IMPORTANT POINT
The legal position that emerges from the decisions and the Supreme Court's approval of the view taken by the Delhi High Court in the case of Kabul Chawla.

JUDGMENT

Girish Kathpalia, J. - By way of this appeal brought under Section 260A of the Income Tax Act, the appellant/revenue has assailed order dated 28.06.2021 of the Income Tax Appellate Tribunal, whereby appeal bearing No. ITA 7826/Del/2018 filed by the revenue against the assessee (respondent herein) pertaining to the Assessment Year 2011-12 was dismissed. On advance notice, the respondent/assessee entered appearance through counsel. We heard learned counsel for both sides.

2. The appellant/revenue has proposed in this appeal the following questions as substantial questions of law:

2.1 Whether the scope of assessment under section 153A extends to income unearthed on the basis of statements recorded during post search proceedings?

2.2 Whether the decision in the case of CIT Vs Kabul Chawla, (2015) 61 Taxman.com 412 (Del) applies to a case where a fresh material/information received after the date of search is sufficient to reopen the assessment under section 153A [see Dr. A.V. Sreekumar Vs CIT, (2018) 90 taxman.com 355]?

However, after preliminary hearing held on 04.12.2023, learned counsel for appellant/revenue stated that the proposed question No. 2.1 is not pressed for the time being. That being so, we have examined only the proposed question No. 2.2.

3. Briefly stated, circumstances relevant for present purposes are as follows. The respondent/assessee was engaged in development of Special Economic Zone (SEZ) for information technology enabled services in Noida, U.P. On 30.09.2011, the respondent/assessee filed its return of income for the Assessment Year 2011-12 and the same was processed under Section 143(1) of the Act. Thereafter, on 29.10.2013, search and seizure action under Section 132 of the Act was carried out at the premises of the respondent/assessee and accordingly, notice dated 11.11.2014 under Section 153A of the Act was issued, calling upon the respondent/assessee to file return of income consequent to the search action. On 22.03.2016, the respondent/assessee requested the appellant/revenue to treat the original return of income as the return filed in response to notice under Section 153A of the Act. In the said return of income, the respondent/assessee had declared net profit of Rs.1,55,13,39,200/- and the same was claimed as deduction under Section 80IAB of the Act. The Assessing Officer disallowed the deduction claimed under Section 80IAB of the Act to the extent of Rs.13,30,50,000/- and added back the same to the income declared in the return of income. Further, the Assessing Officer also initiated penalty proceedings under Section 271(1)(c) of the Act against the respondent/assessee. Feeling aggrieved, the respondent/assessee challenged the said order of the Assessing Officer by way of appeal before the Commissioner of Income Tax (Appeals). In the course of appellate proceedings before CIT(A), the respondent/assessee raised additional ground contending that since no incriminating material belonging to the assessee was found during the course of the said search proceedings, initiation of proceedings under Section 153A of the Act was bad in law, especially because the assessment proceedings stood closed under Section 143(1) of the Act. Vide order dated 27.09.2018, CIT(A) partly allowed the said appeal, including the said additional ground, holding that according to the settled legal position, invocation of Section 153A by revenue would not be sustainable in law where no incriminating material pertaining to the assessee was recovered during the search action. The appellant/revenue assailed the said order of CIT(A) by way of appeal before the Tribunal, which appeal was dismissed by way of the impugned order. Hence, the present appeal.

4. As mentioned above, in the course of preliminary hearing learned counsel for the appellant/revenue did not press the proposed question No. 2.1 and opted to confine this appeal only to the extent as to whether the decision of this court in the case titled CIT vs Kabul Chawla, (20