Facts of the Case

The Revenue filed multiple appeals 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 assessee’s premises on 19 October 2010, followed by issuance of notices under Section 153A.

For earlier assessment years (2006–07 to 2008–09), returns had already been filed and assessments were completed under Section 143(3) prior to the search. The ITAT upheld the findings of the Commissioner of Income Tax (Appeals) [CIT(A)] that no incriminating material was found during the search to justify additions under Section 153A.

For later years, the ITAT examined the additions made by the Assessing Officer (AO) and found them unsustainable on merits.

Issues Involved

  1. Whether additions can be made under Section 153A in absence of incriminating material found during search.
  2. Whether statements recorded during survey (Section 133A) without cross-examination can justify additions.
  3. Whether completed assessments can be disturbed without fresh incriminating evidence.

Petitioner’s Arguments (Revenue)

  • The Revenue relied on statements recorded during a survey under Section 133A in the case of a third party (M/s Nitin Enterprises), alleging issuance of bogus bills.
  • It was argued that the assessee made payments through cheques against bogus transactions and later received cash.
  • The Revenue contended that such material justified additions under Section 153A.

Respondent’s Arguments (Assessee)

  • No incriminating material was found during the search relating to the additions made.
  • The statements relied upon were recorded behind the assessee’s back and without opportunity of cross-examination.
  • Documentary evidence, including settlement records with the alleged parties, was produced before the AO and not disputed.
  • Reliance was placed on the binding precedent of CIT v. Kabul Chawla.

Court Findings / Order

  • The Court upheld the concurrent findings of CIT(A) and ITAT that no incriminating material was found during the search.
  • For completed assessments (AY 2006–07 to 2008–09), additions under Section 153A were held to be beyond jurisdiction in absence of incriminating material.
  • Statements recorded under Section 133A without cross-examination were held unreliable.
  • The Court observed that factual findings of lower authorities were well-reasoned and did not give rise to any substantial question of law.
  • Accordingly, all appeals filed by the Revenue were dismissed.

Important Clarification

  • Additions under Section 153A must be based on incriminating material found during search.
  • Completed assessments cannot be reopened merely on suspicion or third-party statements.
  • Statements recorded during survey without cross-examination lack evidentiary value.
  • The judgment reinforces the principle laid down in CIT v. Kabul Chawla (2016) 380 ITR 573.

Sections Involved

  • Section 153A – Assessment in case of search
  • Section 143(3) – Regular assessment
  • Section 133A – Survey proceedings
  • Income Tax Act, 1961

Link to download the order -

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

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