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2022 (3) TMI 1017 - AT - Income TaxAssessment u/ 153A - Addition based of the consumption/use of demineralized water(DM Water) - CIT(A) deleted the addition holding that DM water has been used by the assessee for washing of tanks, besides, ld CIT(A) also observed that assessing officer has not considered opening stock of DM water, closing stock of DM water, DM water in process in pipes and DM water in blending tanks and other many uses of DM water for different other purposes - HELD THAT - There was no incriminating material found by the department in the process of search action. The ld CIT(A) also observed that there is no incriminating material unearthed during the search. CIT(A) has categorically observed that there is no substance in the allegations of the A.O. Even after a thorough search action under section 132, not a single instance of sale outside books, purchase of basic raw material or even packing material or any instance of discrepancy in the stock of finished goods, spirit, bottles or even bottles etc was detected. The relevant observations in the appellate order. AO had drawn an adverse inference merely relying on the register maintained by the Assessee to have control on demineralized water and the statements recorded during the course of search without pointing how the said material shows any suppressed production and sales on the part of the Assessee. A.O. failed to demonstrate the nexus between the seized material and the addition made during the relevant years. Thus, the allegation of the Ld. A.O. that there was a suppressed production or sale was without any basis and merely on the basis of conjecture and surmises. Thus in case of unabated / concluded assessment, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search and accordingly the addition made by the assessing officer has been rightly deleted by the ld CIT(A). Addition of capital gain - HELD THAT - We note that assessee has shown capital gain in his books of accounts in respect of impugned property and we also observe that assessee has shown such capital gain in the computation of total income for the assessment year 2010-11. The assessee computed capital gain and paid the due taxes, therefore, the property which is disclosed in the books of accounts cannot be an incriminating material. Hence, admittedly the search team did not find any incriminating material. We note that in absence of incriminating material, addition should not be made under section 153A of the Act, hence we cannot take judicial notice about such unfounded allegation of the assessing officer. We note that property has been got valued by the bank for the purposes of loan applied by the purchaser. The valuation is for fair market value as on 21.05.2012 i.e., more than two years after the date of transfer. CIT(A) further observed that no incriminating document showing transfer of money, above the consideration, shown has been found even after the search action. It is to be noted that even when the valuation is by departmental valuer u/s 50C(3); and the valuation of property referred according to the valuation officer comes out more than that taken by the Stamp Valuation Authority s even then section 50C(3) mandates that maximum deemed consideration can be taken to be equal to the valuation adopted by the stamp valuation authority only and not the higher value estimated by the departmental valuer. Therefore, even by the spirit of the Act, when the valuation is of the same property, for the date of transfer, that too for the purposes of taxation of capital gains only; the legislature does not intend even then to take the deemed consideration higher than the value adopted by the stamp valuation authority. In such circumstances, taking a different value (much higher than value adopted by Stamp Valuation Authority) as consideration just on the basis of a third-party valuation, done on the instances of a bank which is giving a loan, without even a reference to any comparative instances, cannot be justified. Based on this factual position, we note that ld CIT(A) has rightly deleted the addition. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A).
Issues Involved:
1. Validity of the addition made by the Assessing Officer on account of suppressed production/sales of IMFL and CL for AYs 2008-09 to 2009-10 and 2011-12 to 2014-15. 2. Validity of the assessment order passed u/s 153A r.w.s 143(3) of the Act without incriminating material. 3. Validity of the search action u/s 132(1) of the Act. 4. Addition on account of unaccounted capital gain from the sale of immovable property for AY 2010-11. Detailed Analysis: Issue 1: Validity of Addition on Account of Suppressed Production/Sales of IMFL and CL The Revenue contended that the Assessing Officer (AO) made additions for the AYs 2008-09, 2009-10, and 2011-12 to 2014-15 based on the consumption of demineralized (DM) water, indicating suppressed production. The AO noted a mismatch between DM water usage and reported production, suggesting unaccounted production and sales. The CIT(A) deleted these additions, noting that DM water was used for various purposes, including washing tanks, and the AO failed to consider opening and closing stock of DM water, DM water in pipes, and blending tanks. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's assumptions were based on conjecture and surmises without concrete evidence of unaccounted production or sales. Issue 2: Validity of Assessment Order u/s 153A r.w.s 143(3) Without Incriminating Material The assessee argued that no incriminating material was found during the search to justify the additions made by the AO under section 153A. The Tribunal agreed, stating that in the absence of incriminating material, the completed assessments should not be disturbed. The Tribunal referred to judicial precedents, including the Delhi High Court's decision in CIT vs. Kabul Chawla, which held that additions under section 153A should be based on incriminating material found during the search. Consequently, the Tribunal upheld the deletion of additions by the CIT(A) for AYs 2008-09 to 2014-15. Issue 3: Validity of Search Action u/s 132(1) The assessee challenged the validity of the search action, arguing that the competent authority did not have valid information to initiate the search. The Tribunal noted that an explanation inserted in section 132 by the Finance Act, 2017, clarified that the reasons to believe recorded by the income-tax authority shall not be disclosed to any person or authority, including the Appellate Tribunal. Therefore, the Tribunal dismissed the assessee's challenge, stating it did not have the power to examine the validity of the search action. Issue 4: Addition on Account of Unaccounted Capital Gain from Sale of Immovable Property for AY 2010-11 The AO made an addition of ?5,55,25,000/- for AY 2010-11, alleging suppressed capital gains based on a valuation report prepared for a bank loan, which valued the property at a higher amount than the sale consideration shown by the assessee. The CIT(A) deleted the addition, noting that the valuation report was prepared more than two years after the sale and was not reliable evidence of suppressed capital gains. The Tribunal upheld the CIT(A)'s decision, emphasizing that the property was disclosed in the assessee's books, and no incriminating material was found during the search to justify the addition. Conclusion: The Tribunal dismissed the Revenue's appeals for AYs 2008-09 to 2014-15, upholding the CIT(A)'s deletion of additions based on DM water consumption. The Tribunal also dismissed the assessee's challenge to the validity of the search action but allowed the cross-objections regarding the absence of incriminating material for additions under section 153A. The Tribunal upheld the CIT(A)'s deletion of the addition for unaccounted capital gains for AY 2010-11.
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