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TMI Blog2012 (12) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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. Thus the unsigned document is a dumb document and cannot be relied upon for making addition in this case - in favour of assessee Levy of interest u/s. 158BFA - Held that:- Levying of interest u/s. 158BFA is consequential and mandatory and no adjudication is required on this issue - appeal of the assessee is partly allowed - IT(SS)A No. 22/Hyd/2011 - - - Dated:- 4-7-2012 - SHRI CHANDRA POOJARI AND SHRI SAKTIJIT DEY, JJ. Appellant by: Shri S. Rama Rao Respondent by: Smt. Subhasree Anant Krishnan 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akrishna is the son of the Managing 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 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 for 91.15 acres. 9,11,50,000 2. Amount paid to Smt. Savitramma as evidenced by the seized document 1,00,00,000 10,11,50,000 Less: Consideration recorded in the books of account during FYs 1997-98 1998-99 at Rs. 2,07,40,000 and Rs. 80,23,085 respectively towards cost of land 2,87,63,085 Total undisclosed income 7,23,86,910 9. The AR submitted that while determining the undisclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Somajigud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iah 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 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 per acre for 91 acres 15 guntas Rs. 9,11,50,000 Amount paid to Smt. Savitramma Rs. 1,00,00,000 Total Rs. 10,11,50,000 (-) Consideration declared in the books of account Rs. 2,87,63,085 Undisclosed income Rs. 7,23,86,915 25. Though the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el.) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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