Income Tax Appellate Tribunal - Pune
Shri C.P. Mohandas, vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench "B" , Pune
Before Shri I.C. Sudhir (JM)
and Shri D. Karunakara Rao (AM)
ITA No. 358 /PN/2008
(Asstt. Year: 2001-02)
The Dy.Commissioner of Income-Tax ... Appellant
Central Cir-1(1), Pune
v.
Shri C.P. Mohandas ... Respondent
Vijay House
599 Sachapeer Street,
Pune-411 001
PAN : AAXPM1656M
ITA No. 357 /PN/2008
(Asstt. Year: 2002-03)
The Dy.Commissioner of Income-Tax ... Appellant
Central Cir-1(1), Pune
v.
Shri C.P. Mohandas ... Respondent
Vijay House
599 Sachapeer Street,
Pune-411 001
PAN : AAXPM1656M
ITA No. 381/PN/2008
(Asstt. Year: 2002-03)
Shri C.P. Mohandas ... Appellant
Vijay House
599 Sachapeer Street,
Pune-411 001
PAN : AAXPM1656M
v.
ACIT ... Respondent
Central Cir-1(1), Pune
2 ITA . No 357, 358/PN/2008 etc.,
Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc.
Page of 22
Assessee by : Shri. P.D. Kudwa
Department by : Shri Jatinder Kaushal
Date of hearing : 3.8.11
Date of Pronouncement: 3.10.11
ORDER
Per I.C. Sudhir, JM
ITA No. 358/PN/2008
The revenue has questioned first appellate order on the following grounds :
"1. The Ld. CIT(A) erred in deleting the addition of Rs. 2,30,000/- made on account of undisclosed sale of land of Smt Nandita Dogara.
2. The Ld. CIT(A) erred in directing the AO to allow cost of land from unaccounted sale of land amounting to Rs. 3,50,000/- after verification of claim of assessee.
3. The Ld. CIT(A) erred in allowing relief of Rs. 5,70,230/- out of total addition of Rs. 12,99,400/- made by the Assessing Officer holding the same as income out of agricultural income treated as from undisclosed sources.Ground No. 1
2. The relevant facts are that during the course of search papers in bundle No. 1 were seized from the office premises of the assessee. Page No. 62 to 71 of this bundle contain a Sale Deed dated 27.10.2000 between Smt. Nandita Dogra and Shri Gajanan Laxman Balwadkar for sale of 5 'R' land at Survey No. 19/3A/2 for Rs. 2,50,000/-. The sale deed was executed by the assessee showing as Power of Attorney holder of Smt. Nandita Dogra . The A.O was not agreeable to this explanation of the assessee and made addition of Rs. 2,30,000/- on account of sale 3 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 of land of Mrs. Nandita Dogra. The contention of the assessee remained that the amount of Rs. 2,30,000/- was not his income and was a liability payable to Mrs. Nandita Dogra. The assessee, however, could not furnish confirmation from Smt. Nandita Dogra during the course of assessment proceedings as he did not receive the same within the time available for assessment. He, however, submitted confirmation from Smt. Nandita Dogra, during the course of first appellate proceedings, as the assessee received confirmation from Smt. Nandita Dogra that dues were paid on 5.3.2007 by the assessee. The assessee requested that the said confirmation may be admitted as additional evidence under Rule 46A of the I.T. Rules as the assessee was prevented by sufficient cause from producing the same before the A.O as Smt. Nandita Dogra was/ and is away in U.K. It was stated that Smt. Nandita Dogra is assessed to income-tax and her address as well as PAN were quoted. It was also submitted tht a copy of 7/12 extract was submitted to the A.O at the time of examination of additional evidence by the A.O. It was submitted further that the mutation has taken place after the sale of the property owned by Smt. Nandita Dogra in the name of the purchaser. Thus, it was pleaded that the subject Rs.2,30,000/- is genuine liability of the assessee and not his income. Other submissions have also been made by the assessee which have been reproduced by the Ld CIT(A) in first appellate order. Being convinced with those explanation, the Ld CIT(A) has deleted the addition.
3. In support of the ground, the Ld. D.R. has basically placed reliance on the assessment order. The Ld. A.R., on the other hand, tried to justify the first appellate order.
4. Having gone through the orders of the authorities below, we find that the Ld CIT(A) has passed a reasoned order on the issue. The A.O disbelieved the explanation of the assessee that Smt. Nandita Dogra had sold 5 'R' land in question on 27.10.2000 through him as a Power of Attorney Holder, on the basis that it is highly in probable that a person who had sold land on 27.10.2000, had not 4 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 collected the amount of Rs.2,30,000/- till date. The A.O also disbelieved the assessee since the assessee failed to submit any confirmation from Smt. Nandita Dogra. We, however, find that during the course of first appellate proceeding, the assessee was able to file confirmation letter issued from smt. Nandita Dogra, who, during the course of assessment proceeding was in London and the assessee could not procure her confirmation within the time limit provided by the A.O. Certain material facts have not been rebutted by the Revenue that the land in question stood in the name of Smt. Nandita Dogra in the revenue record. Out of the amount of Rs.2,30,000/- received on account of sale of the property by the assessee, an amount of Rs. 2,00,000/- was received by the assessee through cheque No. 627121 dated 5.10.2000 drawn on Bank of Maharashtra, Balewadi Branch and further amount of Rs. 30,000/- was received in cash as mentioned on the Sale Deed. Smt. Nandita Dogra has confirmed that on 7.7.2000, she had appointed assessee as a duly constituted Power of Attorney Holder for completing the transaction of land. She confirmed that she had entered into an Agreement to Sale with Shri Gajanan Laxman Balwadkar and Uttam Mohan Phule on 10.7.1977 for sale of 5 'R' land in question for Rs. 2,50,000/- and received Rs. 20,000/- against this agreement. She has further affirmed that the assessee had executed the Sale Deed on 27.10.2000 and received the balance amount of Rs. 2,30,000/- on her behalf but the amount was not collected by her, as at present, she is not in India. Smt. Nandita Dogra has addressed this confirmation letter dated 6.3.2007 to the A.O. Under these circumstances, we are of the view that Ld CIT(A) has rightly come to the conclusion that the amount of Rs. 2,30,000/- was a liability and cannot be said to be income of the assessee because it is in connection with sale of land standing in the name of Smt. Nandita Dogra. The Ld CIT(A) has thus rightly deleted the addition of Rs. 2,30,000/- made by the A.O. The first appellate order on the issue is reasoned one, hence we are not inclined to interfere therewith. The same is upheld. Ground No. 1 is accordingly rejected.
5 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 Ground No.2
5. The A.O. made addition of Rs.3,50,000/- on account of unrecorded sale of land at S.No. 8/2/2, Lohegaon.
6. During the course of assessment proceedings, it was found that the assessee had sold a plot of land out of the Survey No. 9/2/2 Lohegaon to Shri. K.B. Joshi for Rs.3,50,000/-. The A.O noted that assessee had taken possession of the land in F.Y. 1997-98 through Power of Attorney and had paid consideration to the farmers, but the assessee had not credited the sale proceeds of Rs. 3,50,000/- to the sale account. He accordingly added Rs. 3,50,000/- in the total income of the assessee. The explanation of the assessee remained that the plot in question was sold to Shri K.B. Joshi by Sale Deed dated January 2001 executed by the assessee for a consideration of Rs. 3,50,000/-. The assessee had acquired right in the 101 'R' land at S.No. 9/2/2 Lohegaon and 214 'R' of land at S.No. 12/2/1/2 from Shri R.B. Moze by paying total consideration of Rs. 25,00,000/- for 315 'R' of land. This land was the subject of addition in A.Y. 1998-99 wherein on account of seized documents at Sl. No. 2, bundle No.3, the entire consideration was determined at Rs. 25,00,000/- for the subject property. On this, the cost of 101 'R' land for S.No. 9/2/2/ Lohegaon works out to Rs. 14,72,540/0 and for 214 'R' for S. No.12/2/1/2 works out to Rs.10,27,460/-. The proportionate cost of the 20 'R' plot of land sold to Shri K.B. Joshi works out to Rs.2,91,580/-. It was contended that the action of the A.O in making the addition on account of sale consideration of the plot sold to Shri K.B. Joshi without allowing proportionate cost of Rs. 2,91,580/- is not valid and pleaded for direction for allowing cost of Rs.2,91,580/- from the sale consideration of Rs.3,50,000/- added by the A.O. Considering this submission, the Ld CIT(A) has directed the A.O to verify the claim of the assessee that payment in respect of purchase of land on sale of which, amount of Rs. 3,50,000/- was received during the A.Y. under appeal, has been made in F.Y. 1997-98 relating to A.Y. 1998-99 and such payment was claimed as deduction during the A.Y. 1998-99. It has been made clear 6 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 by the Ld CIT(A) that if this claim of assessee is found to be correct, the A.O will allow the assessee the cost of land sold on proportionate basis. We thus find that the Ld CIT(A) has directed the A.O to allow the claimed cost after verification of its correctness by the A.O. We thus do not find infirmity in the first appellate order on the issue. The same is upheld. The Ground No. 2 is accordingly rejected. Ground No.3
7. In this ground, the revenue has questioned first appellate order whereby Ld CIT(A) has allowed relief of Rs.5,70,230/- out of total addition of Rs.12,99,400/- made by the A.O by treating the claimed agriculture income as income from undisclosed sources.
8. Before the Ld CIT(A), the assessee pointed out that an identical issue was raised in the A.Y. 1998-99 wherein the A.O had made similar disallowance. Following the same, a similar disallowance has been made by the A.O during the A.Y. under consideration. It was further pointed out that the said assessment order for the A.Y. 1998-99 was questioned before the Ld CIT(A) and being convinced with the submission of the assessee, the Ld CIT(A) has given part relief to the assessee vide order dated 28.9.2007. Based on the same, the Ld CIT(A) has estimated the agriculture income during the year at Rs. 5,70,230/- out of the claimed agriculture income of Rs. 17,59,300/-. Thus, the remaining income of Rs.12,99,400/- has been held to be income from undisclosed sources. Ld CIT(A) has also accepted the income from Mango trees at Rs.1,19,000/-. This relief given by the Ld CIT(A) have been questioned by the Revenue before us.
9. In support of the ground, the Ld. D.R. has basically placed reliance on the assessment order. He referred contents of para Nos. 23 & 24 of the assessment order with this submission, that bogus bills were found during the course of search.
7 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 The Ld CIT(A) has given relief without appreciating the same. The Ld. A.R., on the other hand, tried to justify first appellate order. He pointed out that the Ld CIT(A) has given relief out of the addition made by the A.O by disallowing the claimed agriculture income on the basis of assessment order for the A.Y. 1998-99. The assessee had preferred first appeal against the said assessment order for the A.Y. 1998-99 wherein the Ld CIT(A) had given relief. The revenue did not question the same before the Tribunal. Following the said decision, the Ld CIT(A) during the year has given relief. Thus, the revenue should not have any grievance thereto.
10. Having gone through the order of the authorities below, we find that the A.O made the addition in question following its earlier order on the issue for the A.Y. 1998-99. The Ld CIT(A) on the basis of estimation, had given part relief towards the claimed agriculture income in the A.Y. 1998-99. Following the decision taken therein, the Ld CIT(A) during the year has given part relief towards the claimed agriculture income. It appears that the assessee had basically claimed agriculture income from rubber trees, mango trees, coconut trees and others. The assessee claimed agriculture income at Rs.17,59,300/- during the search proceedings at Farm House at Palakkad, Kerala, wherein the statements of Shri T. Radhakrishnan were recorded. On the basis of these statements of Shri Radhakrishnan, it was found that bogus sale bills have been procured and have been sent to the assessee which the assessee had accounted for as his agricultural income. This issue was raised and dealt in detail in the assessment order for A.Y. 1998-99 in assessee's case. The A.O came to the conclusion that the assessee had shown inflated agricultural income on the basis of bogus sale bills procured by the assessee. The difference between the agricultural income shown by the assessee in his returns of income and that worked out in the assessment order for A.Y. 1998-99 was treated as undisclosed income from the land business of the assessee. The Assessment Year-wise working of the difference is as under :
8 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 Asst.Year Agrl. Income shown by the Agricultural income Difference to be Assessee as Worked out above treated As income from undisclosed sources.
1998-1999 20,67,000 4,13,910 16,53,090 1999-2000 10,40,143 4,29,240 6,10,903 2000-2001 14,55,300 4,44,570 10,10,730 2001-2002 17,59,300 4,59,900 12,99,400 2002-2003 12,21,600 5,51,880 6,69,720 2003-2003 17,04,222 5,97,870 11,06,352 2004-2005 12,96,326 7,35,840 5,60,486
During the year, the assessee had shown agriculture income at Rs.7,59,300/- whereas the same has been worked out by the A.O at Rs.4,59,900/-. Thus the difference of Rs. 12,99,400/- was added by the A.O. During the year, assessee claimed income of Rs.4,00,000/- on slaughter tapping of 1500 trees. The A.O doubted this claim on the basis of statements of Shri. T. Radhakrishnan recorded during the course of search. From this statement, the A.O drew an inference that the claimed agriculture income was inflated. There was no other material to support the alleged inflation. Considering this material aspect, the Ld CIT(A) has estimated the income from slaughter tapping of 1500 trees at Rs.3,50,000/-. The Ld CIT(A) has estimated Rs.50,000/- towards the expenditure on plantation, maintenance and up-keeping of new trees and thus he has worked out net income from slaughter tapping at Rs. 3,00,000/-
11. Regarding income from the remaining trees, which were not slaughter tapped, the Ld CIT(A) has followed the first appellate order on the issue for the A.Y. 1998-99.
9 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22
12. Regarding the land and number of trees from which income has been computed by the A.O, the observation of the ld CIT(A) after verification of the records is that the assessee has been showing income from 23 acres of land on which numbers of rubber trees are 4640. However, A.O has considered income from 18 acres of land having 3650 trees only in case of the assessee. As per the revenue record, 18 acres of land are in the name of the assessee. The contention of the assessee remained that he is having income from 30 acres of land having 6140 trees as contained in Annexure 1 prepared on the basis of Annexure to Panchnama which has been reproduced by the Ld CIT(A) in its first appellate order. During the A.Y. 1998-99, the A.O was directed to verify the factual position. In response thereto, it was stated by the A.O vide order sheet entry dated 17.9.2007 that it was verified and found the number of rubber trees as contained in Annexure 1 of the written statement of the assessee. It was submitted that this figure matches with figures as contained in Annexure-B to 'Panchnama' prepared under signature of DDIT (Investigation), Pune. Assessee further contended that he is also showing income from land of Savitriamma (mother) (7 acres- 1500 trees); Ms. Kirti (Daughter) (1.25 acre - 300 trees); V. Unniraman Nair (Father) and Savitriamma (Mother) ( 2 acres - 290 trees); Sethumadhavan (Brother) (1.75 acres - 400 trees);, P. Chandrakala (wife) ( 3 acres - 600 trees); and C.P. Unnikrishnan (Borhter ( 5.5 acres - 1250 trees). It was contended that out of these trees, 1500 stood in the land admeasuring 7 Acre belonging to Smt. Savitriamma were subjected to slaughter tapping. It was contended by the assessee that the income from agriculture land belonging to the said persons are being shown by the assessee because these persons have allowed the assessee to use the land and enjoy income from the sale. It was submitted that these persons have never shown any income from the above said land. Considering these submissions and following the first appellate order on the issue for the A.Y. 1998-99, the Ld CIT(A) has directed the A.O to verify the claim of the assessee that income from trees on the land inventorized in Annexure-B to 'Panchnama' drawn at Palakkad, Kerala, during the 10 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 course of search are standing in names of his parents, and others, and income therefrom has not been claimed by them and if the claim of the assessees is found to be correct income from trees on the land of these persons shall be included in the agriculture income of the assessee for the rate purpose. Regarding the agriculture income in case of Ms. Kirti, minor daughter of the assessee, the Ld CIT(A) held that the assessee has rightly clubbed her income from agriculture u/s. 64 of the Act.
13. The Ld CIT(A) considering the totality of the facts and circumstances of the case on the issue has also held that the assessee deserves to be allowed deduction of 35% on account of expenses from gross receipts estimated by the A.O as against such allowance of 30% estimated by the A.O. The Ld CIT(A) has based his finding on the decision taken in this regard by the first appellate authority in the A.Y. 1998- 99 which has not been questioned by the Revenue. The Ld CIT(A) has, however, upheld the findings of the A.O estimating the gross receipt per rubber tree appreciating the observation of the A.O that the assessee is basically a business man and therefore it is not expected from him to give much attention towards agriculture, hence only the benefit of minimum gross receipt from sale of rubber is given. Ld CIT(A) further directed to take the rubber trees at 4640 (after deducing the trees which were subjected to slaughter tapping) and subject to the verification of assessee's claim that income from rubber trees grown on land standing in the names of Smt. Savitriamma, Shri Unniraman Nair and Shri Sethumadhavan has not been claimed in individual assets of these persons or has not been otherwise enjoyed by these persons for the purpose of their household expenses, allow the claim of the assessee.
14. Regarding income from coconut trees and Mango trees, the Ld CIT(A) has reproduced the summary of inventory of coconut trees, mango trees and other trees found and inventorized at the time of search and contained in Annexure B to 11 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 'Panchnama' at pages 29 & 30 of the first appellate order. The Ld CIT(A) has noted from the summary that the coconut trees are located on the land owned by assessee, whereas out of 34 mango trees, 18 mango trees are located on the land standing in the name of Ms. Kirti, a minor daughter of the assessee. Ld CIT(A) has observed that the A.O has merely held that income from such coconut trees and mango trees was utilized for incurring expenditure in connection with rubber plantation and therefore, as against 33% expenditure, with reference to gross receipt of rubber, the A.O allowed 30% expenditure. The Ld CIT(A) following the decision of first appellate authority in the A.Y. 1998-99 in this regard, has estimated that one coconut tree shall yield 150 coconuts in a year and after deducting of expenses, net income from coconut would be at Rs. 3.25 per coconut for A.Y. under consideration. Thus, he worked out income of Rs.68,250/- from 140 coconut trees per annum for the A.Y. under consideration i.e. 2001-02.
15. Regarding Mango trees, the Ld CIT(A) observed that assessee has worked out such income at Rs.5000/- minimum and maximum at Rs.10,000/- per tree per annum. On actual basis, such income has been worked at Rs. 80,000/- and Rs.16,000/- taking into account only 16 mango trees, whereas the number of such trees as per the summarized table was found at 34. Since the assessee had not maintained any records in respect of income from mango trees, the ld CIT(A) found it reasonable to work out net income from each mango tree at the rate of Rs.3500/- after deducting of expenses. He accordingly has worked out income from mango trees during the year at Rs.1,19,000/-. The Ld CIT(A) has further directed that the difference between the agricultural income shown by the assessee in return of income and as computed in accordance with his direction in the appellate order shall be assessed as income of the assessee from undisclosed sources.
16. Considering the above findings given by the Ld CIT(A), we find that it is based upon the area of land and number of trees found during the course of search 12 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 and estimation of income at lower possible level keeping in mind that it was not possible for the assessee to give the expected attention to the agricultural activities since he was having other business also and the just expenses which are required to cultivate the above agricultural activities like plantation of tree, and its maintenance etc.. The first appellate order on the issue as discussed above is reasoned one and hence we are not inclined to interfere therewith. The same is upheld. The Ground No. 3 is accordingly rejected.
17. In result, appeal is dismissed.
ITA No. 357/PN/2008
18. The revenue has questioned first appellate order on the following grounds :
"1. The Ld. CIT(A) erred in deleting the addition of Rs. 15,00,000/- made by the Assessing Officer being unaccounted payments made to Shri Kisan Ganpat Bachude as evidenced in the seized documents.
2. The Ld. CIT(A) erred in deleting the addition of Rs. 16,15,126/- made by the Assessing Officer on account of disallowance of expenses claimed as cost of improvement."Ground No. 1
19. The relevant facts are that the A.O made addition of Rs. 15,00,000/- on account of payment made to Shri Kisan Ganpat Buchade on the basis of page No. 23 of bundle No. 3 seized at the residence of the assessee describing the liabilities of land owners. The A.O did not agree with the explanation of the assessee that subject page No. 23 of bundle No. 3 contends jottings of the liabilities to the land owners and of not the unaccounted cash payments. The Ld CIT (A) has, however, deleted the addition being convinced with the explanation of the assessee.
13 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22
20. In support of the Ground, the Ld. D.R. has basically placed reliance on the assessment order. He referred contents of para Nos. 5 to 8 of the assessment order in this regard. The Ld. A.R., on the other hand, tried to justify the first appellate order.
21. Having gone through the orders of the authorities below, we find that the A.O has dealt with the issue in para Nos. 5 to 8 of the assessment order. The addition is based upon the notings on page No. 23 of the seized bundle No.3 i.e. a diary. The notings as reproduced in para No. 5 of the assessment order are as under :
" Kissan + Vassant
Gankat 4,00,000/-
Lift Loan 8,00,000/-
Sushila 3,00,000/-
15,00,000/-
Kissan & Brothers--------------- 1,00,000/- paid on 12/06/2003." In his statement recorded on 25.6.2003, during the course of search proceedings, the assessee explained the notings as under :
"Page No. 23 contains notings in respect of property at Village Murunji admeasuring 6 ½ Acres approximately purchased from Mr. Kisan Dondiba Buchade and others. I don't remember the exact contents of the sale deed which were effected about one year back. This notings are in respect of mortgage deed against the land for Rs. 4 lakh, loan from lift irrigation society at Rs. 8 lakh and payment to Smt. Sushila, a family member for relinquishment of her rights. The total amount payable on the above account is Rs. 15 lakhs, out of which an amount of Rs. 1 lakh has been paid on 12/06/2003. The balance amount at Rs. 14 lakhs is still to be paid. I wish to state that all these items/payments are not reflected in the sale deed executed, which I will verify and furnish the correct information".
Again, during the course of assessment proceedings, the assessee explained the entries as under :
14 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 "There are notings of facts related to land for which Development Agreement executed on 06/07/2001 with Dagadu Mahadu Buchade and others (32 names) for survey No. 31/1/1 Marunjee.
(i) Kisan Dhondiba Buchade is Krishnaji Dhondiba Buchade (Party No. 15 in agreement) who is commonly known as Kisan.
(ii) Vasant is Vasant Hanuman Buchade (Party No. 11 agreement)
(iii) Gankat 400000- It is just noting that there is charge on the land Amounting to Rs. 4,00,000/-
Lift loan 800000- It is noting that the land owner is having lift loan of Rs.8,00,000/-
Sushila 300000- It is noting that Sushila (Party No.4) is having Liability of Rs. 3,00,000/-
(iv) Kisan & Brothers 100000- Paid on 12/06/2003. This payment of Rs.1,00,000/- is not recorded in the books of accounts and hence offered for taxation".
The A.O noted that the assessee has offered only Rs. 1,00,000/- for taxation whereas the assessee had entered into a Development Agreement on 6/7/2001 with total 33 land owners. The names, which are recorded on the seized document are also appearing in the Development Agreement. The agreement was made for Rs. 27,00,000/-. From the perusal of seized documents and statements of the assessee, the A.O noted that there was encumberance of Rs. 50,00,000/- on the land. He noted further that in his statement, the assessee has admitted that these payments are not reflected in the agreement. The A.O, thus, drew an inference that before entering into Development Agreement, the assessee has paid to the owners Rs. 15,00,000/- to clear the title of land. Subsequently, the assessee has further made payment of Rs. 1,00,000/- to Kissan & Brothers on 12.6.2003, which was admitted to be unaccounted by the assessee. The A.O inferred that the payment of Rs.1,00,000/- is over and above the liability of Rs. 15,00,000/-. The A.O has noted further that the assessee has submitted that lift irrigation loan amount was paid by him by cheque on 28.5.2004, but the assessee has not submitted any explanation 15 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 with regard to payment against Gankat (Rs.4,00,000/-) and payment to Sushila (Rs.3,00,000/-). The A.O. noted that it is well known fact that a substantial amount of cash is receieved or paid at the time of sale or purchase of immovable property, specifically the land. From the seized document, it is clear that the assessee has paid an amount of Rs. 15,00,000/- on or before 6.7.2001, i.e. the date of agreement and amount of Rs. 1,00,000/- was paid on 12.6.2003. The A.O has accordingly made addition of Rs. 15,00,000/- in the A.Y. 2002-03 and addition of Rs. 1,00,000/- in the A.Y. 2004-05 as undisclosed income of the assessee.
22. The Ld CIT(A) has deleted the addition after discussing the issue in detail. The concluding para No. 4.3 of the first appellate order is being reproduced hereunder for a ready reference :
"4.3 I have carefully considered the submission of the appellant and perused material on record. From the notings contained on page No. 23 of bundle No. 3 which are basis of addition made by the Assessing Officer, it is clear that only in respect of an amount of Rs. 1,00,000/- the word 'paid' on 12/06/2007 is mentioned. In this view of the matter and in view of the statement recorded at the time of search of Shri C.P. Mohandas which has been reproduced by the Assessing Officer in para 5 of the assessment order extracted supra, and from the submission of the appellant mentioned hereinbefore, it is absolutely clear that there is no cogent basis for conclusion of the Assessing Officer that the entire amount of Rs. 15 lakh has been paid at the time of development agreement executed on 06-07-2001. The observation of the Assessing Officer that 'it is well known fact that substantial amount in cash is received or paid at the time of sale or purchase of immovable property, specifically the land', cannot be a basis for making additions. Such aspects only provide clue for investigation. Another notable aspect is that the seized material in this group of case shows outstanding liability in respect of sales effected. On given facts, it is clear that the Assessing Officer has failed to adduce any cogent material in respect of his conclusion that the entire amount of Rs. 15 lakh was paid on or before the date of development agreement which is 06-07-2001.
16 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 In view of the foregoing discussion and considering the submission of the appellant and taking into account the content of the seized material and the fact that such amount is subsequently paid by the appellant through account payee cheque, it is clear that the addition made by the Assessing Officer on the basis of inference that entire amount of Rs. 15 lakh has been paid on or before the date of development agreement is not justified on facts and cannot be sustained. Accordingly, addition made by the Assessing Officer is hereby deleted. Appellant succeeds in ground No. 1 of appeal."
23. We find that certain basic facts on the basis of which, the Ld CIT(A) has deleted the addition have not been rebutted before us by the Department. These basic facts are that in the notings on page No. 23 of bundle No. 3, only in respect of an amount of Rs. 1,00,000/-, the word "paid" on 12.6.2007 is mentioned; there is no cogent basis for conclusion of the A.O that the entire amount of Rs. 15,00,000/- has been paid at the time of development agreement executed on 6/7/2001; the amount is subsequently paid by the assessee through Account Payee cheque. Noting these material facts, and the general observation of the A.O that substantial amount in cash is received or paid at the time of sale or purchase of immovable property especially, the land, cannot be a basis for making addition, we are of the view that Ld CIT(A) has rightly deleted the addition in absence of sufficient evidence to justify the addition. We thus are not inclined to interfere with the finding of the Ld CIT(A) on the issue. The same is upheld. Ground No. 1 is accordingly rejected. Ground No.2
24. The A.O disallowed the claimed expenses of Rs. 16,15,126/- made on account of payment over and above the agreement of price of the land representing compensation payment to the land owners to settle various claims and avoid litigation. The Ld CIT(A) has deleted the same after discussing the explanation of the assessee in detail. The A.O has dealt with the issue in para No. 18 of the assessment order. The Ld CIT(A) has discussed the issue in para Nos. 7 to 7.2 of the first appellate order and has given his finding in para No. 7.3 thereof.
17 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22
25. The Ld. D.R. has basically placed reliance on the assessment order whereas first appellate order has been relied upon by the ld. A.R.
26. The assessee claimed that payment of Rs. 16,15,126/- was made over and above the agreement price to settle various claims and avoid litigation. The details of the land purchase and payments made over and above agreement price submitted before the authority below are as under :
"Survey No/ Area Agreement Paid for Lift Loan/ Name of the Farmer Price Litigation 25/2A/2 Marunji 81R 480000 490000 Sadashiv Shanka Murkute 26/1 Marunji 80R 1800000 35000 Suryaji Rangu Buchade 31/1/1 Marunji 76R 2138000 18230000 Dagdu Madhu Buchade 13/2/1 & 13/4+13 Marunji 124R 1600000 262450 Sonba Ganpat Jagtap 31/13 Marunji 58R 1632000 111000 Dagdu Mahadu Buchade 13/13 Marunji 39R 400000 135250 Chindu Kashiram Jagtap 14/11 Marunji 64R 960000 277140 Motiram Rakhmaji Kalokhe - 31/14 Marunji 97R 2730000 219000 Dagdu Mahadu Buchade
It is contended that the payments to the land owner/bank are made by cheques which are appearing in the regular books of account of the assessee. It is pointed out that the Assessing Officer has not disputed the genuineness of the payment and parties. The proportionate cost claimed by the assessee w.r.t. land sold during the financial year 2001-2002 as below:
18 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 S.No. 25/2AJ2, Marunji - Land sold 26R(490000 1 81R X 26) Rs. 157274/- S.No. 26/1, Marunji - Land sold 8R(35000 1 80R X 8R) Rs. 3496/- S.No.31/1/1,Marunji - Land sold 41.80R(1823000 1 76R X 41.8R) Rs. 1002614/- S.No.13/2/1, Marunji-Landsold 72.22R(262450 1 124RX72.22R) Rs. 152817/- & 13/4+13 S.No. 31/13, Marunji - Land sold 11R(111000 1 58R X IIR) Rs. 21043/- S.No. 13/3, Marunji - Land sold 12.89R(135250 1 39R X 12.89R) Rs. 44689/- S.No. 14/1/1, Marunji - Land Sold 34.83 R (277140 1 64R X 34.83R) Rs.150814/- S.No.34/14 Marunji-Land Sold 36.50R (2190001 97R X 36.50R) Rs. 82380/-
------------------------
Total Rs. 16,15,127/-
----------------------"
27. It was submitted that the subject payments though in excess of the agreement value were incurred out of business expediency and wholly and exclusively for the business purpose to meet out the requirements of Section 37 of the Act. It was submitted that the assessee is carrying on real estate business and it has to manage several factors and sale the land within a reasonable period to make profit. He cannot afford delay in resolving issues arising with land owners as formalities before government authorities and litigation in courts are time consuming, expensive and severely affect the profitability of the business. The A.O did not agree with the above explanation and held that all the expenditure incurred by the assessee cannot be treated as business expenditure. He has noted further that the assessee has not given any explanation as to why the payment was made over and above the agreement. The Ld CIT(A) has deleted the addition accepting the explanation of the assessee, as discussed above. In this regard, the Ld CIT(A) has noted that the irresistible conclusion is that additional expenditure of Rs.16,15,127/- is in respect of and in relation to land which is stock-in-trade of assessee. The genuineness of this expenditure is not in doubt and the business purpose of this expenditure becomes clear from the submission of the assessee. We also have no reason to doubt the above explanation of the assessee. Under these 19 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 circumstances, we are of the view that Ld CIT(A) has rightly deleted the addition, which was based upon the general observation of the A.O. The first appellate order in this regard is thus upheld. Ground No. 2 is accordingly rejected.
28. In result, appeal is dismissed.
ITA N o. 381/PN/2008
29. The assessee has questioned first appellate order on the ground that Ld CIT(A) has erred in holding that the cost of Rs.5,57,883/- of plots of land at S.No. 24/4-A and 24/3 Balewadi would not be allowed against sale proceeds of Rs.2,74,000/- thereof in assessment u/s. 153A relying on the decision of Hon'ble Supreme Court in the case of CIT Vs. Sun Engineering Works Pvt. Ltd., 198 ITR 297(SC).
30. The relevant facts are that the authorities below have added and sustained Rs.5,51,883/- by disallowing the claim of cost of land. The assessee in the accounts accompanying his original return recorded the following sales of land Sl No. Survey No. Area Sales Amount 1 S.No.24/4A, Balewadi 39.98R Rs.23,40,000/-
2 S.No.24/3,Balewadi 3R Rs. 4,00,000/-
Rs.27,40,000 ========== The assessee submitted that he inadvertently did not claim the cost of land at Rs.5,51,883/- against the above sales. In the return filed u/s. 153A, the assessee claimed cost of Rs.5,51,883/- against the sales. A.O. disallowed the claim relying on the decision of Hon'ble Supreme Court in the case of CIT Vs. Sun Engineering Pvt. Ltd. (Supra). The A.O held that in the re-assessment proceedings/ proceedings u/s. 153A, the assessee is not allowed to make additional claims corresponding to which no additional income or escaped income has been credited to the "rectification P & L 20 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 Account". He held that the proceedings u/s. 153A of the I.T. Act are as good as the re-assessment proceedings. He held further that Section 147, being for the benefit of the revenue and not for the assessee, the assessee cannot be permitted to convert the re-assessment proceedings into an appeal or revision and seek relief in respect of item earlier rejected or claimed relief in respect of items not claimed in the original assessment proceedings, unless relatable to escaped income. The Ld CIT(A) has upheld the same.
31. On perusal of the orders of the authorities below, we find that the assessee had filed its original return of income on 10.5.2004 i.e. beyond the time allowed u/s. 139(4). It was treated as non-est and no assessment u/s. 143(3) had taken place in respect of this return. In response to notice u/s. 153A, the assessee computed his income based on actual sale transactions and corresponding costs and declared the same in the return filed u/s. 153A. As figure of sales of plot at S.No.24/A, Balewadi was already appearing in books seized by Department, the assessee conveniently presented accounts into 2 parts viz. (1) as appearing in the books and (2) in a rectification account - showing corresponding cost of sale transactions. We are of the view that the decision of Hon'ble Supreme court in the case of CIT Vs. Sun Engineering Pvt. Ltd. (Supra) relied upon by the authorities below is not helpful to the revenue under the facts and circumstances of the present case as the assessee was not making any claim seeking review of any issue already concluded in an earlier assessment. Incorrect figures which had inadvertently crept into the accounts enclosed with the original return filed on 10.5.2004, which was non-est were merely corrected to reflect correct figures of transaction and the income earned. Undisputedly, the assessee was carrying on property development business whose profits were assessable under the head "profits and gains" of business. It is well settled position that income-tax is a tax upon income, profits or gains and it is not tax on gross receipts. There is difference between assessment of income escaped assessment as contemplated u/s. 147 and assessment in search 21 ITA . No 357, 358/PN/2008 etc., Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc. Page of 22 cases u/s. 153A. U/s. 153A, following a search, income of 6 A.Ys. preceding the year of search are considered for assessment afresh. In the case of income escaping assessment u/s. 147, it is only the escaped income which is the subject of re-assessment. Undisputedly, in the present case, assessment has been framed u/s. 153A read with Section 143(3) of the Act on the basis of the return filed by the assessee in response to notice issued u/d. 153A of the Act. Thus, the disclosure and claim made therein require consideration while framing the assessment. The additions in such assessment are made on the amount in difference between the disclosure/claim made in the return and actually found by the A.O. We are thus of the view that the A.O was not justified in ignoring the claimed cost of Rs. 5,51,883/- without examining the correctness of the same. We thus set aside the matter to the file of the A.O to examine the correctness of the claimed cost of Rs. 5,51,883/- and decide the issue afresh after affording opportunity of being heard to the assessee. In other words, if the A.O finds that the claimed cost of Rs.5,51,883/- is correct, the same will be allowed while computing the income of the assessee relating to the connected sales of the land. The ground is thus allowed for statistical purposes.
32. In result, appeal is allowed for statistical purposes.
33. In summary, ITA Nos. 357 & 358/PN/2008 are dismissed and ITA No. 381/PN/2008 is allowed for statistical purposes.
The order is pronounced in the open Court on 3rd October 2011.
Sd/- Sd/-
(D.KARUNAKARA RAO) (I.C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 3rd October, 2011
US
22 ITA . No 357, 358/PN/2008 etc.,
Shri C.P. Mohandas.
A.Y. 2001-02,2002-03 etc.
Page of 22
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT (Central), Pune
4. The CIT(A)-I, pUNE
5. The D.R. "B" Bench, Pune
5. Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Pune