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2018 (5) TMI 2114 - HC - Income TaxAssessment u/s 153A - Deemed divided addition u/s 2(22)(e) - HELD THAT - This Court is of the opinion that there is no infirmity with the decision of the ITAT. In Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT the Court had clearly indicated that the AO cannot arbitrarily complete the block assessment under Section 153A without any relevance or nexus with the seized material . The Court also held that an assessment in such circumstances has to be made under the provision only on the basis of seized material - it was held that in the absence of any incriminating material, the completed assessment can be reiterated and abetted assessment or re-assessment can be made. In the present case, the Revenue does not urge that it discovered any new material justifying the addition under Section 2(22)(e). Rather, there was no material to connect the additions made under that head. Clearly, there was no incriminating material or facts or circumstances justifying the addition - Decided in favour of assessee.
Issues Involved:
1. Interpretation of Section 2(22)(e) of the Income Tax Act, 1961. 2. Validity of the addition of ?17,19,14,701 under Section 2(22)(e) of the Act. 3. Application of the decision in Commissioner of Income Tax v. Kabul Chawla (2015) 380 ITR 573. 4. Assessment under Section 153A and the requirement of incriminating material. Interpretation of Section 2(22)(e) of the Income Tax Act, 1961: The case involved an appeal under Section 260A of the Income Tax Act, 1961, where the Revenue contested the order of the Income Tax Appellate Tribunal (ITAT) regarding the taxation of ?17,19,14,701 under Section 2(22)(e) of the Act. The primary question of law raised by the Revenue was the justification of the Assessing Officer in bringing this amount to tax under the specified provision. Validity of the addition under Section 2(22)(e) of the Act: The respondent/assessee initially declared an income of ?1,07,26,905, which was later increased to ?19,06,41,600 by the Assessing Officer who added ?17,19,14,701 under Section 2(22)(e) of the Act. The Commissioner of Income Tax (Appeals) and the ITAT, following the decision in Commissioner of Income Tax v. Kabul Chawla, held that since no fresh material was discovered during the search, the addition was unjustified. The ITAT emphasized the necessity of incriminating material for such additions and ruled in favor of the assessee. Application of the decision in Commissioner of Income Tax v. Kabul Chawla (2015) 380 ITR 573: The CIT(A) and ITAT relied on the judgment in Kabul Chawla, which established that completed assessments can only be interfered with under Section 153A based on incriminating material unearthed during a search. The courts highlighted that without such material, the AO cannot arbitrarily make additions, emphasizing the importance of a nexus with the seized material for assessments under Section 153A. Assessment under Section 153A and the requirement of incriminating material: The High Court, after considering the arguments of both parties, affirmed the decision of the ITAT. It reiterated the principle from Kabul Chawla that assessments under Section 153A must be based on incriminating material not disclosed during the original assessment. In this case, since no new material was presented to justify the addition under Section 2(22)(e), the Court found no infirmity in the ITAT's decision and dismissed the appeal, stating that no question of law arose.
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