Facts of the Case

The matter arose out of search and seizure proceedings conducted against the respondent-assessees. Consequent to the search, assessments were framed under Section 153A of the Income Tax Act wherein additions were made by the Assessing Officer under Section 68 on account of alleged unexplained credits.

The assessees challenged these additions before the Commissioner of Income Tax (Appeals), and subsequently before the Income Tax Appellate Tribunal (ITAT). The ITAT deleted the additions. Aggrieved by the deletion, the Revenue preferred appeals before the Delhi High Court under Section 260A of the Income Tax Act.

 Issues Involved

  1. Whether additions under Section 68 can be sustained in an assessment framed under Section 153A in absence of incriminating material found during search?
  2. Whether the ITAT was justified in deleting the additions made by the Assessing Officer?
  3. Whether any substantial question of law arose for consideration by the High Court under Section 260A?

 Petitioner’s Arguments (Revenue’s Contentions)

  • The Revenue argued that the ITAT committed an error in law by deleting additions made under Section 68.
  • It was contended that the Assessing Officer was competent to make additions under Section 153A pursuant to the search proceedings.
  • The Revenue sought restoration of the additions and reversal of the ITAT’s findings.

Respondent’s Arguments (Assessee’s Contentions)

  • The assessees submitted that no incriminating material was discovered during the course of search to justify additions under Section 68.
  • It was argued that settled law laid down in CIT vs Kabul Chawla squarely applied to the present facts.
  • The respondents contended that in absence of incriminating evidence, completed assessments could not be disturbed.

 Court Findings / Observations

The Delhi High Court observed that the ITAT had correctly followed the law laid down in Commissioner of Income Tax vs Kabul Chawla (2016) 380 ITR 573 (Del.), which governed the issue relating to additions under Section 153A.

The Court further noted that similar additions under Section 68 in the same search proceedings had already been examined and upheld in the earlier judgment in Pr. Commissioner of Income Tax vs Best Infrastructure India (P.) Ltd., ITA 869/2017.

The Court found no legal infirmity in the ITAT’s order and held that the Tribunal’s deletion of additions was consistent with the established legal position.

 Court Order / Final Decision

The Delhi High Court dismissed all Revenue appeals and held that no substantial question of law arose for consideration under Section 260A of the Income Tax Act.

The order of the ITAT deleting additions under Section 68 in Section 153A assessments was upheld.

 Important Clarification / Legal Principle Settled

The Court reaffirmed the principle that:

In completed/unabated assessments under Section 153A, additions cannot be made unless based on incriminating material found during search.

This decision strengthens and reiterates the legal ratio laid down in Kabul Chawla.

Sections Involved

  • Section 153A – Assessment in case of search or requisition
  • Section 68 – Unexplained cash credits
  • 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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