AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2006 (9) TMI 225
X X X X Extracts X X X X
X X X X Extracts X X X X
....mercial complex. The assessee entrusted the construction to M/s S.A. Builders and the construction was also started on the abovesaid property. Subsequently, the construction could not be completed and the assessee decided to dispose of the unfinished structure. One part of the land was sold to one Syed Mohd. Jafar. The rest of the property was sold to Shri Amir Singh. An agreement of sale-cum-irrevocable general power of attorney was executed by the assessee on 14th Oct., 2000 in respect of the land in favour of Shri Amir Singh. As per the said agreement, the total sale consideration was Rs. 1.08 crores. As on the date of execution of the agreement of sale-cum-irrevocable general power of attorney, the assessee received Rs. 48,11,000 from the purchaser towards part of the sale consideration. On the date of execution of the sale, the said Shri Amir Singh paid another sum of Rs. 24,89,000 by three cheques. The balance consideration of Rs. 35,00,000 was not paid on the date of execution of the agreement of sale-cum-irrevocable general power of attorney. However, the said Shri Amir Singh executed a promissory note for a sum of Rs. 35,00,000 and also gave post dated cheques for payment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....made a computation to show to Shri Amir Singh the loss that may be suffered by the assessee due to non-payment of the amount within the schedule period. According to the learned representative, the interest neither accrued to the assessee nor was received by the assessee. Since there is no clause in the agreement for payment of interest, the assessee has no right to recover any amount towards interest. Therefore, according to the learned representative, the interest said to have been computed in the paper seized cannot be treated as undisclosed income. Furthermore, according to the learned representative, the AO found that there was on-money consideration of Rs. 60,00,000. According to the learned representative, there was no on-money consideration. The actual consideration for the transaction was only Rs. 1.08 crores and nothing more than that. The registered document clearly shows that the sale consideration was only Rs. 1.08 crores and nothing more than that. 4. The learned representative for the assessee further submitted that the assessee computed the interest just to show to Shri Amir Singh the losses that were suffered by the assessee. The interest was computed on Rs. 60,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore the rest of the paper. Therefore, according to the learned representative, either the Revenue should take the entire seized paper P-95 including the amount shown as pending, or reject the same in toto. 6. The learned representative again placed his reliance on the judgment of the apex Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC), and submitted that when the assessee furnishes an explanation to show that the total consideration was only Rs. 1.08 crores, and what was computed in the seized paper is just to show to the purchaser the loss suffered by the assessee and no right accrued to the assessee in respect of the interest, this explanation of the assessee cannot be rejected unreasonably in order to make addition as undisclosed income. According to the learned representative, the Department cannot reject a good explanation unreasonably and convert good proof into no proof. The learned representative again placed his reliance on the judgment of the Bombay High Court in the case of CIT vs. Ace Builders (P) Ltd. (1994) 116 CTR (Bom) 224 : (1993) 202 ITR 324 (Bom), and submitted that unless the right to profit comes int....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... considered rival submissions on either side and perused the material available on record. It is not in dispute that the assessee executed an agreement of sale-cum-irrevocable general power of attorney in favour of Shri Amir Singh on 14th Oct., 2002. The total sale consideration mentioned in the agreement is Rs. 1.08 crores. It is not in dispute that the seized document P-95 was found in the residential premises of the assessee's son, Shri Gyan Kumar Agarwal. A copy of the seized paper is available at p. 52 of the paper book of the assessee. From 1st April, 2002 to 31st Aug., 2002, no interest was computed. For the month of September, interest was computed at the rate of 0.5 per cent. For October, the assessee computed for half of the month at the rate of 0.5 per cent. Further, the assessee computed interest from 14th Oct., 2002 to 26th Oct., 2002 on an amount of Rs. 24,89,000 at the rate of 18 per cent. Similarly, on. an amount of Rs. 16,59,000, interest was computed from 26th Oct., 2002 to 28th Nov., 2002 at the rate of 18 per cent. From 28th Nov., 2002 to 20th Dec., 2002, the assessee computed interest on Rs. 8,29,000 at the rate of 18 per cent. Below these particulars, it is sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unt clearly establishes that there was an oral agreement between the assessee and Shri Amir Singh in respect of the sale of the above said land. Therefore, in our opinion, there was an oral agreement between the assessee and Shri Amir Singh before execution of registered deed on 14th Oct., 2002. The very fact that the substantial amount was paid by Shri Amir Singh before 14th Oct., 2002 establishes that there was an oral agreement and in pursuance of that oral agreement Shri Amir Singh paid the amount to the assessee and ultimately the assessee has executed the agreement of sale-cum-irrevocable general power of attorney in favour of Shri Amir Singh. Therefore, we do not find any justification on the part of the lower authorities in concluding that there was no oral agreement. In our opinion, there was an oral agreement between the assessee and Shri Amir Singh for sale of the land and in consequence thereof Shri Amir Singh and his family members paid a sum of Rs. 48,11,000 and the registered deed was executed on 14th Oct., 2002. 9. The next question for consideration is as to what was the sale consideration. According to the assessee, the sale consideration was Rs. 1.08 crores. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 98176 ----- Pending 8,75,000 15.11.2002 8,75,000 01.12.2002 8,75,000 01.01.2003 8,75,000 15.02.2003" The assessee computed interest initially on Rs. 60,00,000. Thereafter, he restricted the amount to Rs. 24,89,000, Rs. 16,59,000, Rs. 8,29,000 etc. The case of the assessee is that for convenience the outstanding amount of Rs. 59.89 lakhs was rounded off to Rs. 6....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... between the parties to charge interest on the outstanding amount. In other words, the assessee has no right to demand interest on the outstanding purchase money. 11. When the assessee has no right to demand interest from the purchaser, mere unilateral calculation or computation of interest does not enable the assessee to recover any amount from the purchaser. Therefore, in our opinion, the alleged computation of interest said to have been made by the assessee in the seized paper P-95 does not empower him to recover any interest from the purchaser Shri Amir Singh. Moreover, human probability is to round off the figure whenever a fractional figure comes in. Admittedly, what was due as on 14th Oct., 2002 was Rs. 59,89,000. Out of this amount of Rs. 59,89,000, the purchaser paid Rs. 24,89,000 by way of three cheques and gave a pronote for the remaining Rs. 35,00,000. Therefore, technically speaking; the entire amount was paid on 14th Oct., 2002 and the assessee acknowledged the receipt of the money in the registered deed dt. 14th Oct., 2002. Though technically no amount was due as per the registered deed dt. 14th Oct., 2002, in fact the assessee had to realise Rs. 59,89,000 from th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under Chapter XIV-A of the IT Act, 1961. Sec. 158BB(1) clearly says that the undisclosed income of the block period shall be the aggregate of total incomes of the previous years computed in accordance with the provisions of the Act on the basis of evidence found as a result of search or other documents or information available with the AO and relatable to such evidence. In this case, the only material available on record is the seized paper P-95. Merely because the assessee rounded off the figure and computed interest to which he has no legal right, it will not lead to any inference that the assessee has received on-money. The fact remains that as on 14th Oct., 2002, the assessee had to realise Rs. 59,89,000. This is disclosed in the seized paper P-95. On 14th Oct., 2002, after receipt of pronote for Rs. 35,00,000, the assessee has taken only the balance amount of Rs. 24,89,000. Merely because the amount of Rs. 24,89,000 was not rounded to Rs. 25,00,000 and the amount of Rs. 59,89,000 was rounded to Rs. 60,00,000, it would not lead to any inference about the receipt of on-money as contended by the Revenue. Therefore, it is very clear that the total consideration was only Rs. 1.08 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sment by making the addition. The net profit shown in the regular return was Rs. 8,61,621. This was taken as undisclosed income. According to the learned representative, the CIT(A) was under the impression that since no advance tax was paid, it has to be treated as undisclosed income. If advance tax was not paid, it may be a ground to levy interest and other action permissible under the IT Act. However, for the purpose of adding an amount as undisclosed income, it should be relatable to the seized material. The regular return filed by the assessee subsequent to the date of search cannot be a basis for making any addition. 15. On the contrary, the learned Departmental representative submitted that the assessee filed return of income for the asst. yr. 2003-04 on 30th Sept., 2003 admitting a total income of Rs. 10,20,240 which includes a profit of Rs. 8,61,621 on the sale proceeds of Rs. 1.08 crores as per the agreement of sale. Since no advance tax was paid, the CIT(A) has rightly enhanced the assessment. 16. We have considered rival submissions on either side and perused the material available on record. Admittedly, the assessee has tiled return of income for the asst. yr. 200....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e seized material. Unless the Revenue authorities found any material during the course of search operation regarding the claim of bad debt and profit earned on the transaction, no undisclosed income can be computed on the basis of the subsequent P&L a/c filed by the assessee along with the regular return on 30th Sept., 2003. In view of the above discussion, we do not find any justification in making the addition of Rs. 43,61,621. We, therefore, set aside the order of the CIT(A) and delete the addition of Rs. 43,61,621. 17. The next ground of appeal is regarding addition of Rs. 17,426. The learned representative for the assessee submitted that for the asst. year 2002-03, the assessee filed the return of income on 30th Sept., 2003 showing the amount of Rs. 17,426 in the regular return. The income was assessed by the very same AO under s. 143(3) of the IT Act. The learned representative has produced a copy of the assessment order dt. 4th March, 2005 passed by the very same AO. The assessee has clearly shown the profit of business or profession at Rs. 17,426. The CIT(A), on the basis of the P&L a/c filed by the assessee on 30th Sept., 2003, has included this Rs. 17,426 as undisclose....