Facts of the Case

The Revenue filed multiple appeals before the Delhi High Court 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 of the Income Tax Act, 1961.

For Assessment Years 2006–07 to 2008–09, the assessments had already been completed under Section 143(3) prior to the search. The Assessing Officer (AO) made additions under Section 153A despite absence of fresh incriminating material.

The CIT(A) and ITAT held that such additions were not sustainable.

Issues Involved

  1. Whether additions can be made under Section 153A of the Income Tax Act, 1961 in absence of incriminating material found during search.
  2. Whether completed assessments can be reopened under Section 153A without new evidence.
  3. Whether statements recorded during survey (u/s 133A) without cross-examination can justify additions.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that the ITAT erred in deleting additions made by the AO.
  • It relied on statements recorded during survey proceedings under Section 133A, particularly relating to alleged bogus billing by third parties.
  • It was argued that the assessee had routed transactions through such entities and therefore additions were justified.

Respondent’s Arguments (Assessee)

  • The assessee argued that no incriminating material was found during the search.
  • For earlier years (2006–07 to 2008–09), assessments had already attained finality.
  • The assessee relied on the binding precedent of CIT vs Kabul Chawla (2016) 380 ITR 573 (Delhi HC).
  • It was submitted that statements recorded behind the assessee’s back without cross-examination cannot be relied upon.
  • The assessee also produced documentary evidence showing genuine business transactions and settlement of disputes with alleged parties.

Court Findings / Order

  • The Delhi High Court upheld the findings of the CIT(A) and ITAT.
  • It reiterated that no addition can be made under Section 153A in respect of completed assessments unless incriminating material is found during search.
  • The Court relied on the precedent laid down in CIT vs Kabul Chawla.
  • It held that:
    • For AYs 2006–07 to 2008–09, additions were beyond the scope of Section 153A.
    • For later years, the ITAT correctly appreciated evidence and deleted additions.
    • Statements recorded without cross-examination cannot be relied upon.
  • The Court concluded that no substantial question of law arose.

 All appeals filed by the Revenue were dismissed.

Important Clarification

  • Section 153A does not permit arbitrary reassessment of completed assessments.
  • Additions must be strictly based on incriminating material found during search.
  • Statements recorded under Section 133A without opportunity for cross-examination have weak evidentiary value.
  • The ruling reinforces judicial consistency with CIT vs Kabul Chawla principle. 

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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