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Facts
The assessee filed an appeal against the order of the CIT(Appeals) rejecting their rectification application. The assessee had initially filed a return of income which was processed. Later, a search and seizure action was conducted, leading to the issuance of notice u/s 153A. The Assessing Officer made an addition of notional income from house property, which the assessee argued was not based on incriminating material found during the search.
Held
The Tribunal held that the CIT(Appeals) erred in rejecting the rectification application without considering the apex court judgments in Abhisar Buildwell (P) Ltd. and Saurashtra Kutch Stock Exchange Ltd. The Tribunal found that the issue of additions not based on incriminating material is crucial and subsequent judgments clarify the law, which should be applied retrospectively for rectification.
Key Issues
Whether the CIT(Appeals) was justified in rejecting the assessee's rectification application when subsequent Supreme Court judgments clarified the law regarding additions not based on incriminating material found during search.
Sections Cited
154, 132, 153A, 143(1), 143(3), 143(2), 142(1), 147, 148, 132A, 254(2)
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Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SHRI M. BALAGANESH & SHRI SUNIL KUMAR SINGH
ORDER PER : SUNIL KUMAR SINGH, JUDICIAL MEMBER:
The facts and issue involved in all these appeals are common, hence, all these appeals are being disposed of by this common order for the sake of convenience and brevity. The facts of only are being narrated as under. (A.Y. 2013-14):
This appeal has been preferred by assessee against the impugned order dated 24.07.2025 passed on the application of assessee moved u/s. 154 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2013-14, by the Ld. Commissioner of Income- tax (Appeals), Kanpur-4, wherein the ld. CIT(Appeals) has rejected the said application of assessee .
3. According to the facts of this case, the assessee e-filed his original return of income for A.Y. 2013-14 on 10.09.2014, declaring total income of Rs.8,63,060/-. The return was processed u/s. 143(1) of the Act.
Subsequently, a search and seizure action u/s. 132(1) of the Act was carried out on 19.07.2018 in R.S. Bullion and Jewellers Group of cases, including the premises of the assessee. Various assets, books of account and documents were found and seized during the search and seizure action. Notice u/s. 153A of the Act was issued on 23.09.2020 to the assessee, who e-filed return of income on 01.10.2020 in compliance thereof, declaring total income of Rs.9,63,060/- for the year under consideration. Statutory notices u/s. 143(2) read with section 142(1) of the Act were also issued and served upon the assessee, who responded in consequence thereof. After considering the assessee’s reply dated 01.04.2021, Ld. Assessing Officer found that assessee owned three house properties, out of which one house property No. 14, Kamla Bihar Colony, Mathura was self occupied property and remaining two houses No. 4, Kailash Enclave, Balaji Nagar, Kamla Nagar and house No. 16, Kamla Bihar Colony, Mathura were treated as let out properties. Learned 2 | P a g e Assessing Officer computed notional income from house property at Rs.1,19,574/- and added to the income of the assessee, vide assessment order dated 30.09.2021 passed u/s.143(3)/153A of the Act.
Aggrieved, assessee preferred first appeal before Ld. CIT(Appeals), before whom, it was pleaded by the assessee that the additions made vide assessment order dated 30.09.2021 are not based on the incriminating material found during the search and seizure proceedings, hence, cannot be added in the income of the assessee.
Learned CIT(Appeals) was not convinced with the arguments of the assessee and did not find any defect in the assessment order and dismissed assessee’s appeal, vide first appellate order dated 28.06.2022. Assessee filed rectification application dated 25.04.2023 through e-portal u/s. 154 of the Act, before Ld. CIT(Appeals) for rectification of the first appellate order dated 28.06.2022 on the ground that there were mistakes ‘apparent on record’ within the meaning of section 154 of the Act, while passing the first appellate order dated 28.06.2022 in sustaining the addition towards notional income from house property, which was admittedly not based on any incriminating material found during the course of search proceedings conducted u/s. 132 of the Act in respect of the completed and unabated assessment for A.Y. 2013-14 to 2017-18. Assessee also referred the order dated 3 | P a g e 24.4.2023 passed by Hon’ble Supreme Court in the case of Abhisar Buildwell (P) in appeal No. 6580 of 2021 in support of his arguments.
However, Ld. CIT(Appeals), without considering the apex court judgment, rejected assessee’s rectification application, stating that he could not re- visit his earlier order on merits, being beyond the scope and ambit of powers u/s. 154 of the Act.
5. Aggrieved, assessee has filed this second appeal against the impugned order dated 24.07.2025 passed by Ld. CIT(Appeals) u/s. 154 of the Act and has raised following grounds :
“1. Because, in the facts and circumstances of the case, learned CIT (Appeals) has grossly erred in rejecting application dated 25.04.2023 seeking rectification in the appellate order dated 28.06.2022 2. Because, while rejecting rectification application, learned 'CIT (Appeals)' failed to take note and bind herself with judicial precedents cited before her to the effect that orders passed by Hon'ble Supreme Court are declaration of existing law and have retrospective effect and any order passed contrary to the law declared by Supreme Court is liable to be brought in conformity with such law by passing appropriate order under section 154 of the 'Act'.
Because learned 'CIT (Appeals)' failed to appreciate that the appellant was not seeking review of appellate order dated 28.06.2022, but rectification of said order in light of law declared subsequently by Hon'ble Supreme Court.
4. Because, learned 'CIT (Appeals)' has in the facts of the case has erred in not rectifying appellate order dated 28.06.2022 and not directing in deleting the addition of Rs. 1,19,574 (for assessment year 2013-14) and Rs. 1,45,402 (for assessment year 2015-16, 2016-17 and 2017-18).
Because the order appealed against is illegal and bad in law.” 4 | P a g e
Perused the records and heard learned representative for the assessee and learned CIT(DR) for revenue.
Learned AR has submitted that it is an admitted fact that the said notional addition of income from house property is not based on the incriminating material found during the search proceedings. Learned CIT(Appeals) has ignored the referred apex court judgment dated 24.04.2023, passed in Civil Appeal No. 6580/2021, Principal CIT v.
Abhisar Buildwell (P) Ltd. Prayed to allow the appeal.
Learned CIT(DR) has submitted that the assessee has not filed any appeal against the main first appellate order dated 28.06.2022 passed by Ld. CIT(Appeals). The instant appeal has only been filed against the impugned order passed u/s. 154 of the Act. Ld. CIT(DR) has supported the impugned order dated 24.07.2025.
We have gone through the impugned order dated 24.07.2025.
Learned CIT(Appeals) has, though, referred Abhisar Buildwell (P) Ltd. (supra), but does not seem to have considered the same, while passing the impugned order. Hon’ble Apex Court in Abhisar Buildwell (P) Ltd. (supra) has, vide para 14, held as under :
"14... iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under 5 | P a g e section 132A of the Act, 1961. However, the completed/unabated assessment can be reopened under section 147/148 of the Act, subject to fulfillment of the conditions as envisaged/mentioned under section 147/148 of the Act and those powers are saved.”
It is not the case of the revenue that completed/unabated assessment was reopened u/s. 147/148 of the Act. We fail to understand as to why learned CIT(Appeals) did not consider the law laid down by the apex court in Abhisar Buildwell (P) Ltd. (supra).
Learned AR has further submitted that subsequent to the first appellate order dated 28.06.2022, Hon’ble Apex Court in ACIT vs. Saurashtra Kutch Stock Exchange Ltd. (2008) 305 ITR 227 (SC) has treated the subsequent judgment of the jurisdictional High Court and Supreme Court to be considered for the rectification of the error in first appellate order as error apparent on record. Relevant paras 40 to 42 of the said decision in Saurashtra Kutch Stock Exchange Ltd. (supra) read as under :
"40. The core issue, therefore, is whether non-consideration of a decision of Jurisdictional Court (in this case a decision of the High Court of Gujarat) or of the Supreme Court can be said to be a "mistake apparent from the record"? In our opinion, both - the Tribunal and the High Court - were right in holding that such a mistake can be said to be a "mistake apparent from the record" which could be rectified under section 254(2).
A similar question came up for consideration before the High Court of Gujarat in Suhrid Geigy Ltd.'s case (supra). It was held by the Division Bench of the High Court that if the point is covered by a decision of the Jurisdictional Court rendered prior or even subsequent to the order of rectification, it could be said 6 | P a g e to be "mistake apparent from the record" under section 254(2) of the Act and could be corrected by the Tribunal, 42. In our judgment, it is also well-settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite sometime, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood."
The Apex Court judgment in Saurasthtra Kutch Stock Exchange Ltd. (supra), though, has been delivered in reference to section 254(2) of the Act for rectification of the mistake apparent from record by the Tribunal. The CIT(Appeals) is also a quasi judicial authority under the Act and by applying the principle of harmonious construction, he is also bound to follow the aforesaid ratio laid down, subsequent to the passing of the first appellate order dated 28.06.2022. In such facts and circumstances and in view of the aforesaid legal position, we deem it just and appropriate to restore the matter back to the file of learned CIT(Appeals). We direct the first appellate authority to pass order a fresh on the rectification application of the assessee in view of law laid down by Hon’ble Apex Court in Abhisar Buildwell (P) Ltd. (supra) and Saurashtra Kutch Stock Exchange Ltd. (supra). The assessee’s appeal is accordingly liable to be allowed for statistical purposes.
7 | P a g e , 379 & 380/Agr/2025 (A.Yrs. 2015-16, 2016-17 & 2017-18):
The facts and issues involved in these appeals are similar except that common addition of Rs.1,45,402/- has been made for all these assessment years in these three appeals. Our findings recorded in (A.Y. 2013-14) shall mutatis mutandis apply in these appeals too. These appeals are also liable to be allowed for statistical purposes accordingly.
In the result, appeals 378, 379 & 380/Agr/2025 are allowed for statistical purposes.
Order pronounced in the open court on 08.12.2025.