2025 (9) TMI 1242 - AT - Income Tax

Appeals allowed: s.153A additions deleted where s.132 statement lacked corroboration and DVO valuation alone insufficient

SGGR Hospital and Research Centre Private Limited Versus DCIT/ACIT Central Circe, Income Tax officer, Uttarakhand

ITAT, Dehradun allowed the appeals and set aside additions made under s.153A. The Tribunal held that a statement recorded u/s 132, without corroborative ... Assessment u/s 153A - additions made by the A.O. in the absence of any incriminating material found during the course of search - Addition has been made based on the statement of one of the Directors who has stated to have invested unaccounted income in the hospital building construction - AO referred the hospital building for valuation to DVO and based on the report of the DVO, it was found that there was difference in the value of investment as disclosed by the Assessee in its books of account and as estimated by the DVO HELD THAT:- It is well settled law that statement recorded u/s 132 of the Act does not constitute incriminating material in the absence of any other corroborative evidence. See M/S BEST INFRASTRUCTURE (INDIA) PVT. LTD. [2018 (6) TMI 971 - SC ORDER], HARJEEV AGGARWAL [2016 (3) TMI 329 - DELHI HIGH COURT] As in the case of Abhisar Buildwell Pvt. Ltd. [2023 (4) TMI 1056 - SUPREME COURT] held that addition cannot be made in the absence of any incriminating material found during the course of search. Thus, no incriminating materials/documents or any other evidence was found or seized during the course of search proceedings which resulted in additions against the Assessee in all the Assessment Years, we find merit in Ground of the appeals of the Assessee allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether additions under Section 69B of the Income Tax Act, 1961 can be sustained when they are based on a director's statement and a DVO valuation obtained during assessment proceedings, but no incriminating material was found or seized during the search under Section 132? 2. Whether statements recorded or material obtained during assessment (post-search) constitute 'incriminating material' for purposes of making additions in completed or unabated assessments in proceedings initiated under Section 153A? 3. Whether delay in filing appeals (18 days) merits condonation on the stated logistical grounds? 4. Whether a ground challenging non-mentioning of DIN in assessment orders and notices requires adjudication when not pressed before the Tribunal? ISSUE-WISE DETAILED ANALYSIS - Additions under Section 69B vis-à-vis incriminating material from search Legal framework: The Court considered the interplay between search provisions (Section 132), assessment proceedings under Section 153A, and the scope for making additions in completed or unabated assessments where 'incriminating material' is found during search. Additions were made under Section 69B (unexplained investments) based on a director's statement and a DVO report obtained during assessment proceedings. Precedent treatment: The Tribunal relied on the Supreme Court decision in Abhisar Buildwell (supra) which held that where no incriminating material is unearthed during the search, the AO cannot make additions in respect of completed/unabated assessments by taking into consideration other material unless reopening under Sections 147/148 is properly invoked. The Tribunal also cited multiple High Court and Supreme Court pronouncements (e.g., Best Infrastructure and related authorities) establishing that statements recorded under Section 132 alone do not constitute incriminating material absent corroborative evidence. Interpretation and reasoning: The Court examined the material on record and found that the additions arose from (i) a director's statement in which the director admitted investment of unaccounted money in construction, and (ii) a DVO valuation showing a higher fair market cost of construction than that recorded in books. The Tribunal treated the director's statement and the DVO report as material relied upon by the Assessing Officer. However, applying the Abhisar Buildwell ratio and allied authorities, the Court concluded that such material-obtained/relied upon during assessment proceedings-does not amount to incriminating material unearthed during the search under Section 132 unless corroborated by seized documents or other evidence discovered at the time of search. The Court emphasized that in the absence of incriminating material seized during the search, the AO's reliance on post-search statements and valuation reports to reopen or revise completed/unabated assessments is impermissible; the correct remedy, if any, would be to reopen under Sections 147/148 subject to statutory conditions. Ratio vs. Obiter: Ratio - Where no incriminating material is unearthed/seized during a search, additions in completed or unabated assessments cannot be sustained on the basis of material gathered or relied upon during subsequent assessment proceedings (including statements and DVO reports), and such additions must be quashed unless the AO properly invokes Sections 147/148 in accordance with statutory requirements. Obiter - Observations reiterating the need for corroborative evidence when relying on statements under Section 132 and the specific factual weight of DVO valuations were made in support of the ratio. Conclusion: The additions under Section 69B based solely on the director's statement and the DVO report (with no incriminating material seized during search) were held to be unsustainable. The assessment orders and consequential appellate orders confirming those additions were quashed. Once this ground was allowed, other grounds required no adjudication. ISSUE-WISE DETAILED ANALYSIS - Whether statements and DVO report constitute incriminating material Legal framework: Definitions and evidentiary status of 'incriminating material' for the purpose of assessments following searches; legal effect of statements recorded under Section 132 and valuations/reports obtained during assessment. Precedent treatment: Cited authorities establish a consistent principle that statements recorded under Section 132 alone are not sufficient to constitute incriminating material unless corroborated. The Supreme Court in Abhisar Buildwell reiterated that absence of incriminating material discovered at the time of search prevents the AO from making additions in completed/unabated assessments on the basis of subsequent materials unless reopening provisions are satisfied. Interpretation and reasoning: The Tribunal treated the director's admission and DVO valuation as post-search assessment materials. It applied the settled principle that such materials cannot be equated to incriminating material found during search. The DVO report, though indicating a valuation discrepancy, did not convert the director's statement or the report itself into seized incriminating material. Hence, reliance on these for additions in the context of completed/unabated assessments under proceedings triggered by search was impermissible. Ratio vs. Obiter: Ratio - Post-search statements and valuation reports are not substitutes for incriminating material unearthed during the search, and cannot be the sole basis for additions in completed/unabated assessments under Section 153A; proper exercise of reopening powers under Sections 147/148 is the statutory route. Obiter - The factual significance of a DVO report for independent assessment purposes was noted but did not supplant the ratio. Conclusion: Statements and DVO valuation relied upon by the AO did not amount to incriminating material found during search; therefore additions based solely on them were quashed. ISSUE-WISE DETAILED ANALYSIS - Condonation of delay in filing appeals Legal framework: Discretionary power of the Tribunal to condone delay in filing appeals where sufficient cause is shown. Interpretation and reasoning: The Tribunal considered the assessee's explanation that the assessee was based in Dehradun while the authorized representative handling the matter was in Delhi, causing coordination and logistical difficulties which resulted in an 18-day delay. Exercising discretion, the Tribunal found the reasons satisfactory for condoning the delay. Ratio vs. Obiter: Ratio - Short delays arising from logistical/coordination issues between an assessee and its authorized representative can constitute sufficient cause for condonation where explained; applied in the facts of this matter. Obiter - None material beyond the conclusion on facts. Conclusion: Delay of 18 days in filing the appeals was condoned. ISSUE-WISE DETAILED ANALYSIS - Non-pressed ground challenging non-mentioning of DIN Legal framework: Requirement of party to press grounds before the Tribunal for adjudication; courts/tribunals customarily dismiss unpressed grounds as not pressed. Interpretation and reasoning: The assessee's counsel expressly did not press the ground relating to non-mentioning of DIN in assessment orders and notices. The Tribunal recorded that submission and dismissed that ground as not pressed. Ratio vs. Obiter: Ratio - A ground not pressed by the appellant in the hearing may be dismissed as not pressed and is not adjudicated on merits. Obiter - None. Conclusion: Ground challenging non-mentioning of DIN was dismissed as not pressed and was not decided on merits.