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M/s. Avnash Automobiles Pvt. Ltd. Versus DCIT Central Circle-2 Visakhapatnam and Vica-Versa

2015 (10) TMI 2023 - ITAT VISAKHAPATNAM

Validity of proceedings initiated u/s 153C - rejection of books of accounts - unaccounted income in respect of automobile business - Held that:- In the absence of any defect noticed in the automobile business, we are of the view that the assessing officer was not justified in rejecting the book results of automobile business and estimating the income of the assessee. We notice that the Ld. CIT(A) also has upheld the rejection of books of accounts without bringing on record any defects in the boo .....

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f income shall remain.

Claim of set off - Held that:- We have noticed that the Ld. CIT(A) has given telescoping benefit in respect of ₹ 92 lakhs offered by the assessee against the income estimated from automobile business. Since we have cancelled the estimation of income from automobile business, the additional income of ₹ 92 lakhs assessed by the assessing officer is required to be sustained, subject to the claim of set off claimed before the tax authorities.

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otherwise it may result in double assessment of same income. Hence, we find merit in the contention of the assessee that the unaccounted income of ₹ 20 lakhs offered in the assessment year 2007-08 should be adjusted against the undisclosed investment made in assessment year 2008-09. Accordingly, we direct the assessing officer to allow set off of this amount also. - ITA Nos.311&312/Vizag/2014 - Dated:- 15-9-2015 - SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER .....

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ct. 2. The facts relating to the case are that the assessee company is dealing in Maruti brand Cars. Consequent to the search operations conducted in the hands of directors of the assessee company, proceedings were initiated u/s 153C of the Act. In response to the notice issued u/s 153A r.w.s. 153C of the Act, the assessee filed a written reply requesting that the original return filed on 23.10.2007 be considered as the return filed in response to the notice issued u/s 153A r.w.s. 153C of the Ac .....

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s as unaccounted income of the assessee company. However, the same was not declared in the return of income to be filed u/s 153A of the Act, since the assessee had intimated that the original return may be treated as return filed u/s 153 of the Act. Subsequently, during the course of assessment proceeding, the assessee filed a revised return of income, wherein it declared unaccounted income of ₹ 20 lakhs. The assessing officer, in view of the unaccounted income referred above, rejected the .....

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e Ld. CIT(A) held that the assessing officer was not correct in assessing commission income of ₹ 23.45 lakhs separately, since the books of accounts have been rejected and income was estimated. Accordingly, he directed the A.O. to delete the addition of ₹ 23.45 lakhs. The assessee is aggrieved by the decision of Ld. CIT(A) in confirming the rejection of automobile business and estimation of income from that business. The revenue is aggrieved by the decision of Ld. CIT(A) in giving te .....

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izure operation u/s 132 of the Act in the case of Sri A.T. Rayudu on 4.12.2007. During the course of search, certain incriminating documents relating to the assessee company were found. Hence, the notices u/s 153C of the Act were issued to the company on 15.12.2008. The said notices were served on the assessee company on 24.12.2008. The contention of the assessee is that the proceedings relating to assessment year 2007-08 was not pending on the date of issuing of notice u/s 153C of the Act and h .....

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he placed reliance on the decision rendered by Hon ble jurisdictional Andhra Pradesh High Court in the case of Sri Rao Subba Rao (HUF) (I.T.T.A.No.254 of 2014 dated 15.04.2014), wherein the Hon ble High Court has held as under:- We have heard the learned Counsel for the appellant and have gone through the judgement and order of the learned Tribunal. In paragraph No.78.22 of the judgement, the learned Tribunal on fact found that there is clear non-fulfillment of conditions laid down in Section 15 .....

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ssue relating to the recording of satisfaction, the Ld. D.R. submitted that the assessing officer of the searched person and the assessee is one and the same and hence there is no requirement of recording the satisfaction, as the same was a simple formality only. 7. In the rejoinder, the Ld. A.R. submitted that the recording of satisfaction is compulsory even if the assessing officer is one and the same. In support of this contention, he placed reliance on the decision rendered by the M.P. High .....

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rson (other than the person referred to in Section 153A), must apply proprio vigore. The fact that incidentally the Assessing Officer is common at both the stages would not extricate him from recording satisfaction at the respective stages. In that, the Assessing Officer is satisfied that the items referred to in Section 153C belongs or belong to a person (other than the person referred to in Section 153A), being sine qua non. He cannot assume jurisdiction to transmit those items to another file .....

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ade by the other person in the returns for the relevant period already filed by the other person before him. For the same reason, we must reject the argument of the Department that the discretion of the Assessing Officer having jurisdiction will be impaired in any manner, if he were to hold a different view. Similarly, as there is no provision either express or implied (in the Act) to dispense with the requirement of satisfaction, if the Assessing Officer happens to be the same, as in this case, .....

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person has recorded satisfaction in respect of the assessee herein as per the provisions of section 153C of the Act. 9. The Ld D.R contended that the assessing officer was the same for both the assessee and searched person and hence the satisfaction should be deemed to have been arrived at. However, the decision rendered by the Hon ble M.P. High Court in the case of Mechmen 11C (supra) states that the responsibility of recording of satisfaction at the respective stages would not be extricated ev .....

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e of Sri Rao Subba Rao (supra). Accordingly, we set aside the order of Ld. CIT(A) and quash the assessment order. 10. With regard to the first issue relating to the Scope of assessment u/s 153A of the Act, we wish to state here that the said issue was considered in a detailed manner in the case of Shri A.T. Rayudu, after duly considering the arguments of Ld Standing Counsel of the revenue Shri Narasimha Sharma and the counsel of the assessee Shri G.V.N. Hari. However, since we have quashed the a .....

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d in the hands of A.T. Rayudu, certain documents were seized which showed that the assessee company has paid a sum of ₹ 1.32 crores by way of cheque and another sum of ₹ 1.02 crores by way of cash in connection with purchase of a property. When these documents were confronted with Shri Avnash, Director of the Company and when he was asked out the payment of ₹ 1.02 crores by way of cash, he submitted that he paid a sum of ₹ 10 lakhs out of his personal bank account and the .....

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o payment made by way of cash for property purchase and another 1.00 lakh for other reason. Though the assessee admitted a sum of ₹ 92.00 lakhs in his sworn statement, he sought set off of ₹ 20.00 lakhs offered by him in the immediately preceding year and accordingly offered ₹ 72.00 lakhs in the revised return of income. However, the assessing officer assessed the sum of ₹ 92 lakhs originally declared by the Director of the assessee company in the sworn statement as incom .....

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ined the total income of the assessee for assessment year 2008-09 at ₹ 1,86,84,742/-. 13. In the appellate proceedings, the Ld. CIT(A) confirmed the rejection of books of accounts and estimation of income from automobile business. The Ld. CIT(A) also confirmed the assessment of unaccounted payment of ₹ 3 lakhs. The Ld. CIT(A), as held by him in assessment year 2007-08, held that no separate addition of ₹ 92 lakhs is required to be made, when books of account of the assessee is .....

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fit to the addition of ₹ 92 lakhs made by the assessing officer. 15. The Ld. A.R. submitted that the search officials as well as the assessing officer did not find any discrepancy or mistakes in the books of accounts maintained for automobile business and hence there is no proper reason recorded for rejecting books of accounts relating to automobile business. He further submitted that the commission earned in real estate transaction in assessment year 2007-08 and also the undisclosed payme .....

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nds of the assessee company in AY 2007-08 and also he has offered the unaccounted payment relating to purchase of property also in the hands of the assessee company only in AY 2008-09. The Ld D.R submitted that the assessee company is carrying on automobile business and hence the above said admission shows that the undisclosed income by way of accounted receipts and unaccounted investments should have been generated out of automobile business only. Accordingly, the Ld D.R submitted that the asse .....

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al income offered by the Director of the assessee company in assessment year 2007-08 is commission income earned in respect of real estate transaction. In assessment year 2008-09, the nature of additional income was unaccounted payment in respect of property purchased. As submitted by Ld. A.R., there is no evidence to show that the unaccounted money relating to property purchased was generated out of automobile business. Similarly, the commission income earned on real estate transaction, though .....

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view that the assessing officer was not justified in rejecting the book results of automobile business and estimating the income of the assessee. We notice that the Ld. CIT(A) also has upheld the rejection of books of accounts without bringing on record any defects in the books of accounts. Accordingly, we set aside the order of Ld. CIT(A) as well as A.O. with regard to the rejection of books of accounts. 18. Since we have held that the rejection of books of accounts was not proper, the consequ .....

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