INCOME TAX ACT, 1961

Section 153A Section 69C

Search and seizure - Assessment under section 153A - Unexplained expenditure based on entries in books found, belonging to and seized at premises of third party - No cross examination

Assessee company was engaged in the business of manufacturing and sales of Sugar and Alcoholic Liquor. The company had three units. Assessee company was a member of M/s. UPDA (Uttar Pradesh Distillery Association) which was a Registered Society, formed by all the distilleries of Uttar Pradesh for their welfare to jointly take up their cause with various authorities on different issues. Search and Seizure Operation under section 132 was carried out at the residential premises of Mr. R.K. Miglani, General Secretary of UPDA as well as at the premises of M/s. Radico Khaitan (a leading distiller of Uttar Pradesh based company) Many incriminating documents were seized during search operation from both the places. The details of such illegal/unaccounted payments on the basis of these documents coupled with various other details/information which were not allowable as expenditure under the Income Tax Law. After examination of the seized material and after giving an opportunity of being heard, the AO taxed amount under section 69C. The CIT(A) confirmed the addition.Held: The Tribunal in its order in first round dt. 14-12-2018 had already held that the presumption under section 132(4A) and 292C may be good against Shri R.K. Miglani or UPDA. But not in the cases of 'the other person' which were the distilleries in the present appeals. It would not be out of place to point out that the premises of Shri R.K. Miglani were searched, which means that Shri R.K. Miglani was the 'searched person' and all the presumptions were available against him in respect of the seized documents/notings in the seized documents and other things. Surprisingly, the assessments of Shri R.K. Miglani have been made on the returned income. Revenue accepted what was returned by Shri R.K. Miglani and on the strength of his statement that the documents seized from his premises belong to distilleries, the additions have been made as unexplained expenditure/contribution to UPDA. Having gone through the orders in detail in the absence of any other new material, and in the absence of any material change in the facts and circumstances of the case. Addition made by the AO based on the entries in the books found, belonging to and seized at the premises of the third party, in the absence of cross-examination of such party based on which the addition had been made cannot be held to be sustainable in the eyes of the law. In the result, both the appeals of the assessee were allowed.

Relied:Lords Distiller Ltd. ITA No. 257/6/Del/2010 : 2019 TaxPub(DT) 888 (Del-Trib). Distinguished:Mohan Meakins Ltd. decided by ITAT in ITA No. 3787/Del/2008.

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