THE PR. COMMISSIONER OF INCOME TAX 1 vs. M/S ARVIND JOSHI AND CO

Facts

The Revenue (Principal Commissioner of Income Tax) appealed against an order of the Income Tax Appellate Tribunal (ITAT) concerning assessment years 2006-07, 2007-08, and 2008-09. The ITAT had upheld the Commissioner (Appeals)'s deletion of additions made by the Assessing Officer under Section 153A(1)(b) of the Income Tax Act, 1961. The original assessment under Section 143(3) was completed, followed by a search under Section 132. The assessee, M/s Arvind Joshi and Co., filed returns under Section 153A. The Assessing Officer made additions, which were deleted by the Commissioner (Appeals) on the grounds that unabated assessments under Section 153A cannot be made without incriminating material seized during the search. The Revenue's appeal to the ITAT was dismissed.

Held

The High Court held that for unabated assessments under Section 153A(1)(b), additions can only be made if they are based on incriminating documents seized or impounded during the search. In this case, it was an admitted position that scrutiny assessments under Section 143(3) had been completed for the relevant years. The Assessing Officer did not rely on any incriminating material found during the search when framing the assessment under Section 153A. The Revenue's argument that the Special Auditor's report, made under Section 142(2A), considered incriminating documents was found to be factually incorrect. The Special Auditors themselves did not place reliance on the seized material in their report, as the assessee had requested them not to consider explanations related to seized papers, stating it was for the Assessing Officer's consideration. Therefore, the Tribunal's order upholding the Commissioner (Appeals)'s deletion of additions was found to be legally sound. The court found no infirmity in the impugned order, and thus, no substantial question of law arose.

Key Issues

1. Whether the order of the Hon'ble Tribunal is right in law and on facts in deleting the addition made in assessment order u/s 153A(1)(b) of the Act? (Question of law and fact) 2. Whether the Hon'ble Tribunal has erred in law and on facts upholding the order of Ld. CIT(A) while observing that the unabated assessments cannot be made u/s 153A of the Act unless it is based on the incriminating documents seized/impounded during the search operations whereas the assessments were made u/s 153A of the Act on the basis of report of Special Auditor’s report made u/s 142(2A) of the Act wherein the Special Auditor had considered the incriminating documents seized/impounded during the course of search proceedings? (Question of law and fact) Assessee's Contention: Not recorded. Revenue's Contention: The assessments were made under Section 153A based on the Special Auditor's report under Section 142(2A), which considered incriminating documents seized during the search. Therefore, the Commissioner (Appeals) and the Tribunal were not justified in setting aside the additions. The Revenue relied on the principle that unabated assessments under Section 153A should be connected with incriminating material found during the search.