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TMI Blog2020 (11) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... on of residential and commercial complexes. The revenue carried out search and seizure operations u/s 132 of the Income-tax Act,1961 ['the Act' for short] in the group of M/s H M Constructions on 30-06-2011. Consequently, the assessments for assessment years 2006-07, 2008-09 to 2011-12 were completed u/s 153A r.w.s 143(3) of the Act. The assessments of the assessment years 2012-13 and 2013-14 were completed u/s 143(3) of the Act. 3. The grounds urged by both the assessees are identical in nature. In assessment years 2006-07, 2008-09 to 2011-12, the assessees have raised certain legal issues challenging the validity of search action and also the validity of notice issued to them u/s 153A of the Act. 4. With regard to the validity of search proceedings, the Ld CIT(A) has held that he does not have jurisdiction to examine the said issue. Accordingly, he has rejected the grounds raised before in this regard. 5. The Ld A.R, however, raised a new plea before us. He submitted that the various additions made by the AO are based on the materials seized from the premises of M/s H M Constructions and from the premises of the assessees herein. Accordingly, he submitted that the AO s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctions, which is the business premises of the assessees also. Accordingly, he submitted that the question of invoking provisions of sec.153C of the Act separately does not arise. He submitted that the proceedings u/s 153A of the Act have been validly initiated in the hands of the assessees and accordingly, the AO has to determine the "total income" of the assessee by considering all the materials available with him, as held by Hon'ble Karnataka High Court in the case of Canara Housing Development Company (62 taxmann.com 250). 7. We heard rival contentions and perused the record. From the assessment orders, we notice that the revenue has carried out search and seizure operations in the hands of M/s H.M. Constructions and in the hands of the assessees herein. We have earlier noticed that both the assessees herein are partners of M/s H M Constructions. It was also not shown to us that the assessees herein have different business premises distinct and separate from the premises of M/s H M Constructions. Hence it cannot be conclusively said that the incriminating documents were seized from a person other than the assessees herein. The details of seized record are given in the table a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge referred in sec.271(1)(c) are two different charges. Accordingly the High Court held that the AO should make it clear in the notice that he should specify the particular charge for which the penalty proceedings were initiated by him. The Ld D.R, accordingly, submitted that the assessee cannot take support of the above said decision. 10. We heard the parties on this issue and perused the record. We find merit in the contentions of the Ld D.R. The provisions of sec.153A of the Act states that the assessment of six assessment years preceding the year of search would get reopened. Out of the six assessment years, assessment of some of the years would have been completed, while some of the years might not. Hence the provisions of sec.153A uses the expression 'assess/reassess" and the very same expression has been used in the notice issued u/s 153A of the Act. In both the cases, the total income shall be determined by the assessing officer. Hence the assessee would be knowing that the assessment of a particular year is a case of new assessment or reassessment, as it depends upon facts of each assessment year. 11. The facts available in Manjunatha Cotton & Ginning Factory (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a & others (hereinafter called "sellers"). As per the agreement, a sum of Rs. 40.00 lakhs was received by the sellers from the buyers. The above said sum was paid by way of cash of Rs. 20.00 lakhs and cheque of Rs. 20.00 lakhs. The share of each of the assessees herein in the above said transaction was 25% and hence the AO assessed 25% of Rs. 40.00 lakhs, i.e., Rs. 10.00 lakhs each in the hands of Shri M J Siwani and H J Siwani. The Ld CIT(A) restricted the addition to Rs. 5.00 lakhs, since the amount paid by way of cash was only Rs. 20.00 lakhs and 25% of the same works out to Rs. 5.00 lakhs. 12.3 The Ld A.R submitted that the above said agreement was entered on 8th September, 2005 in respect of a property located at Vitsandara (das flowers). He submitted that the conveyance deed has already been registered in favour of the buyers on 22.08.2005 and 6.9.2005. The above said agreement was entered to make some more payment. The Ld A.R submitted that the buyers had agreed to purchase the property for a sum of Rs. 3.60 crores. However, the property suffered from certain disabilities and the co-purchasers Shri Nazeer Ahmed and Shri Aman Jnardhan Agarwal wanted to cancel the deal. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he buyers agreed to pay additional amount of Rs. 20.00 lakhs only. However, the sellers prepared the agreement for Rs. 40.00 lakhs and hence the buyers have not signed the agreement. Accordingly, it was submitted that the amount of Rs. 20.00 lakhs mentioned in the agreement was not paid at all. 12.7 In the facts and circumstances of the case, we are of the view that there is merit in the submissions of the assessee. It is an undisputed fact that the "agreement" was not signed by the buyers, meaning thereby, it is only an incomplete agreement. If the additional amount was really agreed to be Rs. 40.00 lakhs and only Rs. 20.00 lakhs was accounted in the books of account, any prudent business man would not show the same in the agreement at all. Hence, there is merit in the submission of the assessee that a sum of Rs. 20.00 lakhs only was paid as additional amount to the sellers. Accordingly, we are of the view that the assessees have rebutted the presumption with regard to this evidence. It is also pertinent to note that the assessing officer did not examine the sellers to find out the truth. Further, no other material was brought on record to prove that the sum of Rs. 20.00 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No consideration was paid in 2005 at the time of registration, but however to explain the long gap of 10 years from the time the advance was paid to the time of registration in 2005, a receipt was made on the date of registration to confirm the amount received, so as to facilitate registration of the property before the revenue authorities. I am not maintaining books of accounts for my individual financial affairs and therefore, the advance payment made to purchase the property at Ramagondanahalli is reflected in my Statement of Affairs at a value of Rs. 47,40,760/-." Accordingly, it was submitted that entire payments have been made for purchase of property in 1995 itself. It was submitted that a receipt was obtained in 2005 from the vendors in order to facilitate registration of sale deeds. 13.2 The receipts obtained on 16-06-2005 and 17-06-2005 mentioned the payments as "full and final settlement". The AO interpreted the same as "further money" or "final settlement of money". Accordingly he observed that the money was paid in addition to what has earlier been paid and was paid at the time of registration. He further observed that the assessees did not produce any evidence to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of conveyance deeds. (d) The Ld A.R submitted that the AO has presumed the impugned payments as "further money", where as no such expression was used in the receipts so obtained. (e) It was also explained that the value of purchase of land was reflected in the statement of affairs of the assessees at Rs. 47,40,760/-. 13.5 We notice that none of the explanation given by the assessees have been examined by the assessing officer. We notice that the impugned payments are covered by three receipts, out of which two receipts make reference to the agreement to sale dated May, 1995. For the sake of convenience, we extract below the relevant expressions used in one of the receipts:- "..... received a sum of Rs. 12,15,000/- (Rupees Twelve Lakh Fifteen thousand only) by way of cash towards the sale of land bearing survey no.94 measuing 28 Guntas situated at Ramagondanahalli village - Varthur Hobli, Bangalore South from Mr. H J Siwani and Mr M J Siwani as full and final settlement towards the agreement of sale dated May 1995 and towards registration of Agreement of sale dated 16.06.2005. We have no claims whatsoever." The receipt makes it clear that there was an agreement of sale da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Rs. 1,50,000/- relating to property located at White filed. 14.1 The facts relating to the above said issue are stated in brief. During the course of search, the search officials found a receipt dated 24.03.2006 signed by a person named Mr. Winfred Nelson on behalf of M/s Indo Global Spices Ltd for a sum of Rs. 3.00 lakhs. With regard to this receipt, the assessees explained as under:- " I submit that we had agreed to pay a total consideration of Rs. 2.00 crores for purchase of aforesaid property. Out of the aforesaid consideration, the company wanted for some emergency purpose a sum of Rs. 3,00,000/- to be paid by way of cash and a receipt was prepared by the Managing Director Mr. Winfred Nelson and he signed the receipt. As this payment was supposed to be made to Mr. Winfred Nelson on behalf of the company, we insisted Mr. Winfred Nelson to get signature of Mr. N G Jaikumar, another Director of the Company, so as to prevent any misappropriation of money by Mr. Winfred Nelson in his individual capacity. Mr. Winfred Nelson assured that he will get the signature of Mr. N G Jaikumar and requested us to keep the receipt with us, so that he come with Mr. N G Jaikumar and get t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planations of the assessee in order to find out whether the payment of Rs. 3.00 lakhs is part of agreed consideration or not. If it is part of agreed consideration, in our view, then the explanations of the assessee need to be accepted, since the same represents only timing difference. We have earlier noticed that the assessees have accepted the additions, whenever the payments were not accounted for, meaning thereby, the assessees have disputed the evidences, when the facts are against the presumptions drawn by the AO. We further notice that the assessing officer did not make any enquiries from the Mr. Wilfred Nelson or Mr. N G Jaikumar in order to disprove the explanations given by the assessee. Further, no other material was brought on record to prove that the impugned payments were made outside the books of accounts. Hence, in the absence of any contrary material to disprove the submissions of the assessees, the explanations given by the assessees have to be accepted. The surrounding circumstances and evidences, in our view, supports the explanations of the assessees. Accordingly, we hold that the addition of Rs. 1,50,000/- each sustained by Ld CIT(A) in the hands of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould not be accounted for in the books of accounts. As pointed out by Ld A.R, the receipts contain a lot of corrections and the regular receipts would not normally contain such types of corrections. Hence there may be merit in the submission of the assessee that these receipts are only drafts and the payments have not been made. We further notice that the assessing officer has not taken any steps to verify the agreed consideration, payments made by way of cheques etc., mentioned in the receipts. Without establishing that other information available in the receipts are correct, it may not be proper to presume that the cash component alone has been paid under these receipts. We have earlier noticed that the AO has made the addition by making observations relating to some other property, which fact would show that the AO has made the addition in a mechanical manner. Hence, we are of the view that the AO and Ld CIT(A) were not justified in making this addition. Accordingly, we set aside the orders passed by Ld CIT(A) on this issue and direct the AO to delete the addition of Rs. 1,45,000/- each made in the hands of both the assessees in AY 2008-09. 16. In all other years, one common i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the view that no credence should be given to voucher no.1733, i.e., both voucher no.1733 and 1735 relates to the same transaction and hence only a sum of Rs. 20.00 lakhs has been given by the assessee to Mrs. Vasantha Lakshmi and Ms. Vidhya Lakshmi. Accordingly the tax authorities are not justified in taking the amount of transactions at Rs. 40.00 lakhs. The value of transactions under both the vouchers should be taken as Rs. 20.00 lakhs only. 16.4 With regard to the transaction amount of Rs. 20.00 lakhs, it is the submission of the assessees that the same was paid for purchasing their property, but it did not go through. From the explanations given by the assessee as well as the discussions made by the tax authorities, it is not clear as to whether the assessee has explained the sources for payment of Rs. 20.00 lakhs. If the assessee has explained the sources, then no addition is not called for. Since there is lack of clarity on this issue, we restore this issue to the file of the AO in the case of both the assessees for examining the same afresh. 17. The next common issue relates to the disallowance of part of agricultural income declared by the assessees. This issue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales and expenses have been carried out in cash. With regard to sale of produces, the assessees claimed that the produces were utilised in the hotels run by their group. The AO observed that the entities falling under H M Group are well established entities having access to banking facilities. Accordingly he observed that it is not clear as to why group concerns are making payments in cash. He also took the view that the productivity shown in respect of the lands is very high and not comparable with the lands situated in the surrounding areas. Further, the net income from agricultural activities has also increased manifold in a period of 2 to 3 years without any increase in the area of cultivation. Accordingly, the AO expressed the view that the assessees might have used the agriculture route to convert black money into accounted money. 18.4 The AO noticed that the assessees have each declared agricultural income at Rs. 7.00 lakhs in the years relevant to AY 2006-07 to 2008-09, which has increased to Rs. 16.20 lakhs, 16.50 lakhs, 28.50 lakhs, 41.00 lakhs and 65.00 lakhs from AY 2009-10 to 2013-14 respectively. The AO took the view that the agricultural income declared by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the area under cultivation. The appellant submits that the above reasoning of the learned Assessing Officer is not correct, since the agricultural income will increase depending upon the increase in the value of the sale of agricultural produce and the yield of the agriculture. It is not necessary that to have more agricultural income the land holding of the agricultural land should also increase. The finding of the learned Assessing Officer is perverse. The learned Assessing Officer is not correct in law in not accepting the agricultural income of the appellant to the extent of Rs. 6,20,000/-. Further the appellant does not have any other source of income other than declared in the statement of total income, to show as agricultural income. Consequently the addition made as income from other sources to the extent of Rs. 6,20,000/- is liable to be deleted under the facts and circumstances of the case. The learned Assessing Officer made the above additions purely on suspicion, surmise, assumptions and presumptions and consequently the additions made deserves to be deleted on the facts and circumstances of the case. I have gone through the facts of the case, assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his observation. He submitted that the assessees have offered proper explanations in respect of the each of the observations made by the AO. None of the explanation was found to be incorrect. Accordingly he submitted that there is no reason to disbelieve the agricultural income declared by the assessee. 18.7 On the contrary, the Ld D.R submitted that the assessee has merely furnished a statement of income and expenses. But those income and expenses have not been substantiated with evidences. Further the per acreage income declared by the assessees are very much higher than the average income declared by others. He submitted that the AO has not disallowed entire agricultural income. Considering the land holding, past income details and average income generated in surrounding areas, the AO has only restricted the agricultural income declared by the assessees. Accordingly, he submitted that there is no reason to interfere with the decision rendered by Ld CIT(A) on this issue in all the years under consideration. 18.8 We have heard rival contentions on this issue and perused the record. We notice that the assessees have furnished a Statement showing sale value of agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X
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