PR. COMMISSIONER OF INCOME TAX - 10 vs. M/S NARAINHARI INFRASTRUCTURE DEVELOPERS PVT. LTD.

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ITA/548/2026HC DelhiDLHC01132285202420 July 2026Author: HON'BLE MR. JUSTICE DINESH MEHTA,HON'BLE MR. JUSTICE RAJNEESH KUMAR GUPTA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the addition of Rs. 3,50,00,000/- made by the Assessing Officer was based solely on the statement of Mahendra Sethia, recorded under Section 131 of the Income Tax Act, 1961, after the search concluded. Crucially, no corroborative evidence or incriminating material was found during the search at the assessee's premises to support the claim that the unsecured loan was an accommodation entry. The CIT(A) had deleted the addition, reasoning that in the absence of incriminating material found during the search, no addition could be made under Section 153A. The Tribunal affirmed this view. The High Court found no substantial grounds to overturn these findings, deeming them not perverse or contrary to the material on record. Therefore, the appeal filed by the revenue was dismissed.

What were the facts?

The appeal concerns Assessment Year 2015-16. A search and seizure operation under Section 132 of the Income Tax Act, 1961, was conducted on the Luv Kush group of cases, including the assessee, M/s Narainhari Infrastructure Developers Pvt. Ltd., on March 23, 2018. During the search, documents and books of accounts were seized, and statements were recorded. Subsequently, the statement of Mahendra Sethia was recorded, and based on this statement, additions were made to the assessee's income by the Assessing Officer. The Commissioner of Income Tax (Appeals) deleted an addition of Rs. 3,50,00,000/-. The Income Tax Appellate Tribunal affirmed the CIT(A)'s order, leading to the present appeal by the Principal Commissioner of Income Tax – 10.

What were the issues?

1. Whether the addition of Rs. 3,50,00,000/- made on the basis of the statement of Mahendra Sethia, recorded under Section 131 of the Income Tax Act, 1961, after the conclusion of the search, without any corroborative evidence or incriminating material found during the search at the assessee's premises, is valid, particularly in the context of Section 153A proceedings. Assessee's Contention: The addition was made solely on the statement of Mahendra Sethia, recorded post-search under Section 131, without any supporting evidence or incriminating material found during the search. No evidence of accommodation entry was found. Therefore, no addition can be made under Section 153A in the absence of incriminating material. Revenue's Contention: The revenue argued that the addition made based on Mahendra Sethia's statement was justified. However, the judgment notes that the learned Senior Standing Counsel for the revenue was unable to show any substantial ground to dislodge the findings of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 132,Section 131,Section 153A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
$~92 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 548/2026, CM APPL. 45238/2026, CM APPL. 45239/2026, CM APPL. 45240/2026, CM APPL. 45241/2026 CM APPL. 45242/2026 PR. COMMISSIONER OF INCOME TAX – 10 .....Appellant Through: Mr. Siddhartha Sinha, SSC with Ms. Easha Gurung, JSC. versus M/S NARAINHARI INFRASTRUCTURE DEVELOPERS PVT. LTD. .....Respondent Through: None. CORAM: HON'BLE MR. JUSTICE DINESH MEHTA HON'BLE MR. JUSTICE RAJNEESH KUMAR GUPTA

O R D E R %

20.07.

2026

1.

The instant appeal is directed against the order dated 31.01.2024 passed in ITA No. 793/DEL/2021 by the Income Tax Appellate Tribunal Delhi-‘E’ Bench (hereinafter referred to as „Tribunal‟) wherein the Tribunal has affirmed the order dated 03.03.2021 passed by the Commissioner of Income Tax (Appeals) (hereinafter referred to as „CIT(A)‟), whereby the Commissioner had allowed the appeal filed by the assessee against the Assessment Order dated 29.12.2019 passed by the Assessing Officer for Assessment Year 2015-16. 2. The brief facts are that a search and seizure was conducted on 23.03.2018 on Luv Kush group of cases. The case of the assessee company was also covered under Section 132 of the Income Tax Act, 1961. During 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 23/07/2026 at 12:01:05

the Course of said search certain documents and books of accounts were found and statements were recorded.

3.

After the search was completed, the statement of one Mahendra Sethia was also recorded and on the basis of his statement certain additions were made in case of the assessee.

4.

Since, the additions against the respondent-assessee were essentially made on the basis of such statement given by Mahendra Sethia, the same were deleted by the CIT(A) as can be seen from pararaph 11 of the findings of the CIT(A), which is reproduced hereunder:

“11. The addition has been made in the case on the premise that the appellant has taken the accommodation entry in the form of unsecured loan received from companies belonging to Mahendra Sethia. There is no corroborative evidence in support of the above except the statement of Shri Mahendra Sethia. In this case the addition has not been made on the basis of the statement recorded u/s 132(4) of the Act, during the course of search, of any Director of the appellant or of the entry operator or any connected person. The statement banked upon in the assessment order is recorded u/s 131 of the Act of Shri Mahender Sethia after conclusion of the search without any corroborative evidence or incriminating material. Search had taken place at the premises of the appellant company and no evidence was found indicating that the transaction of the said unsecured loan as received from Vagmi Financials Pvt. Ltd. was in the nature of accommodation entry. In view of the above discussion, and respectfully following the judicial pronouncements quoted above, it is held that since no incriminating material was found as a result of the search conducted on the assessee, therefore, no addition can be made in this case. The completed assessment in the cases of the appellant for the year cannot be disturbed u/s 153A in absence of any incriminating material. Therefore, the addition made of Rs.3,50,00,000/- is hereby deleted.” 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 23/07/2026 at 12:01:05

5.

The aforesaid deletion of Rs. 3,50,00,000/- was assailed by the Revenue before the Tribunal and Revenue’s appeal was rejected by the Tribunal, as no other incriminating material was produced before the Tribunal.

6.

Mr. Siddharth Sinha, learned Senior Standing Counsel, has not been able to show any substantial ground to dislodge such finding of fact and to show that the finding recorded by the Commissioner of Income Tax (Appeals) as affirmed by the Tribunal is, in any manner perverse or contrary to facts and the material available on record.

7.

We, therefore, dismiss the appeal.

8.

The pending applications are also disposed of accordingly.

DINESH MEHTA, J.

RAJNEESH KUMAR GUPTA, J. JULY 20, 2026/nk 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 23/07/2026 at 12:01:05

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