2021 (8) TMI 229 - 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 involved:
Appeal against ITAT order for Assessment Year 2010-11, Addition of income based on Client Code Modifications, CIT(A) and ITAT findings, Similarity to previous cases, Interpretation of incriminating material, Application of CIT Vs. Kabul Chawla judgment.

Analysis:
The High Court heard an appeal under Section 260A against the Income Tax Appellate Tribunal's order for the Assessment Year 2010-11. The appellant, a company engaged in trading, had its total income declared at ?39,85,15,922. Following a search and seizure operation, the assessing officer found evidence of Client Code Modifications by certain companies, leading to a substantial addition to the appellant's income. The CIT(A) and ITAT later held that the addition was not based on incriminating material and that no assessment was pending during the search, resulting in the deletion of the additions made by the AO.

In the present case, the Revenue acknowledged the similarity to previous cases where appeals were dismissed based on the absence of incriminating material and pending assessments during the search. The Court noted that the Revenue failed to provide any insight into the alleged incriminating material and upheld the findings of the CIT(A) and ITAT. The Court emphasized that the decisions were in line with the principles established in the CIT Vs. Kabul Chawla case, and no substantial question of law arose for consideration.

The Court reiterated that the absence of incriminating material and the non-pendency of assessments during the search were crucial factors in determining the validity of additions to the appellant's income. Relying on the precedents and legal principles, the Court dismissed the appeal, stating that no substantial question of law was present for consideration. The order was directed to be uploaded on the website and forwarded to the respective counsel via email for reference and compliance.