Addition/disallowance cannot be made merely on admission of assessee during enquiry: Delhi High Court | Tech US News


The Delhi High Court held that the statement recorded during the course of investigation, on its own, without any reference to the material found during the course of investigation, would not empower the AO to make additions/dismissals on the basis of the admission of the assessee alone.

“The appellant-Revenue has not relied on or even relied upon any statement recorded under Section 132(4) of the 1961 Act. No statement has been produced before this Court. Therefore, on the facts of this case, the question is not comes into play unless the appellant-Inland Revenue can show that the statements recorded under section 132(4) disclose some incriminating material on the basis of which the orders under section 153A have been passed,” division bench Justice Manmohan and Justice Manmeet Pritam Singh Arora said.

The appellant or the department assailed the order of the ITAT. The ITAT upheld the order of the CIT(A) setting aside the assessment order(s) dated 28.12.2007 issued under section 153A of the Income Tax Act, 1961 in respect of the search conducted at the premises of the respondent of the client/assessee under section 132.

Both the appellate authorities returned concurrent findings of fact that no incriminating material was found during the evaluation of the search warrant under Section 153A of the 1961 Act.

The Department argued that it is not necessary to find incriminating material during an investigation under Section 132 for an order under Section 153A of the 1961 Act, even if the original assessments have reached finality and have not been reduced.

The department said that a statement recorded during an investigation under Section 132(4) can be considered as incriminating material or a document on the basis of which it can be added or rejected under Section 153A of the 1961 Act.

The amicus curiae submitted that under section 153A(1) of the 1961 Act, when an inquiry is commenced under section 132, the assessments for the six assessment years preceding the date of inquiry may be reopened and closed under that section. The High Courts have consistently held that no addition under Section 153A can be made where no incriminating material has been found during the course of the investigation, particularly when the original assessments have already been completed.

Amicus curiae submitted that there was no fresh information or material discovered during the investigation process or any statement under Article 132(4) recorded during the investigation which could be defined as “incriminating material “, on the basis of which the allowances were rejected by the tax administration.

The Court dismissed the appeal and held that in case of withdrawal of the statement recorded under Section 132(4), the AO will require some corroborative material before adding or rejecting on the basis of the statement.

Case Title: PCIT v. PGF Ltd.

Citation: ITA 528/2019

Date: 14.11.2022

Counsel for the Appellant: Senior Standing Counsel Zoheb Hossain

Counsel for the respondent: amicus curiae Sachit Jolly

Click here to read the order


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