PR COMMISSIONER OF INCOME TAX CENTRAL - 2 DELHI vs. PARAM DAIRY LTD

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ITA/41/2021HC DelhiDLHC01009403202115 February 2021Bench: HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW,HON'BLE MR. JUSTICE SANJEEV NARULA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises as the matter is squarely covered by the decision in Commissioner of Income Tax (Central)-III Vs. Kabul Chawla (2016) 380 ITR 573 (Delhi), which was correctly applied by the ITAT. The ITAT had found that while the assessee's accounting software was seized, the regular books of account could not be treated as incriminating material for framing assessments under Section 153A read with Section 143(3). For Assessment Years 2008-2009 and 2009-2010, where assessments were completed under Section 143(3), the ITAT reasoned that these completed assessments could only be disturbed based on incriminating material found during the search, as per Kabul Chawla. For Assessment Years 2010-2011 to 2012-2013, the ITAT noted that the limitation period for issuing a notice under Section 143(2) had expired before the search, and relied on Chintels India Ltd. Vs. Deputy Commissioner of Income-Tax (2017) 397 ITR 416 (Delhi) to hold that such returns become final. Therefore, the appeals were dismissed.

What were the facts?

The appeals by the Revenue challenge a common order of the ITAT. The ITAT had allowed the appeals of the assessee, Param Dairy Ltd., and dismissed the appeals of the Revenue for Assessment Years 2008-2009 to 2012-2013. A search and seizure operation under Section 132 of the Income Tax Act, 1961, was conducted on the assessee on February 28, 2014. Subsequently, a notice under Section 153A was issued. The assessee had claimed cash payments of approximately Rs. 17,00,00,000/- to dairy owners for milk purchases. However, during the search, it was found that these payments were made to middlemen, and cash payments were not permitted. This led to an addition of Rs. 17,00,00,000/- to the assessee's income. The ITAT held that the regular books of account, even if containing entries of these cash payments, could not be treated as incriminating material found during the search, especially when assessments for some years were already concluded.

What were the issues?

1. Whether the Income Tax Appellate Tribunal (ITAT) erred in holding that regular books of account, which were subject to audit and formed part of the return of income, did not constitute incriminating material found during a search under Section 132 of the Income Tax Act, 1961, for the purpose of framing assessments under Section 153A read with Section 143(3) of the Act? (Mixed question of law and fact, concerning Section 153A and Section 143(3) of the Income Tax Act, 1961). Assessee's Contention (Implicit in ITAT's reasoning): The regular books of account, including entries of cash payments, are not incriminating material found during the search. The ITAT relied on the principle that completed assessments can only be interfered with based on incriminating material unearthed during the search, citing Commissioner of Income Tax (Central)-III Vs. Kabul Chawla (2016) 380 ITR 573 (Delhi). Revenue's Contention: The ITAT wrongly held that the entries in the books of account were not incriminating evidence found during the search. The Revenue argued that the ITAT expanded the scope of the ruling in Kabul Chawla supra. The Revenue also contended that the returns for the relevant assessment years were processed under Section 143(1) and not assessed, and that processing and assessment are distinct. The Revenue further argued that the cash payment fact emerged during the search.

Which sections of the Income-tax Act were involved?

Section 132,Section 153A,Section 143(3),Section 143(1),Section 143(2)

AI-generated summary — verify with the full judgment below

ITA 37/2021 & ITA 41/2021

Page 1 of 4

$~82 & 86 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 37/2021

PR. COMMISSIONER OF INCOME TAX

CENTRAL-2, NEW DELHI

..... Appellant

Through: Mr. Raghvendra Singh, Adv.

Versus

PARAM DAIRY LTD.

..... Respondent

Through: Mr. Rohit Jain and Mr. Aniket D.

Agrawal, Advs.

AND + ITA 41/2021

PR. COMMISSIONER OF INCOME TAX

CENTRAL-2, NEW DELHI

..... Appellant

Through: Mr. Raghvendra Singh, Adv.

Versus

PARAM DAIRY LTD.

..... Respondent

Through: Mr. Rohit Jain and Mr. Aniket D.

Agrawal, Advs. CORAM: HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW HON'BLE MR. JUSTICE SANJEEV NARULA O R D E R %

15.02.2021 [VIA VIDEO CONFERENCING]

1.

The appeals impugn the common order dated 19th November, 2019 of the Income Tax Appellate Tribunal (ITAT) in ITA Nos.3988 to 3992/DEL/2019 for the Assessment Years 2008-2009 to 2012-2013 preferred by the respondent assessee as well as in ITA Nos.5023 to 5027/DEL/2019 for the Assessment Years 2008-2009 to 2012-2013, preferred by the appellant Revenue. 2. Vide the impugned order, the appeals of the respondent assessee were allowed and the appeals of the appellant Revenue were dismissed. 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 24/06/2026 at 14:08:05

ITA 37/2021 & ITA 41/2021

Page 2 of 4

3.

The counsel for the appellant Revenue contends that a substantial question of law arises, as ITAT has expanded the scope of what was held by this Court in Commissioner of Income Tax (Central)-III Vs. Kabul Chawla

(2016) 380 ITR 573 (Delhi). 4. It is argued, (i) that a search and seizure operation under Section 132 of the Income Tax Act, 1961 was carried out in the case of Param and Rama Group, on 28th February, 2014; (ii) that pursuant to search, notice under Section 153A of the Act was issued and served on the respondent assessee, asking the respondent assessee to file the return of income; (iii) that the respondent assessee responded that the return of income already filed, be treated as return filed in response to the notice under Section 153A of the Act; (iv) that the assessment order under Section 143(3) read with Section 153A of the Act was framed, after making several additions to income and other alterations; (v) that though the respondent assessee in his return of income had claimed cash payment of about Rs.17,00,00,000/- to dairy owners from whom the respondent assessee claimed to have purchased milk but during search, it was found that the said payments were not to dairy owners but to middlemen and cash payments whereto were not permitted and which led to addition of the said sum of about Rs.17,00,00,000/- to the income of the respondent assessee; (vi) that the said fact of cash payments to the middlemen emerged during the search only; (vii) that the ITAT wrongly held that since the entries of cash payments were made in the books of account, which had been subjected to audit and which audited financial statements of account were part of the return of income filed and assessment whereof stood concluded, it was not incriminating evidence found during the search; (viii) that the ITAT did not consider that the return of income filed 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 24/06/2026 at 14:08:05

ITA 37/2021 & ITA 41/2021

Page 3 of 4

was merely processed under Section 143(1) of the Act and was not assessed; and, (ix) that it is the settled law that processing of return of income filed and assessment of income, are two distinct things. 5. We have considered the aforesaid contentions and are of the view that no substantial question of law arises, as the matter is squarely covered by Kabul Chawla supra, which has been correctly applied to the facts of the case by the ITAT. The ITAT, in the impugned order has held that in the audited report filed by the assessee along with the report, cash book, ledger, bank book etc. were mentioned; that the respondent assessee was maintaining books on TALLY Accounting Software which was seized during the search and was being treated as incriminating material; however, regular books of account of the assessee, by no stretch of imagination, could be treated as incriminating material to form basis of framing assessment under Section 153A read with Section 143(3) of the Act. It was further held that assessment for the Assessment Years 2008-2009 and 2009-2010 were completed under Section 143(3) vide orders dated 28th July, 2010 and 31st May, 2011 respectively and audited books of account were thoroughly examined and details of purchase of milk must have been scrutinized as it was part of audited financial statement of accounts; as per Kabul Chawla supra, completed assessments can be interfered only on the basis of some incriminating material unearth during the search. With respect to the Assessment Years 2010-2011 to 2012-2013, the ITAT held that though no assessment was framed under Section 143(3) but it could safely be concluded that the period of limitation for issuing a notice under Section 143(2) expired much before the date of the search; reliance was placed on Chintels India Ltd. Vs. Deputy Commissioner of Income-Tax (2017) 397 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 24/06/2026 at 14:08:05

ITA 37/2021 & ITA 41/2021

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ITR 416 (Delhi) holding that once an assessee does not receive a notice under Section 143(2) of the Act within the stipulated period, such an assessee can take it that the return filed by him has become final and no scrutiny proceeding are to be undertaken with respect to that return. 6. Dismissed.

RAJIV SAHAI ENDLAW, J.

SANJEEV NARULA, J. FEBRUARY 15, 2021 'bs'

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 24/06/2026 at 14:08:05

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