ITA No. 738/DEL/2021 is a pivotal case involving the Deputy Commissioner of Income Tax (DCIT), Central Circle-30, New Delhi, and Kuber Khaini Pvt. Ltd. This case reflects a critical analysis of the application of incriminating evidence in tax assessments following search operations, spotlighting the assessment year 2013-14.
The case arose from a search and seizure operation conducted on 09.10.2014 under Section 132 of the Income Tax Act, targeting the business and residential premises associated with Kuber Khaini Pvt. Ltd. This led to subsequent assessments where significant additions were made to the assessee’s declared income, based primarily on unverified unsecured loans.
The primary dispute centered on the additions of Rs. 6,65,00,000, alleged to be from non-existent companies, which the Assessing Officer added under Section 68 of the Income Tax Act. The appellant contested these additions, arguing that they were made without any incriminating material uncovered during the search operation which directly linked to the added amounts.
The CIT(A) sided with the assessee, deleting the additions by applying the legal standards set in the Delhi High Court’s rulings in Kabul Chawla and others, which assert that additions must be based on incriminating materials discovered during the search. The Revenue challenged this decision, bringing the matter before the Income Tax Appellate Tribunal.
The Tribunal upheld the CIT(A)’s decision, emphasizing that the burden of proof lies with the department to connect the evidence found during searches to any additions made. Without such linkage, the additions cannot be sustained. The Tribunal’s decision reiterates the importance of substantive evidence in tax assessment procedures post-search and reinforces the principles of fairness in tax administration.
This case serves as a significant precedent for ensuring that assessments are only revised based on concrete evidence directly linked to any discrepancies found during official search operations. It underscores the legal requirement for the Revenue to establish a clear nexus between the discovered incriminating material and the assessed income adjustments.
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