Section 69 and Section 115BBE cannot apply without findings of undisclosed assets or investments.

By | September 1, 2026
0 Comment
Section 69 and Section 115BBE cannot apply without findings of undisclosed assets or investments.
Issue
Whether the higher tax rate under Section 115BBE read with Section 69 can be invoked without establishing the unearthing or existence of any undisclosed or unaccounted investment.
Facts
  • Assessment Year: AY 2018-19.
  • Revision Order: The Principal Commissioner of Income Tax (PCIT) invoked Section 263, setting aside the assessment order to direct the Assessing Officer to tax additions at a higher rate under Section 69 read with Section 115BBE.
  • Tribunal Ruling: The ITAT allowed the assessee’s appeal, holding that the addition represented business income and was not taxable as unexplained investment under Section 69.
  • Lack of Finding: Neither the Assessing Officer nor the PCIT recorded any finding regarding the unearthing, discovery, or existence of any undisclosed or unaccounted assets or investments.
Decision
  • Inapplicability of Section 69: Held that in the absence of any identified unexplained investment, Section 69 cannot be invoked.
  • Inapplicability of Higher Tax Rate: Held that since the primary condition of Section 69 was not established, the higher tax rate under Section 115BBE automatically becomes inapplicable.
  • Relief: Decided in favour of the assessee.
Key Takeaways
  • Pre-requisite for Section 69: Section 69 requires concrete proof or findings regarding the existence of undisclosed or unaccounted investments.
  • Section 115BBE Dependability: The elevated tax rates under Section 115BBE cannot be applied mechanically; they strictly depend on valid, underlying additions under specified deeming provisions like Section 69.
HIGH COURT OF DELHI
Principal Commissioner of Income-tax -Central
v.
Uttam Chand Rakesh Kumar
Dinesh Mehta and Rajneesh Kumar Gupta, JJ.
IT Appeal No. 478 OF 2025†
AUGUST  12, 2026
Ruchir Bhatia, SSC, Pratyaksh Gupta and Anant Mann, JSCs for the Appellant. Thonpinao Thangal, Ms. Ayushi Srivastava and Abhimanyu Jhansa, Advs. for the Respondent.
ORDER
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 Uttam Chand Rakesh Kumar v. Pr. CIT, Central [IT Appeal No. 1653 (De1.) of 2023, dated 18.12.2024] 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 jurisdiction 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 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 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.