Delhi High Court upheld the quashing of reassessment order and held that the assessment cannot be made on mere presumption of existence of incriminating material.
During the course of search, it came to light that the respondentassessee companies had shown a total amount of INR 325.23 crores as advance against property, from the three companies namely, M/s Attractive Finelease Pvt. Ltd., M/s Ashish Capital Pvt. Ltd. and M/s Aquiss Pvt. Ltd.
A notice under Section 143(2) of the Income Tax Act was issued in the case of M/s Design Infracon (P) Ltd. and another notice under the same provision was issued in the cases of M/s Pavitra Realcon Pvt. Ltd and M/s Delicate Realtors Pvt. Ltd. Pursuant to the said notices, the Assessing Officer passed the assessment order dated 28 March 2013 under Section 143(3)/153C of the Income Tax Act.
The counsel appearing on behalf of the Revenue contended that the additional grounds were raised for the first time only before the ITAT urging that the assessment made under Section 143(3) ought to have been made under Section 153C of the Income Tax Act. He further contended that the finding of the ITAT that no incriminating material was found during the search is ex-facie invalid, particularly in light of the explicit admission of the Directors of the respondent-assessee companies that accommodation entries were taken.
The counsel for the respondent-assessee companies vehemently opposed the submissions advanced by the counsel for the Revenue. He contended that the assessment order under Section 143(3)/ 153C of the Income Tax Act was wrongly framed as no incriminating material against the respondent-assessee companies was found during the course of search. According to him, since there is gross violation of principles of natural justice on the ground of lack of opportunity of cross-examination, the assessment order itself is void.
A Division Bench of Justices Purushaindra Kumar Kaurav and Yashwant Varma observed that “In the present case, it is seen that the Revenue has failed to allude to any steps which were taken to determine that the seized material belonged to the respondent-assessee group. Notably, the satisfaction note has also been prepared in a mechanical format and it does not provide any details about the incriminating material. Therefore, a failure on the part of the Revenue to manifest as to how the material gathered from the search of Jain group of companies belonged to the respondent-assessee group and the same is incriminating, vitiates the entire assessment proceedings.”
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