2023 (2) TMI 340 - AT - Income Tax

Tribunal Upholds Decision to Delete Rs. 104.50 Crore Addition (A)

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of Rs. 104.50 crore. The Tribunal emphasized the ... Assessment u/s 153A - Addition u/s 69 - assessee contended that the addition have been made by the Ld. AO without there being any material found as a result of search conducted on the assessee and some material of alleged survey made on M/s. Vatika Prop. Build Pvt. Ltd. has been relied - whether CIT(A) has failed to take into consideration publicly available information to consider that there was no ambiguity with regard to identity of Vatika in reference to the information seized and the name present assessee? - HELD THAT:- On the basis of admitted facts it can be concluded that there is no dispute to the fact that no incriminating material was discovered or recovered in search proceedings upon the assessee. Survey on M/s Vatika Propbuild Pvt. Ltd. has no relevance as there is no material on record to show how the appellant is connected with this M/s Vatika Propbuild Pvt. Ltd. Public domain information is nothing unless brought on record as evidence and confronted to assessee. It can be noted that Ld. AO has primarily relied the digital information retrieved by the Investigation Wing, Mumbai and allegedly seized from the office Chamber of Mr. Ashok Sharma, the C.F.O. of Indiabulls Group at the time of search on the Indiabulls Group on 12.07.2016 and 14.07.2016. In RRJ Securities Pvt. Ltd. [2015 (3) TMI 410 - DELHI HIGH COURT] Hon’ble Delhi High Court has held that data in hard disk found at the premises of a chartered accountant on basis of which accounts are prepared and return are filed cannot be considered as incriminating material. There is force in the contention of assessee that revenue cannot take a plea of lack of exercise of plenary powers by the ld. CIT(A) rather what transpires from the order of Ld. AO and ld. CIT(A) is that where Ld. AO had nearly approached the issue on the basis of presumptions. CIT(A) has taken into consideration the facts before it to make aforesaid conclusions. The ld. CIT(A) had forwarded the detailed written submissions of the assessee to ld. AO for comments and after receiving the remand report had disposed of the matter. Ld. CIT(A) had specifically authorized, the Ld. AO u/s 250(4) of the Act, to conduct necessary inquiries. It appears, Ld. AO made no efforts. The matter of fact remains that Ld. AO himself did not have with him any seized material and what he had was merely information. The electronic evidences allegedly recovered from the CFO of Indiabulls Group had never reached the hands of the ld. AO. The co-terminus power of Ld. CIT(A) to put to the assessee can only stand to the material available on record. Had there been some material on record, he would have supplied the same to the assessee to counter the prejudice claimed by the assessee of not being provided the material relied against the assessee. But there was no material to do that. Consequently, there is no force in the grounds raised - The appeal of revenue is dismissed. Issues Involved:1. Legality of the addition of Rs. 104.50 crore based on seized material and statements not provided to the assessee.2. Relevance of the name 'Vatika' in the seized documents.3. Assessment based on non-incriminating material found during the search.4. Exercise of plenary powers by the CIT(A) in deleting the addition.Detailed Analysis:Issue 1: Legality of the Addition Based on Seized Material and Statements Not Provided to the AssesseeThe Revenue's appeal contended that the CIT(A) erred in law and on facts by deleting the addition of Rs. 104.50 crore on the grounds that the seized material and statements were not provided to the assessee, and the opportunity for cross-examination was not given. The Tribunal found that the AO had primarily relied on digital information retrieved from the laptop of the CFO of Indiabulls Group. However, the assessee was neither provided with the seized material nor the statements, and no opportunity for cross-examination was afforded. The Tribunal upheld the CIT(A)'s decision to delete the addition, citing that the principles of natural justice were not followed.Issue 2: Relevance of the Name 'Vatika' in the Seized DocumentsThe Revenue argued that the CIT(A) erred in deleting the addition on the basis that the complete name 'Vatika Ltd.' did not appear in the seized documents. The Tribunal noted that there was no material on record to show how the appellant was connected with the entity mentioned in the seized documents. The Tribunal agreed with the CIT(A) that public domain information is not sufficient unless brought on record as evidence and confronted to the assessee. Hence, the deletion of the addition was justified.Issue 3: Assessment Based on Non-Incriminating Material Found During the SearchThe Revenue contended that the CIT(A) erred in holding that the addition, which was not based on incriminating material found during the search, could not be made under section 153A of the Act. The Tribunal referred to several judgments, including CIT vs. Kabul Chawla, which held that additions under section 153A should be based on seized material. Since no incriminating material was found in the search on the assessee, the Tribunal upheld the CIT(A)'s decision to delete the addition.Issue 4: Exercise of Plenary Powers by the CIT(A) in Deleting the AdditionThe Revenue argued that the CIT(A) failed to exercise his plenary powers under the Act. The Tribunal found that the CIT(A) had indeed exercised his powers by calling for a remand report and conducting necessary inquiries. The AO did not provide any seized material or substantial evidence to support the addition. The Tribunal concluded that the CIT(A) had rightly deleted the addition based on the available facts and evidence.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of Rs. 104.50 crore. The Tribunal emphasized the importance of providing seized material and statements to the assessee and allowing cross-examination, the necessity of having incriminating material for additions under section 153A, and the proper exercise of plenary powers by the CIT(A). The appeal was dismissed, and the order was pronounced in the open court on 07th February 2023.