TaxTMI 
TaxTMI 
2015 (11) TMI 1608
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....s. Classique Farms & Estates, Visakhapatnam for a consideration of Rs. 48 lakhs. During the course of search operation, certain incriminating documents were found and seized, wherein certain financial transactions were recorded. From these seized materials, the A.O. found that M/s. Classique Farms & Estates has paid amount over and above the sale consideration shown in the sale deed for the purchase of the property from the assessee firm. Based on these findings, the assessing officer has reasons to believe that income chargeable to tax has escaped assessment and hence, issued notice u/s 148 of the Act on 8.8.2008. In response to notice, the assessee filed a letter and requested to treat the return filed on 28.10.2007 may be treated as return filed in response to notice u/s 148 of the Act. During the course of assessment proceedings, the A.O. noticed that the assessee firm has sold 40 acres of land situated at Maddi village to M/s. Classique Farms & Estates on 31.12.2006 for a valuable consideration of Rs. 48 lakhs. Further, the seized documents from the office of M/s. Classique Farms & Estates reveals that the actual consideration paid for purchase of the said land was at Rs. 2,84....
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....i is one of the partners in N/s Venkatarama Sal Developers. N/s Venkatarama Sal Developers has obtained GPA from the land owners of a Maddi Site to the extent of 40 Acres. The above amounts shown in the Annexure are paid in cash and these payments are out of the books of account. I have already disclosed my portion of unaccounted investment in this Classique Farms & Estates on the date of search operations i.e. 12-09-07. Statement of Mr.Rapeti Govind recorded on 09-10-07 Q. 10. Please go through sheet no 42 and give details and also mention the person who has written it? Ans. I have written this sup. The names & addresses are related to Maddi Site. i.e. Palm Meadows. Q.11. Please go through back side of sheet no 42 and also sheet no 83 & 84 and explain the contents therein. Ans These sheets are written by me. The amounts written on sheet no 84 are cash payments and cheque payments made to M/s Venkatarama Sal Developers by us i.e. M/s Classique Farms & Estates. However, 1 have already admitted an unaccounted income of Rs. 2.21 Crores as my portion of investment for the Asst. Year 2007-08 on the day of search i.e. 1....
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....ount received by you? Ans. We have received the amounts in cheques only." 4. Subsequently, based on the statements recorded from the partners of both the firms, the A.O. issued show cause notice to assessee firm asking it to explain as to why the consideration received in cash could not be assessed as undisclosed income for the assessment year in question. In response to said notice, the assessee firm reiterated that nothing in excess of registered sale consideration was received by it. During the course of assessment proceedings, the assessee firm requested for cross examination of Shri M.V.V. Satyanarayana and as per the assessee's request, the A.O. allowed to cross examine Shri M.V.V. Satyanarayana on 24.12.2009. Relevant portion of the cross examination is reproduced as under: "Q.1 How many acres of land has been purchased from us and how much have you paid per acre. Ans. (Shri M.V.V. Satyanarayana) we have purchased 40 acres from you Rs. 7.10 lakhs per acre. Q.2 How you have paid the consideration? Ans. Rs. 48 lakhs is paid through Cheque, the rest is paid by cash. Rs. 1.01 crores is paid by me to you and ....
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....d and the same was admitted it in the return of income filed by it for the relevant assessment year. Over and above, no cash payment was received by it for sale of the said property. It is further argued that during the course of cross examination of the partner of vendee firm, the firm could not produce any independent evidence for having paid cash, except there are loose sheets found in the premises of the vendee firm wherein some financial transactions are recorded in the name of the one of the partner of the assessee firm. The assessee further contended that even according to the statements of the partners of the vendee firm, the consideration is Rs. 7,10,000/- per acre and for 40 acres and the total consideration works out to Rs. 2,84,00,000/-. Taking into account the declared consideration of Rs. 48 lakhs in the sale deed, the difference would be Rs. 2,36,00,000/- only but, the assessing officer did not even bother to enquire what is the nature of the entries found in the seized materials, because in any case the on money could not have exceeded Rs. 2,36,00,000/-. The assessee further submitted that the Assessing Officer has taken into account Rs. 38 lakhs paid to one Smt. P.....
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.... section 148 of the Income Tax Act, 1961 is invalid and consequently the entire reassessment proceedings are void-ab-initio. Ground No.3: The Learned Commissioner of Income Tax (Appeals), Visakhapatnam is not justified in confirming the addition of Rs. 2,79,10,000 made by the Assessing Officer, on account of alleged onmoney being received by the appellant-firm towards sale of 40 acres of land situated at Maddi Village. Ground No.4: Without prejudice to the above, the Learned Commissioner of Income Tax (Appeals), Visakhapatnam is not justified in not appreciating the assertions of the partners of the vendee firm, in which it was stated that the sale consideration has been settled at! 7,10,000/- per acre total of which works out to Rs. 2,84,00,000/- out of which ! 48,00,000/- is paid through cheque. Thus beyond any imagination the alleged cash portion would not have exceeded! 2,36,00,000/-. Ground No.5: Without prejudice to the above, the Learned Commissioner of Income Tax (Appeals), Visakhapatnam is not justified in confirming the action of the assessing officer in considering an alleged amount of Rs. 38,00,000/- paid by the vendee firm to Smt.P.Radhika as on money in the h....
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....x, if he has reason to believe that the income for any assessment year has escaped assessment. The primary requirement of section 147 of the Act is that there should be formation of belief by the assessing officer coupled with material evidence. If the A.O. has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that income had escaped assessment. The A.O. at the time of issuing notice u/s 148 of the Act is not necessarily to establish the fact that there is an escapement of income. But what is necessary is that there must be some relevant material on which the formation of opinion is arrived at by the assessing officer. In the instant case, the A.O. formed his opinion based on the information received from the investigation wing of the department and which is the valid basis for issuing notice u/s 148 of the Act. It is not necessary for the A.O. to conduct independent enquiry and gather material to form his opinion. Material may come from within the assessment records or from outside the assessment record. But what is important is that there should be some cogent material, which suggests that there is an escapement....
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....n by an employee of the vendee firm, therefore cannot be used as evidence against it. Besides the seized loose sheet, no other document is in the possession of the A.O. to show that the assessee has received on money from the purchaser. The A.O. has not made any attempt to find out some reliable and cogent material evidence on record to support his findings or to corroborate the statements of the vendee firm. The assessee firm denied having received the money over and above what is stated in the sale deed. 14. The A.R. of the assessee rightly pointed out that the sale deed registered in the Office of the Sub-Registrar clearly shows that the consideration of Rs. 48 lakhs was fixed for the property and which was exchanged through proper banking channel. It was not a case of revenue that the value shown in the sale deed is not the real value of the property because the value declared in the sale deed is the market value of the property fixed by the State Government authorities for determining the stamp duty payable to the Government for registering the properties and also which was accepted by the registering authority. Further, there is no evidence to show that there is under v....
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.... is a lot of black money involved in the real estate transactions and particularly cash component is more in the lands situated in outskirts of the big cities. We do not agree with the findings of the CIT(A) for the reason that assessments cannot be made or taxes cannot be levied on the basis of the theory of probability. To tax any particular income, there must be some material evidence to show that the income is accrued or arises to the particular assesse. Unless, there is a proof, the department cannot collect the tax on the admission of the tax payer alone. The CIT, at one stage held that there is no need of direct or primary evidence, even if there is a circumstantial evidence, based on circumstantial evidence, the A.O. come to the conclusion and decide the issue accordingly. We do not agree with the stand taken by the CIT(A), for the simple reason that to tax any particular receipt, primary evidence is very much necessary and unless there is a primary evidence, circumstantial evidence cannot be considered as a conclusive evidence against any person to tax any particular receipt. Circumstantial evidence plays an important role in income tax proceedings, where the A.O. needs to....
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....prove conclusively that the loose document belongs to the assessee. There is no presumption in law that the assessee has actually paid Rs. 165 lakhs towards purchase of the property. The undisclosed income in this case is to be computed by the AO on the basis of the available material on record. It should not be based on conjectures and surmises. As of now, the material considered by the AO for making the addition of Ps. 1 crore is seized material marked a 'A/CRK104' and the statement of S. This loose sheet found at the premises of CRK is not enough material to sustain this addition. The seized material found during the course of search and the statement recorded are some piece of evidence to make the addition. The AO has to establish the link between the seized material and other books of account to the assessee. The seized material and statement of CRK cannot be conclusive evidence to make this addition. The entire case herein is depending upon the rule of evidence. There is no conclusive presumption to say that actual consideration passed on between the parties is actually Rs. 165 lakhs. The assessee as well as her brother stated in their respective statements that the c....
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.... its duty, instead made up a case on surmises and conjectures which cannot be allowed. Under these circumstances, there is no reason to confirm the addition of Rs. 100 lakhs towards on-money payment. Accordingly, the addition of Rs. 100 lakhs is deleted.-CIT vs. P.V. Kalyanasundaram (2006) 203 CTR (Mad) 449: (2006) 282 ITR 259 (Mad) relied on" 19. The Hon'ble A.P. High Court in the case of Smt. K.V. Lakshmi Savitri Devi Vs. ACIT in ITTA 563 of 2011, upheld the order of the ITAT Hyderabad Bench. The Hon'ble High Court while, deciding the issue in favour of the assessee held as under: "We are of the view that the Tribunal has rightly held that the registered document dt. 21.8.2006 unde4r which the respondent purchased the above property showed that only Rs. 65.00 lakhs was paid to the vendor by the respondent; that there was no evidence to show that the respondent had paid Rs. 1.00 crore in cash also to the vendor; that no presumption of such payment of Rs. 1.00 crore in cash can be drawn on the basis of an entry found in a diary/loose sheet in the premises of C. Radha Krishna Kumar which is not in the respondent's handwriting and which did not contain the name of the ....
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....Central Circle)-6 Vs. B. Vijay Kumar in ITA No.930 & 931 of 2009 held the issue in favour of the assessee as under: 11. We have heard rival submissions, perused the material submitted before us and also perused the orders of the revenue authorities. On a reading of the assessment order, it is absolutely clear that the addition has been made entirely on the basis of the photocopy of the sale agreement seized from the residence of the assessee in course of search and seizure operation. Undisputedly, the sale agreement is only photocopy and has not been signed by the assessee. The assessee has also raised serious allegation regarding the seizure of the impugned document and filed affidavit before DDIT (Inv.) asserting that the said document was planted by an officer of the department also named by the assessee in the affidavit. However, such allegation of the assessee has not at all been enquired into and has been met with complete silence by the department. From the materials on record, it is very clear that the AO has failed to lay his hands on any credible evidence to establish the fact that the assessee has purchased the property for a consideration of R s . 1,68, 00,000/....
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....ction. For adopting such a valuation, the AO has not conducted any enquiry or brought any materials on record to show that the value of the property on the date of transaction was actually Rs. 7000 per sq. yard. On the other hand, the assessee has demonstrated with supporting evidence that the value of the land on the date of transaction was the rate mentioned in the registered sale deed and for which the property was sold. The assessee has also produced sufficient evidence to show that the- re was dispute going on regarding the legal right over the property which also had an effect on the fair market value of the property. It is also pertinent to mention here that the assessee had filed his return f income for the assessment years under dispute much prior to the date of search declaring the purchase of land in question at the consideration mentioned in the registered sale deeds. 155) far as the AO's observations on the loose sheets recovered from the residence of Smt. Nalini Devi are concerned, the CIT (A) after duly examining them has given a conclusive finding that the assessee's name has no where been mentioned in those documents nor the amount of Rs. 109.48 lakhs repre....
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.... conclude that the purchase has been made at an under valuation." 23. The Hon'ble Supreme Court in the case of CIT Vs. P.V. Kalyana Sundaram (2007) 294 ITR 49, under the similar circumstances held in favour of the assessee. The Hon'ble Supreme Court, while deciding the issue in favour of the assessee held as under: "We have heard learned counsel for the parties and have gone through the record. It is true that the Division Bench of the High Court has borrowed extensively from the orders of the Tribunal and the Commissioner and passed them off as if they were themselves the author(s). We feel that quoting from an order of some authority particularly a specialized one cannot per se be faulted as this procedure can often help in making for brevity and precision, but we agree with Mr. Vahanvati to the extent that any "borrowed words" used in a judgement must be acknowledged as such in any appropriate manner as a courtesy to the true author(s). Be that as it may, we are of the opinion that the three questions reproduced above can, in no way, be called substantial questions of law. The fact as to the actual sale price of the property, the implication of the contradictory stat....