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2002 (12) TMI 196

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..... nience, both these appeals are being disposed of by a common and consolidated order. 1992-93 3. The assessee (HUF) represented by its Karta is Shri M. Papaiah Reddy, basically is an agriculturist. The assessee is aggrieved by the addition of Rs. 4,96,500 made by the AO, which was reduced to Rs. 2,95,500 by the first appellate authority. As per the assessment order, the impugned addition was made by the AO on the belief that the assessee invested unaccounted funds of Rs. 4,96,500 in the construction of a farm house and a commercial complex (shops) over and above the declared cost of Rs. 6 lakhs and Rs. 2 lakhs, respectively, as on 31st March, 1992. As per the assessee, the construction of the farm house commenced in 1984 and remained unfinished till 31st March, 1992. Similarly, the construction of the commercial complex (shops) was started in 1989 and was incomplete till 31st March, 1992. The assessee declared as on 31st March, 1992, in respect of two buildings under construction (1) Farm House construction from 1st April, 1985, to 31st March, 1992 Rs. 6 lakhs. (2) Commercial complex (shops) construction from 1st April, 1989, to 31st March, 1992 Rs. 2 lakhs = total Rs. 8 la .....

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..... ses considering the family size and thus added back Rs. 4,96,500. The total income of the assessee was computed at Rs. 6,94,750. The assessee felt aggrieved and preferred appeal before the learned CIT(A). The learned CIT(A) deleted Rs. 2,01,000 and confirmed the addition of Rs. 2,95,500 and partly allowed the appeal of the assessee. The assessee is in further appeal before the Tribunal. 1993-94 5. The assessee filed its return of income for the asst. yrs. 1993-94 on 28th March., 1995, in response to notice issued under s. 148 of the IT Act, 1961 declaring 'Nil' income and an agricultural income of Rs. 48,000 and income from house property at Rs. 5,000. The assessment was completed under s. 143(3) on 26th March, 1997, determining Rs. 66,000 which was set aside by the first appellate authority vide its order dt. 3rd Nov., 1998, with certain direction to the AO. The AO sent a proposal to the assessee vide its letter dt. 16th Aug., 2000, to estimate the investment in the buildings at Rs. 75,000 from 1986-87 to 1990-91, which was replied by the assessee vide its letter dt. 24th Aug., 2000. The Department Valuation Officer valued the buildings as on 15th Feb., 1994, at Rs. 13,11,000. .....

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..... ore the AO the learned counsel said to have explained that only Rs. 6 lakhs and Rs. 2 lakhs were really spent in construction by 31st March, 1992, on both the buildings and cash flow, statement was filed from 1981 onwards till 1995 as the cash flow statement showed the source of invested funds. The learned counsel further claimed that the assessee was having agricultural income and also from dairy. The agricultural income varied from year to year depending upon weather conditions. The learned counsel further stated that the AO had disputed the availability of agricultural and dairy income from year to year from 1981 onwards. It was further argued that the assessee was also having borrowed funds to the tune of Rs. 3,03,500 as shown in the cash flow statement. Mr. Lakshminarasimhan further argued that the AO accepted these loans should have accepted the entire cash flow statement in the absence of any evidence to reject the same. The learned counsel further argued that cash flow statement showed investment in the farm house a sum of Rs. 4,90,000 from 1984 to 31st March, 1990, and in the financial year 1990-91 and 1991-92 Rs. 45,000 and Rs. 65,000 respectively, were spent. The AO acce .....

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..... ically mentioned by the assessee in its letter, dt. 6th Oct., 2000, addressed to the AO which is duly mentioned in the assessment order itself. It is also noticed that the AO and CIT(A) while considering the total investment on the two buildings (Rs. 6 lakhs + Rs. 2 lakhs) has not considered the expenses of Rs. 2 lakhs exclusively on commercial shopping complex accepted by the AO and deducted the sum of Rs. 2 lakhs in determining the unaccounted investment in both the buildings. It is also noticed that the AO and CIT(A) have not considered the fact that the alleged unaccounted investment cannot be assessed in one year in the light of the decision of the Hon'ble High Court of Kerala in the case of Upasana Hospital and Nursing Home vs. CIT (2002) 173 CTR (Ker) 54 : (2002) 253 ITR 507 (Ker). From the order of the learned CIT(A) it is nowhere mentioned that the agricultural income is inflated and the Department is also not in appeal for the asst. yr. 1992-93. The AO has accepted Rs. 65,000 as spent during the financial year 1991-92 on the constructions from 1990 onwards is having a nexus with the borrowals. The Department, on the other hand, has not provided any material evidence to sh .....

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..... greements relevant to the asst. yr. 1993-94. From the cash flow statement from 1981 to 1995, we are convinced that there is adequate funds available, even on the opening day 1st April, 1992. The learned counsel for the assessee specifically drawn our attention to cash flow statement filed from 1981 to 1995 which shows that rental deposits received during the financial year 1992-93 were only Rs. 50,000 and not Rs. 1,75,000. The learned counsel further explained that these lease amounts of Rs. 1,25,000 paid by the other 5 tenants were received after 31st March, 1993, and thus the cash flow statement gives a complete picture of funds available with the assessee for meeting the construction expenses of Rs. 2,50,000. This fact is not in dispute that the cash flow statement was examined by the learned CIT(A). We are not convinced with the argument of the learned counsel for the Revenue that, the matter may be sent back to the AO as there must be some end to the litigation and certainly may cause hardship to the assessee due to prolonged litigation. At the same time, no cross-objection has been preferred by the Revenue. At the same time, the AO has admitted the existence of 7 lessees but .....

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