TMI Blog2018 (6) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... by the vendors and does not bear the signature of the vendee, hence the said agreement cannot be held as valid agreement - the agreement was neither signed by the assesses nor their names were mentioned, thus the assesses have never become the parties for the agreement and no other material is available to show that the assessee’s have paid the consideration over and above the consideration recorded in the sale deed, thus there is no material in the case for forming a belief to hold that there was an escapement of income in the hands of the assessee - mere suspicion, presumption, surmises are not sufficient reasons to reopen the assessment - thus there is no case for making addition u/s 69 - Decided in favor of assessee. - ITA No.178/VIZ/2017, ITA No. 179/VIZ/2017, ITA No. 180/VIZ/2017, ITA No. 181/VIZ/2017, ITA No. 182/VIZ/2017, ITA No. 183/VIZ/2017, ITA No. 184/VIZ/2017, ITA No. 185/VIZ/2017, ITA No. 186/VIZ/2017, ITA No. 187/VIZ/2017 And ITA No. 188/VIZ/2017 - - - Dated:- 30-5-2018 - SHRI V. DURGA RAO, HON BLE JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, HON BLE ACCOUNTANT MEMBER ITA No. 189/VIZ/2017 For The Assessee : Shri V.Madhusudan, A.R For The Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in survey Nos.38/2, 43/8 and 5/2 situated in Annavaram village, Visakhapatnam District @ ₹ 32,50,000/- per acre by Shri Yeruva Joji Reddy, S/o Bali Reddy of Hyderabad. Subsequently Shri Joji Reddy purchased 4.64 acres of land in Survey No.38/2(mentioned in agreement dated 21/06/2007 above) for a consideration ₹ 11,60,000/- @ ₹ 2,50,000/- per acre and got it registered in the name of Mr.Y.Joji Reddy through GPA-cum-Possession agreement on 17.7.2007. Further Mr Joji Reddy had purchased 2.00 acres of land by sale cum General Power Attorney agreement (GPA) dated 22/08/2007 from Smt.Pothula Annapurnamma, W/o Shri Gowri Shankar of Bheemunipatnam for consideration of ₹ 5.00 lacs which works out ₹ 2.50 lacs per acre. The assesse and 11 others have purchased the said land of 6.64 acres in survey Nos. 38/2 and 26/2 from Mr.Y.Joji Reddy by registered sale deed No.445 of 2008 dated 12.2.2008 for a consideration of ₹ 26,56,000/- @Rs.4 lakhs per acre. According to the assessing officer, the vendees must not have paid less than ₹ 32.50 lakhs per acre as per the agreement dated 21.6.2007 entered into between Y. Joji Reddy and Shri Kantimohanti Surya Prakas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands of the assessees as undisclosed investment in the hands of the 12 assesses @ to ₹ 15,76,583/- per head. The A.O. has not made any addition other than the unexplained investment relating to purchase of the land. 4. Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A) and objected for initiation of proceedings u/s 148 of the Act in the hands of the assesse, validity of the assessment made u/s 147 and also challenged the assessment order on merits. Ld. CIT(A) upheld the initiation of proceedings u/s 147 of the Act and the validity of assessment made u/s 147 r.w.s. 143(3) of the Act. In respect of quantum addition, the Ld.CIT(A) held that the agreement dated 21.6.2007 shows the agreed purchase price of ₹ 32,50,000/- in survey No.38/2, as per the agreement entered into by Mr. Y. Joji Reddy and Shri Kanti Mohanti Surya Prakasa Rao and 6 others and in survey No.26/2, as per the agreement entered into between Mr. Y. Joji Reddy and Smt. P. Annapurnamma, the agreed price of the land was ₹ 30 lakhs per acre. Thus the Ld.CIT(A) held that it is unjustified to adopt the rate of ₹ 32,50,000/- per acre for the entire land of 6.64 acres i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es from Mr. Y. Joji Reddy for the consideration over and above the sale consideration registered in the sale deed. In none of the documents found and seized by the department referred by the Ld.CIT(A)/AO i.e. the agreement dated 21.6.2007, 7.7.2007 between Smt. P. Annapurnamma and Mr. Y. Joji Reddy and the GPAs registered in favour of Mr. Y. Joji Reddy, there was a mention of the assessees. There was no nexus between assessee and parties for the agreement referred by the lower authorities. Merely because the assessee has purchased the land which was part and parcel of survey No. mentioned in agreement dated 21.6.2007 and 7.7.2007, it cannot not be presumed that the assesse had paid the unaccounted consideration and held against the assessee for reopening the assessment. Since there was no nexus and there was no whisper in the agreements dated 21.6.2007 ad 7.7.2007 or in the statement recorded u/s 132(4) of the Act from Mr. Y. Joji Reddy,the Ld.A.R argued that there is no reason for the A.O. to form a belief for escapement of income and the issue of notice u/s 148 of the Act is on mere suspicion, surmises and presumptions. Hence, the notice issued u/s 148 of the Act required to be q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. In this case, the A.O. has issued notice u/s 148 of the Act for escapement of income u/s 147 of the Act. The foundation for issue of notice u/s 147 of the Act is an agreement dated 21.6.2007 stated to have been entered into between Mr. Y. Joji Reddy and Shri Kantimohanti Surya Prakasa Rao and 6 others for sale of land admeasuring 21.43 acres in survey No.38/2 (17.67 acres), 43/8 (0.68 acres), 5/2 (3.08 acres) in Annavaram village. The agreement was signed by the land owners i.e., Shri Kantimohanti Surya Prakasa Rao and 6 others but not signed by Mr. Y. Joji Reddy, the vendee. As per the agreement, Mr. Y. Joji Reddy stated to have agreed to purchase the land at an agreed price of ₹ 32.50 lakhs per acre and out of which ₹ 90.00 lakhs was paid as advance on 21/06/2007. The agreement was valid for 6 months from the date of agreement. However, Mr. Y. Joji Reddy had purchased only 4.64 acres in survey No.38/2 by General Power of Attorney-cum-Possession agreement dated 17.7.2007 for a consideration of ₹ 11,64,000/-. Similarly, Mr. Y. Joji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the F.Y.2007-08. As per the seized material marked Annexure A/SLT/3/39, it was found that each acre was agreed to be purchased for ₹ 32 lakhs. As the amounts invested by the assessee were not offered to tax, I have reason to believe that the unaccounted income invested in the lands at Annavaram Village have escaped assessment and notice u/s 148 is required to be issued. 9. Perusal of the reasons recorded shows that the foundation for initiating proceedings u/s 147 of the Act was the seized material marked as Annexure A/SLT/3/39 (Page Nos.87 to 85) i.e. an agreement dated 21.6.2007 for purchase of land of 21.43 acres by Mr.Joji Reddy from Shri Kantimohanti Surya Prakasa Rao and 6 others. As discussed earlier, the said document does not bear the signature of Mr. Y. Joji Reddy and there was no mention of the assessees in the said document. As discussed earlier the agreement was signed by the vendors and does not bear the signature of the vendee, hence the said agreement cannot be held as valid agreement. The said agreement was neither signed by the assesses nor their names were mentioned, thus the assesses have never become the parties for the agreement and no othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings under section 34 of the Act is open to challenge in a court of law (see Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District 1, Calcutta [1961] 41 ITR 191 ; [1961] 2 SCR 241) Hon ble apex in Income-tax Officer.v.Lakhmani Mewal Das([1976] 103 ITR 437 (SC),court held that The reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered and duly acknowledged by the vendor and the vendee. There was no evidence found during the course of search in the premises of M/s. Sai Lakshmi Township Pvt. Ltd. or from the statement recorded from Mr. Y. Joji Reddy evidencing that the assessees have paid the consideration over and above the registered sale deed. Though Mr. Y. Joji Reddy stated to have entered into an agreement with Shri Kantimohanti Surya Prakasa Rao and 6 others, the said document was not signed by Mr. Y. Joji Reddy, hence, the same cannot be taken as a valid piece of evidence and has no relevance in the case of assesses. Mr. Y. Joji Reddy has entered into another agreement for purchase of land in 26/2 for an agreed price of ₹ 30 lakhs per acre from Smt. P. Annapurnamma, Smt. P. Vijaya Lakshmi and S. Venkateswara Rao by an agreement dated 7.7.2007 and this document also has no relevance in the case of the assessees. It is observed that Mr. Y. Joji Reddy has purchased and got it registered the said land by GPA dated 22.8.2007 for a consideration of ₹ 5 lakhs @ 2.5 lakhs per acre. Mr. Y. Joji Reddy has stated in his statement recorded u/s 132(4) of the Act that he had paid average price of ..... 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