2021 (7) TMI 922 - HC - Income Tax

Assessment u/s 153A - incriminating material found during the course of search or not? - HELD THAT - Both the CIT(A) as well as the ITAT have held in the instant case that the addition is not based on any incriminating material found during the course of search and the assessment was not pending on the date of search. The observations of the AO relied upon by Mr. Sharma do not give us any insight or clue about the incriminating material which is claimed to be in existence. In the proceedings before the CIT(A) as well as the ITAT, the Revenue has not made any attempt so as to disclose the incriminating material. Even in the present appeal, the revenue is unable to explain or give us any indication about the same. The findings of facts returned by CIT(A) and ITAT are not be interfered with lightly. The view taken by the tax authorities based on the decision of CIT Vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT cannot be held to be perverse. The questions of law proposed by the Revenue are squarely covered by the aforesaid judgment. - Decided in favour of assessee.

Summary

Issues:
Appeal against ITAT order dismissing Revenue's appeal for AY 2009-10 based on Client Code Modifications and cash expenditure disallowance under IT Act.

Analysis:
The appellant, a company trading in equity shares, securities, and commodities, filed its return for AY 2009-10. Subsequently, a search and seizure operation was conducted, leading to the discovery of Client Code Modifications by certain broker companies, resulting in the suppression of profits in the appellant's books. The assessing officer added an amount to the income on account of these modifications and disallowed cash expenditure beyond the prescribed limit, assessing the total income at a specific amount.

In the appeal before CIT(A) and ITAT, it was held that the additions were not based on incriminating material found during the search, and no assessment was pending at the time of search. The Revenue contended that incriminating material was indeed found during the search, justifying the additions. However, the court found that the assessing officer's observations did not provide sufficient details about the alleged incriminating material, and the Revenue failed to disclose or explain it in subsequent proceedings.

The court upheld the findings of CIT(A) and ITAT, emphasizing that the decisions were not perverse and were in line with the precedent set by the CIT Vs. Kabul Chawla case. As the Revenue could not demonstrate the existence or significance of the alleged incriminating material, the court dismissed the appeal, stating that no substantial question of law arose for consideration. The order was directed to be uploaded on the website and forwarded to the counsel via email.