TMI Blog2014 (4) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions and their relevance either in the books of the appellant or any other entity of the group - in the absence of any specific information or the evidence gathered against the submissions of the appellant, the AO is not justified in treating the entire amount by estimation and presumption in the hands of the appellant firm - the additions made merely based on the information in seized material without a corroborative evidence is not sustainable - there was no reason to interfere with the well-reasoned order of the CIT(A) AO was not correct in making the addition in the hands of the firm - firm has not done any real estate business and entire business was done by the individual in his individual capacity the order of the CIT(A) upheld Decided against Revenue. Validity of admission of additional evidence Violation of Rule 46A of the Rules - Held that:- The assessee has not furnished any additional evidence which was not filed before the AO and only an affidavit was filed before the CIT(A), which cannot be considered as additional evidence Decided against Revenue. Income from plots Held that:- CIT(A) was of the view that the basis for making the addition by tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of a seized material presumed to be coded figures or the actual figures, without bringing any corroborative material evidence, in support thereof, and no addition can be made, if primary burden is discharged by the appellant the addition based on loose sheets and presumptions of the AO based could not be sustained in absence of any corroborative material or evidence brought on record - the facts are that the information in seized material was not put to further tests or examinations and the explanation of the assessee has been rejected by the AO - the Revenue is contesting the factual aspects decided by the CIT(A) - The AO did not consider the assessees partner submissions that most of the amounts were accounted for in the hands of individual and entries are not belonging to the firm - Since the firm did not do any business either in real estate or in chit business, question of making additions in the hands of the firm does not arise thus, the order of the CIT(A) on all the grounds is confirmed as he has examined the issues factually Decided against Revenue. Deletion of receipts from real estate business Held that:- CIT(A) was of the view that the proceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seizure proceedings have taken place on 27.09.2007. In the course of proceedings, certain loose sheets/documents were found and Sri K.C. Reddappa Naidu has made certain disclosures based on the findings in the search. Some of the seized material has been disowned by Sri K.C. Reddappa Naidu stating that these materials were left behind in their premises by various visitors and real estate agents. The transactions related to the real estate business of group are reflected in the individual status of Sri K.C. Reddappa Naidu. Statements were also recorded. On the basis of the impugned documents and on the basis of statements from the partner, the Assessing Officer made various additions in the impugned assessment years very cursorily, without much discussion as to why and what basis the additions have been made. These were subject matter of appeal before the Ld. CIT(A) who gave substantial relief. Therefore, the Revenue is mainly aggrieved on the relief granted by the Ld. CIT(A) whereas, assessee is aggrieved on sustaining some of the additions. 3. We have heard the learned D.R. and Ld. Counsel for the assessee and perused various seized documents along with explanations and also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As could be seen from the observations of the A.O. in the assessment order, the only basis relied upon by the A.O. is the indication in the seized material mentioning the amounts. As per the explanation of the appellant, the amounts mentioned therein are the receipts on sale of plots but not the investments as presumed by the A.O. There is no contrary information related to this issue to disprove the submissions made by the appellant. The judicial rulings all along held the view that the addition could not be made on the basis of a seized material presumed to be coded figures or the actual figures, without bringing any corroborative material evidence, in support thereof, and no addition can be made, if primary burden is discharged by the appellant. It was also held by various judicial rulings that addition based on loose sheets and presumptions of the A.O. based thereon could not be sustained in absence of any corroborative material or evidence brought on record. In this case, the facts are that the information in seized material was not put to further tests or examinations and the explanation of the assessee has been rejected by the A.O. summarily. Under the circumstances, the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed aside. In absence of any specific information or the evidence gathered against the submissions of the appellant, the Assessing Officer is not justified in treating the entire amount by estimation and presumption in the hands of the appellant firm. Further, the information related to the plots at Gajalakshmi Nagar indicate and proves consistently that plot no.61 to 139 are relatable to the real estate business carried out in the individual status of Sri K.C.Reddappa Naidu, which was not disputed by the Assessing Officer. It may be relevant here to mention that once the assessee furnishes explanation, it is for the Assessing Officer to prove the income or transaction relate to the assessee, so as to assess in the hands of assessee. Under the circumstances, I am of the opinion that the additions made merely based on the information in seized material without a corroborative evidence is not sustainable. In this connection, the appellant has not denied the transaction but has explained the same in the hands of other entity which is not disputed by the Assessing Officer. Hence, the addition made in the hands of the appellant firm is deleted and this ground of appeal is treated as al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein he maintained the books of accounts, vouchers and obtained audit report u/s 44AB of the I.T.Act, 1951, while plot no. l to 50 are indicated to be belonging to Mr. Adinarayana others. It was stated and clarified by the appellant that plot nos. l to 139 belong to Mr. K.C. Reddappa Naidu kept under the venture name 'Gajalaxmi Nagar-II' and inspite of submissions and information furnished, the Assessing Officer concluded the transaction to be that of the appellant without any evidence. It was also submitted that the amount of Rs.1,38,84,300 which was added by the Assessing Officer separately, is a part of the amount of Rs.2,20,21,558 and as such it is duplication of what was already added. It is also a fact that the appellant has furnished the copy of affidavit by Mr. K. Adinarayana for owning up the considerations related to the plot no.1 to 50. 7.3 The observations of the Assessing Officer and the written submissions of the appellant are perused. As could be seen from the information brought on the record by virtue of submissions made by the appellant, the proceeds of the sale of plots numbered from 1 to 50 belong to Mr. K. Adinarayana others and the consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made towards commission from chits, investment in loans. 3. The CIT(A) erred in deleting the addition made towards unexplained payments. 12.1. ITA.No.931/Hyd/2012 is by the Assessee in which assessee is contesting the sustaining of addition to an extent of Rs.2,62,452/- by the CIT(A) and also the directions given by the CIT(A) which was contested by Revenue in ground No.3. 12.3. For the year under reference, the assessee has filed the return of income admitting an income of Rs. (-) Rs.1908/- as against which the A.O. has determined the total income at Rs.1,10,21,610 by making certain additions and the notable among them are the addition on account of income from chits Rs.10,49,810/-, addition on account of petty expenses Rs.34,000, addition on account of miscellaneous expenses Rs.5,08,000, addition on account of unexplained payments Rs.68,000 and treatment of payments received from buyers as unaccounted income Rs.93,97,710/-. The assessee has chosen to file the appeal on the above additions, while raising the relevant grounds of appeal before CIT(A). 13. Ground No.2 in Revenue appeal as well as Ground No.2 in assessee s appeal is on the addition on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e activity of chit business being carried on by the appellant. Under the circumstances, taxing the income under the head 'commission from chits' do not arise. Further, there is no quantification of such amounts in the assessment order. 4.4 As regards to the income generated by the financial activity of the appellant firm, again there is no quantification of either investment or the interest earned by the appellant. It is a fact that the appellant has accepted to have carried out some business of financing in a small way and the investments as indicated in the books was quantified the at Rs.1,51,500/-. However, such information furnished by the appellant do not indicate the interest earned by the appellant on the said investment. Since the investments are traced, the interest on such investments are also to be there. However, the information furnished by the appellant do not indicate the interest earned by such investments. Since the information as appeared in the seized material and the confirmation by the appellant indicate that the appellant firm carried on the business of finance but the real picture of the investment and the interest earned from there is not fully di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the order or from the seized documents. In the absence of any such explanation from the order of Assessing Officer, it is very difficult to sustain the additions so made by the Assessing Officer. Even though the Ld. CIT(A) gave a finding that there is no quantification of any investment or interest earned by the assessee, we are of the opinion that Ld. CIT(A) erred in confirming the 1/4th of the amount when in fact, the basis for arriving at the amount itself is not forthcoming from the orders. Moreover, assessee s investment as disclosed in the books of accounts was correctly arrived at Rs.15,15,100/- and transactions supposed to be of chit fund do not indicate that assessee has done any chit business or earned any commission thereon. In the absence of any material to establish that assessee has done any business question of confirming 1/4th of the estimated amount does not arise. In view of this, while rejecting the Revenue s ground, we allow assessee s ground with a direction to delete the amount of Rs.2,62,452/- confirmed by the CIT(A) on this issue. 16. The other issue contested by the Revenue as well as by the assessee in Ground No.3 pertain to the addition of Rs.93,63,71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed material was so quick and the appellant could furnish the information related to the other concerns such as M/s Srinivasa Homes Developers, M/s Srinivasa Paper Board Pvt Ltd, etc. This is also quite contrary to the submissions made by the appellant at the time of assessment proceedings as well as the submissions made along with the grounds of appeal. The information as enshrined in seized documents also indicate the document number, plot number and the amounts related to the sale of the plots. Under the circumstances, it was not a difficult task for the appellant and the Assessing Officer to examine the transactions with reference to the name of the vendor and vendee. Further, there is a responsibility cast on the assessee to own up and explain the contents of the evidence/seized material found during in possession of the assessee with the reasonable clarity and evidence, as per the provisions of sec.132(4A) of the LT. Act, 1961. In this case, the appellant failed to discharge his responsibility and the information found through the seized material indicate certain possibilities of linking the transaction to the appellant or one of the group entity. However, this was not disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s ground is considered as partly allowed. 18. In the result, ITA.No.981/Hyd/2012 of the Revenue is dismissed and ITA.No.931/Hyd/2012 of the Assessee is partly allowed to the extent indicated above. ITA.No.982/Hyd/2012 A.Y. 2007-08 : 19. This is Revenue appeal in which the Ld. CIT(A) gave relief on all the additions made by the A.O. Briefly stated, for the year under reference, the assessee has filed the return of income admitting an income of Rs.1,08,820 as against which the A.O. has determined the total income at Rs.88,27,980 by making certain additions and the notable among them are the addition on account of unaccounted receipts Rs.87,26,000, amounts borrowed by the assessee Rs.60,800, loans and advances given to staff Rs.1,00,000 and amount expended for gift items Rs.50,000. The Revenue has raised the following grounds : 2. The CIT(A) is not justified in deleting the addition made towards amo0unt expended for gift items. 3. The CIT(A) erred in deleting the addition made towards amounts borrowed by the assessee. 4. The CIT(A) erred in deleting the addition made towards unaccounted receipts. 20. Ground No.2 pertains to addition on account of expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer do not reflect the correct facts, so as to become a basis for the addition and as such, it is difficult to be sustained. There is no other information brought on the record by the Assessing Officer other than the indication in the seized material as referred at annexure A/KCR/24 and the narration of the seized material is not indicated to pin point the expenditures related to the appellant. When the information was put to the appellant, it was explained that the expenses were meant for the gifts for the new business of chit fund, which was not started yet. Hence, incurring of such expenses do not arise as per the appellant, which was not refuted by the Assessing Officer, with a concrete and correct information/evidence. The judicial rulings all along have expressed the view that additions could not be made on the basis of seized material presumed to be coded figures or the actual figures, without bringing any corroborative material evidence in support thereof and no addition can be made if the primary burden is discharged by the appellant. It is also held by the judicial rulings that the addition based on loose sheets and presumptions of the Assessing Officer based there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from the assessment order, the details related to the said amounts as inscribed in the seized material were not brought on record which was treated as the ground for making the addition by the Assessing Officer. Further, as per the submissions of the appellant, it has been contended that the said amounts represent the amounts of advances given by Mr. K.C. Reddappa Naidu in his individual capacity for the assessment years 2005-06, 2006-07 2007-08 but not the borrowals by the appellant firm, as presumed by the Assessing Officer and the total amounts advanced put together for the three years was quantified at Rs.1,68,900 as against an amount of Rs.1,36,950 recovered and these amounts were stated to be the total of the advances as indicated in the seized material of annexure A/KCR/45 (Rs.1,00,000) and the amounts as reflected in the annexure A/KCR/48 (Rs.60,800). On verification of the same, it is found that the amounts more or less matching with the amounts indicated by the information as above and as such it is relevant to hold that there is no ground to make the addition based on the said information, in the hands of the appellant firm. The judicial rulings all along held the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information that has been brought on record, the addition of Rs.87,26,000/- represent the additions on account of six pieces of information as available from the seized material which have been relied upon by the Assessing Officer. Accordingly, the same are discussed separately with reference to the observations made by the Assessing Officer, information available in the seized material and the submissions of the appellant, on each of the additions. (i) The first addition related to the information available on piece of the paper taken as page nO.16 of Annexure A/KCR/58 which is the letter head of M/s KCR Homes Developers wherein there is a mention of receipt of a sum of Rs.45,00,000, towards survey no.260 for the commitment of earlier agreement and the date inscribed on it is 26.8.2006. The Assessing Officer has disbelieved the contention of the appellant that the transaction do not belong to them though it is written on letter head of M/s KCR Homes Developers, since no name of the payer is mentioned in the receipt and survey no.260 do not belong to the appellant. There is no other information for the Assessing Officer to conclude that the amount belong to the appellant exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are relatable to the appellant firm and as such the appellant disowned the information inscribed on the seized material. The role of the Assessing Officer appears to be only confined to the reference to the seized material and disbelieving the explanation offered by the appellant as no enquiries or investigation related to the information is carried out as per the information available on the record. As the appellant has discharged the responsibility of explaining the transaction, it was for the Assessing Officer to conclude the examination/investigation, with the help of more corroborative evidence, for treating the said amounts as the income of the appellant. As observed earlier, none of this seized material was put to the appellant for further examination and explanation except making a reference in the questionnaire issued at the time of scrutiny assessments. It was held by various judicial rulings that additions based on loose sheets and presumptions of the Assessing Officer based thereon, could not be sustained in absence of any corroborative material or evidence on record. It was also held that additions could not be made on the basis of seized material presumed to be coded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o enquiries or further investigations by the Assessing Officer to link the information to the appellant as per the information brought on the record. As indicated, this information was never examined in detail either during the course of search proceedings or the assessment proceedings so as to bring the truth on the record, so as to make it a fit case for making the addition as against the additions based on mere entries on the seized material. Under the circumstances, I am of the considered opinion that the additions made by the Assessing Officer based on the entries on the seized material where the name of the appellant or the transactions related 0 the appellant are not indicated either directly or indirectly, is not justified and as such, the additions of Rs.40,000, Rs.5,00,000 and Rs.34,00,000 do not survive. (iv) The addition of Rs.1,00,000 related to the receipts of 'Ganesh Gardens' as per the information available on piece of the paper taken as page no.32 of Annexure A/KCR/58. During the course of the assessment proceedings as well as the appellate proceedings, it was submitted by the appellant that the amounts related to the real estate business of Mr. K.C. Red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds on this ground of appeal. Hence, this ground of appeal is treated as allowed. 22.2. As can be seen from the above, in all the above grounds the Revenue is contesting the factual aspects decided by the Ld. CIT(A). The A.O. did not consider the assessee s partner submissions that most of the amounts were accounted for in the hands of individual and entries are not belonging to the firm. Since the firm did not do any business either in real estate or in chit business, question of making additions in the hands of the firm does not arise. Therefore, the order of the CIT(A) on all the above grounds is confirmed as he has examined the issues factually. Accordingly, grounds of the Revenue are dismissed. 23. In the result, ITA.No.982/Hyd/2012 of the Revenue is dismissed. ITA.No.932/Hyd/2012 983/Hyd/2012 - A.Y. 2008-09 24. Briefly stated, for the year under reference the assessee has filed the return of income admitting an income of Rs.1,34,080/- as against which the A.O. has determined the total income at Rs.2,82,46,021/- by making various additions such as disallowance of petty expenses, expenses on gift articles, expenditure on film production, unaccounted income from sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ratio of the judicial decision are very much applicable as to the facts of the case and as such, the additions made merely based on the notings in the seized material without bringing any additional evidence on record or without controverting the submissions of the appellant are not sustainable. Accordingly, the additions of Rs.6,47,658 towards the receipts from chit business and Rs.7,77,015 towards the commission from chit business are deleted and these grounds of appeal are treated as allowed. 27. After considering the rival contentions, perusing the seized material, we affirm the order of the Ld. CIT(A) which is based on facts. Revenue has not brought anything on record that assessee has done any chit business in the impugned years. Accordingly, the ground is rejected. 28. Ground No.3 pertains to additions towards expenditure of gift articles of Rs.20,000/- based on entries reflected in the seized material A/KCR/32 and 33 A.O. was of the opinion that assessee has spent an amount of Rs.20,000/- towards gift articles. Ld. CIT(A) deleted the same stating that the expenditure of Rs.20,000/- represents the proposed expenditure of unaccounted gift articles related to the vent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of Rs.56,12,000 can not represent the income. While furnishing the submission, the appellant submitted a copy of the seized material bearing page no. 57 of annexure A/KCR/58. 10.3 The observations of the Assessing Officer and the written submissions of the appellant are perused. As could be examined, the observations of the Assessing Officer are the nothing but interpretation of the contents of seized material inscribed at the above referred seized material, without looking into the name of the persons who appended the signature and relevance of the transaction in the activities attributable to the appellant. As argued by the appellant, the receipt was signed by one Mr. P. Ramakrishna and there is no name of the person who was paying the amounts. Further, the amount shown to have been received is Rs.2,50,000 towards the part payments for two plots at Hathiramji Colony and there is no indication of plot numbers either, on it. 10.4 The provisions of sec.132(4A) cast a responsibility on the assessee to explain the transactions/contents of the seized material found in their possession and in this case, the appellant has fulfilled its obligation by explaining that the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of receipts from real estate business. This ground pertains to the addition of Rs.50,15,000/- treating the receipts of real estate business as unaccounted receipts based on papers in A/KCR/HYD/3. It was the submission of the assessee that the transactions in the impugned papers pertain to the venture Gajalakshmi Nagar and all the transactions were duly accounted for. However, A.O. made the addition which the Ld. CIT(A) deleted after examining the details of accounting in various hands as explained by the assessee partner. The final conclusion of the Ld. CIT(A) in para 11.3 is as under : 11.3 The observations of the Assessing Officer and the written submissions of the appellant are perused. As could be seen from the information that has been brought on record, the explanation offered by the appellant are not controverted by the Assessing Officer to prove that the transactions related to receipt of Rs.50,15,000 are associated with the appellant firm and to disprove that the same are not related to the business of real estate carried on by Mr. K.C. Reddappa Naidu in his individual status. The said proceeds were shown to be precisely related to 'Ganesh Gardens' venture, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the figure of 98,99,100 is not a cumulative figure, since the figure of 98,99,100 do not have prefix of Rs (Rupees) and the said loose sheet also have some other figures, which are conveniently ignored by the Assessing Officer and the appellant. The Assessing Officer also could have looked into these aspects. Coming to the matter /information that indicated on the loose sheet bearing page no.5 of annexure A/KCR/44, it is pertinent to mention here that word 'dummy' is used and an amount of 8,56,750 is indicated on top of the sheet with a further amount of Rs.4,650 indicated which appears to be the rate of the land sold. At the bottom of the sheet, the amount of 2.50 paid as Adv. was also indicated and all these inscriptions certainly indicate that it is the real estate transaction of prima facie, the figures of 98,99,100 appears to be the plot numbers of land under sale. However, it may be relevant to state that what is apparent may not be real. In a situation, where the information in a seized material is equivocal or vague, it needs to be supported and strengthened by the further enquiries and verification. Now it is for the Assessing Officer to examine with reference ..... X X X X Extracts X X X X X X X X Extracts X X X X
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