No incriminating material was unearthed during the search, no additions could have been made to the income already assessed

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No incriminating material was unearthed during the search, no additions could have been made to the income already assessed

short overview :  Since no incriminating material was unearthed during the search, no additions could be made to the income already assessed.

Revenue challenged the order of Tribunal deleting the addition made pursuant to a search action holding that no incriminating material against assessee was recovered during the search. Case of Revenue was that the report of Special Auditor should be treated as incriminating evidence.

it is held that  Clearly the report of the Special Auditor, having been commissioned subsequent to the search, and during the assessment proceedings against group concern of assesee, cannot obviously be treated as incriminating material qua assessee, recovered during the course of search, in order to justify the addition made in the assessment under section 153A. In the instant case, on the date of search, the assessment for relevant assessment years already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.

Decision: In assessee’s favour.

Referred: Pr. CIT v. Meeta Gutgutia (2017) 395 ITR 526 (Del) : 2017 TaxPub(DT) 1767 (Del-HC), CIT v. Kabul Chawla (2015) 380 ITR 573 (Del) : 2015 TaxPub(DT) 3486 (Del-HC), Dy. CIT v. M/s. Abhisar Buildwell (P) Ltd. [IT Appeal Nos. 4877 and 4878/Del/2014, dt. 4-7-2017] and Pr. CIT v. Meeta Gutgutia (2018) 257 Taxman 441 (SC) : 2018 TaxPub(DT) 4130 (SC).

 

IN THE DELHI HIGH COURT

S. MURALIDHAR & TALWANT SINGH, JJ.

Pr. CIT v. Abhisar Buildwell (P) Ltd.

ITA No. 239/2018, ITA No. 240/2019

24 July, 2019

Appellant by: Vibhooti Malhotra, Advocate

Respondent by: Rakesh Gupta, Anil Aggarwal, Somil Agarwal and Monika Ghai, Advocates

ORDER

CM Appl. 7359/2018 (Exemption) in ITA No. 240/2018

Allowed, subject to all just exceptions.

ITA 239/2018 and ITA 240/2019

2. These are two appeals filed against the impugned common Order, dated 4-7-2017 passed by the ITAT in ITA No. 4877/Del/14 & 2878/Del/2014 for the assessment years (AYs) 2007-08 and 2008-09, respectively.

3. The issue urged in the present appeals is whether the ITAT erred in deleting the additions made by the assessing officer in the assessments framed under section 153A of the Income Tax Act, 1961 (the Act) on the basis that there was no incriminating material qua the assessee.

4. The facts in brief are that a search was conducted on 21-1-2011 in Dharampal Satyapal group of cases. Consequent thereto, a notice under section 153A of the Act was issued to the Respondent Assessee, an entity created on demerger of rubber thread unit of Dharampal Satyapal Ltd. (DSL). The assessee, in the return filed in response to the notice, declared a loss in each of the assessment years. The Assessee claimed depreciation in the sum of Rs. 1,05,84,885 for assessment year 2007-2008 and Rs. 9,50,75,091 for assessment year 2008-2009. The assessing officer (AO) acted on the report of Special Audit ordered in the case of DSL under section 142 (2A) of the Act, after the search, and concluded that the depreciation could not have been claimed in respect of assets acquired by DSL out of the deferred government grant in terms of Explanation 10 to section 43 (1) of the Act.

5. The Commissioner (Appeals) [CIT(A)] by the common Order, dated 25th April 2014 allowed the assessee’s appeals for the assessment years in question on the ground that no incriminating material qua the assessee was recovered during the search. On this ground account the Commissioner (Appeals) deleted the additions made by the assessing officer.

6. The ITAT has dismissed the Revenue’s appeal relying essentially on the decisions of this Court in CIT v. Kabul Chawla (2015) 380 ITR 573 (Del) : 2015 TaxPub(DT) 3486 (Del-HC) and Pr. CIT v. Meeta Gutgutia Proprietor Ferns ‘N’ Petals (2017) 395 ITR 526 (Del) : 2017 TaxPub(DT) 1767 (Del-HC).

7. Learned counsel for the Revenue repeated the submission made before the ITAT viz., that the report of Special Audit should be treated as incriminating evidence. Clearly the report of the Special Auditor, having been commissioned subsequent to the search, and during the assessment proceedings against DSL, cannot obviously be treated as incriminating material qua the assessee, recovered during the course of search, in order to justify the addition made in the assessment under section 153A of the Act. This is consistent with the legal position explained in both CIT v. Kabul Chawla (supra) (which still holds the field) and Pr. CIT v. Meeta Gutgutia Proprietor Ferns ‘N’ Petals (supra). Dr. Rakesh Gupta, learned counsel for the assessee appearing on advance notice produced before this Court copy of an Order, dated 2-7-2018 passed by the Supreme Court dismissing the Revenue’s Special Leave Petition against the aforementioned judgment in Pr. CIT v. Meeta Gutgutia Proprietor Ferns ‘N’ Petals (supra) on merits. The said order is reported as Pr. CIT v. Meeta Gutgutia (2018) 257 Taxman 441 (SC) : 2018 TaxPub(DT) 4130 (SC).

8. This Court, therefore, finds there is no legal infirmity in the impugned order of the ITAT. No substantial question of law arises therefrom.

9. The appeals are accordingly dismissed.

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