2011 (4) TMI 1549 - AT - Income Tax

Summary

Issues Involved:
1. Addition on account of estimated on-money.
2. Addition due to difference in balances as unexplained cash credit.
3. Disallowance of interest on advances to group companies.
4. Disallowance of interest paid to Royal Resorts & Hotels Pvt. Ltd.
5. Addition on account of unaccounted receipts.
6. Addition of unexplained share capital.

Summary:

1. Addition on account of estimated on-money:
The assessee contested the addition of Rs. 1,00,000/- out of Rs. 2,43,650/- (Rs. 3,57,120/- for AY 1997-98) for alleged on-money received in the booking of Ruturaj Complex. The AO based the addition on a statement recorded u/s.132(4) during a search, which indicated on-money practices. The CIT(A) partially upheld the addition, confirming Rs. 1,00,000/- and deleting Rs. 1,43,650/-. The Tribunal found no independent evidence for the addition in the current year and directed to delete the entire addition, allowing the assessee's appeal.

2. Addition due to difference in balances as unexplained cash credit:
The AO added Rs. 4,08,691/- due to a discrepancy between the balances in the assessee's books and those of M/s. Royal Resorts & Hotels Ltd. The CIT(A) upheld this addition. The Tribunal, after reviewing the reconciliation provided by the assessee, found no justification for the addition and directed its deletion.

3. Disallowance of interest on advances to group companies:
The AO disallowed Rs. 3,27,229/- (Rs. 1,63,249/- for AY 1997-98) as interest on advances to group companies, alleging non-business use of borrowed funds. The CIT(A) reversed the disallowance for Rs. 49 lacs given to Alok Trading but confirmed Rs. 43,377/- for the remaining advances. The Tribunal, citing sufficient own funds and business receipts, directed to delete the entire disallowance.

4. Disallowance of interest paid to Royal Resorts & Hotels Pvt. Ltd.:
The CIT(A) confirmed the disallowance of Rs. 97,900/- as interest paid to Royal Resorts & Hotels Pvt. Ltd., considering it a double addition. The Tribunal reversed this finding, allowing the interest as a business expenditure.

5. Addition on account of unaccounted receipts:
The AO added Rs. 4,81,866/- on protective basis, alleging unaccounted receipts from the Rituraj project. The CIT(A) confirmed the addition pro tempore, pending final decision on the taxability of receipts in the hands of RHPL. The Tribunal noted that the amount was substantively added in RHPL's assessment and affirmed the CIT(A)'s findings, dismissing the Revenue's ground.

6. Addition of unexplained share capital:
The AO added Rs. 15,72,882/- as unexplained share capital. The CIT(A), after considering the assessee's explanation and remand reports, deleted the addition, finding the creditworthiness, identity, and genuineness of the transactions verified. The Tribunal affirmed the CIT(A)'s decision, dismissing the Revenue's ground.

Conclusion:
The Tribunal allowed the assessee's appeals for both years and dismissed the Revenue's appeal for AY 1996-97. The order was signed, dated, and pronounced in the Court on 8th April, 2011.