Revenue's appeal dismissed as additions under sections 69C and 68 deleted without incriminating search material

ITAT Nagpur dismissed revenue's appeal challenging additions under sections 69C and 68. The tribunal held that additions based on Department Valuation Officer's report cannot survive without incriminating material found during search, following Supreme Court precedent in Abhisar Buildwell. For abated assessment years, the tribunal found no excess work-in-progress beyond declared amounts. Regarding unsecured loans, since the assessee proved existence of shareholders and genuineness of transactions through account payee cheques, additions under section 68 were deleted as unjustified.

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Issues Involved:
1. Deletion of additions based on Department Valuer's Report.
2. Scope of Section 153A in relation to search-related income.
3. Deletion of additions under Section 68 for unproved loans.

Issue-wise Detailed Analysis:

1. Deletion of Additions Based on Department Valuer's Report:
The revenue challenged the deletion of additions made by the Assessing Officer (AO) based on the Department Valuer's Report (DVO). The AO had added amounts towards differences in the cost of investment in property as per the DVO's report. The CIT(A) deleted these additions, noting that the construction was subcontracted to a sister concern, and the AO failed to examine the Work-in-Progress (WIP) shown by the subcontractor. The CIT(A) also observed that the DVO's report was not binding in this context, as the decision of the Allahabad High Court in CIT vs Dr. Inder Swaroop Bhatnagar applied to Section 50C, not Section 69C. Furthermore, the CIT(A) highlighted that the AO did not have credible evidence to justify the reference to the DVO, even though the amended Section 142A allowed such references without rejecting the books of account.

2. Scope of Section 153A in Relation to Search-Related Income:
For the assessment years 2011-12 and 2012-13, the Tribunal found that these were unabated assessments, meaning no assessment proceedings were pending as of the search date. The Tribunal noted that the additions made by the AO were not based on any incriminating material found during the search but on an invalid valuation report. The Tribunal cited the case of Assistant Commissioner of Income Tax vs. Narula Educational Trust, which held that in respect of completed/unabated assessments, the AO's jurisdiction to make assessments is confined to incriminating material found during the search. The Tribunal further referenced the Hon'ble Apex Court's judgment in Principal Commissioner of Income Tax vs. Abhisar Buildwell P. Ltd, which supported the view that additions based on the DVO report cannot survive.

3. Deletion of Additions Under Section 68 for Unproved Loans:
For the assessment years 2014-15, 2015-16, and 2018-19, the Tribunal examined the CIT(A)'s detailed analysis on the addition of unsecured loans under Section 68. The CIT(A) found that the assessee had provided sufficient evidence, including loan confirmations, bank statements, and audited financial statements, to prove the identity, genuineness, and creditworthiness of the lenders. The CIT(A) also noted that the AO's addition was based on assumptions and lacked concrete evidence. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had discharged its onus, and the AO had not brought any adverse evidence to counter the confirmations provided by the lenders. The Tribunal referenced various judicial pronouncements, including CIT Vs. Lovely Exports Pvt. Ltd. and CIT Vs. Dwarkadhish Investment Pvt. Ltd., which supported the assessee's position.

Conclusion:
The Tribunal dismissed all six appeals by the department and three cross objections by the assessee. The Tribunal upheld the CIT(A)'s decision to delete the additions based on the DVO report and under Section 68, as the revenue failed to provide sufficient evidence to support the additions. The Tribunal reiterated the principle that additions in unabated assessments must be based on incriminating material found during the search, and the assessee had adequately discharged its burden of proof regarding the unsecured loans.

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