TMI Blog2020 (11) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... e seized record has been numbered as HM does not necessarily mean that the same was seized from a different person. Though the assessee has raised this legal plea, no document was produced to substantiate this claim. Accordingly, for the reasons discussed above, we do not find any merit in the legal contentions raised by the assessee. Accordingly, we reject the same. AO has issued notice u/s 153A wherein the expression assessee/reassess is mentioned - Non-striking of inapplicable portion would result in non-application of mind by the AO and since it goes to the root of the matter, the penalty proceedings would get vitiated. In our view, the assessee cannot take support of this decision M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] and hence the contention of the assessee that non-striking of inapplicable portion in the expression assess/reassess would vitiate the assessment proceedings is liable to be rejected, as it does not go to the root of the matter. The provisions of sec.153A of the Act states that the assessment of six assessment years preceding the year of search would get reopened. Out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that the assessees have accepted some of the unaccounted payments on the basis of evidences seized at the time of search, meaning thereby, the assessees have disputed the evidences, when the facts are against the presumptions drawn by the AO - AO did not make any enquiries from the sellers of the land in order to disprove the explanations given by the assessee - no other material was brought on record to prove that the impugned payments were made outside the the books of accounts. Hence, in the absence of any contrary material to disprove the submissions of the assessee the explanations given by the assessee have to be accepted. The surrounding circumstances and evidences, in our view, supports the explanations of the assessee - addition liable to be deleted. Property located at White filed - earlier noticed that the assessees have accepted the additions, whenever the payments were not accounted for, meaning thereby, the assessees have disputed the evidences, when the facts are against the presumptions drawn by the AO - AO did not make any enquiries from the Mr. Wilfred Nelson or Mr. N G Jaikumar in order to disprove the explanations given by the assessee. Further, no oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asing their property, but it did not go through. From the explanations given by the assessee as well as the discussions made by the tax authorities, it is not clear as to whether the assessee has explained the sources for payment of ₹ 20.00 lakhs. If the assessee has explained the sources, then no addition is not called for. Since there is lack of clarity on this issue, we restore this issue to the file of the AO in the case of both the assessees for examining the same afresh. Disallowance of part of agricultural income - HELD THAT:- Assessee have furnished a Statement showing sale value of agricultural produce and the expenses in support of the agricultural income declared by them. As observed by the AO, the assessee have not furnished various details called for by the AO, particularly the details of yield, quantity raised, selling price etc. There should not be any doubt that it is the responsibility of the assessee to prove the agricultural yield, realization etc., by furnishing cogent evidences. Mere furnishing of Statement may not be sufficient. At the same time, the AO also did not attempt to find out the average yield, average selling price etc., from the surround ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructions and from the premises of the assessees herein. Accordingly, he submitted that the AO should have initiated proceedings u/s 153C of the Act. He submitted that the provisions of sec.153A and 153C operate on different persons, which have been explained by Hon ble jurisdictional Karnataka High Court in the case of IBC Knowledge Park (385 ITR 346)(Kar) at paragraph 49 of its order, which reads as under:- 49. On a conjoint reading of the aforesaid provisions, it becomes clear that a search can take place only when a concerned officer has information and reason to believe that any person is in possession of any valuable assets, which has not been or would not be disclosed under the Act. In such a case, a search can take place. Following the search, if any books of account, other documents, any valuable assets is or are found in the possession or control of any person in the course of a search, then the books of account or other documents or valuable assets could be seized. Under Section 153A, the satisfaction regarding an inference of liability must be recorded. The Assessing Officer has to issue notice to the assessee i.e., the person searched for the purpose of assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e seized from a person other than the assessees herein. The details of seized record are given in the table available in page no.2 of the assessment order. A perusal of the same would show that one seized record is numbered as A-1/HM/1 and the remaining records are numbered as M J Shivani/Scanned files 1/Doc. It is a known fact that the numbering of seized documents is done by search officials in order to identify the seized materials. Hence merely because the seized record has been numbered as HM does not necessarily mean that the same was seized from a different person. Though the assessee has raised this legal plea, no document was produced to substantiate this claim. Accordingly, for the reasons discussed above, we do not find any merit in the legal contentions raised by the assessee. Accordingly, we reject the same. 8. The next legal issue contested by the assessee is the assessing officer has issued notice u/s 153A of the Act, wherein the expression assessee/reassess is mentioned. He submitted that the question of reassessment would arise only if the total income of that year has already been assessed earlier. Accordingly he submitted that the assessing officer shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it depends upon facts of each assessment year. 11. The facts available in Manjunatha Cotton Ginning Factory (supra) are different. It related to the penalty levied u/s 271(1)(c) of the Act. Penalty u/s 271(1)(c) of the Act may be levied either for concealment of particulars of income or for furnishing of inaccurate particulars of income . Since two distinct charges are specified in the provisions of sec.271(1)(c) of the Act, the Hon ble jurisdictional Karnataka High Court held that AO should clearly specify the charge under which the penalty proceedings were initiated. In the notice issued for initiating penalty proceedings u/s 271(1)(c) of the Act, the AO should clearly specify the charge. If both the charges are mentioned in the notice, the AO should strike off inapplicable portion. Otherwise, it is quite possible that the assessee does not know the charge under which the penalty proceedings were initiated. Accordingly, it was held that non-striking of inapplicable portion would result in non-application of mind by the AO and since it goes to the root of the matter, the penalty proceedings would get vitiated. In our view, the assessee cannot take support of this decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of ₹ 3.60 crores. However, the property suffered from certain disabilities and the co-purchasers Shri Nazeer Ahmed and Shri Aman Jnardhan Agarwal wanted to cancel the deal. However, the assessee s herein have prevailed upon them and the property was purchased for a lower consideration of ₹ 3.10 crores, in order to take care of the disabilities. Subsequently, the sellers demanded additional amount of ₹ 40.00 lakhs and accordingly, the impugned agreement was prepared for the amount of ₹ 40.00 lakhs. However, it can be noticed that the impugned agreement was not signed by the buyers, i.e., they did not agree for payment of ₹ 40.00 lakhs. After negotiation, the additional amount was determined at ₹ 20.00 lakhs and the same was paid to the sellers by way of cheque. Accordingly, the Ld A.R submitted that the cash payment of ₹ 20.00 lakhs mentioned in the agreement was not paid at all. He submitted that the said agreement is not binding upon the assessees, since it was prepared by the sellers before the finalisation of the dispute and it was not singed by the buyers. Accordingly, he submitted that no credence can be given to the same and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew that the assessees have rebutted the presumption with regard to this evidence. It is also pertinent to note that the assessing officer did not examine the sellers to find out the truth. Further, no other material was brought on record to prove that the sum of ₹ 20.00 lakhs was paid by way of cash and the same has not been accounted in the books of accounts. Hence, in the absence of any contrary material to disprove the submission of the assessees, the explanations given by the assesees have to be accepted. Accordingly, we hold that the addition of ₹ 5.00 lakhs each sustained by Ld CIT(A) in the hands of the assessees herein are liable to be deleted. Accordingly, we set aside the orders passed by Ld CIT(A) on this issue and direct the AO to delete the addition of ₹ 5.00 lakhs each made in the hands of both the assessees in AY 2006-07. 13. The next issue relates to the addition of ₹ 11,80,625/- each relating to Ramagondanahalli property in the hands of both the assessees. 13.1 The facts relating to this addition are stated in brief. During the course of search operations, following receipts evidencing payments made during the financial year 2005-06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained in 2005 from the vendors in order to facilitate registration of sale deeds. 13.2 The receipts obtained on 16-06-2005 and 17-06-2005 mentioned the payments as full and final settlement . The AO interpreted the same as further money or final settlement of money . Accordingly he observed that the money was paid in addition to what has earlier been paid and was paid at the time of registration. He further observed that the assessees did not produce any evidence to say that the transaction for purchase of land at Ramagondanahalli happened much before the registration of the property. The receipts obtained on 16-06-2005 and 17-06-2005 bears the signature of witnesses and also notarised. Accordingly, the AO rejected the explanations of the assessee. Accordingly he assessed 50% of ₹ 23,61,250/-, i.e., ₹ 11,80,625/- each in the hands of the assessees herein. The Ld CIT(A) also concurred with the views taken by the AO and accordingly confirmed the additions. 13.3 We heard the parties and perused the record. The Ld A.R reiterated contentions made before the AO. The Ld D.R, on the contrary, submitted that the explanations given by the assessee should be an accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. received a sum of ₹ 12,15,000/- (Rupees Twelve Lakh Fifteen thousand only) by way of cash towards the sale of land bearing survey no.94 measuing 28 Guntas situated at Ramagondanahalli village Varthur Hobli, Bangalore South from Mr. H J Siwani and Mr M J Siwani as full and final settlement towards the agreement of sale dated May 1995 and towards registration of Agreement of sale dated 16.06.2005. We have no claims whatsoever. The receipt makes it clear that there was an agreement of sale dated May 1995 and this receipt is issued towards registration of Agreement of sale deed dated 16-06-2005. The usage of expression in the receipt, viz., towards registration of Agreement of sale dated 16-06-2005 , in our view, supports the contentions of the assessees. Had it been additional payments, as presumed by the AO, there was no necessity to use the above said expressions. Accordingly, we are of the view that there is merit in the submissions of the assessee that these receipts were prepared in order to enable registration of Agreement of sale dated 16.06.2005. 13.6 We further notice that the assessees have furnished Statement of Affairs in order to show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a receipt was prepared by the Managing Director Mr. Winfred Nelson and he signed the receipt. As this payment was supposed to be made to Mr. Winfred Nelson on behalf of the company, we insisted Mr. Winfred Nelson to get signature of Mr. N G Jaikumar, another Director of the Company, so as to prevent any misappropriation of money by Mr. Winfred Nelson in his individual capacity. Mr. Winfred Nelson assured that he will get the signature of Mr. N G Jaikumar and requested us to keep the receipt with us, so that he come with Mr. N G Jaikumar and get the receipt signed by Mr. N G Jaikumar and collect the cash. However, due to reasons best known to him, he was unable to bring Mr. N G Jaikumar and get the receipt signed by him and therefore this amount of ₹ 3,00,000/- was not paid, as Mr N G Jaikumar did not sign the receipt and therefore, the receipt is incomplete and it is a dumb document, on which no relevance can be placed. The AO did not accept the explanations of the assessee. Since the receipt is available for payment of ₹ 3,00,000/-, the AO assessed the same equally @ ₹ 1,50,000/- in the hands of both the assessees herein. The Ld CIT(A) also confirmed the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiries from the Mr. Wilfred Nelson or Mr. N G Jaikumar in order to disprove the explanations given by the assessee. Further, no other material was brought on record to prove that the impugned payments were made outside the books of accounts. Hence, in the absence of any contrary material to disprove the submissions of the assessees, the explanations given by the assessees have to be accepted. The surrounding circumstances and evidences, in our view, supports the explanations of the assessees. Accordingly, we hold that the addition of ₹ 1,50,000/- each sustained by Ld CIT(A) in the hands of the assessees herein are liable to be deleted. Accordingly, we set aside the orders passed by Ld CIT(A) on this issue and direct the AO to delete the above said addition made in the hands of both the assessees in AY 2006-07. 15. We shall now take up the appeal filed for AY 2008-09. The only issued urged on merits in this year relate to the addition of ₹ 1,45,000/- each made in the hands of both the assessees. 15.1 During the course of search proceedings, six receipts of various amounts aggregating to ₹ 2,90,000/- evidencing payment made in FY 2007-08 relevant to AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e receipts are correct, it may not be proper to presume that the cash component alone has been paid under these receipts. We have earlier noticed that the AO has made the addition by making observations relating to some other property, which fact would show that the AO has made the addition in a mechanical manner. Hence, we are of the view that the AO and Ld CIT(A) were not justified in making this addition. Accordingly, we set aside the orders passed by Ld CIT(A) on this issue and direct the AO to delete the addition of ₹ 1,45,000/- each made in the hands of both the assessees in AY 2008-09. 16. In all other years, one common issue urged is related to disallowance of part of agricultural income declared by the assessee and assessing the same as income of the assessee from income from other sources. Before dealing with the same, we would like to adjudicate the addition of ₹ 20.00 lakhs each made in the hands of the assessees in AY 2011-12. 16.1 During the course of search, the search officials unearthed two receipts bearing numbers 1733 1735, both dated 10-05-2010. The voucher bearing number 1733 mentions (a) payment of ₹ 20.00 lakhs to Mrs. H S Parv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ₹ 20.00 lakhs, it is the submission of the assessees that the same was paid for purchasing their property, but it did not go through. From the explanations given by the assessee as well as the discussions made by the tax authorities, it is not clear as to whether the assessee has explained the sources for payment of ₹ 20.00 lakhs. If the assessee has explained the sources, then no addition is not called for. Since there is lack of clarity on this issue, we restore this issue to the file of the AO in the case of both the assessees for examining the same afresh. 17. The next common issue relates to the disallowance of part of agricultural income declared by the assessees. This issue is being urged by the assessee in assessment years 2009-10 to 2013-14. 18. The details of agricultural income declared by the assessee and accepted by the AO are tabulated below:- Assessment year Agri. Income declared by assessee Agri. Income accepted by the AO Balance income assessed as income from other sources 2009-10 16,20,000 10,00,000 6,20,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns by H M group. 18.3 The AO was of the opinion that the assessees have claimed substantial agricultural income. He further opined that the assessees could not furnish details/evidence with regard to the expenses incurred for cultivation. He also noticed that the assessees have claimed that all transactions of sales and expenses have been carried out in cash. With regard to sale of produces, the assessees claimed that the produces were utilised in the hotels run by their group. The AO observed that the entities falling under H M Group are well established entities having access to banking facilities. Accordingly he observed that it is not clear as to why group concerns are making payments in cash. He also took the view that the productivity shown in respect of the lands is very high and not comparable with the lands situated in the surrounding areas. Further, the net income from agricultural activities has also increased manifold in a period of 2 to 3 years without any increase in the area of cultivation. Accordingly, the AO expressed the view that the assessees might have used the agriculture route to convert black money into accounted money. 18.4 The AO noticed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not only vegetables. The learned Assessing Officer has not put to the notice of the appellant in respect of the comparables for reply by the appellant. Consequently the assessment order passed is in violation of principles of natural justice. iv. It is unlikely event that the income has increased manifold in a period of 2 to 3 years without increase in the area under cultivation. The appellant submits that the above reasoning of the learned Assessing Officer is not correct, since the agricultural income will increase depending upon the increase in the value of the sale of agricultural produce and the yield of the agriculture. It is not necessary that to have more agricultural income the land holding of the agricultural land should also increase. The finding of the learned Assessing Officer is perverse. The learned Assessing Officer is not correct in law in not accepting the agricultural income of the appellant to the extent of ₹ 6,20,000/-. Further the appellant does not have any other source of income other than declared in the statement of total income, to show as agricultural income. Consequently the addition made as income from other sources t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... op grown in each land, gross revenue generated, the expenses incurred therein and net agricultural income. He submitted that the assessing officer did not prove that the details so furnished by the assessee are wrong. Though the AO observes that the productivity shown by the assessees is higher than that shown in comparable cases in surrounding areas, yet he has not cited any comparable instances in support of his observation. He submitted that the assessees have offered proper explanations in respect of the each of the observations made by the AO. None of the explanation was found to be incorrect. Accordingly he submitted that there is no reason to disbelieve the agricultural income declared by the assessee. 18.7 On the contrary, the Ld D.R submitted that the assessee has merely furnished a statement of income and expenses. But those income and expenses have not been substantiated with evidences. Further the per acreage income declared by the assessees are very much higher than the average income declared by others. He submitted that the AO has not disallowed entire agricultural income. Considering the land holding, past income details and average income generated i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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