P. Prabhkar Reddy, Hyd, Hyderabad V. ACIT, Central Circle-4, Hyderabad

ITA 1328/HYD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1321 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 15-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA SAI
• Assessee Lawyers: S RAMA RAO
• Keywords: Search and seizure; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1238/HYD/2011 : ASSESSMENT YEAR 2008-09 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 7(1), HYDERABAD. V/S SHRI P.PRABHAKAR REDDY, HYDERABAD (PAN AAOPP 0238 P ) (APPELLANT) (RESPONDENT) ITA NO.1328/HYD/2011 : ASSESSMENT YEAR 2008-09 SHRI P.PRABHAKAR REDDY, HYDERABAD (PAN AAOPP 0238 P ) V/S ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 7(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.RAMA RAO DEPARTMENT BY : RAVINDRA SAI DR DATE OF HEARING 13.02.2013 DATE OF PRONOUNCEMENT 22.02.2013 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS FOR THE ASSESSMENT YEAR 2 008-09. THEY ARE DIRECTED AGAINST THE ORDER OF THE COMMISSI ONER OF INCOME- TAX(APPEALS)-VII, HYDERABAD DATED 14.4.2011. SINC E THERE ARE CERTAIN COMMON FEATURES IN THESE APPEALS, THEY ARE BEING DI SPOSED OF, WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FACTUAL BACKGROUND LEADING TO THE FILING OF THESE A PPEALS IN BRIEF ARE THAT SEARCH AND SEIZURE OPERATION WAS CO NDUCTED UNDER S.132 OF THE INCOME-TAX ACT, 1961 IN THE CASE OF THE ASSE SSEE, WHO IS AN ITA NO.1238 & 13 28/HYD/11 SHRI P.PRABHAKAR REDDY, HYDERABAD 2 ADVOCATE BY PROFESSION, ON 21.12.2007. IN RESPONSE TO THE NOTICE ISSUED UNDER S.142(1), THE ASSESSEE FILED RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.18,88,070. DURING THE SCRUTINY ASSESS MENT PROCEEDINGS THAT ENSUED, ASSESSEE WAS ASKED TO FURNISH RECEIPTS AND PAYMENT ACCOUNTS AND EVIDENCE FOR THE RECEIPTS DURING THE Y EAR. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FURNISHED ONLY RECE IPTS AND PAYMENT ACCOUNT, AND NOT FURNISHED EVIDENCE FOR THE SAME, A LTHOUGH SUFFICIENT OPPORTUNITIES WERE GIVEN TO THE ASSESSEE. THE ASSE SSING OFFICER NOTED THAT THE ASSESSEE RECEIVED THE FOLLOWING AMOUNTS FR OM DIFFERENT PERSONS- SL. NO. AMOU N T IN RS. PERSON PURPOSE 1 1,77,000 .... ADVANCE RECEIPT AGAINST THE SALE OF AGRICULTURAL LAND. 2. 1,00,000 SAJIDA ------- ASSESSEE WAS ASKED TO FURNISHED EVIDENCE FOR THE SA ID RECEIPTS, AND SINCE THE ASSESSEE WAS UNABLE TO PRODUCE ANY EVIDENCE/CON FIRMATION LETTER FROM THE PARTIES IN SUPPORT OF HIS CLAIM, THE RECEI PT OF RS.2,77,000 HAS BEEN TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09, AND ADDED TO THE INCOME DISCLOSED. 3. FURTHER, DURING ASSESSMENT PROCEEDINGS, SHRI M. SURESH, SHRI P.PRABHAKAR REDDY AND SHRI K.RAMAKRISHNA (LAND BUYE R) FILED INFORMATION/DOCUMENTS. WHILE M. SURESH IS THE OWNER OF THE LAND, IT WAS SOLD LONG BACK BY SOME OTHER PERSON TO VARIOUS PEOP LE. HENCE, LAND WAS UNDER DISPUTE. HENCE, SHRI M.SURESH FILED APPEAL BE FORE THE JOINT COLLECTOR, R.R.DSITRICT AND WON THE APPEAL. OCCUPAN TS PREFERRED APPEALS AGAINST THE SAME. SHRI SURESH LAND OWNER, APPROACH ED HIS LEGAL ADVISOR, SHRI P.PRABHAKAR REDDY, TO SELL HIS DISPUTED LAND. FOR DEFENDING THE CASES ITA NO.1238 & 13 28/HYD/11 SHRI P.PRABHAKAR REDDY, HYDERABAD 3 AND INCURRING INCIDENTAL EXP, SHRI SURESH AGREED TO PAY 20% OF THE SALE CONSIDERATION AS FEE IN THE EVENT OF THE SALE OF TH E SAID LAND TO THE ASSESSEE SHRI PRABHAKAR REDDY. TOTAL SALE CONSIDER ATION OUT OF THE LAND TRANSACTIONS RECEIVED BY SHRI M.SURESH WAS RS.4,32, 00,000 AND THE SAME IS ASSESSED IN THE HANDS OF THE LAND OWNER SHRI M.S URESH FOR ASSESSMENT YEAR 2008-09, BY GIVING CREDIT FOR THE LEGAL FEE PA YMENT TO THE ASSESSEE, PRABHAKAR REDDY. ASSESSEES RECEIPTS SHOULD BE AT 2 0% ON THE TOTAL CONSIDERATION OF RS.66,40,000, ADOPTING THE PERCENT AGE BASED ON THE STATEMENT GIVEN BY THE ASSESSEE AND SHRI M.SURESH. AS PER THE STATEMENT OF THE ASSESSEE, HE HAS TO RECEIVE 20% OU T OF TOTAL LAND TRANSACTION, AGAINST WHICH HE HAS ALREADY RECEIVED AN AMOUNT OF RS.20,00,000 AND DEPOSITED IN HIS BANK ACCOUNTS AND INCLUDED IN THE PROFESSIONAL RECEIPTS. SINCE THE AMOUNT OF RS.20,0 0,000 WAS ALREADY OFFERED AS PROFESSIONAL RECEIPT, THE REMAINING AMOU NT OF RS.66,40,000 WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE, AND ACCORDINGLY BROUGHT TO TAX. 4. THE ASSESSEE DEBITED AN AMOUNT OF RS.1,00,000 A ND FURTHER AMOUNT OF RS.4,33,709 TOWARDS LEGAL EXPENSES AND LA ND TITLE DISPUTE DEALING EXPENSES TO THE INCOME AND EXPENDITURE ACCO UNT, WHICH ACCORDING TO THE ASSESSING OFFICER WAS NOT ALLOWABL E. HE ACCORDINGLY, MADE FURTHER ADDITION OF RS.5,33,709. 5. WITH THE ABOVE ADDITIONS, THE ASSESSING OFFICER COMPLETED ASSESSMENT ON A TOTAL INCOME OF RS.93,38,779, AS AG AINST RETURNED INCOME OF RS.18,88,070. 6. ON APPEAL, THE CIT(A) CONFIRMED THE ADDITIONS O F RS.2,77,000 AND RS.4,33,709. AS FOR THE ADDITION OF RS.1,00,00 0 REPRESENTING LEGAL EXPENSES, THE CIT(A) NOTED THAT ON ACCOUNT OF FAILU RE TO EFFECT TDS IN RESPECT OF THE SAID PAYMENT, IN TERMS OF S.40(A)(IA ) OF THE ACT, THE ITA NO.1238 & 13 28/HYD/11 SHRI P.PRABHAKAR REDDY, HYDERABAD 4 ASSESSEE HIMSELF HAS ADDED BACK THE SAID COMMISSION EXPENDITURE, AND THEREFORE, THE ASSESSING OFFICER SHOULD NOT HAVE AD DED BACK THE SAME OVER AGAIN. IN SUPPORT OF THIS OBSERVATION, HE REF ERRED TO THE COMPUTATION OF INCOME BY THE ASSESSEE, FILED BEFORE HIM. HE ACCORDINGLY DIRECTED THE DELETION OF THIS ADDITION OF RS.1 LAKH SUBJECT TO VERIFICATION, IF NEEDED BY THE ASSESSING OFFICER. AS FOR THE ADDITIO N OF RS.66,40,000 ON THE LAND DEALINGS, THE CIT(A), AFTER ELABORATE CONS IDERATION OF THE CONTENTIONS OF THE ASSESSEE AND THE MATERIAL FURNIS HED BEFORE HIM, SUSTAINED ONLY AN ADDITION OF RS.7,20,000, DELETING THE BALANCE AMOUNT OF ADDITION, WITH THE FOLLOWING OBSERVATIONS- 6.7 IN THE LIGHT OF ABOVE DISCUSSION, IT MAY BE SE EN THAT THE TOTAL COMMISSION RECEIVED BY THE APPELLANT FROM SRI M.SURESH IS AT RS.24,70,000 OUT OF WHICH RS.20,00,000 IS STATED TO HAVE BEEN DISCLOSED WHILE FILING THE RETURN OF INCOM E. THEREFORE, THE BALANCE UNDISCLOSED COMMISSION INCOME IS COMPUTED AT RS.4,7 0,000 FROM SRI M.SRUESH AND COMMISSION OF RS.2,50,000 FROM SRI HARICHAN SINGH SALUJA AS DISCUSSED ABOVE. HENCE, THE TOTAL UNDISCLOSED COM MISSION WORKS OUT TO RS.7,20,000. THE ASSESSING OF FICER HAS ADDED RS.66,40,000. HOWEVER, AFTER HAVING VERIFIED THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF ELABO RATED DISCUSSION MADE IN THE PRECEDING PARAS, I AM INCLINED TO RETAI N THE ADDITION OF RS.7,20,000 AND THE BALANCE ADDITION IS DELETED. THEREFORE, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 7. AGGRIEVED BY THE RELIEFS GRANTED BY THE CIT(A), REVENUE IS IN APPEAL, WHEREAS THE ASSESSEE IS IN APPEAL CONTESTIN G THE ADDITIONS SUSTAINED BY THE CIT(A). 8. EEFFECTIVE GROUNDS OF THE REVENUE, IN ITS APPE AL, ITA NO.1238/HYD/2011, READ AS FOLLOWS- 1. THE CIT(A) ERRED IN APPRECIATING THE FACTS, TEC HNICALITY AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) ERRED IN HOLDING AND APPRECIATING THE EVIDENCES FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERA TION. THE ADDITIONAL EVIDENCE WHICH OUGHT NOT TO HAVE BEE N CONSIDERED FOR ALLOWING THE APPEAL OF THE ASSESSEE HAS BEEN CONSIDERED, THOUGH THE ASSESSEE HAS NOT BROUGHT TO THE NOTICE OF THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ITA NO.1238 & 13 28/HYD/11 SHRI P.PRABHAKAR REDDY, HYDERABAD 5 3. THE CIT(A) ERRED IN APPRECIATING THE MATERIAL PL ACED ON RECORD. THE ASSESSEE EVENTUALLY DIVERTED THE CIT(A ) AND SUCCEEDED IN CONCEALING THE FACTS. THE ASSESSEE HAS NOT TAKEN INTO ACCOUNT THE CASH RECEIPTS WHICH WAS STAT ED TO BE RECEIVED DURING THE SALE TRANSACTION AND THE SAME I S KEPT WITH THE ASSESSEE FOR SAFETY PURPOSES. 4. THE CIT(A) ERRED IN APPRECIATING THE STATEMENT R ECORDED UNDER OATH FROM THE LAND OWNER. THE LAND OWNER SR I M.SURESH HAS STATED THAT HE SIGNED ON PAPERS AS PER THE DIRECTIONS OF THE ASSESSEE WITHOUT VERIFYING THE CO NTENTS. ON THAT PROCESS, THE ASSESSEE MIGHT HAVE BEEN TAKEN SIGNATURE OF SRI M.SURESH TO COME OUT OF THE TAX NE T. IN THE RECEIPT, MR.SURESH HAS STATED THAT THE AMOUNT OF RS .60 LAKHS AVAILABLE WITH THE ASSESSEE, IS KEPT FOR SAFE TY PURPOSE, WHICH ACTUALLY THE ASSESSEE HAS RECEIVED A S COMMISSION. 9. EFFECTIVE GROUNDS OF THE ASSESSEE, IN HIS APPE AL, ITA NO.1328/HYD/2011, READ AS FOLLOWS- 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS ERRONE OUS TO THE EXTENT IT IS PREJUDICIAL TO THE APPELLANT HEREIN. 2. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING T HE ADDITION OF RS.2,77,000 MADE BY THE ASSESSING OFFICER DISBEL IEVING THE RECEIPT TOWARDS THE ADVANCE ON SALE OF AGRICULT URAL LAND. 3. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.7,20,000 OUT OF THE ADDITION OF RS.66,40,000/- B EING THE ALLEGED COMMISSION RECEIVED ON SALE OF LAND. 4. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING TH E ADDITION OF RS.4,33,709 BEING THE LEGAL EXPENSES INCURRED BY THE APPELLANT HEREIN IN THE PROCESS OF DERIVING THE COM MISSION INCOME. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIA L AVAILABLE ON RECORD. THE MAIN GRIEVANCE OF THE PARTIES IN THESE CROSS AP PEALS RELATES TO THE ADDITION MADE ON ACCOUNT OF COMMISSION INCOME OF TH E ASSESSEE FROM LAND DEALINGS. WHILE THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.66,40,000, THE CIT(A) SUSTAINED THE SAME ONLY TO THE EXTENT OF RS.7,20,000. ON CAREFUL CONSIDERATION OF THE MATTE R, WE FIND MERIT IN THE CONTENTION OF THE REVENUE IN ITS APPEAL THAT THE CI T(A), WHILE GIVING RELIEF ITA NO.1238 & 13 28/HYD/11 SHRI P.PRABHAKAR REDDY, HYDERABAD 6 TO THE ASSESSEE HAS CONSIDERED ADDITIONAL EVIDENCE ADDUCED BY THE ASSESSEE FOR THE FIRST TIME BEFORE HIM, WITHOUT GIV ING AFFORDING AN OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE AND OFFER HIS COMMENTS THE SAME, BY WAY OF A REMAND REPORT. BEING SO, T HERE IS CLEAR VIOLATION OF THE PROVISIONS OF RULE 46A OF THE INCOME-TAX RUL ES, 1962. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDER OF T HE CIT(A), AND RESTORE THE ENTIRE ISSUE IN DISPUTE TO THE FILE OF THE ASSE SSING OFFICER FOR ALL THE THREE YEARS, WITH A DIRECTION TO DECIDE THE SAME AF RESH IN THE LIGHT OF THE EVIDENCE IN QUESTION FILED BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE CIT(A), AND ALSO ANY OTHER FURTHER EVIDENCE THAT TH E ASSESSEE MAY PRODUCE BEFORE THE ASSESSING OFFICER TO SUBSTANTIAT E ITS CASE. THE ASSESSING OFFICER IS DIRECTED TO DECIDE THE ISSUE A FRESH, BY PASSING A SPEAKING ORDER, IN ACCORDANCE WITH LAW AND AFTER GI VING REASONABLE OPPORTUNITY TO THE ASSESSEE. 11. SINCE THE OTHER ADDITIONS OF RS.2,77,000 AND R S.4,33,709 SUSTAINED BY THE CIT(A), ARE ALSO LINKED TO THE MAI N ADDITION OF RS.66,40,000, WITH REGARD TO THESE ADDITIONS ALSO, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND RESTORE THE MATTE R TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION IN ACCORD ANCE WITH LAW, AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASS ESSEE. 12. IN THE RESULT, BOTH THE CROSS APPEALS OF THE ASSESSEE AS WELL AS REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 22 .02.2013 SD/ - ( SAKTIJIT DEY ) SD/ - ( CHANDRA POOJARI ) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 22 ND FEBRUARY, 2013 ITA NO.1238 & 13 28/HYD/11 SHRI P.PRABHAKAR REDDY, HYDERABAD 7 COPY FORWARDED TO: 1. SHRI P.PRABHAKAR REDDY, C/O. SHRI S.RAMA RAO, FLAT NO.102, SHIRYA'S ELEGANCE, NO.3-6-643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029 2. ASST COMMISSIONER OF INCOME - TAX C ENTRAL CIRCLE 4, HYDERABAD 3. 4. 5. 6. DY. COMMISSIONER OF INCOME-TAX CIRCLE 7(1) COMMISSIONER OF INCOME-TAX(APPEALS) VII, HYDERABAD COMMISSIONER OF INCOME-TAX, CENTRAL, HYDERABAD THE DEPARTMENTAL REPRESENTATIVE, ITAT HYDERABAD B.V.S.