TaxTMI 
TaxTMI 
2021 (6) TMI 268
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.... of Income-tax (Appeals) has erred in law and 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 ....
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....ure A/SSE/HYD/06 Rs. 2,06,30,000 on account of page Nos. 23 to 24 of A/VNR/RES/01/Nellore Rs. 3,29,81,535 on account of capital gains in the case of VNR Powertech Pvt. Ltd. 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....
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....by Sri Vakati Narayana Reddy. Relevant portion of the written submission dated nil is reproduced here under : "Some of the transactions relating to the payments which have appeared in page No. l59 of A/SSE/HYderabad/02. impounded from the office of S&S Enterprises. 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 proceedin....
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....or of S&S Enterprises in his sworn statement dated February 27, 2014 stated that the amount was given by Shri Vakati Narayana Reddy. The version of Annamreddy Srinivasulu Reddy was accepted by the assessee and admitted additional income before the Deputy Director of Income-tax (Investigation). 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 m....
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....etc., the learned Assessing Officer was pleaded to asses see the income declared under section 132(4) in the hands of company after analysing the material seized. However, the learned Assessing Officer has not accepted the pleading of the assessee and has not taken any pain to verify whether the seized material stated in the letter, submitted on March 14, 2016 to confirm whether it belongs to the company or to the assessee 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 ....
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....t the discrepancies found in the group companies, sub-contractors and in the case of directors has been considered and proposed to admit additional income of Rs. 101 crores. We bring to your kind notice that the assessee Mr. V. Narayana Reddy does not have any business on his own during the financial years 2007-08 to 2013-14 except being a managing director in VNR Infrastructure Limited and other group companies as director. The statement given at the time of search and subsequent 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....
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....seized material 48,90,578 2. Page Nos. 131 and 132 of Annexure/A/SSE/HYD/06 vide seized material 2,06,30,000 3. Page Nos. 133-139 of Annexure/A/SSE/HYD/06 vide seized material 9,20,16,425 Total 11,75,37,003 The details of above amounts admitted before investigation authorities and the reasons for not admitting the same at the time of filing the return are as follows : Particulars Amount (Rs.) Admitted income before investigation authority in the hands of V. Narayana Reddy 48,90,578 Less: Amount of Rs. 2,00,000 in page No. 119 of Annexure/A/SSE/HYD/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 R....
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....Annexure/A/SSE/HYD/06 vide seized material 20,89,000 Total 2,22,10,994 The details of above amounts admitted before investigation authorities and the reasons for not admitting the same at the time of filing the return are as follows : Particulars Amount (Rs.) Admitted income before investigation authority in the hands of V. Narayana Reddy 61,21,994 Less : As the amount of Rs. 10,62,935 in page No. 120 to 128 of 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 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 Red....
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....R Infrastructure Limited and admitted as additional income before Investigation authorities of Rs. 7,74,86,823 which includes above said amount of Rs. 4,05,63,400 4,05,63,400 Net income to be admitted for the assessment year 2012-13 on this account of Rs. 5,24,67,136 Nil Admitted income before investigation authority in the hands of V. Narayana Reddy 38,70,07,051 Less : M/s. VNR Infrastructure Limited has purchased stock through the following parties Ashish Enterprises 3,83,53,730 J K Enterprises 8,76,10,277 Sairam Enterprises 4,47,53,450 Srinathji Enterprises 9,74,26,651 Swastik Corporation 4,41,23,425 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....
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.... of Mr. V. Narayana Reddy Lakshmi Geetha Reddy and mother Mrs. V. Bujjamma and hence there is no jewellery belongs to the assessee and income not admitted 1,75,00,000 Net income in this account of Rs. 1,75,00,000 is Nil Admitted income before Investigation authority in the hands of V. Narayana Reddy 2,10,00,000 Less : The above transaction on page No. 117 of Annexure A/VNR/A/1 are not related to either Mr. V. Narayana Reddy or his group of companies hence not admitted 2,10,00,000 Net income in this account of Rs. 2,10,00,000 is Nil Admitted income before investigation authority in the hands of V. Narayana Reddy 4,99,61,473 Less : There is no finding of income of Rs. 4,99,61,473 either in the form of entries or any material and the said amount has been admitted 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....