Tribunal rules against Revenue due to lack of incriminating material in assessment orders

The Tribunal allowed the application under Rule 27, holding all assessment orders as bad in law due to the absence of incriminating material. Consequently, the Tribunal dismissed Revenue's appeals, as additions were not based on evidence found during the search. The Tribunal emphasized that completed assessments can only be reiterated in the absence of incriminating material, as per Delhi HC precedents. The absence of incriminating material during the search led to the conclusion that the assessments were invalid.

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Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act on account of unexplained share capital and premium.
2. Validity of the assessment under Section 153C of the Income Tax Act in the absence of incriminating material found during the search.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made Under Section 68 of the Income Tax Act:

The common grievance in all the appeals relates to the deletion of the addition made under Section 68 of the Income Tax Act on account of unexplained share capital and premium, though the quantum may differ for each year. The Revenue contested the deletion, but the Tribunal found that the additions were not justified as they were not based on any incriminating material found during the search.

2. Validity of the Assessment Under Section 153C of the Income Tax Act:

The assessee invoked Rule 27 of the ITAT Rules, arguing that the impugned assessments were bad in law as no incriminating material was found during the search which could trigger the provisions of Section 153C of the Act. The Revenue objected, stating that trial balance and bank statements seized were incriminating material. However, the Tribunal noted that the search and seizure operation at the Gurinderjit Singh Group premises did not yield any incriminating material specific to the assessee.

The Tribunal observed that the trial balance and bank statements seized were related to the financial year 2010-11, relevant to the assessment year 2011-12. Interestingly, the trial balance was not treated as incriminating material for the assessment year 2011-12, as the entries were part of the financial statements of the assessee and the returned income was accepted after thorough scrutiny.

The Tribunal referred to the Delhi High Court's decisions in Kabul Chawla and Meeta Gutgutia, which established that in the absence of any incriminating material, completed assessments can only be reiterated, and additions should be made strictly based on evidence found during the search. The Tribunal concluded that the onus was on the Revenue to show that incriminating materials were recovered at the time of the search, which was not the case here.

The Tribunal further noted that none of the years under consideration were abated assessment years, and all were unabated assessment years. Therefore, the ratio laid down by the Hon’ble High Court of Delhi in Kabul Chawla and Meeta Gutgutia squarely applied.

Conclusion:

The Tribunal allowed the application filed under Rule 27, holding that all the assessment orders were bad in law due to the absence of incriminating material. Consequently, the Tribunal did not find it necessary to dwell into the merits of the case and dismissed the appeals of the Revenue. The order was pronounced in the open court on 25.08.2020.

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