Facts of the Case

The present batch of appeals was filed by the Revenue under Section 260A of the Income Tax Act, 1961 challenging the order of the Income Tax Appellate Tribunal (ITAT) for Assessment Years 2008-09, 2009-10, and 2010-11. The ITAT had upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)] directing deletion of additions made under Sections 68 and 69C of the Act.

The additions were made by the Assessing Officer (AO) during assessments framed under Section 153A pursuant to a search conducted under Section 132. However, it was observed that no incriminating material was found during the search and the assessments had already attained finality prior to the date of search.

Issues Involved

  1. Whether additions under Sections 68 and 69C can be made in assessments under Section 153A in absence of incriminating material.
  2. Whether completed assessments can be reassessed under Section 153A without any new evidence found during search.
  3. Whether ITAT erred in relying on judicial precedent without independently examining merits.

Petitioner’s Arguments (Revenue)

  • The ITAT erred in deleting additions made under Sections 68 and 69C relating to unexplained credits and expenses.
  • Section 153A mandates assessment of total income for six assessment years irrespective of incriminating material.
  • The reliance on CIT vs Kabul Chawla (2016) 380 ITR 573 (Delhi HC) was incorrect as the issue has not attained finality and SLPs are pending before the Supreme Court.
  • Incriminating material was allegedly found during the search and therefore additions were justified.

Respondent’s Arguments (Assessee)

  • No incriminating material was found during the search under Section 132.
  • The assessments had already attained finality prior to the search.
  • All transactions, including share capital and premium, were duly substantiated with documentary evidence proving identity, creditworthiness, and genuineness.
  • The case was squarely covered by the binding precedent of CIT vs Kabul Chawla.

Court’s Findings / Order

  • The High Court held that its jurisdiction under Section 260A is limited to substantial questions of law.
  • It was confirmed that no incriminating material was found during the search, and both CIT(A) and ITAT had recorded concurrent findings of fact.
  • The Court relied on CIT vs Kabul Chawla, which establishes that:
    • No addition can be made under Section 153A in respect of completed assessments without incriminating material.
  • The Court rejected the Revenue’s contention and held that the issue is already settled.
  • All appeals filed by the Revenue were dismissed as devoid of merit.

Important Clarification

  • Even if Section 153A permits reassessment of six years, additions in non-abated (completed) assessments can only be made if incriminating material is found during search.
  • Pending SLPs do not dilute the binding nature of jurisdictional High Court judgments unless stayed.

Sections Involved

  • Section 153A – Assessment in case of search or requisition
  • Section 132 – Search and seizure
  • Section 68 – Unexplained cash credits
  • Section 69C – Unexplained expenditure
  • Section 260A – Appeal to High Court

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:2802-DB/MMH09092021ITA812020_221337.pdf

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