2022 (11) TMI 628 - HC - Income Tax

Assessment u/s 153A - Whether no incriminating documents or materials had been found and seized at the time of search? - HELD THAT - This Court in Principal Commissioner of Income Tax vs. Bhadani Financiers Pvt. Ltd. 2021 (9) TMI 902 - DELHI HIGH COURT has held that where the assessment of the Respondents has 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. Though the issue involved in Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT has been challenged and is pending adjudication before the Supreme Court, yet there is no stay of the said judgment till date. No substantial question of law arises.

Summary

Issues:
Challenging ITAT's order on additions without incriminating material
Interpretation of Section 153A of the Income Tax Act, 1961
Applicability of previous judgments on similar Issues
Finality of assessments without incriminating material
Impact of pending Supreme Court adjudication on judgments

Analysis:
The High Court dealt with Income Tax Appeals challenging the ITAT's common order on various Assessment Years (AYs). The Appellant contended that the ITAT erred in deleting additions without incriminating material found during the search under section 153A of the Income Tax Act, relying on the judgment in CIT vs. Kabul Chawla. The Court noted that no incriminating evidence was found during the search for the relevant AYs, leading to concluded assessments that could not be disturbed without such material.

The judgment in Kabul Chawla was summarized, emphasizing the mandatory issuance of notices under Section 153A(1) post-search, abatement of pending assessments, and the power of the AO to assess total income for the preceding years. It was clarified that assessments under Section 153A must be based on seized material, and completed assessments can only be interfered with based on incriminating material found during the search.

Referring to a previous judgment, the Court reiterated that where assessments have been finalized before the search with no incriminating material found, no additions can be made under Section 153A. Despite the pending challenge of the Kabul Chawla judgment before the Supreme Court, the High Court found no stay on its applicability. Citing relevant Supreme Court judgments, the Court concluded that the present appeals align with previous decisions and dismissed them, clarifying that the orders would abide by the final Supreme Court decision on the pending SLP.

In essence, the High Court upheld the principle that additions under Section 153A must be supported by incriminating material found during the search, and assessments without such material cannot be disturbed. The Court's decision was guided by established legal interpretations and previous judgments, ensuring consistency in tax assessments pending the final adjudication by the Supreme Court.