A Division Bench of the Delhi High Court while upholding the order of the Delhi Bench of the Income Tax Appellate Tribunal(ITAT), held that, the recovery of annual report and share certificates from the assessee are not incriminating documents as they were seized from the issuing authority of the share certificates.
The ITAT, Delhi Bench had ordered deletion of the protective additions made in the hands of the respondent-assessee, M/s. Panchmukhi Management Services Pvt. Ltd. The present appeals were filed by the Principal Commissioner of Income Tax challenging the deletions made in the assessment years 2010-11, 2011-12 and 2012-13.
The learned counsel for the appellant contended that the ITAT had erred in holding that no incriminating material was found in the search and seizure. On the contrary, the original copies of share certificates pertaining to share capital and premium allotted to investor companies were found at the premises of the issuing company. This was pointed out by the counsel for the appellant as evidence to show that the investor companies were bogus entry providing entities.
The learned senior counsel for the assessee, however, pointed out that the alleged incriminating materials do not pertain to the assessment years in question. He relied on the satisfaction note for issue of notice under Section 153C, Income Tax Act. The share certificates were relevant to the assessment year 2009-10. In accordance with Section 153C of the Income Tax Act, 1961, a satisfaction note drawn up on 29th January 2016 enables the Revenue to re-open the returns for the six assessment years immediately preceding the search. In the instant case, the Revenue would be entitled to re-open the returns for the assessment years 2010-11 to 2015-16.
No document pertaining to the returns of the assessment years entitled to be reopened by the Revenue was seized during the search. The incriminating nature of the documents seized were ruled out by the court, as Minda Group, from whose premises the search and seizure occurred was not a third party but the issuing authority of the share certificates.
The Division Bench comprising Hon’ble Mr. Justice Manmohan and Hon’ble Ms. Justice Manmeet Pritam Singh Arora held that, the recovery of annual report and share certificates of the assessee are not incriminating due to two reasons. First, that the documents were seized from the issuing authority of the same and second, that the assessment year pertaining to the documents is none of the assessment years in question as held in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society [2017] 397 ITR 344. The Court taking note of the concurrent orders of both CIT(A) and ITAT, held that, no protective additions were to be made and dismissed the appeals in the view that no substantial question of law had arisen for consideration.
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