In a significant case, the Delhi High Court has held that an addition under section 153C of the Income Tax Act without incriminating material is invalid.
The appellant/revenue challenged the common order dated 07.12.2017 passed by the Income Tax Appellate Tribunal [“Tribunal”]. The Tribunal has disposed of the appeals of the appellant/revenue and the cross-objections filed by the respondent/assessee, Sidhi Vinayak Aromatics Pvt Ltd against the common order of the Commissioner of Income Tax (Appeals) [CIT(A)] order dated 25.03.2011 based on a view taken qua a legal issue.
The Tribunal found that in respect of the aforementioned AYs in which assessments were completed, no incriminating material had been found.
In support of its conclusion that additions made were unsustainable in view of what is adverted to, the Tribunal, inter alia, relied upon the judgment rendered by a coordinate bench of the Court in Commissioner of Income Tax vs. Kabul Chawla (2016).
Mr Shlok Chandra, senior standing counsel, who appeared on behalf of the appellant/revenue, does not dispute the fact that no incriminating material was found under the search carried out under Section 132 of the Income Tax Act, 1961 [“Act”] against the Surya Vinayak Group, which included the respondent/assessee, concerning the aforementioned AYs.
In the order, it was observed that the additions made by the AO are beyond the scope of section 153C of the Income Tax Act, 1961 because no incriminating material or evidence had been found during the course of the search to doubt the transactions. It was noted that in the entire assessment order, the AO has not referred to any seized material or other material for the year under consideration having been found during the course of the search in the case of the assessee, let alone the question of any incriminating material for the year under appeal.
Since there was no substantial question of law arose for consideration, the division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia closed the appeal.
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