Income Tax Appellate Tribunal - Hyderabad
M/S. Radha Infra Projects Ltd, ... vs Department Of Income Tax on 29 July, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No. 23/Hyd/2011
Assessment Year: 2008-09
M/s Radha Infra Projects Ltd., vs. Dy. Commissioner of Income-
Hyderabad. tax, Central Circle,
Hyderabad.
PAN - AADCR 6120L
(Appellant) (Respondent)
ITA No. 220/Hyd/2011
Assessment Year: 2008-09
Asst. Commissioner of Income- vs. M/s Radha Infra Projects Ltd.,
tax, Central Circle - 1, Hyderabad.
Hyderabad.
PAN - AADCR 6120L
(Appellant) (Respondent)
Assessee by : Shri A. Srinivas
Revenue by : Shri Rajat Mitra
Date of hearing 23-07-2015
Date of pronouncement 29-07-2015
O RDE R
PER SAKTIJIT DEY, J.M.:
These cross appeals by assessee and the department are directed against the order dated 19/11/2010 of ld. CIT(A)-I, Hyderabad for the AY 2008-09.
2ITA No. 23 & 220 /Hyd/2011 M/s Radha Infra Projects Ltd.
2. First, we will take up assessee's appeal being ITA No. 23/Hyd/2011.
3. The only issue arising in assessee's appeal is in relation to addition of Rs. 42,84,000 as unexplained cash credit u/s 68 of the Act.
4. Briefly the facts are, assessee is a company. A search and seizure operation was conducted in case of assessee on 17/10/07. Subsequently, assessee filed its return of income for the impugned AY on 29/09/08 declaring total income of Rs. 66,66,502. During the assessment proceeding, AO noticed that assessee in the relevant PY has shown to have received share application money of Rs. 3,30,43,783 from 9 different persons. Though, assessee filed confirmation from the concerned parties, but, AO on verifying the information available on record found that the entire share application money has been received in cash from the concerned parties and no shares were allotted till 3/03/08. AO, therefore, doubting the genuineness of the transactions as well as the creditworthiness of some of the share applicants, rejected assessee's explanation and treated the entire share application money of Rs. 3,30,43,783 as unexplained cash credit u/s 68 of the Act and added it to the income of assessee. Being aggrieved of such addition, assessee challenged the same in appeal before ld. CIT(A).
5. From the material on record, ld. CIT(A) found that assessee had received an amount of Rs. 2,87,59,073 as share application money from another company i.e. M/s Radha Realty Corporation, which was treated as unexplained cash credit by AO on the reasoning that the amount has been received in cash. However, during the appellate proceeding, ld. CIT(A) noticed that while deciding similar issue in assessee's own case for AY 2007-08, he had observed that Radha Realty Corporation is a separate and distinct entity and is a major 3 ITA No. 23 & 220 /Hyd/2011 M/s Radha Infra Projects Ltd.
shareholder of the assessee company. It was observed by him that if any discrepancy is found in the books of account of Radha Realty Corporation with regard to share application transaction, AO is free to take action against the share applicant. However, only because share application money was paid in cash, on that basis, provisions of section 68 cannot be attracted. In terms with the decision taken in assessee's own case for AY 2007-08, ld. CIT(A) accepted the share application money shown in the name of Radha Realty Corporation. However, as far as the balance share application money of Rs. 42,84,714 received from eight other individuals, ld. CIT(A) sustained the addition by observing that assessee neither at the stage of assessment nor before him has been able to prove the genuineness of the transaction or creditworthiness of the share applicants.
6. We have considered the submissions of the parties and perused the material on record. At the outset, we may put it on record that the department has not challenged the decision of ld. CIT(A) in accepting the share application money shown in the name of Radha Realty Corporation. As far as the share application money amounting to Rs. 42,84,710 is concerned, it is very much evident on record that neither at the stage of assessment nor before ld. CIT(A) assessee has brought any cogent evidence to prove the creditworthiness of the share applicants or genuineness of the transaction. As it appears, none of the share applicants are income-tax assessees. Moreover, the entire share application money has been received in cash. Therefore, unless assessee proves the creditworthiness of the share applicants and genuineness of the transaction, claim of share application money cannot be accepted. As assessee has failed to substantiate its claim by producing any substantive evidence, we are inclined to uphold the order of ld. CIT(A) in sustaining the addition of Rs. 42,84,710. The grounds raised are, therefore, dismissed.
7. In the result, assessee's appeal is dismissed.
4ITA No. 23 & 220 /Hyd/2011 M/s Radha Infra Projects Ltd.
8. As far as the department's appeal in ITA No. 220/H/11 is concerned, the only ground raised by department is in relation to the decision of ld. CIT(A) in deleting addition made by AO u/s 40A(3) of the Act.
9. Briefly the facts are, during the assessment proceeding, AO noticed that assessee has paid an amount of Rs. 86,58,274 in cash towards purchase of wood and payment to labour contractors, which attracts the provisions of section 40A(3). Though, assessee offered some explanation, but, AO rejected the same by observing that the payments are not covered under any of the exceptions provided under Rule 6DD. Accordingly, disallowing the amount of Rs. 86,58,274, AO added back to the income of assessee. Assessee challenged the addition, so made, before ld. CIT(A).
10. Before ld. CIT(A), it was submitted that cash payments were made to the labourers to the tune of Rs. 72,58,274 and an amount of Rs. 14 lakhs was paid towards purchase of wood. Assessee submitted, as it is in the business of executing contracts and building of apartments and commercial complexes, in course of business payment has to be made to the labourers, through Mastry, who is an employee of the company and looks after the workers. For this purpose, weekly and monthly wages are drawn by the cashier and given to Mastry, who in turn, distributes to the workers. It was submitted, in the cash book/main scroll name of Mastry is mentioned while in distribution register names of workers are mentioned to whom wages distributed appear. Thus, it was submitted, AO's allegation that provisions of section 40A(3) was violated is not correct as individual payments to the workers do not exceed the limit of Rs. 20,000. It was further submitted by assessee that the expenditure incurred towards purchase of wood being outside the purview of section 40A(3), the addition is not called for.
5ITA No. 23 & 220 /Hyd/2011 M/s Radha Infra Projects Ltd.
11. Ld. CIT(A) after considering the submissions of assessee, observed that as per rule 6DD(k) if payments are made by a person to his agent who is required to make payment in cash for goods or services on behalf of such person, then, provisions of section 40A(3) will not be attracted. Ld. CIT(A) after examining the sample distribution slip for payment of wages, found that payments made were mostly of Rs. 4,000 to 8,000 and in some cases it is little above Rs. 10,000. Thus, on considering the submissions of assessee in the context of facts and materials on record, ld. CIT(A) directed AO to examine the contention of assessee that cash was drawn and paid to Mastry for distribution to labourers and examine whether provisions of rule 6DD are applicable. He further directed that if on such examination, it will found that provisions of rule 6DD is not satisfied, then, disallowance made with regard to labour payments may be confirmed. However, in case assessee's contention is found to be correct, then, addition is to be deleted. As far as the expenditure incurred towards payment of wood is concerned, ld. CIT(A) found that as per the evidence produced by assessee payment has been made to two companies for purchase of wood. He, therefore, observed that since rule 6DD provides that payment for purchases of agricultural products or forest produces cannot be disallowed u/s 40A(3), AO should verify the same keeping in view of the provisions of rule 6DD. Being aggrieved of the aforesaid order of ld. CIT(A), department is in appeal before us.
12. We have considered the submissions of the parties and perused the materials on record. As can be seen, ld. CIT(A) has only directed AO to verify assessee's claim that cash payments was made to Mastry, who is an employee for distribution to individual laborourers. Hence, whether provisions of rule 6DD is applicable or not. Similarly, in respect of payments made for purchase of wood, he has directed AO to verify whether the same is covered under agricultural or forest 6 ITA No. 23 & 220 /Hyd/2011 M/s Radha Infra Projects Ltd.
produce, hence, comes within the exceptions provided under rule 6DD. As AO at the stage of assessment has not properly examined these aspects, in our view, there is no infirmity or illegality in the direction of ld. CIT(A) to AO for verifying these aspects and thereafter take a decision whether to allow assessee's claim or confirm the disallowance. In the aforesaid view of the matter, we do not find any reason to interfere with the order of ld. CIT(A) on this issue. Accordingly upholding the order of ld. CIT(A), we dismiss the ground raised.
13. In the result, appeal of department is dismissed.
14. To sum up both the appeals of assessee as well as department are dismissed.
Pronounced in the open on 29 th July, 2015.
Sd/- sd/-
(B. RAMAKOTAIAH) (SAKTIJIT DEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 29 th July, 2015
kv
Copy to:-
1) M/s Radha Infra Projects Ltd., 6-3-609/96/A, Anand Nagar Colony, Khairatabad, Hyderabad.
2) DCIT, Central Circle - 6, Ayakar Bhavan, Hyderabad. 3 CIT(A)-1, Hyderabad
4) CIT (Central), Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.
7ITA No. 23 & 220 /Hyd/2011 M/s Radha Infra Projects Ltd.
Description Date Intls
1. Draft dictated on Sr.P.S.
2. Draft placed befor e auth or Sr.P.S
Draft pr opose d & placed bef ore the secon d AM
3 Mem ber
4 Draft discussed/appr oved b y second Mem ber VP
5 Appro ved Draft com es to the Sr.P.S./PS Sr.P.S.
6. Kept for pro nou ncem ent on Sr.P S.
7. File sent to the Bench Clerk Sr.P.S.
8 Date on which file go es to the Head Cle rk
9 Date of Dispatch of or der