The Mumbai Income Tax Appellate Tribunal (ITAT)has recently while deleting additions made under section 153C of Income Tax Act 1961 observed that Information relied upon by the assessing officer did not have any bearing to search conducted.
The fact of the case that, during search action conducted in the case of Kamdhenu/Green Valley Group, it was noticed that the assessee Khimji Karamshi Patel has received unsecured loans of Rs. 50, 00,000/- from M/s. Divine Tradecom Pvt. Ltd., a Kolkata based company in the year under consideration. Further it was found that assessee was one of the directors in Patel/Patni group of concerns, an associate group of Kamdhenu Group.
Accordingly assessee’s case was reopened and passes an reassessment order and made addition under section 68 of the Income Tax Act, 1961
Against this order assesee filed an appeal before the Commissioner of Income Tax Appeal CIT (A) and CIT (A) granted partial relief to the assessee.
Aggrieved by the relief granted by the CIT (A) to the assessee, revenue filed appeal before ITAT.
Rushabh Mehta, counseling for assessee submits that “Assessing Officer has wrongly acquired the jurisdiction under section 153C of the Income Tax Act 1961 and additions are made devoid of any incriminating material found in the course of search of third party. Hence, none of the additions and disallowances ought to have been made by the Assessing Officer”.
Madhumalti Ghosh, counsel for revenue confirmed the decision of addition made by the assessing officer.
After considering the contentions of the both parties the division bench of the ITAT comprising the Prashant Maharishi, Accountant (Member) and Pavan Kumar Gadale, (Judicial Member) allowed the appeal of assesse and observed that,
“Information relied upon by the Assessing Officer does not have any bearing to the search conducted and cannot be considered as incriminating material found during the search. Even the disallowance of Rs. 4,07,492/- made u/s. 36(1)(iii) for not utilizing the interest bearing funds wholly and exclusively for business purposes is not connected to any incriminating material found during the search”.
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