The Delhi High Court quashed the departments appeal in case of the assessee in whose premises search and seizure proceedings took place but no new material much less incriminating material were found.
The assessing officer based on the information obtained during the course of the search the assessing officer (“AO”) referred the case to the transfer pricing officer (“TPO”) to determine the arm’s length price of interest-free advance given by the assessee to its associated enterprise. The TPO accordingly concluded the assessment by determining the interest rate ought to be charged by the assessee on the said advances. On appeal against the draft order of the AO the assessee preferred an appeal with the dispute resolution panel (“DRP”). The DRP upheld the findings of the TPO however gave a partial relief by way of reduced interest rate.
The assessee further challenged the final order of the AO with the ITAT wherein the hon’ble tribunal quashed the assessment proceedings principally on the ground that in the absence of seizure of any incriminating material during the course of search, the rule enunciated by the apex court in CIT vs. Kabul Chawla, in case of search proceedings where no incriminating material is found the assessment proceedings under section 153A/153C shall reiterate the order issued under the original assessment, was applicable invalidating the proceedings under Section 153A. On further appeal, the High Court also validated the order of the tribunal stating that in view of the decision in case of Kabul Chawla the court’s opinion did not fall into error in quashing the proceedings.