Assessee in this appeal is contesting claim of interest of Rs.7,18,252 / - and salary payment of Rs.2,81,700 /disallowed by A.O. And confirmed by Ld. CIT(A)-II, Hyderabad. Assessee is a company which has not filed return in the impugned year. Survey operation under section 133A was conducted on 17.03.2011 and proceedings under section 147 were initiated.
Assessee in this appeal is contesting claim of interest of Rs.7,18,252 / - and salary payment of Rs.2,81,700 /disallowed by A.O. And confirmed by Ld. CIT(A)-II, Hyderabad. Assessee is a company which has not filed return in the impugned year. Survey operation under section 133A was conducted on 17.03.2011 and proceedings under section 147 were initiated.
Assessee in this appeal is contesting claim of interest of Rs.7,18,252 / - and salary payment of Rs.2,81,700 /disallowed by A.O. And confirmed by Ld. CIT(A)-II, Hyderabad. Assessee is a company which has not filed return in the impugned year. Survey operation under section 133A was conducted on 17.03.2011 and proceedings under section 147 were initiated.
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA.No.171/Hyd/2014 Assessment Year 2007-2008
M/s. Chandralok Hotels Ltd., Hyderabad PAN AACCC-9912-A
vs. ITO, Ward 1(2) Hyderabad. (Appellant) (Respondent)
For Assessee : Mr. P. Muralimohan Rao For Revenue : Mr. P. Somasekhar Reddy
Date of Hearing : 15.05.2014 Date of pronouncement : 23.05.2014
ORDER PER B. RAMAKOTAIAH, A.M. This is an assessee appeal against the order of Ld. CIT(A)-II, Hyderabad dated 05.12.2013. Assessee in this appeal is contesting claim of interest of Rs.7,18,252/- and salary payment of Rs.2,81,700/- disallowed by A.O. and confirmed by Ld. CIT(A). 2. Facts leading to the present appeal are that assessee is a company which has not filed return in the impugned year. A survey operation under section 133A was conducted on 17.03.2011 and proceedings under section 147 were initiated. Assessee filed return of income declaring loss of Rs.10,052/-. However, as there was no compliance to various notices, in the absence of books of accounts and its verification, A.O. treated the share application money of Rs.1,21,49,236/- and unsecured loans of Rs.59,82,840/- as income of assessee from unexplained sources. Further noticing that unsecured loans are in the name of the firms M/s. Shiv 2 ITA.No.171/Hyd/2014 M/s. Chandralok Hotels Ltd., Hyderabad
Shakti 35MM - Rs.29,82,840/- and M/s. Sandhya 70MM Rs.30,00,000/- (treated as income above) and interest payment was in the names of individuals as below, the A.O. disallowed the interest of Rs.7,18,252/-.
a. Saritha Rs. 13,470 b. Brijlal Rs.4,12,500 c. Deepraj Rs. 71,025 d. Dhansri Rs. 20,205 e. B. Dheeraj Rs. 30,000 f. Gurucharan Singh Rs. 30,000 g. Rateen Rs. 33,675 h. Bank of India Rs. 27 i. Kuldeep Rs. 40,000 j. Prudhviraj Rs. 67,350 Total Rs.7,18,252
3. In addition, the salary and bonus claim of Rs.2,81,700/- was also disallowed on the reason of non- production of books of accounts and evidences thereon. 4. Ld. CIT(A) after obtaining a remand report from A.O. who subjected the share application money and unsecured loans for verification, deleted the two additions. However, disallowance of interest and salary payments were confirmed. 5. Referring to the paper book of 19 pages, it was the submission of Ld. Counsel that the A.O. accepted the unsecured loans but did not allow the interest thereon, which was paid on the said unsecured loans. Likewise, it was also submitted that Ld. CIT(A) did not allow expenditure of salary and wages the details of which were furnished to the A.O. in the remand proceedings. It was the submission that these two expenses are to be allowed. 3 ITA.No.171/Hyd/2014 M/s. Chandralok Hotels Ltd., Hyderabad
6. Learned D.R. however, referred to the orders of the A.O. and Ld. CIT(A) to submit that there is no correlation especially with reference to interest expenditure and no details were furnished regarding salaries and wages. 7. We have considered the rival contentions and examined the record. A.O. did disallow the interest even though assessee has deducted the tax on the said amounts as per the provisions of TDS. His reasoning was that the loans were obtained in two firms names whereas the interest was paid to individuals, the details of which were extracted above. Before the Ld. CIT(A) assessee has submitted evidence with respect to unsecured loans. On perusing the remand report of the A.O. it was noticed that actual investments in the share application and unsecured loans were received from individuals and instead of entering their names as lenders, the firms in which they are partners were shown. Consequently, after verification A.O. accepted the genuineness of the source of above two amounts. Prima facie, the interest claimed on the said loans are allowable to the assessee. However, what we noticed was that the orders of A.O. or Ld. CIT(A) including the remand report, does not indicate the amounts invested by the said individuals. Even though assessee furnished evidences regarding payment of interest and consequent TDS made in respective individuals cases and confirmations of them were filed, we are unable to allow the amount as such in the absence of their individual investments and the interest calculation of amount claimed. Moreover, assessee has not placed either the annual report or the computation of income before us. Therefore, whether the interest is to be allowed as a business expenditure or expenditure relating to earning any 4 ITA.No.171/Hyd/2014 M/s. Chandralok Hotels Ltd., Hyderabad
interest under the head Other Sources is also not clear. The utilisation of the amounts for the purpose of business is required to be established if the amounts are invested in the business or under head income from house property or other sources required to be examined. Since none of the details are placed before us except the confirmation letters from the parties, we are unable to allow the expenditure in the absence of necessary details of the claims and also under which head the amounts are claimed. Likewise, even the salaries and wages are also stated to have been paid for the purpose of the company. As stated earlier the said details were not on record nor placed before the A.O. and Ld. CIT(A) even though Ld. Counsel submitted that the details were furnished to the A.O. in the remand proceedings. In the absence of any evidence on record that these details are furnished before the authorities, we cannot allow the expenditure without getting it verified by the A.O. In the result, we are of the opinion that these two amounts are required to be verified by the A.O. and then allow as per law and facts. The orders of AO and CIT(A) on these issues are set aside to be redone according to facts and law. With these directions, grounds are allowed for statistical purposes. 8. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 23.05.2014.
Sd/- Sd/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 23 rd May, 2014 VBP/-