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TMI Blog2022 (7) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... -13 were completely lost of sight and the appeals could not be filed in time. It is only when the auditor of the assessee was contemplating to avail the benefit of scheme "Vivad Se Vishwas, 2020", enquired about the status of the appeals with the assessee, it was learnt that appeal orders were already passed and time limit for filing appeal in all these assessment years before the Tribunal which has also been lapsed. Thereafter, the assessee was advised to file appeals against the first appellate orders by assessee's auditors, consequently appeals were filed by delay of 34 days in all these assessment years and prayed to condone the delay. 1.2 We have heard both the parties on the issue of condonation of delay. In our opinion, the reasons explained by the assessee for delay in filing the appeals is found to be good and sufficient and accordingly we condone this short delay of 34 days and admit the appeals for adjudication. 2. The main grounds for all the assessment years from 2007-08 2012-13 are as follows:- 2.1 Main grounds for AY 2007-08 in ITA No.307/Bang/2020:- "1.The learned Commissioner of Income-tax (Appeals) has erred in partially confirming the order passed by Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has erred in confirming the action of the assessing officer in assessing the capital gain earned on sale of property as Income under the head Business holding that the appellant being a real estate businessman has failed to demonstrate that property sold was held as capital asset. On proper appreciation of facts, evidence available and the law applicable, the property sold was held as investment/ Capital Asset and the same is assessable under the head Short Term Capital Gain. 8. The learned CIT(A) has erred in sustaining the addition made by the assessing officer on account of alleged payments made by the appellant on purchase of property amounting to Rs 2,00,00,000/- by relying on agreement to sell dated 18/05/2006. This agreement to sell was not registered and subsequently revised. The action of authorities below in relying upon the document which was never acted upon makes the entire addition totally erroneous and such addition is to be deleted. 9. The appellant denies the liability to pay interest u/s 234A, 234B and 234C of the Act. The interest levied being wholly erroneous is to be deleted. 10. In view of the above and on other grounds to be adduced at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us both on facts and law is to be rejected and the addition made is to be deleted. 6. The learned CIT(A) has erred in confirming the disallowance made by the Assessing officer to the extent of 50 percent of the expenditure debited to the profit and loss account on the ground that the appellant did not justify the expenditure claimed. The conclusion of authorities below being wholly erroneous, without any basis and purely adhoc is to be rejected and the disallowance as made/sustained is to be deleted. 7.1 The learned CIT(A) has erred in confirming the action of the assessing officer in assessing the capital, gain earned on sale of property as Income under the head Business holding that the appellant being a real estate businessman has failed to demonstrate that property sold was held as capital asset. On proper appreciation of facts, evidence available and the law applicable, the property sold was held as investment/ Capital Asset and the appellant had rightly declared the gain and same is to be accepted without any variation. 7.2 The learned CIT(A) has erred in confirming the disallowance made by the Assessing Officer amounting to Rs.1,65,336/- on account of cost of acquis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-tax (Appeals)has erred in confirming various additions made by the Assessing officer. On proper appreciation of facts and the law applicable, the additions made/confirmed are wholly erroneous and are liable to be deleted. 4. The learned CIT(A) has erred in confirming the action of the assessing officer in adding a sum of Rs. 78,97,764/- as unexplained cash credit u/s 68 of the Act on the ground that the appellant has not established the Identity, credit worthiness of the creditors as well as genuineness of the transaction. All the advances were duly confirmed by the creditors and received through banking channels. The conclusion of authorities below being wholly erroneous both on facts and law is to be rejected and the addition made is to be deleted. 5.1 The learned CIT(A) has erred in confirming the disallowance made by the Assessing officer to the extent of 50 percent of the expenditure debited to the profit and loss account amounting to Rs. 4,75,530/- on the ground that the appellant did not justify the expenditure claimed. The conclusion of authorities below being wholly erroneous, without any basis and purely adhoc in nature is to be rejected and the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by learned assessing officer being bad in law against the principles of natural justice and void-abinitio was required to be quashed in toto instead of being confirmed. 2. In any case, the learned Commissioner of Income-tax (Appeals) has erred in rejecting the contention 'of the appellant that the application of section 153A of the Act lacked jurisdiction. The order passed by the Assessing officer is bad in law especially in the absence of satisfaction to be recorded before the issue of notice u/s 153A of the Act and such order is liable to be quashed. 3. In any case and without prejudice, the learned Commissioner of Income-tax (Appeals)has erred in confirming various additions made by the Assessing officer. On proper appreciation of facts and the law applicable, the additions made/confirmed are wholly erroneous and are liable to be deleted. 4 The learned CIT(A) has erred in confirming the action of the assessing officer in adding a sum of Rs. 86,64,768/- as unexplained cash credit u/s 68 of the Act on the ground that the appellant has not established the Identity, credit worthiness of the creditors as well as genuineness of the transaction. All the advances were du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land as done/confirmed by the authorities below is erroneous and excessive. 7. The learned CIT(A) has erred in confirming the addition .made by the Assessing Officer on account of unexplained cash credit amounting to Rs. 36,00,000/- u/s 68 of the Act On proper appreciation of facts and the law applicable, the addition made is wholly erroneous both on facts and law is to be deleted. 8. The appellant denies the liability to pay interest u/s 234A and 234B of the Act. The interest levied being wholly erroneous is to be deleted. 9. In view of the above and on other grounds to be adduced at the time of hearing it is requested that the impugned orders passed by the CIT(A) and the Assessing Officer be quashed or atleast the various additions made in the hands of the appellant be deleted and the interest levied is also to be deleted." 2.5 Main grounds for assessment year 2011-12 in ITA No.311/Bang/2020:- "1. The learned Commissioner of Income-tax (Appeals) has erred in partially confirming the order passed by Assessing Officer. The order passed by learned assessing officer being bad in law against the principles of natural justice and void-abinitio was required to be quashed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s holding that the appellant being a real estate businessman has failed to demonstrate that property sold was held as capital asset. On proper appreciation of facts, evidence available and the law applicable, the property sold was held as investment/ Capital Asset and the appellant had rightly declared the gain under the head Long Term Capital Gain and same is to be accepted without any variation. 7.2 The learned CIT(A) has erred in confirming the recomputation of profit as done by the Assessing officer amounting to Rs. 1,61,82,436/- on account of sale of land as against the Long term Capital Gain offered by the appellant amounting to Rs. 13,68,000/- and assessing the same under the head Business by i) disallowing the entire cost of improvement claimed by the appellant totalling to Rs. 1,38,53,487/- being interest on loan and Development expenses ii) disallowing the commission paid on sale of land iii) Denying the benefit of indexation on cost of acquisition. The action of the authorities below being wholly erroneous both on facts and law is to be negated and the Long term capital gain as offered by the appellant is to be accepted. 8. The appellant denies the liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is and purely adhoc in nature is to be rejected and the disallowance as made/sustained is to be deleted. 6. The learned CIT(A) has erred in confirming the action of the assessing officer in adding a sum of Rs. 83,00,000/- as unexplained cash credit u/s 68 of the Act on the ground that the appellant has not proved the cash deposits made in the bank accounts. On proper appreciation of facts and law applicable, the cash deposits are duly explainable. The addition as made/ confirmed is wholly erroneous is to be deleted. 7. Me appellant denies the liability to pay interest u/s 234A and 234B of the Act. The interest Ivied being wholly erroneous is to be deleted. 8. In view of the above and on other grounds to be adduced at the time of hearing it is requested that the impugned orders passed by the CIT(A) and the Assessing Officer be quashed or atleast the various additions made in the hands of the appellant be deleted and the interest levied is also to be deleted." 3. The one and only common addition ground raised by the assessee in all these appeals for all the assessment years is as follows: Additional ground:- "In any case the authorities below have erred in making/conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant bank account extract and confirmation letter 138-142 7. Ledger extract of N C Mahesh along with confirmation of transactions. 143-147 8. Copy of letter dated 12.01.2015 filed with Assessing officer by N C Mahesh 148 9. Memorandum of understanding dated 18.04.2007 149-152 4.3 Additional evidences for assessment year 2009-10 in ITA No.309/Bang/2020:- SI. No. Particulars Page No. 1. Copy of Cash book for the period 01/04/2008 to 31/03/2009. 415-426 2. Copy of Ledger extracts of relevant expenditure debited to profit and Loss Account for the year 427-443 3. Copy of Journal Voucher 444 4. Ledger extract of followings a) Sale of Sites at Gollahalli Village 445 b) Sites at Gollahalli village 446 c) Improvement expenditure of gollhalli sites 447-458 d) cash voucher of cost of improvement 459-567 5. Ledger extract commission on Gollahalli Sites 568 6. Copy of Journal voucher and ledger extract of Land at Bhugathahalli Village 569-571 7. Ledger extract of S C Rajesh along with copy of compliant lodge before the Police Commissioner Bangalore and English translation thereof 572-577 4.4 Additional evidences for ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in not filing these documents during the course of assessment as well as first appellate stage. Being so, in our considered view, in the given facts and circumstances of the case, it is appropriate to admit these additional evidences for adjudication in the interest of justice. Accordingly, these additional evidences are admitted for the purpose of adjudication. 6. First common ground in this appeal is with regard to assuming jurisdiction u/s 153A of the Income-tax Act,1961 ['the Act' for short] and thereafter framing the assessment under this provision of the Act. 6.1 This ground is agitated by assessee in main ground No.2 read with additional ground herein above. 6.2 Facts of the issue are that assessee is an individual engaged in business of real estate. There was a search action u/s 132 of the Act on 5.11.2012 in the group case of Shri K.G. Krishna. During the course of search, the residence of Shri K.G. Krishna, located at "Jai Krishna Nilaya, No.1680/55, 5th Cross, 10th Main, 2nd Block, Mysore Bank colony, Banshankari, Bengaluru 560 050" was searched. According to the AO, consequent to the search operation carried out by the Income tax authorities, various incrimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly find ourselves in agreement with the order of the CIT(A) and rightly knock down the assessment completed under section 153A of the Act. We therefore confirm his order." 2) PCIT Vs. Arvind Joshi & Co., Gujarat High Court in which it was held as under:- "In the opinion of this court considering the fact that it is settled legal position that in case of unabated assessment under section 153A(1)(b) of the Act, unless such assessment is based upon incriminating documents seized/impounded during the course of search, no addition can be made, no infirmity can be found in the impugned order passed by the Tribunal in upholding the order passed by the Commissioner (Appeals). In the absence of any legal infirmity in the impugned order, the same does not give rise to any question of law, much less, a substantial question of law, warranting interference." 3) Om Prakash Gupta Vs. ACIT ITA Nos.277 to 281/Indore/2017 dated in which it was held as under:- "The Hon'ble High Court of Gujarat in the case of PCIT Vs. Desai Construction (supra) confirmed the view taken by the Tribunal upholding the contention of the assessee that as no incriminating material was found during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income which is not disclosed in the earlier return and not unearthed during the search. 6.4 According to the Ld. D.R., there is an incriminating material found during the search u/s 153A of the Act and all the 3 types of income has to be assessed by the AO in view of the judgement of Hon'ble Karnataka High Court cited (supra) and the condition precedent for application of section 153A of the Act is completely fulfilled. Accordingly, the assessment was framed u/s 153A of the Act in all these 6 assessment years which has to be upheld. 7. Now we will give findings relating to this legal ground for each assessment year-wise. Assessment year 2007-08:- 8. We have heard the rival submissions and perused the materials available on record. We have carefully gone through the assessment orders. First we will take up the assessment year 2007-08. The A.O. made following additions:- Sl.No. Details Addition made by AO (in lacs) 1 Unexplained opening capital 33.29 2. Agricultural income declared by the assessee treated as taxable income 12.60 3. Disallowance of expenditure claimed by assessee disallowed on adhoc basis 5.67 4. Capital gain treated as business Income 1.60 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2007-08. Findings:- Assessment year 2007-08:- 8.3. The scope of provisions of section 153A of the Act could be summarized as follows as per the order of the Mumbai Special Bench in the case of All Cargo Global Logistics Ltd. Vs. Deputy Commissioner of Income-tax (23 taxmann.com 103):- Scenario Scope of Section 153A 1. No return of income is filed by the assessee (whether or not time limit to file return of income has expired. Since no return has been filed, the entire income shall be regarded as undisclosed income. Consequently, AO would have the authority/jurisdiction to assess the entire income, similar to jurisdiction in regular assessment u/s 143(3). No requirement to restrict to documents found during the course of search. 2. Return of Income just filed by the assessee - return yet to be processed u/s 143(1) - Time limit for issue of notice u/s 143(2) not expired. Since return filed is even pending to be processed, the return would be treated as pending before the AO. Consequently, AO would have authority/jurisdiction to assessee the entire income, similar to jurisdiction in regular assessment u/s 143(3). 3. Return of Income filed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been made. In case of assessment u/s 153A of the Act, the completed assessment can be tinkered if there is incriminating material found during the search. Therefore, in the present assessment year there are incriminating material in the form of above agreement to reopen the concluded assessment u/s 153A of the Act. Therefore, AO is justified in invoking the provisions of section 153A of the Act to open the completed assessment and the sufficiency of seized material to reopen the assessment cannot be challenged by assessee at this stage and he may question the additions made on the basis of seized material separately. Accordingly, framing assessment u/s 153A of the Act is upheld in the assessment year 2007-08. This legal ground is dismissed in this AY 2007-08. Assessment year 2008-09:- 9. In assessment year 2008-09, the AO made following additions while completing the assessment u/s 143(3) r.w.s. 153A of the Act:- Sl.No. Details Addition made by AO (in lacs) 1 Agricultural income 12 2. Disallowance of expenditure debited in the P&L account on adhoc basis 2.74 3. Treatment of capital gain as business income 1.65 4. Unexplained cash credit u/s 68 of the Act 236 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment was framed u/s 153A of the Act, which is bad in law, same to be quashed. In this case after search, notice u/s 153A of the Act, was issued and the assessment was framed there under by the AO during the same period. There was search in the case of N.C. Mahesh and in that case a loose slip A/NCM/2 was found and seized. On that basis, the addition of Rs.3,80,00,250/- was made. As per second proviso to section 153C of the Act, the assessment proceedings pending u/s 153A of the Act in the case of assessee before AO would abate on the date of receipt of the seized material from the AO of Shri N.C. Mahesh and fresh proceedings u/s 153C of the Act ought to have been initiated. However, it is seen that, upon receipt of the said information/materials, the AO did not assume jurisdiction u/s 153C of the Act, but rather chose to use the said materials/information for making addition in the impugned orders of assessment concluded u/s 153A of the Act. This has been clearly mentioned by the AO in the assessment order in para 5 in pages 6 & 7 of the assessment order. In our opinion, the argument of assesseé's counsel has no legs to stand on the reason that section 153C of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid-years. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search. The proviso to the aforesaid section makes it clear the Assessing Officer shall assess or reassess Lhe total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid sub-section on the date of initiation of the search under Section 132, the said proceeding shall abate. If such proceedings are already concluded by the Assessing Officer by initiation of proceedings under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/2018 vide judgement dated 29.9.2021, wherein it was held as under:- "30. Thus, it is clear that the Assessing Office: while passing the order under Section 153A read with Section 143[3] of the Act, ordinarily cannot disturb the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings establishes that. the finalized assessments are contrary to the material unearthed during the, course of 153A proceedings, as held by the Coordinate Bench of this Court in the case of IBC Knowledge Park (P) Ltd., supra. A concluded assessment could not be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good. As observed in Canara Housing Development Company supra, the Assessing Officer is empowered to assess or reassess the total income of six assessment years i.e., the income which was returned in the earlier return, the income which was unearthed during search and also any income which was not disclosed in the earlier return or which was not unearthed during the search by separate assessment orders but in our considered view the complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfaction. For the reasons aforesaid, substantial question of law in ITA Ncs.322/2018 to 324/2018, 354/2018 and 355/2018, substantial question of law No.1 in ITA Nos.380/2018, 382/2018 to 385/2018 and 197/2021 to 199/2021 and substantial question of law Nos.1 and 2 in ITA No.381/2018 are answered in favour of the assessee and against the Revenue. Substantial question of Law No.2 in ITA Nos.380/2018, 383/2018 to 385/2018 is squarely covered by the ruling of the coordinate Bench of this 'Court in ITA No.352/2018 and connecter? matters (DI) 25.05.2021) wherein the said substantial question of law has been answered ir favour of the assessee and against the Revenue. Substantial question of law No.2 in ITA No.382/2018 and substantial question of law No.3 in ITA Nos.380/2018, 383/2018 to 385/2018 does not arise for our consideration since the same are not pressed by the Revenue. Appeals stand disposed of accordingly." 9.7 Being so, it cannot be said that Hon'ble High Court has distinguished the judgement in the case of Canara Housing Development Company (supra) in the above judgement and the ratio laid down in the case of Canara Housing Development Company still holds go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two assessments in case of the same assessee, one u/s 153A of the Act and another u/s 153C of the Act. 9.8 In our opinion, there can be only one assessment order in respect of each of six assessment years in which both disclosed and the undisclosed income would be brought to tax as held by jurisdictional high court in the case of Canara Housing Development Company cited (supra). 9.9 This ground of appeal of the assessee is dismissed in AY 2008-09. Assessment year 2009-10:- 10. In the assessment year 2009-10 the additions made by the AO are as under:- Sl.No. Details Addition made by AO (in lacs) 1 Disallowance of expenditure charged to P&L Account on adhoc basis 6.97 2. Treatment of capital gain as business income 66.47 3. Unexplained investment 20 4. Unexplained cash credit 78.97 5. Total 172.42 10.1. The Ld. A.R. submitted that in this assessment year there is no seized material whatsoever. The AO is only considering the income disclosed in the return of income filed by assessee before search as additional income which cannot be possible without any seized material. She submitted that had it been there in seized material to show the above income as an addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find force in the argument of Ld. Counsel for the assessee in this assessment year 2009-10, the addition made by AO is not based on any seized material and the AO made additions in a routine manner which were disclosed to the department by way of regular return of income filed by the assessee and no incriminating material was found during the course of search and to come to conclusion that the expenses or allowances claimed by the assessee could be disregarded or income disclosed by the assessee could be considered as taxable. Further, Hon'ble Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. Vs. CIT (382 ITR 346) had held that "unless material seized during the course of search which suggest undisclosed income and are incriminating in nature, jurisdiction u/s 153C of the Act cannot be assumed. Further, in the case of Principal CIT Vs. Delhi International Airport Pvt. Ltd. in ITA No.322/2018 vide judgement dated 29.9.2021, the jurisdictional High Court followed the earlier judgement in the case of IBC Knowledge Park Pvt. Ltd. (supra). It is relevant to refer para 10 of the above judgement in the case of Delhi International Airport Pvt. Ltd. (supra) which reads as fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each A Y on the basis of the findings of the search and any ether material existing or brought on the record of the AD. vi. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 10.5 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration, there is no seized material to reopen the concluded assessment. Accordingly, she prayed that assessment order in this case to be quashed. 11.2. The Ld. D.R. relied on the order of the lower authorities. Findings:- 11.3. In assessment year 2010-11, the additions made by AO not based on any seized material found during the course of search action in the case of assessee. The assessee in this case filed original return of income on 1.9.2011. Time limit to issue a notice u/s 143(2) of the Act was on or before 30.9.2012. No notice u/s 143(2) of the Act was issued to the assessee on or before 30.9.2012. Being so, framing of assessment u/s 143(3) of the Act has already been concluded by operation of law on the date of search action i.e. on 5.11.2012. As held by Special bench in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) that in case of assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A of the Act for which assessment shall be made for each of 6 assessment years separately. In other cases, in addition to the income that has already been assessed, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 143(3) of the Act. The assessments were already concluded by the operation of law being these are concluded assessments, which cannot be reopened without any iota of seized material. She submitted that in this assessment year 2011-12, there was no seized material during the course of search action. In the case of assessee no assessment could be framed u/s 153A of the Act in the absence of seized material in the case of concluded assessment. 12.2. The Ld. D.R. relied on the order of the lower authorities. Findings:- 12.3. In assessment year 2011-12, the additions made by AO not based on any seized material found during the course of search action in the case of assessee. The assessee in this case filed original return of income on 15.12.2011. Time limit to issue a notice u/s 143(2) of the Act was on or before 30.9.2012. No notice u/s 143(2) of the Act was issued to the assessee on or before 30.9.2012. Being so, framing of assessment u/s 143(3) of the Act has already been concluded by operation of law on the date of search action i.e. on 5.11.2012. As held by Special bench in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) that in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his assessment year 2012-13, though there was no seized material, time limit to issue notice u/s 143(2) of the Act is not lapsed. The assessment is pending, which is abated and it is not a concluded assessment. Being so, the AO validly assumed jurisdiction u/s 153A of the Act consequent to the search action u/s 132 of the Act so as to frame the assessment u/s 153A of the Act. Accordingly, framing of assessment u/s 153A of the Act for the assessment year 2012-13 is valid. 13.2. Conclusion on legal issue:- The assessment for the assessment years 2009-10, 2010-11 and 2011-12 has been quashed on the basis that there was no seized material to frame assessment u/s 153A r.w.s. 143(3) of the Act as these assessments were not pending as on the date of assessment and these are already concluded assessments, which cannot be reopened without any seized materials. 14. Now we will decide each ground on merit in each appeal, without prejudice to our findings on legal issue in these assessment years i.e. 2009-10, 2010-11 & 2011-12. 15. First ground in ITA No.307/Bang/2020 in assessment year 2007-08 is with regard to unexplained opening balance at Rs.33.29 lakhs. 15.1 The assessee shown openi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared by the assessee as an agricultural income is earned from any other unknown sources. The AO made an allegation that assessee has not filed details of agricultural land owned, crafts cultivated in various seasons, gross income earned out of agricultural operations, details of expenditure income to earn that income and that the evidences, details of crop sold and not income earned and copies of RTC of the properties. In our opinion, in case of such assessments framed u/s 153A of the Act as held by the Delhi bench in the case of Ashok Kumar Tyagi Vs. ACIT in ITA No.5652 to 5654/Del/2017 dated 17.3.2022, it is not possible to treat the agricultural income as non-agricultural income without any seized material. Further, in a proceeding u/s 153A of the Act, addition has to be made on the basis of incriminating material found as a result of search. Since the decision of the assessment officer to treat the agricultural income as income from other sources which is not based on incriminating material seized during the course of search action, no addition or disallowance could be made. Accordingly, addition is deleted in these two assessment years 2007-08 & 2008-09. 17. Adhoc disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness. To come to that conclusion, the AO have no material which is inappropriate. Accordingly, we will delete this addition made in all these assessment years on adhoc basis. This ground of appeal of the assessee is allowed in all the above appeals. 18. Next ground in all these appeals is with regard to the treating of income offered under head "Capital Gain" as business income. This ground for assessment year 2007-08, 2008-09, 2009-10, 2010-11 & 2011-12. 18.1 These findings in AY 2009-10, 2010-11 & 2011-12 is without prejudice to our findings on legal issue. For the Assessment year 2007-08: 19. The assessee along with one Mr. Kempegowda purchased an agricultural land from Shri R. Subbu Krishna on 24.8.2005 for a total consideration of Rs.8 lakhs. The assessee's share of cost of property along with stamp duty and registration was Rs.4,40,930/-. The assessee filed a copy of sale deed, which is placed at additional evidence paper book at page Nos.169 to 179. Subsequently, the assessee executed a relinquished deed on 6.3.2006, thereby he released his share of property to Shri Kempegowda for a consideration of Rs.6 lakhs. The assessee also filed copy of release deed which is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , point to the business character of the transaction. Profit made by sale of capital asset always income from capital gain. One has to see whether the asset held by the assessee as an investment or as a trading asset. Realisation of capital asset is always income from capital gain. 33. The transfer of right or relinquishment part and parcel of business undertaking of the assessee is nothing but transfer of capital asset within the meaning of section 2(14) of the IT Act. Any profit arising from the transfer of capital asset must be chargeable under the head "capital gain". The word "transfer" has been defined in section 2(47) of the Act which lays down as under: "(47) transfer, in relation to a capital asset includes - (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or (v) any transaction involving the the allowing of the possession of any immovable property to be taken or r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated the income as business income as the assessee is in real estate business. The contention of the Ld. A.R. is that this property was treated by assessee as a capital asset and held this property under administrative portfolio and not trading portfolio, the property held under investment to be considered as a capital asset and the sale of the same to be treated as capital gain. 20.1 We have heard the rival submissions and perused the materials available on record. In this case, the assessee purchased the first property on 27.2.2007 and the sale deed in March, 2007. Another property was purchased by assessee on 13.2.2006 and sold in this assessment year under consideration. Income treated as short term capital gain. The Ld. CIT(A) confirmed the same by placing reliance on his earlier order for assessment year 2007-08. As discussed in the earlier para relating to assessment year 2007- 08, the income generated from sale of this property to be considered as short-term capital gain and all the expenditure relating to these transactions to be allowed in terms of section 49 of the Act. If the assessee has treated this property as capital asset not as a stock in trade, which is relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. If it is a capital asset, the income generated from the transfer of this property to be considered as income from capital gain and all expenditure relating to the acquisition and improvement of the property to be allowed in terms of section 49 of the Act. Accordingly, this issue remitted to AO to decide the same in the light of above observation after going through the additional evidence filed by the assessee before us. For assessment year 2011-12:- 23. In this assessment year the assessee sold 73 sites in Urukere for a consideration of Rs.1,87,80,000/-. The assessee computed capital gain on this asset at Rs.13.68 lakhs. The AO considered the gain under head "Business income" and not allowed all the expenditure incurred in connection with the transfer as commission, development expenses, interest on loans as the assessee not furnished the details. As discussed in the earlier para, assessee filed additional evidence which is placed at page nos.879 to 891 with regard to incurring of various expenses like commission paid and development expenses and the AO not allowed the expenditure though he treated as business income. Without prejudice to our findings on legal issue, this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unexplained Investment: During the course of search and seizure operation one agreement of sale entered between the assessee and Sri. R Sunder Raj for purchase of a property situated at sy.no.8, Kathriguppe village measuring _10320 s.ft. was found and seized. This document is enclosed as annexure -1. As per the agreement, the total consideration was Rs.2.00 crore and it was paid in cash. The assessee was confronted by DDIT (Inv).Sri K.G. Krishna vide statement recorded u/s 131( I A) on 22.12.2012 has replied as under: "Q.5 Please refer to your answer to question No.21 of the sworn statement u/s.132(4) recorded during the course of search proceedings uis.132 of the Income tax Act, 1961 on 05/11/2012 wherein you have stated that you have paid Rs.1.50 crores to Shri. R. Sundar Raj. Please state whether you have disclosed this amount to tax. Ans. I have entered into an agreement dated 18/05/2006 with Shri.R.Sunderqj for purchase of property located at Sy.No.17/12 and -17/14 in the layout formed by M/s.Bhavani Housing Co-op. Society Ltd., Khatriguppe Village, Banashankari, Bangalore. Though this agreement speaks of payment of Rs.2.00 crores in cash as sale consideration, it got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and the contents on those evidences can be used for the purpose of assessment. In the present case part of the transactions were accepted by the assessee. Hence it is presumed that the seized document has reflected the true and correct transaction and accordingly. Rs.2,00,00,000/- is added as unexplained investment." 25.2. On that basis, AO drew conclusion that in view of provision of section 292C of the Act, he drew the presumption that assessee paid Rs.2 crores with regard to the property and addition was made. However, there was another agreement dated 6.6.20067 wherein assessee has paid Rs.1,50,02,990/- to R. Sundar Raj by way of banking channels. Assessee filed a copy of ledger account before us. The contention of the Ld. A.R. is that Shri R. Sundar Raj was absolute owner of the property on 18.5.2006. However, R. Sundar Raj has purchased this property from Shri Bhavani Housing Co-operative Society Ltd. Only on 19.5.2006. Further, being so by any stretch of imagination on the date of agreement i.e. 18.5.2006 Smt. R. Sundar Raj cannot sell the property. The Actual owner of the property was Shri R. Sundar raj and not Smt. R. Sundar Raj. More so, Shri R. Sundar Raj has actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l consideration at Rs.1,50,02,990/- and the entire sale consideration has been paid by way of banking channels. It is also brought to our notice that Shri R. Sundar Raj was member of Shri Bhavani Housing Cooperative Society Ltd. And the sale deed in his favour has been registered in respect of this alleged property on 19.5.2006 bearing document No.948/2006-07 in the sub registrar office Basavanagudi, Bangalore. Thus, the Ld. A.R. submitted that if the payment has been made of Rs.2 crores on 18.5.2006, there was no necessity of paying an amount of Rs.1,50,02,990/- to the vendor once again on 6.6.2006. As such, the earlier agreement dated 18.5.2006 is not a valid agreement. It is a dummy document which cannot be considered for making any addition by AO in this assessment year under consideration. In our opinion, these facts to be looked into by the AO and assessee not satisfactorily explained these inconsistencies before the lower authorities. In view of this, we remit this issue to the file of the AO to consider all the additional evidences namely ledger extract and advance paid for site to R. Sundar Raj for the assessment year 2006-07 placed at additional evidence paper book page N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has not filed PAN of these transactions, not established the identity and creditworthiness of the creditors as well as genuineness of the transaction. The transactions are claimed to have been made through banking channels which even if drew, does not by itself establish the genuineness of these transactions. In view of this, the Ld. CIT(A) confirmed the additions. Against this, assessee is in appeal before us. 27.3 We have heard the rival submissions and perused the materials available on record. The assessee has filed the additional evidences in following form:- 1. Ledger extract of Vikram Jain along with relevant bank account extract and confirmation letter pages 125 to 127 2. Ledger extract of Manchaiah along with relevant bank account extract pages 128 to 129 3. Ledger extract of B.M. Kumar along with relevant bank account extract and confirmation letter pages 130 to 137. 4. Ledger extract A.N. Nanjaiah confirmation letter pages 138 to 142. 27.4. In our opinion, these additional evidences were filed first time before this Tribunal and lower authorities have no occasion to examine the same. Being so, these additional evidences remitted to the file of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see also drew our attention to the sale agreement entered on 28.7.2008 with Smt. Shanta Sridhar Murthy, which is placed on record in page nos.105 to 118. The assessee also drew our attention to the details of repayment of loans and advances along with statements which are placed at page nos.578 to 589 of the additional evidence filed before us, which is in the following form:- 1. Ledger extract of Shanta Sridhar Murthy in support of repayment made - page nos.578 to 583 2. Ledger extract of Narasimha Murthy in support of repayment made -pages 584 to 589 28.5. The Ld. D.R. relied on the order of lower authorities. 28.6. We have heard the rival submissions and perused the materials available on record. The assessee has filed the additional evidences as discussed above which the AO has no occasion to examine it. Hence, the issue in dispute is remitted to the AO for fresh consideration after giving an opportunity of hearing to the assessee. 29. For assessment year 2010-11 in ITA No.310/Bang/2020. This ground is adjudicated in this A.Y. without prejudice to our findings on legal issue. 29.1 The assessee challenged addition of Rs.82,66,804/- as unexplained credit u/s 68 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement, he replied that the name written therein as "Krishnappa" refer to Shri K.G. Krishna, present assessee. Accordingly, Shri K.G. Krishna asked to explain the investment of Rs.4,80,00,250/-. The present assessee has filed the written submission before the authorities on 17.3.2015, wherein he denied the cash payment. The reply is as follows:- 33.3. As per this reply, the advance payment given in cheque of Rs.50 lakhs and another payment of Rs.50 lakhs (Rs.25 lakhs each on 7.6.2007) has been admitted by both the persons and a confirmation also given. The remaining cash portion was denied by the assessee. According to the AO, the transaction mentioned in the loose sheet is self-explanatory as AC-25-37 guntas was purchased @ Rs.18.5 lakhs totalling of Rs.4,79,61,250/- by paying the stamp duty of Rs.39,000/-. The total cost was worked out at Rs.4,80,00,250/- in the next page date, extent rate, total consideration, payment and balance price are mentioned clearly. The entire amount has been funded by Shri K.G. Krishna and Shri N.C. Mahesh knows the transaction as he is also involved in it. But to whom the payment was made was not explained by both of them. As far as the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, then atleast, the cheque payment of Rs.1.6 crores at page No.10 should have been appeared in page No.7. Such banking payments not appearing in such slip would itself clearly shows that the slip at page No.7 does not belong to the assessee. Further, the confirmation referred by Shri N.C. Mahesh has not been doubted by the AO nor have they called Shri N.C. Mahesh called Shri N.C. Mahesh for cross examination. This slip at page No.7 itself looks dubious in as much as for a so-called transaction of Rs.4,79,61,250/-, wherein the stamp duty mentioned at Rs.39,000/-. Further, though in the slip, there is mentioned of cheque and DD payment of Rs.3,01,50,000/- at the end of the slip, it is mentioned as cash payment from Krishnappa is Rs.3,01,50,000/-. In any case, the assessee has not made any payment in cash to Shri N.C. Mahesh and he also confirmed the transaction with the assessee as appearing in page No.10 of the assessment order. According to the Ld. A.R., the Ld. CIT(A) would have deleted entire addition instead of sustaining any addition of Rs.3,55,00,250/- as against the addition made by the AO at Rs.3,80,00,250/-. He also drew our attention to the additional evidence filed befo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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