TMI Blog2013 (4) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... er relatives in different denominations. Though it was pleaded that there were enough drawings from these parties to make the gift to the assessee, however, the assessee failed to establish specific withdrawal which indicates gift to the assessee. Further, considering the status of those donors, drawings made by them is not enough to make gift to the present assessee. Assessee has not provided the basic details like names, identity and addresses of the parties - addition confirmed. Against assessee. Addition u/s 68 - AY 2005-06 - Held that:- Mr. Sreenivasulu is having no capacity to advance such amount of Rs. 19.65 lakhs as his only income is only Rs. 35,000 per month. See R.B. Mittal vs. CIT (2000 (8) TMI 54 - ANDHRA PRADESH High Court). Also there is no violation of principles of natural justice since the lower authorities gave ample opportunity to the assessee to put forth his case. Addition u/s 68 - AY 2006-07 - Held that:- Gifts received from close relatives and friends, the assessee failed to furnish basic information such as name, identity and particulars of donors along with the purpose on which these gifts were made. See CIT vs. P. Mohanakala (2007 (5) TMI 192 - S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted sources - Held that:- In this case the addition is made on the basis of entries in the loose sheets. In the loose sheets it does not contain date. Thus these loose sheets cannot be considered as a basis for addition unless supported by corroborative evidence. The addition is based only on surmises and conjectures. It is a dumb document that cannot be acted upon as it is not supported by corroborative material to substantiate Department's version. Addition u/s 68 - AY 2008-09 - application of provisions of section 2(22)(e) for bringing the amounts received from Sri Nukala Srinivasa Rao to tax - Held that:- The ratio of the decision of CIT vs. Tania Investments (P) Ltd. (2009 (3) TMI 473 - BOMBAY HIGH COURT) is squarely applicable in this case, wherein the creditors were examined by the Assessing Officer, during the assessment proceedings, who maintained the books of accounts, which could not have been brushed aside. Thus, the addition made on account of amount is not acceptable. Addition of Rs. 3 lakhs u/s. 68 in the name of Sri N. Vijay Kumar - Held that:- This amount of Rs. 3,00,000 was received in cash from Mr. Vijay Kumar towards advance for purchase of land. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transactions were very old and the details were not readily available though it was explained that the receipt of money is on account of advance of the amount in the earlier year and concerned amounts have been shown as opening balance in the assessee's financial statement. Because of shortage of time and also the Assessing Officer has not given sufficient opportunity to the assessee, the assessee failed to submit the details before the Assessing Officer. On hearing this argument, the CIT(A) collected confirmation letters from the assessee as an additional evidence and called for Remand Report from the Assessing Officer. The CIT(A) after considering the Remand Report for the A.Y. 2003-04 in the case of Sri Duvvuru Subba Reddy - Rs. 5,20,000 - observed that though the assessee filed a confirmation letter along with the copy of the household card, the transaction was in cash and he is not an income-tax assessee and also the assessee has not explained the nature of transaction, how the money was advanced by the assessee in earlier years. Being so, the CIT(A) rejected the claim of the assessee. 5. In the case of Sri Alluru Linga Reddy, though there was a confirmation letter filed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties have furnished the confirmation letters for gifting the same to the assessee. According to the AR these are genuine gifts from family members and they income-tax assessees and the addition has to be deleted. Further he submitted that the gift came from the following parties: Sl. No Name Amount (Rs.) 1. Sri A. Girish Reddy 25,000 2. Smt. Sulochana 5,00,000 3. Sri A. Audinarayana Reddy 30,000 4. Other gifs from family members 45,000 8. Further he submitted that these gifts are reflected intheir personal account of the donors and credit has to be given. 9. We have heard both the parties and perused the material on record. In the case of recovery of advance in the A.Y. 2003-04 and 2004-05 which was advanced in the earlier years, the assessee failed to furnish the details of nature of transaction with regard to which these impugned amounts were advanced. In the absence of explanation regarding nature of transaction, we are not in a position to appreciate the argument of the assessee's counsel. When any amount found credited in the books of account of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not provided the basic details like names, identity and addresses of the parties. In such circumstances, we have no hesitation in confirming the addition made u/s. 68 in respect of these gifs. Accordingly, the additions sustained by the CIT(A) for A.Ys. 2003-04 and 2004-05 are confirmed. In the result assessee's appeals in ITA Nos. 1236 and 1237/Hyd/2012 are dismissed. ITA No. 1238/Hyd/2012 - By assessee A.Y. 2005-06 11. The ground raised by the assessee in this appeal is mainly with regard to confirming addition of Rs. 19.65 lakhs made u/s. 68 of the Act. 12. Brief facts of the issue are that the assessee is said to have received a sum of Rs. 19.65 lakhs in his receipts and payments account as an advance on sale of land from one Mr. T. Sreenivasulu. Before the Assessing Officer the assessee not furnished any details/confirmation. Being so, it was added as unexplained credit u/s. 68 of the Act. On appeal before the CIT(A), the assessee furnished name and address of the parties along with confirmation letter. On receipt of these particulars, the CIT(A) called for Remand Report from the Assessing Officer. The Assessing Officer after duly verifying contents filed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves 1,95,000 Total 4,20,000 15. The assessee pleaded before us that these gifts are received from close relatives and these donors have enough source of income to make the gifts to the assessee. However, we find that even during the course of assessment proceedings the assessee not able to explain the source of income to make the gifts to the assessee. It is also noted that there was no cash withdrawal in the hands of Sri A. Girish Reddy to make gift to the assessee. Similar is the position in the case of Smt. A. Sulochanamma and Sri Audinarayana Reddy. The assessee was unable to explain the specific withdrawals which show offer of gift to the assessee. Being so, as discussed in earlier years 2003-04 and 2004-05, we are inclined to confirm the addition in respect of the gifts made by Sri A. Girish Reddy, Smt. A. Sulochanamma and Sri A. Adinarayana Reddy. 16. With regard to gifts received from close relatives and friends, the assessee failed to furnish basic information such as name, identity and particulars of donors along with the purpose on which these gifts were made. Being so, placing reliance on the judgement of Supreme Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of advance given to the assessee. Sri P. Muddukrishna Reddy further stated that the said advances were given for purchase of property/shares in M/s. AMR Constructions Ltd. He also furnished the details of his sources of income, income tax particulars etc., to the assessing officer. However, the assessing officer proceeded to treat the proprietary concern of the said person, engaged in the business of undertaking sub- contract works, as non-genuine on the following grounds: i) Mr. P. Muddu Krishna Reddy was a relative of the assessee; ii) There was no written agreement, in respect of sub- contract works, between the proprietary concern of the said person and M/s. AMR Constructions Ltd., of which the assessee is a director; iii) He had not deducted PF, ESI and other statutory dues from payments made by him; iv) Details of labour supplier were not provided by him; v) He filed returns from A.Y. 2008-09 onwards only. 20. The AR invited our attention to the account statement and the income tax return filed of Sri P. Muddukrishna Reddy. He submitted that the confirmations letters of the said persons were filed before the lower authorities and the same would be evident from the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 78 (SC), wherein the assessee filed before the assessing officer, the letters of confirmation in respect of loans taken and particulars of the different creditors whose general index numbers were with the Income-tax Department, the Hon'ble Supreme Court approved the conclusion of the Tribunal that the assessee had discharged the burden cast upon him in terms of s. 68. Thus, as the creditor, who is assessed to tax in his individual capacity, had already confirmed the factum of advancing money, no addition is called for in the hands of the assessee and if at all any addition has to be considered, it has to be duly considered in the hands of the creditor and as such the addition made u/s 68 is unsustainable both on facts and in law. 22. He submitted that the assessing officer had alternatively held that the impugned amount is chargeable to tax, in terms of s. 2(22)(e), on the grounds that the proprietary concern of Mr. P. Muddukrishna Reddy was not genuine and it was only a conduit for siphoning off money out of M/s AMR Constructions, the main contractor, and the amount paid by the latter to the sub- contractor was not in the normal course of its business. In this regard it is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the transaction of the creditor with the assessee group in the subsequent assessment years, the transaction for the year under reference is made by cash. Further, it is a fact that Mr. P. Muddukrishna Reddy has started executing the sub-contract works for M/s AMR Constructions Ltd, the flagship company of the group only in the subsequent years which has fetched him certain incomes, so as to explain the transactions in the relevant years but has no sources to explain the transactions of the year under reference to the extent of Rs. 14,00,000/-, thereby attracting the provisions of sec. 68 of the IT Act, 1961. Sec. 68 of the IT Act, 1961 not only specific about the identity but also the creditworthiness of the creditor and in this case, though Mr. P. Muddukrishna Reddy has proved his identity by appearing before the Assessing Officer and confirmed the transaction, the creditworthiness for him, for the year under reference is not enough to substantiate the transactions of Rs. 14,00,000/-, in absence of corroborative evidence to indicate his means and sources for such investment. The advancement of amounts in cash and his status of not assessed to tax for the year under reference, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s justified in treating the amount of credit from Mr. P. Muddukrishna Reddy as unexplained credit in the hands of the assessee as per the provisions of sec. 68 and the ratios of the decisions cited by the Assessing Officer in the assessment order will support the stand taken by the Assessing Officer. Therefore, the addition made by the Assessing Officer by treating the unexplained credit as income of the assessee stands justified, in absence of credible information as regards to the genuineness of the transaction and on account of the failure of the assessee to prove the creditworthiness of the creditor. 25. The DR submitted that, on the issue of application of provisions of section 2(22)(e) for bringing the amounts received from Shri P. Muddukrishna Reddy to tax, it can be held that the provisions u/s 2(22)(e) create a deeming fiction to treat the otherwise non-taxable receipts as taxable dividends, thereby, creating a liability for the assessee. Provisions of Section 2(22)(e) are deemed in nature and are applicable to special situations which are needed to be fulfilled on cumulative basis such as (i) advancement of loan or advance by a company to a share holder being a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer that these name lenders having filed their returns of income only to explain the investment so as to facilitate the conversion of unaccounted money into the assessee's company. It was also alleged that the money was routed like this as a device to explain the investments. However, the fact is that these persons who have made investments in the assessee company are income-tax assessees and the have given the confirmation letters. Had the Assessing Officer has any doubt, it should be questioned in the hands of investors. 34. Similar issue was considered by the jurisdictional High Court in the case of CIT v. Lanco Industries Ltd. (242 ITR 357) (AP). While rejecting the Revenue appeal, the High Court observed that merely by reason of unsatisfactory explanation relating to the source of investment by the shareholders, the money invested in shares cannot be treated as income of the assessee. If the ostensible shareholders failed to explain the means of investment, that should have been treated as unexplained income in their hands. In order to add it to the income of the assessee there must be a further finding that in fact the shareholders were name lenders and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29. With regard to invoking provisions of section 2(22)(e), it is brought to our notice that there was a subcontract between Sri P. Muddukrishna Reddy and M/s. AMRCL and it was offered to tax. The Assessing Officer did not bring on record the fact that no work was carried on by Sri P. Muddukrishna Reddy as per subcontract from M/s. AMRCL and payment was made without any work. The Assessing Officer observations are not based on any cogent material on record and rather on presumption basis. Being so, we are not in a position to hold that the amount advanced by Sri P. Muddukrishna Reddy to the assessee would partake the character of dividend in terms of section 2(22)(e) of the Act. The Assessing Officer failed to bring on record the flow of funds from M/s. AMRCL to the assessee through Sri P. Muddukrishna Reddy without any consideration. The Assessing Officer has not proved the bogus nature of the sub-contract works as no such enquires were shown to have been made and in absence of such enquiry, the amounts paid by the company were already disallowed in the hands of the company i.e. AMR Construction Ltd. As indicated, the conditions stipulated in section 2(22)(e) are applicable on cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition is with regard to Rs. 11,70,000 received from M/s. NR Constructions. With regard to this there is no information or confirmation brought on record to indicate genuineness of the transaction. Being so, placing reliance on the judgement of jurisdictional High Court in the case of R.B. Mittal (cited supra), we are inclined to confirm the addition. 35. The next addition is with regard to Rs. 13.93 lakhs received from Sri Surendra Babu. In this case, the assessee filed a confirmation letter along with household card. Mr. Surendra Babu's income is Rs. 22,000 per month. The capacity to advance an amount of 13.93 lakhs to the assessee is doubted. As such the assessee has not discharged the burden cast upon him. Accordingly, the addition is sustained by placing reliance on the judgement of jurisdictional High Court in the case of R.B. Mittal (cited supra). In the result ITA No. 1240/Hyd/2012 is partly allowed for statistical purposes. ITA No. 1241/Hyd/2012 - By assessee A.Y. 2008-09 36. The first ground in assessee's appeal is with regard to sustaining addition of Rs. 2,94,81,000 received from Sri M. Jayaram Reddy u/s. 68 of the Act. Brief facts of the case are that in this as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount was invested/advanced by his son Mr. Hanumantha Reddy out of his income. In view of the fact that Hanumantha Reddy was assessed to tax in his own right, the amount advanced by him, on behalf of his father, cannot be treated as unexplained credit in the case of the assessee and the taxability, if any, has to be examined in the hands of such other person, who advanced the money, by his Assessing Officer concerned, as per the submission of the assessee. 40. On the other hand the learned DR, regarding the addition of Rs. 2,94,81,000 on account of unexplained credits in the form of advances received from Sri Jayaram Reddy, it was submitted that Sri Jayaram Reddy is an agriculturist, not assessed to tax, do not have known sources of income and creditworthiness to explain the said amounts advanced to the assessee. In response to this, the assessee submitted that the total amount received from the above creditor was Rs. 5,25,00,000/- against which certain amounts were returned since the purported sale of shares and immovable properties were not materialized. In fact, the said amounts were stated to have been advanced by Sri Hanumantha Reddy, S/o Sri Jayaram Reddy on behalf of hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved Rs. 5.25 crores from Sri Jayaram Reddy as advance against the proposed sale of shares and immovable property. Since the transaction not materialised, a sum of Rs. 3,80,19,000 was repaid to him and balance was outstanding. This fact was confirmed by Sri Jayaram Reddy and Sri Jayaram Reddy received this amount frm his son Sri Hanumantha Reddy who is proprietor of M/s. HR Constructions. Sri Jayaram Reddy also confirmed this fact in the statement recorded u/s. 131 of the Act. The assessee also brought on record Profit and Loss A/c. and Balance Sheet of M/s. HR Constructions placed at page Nos. 222 to 239 of the Paper Book. In Schedule-D - Current assets, loans and advances as on 31st March, 2008 - which shows debit in the account of Sri Jayaram Reddy an amount of Rs. 1,39,81,000. This being the case, the assessee proved the source of credit as received from Sri M. Jayaram Reddy. However, the lower authorities not satisfied with this. According to the Department, Sri Jayaram Reddy is an agriculturist and not an assessee of income-tax. His creditworthiness is not proved. In our opinion, the assessee has proved the sources as received from Sri M. Jayaram Reddy and the fact of advancin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as unexplained credit. 44. We have heard the rival submissions. In our opinion, mere filing of confirmation letter does not discharge the assessee in proving the genuineness of the transaction and capacity of the creditor. Only identity is proved. Hence placing reliance in the judgement of jurisdictional High Court in the case of R.B. Mittal (cited supra), we confirm the addition. 45. The next addition is with regard to Rs. 3,15,000 made in the name of Smt. Saroja. Brief facts of the issue are that through the assessee submitted that the amounts were through banking channels, no information regarding the same was furnished. The CIT(A) observed that neither the amount was confirmed nor the creditor was identified with the help of the basic information such as confirmation letter, address, PAN, banking particulars, etc., and in absence of any basic information, the credit deserves to be treated as unexplained credit as per the provisions of section 68 of the IT Act. Accordingly, the CIT(A) confirmed the addition of Rs. 3,15,000. 46. We find, in this case, there is no confirmation letter from the party. All the ingredients of section 68, as discussed earlier, are not fulfilled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs/observations:- (i) Names in the seized material like Krishna Murthy, Charlie, Doraikannan and descriptions like 'due diligence report', belong to M/s. AMRLITL. (ii) By confirming that the total investment in M/s AMRLITL at Rs. 7.5 crore as against the figure of Rs. 625 lakhs as narrated in the seized material, the assessee accepted the contents of the seized material. (iii) The statement recorded from Sri Ravi Kumar Reddy, confirming the sharing of investments in AMRLITL on 50:50 basis as against the denial of the said ratio, by the assessee. (iv) The contents of the seized material contain the cash transactions noted/indicated as 'incurred' or 'paid' which is in past tense and an event that has already taken place as against the explanation of the assessee that the notings are by the accountant on estimation basis. 50. On the lines of the above observations, the A.O. arrived at the conclusion that the amounts mentioned in the seized material was incurred from the unaccounted sources which were not disclosed to the department and were not reflected in the regular books of account and said amounts were treated as expenditure incurred by both Shri A. Mahesh Reddy and Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that the incurrence of expenditure has to be conclusively established by the AO. In this regard, the assessee relied on the decision of the Tribunal, Mumbai Bench in the case of ACIT vs. Shahad Lookman Quadir (3 ITR (Trib) 177). It was also reiterated that no independent material or evidence has been brought on record by the A.O. to establish that the notings recorded in the loose sheets of the seized material represented the actual unaccounted expenditure and it is a settled principle of law that the mere entries in loose sheets are not sufficient to prove conclusively that the assessee has actually indulged in certain transactions unless corroborated by other evidence. The assessee relied on the decision of Hon'ble High Court of Delhi in the case of CIT vs. Anil Bhalla (322 ITR 199), CIT vs. Lubtec India Ltd (311 ITR 175). The assessee also referred to the following decisions on similar lines of facts: (i) S.P.Goyal Vs DCIT(269 ITR(AT) 59), ITAT, Mumbai. (ii) ACIT Vs Satyapal Wassan (295 ITR(AT) 352), ITAT, Jabalpur. (iii) CIT Vs Moulik Kumar K Shah (307 ITR 137)(Guj). 53. The AR contended that the notings in loose papers were not written by the assessee but were si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be given due credit in order to arrive at a reasonable inference. It was contended that the seized material in question, contain the details not only of the expenditure incurred but also the amounts received from Mr. Ravi, the other investor and since the exact dates of expenditure and receipts in cash are not available in the seized material, it cannot be held with certainty as to whether the expenditure preceded the receipt of cash or vice versa and in view of the fact, a benefit of doubt should be granted to the assessee and as such the cash received by the assessee should be treated as cash available with him as a source for the part of the expenditure incurred. 56. On appeal, the CIT(A) observed that the Assessing Officer neither conducted enquiries nor brought additional evidences on record, except interpreting the notings in the seized material as referred with the help of self-drawn conclusions or based on the statement recorded from Sri B. Ravi Kumar Reddy. Similarly, the assessee also failed to explain the transactions/ notings in the seized material with the help of relevant records/ information during the stage of assessment proceedings, except countering the observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of the entries and the amounts spent by each of the promoter. Further, what has been decided by the A.O. was the unexplained expenditure in M/s AMRLITL, by excluding certain amounts related to HMT project, thus the amounts determined are shown to be the amounts spent exclusively for M/s AMRLITL by the two promoters. It is a fact that the period of expenditure was primarily determined by the Assessing Officer based on the information relatable to the repayment of loans obtained from DHFL, which were taken out of the amount of unexplained expenditure determined by the AO that is relatable to M/s AMRLITL and in absence of any specific period mentioned in the seized material related to the other entries, the year of investment/incurring of expenditure is confirmed to be the AY 2008-09 and no serious questions were raised by the assessee on this issue. The assessee's consistent stand of variance of the figures in the seized material with that of the actual amounts invested/incurred as expenditure as reflected in the books was also taken care by the fact that the A.O. excluded the amounts related to the HMT Project while determining the unaccounted expenditure related to M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of expenditure as indicated in the seized material and as per the findings of the A.O. in the assessment order, there is no clarity as to the nature of the expenditure i.e. whether it is capital or revenue in nature and in absence of such clarity, it is difficult to accept it as revenue expenditure so as to be treated as unexplained expenditure. In this case, the assessee has brought in the investments/amounts contributed by the assessee along with other family members shown as the promoters in M/s AMRLITL, to explain the sources for the amounts that have been treated as unexplained expenditure by the A.O. The explanation offered by the assessee appears reasonable and as such the amount of Rs. 1406.19 lakhs invested/paid by the assessee and his family members deserved to be considered so as to explain amounts brought into the books as a share of investment/ expenditure. Thus, it leaves a balance of Rs. 367.19 lakhs (1773.38 lakhs - 1406.19 lakhs), which require to be explained by the assessee with reference to their sources. 61. The CIT(A) observed that as indicated, the assessee tried to explain the balance of the investments / expenditure with the help of Rs. 193.10 lakhs, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of the figures mentioned in the loose sheets in question by pointing out certain errors, with documentary evidence. He submitted that the assessee had produced evidence, with reference to certain investment/ payments, in support of the contention that the figures mentioned in the impugned document, were not based on correct appreciation of facts but only based on estimate or out of memory. The fact that the actual amount invested/paid was different and not as per the loose sheets was not controverted by the assessing officer. On the other hand he accepted this position. He submitted that the assessing officer had misdirected himself and misapplied the well settled principle of interpretation that a document has to be read as a whole and should not be read to suit the convenience of one or the other party, against the assessee. Instead, having accepted the fact that the figures mentioned in the loose sheets, in respect of certain investment/payments, were at variance with the actual amounts, he should not have relied on the figures in the very same document under other heads for making an addition and he ought to have applied the principle in favour of the assessee. 63. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer failed to produce any evidence to show that the assessee had actually incurred any expenditure which was not accounted for. In the instant case, the addition was made as unexplained expenditure u/s. 69C solely based on notings in certain loose papers found during the search operation. The impugned papers were not written by the assessee but were simply typewritten. Further, neither any dates were mentioned against the said entries nor were the papers signed by the assessee. The assessee had produced evidence, with reference to certain investment/payments, in support of the contention that the figures mentioned in the impugned document, were not based on correct appreciation of facts but only based on estimate. The fact that the actual amount invested/paid was different and not as per the loose sheets was not controverted by the assessing officer. On the other hand he accepted this position. Having accepted the fact that the figures mentioned in the loose sheets, in respect of certain investment/payments, were at variance with the actual amounts, he should not have relied on the figures in the very same document under other heads for making the addition. The assessing off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but simply assumes the figures in the papers as actual expenditure. In the case of CIT v. Maulikkumar K. Shah (307 ITR 137), wherein the assessee was stating, from the beginning, that the notings appearing in the diary were rough estimates and estimation was made for submission to the bank for obtaining a loan from the bank, it was held by the Hon'ble High Court of Gujarat that the inference of the Assessing Officer that the assessee had received on- money, i.e., the differential amount as shown in the seized diary and the books of account, was merely based on suspicion and surmises and there was no material to support the conclusion of the Assessing Officer that the assessee had in fact received any on-money from the purchasers. The Assessing Officer had no evidence with him to support his conclusion. The SLP filed against this decision was dismissed by the Supreme Court [(2008) 306 ITR (St.) 1]. Accordingly, the AR submitted that the addition based on a dumb document which is predominantly incorrect cannot be relied upon to make addition. 68. The AR submitted that, without prejudice to the primary submission that mere entries in loose sheets are not sufficient to prove conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as much as no dates were available in respect of both the alleged receipts or expenditure. 71. The AR respectfully submitted that in view of the detailed submission made above, the order of the CIT(A) to the extent of sustaining the addition of Rs. 3,67,19,000 is erroneous and illegal. The CIT(A) ought to have deleted the entire addition made by the AO as the addition is based on surmises and conjectures without going into any of the submission of the assessee. He submitted that neither AO nor the CIT(A) have made efforts to look into the question as to whether any addition can be sustained based on the dumb document in as much as the assessee had already recorded entire expenditure/ investment in the regular books of accounts. Accordingly, he prayed that the addition sustained by the CIT(A) of Rs. 3,67,19,000 may be deleted. 72. The learned AR made an alternative plea that if the Tribunal is not with the assessee on the main ground, the assessee is entitled to further relief of Rs. 193.10 lakhs which as per the document was stated to be paid to the assessee. Since there are no dates for any of the transactions recorded in the document seized, it should be presumed that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in case of Sri Srinivasa Rao Nukala (N. Srinivasa Rao), a sworn statement was recorded on 01.10.2010 wherein details regarding the sources of investments and the activities of Sri Srinivasa Rao were enquired and it revealed that Sri Srinivasa Rao carried on sub-contract works for M/s. AMR Constructions Limited (for short AMRCL), the flagship company of the group, in the name of M/s Live-in Shelters Pvt. Ltd, (for short LSPL), and M/s Reliant Metropolitan Developers Pvt Ltd (for short RMDPL), wherein Sri Srinivasa Rao is a Director. Based on the findings and the contents of the sworn statement recorded from Sri Srinivasa Rao, the Assessing Officer has arrived at the conclusion that Mr. A. Mahesh Reddy, the Managing Director of M/s AMRCL and his family members have used Sri Srinivasa Rao along with others to channelize the unaccounted money earned by the assessee and his family members and as such the creditworthiness of Sri Srinivasa Rao Nukala is not proved. Further, the other observations are summarized as under:- (a) There is no written agreement for the sub-contract work between M/s. AMRCL and M/s LSPL and RMDPL. (b) Mr.Srinivasa Rao Nukala filed his return of income for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eating a liability for the assessee. Provisions of Section 2(22)( e) are deemed in nature and are applicable to special situations which are needed to be fulfilled on cumulative basis such as:- (a) advancement of loan or advance by a company to a shareholder being a person who is the beneficial owner of shares holding not less than 10% of the voting power or to any concern in which such share holder is a member or a partner and in which he has a substantial interest. (b) any payment by company on behalf or for the individual benefit of any share holder. (c) the amount is to the extent to which the company in either case possesses accumulated profits. 79. The CIT(A) observed that in this case, the Assessing Officer tried to apply the situation mentioned at sl. no. (ii), above, as per which, the amounts were shown to have been paid by M/s AMR Constructions Ltd. to Mr. A. Mahesh Reddy, the Director of the company by virtue of payment for sub-contracts to Mr. N. Srinivasa Rao, who in turn, advanced the amounts to Sri Mahesh Reddy. In this case, the apprehension of the Assessing Officer was that the sub-contact works are bogus and the amounts paid as sub-contract works represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly applicable in this case, wherein the creditors were examined by the Assessing Officer, during the assessment proceedings, who maintained the books of accounts, which could not have been brushed aside. 43. Further, it may be relevant to note that the contract works awarded by M/s AMRCL wasdisbelieved and the additions were made in the hands of M/s AMRCL on the said account. Further, the amount of contract receipts appears to have already suffered tax in the hands of the company, as such there is no basis for making the addition originating from the same amounts in the hands of the assessee, being the loanee. On this count, the addition of Rs. 18,00,000 made on account of amount standing in the name of Mr. Srinivasa Rao Nukala, as unexplained credit is not sustainable. Accordingly, deletion by CIT(A) is confirmed. This ground is dismissed." 82. Further, Sri N. Srinivasa Rao was the director in two companies viz., Reliant Metropolitan Developers Pvt. Ltd. (RMDPL) and M/s. Live-in Shelters Pvt. Ltd. (LSPL) and the amount advanced to the assessee was withdrawn by Sri N. Srinivasa Rao from these two companies. The amount advanced to the assessee came from bank account. This fact w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration in ITA No. 1241/Hyd/2012 wherein we have deleted the addition. On the same reason, we are inclined to delete the same for this assessment year also. 86. The next ground is with regard to addition of Rs. 3 lakhs u/s. 68 of the Act in the name of Sri N. Vijay Kumar. Brief facts of the issue are that an amount of Rs. 3,00,000 was shown to have been received from Sri Vijay Kumar, toward advance for sale of land. The CIT(A) observed that though it was submitted by the assessee that a part of the said amount was repaid during the year, it is a fact that the said amount was received in cash and the same were not properly explained or confirmed by the assessee as well as the creditor with reference to the details of the transaction such as the location of the land, extent of the land, agreements related to it etc., and in absence of the same, the entire amount of Rs. 3,00,000 which was shown as received in cash represents the credit in the books of the assessee and in absence of basic information, such credit is held to be rightly treated as unexplained credit by the Assessing Officer irrespective of the fact that a part of the amount was shown as repaid in cash. Accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
