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THE COMMISSIONER OF INCOME-TAX, BANGALORE. AND THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2 (3) , BANGALORE Versus DR. L. NARENDRA PRASAD,

2015 (8) TMI 1285 - KARNATAKA HIGH COURT

Estimating the profit at 8% of the sale consideration - Appellate Authorities directing the Assessing Officer to allow the expenditure incurred towards 8 acres for development, when the Assessing Officer has taken into consideration the land developed in respect of 6 acres - Held that:- The Assessing Officer having accepted the fact that the agreement entered with S.N.Krishnaiah Setty is only in respect of 6 acres of land, while assessing the undisclosed income, had taken into consideration the .....

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usiness or, as the case may be. In the instant case, admittedly, the assessee had not maintained books of accounts.

The assessee is a doctor by profession, his father and brother are involved in the real estate business. For the last so many years, the Department has accepted the net profit at 8% on the total turnover of the company M/s. Skytop Builders Pvt. Ltd. Accordingly, the Appellate Authority as well as the Tribunal accepted the contention of the assessee and taken 8% of the t .....

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finding arrived at by the First Appellate Authority as well as the Tribunal. The appellants have not made out a case to interfere with the order passed by the Tribunal. - Decided in favour of assessee. - ITA No.473 OF 2009 - Dated:- 18-8-2015 - MR.JUSTICE VINEET SARAN AND MR.JUSTICE B MANOHAR FOR THE APPELLANT : SRI.JEEVAN.J.NEERALAGI, ADV., FOR THE RESPONDENT : SRI.A.SHANKAR, ADV. JUDGMENT B.MANOHAR, J The Revenue has preferred this appeal under Section 260-A of the Income-Tax Act (hereinafter .....

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4-1996 to 26-11-2002. 2. The Respondent-assessee is a Doctor by Profession and the main source of income is his salary from Bhagawan Mahaveer Jain Hospital as well as from Profession as a Doctor. He filed his return of income for the assessment years 2000-2003. While filing the return, he filed a note along with the return, which reads as under: The assessee purchased agricultural lands of about 8 acres from K.Gundu Rao in the year 1996 and 1997. Subsequently, he proposed to develop the same by .....

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d from M/s.HMT Employees Co-Operative House Building Society Ltd., and the same was used for layout development. The assessee subsequently, entered into an agreement with one Sri.S.N.Krishnaiah Setty on 05-09-2001 for sale of residential sites @ rate of 110 p.sq.ft. The assessee also received advance payments amounting to ₹ 73,75,000/- upto 31-03-2002 and of which a sum of ₹ 57 lakhs was repaid to HMT Employees Co-op. House Building Society Ltd. And the balance amount utilized to lay .....

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L. Sastry and is also one of the partners of C.V.L. Sastry Group. The father and Sri.B.L.Nagendra Prasad, brother of the assesse e were carrying on Real Estate business in the name and style M/s. Skytop Builders Pvt. Ltd. A search was conducted under Section 132 of the Act on 26-11-2002 in the office premises of the Skytop Builders Pvt. Ltd. and residential premises of the assessee. On the basis of some documents found during search, a notice was issued to the assessee under Section 158BC on 28- .....

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ises was searched. On the basis of the materials seized with reference to the Real Estate business, the Assessing Authority examined the case; and after obtaining the clarification held that though the assessee purchased the property in the year 1996-97, in the balance sheet of the assessment year 1998-99, the assessee has shown the value of the land as ₹ 46,46,660/- and for the assessment year 2000-01, the value was shown as ₹ 1,10,46,660/- and for the assessment year 2001-0 2, the .....

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they have spent ₹ 26,62,33 3/-. The cost of the land comes to ₹ 73,08,993/-, whereas the assessee had entered into an agreement with S.N.Krishnaiah Setty agreeing to sell the sites at the rate of ₹ 110/- per sq.ft. and power of attorney was also executed in favour of S.N.Krishnaiah Setty for marketing the sites through Shri. Balaji Krupa Enterprises. Krishnaiah Setty had sold 86 sites from 01-04-2001 to 31-3-2002 and 53 sites from 01-04-200 2 to 31-3-2003. Taking into considera .....

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,17,430/- for the block period from 1-4-1996 to 26-11-2002. A draft assessment order was prepared and the assessee was called upon to file his objections. The assessee filed his objections to the Draft Assessment. After considering the objections, the Assessing Authority concluded the assessment and called upon the assessee to pay tax on the said amount, by its order dated 30-11-2004. 4. The assessee being aggrieved by the order dated 30.11.2014 passed by the Assessing Authority prefer red an ap .....

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ssessing income contrary to the method of accounting followed by the assessee. The assessee clearly stated that he has not maintained the books of accounts. Along with the returns, the assessee has clearly disclosed that the assessee will offer the income from the real estate business on completion of the layout. For so many years the profit from the Real Estate business has been taken at 8% of total amount of income. However, the Assessing Authority assessed the income at the rate of 26% which .....

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l Estate business on the total amount and accordingly modified the order reducing the undisclosed income of the assessee to ₹ 13,95,240/- from ₹ 42,17,430/- by its order dated 31-03-2008. Being aggrieved by the order passed by the First Appellate Authority the assessee as well as the Revenue preferred appeals before the Tribunal. The Appellate Tribunal after re-examining the matter and taking into consideration the material seized during the course of search and also accepting some o .....

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assessee has spent ₹ 26,62,333/- for formation of the layout. Further, the agreement entered into with S.N.Krishanaiah Setty was only in respect of 6 acres of land and the Department itself has accepted the net profit at 8% on the turnover from the Real Estate business. Accordingly, upheld the order passed by the First Appellate Authority and dismissed both the appeals filed by the assessee as well as the revenue by its order dated 30th April, 2009. Being aggrieved by the said order, the .....

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nditure incurred towards 8 acres for development, when the Assessing Officer has taken into consideration the land developed in respect of 6 acres only as contended by the assessee? 7. We have heard Sri.Jeevan J Neeralagi, learned counsel appearing for the appellants and Sri. A. Shankar, learned counsel appearing for the respondent. 8. The records clearly disclose that the respondent - assessee is a Doctor by profession. He has been filing the income tax return every year disclosing the income f .....

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l layout. However, the said project did not go through and abandoned in the middle. The assessee entered into an agreement with S.N.Krishnaiah Setty for the sale of residential sites at the rate of ₹ 110/- per sq.ft. and received some amount and the said amount was repaid to the HMT Employees Co-operative House Building Society Limit ed. A search was conducted on 26-11-2002 at the residential premises of the assessee as well as the office premises of his father C.V.L. Sastry and also the p .....

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orm a residential layout along with his father and brother. He invested a sum of ₹ 78,00,000/- consequent to buying of the property towards improvement charges, however, no document has been produced in this regard. It was found from the seized material that a sum of ₹ 26,62,333/- has been spent towards improvement of the layout. In view of the agreement entered into with S.N. Krishnaiah Setty on 5-9-2001 to sell the sites for ₹ 110/- per sq.ft., considering the value of the si .....

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idential layout is not fit for residential use, pending completion, and the assessee will offer income from the layout business on completion of the same. As per the agreement entered with S.N.Krishnaiah Setty, the power of attorney execute d was only in respect of 6 acres of land i.e. 158550 sq.ft. and not 8 acres of land. The cost of 6 acres of land is ₹ 1,74,40,550/- instead of ₹ 2,25,01,050/-. Normally, in the real estate business, the net prof it would be taken at the rate of 8% .....

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sing Officer having accepted the fact that the agreement entered with S.N.Krishnaiah Setty is only in respect of 6 acres of land, while assessing the undisclosed income, had taken into consideration the entire 8 acres of land , which is contrary to law. In the real estate business the department had accepted the net profit of 8% on the turnover for the last so many years in respect of the M/s.Skytop Builders Pvt.Ltd. The same benefit was extended in case of assessee also. Section 44-AD of the Ac .....

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