2021 (2) TMI 1186 - HC - Income Tax

Assessment u/s 153A - incriminating material found during the course of search or not? - HELD THAT - In the instant case both the CIT(A) as well as the ITAT have held that the addition is not based on any incriminating material found during the course of search and the assessment was not pending on the date of search. In the proceedings before the CIT(A) as well as the ITAT, the Revenue has not made any attempt as to disclose the incriminating material. The view taken by the tax authorities based on the decision of CIT Vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT cannot be held to be perverse. The questions of law proposed by the Revenue are squarely covered by the aforesaid judgment.

Summary

Issues:
Appeal against ITAT order dismissing Revenue's appeal for Assessment Year 2008-09 based on Client Code Modifications and selling equity shares below market price. Whether additions justified based on incriminating material found during search action u/s 132 of the Act. Whether assessment abated due to no pending assessment/reassessment proceedings on search date.

Analysis:
1. The appeal involved challenging the ITAT order dismissing the Revenue's appeal for the Assessment Year 2008-09. The assessee, engaged in trading, faced additions to income due to Client Code Modifications and selling equity shares below market price. The AO added significant amounts to the income based on alleged profit and loss shifting through Client Code Modifications and under-valuation of shares sold to a director.

2. The CIT(A) and ITAT held that no assessment/reassessment proceedings were pending during the search action, and the additions were not supported by incriminating material found during the search. The CIT(A) relied on the precedent set in CIT Vs. Kabul Chawla, 2015 SCC OnLine Del 11554, to delete the additions. The Revenue's appeal before the ITAT was also dismissed based on the same reasoning.

3. During the hearing, the Revenue argued that incriminating material was indeed found during the search, justifying the additions. However, the court found that the assessing officer's observations did not provide details of any incriminating material, and the Revenue failed to disclose or explain such material during the proceedings.

4. The court emphasized that the findings of the CIT(A) and ITAT should not be lightly interfered with. The decisions were based on the legal precedent of CIT Vs. Kabul Chawla, and the Revenue's arguments were deemed unsubstantiated. The court concluded that no substantial question of law arose for consideration, leading to the dismissal of the appeal.

5. Ultimately, the court dismissed the appeal, stating that the Revenue's arguments did not establish any grounds for interference with the lower authorities' findings. The legal issues raised by the Revenue were deemed to be adequately addressed by the existing legal precedent, and no substantial question of law merited further examination.