2024 (1) TMI 741 - AT - Income Tax

Assessment u/s 153A - incriminating material was found during the search or not? - HELD THAT - As relying on Abhisar Builwell (Pvt.) Ltd. 2023 (4) TMI 1056 - SUPREME COURT and Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT where the assessment of an assessment year stood concluded at the time of search and remains unabated, the additions and disallowances are permissible in s. 153A proceedings only qua incriminating material found in the course of search. In the instant case, no incriminating material was found during the search and referred in the assessment order and hence the AO is not entitled to make additions in such completed/unabated assessments. Revenue has not demonstrated the nature of material found in the course of search which led to impugned additions in the absence of any incriminating material. The cost of land incurred and recorded in the books has been duly accepted and reduced from the fair value derived by the valuer. The additions appear to have been made towards cost of construction of premises thereon. The construction however has been commenced in the subsequent year and has no relation to the AY 2011-12 in question. Secondly, the cost incurred in the respective subsequent year were made by the AO but deleted by the CIT(A). Thirdly, the addition on cost of construction is based on valuation report which is in the realm of estimations without any nexus to any incriminating documents per se. Hence, in the absence of any incriminating material found, We see no perceptible reason to interfere with the finding returned by the CIT(A). Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition under Section 69A of the Income Tax Act, 1961.
2. Validity of assessment under Section 153A without incriminating material.
3. Reliance on valuation report for addition.

Summary:

Issue 1: Deletion of Addition under Section 69A
The Revenue challenged the deletion of Rs. 2,60,71,350/- added by the AO as unexplained money under Section 69A. The CIT(A) deleted this addition, stating it was made without any incriminating material found during the search proceedings. The Tribunal upheld the CIT(A)'s decision, noting that the addition was based on a valuation report rather than any material found during the search.

Issue 2: Validity of Assessment under Section 153A without Incriminating Material
The assessee argued that the AO erred in invoking Section 153A as no incriminating material was found during the search. The CIT(A) agreed, relying on the Delhi High Court's judgment in CIT vs. Kabul Chawla, which states that additions under Section 153A should be based on incriminating material found during the search. The Tribunal confirmed this view, noting that the assessment for AY 2011-12 was completed and could not be reopened without incriminating evidence.

Issue 3: Reliance on Valuation Report for Addition
The assessee contended that the valuation report used by the AO was erroneous and obtained without proper authority. The CIT(A) found that the valuation report alone, without any supporting incriminating material, could not justify the addition. The Tribunal upheld this finding, emphasizing that the valuation report was an estimation and not linked to any incriminating documents.

Conclusion:
The Tribunal dismissed the appeals filed by the Revenue and the cross objections filed by the assessee, affirming the CIT(A)'s decision to delete the additions made under Section 69A. The Tribunal reiterated that in the absence of any incriminating material found during the search, the AO could not make additions in a completed assessment under Section 153A.