Damodar Reddy Kaiti , Hyderabad V. Asst. Commissioner of Income Tax, Central Circle-2(3), Hyderabad

ITA 1631/Hyd/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6051 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB-A
• Assessment Year: 2014-2015
• Appeal Filed On: 02-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Additional evidence; Cost of acquisition; Capital Gains
• Section: 271(1)(c); 44AD; 143(3); 153A; 274; 13; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Before Before Shri Rama Kanta Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member O R D E R Per Laliet Kumar, J.M. These are the two connected appeals filed by the assessee feeling aggrieved by the separate orders of ld. Commissioner of Income Tax (Appeals) – 12, Hyderabad, (hereinafter referred as “ld. CIT”) passed on 01.06.2018 for A.Ys. 2013-14 and 2014-15, respectively. 2. It was submitted by the ld.AR that the issue raised in both the appeals are common and therefore, the appeal in ITA No.1630/Hyd/2018 will be taken as the lead case, in which the ld.DR has raised no objection. 2.1. The grounds raised by the assessee in ITA No.1630/Hyd/2018 reads as under : ITA Nos.1630 & 1631/Hyd/2018 Assessment Years: 2013-14 and 2014-15 Damodar Reddy Kaiti, R/o.Hyderabad. PAN : AEHPK0424M. Vs. The Asst. Commissioner of Income Tax, Central Circle 2(3), Hyderabad. (Appellant) (Respondent) Assessee by: Sri K.A. Sai Prasad, C.A. Revenue by : Sri K.P.R. Murthy. Date of hearing: 13.07.2022 Date of pronouncement: 18.07.2022 2 “1. The order of the Learned First Appellate Authority is not correct either on facts or in law and in both. 2. The Learned First Appellate Authority is not justified in confirming the addition of Rs. 3,18,24,000 is unsubstantiated cash payment to landlords ignoring the claims of the appellant that the said payments were duly accounted in the books of M/S. Square Mill Projects assessed to tax separately. 3. The Learned First Appellate Authority failed to appreciate the fact that the sources for the payments to the landlords were the advances from prospective buyers received by M/s. Square Mill Projects duly reflected in the balance sheets of the said firm filed much before the date of search. 4. The Learned First Appellate Authority is not justified in ignoring the fact that the plots were registered finally by the firm M/S. Square Mill Projects to the persons from whom the advances were received and recorded in the balance sheet filed before the date of search. 5. The Learned First Appellate Authority is not justified in sustaining the addition of Rs. 1,27,00,000 as unexplained cash loans ignoring the fact that the said amount is the advances from customers received by M/S. Square Mill Projects duly reflected in its balance sheet for the Asst. Years 2013-14 and 2014-15 filed much before the date of search. 6. The Learned First Appellate Authority is not justified in treating the sum of Rs. as business turnover for the Asst. Year 2013-14 ignoring the fact that the said amount was admitted as receipts from sale of plots and receipts from sale of houses in Asst. Years 2011-12 to 2014-15 based on the date of registration. 7. The Learned First Appellate Authority having accepted the contention that the entire turnover on sale of plots and houses were reflected in the returns, is not justified in directing the Assessing Officer to treat the entire amount of Rs. 1,45,00,000 as business turnover ignoring the fact that the proceeds on sale of open plots constitute income under capital gain, as admitted in the returns filed. 8. The Learned First Appellate Authority is not justified in directing the Assessing Officer to compute income at 40% on Rs.1,45,00,000/- ignoring the fact that the actual business turnover on sale of independent houses after construction, for the Asst. Year under consideration is Rs. 19,00,000/- and hence, the income admitted at 8% u/s 44AD cannot be disturbed. 9. The Learned First Appellate Authority failed to appreciate the fact that the business income admitted u/s 44AD at 8% is highly reasonable and is as per provisions of law and hence, the Learned First Appellate Authority is not justified in directing the 3 Assessing Officer to assess the income at 40% on the sum of Rs.1,45,00,000 treated as business turnover. 10. The learned First Appellate Authority is not justified in sustaining the additions solely based on the statement given on the date of search ignoring the evidences on record. 3. The brief facts of the case are that Search and Seizure operation u/s.132 of the Income Tax Act, 1961 was conducted in the group cases of M/s. Sri Sri Gruha Nirman India Pvt. Ltd., on 24-12-2014. Notice u/s.153A of the Act dated 16-092016 was issued and served on the assessee. In response to the notice, the assessee filed his return of income for A.Y 2013-14 admitting total income of Rs.4,24,840/-. Assessment was completed by the AO u/s.143(3) rws 153A, making the following additions/disallowances: 1. Unsubstantiated agricultural income of Rs.6,05,000/-. 2. Cash payments to Landlords of Rs.3,18,24,000/- 3. Unexplained Interest Expenditure of Rs.1,27,00,000/-. 4. Unaccounted sale of independent houses and plots of Rs.1,45,00,000/-. 5. Long Term Capital Gain of Rs.38,27,559/-. 6. Undisclosed Income of Rs.2,73,440/-. 7. Unsubstantiated claim for exemption of Rs.2,65,310/-. Finally, assessed the total income of the assessee at Rs.6,44,20,150/-. 4. Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before ld.CIT(A), who partly allowed the appeal of the assessee. 5. Feeling aggrieved with the order of ld.CIT(A), the assessee is now in appeal before us. 6. Before us, at the outset, ld.AR for the assessee has submitted that grounds 6 to 9 can be heard together as these pertain to a common issue. Similarly, grounds 2 to 5 also form part of the same species and hence, the same can also be 4 considered together for the purposes of adjudication. 6.1. In respect of ground No.2 to 6, ld.AR has drawn our attention to para 6 of the assessment order to the following effect : “6. Unaccounted sale of independent houses and plots : M/s Sri Nilaya Constructions developed a venture at Badangpet in an area of 24 acres - comprising of open plots and of independent houses. Being a partner, Sri K. Damodar Reddy was allotted 18 plots as his share in FY 2003-04. Out of the 18 plots, the assessee constructed 11 individual houses on 11 plots and sold the same for a consideration of Rs. 1,65,00,000/ -. The balance 7 plots admeasuring 1600 Sq.yds was sold for a total consideration of Rs.80,00,000/ -. The Total receipts of Rs.2,45,00,000/- on account of sale of 11 independent houses and 7 plots were not offered to tax. Sri K. Damodar Reddy vide his sworn statement recorded on 24/12/2014 and vide his affidavit submitted on 05/02/2015 had confirmed this fact. The year wise break up of undisclosed income for sale of independent houses and plots in the hands of Sri K. Damodar Reddy is given as under: S.No. A.Y. Undisclosed sale (Rs) 1 2013-14 1,45,00,000 2 2014-15 1,00,00,000 Total 2,45,00,000 During the course of assessment proceedings when confronted with the issue, the assessee could not furnish any satisfactory reply. It is pertinent to note here that the assessee filed his original return of income for A.Y 2013-14 declaring business income of Rs 4,25,440/- under 'normal provisions. his return filed u/s 153B the assessee declared business income of Rs.52,000/- u/s 44AD. When queried during the assessment proceedings, the assessee did not state the reasons either for such deviation or for the decrease in business income for the same Period. The assessee also did not State the plots sold were covered and declared u/s 44AD. In any case, the assessee has never brought on record that the plots received by the assessee as his share were ever treated as his business stock in trade. Accordingly, the amount of Rs.1,45,00,000/- is treated as distinct from sale income declared u/S 44AD and held as Long term capital gain, there being no Cost of acquisition and brought to -tax accordingly. The assessee also could hot substantiate that the Long Term Capital Gain declared in the Return of Income for AY 2013-14 are part of the above mentioned 18 plots. Penalty proceedings u/s 271(1)(c) of the I.T. Act 1961 initiated separately for concealment of income. 5 6.2. It was the contention of the ld.AR that the details were provided to the Assessing Officer and the Assessing Officer has wrongly made the addition in the hands of the assessee. The ld.AR has also drawn our attention to paras 9.3 to 9.6 of the order passed by ld.CIT(A) to the following effect. 9.3. The AO was asked to comment on the submissions of the assessee. In the report furnished on 22.03.2018, the Assessing Officer has stated as under: "Unaccounted sale of independent houses and plots: The details of sale of open plots/house sales along with copy of sale deeds furnished at the appellate proceedings were perused. On perusal of the various sale deeds forwarded to this office, it is noticed that the total sale consideration for House sales(11 plots) is arrived by the assessee at .Rs.1,94,36,250/- do the basis of income declared u/s 44AD covering period of AY 2011-12 to AY 2014-15. For 7 open plots, the assessee has declared sale consideration 'of Rs.51,00,000/- in AY. 2013-14 & AY 2015-16. The details are given as under: 6 On analysis of the above, it is noticed that the assessee has claimed sale consideration of Rs 51,00,000 in respect of LTCG (AY 2013-14 & AY 2015-16) as against actual consideration as per Sale Agreements of Rs 34,50,000/-. Similarly, it is noticed that the assessee has claimed sale consideration of Rs. 1,94,36,250/- while arriving at business income u/s 44AD (AY 2013-14 & AY 2015-16) as against actual consideration as . per Sale Agreements of Rs.82,59,500/-, leading to difference of Rs.1,11,76,750/-. Though a total consideration of Rs.2.45 crores appears to be reflected as per the claim made by the assessee for the above years, the following facts deserve to be mentioned: The assessee did not file original Returns for AY 2011-12 & AY 2014-15. For AY 2012-13 though original Return was filed, the assessee changed the Business income from Rs 3,86,136/- to Rs.7,79,736/- in Return filed u/s153A. Similarly, for AY 2013-14, though original Return was filed, the assessee changed the Business income from Rs. 4,25,440/- to Rs 1,52,000/- in Return filed u/s 153A. Thus, subsequent to the search action, the assessee has conveniently . changed the amounts & heads of income. Return for AY 2015-16 was filed after the search action. 2. As against net addition of Rs 2.45 crores made during the assessment proceedings, the assessee is taking recourse to the provisions of section 44AD so that only 8% income can be offered to tax. At the Remand proceedings, the assessee did not produce any evidences for expenditure in respect of sale transactions, only stating that 8% income has been offered to tax as per the provisions of section 44AD - Left intentionally - LL 3. As per the above details, the total sale consideration as per evidences is only Rs 1,17,09,500/-(Rs 2,2.59,500/- in respect of transaction u/s 44ADY-Whereas -at the appellate proceedings, the assessee has attempted to reach the sale consideration at Rs 2.45 crores without any basis. Before the search action, the assessee never disclosed proper sale of plot/houses. It Is also pertinent to note that these documents were never produced at the assessment proceedings before the AO: Further, during the search action, the assessee himself has admitted the amount of Rs 2.45 crores as his undisclosed income for AY 2013-14 & AY 2014-15 vide his statement recorded u/s 132(4) dated 24-12-2014. In this scenario, the attempt of the assessee to seek shelter u/s 44AD may be disregarded and the entire addition of Rs 2.45 cr made for AY 2013-14 & AY 2014-15 may kindly be sustained. Even if relief is to be allowed to the assessee u/s 44AD, the sale value needs to be restricted to Rs 82,59,600/- a's per actual available evidentiary value and net income computed accordingly keeping in mind the returned income u/s 153A and the differential amount of Rs 1,11,76,750/- needs to be taxed fully in the absence of any evidences in favour of the assessee keeping in view the statement given by the assessee during search proceedings as under: Sr AY Plot No. Declared in ROI under-which Head Sale Consideration Amount as claimed by the assessee before Appellate Authorities Sale Consideration as per Sale Agreements produced by the assessee at Remand proceedings AY wise Difference amount 1 2011-12 438 Business income u/s 44AD 15,00,000 12,00,000 3,00,000 82 Business income u/s 44AD 27,86,250 12,51,000 15,35,250 2 2012-13 354A Business income u/s 44AD 20,50,000 12,50,000 8,00,000 354 Business income u/s 44AD 20,50,000 12,50,000 8,00,000 3 2013-14 83NP Business income u/s 44AD 19,00,000 11,00,000 8,00,000 4 2014-15 23NP Business income u/s u/s 44AD 12,50,000 7,86,000 4,64,000 23SP 15,00 000 2,77,500 12,22,500 44 16,00,000 3,32,500 12,67,500 100NP 16,00,000 3,32,500 12,67,500 83SP8,100SP 32,00,000 4,80,000 27,20,000 Total 1,94,36,250 82,59,500 1,11,76,750 ITA Nos.1630 & 1631/Hyd/2018 8 9.4. In response to the remand report submitted by the Assessing Officer, the appellant's reply stated as under: "5.1 Unaccounted sale of plots: The AssesSing Officer claims that the details of sale of open plots and houses along' with copies of sale deeds were not filed in the course of assessment proceedings. .Kind attention of the Hon'ble Commissioner is invited to the assessee's letter placed at pages 1 to 4 of the paper book filed-earlier. In the said letter at page.2 it was mentioned that the details of sale of all plots are enclosed. In the same letter ;at page 4 the appellant claimed that copies of the patta pass books were enclosed. Irrthe remand report dated 05.01.2p18, the Assessing Officer admits that the Pata pass book were furnished before tarn. Hence it is not proper on the part of the Ass sing Officer to say that the details .of sale Of plots and houses finding place in the same letter was not filed in the course of assessment proceedings. The Assessing Officer is acknowledging only a part of the letter filed before him. 5.2 As far as the submissions on merits is concerned the Assessing Officer in his report dated 05.01.2018 has accepted that the total sale consideration of Rs.2.45 crores was part of the returns filed in response to the notice u/s.153A. The Assessing Officer only contention is that no details or evidences for the expenditure were furnished. It is submitted that in the absence of evidence the appellant offered income @8% on the total consideration receipts u/s.44AD. Hence it is submitted that the inadequacy or non furnishing of the evidences for expehditure cannot be a ground for making an addition of Rs.2;45,00,000/-. The appellant in the light of the detailed submissions made on 23.11.2017 and 22.12.2017, prays that the. Hon'ble Commissioner be pleased to direct the Assessing Officer to delete the addition of Rs.1,45,00,000 made for AY 2013-14". 9.5 1 have carefully considered the submissions made by the appellant as well as the observations of the AO in the remand report and in the impugned order. The assessee was allotted 18 plots by M/s.Sri Nilaya Constructions as his share in the site developed at Badangpet. Out of the said 18 plots, the assessee constructed 11 individual houses on 11 plots and the balance 7 plots were sold as pieces of land. It was found during the course of search that the total receipts of Rs.2,45,00,000/- on account of sale of 11 independent houses and 7 plots were non offered to tax. Vide the statement recorded during the course of search, the assessee offered Rs.1.45 crores in AY 2013-14 and Rs.1.00 crore in AY 201415 on account of the said sales. Since in the Return of Income filed u/s.153A the assessee declared business income of Rs.1,52,000/- u/s. 44AD, and Rs.3,22,441/- under the head Long Term Capital Gains, the Assessing Officer, treating these incomes as distinct from the Income of Rs.1.45 crores declared during the course of search, added the entire amount of ITA Nos.1630 & 1631/Hyd/2018 9 Rs.1.45 crores to the assessee's Returned Income on account of the undisclosed income from the sale of independent houses and plots, as discussed above. During the course of appellate proceedings, the contention of the assessee’s AR is that the assessee has shown the profits and capital gains from the sale of the said 11 independent houses and 7 plots in the respective AYs from AY 2011-12 to AY 2015-16, in the Returns filed u/s,153A. The detailed statement showing the year wise sales with regard to the 11 independent houses and 7 plots, AY wise, was furnished, along with supporting evidences, which were forwarded to the Assessing Officer, for examination and report thereon. The Assessing Officer, vide his Remand Report dated 22-03-2018, which is reproduced in para 9.3 above, has verified the statement and the evidences furnished by the appellant, and has confirmed that the total consideration of Rs.2.45 crores has been reflected in the Returns filed u/s.153A for the respective AYs. However, the Assessing Officer has not agreed with the business income u/s.44AD @8% offered by the assessee on. the sale of independent houses, and Long Term Capital Gain offered on the sale of open plots. It is the contention of the Assessing Officer that since the total sale consideration was suppressed, and. since the assessee has been unable to produce evidences of the expenses claimed, the entire amount should be taxed as Undisclosed Income. 9.6 Therefore, while it is seen that the amount of suppressed turnover is not in dispute, and that the entire suppressed turnover of Rs.2.45 crores has been accepted by the assessee and included in the Returns filed u/s.153A for the various AYs, which has been verified by the Assessing Officer also, the issue which needs to be decided here is the quantification of Income on the suppressed turnover. While the AO has treated the entire suppressed turnover as the suppressed income of appellant, the appellant's plea is that only profit element on the .alleged suppressed turnover can be brought to tax, which the appellant has declared u/s.44AD @8%. In support of this contention, the appellant's AR has placed reliance on a number of case laws............................................................................................. ....................................................................................................” From the judgement reproduced above, it can be seen that while all Courts have unanimously held that only profit element out of the suppressed turnover should be taxed, the estimation of that profit element would depend on the facts of the particular case. In the case of the appellant at hand, the AO is of the view that the undisclosed receipt's are outright income, and therefore, the AO has taxed 100% of the amount as suppressed income. The appellant on the other hand contends that the Net Profit Rate of 8% returned by it should be accepted. The contention of the appellant to apply 8% NP rate is obviously baseless. The huge unaccounted sales and suppressed turnover uncovered during search is sufficient ITA Nos.1630 & 1631/Hyd/2018 10 evidence that the Net Profit being returned was grossly suppressed. In similar circumstances, in the case of DOT Vs.Panna Corporation (2012)/74 DTR (Guj) 89, where the assessee was engaged in the business of construction of flats, and loose papers evidencing collection of unaccounted cash were found during course of search, the Gujarat High Court upheld determination of income at Rs.26 lacs out of total undisclosed receipts of Rs.62 lacs (i.e., 42%). In the decision of Sharda Real Estate reproduced above, the MP High Court upheld the determination of income @25% of unaccounted receipts. Therefore, keeping in view the facts of the case in entirety and the proposition laid down by - various High Courts as discussed above, and more particularly, keeping in view the nature of the assessee's business and the evidences uncovered during search operationt, the Assessing Officer is directed to take 40% of the suppressed turnover for the AY under consideration as the appellant's income. It also needs to be tlarified here that there is no logic and justification in the appellant's method of considering income from the sale of independent houses as 'business income', and from sale of plots as 'Capital Gains'. The entire turnover from both types of sales is to be considered as the business turnover, and the profit on the entire turnover is to be calculated @40%, and treated as Business Income of the appellant for the year under consideration. The grounds raised by the appellant are therefore, partly allowed.” 6.3. However, it was the contention of the ld.AR that despite furnishing the information provided to the ld.CIT(A), ld.CIT(A) has confirmed the order of the Assessing Officer. It was the contention of the Assessing Officer in the remand report that the total turnover of the assessee was Rs2.45 crore during these years. However, it was the case of AO that “ “Similarly, it is noticed that the assessee has claimed sale consideration of Rs. 1,94,36,250/- while arriving at business income u/s 44AD (AY 2013-14 & AY 2015-16) as against actual consideration as. per Sale Agreements of Rs.82,59,500/-, leading to difference of Rs.1,11,76,750/-.” ITA Nos.1630 & 1631/Hyd/2018 11 6.4. on the basis of it was submitted that revenue can only assessee on the alleged turn over of Rs. 1,94,36,250/- or only on suppressed turnover of Rs.1,11,76,750/-. It was the contention of AR that instead of computing the income on suppressed turn over CIT(A) had wrongly computed the profit of the assessee by taking the total turnover and thereafter applied the 40% rate. AR submissions were that the Tribunal in the case of group concern vides its order dt.07.09.2018 had restricted the addition to 10% instead of 40% of the disallowance. He has drawn our attention to Para 7.1, 7.2 of the Tribunal order in ITA 95/Hyd/2018 which is to the following effect : “ 7.1 With regard to estimation of income in this line of business, we notice that AO has treated the whole suppressed turnover as supressed income of the assessee, whereas, ld. CIT(A) has estimated the suppressed income @ 40%. We notice that assessee has declared the income @ 5.12% whereas ld. CIT(A) has estimated the income @ 40%. We are in agreement with the CIT(A) that only income should be estimated and not the whole supressed turnover as income. However, the income estimation should be realistic and based on the trend in the industry. In the case of Sri Narendar Reddy Maddi Vs. ITO in ITA No. 871/Hyd/2016 for AY 2011-12, on similar issue, the coordinate bench has held as under: “6. We have considered the rival contentions and perused the statements placed on record and the case law relied upon. As seen from the order of the AO, the order was an ex-parte order, therefore assessee was not in a position to explain the nature of receipt. Before the Ld.CIT(A), necessary explanation was given. CIT(A) in his order has partly accepted the turnovers to the extent they are accounted for and the balance was treated as unexplained cash credit. Since the nature of receipts are pertaining to the contract works, it is not correct on the part of the authorities to bring to tax the entire receipt as income. As seen from the nature of deposits in the bank accounts, there were corresponding withdrawals also and these seems to be petty cash receipts in the small contract works undertaken by assessee. Hon'ble Gujarat High Court in the case of CIT Vs. President Industries [258 ITR 654] (Gujarat HC) has held that it cannot be matter of an argument that the amount of sales by itself cannot represent the income of assessee, who has not ITA Nos.1630 & 1631/Hyd/2018 12 disclosed the sales. It is the realization of excess over the cost incurred that only forms and others Sampada Homes, Hyd. part of the profit included in the consideration of sales. Similar view was taken in the case of CIT Vs. Gurubachhan Singh J. Juneja [215 CTR 509] (Gujarat-High Court) and CIT Vs. Sharda Real Estate (P.) Ltd., [99 DTR 100] (MP-HC). In the case of Jyotichand Bhaichand Saraf & Sons (P.) Ltd., Vs. DCIT [139 ITD 10] the Co-ordinate Bench at Pune has confirmed that the addition could only be made only to an extent of gross profit earned on an unaccounted / suppress sales and not on the entire sales itself. Similar view was also taken in the case of ACIT, Cir1 Vs. M/s. Archana Trading Co in ITA No. 351 & 352/Coch/2011, dt. 28-02-2013 and also ACIT Vs. Pahal Food in ITSSA No. 42/Hyd/2005, dt. 30-09-2009, ITAT, Hyderabad. 6.1. Respectfully following the principles laid down by various High Courts and Co-ordinate Bench decisions, we are of the opinion that the entire turnover cannot be brought to tax as such and there can be reasonable profit estimation on the above amount. Generally income is estimated at 12.5% in the case of big contracts and since assessee has already offered @ 10% profit on the accounted turnover, we are of the opinion that income can be determined on the balance of the turnover at 12.5% of the turnover. AO is directed to do so. Accordingly, assessee's ground are partly allowed.” 7.2 In the above case, we notice that assessee has already declared profit @10% on the accounted turnover, whereas, in the given case, assessee has declared 5.12%. In our considered view, the income has to be realistic and appropriate to the kind of business of assessee. As noted, assessee has declared only 5.12% of the declared turnover as profit. The coordinate bench has opined that in the general scenario income is estimated at 12.5% in the case of big contracts. In the interest of justice and fairness to both the parties, in our considered view, 10% is reasonable and in line with the Villa Projects in the real estate industry. Accordingly, we direct the AO to estimate income @ 10% of the undisclosed turnover. Accordingly, ground raised by the assessee is partly allowed.” 7. Per contra, the ld.DR relied upon the order passed by the lower authorities. It was further submitted that the decision in the case of Sampada Homes pertains to Villa and not pertains to the ITA Nos.1630 & 1631/Hyd/2018 13 plots/housing and therefore, the said decision whereby the estimation of profit @ 10% was restricted by the Tribunal is not applicable. 8. We have heard the rival submissions and perused the material on record. During the argument, the ld.AR has drawn attention to the summary sheet prepared by the assessee, whereby the break-up of each year was mentioned. He has drawn our attention to Page 114 of the Paper Book, wherein the following break- up was given. Income admitted u/s 153A for sale of plots / houses. Asst. Year Paper Book Reference Gross Receipts Business Income @ 8% Capital Gains 2011-12 62 42,86,250 3,42,900 -- 2012-13 66 49,20,000 3,93,600 -- 2013-14 71 19,00,000 1,52,000 -- 2014-15 70 41,50,000 -- 3,22,441 2015-16 75 91,50,000 7,32,000 -- 9,50,000 -- 1,60,789 2,53,56,250 16,20,500 4,83,230 8.1. It was the contention of the ld.AR before us that before the search, the assessee had filed return of income for A.Y. 2011-12 and 2012-13 disclosing the business income at 8%. The said return of income was accepted by the Assessing Officer and no additions were made. Further, it was submitted that if the return of income filed for 2013-14 and 2014-15 which are the subject matter of the present appeal, then it is found that there is no variation in the gross receipt shown by the assessee in the normal return of income as well as return filed u/s 153A of the Act. It was submitted that if all the four ITA Nos.1630 & 1631/Hyd/2018 14 assessment years are taken into account, then the total turnover declared by the assessee matches with the statement given u/s 153A r.w.s. 132 of the Act. In Para 9.3., it was acknowledged by the AO that the assessee had shown a gross receipt of Rs.42,86,250/- for A.Y. 2011-12. However, subsequently, while filing the return u/s 153A, the assessee has bifurcated the same business income as well as a long-term capital gain. 8.2. Similarly, for A.Y. 2012-13, the assessee had shown the gross receipt of Rs.49,20,000/- (Page 66 of the paper book) in the return of income filed for A.Y. 2012-13. Therefore, the total of this i.e. Rs.92,06,250/- pertains to the A.Ys. 2011-12 and 2012-13. In our view, this amount is required to be reduced from the total turnover of Rs.2.45 crores and the net amount pertains to A.Ys. 2013-14 and 2014-15 is Rs.1,52,93,750/-. 8.3. In our view, the turnover pertains to for A.Ys. 2013-14 and 2014-15 as per AO in remand report was 1,94,36,250/- and suppressed turnover was Rs.1,11,76,750/-. In our view, though the assessee has declared the business income u/s 44AD @ 8%, for the year 2013-14 however, in our view, the finding of the ld.CIT(A) was not correct whereby he had directed to compute the income of the assessee by applying the rate of 40% on the entire turnover. Moreover, the ld.CIT(A) in para 9.5 had categorically recorded as under : “During the course of appellate proceedings, the contention of the assessee’s AR is that the assessee has shown the profits and capital gains from the sale of the said 11 independent houses and 7 plots in the respective AYs from AY 2011-12 to AY 2015-16, in the Returns filed u/s,153A. The detailed statement showing the year wise sales with regard to the 11 independent houses and 7 plots, AY wise, was ITA Nos.1630 & 1631/Hyd/2018 15 furnished, along with supporting evidences, which were forwarded to the Assessing Officer, for examination and report thereon. The Assessing Officer, vide his Remand Report dated 22-03-2018, which is reproduced in para 9.3 above, has verified the statement and the evidences furnished by the appellant, and has confirmed that the total consideration of Rs.2.45 crores has been reflected in the Returns filed u/s.153A for the respective AYs” 8.4. In our view, once it was agreed by the Assessing Officer based on the evidence that the entire sale consideration pertaining to 11 independent houses and 7 plots in the respective AYs from A.Y 2011-12 to A.Y. 2015-16 were duly shown by the assessee then the correct course would be to tax the turnover for these two years which pertain to AYs.2013-14 and 2014-15 only. At this stage, it is useful to mention that the co-ordinate Bench of the Tribunal in the case of Sampada Homes had revised the rate of 40% on the total turnover and had reduced it to 10%. However, the said decision was contested by the ld.DR for Revenue showing that it pertains to Villas issues hence can not be relied upon. Nonetheless, it is an undisputed fact that the assessee received its share in the project which has duly been mentioned by the Assessing Officer in para 6 of his order, wherein it was mentioned that M/s. Sri Nilaya Constructions developed a venture at Badangapet in an area of 24 acres and in the return of income on pages 62, 66, the assessee had duly mentioned the profit from Sampada homes which was calculated by the assessee based on estimating the profit at 8% of the turnover. 9. In our view, though the co-ordinate Bench of the Tribunal had applied the rate of 10% as against 40% applied by CIT(A) on the suppressed turnover, however considering the totality of the peculiar facts of the present case, when the assessee had Admitted the total ITA Nos.1630 & 1631/Hyd/2018 16 turnover in the return of income filled under section 153A and had shown profit at the rate of 8%, whereas Assessing Officer held total turnover as income of the assessee and CIT(A), we are of the opinion that rate of 15% is required to be applied as against 40% as applied by CIT(A) on the suppressed turn over of the assessee shown in the return of incomes filed under section 153A of the Act for estimating the profit of assessee for both the years. In light of the above, grounds 6 to 9 are partly allowed. 10. With respect to grounds Nos.2 to 5 of the appeal memo, our attention was drawn to para 4 of the assessment order which is to the following effect : “4. Cash payments to Landlords: During survey operation in the case of M/s Squaremile Projects in which the assessee is a partner, Annexure A/SMP/03 was impounded. As per impounded material A/SMP/03, pages 225 to 238 & 272 to 286, M/s Squaremile Projects purchased land in Tukkuguda vide two Sale Deeds dated 22-2-2013 (Regn 850/2013 & 851/2013) for Rs.4.23 crores out of which, Rs.3.18 crores was paid to landlords in cash in A. Y. 2013-14 at the time of the registration. During the course of search and seizure operation conducted u/s 132 of the Income Tax act on 24/12/2014 in the residential premise of the assessee, a statement was recorded wherein relevant portion of undisclosed income declared by the assessee is reproduced as under : In your response to Q.4 above you have stated that the project was launched in April 2013. Further as seen from the receipt book found and impounded in your premises the receipts for sale considerations received have been issued during the current F. Y.2014-15. This clearly shows that the sales were booked and the sale considerations were received during F. Y. 2014-15 from 35 customers. However, you have shown to have received advance from the same customers for Rs.2.32 crores during F. Y.2012-13 and Rs. 2.80 Crores during F.Y.2013-14 in your balance sheet. Please explain the discrepancy? Ans : I submit that the above discrepancy is due to the incorrect entries deliberately entered by me in my books Of accounts of F. Ys.2012-13 and 2013-14. As stated above, in Feb, 2013 our firm has purchased in ITA Nos.1630 & 1631/Hyd/2018 17 Tukkuüuda for 4.23 crones for which consideration ofRs.3.18 crores was required to be paid in Cash. I had taken cash loans from known persons for this amount and made the payments to landlords at the time of registration. However, in the absence of any explainable Sources of this cash payment, had utilized the names of these various customers and I have entered the same in the balance sheet for F. Y.s 2013-14 and 2014- 15, as if they have given advances for plots. Pan Of the source was also adjusted by increasing the capita/ amount which is in my name i.e., in the name Of Damodar Reddy. ln view of my failure to explain the acceptable source, I admit the amount of Rs.3, 18, 24, 000/- paid in .cash in F. Y. 201213 towards land purchase and Rs.43,00,000/- paid in F. Y.2013-14 towards deposit to landlord for development agreement, totaling to Rs.3,61,24,000/- as my undisclosed income for F.Ys.2012-13 & 2013- 14.” During the course of assessment proceedings When confronted with the issue, the assessee. Could, not furnish any satisfactory reply. It was only stated that the said expenditure is explainedin the hands of the firm M/S Squaremile Projects. However, firm during its assessment' Proceedings has categorically mentioned that the cash expenditure Pertaining to Tukkuguda venture relates to its partner Sri Kaithi Damodar Reddy and the firm has got nothing to do with it. Accordingly, the amount of being cash payments to landlords is brought to tax in the hands of the assessee for RY 2013-14. Penalty proceedings u/s 271 of the I.T. Act, 1961 initiated separately for concealment of income.” 11. Thereafter, ld.AR has drawn our attention to the order passed by the ld.CIT(A). Before the ld.CIT(A), the assessee had filed the claim explaining the payment made by the assessee to the landlords. The assessee has submitted in the submissions in para 3.5.3. to 3.5.6 as under : “3.5.3 With regard to the investment made by the firm and its Partners we already submitted copies of the Returns of Income for the Asst. Years 2013-14 and 2014-15 and in those partners investments were already accounted for. K. Damodar Reddy invested an amount of Rs.70,25,000 during the assessment year 2013-14 and the immediate source for the said investment are withdrawals from the earlier firms of Sampada Homes and Laxmi Nilaya Constructions and the balance amount he invested out of his own savings. He sold hi plots and Villas during the earlier asst. years and the same investment was transferred to that firm. ITA Nos.1630 & 1631/Hyd/2018 18 K. Janardhan Reddy invested an amount of Rs.70 lakhs during the asst.year 201314 and this amount was withdrawn from the firm of M/s. Bricks and Stones which was transferred by way of Cheque. Smt. Deepika Reddy invested an amount of Rs.51,95,000. Thus, all the partners investments are accounted for from our regular source of investments. In addition to this we received an amount of Rs.2,80,57,000 towards advances from customers and other advances of Rs.12,25,000. We also received an amount of Rs.12,00,000 from Squaremile Developments. These amounts were given for advance for purchase of property to the tune of Rs.4,59,62,200 and for others which were clearly mentioned in the Balance Sheet submitted for the Financial Year 2013-14. Thus, the entire investments are accounted for during the Asst. Year 2013-14 relevant to the accounting year ended on 31.03.2013. 3.5.4 Copy of the further submissions of squaremile projects on similar lines is at pages 10 & 11 of Paper Book. 3.6 Copies of the balance sheet of the Squaremile Projects for the Asst. Year.2013-14, 2014-15 and 2015-16 indicating the advances from the customers and the amounts paid for the purchase of the land are placed at pages 13 to 18 of the Paper Book. The said firm had also explained the reasons for the inappropriate statement made by the appellant in the course of proceedings u/s 132. It is pertinent to submit that the assessment u/s. 143(3) was completed in the case of the said firm Squaremile Projects by the very same Assessing Officer accepting the contentions of the firm. Copy of the order u/s 143(3) dt.30.12.2016 is placed at pages 247 & 248 of the paper book. It is also to be submitted that Assessing Officer is not factually correct in stating that the firm in its assessment proceedings disowned the payments. As can be seen from the reply filed in its by the firm as extracted above the transaction substantiate by the firm with evidence in the form of Balance Sheets for Asst. Years 2013-14 and 2014-15 filed much before the date of search. The fact that the Assessing Officer completed the assessment of the firm u/s 143(3) accepting the income returned shows that the payments for purchase of land were fully and satisfactorily explained. 3.7 Hence it is humbly submitted that since the entire sources for acquisition of the land in the case of Squaremile Projects were fully explained and the sources for the payment of purchase of land were explained and duly reflected in the returns of the said firm filed in the regular course, the Assessing Officer is not justified in making a separate addition of Rs.3,18,24,000 in the hands of the appellant towards the payment made for the purchase of land by the said firm especially when the very same issue was examined in detail in the ITA Nos.1630 & 1631/Hyd/2018 19 course of proceedings u/s 143(3) completed simultaneously by the very same Assessing Officer.” 12. The Assessing Officer had submitted the remand report and the assessee had filed a rebuttal and the rebuttal of the assessee was reproduced by the ld.CIT(A) in para 7.4 to the following effect : 7.4 In response to the remand report submitted by the Assessing Officer, the appellant’s AR replied as under : 3. Cash payments to landlords Rs.3,18,24,000/-: Kind attention is invited to the detailed reply already filed on 22.12.20171 All the initial contentions raised by the Assessing Officer and repeated in the final remand report dt.05.01.2018 were explained in detail in the said letter filed by us on 22.12.2017. It remains an undisputed fact that the sources for the acquisition of the land by the firm, Square Mile Projects, was indicated in its balance sheets for Asst.Years 2013-14 and 2014-15 filed much before the date of search. The Assessing Officer is trying to substantiate the addition made on technical issues. The Assessing Officer's contention that the addition is made on the basis of the admission made by the appellant on the date of search has no legs to stand because it was already clarified that this statement itself is on wrong assumption of fats and in a state of confusion. The actual position appearing in the balance sheets and other details cannot be over looked. The undisputed facts remain that the acquisition of land and sources thereon were fully disclosed by the firm much before the date of search. The Assessing Officer states that the assessment of the firm for Asst.Year 201415 was not u/s 143(3). The Assessing Officer in his report dt.05.01.2018 is totally silent on the reference to notices u/s 274 r.w.s.271(1)(b) dt.06.05.2016 for Asst.Year 2014-15 in the case of Firm M/s. Square Mile Projects. it shows that the return of the firm for Asst.Year 2014-15 was before the Assessing Officer. As already stated in the letter filed on 22.12.2017, the firm in its letter filed before the Assessing Officer categorically (pages 10 to 12 of paper book) stated that the sources for land purchase were advances from customers. Hence no addition whatsoever can be made in the hands of the appellant towards the land acquired by M/s. Square Mile Projects since the sources were self explained in the balance sheets of the said firm filed much before the date of search. The Assessing Officer in his remand report could not disprove the contentions made in the detailed submissions filed before the Hon’ble Commissioner of Income Tax and sent to Assessing Officer for his comments.” 13. However, after considering the reply, the ld.CIT(A) has dismissed the grounds raised by the assessee. At the outset, the ld.AR had submitted that the petition for admission of documents ITA Nos.1630 & 1631/Hyd/2018 20 were filed by the assessee on 05.07.2022 whereby the assessee has filed the notices issued by the same Assessing Officer to M/s. Squaremile Projects for A.Y. 2015-16, where the same additions were sought to be made, which are the subject matter of the present appeal. After receipt of notices M/s.Squaremile Project replied and explained the source of investment made by it in making the payment to land owners. Thereafter, Assessing Officer made no additions in the hands of M/s. Squaremile Project. Our attention was drawn to orders passed in the case of M/s. Squaremile Project (pages 82 and 83 of the Paper Book wherein the AY 2015-16). Ld.AR had requested to consider the additional evidence filed by the assessee as it goes to the root of the matter, further it will show that once the same additions were deleted by AO, on the basis of cogent evidence and explanation then the said very additions cannot be made in the case of the assessee. 14. On the other hand, the ld.DR had submitted that though the above aspect has been raised by the assessee however the ld.CIT(A) has made the addition based on the statement given by the assessee himself. Our attention was drawn to the conclusion of ld.CIT(A) at paras 12 and 13 of the ld.CIT(A). 12.0 Disallowance on account of Unsubstantiated claim of exemption of Rs.2,65,310/-: 12.1 The AO has also made the addition on the following grounds: "9. Unsubstantiated claim for exemption: The assessee has claimed an amount of Rs.2,65,310/- as exempt during the year. There was no such claim in the original Return. The assessee failed to produce evidence to substantiate his claim. Hence amount of Rs.2,65,310/- is added to the total income of the assessee" ITA Nos.1630 & 1631/Hyd/2018 21 12.2 The appellant has contested the said disallowance, and in support of his claim, the following submissions have been made by the appellant's AR: 8.3 The addition of Rs.2,65,310 represent the appellants share of profit as partner from Sampada Homes as duly indicated in the computation of income filed along with the return of income. The said firm Sampada Homes is assessed to tax separately by the very same Assessing Officer and the assessments were completed u/s.143(3) r.w.s 153C by the very same Assessing Officer almost simultaneously and hence the addition of Rs.2,65,310 as unsubstantiated is highly unjustified. In fact in the computation filed with the return of income (page 233 of Paper book) the amount was shown as share of profit from M/s. Sampada Homes”. 12.3 When asked to comment on the submissions of the assessee, in the report furnished on 22.03.2018, the Assessing Officer has stated as under: "7. Unsubstantiated claim of exemption of Rs.2,65,310/-: In view of the submissions. made by the AR at the appellate proceedings & forwarded to this office, the assessee's contention in this regard i.e. it being share of profit from the firm Sampada Homes, is acceptable". 12.4 As explained by the appellant's AR, the addition of Rs.2,65,310/- made by the Assessing Officer represents the appellant's share of profit as partner from M/s.Sampada Homes. This fact has been verified and confirmed by the Assessing Officer also, in his Remand Report dated 22-03-2018, which is reproduced at para 12.3 above. In view thereof, the addition made by the Assessing Officer is found to be baseless, and is ordered to be deleted. The grounds related to this issue are ALLOWED. 13.0 In the result, the appeal of the appellant for the AY 2013-14 is PARTLY ALLOWED.” 15. We have heard the rival submissions and perused the material on record. Admittedly, the assessee during the assessment proceedings as well as proceedings before ld.CIT(A) had filed the document showing the questions asked by the AO, the reply given by ITA Nos.1630 & 1631/Hyd/2018 22 M/s. Squaremile Project explains the source of investment/payment made to the landlords and the order passed by the Assessing Officer without making additions in that regard. In the present case, the documents / additional documents were filed by the assessee before us including the notices and the replies given by M/s. Squaremile Project, it is essential that the above-said fact is required to be verified from the case file of M/s. Squaremile Projects. Undoubtedly, the ld.CIT(A) while sustaining the addition has brushed aside the explanation given by the assessee during the appellate proceedings and thereafter, made the addition merely on the basis of the statement recorded during the search proceedings. 16. In our considered opinion, the assessee had filed the documents pertaining to the assessment record, in the form of notices, explanations and orders passed in the case of M/s. Squaremile Projects showing that similar questions were posed by the Assessing Officer to M/s. Squaremile Projects and thereafter the AO had deleted the additions. Therefore the revenue could not be permitted to take a contradictory stand in the case of the assessee when the relief was granted for the same transaction to M/s. Squaremile Projects. Once all payments made to the landlords have been accepted in the case of M/s. Squaremile Projects, then it is not open to the Assessing Officer as well as ld.CIT(A) to confirm the very same amount in the hands of the assessee. The law is fairly settled that the additions should not be ordinarily made based on a statement, as the opportunity should be granted to explain his case and rebut the allegation. In the present case, the assessee was able to explain the source of the payment made to the landowners in their ITA Nos.1630 & 1631/Hyd/2018 23 case record of M/s. Squaremile Projects, though the above said was brought to the notice of CIT(A), however, ld.CIT(A) had made additions solely on the basis of the statement, which can not be countenanced. We disapprove of it. As various documents are specifically filed in the form of additional evidence before us hence ground no 2to 5 are remanded back to the file of AO for the limited purpose to verify additional evidence now filled before us and find out whether the undisclosed cash payment of Rs.3,18,00,000/- made towards the purchase of land was examined and deleted by the Assessing Officer in the case of M/s. Squaremile Projects or not and if the answer to the above question is yes then no addition should be made in the hands of the assessee. Thus, grounds 2 to 5 are allowed for statistical purposes. 17. In the result, the appeal of the assessee in ITA No.1630/Hyd/2018 for A.Y. 2013-14 is partly allowed for statistical purposes. 18. Now coming to ITA No.1631/Hyd/2018 for A.Y. 2014-15, we respectfully, following our decision for A.Y. 2013-14 decided above, partly allow the same i.e. ITA No.1631/Hyd/2018 for A.Y. 2014-15. Accordingly, the appeal of the assessee in ITA No.1631/Hyd/2018 is also partly allowed. ITA Nos.1630 & 1631/Hyd/2018 24 19. In the result, both the appeals of the assessee are partly allowed for statistical purposes. A copy of this common order be placed in respective case files. Order pronounced in the Open Court on 18 th July, 2022. Sd/- Sd/- (RAMA KANTA PANDA) ACCOUNTANT MEMBER (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 18 th July, 2022. TYNM/sps Copy to: S.No Addresses 1 Damodar Reddy Kaiti, Flat No.504, Sri Laxmi Nilaya, Near Hanuman Temple, Karmanghat, Hyderabad. 2 The Asst. Commissioner of Income Tax, Central Circle – 2(3), Hyderabad. 3 The Commissioner of Income Tax (Appeals) – 12, Hyderabad. 4 Pr. CIT (Central), Hyderabad. 5 DR, ITAT Hyderabad Benches 6 Guard File By Order