Siddharth Gupta Vs PCIT (Supreme Court of India)
The matter arose from two sets of Revenue appeals before the Allahabad High Court against common orders of the Income Tax Appellate Tribunal (ITAT) concerning assessments made under Section 153A of the Income-tax Act, 1961 following search and seizure operations under Section 132. The High Court admitted the appeals on two substantial questions of law: (i) whether assessment or reassessment under Section 153A can be framed only on the basis of incriminating material found during the search, and (ii) 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 under Section 132(1) were conducted on 27.11.2015, followed by notices under Section 153A. The Assessing Officer made additions under Sections 68 and 69 in respect of alleged bogus unsecured loans, long-term capital gains (LTCG), short-term capital gains (STCG), interest and commission. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the assessments. However, the ITAT, by order dated 27.05.2021, allowed the assessees’ appeals holding that the assessments for the relevant years had attained finality and that the additions were not based on incriminating material.
The second set related to the Goldie Masale and Shri Santosh Kumar Agarwal Group. Search operations were conducted on 31.08.2015, followed by proceedings under Section 153A. The Assessing Officer made additions after considering seized material, which were affirmed by the CIT(A). The ITAT, by common order dated 14.09.2021, allowed the assessees’ appeals.
Before the High Court, the Revenue contended that searches had yielded incriminating material relating to accommodation entries, bogus unsecured loans and bogus LTCG/STCG through entities such as Success Vyapar Ltd. and Neil Industries Ltd. It argued that the ITAT erred in holding that reassessment under Section 153A required incriminating material and that such a view was contrary to Section 153A and earlier Allahabad High Court decisions.
The assessees contended that no incriminating material had been found during the searches, that their original assessments had already concluded under Section 143(3), and that concluded assessments could not be reopened under Section 153A in the absence of incriminating material. They relied upon decisions including Sinhgad Technical Education Society, Kabul Chawla and Ram Avtar Verma.
The High Court examined Sections 153A and 153C of the Act. It noted that in both sets of appeals, the assessment orders and the CIT(A)’s orders had extensively discussed incriminating materials found during the searches, including seized diaries, documents, statements and other evidence relating to accommodation entries, bogus unsecured loans and bogus LTCG/STCG. The CIT(A) had recorded detailed findings on the seized material, the statements of directors and operators, the alleged accommodation entry providers, and the assessees’ failure to establish the genuineness and creditworthiness of the transactions under Section 68.
The High Court held that the facts showed incriminating material was available and had been used in making the assessments. It observed that Section 153A provides for assessment or reassessment of the total income and is not confined merely to computation of undisclosed income based on search material. Relying upon its earlier Division Bench judgments in Commissioner of Income Tax v. Raj Kumar Arora and Commissioner of Income Tax Central Kanpur v. Kesarwani Zarda Bhandar Sahson Alld., the High Court held that the Assessing Officer has power to reassess total income for the six assessment years covered by Section 153A. It answered the first substantial question of law in the negative and the second in the affirmative, both in favour of the Revenue. Accordingly, all Revenue appeals were allowed and the ITAT’s orders were set aside.
The assessees challenged the High Court judgment before the Supreme Court by filing Special Leave Petitions.
The Supreme Court condoned the delay. After hearing counsel for the petitioners and considering the reasoning of the High Court regarding the incriminating material found and the consequent assessments under Section 153A of the Income-tax Act, 1961, the Court held that no interference was warranted under Article 136 of the Constitution. The Special Leave Petitions were dismissed and pending applications were disposed of.
As a result, the Supreme Court declined to interfere with the Allahabad High Court judgment, leaving intact the High Court’s decision allowing the Revenue’s appeals and setting aside the ITAT’s orders.
Read HC Judgment in this case: Allahabad HC Remands Section 153A Cases to ITAT Over Incriminating Material Findings
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Delay condoned.
Having heard learned counsel appearing on behalf of the petitioner(s) and having gone through the reasoning given by the High Court on incriminating material found and thereafter assessment under Section 153-A of the Income Tax Act, 1961, in the facts and circumstances of the case, no interference of this Court is called for in exercise of powers under Article 136 of the Constitution of India. The Special Leave Petitions stand dismissed.
Pending application(s) shall stand disposed of.
