ACIT, Central Circle-1, Hyderabad V. M/s. Radha Infra Projects Ltd, Hyderabad

ITA 220/HYD/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0293 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Keywords: Unexplained cash credit; Search and seizure
• Section: 40A(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 23/HYD/2011 ASSESSMENT YEAR: 2008-09 M/S RADHA INFRA PROJECTS LTD., HYDERABAD. PAN AADCR 6120L VS. DY. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE, HYDERABAD. (APPELLANT) (RESPONDENT) ITA NO. 220/HYD/2011 ASSESSMENT YEAR: 2008-09 ASST. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 1, HYDERABAD. VS. M/S RADHA INFRA PROJECTS LTD., HYDERABAD. PAN AADCR 6120L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A. SRINIVAS REVENUE BY : SHRI RAJAT MITRA DATE OF HEARING 23-07-2015 DATE OF PRONOUNCEMENT 29-07-2015 O R D E R PER SAKTIJIT DEY, J.M.: THESE CROSS APPEALS BY ASSESSEE AND THE DEPARTMENT ARE DIRECTED AGAINST THE ORDER DATED 19/11/2010 OF LD. CIT(A)-I, HYDERABAD FOR THE AY 2008-09. 2 ITA NO. 23 & 220 /HYD/2011 M/S RADHA INFRA PROJECTS LTD. 2. FIRST, WE WILL TAKE UP ASSESSEES APPEAL BEING I TA NO. 23/HYD/2011. 3. THE ONLY ISSUE ARISING IN ASSESSEES APPEAL IS I N RELATION TO ADDITION OF RS. 42,84,000 AS UNEXPLAINED CASH CREDI T U/S 68 OF THE ACT. 4. BRIEFLY THE FACTS ARE, ASSESSEE IS A COMPANY. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN CASE OF ASSESSEE ON 17/10/07. SUBSEQUENTLY, ASSESSEE FILED ITS RETURN OF INCOME F OR THE IMPUGNED AY ON 29/09/08 DECLARING TOTAL INCOME OF RS. 66,66, 502. DURING THE ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE IN THE RELEVANT PY HAS SHOWN TO HAVE RECEIVED SHARE APPLICATION MONEY OF RS. 3,30,43,783 FROM 9 DIFFERENT PERSONS. THOUGH, ASSES SEE FILED CONFIRMATION FROM THE CONCERNED PARTIES, BUT, AO ON VERIFYING THE INFORMATION AVAILABLE ON RECORD FOUND THAT THE ENTI RE SHARE APPLICATION MONEY HAS BEEN RECEIVED IN CASH FROM THE CONCERNED PARTIES AND NO SHARES WERE ALLOTTED TILL 3/03/08. AO, THEREFORE, D OUBTING THE GENUINENESS OF THE TRANSACTIONS AS WELL AS THE CRED ITWORTHINESS OF SOME OF THE SHARE APPLICANTS, REJECTED ASSESSEES E XPLANATION AND TREATED THE ENTIRE SHARE APPLICATION MONEY OF RS. 3 ,30,43,783 AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND ADDED IT TO THE INCOME OF ASSESSEE. BEING AGGRIEVED OF SUCH ADDITION, ASSE SSEE CHALLENGED THE SAME IN APPEAL BEFORE LD. CIT(A). 5. FROM THE MATERIAL ON RECORD, LD. CIT(A) FOUND TH AT ASSESSEE HAD RECEIVED AN AMOUNT OF RS. 2,87,59,073 AS SHARE APPL ICATION MONEY FROM ANOTHER COMPANY I.E. M/S RADHA REALTY CORPORAT ION, WHICH WAS TREATED AS UNEXPLAINED CASH CREDIT BY AO ON THE REA SONING THAT THE AMOUNT HAS BEEN RECEIVED IN CASH. HOWEVER, DURING T HE APPELLATE PROCEEDING, LD. CIT(A) NOTICED THAT WHILE DECIDING SIMILAR ISSUE IN ASSESSEES OWN CASE FOR AY 2007-08, HE HAD OBSERVED THAT RADHA REALTY CORPORATION IS A SEPARATE AND DISTINCT ENTIT Y AND IS A MAJOR 3 ITA NO. 23 & 220 /HYD/2011 M/S RADHA INFRA PROJECTS LTD. SHAREHOLDER OF THE ASSESSEE COMPANY. IT WAS OBSERVE D BY HIM THAT IF ANY DISCREPANCY IS FOUND IN THE BOOKS OF ACCOUNT OF RADHA REALTY CORPORATION WITH REGARD TO SHARE APPLICATION TRANSA CTION, AO IS FREE TO TAKE ACTION AGAINST THE SHARE APPLICANT. HOWEVER, O NLY BECAUSE SHARE APPLICATION MONEY WAS PAID IN CASH, ON THAT BASIS, PROVISIONS OF SECTION 68 CANNOT BE ATTRACTED. IN TERMS WITH THE D ECISION TAKEN IN ASSESSEES OWN CASE FOR AY 2007-08, LD. CIT(A) ACCE PTED THE SHARE APPLICATION MONEY SHOWN IN THE NAME OF RADHA REALTY CORPORATION. HOWEVER, AS FAR AS THE BALANCE SHARE APPLICATION MO NEY OF RS. 42,84,714 RECEIVED FROM EIGHT OTHER INDIVIDUALS, LD . CIT(A) SUSTAINED THE ADDITION BY OBSERVING THAT ASSESSEE NEITHER AT THE STAGE OF ASSESSMENT NOR BEFORE HIM HAS BEEN ABLE TO PROVE T HE GENUINENESS OF THE TRANSACTION OR CREDITWORTHINESS OF THE SHARE APPLICANTS. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIAL ON RECORD. AT THE OUTSET, WE MAY PUT I T ON RECORD THAT THE DEPARTMENT HAS NOT CHALLENGED THE DECISION OF LD. C IT(A) IN ACCEPTING THE SHARE APPLICATION MONEY SHOWN IN THE NAME OF RA DHA REALTY CORPORATION. AS FAR AS THE SHARE APPLICATION MONEY AMOUNTING TO RS. 42,84,710 IS CONCERNED, IT IS VERY MUCH EVIDENT ON RECORD THAT NEITHER AT THE STAGE OF ASSESSMENT NOR BEFORE LD. CIT(A) AS SESSEE HAS BROUGHT ANY COGENT EVIDENCE TO PROVE THE CREDITWORT HINESS OF THE SHARE APPLICANTS OR GENUINENESS OF THE TRANSACTION. AS IT APPEARS, NONE OF THE SHARE APPLICANTS ARE INCOME-TAX ASSESSE ES. MOREOVER, THE ENTIRE SHARE APPLICATION MONEY HAS BEEN RECEIVE D IN CASH. THEREFORE, UNLESS ASSESSEE PROVES THE CREDITWORTHIN ESS OF THE SHARE APPLICANTS AND GENUINENESS OF THE TRANSACTION, CLAI M OF SHARE APPLICATION MONEY CANNOT BE ACCEPTED. AS ASSESSEE H AS FAILED TO SUBSTANTIATE ITS CLAIM BY PRODUCING ANY SUBSTANTIVE EVIDENCE, WE ARE INCLINED TO UPHOLD THE ORDER OF LD. CIT(A) IN SUSTA INING THE ADDITION OF RS. 42,84,710. THE GROUNDS RAISED ARE, THEREFORE, D ISMISSED. 7. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. 4 ITA NO. 23 & 220 /HYD/2011 M/S RADHA INFRA PROJECTS LTD. 8. AS FAR AS THE DEPARTMENTS APPEAL IN ITA NO. 220 /H/11 IS CONCERNED, THE ONLY GROUND RAISED BY DEPARTMENT IS IN RELATION TO THE DECISION OF LD. CIT(A) IN DELETING ADDITION MADE BY AO U/S 40A(3) OF THE ACT. 9. BRIEFLY THE FACTS ARE, DURING THE ASSESSMENT PRO CEEDING, AO NOTICED THAT ASSESSEE HAS PAID AN AMOUNT OF RS. 86, 58,274 IN CASH TOWARDS PURCHASE OF WOOD AND PAYMENT TO LABOUR CONT RACTORS, WHICH ATTRACTS THE PROVISIONS OF SECTION 40A(3). THOUGH, ASSESSEE OFFERED SOME EXPLANATION, BUT, AO REJECTED THE SAME BY OBSE RVING THAT THE PAYMENTS ARE NOT COVERED UNDER ANY OF THE EXCEPTION S PROVIDED UNDER RULE 6DD. ACCORDINGLY, DISALLOWING THE AMOUNT OF RS . 86,58,274, AO ADDED BACK TO THE INCOME OF ASSESSEE. ASSESSEE CHAL LENGED THE ADDITION, SO MADE, BEFORE LD. CIT(A). 10. BEFORE LD. CIT(A), IT WAS SUBMITTED THAT CASH P AYMENTS WERE MADE TO THE LABOURERS TO THE TUNE OF RS. 72,58,274 AND AN AMOUNT OF RS. 14 LAKHS WAS PAID TOWARDS PURCHASE OF WOOD. ASS ESSEE SUBMITTED, AS IT IS IN THE BUSINESS OF EXECUTING CO NTRACTS AND BUILDING OF APARTMENTS AND COMMERCIAL COMPLEXES, IN COURSE O F BUSINESS PAYMENT HAS TO BE MADE TO THE LABOURERS, THROUGH M ASTRY, WHO IS AN EMPLOYEE OF THE COMPANY AND LOOKS AFTER THE WORKERS . FOR THIS PURPOSE, WEEKLY AND MONTHLY WAGES ARE DRAWN BY THE CASHIER AND GIVEN TO MASTRY, WHO IN TURN, DISTRIBUTES TO THE WO RKERS. IT WAS SUBMITTED, IN THE CASH BOOK/MAIN SCROLL NAME OF MAS TRY IS MENTIONED WHILE IN DISTRIBUTION REGISTER NAMES OF WORKERS ARE MENTIONED TO WHOM WAGES DISTRIBUTED APPEAR. THUS, IT WAS SUBMITTED, A OS ALLEGATION THAT PROVISIONS OF SECTION 40A(3) WAS VIOLATED IS NOT CO RRECT AS INDIVIDUAL PAYMENTS TO THE WORKERS DO NOT EXCEED THE LIMIT OF RS. 20,000. IT WAS FURTHER SUBMITTED BY ASSESSEE THAT THE EXPENDITURE INCURRED TOWARDS PURCHASE OF WOOD BEING OUTSIDE THE PURVIEW OF SECTI ON 40A(3), THE ADDITION IS NOT CALLED FOR. 5 ITA NO. 23 & 220 /HYD/2011 M/S RADHA INFRA PROJECTS LTD. 11. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, OBSERVED THAT AS PER RULE 6DD(K) IF PAYMENTS ARE MA DE BY A PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON, THEN, PROVISIONS OF SECTION 40A(3) WILL NOT BE ATTRACTED. LD. CIT(A) AFTER EXAMINING T HE SAMPLE DISTRIBUTION SLIP FOR PAYMENT OF WAGES, FOUND THAT PAYMENTS MADE WERE MOSTLY OF RS. 4,000 TO 8,000 AND IN SOME CASE S IT IS LITTLE ABOVE RS. 10,000. THUS, ON CONSIDERING THE SUBMISSIONS OF ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD, LD. CIT(A ) DIRECTED AO TO EXAMINE THE CONTENTION OF ASSESSEE THAT CASH WAS DR AWN AND PAID TO MASTRY FOR DISTRIBUTION TO LABOURERS AND EXAMINE WH ETHER PROVISIONS OF RULE 6DD ARE APPLICABLE. HE FURTHER DIRECTED THAT I F ON SUCH EXAMINATION, IT WILL FOUND THAT PROVISIONS OF RULE 6DD IS NOT SATISFIED, THEN, DISALLOWANCE MADE WITH REGARD TO LABOUR PAYME NTS MAY BE CONFIRMED. HOWEVER, IN CASE ASSESSEES CONTENTION I S FOUND TO BE CORRECT, THEN, ADDITION IS TO BE DELETED. AS FAR AS THE EXPENDITURE INCURRED TOWARDS PAYMENT OF WOOD IS CONCERNED, LD. CIT(A) FOUND THAT AS PER THE EVIDENCE PRODUCED BY ASSESSEE PAYMENT HA S BEEN MADE TO TWO COMPANIES FOR PURCHASE OF WOOD. HE, THEREF ORE, OBSERVED THAT SINCE RULE 6DD PROVIDES THAT PAYMENT FOR PURCHASES OF AGRICULTURAL PRODUCTS OR FOREST PRODUCES CANNOT BE DISALLOWED U/ S 40A(3), AO SHOULD VERIFY THE SAME KEEPING IN VIEW OF THE PROVI SIONS OF RULE 6DD. BEING AGGRIEVED OF THE AFORESAID ORDER OF LD. CIT(A ), DEPARTMENT IS IN APPEAL BEFORE US. 12. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD. AS CAN BE SEEN, LD. CIT(A) HAS ONLY DIRECTED AO TO VERIFY ASSESSEES CLAIM THAT CASH PAYMENTS WA S MADE TO MASTRY, WHO IS AN EMPLOYEE FOR DISTRIBUTION TO IND IVIDUAL LABOROURERS. HENCE, WHETHER PROVISIONS OF RULE 6DD IS APPLICABLE OR NOT. SIMILARLY, IN RESPECT OF PAYMENTS MADE FOR PURCHASE OF WOOD, H E HAS DIRECTED AO TO VERIFY WHETHER THE SAME IS COVERED UNDER AGRI CULTURAL OR FOREST 6 ITA NO. 23 & 220 /HYD/2011 M/S RADHA INFRA PROJECTS LTD. PRODUCE, HENCE, COMES WITHIN THE EXCEPTIONS PROVIDE D UNDER RULE 6DD. AS AO AT THE STAGE OF ASSESSMENT HAS NOT PROPE RLY EXAMINED THESE ASPECTS, IN OUR VIEW, THERE IS NO INFIRMITY O R ILLEGALITY IN THE DIRECTION OF LD. CIT(A) TO AO FOR VERIFYING THESE A SPECTS AND THEREAFTER TAKE A DECISION WHETHER TO ALLOW ASSESSEES CLAIM O R CONFIRM THE DISALLOWANCE. IN THE AFORESAID VIEW OF THE MATTER, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) ON THIS ISSUE. ACCORDINGLY UPHOLDING THE ORDER OF LD. CIT(A), WE D ISMISS THE GROUND RAISED. 13. IN THE RESULT, APPEAL OF DEPARTMENT IS DISMISS ED. 14. TO SUM UP BOTH THE APPEALS OF ASSESSEE AS WELL AS DEPARTMENT ARE DISMISSED. 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 RADHA INFRA PROJECTS LTD., 6-3-609/96/A, AN AND NAGAR COLONY, KHAIRATABAD, HYDERABAD. 2) DCIT, CENTRAL CIRCLE 6, AYAKAR BHAVAN, HYDERAB AD. 3 CIT(A)-1, HYDERABAD 4) CIT (CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 7 ITA NO. 23 & 220 /HYD/2011 M/S RADHA INFRA PROJECTS LTD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER