The requirement of incriminating material for making additions under Section 153A of the Income Tax Act, 1961, and the distinction between abated and non-abated assessments.

JUDGMENT

Manmohan, J. - Present Income Tax Appeal has been filed challenging the order dated 31st July, 2020 passed by the Income Tax Appellate Tribunal ('ITAT') in ITA No. 3584/Del./2017 for the Assessment Year 2010-11.

2. Learned counsel for the Appellant states that the ITAT has erred in holding that the addition which was not based on incriminating material found during the search could not be made in assessment under Section 153A of the Income Tax Act, 1961 (for short 'Act') and, consequently, deleted the addition without going into merits of the same.

3. He states that the ITAT has erred in relying upon the judgement of this Court in CIT vs Kabul Chawla (2016) 380 ITR 573 ignoring the fact Neutral Citation Number: 2022/DHC/004377 that Revenue's SLPs on similar issue are pending before the Supreme Court in many other cases including CIT v Continental Warehousing Corporation (Nhava Sheva) Ltd., (2015) 374 ITR 645.

4. Upon a perusal of the paper book, this Court finds that both the CIT(A) and the ITAT have given concurrent findings of fact that no incriminating material/evidence had been found during the search. The ITAT also recorded that the present case of the Respondent was of nonabated assessment. The relevant extract of the impugned order is reproduced herein below:

'13. 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 any incriminating material was found or not.

14. 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.

15. In the result, the appeals of the assessee are allowed and appeals of the Revenue are dismissed.'

5. This Court finds that the conclusion reached in Kabul Chawla (supra) was summarized in PCIT vs. Meeta Gutgutia, (2017) 82 taxmann.com 287 Del. The relevant portion of the judgment Neutral Citation Number: 2022/DHC/004377 passed in PCIT vs. Meeta Gutgutia (supra) is reproduced hereinbelow:-

"37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:

i. Once a search takes place under Section 132 of the Act, otice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.

ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.

iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".

iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus w