TMI Blog2013 (12) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... of its claim that the land sold was agricultural land - There were no other details with regard to the extent and nature of land sold and whether any agricultural activity was carried on those lands by the assessee or not – The case shall be decided in accordance with the guidelines laid down by the Supreme Court in Sarifabibi Mohamed Ibrahim vs. CIT [1993 (9) TMI 10 - SUPREME Court] - The issue was restored for fresh adjudication. Disallowance of expenses – Land development expenses, payment of salary, survey expenses, postage and telegram, staff welfare, office maintenance, printing and stationery etc. - Held that:- The assessee has not produced any evidence such as vouchers and bills or any other material in support of the expenses claimed - The disallowance made by the AO under the aforesaid head appears to be on higher side – All the claim of expenses cannot be accepted – It is justified to disallow the aforesaid expenses to an aggregate amount of Rs.10 lakhs – Partly allowed in favour of expenses. Difference in cash book and cash balance – Held that:- The AO has simply made the addition without making a proper enquiry to find out whether the entries indicated actual rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was made to M/s Kinnera Constructions through account payee cheque - Since the investment has been made out of accounted for money, addition made by the AO was without any basis – Decided against Revenue. - ITA No. 637/Hyd/2011, ITA No. 768/Hyd/2011 - - - Dated:- 7-9-2012 - Shri D. Karunakara Rao And Shri Saktijit Dey,JJ. For the Petitioner : Assessee by : Shri I. Rama Rao For the Respondent : Shri V. Srinivas ORDER Per Saktijit Dey, J. M. These Cross appeals are by the assessee as well as Department are directed against the order dated 3-2-2011 passed in ITA No.0326/DC-5(1)/CIT(A)-V/2009-10 and they pertain to the assessment year 2007-08. For the sake of convenience, these are clubbed together and disposed of by this common order. First let us deal with assessee s appeal. ITA No.637/Hyd/2011 (Assessee s Appeal):- 2. Ground Nos. 1 and 7 are general in nature and needs no adjudication. 3. In Ground No.2, the assessee has raised a legal issue which reads as under:- The ld. CIT (A) ought to have held the assessment proceedings were barred by limitation inasmuch as the notice u/s 143(2) was not issued within the prescribed time limit. 4. Briefly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of ITAT in the case of Kuber Tobacco Products Pvt. Ltd. Vs. DCIT (310 ITR (AT) 300) contended that section 292BB being substantive in nature has to be applied prospectively from the assessment year 2008-09. The learned AR further contended that the decision of Punjab Haryana High Court in the case of Om Sons International vs. CIT (2011) 60 DTR 300 holding that the provisions of section 292BB are procedural in nature and hence will apply to all proceedings pending on 1-4-2008 having not considered the issue in the light of the judgments of Hon ble Supreme Court in the case of Karim Tharuvi Tea Estate Ltd.,vs. State of Kerala 60 ITR 262, Hitendra Vishnu Thakur vs. State of Maharashtra, AIR 1994 SC 2623,CIT vs. Scindia Steam Navigation Co. ( 42 ITR 589). It has to be considered as a judgment per curium and should not be followed. The learned AR further submitted that the decision of the co-ordinate Bench of the Tribunal in the case of M/s Navayuga Spatial Technologies Pvt. Ltd. Vs. DCIT (ITA No.1557/Hyd/2010 dated 26-12-2011 cannot also be considered to be laying correct proposition of law since it has misread the judgment of Special Bench of ITAT in case of Kuber Tobacco Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ab Haryana High Court decision in the case of Om Sons International vs. CIT (60 DTR 393) and the decision of the ITAT, Hyderabad Bench in the case of M/s Navayuga Spatial Technologies Pvt. Ltd., Hyderabad (supra). The ld. DR relying upon a judgment of in the case of K.J. Thomas vs. CIT 301 ITR 301 submitted that where the assessment was completed after giving proper opportunity to the assessee and the assessment order was passed within the period of limitation, then there is no prejudice caused to the assessee by delayed issuance of notice u/s 143(2) and the assessment proceedings cannot be held to be invalid on that ground. The learned DR also relied on a judgment of Hon ble Supreme Court in the case of Deepak Agro Foods vs. State of Rajasthan, (2008) TOIOL 134 in this regard. The learned DR distinguishing the decision of the Hon ble Supreme Court in the case of Hotel Blue Moon submitted that in that case, no notice u/s 143(2) was at all issued and the Hon ble Supreme Court had not occasion to consider the provisions of section 292BB of the Act. Similarly, in case of CIT Vs. Mukesh Kumar Agrawal (supra) 29 it is a case of no notice u/s 143(2) and in case of DCIT vs. Maxim (345 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke of convenience. As for ground No.2(b), we find that the plea with regard to belated the service of notice u/s 143(2), viz., more than 12 months after the month of filing of the return, was not raised before the AO during the assessment proceedings, and such a plea is raised for the first time in the appellate proceedings, that too before this Tribunal. In view of the provisions of s. 292BB, mistake on account of belated service of notice is a curable mistake. Since the assessee has not raised such a plea before the AO, and fully participated in the assessment proceedings, the so-called mistake in serving the notice u/s 143(2) of the Act, stood cured, on account of the assessee s action in ignoring the same and participating in the proceedings before the AO. Learned counsel for the assessee has contended before us that the recently inserted provision of s. 292BB, effective from 1st April, 2008, is applicable only from the assessment year 2008-09 only, and since the present appeal relates to assessment year 2005- 06, the saving provision of that section does not come to the rescue of the Department. We are afraid, such a plea cannot be accepted, for the reason that the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Hotel Blue Moon (321 ITR 362), CIT vs. Mukesh Kumar Agrawal (345 ITR 29) and Maxima Systems (344 ITR 204) are factually distinguishable in the sense that in those cases notice u/s 143(2) was not at all issued and section 292BB was not considered. Considering the fact that the assessee has not raised any objection before the AO with regard to issuance of notice u/s 143(2) and the assessment order has been passed within the period of limitation, we are of the view that the assessee is precluded from raising the validity of initiation of proceedings before the appellate forum in view of the specific bar u/s 292 BB of the Act. For such a proposition, we follow the decision of Hon ble Punjab Haryana High Court in the case of Om Sons International (supra) and the decision of the co-ordinate Bench of the Tribunal in the case of M/s Navayuga Spatial Technologies Pvt. Ltd. (supra). Hence, the ground raised by the assessee is therefore rejected/dismissed. 10. Ground No.3 reads as under:- Without prejudice to the above ground, the ld. CIT (A) ought not have upheld the addition of Rs.25,10,787 inasmuch as the transaction took place in the earlier years and income does not belong to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has simply mentioned other s land against profit earned was Rs.25,10,787/- for the assessment year 2007-08, excepting this, there is no other details with regard to the extent and nature of land sold and whether any agricultural activity was carried on those lands by the assessee or not. It is the contention of the learned AR before us that the land in question was agricultural land and it was sold in the assessment year 2006-07. Considering the contentions of the learned AR, we think it proper to restore this issue to the file of the AO for examining the claim of the assessee afresh. We direct the assessee to produce necessary documentary evidences in supports of its claim that the amount received was towards sale of agricultural land and the land was sold in the assessment year 2006- 07. The AO shall consider the evidences produced by the assessee and examine his claim keeping in view of the guidelines laid down by the Hon ble Supreme Court in the case of Sarifabibi Mohamed Ibrahim vs. CIT 204 ITR 631. If the assessee is able to satisfy the tests laid down in the aforesaid judgment, then the assessee s claim can be accepted. This ground raised by the assessee is set aside. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of business. The learned AR further contended that the AO was not justified in making ad hoc disallowance without rejecting the books of accounts or bringing any comparable cases or evidences justifying the addition. The learned AR in support of such contention relied upon a decision of Rajasthan High Court in the case of CIT Vs. Maharaja Shree Oned Mills Ltd. (192 ITR 565) and the decision of ITAT in the case of R. Maheswar Naidu Vs. Addl. CIT, ITA No. 302/Hyd/2011 dated 30-3-2012. 15. The learned DR submitted that in the absence of proper evidence, the addition was justified. 16. We have heard rival submissions and perused the material available on record. Undisputedly, the assessee has not produced any evidence such as vouchers and bills or any other material in support of the expenses claimed. Though the AO does not dispute the fact that the assessee has incurred such expenses, at the same time, in the absence of proper evidence the expenditure claimed to have been incurred by the assessee cannot be accepted in toto. However, the disallowance made by the AO under the aforesaid head appears to be on higher side. Considering the totality of facts and the circumstances, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout making a proper enquiry to find out whether the entries indicated actual receipt of the amount or not. When pass book numbers have been mentioned against the entries, the AO should have called for pass books for cross verification. The CIT (A) has also not dealt with this issue in a proper manner. In the aforesaid circumstances, we consider it proper to restore the issue back to the file of the AO who shall make cross verification of pass books mentioned against the entries and find out the veracity of the entries made in the cash book. The AO shall afford a reasonable opportunity of being heard to the assessee. This ground of the assessee is set aside. 22. In the result, the appeal is allowed in part. ITA No.768/Hyd/2011 (Departmental Appeal): 23. Ground Nos. 2 and 3 relate to deletion of an amount of Rs.1,07,59,582/- by the CIT (A) which was added by the AO towards profit from real estate business. 24. Briefly the facts are the assessee was having agricultural land aggregating to Ac.67.27 cents spread over various places in Malkapur village of Chouttuppal Mandal, Nalgonda District. The land in question was stated to have been acquired by the assessee in the year 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t since the lands were sold to real estate companies and firms, the nature of land is not agricultural, is contrary to law. The CIT (A) after considering the contentions raised by the assessee came to a conclusion that the lands are situated more than 50 KM away from Hyderabad and it has been classified by the Revenue Department as agricultural lands, the Sub- Registrar s office has also classified them as agricultural lands. The CIT (A) further recorded a finding that the AO in his order has not brought a single evidence to show that the lands in question were developed, plotted and then sold by the appellant. Just because he lands were sold to real estate companies does not mean that the assessee had developed it as commercial land and then sold it. The CIT (A) further observing that the assessee as doing agricultural operations on the land and was disclosing agricultural income from year to year, there was no basis for the AO to hold that the lands sold were not agricultural land. On the aforesaid consideration, he deleted the addition of Rs.1,07,59,558/-. 26. The learned DR submitted before us that the assessee did not carry out any agricultural operations on the land. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Municipality and have been recorded as agricultural land in the revenue records as well as the pattadar pass book, they have to be treated as agricultural lands only. It has been the further claim of the assessee that the assessee has been declaring agricultural income from the agricultural operations carried out in those land. However, as can be seen from the assessment order, the assessee did not produce any evidences with regard to the agricultural income earned nor any bills or vouchers are produced with regard to the expenses incurred towards earning of agricultural income. It is also a fact that the assessee has claimed land development expenses but no details are available on record as to for development of which land, these expenses have been incurred by the assessee. It is also a fact that the land sold were scattered over different places in village Malkapur. No material is available on record to indicate whether agricultural operations were carried on over all the lands sold by the assessee and what should be the average annual yield from cultivation of such land and what is the reasonable income from sale of produce cultivated in such agricultural land. The AO has not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cultural land or not. We therefore consider it proper to restore the matter back to the AO who shall examine the issue afresh after calling for necessary information not only from the assessee but he may also conduct independent enquiry keeping in mind the tests laid down by the Hon ble Supreme Court in the case of Sarifabibi Mohamed Ibrahim (supra) and the order passed by the ITAT, Pune Bench in ITA No.1492/PN/2008 in the case of Mrs. Sunanda U. Chaudhary vs. ITO where the Hon ble Accountant Member is the author of the order. The AO shall pass a reasoned order after affording a reasonable opportunity of being heard to the assessee. The ground raised by the department is set aside. 29. Ground No.4 relates to an addition of Rs.2,50,000 made by the AO which was deleted by the CIT (A). In the assessment order, the AO found a difference between the advances paid to landlords as appearing in the balance-sheet and in the ledger extracts. He added differential amount of Rs.2,50,000/- by observing that the assessee has failed to explain the discrepancy. The CIT (A) deleted the addition by observing that the AO having not found any unexplained credit was not justified in making the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertains to deletion by the CIT (A) of an amount of Rs.30 lakhs made towards undisclosed investment. Facts of the issue are the AO while examining the books of accounts came across the transactions pertaining to investment amounting to Rs.30 lakhs. The AO added the amount of Rs.30 lakhs by observing that the assessee could not explain where the investments were made and the purpose of investment. The CIT (A) while dealing with the issue found that the AO has not found any defect or deficiency in the books of accounts and the investments were met out of the amount reflected in the books of accounts. The CIT (A) therefore deleted the addition on the reasoning that when accounted for money was spent for certain investment, no addition can be made. 34. We have heard rival submissions and perused the material on record. It is the contention of the learned AR that the investment was made by the assessee through account payee cheque to M/s Kinnera Constructions. A copy of the ledger extract was also brought to our notice. However, the AO does not dispute the fact that the investment was made from available source as per the books of accounts and nothing was from outside the books and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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