2015 (12) TMI 1523 - HC - Income Tax

High Court invalidates notice under Income Tax Act, emphasizes need for incriminating material

The High Court allowed exemptions subject to all just exceptions and condoned the delay in re-filing the appeal. The main issue was the validity of the ... Assessment u/s 153A - Held that:- Although the ITAT may have erred in holding that the issuance of notice under Section 153A (1) (a) of the Act was invalid, it is not in dispute that qua the Respondent Assessee no incriminating material was found during the search so as to justify the addition made in the assessment order passed pursuant to the issuance of such notice. As held in several decisions including Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT ), no assessment can be framed in terms of the Section 153A of the Act in the absence of the any incriminating material found during the search. Consequently, the net result is that the assessment order will in any event have to remain quashed. - Decided in favour of assessee. Issues:1. Exemptions allowed subject to all just exceptions.2. Delay in re-filing appeal condoned.3. Validity of notice under Section 153A of the Income Tax Act.4. Assessment validity in absence of incriminating material.Analysis:1. The High Court allowed exemptions subject to all just exceptions in the applications filed in relation to ITA numbers 910/2015, 911/2015, 912/2015, and 913/2015.2. The Court also condoned the delay in re-filing the appeal in the applications numbered 29057/2015, 29059/2015, 29061/2015, and 29063/2015 for ITA numbers 910/2015, 911/2015, 912/2015, and 913/2015 respectively.3. The main issue revolved around the validity of the notice issued under Section 153A of the Income Tax Act. The appeals by the Revenue were against the order passed by the Income Tax Appellate Tribunal (ITAT) for the Assessment Years 2006-07 and 2007-08. The search and seizure operations revealed undisclosed income, and the Respondent Assessee filed a return declaring income. The Commissioner of Income Tax (Appeals) had previously negatived the contention regarding the validity of the notice under Section 153A, but granted partial relief on the disallowance under Section 14A.4. The ITAT, in its order, held that the notice under Section 153A was invalid due to the absence of incriminating material, following a decision of the High Court in a similar case. The Revenue argued against this decision citing a different case law. The Court noted that despite any error in the ITAT's decision on the validity of the notice, the absence of incriminating material during the search meant the assessment order had to be quashed. The Court emphasized that no assessment could be made under Section 153A without such material, leading to the dismissal of the appeals with observations on the assessment's quashing.