The DCIT, Central Circle, Vendra V. Sri Peddu Sankara Rao, Vijayawada

ITA 167/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50260 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 12-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TH L PETER
• Keywords: Gross profit estimation; Unexplained cash credit; Unexplained investment; Unexplained expenditure; Business income; Income from undisclosed sources; Search and seizure; Opportunity of being heard; Additional evidence; Block assessment; Retraction; Revised return
• Section: 153A; 139(5); 69; 54; 154; 139

Judgement Text

ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO S . 166 TO 169 /VIZAG/ 20 10 ASSESSMENT YEAR S : 2002 - 03 TO 2005 - 06 RESPECTIVELY DCIT, CENTRAL CIRCLE VIJAYAWADA VS. SRI PEDDU SANKARA RAO VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO.AEQPP 7501M ITA NO.179/VIZAG/2010 ASSESSMENT YEAR : 2005 - 06 M/S. SUBHADARSI ESTATES VIJAYAWADA VS. ACIT, CENTRAL CIRCLE VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO.AAVFS 6535M ITA NO.180/VIZAG/2010 ASSESSMENT YEAR : 2005 - 06 SRI PEDDU SANKARA RAO VIJAYAWADA VS. ACIT, CENTRAL CIRCLE VIJAYAWADA (APPELLANT) (RESPONDENT) ITA NO.447/VIZAG/2010 ASSESSMENT YEAR : 2002 - 03 SRI PEDDU SANKARA RAO VIJAYAWADA VS. DCIT, CENTRAL CIRCLE VIJAYAWADA (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI T H .L. PETER, CIT(DR) ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE REVENUE AS WEL L AS THE ASSESSEE AGAINST THE RESPECTIVE ORDER OF THE CIT(A) FOR DIFF ERENT ASSESSMENT YEARS. SINCE THESE APPEALS WERE HEARD TOGETHER, THESE ARE BEING DISPOSED OF ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 2 THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CON VENIENCE. WE HOWEVER, PREFER TO ADJUDICATE THEM ONE AFTER THE OTHER. ITA NOS.166 OF 2010 & 447 OF 2010: 2. THE BRIEF FACTS OF THE CASE INVOLVED IN THESE AP PEALS ARE THAT A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE BUSINESS PREMISES OF M/S. SUBH DARSHI CHIT FUNDS PVT. LTD. AND M/S. SUBHDARSHI EST ATES ALONG WITH THE RESIDENTIAL PREMISES OF THE ASSESSEE SHRI P. SANKAR A RAO ON 7.11.2006. DURING THE COURSE OF SEARCH, CERTAIN DOCUMENTS WHIC H CONTAIN INFORMATION COMPRISING OF RECEIPTS AND PAYMENTS TO VARIOUS PERS ONS WERE SEIZED. PROCEEDINGS U/S 153A WERE INITIATED AND IN RESPONSE TO THE NOTICE ISSUED U/S 153A RETURN OF INCOME DECLARING INCOME OF RS.19,43, 200/- WHICH INCLUDED THE UNDISCLOSED INCOME OF RS.16,33,097/- WAS FILED ON 5 .11.2007 BY THE ASSESSEE SHRI P. SANKARA RAO. DURING THE ASSESSMENT PROCEED INGS, THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 8.12.2008 REVISING TH E INCOME TO RS.71,06,300/-. DURING THE COURSE OF SEARCH, UNEXP LAINED INVESTMENT OF RS.37,93,023/- WAS ALSO NOTICED AND THE ASSESSEE CL AIMED THE TELESCOPING OF THIS INVESTMENT AGAINST THE INCOME OFFERED BY IT. THE ASSESSING OFFICER DID NOT ALLOW THE TELESCOPING BETWEEN THE UNDISCLOSED I NCOME OFFERED AND THE UNEXPLAINED INVESTMENT. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) AND CLAIMED TELESCOPING BETWEEN THE UNDISCLOSED INCOME AND THE UNEXPLAINED INVESTMENT. 4. THE CIT(A) HAVING EXAMINED THIS ISSUE HAD ALLOWE D THE TELESCOPING BETWEEN THE UNDISCLOSED ADDITIONAL INCOME AND THE U NEXPLAINED INVESTMENT AND DELETED THE ADDITIONS MADE ON ACCOUNT OF UNEXPL AINED INVESTMENT. AGAINST THIS ORDER OF THE CIT(A), THE REVENUE HAS P REFERRED AN APPEAL BEFORE THE TRIBUNAL THROUGH ITA NO.166 OF 2010 BY RAISING VARIOUS GROUNDS WHICH ARE AS UNDER: 1. THE ORDER OF CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 3 2. THE CIT(A) IS NOT JUSTIFIED IN ADMITTING THE APPEAL AS PER PROVISIONS OF SEC. 249(4)(A) OF THE I.T. ACT, SINCE THE ASSESS EE HAS NOT PAID THE TAX DUE ON THE INCOME RETURNED BY HIM. 3. THE CIT(A) IS NOT JUSTIFIED IN THE FACTS AND CIRCUM STANCES OF THE CASE IN DELETING THE ADDITION MADE TOWARDS INVESTME NT IN PROPERTIES. 4. THE CIT(A) OUGHT TO HAVE NOTICED THAT TELESCOPING T HE ADDITION MADE TOWARDS INCOME ADMITTED IS NOT JUSTIFIED. 5. THE CIT(A) IS NOT JUSTIFIED IN IGNORING THE ONUS CA ST ON THE ASSESSEE TO PROVE THE CLAIM MADE TOWARDS TELESCOPING THE AMO UNT OF INVESTMENT TOWARDS INCOME DECLARED WHICH THE ASSESS EE DID NOT DISCHARGE. 6. THE CIT(A) IS NOT JUSTIFIED TO PUT THE ONUS ON THE ASSESSING OFFICER TO PROVE THAT THE ASSESSEE HAS NOT MADE ANY INVESTM ENT OR HAS NOT INCURRED ANY EXPENDITURE. 7. ANY OTHER GROUND OR GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 5. BESIDES FILING THIS APPEAL, THE ASSESSING OFFICE R HAS ALSO MOVED AN APPLICATION U/S 154 BEFORE THE CIT(A) RAISING THE A LLEGATION THAT THE ASSESSEE HAS NOT PAID THE TAX ON THE ADMITTED INCOME DECLARE D IN THE RETURN. IT WAS ALSO CONTENDED BEFORE THE CIT(A) THAT IN RESPONSE T O NOTICE U/S 153A THE ASSESSEE HAS FILED A RETURN DECLARING INCOME AT RS. 19,43,197/- ON WHICH SELF- ASSESSMENT TAX PAYABLE OF RS.12,84,405/- WAS NOT PA ID AT THE TIME OF FILING THE RETURN. SUBSEQUENTLY, A REVISED RETURN DECLARI NG TOTAL INCOME OF RS.71,06,300/- WAS FILED ON 8.5.2008 ON WHICH SELF- ASSESSMENT TAX PAYABLE WAS OF RS.22,04,663/- BUT THE SAME WAS ALSO NOT PAI D EVEN BEFORE THE COMPLETION OF THE ASSESSMENT. EVEN AT THE TIME OF FILING OF THE APPEAL BEFORE THE CIT(A), THE SELF-ASSESSMENT TAX OF RS.22,04,663 /- WAS NOT PAID. BEING CONVINCED WITH THE CONTENTIONS OF THE A.O., THE CIT (A) REVISED ITS ORDER AND HELD THE APPEAL TO BE NOT ADMISSIBLE AND MAINTAINAB LE AS PER THE PROVISIONS OF SECTION 249(4)(A) OF THE ACT. ACCORDINGLY, THE APPEAL OF THE ASSESSEE WAS DISMISSED. 6. AGAINST THE DISMISSAL, THE ASSESSEE HAS PREFERRE D AN APPEAL VIDE ITA NO.447 OF 2010 RAISING VARIOUS GROUNDS THEREIN WHIC H ARE AS UNDER: 1. THE ORDER OF THE LEARNED CIT(A) PASSED U/S 154 OF T HE I.T. ACT ON 30.7.2010 IS ERRONEOUS BOTH ON FACTS AND IN LAW. ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 4 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPEAL FILED BY THE APPELLANT HEREIN FOR THE ASSESSMENT YEAR 2002-03 ON 17.2.2009 IS NOT ADMISSIBLE. 3. THE LEARNED CIT(A) ERRED IN PASSING THE ORDER U/S 1 54 OF THE ACT HOLDING THAT THE PROVISIONS OF SEC. 249(4)(A) ARE M ANDATORY IN NATURE AND ARE ATTRACTED TO THE CASE OF THE APPELLANT HERE IN. 4. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE ENTI RE TAX AS PER THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002-03 WA S PAID BY THE TIME OF PASSING THE ORDER U/S 154 OF THE I.T. ACT A ND HENCE OUGHT NOT TO HAVE PASSED THE ORDER U/S 154. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 7. IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED U/S 154 IS TO BE DECIDED FIRST AND IF THE ORDER OF THE CIT(A) PASSED U/S 154 IS SET ASIDE THE N THE REVENUES APPEAL VIDE ITA NO.166 OF 2010 IS TO BE DECIDED ON MERIT. WE ACCORDINGLY PROCEED TO ADJUDICATE THE APPEAL OF THE ASSESSEE IN ITA NO. 447 OF 2010. 8. DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE PROVISION S OF SECTION 249(4)(A) OF THE I.T. ACT (HEREINAFTER REFERRED TO AS AN ACT) WI TH THE SUBMISSIONS THAT ACCORDING TO THIS SECTION, THE ASSESSEE IS REQUIRED TO MAKE THE PAYMENT OF TAX DUE ON THE INCOME RETURNED BY HIM BEFORE THE FI LING OF THE APPEAL WITH THE CIT(A). THE APPEAL WAS FILED ON 17.2.2009 AND THE ADMITTED TAX ON THE INCOME RETURNED AT RS.12,84,405/- WAS PAID IN 3 INS TALMENTS. THE FIRST INSTALMENT AND SECOND INSTALMENT OF RS.4,84,405/- A ND RS.3,89,398/- WAS PAID ON 5.11.2007 AND THIRD INSTALMENT OF RS.7 LAKH S WAS PAID ON 16.2.2009. IN SUPPORT OF THESE CONTENTIONS, THE ASSESSEE HAS A LSO FILED THE COPIES OF CHALLANS. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT IN RESPONSE TO NOTICE U/S 153A, THE ASSESSEE HAS FILED THE RETURN OF INCOME DECLARING INCOME THEREIN AT RS.19,43,200/- ON WHICH ADMITTED TAX WAS WORKED OUT TO BE AT RS.12,84,405/- WHICH WAS DULY P AID BEFORE THE FILING OF THE APPEAL BEFORE THE CIT(A). DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FILED THE REVISED RETURN THOUGH TH ERE IS NO PROVISION UNDER THE ACT TO FILE A REVISED RETURN DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 5 CONSEQUENT TO THE SEARCH ACTION, DECLARING THE TOTA L INCOME AT RS.71,06,300/-. THOUGH THE INCOME WAS ASSESSED ON THE BASIS OF THIS INCOME OFFERED IN THE REVISED RETURN, BUT THE ASSESSEE WAS NOT REQUIRED TO PAY THE TAX ASSESSED ON THIS DECLARED INCOME BEFORE FILING THE APPEAL BEFORE THE CIT(A) AS THE INCOME DECLARED THERE IN THE REVISED RETURN CANNOT BE CALLED TO BE AN INCOME RETURNED BY HIM AS PER PROVISIONS OF S ECTION 259(4) OF THE ACT. WHATEVER REVISED RETURN WAS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOT FILED IN ACCORDANCE WITH LA W AND CANNOT BE CONSIDERED TO BE THE REVISED RETURN SUBSTITUTING THE ORIGINAL RETURN FILED IN RESPONSE TO THE NOTICE U/S 153A OF THE ACT. THE LD. COUNSEL FO R THE ASSESSEE FURTHER CONTENDED THAT THE SCOPE OF REVISING THE RETURN IS PRESCRIBED U/S 139(5) OF THE ACT, ACCORDING TO WHICH IF ANY PERSON DISCOVERS ANY OMISSION OR ANY WRONG STATEMENT THEREIN HE MAY FURNISH A REVISED RE TURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASSESSMENT WHICHEVER I S EARLIER. MEANING THEREBY, THE ORIGINAL RETURN FILED CAN ONLY BE REVI SED WITHIN THE TIME PRESCRIBED UNDER SUB-SEC. 5 OF SECTION 139 OF THE A CT. THERE IS NO OTHER PROVISION IN THE ACT WHICH MODIFIES THE PROCEDURE O R THE TIME FRAME FOR REVISING THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT. THEREFORE, THE REVISED RETURN FILED DURING THE COURSE OF ASSES SMENT PROCEEDINGS CANNOT BE LEGALLY TERMED TO BE THE REVISED RETURN. THEREF ORE, THE INCOME RETURNED THEREIN CANNOT BE CONSIDERED TO BE THE INCOME RETUR NED FOR THE PURPOSE OF SUB-SECTION 4 OF SECTION 249 OF THE ACT. THE INCOM E RETURNED CAN ONLY BE THE INCOME WHICH WAS DECLARED IN THE FIRST RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT AND AS PER THAT RETURN, THE ASSESSE E HAS PAID DUES BEFORE FILING OF THE APPEAL BEFORE THE CIT(A). 9. THE LD. COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION TO THE FACT THAT AS ON DATE, THE ASSESSEE HAD PAID THE ENT IRE TAX DUE ON THE INCOME OFFERED DURING THE ASSESSMENT PROCEEDINGS BY FILING THE REVISED RETURN. IN REVISED RETURN, THE TOTAL INCOME WAS DECLARED AT RS .71,06,300/- ON WHICH TAX ALONG WITH THE INTEREST WORKED OUT TO BE AT RS.31,5 0,521/- AND THE ASSESSEE ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 6 HAD PAID THE TAXES OF RS.33,01,303/-. THEREFORE, T HERE IS NO VIOLATION OF ANY OF THE PROVISIONS OF THE I.T. ACT. THE CIT(A) HAS WRONGLY INTERPRETED THE PROVISIONS AND RECTIFIED THE ORDER U/S 154 OF THE A CT. 10. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEN DED THAT THIS ISSUE WHETHER REVISED RETURN FILED DURING THE COURSE OF A SSESSMENT PROCEEDINGS IS VALID REVISED RETURN IS A DEBATABLE ONE AS THERE IS NO SPECIFIC PROVISIONS IN THE ACT EITHER AVAILABLE OR ANY JUDICIAL PRONOUNCEMENT ON THIS ISSUE IS RENDERED. THEREFORE, THE ORDER PASSED BY THE CIT(A) U/S 154 O F THE ACT IS NOT SUSTAINABLE. 11. THE LD. D.R. ON THE OTHER HAND BESIDES PLACING THE HEAVY RELIANCE UPON THE ORDER OF THE CIT(A) HAS CONTENDED THAT THE ASSESSEE HIMSELF HAS FILED THE REVISED RETURN DECLARING INCOME OF RS.71, 06,300/-, THEREFORE, HE IS REQUIRED TO PAY THE TAXES THERE ON BEFORE FILING TH E APPEAL BEFORE THE CIT(A). SINCE HE DID NOT PAY ADMITTED TAXES ON THE INCOME R ETURNED, THE CIT(A) HAS RIGHTLY RECTIFIED HIS ORDER AND DISMISSED THE APPEA L OF THE ASSESSEE. 12. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE PROVISIONS OF SECTION 249(4) OF THE ACT, WE ARE OF THE VIEW THAT AS PER PROVISIONS OF SUB-SECTION 4 OF SECTION 249, THE ASS ESSEE IS REQUIRED TO PAY THE TAX DUE ON THE INCOME RETURNED BY HIM BEFORE FILING OF THE APPEAL BEFORE THE CIT(A) . IT HAS NOT BEEN DEFINED OR EXPLAINED IN T HE SUB-SECTION 4, AS TO WHEN THE REVISED RETURN ASSUMES THE CHARACTER OF THE RET URN FILED BY THE ASSESSEES. THE SCOPE OF FILING A REVISED RETURN IS ONLY AVAILA BLE IN SECTION 139(5) OF THE ACT. THERE IS NO OTHER PROVISION IN THE ACT WHICH ENTAILS THE ASSESSEE TO FILE THE REVISED RETURN. NO DOUBT ONCE THE REVISED RETU RN IS FILED IN ACCORDANCE WITH LAW, IT MAY REPLACE THE ORIGINAL RETURN AND AS SUMES THE CHARACTER OF THE ORIGINAL RETURN. AS PER PROVISIONS OF SUB-SECTION 5 OF SECTION 139 UNDER A PARTICULAR CIRCUMSTANCES, LIBERTY IS GIVEN TO THE A SSESSEE TO REVISE ITS RETURN FILED WITHIN A PARTICULAR PERIOD. AS PER SUB-SECTI ON 5 OF SECTION 139, AN ASSESSEE CAN FURNISH A REVISED RETURN IF HE DISCOVE RS ANY OMISSION OR ANY WRONG STATEMENT IN THE RETURN FILED UNDER SUB-SEC. (1) OR IN PURSUANCE TO A ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 7 NOTICE ISSUED UNDER SUB-SECTION. (1) OF SECTION 142 , AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASS ESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASSESSMENT, WHICHEVER IS EARL IER. MEANING THEREBY, A VALID REVISED RETURN CANNOT BE FILED AT ANY POINT O F TIME DURING ANY ASSESSMENT PROCEEDINGS. THE ASSESSMENT CONSEQUENT TO THE SEARCH OPERATION IS SPECIFICALLY DEALT U/S 153A TO 153D OF THE ACT. CONSEQUENT TO THE SEARCH, RETURN WAS REQUIRED TO BE FURNISHED WITHIN A SPECIFIED PERIOD IN RESPONSE TO NOTICE U/S 153A OF THE ACT AND THE SAID RETURN FILED SHALL BE TREATED TO BE RETURN FILED U/S 139 OF THE ACT. LIK E SECTION 139, NO SPECIFIC PROVISIONS WERE MADE U/S 153A WITH REGARD TO THE FI LING OF THIS REVISED RETURN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THERE FORE, THERE IS NO SCOPE OF FILING ANY REVISED RETURN DURING THE COURSE OF A SSESSMENT FRAMED CONSEQUENT TO THE SEARCH OPERATION. EVEN IF ANY RE VISED RETURN IS FILED IT WOULD NOT BE A VALID REVISED RETURN IN ACCORDANCE W ITH LAW IT MAY ONLY BE A MERE ADMISSION OF ADDITIONAL INCOME DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. BUT THIS REVISED RETURN CANNOT ASSUME OF A CHARACTER OF A RETURN FILED U/S 139(1) OF THE ACT. THEREFORE, THE INCOME DECLARED THEREIN CANNOT BE CALLED TO BE THE INCOME RETURNED FOR THE PURPOSE OF SUB-SECTION 4 OF SECTION 249 OF THE ACT. WE HOWEVER FOR THE SAKE OF REFEREN CE EXTRACT THE RELEVANT PROVISIONS OF SECTION 249(4) AND 139(5) OF THE ACT AS UNDER: SECTION 139(5): IF ANY PERSON, HAVING FURNISHED A R ETURN UNDER SUB- SECTION (1), OR IN PURSUANCE OF A NOTICE ISSUED UND ER SUB-SECTION (1) OF SECTION 142, DISCOVERS ANY OMISSION OR ANY WRONG ST ATEMENT THEREIN, HE MAY FURNISH A REVISED RETURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR O R BEFORE THE COMPLETION OF THE ASSESSMENT, WHICHEVER IS EARLIER: PROVIDED THAT WHERE THE RETURN RELATES TO THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR, THE REFERENCE TO ONE YEAR AFORESAID SHALL BE CONSTRUED AS A REFERENCE TO TWO YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. SECTION 249(4): NO APPEAL UNDER THIS CHAPTER SHALL BE ADMITTED UNLESS AT THE TIME OF FILING OF THE APPEAL,-- (A) WHERE A RETURN HAS BEEN FILED BY THE ASSESSEE, THE ASSESSEE HAS PAID THE TAX DUE ON THE INCOME RETURNED BY HIM; OR ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 8 (B) WHERE NO RETURN HAS BEEN FILED BY THE ASSESSEE, THE ASSESSEE HAS PAID AN AMOUNT EQUAL TO THE AMOUNT OF ADVANCE TAX W HICH WAS PAYABLE BY HIM: PROVIDED THAT, [IN A CASE FALLING UNDER CLAUSE (B) AND] ON A N APPLICATION MADE BY THE APPELLANT IN THIS BEHALF, T HE [COMMISSIONER (APPEALS)] MAY, FOR ANY GOOD AND SUFFICIENT REASON TO BE RECORDED IN WRITING, EXEMPT HIM FROM THE OPERATION OF THE PROVI SIONS OF [THAT CLAUSE]. 13. IN RESPONSE TO NOTICE U/S 153A, THE ASSESSEE HA S FILED THE RETURN OF INCOME DECLARING THE INCOME THEREIN AT RS.19,31,200 /- ON WHICH ADMITTED TAX WITH INTEREST COMES OUT TO RS.12,84,405/-. THE SAID TAX WAS ADMITTEDLY PAID BY THE ASSESSEE BEFORE FILING OF THE APPEAL BEFORE THE CIT(A). THEREFORE, THERE IS NO INFRINGEMENT OF PROVISIONS OF SECTION 2 49(4) OF THE I.T. ACT. THE CIT(A) HAS NOT EXAMINED THIS ASPECT WHILE PASSING A N ORDER U/S 159 OF THE ACT. THEREFORE, WE FIND NO MERIT IN THIS ORDER AND WE SET ASIDE THE SAME. 14. ONCE THE ORDER OF THE CIT(A) PASSED U/S 154 OF THE ACT IS SET ASIDE, THE ORIGINAL ORDER PASSED BY THE CIT(A) DATED 24.12 .2009 STANDS AND HOLDS THE FIELD AND THIS ORDER IS CHALLENGED BY THE REVEN UE THROUGH APPEAL NO. 166 OF 2010. 15. IN THIS APPEAL ALSO, THE REVENUE HAS RAISED A S PECIFIC GROUND ON THE SAME ISSUE THAT THE CIT(A) IS NOT JUSTIFIED IN ADMI TTING THE APPEAL AS PER PROVISIONS OF SECTION 249(4) OF THE I.T. ACT SINCE THE ASSESSEE HAS NOT PAID THE TAX DUE ON THE INCOME RETURNED BY HIM. THIS IS SUE HAS ALREADY BEEN ADJUDICATED BY US IN FOREGOING PARAS, THEREFORE, WE DECIDE THE SAME IN THE SAME MANNER. ACCORDINGLY, THIS GROUND IS REJECTED. THE OTHER GROUNDS IN THIS APPEAL RELATE TO THE TELESCOPING BETWEEN THE U NDISCLOSED INCOME DECLARED BY THE ASSESSEES AND THE UNDISCLOSED INVES TMENTS. DURING THE COURSE OF SEARCH, IT WAS NOTICED THAT THE ASSESSEE HAS MADE CERTAIN PAYMENTS FOR ACQUISITION OF PROPERTIES AND FOR THE YEAR UNDE R CONSIDERATION ASSESSEE HAD MADE THE PAYMENT TO THE EXTENT OF RS.37,93,023/ -. THE ASSESSEE HAS DECLARED THE ADDITIONAL UNDISCLOSED INCOME OF RS.67 ,96,200/- AND ADMITTED ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 9 THE TOTAL INCOME OF RS.71,06,300/-. FOR THE ASSESS MENT YEAR 2001-02, ASSESSEE HAS ALSO OFFERED AN ADDITIONAL INCOME OF R S.92,09,500/-. THEREFORE, UPTO 12.9.2001, THE FUNDS AVAILABLE WITH THE ASSESS EES ON ACCOUNT OF UNDISCLOSED INCOME WAS OF RS.1,60,05,700/-. WHEREA S UP TO THE ASSESSMENT YEAR 2002-03, THE ASSESSEE HAS MADE THE INVESTMENT OF RS.37,93,023/-. THE ASSESSEE CLAIMED THE TELESCOPING OF THE INVESTMENT OUT OF THIS UNDISCLOSED INCOME OFFERED BY THE ASSESSEE. THE TELESCOPING WA S NOT ALLOWED BY THE ASSESSING OFFICER AND THE ASSESSEE PREFERRED AN APP EAL BEFORE THE CIT(A). THE CIT(A) RE-EXAMINED THE ISSUE AND HAS ALLOWED TH E TELESCOPING. THE RELEVANT OBSERVATION OF THE CIT(A) IN THIS REGARD A RE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT. THE ISSUE OF ADJUDICATION IS WHETHER THE APPELLANT IS ENTITLED TO THE BENEFIT OF TELESCOPING IN THE LIGHT OF THE U NDISCLOSED INCOME OFFERED PRIOR TO THE ACQUISITION OF THE PROPERTIES DURING THE YEAR. THE APPELLANT HAD REVISED THE RETURNS FOR THE A.YS 2001-02 & 2002- 03 BY ADDITIONALLY ADMITTING THE PEAK RECEIPTS FOR BOTH THE YEARS AT RS.92,09,500/- AND RS.67,96,200/-. THERE IS NO DIS PUTE OVER THE QUANTIFICATION OF THE PEAK RECEIPTS OFFERED BY THE APPELLANT. THE ASSESSING OFFICER REJECTED THE REQUEST OF THE APPEL LANT FOR TELESCOPING ON THE GROUND THAT THE UNDISCLOSED INCO ME ADMITTED WAS BY FICTION OF LAW AND BEING AN INTANGIBLE INCOM E, NO BENEFIT OF TELESCOPING WAS ALLOWABLE. I AM IN AGREEMENT WITH THE ARGUMENT OF THE LEARNED AUTHORIZED REPRESENTATIVE THAT WHEN BOTH THE RECEIP TS AND PAYMENTS AS PER THE DEPOSIT RECEIPTS/CERTIFICATES F OUND DURING THE COURSE OF SEARCH COULD NOT BE EXPLAINED BY THE APPE LLANT, THE PEAK AMOUNT IN EACH YEAR WAS OWNED UP AND OFFERED AS INC OME, THEN THE A.O. IS NOT JUSTIFIED IN TAKING THE VIEW THAT T HE RECEIPTS/DEPOSITS WERE PAID BACK TO THE PERSONS. EVEN OTHERWISE, THE ADDITIONAL UNDISCLOSED INCOME OFFERED IS AVAILABLE WITH THE AP PELLANT IN SOME FORM OR OTHER. THE SEARCH & SEIZURE ACTION, WHICH IS AN EXTREME MEASURE OF ENFORCEMENT AND THE SUBSEQUENT POST SEAR CH INVESTIGATIONS, HAVE NEITHER RESULTED IN UNEARTHING ANY UNDISCLOSED INVESTMENTS BY THE APPELLANT TOWARDS ACQUISITION OF ANY TANGIBLE ASSETS NOR HAVE LED TO A FINDING THAT UNEXPLAINED E XPENDITURE WAS INCURRED BY THE APPELLANT FOR WHICH THE APPELLANT H AD NO ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 10 SATISFACTORY EXPLANATION TO OFFER, OTHER THAN THOSE WHICH FORM A PART OF THE ASSESSMENT ORDER. IN THE ABSENCE OF SU CH A FINDING, IT CAN BE PRESUMED THAT THE ADDITIONAL INCOME OFFERED IS AVAILABLE WITH THE APPELLANT AS A PROBABLE SOURCE FOR EITHER INVESTMENT OR EXPENDITURE. IN OTHER WORDS, THE INCOME OF RS.1,60 ,05,700/- OFFERED IN THE A.YS 2001-02 & 2002-03 ARE AVAILABLE TO THE APPELLANT FOR BEING CONSIDERED AS A SOURCE FOR THE INVESTMENT IN THE PROPERTIES ACQUIRED SUBSEQUENTLY. IT WOULD BE PERTINENT TO REFER TO THE JUDICIAL PRO NOUNCEMENTS IN THIS REGARD. THE ACCEPTED PRINCIPLE IS THAT IF AN INTANGIBLE ADDITION HAS BEEN MADE EARLIER AND THERE ARE ALSO C ASH CREDITS TO THAT EXTENT, SEPARATE ADDITION OF CASH CREDITS CAN NOT BE MADE. THE COURTS HAVE HELD THAT WHERE TRADING ADDITIONS H AD BEEN MADE, THE UNPROVED CASH CREDITS COULD BE TAKEN TO HAVE CO ME OUT OF SUCH INTANGIBLE ADDITIONS. ACCORDINGLY IF UNEXPLAINED C ASH CREDIT ADDITION HAS BEEN MADE AND SUCH CASH CREDITS ARE WITHDRAWN T HE SAME WOULD BE AVAILABLE FOR UNDISCLOSED INVESTMENTS FOR WHICH NO SEPARATE ADDITIONS FOR UNDISCLOSED INVESTMENTS WOUL D BE NECESSARY. IN THE CASE OF ANANTHARAM VEERASINGHAIAH AND CO. V . CIT (1980) 123 ITR 457 (SC) IT HAS BEEN HELD THAT, WHE N AN INTANGIBLE ADDITION IS MADE TO THE BOOK PROFITS D URING AN ASSESSMENT PROCEEDING, IT IS ON THE BASIS THAT THE AMOUNT REPRESENTED BY THAT ADDITION CONSTITUTES THE UNDISC LOSED INCOME OF THE ASSESSEE. THAT INCOME, ALTHOUGH COMMONLY DESCR IBED AS INTANGIBLE, IS AS MUCH A PART OF HIS REAL INCOME AS THAT DISCLOSED BY HIS ACCOUNT BOOKS. IT HAS THE SAME CONCRETE EXI STENCE. IT COULD BE AVAILABLE TO THE ASSESSEE AS THE BOOK PROFITS CO ULD BE. (LAGADAPATI SUBBA RAMAIAH V. CIT [1956] 30 ITR 593 (AP) AND S. KUPPUSWAMI MUDALIAR V. CIT [1964] 51 ITR 757 (MAD) APPROVED). THE SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSE SSEE EARNED IN AN EARLIER ASSESSMENT YEAR MAY CONSTITUTE A FUND, E VEN THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQU ENTLY FOR MEETING EXPENDITURE OR INTRODUCING AMOUNTS IN HIS A CCOUNT BOOKS. BUT IT IS QUITE ANOTHER THING TO SAY THAT ANY PART OF THAT FUND MUST NECESSARILY BE REGARDED AS THE SOURCE OF UNEXPLAINE D EXPENDITURE INCURRED OR OF CASH CREDITS RECORDED DURING A SUBSE QUENT ASSESSMENT YEAR. IT IS A MATTER FOR CONSIDERATION IN EACH CASE WHETHER THE UNEXPLAINED CASH DEFICITS AND THE CASH CREDITS CAN BE REASONABLY ATTRIBUTED TO A PRE-EXISTING FUND OF CON CEALED PROFITS OR THEY ARE REASONABLY EXPLAINED BY REFERENCE TO CONCE ALED INCOME EARNED IN THAT VERY YEAR. IN THE CASE OF CIT VS. K.S.M. GURUSWAMY NADAR & SONS (MAD) [1984] 149 ITR 127, WHERE INCOME FROM UN DISCLOSED SOURCES HAS BEEN DETERMINED BECAUSE OF LOWER GROSS PROFIT AND UNEXPLAINED CASH CREDITS, CLAIM BY ASSESSEE FOR TEL ESCOPING THE TWO ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 11 ADDITIONS AND MAKING SINGLE ADDITION HAS BEEN FOUND TO CORRECT. IT HAS BEEN HELD; WHEN THERE ARE TWO SEPARATE ADDITIONS, ONE ON ACCO UNT OF SUPPRESSION OF PROFIT AND ANOTHER ON ACCOUNT OF CAS H CREDITS, IT IS OPEN TO THE ASSESSEE TO EXPLAIN THAT THE SUPPRESSED PROFITS HAD BEEN BROUGHT IN AS CASH CREDITS AND ONE HAS TO BE T ELESCOPED INTO THE OTHER RESULTING ONLY IN ONE ADDITION. THE TRIB UNAL WAS THEREFORE RIGHT IN ITS VIEW AND THE ADDITION TOWARD S SUPPRESSED BOOK PROFITS SHOULD BE TELESCOPED WITH THE ADDITION S MADE TOWARDS CASH CREDITS. IN THE CASE OF CIT VS. VENKATESWARA TIMBER DEPOT [ 1996] 222 ITR 0768 (AP), IT HAS BEEN HELD; (I) THAT AS THE ADDITION ON THE GROUND OF INCREASE IN T HE RATE OF PROFIT WAS MADE BY THE COMMISSIONER OF INCOME-TAX A T THE APPELLATE STAGE, THE ASSESSEE COULD NOT HAVE RAISED THE PLEA OF SET OFF EXCEPT BEFORE THE TRIBUNAL IN THE APPEAL. THE TRIBUNAL WAS JUSTIFIED IN LAW IN ACCEPTING THE ASSESSEES AL TERNATIVE ARGUMENT RAISED FOR THE FIRST TIME BEFORE IT; (II) THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE APPELLATE TRIBUNAL WAS JUSTIFIED IN LAW IN TELESCOP ING THE UNEXPLAINED CREDITS WITH THE ESTIMATED ADDITION TO THE BUSINESS INCOME TOWARDS DEFICIENCY IN GROSS PROFITS. IN THE CASE OF RAMESHWAR LAL SONI VS. ASSISTANT COMMISSIONER OF INCOME TAX (2004) 91 ITD 301 (JODHP UR) (TM), IT WAS OBSERVED, IN THE CASE OF A BLOCK ASSESSMENT WHEREIN THE ASSES SMENT OF THE WHOLE BLOCK PERIOD IS MADE, WHEN ADDITIONS A RE MADE FOR THE BLOCK PERIOD ON THE BASIS OF ALL INVESTMENTS, EXPEN DITURES, AND ASSETS FOUND TO HAVE BEEN INCURRED OR ACQUIRED DURI NG THE BLOCK PERIOD, AND WHICH HAVE REMAINED UNEXPLAINED IN RESP ECT OF THEIR DIRECT SOURCE, THE ASSESSEE MAY JUSTIFIABLY CLAIM A ND MAY WELL BE TREATED AS DULY ENTITLED TO THE BENEFIT OF TELESCOP Y/SET OFF/CREDIT OF ALL SUCH AMOUNTS OF INFLOW WHETHER BY WAY OF RECEIP TS OR BY WAY OF UNDISCLOSED INCOME RESULTING FROM INTANGIBLE ADDITI ONS OF THE BLOCK PERIOD AND THUS BEING AVAILABLE WITH ASSESSEE AND W HICH AMOUNT/INCOME COULD BE UTILIZED BY THE ASSESSEE FOR INCURRING THE EXPENDITURE OR MAKING THE INVESTMENT OR ACQUIRING T HE ASSET FOUND AND REMAINING UNEXPLAINED AS ON THE DATE OF SEARCH. THE ASSESSEE WILL BE ENTITLED TO THE ABOVE MENTIONED BENEFIT EVE N THOUGH THE ASSESSEE MAY NOT BE ABLE TO ESTABLISH A DIRECT/LIVE LINK/NEXUS OF THE SAID RESULTANT UNDISCLOSED INCOME WITH THE UNEXPLAI NED ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 12 EXPENDITURE/INVESTMENT/ASSET. IT MAY BE NO LESS FU NNY TO REALIZE THAT WHEN DIRECT LINK OF SOURCE OF AN EXPENDITURE/I NVESTMENT/ASSET IS ESTABLISHED, THE SAME CAN HARDLY BE TREATED AS U NEXPLAINED. OBVIOUSLY, AND UNDERSTANDABLY TOO, THE BENEFIT OF A FORESAID TELESCOPY/SET OFF/CREDIT OF THE SAID RESULTANT UNDI SCLOSED INCOME IS GIVEN ONLY WHEN THE EXPENDITURE/INVESTMENT/ASSET IS FOUND AS UNEXPLAINED DUE TO ANY DIRECT SOURCE OF THE SAME HA VING NOT BEEN ESTABLISHED, SO AS TO AVOID SEPARATE AND INDEPENDEN T ADDITION ON ACCOUNT OF THE SAID EXPENDITURE/INVESTMENT/ASSET, W HICH, THOUGH REMAINS UNEXPLAINED, YET BECAUSE THE ASSESSEE HAS S OME UNDISCLOSED INCOME AVAILABLE WITH HIM, HAVING RESUL TED FROM INTANGIBLE ADDITIONS. FOR ALLOWING THE AFORESAID B ENEFIT, IN OUR VIEW, A DIRECT/LIVE LINK/NEXUS, DATEWISE, OR OTHERW ISE, OF THE RESULTANT UNDISCLOSED INCOME WITH THE UNEXPLAINED EXPENDITURE/INVESTMENT/ASSET NEED HARDLY JUSTIFIABL Y BE INSISTED UPON, AND SUFFICE IT TO SHOW THAT THE SAME HAS AN I NDIRECT NEXUS OR TO EXPRESS IT, WITH MORE ACCURACY AND BETTER EXACTN ESS, THAT THE SAME MAY HAVE A PROBABLE NEXUS, AND THAT THE SAID I NTANGIBLE ADDITION PRECEDES THE UNEXPLAINED EXPENDITURE/INVES TMENT/ASSET, FOR WHICH SEPARATE/INDEPENDENT TANGIBLE ADDITION IS BEING SOUGHT TO BE MADE BY THE DEPARTMENT AND WHICH THE ASSESSEE SE EKS TO AVOID ON THE BASIS OF THE BENEFIT OF TELESCOPY/SET OFF/CR EDIT OF INCOME, BEING AVAILABLE WITH ASSESSEE, HAVING RESULTED FROM INTANGIBLE ADDITION. IN THE CASE OF ARUN KALA VS. ACIT (2005) 98 TTJ 104 6 (JAIPUR) IT HAS BEEN HELD THAT; THE ASSESSEE IS MERELY ASKING THE TELESCOPING BENEF IT OF THE INCOME EARNED FROM SATTA BUSINESS AGAINST THE PEAK WHICH WAS SURRENDERED AND DULY ASSESSED BY THE ASSESSING OFFI CER. BY CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE, BENEFIT OF TELESCOPING OR SET OFF OF SECRET PROFITS OR UNDISCLOSED INCOME OF THE ASSESSEE MAY CONSTITUTE A FUND FROM W HICH THE ASSESSEE MAY DRAW SUBSEQUENTLY FOR MEETING THE EXPE NDITURE OR MAKING INVESTMENTS. THE ASSESSING OFFICER MAY ALSO ALLOW BENEFIT OF TELESCOPING/SETTING OFF OF INCOME AGAINST EXPENDITURE/INVESTMENT, EVEN DURING THE CURRENT, AF TER LOOKING INTO THE FACT THAT UNEXPLAINED EXPENDITURE/INVESTMENT CO ULD BE REASONABLY ATTRIBUTED TO THE PRE-EXISTING FUND OF C ONCEALED INCOME OR THEY WERE REASONABLY EXPLAINED BY REFERENCE TO T HE CONCEALED INCOME EARNED IN THE RELEVANT YEAR. IT IS EVIDENT FROM THE JUDICIAL PRINCIPLES ENUNCIAT ED AS ABOVE, THE APPELLANTS CLAIM FOR TELESCOPING THE INVESTMEN T IN PROPERTIES FOR THE A.Y. 2002-03 INTO THE ADDITIONAL INCOME OF RS.92,09,500/- AND RS.67,96,200/- OFFERED FOR THE A.YS 2001-02 & 2 002-03 REQUIRES TO BE ACCEPTED. UNACCOUNTED PAYMENTS, UND ER THE FACTS ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 13 AND CIRCUMSTANCES OF THE CASE, CAN BE SOURCED TO TH E UNACCOUNTED INCOME DECLARED BY THE APPELLANT. ACCORDINGLY, IT CAN SAFELY BE CONCLUDED THAT UNACCOUNTED INVESTMENT OF RS.37,93,0 23/- IS EXPLAINED BY UNDISCLOSED INCOME OFFERED EARLIER. S INCE UNDISCLOSED AND ADDITIONAL INCOME OF RS.1,60,05,700/- HAS ALREA DY BEEN ASSESSED FOR THE A.YS 2001-02 & 2002-03, THE ADDITI ON OF RS.37,93,023/- IS CONSIDERED AS TELESCOPED INTO THE INCOME ALREADY ASSESSED AND ACCORDINGLY DELETED. 16. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL WITH THE SUBMISSION THAT THIS ASSESSEE HAS MADE AN OFFER OF UNDISCLOSED INCOME WHEN HE WAS NOT ABLE TO PROVE THE DETAILS OF RECEIPTS AND PAYMENTS. THE ASSESSEE HIMSELF HAS CLAIMED THAT HE HAS REPAID THE ENTIRE AMOUNT, THERE FORE, NO FUND IS AVAILABLE WITH HIM FOR MAKING THE SAID INVESTMENTS. THE LD. D.R. FURTHER CONTENDED THAT UNDER THESE CIRCUMSTANCES, THE A.O. HAS RIGHTL Y ADDED THE INVESTMENTS MADE BY THE ASSESSEES AS AN UNEXPLAINED INVESTMENT. 17. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND HAS SUBMITTED THAT INITIALLY THE ASSESSEE HAS CLAIMED THAT HE HAS RECE IVED CERTAIN AMOUNTS AND LATER ON IT WAS REPAID. BUT THESE CONTENTIONS OF T HE ASSESSEE ARE NOT ACCEPTED BY THE REVENUE AND THE ASSESSEE HAS FINALL Y ACCEPTED THE ENTIRE AMOUNT TO BE UNDISCLOSED INCOME. ONCE THE ASSESSEE HAS ADMITTED THE ENTIRE AMOUNT TO BE HIS UNDISCLOSED INCOME, THE FUN D TO THIS EXTENT IS AVAILABLE WITH THE ASSESSEE FOR ITS USE AND IF THE ASSESSEE HAS MADE CERTAIN INVESTMENTS WHICH ARE NOTICED BY THE A.O., THESE IN VESTMENTS ARE CERTAINLY OUT OF THE FUNDS AVAILABLE WITH THE ASSESSEE UNLESS AND UNTIL IT IS PROVED BY THE REVENUE THAT FUNDS AVAILABLE WITH THE ASSESSEE WERE SPENT SOMEWHERE ELSE. THE ADDITION ON ACCOUNT OF UNEXPLAINED INVES TMENT CANNOT BE MADE SEPARATELY. IF IT IS DONE IT WOULD AMOUNT TO A DOU BLE TAXATION. 18. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE LO WER AUTHORITIES AND THE LEGAL PROPOSITION ON THE SUBJECT AND WE FIND THAT O NCE THE ASSESSEE ADMITS A CERTAIN INCOME AS UNDISCLOSED INCOME AND PAID THE T AX THEREON, THE FUND TO THAT EXTENT IS AVAILABLE WITH THE ASSESSEE FOR MAKI NG THE INVESTMENT. THE INVESTMENT MADE BY THE ASSESSEE CANNOT BE TREATED T O BE UNEXPLAINED INVESTMENT UNLESS AND UNTIL IT IS PROVED THAT FUNDS AVAILABLE WITH THE ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 14 ASSESSEES WERE EXHAUSTED SOMEWHERE ELSE AND THE ASS ESSEE WAS LEFT WITH NO FUNDS. BUT IN THE INSTANT CASE, THE ASSESSEE HAS P AID THE TAXES ON THE UNDISCLOSED INCOME OFFERED BY IT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, FUNDS TO THAT EXTENT IS AV AILABLE WITH THE ASSESSEE FOR ITS INVESTMENT AND NO SEPARATE ADDITION CAN BE MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE CIT(A) AND WE FIND THAT HE HAS RIGHTLY ALLOWED THE TELESCO PING BETWEEN THE INCOME OFFERED BY THE ASSESSEES AND THE UNEXPLAINED INVEST MENTS. WE THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND WE CONFIRM THE SAME. ITA 167 & 168 OF 2010: 19. IN THESE APPEALS, THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A) DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINE D INVESTMENT U/S 69 OF THE ACT, AFTER DIRECTING THE ASSESSING OFFICER TO A LLOW THE TELESCOPING BETWEEN THE UNDISCLOSED INCOME OFFERED BY THE ASSESSEE AND THE UNEXPLAINED INVESTMENT. 20. THE BRIEF FACTS AVAILABLE ON RECORD IN BOTH THE ASSESSMENT YEARS ARE THAT THE ASSESSING OFFICER HAS OBSERVED THAT THE AS SESSEE ACQUIRED THE PROPERTIES FOR RS.11,41,245/- IN A.Y. 2003-04 AND F OR RS.8,14,250/- IN A.Y. 2004-05. THE ASSESSING OFFICER HAS MADE THE ADDITI ON OF THE SAME AFTER INVOKING THE PROVISIONS OF SECTION 69 OF THE ACT AS UNEXPLAINED INVESTMENT. 21. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WITH THE SUBMISSION THAT THE ASSESSEE HIMSELF HAS DECLARED T HE UNEXPLAINED INCOME AT RS.1,60,05,700/- IN A.Y. 2001-02 AND 2002-03 AND TH E SAID FUND WAS AVAILABLE WITH THE ASSESSEE FOR MAKING INVESTMENTS IN SUCCEEDING YEARS. IN ASSESSMENT YEAR 2002-03, THE ASSESSEE MADE THE INVE STMENT OF RS.37,93,023/- OUT OF THE SAID UNDISCLOSED INCOME A ND AFTER ADJUSTING THE SAME A SUBSTANTIAL AMOUNT WAS AVAILABLE WITH THE AS SESSEE FOR MAKING INVESTMENT IN PROPERTIES. THE INVESTMENT IN A.Y. 2 003-04 IN PROPERTIES WAS OF ONLY RS.11,41,245/- AND IN A.Y. 2004-05 IT WAS A T RS.8,14,250/-. THEREFORE, THE SAID INVESTMENT WAS MADE OUT OF THE SURPLUS FUNDS AVAILABLE ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 15 WITH THE ASSESSEES IN RELEVANT ASSESSMENT YEARS. T HE CIT(A) EXAMINED THE ISSUE IN THE LIGHT OF VARIOUS JUDGEMENTS AND HAS DE LETED THE ADDITIONS AFTER ALLOWING A TELESCOPY BETWEEN THE UNDISCLOSED INCOME AND THE UNDISCLOSED INVESTMENT. 22. NOW THE REVENUE IS BEFORE US WITH THE SUBMISSIO N THAT THE ASSESSEE HAS TAKEN A STAND WHILE UNDISCLOSED INCOME WAS NOTI CED THAT HE HAS RECEIVED CERTAIN AMOUNTS WHICH WERE RETURNED BACK AFTER A CE RTAIN PERIOD. THEREFORE, ONCE THE AMOUNT RECEIVED BY THE ASSESSEE WAS RETURN ED BACK, NO FUNDS WERE AVAILABLE WITH HIM FOR MAKING INVESTMENT. THE ARGU MENTS OF THE ASSESSEE WERE EXAMINED BY US IN THE FOREGOING APPEALS IN WHI CH WE HAVE CATEGORICALLY OBSERVED THAT ONCE THE ASSESSEE HAS SURRENDERED CER TAIN AMOUNTS ON ACCOUNT OF VARIOUS REASONS THAT FUND IS AVAILABLE WITH THE ASSESSEE FOR MAKING INVESTMENT IN ACQUIRING OF DIFFERENT PROPERTIES. U NLESS AND UNTIL IT IS PROVED BY THE REVENUE THAT THE FUNDS AVAILABLE WITH THE AS SESSEE WERE EXHAUSTED SOMEWHERE ELSE THE TELESCOPING BETWEEN THE UNDISCLO SED INCOME AND THE UNDISCLOSED INVESTMENT CANNOT BE DENIED. WE THEREF ORE FOLLOWING THE VIEW TAKEN IN FOREGOING APPEALS DECIDE THIS ISSUE IN FAV OUR OF THE ASSESSEE. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. ITA NOS.169 OF 2010 & 180 OF 2010: 23. THESE APPEALS ARE CROSS APPEALS PREFERRED BY TH E ASSESSEE AS WELL AS THE REVENUE AGAINST THE ORDER OF THE CIT(A) PERTAIN ING TO THE ASSESSMENT YEAR 2005-06. IN THE REVENUES APPEAL THE DELETION OF ADDITION OF RS.8,06,000/- MADE U/S 69 OF THE ACT ON ACCOUNT OF UNEXPLAINED INVESTMENT IS ALSO QUESTIONED. IN THIS YEAR ALSO THE A.O. NOT ICED THAT THE ASSESSEE HAS ACQUIRED THE PROPERTY FOR RS.8,06,000/- AND HE MADE THE ADDITION OF THE SAME ON ACCOUNT OF UNEXPLAINED INVESTMENT. BEFORE THE CIT(A), THE ASSESSEE TOOK THE SAME PLEA THAT THE INVESTMENT IN THE PROPE RTY WAS MADE OUT OF THE SURPLUS FUNDS AVAILABLE WITH THE ASSESSEES ON ACCOU NT OF DECLARATION OF UNDISCLOSED INCOME. FOLLOWING HIS EARLIER ORDERS, THE CIT(A) ALLOWED THE TELESCOPING BETWEEN THE UNDISCLOSED INCOME AND THE UNDISCLOSED INVESTMENT ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 16 MADE DURING THE YEAR AND DELETED THE ADDITIONS. NO W THE REVENUE IS IN APPEAL BEFORE US. THIS ISSUE HAS ALREADY BEEN EXAM INED BY US IN FOREGOING APPEALS WHERE WE HAVE TAKEN A VIEW THAT TELESCOPING BETWEEN THE UNDISCLOSED INCOME AND UNDISCLOSED INVESTMENT CAN B E ALLOWED UNLESS AND UNTIL IT IS PROVED THAT UNDISCLOSED INCOME WAS NOT AVAILABLE WITH THE ASSESSEE AND IT WAS EXHAUSTED SOMEWHERE ELSE. WE THEREFORE FOLLOWING OUR VIEW IN FOREGOING APPEALS, DECIDE THIS ISSUE IN FAVOUR OF T HE ASSESSEE. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) IN THIS REGARD. 24. THE NEXT CONTROVERSY RAISED IN THE REVENUES AP PEAL IS WITH REGARD TO THE DELETION OF SHORT TERM CAPITAL GAIN OF RS.24,65 ,525/-. IN THE ASSESSEES APPEAL, THE ASSESSEE HAS ASSAILED THE ORDER OF THE CIT(A) THAT HE HAS ERRED IN HOLDING THAT ASSESSEE HAS RECEIVED ON MONEY IN SALE TRANSACTIONS. 25. THE FACTS BORNE OUT IN THIS REGARD FROM THE ORD ERS OF THE LOWER AUTHORITIES ARE THAT DURING THE COURSE OF SEARCH IT CAME TO LIGHT THAT ASSESSEE HAS TRANSFERRED 20 ACRES OF LAND SITUATED AT RAVALK OL VILLAGE, MEDCHAL MANDAL, NEAR HYDERABAD TO M/S. JAYADARSHINI HOUSING PVT. LT D. DURING THE IMPUGNED PERIOD. ANOTHER SITE MEASURING 1930 SQ.YDS. AT KAN URU, VIJAYAWADA OWNED BY M/S. SUBHADARSI ESTATES WAS ALSO SOLD TO M/S. JA YADARSINI HOUSING PVT. LTD. IN THE SAME PERIOD. THE TRANSFER OF THIS LAND AT KANURU WAS EFFECTED BY THE ASSESSEE IN THE CAPACITY OF A MANAGING PARTNER ON BEHALF OF M/S. SUBHADARSI ESTATES. M/S. JAYADARSINI HOUSING PVT. LTD. WAS REPRESENTED BY SRI GORLA SAI BABU, MANAGING DIRECTOR IN BOTH THE T RANSACTIONS. THE A.O. OBSERVED THAT THE LAND AT RAVOLKOL VILLAGE WAS REGI STERED FOR A CONSIDERATION OF RS.15 LAKHS WHILE THE LAND AT KANURU WAS TRANSFE RRED FOR A CONSIDERATION OF RS.1.07 CRORES AS PER THE REGISTERED DOCUMENT. AS BOTH THE TRANSACTIONS WERE NOT RECORDED IN THE BOOKS OF ACCOUNT, STATEMEN TS ON OATH WERE RECORDED FROM BOTH THE BUYER AND THE SELLER. THE B UYER SRI G. SAIBABU IN HIS STATEMENT RECORDED U/S 132(4) OF THE ACT CONFIRMED THAT HE HAS PURCHASED BOTH THE ABOVE MENTIONED PROPERTIES FOR A CONSIDERA TION OF RS.3 CRORES THOUGH THE RECORDED AMOUNT IN THE REGISTERED DOCUME NT WAS ONLY RS.1.22 CRORES. HE ADMITTED THAT BALANCE SALE CONSIDERATIO N OF RS.1.78 CRORES WAS ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 17 PAID IN CASH. THE ASSESSEE WHEN CONFRONTED WITH T HE ADMISSION OF THE BUYER SHRI G. SAIBABU, CONFIRMED IN HIS STATEMENT RECORDE D U/S 132(4) OF THE ACT THAT HE HAD RECEIVED AN AMOUNT OF RS.1.78 CRORES IN CASH OVER AND ABOVE THE SALE CONSIDERATION IN THE REGISTERED DOCUMENTS. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE RETRACTED FROM HIS STATEMENT OF ADMISSION RECORDED DURING THE COURSE OF SEARCH BY W AY OF AN AFFIDAVIT WHEREIN IT WAS CONTENDED THAT THE EARLIER ADMISSION WAS GIVEN OUT OF CONFUSION. 26. THE A.O. REJECTED THE THEORY OF CONFUSION ON TH E PART OF THE ASSESSEE AND CONCLUDED THAT AS THE ADMISSION OF RECEIPT OF R S.1.78 CRORES IN CASH WAS CONFIRMED BY THE ASSESSEE ON TWO OCCASIONS NO CREDE NCE SHOULD BE ATTRIBUTED TO THE RETRACTION. AS BOTH THE ON MONEY TRANSACTIO NS WERE OUTSIDE THE BOOKS OF ACCOUNTS. THE AMOUNT OF RS.1.78 CRORES WAS APPO RTIONED BETWEEN THE ASSESSEE AND THE M/S. SUBHADARSI ESTATES BEING THE OWNERS OF TWO PROPERTIES IN THE RATIO OF SALE CONSIDERATION RECORDED IN THE REGISTERED DOCUMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS EE HAS PLEADED THAT THE AMOUNT OF RAVALKOL, MEDCHAL MANDAL WAS AGRICULTURAL LAND AND THEREFORE NO CAPITAL GAINS WOULD ARISE ON THE SALE OF LAND AS IT IS LOCATED OUTSIDE THE PERIPHERY OF 8 KMS. FROM THE MUNICIPAL LIMIT. THES E CONTENTIONS OF THE ASSESSEE WAS ALSO REJECTED BY THE A.O. 27. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) AND PLACED THE MAP IN SUPPORT OF HIS CONTENTION THAT LAND IN QUEST ION IS LOCATED OUTSIDE THE PERIPHERY OF 8 KMS. FROM THE MUNICIPAL LIMIT. THE CIT(A) ADMITTED THIS ADDITIONAL EVIDENCE AND HAVING PERUSED THE SAME, TH E CIT(A) HELD THAT RAVALKOL VILLAGE IS BEYOND MEDCHAL WHICH IS ITSELF A PANCHAYAT AND THE MEDCHAL AT THE DISTANCE OF 30 KMS. FROM HYDERABAD. THE AGRICULTURAL LAND SITUATED AT RAVALKOL VILLAGE WOULD FALL OUTSIDE 8 K MS. OF MUNICIPAL LIMITS. THEREFORE, THE SALE OF AGRICULTURAL LAND AT RAVALKO L VILLAGE DOES NOT ATTRACT CAPITAL GAIN. IN SUCH CASES, EVEN IF THE ON MONEY IS RECEIVED BY THE ASSESSEE, THE SAME CANNOT BE CHARGED TO CAPITAL GAI N TAX. ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 18 28. THE REVENUE HAS CHALLENGED THE ORDER OF THE CIT (A) ON THE GROUND THAT THE CIT(A) HAS ADMITTED THE JURISDICTIONAL MAP OF THE GREATER HYDERABAD MUNICIPAL CORPORATION WITHOUT CONFRONTING THE SAME TO THE ASSESSING OFFICER. THEREFORE, THE ADDITIONAL EVIDENCE WAS ADMITTED IN VIOLATION OF PROVISIONS OF RULE 46A OF THE I.T. RULES. THE LD. D.R. FURTHER C ONTENDED THAT IN THE LIGHT OF THESE FACTS, THE ORDER OF THE CIT(A) BE SET ASIDE A ND MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH THE DIREC TION TO RE-ADJUDICATE THE ISSUE IN THE LIGHT OF JURISDICTIONAL MAP OF GREAT HYDERAB AD MUNICIPAL CORPORATION. 29. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND HAS SUBMITTED THAT THE CIT(A) IS ALSO ARMED WITH CO-TERMINUS POWERS WI TH THAT OF THE ASSESSING OFFICER AND IS COMPETENT ENOUGH TO EXAMINE THE EVID ENCE FILED BEFORE HIM. SINCE THE CIT(A) HIMSELF HAS VERIFIED THE FACTS OF LOCATION OF THE AGRICULTURAL LAND, NO PURPOSE WOULD BE SERVED IN SENDING THE MAT TER BACK TO THE A.O. AGAIN. 30. WITH REGARD TO THE RECEIPT OF ON MONEY, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS MADE T HE STATEMENT DURING THE COURSE OF SEARCH ADMITTING THE RECEIPT OF ON MONEY UNDER UTTER CONFUSION AND WAS ALSO UNDER THE PRESSURE OF THE DEPARTMENT. THE STATEMENT WAS RETRACTED BY THE ASSESSEE BY FILING THE RETURN OF INCOME NOT INCLUDING THE ON MONEY TO BE ITS INCOME. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS ALSO THE ASSESSEE HAS FILED THE AFFIDAVIT STATING THE CIRCUM STANCES UNDER WHICH THE STATEMENT OF THE ASSESSEE WAS RECORDED BY THE SEARC H PARTY IN WHICH THE RECEIPT OF ON MONEY WAS ADMITTED. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT DURING THE COURSE OF SEARCH NO INCRI MINATING MATERIAL WAS FOUND WHICH CAN SUGGEST THE RECEIPT OF ON MONEY. T HEREFORE, THE ADDITION ON ACCOUNT OF ON MONEY ON THE BASIS OF MERE STATEMENT WHICH WERE LATTER ON RETRACTED IS NOT SUSTAINABLE IN THE EYES OF LAW. 31. THE LD. D.R. IN REBUTTAL HAS SUBMITTED THAT THE STATEMENT OF THE ASSESSEE WAS RECORDED ON 21.12.2006, WHEREAS THE SE ARCH WAS CONDUCTED ON 7.11.2006. THEREFORE, IT CANNOT BE SAID THAT THE S TATEMENT OF THE ASSESSEE ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 19 WAS RECORDED UNDER THE PRESSURE OF THE DEPARTMENT A ND THE ASSESSEE WAS NOT IN A PROPER STATE OF MIND FOR MAKING ANY STATEM ENT. DURING THE COURSE OF SEARCH, CERTAIN INCRIMINATING MATERIAL WAS FOUND WH ICH SUGGEST THE SALE AND PURCHASE OF THE PROPERTIES AND ON THE BASIS OF THOS E DOCUMENTS, THE STATEMENT OF BUYER OF THE IMPUGNED PROPERTY, SHRI S AI BABU, MANAGING DIRECTOR OF JAYADARSHINI HOUSING PVT. LTD. WAS RECO RDED IN WHICH HE HAS ADMITTED THE PAYMENT OF RS.1.78 CRORES IN EXCESS OF THE REGISTERED VALUES OF THE ABOVE SAID BOTH THE TRANSACTIONS OF SALE OF TWO PROPERTIES. WHEN THE STATEMENT WAS CONFRONTED TO THE ASSESSEE HE ADMITTE D THAT HE HAS RECEIVED THE SAME AMOUNT IN EXCESS OF THE REGISTERED VALUE O F THE TRANSACTIONS FOR BOTH THE SALES. THE SAID SALE TRANSACTIONS WERE NO T RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEES AND ALL THE AMOU NTS WERE RECEIVED IN CASH. THE LD. D.R. FURTHER INVITED OUR ATTENTION T HAT EVEN AT THE TIME OF FILING OF THE RETURN, THE ASSESSEE DID NOT RETRACT FROM HI S EARLIER STATEMENT OF RECEIPT OF ON MONEY/THE EXCESS AMOUNT OVER AND ABOV E THE SALE CONSIDERATION DECLARED IN THE REGISTERED SALE DOCUM ENTS. HE SIMPLY FILED THE RETURN OF INCOME NOT DECLARING THE RECEIPT OF ADDIT IONAL AMOUNT AS ADMITTED IN HIS STATEMENT. ON RECEIPT OF RETURN OF INCOME, THE ASSESSING OFFICER HAS ISSUED A QUESTIONNAIRE ON 28.1.2008 ASKING THE ASSE SSEE TO EXPLAIN AS TO WHY RS.1.78 CRORES BEING ON MONEY RECEIVED BY HIM ON TH E ABOVE SALE CONSIDERATION SHALL NOT BE TREATED AS UNDISCLOSED I NCOME FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSEE WAS ASKED TO PRODUCE TH E DETAILS WITH REGARD TO THE SALE CONSIDERATION ON OR BEFORE 18.2.2008. THI S NOTICE WAS NOT REPLIED BY THE ASSESSEE AND A FURTHER NOTICE DATED 24.9.2008 W AS ISSUED TO THE ASSESSEE THROUGH WHICH THE ASSESSEE WAS AGAIN ASKED TO PRODU CE THE DETAILS BEFORE 6.10.2008. EVEN UP TO THIS TIME ASSESSEE DID NOT R ETRACT THE EARLIER STATEMENT BY FILING ANY LETTER OR AFFIDAVIT. HE HA S FILED THE AFFIDAVIT RETRACTING FROM HIS EARLIER STATEMENT ON 8.12.2008 STATING THE REIN THAT UNDER UTTER CONFUSION IN UNDERSTANDING THE AMOUNT OF RS.1.78 CR ORES WAS ACCEPTED. THE AFORESAID FACTS CATEGORICALLY SPEAKS THAT THE ASSES SEE HAS NOT RETRACTED FROM HIS EARLIER STATEMENT AT THE EARLIEST OPPORTUNITY. HE HAS RETRACTED ONLY WHEN HE WAS CORNERED BY THE DEPARTMENT DURING THE COURSE OF ASSESSMENT ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 20 PROCEEDINGS. THEREFORE, THE SAID RETRACTION IS NO RETRACTION AND THE REVENUE HAS RIGHTLY ASSESSED THE ENTIRE ON MONEY AS UNDISCL OSED INCOME IN THE ASSESSEES HAND. 32. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE RECORD, WE FIND THAT THOUGH THE ASSESSEE HAS RAISED A CLAIM BEFORE THE ASSESSING OFFICER THAT THE LAND IS SITUATED OUTSIDE THE LIMIT OF THE GREATER HYDERABAD MUNICIPAL CORPORATION BUT NO EVIDENCE WAS FILED BEFORE HIM. JURISDICTIONAL MAP WAS FILED FIRST TIME BEFORE THE CIT(A). THE RULE 46A OF THE I.T. RULES CLEARLY SAYS THAT NO ADDITIONAL EVIDENCE SHALL BE ADMITTED BY THE CIT(A) UNLESS AND UNTIL IT IS CONFRONTED TO THE ASS ESSING OFFICER. IN THE INSTANT CASE UNDISPUTEDLY THE JURISDICTIONAL MAP WHICH CAN CLINCH THE ISSUE WAS ADMITTED BY THE CIT(A) WITHOUT GETTING IT CONFRONTE D TO THE ASSESSING OFFICER. THEREFORE, IT IS A VIOLATION OF PROVISIONS OF RULE 46A OF THE I.T. RULES. WE THEREFORE, OF THE VIEW THAT TO MEET THE ENDS OF JUS TICE, THIS ISSUE SHOULD BE RE-EXAMINED BY THE ASSESSING OFFICER IN THE LIGHT O F JURISDICTIONAL MAP OF GREATER HYDERABAD MUNICIPAL CORPORATION AFTER AFFOR DING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEES. IF IT IS PROVED THAT THE LAND IS SITUATED OUTSIDE THE MUNICIPAL LIMIT OF THE GREATER HYDERABAD MUNICI PAL CORPORATION THE IMPUGNED AGRICULTURAL LAND CEASED TO BE CAPITAL ASS ET AND NO CAPITAL GAIN CAN BE CHARGED THEREON AND IN THAT CASE ON MONEY RECEIV ED BY THE ASSESSEE ON SALE OF AGRICULTURAL LAND SHALL BE NOT CHARGED TO T AX. IF THE A.O. FINDS OTHERWISE HE MAY COMPUTE CAPITAL GAIN AS PER LAW. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE AND MATTER IS RESTORED TO T HE FILE OF THE A.O. WITH THE DIRECTION TO RE-ADJUDICATE THE ISSUE IN TERMS INDIC ATED ABOVE. 33. WITH REGARD TO THE RECEIPT OF ON MONEY IS CONCE RNED, WE FIND THAT THE SEARCH WAS CONDUCTED UPON THE RESIDENTIAL PREMISES OF THE ASSESSEE ALONG WITH THE BUSINESS PREMISES OF M/S. SUBHADARSHI CHIT FUNDS (P) LTD., AND SUBHADARSHI ESTATES ON 07.11.2006 AND DURING THE CO URSE OF SEARCH VARIOUS INCRIMINATING MATERIALS WERE FOUND SUGGESTING THE S ALE AND PURCHASE OF LAND OR PROPERTIES OUTSIDE THE BOOKS OF ACCOUNTS. ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 21 34. WITH REGARD TO THE IMPUGNED PROPERTIES I.E. 20 ACRE AGRICULTURAL LAND AT RAVALAKOOL VILLAGE AND THE LAND MEASURING 1930 SQ. YARDS AT VIJAYAWADA, THE BUYER OF THE PROPERTY SHRI G. SAI BABU, MANAGING DI RECTOR OF JAIDARSHINI HOUSING PVT. LTD., WAS EXAMINED AND IN HIS STATEMEN T RECORDED ON 9.11.2006, MUCH AFTER THE DATE OF SEARCH HAS ADMITTED CATEGORI CALLY THAT HE HAD PAID RS.1.78 CRORES TO THE ASSESSEE SHRI P. SANKARA RAO OVER AND ABOVE THE SALE CONSIDERATION RECORDED IN THE SALE DOCUMENT. THIS S TATEMENT OF BUYER WAS CONFRONTED TO THE ASSESSEE AND IN HIS STATEMENT REC ORDED ON 21.12.2006 THE ASSESSEE HAS ADMITTED THE RECEIPT OF RS.1.78 CRORES IN EXCESS OF THE REGISTERED VALUE OF THE TRANSACTIONS OF BOTH THE SA LES. THE RELEVANT QUESTION NO.6 AND ITS ANSWER IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: Q. IT IS SEEN FROM THE STATEMENT OF SRI SAI BABU, THE MANAGING DIRECTOR OF JDHPL, HE WAS PAID AROUND RS.1.78 CRORE S IN EXCESS OF THE REGISTERED VALUE OF THE ABOVE SAID TRANSACTI ONS TOWARDS SALE CONSIDERATION. DO YOU AGREE AND HAVE YOU RECOV ERED THIS AMOUNT? A. YES, I DO CONFIRM THAT I HAVE RECEIVED AROUND RS.1. 78 CRORES IN EXCESS OF THE REGISTERED VALUE OF THE TRANSACTIO NS FOR BOTH THE SALES. THIS WAS RECEIVED IN CASH. 35. SINCE THE STATEMENT OF THE ASSESSEE WAS RECORDE D ON 21.12.2006, MUCH AFTER THE SEARCH I.E. ON 07.11.2006, IT CANNOT BE SAID THAT THE ASSESSEE WAS UNDER THE STATE OF UTTER CONFUSION OR NOT IN A PROPER STATE OF MIND WHILE MAKING THE STATEMENT ON ACCOUNT OF PRESSURE FROM TH E DEPARTMENT. THE STATEMENT OF THE ASSESSEE COULD HAVE BEEN RETRACTED EVEN AT THE TIME OF FILING THE RETURN OF INCOME. THE RETURN OF INCOME W AS EXAMINED BY THE ASSESSING OFFICER AND A QUESTIONNAIRE WAS ISSUED ON 28.1.2008 IN WHICH THE ASSESSING OFFICER HAS RAISED A SPECIFIC QUERY AS TO WHY THE ADDITIONAL INCOME OF RS.1.78 CRORES WAS NOT OFFERED TO TAX. THE ASSES SING OFFICER HAS GIVEN TIME TO THE ASSESSEE FOR FURNISHING THE DETAILS UP TO 18 .2.2008 BUT DESPITE OF THIS NOTICE THE ASSESSEE DID NOT COME FORWARD TO RETRACT FROM HIS EARLIER STATEMENT ADMITTING THE RECEIPT OF ON MONEY. THEREA FTER THE ASSESSING OFFICER FURTHER ISSUED A NOTICE ON 24.9.2008 ASKING THE ASSESSEE AGAIN AS TO ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 22 WHY THE CAPITAL GAIN SHOULD NOT BE WORKED OUT ON TH E TOTAL CONSIDERATION INCLUDING THE RS.1.78 CRORES ON MONEY RECEIVED BY T HE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THIS NOTICE WAS TO BE REPLIED BY 6.10.2010, BUT THE ASSESSEE AGAIN DID NOT COME FORWARD EITHER TO REPLY TO THAT NOTICE OR TO RETRACT FROM THE EARLIER STATEMENT. THE ASSESSMENT WAS TO BE COMPLETED BEFORE 31 ST DECEMBER, 2008 AND THE ASSESSEE HAS FILED AN AFFID AVIT RETRACTING FROM THE EARLIER STATEMENT ON 8.12.2008 STATING THE REIN THAT HE HAS ACCEPTED THE ADDITIONAL AMOUNT OF RS.1.78 CRORES BECAUSE OF UTTER CONFUSION IN UNDERSTANDING. NOTHING HAS BEEN PLACED ON RECORD TO JUSTIFY OR TO EXPLAIN AS TO WHY THE ASSESSEE HAS NOT RETRACTED FROM HIS EARL IER STATEMENT DESPITE A QUERY AND THE NOTICES ISSUED BY THE ASSESSING OFFIC ER, IF HIS STATEMENT WAS RECORDED IN UTTER CONFUSION OF MIND. THE EXPLANATIO N PUT FORTH BY THE ASSESSEE DOES NOT APPEAR TO BE REASONABLE. HAD IT BEEN TRUTH THEREIN THE ASSESSEE WOULD HAVE RETRACTED FROM HIS EARLIER STAT EMENT AT THE EARLIEST OPPORTUNITY AVAILABLE TO IT. 36. WE DO NOT RULE OUT THE POSSIBILITY THAT SOMETIM ES DURING THE COURSE OF SEARCH THE ASSESSEE MAY NOT BE IN A PROPER STATE OF MIND UNDER VARIOUS PRESSURE AND HE ADMITS INCOME UNDER DIFFERENT HEADS THOUGH HE HAS REASONABLE EXPLANATION FOR THOSE INCOMES. BUT IN SU CH CIRCUMSTANCES THE ASSESSEE SHOULD COME FORWARD AND RETRACT FROM THE E ARLIER STATEMENT RECORDED DURING THE COURSE OF SEARCH AT THE EARLIES T OPPORTUNITY AVAILABLE TO IT. HE SHOULD NOT WAIT FOR THE START OF ASSESSMENT PROCEEDINGS. AS AND WHEN THE SEARCH IS OVER, THE ASSESSEE HAS EVERY RIGHT TO CONSULT THE PROFESSIONALS ON THE STATEMENT MADE BY IT DURING THE COURSE OF SE ARCH AND IF HE IS ADVISED SO, HE MAY RETRACT FROM THE STATEMENT RECORDED DURI NG THE COURSE OF SEARCH AND FURNISH VALID EXPLANATION EITHER TO THE SEARCH PARTY OR TO THE ASSESSING OFFICER OR TO THE COMMISSIONER HAVING JURISDICTION OVER THE CONCERNED ASSESSING OFFICER. IN SUCH CIRCUMSTANCES, THE CONTE NTION OF THE ASSESSEE CAN BE EXPECTED THAT HIS STATEMENT MIGHT HAVE BEEN RECO RDED UNDER THE INFLUENCE OF COERCION OR UNDER UTTER CONFUSION. BUT IF THE ASSESSEE TRIED TO ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 23 RETRACT FROM HIS EARLIER STATEMENT AFTER A SUBSTANT IAL PERIOD OF TIME, SUCH TYPE OF RETRACTION IS FAR FROM TRUTH AND CANNOT BE ACCEP TED. 37. IN THE INSTANT CASE, THE STATEMENT OF THE ASSES SEE WAS NOT EVEN RECORDED DURING THE COURSE OF SEARCH. THE SEARCH WA S CONDUCTED ON 7.11.2006 AND HIS STATEMENT WAS RECORDED ON 21.12.2 006. THEREFORE, IT CANNOT BE SAID THAT THE STATEMENT WAS RECORDED UNDE R UTTER CONFUSION AS HE HAS SUFFICIENT TIME TO CONSULT THE PROFESSIONALS. M OREOVER THE ASSESSEE HAS FILED THE AFFIDAVIT RETRACTING FROM HIS EARLIER STA TEMENT ON 8.12.2008 I.E. ALMOST AFTER 2 YEARS. THEREFORE, THE SAID RETRACTIO N CANNOT BE CALLED TO BE VALID RETRACTION AND HAS NO EVIDENTIARY VALUE. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) WHO HAS RIGHT LY TREATED THE RECEIPT OF ON MONEY IN THE HANDS OF THE ASSESSEE AS WELL AS SUBHA DARSHI ESTATES, THE OTHER ASSESSEE, ON SALE OF AFORESAID TWO PROPERTIES I.E. 20 ACRES OF AGRICULTURAL LAND AT RAVALAKOLI VILLAGE AND THE LAND MEASURING 1930 S Q. YARDS AT VIJAYAWADA. 38. EITHER IN THE STATEMENT OR DURING THE COURSE OF SEARCH NOTHING HAS BEEN FOUND TO SHOW THAT HOW MUCH MONEY WAS RECEIVED ON ACCOUNT OF SALE OF AGRICULTURAL LAND. THE ASSESSING OFFICER AND THE REVENUE AUTHORITIES ALLOCATED THE ENTIRE MONEY ON BOTH SALE TRANSACTION S ON DIFFERENT BASIS AND THE SAME IS ALSO UNDER DISPUTE BEFORE US. THE ISSUE OF ALLOCATION OF ON MONEY IS ALSO UNDER DISPUTE IN ANOTHER ASSESSEE I.E. SUBH ADARSHI ESTATES ALSO. WE THEREFORE, ADJUDICATE THIS ISSUE IN THE APPEAL OF S UBHDARSHI ESTATES I.E. ITA NO.179 OF 2010. ITA 179 OF 2010: 39. THIS APPEAL IS PREFERRED BY THE ASSESSEE I.E. M /S. SUBHDARSI ESTATES, ASSAILING THE ORDER OF THE CIT(A) ON A SOLITARY GRO UND THAT THE CIT(A) HAS ERRED IN ENHANCING THE ADDITION MADE BY THE A.O. OF RS.1,56,11,475/- TO RS.1,61,71,166/- WITHOUT APPRECIATING THAT THERE IS NO ON MONEY RECEIVED ON SALE OF LAND AT KANUR. SO FAR AS THE RECEIPT OF ON MONEY IS CONCERNED, WE HAVE GIVEN A CATEGORICAL FINDING IN FOREGOING PARAS THAT ON MONEY WAS RECEIVED ON SALE OF BOTH THE LANDS I.E. AGRICULTURA L LAND OF 20 ACRES AND LAND MEASURING 1930 SQ.YDS. AT KANUR, VIJAYAWADA. THE L AND SITE AT KANUR WAS OWNED BY THE ASSESSEE M/S. SUBHDARSI ESTATES, WHERE AS THE AGRICULTURAL LAND ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 24 WAS OWNED BY P. SANKARA RAO, THE MANAGING PARTNER O F THE ASSESSEE FIRM. IN THIS APPEAL ALSO THE ASSESSEE HAS ALSO RAISED TH E PLEA OF RETRACTION BUT THAT ARGUMENT HAS ALREADY BEEN DEALT BY US IN FOREGOING APPEALS. THEREFORE, AFTER CONFIRMING THE RECEIPT OF ON MONEY BY THE ASSESSEE AND SHRI P. SANKARA RAO ON SALE OF RESPECTIVE LANDS TO M/S. JAYADARSINI HOU SING PRVT. LTD. THE ISSUE LEFT FOR ADJUDICATION IS ONLY THE AMOUNT OF ON MONEY REC EIPT ON SALE OF AFORESAID LANDS I.E. LAND AT KANUR AND AGRICULTURAL LAND AT R AVALKOL VILLAGE. 40. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSE E HAS EMPHATICALLY ARGUED THAT WHATEVER ON MONEY IF RECEIVED IT WAS RE CEIVED ON SALE OF AGRICULTURAL LAND BY SHRI P. SANKARA RAO IN AN INDI VIDUAL CAPACITY. THE CIRCLE RATES FOR THE PURPOSE OF STAMP DUTY ON SALE DEED AR E ALWAYS HIGHER IN THE URBAN AREAS THAN THE VILLAGES FOR THE AGRICULTURAL LANDS. SOMETIMES THE CIRCLE RATES IN URBAN AREAS ARE MORE THAN THE RATES ON WHI CH ACTUAL SALE TRANSACTION WAS EFFECTED. THEREFORE, THE POSSIBILITY OF RECEIP T OF ON MONEY ARE VERY REMOTE IN SALE TRANSACTIONS OF THE LAND SITUATED IN URBAN AREAS. THE LD. COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENT ION TO THE STATEMENT OF THE ASSESSEE RECORDED BY THE ASSESSING OFFICER WHICH IS AVAILABLE AT PG.NO.121 TO 128 OF THE COMPILATION OF THE ASSESSEE IN WHICH IN RESPONSE TO QUESTION NO.11 THE ASSESSEE HAS DEPOSED WITH REGARD TO THE SOURCE OF INVESTMENT OF THE PROPERTY PURCHASED ON 1.12.2004 THAT IT WAS OUT OF THE SALE CONSIDERATION OF RS.1.78 CRORES RECEIVED FROM M/S. JAYADARSHINI HOUS ING PVT. LTD. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT AGRICULTURAL LAND WAS SOLD IN 2004, WHEREAS THE LAND AT KANUR, VIJAYAWADA WAS SOLD IN 2005. THEREFORE, THE MONEY INVESTED IN ACQUIRING THE OTHE R PROPERTIES IN 2004 WAS OUT OF THE SALE CONSIDERATIONS RECEIVED BY THE ASSE SSEES ON SALE OF AGRICULTURAL LANDS. THE LD. COUNSEL FOR THE ASSESS EE FURTHER CONTENDED THAT THE CIT(A) HAS ENHANCED THE ADDITIONS WITHOUT ISSUI NG ANY NOTICE. THEREFORE, THE ADDITION MADE ON ACCOUNT OF ENHANCEMENT IS NOT SUSTAINABLE IN THE EYES OF LAW AS HE WAS REQUIRED TO ISSUE NOTICE. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO ARGUED IN THE ALTERNATIVE THAT IF ANY ON M ONEY IS HELD TO BE RECEIVED ON ACCOUNT OF SALE OF THIS LAND AT KANUR, VIJAYAWAD A THE AMOUNT OF THE SAME SHOULD BE MEAGER EITHER AT 5 OR 10% OF THE TOTAL ON MONEY RECEIVED. ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 25 41. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT G ENERALLY MORE ON MONEY IS BEING RECEIVED ON SALE OF PROPERTIES IN TH E URBAN AREAS IN COMPARISON TO VILLAGES. THEREFORE, THE CIT(A) HAS RIGHTLY ALLOCATED THE TOTAL ON MONEY IN BOTH THE TRANSACTIONS. WITH REGARD TO THE NOTICE REQUIRED TO BE ISSUED BY THE CIT(A) BEFORE ENHANCEMENT OF INCOME, THE LD. D.R. HAS SUBMITTED THAT CIT(A) HAS NOT MADE ANY SUCH ADDITIO NS FOR WHICH NOTICE IS REQUIRED. HE HAS SIMPLY ALLOCATED THE ENTIRE ON MO NEY IN BOTH THE SALE TRANSACTIONS AND THIS ISSUE WAS BEFORE HIM FOR ADJU DICATION. 42. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE RECORD AND THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT ON MONEY OF RS.1.78 CRORES WAS RECEIVED BY SHRI P. SANKARA RAO IN HIS PERSONAL CAPACITY AS WELL AS ON BEHALF OF SUBHDARSHI ESTATES, THE PRE SENT ASSESSEE ON SALE OF AGRICULTURAL LAND OF 20 ACRES AT RAVALKOL VILLAGE A ND LAND MEASURING 1930 SQ.YDS. AT KANUR, VIJAYAWADA. IN FOREGOING APPEALS , WE HAVE ALREADY ADJUDICATED THE ISSUE OF RECEIPT OF ON MONEY IN THE LIGHT OF VARIOUS EVIDENCE AND WE HAVE CONCLUDED THAT SAID ON MONEY WAS RECEIV ED BY SHRI P. SANKARA RAO AND M/S. SUBHDARSHI ESTATES. NOW THE QUESTION ARISE AS TO WHAT WOULD BE THE AMOUNT OF ON MONEY RECEIVED BY THE ASSESSEE I.E. P. SANKARA RAO AND M/S. SUBHDARSHI ESTATES ON SALE OF THEIR RESPECTIVE PIECE OF LAND. IN THIS REGARD, WE HAVE EXAMINED VARIOUS ASPECTS AND THE ST ATEMENTS RECORDED BY THE ASSESSING OFFICER AND WE FIND THAT IN RESPONSE TO REPLY TO QUESTION NO.11 WITH REGARD TO THE SOURCE OF INVESTMENT OF THE PROP ERTY PURCHASED ON 1.12.2004 THE ASSESSEE HAS DEPOSED THAT THIS PROPER TY WAS PURCHASED OUT OF THE SALE CONSIDERATION OF RS.1.78 CRORES RECEIVED F ROM JAYADARSHINI HOUSING PVT. LTD. WE ARE ALSO NOT OBLIVIOUS TO THE CURRENT TENDENCY OF INCREASE IN CIRCLE RATES FOR THE PURPOSE OF STAMP DUTY BY THE S TATE GOVERNMENT. THE CIRCLE RATES ARE FREQUENTLY REVISED IN THE URBAN AR EAS IN COMPARISON TO THE AGRICULTURAL LANDS SITUATED IN VILLAGES. WE HAVE A LSO TAKEN INTO ACCOUNT THE AREA OF LAND SOLD IN BOTH THE TRANSACTIONS. THE AG RICULTURAL LAND SOLD WAS OF 20 ACRES, WHEREAS THE LAND AT KANUR WAS ONLY AT 193 0 SQ.YDS. WHEREVER THE CIRCLE RATES ARE REVISED IN THE URBAN AREAS THE DIF FERENCE BETWEEN THE ACTUAL ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 26 SALE CONSIDERATION AND SALE CONSIDERATION DECLARED IN THE SALE DEED BECOMES VERY LESS AND POSSIBILITY OF RECEIPT OF ON MONEY IS REDUCED. 43. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRC UMSTANCES OF THE CASE, IN THE SUCCEEDING PARAGRAPHS, WE HAVE ATTEMPTED TO ALLOCAT E THE ON MONEY COMPONENT BETWEEN THE TWO PROPERTIES ON SOME EQUITA BLE BASIS. 44. THE ACTUAL CONSIDERATION RECEIVED ON SALE OF TWO PROPERTIES LOCATED IN TWO DIFFERENT LOCATIONS IS RS.300 LAKHS. HOWEVER T HE APPARENT CONSIDERATION DECLARED IN THE CONVEYANCE DEEDS IS GIVEN BELOW: DETAILS OF PROPERTIES EXTENT VALUE AV. RATE (A) VACANT SITE IN VIJAYAWADA 1930 SQ. YARDS RS.108 LAKHS. RS.5613/- PER SQ. YARD (B) AGRI. LANDS LOCATED IN VILLAGE 20 ACRES RS. 11 LAKHS RS.54563/- (APPROX.96800 PER ACR E. SQ. YARDS) (OR) RS.11.27 PER SQ. YARD. ------------------- RS.119 LAKHS =========== THUS THERE IS A DIFFERENCE OF RS.181 LAKHS BETWEEN APPARENT CONSIDERATION AND ACTUAL CONSIDERATION AND THE SAME IS CALLED ON MONEY. SINCE THE DETAILS OF ACTUAL CONSIDERATION OF BOTH THE PROPERT IES ARE NOT AVAILABLE, ONE HAS TO ALLOCATE THE ON MONEY COMPONENT ON SOME EQ UITABLE BASIS BETWEEN THE TWO PROPERTIES. THE AO HAS ADOPTED THE APPARE NT SALE CONSIDERATION AS THE BASIS FOR ALLOCATION OF THE ON MONEY COMPONENT. HOWEVER, THE SALES VALUE OF ANY PROPERTY IS ARRIVED AT BY MULTIPLYING THE EXTENT OR AREA OF THE PROPERTY WITH THE SALES RATE. THUS THE AGGREGATE SALES CONSIDERATION OF ANY PROPERTY IS THE COMBINATION OF BOTH THE AREA OR EX TENT AND SALES RATE. HENCE, FOR THE PURPOSE OF ALLOCATION OF ON MONEY C OMPONENT, ONE CANNOT ADOPT INDEPENDENTLY EITHER THE SALES VALUE OR AR EA OR EXTENT AS THE BASIS, SINCE IT WOULD GIVE MISLEADING RESULTS. FOR EXAMPL E, THE ASSESSING OFFICER HAS TAKEN APPARENT SALES CONSIDERATION AS THE BASIS O F ALLOCATION OF ON MONEY AND ACCORDING TO THAT METHOD A SUM OF RS.156 LAKHS IS ALLOCATED TO THE VACANT SITE LOCATED IN VIJAYAWADA. HOWEVER, IF THE AREA OR EXTENT OF THE ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 27 PROPERTIES IS TAKEN AS THE BASIS OF ALLOCATION, THE N THE ON MONEY ALLOCABLE TO THE VACANT SITE LOCATED IN VIJAYAWADA WILL WORK OUT TO RS.3.50 LAKHS. THUS IT IS IMPERATIVE TO ALLOCATE THE ON MONEY BETWEEN THE TWO PROPERTIES ON SOME EQUITABLE BASIS BY TAKING INTO ACCOUNT BOTH THE SA LES VALUE AND AREA OR EXTENT. 45. HOWEVER, IN THE INSTANT CASE, THERE ARE MA NY CONSTRAINTS IN MAKING THE ALLOCATION OF ON MONEY BETWEEN THE TWO PROPER TIES, SOME OF WHICH AS DETAILED BELOW: (A) THE CHARACTERISTICS OF BOTH THE PROPERTIES ARE DIF FERENT AND HENCE THEY ARE NOT COMPARABLES AND THEY STAND ON DIFFEREN T FOOTING, I.E. ONE IS A VACANT SITE LOCATED IN AN URBAN AREA AND A NOTHER ONE IS AN AGRICULTURAL LAND LOCATED IN A VILLAGE. (B) THE EXTENT OF THE URBAN PROPERTY IS MEASURED IN SQU ARE YARDS, WHILE THE VILLAGE PROPERTY IS MEASURED IN ACRES. (C) THE CIRCLE RATES FIXED BY THE SUB REGISTRAR OFFICE FOR STAMP DUTY PURPOSES (SRO RATES) ARE FIXED ON PER SQ. YARD BA SIS IN URBAN AREAS, WHILE THE SAME IS FIXED IN PER ACRE BASIS IN VILLAGE AREAS. SINCE THE AGRICULTURAL LANDS ARE GENERALLY TRANSFER RED IN BETWEEN THE FARMERS, THE FREQUENCY OF UPWARD REVISION OF SR O RATES IS USUALLY LOW. (D) HOWEVER, THE SRO RATES ARE REVISED FREQUENTLY IN UR BAN AREAS CONSIDERING THE RISE IN MARKET RATES. THE FREQUENC Y OF PROPERTY TRANSACTION IN URBAN AREA IS USUALLY HIGH. HOWEVER THE FREQUENCY OF PROPERTY TRANSACTIONS IN VILLAGE AREA IS USUALLY LOW AND ALSO FOR THE REASON STATED IN POINT (C) SUPRA, THE FREQUENCY OF REVISION OF SRO RATES IN VILLAGE AREA IS ALSO LOW. (E) FOR THE REASONS STATED IN POINT (D) SUPRA, THE GAP BETWEEN THE MARKET RATE AND SRO RATE OF A PROPERTY LOCATED IN U RBAN AREA IS MINIMAL. HOWEVER, SUCH GAP TENDS TO BE HIGH FOR VI LLAGE LANDS, PARTICULARLY IN RESPECT OF THOSE LANDS LOCATED IN T HOSE AREAS WHERE HIGH DEVELOPMENT POTENTIALS ARE SEEN IN NEAR FUTURE . THE MARKET RATES WILL INCREASE RAPIDLY WHEN MORE DEVELOPMENT A CTIVITIES ARE EXPECTED IN THOSE AREAS AND IN SUCH CASES, THE GAP BETWEEN THE SRO RATES AND MARKET RATES WILL BE HIGH. 46. IN VIEW OF THE CONSTRAINTS DISCUSSED ABOVE, IT IS INEVITABLE FOR ANYBODY TO MAKE CERTAIN ASSUMPTIONS BEFORE PROCEEDING TO CA RRY OUT THE EXERCISE OF ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 28 ALLOCATION OF ON MONEY BETWEEN THE TWO PROPERTIES, PARTICULARLY WHEN THOSE PROPERTIES STAND IN DIFFERENT FOOTING. WE MAY MAKE IT CLEAR THAT ANY METHOD FOLLOWED FOR THIS PURPOSE WOULD GIVE APPROXIMATE RE SULTS ONLY IN VIEW OF THE CONSTRAINTS STATED ABOVE AND ALSO IN VIEW OF THE AS SUMPTIONS SO MADE. 47. WE SHALL NOW PROCEED TO ALLOCATE THE ON MO NEY BY FOLLOWING DIFFERENT METHODS OF ALLOCATION AND THEN TRY TO ARR IVE AT AN EQUITABLE BASIS OF ALLOCATION. FOR THIS PURPOSE, WE PREFER TO ALLOCAT E THE ACTUAL CONSIDERATION OF RS.300 LAKHS BETWEEN THE TWO PROPERTIES AND THEN AR RIVE AT THE ON MONEY ATTRIBUTABLE TO THE TWO PROPERTIES BY DEDUCTING THE RESPECTIVE APPARENT SALE CONSIDERATION. WE REFER THE VACANT SITE LOCATED I N VIJAYAWADA AS URBAN PROPERTY AND THE AGRICULTURAL LANDS LOCATED IN THE VILLAGE NEAR HYDERABAD AS VILLAGE AGRI. LAND WE MAKE FOLLOWING ASSUMPTIONS: (A) THE GAP BETWEEN THE SRO RATES AND MARKET RATES IS LOW IN RESPECT OF URBAN PROPERTY AND THE SAME IS HIGH IN RESPECT O F VILLAGE LAND. (B) IN PAGE 3 OF THE ASSESSMENT ORDER IN THE CASE OF M/S SUBHADARSI ESTATES, THE ASSESSING OFFICER HAS EXTRACTED QUESTI ON NO.5 AND ANSWER TO THE SAME FROM THE STATEMENT TAKEN FROM SRI GORIA SAI BA BU, THE PURCHASER OF THE URBAN PROPERTY. ACCORDING TO THE SAID STATEMENT, H E PURCHASED THE IMPUGNED URBAN LAND FOR RS.107 LAKHS FROM THE ASSES SEE HEREIN IN THE YEAR 2004-05 AND SOLD THE SAME FOR 115 LAKHS IN THE YEAR 2005, I.E. WITH A PROFIT OF RS.8.00 LAKHS. THIS STATEMENT REVEALS THE FACT THA T THE INCREASE IN THE RATE OF URBAN PROPERTY IS ABOUT 7% ONLY IN ABOUT ONE YEAR P ERIOD. THERE WAS NO OCCASION FOR THE TAX AUTHORITIES TO FIND ANY ON MON EY IN THE SALE EFFECTED BY SRI GORIA SAI BABUS COMPANY. IF MORE PORTION OF O N MONEY IS ALLOCATED TO THE URBAN LAND, THEN THERE WILL BE HEAVY LOSS IN TH E HANDS OF GORIA SURI BABUS COMPANY, WHICH COULD NOT HAVE BEEN THE FACT CLOSE T O REALITY, PARTICULARLY IN VIEW OF THE FACT THAT THE GORIA SURI BABUS COMPANY IS ALREADY ENGAGED IN THE REAL ESTATE BUSINESS. IN THESE CIRCUMSTANCES, IN O UR VIEW, IT WOULD BE REASONABLE TO ASSUME THAT THE GAP BETWEEN THE MARKE T RATE AND SRO RATE IS LOW. ACCORDINGLY, IN THE FIRST METHOD, WE HAVE ATT EMPTED TO CALCULATE THE MARKET RATE BY ADDING 20% TO 40% TO THE SRO RATE OF THE URBAN PROPERTY. AFTER SO ARRIVING THE MARKET VALUE OF THE URBAN PRO PERTY, THE DIFFERENCE BETWEEN RS.300 LAKHS AND THE VALUE SO ARRIVED AT IS TAKEN AS THE VALUE OF VILLAGE AGRI LAND. (C) THE VILLAGE AGRI. LANDS ARE LOCATED IN VILLAGE S COMING UNDER MEDCHAL MANDAL OF HYDERABAD. THE ASSESSEE SHRI P.S ANKAR RAO HAS SOLD 20 ACRES OF LAND IN THE YEAR 2005 @ 11.27 PER SQ. YARD . IN THE SAME YEAR, HE HAS PURCHASED 1000 SQ. YARDS OF DEVELOPED PLOT IN A VILLAGE FALLING IN THE ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 29 ABOVE SAID MANDAL FOR A CONSIDERATION OF RS.4.00 LA KHS, I.E. AT RS.400 PER SQ. YARD, WHICH IS 35 TIMES MORE THAN THE VALUE OF VILL AGE AGRI. LAND SOLD . THIS IS EVIDENT FROM THE STATEMENT TAKEN FROM SHRI GORIA SAI BABU, WHICH IS EXTRACTED IN PAGES 3 AND 4 OF THE ASSESSMENT ORDER OF M/S SUBHADARSI ESTATES. HENCE, IN OUR VIEW, IT WOULD BE REASONABL E TO ASSUME THAT THE THE GAP BETWEEN MARKET RATES AND SRO RATES ARE VERY MUC H HIGHER IN THE CASE OF VILLAGE AGRI. LAND. ACCORDINGLY IT IS ASSUMED THAT THE GAP IS 10 TIMES, 15 TIMES AND 20 TIMES IN THE SECOND METHOD. THE VALUE SO ARRIVED IS TAKEN AS THE MARKET VALUE OF VILLAGE AGRI. LAND. THE DIFFERE NCE BETWEEN RS.300 LAKHS AND THE VALUE SO ARRIVED AT IS TAKEN AS THE VALUE O F URBAN LAND. I METHOD : 48. NOW LET US PROCEED TO ARRIVE AT THE MARKET RA TE OF BOTH PROPERTIES BY FIRST ASCERTAINING THE MARKET VALUE OF URBAN VACANT LAND. THE VALUE OF URBAN VACANT LAND IS ARRIVED BY MAKING THREE TYPES OF AS SUMPTIONS, I.E THE DIFFERENCE BETWEEN SRO RATES AND MARKET RATES IS TA KEN AT 20%, 30% AND 40%. THE AVERAGE RATE OF URBAN VACANT LAND AS PER THE CONVEYANCE DEED IS RS.5,613/- PER SQ. YARD. (A) THE DIFFERENCE BETWEEN THE SRO RATE AND MARKET RATE IS TAKEN AS 20%. THEN THE VALUE OF VACANT LAND IS (RS.5613/- + 20% ) X 1930 SQ. YARDS = RS.130 LAKHS. THEN THE BALANCE CONSIDERATI ON OF 170 LAKHS IS TAKEN AS THE VALUE OF VILLAGE AGRI. LAND. THE DIFFERENCE BETWEEN THE ABOVE SAID MARKET VALUES AND THE APPARENT CONSIDERATION IS TAK EN AS THE ON MONEY PAYMENT OF RESPECTIVE PROPERTIES. URBAN LAND 130 LAKHS (-) 108 LAKHS = 22 LAKHS (12%) VILLAGE LAND 170 LAKHS (-) 11 LAKHS = 159 LAKHS (88%) (B) THE DIFFERENCE BETWEEN THE SRO RATE AND MARKET RATE IS TAKEN AS 30%. THEN THE VALUE OF VACANT LAND IS (RS.5613/- + 30% ) X 1930 SQ. YARDS = RS.141 LAKHS. THEN THE BALANCE CONSIDERATI ON OF 159 LAKHS IS TAKEN AS THE VALUE OF VILLAGE LAND. THEN THE DIFFERENCE BETWEEN THE ABOVE SAID MARKET VALUES AND THE APPARENT CONSIDERATION IS TAK EN AS THE ON MONEY PAYMENT OF RESPECTIVE PROPERTIES. URBAN LAND 141 LAKHS (-) 108 LAKHS = 33 LAKHS (18%) VILLAGE LAND 159 LAKHS (-) 11 LAKHS = 148 LAKHS (82%) ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 30 (C) THE DIFFERENCE BETWEEN THE SRO RATE AND MARKET RATE IS TAKEN AS 40%. THEN THE VALUE OF VACANT LAND IS (RS.5613/- + 40% ) X 1930 SQ. YARDS = RS.152 LAKHS. THEN THE BALANCE CONSIDERATI ON OF 148 LAKHS IS TAKEN AS THE VALUE OF VILLAGE LAND. THEN THE DIFFERENCE BETWEEN THE ABOVE SAID MARKET VALUES AND THE APPARENT CONSIDERATION IS TAK EN AS THE ON MONEY PAYMENT OF RESPECTIVE PROPERTIES. URBAN LAND 152 LAKHS (-) 108 LAKHS = 44 LAKHS (24%) VILLAGE LAND 148 LAKHS (-) 11 LAKHS = 137 LAKHS (76%) II METHOD : 49. NOW LET US PROCEED TO ARRIVE AT THE MARKET RA TE OF BOTHTHE PROPERTIES BY FIRST ASCERTAINING THE MARKET VALUE OF VILLAGE AGRI . LAND. THE VALUE OF VILLAGE AGRI. LAND IS ALSO ARRIVED BY MAKING THREE TYPES O F ASSUMPTIONS, I.E THE DIFFERENCE BETWEEN SRO RATES AND MARKET RATES IS TA KEN AT 10 TIME, 15 TIMES AND 20TIMES. THE AVERAGE RATE OF VILLAGE AGRI. LAN D AS PER THE CONVEYANCE DEED IS RS.54,563/- PER ACRE. (A) THE DIFFERENCE BETWEEN THE SRO RATE AND MARKET RATE IS TAKEN AS 10 TIMES THEN THE VALUE OF VILLAGE AGRI LAND IS (RS.54563/ - X 10) X 20 ACRES = RS.109 LAKHS. THEN THE BALANCE CONSIDERATI ON OF 191 LAKHS IS TAKEN AS THE VALUE OF URBAN VACANT LAND. THEN THE DIFFER ENCE BETWEEN THE ABOVE SAID MARKET VALUES AND THE APPARENT CONSIDERATION I S TAKEN AS THE ON MONEY PAYMENT OF RESPECTIVE PROPERTIES. URBAN LAND 191 LAKHS (-) 108 LAKHS = 83 LAKHS (46%) VILLAGE LAND 109 LAKHS (-) 11 LAKHS = 98 LAKHS (54%) (B) THE DIFFERENCE BETWEEN THE SRO RATE AND MARKET RATE IS TAKEN AS 15 TIMES. THEN THE VALUE OF VILLAGE AGRI. LAND IS (RS.54,56 3/- X 15) X 20 ACRES = RS.164 LAKHS. THEN THE BALANCE CONSIDERATI ON OF 136 LAKHS IS TAKEN AS THE VALUE OF URBAN VACANT LAND. THEN THE DIFFER ENCE BETWEEN THE ABOVE SAID MARKET VALUES AND THE APPARENT CONSIDERATION I S TAKEN AS THE ON MONEY PAYMENT OF RESPECTIVE PROPERTIES. URBAN LAND 136 LAKHS (-) 108 LAKHS = 28 LAKHS (15%) VILLAGE LAND 164 LAKHS (-) 11 LAKHS = 153 LAKHS (85%) ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 31 (C) THE DIFFERENCE BETWEEN THE SRO RATE AND MARKET RATE IS TAKEN AS 20 TIMES. THEN THE VALUE OF VILLAGE AGRI. LAND IS (RS.54,56 3/- X 20) X 20 ACRES = RS.218 LAKHS. THEN THE BALANCE CONSIDERATI ON OF 82 LAKHS IS TAKEN AS THE VALUE OF URBAN VACANT LAND. THEN THE DIFFERENC E BETWEEN THE ABOVE SAID MARKET VALUES AND THE APPARENT CONSIDERATION IS TAK EN AS THE ON MONEY PAYMENT OF RESPECTIVE PROPERTIES. URBAN LAND 82 LAKHS (-) 108 LAKHS = NIL VILLAGE LAND = 181 LAKHS (100%) ON A COMPARISON OF THE ASSUMPTIONS MADE IN I METHOD AND II METHOD, THE ASSUMPTION (B) IN BOTH THE CASES GIVES APPROXIMATEL Y COMPARABLE RESULT. 50 . III METHOD: WE HAVE ALREADY NOTICED THAT THE ASSESSEE SHRI P.S ANKAR RAO HAS PURCHASED 1000 SQ. YARDS OF DEVELOPED PLOT IN HIS W IFES NAME FOR A CONSIDERATION OF RS.400 LAKHS, WHICH GIVES A RATE O F RS.400/- PER SQ. YARD. WE ASSUME THAT THE RATE OF UNDEVELOPED LAND IS ABOU T 50%, I.E. RS.200/- PER SQ. YARD. IF THE SAID RATE IS APPLIED TO THE VILLA GE AGRI LAND, THE MARKET VALUE WORKS OUT TO (96,800 SQ. YARDS X RS.200/-) RS.194 L AKHS. THE BALANCE CONSIDERATION IS TAKEN AS THE MARKET VALUE OF URBAN LAND, WHICH IS ONLY 106 LAKHS. THEN THE ON MONEY COMPONENT IS NIL FOR URBAN LAND AND 100% FOR VILLAGE AGRI. LAND. 51. THUS THE ON MONEY AMOUNT PERTAINING TO THE URBAN LAND WORKED OUT UNDER THE THREE METHODS GIVES A RESULT OF 18%, 15% AND 0%. THE MEDIAN OF THE THREE RESULTS IS 15%, WHICH IN OUR VIEW APPE ARS TO BE A REASONABLE PERCENTAGE. ACCORDINGLY, IN OUR VIEW, THE ON MONEY AMOUNT OF 181 LAKHS MAY BE ALLOCATED IN THE RATIO OF 15% AND 85% BETWEE N THE URBAN VACANT LAND AND VILLAGE AGRI. LAND RESPECTIVELY AND WE ARE OF THE VIEW THAT THE SAME WOULD MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGL Y. THE CAPITAL GAINS COMPUTATION SHALL BE MODIFIED ACCORDINGLY. ITA NO.166 TO 169 OF 2010, 179&180 OF 2010 & 447 OF 2010 PEDDU SANKAR RAO, VJA 32 52. IN THE RESULT, THE APPEALS OF THE REVENUE N UMBERED AS. 166 TO 168 OF 2010 ARE DISMISSED. THE APPEAL OF THE REVENUE NUMB ERED AS 169 OF 2010 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE APPEAL OF THE ASSESSEE NUMBERED AS 447 IS ALLOWED AND OTHER TWO APPEALS OF THE ASSESSEES ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 28.6.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 28 TH JUNE, 2011 COPY TO 1 SRI PEDDU SANKARA RAO, DR.NO.39 - 9 - 1, SAILIK COMPLEX, TEMPLE STREET, LABBIPET, VIJAYAWADA-520 010 2 M/S. SUBHADARSI ESTATES, DR.NO.39 - 9 - 1, SAILIK COMPLEX, TEMPLE STREET, LABBIPET, VIJAYAWADA-520 010 3 DCIT, CENTRAL CIRCLE, VIJAYAWADA 4 ACIT, CENTRAL CIRCLE, VIJAYAWADA 5 THE CI T, VIJAYAWADA 6 THE CIT (A) , VIJAYAWADA 7 THE DR, ITAT, VISAKHAPATNAM. 8 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM