TaxTMI 
TaxTMI 
2010 (11) TMI 951
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.... The first ground in ITA No.362/H/2010 is with regard to disallowance of loss claimed at Rs. 1,73,191/-. 4. Brief facts of the issue are that the assessee firm is engaged in the business of real estate. A search and seizure operation was conducted at the residential cum business premises of Sri Gopal Lal Badruka partner of the assessee firm u/s 132 of I.T Act 1961 on 27-6-2006. It was found that the assessee actively engaged in developing a property situated at No. 205, Tarbund, Secunderabad Cantonment and thereafter assessment was framed u/s 153A of Act in hands of Sri Gopal Lal Badruka in whose name warrant u/s 132 was issued and also assessment was framed in name of this firm and also in the name of other partner viz Sri Avadesh Badruka u/s 153C of the IT Act as assessment of income of any other than the person referred to in section 153A of the I.T.Act. The assessee herein filed return of income for the Assessment year 2003-2004 admitting a loss of Rs. 1,73,191/-. The assessing officer found that the documents seized vide annexure/GLB/22B/2(Page No.12) reveal that the firm was registered in the year 2003. The copy of the acknowledgement of registration issued by the Registra....
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....t as well as carrying on of the business by the assessee is essential even in cases where there is a direct link between the loss incurred and the business. In any case, the assessee has carried on business or not, must be examined with reference to the facts of each case and no generalization can be made. In the present case, the lower authority has given a finding that the assessee has not commenced as well as carried on the business during the year under consideration. As such, this expenditure cannot be allowed as business deduction. In the result, ITA No.362/H/2010 is dismissed. 7. The next common ground in ITA Nos.363 to 366/H/2010 is with regard to addition of on money for all the plots and also estimating the same in the ratio as in the other plots for which evidence is found without appreciating the fact that no such on money is received in respect of other plots and treatment of entire on money receipt as income without giving deduction towards expenses instead of treating the only profit portion on such unrecorded receipts. 8. Brief facts of the issue are that the firm is engaged in the business of real estate. A search and seizure operation was conducted at....
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....Surana 17.7.2003 717/2003 4155580 3 5 482 P.D. Pulla 29.8.2003 1460/03 1301400 4 6 25.8 Sitarama Raju 30.1.2004 155/04 107640 5 7 331.76 AG Kumaraswamy 26.05.2003 922/03 862578 6 8 300 K Ramesh 14.05.2003 847/03 750000 7 9 300 A. Srinivas 14.05.2003 846/03 750000 8 10/part 166.66 PS Reddy 9.7.2003 1137/03 417000 9 10/part & 11 166.66 GS Reddy 9.7.2003 1138/03 417000 10 11/part 166.66 G. G. Reddy 9.7.2003 1139/03 417000 11 12 250 Ms. NS Reddy 29.08.2003 144/03 625000 12 13part A 13 Part B 189.91 133 Ms.Gopamma Ms.K. Gopamma 23.2.2003 8.3.2004 276/04 357/04 760000 532000 TOTAL 15304728 13 205 open 586.66 GV B Rao 19.2.2004 256/2004 2639970 14 205 open 586.66 G. Pawan 19.2.2004 247/2004 2639970 15 205 open 171.11 GV Bhaskara Rao 19.02.2004 258/2004 769995 16 205 open 493.33 Ms.U/L. Sanghani 11.03.2004 378/04 19223962 ....
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.... 1. Expenditure not supported by any proof Rs. 1,46,94,901 2. Suppression of sale receipts on land sale Rs. 7,01,23,094 11. At the same time the assessing officer added back the business loss which was set off by the assessee while filing the return of income since the business loss claimed for the assessment years 2003-04 was disallowed in the said assessment proceedings. Thus, the total income assessed for assessment years 2004-05 to 2007-08 as follows- Assessment year 2004-05 Rs. 10,61,82,676 Assessment year 2005-06 Rs. 4,63,83,800 Assessment year 2006-07 Rs. 99,08,940 Assessment year 2007-08 Rs. 3,32,39,000 12. Being aggrieved against the aforesaid assessments, the assessee went in appeal before CIT(A) who has agreed with the order of assessing officer for the assessment year 2005-06, 2006-07 and 2007-08. However, he has given partial relief for the assessment year 2004-05. While giving the partial relief, in case of layout plots the CIT(A)considered the ratio of unaccounted receipts to accounted receipts at 1.80: 1 and determined the unaccounted receipts in respect of layout plots at Rs. 2,48,48,523/- as below: Name of the purchaser A....
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....also admitted by the assessee has been determined as below: Sl.No. Name of the Purchaser Actual sale price as per the seized document quantified Rs. Sale price as per the registered sale deed Rs. On money consideration 1. Akula Srinivas 2100000 750000 1350000 2. Kanday Ramesh 2100000 750000 1350000 3. K.B.Ramesh Kumar 6070000 1901000 4169000 4. Raj Kumar Jain 16508750 5620000 10888750 26778750 9021000 17757750 As against Rs. 7,01,23,094 determined by the assessing officer as unaccounted income by way of on-money, the CIT(A) estimated the unaccounted receipts on account of on-money in respect of plots sold during the previous year relevant to assessment year 2004-05 at Rs. 6,73,62,147 as under:- a) Unaccounted receipts on layout plots 2,48,48,523/- b) Unaccounted receipts on open plots 2,47,55,874/- c) Unaccounted receipts as per documentary evidence 1,77,57,750/- Total 6,73,62,147/- For the other assessment years under appeal, the unaccounted on-money determined by the assessing officer, which is confirmed by the CIT(A) as follows- For the A.Y 200....
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....n respect of all plots. He submitted that the assessing officer wrongly estimated the unrecorded sale consideration without referring to any seized material. According to learned AR, some of the buyers denied the payment of on money and the payment of on money cannot be uniform to all plots and it changes from plot to plot depending upon marketing conditions. He submitted that the reliance placed by assessing officer on the judgement of Supreme Court in the case of CIT Vs. H.M. Esufali H.M. Abdulali (90 ITR 271) (SC) is misplaced. Further, he submitted that the net worth method of determination of undisclosed to be considered in the absence of proper maintenance of books of account on the basis of which profits of the assessee can be determined. For this purpose, he relied on the order of the Visakhapatnam Bench of the Tribunal in the case of K.V. Srinivasa Rao & Ors. Vs. ACIT (125 TTJ 560). 15. On the other hand, the DR submitted that the assessee sold 32 plots during the block period and there is direct evidence in respect of receipt of on money in case of 8 plots and it is irrelevant as to how many parties have confirmed the payment of on money. The statement recorded from th....
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....li (90 ITR 271) (SC). 16. We have heard both the parties on this issue. The first contention of the learned authorised representative is that for the purpose of computing the income under section 153A/153C of the I T Act, the assessing officer has to confine only to the incriminating material found during the course of search operations. Let us now examine whether the assessing officer has to confine himself to the incriminating material found during the course of search operation for the purpose of computing the income under section 153A/C of the I T Act. We have carefully gone through the section 153A/C of the I T Act. Section 153A is incorporated in the statute book by Finance Act, 2003 w e f 1-6-2003. This section viz., section 153A is applicable in respect search conducted on or after 1-6- 2003 and S.153C of the act is applicable in the cases of assessment of persons, other than the searched party, as in the case of the assessee firm. By the very same Finance Act, 2003 the Legislature incorporated section 158BI of the Act which reads as follows:- "The provisions of this Chapter shall not apply where a search is initiated under section 132, or books of account, other d....
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....sing officer is not required to confine himself to the material found during the course of search operation or the information which is relatable to the search material. In our opinion, the assessing officer is well within his powers to compute the taxable income on the basis of the material on record even though such material was not found during the course of search operation. In view of the above, we are unable to find any merit in the contention of the assessee that the income under section 153A/153C has to be computed only on the basis of the material found during the course of search operation. In other words, it is not necessary for the assessing officer to confine himself only to the material found during the course of search operation. The assessing officer can also place reliance on all material available even though it is not found during the course of search operations. 18. For the purpose of making addition, the assessing officer considered the available seized material, buyers statements and partner' s statements which are available on record and these statements clearly show that the assessee has also earned income by means of on money on sale of plots and assessi....
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....cord by the learned counsel for the assessee. Same is the position even with regard to the allegation that the assessee's partner was under duress while the statement was recorded from him. Further, grievance of the assessee, according to the learned counsel for the assessee, is that the estimation of unrecorded consideration cannot be made uniformly since the price of the plot differs from year to year depending on the market conditions. In our opinion, plots are situated at the same location having same facilities and amenities and the plot price in all practical purposes will go on increasing from year to year instead of decreasing. Further, it was categorically admitted by the partner that on money was received on all plots and also it was stated that how the on money was spent by the assessee. According to the partner of the assessee firm, the undisclosed income generated out of sale of plots was made for investment in acquisition of following properties: i) House property owned by Gopal Lal Badruka at plot No.684/A, Road No.33, Jubilee Hills, Hyderabad acquired on 18-2-05 for consideration of Rs. Rs. 80 lakhs. Later the property was renovated with the cost around Rs. 5 to ....
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.... is also a partner), accepting receipt of on money over and above the registered price, there is no reason to overlook this statement since these admissions by the oral statements can also form part of the material for the purposes of making assessment. For non-consideration of this statement, the assessee is required to prove with more substantial material that the admission made on earlier occasions are contrary to material available on record. The assessee cannot get away from the statement, simply by saying that the admission made by the partner is on account of coercion There is no material before us to show that the assessee has made such statement contrary to any material or on account of coercion. The material available on record suggested that the assessee is in the habit of receipt of on-money over and above the registered price of the plot, and this on-money receipt not recorded in the regular books of account and therefore, it is a clear case of suppression of on-money receipts, which has to be brought to tax in the hands of the assessee firm in the impugned block assessment under S.153C of the Income-tax Act. Therefore, the assessing officer is justified in making t....
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....ideration of Rs. 7,50,000 in each case, though the seized material (sale agreement) suggests the receipt of on-money of Rs. 21,00,000 from each, with the differential on-money of Rs. 13,50,000 in each case. In the circumstances, the ratio of unaccounted receipt to accounted receipt works out to 1.8 : 1. In the same ratio, the unaccounted on-receipts in respect of other lay out plots was determined. We find no infirmity in this approach of the lower authorities. We accordingly confirm the order of the CIT(A) on this aspect. 24. In the case of remaining open plots, the ratio of unaccounted receipts to accounted receipts was determined at 2:1 and unaccounted receipts was determined at Rs. 2,47,55,874. This is also based on the seized material, which has been discussed by the CIT(A) in para-4.3 of his order on pages 13 and 14 thereof, which we have already discussed hereinabove. Even in respect of these open plots, we do not find any infirmity in the order of the CIT(A), which is accordingly confirmed. The balance addition of Rs. 1,77,57,750 is on account of on-money receipt is based on the actual seized material and in the absence of any material to the contrary brought on r....
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....thus worked out to Rs. 3,43,00,000. This agreement was signed by Shri Gopal Lal Badruka, Shri Avadesh Badruka and the buyer. However, the same was registered subsequently for a consideration of Rs. 1,24,67,l344, i.e. at the rate of Rs. 7,600 per sq. yard. There was a suppression to the extent of Rs. 2,18,32,656. Based on this, the assessing officer quantified the suppression of sale receipts and made the addition of Rs. 2,18,32,656. We find the said addition to be in order and accordingly confirm the same, rejecting the grounds of the assessee on this aspect. The learned counsel for the assessee has also taken a plea before us that an opportunity of cross-examining the buyers whose statements were relied upon by the department for the purposes of assessment has not been given to the assessee. In our opinion, the assessments have been made not only on the basis of statements recorded from the buyers but also on the basis of seized materials and statements recorded from the Managing Partner, Shri Gopal Lal Badruka. Further, though the assessee was given opportunity to put forth its case before the lower authorities on various occasions, the assessee has not asked for any opportuni....
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.... the Revenue, regarding the claim of the assessee that the assessee has actually incurred any such unaccounted expenditure as claimed by it, and accordingly decide the allowability thereof, in accordance with law and after allowing reasonable opportunity of hearing to the assessee. 30. There is one more ground in ITA No.363/H/2010 which is with regard to disallowance of Rs. 1,02,67,250/- being amount paid towards consultancy charges paid to Shri Sridev Sharma in spite of the fact that all the evidence available on mere surmise that it is not proved that it is for business purpose without appreciating the fact that without his service the assessee firm could not have obtained approvals from Defence Estate Office, Pune. 31. Brief facts of the issue are that the above expenditure not supported by any proof. This included Rs. 2 lakh towards cost of land, Rs. 42,27,651/- towards development expenses and Rs. 1,02,67,250 as consultancy charges. This amount was said to be paid to Shri Sridev Sharma. It was disallowed on the reason that no documentary evidence has been filed in the course of assessment proceedings. Before the CIT(A) the assessee filed copy of ledger account as well as....
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....assessing officer with the direction to the assessee to prove the genuineness and reasonableness of this expenditure as incurred wholly and exclusively for the purposes of assessee's business and thereafter the assessing officer is required decide the issue accordingly. 35. In the result, as far as these five appeals of the firm are concerned, while appeal ITA No.362/Hyd/2010 is dismissed, the appeals ITA Nos.363 to 366/Hyd/2010 are partly allowed for statistical purposes. Appeals concerning Individual partners: Cross Appeals for Assessment years 2004-05 to 2006-07 and assessees' appeals for assessment year 2007-08 36. Now we will take up the other 14 appeals concerning the individual partners, viz. ITA No.354/H/09, 583/H/2010, 355/H/2009, 584/H/2010, 356/H/2009, 585/H/2010, 357/H/2009, 358/H/2010, 580/H/2010, 359/H/2010, 581/H/2010, 360/H/2010, 582/H/2010 & 361/H/2010, which are cross appeals filed by the assessee as well as the Revenue for the assessment year 2004-05 to 2006-07 and the appeals for assessment year 2007-08 filed only by the assessee. 37. These are cross appeals for assessment year 2004-05 to 2006- 07 and assessee's appeals for assessment year 2007-08....