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Dy. Commissioner of Incometax, Circle–16 (2) , Hyderabad Versus M/s Maheswari Mega Ventures Ltd.

Disallowance of Payment of on-money for purchase of land - Held that:- As during the survey an agreement of sale was found in the business premises of the assessee, as per which, M/s OMDPL proposed to buy land from 11 vendors. In the above company, the assessee is holding 35% of shares. In a separate search proceedings in Delhi, similar agreement of sale was found in the premises of M/s Shiv-vani group, which is having interest in M/s Metro Management Services Pvt. Ltd. (MMSPL). M/s MMSPL is hol .....

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ards the purchase of land, if at all any addition can be made, it can be in the hands of M/s OMDPL and not in the hands of the assessee. It is misconceived idea to charge payment of ‘on money’ to the shareholders of the company, in which company entered in the transaction. We cannot accept and appreciate the action of the AO. - Decided against revenue - Unexplained expenditure - Held that:- AO has not brought any cogent material to prove that assessee has actually incurred these expenses exc .....

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expenditure can be disallowed in relation to exempt income. Accordingly, we uphold the decision of CIT(A) and dismiss the ground raised by the revenue.- Decided against revenue - ITA No. 367/Hyd/2013 - Dated:- 3-2-2017 - SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Revenue : Smt. U. Mini Chandran For The Assessee : Shri K.C. Devdas ORDER PER S. RIFAUR RAHMAN, A.M.: This appeal filed by the Revenue is directed against the order of CIT(A) - V, Hyderabad .....

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Unexplained expenditure ₹ 29,90,050 iii) Disallowance u/s 14A ₹ 3,78,875 3. When the assessee carried the matter in appeal before the CIT(A), the CIT(A) deleted all the said disallowances and aggrieved with the order of the CIT(A), the revenue is in appeal before us. 4. As regards the disallowance of payment of on-money for purchase of land amounting to ₹ 12,14,50,000/-, it is observed that during survey in the business premises of the assessee on 20.10.2008, an agreement of sa .....

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of Dr. P.S. Prasad. The vendee as per this agreement is M/s Om Metal Developers Pvt. Ltd., represented by Sri Raj Kumar Malpani. Sri Malpani was also the Managing Director of the assessee-company and M/s Maheswari Mega Ventures Ltd. It is here based on the multifaceted positions of the vendors and vendees their representatives, the Assessing Officer had drawn a conclusion that in essence the above agreement is between M/s Gold Stone Exports Ltd and M/s OM Metal Developers Pvt. Ltd. It is in M/s .....

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i group of companies, having interests in M/s Metro Management Services Pvt. Ltd., a similar agreement of sale was found for the land at Hafeezpet, Hyderabad between the 11 vendors as above and M/s Om Metal Developers Pvt. Ltd (OMDPL). As per the DDIT(lnv.), New Delhi, the amount for purchase of 10 acres of land was shown at ₹ 20.30 crores in the books of M/s OMDPL and a further amount of ₹ 21.6 crores was shown as 'advances against land in the Balance Sheet. As per the agreement .....

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that 10 acres of land at Hyderabad was purchased for a consideration of ₹ 55 crores (including expenses). 4.3 From the above factual background, the Assessing Officer concluded that the component of cash, out of the above amount of ₹ 55 crores, was ₹ 34.70 crores. As the assessee-company holds 35% of share in M/s Om Metal Developers PVt Ltd., the unaccounted/ undisclosed investments made by the assessee company in M/s OMDPL was taken at 35% of the cash component of ₹ 34. .....

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L in the form of capital to the tune of ₹ 12,14,50,000/- and brought this amount to tax. 5. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A). 6. During appeal proceedings, the assessee submitted that they had not purchased any property in Hafeezpet and that the alleged unrecorded payment of on-money in purchasing the above land should not be considered in its hands. The assessee further contended that there is no material to indicate that they had paid p .....

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ed addition is made in their hands. The assessee further pointed out some inconsistencies in the version of the Assessing Officer in concluding that the assessee had paid unrecorded sale consideration for purchase of land in the name of M/s OMDPL, the gist of which is as under: (a) In para 3.2, the Assessing Officer while bringing the relation between the purchaser of land, M/s OMDPL and the assessee company, stated that in essence the agreement for sale of land was between M/s Gold Stone Export .....

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y means that the company is longer viewed as a distinct entity. (b) In para 3.1 the Assessing Officer refers to an agreement of sale dated 07.08.2006 for transfer of 20 acres of land for a consideration of ₹ 100 crores. There is no mention of any consideration being parted by the purchaser to the seller in this agreement. However, in para 3.5, the Assessing Officer refers to pages 135 to 146 of Annexure A-5 found in the premises of Shivvani group of companies, as the same agreement of sale .....

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while referring to sale deed executed on 12.02.2008 and registered on 18.04.2008 for transfer of 10 acres of land, the total sale consideration was mentioned at ₹ 18 crores, i.e., ₹ 1.8 crore per acre. However, in para 3.6, the Assessing Officer referring to the same sale deed found in Delhi brings out the sale consideration to a 'further' amount of ₹ 18 crores, i.e., ₹ 30 crores already paid on the date of execution of sale agreement and another amount of ₹ .....

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outside books and added ₹ 1214.50 lakhs. The applicant finally concluded that what all the material referred to by the Assessing Officer for making the above addition is agreement of sale and registered sale deeds, indicating that M/s OMDPL had paid some consideration for purchase of land, then it is open for the Department to question the purchaser and the assessee cannot be said to have paid any on-money. 7. After considering the submissions of the assessee as well as the assessment orde .....

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whatever material was found in possession of the assessee about the land transaction was not considered as incriminating but the material found from the premises of M/s Shiv-vani group at New Delhi was found to be incriminating and the assessee was confronted with such material found at New Delhi. As contended by the assessee, this material has to be first clarified from the parties directly involved in the transaction, i.e., M/s OMDPL and the vendors. However, no effort appears to have been ma .....

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scribbling made by other parties and linking their common interests/ share holding ratios in companies. He observed that no material evidence was brought out to hold that the assessee had actually invested money in the share holding of M/s OMDPL outside books or actually paid consideration to the vendors of land on behalf of M/s OMDPL. In view of the above observations made, the CIT(A) held that the addition of ₹ 12,14,50,000/- made cannot be sustained and the Assessing Officer was directe .....

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the assessee s name anywhere in the handwritten note (refer page 55 of paper book). In absence of any such link, it is wrong to bring the assessee s involvement in those transactions. It is contended that the assessee s name was involved in those transactions merely because assessee is holding 35% share holding in M/s OMDPL. Otherwise, there is no other evidence to show that assessee had actually involved in those transactions. He relied on the decision in the case of CIT Vs. Salora Internationa .....

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in M/s Metro Management Services Pvt. Ltd. (MMSPL). M/s MMSPL is holding 65% shares in M/s OMDPL. The AO brought to tax the on money payment which was made by M/s OMDPL to the land owners based on the shareholders in M/s OMDPL. AO failed to appreciate that company is an independent entity and distinct person. The action of the company will not have any bearing on the shareholders. AO has no jurisdiction to charge anything in the case of assessee over the dealings of any other person. It is brou .....

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enue. 11. As regards the disallowance of expenditure amounting to ₹ 29,90,050/- under section 69C of the Act, the Assessing Officer referred to impounded material Annexure-3, page 32, wherein certain payments to various vendors/ provisions like milk, water, vegetables were noted. The total of such payments was ₹ 29,90,050/-. The Assessing Officer held that as these expenses were not recorded in the books, hence, the same were treated as unexplained expenditure under section 69C of th .....

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. Further, he observed that without proving that the assessee had actually incurred such expenses, based on some rough papers it cannot be said that the assessee had incurred expenditure on provisions, milk, water, vegetables, etc., to the tune of ₹ 29,90,050/-. The CIT(A) observed that in the assessment order also, no reason whatsoever was adduced for linking the said expenditure to the business of the assessee or for that matter that the assessee had actually incurred such expenditure on .....

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to prove that assessee has actually incurred these expenses except finding loose sheet in the premises in which such details were recorded. We are inclined to accept the findings of ld. CIT(A). Accordingly ground raised by the revenue is dismissed. 17. As regards the disallowance of ₹ 3,78,875/- under section l4A read with Rule 8D, the AO observed that the assessee invested huge amounts as share capital in different companies out of borrowed funds and interest of ₹ 69,07,096/- was d .....

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