Facts of the Case

The present batch of appeals was filed by the Revenue under Section 260A challenging the common order of the Income Tax Appellate Tribunal (ITAT) for Assessment Years 2008-09, 2009-10, and 2010-11.

The Assessing Officer had made additions under Section 68 and Section 69C on account of alleged unexplained share capital/premium and expenditure. However, both the Commissioner of Income Tax (Appeals) [CIT(A)] and the ITAT deleted these additions.

A search under Section 132 was conducted, but no incriminating material was found during the search. The assessments in question had already attained finality prior to the search, as no notices under Section 143(2) or Section 148 had been issued earlier.

Issues Involved

  1. Whether additions under Sections 68 and 69C can be made in assessments framed under Section 153A without any incriminating material found during search?
  2. Whether completed (non-abated) assessments can be disturbed under Section 153A in absence of new evidence?
  3. Whether ITAT erred in relying on the judgment in CIT vs Kabul Chawla without examining merits independently?

Petitioner’s (Revenue’s) Arguments

  • The ITAT wrongly deleted additions made under Sections 68 and 69C.
  • Section 153A mandates assessment of total income for six years irrespective of incriminating material.
  • The reliance on CIT vs Kabul Chawla was misplaced as the issue had not attained finality and SLPs were pending.
  • Incriminating material was allegedly found during search, and assessments were not final prior to search.

Respondent’s (Assessee’s) Arguments

  • No incriminating material was found during the search proceedings.
  • All transactions relating to share capital were genuine and duly supported by documents such as bank statements, ITRs, audited financials, and ROC records.
  • The assessments had attained finality prior to the search.
  • Additions under Section 153A cannot be made in absence of incriminating material, as settled in CIT vs Kabul Chawla.

Court’s Findings

  • The High Court held that Section 260A allows interference only on substantial questions of law, not on factual findings unless perverse.
  • Both CIT(A) and ITAT had concurrently found that no incriminating material was discovered during the search, and such findings were not perverse.
  • The Court reaffirmed that completed assessments (non-abated) cannot be disturbed under Section 153A without incriminating material.
  • The judgment in CIT vs Kabul Chawla (2016) 380 ITR 573 was binding and applicable.
  • The Court rejected Revenue’s contention that the issue had not attained finality, noting that no stay existed on Kabul Chawla judgment.

Court Order / Decision

  • All appeals filed by the Revenue were dismissed.
  • The Court held that no addition can be made under Section 153A in absence of incriminating material for completed assessments.

Important Clarification / Legal Principle

  • No incriminating material = No addition under Section 153A for completed assessments.
  • Section 153A does not permit arbitrary reassessment; it must be based on material found during search.
  • The distinction between abated and non-abated assessments is crucial.
  • The ruling strengthens the precedent laid down in CIT vs Kabul Chawla.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:2802-DB/MMH09092021ITA812020_221337.pdf

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