TaxTMI 
TaxTMI 
2026 (10) TMI 520
X X X X Extracts X X X X
X X X X Extracts X X X X
....gainst the order dated 10.01.2020. Since common issues are involved in these three appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity. 2. The grounds raised by the assessee in ITA No.788/Hyd/2020 read as under : "1. The Ld. CIT(A) erred in partly allowing the appeal. 2. a) The Ld. CIT(A) erred in confirming the business income of Rs. 8,81,60,000/- which has been arrived at by estimating @ 16% of gross receipts. 2. b) The Ld. CIT(A) erred in relying on the assessee's acceptance of income that has been estimated at 16% for the earlier assessment year and confirming the estimation of income at 16% for the assessment year under consideration. 2. c) The Ld. CIT(A) ought to have appreciated that each assessment year is separate from the other and therefore, the confirmation of estimated income for the year under consideration at 16% of gross receipts based on the estimation of income in the immediate previous year, is not in order. 2. d) The Ld. CIT(A) ought to have appreciated that the estimation of business income at Rs. 8,81,60,000/-, being 16% of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....have appreciated that the Assessing Officer has not given any opportunity of being heard to the assessee before estimating the profit @ 16% which is against the Principles of Natural Justice. 9. The appellant may, add or alter or amend or modify or substitute or delete and / or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal." 3. On the other hand, the grounds raised by the Revenue in ITA No.763/Hyd/2020 read as under : "1. The Ld. CIT(A) erred both in law and on facts of the case in allowing relief to the assessee. 2. The Ld. CIT(A) erred in deleting the entire addition of Rs. 176.11 crores on the ground that the addition was made on protective basis without making any substantive addition in any of the concerns/ individuals. 3. Without prejudice to the above, the Ld.CIT(A) ought not to have deleted the addition of Rs. 9.14 crore included in Rs. 176.11 crores as the same was made substantive basis in respect of AC 5-04 land. 4. The Ld. CIT(A) erred in the granting relief on the presumption that the assessee has offered substantial receipts to tax. 5. The Ld. CIT(A) erred....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aveji, Chartered Accountants, was nominated by the Commissioner of Income Tax, Central, Hyderabad, who later submitted the Special Audit Report. The AO, after considering the relevant submissions of the assessee and also taking note of various incriminating material found during the course of search, observed that, the affairs of the company are far from normal, lack transparency and clarity. Further, there is non-cooperation by way of delay in submission of information coupled with skeletal replies by the assessee. Therefore, the AO, after considering the relevant submissions of the assessee and also taking note of the special audit report, rejected the books of accounts of the assessee. 6. The AO further noted that, during the course of search in MBS group of cases, the incriminating material found shows that there was a land deal between M/s. Goldstone Exports Limited, M/s. Goldstone Group, represented by Sri. Dr. P.S. Prasad, and M/s. MBS Jewellers Private Limited and M/s. MBS Impex Private Limited, etc., represented by Sri. Sukesh Gupta, relating to sale of land at Sy. No. 172, Hydernagar village, Kukatpally Mandal, Ranga Reddy district, and Sy. No. 78, Hafeezpet, Serilinga....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f estimation of 16% profit on gross receipts, which has been reproduced at para 6.1 on pages 11 to 15 of the Ld. CIT(A)'s order. The assessee had also challenged the addition made by the AO towards alleged on-money receipt for sale of land to the extent of 5.04 acres on substantive basis for Rs. 9,14,15,873/- and the balance amount on protective basis for Rs. 166,96,84,127/-, and argued that the material relied upon by the AO were unsigned documents, without any reference as to the amount received by the assessee, and therefore, the additions made by the AO cannot be upheld. The assessee had also challenged the assessment order in light of non-issuance of statutory notice under Section 143(2) and argued that in the absence of issuance of notice under Section 143(2), the assessment order passed by the AO is invalid and liable to be quashed. 8. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of various reasons given by the AO to estimate 16% profit on gross receipts, rejected the ground taken by the assessee and upheld the profit estimated by the AO by holding that the assessee has not produced any evidence with regard to the exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, for which an agreement for sale of land to the extent of 48 acres was entered into and the same has been cancelled. Further, the documents found during the course of search on 29.11.2017 also show that the AO has assessed the capital gain on the above transactions in A.Y. 2013-14. Therefore, it is observed that, there is no clear evidence of receipt of on-money as alleged by the AO and thus deleted the addition made by the AO towards alleged on-money receipts of Rs. 9,14,15,873/- on substantive basis. The Ld. CIT(A) further noted that, in respect of balance on-money of Rs. 166,96,84,127/-, the AO made addition on protective basis, however, there is no substantive addition in any of the group companies and from the above, it is very clear that, there is no clarity as to the taxation of receipts, whether in the hands of the assessee or any other group companies. Thus, the Ld. CIT(A) rejected the reasons given by the AO and deleted the addition made by the AO towards alleged on-money of Rs. 166,96,84,127/-. 10. In so far as the legal ground taken by the assessee challenging the validity of assessment order passed by the AO in the absence of statutory notice under Section 143(2) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-money. The image copies of the seized documents clearly disclose that the total liability towards shares was Rs. 200.11 crores, out of which amounts were settled to the tune of Rs. 176.11 crores. The AO considered all these evidences and made an addition towards alleged on-money on substantive basis of Rs. 9,14,15,873/-, by considering the share of the assessee in the total extent of land sold by the assessee company. In respect of the remaining extent of land, since other group entities were having assignment rights in the land and the assessee had declared the sale consideration in its hands, the AO made a protective addition of Rs. 166,96,84,127/-. The Ld. CIT(A), without considering the evidences, simply deleted the additions made by the AO on the ground that there was no evidence in respect of on-money and that the documents considered by the AO consisted only of an unsigned agreement coupled with other documents, which did not show any receipt of on-money. 14. The Ld. CIT-DR, further referring to the order of the Ld. CIT(A), submitted that, there are apparent contradictions in the findings of the Ld. CIT(A). Going by the order, the Ld. CIT(A) has stated that there is evid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erefore, made an addition of Rs. 166,96,84,127/- on protective basis. However, the fact remains that, as per the seized document, the assessee company has sold land to the extent of 34.61 acres in Sy. No. 172, and the balance land to the extent of 63.49 acres is still in the name of the assessee group companies. The Ld. CIT(A), after considering the relevant facts, has rightly held that, there is no clear evidence of receipt of on-money as alleged by the AO. 16. The Ld. counsel for the assessee, further referring to the order of the Hon'ble High Court of Telangana in various I.A.s in O.S.A. Nos. 54 to 59 of 2004 by order dated 20.12.2019, submitted that, the impugned land to the extent of 98.10 acres in Sy. No. 172 was finally declared to belong to the State of Telangana. Further, the Hon'ble Supreme Court, in various Civil Appeal Nos. arising out of SLP(C) Nos. 2373 to 2377 of 2020, by order dated 15.06.2023, has finally decided the issue and held that the land in question belongs to the Government of Telangana. From the above, it is very clear that, the alleged land transactions considered by the AO for the purpose of making addition towards alleged on-money do not belong to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed draft agreement, which cannot be of great evidentiary value. The contents of the document have to be corroborated with further evidence to draw a definite conclusion from the above. b) The AO relied on the contents of the above pages to hold that Mr. P.S. Prasad has confirmed receipt of Rs. 230 Cr. The relevant content of the page is as under: "Dr. Prasad agreed for total receipts of Rs. 230 Cr as on 14.11.2019 towards land and other things however agreed to adjust in land receipts" It is seen that the above is not confirmation that Rs. 230 Cr. have been received, as concluded by the AO. c) The next document relied on by the AO is the Memorandum of Settlement (MoS) (Pages 3 to 9 of Annexure A/PCG/RES/01) on stamp paper on 25.01.2010. The same is signed by Dr. P.S. Prasad. It contains details of transactions like: "94. The other important document is page nos. 3 to 9 of Annexure A/PCG/RES/01 which is a memorandum of settlement and agreement executed on a stamp paper on 25.01.2010 and the same is signed by Dr. P.S. Prasad. As can be seen from this MoS, it is a continuation document which also speaks of the deal of the same land and reit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A/PCG/RES/01 contain details of payment in respect of shares. The AO also discussed the enquiries/transactions with various share brokers in relation to share transactions in M/s. Goldstone Technologies Ltd. The payments or allocation of shares has been done by the concerns of Mr. Sukesh Gupta (MBS Jewellers Group). vi) In light of the above evidences and the transactions related to the lands in question, it is seen that the appellant has sold land to the extent of Ac. 34 in Sy. No. 172 at Hyderguda only to MBS Group so far. The balance land of Ac. 63.49 Guntas still stands in the name of group companies of Mr. P.S. Prasad only. A part of the land was agreed to be sold to other group companies for which an agreement of sale for land to the extent of Ac. 48 was entered into and the same was cancelled. In fact, during the Search and Seizure operation on 29.11.2017 on Goldstone group companies, the documents to the above effect were found and the AO has assessed the capital gains on the above transactions in A.Y. 2013-14. vii) In view of the above factual position, it is clear that the entire land in question was not sold even as on today and accordingly, the capital....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted 25.01.2010, is signed only by Dr. P.S. Prasad and that the above document does not show any details of the alleged receipt of Rs. 230 crores as considered by the AO. Further, the document clearly shows the transfer of land to the extent of 28 acres and further promise to transfer 48 acres of land. It also talks about obtaining NOC from Sri Vaddepalli Narsing Rao, Sri Vamsi Mohan and Sri Raghu, and the transfer of 57 lakh shares of M/s. Goldstone Technologies Limited. Clause 16 of the above Memorandum of Settlement contains a stipulation that the above document has to be executed within 14 days from 25.01.2010, failing which it shall cease to operate. Since the document is signed only by one party and the agreement was not acted upon till date, the reliance placed by the AO to establish that the assessee had received on-money of Rs. 230 crores and that the same was confirmed by Dr. P.S. Prasad was totally incorrect. 20. The Ld. CIT(A) further noted that, the alleged document relied upon by the AO, i.e., the manuscript dated 19.02.2010, clearly shows that the transaction was yet to be completed, and both the signatories had promised to complete the transaction. Further, the im....
X X X X Extracts X X X X
X X X X Extracts X X X X
....relevant facts and evidence, deleted the addition made by the AO towards alleged on-money of Rs. 176,11,00,000/-. 22. Although, the Revenue has challenged the findings of the Ld. CIT(A) and raised various grounds, but going by the grounds of appeal of the Revenue and the corresponding evidence considered by the AO for the purpose of assessment of alleged on-money, in our considered view, the Revenue has failed to bring on record any credible evidence which shows the alleged on-money transactions between the assessee company and MBS Group for transfer of 98.10 acres of land as considered by the AO. On the other hand, the very same document considered by the AO clearly shows that the transfer of land to the extent of 34.61 acres has taken place so far and the balance 63.49 acres is still in the name of the assessee company, for which an agreement of sale was entered into and later cancelled by the parties. From the above, it is very clear that, the AO has made addition towards alleged on-money received towards sale of land without there being any credible evidence, which is evident from the relevant evidences considered by the AO. Further, the Ld. counsel for the assessee had also....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rotective basis cannot be upheld. Thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the grounds taken by the Revenue. 24. The next issue that came up for our consideration from Ground Nos. 1 to 8 of the assessee's appeal is estimation of profit at 16% on gross receipts. 25. The Ld. counsel for the assessee submitted that, the assessee has treated sale transactions from land transfer as business income and maintained regular books of accounts. The AO rejected the books of accounts under Section 145(3) of the Act, and estimated 16% profit on gross receipts without making any observation with regard to the incorrectness of the books of accounts maintained by the assessee or the supporting bills and vouchers in respect of various expenditure debited to the profit and loss account. Further, the assessee has declared profit of Rs. 3 crore and odd, which is almost 6% of the gross receipts, whereas the AO had arbitrarily adopted 16% profit and claimed that the assessee has declared 16% profit for the assessment year 2018-19, but fact remains that the assessment order passed by the AO for A.Y. 2019-20 was finally quashed by the Tribunal. Therefore, the profit e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of various details during the course of assessment proceedings. From the findings recorded by the AO for rejection of the books of accounts, in our considered view, they do not satisfy the mandate of Section 145(3) of the Act, for rejection of the books of accounts because, as per Section 145(3), books of accounts can be rejected only in a case where the assessee is not able to justify the book results with supporting evidence or has not filed relevant details as and when the AO called for them in support of the books of accounts filed by the assessee. In the present case, going by the reasons given by the AO to reject the books of accounts, the AO has rejected the books of accounts without assigning any reason, and therefore, in our considered view, the reasons given by the AO to reject the books of accounts cannot be accepted. 28. Having said so, let us consider whether the assessee is able to justify the book results by filing the relevant details. Admittedly, during the course of search, various incriminating material was found, which suggests that the books of accounts maintained by the assessee are not true and correct. Further, the assessee has also not justified the b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Therefore, considering the nature of business of the assessee and other judicial precedents, in our considered view, a reasonable profit should be estimated to resolve the dispute between the assessee and the AO. Further, going by the nature of the business of the assessee, in our considered view, 10% profit is reasonable, and therefore, we direct the AO to estimate 10% profit on gross receipts. 30. In the result, the appeal of Revenue in ITA No.763/Hyd/2020 is dismissed and assessee's appeal in ITA no.788/Hyd/2020 is partly allowed. ITA NO.466/HYD/2020 for A.Y. 2010-11 31. The grounds raised by the Revenue read as under : "1 The Id.CIT(A) erred both in law and on facts of the case in allowing relief to the assessee. 2. The Id.CIT(A) failed to appreciate the fact that the assessee company became co-owner of 5.07 Acres of land in the un-divided land of 98.10 acres situated in Sy.No. 172, Hydernagar. 3. The Ld.CIT(A) failed to appreciate the fact that nowhere in the assessment record, it is mentioned that the income offered by M/s.Trinity Infraventures Ltd., includes the amount received by the assessee company from M/s.MBS Impex Pvt. Ltd, on accou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Nizam of Hyderabad and M/s. Cyrus Investments Ltd., and Kazim Nawaz Jung got themselves impleaded in CS No. 14 of 1958 as parties. Further, the Nizam of Hyderabad and M/s. Cyrus Investments Ltd., and Kazim Nawaz Jung through their respective GPA holders and another assignee, M/s. Moonka Enterprises, executed an Assignment Deed dated 29.11.1995 assigning an extent of Ac. 98.10 Gts. in favour of M/s. Goldstone Exports Limited, Mrs. Indrani Prasad, M/s. Goldstone Engineering Limited and others and as per the assignment deed, the assessee is a co-owner to the extent of Ac. 5.07 Gts. in the undivided land of Ac. 98.10 Gts. in Sy. No. 172 of Hydernagar village, Ranga Reddy District. Since the assessee is having undivided share of Ac. 5.07 Gts. in the total land of Ac. 98.10 Gts. sold to M/s. MBS Impex Private Limited, the AO has computed proportional value as per the stamp duty value and made addition of Rs. 21,28,99,500/- to the total income. 34. Aggrieved by the assessment order, the Revenue preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the Revenue has challenged the addition made by the AO and argued that the entire land transaction in respect of Sy. No. 172 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mitted that it is an admitted fact that although the assessee is co-owner, as per assignment agreement between the parties to the assignment agreement and the assessee group of companies, but the fact remains that the assessee does not own any land in its individual capacity, and the entire land transaction in Sy. No. 172 to the extent of Ac. 98.10 Gts. was considered by M/s. Trinity Infra Ventures Limited and the same has been assessed by the AO for the assessment years 2009-10 to 2011-12, and therefore, making addition in the hands of the assessee in light of Section 50C of the Act is totally incorrect. The Ld. counsel for the assessee further submitted that, the assessee group has considered land transaction as business income and also offered relevant receipts in the hands of M/s. Trinity Infra Ventures Limited. However, the AO once again made addition only on the basis of assignment agreement and claimed that the assessee is the owner of Ac. 5.07 Gts. Land, even though there is no demarcation of land to the share of the assessee and there is no proof of receipt of consideration by the assessee company. The Ld. counsel for the assessee, however submitted that the Ld. CIT(A), af....