2023 (11) TMI 1262 - AT - Income Tax

Assessment u/s 153A - Addition of unexplained money u/s 69A - CIT(A) deleted addition as addition is devoid of any incriminating material found during the search - HELD THAT - As in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT where the assessment of an assessment year stood concluded at the time of search and remains unabated, the additions and disallowances are permissible in Section 153A proceedings only qua incriminating material found in the course of search. In the instant case, no incriminating material was found during the search and referred in the assessment order and hence the AO is not entitled to make additions in such completed / unabated assessments. We decline to interfere with the finding of the CIT(A). The appeal by the Revenue is dismissed

Summary

Issues involved:
The issues involved in this case are the addition of unexplained money u/s 69A of the IT Act, the validity of invoking provisions of Section 153A(1)(a) of the Act, reliance on a valuation report prepared without proper basis, and the authority of obtaining a valuation report u/s 142A of the Act.

Addition of Unexplained Money u/s 69A:
The Revenue challenged the deletion of the addition of Rs. 2,67,32,350/- made by the Assessing Officer (AO) on account of unexplained money u/s 69A of the IT Act. The CIT(A) deleted the addition stating that it was not based on incriminating material found during search proceedings, relying on the decision in the case of CIT vs. Kabul Chawla. The Revenue failed to provide any incriminating material basis for the addition. The ITAT upheld the CIT(A)'s decision, citing the Supreme Court's ruling in the case of Abhisar Buildwell Pvt. Ltd. that additions in Section 153A proceedings are permissible only based on incriminating material found during search, which was not the case here. Therefore, the appeal by the Revenue was dismissed.

Validity of Invoking Section 153A(1)(a) of the Act:
The cross objection raised by the assessee challenged the invocation of provisions of Section 153A(1)(a) of the Act, arguing that there were no books of account or evidence to support the allegation of unaccounted investment. The ITAT found that no incriminating material was found during the search to justify the addition made by the AO. The reliance on a valuation report without proper basis was also criticized. The ITAT upheld the CIT(A)'s decision to delete the addition, emphasizing the requirement of incriminating material for additions in completed assessments under Section 153A.

Authority of Obtaining Valuation Report u/s 142A:
The cross objection further contended that the valuation report obtained u/s 142A of the Act was void-ab-initio as it was obtained without proper authority and in violation of established procedures. The ITAT did not find any merit in this argument and dismissed the cross objection as infructuous. The ITAT emphasized the importance of incriminating material for making additions in assessments under Section 153A, which was absent in this case.