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TMI Blog2021 (6) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on facts in reversing the Assessing Officer's action adding unexplained expenditure of Rs. 2,55,20,578 ; Rs. 2,22,10,994 ; Rs. 43,94,74,187 ; Rs. 6,53,44,000 and Rs. 7,09,61,473 (assessment year-wise) and unexplained income addition of Rs. 1 crore in the assessment year 2013-14 and Rs. 2.10 crores and Rs. 4,99,61,473 in the assessment year 2014-15 respectively alleged based on the assessee's statement recorded during the course of search. 3. The learned Departmental representatives took us to paras 2 to 5.5 of the Commissioner of Income-tax (Appeals)'s common lower appellate discussion to the above effect as under : "2. The facts of the case are as under. The appellant, an individual, is managing director of M/s. VNR Infrastructures Ltd., derives income from salary. Search in this case was conducted on October 23, 2013. Last authorisation for S & S was executed on November 19, 2013. The factual information with regard to date of filing of original return of income, details of income returns are tabulated below for ready reference : Sl. No. Asst. Year Date of filing of original return of income Amount declared in the original return of income (Rs.) Date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. shares ; as additional income of the above to the extent of Rs. 5,85,02,113 to total income. -do- -do- 3. 2011-12 -do- -do- Rs. 61,21,994 on account of page No. 5 of A/GBR/02. Rs. 1,40,00,000 on account of page No. 5 of A/GBR/02. Rs. 20,89,000 on account of property purchased in the hands of K. Subba Reddy, father of the appellant ; as additional income of the above to the extent of Rs. 2,22,10,994 to total income. -do- -do- 4. 2012-13 -do- -do- Rs. 5,24,67,136 on account of bank transactions as well as cash in annexure A/VNRIL/HO/04. Rs. 387007051 on account of page No.33 of Annexure A/VNR/A/1; Therefore, the additional income offered by the company on account of this Rs. 439474187(Rs. 52467136 + Rs. 387007051) is considered on protective basis in the hands of company and in the hands of Shri Vakati Narayana Reddy addition is made on substantive basis. -do- -do- 5. 2013-14 -do- -do- Rs. 6,53,44,000 on account of A/VNRIl/HO/3 Rs. 1 crore on account of advance received from Sri Ganga Prasad. Therefore, the additional income offered by the company on account of this Rs. 7,53,44,000 (Rs. 6,53,44,000 + Rs. 1,00,00,000) is cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The sources for the said expenditure of Rs. 97,17,600 relate to the financial year 2007-08, were provided by Sri VNR. Hence, the total amount of Rs. 97,17,600 is considered as additional income in the hands of Sri VNR in the financial year 2007- 08." 3.3 Finally, Rs. 97, 17,600 was admitted as additional undisclosed income in the individual status of Sri Vakati Narayana Reddy for the assessment year 2008-09. Subsequently, it is observed that the asses see did not offer the above income in the return filed in response to the notice issued under section 153A. Therefore, he was asked to furnish financial statements/receipts and payments account and produce books of account. As the assessee did not furnish the information and produce books for verification, a show-cause notice dated February 11, 2016 was issued to the assessee as to why the undisclosed income admitted during the search/post search proceedings Rs. 97,17,600 for the assessment year 2008-09 should not be added to the total income. The assessee filed reply dated "Nil" in the minute, i. e., on March 28, 2016. He stated that on the day of search without knowing the after reconciling the details of income admitted and wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above Rs. 97,17,600 was added to the total income of the Vakati Narayana Reddy.' 5.2 During the course of appellate proceedings, while reiterating the submissions made during the assessment proceedings, the asses see has submitted as under : The assessee is the managing director of M/s. VNR Infrastructure Ltd, having income from salary from the company and other sources. Search and seizure operations were conducted in the case of M/s. VNR Infrastructures Ltd. and also in the case of its managing directors and other director. During the course of search certain incriminating material pertaining to the company was found at the premises of M/s. VNR Infrastructures Ltd. statement of the managing director and the other director and also the statements of other persons were recorded under section 132(4) of the Income-tax Act. During the course of statement the managing director Narayan Reddy. V and other director Praveen Kumar. G have made disclosures under section 132(4) of the Income-tax Act, amounting to Rs. 74,27,47,257 and Rs. 3,00,00,000 respectively, in the hands of company a further amount of Rs. 23,80,37,378 was made, the aggregate disclosure made is at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee V. Narayan Reddy. The additions are made only on the basis of statement of the assessee under section 132(4) ignoring the fact that the seized material belongs to company M/s. VNR Infrastructures Ltd. Therefore, it is submitted that in the absence of any seized material found during the course of search belonging to the assessee no addition can be made. The Central Board of Direct Taxes in their circular in letter F. No. 286/98/2013-IT (Inv-II), dated December 18, 2014, instructed the Assessing Officer not to obtain disclosures, rather focus on gathering evidence during the search. Therefore, in the case of assessee the additions are made only on the basis of statement made under section 132(4) which is given by the assessee in a state of con fusion and without thinking of consequences, and its impact in the future. The company is a separate entity and the assessee is a separate entity, therefore, any discrepancies found during the course of search in respect of material seized, the company is answerable and the company has to pay the taxes on its income, determined as per the books of account with reference to seized material. The income cannot be assessed in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent proceedings before the Investigation authorities that the details of additional income of Rs. 101 crores was as follows : S. No Assessment Year Name of the assessee Total VNR Infrastructure Ltd V Narayan Reddy G. Praveen Kumar 1 2008-09 13,00,000 97,17,600 0 1,10,17,600 2 2009-10 4,24,19,355 0 0 4,24,19,355 3 2010-11 99,02,500 11,75,37,003 0 12,74,39,503 4 2011-12 70,17,450 2,22,10,994 1,40,00,000 4,32,28,444 5 2012-13 7,74,86,823 43,94,74,187 0 51,69,61,010 6 2013-14 8,27,09,250 6,53,44,000 70,00,000 15,50,53,250 7 2014-15 1,72,02,000 8,84,61,473 90,00,000 11,46,63,473 Total 23,80,37,378 74,27,45,257 3,00,00,000 101,07,82,835 However, after verifying and reconciling the details of income admitted as per the seized material with regular books of account and business of the VNR Infrastructure Limited and its group companies it has been found that the income was inappropriately admitted in the case of V. Narayana Reddy instead of the company M/s. VNR Infrastructure Limited those transactions are related to the company or reflected in the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... YD/06 vide seized material-pertaining to the sub contract transaction of M/s. VNR Infrastructure Ltd. and hence the same may be considered as part of additional income offered for the assessment year 2010-11 of Rs. 99,02,500 2,00,000 Less : As the amount of Rs. 23,37,578 in page Nos. 120 to 128 of Annexure/A/SSE/HYD/O6 vide seized material - expenditure incurred at site which has been accounted in regular books of account of VNR Infrastructure Limited and copy of the cash book/ledger account of M/s. VNR Infrastructure Limited enclosed 23,37,578 Less : As the amount of Rs. 23,53,000 in page No. 129 Annexure/A/SSE/HYD/06 vide seized material-expenditure incurred at site which has been accounted in regular books of account of VNR Infrastructure Limited and copy of the cash book/ledger account of M/s. VNR Infrastructure Limited enclosed 23,53,000 Net income to be admitted for the assessment year 2010-11 m this account of Rs. 48,90,578 Nil Admitted income before investigation authority in the hands of V. Narayana Reddy 2,06,30,000 Less : As the amount of Rs. 1,65,30,000 in page No. 131 of Annexure/A/SSE/HYD/06 Madhavi BT-HPCL A/c on 29-6-09 to 8-9-09 vide seized mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructure Limited enclosed 10,62,935 Less : As the amount of Rs. 50,59,059 in page No. 129 Annexure/A/SSE/HYD/06 vide Seized material-expenditure incurred at site which has been accounted in regular book of account of VNR Infrastructure Limited and copy of the cash book/ledger account of M/s VNR Infrastructure Limited enclosed 50,59,059 Net Income to be admitted for the assessment year 2011-12 on this account of Rs. 61,21,994 Nil Admitted income before investigation authority in the hands of V. Narayana Reddy 1,40,00,000 Less : The amount of Rs. 1,40,00,000 vide page No. 130 of Annexure A/GBR/02-not related to either Vakati Narayana Reddy or related to the company M/s. VNR Infrastructure Limited or its group of companies as there is no mention about the V. Narayana Reddy or its group of companies and the papers are not related to him and or not available in his custody and the writing of the said manuscript are not known by the assessee. Since the above documents not pertaining to the V Narayana Reddy or his group of companies, the same cannot be considered as Income in the hands of V. Narayana Reddy or VNR Infrastructure Ltd. 1,40,00,000 Net Income to be admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Venus Trading Company 7,47,39,518 And the said stock was lying in the closing stock of M/s. VNR Infrastructure Limited for the year ending 31-3-12 and 31-3-13 and subsequently the same has been considered as consumed and hence the same has been admitted as income in the assessment year 2014-15 of Rs. 38,70,07,051 8,70,07,051 Net income to be admitted for the assessment year 2012-13 on this account of Rs. 38,70,07,051 is NIL For the assessment year 2013-14 Particulars Amount (Rs.) Admitted income before Investigation authority in the hands of V. Narayana Reddy 6,53,44,000 Less : An amount of Rs. 35,44,000 relates to Vidya Engineering - material supplier of M/s. VNR Infrastructure Limited which has been reflected in books of account, we are herewith enclosing the ledger extract in the books of VNR Infrastructure Ltd. 35,44,000 Less : As the amount of Rs. 18,00,000 in page No. 4 Annexure/A/SSE/HYD/06 vide seized material-expenditure incurred at site which has not been accounted in regular books of account of VNR Infrastructure Ltd. and admitted as additional income before Investigation authorities of Rs. 8,27,09,250 which includes above said amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted without verifying the transaction as a balance amount at the time of search operations, however, after verifying the seized material and regular books of account, there is no such additional income received by the assessee and hence the same has not been offered to tax in the return of income 4,99,61,473 Net income in this account of Rs. 4,99,61,473 is Nil In view of the above, we submit that the assessee has admitted the income which is relevant to the assessed in his hands as explained above and hence the same may be assessed to tax.' 5.5 I have considered the assessment order, submissions of the assessee made during the assessment proceedings, appellate proceedings and the material placed before me. The assessee made detailed submissions before the Assessing Officer claiming that the 'Income/entries' in the seized material relate to the company and offered the same amounts as income as per admission in the hands of the company. The claim of the assessee has not been contradicted by the Assessing Officer. The Assessing Officer has made addition on account of statements given during the course of search by different persons and admission under section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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