Addition/Disallowance Can't Be Made Merely On Assessee's Admission During Search: Delhi High Court
The Delhi High Court has held that the statement recorded during the course of the search, on a standalone basis, without any reference to material found during the search, would not empower the AO to make additions/disallowance merely on the assessee's admission."The Appellant-Revenue has not placed reliance on or even referred to any statement recorded under Section 132(4) of the Act, 1961....
The Delhi High Court has held that the statement recorded during the course of the search, on a standalone basis, without any reference to material found during the search, would not empower the AO to make additions/disallowance merely on the assessee's admission.
"The Appellant-Revenue has not placed reliance on or even referred to any statement recorded under Section 132(4) of the Act, 1961. No statement has been produced before this Court. Therefore, in the facts of the present case, the issue does not arise for consideration unless it can be demonstrated by the Appellant-Revenue that the statements recorded under Section 132(4) disclose some incriminating material on the basis of which orders under Section 153A have been passed," the division bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora said.
The appellant or department has assailed the ITAT's order. The ITAT upheld the CIT(A) order quashing the assessment order(s) dated December 28, 2007, passed under Section 153A of the Income Tax Act, 1961, in relation to the search conducted at the respondent/assessee's premises under Section 132.
Both the appellate authorities have returned concurrent findings of fact that no incriminating material was found during the search warranting assessment under Section 153A of the Act, 1961.
The department contended that it is not necessary that incriminating material be found during a search under Section 132 for an order under Section 153A of the Act, 1961, to be passed, even where original assessments have attained finality and have not abated.
The department submitted that the statement recorded during the course of the search under Section 132(4) can be treated as incriminating material or a document on the basis of which addition or disallowance can be made under Section 153A of the Act, 1961.
The Amicus Curiae submitted that in terms of Section 153A(1) of the Act, 1961 where a search is initiated under Section 132 assessments for six assessment years preceding the date of the search may be reopened and completed under that Section. High Courts have consistently held that no addition under Section 153A can be made in the absence of incriminating material found during the search, particularly where original assessments have already been concluded.
The Amicus Curiae contended that there was no fresh information or material that was unearthed during the search proceedings or any statement under Section 132(4) that was recorded during the search that could be classified as "incriminating material," on the basis of which additions or disallowances were made by the Revenue.
The court, while dismissing the appeal, held that when a statement recorded under Section 132(4) is retracted, the AO would require some corroborative material before making any additions or disallowances on the basis of the statement.
Case Title: PCIT Versus PGF Ltd.
Citation: 2022 LiveLaw (Del) 1085
Date: 14.11.2022
Counsel For Appellant: Sr. Standing Counsel Zoheb Hossain
Counsel For Respondent: Amicus Curiae Sachit Jolly