IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH `B', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No. 1704/Hyd/2012 A.Y. 2002-03
ITA No. 1705/Hyd/2012 A.Y. 2003-04
ITA No. 1706/Hyd/2012 A.Y. 2004-05
ITA No. 1707/Hyd/2012 A.Y. 2005-06
ITA No. 1708/Hyd/2012 A.Y. 2006-07
Mr. Sunil Kumar D. Shah vs. The Dy. Commissioner of
(HUF), Hyderabad Income-tax, Central Circle-2
PAN: AANHS6941R Hyderabad
Appellant Respondent
Appellant by: Sri A. Srinivas
Respondent by: Sri T. Diwakar Prasad
Date of hearing: 10.10.2013
Date of pronouncement: 10.10.2013
ORDER
PER CHANDRA POOJARI, AM:
The above five appeals by the assessee are directed against
the common order of the CIT(A) dated 12.9.2012 for A.Ys. 2002-03
to 2008-09. Since the issues involved in these appeals are common
in nature, these appeals are clubbed together, heard together and
are being disposed of by this common order for the sake of
convenience.
2. In these cases, the CIT(A) passed a common order for A.Ys.
2002-03 to 2008-09. The assessee filed seven appeals for all these
years in ITA Nos. 1704/Hyd/2012 to 1710/Hyd/2012. All these
appeals were heard on earlier occasion i.e., 23.5.2013. The Tribunal
disposed of only the appeals in ITA No. 1709 and 1710/Hyd/2012
vide order dated 23.5.2013. However, ITA Nos. 1704 to 1708/Hyd/
2012 were released vide order sheet entry dated 24.5.2013 which is
as follows:
2 ITA No. 1704/Hyd/2012 & Ors.
Mr. Sunil Kumar D. Shah (HUF)
=========================
"24/5/13. At the time of hearing, the learned counsel
for the assessee advanced arguments only on the
technical ground that the assessments for the A.Ys.
2002-03 to 2005-06 were not pending as on the date of
search and hence u/s. 153C of the IT Act. The
agricultural income declared in the regular returns of
income could not be brought to tax. The ld. DR also
argued on this issue.
However, at the time of hearing, it is found that
the 'A' has not raised this ground of appeal before the
Tribunal. The ground raised is only against the merits
of the addition and no arguments are advanced on this
issue.
Therefore, the appeals for A.Y. 2002-03 to A.Y.
2005-06 are released from HEARD and posted for
hearing on 20th of June, 2013. Issue notice to both the
parties.
Sd/-
JM (SMC)"
3. In view of the above, ITA Nos. 1704 to 1708/Hyd/2012 came
up for hearing today the 10th October, 2013. Accordingly, we take
up ITA Nos. 1704 to 1708/Hyd/2013 for A.Ys. 2002-03 to 2006-07.
Firstly, we take up ITA Nos. 1704 to 1707/Hyd/2012 for A.Ys. 2002-
03 to 2005-06.
ITA Nos. 1704, 1705, 1706 and 1707/Hyd/2012:
4. The grievance of the assessee in these appeals is with regard
to treating agricultural income as regular income of the assessee.
The learned AR submitted that the assessee is regularly declaring
agricultural income in the return of income and the same cannot be
considered as non-agricultural income on account of search action
u/s. 132 of the Act on 9.10.2007 at the residence of the assessee.
He submitted that there is no seized material, whatsoever, found
during the course of search to treat the agricultural income declared
by the assessee in regular return of income as 'income from other
sources' while framing assessment u/s. 143(3) r.w.s. 153C of the Act.
3 ITA No. 1704/Hyd/2012 & Ors.
Mr. Sunil Kumar D. Shah (HUF)
=========================
He relied on the order of the Tribunal dated 27.9.2013 in the case of
DCIT vs. Kishoresons Detergents Pvt. Ltd. in ITA Nos. 1817 to
1820/Hyd/2012 wherein held as under:
"13. We have heard the arguments of both the parties,
perused the record and have gone through the orders
of the authorities as well as the decisions cited.
Additions have been made by the AO for the reason
that the assessee has not admitted the normal profits
from its manufacturing activity as compared to the
other years in consideration and has understated the
incomes, for the respective years on the basis of the
inferences drawn from the variations in the ratio of net
profits to that of gross profits of the assessee. On the
other hand, the CIT(A) before directing the AO to
delete the additions made gave categorical findings
that "the AO has not shown any defects in the books or
method of accountancy adopted by the assessee and
books are not rejected so as to estimate the profits of
business. Rather such estimation is resorted to
superfluous methods of percentage of net of gross,
which is not ordinarily heard in the accounting
languages/practices. Further, the additions made on
theoretical basis, based on surmises and conjectures
are desired to be desisted in search related cases with
no adverse information found, in support of such
estimation/method."
14. Similar issue came up for consideration before the
coordinate bench of ITAT, Hyderabad in case of M/s
Spectrum Pearls & Exports Pvt. Ltd. (supra)wherein
the coordinate bench held as follows:
"8. ... The case records reveal that no incriminating
material was found during the course of search
operations. The determination of undisclosed income
consequent to search action and framing assessment
under section 153C of the Act is different from regular
assessment or it is not substitute for regular
assessment. Being so, the AO shall frame assessment
on the basis of incriminating material found during the
course of search action u/s 153C of the Act. The AO
without bringing any incriminating material on record
for the purpose of determination of undisclosed income
on estimate basis is not possible in the present
circumstances to frame the assessment u/s 153C of the
Act. Therefore, after considering the totality of facts
4 ITA No. 1704/Hyd/2012 & Ors.
Mr. Sunil Kumar D. Shah (HUF)
=========================
and the circumstances of the case and after going
through the order of the CIT(A) in the instant case, we
find that the CIT(A) is perfectly justified in allowing the
claims of the assessee. In this view of the matter, no
interference is called for."
15. In the present case, we find that no incriminating
evidence found against the assessee in proving that
unaccounted incomes were generated by suppression
of profit and, therefore, the AO is not justified in
resorting to estimation and arithmetical assumptions.
Accordingly, we find no infirmity in the order of the
CIT(A) in directing the AO to delete the additions made
by holding that the additions made based on the
percentage of net over gross adopted by the AO are
held to be without any basis that can be justified on
factual or legal grounds and the order of the CIT(A) is
hereby confirmed dismissing the grounds of appeal
raised by the revenue in this regard in all the years
under consideration.
16. In the result, all the appeals being ITA No. 1817,
1818, 1819 & 1820/Hyd/2012 filed by the revenue are
dismissed."
5. On the other hand, the learned DR submitted that as far as
the appeals for the years i.e. AY 2002-03 to 2005-06 are concerned,
the only ground relating to agricultural income is common for all
these years under appeal. According to the AO, the lands received
by the assessee through oral partition were barren lands situated at
Vattinagulapalli village where no crops were cultivated. The AO
obtained revenue records of the land i.e., Pahanis from Mandal
Revenue Office and found that these lands are vacant. He referred
to the order of Tribunal Hyderabad Bench in the case of Shri Suresh
Kumar D Shah in ITA Nos. 420 to 425 dated 16-12-2011 wherein
similar issue came up for hearing. By giving elaborate reasons, it
was held by the Tribunal that the land was barren and rocky and no
agricultural operations were carried out. Incidentally Shri Suresh
Kumar D Shah also entered into development agreement with
Dakshin Shelters Pvt. Ltd in the year relevant to the AY 2007-08.
M/s. Dakshin Shelters Pvt. Ltd had entered into development
5 ITA No. 1704/Hyd/2012 & Ors.
Mr. Sunil Kumar D. Shah (HUF)
=========================
agreement with the whole family of Shri Suresh Kumar D Shah, Shri
Sunil Kumar D Shah and Shri Sudhir Kumar D Shah as well as other
family members in respect of the land situated at Vattinagulapalli
village. All these lands are contiguous to each other. Therefore, the
contention of the assessee that it is carrying on agricultural
operations on this land is highly doubtful due to the nature of land it
possesses at Vattinagulapalli village. In the course of appellate
proceedings before the CIT(A), the assessee was asked to furnish
the evidence of agricultural operations carried on by the assessee
and to furnish the details such as type of crops grown, expenditure
details, sale of the agricultural produce etc. It is also enquired from
the assessee whether the land was cultivated by the assessee itself
or given on lease (Kowlu) to others. The contention of the assessee
that it is regularly declaring the agricultural income in their income-
tax returns is not a valid reason for accepting the claim that the
assessee is having agricultural income on regular basis. The
assessee could not furnish the details of agricultural operations
carried out on this land so as to derive the so called agricultural
income from year to year. Unless regular cultivation of land had
taken place the said activity cannot be construed as agricultural
activity. When the assessee claimed the particular income as
agricultural income, the onus lies on it to prove beyond reasonable
doubt that the income so derived is on account of agricultural
operations carried by the assessee. The assessee should prove with
details of expenses incurred on account of cultivation of land, tilling
of land, sowing, transport and marketing heads etc. Even perusal of
quantum of agricultural income disclosed year after year does not
inspire much confidence about the genuineness of the claim of the
assessee. It is for the assessee to establish the existence of
agricultural income in its hands. In view of the above discussion, the
assessee is unable to prove in all fours the agricultural income
disclosed in these years under appeal. Accordingly, the claim of the
assessee under agricultural income is rejected and the action of the
6 ITA No. 1704/Hyd/2012 & Ors.
Mr. Sunil Kumar D. Shah (HUF)
=========================
AO in treating the amounts as income from other sources for all the
years under appeal i.e., assessment year 2002-03 to 2005-06 is
sustained.
6. We have heard both the parties and perused the material on
record. The contention of the assessee is that there is no seized
material to treat the agricultural income as non-agricultural income
while framing the assessment u/s. 143(3) r.w.s. 153C of the Act. In
our opinion, determination of income consequent to search action by
framing assessment u/s. 143(3) r.w.s. 153C of the Act is different
from regular assessment and it is not a substitute for regular
assessment. Being so, the Assessing Officer shall frame the
assessment on the basis of incriminating material found during the
course of search action u/s. 132 of the Act and other material
gathered subsequent to search action. In the present case, we are
unable to appreciate on the basis on which seized material the AO
came to the conclusion that the assessee has not earned agricultural
income. In our opinion, it is appropriate to remit the issue back to
the file of the AO to specify the basis on which seized material or
material collected consequent to search action was used for the
purpose of framing assessment. While framing the assessment he
has to consider the judgement of jurisdictional High Court in the
case of Gopal Lal Bhadruka, Avadesh Bhadurka and Ahura Holdings
vs. DCIT (346 ITR 106) (AP), wherein the Hon'ble High Court
observed that, "Sections 153A, 153B and 153C were inserted in the
Income-tax Act, 1961, with effect from June 1, 2003, in Chapter XlV.
These sections are applicable to search operations or requisitions
made after May 31, 2003. Simultaneously section 158BI was
inserted in Chapter XIV-B. By virtue of section 158BI of the Act, the
various provisions of Chapter XIV-B of the Act are made inapplicable
to proceedings under sections 153A and 153C of the Act. The effect
of this is that while the provisions of Chapter XIV -B of the Act limit
the inquiry by the Assessing Officer to those materials found during
7 ITA No. 1704/Hyd/2012 & Ors.
Mr. Sunil Kumar D. Shah (HUF)
=========================
the search and seizure operation, no such limitation is found in so
far as sections 153A and 153C of the Act are concerned. Therefore,
it follows that for the purposes of sections 153A and 153C of the Act,
the Assessing Officer can take into consideration material other than
what was available during the search and seizure operation for
making an assessment of the undisclosed income of the assessee"
and decide the matter in accordance with law. The assessee's
appeals in ITA Nos. 1704 to 1707/Hyd/2012 are allowed for
statistical purposes.
ITA No. 1708/Hyd/2012 A.Y. 2006-07:
7. The assessee raised the following grounds of appeal:
(1) The order of the AO is contrary to law, facts and
circumstances of the case.
(2) The AO ought not to have treated the Agriculture
Income of Rs. 24,000 as regular income of the
assessee.
(3) The AO ought not to have added an amount of Rs.
2,08,63,927 as long term capital gains.
(4) The CIT(A) erred in dismissing the appeal in limine
applying the provisions of section 249(4)(a).
(5) The CIT(A) ought to have seen that the cash seized
by the Department during the course of search was
adjusted and thus erred in applying the provisions
of section 249(4)(a).
(6) The CIT(A) ought not to have dismissed the appeal
in limine without adjudicating on the grounds of
appeal on merits.
8. First we will decide ground No. 6 which goes to the root of
the matter. This appeal was un-admitted by the CIT(A) on the
reason that the assessee has not paid admitted tax.
9. The learned AR submitted that the assessee filed his return of
income for A.Y. 2006-07 on 12th March, 2007 and paid admitted tax
8 ITA No. 1704/Hyd/2012 & Ors.
Mr. Sunil Kumar D. Shah (HUF)
=========================
at Rs. 32,618. He also produced copy of return bearing
acknowledgement No. 0501007093 and challan for payment of Rs.
th
32,618 paid in Bank of India on 9 March, 2007.
10. The learned DR relied on the order of the CIT(A).
11. We have heard both the parties and perused the material on
record. In our opinion, there is due payment of admitted tax by the
assessee for assessment year under consideration. Being so, the
CIT(A) without pointing out the non-payment of admitted tax to the
assessee, he is not justified in dismissing the appeal of the assessee
in limine. Accordingly, we remit the entire issue back to the file of
the CIT(A) to decide the issue raised by the assessee in his appeal on
merit. Assessee's appeal is allowed on this ground. We decline to
entertain the other grounds raised by the assessee as these grounds
are not at all adjudicated by the CIT(A). The CIT(A) is directed to
decide the grounds raised by the assessee on merit after giving
opportunity of hearing to the assessee.
12. In the result, ITA No. 1708/Hyd/12 is partly allowed.
Order pronounced in the open court on 10th October, 2013.
Sd/- Sd/-
(SAKTIJIT DEY) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated the 10th October, 2013
tprao
Copy forwarded to:
1. Mr. Sunil Kumar D. Shah (HUF), 8-2-401/C/2, Street No. 1,
Road No. 5, Banjara Hills, Hyderabad-500 034.
2. The Dy. Commissioner of Income-tax, Central Circle-2,
Aayakar Bhavan, Hyderabad.
3. The CIT(A)-I, Hyderabad.
4. The CIT (Central), Hyderabad
5. The DR 'B' Bench, ITAT, Hyderabad
|
