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Facts
The assessee appealed against additions of Rs. 42,000/- for assessment years 2016-17 and 2017-18, made by the Assessing Officer on the ground of under-declaration of annual rental value for a property in Delhi. These additions followed a search operation under Section 132(1) conducted on the assessee's associate concerns, which also covered the assessee, leading to notices under Section 153A. The AO enhanced the rental value to Rs. 3,00,000/- per annum from the Rs. 1,80,000/- declared by the assessee.
Held
The Tribunal observed that no incriminating material regarding the alleged under-declaration of rental income was found during the search operation, and the original assessments had already attained finality or were beyond the notice period before the search. The agreements referred by the AO for letting out the property were not signed by the assessee, and the Department failed to prove that the property was let out based on these agreements or that information was withheld. Consequently, applying the principles laid down by the Supreme Court in Abhisar Buildwell Pvt. Ltd., the Tribunal allowed both appeals and deleted the additions.
Key Issues
Whether additions related to annual rental value, made under Section 153A following a search, are sustainable if no incriminating material is found during the search, especially when original assessments were completed or time-barred.
Sections Cited
143(2), 143(3), 132(1), 153A
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Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
The present two appeals are directed at the instance of the assessee against the separate orders of ld. CIT (Appeals) dated 08.11.2024 passed for assessment year 2016-17 and 2017-18.
Though the assessee has taken eight grounds of appeal in each year, but his grievance revolves around a single issue, & 34/CHD/2025 A.Y. 2016-17 & 2017-18 2 namely, whether addition of Rs.42,000/- deserves to be made in each assessment year or not ? The above addition has been made on the ground that annual rental value of a residence in Delhi ought to be taken at Rs.3,00,000/- instead of Rs. 1,80,000/- shown by the assessee.
The brief facts of the case are that assessee has filed her return of income on 04.08.2016 and 26.07.2017 declaring total income of Rs.28,83,930/- and Rs.18,45,840/- respectively. In assessment year 2016-17, no notice u/s 143(2) was issued for scrutinizing the return of the assessee. However, in assessment year 2017-18, a scrutiny assessment was passed on 04.12.2019 u/s 143(3) of the Income Tax Act. It appears that a search u/s 132(1) was carried out on 13.12.2020 at the business and residential premises related to M/s Nectar Lifesciences Limited, M/s Avensis Exports Pvt. Ltd. which are associate concerns. The assessee was also one of the connected persons, hence, she was also covered under search operation. Notices have been issued u/s 153A on 13.08.2021. The assessee has filed return of income declaring & 34/CHD/2025 A.Y. 2016-17 & 2017-18 3 total income at Rs.21,84,160/- and Rs.22,64,230/- in assessment year 2016-17 and 2017-18 respectively.
With the assistance of ld. Representative, we have gone through the record carefully. The time limit to issue notice in assessment year 2016-17 u/s 143(2) was expired much prior to date of search. Similarly, in assessment year 2017-18, the assessment order attained finality before the search was carried out. The assessments in both the years could only abate if some incriminating material was found. No such incriminating material has been referred by the AO in both the assessments. The AO has referred certain agreements under which this house property could be let out from 01.04.2016. These agreements were not under the signature of the assessee. The Department has not made out a case that these properties have actually been let out on the basis of these agreements and this information was withheld by the assessee from the department. Therefore, it can be considered as an incriminating material. The ld. Assessing Officer has erred in making the additions which are in contravention to the position of law laid down by the Hon'ble Supreme Court in the case of & 34/CHD/2025 A.Y. 2016-17 & 2017-18 4 Abhisar Buildwell Pvt. Ltd. 454 ITR 212. Following the proposition laid down by the Hon'ble Supreme Court in this judgement, we allow both the appeals and delete the additions made by the AO and confirmed by the CIT (Appeals).
In the result, both the appeals are allowed.
Order pronounced on 11.08.2025.