Initiation of Assessment Proceedings on Non-Consideration of Seized Documents by AO: ITAT Upholds Revision Order [Read Order]

The Chennai Bench of Income Tax Appellate Tribunal (ITAT) held that The seized documents are never examined by the Assessing Officer (AO) as is apparent from the assessment order and to counter the same, the assessee has not filed any evidence thus upheld the revisionary order of Principal Commissioner of Income Tax (PCIT) in setting aside the assessment order and remanded the matter back to the file of the Assessing Officer.

The assessee Saravana Global Holdings Ltd is an infrastructure and real estate company and forms part of the Challani group. A search and seizure action was conducted on the premises of Indo Asian Finance Ltd., belonging to Challani Group  by the Income-tax Department under Section 132 of the Income Tax Act,1961.

During the course of search, certain loose sheets and documents belonging to the assessee were seized. Consequently, a notice under Section 153C of the Income Tax Act was issue and assessee furnished return of income for the relevant assessment year 2007-08. Consequently, assessment was framed under Section 153C r.w.s.153A of the Income Tax Act.

Subsequently, the PCIT on examination of assessment records issued a show-cause notice requiring the assessee to explain as to why the assessment framed by AO vide order under Section 153C read with Section153A of the Income Tax Act be not revised under Section 263 of the Income Tax Act for the relevant assessment year 2007-08. The PCIT in his show-cause notice noted that the AO has not considered the seized document vide Annexure found at the premises of M/s.Indo Asia Finance Ltd.

It was noticed that as per an agreement for sale, one of the directors of Saravana Foundations Ltd., now known as Saravana Global Holdings Ltd i.e, the assessee-company, Jayanthilal Challani, gave a general power of attorney to T. Krishnarajan S/o Shri Thanga Nadar residing at Madurantakam, Therai Street to purchase certain land from Mr.B. Govindraj and others at Madurantakam Taluk for Saravana Foundations Ltd. It was noted that in view of the above T.Krishnarajan S/o Shri Thanga Nadar residing at Maduranthakam Theradi Street, purchased the above stated land from B.Govindaraj & others at Madurantakam Taluk for a consideration of Rs.2,63,000/- as per document.

An amount of Rs.19,12,500/- was disbursed by T.Krishnarajan to the land owners. According to PCIT, this was not considered by the AO or no clarification or details have been called for from the assessee with respect to the said transaction as per said seized document.

The PCIT held that the assessment framed by the AO for the assessment year 2007-08 under Section 153C r.w.s. 153A of the Income Tax Act vide order  is erroneous and prejudicial to the interest of Revenue. Thus He directed the AO to re-decide the issue after conducting necessary enquiries and verification with regard to the said issue. Aggrieved, assessee is in appeal before the Tribunal.

The counsel for the assessee K.Ravi (Authorised Representative) submitted that the assessment order that the assessee filed complete details before the AO and he stated that the AO has already formed an opinion in regard to seized material belonging to the assessee company and accordingly initiated proceedings under Section 153C read with Section 153A of the Income Tax Act.

The Departmental Representative (DR),  A.Sasikumar argued that the AO while framing assessment has not considered this seized document vide Annexure found at Indo Asia Finance Ltd. He further stated that the PCIT has only set aside the assessment order and remanded the matter back to the file of the AO for verification and accordingly, takes a fresh decision.

The Bench comprising of Mahavir Singh, Vice President and Manjunatha.G, Accountant Member noted that the seized document found from the premises of Indo Asia Finance Ltd., which contains the details of agreement for sale of Jayanthilal Challani, one of the Directors of Saravana Foundations Ltd., now known as Saravana Global Holdings Ltd., i.e., assessee-company, who gave a power of attorney to  T. Krishnarajan to purchase certain lands from B.Govindaraj and others.

The seized documents are never examined by the AO as is apparent from the assessment order and to counter the same the assessee has not filed any evidence before us. Even otherwise, there is no evidence that the transaction has been carried out by Jayanthilal on his own and not behalf of the assessee company.

Hence the Bench found no infirmity in the revision and the order of PCIT to set aside the assessment order and remanded the matter back to the file of the AO for verification and accordingly, take a fresh decision was confirmed. Accordingly, this appeal of assessee was dismissed.

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