TaxTMI 
TaxTMI 
2012 (6) TMI 447
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....g Officer rejected books of account of the assessee and estimated the income of the assessee u/s. 145 of the Act for A.Ys. 1996-97, 1997-98 and 2000-01, the percentage of income admitted before depreciation as shown in the books of account was 11.57%, 10.57% and 10.53%, respectively. Since the income declared in these years was more than 10% of gross contract receipts, the trading results shown in the regular returns of income have not been disturbed. The percentage of income before depreciation shown in the A.Ys. 1998-99, 1999-2000, 2000- 01, 2001-02 and part period 1.4.2001 to 20.12.2001 was shown at 9.07%, 8.5%, 4.49% and 5.59%, respectively. In these years, the income has been estimated at 10% of the gross receipts. For estimating the income at 10% the Assessing Officer has cited two comparable cases viz., M/s. Prasad & Company (PW) and M/s. SEW Construction Ltd. He has, therefore, estimated the undisclosed income from construction activity for the block period at Rs. 22,77,88,361. In addition to this, one more addition of Rs. 6,46,34,972 being interest accrued on amount advanced to Mr. V. Srinivasa Raju on the basis of calculations shown in the loose sheets has been made. Thus....
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....osed income estimated as above - See para 5.5(p). Income as per regular return of income before set-off of brought forward losses 7,62,72,822 Less: Unabsorbed depreciation of A.Y. 1999-00 as stated above.` 3,75,59,093 Balance of Income 3,87,13,729 Add: Undisclosed income as determined above 11,50,35,173 Total 15,37,48,902 Less 80(IA) deduction The assessee in the return of income claimed 80(IA) deduction representing profits from infrastructure projects at Rs. 9,48,72,688/-. This is as per audit report filed along with return of income. In the letter dated 9.1.04 after allocating expenditure relating to head office, the profits from infrastructure projects eligible for deduction u/s. 80(IA) was worked out to Rs. 6,40,04,966/-. 6,40,04,966 UNDISCLOSED INCOME OF THE YEAR 8,97,43,966 ----------- 8,97,43,936 1.401 to 20.12.01 (a) Interest receivable from Sri V. Srinivasa Raju for the period 1.4.01 to 20.12.01 as mentioned at para 6.4(d) & 6.4(h) 1,03,38,256....
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....e assessee had incurred losses in certain projects the details of which are as under: Loss making projects Loss (Rs.) 1997-98 1998-99 Essar Oils Ltd. 17,355,573 9,904,758 Mukund (Kalyani Steels Ltd.) 8,561,031 - White Field - 3,464,020 Chennai Airport - 1,849,880 Indira Airport - 1,963,363 Total loss 25,916,604 17,182,021 Turnover relating to the loss making projects 47,652,727 99,768,128 5. The assessee submitted the following explanation before the lower authorities: (i) In the case of Essar Oils Ltd., Gujarat, the contracts relate to the construction of factory buildings and townships. However, due to the financial problems, the oil refinery project could never be completed even till date. Right from the beginning the company Essar Oil Ltd., has violated all the terms of the contract including the payment of mobilisation advance. Some of the work bills are still due from Essar Oils Ltd. In view of the problems faced by the assessee-company, a claim was lodged before the Arbitrator for an amount of Rs. 3.67 crores. (ii) In the case of the other contract works, the works were spread more than one f....
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.... works out to 5.59% which is also very low compared to income declared in other years. For these two periods, the CIT (A) given findings that the Assessing Officer appears to be perfectly justified in rejecting the books of account and resorting to the estimation of income as provided u/s. 145 of the I.T. Act. The explanation for low rate of profit for these years was filed by the assessee vide letters dated 14th October, 2003, 4th November, 2003, 18th November, 2003 and 4th December, 2003 filed before the Assessing Officer. It was explained that the company has been in the construction industry for more than two decades. The company for quite some years focussed its core activity in civil works consisting of mostly industrial/house structures. Besides such civil contracts, the company diversified its activities into cement industry, wind power, manufacture of cylinders and other incidental jobs. Heavy losses resulted in closure of its cement division during financial year 1999-2000. The company also started focussing on infrastructure projects because of its line of business in construction and contracts. Hence, in the initial years, the company had undertaken some of the smaller ....
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....ows: Bitumen price increase S. No. Year Rate (Rs) % of increase 1. October, 1999 7,965.95 2. June, 2000 10,835,33 36.02 3. June, 2002 10,562.50 32.60 Diesel price increase S. No. Year Rate per litre (Rs) % of increase 1. October, 1999 15.57 2. September, 2000 19.25 The steep increase in bitumen and diesel cost was not visualised at the time of bidding the project. The above tables would, therefore, confirm that the increased cost has its impact on the ultimate profits of the project as explained above. (g) Majority of the road works are abetting the villages. Due to local social problems, it is always the case labour from abetting villages has to be engaged at higher rate on daily basis besides our permanent labour. Added to this, peripheral works though not connected to main works had to be done as commercial expediency of the business to sail with the local elements without deterrence to our works. This also resultant in additional cost. 9. It has been submitted by the assessee that the net profits estimated by the Assessing Officer at 10% was on the basis of two a....
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....e submissions made by the assessee-company and also gone through the facts narrated in the block assessment order. He observed that analysis of seized documents have clearly indicated that the assessee-company was in the habit of inflating the expenses and thereby suppressing the income. This is clearly borne out from the statement given by the Managing Director u/s. 132(4) of the Income-tax Act, 1961. Analysis of the seized documents and the statement given by the Managing Director on 21.12.2000 is given in para 3.4 of assessment order. the gist of analysis of the seized documents and explanation given by the Managing Director is given below: Loose sheet No. 31: This seized document shows the details of amounts spent on behalf of head office for the period from 1.4.1999 to 31.3.2000. Total payment as per this loose sheet is Rs. 55 lakhs. Explanation of the Managing Director: I have gone through the seized material above and confirm the facts as true and correct. The amounts on the dates 26.7.99, 14.11.99, 6.9.99, 8.9.99 and 8.9.99 are in fact paid by the company but no reflected in the books of account. These amounts totalling to Rs. 55 lakhs are paid to various person....
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....otherwise, the same will be offered for taxation. Ans. to Q. No. 5): Krishnappa exchange account appearing in page No. 152 of annexure: A/NCCL/11 is relating to the real estate division account maintained by regional office of M/s. NCC Ltd., Bangalore, where Sri Krishnappa and M/s. NCCL have developed a property in Bangalore. The payments appeared in this page are relating to that development. The payments appeared in this page will be reconciled with the books of account maintained by the company. If there is any difference, the same will be offered to tax as undisclosed income in the hands of the appropriate persons during the course of proceedings. However, some of the figures appearing on page No. 151 are nothing but repetition of payments appearing on page No. 152. All the figures appeared in page No. 151 are reconcilable with page No. 152. Ans. to Q. No. 11): Sheet Nos. 91, 92 and 93 of annexure: A/NCCL/37 comparing with the sheet No. 23 & 24 of annexure: A/NCCL/38 Are relating to certain expenditure incurred at the project office, Bangalore. the entire expenditure will be reconciled with the books of account of the company, the difference amounts will be offered for ta....
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....disclosed income at Rs. 62,11,980. For this year, if by applying rate of 6.5% of gross contract receipts and allowing rebate u/s. 80IA the undisclosed income works out lower than the undisclosed income admitted in the return, the undisclosed income admitted in the return should be adopted. For broken period from 1.4.01 to 20.12.01 the undisclosed income admitted is Rs. 2,01,39,149. By applying profit rate 6.5% of gross contract receipts amounting to Rs. 258.59 crore, the undisclosed income works out to Rs. 2,34,85,632 (Rs. 16,80,81,389 - Rs. 14,45,95,757) and, therefore, the CIT(A) given a direction that the same should be adopted. 12. The facts relating to the addition of Rs. 6,15,03,415 being interest receivable on funds advanced to Sri V. Srinivasa Raju, prop. Rachana Associates, Bangalore have been narrated at paras 6.1 to 6.4 of the assessment order. The assessee company entered into two MOUs dated 15.9.95 and 15.11.95 with Sri V. Srinivasa Raju, Prop. Rachana Associates for procuring lands at Kodigehalli and Nandi Hills, Bangalore. For this purpose, the assesseecompany advanced an amount of Rs. 440 lakhs between 28.12.1995 and 30.8.1996 to Sri V. Srinivasa Raju. Para 4 of ....
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....pect of noting found on the loose sheets, when there is no evidence to show that such interest change materialised. Such notings cannot be relied upon to determine income relating to the block period. In the case of interest from Sri V. Srinivasa Raju, calculations were found but nowhere evidence for payment/receipt of such interest was found. Added to the above, Sri V. Srinivasa Raju confirmed that there was oral understanding that interest shall not be charged once the principal is fully disclosed. 14. The CIT(A) observed that the Assessing Officer basically given the following reasons for taxing the notional interest: (a) The assessee is following mercantile system of method of accounting and the income is chargeable to tax on accrual basis. (b) Clause 4 of the MOU dated 15.9.95 clearly provided for payment of interest at the rate of 20% p.a. In case of failure on the part of the agent to get the lands registered and such interest is payable from the date of receipt of advance by Shri V. Srinivasa Raju and till the date of refund of the amounts to the assessee-company. This is a written agreement executed on a stamp paper and binding on the parties. There is no dispute ....
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.... that the assessee cannot follow mercantile system for payment of interest and cash system for receiving interest. Further the companies are required to follow only mercantile system of accounting both for expenses and receipts. (f) The guidelines issued by the ICAI are not binding on the department for determining the correct income of the year under the Income-tax Act. (g) The fact that the assessee charged interest on quarterly basis on the advances made to Sri V. Srinivasa Raju, and worked out the interest giving credit to the payments made by the assessee-company as reflected in pages 144 to 149 of the seized material marked A/NCCFL-I/1 is a clear indication of appropriating payments received from Sri V. Srinivasa Raju towards interest receivable from him and non admission of the same in the books of account is a clear omission of admission of income on the part of the assesseecompany and the same is, therefore, assessable as undisclosed income for the block period. (h) For the above reasons I treat the interest receivable of Rs. 6,15,03,415/- as undisclosed income of the assessee company for the block period along with a further sum of Rs. 31,31,557 interest chargeab....
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.... from the block assessment. 16. Against the deletion of addition, the Revenue is in appeal and against sustaining of addition; the assessee is in appeal before us. 17. Regarding invoking the provisions of section 145 of the Income Tax Act in Block Assessment, the learned counsel for the assessee submitted that the Assessing Officer was of the view that the net profit percentage of the assessee was lower for the financial years 2000-01 and 2001-02 (forming part of the block period). The Assessing Officer resorted to estimate for 4 years, though he mentioned only two years in the show cause notice. In other words, on the basis of illusory percentage of profit which the Assessing Officer had in his mind, as a thumb rule, in whichever year falling during the block period he found that the percentage of profit was less than 10%, he resorted to estimate the income. The learned counsel for the assessee submitted that a detailed explanation was filed before the Assessing Officer on 9th January 2004. The explanation substantiated the percentage of net profit derived by the assessee and as to why it was the correct rate of net profit as derived by the assessee. The said explanation tak....
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....ucture, irrigation, electrical, water works and railway works were practically not there and if it were there they are very nominal. (v) Besides such civil contracts, the company diversified its activities into cement industry, wind power, manufacturing of cylinders and other incidental jobs. Under the group concept, the promoters diversified into aquaculture in the name of M/s. NCC Bluewater Products Ltd., and finance in the name of M/s. NCC Finance Ltd. (vi) The heavy losses which lead to the financial troubles, resulted in hiving off its cement division during the financial year 1999-2000. The businesses of aquaculture and finance are no exception to the financial troubles because of the market conditions. (vii) The Government considering the huge requirement in infrastructure industry and with the presence of multinational companies had liberalized the policies which helped the Indian companies to consider the infrastructure business, that increased progressively from 1997-98 onwards. (viii) The company had also started focusing on the infrastructure projects because of its line of business in construction and contracts. This focus takes its own time to be nearer to....
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....1-2002 (up to 31st December 2001) the company had incurred losses in certain major road projects. The details of such projects and losses are as follows: Major loss making projects Loss 2000-01 2001-02 MCC Road works 28141247 3426220 Road Work Bangalore 17171350 4359546 NHAI Haryana 0 14201346 BMP Bangalore 5569146 2196106 NGV Bangalore 23205995 9393679 Total 74087738 33576897 Add: Proportionate expenses of Head Office & Regional Offices 4951011 3846170 Total loss 79038749 37423067 Turnover relating to the loss making projects 140223083 195542001 (xiii) The specific reasons for such losses are: (A) The desire to gain entry into the road project necessitated the company to quote low price in the bids. (B) The establishment cost of infrastructure for executing the road works was high. This is because of the need for establishment of machinery, manpower and related infrastructure and the expenditure related revenue incurred. (C) In spite of the best efforts the cost efficiency in the operations could not be achieved. (D) Added to the above for the road/highway works bitumen and ....
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....in MCC road works and Rs. 0.78 crores in Road Work Bangalore. (ii) In the case of Haryana road project, the company was executing such large project for the first time. The coverage on cost of diesel, which is a major component in the project was not sufficient to meet the escalated amount. This could not offset the periodical increase in the diesel cost. The fact of increase. in diesel cost is demonstrated in the above mentioned table. Further, to get an entry into the large projects in road sector and to gain experience for future works, the company had quoted low price. Adding to these problems, there was a time over run for completing the project. In view of these problems, there was a loss of Rs. 1.42 crores on this project. (iii) In the case of BMP Bangalore project, the client had not made payments promptly. There was undue delay in payments. In view of the delay in payments, the company was forced to stop the work at project site for a period of 8 months from April 2001 to November 2001. During the period June 2000 to October 2000, the company had executed works value of Rs. 1O.25 crores against which in spite of best efforts of the company it could able to realized R....
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....tract basis done by the company is demonstrated in the following table. (Rs. in Crores) S. No. Name of the Contractee Nature of work Quantum of Work 2000-01 Quantum of Work 2001-02 (up to 31st Dec' 02 1 ONDEO DEGREMONT Water 0.49 3.13 2 MECON Road 6.34 12.43 3 TATA INT. Electrical -- 4.10 4 BHEL Housing 0.74 -- 5 NCC-ECIL JV Roads 2.78 6.04 6 NCC-KNR JV Roads 6.63 1.36 Total 16.98 27.06 20. In the above table confirms majority of the sub-contracts are relating to roads, water works and electrical, where the company requires experience in terms of volumes to participate in tenders for future projects in those sectors. The profitability on these subcontract works can never as in the case of a main contractor. 21. It was submitted that, once the losses in the five major projects as explained in detail is considered the average profits earned by the company would obviously be on low side. To the exclusion of such losses if the profitability of the other projects is considered, it is working to 10.03% for the financial year 2000-01 and 8.58% for ....
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.... profitability as an industry in general and the company as specific. Such reasons, contributed for the low profitability are as under: a) Competition in the construction industry: The competition in the construction industry particularly from 1998-99 onwards has been on increasing trend because of the presence of global players and the established companies, which associated with multinationals. The obvious result is the competition amongst the players in the construction industry increased tremendously. The severe competition was one of the reasons for the reduction of the margins compared to others to get the work. The bid success of the company were very low from 1998-99 onwards, when compared with the previous strike rates. b) Entry into new sectors and business expansion: The company had established a cement plant during the financial year 1997- 98. Due to the losses and financial difficulties, the cement plant was hived off during the financial year 1999-2000. During the same period, in view of the change in government policies, the infrastructure sector has opened up with great opportunities and good hope. In order to compensate the volumes of turnover lost on account....
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....ks and highways, the company had to bear the losses, if the company had to complete the works in the time from exclusion of the losses on five projects as explained in detail out of the total number of projects 81 relating to the financial year 2000- 01 and 70 projects in 2001-02 (up to 31st December 2001), the company achieved an average profits of 8.18% and 7.04% respectively. 25. Explanation for low profitability during the financial years 1997 -98 & 1998-99: a) During the financial year 1997-98 & 1998-99, the Appellant had incurred losses in certain projects the details of such projects and losses are as follows: Loss making projects 1997-98 1998-99 Loss Loss Essar Oils Ltd. 17355573 9904758 Mukund (Kalyani Steels Ltd.) 8561031 -- White Field -- 3464020 Chennai Airport -- 1849880 Indira Airpot -- 1963363 Total loss 25916604 17182021 Turnover relating to the loss making projects 47652727 99768128 Explanation for the losses: i) In the case of Essar Oils Ltd., Gujarat, the contracts relate to the construction of factory buildings and townships. However, due to the financial problems, the oil ....
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....fit estimated by the Assessing Officer at 10% was on the basis of two allegedly comparable cases cited by him in the block assessment order. It was submitted that at no point of time in the course of the assessment proceedings were these two alleged comparable instances ever put to the appellant. According to the appellant the two cases cited are not comparable, since they are not in the similar line of the business, as that of the appellant. Those two entities carry on business of the construction mostly in the line of canals and dams. The appellant is mostly in the business of housing and industrial structures. From the financial year 1996-97 onwards the appellant diversified its activities into infrastructure development such as roads, bridges, water works and electrical works. Therefore, the line of business is not comparable merely because the two firms also deal in contracts. The works of those two firms comprise of earth work where the margin of profits are relatively higher. Neither the turnovers of the two firms nor the area of operations are not in any way comparable to the turnover of the appellant and its scope of operations. Further the establishment cost of the appell....
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....rs. 31. The results of the two concerns for those assessment years, which the Assessing Officer has relied on in his order are tabulated hereunder: A. SIMPLEX CONCRETE PILES (INDIA) LIMITED Asst. Year Contract Receipts (Rs.) Income as per Profit and Loss A/e. before Depreciation (Rs.) Percentage of Income 1998-1999 3,53,77,00,777 13,48,69,568 3.81 1999-2000 2,98,38,08,824 6,67,89,513 2.24 2000-2001 3,21,91,77,860 10,05,15,563 3.12 2001-2002 3,92,21,04,907 10,97,15,130 2.80 2002-2003 4,09,06,48,794 11,80,76,047 2.89 Average Profit: 2.97 B. GAMMON INDIA LIMITED Asst. Year Contract Receipts (Rs.) Income as per Profit & Loss A/c. before Depreciation (Rs.) Percentage of Income 1999-2000 3,28,98,92,000 17,32,12,000 5.26 2000-2001 4,53,25,01,000 24,91,34,000 5.49 2001-2002 5,05,50,96,000 29,15,00,000 5.76 2002-2003 5,15,63,83,000 42,32,85,000 8.20 Average Profit: 6.17 Total Average of both the Companies: 4.57% 32. The above data reveals that the results of the appellant are quite fair and reas....
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....sessed for the block period. This disclosure was allocated on proportionate basis of gross expenditure incurred each year on piece rate workers/labour contractors for A.Ys. 1996-97 to 2001-02. He relied on specifically para 5 of the assessment order. He also submitted that the profit declared by the assessee in the years covering the block period is very low as compared to other assessment years and he drew our attention to the comparative chart in page 8 of assessment order. 37. We have heard both the parties and perused the material available on record. As per provisions of Section 158BB, the block assessment to be made based on evidence before the assessing officer. The word "Evidence" has to be construed in a comprehensive and it includes all circumstantial evidence also. The material or evidence with the assessing officer may base assessment is not confined to direct testimony by witnesses. Such evidence need not only be evidence found during the course of search but also material gathered by him. The assessing officer was not fettered by the technical rules of evidence and the like and he may act on material which may not strictly speaking, be accepted as an evidence in th....
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....me element of estimate was unavoidable. 39. Adverting to the facts of the present case, assessment was made by applying the rate of net profit @ 10% for the AY 1998-99 & 1999-2000 for which no reasons has been given for applying such a flat rate of 10% except stating that considering the nature of contract works executed by the assessee company and the percentage of income admitted for the AYs 1996-97, 1997-98 & 2000-2001 and also for the percentage of income admitted by other contractors viz. M/s Prasad & Co. (PW) and M/s SEW Constructions Ltd., income was estimated before depreciation @ 10% for the AY 1998-99, 1999-2000, 2001-02 and for the period 01.04.2001 to 20.12.2001 and treat the difference of income estimated and the income admitted as undisclosed income of the assessee company for such assessment year. The CIT(A) though held that for the AY 1998-99, income declared @ 9.08% before depreciation and 8.5% for the AY 1999-2000 as reasonable. However, he has given different finding for the AY 2001-02 and for the period from 01.04.2001 to 20.12.2001. For AY 2001-02, the total gross receipt was at Rs.204.21 crores, income admitted before depreciation was at Rs.9.16 crores work....
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....15 crores and Rs.2.16 crores respectively in those two projects. (E) Whereas, in the case of Haryana road project, the cost coverage on diesel at a rate of 5% on the total coverage could not off set the increase which was between 20% to 25%. (F) There was steep increase in bitumen price and diesel price. (G) Majority of the road works are abetting the villages. Due to local social problems, it is always the case labour from abetting villages has to be engaged at higher rate on daily basis besides our permanent labour. Added to this, peripheral works though not connected to main works had to be done as commercial expediency of the business to sail with the local elements without deterrence to our works. This also resultant in additional cost. 40. We have gone through the reasons explained by the assessee. In our opinion, there is a reasonable cause for declining in net profit rate and it is found to be genuine. The low profit rate itself cannot be the reason for rejecting the books of accounts more so in the block assessment. It was held by Hon'ble Gauhati High Court in the case of Aluminium Industries P Ltd. Vs. CIT (ITR 12 OF 1990))([1995] 80 Taxman 184) observed that ....
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....S certificates relating to payment made to piece rate workers/ labour contractors were seized from the office premises of the assessee. According to the revenue, these payments were made to the non-existing parties. The Managing Director stated in his statement recorded u/s 132(4) that some of the payments made to the piece rate workers / labour contractors were fictitious and on these account he offered an additional undisclosed income of Rs.1.37 crores. The Department not satisfied with this explanation and offer of additional income of Rs.1.37 crores, further resorted to estimating of income for the AY 2001-02 and part period commencing to 01.04.2001 to 20.12.2001. In our opinion, the further estimation of income by the Department, after accepting the additional income offered by the assessee is not proper. More so, this is the block assessment and not the regular assessment. The block assessment is not a substitute for a regular assessment. Both the assessments are standing on different footings. Its scope and ambit is limited in that sense to materials unearthed during search. It is an addition to the regular assessment already done or to be done. The assessment for the block ....
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....tion 158BB of the Income-tax Act, 1961, it is clear that the returns are required to be filed in pursuance of a notice under section 158BC(a) and the assessment has to be framed on that basis in the light of material that had come into the possession of the assessing authority during the course of search which was the foundation of proceedings. The correctness or otherwise of the returns filed in pursuance of the notice under section 158BC(a) has to be examined with reference to the material in the possession of the assessing authority having nexus to assessment of "undisclosed income". " Bhagwati Prasad Kedia v. CIT, 248 ITR 562 (Calcutta) "The Explanation to section 158BA of the Income-tax Act, 1961, makes it clear that the Legislature thought it fit to make a distinction, between the block assessment and the regular assessment. In the case of regular assessment, the Assessing Officer is free to examine the veracity of the return as well as the claims made by the assessee, whereas the undisclosed income is taxed by way of block assessment as a result of search and seizure. The logic behind the two different modes of assessment is that concealment of income and claiming dedu....
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....he assessee as undisclosed income: Held, that the above basis clearly showed that the Department had not understood the scope of Chapter XIV-B of the Act. The addition did not fall within the Chapter XIV-B." (H) Even if it is presumed that post-search enquiries have resulted in detection of certain undisclosed income, though it is not relatable to the evidence found as on the date of search then also, Mumbai Bench of the Tribunal, in the case of Morarji Gokuldas Spg. & Wvg. Co. Ltd. v. DCIT, 95 ITD 1 (MUM) (TM), while considering an identical situation, held as follows:- "8. Block period for which the assessment is to be made under Chapter XIV-8 means the period comprising previous years relevant to ten assessment years preceding a previous year in which the search was conducted under section 132 or any requisition was made under section 132A, and also includes in the previous year in which such search was conducted or requisition made the period up to the date of the commencement of such search or as the case may be the date of such requisition. Therefore, the assessment for the block period under chapter XIV-8 can be made of the undisclosed income only up to the date of ....
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....ting interest to loan accounts on mercantile basis and claiming as an expenditure in the Profit & Loss Account, it ought to have charged interest receivable on the advances made and credited to P & Loss A/C especially when the written agreement provides for charging of interest on the advances made. He submitted that the assessee can not follow dual method of accounting. He also submitted that the guide lines issued by the Institute of Chartered Accountants are not binding on the department for determining the correct income of the assessee. 43. We have heard both the parties on this issue. As seen from the facts of the case, the addition based on the loose seeds bearing no. 136 to 153 of Annexure marked as A/NCCL-1/1 seized from the office premises situated at plot No.41, Nagarjuna Hills, Punjagutta, Hyderabad. This is with reference to calculation of interest receivable from Shri V Srinivasa Raju on advance of Rs.440 lakhs made by the Company. This is only the calculation made by the assessee to put pressure on Shri V Srinivasa Raju. These loose sheet bundles is a dumb documents and cannot be considered as tangible material to determine the undisclosed income. There should be ....
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....40 lakhs between 28.12.1995 & 30.08.1996 to Shri V Srinivasa Raju. The said Shri V Srinivasa Raju could not acquire the land as per the terms of MOU. Some of the land acquired by Shri V Srinivasa Raju is not suitable to the assessee. In such circumstances, the assessee company rejected the land so acquired by Shri V Srinivasa Raju and made a claim for refund of the advance of Rs.440 lakhs. The assessee able to realize only Rs.305.95 crores principal amount from Shri V Srinivasa Raju. The payments includes (i) payment by cheque, (ii) value of flats registered in favour of assessee. The balance outstanding was at Rs.134.05 lakhs in the accounts of Shri V Srinivasa Raju. As pr MOU, Shri V Srinivasa Raju is liable for payment of interest @ 20% per annum on the amounts advanced by the assessee in the event of failure in buying the lands as required by the assessee. Loose sheets 1 to 37 of A/NCCL/5 represents interest calculation worked out by the company. All these calculations were done by the company to put pressure on Shri V Srinivasa Raju to recover the advance of Rs.440 lakhs made by the company. The advance made to Sri V Srinivasa Raju were recorded in the books of account in the ....
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....ook/loose slips regarding accrual of interest. In our opinion, no addition can be made on the basis of dumb documents/note book/loose slips in the absence of any other material to show that the assessee has carried on money lending business. Noting on the note book/diary/loose sheets are required to be supported/ corroborated by other evidence and are also include the statement of a person who admittedly is a party to the noting and statement from all the persons whose names there on the note book/loose slips and their statements to be recorded and then such statement undoubtedly should be confronted to the assessee and he has to be allowed to cross examine the parties. In the present case, undoubtedly no statement from the parties whose names found in the note book/loose slips has been brought to our notice and as such entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search is not possible. The evidence on record is not sufficient to support the revenue's case that interest has been accrued to the assessee. This is the block assessment and we are concerned only with the undisclosed income and we hav....