O R D E R
PER SAKTIJIT DEY, J.M.:
This appeal by assessee is directed against order dated 16/10/2014 of ld. Commissioner of Income-tax( A)-III, Hyderabad for AY 2006-07.
2. Assessee is aggrieved with the additions made by AO and confirmed by CIT(A) for amount of Rs. 58,88,184 u/s 68 of the Act and an amount of Rs. 54,28,000 u/s 69 of the Act.
3. Briefly the facts are, assessee a company is engaged in the business of construction and infrastructure development. For the AY under consideration, assessee filed its return of income on 30/03/2007 declaring total income of Rs. Nil. Subsequently, on the basis of information found as a result of survey that assessee had purchased 628 sq.yds of land at Gopanpalli Village for a total
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consideration of Rs. 81,28,000 out of which an amount of Rs. 15 lakh was paid through cheque, whereas, assessee has only admitted total consideration of Rs. 15 lakhs in its books, AO reopened assessment u/s 147 of the Act and issued a notice u/s 148 to assessee on 21/07/10. In response to the said notice, assessee requested AO to treat the return of income already filed as a return in response to the notice u/s 148. In course of assessment proceeding, AO noticing that assessee has shown credits in the books of account to the tune of Rs. 7,43,82,947, called upon assessee to furnish details of the creditors along with confirmations disclosing their identity, genuineness and creditworthiness. As stated by AO, in response to the query raised, assessee furnished list of loan creditors along with confirmations. However, on verification of the details furnished, AO found that the following credits were not supported with confirmations:
1. Shri Ganesh Mekala Rs. 25,03,684
2. G. Srinivasa Rs. 14,00,000
3. Radhakrishna Manga Rs. 19,84,500 Rs. 58,88,184
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As the credits were not supported by any confirmation from the creditors, AO treated the credits amounting to Rs. 58,88,184 as unexplained credit u/s 68 of the Act and added it back to the income of assessee. Further, AO from the information available on record, noticed that assessee had purchased land from Shri K. Srirami Reddy for a total consideration of Rs. 81,28,000, out of which an amount of Rs. 54,28,000 was paid in cash. When asked to explain, it was stated by assessee that the amount of Rs. 54,28,000 was paid by Shri Anand Reddy on behalf of the company. AO, however, noted that on verification, it was found that same amount has not been reflected in the books of account of assessee. Therefore, treating the amount of Rs. 54,28,000 paid towards sale consideration as investment outside the books, AO considered it as unexplained investment u/s 69 of the Act and added back to the income of assessee. Being aggrieved of
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such additions made by AO, assessee preferred appeal before ld.
CIT(A).
4. In course of hearing of appeal before ld. CIT(A), assessee submitted confirmation letters from three creditors for credits amounting to Rs. 58,81,184, which could not be filed before AO. Even in respect of investment in purchase of land, assessee submitted confirmation of Shri Anand Reddy, who is one of the director of the company. Ld. CIT(A), however, opined that confirmation letters submitted by assessee being devoid of relevant details, could not stand rigors of section 68 of the Act. He observed that onus is on assessee to establish the credits, investments appearing in the books of account. Alleging that assessee failed to establish the same, additions made by AO were confirmed by ld. CIT(A).
5. Ld. AR submitted before us, though assessee could not submit the confirmation letters relating to three creditors for the credit amount of Rs. 58,88,184 for the reason fact that two of the creditors are non-residents and they have remitted money from outside the country, but, at the first appellate stage, assessee did produce confirmation letters of the said creditors along with other evidences to establish the genuineness of the credits. As far as the investments in land is concerned, ld. AR submitted, one of the director of the company Shri Anand Reddy, who advanced money on behalf of the company has also confirmed of having advanced money and the confirmation letter was submitted before ld. CIT(A). Thus, it was submitted by ld. AR, without properly examining the authenticity of the confirmation letters, ld. CIT(A) has brushed them aside while confirming additions made by AO. Ld. AR submitted, as evidences produced by assessee have not been properly examined by ld. CIT(A), let the same be verified by AO.
6. Ld. DR, on the other hand, submitted, confirmation letters furnished by assessee in respect of non-resident creditors do not contain necessary details, hence, the genuineness of the same
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cannot be established. However, ld. DR has no objection if issue relating to the additions made by AO are remitted back for reexamination on the basis of evidences submitted by assessee.
7. We have considered the submissions of the parties and perused the materials on record. AO added the amount of Rs. 58,88,184 u/s 68 of the Act only for the reason that assessee failed to submit confirmation letters from the concerned creditors. Similarly, addition of Rs. 54,28,000 was also made disbelieving assessee's claim that the amount was invested by one of the director Shri Anand Reddy on behalf of company. However, as could be seen from the materials on record, before ld. CIT(A), assessee did produce confirmation letters from three creditors confirming the advances made to assessee. Further, assessee also furnished confirmation letter from director Shri Anand Reddy confirming that he has paid an amount of Rs. 54,28,000 on behalf of the company towards purchase of land. Ld. CIT(A) without properly verifying the authenticity of the assessee's claim by way of additional evidence either by examining himself or getting it verified through AO has brushed them aside by making general observation. In our view, the evidences submitted by assessee have to be examined by making proper enquiry before rejecting them. Assessee must be given opportunity to establish the fact that statement made in confirmation letters are correct and the amounts actually represent genuine credits received by assessee. As additional evidences produced by assessee have not been property verified by ld. CIT(A), either by himself or through AO, we consider it proper to set aside the impugned order of ld. CIT(A) and remit the matter back to the file of AO for considering the issue relating to additions made u/s 68 as well as u/s 69 after examining the additional evidences submitted by assessee. It is open for AO to make further enquiry, if deemed necessary, to ascertain authenticity of assessee's claim. AO must afford reasonable opportunity of being heard to assessee to explain the credits and investments made by it. Only
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after considering the evidences submitted by assessee, AO has to decide the issue with a reasoned order and in accordance with law.
8. In the result, assessee's appeal is treated as allowed for statistical purposes.
Pronounced in the open on 26th August, 2015. Sd/- Sd/-
(B. RAMAKOTAIAH) (SAKTIJIT DEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 26 thAugust, 2015 kv
Copy to:-
1) M/s Incor Infrastructure (P) Ltd., C/o Venugopal & Chenoy, CAs., 4-1-889/16/2, Tilak Road, Hyderabad - 500 001.
2) ACIT, Circle - 2(1), Hyderabad.
3 CIT(A)-III, Hyderabad
4) CIT-II, Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.