ASSISTANT COMMISSIONER Vs. KENCES FOUNDATION P LTD

JUDGEMENT

(1.) THESE tax case appeals are preferred against the order of the Income Tax Appellate Tribunal dated 26. 04. 1999 made in i. T (SS)A. No. 75/mds/97, which was filed against the order of the Assessing officer dated 27. 02. 1997. Tax Case Appeal No. 10 of 2000 is filed by the revenue and Tax Case Appeal No. 47 of 2000 is filed by the assessee.

(2.) THE assessee is a Private Limited Company engaged in the business of construction and sale of residential and commercial buildings. THE assessee commenced the business in the year 1992. K. Narasa Reddy designated as the Managing Director of the assessee company held 50% of the shares and the remaining 50% of the shares was shared by Subba Reddy (Individual) designated as the Director of the Company, Subba Reddy (HUF) and Rajini Reddy, wife of subba Reddy.

(3.) 1. Against the assessment order dated 27. 2. 1997 directing the assessee to pay tax amounting to Rs. 7. 07 crores, the assessee preferred an appeal before the Tribunal in I. T. (SS) A. No. 75/mds/97 contending that the documents relied on by the Assessing Officer for the purpose of arriving at the undisclosed income, namely, the statement of accounts prepared by V. C. Gupta and the work-sheet of the Chartered Accountants were prepared only for the purpose of settling their shares payable to the outgoing Director subba Reddy and his group as the settlement of shares to an outgoing Director could not be indefinitely postponed and had to be worked out based on the entire value of the project; and therefore, the said documents would not themselves be considered as a conclusive evidence that the assessee had received the entire sale consideration from the purchasers. 7. 2. According to the assessee, the Assessing Officer ought to have taken all relevant factors into consideration, namely, the actual receipts of sale consideration from the purchasers by way of cheques or cash before the date of search as well as the amount received as income generated by such sale subsequent to the date of search, which were in fact shown in the returns duly filed by the assessee as well as the tax paid for the same for the subsequent period. 7. 3. The assessee referring to the fact that except the three documents referred to above, there was no other seizure of cash or bullion, jewellery or other articles or things of value during the time of search, contends that the conclusion of the assessing officer that there is undisclosed income is without any basis. Such conclusion as to the undisclosed income is solely based on the documents referred to above, which was intended to settle their shares payable to the outgoing Director, Subba Reddy and his group is arbitrary, unreasonable and perverse.