2017 (2) TMI 581 - 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 prescribed under Section 153C of the Act. To the limited issue of the ambit and scope of Section 153A of the Act, the learned Tribunal has correctly expressed its opinion. - Decided against revenue

Summary

Issues:
1. Validity of additions made to the income of the assessee on account of gifts under Section 153C of the Income Tax Act.
2. Interpretation of the scope of assessments under Section 153A/153C in relation to seized material and completed assessments.

Issue 1: Validity of additions made to the income of the assessee on account of gifts under Section 153C of the Income Tax Act:
The case involved the Revenue's appeal against the deletion of additions made to the income of the assessee on account of gifts by the Income Tax Appellate Tribunal. The assessee, engaged in the carriage business, had received a gift of ?90,00,000 from Mr. Harish Wadava, and the Assessing Officer treated it as undisclosed income. The Commissioner of Income Tax (Appeals) upheld this decision, leading the assessee to appeal before the Tribunal, which ruled in favor of the assessee. The Revenue contended that the Tribunal erred in restricting the scope of assessments under Section 153C and in concluding that no incriminating evidence was found against the assessee during the search. The Tribunal found that the Assessing Officer lacked justification to invoke Section 153C without incriminating evidence, and the appeal was dismissed as no substantial question of law arose.

Issue 2: Interpretation of the scope of assessments under Section 153A/153C in relation to seized material and completed assessments:
The substantial questions of law raised by the Revenue included the interpretation of the scope of assessments under Section 153A/153C. The Revenue argued that assessments under these sections could be initiated based on seized material even if regular assessments were completed. The assessee contended that Section 153C could not be invoked without incriminating evidence found during the search. The Tribunal held that the power under Section 153C could not be invoked without incriminating evidence against the assessee during the search under Section 132. The Tribunal's decision was supported by the absence of evidence of incriminating material against the assessee. The Court upheld the Tribunal's decision, emphasizing that the issue was specific to the power under Section 153C and not the scope of Section 143(3), ultimately dismissing the appeal.

In conclusion, the judgment addressed the validity of additions to the assessee's income based on gifts under Section 153C and the interpretation of assessments under Section 153A/153C in relation to seized material and completed assessments. The Court upheld the Tribunal's decision, emphasizing the necessity of incriminating evidence to invoke Section 153C and dismissing the Revenue's appeal as no substantial question of law arose.