No Incriminating Evidence Found during Search: ITAT deletes Rs. 58.73 cr Addition on Dalmia Family Trust [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench has upheld the order of the Commissioner of Income Tax who deleted the addition of ₹58.73 crore observing that additions under Section 153A of the Income Tax Act 1961 would not be valid in the absence of search based or seized evidence.

The Tribunal has dismissed the appeals filed by the Revenue and has held that the reassessment framed by the Assessing Officer [AO] is unsustainable.

The case related to Dalmia Family Office Trust which had filed its original return declaring income for the relevant assessment year at around ₹24.84 crore. The return was revised to ₹25.25 crore and the assessment was completed under scrutiny by accepting the income declared in the return.

A search and seizure operation was initiated in the group cases under Section 132and a notice was served on the assessee for reassessment under Section 153A. In the reassessment proceedings the Assessing Officer held that the assessee had entered into sham transactions with JM Mutual Fund for generating artificial losses and reducing taxable income.

An addition was made for ₹58.73 crore on this ground by holding that the losses were not genuine. Further,the assessee claimed that these additions were made without any incriminating evidence found during the course of search.

It was also claimed that these assessment years were completed assessment years and any addition under Section 153A could be made only if it was found on the evidence available during the search. Since no evidence was found the reassessment exceeded the jurisdiction of the Assessing Officer.

However, it was contended by the Revenue that these were colorable devices to avoid payment of taxes and relied on judicial precedents in this regard.

The Tribunal observed that the additions were not based on any material that was seized during the course of the search proceedings. Relying on the judgment of the Supreme Court of India in the case of PCIT vs. Abhisar Buildwell Pvt Ltd., it reiterated that in the case of completed assessments, additions under Section 153A can be made if the additions are supported by incriminating material that is seized during the course of the search.

The Tribunal comprising Sudhir Kumar [Judicial Member] and Manish Agarwal [Accountant Member] observed that the additions were not supported by such evidence and the reassessment was liable to be quashed and the appeals filed by the Revenue for the relevant assessment years were dismissed.

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