2026 Supreme(Online)(ITAT) 7724

INCOME TAX APPELLATE TRIBUNAL (HYDERABAD BENCH)
Vijay Pal Rao, Vice President, Manjunatha G., Accountant Member
Imtiaz Farooqi – Appellant
Versus
DCIT – Respondent
ITA No.150/Hyd./2022 | ITA No.237/Hyd./2022

In search-related assessments, additions for unabated years require incriminating material found during the search. Section 50C of the Act is restricted to sellers and cannot apply to purchasers to treat the difference in stamp duty valuation as taxable income without specific evidence of a perquisite.

Headnote:(A) Income Tax Act, 1961 - Sections 132, 143(1), 143(3), 153A, 2(22)(e) and 68 - Search and seizure action - Scope of assessment in unabated assessments - Requirement of incriminating material - Additions in absence of seized material - The assessee challenged the validity of assessments framed under Section 153A on the ground that there was no incriminating material or that the assessment was an unabated one. The court held that while the assessment order itself cannot be challenged solely for lack of incriminating material, individual additions made without any reference to incriminating material found during search are not sustainable in law, especially where assessments were not pending on the date of search. (Paras 5, 7, 9.3 and 14.1)

(B) Income Tax Act, 1961 - Section 50C - Applicability to purchaser - The court clarified that the deeming provisions of Section 50C of the Act, which apply to the transfer of immovable property to determine the full value of consideration, cannot be invoked in the hands of the purchaser to treat the difference between stamp duty valuation and consideration as a perquisite or benefit unless independent inquiry establishes such benefit. (Paras 11, 12, 14.1)

Facts of the case:
Consequent to a search and seizure operation, the tax authority initiated proceedings under Section 153A of the Act. The assessee's original returns were processed under Section 143(1) and were considered unabated. The tax authority made various additions comprising unexplained bank credits and property transaction benefits. The first appellate authority deleted some additions while confirming others, leading to cross-appeals by both the assessee and the revenue before the tribunal.

Findings of Court:
The tribunal upheld the addition of bank credits where documentation was not provided or where the transaction was clearly identified as unexplained based on search evidence. However, it deleted additions made towards property transactions under Section 50C as the provision does not apply to purchasers, and no independent evidence proved the receipt of a concessional benefit. It further upheld the deletion of cash deposit additions where the assessee provided a reconciled cash book.

Issues: The main issues were the sustainability of additions made under Section 153A in the absence of incriminating material for unabated assessments, the applicability of Section 50C valuation to a purchaser, and the validity of additions regarding unexplained bank credits and property transactions.

Ratio Decidendi: Additions in search assessments for unabated years must be supported by incriminating material found during a search. A purchaser cannot be taxed for the difference between stamp duty value and transaction price under Section 50C, nor can such difference be treated as a perquisite without independent inquiry. Disclosures made during search operations in the form of bank analysis and corroborated cash books serve as valid grounds for assessing undisclosed income.

Result: Assessee's appeal is partly allowed and Revenue's appeal is dismissed.