Section 153C Addition not Sustainable without Incriminating Material: ITAT Delhi

ITO Vs Prajyoti Impex Pvt Ltd (ITAT Delhi)

The Income Tax Appellate Tribunal (ITAT) Delhi heard an appeal filed by the Income Tax Officer (ITO) against Prajyoti Impex Pvt Ltd. The case involved assessment year 2014-15 and the initiation of proceedings under Section 153C of the Income Tax Act after a search and seizure operation. The ITO made certain additions to the assessed income, but the Commissioner of Income-Tax (Appeals) deleted these additions. The ITAT Delhi examines the case to determine whether the additions made by the ITO were based on incriminating material found during the search and seizure operation.

Analysis: The ITAT Delhi carefully reviewed the assessment order and found no indication that the additions made by the ITO were supported by incriminating material found during the search and seizure operation. The Revenue failed to present any material to support their claim that the additions were based on incriminating material. The ITAT Delhi refers to legal precedents that state that no addition can be made under Section 153C of the Act without incriminating material found during the search and seizure operation. Based on this reasoning, the ITAT Delhi upholds the decision of the Commissioner of Income-Tax (Appeals) to delete the additions made by the ITO.

Conclusion: The ITAT Delhi dismisses the appeal filed by the Income Tax Officer against Prajyoti Impex Pvt Ltd. The tribunal affirms that the additions made under Section 153C of the Income Tax Act cannot be sustained without any incriminating material found during the search and seizure operation. Therefore, the decision of the Commissioner of Income-Tax (Appeals) to delete the additions is upheld.

FULL TEXT OF THE ORDER OF ITAT DELHI

This is an appeal by the assessee against order dated 21.08.2019 of learned Commissioner of Income-Tax (Appeals)-IV, Kanpur. Though, in the impugned order, learned Commissioner (Appeals) has disposed of appeals relating to six assessment years, however, presently, we are concerned with assessment year 2014-15.

2. Briefly, the facts are assessee is a resident company. In pursuance to a search and seizure operation under Section 132 of the Income-Tax Act, 1961 carried out in case of Maconns, Meenu and Yadav Singh Group, Noida, proceedings under Section 153C of the Act were initiated in case of the assessee. In response to notice issued under Section 153C of the Act, assessee filed its return of income and participated in the assessment proceedings. Ultimately, the Assessing Officer completed the assessment under Section 143(3) read with section 153C of the Act, making the following additions:

i) Difference in valuation of property as per : Rs.19,25,204 DVO;

ii) Disallowance under Section 37 of the Act; : Rs.78,32,113 &

iii) Cash credit under Section 68 of the Act : Rs.1,54,00,000

3. Contesting the aforesaid additions, assessee preferred an appeal before learned Commissioner (Appeals).

4. After considering the submissions of assessee in the context of facts and material on record, learned Commissioner (Appeals), being convinced that the additions made by the Assessing Officer are not based on any incriminating material/documents found as a result of search and seizure operation, deleted the additions.

5. Being aggrieved, Revenue is before us.

6. We have considered rival submissions and perused material available on record.

7. On careful perusal of the assessment order, we are unable to locate any observation made by the Assessing Officer indicating that the additions made were with reference to any incriminating material found as a result of search and seizure operation conducted under Section 132 of the Act. On a specific query being made, learned Departmental Representative failed to bring any material before us to demonstrate that the additions made by the Assessing Officer were on the basis of incriminating material found as a result of search and seizure operation. Thus, in view of the ratio laid down in the judicial precedents, referred to by the learned Commissioner (Appeals), that no addition can be made in an assessment under Section 153C of the Act in absence of any incriminating material found as a result of search and seizure operation, we do not find any infirmity in the decision of learned Commissioner (Appeals) in deleting the additions. It is relevant to observe, in a recent judgment delivered in the case of PCIT vs. Abhisar Buildwell P. Ltd., Civil Appeal No.6580 of 2021 and others, the Hon’ble Supreme Court has approved the legal proposition followed by learned Commissioner (Appeals). Grounds raised are dismissed.

8. In the result, the appeal is dismissed.

Order pronounced in the open court on 10t^h May, 2023.