TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 530
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....r sec 143(3) r.w.s. 153A of the Income Tax Act, 1961 (in short, "the Act"). Cases called twice. None has put in appearance at the assessee's behest. 2. It transpires at the outset that the assessee's C.O.No.64/Hyd/2016 suffers from 82 days delay stated to be attributable to the reason(s) beyond his control as per condonation petition/affidavit. No rebuttal has come from the departmental side. The impugned delay is condoned therefore. 3. We make it clear that the file notings right from 05.10.2015 onwards indicate the assessee's counsel name but nobody has represented him since 09.05.2018. These appeals had been fixed on 03.09.2021 wherein we had directed the department to serve the assessee afresh. The DCIT, Circle - 1(1), Hyderabad has filed his correspondence dated 14.09.2001 along with service report that the assessee stands served at the site of M/s. AKR Constructions Limited. Nobody has come present despite the instant fresh mode of service. We then proceeded ex-parte against him in all these cases. 4. We advert to former A.Y. 2007-08 involving Revenue's and assessee's cross appeals ITA Nos.902 & 927/Hyd/2015. The assessee's cross appeal ITA No.927/Hyd/2015 has raised the ....
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....e not been taken at the stage of first appeal by oversight and not by intention. The omission to raise the Additional Grounds was for bona fide reasons. No new facts are involved nor any fresh investigation is required in respect of the relevant additional grounds. 5. The A.O has noticed that the interest expenditure is Rs. 2,55,03,426/- on secured loans of Rs. 36,12,99,333/-. The A.O has erred in computation of disallowable interest at Rs. 86,34,421/- on the loans of Rs. 5,75,60,280/- allegedly given out of interest bearing funds. the correct disallowable amount is only Rs. 40,63,248/-. The assessee did not raise the ground on incorrectness of the computation of the disallowable interest. This is by oversight. A ground is being raised by way of an Additional Ground before the Hon'ble Tribunal. 6. Assessee prays the Hon'ble Bench to admit the Additional Grounds of Appeal for adjudication. If they are not admitted, the interests of the assessee will be in great jeopardy. Assessee would be put to loss of the valuable opportunity of their adjudication by the Hon'ble Bench. 1. Learned CIT(A) has erred in sustaining disallowance of any interest No material to disallow ....
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....es that the assessee had submitted his original return of income on 02.11.2007 admitting income of Rs. 5,39,18,400/- which stood summarily processed under sec 143(1) on 25.11.2008. This followed the impugned search carried out at assessee's residential premises on 06.10.2010. A perusal of the assessment order dt.31.03.2013 indicates that incriminating material in annexure AKR/R/PO/01 having page nos. 119 to 121 was found and seized during the course of search pin-pointing the assessee to have made cash payments of Rs. 1,50,000,000/- to one Mr. Sudarshanreddy for land development along with other investments totaling to Rs. 6,41,74,901/- (involving difference of Rs. 1,80,12,096/-). This made the Assessing Officer to invoke sec 153A proceedings vide notice(s) dated 20.02.2011. We therefore hold that the impugned proceedings had been rightly taken recourse to by the learned lower authorities in view of the foregoing incriminating material only where no proceedings were "pending" as on the date of search so as to be abated u/s.153A(1) 2nd proviso of the Act. The assessee's foregoing legal ground to this effect stands declined therefore. 7. We further note that the Assessing Officer al....
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....s made to Rampa Estate, M.Sambhisa Rao, N.Prasanna Kumar Reddy, the submissions before the Assessing Officer were reiterated that the amounts were given in the ordinary course of business as advance to sub contractors and the same should be deleted. It was also submitted by the assessee that, since there was no reference to the seized material, the addition was bad in law. 08.2 Decision: The assessment order and the submissions made by the appellant were carefully considered. According to the provisions of section 153A of the IT Act, if a search u/s 132 of IT Act is conducted in the case of a person, assessment u/s 153A has to be made. Further, such assessment is made to determine the 'total' income and not only the 'undisclosed' income (as was the case with an assessment made under the now deleted section 158BC of the IT Act). That is a reason that pending assessment proceedings abate. As discussed above, there is a debate about whether proceedings u/s 153A of the IT Act can be initiated if there is no incriminating evidence found during the search. But, there is no confusion about the proposition that, once proceedings u/s 153A of the IT Act has been initiated....
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....eady decided in Revenue's favour, this is essentially the reconciliation aspect of diversion of interest bearing funds which has been set by the learned CIT(A) to the Assessing Officer in his lower appellate discussion. We therefore uphold the same in these facts and circumstances. It is made clear that the Assessing Officer shall compute the impugned disallowance inter alia after taking into consideration the assessee's non-interest and interest bearing funds and more particularly his fund position on the date of advances made as per his cash flow statement, if any, filed and proved way of evidence. We further direct the Assessing Officer to disallow interest on those items which the assessee had advanced to various parties in lieu of himself charging interest as well. All these corresponding grounds in these cross-appeals before us are allowed for statistical purposes therefore. 10. The Revenue's later specific grievance seeks to revive labour charges disallowance of Rs. 2.85 crore which has been deleted in CIT(A)'s order as under : "09.0 Labour charges The Assessing Officer observed that the assessee had debited expenditure of Rs. 6.45 crores as labour charges out of which ....
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....ually been discharged after some time. The fact of wages remaining payable may be a good ground of suspicion but suspicion alone cannot be a good ground for disallowance of expenditure. Considering the totality of facts and circumstances of the case, it is held that the addition is not justified and is deleted". 11. With the able assistance coming from Revenue side, it emanates from a perusal of the CIT(A) further that he has gone by Section 69C of the Act primarily on an assumption that the Assessing Officer had treated the assessee's expenditure claim as "unexplained" whereas we note the corresponding assessment discussion in para 3 page 13 of the assessment order dt.31.03.2013 had treated as not "a genuine expenditure only". The Assessing Officer appears to have noted from a perusal of the assessee's ledger account copy that he had not even filed the corresponding vouchers containing the page numbers, names and details of payees much less detailed cogent evidence. Mr.Sai took us to the Assessing Officer's detailed discussion that the assessee had debited the corresponding labour expenses as and when cash was available with him. The fact also remains that payment of cash expens....
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....ig amounts by account payee cheques. In that case payment of 150-00 lakhs to Mr. sudarshanreddy does not arise. It is only Rs. 1,50,000/- that is paid to Sudarshanreddy at the request of Mr. Ramesh. This is wrongly mentioned as 1,50,00,000/- by the accountant or the person, who prepared the statement. I request you to extend me one week time to produce further evidence in this regard. Further assessee has filed reply on 25.03.2013 in response to show cause notice stated that, with regard to the statement of expenses recorded in the statement as page 119,121 and 121 of annexure AKR/R/01., the chronological events of the Aarkey projects are as below. 1. First Advances for security purpose given for the project as Token Advance vide ch no. 757763 of Rs. 1,00,000/- 08.10.2006 (The same is received back on 30.04.2007) 2. First Adv of Rs. 45 lakhs given to land lord 14.10.2006 3. Date of Partnership Deed of AARKAY PROJECTS page No.31-36 30.10.2006 4. MOU with land lords entered on (37-43) 30.1.0.2006 5. Dvpt Ag Cum GPA registered as per page 80 of Ann/AKR/R/1 23.11.2006 6. Meetings of the landlords and Developers (Page 44-47 26.12.2007 7.....
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....nreddy for Land Development charges and not to landlords. 5. The payment is entered to have been made on 10.02.2007. But, as per the agreement, the developers are not allowed to enter the site even. Already some amounts are spent for the stone cutting with the permission of the landlord, which are truly recorded in the books as diesel expenses. 6. The time duration between the date of entering in to the agreement and this entry is only 2.5 months. It is difficult to spend that much amount on the project, apart from the other amounts spent. It cannot be any advances payment also as the Assessee himself is a contractor and wanted to take up the venture on his own as the main partner. 7. When even small amounts are also recorded in the books, it is not possible for the Assessee to spend that much cash for development expenses. 8. There is no stick on the amount, whereas all the other amounts are ticked. That means the entry is doubtful and not verifiable. So, this is not ticked by the office accountant while checking with the cash book entries in his book. It is evident from the material. 9. In the subsequent minutes of the landlords and developers also, there is no mentio....
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....hat, the amount was wrongly entered as Rs. 1,50,00,000 instead of Rs. 1,50,000. If it is so, the total amount comes to 4,93,74,601 instead of 6,41,74,901. But the investment as per balance sheet as 31.03.2008 is Rs. 4,85,63,677. So these figures do not tallying with each other. The amount was paid of Rs. 1,50,00,000 paid on 10.02.2007 to sri Sudharsnan Reddy for the development of Aarkay' Project Site. Shri sudharshan Reddy is one of the debtors in M/s AKR construction for an amount of Rs. 54,90,426. Further his name reflected in AKR construction as share application holder. Therefore its appeared that he is a key person in the assessee's business activity as on 10.02.2007.An amount of Rs. 1.5 crore was paid to him in cash as development expenses for the Aarkay Project Site. As per the clauses 10-10 the assessee paid the advances and started the developmental activity. Hence assessee incurred the expenditure as reported the above account copy. In view of this the difference amount of Rs. 1,80,12,096 can be taken to have incurred by the assessee. Therefore entire different amount of Rs. 1,80,12,096/- including the amount of Rs. 1,50,00,000 paid to Sri sudharshan Reddy for wh....
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....the books as diesel expenses. According to the assessee even the legal notice issued by the developer to the landlords on 10.2.2010 made no mention of the amount of Rs.l,50,00,0000/- spent on development. There was mention of total amount of Rs. 8.50 crores only, out of which the investment relating to him was recorded in the books of account. Thus, the total amount of Rs. 1,55,10,705/- was wrongly entered in the statement. Those amounts were not vouched and did not contain verification marks. The statement which was only a rough sheet prepared by the, site accountant containing wrong and duplicate entries should be ignored. ' 07.2 The Assessing Officer did not accept the explanation given by the assessee and stated that as per clause 10-10, Rs. 10 crores was to be paid to the landlord on or before February, 2007 to start development activity. On examination of the seized material, it was clear that the assessee and his partner started the development activities and spent huge amounts on different dates till March, 2008. And according to the agreement, it was not possible to start development activity without making a payment of Rs.l0 crores. Since the assessee had started th....
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.... spent for site development works. Those amounts were duly accounted for in his books of accounts. During the course of search, a statement relating to the Aarkay Project was found and in that statement there 6-7 transactions amounting to Rs.l,55,10,705/- were recorded against which a question mark was put and they were not accounted for in the books of the appellant. It was explained that those entries were wrongly entered by the site accountant. The differential amounts were not entered in the regular books of the appellant.as they were wrong entries as observed by the regular accountant. 07.4 The appellant further argued that the Assessing Officer had not applied his mind in understanding the facts and in coming to a rational conclusion. The addition was made without appreciating the facts on record. The amount of Rs.l,55,10,705/- did not belong to the appellant and was therefore not" accounted for in the regular books of account. The Assessing Officer had failed to prove that the amount of Rs.l,50,00,000/- and other amounts were paid by the appellant and formed part of his income. M/s.AKR Construction Ltd. started functioning from 1.4.2008 and there was no Sudarshan Reddy in ....
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....expenditure/investment. 07.7 According to the assessee, he had entered into a Development Agreement With owners of a piece of land for its development under the banner of Aarkay Projects. As per the terms of the MoU, the development work could only be started after the agreed sum s of Rs.l0 crores had been paid to the land owners. Since that Sum could not be paid to the land owners and some dispute arose, incurring of such huge expenditure on that project, according to the assessee was not feasible. If this explanation were correct, the assessee should indeed not have incurred any development related expenditure on that project. But, as per his own admission, he had incurred development expenditure. Hence, the explanation is not acceptable. If an expenditure has been incurred in fact, it cannot be said not to have been incurred simply because the MoU did not stipulate the expenditure at that stage. 07.8 According to the assessee, some of the entries do not relate to the previous year under consideration. The contention is prima facie correct. The seized document has to be appreciated in its entirety and if, according to it, some expenditure had been incurred in any assessment y....