2020 (3) TMI 495 - AT - Income Tax

Validity of proceedings u/s.153A - addition as unaccounted profit in respect of land transactions - whether in respect of unabated assessments (no pending proceedings) as on the date of search, the AO could frame the search assessment u/s 153A of the Act by making additions without any incriminating materials found during the course of search? - HELD THAT - As decided in VATIKA LANDBASE PVT. LTD. 2016 (2) TMI 835 - DELHI HIGH COURT addition made merely on the basis of unsigned and undated seized document has been held to be unsustainable in the eye of law. Thus, the proposition made by the revenue towards making addition on the basis of the figures mentioned on the said draft deed, thus, cannot be considered to be valid evidence in the absence of any enquiry made by the authorities which ought to have done from the parties involved. Suppressed purchase consideration -There was no material available with the revenue suggesting that there was any payment of cash made by the assessee to the concerned parties as discussed above. It is also pertinent to note that the AO during the assessment proceedings has not verified the veracity of the impugned draft deed from the parties namely Laxmanji Son, Bhagvatiji and Vikramji. As such the land in dispute was purchased by the assessee from the other parties namely Shri Sanjay Jayntilal Patel, Dhirajbhai Bharatkumar Patel and Urmilbhai Gandhibhai Patel. Thus in our considered view there cannot be any addition based on such draft deed in the hands of the assessee in the given facts and circumstances. In view of the above, we are not convinced with the finding of the authorities below. Accordingly, we set aside the finding of the learned CIT (A) and direct the AO to the addition made by him. Hence the ground of appeal of the assessee is allowed. Unexplained investment in jewellery - Assessee has declared sufficient income in her income tax return for the year under consideration. Therefore, the amount of investment in the jewellery, being a meager amount, can be easily explained from the disclosed income of the assessee. Accordingly, we are of the view that no separate addition can be made on account of the investment in the impugned jewellery in the given facts of circumstances. Accordingly, we set aside the order of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.

Issues Involved:
1. Validity of proceedings under Section 153A of the Income Tax Act.
2. Addition of unaccounted profit in respect of land transactions.
3. Suppressed purchase price of land.
4. Unexplained investment in jewelry.
5. Disallowance under Section 40A(3) of the Act.
6. Disallowance of interest paid to Master Developers & Amar Construction.
7. Addition based on seized material.

Issue-wise Detailed Analysis:

1. Validity of Proceedings under Section 153A:
The primary issue is whether the Assessing Officer (AO) could frame an assessment under Section 153A of the Income Tax Act for concluded proceedings without any incriminating material found during the search. The Tribunal held that for unabated assessments (where no proceedings were pending as of the search date), the AO cannot make additions without incriminating materials found during the search. This decision was supported by various judicial pronouncements, including CIT vs. Continental Warehousing Corporation and Pr. CIT vs. Saumya Construction, which state that the AO cannot disturb the concluded assessments unless new incriminating evidence is found during the search. Thus, the Tribunal directed the deletion of additions made for such assessment years.

2. Addition of Unaccounted Profit in Respect of Land Transactions:
The Tribunal examined whether the addition of ?1,82,49,065/- as unaccounted profit from land transactions was justified. It was found that the additions were based on regular assessments and disclosed in the income tax return. Since no incriminating material was found during the search, the Tribunal held that such additions could not be made under Section 153A. The Tribunal relied on the judgments of the Bombay High Court and Gujarat High Court, which emphasized that additions under Section 153A should be based on incriminating material found during the search.

3. Suppressed Purchase Price of Land:
For the assessment year 2011-12, the Tribunal dealt with the addition of ?1,41,12,238/- as suppressed purchase price of land. It was argued that the addition was based on a draft deed found during the search, which was claimed to be a dump document. The Tribunal noted that the AO did not verify the draft deed's authenticity from the involved parties and held that additions could not be made based on unverified documents. The Tribunal cited the Delhi High Court's judgment in CIT vs. Vatika Landbase Pvt. Ltd., which stated that additions based on unsigned and undated documents are unsustainable.

4. Unexplained Investment in Jewelry:
The Tribunal addressed the addition of ?48,793/- as unexplained investment in jewelry. The AO had added this amount based on a retail invoice found during the search, but the assessee failed to justify the source of cash for the purchase. The Tribunal noted that the assessee had declared sufficient income in the tax return, which could explain the investment in jewelry. Therefore, the Tribunal directed the deletion of this addition.

5. Disallowance under Section 40A(3) of the Act:
The Tribunal dismissed the Revenue's appeal challenging the deletion of disallowance under Section 40A(3) of ?33,13,000/- by the CIT(A). The Tribunal found that the disallowance was not based on any incriminating documents found during the search and upheld the CIT(A)'s decision.

6. Disallowance of Interest Paid to Master Developers & Amar Construction:
The Tribunal also dismissed the Revenue's appeal regarding the deletion of disallowance of interest of ?58,06,303/- paid to Master Developers & Amar Construction. The Tribunal held that the disallowance was not based on any incriminating material found during the search.

7. Addition Based on Seized Material:
The Tribunal addressed the addition of ?38,48,000/- based on seized material. It was found that the addition was not supported by any incriminating documents found during the search. The Tribunal upheld the CIT(A)'s decision to delete the addition.

Conclusion:
The Tribunal allowed the appeals of the assessees on the grounds that the additions made by the AO were not based on any incriminating material found during the search. The Tribunal emphasized that for unabated assessments, the AO cannot make additions without new incriminating evidence. The appeals of the Revenue were dismissed as the additions challenged were not supported by any incriminating documents. The Tribunal's decision was consistent with various judicial pronouncements, ensuring that the assessments under Section 153A are based on incriminating material found during the search.

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