Income Tax Appellate Tribunal - Hyderabad
Bhagawan Sri Bala Sai Baba Central ... vs Assessee on 18 April, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SHRI SAKTIJIT DEY, JUDICIAL MEMBER
IT(SS)A No. 22/Hyd/2011
Block Period: 1.4.1996 to 5.9.002
M/s. Bhagwan Sri Vs. Asst. Commissioner of
Balasaibaba Central Trust Income-tax,
Kurnool Central Circle-6,
PAN: AAATB3818R Hyderabad
Appellant Respondent
Appellant by: Shri S. Rama Rao
Respondent by: Smt. Subhasree Anant
Krishnan
Date of hearing: 18.04.2012
Date of pronouncement: 04.07.2012
ORDER
PER CHANDRA POOJARI, AM:
This appeal by the assessee is directed against the order of the CIT(A)-I, Hyderabad dated 20.7.2011 for the block period 1.4.1996 to 5.9.2002.
2. The assessee raised the following grounds of appeal:
1. The order of the learned CIT (Appeals) is erroneous both on facts and in law.
2. The learned CIT (Appeals) ought to have considered the fact that the Hon'ble Income-Tax Appellate Tribunal, Hyderabad in its order IT(SS)A. No. 98/Hyd/06 dated 16-07-2007 set aside the assessment to the file of the Assessing Officer for being completed and, therefore, all the facts should have been considered both by the Assessing Officer and the CIT (Appeals).
3. The learned CIT (Appeals) erred in holding that the ground with regard to initiation of proceedings u/s 158BD cannot be raised by the appellant at the present stage. The learned CIT (A) ought to have seen that this is a legal issue 2 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== and can be raised at any point of time including before the Hon'ble CIT(A) during the course of appeal proceedings. The CIT (A) ought to have seen that notice u/s 158BD is not valid and the consequential assessment is bad in law.
4. The learned CIT (A) erred in confirming the action of the Assessing Officer in arriving at the consideration paid for acquisition of the property at Rs. 10,11,50,000/- and further erred in confirming the computation of undisclosed income at Rs. 7,23,86,915/-.
5. The learned CIT (A) ought to have considered the fact that appellant paid a consideration of only Rs. 2,87,63,085/- besides incurring an expenditure of Rs. 1,14,11,200/- on behalf of the land owners but did not make payment of Rs.
10,11,50,000/- as presumed by the Assessing Officer.
6. 6) The learned CIT (A) erred in confirming the cost as per the books of account at Rs. 2,87,63,085/- against the amount of Rs. 4,01,74,285 recorded in the books of account.
7. The learned CIT (A) erred in confirming the action of the Assessing Officer in determining the undisclosed income at Rs. 7,23,86,910/-
8. The learned CIT (Appeals) erred in holding that interest u/s. 158BFA is not appealable and further erred in dismissing the appeal filed in this regard.
3. Before us, ground No. 3 was not pressed and the same is dismissed as not pressed.
4. Brief facts of the case are that during the course of search operation in the case of M/s. Sai Sunder Chit Fund (P) Limited, one document identified as 'ASSS/RO/4' was seized. Page Nos. 88 to 90 of the said document is an agreement of sale dated 06.02.1998 between the assessee trust (vendor) as one party and Sri Shaikh Hameed Patel and Sri G. Siva Ramakrishna, the other party. Sri G. Siva Ramakrishna is the son of the Managing 3 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== Director of M/s. Sai Sunder Chit Funds (P) Limited. This agreement also refers to another agreement (release deed) of same date, i.e., 06.02.1998, wherein the assessee (vendor) trust entered into a separate agreement with respective owners represented by their GPA holder Sri M. Thimmaiah for purchase of 104 acres of land in Survey Nos. 104, 105, 106, 107, 108, 109/1, 109/2 at Kondapur Village, R.R. District. This sale agreement mentioned as under:
"Whereas Sri KSV Prasad Rao and Sri KVNV Prasad Rao, both as possession holders of the said scheduled land have relinquished their claims, demands, title and interest and released the same in favour of the vendor Trust through a registered Release Deed dated 06.02.1998."
5. Sri Siva Ramakrishna and Sri Hameed Patel were the mediators between the assessee trust and sellers represented by Sri M. Thimmaiah, GPA holder for seller. The commission payable to the mediators was to be paid in the form of conveying a part of the land @ Rs. 12.25 lakhs per acre, i.e., the assessee trust was to pay Rs. 10 lakhs per acre to the owners of this land and @ Rs. 2.25 lakhs per acre to the mediators. After analysing the issues in detail and making detail discussion in the assessment order, the Assessing Officer computed the cost of 85 acres 32 guntas @ Rs. 12.25 lakh per acre at Rs. 10,51,05,000/- inclusive of commission paid to middlemen, partly in cash and partly in the shape of land. Since an amount of Rs. 2,87,03,085/- was recorded in the books of accounts towards the cost of land, the balance amount of Rs. 7,63,41,915/- (Rs. 10,51,05,000 - Rs. 2,87,03,085/-) was computed as the undisclosed income.
6. The assessee filed an appeal before the CIT(Appeal)-I Hyderabad. The CIT(A) after discussing the issues in detail dismissed the appeal filed by the assessee in ITA No. 0434/CC-6, 4 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== Hyd./CIT(A)-I/05-06 dated 14th August, 2006. The assessee filed an appeal before the ITAT. During the proceeding before the ITAT, apparently the assessee filed certain additional evidence and requested the Hon'ble ITAT to admit the same. The Hon'ble ITAT 'A' Bench, Hyderabad admitted the assessee's petition for admission of additional evidence and sent back the matter to the file of the Assessing Officer with the direction to decide the issue afresh in accordance with law considering the additional evidence as well as other materials and after providing opportunity of hearing to the assessee. In pursuance of the direction of ITAT contained in IT(SS)A No. 98/Hyd/06 the Assessing Officer re- computed the income of the assessee in the assessment order dated 31.12.2008 wherein the total undisclosed income was arrived at Rs. 7,23,86,915/-. It is against this assessment order that the assessee has filed the appeal before the CIT(A).
7. The CIT(A) observed that the ITAT, Hyderabad 'A' Bench has set aside the case to the Assessing Officer in view of the additional evidence filed before the Bench. At page 2 and 3 of the appellate order passed by ITAT, the petition of the assessee requesting for admission of additional evidence has been mentioned. Apparently, the additional evidence put forth by the assessee related to non- payment of Rs. 5 crores to the seller/GPA holder. However, while going through the original assessment order as well as the order of the CIT(A) dated 14th August, 2006 the CIT(A) observed that the issue of non-payment of Rs. 5 crore was already placed before the Assessing Officer and the same has also been discussed in detail by the CIT(A) in his appellate order. In fact, the Assessing Officer at page 3 (para 3) of the assessment order dated 28-2-2006 has given the list of documents referred to before passing of the assessment order. One of the documents referred to by the Assessing Officer was copies of the cheque returned memos issued 5 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== by Syndicate Bank and five dishonoured/un-cashed cheques bearing Nos. 303192 to 303196 for Rs. 1 crore each. Thus, it is not that the so called additional evidence of non payment of Rs. 5 crore was not before the Assessing Officer or before the First Appellate authority. Against this order of the CIT(A), the assessee is in appeal before us.
8. The learned AR submitted that the Assessing Officer wrongly computed the income of the assessee as follows:
1. Sale consideration @ Rs. 10 lakh per acre 9,11,50,000 for 91.15 acres.
2. Amount paid to Smt. Savitramma as 1,00,00,000 evidenced by the seized document 10,11,50,000 Less: Consideration recorded in the books of 2,87,63,085 account during FYs 1997-98 & 1998-99 at Rs. 2,07,40,000 and Rs. 80,23,085 respectively towards cost of land Total undisclosed income 7,23,86,910
9. The AR submitted that while determining the undisclosed income at Rs. 7,23,86,910, the Assessing Officer is of the view that the total area of the land is Ac. 91.15 Guntas including Ac. 5.0 guntas registered by outsiders in favour of Shaik Hamid Patel, that the sale consideration was Rs. 10.0 lakhs per acre and the total sale consideration was Rs. 9,11,50,000, that the entire amount of Rs. 9,11,50,000 was paid by the assessee herein; that an amount of Rs. 1.0 crore was paid to Smt. Savitramma by the assessee herein. The AR submitted that the presumption of the Assessing Officer is not correct.
10. The AR submitted that the area originally thought of being transferred by Sri Thimmaiah to the assessee trust was 86 acres and not Ac. 91.15 Guntas. He submitted that the said Ac. 5.15 Guntas was registered by third parties in favour of others and neither the assessee herein nor Sri Thimmaiah, the GPA holder are 6 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== parties to it. The Assessing Officer is of the view that Ac. 5.23 Guntas of land was transferred to middle men in lieu of commission and, therefore, the Assessing Officer mentioned that the total area is Ac. 91.15 Guntas. He submitted that the assessee did not transfer Ac. 5.23 Guntas to anyone. Even Sri Thimmaiah was not the party to the said sale. Therefore, the land of Ac. 5.23 guntas cannot be considered as acquired by the assessee herein. Therefore, the land to be considered for the purpose of the present assessment is only Ac. 85.32 Guntas.
11. The AR further submitted that when physical measurements were taken, the land was only 70 Acres and the balance Ac. 15.32 guntas could not be located in the area. Even considering the sale consideration to be Rs. 10.0 lakhs per acre for Ac. 85.32 guntas, the total sale consideration would be Rs. 8,58,00,000. Out of the said amount, the assessee paid Rs. 2,87,63,085 and did not pay balance of amount. There is no evidence with the Assessing Officer to show that the assessee paid any amount in addition to what was recorded in the books of account of the assessee of Rs. 2,87,63,085. In this regard, the AR submitted that the following events that have taken place later would prove clearly that the assessee did not pay the balance of consideration to either the land owners or to Sri Thimmaiah.
a) The land admeasuring Ac. 85.32 guntas was registered by Sri Thimmaiah and other owners transferring in favour of the assessee herein. The balance of amount payable was Rs.
5,72,36,915. However, the area that was found was only 70 acres and, therefore, the assessee has given five cheques for Rs. 1.0 crore each in favour of Sri Thimmaiah. The assessee also kept the original documents with Sri Thimmaiah. The assessee executed a Deed of Mortgage against the land in 7 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== favour of Sri Thimmaiah. This clearly indicates that the amount of Rs. 5.0 crores arrived at to be payable was not paid but only cheques have been issued.
b) All the five cheques were bounced. It was submitted that Sri Thimmaiah, the GPA holder misrepresented the facts before the assessee with regard to the landed property and, therefore, the assessee thought that the matters have to be clarified by him and did not honour the cheques.
i) The assessee found that out of seven land owners, two of them approached the Court against Sri Thimmaiah and the other 5 vendors made the assessee also a party to the litigation. The said two owners have filed Partition Suit in O.S. No. 13/1998 in R.R. District court which is still pending. As long as the said litigation is not settled, it is difficult for the assessee herein to get the title for the entire property.
ii) It is the agreement between Sri Thimmaiah and the assessee herein that the entire property has to be got surveyed from the Official Surveyor and a certificate has to be obtained and all the clearances including the Urban Land Ceiling had to be obtained. Sri Thimmaiah did not obtain necessary approvals or the permission and also did not get the land surveyed through the Official Surveyor. As Sri Thimmaiah failed to honour the commitment, the assessee also did not honour the cheques. Therefore, the cheques were bounced.
c) Sri Thimmaiah, at that stage, on 04-06-1999 approached the mediators headed by Sri K.E. Pratap of Kurnool. The 8 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== assessee refused to pay the balance of consideration to Sri Thimmaiah. It was settled by the mediators that the assessee would retain Ac. 43.20 guntas and that the assessee would execute an Agreement of Sale in favour of Sri K.E. Pratap of Kurnool for the balance of Ac. 42.12 guntas. According to the said agreement, Sri Thimmaiah and Sri K.E. Pratap would clear all the permissions necessary from Government and would not ask for any balance from out of the sale consideration. According to the said agreement, the assessee should get clear title over Ac. 43.20 guntas of land with all clearances and without any liability against the said land for the amount which was already paid. After the said agreement was entered into, the original five cheques and the mortgage deed executed in favour of Sri Thimmaiah were returned to the assessee herein. There was no activity or action by either party till the year 2005.
d) On 28-08-2005, Sri Thimmaiah unilaterally filed a complaint against Sri T. Rama Rao, Managing Trustee and the Trust in the Police Station, Kurnool II Town. An FIR dated 28.08.2005 was lodged in the District Court Kurnool by the Inspector Police, Kurnool II Town. In the said complaint Sri Thimmaiah mentioned clearly that he was paid only Rs. 3.0 crores as advance and the balance amount was not paid to him.
e) At that stage on 31-08-2005, the assessee, Sri K.E. Pratap and Sri M. Thimmaiah have approached M/s Eswari Projects Ltd., Srinagar Colony, Hyderabad and entered into an MOU. According to the said MOU, the assessee agreed to pay a sum of Rs. 15.25 crores to Sri Thimmaiah and M/s Eswari Projects Ltd., for the entire land of 70 Acs. With a view to 9 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== implement the said MOU, the assessee on the same date along with Sri K.E. Pratap, Sri M. Thimmaiah and M/s. Eswari Projects Ltd., together entered into an MOU with Sri A. Venkatarami Reddy. According to the said agreement, Sri A. Venkatarami Reddy agreed to pay Rs. 49.0 crores as sale consideration for the entire 70 Acs. of land calculated at the rate of Rs. 70.0 lakhs per acre. Out of the said amount, a sum of Rs. 6,56,28,150 was paid by Sri A. Venkatarami Reddy to the Competent Authority & Special officer, Urban Land Ceiling, Hyderabad.
12. The AR submitted that as the assessee agreed to pay Rs. 15.25 crores as per the MOU mentioned earlier, Sri A. Venkatarami Reddy agreed to provide the said sum of money by making various payments as listed therein. It is also mentioned in the said agreement that on realization of the sale consideration from Sri A. Venkatarami Reddy, the assessee had to clear the mortgage loan of Rs. 10.0 crores obtained from M/s Rasula Securities Ltd., towards the equitable mortgage created. The said amount of Rs. 10.0 crores was proposed to be taken by Sri A. Venkatarami Reddy in clearing the amounts as enunciated in the MOU. All these facts have been stated before the Assessing Officer and mentioned that:
a) The cheques issued on Syndicate Bank, Somajiguda Branch, Hyderabad were returned and not honoured;
b) The mortgage deed was executed in favour of Sri Thimmaiah and kept the original document with him;
c) The fact that only an amount of Rs. 3.0 crores was received by him as categorically mentioned in the complaint lodged by him before the Police authorities in the FIR; Sri Thimmaiah has also stated in the 10 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== complaint that the balance of amount was not paid and the said complaint was made in the year 2005.
13. The AR submitted that all the later developments are the consequence of such complaint made by Sri Thimmaiah. Therefore, there is ample evidence to show that the assessee did not pay the amount, as presumed by the Assessing Officer, to Sri Thimmaiah. In View of the above, the assessee requested the Assessing Officer to summon all the concerned persons i.e. Sri Thimmaiah, Sri K.E. Pratap, M/s Eswari Projects Ltd., and all others concerned so as to enable him to come to a conclusion that the amounts were not paid. When he summoned only Sri Thimmaiah, he categorically stated that he did not receive any amount beyond Rs. 3.0 crores. A copy of the statement is also not provided to the assessee herein.
14. The AR submitted that in view of the above, it is amply clear that the assessee paid only Rs. 3.0 crores in all and did not pay any amount in addition to the same to Sri Thimmaiah or to anyone. Therefore, it is not correct for the Assessing Officer to presume that an amount of Rs. 9,11,50,000 was paid by the assessee herein.
15. The AR further submitted that the Tribunal may hold that only Rs. 3 crores was paid to Sri Thimmaiah. The Assessing Officer mentioned that an amount of Rs. 1.0 crore was paid to Smt. Savitramma. According to the Assessing Officer, the seized documents also reveals such making of such payment on 06.02.1998. This amount is found, according to the Assessing Officer, in the so called agreement of sale executed on 06.02.1998 by the assessee herein in favour of Shaik Amin Patel and Sri G. Sivarama Krishna. The sale is stated to be in respect of 11 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== Ac. 18.28 guntas out of 104 acres. The AR submitted in this regard submits that:
a) The agreement of sale dated 06-02-1998 IS only a Xerox copy and the original was not found;
b) The said agreement of sale was signed by the assessee alone and not by the vendees;
c) According to the agreement, the said amount represents the commission payable to the parties at Rs. 2.25 lakhs per acre for 104 acres of land and it is submitted that the said commission was never paid as the deal was finally incomplete even till this date. The litigations in the property and in the transfer are still not clear;
16. The AR submitted that there is a clause in the said agreement that an amount of Rs. 1.0 crore was paid by the vendees to the assessee herein on the date of agreement. This amount is not actually received by the assessee herein. Similarly, the payment stated to have been made to Smt. Savitramma of Rs. 1.0 crore was also not paid. If the agreement were to be believed to be true, there, is no outgoing from the assessee as in fact the vendees mentioned that they paid Rs. 1.0 crores to the assessee and assessee paid Rs. 1 crore to Smt. Savitramma. If the agreement were to be believed to be true, all the clauses of the agreement are to be believed as true and the payment will be out of receipt. It is also submitted that Shaik Hamid Patel and Sri G. Sivarama Krishna did not get the Ac. 13.28 guntas of land registered in their favour as was agreed in Clause 2 before 31-03- 1998. Al these facts would clearly indicate that the payment of Rs. 1.0 crore to Smt. Savitramma and five others is not correct and no such payments was made to them.
12 IT(SS)A No. 22/Hyd/2011M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ======================
17. The AR submitted that that Shaik Hamid Patel, Sri G. Sivarama Krishna and Smt. Savitramma could have been examined by the officer when the assessee denied the transaction. The AR submitted that the Assessing Officer is not justified in making the addition of Rs. 1.0 crore in view of the above facts.
18. The learned DR submitted that In the original passed u/s. 158BD, the Assessing Officer has considered 85 acres 32 guntas of land @ Rs. 12.25 lakhs per acre which included commission to be paid to the mediators @ Rs. 2.25 lakhs per acre. However the record reveals that in lieu of the commission to be paid in cash, the mediators Shri G. Siva Rama Krishna and Shaik Hamid Patel preferred to get 5 acres 23 guntas of land in their name / their nominees. The record also shows that that as per the sale document 85 acres 32 guntas of land was actually registered in the name of the assessee trust. This means that if the entire commission would have been paid in cash, the land conveyed to the mediators would have been registered in the name of the trust and the total land would have gone up by 5 acres 23 guntas. In any case, what was invested by the assessee was the land cost for 85 acres 32 guntas as also the commission to be paid to be mediators which was paid in the form of land. Thus, in the assessment order passed in pursuance of the direction of ITAT, the Assessing Officer has rightly considered the investment in land for 91 acre 15 guntas out of which 85 acres 32 guntas were registered in the name of the Trust, and the balance land was paid in kind to the mediators Shaik Hamid Patel and G. Sivarama Krishna. It is for this reason that in the second order passed by the Assessing Officer the Assessing Officer has considered the quantum of land to be 91 acres 15 guntas. It may also be mentioned that while in the first order, the rate of land was taken at Rs. 12.25 lakhs per 13 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== acre inclusive of the commission, in the second order, the cost has been taken at Rs. 10 lakhs since the total land has been taken at 91 acres and 15 guntas inclusive of the land conveyed to the mediators as commission. There is no infirmity in the order of the CIT(A) holding that the land acquired was 91 acres 15 guntas.
19. Regarding the rate adopted by the Assessing Officer while estimating the purchase consideration, the learned DR submitted that it is the contention of the assessee that the Assessing Officer erred in estimating the purchase consideration at Rs. 10 lakhs per acre as against the actual consideration paid of Rs. 3.34 lakhs per acre. The CIT(A) has dealt with this issue in detail by while disposing the appeal filed against the order passed u/s. 158BD. In that order, the Assessing Officer had adopted Rs. 12.25 lakhs per acre. The CIT(A) also referred to the agreement of sale dated 04-06-99 where the price of the land has been mentioned at Rs. 10 lakhs per acre excluding the commission of Rs. 2.25 lakhs per acre payable to the negotiator. The CIT(A) has also referred to the finding of the Assessing Officer relating to comparable price of land in the near vicinity where the land cost has been stated to be Rs. 15.05 lakhs per acre and Rs. 10.65 lakhs per acre. In fact, the Managing trustee of the assessee trust was a witness in the sale deeds for the above referred comparable land deals. The CIT(A) also referred to the appellate order passed in the case of the negotiators who were to receive commission i.e. Sri G. Sivarama Krishna etc. Even in the present assessment order passed by the Assessing Officer in pursuance to the direction of ITAT, the Assessing Officer has dealt in detail as to why the rate of land to be taken at Rs. 10 lakhs per acre exclusive of the commission payable. The DR argued that the Assessing Officer was justified in taking the land price at Rs. 10 lakhs per acre.
14 IT(SS)A No. 22/Hyd/2011M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ======================
20. Regarding the assessee's contention that the Assessing Officer erred in relying on the complaint lodged by Sri Thimmaiah before the police authorities which cannot be considered as the basis for determining the sale consideration and accordingly erred in arriving at the cost of acquisition of the property at Rs. 10,11,50,000 the learned DR submitted that the FIR filed by Sri Thimmaiah was one of the many documents referred to by the Assessing Officer while computing the undisclosed income of the appellant and it is not the only document that the Assessing Officer has relied upon to compute the undisclosed income. It is also pertinent to note that the appellant is also relying on the same complaint filed by Shri Thimmaiah to defend his stand. Therefore, it cannot be said that the complaint lodged by Shri Thimmaiah is irrelevant and not to be relied upon. The DR submitted that reliance placed by the Assessing Officer on the FIR lodged by Shri Thimmaiah before the Police Authorities is not without basis. However, while computing the undisclosed income the Assessing Officer, apart from the complaint by Thimmaiah, has also referred to various other documents to arrive at the undisclosed income. While arriving at the cost of acquisition of the property at Rs. 10,11,50,000/-, the Assessing Officer has considered the total quantum of land at 91 acres and 15 guntas @ Rs. 10 lakhs per acre which gives the acquisition price at Rs. 9,11,50,000/-. To this, he has added another Rs. 1 crore paid to Smt. Savitramma as evidenced by seized document. This Rs. 1 crore was paid to Smt. Savitramma on 6-2-1998 as per the seized document. The issue was also discussed in the first assessment order passed u/s. 158BD. However, in the first assessment order, the quantum of land was considered at 85 acres 32 guntas and the rate was adopted at Rs. 12.25 lakhs per acre inclusive of commission. While passing the first assessment order, the Assessing Officer at para 2.3 has discussed that out of the total 15 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== commission payable to the mediators Rs. 1 crore was paid to Smt. Savithramma and others. Since in the present order 5 acres 23 guntas of land has been considered as commission paid to the mediators, a separate addition of Rs. 1 crore has been made with regard to the payment made to Smt. Savithramma. After analyzing the issue in detail, with reference to the assessment orders passed as also the appellate orders passed by my predecessor, the addition of Rs. 1 crore made by the Assessing Officer is justified. Thus, the computation of total acquisition price at Rs. 10,11,50,000 is justified.
21. Regarding the contention of the assessee that the Assessing Officer has erred in determining the undisclosed income at Rs. 7,23,86,910, the learned DR submitted that undisclosed income is the resultant figure after reducing the consideration recorded in the books by the assessee from the acquisition price of Rs. 10,11,50,000. Since the acquisition price of Rs. 10,11,50,000 arrived at by the AO is justified, consequently, the computation of undisclosed income at Rs. 7,23,86,915 is also justified.
22. Regarding charging of interest u/s. 158BFA(1) the learned DR submitted that no appeal lies against charging of interest. Otherwise also charging of interest is consequential in nature. The assessee has also not given any specific reason as to how the interest computed by the Assessing Officer is erroneous. Accordingly, the action of the Assessing Officer is justified on this count.
23. We have heard both the parties and perused the material on record. In this case, on search action conducted u/s. 132 of the Act in the premises of Suman Chit Fund Pvt. Ltd. on 5.9.2002, the assessee was also covered and during the search action seized material marked ASSS/RO/04 containing a document at page 16 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== Nos. 88-90 was found which is an agreement of sale dated 6.2.1998 between Shri Sri Bhagwan Balasai Baba Central Trust, Kurnool as one party and Shaik Hamid Patel and Shri G. Sivarama Krishna on the other side. As per this seized material the assessee entered into an agreement of sale with respective owners represented by their GPA holder Shri M. Thimmaiah for purchase of land of 104 acres in Sy. Nos. 104, 105, 106,107, 108, 109/1 and 109/2 situated at Kondapur village, Serilingampally Mandal, R.R. District for which consideration was Rs. 12.25 lakhs per acre. During the first assessment proceedings on 28.2.2006 the Assessing Officer found that the total land is only 91 acres 15 guntas. Out of this 5 acres 23 guntas was registered by outsider in favour of Shri Hamid Patel and balance 85 acres 32 guntas was registered by the assessee. As per the books of account recorded consideration is Rs. 2,87,63,085. However, the Assessing Officer considered the information about two instances of sale of land at the relevant period in the year under consideration in the near vicinity, as per which one document dated 25.6.1996 shows the consideration at Rs. 10.65 lakhs per acre and another document dated 21.10.1998 shows the consideration at Rs. 15.05 lakhs per acre. The Assessing Officer considered the consideration at Rs. 12.25 lakhs per acre and computed the total consideration for 85 acres 32 guntas at Rs. 10,51,05,000 and deducted the disclosed consideration of Rs. 2,87,63,085. Accordingly, he worked out the undisclosed income at Rs. 7,63,41,915 in the original assessment.
24. During the course of set aside assessment proceedings the assessee produced MOU dated 31.8.2005. The said MOU is between the assessee trust, M/s. Bhoopati Associates and Shri K.E. Pratap as first part, (a) Shri Thimmaiah and (b) M/s. Eswari projects as second part and Shri A. Venkatarami Reddy as third part. As per this MOU the assessee sought cooperation of Sri 17 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== Thimmaiah in settling the pending court litigation and in the sale of 70 acres of land at Rs. 70 lakhs per acre to Shri A. Venkatarami Reddy. It has also sought cooperation of the second part in delivering the amounts due to others consequent to realisation of the sale proceeds of the land in question. The Assessing Officer brushed aside this MOU. He relied upon the police complaint lodged by Shri Thimmaiah and his sworn statement recorded on 8.12.2008 wherein he had stated the consideration is Rs. 10 lakhs per acre. In the set aside assessment proceedings, the Assessing Officer also considered an amount of Rs. 1 crore repaid to Smt. Savitramma and thus the Assessing Officer computed the total amount as follows:
Sale consideration at Rs. 10 lakhs Rs. 9,11,50,000 per acre for 91 acres 15 guntas Amount paid to Smt. Savitramma Rs. 1,00,00,000 Total Rs. 10,11,50,000 (-) Consideration declared in the Rs. 2,87,63,085 books of account Undisclosed income Rs. 7,23,86,915
25. Though the Assessing Officer computed two different amounts of undisclosed income at two assessments stage, he failed to establish the genuineness of the documents. The document found was a Xerox copy of a sale agreement. The Xerox copy of the agreement found during the course of search only bears the signature of the managing trustee and not that of other parties to the agreement. The Assessing Officer was unable to trace the original agreement. The Assessing Officer very much relied on the FIR filed by Shri Thimmaiah who happened to be the GPA holder of the land sold to the assessee. In our humble opinion, the FIR itself cannot be considered as conclusive evidence to come to a conclusion that the consideration has passed between the parties. It is a fact that the land was subjected to litigation 18 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== and the assessee agreed to pay Rs. 5 crores for obtaining clearance from ULC authorities and settle the dispute. Also it is a fact that posted dated cheques were given to him.
26. A Mortgage deed also was executed wherein the details of post dated cheques given by the assessee are clearly mentioned.
Copy of the mortgage deed is placed on record. If the amount of Rs. 5 crores were to be sale consideration it would have been mentioned so in the mortgage deed. It only states that Sri M. Thimmaiah has advanced Rs. 5 crores to the assessee trust. No such amount is received from him and he is not capable also. Later, Sri M. Thimmaiah returned the cheques which were in his possession and executed a declaration on 4-6-1999. A copy of the declaration is on record. As per this declaration since the assessee trust entered into an agreement of sale with Sri K.E. Pratap on 4-6-1999 for sale of agricultural lands to an extent of Ac. 43 in Sy. No. 104/1, 104/2, 105(part) and 108, situated at Kondapur village, Serilingampally Mandal, R.R. District, in which he also signed as witness, he has handed over the cheques in his possession and has also categorically stated that he has no claim or charge on the said Trust whatsoever from then onwards. The assessee trust had to enter into an agreement of sale to Sri K.E. Pratap only to convince Sri Thimmaiah to do his work. It was like a guarantee to Mr. Thimmaiah, who has selected Mr. K.E. Pratap as mediator. The agreement also does not contain any consideration for such transfer. A copy of the Agreement is on record.
27. The FIR lodged by Sri M. Thimmaiah relied upon by the Assessing Officer, is also placed on record. This FIR is contrary to the declaration signed by Sri M. Thimmaiah. This FIR is lodged only said to be steps to persuade the assessee to complete the 19 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== transaction. As per the declarations the cheques were returned to the Trust and he has stated that he will have no claim whatsoever thereafter. But in the FIR he had stated that he has to get money. The Assessing Officer having relied on this FIR has not examined him to find out the truth in spite of bringing on record the declaration and the agreements referred to above. The Assessing Officer merely concluded based on such FIR that the assessee trust has incurred Rs. 5,80,10,000 in spite of repeated assertions by the assessee that it has not incurred anything more than what is recorded in the books of account. It is not known how a statement by third party without any supporting evidence could be relied upon to hold that the assessee trust has paid Rs. 5,80,10,000. The Assessing Officer though in his assessment order stated that the contents of the complaint are only a source of information and that the computation of undisclosed income is not based on these figures but on the fact and documentary evidence supplied by the assessee only. This statement of the Assessing Officer is far from truth. None of the facts submitted by the assessee or the documents supplied by the assessee proves that the assessee has paid more than what is recorded in the books of account. Whatever evidences cited by the Assessing Officer are not authenticated and not supported by examining the concerned parties. The assessee on the other hand submitted that it has no activity which can generate income and that its only source is contributions from devotees and it enjoys exemption and has no necessity to have undisclosed income. The Assessing Officer in his order stated that it is not for his consideration. When the Assessing Officer proposes to hold that the assessee has undisclosed income it is also required to state as to how the income could have been generated. When undisclosed income is to be assessed either it should be based on the assets acquired or based on the sources of income. In the assessee's case as per the 20 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== documents the land of nearly 86 acres is acquired for the consideration recorded in the books of account. There is no evidence which can be relied upon to prove that it has paid more than that. Whatever being relied upon by the Assessing Officer are unproved documents and unauthenticated, more on presumptions and without any evidence. With regard to the submission that when the cheques of Rs. 5 crores is returned the question of the assessee having paid the amount does not arise the Assessing Officer states that the assessee would have made good the said payment to the land owners against the dishonoured cheques. This is only a presumption and not supported with any evidence. It is settled law that determination of undisclosed income could be determined only on the basis of' evidence and not otherwise.
28. The Assessing Officer also relied on the statement dated 18.12.2008 recorded from Sri Thimmaiah to suggest the sale consideration is at Rs. 12.25 lakhs. Shri Thimmaiah lodged a complaint against the assessee and he is having a grievance against the assessee. How far his statement can be relied that is also recorded on 8.12.2008 in the course of set aside assessment proceedings. In our opinion, it cannot be basis to come to the conclusion that the consideration is at Rs. 12.25 lakhs per acre.
29. Further, this is a block assessment framed u/s. 158BD of the Act. The block assessment is based on seized material found during the course of search action. The provisions of Section 158BC(b) which have been amended by Finance Act, 2002 with retrospective effect from 1st July, 1995, as per which ss 144 and 145 have been specifically made applicable to block assessment. However, we make it clear that if no material was found during the search which could show suppression of income, no estimation of undisclosed income of block period by resorting to Section 145 21 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== could be made. In other words, where there is a material, such an estimation of income can be made. This view of ours is fortified by the Judgment of Jurisdictional High Court in the case of Rajnik & Company Vs. ACIT (251 ITR 561) wherein held that once the suppression is established, estimate cannot be avoided. It is not necessary that addition should be limited to what is found during the search if the circumstance warranting an estimate. We have also noticed that Punjab & Haryana High Court in the case of Vedprakash Vs. CIT (265 ITR 642) wherein held that when the books of accounts maintained by the assessee were not reliable and verifiable, the block assessment has to be made in the light of material recovered during the search and in such circumstances, some element of estimate was unavoidable.
30. The block assessment is not a substitute for a regular assessment. Both the assessments are standing on different footings. Its scope and ambit is limited in that sense to materials unearthed during search. It is an addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with the assessing officer. Evidence found as a result of search is clearly relatable to Section 132 and 132A of the I.T. Act. The clause (a) of the explanation to Section 158BFA(2) postulates that assessment made under Chapter XIV-B shall be in addition to the regular assessment of each previous year included in the block period. Clause (b) of the explanation further clarified the position that the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of the related block period. Clause (c) puts a ban on treating any income assessed under the "Block Assessment" so as to form part 22 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== of regular assessment of any previous year included in the "Block Period". The special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. It cannot be a substitute for regular assessment.
CIT v. N.R. Papers and Boards Ltd., 248 ITR 526 (Gauhati) "If prior to the date of search, the assessee had disclosed the particulars of income or expenditure either in the return or in the books of account or in the course of proceedings to the Assessing Officer or where the return had not become due, they are duty recorded in the regular books of account, then such Income cannot be treated as undisclosed income so as to tax a person ft the rate of Sixty per cent. Under Chapter XIV.
CIT V. N.R. Papers and Boards Ltd., 248 ITR 526 (Gauhati) "Under the scheme of the provisions for block assessment it is apparent that it related to assessment of "undisclosed income" of the assessee excluding the income subjected to, regular assessment in pursuance of the returns filed by the assessee for such period. From a perusal of section 158BB of the Income-tax Act, 1961, it is clear that the returns are required to be filed in pursuance of a notice under section 158BC(a) and the assessment has to be framed on that basis in the light of material that had come into the possession of the assessing authority during the course of search which was the foundation of proceedings. The correctness or otherwise of the returns filed in pursuance of the notice under section 158BC(a) has to be examined with reference to the material in the possession of the assessing authority having nexus to assessment of "undisclosed income". "
Bhagwati Prasad Kedia v. CIT, 248 ITR 562 (Calcutta) "The Explanation to section 158BA of the Income-tax Act, 1961, makes it clear that the Legislature thought it fit to make a distinction, between the block assessment and the regular assessment. In the case of regular assessment, the Assessing Officer is free to examine the veracity of the return as well as the claims made by 23 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== the assessee, whereas the undisclosed income is taxed by way of block assessment as a result of search and seizure. The logic behind the two different modes of assessment is that concealment of income and claiming deduction or exemption in respect of a disclosed income cannot be treated at part. The former is an offence which goes to the root of the matter and the other is on the basis of the causes shown by the assessee where the Assessing Officer is free to accept the justification shown or reject the same."
CIT Vs. Vikram A. Doshi, 256 ITR 129 (Bom) "Block assessment - undisclosed income-undisclosed transactions assessed in block assessment-tribunal finding transactions disclosed in return which were subject-matter of regular assessments-transactions in question not to be considered in block assessment - income;-tax act, 1961, ss. 143, 158b."
CIT Vs. Shamlal Balram Gurbani, 249 ITR 501 (Bom) "A search was conducted at the residential premises of the assessee on March 25,1996, and a notice under section 158BC of the Income-tax Act, 1961, was issued; The assessee did not file the returns for the years 1993-94, 1994-95 and 1995-96. The Assessing Officer treated the income of the three years as the income of the block period. On appeal, the Tribunal found that the assessee's income from interest, salary and rent was reflected in the audited balance-sheet of the respective assessment years of the firm and, therefore, the Tribunal deleted the addition."
On appeal the Hon'ble Bombay High Court did not find any reason to interfere with the findings of facts recorded by the Tribunal. It was held:
"Held dismissing the appeal, that the conclusion of the Tribunal that there was no reason for treating the said income as undisclosed income for the purposes of block assessment was based on facts. No substantial question of law arose."
CIT v. Vinod Danchand Ghodawat, 247 ITR 448 (Bom) "Where the value of the gold and silver articles. and jewellery had been disclosed in the assessee's wealth- tax return which was accepted by the Department:
24 IT(SS)A No. 22/Hyd/2011M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== Held that Chapter XIV-B of the Income-tax Act 1961, had no application to the facts of the case and the addition made by the Department on the ground of undisclosed income was erroneous.
During the search, it was found that the assessee had constructed a bungalow. It was found that the assessee had incurred an expense of Rs. 4.16 lakhs. The Assessing Officer, thereafter, referred the matter to the Department Valuer, who valued the property at Rs.
6. 66 lakhs and accordingly, the difference had been added to the income of the assessee as undisclosed income:
Held, that the above basis clearly showed that the Department had not understood the scope of Chapter XIV-B of the Act. The addition did not fall within the Chapter XIV-B."
(A) Even if it is presumed that post-search enquiries have resulted in detection of certain undisclosed income, though it is not relatable to the evidence found as on the date of search then also, Mumbai Bench of the Tribunal, in the case of Morarji Gokuldas Spg. & Wvg. Co. Ltd. v.
DCIT, 95 ITD 1 (MUM) (TM), while considering an identical situation, held as follows:-
"8. Block period for which the assessment is to be made under Chapter XIV-8 means the period comprising previous years relevant to ten assessment years preceding a previous year in which the search was conducted under section 132 or any requisition was made under section 132A, and also includes in the previous year in which such search was conducted or requisition made the period up to the date of the commencement of such search or as the case may be the date of such requisition. Therefore, the assessment for the block period under chapter XIV-8 can be made of the undisclosed income only up to the date of commencement of search or the date of the requisition and not of the period thereafter. Section 1588A provides for assessment of undisclosed income as result of search for the block period and computation of income and the computation of undisclosed income for the block period to be made as per the provisions of section 158BE and assessment has also to be made 25 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== under section 158BC of the block period. The "undisclosed income" for which the assessment is to be made is defined in section 158B(b) which include money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable articles, things, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purpose of this Act and after the amendment by Finance Act, 2002 w.e.f. 1-7-1995 it includes also any expenses, deduction or allowance claimed under this Act which is to be found to be false.
31. Further, it is not enough to say that the assessee paid over and above the declared consideration because the fair market value (FMV) of the impugned asset as on date of transaction exceeds the full value of consideration declared by the assessee. It is further more necessary that the actual value of consideration in respect of assets involved is understated or in other words, shown at a lesser figure than that actually paid by the assessee. If the Revenue seeks to bring into tax any understated value of the assets, it must show not only that the FMV of the assets as on the date of transfer exceeds the full value of consideration declared by the assessee but also that consideration has been understated and the assessee has actually paid more than what is declared by him. If the Revenue having failed to show that the actual consideration passed in this case is more than that was stated by the assessee then it cannot claim to have discharged the burden cast upon it by merely establishing that the FMV of the capital asset as on date of transfer exceeds the value of consideration declared by the assessee in its books of account. The Revenue must go further and prove that it is the consideration passed between the parties exceeds the value disclosed in the books of account of the assessee. Merely because some property in the nearby vicinity having been sold at higher value, it cannot be presumed that the 26 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== assessee property also sold at the same rte. The Revenue should independently establish that actual consideration passed between the parties is higher than the disclosed in the books of account. This is a block assessment. As we have discussed in earlier part of this order, this should be based on seized material and not on the basis of presumption.
32. We place reliance on the judgement of the Supreme Court in the case of K.P. Varghese vs. ITO (131 ITR 597) wherein it was held that section 52(2) of the Income-tax Act, 1961, can be invoked only where the consideration for the transfer of a capital asset has been understated by the assessee, or, in other words, the full value of the consideration in respect of the transfer is shown at a lesser figure than that actually received by the assessee, and the burden of proving understatement or concealment is on the Revenue; and the sub-section has no application in the case of a bona fide transaction where the consideration received by the assessee has been correctly declared. In view of the finding of fact recorded by the Tribunal, there was no question of invoking section 52(2) of the Act. The High Court was, therefore, right in refusing to call for the reference from the Tribunal and rejecting the application under section 256(2) of the Act.
33. Further, the evidence collected by the Revenue authorities was not sufficient to establish their stand that the total consideration passed between the parties was at Rs. 10,11,50,000 instead of Rs. 2,87,63,085. The entire evidence has to be appreciated in a wholesome manner and even where there is documentary evidence, the same can be overlooked if there are surrounding circumstances to show that the claim of the assessee is opposed to the normal course of human thinking and even 27 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== applying this principle to the instant case there are some difficulties in rejecting the assessee's plea as opposed to the normal course of human thinking, conduct and human probabilities. For this purpose, we rely on various decision as follows:
1. Order of ITAT, Delhi Special Bench in the case of Manoj Agarwal v. DCIT wherein the Tribunal held as follows:
"Held, The evidence collected by the revenue authorities was not sufficient to establish their stand that the jewellery transactions carried on by Bemco were only paper transactions or bogus, and that assessee, who was one of the director of the company at the relevant time, controlled and put through these transactions different accommodation entries and earned commission income therefrom. The entire evidence has to be appreciated in a wholesome manner and even where there is documentary evidence, the same can be overlooked if there are surrounding circumstances to show that the claim of the assessee is opposed to the normal course of human thinking and conduct or human probabilities. Even applying this principle to the instant case, there was some difficulty in rejecting the assessee s plea as opposed to the normal course of human conduct. The circumstances surrounding the case were also not strong enough to justify the rejection of assessee's plea as fantastic or outrageous. The background of the assessee and his father was considered as it was relevant to the case. The admission of the assessee that only the transactions in the shares were accommodation entries and that Bemco jewellery transactions were genuine was also considered and there was reason as to why it was so. Most of the questions put to the assessee while recording several statements from him relate to the share transactions put through another company ''F' hardly any relevant question regarding the activities of Bemco was asked. The turnover shown in the share transactions, which were admitted to be bogus, was about three and half times the purchases of Rs. 36.69 crores shown by Bemco in its jewellery business. Added to these were the facts that even in the seized 28 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== material there was a letter head of Bemco which showed Jai Sidhi Apartments at Ahmedabad as the branch office of Bemco which meant that the claim of Bemco that it had a branch office at Ahmedabad where the gold bars were sold was right, as also the sales-tax assessment order under the Gujarat Sales-tax Act where the assessee declared Rs. 24.07 crores as total sales and exempted. sales. There was no evidence of any consequence which was unearthed during the search to directly show that Bemco was carrying on only accommodation entry business for jewellery. The person who was projected as one of the witnesses of the department to support their stand that Bemco's jewellery business was bogus, had been found to have acted as sub-mediator in the share accommodation entry business carried on by assessee through 'F' only and he had also been paid commission in that business. Further, Bemco had been found to have a shop or showroom at Kucha Mahajani, Delhi and that had been confirmed by the report of the sales-tax inspector as also by the rental receipt starting from January, 1998. Thus, the surrounding circumstances, apart from the direct evidence in the instant case did not contain anything which belied the claim of assessee that though his share transaction business was only an accommodation entry business for commission, the jewellery business carried on by Bemco had not been proved to be so. Therefore, no addition could be made on account of 'commission income in the hands of the assessee by treating entire purchase of Bemco as pertaining to accommodation entry business.
2. CIT Vs. Atam Valves (P) Ltd. (332 ITR 468 (P&H) wherein held that even though the explanation of the assessee that the loose paper did not relate to payment of wages during the year in question may not be accepted, in the absence of any other material, the loose sheets by themselves were not enough to make addition as per the estimate of the assessing office and to that extent assessed by the assessing officer, was not called for and it was partly liable to set aside.
3. CIT Vs. Smt. P.K. Noorjahan (237 ITR 570) wherein held that in the instant case, the Tribunal had held that the discretion had not been properly exercised by the Income tax Officer and the Appellate Assistant Commissioner taking into account the circumstances in 29 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== which the assessee was placed and the Tribunal had found that the investments could not be treated as income of the assessee. The High Court had agreed with the said view of the Tribunal. There was no error in the findings recorded by the Tribunal. Section 69 could not be invoked in respect of the investments of the assessee.
4. MM Finances Pvt. Ltd. Vs. DCIT (107 TTJ Chennai
200) wherein held that no addition could be made in the hands of the assessee on the basis of the statement made by the third party and the unsigned agreement and dumb loose slips seized from his residence, in the absence of any corroborative material to show payment of any undisclosed consideration by the assessee towards purchase of land.
5. Bansal Strips (P) Ltd. Vs. ACIT (100 TTJ 665) (Del.) wherein held that addition u/s 68 based on loose papers found during search though authenticity where of being doubtful held that in the absence of adequate material as to the nature and owner ship of transaction, the alleged undisclosed income could not be added u/s 68 to the income to be assessed in the hands of the assessee, merely by arithmetically totalling the various figures jotted down on loose papers found during the course of search.
6. Hon'ble Supreme Court in the case of CIT Vs. P.V. Kalyanasundaram (294 ITR 49) (SC) wherein observed that reliance on the contradictory statement made by the vendor or loose sheets cannot be placed and thereby confirmed the judgement of Madras High Court wherein held that the burden of proving actual consideration in such a transaction was that of the revenue. The assessing officer did not conduct any independent enquiry relating to the value of the property purchased. The deletion of addition was justified.
34. As seen from the impugned document, it is just a signed by a single party which was found in the course of search action at the assessee premises. The impugned document is only circumstantial evidence which required to be corroborated with other evidence. Though there is no necessity in law that the 30 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== assessing officer is supposed to discharge tax liability by direct evidence only, there should be enough evidence to support the addition. The addition is to be made by the assessing officer on the basis of material available on record. It is very important to have enough evidence or conclusive evidence to sustain the addition. When the assessee gives an evasive reply the assessing officer has to make certain estimation of the income. But the assumption should be reasonable corresponding to the material available on record. It should not be based on conjectures and surmises. In the present case, the impugned document is not duly signed document. The circumstances surrounding the case were also not strong enough to justify the rejection of assessee's plea as outrageous. On consideration of the assessee's arguments, we are not in a position to reject the same on the reason that the sale agreement dated 6.2.98 is only a Xerox copy signed by the assessee alone and not by the vendees. In our opinion, as held by the Supreme Court in the case of Moosa Madha & Azam S. Madha vs. CIT (89 ITR 65) that Photostat copies have very little evidentiary value. Being so, Xerox copies of any document cannot be itself considered as evidence for the purpose of making addition in this assessment. Further the consideration at Rs. 12.25 lakhs per acre cannot be said to have been paid as the transfer has not materialised and litigation is going on. Further the payment of Rs. 1 crore to Smt. Savitramma is also not supported by proper evidence to bring the same into taxation in the block assessment. In our opinion, the unsigned document is a dumb document and cannot be relied upon for making addition in this case. The department cannot draw inference on the basis of suspicion conjecture and surmise. Suspicion, however strong cannot take place of material in support of the findings of the assessing officer. The assessing officer should act in a judicial manner, proceed with judicial spirit and should come to a judicial conclusion. The 31 IT(SS)A No. 22/Hyd/2011 M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ====================== assessing officer is required to act fairly as a reasonable person and not arbitrary and capriciously. Assessment made should have adequate material and it should stand on its own legs. The unsigned document or signed by only one party found during the course of search is required to be supported by other corroborated evidence. Further, the statements required to be recorded from all the parties concerned mentioned in the documents found in the course of search and those statements should be confronted to the assessee and the assessee has to be given an opportunity for cross examination. Considering the totality of the facts and circumstances of the case, in our opinion, it is not possible to sustain the addition. Accordingly, the same is deleted.
35. Ground Nos. 6 and 7 do not require adjudication as we have decided the consideration as declared by the assessee has to be accepted.
36. The next issue is levy of interest u/s. 158BFA. Levying of interest u/s. 158BFA is consequential and mandatory and no adjudication is required on this issue.
37. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 4th July, 2012.
Sd/- Sd/-
(SAKTIJIT DEY) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated the 4th July, 2012
Copy forwarded to:
1. M/s. Bhagawan Sri Balasaibaba Central Trust, c/o. Shri S Rama Rao, Advocate, Flat No. 102, Shriya's Residency, Road No. 9, Himayathnagar, Hyderabad.
32 IT(SS)A No. 22/Hyd/2011M/s. Bhagawan Sri Balasaibaba Central Trust, Kurnool ======================
2. The Assistant Commissioner of Income-tax, Central Circle-6, Hyderabad.
3. The CIT(A)-I, Hyderabad.
4. The CIT (Central), Hyderabad.
5. The DR - A Bench, ITAT, Hyderabad.
tprao