M/S. VYALIKAVAL HOUSE BUILDING CO-OPERATIVE SOCIETY LIMITED,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), BANGALORE

Ld.AO noted that during assessment proceedings assessee acquired/allotted large tracts of land at various locations in and around Bangalore. It was noted by authorities below that, assessee collected deposits/advances from its members, who in turn will be allotted sites on successful formation of the layout/group housing. It was submitted that, more often, people sought for refund of money already paid for allotment of land which posed great difficulty to assessee.

During the search proceedings, queries were raised regarding total receipts from various activities. Assessee submitted that, statement of receipts found and seized during the course of search was compiled from books and records, and has been duly accounted by society and from regular books maintained.

Ld.AR submitted that, during assessment proceedings, assessing officer recorded statements of Mr.H.Srinivasa, Secretary of society, and Mr.Lakshman Director of L&C Construction. It has been submitted that, based on statements recorded, and seized materials marked as A/VHBCS/3, additions were made for all years under consideration by Ld.AO.

Ld.AR at the outset, submitted that, assessee was not provided with seized materials even after a specific request Page 3 of 6 ITA No.70 to 76/Bang/2020 was made vide letter dated 24/03/2014. Before Ld.AO, placed at page 316-317 of paper book. He further submitted that, specific Ground Nos. 6, 10 was raised before Ld.CIT (A) which was rejected by Ld.CIT(A) by observing as under: 20. Ground no. 10- Appellant states AO relied on unsubstantiated and uncorroborated statements recorded from various persons- Perusal of assessment order shows statements of Sh. Sreenivasa Secretary of the society & Sh. Lakshman Director of L&C Constructions was recorded. The appellant cannot refute the statement of its own secretary. The appellant also cannot refute the statement of the director of a company with whom it had business dealings and indulged in financial transactions. Therefore, the appellant's denial at the appellate stage is found to be devoid of substance, and hence the same is rejected being untenable. The ground fails.”

On the contrary Ld. CIT DR in his written submission filed before us, dated 21/09/2020 raised reliance on orders passed by authorities below. However he has not submitted any argument against what has been advanced by Ld.AR regarding violation of principles of natural Justice.

We have perused submissions advanced by both sides in light of records placed before us.

In our view, assessee must be granted proper opportunity to controvert the materials gathered by Ld.AO during search and used against assessee. Only then, there would be compliance of principle of natural justice. Hon’ble Supreme Court in case of Krishna Chand Chela Ram v CIT reported in 125 ITR 713 held that, cross-examination is must, where AO relies only on statement of third Party unconnected with assessee.

We also note that, revenue has also not placed reliance on any other circumstantial evidences that formed the basis of addition, apart from statements recorded. We also note that Ld.AO did not provide assesee the seized materials Page 4 of 6 to 76/Bang/2020 marked as A/VHBCS/3 referred by assessee and information collected u/s 133(6).

Under such circumstances we deem it appropriate to remand the issue back to Ld.AO for de novo assessment. Ld.AO is directed to provide all seized materials, details/information is collected under section 133(6) and statements recorded to assessee. Assessee shall then file their submissions which would be subjected to verification by Ld.AO. Assessee is directed to file relevant details in support of their claim and to assist Ld.AO in carrying out the assessment by providing all relevant information/evidences/documents as called for. We direct Ld.AO to pass reasoned order considering all materials/evidences filed by assessee in accordance with law. Needless to say that proper opportunity of hearing must be granted to assessee. Accordingly, grounds raised by assessee in all assessment years under consideration are allowed for statistical purposes. In the result, appeal filed by assessee for all assessment years under consideration stands allowed for statistical purposes. Order pronounced in the open court on 25th Sept, 2020. Sd/- Sd/- (A.K GARODIA) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 25th Sept, 2020.

Date of dispatch of Order. No 13. Draft dictation sheets are Sr.PS attached