Loading judgment…
Facts
The assessee challenged an order confirming additions made by the Assessing Officer (AO) under Section 153A of the Income Tax Act, 1961. The additions pertained to agricultural income and capital gains from the sale of agricultural land. The assessee claimed these amounts were already disclosed and the assessment year was completed prior to the search.
Held
The Tribunal held that no addition can be made under Section 153A for a completed assessment unless incriminating material is found during the search. The AO did not point to any such material for the agricultural income or capital gains. The additions were based on a lack of evidence, not incriminating material, and were therefore not justified.
Key Issues
Whether additions made under Section 153A of the Income Tax Act, 1961, for a completed assessment are sustainable in the absence of incriminating material found during the search.
Sections Cited
153A, 68, 54B, 139
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
Lickmichand Anand Singhvi, The Dy. Commissioner of No.3, Kasi Chetty Street, Vs. Income Tax, Ambur, Vellore-635 802. Central Circle-3(3), [PAN: ADWPA 1581F] Chennai. (अपीलाथ"/Appellant) (""यथ"/Respondent) अपीलाथE की ओर से/ Appellant by : Shri D. Anand, Advocate GHथE की ओर से /Respondent by : Shri R. Clement Ramesh Kumar, CIT सुनवाई की तारीख/Date of Hearing : 19.06.2024 घोषणा की तारीख /Date of Pronouncement : 16.09.2024 आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the assessee challenging the order of Learned Commissioner of Income Tax (Appeals), Chennai-20, [hereinafter “CIT(A)”] dated 12.01.2024 which confirmed the addition made by the Assessing Officer (A.O) in the assessment order passed u/s. 153A of the Income Tax Act, 1961 (hereinafter “the Act”) for the Assessment Year 2014-15. :- 2 -:
The grounds of appeal raised by the assessee are as under:
“1. The order of the Commissioner of Income Tax (Appeals)-20 [CIT(A)] is wrong, illegal and is opposed to law.
2. The Learned CIT(A)-18 erred in confirming the addition made in the assessment order passed u/s. 143(3) r.w.s 153A in the absence of any incriminating material found during search. The learned CIT(A) failed to see that in assessments made U/s.143(3) r.w.s 153A of the Income-Tax Act, 1961 addition can be made only on the basis of incriminating material found in search U/s 132 of the Income-Tax Act, 1961.
The learned CIT(A)-18 ought to have seen that it is a settled law that assessment already deemed to have been completed for the Asst Year2014-15, which are unabated / concluded assessment, on the date of be undisturbed in the absence of any search, deserves to be incriminating material found in the course of search and accordingly no fresh addition could be made thereon without the existence of any incriminating materials found in the course of search from the premises of the appellant.
4. The learned CIT(A) ought to have seen that income from capital gains of Rs.1,17,20,785/- and agricultural income of Rs.8,75,000/- have already been disclosed by the appellant while filing his return under section 139 and no assessment proceedings of the impugned assessment year is pending as on the date of search. Therefore in accordance with the second proviso there is no abatement of pending assessment proceedings and therefore the addition made in the assessment is bad in law and that the learned AO lacks jurisdiction to make any addition on account of capital gain or disallowance of agricultural income by treating the same as unexplained credit under section 68 is bad in law.
5. The learned CIT(A)- 18 ought to have seen that the appellant had already disclosed agricultural income while filing its return under no assessment section 139 and the same was processed and proceedings of the impugned assessment year is pending as on the date of search. Therefore, in accordance with the second proviso there is no abatement of pending assessment proceedings and therefore same as disallowing of agricultural income and treating the unexplained credit under section 68 is bad in law.
6. The learned CIT(A) ought to have seen that the assessing officer erred in making addition of Rs.80,40,785/- to the income of the appellant under the head Long term Capital gain and Rs.36,80,000/- as short term capital gain on sale of agricultural land. The impugned land that has been sold satisfies all requirements to be claimed as rural agricultural land and not a capital asset. :- 3 -:
7. The learned CIT(A) ought to have seen that although the appellant has reinvested the sale consideration in agricultural land, however since the impugned land which was sold is rural agricultural land and not a capital asset the requirement for the appellant to make a claim under section 54B can only be a alternative claim.
The learned CIT(A) erred in confirming the addition of s.8,75,000/- made by the AO as unexplained credit, while the same was disclosed by the appellant both in his original return under section 139 and return filed under section 153A as agricultural income. 9. The CIT(A)-18 ought to have seen that addition under section 68 is warranted only if the twin condition that alleged credit in the financial year is recorded in the books and that no satisfactory explanation is offered by the assessee. In the instant case the appellant has offered satisfactory explanation and therefore no addition is warranted under section 68 of the Act. For these and other grounds that may be rendered at the time of hearing it is most humbly prayed that the Hon'ble Tribunal may be pleased to allow the appellants appeal and thus render justice.”
3. The brief facts of the case are that the A.O has made addition of Rs. 8,75,000/- which was declared by the assessee as agriculture income in the return of income, u/s. 68 of the Act on the ground that no evidence of agriculture activity was provided by the assessee. The A.O has also added Long Term Capital Gain (LTCG) on sale of three agriculture lands located at Kakarapalli, Nekundai and Vinnamangam of Rs. 80,40,785/- and Short Term Capital Gain (STCG) on sale of agriculture land at Vengili of Rs. 36,80,000/- which was claimed as exempt u/s. 54B of the Act. The A.O has disallowed the exemption stating that the assessee had only submitted sales and purchase :- 4 -: agreements on land, but had not provided evidence to establish that the land in question was agriculture land. On appeal, the Ld. CIT(A) has confirmed the addition. The Ld. CIT(A) referred to the statement of the accountant during a search operation in which the accountant allegedly admitted that the assessee group was inflating agriculture income and routing unaccounted income through bank account of employees. The Ld. CIT(A) also upheld the denial of deduction u/s. 54B of the Act as the assessee had not furnished any further evidence to prove that the land sold was agriculture land.
The Ld. Authorized Representative for the assessee has argued that addition was not based on any incriminating material found during the search and since, the assessment year in question was unabated/completed assessment no addition could be made u/s. 153A of the Act unless incriminating material was found. The Ld. AR relied on the decision of Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwel (P.) Ltd. [2023] 454 ITR 212 (SC). The Ld. AR further submitted that the assessee had disclosed agriculture income of Rs.8,32,500/- in the preceding A.Y 2013-14 and Rs. 8,80,500/- in the subsequent year for A.Y 2015-16, Rs. 8,82,520/- for A.Y 2016-17, Rs. 8,85,700/- for A.Y 2017-18 and Rs. 8,85,700/- for A.Y 2018-19 and no :- 5 -: addition has been made by the A.O in those years in the assessment
order passed u/s. 153A of the Act. Therefore, there is no basis for adding agriculture income already disclosed as unexplained income.
Regarding the capital gains, the Ld. AR argued that both the LTCG and STCG on sale of agriculture land were already disclosed in the original return of income and were part of completed assessment.
Thus, in the absence of any incriminating material, no addition could be made u/s. 153A of the Act.
The Ld. Departmental Representative (D.R), on the other hand, relied on the order of Ld. CIT(A) and reiterated that incriminating evidence in the form of bank statement of employees and the account statements supported the addition. The Ld. DR argued that the assessee had used employees bank accounts, but deposited unaccounted cash disguised as agriculture income.
We have heard the rival submissions, and perused the materials available on record. The primary issue in this appeal revolves around whether addition made by the A.O in the order u/s. 153A of the Act can be sustained in the absence of incriminating material. The Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwel (P.) Ltd., :- 6 -: supra, has clearly held that no addition can be made in a completed assessment u/s. 153A of the Act unless an incriminating material is found during the search. In the present case, the A.O has not pointed to any such material with respect to the agriculture income or the capital gains. The addition of Rs. 8,75,000/- as unexplained agriculture income u/s. 68 of the Act was merely on the basis of lack of evidence and no incriminating material was brought on record to support this addition. It is also noteworthy that the A.O had accepted assessee’s agriculture income in the assessment for other years u/s. 153A of the Act. Similarly, with regard to the disallowance of deduction u/s. 54B of the Act on sale of agriculture land, the A.O has not relied on any incriminating material to show that land sold was not agriculture land.
The assessee had already disclosed the capital gain in the return of income and the disallowance is based on only on the lack of further documentary evidence which does not meet the threshold required u/s. 153A of the Act for a completed assessment. In the light of the decision of Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwel (P.) Ltd., supra, and the facts of the case, we are of the view that addition made by the A.O were not justified. Accordingly, we allow the assessee’s appeal and direct the A.O to delete the addition :- 7 -: of Rs. 8,75,000/- made u/s. 68 of the Act and the addition with respect of LTCG of Rs. 80,40,785/- and STCG of Rs. 36,80,000/-.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on 16th September, 2024. (यस यस िव"ने" रिव) (जगदीश) (Jagadish) (SS Viswanethra Ravi) लेखा लेखा सद"य लेखा लेखा सद"य सद"य /Accountant Member सद"य सद"य / Judicial Member "याियक "याियक सद"य "याियक "याियक सद"य सद"य चे"ई/Chennai, "दनांक/Dated: 16th September, 2024. EDN/-