PCIT Vs Jay Ace Technologies Ltd. (Supreme Court of India)
Summary: The litigation concerned Revenue appeals arising from a common order of the Delhi High Court concerning additions made in assessments under Section 153A of the Income Tax Act, 1961, following search proceedings. The underlying proceedings comprised multiple appeals relating to Assessment Years 2008-09 to 2011-12. The Delhi High Court considered whether additions in completed/non-abated assessments could be sustained where no incriminating material was found during the search.
Read Delhi HC Judgmentin this case: Revenue Appeals Dismissed: No Incriminating Material Found in Share Certificate Case
Proceedings Before the Delhi High Court
The Revenue contended that the ITAT had erred in relying on CIT vs Kabul Chawla, 380 ITR 573 (Del), particularly while an appeal involving a similar issue in M/s Apar Industries Ltd. was pending before the Supreme Court. The Revenue also argued that original share certificates found during search constituted incriminating material, that a statement of Shri Rajesh Agarwal had a live link with seized documents, and that investor companies were not genuine business entities because notices under Section 133(6) were returned unserved.
The assessees disputed these assertions and submitted that only photocopies of share certificates had been found. They relied upon the ITAT’s finding that the share certificates merely recorded transactions already disclosed in the books and had not formed the basis of the additions. They also submitted that the statement of Shri Rajesh Agarwal could not be relied upon because they had not been given an opportunity to cross-examine him. The assessees further relied upon details furnished by the investor companies in response to Section 133(6) notices and the net worth of those companies.
The Delhi High Court noted that the assessments had attained finality before the search and that the CIT(A) and ITAT had concurrently found that no incriminating material had been brought on record to sustain the additions. The Court also noted the ITAT’s finding that the investor companies had furnished detailed replies to the Section 133(6) notices. The Court considered the net-worth figures reproduced in the ITAT order and agreed with the assessees’ contention that the investor companies had sufficient net worth to make the investments.
The Court relied on the legal position reflected in Principal Commissioner of Income Tax v. Abhisar Buildwell P. Ltd. and the authorities cited in the supplied material concerning completed assessments and incriminating material. It also referred to PCIT vs. Best Infrastructure (India) (P.) Ltd., where the supplied material records the principle that statements under Section 132(4) do not by themselves constitute incriminating material.
The High Court further held that the absence of a stay in the pending appeal concerning Apar Industries Ltd. did not prevent it from applying the existing legal position. In this context, it referred to Kunhayammed and Others Vs. State of Kerala and Another and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras.
On the evidentiary issue, the High Court agreed with the ITAT that Shri Rajesh Agarwal’s statement could not be relied upon because the assessees had been denied an opportunity to cross-examine him despite a specific request. The Court referred to M/s Andaman Timber Industries vs. CCE on the significance of cross-examination where statements of witnesses form the basis of an adverse order.
Consequently, the Delhi High Court held that no substantial question of law arose and dismissed the batch of Revenue appeals along with the pending applications.
Supreme Court Proceedings and Final Ruling
Against the High Court decision, the Revenue approached the Supreme Court by special leave. The Supreme Court first condoned the delay. Learned counsel for the petitioner submitted that the issue raised in the special leave petition was covered by the Supreme Court’s judgment in Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell P. Ltd., Civil Appeal No. 6580 of 2021, rendered on 24.04.2023.
The Supreme Court, in the supplied order, did not independently reconsider the factual findings concerning the share certificates, investor companies, Section 133(6) notices or Shri Rajesh Agarwal’s statement. Instead, it recorded the submission that the issue was covered by Abhisar Buildwell P. Ltd. and disposed of the special leave petition in terms of that judgment. Pending applications were also disposed of.
Thus, the Supreme Court’s express disposition was a disposal of the special leave petition in terms of its judgment in Abhisar Buildwell P. Ltd.. The supplied Supreme Court order does not contain a separate merits analysis of the factual findings recorded by the Delhi High Court.
SEO Title: Supreme Court Disposes Jay Ace Technologies SLP in Terms of Abhisar Buildwell
SEO Description: Supreme Court disposes Jay Ace Technologies SLP in terms of Abhisar Buildwell on Section 153A and incriminating material.
Cases Discussed
- Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell P. Ltd., Civil Appeal No. 6580 of 2021 — the Supreme Court disposed of the special leave petition in terms of this judgment.
- CIT vs Kabul Chawla, 380 ITR 573 (Del) — relied upon concerning additions in completed assessments under Section 153A in the absence of incriminating material.
- Principal Commissioner of Income Tax vs. Bhadani Financiers Pvt. Ltd., 2021 SCC OnLine Del 4430 — referred to on the Section 153A issue.
- PCIT vs. Meeta Gutgutia, (2017) 82 com 287 Del — referred to in the context of the Section 153A and incriminating-material issue.
- Kunhayammed and Others Vs. State of Kerala and Another, (2000) 6 SCC 359 — considered concerning the effect of the pendency of an appeal and the applicable doctrine relating to Supreme Court orders.
- Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras, (1992) 3 SCC 1 — referred to with Kunhayammed in considering the effect of the pending challenge and absence of a stay.
- PCIT vs. Best Infrastructure (India) (P.) Ltd., [2017] 84 com 287 (Delhi) — relied upon for the treatment of statements recorded under Section 132(4) as incriminating material.
- ACIT vs Moon Beverages Ltd., ITAT Delhi, ITA No. 115 to 118/Del/2018 — referred to in the ITAT reasoning concerning share certificates and incriminating material.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Delay condoned.
Learned counsel for the petitioner submits that the issue raised in this special leave petition is covered by the judgment of this Court in Civil Appeal No. 6580 of 2021 (Principal Commissioner of Income Tax, Central-3 v/s.Abhisar Buildwell P. Ltd.) rendered on 24.04.2023 by a Co-ordinate Bench of this Court. In the circumstances, the special leave petition stands disposed of in terms of the said judgment.
Pending application(s) shall stand disposed of.
