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TMI Blog2016 (1) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... ced on record running into 196 pages containing various agreements and documents as placed before the authorities. 3. Briefly stated, assessees herein are individuals and have jointly entered into an agreement of sale/ purchase on 28.12.1997 with Mr. C. Kishanram Gouli of Secunderabad for purchase of schedule property in Sy.No.1 and 2 admeasuring ac.56.04 gts at Lothkunta (v), Malkajgiri (M), Ranga Reddy District at Rs. 10 lakhs per acre. Out of the total consideration of Rs. 5.61 crores to be paid, they have paid an amount of Rs. 20 lakhs and balance to be paid at the time of registration. However, due to certain disputes arising out of the land and also some complications in getting permissions etc., and also in view of litigation involved, the heirs of original owner and the these two assessees as confirming parties, entered into development agreement -cum- GPA on 16th October, 2006 in favour of M/s. Santha Sriram Constructions Pvt. Ltd., (in short "SSCPL"), Hyderabad. As per the terms of agreement, SSCPL being third party would pay Rs. 4 crores to the first party i.e., land owners and both parties i.e., land owners being first party and consenting parties being second party th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-07, 2007-08 and 2008-09, A.O. rejected the books of account and taking the turnover as the basis, estimated income at 8%. We were informed that assessee has disclosed more than 8% income in A.Y. 2005-06, therefore, there is no rejection of books of account or estimation of income in that assessment year. It was the contention of the Ld. Counsel that there was no incriminating material in the search conducted in the premises of SSCPL and so assessee's incomes which were originally disclosed on the basis of books of account could not be rejected in the absence of any incriminating material. Ld. Counsel relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla dated 28th August, 2015 in support of his contention that additions cannot be made arbitrarily and without any relevance or nexus with the seized material. 5.1 Ld. D.R. in reply, relied on the judgment of the Hon'ble jurisdictional High Court in the case of Gopal Lal Bhadruka vs. DCIT 346 ITR 106 to submit that for the purpose of section 153A/153C A.O. could take into consideration of material, other than what was available during the search and seizure operation, for making an assessment of the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The total income for such AY s will have to be computed by the AOs as a fresh exercise. iii. The A.O. will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acres in Sy.Nos. 1 and 2, Lothkunta (v), Malkajgiri (M). SSCPL had to pay an amount of Rs. 5 crores out of which, Rs. 4 crores was paid at the time of agreement and Rs. 1 crore would be paid at the time of obtaining sanction. We are not here to examine the terms of agreement and how it is to be considered for the purpose of assessment either in the hands of the owners or in the hands of the developer. It is the A.O's contention that assessee do not have any rights on the property and the amounts received being consenting parties from SSCPL is to be brought to tax on the basis of the receipt in respective years as commission in the transaction. Assessees contended before the Ld. CIT(A) that assessees has rights over the property and those rights were transferred to SSCPL and the amounts are received as advance therefrom. Unless the parties herein received developed property, there cannot be any accrual of income. Ld. CIT(A), however, did not agree with the above contentions and confirmed the amount. 8. Before us, Ld. Counsel submitted that the amounts received from SSCPL are not commission received but as part of development agreement. This development agreement has not been fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, Mr. M. Suveer Reddy. It is one of the contentions that the amount received by the assessee is over and above the amount agreed to be paid in the development agreement to the owners. However, Ld. Counsel submits that this amount is part of the amount payable to the owners which was routed through the assessees herein. Ld. D.R. also could not confirm the facts. Therefore, it is to be examined whether the amount received by the assessees is part of the agreed consideration to be paid to the owners or to be received by the assessees as part of transfer of rights over the property, having a lien for purchase of property from the owner(s). The entire payment made by SSCPL was neither examined nor brought on record by the A.O. in order to examine this aspect. It is also surprising to note that Revenue has not considered whether the transaction is to be considered as one involved capital gain or involving business transaction. Assessees herein have entered into an agreement for purchase of property may be for the purpose of investment or may be for the purpose of business activity. However, after so many years, since, no progress have been made, they have in turn, handed-over the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amounts received by the assessee but also proportionately on the property being developed as part of the agreement on the rights over the developed property devolving on the consenting parties. 11.1. The contention that agreement has not been fulfilled because no permissions have been received and land was not developed also requires examination by the A.O. It is also to be verified whether the amounts received by the assessee is over and above the amounts payable as per the agreement or not. In such case, the nature of receipt by the assessees has to be examined vis-à-vis entries and claims made in the case of SSCPL who paid the amounts by way of cheques. If that assessee has shown as part of commission payment and TDS was made, then the issue becomes easy. If that company paid the amounts as part of agreement and shown it as investment on a project in their books of account, then assessees contentions require examination in the light of evidence found. In order to examine these issues, we set aside the orders of AO and CIT(A) to that extent and restore the issues to the file of A.O. to re-consider and determine according to the facts and law on the issue. Grounds rais ..... X X X X Extracts X X X X X X X X Extracts X X X X
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