The case ITA 1126/DEL/2021 involves the appellant, Sita Devi Memorial Siksha Sansthan, Noida, and the respondent, Deputy Commissioner of Income Tax, Central Circle, Ghaziabad. This case pertains to the assessment year 2017-18. The appellant challenged the assessment order passed under section 153C of the Income Tax Act, 1961, and various additions made by the Assessing Officer (AO) on account of unexplained investments. The key points of contention and the tribunal’s judgment are discussed in detail below.
The search and seizure operations under section 132 of the Income Tax Act were conducted on November 10, 2017, at the premises of the Rajeshwar Singh Yadav group of cases. During the search, certain incriminating documents and materials were found and seized, which were allegedly related to Sita Devi Memorial Siksha Sansthan. Consequently, a notice under section 153C was issued on September 26, 2019, requiring the appellant to file a return of income. The appellant filed the return electronically on October 12, 2019, declaring a Nil income.
The appellant argued that the proceedings under section 153C were beyond jurisdiction and bad in law due to the absence of a satisfaction note recorded by the AO in possession of the seized documents. Additionally, the appellant contended that there was no incriminating material or evidence found during the search that suggested undisclosed income or investment. The appellant also disputed the additions made by the AO, arguing that the valuation reports and statements relied upon by the AO were not conclusive evidence of unexplained investments.
The respondent maintained that the documents seized during the search operation were incriminating in nature and justified the initiation of proceedings under section 153C. The respondent also argued that the AO was empowered to make additions based on the seized documents and the valuation reports obtained during the assessment proceedings.
The tribunal examined the satisfaction note and concluded that the satisfaction recorded by the AO was undated and lacked specific details regarding the seized documents. The tribunal noted that the documents found did not constitute incriminating material that would justify the assumption of jurisdiction under section 153C. Citing the Supreme Court’s decision in the case of Singhad Technical Society and the Delhi High Court’s judgment in the case of Kabul Chawla, the tribunal held that the proceedings under section 153C were invalid.
The tribunal observed that the AO’s addition of Rs. 65,83,992 was primarily based on the valuation report by the District Valuation Officer (DVO), which adopted CPWD rates instead of the state PWD rates. The tribunal held that the AO should have brought direct evidence of the actual expenditure incurred by the appellant. The tribunal directed the AO to adopt the state PWD rates and allow a rebate of 10% for self-supervision charges, which is consistent with the established legal principles.
Regarding the addition of Rs. 3,00,00,000 under section 68, the tribunal noted that the AO relied on the statement of the director of one of the investor companies without providing the appellant an opportunity for cross-examination. The tribunal emphasized the necessity of cross-examination and held that the addition could not be sustained solely based on the untested statement. The tribunal directed the deletion of the addition, citing lack of substantive evidence.
Since the addition under section 68 was deleted, the tribunal held that the consequent addition of Rs. 3,00,000 under section 69C for unexplained commission expenditure also could not be sustained. The tribunal directed the AO to delete this addition as well.
The tribunal’s judgment in ITA 1126/DEL/2021 provided significant relief to Sita Devi Memorial Siksha Sansthan by quashing the proceedings under section 153C and directing the deletion of substantial additions made by the AO. This case underscores the importance of adherence to procedural requirements and the necessity of substantive evidence in making additions under various sections of the Income Tax Act.
ITA 1126/DEL/2021: Sita Devi Memorial Siksha Sansthan vs. DCIT, Ghaziabad
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