2017 (2) TMI 552 - HC - Income Tax

Additions on account of gifts - proceedings commenced under Section 153C - Held that - Admittedly the Revenue has not produced any evidence either before the Assessing Officer or before this Court to show that any incriminating evidence was discovered against the assessee during the search on 25.03.2008. In the absence of any incriminating evidence the Assessing Officer was not justified in invoking his power under Section 153C of the Act. The learned Tribunal has also noticed that this opinion has been expressed by other courts. Therefore a mere passing observation made by the learned Tribunal that the said power could not be invoked for regular assessment that had already been completed under Section 143(3) of the Act would not give rise to a substantial question of law. The issue is not with regard to the scope and ambit of Section 143(3) of the Act; it is specifically with regard to the power

Summary

Issues:
1. Validity of deletion of additions made to the income of the assessee on account of gifts under Section 153C of the Income Tax Act, 1961.
2. Interpretation of the powers under Section 153C of the Act in the absence of incriminating evidence against the assessee during a search under Section 132 of the Act.

Analysis:

Issue 1:
The case involved the deletion of additions to the income of the assessee on account of gifts under Section 153C of the Income Tax Act. The assessee had received a gift of ?45,00,000 from a company in Dubai, which was questioned by the Assessing Officer. The Tribunal, in its order dated 09.12.2014, allowed the appeal and held that no addition on account of the gifts could be sustained. The Revenue challenged this decision before the High Court. The Revenue argued that the Tribunal erred in holding the gifts as genuine without prior scrutiny assessment and that the Tribunal's order was not justified. However, the High Court found that the Tribunal correctly interpreted the law and dismissed the appeal, stating that the substantial questions of law raised by the Revenue did not arise in the case.

Issue 2:
The second issue revolved around the interpretation of the powers under Section 153C of the Act in the absence of incriminating evidence against the assessee during a search under Section 132 of the Act. The Revenue contended that the Assessing Officer was justified in reopening the case of the assessee under Section 153C based on the power granted by the Act. On the other hand, the assessee argued that since no incriminating evidence was found during the search, the power under Section 153C could not be invoked. The High Court agreed with the assessee, stating that without any incriminating evidence against the assessee, the Assessing Officer was not justified in invoking the power under Section 153C. The Court upheld the Tribunal's decision and dismissed the appeal, emphasizing the importance of incriminating evidence for invoking such powers.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the necessity of incriminating evidence to invoke powers under Section 153C of the Income Tax Act. The judgment clarified the legal interpretation of the provisions and highlighted the importance of evidence in such cases.