2016 (10) TMI 1022 - HC - Income Tax

Assessment u/s 153A - Deemed dividend addition u/s 2(22)(e) - Held that - There was no material found during the search which promoted the Assessing Officer to make such additions. Additions according to the Assessing Officer therefore were not justified. - Decided in favour of assessee.

Summary

Issues involved:
Challenge to deletion of addition u/s 2(22)(e) based on absence of incriminating material during search proceedings.

Analysis:
1. The Revenue challenged the deletion of addition made under section 2(22)(e) by the Income Tax Appellate Tribunal (ITAT) for the assessment year 2007-08. The core issue revolved around whether the ITAT erred in law and on facts by deleting the addition without any incriminating material being recovered during the search proceedings.

2. The assessee argued before the Tribunal that the Assessing Officer's additions under section 2(22)(e) were unjustified as no material was found during the search to support such additions. The Tribunal upheld the assessee's contention, citing the decision of the Delhi High Court in a similar case.

3. The High Court noted that different High Courts had varying views on this matter. However, referencing a previous judgment, the Court observed that under section 153A of the Income Tax Act, assessments in cases of search or requisition must be connected to incriminating material found during the search. If no such material is discovered, the earlier assessment should be reiterated.

4. The Court emphasized that assessments under section 153A should be based on material collected during the search or requisition. In cases where no incriminating material is found, assessments should be in line with previous assessments. The Court highlighted the importance of providing the assessee with an opportunity to cross-examine individuals involved in the search before making any additions.

5. Consequently, the High Court dismissed the tax appeal, affirming the Tribunal's decision to delete the addition under section 2(22)(e) due to the absence of incriminating material during the search proceedings.