2023 (12) TMI 337 - AT - Income Tax

Assessment u/s 153A - Unexplained cash deposit u/s 68 - Assessee argued additions are devoid of any reference to any incriminating material found at the time of search - HELD THAT - As regards the nature and source of cash deposit in IDBI Bank account was explained that the cash deposit is out of old savings, income earned during the year and withdrawal from banks and partnership firm. Nothing has been brought on record to dismantle the explanation of the assessee by the Ld. AO/CIT(A). It is not the case of the Revenue that the IDBI bank account was not declared by the assessee. The addition in our view is not sustainable as it is not based any solid factual and/or legal footing. Regarding credit received by the assessee in her IDBI Bank account, search was carried out on locker No. 474 IDBI Bank Ltd., Rajouri Garden, New Delhi and undisputedly no incriminating material was found which is evident from the Panchnama - Addition based on incorrect appreciation of facts on record is not sustainable. We find ourselves in agreement with the contention of the assessee that if the Ld. AO wanted to make addition to the income of the assessee on the basis of material found in the case of other person he should have followed the mandatory procedure prescribed under section 153C of the Act which has not been done. The case of the assessee on facts is covered in favour of the assessee following decisions Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT , . Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT and Ms. Lata Jain 2016 (5) TMI 1273 - DELHI HIGH COURT . Also ratio decidendi of Kabul Chawla s case 2015 (9) TMI 80 - DELHI HIGH COURT has been affirmed by the Hon ble Supreme Court in PCIT vs. Abhisaar Buildwell P Ltd. 2023 (4) TMI 1056 - SUPREME COURT We delete the additions sustained by the Ld. CIT(A) and decide ground in favour of the assessee.

Summary

Issues Involved:
1. Jurisdiction and Validity of Assessment Order
2. Incriminating Material and Additions
3. Agricultural Income Addition
4. Unexplained Cash Deposits
5. Unexplained Credit Entries
6. Procedural Compliance under Section 153C
7. Levy of Interest under Section 234A and 234B

Summary:

Jurisdiction and Validity of Assessment Order:
The assessee challenged the jurisdiction and validity of the assessment order passed under section 153A r.w.s 143(3), arguing it was illegal and bad in law due to lack of valid jurisdiction and procedural errors. The Tribunal noted that general and legal grounds (Grounds No. 1, 3, 4, 5, 6, 8, 9, 11, and 12) were not argued and hence not adjudicated.

Incriminating Material and Additions:
The crux of the assessee's case was that the additions were devoid of any reference to incriminating material found during the search, making them unsustainable (Grounds No. 2, 7, and 10). The Tribunal agreed, citing precedents like CIT vs. Kabul Chawla and noted that no incriminating material was found in the search of the locker, thus the additions were not justified.

Agricultural Income Addition:
The assessee's agricultural income was partially disallowed by the AO and CIT(A). The Tribunal found that agricultural income had been declared and accepted in previous years, and the details of land holding were provided. Therefore, the partial disallowance by the CIT(A) was unwarranted (Ground No. 13).

Unexplained Cash Deposits:
The addition of Rs. 93,000/- as unexplained cash deposits was contested. The assessee explained the source as old savings, income, and withdrawals. The Tribunal found no evidence to dismantle this explanation and deemed the addition unsustainable (Ground No. 14).

Unexplained Credit Entries:
Regarding the addition of Rs. 40,00,000/- as unexplained credit entries, the Tribunal noted that the assessee provided explanations and documentary evidence linking the credits to transactions related to the sale of equity shares. The AO's reliance on a third-party statement without following the mandatory procedure under section 153C was incorrect. The Tribunal found the addition based on incorrect appreciation of facts and unsustainable (Ground No. 15).

Procedural Compliance under Section 153C:
The Tribunal emphasized that if the AO wanted to make additions based on material found in another person's case, the mandatory procedure under section 153C should have been followed, which was not done in this case (Ground No. 16).

Levy of Interest under Section 234A and 234B:
Ground No. 19 regarding the levy of interest under sections 234A and 234B was deemed consequential.

Conclusion:
The Tribunal deleted the additions sustained by the CIT(A) and decided in favor of the assessee on grounds No. 2, 7, 10, and 13 to 18. The appeal was partly allowed.