Income Tax Appellate Tribunal - Hyderabad
Social Action For Rural Education ... vs Assessee on 2 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA No.761/Hyd/2012 : Asstt. Year 2008-09
Social Action for Rural Education V/s. Asstt. Director of Income-tax,
Health and Loving Life of Circle 3(2), Hyderabad
Abundance Society, Hyderabad.
( PAN - AADTS 1409 C)
(Appellant) (Respondent)
Appellant by : Shri K.C.Devadas
Respondent by : Smt. Harita DR
Date of Hearing 31.12.2013
Date of Pronouncement 14.2.2014
ORDER
Per Smt.Asha Vijayaraghavan, Judicial Member:
This appeal filed by the assessee is directed against the order of the Commissioner of Income-tax(Appeals) IV, Hyderabad dated 2.3.2012 for the assessment year 2008-09.
2. Facts of the case in brief are that the assessee is a society registered under S.12AA of the Act on 18.7.2003. For the assessment year 2008-09, the assessee filed return of income declaring NIL income, after claiming exemption under S.10(23)(c)(iiiad) of the Act. The assessee society is running two nursing schools, one in the name and style of M/s.Supriya School of Nursing, Kakinada and another in the name and style of M/s. St. Mary's College of Nursing, Visakhapatnam.
3. During previous year relevant to the assessment year 2008-09, the assessee for the purpose of school building, acquired land admeasuring 12 Acres and 36 Guntas at Madhur Village, Shabad Mandal , R.R. District from one Shri Narasimha Reddy and three others, represented by GPA Holder, Shri P.Mahender and two others, for a consideration of Rs.19,35,000 through registered sale deed 2 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
dated 22.12.2007. Entire purchase consideration was paid to the GPA holder, Shri P.Mahender, by way of uncrossed cheques in his name. The Assessing Officer noted that there was survey action under S.133A of the Act, in the case of one Shri P.Krishna on 21.2.2008. During the said survey it came to the light through a paper, containing certain scribbling with regard to various real estate transactions that the land purchased by the assessee has been actually sold to the assessee society for a total consideration of Rs.99,23,520, and not Rs.19,35,000. Statement of Shri P.Krishna was also recorded during the survey on 21.2.2008. The Assessing Officer proceeding on the basis of the said paper found at the time of survey, observed that there was excess money paid by the society to the seller of the land over and above the sale consideration mentioned in the sale deed. The Assessing Officer provided the copies of the statements of Shri P.Manender and Shri P.Krishna alongwith the relevant information available with him to the assessee for its comments/explanation. Assessee contended before the Assessing Officer that it did not have any dealings with P.Krishna, who was neither a seller nor a broker. It was claimed by the assessee that P.Mahender has been paid a total amount of Rs.25,45,000 on 22/24.10.2007, through a bearer cheque by individuals, on behalf of the society, due to non- availability of cash with the society, for the land admeasuring 15 acres. The vendor registered land admeasuring Ac.12.36 Guntas on 22.10.2007, for which the value adopted was Rs.19,35,000 and the registration expenditure worked out to Rs.1,83,920, with the total working out to Rs.21,18,920, which was adjusted from the amount paid by the individuals as mentioned above. The vendor, according to the assessee, not willing to refund back the remaining amount, registered further land admeasuring Ac.2.08 guntas the value therefor being Rs.3,65,000 and registration charges being Rs.61,080, with the total working out to Rs.4,26,080 in the name of Shri S.S.Prasad, the Chairman of the assessee society/trust. It was mentioned in the sale deed that for the balance amount for the purchase of land admeasuring Ac.2.08 Guntas, post dated cheques were given to the vendor as security, and those post dated cheques 3 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
were returned by the vendor on receipt of the amounts due thereon. It was also argued that even if any amount was paid outside the books of account, those would be exempt under S.10(23C) of the Act, as the same represent the application of monies in pursuance of the objects of the society. It was also stated that the amounts were returned by the assessee trust to the persons who have advanced the monies for the purchase of the land in question, during the period 26.11.2007 to 25.3.2008.
4. The Assessing Officer was not satisfied with the explanation of the assessee on this aspect. The Assessing Officer noted that P.Mahender in his subsequent statement dated 20.12.2010 reiterated his earlier statement, submitting that the sale had been arranged through one Sri Bikshapati, mediator/broker, who also had confirmed the sale consideration of Rs.99 lakhs, besides accepting the receipt of brokerage of Rs.1 lakh in his letter dated 20.12.2010. During the assessment proceedings, the Assessing Officer further required the assessee to furnish the sources of amounts advanced by Shri S.S.Prasad and Smt.S.Vijaya Kumari for the payment of sale consideration to the extent of Rs.25,45,000. It was mentioned that the real beneficiary, P.Krishna had admitted his share of 60% out of total consideration of Rs.99,23,520 in his return of income and paid taxes thereon. It was pointed out that even though the cost had been mentioned at Rs.19,35,000 only in the sale deed, bearer cheqeus for Rs.25,45,000, were given to P.Mahender.
5. Vide its reply dated 27.12.2010, the assessee contended before the Assessing Officer that there was no sale agreement with the vendor and that there were no brokers in the deal, and it was reiterated that the sale consideration was paid through bearer cheques. The assessee had also argued before the Assessing Officer that the statements have no evidentiary value and no cognizance can be given to same as the entire income of the trust is exempt. With regard to payment of Rs.10 lakhs for which a receipt had been given by 4 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
Mahender, the assessee contended that the said vendor had never given any receipt either at the time of receiving the amount as recorded in the sale deed or on receiving the bearer cheques. It was claimed that the amount of Rs.10 lakhs paid on 26.12.2007 was not in addition to the payment of Rs.25,45,000. The assessee submitted that he had been paid Rs.13 lakhs by the cheque, by one cheque for Rs.1 lakh from Smt.S.Vijaya Kumari; two cheques of Rs.6,50,000 and Rs.5,50,000 from Shri S.S.Prasad on 24.10.2007, with a request to return back the post dated cheques for Rs.10 lakhs as shown in the sale deed and the balance Rs.3 lakhs towards sale consideration of land of Ac.2.00 to be registered in the name of S.S.Prasad. However, due to some misunderstanding and after negotiations, the receipt of cash of Rs.10 lakhs was signed on 26.12.2007.
7. The Assessing Officer observed that the assessee had tried to justify that there was no additional payment, though there were variations in the letters, wherein initially it was stated that the vendor was paid Rs.25,45,000 through bearer cheques, after adjusting the cost and the registration charges totaling to Rs.21,18,000 relating to land of Ac.12.36 gts. registered to the society, the vendor had refused to refund the excess amount attributable to Ac.2.10 gts. and had sought time to register after negotiations with the other land owners. Subsequently, however, it was explained that three bearer cheques were given to vendor for Rs.13 lakhs to meet the post dated chques of Rs.10 lakhs recorded in the sale deed and Rs.3 lakhs for the additional land of Ac.2.10 gts. The Assessing Officer further observed that the payment of Rs.9,35,000 in cash before executing the sale deed, for which no separate receipt was stated to have been given, was definitely additional amount paid. He observed that the contradiction in the statements with regard to excess payment only led to the belief that there were issues hidden with regard to the consideration paid. Further, there was no corroborative evidence to link up the payment of three bearer cheques for Rs.13 lakhs on 22.4.2007 with the cash of 5 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
Rs.10 lakhs received by P.Mahender, as acknowledged vide his receipt dated 26.12.2007. He also noted that the beneficiary, P.Krishna had already admitted such sale consideration and paid taxes thereon. The Assessing Officer further noticed that the bearer cheques with UTI Bank for Rs.25,45,000 had been encashed on 24.10.2007 and the payment of advance of Rs.9,35,000 had already been recorded in the sale deed dated 22.10.2007. Therefore, there was an excess payment. He noted that Mahinder had paid Rs.10 lakhs in lieu of post dated cheques dated 31.12.2007 as recorded in the sale deed and issued a cash receipt on revenue stamp for the same on 26.12.2007, returning back the cheques. This also had resulted in excess payment of cash against the land purchases, with the total amount working out to Rs.44,80,000 (Rs.9,35,000 + Rs.25,45,000 + Rs.10,00,000) through banks, besides a "due' receipt for Rs.9,65,000 given to Shri P.Mahender towards the land transaction.
8. The Assessing Officer further noticed that in his statement recorded during the course of survey, P.Mahender had stated that he had only cooperated with his brother in law, P.Krishna, in carrying on the business in his name, whereas the real owner was P.Krishna only. Further, Krishna had declared that the real consideration for the land said sold to the assessee society was Rs.99,23,520 as against the recorded consideration of Rs.19,35,000. He noted that the denial of the said statements of P.Krishna was not based on any material evidence. Further, K.Bikshapathi, a middleman/real estate dealer had also confirmed, by his letter dated 18.12.2010 that there was on-money paid on the said transaction and the sale price was Rs.99 lakhs. Even though he had later filed an affidavit dated 29.12.2010 stating that he had no knowledge of land transaction, he had not mentioned anything therein about the agreement letter impounded during the survey. Accordingly, the Assessing Officer concluded that the assessee society had made payment of amounts over and above the recorded consideration of Rs.19,35,000 and the statements of P.Mahender and P.Krishna, corroborated by the income-tax return filed subsequently, established 6 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
that the society had paid Rs.99,23,520 beside incurring further expenditure of Rs.1,83,920, towards stamp duty and registration charges for acquiring the land, whereas sources to the extent of Rs.21,18,920 only were available in the books of the assessee. Accordingly, he held that the difference of Rs.79,88,520 stood unexplained and invested outside the books of account. The Assessing Officer further noted that the payment made through bearer cheques and further surplus attributable to the land of Ac.2.10 gts. registered in the name of S.S.Prasad showed that the assessee was trying to avoid explaining the payments made through cheques issued on 22.10.2007 for Rs.25,45,000 and cash of Rs.10 lakhs paid on 26.10.2007, besides the liability towards stamps and registration which was also the obligation of the assessee only. The Assessing Officer further observed that the sources for the money of the trust could be only form the donations received, which were nothing but anonymous donations and in such situations, the provisions of S.15BBC would be technically operative. He therefore, held that the unrecorded amount of Rs.79,88,520 was assessable under S.69B of the Act. The Assessing Officer accordingly making the said addition under S.69B of the Act, completed the assessment on a total income of Rs.79,88,520, vide order of assessment dated 29.12.2010 passed under S.143(3) of the Act..
9. Aggrieved, assessee preferred appeal before the CIT(A), reiterating the above contentions. The CIT(A) too, however, found no merit in the contentions of the assessee, and accordingly upheld the assessment with the addition under S.69B of Rs.79,88,520 made by the Assessing Officer, in the following manner-
"6. I have gone through the facts of the case and the submissions of the appellant. It is seen that as per the sale deed dtd. 22.10.2007, Rs. 9,35,0001- had already been paid in cash on 22.10.2007 itself. This fact has not been disputed by the appellant. As per the said agreement, the appellant had also given two post dated cheques for Rs. 3 lakhs and Rs. 7 lakhs. It is contended that these two cheques were given only as a security, even though 7 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
sufficient funds for honouring these cheques were not available in the appellant's bank account. However, it is seen that in lieu of these cheques, dtd. 31.12.2007, Rs. 10 lakhs were paid in cash and a cash receipt on revenue stamp towards this on 26.12.2007 was also issued. Besides, these payments, bearer cheques of Rs. 24,45,000/- were also paid, which were got encashed on 24.12.2007 itself. Accordingly, no infirmity can be found in the conclusion of the Assessing Officer that the appellant made payment of Rs. 44,80,000/- (Rs. 9,35,000 + Rs. 10,00,000 + Rs. 25,45,000) towards the purchase of land under consideration. Besides, a 'due' receipt of Rs.9,65,000/- was also given to Sri P.Mahinder towards the impugned land transaction.
6.1 In the light of the above facts, therefore, it is clear that the appellant has not been able to establish that the consideration of Rs. 19,35,000/- recorded in the sale deed dtd. 22.10.2007 was only and the total payment made by the appellant for the purchase of the impugned land. On the-other hand, the finding regarding payment of consideration over and above the recorded consideration of Rs. 19,35,00/- is firstly directly evidenced by the payments discussed above. Besides, the fact of payment of 'on-money' is further supported by the findings during the course of survey u/s. 133A in the case of Sri P. Krishna on 21.2.2008. It was in the course of the said survey that it was found that the total consideration of the land was Rs. 99,23,250/-. In fact, besides, a paper containing the details of payments made by the appellant, photo copies of bearer cheques stated above of Rs. 25,45,000/- were also found. It was admitted by Sri P. Mahinder, the GP Holder and the Vendor that Sri P. Krishna had been authorised by him to carry on the Real Estate Business in his name. In view of the paper and the photo copies mentioned above, Sri P. Krishna, owned up the transaction and after accepting the real consideration at Rs. 99,23,520/-, he even admitted his share in the income from the said transaction in his return of income for the A.Y. 2008-09.
6.2 From the facts stated above, it can be logically deducted that there IS sufficient evidence to conclude that the real consideration paid for the purchase of the land by the appellant was Rs. 99,23,520/- only. The fact of payment of Rs. 44,80,0001-, besides the due receipt of Rs. 9,65,000/-discussed above, coupled with the findings during the above stated survey amply establishes that the appellant has failed to substantiate that the recorded consideration of Rs.19,35,000/- was the real consideration.
6.3 As regards th objection of the appellant that it had no dealings with Sri P. Krishna, the said contention is incorrect in view of the finding that he had been authorised to carry out land dealings by Sri P. Mahender, the Vendor. Besides, the papers relating to the transaction were also found from his possession. It is seen that Sri P. Mahender, in his subsequent statement dtd. 20.12.2010, reiterated his earlier statement. Sri Bhikshapati, named by him as the mediator/broker, also confirmed the consideration at Rs. 99 lakhs, while further accepting receipt of brokerage of Rs. 1 lac in his letter dated 20.12.2010. Even though he retracted from the said 8 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
admission in his affidavit dtd.29.12.2010, it is seen that he was evaSive m the affidavit about the agreement letter impounded during the coursc of survey. The statements of the above said persons and the findings during the survey, therefore, amply establish the fact of payment of 'on-money' of Rs. 79,88,520/- over and above the recorded consideration.
6.4. So far as the explanation of the appellant regarding payment of bearer cheques of Rs. 25,45,000/- is concerned, it is clear that the same is merely an afterthought. In fact, no prudent business man would pay any amount in excess to the vendor for a commodity which is not in his possession / ownership at the time of payment.
6.5 Even o0thrrwise, as has been argued by the appellant, if the above investment of Rs. 79,88,520/- was made in acquisition of land by the appellant trust. The very making of such investment demonstrates that the appellant does not exist solely for educational purposes nor it can be said that it has non-profit motives. In fact, no investment of this nature can be made by any entity unless commensurate returns / profits are expected from the investment. Therefore, the appellant does not satisfy the primary conditions of exemption u/s.10(23C)(iiiad).
6.6 Even otherwise, as has been argued by the appellant if the above investment of Rs. 79,88,5201- is considered as 'anonymous credits', the total receipts of the appellant would exceed Rs. 1 crore, thereby making it mandatory to have the approval u/s. 10(23C)(vi) of the Act. Since the appellant does not have any such approval, its case cannot be considered for exemption even under the said section.
6.7 In the absence of exemption either u/s.10(23C9iiiad) or u/s. 10(23c)(vi of the Act, the profits of the appellate are to be determined in a commercial manner. The Assessing Officer is, therefore, directed to recompute the total income of the appellant on the above lines after taking into consideration the unaccounted investment of Rs.79,88,520/-......"
10. Aggrieved by the order of the CIT(A), assessee filed further appeal before us.
11. Effective grounds raised by the assessee in this appeal read as follows-
"1. The order of the Hon'ble CIT(A) is erroneous in law as well as on facts of the case.9 ITA No.761/ Hyd/2012
Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
2. The Hon'ble CIT(A) erred in confirming the conclusion of the assessing officer arrived at that the assessee invested over and above the recorded consideration in the process of purchasing of the land situated at Madhur, Shabad Mandai, R R Dist.
3. The Hon'ble CIT(A) erred in observing that no infirmity was found in the conclusion of the assessing officer that the appellant paid amount of Rs.44,80,000/- as the same was not supported by any documentary evidence.
4. The Hon'ble CIT(A) ought to have observed that the seller of the property as can be seen from the registered document was Sri P.Mahender and two others and Mr.P.Krishna does not have any locus standi in respect of the land transaction.
5. The Hon'ble CIT(A) erred in upholding the action of the assessing officer in giving cognizance to the slips of papers noticed in the premises of Mr.P.Krishna and relying on the statement of Mr.P.Krishna as he was not a party to that land transaction.
6. The Hon'ble CIT(A) erred in upholding the action of the assessing officer in relying on the letter alleged to have been signed by Sri B.Bikshpathy and filed by Sri P.Krishna, as he (Sri B.Bikshapathy) himself denied the contents of the said letter dated 18.12.2010, by way of a notarized affidavit dated 29.12.2010 and filed before the assessing officer during the course of assessment proceedings.
7. The Hon'ble CIT(A) ought to have observed that the principle of natural justice was not followed by the assessing officer in not allowing an opportunity to the assessee as requested by them to cross examine Sri P.t'1ahender before utilizing the contents of the statement of Sri P.Mahender to arrive at a conclusion.
8. The Hon'ble CIT(A) erred in upholding the addition of Rs.79,88,520/- as suppressed sale consideration without any basis or supporting evidence ignoring the fact of existence of a registered document showing the sale consideration at Rs.19,35,000/-.
10. The Hon'ble CIT(A) ought to have appreciated the fact that the entire sale consideration was paid to the seller Sri P.Mahender by way of bearer cheques in his name and no cash was paid other than the amount mentioned in the document and hence the addition should not have been upheld.
11. The Hon'ble CIT(A) ought to have observed that in the given facts and circumstances of the case section 69B of the IT Act does not have any application and therefore there was no scope to make the addition of Rs.79,88,520/-.10 ITA No.761/ Hyd/2012
Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
12. The Hon'ble CIT(A) ought to have observed that even assuming that the society was in receipt of income of Rs.79,88,520/- over and above the income and expenditure statement the same would not come within the purview of taxable income as the same was deemed to have applied for the purpose of meeting the objects of the society i.e. purchase of land.
13. The Hon'ble CIT(A) ought to have observed that the presumptive receipts of the assessee, if any, were deemed to have been used for the purpose of attaining the aims and objects of the society and therefore in view of various legal decisions the same would not constitute income from undisclosed sources of the assessee and the addition ought to have been deleted.
14. The Hon'ble CIT(A) ought to have struck down the observation 1 presumption of the assessing officer that the alleged on money paid was from anonymous donations and therefore provisions of section 115BBC would be apply as the same is without any basis.
15. The Hon'ble CIT(A) erred in arriving at the conclusion that the appellant did not satisfy the primary conditions of exemption u/s.10(23)(iiiad) is erroneous and without any basis.
16. The conclusion of the Hon'ble CIT(A) that the profits of the appellant are to be determined in commercial manner in the absence of exemption is erroneous in law and liable to be deleted.
17. The Hon'ble CIT(A) erred in confirming levy interest u/s.234 A and 234 B of the IT Act as the case does not warrant levy of interest.
18. The Hon'ble CIT(A) erred in confirming initiated penalty u/s.271(1)(c) of the IT Act on the facts and circumstances of the case.
12. Before us, the learned counsel reiterated the arguments put forth before the CIT(A) and also submitted that P.Mahender and S.Venkatesh acquired the said land through a General Power of Attorney during the financial year 2006-07. It was also pointed out that the Assessing Officer for the reasons best known to him, summoned and examined P.Mahender and P.Krishna only, but not examined S.Venkatesh in order to ascertain the true and correct position with respect to the land transactions in question. Further, it was also pointed out that the Assessing Officer has relied on a letter dated 18.12.2010 obtained from one 11 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
Bikshapathi, who is stated to have acted as a middleman in the transaction. It was submitted that the Assessing Officer ignored the affidavit of the said Bikshapathi dated 29.12.2010, wherein he categorically deposed that he was not aware of the contents of the letter dated 18.12.2010 obtained from him and also clearly stated that the sale price per acre was Rs.1.50 to Rs.1.60 lakhs and the sale consideration was paid only through cheques. The learned counsel relied on various judicial pronouncements and submitted that when admission made by a deponent is not conclusive, no inference against the assessee could be drawn based on such admission.
13. The Learned Departmental Representative on the other hand, strongly relied on the orders of the Revenue authorities and submitted that the present appeal of the assessee is liable to be rejected, as the same is devoid of merit.
14. We heard both sides an perused the orders of the Revenue authorities and other material available on record. It is the addition made on account of undisclosed sale consideration paid by the assessee for the purchase of a land, which is the subject matter of dispute in this appeal. Apparent consideration paid as per the registered sale deed is only Rs.19,35,000, whereas during the course of survey action on the premises of one P.Krishna, who is stated to be brother-in-law of one Mahender, who is the G.P. holder of the land owners, a piece of paper containing certain scribblings relating to various land transactions, stating to be the land purchased by the assessee was unearthed. It is the case of the Revenue that according to the scribbling on the said paper, the consideration for the land purchased by the assessee was Rs.99,23,520 and not Rs.19,35,000 as revealed in the registered sale deed. In the first place, we find that survey action has taken place in the premises of P.Krishna, and not on the premises of the assessee. Whatever material is impounded, it is from the premises of P.Krishna, who was neither the owner of the property nor a person, 12 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
with whom the assessee had any dealing in relation to the purchase of the property in question. Further, the assessee by letter dated 23.12.2010 requested for cross-examination of Mahender, who is the power of attorney holder. However, such an opportunity was not provided to the assessee by the Revenue authorities. Merely based on the statement made by a third party in the course of survey, which took place on his premises, and based on scribbling made on a piece of paper, which was found in the premises of that person, without bringing any corroborative material on record, no addition could be made in the hands of the assessee. The Madras High Court in the case of Khader and Sons (300 ITR 157) held that S.133A does not empower any IT authorities to examine any person on oath, and hence, any statement recorded in the course of such survey has no evidentiary value. In the circumstances, the statement recorded in the course of survey action under S.133A cannot by itself, be a basis for making any addition. Further, even though Mahender and Venkatesh were the AGPA holders, who have registered the sale documents dated 22.10.2007, the Assessing Officer chose to examine P.Mahender and another person, named Krishna related to Mahender as brother-in-law, but not Venkatesh. It is not known why Venkatesh, who stands on par with Mahender, has not been examined by the Assessing Officer. As already noted above, in the absence of opportunity of cross-examination being provided to the assessee, the statement of Krishna, just as that of Mahender, also cannot be relied.
15. Now, we may refer to the statement recorded from Shri P.Krishna, relevant portion of which reads as follows-
"Q.12. I am showing you loose papers found in your business premises. Please go through the workings on the back side of page no.30 and explain the working.
Ans: This paper relates to the payments received by me on sale of 13 acres of land at Maddur. 13 acres of land located at Maddur was purchased by us in the name of Sri P.Mahender and it was sold to a society @ Rs.523/- per gunta which works out to Rs.99,00,000/-. The amounts received on the sale of this land were decided on this paper. In this deed, we 13 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
have to 40% sale consideration to the land lords i.e. Rs.39,69,408/- and 60% comes to our share i.e. Rs.59,54,112/-. But, the land was registered to the party as per sub-registrar value (SRO Value) i.e. Rs.20,00,000/-."
As can be seen from the above statement, the property was sold to society at the rate of Rs.523 per gunta, and it is not explained by the Assessing Officer, how the value comes to Rs.99 lakhs as stated in the statement. Assessee purchased 516 guntas, i.e. Acres 12 and 36 guntas, which multiplied by 523 will work out only to Rs.2,69,868. When this was pointed out to the Learned Departmental Representative in the course of arguments, it was submitted that wrongly area of 523 guntas was stated as rate in the statement. We are unable to understand how, when the statement was recorded wrongly, the same can be relied upon by the Revenue, so as to make a huge addition. Coming to the document impounded during the survey, as stated earlier, the document does not have any date nor it contains any signature. None of the entries therein also contained any match with the features of the transaction of the society. First of all, the document indicates that it pertains to a transaction of Ac.13 and 03 Guntas. Assessee purchased Ac.12 and 36 Guntas. It does not tally. Moreover, there are two different prices of Rs.19,120 and Rs.18,929 stated in the document. There is no clarity as to which rate is adopted. Below the entries, it is mentioned, one P.Krishna is having 484 guntas and Shri Sriram Venkatesham is having 39 guntas. Even though Shri Sriram Venkatesham is mentioned as one of the AGPAs in the ultimate sale document, the supporting agreement-cum- General power of Attorney Document placed in the paper-book does not indicate Shri Sriram Venkatesham as a AGPA. In the circumstances, how Shri Sriram Venkatesham owns 39 guntas, when the AGPA with regard to him, is not even brought on record, is not clear. The documents placed by the assessee in the paper-book with the link documents of AGPAs does not indicate Shri Sriram Venkatesham has any AGPA in his name, and Revenue has not examined at all Shri Sriram Venkatesham, which is also the contention of the assessee, so as to rely on the document. May be, the transaction pertains to some other sale or 14 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
may be, it pertains to the same transaction of the assessee, which the Revenue alleges. But unless these differences are reconciled and established, linking of such blind/dumb document to the assessee is not correct.
16. It is pertinent to note at this juncture that the CBDT vide Instruction dated 10th March, 2003, directed with regard to evidentiary value of the statements recorded during the survey operations, as follows-.
Instruction dated 10th March, 2003 vide No. F No. 286/2/2003/IT (Inv):
"Confession of additional income during the course of search & seizure and survey operation -regarding. Instances have come to the notice of the Board where assessee have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations, such confessions, if not based upon credible evidence are later retreated by the concerned assessees while filing returns of income. In these circumstances, such confessions during the course of search & seizure and survey operation do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Department. Similarly, while recording statement during the course of search & seizure and survey operations. No attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing Officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders".
In the light of the above Instruction of the CBDT, even if the survey action has taken on the premises of the assessee, emphasis of the Assessing Officer should be on the material gathered at the time of survey. In the present case, as already noted above, survey action is not in the premises of the assessee, but on the premises of a third party, and statements recorded were of that third party and another person related to him. The material impounded was a loose 15 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
paper containing certain scribbling, without any signatures, allegedly with regard to real estate transactions, and not any document having evidentiary value.
17. In this behalf, we are supported by the decision of Hyderabad Bench of the Tribunal in the case of B.Ramakrishnaiah V/s. ITO(134 TTJ 600), wherein it has been held as follows-
"8.1. Without prejudice to the above, further we are of the opinion that statement recorded u/s 131 of the IT Act consequent to the survey action cannot be sole basis for addition unless there is a material to support the departmental case. In the survey, the department is not able to find out any corroborative evidence regarding the exact income earned by the assessee in these assessment years. The case of department hinges only and only on the surrender statement. It is well settled law that an addition, in order to be sustainable in a law, must have some concrete material evidence as its basis. It is not so here. If the assessee is doing the business of protecting the property and settling the dispute, the true result of that business to be ascertained. The end result of the trading activities to be brought into tax. Further, if any statement recorded from the assessee could be retracted by the assessee. Further, the CBTD on 10th March 2003, vide instructions F.No.286/2/2003/IT (Inv.) that while recording the statement in the course of search and seizure and survey operations, no attempt should be made to obtain confessions as to the undisclosed income; that any action to the contrary would be viewed adversely and that in respect of pending assessment proceedings also, assessing officer should rely upon the evidence and material gathered in the course of search/seizure operation and connected cases. In these circumstances, on confessions during the course of search and seizure and survey operations do not serve any useful purposes. The CBDT instruction is binding on the department. In our opinion, addition on the basis of admission during the survey without any supportive material cannot be sustainable.
8.2. Further, it was held in the case of Paul Mathew & Sons Vs. CIT (263 ITR 101) Kerala that a statement recorded at the time of survey does not carry any evidentiary value whatsoever. Further it was held that the IT Act, whenever it thought fit and necessary to confirm such power to examine a person on oath has expressly provided for it; whereas 16 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
Sec.133A does not empower any ITO examine any person on oath. Thus, in contradistinction to the power u/s 133A, Sec.132(4) of the IT Act enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used as evidence under the IT Act.
8.3. Further, it was held in the case of Pullangode Rubber Products Company Ltd. Vs. State of Kerala (91 ITR 18) (SC) that an admission is extremely important piece of evidence but it cannot be said that it is conclusive and it is open to person who made the admission to show that it is incorrect.
8.3. Further, in the case of CIT Vs. S. Khader Khan & Sons (300 ITR 157), Hon'ble Madras High Court held that in view of the scope and ambit of the S.133 of the Act, materials collected during the course of survey action u/s 133A of the IT Act shall not have any evidentiary value. It could not be said solely on the basis of the statement given by assessee that the disclosed income was assessable as lawful income of the assessee.
9. In view of the above judgements of various courts and in view of the CBDT instructions, the Sec.133A of the IT Act does not empower any authority to examine any person on oath, any such statement has no evidentiary value and any admission made during such statement, cannot, by itself, be made the basis for addition unless the assessing officer have corroborative material in hand to make such additions. If there is any unaccounted investment, the same should have been brought to tax as undisclosed income and not on the basis of MoU or on the basis of unsubstantiated statements recorded either from the assessee or from the third parties.
9.1. Further, the assessee taken ground before us that there is gross violation of principles of natural justice. The assessing officer relied on the books of accounts of M/s Bharathi Estates Ltd. to make addition and these books of accounts never put to the assessee for comments and the opportunity of cross examination not provided to the assessee. We have gone through this issue. The requirement of natural justice depend on the circumstances of the case, the nature of the enquiry, the rules under which the assessing officer acted upon, the subject matter that is being dealt with, and so forth. One essential is that the person concern should have reasonable opportunity of presenting his case. One of the rules which constitutes a part of principles of natural justice is the rule of "audi alterem partem" which 17 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
requires that no man should be condemned unheard. It is indeed a requirement of the duty to act fairly which lies in all quasi judicial authorities and this duty has been extended also to the authorities holding administrative enquiries involving civil consequences or affecting rights of parties because the aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice, and just in a society which has accepted socialism as its article of faith in the Constitution, is dispensed not only by judicial or quasi judicial authorities, but also by authorities discharging administrative function. This rule requires an opportunity to be heard, to be given to a person likely to be affected by a decision is also, like the genus of which it is species, not an inflexible rule having a fixed connotation. It has variable content depending on the nature of the enquiry, the frame work of the law under which it is held the authority holding the enquiry, the nature and character of the rights affected and the consequences flowing from the decision. It is, therefore, not possible to say that in every case the rule of 'audi alterem partem' requires that a particular specified procedure to be followed. It may be that in a given case, the rule of 'audi alterem partem' may import a requirement that witnesses whose statement are sought to be relied upon by the authority holding an enquiry should be permitted to be cross examined by the party affected while in some other case it may not. The procedure required to be adopted for giving an opportunity to a person to be heard or cross examined must necessarily depend on the facts and circumstances of each case. Now in the present case, we are concerned with the relying on the books of accounts of Ms/ Bharati Estates and the statement recorded from them. In our opinion, the authorities concerned required to give an opportunity of cross examining the parties concerned and also comments on the statements and books of accounts to be relied upon by the Revenue authorities. This will enable assessee to prove the incorrectness or incompleteness of those books of accounts. The opportunity would therefore necessarily carrying with it right to examine witness and that would include the right to cross examine the witness examined by the Revenue authorities. ........"
18. As for the statement of Bikshapathi, contained in his letter dated 18.12.2010, we find that the very same person, as noted even by the Assessing Officer, retracted from the said statement, through his affidavit dated 29.12.2010 filed before the Assessing Officer during the course of assessment 18 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
proceedings, stating categorically that he was not aware of the contents of the letter dated 18.12.2010 obtained from him and also that the sale price per acre was Rs.1.50 lakhs to Rs.1.650 lakhs and the sale consideration was paid only through cheques. He also affirmed in the said affidavit that he did not receive any commission as he was not an agent in the said transaction, and he was only a witness to the sale deed on the date of registration. This affidavit, though finds a mention in the assessment order, was ignored by the Assessing Officer, who proceeded merely on the basis of the earlier letter dated 18.12.2010 of Shri Bikshapathi. We find some truth in the affidavit of Bikshapathi, inasmuch as the registered sale deed, copy of which is filed in the paper-book before us, bears his signature as a witness. In view of the retraction made by the said person, the Assessing Officer, in our opinion, should not have simply gone by the contents of the letter dated 18.12.2010, without bringing on record any corroborative evidence. We are also supported in this behalf by the decision of the Apex Court in the case of Mehta Parikh V/s. CIT(30 ITR 181), wherein it has been held that once an affidavit is filed by a person, the contents thereof have to be taken as true, unless established otherwise.
19. Further, we also find some merit in the alternative contention of the assessee that even assuming that the assessee paid any amount over and above the consideration disclosed in the sale deed, the payment of such amount was for the purpose of advancement of the objects of the assessee-society, viz. education, and consequently even on that ground, there is no justification for any addition, since its income is, as it is, exempt from tax. The claim of exemption under S.10(23C)(iiiad) in respect of 'any income' means the same is exempt provided the educational institution solely exists for educational purpose and not for the purpose of profit. The is no dispute in the present case that the assessee society is exiting solely for purpose of carrying on educational activities, through its institutions. When such educational institution is approved by the prescribed authority and when the assessee also applies its income for 19 ITA No.761/ Hyd/2012 Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
the income or accumulates the same for subsequent application, wholly and exclusively for its objects, the institution is entitled for exemption in respect of any income. In this behalf, we are supported by the decision of the Cochin Bench of the Tribunal in the case of ACIT V/s. Muslim Educational Society (1 ITR's Tribunal Tax Reports 527). In this view of the matter, we do not find any justification for the additions made by the Assessing Officer, on this count as well.
20. Further, it was the case of the Revenue that the amount of Rs.79,88,520, representing difference in the sale consideration sought to be added, was paid by the assessee from out of the anonymous donations collected by the assessee. Apart from the fact that no corroborative evidence has been brought on record by the Revenue authorities to support this inference drawn by them, it has been the contention of the assessee right from the beginning that it has been maintaining regular books of account, and has maintained record as to the identity of donors and the relevant details, and consequently provisions of S.115BBC are not applicable to its case. These contentions of the assessee have not been controverted by the Revenue even before us with any supportive material. That being so, in view of consistent view taken by various Tribunal in similar matters, following Delhi Bench decision of the Tribunal in the case of Hans raj Samarak Society v. ADIT(E)" [2011] 16 Taxmann.com 103(Delhi), we agree with the learned counsel for the assessee that since the assessee has maintained record of the donations with relevant details as to the identity of the donors, the provisions of S.115BBC are not applicable to the facts of the present case.
21. In the light of the foregoing discussion, we set aside the impugned orders of the Revenue authorities, and delete the addition of Rs.79,88,520 made by the Assessing Officer, accepting the grounds of the assessee in this appeal.
20 ITA No.761/ Hyd/2012Social Action for Rural Education Health and Loving Life of Abundance Society, Hyderabad.
22. In the result, assessee's appeal is allowed.
Order pronounced in the court on 14th February, 2014 Sd/- Sd/-
(B.Ramakotaiah ) (Asha Vijayaraghavan)
Accountant Member Judicial Member
Dt/- 14th February, 2014
Copy forwarded to:
1. Social Action for Rural Education Health and Loving Life of Abundance Society, C/o.B.Narsingh Rao & Co., Chartered Accountants, No.610, 6th Floor, Babukhan Estate, Basheer Bagh, Hyderabad 500 001.
2. Asst. Director of Income-tax, Circle 3(2), Hyderabad
3. Commissioner of Income-tax(Appeals) IV, Hyderabad
4. Commissioner of Income-tax III Hyderabad
5. Departmental Representative, ITAT, Hyderabad.
B.V.S