2024 (1) TMI 595 - AT - Income Tax

Assessment u/s 153A - Unexplained investment - Addition made as incriminating documents seized during the course of search prove that the cash loan transactions are unexplained investment of the assessee - HELD THAT - There is no incriminating material in order to fasten the liability of the assessee. The AO has proceeded against the assessee under section 153A of the Act. When there is no incriminating material then how the assessee can be proceeded against under section 153A of the Act. For argument sake even if it is assumed that there is incriminating material against the assessee then assessment ought to be framed under section 153C of the Act. Furthermore, it is admitted fact on record that the evidence relied upon the by the AO in this case was collected in case of search of a third party. No doubt subsequent search was conducted at the premises of the assessee on 18.12.2017 but no material was found or seized. Para 5.14 of the assessment order apparently proves that the alleged incriminating materials viz. promissory note etc. brought on record as Annexure A-16 and A-17 was seized in case of search on a third party and not the assessee and in these circumstances assessment proceedings were required to be initiated under section 153C and not 153A as has been done in this case. No incriminating evidence against the assessee from the material seized from the premises of Mr. Nilesh Bharani and in these circumstances the Ld. CIT(A) has validly and legally deleted the addition made by the AO under section 69 56 of the Act. Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition of unexplained investment.
2. Deletion of addition of undisclosed interest.
3. Validity of assessment proceedings under section 153A versus 153C.

Summary:

Issue 1: Deletion of Addition of Unexplained Investment

The Revenue challenged the deletion of an addition of Rs. 15,00,00,000/- as unexplained investment by the CIT(A). The Tribunal noted that the assessment for AY 2012-13 to AY 2017-18 was made under section 153A, not 153C, and no incriminating material was found during the search at the assessee's premises. The CIT(A) found no correlation between the material seized from a third party (Shri Nilesh Bharani) and the assessee. The Tribunal upheld the CIT(A)'s findings, stating that the assessment should have been framed under section 153C, not 153A, as no incriminating material was found at the assessee's premises.

Issue 2: Deletion of Addition of Undisclosed Interest

The Revenue also challenged the deletion of an addition of Rs. 2,47,38,333/- as undisclosed interest. The Tribunal noted that the AO made the addition based on assumptions and presumptions without any incriminating material. The CIT(A) found that transactions between the assessee and Shri Nilesh Bharani were through banking channels, with TDS and brokerage deducted. The Tribunal upheld the CIT(A)'s deletion of the addition, stating that no incriminating evidence was found against the assessee.

Issue 3: Validity of Assessment Proceedings under Section 153A versus 153C

The Tribunal examined whether the assessment proceedings should have been initiated under section 153A or 153C. It concluded that since the evidence relied upon by the AO was collected during a search of a third party and not the assessee, the assessment should have been framed under section 153C. The Tribunal found that the AO's assessment under section 153A was not sustainable in the absence of incriminating material found at the assessee's premises.

Conclusion:

The Tribunal dismissed the appeals filed by the Revenue for AY 2012-13 to AY 2018-19, upholding the CIT(A)'s deletion of additions under sections 69 and 56 of the Act. The cross objections filed by the assessee were also dismissed as they were filed to support the CIT(A)'s findings. The order was pronounced in the open court on 31.10.2023.