9911796707
TMI Blog2012 (5) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... peals directed against the order of the CIT(A)-I, Hyderabad dated 24.8.2011. The assessee raised the ground in its appeal that the CIT(A) erred in holding that Rs. 100 per square feet (sft) is the net profit earned on the alleged extra consideration received by the assessee despite the fact that no evidence whatsoever is available in the seized material. 4. The Revenue raised the ground that the CIT(A) is not justified in reducing the income from Rs. 250 per sft which the assessee had declared u/s. 132(4) as its income to Rs. 100 per sft. Thus, the assessee ground and the ground raised by the Revenue are interconnected. 5. Brief facts of the issue are that a search and seizure operation u/s. 132 of the Income-tax Act, 1961 was conducted at the business premises of the assessee. Consequently, notices u/s. 153A of the Act were issued in response to which the assessee filed the returns of income for the years under consideration as below. Assessment year Returned income (Rs.) 2008-09 1,24,18,187 2009-10 48,49,724 6. In the course of the assessment proceeding, the Assessing Officer found that the assessee firm is developing a residential complex viz., Sil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ails of additional income offered is as below. Financial Year Area sold (sft) Addl. Income disclosed (Rs.) 2007-08 137428 3,43,57,000 2008-09 (up to 25.9.08) 15763 39,40,750 Plus 27087 (booking) 67,71,750 8. However, the return of income filed by the assessee showed that the declaration made during the search had not been honoured. The assessee had furnished his clarification in this regard on 2-12-2009 wherein it was stated that the firm had filed a letter before DDIT explaining the fact of cancellation- of booking due to recession. This made the alleged extra consideration irrelevant. The assessee had worked out the additional profit considering 10% of the total alleged consideration which worked out to Rs. 38,29,600 which was shown as additional profit for the assessment year 2008-09. It was submitted by the assessee that the additional profit of Rs. 38,29,600 be accepted on the ground that in the real estate business certain portion of consideration in cash is again used for spending on extra consideration paid for acquisition of land etc. This way, both the receipts and payments get compensated leaving no margin. Further, there was no evidence foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence was found relating to the assessee but a statement u/s. 132(4) is itself is evidence in itself. Accordingly, the AO worked out the undisclosed income for the asst. year 2008-09 and 2009-19 as under. Assessment year Undisclosed income (Rs.) 2008-09 3,43,57,000 2009-10 1,07,12,500 10. The Assessing Officer further found that for the AY 2008-09, the assessee had debited a sum of Rs. 44 lakhs towards purchase of land. The AO treated the same as capital in nature and not allowable as revenue expenditure. Accordingly, he disallowed the same. He also disallowed a sum of Rs. 2,20,25,000 u/s. 40A(3) in respect of payments made in cash towards purchase of land. Though the assessee had submitted that the said payments were advances towards purchase of land which were subsequently received back and hence the provision of sec. 40A(3) would not apply. Similarly, for the A.Y. 2009-10, he made an addition of Rs. 1,16,164 u/s. 40A(3). Considering the above disallowances, and disclosure made by assessee the total income was assessed at Rs. 6,93,70,887 for the A.Y. 2008-09 and at Rs. 1,56,78,388 for the A.Y. 2009-10. Being aggrieved, the assessee went in appeal before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome with the said Assessing Officer who have completed the assessments of the assessee firm also. Apparently the gross average written and adopted by the Assessing Officer is Rs. 1300 per sft including the extra consideration declared by the land owners as against Rs. 1750 adopted in the case of the assessee firm. It is impossible to concede that the flats which were sold by the landowners @ Rs. 1300 per sft have been sold by the developer @ Rs. 1750 which tantamount to inequitable justice. 12. As regards retraction of the admission made during the course of search, the assessee referred to the guideline issued by the CBDT in Circular No. F. No. 286/2/2003-IT (lnv) wherein it was advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed and is not likely to be disclosed before the LT. Department. The assessee referred to the decision in the case of CIT Vs. Dhingra Metal Works (2010-TIOL-693-HCDEL- IT) wherein the Hon'ble Delhi High Court laid down the ratio that though an admission is an extremely important piece of evidence it cannot be said to be conclusive and it is open to the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per sft and extra consideration is Rs. 1500 sft. On this the assessee earned Rs. 250 per sft. After considering the expenditure of Rs. 700 per sft there is negative amount. Being so, there cannot any undisclosed income. He submitted that the CIT(A) worked out the profit at Rs. 100 per sft thereby total gross receipt is Rs. 1,53,191 x 100 = Rs. 1,53,19,100. Adopting 10% on this undisclosed income worked out to Rs. 15,31,910 as the assessee has already disclosed Rs. 38,29,600. Being so, it is higher than the income worked by the CIT(A) and there cannot be any addition towards undisclosed income. He further drew our attention to letter dated 25.10.2010 placed on record in Paper Book-II which is in the form of affidavit from various buyers where the gross rate per sft is Rs. 1500. 16. He submitted that the admission made by the assessee u/s. 132(4) was retracted by the assessee by cogent material. Being so it has no financial value. For the purpose of he relied on the order of the Tribunal in the case of K.C.K.A. Gupta vs. ACIT (90 TTJ 555) (Hyd), Abhishek Corporation vs. DCIT (63 TTJ 661). Further he relied on the CBDT circular which prohibits Department officials procuring confessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te works out to Rs. 1250 per sft. Assuming the average rate of sale of Rs. 2200 per sft, the Assessing Officer held that the assessee received about Rs. 950 per sft over and above the registered average rate of Rs. 1250. Allowing an expenditure of Rs. 700 per sft the Assessing Officer held that the net extra consideration of Rs. 250 is quite reasonable. The assessee during the course of assessment proceedings as also during the course of appellate proceedings submitted that the Assessing Officer did not take into consideration the price shown in page 64 and 65 of same seized annexure which shows gross average rate of Rs. 1500 per sft. A copy of the said seized paper was also filed before the lower authorities. The CIT(A) observed that there is nothing about sale of/advance received of 71 flats along with the rate per sft. Out of 71 entries, 41 entries showed sale @ Rs. 1500 per sft and 23 entries showed sale of Rs. 1000 per sft. Based on the factual noting in the seized paper, the average rate comes to around Rs. 1339 per sft. Thus, Assessing Officer's assumption of average of registered sale price of Rs. 1250 per sft does not match with the noting in the seized paper. Even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact not correct and true. It was incumbent upon the IAC to have afforded the assessee full opportunity to prove his assertion. Even treating the surrender as an admission of concealment of undisclosed income the IAC could not deny the assessee its right to prove that fact of surrender was no such admission and that the so called admission was in fact wrong and surrender was made solely to avoid botheration. The surrender by the assessee could have been for more than one reason in spite of the fact that it was not his income and that fact alone could not be the basis of assessment. 23. In the case of Satinder Kumar (HUF) vs. CIT (106 ITR 64) (HP) wherein held that there should be clear and definite material to sustain the addition. 24. In the case of K.C.K.A. Gupta vs. ACIT (90 TTJ 555) (Hyd) wherein held that in case of unaccounted sales only a percentage of sales should be considered as undisclosed income even though it is established from the TDS document where the assessee was receiving premium/on-money on book a flat and the entire onmoney/ premium cannot be treated as undisclosed income of the assessee. 25. The above view has also been taken in the case of Abhishek Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admeasuring 36 acres 1 guntas at Survey No. 376, Gudur village, Kondakal Mandal, Ranga Reddy district which was purchased in the year 2002 from M/s. Icon Orchids & Agri Exports (India) Ltd., vide document No. 2085/2002 dated 16-8- 2002 for a sum of Rs. 7,20,000. This entire land was sold to M/s. UNI Estates on three different dates i.e., on 16-3-2006, 13-4-2006 and 23-06-2006 vide document Nos. 3381/06, 5245/06 and 5380/2006 for a consideration of Rs. 2,92,14,000, Rs. 1,40,40,000 and Rs. 3,45,60,600 totalling to Rs. 7,78,14,600. The Assessing Officer also observed that during the period relevant to A.Y. 2009-10, the assessee has sold another piece of land admeasuring 15 guntas at Survey No. 150B situated at Kokapet village for a sum of Rs. 41,25,000. This land in question was sold along with the land of one Smt. P. Sujana admeasuring 8 guntas as a single transaction vide document No. 1974/08 for a total consideration of Rs. 63,23,000. This entire patch of land was purchased in the year 2006-07 for a sum of Rs. 72,76,375. Gain on sale of 15 guntas of land falling to the share of the assessee was also claimed by the assessee as exempt being the agricultural land. This being the histo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned AR submitted that the learned counsel for the assessee vehemently contested that the action of the Assessing Officer in treating the sale proceeds of the agricultural land as business profits is without an iota of evidence in support of such view. It is submitted that the assessee had purchased agricultural lands and carried the agricultural activities and sold the vegetable products and declared the agricultural income in the return of income filed before the Income-tax Department. The assessee received subsidy from the Government for- the purpose of drip irrigation and planted mango trees on the land etc. The AR further submitted that the land was originally purchased as agricultural land, that the land was further developed with drip irrigation system to make the same suitable for growing orchids, that the firm filed returns declaring agricultural income, that the lands situated beyond specified area, no part of the sale proceeds of these lands cannot be treated as business income under any circumstances. The assessee had incurred capital expenditure for the development of the land and carried agricultural operations; thereby there is no evidence that the assessee is car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence has been furnished to substantiate the claim that these lands are agricultural lands and he is engaged in agricultural operations on these lands. In the absence of such evidence, it cannot be presumed that these lands are agricultural in nature. Nevertheless, it is on record that the assessee is in the business of purchase and sale of lands regularly in other years as well. The lands were not acquired for the purpose of carrying on agricultural operations. In fact, there is no intention on the part of the assessee to utilise these lands to carry out agriculture at all. No attempt or effort has been made by the assessee to initiate any activity of the nature falling under agriculture. Basically he is interested in doing trading activity by purchasing lands from various individuals and sell them to realtors after creating market for his lands. Hence, the action of the Assessing Officer in subjecting the gain as a profit derived out of trading activity is justified. 35. We have heard both the parties and perused the material on record. In the present case, the agricultural lands was disclosed before the date of search and sale was claimed as exempted. These returns were befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate business she would not have kept the land for such a long period. The contention of the department is that the assessee sold the land within a year of acquisition. We have gone through the facts of the case. The certain land acquired by the assessee has been sold by the assessee within short time on account of compelling circumstances. It was explained to us by the AR that certain land as enumerated in the table is falling under Bio conservation zone/green belt which she was not aware of it. Thus, the land was sold under compelling circumstances to realise the investment and to avoid any future dispute. Similarly, in case of certain land, there was impending acquisition by the govt. and to avoid future litigation the assessee was compelled to sell them. Similarly, in the case of land situated at Kokapet village, the assessee had received a legal notice from the family members of the vendors and in fact a case was filed in OS No. 113 before the Addl. District Judge, LB Nagar. Hence, to avoid any future complications, the said land was sold. Considering the above facts, we cannot hold that the assessee engaged in the real estate business. It is also fact that the assessee has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts as follows: i) Opening cash balance (Individual) - Rs. 10,15,112 ii) Opening cash balance (HUF) - Rs. 14,08,503 iii) Sale of land - Rs. 4,10,000 Total Rs. 28,33,615 39. The Assessing Officer rejected the above contention of the assessee and treated Rs. 30.73 lakhs as income of the assessee. On appeal, the CIT(A) sustained a sum of Rs. 18,58,344 as against Rs. 30,73,000 made by the Assessing Officer. Against this the assessee is in appeal before us. 40. The AR submitted that as per the agreement the above cash was paid as purchase consideration but the agreement could not be registered by the authorities for some reasons and the above cash was returned to the assessee as the transaction could not materialise. As far as sources are concerned, it is submitted that the assessee had sufficient cash and submitted cash flow statement from 1.4.2006 to 15.7.2006. Further argued that the assessee had opening cash and bank balance of Rs. 10,15,122 with bank balance of Rs. 5,466 leaving cash portion of Rs. 10,09,656. That the HUF having opening cash of Rs. 14,08,503. That on 27.4.2006, the assessee sold land at Kollur village along with others and assessee's shar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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