2025 (7) TMI 1773 - AT - Income Tax

ITAT Rules House Property Income Addition Without Specific Evidence Unjustified; Directs Fresh Income Recalculation Under Relevant Sections

Sh. Sunil Jain Versus DCIT, New Delhi

The ITAT Delhi held that the addition of house property income without specific incriminating material seized during the search was unjustified and ... Assessment u/s 153A - incriminating material as found during the course of search - addition of house property - HELD THAT:- Lower authorities have added the alleged total receipts from house property resulting in addition without there being any specific incriminating material found/seized during the course of search. This being the clinching factual position, we quash the impugned assessment dated 26.12.2019 itself framed in the assessee’s case in very terms, Addition of gross receipts - undisclosed income based on the incriminating/seized material during the course of search - two PAN issued in the name of same person/assessee - HELD THAT:- We make it clear that once they have treated “Sh. Sunil Jain” and “Sh. Sunil Kumar” as one and the same assessee, corresponding expenditure booked in their respective accounts also deserves to be considered to arrive at his real income as per the provisions of the Act. We thus find no merit in the assessee’s arguments to this limited extent and direct the learned Assessing Officer to finalize his afresh computation as per law with a rider that it shall be the assessee’s onus only to plead and prove all the relevant facts at his own risk and responsibility, in consequential proceeding within three effective opportunities. Ordered accordingly. ISSUES: Whether assessment under section 153A r.w.s. 143(3) of the Income-tax Act, 1961 is valid in the absence of any incriminating material found during the course of search.Whether gross receipts of a person with a different PAN can be assessed in the hands of the assessee without establishing a clear nexus between them.Whether, upon treating two persons as one and the same assessee, the corresponding expenditure should be considered in computing the income.Whether the principles established in the apex court decision in PCIT Vs. Abhisar Buildwell Pvt. Ltd. apply to the facts of the case, including abated assessments. RULINGS / HOLDINGS: The assessment under section 153A r.w.s. 143(3) framed without any incriminating material found during the search is quashed, as there was no basis for addition of income on that ground.The gross receipts of 'Sh. Sunil Kumar' are rightly assessed in the hands of the assessee since the evidence establishes that 'Sh. Sunil Kumar' and the assessee are the same person, supported by overlapping email IDs, auditors, bank records, and DGFT certificates; therefore, the apex court decision cited does not apply.When two entities are treated as one and the same for assessment, the corresponding expenditure booked must also be considered to arrive at the real income, and the Assessing Officer is directed to recompute income accordingly.The apex court's decision in PCIT Vs. Abhisar Buildwell Pvt. Ltd. does not apply to the abated assessment year, and the Assessing Officer is directed to compute correct taxable income as per law. RATIONALE: The Court applied the provisions of section 153A read with section 143(3) of the Income-tax Act, 1961, emphasizing the necessity of incriminating material found during search to sustain assessments under these provisions.Reliance was placed on detailed evidentiary material including Investigation Wing reports, common email IDs, auditors, bank records, and DGFT certificates to establish identity and nexus between the assessee and the person whose income was assessed.The Court distinguished the facts from the apex court's landmark decision (PCIT Vs. Abhisar Buildwell Pvt. Ltd.), holding that the said precedent was not applicable due to the identity of the persons involved and the presence of incriminating material.The Court underscored the principle that when income from one identity is assessed in the hands of another on the basis of identity of person, corresponding expenditure must be allowed to ascertain true income, directing reassessment with opportunity to the assessee to prove relevant facts.Regarding the abated assessment year, the Court clarified that the cited apex court decision does not apply, necessitating fresh computation of income by the Assessing Officer.