TaxTMI 
TaxTMI 
TaxTMI 
2010 (11) TMI 951
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....ith regard to disallowance of loss claimed at ₹ 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 ₹ 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 Registrar of Firms, Govt. of AP was found and....
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....see 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 the premises of the partner of the assessee, namely, Shri Gopa....
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.... 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 17 205 open 538.33 KB R Kumar 23.10.2003 1763/03 1901000 18 205 open 427.50 Sanjeevitha & Ajay Harinath 3.2.2004 159/04 2170000 19 205 open 513.00 Maj.K. Vivek 7.1.2004 22/04 2234040 20 205 open 1405.00 RK Jain 5620000 Total 21822899 FINANCIAL YEAR 2004-05 Sl.No. Plot No Area(sq.yd.) Purchaser Date of deed Doc.No. Amount as per sale deed 21 Open plot 242.47 Smt.M.V. Lakshmi & M Phanikumar 15.10.04 2052/04 970000 22 Open plot 85.56 Sandeep Soni & S....
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....4-05. 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 ₹ 2,48,48,523/- as below: Name of the purchaser Amount as per sale deed (Rs.) Estimated unaccounted receipts (Rs.) Devender Surana 4155580 7480044 Manish Surana 4209530 7577154 A.Gauri Kumaraswamy 862579 1552642 P.Satyajit Reddy 417000 750600 Govardhan reddy 417000 750600 Sukesh Reddy 417000 750600 Sailaja Reddy 625000 1125000 Paul D.P. 1301400 2342520 V.Sitarama raju 107646 1368000 Gopamma 760000 1368000 Gopamma 532000 957600 Total 13804735 24848523 13. Further, with regard to open plots, evidence revealing unaccounted money in the form of seized documents is available in respect of 2 plots in case of K.B.Ramesh Kumar and Sri Raj Kumar Jain. In this case, seized documents A/GLV/684/A/1(page No. 194 to 205) is an agreement between the assessee and Sri Raj Kumar Jain for purchase of open plot No. 205/10 measuring 1521 sq.yd at 11,750 per sq. yd. The actual sale consideration worked out to ₹ 1,79,65,750/- as again....
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.... by the assessing officer, which is confirmed by the CIT(A) as follows- For the A.Y 2005-2006 a) Unaccounted receipts on open plots 1,14,43,940/- b)Unaccounted receipts as per documentary evidence 2,03,44,400/- Total 3,17,88,340/- For the A.Y 2006-07 Unaccounted receipts as per documentary evidence 68,45,000 Total 68,45,000 For the A.Y 2007-2008 Unaccounted receipts as per documentary evidence 2,18,32,656 Total 2,18,32,656 Aggrieved by the orders of the CIT(A), , assessee preferred these appeals before us. 14. The learned AR submitted that there is evidence in respect of receipt of on money on 8 plots, out of buyers of 8 plots, three persons admitted the payment of on- money, 5 persons denied the same and there is no evidence for receipt of on money relating to other 24 plots. No seized materials were found for the receipt of the on money on 24 plots. No opportunity has been given to the assessee to cross examine the buyers who have confirmed the payment of on money. No corresponding assets were found for the investment of on money receipts. The sworn statement was recorded u/s 131 of the Act on 7.11.2008, 14.11.2008 and 21.11.2008 after a long time of the search action....
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....firmed the payment of on money. The statement recorded from the Managing Partner shows that the assessee has received on money with reference to all plots and the sworn statement is not given by the partner under duress and no coercion was exerted on the managing partner while recording his statement. He drew our attention to the sworn statement of Shri Gopal Lal Badruka recorded u/s 131 of the Act on 7.11.2008 specifically to the question Nos.11, 26 & 28 wherein the Managing Partner has confirmed the receipt of on money on more than one occasion. The development activities on land were carried by the firm only and not by partners. The partners have nothing to do with the receipt of the on money. The real estate business was carried on by the firm and not by the partners. When the regular income generated from the business is shown in the hands of the firm, on same logic the undisclosed income also to be brought to tax in the hands of firm only. He submitted that there is a suppression of income by the assessee. When the methodology of suppression has been identified and the partner also has accepted the suppression, there is no question of confining the determination of the income....
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....nitiated under section 132, or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003." In view of section 158BI, it is very clear that Chapter XIVB which prescribes special provision for assessing of income in search cases is not applicable in respect of cases where search was initiated on and from 1st June, 2003. In the case before us admittedly the search was conducted on 26th July, 2006 and 27th July, 2006 at the residential and business premises of Shri Gopal Lal Badruka under S.132 of the Act. Therefore the provisions of Chapter XIV B are not applicable to the present assessee. In other words the income has to be computed under section 153A/153C which falls under Chapter XIV of the I T Act. Therefore, S.158 BB(1) which falls in Chapter XIV B is not applicable to the facts of the present case. 17. Now coming to the contention of the assessee that the income under section 153A/153C has to be computed only on the basis of the search material, in our opinion, this contention of the assessee is misconstrued. Section 158BB in Chapter XIV B provides procedure for computation of undisclosed income in respect of searches ....
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.... by means of on money on sale of plots and assessing officer has relied on the judgment of Jurisdictional High Court in the case of Rajnik & Co., Vs. ACIT (251 ITR 561) (AP ) and also the judgment of the Supreme Court in the case of CIT Vs. H.M. Esufali H.M. Abdulali (90 ITR 271) (SC). In the case of Rajnik & Company, the revenue found material relating to suppression of sales for the financial year 1995-96 and 1996-97 and 1997-98. During the course of search operation, one of the partners admitted that the assessee had practiced suppression of sales turnover for all the assessment years which fall in the block period. In these circumstances, the Hon'ble High Court found that the evidence of the partner clearly shows that the firm has suppressed turnover even for the other years, the addition made by the lower authorities was confirmed by the High Court. In the case of CIT Vs. H.M. Esufali H.M. Abdulali, cited supra, it was held that in estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing officer while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority sho....
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....y was renovated with the cost around ₹ 5 to 6 crores. ii) Purchase of 1.05 acres of land at Coonoor, Tamilnadu by one of the partners Sri Avadesh Badhruka . iii) Payment of ₹ 51 lakhs to Mirza Baig by Shri Gopal Lal Badruka to settle certain disputes iv) Purchase of house property at Coonoor for ₹ 15lakhs by Shri v) Cash seizure of ₹ 1,43,34,500 at the residence Shri Gopal Lal Badruka. vi) Jewellery seized of ₹ 11,20,116 at the residence of Shri Srikanth Ganeriwal owned up by Shri Gopal Lal Badruka and family members . 21. Further, it is not in dispute that the assessing officer proceeded on the basis of seized material which was found during the course of search action in respect of 8 plots which are as follows- 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 Rs. On money consideration Rs. Reference seized Material Nature of seized Material 1 Akula Srinivas 2100000 750000 750000 2003-04 A/GLB/684/A/1 Page No.143 to 154 Agreement of sale dated 24-1-2003 2 Kanday Ramesh 2100000 750000 1350000 2003-04 A/GLB/684/A/1 ....
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....nce the firm is engaged in the business of land transactions and also since regular income generated from disclosed business of sale of plots has been offered for assessment in the hands of the firm. The on-money receipts, though received by the partners, the partners have received on behalf of the firm in their representative capacity and as its agents, and they have nothing to do with the business of the assessee firm, other than as a partner. The on-money is having direct nexus with the land business transactions of the assessee firm. It leads to absurd results, if the regular income from the sale of plots is assessed in the hands of the firm and the on-money in relation to the very same transactions of the firm was assessed in the hands of the partners firm directly. Thus, there is no merit in the arguments of the learned counsel for the assessee, that the on-money receipt is to be assessed in the hands of the partners. More so, it is an admitted fact that on-money receipt was signed by the partners of the firm on behalf of the assessee firm, as a representative of the firm. As such, it is only the firm which has to be assessed even in respect of income by way of on-money. 22.....
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....ar 2005-06, estimated unaccounted receipts in respect of open plots is ₹ 1,14,43,940/- and such unaccounted receipts as per documentary evidence seized at the time of search is ₹ 2,03,44,400/-, with the total additions in this respect aggregating to ₹ 3,17,88,340/-. The seized documentary evidence suggests that the ratio of unaccounted receipts to the accounted receipts in the case of Smt.Kokilaben is 1.94:1 and in case of Shri Anand Singh the ratio is 1.75:1 . In our opinion, the plots are registered at the same time, and it is appropriate to adopt the average of these two ratios, instead of considering a ratio of 2:1 as done by the CIT(A). We accordingly direct the assessing officer to recompute the addition on account of on-money receipt in respect of other plots by applying the average of above two ratios, i.e. 1.85:1. Thus, the addition of ₹ 2,03,44,400/- in respect of unaccounted receipts based on evidence is confirmed and unaccounted receipts on other plots sustained to the extent of ₹ 1,05,85,644/- totally ₹ 3,09,300,044/- 26. For the Assessment year 2006-07, there was seized material, marked as A/SG/01(p1)) in the form of money receipt ....
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.... evidence before us also to point out as to how the Department has denied the opportunity of cross-examination to it. The assessee, having not sought opportunity of cross-examination at the appropriate stages before the lower authorities, cannot now make out a grievance on this score. 28. The other ground common in these appeals is with regard to allowability of ad-hoc unrecorded expenses. The contention of the learned counsel for the assessee is that the expenditure is to be allowed on adhoc basis and only profit portion in relation to the unrecorded receipts has to be considered and it is not possible to have any evidence for expenditure that is not recorded in the books of account. 29. We have heard rival submissions. According to Revenue the assessee has not kept or produced any separate accounts for such unaccounted expenses. All the expenses actually incurred by the assessee have been taken care by regular books and the same have already been allowed. According to the Revenue, the assessee dealt with the land where roads and other amenities were already provided. As such, the assessee has only carried out the work of dividing the land into plots with demarcation of road and....
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....greement was on plain paper having no signature of any witness and bearing no stamp of Shri Sridev Sharma, who has signed on behalf of M/s SD Constructions. Against this assessee is in appeal before us. 32. The learned AR submitted that the payment to Shri Sridev Sharma is subject to TDS and the amount received by Shri Sridev Sharma was assessed to tax . The expenditure incurred wholly and exclusively for the purpose of business. The department has not doubted the payment but doubted the rendering of services by Mr. Sharma . The assessee was able to get all license in connection with the property only because of valuable services rendered by Shri Sharma. 33. On the other hand the DR submitted that because some TDS has been done on the payment made to Mr. Sharma, that payment itself does not entitled for deduction. The assessee has not able to prove the nature of services rendered by Shri Sharma. He submitted that no credibility could be given to the agreement entered by the assessee with Mr. Sharma. It is self serving document. They are not serious about the enforcement of this agreement. Shri Sharma is neither having capacity or experience in the line of real estate business. Th....