2020 (9) TMI 908 - AT - Income Tax

Assessment u/s 153A - seized material found from the premises of the assessee can be made the foundation of the addition - Unaccounted investment u/s.69 - payments been made by the partners - HELD THAT - No infirmity in the decision of Id. CIT(A) after placing reliance on the decision of Saumya Construction 2016 (7) TMI 911 - GUJARAT HIGH COURT wherein it is held that if in relation to any assessment year no incriminating material is found no addition or disallowance can be made in relation to that assessment year in exercise of power u/s. 153A. Addition u/s 69 - During the course of survey u/s. 133 A carried out along with action u/s. 132 of the act a document as banakhat between a seller Shri R. N. Desai and purchaser Shri Suresh R. Patel was impounded from the shop no. 22/23 of Shayona Complex. As stated that in the banakhat that an amount of ₹ 1.8 crores in cash has been paid by Shri Suresh Patel to Shri R.N. Desai at the time of execution of the said banakhat. As per the banakhat the total consideration of the land. AO has added the differential in the case of assessee firm on protective basis u/s. 69 - As finding of CIT(A) it is undisputed fact that the said document was belonged to Shri Sureshbhai Patel which he had executed in individual capacity. There was no mention of making of any payment by the assessee firm. We consider that Id. CIT(A) has correctly deleted this protective addition holding that assessee firm was not a party and completely stranger to the document. Therefore, this ground of appeal of the revenue is also dismissed. Addition u/s 40A(3) - HELD THAT - CIT(A) in his finding the whole of the purchase price for the land at serial no. 210/2 has been shown in the balance sheet under the head deposits and advances and the amount has not been debited to the P L account. Therefore, the provision of section 40A(3) has been wrongly applied by the assessing officer. Considering the above facts that land was not stock in trade as the same was shown in the balance sheet therefore we do not find any infirmity in the decision of Id. CIT(A). Therefore this ground of appeal of the revenue is dismissed.

Summary

Issues Involved:
1. Application of Section 153A of the Income Tax Act.
2. Addition on account of on-money receipt/unrecorded sale consideration.
3. Addition on account of unaccounted investment under Section 69.
4. Disallowance under Section 40A(3).

Issue-wise Detailed Analysis:

1. Application of Section 153A of the Income Tax Act:
The judgment addresses the scope of Section 153A, which mandates the assessment of total income based on incriminating materials found during a search. The Tribunal upheld the CIT(A)'s decision that no incriminating material was found during the search to justify the additions made by the Assessing Officer (AO). The AO's reliance on documents seized from third parties (not the assessee) was deemed insufficient. The Tribunal emphasized that additions under Section 153A must be based on materials seized from the assessee's premises.

2. Addition on Account of On-Money Receipt/Unrecorded Sale Consideration:
The AO added ?3,18,79,334 to the assessee's income, alleging receipt of on-money in cash for the sale of units in Shayona Tilak-2. The CIT(A) deleted this addition, stating that the AO's conclusions were based on documents seized from unrelated third parties and not from the assessee. The Tribunal concurred, noting that the AO's method lacked credible evidence and was based on assumptions and surmises. The AO's extrapolation of on-money receipts from other group cases to the assessee was unsupported by any direct evidence against the assessee.

3. Addition on Account of Unaccounted Investment Under Section 69:
The AO added ?3,45,01,388 as unaccounted investment, based on a 'banakhat' (agreement) found during a survey, which indicated a higher sale consideration for land than reported. The CIT(A) deleted this addition, noting that the 'banakhat' was executed by an individual partner and not the assessee firm. The Tribunal upheld this view, emphasizing that the document did not pertain to the assessee firm and thus, the addition was unjustified.

4. Disallowance Under Section 40A(3):
The AO disallowed ?6,00,000 and ?56,00,000 for cash payments made towards land purchases, invoking Section 40A(3). The CIT(A) deleted these disallowances, stating that the payments were shown as advances in the balance sheet and not debited to the Profit & Loss account, making Section 40A(3) inapplicable. The Tribunal agreed, noting that the land was not stock-in-trade and the payments were not expenses claimed in the P&L account.

Conclusion:
The Tribunal dismissed all four appeals filed by the Revenue, upholding the CIT(A)'s decisions on all issues. The judgment reinforces the principle that additions under Section 153A must be based on direct incriminating evidence against the assessee and not on presumptions or documents related to third parties. The Tribunal also clarified the application of Section 40A(3) concerning advances not debited to the P&L account.