Delhi High Court dismisses appeal challenging the order of the Income Tax Appellate Tribunal regarding the scope of assessment under section 153A (of Income Tax Act, 1961).

Case Name:

ITA 680/2023 - PRINCIPAL COMMISSIONER OF INCOME TAX -CENTRAL -1 vs OXYGEN BUSINESS PARK PVT. LTD (FORMERLY KNOWN AS ACHVIS SOFTECH PVT. LTD.)

Key Takeaways:

1. The scope of assessment under section 153A (of Income Tax Act, 1961) of the Income Tax Act extends to income unearthed on the basis of statements recorded during post-search proceedings.
2. The decision in the case of CIT Vs Kabul Chawla (2015) applies to a case where fresh material/ information is received after the date of search, which is sufficient to reopen the assessment under section 153A (of Income Tax Act, 1961).
3. In the absence of any incriminating material found during the search, the Assessing Officer cannot assess or reassess the completed assessments/unabated

Case Synopsis:

This is a judgment from the High Court of Delhi in the case of Principal Commissioner of Income Tax - Central -1 vs Oxygen Business Park Pvt. Ltd. The judgment was reserved on December 4, 2023, and pronounced on December 8, 2023. The case number is ITA 680/2023.

In this case, the appellant/revenue (Principal Commissioner of Income Tax - Central -1) appealed against the order of the Income Tax Appellate Tribunal, which dismissed their appeal against the respondent/assessee (Oxygen Business Park Pvt. Ltd.) regarding the Assessment Year 2011-12.

The appellant/revenue proposed two questions as substantial questions of law in their appeal. However, during the preliminary hearing, they stated that they are not pressing the first question for the time being. Therefore, the court examined only the second question.

The second question proposed by the appellant/revenue was whether the decision in the case of CIT vs Kabul Chawla (2015) 61 applies to a case where fresh material/information received after the date of search is sufficient to reopen the assessment under section 153A (of Income Tax Act, 1961).

The court referred to the decision in the case of Kabul Chawla, which was upheld by the Supreme Court in the case of PCIT vs Abhisar Buildwell Pvt. Ltd., (2023) SCC OnLine SC 481. The court held that in cases where no assessment proceedings are pending on the date of initiation of search, the Assessing Officer may consider only the incriminating material found during the search and is precluded from considering any other material derived from any other source.

The court also referred to the case of Dr. A.V. Sreekumar vs CIT (2018), which was heavily relied upon by the appellant/revenue. However, the court distinguished this case from the present matter, as the material considered in addition to the material unearthed during the search action in Dr. A.V. Sreekumar’s case was the documents received by the revenue through a Tax Evasion Petition (TEP) filed prior to the search. In the present case, no incriminating material was found during the search, and the material in the form of a statement of Shri B.P. Singh, recorded subsequent to the search action, was now sought to be relied upon by the appellant/revenue.

Based on the above analysis, the court held that the proposed question of law numbered 2.2 in the memo of appeal cannot be admitted as a substantial question of law. Therefore, the appeal was dismissed.