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2016 (8) TMI 1137 - ITAT VISAKHAPATNAM

2016 (8) TMI 1137 - ITAT VISAKHAPATNAM - TMI - Addition towards alleged on money payment for purchase of site - seized documents indicate exchange of on money between the parties - Held that:- The A.O. is not correct in coming to the conclusion that on money exchanged between the parties, based on a loose sheet found in the premises of a third party and also statement given by a third person. To sustain the addition, the A.O. should have taken an independent enquiry about the value of the proper .....

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(A) and direct the A.O. to delete the additions made towards alleged on money for the assessment years 2007-08 & 2008-09. - Decided in favour of assessee - ITA No. 251 and 252/Vizag/2012 - Dated:- 12-8-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER. Appellant by : Shri G.V.N. Hari, AR Respondent by : Shri T.S.N. Murthy, DR. ORDER PER G. MANJUNATHA, Accountant Member: These two appeals filed by the assessee are directed against common order passed by the CIT(A .....

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; 2,90,940/- respectively. During the course of search & seizure operation conducted in the group of M/s. M.V.V. Builders, it was found that M/s. M.V.V. Builders purchased a site admeasuring 4430 sq.yds. on 27.5.2006 for a consideration of ₹ 1,99,35,000/- from Sri Peela Apparao and Others. It was further observed that property was sold by Sri Peela Apparao and others including the assessee Sri P. Koteswara Rao as one of the coowners. During the course of search operation, the departmen .....

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ute in respect of Venkojipalem site. 3. The A.O. observed that the assessee has not disclosed said amount, in the income tax returns filed for the respective assessment years, therefore, having reasons to believe that income chargeable to tax has escaped assessment, issued notice u/s 148 of the Act for both assessment years. In response to notices, the assessee has filed revised returns u/s 148 of the Act, disclosing additional income of ₹ 18,17,561/- towards capital gain for the assessmen .....

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.V.V. Builders should not be brought to tax. In response, the assessee stated that he has not received any on money from M/s. M.V.V. Builders and also stated that it is not known as to why Sri M.V.V. Satyanarayana said that on money is paid to the assessee towards purchase of Venkojipalem site. The assessee further stated that in response to a letter addressed to Sri M.V.V. Satyanarayana seeking clarification in this regard, he has replied that they have not paid any on money to the assessee and .....

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any explanation why said amount has not been considered in the return filed for the respective years, accordingly, completed assessment u/s 143(3), r.w.s. 147 and made addition of ₹ 50 lakhs for the assessment year 2007-08 & ₹ 25 lakhs for the year 2008-09. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has challenged validity of reopening of assessment, in addition to issues on merit. The assessee furthe .....

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has not received any money over and above what was stated in the sale deed from M/s. M.V.V. Builders. To this effect, furnished a copy of letter issued by M/s. M.V.V. Builders, wherein they have stated that no on money is paid towards purchase of Venkojipalem site. 5. The CIT(A) after considering the explanation furnished by the assessee, held that the A.O. has rightly reopened the assessment u/s 147 of the Act, as it is clear from the records that there is no action pending on the return filed .....

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ion of the assessee that he had not received any on money towards sale of site cannot be accepted. With these observations, confirmed additions made by the A.O. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 6. The assessee has filed common grounds for two years. From these grounds of appeal, the assessee has agitated two issues, i.e. from ground no. 1 to 4, the assessee has challenged the validity of notice issued u/s 148 of the Act and consequent reassessment proceedings. .....

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h proceedings, in the case of M/s. M.V.V. Builders, it was found that M/s. M.V.V. Builders purchased a site from assessee with other co-owners on 27.5.2006 for a consideration of ₹ 1,99,35,000/-. It was found from the material seized during search operation, that M/s. M.V.V. Builders has paid on money of ₹ 75 lakhs in cash to Shri P. Koteswara Rao towards purchase of Venkojipalem site. Sri M.V.V. Satyanarayana, Managing Partner of M/s. M.V.V. Builders, while deposing statement before .....

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khs and ₹ 25 lakhs for the assessment year 2007-08 & 2008-09 respectively. 8. The Ld. A.R. for the assessee submitted that the CIT(A) ought to have held that the assessing officer has not justified in making additions of ₹ 50 lakhs and ₹ 25 lakhs for assessment years 2007-08 & 2008- 09, towards alleged on money payment in respect of sale of Venkojipalem site. The A.R. further submitted that the A.O. was not correct in making additions based on certain loose slips found .....

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lement of land dispute in respect of Venkojipalem site, but nowhere, stated that he had paid on money to the assessee towards purchase of site. Therefore, the A.O. was not correct in coming to the conclusion that the assessee has received on money towards sale of Venkojipalem site. The A.R. further submitted that there is some entries recorded in the seized materials in the name of assessee. The Managing partner of the firm categorically stated that the said amount has been paid towards settleme .....

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materials, during the course of search in the premises of M/s. M.V.V. Builders, wherein it was categorically stated that the firm has paid a sum of ₹ 75 lakhs of money to the assessee towards purchase of Venkojipalem site. The Ld. D.R. further submitted that the Managing Partner of the firm, Sri M.V.V. Satyanarayana has admitted while deposing before the investigation officer that he had paid on money to Sri P. Koteswara Rao towards Venkojipalem site. Though assessee claims to have paid mo .....

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ved by the assessee. The A.O. was of the opinion that the assessee has received on money from M/s. M.V.V. Builders, however failed to disclose the same in the return filed for the respective assessment years. The A.O. further was of the opinion that seized documents from the premises of M/s. M.V.V. Builders clearly exhibits that M/s. M.V.V. Builders has paid on money of ₹ 75 lakhs in 2 financial years relevant to assessment year 2007-08 & 2008-09 to the assessee towards purchase of Ven .....

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The assessee further contended that the transaction has been completed on 7.6.2006 and alleged on money payment was issue arised in the financial year relevant to the assessment year 2007-08 & 2008-09. Therefore, it is highly uncommon to make payment of on money after completion of sale transaction. The assessee further claimed that Sri M.V.V. Satyanarayana has addressed a letter, wherein he has categorically stated that no on money is paid towards purchase of Venkojipalem site. Under these .....

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actions were recorded in the name of the assessee. Though, Sri M.V.V. Satyanarayana stated that he had paid a sum of ₹ 50 lakhs and ₹ 25 lakhs in the financial year relevant to assessment year 2007-08 & 2008-09, to Sri P. Koteswara Rao towards land dispute settlement, nowhere it is stated that he had paid on money to the assessee towards purchase of site. The assessee right from the beginning stated that he had not received any on money from M/s. M.V.V. Builders towards sale of s .....

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e transaction has been completed on 7.6.2006. The sale transaction has been completed by way of registered sale agreement-cum-GPA. The assessee has received full consideration as on the date of registration of document and handed over the possession of the property to the buyers. The allegation of the A.O. is that the purchaser has paid on money to the assessee in the financial years relevant to assessment year 2007-08 and 2008-09 which is almost one year after sale is completed. We further noti .....

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e assessment. The A.O. merely acted upon the statement given by the third party which was totally denied by the assessee. It is a settled position of law that unless statement is tested under cross examination, the same cannot be considered as evidence against the assessee. The A.O. used the admission of partners of purchaser firm made u/s 132(4) of the Act in their case against the assessee, but failed to note that admission of other parties cannot be considered as conclusive evidence against t .....

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ticed that Sri M.V.V. Satyanarayana, while deposing before the investigating officer has stated that he has paid money to Sri P. Koteswara Rao towards settlement of land disputes, but nowhere, stated that he had paid on money to the assessee towards purchase of Venkojipalem site. The assessing officer without bringing on record any evidence to prove that on money is exchanged between the parties, merely harping upon loose sheet and third party statement, which cannot be considered as conclusive .....

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nd seller. Therefore, we are of the view that the A.O. is not correct in making additions towards on money without there being any evidence to show that the assessee has received any money over and above what was stated in the sale deed. 13. Coming to the case laws relied upon by the assessee. The assessee relied upon the decision of coordinate bench of Visakhapatnam ITAT in the case of Sri Venkata Rama Sai Developers Vs. DCIT in ITA No.453/Vizag/2012 dated 6.11.2015. The coordinate bench of thi .....

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ue of the property and ascertain whether any under valuation is done, if so what is the correct value of the property. Further, the A.O. did not brought on record any evidence to support his contention to say that there is on money exchanged between the parties. In the absence of proper enquiry and sufficient evidences, we find no reason to confirm the addition made by the A.O. Therefore, we reverse the CIT(A) order and direct the Assessing Officer to delete the addition. 14. The assessee relied .....

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otes C. Radha Krishna Kumar and KRK denotes K. Rajani Kumari. However, no name of the assessee was found in the louse sheet. The property was purchased from P w/c CRK for a disclosed consideration of Ps. 65 lakhs by the assessee. The property has been registered and the sale deed was executed for a consideration of Ps. 65 lakhs on 21st Aug., 2006 which consideration has been accepted by the State registration authorities. Further nothing was brought on record to show that there was any invoking .....

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money over and above ₹ 65 lakhs. The AO placed hi reliance on the statement of 5, who is a third party. The evidence brought on record by the Department is not enough to fasten additional tax liability on the assessee. As seen from the above document this is just a handwritten loose document and the handwriting is also not of the assessee and the loose document was found at the premises of a third party. The burden is on the Department to prove conclusively that the loose document belongs .....

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CRK is not enough material to sustain this addition. The seized material found during the course of search and the statement recorded are some piece of evidence to make the addition. The AO has to establish the link between the seized material and other books of account to the assessee. The seized material and statement of CRK cannot be conclusive evidence to make this addition. The entire case herein is depending upon the rule of evidence. There is no conclusive presumption to say that actual c .....

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ate and name of the assessee. The allegation of the Department is that the seized material denotes the payment made by the assessee to the purchaser for purchase of the property. However, no such narration or name of the assessee was found in the seized material. The Department is not able to unearth any document or material or any corroborative material to show that the assessee herein actually paid Ps. 165 lakhs for purchase of the property. The Department has not brought on record the date on .....

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with judicial spirit and come to a judicial conclusion. The AO is required to act fairly as a reasonable person and not arbitrarily and capriciously. The assessment made should have enough material and it should stand on its own legs. The basis for addition cannot be only the loose sheet or a third party statement. In the absence of corroborative material, and/or circumstantial evidence, the addition cannot be sustained. Thus, no addition can be made on a dumb document and noting on loose sheet .....

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e entire facts of the case, the Revenue has failed to discharge its duty, instead made up a case on surmises and conjectures which cannot be allowed. Under these circumstances, there is no reason to confirm the addition of ₹ 100 lakhs towards on-money payment. Accordingly, the addition of ₹ 100 lakhs is deleted.- CIT vs. P.V. Kalyanasundaram (2006) 203 CTR (Mad) 449: (2006) 282 ITR 259 (Mad) relied on 15. The assessee relied upon the decision of Hon ble A.P. High Court, in the case o .....

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also to the vendor; that no presumption of such payment of ₹ 1.00 crore in cash can be drawn on the basis of an entry found in a diary/loose sheet in the premises of C. Radha Krishna Kumar which is not in the respondent s handwriting and which did not contain the name of the respondent or any date of payment or the name of the person who made the payment. It rightly held that the Revenue failed to establish the nexus of the seized material to the respondent and had drawn inferences based .....

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in favour of the assessee. The Hon ble Supreme Court, while deciding the issue in favour of the assessee held as under: We have heard learned counsel for the parties and have gone through the record. It is true that the Division Bench of the High Court has borrowed extensively from the orders of the Tribunal and the Commissioner and passed them off as if they were themselves the author(s). We feel that quoting from an order of some authority particularly a specialized one cannot per se be fault .....

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