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2022 (5) TMI 1627 - AT - Income TaxValidity of assessment u/s 153A - whether no seized material so as to frame the assessment u/s 153A found? - HELD THAT - 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/s 132(4) of the Act from Internal auditor and financial manager of assessee company. There was also recording of statement u/s 132(4) from 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 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 cross examination of certain person whose statement has been recorded on oath during the course of search - 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 that there was no purchase of goods and services from FY 2007-08 onwards. This is the basis for the addition made by the AO. The statement of Shri V. Janardhan who has admitted that there were bogus purchases his statement was confronted to the Director of the assessee company viz. Suresh Gowda. The statement of Suresh Gowda was also recorded by searched team. For statement recorded from the third parties argument of the assessee s counsel is devoid of merit. The statement recorded from Janardhan V was rightly confronted to the assessee represented by Executive Director Suresh Gowda and he has given reply against various submissions made by Shri Janardhan V. in his statement recorded u/s 132(4) of the Act. Further at the time of recording the statement the authorities asked him whether he wants to say anything else. He said in his answer to question No. 24 that nothing more to add to the above answers and offered Rs. 15 crores additional income for these assessment years and at that point of time he has not asked for any cross examination of Shri V. Janardhan or later also he has not asked for the same. Being so there is no merit in this argument of the assessee and deserves to be rejected. This common additional ground No. 3 in all appeals of the assessee is rejected. Bogus purchases - Addition is based on the seized material and statements recorded from Janardhan V. and Suresh Gowda. However the Ld. CIT(A) has not examined how these transactions are treated in the hands of Vinayaka Fruit Mandi Venkateswara Bottle Traders and Srinivasa Bottle Traders in these assessment years. In our opinion these facts are very relevant to decide the issue in the assessee s case as there should be similar treatment in the hands of seller also. If it is considered as genuine in the hands of these vendors on the same principle these transactions should be considered as genuine in the hands of the present assessee also. With these observations we remit this issue on merit to 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.
Issues Involved:
1. Validity of assessment under Section 153A of the Income-tax Act. 2. Opportunity for cross-examination of witnesses. 3. Assessment of bogus purchases. 4. Substantive and protective assessments for the assessment year 2007-08. Issue-wise Detailed Analysis: 1. Validity of Assessment under Section 153A: The Tribunal examined whether the assessment under Section 153A was valid. The assessee argued that the assessment was not based on any incriminating material found during the search. However, the Tribunal noted that during the search, various incriminating documents were seized, and statements were recorded under Section 132(4) from key personnel, including the Finance Manager and Executive Director. These statements and documents indicated that the assessee had made bogus purchases from certain entities. The Tribunal referenced the Karnataka High Court's judgment in PCIT vs. Delhi International Airport, which held that the Assessing Officer is empowered to assess or reassess the total income of six assessment years in question, even if no undisclosed income was unearthed during the search. Thus, the Tribunal upheld the validity of the assessment under Section 153A. 2. Opportunity for Cross-Examination of Witnesses: The assessee contended that they were not given an opportunity to cross-examine certain witnesses whose statements were recorded during the search. The Tribunal observed that the assessee did not request cross-examination during the assessment proceedings. The statements of the Finance Manager and Executive Director were confronted with the assessee, and the Executive Director admitted to the bogus nature of the transactions. The Tribunal, therefore, rejected the assessee's argument, noting that the opportunity for cross-examination was not sought at the appropriate time. 3. Assessment of Bogus Purchases: The Tribunal considered the addition of Rs. 27,49,31,189/- as bogus purchases. The assessee argued that the purchases were genuine and supported by invoices, goods receipt notes, and payments made through banking channels. However, the Assessing Officer found that the entities from which the purchases were made were non-existent, and the payments were withdrawn in cash immediately after being deposited. The Tribunal noted that the statements recorded from the Finance Manager and Executive Director indicated that the transactions were accommodation entries. The Tribunal remitted the issue back to the CIT(A) to examine how these transactions were treated in the hands of the vendors and to decide the issue afresh within six months. 4. Substantive and Protective Assessments for the Assessment Year 2007-08: For the assessment year 2007-08, the Tribunal dealt with both substantive and protective assessments. The substantive assessment involved an addition of Rs. 7,30,77,776/- as business income. The Tribunal found that the CIT(A)'s order was cryptic and required a detailed examination of the transactions and statements. The issue was remitted back to the CIT(A) for fresh consideration. Regarding the protective assessment, the Tribunal noted that since the substantive assessment was remitted back, the protective assessment should also be reconsidered by the CIT(A) in light of the substantive assessment's outcome. Conclusion: The Tribunal upheld the validity of the assessment under Section 153A, rejected the argument for cross-examination, and remitted the issues of bogus purchases and substantive and protective assessments for fresh consideration by the CIT(A). The appeals were partly allowed for statistical purposes, with directions for the CIT(A) to decide the issues within six months.
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