Facts of the Case

The present appeals were filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT), wherein the Tribunal directed deletion of additions made by the Assessing Officer under Section 68 of the Income Tax Act during assessment proceedings under Section 153A arising from a search action.

The Revenue contended that the Commissioner of Income Tax (Appeals) [CIT(A)] had erred in law in granting relief to the assessees. The matter reached the Delhi High Court under Section 260A of the Income Tax Act.

The dispute essentially concerned whether additions under Section 68 could be sustained in a Section 153A assessment in the absence of incriminating material found during the course of search.

 Issues Involved

  1. Whether additions under Section 68 can be made in proceedings under Section 153A without any incriminating material found during search?
  2. Whether the ITAT was justified in following the precedent laid down in CIT vs Kabul Chawla?
  3. Whether any substantial question of law arose for consideration under Section 260A?

 Petitioner’s Arguments (Revenue’s Contentions)

  • The Revenue argued that the ITAT erred in law by deleting additions made under Section 68.
  • It was contended that the CIT(A) wrongly interfered with the assessment order.
  • The Revenue sought restoration of the additions and challenged the applicability of earlier precedents.

 Respondent’s Arguments (Assessee’s Contentions)

  • The assessees contended that no incriminating material was found during the search to justify additions under Section 68.
  • They relied upon the settled legal position in Commissioner of Income Tax vs Kabul Chawla (2016) 380 ITR 573 (Del.).
  • It was argued that completed assessments cannot be disturbed under Section 153A in the absence of incriminating evidence.

 Court Findings / Observations

The Delhi High Court observed that the ITAT had correctly followed the ratio laid down in CIT vs Kabul Chawla, which governs the scope of Section 153A assessments.

The Court further noted that in a connected matter involving the same assessee for previous years, namely Pr. Commissioner of Income Tax vs Best Infrastructure India (P) Ltd., ITA 869/2017, the deletion of similar additions under Section 68 had already been upheld.

The Court found no infirmity in the ITAT’s order and held that no substantial question of law arose for consideration.

 Court Order / Final Decision

The Delhi High Court dismissed all the Revenue’s appeals and upheld the ITAT’s order deleting the additions made under Section 68 in the Section 153A assessments.

 Important Clarification by the Court

The judgment reinforces the principle that:

  • Completed assessments cannot be reopened under Section 153A merely on the basis of reassessment powers unless incriminating material is found during search.
  • Section 68 additions in search assessments require substantive incriminating evidence.

This decision strengthens the jurisprudence established in Kabul Chawla.

 Sections Involved

  • Section 68 – Unexplained Cash Credits
  • Section 153A – Assessment in Case of Search or Requisition
  • Section 260A – Appeal to High Court

 Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:8952-DB/SRB30102017ITA9002017_124955.pdf

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