Income Tax Appellate Tribunal - Hyderabad
Rajendra Prasad Jakkampudi, Hyderabad vs Ito,Ward-8(3),, Hyderabad on 21 April, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A", HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND
SHRI G. PAVAN KUMAR, JUDICIAL MEMBER
ITA No. Asst. Year Appellant Respondent
1316/Hyd/2014 2007-08 Rajendra Prasad The Income Tax
Jakkampudi, Officer,
HYDERABAD Ward-8(3)
1317/Hyd/2014 2008-09 [PAN: ADNPJ2425L] HYDERABAD
For Assessee : Shri S. Rama Rao, AR
For Revenue : Shri A. Sitarama Rao, DR
Date of Hearing : 09-02-2017
Date of Pronouncement : 21-04-2017
ORDER
PER B. RAMAKOTAIAH, A.M. :
These two appeals are filed by assessee against the order(s) of the Commissioner of Income Tax (Appeals)-Vijayawada, both dated 06-03-2014 confirming an amount of Rs. 18,00,000 in AY 2007-08 and Rs.49,50,000 in AY 2008-09. These appeals are filed with one day delay and after considering the affidavit of the assessee and the condonation petitions filed, the delay of one day is condoned.
2. Briefly stated, assessee is a small time builder and in the course of survey u/s. 133A of the Income Tax Act [Act] conducted on 09-09-2008, certain receipt books and unsigned agreements with two persons were found. In the statement recorded u/s. 133A, assessee admitted additional receipts at Rs. 300 per sq. ft., on 35,000 sq. ft., of constructed area sold, amounting to Rs. 1 Crore. However, in the returns filed, assessee had not admitted I.T.A. Nos. 1316 & 1317/Hyd/2014 :- 2 -: Rajendra Prasad Jakkampudi any income. For AY 2007-08, the return was already filed and Assessing Officer (AO) in the scrutiny assessment noticed that assessee has deposited cash of Rs. 21,07,200/- in Andhra Bank, Miyapur Branch. A Show Cause Notice was issued to assessee asking why the income should not be estimated at Rs. 300 per sq. ft., on the sales made during the year i.e., 6,000 sq. ft ( 6000* 300= 18,00,000). As there is no response from assessee, AO completed the assessment u/s. 144 on 30-12-2009 making an addition of cash deposit of Rs. 21,07,200/- and unaccounted sale proceeds of Rs. 18 Lakhs, thereby determining total income at Rs. 43,73,010/-. Similarly in AY. 2008-09, assessee has disclosed an income of Rs. 9,20,250/- and AO made an addition of Rs. 49,50,000/- (16,500 X
300) on similar way as made in AY. 2007-08. For the sake of clarity, we are considering the appeal in ITA No. 1316/Hyd/2014 for the AY. 2007-08 in detail.
3. Before the Ld.CIT(A), assessee contended that there was terrific pressure on the day of survey and was forced to declare income of Rs. 1 Crore at Rs. 300 per sq. ft., over and above what has been declared in the IT returns or recorded in the books of account. With reference to two unsigned agreements, wherein sale price was shown at Rs. 2,000/- as against actual price of Rs. 1,325/- per sq. ft., assessee filed affidavits from the said persons and also referred to the statements given during the course of survey that those two agreements were considered for obtaining higher amount of loan by the buyers but the party did not take any higher amount of loan and therefore, those two agreements have not been executed. It was further submitted that assessee has no unaccounted receipts and the price shown was reasonable for the I.T.A. Nos. 1316 & 1317/Hyd/2014 :- 3 -: Rajendra Prasad Jakkampudi project completed by him. Ld.CIT(A) sent the information and contentions to the AO, who in the remand report has accepted the contentions and also verified and submitted that those two agreements were not reliable. With reference to cash deposit also AO accepted the source of the amounts, accordingly, report was sent to the Ld.CIT(A).
3.1. Ld.CIT(A) while accepting the report of the AO with reference to addition of Rs. 21,07,200/- however, differed on issue of addition of Rs. 18 Lakhs and confirmed the same by stating as under:
"5.2. The next issue pertains to addition made by the Assessing Officer on account of additional receipts offered by the appellant during the course of survey on the sale of flats. After going through the submissions of the appellant and the observations of the Assessing Officer in the remand report, I am not in agreement with the same in view of the following reasons.
5.2.1. It is a fact that during the course of survey operations, an agreement for sale was detected by the department. It is also a fact that the same was not signed by the vendee. But during the course of survey, certain receipt books containing details of receipt of amount in cash were found, which was not accounted for in the books of account. When the same was confronted, the appellant himself came forward and offered additional receipts @ Rs. 300/- per sq. ft on the sale of flats to cover up the deficiencies in the books. However, the appellant has come altogether with new submissions during the appeal proceedings before me by way of filing MOUs and sale deeds from two vendees viz. Mr. Maramreddy Muralidhar Reddy and Mr.Chennuri Chenchaiah, wherein the sale rate per sq.ft. has been arrived at Rs.1,325/- per sq.ft. I am not in agreement to accept the submissions of the appellant in this regard as the appellant has not made a claim before the Assessing Officer in the assessment proceedings inspite of sufficient opportunities given. Further, it is a general practice that the sale consideration mentioned in the sale deeds will be far less than the amounts agreed as per the 'Agreement of Sale'. This practice is generally being followed in order to reduce stamp duty and registration charges. Hence, I am of the opinion that there is excess sale consideration received by the appellant as found during the course of survey, as also evident from the cash found during the course of survey. Therefore, the Assessing Officer is justified in bringing to tax the additional receipts I.T.A. Nos. 1316 & 1317/Hyd/2014 :- 4 -: Rajendra Prasad Jakkampudi offered by the appellant himself during the course of survey that would cover up the deficiencies in the books of account detected by the appellant. Accordingly, the addition made by the Assessing Officer is sustained".
Assessee is aggrieved.
4. Even though assessee has raised the ground pertaining to deletion of addition of Rs. 18 Lakhs, (Ground Nos. 2 & 3), assessee also raised an additional ground that addition of entire Rs. 18 Lakhs is not justified and only the element of profit would form part of the income. This being a legal ground on which no facts need to be examined, additional ground is admitted.
5. Ld. Counsel referring to the statement given during the course of survey, the unsigned documents and the affidavits filed by Shri Muralidhar Reddy and Chenchaiah, it was submitted that assessee sold at Rs. 1,325 per sq. ft. only, and not at Rs. 2,000/- as stated in the unsigned papers. He referred to the AO's remand report wherein on enquiry, the AO has confirmed that assessee sold the flats at Rs. 1,325/- per sq. ft., and not at Rs. 2,000/- per sq. ft. Further, there were no unaccounted receipts and AO has not made any addition of unaccounted receipts, explaining that it was only the receipts which are not accounted as on the date of survey but subsequently, they were taken into consideration and referred to the statement given in this context that all amounts will be accounted for as books of account were not closed. It was further submitted that AO has not considered the difference of Rs. 700/- in those unsigned documents but has taken Rs. 300/- on the basis of the statement given in the course of survey, which has no basis at all. It was submitted that CIT(A) erred in differing from the remand report of the AO while confirming the amount and has I.T.A. Nos. 1316 & 1317/Hyd/2014 :- 5 -: Rajendra Prasad Jakkampudi made un-founded allegations. It was the submission of Ld. Counsel that no addition is warranted. With reference to additional ground, it was submitted that in the alternate only a profit percentage can be estimated but not the entire amount.
6. Ld.DR, however, submitted that assessee was found with certain unaccounted receipts and cash in the course of survey and subsequent statement was recorded u/s. 131 in which assessee has reiterated the statement given on the date of survey. It was further submitted that it is not a forced declaration and assessee voluntarily offered at Rs. 300/- as profit and not Rs. 700/- which is a difference in sale consideration on the basis of those agreements. It was submitted that Rs. 300/- per sq. ft., is the profit and AO has brought the same to assessment. It was further submitted that alternate plea cannot be accepted as the entire Rs. 300/- is considered as 'profit' but not as 'sale consideration' as can be seen from the statement.
7. We have considered the rival contentions and perused the documents on record. As far as difference in sale consideration considered by the AO in the course of survey, the same was based on unsigned agreements supposed to have been considered for obtaining a higher amount of loan from Bank. But in the course of survey itself, assessee has stated the same and there is no change in assessee's stand. In fact, the officer who was on survey was specifically asked to make enquiries immediately. Therefore, the version stated by assessee that those two agreements are meant for obtaining a higher loan but not actual sale consideration has to be accepted. Moreover, the so called unaccounted receipts have not I.T.A. Nos. 1316 & 1317/Hyd/2014 :- 6 -: Rajendra Prasad Jakkampudi been brought to tax and the cash deposit addition made in the bank accounts representing as unaccounted income by the AO, was accepted in remand report and even Ld.CIT(A) accepted and deleted the same. Therefore, what is surviving for consideration is only the additional income brought to tax on the basis of the statement during the survey. As there is no basis for the same, we are of the opinion that assessee cannot be penalised by making an addition of an amount which he has not earned or there is any evidence to support that this much profit has been earned by assessee. The enquiry by the AO also has revealed that assessee has sold a plot only @ 1,325/- per sq. ft. Therefore, question of bringing it to tax the so called additional sale consideration does not arise at all. In these circumstances, we are of the opinion that no addition can be made to the income returned. We are unable to understand how Ld.CIT(A) could differ from the remand report of the AO, who accepted that there is no extra sale consideration, in the remand report. Even the reasoning given by the CIT(A) is not justifiable in the absence of any evidence. In view of that, we hereby delete the addition made of Rs. 18 Lakhs. The grounds on this are allowed.
Appeal in ITA No. 1317/Hyd/2014 AY. 2008-09:
8. As briefly stated earlier, in this year also, the AO brought to tax the amount of Rs. 300/- per sq. ft., on the area sold during the year making an addition of Rs. 49,50,000/-. For the reasons stated in AY. 2007-08, there is no basis for making an addition. The same has to be deleted. The grounds on this are allowed.
I.T.A. Nos. 1316 & 1317/Hyd/2014
:- 7 -: Rajendra Prasad Jakkampudi
9. However, while contesting that no addition of sale
consideration can be brought to tax, assessee has raised additional ground in both the years that only profit should have been brought to tax and not the entire amount. Even though it was explained that the sale consideration was according to the books of account, it cannot be ruled out that further profit could have been earned. Additional ground raised itself indicates that. In view of that, we are of the opinion that there could be more profit which could have been received by assessee than what was offered in the business and accordingly, we are of the opinion that 10% of the amount brought to tax by AO can be considered as profit earned from the sale of property during the year. Accordingly, as against Rs. 18 Lakhs and Rs. 49,50,000/- addition made by AO, we confirm the profit there on at 10% which can be brought to tax on the facts of the case. Accordingly, an amount of Rs. 1,80,000/- in AY. 2007- 08 and Rs. 4,95,000/- in AY. 2008-09 was confirmed and balance amount was directed to be deleted. Additional ground is accordingly allowed.
10. In the result, both the appeals of assessee are partly allowed.
Order pronounced in the open court on 21st April, 2017 Sd/- Sd/-
(G. PAVAN KUMAR) (B. RAMAKOTAIAH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 21st April, 2017
TNMM
I.T.A. Nos. 1316 & 1317/Hyd/2014
:- 8 -: Rajendra Prasad Jakkampudi
Copy to :
1. Rajendra Prasad Jakkampudi, Hyderabad. C/o. Sri S. Rama Rao, Advocate, Flat No. 102, Shriya's Elegance, Door No. 3-6-643, Street No. 9, Himayat Nagar, Hyderabad.
2. The Income Tax Officer, Ward-8(3), Hyderabad.
3. CIT (Appeals)-Vijayawada.
4. CIT-II, Hyderabad.
5. D.R. ITAT, Hyderabad.
6. Guard File.