The Income Tax Appellate Tribunal (ITAT) upheld the deletion of income tax addition concerning unexplained expenditure for M/s. Radha Madhav Developers.
The Tribunal found that there were no pending assessment proceedings as of the search date. Consequently, under Section 153A of the Income Tax Act, any addition to income must be based on incriminating material found during the search.
 Since no such material was presented, the Tribunal deleted the addition made by the Assessing Officer.
The Tribunal observed that since there were no ongoing assessment proceedings on the search date, the reassessment under Section 153A should focus solely on new evidence discovered during the search.
It was noted that any tax additions or disallowances must be supported by material obtained from the search, and the absence of such evidence justified the deletion of the unexplained expenditure addition.
FACTS – For the assessment year 2014-15, the Accounts of M/s. Radha Madhav Developers were scrutinized by the Assessing Officer (AO) and significant additions were made under Section 69A of the Income Tax Act, 1961. The AO alleged that there was undisclosed income in cash and investments which could not be explained by the firm.
Additionally, certain expenses reported by the firm raised questions about their legitimacy as they appeared to be either exaggerated or not entirely for business purposes. In the assessment year 2015-16, this pattern of issues continued with further disputes over the source of investments as well as the legitimacy of claimed expenses.
‘ The respondent firm in this case contested these additions arguing that all transactions were properly documented and accounted for. It presented explanations and supporting evidence to justify the expenses and investments. The firm’s defense was based mainly on its contention that all the allegations made against it by AO lacked a basis and were unsubstantiated with any tangible evidence at all.
Case Details
Appellant: Assistant Commissioner of Income Tax, Central Circle-1(1), Nagpur.
Respondent: M/s. Radha Madhav Developers.
Tribunal: Income Tax Appellate Tribunal (ITAT), Nagpur Bench.
Bench Members: Shri V. Durga Rao (Judicial Member) and Shri K.M. Roy (Accountant Member). Case Numbers: ITA No. 26/Nag./2020 (Assessment Year 2014-15) and ITA No. 27/Nag./2020 (Assessment Year 2015-16).
