TMI Blog2022 (5) TMI 1627X X X X Extracts X X X X X X X X Extracts X X X X ..... s. As seen from the case records there were seized materials found during the course of search and also the statement recorded u/s 132(4) of the Act from Internal auditor and also from Executive Director of the company. Executive Director offered additional undisclosed income at Rs. 9.96 crores for financial year 2008-09 to 2010-11 and another Rs. 3.6 crores for the financial year 2011-12 in his statement recorded u/s 132(4) of the Act. In another occasion, he offered additional income of Rs. 10.50 crores for the assessment year 2009-10 Rs. 4.50 crores for the AY 2010-11 in answer to Q.Nos.22 24. Since there are seized materials and consequent to the panchanama so drawn where they admitted the various transactions with Vinayak Fruit Mandi, Venkateshwara Fruit Mandi and Venkateswara Bottle Traders. Being so, assessee s case is covered against the assessee by the judgement of Hon ble Karnataka High Court in the case of PCIT Vs. Delhi International Airport [ 2021 (11) TMI 928 - KARNATAKA HIGH COURT] Thus we confirm the issue of notice u/s 153A of the Act and framing of assessment u/s 153A r.w.s. 143(3) - Ground No. 2 of additional ground is dismissed. AO has not given opportunity of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the file of Ld. CIT(A) to consider afresh and decide in accordance with law. Income generated in the hands of the assessee on giving advance to T. Nanda Krishna who has bought the property and later it was sold to M/s. SPR Developers Pvt. Ltd - CIT(A) is required to examine all the documents relating to these transactions listed in earlier para and also examine various statements recorded during the course of search action and decide the issue afresh by considering the entire facts and circumstances of the case. Accordingly, this issue is remitted back to the file of CIT(A) for fresh consideration to decide the same within six months of receipt of this order as this is old matter relating to the AY 2007-08. Appeal partly allowed for statistical purposes. - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER For the Appellant : Shri Bharath L., A.R. For the Respondent : Shri Sumer Singh Meena, D.R. ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER: In assessment year 2007-08, there is an appeal by assessee in ITA No. 127/Bang/2020 which is emanated from the order of CIT(A) dated 23.10.2019, which is in turn emanated from the substantive assessment order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40A(3) of the Act. 1961. The seized material further indicated that some payments were made which were hit by the explanation to provision section 37(1) of the Act. Moreover, the local enquiry conducted by the AO through his inspector revealed that no such concerns were in existence in the address provided by the assessee. With all these incriminating materials, Sri Janardhan.V, Internal Auditor and Finance Manager of the assessee company were confronted and his statements was recorded as under:- Q. 1. Please identify yourself. Ans. I am Sri. Janardhan. V, Internal Auditor and Finance Manager of SPR Group Holdings, S/o.Shri.Late Varadaraja Iyengar and residing at No. 12161650, 12 Cross, 6 Main, Girinagar 2 Phase, Bangalore 560085. Q. 3 Please identify the following persons and explain the transactions with them. M/s. Srinivasa Bottle Traders, Prop: Susheelamma, Mr. Manjunath A Prop: Venkateshwara Bottle Traders, M/s. Venkateshwara Fruit Mandi (Prop Manjunath A) and M/s. Vinayaka Fruit Mandi (Prop Manjunath A). Ans. Mr. Manjunath A and Mrs. Susheelamma his mother were earlier suppliers to SPR Holdings Pvt. Ltd. This was about 5 years ago i.e. prior to FY 2006-07. However, subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 2010-11 aggregating to a sum of Rs. 27.49 Crores as bogus expenditure, and has added it back to the Income returned for the relevant assessment years and levied tax on the same. 9. The assessee submitted that all the purchases of grapes, agricultural produce and bottles from M/s. Srinivasa Bottle Traders, M/s. Vinayaka Fruit Mandi and Venkateshwara Bottle Traders were all genuine and duly supported by invoices issued by the respective parties. Goods Receipt Notes (GRNs) duly stamped and signed acknowledging the actual receipt of the material at the premises of the assessee and proof of payment towards the purchases through authorized banking channels. These are genuine business concerns not related to the assessee Company in any manner and are duly registered with the appropriate statutory authorities and are filing periodical VAT returns, statements, etc. Payments towards all the purchases were made only through Account Payee Cheque, bank transfer, etc. Admittedly, a few documents such as, ledger extract, cash voucher, cheque books, deposit slips, etc., were available with the assessee Company during the time of search. But the Promoters and Directors of the assessee company w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the AO by marshalling the facts in details in his assessment order. The CIT(Appeals) confirmed the orders of the AO. Against this, the assessee is in appeal before us. 12. The assessee has raised following main grounds which are common in all the appeals except change in figures:- 1. The order of the Hon'ble Commissioner of Income Tax (Appeals)-11 is opposed to law and facts of the case. 2. The Hon'ble Commissioner of Income Tax (Appeals) erred in upholding disallowance of expenses aggregating to Rs. 16,74,23,150/-. 3. The Hon'ble Commissioner of Income Tax (Appeals) erred in treating the transactions with M/s. Vinayaka Fruit Mandi and M/s. Srinivasa Bottle Traders as bogus. 4. The Hon'ble Commissioner of Income Tax (Appeals) committed an error in upholding the additions, relying on the statements of Mr. Janardhan and Mr. Suresh Gowda and holding that M/s. Vinayaka Fruit Mandi, M/s. Srinivasa Bottle Traders and M/s. Venkateshwara Bottle Traders are non-existing concerns. 5. The Hon'ble Commissioner of Income Tax (Appeals) failed to appreciate that the appellant did incur expenditure on purchase of raw materials and bottles for the purpose of manufacture and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings Pvt. Ltd. On 8.12.2011 and 16.12.2011. Simultaneously search operation was conducted on 8.12.2011 in the factory premises of M/s. SPR Group Holdings Pvt. Ltd. No. 122/123 Mysore Road,, Manchanayanahalli, Bididi post, Ramnagar Taluk. Consequently, notice u/s 153A of the Act dated 23.11.2012 was issued to the assessee requiring him to file the return of income within 20 days from the receipt of the notice. In response to notice u/s 153A of the Act assessee filed return of income on 5.1.2013 and participated in the assessment proceedings and assessment order was passed on 25.3.2014. Now the contention of the Ld. A.R. is that the AO has no jurisdiction to issue notice u/s 153A of the Act for the assessment year 2008-09 to 2011-12 (4 assessment years). Now the Ld. A.R. submitted as follows:- a. The proceedings under section 153A of the Income-tax Act, 1961 ( the Act ) were completed without basing the same on incriminating material despite the assessment of Appellant for the impugned years having been concluded. This is because, the original return of income of the assessee for the relevant AYs was filed within the statutory due dates; the time limit for issue of notice under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92,55,717 3. 2010-11 4,22,50,000 4. 2011-12 2,60,02,322 19. The ld. DR brought to our notice the additions made on the basis of incriminating material found during the course of search and submitted that incriminating documents (found at the business premises of M/s. SPR Group) of bogus entities namely M/s. Vinayaka Fruit Mandi, Venkateshwara Bottle Traders and Srinivasa Bottle Traders contains self- made cash voucher, deposit and withdrawal slips etc. He stated that statement of Shri V. Janardhan, Internal auditor and Finance Manager of M/s SPR Group Holdings Private Ltd (now known as M/s. SPR Spirits Pvt. Ltd - hereinafter referred as SPR) was recorded wherein he clearly admitted that there is no purchase of any goods or services from these concerns. Further the statement from Shri Suresh Gowda, Executive Director of the company was recorded and confronted with the incriminating material found during the course of search and also confronted with statement recorded from Shri V. Janardhan, Internal auditor and Finance Manager of the company. Shri Suresh Gowda, Executive Director of the Company after acknowledging the incriminating material admitted an additional income of Rs. 15 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statement made by senior partner of assessee firm at time of search could not be retracted by other partner in absence of any allegation of any pressure and coercion by revenue and there being no evidence to establish that original statement was incorrect. 23. The Ld. D.R. submitted that from the seized material, it was found that there were three proprietary concerns fully managed by M/s SPR Group Holdings namely M/s. Vinayaka Fruit Mandi, M/s. Venkateshwara Bottle Traders (name lending proprietor is A Manjunath) and M/s. Srinivasa Bottle Traders (name lending proprietor is Mrs Susheelamma, mother of Sri A Manjunath and also the power of attorney holder).The concerns had the following bank accounts:- S. No. Proprietorship concern A/c Number Bank and Branch 1 M/s. Vinayaka Fruit Mandi 0794201003601 Canara Bank, Seshadripuram Branch 2 M/s. Venkateshwara Bottle Traders 0794201003601 Canara Bank, Seshadripuram Branch 3 M/s. Srinivasa Bottle Traders 0794201003505 Canara Bank, Seshadripuram Branch 24. Examination of bank account statements of the above concerns obtained from the bank showed the following:- (a) The money has been transferred by way of cheque from the bank account of M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SPR Group Holdings, M/s Lotus Mall PN/ Ltd, M/s Alpine Wineries and other SPR Group concerns. (i) The debit entries also contain expenses being made for the family members of Timmegowda and the fuel expenses of the vehicles used by them and for various other purposes. 26. The above incriminating documents were confronted to Shri. Janardhan V., Internal Auditor and Finance Manager of M/s. SPR Group Holdings Pvt. Ltd., on the day of search and a statement u/s. 132(4) was recorded from him at the office premises, Wilson Garden, Bangalore. According to the AO, in the statement, Shri. Janardhan has clearly admitted that there is no purchase of any goods or services after financial year 2007-08 onwards from M/s. Srinivasa Bottle Traders, M/s. Venkateshwara Bottle Traders, and M/s. Vinayaka Fruit Mandi. The AO came to the conclusion that the company SPR Group Holdings Pvt. Ltd. has created the above three entities for the purpose of inflation of expenses in the name of purchase of bottles and grapes. But in reality, there is no any such purchase. The company has transferred the amounts by cheque to the bank accounts of the above concerns and the same has been withdrawn through self-chequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove concerns. Shri. Suresh Gowda in his statement has admitted that the expenses amounting to Rs. 15.00 crores out of Rs. 27.70 crores may be treated as non-allowable expenditure and the same has been admitted as undisclosed income. The undisclosed income admitted is Rs. 10.50 crores for the AY 200910 and Rs. 4.50 crores for the AY 2010-11. 29. The relevant portion of the statement is reproduced as under:- Q. No. 3.: I am showing you page Nos. 1 to 105 of the seized material marked as A/SPRGHPL/2 seized during the course of search u/s. 132 of the 1 T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 105 of the seized material marked as A/SPRGHPL/2 consisting of cash vouchers of the company SPR Group Holdings Pvt.Ltd. The payments varies from Rs. 50,000/- to Rs. 10,00,000/- in cash towards certain expenses. Q. No. 4.: I am showing you page Nos. 1 to 76 of the seized material marked as A/SPRGHPL/3 seized during the course of search u/s.132 of the I T Act at M/s. SPR Group Holding Pvt.Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 of the seized material marked as A/SPRGHPU6 consists of bank statements for the financial year 200910 and 2010-11 bearing current account No. 0794201003601 of M/s. Vinayaka Fruit Mandi maintained at Canara Bank, Seshadripuram Branch. Q. No. 9 The examination of the above account mentioned at answer to Q. No. 8 shows that the money has been transferred by way of cheque from the bank account of M/s. SPR Group Holdings Pvt Ltd only. The amounts have been withdrawn on the same day or the immediate next day by way of self cheque. The statement also shows that the proprietor of M/s. Vinayaka Fruit Mandi is Shri. A. Manjunath, who is the joint account holder. Please explain the transaction. Ans.: Shri. Manjunath was looking after the business of procuring grapes from various sources for the use of our production. The payments to Shri. Manjunath M/s. Vinayaka Fruit Mandi were being made by way of crossed cheques from our company. He had to apparently draw the money to make the various payments against the purchases effected by him and also to meet such other expenses. This could be the reason for the cash being drawn out immediately on transfer of cheque payments from us to his bank ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 33 of the seized material marked as A/SPRGHPLJ20 consists of self-made cash vouchers in the name of M/s. Srinivasa Bottle Traders for the period 08/05/2009 to 18/12/2009. Q. No. 16.: I am showing you page Nos. 1 to 28 of the seized material marked as A/SPRGHPL/23 seized during the course of search u/s.132 of the I T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 28 of the seized material marked as A/SPRGHPL/23 consists of self-made cash vouchers in the name of M/s. Vinayaka Fruit Mandi. Q. No. 17.: I am showing you the 21 pages of the seized material marked as A/SPRGHPL/26 seized during the course of search u/s.132 of the I T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The 21 pages of the seized material marked as A/SPRGHPU26 consists of signed cheque book of M/s. Vinayaka Fruit Mandi bearing current account No. 0794201003601 maintained at Canara Bank, Seshadripuram Branch. The cheq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ou have admitted only Rs. 13.56 crores. Subsequently, you have enhanced the admitted income to an amount of Rs. 15.00 crores (including Rs. 13.56 admitted on 08/12/2011) as un-disclosed income on account of inflation of expenditures with regard to payment to M/s. Venkateshwara Bottle Traders, M/s. Srinivasa Bottle Traders and M/s. Vinayaka Fruit Mandi. You may offer your comments so as to why the entire amount of Rs. 27,49,31,189/- claimed as expenses should not be disallowed. Ans.: As stated earlier, the supplies made by M/s. Srinivasa Bottle Traders, M/s. Vinayaka Fruit Mandi and also M/s. Venkateshwara Bottle Traders are genuine suppliers of bottles and grapes. The payments made for procuring these goods have to be taken into consideration for determining the income. The amount of Rs. 15.00 crores offered as income represents such of those expenses which are not allowable as per the provisions of income tax Act, more specifically u/s.37(1). This is the reason as to why the entire amount of Rs. 27.49 crores cannot be considered as income. The genuineness of procurement and supply of these goods can be verified from the seized materials w.r.t. goods receipt note maintained by our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under the law for this declaration of additional income. Thus, Ld. D.R. submitted that framing of assessment for all these assessment years u/s 153A of the Act is valid. 31. We have heard the rival submissions and perused the materials available on record. In this case there was search at the premises of SPR Group Holdings Pvt. Ltd. (erstwhile company presently known as SPR Spirits Pvt. Ltd.) on 8.12.2011. During the course of search action various seized material found and seized. There was no dispute regarding the search action us/ 132 of the Act at the premises of the assessee and also seizure of various documents at their premises and recording of statement u/s132(4) of the Act from Shri Janardhan V., Internal auditor and financial manager of assessee company. There was also recording of statement u/s 132(4) from Shri Suresh Gowda, Executive Director of assessee company on the basis of this, notice u/s 153A of the Act was issued to the assessee on 23.11.2012. Now the contention of the Ld. A.R. is that there is no seized material so as to frame the assessment u/s 153A of the Act. In our opinion, this argument of Ld. A.R. is devoid of merits. As seen from the case records the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant assessment year or years : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate: Provided also that Provided also that . 10. In Canara Housing Development Company, supra, the coordinate Bench of this Court while considering proceedings under Section 263 of the Act vis- -vis proceedings under Section 153A of the Act, has observed thus: 10. Section 153A of the Act starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed income, if any, unearthed during the search. He has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the total income of each year and then pass the assessment order. Therefore, the Commissioner by virtue of the power con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a search had been conducted in the premises of the assessee. 12. In Commissioner of Income Tax V/s. IBC Knowledge Park (P) Ltd., [(2016) 385 ITR 346 (Kar.), the coordinate Bench of this Court has referred to the decisions of M/s Lancy Constructions supra as well as Canara Housing Development Company supra along with other judgments cited at the Bar and has observed that the relevant sections as well as judicial precedents would enunciate that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the assessing officer to upset or disturb a concluded assessment. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in the case of the searched person, the same reason would hold good as in the case of any other person. It has been held that detection or the existence of incriminating material is a must for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On a plain reading of Sectioin153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under Section 132 or a requisition under Section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the assessing officer to issue notice under Section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under Section 153A of the Act is linked with search and requisition under Sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, Section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial being available against the assessee in the search under Section 132 of the Act on the basis of which the notice was issued under Section 153A (1)(a) of the Act. 17. The Hon ble High Court of Allahabad in the case of Commissioner of Income Tax, Central, Kanpur .v. Raj Kumar Arora [(2014) 52 Taxmann.com 172 (Allahabad)], has held thus: 8. Section 153A of the Act along with Section 153B and 153C replaced the Post Search Block Assessment Scheme in respect of any search under Section 132A or requisition under Section 132A made after 31.05.2003. CBDT explained these provisions through circular dated 5.9.2003, which is reported in (2003) 263 ITR (St) 62. The said circular is as under: . 10. Under the block assessment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved. The introduction of Section 153A of the Act provides a departure from this proceeding. Under Section 153A of the Act, the Assessing Officer has been given the power to assess or reassess the total income of the assessment years in question in separate assessment orders. Consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld thus: 21. Therefore it is clear that the decision in CIT V/s. Anil Kumar Bhatia (supra) does not deal with a situation where, as in the present case, no incriminating material was found during the search conducted under Section 132 of the Act. 19. It is significant to note that the Co-ordinate Bench of this Court in Canara Housing Development Company supra relied upon by the Revenue has also been considered in Kabul Chawla supra and has held thus: 26. In the High Court the question was whether the CIT could invoke the power under Section 263 of the Act once the proceedings under Section 153A was initiated. The High Court in Canara Housing (supra) answered the question in the negative. It referred to the decision of this Court in CIT v. Anil Kumar Bhatia (supra) and came to the conclusion that once proceedings are initiated under Section 153A of the Act the legal effect was that even where an assessment order is passed, it would stand reopened. In the eye of law there was no order of assessment. It meant that the AO shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Rajasthan High Court in Jai Steel (India), Jodhpur V/s. ACIT [(2013) 36 Taxman 523 (Raj)] and also took note of the decision of the Bombay High Court in Commissioner of Income Tax V/s. Continental Warehousing Corporation (Nhava Sheva) Ltd. [(2015) 58 taxmann.com 78 (Bom)] which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment Section 153A and 153C of the Act. The legal position has been summarized in Kabul Chawla supra as under: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , D.D. 29.10.2010] has held thus: 9. What Section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to Section 153A provides for abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under Section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived. 12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. Similarly, the Hon ble High Court of Gujarat in the case of Ramesh Bhai Jivraj Desai supra, in paragraph 6 has held as under: 6. Thus, having regard to the materials on record, the Tribunal is right in holding that once it is held that the assessment has attained finality, then, the Assessing Officer, while passing independent assessment order under Section 153A read with Section 143(3) of the Act cannot disturb the assessment/reassessment, which has attained finality unless the materials gathered in the course of the proceedings under Section 153A of the Act establish that the reliefs granted in the final assessment/reassessment were contrary to the facts coming during the course of Section 153A proceedings. 26. In the light of these judgments, we have analyzed Section 153A of the Act vis- vis the material on record. Strong reliance was placed by the Revenue on the Canara Housing Development Company supra, in support of the contention that search under Section 132 of the Act is sine qua non for initiation of proceedings under Section 153A of the Act but it is not dependent on any undisclosed income being unearthed during search. There is no cavil on this proposition that sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition was made under Section 132A. Thus, it is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under Section 132 shall not abate. 28. Section 153B provides for the time limit for completion of search assessments. 29. Section 153C provides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account documents seized or requisitioned belong or belongs to a person other than the person referred to in Section 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of Section 153A. 30. Thus, it is clear that the Assessing Officer while passing the order under Section 153A read with Section 143[3] of the Act, ordinarily cannot disturb the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant extract of the circular for ready reference can be extracted as under: .. As regards the pending assessments are concerned only one assessment shall be made separately for each assessment year on the basis of the income unearthed during search and any other material existing or brought on the record of the Assessing Officer. Even in the absence of any incriminating material abated assessment or reassessment could be done. The returns filed under Section 139 of the Act gets replaced by the returns filed under Section 153A[1] of the Act. Pending proceedings in appeal, revision/application shall not abate subsequent to initiation of Section 153A proceedings. Further, recording of satisfaction under Section 153A may not be necessary unlike Section 153C of the Act which mandates recording of satisfaction. For the reasons aforesaid, substantial question of law in ITA Nos. 322/2018 to 324/2018, 354/2018 and 355/2018, substantial question of law No. 1 in ITA Nos. 380/2018, 382/2018 to 385/2018 and 197/2021 to 199/2021 and substantial question of law Nos. 1 and 2 in ITA No. 381/2018 are answered in favour of the assessee and against the Revenue. Substantial question of Law No. 2 in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned. During the course of search, statements were recorded through Janardhan V., Internal auditor and Finance Manager of the assessee company and Suresh Gowda, Executive Director of the assessee company. The incriminating material found during the course of search were confronted to the assessee s employee Janardhan V. and also to the Executive Director Suresh Gowda. His statement was also recorded. Suresh Gowda has admitted to the fact that the entities namely Vinayaka Fruit Mandi and Venkateswara Bottle Traders were created for the purpose of inflation of expenses of the assessee company and thereby generation of cash. He also stated that the entire payment is not bogus. He further stated that part of the payment made for the purpose of purchase of bottles by the company from the above concerns be considered as bogus and he offered Rs. 10.5 crores for assessment year 2009-10 Rs. 4.50 crores for assessment year 2010-11, which is evident from the following statement recorded from Suresh Gowda, Executive Director of the assessee company, in answer to Q.Nos.23 24, which reads as follows:- Q. No. 23: I am now showing you some of the payment vouchers seized during the course of search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g spirit. Bottles are used for packing the produce. During the assessment years under consideration, the purchases made from these two concerns are as follows: Asst. Year Vinayaka Fruit Mandy (Rs.) Srinivas Bottle Traders (Rs.) 2007-08 - 1,04,06,142 2008-09 - 15,41,29,110 2009-10 42,14,810 3,42,92,609 2010-11 4,22,50,000 - 2011-12 2,17,78,750 - 37. However, the AO did not accept the contentions of Sri Thimme Gowda, Director, SPR Group Holdings Pvt. Ltd., on the reason that these payments pertained to FY 2008-09 to 2011-12 wherein payments exceeding Rs. 20,000 is not allowable u/s. 40A(3) of the Act. Hence the entire payment of Rs. 27,49,31,189 made to Vinayaka Fruit Mandi and Srinivasa Bottle Traders was treated as bogus expenditure and assessed as undisclosed income as follows:- AY Undisclosed income assessed 2008-09 16,74,23,150 2009-10 3,92,55,717 2010-11 4,22,50,000 2011-12 2,60,02,322 38. With regard to seized documents found in the premises of the assessee pertaining to Vinayaka Fruit Mandi, Venkateshwara Bottle Traders and Srinivasa Bottle Traders, these were confronted to Shri V. Janardhan, Internal Auditor Finance Manager of SPR Group Holdings P. Ltd., who has admitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods purchased; the inward receipt of the purchases is also not questioned. c. Appellant has made payments to the three vendors by way of crossed cheques. The factum of payment by crossed cheques is in accordance with the provisions of the Act and warrants no disallowance. d. The fact that the vendors have withdrawn the cash immediately is of no concern to the Appellant. No assessments have been framed under section 153C of the Act on those vendors. e. The Appellant cannot be held responsible for the cash drawals of the vendors. f. The LAO and CIT(A) did not adduce any evidence to demonstrate that the purchases were bogus apart from the statement of Sri Janardhan. No efforts have been made by the LAO and CIT(A) to demonstrate that the purchases were bogus. g. The fact that Sri Janardhan was maintaining books of accounts of the vendors and hence, some papers of these entities were found in the Appellant's office is of no consequence to the Appellant. If anything, action should have been initiated by the AO against the vendors. h. The AO has not established any additional relationship between the Appellant and the vendors apart from the fact that the Appellant has had busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The order of the Hon'ble -Commissioner of Income Tax (Appeals),Bengaluru11 is opposed to law and facts of the case. 2. The Hon'ble Commissioner of Income Tax (Appeals)-11 erred in upholding the addition in a sum of Rs. 7,30,77,776/-under the head business income. 3. The Hon'ble Commissioner of Income Tax (Appeals) failed to appreciate that entire surplus arising out of the transaction not being exigible to tax in the hands of the appellant. 4. The Hon'ble Commissioner of Income Tax (Appeals) committed an error in upholding the additions, without even looking at the transaction which was a subject matter of arbitration and later was cancelled. 5. The appellant craves for leave to add to delete from or amend the grounds of appeal. 46.1. Assessee has filed additional grounds of appeal in ITA No. 127/Bang/2020, which are as follows:- 1. The order of the Learned Assessing Officer ( LAO ) and Hon ble Commissioner of Income-tax (Appeals) ( Ld. CIT(A) ) is opposed to law and general principles of natural justice as applicable to quasi judicial proceedings. 2. The order of the LAO and Ld. CIT(A) is bad in law and against the provisions of section 153A, since amongst others, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the business income of Rs. 7,30,77,776/- was assessed substantively in the hands of the assessee company. Aggrieved, the assessee is in appeal. Accordingly, AO computed the income in the hands of the assessee as follows: Survey No. Area Village purchase date cost of purchase Sale agreement date Sale Amount Gain 45 4A 22G Manch. halli 15.11.2006 03.02.2007 33,92,289 44/1 2A 2Q Manch. halli 44/2 2A 4a Manch. halli 48 1A Manch. halli 20,01,567 34 3A 3 G Manch. halli 46/2 16G Manph. halli 54 10 Manch. halli 47 2A 4G Manch. halli 14,88,915 54 38G Manch. halli 46/2 2A Manch. halli 47 21.5G Manch. halli 26,30,468 46/1 18.5G Manch. halli 46/1 1A 37G Manch. halli 50,63,379 47 1A 20G Manch. halli 39,45,606 TOTAL 1,85,22,224 9,16,00,000 7,30,77,776 48. From the above table, AO came to the conclusion that assessee earned a business income of Rs. 7,30,77,776/- treated as a business income in the hands of the assessee. Against this assessee went in appeal before Ld. CIT(A). Ld. CIT(A) confirmed the order of AO observed that the assessee has purchased 22 acres 36 guntas of land at Manchanayanahalli through T. Nanda Krishna since the assessee being a company was not permitted to acquire t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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