • Therefore, no additions could be made under Section 153A in respect of non-abated assessments.
  • The Court further noted:
    • Though some related judgments are pending before the Supreme Court, there is no stay on those judgments.
  • Relying on Supreme Court rulings in:
    • Kunhayammed & Ors. vs State of Kerala (2000) 6 SCC 359
    • Shree Chamundi Mopeds Ltd. vs Church of South India Trust (1992) 3 SCC 1

the Court held that binding precedents continue to apply unless stayed or set aside.

 Final Order: Appeals filed by the Revenue were dismissed.

Important Clarification

  • Additions under Section 153A:
    •  Allowed  Only when based on incriminating material found during search
    •  Not allowed  In case of non-abated (completed) assessments without seized material
  • Pending appeals before the Supreme Court do not dilute binding High Court precedents unless stayed.

Link to download the order https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:444-DB/MMH03022022ITA202022_225325.pdf

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