2021 (12) TMI 500 - AT - Income Tax

Assessment u/s 153A - Unexplained investment - HELD THAT - No evidence for any other investment was found during the course of search. The revenue officers also did not make any inventory at the time of search for any such renovation, etc. Nothing is mentioned in the orders of the authorities below in this regard. Thus, no reliance can be placed on the said statement which is not corroborated with any incriminating material found at the time of search. Thus in view of decision of Hon ble Jurisdictional High Court in the case of CIT vs Harjeev Aggarwal 2016 (3) TMI 329 - DELHI HIGH COURT . Such statement cannot be taken adversely. Once it is admitted that no incriminating material was found in respect of the same, then no addition can be made. Here, the original return of income was filed on 15/10/2010 and the search took place on 17/01/2014 and therefore, it is a case of completed assessment and not abated and no adverse material or facts are on record. Therefore, relying on CIT vs Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and CIT vs Harjeev Aggarwal 2016 (3) TMI 329 - DELHI HIGH COURT we hold that no addition is warranted and should be deleted. Addition for l/5th share of the assessee in a godown - CIT(A) made this addition, though not made by the Assessing Officer, by picking up the above figure only from the audited balance sheet of the assessee as above and from nowhere else. Thus, since the above investment is duly disclosed in the regular books of account, no adverse cognizance is permitted. Accordingly, the additions which has been made by the Assessing Officer and ld. CIT(A) are beyond the scope of Section 153A as per law and principle laid down by the Hon ble Delhi High Court cited supra wherein it has been held that in the case where assessment has attained finality and not abated in term of 2nd proviso to Section 153A the addition cannot be made without there being any incriminating documents found during the course of search. Here, in this case, as noted above there is no such incriminating document found during the course of search albeit the addition has been made on the basis of disclosures made in the regular balance-sheet and bank accounts. Therefore, the additions made are deleted and to that extent the order of the AO and ld. CIT(A) is bad in law. Appeal of the Assessee is allowed.

Summary

Issues:
1. Addition of unexplained investment in two flats of Mumbai.
2. Enhancement in income due to unexplained investment in property in Navi Mumbai.

Issue 1: Addition of unexplained investment in two flats of Mumbai

The Assessee filed an appeal against the order passed by the Commissioner of Income Tax (Appeals)-II, Gurgaon for the Assessment Year 2010-11, challenging the addition of ?21,45,600 as unexplained investment made for a share in two flats in Mumbai. The Assessing Officer made the addition based on the statement of one of the co-owners, even though the investment was duly disclosed in the regular books of account and bank account of the Assessee. The co-owners jointly purchased the flats for ?90,00,000 each, with additional expenses, making the total cost ?1,83,73,042. The Assessee and other co-owners admitted to jointly investing ?2.0 Crore in the flats, but failed to provide documentary evidence for the source of payment. The Assessing Officer proportionately divided the investment amount among the shareholders, resulting in an addition of ?33,33,333 in the Assessee's taxable income. The CIT(A) partially allowed relief but confirmed an addition of ?21,45,060 as unexplained investment in the Assessee's 1/10th share of the flats. However, the Tribunal held that since no incriminating material was found during the search, and the investment was disclosed in the balance sheet, the addition was not warranted and should be deleted. The Tribunal relied on legal precedents to support its decision.

Issue 2: Enhancement in income due to unexplained investment in property in Navi Mumbai

The CIT(A) enhanced the Assessee's income by ?12,24,600 for a 1/5th share in a godown in Navi Mumbai, based on the audited balance sheet of the Assessee. The Assessee failed to provide an explanation for this investment, claiming the godown was taken on rent and not purchased. The Tribunal noted that no incriminating material was found during the search regarding this investment. The Tribunal held that since the investment was duly disclosed in the regular books of account, no adverse cognizance was permitted. The additions made by the Assessing Officer and CIT(A) were deemed beyond the scope of Section 153A, and as no incriminating documents were found during the search, the additions were deleted. Consequently, the Tribunal allowed the Assessee's appeal.

In conclusion, the Tribunal ruled in favor of the Assessee, deleting the additions made by the Assessing Officer and CIT(A) for unexplained investments in properties in Mumbai and Navi Mumbai, respectively. The Tribunal emphasized the importance of incriminating material in making such additions and highlighted the necessity of corroborating statements with evidence during assessments post a search and seizure action.