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TMI Blog2020 (2) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sri Koganti Durga Prasad on 18.05.2009, while he was present at Gandhi Cooperative Urban bank Ltd., Museum Road, Vijayawada on 18.05.200 with the cash of Rs. 2,94,17,500/- in his possession. When enquired about the source of cash, he explained that the cash does not belong to him but withdrawn from the bank lockers of four persons as per the details given in page No.2 of the assessment order as under: S.No. Locker Number Name of Owner 1 B 1/2 Sri Nukkanti Sudheer Babu 2 B 1/3 Sri Vemuri Venkata Rao 3 B 3/2 Sri Abburapu Upendra 4 B 3/3 Sri Koganti Veera Venkata Nageswara Rao 2.1. He further submitted that the cash was withdrawn from the lockers on the instructions of managing partner Sri Koganti Venkata Ramaiah. Therefore, consequential search u/s 132, was conducted in the case of Sri Vemuri Venkata Rao on 19.05.2009 being one of the locker owners. During the course of search, two diaries pertaining to calendar years 2008 and 2009 were found and seized as Annexure A/VVR/Res/01 and A/VVR/Res/02 which contained the details of real estate transactions carried out by the assessee. The assessee was asked to explain the activity of the business and the sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee subsequently. The AO made the addition of the same amount in the A.Y.2010-11 without bringing any evidence to show that the said amount of Rs. 2.94 crores was spent by the assessee for any other purpose. Having conducted the search u/s 132, it is needless to mention that the department needs to produce the evidence to tax the sum which was already admitted as income either applied for expenditure or made as investment . No such evidence was brought on record by the department. The CIT(A) also has given a clear finding that the said amount is not permissible to tax in the impugned assessment year. For the sake of clarity and convenience, we extract para No.6.3 of the order of the Ld.CIT(A) which reads as under : "6.3. There is considerable force in the arguments rendered by the appellant. The Assessing Officer has not brought on record any evidence to prove that the cash seized of Rs. 2,94,17,500/- on 18.05.2009, should be taxed in the Asst Year 2010-11 only. Further, the appellant has offered the cash seized as income in the Asst: Year 2009-10 and paid taxes thereon. The cash seized i.e. Rs. 2,94,17,500/- during the search proceedings closely corresponds to the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) and the same is upheld. 6. Appeal of the revenue for the A.Y. 2010-11 is dismissed. I.T.A. 220/Viz/2014, A.Y.2009-10 7. All the grounds in this appeal are related to the addition of Rs. 8,40,00,000/- made u/s 40A(3) of the Act which was deleted by the Ld.CIT(A). In this case, search u/s 132 was conducted in the case of Sri Koganti Durga Prasad on 18.05.2009. Consequently, search action also was undertaken in the case of the assessee on 19.05.2009. During the course of search, diaries marked as Annexure A/VVR/Res/01 and A/VVR/Res/02 were found and seized which contained the details of real estate transactions recorded by the assessee. A statement u/s 132 was recorded by the AO from the assessee on 19.05.2009. In the statement recorded, the assessee had accepted that the amounts recorded in the diaries related to the advances paid for purchase of lands. The details of the transactions recorded are as under : Date Narration Transaction Amount Rs. 11.06.2008 Kondapur land advance given 50,00,000 26.06.2008 Kondapur land advance + net profit 75,00,000 02.07.2008 Serilingampally land advance given 75,00,000 26.08.2008 Serilingampally land advance + net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent but not by unregistered documents. The Ld.CIT(A) further observed that in the transaction, neither there was a part performance u/s 53A of the Transfer of Property Act nor there was a registered agreement as required for transfer of immovable properties. Therefore, held that neither the sale nor real estate business was carried on by the assessee and the payment made as advance does not constitute purchase of stock in trade. Accordingly held that there is no case for making the addition u/s 40A(3), thus deleted the addition. The finding of the Ld.CIT(A) in brief is as under : (i) No books of accounts were maintained by the appellant and all that was found during the course of search was a diary with rough notings. (i) In the absence of books of accounts, the income would amount to estimation and the provisions of Section 40A(3) do not apply to estimation cases in view of judicial pronouncements mentioned earlier in this order. (ii) The seized document indicates only payment of advance, Which does not amount to sale and consequential purchase in view of Accounting Standard 9 and the judicial pronouncements discussed in para 17.9. 9. Against which the department filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0A(3) of the Act. Section 40A(3) is intended to prevent unaccounted money being used for clandestine activities. In the case of the assessee, there were no such transactions to invoke the provisions of section 40A(3) of the Act. All the transactions were recorded in the note book and made available to the AO. The assessee has not maintained any books of accounts, did not claim any expenditure, only given token advances which should not be considered as purchase or sale, since no purchase or sale is involved in the assessee's case, hence, there is no case for expenditure to be disallowed u/s 40A(3) of the Act. The Ld.AR argued that the notings made in the diary should not be taken as purchase or the sale transaction, notings were made without having any details such as name of the person to whom the advances were given, extent of land, rate of land, survey number, the total agreed consideration, advances paid, balance payable etc. In the absence of above details, notings made in the diary can only be considered at it's face value of advances, but not purchases. As rightly observed by the Ld.CIT(A), the land transactions required to be registered before the Sub Registrar for purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the assessee made substantial sums as profits in the short period. The AO compiled the cash book ledger, purchase ledger and sales ledger as per the notings in the diary and held that the advances paid for purchase of land were nothing but amounts paid for purchase of lands which is to be regarded as purchase expenditure. Similarly, the AO held that receipt of advance along with profit constitutes the sale transaction. Thus held that the amounts paid for purchase of land exceeding Rs. 20,000/- required to be taxed as disallowance of expenditure u/s 40A(3) of the Act. Accordingly disallowed the sum of Rs. 8.40 crores and added back to the income. In the instant case, the assessee had neither maintained the books of accounts nor claimed the expenditure to make the disallowance u/s 40A(3) of the Act. Even the note books do not contain the details of incidental expenditure, such as salaries, taxes, wages, travelling expenditure, stamp duty and other expenses relatable to business. In the circumstances, compiling the accounts taking the notings of token advance and the amounts received back is absurd and incorrect. The assessee had only given the token advances and received back the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the order. In the instant case, as discussed above, during the course of search, the diary was found with the notings of land advances given and the advances received along with the profit. The assessee has stated during the course of recording the statements and in the assessment proceedings that he was engaged in the real estate business as middle man and giving token advances and after finding the prospective buyer, the property was sold by the original owner of the land and the property got registered by the original owner of the land. After completion of the sale transaction the assessee was receiving back the advances given by him along with the profit. Except notings made in the diary with regard to giving token advances for purchase of land in various places such Nanakramguda, Kokapet, Kondapur, Sarilingampalli, Madhapur etc., no other details were mentioned in the diary such as name of the person with whom the land transaction was entered, extent of land, rate per square yard, total consideration, boundaries etc.. There was no mention with regard to taking possession of the property also. In the circumstances, the transactions mentioned in the diaries, neither gives an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part performance, as the essentials of part performance are absent. Therefore, mere mention of land advance cannot constitute purchase of immovable property. 11.2. The assessee has neither maintained the books of accounts nor claimed any expenditure. Section 40A(3) is invoked if the assessee incurs, the expenditure in excess of Rs. 20,000/- paid otherwise than crossed cheque. In the instant case, the assessee stated initially, that he made the advances with an intention of investment. Though search was conducted in the assessee's premises, the department did not lay its hands on any evidence to show that the assessee has in fact purchased the lands and sold the same and made an organized activity of purchase and sale of lands to hold that the assessee has engaged in the business activity. Though the AO has stated that the advances constitute purchase, no agreement, no bills were found by the department. In the absence of any agreement, registered or unregistered, evidencing the purchase of land with specific details such as name of the owner, extent of land, total consideration and taking possession of the land by the buyer, mere noting in the diary for payment of token advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice u/s 153A of the Act and in response to which the assessee filed the returns of income for the impugned assessment years as under : A.Y. Returned Income 2004-05 nil 2005-06 nil 2006-07 nil 2007-08 20 2008-09 50 13. Subsequently, the AO has taken up the case for scrutiny and completed the assessment on total income as under : A.Y. Assessed Income 2004-05 1,56,000 2005-06 17,15,000 2006-07 6,30,000 2007-08 1,50,020 2008-09 1,60,050 14. In the assessments made u/s 143(3) r.w.s. 153A, the AO rejected the assessee's claim for agricultural income and assessed the agricultural income as regular income. Thus made the following additions to the returned income. A.Y. Addition made 2004-05 1,56,000 2005-06 17,15,000 2006-07 6,30,000 2007-08 1,50,000 2008-09 1,60,000 15. The assessee went on appeal before the CIT(A) and the Ld.CIT(A) allowed the relief of Rs. 2 lakh for the A.Y.2006-07 and sustained the remaining additions for the assessment years under consideration. 16. Against which the assessee filed appeal before this Tribunal. During the appeal hearing, the Ld.AR submitted that the assessee is an agriculturist h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise. In the absence of filing the return of income, it cannot be presumed that after expiry of time limit for issue of notice u/s 143(2), the assessments gets completed. Further, the Ld.DR submitted that the assessee has furnished the return of income in response to notice u/s 153A of the Act. Once the return of income is furnished, the AO is permitted to examine the issues, books of accounts and information and make the assessments on the basis of information furnished by the assessee. Therefore, submitted that the AO has rightly examined the issues contained in the returns of income filed by the assessee and the information made available during the course of assessment proceedings and completed the assessment as per law which was confirmed by the Ld.CIT(A). Therefore, argued that the Ld.CIT(A) rightly upheld the assessment made by the AO, hence no interference is called for. 18. With regard to additions made u/s 68 of the Act, the AO relied on the orders of the lower authorities and the sections of the Act. 19. We have heard both the parties and perused the material placed on record. In the instant case, the assessee claimed to be an agriculturist and having agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considering the decision of special bench ruling in the case of All Cargo Logistics and the decision of Hon'ble Karnataka High Court in the case of Canara Housing and the Bombay High Court decision in the case of Anil Kumar Bhatia expressed a view that in respect of assessments completed prior to the date of search the scope of proceedings u/s 153A of the Act has to be confined only to the material found in the course of search. For the sake of convenience, we extract the relevant para-25 & 26 of the cited order. 25. We therefore hold that the scope of the proceedings u/s.153A in respect of assessment year for which assessment have already been concluded and which do not abate u/s.153A of the Act, that the assessment will have to be confined to only incriminating material found as a result of search. The next aspect to be considered is as to when returns of income filed u/s.139 of the Act are shown to have been accepted without an intimation u/s.143(1) of the Act or without any notice issued u/s.143(2) of the Act within the time limit contemplated by the proviso thereto, can be said to be assessment proceedings concluded that have not abated u/s.153A of the Act. Section 153A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous additions made in the orders of Assessment ought not to have or could not be made by the AO. Gr.No.1 raised by the Assessee in both the appeals are accordingly allowed." 9. The ITAT, Visakhapatnam allowed the appeal on similar facts in the case of P. Rama Raju Vs. DCIT Central Circle-1, Visakhapatnam in ITA Nos.424, 425 & 426/Vizag/2013 dated 31.7.2017 following the case of Y.V. Anjaneyulu Vs. DCIT, Central Circle, Vijayawada (supra) 10. The Ld. D.R's argument that the assessee has accepted that the additions were made during the course of search & seizure operation relating to unsecured loans is not acceptable since in the assessment order, the assessing officer has not brought on record any evidence found during the course of search relating to the additions made. On verification of the assessment order, it is evident that the addition was made on the basis of the entries made in the regular books of accounts but there was no reference with regard to the seized material. Hence, the reliance of the Ld. D.R. on statement of facts that the assessment was made on the basis of seized material is not correct. Ld. D.R. further argued the legal position subsequent to the introd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e return of income declaring total income of Rs. 1,60,000/- which was brought to tax by the AO holding that the assessee has not carried out any agricultural operations. Hence, the income was assessed as income from other sources. 21. Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) confirmed the addition. 22. We have heard both the parties and perused the material placed on record. The assessee has stated that he has taken the land on lease from Agnikula Kshatriya Sangam, Jupudi Village, Ibrahimpatnam Mandal and cultivated paddy, maize etc. There were no lease agreements, no bills, no vouchers produced by the assessee before the AO or CIT(A). The President of Agnikula Kshatriya Sangam also denied having given the lands on lease. No other evidence was brought on record by the assessee to hold that the assessee had in fact cultivated the agricultural land. The Ld.CIT(A) in his order observed that the assessee failed to establish the onus regarding genuineness of the claim before the Income Tax department. During the appeal hearing also, the assessee failed to place any material to show that he had carried out the agricultural operation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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