M/s Raghavendra Real Estates, Hyderabad V. The JCIT, Central Circle-1, Visakhapatnam

ITA 153/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50131 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 08-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR
• Assessee Lawyers: C SUBRAMANYAM
• Section: 133A; 144

Judgement Text

ITA NOS 152 AND 153 RAGHAVEDRA REAL ESTATES HYDERAB AD PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NOS. 152 & 153/VIZAG/2010 ASSESSMENT YEARS: 2004-05 & 2005-06 M/S RAGHAVENDRA REAL ESTATES, HYDERABAD VS. JCIT, CENTRAL CIRCLE-1, VISAKHAPATNAM (APPELLANT) PAN NO: AASFS 0825 K (RESPONDENT) APPELLANT BY: SHRI C. SUBRAMANYAM, CA RESPONDENT BY: SHRI J. SIRI KUMAR, DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST TH E COMMON ORDER DATED 02-02-2010 PASSED BY LD CIT(A), VISAKHA PATNAM AND THEY RELATE TO THE ASSESSMENT YEARS 2004-05 AND 200 5-06. SINCE THE ISSUES URGED IN BOTH THE APPEALS ARE INTERLINKED WI TH EACH OTHER, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER. 2. IN BOTH THE YEARS, THE GROUNDS RAISED BY THE ASSESSEE GIVE RISE TO THE FOLLOWING TWO ISSUES:- (A) WHETHER THE LD CIT(A) IS JUSTIFIED IN CONFIRMING T HE ACTION OF THE ASSESSING OFFICER IN PLACING RELIANCE ON A D OCUMENT IMPOUNDED DURING THE COURSE OF SURVEY. (B) WHETHER THE AGGREGATE SALES VALUE OF PLOTS CONFIRM ED BY LD CIT(A) IS JUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS 152 AND 153 RAGHAVEDRA REAL ESTATES HYDERAB AD PAGE 2 OF 8 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN TH E BUSINESS OF DEVELOPMENT AND SALE OF HOUSING PLOTS SINCE ASSESSM ENT YEAR 2002- 03. A SURVEY OPERATION U/S 133A OF THE ACT WAS CAR RIED IN THE HANDS OF THE ASSESSEE ON 27-08-2003. DURING THE COURSE O F SURVEY OPERATION, A DOCUMENT, WHICH WAS MARKED AS SRRE/1 , WAS FOUND IN THE OFFICE PREMISES OF THE ASSESSEE AND THE SAME WA S IMPOUNDED. IN THE SAID DOCUMENT, THE HEADING WAS WRITTEN AS ACTI VE PASS BOOK HOLDERS AS ON 10-06-2003. IT CONTAINED CERTAIN DE TAILS IN A TABULATED FORM WITH THE COLUMN HEADINGS, VIZ., PASS BOOK NUM BER, NAME, TOTAL AMOUNT, PAID AMOUNT, PAYABLE AMOUNT, D UE AMOUNT AND PROJECTION. THE SAID DOCUMENT WAS SIGNED BY A PERSO N NAMED V. KISHORE. 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS RE LATING TO THE ASSESSMENT YEAR 2004-05, THE ASSESSEE DID NOT APPEA R BEFORE THE ASSESSING OFFICER AND HENCE THE ASSESSING OFFICER C OMPLETED THE ASSESSMENT TO THE BEST OF HIS JUDGMENT UNDER SECTIO N 144 OF THE ACT. THE ASSESSING OFFICER PRESUMED THAT THE SUM TOTAL O F THE COLUMN NAMED TOTAL AMOUNT IN THE ABOVE SAID DOCUMENT REP RESENTS THE ACTUAL SALE VALUE OF PLOTS. THE SUM TOTAL OF THE A BOVE SAID COLUMN STOOD AT RS.2,13,04,275/-. THE ASSESSING OFFICER FU RTHER PRESUMED THAT THE SAID PROJECT (I.E. SALE OF HOUSING PLOTS) WAS FULLY COMPLETED IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05. ACCORDINGLY, THE ASSESSING OFFICER WORKED OUT THE SALES VALUE OF TH E ASSESSMENT YEAR 2004-05 AT RS.1,03,24,455/- AS UNDER: TOTAL SALE CONSIDERATION 2,13,04,275 ITA NOS 152 AND 153 RAGHAVEDRA REAL ESTATES HYDERAB AD PAGE 3 OF 8 LESS:- DISCLOSED IN THE RETURN OF A.Y. 2002-03 4,85,11 6 A.Y. 2003-04 86,54,00 0 ADDITION IN AY 2003-04 18,40,704 1,09,79,820 ------------------ - 1,03,24,455 ============ AGAINST THE ABOVE CITED SALES AMOUNT, THE ASSESSING OFFICER DEDUCTED EXPENSES RELATING TO THE COST OF PLOTS AND EXPENSES , WHICH WERE ARRIVED ON CERTAIN BASIS, AND FINALLY ARRIVED AT TH E TOTAL INCOME OF RS.35,25,216/-. THE LD CIT(A) ALSO CONFIRMED THE AC TION OF THE ASSESSING OFFICER. 3.2 HOWEVER, IN THE ASSESSMENT YEAR 2005-06, TH E ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER AND FURNISHED CERTAIN DETAILS. THE ASSESSING OFFICER, IN THAT YEAR, NOTICED THAT T HE ASSESSEE HAD PURCHASED TWO BITS OF LAND, I.E. INITIALLY 6 ACRES OF LAND AND THERE AFTER AGAIN ANOTHER ONE ACRE OF LAND. THUS THE TOTAL EX TENT OF LAND PURCHASED BY THE ASSESSEE WAS (19520 + 2519) = 22,0 19 SQ. YARDS(SIC.). THE ASSESSING OFFICER CALLED FOR THE DETAILS OF PLOTS SOLD DURING THE YEARS RELEVANT TO THE ASSESSMENT YEARS 2 002-03 TO 2005- 06 AND NOTICED THAT THE ASSESSEE HAD SOLD 21,326 SQ . YARDS OF LAND DURING THE ABOVE SAID YEARS FOR AN AGGREGATE SALE C ONSIDERATION OF RS.1,98,55,756/-. ACCORDINGLY THE DIFFERENCE IN TH E AREA ACQUIRED AND SOLD, I.E. 693 SQ. YARDS WAS TAKEN AS THE CLOSING S TOCK. BY COMPARING THE INFORMATION AVAILABLE IN THE IMPOUNDED DOCUMENT WITH THE INFORMATION SUPPLIED DURING THE COURSE OF ASSESSMEN T PROCEEDING, THE ASSESSING OFFICER DETERMINED THE AGGREGATE SALE CON SIDERATION OF THE PROJECT AT RS.2,39,13,526/-, AS AGAINST RS.2,13,04, 275/- DETERMINED ITA NOS 152 AND 153 RAGHAVEDRA REAL ESTATES HYDERAB AD PAGE 4 OF 8 IN THE IMMEDIATELY PRECEDING YEAR. IN THIS REGARD, THE ASSESSING OFFICER OBSERVED THAT THE AGGREGATE SALE CONSIDERAT ION OF RS.2,13,04,275/- DETERMINED IN THE PRECEDING YEAR, I.E. ASSESSMENT YEAR 2004-05 PERTAINS TO 19,500 SQ. YARDS ONLY. AC CORDINGLY, THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME OF TH E ASSESSEE FOR ASSESSMENT YEAR 2005-06 AT RS.23,53,294/-. BEFORE THE LD CIT(A), IT WAS CONTENDED THAT THERE WAS MISTAKE IN DETERMINING THE AGGREGATE SALES VALUE, I.E. THERE WAS DUPLICATION OF SALE OF CERTAIN PLOTS. ACCORDINGLY, THE LD CIT(A) DIRECTED THE ASSESSING O FFICER TO EXCLUDE THE SALES FIGURES WHICH HAS ALREADY BEEN TAKEN INTO ACCOUNT IN THE ASSESSMENT YEAR 2004-05. THE ASSESSEE WAS NOT SATI SFIED WITH THE ORDERS PASSED BY LEARNED CIT(A) IN BOTH THE YEARS A ND HENCE IT HAS FILED THESE APPEALS BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREF ULLY PERUSED THE RECORD. THE FIRST ISSUE RELATES TO THE VERACITY OF THE DOCUMENT IMPOUNDED DURING THE COURSE OF SURVEY OPERATION. T HE CONTENTION OF THE ASSESSEE IS THAT THE IMPUGNED IMPOUNDED DOCUMEN T IS A DUMB DOCUMENT ON WHICH NO RELIANCE COULD BE PLACED. HOW EVER, IN THE PAGES 15 TO 18 OF THE PAPER BOOK COMPILED BY THE AS SESSEE, AN ATTEMPT HAS BEEN MADE TO COMPARE THE ENTRIES FOUND IN IMPUGNED IMPOUNDED DOCUMENT WITH THE BOOKS OF ACCOUNT. WHEN IT IS POSSIBLE TO CORROBORATE THE ENTRIES FOUND IN THE IMPUGNED DO CUMENT WITH THE RECORDS OF THE ASSESSEE, IN OUR VIEW, THESE DOCUMEN TS CANNOT BE CONSIDERED AS A DUMB DOCUMENT. ACCORDINGLY WE REJE CT THE GROUND OF THE ASSESSEE ON THIS POINT. ITA NOS 152 AND 153 RAGHAVEDRA REAL ESTATES HYDERAB AD PAGE 5 OF 8 5. THE NEXT ISSUE RELATES TO THE DETERMINATION OF AGGREGATE SALE VALUE ON THE SALE OF PLOTS AND THE SALES VALUE ATTR IBUTABLE TO THE YEARS UNDER CONSIDERATION. THE ASSESSEE HEREIN IS ENGAGED IN DEVELOPMENT AND SALE OF HOUSING PLOTS. THE TRANSACTIONS OF SAL E OF HOUSING PLOTS ARE NORMALLY CARRIED OUT BY EXECUTING CONVEYANCE DE EDS AND THE SAME IS ALSO REQUIRED TO BE REGISTERED WITH THE REL EVANT REGISTRATION AUTHORITIES. NORMALLY, THE VALUE DECLARED IN THE CONVEYANCE DEED IS TAKEN AS THE SALES VALUE, UNLESS THERE ARE OTHER DO CUMENTS TO THE CONTRARY. IN THE INSTANT CASE, THE ENTRIES FOUND I N THE IMPUGNED IMPOUNDED DOCUMENT APPEAR TO BE DIFFERENT FROM THE SALES VALUE DECLARED FOR BOOK PURPOSES. HENCE THE ASSESSING OF FICER HAS PRESUMED THAT THE SUM TOTAL OF COLUMN NAMED TOTAL AMOUNT AS REPRESENTING THE ACTUAL SALES VALUE. HOWEVER, BEFO RE ARRIVING AT SUCH A CONCLUSION, THE ASSESSING OFFICER DID NOT EXAMINE THE ENTRIES FOUND IN THE IMPOUNDED DOCUMENT WITH THE OTHER RECORDS AN D ALSO DID NOT EXAMINE THE ENTRIES FROM THE ANGLE OF INCOME TAX PR OVISIONS. FOR EXAMPLE, ACCORDING TO THE ASSESSEE, THE IMPOUNDED D OCUMENT CONTAINS THE NAMES OF CERTAIN PERSONS FROM WHOM ONL Y ADVANCE AMOUNTS WERE RECEIVED, BUT ULTIMATELY NO PLOT WAS S OLD TO THEM AND THE ADVANCES RECEIVED FROM THEM WERE ALSO RETURNED BACK. IF THE VERSION OF THE ASSESSEE IS FOUND TO BE CORRECT, THE N THE MERE RECEIPT OF ADVANCE WOULD NOT GIVE RISE TO ANY INCOME TAXABL E UNDER THE PROVISIONS OF INCOME TAX ACT. IN THAT CASE, THE SU M TOTAL OF TOTAL AMOUNT COLUMN CANNOT BE TAKEN AS THE ACTUAL SALES VALUE. 6. THE ASSESSING OFFICER, IN BOTH THE YEARS, HAS FIRST ARRIVED AGGREGATE SALES VALUE ON THE BASIS OF IMPOUNDED DOC UMENTS. IT IS PERTINENT TO NOTE THAT DIFFERENT AGGREGATE SALES V ALUE WAS ITA NOS 152 AND 153 RAGHAVEDRA REAL ESTATES HYDERAB AD PAGE 6 OF 8 DETERMINED IN BOTH THE YEARS UNDER CONSIDERATION. FROM THE AGGREGATE SALES VALUE SO DETERMINED, THE ASSESSING OFFICER HAS DEDUCTED THE SALES VALUE ASSESSED IN THE EARLIER YE ARS AND ACCORDINGLY DETERMINED THE SALES VALUE ATTRIBUTABLE TO THE YEARS UNDER CONSIDERATION. THERE IS BASIC FLAW IN THIS A PPROACH. IT HAS NOT BEEN VERIFIED WHETHER THE PLOTS HAVE ACTUALLY BEEN SOLD TO THE PERSONS WHOSE NAME APPEARS IN THE IMPOUNDED DOCUMEN TS, BECAUSE, ACCORDING TO THE ASSESSEE, SOME OF THE PERSONS DID NOT ACTUALLY PURCHASE PLOTS AND THEY HAVE TAKEN BACK THE ADVANCE AMOUNTS. THUS THE PERSONS SHOWN IN THE IMPOUNDED DOCUMENTS H AVE NOT BEEN LINKED WITH THE SPECIFIC PLOTS. AS PER THE ACCOUNTA NCY PRINCIPLES, THE INCOME COULD BE RECOGNIZED ONLY ON EFFECTING ACTUAL SALES AND AS PER INCOME TAX PROVISIONS, THE INCOME PERTAINING TO A P ARTICULAR ASSESSMENT YEAR COULD BE ASSESSED IN THAT YEAR ONLY . IN THE CASE OF BUSINESS OF SALE OF HOUSING PLOTS, THE NUMBER OF PL OTS SOLD IN A PARTICULAR YEAR COULD BE IDENTIFIED ON THE BASIS OF REGISTERED CONVEYANCE DEEDS AND HENCE IT IS POSSIBLE TO ARRIVE AT THE AGGREGATE SALES VALUE OF A PARTICULAR YEAR IN A SCIENTIFIC MA NNER. HENCE, IT IS NOT CORRECT TO ARRIVE AT THE ACTUAL SALES CONSIDERATION AS THE BALANCING FIGURE OF ENTRIES FOUND IN CERTAIN DOCUMENTS, WHEN THE DETAILS ARE OTHERWISE AVAILABLE. 7. IN THE INSTANT CASE, THE ACTUAL SALES VALUE C AN BE ARRIVED AT ON THE BASIS OF PARTICULARS LIKE TOTAL NUMBER OF PLOTS PROMOTED BY THE ASSESSEE, THE TOTAL EXTENT OF AREA DEVELOPED, THE Y EAR WISE SALE OF PLOTS, THE AMOUNT DECLARED IN THE CONVEYANCE DEEDS AND THE AMOUNT SHOWN IN THE IMPOUNDED DOCUMENT. IN OUR VIEW, THE A SSESSING OFFICER COULD HAVE FOLLOWED THE FOLLOWING METHODOLO GY. ITA NOS 152 AND 153 RAGHAVEDRA REAL ESTATES HYDERAB AD PAGE 7 OF 8 (A) THE FIRST STEP WOULD BE TO IDENTIFY THE PLOTS SOLD DURING THE YEARS UNDER CONSIDERATION ON THE BASIS OF REGISTERE D CONVEYANCE DEEDS. AS STATED EARLIER, THE INCOME PERTAINING TO THOSE PLOTS CAN ONLY BE ASSESSED DURING THE YEARS UNDER CONSIDERATI ON. (B) THE NEXT STEP WOULD BE TO COMPARE THE SALES V ALUE SHOWN IN THE CONVEYANCE DEEDS WITH THE TOTAL AMOUNT SHO WN IN THE IMPOUNDED DOCUMENT. (C) THE NEXT STEP WOULD BE TO IDENTIFY THE VARIA TION , IF ANY, IN THE SALES VALUE BETWEEN THE CONVEYANCE DEEDS AND TH E IMPOUNDED DOCUMENT. IF THERE IS VARIATION, THE ASSESSING OFFI CER SHOULD SEEK EXPLANATIONS FROM THE ASSESSEE IN THAT REGARD. (D) IF THE ASSESSING OFFICER IS NOT SATISFIED WIT H THE SAID EXPLANATIONS, THEN HE MAY PROCEED TO EXAMINE THE AU THOR OF THE DOCUMENT AND THE CONCERNED BUYER TO FIND OUT THE TR UTH. (E) BASED ON THE EXAMINATION OF RECORD AND ENQUI RIES, HE MAY TAKE A VIEW IN ACCORDANCE WITH THE LAW. 8. THE FOREGOING DISCUSSIONS WOULD SHOW THAT T HE ASSESSING OFFICER DID NOT EXAMINE THE ISSUE UNDER CONSIDERATI ON IN A PROPER MANNER. THERE IS ALSO FAILURE ON THE PART OF THE A SSESSEE TO PROVIDE ALL THESE INFORMATION TO THE ASSESSING OFFICER. WH EN THESE FACTS WERE PUT FORTH DURING THE COURSE OF HEARING, BOTH THE PA RTIES AGREED THAT THE MATTER OF DETERMINATION OF ACTUAL SALES VALUE M AY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDERS OF LD CIT(A) FOR BOTH THE YEARS UNDER CONSIDERATION AND RESTORE THE MATTER OF DETERMINATION OF SALES VALUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE MATTER AFRE SH ON THE BASIS OF PRINCIPLES DISCUSSED ABOVE AND ALSO IN ACCORDANCE W ITH THE LAW. THE ITA NOS 152 AND 153 RAGHAVEDRA REAL ESTATES HYDERAB AD PAGE 8 OF 8 ASSESSEE SHOULD BE GIVEN NECESSARY OPPORTUNITY OF B EING HEARD. THE ASSESSEE IS ALSO DIRECTED TO FURNISH THE DETAILS TH AT MAY BE CALLED FOR BY THE ASSESSING OFFICER. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSES SEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT M EMBER PVV/SPS VISAKHAPATNAM, DATE: 13-04-2011 COPY TO 1 M/S RAGHAVENDRA REAL ESTATES, 8 - 3 - 95, SRI NILAYA ESTATES, NAGARJUNA NAGAR COLONY ROAD, AMEERPET, HYDERABAD 2 THE JCIT, CENTRAL CIRCLE-1, VISAKHAPATNAM 3 4. THE CIT CENTRAL CIRCLE, HYDERABAD THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM