The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench deleted the addition made on the pretext of Undisclosed Investments as no independent inquiry was undertaken.
The assessee, Charminar Bottling Company Pvt. Ltd. is a company engaged in the business of manufacturing and trading of aerated water i.e. different flavours. During the course of survey certain papers/documents found at the business premises of the assessee were impounded. A scrutiny of the impounded material revealed that the assessee had purchased about 9 acres of land for a consideration of Rs. 9,02,33,471/- as per the registered agreement of sale in the name of M/s SMV Agencies Pvt. Ltd.
The AO observed that the first part deals with the schedule of payments by way of DD for Rs. 9,02,33,471/- and the second part is with schedule of cash payments of Rs. 1,17,30,350/- apart from brokerage of Rs. 20,39,276/-. The AO treated the cash payments amounting to Rs. 1,17,30,350/- and brokerage of Rs. 20,39,276/- as income from other sources under section 69 of the Act, rejecting the submissions of the assessee that the land deal in question was not by it and in fact pertained to M/s SMV Agencies Pvt. Ltd.
The assessee preferred an appeal before the CIT(A) and stated that the land deal in question was not done by it and in fact pertained to M/s SMV agencies Pvt. Ltd. It was further stated that since the said company also belonged to the same group as the assessee, it is their transaction and only facilitated by the assessee.
After considering the submissions of the assessee, the CIT(A) confirmed the addition made by the AO by holding that the evidence is compelling that the land deal was actually done by the assessee and the on money was also paid by the assessee and only the name of M/s SMV agencies was placed.
The coram of S.S.Godara and L.P.Sahu held that AO has relied on only dumb documents, which are not having any evidentiary value. The registered sale deed pertaining to the land purchase is not in the name of the assessee, but, the AO alleged that the name on the sale deed is wrongly mentioned as M/s SMV Agencies Pvt. Ltd., The observations of the Assessing Officer are not believable/ acceptable as there is no material brought on record to establish the same by the AO.
The ITAT observed that the AO failed to discharge his duty by making the addition without undertaking any independent enquiry as to whether the property belonged to assessee or M/s SMV Agencies, he could have made an enquiry to establish who is the owner of the land. He could have further enquired with the vendors regarding sale consideration. He failed to do so.
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