Tirumala Homes (P) Ltd. V. The Income-Tax Officer, Ward-2(1), Hyderabad

ITTA/466/2010

AI Insights

The case revolves around the income tax assessment of M/s. Tirumala Homes (P) Ltd. for the assessment year 2003-2004. The Income Tax Officer assessed additional income based on unexplained investments and share application money. The Commissioner of Income Tax initially disallowed some additions but confirmed the share application money. The Income Tax Appellate Tribunal further reduced some additions but upheld the share application money. The High Court dismissed the company's appeal, emphasizing the lack of evidence to substantiate the source of the share application money.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 820803 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 16-08-2010
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Burden of Proof; Cash credit; Share Application Money; Unexplained investment
• Section: 143(2); 143(1)

Judgement Text

"THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA ITTA No.466 of 2010 Dated:16.08.2010 Between: M/s.Tirumala Homes (P) Ltd. …Appellant and The Income-Tax Officer, Ward-2(1), Hyderabad. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA ITTA No.466 of 2010 JUDGMENT: (per Hon’ble Sri Justice V.V.S.Rao) The appellant company is an assessee under the Income Tax Act, 1961 (the Act). For the assessment year 2003-2004 the company filed return declaring the income of Rs.6,47,272/-. The return was processed under Section 143(1) of the Act on 31.03.2004. After scrutiny of the same, notice dated 09.08.2004 under Section 143(2) of the Act was issued with regard to share application money of Rs.7,50,000/- allegedly paid by M/s.N.Venkatesh and N.Praveen, sons of Managing Director of the Company, and one Sri T.Srihari, father-in-law of the Managing Director. In addition, an amount of Rs.14,00,000/- and another amount of Rs.25,95,099/- were proposed to be added as unexplained investment. After considering the information furnished by the company, total tax payable was assessed at Rs.25,00,554/- on the total income of Rs.54,42,370/- and the balance tax payable was demanded after giving credit to the tax already paid. Against the assessment order dated 31.03.2006, the assessee preferred an appeal to the Commissioner of Income Tax (CIT). By an order dated 19.04.2007, CIT allowed the appeal disallowing the additions in respect of unexplained investment, but affirmed the order of the Assessing Officer insofar as the share application money allegedly made by three persons named hereinabove. The additions to the extent of Rs.7,50,000/- were confirmed. Being aggrieved, the assessee went in appeal before the Income Tax Appellate Tribunal, Hyderabad Bench. By impugned order dated 30.11.2009 the learned Tribunal deleted the addition of Rs.2,50,000/- made in the case of Sri N.Venkatesh, but confirmed the remaining two additions. The second appellate order insofar as it went against them is in challenge in this appeal filed under Section 260A of the Act. Counsel for the appellant contends that the learned Tribunal committed error ignoring the settled principles regarding addition of cash credit. He submits that Sri Praveen and Sri Srihari had their own income and they had capacity to invest in the company. Alternately, he contends that even if the share application money is received by the assessee company from alleged bogus shareholders, the Department has to proceed against those persons and the additions cannot be deleted from the return of income filed by the assessee. After perusing the order impugned in the appeal and the material placed before us and after giving anxious consideration, we are convinced that the appeal is misconceived. Sri Praveen is admittedly the son of the Managing Director of the assessee company. He is a student in Australia, and therefore, the plea of independent source of income is improbable. It is contended that he had financial capacity to deposit money as he comes from a wealthy family and both his parents are assessees. This submission is stated only for the purpose of rejection. When it is claimed that the cash credit is towards share application money, the burden lies on the assessee to show that the person who deposited the money towards share application or for other purpose has independent source of income. As found by the appellate Commissioner as well as the learned Tribunal no evidence was let in this regard to show the capacity of Sri Praveeen. In regard to the cash credit towards share application money made by Sri T.Srihari also no evidence was produced. Though it was alleged that he was engaged in iron and hardware business at Aleru during the financial year 2002-2003, and that he had sold some gold jewellery belonged to his wife, there was no proof offered before the Assessing Authority or appellate Commissioner. Therefore, both these transactions are doubtful. The burden was not properly discharged by the assessee. Learned Tribunal considered this aspect of the matter, which is in the realm of question of fact. Therefore, the appeal is misconceived. The appeal is accordingly dismissed. __________________ (V.V.S.RAO, J) ____________________ (B.N.RAO NALLA, J) 16.08.2010 vs "