Delhi HC: More Addition Not Valid U/S 153C Without Incriminating Material

The Delhi High Court recently delivered a significant judgment, declaring that an addition made under section 153C of the Income Tax Act is invalid if there is no incriminating material to support it.

The appellant, the revenue authority, challenged the common order passed by the Income Tax Appellate Tribunal on 07.12.2017. The Tribunal had rejected the appeals filed by the appellant and the cross-objections filed by the respondent/assessee, Sidhi Vinayak Aromatics Pvt. Ltd, against the Commissioner of Income Tax (Appeals) order dated 25.03.2011.

The Tribunal based its decision on a legal issue and concluded that no incriminating material had been found in relation to the relevant assessment years.

The Tribunal referred to a judgment by a coordinate bench of the Court in the case of Commissioner of Income Tax vs. Kabul Chawla (2016) to support its decision that the additions made were not sustainable.

Related: ITAT: Proper Inspection Needed of Material Before Proceedings U/S 153

During the proceedings, Mr Shlok Chandra, the senior standing counsel representing the appellant, did not contest the fact that no evidence indicating a fake transaction was discovered during the search conducted under Section 132 of the Income Tax Act, 1961 against the Surya Vinayak Group, which included the respondent/assessee, for the relevant assessment years.

In its order, the Court observed that the additions made by the Assessing Officer were independent of section 153C of the Income Tax Act, 1961, as no incriminating material or evidence was found during the search to cast doubt on the transactions.

The Court noted that there is no indication of any reference through the assessment order about any seized material or other material discovered during the scrutiny in the assessee’s case and this alone does not lead to clarity on incriminating material related to the year under appeal.

the division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia closed the appeal as no substantial question of law arose for consideration.