2024 (9) TMI 276 - AT - Income Tax

Validity of assessment u/s 153A - addition u/s 69C based on the report of the Department Valuation Officer - Addition based on or made with reference to any incriminating material or documents found in the course of search or not? - HELD THAT - There is no whisper/mention of any material leave alone any incriminating material seized during search to justify the addition in these unabated assessments other than the invalid valuation report. The valuation report of DVO in the facts discussed cannot be held to be incriminating material, since it is not a fall out of any incriminating material unearthed during search to suggest any investment in building which is over and above the investment shown by the assessee in its audited books. As relying on Narula Educational Trust 2021 (2) TMI 459 - ITAT KOLKATA as following judgement of Abhisar Buildwell P. Ltd. 2023 (4) TMI 1056 - SUPREME COURT we hold that the additions based on DVO report cannot survive. Accordingly the ground of revenue for these two assessment years is dismissed. For assessment years 2013-14, 2014-15 and 2015-16 are concerned, which are abated assessment years, we find that the matter was in the case of B.G.Shirke Construction Technology Pvt Ltd. 2018 (8) TMI 1207 - BOMBAY HIGH COURT wherein held question as proposed is academic, unless the Revenue first challenges finding of fact arrived at by the Tribunal. The finding of fact is that, there is no excess work in progress than that declared by the Respondent-Assessee as on 31.3.2009 and the valuation done of the work-in- progress as on 31.11.2008 was only on provisional basis. Moreover, even if assume that the closing stock i.e. work-in- progress is in excess of that recorded/disclosed by the Respondent, the same has to be added to the income only under Section 69A of the Act as held by this Court in Dialust 2002 (1) TMI 9 - BOMBAY HIGH COURT . In fact, the impugned order of the Tribunal places reliance upon the above decision of this Court. No submission was made on the part of the Revenue as to why the above decision is not applicable to the present facts. Addition on account of so called difference in valuation of the construction carried away as per the valuation report - By no means the addition could have been made on the basis of the departmental valuation report. No enquiry whatsoever has been conducted by the AO to positively come to a conclusion that such an expenditure was incurred outside the book and the assessee was not in a position to explain the nature and source thereof. In fact, the PCIT (Central) had revised the order on the ground that the valuation report was failed to have been taken into cognizance by the AO, but she had judiciously ordered for denovo assessment. Therefore, the Assessing Officer had all the powers to further conduct enquiry and to positively come to a conclusion that certain unexplained expenditure was there. But in the subsequent proceeding, the AO simply added back the difference in the valuation u/s 69 and after cursorily dismissing the objection raised by the assessee against the valuation report. Since the assessment order is continuation of such proceedings and is a fresh order, he even passed the order without taking approval u/s 153D. Addition u/s 68 towards unsecured loans from various companies - As assessee had proved the existence of the shareholders and the genuineness of the transaction as share application money had been received by way of account payee cheques, thus addition made by the AO is unjustified and unjustified and unwarranted.

Summary

Issues Involved:
1. Deletion of additions based on Department Valuer's Report.
2. Scope of Section 153A in relation to search-related income.
3. Deletion of additions under Section 68 for unproved loans.

Issue-wise Detailed Analysis:

1. Deletion of Additions Based on Department Valuer's Report:
The revenue challenged the deletion of additions made by the Assessing Officer (AO) based on the Department Valuer's Report (DVO). The AO had added amounts towards differences in the cost of investment in property as per the DVO's report. The CIT(A) deleted these additions, noting that the construction was subcontracted to a sister concern, and the AO failed to examine the Work-in-Progress (WIP) shown by the subcontractor. The CIT(A) also observed that the DVO's report was not binding in this context, as the decision of the Allahabad High Court in CIT vs Dr. Inder Swaroop Bhatnagar applied to Section 50C, not Section 69C. Furthermore, the CIT(A) highlighted that the AO did not have credible evidence to justify the reference to the DVO, even though the amended Section 142A allowed such references without rejecting the books of account.

2. Scope of Section 153A in Relation to Search-Related Income:
For the assessment years 2011-12 and 2012-13, the Tribunal found that these were unabated assessments, meaning no assessment proceedings were pending as of the search date. The Tribunal noted that the additions made by the AO were not based on any incriminating material found during the search but on an invalid valuation report. The Tribunal cited the case of Assistant Commissioner of Income Tax vs. Narula Educational Trust, which held that in respect of completed/unabated assessments, the AO's jurisdiction to make assessments is confined to incriminating material found during the search. The Tribunal further referenced the Hon'ble Apex Court's judgment in Principal Commissioner of Income Tax vs. Abhisar Buildwell P. Ltd, which supported the view that additions based on the DVO report cannot survive.

3. Deletion of Additions Under Section 68 for Unproved Loans:
For the assessment years 2014-15, 2015-16, and 2018-19, the Tribunal examined the CIT(A)'s detailed analysis on the addition of unsecured loans under Section 68. The CIT(A) found that the assessee had provided sufficient evidence, including loan confirmations, bank statements, and audited financial statements, to prove the identity, genuineness, and creditworthiness of the lenders. The CIT(A) also noted that the AO's addition was based on assumptions and lacked concrete evidence. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had discharged its onus, and the AO had not brought any adverse evidence to counter the confirmations provided by the lenders. The Tribunal referenced various judicial pronouncements, including CIT Vs. Lovely Exports Pvt. Ltd. and CIT Vs. Dwarkadhish Investment Pvt. Ltd., which supported the assessee's position.

Conclusion:
The Tribunal dismissed all six appeals by the department and three cross objections by the assessee. The Tribunal upheld the CIT(A)'s decision to delete the additions based on the DVO report and under Section 68, as the revenue failed to provide sufficient evidence to support the additions. The Tribunal reiterated the principle that additions in unabated assessments must be based on incriminating material found during the search, and the assessee had adequately discharged its burden of proof regarding the unsecured loans.