2021 (8) TMI 200 - HC - Income Tax

Assessment u/s 153A - incriminating material found during the course of search or not? - HELD THAT - In the instant case also both the CIT(A) as well as the ITAT have held 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. In the proceedings before the CIT(A) as well as the ITAT, the Revenue has not made any attempt as to disclose the incriminating material. 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.

Summary

Issues:
Appeal against ITAT order dismissing Revenue's appeal for Assessment Year 2007-08 based on Client Code Modifications and cash expenditure disallowance under IT Act.

Analysis:
The case involved an appeal under Section 260A against an ITAT order dismissing the Revenue's appeal for the Assessment Year 2007-08. The assessee, a company engaged in trading, had filed its return of income declaring total income. A search and seizure operation was conducted in the case of the assessee, revealing evidence of Client Code Modifications by certain companies. The assessing officer added an amount to the income of the assessee due to profit and loss shifting and disallowed a sum under section 40A(3) for cash expenditure beyond the limit. The total income was assessed accordingly.

In the appeal, the CIT(A) held that no assessment proceedings were pending when the search action took place, and no assessment was abated. The addition made by the AO was not based on any incriminating material found during the search and seizure action, leading to deletion of the additions. The ITAT confirmed the CIT(A)'s findings. The Revenue contended that incriminating material was found during the search, justifying the additions. However, the court observed that the assessing officer did not provide details of incriminating material in the assessment order, and the Revenue failed to disclose such material during the proceedings.

The court upheld the findings of the CIT(A) and ITAT, stating that the additions were not based on incriminating material found during the search, and the assessment was not pending during the search. The court noted that the Revenue could not provide any indication of the alleged incriminating material. The court found no reason to interfere with the factual findings, as they were based on the decision in CIT Vs. Kabul Chawla. Consequently, the court dismissed the appeal, stating that no substantial question of law arose for consideration.

In conclusion, the court dismissed the appeal, emphasizing that no substantial question of law was present. The order was to be uploaded on the website and forwarded to the counsel via email.