Facts of the Case

The Revenue (Principal Commissioner of Income Tax, Central-3) filed appeals against the order of the Income Tax Appellate Tribunal (ITAT) concerning Assessment Years 2005–06 and 2006–07.

A search operation under Section 132 was conducted on the Surya Vinayak Group, which included the respondent assessee, Sidhi Vinayak Aromatics Pvt. Ltd.

During the course of assessment proceedings under Section 153C, additions were made by the Assessing Officer (AO). However, the ITAT held that no incriminating material was found during the search relating to the relevant assessment years.

The Tribunal relied upon the judgment in Commissioner of Income Tax vs. Kabul Chawla and ruled in favor of the assessee.

Issues Involved

  1. Whether additions under Section 153C can be sustained in the absence of incriminating material found during search proceedings.
  2. Whether the ITAT was justified in deleting additions made by the Assessing Officer.

Petitioner’s Arguments (Revenue)

  • The Revenue challenged the ITAT’s order, contending that the additions made by the AO were valid.
  • It was argued that the Tribunal erred in relying on judicial precedents to delete additions.

Respondent’s Arguments (Assessee)

  • The assessee contended that no incriminating material was discovered during the search operation.
  • Therefore, any addition made under Section 153C was beyond jurisdiction and unsustainable in law.

Court’s Findings / Order

    • No incriminating material was found during the search concerning the relevant assessment years.
    • The ITAT had correctly relied on the principle laid down in Commissioner of Income Tax vs. Kabul Chawla.
  • The Court further noted that the said principle has been affirmed by the Supreme Court in
    Principal Commissioner of Income Tax vs. Abhisar Buildwell Pvt. Ltd..
  • Accordingly, the Court held:
    • Additions made without incriminating material are unsustainable.
    • No substantial question of law arises.

Result: Appeals dismissed.

Important Clarification

  • For completed assessments, no addition can be made under Section 153C unless incriminating material is found during search.
  • This judgment reinforces settled law confirmed by the Supreme Court.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60804102023ITA2512019_183835.pdf

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