M RAMAKRISHNA PRASAD,HYDERABAD vs. DY.CIT, CIRCLE-16(2), HYDERABAD, HYDERABAD

Brief facts of the case are that the assessee, an individual and Director in M/s. Macro Media Digital Imaging Pvt. Ltd, filed his return of income for the A.Y 2011-12 on 30.09.2011 admitting an income of Rs.9,25,020. The same was processed u/s 143(1) on 11.11.2011. Meanwhile, there was a search & seizure action u/s 132 of the Act on 3.4.2012 in the case of M/s. Vizag Profiles Group during the course of which it was found that the assessee purchased Plot No.53 and constructed a Villa at Green

The assessee vide his submissions dated 19.12.2013 stated that it is the VPL Projects Pvt. Ltd which has declared certain income in addition to its regular income on Green City Project, Visakhapatnam to avoid litigation with I.T. Department at the time of search proceedings initiated in the group companies has paid all the taxes thereon which includes an amount of Rs.33,10,500 on account of villa sold to the assessee but the same was not actually paid by the assessee. It was also reiterated that there was no additional payment made by the assessee over and above the actual sale consideration of Rs.37,45,500 and the additions disclosed by VPL Projects are not the amount paid by the assessee and requested for dropping of the proceedings u/s 147 of the Act. The AO however, was not convinced with the assessee’s contention and observed that the assessee has not brought any concrete evidence to prove that the disclosure made by M/s. Vizag Profiles Group, Visakhapatnam during the course of a Search &Seizure Action u/s 132 of the Act on 30.04.2012 is inclusive of the assessee’s amount of Rs.42,10,500. Further, observing that the villa owners have accepted the receipt of unaccounted cash payment and have disclosed the same as undisclosed income, AO held that the failure of the assessee to

Aggrieved, the assessee preferred an appeal before the CIT (A) challenging the validity of the assessment investment u/s 147 of the Act and also the merits of the addition. The CIT (A) dismissed the appeal and confirmed the additions made by the AO. Assessee is in further appeal before us by raising the following grounds of appeal: “1. CIT(A) erred both in law and on facts in upholding validity of reopening of the assessment u/s 147. 2. The CIT(A) erred both in law and on facts in confirming the addition of Rs.42,10,500 made by the AO towards unexplained investment in purchase of plot and construction of villa thereon”.

Further, vide letter dated 12.10.2017, the assessee has

As far as the additional grounds of appeal are concerned, the learned Counsel for the assessee submitted that the assessee is not a Director of M/s. Vizag Profiles Group and it

The learned DR was also asked to present evidence to prove that the assessee is a Director of M/s. Vizag Profiles Group. The learned DR produced the assessment records and submitted that there is nothing on record and in the possession of the AO, to hold that the assessee is a Director of Vizag Profiles Group. Taking the same into consideration, the additional grounds of appeal raised by the assessee is admitted and the finding of the CIT (A) that the assessee is the Director of the Vizag Profiles Group is set aside.

Coming to the regular grounds of appeal raised by the assessee, the learned DR was asked to produce any evidence available in the assessment record that the assessee has paid the amounts in cash other than the amount mentioned in the books of account of the vendor for the plot of the Villa and the construction thereon. The learned DR submitted that there was no evidence on record to this effect. He submitted that the Department has received information from the search party and therefore, the assessment of the assessee was reopened.

The learned Counsel for the assessee, on the other hand, submitted that there are no valid reasons recorded for the reopening of the assessment and that the AO only proceeded on the basis of the information received from the Search & Seizure party in the case of Vizag Profiles Group. In support of his

Having regard to the rival contentions and the material on record, we find that the assessment of the assessee has been reopened mainly on the basis of the information received from the Director of Investigation with regard to the material found during the course of search in the case of M/s. Vizag Profiles Group The assessment order makes no mention of any such information, nor does it contain the evidence found in the Vizag Profiles Group that the assessee has paid the unaccounted cash. Therefore, the decision of the Coordinate Bench in the case of M/s. Komal Agrotech (P) Ltd (cited Supra) is clearly applicable to the case in hand. The relevant para of the Tribunal order is reproduced hereunder for ready reference: “5.4. As the reasons recorded are mechanical and without application of mind whatsoever by the AO to the information received form the DGIT (Inv.) Mumbai, we apply the proposition of law laid down by the High Court in this matter and hold that the reopening is bad in law”.

Further, even on the merits of the addition, we find that the AO had no material, whatsoever, except the admission of the vendor that the assessee has paid unaccounted cash for purchase of the villa. The statement of Vizag Profiles Group has no supporting evidence. The assessee was not given the copy of the said statement of admission nor was it given any opportunity

In the result, assessee’s original grounds of appeal as well as the additional grounds of appeal are allowed.