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Total Rs. 1,15,52,148
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On verification of the assessee's books of accounts, it was found that the assessee has entered the payment of Rs. 91 lakhs to M/s K.M.R. Estates & Builders (P) Ltd., as against admission by K. Madhava Reddy of M/s K.M.R. Estates & Builders (P) Ltd., at Rs. 2,40,40,000 vide the unsigned MoU. On verification of the books of accounts of the assessee and its sister-concerns, it was noticed that out of Rs. 2,40,40,000 paid to M/s K.M.R. Estate & Builders (P) Ltd., as shown in the MoU dated November, 1996, only a sum of Rs. 91,00,000 was found to be recorded as shown below:

4. The AO is of the opinion that the purchase consideration paid by the assessee to M/s K.M.R. Estates & Builders (P) Ltd., as per unsigned MoU is at Rs. 2,40,40,000. The assessee has disclosed in its books of accounts only Rs. 91 lakhs. The difference between these two figures is Rs. 1,49,40,000 which was treated as undisclosed income of the assessee by the AO which was spread over to two assessment years since the payment was made during the period 1st April, 1995 to 31st March, 1996 and 1st April, 1996 to 31st March, 1997. Accordingly, the AO treated Rs. 1.33 crores for the asst. yr. 1996-97 and 16.40 lakhs for the asst. yr. 1997-98 as undisclosed income, which was confirmed by the CIT(A) on appeal.

13. We have heard the rival submissions and perused the material on record. There was a search action at the premises of the assessee on 20th Feb., 1999. There was no discussion in the assessment order regarding the seizure of the documents or assets during the course of search. In addition to the search of the assessee's premises, there were searches conducted at the business premises of the associates of the assessee on 29th March, 1999. During the course of search, the Department found unsigned MoU (Annex. 'A' to assessment order) reflecting the transaction for purchase of 95 acres and 5 guntas of land for a consideration of Rs. 2,40,40,000. This agreement dt. November, 1996 is unsigned. For this agreement, M/s K.M.R. Estates & Builders (P) Ltd., and K. Madhava Reddy, on the one part (sellers) and M/s M.M. Financiers (P) Ltd., represented by its chairman and directors and Smt. Duggirala Kamala Devi, Sri Vemuri Subramaniam, Shri Suggirala Ravi Kiran, Shri Mulpuri Murali Mohan and Shri Challagula Chandra Mohan, on the second part. On the basis of this agreement, the AO was of the opinion that the assessee has paid the purchase consideration of Rs. 2,40,40,000 towards the purchase of land. The AO also relied on the sworn statement recorded from K. Madhava Reddy and P.C. Reddy, chairman of M/s Shilpa Homes (P) Ltd. The AO also relied on the tripartite agreement entered on 1st Jan., 1997 between M/s K.M.R. Estates & Builders (P) Ltd. and K. Madhava Reddy, on the one part and M/s M.M. Financiers (P) Ltd., Jayabheri Builders, M/s Sri Jayabheri Art Productions, M. Murali Mohan, D. Kishore and M. Ram Mohan, on the second part and M/s Shilpa Homes (P) Ltd., on the third part. Further, he relied on certain loose papers found at the residence of K. Madhava Reddy.

15. In the present case, the unsigned MoU was found at the residence of K. Madhava Reddy. As per that agreement (Annex. 'A' to assessment order), the assessee has agreed to purchase 95 acres and 5 guntas of vacant land for a consideration of Rs. 2,40,40,000. This agreement is unsigned. This was not found at the premises of the assessee. K. Madhava Reddy also stated in his sworn statement that this agreement was not acted upon. He submitted that transaction did not materialize. He also stated that dispute arose between these parties and went for settlement before one MLA. Further, question No. 7 and the answer of K. Madhava Reddy recorded on 26th May, 1999 read as follows: