Facts of the Case

A search under Section 132 of the Income-tax Act, 1961 was conducted in the case of the assessee group. For Assessment Year 2004–05, the Assessing Officer completed assessment under Section 153A making various additions. The CIT(A) deleted the additions holding that no incriminating material pertaining to the relevant assessment year was found during the search. The Revenue preferred an appeal before the Income Tax Appellate Tribunal, which dismissed the appeal by relying on settled law that in case of completed or unabated assessments, additions under Section 153A must be based on incriminating material found during the search. Aggrieved, the Revenue filed an appeal under Section 260A before the High Court.

Issues Involved

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

Appellant’s Arguments

The Revenue contended that Section 153A empowers the Assessing Officer to assess or reassess total income for the six assessment years preceding the year of search and that such power is not confined only to incriminating material found during the search. It was argued that the Tribunal erred in following Kabul Chawla and related precedents.

Respondent’s Arguments

No appearance was recorded on behalf of the assessee before the High Court. However, the findings recorded by the CIT(A) and affirmed by the Tribunal were that no incriminating material pertaining to the relevant assessment year was found during the search.

Court Order / Findings

The Delhi High Court noted that for a subsequent assessment year of the same assessee, namely AY 2007–08, a similar appeal filed by the Revenue had already been dismissed by the Court by judgment dated 28.11.2025 in ITA 686/2025. The Court observed that both the CIT(A) and the Tribunal had concurrently recorded findings of fact that no incriminating material was found during the search for the year under consideration.

The Court held that the Tribunal was justified in relying upon the judgment of the Supreme Court in Principal Commissioner of Income Tax v. Abhisar Buildwell Pvt. Ltd., which affirmed the legal position laid down in Kabul Chawla that in absence of incriminating material, no addition can be made under Section 153A for completed or unabated assessments. The Court held that these concurrent findings were pure questions of fact and disclosed no perversity.

Important Clarification

The Court clarified that for unabated assessment years, jurisdiction under Section 153A to make additions arises only where incriminating material is found during the search. In absence of such material, completed assessments cannot be disturbed, though reassessment under Sections 147/148 remains available 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, upheld the order of the ITAT deleting the additions for Assessment Year 2004–05, and affirmed that in absence of incriminating material found during search, additions under Section 153A are not sustainable for unabated assessment years.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769503548_PR.COMMISSIONEROFINCOMETAX1VsMSMIRAGEHOMESPVT.LTD..pdf

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