2021 (6) TMI 1030 - AT - Income Tax

Assessment u/s 153A - Disallowance of section 80IAB - whether there was any incriminating material found during the course of the search qua the part disallowance of deduction under section 80 IAB? - HELD THAT - There is no question of considering the same as part of the incriminating material found during the course of the search. DR has further referred to the remand report of the AO, wherein it is mentioned that disallowance in question was based on documents and statement recorded both during and post search proceeding. DR was given opportunity to produce any such search material related to part disallowance u/s 80IAB, which is in the nature of the incriminating, but he failed to produce any such incriminating material. CIT(A) has already rejected the contention of the AO in remand proceeding which were based on the appraisal report. Merely, if it is mentioned in the appraisal report that certain documents are found during the course of the search, which are incriminating in nature, it cannot be presumed that such material was found. The onus is on the Revenue to substantiate their claim with the help of producing relevant incriminating material either before the Ld. CIT(A) or before the Tribunal. The Revenue cannot take shelter of the appraisal report, which is a confidential document between the Investigating Wing and the Assessing Officer and not a documentary evidence to be relied upon by the Appellate Authority. The second condition of the ratio of the decision in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT is not satisfied in the facts of the instant case. The finding of the Ld. CIT(A) on the issue in dispute is well reasoned and accordingly, we uphold the same. The grounds raised by the Revenue are accordingly dismissed.

Summary

Issues Involved:
1. Legality of the reassessment order under section 153A read with section 143(3).
2. Disallowance of deduction claimed under section 80IAB of the Income Tax Act, 1961.
3. Whether the addition was based on incriminating material found during the search.

Issue-wise Detailed Analysis:

1. Legality of the Reassessment Order:
The Revenue challenged the order of the Ld. CIT(A) quashing the reassessment order passed by the Assessing Officer (AO) under section 153A read with section 143(3). The Ld. CIT(A) held that the reassessment order was not justified as it was not based on any incriminating material found during the search. The Tribunal upheld this view, agreeing that the reassessment order lacked jurisdiction as it was not based on incriminating material unearthed during the search.

2. Disallowance of Deduction under Section 80IAB:
The AO disallowed ?13,30,50,000/- of the deduction claimed under section 80IAB, arguing that the valuation of land transferred to M/s Standard IT Web Solutions Pvt. Ltd. was excessive. The AO applied a rate of ?25,000 per square meter instead of ?50,000 per square meter, based on a post-search statement by the valuer, Sh. B.P. Singh. The Ld. CIT(A) found that the disallowance was not based on any incriminating material found during the search but rather on a post-search statement, which does not qualify as incriminating material.

3. Incriminating Material Found During the Search:
The Tribunal examined whether the disallowance was based on incriminating material found during the search. The AO and the Revenue contended that the disallowance was based on documents and statements recorded both during and post-search proceedings. However, the Tribunal found that the statement of the valuer, Sh. B.P. Singh, was recorded post-search and was not incriminating material. The Tribunal emphasized that for an addition to be made under section 153A, it must be based on incriminating material found during the search, as per the ratio of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla. Since no such material was produced, the Tribunal upheld the Ld. CIT(A)'s decision to quash the reassessment order.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s order quashing the reassessment and disallowance under section 80IAB. The Tribunal concluded that the reassessment was not based on incriminating material found during the search, thus failing to meet the legal requirements for reassessment under section 153A.