M/s. Nadella Estates Limited, Hyd, Hyderabad V. ITO, Ward-16(2), Hyderabad

ITA 2/HYD/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0299 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 02-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B RAJARAM
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Opportunity of being heard
• Section: 133A; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 01 AND 02/HYD/2012 ASSESSMENT YEARS: 2003-04 & 2006-07 M/S NADELLA ESTATES LTD., HYDERABAD. PAN AABCN5682M VS. INCOME-TAX OFFICER, WARD 16(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.A. SAIPRASAD REVENUE BY : SHRI B. RAJARAM DATE OF HEARING 25-06-2015 DATE OF PRONOUNCEMENT 29 -07-2015 O R D E R PER SAKTIJIT DEY, J.M.: THESE APPEALS BY ASSESSEE ARE DIRECTED AGAINST SEP ARATE ORDERS, BOTH, DATED 25/03/2015 OF LD. COMMISSIONE R OF INCOME-TAX(A) V, HYDERABAD FOR AYS 2003-04 AND 2006-07. ITA NO. 02/HYD/2012 FOR AY 2006-07 2. IN THIS APPEAL ASSESSEE HAS RAISED FOUR GROUNDS. GROUND NO. 4 BEING GENERAL IN NATURE, IS NOT REQUIRE TO BE ADJUD ICATED. 3. IN GROUND NO. 1, ASSESSEE HAS CHALLENGED THE ADD ITION OF RS. 25 LAKHS REPRESENTING SHARE APPLICATION MONEY AS UN EXPLAINED CASH CREDIT U/S 68 OF THE ACT. 4. BRIEFLY THE FACTS ARE, ASSESSEE IS A COMPANY ENG AGED IN REAL ESTATE BUSINESS. FOR THE AY UNDER CONSIDERATION, AS SESSEE FILED ITS 2 ITA NOS. 1 & 2 /HYD/2012 M/S NADELLA ESTATES LTD. RETURN OF INCOME ON 24/11/2006 DECLARING NIL INCO ME. DURING THE ASSESSMENT PROCEEDING, AO WHILE VERIFYING THE BALAN CE SHEET OF ASSESSEE AS AT 31/03/2006 NOTICED THAT AN AMOUNT OF RS. 33 LAKHS HAS BEEN INTRODUCED AS SHARE APPLICATION MONEY. ON VERIFYING THE DETAILS OF SHARE APPLICATION MONEY FURNISHED BY ASS ESSEE, AO NOTICED THAT WHILE THE MANAGING DIRECTOR AND HIS WIFE CONTR IBUTED RS. 8 LAKHS, AND THE BALANCE AMOUNT OF RS. 25 LAKHS WAS SHOWN TO HAVE BEEN CONTRIBUTED BY VARIOUS OTHER PERSONS, THE DETAILS O F WHICH WERE MENTIONED BY AO IN THE IMPUGNED ASSESSMENT ORDER. A SSESSEE ALSO SUBMITTED CONFIRMATION LETTERS FROM THE CONCERNED S HARE APPLICANTS. ON EXAMINING THE CONFIRMATION LETTERS, AO NOTED THE FOLLOWING FACTS: I) ALL THE SHARE APPLICANTS AND AGRICULTURISTS, MAN Y OF THEM HAVING ONLY AGRICULTURE AS THEIR ONLY SOURCE OF IN COME. II) BILLS WERE PRODUCED IN SUPPORT OF THE ALLEGED SHARE OF AGRICULTURAL PRODUCE WHICH IS STATED TO BE THE SOU RCE FOR THE SHARE APPLICATION MONEY. SCRUTINY OF THE BILLS HOW EVER SHOWED SOME UNUSUAL PATTERS LIKE THE BILLS ISSUED BY ONE COMMISSION AGENT TO SEVERAL PERSONS DID NOT HAVE THE SAME FEATURES/DETAILS, THE DATES ON THE BILLS DID NOT S HOW A CONTIGUOUS PATTERNS, THE RATES VARIED ON THE SAME DATE IN RESPECT OF THE SAME AGENT ETC. III) NONE OF THE SHARE APPLICANTS IS ASSESSED TO I NCOME TAX. IV) THE ENTIRE SHARE APPLICATION MONEY HAS BEEN GI VEN AND RECEIVED IN CASH. 4.1 FOR FURTHER VERIFICATION OF AUTHENTICITY OF AS SESSEES CLAIM, AO CONDUCTED SURVEY U/S 133A OF THE ACT IN THE BUSINES S PREMISES OF THE COMMISSION AGENTS LOCATED IN MADANPALLE, CHITTOR DI ST., TO WHOM THE SHARE APPLICANTS CLAIMED TO HAVE SOLD THEIR AGRICUL TURAL PRODUCTS. AS STATED BY AO IN THE ASSESSMENT ORDER, IN COURSE OF SURVEY STATEMENTS WERE RECORDED FROM SEVERAL COMMISSION AGENTS AND WH EN THEY WERE CONFRONTED WITH THE CLAIM MADE BY SHARE APPLICANTS THAT THEY HAVE SOLD THEIR AGRICULTURAL PRODUCE TO THEM, ALL OF THE M DENIED OF HAVING EITHER PURCHASED AGRICULTURAL PRODUCE OR ISSUING AN Y BILLS TO THE CONCERNED SHARE APPLICANTS. FROM THE STATEMENTS OF THE COMMISSION AGENTS, AO INFERRED THAT SHARE APPLICANTS DID NOT S ALE ANY AGRICULTURAL 3 ITA NOS. 1 & 2 /HYD/2012 M/S NADELLA ESTATES LTD. PRODUCE TO THE COMMISSION AGENTS NOR THE COMMISSION AGENTS EVER ISSUED ANY BILLS TO THE SHARE APPLICANTS. ON THE BA SIS OF EVIDENCE BROUGHT ON RECORD, AO PROPOSED TO TREAT SHARE APPLI CATION MONEY OF RS. 25 LAKHS AS UNEXPLAINED CASH CREDIT AND ISSUED SHOW CAUSE NOTICE TO ASSESSEE. OBJECTING TO THE PROPOSED ACTIO N OF AO, ASSESSEE SUBMITTED THAT SHARE APPLICATION MONEY CANNOT BE TR EATED AS UNEXPLAINED CASH CREDIT U/S 68. ASSESSEE SUBMITTED THAT ALL THE SHARE APPLICANTS HAVE FURNISHED DETAILS WITH REGARD TO TH EIR AGRICULTURAL LAND HOLDING AS WELL AS THE AGRICULTURAL ACTIVITY CARRIE D OUT BY THEM. IN THIS CONTEXT, ASSESSEE REFERRED TO THE STATEMENTS RECORD ED FROM SHARE APPLICANTS WHERE THEY CATEGORICALLY ACCEPTED OF HAV ING GIVEN THE SHARE APPLICATION MONEY TO ASSESSEE. AS FAR AS ALLE GATION OF AO THAT AGRICULTURAL PRODUCE WERE NOT SOLD TO COMMISSION AG ENTS, ASSESSEE REFERRED TO THE STATEMENT OF SHARE APPLICANTS WHERE IN IT WAS STATED THAT THEY DID NOT TAKE THE AGRICULTURAL PRODUCE TO ANY MANDY, HENCE, THEY WERE NOT AWARE WHO ISSUED THE BILLS. IT WAS SU BMITTED, SINCE PURCHASERS COME TO THEM FOR PURCHASING THE PRODUCT, THEY ARE NOT AWARE WHO IS THE ACTUAL COMMISSION AGENT. ASSESSEE ALSO SUBMITTED THAT INCASE OF SHARE APPLICATION MONEY, IF AO ENTER TAINS ANY DOUBT WITH REGARD TO THE SOURCE FROM WHERE SHARE APPLICAN TS INVESTED, THEN, IT MAY BE TREATED AS UNEXPLAINED INCOME IN THE HAND S OF SHARE APPLICANTS AND NOT AT THE HANDS OF ASSESSEE. IN THI S CONTEXT, ASSESSEE RELIED UPON THE DECISION OF HONBLE AP HIG H COURT IN CASE OF CIT VS. LANCO INDUSTRIES LTD., 242 ITR 357 AND T HE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. STELLAR IN VESTMENTS LTD., THOUGH, AO ACCEPTED THAT SHARE APPLICANTS IN THE ST ATEMENT RECORDED FROM SOME OF THEM HAVE STATED THAT THEY HAVE ADVANC ED SHARE APPLICATION MONEY TO ASSESSEE, BUT, HE DID NOT BELI EVE THEIR STATEMENTS. AO REFERRING TO THE STATEMENTS OF SOME OF THE SHARE APPLICANTS OBSERVED THAT, THOUGH, ALL OF THEM CLAIM ED TO HAVE SOLD AGRICULTURAL PRODUCE I.E. TOMATOES TO COMMISSION AG ENTS BUT THE COMMISSION AGENTS DENIED OF HAVING PURCHASED SUCH P RODUCTS FROM THEM. THEREFORE, IN VIEW OF THE CONTRADICTING STATE MENTS OF SHARE 4 ITA NOS. 1 & 2 /HYD/2012 M/S NADELLA ESTATES LTD. APPLICANTS AND COMMISSION AGENTS, AO WAS OF THE VIE W THAT CLAIM OF SHARE APPLICANTS THAT THEY HAVE SOLD AGRICULTURAL P RODUCE AND THE MONEY INVESTED TOWARDS SHARE APPLICATION WAS OUT OF SUCH INCOME IS NOT BELIEVABLE. AS FAR AS THE SUBMISSION OF ASSESSE E THAT SHARE APPLICATION MONEY CANNOT BE CONSIDERED AS UNEXPLAIN ED CASH CREDIT AT THE HANDS OF ASSESSEE, AO OBSERVED THAT THE DECI SION RELIED UPON BY ASSESSEE IS RENDERED IN CASE OF A LARGE JOINT ST OCK COMPANY WHERE SHAREHOLDING IS WIDE SPREAD UNLIKE ASSESSEE WHERE S HARE APPLICATION MONEY IS RAISED FROM VERY LIMITED NUMBER OF PERSONS . THUS, AO OPINED THAT SHARE APPLICANTS NOT BEING INCOME-TAX A SSESSEES AND BEING PERSONS OF SMALL MEANS AND ILLITERATE, ASSESS EE IS UNDER HEAVY OBLIGATION TO EXPLAIN SATISFACTORILY THE GENUINENES S OF THE SHARE APPLICATION MONEY. AO FINALLY OBSERVED THAT SINCE A SSESSEE HAS FAILED TO PROVE THE CREDITWORTHINESS OF SHARE APPLI CANTS, INTRODUCTION OF CAPITAL BY WAY OF SHARE APPLICATION MONEY HAS TO BE TREATED AS UNEXPLAINED CASH CREDIT OF ASSESSEE. ACCORDINGLY, H E ADDED THE AMOUNT OF RS. 25 LAKHS TO THE INCOME OF ASSESSEE. B EING AGGRIEVED OF SUCH ADDITION, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 5. AS OBSERVED BY LD. CIT(A) IN THE IMPUGNED ORDER, THOUGH, SEVERAL OPPORTUNITIES WERE GRANTED TO ASSESSEE TO R EPRESENT ITS CASE, NEITHER ASSESSEE NOR ITS LD. AR APPEARED TO PROPERL Y EXPLAIN OR REPRESENT THE CASE. HENCE, ON THE BASIS OF THE WRIT TEN SUBMISSION AND MATERIALS ON RECORD, LD. CIT(A) PROCEEDED TO DEAL W ITH THE ISSUE. ON THE BASIS OF WRITTEN SUBMISSIONS ON RECORD LD. CIT (A) OBSERVED THAT, ASSESSEES CONTENTION THAT SHARE APPLICATION MONEY CANNOT BE TREATED AS CASH CREDIT U/S 68 OF THE ACT, IS NOT ACCEPTABLE DUE TO PRINCIPLE LAID DOWN IN VARIOUS DECISIONS REFERRED TO BY HIM. AS FA R AS THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. STELLAR IN VESTMENTS LTD., 251 ITR 263 IS CONCERNED, LD. CIT(A) OBSERVED THAT FACTS INVOLVED IN THE CASE BEFORE THE HONBLE SUPREME COURT IS DIFFER ENT FROM ASSESSEES CASE AS IN CASE OF STELLAR INVESTMENTS L TD., ASSESSEE WAS A PUBLIC LTD. COMPANY AND SHARES HAVE BEEN SUBSCRIB ED BY MANY PEOPLE AND MOREOVER SUBSCRIPTIONS WERE MADE THROUGH CHEQUES. LD. 5 ITA NOS. 1 & 2 /HYD/2012 M/S NADELLA ESTATES LTD. CIT(A) REFERRED TO THE DECISION OF THE FULL BENCH OF HONBLE DELHI HIGH COURT IN CASE OF SOPHIA FINANCE LTD., [1994] 205 IT R 98 WHEREIN IT WAS HELD THAT IT IS OPEN TO AO TO ENQUIRE INTO THE IDENTITY OF SHAREHOLDERS OF A COMPANY AND THEIR CREDITWORTHINES S AND AVAILABILITY OF FUNDS FOR SUBSCRIBING TO SHARES IN THE COMPANY. REFERRING TO A NUMBER OF DECISIONS, LD. CIT(A), ULTIMATELY, HELD T HAT ASSESSEE HAVING FAILED TO PROVE CREDITWORTHINESS OF THE SHARE APPLI CANTS IN ADVANCING THE MONEY TO ASSESSEE COMPANY, THE SAME CANNOT BE A CCEPTED. HE ALSO OBSERVED THAT GENUINENESS OF THE TRANSACTION I S ALSO NOT PROVED AS NOT A SINGLE TRANSACTION IS ROUTED THROUGH BANK. THUS, LD. CIT(A) ULTIMATELY CONCLUDED THAT SINCE ASSESSEE HAS FAILED TO PROVE CREDITWORTHINESS OF SHARE APPLICANTS AND THE GENUIN ENESS OF THE TRANSACTION, ADDITION OF RS. 25 LAKHS IS VALID. 6. LD. AR SUBMITTED BEFORE US, AT THE STAGE OF ASSE SSMENT PROCEEDING, ASSESSEE HAS NOT ONLY SUBMITTED CONFIRM ATION LETTERS OF THE SHARE APPLICANTS BUT MANY OF THEM WERE ALSO EXA MINED BY AO. IN COURSE OF THEIR EXAMINATION THEY CATEGORICALLY ADMI TTED OF HAVING APPLIED FOR SHARES OF ASSESSEE COMPANY BY MAKING AD VANCES. THEREFORE, MONEY RECEIVED BY ASSESSEE BEING IN THE NATURE OF SHARE APPLICATION MONEY, IT CANNOT BE TREATED AS UNEXPLAI NED CASH CREDIT. LD. AR HEAVILY RELYING UPON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF STELLAR INVESTMENTS LTD., 192 ITR 287 AN D THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF CIT VS. STELLA R INVESTMENTS LTD., 251 ITR 263 WHEREIN THE DECISION OF THE HONB LE DELHI HIGH COURT WAS AFFIRMED. IT WAS SUBMITTED BY LD. AR, IN CASE OF SHARE APPLICATION MONEY, AO CANNOT MAKE ANY ADDITION AT T HE HANDS OF ASSESSEE , IF AO HAS ANY DOUBT WITH REGARD TO CREDI TWORTHINESS OF THE SHARE APPLICANTS, THEN, ADDITION CAN BE CONSIDERED IN THEIR HANDS. IN THIS CONTEXT, LD. AR RELIED UPON A DECISION OF THE HONBLE AP HIGH COURT IN CASE OF CIT VS. LANCO INVESTMENTS LTD., 24 2 ITR 357. AS FAR AS FACTUAL ASPECT IS CONCERNED, LD. AR SUBMITTED, T HERE CANNOT BE ANY DISPUTE TO THE FACT THAT ALL THE SHARE APPLICANTS A RE HAVING AGRICULTURAL LAND HOLDING AND THEY ARE ENGAGED IN AGRICULTURAL A CTIVITIES. 6 ITA NOS. 1 & 2 /HYD/2012 M/S NADELLA ESTATES LTD. THEREFORE, MERELY RELYING UPON THE STATEMENT GIVEN BY SOME COMMISSION AGENTS, IT CANNOT BE CONCLUDED THAT SHAR E APPLICANTS DO NOT HAVE ANY AGRICULTURAL INCOME. MORE SO, WHEN ALL THE SHARE APPLICANTS HAVE CONFIRMED OF HAVING INVESTED IN ASS ESSEE COMPANY. UNDER THESE CIRCUMSTANCES, ASSESSEE CANNOT BE ASKED TO PROVE THE SOURCE OF SOURCE. 7. LD. DR, ON THE OTHER HAND, RELYING UPON THE OBSE RVATIONS MADE BY AO AND LD. CIT(A), SUBMITTED BEFORE US, THE CLAI M OF SHARE APPLICANTS OF HAVING SOLD AGRICULTURAL PRODUCE TO C OMMISSION AGENTS HAVE BEEN PROVED TO BE FALSE NOT ONLY BECAUSE OF TH E FACT THAT COMMISSION AGENTS HAVE DENIED OF HAVING PURCHASED A NY AGRICULTURAL PRODUCE FROM THE SHARE APPLICANTS, BUT, THEY HAVE A LSO DISOWNED THE BILLS SUBMITTED BY SHARE APPLICANTS. THUS, IT WAS S UBMITTED BY LD. DR, THE CLAIM OF SHARE APPLICANTS OF HAVING EARNED AGRI CULTURAL INCOME HAVING BEEN PROVED TO BE BOGUS, THEIR CREDITWORTHIN ESS REMAINED UNPROVED. IN THESE CIRCUMSTANCES, INGREDIENTS OF SE CTION 68 ARE NOT FULLY SATISFIED BY ASSESSEE. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIAL ON RECORD AS WELL AS ORDERS OF REVENUE AUTHORITIES. AS CAN BE SEEN, THE AMOUNT OF RS. 25 LAKHS REPRESENT S HARE APPLICATION MONEY IN THE NAME OF VARIOUS PERSONS. IT WAS ADMITT ED BY LD. AR BEFORE US TILL DATE NO SHARES HAVE BEEN ALLOTTED TO THE CONCERNED SHARE APPLICANTS. THUS, CONSIDERING THE AFORESAID F ACTUAL POSITION, IT HAS TO BE ACCEPTED THAT THE AMOUNT SHOWN AS SHARE A PPLICATION MONEY IS IN THE NATURE OF A CREDIT TILL IT IS CONVE RTED TO SHARES. HAVING HELD SO, IT IS TO BE DECIDED WHETHER THE AMOUNT IN QUESTION CAN BE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE AC T. IN THIS REGARD, IT IS TO BE NOTED THAT THERE IS NO DISPUTE TO THE FACT THAT THE ENTIRE TRANSACTION IS, THROUGH CASH. HOWEVER, IT IS A FACT ON RECORD THAT DURING THE ASSESSMENT PROCEEDING, ASSESSEE HAS SUBM ITTED CONFIRMATION LETTERS FROM EACH OF THE SHARE APPLICA NTS WHEREIN THEY CONFIRMED OF HAVING ADVANCED THE AMOUNTS IN QUESTIO N TOWARDS SHARE 7 ITA NOS. 1 & 2 /HYD/2012 M/S NADELLA ESTATES LTD. APPLICATION MONEY TO ASSESSEE. IT IS ALSO A FACT ON RECORD THAT SOURCE OF SUCH INVESTMENTS IS CLAIMED TO HAVE ORIGINATED F ROM INCOME EARNED FROM SALE OF AGRICULTURAL PRODUCE. IT IS NOTEWORTHY THAT AO IN COURSE OF ASSESSMENT PROCEEDING HAS ALSO EXAMINED SOME OF THE SHARE APPLICANTS AND IN THE STATEMENT RECORDED FROM THEM NOT ONLY THEY HAVE ACCEPTED OF HAVING ADVANCED MONEY TO ASSESSEE TOWARDS SHARE APPLICATION MONEY BUT HAVE ALSO EXPLAINED THE SOURC E OF SUCH INVESTMENT BY STATING THAT IT IS OUT OF INCOME GENE RATED FROM SALE OF AGRICULTURAL PRODUCE. TO PROVE SUCH FACT, SHARE APP LICANTS HAVE SUBMITTED THE BILLS REPRESENTING SALE OF TOMATOES T O COMMISSION AGENTS. AS IT APPEARS, AO TO ASCERTAIN THE GENUINEN ESS OF THE SHARE APPLICANTS CLAIM HAD CONDUCTED SURVEY OPERATION IN THE BUSINESS PREMISES OF THE COMMISSION AGENTS AND IN THE STATEM ENT RECORDED FROM COMMISSION AGENTS THEY HAVE DENIED OF HAVING P URCHASED ANY PRODUCT FROM ASSESSEE OR ISSUED ANY BILLS. IT IS FU RTHER EVIDENT THAT SOLELY RELYING UPON THE STATEMENTS OF THE COMMISSIO N AGENTS, AO HAS TREATED THE SHARE APPLICATION MONEY AS UNEXPLAINED CASH CREDIT, WHICH IS ALSO CONFIRMED BY LD. CIT(A). THOUGH, IT MAY BE A FACT THAT SHARE APPLICANTS CLAIM FOR SALE OF AGRICULTURAL PR ODUCE WAS CONTRADICTED BY SOME COMMISSION AGENTS, BUT, THEIR DENIAL MAY BE FOR VARIOUS REASONS, ONE OF THEM BEING PURCHASER MAY BE OUT OF ACCOUNT. HOWEVER, SOLELY ON THE BASIS OF DENIAL BY SOME COMM ISSION AGENTS IT CANNOT BE CONCLUDED THAT SHARE APPLICANTS WERE NOT HAVING ANY AGRICULTURAL INCOME. MORE SO, WHEN AO HAS MADE ENQU IRIES WITH THE CONCERNED SHARE APPLICANTS AND HAS NOT FOUND ANY AD VERSE MATERIAL TO DISPUTE THE SHARE APPLICANTS CLAIM OF HAVING AG RICULTURAL LAND HOLDING OR THE FACT THAT THEY ARE ENGAGED IN AGRICU LTURAL ACTIVITY. THE ONLY THING THE STATEMENT OF COMMISSION AGENTS PROVE , ACCEPTING THEM TO BE CORRECT, SHARE APPLICANTS CLAIM THAT THEY HA VE NOT GONE TO ANY MANDY OR COMMISSION AGENTS FOR SELLING THEIR PRODUC E AND THE PRODUCE WERE PURCHASED BY SOME PERSONS FROM THE PLA CE OF CULTIVATION ITSELF APPEARS TO BE GENUINE. AO ALSO E NQUIRED ABOUT ONLY TOMATO SALES WHEREAS THE SHARE APPLICANTS HAVE PADD Y CULTIVATION 8 ITA NOS. 1 & 2 /HYD/2012 M/S NADELLA ESTATES LTD. ALSO. THUS, AO HAVING FAILED TO BRING ANY MATERIAL ON RECORD TO DISPROVE SHARE APPLICANTS CLAIM OF HAVING AGRICULT URAL LAND HOLDING OR ENGAGED IN AGRICULTURAL ACTIVITY, NO DOUBT CAN BE E NTERTAINED WITH REGARD TO THEIR CREDITWORTHINESS. IN THE AFORESAID FACTS AND CIRCUMSTANCES, THE ADDITION BEING NOT BASED ON PROP ER EVIDENCE, WE ARE NOT ABLE TO SUSTAIN THE SAME. ACCORDINGLY, WE D IRECT AO TO DELETE THE SAME. 9. IN GROUND NO. 2, ASSESSEE HAS CHALLENGED THE ADD ITION OF AN AMOUNT OF RS. 20,64,529 REPRESENTING THE PROFIT ON SALE OF LAND. 10. BRIEFLY THE FACTS ARE, DURING THE ASSESSMENT PR OCEEDING, AO FOUND THAT DURING SURVEY OPERATION CERTAIN SALE DEE D SHOWING SALE OF LAND BY ASSESSEE TO A COMPANY NAMELY M/S PL COMPUTE RS WAS FOUND. AS PER THE SAID SALE DEED, ASSESSEE COMPANY SOLD A PIECE OF LAND FOR A CONSIDERATION OF RS. 23,62,500 AND THE DEED WAS R EGISTERED ON 29/03/06. HOWEVER, SINCE ASSESSEE DID NOT DISCLOSE ANY PROFIT FROM SUCH TRANSACTION, CONSIDERING THE FACT THAT LAND WA S PURCHASED BY ASSESSEE FOR CONSIDERATION OF RS. 2,97,971, AO ISSU ED SHOW CAUSE NOTICE TO ASSESSEE TO EXPLAIN WHY THE PROFIT ARISIN G FROM SUCH TRANSACTION SHOULD NOT BE BROUGHT TO TAX AS BUSINES S INCOME. IN REPLY TO THE SAID SHOW CAUSE NOTICE, ASSESSEE SUBMITTED T HAT COST OF LAND INCLUDES ORIGINAL COST PAID TO ORIGINAL OWNERS AS W ELL AS AMOUNTS PAID TO VARIOUS PARTIES, WHO WERE HAVING POSSESSION OF T HE LAND, TO SURRENDER THEIR RIGHTS OVER THE LAND. IT WAS CLAIME D BY ASSESSEE THAT THE AMOUNTS PAID TO THOSE PERSONS, OTHER THAN THE O RIGINAL OWNERS, SHOULD ALSO GO TO INCREASE THE COST OF LAND. AO OBS ERVED THAT ASSESSEES CLAIM COULD HAVE BEEN ACCEPTED HAD THE L AND IN QUESTION BEEN AN INVESTMENT. HOWEVER, SINCE ASSESSEE IS IN R EAL ESTATE BUSINESS AND LAND BEING STOCK-IN-TRADE THE ENTIRE E XPENDITURE HAS TO BE DEBITED TO TRADING ACCOUNT AND AFTER UTILIZING A NY SALES MADE THEREIN ASSESSEE HAS TO SHOW REMAINING IN THE FORM OF CLOSING STOCK. ON THE AFORESAID BASIS, AO TREATED THE SURPLUS OF R S. 20,64,529 AS BUSINESS INCOME OF ASSESSEE. BEING AGGRIEVED OF SUC H ADDITION, 9 ITA NOS. 1 & 2 /HYD/2012 M/S NADELLA ESTATES LTD. ASSESSEE CHALLENGED THE SAME BEFORE LD. CIT(A). LD. CIT(A), HOWEVER, CONFIRMED THE ADDITION BY OBSERVING AS UND ER: 7.2 I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLAN T AS WELL AS THE FACTS ON RECORD AND I FIND THAT THE CONTEN TIONS OF THE APPELLANT IS ABSOLUTELY UNFOUNDED AND NOT SUPPORTE D BY ANY EVIDENCE WHATSOEVER. NO DETAILS WHATSOEVER HAVE BE EN SUBMITTED REGARDING THE PERSONS TO WHOM PAYMENTS W ERE MADE, THE CHEQUES NOS., THE DETAILS OF BANK ACCOUNTS, ET C. WHENEVER, A PROPERTY IS PURCHASED WITH AN ENCUMBRANCE, THE P RICE IS INVARIABLY MUCH LOWER THAN THE MARKET PRICE BECAUS E OF THE FACT THAT POSSESSION OF THE PROPERTY IS NOT CLEAR. THES E FACTS ARE ALSO MENTIONED IN THE SALE DEED. NO SUCH FACT HAS BEEN BROUGHT ON RECORD IN THE PRESENT CASE. IN VIEW OF FACTS AN D CIRCUMSTANCES, IT IS CLEAR THAT THE EXPLANATION SU BMITTED BY THE APPELLANT IS WITHOUT ANY EVIDENCE. THEREFORE, THE ADDITION MADE BY THE AO IS HELD TO BE CORRECTLY MADE. 11. LD. AR SUBMITTED BEFORE US, WHILE AO TREATED TH E SURPLUS A BUSINESS INCOME OF ASSESSEE, LD. CIT(A) HAS CONFIRM ED THE ADDITION TOTALLY ON A DIFFERENT GROUND. LD. AR REFERRING TO THE DETAILS OF LAND PURCHASED SUBMITTED, AMOUNTS WERE PAID TO VARIOUS P ERSONS APART FROM ORIGINAL OWNERS TO SECURE RIGHT OVER THE LAND. THUS, THE AMOUNT PAID BEING COST INCURRED BY ASSESSEE FOR ACQUISITIO N OF PROPERTY HAS TO BE ALLOWED AS DEDUCTION. IT WAS SUBMITTED, WHEN AO HAS NO DISPUTE WITH REGARD TO THE GENUINENESS OF THE PAYMENTS TO V ARIOUS PERSONS, DEDUCTION HAS TO BE ALLOWED. HE SUBMITTED, OBSERVAT IONS MADE BY LD. CIT(A) THAT ASSESSEE HAS FAILED TO PRODUCE ANY EVID ENCE IS THEREFORE WITHOUT ANY BASIS. 12. LD. DR, ON THE OTHER HAND, RELIED UPON THE OBSE RVATIONS MADE BY LD. CIT(A). 13. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD. AS COULD BE SEEN, AT THE A SSESSMENT STAGE, ASSESSEE HAS CLAIMED THAT APART FROM THE PAYMENT M ADE TO ORIGINAL OWNERS, ASSESSEE HAS ALSO PAID TO VARIOUS OTHER PER SONS TOWARDS SURRENDER OF THEIR RIGHT OVER THE PROPERTY. AS IT A PPEARS, AO HAS NOT DISPUTED THE AFORESAID CLAIM OF ASSESSEE. THE ONLY REASON, HE TREATED THE SURPLUS AS PROFIT OF ASSESSEE IS, THE LAND IN Q UESTION IS STOCK-IN- 10 ITA NOS. 1 & 2 /HYD/2012 M/S NADELLA ESTATES LTD. TRADE AND NOT INVESTMENT. THAT BEING THE CASE, WE A RE UNABLE TO UNDERSTAND ON WHAT BASIS, LD. CIT(A) CONCLUDED THAT ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE WITH REGARD TO PAYME NT MADE TO VARIOUS PERSONS. AS RIGHTLY SUBMITTED BY LD. AR, WH ETHER IT IS AN INVESTMENT OR STOCK-IN-TRADE, PAYMENT MADE BY ASSES SEE HAS TO BE TAKEN INTO ACCOUNT FOR ARRIVING AT THE COST INCURRE D. THEREFORE, IN EITHER CASE, THERE CANNOT BE ANY SURPLUS TO BE TREA TED AS INCOME OF ASSESSEE. SINCE THE AFORESAID ASPECT HAS NOT BEEN C ONSIDERED EITHER BY AO OR BY LD. CIT(A) IN PROPER PERSPECTIVE, WE AR E INCLINED TO REMIT THE ISSUE BACK TO THE FILE OF AO FOR DECIDING AFRES H AFTER DUE OPPORTUNITY OF BEING HEARD TO ASSESSEE. 14. IN GROUND NO. 3, ASSESSEE HAS CHALLENGED THE AD DITION OF AN AMOUNT OF RS. 97,000. 15. BRIEFLY THE FACTS ARE, IN COURSE OF ASSESSMENT PROCEEDING, AO NOTICED THAT IN COURSE OF SURVEY, CERTAIN AGREEMENT S WERE FOUND WHICH WHEN VERIFIED WITH BOOKS, IT WAS NOTICED THAT CERTA IN INVESTMENTS MADE AS PER THE SAID AGREEMENTS WERE NOT RECORDED I N THE BOOKS OF ACCOUNT. THEREFORE, HE ISSUED A SHOW CAUSE NOTICE T O ASSESSEE TO EXPLAIN WHY THE SAME WILL NOT BE ADDED U/S 69 OF TH E ACT. IN RESPONSE TO THE SAID NOTICE, ASSESSEE SUBMITTED ITS REPLY VI DE LETTER DATED 22/12/08. AO ON VERIFYING THE SUBMISSIONS OF ASSESS EE FOUND THAT THOUGH ASSESSEE HAS EXPLAINED THE INVESTMENTS MADE IN RESPECT OF AN AMOUNT OF RS. 50,000 AND RS. 83,325, BUT, HE HAS FAILED TO EXPLAIN THE AMOUNTS OF RS. 47,000 AND RS. 50,000. ACCORDING LY, HE ADDED AN AMOUNT OF RS. 97,000 BY TREATING IT AS UNEXPLAINED INVESTMENT IN LAND. THOUGH, ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(A), BUT, LD. CIT(A) ALSO CONFIRMED THE ADDITION. 16. LD. AR REITERATING THE SUBMISSIONS MADE BEFORE THE DEPARTMENTAL AUTHORITIES SUBMITTED, ASSESSEE IS NOT AT ALL INVOLVED IN THESE TRANSACTIONS. IT WAS SUBMITTED BY LD. AR, AMO UNT OF RS. 50,000 SHOWN TO BE IN THE NAME OF BAHADUR IS NOT RELATED T O ASSESSEE AS THE PURCHASERS NAME IN THE DOCUMENT IS K. SRINIVAS GOU D. IT WAS 11 ITA NOS. 1 & 2 /HYD/2012 M/S NADELLA ESTATES LTD. SUBMITTED, DOCUMENT FOUND AT THE TIME OF SURVEY MAY BE A LINK DOCUMENT ON THE BASIS OF WHICH ADDITION HAS BEEN MA DE. AS FAR AS P.V, DEVANAND IS CONCERNED, LD. AR SUBMITTED, OPPOR TUNITY MAY BE GIVEN TO EXPLAIN THE AMOUNT. 17. LD. DR RELIED UPON THE ORDER OF LD. CIT(A). 18. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD. AS COULD BE SEEN, AO HAS MADE THE ADDITION BY STATING THAT ASSESSEE HAS FAILED TO EXPLAIN THE AFORESAID TWO AMOUNTS. BEFORE LD. CIT(A) ALSO ASSESSEE HAS NOT MA DE PROPER REPRESENTATION. THEREFORE, CONSIDERING THE NATURE O F DISPUTE AND CLAIM OF ASSESSEE, WE ARE INCLINED TO REMIT THE MATTER BA CK TO THE FILE OF AO ALLOWING ASSESSEE ONE MORE OPPORTUNITY TO EXPLAIN T HE AMOUNTS IN QUESTION. ACCORDINGLY, THE MATTER IS REMITTED TO AO FOR DECIDING AFRESH AFTER DUE OPPORTUNITY OF BEING HEARD TO ASSESSEE. T HIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 19. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ITA NO. 1/HYD/12 FOR AY 2003-04 20. THE ONLY ISSUE RAISED BY ASSESSEE IN THIS APPE AL IS WITH REGARD TO THE ADDITION OF RS. 55,80,000 REPRESENTING SHARE APPLICATION MONEY. 21. THE FACTS RELATING TO THIS ADDITION ARE MATERI ALLY SAME TO THE SIMILAR ISSUED RAISED IN GROUND NO. 1 OF ITA NO. 2/ HYD/2012 (SUPRA), THEREFORE, FOLLOWING OUR DECISION THEREIN , WE DELE TE THE ADDITION MADE BY AO. 22. IN THE RESULT, THIS APPEAL IS ALLOWED. 12 ITA NOS. 1 & 2 /HYD/2012 M/S NADELLA ESTATES LTD. 23. TO SUM UP, ITA NO. 2/HYD/2012 IS PARTLY ALLOWED AND ITA NO. 1/HYD/12 IS ALLOWED. PRONOUNCED IN THE OPEN ON 29 TH JULY, 2015. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 29 TH JULY, 2015 KV COPY TO:- 1) M/S NADELLA ESTATES LTD., C/O CH. PARTHASARATHY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1, ASHOKNAGAR, HYDERABAD 500 020 2) ITO, WARD 16(2), HYDERABAD 3 CIT(A)-V, HYDERABAD 4) CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.