B.L.Shankarlal Yadav, Hyderabad V. DCIT,Central Circle-2, Hyderabad

ITA 1016/HYD/2013

• Counselvise Citation: 101622514 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 25-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: S RAMA RAO
• Keywords: Search and seizure
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO. A.Y. APPELLANT RESPONDENT 758/H/2013 2004 - 05 MR. M. SUVEER REDDY, HYDERABAD PAN AFJPM3514K DCIT, CENTRAL CIRCLE-2, HYDERABAD 759/H/2013 2006 - 07 760/H/2013 2007 - 08 761/H/2013 2008 - 09 762/H/2013 2009 - 10 ITA.NO. A.Y. APPELLANT RESPONDENT 1016/H/2013 2007 - 08 MR. BL SHANKAR LAL YADAV, HYDERABAD PAN AIUPB5103E DCIT, CENTRAL CIRCLE-2, HYDERABAD. 1017/H/2013 2009 - 10 FOR ASSESSEE : MR. S. RAMA RAO FOR REVENUE : MR. M. SITARAM DATE OF HEARING : 26 . 1 0.2015 DATE OF PRONOUNCEMENT : 13 .11 .2015 ORDER PER BENCH : THESE SEVEN APPEALS ARE BY THE ABOVE TWO ASSESSEES AGAINST THE COMMON ORDER OF THE LD. CIT(A ) DATED 28.02.2013 IN RESPECTIVE ASSESSEES CASES. BO TH THESE ASSESSEES HAVE RAISED VARIOUS GROUNDS FOR THE A.YS. 2004-05 TO 2009-10 INTER ALIA, CONTESTING APPLICATION OF PROVISIONS OF SECTION 153C WHEN NO MATERIAL FACTS W ERE FOUND ON SOME ISSUES AND CONFIRMING CERTAIN ADDITIO NS CONSEQUENT TO IMPOUNDING OF AGREEMENTS FOUND IN A 2 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. SEARCH. THUS THERE ARE BASICALLY ONLY THESE TWO ISS UES FOR CONSIDERATION WHICH ARE COMMON IN ALL THESE APPEALS . SINCE ISSUES ARE COMMON, THESE APPEALS ARE HEARD TOGETHER AND DECIDED BY THIS COMMON ORDER FOR THE S AKE OF CONVENIENCE. 2. WE HAVE HEARD THE LD. COUNSEL AND LD. D.R. IN DETAIL AND ALSO PERUSED THE PAPER BOOK PLACED ON RE CORD RUNNING INTO 196 PAGES CONTAINING VARIOUS AGREEMENT S AND DOCUMENTS AS PLACED BEFORE THE AUTHORITIES. 3. BRIEFLY STATED, ASSESSEES HEREIN ARE INDIVIDUAL S AND HAVE JOINTLY ENTERED INTO AN AGREEMENT OF SALE/ PURCHASE ON 28.12.1997 WITH MR. C. KISHANRAM GOULI OF SECUNDERABAD FOR PURCHASE OF SCHEDULE PROPERTY IN SY.NO.1 AND 2 ADMEASURING AC.56.04 GTS AT LOTHKUNTA (V), MALKAJGIRI (M), RANGA REDDY DISTRICT AT RS.10 LAKHS PER ACRE. OUT OF THE TOTAL CONSIDERATION OF RS.5.61 CR ORES TO BE PAID, THEY HAVE PAID AN AMOUNT OF RS.20 LAKHS AN D BALANCE TO BE PAID AT THE TIME OF REGISTRATION. HOW EVER, DUE TO CERTAIN DISPUTES ARISING OUT OF THE LAND AND ALSO SOME COMPLICATIONS IN GETTING PERMISSIONS ETC., AND ALSO IN VIEW OF LITIGATION INVOLVED, THE HEIRS OF ORIGIN AL OWNER AND THE THESE TWO ASSESSEES AS CONFIRMING PARTIES, ENTERED INTO DEVELOPMENT AGREEMENT CUM- GPA ON 16 TH OCTOBER, 2006 IN FAVOUR OF M/S. SANTHA SRIRAM CONSTRUCTIONS PVT. LTD., (IN SHORT SSCPL), HYDERA BAD. AS PER THE TERMS OF AGREEMENT, SSCPL BEING THIRD PARTY WOULD PAY RS.4 CRORES TO THE FIRST PARTY I.E., LAND OWNERS 3 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. AND BOTH PARTIES I.E., LAND OWNERS BEING FIRST PART Y AND CONSENTING PARTIES BEING SECOND PARTY THE REGISTER 57% OF THE LAND TO THE THIRD PARTY. BALANCE OF RS. 1 CRORE WAS TO BE PAID AT THE TIME OF OBTAINING SANCTION FROM CONC ERNED AUTHORITIES. THERE WERE OTHER TERMS OF AGREEMENT AL SO WHICH WOULD INDICATE THAT CONSTRUCTED AREA WOULD BE DEVOLVING ON THIRD PARTY/SECOND PARTY AND FIRST PAR TY WOULD NOT HAVE ANY RIGHTS IN THE CONSTRUCTED AREA. BE THAT AS IT MAY, THERE WERE SEARCH AND SEIZURE OPERA TIONS AT THE PREMISES OF SSCPL ON 25.03.2010 AND CERTAIN INCRIMINATING MATERIAL WAS FOUND MORE PARTICULARLY, THE AGREEMENT AND AS THESES ASSESSEE HAVE NOT DISCLOSE D ANY OF THESE TRANSACTIONS TO THE DEPARTMENT, PROCEEDING S UNDER SECTION 153C WERE INITIATED. THERE IS NO CHAL LENGE TO THE PROCEEDINGS UNDER SECTION 153C. WHAT THE ASS ESSEE IS CONTESTING IS THE ADDITIONS MADE BY THE A.O. IN THE ASSESSMENT ORDERS. 4. THE SEARCH MATERIAL INDICATED THAT THE ASS ESSEE MR. BL SHANKARLAL YADAV HAS RECEIVED AN AMOUNT OF RS.1,01,00,800 IN FINANCIAL YEAR RELEVANT TO A.Y. 2 007-08 AND RS.56,97,391 IN FINANCIAL YEAR RELEVANT TO A.Y. 2009- 10 AND THESE AMOUNTS WERE BROUGHT TO TAX BY THE A.O . AS THE COMMISSION IN THE TRANSACTION. MR. M. SUVEER RE DDY, BEING AN ELECTRICAL CONTRACTOR AS WELL, ALSO RECEIV ED AN AMOUNT OF RS.50 LAKHS IN FINANCIAL YEAR RELEVANT TO A.Y. 2007-08 AND RS.45,63,000 IN FINANCIAL YEAR RELEVANT FOR A.Y. 2009-10 WHICH WERE BROUGHT TO TAX AS COMMISSIO N RECEIVED IN THE ABOVE TRANSACTION. APART FROM THESE TWO 4 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. AMOUNTS, IN THE HANDS OF MR. M. SUVEER REDDY A.O. ESTIMATED THE INCOME AT 8% ON THE TURNOVER IN A.YS. 2004-05, 2006-07, 2007-08 AND 2008-09 ON ELECTRICAL CONTRACT BUSINESS, REJECTING ASSESSEES BOOKS OF AC COUNT. LD. CIT(A) CONFIRMED THE ABOVE AFTER CONSIDERING ASSESSEES SUBMISSIONS. 4.1. AS STATED, THERE ARE TWO ISSUES WHICH ARE FOR OUR CONSIDERATION. THE FIRST ISSUE IS WITH REFERENC E TO THE ESTIMATION OF INCOME AT 8% ON THE TURNOVER IN RESPE CTIVE ASSESSMENT YEARS IN THE CASE OF MR. M. SUVEER REDDY FOR WHICH ASSESSEE CONTENDS THAT THERE IS NO INCRIMINAT ING MATERIAL AND THE RETURNS ORIGINALLY FILED IN RESPEC TIVE YEARS HAVE BEEN ACCEPTED AND BECAME FINAL. THE OTHE R ISSUE IS WITH REFERENCE TO THE SO-CALLED AMOUNTS RE CEIVED FROM SSCPL BY MR. BL SHANKARLAL YADAV AND MR. M. SUVEER REDDY WHICH WERE BROUGHT TO TAX IN THE YEAR OF RECEIPT AS COMMISSION IN THE TRANSACTIONS. THESE TW O ISSUES ARE DEALT WITH AS UNDER. I. ESTIMATION OF INCOME AT 8% : 5. IN A.YS. 2004-05, 2006-07, 2007-08 AND 2008-09, A.O. REJECTED THE BOOKS OF ACCOUNT AND TAK ING THE TURNOVER AS THE BASIS, ESTIMATED INCOME AT 8%. WE WERE INFORMED THAT ASSESSEE HAS DISCLOSED MORE THAN 8% INCOME IN A.Y. 2005-06, THEREFORE, THERE IS NO REJE CTION OF BOOKS OF ACCOUNT OR ESTIMATION OF INCOME IN THAT ASSESSMENT YEAR. IT WAS THE CONTENTION OF THE LD. C OUNSEL THAT THERE WAS NO INCRIMINATING MATERIAL IN THE SEA RCH 5 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. CONDUCTED IN THE PREMISES OF SSCPL AND SO ASSESSEE S INCOMES WHICH WERE ORIGINALLY DISCLOSED ON THE BASI S OF BOOKS OF ACCOUNT COULD NOT BE REJECTED IN THE ABSEN CE OF ANY INCRIMINATING MATERIAL. LD. COUNSEL RELIED ON T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA DATED 28 TH AUGUST, 2015 IN SUPPORT OF HIS CONTENTION THAT ADDITIONS CANNOT BE MADE ARBITRARIL Y AND WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATE RIAL. 5.1 LD. D.R. IN REPLY, RELIED ON THE JUDGMENT OF T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GO PAL LAL BHADRUKA VS. DCIT 346 ITR 106 TO SUBMIT THAT FOR TH E PURPOSE OF SECTION 153A/153C A.O. COULD TAKE INTO CONSIDERATION OF MATERIAL, OTHER THAN WHAT WAS AVAI LABLE DURING THE SEARCH AND SEIZURE OPERATION, FOR MAKING AN ASSESSMENT OF THE UNDISCLOSED INCOME OF THE ASSESSE E. 6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS ON RECORD. AS FAR AS THE ASSESSEE MR. M. SUVEER REDDYS INCOME FOR A.Y. 2004-05 TO 2007-08 ON HIS ELECTRIC CONTRACT BUSINESS IS CONCERNED, THERE WERE NO SEARCH AND SEIZURE OPERATIONS IN ASSESSEES PREMISE S AND 153C PROCEEDINGS WERE INITIATED ONLY ON THE BASIS O F CERTAIN INCRIMINATING MATERIAL AVAILABLE IN THE BUS INESS PREMISES OF SSCPL. EVEN THOUGH JURISDICTIONAL HIGH COURT IN THE CASE OF GOPAL LAL BHADRUKA (SUPRA) HAS EXAMI NED THE JURISDICTION OF THE A.O. IN COMPLETING THE ASSE SSMENTS UNDER SECTION 153A, WHAT IS RELEVANT IS THAT A.O. C OULD TAKE INTO CONSIDERATION MATERIAL, OTHER THAN WHAT W AS 6 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. AVAILABLE DURING THE SEARCH AND SEIZURE OPERATION F OR MAKING AN ASSESSMENT OF UNDISCLOSED INCOME OF ASSES SEE. IN THIS CASE, AS FACTS INDICATE THERE IS NO MATERIA L OTHER THAN THE RETURN FILED BY ASSESSEE. IN THE RETURN FI LED, ASSESSEE HAS DISCLOSED NOT ONLY THE TURNOVER BUT AL SO VARIOUS EXPENDITURES AND THE INCOME EARNED THEREON. WITHOUT ANY OTHER MATERIAL AVAILABLE EITHER DURING THE SEARCH OR DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, A.O. IN OUR VIEW, CANNOT RE-EXAMINE THE INCOMES ALR EADY GOT CONCLUDED, ONCE THE NOTICE PERIOD FOR SCRUTINY WAS OVER AND ASSESSEES RETURNS WERE ACCEPTED. IN THIS CASE, THERE IS NO OTHER MATERIAL OTHER THAN THE RETURN FI LED BY THE ASSESSEE IN TIME, IN VARIOUS ASSESSMENT YEARS. THEREFORE, EVEN APPLYING THE PRINCIPLES LAID DOWN B Y THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GO PAL LAL BHADRUKA (SUPRA), A.O. COULD NOT RE-VISIT THE INCOM ES ALREADY GOT CONCLUDED IN THE ORIGINAL RETURN. THE PRINCIPLES GOVERNING THE JURISDICTION UNDER SECTION 153A WAS SUMMARIZED BY THE HONBLE DELHI HIGH COURT IN T HE CASE OF CIT VS. KABUL CHAWLA AND OTHERS IN ITA.NO.707/2014 DATED 28.08.2015 AS UNDER : 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN THE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER : I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT; NOTICE UNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR 7 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AY S WILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE A.O. WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE 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 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESSMENT PROCEEDINGS. VI. IN SO FAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 8 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153A 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. 6.1. CONSIDERING THE PRINCIPLES LAID DOWN BY THE HONBLE DELHI HIGH COURT, WE ARE OF THE VIEW THAT T HE A.O. COULD NOT REJECT THE BOOKS OF ACCOUNT AND ESTIMATE THE INCOME AT 8%, WITHOUT THERE BEING ANY BASIS IN DOIN G SO. IN VIEW OF THE ABOVE, WE AGREE WITH ASSESSEES GROUN DS ON THE ISSUE AND DELETE THE ESTIMATION OF INCOME AS MA DE OUT BY THE A.O. IT IS ALSO SEEN THAT IN A.Y. 2005-06 AS SESSEE DECLARED INCOME AT MORE THAN 8%. AS ASSESSEES BUSI NESS INCOME VARIES ON YEAR TO YEAR BASIS AND THE ASSESSE E IS DISCLOSING THE INCOMES ON THE BASIS OF THE ENTRIES IN THE BOOKS OF ACCOUNT, THERE SEEMS NO JUSTIFICATION IN R EJECTING THE BOOKS OF ACCOUNT ON ASSUMPTIONS AND PRESUMPTION S. IN VIEW OF THIS, KEEPING THE ABOVE FACTS IN MIND AN D PRINCIPLES OF LAW, WE CANNOT APPROVE THE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME IN THE IMPUGNED ASSESSMENT YEARS. ASSESSEE GROUNDS ARE ALLOWED. 9 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. II. ADDITIONS ON THE BASIS OF RECEIPTS FROM M/S. SSCPL: 7. AS BRIEFLY STATED ABOVE, ASSESSEES HAVE ENTERED INTO A PURCHASE AGREEMENT WITH MR. KISHANRAM GOULI ON 28.12.1997 AND PAID AN ADVANCE OF RS. 20 LAKHS OUT OF THE TOTAL CONSIDERATION PAYABLE AT RS.5.61 CRORES. HOWE VER, SUBSEQUENTLY, A DEVELOPMENT AGREEMENT CUM- GPA WAS ENTERED BETWEEN THE LEGAL HEIRS OF THE ABOVE SAID P ERSON AS FIRST PARTY, ASSESSEES HEREIN VIZ., MR. M. SUVEER R EDDY AND MR. BL SHANKARLAL YADAV AS CONSENTING PARTIES BEING SEC OND PARTY AND SSCPL, HYDERABAD BEING THE DEVELOPER AS THIRD PARTY , FOR DEVELOPING THE LAND ADMEASURING ONLY 40 ACRES I N SY.NOS. 1 AND 2, LOTHKUNTA (V), MALKAJGIRI (M). SSC PL HAD TO PAY AN AMOUNT OF RS.5 CRORES OUT OF WHICH, RS.4 CRORES WAS PAID AT THE TIME OF AGREEMENT AND RS.1 CRORE WO ULD BE PAID AT THE TIME OF OBTAINING SANCTION. WE ARE N OT HERE TO EXAMINE THE TERMS OF AGREEMENT AND HOW IT IS TO BE CONSIDERED FOR THE PURPOSE OF ASSESSMENT EITHER IN THE HANDS OF THE OWNERS OR IN THE HANDS OF THE DEVELOPE R. IT IS THE A.OS CONTENTION THAT ASSESSEE DO NOT HAVE ANY RIGHTS ON THE PROPERTY AND THE AMOUNTS RECEIVED BEING CONSENTING PARTIES FROM SSCPL IS TO BE BROUGHT TO T AX ON THE BASIS OF THE RECEIPT IN RESPECTIVE YEARS AS COM MISSION IN THE TRANSACTION. ASSESSEES CONTENDED BEFORE THE LD. CIT(A) THAT ASSESSEES HAS RIGHTS OVER THE PROPERTY AND THOSE RIGHTS WERE TRANSFERRED TO SSCPL AND THE AMOU NTS ARE RECEIVED AS ADVANCE THEREFROM. UNLESS THE PARTI ES HEREIN RECEIVED DEVELOPED PROPERTY, THERE CANNOT BE ANY ACCRUAL OF INCOME. LD. CIT(A), HOWEVER, DID NOT AGR EE WITH THE ABOVE CONTENTIONS AND CONFIRMED THE AMOUNT. 10 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. 8. BEFORE US, LD. COUNSEL SUBMITTED THAT THE AMOUNTS RECEIVED FROM SSCPL ARE NOT COMMISSION RECEIVED BUT AS PART OF DEVELOPMENT AGREEMENT. THIS DEVELOPMENT AGREEMENT HAS NOT BEEN FULLY IMPLEMENTE D AS THE RELEVANT SANCTIONS FROM THE CONCERNED AUTHOR ITIES HAVE NOT BEEN OBTAINED AND VIRTUALLY THERE IS NO DEVELOPMENT ON THE PROPERTY, AFTER PAYMENT OF INITI AL AMOUNTS. IT WAS SUBMITTED THAT THE AMOUNTS RECEIVED ARE TO BE CONSIDERED AS PART OF CAPITAL GAINS AS AND WH EN COMPLETE TRANSFER TAKES PLACE. IT WAS THE SUBMISSIO N THAT REVENUE DID NOT ANALYSE THE NATURE OF TRANSACTION A ND WRONGLY BROUGHT THE AMOUNT TO TAX IN THE YEAR OF RE CEIPT AS COMMISSION, EVEN THOUGH THE PARTIES HEREIN HAVE RIGHTS TO ACQUIRE THE PROPERTY AND SUCH RIGHT WAS TRANSFERRED TO SSCPL. IT IS THE SUBMISSION THAT CAP ITAL GAINS CANNOT BE BROUGHT TO TAX IN EITHER OF THE ASS ESSMENT YEARS INVOLVED. 9. LD. D.R., WHO HAPPENED TO BE THE A.O. AS WELL AT THE RELEVANT POINT OF TIME, DEFENDED THE ORDERS BY SUBMITTING THAT THE AMOUNTS RECEIVED WAS OVER AND A BOVE THE AMOUNT PAYABLE TO THE OWNERS. THEREFORE, THIS A MOUNT CATEGORICALLY WAS CONSIDERED AS COMMISSION. ON A QU ERY BY THE BENCH, WHETHER THE AMOUNTS RECEIVED IS PART OF THE CONSIDERATION AS AGREED IN THE AGREEMENT OR OVER AN D ABOVE THE AMOUNTS PAYABLE AS PER THE AGREEMENT, LD. D.R. STATED THAT THESE AMOUNTS ARE OVER AND ABOVE T HE AGREED AMOUNTS. THE BENCH ALSO ENQUIRED WHETHER THE RE EXIST ANY EVIDENCE THAT AGREEMENTS ARE NOT COMPLETE D OR 11 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. FULFILLED, AS THE TRANSFER WOULD BE COMPLETE UPON E NTERING THE AGREEMENT AND FULFILLING CONDITIONS THEREIN AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF POTLA NAGESWARA RAO 365 ITR 249 (A.P.). 10. LD. COUNSEL SUBMITTED THAT IN THE WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A), THEY HAVE ONLY MENTIONED THAT AGREEMENT HAS NOT BEEN FULLY COMPLIE D WITH, BUT THE FACT IS THAT NO PERMISSIONS WERE RECE IVED AND NO DEVELOPMENT HAS HAPPENED WHICH CAN BE VERIFI ED EVEN AT THIS POINT OF TIME. 11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE DOCUMENTS PLACED ON RECORD. IT IS NOTIC ED THAT THE PARTIES HEREIN MR. BL SHANKARLAL YADAV AND MR. M. SUVEER REDDY HAD ENTERED INTO AN AGREEMENT FOR PURCHASE OF PROPERTY WAY BACK IN 1997 AND PAID ADVA NCE OF RS.20 LAKHS. MR. BL SHANKARLAL YADAV IS NOT MAINTAINING PROPER BOOKS OF ACCOUNT WHEREAS, MR. M. SUVEER REDDY IS MAINTAINING BOOKS OF ACCOUNT, AS HE IS IN THE BUSINESS AS ELECTRICAL CONTRACTOR. HOWEVER, IT WAS FAIRLY ADMITTED THAT THIS ADVANCE OF RS.20 LAKHS PA ID IN 1997 AS PER THE AGREEMENT OF SALE WAS NOT REFLECTE D IN THE BUSINESS- BALANCE SHEET OF ASSESSEE, MR. M. SUVEER REDDY. IT IS ONE OF THE CONTENTIONS THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS OVER AND ABOVE THE AMOU NT AGREED TO BE PAID IN THE DEVELOPMENT AGREEMENT TO T HE OWNERS. HOWEVER, LD. COUNSEL SUBMITS THAT THIS AMO UNT IS PART OF THE AMOUNT PAYABLE TO THE OWNERS WHICH W AS 12 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. ROUTED THROUGH THE ASSESSEES HEREIN. LD. D.R. ALSO COULD NOT CONFIRM THE FACTS. THEREFORE, IT IS TO BE EXAMI NED WHETHER THE AMOUNT RECEIVED BY THE ASSESSEES IS PAR T OF THE AGREED CONSIDERATION TO BE PAID TO THE OWNERS O R TO BE RECEIVED BY THE ASSESSEES AS PART OF TRANSFER OF RI GHTS OVER THE PROPERTY, HAVING A LIEN FOR PURCHASE OF PROPERT Y FROM THE OWNER(S). THE ENTIRE PAYMENT MADE BY SSCPL WAS NEITHER EXAMINED NOR BROUGHT ON RECORD BY THE A.O. IN ORDER TO EXAMINE THIS ASPECT. IT IS ALSO SURPRISING TO NOTE THAT REVENUE HAS NOT CONSIDERED WHETHER THE TRANSAC TION IS TO BE CONSIDERED AS ONE INVOLVED CAPITAL GAIN OR INVOLVING BUSINESS TRANSACTION. ASSESSEES HEREIN HA VE ENTERED INTO AN AGREEMENT FOR PURCHASE OF PROPERTY MAY BE FOR THE PURPOSE OF INVESTMENT OR MAY BE FOR THE PURPOSE OF BUSINESS ACTIVITY. HOWEVER, AFTER SO MAN Y YEARS, SINCE, NO PROGRESS HAVE BEEN MADE, THEY HAVE IN TURN, HANDED-OVER THE PROPERTY TO ANOTHER BUILDER - CUM- DEVELOPER VIDE SECOND AGREEMENT. SINCE THE ASSESSEE S HAVE A LIEN OVER THE PROPERTY BY VIRTUE OF THE EARL IER PURCHASE AGREEMENT, THEY HAVE BECOME CONSENTING PAR TIES IN THE LATTER AGREEMENT. THEREFORE, IF IT IS CONSID ERED AS AN INVESTMENT TRANSACTION, CAPITAL GAINS ARISES TO THE PARTIES HEREIN. WHEN ENQUIRED, WHETHER ANY ACTION WAS TAKEN ON THE OWNERS FOR BRINGING THE CAPITAL GAIN TO TAX AND WHETHER AMOUNTS RECEIVED BY ASSESSEES ARE PART OF TRANSFER OF PROPERTY BEING TRANSFER OF RIGHTS, THER E IS NO CLARITY FROM EITHER PARTIES. WHAT A.O. HAS DONE IN THE ASSESSMENT IS TO BRING TO TAX THE AMOUNTS RECEIVED BY THE ASSESSEES ON THE BASIS OF RECEIPT IN RESPECTIVE ASS ESSMENT 13 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. YEARS, IGNORING THAT IF IT IS A CAPITAL GAIN TRANSA CTION ON TRANSFER OF PROPERTY, THE CAPITAL GAINS OCCURS WHEN THE TRANSFER IS COMPLETE OR DEEMED TO BE COMPLETE. IF T HE TERMS OF AGREEMENT HAVE BEEN FULFILLED BY THE DEVEL OPER/ BUILDER, THE CAPITAL GAIN IS TO BE BROUGHT TO TAX I N THE YEAR IN WHICH THE AGREEMENT WAS CONCLUDED I.E., IN THIS CASE IN THE YEAR 2007-08. IN CASE THE TERMS OF THE AGREEMEN T ARE NOT FULFILLED AND THE AGREEMENT HAS NOT BEEN IMPLEM ENTED AS PER THE TERMS, THEN, THERE CAN BE NO TRANSFER IN STRICT SENSE, CAPITAL GAIN DOES NOT ARISE EVEN THOUGH CERT AIN ADVANCES WERE RECEIVED. IF IT IS A BUSINESS TRANSAC TION, A.O. MISSED THE POINT THAT ASSESSEES HEREIN HAVE PA ID AN AMOUNT OF RS.20 LAKHS AT THE TIME OF AGREEMENT AS I NITIAL PAYMENT WHICH WILL BE A DEDUCTION, ALONG WITH SUBSEQUENT EXPENDITURE IF ANY, SO AS TO ARRIVE AT T HE CORRECT INCOME. JUST BECAUSE THE PARTIES HEREIN HAV E RECEIVED CERTAIN AMOUNTS IN DIFFERENT ASSESSMENT YE ARS, THEY CANNOT BE BROUGHT TO TAX ON RECEIPT BASIS WITH OUT UNDERSTANDING THE NATURE OF PAYMENTS. IN VIEW OF TH IS, WITHOUT GIVING ANY FINDINGS ON THE RESPECTIVE CONTE NTIONS, WE ARE OF THE OPINION THAT THESE ISSUES ARE TO BE E XAMINED IN DETAIL TO ARRIVE AT PROPER CONCLUSIONS. THEREFOR E, IN THE INTEREST OF BOTH PARTIES, WE RESTORE THE ISSUE TO T HE FILE OF A.O. TO RE-EXAMINE (A) WHETHER THE TRANSACTIONS UNDERTAKEN BY THE ASSESSEES ARE PART OF THE BUSINES S TRANSACTION OR INVESTMENT TRANSACTION (B) THE SOURC E OF FUNDS INVESTED IN 1997 AND ANY EXPENDITURE SUBSEQUE NTLY SPENT BY THE ASSESSEES, IF IT IS A BUSINESS TRANSAC TION OR (C) IF IT IS AN INVESTMENT TRANSACTION WHETHER CAPI TAL GAINS 14 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. CAN BE BROUGHT TO TAX IN THE A.Y. 2007-08, NOT ONLY ON THE AMOUNTS RECEIVED BY THE ASSESSEE BUT ALSO PROPORTIO NATELY ON THE PROPERTY BEING DEVELOPED AS PART OF THE AGRE EMENT ON THE RIGHTS OVER THE DEVELOPED PROPERTY DEVOLVING ON THE CONSENTING PARTIES. 11.1. THE CONTENTION THAT AGREEMENT HAS NOT BEEN FULFILLED BECAUSE NO PERMISSIONS HAVE BEEN RECEIVED AND LAND WAS NOT DEVELOPED ALSO REQUIRES EXAMINATION BY THE A.O. IT IS ALSO TO BE VERIFIED WHETHER THE AMOUNTS RECEIVED BY THE ASSESSEE IS OVER AND ABOVE THE AMOUNTS PAYAB LE AS PER THE AGREEMENT OR NOT. IN SUCH CASE, THE NATURE OF RECEIPT BY THE ASSESSEES HAS TO BE EXAMINED VIS--V IS ENTRIES AND CLAIMS MADE IN THE CASE OF SSCPL WHO PA ID THE AMOUNTS BY WAY OF CHEQUES. IF THAT ASSESSEE HAS SHOWN AS PART OF COMMISSION PAYMENT AND TDS WAS MADE, THEN THE ISSUE BECOMES EASY. IF THAT COMPANY PAID THE AMOUNTS AS PART OF AGREEMENT AND SHOWN IT AS INVESTMENT ON A PROJECT IN THEIR BOOKS OF ACCOUNT, THEN ASSESSEES CONTENTIONS REQUIRE EXAMINATION IN THE LI GHT OF EVIDENCE FOUND. IN ORDER TO EXAMINE THESE ISSUES, W E SET ASIDE THE ORDERS OF AO AND CIT(A) TO THAT EXTENT AN D RESTORE THE ISSUES TO THE FILE OF A.O. TO RE-CONSID ER AND DETERMINE ACCORDING TO THE FACTS AND LAW ON THE ISS UE. GROUNDS RAISED BY RESPECTIVE ASSESSEES ARE ACCORDIN GLY CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 15 ITA.NOS.758 TO 762/H/2013 MR. M. SUVEER REDDY, HYD. ITA.NOS.1016 & 1017/H/2013 MR. BL SHANKARLAL YADAV, HYD. 12. IN THE RESULT, ITA.NOS.758, 759, 761/H/2013 ARE ALLOWED AND ITA.NO.760/H/2013 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ITA.NOS.762 AND 1016 AND 1017/H/2013 ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13.11.2015 SD/- SD/- (SMT. P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH NOVEMBER, 2015 VBP/- COPY TO 1. MR. M. SUVEER REDDY, HYDERABAD C/O. MR. S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, H.NO.3-6-643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500 029. 2. MR. B.L. SHANKARLAL YADAV, HYDERABAD 3 . DCIT, CENTRAL CIRCLE - 2, HYDERABAD. 4. CIT(A) - I, HYDERABAD 5 . CIT (CENTRAL), HYDERABAD. 5. D.R. ITAT A BENCH, HYDERABAD 6. GUARD FILE