2024 (7) TMI 972 - HC - Income Tax

Assessment u/s 153A - Deemed dividend addition u/s 2(22)(e) - HELD THAT - As decided in ABHISAR BUILDWELL P. LTD. 2023 (4) TMI 1056 - SUPREME COURT AO would not be justified to assess income in case no incriminating material is found during the search. Thus, as no incriminating material, based on which the assessment orders are passed, is placed before us, the substantial questions of law are answered against the Revenue, while affirming the order passed by the Appellate Tribunal.

Summary

Issues involved:
Assessment based on deemed dividend under Section 2(22)(e) of Income Tax Act for the years 2009-2010 and 2011-2012, appeal against assessment orders, jurisdiction under Section 153A of the Income Tax Act, reliance on incriminating material for assessment, interpretation of SLP dismissal, applicability of the Apex Court ruling on assessing income without incriminating material.

Analysis:
The judgment involves appeals against assessment orders made by the Income Tax Appellate Tribunal concerning deemed dividend under Section 2(22)(e) of the Income Tax Act for the years 2009-2010 and 2011-2012. The respondent, engaged in trading gold jewellery and bullion, faced assessment following a search and seizure operation under Section 132 of the Act. The Assessing Officer added deemed dividend amounts, which were later deleted by the Commissioner of Income Tax (Appeals). The Revenue appealed this decision, leading to the impugned order by the Appellate Tribunal, which dismissed the Revenue's appeals.

The substantial questions of law admitted for consideration included the Tribunal's authority to initiate proceedings under Section 153A without incriminating material, the acceptance of audited statements as part of the return of income, and the reliance on SLP dismissal in a related case. The Court directed the appellant to provide incriminating material, but the Revenue failed to produce any, acknowledging the absence of such material during the search. Citing a recent Supreme Court ruling, the Court emphasized that assessing income without incriminating material is not justified. The Apex Court's decision clarified that in the absence of incriminating material, no additions can be made to completed assessments, although reopening assessments under Sections 147/148 is permissible.

In light of the absence of incriminating material and the Supreme Court's ruling, the Court upheld the Appellate Tribunal's order, answering the substantial questions of law against the Revenue. Consequently, the appeals were disposed of with no order as to costs. The judgment highlights the importance of incriminating material in assessments and sets a precedent for assessing income based on search findings.