Unexplained unsecured loans addition under section 68 deleted without incriminating material from assessee's search

The ITAT Ranchi upheld CIT(A)'s deletion of additions made under section 68 for unexplained unsecured loans in an assessment under section 153A. The AO made additions based on documents seized from third parties' premises during their search operations, not from the assessee's search. The tribunal held that without incriminating material found during the assessee's own search, no additions could be made under section 153A for unabated years, citing the SC decision in Abhisar Buildwell Private Limited. The proper recourse would have been proceedings under section 153C against the assessee.

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Issues Involved:
1. Deletion of addition towards unexplained unsecured loan.
2. Deletion of addition towards unexplained investment in M/s Anjanay Rice Mills Pvt. Ltd.
3. Deletion of addition made under section 40A(3) of the Income-tax Act.
4. Deletion of addition towards unexplained investment in purchase of land.
5. Legal issue of additions made in absence of incriminating material found during search.

Summary:

Issue 1: Deletion of Addition towards Unexplained Unsecured Loan
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 5,00,000/- towards unexplained unsecured loan, arguing that the assessee had not discharged his onus under section 68 of the Income-tax Act, 1961. However, the Tribunal noted that the addition was made based on documents seized from third parties, not from the assessee, and thus could not be sustained under section 153A.

Issue 2: Deletion of Addition towards Unexplained Investment in M/s Anjanay Rice Mills Pvt. Ltd.
The Revenue challenged the deletion of Rs. 20,00,000/- towards unexplained investment, arguing that the CIT(A) admitted additional evidence without providing the AO a reasonable opportunity to examine it, violating Rule 46A. The Tribunal found that the addition was based on documents seized from third parties and not from the assessee, making the addition unsustainable under section 153A.

Issue 3: Deletion of Addition under Section 40A(3)
The Revenue argued that the CIT(A) erred in deleting the addition of Rs. 2,42,50,900/- made under section 40A(3), as the cash payments were made to M/s Anjanay Rice Mills Pvt. Ltd. and not directly to farmers, thus not qualifying for the exception under Rule 6DD(e). The Tribunal held that the addition was based on documents seized from third parties, not the assessee, and thus could not be sustained under section 153A.

Issue 4: Deletion of Addition towards Unexplained Investment in Purchase of Land
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 3,08,07,170/- towards unexplained investment in land, as the AO found that the assessee paid more than the recorded sale consideration. The Tribunal found that the addition was based on documents seized from third parties and not from the assessee, making the addition unsustainable under section 153A.

Legal Issue: Additions in Absence of Incriminating Material
The assessee argued that no additions could be made under section 153A in the absence of any incriminating material found during the search. The Tribunal agreed, noting that the additions were based on documents seized from third parties, not from the assessee. Citing the Supreme Court's decision in Abhisar Buildwell Pvt. Ltd., the Tribunal held that no additions could be made in an unabated assessment year without incriminating material found during the search.

Conclusion:
The Tribunal concluded that the additions made by the AO were unsustainable as they were based on documents seized from third parties and not from the assessee. Consequently, the assessee's cross-objection was allowed, and the Revenue's appeal was dismissed. The order was pronounced on 26th February, 2024.

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