9911796707
TMI Blog2013 (11) TMI 1748X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome for all the years mentioned above and the assessments were completed by making various types of additions in all the years. The assessee challenged all the assessment orders by filing appeals before Ld CIT(A) and got partial relief. Aggrieved by the orders passed by Ld CIT(A), both the parties have filed appeals before us challenging the decision of the first appellate authority on the issues decided against each of them. 3. For assessment year 2001-02, the assessee only has filed appeal before us, wherein he is challenging the addition of ₹ 50,000/- (out of ₹ 4,50,000/-) confirmed by Ld CIT(A). The facts relating thereto are stated in brief. In response to the notice u/s 153A of the Act, the assessee filed return of income declaring a total income of ₹ 1.00 lakh and agricultural income of ₹ 1.50 lakh. During the course of search operation, the department had seized a document numbered as VJJ-3(5), which happened to be an agreement dated 28-02-2001 entered by the assessee with his wife Smt. Ashifa Begum in connection with purchase of a property. The facts relating to the said agreement has been narrated by the assessing officer in his remand report fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 4.50 lakh was actually paid by his wife as per the original agreement entered by her with Shri E.V. Alexander and Smt. Mary Mathew. It was submitted that the assessee did not pay any amount to his wife as per the agreement dated 28-02-2001 entered by him with her. The ld CIT(A) examined the abovesaid agreement and has given a clear finding as under in paragraph 10 of his order:- "…….But the fact remains that this agreement does not mention at all that Smt. Ashifa begum had received any consideration from the appellant for passing over her rights acquired through the agreement dated 29.11.1999. Hence as per the appellant the contention of the A.O. in para 3 of the assessment order that the appellant had paid ₹ 4,50,000/- vide agreement dated 28-02-2001 is wrong. I have carefully perused the seized documents as mentioned in the order and have verified the contents mentioned therein. It is found that nowhere in the agreement it has been mentioned that Smt. Ashifa Begum has received any consideration or ₹ 4,50,000/- from the appellant for passing on her rights acquired through the agreement dated 29.11.1999. Hence in my view the observations mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hands in pursuance of the said agreement. 8. Even if it is assumed for a moment that the said agreement is a sham agreement and the assessee only entered into this transaction as assumed by Ld CIT(A), then also, in our view, there is no requirement of making any addition since (a) the amount paid during the year under consideration was only ₹ 50,000/- and (b) the amount of total income and agricultural income declared by the assessee aggregating to ₹ 2.50 lakhs would be sufficient enough to explain the sources for ₹ 50,000/-. 9. Accordingly, we do not find any justification in confirming the addition of ₹ 50,000/- in AY 2001-02. Accordingly, we modify the order of Ld CIT(A) on this issue and direct the AO to delete the above said addition. 10. We shall take up the appeals filed for assessment year 2002-03 by both the parties. The additions made by the AO, relief granted/additions sustained by Ld CIT(A) are tabulated below:- Items Amount Relief granted Addition sustained Amount paid for PTP Nagar property 13,00,000 11,50,000 1,50,000 Purchase of Benz Car 6,00,000 6,00,000 ---- Purchase of cashew factory 1,43,000 1,43,000 ----- Depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings, the assessee had filed a confirmation letter obtained from Shri A.R.Shajahan, wherein it was stated that a loan of ₹ 10 lakh was paid by him to the assessee's wife named Smt. Ashifa Begum by way of cheque number 933034 drawn on 15.7.2000. During the course of remand proceedings, the assessing officer made enquiries with Federal Bank and found that the cheque no. 933034 was used to draw a sum of ₹ 50,000/- only on 4th April, 2001. Accordingly, the AO concluded that the assessee has failed to prove the nexus of financial transactions of Shri A.R. Shajahan with him, apparently meaning that there is no proof to substantiate the claim of receipt of money from Shri Shajahan. Accordingly, the AO stood by the addition of ₹ 13.00 lakh made in respect of investment made in PTP Nagar property. 13. The next issue relates to the addition of ₹ 6.00 lakh relating to the investment made in purchase of Benz Car. In the remand report, the AO stood by the addition made by stating that the assessee could not explain the sources for purchasing the car. 14. The next relates to the addition pertaining to Bank deposits. The facts relating thereto are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in those deals were routed through the banks. (c) In the immediately preceding year, his wife had given an advance of ₹ 4.50 lakhs to Mary Mathew and others in connection with a land deal. It was submitted that the said amount was returned back during this year, since the transaction did not fructify and hence the same was available with him a source. (d) In the bank deposits listed out by the AO, the assessee pointed out that a sum of ₹ 5.50 lakhs represent transfer of funds from some other bank account and another deposit of ₹ 5.50 lakhs represent funds withdrawn from the very same bank account in the immediately preceding days. (e) The assessee also contended that the evidences collected by the assessing officer during remand proceedings were not put to the assessee. 16. The Ld CIT(A) examined all the issues and decided as under:- (a) In respect of investment in PTP Nagar Property, the Ld CIT(A) rejected the claim of receipt of loan of ₹ 10.00 lakhs from Shri A.R. Shajahan, as he had stated in the confirmation letter that the loan was given to the wife of the assessee. However, the Ld CIT(A) agreed with the assessee that the amount of ₹ 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate broker and is also engaged in purchase and sale of cars. The modus operandi of the assessee in the real estate transactions is that he would acquire large sized plot by entering into an agreement with the sellers and convert the same into small sized ones by making division/partition. Thereafter, he would identify the prospective buyers and make the seller of plot to register the same directly in the name of the buyers. The modus operandi of the assessee, discussed above, has not been rejected by the revenue. 18. According to the assessee, the bank transactions represent the activities carried on by him in real estate and vehicle business. The assessee has further submitted the funds received by him from out of the loan obtained from Shri A.R. Shajahan, refund received from M/s S.I. Property on behalf of Shri Shajahan, the refund of money of ₹ 4.50 lakhs advanced to Mary Mathew in the immediately preceding year, income declared during the year under consideration, sale proceeds of PTP Nagar property etc. were utilised for making deposits into the bank. Though the AO and Ld CIT(A) have not accepted the claim of availability of certain sources for want of supporting eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 2002-03. The AO also does not have any other material to support his view. Under these circumstances, we agree with the view taken by Ld CIT(A) that the assessing officer has only assumed that the car was purchased during the year relevant to the assessment year 2002-03. In the absence of any credible evidence to show the date of purchase of car, in our view, the Ld CIT(A) was justified in deleting the addition of ₹ 6.00 lakhs, referred supra. 20. The next addition relates to the investment made in the purchase of PTP Nagar property. As stated earlier, the assessing officer has added a sum of ₹ 13.00 lakhs as unexplained investment. The Ld CIT(A) gave set off of ₹ 10.50 lakhs, being the amount received from M/s S.I. Property, and confirmed the balance amount of ₹ 1.50 lakhs. The revenue is challenging the relief granted by Ld CIT(A) and the assessee is aggrieved against the addition sustained. 20.1 In the remand report, the AO rejected the claim of availability of the amount refunded by M/s S.I. Property on the ground that there is no evidence to show the nexus between the transactions entered by Shri Shajahan and the bank accounts of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the amount of ₹ 10.50 lakhs refunded by the above said concern was available with him and used by him. Accordingly, we uphold the view of Ld CIT(A) on this issue. 20.3 While confirming the addition of ₹ 1.50 lakhs, we notice that the Ld CIT(A) did not examine the submission of the assessee that the advance of ₹ 4.50 lakhs given to Smt. Mary Mathew in the years relevant to the assessment years 2000-01 and 2001-02 was received back and the same was used for his business transactions. In the immediately preceding year, i.e., in assessment year 2001-02, the amount of ₹ 4.50 lakhs given to Smt. Mary Mathew was considered in detail by the tax authorities as well as by us. Hence, there is no dispute with regard to the fact that a sum of ₹ 4.50 lakhs was given to Smt. Mary Mathew by the wife of the assessee. According to the assessee, the purchase transaction could not be finalized and hence Smt. Mary Mathew has returned the advance amount, referred above. During the course of search, the department did not unearth any evidence to contradict the said submissions, i.e., no evidence was seized to show that the transaction with Smt. Mary Mathew was conclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld CIT(A) has held that the bank deposit to the tune of ₹ 20,30,376/- stands unexplained. The Ld CIT(A) rejected the contention of the assessee that the sale proceeds received on sale of PTP Nagar property was used to make deposits, for want of evidences. The fact remains that the assessee is a real estate broker. The fact that the assessee has purchased PTP Nagar property is also not in dispute. According to the assessee, he has converted the PTP Nagar plot into four small sized plots and sold them to four persons, viz., M/s Parameswaran, Sundaree Sundaram, Sarath and Dr. Maheen. It was submitted that the original holders of the PTP Nagar plot has directly executed the sale deeds in favour of the four persons mentioned above. Thus, if one looks at the conveyance deeds, the existence of the assessee as an intermediary will not be known. Since the assessee has acted as an intermediary in the transactions, normally his relationship with the buyers/sellers of the property would not continue after the conclusion of relevant transaction. Hence, it would be normally difficult for him to obtain the information, as sought by the AO. On the contrary, it would be easy for the AO to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties are assailing the decision rendered the Ld. CIT(A) on the issue relating to determination of undisclosed income from sale of Anakulam Estate. The facts relating thereto are stated in brief. The seized documents revealed that the assessee had paid an advance of ₹ 25.00 lakhs as per sale agreement dated 19-06- 2002 entered by the assessee for purchase of Anakulam Estate having an extent of 101.50 acres. It was proposed to be purchased at the rate of ₹ 67,000/- per acre. The assessee was asked to explain the source for payment of the advance of ₹ 25.00 lakhs. The assessee submitted that he received a sum of ₹ 24.00 lakhs from a person named Shri Abdul Kalam, Thalhani Textiles, Attingal and used his own funds to the extent of ₹ 1.00 lakh both aggregating to ₹ 25.00 lakhs to pay the advance, referred above. 25.1 In this regard, the Assessing Officer examined Shri Abdul Kalam, refered above, by issuing summons u/s. 131 of the Act and a sworn statement was also recorded from him on 29-12-2008. It is to be noticed that the AO did not make any addition in respect of the advance payment of ₹ 25.00 lakhs referred above. Before the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by M/s Thamarapalli Rubber Co. Ltd and not Anakulam Estate property. The remand officer also noticed that the said Demand draft payments were made during the financial year relevant to the assessment year 2004-05 and not in the year relevant to the assessment year 2003-04. Accordingly, the Assessing Officer reported in the remand report that the amount of ₹ 85.00 lakhs should not be considered in this year. 25.4 The Assessing Officer, in the remand proceedings, noticed that the assessee has reported to have sold only 83.22 acres as detailed below:- 71.22 acres as per list given to AO - 48,66,120 12.00 acres sold to Geevarghese Varghese - 21,60,000 70,26,120 Thus, according to the assessee, 83.22 acres of land have been sold for an aggregate value of ₹ 70.26 lakhs. The AO deducted the proportionate cost for 83.22 acres (83.22 acres ×₹ 67,000/- per acre) from the sale value reported by the assessee and computed the profit at ₹ 14.49 lakhs. The remand officer also determined the profit on sale of Anakulam estate in another method. He noticed that the land was sold to Shri Geevarghese Varghese @ ₹ 1,80,000/- per acre. Accordingly, he applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se reports and submissions made by the Assessing Officer and the appellant the facts have emerged clearly as under: (a) That in the assessment order the whole basis of working the capital gain of ₹ 3859500/- was wrong and without correct appreciation of facts because the then Assessing Officer took the figure of ₹ 8500000/-towards sale of Anakulam Estate and for assessment year 2003-04 whereas, the payments were actually made for the sale of Thamarapalli Rubber Company Ltd. Kottayam and relate to A.Y. 2004-05. The way Assessing Officer dealt with this issue in the assessment order speaks of a very casual manner with which the entire issue was approached and the addition was made without proper verification of facts for A.Y. 2003-04. Hence there is no capital gain worth ₹ 3859500/- to the appellant for A.Y. 2003-04. (b) The Asstt. CIT who submitted the remand report works out capital gain for this year at ₹ 14.49 lakhs based on records and facts and figures available thereon. However, has further assumed that assessee could have realized more profits by selling the land @ 180000/- per acre as sold to G. Varghese for 12 acres. but, this calculation is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty in question that some concession for consumption of this land could have been given. (e) Considering that the appellant had earned a profit of ₹ 14.49 lakhs from the sale of entire land, an expense of ₹ 500000/- is allowed for consumption of land towards internal roads and providing other facilities. Hence remaining ₹ 1000000/- are held to be the gain of the appellant from this transaction, rejecting his plea that only ₹ 2.26 lakhs were earned from the entire transaction and also rejecting the plea that he had earned only commission nothing else out of the transaction. Accordingly additions sustained in this account is ₹ 10,00,000/-". Thus, the Ld CIT(A) granted partial relief to the assessee by confirming the addition to the extent of ₹ 10.00 lakhs. The revenue is assailing the relief granted by Ld CIT(A) and the assessee is assailing the addition sustained by him. 27.1 With regard to the proposal for enhancement of income, the Ld CIT(A) has pointed out that Shri Abdul Kalam has confirmed the payment of ₹ 24.00 lakhs to the assessee in the statement taken from him on 29.12.2008. He also noticed that the AO did not make any add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng internal roads while converting the total extent into several small plots. Thus, according to the assessee, he could sell only 83.22 acres of land and realize a sum of ₹ 70.24 lakhs as sale proceeds. 29.1 In the remand proceedings, the assessing officer has accepted that the profit of ₹ 38.59 lakhs computed by him on sale of Anakulam Estate during the course of assessment proceeding is wrong. Hence, the AO proceeded to compute the profit during the course of remand proceeding under two methods. The AO has suggested that the assessee could have realized a sum of ₹ 94.04 lakhs, if the rate realized on the subsequent sale made to Shri Geevarghese Varghese is applied on the entire extent of land sold. However, this is purely an assumption entertained by the AO and hence it is not based upon any material or facts. Hence, in our view, the Ld CIT(A) has rightly rejected the above said method of calculation of profit suggested by the AO. 29.2 The AO, in the remand proceeding, has also computed the profit on sale of Anakulam Estate at ₹ 14.49 lakhs. Since the sale value of ₹ 70.24 lakhs reported by the assessee relates to 83.22 acres of land, the AO has ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 1.00 crore, vide agreement dated 12.9.2003, for purchase of Thamarapalli Rubber Estate for a sum of ₹ 5.88 crores. The assessee submitted that he took money from Shri Abdul Kalam of Attingal to the extent of ₹ 99.00 lakhs by way of demand drafts and put in his own money of ₹ 1.00 lakh. The assessee also furnished the details of Demand Drafts. On comparing the details of demand drafts with the Agreement, the AO noticed that a D.D for ₹ 1,95,000/- bearing number 586898 given in the list did not find place in the Agreement. similarly a bankers cheque dated 12.9.2003 drawn from ICICI Bank for a sum of ₹ 20,25,000/- found in the agreement did not find place in the list. Hence the AO treated both the amounts, i.e., ₹ 1,95,000/- and ₹ 20,25,000/- as income of the assessee. In this year also, the AO furnished a remand report during the course of appellate proceedings before Ld CIT(A). In the remand report, the AO accepted that the Demand Draft of ₹ 1,95,000/- was purchased by Shri Abdul Kalam of Attingal and the same is required to be considered in his hands only and not in the hands of the instant assessee. With regard to the Banker' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs. According to the assessee, he deposited the money into his bank account out of cash of ₹ 22.80 lakhs received from Shri Abdul Kalam and purchased the bankers cheque for ₹ 20.25 lakhs. The assessee also, before remand officer, furnished copies of certificates obtained from State Bank of India to prove that the demand drafts worth ₹ 18.50 lakhs was purchased by Shri Nadeer Shah and E. Sulaikha. The assessee further submitted that he is now able to clarify all these facts, since he has analyzed the details collected during the course of remand proceedings. 30.4 The Ld CIT(A) was convinced with the explanations furnished by the assessee and accordingly deleted the addition of ₹ 20.25 lakhs relating to bankers cheque. With regard to the addition of ₹ 1.95 lakhs, since the remand officer has expressed the view that it need not be considered in the hands of the assessee, the Ld CIT(A) deleted the said addition also. 30.5 The Ld D.R submitted that the explanations, originally given before the AO during the course of assessment proceedings as well as remand proceedings were found to be false. Before Ld CIT(A), the assessee has given a fresh explanation, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount given by Shri Abdul Kalam. Thus the demand drafts aggregating to ₹ 99.00 lakhs (₹ 78.75 lakhs + ₹ 20.25 lakhs) was given to M/s Thamarapply Rubber company as per the agreement. On consideration of totality of facts, we find that the assessee has reconciled the payments made to M/s Thamarapalli Rubber company and we too find it to be convincing. Though the assessee's explanations were contradictory, it has been pointed out by the assessee that he was not having full details during the course of assessment proceedings. It is also a fact that the assessee did not maintain books of account. However, the subsequent explanations are supported by the statements given by Shri Abdul Kalam (Abdul Majeed) and the letter given by State Bank of India. With regard to the addition of ₹ 1.95 lakhs, the remand officer himself has stated that the same need not be considered in the hands of the assessee. Hence, in our view, the Ld CIT(A) was justified in deleting the additions of ₹ 1.95 lakhs and ₹ 20.25 lakhs referred above. 31. The next issue contested by the revenue relates to the addition of ₹ 5,70,000/-, being the cost of purchase of Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. In the absence of details, the AO proposed to compute peak credit balance in all the bank accounts and assess the same as income of the assessee. Accordingly, the AO computed the peak credit balance at ₹ 98,65,287/- and assessed the same. 32.1 In the remand proceedings, the remand officer computed the peak credit at ₹ 219.44 lakhs and commented that the same would result in enhancement of addition of ₹ 98.65 lakhs made by the AO. Before remand officer, the assessee submitted that the transactions in his bank accounts represent purchase/sale transactions of Anakulam estate and Thamarapally estates. Since the assessee did not file copies of sale agreements and confirmation from buyers, the AO rejected the said explanations. Since the deposits made in the bank accounts exceeded ₹ 3.00 crores, the AO expressed the opinion that the revised peak credit of ₹ 219.44 lakhs computed by him would be more appropriate than the figure computed in the assessment proceedings. 32.2 In response to the remand report, the assessee submitted that the sale value of Anakulam estate and Thamarapalli estate were ₹ 70.26 lakhs and ₹ 534 lakhs respectively and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd perused the record. According to the assessee, the deposits made into his bank accounts represent transactions relating to real estate and vehicle brokerage business. According to the assessee, major portion of sale proceeds were routed through his various bank accounts. The assessee has also submitted that there are many interbank transfers also. It is an admitted fact that the assessee has maintained several bank accounts and hence the possibility of interbank transfers cannot be ruled out. The AO has not accepted the above said claim, apparently for want of supporting evidences. However, the Ld CIT(A) has found force in the contentions of the assessee. In our view also, it may not be correct to reject the submissions of the assessee in an outright manner. Because the fact remains that the assessee is engaged in real estate business activities and further he did not maintain books of account. Hence, in our view, the explanations given by the assessee has to be tested on the basis of available evidences, surrounding circumstances and also by duly considering the human conduct and human probabilities, since the object of the Income tax Act is to assess the income in a judicious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to determine the income from the peak credit balance of ₹ 98.65 lakhs, originally fixed by the AO during the course of assessment proceedings. As stated earlier, the Ld CIT(A) has determined the income element at ₹ 50.00 lakh. However, in our view, there is a flaw in the approach of Ld CIT(A). It is pertinent to note that the Ld CIT(A), after having held that the entire amount of deposits cannot be considered as income of the assessee, has actually held the peak credit balance of ₹ 98.65 lakh as the gross receipts of the assessee. From the abovesaid amount, he has allowed set off of income element declared by the assessee/confirmed in his hands to the tune of ₹ 30.30 lakh, resulting in a balance of ₹ 68.35 lakh. From this amount, the Ld CIT(A) has allowed a deduction of about 25%, i.e., about ₹ 18.35 lakh towards expenses and accordingly confirmed the addition to the extent of ₹ 50.00 lakh. 32.7 It is an admitted fact that the assessee is acting as commission agent in real estate and vehicle businesses. It is nobody's case that the assessee is carrying on any other business. The Ld CIT(A) has also found force in the contentions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings, the assessee submitted that he sold a Benz car with Regn. No. KL-1-V-9669 on 29.7.2004 to a person named Shri Shamusudeen and used the sale proceeds thereof to make the abovesaid payment. However, the assessee did not furnish any document to support his claim and hence the AO assessed the sum of ₹ 11,28,840/- as income of the assessee. 34.1 As in earlier year, the Ld CIT(A) called for a remand report from the assessing officer. In the remand proceedings, the AO conducted enquiries by issuing commission and it was found out that the car was sold to Shri Shamsudeen for ₹ 20.50 lakh. According to the remand officer, Shri Shamusudeen paid a sum of ₹ 4.50 lakh by cash and the balance amount of ₹ 16.00 lakh was adjusted against the ICICI Bank Loan. Accordingly, the remand officer accepted the availability of sources to the extent of ₹ 4.50 lakh and recommended for sustaining the addition of the balance amount of ₹ 6,78,840/- (₹ 11,28,840/- (-) ₹ 4,50,000). 34.2 While giving reply to the remand report, the assessee submitted that he himself received the cheque of ₹ 16.00 lakh from Shri Shamsudeen and it was incorrect to say th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the additional income declared by the assessee, we do not find any infirmity in the decision of Ld CIT(A) in deleting these two additions. 36. The next addition relates to the payments aggregating to ₹ 28.00 lakh given to Rajshree Motors on various dates. The search documents revealed that the assessee has paid amounts to Rajshree Motors aggregating to ₹ 58.00 lakh on various dates as detailed below:- 31.07.2004 45,900 04.08.2004 16,00,000 05.08.2004 1,54,100 17.03.2005 30,00,000 17.03.2005 10,00,000 About the sources for making these payments, the assessee stated that he borrowed loans from ICICI Bank and also used the sale proceeds of ₹ 28.00 lakh realised on sale of Benz Car KL-5-S1. The AO accepted the source for making payment of ₹ 30.00 lakh. For other payments, the date of loans did not match with the dates of payments and hence the AO assessed the aggregate amount of ₹ 28.00 lakh as the income of the assessee. 36.1 In the remand report, the assessing officer accepted the fact that all the payments were made by cheque to Rajshree Motors. He also accepted the fact that the assessee has availed several car loans from ICICI Bank for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at they represent the advances received from real estate transactions, loans received and commission received for Padinjarekkara Rubber Estate, Cheruveli Estate and the compensation amount received for Subamaniam Estate. The AO noticed that the transactions relating to Cheruveli estate and Subramaniam estate has taken place during the financial years 2005-06 and 2006-07, i.e., during succeeding years. In the absence of details, the assessing officer proposed to ascertain peak credit of all bank accounts and make the addition. The AO calculated the peak credit balance, which existed on 23.12.2004, at ₹ 85,77,889/- and accordingly assessed the same. 37.1 In the remand proceedings, the AO worked out the peak credit and according to him, the peak credit existed on 10.01.2005 at ₹ 236.01 lakh. He had worked out the peak credit for the immediately preceding year at ₹ 219.44 lakh. Accordingly, the AO expressed the view that the assessee is required to explain the difference of ₹ 16.57 lakh (236.01 (-) 219.44) and it will result in enhancement of income also. 37.2 In reply to the remand report, the assessee submitted that the majority of sale proceeds of Anakulam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A) 37.4 We have heard the rival contentions on this issue. As in the preceding years, the department is finding fault with Ld CIT(A) in not accepting the enhancement proposal given by the AO in his remand report. As held in the previous year, we decline to interfere with this matter. We also notice that the Ld CIT(A) has rejected the enhancement proposal on legal ground and also on merits. 37.5 An identical addition of peak credit balance was made in the assessment year 2004-05 also. We have dealt with the same in detail while considering the appeal of that year. All the observations made therein shall also apply for the year under consideration. Consistent with the view taken in assessment year 2004-05, in this year also, we hold that there is force in the submission of the assessee that he has routed through major portion of sale proceeds of real estate business and vehicle business through his bank accounts. 38. We shall now take up the appeal filed by the revenue for the assessment year 2006-07. The assessee has not filed appeal for this year. In this year, the AO has made following additions:- Income from Commission Business ₹ 12,88,00,000/- Rent from cashew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 63.00 crore. During the course of search, the search officials also seized vouchers evidencing payments made to labourers to the tune of ₹ 9.56 crore as compensation. 40.1 It is pertinent to discuss about the agreement entered between the assessee and Shri Varkey George. It is mentioned in the agreement that the assessee identified the Cheruvally Estate as a suitable acquisition for Gospel for Asia and accordingly requested Shri Varkey George to negotiate the deal with Harrisonns Malayalam Ltd, the owner of the Cheruvally Estate. Accordingly Shri Varkey George negotiated the deal for a consideration of ₹ 63.00 crores. Accordingly, he entered into a sale agreement with Harrisons Malayalam Ltd on 15.6.2005, as per which the company agreed to sell the estate to the nominee of Sri Varkey George. Accordingly he nominated Gospel for Asia as purchaser. Since the assessee and Shri Varkey George have worked together, they have entered into this agreement to share the commission income. In connection with this deal, a sum of ₹ 20.00 crore was received as commission from Gospel for Asia. It was agreed that all the payments received shall be routed through Shri Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gospel for Asia. He was also responsible for meeting legal and other charges. Accordingly he has nominated Shri Benny Joseph for completing the labour settlement. Accordingly Shri Varkey Joseph transferred ₹ 8.00 crore to the account of Shri Benny Joseph. The assessee also later transferred a sum of ₹ 2.09 crore to his account. Thus the total amount received by Shri Benny Joseph was ₹ 10.09 crore, which was spent by him as under:- Payment for labour settlement 9,54,54,134 Settlement expenses 15,35,866 9,69,90,000 In the sworn statement taken from Shri Benny Joseph, he affirmed the above transactions and agreed to offer the balance amount to the extent of ₹ 29,53,877/-, that was available in his bank account, as his income. The assessee also pointed out that the vouchers for payment of ₹ 9.54 crore to the labourers formed part of seized records. He further submitted that the labour payments were effected through the employees of Harrisons Malayalam Ltd, since neither the purchaser nor the assessee/Shri Benny Joseph have direct contact with the labourers. Hence the sum of ₹ 8.00 crores was withdrawn from ICICI Bank, Edapally branch by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t verify with Taj Malabar hotel to ascertain about their stay in the hotel. Accordingly, the assessee contended before Ld CIT(A) that there is gross violation of principles of natural justice on the part of the AO in placing reliance on material which were not confronted to the assessee and in not accepting the payment of compensation of ₹ 9.54 crore,. The AO also assessed rental income of ₹ 1,68,000/- and the peak credit deposit amount of ₹ 2.93 crore. However, the AO did not indicate these additions in his pre-assessment proposal sent on 29.12.2008. Hence, the assessee submitted that there is violation of principles of natural justice with regard to these additions also. The Ld CIT(A) accepted the said contentions of the assessee and accordingly quashed the assessment order. 40.5 In the original return of income filed u/s 139(1) of the Act, the assessee had declared the gross amount of ₹ 12.88 crore as commission receipts and deducted the expenses incurred towards labour settlement and other expenses. However, in the return filed in response to the notice issued u/s 153A of the Act, the assessee declared gross commission receipts at ₹ 4.88 crore onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld CIT(A) was not right in entertaining the appeal filed by the assessee, since the assessee did not pay the self-assessment tax. However, according to the Ld CIT(A), the tax due as per return of income was paid by way of self-assessment tax as well as by way of adjustment against the cash and bank balances seized during the course of search. Accordingly, the Ld CIT(A) was satisfied with the payment of tax and has admitted the appeal for hearing. Before us, no material was placed by the department to substantiate its contentions. Accordingly we reject the grounds urged by the revenue relating to the claim of non-payment of self-assessment tax. 43. The next issue relates to the decision of Ld CIT(A) in holding that the return filed by the assessee u/s 139(1), being defective, should have been ignored by the AO. According to the assessee, he did not attach the Balance sheet with the return of income as per the requirement of sec. 139(9)(e) of the Act, which has rendered the return filed u/s 139(1) as defective one. Accordingly, it was contended that the AO should not have taken cognisance of the same. The assessee is raising this contention for the reason that he had declared the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m sale of Cheruveli Estate, has also assessed the rental income and the income by way of peak credit of bank deposits and according to the assessee, he was not asked queries about the rental income. The department's contention is that the Ld CIT(A) is not correct in quashing the assessment in toto. We notice that , in the earlier years, the Ld CIT(A) has sought for remand report from the assessing officer and accordingly, in this year also, in our view, the Ld CIT(A) could have called for a remand report from the assessing officer after providing the opportunity of cross examination and also after furnishing the relevant documents, since the power of Ld CIT(A) is co-terminus with that of the assessing officer. At the same time, in our view, it was also not fair on the part of the AO in placing reliance on the documents, which were not put to the assessee. However, our further discussions would show that the abovesaid documents may not have much relevance to the issue under consideration. Hence, we are unable to agree with the decision of Ld CIT(A) in quashing the assessment in toto. Accordingly, we set aside this decision of the first appellate authority. 45. We shall now take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of ₹ 20.00 crore represents not only commission, but also something more than that. (c) As per clause 3 of the agreement entered between the assessee and Shri Varkey Joseph, the assessee will be responsible for dealing with all pending labour and staff issues and disputes and will duly settle the same on behalf of Gospel for Asia. As per clause 4, the assessee shall be responsible for meeting all expenses. In clause 5, it is specifically stated that a sum of ₹ 8.00 crores was given to Mr. Benny Joseph to handle and to meet expenses for settlement of labour. (d) It appears that the AO did not conduct enquiries with Gospel for Asia, who has paid ₹ 20.00 crore to Shri Varkey Joseph. The AO also did not conduct enquiries with Shri Varkey Joseph also. The statement given by Shri Benny Joseph was also not rebutted, but only brushed aside. (e) During the course of search, the search officials have seized vouchers evidencing payment of ₹ 9.54 crore as compensation to the workers. According to the assessee, the payment was made to about 500 workers. However, the AO has conducted enquiries with about 18 workers only, who have denied the receipt of any compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oseph. (h) It is pertinent to note that all the money transactions have been routed through the bank accounts. Shri Varkey George has transferred ₹ 12.88 crore to the account of Shri Benny Joseph, who in turn transferred ₹ 4.88 crore to the account of the assessee. According to the assessee, the balance amount of ₹ 8.00 crore was withdrawn from the bank handed over to Shri Anil Singaneria and Shri Hemant Goenka. Out of ₹ 4.88 crore received, the assessee transferred back ₹ 2.09 crore to Shri Benny Joseph. Thus, Shri Benny Joseph received a sum of ₹ 10.09 crore. All these transactions were confirmed by Shri Benny Joseph in the sworn statement taken by the Addl. Director of IT from him on 05-02-2007, i.e., during the course of search proceedings. We notice that the AO has simply brushed aside these bank transactions on the reasoning that the version of Shri Benny Joseph is not reliable, since he was also a party to the transactions. We notice that the AO did not take any step to disprove the bank transactions or to prove that the funds were diverted for any other purpose. 45.2 The bank account of the assessee shows that he has received only S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee only. Otherwise the bank transactions simply show transfer of ₹ 8.00 crore from the account of Shri Varkey George to Shri Benny Joseph. Having placed reliance so, the AO was not ready to accept the very same agreement, wherein it is mentioned that the said payment is being made to meet the expenses of labour settlements. This action of the AO is not appreciable. 45.5 We have already noticed that the payment of compensation of ₹ 9.54 crore cannot be doubted with. We have already noticed that the assessee has received only ₹ 4.88 crore in his bank account and repaid a sum of ₹ 2.09 crore. Hence, in our view, the net income of the assessee has to be computed by considering the transactions in the bank account of the assessee. Accordingly, in our view, the AO was not correct in assessing the entire amount of ₹ 12.88 crore in the hands of the assessee by totally disregarding the payment made for settlement of labour disputes and payments made to Shri Benny Joseph. Accordingly, we are inclined to uphold the view of Ld CIT(A) on this issue. 46. The department has (sic - not) challenged the decision of Ld CIT(A) in deleting the rental income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the provisions of sec. 40(a)(ia) of the Act, which provides of deduction of expenses, which was disallowed earlier under that section, in the year in which the TDS was paid. The AO took the view that the assessee is entitled to claim deduction only if the said expenditure had been disallowed in any of the earlier years. According to the AO, the sum of ₹ 35.00 lakh was not added back in the assessment year 2006-07 and hence the same cannot be claimed during this year. Accordingly, the AO disallowed the claim of ₹ 35.00 lakh. In the remand report also, the AO stood by the view taken during the assessment proceedings. 49.1 Before Ld CIT(A), the assessee submitted that the question of making disallowance u/s 40(a)(ia) of the Act would arise only if the assessee had claimed the same as a deduction while computing the income. He submitted that the said payment of ₹ 35.00 lakh was not claimed as deduction at all, since he did not deduct tax at source from that payment in that year. Hence, instead of making a claim and further making a disallowance u/s 40(a)(ia) of the Act, the assessee did not claim deduction. He further submitted that he has claimed the same in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement dated 29.1.2007 entered by the assessee with the proposed buyers of Subramaniam Estate. According to the recitals made in the revocation agreement, the buyers agreed to complete the sale transaction within a period of three months from 18.9.2006. The said period was later extended up to 18.01.2007. Since the last dated mentioned to complete the sale deed has expired, the parties have decided to rescind from the agreement for sale. It was further stated in the abovesaid revocation agreement that the buyers have given a sum of ₹ 3.42 crore to the assessee. It is also stated that the assessee: (a) has given an advance of ₹ 70.50 lakh as advance to the original owner of the property (b) has spent a sum of ₹ 98.50 lakh on various expenses and (c) has repaid a sum of ₹ 1,55,23,000/- to the prospective buyers as full and final settlement of all advances received. 50.1 In the return of income filed, the assessee declared the receipt of premium amount at ₹ 3.42 crore and claimed expenses therefrom. Since the receipt unearthed during the course of search stated the premium amount as ₹ 3.95 crore and further the aggregate amount of three disbur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier, we are of the view that the Tribunal is not empowered to give any direction to the Ld CIT(A) in this regard. However, in our view, the enhancement proposal given by the AO in respect of premium income is devoid of merits, which we shall discuss hereunder:- (a) The assessee has already declared the premium receipt as ₹ 3.42 crore, which consists of ₹ 3.02 crore received by way of cheques and ₹ 40.00 received by way of cash. According to AO, since the receipt of ₹ 40.00 lakh was not confirmed, it should be taken as income of the assessee u/s 68 of the Act. However, the fact remains that the amount of ₹ 40.00 lakh is part of ₹ 3.42 crore already declared by the assessee and hence the question of assessing the same again u/s 68 does not arise at all. Hence, the AO's proposal with regard to this amount is devoid of any merit. (b) From the copy of the computation statement, we notice that the assessee has claimed deduction of ₹ 70.50 lakh given as purchase advance and a sum of ₹ 1.55 crore refunded to the prospective purchasers against the premium amount of ₹ 3.42 crore. Accordingly, the assessee has declared a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not reliable. Under these circumstances, in our view also, there is no reason to suspect the veracity of the revocation agreement. Accordingly, in our view also, the premium amount has to be taken as ₹ 3.42 crore only, as mentioned in the revocation agreement. Accordingly, we confirm the view taken by Ld CIT(A) on this issue. 53. The next issue relates to the addition of ₹ 40.00 lakh as unexplained investment. It was noticed by the AO that the assessee has made following investments during the year:- (a) Paid to Shri Thomas Mathew, MD, City Hospital 25 lakhs (b) Paid to Shri Gopalakrishnan, Shareholder 10 lakh (c) Paid to Hotel Maria Park 5 lakh 40.00 lakh Since the assessee did not offer any explanation about the sources for making above said payments, the AO treated the abovesaid amount of ₹ 40.00 lakh as unexplained income of the assessee. 53.1 Before Ld CIT(A), the assessee submitted that the payment of ₹ 25.00 lakh and ₹ 10.00 lakh were made in order to purchase the City hospital. However, the deal did not materialise and hence he received back the abovesaid amounts. With regard to the amount of ₹ 5.00 lakh, he submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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