2017 (2) TMI 346 - HC - Income Tax

Assessments made by TPO/AO set aside after the search and seizure proceedings, culminating in a proceeding under Section 153A - Held that - This Court has considered the record. It is quite evident that the scrutiny assessments concluded earlier were based upon queries. The assessee had disclosed all the materials which came to be reviewed subsequently in Section 153A proceedings. Thus, having regard to the the decision in Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT in the absence of seizure of any incriminating material, the ITAT, in this Court s opinion, did not fall into error in quashing the proceedings

Summary

Issues:

1. Validity of ITAT's decision setting aside assessments made by TPO/AO after search and seizure proceedings under Section 153A of the Income Tax Act, 1961.
2. Application of the rule enunciated in CIT v. Kabul Chawla 2016 (380) ITR 573 (Del) regarding proceedings under Section 153A.

Analysis:

1. The High Court considered the appeal challenging the ITAT's decision to set aside assessments made by the Transfer Pricing Officer (TPO)/Assessing Officer (AO) after search and seizure proceedings under Section 153A of the Income Tax Act, 1961. The revenue contended that the ITAT's decision was unwarranted. It was noted that during the relevant period, scrutiny proceedings were concluded, and assessments were framed by the AO. Subsequently, search and seizure proceedings occurred in the assessee's premises. Despite no new incriminating material being found, the AO referred the matter to the TPO under Section 92C based on the existing material, specifically related to an advance to the Associated Enterprise on an interest-free basis. The TPO's analysis led to an approved assessment order based on Arms' Length Price (ALP) determination. The Disputes Resolution Panel (DRP) reduced the rate of interest upon the assessee's appeal. The ITAT then quashed the assessment, primarily due to the absence of incriminating material following the rule in CIT v. Kabul Chawla.

2. The High Court examined the application of the rule established in CIT v. Kabul Chawla 2016 (380) ITR 573 (Del) concerning proceedings under Section 153A. The Court observed that the scrutiny assessments conducted earlier were based on queries, and the materials disclosed by the assessee were subsequently reviewed in Section 153A proceedings. In light of the decision in Kabul Chawla, the ITAT's decision to quash the proceedings was deemed appropriate by the Court. It was concluded that the ITAT did not err in its decision, and the appeals were dismissed accordingly.