M/s Srinilaya AR Projects, Hyderabad V. ITO, Hyderabad

ITA 664/HYD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9947 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V MADHUVANI
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained investment; Unexplained expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.664/HYD/10 : ASSTT. YEAR 2006-07 M/S. SRINILAYA AR PROJECTS, HYDERABAD ( PAN ABEFS 6028 D ) V/S. INCOME-TAX OFFICER, WARD 6(4), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.V.RAGHURAM RESPONDENT BY : SMT. V. MADHUVANI O R D E R PER G.C.GUPTA, VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006- 07 IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME -TAX(APPEALS). 2. GROUND OF APPEAL NO.1 OF THE ASSESSEE IS GENERAL IN NATURE AND NEEDS NO ADJUDICATION. 3. GROUND NO.2 OF THE ASSESSEE IS AS UNDER- 'THE CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS. 18 LACS AS UNEXPLAINED INVESTMENT. THE CIT(A) FAILED TO APPREC IATE THAT THE SAID AMOUNT WAS PAID BY THE APPELLANT AS PER TH E AGREEMENT CUM GPA AS CONFIRMED BY THE VENDOR.' 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS A SURVEY ACTION UNDER S.133A OF THE ACT ON 25.8.2008 AT THE BUSINESS PREMISES OF THE ASSESSEE AND DURING THE COURSE OF SURVEY, CERTAIN MA TERIAL WAS IMPOUNDED. IN THE RETURN OF INCOME FILED BY THE ASSESSE E, THE ASSESSEE HAS ITA NO.664./HYD/10 2 SHOWN AN AMOUNT OF RS.72 LAKHS AS INVESTMENT MADE IN LAND. THE ASSESSING OFFICER ON THE BASIS OF ANNEXURE A/22/SNP TOOK THE P AYMENT AS MADE TO SHRI VIJAY KUMAR REDDY AT RS.90 LAKHS AND THE DIFFER ENCE BETWEEN THE TWO AMOUNTS OF RS.18 LAKHS WAS ASSESSED IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED INVESTMENT. THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT NO ADDITION IN RESPECT OF THIS AMOUNT OF RS.18 L AKHS WAS MADE IN THE HANDS OF THE SELLER, SHRI VIJAY KUMAR REDDY, AND THER EFORE, THERE IS NO JUSTIFICATION FOR MAKING ANY ADDITION IN THE CASE OF TH E ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS FILED CONFIRMATION LETTER DATED 20.12.2008 FROM THE SELLER, SHRI VIJAY KUMAR REDDY WHO CONFIRMED THAT HE HAS RECEIVED A SUM OF RS.72 LAKHS TOWARDS SALE OF LAND FROM THE ASSE SSEE AND THAT THE CASH PAYMENTS OF RS.1-LAKH, RS.1-LAKH, RS.5- LAKHS AND RS. 1-LAKH ON 30.6.2005; 3.7.2005; 6.8.2005; 13.8.2005 AND 5.10.2 005 RESPECTIVELY, WERE RETURNED TO THE ASSESSEE ON RECEIPT OF PAY ORDER IN LIEU OF THE SAID CASH RECEIPTS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE CASH PAYMENTS MADE BY THE ASSESSEE AS PER ANNEXURE A/22/SNP T O SHRI VIJAY KUMAR REDDY, WERE RETURNED BY HIM (SELLER) TO THE ASSE SSEE ON RECEIPT OF CHEQUE/PAY ORDER GIVEN BY THE ASSESSEE TO THE SELLER. HE SUBMITTED THAT REVENUE HAS FAILED TO BRING ANY EVIDENCE ON RECORD TO CONTROVERT THE CONFIRMATION LETTER DATED 20.12.2008 OF THE SELLER, S HRI VIJAY KUMAR REDDY FILED BEFORE THE REVENUE AUTHORITIES, COPY OF WHICH HA S ALSO BEEN FILED IN THE COMPILATION BEFORE THE TRIBUNAL. HE FURTHER SUBMITTED THAT THE ADDITION OF RS.18 LAKHS IS NOT SUPPORTED BY ANY OTHER CORROBORATIVE EVIDENCE AND HAS BEEN MADE MERELY ON CONJECTURES AND SURMISES. 5. LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). SHE SUBMITTED THA T THE ASSESSEE HAS NOT PASSED ANY ENTRY ON RECEIPT OF THE MONEY CLAIMED TO HAVE BEEN RETURNED BY THE SELLER, SHRI VIJAY KUMAR REDDY IN ITS ACCOUNT BO OKS. SHE SUBMITTED ITA NO.664./HYD/10 3 THAT THE ASSESSEE HAS DECLARED ONLY THE AMOUNTS PAID TO TH E SELLER VIDE CHEQUES/PAY ORDER AND HAS NOT DISCLOSED THE AMOUNT OF R S.18 LAKHS PAID IN CASH TO THE SELLER PARTY. SHE SUBMITTED THAT IN VIEW OF ANNEXURE A/22/SNP, WHEREIN PAYMENTS TO THE SELLER, SHRI VIJAY KUMAR RED DY HAVE BEEN RECORDED AND IN VIEW OF THE FACT THAT NO SATISFACTORY EXPLANAT ION WAS GIVEN BY THE ASSESSEE, THE ADDITION OF RS. 18 LAKHS MADE BY THE ASSESSING OFFICER WAS WHOLLY JUSTIFIED. 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY. WE HAVE PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A ) AND ALSO THE COPY OF THE CONFIRMATION LETTER OF THE SELLER, SHRI VIJAY KUMAR REDDY, DATED 20.12.2008, COPY OF WHICH IS FILED IN THE COMPILATION BEFORE US. WE FIND THAT AS PER ANNEXURE A/22/SNP THE TOTAL PAYMENTS MADE TO S HRI VIJAY KUMAR REDDY ON DIFFERENT DATES MENTIONED THEREIN COMES TO RS. 90 LAKHS. WE FIND THAT OUT OF THE TOTAL PAYMENT OF RS. 90 LAKHS AS PER A NNEXURE A/22/SNP, A SUM OF RS.72 LAKHS HAS BEEN PAID PER CHEQUE/PAY ORDER AND THE BALANCE AMOUNT OF RS.18 LAKHS HAS BEEN PAID IN CASH TO THE SELL ER OF THE LAND, SHRI VIJAY KUMAR REDDY ON DIFFERENT DATES. IT IS NOT THE CASE OF THE ASSESSEE THAT IT HAS NOT MADE THE PAYMENT OF RS.18 LAKHS IN CASH TO TH E SELLER PARTY ON DIFFERENT DATES. THE CASE OF THE ASSESSEE IS THAT THE AMOU NT PAID BY IT TO THE SELLER, SHRI VIJAY KUMAR REDDY IN CASH WERE RETURNED BACK TO THE ASSESSEE, ON RECEIPT OF THE PAY ORDER, IN LIEU OF THE SAID CASH RECEIPTS. WE FIND THAT THERE IS NO CORRESPONDING ENTRY OF THE RECEIPT OF MONE Y BY THE ASSESSEE CLAIMED TO HAVE BEEN RETURNED BY THE SELLER SHRI VIJA Y KUMAR REDDY. IN REPLY TO A QUERY FROM THE BENCH AS TO THE REASON FO R THERE BEING NO CORRESPONDING ENTRY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WITH REGARD TO THE RECEIPT OF MONEY ON RETURN BY THE SELLER PARTY, T HE LEARNED COUNSEL FOR THE ASSESSEE COULD NOT OFFER ANY SATISFACTORY EXPLANATION, EXCEPT TO CLAIMING THAT SINCE THE PAYMENTS WERE RECEIVED BACK IMMEDIATELY, THEY WERE NOT ITA NO.664./HYD/10 4 ACCOUNTED FOR AND ENTRIES WERE NOT MADE BY THE ASSESSEE. WITH REGARD TO THE CONFIRMATION LETTER DATED 20.12.2008 FURNISHED BY THE SELLER, SHRI VIJAY KUMAR REDDY, A SPECIFIC QUERY WAS MADE BY THE BENCH AS TO WHEN THE SAID LETTER WAS FILED AND BEFORE WHICH REVENUE AUTHORITY A ND ANY EVIDENCE THAT THIS CONFIRMATION LETTER WAS IN FACT FILED BEFORE ANY REVENUE AUTHORITY. IN RESPONSE, THE LEARNED COUNSEL FOR THE ASSESSEE COULD NOT AD DUCE ANY EVIDENCE IN THIS REGARD. WE FIND THAT THE ARGUMENT OF THE ASSESSEE THAT SINCE NO ADVERSE ACTION WAS TAKEN IN THE CASE OF THE SELL ER, SHRI VIJAY KUMAR REDDY, NO ADDITION COULD BE TAKEN IN THE HANDS OF THE ASSESSEE AS WELL, IS NOT SUSTAINABLE. IN THE FACTS OF THE CASE THAT PAYMENTS T OTALING TO RS.90 LAKHS WERE RECORDED IN THE IMPOUNDED PAPERS, WHICH THE ASSESSEE COULD NOT DENY BEFORE THE REVENUE AUTHORITIES, AND THERE BEING NO CORRESPONDING ENTRY FOR THE CASH AMOUNTS CLAIMED TO HAVE BEEN RETURNED BACK BY THE SELLER PARTY TO THE ASSESSEE; AND THAT THE INVESTMENT OF RS.90 LAKHS I N THE PURCHASE OF LAND FROM SHRI VIJAY KUMAR REDDY WAS EVIDENCED BY TH E PAPER SEIZED, VIZ. ANNEXURE A/22/SNP, AND THE ASSESSEE COULD NOT DISPUTE THE CORRECTNESS OF THE ENTRIES IN THE IMPOUNDED PAPER, WE HOLD THAT THE ASSESSEE COULD NOT DISCHARGE EVEN ITS INITIAL ONUS WITH REGARD TO CASH PAYME NT OF RS.18 LAKHS AND AS SUCH THERE IS NO MISTAKE IN THE ACTION OF THE CIT (A) IN HOLDING THAT THE CASH PAYMENT OF RS.18 LAKHS HAS TO BE TREATED AS UNE XPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE. THE ORDER OF T HE CIT(A) IS ACCORDINGLY UPHELD AND GROUND OF APPEAL NO.2 OF THE A SSESSEE IS REJECTED. 7. GROUND OF APPEAL NO.3 OF THE ASSESSEE IS AS UND ER- 'THE CIT(A) ERRED IN SUSTAINING THE ADDITION OF A LLEGED UNEXPLAINED EXPENDITURE OF RS.8,72,019. THE CIT(A) FAILED TO APPRECIATE THAT THE SAID PAYM ENT WAS MADE BY OTHER FIRM M/S. SRINILAYA PROJECTS. 8. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THER E IS NO JUSTIFICATION FOR THE ADDITION ON ACCOUNT OF UNEXP LAINED EXPENDITURE OF ITA NO.664./HYD/10 5 RS.8.72 LAKHS AS THE SAID EXPENDITURE WAS MET BY THE OTH ER FIRM, M/S. SRINIALAYA PROJECTS. HE SUBMITTED THAT THERE IS NO VOU CHER OR BILL FOUND FOR ANY OF THE EXPENSES TREATED AS UNEXPLAINED EXPENDITUR E IN THE HANDS OF THE ASSESSEE BY THE DEPARTMENT AND MERE NOTINGS ON A LOOSE PA PER SHEET WITHOUT ANY CORROBORATIVE EVIDENCE COULD NOT BE MADE T HE BASIS FOR THE ADDITION IN THE HANDS OF THE ASSESSEE. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELI ED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). SHE SUBMI TTED THAT ONUS WAS ON THE ASSESSEE TO PROVE THAT THE ENTRIES REGARDING THE PAYMENT OF IN CERTAIN EXPENDITURE WAS NOT CORRECT. SHE SUBMITTED THAT NOTIN GS ON THE LOOSE SHEETS COULD ALSO BE MADE THE BASIS FOR THE ADDITION, IN VIEW OF THE UNSATISFACTORY EXPLANATION OF THE ASSESSEE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF ASSESSING OFFICER AND THE CIT(A). WE FIND THAT NO VO UCHER/BILL FOR THE VARIOUS ITEMS OF EXPENSES WAS FOUND BY THE DEPARTMENT DU RING THE SURVEY PROCEEDINGS UNDER S.133A OF THE ACT. THE NOTINGS ON TH E LOOSE SHEETS WITHOUT ANY CORROBORATIVE EVIDENCE COULD NOT BE MADE T HE BASIS FOR THE ADDITION FOR MAKING AN ADDITION ON ACCOUNT OF UNEXPL AINED EXPENDITURE IN THE CASE OF THE ASSESSEE. THE CIT(A) HAS RECORDED THAT ASSESSE E HAS SOUGHT TO CHALLENGE THE CORRECTNESS OF THE ENTRIES REGARDING P AYMENTS ADMITTED AS ACTUALLY MADE AND IT COULD NOT FURNISH ANY EVIDENCE TO SUBSTANTIATE SUCH CONTENTION. WE FIND THAT THE ASSESSEE HAS CHALLENGED CORRE CTNESS OF THE ENTRIES REGARDING THE PAYMENTS BEFORE THE REVENUE AU THORITIES, AND THERE IS NO MATERIAL BROUGHT ON RECORD ON BEHALF OF THE REVEN UE TO SUGGEST THAT THE PAYMENTS WERE IN FACT MADE BY THE ASSESSEE. FURTHER, WE FIND THAT NO DATES OF PAYMENT ARE MENTIONED IN THE LOOSE SHEETS IMPOUNDED BY THE DEPARTMENT. WE FIND THAT THE CIT(A) HAS RECORDED TH AT EVEN THOUGH THE ITA NO.664./HYD/10 6 OTHER FIRM MIGHT HAVE MADE SOME PAYMENTS FOR STEEL, CEM ENT AND SAND, THE ASSESSEE COULD NEVER ESTABLISH THAT IT WAS FOR THE PAYMENTS RECORDED IN THE BOOKS OF THE OTHER FIRM THAT THE MATERIAL HAD BEEN R ECEIVED AT THE SITE OF THE ASSESSEE AND THE CIT(A) FURTHER RECORDED THAT THERE WAS N OTHING ON RECORD TO ESTABLISH THAT THE SAME MATERIAL, WHICH HAS BEEN RECEIV ED AT THE SITE OF THE ASSESSEE HAD BEEN RECORDED BY THE OTHER FIRM. THIS FIN DING OF THE CIT(A) IS NOT SUPPORTED BY ANY EVIDENCE OR MATERIAL BROUGHT ON RECORD AND THERE IS NO LEGAL BASIS FOR THE CIT(A) TO CONCLUDE THAT THERE IS N OTHING ON RECORD TO ESTABLISH THAT THE SAME MATERIAL WHICH HAS BEEN RECEIV ED AT THE SITE OF THE ASSESSEE, HAD BEEN RECORDED BY THE OTHER FIRM. IN THESE FACTS OF THE CASE, WE HOLD THAT THE ADDITION OF RS.8.72 LAKHS ON ACCOUNT OF UNEXPLAINED EXPENDITURE IN THE HANDS OF THE ASSESSEE WAS NOT JUSTIFIED . IT IS ACCORDINGLY DELETED AND THE GROUND OF APPEAL NO.3 OF THE ASSESSEE I S ALLOWED. 11. GROUND OF APPEAL NO.4 OF THE ASSESSEE IS AS UNDER- 'THE CIT(A) FAILED TO APPRECIATE THE FACT THAT T HE ASSESSEE HAS NOT COMMENCED HIS BUSINESS AND HENCE THERE CANNOT B E ANY INCOME LEAVE ALONE UNDISCLOSED INCOME.' THIS GROUND IS GENERAL AND NO ARGUMENTS WERE ADVANCED FOR THE ASSESSEE ON THIS ISSUE AND THEREFORE, NEEDS NO SEPARATE ADJUDICATIO N. IT IS ACCORDINGLY REJECTED. 12. IN THE RESULT, ASSESSEE'S APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 7.1.2011 SD/- SD/ - (CHANDRA POOJARI) (G.C.GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT DT/- 7TH JANUARY, 2011 ITA NO.664./HYD/10 7 COPY FORWARDED TO: 1. M/S. SRINALAYA AR PROJECTS, C/O. M/S. K.VASANT KUMA R, A.V.RAGHU RAM & B.PEDDI RAJULU, ADVOCATES, 403 MANISHA TOWERS, D.NO.10-1-18/31, SHYAM NAGAR, HYDERABAD 500 004. 2. INCOME TAX OFFICER, WRDP-6(4) HYDERABAD 3. COMMISSIONER OF INCOME-TAX(APPEALS)-IV, HYDERABAD. 4. COMMISSIONER OF INCOME-TAX III, HYDERABAD 5. THE DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S