9911796707
TMI Blog2013 (11) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... o be correct - Being so, the CIT(A) deleted the addition - We do not find any infirmity in the action of the CIT(A) as the Assessing Officer had no objection to delete the same - Accordingly, we confirm the action of the CIT(A) on this issue. Disallowance on Account of Interest on Drawings – Held that:- Following Keshavji Raoji & Co. etc., etc. v. CIT [1990 (2) TMI 1 - SUPREME Court ] - in making disallowance for the interest paid by the partnership firm to a partner u/s. 40(b) the interest, in turn, paid by the partner on his borrowings from the firm should be taken into account of and deducted and only the balance is to be disallowed u/s. 40(b) of the Act - only the net amount of interest paid by the firm after deducting interest paid by the same partner to the firm can be disallowed u/s. 40(b) of the Act - only the net amount of interest to be treated as income in the hands of the assessee and the gross interest cannot be considered - Accordingly, this ground of the assessee was allowed in all these appeals. Treatment of Annual Letting Value (ALV) - Held that:- The Department had no material to show that it was not occupied by the assessee himself or it was rented to any other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of agricultural income at Rs. 50,000 out of the agricultural income declared by the assessee at Rs. 1,19,300 and treating the balance Rs. 69,300 as 'income from other sources'. 2.1 The contention of the learned AR is that the assessee is having 24 acres of land at Aleru and has derived income from this land at Rs. 1,19,300. The Assessing Officer is having no material to show that the assessee derived income from sources other than agriculture to treat Rs. 69,300 as 'income from other sources'. 2.2 On the other hand, the learned DR relied on the order of the CIT(A). 2.3 We have heard both the parties and perused the material on record. The Department has not doubted assessee owning 24 acres of land at Aleru. The assessee was cultivating mango and the Assessing Officer also admitted that there are fruit bearing mango trees on the said land. The Assessing Officer rejected the claim of the assessee on the reason that the assessee has not maintained book of account for agricultural income. In our opinion, when the Assessing Officer not doubted owning of agricultural land and the existence of fruit bearing mango trees in the agricultural land, the income of Rs. 1,19,300 cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f rental agreement and the amount credited in the bank account, the lower authorities doubted the transaction. In our opinion, there is no merit in doubting the transaction as the amount has been received from Blue Dart Express Ltd., and duly credited into the bank account. Being so, the addition is not sustainable. Accordingly, we delete the addition. 6. The next ground is with regard to taxing capital gain of Rs. 3 lakhs, even though the same was already offered to tax in the return of income filed in response to notice u/s. 153C of the IT Act. The CIT(A) made an addition of Rs. 3 lakhs on the basis of the Remand Report submitted by the Assessing Officer. The contention of the assessee's counsel is that the assessee sold two flats (i) bearing No. C-502 at R.K. Towers, Begumpet, Hyderabad at Rs. 5.5 lakhs and flat No. E-402 at Vamsi Span Collective Homes, Begumpet, Hyderabad and thus, Rs. 3 lakhs was considered to be offered to tax out of capital gain derived from above transfers. The CIT(A) confirmed the same on the reason that there is no reference of this investment of Rs. 3 lakhs in the Cash Flow Statement. In our opinion, reflection of investment of Rs. 3 lakhs to be conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued to the assessee for furnishing explanation in that regard. In response to the same, the assessee has filed reply on 21.08.09, stating that the amount of Rs. 9,00,000/- was deposited on 24.03.2002 and the same has been withdrawn on 27.03.2002. The Assessing Officer further submitted that the assessee has also filed a cash book containing the day to day cash flow, and the same has been examined by him. He submitted, accordingly, the claim of the assessee may be considered on merit. 7.5 Later, during hearing of appeal before the CIT(A), while reiterating their earlier submission, the AR submitted, that an amount of Rs. 9,00,000/- was deposited by the assessee on 24.03.2002 in the same loan account. This transaction is reflected in the cash book. It was submitted, as may be seen from the cash book entries, the opening cash balance on 24.03.2002 was Rs. 6,42,321/-. Out of this, an amount of Rs. 35,000/- was deposited in the same bank account. Further an amount of Rs. 3,00,000/- was withdrawn through cheque No. 123473 from SBI account No. 10161692436 maintained at SP Road Branch. Thus, the cash balance available with the assessee was Rs. 9,07,321/- and out of that amount, he dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the context of the said addition of Rs. 28,75,000/-, towards unexplained cash deposit in bank. It was stated, in view of their such explanation furnished against the addition, no addition is called for in this case. On such submissions of the AR the Assessing Officer in his above remand report to CIT(A), submitted that, it is nothing but duplication where the same was added already in the said amount mentioned earlier. Further stating that the assessee has also explained the sources, the Assessing Officer submitted that, hence the claim of the assessee may be considered on merit. 8.2 We have heard both the parties on this issue. Herein also the Assessing Officer sent the Remand Report vide his letter dated 22.2.2010 stating that it is nothing but the duplication where the same was added already and the assessee also explained the source. 8.3 After considering this Remand Report, the CIT(A) deleted the addition as it is a double addition. Being so, the Department cannot have any grievance on this issue. The deletion of addition is confirmed. This ground of the Revenue is rejected. 9. The next ground in ITA No. 1563/Hyd/2010 is with regard to deletion of addition made towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive material to hold that the assessee earned any income other than agricultural income. Being so, we allow the ground taken by the assessee in all the above appeals. In the result, assessee's appeals in ITA Nos. 1598, 1596 1597 and 1599/ Hyd/2010 are allowed. Rao Shiva Kumar Sl. No. Assessee appeal ITA No. A.Y. Sl. No. Revenue Appeal ITA No. 1. 150/Hyd/2011 2000-01 2. 151/Hyd/2011 2001-02 (1) 240/Hyd/2011 3. 152/Hyd/2011 2002-03 4. 153/Hyd/2011 2003-04 5. 154/Hyd/2011 2004-05 (2) 241/Hyd/2011 6. 155/Hyd/2011 2005-06 7. 156/Hyd/2011 2006-07 12. The first common ground in ITA Nos. 150, 151 and 156/Hyd/2011 is with regard to disallowance on account of interest on drawings and treating the same as income of the assessee without appreciating the true nature of the claim and the treatment given by the assessee in his book of account, when the Assessing Officer verified and confirmed the fact in the Remand Report. 12.1 In these cases, the assessee is a partner in M/s. Gautami Constructions from where he has received interest on his capital balance in this assessment year and also paid interest on his drawings. The assessee's claim is to set off of the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. 13.1 In our opinion, this act of the CIT(A) is not justified. The Department has no material to show that it was not occupied by the assessee himself or it was rented to any other person so as to derive the rental income from it. Being so, the claim of the assessee cannot be denied on mere suspicion and surmises. Accordingly, in the absence of any evidence contrary to the evidence produced by the assessee, we are inclined to decide the issue in favour of the assessee as it is self-occupied. This ground of the assessee is allowed in all the above appeals. 14. The next common ground in all the appeals of the assessee, in ITA Nos. 150 to 156/ Hyd/2011 is with regard to disallowance of agricultural income. In the A.Y. 2000-01 the assessee claimed Rs. 70,000 as agricultural income. In other A.Ys., the assessee shown agricultural income at Rs. 1,40,000. The lower authorities treated Rs. 35,000 out of Rs. 70,000 as 'income from other sources' in A.Y. 2000-01. Similarly, the Assessing Officer treated Rs. 1 lakh as 'income from other sources' out of Rs. 1,40,000 shown as agricultural income declared by the assessee in A.Y. 2001- 02 to A.Y. 2006-07. Against this, the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 5 lakhs on account of encashment of FD though the funds routed through bank account of the assessee. Brief facts of the issue are that the Assessing Officer made an addition of Rs. 25 lakhs on account of cancellation of FD as there is no satisfactory explanation by the assessee. 16.1 Before the CIT(A) it was submitted that though the Assessing Officer has made such addition towards cancellation of FD brought into bank account maintained in SBI, there is no such entry in the bank account maintained in that bank. It was stated by the AO that such addition has been made on basis of second cash flow statement and under the circumstance, the accuracy of such entry is doubtful. 16.2 It was further submitted that in fact, such amount pertains to a deposit made in the Canara Bank Kundann Bagh Branch, bearing account no. 9787. It was stated that the sum of Rs. 25,00,000/- was deposited by Mr. Rao Subba Rao, in the bank account of the assessee for making a payment on his behalf to Mr. D.N. Chenoy & Others. This amount of Rs. 25,00,000/- has been duly reflected, in the cash flow statement of Mr. Rao Subba Rao, filed before DDIT (Inv.) and, therefore, no separate addition should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank account. Furnishing copies of those bank accounts of M/s. Gautami Constructions, and of the assessee, it was stated that from the same, it may be noticed that there was inter account transfer of such amount. It was further submitted in the original cash flow statement filed before DDIT(Inv.), an amount of Rs. 20,00,000/- has been shown from M/s. Gautami Constructions. Enclosing a copy of that cash flow statement filed before DDIT(lnv.), it was submitted that while filing return of income in response to notice u/s. 153A, the interest of Rs. 9,041/- has not been shown. It was further stated that the addition of Rs, 41,507/- towards interest on bank, which has been accepted by the assessee, includes such amount of Rs. 9,041/-. However, stating that since the break-up of such interest is not possible, the above amount of Rs. 9,041/- may be added. Clarifying on the balance amount of Rs. 5,00,000/-, It was further submitted that on 31.03.2001, cash of Rs. 5,00,000/- was deposited in bank account in SBI, SP Road Branch, (A/c. No. 10161692414). 16.5 However, vide further written submissions made on 25.10.2010 by the assessee before the CIT(A), explaining about the balance amount of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties on this issue. We have already discussed similar issue in the case of Rao Ravi Kumar and deleted the addition in ITA No. 1594/ Hyd/2010 for A.Y. 2002-03 in earlier paras of this order. On similar lines this addition is deleted. 18. The next ground in ITA No. 155 and 156/Hyd/2011 is with regard to sustaining addition made towards rent from flat Nos. G8, Sai Darshan Apartments, without making any enquiry regarding occupation of the flat as at the time the property was vacant and the Assessing Officer has accepted the same in his Remand Report that that the claim of the assessee is genuine. 18.1 Facts of the issue are that the said flat was acquired by the assessee from one Syed Naseer Hussain on 14.10.2004 for Rs. 5,30,699 and sold to Smt. G. Kalavati and G. Chandra Mouli on 4.1.2007 for Rs. 6,50,000. It was stated that the flat was not let out till the date of sale and kept vacant as the assessee wanted to use the same for his office. 18.2 The learned AR submitted that the claim of the assessee is to be allowed as it is kept vacant. On the other hand, the learned DR submitted that the assessee was not able to produce evidence for his self-usage of the flat, specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch evidenced the receipt of Rs. 2,50,000. However, there is no evidence for receipt of total amount of Rs. 5 lakhs. Being so, the CIT(A) deleted Rs. 2,50,000 and confirmed Rs. 2,50,000 out of Rs. 5 lakhs. Even before us the assessee was not able to lead any evidence for the receipt of Rs. 5 lakhs from Bolla Uma. Being so, we are inclined to confirm the addition of Rs. 2,50,000. This ground in ITA No. 155/Hyd/2001 is dismissed. 21. The next ground in ITA Nos. 155 and 156/Hyd/2011 is with regard to treating the amount received on sale of agricultural land as business income though it is exempted asset which is not liable to capital gain. 21.1 In assessment year 2005-06, the assessee sold 49 acres 39 guntas of agricultural land located at Mansanpally along with his father Rao Subba Rao, his uncle Raja Kumar and Gautami Constructions to M/s. Chalapati Estates Pvt. Ltd. The total consideration is Rs. 2.65 crores. The assessee received consideration of Rs. 50,08,500 for 9.18 acres. The purchase cost per acre is Rs. 18,000 and total cost of purchase is Rs. 1,70,100. Thus, the balance Rs. 48,38,400 considered as income of the assessee for A.Y. 2005-06. Similarly for A.Y. 2006-07 Rs. 78,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k-in-trade. The land is agricultural land located outside the municipal limits i.e., beyond 8 km. Thus, the said land was not a capital asset exigible to tax under the head 'Capital Gains'. It was further submitted that the profit arising out of such land transaction cannot be taxed as adventure in the nature of trade under the head 'Business'. Referring to various judgements of Hon'ble Supreme Court in this regard, it was submitted that in the case of the assessee the lands were acquired by him and reflected in the returns as investments, but not as stock-in-trade. Although, there was profit on such land transactions, the same cannot be characterized as adventure in nature of trade. It was stated that the onus lies on the department to prove that the transaction was in the nature of trade. It was further stated that the said receipts on sale of land in the hands of the assessee, cannot be taxed either under capital gain or under the head business. 21.4 With reference to the above submissions, the Assessing Officer in his remand report before the CIT(A) submitted that the assessee, his brother and his father are actively engaged in the business of real estate. The purchase and sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer in different assessment years. Further, such findings have been given, after considering the submissions of the assessee made in that case. 21.7 Now, coming to the present case of the assessee, the AR submitted that the assessee has received sale consideration of Rs. 50,08,500/- from sale of acre 9 acres 18 guntas of land during the previous year. This fact is not disputed by the assessee. Further, the assessee admitted that taxability or otherwise of the amount would arise only in the hands of the entity who own the land, it has to be considered whether such receipts in the hands of the assessee, as mentioned by the AO, during the year, is taxable or not for the Asst. Year 2005-06. The assessee has submitted that the said land purchased by him, was an investment and same was not his stock in trade. He has further stated that he was not in the business of real estate and hence the profit arising from such transaction cannot be taxed under the head business income. He has further stated that such land being agricultural land, such transaction of sale of that land, is not liable to capital gain tax. However, the assessee, in fact, has purchased such lands with the sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enture in the nature of trade nor it was "capital asset", profits arising from sale therefrom cannot be treated as capital gain. 21.10 We have heard both the parties and perused the material on record. In the present case there were sale of 49 acres 39 guntas of property. Bifurcation is as follows: Name Land sold Acres Guntas Amount (Rs.) Rao Subba Rao 10 33 57,37,250 Rao Shiva Kumar 10 13 1,13,02,250 Rao Raj Kumar 13 30 72,87,500 M/s. Gautami Constructions 4 03 21,59,750 Total 49 39 2,64,86,750 21.11 The property sold by the assessee relating to A.Y. 2005-06 is 9.18 acres for Rs. 50,08,500, for A.Y. 2006-07 is 11.35 acres for Rs. 62,93,750 totalling to 21.13 acres of land at Rs. 1,13,02,250. It is also an admitted fact that the assessee and the assessee's family members are in the real estate business. They are regularly buying and selling properties in and around Hyderabad. Sometime they register the property in their names and on the other hand on some occasions they enter into agreement of sale and thereafter they will search the prospective buyers and sell the property. This is regular business carried on by them. It is quite well settled principle th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity of the assessee. The assessee has been carrying on regular business in landed property and it is an organised business of the assessee. The assessee has to incur various expenses, both direct and indirect, like establishment expenditure, salary to staff, phone charges, travelling and conveyance, staff welfare, advertisement and marketing charges, brokerage, interest etc., in addition to purchase cost of land. The assessee has not maintained regular book of account. As the assessee not maintained regular book of account, the income of the assessee has to be estimated. For the purpose of estimating the profit various factors such as profit ratio of the assessee in earlier years, profit ratio of similar business in the same locality, demand for the land, supply of the land, price fluctuation of the land, time gap available between purchase and sale of land which have to be considered. Therefore, in our opinion, the past history is the best basis for determining the income of the assessee for this assessment year from buying and selling of land. In the present case, we are not in possession of the earlier year data of the assessee. Being so, comparable cases have to be considered. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,88,766 the remaining amount out of Rs. 60,12,360 was explained. Further before the CIT(A) assessee accepted the addition of Rs. 9,88,766. Being so, the CIT(A) dismissed the ground. 23.2 We have heard both the parties on this issue. Before us, the learned AR fairly conceded that this issue is not pressed before us as the assessee offered the said amount for taxation before the CIT(A). Accordingly this ground is dismissed as not pressed. ITA Nos. 240 & 241/Hyd/2011 - (By Revenue) 24. Now let us take ITA No. 240/Hyd/2011 for A.Y. 2001- 02. The first ground in this appeal is with regard to deletion of addition made towards unexplained cash deposits into bank account. The Assessing Officer made addition of Rs. 37,04,100 on account of cash deposit in bank account. Out of this, Rs. 26,04,100 is relating to deposit into Canara Bank account and Rs. 11,00,000 into SBI account. According to the Assessing Officer there was no explanation regarding source of this cash deposit. 24.1 The learned AR submitted that the addition was made without any proper verification. He submitted that the above addition has been made on the basis of second cash flow statement filed with the return u/s. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis and the deletion of addition by CIT(A) is confirmed. 25. The next ground in ITA No. 240/Hyd/2011 is with regard to addition on account of receipts allegedly received from Rao Subba Rao HUF. Before the CIT(A) it was submitted by the assessee that the amount of Rs. 40-.50 lakhs was actually received from Rao Subba Rao (individual) and the same was reflected in the cash flow statement filed before the DDIT (Inv.). Further an amount of Rs. 52,500 represents the receipt on account of adjustment of account. The CIT(A) observed that the AO made an addition of Rs. 41,02,500 on account of receipt from HUF. The addition was made by the AO on account of improper explanation by the assessee. The CIT(A) was of the opinion that it has been reflected in the Cash Flow Statement filed by the assessee before the DDIT (Inv.) and it is a genuine transaction and deleted the same. Being so, we do not find any infirmity in the order of the CIT(A) and the same is confirmed on this issue. This ground is dismissed. 25.1 The Department is also having a grievance relating to deletion of addition of Rs. 20 lakhs deposited into bank account. This ground becomes infructuous in view of confirming the del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to entering into agreement dated 16.01.2004, the assessee has paid another sum of Rs. 13,00,000 to Smt. Satyamma. In this regard, he referred to some notings on page 19 of the seized document A/RSR/1. In this context, he further referred to the statement given by one Sri A.V.S.S. Prasad, accountant of the assessee, given before the DDIT (Inv) on 24.08.2005. He referred to a part of such statement given by the said person, at page-4 of the assessment order. Referring to such statement and stating that the assessee has paid Rs. 13,00,000, after payment of Rs. 10,00,000 made on 16.01.2004 and holding that the same was made out of undisclosed income, he added the said amount to the income of the assessee. 27.1 With reference to the above, the AR submitted that the assessee was acting as a mediator for clearing pending disputes in respect of a land at Bowenpally, belonging to Mrs. Satyamma and others. It was agreed that on final settlement, Sri Shiva Kumar would get some land (around acre 1.37). For that purpose, the assessee paid Rs. 10,00,000 as advance, as evidenced in the agreement of sale dated 16.01.2004. It was stated that no further amount was paid as the pending litigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. 28.1 This issue came for consideration in ITA Nos. 150, 151 and 156/Hyd/2011 in the case of Rao Shiva Kumar wherein we have held in the earlier paras that interest received and interest paid by a partner has to be netted off. Accordingly as held in earlier part of this order, the issue is decided in favour of the assessee. 29. The next common ground is with regard to disallowance of agricultural income. This ground is common in all the assessee's appeals for A.Ys. 2000-01 to 2006-07. In these cases the Assessing Officer treated Rs. 50,000 as agricultural income and the balance amount declared by the assessee as agricultural income was treated by the Assessing Officer as income from 'income from other sources'. This issue was considered in earlier paras in ITA Nos. 150 to 156/Hyd/2011 in the case of Rao Shiva Kumar wherein we held that the income declared by the assessee as agricultural income is to be treated as agricultural income as the holding of agricultural land is not doubted and also the Department is not in possession of any positive material to show that the assessee earned income from any other source other than agriculture. Accordingly, this ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unted only Rs. 4.5 lakhs and the balance of Rs. 8.5 lakhs was not accounted towards investment in Victoria Castle. Before the CIT(A) the AR taken a plea that the same was reflected in Cash Flow Statement filed before the DDIT (Inv.) and it was properly explained. Further, it was stated that the amount was received by the assessee from Sri Rao Subba Rao and the receipt of money also reflected in Cash Flow Statement of Rao Subba Rao also. The CIT(A) called for Remand Report from the Assessing Officer. The Assessing Officer in his Remand Report stated that the outflow was duly reflected in the Cash Flow Statement and the deficit in the cash balance shown in the Cash Flow Statement of Rao Subba Rao was duly offered for taxation. Considering this, the CIT(A) deleted the addition. 33.1 We have heard both the parties and perused the material on record. As seen from the above, deletion of addition by the CIT(A) is justified as it is based upon the Remand Report as the transaction was duly reflected in the Cash Flow Statements of both Rao Satya Kumar as well as Rao Subba Rao. The deficit in Cash Flow Statement of Rao Subba Rao was offered to tax. Being so, the deletion of addition made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 2,31,075 on account of unexplained NRI receipt. We have heard both the parties on this issue. It was stated by the assessee before the lower authorities that the assessee remitted Rs. 2,31,075 from his foreign earnings and deposited into SBI SP Road Branch account on 12.4.2001. This fact was confirmed by the Assessing Officer in his Remand Report and deleted by the CIT(A). The assessee filed affidavit confirming the fact that it was remitted from foreign earnings to his account in SBI SP Road Branch. Being so, deletion of addition by the CIT(A) is justified and we confirm the same. This ground is rejected. 37. The next ground in ITA No. 41/Hyd/2011 is with regard to deletion of addition of Rs. 11 lakhs towards unexplained source as received from S.J. Chenoy. Brief facts of the issue are that the assessee has taken a DD from his bank account in the name of Sona J. Chenoy towards advance for a property at No. 198, Tadbun, Secunderabad. As the transaction was not materialised the DD was cancelled and the amount was re deposited in the bank account with SBI SP Road Branch. The CIT(A) called for Remand Report from the Assessing Officer who has confirmed that the DD was drawn on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed rental income. Brief facts of the issue are that the Assessing Officer made an addition of Rs. 3 lakhs on the basis that office space was given to rent to M/s. Vamsi Span Collective Homes for Rs. 6 lakhs in the assessment year 2005-06. For the assessment year 2006-07 the assessee offered only Rs. 3 lakhs towards rental income. The difference was added. The CIT(A) deleted the same on the basis of Assessing Officer Remand Report that the property was let out to 123 Signup between 19.5.2005 to 31.3.2006 and the rent received from this party is Rs. 3 lakhs. Against this, the revenue is in appeal. 39.1 We have heard both the parties on this issue. The CIT(A) deleted the addition on the basis of the rental agreement produced before him. The Assessing Officer also agreed with the contention of the assessee and sent the remand report that the rent receivable is only Rs. 3 lakhs for that period. Being so, when the property let out for a part period i.e., from 19.5.2005 to 31.3.2006, the rent considered by the CIT(A) is at Rs. 3 lakhs as against Rs. 6 lakhs in earlier year which is for full year at Rs. 6 lakhs, is justified. This ground is rejected. 40. In the result (Department appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the income of the assessee, treating as unexplained investment in such plot of land. As such, he added the said amount to the income of the assessee. 43.2 With reference to the above addition, the AR submitted that the assessee has been acting as a mediator in purchase of properties. It intended to mediate in respect of said land 315 sq. yds., situated in that location at Mayur Marg, Begumpet, as one of the customers approached the assessee for purchase of the said land. The owners of that property were Sri Ashok Kumar and Smt. Padmavathi. It was submitted that the assessee has himself prepared an agreement of sale, as if entered into with the landlords and made the signatures of the landlord (not actual signatures) to convince the intending buyers that it is the owner. The said agreement is fictitious and actually no monetary transaction has taken place. Referring to clause-2 of the said agreement and the receipt attached there to, as per which Rs. 1,00,000/- was paid by cheque 021398 dated 07.06.2004 and Rs. 11,00,000/- by cash, it was submitted that as may be seen from the bank account of the assessee maintained in the Canara Bank, Kundan Bagh Branch, (A/c. No. 1022), that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this regard, it has been submitted that though in the said agreement and also in the money receipt enclosed to that agreement, there is a reference to payment of Rs. 1,00,000/- vide cheque No. 021398 of Canara Bank, Kundan Bagh branch dated 07.06.2004, vide that cheque cash withdrawal of Rs. 2,25,000/- was made on 04.06.2004. Referring to this discrepancy and stating that the signatures contained in the said money receipt dated 07.06.2004 were not of the actual owners of the land and further stating that the said land was finally sold to Smt. A.R. Lata and Smt. A.R. Gita, the assessee has stated that no addition is called for in the hands of the assessee. Though, the CIT(A) agreed that the said land measuring 315 sq. yds., was finally sold to the above two persons, he observed that it has not been explained as to why such an agreement was executed by the assessee on 07.06.2004. In the said money receipt, in which there is signature of two persons, there is affixture of revenue stamps. Later, further agreement of sale in respect of the said land was executed on 20.09.2004 by Sri Ashok Kumar and Smt. Padmavathi with Smt. A.R. Gita and Smt. A.R. Lata, before final sale of that land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44.1 Brief facts of the issue are that as per the seized material marked as A/RSR/2011 page No. 21, the assessee entered into an agreement with M/s. Sri Sri Bhajan Brahmachari Sevashram and Smt. Geeta Karan w/o. Sri Uma Karan, principal, Geetanjali School, Begumpet. As per the said agreement , that Ashram is having land in survey No. 182/7 and 182/9 Begumpet and leased 2500 sq. yds to Geetanjali School and the assessee firm has entered into an agreement of sale for development with the said ashram on 27.12.1990. There was a supplementary agreement dated 30.03.1993. The Assessing Officer noted that the said ashram entered into agreement of sale for Rs. 70,00,000/- with Smt. Geeta Karan and as per clause (c) of such agreement, Smt. Geeta Karan shall pay a sum of Rs. 5,00,000/- to Sri Sri Bhajan Brahmachari Sevashram and a sum of Rs. 20,00,000/- to M/s. Gautami Constructions on or before 30.06.1999 and as per clause (d) Smt. Geeta Karan shall pay a sum of Rs. 15,00,000/- to M/s. Gautami constructions on or before 30.06.2000 provided that OP No. 496 of 1994 pending in the file of the Chief Judge, City Civil Court, Hyderabad is withdrawn unconditionally. Referring to notings of differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of Rs. 23.5 lakhs, payment made to M/s. Rithika Constructions as unexplained payment. 45.1 Brief facts of the issue are that the assessee entered into an agreement of sale on 24.1.2003. As mentioned by the AO, the assessee has entered into an agreement of sale on 24.01.2003 with the said firm represented by its proprietor Sri Kulwant Singh Makkan. As per the same, M/s. Rithika Constructions entered into development agreement on 20.10.2000 with landlords Gopal Reddy and others in respect of plot Nos. 6, 6A, 47 measuring 1330 square yards at Tokatta Village, Bowenpally, Secunderabad, for construction of 30 flats on that land. Due to some financial problems, the said firm was unable to complete the construction and the owners of that building offered the same to the assessee firm i.e., M/s. Gautami Constructions. As noted by him, the assessee offered to pay @ 175 per sq. ft. amounting to Rs. 52,50,000/- to M/s. Rithika Constructions towards settlement of the said complex works already done by them. With regard to payment terms, the assessee transferred 8 acres of land @ Rs. 6 lakhs per acre at Mansanapally village, R.R. District, belonging to it and offered to make cash paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02 for a consideration of Rs. 46,000/- (acres 2.22 guntas) and on 13.12.2002 vide DC. No. 3032/2002 for a consideration of Rs. 1,25,500/- (6 acres 30 guntas). The investment of purchase was duly reflected in the regular return of income. Hence, the addition of Rs. 16,00,000/- on account of undisclosed investment is apparently not correct. Further, as the assessee did not make any cash payment and the relevant seized material was an unsigned agreement, the contention of the assessee may be considered on merit. In his further report vide letter dated 01.06.2010, submitted to the Addl. CIT, Central Range-l, Hyderabad, when directed by the later for making further enquiries into the above matter, the AO informed that he has issued a show cause notice to the assessee, in response to which they have filed further clarification on 15.04.2010. Those submissions made by the assessee vide such reply filed on 15.04.2010, referred to in the said report, are reproduced as under:- "M/s. Rithika Constructions was a builder who has constructed some flats at Bowenpally. In this regard we wish to mention here that the intention of the department is that the builder has constructed the flats out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the total addition of Rs. 29,92,500. Against this, the Revenue is in appeal. 46.2 We have heard both the parties and perused the material on record. The CIT(A) called for Remand Report from the Assessing Officer. The Assessing Officer in his Remand Report stated that Sri Ashok Kumar and Smt. Padmavathi sold the said property to Smt. A.R. Geeta in June, 2006. He also submitted that in the seized document, there is another agreement entered into between the land owner Sri Ashok Kumar and Smt. Padmavathi with Smt. A.R. Geeta and Smt. A.R. Lata. The agreement was entered by Sri Ashok Kumar in favour of Smt. A.R. Geeta and Smt. A.R. Lata is a dummy document which is not acted upon. As discussed in assessee's appeal in ITA No. 148/Hyd/2011 in earlier paras of this order, the payment reference at Rs. 1 lakh vide cheque No. 021398 drawn on Canara Bank, Kundan Bagh Branch dated 7.6.2004 otherwise represents the cash withdrawal of Rs. 2,25,000 made on 4.26.2004. This discrepancy was noticed by the CIT(A) and accordingly, he sustained addition of Rs. 11,00,000 out of Rs. 29,92,500 and deleted Rs. 18,92,500. As we have deleted Rs. 11 lakhs which was sustained by the CIT(A) in assessee's a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome received from the assessee was offered to tax by M/s. Gautami Constructions. This fact was confirmed by the Assessing Officer in his Remand Report. Being so, when the Department accepted offer of lease rental income by M/s. Gautami Constructions it cannot reject claim of the assessee deriving agricultural income from the said land. Being so, considering the totality of the facts of the case for A.Ys. 2001-02 to 2006-07, we allow this ground of the assessee in ITA No. 639 to 644/Hyd/2011. 49. The next common ground in ITA Nos. 638 to 644/Hyd/ 2011 is with regard to sustaining of addition towards low withdrawals, as follows: A.Y. Agricultural income (Rs.) 2000-01 1,00,000 2001-02 1,00,000 2002-03 1,50,000 2003-04 2,00,000 2004-05 2,00,000 2005-06 2,50,000 2006-07 2,75,000 49.1 We have heard both the parties and perused the material on record. The contention of the assessee is that the addition was made by the lower authorities on the basis of the lifestyle of the assessee. According to the assessee the lower authorities derived support of taking plot No. 119, Road No. 10, Jubilee Hills, Hyderabad, where the assessee was staying on a rent of Rs. 25,000 per month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year. In response to this, the assessee in his reply filed before the Assessing Officer on 28.12.2007, has submitted that the said transaction could not be materialized as the owners of that plot have created a trust on that property for the benefit of their family members. The assessee further stated that he has purchased a demand draft for Rs. 11,00,000/- in favour of Mrs. Sona J. Chenoy with an intention to execute the agreement of sale entered. However, due to non-agreement of trustees for sale of that plot, their demand draft was returned to them bearing B.C. No. 342060 and the same was cancelled and credited in the hands of Sri Rao Satya Kumar en 07.05.2001, by depositing in his bank account in State Bank of India, PBB. It was stated that the entire transaction was recorded in the hands of Sri Rao Subba Rao HUF. 50.2 However, the AO did not accept such submission of the assessee. He noted that the assessee has not replied to the specific query relating to the payment of Rs. 2 crores to both the above persons. He noted that both the persons have admitted receipt of Rs. 2 crores on a stamped agreement in the presence of witnesses. He further noted, the assessee ought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document are true and no other inference can be drawn. The same has been reiterated in the provisions of sec. 292C of the Act. He further stated, the said agreement was found and seized from the premises of the assessee during the course of search. The said agreement was duly signed. The AO has made the addition on the basis of the said provisions. He further mentioned that in the said agreement at clause-2, at page No. 2, it is clearly mentioned that an amount of Rs. 2 crore was paid as advance by way of cheque. The assessee has cleverly omitted the details of cheque. He stated that under these circumstances, the submissions made by the assessee denying such payment is an afterthought. He further mentioned that, it is common that no buyer will admit the receipt of on-money. Stating that the said confirmation letter filed by Mr. Saroj J. Chenoy, cannot be considered being devoid of any merit, he submitted that such claim of the assessee cannot be accepted and thus suggested that the said addition should be confirmed. 50.5 We have heard both the parties and perused the material on record. This addition is with regard to the alleged purchase of property bearing No. 198, Tadbun, Secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department also not brought on record the original copy of the agreement of sale. It was held in the case of Moosa S. Madha & Azam S. Madha vs. CIT (89 ITR 65) (SC) that xerox copy of the document cannot be a basis for addition and it has to be annulled. It is settled law that xerox copy of any document cannot be considered as an evidence in the absence of original and supporting evidence either oral or documented. The department not brought on record any corroborative material to show that the impugned agreement between the parties has actually culminated in sale transaction. The lower authorities only harping on the zerox copy of the document and presumption u/s. 132(4A) and 292C of the Act. The presumption under these sections are rebuttable. The assessee placed confirmation letter from the prospective vendor that the transaction was not acted upon. At this stage, the burden shifted from the assessee to the Department. If the Department disbelieves the explanation offered by the assessee, it is incumbent upon the Department to bring cogent material against the assessee. Without doing so, the Department only relying upon the zerox copy of the agreement though not traced the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the backside of the cheque it is mentioned "cash paid by R.S.R. to M.F. Peter". In view of such entry on the backside of the cheque the addition was made in the hands of the assessee. 51.2 We have heard both the parties and perused the material on record. The addition was made on the basis of entry on the backside of the impugned cheque wherein it was mentioned that "cash paid by R.S.R. to M.F. Peter". In the course of remand proceedings, the managing partner of Sri Krishna Earth and Minerals appeared before the Assessing Officer on 24.8.2009. However, he could not produce any books of account or return of income or any other document to verify such claim. However, since it was written on the backside of the cheque "cash paid by R.S.R. to M.F. Peter, we have to sustain the addition. 51.3 The contention of the AR before us is that the assessee filed confirmation letter from M/s. Sri Krishna Earth and Minerals Ltd., wherein they confirmed that the assessee has no connection with the company. But the fact is that the cheque was found in the possession of the assessee and on the backside of the cheque it was mentioned that Rao Subba Rao paid cash to M.F. Peter. So the presumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cument A/RSR/21 page 47 wherein the assessee has shown creditor in the books of Sri Sri Bhajan Brahmachari Sevasarm as on 31.3.2002 for an amount of Rs. 1,49,270. The Assessing Officer called for explanation regarding this. The assessee not furnished any explanation and the same is treated as income of the assessee. On appeal the CIT(A) confirmed the same. 53.2 Before us the AR submitted that this represents the liability in unaudited/draft Balance Sheet prepared by the trust. However, in the seized material the audited Balance Sheet of the trust is available. This audited Balance Sheet does not reflect this liability. According to the AR instead of unaudited Balance Sheet the Department shall consider the audited Balance sheet which is correct Balance Sheet. Further, he submitted that there is no mentioning of assessment year to which year this liability belongs in the seized material. Being so, it cannot be considered for addition. 53.3 The DR submitted that it is reflected in the draft Balance sheet which forms part of the seized material. The assessee has not offered valid explanation. The addition has to be sustained. 53.4 We have heard both the parties on this issue. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He has not filed any return of income. The claim of the assessee is not verifiable. Being so, the CIT(A) was of the opinion that the investment of Rs. 5 lakhs out of Rs. 14.50 lakhs is not verifiable and accordingly confirmed the addition. 55.2 Before us the learned AR submitted that Mr. D. Sudhakara Varma was produced and examined. He has confirmed the transaction and the amount was returned back to the assessee and reflected in the Cash Flow Statement filed before the authorities. The statement of Mr. D. Sudhakara Varma was disbelieved by the Department on the sole reason that he was not assessed to tax and not maintained books of account. The AR submitted that when the person is identifiable and has confirmed the transaction, there is no question of further addition. According to the AR the burden cast upon the assessee is discharged and no addition is to be made. 55.3 We have heard both the parties and perused the material on record. The entire payment of Rs. 14.5 lakhs is reflected in the Cash Flow Statement and whatever deficit in the Cash Flow Statement was offered to tax. Once again making addition for individual items amounts to double addition which is not possible. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed material the flat cost was Rs. 18,00,000/-. Out of that Rs. 15,00,000/- was paid and Rs. 3,00,000/- was shown outstanding. The amount of Rs. 6,50,000/- was relating to another property, a vacant plot. This entry and the said entry of Rs. 3,00,000/- aggregating to Rs. 9,50,000/-, was shown as payable / outstanding. With these submissions, he stated that such claim of the assessee may not be considered. He further stated that the actual cost of Rs. 18,00,000/- was reflected in the original cash flow statement. Later, the Assessing Officer in his further report furnished vide letter dated 01.06.2010, on query raised by the Addl. CIT for making further verification, the AO submitted that there are multiple / overlapping entries found in the seized material at page No. 22 of A/RSR/l, page No. 60 of A/RSR/6 and page No. 52 & 56 of A/RSR/l1. The assessee has submitted that the property was purchased for total consideration of Rs. 18,00,000/- vide sale deed dated 24.12.2003. He further noted that the assessee further stated that the total payment of Rs. 19,08,100/- was reflected in the cash flow statement which includes the registration charges. In that report, he further mentioned that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involvement of Rs. 1 lakhs which was collected from prospective buyers and paid to the transferor. 57.1 Brief facts of the issue are that before the CIT(A), the assessee has objected to the addition of Rs. 4,00,000/- made in the assessment. As noted by the Assessing Officer, as per seized document A/RSR/PO(1)/3 page-103, there was payment of Rs. 4,00,000/- made by the assessee towards certain transaction. Vide query No. 8 of his said questionnaire dated 07.12.2007, he has asked the assessee to explain regarding such payment and further clarify how the same was recorded by him. However, stating that the assessee has not filed any reply to such query, he has added the said amount to the income of the assessee. 57.2 The AR submitted that the addition relates to transfer of flat no.l06, Airlines Apartment, Begumpet, by one Sri Govind Rao. That flat belonged to him i.e. Govind Rao. In that transaction, the assessee acted as a mediator. In the first instance, Rs. 1,00,000/- was paid to the flat owner, after the same was collected from one Sri Sadashiv Bhatt, the prospective buyer. It was stated that the balance amount was not paid as is apparent from that seized document. The same only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document No. 75/2005 dated 20.01.2005. He further noted that the sale price offered to his son Sri R. Shiva Kumar is about Rs. 6000 per sq. yd. At that rate the price of those pieces of lands measuring 56.88 sq. yds and 106.66 sq. yds, works out to Rs. 9,81,240/- He further noted that as per seized document vide Annexure A/RSR/PO-l/l page-71, the assessee has obtained sale agreement- cum- general power of attorney from Sri Parameshwarn on 30.11.2004 in respect of said land for an amount of Rs. 16,00,000/- i.e., at an average rate of Rs. 2,294 per sq. yd. Referring to those seized documents, vide query No. 4 of his said questionnaire, he has asked the assessee to explain as to why the profit arising from sale of such lands measuring 163.54 sq. yds, should not be taxed in his hands. However, stating that the assessee has not filed any reply to such query, he has added an amount of Rs. 6,06,080/- towards profit on account of sale of such lands in the hands of the assessee . 58.2 The learned AR submitted that such addition has been made based on the notings in the seized document A/RSR/P0-1/2 page No. 40 to 46 and page 18 to 24. It was submitted that the assessee purchased the land ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied on the orders of the lower authorities. 58.4 We have heard both the parties and perused the material on record. The contention of the assessee's counsel is that adoption of fair market value (FMV) of 163.54 sq. yards at Rs. 6,06,080 is not correct and there is no enabling provision to adopt a notional value for working out the profit. According to him if we adopt the cost of proportionate area of land to work out the profit or loss relating to the property sold, it results in loss only. Being so, there cannot be any addition on this account. We find merit in the argument of the assessee's counsel. The Assessing Officer adopted the value for determining the gain on the basis of value mentioned in the unsigned agreement. In our opinion, as held in earlier paras unsigned document cannot be a basis for determining the addition. Accordingly, we are inclined to delete the addition as the impugned addition is not based on any signed document. This ground is allowed. 59. The next ground in ITA No. 643/Hyd/2011 is with regard to sustaining addition of Rs. 89.99 lakhs being sale proceeds of agricultural land which is not capital asset. This issue is already considered by us in earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer could have enforced collection of necessary evidence regarding the loan transaction from the payer by invoking of the provisions of section 131 of the IT Act. In fact on the face of evidences filed by the assessee this was the only course available to the Assessing Officer before making any adverse comment. The addition is, therefore, liable for deletion. 60.5 The DR submitted that the assessee failed to submit any confirmation letter in respect of the alleged loan of Rs. 20 lakhs and the addition has to be sustained. 60.6 We have heard both the parties and perused the material on record. During the course of assessment proceedings the Assessing Officer required the assessee to furnish the confirmation letter from M/s. Badam Finance & Leasing. However, the assessee failed to produce the confirmation letter. Being so, in our opinion in the interest of justice, it is appropriate to remit the matter to the file of the Assessing Officer with the direction to the assessee to produce the confirmation from M/s. Badam Finance & leasing to prove the genuineness of the transaction. Accordingly, the issue is remitted back to the file of the Assessing Officer for fresh con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during F.Y 2001-02, Rs. 56.50 lakhs paid during F.Y 2002-03 and of Rs. 20 lakhs paid during F.Y 2003-04, has been taken into account in the cash flow statements filed before the DDIT(Inv) for different financial years and consequential deficit has been offered to tax in respective years, it was submitted that no addition should be made on above account in this case. Referring to the cash flow statement pertaining to the F.Y 2002-03 filed before DDIT(Inv), wherein such investment in the above property has been reflected and the resultant cash deficit has been offered to tax, the assessee requested that accepting such statement, the present addition made on that account may be deleted. 61.3 The DR relied on the order of the Assessing Officer. 61.4 We have heard both the parties and perused the material on record. The Assessing Officer in the Remand Report submitted to the CIT(A) stated that the above payment was duly reflected in the Cash Flow Statement filed before the DDIT (Inv.). On the basis of the Remand Report the CIT(A) deleted the addition as this investment is duly reflected in the Cash Flow Statement. More so, whatever, the deficit in the Cash Flow Statement was duly off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was stated that the AO has made such addition of Rs. 20,00,000/- as advance paid by the assessee, not accounted for in the cash flow statement, on account of purchase of said property at Tadbun, Secunderabad. He submitted that such amount was added since the assessee has declared that investment in the original cash flow statement filed before the DDIT (Inv), but subsequently, retracted from such stand in the return of income filed by him for this assessment year in response to notice 153A of the Act. Stating that the entire payment of Rs. 143.96 lakhs, comprising of sum of Rs. 49.97 lakhs paid during F.Y 2000-01, Rs. 17.49 lakhs paid during F.Y 2001-02, Rs. 56.50 lakhs paid during F.Y 2002-03 and of Rs. 20 lakhs paid during F.Y 2003-04, has been taken into account in the cash flow statements filed before the DDIT(Inv) for different financial years and consequential cash deficit has been offered to tax in respective years, he submitted that no addition should be made on above account in this case. Referring to the cash flow statement for the F.Y 2003-04 filed before DDIT(Inv), wherein such investment of Rs. 20,00,000/- in the above property has been reflected and stating that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inv.) and the same has been confirmed by the Assessing Officer in the Remand Report. Since the deficit arising out of the Cash Flow Statement amount to Rs. 6,57,217 has been offered to tax no separate addition is called for on account of investment in the flat. This amount was added thrice, once under the head unaccounted payment of Rs 10,00,000 to Sunil Reddy, for the second time including in the unaccounted payment or Rs. 24,50,000 to Sunil Reddy and for the third time unaccounted payment for purchase of flat of Rs. 9,00,000. Therefore, no addition should be made repeatedly. Further, since the investment is only Rs. 18,00,000 which has been reflected in the cash flow statement, no further addition is to be made. It may be relevant to mention here that Mr. Sunil Reddy has confirmed that he has only received Rs. 18 lakhs on account of the sale of flat. This confirmation letter was filed along with the additional evidence. As regards Rs. 6,50,000, this relates to a proposal to purchase a plot at Tirumalaghery. This proposal did not materialise and therefore, no addition should be made in this regard. No further evidence was found that the assessee had paid Rs. 6,50,000 in this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt represented an advance paid to different persons for purchase of 3006 sq. yards of land at Tirumalghery. This amount of Rs. 14,89,925 has been taken into account in the original Cash Flow Statement filed before DDIT (Inv.) and the resultant deficit has been offered to tax. This was shifted to HUF account in the second Cash Flow Statement filed in response to notice under section 153A. Since the assessee do not wish to press for the claim of HUF, the original Cash Flow Statement may be taken as the basis for working out the undisclosed income in such an event no addition is called for. This is a double addition. An amount of Rs. 13,25,000 was already added as explained. 66.2 We have heard both the parties and perused the material on record. This addition was deleted on the basis of Remand Report furnished by the Assessing Officer during the first appellate proceedings that this transaction was reflected in the original Cash Flow Statement furnished before the DDIT (Inv.). Being so, the deletion is confirmed. This ground is rejected. 67. The next ground in ITA No. 828/Hyd/2011 is with regard to deletion of Rs. 2.60 lakhs towards purchase of land at Rayadurga. 67.1 Brief facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issue. This ground of the Revenue is dismissed. 69. The first ground in ITA No. 829/Hyd/2011 is with regard to deletion of Rs. 1,84,000 though it is explained by the assessee. 69.1 We have heard both the parties on this issue. This addition was made without any discussion by the Assessing Officer. In the Remand Report by the Assessing Officer he stated that he has examined the Cash Flow Statement filed before the DDIT (Inv.) and as per the Cash Flow Statement there was availability of cash of Rs. 10,00,683. Being so, it is to be believed that the seized cash of Rs. 1,84,000 is out of the cash reflected in the Cash Flow Statement. Accordingly, deletion of addition is justified. This ground is dismissed. 70. The next ground is with regard to deletion of addition of Rs. 4,45,916 towards unexplained jewellery seized during the course of the search action. 70.1 The DR relied on the order of the Assessing Officer. 70.2 The AR submitted that gold ornaments weighing 608.08 grams valued at Rs. 4,45,916 were found in course of search. It was explained that the same belonged to the assessee, his wife and three daughters-in-law. The authorised officer was satisfied about the extent of j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 72.2 We have heard both the parties on this issue. As discussed in the earlier para, this amount was deleted on the basis of reflection of this amount in the Cash Flow Statement filed before the DDIT (Inv.). Accordingly, deletion is justified. This ground is rejected. 73. The next ground is with regard to deletion of Rs. 10 lakhs. 73.1 As regards this addition of Rs. 10,00,000 the same relates to investment in the rented building as per the observation of the Assessing Officer. In this regard detailed explanation is filed in the submission for assessment year 2002-03 as the same amount was also added as unexplained expenditure in the assessment for assessment year 2002-03. Hence the question of further addition does not arise. 73.2 We have heard both the parties and perused the material on record. This addition was deleted on the basis of Remand Report that this amount is already added in A.Y. 2002-03 and sustaining the addition will amount to double addition. Accordingly, the deletion is justified. This ground is dismissed. 74. The last ground in ITA No. 829/Hyd/2011 is with regard to deletion of Rs. 15 lakhs advance paid to Rajan Deshpandey. 74.1 As regards the addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown agricultural income of Rs. 7,54,000/-. In the receipt and payment account for the year ending 31.03.2000, filed with the said return, the assessee has shown opening balance at Rs. 37,30,000/- and the said amount towards agricultural income. However, during the assessment proceedings, referring to the said search carried out in the case of Sri Rao Subba Rao on 29.12.2006, the AO noted that such return filed in the status of HUF is nothing but an after-thought with the intention to defraud the department by evasion of taxes. However, he further noted that without prejudice to the same, the agricultural income claimed by the assessee in the hands of the HUF is bogus and fictitious in nature. He mentioned that there was no trace of any evidence during search to suggest generation of agricultural income in the hands of HUF. With these observations and after discussing the facts of the case in detail, he held that the claim of the assessee regarding taking land on lease and generation of income there from is false. He thus rejected the claim of the assessee for deriving agricultural income and taxed the said amount shown at Rs. 7,54,000/-, treating the same as income from other sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. Further, in the receipt and payment account filed with the return for the Asst. Year 2001-02, the assessee has shown receipt of Rs. 1,16,500/- as advance from Gautami Constructions. He has shown further credits of Rs. 1,00,000, Rs. 25,000/-, Rs, 2,00,000 and Rs. 6,00,000 in the names of K. Srilakshmi, P. Someshwar Rao, R. Ravi Kumar and R. Shiva Kumar respectively. However, as during the assessment proceedings the assessee failed to produce any evidence in support of such credits, the AO added the said amounts, aggregating to Rs. 10,41,500/-, to the income of the assessee treating the same as unexplained cash credits. With these two additions he completed the assessment for the Asst. Year 2001-02 on a total income of Rs. 20,81,500/-. 77.2 Further, for the Asst. Year 2002-03, in the receipts and payments account the assessee has shown various amounts shown as received from different persons and other sources. Those six amounts received from four different persons and towards advance against certain properties, are referred to by the AO in para-4 of the assessment order. However, during the assessment proceedings, the assessee failed to establish genuineness of such transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO completed tile assessment for the Asst. Year 2005-06 on a total income of Rs. 53,4 7,000/-. 77.6 Further, in the return filed for Asst. Year 2006-07, the assessee has shown receipts of various amounts in the receipts and payments account filed with the return. Those thirteen amounts received from different persons and various sources are referred to by the AO at para 4 of the assessment order. However, since during the assessment proceedings the assessee failed to establish genuineness of such transactions, the AO added the said amounts aggregating to Rs. 1,38,17,700/-, to the income of the assessee, treating the same as unexplained cash credits. Further, as noted by the AO during the previous year 2005-06 the assessee has carried on real estate business. He further noted that assessee has sold certain lands to Chalapati Estates Pvt. Ltd. As regards, expenses claimed by the assessee are concerned, the AO noted that since he could not furnish any evidence for the same, such claim cannot be allowed. Accordingly, he disallowed the claim of the expenditure. He further mentioned that, as per the evidence collected, the purchase cost of such land is Rs. 18,000/- per acre. He thus rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Jute Corporation of India Ltd. v. CIT 187 ITR 688 SC, CIT v. Nirbheram Deluram 224 ITR 611 SC and National Thermal Power Corporation v. CIT 229 ITR 383 SC. It is humbly requested that the additional ground filed by the appellant may kindly be admitted for adjudication of the appeal." 77.10 The DR has not opposed for admission of additional grounds. 77.11 Considering the legal issue involved and the plea of the assessee that the assessee is prevented by sufficient cause in not raising these additional grounds before the lower authorities and the ground being legal ground, we are inclined to admit the same to decide it on merit. Further during the course of argument, the learned AR not pressed the first additional ground with regard to assumption of jurisdiction by the Assessing Officer suo moto without the case of the assessee being centralised with him u/s. 127 of the Act. This ground is dismissed as not pressed. 77.12 Regarding the issue of notice u/s. 153C of the Act without recording satisfaction which is condition precedent for issuing notice before assumption of jurisdiction, the learned AR submitted that the CIT(A) should have appreciated that no incriminati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch investigation in the hands of Individual and also by the Assessing officer in course of assessment proceeding and undisclosed income resulting from these seized papers were considered in the assessment of the Individual leaving no room for any further addition in the hands of HUF. There was no claim of HUF either arising out of any oral evidence or documentary evidence found in course of search. In such circumstances there could be no undisclosed income in the hands of any entity, particularly HUF. 77.17 The AR submitted that CIT(A) should have appreciated the salutatory principle that the Income-tax is a levy on income. The substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a "hypothetical income", which does not materialise. Where the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. ( CIT v Shoorji Vallabdas & Co. 1962, 46 ITR 144, 148 SC). As explained, the shifting of some transactions to HUF hand necessitated crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. " He might have done it under the advice of some 'income-tax expert'. The assessee cannot be tied down to an inadvisably made wrong statement. In the circumstances, we delete the addition. " 78.3 He placed reliance on the judgement in the case of Bharat General RE-Insurance Co. Ltd 81 ITR 303 Delhi, it has been held that:"It is true that the assessee itself had included that dividend income in its return for the year in question but there is no estoppel in the IT Act and the assessee having itself challenged the validity of taxing the dividend during the year of assessment in question it must be taken that it had realized from the position which it had wrongly taken while filing the return." 78.4 According to the AR tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. The Hon'ble Court referred to an unreported decision in case of Vinay Chandulal Satia v. N.D. Parekh, CIT [Spl. Civil Application No. 622 of 1981 dated 20-8- 1981], and referred to the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 on 29-12-2006. These returns were regularized by the Assessing officer by issuing notice under section 153C on 04- 10-2007. ii) It is submitted that for assumption of jurisdiction under section 153C, the condition precedent is recording of satisfaction regarding the belongingness of money, bullion jewellery or documents seized in course of search of another assessee. This is the threshold requirement for issuance of a notice. In the case of the assessee, the only document available with the Assessing officer on the date of issuance of notice under section 153C is the return voluntarily filed. This return cannot be treated as a document belonging to the assessee found in course of search in the premises of Rao Suba Rao (Ind). That recording of satisfaction is primary requirement for invoking provisions of 153C is no more res integra. This view supported by the following decisions:- a) SSP Aviation Ltd v DCIT (207 Taxman 260) (Delhi) b) ACIT v MN Rajaraman (5 ITR (Trib) 261) (Chennai) c) Vijay Bhai N Chandrani v ACIT (333 ITR 436) (Guj) d) ACIT v. Gambhir Silk Mills 6 ITR (Trib) 376 (Ahd) e) Sinhgad Technical Educational Society v ACIT (16 Taxmann.com 101) (Pune) f) P Sathy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be quashed. Even otherwise, on merits all the additions are liable to be deleted for the simple reason that all the incriminating materials were considered and assessed in individual hands leaving no room for further addition in the light of AO's own observation that the HUF was created and agricultural income shown were bogus. The AR relied on the following judgements: a) SSP Aviation Ltd v DCIT (346 ITR 177) (Delhi) b) CIT v. Late J. Chandrasekar (HUF) 338 ITR 61 (Mad.) c) ACIT v. M.N. Rajaraman (5 ITR (Trib) 261) (Chennai) 78.14 Thus, the learned AR submitted that recording of satisfaction is a pre-requisite to issue notice u/s. 153C of the Act which is not done in this case. Being so, the assessment is bad in law. 78.15 On the other hand, the DR submitted that the return of income filed by the assessee voluntarily after the issue of notice u/s. 153C. Filing of return of income voluntarily by the assessee itself constitutes as recording of satisfaction u/s. 153C of the Act. According to him, the ratio of judgement in the case of SSP Aviation Ltd. v. DCIT (supra) is not applicable. He relied on the judgement of Supreme Court in the case of CIT v. Shelly Products & Anr. (26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a person other than the searched person. There is no requirement in Section 153C(1) that the Assessing Officer should also be satisfied that such valuable articles or books of account or documents belonging to the other person must be shown to show to conclusively reflect or disclose any undisclosed income. 78.18 Further section 153A enables the Revenue authorities to investigate into the contents of the document seized which belong to a person other than the person searched so that it can be ascertained that whether the transaction or income embedded in the seized document has been accounted for in the case of the assessee other than the searched party. It is aimed at ensuring that income does not escape assessment in the hands of any other person merely because he has not been searched u/s. 132 of the Act. The Assessing Officer on reaching satisfaction that the document relate to a person other than the searched person forward the document to the Assessing Officer having jurisdiction over the other person and thereafter it is for the Assessing Officer having jurisdiction over the other person to follow the procedure prescribed by section 153A and to see whether the income re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voking the provisions of section 158BD, thus, are required to be satisfied before the provisions of the said Chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under section 132A of the Act. 78.22 In the present case, the assessee filed returns of income for all the assessment years on 29.12.2006 before issue of notice and the Assessing Officer never recorded satisfaction before issuing the notice. Notice u/s. 153C was issued on 4.10.2007. Nothing was brought on record to show that the Assessing Officer recorded satisfaction before issuing notice u/s. 153C of the Act. The only plea of the DR is that the assessee itself filed returns voluntarily and filed an affidavit on 28.12.2007 in support of HUF status and also filed a letter on 26.12.2007 stating that the returns filed on 29.12.2006 are to be treated as returns filed in response to the notice u/s. 153C of the Act. In our opinion, there is clear non- fulfilment of conditions laid down in section 153C of the Act as there is no recording of satisfaction by the Assessing Officer that undisclosed income belongs to any person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed 26. 40/Hyd/2011 Dismissed 27. 41/Hyd/2011 Dismissed 28. 42/Hyd/2011 Dismissed M/s. Gautami Constructions - Assessee appeals 29. 144/Hyd/2011 Allowed 30. 145/Hyd/2011 Partly allowed 31. 146/Hyd/2011 Partly allowed 32. 147/Hyd/2011 Partly allowed 33. 148/Hyd/2011 Allowed 34. 149/Hyd/2011 Partly allowed M/s. Gautami Constructions - Revenue appeals 35. 170/Hyd/2011 Dismissed 36. 171/Hyd/2011 Dismissed 37. 173/Hyd/2011 Dismissed 38. 172/Hyd/2011 Dismissed Rao Subba Rao (Ind) - Assessee appeals 39. 638/Hyd/2011 Dismissed 40. 639/Hyd/2011 Partly allowed 41. 640/Hyd/2011 Partly allowed 42. 641/Hyd/2011 Partly allowed 43. 642/Hyd/2011 Partly allowed for statistical purposes 44. 643/Hyd/2011 Partly allowed for statistical purposes 45. 644/Hyd/2011 Partly allowed Rao Subba Rao (Ind) - Revenue appeals 46. 826/Hyd/2011 Dismissed 47. 827/Hyd/2011 Dismissed 48. 828/Hyd/2011 Dismissed 49. 829/Hyd/2011 Dismissed Rao Subba Rao (HUF) -Assessee appeals 50. 787/Hyd/2011 Allowed 51. 788/Hyd/2011 Allowed 52. 789/Hyd/2011 Allowed 53. 790/Hyd/2011 Allowed 54. 791/Hyd/2011 Allowed 55. 792/Hyd/2011 Allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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