Bombay High Court Rejects IT Appeals Over Search Assessment Based On Regular Books Instead Of Search Material

The Bombay High Court has dismissed two appeals filed by the Income Tax Department, upholding an Income Tax Appellate Tribunal order that deleted additions made to a company's completed income tax assessments after finding they were not based on incriminating material recovered during a search.

The court found that no substantial question of law arose for consideration.

A division bench of Justice G.S. Kulkarni and Justice Aarti Sathe agreed with the tribunal that the Assessing Officer had based the additions on the company's regular books of account. The bench held that the tribunal's decision was consistent with the settled legal position on completed assessments after a search.

The case arose after the Income Tax Department searched the Aurum Group, which was involved in the real estate business.

Following the search, the assessing officer treated the proceeds from the sale of flats as business income instead of capital gains.

The officer also disallowed interest claimed as a business expense. The tribunal deleted both additions after finding that the assessments had already attained finality before the search and that no incriminating material had been found to support the additions.

Before the high court, the Revenue argued that documents recovered during the search, including board resolutions, agreements and correspondence, showed that the company intended to carry on the business of selling flats.

It said these documents justified treating the sale proceeds as business income and disallowing the interest expenditure.

Rejecting the Revenue's arguments, the high court said the issue was covered by the Supreme Court's decision in Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell (P.) Ltd. The bench agreed that the tribunal's view was in line with the settled legal position. Finding that no substantial question of law arose on either issue, it dismissed both appeals.

For Appellant (Revenue): Advocate Suresh Kumar, 

For Respondent (Aurum Ventures Private Limited): Advocate P.C. Tripathi