TMI Blog2018 (3) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... he payments received through banking channels and repayments also through banking channels. Finding given by the ld. CIT(A) that the assessee failed to discharge his burden, is not correct. The assessee has discharged burden in respect of loan received from four creditors and Assessing Officer failed to make enquiries, therefore we reverse the order of the ld. CIT(A). Thus, this ground of appeal raised by the assessee is allowed. Difference between the rates of CPWD & PDW - Held that:- We allow further deduction of 10% in addition to 5% which has already been granted by the CIT(A) to meet the ends of justice. Accordingly, Assessing Officer is directed to allow deduction of 15% on variation of rates between CPWD and PWD. Thus, this ground of appeal raised by the assessee is partly allowed. Unexplained flat advances from customers - Held that:- On appeal before the ld. CIT(A), ld. counsel has reiterated the submissions which he was made before the Assessing Officer but, no evidence is filed. Therefore, ld. CIT(A) confirmed the order of the Assessing Officer. Even before us also, no evidence with reference to the advance received from Sri W. Raju for purchase of flat. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess or not. Therefore, in the interest of justice, this issue has to be remitted back to the file of the Assessing Officer for fresh adjudication. We therefore, set aside the order passed by the ld. CIT(A) and direct the Assessing Officer to re-adjudicate this ground afresh in accordance with law after providing reasonable opportunity of being heard to the assessee. It is also directed the assessee to file all the relevant material before the Assessing Officer. This ground of appeal is allowed for statistical purposes. Addition towards unexplained expenditure - Held that:- The assessee is not able to explain the discrepancy pointed out by the Assessing Officer. Therefore, we find no infirmity in the order of the ld. CIT(A). Thus, this ground of appeal raised by the assessee is dismissed. - ITA No. 247/VIZ/2016, ITA No. 323/VIZ/2017, ITA No. 314/VIZ/2016 And ITA No. 392/VIZ/2017 - - - Dated:- 14-3-2018 - SHRI V. DURGA RAO, HON BLE JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, HON BLE ACCOUNTANT MEMBER For The Assessee : Shri G.V.N. Hari Advocate. For The Department : Shri T. Satyanandam Sr.DR ORDER PER V. DURGA RAO, JUDICIAL MEMBER ITA Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identity and creditworthiness of the partners as well as genuineness of these transactions. The Assessing Officer after careful consideration of the assessee s explanation, partners income tax returns copies and their affidavits and other details, came to a conclusion that the above mentioned partners did not have sufficient source for introducing amounts into the business towards their capital contribution and current account contribution. The Assessing Officer also examined the Manager Partner of the assessee and his recorded sworn statement. Accordingly, the Assessing Officer added a sum of ₹ 73,30,000/- towards unsubstantiated cash credits under section 68 of the Act to the total income of the assessee by observing as under:- Introduction of capital by the partners:It is noticed from the balance sheet furnished that an aggregate of ₹ 63,55,999/- has been introduced as partners capital during the financial year relevant to the asst. Year under consideration. When it was asked, vide this office notice u/s 142(1) of the IT Act dt. 23-01-2014, to explain the sources for the partners along with supporting evidences, vide its Letter submitted on 06-02-2014 the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long with the copies of affidavits filed by the respective partners of the firm are carefully examined and found the explanation ) offered by the firm and the partners towards the sources for the introduction of such huge capitals is not acceptable in view of the following reasons. All the partners in their affidavits have stated that alleged capitals introduced have been received from their debtors, who are due to them. Neither the assessee firm nor its partners have given any details of the debtors from when the said amounts have been received, the date of receipt and the mode of receipt They have not given any proof in support of their contention that the partners have received amounts from their debtors. It is also noticed from the copies of returns of income filed by all the partners except Sri Lathi Rarnakrishna Reddy, that the returns for the Asst. Year 2010-11 and 2011-12 have been filed by them 30-03-2012 subsequent to the survey action carried out in the assessee firm's business premises on 27-01-2012. None of the partners or the Firm have produced individual books of the partners in order to verify the assessee firm's contention that the amounts withdrawn f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gating ₹ 56,55,000/- is not acceptable and hence the same has been treated as unexplained cash credit in the assessee firm's books of account and brought the same to tax as per sec. 68 of the IT Act. Further as discussed above as neither the assessee firm nor the respective partners viz. Smt. S. Narasayamma and Smt. S.Venkayamma have explained the sources towards amounts introduced through their current accounts aggregating ₹ 16,75,000/- though the current account, in the written submission or in the affidavits filed by them, the same has been treated assessee firm's unexplained Investment and brought to tax. 4. On appeal before the ld. CIT(A), it was submitted that the partners of the firm have brought in a sum of ₹ 56,55,000/- through their capital account and ₹ 16,75,00/- through their current account. Partners also filed their affidavits before the Assessing Officer by stating that all partners are assessed to income tax and PAN numbers have been allotted to them. Further, all the partners are confirmed the fact that they have invested in the capital of the firm. Such being the case, addition if any in this regard has to be made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the submissions of the assessee and also by following the judgment of the Hon'ble Jurisdictional High Court in the case of M. Venkateswara Rao (supra), deleted the addition made by the Assessing Officer and given liberty to the Assessing Officer to examine and consider these amounts in the respective partners. The relevant portion of the order is extracted as under:- 7.3 I have carefully considered the above submissions I have also gone through the assessment order, statement of facts and other details Even though the business is carried out in the name of the firm the entire business is owned, managed and run by the partners When the partners confirm that they contributed to capital account and current account it is not correct to assess these amounts in the hands of the firm. It would be more appropriate to consider these amounts in the hands of the respective partner. On identical facts, the Hon'ble Andhra Pradesh High Court in the case of CIT Vs Venkateswara Rao (232 Taxmann 123) held that the amounts received by the firm from its partners cannot be assessed in the hands of the firm though they may be assessed in the hands of the individual partners. The rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed. ITA No. 392/VIZ/2017 11. 11. The revenue has raised a similar ground as has been raised in Assessment Year 2010-11, which reads as under:- 2. The ld. CIT(A)-1 erred in deleting the addition of ₹ 43,50,000/- made towards unexplained capital introduction in the name of partners of the assessee firm relying on the decision of Hon'ble High Court of Andhra Pradesh reported in 232 Taxmann 123 in the case of CIT vs. Venkateswara Rao. 12. In view of our decision in the Assessment Year 2010-11 shall apply mutatis mutandis to this appeal also. Thus, this appeal filed by the Revenue is also dismissed. ITA No. 247/VIZ/2016 13. The assessee has raised the following grounds:- 1. The order of the learned Commissioner of income Tax(Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of income Tax (Appeals) is not justified in sustaining the addition of ₹ 19,00,000/- made towards unexplained unsecured loans in spite of the confirmations given by the loan creditors. 3. The learned Commissioner of Income Tax (Appeals) is not justified in confirming the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re In the- absence of any supporting evidences towards the identification, sources and creditworthiness of the alleged lenders and also genuineness of the transactions it was proposed to treat the entire amount of ₹ 1,68,99,450/- brought into the assessee firm's, in the guise of unsecured loans, as unexplained investment and bring the same to tax. Accordingly vide this office letter dated 07-03-2014 the assessee firm was requested to file its objections for the same along with necessary supporting evidences In response to the same the assessee firm has submitted a letter on 18-03-14 submitting that the amounts due to the land owners viz Sri Sathi Ram -Krishna Reedy and Sri Sathi Sybbi -Reddy-- from whom the firm has taken their site for development, aggregating ₹ 1,49,99,450/- has been by mistake shown as unsecured loans and submitted the copies of confirmation letters stated to be issued by the following lenders towards the balance amount of ₹ 19,00,000/-. The firm has also submitted that since -the parties are away from vizag they could not submit further evidence and they it will submit the necessary explanation from them within a week. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mply addition is made, therefore same may be deleted. 20. On the other hand, ld. Departmental Representative relied on the orders passed by the authorities below. 21. We have heard both the sides, perused the material available on record and orders of the authorities below. 22. The assessee has borrowed an amount of ₹ 19,00,000/- from four loan creditors. From Datla Sitaram Raju, assessee has borrowed ₹ 1,00,000/- through State Bank of Hyderabad cheque No. 258080 dated 21/12/2009, the same was returned on 28/09/2010 through Indian Bank, Visakhapatnam by Cheque No. 3357201. In his confirmation letter, complete address is available. He also submitted that he is an income tax assessee. When the assessee has filed confirmation letter by giving all the details of the loan creditors, the Assessing Officer without making any enquiry, simply addition cannot be made. In the case of loan creditor of Tetali Subbirami Reddy, in his confirmation letter he has stated that he has given advance of ₹ 15,00,000/- i.e. ₹ 9,00,000/- on 09/10/2009 through Andhra Bank vie DD No. 67788 and ₹ 6,00,000/- on 09/10/2009 through Andhra Bank vide DD No. 169787 to M/s. Gow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer has noted that the assessee has not maintained any books of account and any construction account of the complex, i.e. Gowthami Complex, constructed by the assessee. The Assessing Officer referred the building valuation to the Departmental Valuation Officer (DVO) to estimate the total cost of construction of the said property. The DVO vide his report dated 03/06/2013 estimated the cost of construction at ₹ 2,49,10,606/- as against the cost of construction admitted by the assessee-firm at ₹ 211.62 lakhs. The Assessing Officer from the DVO s report, arrived at the cost of construction incurred during the previous year relevant to the Assessment Year 2010-11 at ₹ 29,89,272/-. However, the assessee has shown construction expenditure for the year at ₹ 23,77,410/-. Thus as per the Assessing Officer, the assessee incurred unexplained cost, during the previous to the tune of ₹ 6,11,862/-. The explanation submitted by the assessee with regard to excess expenditure incurred of ₹ 6,11,862/- was not accepted by the Assessing Officer and accordingly the Assessing Officer treated the impugned amount of ₹ 6,11,862/- as unexplained expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ground of appeal raised by the assessee is partly allowed. 30. Ground No.5 relates to sustenance of addition of ₹ 9,75,000/- towards unexplained flat advances from customers. 34. In the assessment order, the Assessing Officer has noted that there was a negative balance of ₹ 9,75,000/- under the head sundry debtors. The Assessing Officer called upon the assessee to furnish the explanation for the above. The assessee firm submitted before that Assessing Officer that an amount of ₹ 9,75,000/- was received from one Sri W. Raju towards advance for purchase of flat. It was also submitted that the said person had withdrawn the proposal and received back money on 15/12/2010. The Assessing Officer noted that the assessee firm had not filed any proof in support of the said claim. The Assessing Officer, thus, treated the impugned amount of ₹ 9,75,000/- as unexplained cash credit under section 68 of the Act. 31. On appeal before the ld. CIT(A), ld. counsel has reiterated the submissions which he was made before the Assessing Officer but, no evidence is filed. Therefore, ld. CIT(A) confirmed the order of the Assessing Officer. Even before us also, no evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is noticed from the analysis of remittances made into the firms bank account held with M/s. Indian Bank, Maharanipet, Visakhapatnam Vide A/c No. 858761196, filed on 11-02-2014, that sources for an amount of ₹ 45,000/- credited in the bank account was on account of receipt of the said amount from one Sri BS Patnaik towards flat advance. As the assessee firm has not filed any proof in support of the same it was, proposed to treat the same as assessee firm's unexplained credit in the books of account and bring the same to tax. Accordingly, vide this office letter dated 07-03-2014 the assessed-firm was requested to file its objections for the same along with necessary supporting evidences. In response to the same the assessee firm submitted a letter on 18-03-14, stating that the amount was received from one Sri BS Patnaik towards advance for the flat and the same was returned as he was not interested to take the flat. However the assessee has not filed any proof in support of his explanation. He has not furnished details of the flat towards which the advance was stated to be given and the address of the party even. Therefore in the absence of any supporting evidences, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) are deleted by reversing the order passed by the ld. CIT(A). Thus, this ground of appeal raised by the assessee is allowed. 36. So far as addition of ₹ 45,000/- is concerned, the assessee has not placed any evidence before the Assessing Officer nor before the ld. CIT(A), even before us also. Under these circumstances, we find no infirmity in the order passed by the ld.CIT(A). Thus, this ground of appeal raised by the assessee is dismissed. ITA No. 323/VIZ/2017 37. The assessee has raised the following grounds of appeal:- 1. The order of the learned Commissioner of income Tax(Appeals) is contrary to the facts and also the law applicable to the facts of the case. 8. The learned Commissioner of income Tax (Appeals) is not justified in sustaining the addition of ₹ 3,03,000/- made by the Assessing Officer towards alleged unexplained advance from Sri Surya Rao. 9. The learned Commissioner of Income Tax (Appeals) is not justified in partly sustaining the addition of ₹ 43,72,498/- made by the assessing officer towards disallowance u/s 40A(3) of the Act. 10. The learned Commissioner of Income Tax (Appeals) ought to have granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction material account placed in the paper book. Therefore, the actual expenditure debited to the profit loss account towards construction material was ₹ 18,61,355/- and not ₹ 34,36,489/- If at all, the expenditure required to be disallowed under section 40A(3) in respect of construction material, the aggregate amount of ₹ 18,61,355/- should be disallowed but not ₹ 34,36,489/- as worked out by the ld. Assessing Officer. The Assessing Officer has disallowed the entire amount of ₹ 34,36,489/- stating that the amount of expenditure was incurred in excess of ₹ 20,000/- in cash, which is incorrect. The actual expenditure was only ₹ 18,61,355/-. 45. Even otherwise also, on verification of the construction material account, the assessee has debited the construction material account month-wise, but not item-wise or party-wise. As per the provisions of section 40A(3), the payment in excess of ₹ 20,000/- to the individual parties required to be disallowed, but not the monthly expenditure incurred for purchase of the material. In this case, the Assessing Officer failed to bring on record the details with regard to the amounts of expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, set aside the order passed by the ld. CIT(A) and direct the Assessing Officer to re-adjudicate this ground afresh in accordance with law after providing reasonable opportunity of being heard to the assessee. It is also directed the assessee to file all the relevant material before the Assessing Officer. This ground of appeal is allowed for statistical purposes. 53. Insofar as credit of ₹ 3,06,000/- is concerned, it was submitted before the Assessing Officer that the amount has been received from the customer, but no name, no details / information has been given. Therefore, the same is added in the hands of the assessee. Even before the ld. CIT(A) no explanation is given. Even before us the assessee has not given any explanation. Therefore, the addition made by the Assessing Officer of ₹ 3,06,000/- is hereby confirmed. Thus, this ground of appeal is dismissed. 54. Ground No.6 relating to sustenance of addition of ₹ 2,70,804/- towards unexplained expenditure. 55. In the assessment order, the Assessing Officer has noted from the balance sheet and profit loss account that the assessee has arrived at an excess claim expenditure of ₹ 2,70,804/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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