TMI Blog2012 (5) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... in the nature of capital gain and therefore, not assessable as income from business. Accordingly, we are entirely agreement with the findings given by the CIT(A) in his order and the same is confirmed. The grounds raised by the revenue are rejected. Not giving credit to the balance of cash available in his capacity as the Karta of HUF as on the opening day of the financial year - Held that:- In this case, the assessee filed the return of income on 21.2.2008 and disclosed the entire investment in purchase of agricultural property. The assessee had 50% share in the land. Since the entire investment is disclosed in the return of income filed before the date of search, there is no question of treating the same as undisclosed income in the absence of any evidence to the contrary. More so, due credit has to be given towards opening cash balance available with assessee in his individual capacity as well as HUF as the fund is available for investment in land. Accordingly, this ground is allowed. Addition u/s 40A - Held that:- Since we have already held elsewhere in this order that the land in dispute is an agricultural land and the provisions of section 40A(3) are not applicable bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceeding, the Assessing Officer found that the assessee firm is developing a residential complex viz., Silicon Ridge at Attapur. The land admeasuring 3 acre 39 guntas originally belonged to Smt. B. Kalavathi and Smt. P. Sujana. Smt. B. Kalavathi sold one acre and Smt. P. Sujana sold about 20 guntas of land to Sri P. Mahender Reddy and Smt. P. Pushpaseela. The remaining land was given on development basis to the assessee firm. Development Agreement was entered for development of a residential complex on the total land including 2 acre 19 guntas of land belonging to Smt. P. Sujana and Smt. P. Kalavathi. As per the agreement both the land owners got 40% and the developer got 60% of the land. The share of super built up area was specified. As per the MOU, the super built up area allocated to Smt. P. Sujana and Smt. Kalavathi was 77,298 sft and 41,889 square feet (sft for short), respectively. The developer's share of built up area was 2,98,773 sft. The Assessing Officer found that during the course of search, a loose sheet vide page No. 66 of Annexure A/RPP/03 was found which contained details of sale consideration received in respect of sale of flats. As per the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d consideration which worked out to ₹ 38,29,600 which was shown as additional profit for the assessment year 2008-09. It was submitted by the assessee that the additional profit of ₹ 38,29,600 be accepted on the ground that in the real estate business certain portion of consideration in cash is again used for spending on extra consideration paid for acquisition of land etc. This way, both the receipts and payments get compensated leaving no margin. Further, there was no evidence found during the course of search that extra consideration had been received, no assets were found matching the declaration made. Confessional statements alone should not be taken without pointing out any incriminating material or evidence in view of the circulars of CBDT. If the entire extra consideration is taken as profit and no expenditure is allowed, then the net profit for the FY 2007-08 and 2008-09 would work out to 25.06% and 22.04% respectively. During the course of assessment proceeding, the assessee was once again given opportunity to explain why the average rate as per the seized documents should not be made applicable to their sales. In reply, the assessee submitted that the seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly, he disallowed the same. He also disallowed a sum of ₹ 2,20,25,000 u/s. 40A(3) in respect of payments made in cash towards purchase of land. Though the assessee had submitted that the said payments were advances towards purchase of land which were subsequently received back and hence the provision of sec. 40A(3) would not apply. Similarly, for the A.Y. 2009-10, he made an addition of ₹ 1,16,164 u/s. 40A(3). Considering the above disallowances, and disclosure made by assessee the total income was assessed at ₹ 6,93,70,887 for the A.Y. 2008-09 and at ₹ 1,56,78,388 for the A.Y. 2009-10. Being aggrieved, the assessee went in appeal before the CIT(A). The CIT(A) confirmed the profit at ₹ 100 per sq. ft as against ₹ 250/- per sq. ft determined by assessing officer. Against this, the assessee as well as the Revenue are in appeal before us. 11. The first common effective ground of appeal for A.Y. 2008-09 and 2009-10 relates to the addition made on account of extra consideration received by the assessee. The AR submitted that the statement of the partner was recorded at a time when no books of account or documents or papers were readily available. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice. 12. As regards retraction of the admission made during the course of search, the assessee referred to the guideline issued by the CBDT in Circular No. F. No. 286/2/2003-IT (lnv) wherein it was advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed and is not likely to be disclosed before the LT. Department. The assessee referred to the decision in the case of CIT Vs. Dhingra Metal Works (2010-TIOL-693-HCDEL- IT) wherein the Hon'ble Delhi High Court laid down the ratio that though an admission is an extremely important piece of evidence it cannot be said to be conclusive and it is open to the person who has made the admission to show that it is incorrect. The assessee also referred to the decision in the case of Vinod Solanki Vs. Union of India in Civil Application No. 7407 of 2008 on the issue of confession. Assessee also referred to the decision of Hon'ble Gujarat High Court in the case of Kailash Ben Manoharlal Chokshi Vs. CIT 14 DTR 257 that a statement recorded at odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has already disclosed ₹ 38,29,600. Being so, it is higher than the income worked by the CIT(A) and there cannot be any addition towards undisclosed income. He further drew our attention to letter dated 25.10.2010 placed on record in Paper Book-II which is in the form of affidavit from various buyers where the gross rate per sft is ₹ 1500. 16. He submitted that the admission made by the assessee u/s. 132(4) was retracted by the assessee by cogent material. Being so it has no financial value. For the purpose of he relied on the order of the Tribunal in the case of K.C.K.A. Gupta vs. ACIT (90 TTJ 555) (Hyd), Abhishek Corporation vs. DCIT (63 TTJ 661). Further he relied on the CBDT circular which prohibits Department officials procuring confession statement during such survey operations. Placing reliance on the circular, he submitted that the Department shall concentrate on collection of evidence of undisclosed income rather than collection of confession statements from the assessee. 17. The learned DR submitted that the CIT(A) erred in not holding that a declaration u/s. 132(4) has evidentiary value and that no further evidence is collectable after a lapse of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of assessment proceedings as also during the course of appellate proceedings submitted that the Assessing Officer did not take into consideration the price shown in page 64 and 65 of same seized annexure which shows gross average rate of ₹ 1500 per sft. A copy of the said seized paper was also filed before the lower authorities. The CIT(A) observed that there is nothing about sale of/advance received of 71 flats along with the rate per sft. Out of 71 entries, 41 entries showed sale @ ₹ 1500 per sft and 23 entries showed sale of ₹ 1000 per sft. Based on the factual noting in the seized paper, the average rate comes to around ₹ 1339 per sft. Thus, Assessing Officer s assumption of average of registered sale price of ₹ 1250 per sft does not match with the noting in the seized paper. Even if the Assessing Officer s assumption of actual sale of ₹ 2200 per sft is considered, the difference comes to about ₹ 861 and not ₹ 950- as worked out by the Assessing Officer. The Assessing Officer himself shows ₹ 700 towards construction cost though no basis has been given for that. Thus, the net extra consideration based on factual noting in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed admission was in fact wrong and surrender was made solely to avoid botheration. The surrender by the assessee could have been for more than one reason in spite of the fact that it was not his income and that fact alone could not be the basis of assessment. 23. In the case of Satinder Kumar (HUF) vs. CIT (106 ITR 64) (HP) wherein held that there should be clear and definite material to sustain the addition. 24. In the case of K.C.K.A. Gupta vs. ACIT (90 TTJ 555) (Hyd) wherein held that in case of unaccounted sales only a percentage of sales should be considered as undisclosed income even though it is established from the TDS document where the assessee was receiving premium/on-money on book a flat and the entire onmoney/ premium cannot be treated as undisclosed income of the assessee. 25. The above view has also been taken in the case of Abhishek Corporation vs. DCIT (63 TTJ 661) 26. Considering the fact that the Assessing Officer has resorted to estimation, we are of the opinion that estimation of 25% of the undisclosed turnover at ₹ 250 per sq. ft. be treated as undisclosed income of the assessee instead of ₹ 100 per sft being the net profit out of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e land was sold to M/s. UNI Estates on three different dates i.e., on 16-3-2006, 13-4-2006 and 23-06-2006 vide document Nos. 3381/06, 5245/06 and 5380/2006 for a consideration of ₹ 2,92,14,000, ₹ 1,40,40,000 and ₹ 3,45,60,600 totalling to ₹ 7,78,14,600. The Assessing Officer also observed that during the period relevant to A.Y. 2009-10, the assessee has sold another piece of land admeasuring 15 guntas at Survey No. 150B situated at Kokapet village for a sum of ₹ 41,25,000. This land in question was sold along with the land of one Smt. P. Sujana admeasuring 8 guntas as a single transaction vide document No. 1974/08 for a total consideration of ₹ 63,23,000. This entire patch of land was purchased in the year 2006-07 for a sum of ₹ 72,76,375. Gain on sale of 15 guntas of land falling to the share of the assessee was also claimed by the assessee as exempt being the agricultural land. This being the history of the lands acquired and sold by the assessee at Gudur and Kokapet villages, the Assessing Officer in the assessment orders passed for the A.Ys. 2006-07 and 2007-08, has discussed the issue at length. In paragraph Nos. 3.1, 3.2, 3.2.1, 3.3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s without an iota of evidence in support of such view. It is submitted that the assessee had purchased agricultural lands and carried the agricultural activities and sold the vegetable products and declared the agricultural income in the return of income filed before the Income-tax Department. The assessee received subsidy from the Government for- the purpose of drip irrigation and planted mango trees on the land etc. The AR further submitted that the land was originally purchased as agricultural land, that the land was further developed with drip irrigation system to make the same suitable for growing orchids, that the firm filed returns declaring agricultural income, that the lands situated beyond specified area, no part of the sale proceeds of these lands cannot be treated as business income under any circumstances. The assessee had incurred capital expenditure for the development of the land and carried agricultural operations; thereby there is no evidence that the assessee is carrying on trading activity on the land. The AR has tried to distinguish the facts ruling in his case with that of cases mentioned by the Assessing Officer in the assessment order. In support of his cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be presumed that these lands are agricultural in nature. Nevertheless, it is on record that the assessee is in the business of purchase and sale of lands regularly in other years as well. The lands were not acquired for the purpose of carrying on agricultural operations. In fact, there is no intention on the part of the assessee to utilise these lands to carry out agriculture at all. No attempt or effort has been made by the assessee to initiate any activity of the nature falling under agriculture. Basically he is interested in doing trading activity by purchasing lands from various individuals and sell them to realtors after creating market for his lands. Hence, the action of the Assessing Officer in subjecting the gain as a profit derived out of trading activity is justified. 35. We have heard both the parties and perused the material on record. In the present case, the agricultural lands was disclosed before the date of search and sale was claimed as exempted. These returns were before the lower authorities as evident from the acknowledgment, computation of income, balance sheet and computation of short term capital gain for the A.Y. 2006-07 and 2007-08 which are pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the facts of the case. The certain land acquired by the assessee has been sold by the assessee within short time on account of compelling circumstances. It was explained to us by the AR that certain land as enumerated in the table is falling under Bio conservation zone/green belt which she was not aware of it. Thus, the land was sold under compelling circumstances to realise the investment and to avoid any future dispute. Similarly, in case of certain land, there was impending acquisition by the govt. and to avoid future litigation the assessee was compelled to sell them. Similarly, in the case of land situated at Kokapet village, the assessee had received a legal notice from the family members of the vendors and in fact a case was filed in OS No. 113 before the Addl. District Judge, LB Nagar. Hence, to avoid any future complications, the said land was sold. Considering the above facts, we cannot hold that the assessee engaged in the real estate business. It is also fact that the assessee has been offered capital gain in subsequent years which has not been disturbed by the assessing officer. For example, for the assessment year 2006-07 the assessee had shown in her return long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 14,08,503 iii) Sale of land - ₹ 4,10,000 Total Rs. 28,33,615 39. The Assessing Officer rejected the above contention of the assessee and treated ₹ 30.73 lakhs as income of the assessee. On appeal, the CIT(A) sustained a sum of ₹ 18,58,344 as against ₹ 30,73,000 made by the Assessing Officer. Against this the assessee is in appeal before us. 40. The AR submitted that as per the agreement the above cash was paid as purchase consideration but the agreement could not be registered by the authorities for some reasons and the above cash was returned to the assessee as the transaction could not materialise. As far as sources are concerned, it is submitted that the assessee had sufficient cash and submitted cash flow statement from 1.4.2006 to 15.7.2006. Further argued that the assessee had opening cash and bank balance of ₹ 10,15,122 with bank balance of ₹ 5,466 leaving cash portion of ₹ 10,09,656. That the HUF having opening cash of ₹ 14,08,503. That on 27.4.2006, the assessee sold land at Kollur village along with others and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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