Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act challenging the order dated 16.05.2023 passed by the Income Tax Appellate Tribunal in ITA No. 2624/DEL/2016 relating to Assessment Year 2007-08. The case arose out of search proceedings conducted under Section 132, pursuant to which assessments were framed under Section 153A. The Assessing Officer made multiple additions including unexplained cash credit, rent for non-genuine business purpose, foreign travel expenses, unexplained liabilities, sales of malwa and addition under Section 69B. The CIT(A) deleted the additions holding that no incriminating material pertaining to the relevant assessment year was found during the search. The Tribunal dismissed the Revenue’s appeal relying on settled law.

Issues Involved

Whether additions can be made under Section 153A for an unabated assessment year in absence of incriminating material found during search, and whether the Tribunal erred in dismissing the Revenue’s appeal by relying on binding judicial precedents.

Petitioner’s Arguments

The Revenue contended that Section 153A permits assessment and reassessment of total income and is not confined only to incriminating material found during search. It was argued that the CIT(A) erred in deleting the additions and in admitting additional evidence without proper confrontation to the Assessing Officer.

Respondent’s Arguments

The assessee relied on the judgment of the Delhi High Court in Kabul Chawla and the subsequent affirmation by the Supreme Court in Principal Commissioner of Income Tax vs. Abhisar Buildwell Pvt. Ltd., contending that in case of completed or unabated assessments, no addition can be made under Section 153A unless based on incriminating material found during the search.

Court Order / Findings

The Delhi High Court noted that both the CIT(A) and the Tribunal recorded a categorical finding of fact that no incriminating material pertaining to Assessment Year 2007-08 was found during the search. The Court observed that the Tribunal correctly applied the law laid down in Kabul Chawla, which has been affirmed by the Supreme Court in Abhisar Buildwell Pvt. Ltd. The Court held that where two appellate authorities have concurrently found absence of incriminating material, the issue becomes a pure question of fact. Relying on Abhisar Buildwell, the Court held that for unabated assessment years, additions under Section 153A are impermissible without incriminating material.

Important Clarification

The Court clarified that in respect of completed or unabated assessments, jurisdiction under Section 153A to make additions arises only when incriminating material is found during search. In absence thereof, assessments cannot be disturbed under Section 153A, though reopening under Sections 147/148 remains permissible subject to statutory conditions.

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court held that no substantial question of law arose for consideration and upheld the order of the Income Tax Appellate Tribunal deleting the additions made under Section 153A for Assessment Year 2007-08.

Link to Download order- https://mytaxexpert.co.in/uploads/1769502982_PR.COMMISSIONEROFINCOMETAX1VsMIRAGEHOMESPVT.LTD..pdf

 

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