SUNIL NARANG,HYDERABAD vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(1), HYDERABAD

PDF · subscribers
ITA 746/HYD/2020Status: DisposedITAT Hyderabad12 February 2025AY 2017-1821 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the impugned additions were made solely on the basis of the statement of a third party, Sri Sunkara Ravi Chandra. The assessee had denied the transactions mentioned in the WhatsApp conversation. The Assessing Officer neither confronted Sri Sunkara Ravi Chandra to the assessee nor brought any corroborative evidence on record to substantiate the additions. The Ld. CIT(A) also sustained the additions by relying on the AO's order. The Tribunal found that additions made merely on the basis of a third-party statement without corroborative evidence are not sustainable in law. Therefore, the Tribunal deleted the impugned additions made by the AO. The Tribunal did not decide on the grounds related to the validity of the assessment proceedings (grounds 1 and 2) as the appeal was allowed based on the merits of the additions.

What were the facts?

The assessee, Shri Sunil Narang, filed an appeal against the order of the Learned Commissioner of Income Tax (Appeals)-11, Hyderabad, for Assessment Year 2017-18. The Assessing Officer (AO) completed the assessment under Section 143(3) of the Income Tax Act, 1961, on December 31, 2018, making additions of Rs. 1,30,88,750 based on WhatsApp messages and Rs. 75 lakhs for unexplained expenditure. The assessee appealed to the Ld. CIT(A), who partly allowed the appeal, deleting Rs. 95 lakhs from the WhatsApp message addition and the entire Rs. 75 lakhs for unexplained expenditure. The assessee is now in appeal before the ITAT against the sustained additions.

What were the issues?

1. Whether the assessment made under Section 143(3) of the Act dated 31.12.2018 ought to be annulled as void ab initio, considering the AO issued notices under Section 143(2) based on earlier years and the amended first proviso to Section 153A of the Act, effective from AY 2017-18, mandates a notice under Section 153A for such assessment years. - Assessee's contention: The AO erred in issuing notices under Section 143(2) instead of Section 153A, making the assessment void. The AO also failed to pass a speaking order on objections raised regarding the Section 143(2) notice and ignored the legal position that the Finance Act, 2017 amendment has bearing on cases selected for scrutiny via Section 143(2) notices, rendering the notice and subsequent assessment invalid and without jurisdiction. - Revenue's contention: Not recorded. 2. Whether the assessment is invalid without a search warrant executed specifically in the name of the assessee or their business entity/premises, considering search warrants are person and premise specific. - Assessee's contention: The search warrant was issued on a specific company and premise, not on the assessee's proprietary concern. An officer/employee is a different taxable entity from a company, and no search can be made on an officer/employee based on a warrant issued for a company. Consequently, no panchanama was drawn in the assessee's name. - Revenue's contention: Not recorded. 3. Whether the additions made by the AO towards unaccounted income and expenditure, confirmed in part by the Ld. CIT(A), are sustainable when based on mere suspicions, surmises, and the disowned statement of a third party without corroborative evidence or opportunity for cross-examination. - Assessee's contention: The Ld. CIT(A) erred in confirming additions based on mere suspicions and surmises, particularly Rs. 1,30,88,750/- related to WhatsApp transactions, even after the assessee disowned the information. The AO failed to provide sufficient opportunity for cross-examination of Mr. Sunkara Ravichandra, on whose statements the AO relied. There is no evidence of earning unaccounted income or incurring unaccounted expenditure by the appellant. - Revenue's contention: Relied on the orders of the revenue authorities.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 153A,Section 143(2),Section 119,Section 132(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad

Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA

For Respondent: Shri P. Murali Mohan Rao,C.A

(निर्धारण वर्ा/Assessment Year:2017-18) Shri Sunil Narang, Dy. Commissioner of Income Tax, Vs. Central Circle-2(1), Hyderabad. Secunderabad. PAN:ABFPN3762L (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri P. Murali Mohan Rao,C.A. रधजस् व द्वधरध/Revenue by:: Ms.M. Narmada, CIT-DR सुिवधई की तधरीख/Date of hearing: 23/12/2024 घोर्णध की तधरीख/Pronouncement: 12/02/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by Shri Sunil Narang (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-11, Hyderabad (“Ld. CIT(A)”), dated 11.09.2020 for the A.Y. 2017-18.

2.

The assessee has raised the following grounds :

3. The brief facts of the case are that the assessee is an individual, filed its Return of Income (“ROI”) for the A.Y. 2017-18 on 26.10.2017 admitting the total income of Rs.2,89,43,250/-. In lieu of search and seizure operation, notice u/s. 153A of the Income Tax Act, 1961 (“the Act”) were issued to the assessee on 27.07.2018 followed by notice u/s.143(2) on 17.09.2018. The Learned Assessing Officer (“Ld. AO”) completed the assessment u/s.143(3) of the Act on 31.12.2018 making addition of Rs.1,30,88,750/- on the basis of transactions as per Whatsapp messages and Rs.75 lakhs on account of unexplained expenditure.

4. Aggrieved with the decision of Ld. AO, the assessee filed appeal before the Ld. CIT(A), who partly allowed the appeal of the assessee. The Ld. CIT(A) deleted the addition of Rs.95 lakhs out of Rs.1,30,88,750/-, which was on account of whatsapp messages and Rs.75 lakhs, which was on account of unexplained expenditure.

5.

Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Ld. AR submitted that, their main grievance is against the addition made by Ld. AO, which has been sustained by the Ld. CIT(A), which are discussed by Ld. AO at para nos.7.9 to 7.38, as under :

5.1 Out of the aforesaid addition made by the Ld. AO, the Ld. CIT(A) deleted Rs.95 lakhs out of addition of Rs.96,06,250/- and sustained the remaining addition made by the Ld. AO. The Ld. AR also invited our attention to para no.5.2.3 of order of Ld. CIT(A) sustaining the addition made by the Ld. AO, which is to the following effect : “ 5.2.3 For the other transactions, the appellant simply disowned the transaction saying the same are personal transactions of Mr. Ravi Chandra whereas Mr. Ravi Chandra has given a clear and categorial statement regarding the details of the transactions. The statement of Mr. Ravi Chandra was confronted to the appellant and the appellant has not asked for cross examination. It is also a fact that Mr. Ravi Chandra continued as employee of the group and has not retracted the statement shows that the appellant’s statement cannot be relied upon. In view of the above, the other additions made are confirmed. The grounds raised above are partly allowed.” 5.2 The Ld. AR further submitted that, during the search and seizure proceedings, the transcript of whatsapp conversation between the assessee and Sri Sunkara Ravi Chandra were seized and the statement of Sri Sunkara Ravi Chandra was recorded on 11.11.2016 regarding the details of whatsapp conversation. On the basis of the sole statement of Sri Sunkara Ravi Chandra, the impugned additions have been made by the Ld. AO in the hands of the assessee. However, the assessee in his statement dated 20.10.2017 recorded by the DDIT, had denied all the impugned transactions and also reiterated the same during the assessment proceedings before the Ld. AO. In spite of the denial of the impugned transactions qua the whatsapp conversation, the Ld. AO failed to bring any corroborative evidence qua the impugned additions. Further, the Ld. AO also failed to confront Sri Sunkara Ravi Chandra to the assessee. Therefore, the basis of addition by the Ld. AO is only the statement of a third party. The Ld. CIT(A) also simply relying on the order of Ld. AO, sustained the addition. Finally, the Ld. AR submitted that, the addition made by the Ld. AO merely on the basis of third party statement is not sustainable under law and is liable to be quashed.

6.

Per contra, the Ld. DR relied on the order of revenue authorities.

7.

We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have gone through the relevant portion of order of Ld. AO as well as Ld. CIT(A) as reproduced hereinabove. We found that the impugned additions have been made in the hands of the assessee merely on the basis of statement of a third party. In spite of the denial by the assessee to the statement of Sri Sunkara Ravi Chandra, the Ld. AO neither confronted Sri Sunkara Ravi Chandra to the assessee nor brought any corroborative evidence on record to substantiate the additions made by him. Under the factual matrix, we are of the considered opinion that, the addition made by the Ld. AO merely on the basis of a statement of third party and without any corroborative evidence, is liable to be deleted. Accordingly, we delete the impugned additions made by the Ld. AO.

8.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 12th Feb., 2025. Sd/- Sd/- (VIJAY PAL RAO) (MADHUSUDAN SAWDIA) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad. Dated: 12.02.2025. * Reddy gp Copy of the Order forwarded to : 1. Shri Sunil Narang, C/o P. Murali & Co., C.As, 6-3-655/2/3, Somajiguda, Hyderabad-500082

More judgments on Section 153A

All 18,957 judgments and leading authorities on Section 153A →

Recent GST High Court judgments

Search GST case law →