Fraudulent Action of Director of Assessee-Company to Sell Property without valid Authorization: ITAT deletes Addition of 2 cr [Read Order]

An Addition of 2 crores was deleted by the Income Tax Appellate Tribunal (ITAT), Chennai due to fraudulent action of director of assessee-company to sell property without valid authorization.

The assessee, M/s. Anush Infrastructure (P) Ltd was assessed u/s 153C and 143(3) in view of the fact that the assessee group was subjected to search action u/s 132 on 21.06.2011. The assessee was engaged in real estate business. The group was managed by B.Venkatrama Reddy and Sukumar Reddy who were the directors of the assessee-company.  During search operations, one seized document was found which was in the shape of an agreement dated 24.08.2009 between the assessee and one Bhavika Jain. As per the agreement, the assessee agreed to sell one acre of land at Paiyanoor for a sum ofRs.210 Lakhs out of which Rs.200 Lakhs were already been received.

Since the transaction was not reflected in the books of account, the assessee was confronted with the same.The assessee submitted that the agreement was not executed at all and the alleged amount was never received. The assessee also produced copy of court judgmentpassed by the City Civil Court, Chennai by which the sale agreement dated was held to be null and void and Bhavika Jain was directed to handover the original title deeds. However,AO held that it was nowhere observed by the court that the money was never paid. Therefore, the amount of Rs.200 Lakhs was added to the income of the assessee as unaccounted money.

During appellate proceedings, the assessee submitted that it was not at all connected with the fraudulent sale agreement entered into byVenkatrama Reddy withBhavika Jain and the assessee never received the cash amount of Rs.200 Lakhs. It was averred that once the Court passed a final decree in the suit, the sale agreement was declared null and void since the assessee never entered into such agreement and received the consideration as stated therein and Venkatta Reddy misused the position as director and put the company into huge litigation and caused irreparable financial loss.

The bench consisting of Mahavir Singh, Vice President and Manoj Kumar Aggarwal, Accountant Member observed that “The director of the assessee-company misused the position as director which ultimately led to declaration of sale agreement as null and void. Therefore, the money as allegedly paid under the agreement could not be considered to be received by the assessee and held as unaccounted money of the assessee. Taxation of Rs.2,00,00,000 in the hands of the assessee is not correct and justified. The Assessing Officer is directed to delete the additions made.”

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