M/s. Harina Developers Private Limited, Bengaluru V. Income Tax Officer, Ward- 3(1)(3), Bengaluru

ITA 2185/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2109 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 09-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CHYTHANYA K K
• Keywords: Unexplained cash credit; Principle of natural justice; Additional evidence; Set aside
• Section: 234B; 133(6); 13; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B R BASKARAN , ACCOUNTANT MEMBER IT A NO. 2185/BANG/20 1 9 ASSESSMENT YEAR: 2012 - 13 M/S. HARINA DEVELOPERS PVT. LTD., NO.47/10/01, 6 TH CROSS, 10 TH MAIN, BSK III STAGE, BENGALURU 560 085. PAN: AABCH 8168A VS. THE INCOME TAX OFFICER, WARD 3(1)(3), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI CHYTHANY A K.K. , ADVOCATE RESPONDENT BY : SRI PRIYADARSHINI MISRA, JT.C I T(DR)(ITAT ), BENGALURU. DATE OF HEARING : 26 .0 2 .2020 DATE OF PRONOUNCEMENT : 28 .0 4 .2020 O R D E R PER B R BASKARAN, ACCOUNTANT MEMBER THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 09.08.2019 PASSED BY LD CIT(A)-3, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2012-13. THE LD A.R DID NOT PRESS GROUND NO.2, WHEREIN A LEGAL ISSUE HAS BEEN URGED. REMAINING GROUNDS UR GED BY THE ASSESSEE RELATE TO THE FOLLOWING ISSUES:- (A) ADDITION OF OUTSTANDING LIABILITIES U/S 68 OF T HE ACT (B) ADDITION OF LOANS TAKEN FROM DIRECTORS U/S 68 O F THE ACT. (C) ADDITION OF ADVANCES RECEIVED ON SALE OF SITES U/S 68 OF THE ACT. (D) CHARGING OF INTEREST U/S 234B OF THE ACT. ITA NO.2185/BANG/2019 PAGE 2 OF 8 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PLOTT ING AND SELLING OF HOUSING SITES. 3. THE FIRST ISSUE RELATES TO THE ADDITION OF OUTSTAND ING LIABILITIES MADE U/S 68 OF THE ACT. THE AO NOTICED THAT THE ASS ESSEE HAS PURCHASED LANDS FROM CERTAIN PERSONS, BUT WAS SHOWI NG A SUM OF RS.2,99,20,000/- AS STILL PAYABLE TO THE SELLERS OF LAND AS ON 31.3.2012. THE BREAK-UP DETAILS OF OUTSTANDING AMO UNT WAS GIVEN BY AO AS UNDER:- (A) MRS. SHARADAMMA - 55,00,000 (B) MS. BEERAMMA - 72,00,000 (C) MR. KEMPA HANUMAIAH - 1,23,95,000 ----------------- 2,50,95,000 ============ IT CAN BE NOTICED THAT THE AO HAS NOT GIVEN COMPLET E DETAILS PERTAINING TO THE AMOUNT OF RS.2,99,20,000/-. THE ASSESSEE SUBMI TTED THAT THE PAYMENTS TO THE SELLERS OF LAND HAS BEEN STOPPED DU E TO PENDING LEGAL PROBLEMS EXISTING IN THE LAND PURCHASED BY IT. HEN CE THE AO ASKED THE ASSESSEE TO PRODUCE THE CREDITORS, BUT IT COULD PRO DUCE ONLY SONS OF MS.BEERAMMA, WHO CONFIRMED THAT THE SUM OF RS.72.00 LAKHS WAS NOT RECEIVED BY HER. ACCORDINGLY, THE AO ACCEPTED THE OUTSTANDING CREDIT BALANCE OF RS.72.00 LAKHS AND ADDED THE REMAINING A MOUNT OF RS.2,27,20,000/- AS INCOME IN THE HANDS OF THE ASSE SSEE U/S 68 OF THE ACT. THE LD CIT(A) ALSO CONFIRMED THIS ADDITION. 4. WITH REGARD TO MRS. SHARADAMMA, THE LD A.R INVIT ED OUR ATTENTION TO THE PAYMENT SCHEDULE MENTIONED IN THE CONVEYANCE DE ED, WHICH IS PLACED AT PAGE 231 OF PAPER BOOK. THE PAYMENT SCHEDULE RE ADS AS UNDER:- ITA NO.2185/BANG/2019 PAGE 3 OF 8 (A) AMOUNT PAID VIDE DD BEARING NO.229515 DATED 23.09.2011 DRAWN ON KOTAK BANK, BANASHANKARI, BANGALORE. RS.20,00,00 0 (B) AMOUNT PAID VIDE DD BEARING NO.229514 DATED 23.09.2011 DRAWN ON KOTAK BANK, BANASHANKARI, BANGALORE. RS.15,00,00 0 (C) AMOUNT PAID VIDE DD BEARING NO.000063 DATED 09-11-2011 DRAWN ON KOTAK BANK, BANASHANKARI, BANGALORE. RS.20,00,00 0 (D) AMOUNT PAID VIDE CHEQUE BEARING NO.000064 DATED 09.11.2011 DRAWN ON KOTAK BANK, BANASHANKARI, BANGALORE. RS.20,00,00 0 (E) AMOUNT PAID BY CASH BEFORE THE WITNESSES RS.22 ,87,500 ------------------ RS.97,87,500 ------------------ THE LD A.R SUBMITTED THAT THE TWO DEMAND DRAFTS MEN TIONED AS ITEM (A) AND (B) HAS NOT BEEN ENCASHED BY THE SELLERS OF LAN D AND HENCE THE ASSESSEE HAS CANCELLED THE SAME. THE AGGREGATE AMOU NT OF BOTH DEMAND DRAFTS IS RS.35.00 LAKHS. FURTHER CHEQUE BEARING N O.000064 MENTIONED IN ITEM (D) AMOUNTING TO RS.20.00 LAKHS HAS BEEN ENCAS HED ONLY ON 22.05.2012. ACCORDINGLY THE AGGREGATE AMOUNT PAYAB LE TO MRS. SHRADAMMA WAS RS.55.00 LAKHS (RS.35.00 PLUS RS.20.0 0) AS ON 31.03.2012. 5. WITH REGARD TO MR. KEMPA HANUMAIAH, THE LD A.R S UBMITTED THAT THE LAND WAS PURCHASED BY THE ASSESSEE FROM THE ABOVE S AID PERSON ON 17.10.2011 BY PAYING POST DATED CHEQUES, WHICH ARE MENTIONED IN THE PAYMENT SCHEDULE IN THE CONVEYANCE DEED. THE PAYME NT SCHEDULE IS AVAILABLE AT PAGE 247 OF THE PAPER BOOK. THE LD A. R SUBMITTED THAT MOST OF THE CHEQUES HAVE BEEN DATED IN THE MONTH OF DECE MBER, 2011. HE SUBMITTED THAT THESE CHEQUES HAVE NOT BEEN ENCHASED BY 31.3.2012 AND ITA NO.2185/BANG/2019 PAGE 4 OF 8 HENCE THE OUTSTANDING AMOUNT IS SHOWN AGAINST THE N AME OF MR. KEMPA HANUMAIAH. 6. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE CHEQUES HAVE A LIMITED LIFE OF 3 MONTHS ONLY, I.E., IF THE CHEQUES ARE NOT ENCASHED WITHIN 3 MONTHS, THEY BECOME STALE AND LOSES ITS VALUE UNLES S THE SAME IS REVALIDATED. HE SUBMITTED THAT, IN THE CASE OF LAN D TRANSACTIONS, OFFERING OF CREDIT BY THE SELLERS IS AGAINST HUMAN PROBABILITIE S. HENCE THE LD CIT(A) HAS TAKEN THE VIEW THAT THE ASSESSEE COULD HAVE SET TLED THE PAYMENT BY WAY OF CASH OUTSIDE THE BOOKS OF ACCOUNTS. 7. WE HEARD RIVAL CONTENTIONS AND PERUSED THE RECOR D. BEFORE US, THE LD A.R ALSO ARGUED THAT THE TRANSACTION OF PURCHASE OF LAND IS A TRADING ACTIVITY IN THE HANDS OF THE ASSESSEE. HENCE, THE ASSESSING OFFICER, AFTER ACCEPTING THE GENUINENESS OF PURCHASES, COULD NOT M AKE ADDITION OF OUTSTANDING CREDITORS U/S 68 OF THE ACT. HOWEVER, WE NOTICE THAT THE ASSESSEE HAS FAILED TO PRODUCE BOTH THE SELLERS REF ERRED ABOVE BEFORE THE AO. HOWEVER, THE LD A.R IS ABLE TO DEMONSTRATE THA T THE PAYMENTS HAVE BEEN MADE AFTER 31.3.2012. HOWEVER, ALL THESE EXPL ANATIONS REQUIRE VERIFICATION AT THE END OF THE ASSESSING OFFICER. WE NOTICE THAT THE TAX AUTHORITIES HAVE NOT EXAMINED THESE FINER DETAILS. WE HAVE NOTICED THAT THE ASSESSING OFFICER HAS GIVEN DETAILS OF OUTSTANDING CREDITORS TO THE TUNE OF RS.2,50,95,000/-, WHILE THE AMOUNT OF SUNDRY CREDIT ORS IS MENTIONED INITIALLY AS RS.2,99,20,000/-. THE ADDITION HAS BEEN MADE BY TAKING THE FIGURE OF RS.2,99,20,000/- ONLY. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. A CCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RES TORE THE SAME TO THE FILE OF THE AO FOR EXAMINING IT AFRESH BY DULY CONSIDERI NG THE EXPLANATIONS OF THE ASSESSEE. IN THE SET ASIDE PROCEEDINGS, THE AO MAY EXAMINE THE ABOVE SAID SELLERS OF LAND, IF IT IS CONSIDERED NEC ESSARY. ITA NO.2185/BANG/2019 PAGE 5 OF 8 8. THE NEXT ISSUE RELATES TO THE ADDITION OF RS.1,0 7,46,510/-, BEING THE LOAN RECEIVED FROM TWO DIRECTORS, AS UNEXPLAINED CA SH CREDIT U/S 68 OF THE ACT. THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED FOLLOWING AMOUNT FROM TWO OF ITS DIRECTORS AS DETAILED BELOW:- MR. RAGHAVENDRA REDDY - 88,62,000 MS. SUJATHA REDDY - 38,50,000 THE ASSESSEE COULD FILE ONLY LEDGER ACCOUNT EXTRACT OF ABOVE CREDITORS. SINCE THE ASSESSEE DID NOT FILE ANY CONFIRMATION LE TTER FROM THEM, THE ASSESSING OFFICER ASSESSED A SUM OF RS.1,07,46,510/ - AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 9. BEFORE LD CIT(A), THE ASSESSEE FURNISHED ADDITIO NAL EVIDENCES AND HENCE THE FIRST APPELLATE AUTHORITY ALSO CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. HOWEVER, THE LD CIT(A) CHOSE NO T TO ADMIT ADDITIONAL EVIDENCES AND ACCORDINGLY CONFIRMED THE ADDITIONS. 10. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. THERE IS NO DISPUTE THAT THE IMPUGNED AMOUNTS HAVE BEEN RECE IVED FROM THE DIRECTORS, WHO ARE ACTUALLY MANAGING THE AFFAIRS OF THE ASSESSEE COMPANY. BEFORE LD CIT(A), THE ASSESSEE HAS SUBMITTED BANK S TATEMENTS OF DIRECTORS AND ALSO LEDGER ACCOUNT COPIES. BEFORE THE AO, THE ASSESSEE HAS SUBMITTED COPIES OF THEIR INCOME TAX RETURNS. DURI NG THE COURSE OF HEARING BEFORE US, THE LD A.R ALSO SUBMITTED THAT THE ASSES SEE COULD NOT FURNISH ALL THESE DETAILS, SINCE THERE WAS CHANGE OF COUNSEL AP PEARING BEFORE THE AO. THE FACT OF CHANGE OF COUNSEL HAS BEEN NOTED BY THE AO IN PARAGRAPH 14 OF HIS ORDER. UNDER THESE SET OF FACTS, IN THE INTERE ST OF NATURAL JUSTICE, WE ARE OF THE VIEW THAT THE ADDITIONAL EVIDENCES SHOULD BE ADMITTED AND THE ASSESSEE SHOULD BE GIVEN OPPORTUNITY TO SUBSTANTIAT E THE LOAN TAKEN FROM ITA NO.2185/BANG/2019 PAGE 6 OF 8 DIRECTORS. ACCORDINGLY, WE ADMIT THE ADDITIONAL EV IDENCES. SINCE THESE EVIDENCES REQUIRE EXAMINATION AT THE END OF THE ASS ESSING OFFICER, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE A ND RESTORE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER FOR EXAMI NING IT AFRESH. THE ASSESSEE IS ALSO DIRECTED TO FURNISH ALL THE INFORM ATION AND EXPLANATIONS TO SUBSTANTIATE THE LOAN TAKEN FROM THE DIRECTORS. 11. THE LAST ISSUE RELATES TO THE ADDITION OF RS.2, 25,16,003/-, BEING THE ADVANCE RECEIVED FROM CUSTOMERS TOWARDS SALE OF PLO TS. THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED ADVANCES FOR SALE OF PLOTS FROM 15 PERSONS IN RESPECT OF NELAMANGALA PROJECT. THE TOTAL AMOUN T RECEIVED WAS RS.2,40,66,003/-. SINCE THE ASSESSEE COULD NOT FUR NISH ANY CONFIRMATION LETTERS, THE AO ISSUED NOTICES U/S 133(6) TO ALL TH E 15 PERSONS. OUT OF THE SAME, EIGHT LETTERS WERE RETURNED UNSERVED WITH THE NOTING, ADDRESSEE LEFT, INCOMPLETE ADDRESS ETC. SEVEN PERSONS TO WHOM THE NOTICES WERE SERVED DID NOT RESPOND. THE ASSESSEE FILED COPIES OF BANK STATEMENTS WITH THE SUBMISSION THAT SOME OF THE ADVANCES HAVE BEEN RETU RNED BACK. THE AO DID NOT ACCEPT THE SAME. ACCORDINGLY HE ADDED A SU M OF RS.2,25,16,003/- TO THE TOTAL INCOME OF THE ASSESSEE. THE LD CIT(A) ALSO CONFIRMED THE SAME. 12. THE LD A.R SUBMITTED THAT THE ASSESSEE HAD TAKE N OVER THE NELEMANGALA PROJECT FROM ORIGINAL DEVELOPER NAMED M /S KETHAMARANAHALLI HOUSE BUILDING CO-OP SOCIETY. HE SUBMITTED THAT SO ME OF THE ADVANCES WERE RETURNED BACK IN THE SUBSEQUENT YEAR. THE ASS ESSEE HAS OBTAINED CONFIRMATION LETTERS AND BANK STATEMENTS FROM TWO P ERSONS NAMED SURYA SENA REDDY AND PUSHPAVATHI. IT HAS ALSO OBTAINED BANK STATEMENT FROM KURNOOL GAS AGENCY. ONE SALE DEED HAS BEEN EXECUTE D. THE ASSESSEE ALSO FILED THESE DOCUMENTS BEFORE THE AO, BUT IT CO ULD BE FILED AFTER COMPLETION OF ASSESSMENT. THE LD A.R SUBMITTED THA T THE LD CIT(A) ALSO ITA NO.2185/BANG/2019 PAGE 7 OF 8 DID NOT EXAMINE THESE DOCUMENTS, EVEN THOUGH THEY W ERE BROUGHT TO HIS NOTICE. 13. WE HEARD LD D.R AND PERUSED THE RECORD. THERE IS NO DISPUTE THAT THE ONUS IS CAST UPON THE ASSESSEE TO PROVE THE CAS H CREDITS RECEIVED BY IT. WE NOTICE THAT THE ASSESSEE HAS FURNISHED CERTAIN D OCUMENTS IN RESPECT OF SOME OF THE ADVANCES. IT HAS ALSO GIVEN EXPLANATIO NS WITH REGARD TO CERTAIN OTHER ADVANCES. NONE OF THESE DOCUMENTS AND EXPLAN ATIONS HAS BEEN EXAMINED BY THE TAX AUTHORITIES. ACCORDINGLY, WE A RE OF THE VIEW THAT THIS ISSUE ALSO REQUIRES EXAMINATION AT THE END OF THE A O. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE A ND RESTORE THE SAME TO THE FILE OF THE AO FOR EXAMINING IT AFRESH. 14. AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING H EARD, THE AO MAY TAKE APPROPRIATE DECISION IN RESPECT OF ALL THE ABO VE SAID ISSUES IN ACCORDANCE WITH LAW. 15. THE LAST ISSUE URGED BY THE ASSESSEE RELATES TO CHARGING OF INTEREST U/S 234B OF THE ACT. THIS IS CONSEQUENTIAL IN NATU RE. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF APRIL, 2020. SD/- SD/- ( N V VASUDEVAN ) ( B R BASKARAN ) VICE PRESIDENT ACCOUNTANT M EMBER BANGALORE, DATED, THE 28 TH APRIL, 2020. / DESAI S MURTHY / ITA NO.2185/BANG/2019 PAGE 8 OF 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FIL E BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.