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2023 (6) TMI 226 - HC - Income TaxAssessment u/s 153A - Assessee claimed that the AO had not given copies of the seized materials extracted from the hard disk and the pen drive - violation of the principles of natural justice - ITAT has noted in the impugned order that the AO has simply reproduced the appraisal report and has not undertaken any analysis of the seized materials. Even the hard disk with the working copy was not seen by the AO. The seized material had neither been opened nor examined. The expert report also failed to point out that the software was hardware specific . HELD THAT - In the impugned order the ITAT has concluded that the CIT(A) was right in holding that the additions made in the all three AYs was in total violation of the principles of natural justice and that the additions have been made clearly on estimate basis. With there being concurrent findings on fact by the both the CIT(A) and ITAT and there being clear violations of the legal requirements by the AO, this Court is unable to find any error committed by the CIT (A) or the ITAT in disagreeing with the AO and setting aside the assessment order. No substantial question of law arises.
Issues involved:
The judgment involves appeals by the Revenue against the Income Tax Appellate Tribunal's decision for the assessment years 2012-2013 and 2016-2017. The questions raised include the use of findings by the Deputy Director of Income Tax (DDIT) in assessment proceedings, the adequacy of verification of digital evidence by the Assessing Officer (AO), and the correctness of additions made by the AO based on seized materials. Issue 1: Use of DDIT findings in assessment proceedings The Revenue questioned whether the ITAT was correct in ruling that findings of the DDIT cannot be used by the AO in assessment proceedings. The ITAT observed that the AO had not verified the contents of the digital evidence and had merely reproduced the appraisal report without proper examination. The seized materials were not adequately analyzed, leading to a violation of natural justice principles. The ITAT concluded that the additions made by the AO were on an estimate basis and lacked proper foundation. Issue 2: Verification of digital evidence by the AO The ITAT highlighted that the AO failed to properly examine the seized materials, including a hard disk identified as BDJC-27. The AO did not open or examine the seized material, and even the expert report did not clarify the software's "hardware specificity." The ITAT questioned the absence of the extracts from BDJC-27 and CWJ-12 in the assessment process, indicating a lack of available evidence for the assessment basis. The ITAT agreed with the CIT(A) that the additions made by the AO were in violation of natural justice principles and were done on an estimate basis. Issue 3: Violations of legal requirements by the AO The High Court found that there were concurrent findings by the CIT(A) and ITAT regarding the AO's failure to meet legal requirements in the assessment process. The Court noted clear violations by the AO and upheld the decisions of the lower authorities in setting aside the assessment order. As no substantial question of law arose, the appeals by the Revenue were dismissed.
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