ITAT Quashes 153A Additions for Unabated Years; Restricts Interest Addition to Net Rs. 4.37 Lakh

A search under Section 132 was conducted on 08.08.2019 in the Patel RPL Realty Group. Assessments under Section 143(3) r.w.s. 153A was framed for multiple years. For AY 2012–13, an addition of Rs. 11,77,110/- was made despite no incriminating material being found for that year.

For AY 2019-20, additions of Rs. 92.63 lakh under Section 69A and Rs. 87.96 lakh under Section 69C were made based on seized Tally sheets, without restricting to net differential. An additional Rs. 1,87,142/- was added to the account due to a loan mismatch. The CIT(A) restricted the addition to net undisclosed interest of Rs. 4,37,330/- as business income. Cross-appeals were filed.

Main Issue: Whether additions under Section 153A can be made for an unabated year without incriminating material, and whether gross interest entries in seized documents can be taxed separately under Sections 69A/69C.

Tribunal Decided: The Tribunal held that AY 2012–13 was an unabated year, and no incriminating material was found for that year. Relying on the judgment of the Supreme Court of India in PCIT v. Abhisar Buildwell (P.) Ltd., it was held that no addition under Section 153A can be sustained in the absence of incriminating material. The addition for AY 2012-13 was accordingly quashed.

The Tribunal agreed that Sections 69A and 69C were wrongly invoked since the nature and source of entries were identifiable as loan-related interest. Only the net undisclosed interest could be taxed as business income. The restriction of addition to Rs. 4,37,330/- was upheld, and the revenue’s appeal was dismissed. The addition of Rs. 1,87,142/- was also deleted, being based merely on reconciliation differences without any incriminating evidence.

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