Assessee wins appeal as additions under section 153A require corroborative material from search proceedings

The ITAT Jodhpur allowed the assessee's appeal against additions made under section 153A assessment. The court held that in completed assessments during search proceedings, additions can only be made with corroborative material found during search. The addition was based solely on valuation report using CPWD rates and statements without any incriminating material. Following the SC precedent in Abhisar Buildwell P. Ltd, the court ruled that mere statements cannot justify additions in post-search assessments. The revenue failed to demonstrate incriminating material found during search, making the construction cost addition unsustainable and deserving deletion.

---

---

Issues Involved:

1. Legality of the reference to the Departmental Valuation Officer (DVO).
2. Validity of additions based on DVO report in absence of incriminating material.
3. Adoption of Central Public Works Department (CPWD) rates over State Public Works Department (PWD) rates.
4. Rejection of expert report and comments on DVO report.
5. Charging of interest under sections 234B and 234C of the Income Tax Act.

Summary of Judgment:

1. Legality of the Reference to the DVO:
The Tribunal noted that the appellant argued the reference to the DVO was illegal as no books of accounts were rejected before making the reference. The Tribunal upheld the CIT(A)'s finding that post the Finance Act 2014 amendment, the rejection of books of accounts is no longer a prerequisite for making a reference to the DVO under Section 142A.

2. Validity of Additions Based on DVO Report in Absence of Incriminating Material:
The Tribunal examined whether the addition based on the DVO report could be made in the absence of any incriminating material found during the search. It was highlighted that the search team did not find any incriminating material and the addition was based purely on the statement of Shri Bhanwar Lal Soni. The Tribunal relied on the Supreme Court's decision in PCIT vs. Abhisar Buildwell Pvt. Ltd., which held that in cases of completed assessments, additions can only be made based on incriminating material found during the search. Consequently, the Tribunal directed the deletion of the addition.

3. Adoption of CPWD Rates over State PWD Rates:
The appellant contended that the valuation should have been based on State PWD rates rather than CPWD rates. The Tribunal noted that if State PWD rates were considered, there would be no significant difference. It was observed that the lower authorities did not consider the objections raised by the appellant regarding the adoption of CPWD rates.

4. Rejection of Expert Report and Comments on DVO Report:
The Tribunal found that the lower authorities arbitrarily rejected the expert report and the appellant's comments on the DVO report, which was against the principles of natural justice. The Tribunal emphasized that the addition based on the DVO report was in the realm of estimations without any nexus to incriminating documents.

5. Charging of Interest under Sections 234B and 234C:
The Tribunal noted that the issue of charging interest under sections 234B and 234C is consequential in nature and did not require specific adjudication.

Conclusion:
The Tribunal allowed the appeals of the assessee, directing the deletion of the additions made based on the DVO report due to the absence of incriminating material and the improper adoption of CPWD rates. The Tribunal's decision in ITA No. 530/Jodh/2023 was applied mutatis mutandis to the other appeals (ITA Nos. 531 to 534/Jodh/2023).

---