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2023 (2) TMI 1116 - HC - Income TaxAssessment u/s 153A - incriminating material found in search or not? - HELD THAT - We have perused the statement dated 3rd August, 2015 and the contents of the letter dated 31st July, 2015, both authored by Sh. Madho Gopal Agarwal. There is no reference to M/s KGN Industries Limited in either of the said documents. No other material found during search pertaining to M/s KGN Industries Ltd. has been placed on record. The Revenue has not placed on record any incriminating material which was found as a result of the search conducted on the assessee herein. On the date of search, admittedly, the assessment with respect to the AY under consideration 2011-12 admittedly stood completed. Since no assessment was pending for the relevant AY 2011-12 on the date of search and no incriminating material was found during the course of search, the issue is covered in favour of the assessee by the judgment of this Court in the case of Commissioner of Income Tax v. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and Principal CIT vs. Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT Thus no substantial questions of law arise for consideration. Accordingly, the present appeal is dismissed.
Issues:
1. Interpretation of incriminating material in income tax assessment. 2. Validity of additions made by the Assessing Officer. 3. Application of Section 153A of the Income Tax Act, 1961. 4. Compliance with legal precedents in assessment proceedings. Issue 1: Interpretation of incriminating material in income tax assessment: The case involved a dispute regarding undisclosed income routed through bogus entries of Long Term Capital Gains (LTCG) by selling shares of penny stock companies. The Revenue alleged that LTCG earned by the promoters was used for personal use. The Assessing Officer (AO) considered the LTCG as an accommodation entry, leading to its addition to the total income of the assessee. The appellate authorities examined whether the incriminating material found during search operations justified the addition. Issue 2: Validity of additions made by the Assessing Officer: The assessee challenged the addition made by the AO before the Commissioner of Income Tax (Appeals) [CIT(A)] and subsequently before the Income Tax Appellate Tribunal (ITAT). The ITAT found that the additions were not supported by incriminating material discovered during the search. The ITAT emphasized that reliance solely on statements without corroborative evidence was not sufficient to make additions to the income. The ITAT set aside the addition made by the AO, citing legal precedents where statements alone were not considered incriminating material. Issue 3: Application of Section 153A of the Income Tax Act, 1961: The case also delved into the application of Section 153A concerning completed assessments and incriminating material found during search operations. The ITAT, following legal precedents, held that since no incriminating material was found during the search for the relevant assessment year, no additions could be made under Sections 153A and 153C of the Act. The ITAT reiterated that assessments under Section 153A must be based on seized material and not arbitrary in nature. Issue 4: Compliance with legal precedents in assessment proceedings: The judgment extensively referenced legal precedents, including the case of Commissioner of Income Tax vs. Kabul Chawla and Principal CIT vs. Meeta Gutgutia, to establish the legal framework for assessments under Section 153A. The Court emphasized that assessments under Section 153A must be supported by incriminating material unearthed during the search, and completed assessments can only be interfered with based on such material. The Court dismissed the appeal, upholding the ITAT's decision based on the legal principles discussed. In conclusion, the judgment clarified the interpretation of incriminating material in income tax assessments, scrutinized the validity of additions made by the Assessing Officer, explained the application of Section 153A of the Income Tax Act, and highlighted the importance of complying with legal precedents in assessment proceedings.
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