2024 (5) TMI 483 - AT - Income Tax

Assessment u/s 153A/153C - Addition u/s 68 - unexplained unsecured loan - assessee had not discharged his onus - additions made are in reference to material found and seized from the premises of the third persons in their respective search operations - CIT(A) deleted addition - HELD THAT - It will be important to note that section 292C of the Act provides for a presumption that the documents assets books of account etc found at the time of search in the premises of a person is always presumed to be belonging to him/them unless proved otherwise. The presumption derived under this section is a rebuttable presumption. Thus the person on whom such a presumption is drawn has got every right to state that the said document does not belong to him/them. AO if he is satisfied with such explanation has got recourse to proceed on such a person in terms of section 153C of the Act. In the present case the seized documents used by the AO for making the additions u/s 153A while making assessment of the assessee were found and seized from the third persons as noted above. Thus the only legal recourse available to the Revenue is to proceed on the assessee in terms of section 153C of the Act. Whether the addition can be made u/s 153A in an unabated year in absence of incriminating material found and seized in the course of search conducted on the assessee for the additions made by the AO? - We take note of the recent decision of Abhisar Buildwell Private Limited 2023 (4) TMI 1056 - SUPREME COURT wherein the assessment framed u/s. 153A of the Act are liable to be quashed where additions have been made without reference to any incriminating material found in the course of search relating to the addition so made. There is no reference to any incriminating material found and seized during the course of search from the premises of the assessee in his search in respect of the additions made. It is also undisputed that the year under consideration is an unabated year considering the date of conduct of search within the meaning of section 153A of the Act. Admittedly no incriminating material has been referred which was found in the course of search of the assessee for the impugned assessment year thus no addition could be made. Decided in favour of assessee.

Issues Involved:
1. Deletion of addition towards unexplained unsecured loan.
2. Deletion of addition towards unexplained investment in M/s Anjanay Rice Mills Pvt. Ltd.
3. Deletion of addition made under section 40A(3) of the Income-tax Act.
4. Deletion of addition towards unexplained investment in purchase of land.
5. Legal issue of additions made in absence of incriminating material found during search.

Summary:

Issue 1: Deletion of Addition towards Unexplained Unsecured Loan
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 5,00,000/- towards unexplained unsecured loan, arguing that the assessee had not discharged his onus under section 68 of the Income-tax Act, 1961. However, the Tribunal noted that the addition was made based on documents seized from third parties, not from the assessee, and thus could not be sustained under section 153A.

Issue 2: Deletion of Addition towards Unexplained Investment in M/s Anjanay Rice Mills Pvt. Ltd.
The Revenue challenged the deletion of Rs. 20,00,000/- towards unexplained investment, arguing that the CIT(A) admitted additional evidence without providing the AO a reasonable opportunity to examine it, violating Rule 46A. The Tribunal found that the addition was based on documents seized from third parties and not from the assessee, making the addition unsustainable under section 153A.

Issue 3: Deletion of Addition under Section 40A(3)
The Revenue argued that the CIT(A) erred in deleting the addition of Rs. 2,42,50,900/- made under section 40A(3), as the cash payments were made to M/s Anjanay Rice Mills Pvt. Ltd. and not directly to farmers, thus not qualifying for the exception under Rule 6DD(e). The Tribunal held that the addition was based on documents seized from third parties, not the assessee, and thus could not be sustained under section 153A.

Issue 4: Deletion of Addition towards Unexplained Investment in Purchase of Land
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 3,08,07,170/- towards unexplained investment in land, as the AO found that the assessee paid more than the recorded sale consideration. The Tribunal found that the addition was based on documents seized from third parties and not from the assessee, making the addition unsustainable under section 153A.

Legal Issue: Additions in Absence of Incriminating Material
The assessee argued that no additions could be made under section 153A in the absence of any incriminating material found during the search. The Tribunal agreed, noting that the additions were based on documents seized from third parties, not from the assessee. Citing the Supreme Court's decision in Abhisar Buildwell Pvt. Ltd., the Tribunal held that no additions could be made in an unabated assessment year without incriminating material found during the search.

Conclusion:
The Tribunal concluded that the additions made by the AO were unsustainable as they were based on documents seized from third parties and not from the assessee. Consequently, the assessee's cross-objection was allowed, and the Revenue's appeal was dismissed. The order was pronounced on 26th February, 2024.

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