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2012 (8) TMI 11

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..... CIT(A) has rightly estimated the 8% profit on difference in work in progress and given relief for the balance and his order needs no rectification. - IT(SS)A No. 1/Hyd/2003 IT(SS)A No. 173/Hyd/2002 - - - Dated:- 31-5-2012 - SHRI CHANDRA POOJARI, SMT. ASHA VIJAYARAGHAVAN, JJ. Assessee by: Shri S. Rama Rao Revenue by: Shri K. Vishwanatham O R D E R PER CHANDRA POOJARI, AM: These cross appeals by the assessee and the Revenue are filed against the order of CIT(A)-III dated 31.10.2002. The assessee and the Revenue are both in appeal before us on the same issue which we will dispose of by this common order, for the sake of convenience. 2. The assessee and Revenue has raised the following grounds. a. The order of the CIT(A) is erroneous to the extent it is prejudicial to the appellant. b. The learned CIT(A) erred in confirming the addition of Rs. 46,29,401 towards unexplained investment in the form of advances to Sri K. Anjaneyulu Bros. The learned CIT(A) ought to have seen that an aggregate amount of Rs. 1,18,68,000 was treated as the undisclosed income (Rs. 65 lakhs for the assessment year 1997-98, Rs. 21 lakhs for the A.Y. 1998-99 and Rs. 32,68 .....

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..... r Area in sq. yds. Municipal No. Date of registration Registered value (Rs.) 1 C. Venkateswara Rao 1180.00 1-98/4/1 09.04.98 1:36,000 2 C. Sesharatnamma 1180.00 1-98/4/2 09.04.98 1,46,000 3 K. Pattabhi Ramaiah 1180.00 1-98/4/3 09.04.98 1,26,000 4 Image Chit Fund (P) Ltd. 1180.00 1-98/4/4 09.04.98 2,36,000 5 Image Finance (P) Ltd. 1180.00 1-98/4/5 09.04.9 2,36,000 6 Image Housing (P) Ltd. 1180.00 1-98/4/6 09.04.98 2,36,000 7 Image Hotels (P) Ltd. 1180.00 1-98/4/7 09.04.98 2,36,000 8 Image Garment Exports 1180.00 1-98/4/8 09.04.98 2,36,000 9 Image Agro Farms (P) Ltd. 1180.00 1-98/4/9 09.04.98 2,36,000 10 K. Padmaja 1180.00 1-98/4/10 09.04.98 2,36,000 11 K. Dhanunjaya Rao 976.90 1-98/4/11 09.04.98 1,95,380 12 Usha T .....

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..... yulu Bros. 29,000 Cheque 09.04.98 Smt. C. Sesharatnamma 19 K. Anjaneyulu Bros. 29,000 Cheque 09.04.98 Smt. C. Sesharatnamma 20 K. Anjaneyulu Bros. 29,000 Cheque 09.04.98 Smt. C. Sesharatnamma 21 K. Anjaneyulu Bros. 59,000 Cheque 09.04.98 Smt. C. Sesharatnamma 22 K. Anjaneyulu Bros. 19.000 Cheque 09.04.98 Sri K. PattabhiRamayya 23 K. Anjaneyulu Bros. 19,000 Cheque 09.04.98 Sri K. PattabhiRamayya 24 K. Anjaneyulu Bros. 29.000 Cheque 09.04.98 Sri K. Pattabhi Ramayya 25 K. Anjaneyulu Bros. 59,000 Cheque 09.04.98 Sri K. Pattabhi Ramayya 26 K. Anjaneyulu Bros. 59,000 Cheque 09.04.98 Image Chit Fund (P) Ltd. 27 K. Anjaneyulu Bros. 59,000 Cheque 09.04.98 Image Chit Fund (P) Ltd. 28 K. Anjaneyulu Bros. 59,000 Cheque 09.04.98 Image Chit Fund (P) Ltd. 29 .....

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..... 09.04.98 Sri K. Dhanunjaya Rao 51 K. Anjaneyulu Bros. 48,845 Cheque 09.04.98 Sri K. Dhanunjaya Rao 52 K. Anjaneyulu Bros. 48,845 Cheque 09.04.98 Sri K. Dhanunjaya Rao 53 K. Anjaneyulu Bros. 48,845 Cheque 09.04.98 Sri K. Dhanunjaya Rao 54 K. Anjaneyulu Bros. 48,375 Cheque 09.04.98 Usha Tours Travels Pvt. Ltd. 1,23,67,755 6. A sworn statement was recorded from Mr. C.V. Rao on 23.9.1999 wherein a question was asked about these receipts which is as follows: "Q2) Please refer to the sheet Nos. from 21 to 49 of Annexure ICF/A1/3 and sheet Nos. 212 to 216 of the same annexure relating to the purchase of 3.00 acres of land in Sy. Nos. 71 82 in Madhapur Village, Serilingampally Mandal, R.R. District. In your sworn deposition given on 13.8.1999, you have confirmed the payment of Rs. 1,18,68,000 to Sri K. Anjaneyulu, Sri K. Indrasena, Sri K. Manikyam and Smt. K. Lingamma. Sri K. Anjaneyulu in his sworn deposition given on 22.9.1999, has confirmed t .....

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..... nprogress (Rs.) Percentage of work-inprogress over flat advances received (%) [(3)/(2)x100] Advance given for land purchase (Rs.) (1) (2) (3) (4) (5) 1992-93 - 3929578 - 1993-94 1735000 2256050 130 - 1994-95 3404811 2382488 70 - 1995-96 7828748 4503635 50 - 1996-97 16361446 9840788 60 3300000 1997-98 11788800 2680233 23 2100000 1998-99 11040050 6313074 57 4268000 1999-00 9687800 7070530 73 - 2000-01 6699822 6280093 94 - 2001-02 34755578 17828824 51 - Total 103302055 63085293 61 11. The AR further submitted that the assessee was constructing residential complex by name Usha Enclave, and he had received flat advances from prospective buyers and out of the advances received he has paid on money for purchase of lands alleged to be undisclosed. He had .....

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..... documents relating to the Madhapur land purchased from Sri K. Anjaneyulu and others. I confirm that I have paid Rs. 1,18,68,000 to Sri K. Anjaneyulu and others relating to the purchase of 3 acres of land at Madhapur. I have not maintained my books of account. They are not up to date. Subject to verification of my sources for the above cash payments, I am offering this amount of Rs. 1,18,68,000 as undisclosed income. 15. During the course of search the assessee clearly said that he has paid on money for purchase of land, and agreed to offer the on money as his undisclosed income at Rs. 1,18,68,000 subject to verification of his source of income. The assessee has filed his block return declaring undisclosed income of Rs. 25,0,3,539/- and explained the sources for investments in purchase of property. 16. Admittedly the assessee has filed cash flow statement at the time of assessment for the period 1.4.1996 to 3.8.1999. According to the cash flow statement he has enough sources for making the on money payment, except to the extent of Rs. 32 lacs for which he has admitted undisclosed income and filed the block return. The assessee has explained the sources for making payment of the .....

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..... erefore, the method adopted by the CIT(A) for arriving at the work in progress, and thereby working out the deficit is not correct. 18. In our opinion, the assessee has justified the payment of onmoney for purchase of land and he has filed necessary cash flow statement to explain the sources for on-money payment and details of advances received for Usha Enclave to justify the sources of fund. The assessing officer has conducted series of investigation and probed the assessee, which proves that the advances are genuine. The assessing Officer justified his addition purely on guess work stating that the assessee has no chance of diverting advances for purchase of property and he would have used all the money for construction of building itself. It is not able to prove that the work in progress declared by the assessee with the support of valuation report from registered valuer is not correct. It is only on the basis of hypothetical assumptions and the additions are purely on guess work and without any material evidences. The revenue does not prove the work in progress declared by the assessee is not correct. Unless it proves the work in progress declared by the assessee is not corre .....

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..... ated 8% profit for difference in work in progress of Rs. 8,55,389/- which works out to Rs. 68,431/-. Therefore out of Rs. 7,87,263/- added by assessing officer the CIT(A) confirm the addition of Rs. 68,431/- and given relief of Rs. 7,18,832/-. The CIT(A) has rightly estimated the 8% profit on difference in work in progress and given relief for the balance and his order needs no rectification. Hence we confirm the order of the CIT(A). 25. Similarly for the A.Y. 1998-99, the due date for furnishing the return of income was already ended the assessing officer was right in principle in computing the profit at 8% of the work in progress for the A.Y. 1998-99 and included in the block period. However, the assessee has already considered sum of Rs. 2,33,064/- profit form work in progress and set off the same from other losses and returned net loss of Rs. 6,96,461/- a separate addition of Rs. 2,14,418/- is not justified. Accordingly we upheld the order of CIT(A) for the A.Y. 1998-99 and 1999-2000 too in this matter and confirm the order of CIT(A). Accordingly this ground of the assessee as well as the revenue is dismissed. 26. Ground No. 5 by the assessee is with regard to addition of R .....

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