Meticulous Properties Llp, ... vs Assessee

This is an assessee's appeal against the order of the Ld. CIT(A)-V, Hyderabad dated 30.06.2014. The issue in this appeal is with reference to addition of Rs. 50 lakhs as unexplained income under section 68 of the I.T. Act.

2. Assessee is engaged in the business of construction of flats and building and A.O. has completed the assessment under section 143(3) of the I.T. Act originally on 28.09.2009 by making a small disallowance out of rates and taxes. The CIT invoked the provisions of section 263 to set aside the assessment for examination of credits received by the assessee from 4 persons on 19.05.2006 by way of cheques. The CIT records that these cheques were returned on 26.05.2006 itself. However, on the reason that A.O. has not examined the credits in its correct perspective the 2 ITA.No.1694/Hyd/2014 M/s. Meticulous Properties LLP, Secunderabad

order of the A.O. was set aside and A.O. was directed to make enquiry into the credits from four persons and complete the assessment denovo. Assessee has not objected to the order of CIT under section 263 as it was set aside without any directions. In the course of re-assessment proceedings assessee has furnished various confirmation letters, copy of the returns and also bank accounts to support that assessee did receive amount of Rs. 50 lakhs from four persons as a business consideration and immediately they were returned and showed the entries thereon. A.O. however, did not accept assessee's contention and held that no confirmations or evidences were produced till 31.12.2012 in respect of the amount claimed to have received from the above mentioned four persons.

3. Before the Ld. CIT(A) assessee filed all the documents which are placed before A.O. and Ld. CIT(A) sent the matter to the file of A.O. Even though para 4.3 of the order of Ld. CIT(A) records that A.O. was reminded four times and no report has come, the CIT went on to decide the issue on merits, as he felt that remand report is not necessary. In para 4.4 of the order, he agreed with the observations of the A.O. that assessee neither produced confirmation letters about the nature and source nor satisfactory explanation was offered for the cash credits of Rs. 50 lakhs. He confirmed the amount in his brief order as under :

"4.4. I have carefully considered the submissions of the appellant and the assessment order. I agree with the observations of the A.O. and hold that as the assessee neither produced confirmation letters about the nature and source nor satisfactory explanation offered for the cash credits of Rs.50 lakhs, inspite of reasonable opportunity, the A.O. has rightly added Rs.50 lakhs on account of unexplained income under section 68 of the Act. Hence, I confirm the addition."

3 ITA.No.1694/Hyd/2014 M/s. Meticulous Properties LLP, Secunderabad

4. Ld. Counsel referring to the original order under section 143(3) submitted that A.O. in that order vide para 2 has recorded that assessee has filed details of bank account extract, note on business activities, hard copy of return of income, confirmation letters for unsecured loans and account copies. These documents have been filed before the A.O. and they have been duly examined by the A.O. before completing the assessment. However, Ld. Counsel fairly admitted that Ld. CIT in the order under section 263 records that no confirmations were available on record. It was submitted that all the confirmations, bank accounts were placed before the A.O. as well as before the Ld. CIT(A). Since they have not considered the same, he placed on record the details of income tax returns of the creditors, relevant bank accounts and also confirmation letters including ledger copies with a plea for admission of additional evidence. He submitted that assessee has necessary evidence in support of cash credits.

5. Learned D.R. however, relied on the orders of the authorities.

6. We have considered the issue and examined the rival contentions. There was a finding by AO in the assessment order originally passed that assessee filed relevant confirmations and account copies. Eventhen the CIT invoked jurisdiction u/s 263. Even though assessee has not challenged the said order of CIT, the A.O. in our opinion ignored confirmations and other letters filed before him. The same is the case with Ld. CIT(A) also. Even though Ld. CIT(A) has sent the matter on remand and gave four reminders to the A.O. ultimately he thought it fit not to rely on the remand report and complete the appeal confirming the addition, in spite of having the evidence on record. Since the same was not acknowledged by CIT(A), assessee filed them as additional evidence.

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In these circumstances, we have no other option than to set aside the order of the A.O. and CIT and restore the matter to the file of A.O. for fresh adjudication, after giving due opportunity to the assessee to explain the cash credits. A.O. is directed to examine the documents on record including the additional evidence filed before us in correct perspective and complete the assessment after giving due opportunity to the assessee. Grounds of the assessee are allowed for statistical purposes.

7. In the result, appeal of the assessee is allowed for statistical purposes.

Order pronounced in open Court on 25.03.2015.

Sd/- Sd/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER

Hyderabad, Dated 25th March, 2015

VBP/-

Copy to :

1. M/s. Meticulous Properties LLP, Unicorn House No.3, Balaji Enclave, Transport Road, Near Gunrock Enclave Diamond Point, Secunderabad.

2. The Deputy Commissioner of Income Tax, Circle 16 (2), Hyderabad.

3. CIT(A)-V, Hyderabad.

4. CIT-IV, Hyderabad.

5. D.R. ITAT 'B' Bench, Hyderabad

6. Guard File