2018 (12) TMI 1261 - AT - Income Tax

Assessment u/s 153A - validity of action u/s. 132 - Held that - Adverting to the facts of the present case it is found that not only the documents relating to the assessee s business were found at 102 and 103 B-Wing Parmar Trade Centre Sadhu Vaswani Chowk Pune but they were incriminating in nature and on the basis of such documents the assessee surrendered certain income as well. The name of the assessee also appears in the panchanama drawn for that premises. Action u/s. 132 of the Act was validly taken against the assessee pursuant to which the assessment got completed u/s. 153A of the Act. No illegality can be found in the framing of assessment u/s. 153A of the Act. Addition on loose papers as found and seized from the searched premises - Held that - The situation is that the assessee paid its share of unaccounted income of Rs. 123.13 lakhs to Sushil Agarwal and such income was generated in books by obtaining inflated purchase bills on which he earned income at the rate of 25% at Rs. 130.88 lakhs. It is the higher of unexplained inflow or unexplained outflow which can be subjected to tax. The assessee has already surrendered a sum of Rs. 123.13 lakhs being payment of unaccounted income to Sushil Agarwal. If we reduce the outflow of unaccounted income of Rs. 123.13 lakhs from the inflow of unaccounted income generated by procuring accommodation bills at Rs. 130.88 lakhs any further addition which is warranted can be a sum of Rs. 7.75 lakhs. We therefore direct to restrict the addition to a sum of Rs. 7.75 lakhs. Bogus purchases - Addition in respect of entries recorded in the seized document - Held that - We have already directed to include a sum of Rs. 7.75 lakhs in the income of the assessee for the preceding year on the basis of profit of 25% on total bogus purchases of Rs. 5.23 crore for both the years as reduced by the surrender of Rs. 123.13 crore made by the assessee for the instant year. If we view total bogus purchases pertaining to both the years in juxtaposition to the surrender made by the assessee in income for the instant year there remains nothing more to be added on this score to the total income of the assessee for the year under consideration. We therefore order to delete the addition

Summary

Issues Involved:
1. Validity of the search action under Section 132 of the Income-tax Act, 1961, and the consequent assessment under Section 153A.
2. Confirmation of addition of Rs. 3,07,02,754/- for the assessment year 2009-10.
3. Addition of Rs. 90,28,442/- for the assessment year 2010-11.

Issue-wise Detailed Analysis:

1. Validity of the Search Action under Section 132 and Assessment under Section 153A:
The primary contention of the assessee was that no search action was conducted against him, and hence, the assessment under Section 153A should be quashed. The Tribunal examined the facts and found that a valid search warrant dated 17-09-2010 was issued in the name of the assessee. The search was conducted at Room No.102 and 103, B-Wing, Parmar Trade Centre, Pune, where documents related to the assessee were found. The Tribunal noted that the assessee admitted in his statement under Section 132(4) and in his letter to the AO that he was covered under the search action. The Tribunal concluded that a valid search was conducted, and the assessment under Section 153A was justified.

2. Confirmation of Addition of Rs. 3,07,02,754/- for A.Y. 2009-10:
The AO made an addition of Rs. 3,07,02,754/- based on loose papers seized during the search, which indicated purchases of steel amounting to Rs. 5.23 crore. The AO interpreted these as accommodation entries. The assessee contended that the purchases were genuine and recorded in his books. However, the AO found that the assessee failed to provide primary evidence such as delivery challans and stock registers to prove the genuineness of the transactions. The Tribunal noted that the assessee admitted to unaccounted income of Rs. 307.8466 lakhs paid to Sushil Agarwal as bribe for securing contracts. The Tribunal held that the assessee inflated purchase costs with accommodation entries and directed to restrict the addition to Rs. 7.75 lakhs, considering the profit element embedded in the bogus purchases.

3. Addition of Rs. 90,28,442/- for A.Y. 2010-11:
The AO made an addition of Rs. 90,28,442/- for the year 2010-11, which was part of the Rs. 5.23 crore bogus purchases recorded on page 25 of the seized documents. The Tribunal noted that the assessee had already surrendered Rs. 123.13 lakhs for the year 2010-11 and directed to delete the addition of Rs. 90,28,442/-, as it was covered by the earlier surrender and the profit element of 25% on bogus purchases.

Conclusion:
The Tribunal upheld the validity of the search action and the assessment under Section 153A. It partly allowed the appeal for the assessment year 2009-10 by restricting the addition to Rs. 7.75 lakhs and allowed the appeal for the assessment year 2010-11 by deleting the addition of Rs. 90,28,442/-.