Income Tax Appellate Tribunal - Hyderabad
Sri S Jayachandra Reddy,, Hyderabad vs Assessee on 20 February, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B', HYDERABAD
BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER
AND SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
S.No ITA No. A.Y Appellant Respondent
1 1765/Hyd/2013 2003-04 DCIT,
2 1766/Hyd/2013 2004-05 Central Circle
3 1767/Hyd/2013 2005-06 Shri S.Jayachandra Reddy, Tirupati
4 91/Hyd/2014 2006-07 Tirupati.
5 92/Hyd/2014 2007-08 (PAN - ABXPC 6780 D)
6 127/Hyd/2014 2008-09
7 128/Hyd/2014 2009-10
8 339/Hyd/2014 2003-04
9 340/Hyd/2014 2004-05
10 90/Hyd/2014 2005-06
11 432/Hyd/2014 2006-07 Shri Saikam Siva DCIT,
12 341/Hyd/2014 2007-08 Chaitanya, Avilala, Tirupati Central Circle
13 342/Hyd/2014 2008-09 PAN: BJPPS 7029 J Tirupati
14 343/Hyd/2014 2009-10
15 362/Hyd/2014 2007-08 Ms. Saikam Saiswetha DCIT,
16 363/Hyd/2014 2008-09 Tirupati Central Circle
17 364/Hyd/2014 2009-10 PAN: CGPPS 5695 L Tirupati
18 284/Hyd/2014 2003-04
19 285/Hyd/2014 2004-05
20 366/Hyd/2014 2005-06 DCIT,
21 286/Hyd/2014 2006-07 Smt. S. Sai Ramani, Central Circle
22 125/Hyd/2014 2007-08 Tirupati Tirupati
23 126/Hyd/2014 2008-09 PAN: AMRPS 8072 M
24 287/Hyd/2014 2009-10
25 475/Hyd/2014 2003-04 Smt. Panjam Shobha Rani, DCIT,
26 476/Hyd/2014 2004-05 Tirupati Central Circle
27 477/Hyd/2014 2005-06 PAN: BLWPP 4969 D Tirupati
28 478/Hyd/2014 2007-08
29 431/Hyd/2014 2007-08 Smt.P. Deepthi, -do-
Tirupati
30 433/Hyd/2014 2007-08 Shri P. Vamshi Krishna DCIT,
Tirupati Central Circle
PAN: ANXPP 0135 H Tirupati
31 479/Hyd/2014 2008-09 DCIT, Shri
Central Circle S.Jayachandra
Tirupati Reddy, Tirupati.
(PAN - ABXPC
6780 D)
32 480/Hyd/2014 2009-10 -do- -do-
Appellant by : Shri P.Muralimohan Rao
Respondent by : Shri Solgy Jose T.Kottaram DR
2 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
Date of Hearing 10.12.2014
Date of Pronouncement 20.02.2015
ORDER
Per Bench:
ITA Nos.1765/Hyd/2013, 1766/Hyd/2013, 1767/Hyd/2013, 91/Hyd/2014,92/Hyd/2014, 127/Hyd/2014 & 128/Hyd/2014:
Shri S. Jayachandra Reddy:ITA No.1765/Hyd/2013 - A.Y 2003-04
These appeals are preferred by the assessee directed against separate orders of the Commissioner of Income- tax(Appeals) Guntur, for the assessment years 2003-04 to 2009-
10. Since certain common issues are involved, these appeals are being disposed of with this common consolidated order for the sake of convenience.
2. Facts of the case in brief leading to the filing of the present appeals are that the assessee is an individual engaged in real estate business and has been deriving income from business, house property and agriculture. A search and seizure operation under S.132(1) of the Income Tax Act,1961 was conducted at the residence of the assessee on 12.9.2009. Subsequently, notice under S.153A was issued on 16.9.2009, calling for returns of income for the assessment years 2003-04 to 2008-09. In response to the said notice, assessee filed return for the assessment year 2003-04 on 4.10.2010 admitting total income of Rs.1,33,129 and agricultural income of Rs.4,98,500. After making the following additions/disallowances, assessment was completed determining taxable income at Rs.16,87,987, besides agricultural income at RS.2,49,250, vide order of assessment dated 31.12.2010 passed under S.143(3) read with S.153A of the Act-
3 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
(a) Disallowance of expenditure on purchase of Rs.4,32,036 land u/s. 40A(3)
(b) Disallowance of other expenditure Rs.1,78,572
(c) Agricultural income treated as income from Rs.2,49,250 other sources
(d) Addition on account of unexplained cash credit Rs.6,95,000
3. Aggrieved by the above additions/disallowances, assessee preferred appeal before the CIT(A), who confirmed disallowance made by the Assessing Officer in terms of S.40A(3) in its entirety, but gave some relief out of the other three additions/disallowances made by the Assessing Officer, and thus partly allowed the appeal of the assessee.
4. Still aggrieved, assessee preferred appeal, ITA No.1765/Hyd/2013 before this Tribunal.
5. In addition to the grounds raised in the appeal originally, contesting the additions/disallowances sustained by the CIT(A), to which we shall advert later, the following additional grounds have been raised, with a petition for admission and adjudication on the same-
(1) The Ld. Assessing Officer ought to have appreciated the fact that no incriminating/seized material was found during the course of search in order to make the addition to the returned income.
(2) The Ld. Assessing Officer ought to have followed the ITAT Mumbai Special bench decision in ITA Nos.5018 & 5059/M/10 dated 06.07.2012 in the case of M/s. All Cargo Global logistics Ltd. V/s. DCIT Central Circle-44, Mumbai.
(3) The learned A.O. ought to have applied the principle of Telescoping to the income of the appellant group against the expenditure of the appellant group.
4 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati (4) The assessee may add, alter or modify or substitute any other points to the Grounds of appeal at any time before or at the time foe haring of the appeal."
In as much as the above grounds are legal ones and do not warrant investigation into any fresh facts, we admit the same, and since the additional grounds against Sl. No.1 and 2 above go to the root of the very assessments made, we take up the same for adjudication in the first place.
6. As for additional grounds relating to the legality and validity of the assessment made under Section 153A, on the ground of absence of any incriminating material relating to the assessee found at the time of search, relying on the order of the jurisdiction High Court of Andhra Pradesh in the case of Gopal Lal Bhadruka and Ahura Holdings wherein it has been held that the AO can take into consideration material other than that discovered during search. We do not find any merit in the same, and the said ground is accordingly rejected.
7. As for the additional ground raised by the assessee claiming telescoping the income of the group against the expenditure of the group, we do not find merit in the same, inasmuch as it is only any item/items of income added which can be telescoped against the addition made on account of any item/items of expenditure. Even in such a case, telescoping can be accepted only if the assessee establishes nexus between the same. What the assessee is claiming is telescoping of income/expenditure additions made in the assessee group. Since the group consists of different taxable entities, viz. assessees, each assessee and assessment are independent, and no telescoping could be allowed for the expenditure additions made in the hands of one assessee by virtue 5 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati of income additions made in the hands of a different assessee, even if both belong to the same group. Hence this ground of the assessee is rejected.
8. Now turning to the grounds of the assessee originally raised in this appeals, on the merits of additions/disallowances made, the first effective grievance of the assessee relates to disallowance of Rs.4,32,036 made by the Assessing Officer under Section 40A(3) of the Act, which has been confirmed by the CIT(A).
9. Facts of the case in relation to this issue are that the assessee showed purchase of land related to real estate business amounting to Rs.23,76,020 during the year, which comprised of cost of land of Rs.21,60,180 and registration charges paid to government of RS.2,16,020. Since the entire purchases were made in cash, the Assessing Officer held that these purchase were in violation of the provisions of Section 40A(3) and hence, disallowed 1/5th of the same amounting to Rs.4,32,036.
10. On appeal before the CIT(A), it was submitted that the lands purchased by the assessee are agricultural lands and payments have been made to farmers/agriculturists. It was also stated that agriculturists normally do not maintain any bank account and as per their request, assessee had made payments in cash. Placing on record certificates from Tahsildar of Tirupati Rural Mandal and Renigunta Mandal stating that the villages in question were located outside Tirupati municipal limits and their population was below 10,000, assessee claimed that the payments made for purchase of land was covered by Rule 6DD(g) of the Income-tax Rules. The CIT(A), observing that the exception provided by rule 6DD(g) is in respect of payment made to such person, who ordinarily resides in a village, which is not served by any bank, and 6 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati the assessee has not furnished any evidence and has in fact not made any submission with regard to this crucial element contained in Rule 6DD(g), except for stating that the land in question was located in a village, upheld the disallowance made by the Assessing Officer in terms of Section 40A(3) of the Act.
11. Aggrieved, assessee preferred second appeal on this issue.
12. Learned counsel for the assessee, reiterating the contentions urged before the lower authorities submitted that such payments are made to agriculturalists in rural villages with no banking facilities, and therefore, payments are exempt from provisions of Section 40A(3) as per clause (g) of Rule 6DD of I.T. Rules, 1962. In this connection, our attention was drawn to pages 24 to 39 of the paper-book, which contained the land certificates issued by the MRO, indicating thereby the names of the villages where land were purchased. Reference was also made to pages 20 to23 of the paper-book containing list of major banks in Chittoor District, which also clearly reflects that no banks were available in the villages where payments were made by the assessee. In the circumstances, it is submitted that the provisions of S.40A(3) are not attracted to the payments in question, which are covered by the exceptional circumstance contained in Rule 6DD(g) of the I.T. Rules.
13. Learned Departmental Representative on the contrary, strongly supported the impugned orders of the Revenue authorities and submitted that the disallowance in terms of S.40A(3) made by the Assessing Officer is in order, and the same should be upheld.
7 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
14. We have considered the rival submissions and perused the impugned orders of the Revenue authorities and other material available on record. It is the case of the assessee that the payments in question were made in villages where banking facilities are not available and as such, the same are covered by the exceptional circumstances envisaged in Rule 6DD(g) of the Income
-tax Rules. In support of this plea, assessee has submitted details with respect to the names of the villages where the lands were purchased and also the list of major banks in Chittoor District. The Revenue authorities have rejected the plea of the assessee in this behalf by general observations. Since the assessee has furnished details of the villages and the details of the branches of major banks in Chittoor District, we deem it just and proper to set aside the impugned orders of the Revenue authorities on this aspect, and remit the matter to the file of the Assessing Officer for proper examination of the claim of the assessee that banking facilities were not available where lands have been purchased and payments have been made and consequently, these payments are covered by the exceptional circumstance envisaged in Rule 6DD(g) of the I.T. Rules. The Assessing Officer shall accordingly re-decide this issue in accordance with law and after giving reasonable opportunity of hearing to the assessee. This ground is allowed for statistical purposes.
15. The next grievance of the assessee in this appeal relates to disallowance of expenditure on adhoc basis.
16. Facts of the case in relation to this issue are that during the course of assessment proceedings, it was noticed that the assessee has claimed a total expenditure of Rs.8,92,861 in respect of his real estate business. The Assessing Officer noted that the expenditure has been incurred entirely in cash and vouchers were 8 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati not produced for verification. Hence, in the absence of any evidence, the Assessing Officer disallowed 20% of such expenditure claimed, which resulted in an addition of Rs.1,78,572.
17. On appeal, the CIT(A), taking note of the fact that the assessee's business requires expenditure on development of and the very nature of expenditure would require that it has to be incurred substantially in cash. In this view of the matter and taking note of the fact that average expenditure incurred by the assessee from 2000-01 to 2005-06 worked out to 49.18% , as against 52.36% in assessment year 2003-04, sustained a disallowance of 10%, and accordingly restricted the disallowance made by the Assessing Officer to Rs.89,286. Still aggrieved, assessee preferred second appeal on this issue before this Tribunal.
18. Learned counsel for the assessee submitted that the expenditure is required to be allowed in full as the payments have been made to different individual labourers, most of who live in rural areas and insist on payments to be made in cash only. In the line of assessee's business, such expenditure in cash is unavoidable. As for the documentary proof of the expenditure claimed, it is submitted that the record, being very old and voluminous, the same was destroyed, and as such though vouchers were maintained, they are not available now. He therefore, submitted the entire disallowance made by the Assessing Officer is deleted.
19. Learned Departmental Representative, on the contrary, supported the orders of the Revenue authorities.
20. We have considered the rival submissions and perused the orders of the Revenue authorities and other material on record.
9 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati We find that the CIT(A), after considering all the facts and circumstances of the case and corresponding expenditure claimed and allowed in the earlier years, has restricted the disallowance made by the Assessing Officer at 10%. We find that the disallowance sustained by the CIT(A) is fair and reasonable and there is no justification for interference with the order of the CIT(A) on this issue. We accordingly uphold the order of the CIT(A) reject the grounds of the assessee on this issue.
21. The next grievance of the assessee in this appeal relates to the addition made by treating part of the agricultural income claimed by the assessee as income from other sources.
22. Facts of the case in relation to this issue are that the Assessing Officer noticed that the assessee has claimed agricultural income amounting to Rs.4,98,500, but failed to furnish evidence regarding agricultural operations carried out by him or regarding sale of agricultural produce. He, however, submitted an income certificate obtained from MRO/Tahsildar for the year 2005-06. Holding that it was not clear whether the assessee was in ownership of the agricultural lands in the year 2002-03, the Assessing Officer disallowed 50% of the agricultural income claimed by the assessee and accordingly made an addition of Rs.2,49,250.
23. On appeal, the CIT(A), taking note of the fact that the agricultural income claimed by the assessee works out to Rs.30,000 is on higher side considering the fact that the lands in question are situated in Chittoor District which is not known for its agricultural productivity, estimating the agricultural income at Rs.15,000 per acre, worked out the agricultural income on the land-holding of the assessee on 17.25 acres owned by him, determined the same at Rs.2,58,750. He accordingly, restricted the disallowance to 10 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati Rs.2,39,750 as against Rs.2,49,250 made by the Assessing Officer. Still aggrieved, assessee preferred second appeal on this issue before this Tribunal.
24. Learned counsel for the assessee inviting our attention to the details of the land holding of the assessee, submitted that the assessee was having land-holding around Tirupati region and agricultural operations were indeed carried on, and the agricultural income derived from such lands was duly certified by the MRO As such, he pleaded that there was no justification for any disallowance to be made out of the agricultural income claimed by the assessee.
25. Learned Departmental Representative, on the contrary, supported the orders of the Revenue authorities.
26. We have considered the rival submissions and perused the orders of the Revenue authorities and other material on record. There can be no dispute with regard to the land holding of the assessee. Considering the extent of land holding and the claim of the assessee as to the agricultural operations carried thereon during the relevant period, we find it just and proper to set aside the impugned orders of the Revenue authorities and restore this issue to the file of the Assessing Officer for fresh examination this issue. The Assessing Officer is directed to verify the records of the agricultural land owned by the assessee and Adangal Patti and other records to ascertain the crops grown and the income derived by the assessee, and thereafter arrives at any reasonable amount of disallowance, if any, warranted out of the agricultural income claimed by the assessee. The Assessing Officer shall give reasonable opportunity of being heard to the assessee, while 11 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati determining this issue. This ground is allowed for statistical purposes.
27. The next grievance of the assessee in this appeal relates to the addition of Rs.2,63,000 made by the Assessing Officer and sustained by the CIT(A) on account of unexplained cash credit.
28. Facts of the case in relation to this issue are that during the course of assessment proceedings, the Assessing Officer noticed that the assessee had introduced Rs.6,95,000 in his capital account on 1.4.2002. Since the assessee could not offer any explanation with regard to introduction of cash, the Assessing Officer treated the said amount as unexplained cash credit and accordingly made addition of Rs.6,95,000 under S.68 of the Act.
29. On appeal before the CIT(A), it was explained that this amount of RS.6,95,000 included agricultural incomes generated in the financial year 2001-02 of Rs.4,32,500 and credited on1.4.2002, relevant to assessment year 2003-04. As for the balance, it was stated that the same represented rental and agricultural income of his mother, Smt. S.Basamma. In support of agricultural income of Smt.Basamma, assessee furnished a certificate dated 13.9.2002 from MRO Rayachoti, stating that Smt.Basamma has agricultural income amounting to Rs.2,00,000. The assessee has also filed a copy of his return for assessment year 2002-03 filed on 14.8.2002, which reflected the net agricultural income of Rs.4,35,200. The CIT(A) remanded the matter to the Assessing Officer for verifying the correctness of the explanation of the assessee before him in the light of evidence adduced. After considering the remand report of the Assessing Officer in response and the submissions of the assessee thereon, the CIT(A) gave the benefit of agricultural income of the year 2001-02 of Rs.4,32,500 to the assessee, but 12 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati sustained the balance addition of Rs.2,63,000 made by the Assessing Officer. Still aggrieved, assessee preferred second appeal on this issue before this Tribunal.
30. Learned counsel for the assessee submitted that the assessee and his group are having agricultural lands in and around Tirupati and all of them are deriving income under various heads, and are regularly filing their returns of income and paying taxes thereon. The expenditure incurred/investments made by the assessee are from the explained sources of income only and are duly reflected in the cash flow statement of the assessee. He invited our attention to the cash flow statement furnished in the paper-book.
31. Learned Departmental Representative, on the contrary, supported the orders of the Revenue authorities.
32. We have considered the rival submissions and perused the orders of the Revenue authorities and other material on record. The Assessing Officer has made the addition of Rs.6,95,000, on account of capital introduced by the assessee, treating it as unexplained cash credit under S.68 of the Act. The CIT(A), accepting the explanation of the assessee with regard to availability of agricultural income of Rs.4,32,500 of the year 2001-02, restricted the addition made by the Assessing Officer to Rs.2,63,000. As for the balance amount of Rs.2,63,500 sustained by the CIT(A) as well, we find that the assessee claimed before the CIT(A) rental income and agricultural income of his mother as constituting the sources for the capital introduced on 1.4.2002. Mere possession of agricultural land by the assessee's mother or her deriving substantial agricultural income there from does not establish the sources for the cash credit introduced by the 13 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati assessee, unless it is established by the assessee that the said income of his mother constituted source for the capital introduced by him by way of cash. At the same time, the learned counsel for the assessee has also furnished before us, a cash flow statement, for explaining the sources of the capital introduced. These aspects of the matter have not been examined by the CIT(A) and the same have to be verified by the Assessing Officer. Considering totality of facts and circumstances of the case, we find it just and proper to remit this issue to the file of the Assessing Officer for re-deciding the same, after verifying the cash-flow statement furnished by the assessee and in the light of the explanation of the assessee with regard to the sources for the capital introduced by the assessee. He shall of course, re-decide this issue after giving reasonable opportunity of hearing to the assessee to substantiate his claim with regard to the sources, other than the agricultural income of Rs.4,32,500 which has been accepted by the CIT(A).
33. In the result, this appeal of the assessee, viz. ITA No.1765/Hyd/2013 for the assessment year 2003-04, is treated partly allowed for statistical purposes.
ITA No.1766/Hyd/2013: Assessment year 2004-0534. Assessee has raised as many as five effective grounds besides two general grounds which do not require specific adjudication, contesting the following additions/disallowances made by the Assessing Officer and confirmed by the CIT(A).
(a) Disallowance of 20% of land purchases under S.40A(3) amounting to Rs.4,76,230
(b) Disallowance of 10% of total expenditure amounting to Rs.73,083 14 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati
(c) Addition of Rs.4,00,000 (Rs.3,50,000 + Rs.50,000) as unexplained investment.
(d) Addition of Rs.1,76,500 as unexplained cash credit appearing in the books of account.
34.1 We find in the grounds of appeal the addition of unexplained cash credit appearing in the books of accounts is mentioned as Rs.2,63,000 which is wrong, the correct figure is Rs.1,76,500.
35. In addition to the grounds originally raised, assessee has also raised additional grounds and also filed a petition seeking admission and adjudication thereon. The additional grounds raised by the assessee in this appeal are identical to the ones raised for the assessment year 2003-04 in ITA No.1765/Hyd/2013. Hence for the detailed reasons discussed while dealing with that appeal herein above, we admit the same and proceed to adjudicate upon the same since the same are legal ones going to the root of the assessment made for the year under appeal. For the first additional ground relating to the legality and validity of the additions made in the impugned assessment made by making recourse to S.153A in the absence of any incriminating material found at the time of search in that behalf, for the detailed reasons discussed in Para No.6 for A.Y 2003-04 herein above, we do not find any merit in the contentions of the assessee on that aspect. Assessee's grounds on that aspect are rejected. Similarly for the detailed reasons discussed in Para No.7 for A.Y 2003-04 herein above in the context of corresponding ground of the assessee for the assessment year 2003-04, additional ground of the assessee in the matter of telescoping of the additions/disallowances made in the assessment is also rejected.
15 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
36. Now turning to the grounds raised originally in this appeal, the first effective grievance of the assessee covered by ground No.2 relates to the disallowance made in terms of S.40A(3). We have decided identical ground of the assessee for the assessment year 2003-04. Facts and circumstances of the case for the assessment year 2004-05 being identical, for the reasons discussed while dealing with the corresponding ground of the assessee for assessment year 2004-05 herein above, we remit this matter to the file of the Assessing Officer with directions identical to the ones given herein above for assessment year 2003-04, for fresh decision in accordance with law and after giving reasonable opportunity of hearing to the assessee.
37. The next effective grievance of the assessee, covered by ground No.3 of this appeal relates to disallowance of 10% of total expenditure claimed, amounting to Rs.73,083. We have decided identical ground of the assessee for the assessment year 2003-04 vide Para No.20. Facts and circumstances of the case for the assessment year 2004-05 being identical, for the reasons discussed while dealing with the corresponding ground of the assessee for assessment year 2004-05 herein above, we do not find merit in the grievance of the assessee on this aspect and accordingly confirm the impugned order of the CIT(A) and reject ground No.3 of the assessee in this appeal.
38. The next effective grievance of the assessee, covered by ground Nos.4 and 5 of this appeal relates to addition of Rs.4,00,000 made by the assessee treating the same as unexplained investment. Similar issue has already been adjudicated by us in ITA No.1765/Hyd/20013 vide Para No.32, hence the same shall also be followed for this A.Y. 16 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati
39. The next effective grievance of the assessee, covered by ground No.6 of this appeal relates to an addition of Rs.1,76,500 made by the assessee as unexplained cash credit appearing in the books of account.
40. We find that the CIT(A), after considering all the facts and circumstances of the case and corresponding expenditure claimed and allowed in the earlier years, has restricted the disallowance made by the Assessing Officer at 10%. We find that the disallowance sustained by the CIT(A) is fair and reasonable and there is no justification for interference with the order of the CIT(A) on this issue. We accordingly uphold the order of the CIT(A) reject the grounds of the assessee on this issue. We find that the CIT(A), after considering all the facts and circumstances of the case and corresponding expenditure claimed and allowed in the earlier years, has restricted the disallowance made by the Assessing Officer at 10%. We find that the disallowance sustained by the CIT(A) is fair and reasonable and there is no justification for interference with the order of the CIT(A) on this issue. We accordingly uphold the order of the CIT(A) reject the grounds of the assessee on this issue.
41. The next issue for the A.Y 2004-05 is unexplained investment in purchase of land. The AO observed as follows:
2. 1 It is discussed in the introductory paragraph, has entered into agreements for purchase of landed properties in and around Tirupati and in this connection he has maintained all the agreement and receipts and the same was found and seized from his residence. One such agreement dated 23.08.2003 entered between the assessee Sri T. Venkat Reddy for purchase of 3.23 acres of land @ Rs.4,05,000/- per acre was found and seized and placed at page Nos. 134 & 135 of A/SJC/RES/04. As per the agreement, the total consideration for the said land was Rs.13,08,150/-.
Copy of the agreement is photocopies and enclosed along with this order as Annexure-2. However, the assessee has furnished his reply on 22.11.2010 stating 17 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati that it is an agreement entered between him and only a sum of Rs.3,50,000/-. Cash was paid as advance to the landlords on 23.08.2003 and subsequently the agreement was cancelled. He has also replied that the advance amount of Rs.3,50,000/- was received back from the landlord on 20.09.2003. However, on examination of the cash books submitted by the assessee, neither the advance given by him on 23.08.2003 nor advance received on 20.09.2003 was reflected. The copy of relevant pages of the cash book is enclosed as Annexure-3 of the order. Hence it is evident that the explanation offered by the assessee is false and not acceptable. In this connection, another seized document Annexure A/SJC/RES/PO-1 also contains agreement entered by the assessee for purchase of the same land and it is placed at page No.60 of the said annexure. Accordingly, the entire amount of Rs.13,08,150/- is added as the unexplained investment of the assessee in purchase of the said land.
2.2 In the same annexure, page No.136 is the receipt- cum-agreement for Rs.1,57,950/- issued by M. Mangamma towards sale of her land admeasuring 0.39 cents. As per the receipt the landlord has acknowledged the amount of Rs.1,57,950/- received from the assessee on 23.08.203. However, the assessee has replied that this transaction has been negotiated and purchased the land for only Rs.61,000/- vide document No.4606/2008 on 07.07.2008. Hence it is claimed that it is not the unexplained investment of the assessee for the A.Y 2004-05. It is pertinent to mention here that as per the stamped receipt a sum of Rs.1,57,950/- was paid by the assessee and it is also evidenced from the seized document. The said payment was also not reflected in the cash book of the assessee. Accordingly the entire amount of Rs.1,57,950/- is treated as unexplained investment of the assessee.
Accordingly, the entire amount of Rs.14,66,100/- (Para 2.1 + 2.2) is treated as unexplained investment of the assessee and added back to the income returned".
42. On appeal, the CIT (A) held as follows:
18 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati "9.3 I have perused the documents seized, the submissions made by the appellant as well as the assessment order. The seized document clearly mentions payment of Rs.3,50,000 as advance in pursuance of an agreement dated 23.8.2003. Out of Rs.3,50,000, Rs.2,50,000 has been paid in cash and the balance vide cheque No.171498 dated 23.08.003 drawn on Andhra Bank, S P M V V Branch. The appellant has also submitted a statement of encumbrance of property, which indicates that even as on 20.11.2009 the property in question had not been transferred to Sri Saikam Jayachandra Reddy or his family members. Thus the evidence on record is regarding payment of only Rs.3,50,000. The appellant has not filed any evidence showing the source of this Rs.3,50,000 and whether it has been accounted for in his regular books of accounts. In fact the appellant, in his submissions has mentioned payment of Rs.3,50,000 in cash whereas the document itself indicates that Rs.1,00,000 was paid in cheque and balance alone was in cash. The claim of the appellant that this amount of Rs.3,50,000 was received back on 1.11.2013 is not relevant to the issue at hand. The appellant needs to first explain the source of this money on 23.08.2003 and subsequent return of the same does not become source of the money on a prior date. The AO has categorically pointed out that the cash book does not indicate either payment of Rs.3,50,000 or subsequent receipt. Hence, keeping the above in view, what emerges is that the evidence available indicates payment of Rs.3,50,000 as advance and that the property in question has not been transferred to the appellant or his family members and hence there is no evidence of any payment beyond the initial payment of Rs.3,50,000. The appellant has failed to offer satisfactory explanation regarding the payment of Rs.3,50,000 and hence it remains unexplained. Out of the addition of Rs.13,08,150 an amount of Rs.3,50,000 is being confirmed and the balance is being deleted.19 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati 9.4 As regards the second property, the appellant has submitted that the purchase transaction never took place and an advance of Rs.9000/- was paid on 23.08.2003 which was returned on 28.8.2003. The appellant has further stated that the AO in his order, has mentioned that the property was negotiated and purchased for Rs.61,000 vide document No.4606/2008 dated 7.7.2008.
According to the appellant, the transaction vide document No.4606/2008 is with one K Mangamma who is entirely different from the present M. Mangamma. I have perused the seized document as well as the submissions made by the appellant and the assessment order. The seized document mentions that land at survey No.503/5A measuring acres 0.39 cents has been negotiated for Rs.1,57,950 and that Rs.50,000 has been paid in cash as advance. There is no evidence of subsequent payment and/or registration of this land in favour of the appellant or his family members. Thus, the evidence available is only regarding Rs.50,000 paid in cash and the appellant has offered no explanation for the source of this Rs.50,000. Hence out of the total addition of Rs.1,57,950 an amount of Rs.50,000 is being sustained. Thus, keeping in view both the transactions referred to above, out of an addition of Rs.14,66,100, Rs.4,00,000 is sustained as being unexplained investment, while the remaining Rs.10,66,100 stands deleted".
43. On appeal, it was submitted before us that the agreement for purchase of above lands was cancelled and the advances given were returned back by the said parties to the assessee and no actual sale of land took place. Further assessee has only advanced an amount of Rs.9000/- to M. Mangamma as against Rs.50,000/- as observed by the CIT (A). Since no land is purchased by the assessee, no additions can be made in the hands of the assessee towards unexplained investment in land.
20 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
44. Further, it was submitted that the advances are made out of the income of the assessee and therefore, adding the same as unexplained results in double additions of income which is not correct. Therefore, it was prayed that the assessee may be allowed telescoping of its income for current year as well as earlier years against its expenditure/investment. Further it was prayed that telescoping should also be allowed for the income of the assessee group against the investment/expenditure. In this regard, reliance was placed on the order of the ITAT Hyderabad in the case of Anil Kishore Agarwal & Others vs. DCIT CC-4 in ITA No.493-95/Hyd/2011.
45. It was further submitted that the advances made by the assessee are made out of explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT (A) and are again submitted in the paper book. It can be seen in the cash flow statements wherein amount of Rs.3.50 lakhs and Rs.9,000/- are shown respectively before the name of Sr. T. Venkat Reddy and Smt. M. Mangamma respectively in application of funds in rows 32 and 33 at page 2. Advance returned back is reflected at row 36 of page 1 of consolidated cash flow statement under cash inflow.
46. We are in confirmity with the order of the CIT (A) as the claim of the assessee that it received back this amount of Rs.3,50,00 on 1.11.2003 is not relevant. The assessee has not explained the source of this money and the AO has clearly 21 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati pointed out that the cash book does not indicate either payment of Rs.3.50 lakhs or subsequent receipt. Hence, the CIT (A) was right in holding that the payment of Rs.3.50 lakhs is unexplained in the absence of satisfactory explanation.
47. As regard the 2nd property, there is no evidence of subsequent payment or registration of this land in favour of assessee or his family members. The assessee has no offered explanation for the source of Rs.50,000, hence we confirm the order of the CIT (A), in sustaining the addition of Rs.50,000. Hence the sum of Rs.4.00 lakhs is being held as unexplained investment. The appeal of the assessee on this issue is dismissed.
48. The next issue is with respect to unexplained cash credit appearing in the books of the assessee. The AO noted that the assessee had introduced Rs.3,75,000 and Rs.3.00 lakhs in his capital account on 30.06.2003 and 16.11.2003 respectively. The assessee offered no explanation regarding this introduction of cash and hence the AO treated this as unexplained cash credit u/s 68.
49. In his written submissions, the assessee had stated that out of this amount of Rs.6,75,000, Rs.4,98,500 is agricultural income generated in the financial year 2002-03 i.e. A.Y 2003-04 and credited on 1.4.2003 i.e. relevant to A.Y 2004-05. The balance Rs.1,76,500 is rental and agricultural income of his mother Smt. S. Basamma. Moreover the assessee has filed a copy of his return for A.Y 2003-04 filed on 22 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati 30.09.2003 which shows net agricultural income at Rs.4,98,500.
50. In the remand report, the AO has stated that although a copy of the return has been filed by the assessee for A.Y 2003-04, it cannot be concluded whether the agricultural income was included in the assessee's capital account for A.Y 2002-03 or not.
51. The assessee in his counter submissions, has filed a copy of his capital account for A.Y 2003-04 which shows that the agricultural income offered in the return for A.Y 2003-04 was not included in the capital account.
52. The CIT (A) has held that:
"the assessee in his original return filed u/s 139 for A.Y 2003-04 had claimed agricultural income of Rs.4,98,500 which has been repeated in the return filed in response to notice u/s 153A. In the assessment carried out u/s 143(3) r.w.s. 153A for A.Y 2003-04, 50% of such agricultural income was treated as income from other sources. In the appellate order passed by the undersigned, part relief had been granted. However, what is apparent is that the assessee has an amount of Rs.4,98,500 available to be credited to his capital account, whether entirely as agricultural income or part agricultural income and part income from other sources. Adding back this amount as unexplained cash credit would be taxing the same amount twice, especially since while completing assessment for A.Y 2003-04, it has been noted that this amount of Rs.4,98,500 has not been credited to the appellant's capital account. Thus, the amount of Rs.4,98,500 is being treated as explained and addition on this account is being deleted. However, no evidence has been brought on record to suggest that the appellant's mother 23 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati Smt. S. Basamma carried out agricultural operations and/or generated agricultural income and that this agricultural income was made available to the assessee. Hence an amount of Rs.1,76,500 is being confirmed as an unexplained cash credit appearing in the books of the appellant and appeal in respect of Ground No.4 is partly allowed".
53. We heard both the parties. Since no evidence has been brought to our record that Smt. S. Basamma, mother of the assessee was having agricultural income and carrying out agricultural operations, for the past several years and had given the same to the assessee, we set aside this issue to the file of the AO to verify this fact and decide accordingly.
ITA No.1767/Hyd/2013: A.Y. 2005-0654. The additions/disallowances sustained by the CIT (A) are:
Disallowance of expenditure on purchase of land Rs.8,86,100 u/s 40A(3) Disallowance of expenditure Rs. 78,780 Unexplained investment Rs. 84,500 Addition on account of unexplained cash credit Rs.8,47,873 Agricultural income treated as income from Rs. 61,150 other sources
55. The issue with respect to disallowance of expenditure u/s 40A(3) of Rs.8,86,100/- towards purchase of land and disallowance of expenditure of Rs.78,780/- has already been adjudicated in the AY 2003-04 at Paras 14 and 20 respectively and the same conclusion shall be followed in this appeal also.
56. The issue with respect to agricultural income treated as income from other sources amounting to Rs. 61,150/- has been adjudicated at Para 26 in AY 2003-04 and the same conclusion shall be followed in this appeal also.
24 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati Unexplained investment in purchase of land
57. The CIT (A) sustained an amount of Rs.84,500/- towards unexplained investment in purchase of land for AY 2005-06. The ld CIT (A) observed that the assessee has advanced an amount of Rs.60,500/- and Rs.24,000/- to Smt. Sayamma and Sri Chinnappa respectively towards purchase of land based on the seized documents found during the course of search. The CIT (A) sustained the additions for want of source of income for making the alleged investment.
58. In this regard, it was submitted that the agreement for purchase of above lands was canceled and the advances given were returned back by the said parties to the assessee and no actual sale of land took place. Since no land was purchased by the assessee, no additions can be made in the hands of the assessee towards unexplained investment in land.
59. Further, it was submitted that the advances were made out of the income of the assessee and therefore, adding the same as unexplained results in double addition of income which is not correct. Therefore, it was prayed by the assessee to telescope his income for current year as well as earlier years against its expenditure/investment. Further telescoping should also be allowed for the income of the assessee group against the investment/expenditure of the assessee. Reliance was placed on the order of the ITAT Hyderabad Bench in the case of Anil Kishore Agarwal & Others vs. DCIT in ITA No.493-95/Hyd/2011.
60. It was further submitted that the advances made by the assessee are made out of explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT (A).
25 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
61. Since the assessee has submitted that sufficient cash was available as could be seen from the cash flow statement for investment in purchase of land, we set aside this issue to the file of the AO to verify whether the names of Smt. Sayamma and Shri Chinnappa are reflected in the cash flow statement against the figure of Rs.60,500 and Rs.24,000 respectively and decide the issue in accordance with law. This ground of the appeal of the assessee is set aside for statistical purposes.
62. Hence, for the A.Ys 2003-04, 2004-05 and 2005-06, are partly allowed for statistical purposes.
Addition of Rs.8,47,873/- as unexplained cash credit.
63. With respect to addition of Rs.11,73,323/- treated by the AO as unexplained cash credit u/s 68, the assessee had submitted that out of total amount of Rs.11,73,323/-, Rs.3,25,450 is agricultural income claimed in the return of income filed for AY 2004-05, rental income of Rs.48,000, compensation received as political prisoner from A.P. Govt. amounting to Rs.3.00 lakhs, compensation received from A.P. Govt. for residential house which was destroyed - Rs.2,99,350/- and other gifts and savings totaling to Rs.2,00,523. As regards agricultural income, the AO, in his remand report has said that it cannot be concluded whether the capital account of the assessee for AY 2004-05 included the said agricultural income or not.
64 The ld CIT (A) after perusing the evidence furnished by the assessee, deleted the amount of Rs.3,25,450 representing agricultural income for AY 2004-05 and as regards the balance addition to the capital account, since the assessee has not furnished any details regarding the claims made, the CIT (A) was not 26 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati convinced. Two credits amounting to Rs.3.00 lakhs and Rs.2,99,350 were claimed as receipts from the Govt. Of A.P as compensation for destruction of residential house and for being a political sufferer which was disallowed by the CIT (A). Similarly cash deposit of Rs.2,00,523/- was claimed to be past savings and gifts which was not acceptable to the CIT (A). Hence CIT (A) sustained addition of Rs.8,47,873/-.
65. We have heard both the parties. We are of the opinion that the assessee has not furnished any details and the CIT (A) has rightly disallowed the claim as regarding the compensation for destruction of residential house and for being a political leader, we agree with the view of the CIT (A) that generally the amounts received from the Govt. in the form of cheque and not cash. The cash deposits of Rs.2,00,523/- are also not explained by the assessee satisfactorily. Hence we confirm the order of the CIT (A) on this issue.
66. In the result, appeal for AY 2005-06 is partly allowed for statistical purposes.
ITA No.91/Hyd/2014 - A.Y 2006-07.67. The grounds raised in the appeal are as follows:
(1) The ld CIT (A) has erred both in law and on facts in upholding the additions.
(2) The ld CIT (A) has erred in sustaining the part of addition of Rs.7,11,000/- towards investment for purchase of land. (3) The ld CIT (A) ought to have appreciated the fact that appellant has submitted the books of account and ledger copies in respect of purchases of properties and all these properties are registered in the appellant's name. (4) The ld CIT (A) has erred in upholding the addition of Rs.2,58,500/- towards income from business and profession, which had been offered to tax as capital gains. (5) The ld CIT (A) ought to have appreciated the fact that the appellant has converted stock-in-trade available as on 1.4.2005 into capital asset and that no business income accrued to him from the F.Y 2005-06.27 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati (6) The ld CIT (A) has erred in upholding the addition of Rs.3,79,300/- towards unexplained expenditure u/s 69C of the I.T. Act, 1961.
(7) The ld CIT (A) has erred in sustaining the addition of Rs.57,600/- towards agricultural income which is not correct and justified.
(8) The assessee may add............"
68. Ground No. 1 is general, hence no adjudication is called for.
69. With respect to Ground Nos. 2 & 3, the AO has discussed at page 6 & 7 of his order and concluded as follows:
"The assessee has accepted that the entire investment/purchases were made by him during the relevant A.Y. However, it is stated by him that all the transactions are duly reflected in the return of income. It discussed in the earlier paragraphs that even though the assessee purchased and sold several properties, he has not filed any profit and loss account and balance sheet in order to verify the sources of investment. It is not clear on what sense the assessee is stating that the transactions are reflected in the return of income. The return of income filed by the assessee for the relevant year on 4.10.2010 contains a statement of computation of total income only. Accordingly the A.O treated the purchases as unexplained investment of the assessee and added the entire amount of Rs.7,43,000/- to the income returned.
70. The CIT (A) has sustained an amount of Rs.7,11,000/- made towards unexplained investment in purchase of land for the A.Y 2006-07. The ld CIT (A) observed that the explanation offered by the assessee does not match the cash reflected in the seized documents and hence the investment made is treated as unexplained.
71. In this regard it was submitted that during the year under consideration the assessee had made payments of Rs.79,000 and Rs.3,57,000 and Rs.2,75,000 to Shri P. Nagraj Reddy & Others, Smt. V. Nagamunamma and Sri P. Srinivasulu Reddy respectively. The above transactions are duly reflected in the books of accounts of the assessee and the income arising out of it is offered to tax in the return of income of the assessee for the year under consideration.
28 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
72. The assessee relied on the decision of the ITAT Hyderabad Bench in the case of DCIT vs. Shri B. Vijaya Kumar. The assessee also submitted that the investments are made out of the income of the assessee and therefore adding the same as unexplained results in double additions of income which is not correct. Therefore, it was prayed by the ass to telescope its income for the current year as well as earlier years against its expenditure/ investments. Further telescoping should also be allowed for the income of the assessee group against the investment/expenditure of the assessee. Assessee put reliance on the order of Hyderabad ITAT Bench in the case of Anil Kishore Agarwal & Others vs. DCIT CC-4 in ITA No.493-95/Hyd/2011.
73. It was further submitted that the investments made by the assessee are made out of explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT (A) and are again submitted in the paper book.
74. It has been submitted that an amount of Rs.79,000/-, Rs.3,57,000/- and Rs.2,75,000/- is shown before document Nos. 3646/2005, 5625/05 and 2732/05 at row 15, 17 and 18 of page 3 of consolidated cash flow statement respectively under application of funds. Hence we set aside this issue to the file of the AO to verify the same and decide as to whether the amounts are to be treated as unexplained investment in land.
75. The ground Nos. 4 & 5 are with respect to addition of Rs.2,58,500/- towards income from business and profession. It was submitted that the assessee has received a sum of Rs.4,05,000/- towards the sale of land and against that after reduction of the cost of acquisition of Rs.1,46,500/- the balance amount of Rs.2,58,500/- has been offered to tax as capital gain. However, during the assessment proceedings, the AO observed that since the assessee was engaged in the business of purchase and sale of lands in previous assessment years, the income out of sale of agricultural land was treated as income from business.
29 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
76. In this regard it was submitted that during the year under consideration the assessee has sold several agricultural lands and claimed the capital gain thereon as exempt u/s 54B of the Act. It was also submitted that the assessee is having various agricultural lands and is deriving agriculture income consistently. It was further submitted that the AO has changed the head of income of the receipt merely on the basis of suspicion and surmises without bringing anything on record to show that the lands sold were not agricultural lands. The assessee stated that he has submitted all the relevant details of the agriculture lands before the AO including the sale deeds.
77. We heard both the parties. We find that the action of the CIT (A) is not correct in treating the capital gains on sale of agriculture lands as income from business for the following reasons as the CIT (A) should have considered the important features of land:
• All the lands are classified in the revenue records as agricultural and are subject to payment of land revenue. • The lands were actually used for agricultural purposes at the relevant time of sale.
• The income derived from the agricultural operations carried on in the land bore rational proportion to the investment made in purchasing the land.
• No permissions were obtained for the non agricultural use of the land.
• The lands are situated in rural agricultural area and not developed area.
• Lands were not developed by plotting or laying of roads. • Lands were sold only on acre basis and non on sq.feet basis. Hence, the assessee is correct in declaring the sales as long term capital gain since the land in question was held by the assessee for more than three years and exemption under sec 54B is to be allowed to the assessee.30 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
78. Hence the ground of the appeal of the assessee on this issue is allowed.
79. Ground No.6 is with respect to the addition of Rs.3,79,300 towards unexplained expenditure u/s 69C of the I.T. Act. The AO while completing the assessment for the AY 2006-07 has made an addition of Rs.3,79,300 towards unexplained investment in daughter's education. It was submitted that the expenditure incurred by the assessee is out of the explained investment of the assessee and his family and is duly reflected in the cash flow statement submitted before the CIT (A) and also in the paper book before us.
80. Since the assessee has stated that in the consolidated cash flow statement, the amount of Rs.3,79,300 is shown against the expenditure towards education of Kum. Saiswetha under Row No.21, page 3 under application of funds, we set aside this issue to the file of the AO to verify the same and decide accordingly.
81. The last ground of appeal is with respect of addition of Rs.57,600/- towards agricultural income. Similar issue has been discussed at Para.26 of our order in A.Y 2003-04 which is as follows:
". 26. We have considered the rival submissions and perused the orders of the Revenue authorities and other material on record. There can be no dispute with regard to the land holding of the assessee. Considering the extent of land holding and the claim of the assessee as to the agricultural operations carried thereon during the relevant period, we find it just and proper to set aside the impugned orders of the Revenue authorities and restore this issue to the file of the Assessing Officer for fresh examination this issue. The Assessing Officer is directed to verify the records of the agricultural land owned by the assessee and Adangal Patti and other records to ascertain the crops grown and the income derived by the assessee, and thereafter arrive at any reasonable amount of disallowance, if any, warranted out of the agricultural 31 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati income claimed by the assessee. The Assessing Officer shall give reasonable opportunity of being heard to the assessee, while determining this issue. This ground is allowed for statistical purposes".
Hence, similar direction as above will apply to this year also.
82. In the result appeal for AY 2006-07 is partly allowed for statistical purposes.
ITA No.92/Hyd/2014 - AY 2007-0883. The assessment was completed by the AO under sec. 143(3) r.w.s. 153A of the I.T. Act and the income was assessed at Rs.1,50,91,148/-. On appeal before the CIT (A), the CIT (A) sustained the following additions:
- Addition of Rs.3,79,230 as undisclosed business income
- Addition of Rs.83,14,000 made towards unexplained investment for purchase of land
- Addition of Rs.7,66,918 towards unexplained investment in furniture
- Addition of Rs.55,900 towards contribution to Chit Fund
- Addition of Rs.1,75,000 towards agricultural income.
84. Aggrieved, the assessee preferred appeal before us. Ground Nos.2, 3 & 4 are with respect to the addition of Rs.3,79,230 as undisclosed business income. The facts are that the total consideration from sales receipts was Rs.7,88,500/- while the cost of acquisition was Rs.4,09,270 leading to a capital gain Rs.3,79,230. Against this capital gain, exemption u/s 54B was claimed. The AO noted that the plots sold by the assessee was the stock-in-trade of earlier years and hence the transactions were held to be business income and not capital gains. This issue has been dealt with in the AY 2006-07 and adjudicated the issue at Paras 77- 78 in ITA No.91/Hyd/2014 above and the same conclusion shall be followed in this year also.
32 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati Unexplained investment in land Rs.83,14,000/- .
85. During the assessment proceedings, AO made several additions as unexplained investment in land out of which the following amounts were sustained by ld CIT (A).
Particulars Amount(Rs.) Purchase of land from P. Rama Lakshamma & Others 38,34,000 Purchase of land from P. Venkata Krishnaiah 38,34,000 Purchase of land from C. Chengal Raydu 46,000 Purchase of land from A. Prasad 6,00,000 Total 83,14,000
86. With regard to land purchased from P. Rama Lakshamma & Others, it was submitted during the year under consideration, the assessee purchased agriculture land for Rs.3,21,000 from 5 persons viz., Smt. P. Rama Lakshmamma, Sr. P. Munikrishna Reddy, Sri P. Giribabu, Sri P. Shiva Shankar and Sr. P. Bala Krishna Reddy vide document No.6584/2006 registered at Renigunta SRO. Out of the above mentioned persons, four persons have given a receipt on 7.12.2006 i.e. on the date of registration for Rs.3,21,000 confirming letter that the total amount received was for Rs.2.84 acres of land situated in survey No.365 of Thandam Village as in page 64 of A/SJC/RES/04. One of the person Smt. P.Rama Lakshmamma was not available at the time of signing the confirmation letter in page 64, she issued a receipt towards sale of the respective agricultural land mentioning total sale consideration of Rs.3,21,000.
87. It was submitted that the assessee along with two other parties have agreed to buy a land and construct a facility for mango storage for a cost of Rs.38,34,000 (including cost of land). Accordingly land was purchased from Smt. P. Rama Lakshmamma & Others at a cost of Rs.3,21,000. Assessee's 1/3rd share in the 33 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati cost of land was at Rs.1,07,000 and the same was recorded by the assessee in his books of accounts.
88. Later the storage facility for Mango could not materialize and therefore the land was purchased and no godown was constructed on the said land. The argument of the assessee was further substantiated from the fact that a portion of the said land in question was acquired by the Govt. of A.P. u/s 11 the Land Acquisition Act, 1894 for the purpose of construction of road. The compensation paid by the Govt. was at the rates nearby to purchase cost of the land by the assessee by order dated 25.2.2008. Therefore, taking the cost of land at Rs.38,34,000 is not justified and is against the facts of the case.
89. It was submitted that the CIT (A) ought to have appreciated the fact that when original registered sale deed was available before the AO, then no addition can be made basing on a photocopy of agreement to sale without having any corroborative evidence as observed by the ITAT Hyderabad Bench in the case of DCIT vs. Shri B. Vijay Kumar (ITA No.930 & 931/Hyd/2009).
90. With regard to purchase of land from P. Venkata Krishnaiah & Others, it was submitted by the assessee that during the year consideration, the assessee purchased agricultural land for Rs.3,21,00 from 5 persons vide document No.6604/2006 registered at Renigunta SRO. It was submitted that the assessee along with two others have agreed to buy a land and construct a facility for Mango storage for a cost of 38,34,000 (including cost of land), hence land was purchased from P. Venkata Krishnaiah & Others at a cost of Rs.3,21,000. The assessee's 1/3rd share in the cost of land was at Rs.1,07,000/- and the same was recorded by the assessee in his books of accounts.
34 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
91. Assessee reiterated the same reasons with regard to purchase of land from P.Rama Lakshmamma & Others in this case also.
92. It was submitted that the CIT (A) ought to have appreciated the fact that when original registered sale deed was available before the AO, then no addition can be made basing on a photocopy of agreement to sale without having any corroborative evidence as observed by the ITAT Hyderabad Bench in the case of DCIT vs. Shri B. Vijay Kumar (ITA No.930 & 931/Hyd/2009).
Unexplained investment in land of Rs.46,000/-
93. It was submitted that the assessee made an advance payment of Rs.46,000/- towards purchase of land to Sri C. Chengal Rayudu which was made out of explained income of the assessee and his family and are duly reflected in the consolidated cash flow statements as submitted at Row 14 of page 3 under application of funds. Hence, no additions can be sustained in this regard.
Unexplained investment in land Rs.6.00 lakhs
94. It was submitted that the assessee has made an advance payment of Rs.6.00 lakhs towards purchase of land to Sri A. Prasad. Since the deal did not materialize, the advances were returned back to the assessee. It was submitted that the advances were made out of the income of the assessee, hence adding the same as unexplained results in double additions of income is not correct. Hence it was submitted that the assessee be allowed telescoping of his income for the current year as well as earlier years against his expenditure/investment. Further telescoping should also be allowed for the income of the assessee group against the investment/expenditure of the assessee. Reliance was placed on the order of the ITAT Hyderabad Bench in the case of Anil 35 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati Kishore Agarwal & Others vs. DCIT in ITA No.493-95/Hyd/2011. It was also submitted that the advances were made by the assessee out of explained income of assessee and his family and are duly reflected in the consolidated cash flow statements submitted before the CIT (A) and in the paper book submitted before us. Hence, no addition can be sustained in this regard.
95. We have heard both the parties. With respect to land purchase from Smt. P. Rama Lakshmamma and other amounting to Rs.38,34,000 and purchase of land from Shri Venkat Krishnaiah, the assessee has relied on the decision of ITAT Hyderabad Bench in the case of DCIT vs. B. Vijaya Kumar (ITA Nos.930 & 931/Hyd/2009 for A.Ys 2003-04 and 2004-05 dated 18.9.2012). The Hon'ble Delhi High Court in the case of CIT vs. Kulwant Rai (291 ITR 36) and CIT vs. Ved Prakash Choudhary (305 ITR 245) held that no addition can be made in the hands of the assessee on the basis of unsigned agreement found as a result of search. The Delhi High Court in the CIT vs. D.K. Gupta (308 ITR 230) held that in the absence of corroborative or direct evidence to presume that the notings or jottings has materialized with the transaction giving rise to income not disclosed in the regular books of accounts, no addition can be made. Hence, taking the facts of the case into account, since the AO failed to provide any corroborative evidence in order to hold that the assessee has made unexplained investment in land, the addition cannot be sustained. Hence we delete the addition made by the CIT (A).
96. With respect to the unexplained investment of Rs.40,000 paid to Shri Chengal Raidu, it was submitted by the Counsel for the assessee that the amount has been duly reflected in the consolidated cash flow statement at Row 14 of page 3 under 36 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati application of funds. Hence we set aside this issue to the file of the AO to verify the same and decide the issue accordingly.
97. Similarly with respect to Rs.6.00 lakhs, the ld Counsel submitted that the amount is reflected against the name of A. Prasad at Row No.31 of page No.2 under application of funds and also Row 36 of page 1 and the source of income for advances returned back in the consolidated cash flow statement. Hence we set aside this issue to the file of the AO to verify the same and decided accordingly.
98. The fifth ground of appeal is with respect of addition of Rs.7,66,918 made towards unexplained investment towards purchase of furniture. The AO while completing the assessment for AY 2007-08 made an addition of Rs.7,66,918 towards unexplained investment in furniture. It was submitted that the expenditure incurred by the assessee is out of explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT (A) and are again submitted in the paper book. Since the assessee has submitted that in the consolidated cash flow statements, amount of Rs.7,66,918 is shown before the expenditure towards "purchase of furniture" at row 22 of page 3 under application of funds, we set aside this issue to the file of the AO to verify the details submitted by the assessee and decide the issue in accordance with law.
99. With respect to 6th & 7th grounds, are with respect to Rs.55,900 towards unexplained investment in chit funds. It was submitted during the year under consideration, the assessee has made investment in chit funds out of his income from the year and also previous year earnings.
37 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
100. The ld Counsel for the assessee submitted that in the cash flow statement, this amount has been reflected at Row No.23 of Page 3. Hence, we set aside this issue to the file of the AO to verify the details submitted by the assessee and decide the issue in accordance with law.
101. The last ground of appeal is with respect to addition of Rs.1,75,000 made towards agricultural income. Similar issue has already been adjudicated by us at Para No.26 for A.Y 2003-04 and the same conclusion shall be followed in this appeal also.
102. In the result, the appeal for A.Y. 2007-08 is partly allowed for statistical purposes.
ITA No.127/Hyd/2014 - A.Y. 2008-09Grounds raised by the assessee in this appeal is reproduced below:
"1. The ld CIT(A) Guntur erred both in law and on facts in upholding the following additions.
2. The ld CIT(A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified.
3. The ld CIT(A) Guntur erred in upholding the addition of Rs.14,53,267 towards income from business & profession by changing the head of income which had been offered to tax as capital gains by the assessee in the return of income.
4. The ld CIT(A) Guntur erred in confirming the disallowance u/s 54B claimed by assessee in respect of capital gain.
5. The ld CIT(A) Guntur erred in sustaining the addition of Rs.33,43,733 towards unexplained investment for purchase of land.38 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
6. The ld CIT(A) Guntur ought to have appreciated the fact that appellant has submitted the books of accounts & ledger copies in respect of purchases of properties which are registered in the appellant's name.
7. The ld CIT(A) Guntur erred in upholding the addition of Rs.46,700 made towards contribution to chit fund, despite the appellant already explained the source of funds.
8. The ld CIT(A) Guntur ought to have appreciated the fact that Rs.46,700 is towards purchase of residential plot due to certain problems the agreement got cancelled and the amount was returned, the initial source of investment was out of appellant savings.
9. The ld CIT(A) Guntur erred in upholding the addition of Rs.1,22,160 towards political expenditure, without appreciating the fact that the said amount was spent out of the savings and agriculture income of earlier years.
10. The ld CIT(A) Guntur erred in upholding the addition of Rs.16,10,000 towards education expenditure, despite the appellant already explained the source of funds.
11. The ld CIT(A) Guntur ought to have appreciated the fact that the source for investment towards cost of construction of Rs.90,47,352 remains completely explained and no addition u/s 69C can be made after considering the valuation made by DVO u/s 147 of the I.T. Act, 1961 in the fresh assessment also as the matter has already been explained in detail.
12. The ld CIT (A) ought to have appreciated that no addition can be made u/s 69C merely on the basis of valuation report without there being any supportive document found as per the assessment done u/s 147 of the I.T. Act, 1961.
13. The ld CIT(A) Guntur erred in sustaining the addition of Rs.2,06,000 towards unaccounted income by changing the source of agricultural 39 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati income to other source of income which is not correct and not justified".
103. The grounds 1 & 2 are general in nature, hence no specific adjudication is required.
104. With respect to Ground Nos. 3 & 4, similar issue has already been decided by us at Para Nos.77 & 78 in ITA No.91/Hyd/2014 for A.Y 2006-07. The same shall be followed in this appeal also.
Unexplained investment in land Rs.33,34,733
105. With respect to Ground Nos.5 & 6 it was submitted that during the assessment proceedings, the AO made several additions as unexplained investment in land out of which the following amounts were sustained by the CIT (A):
Particulars Amount (Rs.)
added by AO
Receipt issued by Chinna Garitappa Naidu 3,31,000
Receipts issued by M Gopala Chowdhary 1,56,000
Receipt issued by E. Ramachandra Naidu 1,25,000
Receipt issued by Talluri Muniratnam Naidu 10,000
Stamped Receipt cum agreement by N. Balarami 2,40,000
Reddy - Land at Renigunta Mandalam
Stamped Receipt cum agreement-A Muni Reddy & 7,06,000
Others
Stamped receipt cum agreement issued by 3,00,000
Venugopal Reddy
Agreement cum receipt by N Sudhakar 17,80,000
Cash Receipt cum agreement by Pattabi Rami 5,79,500
Reddy
Cash Receipt cum agreement by K. Niranjan Reddy 5,70,000
Total 47,97,500
Less: Adjustment towards undisclosed income 14,54,267
Addition towards unexplained investment 33,44,233
106. It was submitted that the advances were made out of the income of the assessee, hence adding the same as unexplained 40 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati results in double additions of income is not correct. Hence it was submitted that the assessee be allowed telescoping of his income for the current year as well as earlier years against his expenditure/investment. Further telescoping should also be allowed for the income of the assessee group against the investment/expenditure of the assessee. Reliance was placed on the order of the ITAT Hyderabad Bench in the case of Anil Kishore Agarwal & Others vs. DCIT in ITA No.493-95/Hyd/2011.
107. In this regard addition-wise reply submitted by the assessee is as follows:
• CIT (A) sustained an amount of Rs.3,31,000 made towards unexplained investment in purchase of land for A.Y 2008-09, as the explanation offered by the assessee does not match the cash reflected in the seized documents and hence the investment made is treated as unexplained. • It was submitted that during the year under consideration, the assessee made payments of Rs.3,31,000 to Chinna Garitappa which was duly reflected in the books of accounts of the assessee, the income arising out of it was offered to tax in the return of income of the assessee for the year under consideration and advances made by the assessee are made out of explained income of the assessee and his family and are duly reflected in the cash flow statements wherein amount of Rs.3,31,000 is shown before document No.5653/2007 at Row 4 of page 3 under application of funds.
Receipts issued by M Gopala Chowdhary, E. Rama Chandra Naidu, Talluri Muniratnam Naidu, Balarami Reddy, A. Munni Reddy & Others:
• It was submitted that the CIT(A) sustained an amount of Rs.12,37,000 towards unexplained investment in purchase of land for A.Y 2008-09. The CIT (A) observed that the assessee 41 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati made payments of Rs.1,56,000, Rs.1,25,000, Rs.10,000, Rs.2,40,000 and Rs.7,06,000 to M.Gopala Chowdhary, E. Ramachandra Naidu, T. Muniratnam Naidu, N. Balarami Reddy and A. Munni Reddy respectively towards purchase of land based on the seized documents found during the course of search. The CIT (A) sustained the additions for the need of source of income for making the alleged additions. • It was submitted by the assessee that the above transactions are duly reflected in the books of accounts and the income arising out of it was offered to tax in the return of income of the assessee for the year under consideration. • It was submitted that the advances made by the assessee are made out of explained income and duly reflected in the cash flow statements submitted before the CIT (A) and to the ITAT vide paper book (document No.5656/2007, 5655/2007, 4971/2007 and 4063/2007 - Row 5, 6 of page 3, Row 29 of page 2, Row 11 and 12 of Page 3).
• Purchase of land from V.Venugopal Reddy • CIT (A) sustained an amount of Rs.3,00,000 made towards unexplained investment in purchase of land for A.Y 2008-09, as the explanation offered by the assessee does not match the cash reflected in the seized documents and hence the investment made is treated as unexplained. • It was submitted that during the year under consideration, the assessee made payments of Rs.3,00,000 to V.Venugopal Reddy which was duly reflected in the books of accounts and the income arising out of it was offered to tax in the return of income of the assessee for A.Y 2008-09. It was submitted that the advances made by the assessee are made out of explained income and duly reflected in the cash flow statements submitted before the CIT (A) and to the ITAT vide 42 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati paper book vide document No.4574/2007 at Row 8 of page 3 under application of funds.
• Purchase of land from N. Sudhakar Naidu • It was submitted that the CIT (A) sustained an addition of Rs.17,80,000 towards unexplained investment in land based in the agreement copy found during the course of search proceedings. In this regard the assessee submitted that the addition was made based on the agreement to sale copy found during search which was not original and was not implemented upon. Agreement was made for purchase of land with storage facility and hence price was fixed at Rs.17,80,000. Since the agreement was cancelled and only land was purchased at Rs.2,14,000 which was duly reflected in the books of accounts and even the same amount was reflected in the sale deed vide document No.966/2007. • It was submitted that the ld CIT (A) ought to have appreciated the fact that when original sale deed was available, then no addition can be made based on the photocopy of the agreement to sale as observed by ITAT Hyderabad in the case of DCIT v. B.Vijaya Kumar (ITA No.930,931/Hyd/2009).
• It was submitted that the of Rs.2,14,000 made by the assessee are made out of explained income and duly reflected in the cash flow statements submitted before the CIT (A) and to the ITAT vide paper book vide document No.966/2007 at Row 7 of page 3 under application of funds. • Purchase of land from K. Pattabi Rami Reddy • It was submitted that the CIT (A) sustained an addition of Rs.5,79,500 towards unexplained investment in land based on the agreement copy found during the course of search proceedings. In this connection, it was submitted that the addition was made based on the copy of sale agreement and 43 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati not on original agreement. The agreement was made for purchase of land with digging of pond and construction of storage facility, hence price was fixed at Rs.5,79,500. However, the agreement was canceled and only land was purchased at Rs.61,000 only, which was reflected in the books of accounts and also in sale deed vide document No.4606/2008.
• It was submitted that the ld CIT (A) ought to have appreciated the fact that when original sale deed was available, then no addition can be made based on the photocopy of the agreement to sale as observed by ITAT Hyderabad in the case of DCIT v. B.Vijaya Kumar (ITA No.930,931/Hyd/2009).
• It was further submitted that the of Rs.61,000 made by the assessee are made out of explained income and duly reflected in the cash flow statements submitted before the CIT (A) and to the ITAT vide paper book vide document No.4606/2008 at Row 7 of page 3 under application of funds. Purchase of land from K. Niranjan Reddy: • The ld CIT (A) sustained an addition of Rs.5,70,000 towards unexplained investment in land based in the agreement copy found during the course of search proceedings. In this regard, it was submitted that:
• The addition is made based on the agreement to sale copy found during the time of search which was not original and was not implemented upon.
• The agreement was made for purchase of land with storage facility and therefore, price was fixed at Rs.5,70,000. • However, the agreement was cancelled and only land was purchased at Rs.61,000/- which is duly reflected in the books of account and even the same amount is reflected in sale deed vide document No.5281/2008.44 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati • The CIT (A) ought to have appreciated the fact that when original sale deed was available, then no addition can be made basing on a photocopy of agreement to sale as observed by the decision of ITAT Hyderabad Bench in the case of DCIT vs. Shri B. Vijay Kumar (ITA No.930,931/Hyd/2009).
• It was further submitted that the advances made by the appellant are made out of explained income of the appellant and his family and are duly reflected in the cash flow statements submitted before the CIT (A) and are again submitted before the ITAT in the paper book (consolidated cash flow statements wherein amounts of Rs.61,000 is shown before the document No.5281/2008 at Row 7 of page 3 under application of funds).
108. We find that the ld counsel for the assessee has relied on the consolidated cash flow statement submitted in the paper book before us. The ld Counsel has pointed out to exact row and page of the cash flow statement from which the amounts paid as advances are made out of explained income. The assessee has also stated that in the case of Chinnagaritappa Naidu and Gopal Choudhary, E. Ramachandra Naidu, Thalluri Muniratnam Naidu, Balarami Reddy, A Muni Reddy and Others, the transactions are duly reflected in the books of accounts and income arising out of it was offered to tax in the return of income of the assessee for the year under consideration. Hence we are of the opinion that the advances made by the assessee are out of explained income of the assessee and hence this ground of appeal is allowed.
109. With respect to purchase of land from Sudhakar Naidu, and Pattabhirami Reddy and Niranjan Reddy, the Counsel relied on the decision of Hyderabad ITAT Bench, in the case of DCIT vs. B. 45 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati Vijaya Kumar (ITA Nos. 930 & 931/Hyd/2009 dated 18.9.2012). Hence we set aside this issue to the file of the AO to verify the same and decide in accordance with law. We bring to the notice of the AO that with respect to unsigned document, we have already given our finding at Para 95 in ITA No.92/Hyd/2014 for A.Y 2007- 08 and the same shall be followed in this appeal also.
110. Ground Nos.7 & 8 is with respect to contribution to chit fund. The AO held that the payment of the amount of Rs.21,700/- and Rs.25,000/- to Shri Chamundi Group of companies has not been explained and added the amount. During the appellate proceedings, the assessee stated that these amounts were installments towards purchase of residential plots and were subsequently refunded since permission for developing the plot were not received by them. The CIT (A) held that this does not explain the source of initial investment of Rs.46,700 as unexplained investment and sustained the addition. It was submitted that in the consolidated cash flow statement at Row No.23 of page No.3, the amount is reflected. Hence we set aside this issue to the file of the AO to verify the same and decide accordingly.
111. Ground No.9 is with respect to addition of Rs.1,22,160 towards political expenditure. It was submitted that during the years under consideration, the assessee has made certain political expenditures amounting to Rs.33,840 for AY 2008-09 and the same is reflected in the books of accounts of the assessee and is made out of the explained source of income. It was submitted that the AO made the addition based on the invoices found during the search which does not belong the assessee and contained names of some other parties not belong the assessee group. Since it was submitted by the ld Counsel that the same is reflected in the cash 46 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati flow statement filed before us, we set aside the issue to the file of the AO to verify the cash flow statement and decide accordingly.
112. With respect to Ground No.10 which is a common ground for AY 2008-09 and 2009-10. The next common issue for AYs 2008-09 and 2009-10 is with regard to unexplained expenditure towards son's education. Brief facts of this issue are that assessee's son Mr. S. Sivachaitanya has done his higher education in USA and major expenditure of his education was sponsored by his cousin Smt. Dr. Deepthi Panjam and her husband Sri Iskapalli Srinivas. Dr. Deepthi Panjam is daughter of sister in law of the assessee and has been closely attached with the family of the assessee as her father died when she was only 4 years old and was brought up by Mrs. Jayachandra Reddy. She is now residing in USA with her spouse. Mr. S. Sivachaitanya who was brilliant in studies was encouraged by Dr. Deepthi to do his MBA from USA, where he was given 50% scholarship and was also awarded outstanding student for the year 2007. Dr. Deepthi also offered to pay all his expenses. It was further submitted that the total amount of expenditure incurred for the education of S.Siva Chatinaya was wrongly taken by the AO from the loose slip found during search as Rs.40,10,000/- instead of Rs.39,00,000/- as can be seen from the seized document (Annexure-A/SJC/REC/04). It was further submitted that AO has erred in adding the amount of Rs.1,10,000 (Paid to Deepthi Akka) as expenditure incurred instead of reducing it. It is written in loose slip as "paid to Deepthi Akka" which is in fact excess of borrowed money paid back to Dr. Deepthi by S. Siva Chatinaya while returning to India.
113. Following submissions were also made:
• The AO erred in not considering the fact that an amount of Rs.4.00 lakhs marked as "Cash via Kuldeep" dated 47 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati 23.10.2008 was not to be added as it was repeated twice in loose sheet seized. This fact can be established from the face of loose slip as this entry is reflected twice in the slip and therefore, it is market off.
• The AO ought to have appreciated the fact that the entries reflected in the loose slip as "Cash via Dad" amounting to Rs.3.50 lakhs (Rs.1.00 lakh + Rs.2.50 lakhs) were paid by the assessee out of the income of Siva Chatinaya towards his credit card payments in India. The amounts so paid are duly reflected in the books of accounts of S.Siva Chaitanaya. • The AO ought to have appreciated the fact that Mr.S.Siva Chaitanya during his studies in USA has taken cash in forex and a DD for his first quarter fees from SBI Tirupathi Branch out of his income. The same was duly recorded in his book of accounts and was available for scrutiny before the AO at the time of assessment proceedings. However, the AO without considering the same has made addition which is not correct. • The AO ought to have considered the fact that Dr.Deepathi and Dr. I Srinivas, aunt and uncle of Mr.S.Siva Chaitanya have sponsored his studies in USA for amount of Rs.23,00,000. Dr. Deepthi and Dr. Srinivas have already submitted affidavit stating payment of Rs.23.00 lakhs, their return of income filed in USA identity card in this regard. The AO has found no adverse finding in relation to the submission of the assessee in his remand report. The AO ought to delete the addition made in this regard.
• The AO erred in not considering the fact that Mr. Siva Chaitanya while returning back to India has returned the excess cash borrowed from Dr. Deepthi amounting to Rs.1.50 lakhs which is duly reflected bottom of the seized loose slip. A reconciliation statement of the above is given below:
48 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati Particulars Amount Amount (Rs.) Total addition made by the AO 40,10,000 Less:
Amount added instead of deleting 1,10,000
- as per point (i) Amount entered twice - as per 4,00,000 point (ii) Credit card payments in India - As 3,50,000 per point (iii) DD taken from SBI (as per point 7,00,000
iv) Money received from cousin (as 23,00,000 per point -v) Amount returned back (as per 1,50,000 40,10,000 point vi) Net addition Nil
114. Without prejudice to the above, it was submitted by the assessee that the assessee group is having enough source of income to meet the expenditure towards son's education and it was requested for telescoping the income of the assessee group. In this reliance was placed on the order of the ITAT Hyderabad Bench in the case of Anil Kishore Agarwal & Others vs. DCIT CC-4 in ITA No.493-95/Hyd/2011. Hence it was submitted that the addition may be deleted.
115. The CIT (A) for the A.Y 2008-09 held as follows:
"12.3 I have perused the documents as well as the submissions made. The document in question clearly indicates that it has been recorded by Siva Chaitanya, since the reference is to "Dad and Deepthi Akka". Secondly, the entire amount has been paid in cash. Thirdly, since the amount has been paid in Indian Rupees for conversion into US Dollars, it indicates that the amount was generated in India and does not pertain to money spent by Dr.Deepthi, who is a non resident. Further, there is clear reference to cash being sent by the appellant, wherein entries with the narration "cash by dad" have been recorded. The document indicates that the amount spent during F.Y 2007- 08 is relevant to A.Y 2008-09 is Rs.23.10 lakhs. Further, the appellant's claim that Rs.7,00,000 was 49 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati borrowed from SBI, Tirupati as an education loan on 8.8.2007 is acceptable and it explains the entry dated 15.8.2007 for Rs.7,00,000. The balance amount of Rs.16.10 lakhs is unexplained and the document clearly indicates that unaccounted cash has been utilized towards purchase of US Dollars and remitted for education of Siva Chaitanya by the appellant and hence addition of Rs.16.10 lakhs as unexplained expenditure is upheld. Appeal, in respect of Ground No.6 is partly allowed".
116. For the A.Y 2009-10 the CIT (A) held as follows:
"12.3 ..... The document in question clearly indicates that it has been recorded by Siva Chaitanya, since the reference is to "Dad and Deepthi Akka". Secondly the entire amount has been paid in cash. Thirdly since the amount has been paid in Indian Rupees for conversion into US Dollars, it indicates that the amount was generated in India and does not pertain to money spent by Dr.Deepthi, who is a non-resident. Further, there is clear reference to cash being sent by the appellant, wherein entries with the narration "Cash by dad"
have been recorded. The document indicates that the amount spent during F.Y 2008- 09 relevant to AY 2009-10 is Rs.17.00 lakhs. Hence, the entire amount of Rs.17.00 lakhs is unexplained and the document clearly indicates that unaccounted cash has been utilized towards purchase of US Dollars and remitted for education of Siva Chaitanya. Appeal in respect of Ground No.6 is dismissed".
117. We perused the reconciliation statement and found that:
(i) Rs.1,10,000 has been wrongly taken by the AO from the loose slip found during search as Rs.40,10,000 instead of Rs.39,00,000 as can be seen from the seized document (Annexure A/SJC/REC/04).
(ii) Amount of Rs.4,00,000 has entered twice. The AO erred in not considering that an amount of Rs.4.00 lakhs marked as "Cash via Kuldeep" dated 23.10.2008 was not to be added as it was repeated twice in loose sheet seized.
(iii) Credit card payments in India amounting to Rs.3,50,000 reflected in loose slip as "Cash via Dad" were paid by the assessee 50 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati out of the income of Siva Chaitanya and the amounts paid are duly reflected in the books of account of Siva Chaitanya.
(iv) DD of Rs.7.00 lakhs was taken from SBI Tirupati Bank from out of his income and the same is recorded in the books of accounts and was available before the AO.
(v) An amount of Rs.1,50,000 had been returned back by Siva Chaitanya while returning to India to Dr.Deepthi which is reflected in the bottom of the seized loose slip.
117(i) Hence we find that the source for the amount of Rs.17,10,000 (Rs.1.10 + 4.00 + 3.50 +7.00 + 1.50) has been properly explained out of the total amount of Rs.40,10,000. The balance of Rs.23.00 lakhs (i.e. 40,10,000 - 17,10,000) which according to the assessee is a loan to be returned back in due course. Dr.Deepthi has submitted sworn affidavit in this regard. Therefore, we are convinced of the source of funds towards son's education expenditure. Hence this ground of appeal is allowed.
118. With respect to Ground Nos.11 & 12 pertains to unexplained investment in construction of house property. Brief facts are that the assessee has constructed a residential house at Tirupati. Certain documents were seized during the course of search which indicated purchase of steel, cement, sand, glass etc, towards construction of the house. Aggregate of payments reflected in these documents has been computed at Rs.14,27,728 by the AO. The house property which was completed in the year 2007 was sent for valuation u/s 142A of the I.T. Act. The valuation report having not been received, the AO proceeded to determine the total investment in construction of the house based on documents seized. AO noted that as per page 174 of annexure A/SJC/RES/04, TRK Rao, an approved valuer has valued the construction of the house at Rs.87,50,000. The plinth area has been worked out at Rs.12,500 51 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati per sft and the cost of construction at Rs.700/- sft. The entire valuation report has been seized at pages 166 to 176. Pages 158 to 165 is another report by C. Raghavendra Rao, also a Govt. approved valuer. AO noted that both reports mentioned the cost of construction at around Rs.700 per sft. AO hence adopted Rs.87.50 lakhs as the cost of construction and to this figure he added Rs.14,27,728 being bills and cash receipts seized during the search which have been mentioned above. AO was of the opinion that this amount of Rs.14,27,728 reflected expenditure other than civil construction, which is included in the figure of Rs.87.50 lakhs. Thus, the AO held that the cost of construction was Rs.1,01,77,728 and treated the entire amount as unexplained investment.
119. During the appellate proceedings, the assessee stated that the valuation report was obtained to enable his son Siva Chaitanya to get a visa for USA. The valuation report indicates the asset value as on date and not the cost of construction. Assessee further stated that he and his wife Smt. S. Sai Ramani have obtained housing loan of Rs.50.00 lakhs from the SBI, Settipalli Branch, Tirupati for which relevant documents have been submitted. The assessee has further stated that the ledger account for house construction was submitted to the AO during the assessment proceedings and a copy of the same has also been submitted during the appellate proceedings. In the remand report AO has mentioned that Rs.51.00 lakhs has been obtained from SBI, Settipalli and has stated that the assessee's contention cannot be acceptable. In his counter submissions, the assessee stated that the addition was made provisionally since the valuation report has not been received from the valuation cell. Subsequently, the valuation report from the DVO was received and the assessment for the present A.Y was reopened u/s 147 and assessment proceedings completed on 18.03.2013. In the said re-assessment order, the 52 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati cost of construction of the house property was adopted at Rs.1,13,87,000 and the cost of construction reflected by the assessee was taken at Rs.90,47,352. The difference of Rs.23,39,648 was apportioned in equal parts between A.Y 2006-07 to A.Y 2009-10. The assessee also referred to various judicial pronouncements to claim that a rebate of 15% on the valuation done by the DVO should have been allowed for self supervision.
120. The CIT (A) in this regard adjudicated the issue as follows:
"Since fresh assessment on the issue of house construction has been carried out based on the final report of the DVO and necessary additions made in the relevant A.Ys, this addition based on provisional valuation becomes unsustainable and stands deleted and Ground of appeal No.7 is allowed"
121. We find that the CIT (A) has deleted the addition and ground of appeal 7 before him has been allowed. Hence we are of the opinion that the assessee has no grievance to file Ground Nos. 11 and 12 before us. Hence ground numbers 11 & 12 are dismissed.
122. Last ground of appeal is with respect to the addition of Rs.2,06,000 towards unaccounted income by changing the source of agricultural income to income from other sources. This has already been dealt with by us at Para 26 of our order for the AY 2003-04 in the case of Jayachandra Reddy and the same shall be followed in this ground also.
123. In the result appeal is partly allowed for statistical purposes.
53 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati ITA No.128 /Hyd/2014 (A.Y 2009-10):
124. The first ground is general in nature, hence no adjudication is required.
125. With regard to Ground Nos 2 & 3, similar issues have already been adjudicated by us at Para No.77-78 in ITA No.91/Hyd/2014 for A.Y 2006-07. The same shall be followed in this appeal also.
126. With respect to Ground No.4 & 5, the facts are as follows:
• During the assessment proceedings, the AO made several additions as unexplained investment in land out of which the following amounts were sustained by CIT (A):
Addition Amount
Purchase of land at Gaju Mandalam 9,000
Land at Pankam Village 9,000
Receipts cum agreement from Venkata Muni 9,000
Reddy
Receipts cum agreement from Giri Govardhan 9,000
Reddy
Receipt cum agreement by O. Subramanyam 9,84,000
Total 10,20,000
Less: Adjustment towards undisclosed 7,83,258
income
Additions towards unexplained investment in 2,36,742
land
• It was submitted that the investments are made out of the income of the assessee and therefore, adding the same as unexplained results in double additions of income which is not correct. Hence, prayed that assessee may be allowed telescoping of income for the year under consideration as well as earlier years against his expenditure/investment. Further telescoping should also be allowed for the income of the assessee group against the investment/expenditure of the assessee. Reliance was placed on the order of the ITAT 54 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati Hyderabad Bench in the case of Anil Kishore Agarwal & Others vs. DCIT in ITA No.493-95/Hyd/2011.
• It was further submitted that the ld CIT (A) has sustained the above addition in need of source of income. Assessee reiterated that the assessee group was having enough explained source of money for making the above payments and therefore, no addition can be made in this regard. The same were duly reflected in the cash flow statements submitted before the CIT (A) and ITAT. • The ld Counsel for the assessee stated that in the cash flow statements, amounts of Rs.9,000/-, Rs.9000/ Rs.9000/- Rs.9000/- and Rs.9,84,000 are shown before the names of Gaju Mandalam, Panakam Village, Muni Reddy, Goverdhan and document No.4545/2008 at Rows 25 to 28 of page 2 and Row 3 of page 3 under application of funds. Hence we set aside the issue to the file of the AO to verify the same and decide accordingly.
127. Ground No.6 is with respect to addition of Rs.22,71,822 made towards silver and gold ornaments.
• During the year under consideration the AO made an addition of Rs.22,71,822 (Rs.9,29,200+Rs.10,41,079+Rs.3,01,543) to the income of the assessee as unexplained expenditure in purchase of gold and silver ornaments. It was submitted that the assessee along with his family members have donated silver and gold articles to Tirumala Tirupathi Devastanam during the year under consideration. During this process the assessee approached the jeweler to estimate the cost for different articles, the estimates for which was Rs.10,41,079. Later AO found these estimates along with the purchase invoice for Rs.12,30,743 during the search and quantified the 55 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati entire amount as undisclosed investment in purchase of silver and gold.
• It is a fact that the estimates found by the AO is for the original purchase of silver articles. Also during the search AO has not found physically any of these items. Hence, AO added the estimate as well as the purchase invoice for the same items which was not correct, not justified and bad in law. • It was further submitted that the expenditure made by the assessee are out of the explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT (A) and are again provided in the paper book. Therefore, we set aside this issue to the file of the AO to verify whether the amount of Rs. 12,30,743/- is shown before purchase of jewellery in the cash flow statement under application of funds.
128. Ground No.7 is with respect to contribution to chit funds which has already been adjudicated by us vide Para 77 for the A.Y. 2008-09. Hence the same shall be followed for this A.Y also.
129. Ground No.8 is regarding addition of Rs.1,03,350 towards purchase of residential plot. We have adjudicated similar issue for the A.Y 2008-09 vide Para 78. Hence the same shall be followed for this A.Y also.
130. The Ground No.9 is with respect to Rs. 98,880/- was for political expenditure which has already been adjudicated by us vide Para No.111 For A.Y 2008-09 and the same shall be followed for this A.Y also.
131. Ground No.10 is with respect to addition of Rs.17.00 lakhs towards son's education. This issue has been adjudicated by us vide 56 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati Para Nos.112-117 in ITA No. and the same shall be followed in this A.Y. also.
132. Ground No.11 is with respect to addition of Rs.5,61,263 towards unexplained personal and miscellaneous expenditure. The facts are that the AO while completing the assessment have added an amount of Rs.5,61,263 towards unexplained expenditure towards personal and miscellaneous expenditure. It was submitted that the assessee is having enough explained sources to meet such expenses. Further it was submitted that the assessee group is drawing income for personal expenses. We set aside the issue to the file of the AO to verify the cash flow statement and whether the amount added is duly reflected in the consolidated cash flow of the assessee at Row 26 of Page 3 and decide the issue accordingly.
133. Ground No.12 is with respect to agriculture income being treated as income from other sources. We have already adjudicated the same for the A.Y 2003-04 vide Para No.26 in ITA No1765/Hyd/2013 in the case of S.Jayachandra Reddy and the same shall be followed for this assessment year also.
134. In the result, appeal is treated as partly allowed.
135. To sum up, appeals are treated as partly allowed for statistical purposes.
ITA Nos. 339, 340, 90, 432, 341, 342 & 343/Hyd/2014. A.Y 2003-04 to 2009-10 - Saikam Siva Chaitanya ITA No.339/Hyd/2014. A.Y 2003-04:
1. Grounds preferred by the assessee read as under:
"1. The ld CIT (A) Guntur erred both in law and on facts in upholding the addition.
2. The ld CIT (A) Guntur erred in confirming the action of the AO in respect of issuance of notice u/s 153C of the I.T. Act, 1961.57 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
3. The ld CIT (A) Guntur erred in upholding the addition of Rs.6,45,282 made towards undisclosed income on account of sale of land.
4. The ld CIT (A) Guntur ought erred in not allowing the purchase and development expenses of Rs.2,41,935 from the sale value.
5. The ld CIT (A) Guntur erred in rejecting the submissions and encumbrance certificates for land at Avilala and Peruru".
2. The first ground of appeal is general, hence no adjudication is called for.
3. Ground No.2 is with respect to confirmation of the action of the AO in respect of issuance of notice u/s 153C of the I.T. Act. We have already adjudicated this issue in the case of Shri Jayachandra Reddy, for AY 2003-04 vide Para Nos.6 and 7 (ITA No.1765/Hyd/2014). Hence the same shall be followed in this year also.
4. It was submitted that the AO while completing the assessment proceedings u/s 143(3) r.w.s. 153C of the Act have made an addition of Rs.6,45,282 towards income of the assessee as undisclosed income on sale of land. In this regard it was submitted that the AO passed order u/s 144 r.w.s. 153C of the Income Tax Act, 1961 by quantifying the share amount, out of the plot sales at Peruru and Avilal for Rs.22,66,100. However the CIT (A) erred in not allowing the cost of acquisition and development of above properties of Rs.2,40,935. Therefore, the CIT (A) ought to have allowed an amount of Rs.2,40,935 as deduction from sale proceeds of Rs.6,45,282.
58 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
5. It was further submitted that the AO and the CIT (A) erred in not allowing the cost of acquisition as deduction while bringing to tax the entire sales proceeds which was against the provisions of the Act and the same needs to be corrected. In this regard reliance was placed on the judgment of the Hon'ble Supreme Court in the case of CIT vs. B.C. Srinivas Shetty (1981) 128 ITR
294.
6. The CIT (A) held that during the course of assessment, it was noticed that the assessee has sold several lands in the year 2001-02, 2002-03 and 2003-04. As per the seized document A/SJC/RES/04 at Page No.116, it is clearly written "S.S.CHAITANYA-SALES". The assessee has sold several properties situated at Peruru and Avilala. The total sales between 17.06.2002 to 12.12.2002 and the assessee's share on the said sales were quantified at Rs.22,66,100 and Rs.6,76,588 respectively. The assessee's share of Rs.6,76,588 was treated as undisclosed income for the A.Y 2003-04.
7. During the appellate proceedings, it has been stated by the assessee that the AO has adopted 1/3rd of the total sales figure of Rs.22,66,100 whereas the seized document itself indicates that in some of the properties, the assessee's share is 1/4th and 1/7th. Moreover, purchase cost and development expenses on the plots amounting to Rs.2,41,935 has not been reduced.
8. In the remand report, the AO stated that the correct share of the assessee has been adopted to arrive at the amount of undisclosed income and where the share has been stated as 1/4th or 1/7th the same has been adopted. Further the assessee has not filed any evidence in support of his claim that the purchase cost and development expenses amounted to Rs.2,41,935.
59 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
9. In this regard the CIT (A) held as under:
"7.1.4. I have perused the submissions made. The appellant's contention that his correct share works out to Rs.6,45,282 as against Rs.6,76,588 computed by the AO is correct. On the other hand, the appellant has forwarded encumbrance certificates for land at Avilala and Peruru to show both the date of purchase as well as the cost. However, neither is the date tallying nor the cost and hence the cost claimed by the appellant cannot be determined on the basis of documents submitted. In view of the same, an amount of Rs.6,45,282 is being held as undisclosed income on account of sale of land".
10. Since the CIT (A) has observed that neither the date nor the cost of the land sold tally an amount of Rs. 6,45,282/- is to be held as undisclosed income on account of sale of land. In these circumstances, we set aside the issue to the file of the AO to give one more opportunity to the assessee to produce the correct details and thereafter the AO shall decide the issue in accordance with facts and the law.
11. In the result, appeal is partly allowed for statistical purposes.
ITA No.340/Hyd/2014 - AY. 2004-0512. Grounds preferred by the assessee is as follows:
"1. The ld CIT (A) Guntur erred both in law and on facts while partly allowing the appeal.
2. The ld CIT (A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises.
3. The ld CIT (A) Guntur erred in confirming the action of the AO in respect of issuance of notice u/s 153C of the I.T. Act, 1961.
4. The ld CIT (A) Guntur erred in restricting the claim of agricultural income to Rs.3,60,000 and confirming 60 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati the balance amount of Rs.20,000 as income from other sources.
5. The ld CIT (A) Guntur ought to have appreciated that the assessee has already furnished certificates and documents pertaining to the agricultural land from respective revenue authorities in support of his claim".
13. First two grounds are general in nature, hence no specific adjudication is required..
14. Third ground we have already adjudicated at Para Nos. 6 & 7 (ITA No.1765/Hyd/2013) for AY 2003-04 and the same conclusion shall be followed in this year also.
15. Ground Nos. 4 & 5 are common grounds for the A.Y. 2004-05 to 2009-10.
Agriculture income treated as income from other sources (A.Y 2004-05 to 2009-10)
16. The common ground for the A.Y 2004-05 to 2009-10 is with respect to treatment of agriculture income as income from other sources. It was submitted that the AO while passing the assessment has treated the following agriculture income of the assessee as income from other sources:
Assessment Added by AO Sustained by
year (Rs.) CIT (A)(Rs.)
2004-05 3,80,000 20,000
2005-06 7,20,000 3,60,000
2006-07 7,60,000 4,00,000
2007-08 7,88,000 4,28,000
2008-09 20,64,000 3,78,000
2009-10 7,26,500 3,64,500
Total 54,38,500 19,52,500
17. Before the CIT (A) it was submitted that the appellant's grandfather Saikam Basi Reddy was in ownership of land in 61 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati Madhavaram and Yandapalli villages and after his expiry, assessee inherited his agricultural lands. His grandfather was earlier reflecting agricultural income from such lands in his returns of income. Moreover assessee also purchased some agricultural land in Tirupati Rural mandal as well as Renigunta Mandal. Assessee submitted pattadar passbooks in respect of land in villages Krishnapuram, Thanapalle and Vemuru to show that apart from inherited land, he also owns agricultural lands in these villages. In the remand report, the AO reiterated his contention that the income from certificates issued by MRO, Rayachoti do not make it clear as to how much land holding is in the possession of the assessee and what is the agricultural income being derived. Moreover, lands in Madhavaram and Yandapalli remains in the name of late Sri Saikam Basi Reddy and it cannot be held that the assessee has derived income from this land. AO further reiterated that the agricultural income claimed by the assessee cannot be accepted.
18. In his counter submissions, the assessee stated as under:
"The AO has added the entire amount declared under agricultural income in the assessee's return of income as income from other sources without considering the explanations offered by the assessee. It is to submit that the addition is incorrect as the assessee is in receipt of agricultural income from the lands viz., from the assessee's grandfather Mr.Saikam Basi Reddy from whom the assessee has inherited the agricultural lands in Madhavaram Village of Rayachoti Mandal and assessee purchased agricultural lands in Tirupathi Rural Mandal as well as in Renigunta Mandal. It is to bring to your kind notice that the assessee has produced certificate of Tahasildar (from Land Revenue Officials) of Renigunta Mandal to prove the genuineness of the agricultural income received. This certificate stands as a corroborative evidence to substantiate the genuinity of the assessee's claim to prove that the amount received is agricultural income. But the AO has treated the exempt agricultural income as income from other sources and 62 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati taxed such income, which is not correct and not justified. The addition in this regard is purely on the assumptions and surmises which are baseless and are detrimental to the interest of the assessee. Further, the AO has not brought in any proof which has evidentiary value.
In this regard the assessee has relied on the following case laws for erroneous addition of agricultural income by treating it as income from other sources:
"It was held in the case of Mr.T.C. Reddy in ITA No.469/Hyd/2009 and ITA No.228/Hyd/2010 that were the land holding and cultivation thereof is not in dispute, the AO cannot be simply reject the claim of the assessee with regard to the agricultural income. It was further held that as agriculture in this country is an unorganized sector and sale of agricultural produce is also not properly organized, one cannot blame the assessee for not maintaining the books of accounts for the purpose of cultivation and therefore, non maintenance of books of accounts cannot be a ground to reject the claim of the assessee"
.
It is to further submit that the assessee has already furnished a paper book as additional evidence which consists of the income certificate issued by the Mandal Revenue Officer, Rayachoti in the name of Basi Reddy with details of the extent of land holding, Ryothwari Pass Books for respective lands which may please be considered in favour of the assessee and the addition in this regard may please be deleted"
19. The CIT (A) adjudicated the issue as under:
"6.4. I have perused the submissions and counter submissions made as well as documents submitted in support of the contentions raised by the appellant. Late Sri Saikam Basi Reddy was in possession and ownership of agricultural lands and till the A.Y 2002-03, agricultural income from such land was reflected in his returns. Subsequently, the land in question, is stated to have been divided amongst the appellant and his sister Deepthi. It may be noted that for A.Y 2002-03, Saikam Basireddy had claimed agricultural income of Rs.3,27,500 only. In the subsequent years, the appellant and his sister are both claiming substantial agricultural income. There is no doubt that there are other agricultural lands owned by the appellant in Vemuru, Thandlam, Paidipalli, Krishnapuram villages. The appellant, in his counter submissions has stated that the total land holding is approximately 38 Acres other than the inherited lands, whereas the pattadar pass books submitted reflect only 63 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati 14 acres (approx.). Out of the same 14 acres, there are certain plots of land, which are much too small for regular agricultural activity. Thus what the appellant has is approximately 12 Acres of agricultural land along with land inherited from his grandfather Late Sri Saikam Basi Reddy. Keeping in view the agricultural income reflected by late Sri Saikam Basireddy and also the fact that it is now distributed between the appellant and his sister as well as keeping in view the 12 acres (approx.) of land owned by him, the agricultural income acceptable in the case of the appellant is arrived at Rs.3,60,000 per year. The year-wise agricultural income reflected, the amount treated as income from other sources and the amount now held as agricultural income is as per table below:
Asses Agril. Agril. Income Amount now
sment year Income treated as held as agril.
reflected income from Income
other sources
2004-05 3,80,000 3,80,000 3,60,000
2005-06 7,20,000 7,20,000 3,60,000
2006-07 7,60,000 7,60,000 3,60,000
2007-08 7,88,000 7,88,000 3,60,000
2008-09 20,64,000 20,64,000 3,60,000
2009-10 7,26,500 7,26,500 3,60,000
6.5 It may be noted that the AO has considered Rs.20,64,000 as agricultural income claimed by the appellant in A.Y 2008-09. On the other hand, the appellant has stated that the agricultural income claimed in the relevant year is only Rs.7,38,000 and has furnished a copy of the return and tax computation sheet for A.Y 2008-09. The appellant's contention appears correct. However, the AO may verify from the original records to arrive at the correct agricultural income claimed by the appellant. Irrespective of the same, agricultural income to the extent of Rs.3,60,000 is being accepted in the case of the appellant for each year including A.Y 2008-09".
20. Before the Tribunal, in this regard it was submitted that the assessee and his family members are having agriculture land and are carrying out agricultural activity around Tirupati. The assessee inherited agricultural lands from his grandfather in Madhavaram and Yandapalla Villages after his expiry. Moreover assessee also purchased agricultural lands in Tirupati Rural Mandal as well as Renigunta Mandal. All the relevant documents including 64 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati pattadar pass books, income certificates from MRO etc., were submitted. Hence it was submitted that the action of the CIT (A) in treating part of agriculture income admitted as income from other sources is not justified.
21. Assessee submitted another table showing the certificates from MRO for A.Y 2009-10 showing the agriculture income from the agriculture lands held by the assessee:
Details of agricultural income for A.Y 2009-10 Income Certificate Village S.No Acre Amount Paper Book (Rs.) Page No. Fasli 1418 Krishnapuram 108/3B 3.27 65,000 128 Tirupati Rural Mandal Durgasamudram 239/1 6.78 2,03,400 129 Tirupati Rural Mandal Durgasamudram 239/7 0.55 16,500 130 Tirupati Rural Mandal Thanapalle & 260-B 4.47 1,29,366 131 Others & Others Rychoty Mandal Madhavaram & 247 & 14.96 3,00,000 4 (inherited from Basi Others others Reddy) Rychoty Mandal Madhavaram & 230/1B 27.89 9,42,150 5 & 133 Others & Others 16,56,416
22. We find for the A.Y 2004-05, the CIT (A) has confirmed an amount of Rs.20,000/- as income from other sources. With the prices of agricultural commodities undergoing steady increase, we find that once the assessee is having ownership of agricultural land and growing agricultural produce, meagre amount of Rs.20,000 can also be taken as agricultural income especially since the assessee has provided all the details and income certificates from MRO. This ground is allowed.
23. In the result, this appeal is partly allowed for statistical purposes.
65 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati ITA No.90/Hyd/2014 - A.Y 2005-06:
24. Grounds of appeal preferred by the assessee read as under:
"1. The ld CIT (A) Guntur erred in law and on facts in upholding the additions.
2. The ld CIT (A) Guntur erred in sustaining the addition of Rs.2,15,449 made towards the long term capital gains which is not correct and not justified.
3. The ld CIT (A) Guntur ought to have appreciated the fact that the appellant has already admitted the sale of property in his return of income.
4. The ld CIT (A) Guntur erred in sustaining the addition of Rs.9,93,325 made towards unexplained investment in purchase of land which is not correct and not justified.
5. The ld CIT (A) Guntur erred in sustaining the addition of Rs.3,60,000 made towards agricultural income which is not correct and not justified.
6. The ld CIT (A) Guntur ought to have appreciated the fact that the appellant has already enclosed the certificates of the land".
25. First ground is general in nature, hence no specific adjudication is required.
26. Ground No.2 is regarding addition towards Long Term Capital Gain of Rs.2,15,449/-. Brief facts of the ground are that during the course of search, a document was seized as page No.116 of Annexure A/S3/RES/04. This is a hand written sheet of paper with a title 'S.S.Chattanya-SALES' and contains a list of plots and land parcels sold by the assessee i.e. S.Siva Chaitanya. The AO noted that during the financial year 2004-05 relevant to the A.Y 2005-06 there was one sale of land at Avilala Village vide document No.4385 for a total consideration of Rs.7,04,000. The share of the 66 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati assessee was recorded as ½ and hence an amount of Rs.3,52,000 was treated as income of the assessee.
27. During the appellate proceeding, assessee stated that the sale of this property was admitted in the return of income filed on 4.10.2010 in response to notice u/s 153C. Assessee pointed out that the entire sale consideration of Rs.3,52,000 has been taken into account and long term capital gains determined at Rs.1,25,371 after reducing indexed cost of acquisition at Rs.2,26,629. In the remand report, AO has reiterated his contention that the purchase document has not been submitted by the assessee and hence his amount should be treated as undisclosed income. In his counter submissions the assessee pointed out that an amount of Rs.1,25,371 has already been offered as long term capital gains. Hence the entire amount of Rs.3,52,000 cannot be treated as undisclosed income. The assessee has also filed encumbrance certificates for this property to indicate the cost of acquisition.
28. In this regard, the CIT(A) held as under:
"8.3 I have perused the submissions made. It is apparent that long term capital gains amounting to rs.1,25,371 has been offered by the appellant in his return income. The encumbrance certificate for Survey No.484/1 shows that on 7.12.2000, this land was sold by A. Guruswamy to the appellant and his father Saikam Jayachandra Reddy for Rs.2,31,000. Subsequently, the encumbrance certificate shows that land at survey No.484/1 has been sold for Rs.7,04,000, appellant is one of the executors, the other being his father Saikam Jayachandra Reddy. The land has been sold to K. Muneendra for Rs.7,04,000. Thus the appellant has been able to furnish evidence that the land in question was purchased in the financial year 2000-01 and that the appellant owns half share of the land. However, the purchase cost in the hands of the appellant works out to Rs.1,15,500 which on indexing is Rs.1,36,551 and not Rs.2,26,629 as determined by the appellant. In view of the above, the long term capital gains is 67 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati being determined at Rs.2,15,449 instead of Rs.3,25,000 held as undisclosed income by the AO and appellant's ground of appeal No.2 is treated as partly allowed".
29. We heard both the parties. We set aside the issue to the file of the AO to verify the details with regard to the land sold to K.Muneendra and determine the Long Term Capital Gains arising from the transaction of the sale after giving due opportunity to explain the computation.
30. Ground No 3 pertains to addition on account of unexplained investment in purchase of land. Page No.115 of Annexure A/SIC/RES/04 is a hand written sheet with the heading 'S.S.CHAITANYA - PURCHASES'. The sheet contains a date-wise list of land parcels purchased and the share of the appellant S. Siva Chaithnya in the same. The share of the assessee has been determined at Rs.30,08,592 and out of the same Rs.20,65,325 pertains to A.Y 2005-06. During the assessment proceedings, the assessee stated that the total amount of Rs.30,08,592 is out of the amount inherited from his grandfather Sri Saikam Basi Reddy as well as sale of some inherited properties and business income. AO found the reply vague and unsupported by any evidence. He also noted that the assessee's grandfather was not assessed to tax and hence treated the entire amount of Rs.20,65,352 as unexplained investment in purchase of land.
31. During the appellate proceedings, the assessee stated that Sri S. Basi Reddy had filed returns of income for A.Ys 2000-01, 2001-02 & 2002-03, copies of which were furnished by him. Moreover, details of land owned by Sri S. Basi Reddy at Madhavaram Village were also furnished. In his counter submissions to the remand report, the assessee has given details of land owned by Sri Saikam Basi Reddy as well as incomes returned 68 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati by him. Moreover a document stated to be a family settlement after the death of Sri Saikam Basi Reddy has been filed, according to which the assessee has received Rs.25.80 lakhs.
32. The CIT (A) in this regard held as under:
"9.3 I have perused the above documents including land ownership certificates in respect of land owned by Sri Saikam Basi Reddy, the grandfather of the appellant. While it is not denied that Sri S. Basi Reddy had substantial agricultural land holdings, the returns filed by him indicate agricultural income in the region of Rs.1 lakh to Rs.3 lakh in different years. He had nominal other income and it would be fair to assume that with the level of agricultural and other income returned by him, there would have been hardly any accumulation of capital. Moreover, the agreement stated to be a family settlement cannot be relied upon, since it mentions all amounts in cash, it was not found during the course of search or presented during the search and the amounts mentioned cannot have been accumulated with the limited income reflected by late Sri S. Basi Reddy, in his returns of income. In view of the same, the appellant's claim that investment in purchase of land is out of amount received on inheritance from his grandfather is rejected. However, it is seen that the appellant has received Rs.3,52,000 during the year on sale of land and has also reflected agricultural income amounting to Rs.7,20,000. Even if the agricultural income is treated as income from other sources, it still remains as an amount available for investment and in not giving credit for the same, it shall amount to taxing the same income twice. Thus, the appellant is given credit for Rs.3,52,000 + Rs.7,20,000 which works out to Rs.10,72,000. Thus, out of the total addition of Rs.20,65,325, an amount of Rs.9,93,325 is sustained as unexplained investment in purchase of land and appellant's appeal in respect of Ground No.3 is partly allowed".
33. Before us, the ld Counsel submitted that the AO while completing the assessment u/s 143(3) r.w.s. 153C of the Act has made an addition of Rs.9,93,325 and Rs.9,43,267 for the A.Y 2005- 06 and 2006-07 respectively as unexplained investment in land. In 69 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati this regard, it was submitted that the above mentioned investment is made out of the explained source of income of the assessee and therefore no addition can be made as unexplained investment in the hands of the assessee. It was further submitted that the investments made by the assessee are made out of explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT (A) and before the ITAT in the paper book.
34. Since the ld Counsel has submitted that the amount of Rs.9,93,325 and Rs.9,43,267 for the AYs 2005-06 & 2006-07 appear against investment in land at Row No.28 of page No.3 under application of funds in the cash flow statements, we direct the AO to verify the same and decided the issue in accordance with law. The AO shall give an opportunity to the assessee to submit the details of the inheritance from grandfather Shri Basi Reddy while deciding this issue under appeal.
35. Ground Nos. 5 & 6 are regarding sustaining addition by CIT (A) for an amount of Rs.3,60,000 made towards agricultural income. We have held in the earlier that the amount sustained by the CIT (A) being only Rs.20,000/- is to be deleted. However, in all the AYs from 2004-05 to 2009-10, this issue is common and approximately range from Rs.3.60 to Rs.4.28 lakhs. The assessee has inherited agricultural lands from his father at Madhavaram and Yandapalla villages after the death of his grandfather. The assessee has also purchased lands in and around Tirupati and Renigunta which are evidenced by documents submitted in the paper book. The assessee has also admitted agricultural income as he has been carrying on agricultural operations for the AYs 2004-05 to 2009-10 which are under appeal. The relevant documents such as Pattadar Pass Books and income certificates from MRO has been submitted. Hence we set aside this issue to the file of the AO to consider the 70 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati MRO certificates wherein the agricultural income has been accepted by the local authority. After giving an opportunity to the assessee, the AO may determine the amount of agricultural income which is to be treated as income from other sources.
36. In the result, the appeal is partly allowed for statistical purposes.
ITA No.432/Hyd/2014 - A.Y 2006-07:37. Grounds preferred by the assessee in this A.Y read as under:
"1. The ld CIT (A), Guntur erred both in law and facts while partly allowing the appeal.
2. The ld CIT (A), Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified.
3. The ld CIT (A), Guntur erred in confirming the action of the AO in respect of issuance of notice u/s 153C of the I.T. Act, 1961.
4. The ld CIT (A), Guntur erred in restricting the claim of agricultural income to Rs.3,60,000 and confirming the balance amount of Rs.4,00,000 as income from other sources.
5. The ld CIT (A), Guntur ought to have appreciated that the assessee has already furnished certificates and documents pertaining to the agricultural land from respective revenue authorities in support of his claim.
6. The ld CIT (A), Guntur erred in upholding the addition of Rs.9,43,267 towards unexplained investment in purchase of land based on suspicions and surmises.
7. The ld CIT (A), Guntur ought to have appreciated the fact that the assessee's grandfather had accumulated capital of Rs.30,08,592 which has been utilized for investment in purchase of land.71 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
8. The ld CIT (A), Guntur ought to have appreciated the fact that the investment in purchase of land is made out of amount inherited from grandfather Sri S. Basi Reddy".
38. First two grounds are general in nature, hence no adjudication is called for.
39. Ground No. 3 is in respect of issuance of notice u/s 153C. This issue has already been adjudicated by us in ITA No.1765/Hyd/2013 vide Para No.6 and the same shall be followed in this A.Y also.
40. Ground Nos. 4 & 5 are regarding treatment of agricultural income as income from other sources. We have already adjudicated similar issue in ITA No.90/Hyd/2014 (Para No.160) for A.Y 2005-06 in Ground Nos. 5 & 6 and the same shall be followed in this A.Y also.
41. With regard to Ground No.6, 7 & 8 pertains to addition of unexplained investment in purchase of land. Page No.115 of Annexure A/SJC/RES/04 is a hand written sheet with the heading 'S.S.CHAITANYA-PURCHAES'. The sheet contains a date-wise list of land parcels purchased and the share of the assessee S. Siva Chaitanya in the same. The share of the assessee has been determined at Rs.30,08,592 and out of the same, Rs.9,43,267 pertains to A.Y 2006-07. During assessment proceedings, the assessee stated that the total amount of Rs.30,08,592 is out of the amount inherited from his grandfather Sri Saikam Basi Reddy as well as sale of some inherited properties and business income. AO found the reply vague and unsupported by any evidence. He also noted that the assessee's grandfather was not assessed to tax and hence treated the entire amount of Rs.9,43,265 as unexplained investment in purchase of land.
72 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
42. During the appellate proceedings, assessee stated that Sri S. Basi Reddy had filed returns of income for A.Ys 2000-01, 2001-02 & 2002-03, copies of which were furnished by him. Moreover, details of land owned by Sri S. Basi Reddy at Madhavaram village were also furnished. In his counter submissions to the remand report, the assessee stated that the amount is met out of agricultural incomes of earlier years and given details of land owned by Sri Saikam Basi Reddy as well as incomes returned by him. Moreover, a document stated to be a family settlement after the death of Sri Saikam Basi Reddy has been filed, according to which the assessee has received Rs.25.80 lakhs.
43. In this regard, the ld CIT (A) held as under:
"8.3 I have perused the above documents including land ownership certificates in respect of land owned by Sri Saikam Basi Reddy, the grandfather of the appellant. While it is not denied that Sri S. Basi Reddy had substantial agricultural land holdings, the returns filed by him indicate agricultural income in the region of Rs.1.00 lakhs to Rs.3.00 lakhs in different years. He had nominal other income and it would be fair to assume that with the level of agricultural and other income returned by him, there would have been hardly any accumulation of capital. Moreover, the agreement stated to be a family settlement cannot be relied upon, since it mentions all amounts in cash, it was not found during the course of search or presented during the search and the amounts mentioned cannot have been accumulated with the limited income reflected by late Sri S. Basi Reddy, in his returns of income. In view of the same, the appellant's claim that investment in purchase of land is out of amount received on inheritance from his grandfather is rejected. Appellant's appeal in respect of Ground No.4 is dismissed"73 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
44. The assessee submitted that the AO while completing the assessment u/s 143(3) r.w.s 153C of the Act has made additions of Rs.9,93,325, Rs.9,43,267 for AY 2005-06 and 200607 respectively as unexplained investment in land. It was submitted that the above mentioned investments are made out of the explained source of income of the assessee and hence no addition can be made as unexplained investment in the hands of the assessee. It was further submitted that the investments made by the assessee are made out of explained source income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT (A) and also submitted before the ITAT vide paper book at Row No.28 of page No.3 under application of money.
45. This is a common issue for AY 2005-06 & 2006-07. We have already held in A.Y 2005-06 as follows:
"Since the ld Counsel has submitted that the amount of Rs.9,93,325 and Rs.9,43,267 for the AYs 2005-06 & 2006-07 appear against investment in land at Row No.28 of page No.3 under application of funds in the cash flow statements, we direct the AO to verify the same and decided the issue in accordance with law. The AO shall give an opportunity to the assessee to submit the details of the inheritance from grandfather Shri Basi Reddy while deciding this issue under appeal".
The same shall be followed in this A.Y also.
46. In the result, appeal is partly allowed for statistical purposes.
ITA No.341/Hyd/2014 - A.Y. 2007-08:47. Grounds preferred by the assessee read as under:
"1. The ld CIT (A) Guntur erred both in law and on facts while partly allowing the appeal.74 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
2. The ld CIT (A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises.
3. The ld CIT (A) Guntur erred in confirming the action of the AO in respect of issuance of notice u/s 153C of the I.T. Act, 1961.
4. The ld CIT (A) Guntur erred in restricting the claim of agricultural income to Rs.3,60,000 and confirming the balance amount of rs.4,28,000 as income from other sources.
5. The ld CIT (A) Guntur ought to have appreciated that the assessee has already furnished certificates and documents pertaining to the agriculture land from respective revenue authorities in support of his claim".
48. Ground No.1 & 2 are general in nature, hence no specific adjudication is required for.
49. With regard to Ground Nos. 3 similar issue has already been adjudicated by us in ITA No.1765/Hyd/2013 for A.Y 2003-04 at Para No.6 and the same shall hold for this A.Y also,
50. With regard to Ground Nos.4 & 5, similar issue has already been adjudicated by us in ITA No.432Hyd/2014 - AY 2006- 07 (Para No. 166).
51. In the result, appeal is partly allowed for statistical purposes.
ITA No.342/Hyd/2014 - A.Y. 2008-09:52. Grounds preferred by the assessee read as under:
"1. The ld CIT (A) Guntur erred both in law and on facts while partly allowing the appeal.
2. The CIT (A) Guntur ought to have appreciated the fact that the order of the AO is based on the suspicions, conjectures and surmises.75 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati "3. The ld CIT (A) Guntur erred in confirming the action of the AO in respect of issuance of notice u/s 153C of the I.T. Act, 1961.
4. The CIT (A) Guntur ought to have appreciated the fact that the AO erred while passing order u/s 153C wherein Rs.20,64,000 has been taken as agriculture income of the assessee as per original return filed as on 20.09.2008 instead of Rs.7,38,000 as per revised return filed u/s 153C as o 4.10.2010.
5. The CIT (A) Guntur ought to have appreciated the fact that once the revised return is filed, it substitutes the original return and revised return is only a valid return".
6. The ld CIT (A) Guntur erred in restricting the claim of agricultural income to Rs.3,60,000 and confirming the balance amount of Rs.3,78, 000 (Rs.7,38,000 - Rs.3,60,000) as income from other sources.
7. The ld CIT (A) Guntur ought to have appreciated the assessee has already furnished certificates and documents pertaining to the agriculture land from respective revenue authorities in support of his claim"
53. Ground No.1 & 2 are general in nature, hence no adjudication is called for.
54. With respect to Ground Nos. 3 to 7, the ld Counsel argued that only the amount of agricultural income as per the revised return is to be taken and therefore, the CIT (A) has erred in confirming the amount of Rs.3,78,000 as income from other sources. The assessee reiterated its arguments that the details produced as well as the MRO certificates has to be taken into consideration before deciding the issue. We have already decided the issue in ITA No.90/Hyd/2014 (Para No.160) for A.Y 2005-06 and the same shall be followed in this year also.
55. In the result, appeal is partly allowed for statistical purposes.76 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati ITA No.343/Hyd/2014 - A.Y. 2009-10:
56. Grounds preferred by the assessee read as under:
"1. The ld CIT (A) Guntur erred both in law and on facts in upholding the addition.
2. The ld CIT (A) Guntur erred in confirming the action of the AO in respect of issuance of notice u/s 153C of the I.T. Act, 1961.
3. The ld CIT (A) Guntur erred in upholding the addition of Rs.6,45,282 made towards undisclosed income on account of sale of land.
4. The ld CIT (A) Guntur ought erred in not allowing the purchase and development expenses of Rs.2,41,935 from the sale value.
5. The ld CIT (A) Guntur erred in rejecting the submissions and encumbrance certificates for land at Avilala and Peruru"
57. Ground Nos.1 & 2 are general in nature.
58. Ground No.3, we have already adjudicated the issue in ITA No.1765/Hyd/2013 vide Para No.6 and the same shall be followed in this year also.
59. Ground No.4 & 5, we have already decided this issue in ITA No.90/Hyd/2014 (Para No.160) the same shall be followed in this year also.
60. In the result, appeal is partly allowed for statistical purposes.
61. To sum up, appeals are partly allowed for statistical purposes.
77 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati ITA NO.362, 363 & 364/Hyd/2014 -A.Ys 2007-08 to 2009-10
- Ms. Saikam Saiswetha
1. Grounds preferred by the assessee for all the years under appeal are common as under:
"1. The ld CIT (A) Guntur erred both in law and on facts in upholding the addition.
2. The ld CIT (A) Guntur erred in confirming the action of the AO in respect of issuance of notice u/s 153C of the I.T. Act, 1961.
3. The ld CIT (A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified.
4. The ld CIT (A) Guntur erred in confirming the treatment of agricultural income of Rs.1,50,000 as income from other sources.
5. The ld CIT (A) Guntur ought to have appreciated the fact that the assessee has already furnished certificates and documents pertaining to the agricultural land from respective revenue authorities in support of his claim.
6. The ld CIT (A) Guntur ought to have appreciated the fact that the day to day agricultural operations are being carried by the daily workers who are not literate and it is very difficult for the labourers to maintain all the necessary documents for the purpose of agriculture".
2. First ground is general in nature, hence no adjudication is called for.
3. Ground No.2 & 3 is with regard to confirming the action of the AO in respect of issuance of notice u/s 153 of the I.T. Act. Similar issue has already been adjudicated at Para No. 6 in ITA 78 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati No.1765/Hyd/2013 in the case of S. Jayachandra Reddy and the same shall be followed in this A.Y also.
Ground Nos.4 to 6 are with respect to treatment of agricultural income as income from other sources. it was submitted that:
• The assessee is having various agriculture lands around Tirupathi which have been acquired through inheritance and some through purchases. These lands have been cultivated for many years and assessee is deriving agriculture income out of it.
• AO has not disputed the fact regarding the holding of agriculture lands by the assessee. AO has treated the income of the assessee by stating that assessee has failed to produce evidence regarding sale of agriculture produce, purchase of various chemicals and fertilizers, etc. • Assessee is holding several agriculture lands around Tirupati. Assessee has submitted Pattedar Pass Books for various land holdings, income certificate in favour of the assessee by MRO of Rayachoty Mandal, Renigunta Mandal and Tirupati Rural for different A.Ys.
• It was submitted that it is a common practice to employ labours on daily wages for doing day to day activities of the cultivation. However, as the labourers are generally illiterates, it is difficult for any agriculturist to keep the documentation of every transaction. AO erred in appreciating this fact before passing the order which is not correct. • It was further submitted that the CIT (A) while passing the order has accepted that the assessee possess some agricultural lands and carried on agricultural activities upon such land. But while coming to the conclusion upon the income derived from such agricultural land has accepted the 79 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati income only to certain extent which is not correct and not justified.
• Hence, assessee submitted that assessee is deriving agricultural income out of the agricultural lands held by it. Certificates of land holdings and agricultural income certificates were produced before us as per the paper book filed.
• Assessee further relied on the case law in the case of T.C. Reddy vs. DCIT in ITA No.469/Hyd/2009 and ITA No.228/Hyd/2010 wherein it has been held that where the land holding and cultivation thereof is not in dispute, AO cannot be simply reject the claim of the assessee with regard to the agricultural income. It was further held that as agriculture in this country is an unorganized sector and sale of agricultural produce is also not properly organized, one cannot blame the assessee for not maintaining the books of accounts for the purpose of cultivation and therefore, non- maintenance of books of accounts cannot be a ground to reject the claim of the assessee.
4. The facts are that the AO while completing the assessment proceedings have treated entire agriculture income as income from other sources of which a part is sustained by the ld CIT (A) which is given below:
Assessment year Amount (Rs.)
2007-08 1,50,000
2008-09 1,50,000
2009-10 1,50,000
5. We find from the records that the assessee is having various agriculture lands around Tirupati which have been acquired through inheritance and some through purchases. These lands have been cultivated for many years and assessee is deriving agriculture income out of it.
80 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
6. We observe that AO has not disputed the fact regarding the holding of agriculture lands by the assessee. AO has treated the income of the assessee by stating that the assessee failed to produce evidence regarding sale of agriculture produce, purchase of various chemicals and fertilizers etc. The CIT (A) has sustained part addition.
7. The ld Counsel for the assessee has submitted Pattadar Pass Books for various landholdings, income certificate in favour of assessee by MRO of Rayachoti Mandal, Renigunta Mandal, Tirupati Rural for various AYs in the paper book before us.
8. The ld Counsel for the assessee also relied was placed in the case of T.C. Reddy vs. DCIT in ITA No.469/Hyd/2009 and ITA No.228/Hyd/2010.
9. It was further submitted by the ld Counsel for the assessee that is a common practice to employ labours on daily wages for doing day to day activities of the cultivation and as the labourers are generally illiterate, it is difficult for any agriculturist to keep the documentation of every transaction.
10. CIT (A) while passing the order has accepted that the assessee possess some agricultural lands and carried on agricultural activities upon such land. But while coming to the conclusion upon the income derived from such agricultural land accepted the income only to certain extent.
11. The fact is that the assessee is deriving agricultural income out of the agricultural lands held by the assessee. The certificates of 81 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati landholdings and agricultural income certificates are produced before the ITAT in the paper book filed. We have perused the same.
12. In the case of T.C. Reddy (Supra), it was held that where the landholding and cultivation thereof is not in dispute, the AO cannot simply reject the claim of the assessee with regard to the agricultural income. It was further held that as agriculture in this country is an unorganized sector and sale of agricultural produce is also not properly organized, one cannot blame the assessee for not maintaining the books of account for the purpose of cultivation and therefore, non-maintenance of books of accounts cannot be a ground to reject the claim of the assessee. Taking the totality of the situation into account, we delete the addition made by the CIT (A) under the head "income from other sources" for an amount of Rs.1,50,000 for all the AYs under appeal i.e. 2007-08 to 2009-10. This ground of the assessee is allowed.
13. In the result appeal is partly allowed for statistical purposes.
ITA No.284/Hyd/2014 - A.Y 2003-04 Smt.S. Sai Ramani1. Grounds preferred by the assessee read as under:
"1. The ld CIT (A) Guntur erred both in law and on facts while allowing the appeal of the assessee.
2. The ld CIT (A) erred in sustaining the addition of Rs.3,53,903 towards disallowance of land purchase u/s 40A(3) which is not correct and not justified.
3. The ld CIT (A) ought to have appreciated the fact that the disallowance u/s 40A(3) cannot be made when banking facilities are not available to the place of business.
4. Without prejudice to the above, the ld CIT (A) Guntur ought to have appreciated the fact 82 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati that the assessee has purchased agricultural lands and already furnished certificates issued by MRO, Tirupati Rural and MRO, Renigunta stating that the lands purchased are agricultural lands.
5. The ld CIT (A) Guntur erred in sustaining the 10% of disallowance amounting of Rs.54,500 towards other expenditure, without any basis and considering the facts submitted by the assessee.
6. The ld CIT (A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified".
2. The additional ground which is common for all the AYs under appeal with respect to Smt. S. Sai Ramani i.e. AY 2003-04 to 2009-10 that the addition made u/s 153A of the Act should be limited to incriminating material found during the search only. We have already adjudicated this issue in the case of S.Jayachandra Reddy (ITA No.1765/Hyd/2013 - A.Y 2003- 04) vide Para Nos. 6
3. The additional ground with respect to telescoping of income of the assessee group against the expenditure of the assessee, common for the AYs 2003-04 to 2009-10. We have already adjudicated the same at Para No.7, hence the same conclusions shall be drawn in this year also.
4. First ground is general in nature, needs no adjudication.
5. Ground Nos. 2 & 3 are with respect to disallowance of land purchase u/s 40A(3) of the I.T. Act amounting to Rs.3,53,903. We have already adjudicated similar ground in ITA No.1765/Hyd/2013 83 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati for A.Y. 2003-04 vide Para No.14 and the same conclusion shall be followed in this year also.
6. Ground No.4 is an alternate ground and not adjudicated.
7. Ground Nos. 5 & 6 are with respect to CIT (A) Guntur sustaining 10% disallowance amounting to Rs.54,500 towards other expenditure. It was submitted that the expenditure is required to be allowed in full because of the fact that payments have been made to different individual labourers, most of whom live in rural areas and they insist on payments to be made only in cash. Since such expenditure is unavoidable, it was submitted that the claim is to be allowed. Similar issue has been adjudicated by us at Para No.20 in the case of S.Jayachandra Reddy (ITA No.1765/Hyd/2013
- A.Y. 2003-04) and the same conclusion shall be followed in this year also.
8. In the result appeal of the assessee is partly allowed for statistical purposes.
ITA No.285/Hyd/2014 - A.Y. 2004-059. Grounds preferred by the assessee read as under:
1. The ld CIT (A) Guntur erred both in law and on facts while partly allowing the appeal.
2. The ld CIT (A) Guntur erred in sustaining the addition of Rs.3,03,055 towards disallowance of land purchase u/s 40A(3) which is not correct and not justified.
3. The ld CIT (A) Guntur ought to have appreciated the fact that the disallowance u/s 40A(3) cannot be made when banking facilities are not available to the place of business.84 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
4. Without prejudice to the above, the ld CIT (A) Guntur ought to have appreciated the fact that the assessee has purchased agricultural lands and already furnished certificates issued by MRO, Tirupati Rural and MRO, Renigunta stating that the lands purchased are agricultural lands.
5. The ld CIT (A) Guntur erred in sustaining the 10% of disallowance amounting of Rs.35,800 towards other expenditure, without any basis and considering the facts submitted by the assessee.
6. The ld CIT (A) Guntur erred in sustaining the partly addition of Rs.50,589 towards unexplained cash credits, without considering the explanation submitted by the appellant, which is not justified and bad in law
7. The ld CIT (A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified.".
10. The following disallowances were made by the AO which were confirmed by the CIT (A).
• Disallowance of Rs.3,03,055 towards land purchase u/s 40A(3).
• Disallowance of other expenditure Rs.35,800. • addition of unexplained cash credit of Rs.50,589
11. The first ground is general in nature, hence no adjudication is required.
12. Ground Nos.2 & 3 are with reference to disallowance of land purchased u/s 40A(3). We have already adjudicated similar issue for the A.Y 2003-04 in ITA No.1765/Hyd/2013 at Para No.14 and the same shall be followed in this year also.
85 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
13. Ground No.4 is an alternate ground, hence not adjudicated.
14. Ground No.5 is with respect to sustaining 10% disallowance amounting to Rs.35,800 towards other expenditure. We have already adjudicated this issue in ITA No.284/Hyd/2014 for A.Y. 2003-04 in assessee's own case at Para No.190.
15. Ground No.6 is against the CIT (A) sustaining the addition of Rs.50,589 towards unexplained cash credits. It was submitted that the cash credit appearing in the capital account of the assessee is out of the income of the assessee of the previous years as well as amount received from his mother. It was further submitted that the amount was duly reflected in the cash flow statements of the assessee submitted in the paper book which were already submitted before the CIT (A) also. Therefore, the amount credited in the capital account remains completely explained and therefore, no addition could be made.
16. Since the ld Counsel has submitted that in the consolidated cash flow statements submitted by the assessee a sum of Rs.2,81,339 and Rs.6.00 lakhs are shown at Row 32 on page 3 for A.Y 2004-05 and 2005-06 respectively as transferred to capital a/c in the application of income, we direct the AO to verify the consolidated cash flow statement and decide the issue accordingly.
17. In the result, appeal in ITA No.285/Hyd/2014 is partly allowed for statistical purposes.
ITA No.366/Hyd/2014 - A.Y. 2005-0618. Grounds preferred by the assessee is as follows:
"1. The ld CIT (A) Guntur erred both in law and on facts while partly allowing the appeal.86 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
2. The ld CIT (A) Guntur erred in sustaining the addition of Rs.5,61,750 towards disallowance of land purchase u/s 40A(3) which is not correct and not justified.
3. The ld CIT (A) Guntur ought to have appreciated the fact that the disallowance u/s 40A(3) cannot be made when banking facilities are not available to the place of business.
4. Without prejudice to the above, the ld CIT (A) Guntur ought to have appreciated the fact that the assessee has purchased agricultural lands and already furnished certificates issued by MRO, Tirupati Rural and MRO, Renigunta stating that the lands purchased are agricultural lands.
5. The ld CIT (A) Guntur erred in sustaining the 10% of disallowance amounting of Rs.44,800 towards other expenditure, without any basis and considering the facts submitted by the assessee.
6. The ld CIT (A) Guntur erred in sustaining the partly addition of Rs.1,15,000 towards unaccounted income by changing the source of agricultural income to other source income, which is not correct and not justified.
7. The ld CIT (A) Guntur erred in sustaining the partly addition of Rs.3,95,000 towards unexplained cash credits, without considering the explanation submitted by the appellant, which is not justified and bad in law.
8. The ld CIT (A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified.".
19. The CIT (A) confirmed the following disallowances made by the AO:
• Disallowance of land purchase u/s 40A(3) - Rs.5,61,750 • Disallowance of other expenditure amounting to Rs.44,800 87 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati • Confirmation of addition of Rs.1,15,000 towards unaccounted income by changing the source of agricultural income to other source of income.
• Sustenance of addition of Rs.3,95,000 towards unexplained cash credits.
20. Ground No.1 is general, hence no specific adjudication is required.
21. Ground Nos. 2 & 3 are with respect to disallowance u/s 40A(3). Similar issue has already been decided by us in ITA No.1765/Hyd/ 2013, vide Para No.14 and the same conclusion shall be followed in this A.Y also.
22. Ground No.4 is alternate ground and not decided.
23. Ground No.5 is with regard to CIT (A) sustaining 10% disallowance amounting to Rs.44,800 towards other expenditure, has been adjudicated by us in ITA No.284/Hyd/2014 for A.Y 2003- 04 in assessee's own case at Para No.190 and the same shall be followed in this ground also.
24. Ground No.6 with respect to addition of Rs.1,15,000 towards unaccounted income. AO while completing the assessment proceedings have treated 50% of agriculture income as income from other sources of which a part is sustained by the CIT (A) which is as under:
A.Y Amount (Rs.)
2005-06 1,15,000
2006-07 1,92,560
2007-08 1,39,350
2008-09 3,60,000
2009-10 4,78,000
88 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
25. It was submitted that:
• The assessee is having various agriculture lands around Tirupati which have been cultivated for many years and assessee is deriving agriculture income out of it. • AO has not disputed the fact regarding the holding of agriculture lands by the assessee. AO has treated the income of the assessee by stating that assessee has failed to produce evidence regarding sale of agricultural produce, purchase of various chemicals and fertilizers etc. • The assessee is holding several agril. Lands around Tirupati and assessee submitted pattedar pass books for various land holdings, income certificate in favour of the assessee by MRO of Rayachoty Mandal, Renigunta Mandal, Tirupati Rural for various A.Ys, purchase bills for fertilizers and chemicals in paper book filed vide Page Nos.42-44, 49-61, 67-75, 81, 113- 117, 123-137.
• Assessee also submitted the following table showing the certificates from MRO for 2009-10 showing agricultural income from agriculture lands held by the assessee:
Saikam Sai Ramani Details of Agricultural Income - A.Y 2009-10 Income Amount Paper certificate Village S.No Acre (Rs.) Book Page Nos.
AGRICULTURE INCOME FOR WHICH CERTIFICATES PRODUCED Raychoty Madhavaram 149 & 5.09 1,27,250 123 Mandal others Fasali Karakambadi & 290/2A & 3.43 56,000 124 1418 Others Others Fasali Thanapalle & 261-A1 & 4 1,75,941 125 1418 Others others Fasali Gajulamandyam 1060/1 6.79 90,000 126 1418 1/2 Fasali Thandlam 253/1B 9.82 1,35,000 127 1418 1/2 Fasali Surrappakasam 251/1B 1.13 63,000 128 1418 6,47,191 89 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati
26. It was also submitted by the assessee that it is a common practice to employ labours on daily wages for doing day to day activities of the cultivation. However, as the labourers are generally illiterates, it is difficult for any agriculturist to keep the documentation of every transaction.
27. We have heard both the parties. CIT (A) observed that the land documents with Pattadar Passbooks submitted by the assessee sum up to only 14 acres as supposed to 20.9 acres claimed in the agricultural income certificate. Hence the CIT (A) restricted the agricultural income to Rs.15,000 per acre which worked to Rs.2,10,000 and considered the balance of Rs.1,50,000 as income from other sources. Since the assessee has not produced evidence for the ownership of the remaining (20.9 - 14 acres = 5.1), we set aside the issue to the file of the AO to give one more opportunity to produce the land holdings and the proof for the income from the sale of agricultural commodities as well as the expenses incurred in the course of cultivating the land. The AO shall decide the issue after examining the records and vouchers. Hence this ground of appeal is set aside for statistical purposes.
28. Ground No.7 is with respect to sustaining addition of Rs.3,95,000 towards unexplained cash credits. Brief facts of the issue are that Rs.6,00,000 being addition to the capital account, which the AO treated as unexplained cash credit. At the assessment stage, no reply was filed by the assessee and hence the AO treated the entire amounts as unexplained cash credit.
29. At the appellate stage it was submitted that the cash credit represents agricultural income received by way of cash for financial year 2003-04 i.e. A.Y 2004-05, rental income of Rs.60,000 90 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati inheritance of Rs.3,30,000 after death of her father Kasireddy Ranga Reddy and balance is from her personal savings.
30. The CIT (A) held as under:
"6.6.3 I have perused the submissions made. The agricultural income was reflected in her return. Although part of the agricultural income had been added back as income from other sources, the fact remains that the amount was available to the appellant and to now disallow the same as unexplained cash credit would amount to taxing the same income twice. However, the appellant has not filed any evidence regarding receipt of Rs.3,30,000 on the demise of her father. In fact at the time of filing counter submissions to the remand report, the appellant has stated that Rs.3,30,000 reflects gift from her father while Rs.65,500 is gifts from others. This claim of the appellant is not backed with any evidence and further is contradictory to the earlier claim made during the assessment proceedings. Hence an amount of Rs.3,95,000 is sustained as unexplained cash credit".
31. We have heard both the parties. We set aside the issue to the file of the AO to give one more opportunity to the assessee to substantiate her claim by producing proper evidence for the source of funds as she has stated that a sum of Rs.3,30,000 has been received from her father as gift while a sum of Rs.65,500 as gifts from others. The assessee has contradicted herself while explaining the source of the amounts available with her, before the lower authorities while challenging the addition of unexplained cash credits amounting to Rs.3,95,000. Hence we set aside this issue to the file of the AO to verify whether the assessee has received a sum of Rs.3.30 lakhs from her father who has expired and other gifts received amounting to Rs.65,500 also needs substantiation.
32. In the result appeal is partly allowed for statistical purposes.
91 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati ITA No.286/Hyd/2014 - A.Y. 2006-07
33. Grounds preferred by the assessee read as under:
"1. The ld CIT (A) Guntur erred both in law and on facts while partly allowing the appeal.
2. The ld CIT (A) Guntur erred in sustaining the addition of Rs.1,01,500 towards income from business and profession by changing the head of income which has been offered to tax as capital gains by the assessee in the return of income.
3. The ld CIT (A) Guntur erred in confirming the disallowance u/s 54B claimed by the assessee in respect of capital gain.
4. The ld CIT (A) Guntur erred in confirming the addition of Rs.1,92,560 towards unaccounted income by changing the source of agricultural income to other source income, which is not correct and not justified.
5. The ld CIT(A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified".
34. Ground No.1 is general in nature.
35. With respect to Ground Nos. 2 & 3, the issue is Treating Long Term Capital Gain as income from business.
36. It was submitted that AO while completing the assessment proceedings has made certain additions by treating the LTCG upon the sale of agril. Land as income from business and profession of which CIT (A) has sustained the following:
A.Y Amount (Rs.)
2006-07 1,01,500
2007-08 8,52,977
2008-09 6,99,100
2009-10 4,52,800
37. On perusal of the record, we find that:
92 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati • The lands sold are agricultural lands from which the assessee is deriving the agricultural income and the LTCG upon the sale of such agricultural land are claimed as exemption u/s 54B.
• The assessee is an agriculturist having various agril. Lands around Tirupati which have been cultivated for many years and assessee is deriving agricultural income out of it which has been duly reflected in the return of income filed by assessee from time to time.
• AO has not disputed the fact regarding the holding of agriculture lands by the assessee. AO has wrongly treated the income from sale of agricultural land as business income of the assessee without considering the fact that the said lands are held as investments.
• It was further submitted that the assessee has submitted Pattedar Pass Books for various land holdings, income certificate in favour of assessee by MRO Rayachoty Mandal, Renigunta Mandal and Tirupati Rural for various A.Ys. Purchase bills for fertilizers and chemicals in the paper book filed vide Page Nos.42-44, 49-61, 67-75, 81, 113-117, 123-
137.
38. Similar issue has already been decided by us in the case of S. Jayachandra Reddy (ITA No.1765/Hyd/2013 - A.Y 2003-04) Para No.77 & 78 and the same conclusion shall be followed in this A.Y also.
39. Fourth and fifth ground is with respect to the CIT (A) confirming the addition of Rs.1,92,560 towards unaccounted income by changing the source of agricultural income to other source of income. Similar issue has already been decided by us in 93 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati ITA No.1765/Hyd/2013 for A.Y.2003-04 (Para No.26) and the same conclusion shall be followed in this AY also.
40. In the result appeal No.366/Hyd/2014 is partly allowed for statistical purposes.
ITA No.125/Hyd/2014 - A.Y 2007-0841. Grounds preferred by the assessee is as follows:
"1. The ld CIT (A) Guntur erred both in law and on facts in upholding the following additions.
2. The ld CIT (A) Guntur erred in sustaining the addition of Rs.8,52,977 towards income from business and profession by changing the head of income which had been offered to tax as capital gains by the assessee in the return of income.
3. The ld CIT (A) Guntur erred in confirming the disallowance u/s 54B claimed by the assessee in respect of capital gain.
4. The ld CIT (A) Guntur erred in confirming the addition of Rs.1,39,350 towards unaccounted income by changing the source of agricultural income to other source income, which is not correct and not justified.
5. The ld CIT(A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified".
42. The grounds of appeal are identical to that in ITA No.286/Hyd/2014 for A.Y.2006-07.
43. Ground No.1 is general. With regard to Ground Nos. 2 & 3, similar issue has been decided by us in ITA No.1765/hyd/2013 for A.Y.2003-04 (Para No.77 & 78) and the same conclusion shall be followed in this AY also.
94 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
44. Ground No.4 and 5, similar issue has been decided by us in ITA No.1765/Hyd/2013 for A.Y 2003-04 vide Para No. 26 and the same conclusions shall be followed in this AY also.
45. In the result appeal is partly allowed ITA No.126/Hyd/2014 - A.Y 2008-09
46. Grounds preferred by the assessee are given below:
"1. The ld CIT (A) Guntur erred both in law and on facts in upholding the following additions.
2. The ld CIT (A) Guntur erred in sustaining the addition of Rs.28,86,400 towards unexplained investment for purchase of land.
3. The ld CIT (A) Guntur ought to have appreciated the fact that appellant has submitted the books of accounts and ledger copies in respect of purchases of properties which are registered in the appellant's name.
4. The ld CIT (A) Guntur erred in confirming the addition of Rs.3,60,000 towards unaccounted income by changing the source of agricultural income to other source income, which is not correct and not justified.
5. The ld CIT(A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified".
47. Ground No.1 is general, need no adjudication.
48. With regard to Ground No. 2 & 3, it was submitted that the assessing officer while completing the assessment proceedings has made several additions as unexplained investment in land out of which the following amounts were sustained by Ld. CIT(A):
95 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati Particulars Amount Receipt issued by T. Nadamuni & 9,51,OOO Vijayalakshmi Receipt issued by A. Bhanuprakash, B. 4,85,OOO Keshav Reddy, B. Shashidhar Reddy Receipt cum agreement issued by P. Nagoor l,96,OOO & P. Shah Receipt cum agreement issued by D. Munnar l,70,OOO Agreement by N. Venkatappa Naidu 6,64,OOO Agreement by D. Krishnaiah 1,00,000 Receipt cum agreement issued by A Muni 6,79,500 Reddy Receipt issued by S. Nagoor & Others 3,40,000 Total 35,85,500
49. It was submitted that the investments are made out of the income of the assessee and therefore adding the same as unexplained results in double additions of income which is not correct. Therefore, we request your honours to kindly allow the appellant the telescoping of his income for current year as well as earlier years against his expenditure/investment. Further telescoping should also be allowed for the income of the appellant group against the investment/expenditure of the appellant. In this regard, we place our reliance on the order of Hyderabad ITAT in the case of Anil Kishore Agarwal & others vs DCIT CC-4 in ITA No.493-95/H/2011.
50. Further, assessee submitted the addition wise reply as under:
a. Purchase of agricultural land from T. Nadamuni & Vijayalakshmi (Rs. 9,51,000/-) • that the land was purchased by the assessee from T. Nadamuni & Vijayalakshmi vide doe. no. 5922/07 dated 08.10.2007.
• The Land purchased was out of compensation received 96 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati from the Government of A.P towards acquisition of agricultural lands and out of the savings of the assessee. The compensation received is duly reflected in the bank statements.
• that the land in question is reflected in the ROI & Statement of affairs filed before your honour. • the advances made by the assessee are made out of explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT(A) and are again submitted before your honour vide paper book. Kindly refer to the cash flow statements wherein, amount of Rs. 9,51000/-is shown before document number 5922/2007 at Row 1 of Page 4 under application of funds.
b. Purchase of agricultural land from A. Bhanu Prakash & Others (Rs.4,85,OOO / -) • that the land was purchased by the assessee from A. Bhanu Prakash & Others vide doe. no. 5923/07. It is further submitted that the transaction was cancelled and the amount has been subsequently returned.
• The Land purchased was out of the savings of the assessee.
• that the land in question is reflected in the ROI & Statement of affairs filed before the ITAT.
• that the advances made by the assessee are made out of explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT(A) and are again submitted before your honour vide paper book. Kindly refer to the consolidated cash flow statements wherein, amount of Rs. 4,85000/-is shown before document number 5923/2007 at Row 2 of Page 4 under application of funds.
c. Purchase of agricultural land from P.Nagoor & Others(Rs.l,96,OOO/-) • that the land was purchased by the assessee from P.Nagoor & others vide doe. no. 6711/07.
• The Land purchased was out of compensation received from the Government of A.P towards acquisition of agricultural lands and out of the savings of the assessee. The compensation received is duly reflected in the bank statements.
• that the land in question is reflected in the ROI & Statement of affairs filed before the ITAT.
97 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati • that the advances made by the assessee are made out of explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT(A) and are again submitted before your honour vide paper book. Kindly refer to the consolidated cash flow statements wherein, amount of Rs. 1,96,000/-is shown before document number 6711/2007 at Row 3 of Page 4 under application of funds.
d. Purchase of agricultural land from P.Munar (Rs.l,70,OOO/-) • that the land was purchased by the assessee from P.Munar vide doe. no. 6705/07.
• The Land purchased was out of the sale proceeds of other lands and out of past savings of the assessee. • It is also submitted that the land in question is reflected in the ROI & Statement of affairs filed before the ITAT. • that the advances made by the assessee are made out of explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT(A) and are again submitted before your honour vide paper book. Kindly refer to the consolidated cash flow statements wherein, amount of Rs. 1,70000/-is shown before document number 6705/2007 at Row 4 of Page 4 under application of funds.
e. Purchase of agricultural land from N. Venkatappa Naidu (Rs.6,64,OOO/-) • In this regard it is submitted that the land in question was never purchased by the assessee and no agreement pertaining to the assessee upon the said land. • The document seized is an agreement between S. Jayachandra Reddy (husband of the assessee) and three others for land in Vemuru Village.
• The agreement value of Rs. 24,44,400/- was upon the construction of storage facility. The same has been negotiated and agreed upon by the parties at Rs. 17,26,600/-. However as there was no storage facility constructed on the said land, the property was purchased for Rs. 2,14,000/-.
• The Ld. CIT(A) has considered an amount of Rs. 17,80,000/- as unexplained in the case of S. Jayachandra Reddy upon the said property. The Id. CIT(A) however added the difference of Rs. 6,64.400/- (Rs. 24.44.400 - 17,80,000) upon the same property, in the case of the 98 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati appellant which is not correct and not justified. • It is further submitted that the Land in question has been reflected in the ROI and statement of affairs filed in the case of S. Jayachandra Reddy vide cash flow statements of Sri jayachandra Reddy wherein amounts of Rs. 2,14,000/- is shown before the document number 966/2007 Row 7 of Page 3 under application of funds.
f. Purchase of agricultural land from D. Krishnaiah (Rs.l,OO,OOO) • The Land was never purchased by the assessee. Only an advance payment of Rs. 1,00,000/- has been made and balance amount was agreed upon to be paid at the time of registration.
• It is further submitted that the advances made by the assessee are made out of explained income of the appellant and his family and are duly reflected in the cash flow statements submitted before the (ITAT) and are again submitted before your honour vide paper book. It is also submitted that the land in question is reflected in the ROI & Statement of affairs filed before ITAT.
g. Purchase of agricultural land from A. Muni Reddy & Others (Rs.6,79,500) • In this regard it is submitted that the land was purchased by the assessee from A. Muni Reddy & others vide doe. no. 8062/07.
• The Land purchased was out of the sale proceeds of other lands and out of past savings of the assessee. • that the land in question is reflected in the ROI & Statement of affairs filed before ITAT.
• that the advances made by the assessee are made out of explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the ITAT and are again submitted before your honour vide paper book. Kindly refer to the cash now statements wherein, amount of Rs. 6,79,SOO/-is shown before document number 8062/2007 at Row 6 of Page 4 under application of funds.
h. Purchase of agricultural land from S. Nagoor &others(Rs.3,40,OOO/-) • In this regard it is submitted that the land was purchased by the assessee from S. Nagoor & others vide document.
99 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati no. 7067/07.
• The Land purchased was out of the sale proceeds of other lands and out of past savings of the assessee. • It is also submitted that the land in question is reflected in the ROI & Statement of affairs filed before the ITAT. • that the advances made by the assessee are made out of explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT(A) and are again submitted before your honour vide paper book under cash flow statements wherein, amount of Rs. 3,40,000/-is shown before document number 7067/2007 at Row 7 of Page 4 under application of funds.
51. It was, therefore, prayed to delete the additions made for the years under consideration.
52. We have gone through the submissions made by the assessee. The assessee submitted the documents for the purchase of various properties as stated above. We find the following facts from the record:
(i) Purchase of agricultural land from Shri Nada Muni and Smt. Vijayalakshmi ... Source is from compensation received from the Govt. Of A.P. And past savings.
(ii) Purchase of land from Banu Prakash and others - the transaction was cancelled and the amount has been subsequently returned.
(iii) Purchase of agricultural land from Shri P. Nagoor and others
- source is from compensation from the Govt. Of A.P. Towards acquisition of agricultural land and past savings.
(iv) Purchase of agricultural land from Shri P. Munar - source is from past savings.
(v) Purchase of land from Shri N Venkatappa Naidu - The land 100 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati was never purchased by the assessee and no agreement has been made for the land.
(vi) Purchase of agricultural land from Shi D.Krishnaiah - land was never purchased, only advance was paid.
(vii) Purchase of land from A. Muni Reddy - source is from sale of other lands and past savings.
(vii) Purchase of land from Shri S. Nagoor - source is from other lands and past savings.
53. From analyzing the documents, we are of the opinion that for verification of the amount of funds available with the assessee, as submitted by the ld Counsel the cash flow statement of the assessee has to be thoroughly examined. It is also a fact that the lands are reflected in the return of income filed and statement of facts filed before us. In these circumstances, we direct the AO to verify the cash flow statement and examine whether the amounts shown for the purchase of documents are reflected in the cash flow statement under application of funds and decide the issue in accordance with law.
54. With respect to Ground No.4 & 5, we have already adjudicated similar issue at Para 26 in ITA 1765/Hyd/2013 - AY 2003-04 and the same conclusion shall be followed in this AY also.
55. In the result, appeal is partly allowed for statistical purposes.
ITA No.287/Hyd/2014 - A.Y 2009-1056. Grounds preferred by the assessee read as under:
"1. The ld CIT (A) Guntur erred both in law and on facts while disallowing the appeal.101 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
2. The ld CIT (A) Guntur erred in sustaining the addition of Rs.4,52,800 towards income from business & profession by changing the head of income, which had been offered to tax as capital gains by the assessee in the return of income.
3. The ld CIT (A) Guntur erred in confirming the disallowance u/s 54B claimed by the assessee in respect of capital gain.
4. The ld CIT (A) Guntur erred in confirming the addition of Rs.4,78,000 towards unaccounted income by changing the source of agricultural income to other source income, which is not correct and not justified.
5. The ld CIT(A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified".
57. Ground No.1 is general, needs no adjudication.
58. With regard to Ground No.2 & 3 regarding the CIT (A) sustaining the addition of Rs.4,52,800/- & Rs.4,78,000 towards income from business and profession by changing the head of income. We find that similar issue has been decided by us at Para No.77 & 78 in ITA No.1765/Hyd/2013 for AY 2003-04 and the same conclusions shall be followed in this AY also.
59. Ground No. 4 & 5, similar issue has been decided by us at Para No.26 (ITA No.1765/Hyd/2013 AY 2003-04) and the same conclusions shall be followed in this AY also.
60. In the result, appeal is partly allowed for statistical purposes.
61. To sum up, appeals are treated as partly allowed for statistical purposes.
102 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati ITA Nos.475 to 478/Hyd/2014 - A.Y. 2003-04, 2004-05, 2005-06 & 2007-08: Smt. Panjam Shobha Rani ITA No.475/Hyd/2014 - A.Y 2003-04
1. Grounds of appeal preferred by the assessee read as under:
"1. The ld CIT (A) Guntur erred both in law and on facts while partly allowing the appeal.
2. The ld CIT(A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified.
3. The ld CIT (A) Guntur erred in confirming the assessment u/s 144 r.w.s. 153C which is invalid ab-initio and issue of notice u/s 153C is not correct.
4. The ld CIT (A) Guntur ought to have accepted the fact that presumption u/s 132(4A) is applicable in respect of persons from whose custody or possession seized material was found and it cannot be applied to third parties.
5. The ld CIT (A) Guntur erred in sustaining the addition of Rs.2,95,574 towards cheque deposits appearing in the savings bank account of the appellant, which is not correct and not justified.
6. Without prejudice to the above, the ld CIT (A) Guntur erred in rejecting the documents submitted by the appellant like copies of order u/s 11 of the Land Acquisition Act, 1894 and copy of bank statement pertaining to Andhra Bank Account No.20267 the same was rejected on the basis of suspicions and surmises.
2. Ground Nos.1 & 2 are general in nature.
3. Ground Nos.3 & 4 are with confirming the assessment u/s 144 r.w.s. 153C. This issue has already been adjudicated by us in ITA No.1765/Hyd/2013 for A.Y 2003-04 (Par No.6) and the same conclusion shall be followed in this AY also.
103 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
4. Ground No.5 is with respect to sustaining the addition of Rs.2,95,574 by the CIT (A).
5. It was submitted that during the course of assessment proceedings, the AO has made an addition of Rs.3,95,574 towards unexplained bank deposits out of which Rs.2,95,574 has been sustained by the CIT (A) for the need of the evidence.
6. It was further submitted that during the year under consideration, the assessee received compensation from government towards acquisition of land amounting to Rs.2,95,574 and the same cheque was deposited in the bank (paper book page No.3).
7. It was submitted before us that an addition of Rs.3,95,574 as pertains to unexplained deposits. During the course of assessment, AO noted that the assessee had maintained a savings bank account at Andhra Bank, Tirupati bearing account No.20267. The bank account reflected the following deposits which were treated as unexplained and added to the income of the assessee.
Date Amount (Rs.) Mode
20.02.2003 1,00,000 Cash
17.03.2003 2,95,574 Cheque
Total 3,95,574
8. Before the CIT (A) assessee submitted that out of the amount of Rs.3,95,574, Rs.1,00,000 in cash was deposited by her son Vamsi Krishna, out of her agricultural income. She filed agricultural income certificates in support of her claim regarding agricultural income and stated that she had 10 acres of land in Koduri village in Kadapa. As regards the cheque deposit of Rs.2,95,574 it was stated that this represented receipt from Govt.
104 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati of Andhra Pradesh towards acquisition of land located at Avilala village, Tirupati. In his remand report AO stated that the agricultural income certificates submitted by the assessee are for financial year 2005-06 to 2009-10 and not relevant to A.Y 2003-04. Secondly, the only evidence submitted in support of land acquisition compensation is a ledger extract, which cannot be treated as valid evidence. In her counter submissions, the assessee has stated that she has consistently been deriving agricultural income for several years prior to A.Y 2003-04. In support of her claim, she stated that pattadar pass book for survey No.261/A2 and 273/A1 was submitted. Thirdly, assessee has submitted copies of order u/s 11 of the Land Acquisition Act, 1894 by the competent authority showing details of land acquisition and payments made thereto. Besides, a copy of the bank statement pertaining to the Andhra Bank A/c No.20267 has been submitted which shows deposit of Rs.2,95,574 by cheque.
9. The ld CIT (A) held as under:
"8.3 I have perused the submissions made. The appellant has submitted agricultural land ownership details as well as agricultural income certificates. The income certificates pertain to financial year 2005-06 onwards. However, it is not denied that the appellant was in ownership of agricultural land in financial year 2002-03 and earlier years and hence generation of agricultural income in A.Y 2003-04 cannot be denied. As regards cheque deposit of Rs.2,95,574 the appellant has submitted copy of the proceedings carried out by the land acquisition officer on 30.04.2003. In the case of Shobha Rani, the amount reflected is Rs.1,01,731 in respect of Plots No.10, 11 & 67 measuring 619.500 sq. yards. There is no other amount recorded in her case and hence the document submitted does not furnish evidence regarding the cheque deposit of Rs.2,95,574. Hence, out of the total addition of Rs.3,95,574 an amount of Rs.1,00,000 being cash deposit out of agricultural income is allowed and the balance Rs.2,95,574 is sustained as unexplained deposit 105 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati appearing in the bank account. The appellant's appeal in respect of Ground No.3 is partly allowed".
10. From page 3 of the paper book submitted, we find that Shobha Rani has received an amount of Rs.2,95,574 under Section 11 of the Land Acquisition Act, 1894. Hence we delete the addition made by the CIT (A).
11. In the result appeal is partly allowed for statistical purposes.
ITA No.476/Hyd/2014 - A.Y. 2004-0512. Grounds preferred by the assessee read as follows:
"1. The ld CIT (A) Guntur erred both in law and on facts while partly allowing the appeal.
2. The ld CIT(A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified.
3. The ld CIT (A) Guntur erred in confirming the assessment u/s 144 r.w.s. 153C which is invalid ab-initio and issue of notice u/s 153C is not correct.
4. The ld CIT (A) Guntur ought to have accepted the fact that presumption u/s 132(4A) is applicable in respect of persons from whose custody or possession seized material was found and it cannot be applied to third parties.
5. The ld CIT (A) Guntur erred in sustaining the addition of Rs.1,30,700 towards unexplained investment in land, which is not correct and not justified.
6. The ld CIT (A) Guntur ought to have appreciated the fact that the assessee has already explained the source of income that the amount invested has got from the loan taken from the close relative.106 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
7. The ld CIT (A) Guntur erred in sustaining the addition of Rs.13,51,000 towards unexplained deposits in saving bank account, without appreciating the fact that the appellant has already explained the same".
13. Ground No.1 is general in nature
14. Ground Nos. 2 3 & 4 are with respect to assessment u/s 144 r.w.s 153C. We have already adjudicated this issue in ITA No.1765/Hyd/2013 (AY 2003-04) vide Para No.6 and the same conclusion shall be followed in this AY also.
15. Ground No.5 & 6 are with respect to addition of Rs.1,30,700 as unexplained investment. It was submitted that the AO noted that page 61 of the document No.A/SJC/RES/01 seized from the residence of Sri S. Jayachandra Reddy reflected purchase of 0.09 acres of land at Tiruchanoor by the assessee for Rs.1,30,700 on16.07.2003 vide document No.2483/03. The assessee did not submit any reply to the show cause notice issued by the AO seeking source of the investment made. Hence this amount was added to the income of the assessee.
16. Before the CIT (A) it was stated by the assessee that the amount of Rs.1,30,700 was paid out of streedhan received from her parents. Subsequently the assessee stated that this amount has been withdrawn on 16.07.2003 for purchase of a plot of land. In the remand report, AO stated that bank account details have not been furnished so as to verify whether such withdrawal has taken place.
17. The ld CIT (A) held as under:
"8.3 I have perused the bank account statement and there is no withdrawal on 16.07.2003 which would justify the investment made. Secondly, it appears that the contention regarding receipt of streedhan is also not 107 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati backed by any evidence. In the counter submissions to the remand report, the appellant has raised an additional ground stating that the document in question was found at the premises of the appellant's brother in law Sri S. Jayachandra Reddy and cannot be considered as evidence against the appellant. This contention of the appellant can also not be accepted in that the document in question reflects a property which has been purchased and registered in the name of the appellant. The amount in question is the consideration recorded in a registered sale deed and hence it is for the appellant to explain the source of investment made. In the absence of any satisfactory explanation, the addition amounting to Rs.1,30,700 is sustained and the appellant's appeal on ground No.2 is rejected".
18. Before us it was submitted that during the year under consideration, the assessee had made investment in land amounting to Rs.1,30,700. The investment was made out of the "Stridhan" received by her from her parents. An affidavit from the assessee in this regard was already filed. Further it was stated that the assessee group is having enough sources of cash to meet the investment which was reflected in the cash flows statement of the assessee group. We find the explanation of the assessee is reasonable, since an amount of Rs.1,30,700 could be a gift received by the assessee from her parents and we also find that the sale deed has been registered in her name. Hence, we delete the addition made by the CIT (A).
19. Ground Nos. 6 is with respect to unexplained Bank Deposits amounting to Rs.13,51,000 sustained by the CIT (A).
20. Before us, it was submitted by the ld Counsel that during the course of the assessment proceedings, AO made an addition of Rs.68,30,731 towards unexplained bank deposits out of which Rs.13,51,000 has been sustained by the CIT (A) for the need of source. It was further submitted that during the appellate 108 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati proceedings, the CIT (A) made the analysis of the withdrawals and deposits of the assessee's bank account and arrived at the negative cash balance of Rs.13,51,000 (Rs.1,00,000 on 2.7.2003 + Rs.1,01,000 on 6.11.2003 + Rs.10,00,000 on 17.11.2003 + Rs.1,50,000 received from Madhava Rao towards repayment of loan).
21. It was stated before us that the CIT (A) erred in not taking the opening bank balance of Rs.20,69,646 while analyzing the deposits and withdrawals of the assessee's bank account. In support of this contention, assessee submitted detailed analysis of assessee's bank account for all the years.
21. It was further submitted that the assessee has received an amount of Rs.1,50,000 from one Sri Madhava Rao towards repayment of loan advance earlier and the same is deposited in the Bank. In this connection, an affidavit from Shri Madhava Rao was filed vide Page No.32 of the paper book.
23. We have perused the record and at pages 10 & 11 of the paper book filed we find that an amount of Rs.20,69,646 appears in the opening cash balance as on 30.05.2003 which the CIT (A) has not considered. Hence, we delete this addition made by the CIT (A).
24. In the result appeal is partly allowed for statistical purpose.
ITA No.477/Hyd/2014 - A.Y. 2005-06:25. Grounds preferred by the assessee are given below:
"1. The ld CIT (A) Guntur erred both in law and on facts while partly allowing the appeal.109 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
2. The ld CIT(A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified.
3. The ld CIT (A) Guntur erred in confirming the assessment u/s 144 r.w.s. 153C which is invalid ab-initio and issue of notice u/s 153C is not correct.
4. The ld CIT (A) Guntur ought to have accepted the fact that presumption u/s 132(4A) is applicable in respect of persons from whose custody or possession seized material was found and it cannot be applied to third parties.
5. The ld CIT (A) Guntur erred in sustaining the addition of Rs.8,25,588 towards unexplained investment in land, which is not correct and not justified.
26. Ground No.1 & 2 are general, hence no adjudication is called for.
27. Ground Nos. 3 & 4 are with regard to assumption of jurisdiction u/s 144 r.w.s 153C. Similar issue has already been adjudicated by us at Para No.6 (ITA No.1765/Hyd/2013 AY 2003-
04) in the case of S. Jayachandra Reddy and the same conclusion shall be followed in this A.Y also.
28. Ground No.5 is with respect to sustaining the addition of Rs.8,25,588 towards unexplained cheques deposits in the bank accounts. It was submitted that there are two deposits by means of cheques during the year viz., Rs.6.00 lakhs on 21.04.2004 and Rs.2,25,588 on 5.6.2004. The assessee stated that Rs.6.00 lakhs received by cheque No.0241832 was repayment of an earlier advance of Rs.6.00 lakhs while Rs.2,25,588 was received by cheque from one Sri Muni Reddy as advance for sale of land at Tiruchanoor village.
110 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
29. The AO held that in support of this claim, the assessee has not furnished any evidence except a computer generated ledger print out. AO in the remand report observed that no evidence has been submitted except a ledger extract. In the subsequent written submissions as well as counter submissions to the remand report, the assessee stated that both the amounts represent advances received from Sri Muni Reddy for sale of land at Tiruchanoor village.
30. The CIT (A) held that neither the assessee furnished any confirmation regarding the same nor has he submitted any document indicating sale of land at Tiruchanoor village, which would confirm receipt of advance. The CIT (A) further held that the assessee's own contention has changed regarding deposit of Rs.6.00 lakhs by cheque and in the earlier submission during the appellate proceedings, it was stated that this amount represents repayment of earlier advance given, while, subsequently the CIT (A) concluded that while making counter submissions to the remand report, it has been claimed as an advance against sale of land received from Sri Muni Reddy. The CIT (A) observed that the assessee has not been able to satisfactorily explain the nature and sources of Rs.8,25,588. Thus, the CIT (A) held "hence, out of the total addition of Rs.17,33,088 on account of unexplained deposits in bank account, an amount of Rs.8,25,588 is confirmed while the balance of Rs.9,07,500 stands deleted".
31. Before us it was submitted that in the assessment proceedings the AO made an addition of Rs.17,33,088 towards unexplained bank deposits out of which Rs.8,25,588 has been sustained by the CIT (A) for the need of source. It was further submitted that during the year under consideration, assessee received an amount of Rs.8,25,588 from one Sri Muni Reddy s/o Ambati Nagulu Reddy towards repayment of loan advance by the 111 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati assessee to him. In this regard, a confirmation letter from Sri Muni Reddy was filed by the assessee vide page No.33 of the paper book. It was also submitted that the assessee group is having enough cash balance and telescoping has to be given to the deposits made by the assessee. We set aside this issue to the file of the AO to analyze if the assessee has enough cash balance and decide in the light of the decision of R.B. Mittal wherein it has been held as follows:
"we hold that the assessee is expected to establish proof of identity of his creditors, capacity of his creditors to advance money and genuineness of the transactions in order to discharge the onus imposed on him under section 68. "
32. In the result appeal is partly allowed for statistical purposes.
ITA No.478/Hyd/2014 - AY 2007-0833. Grounds raised by the assessee in this A.Y read as under:
"1. The ld CIT (A) Guntur erred both in law and on facts while partly allowing the appeal.
2. The ld CIT(A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified.
3. The ld CIT (A) Guntur erred in confirming the assessment u/s 144 r.w.s. 153C which is invalid ab-initio and issue of notice u/s 153C is not correct.
4. The ld CIT (A) Guntur ought to have accepted the fact that presumption u/s 132(4A) is applicable in respect of persons from whose custody or possession seized material was found and it cannot be applied to third parties.
5. The ld CIT (A) Guntur erred in sustaining the addition of Rs.7,50,000 towards unexplained cash deposit in saving bank account, without 112 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati appreciating the facts that the appellant has already explained the same".
34. Ground No.1 & 2 are general, hence no adjudication is called for.
35. Ground Nos. 3 & 4 are with regard to assumption of jurisdiction u/s 144 r.w.s 153C. Similar issue has already been adjudicated by us at Para No.6 (ITA No.1765/Hyd/2013 AY 2003-
04) in the case of S. Jayachandra Reddy and the same shall be followed in this A.Y also.
36. Ground no.5 is with respect to Unexplained Bank Deposits of Rs.6,50,000.
37. During the course of the assessment proceedings, AO made an addition of Rs.38,00,000 towards unexplained bank deposits out of which Rs.6,50,000 has been sustained by the CIT (A) for the need of source. In this connection, it was submitted that during the appellate proceedings, the CIT (A) made analysis of the withdrawals and deposits of the assessee's bank account and concluded that the assessee is not having the source for the deposit of Rs.6,50,000.
38. It was submitted that the ld CIT (A) erred in not taking the opening bank balance of Rs.20,69,646 on 30.05.2003 while analyzing the deposits and withdrawals of the assessee's bank account. In support, detailed analysis of the assessee's bank account for all the years wherein opening balance of Rs.20,69,646 is clearly seen which is not considered by the CIT (A). The same is reflected in page Nos. 10 & 11 of the paper book. Hence, if the opening bank balance of Rs.20,69,946 is considered, the assessee has enough source for the bank deposits.
113 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
39. We have already decided similar issue with respect to unexplained bank deposit in ITA No.475/Hyd/2014 for A.Y 2004-05 as follows:
"We have perused the record and at pages 10 & 11 of the paper book filed we find that an amount of Rs.20,69,646 appears in the opening cash balance as on 30.05.2003 which the CIT (A) has not considered. Hence, we delete this addition made by the CIT (A)".
40. In the result appeal is partly allowed for statistical purpose.
41. To sum up, appeals are partly allowed for statistical purposes.
ITA No.431/Hyd/2015 : A.Y 2007-08 (Smt. P. Deepthi)1. Grounds of appeal preferred by the assessee are as under:
"1. The ld CIT (A) Guntur erred both in law and on facts while disallowing the appeal.
2. The ld CIT(A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified.
3. The ld CIT (A) Guntur erred in confirming the assessment u/s 144 r.w.s. 153C which is invalid ab-initio and issue of notice u/s 153C is not correct.
4. The ld CIT (A) Guntur ought to have accepted the fact that presumption u/s 132(4A) is applicable in respect of persons from whose custody or possession seized material was found and it cannot be applied to third parties.
5. The ld CIT (A) Guntur erred in upholding the addition of Rs.8,44,600 towards the income from sale of land.
6. The ld CIT (A) Guntur ought to have appreciated the fact that the sale agreement 114 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati was cancelled on 24.12.2006 and the advance was returned back to the party.
7. The ld CIT (A) Guntur ought to appreciated the fact that the appellant has already filed cancellation letter of sale agreement dated 24.12.2006.
8. Without prejudicial to above the ld CIT (A) Guntur erred in rejecting the documents submitted by the appellant, cancellation letter dated 24.12.2006, sale agreement dated 21.02.2007 based on suspicious and surmises.
9. The ld CIT Guntur (A) without having any evidence in possession erred in holding that the appellant had received sales consideration as per original agreement for sale while the registered sale deed only reflected the stated consideration and not the actual sale price".
2. First ground of appeal is general in nature, hence no specific adjudication is called for.
3. Ground Nos. 2, 3 & 4 are with respect to assumption of jurisdiction u/s 153C as similar issue has already been adjudicated by us in A.Y 2003-04 in ITA No.1765/Hyd/2013).
4. Ground No.10 is an alternate ground, not adjudicated.
5. Ground Nos. 5 to 7 and 9 are with respect to addition of Rs.8,44,600 towards income from sale of land. During the course of search, a photocopy of sale agreement dated 13.12.2006 executed by the assessee and her brother was found and seized. As per page Nos. 198 to 200 of Annexure A/SJC/RES/04, the assessee and her brother have entered into a sale agreement with one Smt. C. Tulasi w/o B. Somasekhar for sale of 88.90 ankanams of land situated at Avilala Village, Tirupati for a sum of Rs.16,89,200.
115 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
6. During the appellate proceedings, the assessee stated that the said sale agreement was cancelled on 24.12.2006 and the advance was returned back to the party. In support of her claim, the assessee has filed cancellation letter dated 24.12.2006 signed by Smt. C. Tulasi, w/o B. Somasekhar vide page 4 of the paper book filed on 30.05.2011. The assessee also stated that the said property was subsequently sold to Sri Abdul Rahaman, S/o Sulemaan Saheb, Tirupati and Sri Gollapalli Guruswami Reddy, S/o Narayana Reddy, Tirupati for Rs.3,57,000 and Rs.3,54,500 respectively vide registered sale deeds bearing No.1212/07 and 1213/07 dated 22.02.2007. The assessee has stated that only an amount of Rs.4.00 lakhs had been received as advance, which was subsequently returned to the original buyer Smt. C. Tulasi on 24.12.2006.
7. The CIT (A) held as under:
"9.3 I have perused the submissions made. The agreement in question fixes the price of the land at Rs.16,89,200 and also states that an advance of Rs.4,00,000 has been paid while the balance amount of Rs.12,89,200 has to be paid by 12.02.2007. It is a common practice in land transactions that the person who originally enters into an agreement to buy is not the actual buyer or the final buyer, but instead merely an agent or a trader in land. Having paid an advance amount, this agent/trader scouts for buyers at a price higher than the one agreed by him. Once, such a buyer is located, the sale deed is drawn between the land owner and the final buyer and it is this sale deed, which is registered. The land owner in such cases receives the amount, which has been determined in the original agreement for sale. It is clear that the plot had been valued at Rs.16,89,000 as late as on 13.12.2006. There appears to be no reason why the appellant and her brother would agree to sell a plot of land at less than half its price barely two months later. Hence, it is apparent that the appellant has received sales consideration as per the original agreement for sale while the registered sale deed only reflects the stated 116 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati consideration and not the entire sale price. Hence the contention of the appellant is not acceptable and the addition made is sustained. The appeal in respect of Ground No.3 is dismissed".
8. On appeal before us it was submitted by the ld Counsel for the assessee that AO while completing the assessment made addition by treating 50% of the total consideration as the undisclosed income of the assessee amounting to Rs.8,44,600 on the basis of a photocopy of sale agreement. In this regard it was submitted that:
• The sale agreement found during the course of search is only a photocopy and not the actual sale deed. • Sale agreement was towards sale of 88.90 ankanam of land situated at Avilala Village, Tirupati for a sum of Rs.16,89,200. • Sale agreement dated 13.12.06 on the basis of which addition have been made was cancelled on 24.12.2006 and the advance was returned back to the party. • Subsequently, a registered sale deed was entered into with other parties upon same land in question. • In support, assessee filed evidence of cancellation letter dated 24.12.2006 signed by Smt. C. Tulasi w/o B. Somashekhar vide Page No.4 of the paper book 1 filed on 30.05.2011.
• Assessee vide paper book has also filed the original sale deed copies upon the land in question.
• Hence no addition of undisclosed income can be made merely on the basis of cancelled sale agreement found during the course of search.
• Reliance was placed on the decisions of the Hyderabad ITAT in the case of DCIT vs. Shri B.Vijaya Kumar (ITA Nos.930 & 931/Hyd/2009) and the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. Fairdeal Textile Park (P) Ltd.
9. We heard both the parties. We find that the sale agreement found during the course of search is only a photocopy. In the case 117 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati of DCIT vs. B. Vijaya Kumar, the Coordinate Bench of ITAT Hyderabad has held as follows:
"11................
The Hon'ble Supreme Court in the case of K.P. Verghese reported in 131 ITR 597 has held that onus is on the department to prove that the assessee has understated the value of the property and has paid more than what is mentioned in the registered sale deed. The Hon'ble Supreme Court in the case of Moosa S. Madha and Azam S. Madha vs. CIT (89 ITR 65) has held that photocopies have little evidentiary value. Therefore, photocopies of any document cannot by itself be considered as evidence for purpose of making addition in assessment proceedings".
10. Subsequently a registered sale deed was entered with other parties upon the same land and the sale agreement dated 13.12.2006 on the basis of which the addition has been made was cancelled on 24.12.2006 and the advance was returned back. In support of the cancellation, the assessee has filed evidence of cancellation letter dated 24.12.2006 signed by Smt. C. Tulasi W/o B. Somasekhar in the paper book filed. Hence we are of the opinion that no addition of undisclosed income can be made (i) merely on the basis of a cancelled agreement found during the course of search (2) relying on the photocopy and not on the actual sale deed. Hence, we allow this ground of the assessee.
11. In the result, assessee's appeal is partly allowed for statistical purposes.
118 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati ITA No. 433/Hyd/2014 : A.Y 2007-08 (P. Vamshi Krishna)
1. Grounds preferred by the assessee read as under:
"1. The ld CIT (A) Guntur erred both in law and on facts while disallowing the appeal.
2. The ld CIT(A) Guntur ought to have appreciated that the order of the AO is based on the suspicions, conjectures and surmises which is not correct and not justified.
3. The ld CIT (A) Guntur erred in confirming the assessment u/s 144 r.w.s. 153C which is invalid ab-initio and issue of notice u/s 153C is not correct.
4. The ld CIT (A) Guntur ought to have accepted the fact that presumption u/s 132(4A) is applicable in respect of persons from whose custody or possession seized material was found and it cannot be applied to third parties.
5. The ld CIT (A) Guntur erred in upholding the addition of Rs.8,44,600 towards the income from sale of land.
6. The ld CIT (A) Guntur ought to have appreciated the fact that the sale agreement was cancelled on 24.12.2006 and the advance was returned back to the party.
7. The ld CIT (A) Guntur ought to appreciated the fact that the appellant has already filed cancellation letter of sale agreement dated 24.12.2006.
8. Without prejudicial to above the ld CIT (A) Guntur erred in rejecting the documents submitted by the appellant, cancellation letter dated 24.12.2006, sale agreement dated 21.02.2007 based on suspicious and surmises.
9. The ld CIT Guntur (A) without having any evidence in possession erred in holding that the appellant had received sales consideration as 119 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati per original agreement for sale while the registered sale deed only reflected the stated consideration and not the actual sale price".
2. First ground is general in nature, hence no specific adjudication is called for.
3. Ground Nos. 2 3 and 4 are with respect to assumption of jurisdiction. Similar issue has been adjudicated by us in ITA No.1765/Hyd/2013 for A.Y 2003-04 in the case of S. Jayachandra Reddy, at Para No.6.
4. Ground No.5 6 7 and 9 are with respect to CIT (A) upholding the addition of Rs.844600 towards the income from sale of land. During the course of search, a photocopy of sale agreement dated 13.12.2006 executed by the assessee and his sister was found and seized. As per page Nos. 198 to 200 of Annexure A/SJC/RES/04, the assessee and his sister have entered into a sale agreement with one Smt. C. Tulasi, W/o B. Somasekhar for sale of 88.90 ankanams of land situated at Village Avilala, Tirupati for a sum of Rs.16,89,200.
5. During the appellate proceedings, the assessee stated that the said sale agreement was cancelled on 24.12.2006 and the advance was returned back to the party. In support of her claim, the assessee has filed cancellation letter dated 24.12.2006 signed by Smt. C. Tulasi, w/o B. Somasekhar vide page 4 of the paper book filed on 30.05.2011. The assessee also stated that the said property was subsequently sold to Sri Abdul Rahaman, S/o Sulemaan Saheb, Tirupati and Sri Gollapalli Guruswami Reddy, S/o Narayana Reddy, Tirupati for Rs.3,57,000 and Rs.3,54,500 respectively vide registered sale deeds bearing No.1212/07 and 1213/07 dated 22.02.2007. The assessee has stated that only an amount of 120 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati Rs.4.00 lakhs had been received as advance, which was subsequently returned to the original buyer Smt. C. Tulasi on 24.12.2006.
6. The CIT (A) held as under:
"9.3 I have perused the submissions made. The agreement in question fixes the price of the land at Rs.16,89,200 and also states that an advance of Rs.4,00,000 has been paid while the balance amount of Rs.12,89,200 has to be paid by 12.02.2007. It is a common practice in land transactions that the person who originally enters into an agreement to buy is not the actual buyer or the final buyer, but instead merely an agent or a trader in land. Having paid an advance amount, this agent/trader scouts for buyers at a price higher than the one agreed by him. Once, such a buyer is located, the sale deed is drawn between the land owner and the final buyer and it is this sale deed, which is registered. The land owner in such cases receives the amount, which has been determined in the original agreement for sale. It is clear that the plot had been valued at Rs.16,89,000 as late as on 13.12.2006. There appears to be no reason why the appellant and her brother would agree to sell a plot of land at less than half its price barely two months later. Hence, it is apparent that the appellant has received sales consideration as per the original agreement for sale while the registered sale deed only reflects the stated consideration and not the entire sale price. Hence the contention of the appellant is not acceptable and the addition made is sustained. The appeal in respect of Ground No.3 is dismissed".
7. On further appeal before it was submitted by the ld Counsel that AO while completing the assessment made addition by treating 50% of the total consideration as the undisclosed income of the assessee amounting to Rs.8,44,600 on the basis of a photocopy of sale agreement. In this regard it was further submitted that:
• The sale agreement found during the course of search is only a photocopy and not the actual sale deed.121 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati • Sale agreement was towards sale of 88.90 ankanam of land situated at Avilala Village, Tirupati for a sum of Rs.16,89,200. • Sale agreement dated 13.12.06 on the basis of which addition have been made was cancelled on 24.12.2006 and the advance was returned back to the party. • Subsequently, a registered sale deed was entered into with other parties upon same land in question. • In support, assessee filed evidence of cancellation letter dated 24.12.2006 signed by Smt. C. Tulasi w/o B. Somashekhar vide Page No.4 of the paper book 1 filed on 30.05.2011.
• Assessee vide paper book has also filed the original sale deed copies upon the land in question.
• Hence no addition of undisclosed income can be made merely on the basis of cancelled sale agreement found during the course of search.
• Reliance was placed on the decisions of the Hyderabad ITAT in the case of DCIT vs. Shri B.Vijaya Kumar (ITA Nos.930 & 931/Hyd/2009) and the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. Fairdeal Textile Park (P) Ltd.
8. We heard both the parties. We find that the sale agreement found during the course of search is only a photocopy. In the case of DCIT vs. B. Vijaya Kumar, the Coordinate Bench of ITAT Hyderabad has held as follows:
"11................
The Hon'ble Supreme Court in the case of K.P. Verghese reported in 131 ITR 597 has held that onus is on the department to prove that the assessee has understated the value of the property and has paid more than what is mentioned in the registered sale deed. The Hon'ble Supreme Court in the case of Moosa S. Madha and Azam S. Madha vs. CIT (89 ITR 65) has held that photocopies have little evidentiary value. Therefore, photocopies of any document cannot by itself be considered as evidence for purpose of making addition in assessment proceedings".122 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
9. Subsequently a registered sale deed was entered with other parties upon the same land and the sale agreement dated 13.12.2006 on the basis of which the addition has been made was cancelled on 24.12.2006 and the advance was returned back. In support of the cancellation, the assessee has filed evidence of cancellation letter dated 24.12.2006 signed by Smt. C. Tulasi W/o B. Somasekhar in the paper book filed. Hence we are of the opinion that no addition of undisclosed income can be made (i) merely on the basis of a cancelled agreement found during the course of search (2) relying on the photocopy and not on the actual sale deed. Hence, we allow this ground of the assessee.
10. In the result, assessee's appeal is partly allowed for statistical purposes.
123 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati ITA No.479/Hyd/2014 - A.Y 2008-09 : Revenue's Appeal
1. Grounds preferred by the Revenue in this appeal read as follows:
"1. The ld CIT (A) has not taken into consideration the remarks of the AO in the remand report while deleting the addition made of Rs.43,04,733.
2. The ld CIT (A) has deleted the addition of Rs.1.00 lakhs without any grounds.
3. The ld CIT (A) ought not to have deleted the addition of Rs.6,66,000 made on the basis of seized document of page No.146 of A/SJC/RES/04. The assessee has not produced any documentary evidence in support of cancellation of transaction and agreement during the remand report proceedings; the CIT (A) should not have been relied upon the submission which was not submitted before the AO during the remand report proceedings;
4. The ld CIT (A) ought not to have deleted the addition of Rs.1,95,000 made on the basis of seized document of page No.82 of A/SJC/RES/04. The assessee has simply filed the ledger extract of construction account and the sources has not explained during the remand report proceedings; The CIT (A) should not have been relied upon the house construction account and sources has not examined.
5. The ld CIT (A) ought not to have deleted the addition Rs.2.00 lakhs made on the basis of page No.37 of A/SJC/RES/03 without verifying the seized material".
2. Ground No.1 is general nature which is against the order of the ld CIT (A) in not considering the remand report.
3. With regard to Ground No.2, it was stated that as per page Nos. 65 & 66 of Annexure A/SJC/RES/04, two receipts issued by V.Venugopal Reddy have been seized. The receipt at page No.65 is for Rs.1,00,000 paid by the assessee by cheque and the receipt at Page No.66 is with regard to purchase of 2.71 acres of land at 124 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati Renigunta by the assessee for Rs.3.00 lakhs. Assessee stated that he has purchased this land from Venugopal Reddy for Rs.3.00 lakhs vide document No.4574/2007 on 28.06.2006 and this purchase has been reflected in the relevant A.Y 2007-08. AO held that the returns of income do not reflect investment of both Rs.1.00 and Rs.3.00 lakhs and added the entire amount of Rs.4.00 lakhs.
4. In his counter submissions, the assessee stated that this property was purchased for Rs.3.00 lakhs out of which Rs.1.00 lakhs by cheque and Rs.2.00 lakhs by cash and both pages 65 & 66 of the seized documents referred to the same property purchased from V. Venugopal Reddy. Assessee also in his counter submissions filed a copy of the registered document which shows that the property in question was purchased for Rs.3.00 lakhs out of which Rs.1.00 lakhs was paid by ICICI Bank Cheque No.651397 dated 28.06.2007 while the balance of Rs.2.00 lakhs by way of cash. This registered document supports the seized document at page No.65 of Annexure A/SJC/RES/04. Thus, it is clear that the property in question was purchased for Rs.3.00 lakhs. The assessee stated that the payments took place on 28.6.2006. However, the registered document as well as the seized documents shows that both the cash and cheque payments took place on 28.06.2007 which is the date on which the property was registered.
5. The assessee showed an investment of Rs.3.00 lakhs in his books of accounts in the financial year 2006-07 whereas the investment has taken place in the financial year 2007-08. Thus, the assessee's books of accounts and submissions cannot be relied upon. Hence, out of an amount of Rs.4.00 lakhs added in respect of these two documents, the ld CIT (A) sustained an amount of Rs.3.00 lakhs.
125 ITA No.1765/Hyd/2013 & six othersShri S.Jayachandra Reddy, Tirupati
6. We heard both the parties. We find that the CIT (A) has correctly deleted the addition of Rs.1.00 lakh as the amount was paid by ICICI Bank cheque No.651397 dated 28.06.2007 while the balance of Rs.2.00 lakhs was paid by cash. Further, the CIT (A) stated that the assessee has shown an investment in his Books of Accounts, in the F.Y 2006-07, whereas the investment has taken place in the F.Y. 2007-08 and hence the assessee submission is unreliable and therefore, he sustained the amount of Rs.3.00 lakhs instead of the amount arrived at Rs.4.00 lakhs by the AO as Rs.1.00 lakhs has been given by cheque. Hence, we find no infirmity in the order of the CIT (A) and confirm the same. This ground of the Revenue is dismissed.
7. With regard to Ground No.3, it was submitted that at Page No.146 which is a receipt cum agreement of Rs.6,66,000 for 20 cents of land @ Rs.33,000/- per cent on 10.05.2007, whereby R. Venkata Reddy has sold the land to the assessee. At the assessment stage, the assessee stated that he has only paid Rs.9000 as advance and no further payment has been made. AO did not agree with the assessee and added the entire amount as unexplained investment.
8. During appellate proceedings, the assessee has submitted the encumbrance certificate regarding this piece of land which shows that as on 20.11.2009 the property in question remained in the name of R.Venkata Reddy and had been mortgaged to Gajulamandalam Primary Agricultural Cooperative Society.
9. We are in agreement with the order of the CIT (A) since he has observed that the property remained recorded in the name of the original seller and the seized document also mentions only payment 126 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati of Rs.9000/-. Hence we confirm the order of the CIT (A) wherein he has held as under:
"8.9.3 I have perused the documents submitted by the appellant and it is clear that this transaction has not gone through since on a day subsequent to the search, the property remains recorded in the name of the original seller in the land revenue records. The seized agreements mentions only Rs.9,000 as advance and there is no evidence of any further payment in this regard. Thus, the amount of Rs.6,66,000 treated as unexplained investment by the AO is being deleted".
10. As regards, Ground No.4, it was submitted that page 82 of Annexure A/SJC/RES/04 is a document evidencing payment of Rs.1,95,000 in cash as advance for purchase of plywood and laminates on 26.03.2008. The assessee stated that this pertains to house construction expenses incurred out of loans and savings. AO held that the sources remained unexplained and added this as unexplained investment.
11. At the appellate stage, assessee had stated that this amount has been paid towards supply of granites for construction of the building and has been accounted for in the books of accounts maintained in respect of house construction.
12. The CIT (A) held that "The appellant has reflected Rs.35.89 lakhs towards house construction as on 31.03.2008 and hence the contention is accepted and the addition is deleted".
13. We have heard both the parties. We find that the construction account has shown an expenditure of Rs.35.89 lakhs as on 31.03.2008. Hence payment of Rs.1,95,000 being part of construction accounts is only a small portion of the entire amount spent towards construction. We find that the amount of Rs.35.89 127 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati lakhs towards house construction has been reflected in the accounts of the assessee. Whether the amount has been paid towards granites or plywood and laminates, is not relevant as the payment is part of the construction account. Therefore, we confirm the deletion made by CIT (A) for an amount of Rs. 1,95,000/-.
14. In the result appeal filed by the Revenue is dismissed.
ITA No.480/Hyd/2014 A.Y 2009-10 : Revenue's Appeal15. Grounds preferred by the Revenue read as under:
"1. The ld CIT (A) has not taken into consideration the remarks of the AO in the remand report while deleting the addition made of Rs.1,16,40,625/-.
2. The ld CIT (A) ought not to have deleted the addition of Rs.12,86,000 made on the basis of seized document of page No.145 of A/SJC/RES/04. The assessee has not produced any documentary evidence in support of cancellation of transaction and agreement during the remand report proceedings; the CIT (A) should not have been relied upon the submission which was not submitted before the AO during the remand report proceedings;
3. The ld CIT (A) ought not to have deleted the addition of Rs.13,06,000 made on the basis of seized document of page No.82 of A/SJC/RES/04. The assessee has not produced any documentary evidence in support of cancellation of transaction and agreement during the remand report proceedings; The CIT (A) should not have been relied upon the house construction account and sources has not examined.
4. The ld CIT (A) ought not to have deleted the additions of Rs.38,400 and Rs.60,000 made on the basis of seized document of page Nos. 73 & 75 of A/SJC/RES/04. The assessee has simply filed the ledger extract of construction account and the sources has not explained during the remand report proceedings; The CIT (A) should not have been relied upon the house construction account and sources has not examined".128 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
16. Ground No.1 is general nature which is against the order of the ld CIT (A) in not considering the remand report.
17. With regard to Ground No.2, it was stated that at Page No.145of Annexure A/SJC/RES/04 is a receipt cum agreement for Rs.12,86,000 issued by Venkata Muni Reddy towards sale of 36 cents of land to the assessee. During the assessment proceedings, it was stated that only Rs.9000 was paid as an advance and no further payments have been made. AO did not agree with the contention of the assessee and added the entire amount as unexplained investment.
18. During the appellate proceedings, the assessee has furnished an encumbrance certificate regarding the said property located in Village Thukivakam bearing Survey Nos. 482 & 484. It shows that on 20.11.2009 the land remained in the name of S. Venkata Reddy, father of S.Venkata Muni Reddy, Nagi Reddy & Kumaraswamy Reddy, the three signatories to the receipt seized as page No.145. In view of the same, there was no evidence that the transaction was concluded and the property registered in the name of the assessee. The only evidence is regarding payment of advance of Rs.9000 and hence the addition made of Rs.12.86 lakhs stands deleted.
19. We have dealt with similar issue in ITA No.479/Hyd/2014 in the Revenue's appeal for A.Y 2008-09 and adjudicated at Para No.13 and the same conclusion shall be followed in this AY also.
20. With regard to Ground No.3, it was submitted that at Page 147 of Annexure A/SJC/RES/04 is a receipt signed by S. Giri Govardhana Reddy, S. Venkatadri Reddy and S. Tyagaraja Reddy, all sons of S. Gangi Reddy for sale of 36.5 cents of land for an 129 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati amount of Rs.13.06 lakhs. The receipt is for Rs.9000 given as token advance. During assessment proceedings, it was stated that only Rs.9000 was paid and the transaction could not be concluded and no further payments were made. AO did not agree to the contention of the assessee and has added the entire amount of Rs.13.06 lakhs.
21. During the appellate proceedings, assessee furnished encumbrance certificate regarding land located at Survey No.484/2 in Village Thukivakam which continues to be in the names of Tyagaraja Reddy, Venkatadri Reddy, Giri Govardhana Reddy and other minors as on 20.11.2009 indicating thereby that the transaction has not been concluded and the only evidence is regarding payment of Rs.9000 as advance. The CIT (A) deletion the addition of Rs.13.06 lakhs made by the AO . The Department is in appeal before us.
22. We hard both parties. From the encumbrance certificate submitted by the assessee it can be gathered that the land holdings remained in the names of Tyagaraja Reddy, Venkatadri Reddy, Giri Govardhana Reddy and other minors as on 20.11.2009. Hence the sale has not been concluded and only an advance payment of Rs.9000 has been paid. Therefore, we confirm the order of the CIT (A) in deleting the addition of Rs.13.06 lakhs.
23. With regard to Ground No.4, it was stated that pages 73 & 75 of Annexure A/SJC/RES/04 being receipts of Rs.38,400 & Rs.60,000 have been stated as pertains to construction of house, which have been wrongly added as unexplained investment in purchase of land.
24. The ld CIT (A) held as under:
"8.10.2 I have perused the documents and the contention of the appellant appears correct. Moreover, 130 ITA No.1765/Hyd/2013 & six others Shri S.Jayachandra Reddy, Tirupati the appellant has shown substantial investment towards construction of the house and hence the addition of Rs.98,400 in respect of these two documents stands deleted".
25. Aggrieved, the Revenue is in appeal before us.
26. We find that the CIT (A) has gone through the document and as a matter of fact found that the AO has wrongly added the amounts of Rs.38,400 and Rs.16,000 as unexplained investment in purchase of land. The assessee has incurred heavy expenditure in the construction of house and receipts in pages 73 and 75 of annexure-A/SJC/RES/04 have been stated by the assessee pertain to construction of the house. The amounts being part of the construction account which is a large amount, we confirm the order of the CIT (A) in deleting the same. The grounds of the revenue are dismissed.
27. In the result, Revenue's appeal is dismissed.
28. To sum up, Revenue appeals are dismissed.
29. Final result is given below:
S.No ITA No. A.Y Result
1 1765/Hyd/2013 2003-04
2 1766/Hyd/2013 2004-05
3 1767/Hyd/2013 2005-06 Partly allowed for statistical
4 91/Hyd/2014 2006-07 purposes in the case of Shri
5 92/Hyd/2014 2007-08 S. Jayachandra Reddy.
6 127/Hyd/2014 2008-09
7 128/Hyd/2014 2009-10
8 339/Hyd/2014 2003-04
9 340/Hyd/2014 2004-05
10 90/Hyd/2014 2005-06 Partly allowed for statistical
11 432/Hyd/2014 2006-07 purposes in the case of Shri
12 341/Hyd/2014 2007-08 Saikam Siva Chaitanya.
13 342/Hyd/2014 2008-09
14 343/Hyd/2014 2009-10
15 362/Hyd/2014 2007-08 Partly allowed for statistical
16 363/Hyd/2014 2008-09 purposes in the case of Ms.
17 364/Hyd/2014 2009-10 Saikam Saiswetha.
131 ITA No.1765/Hyd/2013 & six others
Shri S.Jayachandra Reddy, Tirupati
18 284/Hyd/2014 2003-04
19 285/Hyd/2014 2004-05
20 366/Hyd/2014 2005-06 Partly allowed for statistical
21 286/Hyd/2014 2006-07 purposes in the case of
22 125/Hyd/2014 2007-08 Smt. S. Sai Ramani.
23 126/Hyd/2014 2008-09
24 287/Hyd/2014 2009-10
25 475/Hyd/2014 2003-04 Partly allowed for statistical
26 476/Hyd/2014 2004-05 purposes in the appeals of
27 477/Hyd/2014 2005-06 Smt. Panjam Shobha Rani,
28 478/Hyd/2014 2007-08
29 431/Hyd/2014 2007-08 Partly allowed for statistical
purposes in respect of
Smt.P. Deepthi,
30 433/Hyd/2014 2007-08 Partly allowed for statistical
purposes in the case of Shri
P. Vamshi Krishna
31 479/Hyd/2014 2008-09 Both the Revenue appeals
32 480/Hyd/2014 2009-10 are dismissed.
Order pronounced in the court on 20th February, 2015 Sd/- Sd/-
(B. Ramakotaiah) (Asha Vijayaraghavan)
Accountant Member Judicial Member
Date: 20th February, 2015
Copy forwarded to:
1. Shri S. Jayachandra Reddy, H.No. 6-1-144/1 Dana Lakshmi Nagar, Near MR Pally Police Station, Avilala, Tirupati
2. P. Murali & Co. CAs. 6-3-655/2/3, 1st Floor, Somajiguda, Hyderabad 500028
3. Dy. Commissioner of Income Tax, Central Circle, Tirupati
4.
5. The Commissioner of Income Tax (Appeals), Guntur The Commissioner of Income Tax (Central Circle) Hyderabad
6. The Departmental Representative, ITAT, Hyderabad
7. Guard File By Order