TaxTMI 
TaxTMI 
2013 (11) TMI 1266
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.... 4. 1598/Hyd/2010 2003-04 5. 1596/Hyd/2010 2004-05 6. 1597/Hyd/2010 2005-06 7. 1599/Hyd/2010 2006-07 ITA No. 1595/Hyd/2010 - Assessee appeal 2. The first grievance of the assessee is with regard to limiting of agricultural income at Rs. 50,000 out of the agricultural income declared by the assessee at Rs. 1,19,300 and treating the balance Rs. 69,300 as 'income from other sources'. 2.1 The contention of the learned AR is that the assessee is having 24 acres of land at Aleru and has derived income from this land at Rs. 1,19,300. The Assessing Officer is having no material to show that the assessee derived income from sources other than agriculture to treat Rs. 69,300 as 'income from other sources'. 2.2 On the other hand, the learned DR relied on the order of the CIT(A). 2.3 We have heard both the parties and perused the material on record. The Department has not doubted assessee owning 24 acres of land at Aleru. The assessee was cultivating mango and the Assessing Officer also admitted that there are fruit bearing mango trees on the said land. The Assessing....
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....eceipt of Rs. 1,51,100 vide cheque through lease agreement made with the Blue Dart Express Ltd., executed on 31.3.2001. This cheque consists of two portions, (i) Rs. 1,41,000 towards rental deposit and (ii) Rs. 10,110 towards rental income. The amount was credited into bank account on 18.4.2001. Because of gap of 18 days between the date of rental agreement and the amount credited in the bank account, the lower authorities doubted the transaction. In our opinion, there is no merit in doubting the transaction as the amount has been received from Blue Dart Express Ltd., and duly credited into the bank account. Being so, the addition is not sustainable. Accordingly, we delete the addition. 6. The next ground is with regard to taxing capital gain of Rs. 3 lakhs, even though the same was already offered to tax in the return of income filed in response to notice u/s. 153C of the IT Act. The CIT(A) made an addition of Rs. 3 lakhs on the basis of the Remand Report submitted by the Assessing Officer. The contention of the assessee's counsel is that the assessee sold two flats (i) bearing No. C-502 at R.K. Towers, Begumpet, Hyderabad at Rs. 5.5 lakhs and flat No. E-402 at Vamsi Span Colle....
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....IT(A), the Assessing Officer in his remand report submitted that the claim of the assessee has been gone through. On verification of the said loan account of SBI, SP Road Branch, an amount of Rs. 6,00,000/- sanctioned by the bank was reflected, whereas the balance amount of Rs. 9,00,000/- was not explained. He stated, hence a notice dated 11.08.2009 was issued to the assessee for furnishing explanation in that regard. In response to the same, the assessee has filed reply on 21.08.09, stating that the amount of Rs. 9,00,000/- was deposited on 24.03.2002 and the same has been withdrawn on 27.03.2002. The Assessing Officer further submitted that the assessee has also filed a cash book containing the day to day cash flow, and the same has been examined by him. He submitted, accordingly, the claim of the assessee may be considered on merit. 7.5 Later, during hearing of appeal before the CIT(A), while reiterating their earlier submission, the AR submitted, that an amount of Rs. 9,00,000/- was deposited by the assessee on 24.03.2002 in the same loan account. This transaction is reflected in the cash book. It was submitted, as may be seen from the cash book entries, the opening cash bal....
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....ing Officer. 8.1 Referring to the above addition made by the Assessing Officer, the AR submitted that the Assessing Officer has mentioned that there is a bank deposit of Rs. 5,00,000/- on 15.06.2001 and Rs. 9,35,000/- on 14.06.2001. It was submitted that the same is a duplicate addition made by the Assessing Officer, in view of their earlier explanation furnished in the context of the said addition of Rs. 28,75,000/-, towards unexplained cash deposit in bank. It was stated, in view of their such explanation furnished against the addition, no addition is called for in this case. On such submissions of the AR the Assessing Officer in his above remand report to CIT(A), submitted that, it is nothing but duplication where the same was added already in the said amount mentioned earlier. Further stating that the assessee has also explained the sources, the Assessing Officer submitted that, hence the claim of the assessee may be considered on merit. 8.2 We have heard both the parties on this issue. Herein also the Assessing Officer sent the Remand Report vide his letter dated 22.2.2010 stating that it is nothing but the duplication where the same was added already and the assessee al....
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.... out of Rs. 1,40,000, income declared by the assessee as agricultural income as 'income from other sources'. Similar issue already came for consideration in assessee's own case in earlier paras in ITA No. 1595/Hyd/2010 wherein we have held that the agricultural income is to be accepted as declared by the assessee in view of the land holdings by the assessee at 24 acres and there is no positive material to hold that the assessee earned any income other than agricultural income. Being so, we allow the ground taken by the assessee in all the above appeals. In the result, assessee's appeals in ITA Nos. 1598, 1596 1597 and 1599/ Hyd/2010 are allowed. Rao Shiva Kumar Sl. No. Assessee appeal ITA No. A.Y. Sl. No. Revenue Appeal ITA No. 1. 150/Hyd/2011 2000-01 2. 151/Hyd/2011 2001-02 (1) 240/Hyd/2011 3. 152/Hyd/2011 2002-03 4. 153/Hyd/2011 2003-04 5. 154/Hyd/2011 2004-05 (2) 241/Hyd/2011 6. 155/Hyd/2011 2005-06 7. 156/Hyd/2011 2006-07 12. The first common ground in ITA Nos. 150, 151 and 156/Hyd/201....
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....IT(A) called for Remand Report from the Assessing Officer. The Assessing Officer submitted in his Remand Report that the claim of the assessee is genuine. The assessee also filed a copy of the certificate dated 16.10.2010 from concerned authority of Radhakrishna Complex Welfare Association confirming that assessee's father Sri Rao Subba Rao and his family members were staying therein in flat No. C-501-502 along with penthouse. Since no evidence was produced before the Assessing Officer and it was obtained after remand proceedings, the CIT(A) not considered the same. 13.1 In our opinion, this act of the CIT(A) is not justified. The Department has no material to show that it was not occupied by the assessee himself or it was rented to any other person so as to derive the rental income from it. Being so, the claim of the assessee cannot be denied on mere suspicion and surmises. Accordingly, in the absence of any evidence contrary to the evidence produced by the assessee, we are inclined to decide the issue in favour of the assessee as it is self-occupied. This ground of the assessee is allowed in all the above appeals. 14. The next common ground in all the appeals of the assesse....
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.... the remittances of gift came from the close relative of the assessee who is none other than his brother Rao Satya Kumar who is an NRI. The assessee filed confirmation letter and bank account details and also IT returns of the donor. Being so, identity and capacity of the donor and genuineness of the transaction are proved. In these circumstances, as the gift is received from close relative of the assessee addition cannot be sustained. Accordingly, we delete the addition. This ground is allowed in all the above appeals. 16. The next ground in ITA No. 151/Hyd/2011 is with regard to addition of Rs. 5 lakhs on account of encashment of FD though the funds routed through bank account of the assessee. Brief facts of the issue are that the Assessing Officer made an addition of Rs. 25 lakhs on account of cancellation of FD as there is no satisfactory explanation by the assessee. 16.1 Before the CIT(A) it was submitted that though the Assessing Officer has made such addition towards cancellation of FD brought into bank account maintained in SBI, there is no such entry in the bank account maintained in that bank. It was stated by the AO that such addition has been made on basis of seco....
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....the AR submitted that on 16.02.2001 Rs. 20,00,000 was transferred from the bank account No. 1022, Canara Bank, Kundan Bagh Branch, standing in the name of M/s. Gautami Constructions. This amount was transferred to SBI, SP Road Branch and FD was made directly for Rs. 20,00,000/- in the name of the assessee. This FD matured on 17.03.2001 for Rs. 20,09,041/- which was credited in the bank account No. 01190005223. It was stated that wrongly in the second cash flow statement filed by the assessee, this was mentioned as cancellation of FD, whereas the same is encashment of FD as would be apparent from the bank account. Furnishing copies of those bank accounts of M/s. Gautami Constructions, and of the assessee, it was stated that from the same, it may be noticed that there was inter account transfer of such amount. It was further submitted in the original cash flow statement filed before DDIT(Inv.), an amount of Rs. 20,00,000/- has been shown from M/s. Gautami Constructions. Enclosing a copy of that cash flow statement filed before DDIT(lnv.), it was submitted that while filing return of income in response to notice u/s. 153A, the interest of Rs. 9,041/- has not been shown. It was further....
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....e of the Assessing Officer for fresh consideration. This ground is partly allowed for statistical purposes. 17. The next ground in ITA No. 152/Hyd/2011 is with regard to addition of Rs. 1,41,000 as unexplained rental deposit without considering the documentary evidence filed showing that the amount was received by way of security deposit from Blue Dart Express Ltd., and reflected in the lease agreement filed before the lower authorities. At the state of remand proceedings the Assessing Officer has recommended that the transaction is genuine and calls for no addition on this count. 17.1 We have heard both the parties on this issue. We have already discussed similar issue in the case of Rao Ravi Kumar and deleted the addition in ITA No. 1594/ Hyd/2010 for A.Y. 2002-03 in earlier paras of this order. On similar lines this addition is deleted. 18. The next ground in ITA No. 155 and 156/Hyd/2011 is with regard to sustaining addition made towards rent from flat Nos. G8, Sai Darshan Apartments, without making any enquiry regarding occupation of the flat as at the time the property was vacant and the Assessing Officer has accepted the same in his Remand Report that that the claim ....
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....om customers though the fund is routed through bank account. 20.1 The learned AR submitted that this amount is received from Bolla Uma towards advance for sale of the flat at Thokatta and the same was evidenced by seized document A/RSR/6 vide page Nos. 49-53 and the same was credit to SBI SP Branch at 13.8.2004. 20.2 The DR relied on the order of the CIT(A). 20.3 We have heard both the parties and perused the material on record. On this issue the Assessing Officer made addition of Rs. 5 lakhs. The assessee during remand proceedings furnished the evidence in the form of agreement entered with Bolla Uma on 11 th August, 2004 which evidenced the receipt of Rs. 2,50,000. However, there is no evidence for receipt of total amount of Rs. 5 lakhs. Being so, the CIT(A) deleted Rs. 2,50,000 and confirmed Rs. 2,50,000 out of Rs. 5 lakhs. Even before us the assessee was not able to lead any evidence for the receipt of Rs. 5 lakhs from Bolla Uma. Being so, we are inclined to confirm the addition of Rs. 2,50,000. This ground in ITA No. 155/Hyd/2001 is dismissed. 21. The next ground in ITA Nos. 155 and 156/Hyd/2011 is with regard to treating the amount received on sale of agricultural....
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....gainst gross receipts of Rs. 2,65,00,000/-, the Assessing Officer has adopted gross receipts of Rs. 4,03,10,500/- and reduced the cost of land at Rs. 10,11,845/- and the same has resulted in addition in multiple hands. Stating that the real owners of said land are Sri Rao Subba Rao, Sri Rao Shiva Kumar, Sri Rao Ravi Kumar and Gautami Constructions. It was submitted that the taxability or otherwise of the amount would arise only in the hands of various entities who owned the land. 21.3 It was further submitted that no income was offered on account of sale of land in the case of the assessee, as he held such land as investment but not as stock-in-trade. The land is agricultural land located outside the municipal limits i.e., beyond 8 km. Thus, the said land was not a capital asset exigible to tax under the head 'Capital Gains'. It was further submitted that the profit arising out of such land transaction cannot be taxed as adventure in the nature of trade under the head 'Business'. Referring to various judgements of Hon'ble Supreme Court in this regard, it was submitted that in the case of the assessee the lands were acquired by him and reflected in the returns as investments, but....
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....these submissions, it was requested that the said addition made in the assessment may be deleted. 21.6 The DR submitted that the assessee and his family members own only 49.39 acres of land which were sold during different years, it was submitted that consideration of gross receipt by the Assessing Officer from sale of such land at Rs. 4,03,10,500/-, has resulted in addition in multiple hands. In this context, it is stated here that so far, the CIT(A) disposed off the appeals involving such issue only in the case of M/s. Gautami Constructions and in that case the CIT(A) has given his findings with reference to factual observations made by the Assessing Officer in different assessment years. Further, such findings have been given, after considering the submissions of the assessee made in that case. 21.7 Now, coming to the present case of the assessee, the AR submitted that the assessee has received sale consideration of Rs. 50,08,500/- from sale of acre 9 acres 18 guntas of land during the previous year. This fact is not disputed by the assessee. Further, the assessee admitted that taxability or otherwise of the amount would arise only in the hands of the entity who own the la....
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.... an adventure in the nature of trade. According to the DR the intention of the assessee is to be seen at the time of buying the land and the assessee has no intention to carry on any agricultural operation in the said land. According to the DR the case is covered against the assessee by the following judgements: (a) Smt. Parvathi Devi & Ors. v. CIT (164 ITR 675) (AP) (b) CIT v. M. Krishna Rao (120 ITR 101) (AP) (c) CIT v. B. Narasimha Reddy (150 ITR 347) (Karn) 21.9 In the rejoinder, the learned AR relied on the order of the Tribunal in the case of ITO vs. Chandar (HUF) (Chen) 47 SOT 17 wherein it was held that when the land neither subjected to adventure in the nature of trade nor it was "capital asset", profits arising from sale therefrom cannot be treated as capital gain. 21.10 We have heard both the parties and perused the material on record. In the present case there were sale of 49 acres 39 guntas of property. Bifurcation is as follows: Name Land sold Acres Guntas Amount (Rs.) Rao Subba Rao 10 33 57,37,250 Rao Shiva Kumar 10 13 1,13,02,250 Rao Raj Kumar 13 30 72,87,500 M/s. Gautami Constructions 4 03 2....
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....on by the assessee is in the nature of adventure in trade as a part of organised business activity which is normally carried on by the assessee and the income from such kind of activities like those carried on by the assessee and his family members cannot be construed as investment activity. 21.12 The income derived is from the operation of business carried on by the assessee in ordinary line of real estate business and being so the income derived from such transaction is to be considered as income from business only. To that extent we are agreeing with the orders of the lower authorities. But the entire sale consideration minus purchase cost of the land cannot be considered as income derived from business activity of the assessee. The assessee has been carrying on regular business in landed property and it is an organised business of the assessee. The assessee has to incur various expenses, both direct and indirect, like establishment expenditure, salary to staff, phone charges, travelling and conveyance, staff welfare, advertisement and marketing charges, brokerage, interest etc., in addition to purchase cost of land. The assessee has not maintained regular book of account. As....
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....pages 7 to 8 on account of purchase cost of Rs. 501.83 sq. yards. It was submitted by the assessee before the lower authorities that this is relating to property at Gandhinagar purchased from Chandrakala Deshpande and others. It was stated that a portion of that property was purchased by the assessee's father. The total consideration was Rs. 60,12,360. The entire payment was made by the assessee's father Sri Rao Subba Rao and the same was reflected in Cash Flow Statement as follows: A.Y. 2004-05 Rs. 14,89,924 A.Y. 2005-06 Rs. 35,33,670 The balance amount of Rs. 5,15,000 was paid by the assessee. 23.1 Later this amount was reflected in the hands of HUF. The Assessing Officer in his Remand Report stated that except Rs. 9,88,766 the remaining amount out of Rs. 60,12,360 was explained. Further before the CIT(A) assessee accepted the addition of Rs. 9,88,766. Being so, the CIT(A) dismissed the ground. 23.2 We have heard both the parties on this issue. Before us, the learned AR fairly conceded that this issue is not pressed before us as the assessee offered the said amount for taxation before the CIT(A). Accordingly this ground is dismissed as not pressed. ITA Nos. 240 & 2....
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....uine. In view of this, the CIT(A) observed that there was sufficient opening cash balance available in the hands of the assessee on different dates to make these deposits into these two bank accounts viz., Canara Bank and SBI Bank on various dates and the assessee shown the receipt of Rs. 25 lakhs from Sri Rao Subba Rao on 28.8.2000 and Rs. 12 lakhs on 22.11.2000. The Cash Flow Statement also reflects the receipt of Rs. 40.50 lakhs from Sri Rao Subba Rao under "inflow side" of that statement. These are reflected in the original Cash Flow Statement filed by the assessee before the DDIT (Inv.). Being so, it was found by the CIT(A) that the amount of Rs. 37,04,100 is duly explained and deleted the same. The deletion of Rs. 37,04,100 is on valid basis and the deletion of addition by CIT(A) is confirmed. 25. The next ground in ITA No. 240/Hyd/2011 is with regard to addition on account of receipts allegedly received from Rao Subba Rao HUF. Before the CIT(A) it was submitted by the assessee that the amount of Rs. 40-.50 lakhs was actually received from Rao Subba Rao (individual) and the same was reflected in the cash flow statement filed before the DDIT (Inv.). Further an amount of Rs.....
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....nsideration, loss arising out of the transaction was duly reflected in the Cash Flow Statement filed before the DDIT (Inv.) in the hands of Rao Subba Rao. This fact was confirmed by the Assessing Officer in his Remand Report. After considering this fact as this was reflected in the Cash Flow Statement of Rao Subba Rao who is father of the assessee, the addition is deleted. Being so, we do not find any infirmity in the order of the CIT(A) and the same is confirmed. This ground of Revenue is dismissed. 27. The next ground in ITA No. 241/Hyd/2011 is with regard to deletion of addition of Rs. 13 lakhs as unexplained advance given to Smt. Satyamma and others. Brief facts of the issue are that as seen from the assessment order, the AO noted that consequent to entering into agreement dated 16.01.2004, the assessee has paid another sum of Rs. 13,00,000 to Smt. Satyamma. In this regard, he referred to some notings on page 19 of the seized document A/RSR/1. In this context, he further referred to the statement given by one Sri A.V.S.S. Prasad, accountant of the assessee, given before the DDIT (Inv) on 24.08.2005. He referred to a part of such statement given by the said person, at page-4 ....
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..... Result 150/Hyd/2011 Allowed 151/Hyd/2011 Partly allowed for statistical purposes 152/Hyd/2011 Allowed 153/Hyd/2011 Allowed 154/Hyd/2011 Allowed 155/Hyd/2011 Partly allowed 156/Hyd/2011 Partly allowed 240/Hyd/2011 Dismissed 241/Hyd/2011 Dismissed Rao Satya Kumar S. No. Assessee's Appeal ITA No. A.Y. S. No. Revenue Appeal ITA No. 1. 6/Hyd/2011 2000-01 1. 39/Hyd/2011 2. 7/Hyd/2011 2001-02 2. 40/Hyd/2011 3. 8/Hyd/2011 2002-03 3. 41/Hyd/2011 4. 9/Hyd/2011 2003-04 5. 10/Hyd/2011 2004-05 6. 11/Hyd/2011 2005-06 7. 12/Hyd/2011 2006-07 4. 42/Hyd/2011 28. The first common ground in assessee's appeals in ITA Nos. 6 and 7/Hyd/2011 is with regard to disallowance of interest on drawings and treating the same as income of the assessee. 28.1 This issue came for consideration in ITA Nos. 150, 151 and 156/Hyd/2011 in the case of Rao Shiva Kumar wherein we have held in the earlier paras that interest received and interest paid by a partner has to be netted off. Accordingly as....
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....assessee's father, brother and also by the assessee whenever he visits India. The CIT(A) also gone through the bank account of the assessee with SBI, SP Road Branch, Hyderabad wherein no rental income was credited. The CIT (A) also considered the Remand Report submitted by the Assessing Officer wherein it was submitted that the property was self occupied and considering all these facts, we are of the opinion that deletion of addition on account of notional rental income from house property is justified. This ground is dismissed. 33. The next ground in ITA No. 39/Hyd/2011 is with regard to deletion of addition of Rs. 8,50,000 on account of addition made towards unexplained investment in Victoria Castle. We have heard both the parties on this issue. The addition was made on the basis of seized material marked A/RSR/P01-5 as per which the assessee paid Rs. 30 lakhs in the previous year. According to the Assessing Officer, the assessee accounted only Rs. 4.5 lakhs and the balance of Rs. 8.5 lakhs was not accounted towards investment in Victoria Castle. Before the CIT(A) the AR taken a plea that the same was reflected in Cash Flow Statement filed before the DDIT (Inv.) and it was pro....
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.... Rs. 3 lakhs on account of repayment of loan. Brief facts of the issue are that the Assessing Officer made an addition of Rs. 3 lakhs towards repayment of loan as it was not properly explained. It was stated by the assessee that the assessee received Rs.1.60 lakhs from Rao Ravi Kumar (brother) on 26.4.2001 by cheque and balance Rs. 1,40,000 from Rao Shiva Kumar (brother). These transactions were duly reflected in their respective Cash Flow Statement. The CIT(A) after calling for Remand Report from the Assessing Officer deleted the same. Against this, the revenue is in appeal before us. 35.1 We have heard both the parties on this issue. We find no merit in the DR argument that it is unexplained. As seen from the facts of the case, the transaction is duly reflected in the hands of Rao Shiva Kumar and Rao Ravi Kumar as it is received from them. Accordingly, this ground is dismissed. 36. The next ground in ITA No. 41/Hyd/2011 is with regard to deletion of addition of Rs. 2,31,075 on account of unexplained NRI receipt. We have heard both the parties on this issue. It was stated by the assessee before the lower authorities that the assessee remitted Rs. 2,31,075 from his foreign ea....
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..... 12 lakhs. However, the CIT(A) deleted Rs. 1.54 lakhs on the reason that the Assessing Officer in his Remand Report stated that only Rs. 12 lakhs is to be sustained and Rs. 1.54 lakhs was duly explained in the Cash Flow Statement filed before the DDIT (Inv.). 38.1 We have heard both the parties and perused the material on record. The addition was made on the basis of second Cash Flow Statement filed by the assessee. However, on the basis of original Cash Flow Statement filed before the DDIT (Inv.) the income was offered to tax. Being so, further addition of Rs. 1.54 lakhs is not justified. The transaction which cannot be explained by the assessee was offered to tax on which the Assessing Officer agreed that only Rs. 12 lakhs is to be sustained. Now the department cannot make fresh claim when the CIT(A) deleted the addition on the basis of Remand Report. This ground is rejected. 39. The next ground is with regard to deletion of addition of Rs. 3 lakhs made towards undisclosed rental income. Brief facts of the issue are that the Assessing Officer made an addition of Rs. 3 lakhs on the basis that office space was given to rent to M/s. Vamsi Span Collective Homes for Rs. 6 lakhs....
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....nded property by the respective assessees is to be treated as income from business and we direct the Assessing Officer to adopt the income rate at 25% of gross receipt on sale of land. Accordingly, in this case also, we give similar direction to the Assessing Officer to decide the issue afresh. 43. The next ground in ITA No. 148/Hyd/2011 is with regard to sustaining addition of Rs. 11 lakhs on the basis of documents which are not acted upon ignoring the evidence produced and in the absence of anything adverse in the Remand Report. 43.1 Brief facts of the issue are that as noted by the AO, as per seized document in annexure A/RSR/27, page-45, the assessee has entered into agreement of sale on 07.06.2004 in respect of land of 315 Sq. Yds situated at H. No. 1-10-119 to 125/6, Mayur Marg, Begumpet for Rs. 29,92,500/-. He further noted, in this transaction, the assessee has paid advance of Rs. 12,00,000/- as per receipt dated 07.06.2004 at page-42 of the said annexure A/RSR/27. Stating that this transaction is not reflected by the assessee in its return of income, the AO held that the said amount of Rs. 29,92,500/- shall be added to the income of the assessee, treating as unexplai....
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....reement entered into between land owners Sri Ashok Kumar and Smt. Padmavathi with Smt. A. R. Gita and Smt. A.R. Lata, placed at page No. 108 to110. Stating that the land belongs to Sri Ashok Kumar and Smt. Padmavathi, he submitted that the other contentions raised by the assessee may be considered on merit. 43.4 The AR contended that no addition is called for in the hands of the assessee. 43.5 The DR submitted that the CIT(A) has carefully considered the submissions of the assessee and the above remand report of the AO. He has also perused the said agreement of sale dated 07.06.2004 entered into by the assessee with Sri Ashok Kumar and Smt. Padmavathi, on basis of which such addition has been made by the AO in the assessment. He has also seen the said bank statement of the assessee in Canara Bank, Kundan Bagh Branch and those sale deeds vide which the said property was sold by Sri Ashok Kumar in favour of Smt. A.R. Gita and Smt. A.R. Lata. It has been submitted that the said agreement, contained in that seized documents bundle, on basis of which such addition has been made, is a dummy document and the same should not be acted upon. In this regard, it has been submitted that t....
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....1 lakhs out of Rs. 29,92,500. The contention the assessee is that the assessee is a mediator in purchase and sale of property, provided a fictitious agreement and shown Rs. 1 lakh paid by Check No. 021398 dated 7.6.2004 and Rs. 11 lakhs cash. The AR also drew our attention to Cheque No. 021398 which represents the withdrawal of Rs. 2,25,000 on 4.6.2004 from Canara Bank, Kundan Bagh Branch, Account No. 01022 and also stated that the document is a dummy document and is not acted upon. He also produced a copy of document entered with Smt. Geeta and Smt. Lata in January, 2006 with reference to the property mentioned in the seized material. Being so, in our opinion, the addition cannot be made on the basis of un-acted document. The addition is deleted. 43.7 In the result ITA No. 144 and 148 are allowed, 145,146,147 and 149/Hyd/2011 are partly allowed. Gautami Constructions: Department Appeals ITA Nos. 170, 171, 172 and 173/Hyd/2011 - 4 Revenue appeals. 44. The first common ground in ITA No. 170 and 171/Hyd/ 2011 is with regard to deletion of Rs. 20 lakhs and Rs. 15 lakhs towards unexplained investment in A.Ys. 2000-01 to 2001-02, respectively. 44.1 Brief facts of the issue a....
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....ent says about the suit filed for the secretary post in M/s. Sri Sri Bhajan Brahmachari Sevashram between the parties Muthayam Agaiah Goud and Rao Subba Rao vide OP No. 496/1994. Later these parties entered into a compromise agreement and accordingly compromise petition was filed. Considering all these facts, the CIT(A) deleted the addition for these two assessment years. Against this deletion, Department is in appeal before us. 44.4 We have heard both the parties on the issue. The addition is made only on the basis of unsigned document having no dates. In our opinion, unsigned documents have no legs to stand. It is not supported by any corroborative materials to substantiate the payment mentioned in the impugned document. More so, the Remand Report sent by the Assessing Officer also stated that the claim of the assessee is genuine. Being so, the only possible view is to delete the addition. Accordingly, we do not find any infirmity in the order of the CIT(A). The deletion of addition is confirmed. This ground in both the appeals in ITA Nos. 170 and 171/Hyd/2011 is rejected. 45. The next ground in ITA No. 173/Hyd/2011 is with regard to deletion of addition of Rs. 23.5 lakh....
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....0,000/-, aggregating to Rs. 23,50,000/-, having been paid out of books of accounts, the AO held that, the same shall be added to the total income of the assessee. Accordingly, he added the said amount to the income of the assessee. 45.2 On appeal, the CIT(A) deleted the addition after calling Remand Report from Assessing Officer wherein the Assessing Officer stated that the agreement was not acted upon and the property was subsequently sold to M/s. Chalapati and reflected in the regular return of income. It is also observed that it is only a draft agreement which cannot be given any credit. Against this, the Revenue is in appeal before us. 45.3 We have heard both the parties and perused the material on record. We have gone through the contention of the Assessing Officer in the Remand Report furnished before the CIT(A). The AO in his remand report submitted that the same has been gone through and the relevant seized material was also examined. He noted, it is a fact that the said land of 8 acres was not transferred to M/s. Rithika Constructions. The same was sold subsequently to M/s. Chalapathi Estates. The land was purchased on 03.09.2002 vide DC. No. 5522/2002 for a consider....
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....he deletion is justified as the agreement was not acted upon. We confirm the action of the CIT(A). This ground in ITA No. 173/Hyd/2011 is dismissed. 46. The next ground is in ITA No. 172/Hyd/2011 for A.Y. 2005- 06. This is with regard to deletion of Rs. 18,92,500 out of Rs. 29,92,500 made on account of unexplained investment as advance to landlord. Brief facts of the issue are that as noted by the AO, as per seized document in annexure A/RSR/27, page-45, the assessee has entered into agreement of sale on 07.06.2004 in respect of land of 31.5 Sq. Yds situated at H. No.1-10-119 to 125/6, Mayur Marg, Begumpet for Rs. 29,92,500/-. He further noted, in this transaction, the assessee has paid advance of Rs. 12,00,000/- as per receipt dated 07.06.2004 at page-42 of the said annexure A/RSR/27. Stating that this transaction is not reflected by the assessee in its return of income, the AO held that the said amount of Rs. 29,92,500/- shall be added to the income of the assessee, treating as unexplained investment in such plot of land. As such, he added the said amount to the income of the assessee. 46.1 On appeal, the CIT(A) deleted Rs. 18,92,500 and sustained Rs. 11 lakhs out of the....
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....07 75,000 48.1 The same was treated as non-agricultural income. According to the Assessing Officer there is no basis for agricultural income. The assessee tried to convert his other income as agricultural income by adopting the theory of taking land on lease from his sons in the status of HUF. Being so, the lower authorities rejected the claim of the assessee. Against this, the assessee is in appeal before us. 48.2 We have heard both the parties on this issue. In these cases, the assessee taken a plea that he has taken land belonging to M/s. Gautami Constructions on lease and derived agricultural income. However, it was found that the assessee has not paid any lease rent for the A.Y. 2000-01. Being so, the claim was rejected. Even before us the assessee has not filed any evidence to show that the assessee taken the land belonging to M/s. Gautami Constructions on lease and derived agricultural income. Further in the absence of positive evidence to support the earning of agricultural income, we reject this ground for A.Y. 2000-01. 48.3 For the A.Y. 2001-02 to 2006-07, the assessee taken a plea that he has taken the land on lease from Gautami Constructions for carrying on ....
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.... For A.Y. 2005-06, the withdrawal is shown at Rs. 6,20,868, the household expenses are considered at Rs. 1,20,000 by the assessee. For A.Y. 2006-07, withdrawals were shown at Rs. 7,11,033, out of this only Rs. 60,000 was household expenses. Being so, considering all these facts, the household expenses estimated by the lower authorities are to be sustained. Accordingly, we reject the ground. In the result, the ground relating to addition towards low withdrawals in assessee's appeals in ITA Nos. 638 to 644 is dismissed. 50. The next ground in ITA No. 639/Hyd/2011 is with regard to sustaining addition of Rs. 2 crores on the basis of seized document A/RSR/PO-1/4/page 5, which is an agreement of sale dated 30.12.2000 executed by the assessee as per which the assessee paid Rs. 2 crores for purchase of bungalow bearing No. 198, at Akber road, Tadbun, Thokatta village. 50.1 Brief facts of the issue are that there was a seized document, A/RSR/PO-l/4/page 5, is an agreement of sale dated 30.12.2000 executed by the assessee, as per which he had paid advance of Rs. 2 crores for purchase of bungalow No. 198 spread over an extent of 3 acres of land near Bowenpally, Secunderabad, to the own....
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....t for Rs. 2 crores was ever made by the assessee by cheques towards advance as mentioned in the said agreement. Stating that the name of the bank and details of cheque are left blank, it was submitted that the same proves that the contents of the document are not correct. It was further stated that for the proposed transactions a banker's cheque for Rs. 11,00,000/- was purchased. The same was purchased from the account of Sri Rao Satya Kumar, but the same was not handed over to the vendor. Since the deal did not materialize, the DD (BC) was cancelled and the amount was deposited in the same bank account of Sri Rao Satya Kumar. It was further submitted that the said agreement was not acted upon. Stating that no amount was paid by the assessee either by cash or by cheques as mentioned in the said document, it was contended that the AO was not justified in making such addition. It was further submitted that the above issue was investigated by the DDI during post-search investigation and the matter was explained in detail. Further, drawing attention to the confirmation letter stated to be obtained from Mr. Saroj J. Chenoy, the AR requested that the said addition may be deleted. 50.4....
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....fore 30.7.2002 (d) Rs. 50 lakhs on or before 30.12.2002 (e) Rs.110 lakhs on or before the time of registration. Rs. 300 lakhs 50.6 However, the contention of the assessee is that the transfer has not taken place. Regarding this, the assessee furnished a copy of letter from the vendor Saroj J. Chenoy which reads as follows: "To WHOMSOEVER IT MAY CONCERN This is to certify that Sri Rao Subba Rao, a real estate broker, was in the process of negotiating on behalf of others for sale of a property bearing Bungalow No. 198, Tadbun, Secunderabad belonging to Mrs. Sona J. Chenoy. After the demise of my mother, Mrs. Sona J. Chenoy, I became the legal heir of the said land. This is to further certify that the deal was terminated because we could not obtain necessary clearance from Ministry of Defence for disposal of this land. We are still in the occupation of the house. We have not received any payment from Sri Rao Subba Rao on account of the proposed deal. Sd/- 05.03.09 (Saroj J. Chenoy)" 50.7 The CIT(A) was not ready to accept this letter as the transaction has not taken place. However, the fact is that had there been a payment of Rs. 2 crores on ....
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....on,, the addition made by the Revenue authorities is without sufficient material cannot be sustained. 50.8 We also place reliance on the judgement of Supreme Court in the case of Dakeshwari Cotton Mills Ltd. v. CIT (26 ITR 775) and Uma Charan shah & Bros. Vs. CIT (37 ITR 271) wherein held that whatever the strong suspicion that itself cannot be a basis for addition. Further the Tribunal in IT(SS)A No. 22/Hyd/2008 dated 18.2.2010 in the case of Sri Gyankumar Agarwal, Hyderabad, held that suspicion, however, strong cannot take place of material in support of the findings of the Assessing Officer. The Assessing Officer should act in a judicious manner, proceed with judicious spirit and should come to judicious conclusion. The Assessing Officer is required to act fairly as a reasonable person and not arbitrarily and capriciously. Assessment made should have adequate material and it should stand on its own legs. No addition can be made in the absence of corroborative material. Accordingly, we delete the addition and allow the ground taken by the assessee. 51. The next ground in ITA No. 639/Hyd/2011 is with regard to the addition of Rs. 2 lakhs being the payment to one Mr. M.F. Pet....
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.... 119, Tadbun, Secunderabad.: A.Y. Party name Amount (Rs.) 2001-02 D.N. Chenoy 31,25,000 2001-02 Avan Gopal Rao 10,41,000 2001-02 Bapuji Edulji Chenoy 10,40,000 2001-02 Batsy Sohrab Dittia 10,40,000 Total 62,46,000 52.2 The assessee pleaded before the lower authorities that out of the above, Rs. 30 lakhs was received from Sri Uma Karan on 22.2.2008. During the investigation Sri Uma Karan was summoned and examined u/s. 131 of the Act. He was asked to explain the same. He could not substantiate the payment of Rs. 35 lakhs to Rao Subba Rao. Being so, it was confirmed. Against this, the assessee is in appeal before us. 52.3 We have heard both the parties and perused the material on record. The assessee taken a plea before us that the assessee filed affidavit which was not examined. Without examining the same addition was made. According to him without examination of the affidavit addition cannot be sustained. Placing reliance on the judgement of supreme Court in the case of Mehta Parekh & Co. Vs. CIT (30 ITR 181), we are inclined to remit the issue back to the file of the Assessing Officer to cause necessary enquiry and ....
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.... no basis for addition of Rs. 50,49,500. 54.2 The DR submitted that the total investment in Mansanpally land in the name of the assessee and his brother Rao Raj Kumar is at Rs. 54,13,335. Even in the remand proceedings the assessee failed to explain the investment. He relied on the order of the CIT(A). 54.3 We have heard both the parties and perused the material on record. The authorities below accepted the claim of the assessee that the total investment was at Rs. 54,13,335 and investment was not only made by the assessee himself but also made by other two persons Sri Rao Raj Kumar and M/s. Gautami Constructions. Being so, it is appropriate to see the exact investment by each party and consider the same in the respective hands accordingly. Hence, we remit this issue back to the file of the Assessing Officer with a direction to reconsider this issue afresh and decide accordingly. This ground is partly allowed for statistical purposes. 55. The next ground in ITA No. 641/Hyd/2011 is with regard to addition of Rs. 5 lakhs being the payment made to D. Sudhakara Varma. 55.1 Brief facts of the issue are that there was a payment of Rs. 14.5 lakhs towards Victoria Castle buildi....
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.... learned AR submitted that the assessee has negotiated for purchase of the said flat from Smt. Pushpalatha Reddy, mother of Sri Sunil Reddy. For that purpose he had paid Rs. 10,00,000/- on various dates, and the same is reflected in page No. 22 of A/RSR/l. The final settlement was made for a consideration of Rs. 18,00,000/- and the assessee has purchased that property vide sale deed dated 24.12.2003. The said transaction was duly reflected in the cash flow statement filed before the DDIT(Inv). It was stated, since the resultant deficit amount is basis of such statement was offered to tax, no separate addition is called for on above account. Furnishing a confirmation letter for such sale consideration, it was submitted that at different points of time the assessee was preparing accounts in respect of that flat and was noting the transactions in different sheets of paper. It was stated that the AO instead of taking into account the multiple / overlapping entries in respect of the same transaction, has added the amount thrice. He drew our attention to the photocopies of page No. 22 of A/RSR/l, page No. 60 of A/RSR/6 and page 52 & 56 of A/RSR/11(sale deed) and it was reiterated that th....
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....17 in the Cash Flow Statement was offered to tax for the assessment year under consideration. He submitted that sustaining of addition of Rs. 6,50,000 leads to making the addition three times for a single lapse. According to him, once unaccounted payment of Rs. 10 lakhs to Sri Sunil Reddy was added, secondly unaccounted payment of Rs. 24.5 lakhs was considered for addition and thirdly, unaccounted payment for purchase of flat at Rs. 9 lakhs was considered. According to him, the total investment is only Rs. 18 lakhs and it was duly reflected in the Cash Flow Statement. The fact of Rs. 18 lakhs payment to Sri Sunil Reddy was also confirmed by him. Being so, there cannot be any addition on this count once again. We examined this fact with reference to the Remand Report. The Remand Report is clear that total investment on this count is only Rs. 18 lakhs which was duly reflected in the Cash Flow Statement. Being so, there cannot be any further addition. Thereafter, registration cost if Rs. 1,08,100. Being so, when the vendor confirmed the payment of Rs. 18 lakhs it should be relied upon and cannot be rejected without any contrary evidence. Accordingly, we delete the addition as the asse....
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....ed. 57.4 We have heard both the parties and perused the material on record. During the course of first appellate proceedings, Remand Report was called from the Assessing Officer. The Assessing Officer stated that as per the seized material, there was a receipt given by Sri Govinda Rao for Rs. 1 lakh to Sri Rao Subba Rao on 12.3.20004. As per confirmation letter from Mr. Bhatt, Rs. 1 lakhs was paid by Sri Rao Subba Rao. The assessee taken a plea before the Assessing Officer that he was only a mediator between Sri Govinda Rao and Sri Sadashiv Bhatt. However, the assessee not furnished the details whether actually Mr. Sadashiv Bhat has purchased this property flat No. 106, Airlines Apartments, Begumpet. Being so, we feel it appropriate to remit the issue back to the Assessing Officer with a direction to the assessee to furnish full details of the transaction. This ground in ITA No. 242/Hyd/ 2011 is partly allowed for statistical purposes. 58. The next ground in ITA No. 643/Hyd/2011 is with regard to addition of Rs. 6,06,080 towards market value of the property on the basis of seized material A/RSR/PO-1/1 pages 34 and 35. 58.1 The ld. AR has objected to the addition of Rs. 6,0....
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.... assessment. It was stated that he adopted the market value of the land as consideration received for transfer of the impugned land which is not justified. No evidence for payment of any on-money was found to support such addition. There cannot be any addition u/s. 69 of any notional consideration. It was further stated that no addition can be made on this account as the amount represented a receipt from a bona-fide source but not a revenue out go or investment. It was further submitted, even otherwise the transaction is revenue neutral as the cost of 163.54 sq. yds of land is Rs. 4,01,654/- and the sale consideration received is Rs. 3,26,500/-. Thus, there is a loss of Rs. 75,154/- on that account. It was further submitted that in the cash flow statement field before the DDIT(Inv), the said sale consideration of Rs. 2,61,500/- has been inadvertently omitted. Stating that the receipt is from a genuine and from a bona-fide source evidenced by a sale deed, it was submitted that the receipt on that account may be allowed to be adjusted against deficit. 58.3 On the other hand, the learned DR submitted that in A.Y. 2004-05, the assessee has purchased the said property for Rs. 16 lakh....
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....7,31,500 to the income of the assessee. 60.2 The CIT(A) observed that the assessee has failed to explain the alleged loan of Rs. 22.5 lakhs (Rs. 20 lakhs + Rs. 2.5 lakhs) as there are two deposits in the bank account. Since the Assessing Officer already made addition of Rs. 7,31,500 the CIT(A) direct to make further addition of Rs. 15,18,500. Against this the assessee is in appeal before us. 60.3 The AR submitted that the addition relates to receipt of a loan of Rs. 20 lakhs from M/s. Badam Finance & Leasing, Lakdikapool, Hyderabad. The Assessing Officer in his Remand Report stated that since the assessee failed to produce confirmation letter, the loan is not genuine and liable for addition. It is submitted that the loan was incurred by pay order No. 173389, Andhra Bank, Khairatabad Branch, Hyderabad which was deposited in Canara Bank, Kundan Bagh branch account No. 2145. The same was repaid on 28.12.2005 vide cheque No. 366591 IDBI Bank. The bank account of the assessee was filed as additional evidence under rule 46A. The receipt acknowledging interest on the above loan was available in the seized records and form part of the additional evidence. In view of the above documen....
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..../2011 is with regard to deletion of Rs. 56.5 lakhs, payment made to Sri D.N. Chenoy towards unaccounted payment.' 61.1 Brief facts of the issue are that as per the seized document A/RSR/l page-31, 32 & 33, the assessee has made payment of Rs. 56.50 lakhs during the year relevant to the A.Y. 2003-04, to four different persons including Sri D.N. Chenoy. During the assessment proceedings, vide his questionnaire dated 07.12.2007, he has asked the assessee to explain whether such payments have been reflected by him in his return of income. However, stating that the assessee has not filed any reply in response to such query, he added the said amount to the income of the assessee, treating the same as undisclosed income for this assessment year. 61.2 The AR submitted that in the course of negotiation for the deal in respect of the said property, bungalow No. 199, Tadbun, Secunderabad, the assessee has paid Rs. 143.96 lakhs to Sri D.N. Chenoy and others towards advance, spread over four financial years from F.Y 2000-01 to 2003-04. It was stated that the AO has made such addition of Rs. 56,50,000 as advance paid by the assessee, not accounted for in the cash flow statement, on account....
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....eflected in the original Cash Flow Statement filed before the DDIT (Inv.). Against this the Revenue is in appeal before us. 62.2 We have heard both the parties on this issue. The addition was deleted on the basis of reflection of the transaction in the original Cash Flow Statement filed by the assessee before the DDIT (Inv.). Being so, we confirm the order of the CIT(A) in para 12.3 of his order. This ground is rejected. 63. The next ground in ITA No. 827/Hyd/2011 is with regard to deletion of Rs. 20 lakhs which was initially admitted as the payment made to Mr. D.N. Chenoy as unaccounted payment. 63.1 Brief facts of the issue are that as per the seized document vide Annexure A/RSR/1/page-31, 32 & 33, the assessee has made payment of Rs. 20,00,000 to four different persons, including Sri D.N. Chenoy during the previous year relevant to the A.Y. 2004- 05, for purchase of the property, bungalow NO. 119, Tadbun, Secunderabad. Vide query No. 1 of his questionnaire dated 7.12.2007, he has asked the assessee to explain the source of such payment and to clarify as to how the same are reflected in his return of income. However, stating that the assessee has not filed any reply to s....
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....seized document A/RSR/1/page-22, the assessee has paid a sum of Rs. 10,00,000 till 12.2.2004 to one Mr. Sunil Reddy. Vide query No. 2 of his said questionnaire, he has asked the assessee to explain as to how such payment was accounted for by him. However, stating that the assessee has not filed any reply to that query, the Assessing Officer added the said amount to the returned income of the assessee. 64.2 The DR relied on the order of the Assessing Officer. 64.3 The AR submitted that the assessee negotiated for purchase of flat No. 201 in RK Towers from Smt. Pushpa Latha Reddy, mother of Sri Sunil Reddy. For the said purpose he has paid Rs. 10,00,000 on various dates. Finally the property was registered in the name of the assessee and his son for a consideration of Rs. 18,00,000 vide sale deed dated 24.12.2003. The AR submitted that the sale consideration paid of Rs. 18,00,000 is duly reflected in the Cash Flow Statement filed before the DDIT (Inv.) and the resultant cash deficit on the basis of such statement was offered to tax. Stating that the assessee has offered income for taxation on the basis of such original Cash Flow Statement filed before the DDIT (Inv.), the AR su....
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....d Cash Flow Statement filed along with the return of income consequent to search. 65.2 The DR submitted that the assessee has not disclosed this investment in his return of income and the same is to be confirmed. 65.3 The AR submitted that it may be pertinent to mention here that the investment has been duly accounted for in the original Cash Flow Statement of the assessee filed before the DDIT (Inv.) and the resultant deficit has been offered to tax. The total investment in the land amounting to Rs. 14,89,925 has been reflected in the Cash Flow Statement filed before the DDIT (Inv.). However, in the second Cash Flow Statement the investment was shifted to HUF. Since the assessee does not press for the HUF status as opined by the Assessing Officer, the amount has been duly declared in the Cash Flow Statement filed before the DDIT (Inv.), no addition on this account is called for. 65.4 We have heard both the parties and perused material on record. The Assessing Officer in his Remand Report stated that this amount is reflected in the Cash Flow Statement filed before the DDIT (Inv.). It is also an admitted fact that the deficit in Cash Flow Statement at Rs. 12,38,318 is relat....
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....s called for on this account. 67.2 We have heard both the parties and perused the material on record. The deletion is based on reflection of this transaction in the Cash Flow Statement filed before the DDIT and offering of deficit in the Cash Flow Statement at Rs. 12,38,317 for taxation. Being so, the deletion is justified and we confirm the order of the CIT(A) on this issue. 68. The last ground in ITA No. 828/Hyd/2011 is with regard to deletion of Rs. 9.15 lakhs, payment made to A. Usha Swamy. 68.1 Brief facts of the issue are that this amount was added since the assessee failed to furnish explanation due to paucity of time. This amount represents a repayment of loan to Sri A. Usha Swamy. The loan was incurred prior to 1.4.1999. The same was repaid during the year by cheque drawn on Canara Bank, Kundan Bagh Branch, Hyderabad and is duly reflected in the cash flow statement filed before the DDIT (Inv.). The Assessing Officer had added this amount for the reason that the same is not reflected in the Cash Flow Statement filed along with the return in response to notice u/s. 153A. However, since the amount was repaid by cheque out of known sources of income and the same has b....
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....should not have been added as the income of the assessee as unexplained without assigning cogent reasons. The same, therefore, liable to be deleted. 70.3 We have heard both the parties and perused the material on record. In the Remand Report submitted by the Assessing Officer during the first appellate proceedings he has not opined anything against the assessee. This is a small quantum of jewellery of 608.08 grams. Considering the age of the assessee and his status no addition can be sustained on this issue. The deletion of the addition by the CIT(A) is justified. This ground is rejected. 71. The next ground is with regard to deletion of addition of Rs. 20,000. 71.1 We have heard both the parties and perused the material on record. This amount was added without much discussion in the assessment order and this was towards investment made in the Victoria Castle. The CIT(A) deleted the same on the basis of reflection of this amount in the original Cash Flow Statement filed before the DDIT (Inv.). Accordingly, we confirm the deletion of addition. This ground is rejected. 72. The next ground is with regard to deletion of Rs. 11.06 lakhs towards investment in Tirumalagheri pr....
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.... on this issue and perused material on record. This addition was relating to purchase of property and payment made to Rajan Deshpande for the plot at Tirumalagheri during the F.Y. 2005-06. The assessee has already invested Rs. 11,06,630 up to the date of search and it was duly reflected in the Cash Flow Statement filed before the DDIT (Inv.). The balance payment was made after the date of search. Being so, deletion of addition is justified and this ground is rejected. 75. In the result, Revenue appeals in ITA No. 826 to 829/Hyd/ 2011 are dismissed. Rao Subba Rao (HUF) S. No. Assessee's Appeal ITA No. A.Y. 1. 787/Hyd/2011 2000-01 2. 788/Hyd/2011 2001-02 3. 789/Hyd/2011 2002-03 4. 790/Hyd/2011 2003-04 5. 791/Hyd/2011 2004-05 6. 792/Hyd/2011 2005-06 7. 793/Hyd/2011 2006-07 76. All the above appeals are relating to Rao Subba Rao HUF. In ITA No. 787/Hyd/2011 for A.Y. 2000-01, facts are that the assessee is an HUF. In this case, Sri Rao Subba Rao as the Karta of the HUF has filed the return of income for the A.Y. 2000-01 on 29.12.2006. As noted by the AO, earlier search and seizure operation u/s. 132(1) of t....
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....f the Act, determining total income at Rs. 44,84,000. 76.2 On appeal the CIT(A) confirmed the addition. Against sustaining of the addition, the assessee is in appeal before us. 77. In ITA Nos. 788 to 793/Hyd/2011 for A.Ys. 2001-02 to 2006-07 the facts are as follows. The assessee is an HUF. In this case, Sri Rao Subba Rao as the Karta of the HUF has filed the returns of income for the above A.Ys. 2001-02 to 2006-07 on 29.12.2006. As noted by the AO, earlier search and seizure operation u/s. 132(1) of the Act, were conducted in the residential- cum-business premises of Sri Rao Subba Rao, at plot No. 119, Road No. 10, Jubilee Hills, Hyderabad, on 24.08.2005. After the search operation, he has filed such returns in the status of HUF for the above assessment years on 29.12.2006. In response to notice u/s. 153C of the Act issued by the AO on 04.10.2007, the assessee vide letter filed on 26.12.2007, has requested that the said returns filed for the Asst. Years 2001-02 to 2005-06 in the status of HUF on 29.12.2006 may be considered as returns filed in response of such notice. Simultaneously, the AO selected the return filed by the assessee for the Asst. Year 2006-07 for scrutiny ass....
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....the assessment proceedings the assessee failed to establish genuineness of such transactions, the AO added the said amounts aggregating to Rs. 51,96,722/-, treating the same as unexplained cash credits. Since the assessee has shown returned income at Rs. 42,75,000/-, with the two additions of Rs. 11,50,000/- and of Rs. 51,96,722/-, the AO completed the assessment for the Asst. Year 2003-04 on a total income of Rs. 1,06,21,720/-. 77.4 Further, in the return filed for Asst. Year 2004-05, the assessee has shown receipts of various amounts in the receipts and payments account filed with the return. Those eight amounts shown as received from different persons and various sources are referred to by the AO at para 4 of the assessment order. However, since during the assessment proceedings the assessee failed to establish genuineness of such transactions, the AO added the said amounts aggregating to Rs. 55,19,788/- to income of the assessee, treating the same as unexplained cash credits. Since in the return the assessee has shown income at Rs. 15,00,000/-, with the two additions of Rs. 11,50,000/- and of Rs. 51,19,788/-, the AO completed the assessment for the Asst. Year 2004-05 determi....
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....1,21,14,601/-, the AO completed the assessment for the Asst. Year 2006-07 determining total income at Rs. 2,98,03,160/-. 77.7 The CIT(A) dismissed all these appeals. Against this the assessee is in appeal before us. 77.8 In the course of the hearing before us the assessee filed additional grounds and filed a petition for admission of the additional grounds in ITA Nos. 787 to 793/Hyd/2011 which read as follows: (1) Assumption of jurisdiction by the Assessing Officer suo moto, without the case of the appellant-HUF being centralised with him under section 127 of the IT Act, is bad in law and, therefore, the assessment order in the case of HUF is a nullity for want of jurisdiction and liable to be quashed. (2) Regularising the returns filed voluntarily by the appellant HUF by issuing notice under section 153C has no legal sanction when recording of satisfaction is a condition precedent before issuing notice under the said section for assuming jurisdiction and particularly when no incriminating material was found in course of search as admitted by the AO in the assessment order. (3) Filing of returns under on patently wrong advice of the tax expert not supported by any le....
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....ual picture to CIT(A) that the claim made by the assessee under the advice of CA was not correct to initiate and go ahead with the proceeding under section 153C. 77.13 The AR submitted that the CIT(A), while accepting the cash flow statement filed before DDIT in his individual capacity, as the base for the purpose of his order, should not have reached any adverse conclusion against assessee-HUF in the absence of any incriminating evidence found in course of search and merely because a HUF return was filed on advice of the auditor. 77.14 He submitted that in all fairness, the returns filed in the hands of HUF should have been ignored on the basis of AO's findings in income tax and wealth tax orders as extracted in his order and all the additions in the HUF hands should have been deleted. The CIT(A) should have considered specific findings of AO that the HUF was created by the assessee by showing bogus and fictitious agricultural income. There was no question of assessing the HUF as an entity merely because, a return was filed on the incorrect advice of the tax expert. 77.15 It is submitted that the income shown in HUF hand and additions made in the order out of the cash flo....
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....e assessing the wealth and clubbed the assets shown in the hands of HUF and Individual as he was of the opinion that there was no nucleus of HUF nor it could have acquired any asset out of fictitious agricultural income which constituted the source for nucleus. Assessee did not filed any appeal against the said order. This fact on the records of AO was not considered by the learned CIT(A). In the light of the above, the assessment in the hands of HUF should have been set aside and all the additions deleted. 78. Regarding the legal issues involved in the case, the AR submitted that the opinion of various Courts in the context of filing a return under incorrect advice of the tax experts and without confirming to legal requirements: In the light of the above facts, the assessee submits the following judicial precedents for consideration. 78.1 The first issue relates to filing of return under the wrong impression of law. The AR placed reliance on the judgement CIT v. VMRP Firm (56 ITR 67) wherein held as follows:- "The doctrine of "approbate and reprobate" is only a species of estoppels" it applies only to the conduct of parties. As in the case of estoppel, it cannot operate a....
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....ants might adopt." ( S.R. Koshti v. CIT 193 CTR 518) (Guj.)." 78.5 The AR submitted that the CBDT Circular 14(XL-35) of 1955, dated 11-4-1955 states that, officers of the Department must not take advantage of the ignorance of an assessee as to its rights. It is settled law that CBDT Circulars are binding on Revenue authorities. This circular of the Board is in consonance with the constitutional provision that no tax can be levied without the authority of law. This also accords with the principles enunciated by the Courts. 78.6 The AR further submitted that the assessee out of ignorance included exempted income as taxable in the return. It approached the Court to direct the AO to exclude said amount from assessable income. Plea of the revenue was that department could not be faulted for accepting returns filed by assessee where he himself had offered for tax sum received from superannuation fund. The plea of the department was not accepted in the case of SDS Mongia v. CBDT (160 Taxman 101), 78.7 In the case of Narayanan vs. Gopal AIR 1960 SC 235, the Hon'ble Supreme Court held that an admission in the return is not conclusive and it would be decisive only if not subsequentl....
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....assumption of jurisdiction would be wrong and would invalidate the proceedings. It may be mentioned here that the assessment records of the assessee were inspected. But no satisfaction was found to have been recorded. He drew our attention to the order sheet entries. 78.10 He submitted that the cases were not centralized with the AO under section 127 of the IT Act. He has neither got them centralized with him under section 127 nor handed over the seized document with his satisfaction to the jurisdictional Assessing officer for initiating appropriate proceedings. 78.11 The AR submitted that no incriminating document was found in course of search of the premises of Rao Suba Rao (Ind) belonging to HUF, a fact borne out on record because of the observation of the AO that no document was found in course of search pertaining to HUF which was created with bogus income. Further on the same analogy, the AO proceeded to club all the assets in the hands of assessee-individual. According to the AR the Assessing Officer cannot frame the assessment without recording the satisfaction for initiating proceeding under section 153C. 78.12 The AR submitted that one cannot protect another by f....
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.... firstly satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized in the course of search belong to a person other than the person who was searched, then such assets or books of account or documents shall be handed over by him to the Assessing Officer having jurisdiction over such other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under Section 132 or the requisition under Section 132A. For instance, in the present case, with reference to the Rao Subba Rao Group search had t....
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....Chapter XIV-B, may be of some use. This section provided for assessment of the undisclosed income by any person other than the person searched under Section 132. It applies to search conducted prior to 31.05.2003. It provided as follows:- "Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and the provisions of this Chapter shall apply accordingly." 78.20 It will be seen that whereas Section 158BD refers to the satisfaction of the Assessing Officer that any "undisclosed income" belongs to any person other than the searched person, Section 153C(1) in contrast refers merely to the satisfaction of the Assessing Officer that the valuable article or books of account or document "belongs" to a person other than the searched person. The latt....
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.... requisitioned belongs to somebody else. There is nothing brought on record by the Department to show that such satisfaction was recorded by the Assessing Officer. Recording satisfaction by the Assessing Officer is neither procedural nor administrative defect but it relates to the jurisdiction defect. Accordingly, the assessment framed in this case u/s. 153C is bad in law and to be quashed. Our view is fortified by the judgements relied on by the assessee's counsel. Accordingly, we quash all the assessments framed in respect of HUF in all these assessment years. As we have quashed the assessment orders itself, we refrain from going into the other grounds raised by the assessee HUF. However, whatever the admitted tax paid by the assessee in all these assessment years is forfeited in view of the judgement of the Supreme Court in the case of CIT vs. Shelly Products & Anr. (261 ITR 367) (SC). In the result all the assessee appeals in ITA Nos. 787 to 793/Hyd/2011 are allowed. 79. In the result, Rao Ravi Kumar - Assessee appeals 1. 1595/Hyd/2010 Allowed 2. 1593/Hyd/2010 Allowed 3. 1594/Hyd/2010 Partly allowed for statistical purposes ....