TaxTMI 
TaxTMI 
2021 (9) TMI 507
X X X X Extracts X X X X
X X X X Extracts X X X X
....he grounds of appeal originally along with Form 36 and later revised the grounds through letter dated 20.05.2021. As per the request of the Revenue, the revised grounds of appeal are taken for adjudication : The revised grounds raised by the department as under: 1. The Ld.CIT(A) erred in deleting the addition on unaccounted income from sale of Villas of Rs. 3,94,47000/- by relying on the ITATs order in the assessee's case for the AY 2016 -17, wherein ITAT has held that employee of the assessee Sri Lanka Anil Kumar as third party, without giving credence to the evidences found in his residence. 2. The Ld.CIT(A) erred in deleting the addition on unaccounted income from sale of plots of R5.24,80,88,660/- by relying on the JTATs order in the assessee's case for the AY 2016-17, wherein ITAT failed to appreciate the fact that the then CIT(A) deleted the additions by admitting additional evidence i.e., MOU entered into with M/S Kranthi Properties, without giving opportunity to AO. 3. The Ld.CIT(A) erred in deleting the addition of Rs. 8,99,900/- on account of bogus sub-contract expenses by ignoring the fact that Sri K.S.N.Murthy in his statement has adm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the project name 'Blue Marino'. The project was developed in two phases i.e. Phase I and Phase II. Each villa was allotted the land admeasuring 150 sq.yds with individual duplex home with uniform design for all villas at Chepalauppada. The assessee started selling villas in the F.Y. 2013-14. Search u/s 132 was conducted in the business premises of Lanka Anil Kumar, the marketing executive of the firm and survey u/s 133A was conducted on 24.11.2015 in the case of Navaratna Estates at D.No.10-1-29, Sampath Vinayaka Temple Road, Visakhapatnam. Certain incriminating material was found and impounded as per order No.ACIT/Kkd/Survey/133A(3)(ia)/2015-16 dated 25.11.2015. Statement was recorded from Sri Manchukonda Yethiraja Subrahmanyam, one of the partners of the assessee firm. Statement is also recorded and subsequently on 11.12.2015 from Sri Manchukonda Yethiraja Subrahmanyam. On the basis of incriminating material found during the course of survey and the statements recorded, the AO worked out the unaccounted receipts on estimation basis at Rs. 9,84,55,000/-. Search u/s 132 was conducted in the case of Lanka Anil Kumar and found certain incriminating material. The AO worked out the u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e appeal hearing, the Ld.DR supported the order of the AO and submitted that Lanka Anil Kumar is an employee of the firm and the material found and statement recorded from the employee is very much relevant to the assessee's case. As per the statement recorded there was an element of cash component in sale of villas which was not accounted in the books of accounts, hence, argued that the addition needs to be sustained. 6. On the other hand, the Ld.AR relied on the orders of the Ld.CIT(A) and argued that no interference is called for in the order of the Ld.CIT(A). 7. We have heard both the parties, perused the material placed on record. Identical issue has come up before this Tribunal in the assessee's own case for the A.Y. 2016-17 and after having discussed the issue in detail, the Hon'ble ITAT has deleted the addition holding that there was no material to support the order of the AO for assessment of unaccounted income. For the sake of clarity and convenience, we extract relevant para No.17 to 17.6 in I.T.A. No. 618/Viz/2018 and 612/Viz/2018 dated 22.01.2020 for the A.Y.2017-18. "17. We have heard both the parties and perused the material placed on record. The AO ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re mentioned in the material found during the course of search regarding the sale price of the villas. One quotation shows 53.00 lacs and another document shows at Rs. 50 lakhs and 60 lakhs. At the end the AO also did not place reliance on the above documents for arriving at the undisclosed income. During the appeal hearing also the department could not place any evidence to controvert the finding of the Ld.CIT(A). We also observe from the seized material or impounded material marked as Annexure NRE/Survey/buss/01 , BMHP/133A/Navaratna, page No.50 and other email correspondence that there was no indication or evidence to support the receipt of on money by the assessee. Therefore, we do not find any reason to disagree with the Ld.CIT(A). With regard to seized or impounded documents mentioned in para No.17 of this order, the Department also did not place any material to controvert the findings of Ld.CIT(A) on this issue. Further though the AO referred the above impounded or seized material and ultimately dropped the proposal and relied on page No.6 to 8 of LAK/01 found and seized from the residence of Sri Lanka Anil Kumar for assessment of undisclosed income in respect of Blue Marino....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nil Kumar marked as LAK/01. During the course of statement recorded from Sri Lanka Anil Kumar, he had stated that page No.6 to 8 related to the information of villa of buyers and major part of the amounts were collected. Sri Suresh Kumar Jain in the statement, confronted with him, completely denied having received any on money and stated that statement given by Anil kumar has no relevance to affairs of the firm and whatever stated by Lanka Anil Kumar was wrong. The AO did not make any cross verification of the statement given by Sri Suresh Kumar Jain with Sri Lanka Anil Kumar or with any of the buyers of the villas to ascertain the receipt of on money. The above scribbling found and seized as annexure LAK/01 does not indicate any on money except giving leads to consider the total sale consideration could be Rs. 52.00 lacs in case of Villa No.122 and Rs. 44.25 lacs in the case of villa No.139. Since the material was found in the residence of Lanka Anil Kumar the presumption is not available to hold that contents were related to the assessee firm unless it is established by the revenue. Therefore, merely on the basis of scribbling, it cannot be presumed that the assessee had received....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ade the payment. According to the Department, CRK denotes C. Radha Krishna Kumar and KRK denotes K. Rajani Kumari. However, no name of the assessee was found in the loose sheet. The property was purchased from w/o CRK for a disclosed consideration of Rs. 65 lakhs by the assessee. The property has been registered and the sale deed was executed for a consideration of Rs. 65 lakhs on 21st Aug., 2006 which consideration has been accepted by the State registration authorities. Further nothing was brought on record to show that there was any invoking of s. 50C while completing the assessment in the case of the seller. There is no evidence other than the seized material marked as 'A/CRK/104' where relevant entries are made at Rs. 1,65,00,000. The seized material was not found at the premises of the assessee and there is no corroborative material to suggest that the assessee has actually paid Rs. 1.65 crores towards purchase consideration of the property. The assessee and her brother categorically denied the payment of any money over and above Rs. 65 lakhs. The AO placed his reliance on the statement of S, who is a third party. The evidence brought on record by the Department is not en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....count from where the cash was withdrawn. Without any of these details, the Department has taken a view that the assessee has paid Rs. 165 lakhs for purchase of the property. The Department cannot draw inference on the basis of suspicion, conjectures and surmises. Suspicion, however strong cannot take place of material in support of the finding from the A0. The A0 should act in a judicial manner, proceed with judicial spirit and come to a judicial conclusion. The A0 is required to act fairly as a reasonable person and not arbitrarily and capriciously. The assessment made should have enough material and it should stand on its own legs. The basis for addition cannot be only the loose sheet or a third party statement. In the absence of corroborative material, and/or circumstantial evidence, the addition cannot be sustained. Thus, no addition can be made on a dumb document and noting on loose sheet. It should be supported by the evidence on record and the evidence on record is not sufficient to support the Revenue's action. In a block assessment undisclosed income has to be determined on the basis of the material and evidence detected in the course of the search action. The circumst....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e payment of Rs. 1,01,687/- only upto 31st March, 1999 and has consistently taken the stand that it has not paid balance amount of Rs. 3,81,414/- as stated in the seized document. No evidence could be brought on record by the Revenue to show that in fact the assessee had paid the amount of Rs. 3,81,414/- to OD. No document containing signature of the assessee or handwriting of the assessee to corroborate the above making of payment by the assessee was found during the course of the search. Even at time of cross examination by the assessee the partner of OD could not produce any evidence that the amount written in the seized document was in fact received from the assessee. As the assessee has categorically denied to have made any payment in excess of Rs. 1,01,687/- upto 31st March, 1999 in respect of purchase of flat the said denial cannot be brushed aside without bringing any positive material on record. Merely recording made by a third party or statement of a third party cannot be treated as so sacrosanct so as to read as a positive material against the assessee. In view of the above the CIT(A) was not justified in confirming addition to the extent of Rs. 3,81,414/- in the hands o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioned in the registered sale deed but as per the sale agreement found during search operation. It is also an interesting fact to note that in the statement recorded from the assessee u/s 132(4) the revenue authorities have not put any question with regard to the sale agreement seized at the time of search and seizure operations. Smt. P. Nalini Devi also in her statement further clearly stated that the property was sold at Rs. 23.50 lakhs and not at the rate of Rs. 1.68 crores. The Hon 'ble Supreme Court in the case of K.P. Verghese reported in 131 ITR 597 has held that onus is on the department to prove that the assessee has understated the value of the property and has paid more than what is mentioned in the registered sale deed. The Hon'ble Supreme Court in the case of Moosa S. Madha and Azam S. Madha vs. CIT( 89 ITR 65) has held that photo copies have little evidentiary value. Therefore, photocopies of any document cannot by itself be considered as evidence for purpose of making addition in assessment proceedings. The AO is required to bring further evidence on record to show that the sale agreement was actually acted upon by the parties. This is because of the fact when....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 22. The Hon'ble A.P. High Court in ITA No.232 of 2013 in the case of CIT Vs. Smt. R. Nalini Devi has upheld the order of the ITAT Hyderabad Bench. The Hon'ble High Court while, considering the issue held as under: "We have heard the learned counsel for the appellant and gone through the impugned judgement and order of the learned Tribunal. It appears, the Assessing Officer had relied on a photocopy of an unsigned sale agreement in order to find that consideration amount has been paid at Rs. 1,68,00,000/-. Therefore, this amount was not disclosed. The learned Tribunal has correctly concluded that unsigned photocopy of the agreement for purchase of the property cannot be a material to rely on, when the registered sale deed has been produced and the same shows that the property was purchased at a price of Rs. 23,50,000/-. This registered sale deed was disclosed at the time of original assessment. According to us, the agreement of sale loses its force, the moment registered sale deed is executed. If the property has been purchased at a higher price than that of mentioned in the purchase deed, then the onus is on the Assessing Officer to establish that as has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idence to support his contention to say that there is on money exchanged between the parties. In the absence of proper enquiry and sufficient evidences, we find no reason to confirm the addition made by the A.O. Therefore, we reverse the CIT(A) order and direct the Assessing Officer to delete the addition." 17.6. Though the above decisions are rendered in respect of on money payment, the same findings and observations are equally applicable for on money receipts also. In 15 villas, which were neither sold nor registered, there is no case for addition of undisclosed income, hence the same required to be deleted. In the remaining 25 villas there is no evidence brought on record to show that the assessee has received on money except the scribbling paper seized or impounded at the time of survey or the loose sheets seized from third party, Sri Lanka Anil Kumar. The scribbling also does not indicate the on money receipt with date and name of the party. No other evidence was brought on record by the revenue to establish that the assessee had received on money for sale of villas. Therefore, we hold that there is no case for assessment of unaccounted income on account of on money ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....larity and convenience, we extract relevant part of the order of this Tribunal for the A.Y.2016-17 which reads as under : "20. We have heard both the parties and perused the material placed on record. In the instant case, there was no evidence found during the course of search/survey with regard to receipt of on money in respect of project Sea Pearl. The AO made the addition on the basis of sale price of plots to 61 to 64 which were adjacent to Sea Pearl Project and has no connection with the project Sea Pearl. The plot No.61 to 64 and the Sea Pearl projects were completely different and not inter linked. As explained by the assessee, it has sold the bulk of plots to M/s Kranthi Properties @4000/- per sq.yd and any amount received over and above the agreed rate would accrue to Kranthi Properties, but not to the assessee. The assessee placed copy of MoU reached between the assessee and the Kranthi Properties in page No.190 to 192 of the paper book. No other evidence was brought on record by the department to controvert the finding of the Ld.CIT(A) or to controvert the contents of MoU between the assessee and the Kranthi properties dated 25.07.2013. Therefore, we do not find....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ver, the AO placing reliance on the statement of Sri K.S.N.Murty refused the submission of the assessee and made the addition as bogus expenditure in the hands of the assessee. 14. Against which the assessee went on appeal before the CIT(A) and the Ld.CIT(A) deleted the addition, holding that the AO has not properly appreciated the submission made by the assessee on the evidences filed before the AO. 15. Against which the department is in appeal before this Tribunal. During the appeal hearing, the Ld.DR supported the order of the AO, whereas, the Ld.AR relied on the order of the Ld.CIT(A) and argued that the amount paid to Sri K.S.N.Murty was genuine expenditure incurred for the sub contract works and it was never received back by the assessee. The self withdrawals made by Sri K.S.N.Murty were for their own purpose and it was not received back by the assessee. In addition to the above, the assessee submitted that Sri M.Y.Subrahmanyam has retracted the statement. There was no evidence found during the course of survey or search with regard to receipt of money back from Sri K.S.N.Murty. Further, the Ld.AR argued that the assessee has requested for cross examination of Sri K.S.N....