No Additions can be made u/s 153A in the absence of Incriminating Materials unearthed during Search if the Assessment is Non-Abated: Delhi HC [Read Order]

A Division Bench of the High Court of Delhi comprising Justice Manmohan and Justice Manmeet Pritam Singh Arora recently dismissed an appeal by the Income Tax Department, upholding the order of the ITAT that, where the assessment of the Respondents had attained finality prior to the date of search and no incriminating documents or materials had been found and seized at the time of search, no addition could be made under Section 153A of the Act as the cases of the Respondents were of non-abated assessment.

It was contended by the appellant-revenue that the Income Tax Appellate Tribunal (ITAT) had erred in holding that the addition which was not based on incriminating material found during the search, could not be made the basis for an assessment order under sections 68 and 153A of the Income Tax Act,1961 (‘the Act’) without going into the merits of the same.

This court found that both the CIT(A) and the ITAT have given concurrent findings of fact that no incriminating evidence/material had been found during the search.

The ITAT also recorded that the present case of the Respondent was of non-abated assessment. The findings are reproduced as – “In such a scenario, we have to see the discovery of incriminating material vis-a-vis two stages of assessment i.e. abated and non-abated assessment. It is not the dictate of the Hon’ble High Court that in the absence of any incriminating material, in any of the years, no additions can be made. The Hon’ble High Court is very clear in its findings. So, to apply the principle laid down by the Hon’ble High Court (supra), it is the first step to find whether the proceedings had abated or non-abated and also to determine whether any incriminating material was found or not. The Ld.AR before us has pointed out that no incriminating material was found and also that the proceedings are non-abated. In these facts and circumstances, following the dictate of Hon’ble Delhi High Court in Kabul Chawla (supra), we hold that no addition u/s 68 of the Act is warranted.”

The Division Bench also reiterated the law laid down in Principal Commissioner of Income Tax vs. Bhadani Financiers Pvt. Ltd. that where the assessment of the Respondents had attained finality prior to the date of search and no incriminating documents or materials had been found and seized at the time of search, no addition could be made under Section 153A of the Act as the cases of the Respondents were of non-abated assessment.

Concluding that there was no substantial question of law had arisen for consideration in the present appeal by the department, the Delhi High Court dismissed the appeal in favour of the assessee.

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