The Delhi High Court proceedings under section 153 C of the Income Tax Act, 1961 are not valid in the absence of incriminating material.
The appellant/revenue is the order dated 24.03.2017 passed by the Income Tax Appellate Tribunal [“Tribunal”] in favour of respondents M/S Victory Apartments Pvt Ltd And M/S Victory Dwellings Pvt Ltd.
The Tribunal held the proceedings initiated against the assessee under Section 153C of the Income Tax Act, 1961 [“Act”] as bad in law as no incriminating material was found during the search conducted on Mr Pramod Goel, Ms Savita Goel and Mr Ashish Goel [“Goels”], the directors of the assessee companies.
The Commissioner of Income Tax (Appeals) [“CIT(A)”] ruled in favour of the assessees qua the aspect concerning the untenability proceedings in law in the absence of incriminating material, on merits, he decided in favour of the appellant/revenue.
A perusal of the impugned order passed by the Tribunal shows that it did not return any ruling on merits and in that sense left the order of the CIT(A) untouched. However, on the two legal issues which arose before the Tribunal, the decision taken was in favour of the assessees.
Mr Ved Jain, counsel who appeared on behalf of the respondents/assessees, fairly concedes that insofar as the first aspect is concerned, the Tribunal’s decision cannot be sustained in view of the judgment rendered by the Supreme Court in Super Malls Pvt. Ltd. v. Principal Commissioner of Income Tax 8, New Delhi.
However, Mr Sanjeev Menon, standing counsel, who appeared on behalf of the appellant/revenue, cannot but accept the fact that as far as the decision of the Tribunal on the second issue is concerned, i.e., because no incriminating material was found, the proceedings taken out against the assessees under Section 153C of the Act were not valid in the eyes of law, was the correct view.
A division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia held that the question of law as framed in the above-captioned appeals will have to be answered against the appellant/revenue and in favour of the respondents/assesses having regard to the finding returned by the Tribunal on the second issue.
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