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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
In assessment year 2007-08, there is an appeal by assessee in ITA No.127/Bang/2020 which is emanated from the order of CIT(A) dated 23.10.2019, which is in turn emanated from the substantive assessment order dated 25.3.2014. Further, there is an appeal by revenue in ITA No.575/Bang/2020 which emanated from the CIT(A) order dated 27.2.2020, which is in turn emanated from the protective assessment order dated 25.3.2014. The assessee also filed a cross objection in support of the order of CIT(A) dated 27.2.2020 in the case of that assessee.
Further, there are 5 appeals by assessee against the order of CIT(A) dated 21.3.2018 for the assessment years 2008-09 to 2011- 12. Since certain issues in all these appeals are common in nature and also relating to same assessee, these are clubbed together, heard together and disposed of by this common order for the sake of convenience.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 3 of 55 3. First we take up the appeals in ITA Nos.1658 to 1661/Bang/2018 for the A.Ys 2008-09 to 2011-12. Since issues in all these appeals are common in nature these are heard together and disposed of by this common order for the sake of convenience.
ITA Nos.1658 to 1661/Bang/2018 for the AYs 2008-09 to 2011- 12: 4. The brief facts of the case are that the assessee company is a manufacturer of alcoholic beverages. The Search and seizure operation u/s 132 of the Income-tax Act,1961 ['the Act' for short] was conducted in the premises of the assessee on 08.12.2011 and 16.12.2011. During the course of search certain incriminating documents were seized and the statement of the Finance Manager and the Executive Director of the Company were recorded.
The proceedings u/s 153A of the Act were initiated by, issuing notice dated 23.11.2012. During the course of search, incriminating' documents were seized from the premises of the assessee at Wilson Garden, Bangalore. From among the documents seized, the authorities found that the assessee company had made huge purchases from three concerns (i) M/s. Vinayaka Fruit Mandi, (ii) M/s. Venkateshwara Bottle Traders (both of which concerns, one Mr. A Manjunath was a proprietor) and (iii) M/s. Srinivasa Bottle Traders (name of the proprietrix is Mrs. Susheelamma, who is mother of Mr. A Manjunath). The seized documents including the bank details indicated inter alia that though these concerns stood in the name of Mr. A Manjunath and his mother, these were de facto controlled by M/s. SPR Group Holdings Private Limited. The seized materials also indicated that there were huge payments above Rs.20,000/- made in cash in contravention of the provisions of Section 40A(3) of the Act. 1961. The seized material further indicated that some payments were made which were hit by the explanation to provision section 37(1) of
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 4 of 55 the Act. Moreover, the local enquiry conducted by the AO through his inspector revealed that no such concerns were in existence in the address provided by the assessee. With all these incriminating materials, Sri Janardhan.V, Internal Auditor and Finance Manager of the assessee company were confronted and his statements was recorded as under:-
"Q.1. Please identify yourself. Ans. I am Sri. Janardhan.V, Internal Auditor and Finance Manager of SPR Group Holdings, S/o.Shri.Late Varadaraja Iyengar and residing at No.12161650, 12 Cross, 6 Main, Girinagar 2 Phase, Bangalore 560085. Q.3 Please identify the following persons and explain the transactions with them. M/s.Srinivasa Bottle Traders, Prop: Susheelamma, Mr. Manjunath A Prop: Venkateshwara Bottle Traders, M/s. Venkateshwara Fruit Mandi (Prop Manjunath A) and M/s. Vinayaka Fruit Mandi (Prop Manjunath A). Ans. Mr. Manjunath A and Mrs. Susheelamma his mother were earlier suppliers to SPR Holdings Pvt. Ltd. This was about 5 years ago i.e. prior to FY 2006-07. However, subsequently from FY 2007-08 onwards, they are not supplying any good or service to us. Sale bills by them are however being provided which are for the purposes of accommodation entries. The purchases of goods and services from them have actually not taken place since FY 2007-08 and the amounts debited on their account are for meeting several cash expenses that have to be incurred for business purposes. The cash that is returned back by these persons are used for labour payments made in cash and other miscellaneous payments. Q.4 Several papers have been found which refer to "M.M.Payments". Please explain the same. Ans. These are Miscellaneous payments incurred in the course of business promotion and are according to the instructions of the management. Q.5 I am showing you ledger copies where the payments made to the concerns are as per list below:
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 5 of 55
As per the replies submitted above, the payments made to the extent of Rs.27,49,31,189/- for the various years listed against parties in whose name the same have been booked are bogus. Do you agree? Ans. I Agree. 6. The detailed statement of Sri. Suresh Gowda has been quoted in the Assessment Order. On analysis of such statement, Sri. Suresh Gowda was asked to produce Sri. Manjunath before the Assessing Officer for confirmation of the transactions. This was not done. However in response, Sri. Thimme Gowda filed a reply denying any liability arising out of the transaction recorded in the seized incriminating documents.
The AO however, declined to accept such explanation and completed the assessments making the additions of Rs.27,49,31,180/- spread over four years as under:-
S.No. Asst. Year Undisclosed income (Rs.) 1. 2008-09 16,74,23,150 2. 2009-10 3,92,55,717 3. 2010-11 4,22,50,000 4. 2011-12 2,60,02,322 8. Before the CIT(Appeals), the assessee contended that the AO has erroneously relied on the deposition of Shri V.Janardhan, the accountant and internal auditor who was only entrusted with the responsibility of maintaining the books of accounts of the assessee company along with other business concerns unrelated to the
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 6 of 55 appellant company. On a misplaced reasoning that any payment made over and above Rs.20,000/- is not allowable as expenditure as per Section 40A(3) of the Income Tax Act, the AO has treated the entire payment made to the aforesaid three concerns towards purchase made during the financial years 2007-08 to 2010-11 aggregating to a sum of Rs.27.49 Crores as bogus expenditure, and has added it back to the Income returned for the relevant assessment years and levied tax on the same.
The assessee submitted that all the purchases of grapes, agricultural produce and bottles from M/s. Srinivasa Bottle Traders, M/s. Vinayaka Fruit Mandi and Venkateshwara Bottle Traders were all genuine and duly supported by invoices issued by the respective parties. Goods Receipt Notes (GRNs) duly stamped and signed acknowledging the actual receipt of the material at the premises of the assessee and proof of payment towards the purchases through authorized banking channels. These are genuine business concerns not related to the assessee Company in any manner and are duly registered with the appropriate statutory authorities and are filing periodical VAT returns, statements, etc. Payments towards all the purchases were made only through Account Payee Cheque, bank transfer, etc. Admittedly, a few documents such as, ledger extract, cash voucher, cheque books, deposit slips, etc., were available with the assessee Company during the time of search. But the Promoters and Directors of the assessee company were largely oblivious of these facts. Factually the Internal Auditor and Accountant Sri. V Janardhan has also undertaken to maintain the books of accounts of these business entities in his personal capacity and solely for the sake of his convenience had maintained the accounts and documents and records pertaining to these business concerns at the premises of the assessee. This has been admitted by Sri. Suresh Gowda, Director
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 7 of 55 of the Company in his sworn statement which has been extracted in page 12 of the impugned order (Q.No.10). As stated earlier, the management of the Company were largely unaware of this act of Sri. V Janardhan and the stationery belonging to the assessee company was found to have been used for the book keeping tasks of these business entities.
The assessee submitted that the AO has also relied on such other factors like the withdrawal of cash by the business entities on the same day of receipt of funds from the assessee company, the presence of signatures of the Proprietors of these business entities on both sides of cheques evidencing cash withdrawal, presence of self-made cash vouchers belonging to these business entities, etc., to hold that the payments made to these entities were bogus. It is most respectfully submitted that all these factors had no bearing on the assessee Company as they merely pertained to the suppliers of the assessee.
The CIT(Appeals) observed that during the course of seizure proceedings, the statement of Sri V. Janardhan, the Internal Auditor of the Company was recorded and he, in his statement, clearly indicated that all the transactions like payments in the nature of "M.M. Payments" which are not allowable u/s 37 of the Act were made with the instruction of the management. (Vide answer to Q.No.4). Moreover, the statement of Sri V. Janardhan to this extent was corroborated with the statement of Sri Suresh Gowda, the Director of the Company. However, he failed to produce Sri Manjunath A, for examination by the AO to confirm the transaction. Finally, it was misconceived that the entire addition was made for infringing the provision of section 40A(3) of the Act. The fact is that the transaction itself was held as bogus. Therefore, the contention of the assessee that the transaction was genuine and legal is devoid of
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore Page 8 of 55 any objective basis. The details of the transaction and its fallibility had been discussed by the AO by marshalling the facts in details in his assessment order. The CIT(Appeals) confirmed the orders of the AO. Against this, the assessee is in appeal before us.
The assessee has raised following main grounds which are common in all the appeals except change in figures:-
The order of the Hon'ble Commissioner of Income Tax (Appeals)-11 is opposed to law and facts of the case.
The Hon'ble Commissioner of Income Tax (Appeals) erred in upholding disallowance of expenses aggregating to Rs.16,74,23,150/-.
The Hon'ble Commissioner of Income Tax (Appeals) erred in treating the transactions with M/s. Vinayaka Fruit Mandi and M/s. Srinivasa Bottle Traders as bogus.
The Hon'ble Commissioner of Income Tax (Appeals) committed an error in upholding the additions, relying on the statements of Mr.Janardhan and Mr. Suresh Gowda and holding that M/s. Vinayaka Fruit Mandi, M/s. Srinivasa Bottle Traders and M/s. Venkateshwara Bottle Traders are non-existing concerns.
The Hon'ble Commissioner of Income Tax (Appeals) failed to appreciate that the appellant did incur expenditure on purchase of raw materials and bottles for the purpose of manufacture and sale of alcoholic beverages.
The assessee has raised following additional grounds in all the appeals:-
The order of the Learned Assessing Officer (‘LAO’) and Hon’ble Commissioner of Income tax (Appeals) (‘Ld. CIT(A)’) is opposed to law and general principles of natural justice as applicable to quasi judicial proceedings. 2. The order of the LAO and Ld. CIT(A) is bad in law and against the provisions of section 153A, since amongst others, the additions are not based on any incriminating material found during the course of search.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 9 of 55 3. Without prejudice to above grounds, the order passed by the LAO is bad in law since the LAO has not provided an opportunity to the Appellant to cross examine certain personnel whose statements have been recorded on oath during the course of search. 4. For the above and other grounds that may be urged at the time of hearing of the appeal the appeal may be allowed and justice rendered.
The assessee filed petition for admission of additional ground explaining the reason for raising the additional ground and also placed reliance on the judgement of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 and also judgement of Hon’ble Karnataka High Court in the case of Gundappa Kunnappa & sons. The Ld. D.R. put strong oppose for admission of additional grounds.
We have heard the rival submissions and perused the record on the admission of additional grounds. The assessee explained that all the facts relevant to the issue raised in additional grounds are already on records. This ground was also urged before Ld. CIT(A). However, it was inadvertently omitted from the original grounds of appeal filed before the Tribunal. The omission by the assessee is bonafide and these grounds do not require any investigation of fresh facts otherwise on record. Accordingly, these additional grounds are admitted for adjudication.
Ground No.1 of the additional ground which is too general in nature and the AO as well as CIT(A) has given ample opportunity of hearing to the assessee to plead its case before them. As such, the assessee not made out of a case that there is any violation of principles of natural justice. Accordingly, first additional ground is dismissed.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 10 of 55 17. Ground No.2 of the additional ground is with regard to framing assessment u/s 153A of the Act. In this case, there was a search action in the case of SPR Group Holdings Pvt. Ltd. On 8.12.2011 and 16.12.2011. Simultaneously search operation was conducted on 8.12.2011 in the factory premises of M/s. SPR Group Holdings Pvt. Ltd. No.122/123 Mysore Road,, Manchanayanahalli, Bididi post, Ramnagar Taluk. Consequently, notice u/s 153A of the Act dated 23.11.2012 was issued to the assessee requiring him to file the return of income within 20 days from the receipt of the notice. In response to notice u/s 153A of the Act assessee filed return of income on 5.1.2013 and participated in the assessment proceedings and assessment order was passed on 25.3.2014. Now the contention of the Ld. A.R. is that the AO has no jurisdiction to issue notice u/s 153A of the Act for the assessment year 2008-09 to 2011-12 (4 assessment years). Now the Ld. A.R. submitted as follows:- a. The proceedings under section 153A of the Income-tax Act, 1961 (‘the Act’) were completed without basing the same on incriminating material despite the assessment of Appellant for the impugned years having been concluded. This is because, the original return of income of the assessee for the relevant AYs was filed within the statutory due dates; the time limit for issue of notice under section 143(2) of the Act had lapsed and no such notice was issued. In this regard, reliance is placed on the following judgments:-
i. PCIT vs Meeta Gutgutia (405 ITR 28) (SC); ii. Yunus Zia v. DCIT (ITA No. 126 to 130/Bang/2013 (Bang. Trib); iii. Chintels India Ltd v. DCIT (397 ITR 416) (Delhi HC); iv. CIT v. Continental Warehousing Corporation Ltd (374 ITR 645) (Bom HC); v. DCIT v. Saravana Stores (61 ITR ( Chennai Trib) 20)
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 11 of 55 b. The assessment u/s 153A of the Act ought to be quashed since it is not based on any incriminating material but is based on:
i. Books of account of the assessee – it is the purchase ledger copies of the Appellant that was shown to Sri Janardhan and no fresh material that was incriminating; and
ii. Sworn statement / admission of Sri Janardhan where Sri Janardhan has stated that the expenditure on purchase of grapes and bottles from three vendors (Vinayaka Fruit Mandi, Srinivasa Bottle Traders and Venkateshwara Bottle Traders) is bogus.
In this regard, reliance is placed on the following judgments :-
(i) CIT v. IBC Knowledge Park (P) Ltd (69 taxmann.com 108) (Kar HC); (ii) PCIT v. Best Infrastructure (India) (P) (Ltd) (84 taxmann.com 287) (Del HC); (iii) Delhi HC in CIT v. Kabul Chawla (61 taxmann.com 412).
c. No opportunity was given by the AO to cross examine Sri Janardhan who, without basis, had stated that the expenditure on purchase of grapes and bottles from three vendors (Vinayaka Fruit Mandi, Srinivasa Bottle Traders and Venkateshwara Bottle Traders) is bogus. This opportunity ought to have been given by the AO as a general principle of natural justice as applicable to a quasi- judicial proceeding.
In this regard, reliance is placed on the following judgments:-
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 12 of 55 (i) Andaman Timber Industries and Commissioner of Central Excise, Kolkata (Civil Appeal No. 4228 of 2006) (SC); (ii) Veena Gupta v. ACIT (5662/Del/2008) (Del Trib.)
The Ld. D.R. submitted that the assessment was rightly framed u/s 153A of the Act. The ld. DR submitted that the assessee, M/s. SPR Spirits Pvt. Ltd (erstwhile M/s. SPR Group Holdings Pvt. Ltd) and its other sister concerns/associate concerns are covered u/s 132 of IT Act. A Search action was conducted on 8.12.2011. The Directors of the SPR Group are also covered u/s 132 of IT Act. The addition made for the following Asst. Year as under:
S.No. Asst. Year Undisclosed income (Rs.) 1. 2008-09 16,74,23,150 2. 2009-10 3,92,55,717 3. 2010-11 4,22,50,000 4. 2011-12 2,60,02,322
The ld. DR brought to our notice the additions made on the basis of incriminating material found during the course of search and submitted that incriminating documents (found at the business premises of M/s. SPR Group) of bogus entities namely M/s. Vinayaka Fruit Mandi, Venkateshwara Bottle Traders and Srinivasa Bottle Traders contains self- made cash voucher, deposit and withdrawal slips etc. He stated that statement of Shri V. Janardhan, Internal auditor and Finance Manager of M/s SPR Group Holdings Private Ltd (now known as M/s. SPR Spirits Pvt. Ltd - hereinafter referred as SPR) was recorded wherein he clearly admitted that there is no purchase of any goods or services from these concerns. Further the statement from Shri Suresh Gowda, Executive Director of the company was recorded and confronted with the incriminating
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 13 of 55 material found during the course of search and also confronted with statement recorded from Shri V. Janardhan, Internal auditor and Finance Manager of the company. Shri Suresh Gowda, Executive Director of the Company after acknowledging the incriminating material admitted an additional income of Rs. 15 crores for Asst. Year 2009-10 to 2012-13. The AO has elaborated the modus operandi and the statement of Shri Suresh Gowda in para 9 to 13 of Assessment order. Relevant portion of statement recorded from Shri Suresh Gowda is also made part of Assessment order.
The ld.DR submitted that Shri Suresh Gowda, Executive Director of company was specifically asked to produce Shri A. Manjunath, Prop of M/s. Vinayaka Fruit Mandi and M/s. Venkateshwara Bottle Traders for examination. However, there was no response from Shri Suresh Gowda, Executive Director of the company.
A final show cause notice was issued in the month of January 2014 as the case was getting time barred by 31st March 2014. This was issued after analysing the incriminating documents seized during the course of search and on the basis of enquiries conducted thereafter. In compliance to the Show cause notice, Shri Thimmegowda, Director of company filed a reply contradicting the statement of Shri V. Janardhan, Internal Auditor and Finance Manager and Shri Suresh Gowda, Executive Director of company. Here it is pertinent to mention that:-
(1) The statement of Shri V Janardhan and Shri Suresh Gowda was recorded u/s 132(4) of the IT Act.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 14 of 55 (2) The reply by Mr. Thimmegowda in compliance to show cause notice is without any supporting documents whatsoever.
(3) There is no allegation of any undue influence, coercion, threat by the Department, while recording statement from Shri V Janardhan and Shri Suresh Gowda.
The ld.DR placed reliance on the following judgments,
(i) DCIT vs. Geneva Industries Ltd., taxmann.com 406 (Bengaluru - Trib)
wherein it is held that the addition was made to income of assessee on account of unexplained investments on basis of loose sheets found during search on its premises, since assessee had merely denied said investments without tendering any credible examination, there was no discharge of initial burden of proof on part of assessee, thus, impugned addition was justified. (ii) Pr.CIT New Delhi vs. Avinash Kumar Setia 395 ITR 235 (Delhi High Court)
wherein it is held that the assessee surrendered certain income by way of declaration and withdraw same after two years without any satisfactory explanation, it could not be treated as bona fide and, hence, addition would sustain. (iii) T. Lakhamshi Ladha & Co. vs. CIT Mumbai, 386 ITR 24 5 (Bombay High Court) wherein it is held that the statement made by senior partner of assessee firm at time of search could not be retracted by other partner in absence of any allegation of any pressure and coercion by revenue and there being no evidence to establish that original statement was incorrect.
The Ld. D.R. submitted that from the seized material, it was found that there were three proprietary concerns fully managed by M/s SPR Group Holdings namely M/s. Vinayaka Fruit Mandi, M/s. Venkateshwara Bottle Traders (name lending proprietor is A Manjunath) and M/s. Srinivasa Bottle Traders (name lending
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 15 of 55 proprietor is Mrs Susheelamma, mother of Sri A Manjunath and also the power of attorney holder).The concerns had the following bank accounts:-
S. Proprietorship A/c Number Bank and Branch No. concern
1 M/s. Vinayaka Fruit 0794201003601 Canara Bank, Mandi Seshadripuram Branch 2 M/s. Venkateshwara 0794201003601 Canara Bank, Bottle Traders Seshadripuram Branch 3 M/s. Srinivasa Bottle 0794201003505 Canara Bank, Traders Seshadripuram Branch
Examination of bank account statements of the above concerns obtained from the bank showed the following:-
(a) The money has been transferred by way of cheque from the bank account of M/s.SPR Group Holdings Pvt. Ltd., only. The amounts have been withdrawn on the same day or the immediate next day by way of self cheque. (b) It was also found in the seized material that the cheque leaves have been signed by Sri. A Manjunath on both the sides so that somebody can withdraw on his behalf. (c) The banks were requested to furnish instruments such as deposit slips and withdrawal slips used in depositing the cheque and withdrawing cash from the above mentioned accounts. (d) For all the transactions the deposit and withdrawal slips were not signed by Sri A Manjunath. (e) However in one case while mentioning it in the deposit slip it was mentioned as M/s SPR Group Holdings only.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 16 of 55 25. According to the department, the other incriminating material found in the searched premises were as follows:-
(a) Self-made cash vouchers were found where in payments, exceeding Rs 20,000 were booked in the name of M/s.Vinayaka Fruit Mandi, M/Venkateshwara Bottle Traders and M/Srinivasa Bottle Traders. (b) Certain vouchers contained payments which were made in violation of law which would attract Explanation to section 37(1) and were booked in the name of M/s.Vinayaka Fruit Mandi, M/Venkateshwara Bottle Traders and M/Srinivasa Bottle Traders. (c) The idea is to book these non-allowable expenditures in the above mentioned bogus entities, so that the main company M/s SPR Group Holdings will remain insulated from any blemish. (d) The seized material also contained books of accounts of above mentioned 3 bogus entities where in credit entries on issuance of cheque from M/s SPR Group Holdings to these entities and a corresponding debit entry as to how this expenditure has to be booked. (e) Surprisingly by the debit side entries in these bogus entities no purchases of either any bottles or grapes which are allegedly supplied to M/s SPR Group Holdings is made. (f) Interestingly the debit side entries are replete with the instances of money being paid to few employees of M/s SPR Group Holdings or their group concerns for handling certain group expenses. (g) The debit entries also contain sums being paid to or expenses being made on behalf of Sri Timmegowda and their family members namely Sharath Gowda, Prasanna Gowda, Suresh Gowda, Sunitha and Vinutha. (h) The debit entries in these bogus entities also contains payments made in the name of Factory expenses obviously meaning M/s SPR Group Holdings, M/s Lotus Mall PN/ Ltd, M/s Alpine Wineries and other SPR Group concerns.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 17 of 55 (i) The debit entries also contain expenses being made for the family members of Timmegowda and the fuel expenses of the vehicles used by them and for various other purposes. 26. The above incriminating documents were confronted to Shri. Janardhan V., Internal Auditor and Finance Manager of M/s. SPR Group Holdings Pvt. Ltd., on the day of search and a statement u/s.132(4) was recorded from him at the office premises, Wilson Garden, Bangalore. According to the AO, in the statement, Shri. Janardhan has clearly admitted that there is no purchase of any goods or services after financial year 2007-08 onwards from M/s. Srinivasa Bottle Traders, M/s. Venkateshwara Bottle Traders, and M/s. Vinayaka Fruit Mandi. The AO came to the conclusion that the company SPR Group Holdings Pvt. Ltd. has created the above three entities for the purpose of inflation of expenses in the name of purchase of bottles and grapes. But in reality, there is no any such purchase. The company has transferred the amounts by cheque to the bank accounts of the above concerns and the same has been withdrawn through self-cheque which has been utilized for the payment of certain expenses which are not allowable u/s. 37(1) of the Act. The AO caused enquiry with regard to location of these concerns and deputed the ITI, who furnished his report as follows:-
" Enquiry Report As per direction by the DCIT-CC 1(3) open enquiry is made in the following addresses 1. Sri.A.Manjunath #.58/2,8th cross, 12th main, Nanjappa Layout, Adugodi, B'lore-30. 2. #.65, 2nd cross, 3rd main, Rajajinagar, B'lore-10 3. #.3866, 10th cross, 1st main, gayatheri nagar, B'lore. 4. #.214/5B,Nayandahalli,Kengri, Hobli, B'lore. 5. #.55/160,5th Main Rd, 8th Cross, Malleswaram, B’lore. 6. Smt.A.Susleelamma. #.55/160,5th main, 8th cross, Malleswaram, Bangalore. 7. Srinivas Bottle traders.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 18 of 55 #.67, Old.No.2, 3rd cross, Jolly Masjid Rd, Bangalore-53. As per the enquiry conducted by me on my personal visit on.16- 01-2014, at the above mentioned address at serial no.1 & 2 and on 20- 01-2014 I had visited at the above mentioned address at SI.No.3,4,& 5. Further, On 22-01-2014 I had visited the above mentioned address at SI.6&7. It was conveyed to me by the neighbors and the locals that there exists no person by that name in the above mentioned addresses or in the nearby locality." 27. From the above facts, the AO was of the view that it is very much clear that the company has resorted to inflation of expenses and there by generation of cash and part of the same has been utilized for the purpose of certain expenses which are not allowable as per Sec.37(1) of the I T Act.
Further, on examination of the bank accounts and ledger extracts of the concerns M/s. Vinayaka Fruit Mandi and M/s. Srinivasa Bottle Traders, the AO observed that the total payment made by the company to these concerns is amounting to Rs. 26,70,71,421/- during the financial year 2007-08 to 2011-12. The above incriminating documents were confronted to Shri. Suresh Gowda, one of the Director of M/s. SPR Group Holding Pvt. Ltd. and a statement was recorded on the date of search and subsequently. In the statement, Shri. Suresh Gowda admitted to the fact that these entities were created for the purpose of inflation of expenses of the company and thereby generation of cash. He also contended that the entire payment is not bogus and thereby, he further contended that part of the payment made for the purpose of purchase of bottles by the company from the above concerns. Shri. Suresh Gowda in his statement has admitted that the expenses amounting to Rs.15.00 crores out of Rs.27.70 crores may be treated as non-allowable expenditure and the same has been admitted as undisclosed income. The undisclosed income admitted is Rs.10.50 crores for the AY 2009- 10 and Rs.4.50 crores for the AY 2010-11.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 19 of 55 29. The relevant portion of the statement is reproduced as under:-
"Q.No.3.: I am showing you page Nos. 1 to 105 of the seized material marked as A/SPRGHPL/2 seized during the course of search u/s.132 of the 1 T Act at M/s.SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 105 of the seized material marked as A/SPRGHPL/2 consisting of cash vouchers of the company SPR Group Holdings Pvt.Ltd. The payments varies from Rs.50,000/- to Rs.10,00,000/- in cash towards certain expenses. Q.No.4.: I am showing you page Nos. 1 to 76 of the seized material marked as A/SPRGHPL/3 seized during the course of search u/s.132 of the I T Act at M/s.SPR Group Holding Pvt.Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 76 of the seized material marked as A/SPRGHPL/3 consists of cash vouchers and ledger extracts of cash payments of the company SPR Group Holdings Pvt.Ltd., The same folder at page No.54 to 64 also consists of cash vouchers debited to M/s. Srinivasa Bottle Traders. Q.No.5.: I am showing you page Nos. 1 to 42 of the seized material marked as A/SPRGHPL/4 seized during the course of search u/s.132 of the I T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 42 of the seized material marked as A/SPRGHPL/4 consists of bank statements for the financial year 2007- 08 to 2009-10 bearing current account No. 0794201003505 of M/Srinivasa Bottle Traders maintained at Canara Bank, Seshadripuram Branch, Bangalore. Q.No.6. The examination of the above account mentioned at Q.No.5 shows that the money has been transferred by way of cheque from the bank account of M/s. SPR Group Holdings Pvt.Ltd., only. The same amounts have been withdrawn on the same day or the immediate next day by way of self cheque. Please explain the transactions. Ans. Shri. Manjunath was looking after the business of procuring bottles from various sources for the use of our production. The payments to Shri. Manjunath - M/s. Srinivasa Bottle Traders were being made by way of crossed cheques from our company. He had to apparently draw the money to make the various payments against the purchases affected by him and also to meet such other expenses. This could be the reason
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 20 of 55 for the cash being drawn out immediately on transfer of cheque payments from us to his bank account. Q.No.7.: I am showing you page Nos. 1 to 86 of the seized material marked as A/SPRGHPU5 seized during the course of search u/s.132 of the I T Act at M/s.SPR Group Holding Pvt.Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 86 of the seized material marked as A/SPRGHPU5 consists of cash vouchers of various payments of the company SPR Group Holdings Pvt.Ltd. Q.No.8.: I am showing you page Nos. 1 to 19 of the seized material marked as A/SPRGHPU6 seized during the course of search u/s.132 of the I T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 19 of the seized material marked as A/SPRGHPU6 consists of bank statements for the financial year 2009- 10 and 2010-11 bearing current account No. 0794201003601 of M/s. Vinayaka Fruit Mandi maintained at Canara Bank, Seshadripuram Branch. Q.No.9 The examination of the above account mentioned at answer to Q.No.8 shows that the money has been transferred by way of cheque from the bank account of M/s. SPR Group Holdings Pvt Ltd only. The amounts have been withdrawn on the same day or the immediate next day by way of self cheque. The statement also shows that the proprietor of M/s. Vinayaka Fruit Mandi is Shri. A. Manjunath, who is the joint account holder. Please explain the transaction. Ans.: Shri. Manjunath was looking after the business of procuring grapes from various sources for the use of our production. The payments to Shri. Manjunath — M/s. Vinayaka Fruit Mandi were being made by way of crossed cheques from our company. He had to apparently draw the money to make the various payments against the purchases effected by him and also to meet such other expenses. This could be the reason for the cash being drawn out immediately on transfer of cheque payments from us to his bank account. Q.No.10 Please explain why the bank statement of M/s. Vinayaka Fruit Mandi is found in the business premises of M/s. SPR Group Holdings Pvt. Ltd? Ans.: Shri. Janardhan, our accountant was also looking after the accounts of both the concerns viz., M/s. Srinivasa Bottle Traders and M/s. Vinayaka Fruit Mandi. I am told by Shri. Janardhan that he had collected all the details from the said Shri. Manjunath to update the
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 21 of 55 accounts. This is the reason why some of the papers and documents relating to these concerns are found in our office. Q.No.11.: I am showing you page Nos. 1 to 119 of the seized material marked as A/SPRGHPL/7 seized during the course of search u/s.132 of the I T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 119 of the seized material marked as A/SPRGHPL/7 consists of cash vouchers of payments of the company SPR Group Holdings Pvt. Ltd. Q.No.12.: I am showing you page Nos. 1 to 165 of the seized material marked as A/SPRGHPL/14 seized during the course of search u/s.132 of the I T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 165 of the seized material marked as A/SPRGHPL/14 consists of folder containing copies of monthly VAT returns in the case of M/s. Srinivasa Bottle Traders and M/s. Venkateshwara Bottle Traders for different years. Q.No.13.: Please explain why the VAT returns of M/s. Srinivasa Bottle Traders and M/s. Venkateshwara Bottle Traders are found in the business premises of M/s. SPR Group Holdings Pvt. Ltd? Ans.: My answer to Q.No.10 holds good for this question also. Q.No.14.: I am showing you page Nos. 1 to 38 of the seized material marked as A/SPRGHPL/19 seized during the course of _search u/s.132 of the I T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 38 of the seized material marked as A/SPRGHPLI19 consists of self-made cash vouchers in the name of M/s. Vinayaka Fruit Mandi for the period 19/06/2010 to 14/03/2011. Q.No.15.: I am showing you page Nos. 1 to 33 of the seized material marked as A/SPRGHPLJ20 seized during the course of search u/s.132 of the I T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 33 of the seized material marked as A/SPRGHPLJ20 consists of self-made cash vouchers in the name of M/s. Srinivasa Bottle Traders for the period 08/05/2009 to 18/12/2009. Q.No.16.: I am showing you page Nos. 1 to 28 of the seized material marked as A/SPRGHPL/23 seized during the course of search u/s.132
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 22 of 55 of the I T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The page Nos 1 to 28 of the seized material marked as A/SPRGHPL/23 consists of self-made cash vouchers in the name of M/s. Vinayaka Fruit Mandi. Q.No.17.: I am showing you the 21 pages of the seized material marked as A/SPRGHPL/26 seized during the course of search u/s.132 of the I T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The 21 pages of the seized material marked as A/SPRGHPU26 consists of signed cheque book of M/s. Vinayaka Fruit Mandi bearing current account No.0794201003601 maintained at Canara Bank, Seshadripuram Branch. The cheque leaves have been signed by Shri. A. Manjunath, Prop: M/s. Vinayaka Fruit Mandi. Q.No.18 The details of the cheques already issued as per the counter-foil in the cheque book shows that all the cheques have been used as self cheque for withdrawal of cash. Please explain the reason for withdrawing' the cash as self cheque. Ans.: My answer to Q.No.9 shall hold good for this question also. Q.No.19.: Please explain the reasons why the entire cheque book consisting of signed cheque leaves of M/s. Vinayaka Fruit Mandi bearing current account No.0794201003601 maintained at Canara Bank, Seshadripuram Branch is found in the business premises of M/s. SPR Group Holdings Pvt. Ltd. Ans: My answer to Q.No.9 shall hold good for this question also. Q.No.20.: I am showing you the 47 pages of the seized material marked as A/SPRGHPL/27 seized during the course of search u/s.132 of the I T Act at M/s. SPR Group Holding Pvt. Ltd., Wilson Garden, Bangalore. Please go through the same and explain the contents therein. Ans.: The 47 pages of the seized material marked as A/SPRGHPL/27 consists of signed cheque book of M/s. Srinivasa Bottle Traders bearing current account No.0794201003505 maintained at Canara Bank, Seshadripuram Branch. The cheque leaves have been signed by Shri.A. Manjunath, Prop: M/s. Srinivasa Bottle Traders. Q.No.21.: Please explain the reasons why the entire cheque book consisting of signed cheque leaves of M/Srinivasa Bottle Traders bearing current account No.0794201003505 maintained at Canara
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 23 of 55 Bank, Seshadripuram Branch is found in the business premises of M/s. SPR Group Holdings Pvt. Ltd. Ans.: My answer to Q.No.10 shall hold good for this question also. Q.No.22.: During the course of search proceedings, copies of ledger extracts of the above firms / persons to whom the payments are made were taken, as per which the total payments made are as under. S.NO NAME F.Y. AMOUNT 1 42,14,810 Vinayaka Fruit Mandi 2009-10 2 Vinayaka Fruit Mandi 2010-11 4,22,50,000 3 Vinayaka Fruit Mandi 2011-12 2,60,02,322 4 Srinivasa Bottle 2008-09 15,41,29,110 Traders 5 Srinivasa Bottle 2009-'10 3,50,40,907 Traders 6 Venkateshwara Bottle 2008-09 1,32,94,040 Traders TOTAL 27,49,31,189 As per the above table, the total amount paid to firms / persons is amounting to Rs. 27,49,31,189/-. Whereas during the course of search proceedings at M/s SPR Holdings Pvt. Ltd. on 08/12/2011, you have admitted only Rs. 13.56 crores. Subsequently, you have enhanced the admitted income to an amount of Rs.15.00 crores (including Rs.13.56 admitted on 08/12/2011) as un-disclosed income on account of inflation of expenditures with regard to payment to M/s. Venkateshwara Bottle Traders, M/s. Srinivasa Bottle Traders and M/s. Vinayaka Fruit Mandi. You may offer your comments so as to why the entire amount of Rs. 27,49,31,189/- claimed as expenses should not be disallowed. Ans.: As stated earlier, the supplies made by M/s. Srinivasa Bottle Traders, M/s. Vinayaka Fruit Mandi and also M/s. Venkateshwara Bottle Traders are genuine suppliers of bottles and grapes. The payments made for procuring these goods have to be taken into consideration for determining the income. The amount of Rs.15.00 crores offered as income represents such of those expenses which are not allowable as per the provisions of income tax Act, more specifically u/s.37(1). This is the reason as to why the entire amount of Rs.27.49 crores cannot be considered as income. The genuineness of procurement and supply of these goods can be verified from the seized materials w.r.t. goods receipt note maintained by our company. Q.No. 23: I am now showing you some of the payment vouchers seized during the course of search proceedings at the office of M/s SPR Group Holdings Pvt. Ltd on 08/12/2011. The details of some of the sample cash vouchers are as follows:
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 24 of 55 S.NO MATERIAL NO. PAGE NO. DATED AMOUNT 1 A/SPRGHPU2 6 25/08/2011 4,25,000 2 A/SPRGHPL/2 32 10,00,000 30/07/2010 3 A/SPRGHPL/2 48 25/09/2010 25,00,000 A/SPR 4 A/SPRG HPL/2 105 24/12/2009 10,00,000 5 A/SPRG HPL/5 61 24/12/2009 9,00,000 6 A/SPRGHPU5 70 26/09/2011 25,00,000 7 A/SPRGHPU5 78 22/09/2011 25,00,000 8 A/SPRGHPU5 82 03/08/2011 8,00,000 9 A/SPRGHPU5 84 04/08/2011 4,79,000
Since, the above payments are not allowable as per Sec.37(1) of the I T Act, and Sec.40A(3) of the I T Act, you are requested to offer your comments. Ans.: I am unable to answer to this question since it appears - to be a legal one. I would consult our Auditors and act according to the law at the time of filing of returns of income. Q.No. 24: Do you have anything else to say? Ans.: Nothing more to add to the above answers. The income of Rs.15.00 crores would be offered to tax in the respective assessment years. Further, during the course of search you have noticed that we have hardly any liquidity. The payment of taxes applicable to the above declaration may be permitted to be paid in easy installments. You would also appreciate that we have cooperated in the course of search." 30. On detailed enquiry with V. Janardhan, Internal auditor and Finance Manager of SPR Group Holdings Pvt. Ltd. U/s 132(4) of the Act, it was found that these are benami companies of assessee company from where the assessee raised the bogus bills for purchase of various items from these companies and issued a to them and got back the cash which is evident from the answer No.5 to question No.5 of statement recorded from Shri Janardhan V. that assessee made bogus purchase of Rs.27,49,31,180/- from various concerns for which Shri Suresh Gowda, Executive Director of the company agreed and offered additional income of Rs.9.96 crores in the hands of SPR Group Holdings Pvt. Ltd. Vide his statement recorded u/s 132(4) of the Act on 9.2.2011 for the financial year 2008-09 to financial year
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 25 of 55 2010-11 and another Rs.3.6 crores of additional income for the financial year 2011-12. Further, he said that this offer of income to be considered as undisclosed income and immunity may be granted under the law for this declaration of additional income. Thus, Ld. D.R. submitted that framing of assessment for all these assessment years u/s 153A of the Act is valid.
We have heard the rival submissions and perused the materials available on record. In this case there was search at the premises of SPR Group Holdings Pvt. Ltd. (erstwhile company presently known as SPR Spirits Pvt. Ltd.) on 8.12.2011. During the course of search action various seized material found and seized. 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/s132(4) of the Act from Shri Janardhan V., Internal auditor and financial manager of assessee company. There was also recording of statement u/s 132(4) from Shri Suresh Gowda, 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 Janardhan v. and also from Suresh Gowda, Executive Director of the company. Sri Suresh Gowda, 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
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 26 of 55 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 in ITA No.322/18 dated 29.9.2021, wherein the High Court held as under:- “8. We have carefully considered the rival submissions of the learned counsel for the parties and perused the material on record. 9. Section 153A of the Act reads thus: “Assessment in case of search or requisition. 153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 9 but on or before the 31st day of March, 2021, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 27 of 55 under section 132 or making of requisition under section 132A, as the case may be, shall abate: Provided also that………… Provided also that………. 10. In Canara Housing Development Company, supra, the coordinate Bench of this Court while considering proceedings under Section 263 of the Act vis-à-vis proceedings under Section 153A of the Act, has observed thus: “10. Section 153A of the Act starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time- limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search. The proviso to the aforesaid section makes it clear the assessing officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid sub-section on the date of initiation of the search under Section 132, the said proceeding shall abate. If such proceedings are already
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 28 of 55 concluded by the assessing officer by initiation of proceedings under Section 153A, the legal effect is the assessment gets reopened. The block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the “total income” of the six assessment years in question in separate assessment orders. The Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. He has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the “total income” of each year and then pass the assessment order. Therefore, the Commissioner by virtue of the power conferred under Section 263 of the Act gets no jurisdiction to initiate proceedings under the said provision because the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction. 11. ……………………. On the contrary, it is expressly provided under Section 153A of the Act the Assessing Officer shall assess or reassess the “total income” of six
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 29 of 55 assessment years which means the said total income includes income which was returned in the earlier return, the income which was unearthed during search and income which is not the subject matter of aforesaid two income….” 11. In M/s Lancy Constructions supra, the Coordinate Bench of this Court where one of us (Hon’ble SSJ) was a member, has observed thus: “5. We agree with the opinion of the Tribunal that additions could not have been made by the Assessing Officer without rejecting the books of account of the assessee, and also without there being any adverse comment made by the Assessing Officer with regard to the books of account that were maintained by the assessee, which were duly audited. 6. In our view, if assessment is allowed to be reopened on the basis of search, in which no incriminating material had been found, and merely on the basis of further investigating the books of accounts which had been already submitted by the assessee and accepted by the Assessing Officer at the time of regular assessment, the same would amount to the Revenue getting a second opportunity to reopen the concluded assessment, which is not permissible under the law. Merely because search is conducted in the premises of the assessee, would not entitle the Revenue to initiate the process of reassessment, for which there is a separate procedure prescribed in the statute. It is only when the conditions prescribed for reassessment are fulfilled that a concluded assessment can be reopened. The very same accounts which were submitted by the assesseee, on the basis of which assessment had been concluded, cannot be reappreciated by the Assessing Officer merely because a search had been conducted in the premises of the assessee.” 12. In Commissioner of Income Tax V/s. IBC Knowledge Park (P) Ltd., [(2016) 385 ITR 346 (Kar.), the coordinate Bench of this Court has referred to the decisions of M/s Lancy Constructions supra as well as Canara Housing Development Company supra along with other judgments cited at the Bar and has observed that the relevant sections as well as judicial precedents would enunciate that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income
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Page 30 of 55 which would empower the assessing officer to upset or disturb a concluded assessment. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in the case of the searched person, the same reason would hold good as in the case of any other person. It has been held that detection or the existence of incriminating material is a must for disturbing the assessment already made and concluded but at the same time, search can be at three stages: (i) when reassessment is reinitiated; (ii) at the stage during the course of reassessment; (iii) where reassessment is altered by a different assessment in respect of the searched person or in respect of a third party. 13. In Principal Commissioner of Income Tax and Another V/s. BMR Energy Ltd. (ITA No.358/2018 and connected cases DD.08.01.2019), a coordinate bench of this Court has held that the judgment reported in the case of Canara Housing Development Company supra was not even considered in M/s Lancy Constructions supra and the latter decision was discussed at the stage of admission without even notice to the assessee. It has been observed that in M/s Lancy Constructions, the High Court was of the view that no substantial question of law would arise for consideration in the appeal and as such, the judgment reported in the case of M/s Lancy Constructions does not render the true position in law and it cannot be considered as a precedent. Accordingly, the order of the Tribunal based on the case of M/s Lancy Constructions was set aside and remanded to the Tribunal for fresh consideration in accordance with law. 14. In the case of Principal Commissioner of Income Tax V/s. Ramesh Bhai Jivraj Desai [(2020) 121 Taxxman.com 333 (Gujrat)], it has been held that having regard to the materials on record, the Tribunal is right in holding that once it is held that the assessment has attained finality, then the assessing officer, while passing independent assessment order under Section 153A read with 143 (3) of the Act cannot disturb the assessment/reassessment which has attained finality, unless the materials gathered in the course of proceedings under Section 153A of the Act establish that the reliefs granted in the final assessment/reassessment were contrary to the facts coming during the course of Section 153A proceedings. 15. The Hon’ble High Court of Gujarat in Principal Commissioner of Income Tax-4 V/s. Saumya
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 31 of 55 Constructions (P) Ltd. [2017 81 Taxxman.com 292 (Gujarat)], has held thus: “14. Essentially, therefore, both the provisions contemplate search and requisition where the assessee is not likely to disclose his income. It appears that the object of both the provisions is to unearth the income which the assessee has not or is not likely to disclose. 15. On a plain reading of Sectioin153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under Section 132 or a requisition under Section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the assessing officer to issue notice under Section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under Section 153A of the Act is linked with search and requisition under Sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, Section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the assessing officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under Section 132 or requisition under section 132A, as the case may be, shall abate. Sub- Section (2) of Section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-Section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 32 of 55 within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under Section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under Section 153A of the Act is annulled in appeal or any other proceeding.” 16. In the decision of E.N. Gopakumar V/s. Commissioner of Income Tax (Central) [(2016) 75 Taxxman.com 215 (Kerala)], the Hon’ble High Court of Kerala has held that Section 153A is a provision which deals with assessment in case of search or requisition. Section153A (1) (a) authorizes the issuance of notice calling for filing of returns. Once that is done, it is well within the jurisdiction of the assessing authority to proceed with any lawful modes of assessment as prescribed in the Act. The statute nowhere makes it conditional that the department has to unearth some incriminating material to conclude some method against the assessee in events where the assessment is triggered by a notice under Section 153A (1)(a) of the Act. When such notice is triggered following the search, the assessment proceedings can be concluded in any manner known to law including under Section 143(3) of the Act or even144 of the Act, if need be. Assessment proceedings can be concluded even without any incriminating material being available against the assessee in the search under Section 132 of the Act on the basis of which the notice was issued under Section 153A (1)(a) of the Act. 17. The Hon’ble High Court of Allahabad in the case of Commissioner of Income Tax, Central, Kanpur .v. Raj Kumar Arora [(2014) 52 Taxmann.com 172 (Allahabad)], has held thus: “8. Section 153A of the Act along with Section 153B and 153C replaced the “Post Search Block Assessment Scheme” in respect of any search under Section 132A or requisition under Section 132A made after 31.05.2003. CBDT explained these provisions through circular dated 5.9.2003, which is reported in (2003) 263 ITR (St) 62. The said circular is as under: …………. 10. Under the block assessment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved. The
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 33 of 55 introduction of Section 153A of the Act provides a departure from this proceeding. Under Section 153A of the Act, the Assessing Officer has been given the power to assess or reassess the total income of the assessment years in question in separate assessment orders. Consequently, there would be only one assessment order in respect of six assessment years in which total disclosed or undisclosed income would be brought to tax. Consequently, even though an assessment order has been passed under Section 143(1) (a) or under Section 143(3) of the Act, the Assessing Officer would be required to reopen these proceedings and reassess the total income taking notice of undisclosed income even found during the search and seizure operation. The fetter imposed upon the Assessing Officer under Sections 147 and 148 of the Act have been removed by the non obstante clause under Section 153A of the Act. Consequently, we are of the opinion that in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which were subsisting when the search was made, the Assessing Officer would be competent to reopen the assessment proceeding already made and determine the total income of the assessee. The Assessing Officer, while exercising the power under Section 153A of the Act, would make assessment and compute the total income of the assessee including the undisclosed income, notwithstanding the assessee had filed the return before the date of search which stood processed under Section 143(1)(a) of the Act. 11. In the light of the aforesaid, the reasons given by the Tribunal that no material was found during the search cannot be sustained, since we have held that the Assessing Officer has the power to reassess the returns of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to the material that was available at the time of the original assessment. We find that the Tribunal dismissed the appeal while relying upon the decision of a Coordinate Bench of the Tribunal in the case of Anil Kumar Bhatia Vs. ACIT (2010) 1 ITR (Trib.) 484 (Delhi). We find that the said decision of the Coordinate Bench of the Tribunal was set aside by the Delhi High Court in Commissioner of Income Tax Vs. Anil Kumar Bhatia (2012) 24 taxmann.com 98 (Delhi). We find that the Tribunal only dismissed the appeal on this legal issue and had not considered the matter on merits.”
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 34 of 55 18. In Commissioner of Income Tax V/s. Kabul Chawla [(2016) 380 ITR 573 (Delhi)], Hon’ble Delhi High Court considering the decision in CIT V/s. Anil Kumar Bhatia [(2013) 352 ITR 493 (Del)], has held thus: “21. Therefore it is clear that the decision in CIT V/s. Anil Kumar Bhatia (supra) does not deal with a situation where, as in the present case, no incriminating material was found during the search conducted under Section 132 of the Act.” 19. It is significant to note that the Co-ordinate Bench of this Court in Canara Housing Development Company supra relied upon by the Revenue has also been considered in Kabul Chawla supra and has held thus: “26. In the High Court the question was whether the CIT could invoke the power under Section 263 of the Act once the proceedings under Section 153A was initiated. The High Court in Canara Housing (supra) answered the question in the negative. It referred to the decision of this Court in CIT v. Anil Kumar Bhatia (supra) and came to the conclusion that once proceedings are initiated under Section 153A of the Act the legal effect was that even where an assessment order is passed, it would stand reopened. In the eye of law there was no order of assessment. It meant that the AO “shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the “total income” of each year and then pass the assessment order.” 27. It is important to note that Canara Housing was also a case where some material was unearthed during the search. Further, the High Court was clear that the addition to the income already disclosed would have to be based on some material unearthed during the search. This is clear from the observation in para 9 of the decision to the effect: “The AO is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search.” It was further observed that in the facts of that case if the CIT had come across any income that the AO had not taken note of while passing the earlier order, “the said material can be furnished to the assessing authority” who will take note of it while determining total income.”
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 35 of 55 20. In Principal Commissioner of Income Tax and Others V/s. Meeta Gutgutia Prop. Ferns ‘N’ Patels and Others [(2017) 295 CTR 0466 (Del)], Hon’ble High Court of Delhi while considering the substantial question of law relating to invoking of Section 153A of the Act has analyzed the catena of judgments more particularly, Smt. Dayawanti Gupta V/s. CIT [(1954) 26 ITR 736 (SC)J and Kabul Chawla supra and held that there was a clear admission by the assessee in Dayawanti Gupta supra of a failure in maintaining regular books of accounts, on the basis of material recovered during search, the additions were made for all the years. The Hon’ble Court held that what weighed with the Court in the said decision was the “habitual concealing of income and indulging in clandestine operations”. Thus, it has been held that the distinguishing factors of Dayawanti Gupta supra, do not detract from the settled legal position in Kabul Chawla supra which has been followed by several High Courts and thereby recorded a finding that the Tribunal was justified in holding that invoking of Section 153A by the Revenue for the assessment years concerned therein was without any legal basis as there was no incriminating material qua each of those assessment years. In the judgment of Kabul Chawla supra, the Hon’ble High Court of Delhi has referred to the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur V/s. ACIT [(2013) 36 Taxman 523 (Raj)] and also took note of the decision of the Bombay High Court in Commissioner of Income Tax V/s. Continental Warehousing Corporation (Nhava Sheva) Ltd. [(2015) 58 taxmann.com 78 (Bom)] which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment Section 153A and 153C of the Act. The legal position has been summarized in Kabul Chawla supra as under: “37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 36 of 55 such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the ‘total income’ of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs “in which both the disclosed and the undisclosed income would be brought to tax”. iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.” v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word ‘assess’ in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word ‘reassess’ to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.” 21. The Judgment of Meeta Gutgutia, supra was challenged before the Hon’ble Apex Court by the Revenue and Special Leave Petition has been dismissed condoning the delay. Thus, the judgment of the Hon’ble High Court of Delhi in Meeta Gutgutia has reached finality.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 37 of 55 22. The Hon’ble High Court of Judicature at Bombay, Nagpur Bench in the case of Commissioner of Income Tax V/s. Murli Agro Products Ltd., [ITA No.36/2009, D.D. 29.10.2010] has held thus: “9. What Section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to Section 153A provides for abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under Section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived. 12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-122000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act.”
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 38 of 55 23. In the case of Commissioner of Income Tax V/s. Continental Warehousing Corporation [(2015) 374 ITR 0645 (BOM)], an endeavor made by the Revenue contending that the ambit and scope of powers conferred on Assessing Officer under Section 153A of the Act was not properly appreciated in Murli Agro Products Ltd., and the same requires re-consideration was negated and the law laid down in Murli Agro Products Ltd., supra, was followed. 24. It is relevant to refer to the dicta pronounced by the High Court of Judicature at Bombay in the case of Murli Agro Products Ltd., supra wherein the Hon’ble High Court of Bombay in para 12 has held thus: “12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-122000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings.” 25. Similarly, the Hon’ble High Court of Gujarat in the case of Ramesh Bhai Jivraj Desai supra, in paragraph 6 has held as under: “6. Thus, having regard to the materials on record, the Tribunal is right in holding that once it is held that the assessment has attained finality, then, the Assessing Officer, while passing independent assessment order under Section 153A read with Section 143(3) of the Act cannot disturb the assessment/reassessment, which has attained finality unless the materials gathered in the course of the proceedings under Section 153A of the Act establish that the reliefs granted in the final assessment/reassessment were contrary to the facts coming during the course of Section 153A proceedings. 26. In the light of these judgments, we have analyzed Section 153A of the Act vis-à- vis the material on record. Strong reliance was placed by the Revenue on the Canara Housing Development Company supra, in support of the contention that search under Section 132 of the Act is sine qua non for initiation of proceedings under
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 39 of 55 Section 153A of the Act but it is not dependent on any undisclosed income being unearthed during search. There is no cavil on this proposition that search under Section 132 or requisition under 132A is a condition precedent for invoking Section 153A of the Act, the assessing officer can assess or re-assess the total income with respect to six assessment years separately immediately preceding the assessment year relevant to the previous years in which the search was conducted or requisition was made but the controversy rests on whether the incriminating material is a condition precedent for invoking Section 153A?. 27. It is discernable from the memorandum explaining the provisions in the Finance Bill 2003 [260 ITR [ST] 14 at page 219] that it is to overcome the difficulty leading to prolonged litigation inasmuch as “undisclosed income”, the legislature by Finance Act, 2003, decided to discard Chapter XIV-B provisions and introduced Sections 153A, 153B and 153C in the Act. Section 153A would contemplate that on initiation of proceedings under said Section 153A, the assessment/reassessment proceedings that are pending on the date of conducting search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessment/reassessment already finalized. The CBDT Circular No.8/2003 dated 18.09.2003 clarifies that on initiation of proceedings under Section 153A of the Act, the proceedings pending in appeal, revision/application against finalized assessment shall not abate. It is clarified in the said CBDT Circular that the then existing provisions of Chapter XIV-B provided for a single assessment of the undisclosed income of a block period, which means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted and also includes the period up to the date of the commencement of such search, and laid down the manner in which such income is to be computed. The new Section 153A provides the procedure for completion of assessment where a search is initiated under Section 132 or books of account or other documents or any assets are requisitioned under Section 132A, after May 31st 2003. In such cases, the assessing officer shall issue notice to such person requiring him to furnish within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 40 of 55 relevant to the previous year in which the search was conducted under Section 132 or requisition was made under Section 132A. Thus, it is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under Section 132 shall not abate. 28. Section 153B provides for the time limit for completion of search assessments. 29. Section 153C provides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account documents seized or requisitioned belong or belongs to a person other than the person referred to in Section 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of Section 153A. 30. Thus, it is clear that the Assessing Officer while passing the order under Section 153A read with Section 143[3] of the Act, ordinarily cannot disturb the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings establishes that the finalized assessments are contrary to the material unearthed during the course of 153A proceedings, as held by the Co-ordinate Bench of this Court in the case of IBC Knowledge Park (P) Ltd., supra. A concluded assessment could not be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good. As observed in Canara Housing Development Company supra, the Assessing Officer is empowered to assess or reassess the total income of six assessment years i.e., the income which was returned in the earlier return, the income which was unearthed during search and also any income which was not disclosed in the earlier return or which was not unearthed during the search by separate assessment orders but in our considered view the completed assessments should be subject to the safeguards provided in IBC Knowledge Park (P) Ltd. supra. “54. On a consideration of the relevant sections as well as judicial precedent referred to above, what emerges is that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 41 of 55 of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the Assessing Officer to upset or disturb a concluded assessment of the other person. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good as in case of any other person. As observed by us, detection or the existence of incriminating material is a must for disturbing the assessment already made and concluded. But, at the same time, such can be at three stages: one, at the stage when the reassessment is initiated, the second, at the stage during the course of reassessment and third, at a stage where the reassessment is altered by a different assessment in respect of searched person or in respect of third party. In this regard, reference may be made to the decision of Apex Court in case of M/s.Calcutta Knitwear (supra) and based on the said decision, the CBDT has also issued circular dated 31.12.2015 vide No.24/2015.The relevant extract of the circular for ready reference can be extracted as under: ‘……………….. ’” As regards the pending assessments are concerned only one assessment shall be made separately for each assessment year on the basis of the income unearthed during search and any other material existing or brought on the record of the Assessing Officer. Even in the absence of any incriminating material abated assessment or reassessment could be done. The returns filed under Section 139 of the Act gets replaced by the returns filed under Section 153A[1] of the Act. Pending proceedings in appeal, revision/application shall not abate subsequent to initiation of Section 153A proceedings. Further, recording of satisfaction under Section 153A may not be necessary unlike Section 153C of the Act which mandates recording of satisfaction. For the reasons aforesaid, substantial question of law in ITA Nos.322/2018 to 324/2018, 354/2018 and 355/2018, substantial question of law No.1 in ITA Nos.380/2018, 382/2018 to 385/2018 and 197/2021 to 199/2021 and substantial question of law Nos.1 and 2 in ITA No.381/2018 are answered in favour of the assessee and against the Revenue. Substantial question of Law No.2 in ITA Nos.380/2018, 383/2018 to 385/2018 is squarely covered by the ruling of the
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 42 of 55 coordinate Bench of this Court in ITA No.352/2018 and connected matters (DD 25.05.2021) wherein the said substantial question of law has been answered in favour of the assessee and against the Revenue. Substantial question of law No.2 in ITA No.382/2018 and substantial question of law No.3 in ITA Nos.380/2018, 383/2018 to 385/2018 does not arise for our consideration since the same are not pressed by the Revenue. Appeals stand disposed of accordingly.”
Being so, we confirm the issue of notice u/s 153A of the Act and framing of assessment u/s 153A r.w.s. 143(3) of the Act. Ground No.2 of additional ground is dismissed.
The next common additional ground in all these appeals is ground No.3 in which the assessee alleges that AO has not given opportunity of cross examination of certain person whose statement has been recorded on oath during the course of search as follows:- “c. No opportunity was given by the AO to cross examine Sri Janardhan who, without basis, had stated that the expenditure on purchase of grapes and bottles from three vendors (Vinayaka Fruit Mandi, Srinivasa Bottle Traders and Venkateshwara Bottle Traders) is bogus. This opportunity ought to have been given by the AO as a general principle of natural justice as applicable to a quasi- judicial proceeding.
In this regard, reliance is placed on the following judgements:-
(i) Andaman Timber Industries and Commissioner of Central Excise, Kolkata (Civil Appeal No. 4228 of 2006) (SC); (ii) Veena Gupta v. ACIT (5662/Del/2008) (Del Trib.)
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 43 of 55 34. The Ld. D.R. submitted that the assessee not sought cross examination of any parties on earlier occasion before the lower authorities. As such, it was not provided. Now it cannot be given after lapse of more than 10 years.
We have heard the rival submissions and perused the record. In this case, a search was taken place on 8.12.2011 at the assessee’s premises. The assessment was framed on 25.3.2014 by issuing a notice u/s 153A of the Act on 23.11.2012. Notice u/s 143(2) of the Act was issued on 14.5.2013. Notice u/s 142(1) of the Act was issued on 28.11.2013 and 17.2.2014. The assessee’s counsel Shri Ranganath, FCA appeared before the AO and given various information and filed details before AO. At that time the assessee not sought any cross examination of the parties concerned. During the course of search, statements were recorded through Janardhan V., Internal auditor and Finance Manager of the assessee company and Suresh Gowda, Executive Director of the assessee company. The incriminating material found during the course of search were confronted to the assessee’s employee Janardhan V. and also to the Executive Director Suresh Gowda. His statement was also recorded. Suresh Gowda has admitted to the fact that the entities namely Vinayaka Fruit Mandi and Venkateswara Bottle Traders were created for the purpose of inflation of expenses of the assessee company and thereby generation of cash. He also stated that the entire payment is not bogus. He further stated that part of the payment made for the purpose of purchase of bottles by the company from the above concerns be considered as bogus and he offered Rs.10.5 crores for assessment year 2009-10 & Rs.4.50 crores for assessment year 2010-11, which is evident from the following statement recorded from Suresh Gowda, Executive Director of the assessee company, in answer to Q.Nos.23 & 24, which reads as follows:-
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 44 of 55 Q.No. 23: I am now showing you some of the payment vouchers seized during the course of search proceedings at the office of M/s SPR Group Holdings Pvt. Ltd on 08/12/2011. The details of some of the sample cash vouchers are as follows: S.NO MATERIAL NO. PAGE NO. DATED AMOUNT 1 A/SPRGHPU2 6 25/08/2011 4,25,000 2 A/SPRGHPL/2 10,00,000 32 30/07/2010 3 A/SPRGHPL/2 48 25/09/2010 25,00,000 A/SPR 4 A/SPRG HPL/2 105 24/12/2009 10,00,000 5 A/SPRG HPL/5 61 24/12/2009 9,00,000 6 A/SPRGHPU5 70 26/09/2011 25,00,000 7 A/SPRGHPU5 78 22/09/2011 25,00,000 8 A/SPRGHPU5 82 03/08/2011 8,00,000 9 A/SPRGHPU5 84 04/08/2011 4,79,000
Since, the above payments are not allowable as per Sec.37(1) of the I T Act, and Sec.40A(3) of the I T Act, you are requested to offer your comments. Ans.: I am unable to answer to this question since it appears - to be a legal one. I would consult our Auditors and act according to the law at the time of filing of returns of income. Q.No. 24: Do you have anything else to say? Ans.: Nothing more to add to the above answers. The income of Rs.15.00 crores would be offered to tax in the respective assessment years. Further, during the course of search you have noticed that we have hardly any liquidity. The payment of taxes applicable to the above declaration may be permitted to be paid in easy installments. You would also appreciate that we have cooperated in the course of search." 36. The contentions of Shri. Suresh Gowda was not acceptable to the AO for the simple reason that he was not able to prove conclusively that the actual purchase of the bottles have been made. Further, Sri Suresh Gowda was give show cause notice vide letter dated 02.01.2014 and requesting him to produce Sri A Manjunath for examination. However there was no response from Sri Suresh Gowda. Instead, another Director, in response Sri Thimmegowda has replied as under:-
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore Page 45 of 55 "You have referred to seized materials marked as A/SPRGHPU2,3,5,7 & 15. Apparent these documents were seized at our marketing office at Wilson Garden on 08.12.2011. The documents contained in seized materials are payments made to various persons, apparently on the vouchers under the heading of our Company. In reality, they _are payments, not relating to our company or activities. We have two major suppliers M/s. Vinayaka Fruit Mundy, Prop., concern of Mr. Manjunath and M/s.Srinivasa Bottle Traders, Prop., concern of Mrs. Sushilamma, supplying grapes and bottles respectively. Grapes are used for fermenting and producing spirit. Bottles are used for packing the produce. During the assessment years under consideration, the purchases made from these two concerns are as follows: Asst. Vinayaka Fruit Srinivas Bottle Year Mandy (Rs.) Traders (Rs.) 2007-08 - 1,04,06,142 2008-09 - 15,41,29,110 2009-10 42,14,810 3,42,92,609 2010-11 4,22,50,000 - 2011-12 2,17,78,750 -
However, the AO did not accept the contentions of Sri Thimme Gowda, Director, SPR Group Holdings Pvt. Ltd., on the reason that these payments pertained to FY 2008-09 to 2011-12 wherein payments exceeding Rs.20,000 is not allowable u/s. 40A(3) of the Act. Hence the entire payment of Rs.27,49,31,189 made to Vinayaka Fruit Mandi and Srinivasa Bottle Traders was treated as bogus expenditure and assessed as undisclosed income as follows:-
AY Undisclosed income assessed 2008-09 16,74,23,150 2009-10 3,92,55,717 2010-11 4,22,50,000 2011-12 2,60,02,322
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 46 of 55 38. 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.
Now the contention of the Ld. A.R. is that the statement recorded from the third parties were not confront to the assessee. This 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.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 47 of 55 40. Next common grounds in ground Nos.3 to 6 in main grounds are with regard to the sustaining of addition by Ld. CIT(A) of bogus purchase in these assessment years. In this case the AO made additions as follows:- S.No. Asst. Year Undisclosed income (Rs.) 1. 2008-09 16,74,23,150 2. 2009-10 3,92,55,717 3. 2010-11 4,22,50,000 4. 2011-12 2,60,02,322
The Ld. A.R. submitted that these additions are opposed on the
basis of seized material and also the statement recorded u/s 132(4)
of the Act from Janardhan V. and Suresh Gowda. Now the contention
of Ld. A.R. is that CIT(A) erred in treating the purchases as bogus
for the following reasons:
The fact of actual purchases made is evident from a. the purchases made by the Appellant, the bills, goods received notes which form part of the seized material. That the goods have been consumed for production (which has finally yielded sales and taxable income) has not been questioned by the AO or the CIT(A).
The LAO and CIT(A) have not disputed the quantity b. details of goods purchased; the inward receipt of the purchases is also not questioned.
Appellant has made payments to the three vendors c. by way of crossed cheques. The factum of payment
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 48 of 55 by crossed cheques is in accordance with the provisions of the Act and warrants no disallowance.
The fact that the vendors have withdrawn the cash d. immediately is of no concern to the Appellant. No assessments have been framed under section 153C of the Act on those vendors.
The Appellant cannot be held responsible for the e. cash drawals of the vendors.
The LAO and CIT(A) did not adduce any evidence to f. demonstrate that the purchases were bogus apart from the statement of Sri Janardhan. No efforts have been made by the LAO and CIT(A) to demonstrate that the purchases were bogus.
g. The fact that Sri Janardhan was maintaining books of accounts of the vendors and hence, some papers of these entities were found in the Appellant's office is of no consequence to the Appellant. If anything, action should have been initiated by the AO against the vendors.
h. The AO has not established any additional relationship between the Appellant and the vendors apart from the fact that the Appellant has had business relationship with these Vendors over the past many years. No other tangible connection has been mentioned by the AO.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 49 of 55 On the vendors not being available at the i. addresses mentioned, it is to be noted that the Appellant had business transactions with the vendors in the years of FY 2011-12 and those prior to these years. The enquiry was made by the AO in 2014, many years from the last business transactions. Hence, mere enquiry by the AO and absence of the vendor from the said address after 2 years is not conclusive of the existence of the vendors. 42. The Ld. D.R. strongly relied on the order of lower
authorities.
We have heard the rival submissions. In our opinion, the 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 within six months from the date of receipt of this order as this is very old matter relating to AY 2008- 09 to 2011-12.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore Page 50 of 55 44. In the result, the appeals filed by the assessee in ITA Nos.1658
to 1661/Bang/2018 for the AYs 2008-09 to 2011-12 are partly
allowed for statistical purposes.
Appeal No.127/Bang/2020, Revenue’s appeal No.575 /Bang
/2020 & CO No.12/Bang/2020 for the AY 2007-08:-
ITA No.127/Bang/2020 is the appeal filed by the assessee against the substantive addition made by AO confirmed by CIT(A) vide order dated 23.10.2019. ITA No.575/Bang/2020 is the appeal by revenue directed against protective assessment order vacated by the CIT(A) vide order dated 27.2.2020 and the CO No.12/Bang/2020 is filed by the assessee in support of the CIT(A) order dated 27.2.2020. 46. First, we will take up the substantive assessment in the case of SPR Spirits Ltd. In ITA No.127/Bang/2020. The assessee has raised following grounds of appeal:-
The order of the Hon'ble -Commissioner of Income Tax (Appeals),Bengaluru- 11 is opposed to law and facts of the case.
The Hon'ble Commissioner of Income Tax (Appeals)-11 erred in upholding the addition in a sum of Rs.7,30,77,776/-under the head business income.
The Hon'ble Commissioner of Income Tax (Appeals) failed to appreciate that entire surplus arising out of the transaction not being exigible to tax in the hands of the appellant.
The Hon'ble Commissioner of Income Tax (Appeals) committed an error in upholding the additions, without even looking at the transaction which was a subject matter of arbitration and later was cancelled.
The appellant craves for leave to add to delete from or amend the grounds of appeal.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 51 of 55 46.1. Assessee has filed additional grounds of appeal in ITA No.127/Bang/2020, which are as follows:-
The order of the Learned Assessing Officer (‘LAO’) and Hon’ble Commissioner of Income-tax (Appeals) (‘Ld. CIT(A)’) is opposed to law and general principles of natural justice as applicable to quasi judicial proceedings. 2. The order of the LAO and Ld. CIT(A) is bad in law and against the provisions of section 153A, since amongst others, the additions are not based on any incriminating material found during the course of search. 3. Without prejudice to above grounds, the order passed by the LAO is bad in law since the LAO has not provided an opportunity to the Appellant to cross examine certain personnel whose statements have been recorded on oath during the course of search. 4. For the above and other grounds that may be urged at the time of the hearing of the appeal the appeal may be allowed and justice rendered. 47. Facts of the case are that a search action u/s 132 of the Act was conducted in the case of M/s SPR Spirits Pvt. Ltd. (erstwhile M/s SPR Group Holdings Pvt. Ltd.) to search of office at No. 33/1, Sapthagiri Arcade, 8th Cross, H. Siddaiah Road, Wilson Garden, Bangalore on 08/12/2011 & 16/12/2011. Notice u/s 153A of the Act dated 23/11/2012 was issued to the assessee requiring it to file return of income within 20 days from the date of receipt of notice. In response to notice u/s 153A, assessee filed return of income on 05/01/2013 declaring an income of Rs. 3,80,24,770/- as income from business. The original return of income u/s 139(1) of the Act was filed on 31/10/2007 declaring an income of Rs. 3,47,98,080/-. Notice u/s 143(2) of the Act dated 14/05/2013 was issued and served on the assessee on 20/05/2013. Notice u/s 142(1) of the Act along with annexure dated 14/05/2013, 28/11/2013 & 17/02/2014 were issued and served on the assessee. During the course of search action
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 52 of 55 conducted in the group cases, it came to light that M/s SPR Developers Pvt. Ltd., had entered into sale agreement dated 23/11/2005 and MOUs dated 06/10/2005 and 28/07/2007 with M/s Vijay Bank Employees Housing Cooperative Society to form residential sites and transfer the same to members of the society at the rate of Rs. 276/- per sq. ft of saleable area for the first 80 acres of land and subsequently it was increased to Rs. 360/- per Sq. ft. of saleable area for the rest 100 acres of land situated on Mysore-Bangalore Road. These lands were transferred from Shri M. Thimme Gowda and his family members to the society during FY 2005-06 and 2006-07. As the assessee being a company cannot acquire agricultural land for the purpose of formation of residential sites and cannot sell the same to the employees of M/s Vijay Bank Employees Housing Co-operative Society, purchase and selling was done through Shri T. Nadakrishna. Therefore, the business income of Rs. 7,30,77,776/- was assessed substantively in the hands of the assessee company. Aggrieved, the assessee is in appeal. Accordingly, AO computed the income in the hands of the assessee as follows: Survey Area Village purchase cost of Sale Sale Gain no. date purchase agreement Amount date 45 4A Manch. halli 22G 44/1 2A 2Q Manch. halli 33,92,289 44/2 2A 4a Manch. halli 48 1A Manch. halli 20,01,567 34 3A 3 G Manch. halli 15.11.2006 46/2 16G Manph. halli 54 10 Manch. halli 47 2A 4G Manch. halli 14,88,915 54 38G Manch. halli 46/2 2A Manch. halli 47 21.5G Manch. halli 26,30,468 46/1 18.5G Manch. halli
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 53 of 55 46/1 1A Manch. halli 50,63,379 37G 47 1A Manch. halli 39,45,606 03.02.2007 20G TOTAL 1,85,22,224 9,16,00,000 7,30,77,776
From the above table, AO came to the conclusion that assessee earned a business income of Rs.7,30,77,776/- treated as a business income in the hands of the assessee. Against this assessee went in appeal before Ld. CIT(A). Ld. CIT(A) confirmed the order of AO observed that the assessee has purchased 22 acres 36 guntas of land at Manchanayanahalli through T. Nanda Krishna since the assessee being a company was not permitted to acquire the agricultural land for formation of residential sites and layouts and later said land was sold by T. Nanda Krishna to SPR Developers Pvt. Ltd. for a consideration of Rs.9.16 crores for which assessee has given an amount of Rs.1.85 crores. The income generated from the same to be assessed as business income of the assessee. Against this assessee is in appeal before us by way of above grounds.
The additional grounds raised herein as additional ground Nos.1 to 3 in ITA No.127/Bang/2020 were already discussed while adjudicating the ITA in Nos.1658 to 1661/Bang/2018 from para Nos.14 to 39 and the same decision is applicable herein also. Accordingly, all the additional grounds raised by the assessee herein are dismissed.
The constructive main grounds for our consideration in ground Nos.2 to 4 in ITA No.127/Bang/2020 are as follows:-
“The Hon'ble Commissioner of Income Tax (Appeals)-11 erred in upholding the addition in a sum of Rs.7,30,77,776/-under the head business income.
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore
Page 54 of 55
The Hon'ble Commissioner of Income Tax (Appeals) failed to appreciate that entire surplus arising out of the transaction not being exigible to tax in the hands of the appellant.
The Hon'ble Commissioner of Income Tax (Appeals) committed an error in upholding the additions, without even looking at the transaction which was a subject matter of arbitration and later was cancelled.”
We have heard the rival submissions and perused the materials available on record. In this case, order of the Ld. CIT(A) is very cryptic with regard to the issue that how there was income generated in the hands of the assessee on giving Rs.1.85 crores advance to T. Nanda Krishna who has bought the property and later it was sold to M/s. SPR Developers Pvt. Ltd. In our opinion, the 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.
ITA No.575/Bang/2020 for AY 2007-08 (Revenue’s appeal):-
This appeal by revenue challenging the protective additions deleted by the CIT(A) and on the reason that the addition is sustained in the hands of M/s. SPR Spirits Pvt. Ltd. Since we have remitted the substantive assessment back to the file of CIT(A) for fresh consideration, as discussed in para 48 of this order. This issue should also go back to CIT(A) to decide both the appeals together in view of the judgement of Hon’ble Gujarat High Court in the case of
ITA Nos.1658 to 1661/Bang/2018, ITA No.127/Bang/2020 & ITA 575/Bang/2020 M/s. SPR Spirits Pvt. Ltd., Bangalore & T. Nadakrishna, Bangalore Page 55 of 55 Surendra Gulabchand Modi (140 ITR 517) and Rajesh Shantilal Adani (20 GSTR 526) and issue in dispute accordingly is remitted to the CIT(A) for fresh consideration. The CIT(A) has to decide this issue within six months from the d ate of receipt of this order as this is old matter relating to the AY 2007-08.
In the result, assessee’s appeal in ITA No.127/Bang/2020 and revenue’s appeal in ITA No.575/Bang/2020 for the assessment year 2007-08 are partly allowed for statistical purposes. CO filed by the assessee in CO No.12/Bang/2020 is dismissed as infructuous. Assessee’s appeals in ITA Nos.1658 to 1661/Bang/2018 for the A.Ys 2008-09 to 2011-12 are partly allowed for statistical purposes. Order pronounced in the open court on 27th May, 2022
Sd/- Sd/- (Beena Pillai) (Chandra Poojari) Judicial Member Accountant Member
Bangalore, Dated 27th May, 2022. VG/SPS Copy to:
The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order
Asst. Registrar, ITAT, Bangalore.