2019 (5) TMI 1711 - HC - Income Tax

Assumption of jurisdiction u/s 153C - Addition u/s 68 - ITAT has deleted the said addition for the simple reason that the above addition was not based on the satisfaction note prepared for the purposes of initiation of proceedings against the Assessee u/s 153C - HELD THAT - The so-called incriminating material had to have some nexus with the addition ultimately made. That not having been established, the ITAT was justified in upholding the order of CIT (A) deleting the addition. No substantial question of law arises. The appeal is dismissed.

Summary

Issues:
Jurisdiction under Section 153C of the Income Tax Act, 1961 based on incriminating material found during search and seizure operation.

Analysis:

1. Jurisdiction under Section 153C:
The case involved a question regarding the assumption of jurisdiction under Section 153C of the Income Tax Act, 1961. The search and seizure operation conducted at various premises of a company revealed incriminating material. However, the issue arose when the addition made to the income of the Assessee was not directly linked to the incriminating material found during the search. The ITAT held that the addition made was not based on the satisfaction note prepared for the initiation of proceedings under Section 153C. The ITAT emphasized the necessity for a nexus between the incriminating material and the addition made, which was lacking in this case. Consequently, the ITAT upheld the order of the CIT (A) deleting the addition, leading to the dismissal of the appeal.

2. Search and Seizure Operation Details:
The search and seizure operation were conducted at various premises of M/s Today Homes & Infrastructure Pvt. Ltd., leading to the discovery of incriminating material. The Assessee was part of the associated/group concerns in the Today Group of cases. Among the seized documents was an agreement for sale dated 5th May 2006 for an office space in New Delhi. Despite this, the addition to the Assessee's income was based on a different amount sourced from M/s. BJ Buildwell Pvt. Ltd. The added amount was sourced from entities of Jain Brothers and failed the genuineness test under Section 68 of the Act. The ITAT's decision to delete this addition was based on the lack of a clear connection between the incriminating material found during the search and the addition made to the Assessee's income.

In conclusion, the judgment highlighted the importance of establishing a direct nexus between incriminating material found during a search and any subsequent additions made to an Assessee's income under Section 153C of the Income Tax Act, 1961. The decision of the ITAT to delete the addition in this case was upheld, emphasizing the requirement for a clear link between the incriminating material and the income addition.