2024 (6) TMI 982 - AT - Income Tax

Issues Involved:
1. Deletion of additions based on statements recorded u/s 132(4) without incriminating material.
2. Taxation of undisclosed stock and unaccounted sales under section 115BBE.
3. Validity of assessments u/s 153A without incriminating material.
4. Tax rate applicability under section 115BBE for income quantified before the amendment.

Comprehensive Summary:

Issue 1: Deletion of Additions Based on Statements Recorded u/s 132(4) without Incriminating Material
The revenue challenged the deletion of additions for AY 2013-14 to AY 2015-16, arguing that the CIT(A) erred by not considering the statements recorded u/s 132(4) during the search. The Tribunal upheld the CIT(A)'s decision, emphasizing that no incriminating material was found during the search to support the additions. The Tribunal cited the Supreme Court's decision in PCIT Vs. Abhisar Buildwell Pvt. Ltd., which held that no additions can be made in the absence of incriminating material during a search for completed/unabated assessments.

Issue 2: Taxation of Undisclosed Stock and Unaccounted Sales under Section 115BBE
For AY 2017-18, the revenue argued that the entire declaration of Rs. 5,48,60,039/- should be taxed under section 115BBE at 60%, including Rs. 4,11,86,426/- treated as undisclosed business income by the CIT(A). The Tribunal upheld the CIT(A)'s decision that Rs. 4,11,86,426/- should be taxed as business income under section 28 and not under section 115BBE, as the income was generated from business activities. The Tribunal relied on various judicial precedents, including the Andhra Pradesh High Court's decision in Pr. CIT Vs. Deccan Jewellers (P) Ltd., which held that excess stock from business operations is assessable under regular provisions, not section 115BBE.

Issue 3: Validity of Assessments u/s 153A without Incriminating Material
The Tribunal quashed the assessments for AY 2013-14 and 2014-15, as no incriminating material was found during the search. It reiterated that for completed/unabated assessments, additions can only be made if incriminating material is found during the search. The Tribunal cited the Karnataka High Court's decision in Delhi International Airport Pvt. Ltd., which held that completed assessments cannot be disturbed without incriminating material.

Issue 4: Tax Rate Applicability under Section 115BBE for Income Quantified Before the Amendment
The Tribunal addressed the applicability of the tax rate under section 115BBE for income quantified during a search conducted on 24.06.2016. It held that the tax rate of 30%, applicable before the amendment on 05.12.2016, should apply. The Tribunal cited the Supreme Court's decision in CIT V. Vatika Township (P) Ltd., which held that substantive amendments cannot be applied retrospectively unless explicitly stated.

Conclusion:
The Tribunal dismissed the revenue's appeals for AY 2013-14 to AY 2015-16 and AY 2017-18, upholding the CIT(A)'s decisions. It allowed the assessee's appeal for AY 2017-18, holding that the entire undisclosed stock should be taxed as business income under section 28 and not under section 115BBE. The Tribunal emphasized the need for incriminating material to support additions in search assessments and clarified the applicability of tax rates under section 115BBE.