IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER SL. NO. ITA NO. & A.Y. APPELLANT RESPONDENT 1. ITA NO. 1637/HYD/2011 A.Y. 2003-04 ASST. CIT CENTRAL CIRCLE TIRUPATI M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. YEMMIGANUR PAN: AABCM3712D 2. ITA NO. 1638/HYD/2011 A.Y. 2004-05 3. ITA NO. 1639/HYD/2011 A.Y. 2005-06 4. ITA NO. 1640/HYD/2011 A.Y. 2006-07 5. ITA NO. 1641/HYD/2011 A.Y. 2007-08 6. ITA NO. 1802/HYD/2011 A.Y. 2008-09 7. ITA NO. 417/HYD/2012 A.Y. 2009-10 8. ITA NO. 1642/HYD/2011 A.Y. 2003-04 M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. YEMMIGANUR PAN: AABCM3712D DEPUTY CIT CENTRAL CIRCLE TIRUPATI 9. ITA NO. 1643/HYD/2011 A.Y. 2004-05 10. ITA NO. 1644/HYD/2011 A.Y. 2005-06 11. ITA NO. 1645/HYD/2011 A.Y. 2006-07 12. ITA NO. 1646/HYD/2011 A.Y. 2007-08 13, ITA NO. 1647/HYD/2011 A.Y. 2008-09 14. ITA NO. 296/HYD/2012 A.Y. 2009-10 REVENUE BY: SRI K.C. DEVADAS ASSESSEE BY: SRI D. SUDHAKAR RAO DATE OF HEARING: 25.02.2013 DATE OF PRONOUNCEMENT: 29.04.2013 O R D E R PER CHANDRA POOJARI, AM: THE ABOVE APPEALS BY THE ASSESSEE AS WELL AS BY TH E REVENUE ARE DIRECTED AGAINST DIFFERENT ORDERS OF TH E CIT(A)-VII, IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 2 HYDERABAD FOR THE ABOVE ASSESSMENT YEARS. SINCE AL L THE APPEALS BELONG TO A SINGLE ASSESSEE, THESE APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE GROU NDS RAISED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE ILLUS TRATIVE IN NATURE. HOWEVER, WE HAVE CONCISED THE SAME AND ADJ UDICATED THEREON. 2. THE FIRST COMMON GROUND IN BOTH REVENUE AND ASSESSE E APPEALS IS WITH REGARD TO ALLOWABILITY OF EXPENDITU RE INCURRED ON REAL ESTATE BUSINESS IN PURCHASE OF LAND SITES. TH ERE WAS A SEARCH ACTION U/S. 132 OF THE ACT IN THE BUSINESS P REMISES OF THE ASSESSEE RELATING TO REAL ESTATE BUSINESS SITUA TED AT TIRUPATI AND NELLORE ON 25.7.2008. CONSEQUENT TO THIS SEARC H ACTION, ASSESSMENT ORDER WAS FRAMED. THE ASSESSEE IS HAVIN G SEVERAL BUSINESS ACTIVITIES SUCH AS AUTOMOBILES, REAL ESTAT E AND AQUA FEEDS. IN AUTOMOBILE DIVISION, THE ASSESSEE IS INV OLVED IN TRADING OF TATA MAKE VEHICLES, TRACTORS, BAJAJ SCOO TERS, MOTORCYCLES, TRACTOR SPARE PARTS AND ACCESSORIES AN D MICO SPARE PARTS AND ACCESSORIES. THE ASSESSEE IS ALSO ENGAGED IN TRADING OF AQUA FEEDS AND CHEMICALS. IN ADDITION T O THESE, THE ASSESSEE IS ENGAGED IN REAL ESTATE BUSINESS IN CITI ES LIKE NELLORE, ELURU, VIJAYAWADA, TIRUPATI, KURNOOL AND BANGALORE. FROM THE PROFIT AND LOSS A/C., THE ASSESSING OFFICER EXTRACT ED THE DETAILS OF PROJECTS AND SALES FOR THE ABOVE ASSESSMENT YEAR S AS FOLLOWS: A.Y. 2003 - 04 2004 - 05 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 PURCHASES: REAL ESTATE SITES 15897872 37377194 90359771 74333032 154729647 155463876 146865975 SALES: REAL ESTATE SITES 2333125 43060394 79638679 140295749 132442289 146929868 142145887 3. THE DETAILS OF DISALLOWANCE BY THE ASSESSING OFFICE R AS WELL AS BY THE CIT(A) ON THIS COUNT ARE AS FOLLOWS: IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 3 A.Y. DISALLOWANCE BY AO (RS.) DISALLOWANCE BY THE CIT(A) (RS.) 2003-04 31,79,574 9,00,000 2004-05 74,75,439 20,00,000 2005-06 1,80,71,954 30,00,000 2006-07 1,48,66,606 34,70,741 2007-08 3,09,45,930 56,05,655 2008-09 3,10,92,775 41,97,815 2009-10 2,93,73,195 40,33,670 4. THUS, THE CIT(A) HAD GIVEN CERTAIN RELIEF ON THIS C OUNT. AGAINST GIVING RELIEF TO THE ASSESSEE, THE DEPARTME NT IS IN APPEAL BEFORE US IN ALL THESE ASSESSMENT YEARS. AG AINST SUSTAINING A PORTION OF ADDITIONS, THE ASSESSEE IN APPEAL BEFORE US. 5. THE CONTENTION OF THE ASSESSEE COUNSEL IS THAT THE DISALLOWANCE BY THE ASSESSING OFFICER AT 20% IS ON AD-HOC BASIS AS CERTAIN DEVELOPMENT EXPENSES WERE MADE IN CASH I S UNJUSTIFIED. THE LEARNED AR SUBMITTED THAT THE ASS ESSEE INCURRED THIS EXPENDITURE IN THE COURSE OF DEVELOPM ENT OF LAND TO MAKE THE LAND SALEABLE PLOTS AND IN THIS LINE OF BUSINESS IT IS NOT POSSIBLE TO PRODUCE FOOLPROOF OF EXPENDITURE. HE SUBMITTED THAT THE DISALLOWANCE ON AD-HOC BASIS AT 20% OF TOT AL EXPENDITURE BY THE ASSESSING OFFICER IS NOT CORRECT . SIMILARLY, THE CIT(A) SHOULD HAVE DELETED THE ENTIRE EXPENDITU RE INSTEAD OF SUSTAINING A PORTION OF EXPENDITURE. 6. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E ASSESSEE HAS NOT FURNISHED FULL DETAILS OF EXPENSES RELATING TO LAND PURCHASE, LAND DEVELOPMENT, COMMISSION PAYMENT , ETC. THE ASSESSEE ALSO NOT FURNISHED DETAILS RELATING TO PURCHASE OF LAND, DETAILS OF PERSONS FROM WHOM SUCH LAND WAS PU RCHASED, TOTAL AREA DEVELOPED, NUMBER OF PLOTS EXTRACTED YEA R-WISE, PLOTS SOLD AND TOTAL CLOSING STOCK-IN-TRADE. EVEN THE RE GISTERED IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 4 DOCUMENT OF LAND WAS NOT PRODUCED BEFORE THE ASSESS ING OFFICER AND ONLY THE CASH BOOK WAS PRODUCED. BEING SO, IN THE ABSENCE OF SUPPORTING DOCUMENTS, THE ASSESSING OFFI CER DISALLOWED 20% OF THE EXPENDITURE CLAIMED B THE ASS ESSEE ON REAL ESTATE AND THE SAME HAS TO BE CONFIRMED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL ON RECORD. THE MAIN REASON FOR DISALLOWANCE BY THE LO WER AUTHORITIES IS THAT MOST OF THE PAYMENT IS CASH PAY MENTS AND NOT SUPPORTED BY PROPER DOCUMENTS. THE ASSESSEE IS IN REAL ESTATE BUSINESS. THE NATURE OF BUSINESS REQUIRES P AYMENTS BY CASH. WHEN THE ASSESSEE MAKES PAYMENT IN CASH, THE ASSESSEE IS REQUIRED TO FURNISH DETAILS OF PAYMENT SO AS TO SHOW THE PERSON WHO RECEIVED THE PAYMENT AND PURPOSE OF PAYM ENT. WHEN THE PAYMENT IS ONLY SUPPORTED BY SELF-MADE VOU CHERS, THERE IS EVERY CHANCE OF INFLATING THE EXPENDITURE. BEING SO, CERTAIN DISALLOWANCE IS VERY MUCH WARRANTED. THE D ISALLOWANCE AT 20% BY THE ASSESSING OFFICER IS ON VERY HIGHER S IDE. IT GIVES EXORBITANT RATE OF NET PROFIT IN THIS LINE OF BUSIN ESS WHICH IS NOT AT ALL POSSIBLE. CONSIDERING THE SALES AND NET PRO FIT RATE, WE ARE INCLINED TO RESTRICT THE DISALLOWANCE AT 5% OF CASH PAYMENTS AND NO DISALLOWANCE ON CHEQUE PAYMENT. ACCORDINGLY, TH E ASSESSING OFFICER IS DIRECTED TO RE-WORK THE DISALL OWANCE. 8. THIS GROUND IS PARTLY ALLOWED IN ASSESSEE'S APPEAL AS WELL AS REVENUE APPEALS. 9. THE NEXT GROUND IN ALL THE ASSESSEE AS WELL AS REVE NUE APPEALS, EXCEPT IN ITA NO. 1640/HYD/2011 (REVENUE APP EAL), IS WITH REGARD TO ALLOWABILITY OF EXPENDITURE IN PURCH ASE OF AQUA FEEDS. THE ASSESSEE COMPANY CLAIMED EXPENDITURE TO WARDS PURCHASE OF AQUA FEEDS AS FOLLOWS: IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 5 A.Y. AMOUNT (IN RS.) 2003-04 4,08,87,118 2004-05 5,90,30,556 2005-06 5,12,76,636 2006-07 3,67,69,890 2007-08 4,46,73,702 2008-09 4,75,15,970 2009-10 4,77,07,794 10. THE ASSESSING OFFICER DISALLOWED 20% OF THE ABOVE O N AD- HOC BASIS ON THE REASON THAT THE LEDGER ACCOUNTS OF THE CREDITORS FROM WHOM THE ASSESSEE HAS PURCHASED AQUA FEEDS WHI CH SHOWS HUGE CREDIT BALANCES ESPECIALLY IN THE CASE OF GODR EJ AGROVET, CHENNAI, GODREJ, KONDAPALLI, SR SEA FOODS, NELLORE. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE MADE HUGE CAS H PURCHASES. HE DISALLOWED 20% OF THE ABOVE EXPENDITU RE. THE CIT(A) SUSTAINED THE DISALLOWANCE AS FOLLOWS: A.Y. DISALLOWANCE SUSTAINED BY THE CIT(A) (RS.) 2003-04 3,00,000 2004-05 5,00,000 2005-06 5,00,000 2006-07 5,00,000 2007-08 7,00,000 2008-09 6,00,000 2009-10 7,50,000 11. AGAINST THE DELETION OF A PORTION OF THE ADDITIONS AND GIVING PART RELIEF TO THE ASSESSEE, THE REVENUE IS IN APPEAL BEFORE US. AGAINST SUSTAINING PORTION OF THE ADDIT IONS, THE ASSESSEE IS IN APPEAL BEFORE US. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. IN THIS CASE THE ASSESSING OFFICER NOT DOUBTED THE SALE OF AQUA FEEDS. THE ASSESSING OFFICER MADE THE ADDITION ON IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 6 THE REASON THAT THE LEDGER ACCOUNTS OF THE PARTIES ARE SHOWING HUGE BALANCES. THE ASSESSING OFFICER RECORDED IN H IS ORDER THAT THE PAYMENT WAS MADE BY DEMAND DRAFTS IN CERTAIN CA SES. HE HAS DOUBTED THE PAYMENT BY DEMAND DRAFT THAT WHETHE R THEY ARE CROSSED DEMAND DRAFTS OR NOT. THUS HE HAS DOUB TED THE GENUINENESS OF AQUA FEED PURCHASES. HOWEVER, THE F ACT IS THAT THE PURCHASES ARE FROM REPUTED COMPANIES LIKE GODRE J AND THERE CANNOT BE ANY INFLATING OF EXPENDITURE BY COM PANIES LIKE GODREJ. AS SUCH AD-HOC DISALLOWANCE AT 20% IS ON V ERY HIGHER SIDE. IN CASE OF CASH EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS LOADING AND UNLOADING WHERE THERE IS CHANCE OF INFLATING THE EXPENDITURE. ACCORDINGLY, ON THIS CO UNT, WE ARE INCLINED TO DISALLOW 5% OF LOADING AND UNLOADING EX PENSES WHICH WAS MADE BY CASH. THIS GROUND IN BOTH REVENU E APPEALS AS WELL AS ASSESSEE'S APPEALS IS PARTLY ALLOWED. 13. THE NEXT GROUND IN ASSESSEE'S APPEAL IN ITA NO. 164 3/ HYD/2011 IS WITH REGARD TO SUSTAINING DISALLOWANCE B Y THE CIT(A) UNDER SALES PROMOTION EXPENSES AT RS. 5 LAKH S AND REVENUE APPEAL IN 1638/HYD/2011 IS WITH REGARD TO DEL ETION OF RS. 12,29,816. 14. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE CLAI MED AN EXPENDITURE OF RS. 57,66,056 TOWARDS SALES PROMOTIO N EXPENSES. THE ASSESSING OFFICER COMPARED THIS EXPE NDITURE WITH EARLIER YEAR'S EXPENDITURE. ACCORDING TO HIM, IN EARLIER YEAR THE TOTAL TURNOVER WAS RS. 11.23 CRORES AND CO RRESPONDING SALES PROMOTION EXPENDITURE IS AT RS. 18,94,937. I N THE ASSESSMENT YEAR UNDER CONSIDERATION, THE SALES TURN OVER WAS AT RS. 13.30 CRORES AS AGAINST THIS THE SALES PROMOTIO N EXPENDITURE WAS RS. 57,66,056. THE ASSESSING OFFICER IS OF THE OPINION THAT THE EXPENDITURE INCREASED 3 TIMES IN THE ASSESSMENT YEAR UNDER IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 7 CONSIDERATION AS COMPARED TO EARLIER YEAR. THEREFO RE, HE DISALLOWED 30% OF THIS EXPENDITURE WORKED OUT AT RS . 17,29,816. 15. ON APPEAL, THE CIT(A) SUSTAINED RS. 5 LAKHS OUT OF THE ABOVE ON THE REASON THAT THE ASSESSEE HAS INCURRED EXPENDITURE IN THIS ASSESSMENT YEAR FOR CONDUCTING DEMONSTRATIO N, ARRANGING MEETINGS, ERECTING HOARDINGS AND OTHER PR OMOTIONAL EXPENSES. AGAINST THIS THE ASSESSEE IS IN APPEAL B EFORE US. THE REVENUE IS IN APPEAL BEFORE US AGAINST THE RELIEF G IVEN BY THE CIT(A) AT RS. 12,29,816. 16. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. ADMITTEDLY, THE SALES PROMOTION EXPENDI TURE SHOWN BY THE ASSESSEE IS COMPARABLY HIGHER AS COMPARED TO EARLIER YEAR. THE ASSESSEE IS REQUIRED TO PROVE THE EXPEND ITURE WITH SUPPORTING VOUCHERS AND BILLS. IN THE PRESENT CASE THE ASSESSEE NEITHER FURNISHED BOOKS OF ACCOUNT NOR VOUCHERS IN SUPPORT OF THE EXPENDITURE. CONSIDERING THESE FACTS, WE DIREC T THE ASSESSING OFFICER TO DISALLOW 5% OF CASH EXPENDITUR E ONLY INCURRED TOWARDS SALES PROMOTION EXPENDITURE. THIS GROUND IN BOTH THE APPEALS IN ITA NO. 1643/HYD/2011 AND ITA NO . 1638/HYD/2011 IS PARTLY ALLOWED. 17. THE NEXT GROUND IN REVENUE APPEALS IN ITA NO. 1640/ HYD/2011, 1641/HYD/2011, 1802/HYD/2011 AND 417/HYD/2012 (FOR A.YS. 2006-07 TO 2009-10) IS WITH REGARD TO DE LETING UNDISCLOSED INCOME ON SALE OF SURENDRA GARDEN VENTU RES. 18. BRIEF FACTS OF THE ISSUE ARE THAT DURING THE COURSE OF SEARCH OPERATION CARRIED OUT IN THE BUSINESS PREMIS ES OF THE ASSESSEE-COMPANY EVIDENCE IN SUPPORT OF A REAL ESTA TE DIVISION CARRIED OUT IN THE NAME OF SURENDRA GARDENS WAS FOU ND AND SEIZED AS DOCUMENT MARKED AS ANNEXURE 'A/MGBRE/TPT/4 AT IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 8 VARIOUS PAGES I.E., PAGE NOS. 46 TO 62, 37 AND 38, 27 TO 30, 1 TO 12 AND 64. THERE WAS TOTAL DEVELOPMENT OF 10 ACRES 42 CENTS OF LAND IN THE NAME OF SURENDRA GARDENS IN A.YS. BETWE EN 2006-07 TO 2009-10. THE TRANSACTION WAS CARRIED ON BY SRI M.R. GANGADHAR WHO IS MANAGING DIRECTOR OF THE ASSESSEE- COMPANY. THE ASSESSING OFFICER WAS OF THE OPINION THAT THIS IS A TRANSACTION CARRIED ON BY THE ASSESSEE ITSELF ON TH E FOLLOWING REASONS: 1. THE ENTIRE LAND WAS ORIGINALLY BELONGING TO LATE SR I V. SUDARSHAN REDDY (FATHER-IN-LAW OF SRI M.R. GANGADHAR THE MANAGING DIRECTOR OF THE M.G. BROTHERS AUTOMOBILES REAL ESTATE DIVISION. 2. ON DEMISE OF SRI V. SUDARSHAN REDDY THE THE LAND WAS INHERITED BY SMT. V. ANNAPURNAMMA (WIFE) AND SMT. RAMADEVI AND SMT. UMA GANGADHAR (DAUGHTERS). SMT. UMA GANGADHAR IS THE WIFE OF SRI M.R. GANGADHAR. THESE THREE PEOPLE ARE CO-OWNERS OF THE SAID LAND. 3. ALL THE THREE CO-OWNERS HAD REGISTERED A POWER OF ATTORNEY ON 16-09-2005 IN FAVOUR OF SRI M.R. GANGADHAR VIDE DOCUMENT NO. 222/2005 TO EXECUTE THE SALE DEEDS ON THEIR BEHALF. AS PER THE POWER O F ATTORNEY EXECUTED, THE MARKET VALUE OF THE PROPERTY AS ON DATE OF 16-9-2005 WAS RS. 8,10,000. 4. THOUGH THE POWER OF ATTORNEY WAS GIVEN TO SRI M.R. GANGADHAR, THE ORIGINAL CO-OWNERS NAMELY SMT. V. ANNAPURNAMMA, SMT. K. RAMADEVI AND SMT. M. UMA GANGADHAR WERE ONLY APPLIED TO THE GRAM PANCHAYAT OF MANGASAMUDRAM VILLAGE IN ORDER TO OBTAIN THE PLAN APPROVAL TO EXECUTE THE SAID REAL ESTATE IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 9 VENTURE. IT IS TO BE MENTIONED HERE THAT THEY HAVE GOT THE PLAN APPROVAL RESOLUTION NO. 3 DATED 14-5- 2005 ITSELF. THE GPA WAS GIVEN SUBSEQUENTLY TO MR. M.R. GANGADHAR TO EXECUTE THE SALE DEEDS. 5. THE ENTIRE LAND WAS CONVERTED INTO 137 PLOTS AND THE SAME HAS BEEN SOLD IN THE A.Y. 2006-07 TO 2009- 10. HOWEVER, NEITHER THE CO-OWNERS NOR THE ASSESSEE COMPANY HAS OFFERED ANY PROFIT OUT OF THE SAID REAL ESTATE VENTURE. 6. ON THE BASIS OF THE EVIDENCES GATHERED, THE ASSESSE E COMPANY WAS ASKED TO EXPLAIN THE UNACCOUNTED INCOME GENERATED OUT OF THE SAID TRANSACTION. IN RESPONSE TO THE SHOW CAUSE, IT WAS STATED BY THE ASSESSEE COMPANY THAT THE COMPANY HAS ONLY ACTED AS A COMMISSION AGENT TO CARRY OUT THE REAL ESTATE VENTURE ON BEHALF OF THE LANDLORDS. 7. FURTHER IT WAS ALSO STATED BY THEM THAT ALL THE CO- OWNERS HAVE ADMITTED THE NET CAPITAL GAIN IN THEIR RESPECTIVE RETURNS OF INCOME. 8. IT IS PERTINENT TO MENTION HERE THAT ALL THE CO-OWN ERS DID NOT ADMIT ANY CAPITAL GAIN IN THEIR ORIGINAL RETURN OF INCOME AND ALSO RETURN OF INCOME FILED ON 25.11.2009 IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 153C. SUDDENLY ON 03.08.2010 ALL THE MEMBERS NAMELY M G GOPALA KRISHNA, M G GANGADHAR, M G RAGHAVENDRA, M G VASAVI AND OTHERS FILED REVISED RETURN OF INCOME AND ADMITTED 1/10 TH OF THEIR SHARES AS THE LONG TERM CAPITAL GAIN. IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 10 9. IT IS EVIDENT THAT THE ASSESSEE FAMILY DID NOT ADMI T THE ENTIRE TRANSACTION IN THE ORIGINAL RETURN AND A LSO THE RETURN FILED IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 153C. INITIALLY THE ENTIRE GROUP INTENDED TO DISOWN THE TRANSACTION. AS THE SAME HAS BEEN PROVED BEYOND DOUBT THEY FILED VOLUNTARY REVISED RETURNS OF INCOME. HOWEVER, THE REVISED RETURN IS NOT CONSIDERED ON THE FACT THAT THEY ARE NOT THE ORIGINAL CO-OWNERS AND THE REVISED RETURN WAS FILED WITH AN INTENTION TO FURTHER MISLEAD THE DEPARTMENT. 10. AS THE ENTIRE TRANSACTION OF RECEIPTS AND PAYMENTS ARE BOOKED IN THE BOOKS OF ACCOUNT OF M/S. M G BROTHERS AUTOMOBILES PVT. LTD, IT HAS TO BE ASSESSE D IN THE HANDS OF THE COMPANY AND NOT IN ANY OTHER HAND. 11. THE TRANSACTIONS ARE REFLECTED IN THE BALANCE SHEET OF THE COMPANY UNDER CURRENT ASSETS (LAND PAYMENT & DEVELOPMENT) AND CURRENT LIABILITIES (ACTUAL SALE CONSIDERATIONS RECEIVED FROM CUSTOMERS). IN THIS MANNER, THE COMPANY HAS TOTALLY EVADED PAYMENT OF TAX. 19. THE ASSESSING OFFICER QUANTIFIED THE SALES FOR THIS ASSESSMENT YEAR AS FOLLOWS: A.Y. EXTENT (SFT) SALE CONSIDERATION (IN RS.) 2006-07 46190 61,87,699 2007-08 43986 58,47,495 2008-09 69374 91,57,368 2009-10 60663 80,07,516 TOTAL 220213 2,92,00,078 IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 11 20. FINALLY, HE DETERMINED THE ADDITION FOR ABOVE ASSES SMENT YEARS AS FOLLOWS: TRADING ACCOUNT FOR A.Y. 2006-07 * THE TOTAL EXTENT OF LAND WAS 4,46,926 SFT. OUT OF THIS 1,84,328 SFT WAS CONSUMED BY ROADS AND OPEN SPACE. ACCORDINGLY, THE NET PLOTTABLE AREA AS PER THE ASSESSEE FAMILY WAS ONLY 2,62,598 SFT. THE GROSS PROFIT OF THE ASSESSEE-COMPANY FOR A.Y. 2 006-07 WAS QUANTIFIED INTO RS. 60,26,947. IN THE SIMILAR MANNER THE TRADING ACCOUNT FOR THE A .Y. 2007-08; 2008-09 AND 2009-10 ARE ALSO DRAWN AND DISCUSSED IN THE RESPECTIVE ASSESSMENT ORDERS. A.Y. 2007-08 A.Y. 2008-09 OPENING STOCK (SFT) COST (IN RS.) RATE PER SFT (RS.) EXTENT OF SALES (SFT) CONSIDERATION (IN RS.) 2,62,598* 8,10,000 3 46,190 61,87,699 CLOSING STOCK 2,16,416 6,49,248 GROSS PROFIT RS. 60,26,947 TOTAL 68,36,947 68,36,947 OPENING STOCK (SFT) COST (IN RS.) RATE PER SFT (RS.) EXTENT OF SALES (SFT) CONSIDERATION (IN RS.) 2,16,416 6,49,248 3 43,986 58,47,495 CLOSING STOCK 1,72,430 5,17,290 GROSS PROFIT RS. 57,15,537 TOTAL 63,64,785 63,64,785 OPENING STOCK (SFT) COST (IN RS.) RATE PER SFT (RS.) EXTENT OF SALES (SFT) CONSIDERATION (IN RS.) 1,72,430 5,17,290 3 69,374 91,57,368 CLOSING STOCK 1,03,056 3,09,168 GROSS PROFIT RS. 89,49,246 TOTAL 94,66,536 94,66,536 IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 12 A.Y. 2009-10 21. ON APPEAL, THE CIT(A) DELETED THE ABOVE ADDITION ON THE REASON THAT THE LAND BELONGED TO LATE SRI V. SUDARS HAN REDDY AND ORIGINALLY IT BELONGS TO HIS LEGAL HEIRS. THE ASSESSEE- COMPANY ONLY ACTED UPON AS A MIDDLEMAN REPRESENTED BY THE MANAGING DIRECTOR, SRI M.R. GANGADHAR TO FACILITATE THE SALES TRANSACTION. THEREFORE, IT IS APPROPRIATE TO ASSES S THE CAPITAL GAIN IN THE HANDS OF THE REAL OWNERS OF THE LAND RA THER THAN A PERSON WHO ACTED AS A FACILITATOR. THE ASSESSEE-C OMPANY WHO HAS ACTED UPON AS AN AGENT AND RECEIVED COMMISSION ON EXECUTION OF THE SALE DEED OF SUCH LAND. ACCORDING LY, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ASSESS THE CAPITA L GAIN IN THE HANDS OF THE REAL OWNERS OF THE PROPERTY. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US FOR ALL THE ASSESSME NT YEARS. 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL ON RECORD. THERE IS NO DISPUTE IN THIS YEAR THAT THE PROPERTY MEASURING 10 ACRES 42 CENTS IS OWNED BY LATE SRI V. SUDARSHAN REDDY. THE ASSESSEE HAVING NO LEGAL TITLE OVER THE PROPERTY AND THE ASSESSEE-COMPANY ACTED AS AN AGENT ON BEHALF OF THE LEGAL OWNERS OF THE PROPERTY THROUGH GPA AND EARNED COMMI SSION ON THE TRANSACTIONS. THE ASSESSING OFFICER TREATED TH E INCOME ARISING OUT OF THE SALE OF THE PROPERTY IN THE HAND S OF THE ASSESSEE ON THE REASON THAT THE INCOME WAS NOT OFFE RED BY THE CO-OWNERS OF THE PROPERTY IN THEIR ORIGINAL RETURNS OF INCOME AND ONLY IN THE REVISED RETURNS OF INCOME IT WAS DI SCLOSED BY OPENING STOCK (SFT) COST (IN RS.) RATE PER SFT (RS.) EXTENT OF SALES (SFT) CONSIDERATION (IN RS.) 1,03,056 3,09,168 3 60,663 80,07,576 CLOSING STOCK 42,393 1,27,179 GROSS PROFIT RS. 78,25,587 TOTAL 81,34,755 81,34,755 IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 13 THE CO-OWNERS. THE NON-OFFERING OF INCOME BY THE C O-OWNERS OF THE PROPERTY DOES NOT ENTITLE THE ASSESSING OFFICER TO TAX THE SAME IN THE HANDS OF A NON-OWNER OF THE PROPERTY. IN OUR HUMBLE OPINION, THE INCOME ARISING OUT OF THE SALE OF PROPERTY HAS TO BE TAXED IN THE RESPECTIVE HANDS OF THE CO-O WNERS BUT NOT IN THE HANDS OF SOMEBODY ELSE. AS PER THE EVIDENCE BROUGHT ON RECORD, LATE SRI V. SUDARSHAN REDDY WAS THE ORIGINA L OWNER OF THE PROPERTY. ON HIS DEATH, THE PROPERTY WAS INHER ITED BY SMT. ANNAPURNAMMA W/O. LATE SRI V. SUDARSHAN REDDDY, SMT . RAMA DEVI (DAUGHTER) AND SMT. UMA GANGADHAR (DAUGHTER) A ND THE DAUGHTERS ARE ALSO HAVING SHARE IN THE PROPERTY AS PER THE WILL OF LATE SRI V. SUDARSHAN REDDDY. SRI M.R. GANGADHA R IS ONLY A GPA HOLDER WHO HAD EXECUTED THE SALE DEED ON BEHALF OF THE ASSESSEE-COMPANY FOR WHICH COMMISSION WAS RECEIVED BY HIM AND OFFERED THE SAME FOR TAXATION. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND THE SA ME IS CONFIRMED. THIS GROUND IN REVENUE APPEALS IN ITA N OS. 1640/HYD/2011, 1641/HYD/2011, 1802/HYD/2011 AND ITA NO. 417/HYD/2012 IS DISMISSED. 23. THE NEXT GROUND IN REVENUE APPEALS IN ITA NOS. 1637/HYD/2011, 1638/ HYD/2011, 1639/HYD/2011, 1640/HYD/ 2011 AND 1641/HYD/ 2011 IS WITH REGARD TO ADMISSION O F ADDITIONAL EVIDENCE IN SUPPORT OF PAYMENT FOR LAND PURCHASE THROUGH CHEQUE WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE SAME AS PROVIDED UNDER RULE 46A(3) OF THE INCOME-TAX RULES, 1962. 24. IN ITA NO. 1802/HYD/2011 THE REVENUE RAISED THE GROUN D THAT THE CIT(A) IS NOT JUSTIFIED IN ALLOWING THE EX PENDITURE WHICH WAS DISALLOWED BY THE ASSESSING OFFICER U/S. 40(A)(I A) BY ACCEPTING ADDITIONAL EVIDENCE IN SUPPORT OF TDS MAD E ON ADVERTISEMENT AND COMMISSION EXPENDITURE WITHOUT AF FORDING IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 14 OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE SAME UNDER RULE 46A(3). THE GRIEVANCE OF THE DEPARTMENT IS TH AT THE ASSESSEE CLAIMED EXPENDITURE TOWARDS ADVERTISEMENT AND COMMISSION IN THESE ASSESSMENT YEARS ON WHICH THE A SSESSEE IS LIABLE TO DEDUCT TDS U/S. 194C AND 194H OF THE INCOM E-TAX ACT, 1961. 25. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE-COMP ANY PRODUCED EVIDENCE IN SUPPORT OF DEDUCTION OF TDS MA DE ON THESE EXPENDITURES. WHENEVER THE ASSESSEE DEDUCTED TDS, CERTIFICATES ARE ISSUED BELATEDLY AND THE SAME WAS NOT TALLYING FROM THE NSDL DATA. BEING SO, THE ASSESSING OFFICE R DISALLOWED THE EXPENDITURE IN THESE ASSESSMENT YEARS BY INVOKI NG THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 26. ON APPEAL THE CIT(A) OBSERVED THAT THE ASSESSEE HAD DEDUCTED THE TDS AND MADE PAYMENT TO THE CENTRAL GOVERNMENT. HOWEVER, THERE WAS DELAY IN ISSUE OF T DS CERTIFICATES. THE DELAY IN ISSUE OF TDS CERTIFICAT ES CANNOT BE A REASON FOR DISALLOWANCE OF ADVERTISEMENT AND COMMIS SION EXPENDITURES. AFTER CONSIDERING THE NECESSARY DETA ILS, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE SAID TDS CERTIFICATES AND ALLOW THE ASSESSEE'S CLAIM IN ACCO RDANCE WITH LAW AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. 27. WE FIND THAT THE CIT(A) HAS NOT DECIDED THE ISSUE B Y HIMSELF. ON THE OTHER HAND, HE HAS DIRECTED THE AS SESSING OFFICER TO EXAMINE THE TDS CERTIFICATES AND ALLOW C LAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW AFTER GIVING AN OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE. IN SUCH FINDINGS OF T HE CIT(A), WE DO NOT FIND ANY INFIRMITY. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) THAT THE ASSESSING OFFICER IS REQUIRED T O VERIFY TDS CERTIFICATES WITH REGARD TO THESE TWO EXPENDITURES AND DECIDE IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 15 THE ISSUE IN ACCORDANCE WITH LAW. THIS GROUND IN A LL THE ABOVE REVENUE APPEALS IS DISMISSED. 28. THE NEXT GROUND IN ITA NO. 417/HYD/2012 IS THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE EXPENDITURE OF RS. 20,38,427 WAS NOT ACCOUNTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 29. BRIEF FACTS OF THE ISSUE ARE THAT WHILE COMPUTING T HE TAXABLE INCOME OF THE ASSESSEE-COMPANY FOR THE YEAR UNDER REFERENCE, AN AMOUNT OF RS. 20,38,427 WAS ADDED AS INCOME OF THE ASSESSEE TREATING THE SAID AMOUNT AS UNEXPLAINE D EXPENDITURE INCURRED BY THE COMPANY DURING THE YEAR , BASED ON THE QUANTIFICATION OF CERTAIN VOUCHERS AS REFLECTED AT PAGE NOS. 1 TO 202 OF ANNEXURE A/MGBN/01, SEIZED AT THE BUSINE SS PREMISES OF THE COMPANY AT NELLORE. THE AMOUNT OF RS. 20,38,427 WAS QUANTIFIED BASED ON THE DETAILS OF TH E VOUCHERS, ANNEXED TO THE ASSESSMENT ORDER AND SINCE SUCH AMOU NTS ARE NOT REFLECTED IN THE BOOKS OF ACCOUNT, THE SAME WAS TREATED AS UNEXPLAINED EXPENDITURE. IN COMING TO A CONCLUSION THAT SUCH AMOUNT REPRESENTS THE UNEXPLAINED EXPENDITURE, THE ASSESSING OFFICER HAS MADE THE FOLLOWING OBSERVATION: (I) PRIMA FACIE THE ASSESSEE COMPANY ADMITTED THAT THE SAID EXPENDITURE ARE NOT ACCOUNTED IN BOOKS OF ACCOUNTS, EITHER BEFORE THE DATE OF SEARCH OR SUBSEQUENT TO SEARCH. (II) THE CLAIM OF THE ASSESSEE THAT THE SAID AMOUNTS ARE ADVANCES GIVEN TO THE STAFF FOR VARIOUS EXPENSES, I S TOTALLY WRONG WHERE SUCH VOUCHERS CONTAINED VARIOUS DETAILS OF EXPENDITURE INCURRED BY THE ASSESSEE COMPANY. IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 16 (III) THE PAYMENTS WERE MADE OUTSIDE THE BOOKS OF ACCOUNTS AND THE SAME DID NOT REFLECT IN THE CASH B OOK PRODUCED BY THE ASSESSEE COMPANY ON 25.11.2010. 30. THE ASSESSEE OBJECTED TO THE SAID ADDITION AND WENT IN APPEAL BEFORE THE CIT(A). IT WAS SUBMITTED BY THE ASSESSEE THAT IT IS A NORMAL PRACTICE FOR THE COMPANY TO PAY THE ADVANCES TO THE STAFF FOR INCURRING CERTAIN EXPENSES WHICH WILL BE KEPT AS SUSPENSE AND THE ACCOUNTING OF THE SAID EXPENDITURE WILL BE MADE ON THE DATE WHEN STAFF SUBMITS THE BILLS WHICH MAY BE AT DIFFERENT DATES. ACCORDINGLY, IT WAS SUBMITTED THAT THE CONSOLIDATED LIST OF VOUCHERS WHICH WAS QUANTIFIED AT RS. 20,38,427 ALONG WITH THE AMOUNT OF PHYSICAL CASH AT NELLORE DIVISION RECONCILED WITH THE CASH BALANCES AS PER T HE CASH BOOKS. THESE DETAILS WERE SUBMITTED TO THE ITO ON THE DAY OF SEARCH AND THE ASSESSING OFFICER FAILED TO CONSIDER THESE FACTS THAT AMOUNTS WERE ONLY ADVANCES GIVEN TO STAFF TO I NCUR VARIOUS EXPENDITURES. HENCE, IT WAS PLEADED THAT THE AMOUN T OF RS. 20,38,427 WAS WRONGLY ADDED AND SHOULD BE ACCORDING LY DELETED. THE ASSESSEE HAS RECONCILED SUCH AMOUNTS T O BE RS. 18,78,964 AS AGAINST RS. 20,38,427, ON ACCOUNT OF R EPEAT OF CERTAIN BILLS TO THE EXTENT OF RS. 1,59,463 BEFORE THE CIT(A). BY SHOWING SUCH AMOUNTS AS ADVANCES PAID TO THE EMPLOY EES FOR INCURRING CERTAIN EXPENDITURE, THE DEFICIT CASH BAL ANCE WAS EXPLAINED WITH REFERENCE TO THE PHYSICAL CASH AVAIL ABLE AND BALANCE AS PER CASH BOOK MAINTAINED AT HEAD OFFICE OF NELLORE. 31. THE CIT(A) HELD THAT IT COULD BE SEEN FROM THE ANNE XURE MADE TO THE ASSESSMENT ORDER, THE AMOUNT REPRESENTS ADVANCES GIVEN TO THE EMPLOYEES ON VARIOUS DATES STARTING FR OM 13.7.2008 TO 30.7.2008 AND THE SAID AMOUNTS WERE AL SO REFLECTED IN THE ANNEXURE BEARING NO. MGB/VOUCHERS/PO DT. 30.7.2008 PREPARED BY THE ADIT (INV.), TIRUPATI. UN DER THE IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 17 CIRCUMSTANCES, THE SAID AMOUNTS CANNOT BE TERMED AS UNEXPLAINED EXPENDITURE WHICH FORMED PART OF THE CA SH BOOK FOR EXPLAINING THE DEFICIT CASH BALANCE AS MADE ON THE DAY OF SEARCH AND AS CERTIFIED BY THE ANNEXURE MADE DURING THE OPERATION OF THE PO ON 30.07.2008. FURTHER, WHILE DEALING WITH THE ADDITION UNDER THE HEAD 'UNEXPLAINED CASH FOUND ' ON THE DAY OF SEARCH, THE CLAIM FOR THE CREDIT OF SUCH AMO UNT TO EXPLAIN THE CASH FOUND AT SEARCH PREMISES WAS NOT ALLOWED T O THE ASSESSEE, HOLDING THAT THE AMOUNTS WERE NOT AVAILAB LE WITH THE ASSESSEE, SINCE THE SAME WERE ADVANCED TO THE EMPLO YEES. HAVING TREATED THEM AS ADVANCES IN EXPLAINING THE C ASH FOUND IN SEARCH PROCEEDINGS, CANNOT BE FURTHER TREATED AS UNEXPLAINED EXPENDITURE. ACCORDINGLY, THE CIT(A) DIRECTED THE A SSESSING OFFICER TO DELETE THE ADDITION MADE UNDER THIS HEAD . AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 32. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. AS OBSERVED BY THE CIT(A), THE ASSESSIN G OFFICER HAS NOT GIVEN CORRECT TREATMENT TOWARDS THIS EXPENDITUR E OUT OF UNEXPLAINED CASH FOUND ON THE DAY OF SEARCH. BY OB SERVING THAT THE AMOUNTS WERE NOT AVAILABLE TO THE ASSESSEE SINC E THE SAME WERE ADVANCED TO THE EMPLOYEES. ONCE THE ASSESSING OFFICER HELD THAT THE AMOUNT WAS SPENT TOWARDS ADVANCES TO THE EMPLOYEES, AGAIN MAKING THE ADDITION ON THE SAME CO UNT WOULD AMOUNT TO DOUBLE ADDITION WHICH IS NOT POSSIBLE. A CCORDINGLY, DELETION OF ADDITION BY THE CIT(A) IS JUSTIFIED AND WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS DISMISSED IN ITA NO. 417/HYD/2012. 33. TO SUM UP, REVENUE APPEALS IN ITA NOS. 1637 TO 1641 / HYD/2011, 1802/HYD/2011 AND 417/HYD/2012 ARE PARTLY ALLOWED. IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 18 34. THE NEXT GROUND IN ASSESSEE'S APPEAL IN ITA NO. 164 7/ HYD/2011 IS THAT THE CIT(A) ERRED IN UPHOLDING THE A DDITION OF RS. 60 LAKHS WITH RESPECT TO SRI A. MADHUSUDANA NA IDU U/S. 69C OF THE ACT. 35. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE MADE A PAYMENT OF RS. 1.2 CRORES TO SRI MADHUSUDANA NAIDU FOR DEVELOPMENT OF LAND. SRI MADHUSUDANA NAIDU HAD ENT ERED INTO AN AGREEMENT WITH THE ASSESSEE TO DEVELOP A PARTICU LAR LAND FOR A CONSIDERATION OF RS. 1.25 CRORES OUT OF WHICH SRI MADHUSUDANA NAIDU APPEARS TO HAVE RECEIVED RS. 1.20 CRORES FROM THE ASSESSEE COMPANY. OUT OF RS. 1.20 CRORES, THE ASSE SSING OFFICER OBSERVED THAT ONLY RS. 60 LAKHS WAS ENTERED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND BALANCE AMOUNT WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. THE RECEIPT OF RS. 1.20 C RORES WAS CONFIRMED BY SRI MADHUSUDANA NAIDU IN HIS SWORN STA TEMENT. THEREFORE, THE ASSESSING OFFICER MADE THE ADDITION OF RS. 60 LAKHS U/S. 69C OF THE ACT AS THE ASSESSEE HAS NOT FU RNISHED NECESSARY DETAILS REGARDING PAYMENT OF THIS MONEY. ON APPEAL, THE CIT(A) CONFIRMED ORDER OF THE ASSESSING OFFICER . AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 36. THE LEARNED AR SUBMITTED THAT BOTH ASSESSING OFFICE R AND CIT(A) RELIED ONLY ON THE SWORN STATEMENT OF SRI MA DHUSUDANA NAIDU AND THERE IS NO EVIDENCE TO SHOW THAT THE AS SESSEE HAS PAID RS. 1.20 CRORES. THE AGREEMENT WAS UNILATERAL LY SIGNED BY SRI MADHUSUDANA NAIDU AND NO PERSON ON BEHALF OF TH E ASSESSEE COMPANY SIGNED THE SAID AGREEMENT. BEING SO, THAT AGREEMENT CANNOT BE BINDING ON THE ASSESSEE. FURTHER HE SUB MITTED THAT IN THE CASE OF SRI MADHUSUDANA NAIDU FOR A.Y. 2008- 09, THE SAME CIT(A) VIDE HIS ORDER DATED 12.8.2011 OBSERVED IN PARA 5.1 OF HIS ORDER THAT SRI MADHUSUDANA NAIDU HAD CONTRAC T WORK ONLY FOR RS. 60 LAKHS AND ANOTHER RS. 60 LAKHS IS FOR EV ICTION OF IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 19 ENCROACHERS. THE LAND IS BELONGING TO SMT. CHITTOO R MUNAMMA AND RS. 60 LAKHS WAS PAID TO THE ENCROACHERS ON BEH ALF OF THE LAND OWNERS AND THE SAID AMOUNT WAS TO BE FINALLY A DJUSTED FROM THE PURCHASE COST TO BE PAID TO LAND OWNERS BY M/S. M.G. BROTHERS AUTOMOBILES PVT. LTD. BEING SO, SRI MADHU SUDANA NAIDU HAD A CONTRACT WORK OF RS. 60 LAKHS ONLY. TH E ASSESSING OFFICER HAS NOT ASCERTAINED THE FACT THAT THE SAID AMOUNT OF RS. 60 LAKHS IS NOT PAID TO THE ENCROACHERS. THEREFORE , IN THE ABSENCE OF THAT FINDING FROM THE ASSESSING OFFICER S SIDE, IT CANNOT BE SAID THAT THE ASSESSEE (SRI MADHUSUDANA N AIDU) CLAIM FOR HAVING PAID TO THE ENCROACHERS IS FALSE, ON THE STRENGTH OF THAT ORDER OF THE CIT(A). ACCORDING TO THE AR, IT CANNOT BE SAID THAT THE ASSESSEE HAS PAID ANOTHER RS. 60 LAKHS OVE R AND ABOVE RS. 60 LAKHS PAID BY CHEQUE. 37. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E ABOVE ARGUMENT OF THE AR HAS NO MERIT. IT IS ONLY DUE TO SEARCH AND SEIZURE OPERATION, THE ENTIRE TRANSACTION CAME TO LIGHT. SRI MADHUSUDANA NAIDU HAS NEVER FILED ANY RETURN OF INC OME FOR A.Y. 2008-09. ONLY AFTER THE SEARCH OPERATION, HE HAS ADMITTED IN HIS RETURN OF INCOME A SUM OF RS. 60 LAKHS THAT WAS STATED TO HAVE BEEN PAID BY CHEQUE. AS PER THE AGREEMENT A P ART OF THE TRANSACTION WAS ACTED UPON WHEREAS THE REMAINING WA S NOT ADMITTED BY BOTH THE PARTIES. DURING THE COURSE OF EXAMINATION OF SRI MADHUSUDANA NAIDU, HE HAS CATEGORICALLY ADMI TTED THAT HE HAS RECEIVED RS. 60 LAKHS IN CASH AND RS. 60 LAK HS BY CHEQUE. ACCORDING TO THE DR, THE ASSESSEE HAS EVEN NOT ADMI TTED THE PAYMENT OF RS. 60 LAKHS THOUGH IT IS EVIDENCED BY C OPY OF TDS CERTIFICATE. 38. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. AN ADDITION OF RS. 60 LAKHS IS MADE ON ACCOUNT OF AN AGREEMENT SIGNED BY SRI MADHUSUDANA NAIDU FOR IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 20 DEVELOPMENT OF THE PROJECT NAMED AS MGB ENCLAVE AT CHIGURUVADA. AS PER THIS AGREEMENT THE TOTAL CONTR ACT VALUE IS RS. 1.25 CRORES. THE ASSESSEE HAS PAID RS. 60 LAKH S BY CHEQUE WHICH WAS DULY ACCOUNTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. AS PER THE ASSESSING OFFICER, AS STATED BY SRI MADHUSUDANA NAIDU, THE ASSESSEE ALSO PAID A SUM OF RS. 60 LAKHS BY WAY OF CASH WHICH WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER HEREIN MADE AN ADDITION OF RS. 60 LAKHS TOWARDS UNACCOUNTED INV ESTMENT BY THE ASSESSEE. FURTHER THE ASSESSING OFFICER MADE A NOTHER ADDITION OF RS. 60 LAKHS ON THE REASON THAT THERE W AS NO TDS ON PAYMENT OF MONEY TO SRI MADHUSUDANA NAIDU. IN OTHE R WORDS, THE ASSESSING OFFICER MADE A TOTAL ADDITION OF RS. 1.20 CRORES ON THIS COUNT. IT IS AN ADMITTED FACT THAT THE AGREEM ENT ENTERED ON 17.6.2007 BY THE ASSESSEE WITH SRI MADHUSUDANA NAID U FOR THE DEVELOPMENT OF MGB ENCLAVE IS AN UNSIGNED DOCUMENT. THE ASSESSEE DENIED THE CONTRACT AMOUNT AT RS. 1.25 CRO RES AND STATED THAT THE CONTRACT IS ONLY OF RS. 60 LAKHS. IT IS ALSO ON RECORD IN THE STATEMENT RECORDED FROM SRI MADHUSUDA NA NAIDU IN ANSWER TO QUESTION NOL. 29 WHICH READS AS FOLLOW S: Q. 29: ONCE AGAIN I QUESTION YOU REGARDING THE PAYM ENT OF CASH OF RS. 60,00,000 FOR WHICH ENDORSEMENTS HAVE BEEN MADE ON THE REAR SIDE OF THE AGREEMENT. YOU HAVE SIGNED THE ACCEPTANCE OF MONEY IN THE PRESENCE OF TWO WITNESSES SHRI PRABHAKAR NAIDU AND SHRI D. RAJA REDDY. DO YOU CONFIRM THE RECEIPT OF PAYMENT? ANS.: YES. I CONFIRM THE RECEIPT OF PAYMENT TO THE ENCROACHERS OF THE LAND AT CHIGURUVADA VILLAGE. THIS PROPERTY BELONGED TO CHITTOOR MUNAMMA AND THERE WERE QUITE A FEW DISPUTES IN IT. THE PROBLEM S ARE ALL CLEARED ON RECEIPT OF THIS COMPENSATION. 39. CONTRARY TO THIS SRI MADHUSUDANA NAIDU FILED AN AFF IDAVIT BEFORE THE CIT(A) DATED 11.6.2011 WHICH READS AS FO LLOWS: IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 21 'AFFIDAVIT I, ABBURI MADHUSUDHANA NAIDU S/O. A. DORASWAMY NAIDU, AGED 59 YEARS RESIDENT OF KAMMA KANDRIGA VILLAGE, GAJIREDDIPALLI POST, RAMACHANDRAPURAM MANDAL, CHITTOOR DISTRICT, DO HEREBY SOLEMNLY AFFIRM AND STATE ON OATH AS UNDER: I AM AN INCOME TAX ASSESSEE WITH PAN AQDPA9642D. I GAVE A SWORN STATEMENT ON 16.10.2008 BEFORE THE ADI, TIRUPATI. THEREIN I CONFIRMED THAT I PAID RS. 60.00 LAKHS (RS. SIXTY LAKHS) TO THE ENCROACHERS OF SMT. CHITTOR MUNEMMA LAND THAT IS BEING PURCHASED BY M/S. M.G. BROTHERS LTD. THE MONEY I PAID BELON GS TO SMT. C. MUNEMMA ONLY. IT IS NEITHER BELONGS TO M E NOR TO M/S. M.G. BROTHERS LTD., UNLESS THE ENCROACHERS VACATE THE LAND CANNOT BE PURCHASED BY THE M.G. BROTHERS LTD. UNLESS THE M.G. BROTHERS L TD. PURCHASES, THE MONEY FOR PAYMENT TO EVICT THE ENCROACHERS IS NOT AVAILABLE TO SMT. C. MUNEMMA. HENCE IN THESE CIRCUMSTANCES, I STOOD AS A MEDIATOR TO RELEASE THE MONEY IN INSTALMENTS AND SEE THAT IT IS UTILIZED PROPERLY TO PAY THE ENCROACHERS ONLY. THUS THIS AMOUNT HAS FORMED PART OF MY WORK CONTRACT AGREEMENT. AS I HAVE ALREADY STATED IN THE ABOVE SWORN STATEMENT, MY CONTRACT WORK IS ONLY FOR RS. 60.00 LAKHS. I HAVE ALREADY FILED MY RETURN OF INCOME FOR THIS WORK. ON THE RESPECTIVE PAYMENT DATES I.E. 25.6.2007 RS. 25.00 LAKHS AND RS. 15.00 LAKHS AND ON 5.7.2007 RS. 20.00 LAKHS IN ALL COMING TO RS. 60.00 LAKHS WAS PAID BY CASH AND THE SAME WAS RECEIVED BY ME ON THOSE OCCASIONS FROM SMT. C. MUNEMMA ONLY. I, THE DEPONENT ABOVE NAMED, DO HEREBY VERIFY AND DECLARE THAT THE CONTENTS OF THIS AFFIDAVIT ARE TRU E AND CORRECT TO THE BEST OF MY KNOWLEDGE AND BELIEF; NO PART OF IT IS FALSE AND NOTHING MATERIAL HAS BEE N CONCEALED THERE FROM VERIFIED AT TIRUPATI ON THIS 10TH DAY OF JUNE, 2011 SOLEMNLY, SINCERELY AFFIRMED AND SIGNED BEFORE ME ON THIS 11 TH DAY OF JUNE ,2011. 40. IT IS ALSO ON RECORD THAT THE ASSESSEE FILED A LETT ER BEFORE THE CIT(A) ON 14.6.2011 AS FOLLOWS: IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 22 'FROM DT: 14/06/2011 M.G. BROTHERS AUTOMOBILES PRIVATE LIMITED NO. 1/683, COOP. HOUSE BUILDING, YEMMIGANUR, KURNOOL DISTRICT TO THE COMMISSIONER OF INCOME TAX (APPEALS)-VII, AAYAKAR BHAVAN, HYDERABAD. DEAR SIR, SUB: FILING OF FURTHER EVIDENCE AND SUBMISSIONS- APPEAL - REG. REF: PAN: AABCM3712D, A.Y. 2008-09. WE SUBMIT THE FOLLOWING INFORMATION/EVIDENCE FOR YO UR KIND CONSIDERATION FOR THE ASST. YEAR 2008-09. REG ARDING THE ADDITION MADE BY THE ASSESSING OFFICER FOR THE PAYMENTS MADE TO SRI A. MADHUSUDANA NAIDU, WE FURTH ER STATE AS FOLLOWS. THE FIRST RS. 60.00 LAKHS IS TOWA RDS THE CONTRACT ALLOTTED TO HIM TO EXECUTE THE LAND DEVELO PMENT WORK, WHICH FACT IS NOT DISPUTED BY HIM OR BY US. REGARDING THE SECOND RS. 60.00 LAKHS THE ASSESSING OFFICER IS RELYING ON THE SWORN STATEMENT OF SRI A. MADHUSUDHANA NAIDU. WE WOULD LIKE TO DRAW THE ATTENTION OF THE LEARNED CIT (APPEALS) THAT NEVER T HE ADI, ASKED ABOUT THE SOURCE OF THIS MONEY. IT IS MERELY ASKED WHETHER HE HAS PAID IT OR NOT. HE AGREED FOR THE SA ME. THE FACT IS THAT THE SOURCE OF MONEY IS SMT. C. MUN EMMA, THE LAND SELLER TO M/S. M.G. BROTHERS PVT. LTD. TO THIS EFFECT HE IS NOW COMING FORWARD TO CONFIRM BY WAY OF AN AFFIDAVIT WHICH IS HEREWITH ENCLOSED IN ORIGINAL. A S THE NATURE OF PAYMENT IS TO ENCROACHERS, IT IS BUT NATU RAL THAT THE LAND OWNER FOR GETTING THE LAND VACATED HAS ASS URED THE COMPANY THAT SHE WILL UTILIZE THE PART PAYMENT OF THE SALE PROCEEDS ONLY FOR THIS PURPOSE. KINDLY TAKE THIS ON RECORD. THANKING YOU, END: AS ABOVE YOURS FAITHFULLY, SD/- FOR M.G. BROTHERS AUTOMOBILES PVT. LTD.' IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 23 41. FURTHER THERE WAS ALSO AN AGREEMENT BROUGHT ON RECO RD WHICH IS PLACED PAGE NOS. 252 TO 253 PB I WHEREIN T HE ASSESSEE ENTERED INTO DEVELOPMENT AGREEMENT WITH SRI MADHUSU DANA NAIDU ON 20.6.2007 FOR DEVELOPMENT OF PROPERTY FOR RS. 60 LAKHS. IT IS ALSO BROUGHT ON RECORD THAT THE CIT(A) IN THE CASE OF SRI MADHUSUDANA NAIDU VIDE ORDER DATED 12.8.2011 FO R A.Y. 2008-09 ACCEPTED THE PLEA OF SRI MADHUSUDANA NAIDU THAT CONTRACT WAS ONLY FOR RS. 60 LAKHS AND RS. 60 LAKHS IS FOR EVICTION OF ENCROACHERS. THE CIT(A)S ORDER IS PLA CED AT PAGE NOS. 234 TO 238 OF ASSESSEES PAPER BOOK-I. BEING SO, CONSIDERING ALL THESE FACTS, WE ARE NOT IN A POSITI ON TO HOLD THAT THE ASSESSEE HAS PAID RS. 60 LAKHS IN CASH TO SRI M ADHUSUDANA NAIDU VIDE UNSIGNED AGREEMENT DATED 17.6.2007 FOUND DURING THE COURSE OF SEARCH ACTION. FURTHER WE ALSO MAKE IT CLEAR THAT THE STATEMENT RECORDED FROM SRI P. MOHANA, MANAGER OF THE ASSESSEE FIRM NOR OF SRI MADHUSUDANA NAIDU CANNOT B E CONCLUSIVE EVIDENCE UNLESS IT IS SUPPORTED BY CORRO BORATIVE MATERIAL. THE STATEMENTS WERE RECORDED BY THESE TWO PERSONS ON THE BASIS OF UNSIGNED AGREEMENT WHICH WAS NOT AC TED UPON. BEING SO, IT IS NOT POSSIBLE TO HOLD THAT THE ASSES SEE HAS PAID ANY MONEY OVER AND ABOVE RS. 60 LAKHS WHICH WAS PAI D BY CHEQUE. ACCORDINGLY, THIS GROUND OF THE ASSESSEE I S ALLOWED. 42. THE NEXT GROUND IN ITA NO. 296/HYD/2012 IS WITH REGAR D TO NON-GRANTING OF RELIEF TO THE ASSESSEE IN RESPEC T OF THE ADDITION MADE ON ACCOUNT OF CASH SEIZED DURING THE SEARCH OPERATION AT RS. 51,87,159. 43. BRIEF FACTS OF THE ISSUE ARE THAT DURING THE COURSE OF SEARCH ACTION ON 25.7.2008 A TOTAL CASH OF RS. 60,1 0,400 WAS FOUND AT THE OFFICE PREMISES OF REAL ESTATE DIVISIO N OF THE ASSESSEE LOCATED AT 146, PRAKASAM ROAD, TIRUPATI O UT OF WHICH RS. 60 LAKHS WAS SEIZED. IN ADDITION TO THIS, AN A MOUNT OF RS. IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 24 8,87,050 WAS SHOWN TO BE CASH FOUND AT THE REAL EST ATE DIVISION OF NELLORE BRANCH OF THE ASSESSEE COMPANY AND RS. 2 LAKHS WAS FOUND AT THE BANK LOCKER BELONGING TO SRI M.R. GANG ADHAR. WHILE MAKING THE ADDITION, THE ASSESSING OFFICER TR EATED A SUM OF RS. 51,87,159 AS UNEXPLAINED CASH AFTER GIVING C REDIT TO THE AVAILABLE CASH IN THE BOOKS OF ACCOUNT AT RS. 8,23, 241 OUT OF RS. 60,10,400 FOUND. WHILE MAKING THE SAID ADDITION, T HE ASSESSING OFFICER RELIED ON CERTAIN DOCUMENTS NOTABLY PAGE NO S. 70 & 71 OF ANNEXURE A/MGBRE/TPT/01, SEIZED DURING THE COURSE O F SEARCH PROCEEDINGS, APART FROM THE STATEMENT RECORD ED FROM MR. P. MOHANA, THE MANAGER OF THE COMPANY ON 25.7.2008 . SEIZED MATERIAL PAGE NOS. 70 & 71 OF ANNEXURE A/MGBRE/TPT/01, INDICATING THE REQUIREMENTS OF FUNDS FOR PURCHASE O F LAND AT PUDIPATLA VILLAGE ALONG WITH THE SOURCES FOR MOBILI ZATION OF THE CASH FOR SUCH PAYMENTS, AND THE ASSESSING OFFICER H AS DRAWN THE INFERENCES AS REGARDS TO THE CASH FOUND ON THE DAY OF SEARCH WITH REFERENCE TO THE CASH AVAILABLE IN THE BOOKS O F ACCOUNT OF THE COMPANY, REPRESENTED BY ITS VARIOUS BRANCHES/DIV ISIONS. IN THE COURSE OF THE ASSESSMENT, THE ASSESSING OFFICER HAS DISBELIEVED THE EXPLANATION DT. 12.9.2008 MADE BY T HE ASSESSEE BEFORE THE ADIT (LNV.), TIRUPATI AND THE WRITTEN EX PLANATION BEFORE THE ASSESSING OFFICER VIDE LETTER DT. 11.11. 2010 AND TREATED THE DIFFERENCE BETWEEN THE CASH FOUND AND C ASH AS PER CASH BOOK AT TIRUPATI, AS UNEXPLAINED CASH U/S 69A O F THE IT ACT, 1961 AND ASSESSED THE SAME AS THE INCOME OF TH E ASSESSEE COMPANY. 44. BEFORE THE CIT(A), THE ASSESSEE HAS TAKEN OBJECTION S TO THE ABOVE ADDITION UNDER THE HEAD 'UNEXPLAINED CASH', A ND THE MAIN CONTENTION OF THE ASSESSEE WAS THAT THE ASSESSING O FFICER FAILED TO CONSIDER THE FACT THAT THE TRANSFER OF CASH BY V ARIOUS BRANCHES OF THE COMPANY AT NELLORE TO TIRUPATI WAS ALREADY ACCOUNTED FOR, ON THE DAY OF TRANSFER AS SUPPORTED BY A IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 25 VOUCHERS AND CASH BOOKS OF VARIOUS BRANCHES, WHICH WERE THOROUGHLY EXAMINED BY THE ASSESSING OFFICER FOR TR ANSFER OF CASH WITH THE EXTRACTS OF THE CASH BOOK OF BRANCHES AT NELLORE TAKEN BY THE ADIT (LNV.) AND ITS TEAM OF INSPECTORS , ON 25.7.2008. IT WAS ALSO CONTENDED BY THE ASSESSEE TH AT CASH OF RS. 56,00,000 WAS TRANSFERRED FROM NELLORE BRANCH T O TIRUPATI BRANCH THROUGH MR. P. MOHANA ON 24.7.2008, CARRIED PHYSICALLY BY CAR FOR WHICH THE TOLLGATE RECEIPTS AND RELATED VOUCHERS/BILLS OF EXPENDITURE FOR HIS STAY AT NELLORE WERE FURNISH ED BUT NOT CONSIDERED BY THE ASSESSING OFFICER. AS THE TOLLGA TE RECEIPTS AND VOUCHERS OF EXPENSES FORMS THE CIRCUMSTANTIAL A ND LOGICAL EVIDENCE, WITH THE ENTRIES IN CASH BOOK WERE EXAMIN ED BY THE ASSESSING OFFICER WITH REFERENCE TO THE AVAILABILIT Y OF CASH BALANCES AS REQUIRED TO BE TRANSFERRED TO TIRUPATI BRANCH AND EXPLAINED FROM THE EXTRACT OF THE CASH BOOKS OF NEL LORE BRANCHES, THERE IS NO ROOM FOR THE ASSESSING OFFICE R TO TREAT THE CASH FOUND AT TIRUPATI BRANCH, AS UNEXPLAINED CASH. IT WAS ALSO CONTENDED BY THE ASSESSEE THAT THOUGH THE CASH WAS TRANSFERRED ON 24.7.2008 ITSELF, THE ENTRIES IN THE BOOKS COULD BE MADE ONLY ON 27.7.2008 SINCE THE SEARCH PROCEEDINGS THAT COMM ENCED ON 25.7.2008 WERE CONTINUED TILL 26.7.2008, 45. IT WAS STATED BY THE ASSESSEE THAT EVEN AFTER PRODU CING THE EVIDENCE BY TIRUPATI MANAGER, THE ASSESSING OFFICER HAS TREATED IT AS UNEXPLAINED CASH. IT WAS ALSO SUBMITTED THAT ON THE SAME DAY OF SEARCH, SEARCH PARTY VISITED NELLORE BRANCH AND HAVE VERIFIED PHYSICAL CASH BALANCE WITH BOOK BALANCE WH ICH WAS TALLIED AND KEEPING THAT ASIDE, THE CONCLUSIONS WER E DRAWN AND ADDITIONS MADE WHICH NEED TO BE DELETED. SINCE IT WAS ADDITIONAL GROUND BEFORE THE CIT(A), THE MATTER WAS REFERRED TO THE ASSESSING OFFICER WHEREIN THE ASSESSING OFFICER WAS REQUESTED TO FURNISH THE DOCUMENTARY EVIDENCE AS RE GARD TO THE RECONCILIATION OF STATEMENT OR COPY OF EXTRACT OF B OOKS OF IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 26 ACCOUNTS OR COPY OF THE STATEMENTS RECORDED U/S 132( 4) AND 133A AT VARIOUS BRANCHES OF THE ASSESSEE COMPANY FO R THE NEEDED RECONCILIATION OF THE CASH FOUND AND THE CAS H BALANCE WITH CASH BOOKS IN NELLORE BRANCHES. IN RESPONSE T O THE SAME, THE ASSESSING OFFICER (ACIT, CENTRAL CIRCLE, TIRUPA TI) HAS FURNISHED THE REPORT DT. 14.11.2011, WHICH RUNS AS UNDER: 'IN THIS CONNECTION, THE ASSESSEE COMPANY DID NOT PRODUCE ANY ADDITIONAL EVIDENCE. IT HAS SIMPLY RESUBMITTED THE EXPLANATION THAT WAS SUBMITTED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAS DISCUSSED TH IS ISSUE ELABORATELY IN THE ASSESSMENT ORDER FOR THE A Y 2009-10 AT PAGE NOS. 6 TO 13, COUNTERING THE ARGUMENTS OF THE ASSESSEE AND ALSO GAVE REASONS FOR ADDITION OF RS. 51,87,159, ALONG WITH DOCUMENTARY PROOF EXTRACTED FROM THE SEIZED MATERIAL, WHEREVER APPLICABLE. IN THIS CONNECTION, A COPY OF THE SWORN STATEMENT RECORDED UNDER SEC. 132(4) OF THE IT ACT, 1961 FROM SRI P. MOHANA, MANAGER OF M/S. M.G. BROTHERS AUTOMOBILES PVT. LTD IS SUBMITTED HEREWITH , AS CALLED FOR, VIDE REFERENCE CITED.' 46. THE FINDINGS/OBSERVATIONS OF THE ASSESSING OFFICER THROUGH THE ASSESSMENT ORDER AND REMAND REPORT AND THE SUBMISSIONS OF THE ASSESSEE WERE CONSIDERED BY THE CIT(A). HE OBSERVED THAT THE ASSESSEE COMPANY ENGAGED ACTIVELY IN THE BUSINESS OF REAL ESTATE, IN ADDITION TO THE REGULAR BUSINESS OF AUTOMOBILES COVERING TRACTORS, TWO WHEELERS AND DEA LERSHIP OF TATA MOTORS, BEING OPERATED FROM TIRUPATI, KURNOOL, CHITTOOR, AND NELLORE AND ON THE DAY OF SEARCH OPERATIONS LAU NCHED ON THE EVENING OF 25.7.2008, A TOTAL CASH OF RS. 60,10 ,400 WAS FOUND AT TIRUPATI, OUT OF WHICH AN AMOUNT OF RS. 60 ,00,000 WAS SEIZED, SINCE THE CASH FOUND WAS NOT TALLYING WITH THE AMOUNTS REFLECTED IN THE BOOKS OF ACCOUNTS OF THE COMPANY. ON THE DAY OF SEARCH, STATEMENT WAS RECORDED FROM ONE MR. P. M OHANA, MANAGER OF THE COMPANY WHEREIN RELEVANT QUESTIONS W ERE PUT TO HIM AS REGARDS TO THE SOURCES FOR THE CASH FOUND IN THE MANAGING DIRECTOR'S CABIN AT REAL ESTATE DIVISION O F THE COMPANY IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 27 LOCATED AT PRAKASAM ROAD, TIRUPATI AND AS PER HIS S TATEMENT, AN AMOUNT OF RS. 60,00,000 WAS CARRIED BY HIM FROM NEL LORE TO TIRUPATI ON THE NIGHT OF 24.7.2008, BEING THE CASH GIVEN/HANDED OVER BY SRI M.R. GANGADHAR, THE MANAGING DIRECTOR O F THE COMPANY AT THE HEAD OFFICE IN NELLORE. BUT BASED ON THE INFORMATION IN THE BOOKS OF COMPANY, MORE SPECIFICA LLY, THE CASH BOOK WHICH WAS WRITTEN UP TO 24.7.2008 AND AS PER THE ENTRIES UPDATED ON THE DAY OF SEARCH BASED ON THE R ELEVANT DOCUMENTS, THE CASH BALANCE WAS ARRIVED AT RS. 8,23 ,241. ACCORDINGLY, THE UNEXPLAINABLE CASH WAS ARRIVED AT RS. 51,87,159, AFTER GIVING CREDIT FOR THE BALANCES AS PER CASH BOOK, WHICH HAS BEEN TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY, WHILE PASSING THE ASSESSMENT ORDER. 47. THE MAIN CONTENTION/DISPUTE ARISEN ON THIS ISSUE IS THE SOURCE FOR THE CASH FOUND IN THE COURSE OF SEARCH & SEIZURE PROCEEDINGS WHICH HAS BEEN QUANTIFIED BY THE ASSESS ING OFFICER AT RS. 51,87,159 AS UNEXPLAINED CASH, WITH REFERENC E TO THE ENTRIES IN THE CASH BOOK OF REAL ESTATE DIVISION OF THE COMPANY AT TIRUPATI, WHERE THE PHYSICAL CASH OF RS. 60,10,4 00 WAS FOUND ON THE DAY OF SEARCH. AS PER THE ASSESSING OFFICER, THE ENTIRE AMOUNT OF RS. 51,87,159 REPRESENTS UNEXPLAINED CASH SINCE THERE IS NO EVIDENCE FOR THE AVAILABILITY OF THE CA SH FOR THE COMPANY EITHER AT TIRUPATI OR AT OTHER BRANCHES OR NO DIRECT INDICATION FOR TRANSFERRING OF CASH FROM OTHER BRAN CHES TO TIRUPATI. WHILE EXPLAINING THE SOURCE FOR THE CASH FOUND, THE ASSESSEE FELL ON THE CIRCUMSTANTIAL/CORROBORATIVE EV IDENCE IN THE FORM OF TOLLGATE FEE PAID FOR THE CAR THAT WAS SHOWN TO HAVE BEEN USED BY MR. P. MOHANA, THE MANAGER FOR CARRYIN G THE CASH FROM NELLORE TO TIRUPATI. THE TOLLGATE RECEIPT IS S HOWN TO HAVE BEEN THE PART OF THE SEIZED MATERIAL AT PAGE NOS. 4 3 TO 46 OF ANNEXURE A/MGBRE/TPT/01. HOWEVER, WHILE EXPLAINING THE SOURCES FOR THE CASH FOUND, THE ASSESSEE HAS TAKEN DIFFERENT IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 28 STAND AT DIFFERENT TIMES NOTWITHSTANDING THE CONTEN TS OF THE SWORN STATEMENT OF MR. P. MOHANA, WHEREIN IT WAS CA TEGORICALLY STATED THAT MD OF THE COMPANY MR. M.R. GANGADHAR HA S HANDED OVER A CASH OF RS. 60,00,000 TO MR. P. MOHANA AT NE LLORE ON 24.7.2008 WHICH WAS STATED TO HAVE BEEN CARRIED TO TIRUPATI ON THE SAME NIGHT. WHILE SUBMITTING THE STATEMENT OF T HE AFFAIRS RELATED TO THE SAME ISSUE, BEFORE THE ADIT (LNV.), TIRUPATI, IT WAS STATED THAT AN AMOUNT OF RS. 65,08,000 WAS THE CASH BALANCES AVAILABLE FOR THE COMPANY WITH ITS VARIOUS BRANCHES /DIVISIONS (7 IN NUMBER) LOCATED AT NELLORE AND TIRUPATI, OUT OF WHICH AN AMOUNT OF RS. 12,88,000 RELATED TO MGB REAL ESTATE, NELLORE AND LEAVING AN AMOUNT OF RS. 9,08,000 PERTAINING TO THE SAID REAL ESTATE DIVISION AT NELLORE, THE BALANCE OF RS. 56,0 0,000 WAS SHOWN TO HAVE TRANSFERRED TO TIRUPATI ON THE NIGHT OF 24.7.2008. THE BALANCE OF RS. 4,00,000 (RS. 60.10 LAKHS - RS. 56.00 LAKHS) STATED TO BE THE AMOUNT REPRESENTING THE UNEXPLAINE D CASH TO BE OFFERED IN THE HANDS OF THE COMPANY FOR AY 2009- 10. THE SAME ASSESSEE WHILE SUBMITTING BEFORE THE ASSESSING OFFICER, VIDE THE EXPLANATION DT. 11.11.2010, SUBMITTED THA T THE TOTAL OF BALANCES AVAILABLE AT THE SAID 7 BRANCHES/DIVISIONS AT NELLORE WAS RS. 56.00 LAKHS AND WAS TRANSFERRED TO TIRUPATI . THUS, THE UNEXPLAINED CASH OF RS. 4.10 LAKHS (RS. 60.10 LAKHS RS. 56.00 LAKHS) STATED TO BE UNEXPLAINED CASH OF MR. M.R. GA NGADHAR AND THE SAME WOULD BE OFFERED AS UNEXPLAINED INCOME OF SRI M.R. GANGADHAR FOR AY 2009-10. 48. THUS, THE ASSESSEE'S STATEMENT FOUND TO BE VARYING AND INCONSISTENT ON THESE REASONS BY THE ASSESSING OFFI CER: (I) THE SUBMISSIONS DEVIATED FROM THE STATEMENTS OF MR. P. MOHANA, AS REGARDS TO THE QUANTUM OF AMOUNT TRANSFERRED FROM NELLORE TO TIRUPATI, AS WELL AS TH E SOURCES FOR POOLING THE SAID AMOUNTS AT NELLORE. IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 29 (II) THE BALANCE OF THE AMOUNTS (RS. 4.10 LAKHS), AFTER TAKING CREDIT FOR THE AMOUNTS SHOWN TO HAVE TRANSFERRED FROM NELLORE (RS. 56.00 LAKHS) WAS SHOW N ONCE AS THE UNACCOUNTED INCOME OF THE ASSESSEE AND AT THE OTHER TIME, IT WAS SHOWN AS THE AMOUNTS BELONGI NG TO MR. M.R. GANGADHAR, MANAGING DIRECTOR OF THE COMPANY. (III) WHILE PASSING THE ENTRIES IN CASH BOOK AT TIRUPATI FOR HAVING TRANSFERRED THE CASH, THE AMOUNT WAS PUT AT RS. 52.00 LAKHS OUT OF WHICH RS. 4.00 LAKHS STATED TO B E RELATED TO THE BANGALORE BRANCH, WHICH IS ALTOGETHE R A NEW ANGLE IN THE EXPLANATION. (IV) WHILE EXPLAINING BEFORE THE ASSESSING OFFICER DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FELL ON THE STAND THAT THE CASH BALANCES AVAILABLE WITH VARIOUS BRANCHES AND DIVISIONS OF THE COMPANY INCLUDING THE BRANCHES AT TIRUPATI WERE THE SOURCES FOR THE CASH FOUND AT TIRUPATI BUT THE SAID STAND WAS ALMOST ABANDONED SUBSEQUENTLY. 49. ON THE OTHER HAND, THE ASSESSING OFFICER INSTEAD OF RECONCILING THE CASH BALANCES AS PER THE CASH BOOKS OF VARIOUS BRANCHES, AS ON THE DATE OF SEARCH, FOR ARRIVING AT THE EXACT AND CORRECT CASH AVAILABLE TO THE COMPANY WITH REFERENC E TO THE CASH FOUND AS ON THE DATE OF SEARCH, WAS REFERRING TO TH E SEIZED MATERIAL WHEREIN CERTAIN NOTINGS WERE MADE REFERRIN G TO THE AMOUNTS AVAILABLE AND THE CASH BALANCES REQUIRED FO R THE COMPANY FOR PAYMENT OF CONSIDERATION FOR PURCHASE O F LAND LOCATED AT PUDIPATLA VILLAGE. PAGE NOS. 70 & 71 ARE THE TWO VITAL DOCUMENTS, REFERRED BY THE ASSESSING OFFICER, WHICH WERE IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 30 SHOWN TO BE INDICATING THE FIGURES OF SUCH REQUIREM ENT, AND ARE ILLUSTRATED AS UNDER; PAGE NO. 70 OF A/MGBRE/TPT/01 MD SIR 51,00,000 FROM KURNOOL 20,00,000 CASH IN HAND 8,00,000 CASH AT BANK 2.64,000 CHEQUES PENDING 4,00,000 EXPECTED COLLECTIONS BEFORE REGN. 15,00,000 ------------------ 1,00,64,000 BALANCE REQ. FOR PAYMENT 1,15,86,000 ------------------ AS COULD BE SEEN, THERE IS NO INDICATION OF THE DAT ES AS REGARDS TO THE ENTRIES INDICATED ON THIS PAGE OF THE SEIZED MATERIAL. PAGE NO. 71 OF A/MGBRE/TPT/0L DATE 24.07.08 TO HON'BLE MD SIR, FUNDS POSITION IN TIRUPATI BRANCH AS ON 24.07.08. CASH IN HAND 6.73 CASH AT BANK 23.50 CASH 13.44 TOTAL CASH 43.67 FUNDS REQUIRED FOR LANDLORD PAYMENT CASH 58.00 CHEQUE 95.00 153.00 109.33 REQUIRED P. MOHANA 50. WHILE DRAWING THE INFERENCES FROM THE CONTENTS OF T HE SAID SEIZED MATERIAL, THE ASSESSING OFFICER HAS ARR IVED AT THE FOLLOWING CONCLUSIONS; (I) SRI P. MOHANA IN HIS SWORN STATEMENT DT. 25.7.2008 HAD STATED THAT HE HAD RECEIVED RS. 58,00,000 PREVIOUS DAY I.E., ON 24.7.2008 FROM SRI M.R. GANGADHAR AND ENTRY WITH MENTION OF THE AMOUNT OF IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 31 RS. 58,00,000 AT PAGE NO.71 OF A/MGBRE/TPT/01 WHICH ALSO SUBSTANTIATES THAT RS. 58,00,000 WAS RECEIVED FROM SRI M.R. GANGADHAR. (II) THE AMOUNT OF RS. 8,00,000 (BEING THE CASH IN HAND) AT PAGE NO.70 OF A/MGBRE/TPT/01, EXACTLY COINCIDES WITH THE CASH AVAILABILITY IN CASH BOOK, PROVIDED B Y THE ASSESSEE TO EXPLAIN THE SOURCES. (III) THE INFORMATION AT PAGE NO. 70 OF A/MGBRE/TPT/OL MENTION THAT FUNDS WERE TO BE TRANSFERRED FROM KURNOOL WHICH DOES NOT MENTION ANYTHING ABOUT OTHER DIVISIONS SPECIALLY THE OTHER DIVISION AT NELLORE, WHICH PROVES THAT NO CASH WAS TRANSFERRED PHYSICALLY FROM NELLORE AS PER THE CLAIM OF THE ASSESSEE COMPANY. 51. BASED ON THE ANALYSIS OF THE INFERENCES DRAWN BY TH E ASSESSING OFFICER, IT CLEARLY INDICATES THAT INSTEA D OF VERIFYING WITH THE ENTRIES OF CASH BOOKS, THE ASSESSING OFFIC ER HAS SIMPLY RESORTED TO THE SURMISES AND PRESUMPTIONS BA SED ON THE SCATTERED INFORMATION FOUND IN THE SEIZED MATERIAL AND THE SAID ANALYSIS FURTHER INDICATES THAT THE SAID INFERENCES BY THE ASSESSING OFFICER DO NOT ESCAPE FROM THE INCONSISTE NCIES OR CONTRADICTIONS, AS COULD BE EXPLAINED/NARRATED AS U NDER; (I) THE AMOUNT THAT MENTIONED TO HAVE BEEN RECEIVED BY MR. P. MOHANA FROM THE MD OF THE COMPANY AT NELLORE WAS INDICATED AT RS. 60,00,000, VIDE HIS STATEMENT DT. 25.7.2008, AND NOT RS. 58,00,000 AS INFERRED/INDICAT ED BY THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER. (II) THE AMOUNT OF RS. 8,00,000 INFERRED TO BE THE CASH ON HAND WHICH STATED TO BE TALLIED WITH THE CASH BALAN CE AS PER BOOKS, WHICH WAS TAKEN AS BASIS FOR EXPLAINI NG IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 32 THE CASH FOUND, HAS BEEN TAKEN FROM THE SEIZED MATERIAL (PAGE NO. 70 OF A/MGBRE/TPT/01) WHERE DATE WAS NOT MENTIONED AND IN CASE OF SEIZED MATERIAL WHERE THE DATE OF 24.7.2008 WAS MENTIONED (PAGE NO. 71 OF ANNEXURE A/MGBRE/TPT/01), THE CASH IN HAND WAS PUT AT RS. 6.73 LAKHS AS AGAINST THE BOOK BALAN CE OF RS. 8.23 LAKHS. (III) RECONCILIATION OF THE CASH FOUND PHYSICALLY AS AGAI NST THE BALANCES OF CASH BOOKS OF VARIOUS BRANCHES, WIT H REFERENCE TO THE DATE OF SEARCH, WAS NOT CARRIED OU T, WITH SUCH BOOKS OF ACCOUNTS WERE IMPOUNDED ONLY AFTER FOUR MONTHS OF SEARCH. SUCH RECONCILIATION WA S ALSO NOT MADE IN THE REMAND REPORT IN SPITE OF THE SPECIFIC REQUEST. 52. UNDER THE CIRCUMSTANCES AND BASED ON THE FACTS AND INFORMATION THAT HAVE BEEN BROUGHT ON THE RECORD, T HE CIT(A) CONCLUDED THAT THE BASIS ADOPTED BY THE ASSESSING OFFICER LACKS CLARITY IN ARRIVING AT THE CONCLUSION AS REGARDS TO THE UNEXPLAINED NATURE AND SOURCE OF CASH FOUND IN THE SEARCH PROCEEDINGS. SIMILARLY, THE STAND TAKEN BY THE ASSE SSEE ALSO PLAGUED BY THE INCONSISTENCIES WHEREBY LOSING THE CREDIBILITY OF THE EXPLANATION OFFERED FOR THE CASH FOUND ON THE DAY OF SEARCH. THE MAIN STAND OF THE ASSESSEE IS TH AT THE AMOUNT OF RS. 56,00,000, WAS FLOWN FROM NELLORE TO TIRUPATI BY ROAD IN A CAR ,ACCOMPANIED BY MR. P. MOHANA ON T HE PREVIOUS NIGHT OF THE DAY OF SEARCH, REPRESENTS THE MAJOR PORTION OF CASH FOUND AT REAL ESTATE DIVISION OF TH E COMPANY AT TIRUPATI, ON THE DAY OF SEARCH AND IN-TURN IS EXPLA INABLE THROUGH THE CASH BALANCES AVAILABLE WITH VARIOUS BRANCHES/D IVISIONS OF THE COMPANY LOCATED AT NELLORE. BUT THE ANALYSIS O F THE CASH BALANCES AVAILABLE FOR THE COMPANY AT NELLORE REVEA LS THE IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 33 FOLLOWING INFORMATION WITH REGARD TO THE AVAILABILI TY OF CASH FOR THE COMPANY, TO BE TRANSFERRED TO TIRUPATI ON THE D AY BEFORE THE DAY OF SEARCH. DIVISION CASH AS PER CASH BOOK PHYSICAL CASH I) REAL ESTATE 31,28,207 8,87,050 II) BAJAJ TWO WHEELERS 3,62,303 77,483 III) TATA CARS 2,31,053 33,980 IV) TAFE TRACTORS 5,63,104 2,65,834 TOTAL 42,84,669 12,64,347 DIFFERENCE 30,20,322 53. ACCORDING TO THE CIT(A), AS COULD BE SEEN FROM THE ABOVE TABLE, ONLY A CASH OF RS. 12,64,347 WAS AVAILABLE F OR THE ASSESSEE COMPANY, PHYSICALLY AT NELLORE, FROM ALL T HE BRANCHES AND DIVISIONS PUT TOGETHER AS AGAINST THE CASH BALA NCE AS PER CASH BOOKS TO THE TUNE OF RS. 42,84,669, ON THE DAY OF SEARCH, THEREBY SHOWING A DEFICIT BALANCE OF RS. 30,20,322. THIS IS THE AMOUNT, WHICH THE ASSESSEE WAS TRYING TO EXPLAIN AS THE SOURCE OF THE CASH FOUND AT TIRUPATI, SINCE THE ASSESSEE A LL ALONG WAS SUBMITTING THAT SOURCE FOR CASH FOUND AT TIRUPATI W AS THE CASH TRANSFERRED FROM THE HEAD OFFICE LOCATED AT NELLORE AND TO EXPLAIN SUCH TRANSFER THE ASSESSEE WAS RELYING ON T HE TOLLGATE RECEIPT AS A CORROBORATIVE PROOF. WHILE FILING THE WRITTEN SUBMISSIONS DT. 14.6.2011, THE ASSESSEE WAS FORCEFU LLY EXPLAINING THAT CASH WAS POOLED FROM THE DIFFERENT DIVISIONS OF NELLORE BRANCH, BEFORE TRANSFER TO TIRUPATI ON 24.7 .2008. 54. THE CIT(A) OBSERVED THAT THE EXPLANATION OF THE ASS ESSEE THAT THE CASH WAS POOLED FROM THE VARIOUS DIVISIONS /BRANCHES AT NELLORE IS TO BE CORRECT, IT IS TIME TO EXAMINE THE REAL CASH AVAILABLE FOR THE ASSESSEE COMPANY AS ON THE DATE O F SEARCH AT NELLORE. AS PER THE STATEMENT ON THE CASH BALANCES OF VARIOUS BRANCHES/ DIVISIONS OF NELLORE, AS ON THE DATE OF S EARCH, INDICATE THE DEFICIT BALANCE OF RS. 30,20,322, BEIN G THE IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 34 DIFFERENCE BETWEEN THE PHYSICAL CASH AVAILABLE AND THE CASH AS PER THE BOOKS WHICH CAN BE ASSUMED THAT THE SAID CA SH WAS TRANSFERRED TO TIRUPATI FOR MAKING THE PAYMENTS TO THE LANDLORD FOR PURCHASE OF LAND AT PUDIPATLA VILLAGE, WITH A F URTHER ASSUMPTION THAT ENTIRE CASH EQUIVALENT TO THE DEFIC IT BALANCE IN CASH WAS TRANSFERRED TO TIRUPATI, WILL NOT FULLY EX PLAIN THE CASH FOUND ON THE DAY OF SEARCH AT TIRUPATI. HOWEVER, I T IS A FACT THAT SUCH DEFICIT BALANCE OF THE CASH WHICH HAS BEEN IND ICATED AND ARRIVED AS ABOVE, WAS NOT AVAILABLE FOR THE ASSESSE E TO BE TRANSFERRED TO TIRUPATI, AS CERTAIN AMOUNTS TOTALLI NG AROUND RS. 20,38,427 WAS SHOWN TO HAVE BEEN ADVANCED TO THE EM PLOYEES, TOWARDS EXPENSES FOR WHICH THE BILLS ARE YET TO BE SUBMITTED AS ON THE DATE OF SEARCH, AND FOR THE SAID REASONS, TH E AMOUNT EQUIVALENT TO RS. 20,38,427 WAS REQUESTED TO BE TRE ATED AS CASH AVAILABLE WITH THE ASSESSEE PHYSICALLY. THIS EXPLA NATION WAS OFFERED BY THE ASSESSEE WHILE DEALING WITH THE SUBJ ECT OF THE ADDITION MADE UNDER THE HEAD 'UNEXPLAINED EXPENDITU RE', IN THE SAME ASSESSMENT ORDER. UNDER THE CIRCUMSTANCES, THE CIT(A) OBSERVED THAT THE REAL CASH AVAILABLE TO THE ASSESS EE AT NELLORE AS ON THE DATE OF SEARCH IS ONLY RS. 11,41,358 WHIC H HAS BEEN ARRIVED AS UNDER: BALANCES AVAILABLE AS PER BOOKS RS. 42,84,669 LESS : ACTUAL CASH FOUND RS. 12,64,347 RS. 30,20,322 L.ESS : ADVANCES GIVEN FOR EXPENSES RS. 18,78,964 RS. 11,41,358 =========== 55. FURTHER THE CIT(A) OBSERVED THAT EVEN ASSUMING THAT THE ENTIRE BALANCE OF RS. 11,41,358 WAS TRANSFERRED/CARR IED TO TIRUPATI, THE BALANCE AMOUNT OF CASH THAT CAN BE TR EATED AS UNEXPLAINED WOULD BE RS. 40,45,801. HOWEVER, THE A SSESSEE WAS TRYING TO EXPLAIN THAT AN AMOUNT OF RS. 56,00,0 00 WAS CARRIED FROM NELLORE TO TIRUPATI BY ROAD ON THE NIG HT OF 24.7.2008 WHICH MEANS THE SUBMISSION OF THE ASSESSE E IS NOT IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 35 FULLY RELIABLE AND AS SUCH DO NOT EXPLAIN THE AMOUN T OF RS. 51,87,159 WHICH WAS TREATED BY THE ASSESSING OFFICE R AS UNEXPLAINED CASH FOUND DURING THE SEARCH AT TIRUPAT I. IT IS ALSO THE FACT THAT THE BALANCE OF RS. 11,41,358 AS INDIC ATED TO BE THE AMOUNT AVAILABLE FOR THE ASSESSEE AT NELLORE ON 24. 7.2008, IS ARRIVED ON THE BASIS OF THE ASSUMPTION THAT CASH BA LANCES WERE POOLED FROM ALL THE BRANCHES WITHOUT ANY EXCEPTION. HOWEVER, THE FACT REMAINS THAT EXCEPT IN THE REAL ESTATE DIV ISION AT NELLORE, THE CASH BALANCES AVAILABLE WITH OTHER BRA NCHES WERE NOT REALLY BIG AMOUNTS TO BE TRANSFERRED ELSEWHERE. UNDER THE CIRCUMSTANCES, IT CAN BE SAFELY CONCLUDED THAT ACTU AL BALANCE AVAILABLE AT REAL ESTATE DIVISION OF NELLORE IS ONL Y TO THE EXTENT OF RS. 3,62,193, TO BE TRANSFERRED TO TIRUPATI, IF THE THEORY OF TRANSFER OF CASH FROM NELLORE TO TIRUPATI, TO BE BE LIEVED. THE SAID AMOUNT OF AVAILABLE CASH OF RS. 3,62,193 IS AR RIVED, AS UNDER: BALANCE AS PER BOOKS RS. 31,28,207 LESS: PHYSICAL CASH RS. 8,87,050 RS. 22,41,157 LESS: ADVANCE GIVEN FOR EXPENSES RS. 18,78,964* RS. 3,62,193 * THE AMOUNT OF RS. 20,38,427 WAS CORRECTED AND REDUCED TO RS. 18,78,964 ON ACCOUNT OF THE FACT THA T AN AMOUNT EQUIVALENT TO RS. 1,59,463 WAS SHOWN TO HAVE BEEN ADDED TWICE IN TOTALLING THE AMOUNT DUE TO DUPLICATION OF FEW BILLS. 56. HE OBSERVED THAT THE EXPLANATION OF THE ASSESSEE TH AT CASH HAS BEEN CARRIED BY ROAD TO TIRUPATI BECOMES REDUND ANT, ALONG WITH THE INFERENCES DRAWN BY THE ASSESSING OFFICER BASED ON THE FIGURES INDICATED IN CERTAIN SEIZED MATERIAL, AS DI SCUSSED. BASED ON THE ABOVE FINDINGS, IT WAS CONCLUDED THAT THE AS SESSEE VIRTUALLY DO NOT HAVE ANY ACCOUNTED/EXPLAINABLE CASH BALANCES AVAILABLE WITH HIM AT NELLORE, SO AS TO EXPLAIN THE CASH FOUND IN THE SEARCH AND AS SUCH THE ENTIRE ADDITION OF RS. 5 1,87,159 ON IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 36 ACCOUNT OF UNEXPLAINED CASH FOUND IN THE SEARCH PRE MISES, IS CONFIRMED BY CIT(A). AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 57. THE LEARNED AR SUBMITTED THAT THERE WAS A TRANSFER OF CASH BALANCE FROM VARIOUS DIVISIONS TO TIRUPATI DIV ISION AS FOLLOWS: SL. NO. PARTICULARS AMOUNT (RS.) REMARKS 1. REAL ESTATE, NELLORE 3,80,000 PB II PAGE 14 2. TAFE DIVISION 1,70,000 PB II PAGE 16 3. TATA CARS 16,00,000 PB II PAGE 18 4. BALAJI TWO WHEELERS 4,50,000 PB II PAGE 23 5. TATA COMMERCIAL VEHICLES 17,00,000 PB II PAGE 26 6. AQUA DIVISION 5,00,000 PB II PAGE 47 7. CASH BALANCE AVAILABLE AT TIRUPATI 8,23,241 TOTAL 56,23,241 THE TOTAL CASH FOUND IS RS. 60,10,400. EXCESS CASH IS RS. 3,87,159 (RS. 60,10,400 RS. 56,23,241). 58. HE SUBMITTED THAT AT THE FIRST INSTANCE ITSELF IN T HE COURSE OF SEARCH ACTION, THE MANAGER AT TIRUPATI BRANCH MR . MOHANA STATED THAT HE BROUGHT THE CASH FROM NELLORE. WITH IN A FEW HOURS, THE DEPARTMENT OFFICIALS HAVE VISITED NELLOR E BRANCH AND VERIFIED ALL THE CASH BOOKS OF THE DIVISION AND COM PARED PHYSICAL CASH BALANCE WITH THE BOOKS. ONE STAFF ME MBERS OF THE ASSESSEE MR. J. MALLESH HAS GIVEN A SWORN STATEMENT THAT THE PHYSICAL CASH BALANCE OF BAJAJ DIVISION IS HAVING R S. 77,483, CAR DIVISION RS. 33,980 AND TRACTOR DIVISION RS. 2,65 ,834 AND THE REAL ESTATE DIVISION IS HAVING RS. 8,87,050. ON TH E DATE OF SEARCH THE DEPARTMENT HAS TAKEN THE COPIES OF CASH BOOKS ACCORDING TO THE AR THE DEFICIT CASH BALANCE AT NEL LORE BRANCH WAS NOTHING BUT TRANSFER OF THE CASH TO TIRUPATI BR ANCH. HE SUBMITTED THAT THE TRANSFER OF CASH ENTRIES WAS MAD E ON 26.7.2008 AND THEREAFTER THE COPIES OF THE CASH BOO K WAS IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 37 OBTAINED BY THE DEPARTMENT ON THE SAME DAY, AS PER WHICH SUFFICIENT CASH BALANCE WAS AVAILABLE. WITH REGARD TO THIS HE DREW OUR ATTENTION TO THE RESPECTIVE CASH BOOK PAGE S AS NOTED IN PB NO. II IN PAGES 14, 16, 18, 26, 29 AND 47. 59. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORD ER OF THE CIT(A). 60. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN THIS CASE AS PER COPIES OF CASH BOO K FURNISHED BY THE ASSESSEE IN PASS BOOK-II IN PAGE NO. 14, 16, 18 , 26, 29 AND 47 THERE WAS CASH BALANCE IN VARIOUS DIVISIONS BELO NGING TO THE ASSESSEE. THE ASSESSEE TAKEN A PLEA THAT THE CASH BALANCES FROM OTHER DIVISIONS WAS TRANSFERRED TO THE TIRUPATI BRA NCH. WHEN REVENUE AUTHORITIES INSPECTED, PHYSICALLY THERE WAS A SHORTAGE OF CASH BALANCE IN OTHER DIVISIONS AND EXCESS BALAN CE IN THE TIRUPATI BRANCH AS COMPARABLE TO BOOKS. THE DEPART MENT IS NOT READY TO ACCEPT THE SHORTAGE IN VARIOUS DIVISIONS A ND ONLY TREATING THE CASH BALANCE IN TIRUPATI AS UNDISCLOSE D INCOME OF THE ASSESSEE WHICH IS NOT PROPER. THE DEPARTMENT W ANTS EVIDENCE FOR TRANSFER OF CASH BALANCE FROM OTHER DI VISIONS TO TIRUPATI DIVISION. THE DEPARTMENT IS DISBELIEVING TRANSFER OF CASH BALANCE FROM OTHER DIVISIONS TO TIRUPATI. IN OUR OPINION IT IS NOT CORRECT AS THE DEPARTMENT IS NOT HAVING ANY MATERIAL TO SHOW THAT THE ASSESSEE HAS MADE ANY UNDISCLOSED INV ESTMENT OR EXPENDITURE OUT OF CASH BALANCES APPEARING IN THE B OOKS OF ACCOUNT OF THE OTHER DIVISIONS. IT WAS HELD IN THE CASE OF MS. AISHWARYA K. RAI VS. DCIT (104 ITD 166) (TM) (MUM) THAT WHEN THE ASSESSEE EXPLAINED THE CASH FOUND AT THE TIME O F SEARCH OR THE CASHBOOK WHICH WAS PRODUCED BEFORE THE ASSESSIN G OFFICER AND THE WITHDRAWAL MADE BY THE ASSESSEE FROM THE BA NK A/C. IN THE PAST, THE EXPLANATION CANNOT BE REJECTED AND TH E CASH CANNOT BE TREATED AS UNDISCLOSED INCOME. BEING SO DUE CREDIT IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 38 HAS TO BE GIVEN TOWARDS SHORTAGE OF CASH BALANCE SO AS TO CONSIDER THAT THE SAME CASH BALANCE HAS BEEN TRANSF ERRED TO TIRUPATI DIVISION. ACCORDINGLY, WE DIRECT THE ASSE SSING OFFICER TO GIVE CREDIT TO THE SHORTAGE FOUND IN OTHER DIVIS IONS TO SET OFF OF EXCESS BALANCE FOUND AT THE TIRUPATI DIVISION. THIS GROUND IS ALLOWED. 61. THE NEXT GROUND IN ITA NO. 296/HYD/2012 IS THAT THE CIT(A) ERRED IN CONSIDERING THE TOTAL VALUE OF LAND PURCHASED AT TIRUPATI FOR RS. 5.13 CRORES AS AGAINST PURCHASE VA LUE OF LAND AT TIRUPATI AT RS. 2.93 CRORES THEREBY UPHOLDING ADDIT ION OF RS. 2.20 CRORES. 62. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSING OFF ICER MADE AN ADDITION OF RS. 4 CRORES AS UNACCOUNTED INVESTME NT BY THE ASSESSEE IN PURCHASE OF LAND LOCATED AT PUDIPATLA V ILLAGE FROM M/S. VSN JEEVAN INFRA & DEVELOPERS REPRESENTED BY TH E MANAGING PARTNER MR. N. PURUSHOTHAM NAIDU. WHILE M AKING THE ADDITION, THE ASSESSING OFFICER CONSIDERED THE VALU E OF 9.5 ACRES AT RS. 5.13 CRORES BASED ON THE FIGURES REFLECTED I N THE SEIZED MATERIAL AS REDUCED BY THE AMOUNT OF RS. 1.13 CRORE S FOR WHICH SAID LAND WAS REGISTERED SUBSEQUENTLY. WHILE DETER MINING THE ADDITION OF RS. 4 CRORES, THE ASSESSING OFFICER ALS O RELIED UPON THE CORROBORATIVE EVIDENCES FOUND IN THE COURSE OF SEARCH PROCEEDINGS SUCH AS RECEIPT FOR PAYMENT MADE TO THE LANDLORD ON VARIOUS DATES IN CASH. THE ASSESSING OFFICER AL SO RELIED ON THE STATEMENT RECORDED FROM SRI P. MOHANA, MANAGER OF THE ASSESSEE COMPANY WHO EXPLAINED THE NATURE AND CORRE CTNESS OF THE CONTENTS OF THE SEIZED MATERIAL RELIED UPON BY THE ASSESSING OFFICER. ON APPEAL, THE CIT(A) SUSTAINED THE ADDIT ION OF RS. 2.2 CRORES OUT OF RS. 4 CRORES. AGAINST THIS THE ASSES SEE IS IN APPEAL BEFORE US. IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 39 63. THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFICER BASED HIS ARGUMENTS ON THE SEIZED MATERIAL PAGE NO. 70 OF A/MGBRE/ TPT/01 WHICH WAS THE ROUGH PAPER WORKING AND NOT SIGNED BY ANYONE TO QUANTIFY THE AMOUNT OF UNACCOUN TED INVESTMENT OF RS. 4,00,00,000, AS THE DIFFERENCE BE TWEEN RS. 5.13 CRORES AND RS. 1.13 CRORES, FOR 9.5 ACRES OF L AND @ RS. 54.00 LAKHS PER ACRE, WHEREAS THE LAND PURCHASED IS ONLY 8.5 ACRES AND REGISTERED FOR RS. 1.13 CRORES. THE AR A LSO SUBMITTED THAT FIGURES OF RS. 3.70 CRORES TREATED AS UNACCOUN TED PAYMENTS MADE FOR THE PURCHASE OF LAND, TILL THE DATE OF SEA RCH IS WRONG FOR THE REASON THAT THE ASSESSING OFFICER WAS INCON SISTENT IN STATING THAT THE ACCOUNTED AMOUNT FOR PURCHASE OF L AND WAS SHOWN AS RS. 1.27 CRORES AND SOMETIMES RS. 85 LAKHS , WHEREAS THE AMOUNT ACTUALLY REGISTERED FOR IS ONLY RS. 1.13 CRORES. IT IS ALSO SUBMITTED THAT THE AMOUNT OF RS. 3.70 CRORES S HOWN TO HAVE BEEN PAID UP TO 22.7.2008, INCLUDE THE AMOUNTS OF RS. 1.80 CRORES WHICH WAS ALREADY ADMITTED BY THE ASSESSEE C OMPANY AS ITS UNACCOUNTED INCOME IN FILING THE RETURNS OF INC OME FOR AY 2008-09 & 2009-10 AND RS. 1.90 CRORES REPRESENTING THE AMOUNT MENTIONED IN A RECEIPT DT. 6.4.2008 WHICH WAS NOT S IGNED BY THE SELLER OF THE LAND. ACCORDINGLY, THE ASSESSEE SUBM ITTED THAT THE ABOVE TWO AMOUNTS NEEDED TO BE EXCLUDED FROM QUANTI FYING THE UNACCOUNTED INVESTMENT/ CONSIDERATION AND PLEADED F URTHER THAT THE AMOUNT OF ADDITION OF RS. 3.70 CRORES NEED S TO BE DELETED, SINCE RS. 1.80 CRORES WAS OFFERED AS INCOM E AND RS. 1.90 CRORES REPRESENT THE AMOUNT MENTIONED IN AN UN SIGNED RECEIPT. 64. IT WAS SUBMITTED BY THE AR THAT THE LAND PURCHASED WAS ONLY 8.5 ACRES @ RS. 25 LAKHS PER ACRE, WHICH COMES TO RS. 2,12,50,000, WHEREAS AN AMOUNT OF RS. 2.93 CRORES W AS ADMITTED BY THE ASSESSEE COMPANY WHICH CONSISTS OF AN AMOUNT OF RS. 1.13 CRORES BEING THE AMOUNT FOR WHICH THE L AND WAS IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 40 REGISTERED AND RS. 1.80 CRORES REPRESENTS THE UNACC OUNTED INCOME AS ADMITTED BY THE ASSESSEE FOR TWO ASSESSME NT YEARS 2008-09 AND 2009-10. 65. THE LEARNED DR SUBMITTED THAT THE ASSESSEE COMPANY ENTERED INTO AN AGREEMENT WITH M/S. VSN JEEVAN INFR A & DEVELOPERS FOR PURCHASE OF LAND TO AN EXTENT OF 9.5 ACRES LOCATED AT SURVEY NO. 377, 378, 379 & 380 OF PUDIPA TLA VILLAGE FOR A CONSIDERATION OF RS. 5.13 CRORES @ RS. 54.00 LAKHS PER ACRE. THE FIRST INSTALMENT OF RS. 10,00,000 WAS SHOWN TO HAVE BEEN MADE ON 26.3.2008 AND THE REGISTRATION OF THE LAND WAS SHOWN TO HAVE BEEN MADE SUBSEQUENT TO THE DATE OF SEARCH REGISTERED FOR AN AMOUNT OF RS. 1.13 CRORES, FOR 8.5 ACRES OF LAND. THE EVIDENCE RELIED UPON BY THE ASSESSING OFFICER ARE P AGE NO. 70 OF A/MGBRE/TPT/01 DT. 25.7.2008, WHICH HAS BEEN SCANNED A ND MADE PART OF THE ASSESSMENT ORDER BY THE ASSESSING OFFICER WHEREIN IT HAS BEEN CLEARLY INDICATED THE EXTENT OF THE LAND, ALONG WITH RATES FOR EACH ACRE OF LAND, TOTAL CONSI DERATION WITH CERTAIN AMOUNTS ALREADY PAID AS ON DATE OF SEARCH, THOUGH THE EXACT DATE OF THE TRANSACTIONS WERE NOT INDICATED O N THE SAID PAGE OF THE LOOSE SHEET. THE OTHER EVIDENCES RELIED UPON BY THE ASSESSING OFFICER ARE THE RECEIPTS ISSUED BY THE SE LLER OF LAND AND THE DETAILS OF SUCH RECEIPTS ARE AS UNDER WHICH INDICATE THE DATE, AMOUNTS, AND THE PAGE NUMBER IN THE SEIZED AN NEXURES. ETC. S. NO. DATE AMOUNT (IN RS.) LOOSE SHEET & ANNEXURE (OF SEIZED MATERIAL) 1. 26.03.2008 10,00,000 LOOSE SHEET NO. 60 OF A/MGBRE/TPT/01 2. 06.04.2008 1,90,00,000 LOOSE SHEET NO. 10 OF A/MGBRE/TPT/05 3. 16.05.2008 10,00,000 LOOSE SHEET NO. 59 OF A/MGBRE/TPT/01 4. 28.05.2008 54,00,000 LOOSE SHEET NO. 58 OF A/MGBRE/TPT/01 5. 16.06.2008 25,00,000 LOOSE SHEET NO. 57 OF A/MGBRE/TPT/01 6. 19.06.2008 21,00,000 LOOSE SHEET NO. 56 OF A/MGBRE/TPT/01 7. 22.07.2008 60,00,000 LOOSE SHEET NO. 61 OF A/MGBRE/TPT/01 IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 41 66. THE DR SUBMITTED THAT THE RECEIPT MENTIONED AT SERI AL NO.(II), FOR AN AMOUNT OF RS. 1,90,00,000, WAS NOT SIGNED BY ANYONE AND AS SUCH WAS NOT ACCEPTED BY THE ASSESSEE TO BE HIS UNACCOUNTED INCOME WHEREAS THE RECEIPT NUMBERS (I) & (III) TO (VII) WERE ACCEPTED BY THE ASSESSEE FOR HAVING PAID THE AMOUNTS TOWARDS THE PURCHASE OF THE LAND AND AS SUCH ADMITT ED THE AMOUNT REPRESENTED BY SUCH RECEIPTS AS UNACCOUNTED INCOME PERTAINING TO AY 2008-09 [RS. 10,00,000 REPRESENTED BY RECEIPT AT SERIAL NO.(I)] AND FOR A.Y. 2009-10 [RS. 1,70,00 ,000 REPRESENTED BY RECEIPTS AT SERIAL NO. (III) TO (VII )], BASED ON THE DATES OF THE RECEIPTS FOR PAYMENTS. 67. REGARDING THE AMOUNT OF RS. 1,90,00,000 REPRESENTED BY THE RECEIPT DT. 6.4.2008 WHICH IS DISPUTED BY THE A SSESSEE FOR ACCEPTING THE SAME AS THE UNACCOUNTED PAYMENTS MADE FOR THE PURCHASE OF LAND AT PUDIPATLA, IT MAY BE RELEVANT T O REFER TO THE CORROBORATIVE EVIDENCES AS BROUGHT ON RECORD IN THE FORM OF: (A) STATEMENT OF MR. P. MOHANA REGARDING THE RATE AT WH ICH LAND WAS PURCHASED, EXTENT OF LAND PURCHASED, THE AMOUNTS PAID AND THE BALANCES PAYABLE AS ON THE DAT E OF SEARCH. (B) PAGE NO. 70 OF ANNEXURE A/MGBRE/TPT/0L WHERE THE INFORMATION REGARDING THE AREA OF LAND, RATE AND TO TAL CONSIDERATION WERE MENTIONED ALONG WITH THE AMOUNTS PAID (RS. 3,70,00,000) TILL A PARTICULAR DATE, WHIC H IN ALL PROBABILITY UP TO THE DATE OF 22.7.2008 FOR WHICH T HE AMOUNT OF RS. 60,00,000 SHOWN TO HAVE BEEN PAID VID E THE SIGNED RECEIPT DT. 22.7.2008, WHICH WAS NOT DIS PUTED BY THE ASSESSEE. 68. THE DR SUBMITTED THAT THE CIRCUMSTANTIAL EVIDENCE I N THIS CASE IS PAGE NO. 70 OF ANNEXURE A/MGBRE/TPT/0L, WHER EIN THE IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 42 CONSIDERATION, RATE, AREA OF THE LAND, TOTAL CONSID ERATION AND OTHER DETAILS ARE MENTIONED. THE NEXT EVIDENCE IS T HE RECEIPT OF RS. 1,90,00,000 DT 6.4.2008, THOUGH UNSIGNED, CONTA INS ALL THE DETAILS SUCH AS THE SURVEY NUMBER OF LAND, EXTENT O F LAND, NAME OF THE BUYER, NAME OF THE SELLER, ETC. SINCE THE I NFORMATION/ EVIDENCE IN THE SAID UNSIGNED RECEIPT IS MATCHING W ITH THE MAJORITY OF THE INDICATIONS/INFORMATION RELATED TO T HE TRANSACTIONS, WHICH IS CLINCHING IN NATURE MAY HELP IN OVERCOMING THE HANDICAP OF 'NOT SIGNED BY ANYONE', AS CLAIMED BY THE ASSESSEE AND AS SUCH THE TRUE NATURE AND THE EVIDENTIAL VALUE OF THE INFORMATION EMBEDDED IN SUCH RECEIPT/EV IDENCE MAY HAS TO BE DETERMINED ON THE BASIS OF CIRCUMSTAN TIAL/ CORROBORATIVE EVIDENCES THAT IT PRESENTS. IN THIS CASE, THE RECEIPT DT. 6.4.2008, FOR PAYMENT OF RS. 1,90,00,00 0, DO HAVE ALL THE INDICATIONS EXCEPT THE SIGNATURE, TO MAKE IT A FULL FLEDGED EVIDENCE AS SUPPORTED BY THE CORROBORATIVE EVIDENCE IN THE FORM OF PAGE NO. 70 OF A/MGBRE/TPT/0L, WHEREIN THE OT HER RELATED DETAILS OF THE TRANSACTION ARE PROPERLY IND ICATED. ACCORDINGLY, THE EVIDENCE IN THIS CASE IS CLEARLY I NDICATING AGAINST THE ASSESSEE, ABLY SUPPORTED BY THE SEIZED MATERIAL FOUND IN THE SEARCH PROCEEDINGS. FURTHER, THE EXPL ANATIONS OFFERED BY THE ASSESSEE ARE INCOHERENT AS REGARD TO THE TOTAL CONSIDERATION FOR PURCHASE OF THE LAND IS CONCERNED . IN THIS CONTEXT, IT IS PERTINENT TO MENTION THAT WHILE FURN ISHING THE SUBMISSIONS DT. 10.08.2011, THE ASSESSEE WAS MERELY TAILING ON THE INCONSISTENCIES ARISEN ON ACCOUNT OF THE LOOSE ENDS PUT TOGETHER BY THE ASSESSING OFFICER WHEREAS IN THE SU BMISSIONS, IT WAS TRIED TO EXPLAIN THROUGH ANOTHER SET OF EXPLANA TION INDICATING THE RATE OF CONSIDERATION FOR PURCHASE W AS RS. 25 LAKHS PER ACRE AND THE ACTUAL CONSIDERATION WAS RS. 2,12,50,000 FOR 8.5 ACRES, AS AGAINST WHICH THE ASSESSEE CLAIME D TO HAVE ADMITTED THE INVESTMENT OF RS. 2,93,00,000, WITH AN AMOUNT OF IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 43 RS. 1.80 CRORES ADMITTED AS ADDITIONAL INCOME AND R S. 1.13 CRORES BEING THE CONSIDERATION FOR REGISTERING THE LAND. 69. THE DR SUBMITTED THAT BASED ON THE INFORMATION AVAI LABLE ON RECORD AND THE SUPPORTIVE EVIDENCES ON THE SUBJE CT MATTER UNDER REFERENCE, THE ACTUAL CONSIDERATION CAN BE QU ANTIFIED AT RS. 5,13,00,000 WITH THE UNACCOUNTED INVESTMENT IN SUCH PROPERTY QUANTIFIED AT RS. 4,00,00,000 BEING THE DI FFERENCE BETWEEN THE AMOUNT FOR WHICH IT WAS AGREED FOR PURC HASE AND AT WHICH IT WAS REGISTERED SUBSEQUENT TO THE DATE OF T HE SEARCH, BUT WELL WITHIN THE FINANCIAL YEAR ENDING 31.3.2009 . SINCE THE TRANSACTION IS COMPLETED DURING THE SAME FINANCIAL YEAR, THE ENTIRE AGREED CONSIDERATION WAS DEEMED TO HAVE BEEN PAID BEFORE REGISTRATION OF THE LAND AND THERE ARE NO AL TERNATIVE CLAIMS MADE BY THE ASSESSEE OR EVIDENCED IN ANY OTH ER FORM TO INDICATE THAT THE TOTAL CONSIDERATION WAS ON REDUCE D NOTE, ON ACCOUNT OF REDUCTION IN EXTENT OF LAND AREA AS WELL AS THE INCIDENCE OF THE SEARCH IN WHICH THE PROPOSED CASH FOR THE LAST INSTALMENT OF RS. 58.00 LAKHS WAS SEIZED BY THE DEP ARTMENT. 70. THE DR SUBMITTED THAT HAVING QUANTIFIED AND CONFIRM ED THE ACTUAL CONSIDERATION FOR PURCHASE OF LAND AT RS . 5,13,00,000 AND THE UNACCOUNTED PAYMENTS AT RS. 4,00,00,000. IT WAS POINTED OUT BY THE ASSESSEE ALL ALONG THAT THE LAND REGISTERED WAS 8.5 ACRES WHEREAS THE CONSIDERATION WAS DETERMI NED FOR 9.5 ACRES. IN THIS REGARD, IT WAS CLARIFIED IN THE ASS ESSMENT ORDER THAT THOUGH IT WAS AGREED TO PURCHASE THE LAND TO T HE EXTENT OF 9.5 ACRES @ RS. 54 LAKHS PER ACRE, ONLY 8.5 ACRES W AS REGISTERED, LEAVING A BALANCE OF 1 ACRE TO THE GRAM PANCHAYAT, WITHOUT ANY REDUCTION IN THE CONSIDERATION, AS AGREED UPON BY T HE ASSESSEE AND THE SELLER. THIS FACT WAS ALSO REFLECTED IN THE SEIZED MATERIAL AT PAGE NO. 70 OF A/MGBRE/TPT/01 WHICH WAS PRESUMED TO BE AS LATEST AS 22.7.2008 I.E., JUST THREE DAYS BEFORE THE DATE OF IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 44 SEARCH AND THE DATE FIXED FOR REGISTRATION OF THE L AND (I.E. 25.7.2008) AND AS PER THE RECEIPT DT. 22.7.2008, TH E AMOUNT OF RS. 60,00,000 WAS INCORPORATED IN THE TOTAL AMOUNT OF RS. 3,70,00,000 PAID, AS ON THE SAID DATE. REGARDING TH E DRAFT SALE DEED DT. 25.7.2008, IT MAY BE RELEVANT TO MENTION T HAT IT IS A DOCUMENT WHICH WAS PROPOSED TO BE REGISTERED WITH L OWER VALUE OF CONSIDERATION AND IT DOES NOT HAVE ANY RELEVANCE IN THE BACKGROUND OF THE ADMITTANCE OF ADDITIONAL CONSIDER ATION OVER AND ABOVE THE REGISTERED PRICE PAID BY THE ASSESSEE ITSELF. IT IS ALSO RELEVANT TO INDICATE THAT THE AMOUNT OF RS. 89 ,11,000 FOR WHICH IT WAS PROPOSED TO BE REGISTERED BY THE DRAFT SALE DEED, IS ALSO VARYING FROM THAT OF THE AMOUNT AT WHICH IT WA S ACTUALLY REGISTERED AT RS. 1,13,00,000. 71. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN THIS CASE THE CONTENTION OF THE DEPA RTMENT IS THAT THE TOTAL PAYMENT WAS TOWARDS 9.5 ACRES AT RS. 54 L AKHS PER ACRE WORKED OUT AT RS. 5.13 CRORES. THE ASSESSEES PLEA IS THAT THE PROPERTY HAS BEEN REGISTERED FOR A VALUE OF RS. 1.1 3 CRORES. THE DEPARTMENT IS RELYING ON THE LOOSE SHEETS FOUND DUR ING THE COURSE OF SEARCH FOR MAKING THIS ADDITION. IN OUR OPINION, LOOSE SHEETS DATED 6.4.2008 MARKED AS 10 OF A/MGBRE/TPT/05' SHOWS AN AMOUNT OF RS. 1.90 CRORES. THERE IS NO DI SPUTE THAT THIS IS AN UNSIGNED RECEIPT WHICH CANNOT BE ACTED U PON AND ALSO CANNOT BE RELIED UPON. FURTHER AFTER EXCLUDING RS. 1.90 CRORES FROM THE SEIZED MATERIAL, THE BALANCE AMOUNT LEFT O UT IS AT RS. 1.80 CRORES. THE ASSESSEE ADMITTED IN THE BOOKS OF ACCOUNT RS. 1,13,00,000 TOWARDS COST OF 8.5 ACRES OF PROPERTY W HICH WAS DULY REGISTERED AS PER DOCUMENT NO. 2556/2008 DATED 8 TH SEPTEMBER, 2008 WHICH IS PLACED ON RECORD AT PAGES 55-57 OF PAPER BOOK III (A.YS. 2008-09 AND 2009-10) (ENGLISH VERSION) AND PAGES 58-64 OF PAPER BOOK III AY 2009-10 (TELUGU VE RSION). IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 45 FURTHER THERE WAS VALID SEIZED MATERIAL AS BELOW RE FLECTED TOTALLING TO RS. 1.80 CRORES WHICH IS AS FOLLOWS: S. NO. DATE AMOUNT (IN RS.) LOOSE SHEET & ANNEXURE (OF SEIZED MATERIAL) 1. 26.03.2008 10,00,000 LOOSE SHEET NO. 60 OF A/MGBRE/TPT/01 2. 16.05.2008 10,00,000 LOOSE SHEET NO. 59 OF A/MGBRE/TPT/01 3. 28.05.2008 54,00,000 LOOSE SHEET NO. 58 OF A/MGBRE/TPT/01 4. 16.06.2008 25,00,000 LOOSE SHEET NO. 57 OF A/MGBRE/TPT/01 5. 19.06.2008 21,00,000 LOOSE SHEET NO. 56 OF A/MGBRE/TPT/01 6. 22.07.2008 60,00,000 LOOSE SHEET NO. 61 OF A/MGBRE/TPT/01 CONSIDERING ALL THIS, THE ASSESSEE OFFERED A SUM OF RS. 10 LAKHS AS UNDISCLOSED INCOME IN A.Y. 2008-09 AND RS. 1.70 CRORES A.Y. 2009-10 TOTALLING TO RS. 2,93,00,000 TOWARDS PURCHA SE COST OF 8.5 ACRES OF LAND. BEING SO, MAKING FURTHER ADDITI ON ON THIS COUNT IS NOT POSSIBLE AS THERE IS NO SEIZED MATERIA L REPRESENTING THE ADDITION. 72. FURTHER IT WAS ALSO BROUGHT ON RECORD THAT THE PROP ERTY SITUATED NEXT TO THE ASSESSEES PROPERTY WAS SOLD F OR THE SAME PRICE WHICH WAS PURCHASED BY SRI MANCHU MANOJ KUMAR S/O. SRI MANCHU MOHAN BABU, WHO PURCHASED 1.40 ACRES AT RS. 13.2 LAKHS PER ACRE WORKED OUT AT RS. 18.48 LAKHS ON 10 TH SEPTEMBER, 2008. CONSIDERING THIS, THE COMPARABLE CASE BROUGH T ON RECORD JUSTIFIES THE CLAIM OF THE ASSESSEE THAT THE ASSESS EE PURCHASED THE PROPERTY ON 15.7.2007 MEASURING 8.5 ACRES FOR A CONSIDERATION OF RS 1.13 CRORES AT A RATE OF RS. 13 .2 LAKHS PER ACRE. THE MARKET VALUE OF THE PROPERTY IS RA. 13.20 LAKHS PER ACRE. HOWEVER, THERE WAS EVIDENCE BROUGHT ON RECOR D BY THE ASSESSING OFFICER THAT TO THE EXTENT OF RS. 1.8 CRO RES TOWARDS ON-MONEY PAYMENT, TO THAT EXTENT THE ASSESSEE OFFER ED THE SAME FOR TAXATION AS UNDISCLOSED INCOME TWO ASSESSMENT Y EARS AS STATED EARLIER. THERE CANNOT BE ANY FURTHER ADDITI ON ON THIS COUNT. FURTHER WE RELY ON THE JUDGEMENT OF DELHI H IGH COURT IN THE CASE OF CIT VS. ANIL BHALLA (322 ITR 191) WHERE IN HELD AS UNDER: IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 46 'SEARCH AND SEIZURE WAS CARRIED OUT IN THE PREMISES OF THE ASSESSEE AND THE PREMISES OF A COMPANY OF WHICH THE ASSESSEE WAS A DIRECTOR. THE ASSESSING OFFICER MADE ADDITIONS UNDER THE HEAD OF UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE INCOME-TAX ACT, 1961. THE COMMISSIONER (APPEALS) AND THE TRIBUNAL EXAMINED THE ENTIRE EVIDENCE ON RECORD INCLUDING THE STATEMENTS MADE BY THE ASSESSE E IN THE PROCEEDINGS AS WELL AS BEFORE THE ASSESSING OFFICER AND THEN CAME TO THE CONCLUSION THAT THE ADDITIONS COULD NOT BE SUSTAINED IN THE ABSENCE OF ANY OTHER CORROBORATIVE EVIDENCE. THE COMMISSIONER (APPEALS) DELETED THE ADDITIONS AND THIS WAS CONFIRMED BY THE TRIBUNAL. ON APPEAL: HELD, DISMISSING THE APPEAL THAT THE FINDINGS ARRIV ED AT BY THE TRIBUNAL WERE PURE FINDINGS OF FACT AND D ID NOT WARRANT ANY INTERFERENCE BY THE COURT.' 73. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS ALLOWED . ADDITIONAL GROUNDS IN ITA NO. 296/HYD/2012: 74. THE FIRST ADDITIONAL GROUND IN ITA NO. 296/HYD/2012 IS THAT THE CIT(A) ERRED IN CONFIRMING A SUM OF RS. 1. 36 CRORES U/S. 69 OF THE ACT BEING TRANSACTION FOR LAND AT KURNOOL . 75. THE ASSESSEE FILED A PETITION EXPLAINING REASONS FO R NOT RAISING THIS GROUND ON EARLIER OCCASION AND SUBMITT ED THAT THE ADDITIONAL GROUND WAS NOT RAISED INADVERTENTLY ON E ARLIER OCCASION. HOWEVER, IT ARISES DIRECTLY OUT OF THE C IT(A) ORDER AND DOES NOT REQUIRE ANY INVESTIGATION INTO THE FACTS A ND PRAYED THAT THE ADDITIONAL GROUND BE ADMITTED. SIMILARLY, THE ASSESSEE RAISED THE SECOND ADDITIONAL GROUND THAT CASH SEIZE D OF RS. 60 LAKHS ON 25.7.2008 OUGHT TO HAVE BEEN ADJUSTED TOWA RDS ADVANCE TAX AS PER REQUEST MADE ON 22.12.2008 THERE BY REDUCING THE IMPOSITION OF INTEREST U/S. 234B OF THE ACT. THE ASSESSEE RAISED THE THIRD ADDITIONAL GROUND THAT CE RTAIN DIRECTION GIVEN BY THE CIT(A) IS UNWARRANTED. THE ASSESSEE IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 47 RELIED ON THE FOLLOWING JUDGEMENTS FOR ADMISSION OF THE ADDITIONAL GROUNDS: A) CIT V. PRUTHVI BROKERS AND SHAREHOLDERS P. LTD., 34 9 ITR 336 (BOM) B) KAILASHBEN MANHARLAL CHOKSHI VS. CIT, 328 ITR 411 ( GUJ) C) CIT VS. GANGAPPA CABLES LTD., 116 ITR 778 (AP) D) NATIONAL THERMAL POWER CO. LTD. VS. CIT, 229 ITR 38 3 (SC) E) CIT VS. MOHD IQBAL, 221 ITR 481 (MP) F) CIT VS. MAHALAKSHMI TEXTILE MILLS LTD., 66 ITR 710 (SC) G) JUTE CORPORATION OF INDIA LTD. VS. CIT(A), 187 ITR 688 (SC) H) RAJINDER NATH VS. CIT, 120 ITR 14 (SC) 76. AFTER GOING THROUGH THE REASONS ADVANCED BY THE ASS ESSEE COUNSEL FOR RAISING THE ADDITIONAL GROUND AND THAT THE ASSESSEE WAS INADVERTENTLY NOT RAISED THE ADDITIONAL GROUNDS ON EARLIER OCCASION, WE ARE CONVINCED ABOUT THE REASONS ADVANC ED. ACCORDINGLY, WE ADMIT THE ADDITIONAL GROUNDS FOR AD JUDICATION. 77. THE FIRST ADDITIONAL GROUND IS WITH REGARD TO CIT(A ) CONFIRMING A SUM OF RS. 1.36 CRORES U/S. 69 OF THE ACT BEING THE TRANSACTION OF LAND AT KURNOOL. 78. BRIEF FACTS OF THE ISSUE ARE THAT THE ADDITION OF R S. 1,36,00,000 WAS MADE ON ACCOUNT OF THE INVESTMENT B Y VIRTUE OF PURCHASE OF LAND AT KURNOOL BASED ON THE CONTENTS O F PAGE NO. 65 OF ANNEXURE A/MGBRE/TPT/03, WHICH IS NOTHING BUT AN AGREEMENT FOR PURCHASE OF ONE ACRE LAND AT KURNOOL FOR A CONSIDERATION OF RS. 1.36 CRORES, OUT OF WHICH IN A MOUNT OF RS. 50.00 LAKHS WAS SHOWN TO HAVE BEEN PAID AS ADVANCE WITH AN AMOUNT OF RS. 17.00 LAKHS PAID BY CHEQUE AND RS. 33 .00 LAKHS PAID IN CASH. THE SAID PAYMENTS WERE ALLEGED TO HAV E NOT BEEN ACCOUNTED IN THE BOOKS AND AS SUCH THE ENTIRE AMOUN T OF RS. 1.36 CRORES WAS TREATED AS UNACCOUNTED INVESTMENT U /S 69 OF THE IT ACT, 1961. 79. THE ASSESSEE OBJECTED TO THE ABOVE ADDITION WHILE SUBMITTING THAT A DOCUMENT REFERRED BY THE ASSESSIN G OFFICER IS ONLY A FAX MESSAGE OF THE DRAFT AGREEMENT NOT SIGNE D BY IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 48 ANYONE, THOUGH THE PART PAYMENT HAS BEEN GIVEN TOWA RDS PURCHASE OF THE LAND. IT WAS ALSO SUBMITTED THAT IT IS ONLY A PROPOSAL OF THE SELLER AND NO SUCH PURCHASE WAS MAT ERIALIZED BY 31.3.2009. IT WAS ALSO SUBMITTED BY THE ASSESSEE TH AT ASSESSING OFFICER HAS NOT ENQUIRED WITH THE SELLER TO KNOW TH E FACTS AND AN UNSIGNED LOOSE SHEET OF AGREEMENT CANNOT BE MADE THE BASIS FOR THE ADDITION. 80. FURTHER, THE ASSESSEE HAS FILED AN ADDITIONAL EVIDE NCE BEFORE THE CIT(A) IN THE FORM OF COPY OF THE REGIST ERED SALE DEED IN DOCUMENT NO. 10292/2010 DT. 1.12.2010 PERTAINING TO THE LANDS LOCATED AT SURVEY NO. 931 BY 1-1A, ADMEASURIN G AC. 2.40 GUNTAS LOCATED IN SUBURBS OF KURNOOL TOWN, THROUGH WHICH IT WAS SHOWN TO HAVE PURCHASED THE SAID LANDS FOR A TO TAL CONSIDERATION OF RS. 48 LAKHS FROM THREE PARTIES WH ICH ALSO COMPRISED THE LAND OF 1 ACRE, AS REFLECTED IN THE D RAFT AGREEMENT ENTERED WITH MR. B. CHANDRASHEKAR. SINCE THE INFORMATION FURNISHED BY THE ASSESSEE CONSTITUTED T HE ADDITIONAL EVIDENCE AS PER RULE 46A, THE SAME HAS B EEN REFERRED TO THE ASSESSING OFFICER BY THE CIT(A) AND THE REMA ND REPORT OF THE ASSESSING OFFICER (ACIT CENTRAL CIRCLE, TIRUPAT I) DT. 14.11.2011 ON THE SUBJECT IS AS UNDER: 'AN ADDITION OF RS. 1,36,00,000 WAS MADE TOWARDS UNEXPLAINED INVESTMENT IN PURCHASE OF LAND FROM SRI . B . CHANDRA SEKHAR BASING ON THE SEIZED DOCUMENT OF PAGE NA. 65 OF ANNEXURE A/MGBRE/TPT/3 WHICH CONTAINS THE DETAILS OF AN AGREEMENT BETWEEN THE ASSESSEE COMPANY AND SRI B. CHANDRA SEKHAR IN THE MONTH OF APRIL 2008. AS PER THE SEIZED DOCUMENT, THE ASSESSEE COMPANY HAS INTENDED TO PURCHASE 1 ACRE OF LAND SITUATED AT S. NO. 931/IA AF DWARAKA NAGAR FAR A CONSIDERATION OF 1.36 CRORES. AS THE SAID TRANSACTION WAS NOT REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE SAME WAS ADDED AS UNEXPLAINED INVESTMENT. THE ASSESSEE HAS PRODUCED THE ADDITIONAL EVIDENCE I N THE FORM OF REGISTERED SALE DOCUMENT NO. IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 49 10292/2010 DT. 01.12.2010 SAYING THAT THE LAND ADMEASURING 2.4 ACRES WHICH INCLUDES THE ABOVE SAID LAND WAS PURCHASED BY THE ASSESSEE COMPANY ONLY ON 01.12.2010 FOR A CONSIDERATION OF RS. 48,00,000 (@ RS. 20,00,000 PER ACRE). THUS, THE ASSESSEE CLAIMED THAT THE COMPANY HAS NOT INVESTED THE SUM OF RS. 1.36 LAKHS AS MENTIONED IN THE ASSESSMENT ORDER. THE EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE F OR THE FOLLOWING REASONS: (I) IT IS ONLY ON AFTER-THOUGHT THAT THE ASSESSEE HAS REGISTERED THE PURCHASE OF THE ABOVE SAID LAND ALONG WITH THE PIECE OF LAND THAT WAS MENTIONED IN THE SEIZED DOCUMENT FOR A FOR LESS RATE THAN THAT OF THE RATE MENTIONED IN THE SEIZED DOCUMENT TO MISLEAD THE DEPORTMENT. IT IS FURTHER PROVED BY THE FACT THAT THE MARKET VALUE OF THE SAID LAND AS MENTIONED IN THE REGISTERED SOLE DEED IS RS. 2,32,32,000 (@ RS. 2000 PER SQ. YARD FOR 11,616 SQ. YARDS I.E., 2.4 ACRES). THUS THE MARKET VALUE OF THE LAND WAS RS. 96,80,000 PER ACRE WHEREAS THE ASSESSEE HAS SHOWN THE PURCHASE COST AS RS. 20,00,000 PER ACRE WHICH IS VERY HARD TO BELIEVE. (II) THE ASSESSEE IN ITS SUBMISSION HAS STATED THAT IT HAS PAID ON AMOUNT OF RS. 17,00,000 AS ADVANCE BY WAY OF DD ON 19.4.2008 TOWARDS THE PURCHASE OF L ACRE OF LAND FOR RS. 20,00,000 . BUT AS SEEN FROM THE ASSESSMENT RECORDS, THE ABOVE ADVANCE PAID TO SRI. B. CHANDRA SEKHAR IS NOT REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FOR THE A.Y. 2009-10. (III) IT IS VERY HARD TO BELIEVE THAT THE ASSESSEE HAS PAID AROUND 85% (I.E. RS. 17,00,000) OF THE TOTAL CONSIDERATION (I.E., RS. 20,00,000 ) AS ADVANCE, THAT TOO, 32 MONTHS BEFORE THE REGISTRATION OF THE AGREEMENT BECAUSE IN THE REAL ESTATE BUSINESS, NORMALLY, AROUND 10-20% OF THE TOTAL CONSIDERATION IS PAID AS ADVANCE AND THE REMAINING AMOUNT IS PAID AT THE TIME OF REGISTRATION. (IV) THOUGH THE SALE WAS REGISTERED ON 01-12-2010 , THE ASSESSEE HAS NOT MENTIONED ABOUT THIS REGISTERED SALE DEED IN ITS REPLY DT. 03-12-2010 SUBMITTED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS.' IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 50 81. WHILE FURNISHING THE SUBMISSIONS WITH REFERENCE TO THE COMMENTS OF THE ASSESSING OFFICER IN THE REMAND REP ORT, THE ASSESSEE HAS SUBMITTED BEFORE THE CIT(A) VARIOUS DE TAILS SUCH AS THE EXTENT OF THE LAND, THE AMOUNT OF CONSIDERATION PAID FOR PURCHASE OF LANDS FROM SRI B. CHANDRASEKHAR, SMT. B . NAGAMANI AND SRI B. LAKSHMI NARAYANA. IT WAS ALSO SUBMITTED THAT THE MARKET VALUE OF THE LAND SHOWN AT RS. 96,80,000 PER ACRE ON 1.12.2010, AND WHEREAS THE MARKET VALUE OF SUCH LAN D AS ON 23.4.2008 I.E., AROUND THE DATE OF AGREEMENT WAS ON LY AT RS. 20,00,000 PER ACRE, VALUED AS A WHOLE, AND AS AN AG RICULTURAL LAND, WHICH WAS NOT DIVIDED INTO PLOTS AND THESE AS PECTS WERE SHOWN TO HAVE CLEARLY INDICATED IN THE MARKET VALUE CERTIFICATE. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THE SAID LAND WHICH WAS AN AGRICULTURAL LAND AS ON THE DATE OF AGREEMEN T WAS DEVELOPED INTO PLOTS AFTER CONVERSION OF THE SAME F ROM AGRICULTURAL LAND TO URBAN RESIDENTIAL LAND AND AS SUCH THE MARKET VALUE WAS INCREASED DRASTICALLY BY THE TIME THE ACTUAL REGISTRATION HAS TAKEN PLACE I.E., ON 1.12.2010. I T WAS ALSO SUBMITTED THAT THE POSSESSION WAS GIVEN BY THE SELL ERS BEFORE THE REGISTRATION AND AS PER THE PROVISIONS OF SEC. 2(47) OF THE IT ACT, 1961, THE TRANSACTION WAS COMPLETED WITH REFER ENCE TO THE SALE AGREEMENT OF APRIL 2008 AND AS SUCH CAPITAL GA INS WERE ALSO FURNISHED BY THE SELLERS OF THE LAND FOR AY 2009-10 . THE ASSESSEE ALSO RELIED ON THE FOLLOWING CASE LAWS, CI TING THE RATIOS OF THE DECISIONS AND STATING THAT THE LOOSE PAPERS FOUND DURING THE SEARCH HAVE NO VALIDITY UNLESS SUBSTANTIATED BY THE OTHER FACTS FOUND DURING THE SEARCH. (I) CIT VS KAILASHCHAND SHARMA, 198 ITR 201 (II) DCIT VS RADHE DEVELOPERS, 329 ITR 1 (III) CIT VS DIPLAST PLASTICS LTD., 327 ITR 399 (IV) CIT VS MAULIK KUMAR K. SHAH, 307 ITR 137 (V) CIT VS ATAM VALUES PVT. LTD., 184 TAXMAN 6 (VI) GYAN KUMAR AGARWAL VS ACIT, 60 DTR 241 IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 51 82. AS COULD BE SEEN FROM THE ASSESSMENT ORDER, THE SUBMISSIONS OF THE ASSESSEE AND THE REMAND REPORT O F THE ASSESSING OFFICER, THE FOLLOWING FACTS EMERGED ON T HE ISSUE: (I) THE AGREEMENT FOR SALE OF LAND OF 1 ACRE FROM MR. B . CHANDRASHEKAR, WAS ENTERED IN THE MONTH OF APRIL 2008. THOUGH IT WAS UNSIGNED AS APPEARED AT PAGE NO . 65 OF THE ANNEXURE A/MGBRE/TPT/03, SINCE IT WAS A FAX MESSAGE, THE SIGNATURE ON THE AGREEMENT WAS NOT SEE N, HAS ALL THE INFORMATION THAT ARE RELATED TO THE AGREEMENT FOR SALE, WHEREIN THE INFORMATION SUCH AS DETAILS OF THE PROPERTY, RATE PER ACRE, TOTAL CONSIDERATION, OTHER TERMS AND CONDITIONS SUCH AS PAYMENT SCHEDULES, DETAILS OF PAYMENTS ETC., ARE CLEARLY INDICATED. (II) THE AMOUNTS OF RS. 17.00 LAKHS PAID THROUGH DEMAND DRAFT DT. 19.4.2008 FORM THE CORROBORATIVE EVIDENCE IN THIS REGARD AND THE ASSESSEE FAILED TO EXPLAINTHE S AID AMOUNTS THROUGH THE BOOKS OF ACCOUNTS FOR THE FINANCIAL YEAR ENDING ON 31.3,2009. (III) THE LAND UNDER THE SUBJECT MATTER WAS REGISTERED SUBSEQUENTLY WHICH MEANS THE AGREEMENT FOR SALE WAS EXECUTED LATER, TO PRESUME ALL THE CONDITIONS OF TH E SAID AGREEMENT WERE COMPLIED WITH REFERENCE TO THE DRAFT AGREEMENT, INCLUDING THE AGREED CONSIDERATION OF RS. 1.36 CRORES. (IV) THE REGISTRATION OF THE PROPERTY AT A LOWER RATE I. E. RS. 20.00 LAKHS PER ACRE, AS IT APPEARS IS ONLY AN AFTERTHOUGHT OF THE ASSESSEE AND BY THE TIME THE WRITTEN SUBMISSIONS DT. 3.12.2010 MADE BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 52 PROCEEDINGS, THE INFORMATION REGARDING THE REGISTRA TION OF THE LAND WAS AVAILABLE BUT NO SUCH INFORMATION W AS FURNISHED BEFORE THE ASSESSING OFFICER. (V) THE CONSIDERATION PAID AS ADVANCE AGREED TO BE PAID WAS NOT ACCOUNTED IN THE BOOKS OF ACCOUNTS THEREBY INTENTIONS OF THE ASSESSEE WERE MADE CLEAR, WHICH W AS TO REDUCE THE COST OF SUCH INVESTMENT IN THE BOOKS OF ACCOUNTS. (VI) SINCE A PART OF THE INFORMATION AS PER THE DOCUMENT PROVED TO BE CORRECT, IT CANNOT BE FAIR TO PRESUME THAT THE OTHER PART OF THE INFORMATION IN THE SAME DOCUM ENT IS WRONG. (VII) IN NORMAL COURSE, NO ADVANCE AS HIGH AS 85% OF THE TOTAL CONSIDERATION ARE GIVEN FOR A TRANSACTION, AS SHOWN TO HAVE HAPPENED IN THIS CASE WHEREIN AN AMOUNT OF RS. 17.00 LAKHS (PAID THROUGH DEMAND DRAFT), WAS SHOWN TO BE THE ADVANCE AGAINST A TOTAL CONSIDERATION OF RS. 20.00 LAKHS FOR 1 ACRE OF LAND SUPPOSED TO BE PURCHASED FROM MR. B. CHANDRASHEKAR. (VIII) THE INCOME TAX RETURNS OF THE SELLERS OF THE LAND, AS FURNISHED BY THE ASSESSEE DURING THE COURSE OF THE APPEAL PROCEEDINGS, CANNOT BE TREATED AS AN ADDITIO NAL EVIDENCE WHERE THE PRIMARY EVIDENCE ITSELF IS CLINC HING IN NATURE. (IX) THE SUBMISSIONS OF THE ASSESSEE ARE LITTLE CONTRADICTORY WHEREIN IT WAS SUBMITTED THAT THE AGREEMENT WAS ONLY A PROPOSAL AND PURCHASE WAS NOT MATERIALIZED BY END OF FINANCIAL YEAR 2008-09. ON THE OTHER HAND, THE ASSESSEE ALSO TRIED TO EXPLAIN THAT IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 53 THOUGH THE LAND WAS NOT REGISTERED, THE POSSESSION OF THE LAND WAS GIVEN TO THE ASSESSEE, ACCORDINGLY PLO TS WERE MADE AND THE SELLERS HAVE TAKEN THE SALE CONSIDERATIONS FOR COMPUTING THEIR CAPITAL GAINS IN FILING THEIR INCOME TAX RETURNS. 83. FURTHER, AS PER THE RECORD, THERE IS NO INFORMATION TO INDICATE THAT THE SAID LAND WAS TAKEN INTO POSSESSI ON BY THE ASSESSEE BEFORE THE DATE OF REGISTRATION AND NO PRO OF TO INDICATE THAT THE CONSIDERATION FOR SALE OF LAND IS LESS THA N WHAT HAS BEEN INDICATED IN THE AGREEMENT SEIZED AS PAGE 65 O F ANNEXURE A/MGBRE/TPT/03, EXCEPT THE COPIES OF THE INCOME TAX RE TURNS FILED BY THE SELLERS OF THE LAND WHEREIN THE CAPITA L GAINS WERE COMPUTED. HOWEVER, CLOSE EXAMINATION OF SUCH RETURN S ALSO INDICATE THAT SUCH RETURNS WERE FILED BELATEDLY I.E ., AFTER THE DATE OF SEARCH AND APPARENTLY WITHOUT PAYING THE SE LF- ASSESSMENT TAXES AND AS SUCH CANNOT BE TAKEN AS ADD ITIONAL EVIDENCE. FURTHER, THERE IS NO EXPLANATION FOR PAYI NG THE ADVANCE FOR LAND TO THE EXTENT OF 85% OF THE TOTAL LAND COST, IF THE CLAIM OF THE ASSESSEE THAT COST IS ONLY RS. 20 LAKHS PER ACRE, IS TO BE BELIEVED AS TRUE. 84. IT WAS OBSERVED BY THE CIT(A) THAT THE EVIDENCE FOU ND IN THE COURSE OF SEARCH PROCEEDINGS WHEREIN THE RATE O F LAND WAS QUOTED AS RS. 1.36 CRORES PER ACRE IS SUBSTANTIAL E VIDENCE WHEREIN ALL THE INGREDIENTS OF A RELIABLE DOCUMENT ARE INDICATED SUCH AS THE EXTENT OF THE LAND, SURVEY NUMBER, RATE OF CONSIDERATION, ADVANCES PAID, TOTAL CONSIDERATION, DATE OF PROBABLE REGISTRATION AND CONDITIONS ASSOCIATED WIT H IT. IT WAS ALSO CLEARLY STATED IN THE AGREEMENT THAT THE AMOUN TS WERE TO BE PAID WITHIN 45 DAYS FROM THE DATE OF AGREEMENT. FUR THER, THE DETAILS OF THE PART PAYMENTS MADE AS ADVANCE THROUG H DEMAND DRAFT ARE VERY MUCH AVAILABLE ON RECORD. IN THIS MA NNER, THE IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 54 EVIDENCE FOUND IN THE COURSE OF SEARCH RELATED TO T HE ABOVE TRANSACTION IS NOT A LOOSE SHEET AS CONTENDED BY TH E ASSESSEE BUT A SUBSTANTIAL EVIDENCE ON ITS OWN, WELL SUPPORT ED BY THE CORROBORATIVE AND CIRCUMSTANTIAL EVIDENCE, AS INDIC ATED ABOVE. UNDER THE CIRCUMSTANCES, THE TRANSACTION IS PRESUME D TO HAVE BEEN CONCLUDED WITH ALL THE CONDITIONS OF THE AGREE MENT COMPLIED, INCLUDING THE TOTAL AGREED CONSIDERATION OF RS. 1.36 CRORES PAID BEFORE THE EXECUTION OF THE SALE DEED, RELATED TO THE SAID LAND AT KURNOOL. ACCORDINGLY, THE CIT(A) CONFI RMED THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS COUN T. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 85. WE HAVE HEARD BOTH THE PARTIES. THE ADDITION OF RS . 1.36 CRORES IS BASED ON THE FAX COPY OF UNSIGNED AGREEME NT COPY. THIS FAX COPY OF AGREEMENT MARKED AS 65 OF ANNEXURE MGBRE/TPT/1 IS A DRAFT AGREEMENT NOT SIGNED BY ANYBOD Y. ACCORDING TO THE ASSESSEE THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY WHILE RECORDING THE STATEMENT ON 27.8.2008 RECORDED THAT NO AGREEMENT HAS TAKEN PLACE WITH REGARD TO KU RNOOL PROPERTY. ONLY AN ADVANCE AMOUNT WAS PAID WHICH W AS DULY ACCOUNTED AND ON RECEIPT OF THE ADVANCE MONEY THE S ELLER HAS PREPARED DRAFT PROPOSAL. THE AR ALSO PLEADED BEFOR E US THAT AS PER THE JUDGEMENT OF SUPREME COURT IN THE CASE OF M OOSA S. MADHA AND AZAM S. MADHA VS CIT (89 ITR 65) WHEREIN HELD THAT PHOTOSTAT COPIES HAVE VERY LITTLE EVIDENTIARY VALUE . IT IS ALSO PLEADED BEFORE US THAT AN AMOUNT OF RS. 17 LAKHS WA S PAID BY DEMAND DRAFT ON 19.4.2008 FOR THE PURPOSE OF PURCHA SE OF 1 ACRE OF LAND SITUATED AT KURNOOL FROM B CHANDRASEKH AR WHICH WAS DULY ACCOUNTED IN THE BOOKS OF ACCOUNT. ADMITT EDLY, THE LAND WAS PURCHASED BY THE ASSESSEE ON 1.12.2012 BY A REGISTERED SALE DEED BEARING DOCUMENT NO. 10292/2010 WHEREIN 2.4 ACRES WAS PURCHASED FROM THREE PERSONS FOR A TO TAL CONSIDERATION OF RS. 48 LAKHS. WE HAVE ALSO GONE T HROUGH THE IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 55 ACTUAL SALE DEED EXECUTED ON 1.12.2010 WHICH IS PLA CED ON RECORD AT PAGE NOS. 38 TO 54 PB NO. III FOR A.Y. 20 09-10 WHEREIN THE TOTAL CONSIDERATION FOR PURCHASE OF 2.4 ACRES S ITUATED AT WARD NO. 46 AT KC CANAL AND HUNDRI RIVER, KURNOOL M UNICIPAL CORPORATION, KURNOOL SUB DISTRICT FOR A CONSIDERATI ON OF RS. 48 LAKHS. THIS SALE DEED WAS EXECUTED BY THREE PERSONS VIZ., (1) B. NAGAMANI W/O. B. CHANDRA SEKHAR, (2) B. CHANDRA SEKH AR, S/O. LATE BASINA ANNAIAH AND (3) B. LAKSHMINARAYANA S/O. LATE BANDLA NARASAIAH. THE ASSESSEE ALSO PLACED COPIES OF IT RETURNS OF THESE THREE PERSONS WHICH IS PLACED ON RECORD IN PB V FOR A.Y. 2009-10 WHEREIN THE DEPARTMENT ACCEPTED THE CONSIDE RATION AT RS. 48 LAKHS PASSED TOWARDS SALE OF THIS PROPERTY. CONSIDERING ALL THESE FACTS AND ALSO THE JUDGEMENT OF SUPREME C OURT IN THE CASE OF K.P. VARGHESE (131 ITR 597) WHEREIN HELD TH AT THAT SECTION 52(2) OF THE INCOME-TAX ACT, 1961, CAN BE I NVOKED ONLY WHERE THE CONSIDERATION FOR THE TRANSFER OF A CAPIT AL ASSET HAS BEEN UNDERSTATED BY THE ASSESSEE, OR, IN OTHER WORD S, THE FULL VALUE OF THE CONSIDERATION IN RESPECT OF THE TRANSF ER IS SHOWN AT A LESSER FIGURE THAN THAT ACTUALLY RECEIVED BY THE AS SESSEE, AND THE BURDEN OF PROVING UNDERSTATEMENT OR CONCEALMENT IS ON THE REVENUE; AND THE SUB-SECTION HAS NO APPLICATION IN THE CASE OF A BONA FIDE TRANSACTION WHERE THE CONSIDERATION RECEI VED BY THE ASSESSEE HAS BEEN CORRECTLY DECLARED AND ALSO ON THE JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL BHA LLA (322 ITR 191), WE ARE INCLINED TO HOLD THAT THE CONSIDERATIO N PASSED BETWEEN THE PARTIES TOWARDS PURCHASE OF KURNOOL PR OPERTY HAS TO BE CONSIDERED AT RS. 48 LAKHS ONLY AND THE ADDIT ION MADE BY LOWER AUTHORITIES AT RS. 1.36 CRORES IS UNJUSTIFIED ACCORDINGLY DELETED. 86. THE NEXT ADDITIONAL GROUND IS WITH REGARD TO SEIZED CASH OF RS. 60 LAKHS ON 25.7.2008 OUGHT TO HAVE BEEN ADJ USTED TOWARDS ADVANCE TAX AS PER REQUISITION MADE BY THE ASSESSEE ON IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 56 22.12.2008 THEREBY REDUCING THE LEVY OF INTEREST U/S . 234B OF THE ACT. 87. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS REQU ESTED IN HIS LETTER DATED 22.12.2008 TO ADJUST THE SEIZED CASH TOWARDS ADVANCE TAX FOR A.Y. 2009-10. IN SPITE OF THIS, THE DEPARTMENT NOT ADJUSTED THE AMOUNT AND LEVIED INTEREST U/S. 234 B OF THE ACT. HE RELIED ON THE JUDGEMENT OF DELHI HIGH COUR T IN THE CASE OF CIT VS. KK MARKETING (278 ITR 596) AND ALSO ON T HE JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF VISHWA NATH KHANNA (335 ITR 548) AND JUDGEMENT OF P&H HIGH COUR T IN THE CASE OF CIT VS. ASHOK KUMAR (334 ITR 355). 88. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT ADJUSTMENT OF SEIZED CASH CANNOT BE ADJUSTED TOWARD S ADVANCE TAX OR SELF-ASSESSMENT TAX AND IT HAS TO BE ADJUSTE D TOWARDS EXISTING LIABILITY. HE SUBMITTED THAT PROVISIONS O F SECTION 132B ARE APPLICABLE ON THIS ISSUE. 89. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPIN ION THAT THE SEIZED CASH HAS TO BE ADJUSTED IN TERMS OF SECT ION 132B OF THE IT ACT. FURTHER, AFTER ADJUSTMENT OF THE EXIST ING TAX LIABILITY, IF ANY AMOUNT STILL REMAINS, THE SAME HAS TO BE APP ROPRIATED TOWARDS THE TAX RELATING TO THE ASSESSMENT COMPLETE D U/S. 153A OF THE ACT. IN THE PRESENT CASE, THE PLEA OF THE AS SESSEE IS THAT THERE IS NO EXISTING OUTSTANDING LIABILITY WHEN THE CASH WAS SEIZED. HENCE THE SAID AMOUNT HAS TO BE APPROPRIATE D TOWARDS THE TAX LIABILITY UNDER DISPUTE. IN OUR OPINION, I F THERE IS NO EXISTING TAX LIABILITY, THE ASSESSEES CLAIM HAS TO BE ENTERTAINED AND THE SEIZED AMOUNT HAS TO BE ADJUSTED TOWARDS TA X LIABILITY OF THE PRESENT ASSESSMENT YEAR UNDER CONSIDERATION AS PER ASSESSEES REQUEST VIDE LETTER DATED 22.12.2007. WE ORDER ACCORDINGLY. IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 57 90. THE THIRD ADDITIONAL GROUND IS THAT THE CIT(A)-VII, HYDERABAD ERRED IN GIVING DIRECTION IN PARAGRAPHS 5 .9, 6.2.2, 6.3.4 AND 8.1 THAT THE ASSESSING OFFICER HAS TO GIV E RELIEF FOR SET OFF OF INCOME OF RS. 1.8 CRORES, RS. 35 LAKHS, RS. 56 LAKHS AND RS. 79,65,220 'PROVIDED THEY ARE NOT SET OFF WITH T HE CLAIM OF EXPENDITURE BEING THE COST OF LAND DEBITED TO PROFI T AND LOSS A/C. ACCORDING TO THE AR THESE ARE UNWARRANTED DIRE CTIONS GIVEN BY THE CIT(A) WHILE DISPOSING THE APPEAL AND IT IS NOT NECESSARY FOR THE PURPOSE OF DISPOSAL OF THE APPEAL S. FOR THIS PURPOSE HE RELIED ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF RAJINDER NATH VS. CIT (120 ITR 14) WHEREIN HELD AS UNDER: 'THE EXPRESSIONS 'FINDING' AND 'DIRECTION' IN S. 15 3(3) ARE LIMITED IN MEANING. A FINDING GIVEN IN AN APPEAL, R EVISION OR REFERENCE ARISING OUT OF AN ASSESSMENT MUST BE A FINDING NECESSARY FOR THE DISPOSAL OF THE PARTICULA R CASE, THAT IS TO SAY, IN RESPECT OF THE PARTICULAR ASSESS EE AND IN RELATION TO THE PARTICULAR ASSESSMENT YEAR. TO BE A NECESSARY FINDING, IT MUST BE DIRECTLY INVOLVED IN THE DISPOSAL OF THE CASE. IT IS POSSIBLE IN CERTAIN CAS ES THAT IN ORDER TO RENDER A FINDING IN RESPECT OF A, A FINDIN G IN RESPECT OF B MAY BE CALLED FOR. FOR INSTANCE, WHERE THE FACTS SHOW THAT THE INCOME CAN BELONG EITHER TO A O R B AND TO NO ONE ELSE, A FINDING THAT IT BELONGS TO B OR D OES NOT BELONG TO B WOULD BE DETERMINATIVE OF THE ISSUE WHE THER IT CAN BE TAXED AS A'S INCOME. A FINDING RESPECTING B IS INITIALLY INVOLVED AS A STEP IN THE PROCESS OF REAC HING THE ULTIMATE FINDING RESPECTING A. IF, HOWEVER, THE FIN DING AS TO A'S LIABILITY CAN BE DIRECTLY ARRIVED AT WITHOUT NECESSITATING A FINDING IN RESPECT OF B, THEN A FIN DING MADE IN RESPECT OF B IS AN INCIDENTAL FINDING ONLY. IT IS NOT A FINDING NECESSARY FOR THE DISPOSAL OF THE CASE PERTAINING TO A. AS REGARDS THE EXPRESSION 'DIRECTION' IN S. 153(3) (II) OF THE ACT, IT IS NOW WELL SETTLED THAT IT MUST BE AN EXPRESS DIRECTION NECESSARY FOR THE DISPOSAL OF THE CASE BE FORE THE AUTHORITY OR COURT. IT MUST ALSO BE A DIRECTION WH ICH THE AUTHORITY OR COURT IS EMPOWERED TO GIVE WHILE DECID ING THE CASE BEFORE IT. THE EXPRESSIONS 'FINDING' AND' DIRECTION' IN S. 153(3)(II) MUST BE ACCORDINGLY CON FINED. SECTION 153(3)(II) IS NOT A PROVISION ENLARGING THE JURISDICTION OF THE AUTHORITY OR COURT.' IT A NO. 1637/HYD/2011 & ORS. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD. ============================== 58 91. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A) A ND SUBMITTED THAT THE FINDING GIVEN BY THE CIT(A) IN T HE ABOVE REFERRED PARAS IS VERY MUCH NECESSARY FOR THE DISPO SAL OF THE APPEAL. 92. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. WE HAVE ALSO GONE THROUGH THE PARAGRAPH S 5.9, 6.2.2, 6.3.4 AND 8.5 OF THE CIT(A) ORDER. THE CIT( A) HAS GIVEN THE DIRECTIONS IN THESE PARAS ON ABUNDANT CAUTION T O AVOID DOUBLE RELIEF TO THE ASSESSEE. BEING SO, WE ARE IN CLINED TO HOLD THAT APPROPRIATE DEDUCTION TO THE ASSESSEE IS TO BE GIVEN ENSURING NO DOUBLE DEDUCTION WHILE PASSING CONSEQUE NTIAL ORDER. 93. IN THE RESULT, ALL THE REVENUE APPEALS IN ITA NOS. 1637 TO 1641/HYD/2011, ITA NO. 1802/HYD/2011 AND ITA NO. 417/HYD / 2012 AND ALL THE ASSESSEE APPEALS IN ITA NOS. 1642 TO 1647/ HYD/20111 AND ITA NO. 296/HYD/2012 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2013. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 29 TH APRIL, 2013 COPY FORWARDED TO: 1. THE ASST. CIT, CENTRAL CIRCLE, 3 RD FLOOR, AAYAKAR BHAVAN, K.T. ROAD, TIRUPATI. 2. THE DEPUTY CIT, CENTRAL CIRCLE, 3 RD FLOOR, AAYAKAR BHAVAN, K.T. ROAD, TIRUPATI. 3. M/S. M.G. BROTHERS AUTOMOBILES (P) LTD., 1/683, CO-OP. HOUSE BUILDING, YEMMIGANUR, KURNOOL DIST. 4. THE CIT(A)-VII, HYDERABAD. 5. THE CIT (CENTRAL), HYDERABAD. 6. THE DR B BENCH, ITAT, HYDERABAD. TPRAO