2024 (5) TMI 155 - AT - Income Tax

Validity of assessment proceedings initiated u/s 153A - unabated assessment - purchase of agri-land by the assessee - Addition u/s 69 - HELD THAT - As held in the case of Abhisar Buildwell P Ltd ( 2023 (4) TMI 1056 - SUPREME COURT no addition can be made in the case of unabated assessment which are not part of incriminating materials found during the search. In the present case it is clearly established that assessee has made several payments to the farmers which lead to the finding that the assessee has purchased several immovable properties. Therefore we are not inclined to accept the submissions of the assessee on the issue of purchase of agri-land by the assessee that there is no incriminating material found during the search. Accordingly the ground nos.1 and 2 are are partly allowed because in the other additions there are no incriminating material the same was discussed somewhere in this order. Addition u/s 69 - Payment to farmers and purchase of agriland - We observed from the record that AO acknowledged that assessee has paid cash payment to the farmers to the extent of money withdrawn from the bank. These findings clearly shows that there is a direct link with the information collected from the assessee and substantiates that the assessee has capacity to make payments to farmers. We also observed from the record that the AO has made addition based on the presumption that the assessee has no source and also the difference between the investment made as per registered documents and circle rates as per the respective lands. The assessee has demonstrated that she has sources to make the investment and she is eligible to get the investment made in the agricultural land to the extent of declared sources. It is fact on record that the assessee has withdrawn the cash and made the payment to the farmers to the extent of cash withdrawn by her from the bank for which she has sufficient fund available in the bank. Therefore we are directing the AO to adjust the payments made from withdrawing from the bank account. The other part of the addition after making the addition may be sustained. In this regard we are inclined to partly allow the ground no 3 raised by the assessee. Coming to the other additions made by the Assessing Officer we observed that all these information collected in post search proceedings and there is no evidence to show that the additions made by the assessing officer has bearing from the material found during the search - we are inclined to direct the Assessing Officer to delete above mentioned additions made by him in the assessment order. Accordingly ground Nos 4 to 7 raised by the assessee are allowed.

Issues Involved:

1. Jurisdiction and validity of notice u/s 153A.
2. Addition of unexplained investment u/s 69.
3. Denial of deduction u/s 54F.
4. Addition on account of unexplained investment in shares.
5. Addition of unexplained investment in immovable property.
6. Adequacy of opportunity of hearing and principle of natural justice.

Summary:

1. Jurisdiction and Validity of Notice u/s 153A:
The assessee contested the jurisdiction and validity of the notice issued u/s 153A r/w section 143(3), arguing that the assessment proceedings were void-ab-initio as basic jurisdictional conditions were not met. The Tribunal, however, observed that a search and seizure operation u/s 132 was conducted, and incriminating documents were found, establishing a direct link between the search findings and the material submitted during assessment proceedings. Thus, the Tribunal upheld the jurisdiction and validity of the notice u/s 153A, partly allowing the grounds as some additions were not based on incriminating material.

2. Addition of Unexplained Investment u/s 69:
The Assessing Officer made additions for unexplained investment in land, noting that the properties were purchased below Fair Market Value (FMV) and the difference was paid in cash. The Tribunal observed that the assessee had demonstrated sources of income and bank withdrawals for payments to farmers. The Tribunal directed the AO to adjust the payments made from the bank account and sustain the addition only for the differential amount not covered by bank withdrawals.

3. Denial of Deduction u/s 54F:
The AO disallowed the deduction claim u/s 54F due to lack of adherence to provisions. The Tribunal, however, found no incriminating material related to this disallowance during the search and directed the AO to delete the addition, allowing the ground raised by the assessee.

4. Addition on Account of Unexplained Investment in Shares:
The AO added Rs. 6,60,000/- for unexplained investment in shares. The Tribunal noted that the investments were made through banking channels and there was no incriminating material found during the search. Hence, the Tribunal directed the deletion of this addition.

5. Addition of Unexplained Investment in Immovable Property:
The AO added Rs. 20,39,810/- as unexplained investment in immovable property based on the difference between the declared investment and the valuation report. The Tribunal found that the addition was not based on any incriminating material found during the search and directed the AO to delete this addition.

6. Adequacy of Opportunity of Hearing and Principle of Natural Justice:
The assessee claimed that the AO did not provide adequate opportunity of hearing and violated the principle of natural justice. The Tribunal did not find merit in this ground and dismissed it as not pressed.

Conclusion:
The appeals for the assessment years 2009-10 to 2013-14 were partly allowed, with specific directions to the AO to delete additions not based on incriminating material found during the search. The Tribunal emphasized adherence to judicial precedents and the principle that no additions can be made in unabated assessments without incriminating material.

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