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2015 (11) TMI 1608 - ITAT VISAKHAPATNAM

2015 (11) TMI 1608 - ITAT VISAKHAPATNAM - TMI - Validity of reopening of assessment - formation of opinion - Held that:- A.O. at the time of issuing notice u/s 148 of the Act is not necessarily to establish the fact that there is an escapement of income. But what is necessary is that there must be some relevant material on which the formation of opinion is arrived at by the assessing officer. In the instant case, the A.O. formed his opinion based on the information received from the investigatio .....

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ation received from the investigation wing of the department. The CIT(A) has elaborately discussed on the issue and rejected the assesse arguments. Therefore, we upheld the reopening of the assessment and reject the ground raised by the assessee. - Decided against assessee - Addition towards alleged on money received by the assessee based on third party statement relied upon by the assessing officer - Held that:- A.O. is not correct in coming to the conclusion that the on money is exchanged .....

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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. - Decided in favour of assessee - I.T.A.No.453/Vizag/2012 - Dated:- 6-11-2015 - SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER Appellant by : Shri G.V.N. Hari, AR Respondent by : Smt. D. Komali Krishna, DR O R D E R PER G. MANJUNATHA, Accountant Member: This appeal filed by the .....

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Classique Farms & Estates, Visakhapatnam on 12.9.2007, it was noticed that the assessee has sold land admeasuring 40 acres situated at Maddi village, Visakhapatnam district to M/s. Classique Farms & Estates, Visakhapatnam for a consideration of ₹ 48 lakhs. During the course of search operation, certain incriminating documents were found and seized, wherein certain financial transactions were recorded. From these seized materials, the A.O. found that M/s. Classique Farms & Estat .....

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g the course of assessment proceedings, the A.O. noticed that the assessee firm has sold 40 acres of land situated at Maddi village to M/s. Classique Farms & Estates on 31.12.2006 for a valuable consideration of ₹ 48 lakhs. Further, the seized documents from the office of M/s. Classique Farms & Estates reveals that the actual consideration paid for purchase of the said land was at ₹ 2,84,00,000/- @ ₹ 7,10,000/- per acre as against the declared sale consideration of S .....

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d into between by our firm with M/s. Sri Venkatarama Sai Developers and the amount written therein is the cash payments made by us over and above the amounts shown in the sale deed for purchase of the said property. Page no.84 of seized materials shows that ₹ 62 lakhs was paid by cheques drawn on Bank of Baroda and ₹ 1,38,00,000/- was paid in cash on various dates beginning from 2.1.2007 to 10.2.2007. Similar materials were also seized from the business premises of M/s. M.V.V. Builde .....

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tner of the assessee firm for purchase of land. The relevant portion of the statement as culled out from the assessment order is reproduced hereunder: Q. 4. After going through Annex/N W516, it is observed that ₹ 1,01,10,000/- is paid to Sri Pattabi garu from 02-01-2007 to April, 2007. Please identify this person. Further, the name of Mr.Pattabhi did not appear in the registered document of N/s Classique Farms & Estates ( where macid! Site is located. Pleased give details? The payments .....

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id in cash and these payments are out of the books of account. I have already disclosed my portion of unaccounted investment in this Classique Farms & Estates on the date of search operations i.e. 12-09-07. Statement of Mr.Rapeti Govind recorded on 09-10-07 Q. 10. Please go through sheet no 42 and give details and also mention the person who has written it? Ans. I have written this sup. The names & addresses are related to Maddi Site. i.e. Palm Meadows. Q.11. Please go through back side .....

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er acre which comes to sum of ₹ 76 laks is the registered value. However, this portion of land was registered at ₹ 48 laks. Further, ₹ 178 laks was paid in cash out of which ₹ 40 laks was deducted. Which is written ₹ 138 laks as seen in sheet no.84. 3. During the course of assessment proceedings, the A.O. issued summons to Shri V. Pattabhiram and questioned about the said transaction. However, shri. V. Pattabhiram the partner of the assessee firm has denied having r .....

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u is your name or not. Confirm whether the name written as Pattabhi garu is your name or not. Ans. Yes the name written Pattabhi garu is my name only. I have received an amount of ₹ 48 laks only from the sales of lands at Maddi village from M/s. Classique Farms & Estates. Q.7 Please go through sheet nos.84,83 and 42 of Annex. A/CFE/2 seized in the business premises of M/s. Classique Farms & Estates and identity whether the nothings belong to your or not? Ans. As appearing from this .....

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the Annexure. Q.8 It is very clear from sheet nos.83 & 84 and also sheet no.42 that the noting are related to your firm M/s. Venkatarama Sai Developers. When you are able to identify the portion of amount given to the firm in cheque, why cannot the amount given is cash be treated as amount received by you? Ans. We have received the amounts in cheques only. 4. Subsequently, based on the statements recorded from the partners of both the firms, the A.O. issued show cause notice to assessee fir .....

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on 24.12.2009. Relevant portion of the cross examination is reproduced as under: Q.1 How many acres of land has been purchased from us and how much have you paid per acre. Ans. (Shri M.V.V. Satyanarayana) we have purchased 40 acres from you ₹ 7.10 lakhs per acre. Q.2 How you have paid the consideration? Ans. ₹ 48 lakhs is paid through Cheque, the rest is paid by cash. ₹ 1.01 crores is paid by me to you and the rest is given to you by my partner. Q.3 Have you taken receipts for .....

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we have paid. 5. The assessing officer after considering the evidences available in the seized material and also statements given by the partners of M/s. Classique Farms & Estates, held that the assessee s contention that there is no on money received by it from the sale of the said land is not acceptable. Therefore, the A.O. made an addition of ₹ 2,79,10,000/- towards alleged on money received by the firm from M/s. Classique Farms & Estates as income from other sources and complet .....

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of the information received from investigation wing, except information from the investigation wing, there is no tangible material or prima facie case before Assessing Officer to come to the conclusion that there is an escapement of income. The assessee further contended that it has purchased the said property in the year 2005 and within a span of short period of 2 years, there is no possibility of getting such a huge price for the same property. It has further contended that simply on the basi .....

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course of cross examination of the partner of vendee firm, the firm could not produce any independent evidence for having paid cash, except there are loose sheets found in the premises of the vendee firm wherein some financial transactions are recorded in the name of the one of the partner of the assessee firm. The assessee further contended that even according to the statements of the partners of the vendee firm, the consideration is ₹ 7,10,000/- per acre and for 40 acres and the total c .....

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t. P. Radhika into the firm s hands as amount received by the firm without mentioning any reasons as to how this amount alleged to have been paid to Smt. P. Radhika could be considered as on money in the hands of the assessee firm. To support his contentions, the assessee placed its reliance in the case of Jawaharbhai Atmaram Hathiwala Vs. ITO (2010) 128 TTJ 36 (UO). 8. However, the CIT(A) did not convinced with the explanations offered by the assessee, held dismissing the assessee s appeal i.e. .....

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it is a well known fact and an open secret that there is a lot of black money involved in real estate transaction and the cash component is more in case of the lands situated in outskirts of big cities and towns. The CIT(A) further held that the entries in the seized materials when taken into the totality of the circumstances, clearly points out that the unaccounted cash was paid in the said transactions except primary evidence of payment of cash, all other details like date of cheques, the part .....

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A) s order, the assessee is in appeal before us and raised the following grounds:- Ground No.1: The, order of the Learned Commissioner of Income Tax (Appeals), Visakhapatnam is contrary to the facts and law applicable to the case of the appellant- firm. Ground No.2: The Learned Commissioner of Income Tax (Appeals), Visakhapatnam ought to have held that the notice issued under the provisions of section 148 of the Income Tax Act, 1961 is invalid and consequently the entire reassessment proceedings .....

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of the vendee firm, in which it was stated that the sale consideration has been settled at! 7,10,000/- per acre total of which works out to ₹ 2,84,00,000/- out of which ! 48,00,000/- is paid through cheque. Thus beyond any imagination the alleged cash portion would not have exceeded! 2,36,00,000/-. Ground No.5: Without prejudice to the above, the Learned Commissioner of Income Tax (Appeals), Visakhapatnam is not justified in confirming the action of the assessing officer in considering an .....

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t us first take up the issue of validity of reopening of the assessment. 10. During the course of hearing, the Ld. A.R. submitted that the assessment order passed u/s 143(3) r.w.s. 147 of the Act is bad in law. The Assessing officer issued notice on the basis of information received from the investigation wing. The assessing officer did not conduct any independent enquiry or his opinion is not based on any tangible material so as to form a belief of escapement of income. The A.R. further submitt .....

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e assessment, therefore, the assessment order passed u/s 143(3) r.w.s 147 of the Act should be quashed. On the other hand, the Ld. D.R. strongly supported the order of the CIT(A). 11. We have heard both the parties, perused the material available on record and also considered the orders of the authorities below. In this case, the assessing officer has reopened the assessment based on the information received from the Investigation wing of the department consequent to the search conducted in the .....

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has reason to believe that the income for any assessment year has escaped assessment. The primary requirement of section 147 of the Act is that there should be formation of belief by the assessing officer coupled with material evidence. If the A.O. has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that income had escaped assessment. The A.O. at the time of issuing notice u/s 148 of the Act is not necessarily to establish th .....

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y come from within the assessment records or from outside the assessment record. But what is important is that there should be some cogent material, which suggests that there is an escapement of income chargeable to tax. Therefore, the A.O. has rightly formed his opinion based on the information received from the investigation wing of the department. The CIT(A) has elaborately discussed on the issue and rejected the assesse arguments. Therefore, we upheld the reopening of the assessment and reje .....

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documents reveals that the assessee has sold lands for a consideration of ₹ 48 lakhs and also received on money of ₹ 2,79,10,000/-. During the course of assessment proceedings, the A.O. recorded statements from the partners of the vendee firm u/s 132(4) of the Act. During the course of investigation, the partners of the vendee firm have admitted that they have paid on money to the assessee firm for purchase of property. On cross examination, the partners of the assessee firm denied .....

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Based on the said document and also admission made by the partners of the vendee firm, the A.O. acted upon and came to the conclusion that the on money was paid to the assessee firm towards sale of property. At the time of assessment proceedings, the partners of the assessee firm categorically denied having received the on money right from the beginning. The assessee contended that the seized document found in the premises of M/s. Classique Farms & Estates is neither in the hand writing of .....

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the vendee firm. The assessee firm denied having received the money over and above what is stated in the sale deed. 14. The A.R. of the assessee rightly pointed out that the sale deed registered in the Office of the Sub-Registrar clearly shows that the consideration of ₹ 48 lakhs was fixed for the property and which was exchanged through proper banking channel. It was not a case of revenue that the value shown in the sale deed is not the real value of the property because the value declar .....

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rs of the assessee firm. It was a settled position of law that unless the statement is tested under the cross examination, the same cannot be considered as evidence against the assessee. The A.O. used the admission of partners of vendee firm made in the statement u/s 132(4) of the Act in their case, against the assessee. But, the A.O. failed to note that admission of other parties cannot be considered as conclusive evidence against the assessee, unless there is a corroborative evidence on record .....

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harping upon the loose sheet and the third party admission, which cannot be considered as conclusive evidence against the assessee to bring the on money to tax as undisclosed income. The A.O. is required to bring further evidence on record to show that actual on money is exchanged between the parties, but literally failed to do so. The A.O. did not conduct any independent enquiry relating to the value of the property instead, merely relied upon the statement given by the purchasers of the proper .....

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rming the assessment order, observed that it is uncommon that on money paid/received in real estate transactions. The CIT(A) further observed that it is a well known fact and open secret that there is a lot of black money involved in the real estate transactions and particularly cash component is more in the lands situated in outskirts of the big cities. We do not agree with the findings of the CIT(A) for the reason that assessments cannot be made or taxes cannot be levied on the basis of the th .....

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gree with the stand taken by the CIT(A), for the simple reason that to tax any particular receipt, primary evidence is very much necessary and unless there is a primary evidence, circumstantial evidence cannot be considered as a conclusive evidence against any person to tax any particular receipt. Circumstantial evidence plays an important role in income tax proceedings, where the A.O. needs to estimate the income based on some evidence available for part of the year, then remaining period estim .....

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er similar circumstances held as under: Admittedly there was no search action in the case of the assessee. It is a loose slip containing certain entries recording the payment which was found at the premises of CRK. It does not contain either date of payment or name of the person who has made the payment. According to the Department, CRK denotes 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 .....

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levant entries are made at ₹ 1,65,00,000. The seized material was not found at the premises o the assessee and there is no corroborative material to suggest that the assessee has actually paid ₹ 1.65 çrores towards purchase consideration of the property. The assessee and her brother categorically denied the payment of any 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 Departmen .....

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e in this case is to be computed by the AO on the basis of the available material on record. It should not be based on conjectures and surmises. As of now, the material considered by the AO for making the addition of Ps. 1 crore is seized material marked a 'A/CRK104' and the statement of S. This loose sheet found at the premises of 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 eviden .....

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onsideration passed between the parties is only ₹ 65 lakhs. In spite of this the AO proceeded to conclude that the seized material is conclusively reflecting the payment of consideration at ₹ 165 lakhs. The Department herein i required to establish the nexus of the seized material to the assessee. As stated earlier there is no date 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 purch .....

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tails, the Department has taken a view that the assessee has paid Ps. 165 lakhs for purchase of the property. The Department cannot draw inference on the basis of suspicion, conjectures and surmises. Suspicion, however strong cannot take place of material in support of the finding from the AO. The AO should act in a judicial manner, proceed 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 ass .....

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isclosed income has to be determined or the .basis of the material and evidence detected in the course of the search action. The circumstances surrounding the case are not strong enough to justify the addition made by the Department. The burden of proving the actual consideration in the purchase of property is on the Revenue. Considering the 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 th .....

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: We are of the view that the Tribunal has rightly held that the registered document dt. 21.8.2006 unde4r which the respondent purchased the above property showed that only ₹ 65.00 lakhs was paid to the vendor by the respondent; that there was no evidence to show that the respondent had paid ₹ 1.00 crore in cash 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. .....

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relating to the value of the property purchased and the burden of proving the actual consideration in the purchase of the property is on the Revenue and it had failed to discharge the said burden. 20. The A.R. further relied upon the ITAT Ahmedabad C' Bench decision in the case of Jawaharbhai Atmaram Hathiwala Vs. ITO reported in (2010) 128 TTJ 36, wherein under similar set of facts, the Hon ble ITAT decided the issue in favour of the assessee as under: The assessee has claimed to have made .....

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arch. Even at time of cross examination by the assessee the partner of OD could not produce any evidence that the amount written in the seized document was in fact received from the assessee. As the assessee has categorically denied to have made any payment in excess of ₹ 1,01,687/- upto 31st March, 1999 in respect of purchase of flat the said denial cannot be brushed aside without bringing any positive material on record. Merely recording made by a third party or statement of a third part .....

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e of DCIT (Central Circle)-6 Vs. B. Vijay Kumar in ITA No.930 & 931 of 2009 held the issue in favour of the assessee as under: 11. We have heard rival submissions, perused the material submitted before us and also perused the orders of the revenue authorities. On a reading of the assessment order, it is absolutely clear that the addition has been made entirely on the basis of the photocopy of the sale agreement seized from the residence of the assessee in course of search and seizure operati .....

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als on record, it is very clear that the AO has failed to lay his hands on any credible evidence to establish the fact that the assessee has purchased the property for a consideration of R s . 1,68, 00,000/ - as mentioned in the photo copy of sale agreement seized in course of search and seizure operation. The assessee has produced before the AO registered sale deeds in support of its claim that they had purchased the property for a consideration of ₹ 23.50 lakhs. When the AO alleges that .....

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AO which could establish the fact that the actual consideration passed between the parties is not as mentioned in the registered sale deed but as per the sale agreement found during search operation. It is also an interesting fact to note that in the statement recorded from the assessee u/s 132(4) the revenue authorities have not put any question with regard to the sale agreement seized at the time of search and seizure operations. Smt. R. Nalini Devi also in her statement further clearly state .....

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dentiary value. Therefore, photocopies of any document cannot by itself be considered as evidence for purpose of making addition in assessment proceedings. The AO is required to bring further evidence on record to show that the sale agreement was actually acted upon by the parties. This is because of the fact. when the AO is going to make an addition, there should be sufficient evidence brought on record to support such addition. No addition can be made on conjectures and surmises. As seen from .....

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red sale deed and for which the property was sold. The assessee has also produced sufficient evidence to show that the- re was dispute going on regarding the legal right over the property which also had an effect on the fair market value of the property. It is also pertinent to mention here that the assessee had filed his return f income for the assessment years under dispute much prior to the date of search declaring the purchase of land in question at the consideration mentioned in the registe .....

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Nalini Devi. We find that the CIT (A) in his elaborate and well reasoned order has dealt with all these aspects and came to a finding on fact that the AO has made the addition purely on conjectures and surmises and not on the basis of any material or evidence brought on record. On examining the facts and materials before us, we are of the view that the finding arrived by the CIT (A) is just and proper and in accordance with the principles of law laid down by the Hon'ble Supreme Court and Hon .....

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one through the impugned judgement and order of the learned Tribunal. It appears, the Assessing Officer had relied on a photocopy of an unsigned sale agreement in order to find that consideration amount has been paid at ₹ 1,68,00,000/-. Therefore, this amount was not disclosed. The learned Tribunal has correctly concluded that unsigned photocopy of the agreement for purchase of the property cannot be a material to rely on, when the registered sale deed has been produced and the same shows .....

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agreement has got no evidentiary value. The Assessing Officer has done a guess work while coming to the conclusion that the price of the property is more than mentioned in the sale deed. There must be some material and basis to conclude that the purchase has been made at an under valuation. 23. The Hon ble Supreme Court in the case of CIT Vs. P.V. Kalyana Sundaram (2007) 294 ITR 49, under the similar circumstances held in favour of the assessee. The Hon ble Supreme Court, while deciding the issu .....

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