TaxTMI 
TaxTMI 
2013 (11) TMI 1748
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....ereto, the assessee filed returns of income for all the years mentioned above and the assessments were completed by making various types of additions in all the years. The assessee challenged all the assessment orders by filing appeals before Ld CIT(A) and got partial relief. Aggrieved by the orders passed by Ld CIT(A), both the parties have filed appeals before us challenging the decision of the first appellate authority on the issues decided against each of them. 3. For assessment year 2001-02, the assessee only has filed appeal before us, wherein he is challenging the addition of Rs. 50,000/- (out of Rs. 4,50,000/-) confirmed by Ld CIT(A). The facts relating thereto are stated in brief. In response to the notice u/s 153A of the Act, the assessee filed return of income declaring a total income of Rs. 1.00 lakh and agricultural income of Rs. 1.50 lakh. During the course of search operation, the department had seized a document numbered as VJJ-3(5), which happened to be an agreement dated 28-02-2001 entered by the assessee with his wife Smt. Ashifa Begum in connection with purchase of a property. The facts relating to the said agreement has been narrated by the assessing officer....
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....ally paid by his wife as per the original agreement entered by her with Shri E.V. Alexander and Smt. Mary Mathew. It was submitted that the assessee did not pay any amount to his wife as per the agreement dated 28-02-2001 entered by him with her. The ld CIT(A) examined the abovesaid agreement and has given a clear finding as under in paragraph 10 of his order:- ".......But the fact remains that this agreement does not mention at all that Smt. Ashifa begum had received any consideration from the appellant for passing over her rights acquired through the agreement dated 29.11.1999. Hence as per the appellant the contention of the A.O. in para 3 of the assessment order that the appellant had paid Rs. 4,50,000/- vide agreement dated 28-02-2001 is wrong. I have carefully perused the seized documents as mentioned in the order and have verified the contents mentioned therein. It is found that nowhere in the agreement it has been mentioned that Smt. Ashifa Begum has received any consideration or Rs. 4,50,000/- from the appellant for passing on her rights acquired through the agreement dated 29.11.1999. Hence in my view the observations made by the AO in the impugned order are not ....
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....he said agreement is a sham agreement and the assessee only entered into this transaction as assumed by Ld CIT(A), then also, in our view, there is no requirement of making any addition since (a) the amount paid during the year under consideration was only Rs. 50,000/- and (b) the amount of total income and agricultural income declared by the assessee aggregating to Rs. 2.50 lakhs would be sufficient enough to explain the sources for Rs. 50,000/-. 9. Accordingly, we do not find any justification in confirming the addition of Rs. 50,000/- in AY 2001-02. Accordingly, we modify the order of Ld CIT(A) on this issue and direct the AO to delete the above said addition. 10. We shall take up the appeals filed for assessment year 2002-03 by both the parties. The additions made by the AO, relief granted/additions sustained by Ld CIT(A) are tabulated below:- Items Amount Relief granted Addition sustained Amount paid for PTP Nagar property 13,00,000 11,50,000 1,50,000 Purchase of Benz Car 6,00,000 6,00,000 ---- Purchase of cashew factory 1,43,000 1,43,000 ----- Deposits in bank account 35,45,376 15,15,000....
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.... assessment proceedings, the assessee had filed a confirmation letter obtained from Shri A.R.Shajahan, wherein it was stated that a loan of Rs. 10 lakh was paid by him to the assessee's wife named Smt. Ashifa Begum by way of cheque number 933034 drawn on 15.7.2000. During the course of remand proceedings, the assessing officer made enquiries with Federal Bank and found that the cheque no. 933034 was used to draw a sum of Rs. 50,000/- only on 4th April, 2001. Accordingly, the AO concluded that the assessee has failed to prove the nexus of financial transactions of Shri A.R. Shajahan with him, apparently meaning that there is no proof to substantiate the claim of receipt of money from Shri Shajahan. Accordingly, the AO stood by the addition of Rs. 13.00 lakh made in respect of investment made in PTP Nagar property. 13. The next issue relates to the addition of Rs. 6.00 lakh relating to the investment made in purchase of Benz Car. In the remand report, the AO stood by the addition made by stating that the assessee could not explain the sources for purchasing the car. 14. The next relates to the addition pertaining to Bank deposits. The facts relating thereto are stated in br....
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.... money transactions carried out in those deals were routed through the banks. (c) In the immediately preceding year, his wife had given an advance of Rs. 4.50 lakhs to Mary Mathew and others in connection with a land deal. It was submitted that the said amount was returned back during this year, since the transaction did not fructify and hence the same was available with him a source. (d) In the bank deposits listed out by the AO, the assessee pointed out that a sum of Rs. 5.50 lakhs represent transfer of funds from some other bank account and another deposit of Rs. 5.50 lakhs represent funds withdrawn from the very same bank account in the immediately preceding days. (e) The assessee also contended that the evidences collected by the assessing officer during remand proceedings were not put to the assessee. 16. The Ld CIT(A) examined all the issues and decided as under:- (a) In respect of investment in PTP Nagar Property, the Ld CIT(A) rejected the claim of receipt of loan of Rs. 10.00 lakhs from Shri A.R. Shajahan, as he had stated in the confirmation letter that the loan was given to the wife of the assessee. However, the Ld CIT(A) agr....
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....e assessee is a real estate broker and is also engaged in purchase and sale of cars. The modus operandi of the assessee in the real estate transactions is that he would acquire large sized plot by entering into an agreement with the sellers and convert the same into small sized ones by making division/partition. Thereafter, he would identify the prospective buyers and make the seller of plot to register the same directly in the name of the buyers. The modus operandi of the assessee, discussed above, has not been rejected by the revenue. 18. According to the assessee, the bank transactions represent the activities carried on by him in real estate and vehicle business. The assessee has further submitted the funds received by him from out of the loan obtained from Shri A.R. Shajahan, refund received from M/s S.I. Property on behalf of Shri Shajahan, the refund of money of Rs. 4.50 lakhs advanced to Mary Mathew in the immediately preceding year, income declared during the year under consideration, sale proceeds of PTP Nagar property etc. were utilised for making deposits into the bank. Though the AO and Ld CIT(A) have not accepted the claim of availability of certain sources for wan....
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....year 2002-03. The AO also does not have any other material to support his view. Under these circumstances, we agree with the view taken by Ld CIT(A) that the assessing officer has only assumed that the car was purchased during the year relevant to the assessment year 2002-03. In the absence of any credible evidence to show the date of purchase of car, in our view, the Ld CIT(A) was justified in deleting the addition of Rs. 6.00 lakhs, referred supra. 20. The next addition relates to the investment made in the purchase of PTP Nagar property. As stated earlier, the assessing officer has added a sum of Rs. 13.00 lakhs as unexplained investment. The Ld CIT(A) gave set off of Rs. 10.50 lakhs, being the amount received from M/s S.I. Property, and confirmed the balance amount of Rs. 1.50 lakhs. The revenue is challenging the relief granted by Ld CIT(A) and the assessee is aggrieved against the addition sustained. 20.1 In the remand report, the AO rejected the claim of availability of the amount refunded by M/s S.I. Property on the ground that there is no evidence to show the nexus between the transactions entered by Shri Shajahan and the bank accounts of the assessee. There is no di....
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....funded by the above said concern was available with him and used by him. Accordingly, we uphold the view of Ld CIT(A) on this issue. 20.3 While confirming the addition of Rs. 1.50 lakhs, we notice that the Ld CIT(A) did not examine the submission of the assessee that the advance of Rs. 4.50 lakhs given to Smt. Mary Mathew in the years relevant to the assessment years 2000-01 and 2001-02 was received back and the same was used for his business transactions. In the immediately preceding year, i.e., in assessment year 2001-02, the amount of Rs. 4.50 lakhs given to Smt. Mary Mathew was considered in detail by the tax authorities as well as by us. Hence, there is no dispute with regard to the fact that a sum of Rs. 4.50 lakhs was given to Smt. Mary Mathew by the wife of the assessee. According to the assessee, the purchase transaction could not be finalized and hence Smt. Mary Mathew has returned the advance amount, referred above. During the course of search, the department did not unearth any evidence to contradict the said submissions, i.e., no evidence was seized to show that the transaction with Smt. Mary Mathew was concluded. Hence, in our view, there is no reason to reject the....
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....jected the contention of the assessee that the sale proceeds received on sale of PTP Nagar property was used to make deposits, for want of evidences. The fact remains that the assessee is a real estate broker. The fact that the assessee has purchased PTP Nagar property is also not in dispute. According to the assessee, he has converted the PTP Nagar plot into four small sized plots and sold them to four persons, viz., M/s Parameswaran, Sundaree Sundaram, Sarath and Dr. Maheen. It was submitted that the original holders of the PTP Nagar plot has directly executed the sale deeds in favour of the four persons mentioned above. Thus, if one looks at the conveyance deeds, the existence of the assessee as an intermediary will not be known. Since the assessee has acted as an intermediary in the transactions, normally his relationship with the buyers/sellers of the property would not continue after the conclusion of relevant transaction. Hence, it would be normally difficult for him to obtain the information, as sought by the AO. On the contrary, it would be easy for the AO to elicit the required information by summoning them, which was not done by him. According to the assessee, the assess....
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....akulam Estate. The facts relating thereto are stated in brief. The seized documents revealed that the assessee had paid an advance of Rs. 25.00 lakhs as per sale agreement dated 19-06- 2002 entered by the assessee for purchase of Anakulam Estate having an extent of 101.50 acres. It was proposed to be purchased at the rate of Rs. 67,000/- per acre. The assessee was asked to explain the source for payment of the advance of Rs. 25.00 lakhs. The assessee submitted that he received a sum of Rs. 24.00 lakhs from a person named Shri Abdul Kalam, Thalhani Textiles, Attingal and used his own funds to the extent of Rs. 1.00 lakh both aggregating to Rs. 25.00 lakhs to pay the advance, referred above. 25.1 In this regard, the Assessing Officer examined Shri Abdul Kalam, refered above, by issuing summons u/s. 131 of the Act and a sworn statement was also recorded from him on 29-12-2008. It is to be noticed that the AO did not make any addition in respect of the advance payment of Rs. 25.00 lakhs referred above. Before the Assessing Officer, the assessee submitted that he earned a commission of 2% in the transaction relating to the purchase and sale of Anakulam Estate. In the return filed aft....
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....ssment year 2004-05 and not in the year relevant to the assessment year 2003-04. Accordingly, the Assessing Officer reported in the remand report that the amount of Rs. 85.00 lakhs should not be considered in this year. 25.4 The Assessing Officer, in the remand proceedings, noticed that the assessee has reported to have sold only 83.22 acres as detailed below:- 71.22 acres as per list given to AO - 48,66,120 12.00 acres sold to Geevarghese Varghese - 21,60,000 70,26,120 Thus, according to the assessee, 83.22 acres of land have been sold for an aggregate value of Rs. 70.26 lakhs. The AO deducted the proportionate cost for 83.22 acres (83.22 acres xRs. 67,000/- per acre) from the sale value reported by the assessee and computed the profit at Rs. 14.49 lakhs. The remand officer also determined the profit on sale of Anakulam estate in another method. He noticed that the land was sold to Shri Geevarghese Varghese @ Rs. 1,80,000/- per acre. Accordingly, he applied the said rate to the entire extent of 83.22 acres and determined the sales value at Rs. 149.79 lakhs. Thereafter the AO deducted the cost of 83.22 acres @ Rs. 67000/- per acre and accordingly arri....
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.... without correct appreciation of facts because the then Assessing Officer took the figure of Rs. 8500000/-towards sale of Anakulam Estate and for assessment year 2003-04 whereas, the payments were actually made for the sale of Thamarapalli Rubber Company Ltd. Kottayam and relate to A.Y. 2004-05. The way Assessing Officer dealt with this issue in the assessment order speaks of a very casual manner with which the entire issue was approached and the addition was made without proper verification of facts for A.Y. 2003-04. Hence there is no capital gain worth Rs. 3859500/- to the appellant for A.Y. 2003-04. (b) The Asstt. CIT who submitted the remand report works out capital gain for this year at Rs. 14.49 lakhs based on records and facts and figures available thereon. However, has further assumed that assessee could have realized more profits by selling the land @ 180000/- per acre as sold to G. Varghese for 12 acres. but, this calculation is not based on any seized material that assessee could have sold the entire land for Rs. 180000/-per acre and could have earned profit of Rs. 94.04 lakhs in the entire deal. (c) Challenging this, the appellant has vehemently stated....
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....consumption of land towards internal roads and providing other facilities. Hence remaining Rs. 1000000/- are held to be the gain of the appellant from this transaction, rejecting his plea that only Rs. 2.26 lakhs were earned from the entire transaction and also rejecting the plea that he had earned only commission nothing else out of the transaction. Accordingly additions sustained in this account is Rs. 10,00,000/-". Thus, the Ld CIT(A) granted partial relief to the assessee by confirming the addition to the extent of Rs. 10.00 lakhs. The revenue is assailing the relief granted by Ld CIT(A) and the assessee is assailing the addition sustained by him. 27.1 With regard to the proposal for enhancement of income, the Ld CIT(A) has pointed out that Shri Abdul Kalam has confirmed the payment of Rs. 24.00 lakhs to the assessee in the statement taken from him on 29.12.2008. He also noticed that the AO did not make any addition in view of the confirmation given by Shri Abdul Kalam. Since the revenue did not raise any ground on this issue before him, the Ld CIT(A) felt that there is no jurisdiction for him to discuss the said issue. The Ld CIT(A) also pointed out that he did not refer....
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....9 lakhs computed by him on sale of Anakulam Estate during the course of assessment proceeding is wrong. Hence, the AO proceeded to compute the profit during the course of remand proceeding under two methods. The AO has suggested that the assessee could have realized a sum of Rs. 94.04 lakhs, if the rate realized on the subsequent sale made to Shri Geevarghese Varghese is applied on the entire extent of land sold. However, this is purely an assumption entertained by the AO and hence it is not based upon any material or facts. Hence, in our view, the Ld CIT(A) has rightly rejected the above said method of calculation of profit suggested by the AO. 29.2 The AO, in the remand proceeding, has also computed the profit on sale of Anakulam Estate at Rs. 14.49 lakhs. Since the sale value of Rs. 70.24 lakhs reported by the assessee relates to 83.22 acres of land, the AO has arrived at this profit by deducting the cost of land pertaining to 83.22 acres of land. However, the contention of the assessee is that the AO should have deducted the cost of entire land of 101.50 acres, since the remaining portion of 18.28 acres was consumed in creating internal roads. We notice that the Ld CIT(A) ha....
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....lakh. The assessee also furnished the details of Demand Drafts. On comparing the details of demand drafts with the Agreement, the AO noticed that a D.D for Rs. 1,95,000/- bearing number 586898 given in the list did not find place in the Agreement. similarly a bankers cheque dated 12.9.2003 drawn from ICICI Bank for a sum of Rs. 20,25,000/- found in the agreement did not find place in the list. Hence the AO treated both the amounts, i.e., Rs. 1,95,000/- and Rs. 20,25,000/- as income of the assessee. In this year also, the AO furnished a remand report during the course of appellate proceedings before Ld CIT(A). In the remand report, the AO accepted that the Demand Draft of Rs. 1,95,000/- was purchased by Shri Abdul Kalam of Attingal and the same is required to be considered in his hands only and not in the hands of the instant assessee. With regard to the Banker's cheque of Rs. 20,25,000/-, the assessee claimed that following demand drafts received from buyers of Estate were deposited into his bank account maintained with ICICI bank and then a Banker's cheque for Rs. 20,25,000/- was purchased by utilizing those proceeds. 12.9.2003 1,95,000 12.9.2003 7,00,000 12....
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....d copies of certificates obtained from State Bank of India to prove that the demand drafts worth Rs. 18.50 lakhs was purchased by Shri Nadeer Shah and E. Sulaikha. The assessee further submitted that he is now able to clarify all these facts, since he has analyzed the details collected during the course of remand proceedings. 30.4 The Ld CIT(A) was convinced with the explanations furnished by the assessee and accordingly deleted the addition of Rs. 20.25 lakhs relating to bankers cheque. With regard to the addition of Rs. 1.95 lakhs, since the remand officer has expressed the view that it need not be considered in the hands of the assessee, the Ld CIT(A) deleted the said addition also. 30.5 The Ld D.R submitted that the explanations, originally given before the AO during the course of assessment proceedings as well as remand proceedings were found to be false. Before Ld CIT(A), the assessee has given a fresh explanation, which was totally new one and totally in contradiction to the submissions earlier made. Since the assessee is changing his stand on this issue, the Ld D.R contended that the Ld CIT(A) was not justified in cancelling the addition. However, the Ld A.R submitted....
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.... Rubber company and we too find it to be convincing. Though the assessee's explanations were contradictory, it has been pointed out by the assessee that he was not having full details during the course of assessment proceedings. It is also a fact that the assessee did not maintain books of account. However, the subsequent explanations are supported by the statements given by Shri Abdul Kalam (Abdul Majeed) and the letter given by State Bank of India. With regard to the addition of Rs. 1.95 lakhs, the remand officer himself has stated that the same need not be considered in the hands of the assessee. Hence, in our view, the Ld CIT(A) was justified in deleting the additions of Rs. 1.95 lakhs and Rs. 20.25 lakhs referred above. 31. The next issue contested by the revenue relates to the addition of Rs. 5,70,000/-, being the cost of purchase of Benz Car. It was noticed by the AO that the assessee had purchased a Benz car during the year for an amount of Rs. 5.70 lakhs. With regard to the sources, the assessee explained that he obtained loans from a person named Shri Surendran of Trivandrum and also from Shri Shajahan. Since the assessee did not file any confirmation letters from ....
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....ommented that the same would result in enhancement of addition of Rs. 98.65 lakhs made by the AO. Before remand officer, the assessee submitted that the transactions in his bank accounts represent purchase/sale transactions of Anakulam estate and Thamarapally estates. Since the assessee did not file copies of sale agreements and confirmation from buyers, the AO rejected the said explanations. Since the deposits made in the bank accounts exceeded Rs. 3.00 crores, the AO expressed the opinion that the revised peak credit of Rs. 219.44 lakhs computed by him would be more appropriate than the figure computed in the assessment proceedings. 32.2 In response to the remand report, the assessee submitted that the sale value of Anakulam estate and Thamarapalli estate were Rs. 70.26 lakhs and Rs. 534 lakhs respectively and major portion of the sale proceeds were routed through the bank accounts maintained by him. He further submitted that he has furnished the names and addresses of the buyers of the property and hence the AO was not justified in drawing adverse conclusions without examining the buyers. 32.3 The Ld CIT(A) found force in the contentions of the assessee. The Ld CIT(A) expr....
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....accounts and hence the possibility of interbank transfers cannot be ruled out. The AO has not accepted the above said claim, apparently for want of supporting evidences. However, the Ld CIT(A) has found force in the contentions of the assessee. In our view also, it may not be correct to reject the submissions of the assessee in an outright manner. Because the fact remains that the assessee is engaged in real estate business activities and further he did not maintain books of account. Hence, in our view, the explanations given by the assessee has to be tested on the basis of available evidences, surrounding circumstances and also by duly considering the human conduct and human probabilities, since the object of the Income tax Act is to assess the income in a judicious manner. The AO, in the remand proceedings, has pointed out that aggregate amount of deposits made during the year in various bank accounts of the assessee was about Rs. 300 lakhs. The assessee has pointed out that the sale value of Anakulam Estate was 70.26 lakhs and Thamarakulam Estate was Rs. 534 lakhs, both aggregating to about Rs. 600 lakhs. Accordingly, the assessee has submitted that the deposits made into his ba....
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.... of the assessee, has actually held the peak credit balance of Rs. 98.65 lakh as the gross receipts of the assessee. From the abovesaid amount, he has allowed set off of income element declared by the assessee/confirmed in his hands to the tune of Rs. 30.30 lakh, resulting in a balance of Rs. 68.35 lakh. From this amount, the Ld CIT(A) has allowed a deduction of about 25%, i.e., about Rs. 18.35 lakh towards expenses and accordingly confirmed the addition to the extent of Rs. 50.00 lakh. 32.7 It is an admitted fact that the assessee is acting as commission agent in real estate and vehicle businesses. It is nobody's case that the assessee is carrying on any other business. The Ld CIT(A) has also found force in the contentions of the assessee that the sale proceeds relating to the real estate business activities have been routed through the bank accounts of the assessee. After having accepted these facts, in our view, the Ld CIT(A) was not right in presuming that the bank deposits represent receipts from some other business activities. In assessment year 2003-04 also, the assessee had such kind of transactions in his bank accounts. The AO made an addition of Rs. 50,000/- only t....
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....led for a remand report from the assessing officer. In the remand proceedings, the AO conducted enquiries by issuing commission and it was found out that the car was sold to Shri Shamsudeen for Rs. 20.50 lakh. According to the remand officer, Shri Shamusudeen paid a sum of Rs. 4.50 lakh by cash and the balance amount of Rs. 16.00 lakh was adjusted against the ICICI Bank Loan. Accordingly, the remand officer accepted the availability of sources to the extent of Rs. 4.50 lakh and recommended for sustaining the addition of the balance amount of Rs. 6,78,840/- (Rs. 11,28,840/- (-) Rs. 4,50,000). 34.2 While giving reply to the remand report, the assessee submitted that he himself received the cheque of Rs. 16.00 lakh from Shri Shamsudeen and it was incorrect to say that he has directly paid the amount towards settlement of loan, as Shri Shamusudeen was not aware of outstanding balance in the loan account. The assessee also contended that the statement was recorded from Shri Shamsudeen behind his back and further he was not given opportunity to cross-examine him. However, the assessee furnished a letter dated 08-09-2010 obtained from Shri Shamsudeen, wherein he clarified that he gave ....
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....00,000 05.08.2004 1,54,100 17.03.2005 30,00,000 17.03.2005 10,00,000 About the sources for making these payments, the assessee stated that he borrowed loans from ICICI Bank and also used the sale proceeds of Rs. 28.00 lakh realised on sale of Benz Car KL-5-S1. The AO accepted the source for making payment of Rs. 30.00 lakh. For other payments, the date of loans did not match with the dates of payments and hence the AO assessed the aggregate amount of Rs. 28.00 lakh as the income of the assessee. 36.1 In the remand report, the assessing officer accepted the fact that all the payments were made by cheque to Rajshree Motors. He also accepted the fact that the assessee has availed several car loans from ICICI Bank for the business. Since the assessee did not furnish the bank accounts and prove the nexus between the loans taken by him and the payments made to Rajshree Motors, the AO expressed the view that there is a possibility of diverting the loan funds to the real estate business. In the absence of details, the remand officer opined that the addition of Rs. 28.00 lakh was justified. 36.2 In reply to the remand report, the assessee submitted that the terms ....
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....n peak credit of all bank accounts and make the addition. The AO calculated the peak credit balance, which existed on 23.12.2004, at Rs. 85,77,889/- and accordingly assessed the same. 37.1 In the remand proceedings, the AO worked out the peak credit and according to him, the peak credit existed on 10.01.2005 at Rs. 236.01 lakh. He had worked out the peak credit for the immediately preceding year at Rs. 219.44 lakh. Accordingly, the AO expressed the view that the assessee is required to explain the difference of Rs. 16.57 lakh (236.01 (-) 219.44) and it will result in enhancement of income also. 37.2 In reply to the remand report, the assessee submitted that the majority of sale proceeds of Anakulam estate and Thamarapally rubber estate were routed through his bank accounts. Their sale proceeds were Rs. 70.26 lakh and Rs. 534 lakh respectively. He submitted that the last sale in the block of Thamaraplly estate took place on 29.3.2005 for a consideration of Rs. 121.28 lakh. He further submitted the peak credit balance worked for the current year and for the immediately preceding year put together works out to Rs. 455.45 lakh, which is less than the sale consideration of Thamara....
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.... same in detail while considering the appeal of that year. All the observations made therein shall also apply for the year under consideration. Consistent with the view taken in assessment year 2004-05, in this year also, we hold that there is force in the submission of the assessee that he has routed through major portion of sale proceeds of real estate business and vehicle business through his bank accounts. 38. We shall now take up the appeal filed by the revenue for the assessment year 2006-07. The assessee has not filed appeal for this year. In this year, the AO has made following additions:- Income from Commission Business Rs. 12,88,00,000/- Rent from cashew factory Rs. 1,68,000/- Peak credit balance in bank accounts Rs. 2,93,91,652/- Before Ld CIT(A), the assessee contended that: (a) there is violation of natural justice on the ground that the AO has made the impugned additions by collecting materials behind the back of the assessee. (b) the AO was not right in law in placing reliance on the defective return originally filed by the assessee u/s 139 of the Act. (c) the AO was not right in assessing commission inco....
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....ayalam Ltd, the owner of the Cheruvally Estate. Accordingly Shri Varkey George negotiated the deal for a consideration of Rs. 63.00 crores. Accordingly, he entered into a sale agreement with Harrisons Malayalam Ltd on 15.6.2005, as per which the company agreed to sell the estate to the nominee of Sri Varkey George. Accordingly he nominated Gospel for Asia as purchaser. Since the assessee and Shri Varkey George have worked together, they have entered into this agreement to share the commission income. In connection with this deal, a sum of Rs. 20.00 crore was received as commission from Gospel for Asia. It was agreed that all the payments received shall be routed through Shri Varkey George. The relevant clauses of the agreement are extracted below for the sake of convenience. "3. Sulaiman will be responsible for arranging for completion of all registration formalities, receiving back the registered conveyance and arranging for mutation of names in the revenue records to reflect the ownership of GFA to and in respect of the Estate and dealing with all pending labour and staff issues and disputes and duly settling all the same on behalf of GFA and generally making all require....
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.... 9,69,90,000 In the sworn statement taken from Shri Benny Joseph, he affirmed the above transactions and agreed to offer the balance amount to the extent of Rs. 29,53,877/-, that was available in his bank account, as his income. The assessee also pointed out that the vouchers for payment of Rs. 9.54 crore to the labourers formed part of seized records. He further submitted that the labour payments were effected through the employees of Harrisons Malayalam Ltd, since neither the purchaser nor the assessee/Shri Benny Joseph have direct contact with the labourers. Hence the sum of Rs. 8.00 crores was withdrawn from ICICI Bank, Edapally branch by way of cash along with employees of RPG Enterprises (a group concern of Harrisons Malayalam Ltd) viz., Shri Anil Sanganeria and Shri Heman Goenka and the same was handed over to the abovesaid two persons. In support of this, it was submitted that the video camera recording of the Chest branch of ICICI bank may be referred to. It was also submitted that the abovesaid two persons were staying in Taj Malabar hotel on that date. 40.3 The AO examined the explanations of the assessee. In this regard he conducted enquiries with Shri T.P. Math....
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....oposal sent on 29.12.2008. Hence, the assessee submitted that there is violation of principles of natural justice with regard to these additions also. The Ld CIT(A) accepted the said contentions of the assessee and accordingly quashed the assessment order. 40.5 In the original return of income filed u/s 139(1) of the Act, the assessee had declared the gross amount of Rs. 12.88 crore as commission receipts and deducted the expenses incurred towards labour settlement and other expenses. However, in the return filed in response to the notice issued u/s 153A of the Act, the assessee declared gross commission receipts at Rs. 4.88 crore only. From that amount, the assessee deducted the payment of Rs. 2.09 crore made to Shri Benny Joseph and other expenses. According to the assessee, he did not claim many expenses which were claimed in the original return of income. When the AO questioned about the change in the gross commission receipts, the assessee submitted that the return filed by him u/s 139(1) was a defective return and the AO should not take cognizance of the same. The assessee submitted that he did not attach Balance sheet along with the original return of income, which makes ....
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.... relating to the claim of non-payment of self-assessment tax. 43. The next issue relates to the decision of Ld CIT(A) in holding that the return filed by the assessee u/s 139(1), being defective, should have been ignored by the AO. According to the assessee, he did not attach the Balance sheet with the return of income as per the requirement of sec. 139(9)(e) of the Act, which has rendered the return filed u/s 139(1) as defective one. Accordingly, it was contended that the AO should not have taken cognisance of the same. The assessee is raising this contention for the reason that he had declared the gross commission receipts at Rs. 12.88 crore in the original return of income and at Rs. 4.88 crore in the return of income filed in response to the notice issued u/s 153A of the Act. We have already noticed that the Ld CIT(A) has accepted this contention of the assessee. 43.1 However, a careful reading of provisions of sec. 139(9) shows that the said provision shall become effective only if the AO considers that the return of income furnished by the assessee is defective. The search took place in the hands of the assessee on 13.12.2006 and hence the assessment of the instant year....
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....nd also after furnishing the relevant documents, since the power of Ld CIT(A) is co-terminus with that of the assessing officer. At the same time, in our view, it was also not fair on the part of the AO in placing reliance on the documents, which were not put to the assessee. However, our further discussions would show that the abovesaid documents may not have much relevance to the issue under consideration. Hence, we are unable to agree with the decision of Ld CIT(A) in quashing the assessment in toto. Accordingly, we set aside this decision of the first appellate authority. 45. We shall now take up the issues contested on merits of addition. The AO has assessed a sum of Rs. 12.88 crore as Commission income of the assessee. Though the assessee declared the gross receipts as Rs. 12.88 crore in the return of income filed u/s 139 of the Act, he declared only Rs. 4.88 crore as gross receipts in his 153A return and deducted there from the amount of Rs. 2.09 crore paid back to Shri Benny Joseph. We have already discussed the facts relating thereto in the preceding paragraphs. We have already noticed that the AO has placed reliance on the statement attached to the original return of i....
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.... did not conduct enquiries with Gospel for Asia, who has paid Rs. 20.00 crore to Shri Varkey Joseph. The AO also did not conduct enquiries with Shri Varkey Joseph also. The statement given by Shri Benny Joseph was also not rebutted, but only brushed aside. (e) During the course of search, the search officials have seized vouchers evidencing payment of Rs. 9.54 crore as compensation to the workers. According to the assessee, the payment was made to about 500 workers. However, the AO has conducted enquiries with about 18 workers only, who have denied the receipt of any compensation. However, the assessee was ready to produce as many workers as required to substantiate the claim, but the said request was not acceded to. (f) The assessee has also contended that it would be unreasonable to suspect the genuineness of the vouchers on the ground that they are bogus one. The assessee further submitted that these payments were made and vouchers were obtained prior to the commencement of search operations. The Ld A.R contended that it would be unreasonable to presume that the assessee has prepared the vouchers visualizing search operations, as no one can predict such operati....
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....nsactions were confirmed by Shri Benny Joseph in the sworn statement taken by the Addl. Director of IT from him on 05-02-2007, i.e., during the course of search proceedings. We notice that the AO has simply brushed aside these bank transactions on the reasoning that the version of Shri Benny Joseph is not reliable, since he was also a party to the transactions. We notice that the AO did not take any step to disprove the bank transactions or to prove that the funds were diverted for any other purpose. 45.2 The bank account of the assessee shows that he has received only Rs. 4.88 crore from Shri Varkey George through Shri Benny Joseph. It also shows that he returned back a sum of Rs. 2.09 crore to Shri Benny Joseph. In the sworn statement, Shri Benny Joseph has also confirmed these transactions. In the instant case, Shri Benny Joseph has also confirmed that he has received Rs. 8.00 crore from Shri Varkey George and the same was withdrawn and handed over to the officials connected with Harrisons Malayalam Ltd for disbursing to the workers. According to the assessee, the workers were paid a sum of Rs. 9.54 crore and evidences in that regard was found during the course of search. Hen....
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....ncome of the assessee has to be computed by considering the transactions in the bank account of the assessee. Accordingly, in our view, the AO was not correct in assessing the entire amount of Rs. 12.88 crore in the hands of the assessee by totally disregarding the payment made for settlement of labour disputes and payments made to Shri Benny Joseph. Accordingly, we are inclined to uphold the view of Ld CIT(A) on this issue. 46. The department has (sic - not) challenged the decision of Ld CIT(A) in deleting the rental income of Rs. 1.68 crore before us. Hence his decision on this issue has reached finality. 47. The next issue relates to the addition of peak credit balance in the bank accounts of the assessee. The Ld CIT(A) has deleted the same by holding that there is no reason to make this addition, when the assessee has transacted his real estate deals through his bank accounts. The revenue is aggrieved by the said decision of Ld CIT(A). 47.1 An identical addition of peak credit balance was made in the assessment year 2004-05 also. We have dealt with the same in detail while considering the appeal of that year. All the observations made therein shall also apply for the y....
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.... Before Ld CIT(A), the assessee submitted that the question of making disallowance u/s 40(a)(ia) of the Act would arise only if the assessee had claimed the same as a deduction while computing the income. He submitted that the said payment of Rs. 35.00 lakh was not claimed as deduction at all, since he did not deduct tax at source from that payment in that year. Hence, instead of making a claim and further making a disallowance u/s 40(a)(ia) of the Act, the assessee did not claim deduction. He further submitted that he has claimed the same in this year, since the tax was deducted at source and paid during this year. The Ld CIT(A) accepted the said contention and accordingly deleted the disallowance of Rs. 35.00 lakh made by the AO. 49.2 We have heard the rival submissions on this point. We agree with the submissions of the assessee that the question of making disallowance u/s 40(a)(ia) would arise only if the relevant expenditure was claimed as a deduction. In the instant case, the assessee has submitted that he did not claim the payment of Rs. 35.00 lakh as deduction at all in the assessment year 2006-07. The said action of the assessee would have a neutral effect, i.e., it wou....
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....original owner of the property (b) has spent a sum of Rs. 98.50 lakh on various expenses and (c) has repaid a sum of Rs. 1,55,23,000/- to the prospective buyers as full and final settlement of all advances received. 50.1 In the return of income filed, the assessee declared the receipt of premium amount at Rs. 3.42 crore and claimed expenses therefrom. Since the receipt unearthed during the course of search stated the premium amount as Rs. 3.95 crore and further the aggregate amount of three disbursements stated above worked out to Rs. 3.24 crore only, the AO took the view that the premium should be taken as Rs. 3.95 crore only. Since the assessee has declared only Rs. 3.42 crore, the AO treated the difference of Rs. 53.00 lakh as income of the assessee. 50.2 In the remand report submitted to Ld CIT(A), the AO worked out the difference in the premium receipt at Rs. 1.91 crore, i.e., in a totally different manner, as discussed below:- (a) As against the amount of Rs. 3.42 crore mentioned in the revocation agreement, the assessee has received a sum of Rs. 3.02 crore by way of cheques and hence the remaining amount of Rs. 40.00 lakh remains unconfirmed.....
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....he same again u/s 68 does not arise at all. Hence, the AO's proposal with regard to this amount is devoid of any merit. (b) From the copy of the computation statement, we notice that the assessee has claimed deduction of Rs. 70.50 lakh given as purchase advance and a sum of Rs. 1.55 crore refunded to the prospective purchasers against the premium amount of Rs. 3.42 crore. Accordingly, the assessee has declared a sum of Rs. 1.16 crore as net receipt from which he has claimed other expenses. Both these payments have been confirmed by the prospective buyers in the revocation agreement. However, the AO takes the view that the prospective buyers have confirmed receipt of Rs. 1.02 crore only, where as in the revocation agreement, they have confirmed the receipt of Rs. 1.55 crore. Hence, the inference drawn by the AO is against the facts available on record. Since the AO has taken the figure of Rs. 1.02 crores, he is arriving at the income figure of Rs. 1.30 crore. If the repayment is taken at Rs. 1.55 crore and the gross premium amount is taken as Rs. 3.42 crore, it would result in a figure of Rs. 1.16 crore, which is the amount declared by the assessee in his return of inco....
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....O treated the abovesaid amount of Rs. 40.00 lakh as unexplained income of the assessee. 53.1 Before Ld CIT(A), the assessee submitted that the payment of Rs. 25.00 lakh and Rs. 10.00 lakh were made in order to purchase the City hospital. However, the deal did not materialise and hence he received back the abovesaid amounts. With regard to the amount of Rs. 5.00 lakh, he submitted that the same was paid as advance for purchase of Hotel Maria Park. He further submitted that the premium income declared by him as well as the loan of Rs. 80.00 lakh obtained from Shri Isacc George during the year sufficiently explains the sources for the abovesaid payments. 53.2 In the remand report, the AO accepted about the availability of funds through the Commission income of Rs. 6.00 lakh and also the loan of Rs. 80.00 lakh taken from Shri Isacc George. However, the AO expressed the view that it is difficult to accept these explanations in the absence of a Cash flow statement. The Ld CIT(A) accepted the fact of availability of funds through the income declared by the assessee as well as the loan availed by him. Accordingly, the Ld CIT(A) deleted this addition. 53.3 We have heard the rival c....