2024 (12) TMI 895 - AT - Income Tax

Assessment u/s 153A - documents has been impounded from the premises of third party - additions based on statements recorded during search - HELD THAT - In the instant case there was not a shread of material apart from the statement recorded during search. Proceedings are not justifiable wholly on the basis of sworn statement recorded in the course of search/survey in the absence of any other tangible evidence available with the Assessing Officer as the material collected and the statement obtained u/s 131 would not automatically bind upon the assessee. This issue had been considered in the case of CIT Salem 2013 (6) TMI 305 - SC ORDER wherein the Bench stated that the word may used in Section 133A(3)(iii) of the Act viz. record the statement of any person which may be useful for or relevant to any proceeding under this Act made it clear that the materials collected and the statement recorded during the survey u/s 133A were not conclusive piece of evidence by itself. Following the circular F.No.286/2/2003 of the Central Board of Direct Taxes dated 10.3.2003 it was concluded that the materials collected and the statement obtained under Section 133A would not automatically bind the assessee. The application of the extrapolation technique shall depend on facts and circumstances of each case and there can be no universal law on this issue. In the present case no documents have been found and seized during the search and Ld. AO is merely relying on the statement of employees only and as such application of extrapolation technique is not warranted for the entire assessment period. Thus no adverse inference may kindly be drawn against the assessee and addition made in the hands of assessee may kindly be deleted. Addition made u/s 69C on account of unexplained expenditure should be deleted as there is no supporting document to proof the contention that assessee has actually spend amount of Rs 10, 00, 000/- as marriage expenditure neither any documents were found at the time of search which could proof the same. So the addition made in the hands of assessee on account of marriage expenses should kindly be deleted. Addition on estimate basis in the hands of assessee on account of foreign tour expenses not confirmed without proving or bringing on record any evidence that the assessee has incurred said expenditure on foreign tour. Additions u/s 69B - Addition is made merely on the basis of DVO valuation report only without bringing on record any material to show or establish that unaccounted investment has been made by the assessee. The law has been settled by various courts that addition cannot be made only on the basis of valuation report which is just a tool for guidance of the AO and is just an opinion of a technical expert and without any evidence or material brought on record by the AO an addition u/s 69B cannot be sustained simply on the basis of an opinion.

Summary

Issues Involved:

1. Legality of additions made under Section 153A without incriminating material.
2. Validity of additions based on statements recorded during search.
3. Application of extrapolation technique in search cases.
4. Non-compliance with Document Identification Number (DIN) requirements.
5. Additions on account of unexplained wedding expenses, foreign tour expenses, unexplained receipts, sundry creditors, and valuation of property.

Detailed Analysis:

1. Legality of Additions under Section 153A:
The Tribunal examined whether the Assessing Officer (AO) could make additions under Section 153A without finding incriminating material during the search. It was noted that the search did not yield any incriminating documents or materials, and the AO's additions were based on estimations derived from statements recorded during the search. The Tribunal upheld the CIT(A)'s decision to delete the additions, citing the Supreme Court's ruling in PCIT vs. Abhisar Buildwell Pvt Ltd, which clarified that no additions could be made in the absence of incriminating material for completed assessments.

2. Validity of Additions Based on Statements:
The Tribunal addressed the AO's reliance on statements from employees and other individuals recorded during the search. It was argued that these statements, taken under pressure, lacked corroborative evidence and could not constitute incriminating material. The Tribunal agreed with the CIT(A) that statements alone, without supporting evidence, could not justify additions under Section 153A.

3. Application of Extrapolation Technique:
The Tribunal considered the AO's use of extrapolation to estimate unaccounted production and sales of cigarettes. It was emphasized that extrapolation should not be applied without concrete evidence of discrepancies across different periods. The Tribunal found that the AO's estimations were speculative and unsupported by evidence, leading to the deletion of the related additions.

4. Non-compliance with DIN Requirements:
The Tribunal examined the procedural lapse of not mentioning the Document Identification Number (DIN) in the assessment orders and demand notices. It was noted that separate communications should carry distinct DINs, and the absence of DIN rendered the orders invalid as per CBDT Circular No. 19/2019. The Tribunal held that the assessment orders and demand notices were deemed never to have been issued due to this non-compliance.

5. Additions on Account of Various Expenses and Valuation:
- Wedding and Foreign Tour Expenses: The Tribunal found that additions for wedding and foreign tour expenses were made without evidence, relying solely on assumptions. The assessee's explanations were accepted, and the additions were deleted.
- Unexplained Receipts and Sundry Creditors: The Tribunal noted that the receipts were accounted for in regular books and disclosed in returns. The genuineness and creditworthiness of sundry creditors were established, and no incriminating material was found during the search. Consequently, the additions were deleted.
- Valuation of Property: The Tribunal criticized the reliance on the Department Valuer's report for property valuation, highlighting the absence of supporting material or incriminating evidence. The addition based solely on the valuation report was deleted.

In conclusion, the Tribunal dismissed the revenue's appeals, affirming the CIT(A)'s decision to delete the additions due to the lack of incriminating material and procedural irregularities. The cross objections filed by the assessee were deemed infructuous and dismissed.