2024 (11) TMI 1189 - AT - Income Tax

Revenue's appeal dismissed on unexplained hotel construction investments under section 153A due to lack of jurisdiction

The DCIT Central Circle-1 Jaipur Versus Shri Mahaveer Kumar Jain And (Vice-Versa)

The DCIT Central Circle-1 Jaipur Versus Shri Mahaveer Kumar Jain And (Vice-Versa) - TMI Issues Involved:1. Legitimacy of additions made on account of unexplained investments in hotel and residential property construction.2. Legitimacy of additions made on account of undisclosed income from Garden Mahaveer Paradise.3. Application of Supreme Court judgments in cases involving incriminating documents.4. Validity of assessment orders issued without a Document Identification Number (DIN).5. Condonation of delay in filing appeals by the Department.Detailed Analysis:1. Unexplained Investments in Hotel and Residential Property Construction:The primary issue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting additions made by the Assessing Officer (AO) concerning unexplained investments in the construction of a hotel and residential property. The AO had relied on the District Valuation Officer's (DVO) report, which estimated a higher construction cost than declared by the assessee. The Tribunal upheld the CIT(A)'s decision to delete these additions, emphasizing that no incriminating material was found during the search to justify these additions. The Tribunal reiterated that additions based solely on a DVO's report are not sustainable, as such reports are considered mere opinions and not concrete evidence of undisclosed income.2. Undisclosed Income from Garden Mahaveer Paradise:The Revenue challenged the deletion of additions related to alleged undisclosed income from Garden Mahaveer Paradise. The AO had made these additions based on assumptions and extrapolations without any incriminating evidence found during the search. The Tribunal agreed with the CIT(A)'s decision to delete these additions, highlighting that the garden was used by the assessee's family and friends on a complimentary basis, and there was no evidence of rental income. The Tribunal emphasized that additions in search assessments must be based on tangible incriminating material, not on conjectures or extrapolations.3. Application of Supreme Court Judgments:The Revenue argued that the CIT(A) wrongly applied Supreme Court judgments in the cases of Abhisar Buildwell and UK Paints, which pertain to situations where no incriminating documents are found during a search. The Tribunal supported the CIT(A)'s application of these judgments, stating that no incriminating material was found during the search in the present case, and therefore, the AO could not make additions for completed/unabated assessments. The Tribunal underscored that the absence of incriminating material limits the scope of additions under section 153A of the Income Tax Act.4. Validity of Assessment Orders Without DIN:The assessee raised cross-objections regarding the validity of assessment orders issued without a mandatory Document Identification Number (DIN). The Tribunal noted that the assessment order was communicated with a DIN, thus rendering this objection moot. The Tribunal dismissed the cross-objections, as the main appeals by the Department were dismissed, making the cross-objections irrelevant.5. Condonation of Delay in Filing Appeals:The Department filed appeals with a delay of 13 days, citing voluminous time-barring matters as the reason for the delay. The Tribunal condoned the delay in the interest of equity and justice, noting that the assessee did not object to the delay. The Tribunal, however, advised the Department to be vigilant in timely filing appeals in the future.Conclusion:The Tribunal dismissed the appeals filed by the Revenue and the cross-objections filed by the assessee, upholding the CIT(A)'s orders. The Tribunal emphasized the necessity of incriminating material for making additions in search assessments and reiterated that mere valuation reports or assumptions cannot form the basis for such additions. The Tribunal's decision aligns with the principles laid down by the Supreme Court regarding the scope of assessments under section 153A in the absence of incriminating material.