Revenue cannot reopen finalized assessments without finding incriminating material during search operations

Delhi HC held that no addition can be made to completed assessments without incriminating material found during search. Assessment for AY 2011-12 was finalized before search date of 29.10.2013, with no pending assessment. Since no incriminating material was discovered during search and the statement relied upon by revenue was recorded after search action, the proposed question of law was not admitted as substantial. Court followed SC precedent in Abhisar Buildwell approving Delhi HC's earlier ruling in Kabul Chawla case.

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Issues:
The issues involved in the judgment are whether the scope of assessment under section 153A extends to income unearthed based on statements recorded during post-search proceedings and whether a fresh material received after the date of search is sufficient to reopen the assessment under section 153A.

Summary:
The appellant/revenue challenged the order of the Income Tax Appellate Tribunal, which dismissed the appeal against the assessee pertaining to the Assessment Year 2011-12. The respondent/assessee, engaged in developing a Special Economic Zone for IT services, filed its return of income, which was processed under Section 143(1) of the Act. Subsequently, a search and seizure action was conducted, leading to the issuance of a notice under Section 153A of the Act. The Assessing Officer disallowed a deduction claimed under Section 80IAB of the Act, leading to penalty proceedings. The respondent challenged the order before the Commissioner of Income Tax (Appeals) and raised the issue of the legality of invoking Section 153A without incriminating material. The CIT(A) partly allowed the appeal, leading to the current appeal before the High Court.

The appellant/revenue contended that a statement recorded in post-search proceedings formed the basis for disallowance of the deduction claimed under Section 80IAB of the Act. The legal position regarding the consideration of material found during a search for assessment purposes was discussed, with different High Courts taking divergent views. The High Court's decision in the case of Kabul Chawla was upheld by the Supreme Court, emphasizing the importance of incriminating material for making additions in assessments.

The High Court examined the legal principles laid down in previous cases and concluded that the statement of Shri B.P. Singh, recorded after the search action, cannot be the basis for initiating proceedings under Section 153A. The Court found no substantial question of law for consideration under Section 260A of the Act and dismissed the appeal.

In conclusion, the High Court dismissed the appeal as it found no substantial question of law for consideration under Section 260A of the Income Tax Act.

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