Facts of the Case

The present case involves multiple appeals filed by the Revenue against a common order of the Income Tax Appellate Tribunal (ITAT) concerning Assessment Years 2006-07 to 2011-12. A search and seizure operation was conducted at the premises of the assessee, M/s Meroform India Pvt. Ltd., on 19 October 2010. Subsequently, notices under Section 153A of the Income Tax Act, 1961 were issued.

For earlier assessment years (2006-07 to 2008-09), assessments had already been completed under Section 143(3) prior to the search. The Assessing Officer (AO) made additions under Section 153A despite no incriminating material being found during the search.

Issues Involved

  1. Whether additions can be made under Section 153A of the Income Tax Act, 1961 in the absence of incriminating material found during a search.
  2. Whether completed assessments can be reopened under Section 153A without fresh evidence.
  3. Validity of reliance on third-party statements recorded without cross-examination.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that statements recorded during survey proceedings under Section 133A (in the case of M/s Nitin Enterprises) indicated that the assessee was involved in bogus transactions.
  • It was argued that the assessee issued cheques against bogus bills and received cash in return.
  • Based on such statements, the Revenue justified additions made under Section 153A.

Respondent’s Arguments (Assessee)

  • The assessee argued that no incriminating material was found during the search operation.
  • It relied on the settled legal position laid down in CIT vs Kabul Chawla (2016) 380 ITR 573 (Delhi HC).
  • The assessee highlighted that:
    • Completed assessments cannot be disturbed without incriminating material.
    • Statements recorded behind its back without cross-examination have no evidentiary value.
    • Documentary evidence regarding transactions and settlements was already produced before the AO. 

Court’s Findings / Order

  • The Delhi High Court upheld the findings of both CIT(A) and ITAT.
  • It observed that:
    • No incriminating material was found during the search to justify additions under Section 153A.
    • For completed assessments, additions cannot be made in absence of such material.
    • Statements recorded without giving opportunity for cross-examination cannot be relied upon.
  • The Court found that the ITAT had correctly applied the law laid down in CIT vs Kabul Chawla.
  • It further held that the findings of CIT(A) and ITAT were concurrent findings of fact.

Important Clarification

  • Section 153A assessments must be based on incriminating material found during search.
  • Completed assessments (non-abated assessments) cannot be reopened arbitrarily.
  • Third-party statements without cross-examination lack evidentiary value.
  • Reinforces binding precedent of CIT vs Kabul Chawla.

Sections Involved

  • Section 153A – Assessment in case of search or requisition
  • Section 143(3) – Regular assessment
  • Section 133A – Survey proceedings

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2019:DHC:7417-DB/SMD22072019ITA6582019_164954.pdf

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