The USD 2.3 million showpiece seemed destined for a play-off between Coles and Chowrasia until Coles` costly bogey on the 18th hole gave the Indian his first win since 2008.
The Indian closed with a five-under 67 for a winning total of 15-under 273, while Coles took second place after rounds of 70, 67, 67 and 70 at the DLF Golf and Country Club.
France`s Gregory Havret is in third place on 275, while Netherland`s Robert-Jan Derksen, who had taken the first round lead, signed off in fourth place on 276.
India`s Sujjan Singh got his rookie year on the Asian Tour off to the best of starts with a tied-fifth place alongside Spain`s Pablo Larrazabal on 277.
Chowrasia showed that he is the man for the big occasion after winning the battle of fairway supremacy against an elite field once again.
His last victory came at the Indian Masters in 2008 and he was determined to end his three-year title drought at the Avantha Masters which is tri-sanctioned by the Asian Tour, European Tour and the Professional Golf Tour of India (PGTI).
Chowrasia signalled his title intent by opening with a birdie on the par-four first. He continued his charge with birdies on holes four, seven, eight, 10, 11 and 14.
The 32-year-old seemed to be cruising towards a grandstand finish until a disastrous double-bogey on the par-three 16th set him back to 15-under with just two holes remaining.
"It was a tight lie on the 16th with one of my chips, I duffed it and ran my second shot by. I made a weak putt and I paid the price for it," said Chowrasia.
He could only par his closing two holes and had to endure an agonising hour-long wait before being declared the champion as Coles was still on the course with four holes to play.
"After making those four birdies on the front-nine, I felt like I was on a roll. I thought that I could win the title already," said Chowrasia.
"At 15-under, I was mentally prepared for the play-off already but luckily for me, Cole failed to take advantage and I`m glad I`m the winner," added Chowrasia.
Cole was left to rue his missed chance at the last and could only reflect on what could have been his maiden win.
"The ball was really far below my feet and a bit of grass in between it and it was just a really awkward shot. I really needed to get underneath to get it up in the air as soon as I could but the ground was rock hard and it just kind of flew on me a bit," Coles said.
"Then I got over the putt and I was still thinking I could make it and win the tournament, but I just hit it so hard and it flew out of the middle of the putter and then I obviously missed the one coming back.
"I think the main lesson to take from this is that you have to adapt to those situations under that kind of pressure with those adrenaline flowing," added the Englishman.
Meanwhile Sujjan, who earned his Tour card by finishing in tied-21st at Qualifying School last month, is poised for the big leap as he showed that he can match up against the best with a noteworthy performance.
Starting the final round in tied-fifth, the 30-year-old marked his card with three birdies on holes four, six and nine with his only blemish on the front-nine coming at the par-four fifth.
Sujjan dropped another shot on the 12th hole but parred his last six holes to sign off in 71.
"It has been a good week for me. I?ve been hitting the ball really well and gave myself lots of chances. There was no pressure for me even playing in front of the home fans. I just stayed focus and played my game," said Sujjan.
"I`ll be concentrating on playing more on the Asian Tour this season and hopefully my performance this week can spur me on to better things," added the Indian.