No liability on Managing Director for unaccounted income of company

JCIT Vs Shri Narayana Reddy Vakati (ITAT Hyderabad)

Conclusion: Additions made on the basis of statement of assessee u/s 132(4) in the hands of assessee ignoring the fact that the seized material belongs to company was not justified as the same were not attributable to the Managing Director for undisclosed and unaccounted income of the Company.

Held: Assessee was the Managing Director of M/s VNR Infrastructure Ltd, having income from salary from the company and other sources. Search and seizure operations were conducted in the case of M/s VNR Infrastructures Ltd and also in the case of its Managing Directors and other Director. During the course of search certain incriminating material pertaining to the company was found at the premises of M/s. VNR Infrastructures Ltd, statement of the Managing Director and the other director and also the statements of other persons were recorded u/s 132(4) of the IT Act. During the course of statement the Managing Director Narayan Reddy. V and other Director Praveen Kumar.G had made disclosures u/s 132(4) amounting to Rs.74,27,47,257/- and Rs.3,00,00,000 Crores respectively, in the hands of company a further amount of Rs.23,80,37,378/- was made, the aggregate disclosure made was at Rs.101 Crores. Assessee admitted an aggregate amount of Rs.74,27,45,257 in his hands during the course of statement u/s 132(4). However, the seized material on which additions were obtained, belonged to the company However, AO had not taken any pain to verify whether the seized material stated in the letter submitted on 14.03.2016 to confirm whether it belonged to the company or to assessee V.Narayan Reddy. The additions were made only on the basis of statement of assessee u/s 132(4) in the hands of assessee ignoring the fact that the seized material belongs to company.  It was held that  no additions could be made in the assessee/individual’s hands since corresponding undisclosed and unaccounted income pertained to its company M/s. VNR Infrastructure Limited carrying out the business in its own name. ITAT clarified that Revenue had not even indicated the fact above the company’s assessment qua the very incomes.

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

These Revenue’s five appeals for Assessment Years 2010-11 to 2014-15 arise from the Commissioner of Income Tax (Appeals)-11, Hyderabad common order dt.27.02.2018 passed in case Nos.130 to 134/2016-17/DCIT-TC-1(3), Hyd/17-18 involving proceedings under Section 143(3) r.w.s. 153A in former four and u/s. 143(3) of the Income Tax Act, 1961 (‘the Act’) in last assessment year; respectively.

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