M/s. Lahari Impex Private Limited, Hyderabad V. Dy. CIT, Central Circle-6, Hyderabad

ITA 1635/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2842 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 01-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: J J VARUN
• Keywords: Unexplained cash credit; Capital asset converted into stock in trade; Capital asset; Business income; Depreciation; Search and seizure; Document seized; Cost of acquisition; Fair market value; Capital receipt; Documents seized
• Section: 45(2); 153A; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNA L HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1635/HYD/2012 A.Y. 2004-05 ITA NO. 1636/HYD/2012 A.Y. 2007-08 ITA NO. 1637/HYD/2012 A.Y. 2008-09 M/S. LAHARI IMPEX PVT. LTD. HYDERABAD PAN: AAACL4109L VS. THE DEPUTY CIT CENTRAL CIRCLE-6 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI J.J. VARUN RESPONDENT BY: SRI D. SUDHAKAR RAO DATE OF HEARING: 13 .0 3 .2013 DATE OF PRONOUNCEMENT: 03.05.2013 O R D E R PER CHANDRA POOJARI, AM: THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED A GAINST THE COMMON ORDER OF THE CIT(A)-I, HYDERABAD DATED 2 4.8.2012 FOR ASSESSMENT YEARS 2002-03 TO 2008-09. 2. THE BENCH ENQUIRED WITH THE LEARNED COUNSEL FOR THE ASSESSEE THAT WHETHER THE ASSESSEE HAS FILED ANY AP PEALS OTHER THAN FOR THESE THREE ASSESSMENT YEARS VIZ., 2004-05 , 2007-08 AND 2008-09 AS THE ORDER OF THE CIT(A) IS COMMON FO R A.YS. 2002-03 TO 2008-09. FOR THIS QUERY, THE LEARNED AR SUBMITTED THAT THE ASSESSEE FILED APPEALS ONLY FOR THESE THRE E ASSESSMENT YEARS. ACCORDINGLY, WE TAKE UP THESE THREE APPEALS FOR ADJUDICATION. 3. BRIEF FACTS OF THE CASE ARE THAT THERE WAS A SEARCH AND SEIZURE OPERATION U/S. 132 OF THE IT ACT WAS CONDUC TED AT THE BUSINESS PREMISES OF THE ASSESSEE COMPANY ON 19.2.2 008. 2 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== CONSEQUENTLY NOTICES U/S. 153A WERE ISSUED IN RESPO NSE TO WHICH ASSESSEE COMPANY FILED RETURNS OF INCOME ADMI TTING THE FOLLOWING INCOMES: ASST. YEAR INCOME/LOSS RETURNED (RS.) DATE OF FILING 2002 - 03 (80,47,622) 11.11.2009 2003 - 04 NIL 13.10.2009 2004 - 05 (58,68,359) 23.10.2009 2005 - 06 (55,20,344) 23.10.2009 2006 - 07 (17,06,505) 23.10.2009 2007 - 08 (37,96,646) 23.10.2009 2008 - 09 (13,29,373) 23.10.2009 4. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICE R OBSERVED THAT ASSESSEE COMPANY CLAIMED EXPENDITURE UNDER VARIOUS HEADS VIZ., CONSUMPTION OF MATERIAL, WORKER S' PAYMENT AND BENEFITS, RATES AND TAXES, ADMINISTRATIVE EXPEN SES, FRINGE BENEFITS ETC., AMOUNTING TO RS. 42,56,521 FOR A.Y. 2002-03, RS. 37,85,843 FOR A.Y. 2003-04, RS. 96,14,871 FOR A.Y. 2004-05, RS. 90,90,650 FOR A.Y. 2005-06, RS. 54,76,196 FOR A.Y. 2006- 07, RS. 29,30,087/- FOR A.Y. 2007-08 AND RS. 23,41 ,616 FOR A.Y. 2008-09. THE ASSESSING OFFICER CALLED FOR THE DETAILS OF THE ABOVE EXPENDITURE WITH EVIDENCES. THE ASSESSING OFF ICER HELD THAT THE ONUS TO PRODUCE BOOKS OF ACCOUNT AND OTHER DOCUMENTS LIES ENTIRELY ON THE ASSESSEE AND NON-PRODUCTION OF THE SAME WOULD NOT ABSOLVE THE ASSESSEE FROM THE CONSEQUENCE S OF NON- PRODUCTION. PLACING RELIANCE ON IN THE CASE OF GOVI NDARAJULY VS. CIT (34 ITR 807) (SC), KALE KHAN MOHAMMD HANIF VS. CIT (50 ITR 1) (SC) AND SRELEKHA BANERJEE VS. CIT (49 ITR 1 12) (SC), ETC., THE ASSESSING OFFICER DISALLOWED 50% OF THE T OTAL EXPENDITURE CLAIMED UNDER DIFFERENT HEADS AND ADDED THE SAME TO THE INCOME RETURNED IN ALL THE ASST. YEARS I.E., A.YS. 2002-03 TO 2008-09. 3 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== 5. THE ASSESSING OFFICER OBSERVED THAT THERE WERE UNSE CURED LOANS SHOWN BY THE ASSESSEE FOR A.YS. 2002-03 AND 2 007-08 AMOUNTING TO RS. 41,55,920/- AND RS. 5,85,000/- RES PECTIVELY. HE REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF UNSECURED LOANS AND CONFIRMATIONS ALONG WITH PAN, ETC BUT THE RE WAS NO COMPLIANCE FROM THE ASSESSEE. THE ASSESSING OFFICER RELIED ON THE JUDICIAL DECISIONS IN THE CASE OF BHARATI PVT. LTD. VS. CIT REPORTED IN 111 ITR 951 AND IN THE CASE OF CIT VS. BAISHNAB CHARAN MOHANTI REPORTED IN 212 ITR 195 AND HELD THA T EVEN WHERE CONFIRMATIONS WERE FILED, THAT ITSELF DOES NO T DISCHARGE THE ONUS CAST ON THE ASSESSEE IN VIEW OF THE LEGAL POSI TION THAT ASSESSEE IS REQUIRED TO ESTABLISH THE IDENTITY OF T HE PARTY, CAPACITY OF THE PARTY TO ADVANCE THE MONEY AND THE GENUINENESS OF THE TRANSACTION. SINCE THE ASSESSEE HAS NEITHER FILED ANY CONFIRMATIONS NOR ANY EVIDENCE TO PROVE THE CAPACIT Y OF THE PARTIES FOR ADVANCING THE LOANS AMOUNTS, HE TREATED THE AMOUNTS AS UNEXPLAINED CASH CREDITS U/S. 68 AND ADD ED TO THE TOTAL INCOME OF THE ASSESSEE IN A.YS. 2002-03 AND 2 007-08. 6. THE ASSESSING OFFICER ALSO OBSERVED THAT IN THE BAL ANCE SHEETS FILED FOR THE A.YS. 2002-03, 2003-04, 2004-0 5, 2005-06 AND 2007-08, THE ASSESSEE HAD SHOWN NEW CREDITORS F OR EXPENSES OF RS. 44,15,789/- IN A.Y. 2002-03, RS. 18 ,01,776/- IN A.Y. 2003-04, RS. 9,41,059/- IN A.Y. 2004-05, RS. 1 3,12,418/- IN A.Y. 2005-06 AND RS. 3,36,78,174/- IN A.Y. 200 7-08. THE ASSESSING OFFICER CALLED FOR THE DETAILS OF THESE NEW CREDITORS BUT THE ASSESSEE, IN SPITE OF SUFFICIENT TIME AND O PPORTUNITY GRANTED, DID NOT FURNISH THE DETAILS. THE ASSESSING OFFICER TREATED THESE CREDITS AS UNPROVED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE IN THE RESPECTIVE ASSESSMENT YEARS. 4 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== 7. THE ASSESSING OFFICER ALSO OBSERVED THAT IN A.Y. 2 001-02, THE ASSESSEE HAD PURCHASED 436 GUNTAS OF LAND @ RS. 3,206/- PER GUNTA SITUATED AT SURARAM VILLAGE, QUTBULLAPUR MANDAL FOR RS. 13,98,000 WHICH WAS SHOWN AS FIXED ASSET IN THE BALANCE SHEET FOR THE A.Y. 2001-02. HOWEVER, IN A.Y. 2002- 03, THE ASSESSEE COMPANY HAD TRANSFERRED THIS ASSET FROM FI XED ASSETS TO STOCK-IN-TRADE AND REFLECTED THE SAME UNDER THE HEAD 'ADVANCES' IN THE BALANCE SHEET. PART OF THIS LAND WAS SOLD IN A.Y. 2003-04 @ RS. 9,062/- PER GUNTA AND THE PROFI TS EARNED WERE SHOWN AS BUSINESS PROFITS. THE ASSESSING OFFIC ER HELD THAT AS PER THE PROVISIONS OF SEC. 45(2) OF IT ACT, THE PROFITS ARISING FROM TRANSFER BY WAY OF CONVERSION BY THE OWNER OF THE CAPITAL ASSET INTO OR ITS TREATMENT BY HIM AS STOCK IN TRAD E OF A BUSINESS CARRIED ON BY HIM SHALL BE CHARGEABLE TO I NCOME TAX AS HIS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH STOCK IN TRADE IS SOLD OR OTHERWISE TRANSFERRED BY HIM AND FOR THE PU RPOSE OF SEC. 48, THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF SUCH CONVERSION SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF TH E TRANSFER OF THE CAPITAL ASSET. THE ASSESSING OFFICER PUT THE AB OVE LEGAL POSITION TO THE ASSESSEE DURING ASSESSMENT PROCEEDI NGS AND ASKED THE ASSESSEE AS TO WHY THE CAPITAL GAINS SHOU LD NOT BE LEVIED U/S. 45(2) IN A.Y. 2002-03. AS THE ASSESSEE HAS NOT FILED ANY OBJECTIONS, THE ASSESSING OFFICER PROCEEDED TO TAX THE CAPITAL GAINS BY ADOPTING RS. 7,000/- PER GUNTA AS MARKET VALUE IN A.Y. 2002-03 AND WORKED OUT THE MARKET VALUE OF 436 GUNTAS OF LAND AT RS. 30,52,000/- AND REDUCING THE COST OF ACQUISITION OF RS. 13,98,000/- FROM IT, ARRIVED AT THE SHORT TERM CAPITAL GAINS AT RS. 16,54,000/- AND ADDED THE SAME TO THE TOTAL INCOME IN A.Y. 2002-03. 5 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== 8. FURTHER, THE ASSESSING OFFICER NOTICED THAT IN AY 2 004-05, THE ASSESSEE COMPANY HAD SHOWN NEW UNSECURED LOANS OF RS. 4,26,500/- AND NEW SHARE CAPITAL RECEIPT OF RS. 23, 27,180/-. SIMILARLY IN A.Y. 2008-09, IT HAD SHOWN RS. 30,55,7 62/- AS NEW UNSECURED LOANS AND RS. 50,00,000/- AS SHARE APPLIC ATION MONEY. THE ASSESSING OFFICER CALLED FOR THE DETAILS SUCH AS CONFIRMATIONS, PAN ETC., FOR THE ABOVE AMOUNTS BUT THE ASSESSEE FAILED TO FURNISH THE SAID DETAILS. THE ASSESSING O FFICER TREATED THE ABOVE AMOUNTS AS UNEXPLAINED CASH CREDITS U/S. 68 AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE IN RESPECTIVE ASSESSMENT YEARS I.E., RS. 27,53,680/- IN A.Y. 2004 -05 AND RS. 80,55,762/- IN A.Y. 2008-09. 9. THAT APART, THE ASSESSING OFFICER ALSO NOTICED IN A.Y. 2004-05 THAT AS PER THE SEIZED MATERIAL A/AVR/RES/2 , THE ASSESSEE COMPANY HAD ENTERED INTO MOU DATED 22.12.2 003 2003 WITH LAHARI HOMES FOR DEVELOPMENT OF ITS LAND OF 39 GUNTAS OF LAND SITUATED AT KONDAPUR AND IN EXCHANGE , THE COMPANY WOULD GET TWO INDEPENDENT HOUSES OF (PLOT N OS. 19 AND 23) 445 SQUARE YARDS AND 185 SQUARE YARDS RESPECTIV ELY AND THE CONSTRUCTED AREA WOULD BE 3400 SQUARE FEET AND 2800 SQUARE FEET RESPECTIVELY. THE ASSESSING OFFICER OBSERVED T HAT AS PER THE SEIZED DOCUMENTS IN THE CASE OF LAHARI HOMES, THE M ARKET VALUE OF THESE PLOTS IS RS. 2,584/- PER SQUARE YARD AND T HE CONSTRUCTION COST IS RS. 1050/- PER SQUARE FOOT. TH E ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROFITS ON SALE OF THESE LANDS SHOULD NOT BE TAXED AS BUSINESS PROFITS. THE ASSESSEE IN ITS REPLY DATED 16.12.2009 STATED THAT THE MOU THAT WAS ENTERED ON 22.12.2003 BY THE COMPANY WITH M/S. LAHARI HOMES WAS NOT IMPLEMENTED AND NO ACTIVITY WAS CARRI ED OUT AS MENTIONED IN THE MOU AND, THEREFORE, NO INCOME IS T AXABLE. THE ASSESSING OFFICER OBSERVED THAT M/S. LAHARI HOMES I S SHOWING 6 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== THE ABOVE LAND IN ITS BALANCE SHEET AS ASSET BASING ON THE SAME MOU AND IT HAS ALSO DEVELOPED THE LAND AND CONSTRUC TED THE HOUSES ON THE LAND. FURTHER LAHARI HOMES HAD ALSO S HOWN RS. 9,75,000/- IN ITS BALANCE SHEET, PAYABLE TO THE ASS ESSEE TOWARDS COST OF LAND. THE ASSESSING OFFICER HELD THAT SINC E LAHARI HOMES IS A GROUP CONCERN OF THE ASSESSEE COMPANY, T HERE IS NO BASIS FOR SHOWING RS. 9,75,000/ - AND ALSO HELD THA T THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE MO U WAS NOT MATERIALIZED. THEREFORE, BASING ON THE MOU, THE ASS ESSING OFFICER WORKED OUT THE TAXABLE PROFITS ON SALE OF A BOVE MENTIONED LAND TO LAHARI HOMES. THE ASSESSING OFFIC ER ADOPTED THE RATE OF RS. 2,584/- PER SQUARE YARD AND ARRIVED AT RS. 16,27,920/- AS THE VALUE OF THE LAND. HE ALSO WORKE D OUT THE COST OF CONSTRUCTION ADOPTING RS. 1050/- PER SQUARE FOOT AND ARRIVED AT RS. 65,10,000/-. ADDING THE COST OF LAN D AND COST OF CONSTRUCTION, THE TOTAL CONSIDERATION TO BE RECEIVE D FROM LAHARI HOMES WAS ARRIVED AT RS. 81,37,920/-. REDUCING THE COST OF ACQUISITION OF RS. 7,80,000/- FROM RS. 81,37,920/-, THE ASSESSING OFFICER ARRIVED AT THE BUSINESS PROFIT OF RS. 3,57,920 FOR THE A.Y. 2004-05 AND ADDED THE SAME TO THE TOTA L INCOME. 10. FURTHER, THE ASSESSING OFFICER NOTICED THAT ASSESSE E HAD CLAIMED DEPRECIATION ON NEW VEHICLES PURCHASED OF R S. 2,37,725/- (@10 % FOR A.Y. 2004-05), RS. 2,15,183 (@ FOR A.Y. 2005-06), RS. 4,21,530/- (@ FOR A.Y. 2006-07), RS. 3,58,301/- (@ FOR A.Y. 200-08)) AND RS. 94,671 (@ FOR A.Y. 200 8-09). AS THE ASSESSEE COULD NOT PRODUCE ANY OF THE DETAILS OF TH E NEW ASSETS PURCHASED, THE ASSESSING OFFICER OPINED THAT THE AS SESSEE FAILED IN ITS DUTY TO PROVE THE EXISTENCE OF THE ASSETS AN D ITS USAGE FOR THE BUSINESS AND DISALLOWED THE CLAIM OF THE ASSESS EE IN THESE YEARS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE IN RESPECTIVE ASSESSMENT YEARS. WITH THE ABOVE DISCUSS ED 7 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== ADDITIONS/DISALLOWANCES, THE ASSESSING OFFICER COMP LETED THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2002-03 TO 200 8-09 AND COMPUTED THE TOTAL INCOME OF THE ASSESSEE AND RAISE D TAX DEMANDS. AGAINST THIS THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A), INTER ALIA, GIVEN RELIEF IN AL L THE ASSESSMENT YEARS. THE ASSESSEE HAS GRIEVANCE IN THESE ASSESSM ENT YEARS WITH REGARD TO CERTAIN DISALLOWANCES. ITA NO. 1635/HYD/2012 (A.Y. 2004-05) 11. IN THIS YEAR THE ASSESSEE RAISED THE GROUND THAT TH E CIT(A) OUGHT NOT HAVE CONFIRMED THE PROFIT ON SALE OF LAND AT KONDAPUR AMOUNTING TO RS. 73,57,920. 12. BRIEF FACTS OF THE ISSUE ARE THAT IN THIS CASE AN M OU WAS EXECUTED WITHOUT SUBSEQUENT FOLLOW-UP ACTION OF HAN DING OVER OF THE PROPERTY OR ANY DEVELOPMENT WORK CARRIED BY THE DEVELOPER NOR ANY CONSIDERATION HAS PASSED ON IN TH IS TRANSACTION. IT IS SUBMITTED THAT THE PROPERTY IN Q UESTION IS STILL WITH THE ASSESSEE AND HAS BEEN MORTGAGED TO THE BAN K FOR OBTAINING LOAN. FURTHER, THE ASSESSING OFFICER HIMS ELF HAS OBSERVED THAT IN THE CASE OF M/S, LAHARI HOMES (DEV ELOPER) A SUM OF RS. 9,75,000/ - IS PAYABLE TO THE ASSESSEE C OMPANY TOWARDS THE LAND COST. ASSESSING OFFICER ALSO OBSER VED THAT M/S. LAHARI HOMES HAS DEVELOPED THE LAND AND CONSTRUCTED THE HOUSES ON THIS LAND. ON THE CONTRARY, THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER IS TOTALLY ERRED IN CONC LUDING THAT THE LAND IN QUESTION HAS BEEN DEVELOPED BY M/S. LAHARI HOMES AND THE LAND STILL IS WITH ITS POSSESSION WITHOUT ANY T RACE OF DEVELOPMENT ON THIS LAND AND NO AMOUNT RECEIVED FOR THIS LAND FROM M/S. LAHARI HOMES. FURTHER AS CONTENDED BY THE ASSESSING OFFICER, THE ASSESSEE HAS NOT RECEIVED AN Y HOUSES IN LIEU OF THE LAND. M/S. LAHARI HOMES DEVELOPED THE P ROPERTY 8 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== SITUATED AT SURVEY NOS. 165 AND 166, KONDAPUR BUT N OT THE LAND BELONGING TO THE ASSESSEE WHICH IS SITUATED AT SURV EY NO. 167. THE CIT(A) DID NOT AGREE WITH THE ARGUMENT OF THE A SSESSEE ABOUT THE PROPERTY BEING RETAINED WITH IT. THE ASSE SSEE COULD NOT SUBSTANTIATE ITS CONTENTION WITH ANY CORROBORAT IVE EVIDENCE EXCEPT FILING THE BANK LOAN PARTICULARS IN RESPECT OF MORTGAGE OF THE PROPERTIES FOR LOAN. IN FACT, ON VERIFICATION O F SUCH DETAILS, THE CIT(A) NOTICED THAT THE ASSESSEE MORTGAGED THE PROPERTY SITUATED AT SURVEY NOS. 165, 166 AND 167. THEREFOR E, THERE IS CONTRADICTORY EXPLANATION FORTHCOMING FROM THE ASSE SSEE ABOUT THE EXACT PROPERTY WHICH IS UNDER SUBJECT MATTER OF APPEAL. PROPERTY CAN BE MORTGAGED TO ANY FINANCIAL INSTITUT ION EVEN AS A GUARANTOR BUT NOT NECESSARILY AS OWNER OF SUCH PROP ERTY. THEREFORE THE CONTENTION OF THE ASSESSEE THAT PROPE RTY HAS BEEN MORTGAGED AND OBTAINED LOAN DOES NOT ESTABLISH ITS CONTENTION BEYOND REASONABLE DOUBT. FURTHER, IN THIS CASE, TH E PROPERLY WAS MORTGAGED BY M/S. LAHARL HOLIDAY HOMES LTD., WH ICH ANOTHER GROUP CONCERN OF ASSESSEE GROUP BUT NOT THE ASSESSEE AS SUCH. THERE ARE SO MANY CONTRADICTIONS IN THE EX PLANATION OF THE ASSESSEE ON THIS GROUND. IN THE ABSENCE OF ANY REBUTTAL FROM THE ASSESSEE AGAINST THE CONTENTION OF THE ASSESSIN G OFFICER, IT IS DIFFICULT TO ACCEPT THE ARGUMENT OF THE ASSESSEE. ACCORDINGLY, THE CIT(A) WAS OF THE OPINION THAT THERE IS NO JUST IFICATION TO INTERFERE WITH THE ACTION OF THE ASSESSING OFFICER IN MAKING THE ADDITION ON ACCOUNT OF SALE OF PROPERTY SITUATED AT KONDAPUR. THE CIT(A) CONFIRMED THE ADDITION OF RS. 73,57,920/ -. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN THIS CASE THE CIT(A) SUSTAINED THE A DDITION ON THE REASONS THAT THE ASSESSEE HAS NOT ESTABLISHED THE F ACT THAT THE ASSESSEE HAS MORTGAGED THE PROPERTY AND OBTAINED LO AN SO AS TO 9 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== SHOW THAT THE PROPERTY IS STILL OWNED BY THE ASSESS EE. IN OUR OPINION, NEITHER THE CIT(A) NOR THE ASSESSING OFFIC ER CARRIED ON DETAILED ENQUIRY REGARDING THE EXACT POSITION OF TH IS PROPERTY AND IN OUR OPINION, IT IS APPROPRIATE TO REMIT THE ISSUE TO CAUSE NECESSARY ENQUIRY TO THE FILE OF THE AO SO AS TO ES TABLISH WHETHER THE ASSESSEE OWNS THIS PROPERTY OR SOLD THE SAME. ONLY IN THE EVENT OF SALE OF THIS LAND PROPERTY THE PROF IT ARISING OUT OF SALE HAS TO BE TAXED BY THE AO. THIS GROUND IN IT A NO. 1635/HYD/2012 IS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT, ITA NO. 1635/HYD/2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1636/HYD/2012 (A.Y. 2007-08): 14. THE ASSESSEE RAISED THE GROUND DISALLOWANCE ON CRED ITORS AMOUNTING TO RS. 30,05,195 IS NOT JUSTIFIED. 15. BRIEF FACTS OF THE ISSUE ARE THAT IN THE BALANCE SH EET THE ASSESSEE HAS SHOWN NEW CREDITORS FOR EXPENDITURE AT RD. 3,36,78,174. THE ASSESSING OFFICER VIDE LETTER DAT ED 9.11.2009 REQUESTED THE ASSESSEE TO FURNISH THE DETAILS OF SU NDRY CREDITORS. THE ASSESSEE HAS NOT FILED DETAILS OR C ONFIRMATION LETTER FROM THE PARTIES. IN SPITE OF GIVING OPPORT UNITY, THE ASSESSEE FAILED TO FURNISH NECESSARY DETAILS. BEIN G SO, THE ASSESSING OFFICER MADE AN ADDITION OF RS. 3,36,78,1 74 AS UNPROVED LIABILITY. 16. ON APPEAL, THE CIT(A) OBSERVED THAT RS. 3,36,78,174 / - IN A.Y. 2007-08 IN RESPECT OF CREDITORS FOR EXPENSES WAS SHOWN IN THE BALANCE SHEET. AFTER CONSIDERING THE VARIOUS S UBMISSIONS OF THE ASSESSEE AS WELL AS THE FACTS AVAILABLE IN THIS CASE, THE ADDITION IN RESPECT AT CREDITORS FOR EXPENSES IS NO T SUSTAINABLE IN VIEW OF THE FACT THAT SOME OF THESE CREDITORS HA VE BEEN PAID BACK SUBSEQUENTLY THROUGH BANKING CHANNEL. THE CIT (A) 10 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== VERIFIED SOME OF THE PAYMENTS MADE TO MAJOR CREDITO RS AND FOUND THAT SUBSEQUENTLY PAYMENTS WERE MADE TO THESE CREDITORS THROUGH ANDHRA BANK, STATE BANK OF HYDERABAD, ETC. IN FACT, THE ASSESSING OFFICER HAS TAKEN THE FIGURES OF SUND RY CREDIT BALANCES AS AT THE END OF MARCH IN EACH YEAR COMPAR ING THE SAME WITH IMMEDIATE PRECEDING YEAR AND THE DIFFEREN T AMOUNT WAS ASSESSED AS INCOME OF THE ASSESSEE WITHOUT EXAM INING THE NATURE OF SUCH CREDIT BALANCES AND THE SUBSEQUENT P AYMENTS MADE BY THE ASSESSEE. IN THE A.Y. 2007-08, THE SUN DRY CREDITOR BALANCE IS RS. 3,86,45,687/- AS ON 31-3-2007 AND TH E BALANCE AS ON 31.3.2006 WAS AT RS. 49,67,513/- AND DIFFEREN CE OF RS. 3,36,78,174/- WAS ASSESSED AS INCOME. IN FACT, THER E IS A BALANCE OF RS. 3.35 CRORES IN THE NAME OF M/S. L.AH ARI GREEN PARK, PROPRIETARY CONCERN OF MR. G. HARI BABU, MANA GING DIRECTOR OF THE COMPANY WHO IS ASSESSED WITH ACIT, CENTRAL CIRCLE-1 AND HAVING RUNNING A/C WITH THE ASSESSEE C OMPANY. HIS CASE ALSO WAS SUBJECTED TO SCRUTINY ASSESSMENT CONSEQUENT TO SEARCH. AS PER BOOKS OF A/C OF M/S. LAHARI GREE N PARK (PROP. CONCERN OF MR. G.HARI BABU, MANAGING DIRECTOR), A S UM OF RS. 5,44,13,974 (DR.) WAS SHOWN AS AMOUNT OUTSTANDING A S AT 31.3.2007 IN THE NAME OF ASSESSEE COMPANY. WHEREAS IN THE BOOKS OF THE ASSESSEE COMPANY, AN AMOUNT OF RS. 3,3 5,07,550/- IS SHOWN UNDER SUNDRY CREDITOR AND RS. 2,18,17,890/ - AS UNSECURED LOAN FROM DIRECTOR. THUS THE TOTAL COMES TO RS. 5,53,25,440/- LEAVING A DIFFERENCE OF RS. 9,11,466/ - AS EXCESS CREDIT APPEARING IN THE BOOKS OF THE ASSESSEE WHEN COMPARED WITH THE BOOKS OF LAHARI GREEN PARK. THE ASSESSEE T RIED TO EXPLAIN THAT PROPERTIES WERE ACQUIRED IN THE NAME O F ASSESSEE COMPANY BY MAKING PAYMENTS THROUGH THE BOOKS OF LAH ARI GREEN PARK; WHILE DOING SO ONLY PART AMOUNT WAS TAK EN IN ASSESSEE'S BOOKS AND SUBSEQUENTLY ENTRIES HAVE BEEN RECONCILED BY PASSING RECTIFICATION JOURNAL ENTRIES. BUT NO DO CUMENTARY 11 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== EVIDENCE FILED IN SUPPORT OF THE EXPLANATION. HENC E THE EXCESS CREDIT AMOUNT OF RS. 9,11,466/- IS REQUIRED TO BE A SSESSED AS INCOME OF THE ASSESSEE IN A.Y. 2007-08. FURTHER, A SUM OF RS. 25 LAKHS WAS APPEARING IN THE NAME OF M/S. NAKAHT R EAL ESTATES AS ON 31-3-2007. IN THE SUBSEQUENT YEAR ANO THER RS. 20 LAKHS WAS RECEIVED ON 17-7-2007 AND TOTAL OF RS. 45 LAKHS WAS TRANSFERRED TO LAHARI GREEN PARK A/C ON 31.3.2008. THE ASSESSEE SUBMITTED THAT THIS AMOUNT WAS ADJUSTED IN THE HANDS OF LAHARI GREEN PARK TOWARDS SALE OF LAND TO THE AB OVE PARTY IN A.Y. 2008-09. M/S. LAHARI GREEN PARK DECLARED THE S AME AS SALE CONSIDERATION OF LAND IN THEIR BOOKS. THEREFORE, AD DITION CANNOT BE MADE ON THESE BALANCES ON THE BASIS OF MERE APPE ARANCE IN THE BOOKS OF ASSESSEE WITHOUT EXAMINING THE NATURE OF RECEIPT. 17. IT IS ALSO NOTICED THAT IN THE FINANCIAL YEAR 2005- 06 RELEVANT TO A.Y. 2006-07, ASSESSEE HAD WRITTEN OFF SUNDRY CREDITORS AMOUNTING TO RS. 26,74,610/- AND CREDITED THE SAME TO THE PROFIT AND LOSS A/C. THIS AMOUNT REPRESENTS CREDIT BALANCES CARRIED OVER FROM EARLIER YEARS WITHOUT AN Y FURTHER TRANSACTIONS. SIMILARLY IN THE FINANCIAL YEAR 2007- 08 RELEVANT TO A.Y. 2008-09, ASSESSEE HAD WRITTEN OFF SUNDRY CREDI TORS AMOUNTING TO RS. 3,46,065 AND CREDITED THE SAME TO THE PROFIT AND LOSS ACCOUNT. HOWEVER, IN THE A.Y. 2007 08, IT IS NOTICED THAT IN SOME OF THE CASES OF CREDITORS, NO TRANSACT IONS HAVE TAKEN PLACE BUT BROUGHT FORWARD BALANCES HAVE BEEN CARRIED FORWARD TO SUBSEQUENT YEARS. THE ASSESSEE HAS BEEN ASKED SPECIFICALLY TO FURNISH THE PAYMENTS TO THESE PARTI ES IN SUBSEQUENT YEARS. THE ASSESSEE COULD FURNISH SOME D ETAILS, WHICH SHOWS THAT ONLY IN A FEW CASES, TRANSACTIONS HAVE TAKEN PLACE AND IN REST OF THE CASES THE SAME BALANCES HA VE BEEN CARRIED FORWARD TO SUBSEQUENT YEARS. THE ASSESSEE H AS NO EXPLANATION TO OFFER ABOUT NON-PAYMENT OF THESE CRE DIT BALANCES 12 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== AND THEY ARE NOT RUNNING ACCOUNTS. THE TOTAL AT SU CH CREDIT BALANCES COMES TO RS. 20,93,729 FOR WHICH THE ASSES SEE HAS NO EXPLANATION TO OFFER. THEREFORE, THE CREDIT BALANC ES APPEARING IN THE BOOKS OF THE ASSESSEE ARE NO LONGER TO BE REPAI D, SINCE THE LIABILITY TO PAY-BACK IS CEASED TO EXIST, THE SAME IS REQUIRED TO BE TAKEN AS INCOME OF THE ASSESSEE. IT IS FOR THE A SSESSEE TO ESTABLISH WITH NECESSARY EVIDENCES TO PROVE THAT TH E CREDITORS ARE GENUINE AND ASSESSEE IS UNDER THE OBLIGATION TO RE-PAY SUCH LIABILITIES. IT IS ALSO A FACT THAT THESE CREDIT BA LANCES REPRESENT EXPENSES ALLOWED IN THE EARLIER YEARS AS DEDUCTION IN THE COMPUTATION OF BUSINESS INCOME. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, A SUM OF RS. 30,05,195/- (20,93,7 29 + 9,11,466) IS DIRECTED TO BE ASSESSED AS INCOME AND ACCORDINGLY THE ADDITION TO BE RESTRICTED TO RS. 30,05,195/- AS AGAINST RS. 3,36,78,174/- IN THE A.Y. 2007-08. AGAINST THIS, TH E ASSESSEE IS IN APPEAL BEFORE. 18. IN OUR OPINION, ANY CREDIT APPEARING IN THE BOOKS O F ACCOUNT IN THE RELEVANT ASSESSMENT YEAR, THE ASSESS EE IS BOUND TO EXPLAIN THE NATURE, SOURCE, GENUINENESS AND CRED ITWORTHINESS OF SUCH CREDIT. IN THE PRESENT CASE, THE ASSESSEE FAILED TO ESTABLISH ALL THE INGREDIENTS AS REQUIRED. BEING S O, THE CIT(A) SUSTAINED THE ADDITION. 19. BEFORE US, THE LEARNED AR PLEADED THAT ALL THE REQU IRED INFORMATION IS AVAILABLE WITH THE ASSESSEE AND IT I S IN A POSITION TO DISCHARGE THE BURDEN CAST UPON THE ASSESSEE. CO NSIDERING THE PLEA OF THE AR WE ARE INCLINED TO REMIT THE ISS UE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THE APPEAL OF THE ASSESSEE IN ITA NO. 1636/HYD/2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 13 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== ITA NO. 1637/HYD/2012 (A.Y. 2008-09): 20. THE ASSESSEE RAISED A GROUND THAT THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 50.55,762 U/S. 6 8 OF THE ACT. 21. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE SHOW N UNSECURED LOAN OF RS. 30,55,762 IN ITS BOOKS OF ACC OUNT. THERE WAS ALSO SHARE APPLICATION MONEY AT RS. 50 LAKHS. THE TOTAL ADDITION WAS MADE AT RS. 80,55,762 AS THE ASSESSEE COULD NOT FURNISH NECESSARY DETAILS REGARDING THE NATURE, SOU RCE AND GENUINENESS OF THE TRANSACTION. 22. ON APPEAL, THE CIT(A) OBSERVED THAT A SUM OF RS. 30,55,762/- WAS ADDED UNDER UNSECURED LOAN, AND RS. 50,00,000/- WAS ASSESSED UNDER SHARE APPLICATION MO NEY. AS FAR AS RS. 30,55,762/- IS CONCERNED, REMAND REPORT WAS OBTAINED FROM THE ASSESSING OFFICER WHEREIN THE ASS ESSING OFFICER HAS CLARIFIED THAT THE ASSESSEE SOLD FACTOR Y TO M/S. YANTRA TOOLS PVT. LTD., FOR A CONSIDERATION OF RS. 2.15 CRORES AND RECEIVED ADVANCE OF RS. 30 LAKHS FROM THEM ON THREE DIFFERENT DATES FOR RS. 10 LAKHS EACH I.E., ON 23-2-2008, 29- 3-2008, AND 31-3-2008. FURTHER CLARIFIED THAT THESE PAYMENTS WE RE DULY REFLECTED IN THE SALE DEED DATED 28.11.2008. THE A SSESSING OFFICER ALSO SUBMITTED THAT THE SALE DEED HAS BEEN VERIFIED AND THE CLAIM OF THE ASSESSEE APPEARS TO BE TRUE. IN V IEW OF THE ABOVE SUBMISSION OF THE ASSESSING OFFICER, THE CIT( A) OBSERVED THAT THE ADDITION OF RS. 30,00,000 DOES NOT STAND A ND ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO D ELETE THE SAME. 23. AS FAR AS ADDITION OF RS. 50 LAKHS ON ACCOUNT OF SH ARE APPLICATION MONEY IS CONCERNED, THE ASSESSING OFFIC ER SUBMITTED THAT THE ASSESSEE COMPANY FILED A CONFIRMATION FROM THE 14 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== INVESTOR BY NAME MR. PAVAN KUMAR NALLAMALA STATING THAT HE HAD GIVEN A DEMAND DRAFT FOR RS. 50 LAKHS BEARING N O. 125623 DATED 21-1-2008 DRAWN ON CITIBANK, HYDERABAD TOWARD S SHARE APPLICATION MONEY FOR ALLOTMENT OF 5 LAKHS EQUITY S HARES @ FACE VALUE OF RS. 10/- EACH IN M/S. LAHARI IMPEX PVT. LT D. IN THE REMAND PROCEEDINGS THE ASSESSING OFFICER DIRECTED T HE ASSESSEE COMPANY TO PRODUCE THE SAID INVESTOR FOR FURTHER EX AMINATION BUT THE SAME COULD NOT BE MATERIALIZED ON THE GROUN D THAT THE ALLEGED INVESTOR/CREDITOR IS AN NRI, HENCE NOT PROD UCED BEFORE THE ASSESSING OFFICER. THE CIT(A) OBSERVED THAT THE ASSESSEE FILED A CONFIRMATION LETTER FROM MR. PAVAN KUMAR FR OM THE RESIDENTIAL ADDRESS LOCATED AT KHAMMAM (ANDHRA PRAD ESH). HOWEVER, HE COULD NOT BE PRODUCED ON THE GROUND THA T HE IS AN NRI NOT AVAILABLE IN INDIA. AT LEAST HE COULD HAVE FURNISHED THE NECESSARY CONFIRMATION FROM THE SAID NRI TO THE EFF ECT THAT HE IS PRESENTLY RESIDING AT SO AND SO ADDRESS, ETC. IN TH E APPEAL PROCEEDINGS ALSO, THE ASSESSEE WAS ASKED TO GET THE FRESH CONFIRMATION FROM HIM ABOUT THE INVESTMENT IN THE C OMPANY FOR THE PURPOSE OF PURCHASE OF EQUITY SHARES. NO COMPL IANCE FROM THE ASSESSEE TO THE ABOVE QUERY RAISED IN THE APPEA L PROCEEDINGS. THE SAID TRANSACTION IS ALSO SUSPICIOU S IN VIEW OF THE FACT THAT TILL DATE NO SHARES HAVE BEEN ALLOTTE D TO THE INVESTOR NOR ANY INTEREST HAS BEEN PAID ON THE AMOU NT KEPT WITH THE ASSESSEE COMPANY. IT IS VERY STRANGE ON T HE PART OF ANY GENUINE INVESTOR TO KEEP HIS FUNDS OF SUCH LARGE QU ANTUM IN A PVT. LTD. COMPANY ENGAGED IN REAL ESTATE WITHOUT AN Y RETURN ON SUCH INVESTMENT. IT IS NOT A SMALL AMOUNT TO BE KEP T ASIDE WITHOUT ANY YIELD. THE FINANCIAL SOUNDNESS OF THE I NVESTOR IS ALSO NOT PROVED BEYOND DOUBT. THEREFORE, THE SO CAL LED SHARE APPLICATION MONEY FROM MR. PAVAN KUMAR NALLAMALA IS NOT ESTABLISHED AS A GENUINE TRANSACTION. ACCORDINGLY, THE CIT(A) SUSTAINED THE ACTION OF THE ASSESSING OFFICER IN TH E ABSENCE OF 15 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== NECESSARY PROOF BY THE ASSESSEE COMPANY AND ADDITIO N OF RS. 50 LAKHS IS, THEREFORE, CONFIRMED. ASSESSEE HAS ALSO NO EXPLANATION FOR THE DIFFERENCE OF RS. 55,762/- ASSESSED AS UNSE CURED LOAN. THEREFORE, THE SAME ALSO GETS CONFIRMED. IN EFFECT, ADDITION OF RS. 50,55,762/- IS SUSTAINED AND BALANCE OF RS. 30 LAKHS IS DIRECTED TO BE DELETED. AGAINST SUSTAINING ADDITION AT RS. 50,55,762 THE ASSESSEE IS IN APPEAL BEFORE US. 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. AS HELD IN EARLIER PARAS FOR A.Y. 2007- 08, WE ARE INCLINED TO REMIT THE ISSUE TO THE FILE OF THE ASSE SSING OFFICER WITH A DIRECTION TO THE ASSESSEE TO FURNISH NECESSA RY DETAILS TO DISCHARGE THE BURDEN CAST UPON IT U/S. 68 OF THE AC T AS ANY CREDIT APPEARING IN THE BOOKS OF ACCOUNT, THE ASSES SEE IS REQUIRED TO EXPLAIN THE IDENTITY OF THE PARTIES, GE NUINENESS OF THE TRANSACTION AND CAPACITY OF THE CREDITORS AS HE LD BY JURISDICTIONAL HIGH COURT IN THE CASE OF R.B. MITTA L (246 ITR 283). ACCORDINGLY, THE ISSUE IS REMITTED BACK TO TH E FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. 25. IN THE RESULT, ALL THE ASSESSEE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 3 RD MAY, 2013. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 3 RD MAY, 2013 TPRAO 16 ITA NOS. 1635-1637/HYD/2012 M/S. LAHARI IMPEX PRIVATE LTD ====================== COPY FORWARDED TO: 1. M/S. LAHA RI IMPEX PVT. LTD., HOUSE NO. 723/A, ROAD NO. 37, JUBILEE HILLS, HYDERABAD. 2. THE DEPUTY CIT, CENTRAL CIRCLE - 6, AAYAKAR BHAVAN, HYDERABAD. 3. THE CIT(A) - I , HYDERABAD. 4. THE CIT (CENTRAL) , HYDERABAD. 5. THE DR B BENCH, ITAT, HYDERABAD.