THE PR. COMMISSIONER OF INCOME TAX -CENTRAL -1 vs. UTTAM CHAND RAKESH KUMAR

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ITA/478/2025HC DelhiDLHC01072718202512 August 2026Author: HON'BLE MR. JUSTICE RAJNEESH KUMAR GUPTA,HON'BLE MR. JUSTICE DINESH MEHTA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that neither the Assessing Officer nor the Commissioner had recorded any finding regarding the unearthing or existence of any undisclosed or unaccounted assets or investments. The absence of unexplained investments made the applicability of Section 69 of the Act of 1961 questionable. Consequently, since the applicability of Section 69 was not established, the higher rate of tax under Section 115BBE was also not applicable. The Court found no merit in the appeal. The operative direction was to dismiss the appeal.

What were the facts?

The Revenue, represented by the Pr. Commissioner of Income Tax, has appealed an order dated 18.12.2024 passed by the Income Tax Appellate Tribunal (Tribunal) for assessment year 2018-19. The Tribunal's order set aside an earlier order dated 31.03.2023 by the Principal Commissioner of Income Tax (Commissioner), which had invoked Section 263 of the Income Tax Act, 1961. The Commissioner had directed the Assessing Officer to levy tax at a higher rate on additions of Rs. 3.75 crores towards unexplained investments and receivables under Section 69 read with Section 115BBE. The Tribunal allowed the assessee's appeal, holding that the addition was in the nature of business income and not applicable under Section 69.

What were the issues?

1. Whether the Tribunal erred in law by treating income, which arose from excess stock/undisclosed cash found during a search, as business income, thereby not allowing the Commissioner to direct the levy of tax at a higher rate under Section 115BBE? Assessee's contentions: The assessee argued that there was no evidence of any cash or excess stock found during the search. The assessment order indicated a shortage of stock, rendering the Revenue's entire contention factually incorrect. Revenue's contentions: The Revenue argued that since excess stock/undisclosed cash was found during the search, the Commissioner was justified in issuing directions for a higher rate of tax. The Tribunal committed an error of law by classifying the income as business income.

Which sections of the Income-tax Act were involved?

Section 260A,Section 263,Section 69,Section 115BBE

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
$~4 * IN THE HIGH COURT OF DELHI AT NEW DELHI # CNR No. DLHC010727182025 + ITA 478/2025 THE PR. COMMISSIONER OF INCOME TAX -CENTRAL -1 .....Appellant Through: Mr.Ruchir Bhatia SSC, Pratyaksh Gupta JSC and Anant Mann JSC versus UTTAM CHAND RAKESH KUMAR .....Respondent Through: Mr. Abhimanyu Jhansa, Mr. Thonpinao Thangal and Ms. Ayushi Srivastava, Advs. CORAM: HON'BLE MR. JUSTICE DINESH MEHTA HON'BLE MR. JUSTICE RAJNEESH KUMAR GUPTA

O R D E R %

12.08.

2026

1.

By way of the present appeal under Section 260A of the Income Tax Act, 1961 (herein after referred to as ‘Act of 1961’), the Revenue has challenged the order dated 18.12.2024 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘F’ New Delhi (hereinafter referred to as ‘Tribunal’) in Appeal No. 1653/De1/2023 for assessment year 2018-19. 2. The order under challenge before the Tribunal was, an order passed by the Principal Commissioner of Income Tax (herein after referred to as ‘Commissioner’) in exercise of juri iction under Section 263 of the Act of 1961 on 31.03.2023, whereby he had set aside the order of the Assessing Officer and directed him to levy tax at higher rate on the additions of Rs. 3.75 This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 14/08/2026 at 12:47:31

crores towards unexplained investments and receivables made under Section 69 read with Section 115BBE of the Act of 1961. 3. Against the aforesaid order, the assessee preferred an appeal before the Tribunal, which came to be allowed by the impugned order holding inter-alia, that the addition in question was essentially in the nature of business income and thus could not have been added under Section 69 of the Act of 1961. 4. Mr.Mann, learned Junior Standing Counsel for the appellant argued that since the excess stock/undisclosed cash etc. were found during the course of search, the Commissioner was justified in issuing direction to levy higher rate of tax and the Tribunal has committed an error of law in treating the income to be a business income.

5.

Learned counsel for the respondent, on the other hand, invited court’s attention towards the assessment order dated 28.03.2021 and the findings of the Tribunal and pointed out that there is not an iota of evidence showing that any cash or excess stock was found.

6.

He pointed out that as a matter of fact the Assessing Officer had found it to be a case of shortage of stock and, therefore, the entire foundation of revenue’s contention is premised on incorrect basis.

7.

Having heard the learned counsel for the parties, we are of the considered opinion that neither the Assessing Officer nor the Commissioner has recorded any finding about the unearthing of or existence of any undisclosed or unaccounted assets or investments. The absence of unexplained investments, renders the very applicability of Section 69 of the Act of 1961 out of question. Since the very applicability of Section 69 of the Act of 1961 has not been established, the applicability of higher rate of tax This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 14/08/2026 at 12:47:31

under Section 115BBE of the Act of 1961, goes out of question.

8.

We, therefore, do not find any merit or substance in the present appeal, for which, it is hereby dismissed.

DINESH MEHTA, J.

RAJNEESH KUMAR GUPTA, J. AUGUST 12, 2026 neelam

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 14/08/2026 at 12:47:31

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