A division bench of the Delhi High Court, while dismissing a bunch of appeals by the income tax department has held that the recovery of share certificate allotted to investor companies found at the premises of issuing company is not “incriminating material” for the purpose of addition under the provisions of the Income Tax Act, 1961.
The income tax department contended that the Tribunal has erred in holding that no incriminating material was found in the search, whereas the original copies of share certificates pertaining to share capital and premium allotted to investor companies were found at the premises of issuing company itself instead of investor company’s premises evidencing, that, the investor companies were bogus/accommodation entry providing entities.
Justice Manmohan and Justice Manmeet Pritam Singh Arora found that in the present case a satisfaction note was drawn up under Section 153C of the Income Tax Act, 1961, on 29th January, 2016. Consequently, the search year would be the Assessment Year 2016-17 and Revenue would be entitled to re-open the returns for the Assessment Years 2010-11 to 2015-16.
Dismissing the departmental appeals, the Court held that “with respect to Assessment Years 2010-11 & 2012-13, this Court is of the view that the recovery of the annual report and the share certificate of the Petitioner from premises of Minda Group cannot be considered to be incriminating documents. After all, the Minda Group was not a third party but the issuing authority of the share certificates. In fact, both the appellate authorities below have given a concurrent finding that no incriminating material had been brought on record by the Assessing Officer to sustain the additions on merit. Also, the genuineness of the share capital has been accepted both by CIT (A) and ITAT and also there is no live link between seized material and the additions made. Therefore, this Court is of the view that assumption of jurisdiction in the present cases by the Assessing Officer was erroneous.”
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