TaxTMI 
TaxTMI 
2014 (4) TMI 71
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....lot in the name of minor son. 3. Facts of the case in brief in relation to this issue are that the assessee was found to have purchased a plot at Madhapur for Rs.4,00,000/- in the name of his minor son Sri. M. Ramakrishna Reddy. On being asked about the source of investment, it was explained by the assessee that the sale consideration was paid by cheque and the transaction was duly recorded in his account books. However, the Assessing Officer did not find the explanation satisfactory and treated the investment as .unexplained. During the appeal proceedings, ld AR filed the copies of sale deed, cash book, ledger and the bank statement evidencing the payments made by cheque and duly recorded in the account books. It was submitted that the said account books were seized during search and the AO without verifying the same made the addition. 4. On appeal, the CIT(A) deleted the addition made by the assessing officer, observing as follows:- "On due verification of the evidences produced by the assessee, I am convinced that the source of investment in the said land was satisfactorily explained by the assessee. The payments were made by cheque which were duly reflected in the asse....
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....the Assessing Officer towards unexplained investment in the purchase of plot of Rs. 4,00,000/- on account of unexplained investment in purchase of site at Madhapur of Rs. 3,40,000/- He has also erred in deleting addition made of Rs 4,00,000/- towards unexplained investment in purchase of plot at Madhapur in the name of his minor daughter. 2. The learned CIT(A) erred in holding that the sources for the investment were satisfactorily unexplained by the assessee. 3. The learned CIT(A) ought to have considered the fact that the assessee did not properly explained the sources except mere saying that the payments were made through bank and the transactions were recorded in the books of account. 4. The learned CIT(A) ought to have not admitted those fresh evidences submitted by the assessee which is against Rule 46 of the I.T. Act. 11. We heard both the parties. It is mentioned by the CIT(A) at para 2.2. at Page 2 of his order that during the Appellate Proceeding., the Ld.AR filed the copies of sale deed, cash book, ledger, and the bank statement evidencing the payments made by cheque and duly recorded in the accounts books. The CIT(A) has also observed that the said account b....
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....ssessing Officer towards assessee's understatement in cost of construction in "Punnaiah Plaza" basing on the seized material. 2. The CIT(A) erred in concluding that the A.O. estimated the cost of construction on presumption as the estimation was made based on the seized document and the rate adopted based on the valued as per seized document only. 19. We had heard both the parties. In the cases of Shri Y.Shivarama Krishna in ITA No 969-970/Hyd/08, the co-ordinate Bench of this Tribunal, has held as follows:- "Search and seizure operations were conducted on 07.10.2004. In the premises of the person relating to Sujana group of companies, including the assessee. During the course of search operations, some material was found from the residence of one shri C.V.Ramana Reddy. The assessing officer on the basis of the presumption under Section 132(4) of the Act made additions in the hands of the present assessee. However, on appeal, the CIT(A) held that presumption under Sec.132(4) is applicable only in respect of persons from whose custody or possession, seized material was found and it cannot be applied to third parties The CIT(A) placed reliance on the third member decision of....
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....ition of Rs.3,12,000/- for assessment year 2001-02, of Rs.8,62,440/- for assessment year 2002-03 and of Rs.62,665/- for assessment year 2003-04. 24. During the appeal proceedings before the CIT(A), learned authorized representative filed the written submissions stating that the assessee had maintained regular books of account for all the three years under consideration which were duly audited. Copy of the audited profit and loss account and balance sheet were filed along with the returns of income. The sales turnover and cost of land of Rs.54,00,000/- shown in the books, have been accepted by the assessing officer. Hence, it was submitted that there was no scope whatsoever for assessing officer to estimate the income @ 15% of sales turnover. He vehemently opposed the estimation of income on work in progress in assessment year 2001-02. The learned authorized representative filed copies of audited accounts during the appeal proceedings. 25. The CIT(A) deleted the impugned additions made by the assessing officer, by observing as follows:- "I have duly considered the submissions of the assessee and the material available on record. I do not agree with the contention of the ld.....
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.... Yousufguda. The assessee owned this land jointly with Sri.M. Koti Reddy, which was given for development to M/s BRR Constructions. The sale value of land was determined at Rs. 54,00,000, 50% of which was shown in the hands of the assessee HUF. In lieu of the land transferred to M/s BRR Constructions, the assessee received flat No.501 along with the appurtenant lands. The flat was valued at Rs.16,00,000 and the same was claimed as deduction u/s 54F of the Act. The assessing officer observed that the appurtenant land admeasuring 2,830 sq. ft. was the extra gain to the assessee which should be taxed as long term capital gains. He valued the said appurtenant land at Rs 23,20,600 @ Rs. 410/- per sq. ft. and added the differential amount to the income returned. 32. In his written submissions filed before the CIT(A), learned Authorised Representative stated that capital gains tax is leviable on the sale of land jointly held with Sri. M. Koti Reddy. The entire land was transferred to the developer M/s BRR Constructions for Rs.54,00,000/- This amount was accepted and allowed as cost of land by the assessing officer in the assessment of Sri. B. Rami Reddy proprietor of M/s BRR Constructi....
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....tition deed as per provisions of section 48 of the I.T. Act. 3. The ld. CIT(A) erred in not considering fact that the property was given on development jointly by the assessee and Sri. M. Koti Reddy (Indl) and in turn the assessee has received developed area as per partition deed. This is nothing but full value of consideration for the purpose of section 48 of the I.T. Act. 36. We have heard both the parties. We find that the assessee has owned this land jointly with Shri M.Koti Reddy and it was given for development to M/s.BRR Constructions. The sale value of the land was determined at Rs.54,00,000 50% of which was shown in the hands of assessee HUF. In lieu of the land transferred to M/s.BRR constructions, the assessee received flat NO.501, along with the appurtenant lands. The flat was valued at Rs.16 lakhs and the same was claimed for deduction u/s.54F of the Act. The assessing officer observed that the appurtenant land admeasuring 2,830 sq. ft. was the extra gain to the assessee which should be taxed as long term capital gains. He valued the said appurtenant land at Rs 23,20,600 @ Rs. 410/- per sq. ft. and added to the income returned. 37. The Learned Counsel for the ....
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....exed cost of acquisition long term capital gains was computed at Rs. 30,20,598/- The said amount was invested in a new property named "Punnaiah Plaza" at Rd. No.2 Banjara Hills, Hyderabad vide registered sale deed dated 14.8.2004. The assessee claimed deduction under S.54F, but the same was disallowed by the assessing officer on the ground that the new property purchased was not a residential property as required under S.54F. 43. In his written submission filed during the appeal proceedings before the CIT(A), the learned authorized representative for the assessee stated that the property purchased by the appellant was a residential property as evident from the construction plan approved by MCH, guarantee issued by the bank approval of Director General of Fire Services and Govt. G.O. permitting the construction of residential complex. Learned authorized Representative also filed copies of all these evidences as additional evidences as per the provisions of Rule 46A. 44. The aforesaid additional evidences were forwarded to the assessing officer for verification and comments vide CIT(A)'s office letter dated 17.3.2009. The assessing officer vide his letter dated 4.5.2009 objecte....
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....ated 11.1.1999 also specifically and repeatedly referred the property as a residential complex. The memorandum of understanding dated 14.1.2001 entered for the joint development and construction of the said property also referred to the construction of residential complex. 2.6. In view of the aforesaid evidences I hold that the property purchased by the appellant was a residential property and therefore the appellant was eligible for deduction u/s 54F of the Act. It is immaterial that the property was subsequently leased out to M/s APP Lab Technologies P. Ltd., which might have used the property for non residential purposes. I am supported in my views by the decision of ITAT, Delhi in the case of Mahavir Prasad Gupta vs JCIT (2006) 5 SOT 353. where the assessee let out the new property for commercial use due to which AO disallowed the claim of deduction u/s 54F. Hon'ble Tribunal held that the only requirement of sec. 54F is the construction or purchase of a residential house by the assessee. The use of the property is not the relevant criteria to consider the eligibility of sec. 54F benefit. It was held that mere non residential use would not render a property ineligible for ben....
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....ank guarantee for security deposit given by State Bank of India to MCH also refers to the property as residential complex. e) Permission / No objection certificate given by the Fire Service Department also refers to the property as residential complex f) The memorandum of understanding dated 14.01.2001 entered for the joint development and construction of the said property also refers to the construction of residential complex. We find no infirmity in the view taken by the CIT(A) as to the residential nature of the property purchased by the assessees, considering the factual aspects noted above. Even though the property was subsequently leased out to M/s.APP Lab Technology P Ltd, and it has been used for non-residential purposes, on that ground, the deduction u/s.54F cannot be denied. Mere non residential use subsequently would not render the property ineligible for benefit u/s.54F, if it is otherwise a residential property, as held by the Delhi Bench of the Tribunal in the case of Mahavir Prasad Gupta Vs JCIT (5 SOT 353). Respectfully following the said decision of the Tribunal, we are of the opinion that the CIT(A) had rightly allowed deduction u/s.54F. 49. Further, w....
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....erused the relevant seized documents. It is an undisputed fact that no evidence of onmoney payment by the appellant was found during search at any of the premises. Neither the seller nor the purchaser stated or accepted the on - money transactions. In such circumstances onus is on the AO to prove the payment of on money as held by the Hon'ble Supreme Court in the case of K.P. Verghese (131 ITR 597). One such case came up before the Hon'ble Madras High Court in CIT Vs P.V. Kalyana Sundaram (282 ITR 259) where the Tribunal had accepted the assessee's plea that no on money payment was made though the other party to the transaction .accepted receipt and the market value was also significantly higher than the value recorded in the sale deed. It was held by the Hon'ble Court that the payments over and above the amount mentioned in the registered document though widely prevalent would require investigation to establish the same where such payment was denied since the burden of proving that the appellant is not real falls on the revenue. There can be no presumption of on money payment. The decision of the Hon'ble Madras High Court was affirmed by the Apex Court in the decision reported in ....
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....und from a third person, cannot be used for addition in the assessment of the assessee. In the case of Amarjeet Singh Bakshi (263 ITR (AT) 75 (Del) the Hon'ble Third Member held that ho addition can be sustained on the basis of notings on a slip of paper found in the premises of a third party. It was held that what was found on a slip of paper or a loose sheet is not covered by any rule under the Evidence Act . In the absence of anything more to corroborate the inference drawn on the basis of a noting on a slip of paper the addition could not be sustained. It was held in the case of Rama Traders v ITO (32 TTJ 483) TM(Pat) that presumption can be drawn against person from whom books seized but not against any third person,. This decision was followed by Hon'ble ITAT Hyderabad in the case of Shri.V.Y. Sivaramakrishna (Supra) . In fact the Hon'ble Supreme Court in the case of P.R. Metrani vs CIT (287 ITR 209) held that the presumption u/s 132 (4A) is neither conclusive nor applicable to the assessment proceedings.. The document seized from the residence of Shri Harshavardhan Reddy, relied upon by the AO was in respect of some dispute with Sri. P. Prabhakar Reddy where the property ....
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.... case of Shri M.Ramakrishna Reddy and at Rs.12,84,613 in the case of Smt.Harnita Reddy, and accordingly made the additions in that behalf. 57. Aggrieved by the above additions, assessees pleaded before the CIT(A) that the construction of Punnaiah Plaza was done as per MOU wherein the amount was contributed by various individuals/owners in certain ratio. As per MOU the cost of construction and the lease rent of 2nd, 3rd & 4th floor was to be shared with 1st & ground floor in the ratio of 1.2 : 1 + 2:1. Hence the uniform cost of construction cannot be applied in respect of all the floors. It was further contended that there was no basis for the AO to arrive at a conclusion that a sum of Rs 1,16,76,030 was spent unaccounted for centralized air conditioning of the building. The expenses were to be incurred by lessee M/s App Lab Technologies P. Ltd as per MOU dated 14.12.2004. Learned Authorised Representative for the assessee filed copies of audited accounts of M/s P. Rajasree & Others for Assessment years 2005-06 to 2007-08 to show that the cost of construction of "Punnaiah Plaza" shown in the audited accounts and the seized documents were one and the same and no unaccounted expend....
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....rty as evident from the sale deed. He further invested a sum of Rs 11,91,000 in the construction of the said residential unit. At the time of purchase there was a dispute over the sanction plan due to which a stay order was passed by the Hon'ble High Court. Hence, the property purchased by the appellant cannot be compared with the prevailing market rate as contended by the AO. Similarly the comparison made by the AO with the HUDA auction on subsequent date, was also not justified,. 61. The learned counsel for the assessee further contended that no addition can be made on the basis of a document seized from the premises of a third person i.e. Shri Harshvardhan Reddy. The seized document referred to certain settlement with Shri. P. Prabhakar Reddy, in which the appellant was not a party. The appellant was not aware of the said disputes and was not aware of the said seized document. No evidence was found during search showing that the appellant had made any amount over and above the purchase consideration mentioned in the registered sale deed. Hence no addition can be made on account of unexplained investment in the said property. The Ld counsel for the assessee relied on the third....