Suram Venkateshwara Reddy Hyderabad v. Dy Cit Central Circle 2 Hyderabad

In The Income Tax Appellate Tribunal Hyderabad Bench B Hyderabad Before Smt P Madhavi Devi Judicial Member And Shri S Rifaur Rahman Accountant Member Ita No 1222 1223 1224 1225 1226 Hyd 2014 Assessment Years 2002 03 2003 04 2004 05 2005 0 6 2006 07 Suram Venkateshwara Reddy Hyderabad Pan Ahups 5707 P Vs Dy Commissioner Of Income Tax Central Circle 2 Hyderabad Appellant Respondent Assessee By Shri S Rama Rao Revenue By Shri D Srinivas Date Of Hearing 13 10 2017 Date Of Pronouncement 29 12 2017 O R D E R Per S Rifaur Rahman A M All These Appeals Filed By The Assessee Are Direct Ed Against A Common Order Of Cit A I Hyderabad Dated 27 03 2014 For The Ays 2002 03 To 2006 07 As Identical Issues Are Inv Olved In These Appeals They Were Clubbed And Heard Together And T Herefore A Common Order Is Passed For The Sake Of Convenience 2 Briefly The Facts Of The Case Are That A Search And Seizure Operation Was Carried Out In The Case Of The Assess Ee Who Is The Managing Director Of M S Dhatri Constructions Pvt Ltd On 9 10 2007 At His Residence Consequent To Search Operation N Otice U S 153 A Was Issued For Asst Years 2002 03 To 2007 08 In R Esponse To Which The Assessee Has Not Filed His Return Of Income Eve N Though He Has Given Total Disclosure Of Rs 9 90 05 000 For Asst Years 2003 04 To 2008 09 During The Course Of Search And Seizure Ope Ration On 2 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy Account Of Undisclosed Income Earned By Him The As Sessee Has Filed The Return Of Income For Asst Year 2002 03 To 2004 05 On 7 10 2009 And For Asst Years 2005 06 And 2006 07 On 13 10 20 09 Without Admitting Any Undisclosed Income As On The Date Of Search I E 9 10 2007 The Assessee Has Filed Only Return Of Inco Me Up To 2005 06 And The Income Admitted By Him Prior To Search And Income Admitted In The Return Of Income After Search Are As Under Ay Income Admitted In The Regular Return Income Admitted In Response To Notice U S 153 A 2002 03 62 150 62 150 2003 04 1 71 350 2 92 003 2004 05 2 83 272 2 16 076 2005 06 3 67 705 4 40 371 2006 07 Not Filed 9 74 768 2 1 Further In Response To The Final Show Cause Dt 30 9 2009 And 30 10 2009 Assessee Has Replied That All The Undis Closed Income That Was Declared Before Ddit Inv Was Duly Recorded In The Books Of Accounts Of The Company In Which Assessee Is The Di Rector And He Has Also Filed A Detailed Cash Flow Along With Capi Tal Account On 18 12 2009 However He Has Not Furnished Any Docum Entary Evidences In Support Of Cash Flow Statement Capit Al Account In View Of The Above Observations The Ao Had Completed The Assessments For Ays 2002 03 To 2008 09 On 31 12 2009 By Making Various Additions 2 2 When The Assessee Preferred Appeals Before The Cit A The Cit A Confirmed Most Of The Additions And Gave Par Tial Relief 3 Aggrieved The Assessee Is In Appeal Before Us 4 Before Us The Assessee Has Raised Grounds Relat Ing To Disallowance Of Expenses Addition Of Deposits In B Ank U S 68 Credits Of Collection On Behalf Of Radha Realtors And Inter Est U S 234 A 3 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy 234 B Of The Act All The Above Issues Are Dealt Tog Ether Issue Wise As Under I Disallowance Of Expenditure 5 A Common Ground Relating To Disallowance Of Expe Nditure Is Raised In All The Appeals Under Consideration Whic H Is As Under The Cit A Erred In Allowing Only 50 Of The Expend Iture Incurred Against Commission Receipt The Cit A Oug Ht To Have Seen That The Expenditure Claimed Is For The Purpos E Of And In Connection With The Business Of The Appellant 5 1 The Facts Relevant For This Ground Are Extrac Ted From Ay 2002 03 The Assessee Was In Receipt Of An Amount Of Rs 3 15 000 As Commission Against Which He Claimed An Expenditur E Of Rs 1 66 723 Since He Has Not Submitted Any Support Ing Document The Ao Disallowed The Expenditure Claimed 5 2 Before The Cit A He Submitted That He Claimed Only Nominal Expenditure The Cit A Restricted The Disallowanc E To 50 Of The Claim In All The Years Under Consideration By Obser Ving As Under 06 0 At The Time Of Assessment The Appellant Did N Ot Produce Any Evidences In Support Of The Claim Of Expenditur E On Account Of Telephone Charges Vehicles Maintenance And Oth Er Expenses Even Though The Appellant Raised The Grou Nd When The Matter Was Remanded To The Assessing Officer Fo R Verification He Has Not Filed Any Details Whatsoev Er It Is Also Noticed That In The Submissions Filed That The Appe Llant Made An Alternate Plea That The Disallowance Of Entire Expe Nditure Is Not Justified And The Ao Ought To Have Allowed At Least Reasonable Expenditure The Assessing Officer Has Not Disputed The Fact That The Appellant Derived Commission Income And I T Cannot Be Denied That There Would Be Some Expenditure Incurre D By Him To Earn The Commission And Since The Appellant Could Not Produce Any Evidence Of Incurring Of The Expenditure Disal Lowance Of Some Expenditure Is Warranted Considering The Natu Re Of Business And The Amount Of Income Shown The Expend Iture Claim D Appears Excessive Even In The Reply To The Remand Report Also The Appellant Has Not Given Any Detail S With Supporting Evidences He Simply Stated That Against The Commission Received He Claimed Only Nominal Expend Iture And When Books Of Accounts Are Not Maintained And The I Nformation 4 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy Is Not Available The Only Method Of Arriving At Th E Income Is By Resorting To Estimation Of Income In View Of The Above Disallowance Of 50 Of The Expenditure Claimed To H Ave Been Incurred For Earning Commission Income Is Reasonabl E And Accordingly The Disallowance Is Restricted To 50 Of The Claim For Asst Years 2002 03 To 2006 07 5 3 Aggrieved The Assessee Is In Appeal Before Us 5 4 Before Us The Ld Ar Of The Assessee Submitted That The Expenditure Incurred Is Towards Salaries Office Ma Intenance Maintenance Of Vehicle And Telecommunication Expens Es Further He Submitted That As The Entire Expenditure Of Rs 1 6 6 723 Is Relatable To The Commission Income From Real Estate The Same Is Allowable 5 5 The Ld Dr On The Other Hand Relied On The Ord Ers Of Revenue Authorities 5 6 Considered The Rival Submissions And Perused Th E Material Facts On Record It Is Observed That The Ao Has Not Dispu Ted The Fact That The Assessee Derived Commission Income And It Cann Ot Be Denied That There Would Be Some Expenditure Incurred By As Sessee To Earn The Commission And Since The Assessee Could Not Pro Duce Any Evidence Of Incurring Of The Expenditure Disallowa Nce Of Some Expenditure Is Warranted Therefore To Meet The En Ds Of Justice We Restrict The Disallowance To 20 As Against 50 Sus Tained By The Cit A Accordingly This Ground Of Appeal Is Partl Y Allowed In All The Appeals Under Consideration Ii Addition In Respect Of The Amounts Collected On Behalf Of Radha Realty And Payment To Radha Realty In Ays 2003 04 T O 2006 07 6 The Facts As Taken From Ay 2002 03 Are That The Ao Noticed That The Assessee Had Shown Rs 2 50 000 As Amoun T Due To Radha Realtors Pvt Ltd And Rs 22 72 325 As Radha Re Altors Customers As Liabilities And When Questioned The Assessee Could 5 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy Not Explain The Nature Of Liability And Accordingly The Ao Treated The Entire Sum Of Rs 25 22 325 As Unexplained Cash C Redit 6 1 Before The Cit A The Assessee Contended That The Amount Of Rs 22 72 325 Was Collected From The Customers Of M S Radha Realty And The Same Was Outstanding As On 31 03 200 3 And Filed A Copy Of The Letter Dated 22 12 2009 From M S Radha Realty Giving Year Wise Details Of Amounts Collected Balance Due To The Company And The Commission Paid When The Matter Remanded T O The Ao The Ao Noted That The Assessee Could Not Furnish The De Tails Documentary Evidence Regarding The Parties Customers From Whom Collection Was Made Confirmation Of The Respective Parties Suppo Rting Receipts Details Of Plots Against Which Advances Were Receiv Ed More Importantly Any Agreement With M S Radha Realty Etc To Prove His Claim He Further Noted That From The Said Letter D Ate 22 12 2009 Which Gave Year Wise Details Of The Amounts Collect Ed By Assessee And Subsequent Repayments Made To The Company Acco Rding To Which The Assessee Collected A Sum Of Rs 1 36 24 348 During Financial Years 2002 03 To 2005 06 Of Which Rs 8 0 0 000 Was Paid Back To The Company And The Balance Amount Of Rs 1 28 24 348 Were Shown As Outstanding And No Reasons As To Why Such Huge Amounts Allegedly Stated To Be Collected From The C Ustomers Of M S Radha Realty Were Remained With Him And Not Paid Ba Ck To The Company 6 2 In Reply To The Remand Report The Assessee Sta Ted That He Collected Advances From Customers On Behalf Of Radh A Realtors And Did Not Repay The Amount And The Said Fact Was Also Confirmed By The Said Company And It Was Further Stated That The Amo Unt Collected And Retained By The Assessee Was Not Adjusted By Radha Realtors Pvt Ltd The Fact Remains That The Amount Was Retained By The Assessee After Being Collected Obviously Such Retention Of Money Is Not Adjusted By The Company And In The Circumstances Th E Amount 6 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy Retained With The Assessee From Out Of The Advances Received Cannot Be Considered As The Income Of The Assessee 6 3 After Considering The Submissions Of The Assess Ee And Remand Report Of The Ao The Cit A Observed That It Is Pe Rtinent To Note That The Alleged Amount Of Rs 22 72 325 Which Was Cla Imed To Have Been Collected On Behalf Of M S Radha Realty In The Fy 2002 03 Remained Outstanding In The Assessees Balance Shee T Till Fy 2005 06 And The Assessee Could Not Give Any Plausible Expla Nation For The Same He Further Observed That It Is Also Not Expla Ined As To When These Amounts Were Ultimately Paid To Radha Realtor S If The Same Were Collected On Behalf Of The Said Company In Vi Ew Of The Above Observations He Confirmed The Addition Of Rs 22 7 2 325 Similar Additions Were Made In Ay 2004 05 To 2006 07 Which Are Tabulated As Under Ay Addition Made By Ao Confirmed By The Cit A Unexplained Cash Credits Appearing In The Balance Sheet Gr No 4 2003 04 22 72 325 22 72 325 Do Ground No 3 2004 05 21 55 119 21 55 119 Do Ground No 3 2005 06 23 64 410 23 64 119 Do Ground No 3 2006 07 68 32 494 68 32 494 6 4 Ld Ar Of The Assessee Submitted That The Asses See Works For Radha Realtors On Commission Basis And The Amount R Eceived From Its Customers Was Deposited In His Bank Account He Submitted That The Said Company Confirmed The Fact That Such Amoun T Is Payable To Them By The Assessee And The Same Is Capital Receip T Which Has Been Accepted By Radha Realtors 6 5 Ld Dr On The Other Hand Relied On The Orders Of Revenue Authorities 7 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy 6 6 Considered The Rival Submissions And Perused Th E Material Facts On Record After Hearing Both The Parties At Length Bench Felt That It Is Necessary To Call For A Remand Report From The Ao O N 31 08 2017 On The Cash Credits Into The Bank Account And Also The Advances Received By The Assessee From The Customers Of Radh A Realtors Which According To The Assessee Are Collected On B Ehalf Of Radha Realtors Accordingly Ao Submitted His Report On 2 5 09 2017 Based On The Direction Ao Has Issued Summons U S 131 Of The Act To Principal Officer M S Radha Realtors On 08 09 2017 Requiring Them To Appear And Produce The Following Documents 1 Details Of Payment Made Or Amounts Received If Any From Sri Suram Venkateswara Reddy 2 Complete Details Of Transaction With Sri Suram V Enkateswara Reddy For Fy 2001 02 To 2007 08 3 Relevant Ledger Extracts In Respect Of Above Tra Nsactions Relevant To Ay 2002 03 To 2008 09 4 Copies Of Balance Sheets For The Years Ending Fo R The Above Period Evidencing The Above Transactions 5 The Copies Of Itr Along With Computation Of Inco Me For Respective Assessment Years 6 7 Mr N Ravindranath Reddy M D At That Point O F Time In Which These Transactions Were Carried On Appeared Before Ao On 22 09 2017 And Furnished The Following Documents 1 Ledger A C Copy Of The Assessee Shri S V Reddy For The Fy 2005 06 2006 07 Relevant To Ay 2006 07 2007 08 Not Relevant To Present Proceedings 2 Itr Acknowledgments Of Rrcpl For The Ays 2002 0 3 To 2008 09 3 Annual Accounts Containing Balance Sheet Of Rrcp L For The Fys 2005 06 To 2007 08 4 Sundry Creditors Ledger Account In The Books Of Rrcpl For The Fys 2006 07 2007 08 Depicting The Balances Of Assessee Shri S V Reddy 8 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy 6 8 From The Above It Is Important To Note That Ra Dha Realtors Has Not Submitted Ledger Copies Of The Assessee For The Fys 2001 02 To 2004 05 Relevant To Ays 2002 03 To 2005 06 On Care Ful Reading Of The Remand Report Ao Basically Contested That Radh A Realtors Has Not Produced Year Wise Ledger Account Copies Of The Assessee In Its Books Stating That They Are Not Available They Cou Ld Only Produce Ledger Extracts Of The Assessee For The Ay 2006 07 Wherein There Is An Opening Balance Carried Forward For Rs 68 32 49 4 Shri N Ravindranath Reddy In His Statement Clearly Stated That They Do Not Have Year Wise Break Up For This Period Accordingl Y Ao Has Justified That Additions Made During These Ays 2002 03 To 200 5 06 When It Comes To Ay 2006 07 He Has Stated That Shri N Rav Indranath Reddy Has Submitted Ledger Extract Of Fy 2005 06 Relevant To Ay 2006 07 As Per Which There Is Only Opening Balance Of Rs 68 32 494 Whereas In The Statement Submitted By The Assessee The Opening Balance Stands At Rs 59 91 854 At The Same Time Assessee Submits That He Has Collected Rs 68 32 494 For T He Current Ay Whereas There Is No Corresponding Confirmation Fro M Radha Realtors Further He Submitted That Radha Realtors Has Given Advances To The Assessee To The Extent Of Rs 1 25 05 000 And Returned Rs 5 Lakhs From The Record It Is Clear That With Regard To Advances Assessee And Radha Realtors Confirmed Tha T There Is Outstanding Of Rs 1 20 05 000 But There Is No Confirmation With Regard To Rs 68 32 494 There Is Evidence That T Here Is Mismatch Of The Informations Submitted By The Assessee Accordi Ngly He Justified That Addition Made During The Year Is Proper He Fu Rther Submitted That In Question No 14 Of The Sworn Statement Reco Rded From Shri N Ravindranath Reddy It Was Asked To Confirm The Clo Sing Balance As On 31 03 2006 Relevant To Ay 2006 07 That The Balan Ce Outstanding In Radha Realtors Was Shown At Rs 1 88 37 494 Wher Eas The Closing Balance As Per The Cash Flow Statement Submitted By The Assessee Was Shown At Rs 2 48 29 348 For Which Shri N Ravindranath Reddy Has Confirmed That He Is Not Aware As To How Assessee Has 9 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy Presented His Accounts However He Confirmed The C Losing Balance As Per His Books 7 Considered The Above Remand Report From Ao And O Ther Material Facts On Record It Is Clear That Assessee Was Working For Radha Realtors On Commission Basis And The Same Was Also Confirmed By Shri N Ravindranath Reddy In His Swor N Statement From The Above It Is Also Clear That Assessee Was Collecting Funds On Behalf Of Radha Realtors And The Same Was Retained By Him For The Reasons Known To The Assessee And Radha Realtors A Ssessee Was Collecting Advances From Ay 2003 04 As Per The Bel Ow Statement Rs 2003 04 22 72 325 2004 05 21 55 119 2005 06 23 64 410 2006 07 68 32 494 7 1 We Have Noticed That Assessee Collected The Fun Ds From The Creditors Of Radha Realtors Every Year And Retaine D With Him Hence The Funds Collected In Ay 2003 04 Was Rs 22 72 325 Which Was Disallowed By The Ao Again Similar Additions Were Made By The Ao For Ays 2004 05 2005 06 The Aggregate Of These A Dditions Are Rs 67 91 854 In The Ay 2006 07 Assessee Has Shown In His Cash Flow Statement That He Has Also Collected Rs 68 32 494 During This Ay And Also Brought Forward Rs 59 91 854 From The P Revious Ays Since Assessee Has Submitted That He Has Collected Rs 68 32 494 During The Ay 2006 07 The Addition Was Made For Ay 2006 07 Also However We Notice That M D Of Radha Realtors Has Confirmed Only To The Extent Of Rs 68 32 494 As Opening Balance Which Was Carried Forward From Earlier Years Since They Do N Ot Have Copy Of Ledger Extracts For The Previous Years And Since Md Has Confirmed The Opening Balances We Are Inclined To Delete The Addition For The Ays 2003 04 To 2005 06 Since Radha Realtors Has No T Confirmed The Collection For Ay 2006 07 The Same Has To Be Analy Sed For The 10 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy Purpose Of Confirming Addition In Our Considered V Iew This Addition Was Made By Relying On Cash Flow Which Was Submitt Ed By The Assessee Can This Be Considered As Undisclosed Inc Ome In Our View The Relevance For Making Addition In The Real Incom E We Notice That In Ay 2006 07 Ao Has Made The Addition For Credits In The Bank And Also The Admission Of Collection On Behalf Of Radha Realtors Since The Advances Collected On Behalf Of Radha Realtors Were Not Confirmed By The Radha Realtors This Disclosure Is Not Substantiated Can It Be Added As Income The Income Has To Be Rea L Income I E The Assessee Should Have Made The Investment Or Deposit Ed In Bank In This Ay Assessee Has Deposited In Bank Account We Will Deal With This In Next Para On Bank Deposits Moreover Ld C It A Has Also Allowed The Ground On This Issue 7 2 We Have Deleted The Above Additions In Ays 2003 04 To 2005 06 Based On The Facts That Assessee Has Proved Iden Tity Creditworthiness And Genuineness Of The Transaction Considering The Confirmation From Radha Realtors Represented By Its Md And There Is A Direct Link Of Collection From The Customers Of R Adha Realtors And Also Deposits In The Bank For The Earlier Ays Howe Ver For The Ay 2006 07 Radha Realtors Has Not Confirmed Any Trans Action Done For This Year But The Assessee Has Declared To Have C Ollected On Behalf Of Radha Realtors To The Extent Of Rs 68 32 494 Whereas The Assessee Has Deposited Rs 80 31 593 In The Bank Since Radha Realtors Has Not Confirmed This Transaction We Are Inclined To Confirm One Of The Additions I E Bank Deposit To The Exten T Of Rs 80 31 593 Or Advance Declared By The Assessee In Its Cash Flo W Statement We Cannot Treat Both The Amounts As Income Of The Asse Ssee As It Will Amount To Double Addition Accordingly We Confirm The Addition Of Cash Deposit In Bank Which Is More Than The Advanc E Declared By The Assessee The Grounds Raised By The Assessee Are Pa Rtly Allowed Iii Addition U S 68 Of The Act On Account Of Bank Deposits In All The Years Under Consideration 11 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy 8 The Addition Made In Respect Of Bank Deposits I N The All The Years Under Consideration Are As Under Ay Addition Made By Ao Cit A Addition In Respect Of Deposits In The Bank Gr No 3 2002 03 1 08 500 Confirmed Gr No 3 2003 04 5 77 600 Remitted The Issue To Ao Do Ground No 4 2004 05 16 84 000 Confirmed To The Extent Of Rs 14 84 000 Do Ground No 4 2005 06 47 86 199 Deleted Rs 8 63 200 And Balance Amount Of Rs 39 22 299 Remitted To Ao For Verification Do Ground No 5 2006 07 80 31 593 Cit A Confirmed 8 1 Ld Ar Of The Assessee Submitted That The Commi Ssion Received During The Year 2002 03 By Way Of Cash Was Rs 3 15 000 From Various Parties And The Cash Deposited In Bank Acco Unt Is Out Of Such Commission Received He Submitted That During The P Revious Year The Total Credits Into The Bank Account Amounted To Rs 1 34 116 And The Assessee Did Not Maintain Book Of Account He There Fore Submitted That The Revenue Authorities Are Not Justified In H Olding That The Deposits Are Without Any Source Hence The Additio N Is Not Warranted 8 2 Ld Dr On The Other Hand Relied On The Orders Of Revenue Authorities And Submitted That The Assessee Neither Appeared Nor Filed Documents To Substantiate His Claim Before The Reve Nue Authorities 8 3 Considered The Rival Submissions And Perused T He Material Facts On Record With Regard To Ays 2002 03 And 2003 04 On Considering The Totality Of The Facts Of The Issue It Is Obser Ved That There Is Direct 12 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy Nexus Between The Income Earned By Way Of Commissio N In Cash And The Cash Deposited Are Less Than The Income Earned During The Year By Giving Telescopic Benefit The Claim Of The Asse Ssee Can Be Accepted Accordingly These Ground Are Allowed 8 4 For The Other Ays 2004 05 2005 06 Cash Recei Ved By The Assessee On Behalf Of M S Radha Realtors And The Sa Me Was Also Confirmed By The Company That The Assessee Has Coll Ected Funds On Behalf Of The Company And Retained By Him Since T Here Is Confirmation For The Source Of Funds The Same Fund S Were Used To Deposit In The Bank There Is Direct Nexus Between The Funds Collection And Deposits In The Bank Hence Assesse E Also Accepted In His Financial Statement That As Liability He Owes To M S Radha Realtors The Genuineness Of The Transaction And It S Relevance Is Discussed In Para 7 1 Since The Nexus Is Proved F Or The Cash Deposits In The Bank And Liability To Pay To M S Ra Dha Realtors Ao Cannot Make Addition U S 68 For The Bank Deposits A S The Identity Genuineness Are Proved With Regard To Creditworthi Ness Of The Party It Is Radha Realtors Assessee Need Not Have To Pro Ve The Creditworthiness In This Case Accordingly These A Dditions Are Deleted 8 5 For Ay 2006 07 We Have Already Discussed In Pa Ra 7 2 We Have Sustained The Addition Of Bank Deposit Hence Need No Further Adjudication Iv Advances From Assessees Own Customers Ay 2006 07 9 As Regards Ground No 4 Relating To The Additio N Of Rs 99 46 050 Being The Advance From Customer The Ao Observed That During The Assessment Proceedings The Assessee Fai Led To Give Any Details Of Rs 99 46 050 On Account Of The Claim Of Advances From Customers Such As The Nature Of The Advances Name S And Address Of The Persons Who Have Advanced Mode Of Acceptanc E Details Of 13 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy Plots Land Against Which The Advances Were Received Etc The Ao Therefore Treated The Entire Amount Of Rs 99 46 0 50 Appearing In The Cash Flow Statement As Unexplained Cash Credits U S 68 Of The Act 9 1 During The Remand Proceedings The Assessee Sub Mitted That These Amounts Were Received From Various Persons Fo R Purchase Of Properties At Hyderabad On Their Behalf As Under Sl No Name Of The Person Amount Received Rs Remarks 1 S Pulla Reddy 1 50 000 Copy Of Confirmation Letter Dt 19 12 2009 Filed 2 Bhanu Prasad 1 50 000 3 Govind Reddy 1 00 000 Claimed As Refunded On 31 03 2006 Through Abn Amro Bank 4 Jayasimha 11 66 000 5 M Nagesh 2 00 000 Refunded On 07 12 05 Vide Cheque No 171981 Drawn On Icici Bank 6 M Srinivas Kumar 5 85 000 Copy Of Confirmation Letter Filed 7 Prasad Bachu 9 11 050 Copy Of Confirmation Letter Filed 8 P Sridhar Reddy 5 84 000 Copy Of Confirmation Letter Filed 9 Sharath 36 00 000 A Plot Was Allotted For Rs 2 50 000 And Balance Remains As Advance 10 S Rajasekhar Reddy 20 00 000 The Amount Was Refunded In Subsequent Year Rs 10 Lakhs Each On 181 11 2006 And On 12 12 2006 9 2 The Ao Had Verified The Details And The Confirm Ations Filed In Respect Of The Above Persons And Observed That The So Called Confirmations Or Evidences Filed Would Not Satisfac Torily Support The Contention Of The Assessee In Reply To The Remand Report The Assessee Submitted That He Is In The Business Of Re Al Estate And Derived Commission Income He Was Also Engaged In S Elling Of Plots And The Advances Received Were Part Of The Business Activity Carried 14 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy On By Him He Further Stated That All The Persons H Ave Confirmed The Fact That They Invested The Amounts With The Assess Ee For Acquisition Of Plots Through Him Which Clearly Indicates That T He Amounts Were Received For The Purpose Of Business Activity Of Th E Assessee And Part Of These Amounts Were Either Refunded To The Person S Through Cheques Or Were Adjusted Towards The Sale Of Plots By The Company And In Such Circumstances The Ao Should Not Have M Ade Any Addition On This Account 9 3 After Considering The Submissions Of The Assess Ee As Well As The Remand Report Of The Ao The Cit A Confirmed T He Addition Made By The Ao U S 68 Of The Act By Observing As Under 16 2 The Submissions Of The Appellant Have Been Examine D In The Light Of The Observations Made By The Assessing Officer In The Remand Report Despite The Assessing Officers Clear Observation That The Confirmations Filed Were Eithe R Incomplete Or Do Not Give The Complete Picture Of The Transact Ions Entered Into By The Appellant With Them Such As Details Of The Plots Purchased And Registration Thereof Etc The Appell Ant Did Not Rebut These Findings Of The Assessing Officer With Any Evidences Substantiating That The Amounts Received Were Actua Lly The Business Proceeds In Fact The Appellant Did Not G Ive Whether These Customers Were His Customers Or That Of Radha Realty The Appellants Submissions And The Rebuttal Are Ge Neral In Nature And Do Not Throw Any Light On The Nature Of These Advances Even The Appellant Has Not Bothered To Gi Ve The Details Of The Plots For Which The Advances Were Gi Ven And The Details Of Registration Thereof It May Be Noted Th At Customers Do Not Give Advances Without Identifying The Plots Of Their Choice And Even The Confirmations Filed Do Not Show Any Details Of The Address Or The Sources And They All Stated T Hat They Paid The Amounts Because They Know The Appellant For Man Y Years And Requested Him To Arrange A Suitable Property A N Illustration Of One Confirmation Letter Which Is Allegedly Given By Sri S Pulla Reddy Did Not Have Any Address Though He Stated Tha T He Was Working As An Officer Of Indian Overseas Bank And T He Total Amount Of Rs 7 05 000 Was Paid In Cash Over A Per Iod From 19 2 2005 To 2 5 2007 As Against The Details Filed By The Appellant Of The Advances An Amount Of Rs 1 50 000 Has Been Shown As Received From Sri S Pulla Reddy Even Tho Ugh This Person Has Over A Period Of Time Paid Rs 7 05 000 There Was No Indication Of Allotment Purchase Of Land In The Name Of The Person Sri S Pulla Reddy The Appellant Failed To Establish The 15 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy Nature And Source Of The Credits With Any Satisfact Ory Explanation And Credible Evidences In View Of The Above The Contention That These Were All The Advances From Cu Stomers Cannot Be Accepted And The Addition Made By The Ass Essing Officer Of Rs 99 46 050 U S 68 Of I T Act Is Con Firmed 9 4 Before Us The Ld Ar Submitted That The Assess Ee Received Advances From Customers And Other Realtors He Furt Her Submitted That Besides The Assessee Received Advances From T He Persons As Mentioned In The Remand Proceedings Supra And The Y Confirmed The Fact That They Have Paid Advances To The Assessee A Nd Letters Of Confirmation Were Filed He Pointed Out That No Adv Erse Findings Were Brought On Record 9 5 The Ld Dr On The Other Hand Relied On The Ord Ers Of Revenue Authorities 9 6 Considered The Rival Submissions And Perused Th E Material Facts On Record The Assessee Is Dealing In Real Estate A Nd He Has Received Funds From The Customers For The Purpose Of Buying Lands For Them On Verification Of The Confirmation Letters Submitt Ed It Is Noticed That All Have Confirmed The Payments Made To Assessee An D It Contains The Details Like Address And Pan Details Further Except Mr S Pulla Reddy All Other Remittances Are Through Bank Ld Cit A Has Given Example Of S Pulla Reddy And Explained The Discre Pancies In This Transaction And Rejected The Plea Of The Assessee W Ithout Considering The Merits In The Other Cases In All The Cases Vi Z Mr Jayasimha M Srinivasa Kumar Prasad Bachu P Sreedhar Reddy And Rajasekhar Reddy All Have Given The Details Of Rem Ittance Through Bank And Gave Pan Details They Have Fulfilled The Condition Stipulated In Section 68 Moreover In The Case Of Rajasekhar Reddy The Assessee Has Refunded The Advance Received Thro Ugh Bank The Details Are Already In The Confirmation Letter It Is Not Proper To Reject The Confirmation Without Proper Investigation Sinc E All The Creditors Have Already Given Confirmations And Are Traceable These Advances 16 Ita Nos 1222 To 1226 Hyd 2014 Suram Venkateshwara Reddy Are Considered As Genuine And Accordingly Addition Made On This Count Is Deleted With Regard To Mr Jayasimha Ld Cit A Has Already Explained The Details For Rejecting The Genuineness Of This Transaction Hence We Sustain This Addition Therefore The Add Ition Made By The Ao To The Extent Of Rs 52 46 050 Is Deleted V Ground Regarding Charging Of Interest 10 A Common Ground Relating To Charging Of Inter Est U S 234 A 234 B Of The It Act Has Been Raised In Ays 2002 03 T O 2005 06 Charging Of Interest Under These Sections Is Conseq Uential In Nature Therefore The Ao Is Directed Accordingly 11 In The Result All The Appeals Under Considerat Ion Are Partly Allowed Pronounced In The Open Court On 29 Th December 2017 Sd Sd P Madhavi Devi S Rifaur Rah Man Judicial Member A Ccountant Member Hyderabad Dated 29 Th December 2017 Kv Copy To 1 Suram Venkateswara Reddy C O Sri S Rama Rao Advocate Flat No 102 Shriyas Elegance 3 6 643 Stree T No 9 Himayatnagar Hyderabad 500 029 2 Dcit Central Circle 2 Aayakar Bhavan Bashee Rbagh Hyd 3 Cit A I Hyd 4 Cit Central Hyd 5 The Departmental Representative I T A T Hyde Rabad 6 Guard File