Supreme Court upholds quashing of Income Tax Assessment Proceedings initiated u/s 153C for Lack of Incriminating Evidence

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The Supreme Court has recently upheld the quashing of reassessment proceedings by the jurisdictional High Court and dismissed a bunch of appeals of the revenue in the absence of any incriminating evidence against the respondents.

The High Court found that in none of the cases, any incriminating material was found during the search either from the Assessee or from a third party, the Two-Judge Bench of Justice M R Shah and Justice C T Ravikumar observed.

A bunch of appeals were filed by the appellant Dy. Commissioner of Income Tax, Central Circle 20 against many assessees including M/s U.K. PAINTS (OVERSEAS) LTD.

N Venkataraman, learned ASG appearing on behalf of the Revenue, quoted some of the observations made by the Apex Court in Principal Commissioner of Income Tax, Central —3 Vs  Abhisar BuildweII P. Ltd. particularly, paragraphs 11 and 13, prayed to observe that the Revenue may be permitted to initiate re—assessment proceedings under Section 147/148 of the Act as in the aforesaid decision, powers of the re—assessment of the Revenue even in case of block assessment under Section 153—A have been preserved by the decision.

Section 153A of the Income Tax Act is a provision that allows the income tax department to make assessments of income in certain cases where the regular assessment proceedings have been prevented by either the concealment of income or the destruction of books of accounts.

It applies to assessments for a period of six years preceding the current assessment year, in cases where search and seizure operations have been conducted on a taxpayer’s premises. The provision empowers the tax authorities to make best judgment assessments, based on the evidence available, to determine the taxpayer’s income and tax liability.

Section 153C of the Income Tax Act, 1961 entrusts assessing officers with the power to assess income of persons other than against whom the search has been made, in case any incriminating evidence of tax evasion is found against him/her.

However, the Bench found that, in this case, no incriminating material was found, either from the Assessee or from the third party and the assessments were under Section 153—C of the Act.

The Top Court thus held that the High Court has rightly set aside the Assessment Order(s) , refusing to interfere with the impugned judgment and orders passed by the High Court.To Read the full text of the Order CLICK HERE

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