No Material Found On Search, Income Tax Additions Can't Be Made On Presumption: Delhi High Court

The Investigation Wing of the Income Tax Department carried out a search and seizure operation against M/s K.R. Pulp & Papers Limited under Section 132(1) of the Income Tax Act, 1961 at various residential and business premises. The company was stated to be managed and controlled by Madho Gopal Agarwal, Raj Gopal Agarwal, and Gopal Agarwal. The statements of Gopal Agarwal were recorded, and the statements of Madho Gopal Agarwal were recorded during the post-search inquiry.

The notice under Section 153A was issued by the Assessing Officer and it was duly served upon the assessee. In response, the assessee filed her Income Tax Return, declaring an income of Rs. 5,40,550. The Assessing Officer, after making reference to the documents discovered during the raid, made the additions to the income of the assessee under Section 69B and Section 68 of the Income Tax Act.

The assessee filed an appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee and deleted the additions. In the absence of any incriminating material, the Assessing Officer cannot re-appraise and review an already completed assessment and settle issues before the date of search under Section 153A, according to the CIT(A).

The department preferred an appeal before the ITAT, which was dismissed. The ITAT concluded that the additions made by the Assessing Officer were not based on any incriminating material found during the course of the search on July 8th, 2015. The ITAT observed that the original return of income was filed by the assessee for the assessment year under appeal. The search was conducted and on the date of the search, the assessment under appeal was completed as the time period to issue notice under Section 143(2) for the year had expired. The ITAT observed that on the date of search assessment for the assessment year 2010–11, the search had attained finality and was not pending assessment. The ITAT held that any additions over and above the earlier assessed income could not be made in the absence of any incriminating material found during the course of the search.

The ITAT concluded that no material was found during the course of the search so as to indicate any unaccounted investment made by the assessee. The ITAT, therefore, determined that the Assessing Officer made the additions to the unaccounted investment merely on the basis of presumptions.

The court held that no material was placed on record to rebut the findings of the ITAT.

Case Title: PCIT Versus Mamta Agarwal

Citation: 2022 LiveLaw (Del) 740

Dated: 14.07.2022

Counsel For Appellant: Sr. Standing Counsel Ajit Sharma

Counsel For Respondent: Advocate Gautam Jain

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