M/s Madhupala Estates Pvt. Ltd., Hyderabad V. DCIT, Circle-16(2), Hyderabad

ITA 2078/Hyd/2011

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4735 (ITAT-HYDERABAD)
• Duration Of Justice: 11 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 27-11-2023
• Assessment Year: 2006-2007
• Appeal Filed On: 15-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Opportunity of being heard; TDS
• Section: 68; 69; 40(a)(ia); 251; 13

Judgement Text

ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 1 of 17 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ Bench, Hyderabad Before Shri R.K. Panda, Vice-President AND Shri Laliet Kumar, Judicial Member ITA No.2078/Hyd/2011 Assessment Year: 2006-07 Madhupala Estates (P) Ltd Hyderabad Vs. Dy. CIT Circle 16(2) Hyderabad (Appellant) PAN:AACCM3943R (Respondent) Assessee by : Shri A Srinivas, CA Revenue by: Shri Shakeer Ahmed, DR Date of hearing: 28/11/2023 Date of pronouncement: 12/12/2023 ORDER Per Laliet Kumar, J.M This appeal filed by the assessee is directed against the order dated 02.08.2011 of the learned CIT (A)-V, Hyderabad relating to A.Y.2006-07. 2. The grounds raised by the assessee read as under: “1. The Order of the A.O is contrary to facts, law and circumstances of the case. 2. The A.O ought not to have added an amount of Rs.74,20,000/- being cash payment made to Mr.Ramakrishna Reddy . 3. The Appellate Commissioner ought not to have confirmed the said additions of Rs. 74,20,000/-. ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 2 of 17 4. The A.O ought not to have added an amount of Rs.1,66,50,000/- being site development expenses u/s.40(a)(3) and u/s.40(a) (ia) of the Income Tax Act. 5. The Appellate Commissioner ought not to have confirmed the said additions of Rs. 1,66,50,000/-. 6. The A.O ought not to have added an amount of Rs.2,03,59,000/- as cash credits. 7. The Appellate Commissioner ought not to have confirmed the said additions of Rs.2,03,59,000/-. 8. The A.O ought not to have added an amount of Rs.20,00,000/- being cash payment made to Mr.M.Venkata Reddy. 9. The Appellate Commissioner ought not to have confirmed an amount of Rs.8.75 lakhs out of the said additions of Rs.20,00,000/-. 10. The A.O ought not to have added an amount of Rs.2,42,09,333/- under section 40(a)(ia) of the Act. 11. The Appellate Commissioner ought not to have confirmed the said additions of Rs.2,42,09,333/-. 12. Any other ground which the appellant might urge either at or before the time of hearing.” 3. The assessee has also raised the following additional grounds: “1. The Appellate Commissioner ought not to have remitted the matter pertaining to cash payments of Rs.94,63,000/- to the AO for verification. 2. TheAO while passing the consequential order in following the direction of Appellate Commissioner by not verifying in detail the said account vis-à-vis the names amounting to Rs.94,63,000/-. 3. The Appellate Commissioner ought not to have remitted the matter pertaining to cash payments made to amounting to Rs.1,61,00,000/-. 4. The AO while passing the consequential order erred in following the directions of Appellate Commissioner by not verifying in detail the said account vis-à-vis the names amounting to Rs.1,61,00,000/-.” ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 3 of 17 4. At the outset, the learned Counsel for the assessee submitted that Grounds of appeal No. 1 and 12 are general in nature and grounds 8 & 9 are not being pressed. In the light of the submissions made by the learned Counsel for the assessee, the grounds 8 and 9 are dismissed as not pressed. 5. Grounds 2 and 3 pertain to the addition of Rs.74,20,000/- made by the Assessing Officer and confirmed by the learned CIT (A). In this regard, the learned Counsel for the assessee drew the attention of the Bench to relevant Paras in the assessment order and Para 7.1.2 and 7.2 of the order passed by the learned CIT (A). The submission of the assessee before us is that in Schedule-1 (Page 17 of the Paper Book), the amount of Rs.26,42,20,355/- was shown as advance to the landlord. The AR drew our attention to page 121 of the Paper Book wherein the details of the total advances paid during the A.Y had been shown as Rs.26,42,20,355/-. The learned Counsel for the assessee thereafter drew our attention to page 94 of the Paper Book wherein advance paid to Ram Kishan Reddy to the tune of Rs.85,30,930/- was mentioned. It was submitted by the learned AR that similar sum was the subject matter of consideration in the case of the assessee for the A.Y 2005-06 and the Tribunal after considering the submission of the assessee in Para 6 has deleted the addition while observing as under: “6. Having regard to the rival contentions and material on record, for the purpose of ready reference and clarity, the provision of section 69 is reproduced hereunder: "Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 4 of 17 of the investments or the explanation offered by him is not, in the opinion of the AO, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.” A literal reading of this provision clearly shows that only such investments which are not recorded in the books of account maintained by the assessee, can be brought to tax u/s 69, if the assessee offers no explanation or if the explanation offered by the assessee is not satisfactory to the A0. But, in the case before us, we find that the assessee has shown the total of Rs. 25.97 crores as advances to the landlords in Schedule - VIII of the balance sheet and Mr. Rama Krishna Reddy's name is mentioned in the list of people to whom advances have been paid. Therefore, it is clear that the relevant entries have been made in the books of account and the same is also reflected in the material found i.e. "note book" impounded by the department during the course of search. Further, AO has not rejected the books of account. In fact, he proceeded to make additions to the income returned by the assessee as per its P&L Account and Balance Sheet. The loans and advances is shown in the Balance Sheet of the company. Therefore, the addition made u/s 69 is not sustainable. The AO has made the disallowance u/s 69 and the ld. DR cannot, now, argue that the disallowance is of expenditure and not u/s 69 of the Act. Further, the loans and advances is a balance sheet item and has not been claimed as expenditure. Hence, there can be no disallowance of expenditure, which has not been debited to the P&L Account. Since the payment of the amount to Mr. Rama Krishna Reddy is not doubted by the AO, and he has brought it to tax only u/s 69 of the Act, and the relevant entries are already recorded in the books of account, we hold that it cannot be brought to tax u/s 69 of the Act. Therefore, we hereby delete the addition made by the Assessing Officer and confirmed by the CIT (A) on this account. Thus, the grounds raised by the ass are allowed”. 6. The learned Counsel for the assessee accordingly submitted that the issue is squarely covered in favour of the assessee, therefore, the issue is to be decided in favour of the assessee. 7. Per contra, the learned DR submitted that the issue for the A.Y 2005-06 was with respect to the addition u/s 69 of the Act for a sum of Rs.1,07,59,000/- whereas in the present case the ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 5 of 17 issue before us is with respect to addition of Rs.74,20,000/- being the unexplained cash payment made on various occasions to buy the land mentioned at page 32 of the impounded documents which were added u/s 68 of the I.T. Act. It was submitted that the yardstick required to be applied for application of section 69 & 68 are different. In the present case, the addition is required to be sustained, being made u/s 68 of the Act. It was further submitted that mere mention of wrong provision of section will not entitle the assessee to seek the relief from the Tribunal. 8. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. From a perusal of para 6 reproduced herein above, it is abundantly clear that the loans and advances which are subject matter of the present adjudication were duly mentioned in the books of account of the assessee. Further, the books of account of the assessee were not rejected by the Assessing Officer. It was submitted by the A.R that for the A.Y 2005-06, the assessee has not claimed the loans and advances as expenditure and has not debited the same to the P&L Account. Further, in the present case, the whole premise of making the addition by the Assessing Officer and the CIT (A) is “that the relevant entries are nowhere mentioned in the books of account” (Para 7.2 of the order of the CIT (A). The above said statement of fact is quite contrary to the record. We find that the loans and advances were shown in the balance sheet of the company and the lower authorities have wrongly recorded that entries in books were not mentioned in regular books of account. Therefore, the very foundation of the addition cannot be sustained. In the present case, the assessee was able to show that ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 6 of 17 the relevant credit entries were made in the books of account of the assessee. However, as per section 68 of the Act, the assessee is required to explain about the nature and source thereof to the satisfaction of Assessing Officer/CIT (A). In the present case, the above aspect namely genuineness, creditworthiness etc., were not examined by the lower authorities. In view of the above, we remand this issue to the file of the Assessing Officer for fresh adjudication in accordance with law. The grounds are accordingly allowed for statistical purposes. 9. With regard to Grounds 4 & 5 are concerned, the assessee drew the attention of the Bench to Para 4 & 5 of the order passed by the Assessing Officer wherein the Assessing Officer has made disallowance on the pretext that the payment was made in cash by the assessee for infrastructural facility and manufacture: ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 7 of 17 ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 8 of 17 10. The learned AR further drew our attention to para 9.2 of the order passed by the learned CIT (A). The learned AR submitted that from the comparison of the tabulation in the assessment order with that at page 82 of the Paper Book, it was submitted that the amount of Rs.10,00,000/-were paid to Mr. Rao who happened to be an employee of the assessee. It was submitted that the said amount was spent towards site development expenses by the said employee and other employees after it was given by the assessee to them. It was submitted that the issue is required to be allowed in favour of the assessee since the cash amount paid by the assessee to its employees for routine expenses of the assessee. 11. The learned DR, on the other hand, submitted that if the expenditure in cash beyond certain limit cannot be incurred ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 9 of 17 being impermissible, then the same cannot be incurred and allowed if made by the employees of the assessee. He submitted that what cannot be done directly cannot be done indirectly. It was further submitted by the DR that the assessee was unable to give the employment details of the employees to whom the money was paid for spending in cash. 12. We have heard the rival arguments and perused the material available on record. It is an admitted fact that the assessee gave Rs.10,00,000/- to its employee namely Mr. Rao and that too in cash which is not permissible as per law. Similarly, the assessee had paid huge amount in cash to its various other employees and claimed the same as site development expenses. In our view the cash payment made by the assessee was beyond the threshold limit provided by law. No explanation was given by the assessee at assessment/appellate stages substantiating the reasons for making such payments to various persons and the necessity for doing so. Furthermore, the pertinent details like names of employees and their employment record, role and responsibilities were not provided to the lower authorities. In the light of above discussion, we do not find any reason to interfere in the order of the learned CIT (A) on this issue. Hence the ground of appeal No.4 & 5 of the assessee are dismissed. 13. With regard to grounds 6 & 7, the learned AR drew our attention to the order of the Assessing Officer at page 5 & 6 whereby the addition was made by the assessee towards advances made by the assessee in cash but have shown the same as unsecured loans to various parties. ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 10 of 17 14. The learned AR drew our attention to the order passed by the CIT (A) and our attention was drawn to page 102 of the order. The CIT (A) in his order noted that these were the expenses incurred by the assessee quite contrary to law. The case of the Assessing Officer was that these amounts are advances and loans given by the assessee. The AR further submitted that these additions were made on the basis of scribble/documents found during the course of search and for the above said purpose, the AR relied upon the decision in the case of 3 rd Member case in SP Goyal vs. DCIT (82 ITD 85) at Para No.13 at page 14, it was held as under: “13. Secondly, the assessee has been explaining that the entries at p. 37 are in the nature of planning. The loose paper is torn out of 15th Nov., 1992. The entry of the date is 26th Sept., 1992. As on the year ending on 31st March, 1992, the assessee filed the wealth-tax return for the asst. yr. 1992-93 in which there is absolutely no investment in gold and jewellery. However, if the balance sheet for assessment year ending on 31st March, 1993 is seen, it is revealed that the assessee purchased and declared jewellery consisting of gold, silver and diamond jewellery at Rs. 46,61,720. It is further seen that in the year ending on 31st March, 1994, the assessee declared jewellery consisting of the same items at Rs. 1,08,95,995. The AO did not point out anywhere that this jewellery consisting of gold, silver and diamond jewellery were purchased from outside the books. The books of account tallied with the items found at the time of search on 14th Oct., 1993. In such a case, the contention of the assessee that the entries made on 26th Sept., 1992 was in the nature of planning is more probable. The AO did not give any concrete proof to reject the explanation offered by the assessee.” 15. The learned AR also drew our attention to the order in the case of Vinesh Maheshwari in ITA No.7210/Del/2018 at page 15 of the paper book. ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 11 of 17 16. Per contra, the learned DR submitted that the additions were made on the basis of the documents found during the course of search from the premises/possession of the assessee and the onus is on the assessee to prove that the entries made in the said documents are not correct. In fact, sufficient opportunities were given to prove the creditworthiness to the assessee, by providing bank details, PAN Nos, confirmation etc., However, the assessee failed to comply with the same. The learned DR also relied upon the provisions of section 292C of the I.T. Act on the basis of which it was submitted that once the documents were found from the possession of the assessee, then the onus is on the assessee to rebut the contents of such documents. In the present case nothing has been proved by the assessee that the documents found during the course of search were incorrect and no cash was paid and advances to the said persons. The learned DR referred to Para 5 of assessment order (already reproduced herein above) and Para 10.2 of the order of the CIT (A) which are to following effect: “10.2 Looking at the record, I do not find that these are merely estimates or rough jottings. The documents were recovered from the possession of the appellant and the onus is squarely on the appellant to prove its contentions regarding the various entries. As already shown above, these are not at all rough jottings but clearly mention the names of persons from whom the amounts have been received. However, I find that Some of the entries do not pertain to advances received but may pertain to unaccounted expenses. For example, at SI.No.15 of the entries as shown above, an amount of Rs.15 lakhs has been shown against labour. This obviously corresponds to payments made to labour and not advance received from labour. However, the fact remains that none of these entries are recorded in the books of account and are to be added back either as unaccounted expenditure or as unaccounted receipts/advances. The additions made are accordingly confirmed”. ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 12 of 17 17. We have heard the rival arguments and perused the material available on record. In the present case, undoubtedly the evidences were found during the course of search showing payment by cash of Rs.2,03,59,000 in the impounded material. The assessee company has failed to discharge its onus by filing confirmation letters from these 26 parties as mentioned in the assessment order by giving receipts, particulars and mode, PAN Nos. etc. Further, it was submitted that these are not recorded in the regular books of account maintained by the assessee as the details are from the tentative record which were maintained on temporary basis based on discussion that took place between the parties and transaction have not reached finality. 18. Undoubtedly, before the Assessing Officer or before the learned CIT (A) the assessee has not denied that these documents were impounded from the premises of the assessee. The case of the assessee is that the amounts were mere estimation and noting in the diary were for discussion. No money was received by the assessee nor any money was paid by it therefore, no credits were made in the cash book. In our considered opinion, once the documents were found in possession of the assessee showing the receipt of amount from these 26 persons, then it is for the assessee to prove that the assessee has not received the amount mentioned in the impugned documents. In fact, the learned CIT (A) has given elaborate finding whereby it was concluded that the noting made on the recovered documents from the possession of the assessee were self-explanatory and complete document giving full details of the name of the persons and the amount paid in cash. In our view since the assessee has failed to prove on record that the amounts were not actually received but were recorded in ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 13 of 17 the impounded documents, only for the purpose of discussion, by bringing on record some evidence/information from these 26 persons to substantiate their stand. Nothing has been done by the assessee to discharge the onus that lies on it by bring evidence that the contents of impounded documents were recorded only for estimate and no money was received by the assessee. Further, the decisions relied upon by the assessee are not applicable to the facts of the present case and are clearly distinguishable. In view of the above discussions, the grounds 6 & 7 filed by the assessee are dismissed. 19. Grounds 10 & 11 pertaining to disallowance u/s 40(a)(ia) for non-deduction of TDS. 19.1 In this regard the assessee drew our attention to page 15.1.1 and 15.2 of the order of the CIT (A) and also decision of the Hon'ble Supreme Court in the case of CIT vs. Calcutta Export Company (Civil Appeal No.4339-4340 of 2018 dated 24.4.2018). It was submitted that the issue is covered in favour of the assessee by the decision of the Hon'ble Supreme Court and therefore, the issue is to be allowed in favour of the assessee. 20. The learned DR, on the other hand, relied upon the order of the lower authorities. He drew the attention to para 10 of the assessment order which is to the following effect: ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 14 of 17 21. We have heard the rival arguments and perused the material available on record. In the above grounds, admittedly the assessee has deposited the tax before the due date of filing of the return of income i.e. on 30.11.2005 and the above said fact has not been disputed by the Revenue. In fact, the Hon'ble Supreme Court upholding the judgment of the Hon'ble Delhi High Court in the case of Ansel Landmarks has held that the provisions inserted in section 40(a)(ia) is retrospective in nature and therefore, the benefit of the amendment is required to be given to the assessee. In our considered opinion, the issue is squarely covered in favour of the assessee, therefore, we do not find any merit in the submission of the learned DR. Accordingly, we direct the Assessing Officer to delete the amount of Rs.2,42,09,333/- as the TDS has been deposited before the stipulated due date of filing of the return and the assessee is entitled to the above benefit. ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 15 of 17 22. With regard to the additional grounds raised by the assessee are concerned, the learned AR drew our attention to the following additional grounds raised before us: “1. The Appellate Commissioner ought not to have remitted the matter pertaining to cash payments of Rs.94,63,000/- to the AO for verification. 2. TheAO while passing the consequential order in following the direction of Appellate Commissioner by not verifying in detail the said account vis-à-vis the names amounting to Rs.94,63,000/- 3. The Appellate Commissioner ought not to have remitted the matter pertaining to cash payments made to amounting to Rs.1,61,00,000/-. 4. The AO while passing the consequential order erred in following the directions of Appellate Commissioner by not verifying in detail the said account vis-à-vis the names amounting to Rs.1,61,00,000/-.” 23. It was submitted that the learned CIT (A) has no power to remand back the matter to the Assessing Officer for verification under the scheme of the Act. 24. The learned DR submitted that though the power of the CIT (A) is co-terminus with the Assessing Officer and also have a supervisory and appellate authority, therefore, the learned CIT (A) has also empowered to remand back the matter to the Assessing Officer for verification. 25. We have heard the rival arguments and perused the material available on record. Section 251 of the I.T. Act reads as under: “251. (1) In disposing of an appeal, the [Commissioner (Appeals)] shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment. ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 16 of 17 [(aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;] (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The Commissioner (Appeals)] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.—In disposing of an appeal, the Commissioner (Appeals)] may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the [Commissioner (Appeals)] by the appellant. 26. From the above, it is clear that the learned CIT (A) has no power to remand back the matter to the file of the Assessing Officer. However, there is no such restriction on the Tribunal. Hence, we issue similar directions to the Assessing Officer to do the needful as directed by the learned CIT (A). Therefore, the issue is required to be decided afresh by the Assessing Officer after affording reasonable opportunity of being heard to the assessee. 27. In the result appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 12 th December, 2023. Sd/- Sd/- (R.K. PANDA) VICE-PRESIDENT (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 12 th December, 2023. Vinodan/SPS ITA No.2078 of 2011 Madhupala Estates (P) Ltd Page 17 of 17 Copy to: S.No Addresses 1 M/s. Madhupala Estates (P) Ltd 11-3-113/12/A RK Puram, Kothapet, Hyderabad 2 Dy. CIT, Circle 16(2) Aayakar Bhavan, Basheerbagh, Hyderabad 3 Pr. CIT – IV, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order