Itta/466/2010 Of M/S. Tirumala Homes(P) Ltd v. The Income Tax Officer

THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA ITTA No.466 of 2010 Dated:16.08.2010 Between: M/s.Tirumala Homes (P) Ltd. …Appellant and The Income-Tax Officer,Ward-2(1), Hyderabad. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA ITTA No.466 of 2010 JUDGMENT:(per Hon’ble Sri Justice V.V.S.Rao) The appellant company is an assessee under the Income Tax Act, 1961(the Act). For the assessment year 2003-2004 the company filed returndeclaring the income of Rs.6,47,272/-. The return was processed underSection 143(1) of the Act on 31.03.2004. After scrutiny of the same, noticedated 09.08.2004 under Section 143(2) of the Act was issued with regard toshare application money of Rs.7,50,000/- allegedly paid by M/s.N.Venkateshand N.Praveen, sons of Managing Director of the Company, and one SriT.Srihari, father-in-law of the Managing Director. In addition, an amount ofRs.14,00,000/- and another amount of Rs.25,95,099/- were proposed to beadded as unexplained investment. After considering the informationfurnished by the company, total tax payable was assessed at Rs.25,00,554/-on the total income of Rs.54,42,370/- and the balance tax payable wasdemanded after giving credit to the tax already paid. Against the assessmentorder dated 31.03.2006, the assessee preferred an appeal to theCommissioner of Income Tax (CIT). By an order dated 19.04.2007, CIT allowed the appeal disallowing the additions in respect of unexplainedinvestment, but affirmed the order of the Assessing Officer insofar as theshare application money allegedly made by three persons namedhereinabove. The additions to the extent of Rs.7,50,000/- were confirmed. Being aggrieved, the assessee went in appeal before the Income TaxAppellate Tribunal, Hyderabad Bench. By impugned order dated 30.11.2009the learned Tribunal deleted the addition of Rs.2,50,000/- made in the case ofSri N.Venkatesh, but confirmed the remaining two additions. The secondappellate order insofar as it went against them is in challenge in this appealfiled under Section 260A of the Act. Counsel for the appellant contends that the learned Tribunal committederror ignoring the settled principles regarding addition of cash credit. Hesubmits that Sri Praveen and Sri Srihari had their own income and they hadcapacity to invest in the company. Alternately, he contends that even if theshare application money is received by the assessee company from allegedbogus shareholders, the Department has to proceed against those personsand the additions cannot be deleted from the return of income filed by theassessee. Counsel for the appellant contends that the learned Tribunal committederror ignoring the settled principles regarding addition of cash credit. Hesubmits that Sri Praveen and Sri Srihari had their own income and they hadcapacity to invest in the company. Alternately, he contends that even if theshare application money is received by the assessee company from allegedbogus shareholders, the Department has to proceed against those personsand the additions cannot be deleted from the return of income filed by theassessee. After perusing the order impugned in the appeal and the materialplaced before us and after giving anxious consideration, we are convincedthat the appeal is misconceived. Sri Praveen is admittedly the son of theManaging Director of the assessee company. He is a student in Australia,and therefore, the plea of independent source of income is improbable. It iscontended that he had financial capacity to deposit money as he comes froma wealthy family and both his parents are assessees. This submission isstated only for the purpose of rejection. When it is claimed that the cashcredit is towards share application money, the burden lies on the assessee toshow that the person who deposited the money towards share application orfor other purpose has independent source of income. As found by theappellate Commissioner as well as the learned Tribunal no evidence was letin this regard to show the capacity of Sri Praveeen. In regard to the cashcredit towards share application money made by Sri T.Srihari also noevidence was produced. Though it was alleged that he was engaged in ironand hardware business at Aleru during the financial year 2002-2003, and thathe had sold some gold jewellery belonged to his wife, there was no proofoffered before the Assessing Authority or appellate Commissioner. Therefore, both these transactions are doubtful. The burden was not properlydischarged by the assessee. Learned Tribunal considered this aspect of the matter, which is in therealm of question of fact. Therefore, the appeal is misconceived. The appeal is accordingly dismissed. 16.08.2010vs __________________(V.V.S.RAO, J) ____________________(B.N.RAO NALLA, J)