Ghata Mehandipur Balaji Griding Works Pvt. Ltd. Vs PCIT (Supreme Court of India)
The matter arose from assessments framed under Section 153A of the Income-tax Act, 1961 following search operations conducted under Section 132. The controversy concerned whether assessments or reassessments under Section 153A could be sustained in concluded assessment years and whether the Income Tax Appellate Tribunal (ITAT) was justified in deleting additions on the ground that no incriminating material had been found during the search. The Supreme Court considered Special Leave Petitions against the Allahabad High Court’s common judgment remitting the matters to the ITAT for fresh adjudication.
Read HC Judgment in this case: Allahabad HC Remands Section 153A Cases to ITAT Over Incriminating Material Findings
Before the Allahabad High Court, the Income Tax Department filed two sets of appeals arising from common orders of the ITAT, Lucknow. The substantial questions of law framed by the High Court were whether assessment or reassessment under Section 153A can be made only on the basis of incriminating material found during a search under Section 132 and whether such assessment can be framed where no incriminating material is found.
The first set of appeals related to the Chaurasia Group. Search and seizure operations were conducted on 27.11.2015, accompanied by a survey under Section 133A. According to the assessment records, various incriminating documents were found and impounded. The cases were centralized, notices under Section 153A were issued, returns were filed, and further notices under Sections 143(2) and 142(1) followed. The Assessing Officer made additions under Sections 68 and 69 in respect of alleged bogus unsecured loans, long-term capital gains (LTCG), interest and commission relating to Success Vyapar Ltd. and Neil Industries Ltd. The Commissioner of Income Tax (Appeals) dismissed the assessees’ appeals. However, the ITAT allowed the appeals, holding that the assessments had attained finality and that no additions could be sustained in the absence of incriminating material.
The second set of appeals concerned the Goldie Masale and Shri Santosh Kumar Agarwal Group. Search operations were conducted on 31.08.2015, during which cash, jewellery and various incriminating documents were stated to have been seized. Following notices under Section 153A and subsequent assessment proceedings, additions were made under Sections 68 and 69 on account of alleged bogus LTCG, commission, unsecured loans and interest. The CIT(A) upheld the assessments, whereas the ITAT allowed the assessees’ appeals on the ground that no incriminating material had been found to justify additions in concluded assessments.
Before the High Court, the Revenue contended that the searches had yielded incriminating material relating to accommodation entries, bogus unsecured loans and bogus LTCG, that proceedings under Section 153A had been validly initiated, and that the ITAT erred in holding that reassessment under Section 153A could not be made without incriminating material. The assessees argued that no incriminating material had been found during the searches, that the original assessments under Section 143(3) had already been completed, and that concluded assessments could not be reopened under Section 153A without search-based incriminating material.
The High Court examined Sections 153A and 153C of the Income-tax Act together with the assessment and appellate orders. It noted that, in both sets of appeals, the Assessing Officer and the CIT(A) had extensively discussed the evidence, including alleged incriminating material found during the search and survey proceedings, statements, seized diaries, documentary evidence, and findings concerning alleged accommodation entries, bogus unsecured loans and bogus LTCG/STCG. The CIT(A) had also recorded findings regarding the genuineness of transactions, creditworthiness of creditors, seized documents, statements of directors and entry operators, and other evidence relied upon by the Assessing Officer.
The High Court observed that the ITAT, while allowing the appeals, had merely stated that the assessments had become concluded and that no additions had been made on the basis of incriminating material. According to the High Court, the Tribunal neither dealt with nor set aside the detailed factual findings recorded by the Assessing Officer and the CIT(A), but proceeded on the assumption that no incriminating material had been found while following its earlier decision. The High Court also noted that Section 153A begins with a non obstante clause empowering the Assessing Officer to issue notices and assess or reassess total income for the prescribed assessment years following a search, while discussing the statutory scheme relating to pending assessments and abatement.
On the facts before it, the High Court held that the ITAT had failed to examine the detailed findings recorded by the Assessing Officer and the CIT(A) regarding the incriminating material and other evidence. Consequently, it set aside the common orders of the ITAT and restored the appeals to the Tribunal for fresh adjudication in accordance with law after considering the findings and evidence already on record. The departmental appeals were allowed to that extent, and the substantial questions of law were answered accordingly.
The assessees challenged the High Court’s common judgment before the Supreme Court by filing Special Leave Petitions.
Before the Supreme Court, the Court recorded that the High Court had merely remitted the matters to the ITAT for consideration of the alleged incriminating materials that had been examined by the Assessing Officer and the CIT(A) for the purposes of Section 153A of the Income-tax Act, 1961. The Supreme Court further observed that the issue remained entirely open for both sides to advance their respective cases before the Tribunal.
In these circumstances, the Supreme Court declined to interfere with the common judgment of the Allahabad High Court. It dismissed the Special Leave Petitions while leaving all rights and contentions open to be urged before the Income Tax Appellate Tribunal. As a result, the High Court’s direction remitting the appeals to the ITAT for fresh adjudication remained undisturbed, and the Tribunal is required to reconsider the matters after examining the alleged incriminating material already considered by the Assessing Officer and the CIT(A). Pending applications, if any, were also disposed of.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Heard Mr. Ved Jain, the learned counsel appearing for the petitioners & Mr. N. Venkataraman, the learned Additional Solicitor General appearing for the respondent.
2. All that the High Court has done is to remit the matter to the Income Tax Appellate Tribunal to consider the alleged incriminating materials which was looked into by the Assessing Officer as well as the CIT (Appeals) for the purpose of Section 153A of the Income Tax Act, 1961.
3. The issue is still wide open for both the sides to put forward their respective cases.
4. In such circumstances, we decline to interfere with the common impugned orders passed by the High Court.
5. The Special Leave Petitions are, accordingly, dismissed.
6. All rights and contentions are left open to be canvassed before the Income Tax Appellate Tribunal.
7. Pending applications, if any, also stand disposed of.
