9911796707
TMI Blog2014 (10) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... on of ₹ 2,10,800 – Decided in favour of assessee. Addition treated as gifts – Held that:- The gifs consist of small amounts received from close relatives of the assessee - all the donors have furnished affidavits not only confirming the gifts but have also furnished their source of income from agriculture with supporting evidences like Pahani and certificate from the VRO - It cannot also be denied that assessee has shown gifts in the original return filed by him prior to the date of search - the addition made by observing that the creditworthiness of the donors have not been established appears to be merely on presumption and surmises - As the assessee has established the identity of the donors and their source of income as well as genuineness of transaction, which in any case has not been disputed by the CIT(A), addition of the gifts amounting to ₹ 1,99,227/- is not justified – Decided in favour of assessee. Addition towards unaccounted investment – Held that:- While the AO has added the amount in question with the remark that the assessee has not reflected them in the returns filed, the CIT(A) sustained part of the addition on the ground that though the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on from the assessee in that regard - These evidences have not been controverted by bringing any other evidence on record either by the AO or by the CIT(A) - seized document raises a presumption with regard to the authenticity of the contents thereof in terms of section 132(4A) of the Act - assessee can prove the contents of such document incorrect by producing necessary evidence - apart from unregistered sale agreement (not signed by the assessee) there are no other evidence corroborating the fact that the assessee has in fact purchased the land or has paid any consideration to the original land owners - the statement of the vendors before the departmental authorities, affidavits filed by the vendors and vendees, copies of the registered sale deeds on actual sale of the property clearly establish that the unregistered agreement of sale found during search was never acted upon, nor assessee paid any consideration to the vendors - no addition can be made at the hands of the assessee purely relying upon unregistered sale agreement when the fact remains that land was ultimately sold to some other persons by the original land owners - addition made at the hands of the assessee cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed by the assessee –the matter is to be remitted back to the AO for fresh consideration – Decided in favour of assessee. Amount of fictitious gifts deleted – Held that:- The AO has given absolutely no reason why he considers gifts to be unexplained inspite of the fact that the assessee has furnished confirmations/affidavits along with other details like land holding of the donors their source of income etc. - gifts are of small amounts of ₹ 30,000/- to ₹ 45,000/- from different donors and most of them are close relatives of the assessee - when the assessee has established the identity of the donors, their source of income and the donors have also confirmed of having gifted the amounts to the assessee, it is unreasonable on the part of the AO to ignore the evidences brought on record and make addition by treating the gifts as unexplained - the CIT(A) was justified in deleting the addition made by the AO – Decided against revenue. Unexplained investment in land – Held that:- CIT(A) rightly observed that the AO without properly verifying the facts has made the addition in a summary manner - the assessee has reflected the investment made in purchase of land in hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed hand it is not possible to sustain the addition – the order of the CIT(A) is upheld – Decided against revenue. - ITA No. 1450, 1451, 1452, 1453 & 1454/Hyd/2012 AY: 2003-04, 2004-05, 2006-07, 2007-08 & 2008-09 - - - Dated:- 16-5-2014 - SHRI B. RAMAKOTAIAH AND SHRI SAKTIJIT DEY, JJ. For the Assessee by :- Shri K.C. Devdas For the Revenue by :- Shri P. Soma Sekhar Reddy O R D E R PER BENCH : All these appeals filed by the assessee as well as the revenue are directed against different orders of the CIT(A)-VII, Hyderabad. Since identical issues are involved in these appeals, they were clubbed and heard together and, therefore, a common order is passed for the sake of convenience. ITA NO. 1462/HYD/2012 for AY 2002-03 2. The only dispute in the present appeal is in respect of addition of ₹ 2,10,800/- being sustained by the CIT(A). 3. Briefly the facts are, the assessee is an individual. A search and seizure operation was carried out in case of assessee u/s 132 of the Act on 23/01/2008. As a consequence of search and seizure operation, notice was issued u/s 153A of the Act calling upon the assessee to file a return of income. In response to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the name of such person could have been reflected as debtor as per the accounting norms. The CIT(A) wondered how investment made in the name of another person can be explained through the books of the assessee as his own investments. He, therefore, held that the revised accounts incorporating such receipts prepared after the date of search will not indicate the true and correct position and nature of the transaction as such transactions are recorded in the name of a third party. He further noted that there is no confirmation or affidavits furnished by the person in whose names such investments are made. He, therefore, sustained the addition of an amount of ₹ 76,500/- and ₹ 1,34,300/-totalling to ₹ 2,10,800/- out of total addition of ₹ 7,31,000/-. 6.1 So far as the addition of ₹ 2,30,601/- being gifts credited to capital account, the CIT(A) deleted the same. 7. Being aggrieved of the order passed by the CIT(A) sustaining the addition of ₹ 2,10,800/-, the assessee is in appeal before us. 8. The learned AR submitted before us that though the assessee had purchased the land in the name of one of his employee Shri S. Vijaya Kumar but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the return of income, there is no reason to consider the investment made as unexplained. Accordingly, we direct the Assessing Officer to delete the addition of ₹ 2,10,800/-. 11. In the result, appeal in ITA No. 1462/Hyd/2012 is allowed. ITA NO. 1463/H/2012 for AY 2003-04 12. The only dispute in this appeal is with regard to the action of the CIT(A) in sustaining the addition of ₹ 1,99,227/- representing gifts. 13. Briefly the facts are, during the assessment proceeding, the Assessing Officer noted that the assessee has shown an amount of ₹ 1,99,227/- as gift received. As seen from the assessment order, the Assessing Officer by observing that no details were furnished explaining the gifts, the amount was added to the income of the assessee. Being aggrieved of such addition, assessee preferred appeal before the CIT(A). 14. Before the CIT(A), it was contended by the assessee that the assessee has received the gifts on his marriage day celebration on 13/11/2003 from his close relatives. It was submitted that gifts were duly accounted for and were admitted in the original return of income filed. It was also submitted that the assessee had furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the materials on record. As can be seen from the facts recorded at para 5.3 of the order of the CIT(A), the gifs amounting to ₹ 1,99,227/- consist of small amounts received from close relatives of the assessee. It is also a fact that all the donors have furnished affidavits not only confirming the gifts but have also furnished their source of income from agriculture with supporting evidences like Pahani and certificate from the VRO. It cannot also be denied that assessee has shown gifts in the original return filed by him prior to the date of search. In such circumstances, the addition made by observing that the creditworthiness of the donors have not been established appears to be merely on presumption and surmises. As the assessee has established the identity of the donors and their source of income as well as genuineness of transaction, which in any case has not been disputed by the CIT(A), we are of the view that addition of the gifts amounting to ₹ 1,99,227/- is not justified. Accordingly, we direct the Assessing Officer to delete the same. 18.1. In the result, appeal in ITA No. 1463/Hyd/2012 is allowed. ITA NO. 1464/HYD/2012 for AY 2005-06 19. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicated by the assessee. He, therefore, was of the view that investments in the names of Shri Vijaya Kumar and D. Mahesh amounting to ₹ 7,76,500/- stands unexplained and addition to that extent is justified. However, so far as the amount of ₹ 4,28,500/- being investment made by K. Aruna Kumiar, the CIT(A) deleted the addition by accepting the submissions of the assessee. 23. The learned AR submitted before us that though the lands were purchased in the names of D. Mahesh and Vijaya Kumar, but, actually they were assessee s investments and accordingly have been duly recorded in the books of the assessee. The investments have also been reflected in the cash flow statement filed along with the return of income. It was submitted that the Assessing Officer without properly verifying the cash flow statements has added the amount by merely observing that the assessee has not reflected the investments in the return of income. In this context, the learned AR referred to the copies of the sale deed at page 23 of the paper book and also the ledger copy showing the investment. 24. The learned DR, on the other hand, supported the order of the CiT(A). 25. We have heard the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de and accordingly, he directed the Assessing Officer to restrict the disallowance to 10% of the expenditure debited to P L account. 28. The learned AR contesting the disallowance confirmed by the CIT()A) submitted that expenditures made are recorded in the books of account. It was submitted that books of account have been audited u/s 44AB. It was submitted that without pointing out any defects or deficiencies in the books of account or without rejecting book result, the Assessing Officer was not justified in making adhoc disallowance and the CIT(A) in sustaining a part of it. It was further contended by the learned AR that assessment in case of assessee being a search assessment adhoc disallowance cannot be made in absence of any incriminating material found as a result of search. In support of such allegation, the learned AR relied upon a number of decisions of Tribunal and the copies of which have been filed in the paper book. 29. The learned DR, on the other hand, submitted that as the expenditure claimed was not supported by genuine vouchers and supported by only self-made vouchers and since expenditures were incurred in cash, disallowance made was justified. 30. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 25,86,245/- in the P L A/c relating to M/s Gaja Lakshmi Gardens project. The Assessing Officer by observing that assessee could not produce any evidences and details of the expenditure incurred made disallowance of ₹ 8 lakhs out of the total expenditure. Similarly, the Assessing Officer noticed that the assessee has debited an expenditure of ₹ 17,45,246/- towards M/s Ganesh Gardens Project By making similar observation disallowed the amount of ₹ 5 lakhs out of the total expenditure claimed. The assessee challenged the disallowance made before the CIT(A). The CIT(A) as in AY 2005-06 directed the Assessing Officer to restrict the disallowance to 10%. Of total expenditure claimed. Being aggrieved the assessee is in appeal before us. 34. We have heard the parties and perused the orders of the revenue authorities as well as the relevant materials on record. Similar issue came up in ITA No. 1464/Hyd/2012 (supra). Following the reasoning therein at para 30 of the order we confirm the order of the CIT(A) on this issue by rejecting the ground raised by the assessee. 35. Ground No. 3 on the addition of ₹ 13,02,900 from M/s Viking Realtors was not pressed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Assessing Officer on such additional evidence. In the remand report, the Assessing Officer commented that the unregistered sale agreement dated 16/04/2005 though was signed only by the original land owners, but, they acknowledged that they have received an amount of ₹ 26,16,750/- on 15/04/2005 from the assessee out of the total sale consideration of ₹ 26,69,750/-. He further noted that seized document clearly mentioned that the owners of the property have committed that they would register the property whenever the buyer wants and in the name of the buyer or any other person as per the wish of the buyer. Therefore, subsequent sale of the property in the name of some other person is only an afterthought. 39. The CIT(A) after considering the remand report as well as the submissions of the assessee though accepted the fact that unregistered sale agreement was not signed by the assessee and also the fact that the property in question was subsequently sold to some other persons but he nevertheless came to hold that the assessee s claim that the unregistered sale agreement is a fake document cannot be accepted because full details relating to transactions are clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Original land owners in their affidavits have clearly stated that they have neither sold the property to the assessee nor received any consideration from the assessee in that regard. These evidences have not been controverted by bringing any other evidence on record either by the AO or by the CIT(A). Though, it may be a fact that seized document raises a presumption with regard to the authenticity of the contents thereof in terms of section 132(4A) of the Act, but, law is well settled that such presumption is rebuttable. The assessee can prove the contents of such document incorrect by producing necessary evidence. It is a fact on record that apart from unregistered sale agreement (not signed by the assessee) there are no other evidence corroborating the fact that the assessee has in fact purchased the land or has paid any consideration to the original land owners. On the contrary, the statement of the vendors before the departmental authorities, affidavits filed by the vendors and vendees, copies of the registered sale deeds on actual sale of the property clearly establish that the unregistered agreement of sale found during search was never acted upon, nor assessee paid any con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. It was submitted that the document is dated 19/12/2006 i.e. prior to the date of search and if the entire sale consideration was received by the vendor, then, original documents and link documents of the property must have been available at the residence of the assessee, but, as a matter of fact, no such document was found during the course of search proceedings. It was further submitted that actually the land was found to have been sold to various other persons, which was also stated by the vendor while he was examined on oath and such transaction with the third party was also supported by affidavit filed by them. Therefore, when the land was never purchased by either assessee or his wife, but, purchased by other parties and there is no other material except the said unregistered document, the assessee cannot be considered to be the owner of the property and the consideration of ₹ 1,19,37,000/- as mentioned in the said document cannot be treated as unexplained investment of the assessee. The CIT(A) though accepted the fact that the assessee has not signed the document found during search and also the fact that the land in question owned by Shri G. Sreenivasulu Reddy and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey have not sold the property to the assessee nor received any consideration from the assessee. It is also further fact on record that property in question has been ultimately sold to some other persons, as evidenced in registered sale deeds, copies of which have been placed at pages 145 to 155 of the paper book. Similarly, affidavits filed by the vendors and vendees clearly established the fact that property, in question, was not sold to the assessee and his wife at any point of time. Therefore, solely relying upon unregistered document, which is also not signed by the assessee and his wife, addition cannot be made at the assessee s hands. It is very much evident that the AO has not brought any corroborative material on record to prove that the transaction as mentioned in unregistered agreement of sale has fructified and the consideration referred to therein was actually paid by the assessee. Therefore, since there are material to indicate that the consideration mentioned in the unregistered and unsigned document was actually paid by the assessee to land owners and when the materials on record otherwise prove that the land was sold to persons other than the assessee and his wife, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 3 . T. Nagi Reddy ₹ 2,55,823 ₹ 51,23,985 In response to the query made by the AO assessee produced affidavits from the creditors along with their pattadar passbook indicating their land holdings. He also furnished details with regard to crops grown, agricultural income earned per year and also mode of payment of the amount. The AO stated that as the creditors are agriculturists and not identifiable the credits are not verifiable. He further mentioned that the credits are without interests, which is very much unusual. W ith the aforesaid observation, the AO termed the credits as fictitious and added to the income of the assessee. Assessee challenged the addition before the CIT(A). In course of hearing before the CIT(A), the assessee contended that loan of ₹ 12,68,164/- taken from Sri K. Adi Narayana Reddy was supported by confirmations from the creditor and also other details relating to source of income. So far as loan of ₹ 36 lakhs standing in the name of Shri K. Harinath Reddy, it was submitted by the assessee that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hari Nath Reddy, which is placed at page 186 of the assessee s paper book. The learned AR further submitted that returns of income of Shri K. Vishwanatha Reddy and Shri K. Gopinath Reddy clearly indicate that they have shown capital gain arising from the sale transaction of the said land, therefore, no addition should have been made on that account. 57. The learned DR on the other hand relied on the orders of the CIT(A) and AO. 58. We have heard the submissions of the parties and perused the materials on record . As can be seen from the record, the assessee has explained that the amount was received on behalf of Shri K. Harinath Reddy as GPA Holder towards sale of site on 23/08/2007 and the same were passed on to the Shri Harinath Reddy on 08/04/2007. It is further noted that the assessee has contended that sale document relating to the aforesaid transaction was also verified by the AO. On perusal of ledger account copy of Shri Harinath Reddy in the books of the assessee, it is seen that there is a credit entry of ₹ 36 lakhs with the noting that the amount was received on behalf of Shri Harinath Reddy being a GPA holder. Similarly, assessee has referred to the returns o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86/-. 63. Brief facts are, during the assessment proceeding, the Assessing Officer found that during the previous year relevant to AY under dispute, the assessee has introduced fresh loans of ₹ 5,38,335/- in the name of different creditors. Further, the assessee has also taken fresh loans from existing creditors to the tune of ₹ 11,08,711/-. The total loan taken for the year under consideration is ₹ 16,47,046/-. Though the assessee in course of assessment proceeding produced affidavits from the creditors along with their pattadar passbooks to substantiate the identity of the creditors, genuineness of the transaction and creditworthiness of the creditors and also other details regarding extent of land, crops grown and approximate income earned per year and also mode of payment, etc. but the Assessing Officer by stating that all the creditors are agriculturists and not identifiable, therefore, credits are not verifiable and further mentioning that the credits are without interest which is most unusual treated the entire loan amount of ₹ 16,47,046/- as unexplained and added it to the income of the assessee for the assessment year under consideration. Being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiness of the creditor, before arriving at the conclusion about such credits to treat them as explained or unexplained. In this case, no such examination appears have been made by the Assessing Officer and the affidavits were summarily rejected without any examination of the creditors or verification of their creditworthiness. In this case, the appellant's confirmation were not mere paper confirmations but were supported by affidavits which cannot be ignored or brushed aside without bringing the contrary information/evidence on the record. The stand of the appellant was consistent and non-charging of interest on the loans cannot be the ground for treating the credits as unexplainable, specially in the cases where creditors are either relatives or associates. Accordingly, the explanation of the appellant that the loans were obtained by cheques/DDs and supported by the affidavits along with the supporting evidence for showing the sources for such credit cannot be denied without controverting the same with relevant evidence by the Assessing Officer. Thus, based on the facts of the case and the judicial decisions referred supra, the argument of the appellant is found to be in order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of ₹ 17,31,252/- being the expenditure incurred towards construction of house as per the seized material, the assessee has disclosed only an amount of ₹ 2,28,595/- in the return of income. He, therefore, treated the differential amount of ₹ 15,02,657/- as unexplained investment of the assessee and added to the income of the year. The assessee challenged the addition before the CIT(A). 69. In course of hearing of appeal before the CIT(A), it was submitted by the assessee that the Assessing Officer has committed an error while treating the amount of ₹ 17,31,252/- as recorded in the seized document as investment made by the assessee in construction of the house. It was submitted that the total of the investment as recorded in the seized material is the investment in the house of the assessee as well as Mr. V. Mallesh, neighbour of the assessee, whose construction activity was also looked after by the assessee. Thus, it was submitted by the assessee that actual amount invested by assessee during the relevant FY is ₹ 2,28,595/- as reflected in the return of income. In this context, assessee also submitted the details of expenditure incurred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the investment of the appellant. Since there is no difference between the amounts reflected in the seizedmaterial(Rs. 27,43,431/-) andtheamount of investment reflected in the appellant's return of income (Rs. 27,40,957/ -) at the end of the FY 2003- 04, there is no scope for making the addition on account of unrecorded investment. This issue has been elaborately discussed in the Appellate order for the AY 2004- 05, in the appellant's own case. Accordingly, the addition of ₹ 15,02,657/-made by the Assessing Officer based on the inference of the contents of the seized material, without referring to the facts of the case and without making enquiries, is held to be not sustainable. This ground of appeal is treated as allowed. 70. The learned DR submitted before us that the CIT(A) has committed an error by accepting the assessee s claim that the addition made by the Assessing Officer also included the investment made in house construction of Shri V. Mallesh. The learned DR referring to seized material marked as A/KCRN/3 submitted that page 38 of the seized material clearly relates to investment made by the assessee and the entries made from pages 40 to 47 relates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence has been made to the Valuation Officer to ascertain the cost of construction but there is no mention of that in the assessment order. Be that as it may, on perusal of the seized material, copies of which were submitted before us by the learned DR, it is very much clear that totalling at pages 38 39 of the seized material marked as A/KCRN/3 as made by the search party is ₹ 44,74,685/-. So far as the entries at pages 40 to 47, they are found to have been struck off. Therefore, contention of the learned DR that they represent expenditure incurred towards construction of house of Shri V. Mallesh is without any substance. Furthermore, it is a fact on record that on reference made by the Assessing Officer, DVO has made a valuation of the cost of construction of assessee s house and determined the cost at ₹ 30.40 lakh. W hereas as per the seized material as well as the returns filed by the assessee, he has disclosed the investment in house at ₹ 27,43,431/- spread over two years i.e. AY 2003-04 and AY 2004-05. Therefore, there is not much difference between the cost of construction declared by the assessee and the valuation made by the DVO. This gives credence to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the affidavits filed by the donors are dated 10. 11 . 2009 and in some of the affidavits the gifts were shown to have been given on earlier occasions, such as 13. 11. 01 and 13. 11. 03 and the affidavits are supported by passbooks of agricultural lands and in few cases income certificates issued by the VRO. In this context it is relevant to observe that the appellant furnished the copies of the affidavits before the A. O. and same during the appellate proceedings. However, it has been observed that the same were not considered by the AO. The confirmations furnished by the appellant point out to the consistency of the stand, if not anything related to the creditworthiness of the donors. The genuineness of the transaction as well as the creditworthiness of the creditor may not be gauged from the copies of the affidavits furnished alone as the same are transacted in cash and the donors do not have any other sources than agricultural income. However, since the confirmations furnished by the donors in the form of affidavits certainly indicate the identity of the donors and their creditworthiness, on record. What is left to the Assessing Officer is to examine the same and come to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department has challenged the deletion of addition of ₹ 5,04,800/- being unexplained investment made in land. 79. Briefly the facts relating to the issue are, the Assessing Officer on going through the seized material noted that as per the sale deeds found at the time of search, assessee has made the following investments in land: 1. A/KCRN/04 page No. 67 73 investment in land 5,04,800 2. A/KCR/04 page No. 108 to 114 investment in Land in the name of K. Aruna Kumari 4,71,200 Total 9,76,000/- The Assessing Officer by mentioning that the assessee has not reflected these investments in his return of income added the amount to the income of the assessee for the impugned assessment year. 80. In appeal proceeding before the CIT(A), the assessee objecting to the addition made submitted that in response to the questionnaire dated 19/10/2009 issued by the Assessing Officer, the assessee had specifically explained that purchase of land was already declared and accounted for in the original return file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83. Briefly the facts are, on the basis of a document seized at the time of search marked as A/KCRN/03, the Assessing Officer noted that the assessee had constructed a residential house at Door No. 8-17-1 and incurred expenditure of ₹ 27,43,431/-. However, on verifying the return of income filed, the Assessing Officer noticed that the assessee has reflected investment of ₹ 22,42,362/- in construction of the house property. Therefore, Assessing Officer added the differential amount of ₹ 5,01,069/- as unexplained investment. That apart, during the assessment proceedings, Assessing Officer also made a reference to the DVO for ascertaining the cost of construction. The DVO in his report determined the cost of construction at ₹ 30.04 lakhs. As the assessee has disclosed cost of construction at ₹ 27,40,957/-, Assessing Officer treated the balance amount of ₹ 2,63,043/- as unexplained investment and added it to the income of the assessee. Therefore, the total addition made by the Assessing Officer was to the tune of ₹ 7,64,112/-. Being aggrieved of the addition so made, the assessee preferred appeal before the CIT(A). The CIT(A) deleted the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material and the appellant also deserve the concession for self - supervision, which is allowable as per the provisions. Under the circumstances, I am of the considered opinion that there is no substantial ground for the AO to make the addition based on the valuation by the valuation officer. Accordingly, the addition of ₹ 2,63,043/ - is held to be not sustainable and deserve to be deleted. Hence, this ground of appeal is a l l o w e d. 84. We have heard the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record. After perusing the finding of the CIT(A) we do not find any infirmity in the same. This issue has been dealt in detail while considering Departmental appeal in ITA No. 1450/Hyd/2012. As observed by us the seized material clearly indicates that the expenditure incurred was towards construction of assessee s own house as well as the house of Shri V. Mallesh. It was held by us that even as per the seized material, it cannot be said that the assessee has invested more than ₹ 27,40,957/- as disclosed in the return of income for the AY 2003-04 and 2004-05. Furthermore, the valuation made by the DVO also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said parties in the form of affidavits make the transaction verifiable, with further indication of mode of payment along with the identification of the loan vendor. In such a case, the relevant question would be the examination of the creditworthiness of the creditor, before arriving at the conclusion about such credits to treat them as explained or unexplained. In this case, no such examination appears have been made by the Assessing Officer and the affidavits were summarily rejected without any examination of the creditors or verification of their creditworthiness. In this case, the appellant's confirmation were not mere paper confirmations but were supported by affidavits which cannot be ignored or brushed aside without bringing the contrary information/evidence on the record. The stand of the appellant was consistent and non - charging of interest on the loans cannot be the ground for treating the credits as unexplainable, specially in the cases where creditors are either relatives or associates. Accordingly, the explanation of the appellant that the loans were obtained by cheques/DOs and supported by the affidavits along with the supporting evidence for showing the sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst ₹ 16,32,958/-adopted by the Assessing Officer. Further, explaining the advance of ₹ 6,50,000/-, it was stated that the amount represents advances received from parties towards sale of plots of Gajalakshmi Gardens and the said amounts were later transferred to the sales account when sale actually took place and was shown as income of the assessee in the respective assessment year. It was further submitted that the Assessing Officer without appreciating the fact that the advances do not represent the income by itself and whenever sale of flats are effected the amount of advances were transferred to sales account, has made the addition. The CIT(A) after considering the submissions of the assessee deleted the addition with the following observations: 6.3 The observations of the Assessing Officer and the written submissions of the appellant are perused. As indicated, the appellant is in the business of real estate and was involved in developing the land into plots and during the year under reference, two of such projects were in progress. It is a fact that in real estate business, amounts were received in stages and the amounts received prior to the registration a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted income of the appellant. Hence, the addition of ₹ 26,30,000/- made is not justified and is ordered to be deleted. This ground of appeal is treated as allowed. 95. We have heard the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record. As can be seen from the assessment order, the Assessing Officer has made additions in a summary manner without discussing the issue elaborately. The CIT(A) on considering the facts that the amounts reflected in the capital account are only advances received from parties towards sale of plots and subsequently when sale has actually taken place the amount was transferred to the sales account and offered as income by the assessee has deleted the addition. This fact has not been controverted by the learned DR. In that view of the matter, we do not find any infirmity in the order of the CIT(A) in deleting the addition, considering the fact that the assessee has shown the advances as income when the sale has crystallized. This ground is, therefore, dismissed. 96. Ground No. 4 relates to deletion of addition made of an amount of ₹ 13,67,631/- on account of unexplained cash c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be the ground for treating the credits as unexplainable. Accordingly, the explanation of the appellant that the loans were obtained by cheques/DC's and supported by the affidavits along with the supporting evidence for showing the sources for such credit cannot be denied without controverting the same with relevant evidence by the Assessing Officer. Thus, based on the facts of the case and the judicial decisions referred supra, the argument of the appellant is found to be in order and the addition made by the Assessing Officer without making basic verification/enquiries, tantamount to additions without justification. Under the circumstances, the additions made by the Assessing Officer amounted to the addition based on the presumptions and surmises and as such are not justified. Under the circumstances, I am of the considered opinion that the addition made without any verification or the \ required evidence, is not sustainable and as such the addition of Il ₹ 64,231/-, treating the loan from Sri Rajasekhar as unexplained credit, stand deleted. 98. We have heard the parties and perused the orders of revenue authorities as well as other materials on record. So far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee challenged the addition before the CIT(A). In course of hearing of appeal before the CIT(A), assessee submitted that during post search proceedings, the land owners were examined on oath by the departmental authorities and in the statement recorded, they clearly stated that they have not received the consideration mentioned in the said agreement and the lands were also not purchased by the assessee and in fact the lands were purchased by some other persons namely N. Sunitha, A. Lokanatha Reddy, M. Shamsunder Reddy, K. Bhuvaneswara Naidu, P. Ananda Naidu, Madala Chaitanya, B. Muni Rami Reddy, N. Ekambara Naidu, etc. It was submitted by the assessee that no other material except unregistered document not signed by the assessee, was found to show that the assessee has become owner of the property and the amount of ₹ 1.25 crores was actually paid by the assessee to the vendor on 02/02/2006. Assessee also submitted that as the agreement was not signed by the assessee and the vendors have asserted that the transaction was not effected by them, the addition made by the Assessing Officer ignoring such fact is not justified. In support of such contention, the assessee also furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he had initially admitted an amount of ₹ 2,00,00,000/- inrespect ofthe transaction for ₹ 5,52,42,595/- during the course of the search operations i.e. on 27.09.2009 but ultimately on the very next day thoroughly checked and found that there was no such business transaction carried and no money was passed on and accordingly on the very next day, the declaration made originally was denied in respect of the transaction for ₹ 5.15 crores. 9.4 It is a fact that the appellant made a declaration during the course of the search proceedings based on the information found. It is also a fact that the investigation authorities have examined the vendor namely K.Hemant Babji and P . Satyanarayana by recording a statement, in which they have not only denied to have sold the property to the appellant and his wife, but also identified the buyers who have brought the land separately, holding that such documents were created for inflating the value of the property in the market. It is also relevant to note that the A.O. has not brought out any discussion on the submissions and retraction of the declaration made by the appellant in the assessment order . In this context, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, B. Muni Rami Reddy, N. Ekambara Naidu, etc, almost the entire land has been registered in their names by the considered to support the claim of the appellant, since they have not been produced before the Assessing Officer, the information furnished therein remained worth examining from the point of view of the verification of the facts as regards to the real nature of the transaction involved in transfer of the land under reference. 9.6 As indicated above, the statement of Sri P . Satyanarayana, recorded by the ADIT indicate that a portion of the land under reference was sold and registered in the month of March, 2007 and as per the copy of the affidavit furnished from one of the vendees, part of the land under reference was purchased by one Sri Madala Chaitanya, 5/0 M .Ratnagiri Babu, D .No.3- 1-3A, Rajendra Nagar, Guntur Town and the total land purchased was to the extent of acre 6.95 cents for a consideration of RS .6.96 lakhs executed by Sri K .Hemant Babji, one of the vendor, who shown to have signed the document under reference. This is one of the indication, if not the only evidence to indicate that the land under reference has not come to the possession of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the receipt of the alleged sale consideration of ₹ 5,15,42,595/- as mentioned in the seized material marked as A/KCRN/05, categorically stated that the said document was only created for business promotion purposes and he has not received any money. He further stated that he has not sold the property to the assessee. Similarly, another land owner Shri P. Satyanarayana in response to the question put to him stated in his sworn deposition recorded on 13/10/2007 that he has not received any consideration towards sale of property to the assessee and Smt. K. Aruna Kumari and the property was not registered in the name of the assessee or Smt. K. Aruna Kumari. It was submitted that even in response to the query made by the Assessing Officer during the assessment proceeding relating to the AY 2007-08, it was clearly stated by the assessee that the transaction did not take place and the so called receipts does not bear any date. Therefore, the conclusion drawn by the Assessing Officer is not correct. 104. We have heard the parties and perused the materials on record as well as the orders of the revenue authorities. On going through the finding of the CIT(A) we do n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , assessee challenged the addition before the CIT(A). In course of hearing before the CIT(A), it was contended by the assessee that loose slips found and seized during the search and seizure operation do not pertain to assessee s transactions as they are prepared by brokers and also written by assessee s staff with regard to valuation of land, initial payments, structured period of payment and interest in case of delay in payments etc. However, actually no such transaction has taken place nor monies were passed on. It was submitted that the writing on these papers were only notings and estimation prepared by brokers by inflating the value of the land, who have been guided by his employer Shri Y. Siddaiah Naidu. It was submitted that according to the Assessing Officer the said amount represent the amount given by one Sri Siddaiah Naidu. However, it was not the case as the assessee has not raised any loan from Sri Y. Siddaiah Naidu either in cash or through bank and as Sri Y. Siddaiah Naidu was employed with him during that time and scribbling might have been made in his presence. To dispel the doubt created that the assessee might have obtained loan from Sri Siddaiah Naidu, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the notings out of discussion and estimation prepared by some brokers, as indicated by the appellant, there is no connectivity between the amounts noted and the narration indicated appended to the figures/amounts. Similarly, if the figures are to be assumed to be unrecorded investments, as observed by the Assessing Officer, there is no basis as well for such assumption. In fact, there is no related or corroborative information indicating such investments with reference to the dates indicated therein, were noticed or found. Neither the papers are signed by the appellant nor any of his employees to gauge the relevance of the contents of the said seized material. In absence of any clear evidence, either directly or in the form of corroborative evidence, there is no ground for the Assessing Officer to assume the amounts indicated in the said seized material to be an unrecorded investment of the appellant and such assumptions may amount to mere surmises. Alternatively, if the amounts are assumed to be the loans obtained from Sri Siddaiah, it was noticed that there was search and seizure operations carried out in his house and no evidence was found in his house to substantiate his capa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the seized material, a copy of which is at page 262 of the assessee s paper book, shows certain amounts along with dates having been noted there in totalling to ₹ 4,22,30,313/- including interest of ₹ 15,30,313/-. Nothing has been indicated whether the figures mentioned denote receipts or payments. The document also does not bear signature of either the assessee or anyone else. It is also a fact that this paper was seized from KCR Homes and Developers and not the assessee. There is also no allegation that the entries in the loose paper was made by the assessee . In these circumstances it is not at all possible to treat the figures mentioned in the seized document as transactions of the assessee in absence of any other corroborative evidence brought on record to corelate the entries made in the seized material to the assessee. In these circumstances explanation of the assessee with regard to the seized document cannot be rejected on mere presumptions and surmises. On going through the order of the CIT(A) it becomes crystal clear that CIT(A) after considering all aspects of the matter has arrived at a finding of fact that the entries made in the loose paper cannot be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee explained that the transaction was made only for the purpose of business promotion and not real. The AO however did not accept the explanation of the assessee and added the amount of ₹ 18 lakhs to the income by treating it as unaccounted investment. The addition was challenged in appeal before CIT(A). 114. In course of hearing before CIT(A), the assessee submitted that the investment of ₹ 18 lakhs was accounted for in the cash flow statement on 03/06/2006 and produced before the AO. It was submitted that assessee also received back the amounts on 02/02/2008 and 06/02/2008 as the assessee cancelled the agreement for poor quality of the flats. The CIT(A) after considering the submissions of the assessee along with materials on record deleted the addition by holding as under: 6.3 The observations of the Assessing Officer and the written submissions of the appellant are perused. As seen from the information in the form of seized material, the appellant has entered into agreement with Mjs Shree Vignesh Constructions, for purchase of six flats at Vignesh Towers for a total consideration of Rs.l,39,84,000/- , out of which, an amount of ₹ 18,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the document is not signed by the assessee but the assessee paid advance of ₹ 18,00,000/- to Shri Vignesh constructions for purchase of flats. This payment of advance has been recorded in books of the assessee which is evident from the ledger account copy at page 69 of assessee s paper book. It is also a fact that the agreement was not acted upon as the assessee withdrew from the deal for poor quality of flats. The advance paid was also refunded back to the assessee through banking channel. In the aforesaid circumstances we fail to understand how addition can be made by treating the advance of ₹ 18 lakhs as unaccounted investment. Accordingly, we uphold the order of the CIT(A) on this issue . 116. In ground No.5 department has raised the issue of deletion of addition of ₹ 36,00,000/- made on account of unrecorded investment in land. 117. Briefly the facts are, during search and seizure operation a number of sale deeds were found indicating investment made in land by the assessee in his own name as well as in the name of others. By alleging that assessee has not reflected the investments in his return of income the assessee added the amount of ₹ 66, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Undisputedly, the addition has been made by the AO solely on the basis of the sale agreement allegedly executed by Smt. Kalavatamma, the owner of the property. However, not only the document is not signed by the assessee but Smt. Kalavatamma has also disowned the document by stating in an affidavit that she never signed any such document nor has received any money from the assessee towards sale of the property. The ld. DR has not brought any material before us to controvert these facts. In the aforesaid view of the matter, the finding of the ld CIT(A) deserves to be upheld. The ground raised is dismissed. 120. In ground No. 6 the department has challenged the action of the CIT(A) in deleting the addition of ₹ 75,74,097/- made by the AO. 121. Fact in brief are, during the assessment proceedings the AO noticed that the assessee has credited an amount of ₹ 75,74,097 to the capital account as advance received. By alleging that the assessee could not furnish any details such as names, addresses, amount, mode of payment etc., the AO added the advance received to the income of the assessee. Assessee challenged the addition in appeal before the CIT(A). 122. Before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding. The department has not been able to bring any adverse material to disturb the aforesaid finding of fact. Hence, we affirm the order of the CIT(A) on this issue by dismissing the ground raised. 124. The next issue as raised in ground No. 7 relates to deletion by CIT(A) of unexplained credits of ₹ 12,68,164/-. 125. Briefly the facts are, during the assessment proceeding the AO noticed that the assessee during the year has availed loans from creditors as under: K. Adinarayana Reddy ₹ 12,68,164 K. Harinath Reddy ₹ 36,00,000 He further noticed that assessee has taken fresh loan of ₹ 2,55,823 during the year from an existing creditor namely Sri T. Nagi Reddy. The total loan taken during the year is ₹ 51,23,987/-. Though the assessee produced affidavits from the creditors confirming the loans as well as other evidences like pattadar passbooks indicating extent of land, crops grown and approximate income earned in respect of the creditors, but, the AO treated the entire loan as unexplained credit by alleging that the creditors being agriculturists are not identifiable, therefore, credits are not verifiable. 126. The addition made was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o establish the identity of the creditor, their creditworthiness and genuineness of the transaction. If the AO had any doubt with regard to the loan transaction he should have made proper enquiry to establish that the creditors are not identifiable or they do not have creditworthiness or the transaction is not genuine. It is not forthcoming from record whether the AO at all has made any such enquiry in this regard. Therefore, without making enquiry the AO cannot treat the loans as unexplained by simply making some sweeping remarks. We therefore see no reason to interfere with the order of the CIT(A). The ground is dismissed. 128. Ground No. 8 is in respect of addition of ₹ 65.50 lakhs deleted by the CIT(A). 129. Facts in brief are on the basis of page no. 43 of seized material marked as annexure No. A/KCR/58 the AO noted that assessee had taken loan of ₹ 65.50 lakhs from M. Subramanyam Naidu. By alleging that the assessee has confirmed it in statement recorded on 27/09/2007, the AO treated the amount mentioned in the seized document as undisclosed income of the assessee. The addition was challenged by the assessee before CIT(A). Before the CIT(A) the assessee sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant in any manner . Further, the lender of the amount Sri Subramanayam Naidu, has denied having lent the amount to the appellant and the addition made in the case of the said lender relying on the same seized material has been deleted by the CIT(A) - VII, Hyderabad, for want of enough evidence on this issue. Thus, it can be held that notwithstanding the deposition of the appellant given at the time of search proceedings, the facts indicate otherwise and there is no other proof that amount of ₹ 65,500 mentioned in the seized material represent the figure of ₹ 65,50,000/- as interpreted by the A .O. The judicial decision relied upon by the appellant support the submissions taken by the appellant. It is also a fact that the amount of loan whether remained to be explained or the explanations offered is not accepted by the A.O., unless taken into the books cannot be treated as unexplained credit and in this case, no such entry was there in the books of the accounts of the appellant. Further, in absence of any entry taken in the books, the amounts appearing as hypothetical figures cannot be presumed as loans and even in such case of assuming the said amount as lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008-09 133. In ground No. 3 with its sub-grounds the department has challenged the action of the CIT(A) in deleting addition of ₹ 12,92,266 being unexplained credits. 134. We have heard the parties, perused the record and have gone through the orders of the revenue authorities. Similar issue came up for consideration in ITA No. 1453/Hyd/2012(supra) wherein we have confirmed order of CIT(A) dismissing revenue s ground. Following the decision therein, we confirm the order of CIT(A) and dismiss the ground raised by the revenue on this issue. 135. Ground No. 4 relates to deletion of ₹ 40 lakhs added by the AO treating it as unaccounted investment. 136. Briefly the facts are, on the basis of an agreement found and seized at the time of search, the AO concluded that the assessee has made investment of ₹ 1,21,84,000 in purchasing flats in Sri Vignesh Towers. Investment relating to impugned assessment year was quantified at ₹ 40 lakhs and added to the total income. The CIT(A) after considering the submissions of the assessee along with facts and materials on record deleted the addition by concluding as under: 8.3 The observations of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This ground of appeal is treated as allowed. 137. We have heard the parties and perused the orders of the revenue authorities as well as other materials on record. This issue is materially same to the issue raised in ground No. 4 of ITA No. 1453/Hyd/12 (supra). On going through the order of the CIT(A), we are of the view that the finding of fact arrived at by the CIT(A) cannot be disturbed as the department has failed to bring any material to controvert such finding. In this view of the matter, we uphold the order of the CIT(A) on this issue and dismiss the ground raised. 138. In ground No. 5 Revenue has challenged deletion of amount of ₹ 40,40,000/- added by the AO as unaccounted investment. 139. On the basis of certain seized material being sale deeds and other documents the AO concluded that assessee has invested an amount of ₹ 42,37,000 as under: 9.1 While computing the taxable income of the appellant, the Assessing Officer made a consolidated addition of ₹ 42,37,000/- holding that the said amounts were invested in properties by the appellant as reflected in the seized material found during the course of the search proceedings, but were not refle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d through the books based on the information brought on the record. In absence of any adverse information brought on the record by the A .O., to indicate such investments of the appellant are unexplained, the addition made will not stand to the test of judicial scrutiny and as such the addition of ₹ 3,90,OOOj- is held to be not sustainable. (c) (d) Rs . 34,OO,OOO/ - ₹ 2,5O,OOO/ - : As per the information brought on record, the said amounts represent the registered rights of properties as reflected through the sale deeds, evidenced through the any additional evidence to indicate that such amounts represents the investments of the appellant since the details indicated in such document are related to the persons other than the appellant.Theappellantstoutlydeniedthat such transactions do not relate to him and there is no adverse information to indicate that the said amounts belonged to him. In absence, of the relevant information, which can be linked to the appellant, the amounts cannot be attributed to the appellant and as such cannot be treated as unexplained investment/income of the appellant. Hence, the addition of ₹ 34,00,000/ - and ₹ 2,50,000/ - sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in the form of cash withdrawals made for the purpose of construction of the compound wall. Thus, the expenditure claimed stood explained through the books maintained by the appellant. In absence of any contrary information brought on record or any adverse findings made on maintenance of books, the expenditure which was explained through the books, cannot be denied. Based on the above facts, I am of the considered opinion that there is no basis for the Assessing Officer to make the addition c ₹ 2,20,000/- . Accordingly the addition is ordered to be deleted . This ground of appeal is thus allowed. 145. We have heard the parties. On a perusal of the order passed by the CIT(A) it becomes clear that the expenditure is reflected in the books of account of the assessee. Hence, in our view, the CIT(A) was justified in deleting the addition. The ground raised is dismissed. 146. In Ground No. 7 department has challenged deletion of an amount of ₹ 57,19,495/-. 147. As mentioned by the AO, seized materials revealed expenditure incurred by the assessee in production of a movie by name Sindoor . The assessee explained that investment made is reflected in the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the assets side of the balance sheet. Having accepted the balance sheet, and without making enquiries as regard to the sources, which in all probability were tagged to the liabilities of the balance sheet, it is not justified to assume that the said expenditure is not explained by the sources. Since the expenditure is reflected in the books of account, the same could not have been disbelieved only on the basis of lack of sources that too without making verification regarding the sources. Accordingly, the ground taken by the A.O. for making the addition on account of treating the expenditure in film production as unaccounted/unexplained investment, is not substantiated. Further, having accepted the balance sheet as submitted by the appellant, the right course for the A.O. could have been the examination of the sources that have been brought into the books of accounts and since such exercise was not carried out by the A.O., the addition of ₹ 57,19,495/ - is held to be unsustainable. Accordingly, this ground of appeal is treated as allowed. 149. We have heard the parties and perused the materials on record. It is very much clear from the assessment order that in cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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