No Incriminating Material Found against Oswal Fab Knits: ITAT deletes Additions [Read Order]

In a significant ruling, the Income Tax Appellate Tribunal ( ITAT ) in Chandigarh has dismissed additions made against Oswal Fab Knits Ltd. and related entities by the Income Tax Department.

The decision by the two member-bench of Judicial Member Shri Sanjay Garg and Accountant Member Shri Krinwant Sahay, took note of the absence of incriminating material during a search action conducted on May 10, 2012.

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The case revolves around assessments for the financial years 2009-10 and 2010-11, where the department alleged that share application money received by the company constituted unaccounted income under Section 68 of the Income Tax Act, 1961. The additions were based on the re-appreciation of information already on record. However, no new incriminating evidence was unearthed during the search action.

The tribunal referred to the landmark judgment by the Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd., which established that additions cannot be sustained in completed or non-abated assessments in the absence of incriminating material found during a search. Applying this precedent, the ITAT ruled that the additions made against Oswal Fab Knits Ltd. and its group entities lacked legal basis and were unsustainable.

The order noted that assessments for the relevant years had already been completed and were outside the scope of further scrutiny by the department, barring new evidence. The tribunal emphasized that the time limit for issuing notices under Section 143(2) had also expired well before the search action.

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The bench observed that, “A perusal of the assessment order in all these cases would reveal that a common assessment order has been passed by the AO in all these cases. Only the quantum of additions differ for each assessee and assessment year. The additions, as observed above, have been made treating the share application money received by the assessee as unaccounted income of the assessee. These additions have been made by the AO by way of re-appreciating the information and evidences on record.”

It was thus noted that, no incriminating material, whatsoever, was found during the course of search action.

In the case of Oswal Fab Knits Ltd., an addition of ₹2.39 crore was deleted, while a similar treatment was given to other entities in the Oswal Group.

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The tribunal upheld the principle that mere re-evaluation of existing records cannot justify additions in cases of completed assessments without substantial evidence of wrongdoing.

To Read the full text of the Order CLICK HERE

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