Facts of the Case

The Revenue filed an appeal under Section 260A challenging the deletion of an addition of ₹21,00,00,000 made in the hands of Som Hari Infrastructure Pvt. Ltd. for Assessment Year 2012-13. The addition was made by the Assessing Officer on the ground that a Kolkata-based firm which had advanced the said amount lacked creditworthiness. The assessment arose out of search proceedings.

The Commissioner of Income Tax (Appeals)-24, by order dated 22.06.2020, deleted the addition holding that no incriminating material relating to the alleged unsecured loan was found during the course of search and that the conclusion regarding lack of creditworthiness was drawn only during assessment proceedings. The CIT(A) relied on the judgment of the Delhi High Court in Commissioner of Income Tax (Central)-III vs. Kabul Chawla. The ITAT, Delhi Bench “G”, upheld the order of the CIT(A) vide order dated 30.04.2025. Aggrieved, the Revenue approached the High Court.

Issues Involved

Whether an addition under Section 153A can be sustained in respect of a completed assessment year in the absence of any incriminating material found during search, and whether issues relating to creditworthiness examined only during assessment proceedings can justify such addition.

Petitioner’s Arguments

The Revenue contended that the Assessing Officer was justified in making the addition as the lender lacked creditworthiness and argued that the CIT(A) and the ITAT erred in deleting the addition.

Respondent’s Arguments

The assessee relied on settled law that in search-based assessments under Section 153A, no addition can be made for completed assessment years unless supported by incriminating material unearthed during search. It was submitted that no such material existed and that the issue of creditworthiness was examined only during assessment proceedings.

Court Order / Findings

The Delhi High Court observed that both the CIT(A) and the ITAT had recorded concurrent findings of fact that no incriminating material was found during the search for Assessment Year 2012-13. The Court noted that the reliance placed on the judgment in Kabul Chawla was correct and further observed that the said judgment has been affirmed by the Hon’ble Supreme Court in Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell Pvt. Ltd.

The Court held that in the absence of incriminating material, the Assessing Officer lacked jurisdiction to make the impugned addition in proceedings under Section 153A. It further held that the issue raised by the Revenue was purely factual and did not give rise to any substantial question of law.

Important Clarification

The High Court reiterated that for completed assessment years, additions under Section 153A are impermissible unless based on incriminating material found during the search. Issues such as creditworthiness examined only during assessment proceedings cannot substitute the statutory requirement of incriminating material.

Final Outcome

The appeal filed by the Revenue was dismissed. The deletion of the addition of ₹21,00,00,000 was upheld, and the orders of the CIT(A) and the ITAT were affirmed.

 

Link to download order https://www.mytaxexpert.co.in/uploads/1769504182_THEPR.COMMISSIONEROFINCOMETAXCENTRAL1VsSOMHARIINFRASTRUCTUREPVT.LTD..pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.