The case of DCIT Central Circle-14 vs. Param Dairy Ltd (ITA 5023/DEL/2019) involves a complex tax dispute resolved by the Income Tax Appellate Tribunal (ITAT), Delhi. The case, which pertains to the assessment year 2008-09, was filed on 31st May 2019, with the final order pronounced on 19th November 2019.
Param Dairy Ltd., a prominent manufacturer and exporter of dairy products, was subjected to a search and seizure operation under Section 132 of the Income-tax Act on 28th February 2014. This operation was conducted on the Param and Rama Group. Subsequent to the search, the company was asked to file a return of income under Section 153A of the Act.
In response, Param Dairy Ltd. stated that the previously filed return should be treated as filed in response to the notice under Section 153A. The assessment proceedings were then initiated, leading to several additions by the Assessing Officer (AO).
The assessment order was framed under Section 143(3) read with Section 153A of the Act, including the following additions:
The appeal was heard by a bench comprising Shri N.K. Billaiya, Accountant Member, and Ms. Suchitra Kamble, Judicial Member. Both sides presented their arguments, with the counsel for Param Dairy Ltd. emphasizing that the additions were not based on any incriminating material found during the search.
The counsel for Param Dairy Ltd. argued that the additions made were not based on any material found during the search and hence were outside the scope of the Act. They relied heavily on the judgments of the Hon’ble High Court of Delhi in the case of Kabul Chawla and the Hon’ble Supreme Court in the case of Singhad Technical Educational Society.
The Tribunal examined the assessment orders and noted that the additions were indeed not based on any incriminating material. The Tribunal referenced the past assessments and financial statements, highlighting that the purchases and expenses were part of the audited financial statements submitted prior to the search.
The Tribunal quashed the assessment orders for the assessment years 2008-09 and 2009-10, concluding that the additions were not based on any new evidence or incriminating material found during the search. For the subsequent assessment years 2010-11 to 2012-13, it was determined that the period for issuing notice under Section 143(2) had expired before the date of the search, thus rendering those assessments as final and not open to scrutiny without new material evidence.
The Tribunal, therefore, quashed the assessments made under Section 143(3) read with Section 153A of the Act for being bad in law and unsupported by incriminating material. This judgment underscores the importance of having substantive evidence directly resulting from search operations to justify additions in such assessments.
The decision sets a precedent in ensuring that assessments based on search operations are grounded in solid, incriminating evidence, thereby protecting taxpayers from arbitrary additions.
DCIT Central Circle-14 vs. Param Dairy Ltd: Resolution of ITA 5023/DEL/2019
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