TMI Blog2013 (11) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the CIT(A) as the Assessing Officer had no objection to delete the same - Accordingly, we confirm the action of the CIT(A) on this issue. Disallowance on Account of Interest on Drawings – Held that:- Following Keshavji Raoji & Co. etc., etc. v. CIT [1990 (2) TMI 1 - SUPREME Court ] - in making disallowance for the interest paid by the partnership firm to a partner u/s. 40(b) the interest, in turn, paid by the partner on his borrowings from the firm should be taken into account of and deducted and only the balance is to be disallowed u/s. 40(b) of the Act - only the net amount of interest paid by the firm after deducting interest paid by the same partner to the firm can be disallowed u/s. 40(b) of the Act - only the net amount of interest to be treated as income in the hands of the assessee and the gross interest cannot be considered - Accordingly, this ground of the assessee was allowed in all these appeals. Treatment of Annual Letting Value (ALV) - Held that:- The Department had no material to show that it was not occupied by the assessee himself or it was rented to any other person so as to derive the rental income from it - Being so, the claim of the assessee can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -05 6. 1597/Hyd/2010 2005-06 7. 1599/Hyd/2010 2006-07 ITA No. 1595/Hyd/2010 - Assessee appeal 2. The first grievance of the assessee is with regard to limiting of agricultural income at Rs. 50,000 out of the agricultural income declared by the assessee at Rs. 1,19,300 and treating the balance Rs. 69,300 as 'income from other sources'. 2.1 The contention of the learned AR is that the assessee is having 24 acres of land at Aleru and has derived income from this land at Rs. 1,19,300. The Assessing Officer is having no material to show that the assessee derived income from sources other than agriculture to treat Rs. 69,300 as 'income from other sources'. 2.2 On the other hand, the learned DR relied on the order of the CIT(A). 2.3 We have heard both the parties and perused the material on record. The Department has not doubted assessee owning 24 acres of land at Aleru. The assessee was cultivating mango and the Assessing Officer also admitted that there are fruit bearing mango trees on the said land. The Assessing Officer rejected the claim of the assessee on the reason that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Blue Dart Express Ltd., executed on 31.3.2001. This cheque consists of two portions, (i) Rs. 1,41,000 towards rental deposit and (ii) Rs. 10,110 towards rental income. The amount was credited into bank account on 18.4.2001. Because of gap of 18 days between the date of rental agreement and the amount credited in the bank account, the lower authorities doubted the transaction. In our opinion, there is no merit in doubting the transaction as the amount has been received from Blue Dart Express Ltd., and duly credited into the bank account. Being so, the addition is not sustainable. Accordingly, we delete the addition. 6. The next ground is with regard to taxing capital gain of Rs. 3 lakhs, even though the same was already offered to tax in the return of income filed in response to notice u/s. 153C of the IT Act. The CIT(A) made an addition of Rs. 3 lakhs on the basis of the Remand Report submitted by the Assessing Officer. The contention of the assessee's counsel is that the assessee sold two flats (i) bearing No. C-502 at R.K. Towers, Begumpet, Hyderabad at Rs. 5.5 lakhs and flat No. E-402 at Vamsi Span Collective Homes, Begumpet, Hyderabad and thus, Rs. 3 lakhs was considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has been gone through. On verification of the said loan account of SBI, SP Road Branch, an amount of Rs. 6,00,000/- sanctioned by the bank was reflected, whereas the balance amount of Rs. 9,00,000/- was not explained. He stated, hence a notice dated 11.08.2009 was issued to the assessee for furnishing explanation in that regard. In response to the same, the assessee has filed reply on 21.08.09, stating that the amount of Rs. 9,00,000/- was deposited on 24.03.2002 and the same has been withdrawn on 27.03.2002. The Assessing Officer further submitted that the assessee has also filed a cash book containing the day to day cash flow, and the same has been examined by him. He submitted, accordingly, the claim of the assessee may be considered on merit. 7.5 Later, during hearing of appeal before the CIT(A), while reiterating their earlier submission, the AR submitted, that an amount of Rs. 9,00,000/- was deposited by the assessee on 24.03.2002 in the same loan account. This transaction is reflected in the cash book. It was submitted, as may be seen from the cash book entries, the opening cash balance on 24.03.2002 was Rs. 6,42,321/-. Out of this, an amount of Rs. 35,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AR submitted that the Assessing Officer has mentioned that there is a bank deposit of Rs. 5,00,000/- on 15.06.2001 and Rs. 9,35,000/- on 14.06.2001. It was submitted that the same is a duplicate addition made by the Assessing Officer, in view of their earlier explanation furnished in the context of the said addition of Rs. 28,75,000/-, towards unexplained cash deposit in bank. It was stated, in view of their such explanation furnished against the addition, no addition is called for in this case. On such submissions of the AR the Assessing Officer in his above remand report to CIT(A), submitted that, it is nothing but duplication where the same was added already in the said amount mentioned earlier. Further stating that the assessee has also explained the sources, the Assessing Officer submitted that, hence the claim of the assessee may be considered on merit. 8.2 We have heard both the parties on this issue. Herein also the Assessing Officer sent the Remand Report vide his letter dated 22.2.2010 stating that it is nothing but the duplication where the same was added already and the assessee also explained the source. 8.3 After considering this Remand Report, the CIT(A) dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sources'. Similar issue already came for consideration in assessee's own case in earlier paras in ITA No. 1595/Hyd/2010 wherein we have held that the agricultural income is to be accepted as declared by the assessee in view of the land holdings by the assessee at 24 acres and there is no positive material to hold that the assessee earned any income other than agricultural income. Being so, we allow the ground taken by the assessee in all the above appeals. In the result, assessee's appeals in ITA Nos. 1598, 1596 1597 and 1599/ Hyd/2010 are allowed. Rao Shiva Kumar Sl. No. Assessee appeal ITA No. A.Y. Sl. No. Revenue Appeal ITA No. 1. 150/Hyd/2011 2000-01 2. 151/Hyd/2011 2001-02 (1) 240/Hyd/2011 3. 152/Hyd/2011 2002-03 4. 153/Hyd/2011 2003-04 5. 154/Hyd/2011 2004-05 (2) 241/Hyd/2011 6. 155/Hyd/2011 2005-06 7. 156/Hyd/2011 2006-07 12. The first common ground in ITA Nos. 150, 151 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him. The CIT(A) called for Remand Report from the Assessing Officer. The Assessing Officer submitted in his Remand Report that the claim of the assessee is genuine. The assessee also filed a copy of the certificate dated 16.10.2010 from concerned authority of Radhakrishna Complex Welfare Association confirming that assessee's father Sri Rao Subba Rao and his family members were staying therein in flat No. C-501-502 along with penthouse. Since no evidence was produced before the Assessing Officer and it was obtained after remand proceedings, the CIT(A) not considered the same. 13.1 In our opinion, this act of the CIT(A) is not justified. The Department has no material to show that it was not occupied by the assessee himself or it was rented to any other person so as to derive the rental income from it. Being so, the claim of the assessee cannot be denied on mere suspicion and surmises. Accordingly, in the absence of any evidence contrary to the evidence produced by the assessee, we are inclined to decide the issue in favour of the assessee as it is self-occupied. This ground of the assessee is allowed in all the above appeals. 14. The next common ground in all the appeals of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d both the parties and perused the material on record. In this case, the remittances of gift came from the close relative of the assessee who is none other than his brother Rao Satya Kumar who is an NRI. The assessee filed confirmation letter and bank account details and also IT returns of the donor. Being so, identity and capacity of the donor and genuineness of the transaction are proved. In these circumstances, as the gift is received from close relative of the assessee addition cannot be sustained. Accordingly, we delete the addition. This ground is allowed in all the above appeals. 16. The next ground in ITA No. 151/Hyd/2011 is with regard to addition of Rs. 5 lakhs on account of encashment of FD though the funds routed through bank account of the assessee. Brief facts of the issue are that the Assessing Officer made an addition of Rs. 25 lakhs on account of cancellation of FD as there is no satisfactory explanation by the assessee. 16.1 Before the CIT(A) it was submitted that though the Assessing Officer has made such addition towards cancellation of FD brought into bank account maintained in SBI, there is no such entry in the bank account maintained in that bank. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the CIT(A), while clarifying on the above issue, the AR submitted that on 16.02.2001 Rs. 20,00,000 was transferred from the bank account No. 1022, Canara Bank, Kundan Bagh Branch, standing in the name of M/s. Gautami Constructions. This amount was transferred to SBI, SP Road Branch and FD was made directly for Rs. 20,00,000/- in the name of the assessee. This FD matured on 17.03.2001 for Rs. 20,09,041/- which was credited in the bank account No. 01190005223. It was stated that wrongly in the second cash flow statement filed by the assessee, this was mentioned as cancellation of FD, whereas the same is encashment of FD as would be apparent from the bank account. Furnishing copies of those bank accounts of M/s. Gautami Constructions, and of the assessee, it was stated that from the same, it may be noticed that there was inter account transfer of such amount. It was further submitted in the original cash flow statement filed before DDIT(Inv.), an amount of Rs. 20,00,000/- has been shown from M/s. Gautami Constructions. Enclosing a copy of that cash flow statement filed before DDIT(lnv.), it was submitted that while filing return of income in response to notice u/s. 153A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Accordingly, we remit this issue to the file of the Assessing Officer for fresh consideration. This ground is partly allowed for statistical purposes. 17. The next ground in ITA No. 152/Hyd/2011 is with regard to addition of Rs. 1,41,000 as unexplained rental deposit without considering the documentary evidence filed showing that the amount was received by way of security deposit from Blue Dart Express Ltd., and reflected in the lease agreement filed before the lower authorities. At the state of remand proceedings the Assessing Officer has recommended that the transaction is genuine and calls for no addition on this count. 17.1 We have heard both the parties on this issue. We have already discussed similar issue in the case of Rao Ravi Kumar and deleted the addition in ITA No. 1594/ Hyd/2010 for A.Y. 2002-03 in earlier paras of this order. On similar lines this addition is deleted. 18. The next ground in ITA No. 155 and 156/Hyd/2011 is with regard to sustaining addition made towards rent from flat Nos. G8, Sai Darshan Apartments, without making any enquiry regarding occupation of the flat as at the time the property was vacant and the Assessing Officer has acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,50,000 on account of advances received from customers though the fund is routed through bank account. 20.1 The learned AR submitted that this amount is received from Bolla Uma towards advance for sale of the flat at Thokatta and the same was evidenced by seized document A/RSR/6 vide page Nos. 49-53 and the same was credit to SBI SP Branch at 13.8.2004. 20.2 The DR relied on the order of the CIT(A). 20.3 We have heard both the parties and perused the material on record. On this issue the Assessing Officer made addition of Rs. 5 lakhs. The assessee during remand proceedings furnished the evidence in the form of agreement entered with Bolla Uma on 11 th August, 2004 which evidenced the receipt of Rs. 2,50,000. However, there is no evidence for receipt of total amount of Rs. 5 lakhs. Being so, the CIT(A) deleted Rs. 2,50,000 and confirmed Rs. 2,50,000 out of Rs. 5 lakhs. Even before us the assessee was not able to lead any evidence for the receipt of Rs. 5 lakhs from Bolla Uma. Being so, we are inclined to confirm the addition of Rs. 2,50,000. This ground in ITA No. 155/Hyd/2001 is dismissed. 21. The next ground in ITA Nos. 155 and 156/Hyd/2011 is with regard to treating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent persons, it was submitted that as against gross receipts of Rs. 2,65,00,000/-, the Assessing Officer has adopted gross receipts of Rs. 4,03,10,500/- and reduced the cost of land at Rs. 10,11,845/- and the same has resulted in addition in multiple hands. Stating that the real owners of said land are Sri Rao Subba Rao, Sri Rao Shiva Kumar, Sri Rao Ravi Kumar and Gautami Constructions. It was submitted that the taxability or otherwise of the amount would arise only in the hands of various entities who owned the land. 21.3 It was further submitted that no income was offered on account of sale of land in the case of the assessee, as he held such land as investment but not as stock-in-trade. The land is agricultural land located outside the municipal limits i.e., beyond 8 km. Thus, the said land was not a capital asset exigible to tax under the head 'Capital Gains'. It was further submitted that the profit arising out of such land transaction cannot be taxed as adventure in the nature of trade under the head 'Business'. Referring to various judgements of Hon'ble Supreme Court in this regard, it was submitted that in the case of the assessee the lands were acquired by him and ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adventure in the nature of trade. With these submissions, it was requested that the said addition made in the assessment may be deleted. 21.6 The DR submitted that the assessee and his family members own only 49.39 acres of land which were sold during different years, it was submitted that consideration of gross receipt by the Assessing Officer from sale of such land at Rs. 4,03,10,500/-, has resulted in addition in multiple hands. In this context, it is stated here that so far, the CIT(A) disposed off the appeals involving such issue only in the case of M/s. Gautami Constructions and in that case the CIT(A) has given his findings with reference to factual observations made by the Assessing Officer in different assessment years. Further, such findings have been given, after considering the submissions of the assessee made in that case. 21.7 Now, coming to the present case of the assessee, the AR submitted that the assessee has received sale consideration of Rs. 50,08,500/- from sale of acre 9 acres 18 guntas of land during the previous year. This fact is not disputed by the assessee. Further, the assessee admitted that taxability or otherwise of the amount would arise only in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... selling of agricultural land, it is an adventure in the nature of trade. According to the DR the intention of the assessee is to be seen at the time of buying the land and the assessee has no intention to carry on any agricultural operation in the said land. According to the DR the case is covered against the assessee by the following judgements: (a) Smt. Parvathi Devi Ors. v. CIT (164 ITR 675) (AP) (b) CIT v. M. Krishna Rao (120 ITR 101) (AP) (c) CIT v. B. Narasimha Reddy (150 ITR 347) (Karn) 21.9 In the rejoinder, the learned AR relied on the order of the Tribunal in the case of ITO vs. Chandar (HUF) (Chen) 47 SOT 17 wherein it was held that when the land neither subjected to adventure in the nature of trade nor it was "capital asset", profits arising from sale therefrom cannot be treated as capital gain. 21.10 We have heard both the parties and perused the material on record. In the present case there were sale of 49 acres 39 guntas of property. Bifurcation is as follows: Name Land sold Acres Guntas Amount (Rs.) Rao Subba Rao 10 33 57,37,250 Rao Shiva Kumar 10 13 1,13,02,250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o return of income from the said property, the assessee made an investment in landed property for resale purpose. The transaction carried on by the assessee is in the nature of adventure in trade as a part of organised business activity which is normally carried on by the assessee and the income from such kind of activities like those carried on by the assessee and his family members cannot be construed as investment activity. 21.12 The income derived is from the operation of business carried on by the assessee in ordinary line of real estate business and being so the income derived from such transaction is to be considered as income from business only. To that extent we are agreeing with the orders of the lower authorities. But the entire sale consideration minus purchase cost of the land cannot be considered as income derived from business activity of the assessee. The assessee has been carrying on regular business in landed property and it is an organised business of the assessee. The assessee has to incur various expenses, both direct and indirect, like establishment expenditure, salary to staff, phone charges, travelling and conveyance, staff welfare, advertisement and marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gheri. Brief facts of the issue are that the Assessing Officer made addition of Rs. 10 lakhs on the basis of seized material A/RSR/28 pages 7 to 8 on account of purchase cost of Rs. 501.83 sq. yards. It was submitted by the assessee before the lower authorities that this is relating to property at Gandhinagar purchased from Chandrakala Deshpande and others. It was stated that a portion of that property was purchased by the assessee's father. The total consideration was Rs. 60,12,360. The entire payment was made by the assessee's father Sri Rao Subba Rao and the same was reflected in Cash Flow Statement as follows: A.Y. 2004-05 Rs. 14,89,924 A.Y. 2005-06 Rs. 35,33,670 The balance amount of Rs. 5,15,000 was paid by the assessee. 23.1 Later this amount was reflected in the hands of HUF. The Assessing Officer in his Remand Report stated that except Rs. 9,88,766 the remaining amount out of Rs. 60,12,360 was explained. Further before the CIT(A) assessee accepted the addition of Rs. 9,88,766. Being so, the CIT(A) dismissed the ground. 23.2 We have heard both the parties on this issue. Before us, the learned AR fairly conceded that this issue is not pressed before us as the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see vide letter dated 21.5.2010 was considered and found that deposits into these two banks have been explained and are genuine. In view of this, the CIT(A) observed that there was sufficient opening cash balance available in the hands of the assessee on different dates to make these deposits into these two bank accounts viz., Canara Bank and SBI Bank on various dates and the assessee shown the receipt of Rs. 25 lakhs from Sri Rao Subba Rao on 28.8.2000 and Rs. 12 lakhs on 22.11.2000. The Cash Flow Statement also reflects the receipt of Rs. 40.50 lakhs from Sri Rao Subba Rao under "inflow side" of that statement. These are reflected in the original Cash Flow Statement filed by the assessee before the DDIT (Inv.). Being so, it was found by the CIT(A) that the amount of Rs. 37,04,100 is duly explained and deleted the same. The deletion of Rs. 37,04,100 is on valid basis and the deletion of addition by CIT(A) is confirmed. 25. The next ground in ITA No. 240/Hyd/2011 is with regard to addition on account of receipts allegedly received from Rao Subba Rao HUF. Before the CIT(A) it was submitted by the assessee that the amount of Rs. 40-.50 lakhs was actually received from Rao Subba Rao ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an admitted fact that the flat is owned by the present assessee i.e., Rao Shiva Kumar. The total investment, sale consideration, loss arising out of the transaction was duly reflected in the Cash Flow Statement filed before the DDIT (Inv.) in the hands of Rao Subba Rao. This fact was confirmed by the Assessing Officer in his Remand Report. After considering this fact as this was reflected in the Cash Flow Statement of Rao Subba Rao who is father of the assessee, the addition is deleted. Being so, we do not find any infirmity in the order of the CIT(A) and the same is confirmed. This ground of Revenue is dismissed. 27. The next ground in ITA No. 241/Hyd/2011 is with regard to deletion of addition of Rs. 13 lakhs as unexplained advance given to Smt. Satyamma and others. Brief facts of the issue are that as seen from the assessment order, the AO noted that consequent to entering into agreement dated 16.01.2004, the assessee has paid another sum of Rs. 13,00,000 to Smt. Satyamma. In this regard, he referred to some notings on page 19 of the seized document A/RSR/1. In this context, he further referred to the statement given by one Sri A.V.S.S. Prasad, accountant of the assessee, g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, deletion of addition is confirmed. This ground in Revenue appeal is dismissed. 27.3 In the result, ITA No. Result 150/Hyd/2011 Allowed 151/Hyd/2011 Partly allowed for statistical purposes 152/Hyd/2011 Allowed 153/Hyd/2011 Allowed 154/Hyd/2011 Allowed 155/Hyd/2011 Partly allowed 156/Hyd/2011 Partly allowed 240/Hyd/2011 Dismissed 241/Hyd/2011 Dismissed Rao Satya Kumar S. No. Assessee's Appeal ITA No. A.Y. S. No. Revenue Appeal ITA No. 1. 6/Hyd/2011 2000-01 1. 39/Hyd/2011 2. 7/Hyd/2011 2001-02 2. 40/Hyd/2011 3. 8/Hyd/2011 2002-03 3. 41/Hyd/2011 4. 9/Hyd/2011 2003-04 5. 10/Hyd/2011 2004-05 6. 11/Hyd/2011 2005-06 7. 12/Hyd/2011 2006-07 4. 42/Hyd/2011 28. The first common ground in assessee's appeals in ITA Nos. 6 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was self- occupied by the assessee. The Assessing Officer made addition towards estimated rental income from flat No. C-501, RK Towers, Begumpet for A.Ys. 2000-01, 2001-02 and 2002-03. The same was deleted by the CIT(A) on the basis of affidavit filed by the assessee wherein it was stated that the assessee is in USA and the property was used by the assessee's father, brother and also by the assessee whenever he visits India. The CIT(A) also gone through the bank account of the assessee with SBI, SP Road Branch, Hyderabad wherein no rental income was credited. The CIT (A) also considered the Remand Report submitted by the Assessing Officer wherein it was submitted that the property was self occupied and considering all these facts, we are of the opinion that deletion of addition on account of notional rental income from house property is justified. This ground is dismissed. 33. The next ground in ITA No. 39/Hyd/2011 is with regard to deletion of addition of Rs. 8,50,000 on account of addition made towards unexplained investment in Victoria Castle. We have heard both the parties on this issue. The addition was made on the basis of seized material marked A/RSR/P01-5 as per which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sustained. We have carefully gone through the findings of the CIT(A) on this issue. In our opinion, the assessee has duly explained the source of deposit in the Cash Flow Statement. The Assessing Officer also examined the same. Being so, there is no merit in the ground of appeal by the Revenue. This ground is dismissed. 35. The next ground in ITA No. 41/Hyd/2011 is with regard to deletion of Rs. 3 lakhs on account of repayment of loan. Brief facts of the issue are that the Assessing Officer made an addition of Rs. 3 lakhs towards repayment of loan as it was not properly explained. It was stated by the assessee that the assessee received Rs.1.60 lakhs from Rao Ravi Kumar (brother) on 26.4.2001 by cheque and balance Rs. 1,40,000 from Rao Shiva Kumar (brother). These transactions were duly reflected in their respective Cash Flow Statement. The CIT(A) after calling for Remand Report from the Assessing Officer deleted the same. Against this, the revenue is in appeal before us. 35.1 We have heard both the parties on this issue. We find no merit in the DR argument that it is unexplained. As seen from the facts of the case, the transaction is duly reflected in the hands of Rao Shiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound is rejected. 38. The next ground in ITA No. 42/Hyd/2011 is with regard to deletion of Rs. 1,54,000 on account of deposit into bank account in the A.Y. 2006-07. The Assessing Officer made addition of Rs. 13.54 lakhs towards cash deposit into bank account. The CIT(A) confirmed the addition of Rs. 12 lakhs on the reason that the assessee in order to buy peace agreed for the addition of Rs. 12 lakhs. However, the CIT(A) deleted Rs. 1.54 lakhs on the reason that the Assessing Officer in his Remand Report stated that only Rs. 12 lakhs is to be sustained and Rs. 1.54 lakhs was duly explained in the Cash Flow Statement filed before the DDIT (Inv.). 38.1 We have heard both the parties and perused the material on record. The addition was made on the basis of second Cash Flow Statement filed by the assessee. However, on the basis of original Cash Flow Statement filed before the DDIT (Inv.) the income was offered to tax. Being so, further addition of Rs. 1.54 lakhs is not justified. The transaction which cannot be explained by the assessee was offered to tax on which the Assessing Officer agreed that only Rs. 12 lakhs is to be sustained. Now the department cannot make fresh claim when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered as agricultural income only. Similarly, this ground in the above appeals is allowed on similar lines. 42. The next ground in ITA No. 145, 146, 147 149/Hyd/2011 is with regard to treatment of income derived from sale of landed property as income from business though it is sale of agricultural land which is exempt from Income-tax. This issue came for our consideration in the case of other assessees viz., Rao Shiva Kumar in ITA No. 155 and 156/Hyd/2011 herein above wherein held that sale of landed property by the respective assessees is to be treated as income from business and we direct the Assessing Officer to adopt the income rate at 25% of gross receipt on sale of land. Accordingly, in this case also, we give similar direction to the Assessing Officer to decide the issue afresh. 43. The next ground in ITA No. 148/Hyd/2011 is with regard to sustaining addition of Rs. 11 lakhs on the basis of documents which are not acted upon ignoring the evidence produced and in the absence of anything adverse in the Remand Report. 43.1 Brief facts of the issue are that as noted by the AO, as per seized document in annexure A/RSR/27, page-45, the assessee has entered into agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d executed by Sri Ashok Kumar in that regard, the assessee contended that under the circumstances, no addition is called for in their hands. 43.3 With reference to the above submissions of the assessee, the AO in his remand report submitted that such submissions have been gone through by him. He noted that Sri Ashok Kumar and Smt. Padmavathi only sold the said property to Smt. A.R Lata and A.R. Gita in January, 2006. He further submitted that in the same bundle of seized documents, there is another agreement entered into between land owners Sri Ashok Kumar and Smt. Padmavathi with Smt. A. R. Gita and Smt. A.R. Lata, placed at page No. 108 to110. Stating that the land belongs to Sri Ashok Kumar and Smt. Padmavathi, he submitted that the other contentions raised by the assessee may be considered on merit. 43.4 The AR contended that no addition is called for in the hands of the assessee. 43.5 The DR submitted that the CIT(A) has carefully considered the submissions of the assessee and the above remand report of the AO. He has also perused the said agreement of sale dated 07.06.2004 entered into by the assessee with Sri Ashok Kumar and Smt. Padmavathi, on basis of which such addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) observed, having regard to such seized documents, an addition of Rs. 11,00,000/- is called for in the hands of the assessee. Therefore, out of the said addition of Rs. 29,92,500/- made in the assessment, the CIT(A) confirmed the addition to the extent of Rs. 11,00,000/- and he deleted the balance amount of Rs. 18,92,500. The DR submitted that the addition is to be sustained. 43.6 We have heard both the parties and perused the material on record. The CIT(A) sustained the addition of Rs. 11 lakhs out of Rs. 29,92,500. The contention the assessee is that the assessee is a mediator in purchase and sale of property, provided a fictitious agreement and shown Rs. 1 lakh paid by Check No. 021398 dated 7.6.2004 and Rs. 11 lakhs cash. The AR also drew our attention to Cheque No. 021398 which represents the withdrawal of Rs. 2,25,000 on 4.6.2004 from Canara Bank, Kundan Bagh Branch, Account No. 01022 and also stated that the document is a dummy document and is not acted upon. He also produced a copy of document entered with Smt. Geeta and Smt. Lata in January, 2006 with reference to the property mentioned in the seized material. Being so, in our opinion, the addition cannot be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal the CIT(A) called for Remand Report from the Assessing Officer wherein the Assessing Officer stated that the claim of the assessee as genuine. It was also observed by the CIT(A) that as per Encumbrance Certificate (EC) the said property is still held by M/s. Sri Sri Bhajan Brahmachari Sevashram. The said agreement was not signed by respective parties and it cannot be presumed that such transaction was carried out. It is also observed that the civil suit mentioned in the said draft agreement says about the suit filed for the secretary post in M/s. Sri Sri Bhajan Brahmachari Sevashram between the parties Muthayam Agaiah Goud and Rao Subba Rao vide OP No. 496/1994. Later these parties entered into a compromise agreement and accordingly compromise petition was filed. Considering all these facts, the CIT(A) deleted the addition for these two assessment years. Against this deletion, Department is in appeal before us. 44.4 We have heard both the parties on the issue. The addition is made only on the basis of unsigned document having no dates. In our opinion, unsigned documents have no legs to stand. It is not supported by any corroborative materials to substantiate the payment me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s offered by the assessee to M/s. Rithika Constructions along with another 2 acres in Sy. No. 164 whose value was Rs. 4 lakhs. Though the registered value is Rs. 12 lakhs as per the above agreement, the assessee has transferred the same along with 2 acres in Sy. No. 164 for Rs. 55,50,000/-. After stating that the assessee has not reflected the above transactions in its return of income, the amount of Rs. 16,00,000 (Rs. 12,00,000 + Rs. 4,00,000) as above, and also the cash payment of Rs. 7,50,000/-, aggregating to Rs. 23,50,000/-, having been paid out of books of accounts, the AO held that, the same shall be added to the total income of the assessee. Accordingly, he added the said amount to the income of the assessee. 45.2 On appeal, the CIT(A) deleted the addition after calling Remand Report from Assessing Officer wherein the Assessing Officer stated that the agreement was not acted upon and the property was subsequently sold to M/s. Chalapati and reflected in the regular return of income. It is also observed that it is only a draft agreement which cannot be given any credit. Against this, the Revenue is in appeal before us. 45.3 We have heard both the parties and perused the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the flat owners in the form of advances. Further in course of search no evidence was found to indicate that the assessee has paid any compensation to give the work. Further the whereabouts of M/s. Rithika Construction is not known and hence it is not possible to locate them. " 45.4 From the above the CIT(A) taken a clue that the agreement is not acted upon and it is only a draft agreement and deleted the addition. In the said finding of the CIT(A), we do not find any infirmity and the deletion is justified as the agreement was not acted upon. We confirm the action of the CIT(A). This ground in ITA No. 173/Hyd/2011 is dismissed. 46. The next ground is in ITA No. 172/Hyd/2011 for A.Y. 2005- 06. This is with regard to deletion of Rs. 18,92,500 out of Rs. 29,92,500 made on account of unexplained investment as advance to landlord. Brief facts of the issue are that as noted by the AO, as per seized document in annexure A/RSR/27, page-45, the assessee has entered into agreement of sale on 07.06.2004 in respect of land of 31.5 Sq. Yds situated at H. No.1-10-119 to 125/6, Mayur Marg, Begumpet for Rs. 29,92,500/-. He further noted, in this transaction, the assessee has paid advance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 643/Hyd/2011 2005-06 3. 828/Hyd/2011 7. 644/Hyd/2011 2006-07 4. 829/Hyd/2011 48. Now we will take up assessee's appeals. The first common ground in all the assessee's appeals (638 to 644/Hyd/2011) is with regard to treatment of agricultural income declared by the assessee as non-agricultural income. In these assessment years the assessee declared agricultural income as follows: A.Y. Agricultural income (Rs.) 2000-01 40,000 2001-02 50,000 2002-03 50,000 2003-04 50,000 2004-05 60,000 2005-06 60,000 2006-07 75,000 48.1 The same was treated as non-agricultural income. According to the Assessing Officer there is no basis for agricultural income. The assessee tried to convert his other income as agricultural income by adopting the theory of taking land on lease from his sons in the status of HUF. Being so, the lower authorities rejected the claim of the assessee. Against this, the assessee is in appeal before us. 48.2 We have heard both the parties on this issue. In these cases, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the assessee's counsel is devoid of merit. The assessee shown very meagre drawings in these assessment years. Considering the lifestyle of the assessee and social status, it is very low. For example, the assessee shown Rs. 64,920 drawing for A.Y. 2000-01, Rs. 1,85,592 for A.Y. 2001- 02, out of this the amount available for household expenses is Rs. 45,000 and the balance of Rs. 1,37,592 is for other purposes. For A.Y. 2002-03, the drawings were shown at Rs. 1,71,313, out of this Rs. 1,00,000 was incurred towards rent. For A.Y. 2003-04 though the withdrawal was shown at Rs. 4,41,230, actual amount available for household expenses is only Rs. 91,593. For A.Y. 2004-05, though the withdrawals were shown at Rs. 3,96,172, the amount available for household expenses is only Rs. 89,000. For A.Y. 2005-06, the withdrawal is shown at Rs. 6,20,868, the household expenses are considered at Rs. 1,20,000 by the assessee. For A.Y. 2006-07, withdrawals were shown at Rs. 7,11,033, out of this only Rs. 60,000 was household expenses. Being so, considering all these facts, the household expenses estimated by the lower authorities are to be sustained. Accordingly, we reject the ground. In the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the same were made out of his undisclosed income, the AO added the said amounts to the returned income of the assessee. 50.3 With reference to above addition, the AR submitted that the assessee was negotiating for purchase of a property located at bungalow No. 198, Tadbun, Secunderabad. The said bungalow and the adjoining land belong to Mrs. Sona J. Chenoy and Mr. Saroj J. Chenoy. It was stated, before the deal could materialize, the assessee convinced the owners to enter into an agreement for sale with him, so that the same can be shown to various persons for mobilization of funds for any future development of property. It was stated that for the purpose, the assessee entered into a dummy agreement with the owners without making any payment. It was contended that no payment for Rs. 2 crores was ever made by the assessee by cheques towards advance as mentioned in the said agreement. Stating that the name of the bank and details of cheque are left blank, it was submitted that the same proves that the contents of the document are not correct. It was further stated that for the proposed transactions a banker's cheque for Rs. 11,00,000/- was purchased. The same was purchased f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not acted upon. Though there was a demand draft for Rs. 11 lakhs in favour of Sona J. Chenoy with an intention to execute the agreement, the same DD was cancelled and credited in the hands of P. Satya Kumar on 7.5.2001 in his bank account with SBI PB Branch. The addition was sustained by the CIT(A) on the basis of this agreement only. Admittedly, this agreement is a xerox copy. As per the xerox copy of the agreement the total consideration the assessee has to pay for purchase of the above property is Rs. 5 crores. The assessee has to pay Rs. 2 crores by cheque as per clause (2) of the agreement. Further the assessee has to pay as per clause (6) as follows:- (a) Rs. 50 lakhs on or before 10.4.2001 (b) Rs. 15 lakhs on or before 30.12.2001 (c) Rs. 75 lakhs on or before 30.7.2002 (d) Rs. 50 lakhs on or before 30.12.2002 (e) Rs.110 lakhs on or before the time of registration. Rs. 300 lakhs 50.6 However, the contention of the assessee is that the transfer has not taken place. Regarding this, the assessee furnished a copy of letter from the vendor Saroj J. Chenoy which reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er authorities copy of the bank account, affidavit and required the Department to cause further enquiry. The Department has not caused any enquiry. Even the search action was not able to unearth any material against the assessee. Also, it is a fact that the DD purchased for Rs.11 lakhs in favour of Sona J. Chenoy and subsequently cancelled and re deposited in Sri Rao Subba Rao account with SBI PB Branch. It is also a fact that the property was continuously occupied by the vendor. It was stated by the assessee in the affidavit that the Department may cause further enquiry on this issue. The Department kept silent and confined to the addition. As held by the Supreme Court in the case of Mehta Parekh Co. Vs. CIT (30 ITR 181) unless the contents of the affidavit are disproved by the Assessing Officer, the same should be accepted. In our opinion,, the addition made by the Revenue authorities is without sufficient material cannot be sustained. 50.8 We also place reliance on the judgement of Supreme Court in the case of Dakeshwari Cotton Mills Ltd. v. CIT (26 ITR 775) and Uma Charan shah Bros. Vs. CIT (37 ITR 271) wherein held that whatever the strong suspicion that itself cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the backside of the cheque. Accordingly, the addition is confirmed. This ground in ITA No. 639/Hyd/2011 is dismissed. 52. The next ground in ITA No. 639/Hyd/2011 is with regard to sustaining addition of Rs. 35 lakhs representing the amount received from Uma Karan. This is additional ground raised by the assessee. The assessee filed a petition for admitting the additional ground and submitted that this ground is emanating from the order of the CIT(A). Considering the plea of the assessee, we are inclined to admit this additional ground. 52.1 Brief facts of the issue are that as per the seized material vide annexure No. A, the Assessing Officer made an addition of Rs. 62.46 lakhs on the basis of seized material A/RSR/1/page No. 31, 32, 33 which reflects the payment made to the following persons towards purchase of property at No. 119, Tadbun, Secunderabad.: A.Y. Party name Amount (Rs.) 2001-02 D.N. Chenoy 31,25,000 2001-02 Avan Gopal Rao 10,41,000 2001-02 Bapuji Edulji Chenoy 10,40,000 2001-02 Batsy Sohrab Dittia 10,40,000 Total 62,46,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4 We have heard both the parties on this issue. This amount of Rs. 1,49,270 is not reflected in the audited Balance Sheet which was found during the course of search and there was entry only in the unaudited Balance Sheet. In our opinion,, as it is not reflected in the audited Balance Sheet, the addition cannot be sustained. This ground is allowed. 54. The next ground in ITA No. 640/Hyd/2011 is with regard to addition of Rs. 54,13,335 towards purchase of land as per seized material A/RSR/PO-1/7/page 1 and 9. The assessee has purchased several pieces of land from different persons. 54.1 The AR submitted that the actual transaction is only Rs. 6 lakhs which was paid on 6.3.2002 at Rs. 3,50,000 and Rs. 2,50,000 on 9.3.2002. The transaction of Rs. 6,31,000 relates to lands purchased by Sri Rao Raj Kumar. The only transaction in page No. 1 of seized material is paid on 13.2.2002. According to the AR there is no basis for addition of Rs. 50,49,500. 54.2 The DR submitted that the total investment in Mansanpally land in the name of the assessee and his brother Rao Raj Kumar is at Rs. 54,13,335. Even in the remand proceedings the assessee failed to explain the investment. He relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idual items amounts to double addition which is not possible. Accordingly, we delete the same. This ground is allowed. 56. The next ground in ITA No. 642/Hyd/2011 is with regard to sustaining addition of Rs. 6,50,000 being purchase of 626 sq. yards of land at Tirumalagheri though no transaction has taken place. 56.1 Brief facts of the issue are that as per seized document A/RSR/6/page-60, the assessee has paid an amount of Rs. 18,00,000/- for purchase of flat No. 201, C-Block, R.K. Towers, Begumpet and a sum of Rs. 6,50,000/- for purchase of 696 sq. yds of land. Vide query No. 3 of the said questionnaire dated 07.12.2007, he has asked the assessee to explain as to how such payments were accounted for by him. However, stating that the assessee has not filed any reply in response to such query, he has added the said amounts, aggregating to Rs. 24,50,000/- to the income of the assessee. 56.2 The learned AR submitted that the assessee has negotiated for purchase of the said flat from Smt. Pushpalatha Reddy, mother of Sri Sunil Reddy. For that purpose he had paid Rs. 10,00,000/- on various dates, and the same is reflected in page No. 22 of A/RSR/l. The final settlement was made fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the registration charges. In that report, he further mentioned that the AO made such addition without appreciating the entire fact. Later, during the rejoinder, the AR reiterating the same submissions and stating that the investment of Rs. 18,00,000/- made in the said flat has been duly reflected in the cash flow statement filed before the DDIT (Inv) and since the deficit arising out of said cash flow statement amounting to Rs. 6,57,217/- has been offered to tax, the assessee contended that no separate addition is called for in this case. 56.4 We have heard both the parties and perused the material on record. According to the assessee's counsel this amount is already reflected in the Cash Flow Statement and deficit in the Cash Flow Statement was already offered to tax. This fact was confirmed by the Assessing Officer in his Remand Report. He specifically pointed out that a deficit of Rs. 6,57,217 in the Cash Flow Statement was offered to tax for the assessment year under consideration. He submitted that sustaining of addition of Rs. 6,50,000 leads to making the addition three times for a single lapse. According to him, once unaccounted payment of Rs. 10 lakhs to Sri Sunil Reddy w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was not paid as is apparent from that seized document. The same only represented a commitment. Stating that he acted as a mediator and has no connection with that transaction, it was submitted that no addition should be made in this case. In this regard, the assessee filed a confirmation letter, stated to be obtained from the said Sri Sadashiv Bhatt. 57.3 The DR submitted that the confirmation letter stated to be given by Sri Sadashlv Bhatt. Though in the said confirmation letter, the said person has stated that the balance amount of Rs. 4,00,000/- in respect of that flat was not paid, in absence of his address and the dates etc. mentioned in that letter, no sanctity can be attached to the same. Under the circumstance, and having regard to such remand report of the present Assessing Officer, the addition of the said amount of Rs. 4,00,000/- made in the assessment in this case, is justified. 57.4 We have heard both the parties and perused the material on record. During the course of first appellate proceedings, Remand Report was called from the Assessing Officer. The Assessing Officer stated that as per the seized material, there was a receipt given by Sri Govinda Rao for Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and page 18 to 24. It was submitted that the assessee purchased the land admeasuring 697 sq. yds situated at Gandhinagar, Tirmulghery, Hyderabad, from Sri P. Parameshwaran on the basis of agreement of sale cum GPA for Rs. 16,OO,000/- and incurred registration expenses of Rs. 1,12,070/- during the F.Y 2004-05. The total cost works out to Rs. 17,12,070/-. It was stated that Mr. Parameshwaran's brother, Sri S.T. Pararneshwaran approached the assessee to register a small piece of land to serve as a passage to his land, which is located on back side of the main plot. Accordingly, two registrations were made for the purpose of passage area - one with S.T. Parameshwaran for Rs. 2,61,500/- and the other with Sri G.B. Shivnarayana for Rs. 65,000/-. The total amount received is Rs. 3,26,500/- for 163.54 sq. yds of land. With these submissions, the AR objected to such addition made by the AO in the assessment. It was stated that he adopted the market value of the land as consideration received for transfer of the impugned land which is not justified. No evidence for payment of any on-money was found to support such addition. There cannot be any addition u/s. 69 of any notional consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and which is not capital asset. This issue is already considered by us in earlier paras of this order in the case of Rao Shiva Kumar in ITA Nos. 155 and 156/Hyd/2011 wherein we have held that in case of sale of land, the gross receipt of 25% is to be considered as income of the assessee. Accordingly, this ground is partly allowed. 60. The next ground in ITA No. 643/Hyd/2011 is with regard to sustaining addition of Rs. 20 lakhs from loan taken from Badam Finance. 60.1 Brief facts of the issue are that the Assessing Officer noted that as per seized document A/RSR/7/pg. 9, which is an account copy of the SB account No. 2145, there were certain deposits made on 29.4.2004. Vide query No. 8 of the said questionnaire, he has asked the assessee to explain the nature of those deposits in that account. However, stating that, the assessee has not filed any reply, he added an amount of Rs. 7,31,500 to the income of the assessee. 60.2 The CIT(A) observed that the assessee has failed to explain the alleged loan of Rs. 22.5 lakhs (Rs. 20 lakhs + Rs. 2.5 lakhs) as there are two deposits in the bank account. Since the Assessing Officer already made addition of Rs. 7,31,500 the CIT(A) direct t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, the issue is remitted back to the file of the Assessing Officer for fresh consideration. The assessee shall cooperate with the Department and produce necessary evidence. This ground is partly allowed for statistical purposes. Assessee's Appeal ITA No. A.Y. Result 638/Hyd/2011 2000-01 Dismissed 639/Hyd/2011 2001-02 Partly allowed 640/Hyd/2011 2002-03 Partly allowed for statistical purposes 641/Hyd/2011 2003-04 Partly allowed 642/Hyd/2011 2004-05 Partly allowed for statistical purposes 643/Hyd/2011 2005-06 Partly allowed for statistical purposes 644/Hyd/2011 2006-07 Partly allowed Department appeals - Rao Subba Rao Revenue Appeal ITA No. A.Y. 826/Hyd/2011 2003-04 827/Hyd/2011 2004-05 828/Hyd/2011 2005-06 829/Hyd/2011 2006-07 61. The first ground in ITA No. 286/Hyd/2011 is with regard to deletion of Rs. 56.5 lakhs, payment made to Sri D.N. Chenoy towards unaccounted payment.' 61.1 Brief facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Report submitted to the CIT(A) stated that the above payment was duly reflected in the Cash Flow Statement filed before the DDIT (Inv.). On the basis of the Remand Report the CIT(A) deleted the addition as this investment is duly reflected in the Cash Flow Statement. More so, whatever, the deficit in the Cash Flow Statement was duly offered to tax. Being so, there is no question of sustaining this addition. Considering the facts and circumstances of the case, the CIT(A) is justified in deleting the addition and we confirm the findings of the CIT(A) in para 8.4 of his order. This ground is rejected. 62. The next ground in ITA No. 826/Hyd/2011 is with regard to deletion of addition of Rs. 3.2 lakhs, initially admitted as the loan given to Dwaraka Prasad as unaccounted payment. 62.1 Brief facts of the issue are that the assessee admitted an unaccounted loan of Rs. 3.2 lakhs given by him to one Mr. Dwaraka Prasad during the year. On appeal, the CIT(A) deleted it on the basis of Remand Report sent by the Assessing Officer that the payment was reflected in the original Cash Flow Statement filed before the DDIT (Inv.). Against this the Revenue is in appeal before us. 62.2 We have h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l years and consequential cash deficit has been offered to tax in respective years, he submitted that no addition should be made on above account in this case. Referring to the cash flow statement for the F.Y 2003-04 filed before DDIT(Inv), wherein such investment of Rs. 20,00,000/- in the above property has been reflected and stating that the resultant cash deficit has been offered to tax, the AR requested that accepting such statement, the present addition made on that account in this case may be deleted. 63.4 We have heard both the parties and perused the material on record. As discussed earlier, the addition was deleted by the CIT(A) on the basis of reflection of this transaction in the Cash Flow Statement filed before the DDIT (Inv.). Being so, the deletion is confirmed. We confirm the order of the CIT(A) in para 9.4 and this ground is rejected. 64. The next ground in ITA No. 827/Hyd/2011 is with regard to deletion of addition of Rs. 10 lakhs as the loan given to Mr. Sunil Reddy. 64.1 Brief facts of the issue are that as per seized document A/RSR/1/page-22, the assessee has paid a sum of Rs. 10,00,000 till 12.2.2004 to one Mr. Sunil Reddy. Vide query No. 2 of his said qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale of flat. This confirmation letter was filed along with the additional evidence. As regards Rs. 6,50,000, this relates to a proposal to purchase a plot at Tirumalaghery. This proposal did not materialise and therefore, no addition should be made in this regard. No further evidence was found that the assessee had paid Rs. 6,50,000 in this regard. This is duly confirmed by Mr. Sunil Reddy in his confirmation letter. 64.5 Being so, in our opinion, this amount was reflected in the Cash Flow Statement and deficit was offered to tax. Once again addition is not possible and deletion is justified. This ground is dismissed. 65. The next ground in ITA No. 828/Hyd/2011 is with regard to deletion of addition of Rs. 13.25 lakhs towards unexplained investment in purchase of land at Tirumalgheri. 65.1 Brief facts of the issue are that the addition of Rs. 13,25,000 relates to purchase of land at Gandhinagar, Tirumalghery. This amount was added by the Assessing Officer for the reason that the amount had not been disclosed in the second Cash Flow Statement filed along with the return of income consequent to search. 65.2 The DR submitted that the assessee has not disclosed this investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer during the first appellate proceedings that this transaction was reflected in the original Cash Flow Statement furnished before the DDIT (Inv.). Being so, the deletion is confirmed. This ground is rejected. 67. The next ground in ITA No. 828/Hyd/2011 is with regard to deletion of Rs. 2.60 lakhs towards purchase of land at Rayadurga. 67.1 Brief facts of the issue are that this addition was made on the basis of the statement of the assessee recorded at the time of search. The investment of Rs. 2,60,000 was duly reflected in the Cash Flow Statement filed by the assessee before DDIT (Inv.) and the resultant income was offered to tax. Hence this item cannot be separately considered to work out undisclosed income. It may be pertinent to mention here in the original Cash Flow Statement the payment was considered in the individual hand but later shifted to HUF hand. Since the assessee does not press for the claim of HUF, and the amount is duly reflected in the Cash Flow Statement in individual and no separate addition is called for on this account. 67.2 We have heard both the parties and perused the material on record. The deletion is based on reflection of this transaction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of the search action. 70.1 The DR relied on the order of the Assessing Officer. 70.2 The AR submitted that gold ornaments weighing 608.08 grams valued at Rs. 4,45,916 were found in course of search. It was explained that the same belonged to the assessee, his wife and three daughters-in-law. The authorised officer was satisfied about the extent of jewellery found in the course of search. After being satisfied the jewellery was not seized keeping in view Board's Instruction. In this regard, it is submitted that as a point of law that once the jewellery is not seized in course of search after the authorised officer is satisfied about the source of the same, the same cannot be treated as unexplained in course of assessment. This is for the reason that in course of a search once any asset is found to be unexplained, the authorised officer has no option but to seize the same. The very fact that the ornaments were not seized establishes that the same is explained. Hence, the value of gold ornaments should not have been added as the income of the assessee as unexplained without assigning cogent reasons. The same, therefore, liable to be deleted. 70.3 We have heard b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition was deleted on the basis of Remand Report that this amount is already added in A.Y. 2002-03 and sustaining the addition will amount to double addition. Accordingly, the deletion is justified. This ground is dismissed. 74. The last ground in ITA No. 829/Hyd/2011 is with regard to deletion of Rs. 15 lakhs advance paid to Rajan Deshpandey. 74.1 As regards the addition of Rs. 15,00,000, the same relates to payment made to Rajan Deshpandey for purchase of Gandhinagar plot at Tirumalaghery during the financial year 2005-06. The assessee has accounted for payment of Rs. 11,06,630 up to the date of search in the Cash Flow Statement filed before the DDIT. The balance amount was paid after date of search and the total amount was shifted to the cash flow statement of the HUF. The amount of Rs. 11,06,630 is already added by the Assessing Officer. Further payments were made after the date of search through IDBI bank. According to the AR, no addition is called for. 74.2 We have heard both the parties on this issue and perused material on record. This addition was relating to purchase of property and payment made to Rajan Deshpande for the plot at Tirumalagheri during the F.Y. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the HUF is bogus and fictitious in nature. He mentioned that there was no trace of any evidence during search to suggest generation of agricultural income in the hands of HUF. With these observations and after discussing the facts of the case in detail, he held that the claim of the assessee regarding taking land on lease and generation of income there from is false. He thus rejected the claim of the assessee for deriving agricultural income and taxed the said amount shown at Rs. 7,54,000/-, treating the same as income from other sources. Further, as regards, the claim of the assessee regarding opening balance shown at Rs. 37,30,000 is concerned, since during the assessment proceedings the assessee felled to substantiate the same with supporting evidences, the AO rejected such claim and held that the said amount represents unexplained cash credits during the previous year and thus added the said amount to the income of the assessee for this assessment year. With both the additions, the AO completed the assessment in case of the assessee HUF Vide order dated 28.12.2007 passed u/s. 143(3) r.w.s 153C of the Act, determining total income at Rs. 44,84,000. 76.2 On appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo additions he completed the assessment for the Asst. Year 2001-02 on a total income of Rs. 20,81,500/-. 77.2 Further, for the Asst. Year 2002-03, in the receipts and payments account the assessee has shown various amounts shown as received from different persons and other sources. Those six amounts received from four different persons and towards advance against certain properties, are referred to by the AO in para-4 of the assessment order. However, during the assessment proceedings, the assessee failed to establish genuineness of such transactions, The AO added the said amounts, aggregating to Rs. 54,33,251/-, treating the same as unexplained credits for this assessment year. He thus completed the assessment for this assessment year determining total income at Rs. 64,63,250/- 77.3 Further, in the return filed for the Asst. Year 2003-04, the assessee has shown receipts of various amounts in the receipts and payments account filed with the return. Those eleven amounts received from different persons and various sources are referred to by the AO at para 4 of the assessment order. However, since during the assessment proceedings the assessee failed to establish genuineness of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined cash credits. Further, as noted by the AO during the previous year 2005-06 the assessee has carried on real estate business. He further noted that assessee has sold certain lands to Chalapati Estates Pvt. Ltd. As regards, expenses claimed by the assessee are concerned, the AO noted that since he could not furnish any evidence for the same, such claim cannot be allowed. Accordingly, he disallowed the claim of the expenditure. He further mentioned that, as per the evidence collected, the purchase cost of such land is Rs. 18,000/- per acre. He thus rejected the claim of the assessee made at Rs. 69,92,593/-. Taking cost of the land sold of 26.36 acres at Rs. 4,74,545/- and deducting the same from total income from real estate business amounting to Rs. 1,49,60,000/- (4,50,000 + 1,45,00,00 + 10,000) and further deducting Rs. 23,70,854/- towards income already disclosed, he determined the profit from sale of land at Rs. 1,21,14,601/-. Since, in the return filed for this assessment year, the assessee has shown income of Rs. 23,70,854/-, with the three additions of Rs. 15,00,000/-, Rs. 1,38,17,700/- and Rs. 1,21,14,601/-, the AO completed the assessment for the Asst. Year 2006-07 deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o decide it on merit. Further during the course of argument, the learned AR not pressed the first additional ground with regard to assumption of jurisdiction by the Assessing Officer suo moto without the case of the assessee being centralised with him u/s. 127 of the Act. This ground is dismissed as not pressed. 77.12 Regarding the issue of notice u/s. 153C of the Act without recording satisfaction which is condition precedent for issuing notice before assumption of jurisdiction, the learned AR submitted that the CIT(A) should have appreciated that no incriminating evidence regarding existence of HUF or earning of agriculture income and other income was found in course of search.CIT(A) should have perused the seized materials which would have shown that even in the deeds and documents, there was no mention of HUF. The claim of the assessee-HUF that the funds emanated out of leased agricultural land taken from his sons should have been examined in the light of evidences available in the records of the assessee-Ind. All these documentary evidences available in the file would have given the actual picture to CIT(A) that the claim made by the assessee under the advice of CA was not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n income. The substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a "hypothetical income", which does not materialise. Where the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. ( CIT v Shoorji Vallabdas Co. 1962, 46 ITR 144, 148 SC). As explained, the shifting of some transactions to HUF hand necessitated creation of notional income from agriculture. This view is supported by the observation of the Assessing officer in the assessment order of the individual wherein he has categorically come to a finding that the agriculture income shown in the status of the HUF is fictitious. In the light of this specific observation and in the absence of any incriminating material found in course of search as belonging to HUF, the additions should have been deleted. 77.18 The AR further submitted that AO himself ignored the claim of HUF while assessing the wealth and clubbed the assets shown in the hands of HUF and Individual as he was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it had realized from the position which it had wrongly taken while filing the return." 78.4 According to the AR tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. The Hon'ble Court referred to an unreported decision in case of Vinay Chandulal Satia v. N.D. Parekh, CIT [Spl. Civil Application No. 622 of 1981 dated 20-8- 1981], and referred to the decision of the Apex Court: "The Supreme Court has observed in numerous decisions, including Ramlal v. Rewa Coalfields Ltd. AIR 1962 SC 361, State of West Bengal v. Administrator, Howrah Municipality AIR 1972 SC 749 and Babutmal Raichand Oswal v. Laxmibai R. Tarte AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt." ( S.R. Koshti v. CIT 193 CTR 518) (Guj.)." 78.5 The AR submitted that the CBDT Circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return cannot be treated as a document belonging to the assessee found in course of search in the premises of Rao Suba Rao (Ind). That recording of satisfaction is primary requirement for invoking provisions of 153C is no more res integra. This view supported by the following decisions:- a) SSP Aviation Ltd v DCIT (207 Taxman 260) (Delhi) b) ACIT v MN Rajaraman (5 ITR (Trib) 261) (Chennai) c) Vijay Bhai N Chandrani v ACIT (333 ITR 436) (Guj) d) ACIT v. Gambhir Silk Mills 6 ITR (Trib) 376 (Ahd) e) Sinhgad Technical Educational Society v ACIT (16 Taxmann.com 101) (Pune) f) P Sathyanarayanan v. ACIT (50 SOT 168) (Chennai) 78.9 The AR submitted that in the case of Manish Maheshwari (289 ITR 341) (SC), it was held that satisfaction by the Assessing officer that money, bullion, jewellery etc belong to the party other than the searched party is a precondition to initiate proceeding under section 158BD. The same principle holds good in case of initiation of proceeding under section 153C. If the satisfaction does not meet the requirements of section 153C, the assumption of jurisdiction would be wrong and would invalidate the proceedings. It may be mentioned here that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfaction is a pre-requisite to issue notice u/s. 153C of the Act which is not done in this case. Being so, the assessment is bad in law. 78.15 On the other hand, the DR submitted that the return of income filed by the assessee voluntarily after the issue of notice u/s. 153C. Filing of return of income voluntarily by the assessee itself constitutes as recording of satisfaction u/s. 153C of the Act. According to him, the ratio of judgement in the case of SSP Aviation Ltd. v. DCIT (supra) is not applicable. He relied on the judgement of Supreme Court in the case of CIT v. Shelly Products Anr. (261 ITR 367) (SC). 78.16 We have heard both the parties and perused the material on record. The assessee counsel's main contention is regarding non-recording of satisfaction before issuing the notice to frame assessment u/s. 153C of the Act. Section 153C of the Act provides for the assessment of income of any person other than the person who is searched u/s. 132 of the Act. Further before framing assessment u/s. 153C of the Act, the Assessing Officer has to be firstly satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been accounted for in the case of the assessee other than the searched party. It is aimed at ensuring that income does not escape assessment in the hands of any other person merely because he has not been searched u/s. 132 of the Act. The Assessing Officer on reaching satisfaction that the document relate to a person other than the searched person forward the document to the Assessing Officer having jurisdiction over the other person and thereafter it is for the Assessing Officer having jurisdiction over the other person to follow the procedure prescribed by section 153A and to see whether the income reflected in the seized material has been accounted by such other person. If he is so satisfied, the proceedings will have to be closed. If the return filed by the other person who was not searched for the period of six years does not show that the income reflected in the document has been accounted for, addition will be accordingly made after following the procedure prescribed by law. 78.19 A reference to Section 158BD of the Act, which falls under the Chapter XIV-B, may be of some use. This section provided for assessment of the undisclosed income by any person other than the pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show that the Assessing Officer recorded satisfaction before issuing notice u/s. 153C of the Act. The only plea of the DR is that the assessee itself filed returns voluntarily and filed an affidavit on 28.12.2007 in support of HUF status and also filed a letter on 26.12.2007 stating that the returns filed on 29.12.2006 are to be treated as returns filed in response to the notice u/s. 153C of the Act. In our opinion, there is clear non- fulfilment of conditions laid down in section 153C of the Act as there is no recording of satisfaction by the Assessing Officer that undisclosed income belongs to any person other than the person who was searched which is a condition precedent. The principles applicable to section 153C is to be discharged by the Revenue so as to show that the necessary ingredients of provisions of section 153C have been complied with and there is material to show that the Assessing Officer in the case of person searched was satisfied that money, bullion or other valuable articles or things or books of account or documents seized or requisitioned belongs to somebody else. There is nothing brought on record by the Department to show that such satisfaction was record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39/Hyd/2011 Dismissed 26. 40/Hyd/2011 Dismissed 27. 41/Hyd/2011 Dismissed 28. 42/Hyd/2011 Dismissed M/s. Gautami Constructions - Assessee appeals 29. 144/Hyd/2011 Allowed 30. 145/Hyd/2011 Partly allowed 31. 146/Hyd/2011 Partly allowed 32. 147/Hyd/2011 Partly allowed 33. 148/Hyd/2011 Allowed 34. 149/Hyd/2011 Partly allowed M/s. Gautami Constructions - Revenue appeals 35. 170/Hyd/2011 Dismissed 36. 171/Hyd/2011 Dismissed 37. 173/Hyd/2011 Dismissed 38. 172/Hyd/2011 Dismissed Rao Subba Rao (Ind) - Assessee appeals 39. 638/Hyd/2011 Dismissed 40. 639/Hyd/2011 Partly allowed 41. 640/Hyd/2011 Partly allowed 42. 641/Hyd/2011 Partly allowed 43. 642/Hyd/2011 Partly allowed for statistical purposes 44. 643/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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