ITO, Ward-8(2), Hyd, Hyderabad V. Rachamalla Om Prakash (HUF), Hyd, Hyderabad

ITA 1011/HYD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2216 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 05-08-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: L R AMJI RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit
• Section: 147; 69; 148; 144

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1010/HYD/2015 ASSESSMENT YEAR: 2007-08 & ITA NO.1011/HYD/2015 ASSESSMENT YEAR: 2008-09 THE INCOME TAX OFFICER, WARD-8(2), HYDERABAD. VS. SRI RACHAMALLA OM PRAKASH (HUF), HYDERABAD. PAN-AFGHR0798L (APPELLANT) (RESPONDENT) REVENUE BY : SHRI L. RAMJI RAO ASSESSEE BY : SHRI S. RAMA RAO DATE OF HEARING : 18-10-2017 DATE OF PRONOUNCEMENT : 29-12-2017 ORDER PER P. MADHAVI DEVI, J.M.: BOTH ARE REVENUES APPEALS FOR THE A.YS 2007-08 AND 2008-09 AGAINST THE ORDERS OF THE CIT(A)-2 HYDERABAD, DATED 15-05-2015 RESPECTIVELY. 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE (HUF) WAS THE 10% OWNER AND POSSESSOR OF LAND SITUATED AT SY. NO. 56, MIYAPUR, HYDERABAD, IN THE NAME OF ONE OF THE MEMBERS OF THE HUF I.E SMT. SAI RANI. THIS LAND WAS GIVEN FOR DEVELOPMENT TO SR BUILDERS ALONG WITH THE OTHER LAND 2 ITA NOS. 1010 & 1011/HYD/2015 SRI RACHAMALLA OM PRAKASH (HUF), HYDERABAD. OWNERS. AS PER THE DEVELOPMENT AGREEMENT DATED 14-02- 2003, THE LAND OWNERS WERE TO RECEIVE 32% OF THE CONSTRUCTED AREA AND ACCORDINGLY THE ASSESSEE WAS ENTITLED TO 09 FLATS. OUT OF THE SAID 09 FLATS, THE ASSESSEE HAD SOLD 04 FLATS DURING THE F.Y 2005-06 RELEVANT TO THE A.Y 2006-07 AND 05 FLATS WERE SOLD DURING THE F.Y 2006-07 RELEVANT TO THE A.Y 2007- 08. 3. THE A.O OBSERVED THAT THE ASSESSEE DID NOT FILE ANY RETURN OF INCOME FOR THE A.Y 2007-08 AND 2008-09. THEREFORE, THE A.O ISSUED NOTICES U/S 148 OF THE IT ACT DATED 14-05-2010 FOR BOTH THE ASSESSMENT YEARS. THE ASSESSEE DID NOT RESPOND TO THE SAME. THE OTHER STATUTORY NOTICES WERE ALSO ISSUED TO THE ASSESSEE, BUT THERE WAS NO COMPLIANCE BY THE ASSESSEE TILL 11-10-2011, ON WHICH DATE THE ASSESSEE REPRESENTED BY HIS BROTHER-IN-LAW, FURNISHED CERTAIN INFORMATION. 4. THE A.O COMPLETED THE ASSESSMENT FOR THE A.Y 2007-08 ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD U/S 144 R.W.S 147 OF THE IT ACT. THE A.O OBSERVED THAT THE ASSESSEE HAS SOLD 05 FLATS FOR WHICH, THE ASSESSEE HAS RECEIVED THE SALE 3 ITA NOS. 1010 & 1011/HYD/2015 SRI RACHAMALLA OM PRAKASH (HUF), HYDERABAD. CONSIDERATION OF RS. 33,05,000/-. THE A.O ADOPTED THE MARKET PRICE OF SUCH FLATS AT RS. 2,000/- PER SQ FT, AND ARRIVED AT THE SHORT TERM CAPITAL GAIN OF RS. 1,09,40,020/-. THEREAFTER, HE ALSO OBSERVED THAT THE ASSESSEE HAS TRANSFERRED UNDIVIDED SHARE OF LAND TO THE BUILDER TOWARDS HIS SHARE OF CAPITAL AND TOWARDS THIS, HE ARRIVED AT LONG TERM CAPITAL GAIN OF RS. 19,22,470/-. THEREAFTER, HE ALSO PROCEEDED TO CONSIDER THE CAPITAL GAIN ARISING OUT OF THE SALE 04 FLATS DURING CONSTRUCTION STAGE AND ARRIVED AT THE SHORT TERM CAPITAL GAIN OF RS. 3,68,020/- AND LONG TERM CAPITAL GAIN OF RS. 2,11,050/-. THUS THE TOTAL ADDITION OF THE TOTAL LONG TERM CAPITAL GAINS WAS RS. 21,93,520/-. FURTHER, THE A.O ALSO OBSERVED THAT THE ASSESSEE HAS MADE HUGE CASH CREDITS INTO THE BANK ACCOUNT AND SINCE THE ASSESSEE COULD NOT EXPLAIN THE TRANSACTIONS, HE TREATED THEM AS UNEXPLAINED CASH CREDITS U/S 69 OF THE ACT AND MADE THE ADDITION OF RS. 37,48,467/- TOWARDS THE CREDITS AS WELL AS THE INTEREST THEREON. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO ALLOWED THE SAME BY HOLDING THAT THE LONG TERM 4 ITA NOS. 1010 & 1011/HYD/2015 SRI RACHAMALLA OM PRAKASH (HUF), HYDERABAD. CAPITAL GAIN ARISES IN THE YEAR OF ENTERING INTO THE DEVELOPMENT AGREEMENT AND THEREFORE IT IS NOT TAXABLE INCOME IN THE RELEVANT ASSESSMENT YEAR. FURTHER, WITH REGARD TO THE SHORT TERM CAPITAL GAIN, THE CIT(A) HELD THAT ADOPTING OF RS. 2,000/- PER SQ FT., AS SALE CONSIDERATION IS WITHOUT ANY BASIS. THUS, HE DELETED THE ENTIRE SHORT TERM CAPITAL GAIN. WITH REGARD TO THE UNEXPLAINED CASH CREDITS, THE CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT THEY ARE OUT OF THE SALE PROCEEDS OF THE FLATS SOLD DURING THE RELEVANT FINANCIAL YEAR AND DELETED THE ADDITION. THUS, HE DELETED ALL THE ADDITIONS MADE BY THE A.O. AGAINST THE DELETION OF THE ADDITIONS TOWARDS LONG TERM CAPITAL GAINS, SHORT TERM CAPITAL GAINS AND THE UNEXPLAINED CASH CREDITS, THE REVENUE IS IN APPEAL BEFORE US. SIMILARLY, FOR THE ASSESSMENT YEAR 2008-09 ALSO, SIMILAR ADDITIONS MADE BY THE A.O HAVE BEEN DELETED BY THE CIT(A) AND THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DR POINTED OUT THAT THE CIT(A) HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE WITHOUT CALLING FOR A REMAND REPORT OR EVEN VERIFYING THE VERACITY OF THE CONTENTIONS OF THE ASSESSEE BY HIMSELF. THEREFORE, ACCORDING TO HIM, THE ORDER 5 ITA NOS. 1010 & 1011/HYD/2015 SRI RACHAMALLA OM PRAKASH (HUF), HYDERABAD. OF THE CIT(A) IS TO BE SET ASIDE, PARTICULARLY SINCE THE ASSESSEE HAS NOT FILED ANY DETAILS BEFORE THE A.O. 7. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT ASSESSEE HAS FILED THE DETAILS BEFORE THE CIT(A) AND THE CIT(A) HAS DELETED THE ADDITIONS AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE AT LENGTH. 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL PLACED ON RECORD, WE FIND THAT, UNDISPUTEDLY THE ASSESSEES HUF HAS ENTERED INTO A DEVELOPMENT AGREEMENT ON 14-02- 2003 AND THEREFORE FOLLOWING THE JUDICIAL PRECEDENTS ON THE ISSUE, PARTICULARLY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SHRI POTLA NAGESWARA RAO VS DCIT (2014) 365 ITR 0249 (AP), THE CAPITAL GAINS ARISE IN THE RELEVANT ASSESSMENT YEAR OF AGREEMENT. THEREAFTER, THE ASSESSEE HAS SOLD CERTAIN FLATS DURING THE F. Y 2005-06 THE CAPITAL GAIN ARISING THEREON IS TAXABLE IN THE A.Y 2006-07 AND BALANCE OF THE FLATS WHICH WERE SOLD IN THE F.Y 2006-07, THE CAPITAL GAINS IS TAXABLE IN THE A.Y 2007-08. WHEN THE FLATS ARE SOLD, BOTH, THE SHORT TERM CAPITAL GAIN ON SALE OF THE STRUCTURE, AND LONG TERM CAPITAL GAIN ON THE SALE OF THE 6 ITA NOS. 1010 & 1011/HYD/2015 SRI RACHAMALLA OM PRAKASH (HUF), HYDERABAD. UNDIVIDED SHARE OF LAND WOULD ARISE. WHILE THE A.O HAS COMPUTED THE LONG TERM AND SHORT TERM CAPITAL GAIN ON SALE OF FLATS SEPARATELY, HE AGAIN COMPUTED LONG TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE FOR ENTERING INTO THE DEVELOPMENT AGREEMENT AND ALSO SHORT TERM CAPITAL GAIN ON SALE OF FLATS. HE HAS BROUGHT TO TAX CAPITAL GAIN ON SALE OF FLATS IN THE F.Y 2005-06 ALSO IN A.Y 2007-08. ON THE OTHER HAND, WE FIND THAT THE CIT(A) HAS DELETED THE ENTIRE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN WITHOUT TAKING INTO ACCOUNT THAT THE SHORT TERM AND LONG TERM CAPITAL GAIN HAS ARISEN TO THE ASSESSEE ON THE SALE OF 05 FLATS DURING THE RELEVANT ASSESSMENT YEAR. THEREFORE, THE FACTS HAVE NOT BEEN PROPERLY CONSIDERED EITHER BY THE A.O OR THE CIT(A). 9. SIMILAR IS THE CASE WITH REGARD TO THE UNEXPLAINED CASH CREDITS. THE A.O HAS TREATED, THE ENTIRE CREDITS INTO THE BANK ACCOUNT, AS UNEXPLAINED CASH CREDITS, WHILE THE CIT(A) HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE WITHOUT EVEN VERIFYING THE VERACITY OF THE SAME. SIMILAR FACTS AND CIRCUMSTANCES ARE ARISING IN THE A.Y 2008-09 AS WELL. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMAND ALL THE 7 ITA NOS. 1010 & 1011/HYD/2015 SRI RACHAMALLA OM PRAKASH (HUF), HYDERABAD. ISSUES TO THE FILE OF THE A.O FOR DE-NOVO CONSIDERATION IN ACCORDANCE WITH LAW FOR BOTH THE ASSESSMENT YEARS. NEEDLESS TO MENTION BY THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARING. 10. IN THE RESULT THE REVENUES APPEALS ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2017. SD/- SD/- (B. RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 29 TH DECEMBER, 2017 KRK 1 SRI RACHAMALLA OM PRAKASH (HUF), D.NO. 5-354, DEEPTI SREE NAGAR, MADINAGUDA, SERILINGAMPALLY, HYD. 2 ITO, WARD-8(2), HYDERABAD. 3 CIT(A)-2, HYDERABAD 4 PR. CIT-2, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE