PRINCIPAL COMMISSIONER OF INCOME TAX(CENTRAL)-3 vs. GAHOI CHEMICALS PVT. LTD.

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ITA/289/2018HC DelhiDLHC01008700201812 March 2018Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE A. K. CHAWLA2 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal correctly directed the deletion of the amounts sought to be brought to tax. The High Court noted that the search assessment was completed not on the basis of fresh incriminating material seized or recovered during the search and seizure operation under Section 132 of the Income Tax Act. Instead, the AO relied upon materials that were already on the record to form an opinion contrary to the Court's established rulings in Commissioner of Income Tax vs. Kabul Chawla, 380 ITR 573 and Commissioner of Income Tax vs. Meeta Gutgutia, 395 ITR 526. The Court found that the appeal did not involve any substantial question of law. Therefore, the appeal was dismissed.

What were the facts?

The Revenue is aggrieved by an order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year (AY) 2006-07. The ITAT had directed the deletion of additions made by the Assessing Officer (AO) during a search assessment. A search was conducted on the Kurele Group of companies/firms on January 19, 2009. The assessee, Gahoi Chemicals Pvt. Ltd., filed a return declaring a loss of ₹10,73,507/-. The AO added ₹50 lacs under Section 68 of the Income Tax Act, 1961, citing the failure to establish the creditworthiness of a share applicant. This addition was confirmed by the Appellate Commissioner but subsequently deleted by the ITAT.

What were the issues?

1. Whether the Tribunal erred in deleting the addition of ₹50 lacs made under Section 68 of the Income Tax Act, 1961, on account of alleged non-establishment of creditworthiness of a share applicant, when the assessment was completed based on materials already on record and not on fresh incriminating material seized during the search? Assessee's Contention: The judgment does not record any specific contentions made by the assessee. However, the Tribunal's decision implies reliance on its previous rulings. Revenue's Contention: The AO relied upon materials already on the record to form an opinion contrary to the view expressed in the Court's ruling in Commissioner of Income Tax vs. Kabul Chawla. The Revenue argued that the search assessment was completed not on the basis of fresh incriminating material seized or recovered in the search and seizure operation under Section 132 of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 68,Section 132

AI-generated summary — verify with the full judgment below

$~43 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 289/2018 and CM APPL. 9300/2018

PRINCIPAL COMMISSIONER OF INCOME TAX(CENTRAL)-3 ..... Appellant Through Mr. Sanjay Kumar and Mr. Rahul Chaudhary, Standing Counsel.

versus

GAHOI CHEMICALS PVT. LTD.

..... Respondent

Through None.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A. K. CHAWLA

O R D E R %

12.03.2018

The Revenue is aggrieved by the ITAT’s order made in ITA 3050/Del/2013 for AY 2006-07, whereby, the additions made by the AO during the course of search have been deleted.

Search of the premises of one Kurele Group of companies/firms was conducted on 19.01.2009. Notice was issued on 30.11.2009 to which the assessee filed the return declaring a loss of `10,73,507/-. The AO brought to tax a sum of `50 lacs under Section 68 in the course of search assessment on the ground that for the relevant year the credit worthiness of the share applicant has not been established. The additions were confirmed by the Appellate Commissioner, but, directed to be deleted by the Tribunal, which followed this Court’s rulings in Commissioner of Income Tax vs. Kabul Chawla, 380 ITR

573 and Commissioner of Income Tax vs. Meeta Gutgutia, 395 ITR 526. Since concededly the search assessment was completed not on the basis of fresh incriminating material seized or recovered in the search and seizure operation under Section 132 of the Income Tax Act, the AO relied upon the materials that were already on the record to form another opinion contrary to the view expressed in Kabul Chawla. Therefore, the Tribunal quite correctly directed the amounts sought to be brought to tax, be deleted. The appeal does not involve any question of law. It is accordingly dismissed. All the pending applications also stand disposed of.

S. RAVINDRA BHAT, J

A. K. CHAWLA, J MARCH 12, 2018 rc

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