2017 (12) TMI 359 - AT - Income Tax

Addition of bogus purchases - scope of jurisdiction of Section 153A - Held that - From the order of the Assessing Officer it can be clearly seen that no incriminating material is found during the search activities. In-fact the group is engaged in the business of manufacturing and started through flag ship concerned M/s Tegh International. In-fact the assessment was long back concluded and the same was not disputed by the Revenue authorities. - Decided in favour of assessee.

Summary

Issues:
Appeal against addition of alleged bogus purchase under Section 153A of IT Act, 1961 for AY 2007-08.

Analysis:
The appellant, engaged in artificial jewelry business, contested the addition of Rs. 46,19,000 made by the Assessing Officer on account of alleged bogus purchases under Section 153A. The appellant argued that no incriminating material was found during the search, challenging the jurisdiction of the Assessing Officer. The appellant cited legal precedents, including Delhi High Court decisions and ITAT rulings, to support their claim that the addition was not sustainable without relevant incriminating material.

The CIT(A) partly allowed the appeal, confirming the addition of Rs. 46,19,000. The appellant's representative contended that the Assessing Officer's action was unjustified as no incriminating material was discovered during the search. The representative emphasized that the addition was based on conjecture and surmises, lacking a legal basis. Citing Delhi High Court decisions and ITAT rulings, the appellant's representative argued for the deletion of the addition.

The ITAT examined the case, noting the absence of incriminating material during the search. Referring to the decision in the case of M/s Tegh International, the ITAT highlighted the legal position emerging from the Delhi High Court's ruling in CIT vs. Kabul Chawla. The ITAT concluded that the addition made without incriminating material was not sustainable in law. Relying on legal precedents, the ITAT allowed the appeal, deleting the disputed addition of Rs. 46,19,000. The ITAT's decision was based on the principle that assessments under Section 153A must be supported by seized material or relevant post-search information, which was lacking in this case.

In conclusion, the ITAT ruled in favor of the appellant, allowing the appeal and deleting the addition of Rs. 46,19,000. The judgment emphasized the necessity of incriminating material to support additions under Section 153A, as established by legal precedents and the Delhi High Court's interpretation in CIT vs. Kabul Chawla. The decision highlighted the importance of adhering to legal principles and precedents in tax assessments under the IT Act, 1961.