2008 (4) TMI 357 - AT - Income Tax

Tax Assessments Quashed: Invalid Search, Insufficient Evidence; Unpaid CST Remanded for Verification and Possible Allowance.

Jindal Stainless Limited. Versus Assistant Commissioner Of Income-Tax.

Jindal Stainless Limited. Versus Assistant Commissioner Of Income-Tax. - ITD 120, 301, TTJ 122, 902, Issues Involved:1. Validity of assessment under Section 153A of the IT Act.2. Justification of additions made on account of under-billing.3. Non-observance of principles of natural justice.4. Disallowance of unpaid CST.Issue-Wise Detailed Analysis:1. Validity of Assessment under Section 153A of the IT Act:The primary issue was whether the assessment framed under Section 153A was valid. The assessee contended that no search was initiated against it under Section 132, and thus, the provisions of Section 153A could not be invoked. The Tribunal examined the Panchnamas and search warrants, which were in the name of Shri Sandeep Bansal, an employee of the assessee, and not in the name of the assessee company. The Tribunal concluded that the prerequisite condition for the application of Section 153A was not fulfilled as no search was initiated against the assessee. Consequently, the assessments framed under Section 153A were deemed invalid.2. Justification of Additions Made on Account of Under-Billing:The assessee challenged the addition of Rs. 2,62,68,654 for the assessment year 2003-04 and Rs. 11,59,78,180 for the assessment year 2004-05, made on the basis of the statement of Shri Sandeep Bansal and documents seized from his residence. The Tribunal noted that the statement of Shri Sandeep Bansal was recorded behind the back of the assessee and no opportunity for cross-examination was provided. The Tribunal emphasized that the statement of Shri Sandeep Bansal could not be relied upon without cross-examination, and the documents seized from his residence could not be attributed to the assessee without independent corroborative evidence. The Tribunal also noted that the assessee had provided comparative sales data showing that its prices were comparable to market rates, which the AO and CIT(A) failed to rebut with concrete evidence. Therefore, the additions were deleted.3. Non-Observance of Principles of Natural Justice:The Tribunal found that the AO violated the principles of natural justice by not providing the assessee an opportunity to cross-examine Shri Sandeep Bansal despite repeated requests. The Tribunal held that the failure to provide such an opportunity invalidated the reliance on Shri Sandeep Bansal's statement for making additions. The Tribunal cited several judicial precedents emphasizing the necessity of cross-examination to uphold the principles of natural justice.4. Disallowance of Unpaid CST:For the assessment year 2003-04, the AO disallowed Rs. 69,438 on account of unpaid CST. The CIT(A) upheld the disallowance on the ground that no proof of payment was furnished with the return of income. The Tribunal restored this issue to the AO for verification, directing that if the payment was made before the due date of filing the income tax return, the same should be allowed.Conclusion:The Tribunal quashed the assessments framed under Section 153A as invalid due to the lack of a valid search against the assessee. The additions made on account of under-billing were deleted due to non-observance of principles of natural justice and lack of substantive evidence. The issue of unpaid CST was remanded to the AO for verification. The appeals filed by the assessee were allowed.