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2023 (8) TMI 431 - AT - Income TaxAssessment u/s 153A - Addition towards the cost of construction of the building - Reference made to ld. DVO u/s 142A - HELD THAT - Admittedly, no incriminating material has been found during the course of search qua this addition towards cost of construction. This fact is evident from the perusal of the orders of the lower authorities. Sole basis of the addition is only the valuation report furnished by the DVO which has been obtained by the ld. AO during the course of search assessment proceedings . Then, the said report cannot constitute incriminating material found during the course of search. Hence, we have no hesitation to hold that no addition could be made by placing reliance on the said valuation report while framing the assessment u/s 153A of the Act in the hands of the assessee. This issue is now well settled by the recent decision of Sargam Cinema vs. 2009 (10) TMI 569 - SC ORDER and in the case of CIT vs. Nirmal Kumar Aggarwal 2018 (10) TMI 2002 - SC ORDER as referred to supra in the contentions of the ld. AR. We find that the provisions of section 142A(6) of the Act categorically state that the valuation report has to be furnished by the ld. DVO within six months from the end of the month in which reference is made by the ld. AO. Admittedly, the valuation report is dated 28.10.2016 which is beyond the prescribed time of 30.09.2016. Hence, it is clearly evident that the said valuation report of ld. DVO is barred by limitation and, hence, cannot be relied upon by any party in the eyes of law. Consequentially no addition per se can be made by the Revenue by placing reliance on an invalid valuation report.- Decided in favour of assessee. Addition u/s 68 - unsecured loan - HELD THAT - The transactions have been routed through regular banking channels details of which were already submitted hereinabove and, hence, the genuineness of the transaction is also proved. Merely because the bank statement of the lender company (which is the personal property of the lender company) is not furnished by the assessee, that would not automatically disprove the creditworthiness of the lender. Nothing prevented the ld. AO by either issuing notice u/s 133(6) of the Act to the lender company to ascertain the said details. Admittedly, no examination whatsoever was carried out by the ld. AO in the instant case after the receipt of documents from the assessee. The assessee cannot be fastened with a tax liability for non-furnishing of a particular document which is not even expected to be in possession of the assessee. Hence, we hold that the assessee in the instant case had duly proved all the three ingredients of section 68 of the Act viz., identify of the creditor, creditworthiness of the creditor and genuineness of the transaction. Hence, there cannot be any addition u/s 68 - Decided in favour of assessee.
Issues Involved:
1. Validity of proceedings initiated under Section 153A and assessment framed under Section 153A/143(3). 2. Addition of Rs. 50,00,000/- on account of unsecured loan under Section 68. 3. Addition of Rs. 97,16,144/- on account of difference in the cost of construction of building. 4. Rejection of valuation report submitted by the DVO as barred by limitation. Summary of Judgment: Issue 1: Validity of Proceedings under Section 153A The assessee contended that the proceedings initiated under Section 153A and the assessment framed under Section 153A/143(3) were in violation of statutory conditions and procedures prescribed by law. The Tribunal admitted the additional grounds raised by the assessee, noting that these legal issues go to the root of the matter and were indeed submitted before the CIT(A) but not addressed. Issue 2: Addition on Account of Unsecured Loan under Section 68 The AO added Rs. 50,00,000/- as unexplained cash credit under Section 68, questioning the creditworthiness and genuineness of the transaction with Creative Capital Services Pvt. Ltd. The CIT(A) partially upheld this addition. However, the Tribunal found that the assessee had provided sufficient evidence, including confirmation letters, bank statements, and ITRs of the lender, proving the identity, creditworthiness, and genuineness of the transaction. The Tribunal directed the AO to delete the addition. Issue 3: Addition on Account of Difference in Cost of Construction The AO made an addition of Rs. 97,16,144/- based on a valuation report by the DVO, treating it as unexplained investment under Section 69B. The CIT(A) upheld this addition. The Tribunal noted that the valuation report was obtained during the assessment proceedings and not found during the search, thus not constituting incriminating material. The Tribunal also observed that the valuation report was barred by limitation under Section 142A(6). Consequently, the Tribunal directed the deletion of the addition. Issue 4: Rejection of Valuation Report as Barred by Limitation The Tribunal highlighted that the valuation report by the DVO was furnished beyond the prescribed period, making it invalid. The Tribunal held that no addition could be made based on an invalid valuation report and directed the deletion of the addition towards the cost of construction. Conclusion: The Tribunal allowed the appeals of the assessee for AYs 2008-09, 2009-10, and 2010-11, directing the deletion of additions made on account of unsecured loans and cost of construction. The Tribunal emphasized the importance of adhering to statutory timelines and the necessity of incriminating material found during the search for making additions under Section 153A.
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