Facts of the Case

The Revenue filed multiple appeals under Section 260A challenging a common order of the ITAT relating to Assessment Years 2008–09, 2009–10, and 2010–11. The Assessing Officer had made additions under Sections 68 and 69C on account of alleged unexplained credits and expenses.

The CIT(A) and ITAT deleted these additions on the ground that no incriminating material was found during the search conducted under Section 132. The assessees had already filed returns, which were accepted under Section 143(1), and no further scrutiny or reassessment notices were issued prior to the search. Therefore, the assessments had attained finality before the search date.

 Issues Involved

  1. Whether additions under Sections 68 and 69C can be made in proceedings under Section 153A without any incriminating material found during search.
  2. Whether Section 153A permits reassessment of completed assessments irrespective of seized material.
  3. Whether reliance on CIT vs Kabul Chawla is justified when the matter is pending before the Supreme Court.
  4. Whether ITAT erred in deleting additions without examining merits independently.

Petitioner’s Arguments (Revenue)

  • The ITAT erred in deleting additions made under Sections 68 and 69C.
  • Section 153A mandates assessment of total income for six years, irrespective of incriminating material.
  • The decision in CIT vs Kabul Chawla was wrongly relied upon, as it was not accepted by the Department and SLP was dismissed only due to low tax effect.
  • The issue has not attained finality as similar matters are pending before the Supreme Court.
  • Incriminating material was allegedly found during the search, justifying additions.

Respondent’s Arguments (Assessee)

  • No incriminating material was found during the search proceedings.
  • All transactions, including share application money, were fully disclosed and supported by documentary evidence such as bank statements, ITRs, and financial records.
  • The assessments had already attained finality prior to the search.
  • Additions under Section 153A cannot be made without seized material, as per settled law in CIT vs Kabul Chawla.

Court’s Findings / Order

  • The High Court held that under Section 260A, interference is permissible only on substantial questions of law.
  • It was observed that both CIT(A) and ITAT recorded concurrent findings that no incriminating material was found during the search, and such findings were not perverse.
  • The Court reaffirmed the legal position laid down in CIT vs Kabul Chawla (2016) 380 ITR 573, holding that:
    • No addition can be made under Section 153A in respect of completed assessments if no incriminating material is found during search.
  • The Court rejected Revenue’s contention regarding pending SLPs, stating that there is no stay on the Kabul Chawla judgment.
  • Since assessments had attained finality and no incriminating material existed, additions were not permissible.

Final Order

All appeals filed by the Revenue were dismissed as being devoid of merit.

Important Clarification

  • Section 153A does not allow arbitrary reassessment of completed assessments.
  • Additions must have a direct nexus with incriminating material found during search.
  • Completed (non-abated) assessments cannot be disturbed without such material.
  • The Kabul Chawla principle continues to hold the field unless stayed or overturned by the Supreme Court.

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