2022 (10) TMI 496 - HC - Income Tax

Assessment u/s 153A - Proof of Incriminating documents or materials had been found and seized at the time of search - HELD 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. See Bhadani Financiers Pvt. Ltd. 2021 (9) TMI 902 - DELHI HIGH COURT and Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Challenge to ITAT order under Section 153A of the Income Tax Act, 1961 for AY 2010-11.

Analysis:
The appellant challenged the ITAT order, arguing that the addition made without incriminating material during a search cannot be the basis for assessment under Section 153A. The ITAT's decision was influenced by the judgment in CIT vs Kabul Chawla, disregarding the pending SLP in M/s Apar Industries Ltd. The ITAT found no incriminating material in the respondent's case for AY 2010-11, leading to the deletion of the addition and disallowance under Section 14A of the Act. The conclusion in Kabul Chawla was summarized in PCIT vs. Meeta Gutgutia, emphasizing the necessity of seized material for assessments under Section 153A.

The High Court referenced the judgment in Principal Commissioner of Income Tax vs. Bhadani Financiers Pvt. Ltd., affirming that no addition can be made under Section 153A if assessments were finalized before the search without incriminating materials. Despite the pending challenge to Kabul Chawla before the Supreme Court, the absence of a stay order meant the judgment's applicability. Relying on precedents like Kunhayammed and Shree Chamundi Mopeds Ltd., the High Court dismissed the appeal in line with Bhadani Financiers Pvt. Ltd. and Kabul Chawla, subject to the final decision in the SLP of M/s Apar Industries Ltd.