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Shri G. Mahesh Babu Versus Dy. Commissioner of Income-tax, Central Circle 7, Hyderabad and Vica-Versa

2015 (12) TMI 986 - ITAT HYDERABAD

Addition as income from other sources as against agricultural income declared by the assessee - Held that:- There is no dispute that there was earlier a search and seizure operation conducted in the case of the assessee in the year 2008, in pursuance of which an assessment was made under S.143(3), wherein the Assessing Officer had accepted the agricultural income declared by the assessee in the original return of income. It is also relevant to note that in the assessment order, the Assessing Off .....

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ibunal in the case of All Cargo Global Logistics Ltd. V/s. DCIT (2012 (7) TMI 222 - ITAT MUMBAI(SB)). Admittedly, in the present case, as far as agricultural income is concerned, it has been considered in the original assessment proceedings. Therefore, in the absence of any incriminating material found during the second search and seizure operation conducted on 8.12.2011, to show that agricultural income was inflated, the Assessing Officer cannot consider this issue again in the impugned re-asse .....

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extent of assessee’s involvement, if at all, in the irregularities alleged by CBI or whether the assessee has also been implicated by the investigation agency or any other person. Therefore, in our view, issue relating to payment of on-money requires to be examined afresh by Assessing Officer after confronting evidence/material sought to be relied upon to the assessee and seeking his response on them. The Assessing Officer must also disclose to the assessee the material/information on the basis .....

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de. With the aforesaid observations, we remit the issue to the file of the Assessing Officer with a direction to re-decide the same afresh in accordance with law - Decided in favour of assessee for statistical purposes.

Disallowance of assessee’s claim for depreciation - as submitted by the assessee that Plasma TV and Home Theatre System were used by the assessee for his business purposes, because the assessee, being a film artist, these electronic items are required to view films, se .....

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enses - Held that:- We are of the view that the nature of expenditure claimed demonstrate that there would be some amount of personal element in the same, and hence, certain disallowance is warranted. We find that the disallowance worked out at 20% made by the Assessing Officer is reasonable, and the CIT(A) was therefore, justified in sustaining the same - Decided against assessee.

Addition as undisclosed income - Held that:- On careful examination of the seized document, it is seen, .....

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acceptable. Keeping these facts in view when the Bench made a specific query to Learned Departmental Representative to explain how Assessing Officer has correlated the payment to the impugned assessment year, he has no valid answer for the same. Therefore, even accepting for argument’s sake that contents of seized document are correct, but certainly, it cannot be linked to the impugned assessment year. Thus, looked at from any angle, the addition cannot be sustained. Accordingly, allowing assess .....

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entitled for getting credit of ₹ 5 lakhs deducted by way of TDS and remitted to the Government account, as it is in the name of the assessee. The apprehension of the Department that the deductor will take credit for the same, in our view is totally misplaced. Therefore, we do not find any infirmity in the order of the learned CIT(A) in directing the Assessing Officer to give credit to the TDS of ₹ 5 lakhs.- Decided in favour of assessee - ITA No. and CO No. 256, 286, 55, 56, 57, 58 H .....

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e, there are 14 matters in all in this bunch. Though these matters are directed against separate orders of the first appellate authority, since common issues are involved, the same are being disposed of, by this common consolidated order for the sake of convenience. 2. Let us first take up for consideration, the assessee s appeals. ITA No.256/Hyd/2015 : Assessment year 2006-07 3. The only issue involved in this appeal, directed against the order of the Commissioner of Income-tax(Appeals) 12, Hyd .....

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case of the assessee under S.132 of the Act on 4.3.2008. Pursuant to the said operation, assessment was completed under S.143(3) vide order dated 31.12.2009, determining the loss at ₹ 1,29,863. Subsequently, again a search and seizure operation under S.132 of the Act was conducted in the case of the assessee on 8.12.2011. Consequent to the said search and seizure operation, as aforesaid, the Assessing Officer issued notice under S.153A of the Act, calling upon the assessee to furnish his r .....

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₹ 76,545 as income from other sources. 5. Being aggrieved by the assessment order, assessee preferred appeal before the first appellate authority on this issue, who, however, dismissed the assessee s appeal on this issue, confirming the addition made by the Assessing Officer, and hence, the assessee is in second appeal before us. 6. The learned counsel submitted before us that prior to the date of search i.e. 8.12.2011, assessment in the case of the assessee was completed under S.143(3), t .....

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ond search and seizure proceeding relating to the agricultural income, therefore, the issue of agricultural income, having already been examined and concluded in an assessment completed under S.143(3), cannot be made subject matter of assessment in the re-assessment proceeding, in the absence of any incriminating material. For this proposition, he relied upon the decision of the Mumbai Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. V/s. DCIT (137 ITD 287)(Mum-SB). 7 .....

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the assessee in the original return of income. It is also relevant to note that in the assessment order, the Assessing Officer has not referred to any incriminating material found, while disbelieving a part of the agricultural income and treating it as income from other sources. Consequently, it is well settled that if a particular income is subject matter of assessment in an earlier assessment proceedings and stands concluded, it cannot be reopened unless there are incriminating material found .....

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was inflated, the Assessing Officer cannot consider this issue again in the impugned re-assessment proceedings. Accordingly, we delete the addition of ₹ 76,545 made by the Assessing Officer treating part of the agricultural income declared as income from other sources. 9. Consequently, this appeal of the assessee is allowed. ITA No.286/Hyd/2015 : Assessment year 2007-08 10. The only issue involved in this appeal, directed against the order of the Commissioner of Income-tax(Appeals) 12, Hy .....

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3,400 thereby treating the balance amount of ₹ 2,600 as income from other sources. The CIT(A), however, deleted the addition made of ₹ 2,600 as income from other sources. Thus, since the addition made by the Assessing Officer stands deleted by the CIT(A) by his impugned order and the Revenue has not challenged the deletion made by the CIT(A), in our view, the issue raised by the assessee in this appeal is of mere academic nature and hence, not required to be adjudicated upon. Accordi .....

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uthorities in treating a part of the agricultural income declared by the assessee as income from other sources. 14. Briefly facts of the case are that in the return of income for the assessment year 2009-10, besides declaring an income of ₹ 3,16,76,600, assessee has also shown agricultural income of ₹ 2,07,760. During the assessment proceedings initiated under S.153A of the Act in pursuance of a search and seizure operation, the Assessing Officer noticed that the assessee owned Acres .....

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sessing Officer observing that the assessee has failed to produce evidence to show the variety of crops, details of agricultural activity carried on, etc. restricted the agricultural income to ₹ 63,400 and treated the balance amount of agricultural income of ₹ 1,44,360 as income from other sources. 15. Assessee challenged this disallowance of part of agricultural income before the CIT(A), who, however, sustained the disallowance made by the Assessing Officer. Hence, assessee is in se .....

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e assessee. However, considering the extent of land held by the assessee and the fact that the Departmental authorities also did not dispute the earning of agricultural income by the assessee, we hold that the income declared from agricultural activities by the assessee is reasonable. Therefore, we delete the disallowance made by the Assessing Officer on this aspect and allow this ground. 17. The next issue raised in ground No.3 relates to the addition made of ₹ 1,99,20,000 as unexplained .....

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hat the CBI had conducted an investigation into the irregularities done by EHTPL, which revealed that though the rate of selling the Villas was fixed at ₹ 5,000 per sq. yard, actually Villas were sold to the buyers at rates varying from ₹ 4,000 per sq. yard to ₹ 45,000 per sq. yard. On the basis of the information received, it was found by the Assessing Officer that over and above the registered sale consideration, assessee has paid an amount of ₹ 1,99,20,000 towards purc .....

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r relying upon a statement given by one Shri Tummala Ranga Rao under S.164 of CrPC before the Metropolitan Magistrate-II, Hyderabad as well as before the Assessing Officer of EHTPL, observed that in the statement, it was categorically admitted that the villas in EHTPL were sold at much higher rate than the recorded sale consideration to all the owners who have entered into agreement with EHTPL. Also relying upon the assessment of EHTPL , he observed that the department in exercise of power under .....

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e deeds. He further observed that in the appellate proceedings in the case of EHTPL, additional evidence brought in the form of charge-sheets and supplemental charge sheets filed by the CBI, also revealed that buyers of plots have paid on money in addition to the recorded sale consideration. Thus, on the basis of the statement of Shri Tummala Ranga Rao and the information gathered from certain buyers of plots, the Assessing Officer observed that assessee s version that he has not paid any on mon .....

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ssessee and his wife and the payments are duly reflected in the financial statements and books of account and apart from the recorded payment, no on money was paid . It was submitted that the Assessing Officer, merely relying upon the statement recorded under S.164 of the CrPC, cannot make any addition, as such statement is no substantive piece of evidence and the same, at the most, can be used only for the purpose of corroboration. In this context, assessee relied upon a number of judicial prec .....

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hri T.Ranga Rao, modus operandi of the transaction involving sale of plots has been revealed. He observed that even some other buyers also in the course of investigation have accepted of having paid on money and even filed revised returns of income. He observed that mere fact that the assessee was not granted opportunity of cross examination, does not vitiate the assessment, as the Assessing Officer has made the assessee aware of the statement recorded from Shri T.Ranga Rao. Accordingly, the CIT .....

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y, nor the statement recorded from Shri T.Ranga Rao were supplied to the assessee. He submitted that even though during the course of assessment proceedings, the assessee has specifically asked for cross-eamination of Shri T.Ranga Rao, the Assessing Officer without allowing the assessee to cross examine, has made the addition solely relying upon the statement of Shri T.Ranga Rao. In this context, he referred to the letter dated 13. March, 2014 filed before the Assessing Officer. Thus, he submitt .....

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essing Officer clearly revealed that on-money was paid by the assessee for purchasing the Villa. However, the Learned Departmental Representative submitted that if it is felt that there is violation of principles of natural justice because the Assessing Officer has not confronted the assessee with the materials utilised for making the addition, and has not allowed opportunity to the assessee to cross examine Shri T.Ranga Rao, then the matter may be remitted back to the Assessing Officer for givi .....

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much evident from the assessment order that mainly relying upon the material gathered as a result of investigation made during the assessment proceedings of EHTPL, particularly on the basis of statement recorded from Shri T.Ranga Rao, the Assessing Officer has come to the conclusion that the assessee has paid on money to the extent of ₹ 1,99,20,000 over and above the recorded sale consideration. Of course, besides the statement of Shri T.Ranga Rao, it is seen that the department has gathe .....

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ered as a result of investigation/enquiry adverse to the assessee without either supplying the same to him or allowing an opportunity to the assessee to cross examine Shri T.Ranga Rao, whose statement primarily formed the basis of the addition. We find that the aforesaid submissions of the assessee are acceptable. It is very much clear from the assessment order that though the Assessing Officer has referred to the information received to suggest that the assessee has paid amount of ₹ 1,99, .....

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Even the Learned Departmental Representative accepts the aforesaid factual position. Though in the course of assessment proceedings there is no fetter on the Assessing Officer to conduct any enquiry or investigation as found necessary for ascertaining the real nature of transaction or income, at the same time, it is salutary principle of law that any adverse material gathered by him, which he proposes to utilise against the assessee, must be confronted to the assessee for allowing him an effecti .....

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amination of Shri T.Ranga Rao. In the aforesaid view of the matter, there is violation of rules of natural justice by the Assessing Officer while making the addition of ₹ 1,99,20,000. Therefore, the addition made by the Assessing Officer, on account of alleged payment of on-money, cannot be sustained. 24. Having held so, it is necessary to examine whether non-compliance of the rules of natural justice in the facts and circumstances of the present case has made the assessment void ab initio .....

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id judgment of the Hon'ble Supreme Court it is found to be factually distinguishable. In that case, Hon'ble Supreme Court has initially remitted back the matter to the Tribunal for deciding the issue in one way or the other, after considering the submissions of the assessee. However, it is noticed that the Hon'ble Supreme Court ultimately allowed assessee s appeal because the Tribunal while examining the issue of cross examination of witness has merely observed that even such cross-e .....

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mation gathered by the department by taking recourse to S.133(6) as per which some of the buyers of the plots have admitted of having paid onmoney. Further, through a process of investigation, CBI has found irregularities in the activities of EHTPL and submitted charge sheet(s). As the statement of Srhi T.Ranga Rao, the entire charge sheet(s) filed by CBI and information gathered by the department through enquiry have not been brought on record before us either by assessee or department, we are .....

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ormation on the basis of which he has quantified the on-money payment of ₹ 1,99,20,000. If the Assessing Officer is able to establish on the basis of evidence gathered that the assessee has paid onmoney to the extent quantified by him, then he can make the addition under S.69B. On the flip side, if there is no evidence available on record to directly link the assessee towards payment of on-money, then merely on the basis of the fact that some other buyers have accepted payment of on-money, .....

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g the assessment proceedings, the Assessing Officer noticed that the assessee has claimed depreciation of ₹ 21,536 on LG Plasma Television and ₹ 71,191 on home theatre, totalling to ₹ 94,727. The Assessing Officer being of the opinion that these are personal assets of the assessee and for personal use, disallowed the depreciation claimed by the assessee. 27. Being aggrieved by such disallowance, assessee filed appeal before the CIT(A), who also confirmed the disallowance made b .....

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owable. However, by looking at the nature of the assets and the fact that they are used in assessee s home, we are unable to accept the assessee s claim for depreciation. Further, assessee has not substantiated with any evidence that the TV or the Home Theatre System were used for business purposes. We accordingly confirm the disallowance made by the Assessing Officer, rejecting this ground of the assessee. 29. The next issue raised in ground No.5 relates to disallowance of 20% out of personal e .....

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at the nature of expenditure claimed demonstrate that there would be some amount of personal element in the same, and hence, certain disallowance is warranted. We find that the disallowance worked out at 20% made by the Assessing Officer is reasonable, and the CIT(A) was therefore, justified in sustaining the same. We accordingly uphold the orders of the Revenue authorities on this issue, and reject this ground. 31. In the result, this appeal of the assessee is treated as partly allowed. ITA No. .....

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rces. The additions made are ₹ 1,19,000 (out of agricultural income claimed of ₹ 2,10,000) for assessment year 2010-11, ₹ 1,01,000 (out of agricultural income claimed of ₹ 2,10,000) for assessment year 2011-12 and ₹ 89,000 (out of agricultural income claimed of ₹ 2,20,000) for assessment year 2012-13. Facts and circumstances of the case involved in these years are similar to those considered in the preceding years. Hence, for the reasons discussed hereinabove .....

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, ₹ 15,560 and ₹ 13,226 respectively for the three years under consideration. Facts and circumstances of the case involved in these years are similar to those considered in the preceding year. Hence, for the reasons discussed hereinabove in the context of corresponding ground of the assessee for the assessment year 2009-10 in para-28 hereinabove, we uphold the disallowance in question and reject the grounds of the assessee on this issue. 33. The next common effective ground in these .....

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-10 in para-30 hereinabove, we uphold the disallowances in question and reject the grounds of the assessee on this issue. 34. The only other ground that survives for consideration is in ITA No.58/Hyd/2015, wherein, vide ground of appeal No.5, assessee has challenged the addition of ₹ 2 crores made as undisclosed income. 35. Briefly, the facts are, in the course of search and siezure operations conducted in the case of Shri Jetti Venakta Phanindra Reddy, producer of the Film Businessman cer .....

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terial. The Assessing Officer, therefore, issued summons to both assessee and the producer Shri j.V.Phanindra Reddy. As observed by Assessing Officer, both assessee and Shri Reddy flatly denied of any payment having been made in cash over and above the cheque payments. Assessing Officer, however, disbelieved the statements of assessee and Shri Reddy. He observed that when the cheque payments recorded in the seized material was accepted as correct, cash payments recorded cannot be denied. He furt .....

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the assessee challenged the addition in appeal, the learned CIT(A) sustained the addition more or less adopting the reasoning of the Assessing Officer. 36. Learned Authorised Representative s submissions while contesting the addition are two-fold. Firstly, loose sheets seized from a third party, will have no evidentiary value, hence cannot form basis for any addition. He submitted, assessee has received his remuneration for the concerned movie entirely in cheque which is duly reflected in his b .....

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rial is correct, no specific date is mentioned against such payment. Drawing the attention of the bench to the seized material at page 3 of the paper-book, he submitted, dates appearing against each payment is in sequence. Therefore, if the payment recorded in the document immediately after assessee s name is in February, then it must be accepted that payment made to assessee is prior to that date, hence, it will not relate to the impugned assessment year. Therefore, no addition can be made in t .....

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d. We have also examined the decisions cited at the Bar. Undisputedly, the basis for the addition of ₹ 2 crores as undisclosed income is a loose sheet seized not from the assessee, but from a third party, who happens to be producer of a movie in which assessee has acted. On a perusal of the said seized document, a copy of which is at page 3 of the paper-book, we find it contains cash payments made to some persons, one amongst them being the assessee. Admittedly, apart from this document, n .....

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seized document. In fact, a confirmation letter obtained from the producer stating therein that entire remunerations are paid in cheques was also submitted before the Assessing Officer. Further, remuneration received by the assessee for the movie Businessman as reflected in assessee s bank account and books of account is also in agreement with the books of accounts maintained by the producer. In these circumstances, explanation furnished by Shri Phanindra Reddy before the Assessing Officer to t .....

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re so, when both the assessee as well as the person from whom the document was seized have denied of having entered into any such transaction/ Therefore, in our view, the addition made by the Assessing Officer cannot be sustained. 39. There is one more aspect to the issue. On careful examination of the seized document, it is seen, against the name of every person to whom payment is supposed to have been made, a date is mentioned. Interestingly, against assessee s payment no date is mentioned. Fu .....

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payment to the impugned assessment year, he has no valid answer for the same. Therefore, even accepting for argument s sake that contents of seized document are correct, but certainly, it cannot be linked to the impugned assessment year. Thus, looked at from any angle, the addition cannot be sustained. Accordingly, allowing assessee s ground, we delete the addition of ₹ 2 crores. 40. These three appeals of the assessee are accordingly partly allowed. 41. Now, let us take up for considerat .....

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e Income Tax Act, 1961. Assessee has also filed cross objections in these appeals raising some technical issues. 43. Having considered the rival submission of the parties and perused the material on record, in the light of the relevant statutory provisions as well as judicial precedents cited, we are of the view that in so far as the appeals for the assessment years 2009-10 to 2011-12 are concerned, the orders of the learned first appellate authority on the issue is in accordance with statutory .....

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hile dealing with the appeal of the assessee, being ITA No.58/Hyd/2015, for that year hereinabove, we direct the Assessing Officer to recompute the interest under S.234B of the Act, giving consequential relief to the assessee. This appeal of the Revenue is accordingly treated as partly allowed. 45. The only other surviving issue is in the Department s appeal for assessment year 2011-12, being ITA No.394/Hyd/2015, which, as raised in ground No.2 thereof, relates to allowance of TDS credit of S .....

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s Talkies through cheque. However, since the amount of ₹ 5 lakhs towards TDS was also returned back by the assessee, in the return of income filed for the impugned assessment year, assessee claimed credit for the said amount. The Assessing Officer, however had not accepted the assessee s claim and denied credit for TDS of ₹ 5 lakhs. 47. Assessee being aggrieved challenged the addition of the Assessing Officer before the CIT(A), who accepted the assessee s claim and directed the Asses .....

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