Brainware Computers Pvt Ltd vs ITO Ward 5(2), New Delhi: Appeal Against Addition Under Section 153C Dismissed for Assessment Year 2006-07

Brainware Computers Pvt Ltd vs ITO Ward 5(2), New Delhi: Appeal Against Addition Under Section 153C Dismissed for Assessment Year 2006-07

Case Number: ITA 6107/DEL/2019

Appellant: Brainware Computers Pvt Ltd, New Delhi

Respondent: ITO Ward 5(2), New Delhi

Assessment Year: 2006-07

Order Type: Final Tribunal Order

Date of Order: 19th October 2022

Case Filed On: 18th July 2019

Pronounced On: 19th October 2022

Background of the Case

Brainware Computers Pvt Ltd, a company based in New Delhi, filed an appeal against the Income Tax Officer (ITO), Ward 5(2), New Delhi, for the assessment year 2006-07. This appeal, under case number ITA 6107/DEL/2019, was directed against an order passed by the Commissioner of Income Tax (Appeals)-35 [CIT(A)], New Delhi, dated 22nd July 2017, which upheld the assessment order passed under Section 153C of the Income Tax Act, 1961.

The primary issue in this case was the addition of Rs. 94,09,400/- under Section 68 of the Income Tax Act, related to share capital and share premium received by the appellant. The addition was made based on proceedings initiated under Section 153C, following a search and seizure operation conducted under Section 132 in the PNC Group on 25th August 2011.

Grounds for Filing the Appeal

The appellant challenged the addition made under Section 68, as well as the initiation of proceedings under Section 153C, on the following grounds:

• The appellant argued that the proceedings under Section 153C were invalid as no incriminating material related to the appellant was found during the search and seizure operation. The addition made by the Assessing Officer (AO) did not stem from any material seized during the search.
• The appellant also contended that the cheque found during the search operation was dated 30th October 2009, which was well beyond the relevant assessment year 2006-07. Therefore, it could not form the basis for any addition for the assessment year in question.
• The appellant further argued that the proceedings initiated under Section 153C were not applicable as the assessment for the relevant year had already been completed, and no incriminating material was found during the search.

Tribunal Proceedings

The case was heard by the Delhi Bench ‘A’ of the Income Tax Appellate Tribunal (ITAT) on 29th September 2022. The bench was presided over by Accountant Member Shri Anil Chaturvedi and Judicial Member Shri Narender Kumar Choudhry. The appellant was represented by Shri Rajeev Saxena and Ms. Sumangla Saxena, while the respondent was represented by Senior Departmental Representative (DR) Shri Ishtiyaque Ahmed and Shri Kanav Bali.

The tribunal examined the validity of the proceedings initiated under Section 153C and the addition made under Section 68. The appellant’s counsel argued that the addition was not justified as it did not stem from any incriminating material found during the search. They also highlighted the timing of the cheque, which was beyond the relevant assessment year.

Final Tribunal Order

After considering the submissions made by both parties, the tribunal found merit in the appellant’s arguments. The tribunal noted that the addition made under Section 68 was not based on any incriminating material found during the search. Furthermore, the tribunal referenced the judgments of the Delhi High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 573 and the Supreme Court in the case of Pr. Joint CIT vs. Meeta Gutgutia (2018), which supported the appellant’s contention.

The tribunal concluded that no addition could be made under Section 153C in the absence of any incriminating material related to the appellant. As a result, the tribunal allowed the appeal and set aside the order of the CIT(A), thereby deleting the addition of Rs. 94,09,400/- made under Section 68.

Conclusion

The case of Brainware Computers Pvt Ltd vs ITO Ward 5(2), New Delhi, highlights the importance of having clear and incriminating evidence when making additions under Section 153C of the Income Tax Act. The tribunal’s decision to dismiss the addition underscores the necessity for tax authorities to base their actions on solid and relevant evidence, particularly when invoking special provisions like Section 153C.

This judgment serves as a significant reference for similar cases where additions are made under Section 68 based on proceedings initiated under Section 153C without any incriminating material. It reinforces the principle that the tax authorities must adhere to the legal framework and ensure that their actions are justified by the evidence at hand.

Note: The above summary provides an overview of the tribunal proceedings and the final order in the case of Brainware Computers Pvt Ltd. For a more detailed understanding, interested parties are encouraged to refer to the full text of the tribunal’s order dated 19th October 2022.

Sd/-
(ANIL CHATURVEDI)
ACCOUNTANT MEMBER

Sd/-
(N.K.CHOUDHRY)
JUDICIAL MEMBER

Assistant Registrar

Brainware Computers Pvt Ltd vs ITO Ward 5(2), New Delhi: Appeal Against Addition Under Section 153C Dismissed for Assessment Year 2006-07