2018 (1) TMI 596 - AT - Income Tax

Validity of assessment made u/s 153C - estimation of income in respect of the flats sold on the basis of the statements recorded from the flat buyers Mr. V.V.S. Venugopal and others u/s 131 - Held that - As per the provisions of section 153C of the Act, it is mandatory to have the satisfaction of the A.O. that money, bullion, jewellery or other valuable article or thing or any books of accounts, documents seized or requisitioned pertains to or relates to the assessee, which means that unless there is an incriminating material belonging to the assessee is found, the action u/s 153C of the Act is not permissible. In the assessee s case there was no incriminating material found and seized from the premises of the group cases. Therefore, we hold that the notice issued u/s 153C of the Act is not sustainable and accordingly quashed. This view is upheld in the case of CIT Vs. Sinhagad Technical Education Society (2017 (8) TMI 1298 - SUPREME COURT OF INDIA). Thus we hold that the notice issued u/s 153C of the Act is unsustainable and accordingly quashed. - Decided in favour of assessee

Summary

Issues:
1. Validity of assessment under section 153C without incriminating material.
2. Acceptance of method of accounting followed by the appellant.
3. Difference in sale value per flat and acceptance of returned income.
4. Addition based on post-search enquiries or estimation of sale price.

Issue 1: Validity of assessment under section 153C without incriminating material:
The appellant challenged the assessment under section 153C without incriminating material. The appellant argued that the assessment under section 143(3) r.w.s 153C was invalid without any incriminating material. The appellant contended that the notice under section 153C was unwarranted due to the absence of any such material. The appellant relied on the Supreme Court judgment in CIT Vs. Sinhagad Technical Education Society, where the notice under section 153C was quashed. The Tribunal held that the notice issued under section 153C without incriminating material was unsustainable and accordingly quashed.

Issue 2: Acceptance of method of accounting followed by the appellant:
The appellant contended that the method of accounting followed was appropriate and income was admitted accordingly. The appellant raised grounds against the CIT(A)'s decision not to accept the accounting method. The Tribunal observed that the appellant had been following the project completion method and admitted income accordingly. The Tribunal directed that the addition made based on the accounting method be deleted.

Issue 3: Difference in sale value per flat and acceptance of returned income:
The appellant argued that there was no difference in the sale value per flat, and the books were not rejected. The appellant submitted that the returned income should have been accepted. The CIT(A) confirmed the addition based on the difference in the consideration stated by buyers and that admitted by the appellant. The Tribunal found no substantial variance in the sale value per flat and directed that the returned income be accepted.

Issue 4: Addition based on post-search enquiries or estimation of sale price:
The appellant challenged the addition made based on post-search enquiries or estimation of sale price. The appellant argued that no incriminating material was seized, and income offered under section 132(4) had been admitted. The Tribunal noted that no incriminating material was found during the search proceedings, and the action under section 153C was impermissible without such evidence. The Tribunal held that the addition based on estimation without incriminating material was unsustainable and ordered its deletion.

In conclusion, the Tribunal allowed the appeal filed by the appellant for the assessment year 2008-09 and dismissed the appeal for the assessment year 2009-10.