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Facts
The assessee company, engaged in running a resort, filed appeals against the order of the CIT(A) which partly allowed its appeal against the assessment order. The assessment involved additions for unexplained expenditure for resort maintenance and unexplained investment in land purchase. The assessee's operations were suspended, and a search was conducted, yielding documents related to expenditure and property transactions.
Held
The Tribunal held that the addition of Rs. 37,84,963 for AY 2014-15 as unexplained expenditure for resort maintenance was confirmed as the assessee could not provide evidence to show that the expenditure was not incurred or not related to the resort, and the documents were found from the assessee's premises. Similarly, the addition of Rs. 39,47,000 for AY 2015-16, relating to the balance consideration for land purchase where the registered sale deed amount was significantly lower than the sale agreement, was also confirmed due to lack of explanation from the assessee.
Key Issues
Whether additions made for unexplained expenditure on resort maintenance and unexplained investment in land purchase are justified and properly supported by evidence and legal provisions. Whether the assessee provided adequate explanation for the difference between sale agreement consideration and the registered sale deed value.
Sections Cited
153C, 143(3), 253D, 69C, 269SS, 269T, 234A, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President 1. These two appeals are filed by Ramya Resorts Pvt. Ltd. (the assessee/appellant) for the assessment years 2014-15 & 2015-16 against the appellate order passed by the CIT(Appeals)-11, Bengaluru [ld. CIT(A)] dated 31.7.2024 wherein the appeal filed by the assessee against the assessment order passed by ACIT, Circle 1(4), Bangalore u/s. 153C r.w.s. 143(3) r.w.s. 253D of the Income-tax Act, 1961 [the Act] dated 31.12.2018 was partly allowed.
The assessee is aggrieved with the same and has filed appeals for both the years raising identical grounds. The grounds of appeal for AY 2014-15 are as under:-
1. 1. 1. 1. “1. On the facts and in the circumstances of the case, the orders passed by the LAO and the Hon. CIT(A) are bad in law to the extent they are prejudicial to the Appellant since the same were undertaken without appreciating the Appellant's submissions.
2. The Hon. CIT(A) erred in upholding the disallowances made by the LAO without considering that the same is not in accordance with the provisions of the Act to the extent they are prejudicial to the Appellant since the order is against the provisions of the Income-tax Act, 1961 ('the Act') and the judicial precedence on the subject.
3. On the addition of Rs. 35,34,000/- made by the LAO towards unexplained investment in immovable property at Chilamathur, the Hon. CIT(A) erred in directing the LAO to consider invoking penal provisions under Section 269SS/269T read with Section 271D / 271E in respect of loan availed from Mr. Sudhakar Raju.
4. The LAO erred in considering a sum of Rs. 37,84,963 incurred towards maintenance of the resort as unexplained expenditure. The Hon. CIT(A) erred in confirming this addition, despite submissions by the Appellant.
5. The LAO erred in considering a sum of Rs. 37,84,963 incurred towards maintenance of the resort as unexplained expenditure based on inadmissible evidence. The Hon. CIT(A) erred in confirming this addition, despite submissions by the Appellant, solely by relying on rulings that are not relevant to the facts at hand.
6. The Hon. CIT(A) erred in adding a sum of Rs. 37,84,963 without providing an opportunity to the Appellant for cross examination of Mr. K Prakash and Ms. V Soumya. Additional legal ground taken up before the Hon. Tribunal for the first time on the above:
7. The LAO erred in adding a sum of Rs. 37,84,963 without considering that for the deeming provision of section 69C to apply, the LAO should be clear of the amount that is to be considered as unexplained for each financial year, and no assumption of the amount or period can be further 'deemed' / made by the LAO, given the provisions of section 69C.
8. The LAO erred in adding a sum of Rs. 37,84,963 without considering that it is beyond human probabilities that the exact same sum becomes income in the immediately succeeding previous year. The Hon. CIT(A) erred in confirming this addition.
9. The LAO erred in charging interest under section 234A, 234B and 234C of the Act, without considering the facts and circumstances of the case. The Hon. CIT(A) erred in confirming the same. The Appellant craves leave to add or alter, by deletion, substitution or otherwise, any or all the above grounds of appeal
, at any time before or during the hearing of the appeal.”
3. The brief facts of the case show that assessee is a company engaged in the business of running & maintaining resort. The operation of resort is suspended. A search u/s. 132 of the Act was carried out on the premises of V.C. Redeppa Chetty, Director of the Company on 17.8.2016. During the course of search agreements, various loose sheets and other documents belonging to Mr. Chetty were found and seized. During the course of search, the statement of Director was recorded.
4. For AY 2014-15, the assessee filed its return of income on 30.9.2014 at a loss of Rs.5,65,840. Subsequently the case of the assessee was transferred due to centralization and notice u/s. 153C of the Act was issued. In response to that notice, assessee filed return of income on 02.11.2018. During the course of assessment proceedings, the documents pertaining to daily maintenance of the resort and various sale deeds of immovable property were found. The assessee was issued a show cause notice. Further on the basis of other documents also, the assessee was issued show cause notice. The ld. AO found that total expenditure amounting to Rs.1,77,04,858 is paid by Mr. Chetty for maintenance of the resort from his own income. This is derived from the seized documents.
5. Further from the premises of the assessee, on the basis of impounded documents, it was found that total expenditure of Rs.1.97 Crore was incurred and there was also a receipt of Rs.46 lakhs. Thus, after giving a set off, it was found that Rs.1,51,39,853 is the undisclosed income of the assessee. Accordingly, the ld. AO divided into 4 different years as the amount of expenditure incurred for AYs 2014-15 to 2017-18 and made an addition of Rs.37,84,963 for AY 2014-15. The assessment order was passed on 31.12.2018 at a total income of Rs.67,53,123. There were other additions made by the AO.
The ld. CIT(A) upheld the addition to the extent of the above sum and as some other additions were deleted, the appeal of the assessee was partly allowed.
Thus, for AY 2014-15, the only issue before us is the addition of Rs.37,84,963 confirmed by the ld. CIT(A) as unexplained expenditure.
The appeals of the assessee were listed for more than 10 times, however, none appeared even before us. The assessee has submitted
written submissions. Before us, the only argument is that the additions are made only on the basis of dumb documents. It was further stated that the documents found also do not bear the name of the assessee and therefore they are uncorroborated. The assessee denies incurring any such expenditure.
The ld. DR vehemently supported the orders of the ld. lower authorities and submitted that all these arguments made by the assessee are considered by the ld. CIT(A). He referred to para 6 of the order of the ld. CIT(A).
We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The facts clearly show that assessee has incurred total expenditure of Rs.1,97,87,353 and has also shown receipt of Rs.46,47,490 which is not accounted. Therefore the net expenditure incurred by the assessee of Rs.1,51,39,853 in absence of any details, the ld. AO treated as unexplained expenditure incurred for maintenance of resort and made the addition of 1/4th in each of the four years. This addition was made on the basis of statement of Mr. K. Prakash and Ms. V. Soumya who managed the resort. The addition is also made on the basis of supplementary evidence of Google search engine. Further the M.D. of the company, Mr. V.C. Chetty in his statement claimed ignorance of the impounded material and relied upon the statement of the persons who operated the research. The assessee could not show that whether the expenditure incurred as per impounded documents are recorded in the books of account or not. There is no evidence to show that this expenditure are not pertaining to the resort or not incurred. Merely saying that the documents are loose sheets and loose diary notings does not help the case of the assessee because these documents were found from the assessee.
Accordingly we do not find any infirmity in the order of the ld. CIT(A). We confirm the addition of Rs.37,84,963 u/s. 69C of the Act. Thus the appeal of the assessee for AY 2014-15 does not have any legs to stand and hence, dismissed.
Coming to the appeal of the assessee for AY 2015-16, we find that identical addition was also confirmed by the ld. CIT(A) and therefore for the reasons given by us in the appeal of the assessee for AY 2014- 15, we dismiss ground No.5 of the appeal along with other consequential grounds.
There is one more issue in the appeal for AY 2015-16 with respect to the addition of Rs.34,47,000 made as unexplained investment for purchase of land bearing Sy.Nos.16/2 & 159/2 at Chilamathur, Andhra Pradesh.
The brief facts of the issue show that as pr documents seized marked as 25/19 noted that assessee entered a Sale Deed for purchase of land at above Survey numbers for a consideration of Rs.57,45,000. The ld. AO sought explanation for source of the funds. The assessee submitted that a sum of Rs.1.70 Crore was borrowed from one company which was utilized for purchase of the said property. However, the ld. AO
rejected the contention of the assessee and made addition of Rs.57,45,000.
The assessee challenged the same before the ld. CIT(A). The ld. CIT(A) sought for remand report during appellate proceedings and thereafter held that a sum of Rs.22,98,000 is paid through banking channel and further stated that this is only the agreed consideration. However, the ld. CIT(A) found that the total consideration is Rs.57,45,000 out of which Rs.22,98,000 is paid through cheque and for the balance consideration, there is no explanation and therefore he upheld the addition of Rs.39,47,000. The assessee is in appeal before us.
The ld. DR submits that there is infirmity in the orders of the ld. Lower authorities. He submits that assessee entered in to sale agreement to buy the property for Rs 54 lakhs but ultimately purchased it for Rs 22.98 lakhs. Only. There was no explanation provided for the change in the values.
In the written submissions, the same arguments were repeated which were raised before the ld. Lower authorities, but no further evidence was put to show that the view of the ld. Lower authorities is incorrect. There was no explanation why the property of Rs.54 lakhs which was the agreed consideration as per sales agreement was registered at Rs.22,98,000. In the absence of the same, we do not find any infirmity in the order of the ld. CIT(A) in confirming the addition. Therefore, we dismiss this ground.
The appeal of the AY 2015-16 is also dismissed.
In the result, both the appeals of the assessee are dismissed.
Pronounced in the open court on this 9th day of January, 2026.