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TMI Blog2014 (1) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... are not applicable as the warrant was not issued in the name of Shri M.P.B. Kutumba Rao - If the Assessing Officer wanted to make assessment in the case of the assessee, he should have done u/s 153C of the IT Act - Decided against Revenue. Estimation of income u/s 44AD - Held that:- Following M/s C. Eswara Reddy & Co [2011 (1) TMI 1238 - ITAT HYDERABAD] - The assessee has taken contracts from Nagarjuna Construction Company, which, in turn, has taken the main contract from the Government - The estimation of 5% net profit on gross receipts as held by the Tribunal is justified - As per the provision of section 44AD as applicable for the assessment year under consideration and the provisions which are applicable with effect from 1.4.2011 - The deduction available u/s 30 to 38 shall be deemed to have been already given full effect and no further deduction under those sections shall be allowed - No further deduction shall be allowed for depreciation - Partly allowed in favour of assessee. Interest deduction u/s 24 - Held that:- The assessee has furnished certificate given by Oriental Bank of Commerce dated 22/09/2008 regarding the details of payment of housing loan for FY 2007-08 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 'total income' of the assessee in contradistinction to the assessment of 'undisclosed income' as per section 158BB that existed hitherto. 3. The CIT(A) erred in deleting the addition made by the Assessing Officer, on the ground that since section 153A required the assessment or reassessment of total income which is defined in section 2(45) to be read with section 5 of the IT Act, a strict construction of the taxing statute is necessary. 4. The CIT(A) erred in deleting the addition made by the Assessing Officer having failed to appreciate that the operation of section 153A is distinct and separate from section 147 r.w.s. 148 and that assessment made u/s 153A is not merely a change of opinion of the Assessing Officer." 4. Briefly the facts of the case are that there was a search and seizure operation at the residential premises of the assessee on 19/02/2008. Consequent to the search action, notice u/s 153A of the IT Act was issued and in response to which the assessee filed the return of income for the AY 2002- 03 to 2007-08. The income returned by the assessee for the assessment years under appeal and the income assessed by the Assessing Officer, are as follows: AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common in all the appeals: "1. The CIT(A) erred in deleting addition made by the Assessing Officer, without going into the merit of the additions made on the ground that no addition can be made u/s 153A unless the addition so made is supported by any seized material. 2. The CIT(A) erred in deleting the addition made by the Assessing Officer by failing to appreciate the law and fact that provision of section 153A requires assessment or reassessment of the 'total income' of the assessee in contradistinction to the assessment of 'undisclosed income' as per section 158BB that existed hitherto. 3. The CIT(A) erred in deleting the addition made by the Assessing Officer, on the ground that since section 153A required the assessment or reassessment of 'total income' which is defined in section 2(45) to be read with section 5 of the Income Tax Act, a strict construction of the taxing statute is necessary. 4. The CIT(A) erred in deleting the addition made by the Assessing Officer having failed to appreciate that the operation of section 153A is distinct and separate from section 147 r.w.s. 148 and that assessment made u/s 153A is not merely a change of opinion." 8. The assessee al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to this effect the assessee has not taken a ground in the grounds of appeal filed that the order u/s 153A is not valid. Accordingly, he submitted that there is no valid warrant in the name of the assessee and in this connection he invited our attention to the Form No. 45, which is Warrant of Authorisation under section 132 of the IT Act, 1961 and Rule 112(1) of the Income-tax Rules, 1962. 11. The learned counsel submitted that the contents in the Warrant of Authorisation clearly mentioned that the search warrant was issued in the name of M/s Lahari Constructions and M/s Lahari Infrastructure Ltd and Others and the place mentioned therein as Plot No. 244, Phase-III, Road No. 78, Jubilee Hills, Hyderabad. He, therefore, contended that there is no valid warrant in the name of the assessee and the assessment cannot be framed in the case of the assessee u/s 153A of the Act rather it should be u/s 153C of the IT Act. 12. Further, the learned counsel submitted that there was no seized material found in the course of search relating to these assessment years and the Assessing Officer did not bring any material on record to make the additions and without pointing out any specific se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional ground raised by the assessee for adjudication. 15. In this case, admittedly the CIT(A) deleted the additions for the assessment years 2002-03 to 2005-06 on the ground that the additions made by the Assessing Officer are not on the basis of any seized material. However, before us, the assessee has raised additional ground stating that the framing of assessment u/s 153A is bad in law as there is no valid search warrant in the name of the assessee. The learned DR tried to impress upon us that warrant u/s 132 was issued jointly in the name of M/s Lahari Constructions, M/s Lahari Infrastructure Ltd and Others and Mr. M.P.B. Kutumba Rao, the assessee. In this connection, we refer to the operative portion of Warrant of Authorisation issued u/s 132, which is as under: "FORM NO. 45 (SEE RULE 112) WARRANT OF AUTHORISATION UNDER SECTION 132 OF THE INCOME-TAX ACT, 1961 AND RULE 112(1) OF THE INCOME-TAX RULES, 1962 To, The Additional Director of Income-tax (Investigation) (Sri Suresh Battini) The Deputy Director of Income-tax (Investigation) (Sri M. Raja Sekhar) The Deputy Commissioner of Income-tax (Sri P.V. Pradeep Kumar) The Asst. Director of Income-tax (Investig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hills, Hyderabad. 17. In order to answer the question raised in the instant appeal, it would be appropriate to deal with the provisions of s.132(1)(c) and other connected provisions. The relevant provisions of s. 132(1)(c) are reproduced as under : "Sec. 132. (1) Where the Director General or Director or the Chief CIT or CIT or any such Jt. Director or Jt. CIT as may be empowered in this behalf by the Board, in consequence of information in his possession, has reason to believe that-- (a) ............... (b) ............... (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian IT Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), then,-- (A) the Director General or Director or the Chief CIT or CIT, as the case may be, may authorise any Jt. Director, Jt. CIT, Asstt. Director or Dy. Director, Asstt. CIT or Dy. CIT or ITO, or (B) such Jt. Director or Jt. CIT, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under cl. (iii)." 18. On perusal of the provisions of s. 132(1)(c), it reflects that the officer empowered by the Board has reason to believe that "any person" who is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing representing wholly or partly income or property, which has not been or would not be disclosed under the IT Act, 1961, then, authorities, referred in cl. (A) of s. 132(1)(c), authorizes the authorities referred to in cl. (B) of s. 132(1)(c) to enter the premises and search any building, place, vessel, vehicle or aircraft and also seize any such books of account, other documents, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate "all" or "every" as well as "some" or "one" and its meaning in a given statute depends upon the context and the subject-matter of the statute. It is often synonymous with "either", "every" or "all". Its generality may be restricted by the context. 21. Now, let us consider a few particular cases when the General Clauses Act would assist in the interpretation of the IT Act, 1961. The word "person" as defined under s. 2(31) of the IT Act, 1961 includes-- "(i) an individual, (ii) an HUF, (iii) a company, (iv) a firm, (v) an AOP or a BOI, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses; Explanation--For the purposes of this clause, an AOP or a BOI or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains." 21.1 This is an inclusive definition which is much beyond the scope of person as defined in s. 2(42) of the General Clauses Act, 1897 which merely states that "person" shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or group of people. According to Aristotle's Politics I, it is the characteristic of man that he alone has any sense of good and evil, or just and unjust, and the association of living beings who have this sense make a family and a State. The word "family" always signifies a group. Plurality of persons is an essential attribute of a family. A single person, male or female, does not constitute a family. He or she would remain, what is inherent in the very nature of things, an individual, a lonely wayfarer till per chance he or she finds a mate. A family consisting of a single individual is a contradiction in terms. Sec. 2(31) of the 1961 Act treats an HUF as an entity distinct and different from an individual and it would be wrong not to keep that difference in view--C. Krishna Prasad vs. CIT, 97 ITR 493 (SC). 26. "Firm' is a collective noun, a compendious expression to designate an entity, not a person. In IT law a firm is a unit of assessment by special provisions but is not a full person-- CIT vs. R.M. Chidambaram Pillai (1977) 106 ITR 292 (SC). 27. The word "associate" means, according to the Oxford Dictionary, "to join in common purpose or to join in an action". Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1977) 106 ITR 111 (AP). 32. Joining together by the members of the association for the purpose of producing income is a pre-requisite for formation of an AOP. Such coming together or combining is a consensual act and depends upon the volition of the parties. Merely because certain persons are constituted joint owners, such as by inheriting the property of a person on his death, they do not become an AOP, for, in that event, the jointness is the result of operation of law and not of volition of parties-- CIT vs. T.V. Suresh Chandran (1980) 121 ITR 985 (Ker). 33. The expression "BOI" should receive a wide interpretation, perhaps not wide enough to include a combination of individuals who merely receive income jointly without anything further as in the case of co-heirs inheriting shares or securities, but certainly wide enough to include a combination of individuals who have a unity of interest but who are not actuated by a common design, and one or more of whose members produce or help to produce income for the benefit of all--Deccan Wine General Stores vs. CIT (supra). 34. The BOI with which the IT Act is concerned must be carrying on an activity with a view to earn income b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rought them together and irrespective of the activities which they carry on. 38. It is clear that if the first meaning were to be adopted, that would be the narrowest meaning and adoption of that meaning would mean attributing tautology( a repetition of the same meaning in different words) to the legislature and there would be no difference between an "AOP" and a "BOI". Acceptance of the meaning would mean that the legislature had used the words "BOI" in vain to describe one and the same group of individuals. On the other hand, if the third meaning is accepted, then the principle of noscitur a sociis(that the meaning of a word may be known from accompanying words) would be lost sight of. Though the principle of ejusdem generis cannot be applied to the definition of the word "person" occurring in s. 2(31), since there is no specific genus to which an individual, an HUF, a company, a firm or an AOP can be said to belong, the principle of noscitur a sociis can certainly apply in the facts of this case. The BOI with which the IT Act is concerned must be carrying on an activity with a view to earn income because it is only with such a BOI that the IT Act is concerned and again the wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Lahari Constructions and M/s Lahari Infrastructure Ltd. and Others and not in the name of present Assessee and that too by invoking provisions of section 153A of the Act. Search cases arise on the basis of warrant of authorisation u/s 132 of the IT Act in pursuance thereof search is carried out in the case of M/s Lahari Constructions and M/s Lahari Infrastructure Ltd. and Others and the search warrant is not belonging to Shri M.P.B. Kutumba Rao, the assessee. In our opinion, in this case, the provisions of section 153A are not applicable as the warrant was not issued in the name of Shri M.P.B. Kutumba Rao. Therefore, assessment framed u/s 153A is not valid and if the Assessing Officer wanted to make assessment in the case of the assessee, he should have done u/s 153C of the IT Act and it is not u/s 153A of the IT Act. As the Assessing Officer has not framed the assessment u/s 153C, the assessment framed u/s 153A individually in the case of Shri M.P.B. Kutumba Rao, is bad in law. In the case of Sikshsa 'O' Anusandhan Vs. CIT, on which reliance placed by the learned counsel, the Hon'ble Court held that "In the absence of warrant in the name of an assessee the search conducted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, directed the Assessing Officer to examine the sum of Rs. 15 lakhs received through bank transfer and delete the addition if it is found genuine. On the other hand, if the amount so received through bank transfer, as claimed, is not supported by any documentary evidence, the same may be assessed as unexplained income of the assessee in the AY 2007-08 and deleted the addition of Rs. 39 lakhs made in the AY 2008-09, if on verification found that no such entry appearing in the books or in the bank account of the assessee. 46. At the time of hearing before us, the learned counsel for the assessee has not pressed this ground, therefore, the same is dismissed as not pressed. 47. Ground No. 3 is as follows: "The learned CIT(A) erred in holding that the income of the appellant be estimated at 8% of the gross bills of Rs. 10,56,80,698/-. The learned CIT(A) ought to have allowed the ground of the appellant, particularly when the Assessing Officer did not reject the books of account and when the Assessing Officer resorted to disallowance of expenditure." 48. During the year under consideration, the assessee had debited to the P L Account the following major expenditure under various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bench held as follows: "13. We have carefully gone through the provisions of section 44AD of the Act. Now doubt this provision is applicable for those cases where the turnover/total contract receipt does not exceedRs.40 lakhs. However, by Finance (No.2) Act of 2009 with effect from 1.4.2011 the Legislature removed the restriction of the total contract receipts of Rs.40 lakhs. By taking a clue from the provision of section 44AD as is applicable for the assessment year under consideration and the provisions which are applicable with effect from 1.4.2011, we find that the deduction available u/ss. 30 to 38 shall be deemed to have been already given full effect and no further deduction under those sections shall be allowed. Depreciation is allowable u/s. 32 of the Income-tax Act. Therefore, as provided in section 44AD no further/separate deduction shall be allowed. In view of the above, in our opinion, the claim of depreciation on the estimated income is not justified. Therefore, the lower authorities have rightly rejected the same." 53. The assessee pleaded before us that the assessee has taken contracts from Nagarjuna Construction Company, which, in turn, has taken the main con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, we direct the Assessing Officer to allow assessee's claim of deduction towards interest on housing loan. Thus, this ground of appeal of assessee is allowed. 57. Ground No. 5 is as follows: "The learned CIT(A) erred in holding that the part of the amount received on sale of lands aggregating to Rs. 50,30,000/- is assessable as income from other sources. The learned CIT(A) failed to see that the entire amount was received as a consideration on sale of capital assets and the source of receipts is known." 58. During the year under consideration, the total amount disclosed by the assessee on sale of land is t Rs. 50,30,000/-. When asked to submit the details of the lands sold, the assessee did not submit the required documents and contended that land of 2.08 acres and 0.10 acres were sold on 31/07/2007 and 01/08/2007 to Swapna Lahari Films Pvt. Ltd and Lahari Infrastructure Ltd. respective and received consideration of Rs. 2,85,000/- and Rs. 1,75,000/- respectively. Further contended that on 03/08/2007 a sum of Rs. 15,40,000/- was received from M/s Swapna Lahari Films Pvt. Ltd. and further sum of Rs. 30,30,000/- was also received on 30/09/2007 from Swapna Lahari Films Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 of the paper book and another copy of sale deed executed by M. Rupesh (Assessee's son) on 30/09/2009 in favour of Swapna Lahari Films Pvt. Ltd., which is placed at pages 222 to 227 of the paper book. It was submitted that the entire amount is received on sale of agricultural property, which is situated in Patigunpur village near Patancheruvu, Medak District and the assessee having been carried out agricultural operations since long time and declaring agricultural income from AY 1997-98 onwards. Further, it was submitted that assessee's agricultural income has been accepted by the Department u/s 143(3) of the Act in earlier years and the land is not at all situated in the municipality and the Patigunpur Village is not notified by the Central Government u/s 2(14)(iii)(b) of the Act. Therefore, the land situated beyond the municipality limits of Hyderabad and the land sold as agricultural land and on acrege. It is submitted that in the sale deed also it is mentioned as sale of agricultural land only and the sale is also on acrege basis, which is also evident from the MRO records as the property is agricultural land. He, therefore, contended that the judgment of the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istinct sources, namely from sale of agricultural land and, thus, it is to be treated as income from sale of agricultural land and to be considered accordingly. It will not be permissible to estimate the income from any other sources as deposit in the bank account having direct nexus with the sale of agricultural property. The reliance placed by the learned AR on the decision of Allahabad High Court in the case of CIT Vs. Intezar Ali (supra) is directly applicable to the facts of the case and, therefore, we direct the Assessing Officer to treat the sale consideration received by the assessee only from the sale of agricultural property and decide the issue accordingly, unless any contrary evidence is brought on record by the Department. Accordingly, this ground of appeal is partly allowed. 64. In the result, this appeal of the assessee is partly allowed for statistical purposes. 65. To sum up, all the appeals of revenue being ITA Nos. 739, 740, 741 742/Hyd/10 are dismissed, the C.Os. raised by the assessee being Cos. 40, 41, 42, 43/Hyd/10 are allowed. Also, the appeals filed by the assessee for AY 2006- 07 and 2007-08 being ITA Nos. 1432 1433/Hyd/12 are allowed. The appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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