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2019 (8) TMI 165 - HC - Income TaxAssessment u/s 153A - incriminating material - HELD THAT - Clearly the report of the Special Auditor, having been commissioned subsequent to the search, and during the assessment proceedings against DSL, cannot obviously be treated as incriminating material qua the Assessee, recovered during the course of search, in order to justify the addition made in the assessment u/s 153A. This is consistent with the legal position explained in both CIT v. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT (which still holds the field) and Pr. CIT v. Meeta Gutgutia Proprietor Ferns N Petals 2017 (5) TMI 1224 - DELHI HIGH COURT . Dr. Rakesh Gupta, learned counsel for the Assessee appearing on advance notice produced before this Court copy of an order dated 2nd July 2018 passed by the Supreme Court dismissing the Revenue s Special Leave Petition against the aforementioned judgment in Pr. CIT v. Meeta Gutgutia Proprietor Ferns N Petals (supra) on merits. The said order is reported as Pr CIT v. Meeta Gutgutia 2018 (7) TMI 569 - SC ORDER . This Court, therefore, finds there is no legal infirmity in the impugned order of the ITAT. No substantial question of law arises therefrom.
Issues:
Appeals against ITAT order deleting additions made by AO under Section 153A of the Income Tax Act, 1961 for AYs 2007-08 and 2008-09 based on lack of incriminating material. Analysis: The appeals were filed against a common order passed by the ITAT for the AYs 2007-08 and 2008-09, questioning the deletion of additions by the Assessing Officer under Section 153A of the Income Tax Act. The main issue in the appeals was whether the ITAT erred in deleting the additions without any incriminating material against the Assessee. The search conducted in the Dharampal Satyapal group of cases led to the issuance of a notice under Section 153A to the Respondent Assessee, which declared a loss in both AYs and claimed depreciation. The AO, based on a Special Audit report of DSL, disallowed the depreciation claimed by the Assessee in respect of assets acquired out of deferred government grant. The CIT(A) allowed the Assessee's appeals for the AYs in question, citing the absence of incriminating material during the search. The ITAT upheld this decision, referencing previous court rulings. The Revenue contended that the Special Audit report should be considered incriminating evidence. However, the Court held that the report, commissioned post-search and during assessment proceedings against DSL, cannot be deemed incriminating material against the Assessee. This interpretation aligns with established legal precedents, including the decisions in CIT v. Kabul Chawla and Pr. CIT v. Meeta Gutgutia Proprietor Ferns ‘N’ Petals. The Supreme Court's dismissal of the Revenue's Special Leave Petition further supported this position. Consequently, the Court found no legal flaw in the ITAT's order and determined that no substantial question of law arose from it. As a result, the appeals were dismissed, upholding the ITAT's decision to delete the additions made by the AO under Section 153A due to the lack of incriminating material against the Assessee.
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