2024 (8) TMI 1503 - HC - Income Tax

Assessment u/s 153A - ITAT not treating the statement u/s 132(4) as incriminating in nature and thereby deleting the addition - HELD THAT - Undisputedly, the assessment was confined to Section 153A and consequently the significance of the incriminating material found in the course of the search alone possibly constituting the basis for any additions. Since and undisputedly the pen-drive was an article which was not recovered in the course of the search but constituted material which had been obtained by the appellants through the exchange of information route, we find no ground to interfere with the view expressed by the Tribunal.

Summary

Issues:
1. Interpretation of incriminating material under Section 132(4) of the Income Tax Act.
2. Deletion of additions without considering merits by the Income Tax Appellate Tribunal.
3. Treatment of information shared by foreign authorities under the exchange of information provisions.
4. Consideration of evidentiary value of statements recorded under Section 132(4) corroborated by foreign information.
5. Application of Section 153A of the Income Tax Act in assessment proceedings.

Analysis:

1. The High Court considered the appeal challenging the judgment of the Income Tax Appellate Tribunal (ITAT) regarding the incriminating nature of a statement under Section 132(4) of the Income Tax Act. The Tribunal had deleted an addition without delving into the merits of the statement. The Court referred to previous decisions and emphasized that incriminating material found during a search is crucial for additions in assessments under Section 153A.

2. The Principal Commissioner of Income Tax questioned the deletion of an addition by the ITAT without proper consideration of the merits. The Court noted that the assessment under consideration was already concluded, and the material in question, a pen-drive, was not discovered during the search but obtained through an exchange of information. Consequently, the Court upheld the Tribunal's decision and dismissed the appeal.

3. The Court addressed the issue of information shared by France with India under the exchange of information provisions. The ITAT had treated this information as mere data without evidentiary value. The Court reiterated the importance of incriminating material in assessments under Section 153A, emphasizing that assessments should be based on seized material.

4. The ITAT was criticized for not considering the evidentiary value of a statement recorded under Section 132(4) corroborated by information from France regarding a foreign bank account. The Court highlighted the necessity of incriminating material for making additions in assessments under Section 153A and upheld the Tribunal's decision in this regard.

5. The Court clarified the application of Section 153A of the Income Tax Act in assessment proceedings. It emphasized that assessments under this section should be based on incriminating material found during a search or related post-search information. The Court dismissed the appeal, keeping the question regarding the treatment of information from foreign authorities open for future examination in relevant cases.