IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH `A', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SHRI SAKTIJIT DEY, JUDICIAL MEMBER
IT(SS)A No. 22/Hyd/2011
Block Period: 1.4.1996 to 5.9.002
M/s. Bhagwan Sri Vs. Asst. Commissioner of
Balasaibaba Central Trust Income-tax,
Kurnool Central Circle-6,
PAN: AAATB3818R Hyderabad
Appellant Respondent
Appellant by: Shri S. Rama Rao
Respondent by: Smt. Subhasree Anant
Krishnan
Date of hearing: 18.04.2012
Date of pronouncement: 04.07.2012
ORDER
PER CHANDRA POOJARI, AM:
This appeal by the assessee is directed against the order of
the CIT(A)-I, Hyderabad dated 20.7.2011 for the block period
1.4.1996 to 5.9.2002.
2. The assessee raised the following grounds of appeal:
1. The order of the learned CIT (Appeals) is
erroneous both on facts and in law.
2. The learned CIT (Appeals) ought to have
considered the fact that the Hon'ble Income-Tax
Appellate Tribunal, Hyderabad in its order
IT(SS)A. No. 98/Hyd/06 dated 16-07-2007 set
aside the assessment to the file of the Assessing
Officer for being completed and, therefore, all the
facts should have been considered both by the
Assessing Officer and the CIT (Appeals).
3. The learned CIT (Appeals) erred in holding that
the ground with regard to initiation of
proceedings u/s 158BD cannot be raised by the
appellant at the present stage. The learned CIT
(A) ought to have seen that this is a legal issue
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Central Trust, Kurnool
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and can be raised at any point of time including
before the Hon'ble CIT(A) during the course of
appeal proceedings. The CIT (A) ought to have
seen that notice u/s 158BD is not valid and the
consequential assessment is bad in law.
4. The learned CIT (A) erred in confirming the action
of the Assessing Officer in arriving at the
consideration paid for acquisition of the property
at Rs. 10,11,50,000/- and further erred in
confirming the computation of undisclosed income
at Rs. 7,23,86,915/-.
5. The learned CIT (A) ought to have considered the
fact that appellant paid a consideration of only
Rs. 2,87,63,085/- besides incurring an
expenditure of Rs. 1,14,11,200/- on behalf of the
land owners but did not make payment of Rs.
10,11,50,000/- as presumed by the Assessing
Officer.
6. 6) The learned CIT (A) erred in confirming the cost
as per the books of account at Rs. 2,87,63,085/-
against the amount of Rs. 4,01,74,285 recorded
in the books of account.
7. The learned CIT (A) erred in confirming the action
of the Assessing Officer in determining the
undisclosed income at Rs. 7,23,86,910/-
8. The learned CIT (Appeals) erred in holding that
interest u/s. 158BFA is not appealable and
further erred in dismissing the appeal filed in this
regard.
3. Before us, ground No. 3 was not pressed and the same is
dismissed as not pressed.
4. Brief facts of the case are that during the course of search
operation in the case of M/s. Sai Sunder Chit Fund (P) Limited,
one document identified as 'ASSS/RO/4' was seized. Page Nos. 88
to 90 of the said document is an agreement of sale dated
06.02.1998 between the assessee trust (vendor) as one party and
Sri Shaikh Hameed Patel and Sri G. Siva Ramakrishna, the other
party. Sri G. Siva Ramakrishna is the son of the Managing
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Central Trust, Kurnool
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Director of M/s. Sai Sunder Chit Funds (P) Limited. This
agreement also refers to another agreement (release deed) of same
date, i.e., 06.02.1998, wherein the assessee (vendor) trust entered
into a separate agreement with respective owners represented by
their GPA holder Sri M. Thimmaiah for purchase of 104 acres of
land in Survey Nos. 104, 105, 106, 107, 108, 109/1, 109/2 at
Kondapur Village, R.R. District. This sale agreement mentioned as
under:
"Whereas Sri KSV Prasad Rao and Sri KVNV Prasad
Rao, both as possession holders of the said scheduled
land have relinquished their claims, demands, title and
interest and released the same in favour of the vendor
Trust through a registered Release Deed dated
06.02.1998."
5. Sri Siva Ramakrishna and Sri Hameed Patel were the
mediators between the assessee trust and sellers represented by
Sri M. Thimmaiah, GPA holder for seller. The commission payable
to the mediators was to be paid in the form of conveying a part of
the land @ Rs. 12.25 lakhs per acre, i.e., the assessee trust was to
pay Rs. 10 lakhs per acre to the owners of this land and @ Rs.
2.25 lakhs per acre to the mediators. After analysing the issues in
detail and making detail discussion in the assessment order, the
Assessing Officer computed the cost of 85 acres 32 guntas @ Rs.
12.25 lakh per acre at Rs. 10,51,05,000/- inclusive of commission
paid to middlemen, partly in cash and partly in the shape of land.
Since an amount of Rs. 2,87,03,085/- was recorded in the books
of accounts towards the cost of land, the balance amount of Rs.
7,63,41,915/- (Rs. 10,51,05,000 - Rs. 2,87,03,085/-) was
computed as the undisclosed income.
6. The assessee filed an appeal before the CIT(Appeal)-I
Hyderabad. The CIT(A) after discussing the issues in detail
dismissed the appeal filed by the assessee in ITA No. 0434/CC-6,
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Central Trust, Kurnool
======================
Hyd./CIT(A)-I/05-06 dated 14th August, 2006. The assessee filed
an appeal before the ITAT. During the proceeding before the ITAT,
apparently the assessee filed certain additional evidence and
requested the Hon'ble ITAT to admit the same. The Hon'ble ITAT
'A' Bench, Hyderabad admitted the assessee's petition for
admission of additional evidence and sent back the matter to the
file of the Assessing Officer with the direction to decide the issue
afresh in accordance with law considering the additional evidence
as well as other materials and after providing opportunity of
hearing to the assessee. In pursuance of the direction of ITAT
contained in IT(SS)A No. 98/Hyd/06 the Assessing Officer re-
computed the income of the assessee in the assessment order
dated 31.12.2008 wherein the total undisclosed income was
arrived at Rs. 7,23,86,915/-. It is against this assessment order
that the assessee has filed the appeal before the CIT(A).
7. The CIT(A) observed that the ITAT, Hyderabad 'A' Bench has
set aside the case to the Assessing Officer in view of the additional
evidence filed before the Bench. At page 2 and 3 of the appellate
order passed by ITAT, the petition of the assessee requesting for
admission of additional evidence has been mentioned. Apparently,
the additional evidence put forth by the assessee related to non-
payment of Rs. 5 crores to the seller/GPA holder. However, while
going through the original assessment order as well as the order of
the CIT(A) dated 14th August, 2006 the CIT(A) observed that the
issue of non-payment of Rs. 5 crore was already placed before the
Assessing Officer and the same has also been discussed in detail
by the CIT(A) in his appellate order. In fact, the Assessing Officer
at page 3 (para 3) of the assessment order dated 28-2-2006 has
given the list of documents referred to before passing of the
assessment order. One of the documents referred to by the
Assessing Officer was copies of the cheque returned memos issued
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Central Trust, Kurnool
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by Syndicate Bank and five dishonoured/un-cashed cheques
bearing Nos. 303192 to 303196 for Rs. 1 crore each. Thus, it is not
that the so called additional evidence of non payment of Rs. 5
crore was not before the Assessing Officer or before the First
Appellate authority. Against this order of the CIT(A), the assessee
is in appeal before us.
8. The learned AR submitted that the Assessing Officer wrongly
computed the income of the assessee as follows:
1. Sale consideration @ Rs. 10 lakh per acre 9,11,50,000
for 91.15 acres.
2. Amount paid to Smt. Savitramma as 1,00,00,000
evidenced by the seized document
10,11,50,000
Less: Consideration recorded in the books of 2,87,63,085
account during FYs 1997-98 & 1998-99 at
Rs. 2,07,40,000 and Rs. 80,23,085
respectively towards cost of land
Total undisclosed income 7,23,86,910
9. The AR submitted that while determining the undisclosed
income at Rs. 7,23,86,910, the Assessing Officer is of the view that
the total area of the land is Ac. 91.15 Guntas including Ac. 5.0
guntas registered by outsiders in favour of Shaik Hamid Patel, that
the sale consideration was Rs. 10.0 lakhs per acre and the total
sale consideration was Rs. 9,11,50,000, that the entire amount of
Rs. 9,11,50,000 was paid by the assessee herein; that an amount
of Rs. 1.0 crore was paid to Smt. Savitramma by the assessee
herein. The AR submitted that the presumption of the Assessing
Officer is not correct.
10. The AR submitted that the area originally thought of being
transferred by Sri Thimmaiah to the assessee trust was 86 acres
and not Ac. 91.15 Guntas. He submitted that the said Ac. 5.15
Guntas was registered by third parties in favour of others and
neither the assessee herein nor Sri Thimmaiah, the GPA holder are
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Central Trust, Kurnool
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parties to it. The Assessing Officer is of the view that Ac. 5.23
Guntas of land was transferred to middle men in lieu of
commission and, therefore, the Assessing Officer mentioned that
the total area is Ac. 91.15 Guntas. He submitted that the assessee
did not transfer Ac. 5.23 Guntas to anyone. Even Sri
Thimmaiah was not the party to the said sale. Therefore, the land
of Ac. 5.23 guntas cannot be considered as acquired by the
assessee herein. Therefore, the land to be considered for the
purpose of the present assessment is only Ac. 85.32 Guntas.
11. The AR further submitted that when physical measurements
were taken, the land was only 70 Acres and the balance Ac. 15.32
guntas could not be located in the area. Even considering the sale
consideration to be Rs. 10.0 lakhs per acre for Ac. 85.32 guntas,
the total sale consideration would be Rs. 8,58,00,000. Out of the
said amount, the assessee paid Rs. 2,87,63,085 and did not pay
balance of amount. There is no evidence with the Assessing
Officer to show that the assessee paid any amount in addition to
what was recorded in the books of account of the assessee of Rs.
2,87,63,085. In this regard, the AR submitted that the following
events that have taken place later would prove clearly that the
assessee did not pay the balance of consideration to either the
land owners or to Sri Thimmaiah.
a) The land admeasuring Ac. 85.32 guntas was registered by
Sri Thimmaiah and other owners transferring in favour of
the assessee herein. The balance of amount payable was Rs.
5,72,36,915. However, the area that was found was only 70
acres and, therefore, the assessee has given five cheques for
Rs. 1.0 crore each in favour of Sri Thimmaiah. The assessee
also kept the original documents with Sri Thimmaiah. The
assessee executed a Deed of Mortgage against the land in
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Central Trust, Kurnool
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favour of Sri Thimmaiah. This clearly indicates that the
amount of Rs. 5.0 crores arrived at to be payable was not
paid but only cheques have been issued.
b) All the five cheques were bounced. It was submitted that Sri
Thimmaiah, the GPA holder misrepresented the facts before
the assessee with regard to the landed property and,
therefore, the assessee thought that the matters have to be
clarified by him and did not honour the cheques.
i) The assessee found that out of seven land owners, two
of them approached the Court against Sri Thimmaiah
and the other 5 vendors made the assessee also a
party to the litigation. The said two owners have filed
Partition Suit in O.S. No. 13/1998 in R.R. District
court which is still pending. As long as the said
litigation is not settled, it is difficult for the assessee
herein to get the title for the entire property.
ii) It is the agreement between Sri Thimmaiah and the
assessee herein that the entire property has to be got
surveyed from the Official Surveyor and a certificate
has to be obtained and all the clearances including
the Urban Land Ceiling had to be obtained. Sri
Thimmaiah did not obtain necessary approvals or the
permission and also did not get the land surveyed
through the Official Surveyor. As Sri Thimmaiah failed
to honour the commitment, the assessee also did
not honour the cheques. Therefore, the cheques were
bounced.
c) Sri Thimmaiah, at that stage, on 04-06-1999 approached
the mediators headed by Sri K.E. Pratap of Kurnool. The
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Central Trust, Kurnool
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assessee refused to pay the balance of consideration to Sri
Thimmaiah. It was settled by the mediators that the
assessee would retain Ac. 43.20 guntas and that the
assessee would execute an Agreement of Sale in favour of Sri
K.E. Pratap of Kurnool for the balance of Ac. 42.12 guntas.
According to the said agreement, Sri Thimmaiah and Sri
K.E. Pratap would clear all the permissions necessary from
Government and would not ask for any balance from out of
the sale consideration. According to the said agreement, the
assessee should get clear title over Ac. 43.20 guntas of land
with all clearances and without any liability against the said
land for the amount which was already paid. After the said
agreement was entered into, the original five cheques and
the mortgage deed executed in favour of Sri Thimmaiah were
returned to the assessee herein. There was no activity or
action by either party till the year 2005.
d) On 28-08-2005, Sri Thimmaiah unilaterally filed a complaint
against Sri T. Rama Rao, Managing Trustee and the Trust in
the Police Station, Kurnool II Town. An FIR dated
28.08.2005 was lodged in the District Court Kurnool by the
Inspector Police, Kurnool II Town. In the said complaint Sri
Thimmaiah mentioned clearly that he was paid only Rs. 3.0
crores as advance and the balance amount was not paid to
him.
e) At that stage on 31-08-2005, the assessee, Sri K.E. Pratap
and Sri M. Thimmaiah have approached M/s Eswari Projects
Ltd., Srinagar Colony, Hyderabad and entered into an MOU.
According to the said MOU, the assessee agreed to pay a
sum of Rs. 15.25 crores to Sri Thimmaiah and M/s Eswari
Projects Ltd., for the entire land of 70 Acs. With a view to
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Central Trust, Kurnool
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implement the said MOU, the assessee on the same date
along with Sri K.E. Pratap, Sri M. Thimmaiah and M/s.
Eswari Projects Ltd., together entered into an MOU
with Sri A. Venkatarami Reddy. According to the said
agreement, Sri A. Venkatarami Reddy agreed to pay Rs. 49.0
crores as sale consideration for the entire 70 Acs. of land
calculated at the rate of Rs. 70.0 lakhs per acre. Out of the
said amount, a sum of Rs. 6,56,28,150 was paid by Sri A.
Venkatarami Reddy to the Competent Authority & Special
officer, Urban Land Ceiling, Hyderabad.
12. The AR submitted that as the assessee agreed to pay Rs.
15.25 crores as per the MOU mentioned earlier, Sri A.
Venkatarami Reddy agreed to provide the said sum of money by
making various payments as listed therein. It is also mentioned in
the said agreement that on realization of the sale consideration
from Sri A. Venkatarami Reddy, the assessee had to clear the
mortgage loan of Rs. 10.0 crores obtained from M/s Rasula
Securities Ltd., towards the equitable mortgage created. The said
amount of Rs. 10.0 crores was proposed to be taken by Sri A.
Venkatarami Reddy in clearing the amounts as enunciated in the
MOU. All these facts have been stated before the Assessing Officer
and mentioned that:
a) The cheques issued on Syndicate Bank, Somajiguda
Branch, Hyderabad were returned and not honoured;
b) The mortgage deed was executed in favour of Sri
Thimmaiah and kept the original document with him;
c) The fact that only an amount of Rs. 3.0 crores was
received by him as categorically mentioned in the
complaint lodged by him before the Police authorities
in the FIR; Sri Thimmaiah has also stated in the
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Central Trust, Kurnool
======================
complaint that the balance of amount was not paid
and the said complaint was made in the year 2005.
13. The AR submitted that all the later developments are the
consequence of such complaint made by Sri Thimmaiah.
Therefore, there is ample evidence to show that the assessee did
not pay the amount, as presumed by the Assessing Officer, to Sri
Thimmaiah. In View of the above, the assessee requested the
Assessing Officer to summon all the concerned persons i.e. Sri
Thimmaiah, Sri K.E. Pratap, M/s Eswari Projects Ltd., and all
others concerned so as to enable him to come to a conclusion that
the amounts were not paid. When he summoned only Sri
Thimmaiah, he categorically stated that he did not receive any
amount beyond Rs. 3.0 crores. A copy of the statement is also not
provided to the assessee herein.
14. The AR submitted that in view of the above, it is amply clear
that the assessee paid only Rs. 3.0 crores in all and did not pay
any amount in addition to the same to Sri Thimmaiah or to
anyone. Therefore, it is not correct for the Assessing Officer to
presume that an amount of Rs. 9,11,50,000 was paid by the
assessee herein.
15. The AR further submitted that the Tribunal may hold that
only Rs. 3 crores was paid to Sri Thimmaiah. The Assessing Officer
mentioned that an amount of Rs. 1.0 crore was paid to Smt.
Savitramma. According to the Assessing Officer, the seized
documents also reveals such making of such payment on
06.02.1998. This amount is found, according to the Assessing
Officer, in the so called agreement of sale executed on 06.02.1998
by the assessee herein in favour of Shaik Amin Patel and Sri G.
Sivarama Krishna. The sale is stated to be in respect of
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Central Trust, Kurnool
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Ac. 18.28 guntas out of 104 acres. The AR submitted in this
regard submits that:
a) The agreement of sale dated 06-02-1998 IS only a
Xerox copy and the original was not found;
b) The said agreement of sale was signed by the
assessee alone and not by the vendees;
c) According to the agreement, the said amount
represents the commission payable to the parties at
Rs. 2.25 lakhs per acre for 104 acres of land and it
is submitted that the said commission was never
paid as the deal was finally incomplete even till this
date. The litigations in the property and in the
transfer are still not clear;
16. The AR submitted that there is a clause in the said
agreement that an amount of Rs. 1.0 crore was paid by the
vendees to the assessee herein on the date of agreement. This
amount is not actually received by the assessee herein. Similarly,
the payment stated to have been made to Smt. Savitramma of Rs.
1.0 crore was also not paid. If the agreement were to be believed to
be true, there, is no outgoing from the assessee as in fact the
vendees mentioned that they paid Rs. 1.0 crores to the assessee
and assessee paid Rs. 1 crore to Smt. Savitramma. If the
agreement were to be believed to be true, all the clauses of the
agreement are to be believed as true and the payment will be out
of receipt. It is also submitted that Shaik Hamid Patel and Sri G.
Sivarama Krishna did not get the Ac. 13.28 guntas of land
registered in their favour as was agreed in Clause 2 before 31-03-
1998. Al these facts would clearly indicate that the payment of Rs.
1.0 crore to Smt. Savitramma and five others is not correct and no
such payments was made to them.
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Central Trust, Kurnool
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17. The AR submitted that that Shaik Hamid Patel, Sri G.
Sivarama Krishna and Smt. Savitramma could have been
examined by the officer when the assessee denied the transaction.
The AR submitted that the Assessing Officer is not justified in
making the addition of Rs. 1.0 crore in view of the above facts.
18. The learned DR submitted that In the original passed u/s.
158BD, the Assessing Officer has considered 85 acres 32 guntas of
land @ Rs. 12.25 lakhs per acre which included commission to be
paid to the mediators @ Rs. 2.25 lakhs per acre. However the
record reveals that in lieu of the commission to be paid in cash,
the mediators Shri G. Siva Rama Krishna and Shaik Hamid Patel
preferred to get 5 acres 23 guntas of land in their name / their
nominees. The record also shows that that as per the sale
document 85 acres 32 guntas of land was actually registered in
the name of the assessee trust. This means that if the entire
commission would have been paid in cash, the land conveyed to
the mediators would have been registered in the name of the trust
and the total land would have gone up by 5 acres 23 guntas. In
any case, what was invested by the assessee was the land cost for
85 acres 32 guntas as also the commission to be paid to be
mediators which was paid in the form of land. Thus, in the
assessment order passed in pursuance of the direction of ITAT, the
Assessing Officer has rightly considered the investment in land for
91 acre 15 guntas out of which 85 acres 32 guntas were registered
in the name of the Trust, and the balance land was paid in kind to
the mediators Shaik Hamid Patel and G. Sivarama Krishna. It is
for this reason that in the second order passed by the Assessing
Officer the Assessing Officer has considered the quantum of land
to be 91 acres 15 guntas. It may also be mentioned that while in
the first order, the rate of land was taken at Rs. 12.25 lakhs per
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Central Trust, Kurnool
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acre inclusive of the commission, in the second order, the cost has
been taken at Rs. 10 lakhs since the total land has been taken at
91 acres and 15 guntas inclusive of the land conveyed to the
mediators as commission. There is no infirmity in the order of the
CIT(A) holding that the land acquired was 91 acres 15 guntas.
19. Regarding the rate adopted by the Assessing Officer while
estimating the purchase consideration, the learned DR submitted
that it is the contention of the assessee that the Assessing Officer
erred in estimating the purchase consideration at Rs. 10 lakhs per
acre as against the actual consideration paid of Rs. 3.34 lakhs per
acre. The CIT(A) has dealt with this issue in detail by while
disposing the appeal filed against the order passed u/s. 158BD.
In that order, the Assessing Officer had adopted Rs. 12.25 lakhs
per acre. The CIT(A) also referred to the agreement of sale dated
04-06-99 where the price of the land has been mentioned at Rs.
10 lakhs per acre excluding the commission of Rs. 2.25 lakhs per
acre payable to the negotiator. The CIT(A) has also referred to the
finding of the Assessing Officer relating to comparable price of land
in the near vicinity where the land cost has been stated to be Rs.
15.05 lakhs per acre and Rs. 10.65 lakhs per acre. In fact, the
Managing trustee of the assessee trust was a witness in the sale
deeds for the above referred comparable land deals. The CIT(A)
also referred to the appellate order passed in the case of the
negotiators who were to receive commission i.e. Sri
G. Sivarama Krishna etc. Even in the present assessment order
passed by the Assessing Officer in pursuance to the direction of
ITAT, the Assessing Officer has dealt in detail as to why the rate of
land to be taken at Rs. 10 lakhs per acre exclusive of the
commission payable. The DR argued that the Assessing Officer
was justified in taking the land price at Rs. 10 lakhs per acre.
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Central Trust, Kurnool
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20. Regarding the assessee's contention that the Assessing
Officer erred in relying on the complaint lodged by Sri Thimmaiah
before the police authorities which cannot be considered as the
basis for determining the sale consideration and accordingly erred
in arriving at the cost of acquisition of the property at Rs.
10,11,50,000 the learned DR submitted that the FIR filed by Sri
Thimmaiah was one of the many documents referred to by the
Assessing Officer while computing the undisclosed income of the
appellant and it is not the only document that the Assessing
Officer has relied upon to compute the undisclosed income. It is
also pertinent to note that the appellant is also relying on the
same complaint filed by Shri Thimmaiah to defend his stand.
Therefore, it cannot be said that the complaint lodged by Shri
Thimmaiah is irrelevant and not to be relied upon. The DR
submitted that reliance placed by the Assessing Officer on the FIR
lodged by Shri Thimmaiah before the Police Authorities is not
without basis. However, while computing the undisclosed income
the Assessing Officer, apart from the complaint by Thimmaiah,
has also referred to various other documents to arrive at the
undisclosed income. While arriving at the cost of acquisition of the
property at Rs. 10,11,50,000/-, the Assessing Officer has
considered the total quantum of land at 91 acres and 15 guntas @
Rs. 10 lakhs per acre which gives the acquisition price at Rs.
9,11,50,000/-. To this, he has added another Rs. 1 crore paid to
Smt. Savitramma as evidenced by seized document. This Rs. 1
crore was paid to Smt. Savitramma on 6-2-1998 as per the seized
document. The issue was also discussed in the first assessment
order passed u/s. 158BD. However, in the first assessment order,
the quantum of land was considered at 85 acres 32 guntas and
the rate was adopted at Rs. 12.25 lakhs per acre inclusive of
commission. While passing the first assessment order, the
Assessing Officer at para 2.3 has discussed that out of the total
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Central Trust, Kurnool
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commission payable to the mediators Rs. 1 crore was paid to Smt.
Savithramma and others. Since in the present order 5 acres 23
guntas of land has been considered as commission paid to the
mediators, a separate addition of Rs. 1 crore has been made with
regard to the payment made to Smt. Savithramma. After analyzing
the issue in detail, with reference to the assessment orders passed
as also the appellate orders passed by my predecessor, the
addition of Rs. 1 crore made by the Assessing Officer is justified.
Thus, the computation of total acquisition price at Rs.
10,11,50,000 is justified.
21. Regarding the contention of the assessee that the Assessing
Officer has erred in determining the undisclosed income at Rs.
7,23,86,910, the learned DR submitted that undisclosed income
is the resultant figure after reducing the consideration recorded in
the books by the assessee from the acquisition price of Rs.
10,11,50,000. Since the acquisition price of Rs. 10,11,50,000
arrived at by the AO is justified, consequently, the computation of
undisclosed income at Rs. 7,23,86,915 is also justified.
22. Regarding charging of interest u/s. 158BFA(1) the learned
DR submitted that no appeal lies against charging of interest.
Otherwise also charging of interest is consequential in nature. The
assessee has also not given any specific reason as to how the
interest computed by the Assessing Officer is erroneous.
Accordingly, the action of the Assessing Officer is justified on this
count.
23. We have heard both the parties and perused the material on
record. In this case, on search action conducted u/s. 132 of the
Act in the premises of Suman Chit Fund Pvt. Ltd. on 5.9.2002, the
assessee was also covered and during the search action seized
material marked ASSS/RO/04 containing a document at page
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Central Trust, Kurnool
======================
Nos. 88-90 was found which is an agreement of sale dated
6.2.1998 between Shri Sri Bhagwan Balasai Baba Central Trust,
Kurnool as one party and Shaik Hamid Patel and Shri G. Sivarama
Krishna on the other side. As per this seized material the assessee
entered into an agreement of sale with respective owners
represented by their GPA holder Shri M. Thimmaiah for purchase
of land of 104 acres in Sy. Nos. 104, 105, 106,107, 108, 109/1
and 109/2 situated at Kondapur village, Serilingampally Mandal,
R.R. District for which consideration was Rs. 12.25 lakhs per acre.
During the first assessment proceedings on 28.2.2006 the
Assessing Officer found that the total land is only 91 acres 15
guntas. Out of this 5 acres 23 guntas was registered by outsider
in favour of Shri Hamid Patel and balance 85 acres 32 guntas was
registered by the assessee. As per the books of account recorded
consideration is Rs. 2,87,63,085. However, the Assessing Officer
considered the information about two instances of sale of land at
the relevant period in the year under consideration in the near
vicinity, as per which one document dated 25.6.1996 shows the
consideration at Rs. 10.65 lakhs per acre and another document
dated 21.10.1998 shows the consideration at Rs. 15.05 lakhs per
acre. The Assessing Officer considered the consideration at Rs.
12.25 lakhs per acre and computed the total consideration for 85
acres 32 guntas at Rs. 10,51,05,000 and deducted the disclosed
consideration of Rs. 2,87,63,085. Accordingly, he worked out the
undisclosed income at Rs. 7,63,41,915 in the original assessment.
24. During the course of set aside assessment proceedings the
assessee produced MOU dated 31.8.2005. The said MOU is
between the assessee trust, M/s. Bhoopati Associates and Shri
K.E. Pratap as first part, (a) Shri Thimmaiah and (b) M/s. Eswari
projects as second part and Shri A. Venkatarami Reddy as third
part. As per this MOU the assessee sought cooperation of Sri
17 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
Thimmaiah in settling the pending court litigation and in the sale
of 70 acres of land at Rs. 70 lakhs per acre to Shri A. Venkatarami
Reddy. It has also sought cooperation of the second part in
delivering the amounts due to others consequent to realisation of
the sale proceeds of the land in question. The Assessing Officer
brushed aside this MOU. He relied upon the police complaint
lodged by Shri Thimmaiah and his sworn statement recorded on
8.12.2008 wherein he had stated the consideration is Rs. 10 lakhs
per acre. In the set aside assessment proceedings, the Assessing
Officer also considered an amount of Rs. 1 crore repaid to Smt.
Savitramma and thus the Assessing Officer computed the total
amount as follows:
Sale consideration at Rs. 10 lakhs Rs. 9,11,50,000
per acre for 91 acres 15 guntas
Amount paid to Smt. Savitramma Rs. 1,00,00,000
Total Rs. 10,11,50,000
(-) Consideration declared in the Rs. 2,87,63,085
books of account
Undisclosed income Rs. 7,23,86,915
25. Though the Assessing Officer computed two different
amounts of undisclosed income at two assessments stage, he
failed to establish the genuineness of the documents. The
document found was a Xerox copy of a sale agreement. The Xerox
copy of the agreement found during the course of search only
bears the signature of the managing trustee and not that of other
parties to the agreement. The Assessing Officer was unable to
trace the original agreement. The Assessing Officer very much
relied on the FIR filed by Shri Thimmaiah who happened to be the
GPA holder of the land sold to the assessee. In our humble
opinion, the FIR itself cannot be considered as conclusive evidence
to come to a conclusion that the consideration has passed between
the parties. It is a fact that the land was subjected to litigation
18 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
and the assessee agreed to pay Rs. 5 crores for obtaining clearance
from ULC authorities and settle the dispute. Also it is a fact that
posted dated cheques were given to him.
26. A Mortgage deed also was executed wherein the details of
post dated cheques given by the assessee are clearly mentioned.
Copy of the mortgage deed is placed on record. If the amount of
Rs. 5 crores were to be sale consideration it would have been
mentioned so in the mortgage deed. It only states that Sri M.
Thimmaiah has advanced Rs. 5 crores to the assessee trust. No
such amount is received from him and he is not capable also.
Later, Sri M. Thimmaiah returned the cheques which were in his
possession and executed a declaration on 4-6-1999. A copy of the
declaration is on record. As per this declaration since the
assessee trust entered into an agreement of sale with Sri K.E.
Pratap on 4-6-1999 for sale of agricultural lands to an extent of
Ac. 43 in Sy. No. 104/1, 104/2, 105(part) and 108, situated at
Kondapur village, Serilingampally Mandal, R.R. District, in which
he also signed as witness, he has handed over the cheques in his
possession and has also categorically stated that he has no claim
or charge on the said Trust whatsoever from then onwards. The
assessee trust had to enter into an agreement of sale to Sri K.E.
Pratap only to convince Sri Thimmaiah to do his work. It was like
a guarantee to Mr. Thimmaiah, who has selected Mr. K.E. Pratap
as mediator. The agreement also does not contain any
consideration for such transfer. A copy of the Agreement is on
record.
27. The FIR lodged by Sri M. Thimmaiah relied upon by the
Assessing Officer, is also placed on record. This FIR is contrary to
the declaration signed by Sri M. Thimmaiah. This FIR is lodged
only said to be steps to persuade the assessee to complete the
19 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
transaction. As per the declarations the cheques were returned to
the Trust and he has stated that he will have no claim whatsoever
thereafter. But in the FIR he had stated that he has to get money.
The Assessing Officer having relied on this FIR has not examined
him to find out the truth in spite of bringing on record the
declaration and the agreements referred to above. The Assessing
Officer merely concluded based on such FIR that the assessee
trust has incurred Rs. 5,80,10,000 in spite of repeated assertions
by the assessee that it has not incurred anything more than what
is recorded in the books of account. It is not known how a
statement by third party without any supporting evidence could be
relied upon to hold that the assessee trust has paid Rs.
5,80,10,000. The Assessing Officer though in his assessment order
stated that the contents of the complaint are only a source of
information and that the computation of undisclosed income is not
based on these figures but on the fact and documentary evidence
supplied by the assessee only. This statement of the Assessing
Officer is far from truth. None of the facts submitted by the
assessee or the documents supplied by the assessee proves that
the assessee has paid more than what is recorded in the books of
account. Whatever evidences cited by the Assessing Officer are not
authenticated and not supported by examining the concerned
parties. The assessee on the other hand submitted that it has no
activity which can generate income and that its only source is
contributions from devotees and it enjoys exemption and has no
necessity to have undisclosed income. The Assessing Officer in his
order stated that it is not for his consideration. When the
Assessing Officer proposes to hold that the assessee has
undisclosed income it is also required to state as to how the
income could have been generated. When undisclosed income is to
be assessed either it should be based on the assets acquired or
based on the sources of income. In the assessee's case as per the
20 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
documents the land of nearly 86 acres is acquired for the
consideration recorded in the books of account. There is no
evidence which can be relied upon to prove that it has paid more
than that. Whatever being relied upon by the Assessing Officer are
unproved documents and unauthenticated, more on presumptions
and without any evidence. With regard to the submission that
when the cheques of Rs. 5 crores is returned the question of the
assessee having paid the amount does not arise the Assessing
Officer states that the assessee would have made good the said
payment to the land owners against the dishonoured cheques.
This is only a presumption and not supported with any evidence.
It is settled law that determination of undisclosed income could be
determined only on the basis of' evidence and not otherwise.
28. The Assessing Officer also relied on the statement dated
18.12.2008 recorded from Sri Thimmaiah to suggest the sale
consideration is at Rs. 12.25 lakhs. Shri Thimmaiah lodged a
complaint against the assessee and he is having a grievance
against the assessee. How far his statement can be relied that is
also recorded on 8.12.2008 in the course of set aside assessment
proceedings. In our opinion, it cannot be basis to come to the
conclusion that the consideration is at Rs. 12.25 lakhs per acre.
29. Further, this is a block assessment framed u/s. 158BD of
the Act. The block assessment is based on seized material found
during the course of search action. The provisions of Section
158BC(b) which have been amended by Finance Act, 2002 with
retrospective effect from 1st July, 1995, as per which ss 144 and
145 have been specifically made applicable to block assessment.
However, we make it clear that if no material was found during the
search which could show suppression of income, no estimation of
undisclosed income of block period by resorting to Section 145
21 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
could be made. In other words, where there is a material, such an
estimation of income can be made. This view of ours is fortified by
the Judgment of Jurisdictional High Court in the case of Rajnik &
Company Vs. ACIT (251 ITR 561) wherein held that once the
suppression is established, estimate cannot be avoided. It is not
necessary that addition should be limited to what is found during
the search if the circumstance warranting an estimate. We have
also noticed that Punjab & Haryana High Court in the case of
Vedprakash Vs. CIT (265 ITR 642) wherein held that when the
books of accounts maintained by the assessee were not reliable
and verifiable, the block assessment has to be made in the light of
material recovered during the search and in such circumstances,
some element of estimate was unavoidable.
30. The block assessment is not a substitute for a regular
assessment. Both the assessments are standing on different
footings. Its scope and ambit is limited in that sense to materials
unearthed during search. It is an addition to the regular
assessment already done or to be done. The assessment for the
block period can only be done on the basis of evidence found as a
result of search or requisition of books of accounts or documents
and such other materials or information as are available with the
assessing officer. Evidence found as a result of search is clearly
relatable to Section 132 and 132A of the I.T. Act. The clause (a) of
the explanation to Section 158BFA(2) postulates that assessment
made under Chapter XIV-B shall be in addition to the regular
assessment of each previous year included in the block period.
Clause (b) of the explanation further clarified the position that the
total undisclosed income relating to the block period shall not
include the income assessed in any regular assessment as income
of the related block period. Clause (c) puts a ban on treating any
income assessed under the "Block Assessment" so as to form part
22 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
of regular assessment of any previous year included in the "Block
Period". The special procedure of Chapter XIV-B is intended to
provide a mode of assessment of undisclosed income, which has
been detected as a result of search. It cannot be a substitute for
regular assessment.
CIT v. N.R. Papers and Boards Ltd., 248 ITR 526 (Gauhati)
"If prior to the date of search, the assessee had
disclosed the particulars of income or expenditure either
in the return or in the books of account or in the course
of proceedings to the Assessing Officer or where the
return had not become due, they are duty recorded in
the regular books of account, then such Income cannot
be treated as undisclosed income so as to tax a person
ft the rate of Sixty per cent. Under Chapter XIV.
CIT V. N.R. Papers and Boards Ltd., 248 ITR 526 (Gauhati)
"Under the scheme of the provisions for block
assessment it is apparent that it related to assessment
of "undisclosed income" of the assessee excluding the
income subjected to, regular assessment in pursuance
of the returns filed by the assessee for such period.
From a perusal of section 158BB of the Income-tax Act,
1961, it is clear that the returns are required to be filed
in pursuance of a notice under section 158BC(a) and
the assessment has to be framed on that basis in the
light of material that had come into the possession of
the assessing authority during the course of search
which was the foundation of proceedings. The
correctness or otherwise of the returns filed in
pursuance of the notice under section 158BC(a) has to
be examined with reference to the material in the
possession of the assessing authority having nexus to
assessment of "undisclosed income". "
Bhagwati Prasad Kedia v. CIT, 248 ITR 562 (Calcutta)
"The Explanation to section 158BA of the Income-tax
Act, 1961, makes it clear that the Legislature thought it
fit to make a distinction, between the block assessment
and the regular assessment. In the case of regular
assessment, the Assessing Officer is free to examine
the veracity of the return as well as the claims made by
23 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
the assessee, whereas the undisclosed income is taxed
by way of block assessment as a result of search and
seizure. The logic behind the two different modes of
assessment is that concealment of income and claiming
deduction or exemption in respect of a disclosed income
cannot be treated at part. The former is an offence
which goes to the root of the matter and the other is on
the basis of the causes shown by the assessee where
the Assessing Officer is free to accept the justification
shown or reject the same."
CIT Vs. Vikram A. Doshi, 256 ITR 129 (Bom)
"Block assessment - undisclosed income-undisclosed
transactions assessed in block assessment-tribunal
finding transactions disclosed in return which were
subject-matter of regular assessments-transactions in
question not to be considered in block assessment -
income;-tax act, 1961, ss. 143, 158b."
CIT Vs. Shamlal Balram Gurbani, 249 ITR 501 (Bom)
"A search was conducted at the residential premises of
the assessee on March 25,1996, and a notice under
section 158BC of the Income-tax Act, 1961, was issued;
The assessee did not file the returns for the years
1993-94, 1994-95 and 1995-96. The Assessing Officer
treated the income of the three years as the income of
the block period. On appeal, the Tribunal found that the
assessee's income from interest, salary and rent was
reflected in the audited balance-sheet of the respective
assessment years of the firm and, therefore, the
Tribunal deleted the addition."
On appeal the Hon'ble Bombay High Court did not
find any reason to interfere with the findings of facts
recorded by the Tribunal. It was held:
"Held dismissing the appeal, that the conclusion of the
Tribunal that there was no reason for treating the said
income as undisclosed income for the purposes of block
assessment was based on facts. No substantial
question of law arose."
CIT v. Vinod Danchand Ghodawat, 247 ITR 448 (Bom)
"Where the value of the gold and silver articles. and
jewellery had been disclosed in the assessee's wealth-
tax return which was accepted by the Department:
24 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
Held that Chapter XIV-B of the Income-tax Act 1961,
had no application to the facts of the case and the
addition made by the Department on the ground of
undisclosed income was erroneous.
During the search, it was found that the assessee had
constructed a bungalow. It was found that the
assessee had incurred an expense of Rs. 4.16 lakhs.
The Assessing Officer, thereafter, referred the matter to
the Department Valuer, who valued the property at Rs.
6. 66 lakhs and accordingly, the difference had been
added to the income of the assessee as undisclosed
income:
Held, that the above basis clearly showed that the
Department had not understood the scope of Chapter
XIV-B of the Act. The addition did not fall within the
Chapter XIV-B."
(A) Even if it is presumed that post-search
enquiries have resulted in detection of certain
undisclosed income, though it is not relatable to
the evidence found as on the date of search then
also, Mumbai Bench of the Tribunal, in the case
of Morarji Gokuldas Spg. & Wvg. Co. Ltd. v.
DCIT, 95 ITD 1 (MUM) (TM), while considering
an identical situation, held as follows:-
"8. Block period for which the assessment is to be
made under Chapter XIV-8 means the period
comprising previous years relevant to ten assessment
years preceding a previous year in which the search
was conducted under section 132 or any requisition
was made under section 132A, and also includes in the
previous year in which such search was conducted or
requisition made the period up to the date of the
commencement of such search or as the case may be
the date of such requisition. Therefore, the assessment
for the block period under chapter XIV-8 can be made of
the undisclosed income only up to the date of
commencement of search or the date of the requisition
and not of the period thereafter. Section 1588A
provides for assessment of undisclosed income as
result of search for the block period and computation of
income and the computation of undisclosed income for
the block period to be made as per the provisions of
section 158BE and assessment has also to be made
25 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
under section 158BC of the block period. The
"undisclosed income" for which the assessment is to be
made is defined in section 158B(b) which include
money, bullion, jewellery or other valuable article or
thing or any income based on any entry in the books of
account or other documents or transactions, where such
money, bullion, jewellery, valuable articles, things,
entry in the books of account or other document or
transaction represents wholly or partly income or
property which has not been or would not have been
disclosed for the purpose of this Act and after the
amendment by Finance Act, 2002 w.e.f. 1-7-1995 it
includes also any expenses, deduction or allowance
claimed under this Act which is to be found to be false.
31. Further, it is not enough to say that the assessee paid over
and above the declared consideration because the fair market
value (FMV) of the impugned asset as on date of transaction
exceeds the full value of consideration declared by the assessee. It
is further more necessary that the actual value of consideration in
respect of assets involved is understated or in other words, shown
at a lesser figure than that actually paid by the assessee. If the
Revenue seeks to bring into tax any understated value of the
assets, it must show not only that the FMV of the assets as on the
date of transfer exceeds the full value of consideration declared by
the assessee but also that consideration has been understated and
the assessee has actually paid more than what is declared by him.
If the Revenue having failed to show that the actual consideration
passed in this case is more than that was stated by the assessee
then it cannot claim to have discharged the burden cast upon it by
merely establishing that the FMV of the capital asset as on date of
transfer exceeds the value of consideration declared by the
assessee in its books of account. The Revenue must go further
and prove that it is the consideration passed between the parties
exceeds the value disclosed in the books of account of the
assessee. Merely because some property in the nearby vicinity
having been sold at higher value, it cannot be presumed that the
26 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
assessee property also sold at the same rte. The Revenue should
independently establish that actual consideration passed between
the parties is higher than the disclosed in the books of account.
This is a block assessment. As we have discussed in earlier part
of this order, this should be based on seized material and not on
the basis of presumption.
32. We place reliance on the judgement of the Supreme Court in
the case of K.P. Varghese vs. ITO (131 ITR 597) wherein it was
held that section 52(2) of the Income-tax Act, 1961, can be
invoked only where the consideration for the transfer of a capital
asset has been understated by the assessee, or, in other words,
the full value of the consideration in respect of the transfer is
shown at a lesser figure than that actually received by the
assessee, and the burden of proving understatement or
concealment is on the Revenue; and the sub-section has no
application in the case of a bona fide transaction where the
consideration received by the assessee has been correctly declared.
In view of the finding of fact recorded by the Tribunal, there was
no question of invoking section 52(2) of the Act. The High Court
was, therefore, right in refusing to call for the reference from the
Tribunal and rejecting the application under section 256(2) of the
Act.
33. Further, the evidence collected by the Revenue authorities
was not sufficient to establish their stand that the total
consideration passed between the parties was at Rs. 10,11,50,000
instead of Rs. 2,87,63,085. The entire evidence has to be
appreciated in a wholesome manner and even where there is
documentary evidence, the same can be overlooked if there are
surrounding circumstances to show that the claim of the assessee
is opposed to the normal course of human thinking and even
27 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
applying this principle to the instant case there are some
difficulties in rejecting the assessee's plea as opposed to the
normal course of human thinking, conduct and human
probabilities. For this purpose, we rely on various decision as
follows:
1. Order of ITAT, Delhi Special Bench in the case of
Manoj Agarwal v. DCIT wherein the Tribunal held as
follows:
"Held, The evidence collected by the revenue authorities
was not sufficient to establish their stand that the
jewellery transactions carried on by Bemco were only
paper transactions or bogus, and that assessee, who
was one of the director of the company at the relevant
time, controlled and put through these transactions
different accommodation entries and earned
commission income therefrom. The entire evidence has
to be appreciated in a wholesome manner and even
where there is documentary evidence, the same can be
overlooked if there are surrounding circumstances to
show that the claim of the assessee is opposed to the
normal course of human thinking and conduct or
human probabilities. Even applying this principle to the
instant case, there was some difficulty in rejecting the
assessee s plea as opposed to the normal course of
human conduct. The circumstances surrounding the
case were also not strong enough to justify the rejection
of assessee's plea as fantastic or outrageous. The
background of the assessee and his father was
considered as it was relevant to the case. The
admission of the assessee that only the transactions in
the shares were accommodation entries and that
Bemco jewellery transactions were genuine was also
considered and there was reason as to why it was so.
Most of the questions put to the assessee while
recording several statements from him relate to the
share transactions put through another company ''F'
hardly any relevant question regarding the activities of
Bemco was asked. The turnover shown in the share
transactions, which were admitted to be bogus, was
about three and half times the purchases of Rs. 36.69
crores shown by Bemco in its jewellery business.
Added to these were the facts that even in the seized
28 IT(SS)A No. 22/Hyd/2011
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Central Trust, Kurnool
======================
material there was a letter head of Bemco which
showed Jai Sidhi Apartments at Ahmedabad as the
branch office of Bemco which meant that the claim of
Bemco that it had a branch office at Ahmedabad where
the gold bars were sold was right, as also the sales-tax
assessment order under the Gujarat Sales-tax Act
where the assessee declared Rs. 24.07 crores as total
sales and exempted. sales. There was no evidence of
any consequence which was unearthed during the
search to directly show that Bemco was carrying on
only accommodation entry business for jewellery. The
person who was projected as one of the witnesses of
the department to support their stand that Bemco's
jewellery business was bogus, had been found to have
acted as sub-mediator in the share accommodation
entry business carried on by assessee through 'F' only
and he had also been paid commission in that
business. Further, Bemco had been found to have a
shop or showroom at Kucha Mahajani, Delhi and that
had been confirmed by the report of the sales-tax
inspector as also by the rental receipt starting from
January, 1998. Thus, the surrounding circumstances,
apart from the direct evidence in the instant case did
not contain anything which belied the claim of assessee
that though his share transaction business was only an
accommodation entry business for commission, the
jewellery business carried on by Bemco had not been
proved to be so. Therefore, no addition could be made
on account of 'commission income in the hands of the
assessee by treating entire purchase of Bemco as
pertaining to accommodation entry business.
2. CIT Vs. Atam Valves (P) Ltd. (332 ITR 468 (P&H)
wherein held that even though the explanation of the
assessee that the loose paper did not relate to
payment of wages during the year in question may not
be accepted, in the absence of any other material, the
loose sheets by themselves were not enough to make
addition as per the estimate of the assessing office
and to that extent assessed by the assessing officer,
was not called for and it was partly liable to set aside.
3. CIT Vs. Smt. P.K. Noorjahan (237 ITR 570) wherein
held that in the instant case, the Tribunal had held
that the discretion had not been properly exercised by
the Income tax Officer and the Appellate Assistant
Commissioner taking into account the circumstances in
29 IT(SS)A No. 22/Hyd/2011
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Central Trust, Kurnool
======================
which the assessee was placed and the Tribunal had
found that the investments could not be treated as
income of the assessee. The High Court had agreed
with the said view of the Tribunal. There was no error
in the findings recorded by the Tribunal. Section 69
could not be invoked in respect of the investments of
the assessee.
4. MM Finances Pvt. Ltd. Vs. DCIT (107 TTJ Chennai
200) wherein held that no addition could be made in
the hands of the assessee on the basis of the
statement made by the third party and the unsigned
agreement and dumb loose slips seized from his
residence, in the absence of any corroborative material
to show payment of any undisclosed consideration by
the assessee towards purchase of land.
5. Bansal Strips (P) Ltd. Vs. ACIT (100 TTJ 665) (Del.)
wherein held that addition u/s 68 based on loose
papers found during search though authenticity where
of being doubtful held that in the absence of adequate
material as to the nature and owner ship of
transaction, the alleged undisclosed income could not
be added u/s 68 to the income to be assessed in the
hands of the assessee, merely by arithmetically
totalling the various figures jotted down on loose
papers found during the course of search.
6. Hon'ble Supreme Court in the case of CIT Vs. P.V.
Kalyanasundaram (294 ITR 49) (SC) wherein
observed that reliance on the contradictory statement
made by the vendor or loose sheets cannot be placed
and thereby confirmed the judgement of Madras High
Court wherein held that the burden of proving actual
consideration in such a transaction was that of the
revenue. The assessing officer did not conduct any
independent enquiry relating to the value of the
property purchased. The deletion of addition was
justified.
34. As seen from the impugned document, it is just a signed by
a single party which was found in the course of search action at
the assessee premises. The impugned document is only
circumstantial evidence which required to be corroborated with
other evidence. Though there is no necessity in law that the
30 IT(SS)A No. 22/Hyd/2011
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Central Trust, Kurnool
======================
assessing officer is supposed to discharge tax liability by direct
evidence only, there should be enough evidence to support the
addition. The addition is to be made by the assessing officer on
the basis of material available on record. It is very important to
have enough evidence or conclusive evidence to sustain the
addition. When the assessee gives an evasive reply the assessing
officer has to make certain estimation of the income. But the
assumption should be reasonable corresponding to the material
available on record. It should not be based on conjectures and
surmises. In the present case, the impugned document is not
duly signed document. The circumstances surrounding the case
were also not strong enough to justify the rejection of assessee's
plea as outrageous. On consideration of the assessee's arguments,
we are not in a position to reject the same on the reason that the
sale agreement dated 6.2.98 is only a Xerox copy signed by the
assessee alone and not by the vendees. In our opinion, as held by
the Supreme Court in the case of Moosa Madha & Azam S. Madha
vs. CIT (89 ITR 65) that Photostat copies have very little
evidentiary value. Being so, Xerox copies of any document cannot
be itself considered as evidence for the purpose of making addition
in this assessment. Further the consideration at Rs. 12.25 lakhs
per acre cannot be said to have been paid as the transfer has not
materialised and litigation is going on. Further the payment of Rs.
1 crore to Smt. Savitramma is also not supported by proper
evidence to bring the same into taxation in the block assessment.
In our opinion, the unsigned document is a dumb document and
cannot be relied upon for making addition in this case. The
department cannot draw inference on the basis of suspicion
conjecture and surmise. Suspicion, however strong cannot take
place of material in support of the findings of the assessing officer.
The assessing officer should act in a judicial manner, proceed with
judicial spirit and should come to a judicial conclusion. The
31 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
assessing officer is required to act fairly as a reasonable person
and not arbitrary and capriciously. Assessment made should
have adequate material and it should stand on its own legs. The
unsigned document or signed by only one party found during the
course of search is required to be supported by other corroborated
evidence. Further, the statements required to be recorded from all
the parties concerned mentioned in the documents found in the
course of search and those statements should be confronted to the
assessee and the assessee has to be given an opportunity for cross
examination. Considering the totality of the facts and
circumstances of the case, in our opinion, it is not possible to
sustain the addition. Accordingly, the same is deleted.
35. Ground Nos. 6 and 7 do not require adjudication as we have
decided the consideration as declared by the assessee has to be
accepted.
36. The next issue is levy of interest u/s. 158BFA. Levying of
interest u/s. 158BFA is consequential and mandatory and no
adjudication is required on this issue.
37. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 4th July, 2012.
Sd/- Sd/-
(SAKTIJIT DEY) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated the 4th July, 2012
Copy forwarded to:
1. M/s. Bhagawan Sri Balasaibaba Central Trust, c/o. Shri S
Rama Rao, Advocate, Flat No. 102, Shriya's Residency, Road
No. 9, Himayathnagar, Hyderabad.
32 IT(SS)A No. 22/Hyd/2011
M/s. Bhagawan Sri Balasaibaba
Central Trust, Kurnool
======================
2. The Assistant Commissioner of Income-tax, Central Circle-6,
Hyderabad.
3. The CIT(A)-I, Hyderabad.
4. The CIT (Central), Hyderabad.
5. The DR A Bench, ITAT, Hyderabad.
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