Shri. S. Narayan Reddy, Hyderabad V. DCIT, Central Circle-6, Hyderabad

ITA 291/HYD/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69958 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 21-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: K C DEVADAS
• Keywords: Sale consideration of property below Jantri Value; Unexplained expenditure; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.291/HYD/2012 (ASSESSMENT YEAR 2008 - 09) SHRI S.NARAYAN REDDY, HYDER ABAD ( PAN AGHPR 0315 G ) V/S DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 6, HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.337/HYD/2012 (ASSESSMENT YEAR 2008 - 09) DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 6, HYDERABAD V/S SHRI S.NARAYAN REDDY, HYDERABAD ( PAN AGHPR 0315 G ) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.C.DEVADAS RESPONDENT BY : SHRI P.SOMA SEKHAR REDDY, CIT - DR DATE OF HEARING 10.10.2013 DATE OF PRONOUNCEMENT 29.11.2013 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: TH ESE ARE CROSS APPEAL S FOR THE ASSESSMENT YEAR 2008 - 09 DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEALS) I, HYDERABAD DATED 30.12.2011. SINCE COMMON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED OF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE . 2. FACTS OF THE CASE IN BRIEF LEADING TO THE FILING OF THE PRESENT APPEAL ARE THAT THERE WAS A SEARCH ACTION UNDER S.132 OF THE ACT ON ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 2 17.10.2007 AT THE RESIDENTIAL PREMISES OF THE ASSESSEE. IN RESPONSE TO NOTICE UNDER S.153A, THE ASSESSEE FILED R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 - 09 ON 10.11.2008, ADMITTING TOTAL INCOME OF RS.8,92,730. THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER S.153A OF THE ACT READ WITH S.143(3) OF THE ACT, VIDE ORDER DATED 31.12.2009, DETERMINING THE INCOME O F THE ASSESSEE AT RS.105,70,17,730, AFTER MAKING THE FOLLOWING ADDITIONS - (A) UNEXPLAINED EXPENDITURE RS.32 CRORES (B) CONSIDERATION IN KIND RS.68,31,25,000 (C) PROFIT RECEIVED/RECEIVABLE FROM SAI SURYA REALTORS RS. 5 CRORES. 3. ON APPEAL, TH E CIT(A) THOUGH DELETED THE ADDITION OF RS.32 CRORES MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE, HE SUSTAINED ADDITION OF RS.3,55,28,500 OUT OF RS.68,31,25,000 MADE ON ACCOUNT OF CONSIDERATION IN KIND, DELETING THE BALANCE ADDITION MADE BY THE ASSESSING OF FICER, AND SUSTAINED THE ENTIRE ADDITION OF RS.5 CRORE MADE BY THE ASSESSING OFFICER REPRESENTING PROFIT RECEIVED OR RECEIVABLE BY THE ASSESSEE FROM SAI SURYA REALTORS. 4. AGGRIEVED BY THE RELIEFS GRANTED BY THE CIT(A), REVENUE PREFERRED APPEAL, ITA NO .337/HYD/2012, WHEREAS THE ASSESSEE IS IN APPEAL, ITA NO.291/HYD/2012, AGGRIEVED BY THE ADDITIONS SUSTAINED BY THE CIT(A). 5. THE FIRST ISSUE IN THESE APPEALS RELATES TO THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS.32 CRORES MADE BY THE ASSES SING OFFICER. 6. FACTS OF THE CASE IN BRIEF IN RELATION TO THIS ISSUE ARE THAT THE ASSESSEE IS A KEY PERSON IN THE PURCHASE AND SALE OF LANDS OF NARSINGI ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 3 VILLAGE AND PUPPALAGUDA VILLAGE, WHICH ARE SOLD TO DLF. THE ASSESSEE IS A MANAGING DIRECTOR OF MA LI FLOREX LIMITED, WHICH ALONG WITH ANOTHER CONCERN CALLED DEMI REALTORS HAD ENTERED INTO MEMORANDUMS OF UNDERSTANDING EXECUTED ON 23.2.2007 AND 19.6.2007, WITH A COMPANY CALLED DLF COMMERCIAL DEVELOPERS LTD., TO PROCURE LAND FOR THE SAID COMPANY IN NARASI NGI, PUPPALGUDA VILLAGES OF RAJENDRA NAGAR MANDAL. AS PER THE TERMS AND CONDITIONS OF THE SAID MOUS, BOTH THE CONCERNS, VIZ. MALI FLOREX LTD. AND DEMI REALTORS HAVE PROCURED 26 ACRES OF LAND. THE DLF COMPANY PAID A TOTAL CONSIDERATION OF RS.325 CRORES FOR 26 ACRES WORKED OUT AT THE RATE OF RS.12.5 LAKHS PER ACRE; AND THE LANDS PROCURED FOR T H EM WERE GOT REGISTERED IN FAVOUR OF DLF. DURING THE COURSE OF SEARCH OPERATIONS, AN UNSIGNED AND UNDATED LETTER WAS FOUND IN THE PREMISES OF SHRI CH.SRINIVAS, VICE PRE SIDENT OF DLF. ON PERUSAL OF THE SAID LETTER, THE ASSESSING OFFICER OBSERVED THAT THE SAID LETTER WAS WRITTEN BY THE ASSESSEE; THAT AN AMOUNT OF RS.32,00,00,000 WAS PAID BY THE ASSESSEE TO THE LANDLORDS AND THE CLAIMANT BEFORE THE DATE OF REGISTRATION AND THAT THE ASSESSEE GOT BACK THE SAID MONEY FROM DEMI REALTORS AFTER REGISTRATION OF LANDS. WHEN CONFRONTED WITH THE SAID LETTER, THE ASSESSEE, VIDE DETAILED EXPLANATION DATED 5.12.2009 SUBMITTED THAT THE SAID LETTER WAS NEVER WRITTEN BY HIM; AND NEITHER HE PAID RS.32,00,00,000 IN ADVANCE OF THE REGISTRATION, NOR SUBSEQUENTLY GOT BACK THE SAME FROM DEMI REALTORS. THE ASSESSING OFFICER, HOWEVER, WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, AND ADDED THE SAID AMOUNT OF RS.32 CRORES TO THE INCOME DISCLOSED BY THE ASSESSEE. 7. ON APPEAL, THE CIT(A) AFTER DUE CONSIDERATION OF THE DETAILED ARGUMENTS OF THE ASSESSEE, OBSERVED THAT SHRI C.SRINIVAS, VICE PRESIDENT OF DLF, FROM WHOSE RESIDENCE, THE HAND - WRITTEN LETTER, WHICH LED TO THE IMPUGNED AD DITION WAS MADE, WAS SEIZED, IN THE STATEMENT RECORDED FROM HIM ON THE DATE OF SEARCH, CATEGORICALLY STATED THAT THE SAID LETTER HAS NOT ORIGINATED FROM THE ASSESSEE AND THAT THE SAME WAS IN FACT DRAFTED BY SRI ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 4 SRINIVAS HIMSELF. HE ALSO CONFIRMED THAT IT I S HIS HANDWRITING AND IT WAS WRITTEN TO THE DICTATION OF THE EXECUTIVE DIRECTOR OF DLF AND THE DRAFT WAS GIVEN TO M/S. MALI FLOREX TO BE WRITTEN TO DLF. THE CIT(A) OBSERVED THAT THERE APPEARS TO BE NO DIRECT INVOLVEMENT OF THE ASSESSEE TO SUCH UNSIGNED LET TER FOUND AT THE RESIDENCE OF SRHI SRIIVAS. WITH THESE OBSERVATIONS, THE CIT(A), DELETED THE ADDITION OF RS.32 CRORES MADE BY THE ASSESSING OFFICER, VIDE PARA 5.0 OF THE IMPUGNED ORDER, CONCLUDING PORTION OF WHICH READS AS UNDER - 05.0 SHRI SRINIVASS ASSERTION THAT HE SAID LETTER NOTED IN HIS DIARY IS IN HIS OWN HANDWRITING; AND THAT IT IS HE WHO DRAFTE D THE LETTER CLEARLY EXPLAINS THE POSITION. IT SHOULD ALSO BE APPRECIATED THAT THE SAID ASSERTION BY SRI SRINIVAS WAS MADE ON TH E V E RY DAY AND DURING T HE COU R SE O F SEARCH PROCEEDINGS AND IS NO T AN EXERCISE AS A RESULT OF AFTERTHOUGHT. THU S , THE PRESUMPTION UN D ER SEC T ION 132(4A) S HOULD POINT TO THE FACT THAT THE ASSESSEE H A D NO CON N ECTION WHATSOEVER WITH THE SAID LETTER. IN VIEW O F THI S VERACITY OF THE S AID UNSIGNED LETTER WAS DOUBTFUL NO T ONLY B E CAU S E IT WAS SEIZED FROM THE PREMI SE S OF SRI SRINIVAS; BUT ALSO ON ACCOUNT O F TH E FACT THAT I T W AS CLARIFIED BY THE PERSON IN WHOSE WRITING THE SAME WAS WRITTEN THAT THE SAID LETTER DID NO T EMANATE FROM THE ASSE SSEE; IT CANNO T B E PRESUMED THAT TH E ASSESSEE IS THE OWNER OF THE LETTER AND THE CONTENTS O F THAT LETTER. UNLESS AND UNTIL THE SAID PAPER SEIZED FROM ELSEWHERE SHOULD B E INDEPENDENTLY CORROBORATED WITH CONTEMPORANEOUS RECORD THE SAID DOCUMENT DOES NOT CA RRY ANY EVIDENTIARY VALUE. IT I S ALSO A FACT THAT LANDS SITUATED AT PUPPALGUDA VILLAGE WERE DEALT BY M /S. DEMI R E ALTORS, BUT NOT THE APPELLANT. AGGRIEVED BY THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS.32 CRORES, REVENUE IS IN APPEAL BEFORE U S ON THIS ISSUE. 8. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. IT IS EVIDENT FROM THE IMPUGNED ORDER OF THE CIT(A) AND OTHER MATERIAL ON RECORD THAT THE DOCUMENT BASED ON WHICH THE IMPUGNE D ADDITION OF RS.32 CRORES HAS BEEN MADE BY THE ASSESSING OFFICER IS A DUMB AND UNSIGNED DOCUMENT. THE PERSON FROM WHOSE RESIDENCE THE SAID LETTER HAS BEEN SEIZED AND IN WHOSE HANDWRITING THE SAME HAS BEEN WRITTEN, CLARIFIED THE POSITION THAT THE SAID LET TER HAS NO RELATION WHATSOEVER WITH THE ASSESSEE, AND IT WAS ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 5 WRITTEN BY HIM TO THE DICTATION OF HIS EXECUTIVE DIRECTOR, SO AS TO HAVE IT ISSUED BY THE ASSESSEE TO DLF. THAT BEING SO, IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE BROUGHT ON RECORD TO DISPRO VE THE VERSION OF SHRI SRINIVAS, THERE IS NO SCOPE FOR MAKING ANY ADDITION IN THE HANDS OF THE ASSESSEE. FURTHER, THE LETTER IN QUESTION IS AN UNSIGNED DUMB DOCUMENT, BASED ON WHICH NO ADDITION COULD BE MADE WITHOUT BRINGING ON RECORD ANY CORROBORATIVE EV IDENCE TO SUBSTANTIATE THE CONTENTS OF SUCH LETTER. IN THIS VIEW OF THE MATTER, THE CIT(A) IN OUR CONSIDERED OPINION, WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A), REJECTING THE GROUN DS OF THE REVENUE ON THIS ISSUE. 9. NEXT EFFECTIVE GROUNDS ARISING FOR CONSIDERATION IN BOTH THESE CROSS - APPEALS RELATES TO ADDITION MADE ON ACCOUNT OF CONSIDERATION IN KIND. WHILE THE ASSESSEE IN ITS APPEAL DISPUTES THE ADDITION SUSTAINED BY THE C IT(A), THE REVENUE IN ITS APPEAL CONTESTS THE RELIEF GRANTED BY THE CIT(A). 10. FACTS IN BRIEF RELATING TO THIS ISSUE ARE THAT MALI FLOREX LTD. OF WHICH THE ASSESSEE IS A DIRECTOR AND ALSO DEMI REALTORS HAVE JOINTLY UNDERTAKEN THE WORK OF PROCURING LAN D FOR DLF. IN THIS PROCESS, TOTAL EXTENT OF LAND ADMEASURING 41 ACRES 34 GUNTAS WERE PROCURED. OUT OF THIS, AFTER FULFILLING CERTAIN OBLIGATIONS AND TRANSACTIONS, LAND TO THE EXTENT OF 10 ACRES AND 37 GUNTAS REMAINED. THE ASSESSING OFFICER CONCLUDING THAT THIS BALANCE LAND WAS TRANSFERRED TO FOUR PERSONS WITHOUT CONSIDERATION, AND ARRIVED AT THE VALUE OF SUCH LAND AT RS.136.62 CRORES. FURTHER OBSERVING THAT TWO OF SUCH PERSONS TO WHOM THE LAND WAS TRANSFERRED WERE DUMMY PERSONS, THE ASSESSING OFFICER BROUGHT T O TAX 50% OF THE CONSIDERATION AMOUNTING TO RS.68,31,25,00 IN ASSESSEES HANDS, BY MAKING AN ADDITION IN THAT BEHALF. ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 6 11. ON APPEAL, THE CIT(A), IN THE FIRST PLACE NOTED THAT THE MAIN PLAYERS RIGHT FROM THE BEGINNING ARE TWO CONCERNS SUCH AS M/S. DEMI RE ALTORS, WHO HANDLED LAND SITUATED AT PUPPALGUDA VILALGE AND M/S. MALI FLOREX LTD. WHO DEALT WITH LAND SITUATED AT NARSINGI VILLAGE. THESE TWO CONCERNS, ACCORDING TO HIM, HAVE TAKEN VARIOUS STEPS WHICH INCLUDE DIRECT NEGOTIATIONS WITH LAND OWNERS ENGAGING M IDDLEMEN, GP HOLDERS AND TAKING LEGAL ACTION TO ENSURE PROPER TITLE TO THE LAND TRANSFERRED TO DLF AND ITS SUBSIDIARIES. THEREFORE, IT IS NECESSARY TO CONSIDER THE VALUE OF THE LAND, SO OBTAINED UNDER GPA, IN THE HANDS OF M/S. DEMI REALTORS AND ALSO M/S. M ALI FLOREX LTD. FOR THE SERVICES AND ACTIVITIES CARRIED ON BY THEM TO FIULFIL THE COMMITMENT AS PER THE CONTRACTUAL AGREEMENT ENTERED INTO WITH DLF SUBSIDIARIES. THE CIT(A) FURTHER NOTED THAT THE FACTS REVEAL THAT THE ACTIVITY FROM WHICH THE INCOME OR BENEFIT IS EARNED/DERIVED HAS DIRECT AND PROXIMATE CONNECTION WITH THE MAIN ACTIVITY OF PROCURING AND REGISTERING LAND TO DLR. UNDER SUCH CIRCUMSTANCES, THE PROFIT ARISING FROM THE ACTIVITY INCIDENTAL TO THE MAIN ACTIVITY WOULD BE CONSIDERED AS PROFIT AT TRIBUTABLE TO /PROFIT RELATING TO THE MAIN ACTIVITY. ACCORDINGLY, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO TAKE APPROPRIATE ACTION TO CONSIDER THE LAND VALUE IN THE HANDS OF THE TWO CONCERNS, I.E. M/S. DEMI REALTORS AND M/S. MALI FLOREX AS PER LAW, AFT ER CONSIDERING THEIR RESPECTIVE ROLES AND SERVICES RENDERED TO FULFIL THE CONTRACTUAL OBLIGATIONS WITH DLF SUBSIDIARIES. 12. THE CIT(A) OBSERVING THAT THE PLEA OF THE ASSESSEE THAT THERE WAS NO DIRECT RECEIPT TO THE ASSESSEE, WHILE TRANSFERRING THE PROPERTY, HAS NO RELEVANCE, AND IT IS A FACT THAT ASSESSEES SHARE OF GAIN ARISING OUT OF THE TRANSACTIONS WITH OTHERS WAS OFFERED TO TAX, AND THE BENEFIT ACCRUING TO THE ASSESSEE HAS TO BE CONSIDERED, HELD THAT THE PRICE PAID BY THE ASSESSEE FOR ACQUISITI ON OF THE PROPERTY AT A CONSIDERATION, WHICH WAS ADMITTEDLY LOWER THAN THE TRUE MARKET VALUE CONSTITUTED A BENEFIT WITHIN THE MEANING OF S.2(24)(IV) OF THE ACT. PLACING RELIANCE ON THE DECISION OF ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 7 THE MADRAS HIGH COURT IN THE CASE OF CIT V/S. S.V A RADARAJA N ( 224 ITR 9); AND THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF IBM INDIA LTD. V/S. CIT (290 ITR 183) IN THIS BEHALF, THE CIT(A) HELD THAT THE BENEFIT DERIVED IN ACQUIRING THE PROPERTY FOR CONSIDERATION LOWER THAN THE MARKET VALUE HAS TO BE TREATED AS INCOME UNDER S.2(24)(IV). 13. THE CIT(A) THEREAFTER PROCEEDED TO COMPUTE THE BENEFIT THAT ACCRUED TO THE ASSESSEE AND THE INCOME ASSESSABLE IN THE HANDS OF THE ASSESSEE ON THAT ACCOUNT, AND ULTIMATELY SUSTAINED AN ADDITION OF RS.3,55,28, 500 AS AGAINST TOTAL ADDITION OF RS.68,31,25,000 MADE BY THE ASSESSING OFFICER, AFTER DETAILED DISCUSSION IN THAT BEHALF IN PARAS 6.4 TO 6.8 OF THE IMPUGNED ORDER, WHICH READ AS FOLLOWS - 06.4 IN ORDER TO CONSIDER ANY INCOME ACCRUES TO THE APPELLANT IS C ONCERNED, IT IS NECESSARY TO EXAMINE THE FOLLOWING FACTS. OUT OF THE TOTAL LAND UNDER GPA I.E. 10 ACRES 37 GUNTAS, THEY HAVE TRANSFERRED THE EXTENT OF LAND IN FAVOUR OF THE FOLLOWING PERSONS: A) 0.20GUNTAS TRANSFERRED TO SRI C.SRINVAS; B) 0.37.5 GUNTAS T O ANJANAKUMAR & OTHERS; C) 1.32 TO BELMONT ESTATES (PART OF 26 ACRES SOLD TO DLF). AROUND 5 - 00 ACRES LAND WAS REGISTERED IN FAVOUR OF THE ASSESSEE AND SRI D.S.KARUNAKARA REDDY I.E. 2.5 ACRES EACH. BALANCE LAND CLAIMED TO BE NOT IN EXISTENCE. 06.5 . ALTH OUGH AS DISCUSSED ABOVE, THE VALUE OF THE TOTAL LAND UNDER THE AGPA SHOULD BE ASSESSED IN THE HANDS OF TWO ENTITIES, WHATEVER BENEFIT ACCRUES TO THE APPELLANT ALONG WITH OTHER PERSON SRI D.S.KARUNAKAR REDDY, ALSO TO BE ASSESSED IN THEIR RESPECTIVE HANDS AS GRATUITOUS PAYMENTS. IN REGARD TO ISSUE OF VALUING SUCH BENEFIT IT HAS FIRST TO BE DECIDED AS TO WHETHER THE VALUE OF ENTIRE 10.37 ACRES IS TO BE TAKEN INTO ACCOUNT OR THE VALUE OF LAND LEFT OVER WITH THE ASSESSEE UNDER AGPA. AFTER TRANSFERRING 1 ACRE 32 GUNTAS TO DLF, OUT OF THE REMAINING LAND, THE FOLLOWING EXTENT OF LAND WAS TRANSFERRED IN FAVOUR OF THE FOLLOWING PERSONS: A ) 0 - 20 GUNTAS TRANSFERRED TO SRI C. SRINIVAS; B ) 0 - 37.5 GUNTAS TO ANJANAKUMAR & OTHERS; 06.6 THE APPELLANT HAD ALSO EXPLAINED THE SEQUE NCE ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 8 OF EVENTS AND THE ASSESSEE'S INTEREST IN ACQUISITION/DISPOSAL OF LAND OF 10.37 ACRES AND,THE INCOME EARNED BY THE ASSESSEE IN THE SAID TRANSACTION. SO FAR AS THE TRANSACTION WITH BELMONT ESTATES LTD IS CONCERNED, IT IS CLEARLY EXPLAINED ,THAT THE ASSES SEE HAD RECEIVED THE AMOUNT SPECIFIED IN THE MOU ON ACCOUNT OF A PRE EXISTING CONTRACT BETWEEN THE PARTIES DEMI REALTORS & PINK ESTATES PVT LTD OVER THE LAND HELD BY THE ASSESSEE AND OTHER UNDER AGPA. AS FAR AS 1.32 ACRES OF LAND IS CONCERNED, M/S. DEMI RE ALTORS HAD ALREADY TAKEN POSSESSION OF TITLE AND RIGHTS AND ALSO UNDER CONTRACTUAL AGREEMENT TO TRANSFER THE SAME TO DLF COMPANY FOR A CONSIDERATION. ALL ALONG, DEMI REALTORS IS DEALING WITH BOTH ORIGINAL OWNERS AS WELL AS MIDDLEMEN TO SECURE THE LAND IN O RDER TO TRANSFER THE SAME TO SUBSIDIARY OF THE DLF COMPANY. THEREFORE, THEY HAD OVERRIDING INTEREST ON SUCH LAND IN ORDER TO FULFIL THE COMMITMENT TO DLF COMPANY. HENCE, INCOME ON TRANSFER OF THIS LAND HAS TO BE CONSIDERED IN THE HANDS OF MIS. DEMI REALTOR S AS HELD IN ABOVE PARAGRAPHS, AND EXPENSES IF ANY, TO BE ALLOWED AS PER THE PROVISIONS OF THE LAW. THE FACT THAT THE SALE CONSIDERATION OF RS.22.5 CRORES REPRESENTING LAND ADMEASURING 1.32 ACRES WITHHELD BY DLF COMPANY FOR THE PURPOSE OF PHYSICAL MEASUREM ENT, FREE FROM LEGAL ISSUES ETC CLEARLY ESTABLISHES PRE - EXISTING TERMS AND CONDITIONS IMPOSED BY THE SAID COMPANY. SUCH WITHHOLDING OF SALE CONSIDERATION WAS EVIDENCED DURING SEARCH PROCEEDINGS ALSO. IT IS NOT THE CASE THAT THE APPELLANT HAS INVOLVED IN SU CH FIRE FIGHTING TO RESOLVE VARIOUS ISSUES ENTANGLED IN THIS DEAL. IT IS ALSO TO BE NOTED HERE THAT THE SALE CONSIDERATION OF RS.22.5 CRORES WAS ISSUED VIDE DEMAND DRAFT IN THE NAME OF MIS. MALI FLOREX LTD BUT NOT IN THE NAMES OF ASSESSEE AND THE OTHER GPA HOLDERS. 06.7 IN THE COURSE OF SEARCH OFFICIALS OF THE DEPARTMENT SEIZED THE SALE CONSIDERATION FROM THE POSSESSION OF ONE OF THE OFFICIAL OF THE DLF COMPANY AND SUBSEQUENTLY RELEASED AFTER THE EXPLANATION PUT FORTH BY THE RELEVANT PARTIES ON THIS DEAL . IT IS CLEAR FROM THE FACTS THAT IT IS THE DUTY OF MIS. DEMI REALTORS TO ENSURE THE TOTAL LAND AS COMMITTED TO THE DLF SHALL BE TRANSFERRED AS PER THE TERMS AND CONDITIONS ENTERED INTO BY THEM. THE COMMITMENT SO MADE TO THE COMPANY WAS DISCHARGED BY TRANS FERRING THE LAND AS PER THE REGISTERED SALE DEED. IN ORDER TO FULFIL SUCH COMMITMENT, M/S. DEMI REALTORS HAD TO UNDERTAKE VARIOUS ACTIVITIES WHICH INCLUDE ENGAGING THE SERVICES OF MIDDLEMEN AND OTHERS. IT IS VERY CLEAR FROM THE FACTS OF THE CASE THAT THIS LAND DEAL IS HAVING MULTIPLICITY OF LEGAL ISSUES, OWNERS, MIDDLEMEN AND NOTIFICATIONS OF THE GOVERNMENT ON LAND USE ETC. IN THE PROCESS OF HAVING CONTROL ON THE LAND TO BE TRANSFERRED TO DLF SUBSIDIARY COMPANY, M/S. DEMI REALTORS HAS OBTAINED AGP IN THE NA MES OF SRI KARUNAKAR REDDY AND NARAYANA REDDY BY ROPING IN ALL THE PARTIES INVOLVED IN THIS DEAL. THEREAFTER, THE LAND HAS BEEN TRANSFERRED TO THE DLF COMPANY FOR AGREED ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 9 CONSIDERATION. HENCE, IN THE FITNESS OF THINGS, THE VALUE RECEIVED ON TRANSFER OF 1 AC RE 32 GUNTAS IS REQUIRED TO BE CONSIDERED IN THE HANDS OF M/S. DEMI REALTORS. THE APPELLANT HAS NO STAKE OR RIGHT OVER THIS LAND BECAUSE OF PRE - EXISTING COMMITMENT OF THE MAIN COMPANY I.E. DEMI REALTORS. ACCORDINGLY, THE LAND ADMEASURING 1.32 ACRES CANNOT BE CONSIDERED AS BENEFIT ACCRUED TO THE ASSESSEE. THEREFORE, THE SAME SHOULD BE EXCLUDED FOR PURPOSE OF CALCULATING THE VALUE OF THE BENEFIT TO THE ASSESSEE ON THIS TRANSACTION. NEVERTHELESS, THE APPELLANT HAS DISCLOSED AN AMOUNT OF RS 4 LAKHS AS INCOME FR OM OTHER SOURCES ON THIS LAND. THUS IF THE TRANSACTION RELATING TO SALE OF LAND TO BELMONT ESTATES LTD (DLF SUBSIDIARY) IS TAKEN OUT OF THE RECKONING BECAUSE OF THE DETAILED REASONS EXPLAINED ABOVE, THE VALUE OF THE REMAINING LAND OF 9.05 ACRES IS TO BE CO NSIDERED IN THE HANDS OF THE ASSESSEE ALONG WITH SRI KARUNAKAR REDDY. THIS IS NECESSARY BECAUSE OF THE SUBSEQUENT EVENTS WHICH CULMINATED IN THE REGISTRATION OF 5 ACRES OF THE LAND IN THE NAMES OF THE APPELLANT AND SRI KARUNAKAR REDDY WHOSE CONCERNS ARE MA IN PLAYERS IN THE WHOLE LAND DEAL. TO THAT EXTENT, THERE IS A CLEAR BENEFIT PASSED ON TO THE ASSESSEE AND SRI KARUNAKAR REDDY. THIS LAND IS REQUIRED TO BE CONSIDERED AS BENEFIT ACCRUES TO THEM BY VIRTUE OF THE SERVICES RENDERED BY THEM. THOUGH THE ASSESSEE IS HARPING ON THE POINT THAT NO MARKET VALUE CAN BE CONSIDERED AS INCOME, IN ORDER TO ASCERTAIN FAIR VALUE AS PER MARKET CONDITIONS, THE ONLY RECOURSE IS TO FALL ON THE ASSESSED VALUE AS PER THE SUB - REGISTRAR. THE AO IS NOT CORRECT TO ASSESS THE WHOLE PA RT OF LAND @12.5 CRORES BASED ON SALE TRANSACTION WITH DLF. IT IS AN ADMITTED FACT THAT THE LAND IN DISPUTE IS NOT UNIFORM AND SITUATED IN WATER BODY, ETC. THEREFORE, UNIFORM VALUE CANNOT BE ADOPTED FOR THE WHOLE PATCH OF LAND. THE CORRECT METHOD WOULD BE THE ONE ADOPTED BY SUB REGISTRAR WHILE COMPUTING THE STAMP DUTY AT THE TIME OF REGISTRATION. 06.8 AS PER THE STAMP AUTHORITY, THE VALUE OF THE LAND ADMEASURING 20 GUNTAS SOLD TO SRI SRINIVAS IS ASSESSED AT RS 49,50,000/ - (SO ALSO THE ACTUAL CONSIDERATION ) AND 37.5 GUNTAS SOLD TO T.ANJAN KUMAR AND OTHERS; THE REGISTRATION AUTHORITY VALUED THE PROPERTY AT RS.92,82,000/ - (SAME AS THAT OF SALE VALUE). SO ALSO, 5 ACRES WHICH ULTIMATELY HAS BEEN REGISTERED TO THE ASSESSEE AND KARUNAKAR REDDY EQUALLY VIDE SALE D EED HAS BEEN ASSESSED AT RS 4,95,00,000/ - . REGARDING BALANCE OF LAND, IT IS VEHEMENTLY ARGUED THAT ON PHYSICAL MEASUREMENT, AROUND 1 ACRE 19 GUNTAS IS NOT TRACEABLE AND THE BALANCE IS IN WATER BODY, THEREFORE, NO VALUE CAN BE ATTRIBUTED FOR THE PURPOSE OF COMPUTING BENEFIT IN THE HANDS OF THE ASSESSEE. IT IS VERY DIFFICULT TO ACCEPT THE EXPLANATION OF THE ASSESSEE ABOUT THE NON - AVAILABILITY OF THE LAND WHEN THE DOCUMENT EVIDENCING THE EXISTENCE OF THE LAND. HOWEVER, AFTER EXAMINING THE REPORT OF THE DISTRIC T VALUATION OFFICER, AND AS THE LAND WAS NOTIFIED AS A RECREATION ZONE, AND THE AREA AS EVACUEE PROPERTY, I AM OF THE OPINION THAT THE BALANCE OF LAND CAN REASONABLY BE ASSESSED AT RS.1 CRORE FOR THE PURPOSE OF ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 10 VALUING THE BENEFIT. THUS, THE TOTAL VALUE CO MES TO RS. 7,37,32,000/ - (49,50,000+92,82,000+4,95,00,000 - +,1,00,00,000) THE ASSESSEE CLAIMS THAT HE IS ONLY OWNER OF 1/4TH SHARE IN THE DEAL WHEREAS THE ASSESSING OFFICER CONSIDERED 50% IN THE HANDS OF THE ASSESSEE. I HAVE CONSIDERED THE ASPECT OF SHARE O F THE ASSESSEE IN THIS DEAL. THE OTHER TWO NAMES CROPPED UP IN THIS DEAL ARE MR. K.SRINIVASULU AND SRI B.MUKUNDA RAO. THESE TWO PERSONS ARE MERE NAME - LENDERS WITHOUT ANY SERVICE RENDERED TO THE ENTIRE DEAL. THEY HAVE BEEN ROPED IN ONLY FOR THE SAKE OF TRAN SACTION WITHOUT ANY STAKE FOR THEM. THEIR CONTRIBUTION TO THE DEAL IS NOT VISIBLE TILL THE AGP COMES INTO PICTURE. THE FACT OF SUCH SUBSEQUENT REGISTRATION OF 5 ACRES IN THE HANDS OF THE ASSESSEE AND KARUNAKAR REDDY IS CLEAR INDICATION ABOUT THE TRUTH IN T HE CONTENTION OF THE ASSESSEE. HAD THESE PERSONS ARE ALSO HAVING INTEREST IN THE TRANSACTION; THEY ALSO COULD HAVE RECEIVED SOME VALUE. BUT NO SUCH BENEFIT HAS BEEN GIVEN TO SRI SRIHIVASULU AND MUKUNDA RAO. THEREFORE, THE CONTENTION OF THE ASSESSEE SMACKS OF ANY EVIDENCE MUCH LESS SUBSTANTIAL EVIDENCE. ACCORDINGLY, IT IS HELD THAT THE ASSESSEE IS BENEFICIAL OWNER OF 50% IN THE LAND TRANSACTION. THE VALUE IN THE HANDS OF ASSESSEE, BEING 50% HOLDER, COMES TO RS.3,68,66,000/ - (7,37,32,000/2). OUT OF THIS, THE ASSESSEE HAD ALREADY DECLARED RS.13,37,500/ - ON THIS LAND TRANSACTION. THEREFORE, THE TOTAL VALUE TO BE CONSIDERED IN THE HANDS OF THE ASSESSEE AS INCOME ACCRUES ON LAND DEAL COMES TO RS. 3,55,28,500/ - (3,68,66,000 - 13,37,500). ACCORDINGLY, THE AO IS DIRECT ED TO SUBSTITUTE A SUM OF RS.3,55,28,500/ - AS INCOME IN THE HANDS OF THE ASSESSEE AS AGAINST RS.68,31,25,000/ - ASSESSED BY HIM. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A) ON THIS COUNT, REVENUE IS IN APPEAL BEFORE US, AS AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US CONTESTING THE ADDITION SUSTAINED BY THE CIT(A). 14. WE HAVE HEARD BOTH THE PARTIES AND PERU S ED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE ALONG WITH D EMI REALTORS, ACQUIRED AN ESTATE OF LAND AD MEASURING 41 ACRES 34 GUNT AS. THIS EXTENT OF LAND ALSO INCLUDES 10 ACRES AND 37 GUNTAS ACQUIRED FROM 65 VENDORS THROUGH AGREEMENT OF SALE CUM IRREVOCABLE GENERAL POWER OF ATTORNEY FROM 65 , WHEREAS THE ASSESSEE, S.NARAYAN REDDY, D.S.KARUNAKAR REDDY, K.SRINIVASULU,AND R.MUKUND RAO ARE PURCHASERS . THIS LAND HAS BEEN DEALT AS FOLLOWS - ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 11 A ) 0 - 20 GUNTAS TRANSFERRED TO SHRI C.SRINIVAS B ) 0.37.5 GUNT AS TO ANJANAKUMAR & OTHERS C ) 1 ACRE 32 GUNTAS SOLD TO BELMONT ESTATES D ) 5 ACRES WAS REGISTERED IN FAVOUR OF ASSESSEE AND SHRI D.S.KARUNAKAR REDDY A T 2.5 ACRES EACH E ) 1 ACRE AND 10 GUNTAS IS NON - EXISTING LAND AS SUPPROTED BY THE VALUATION REPORT WHICH IS PLACED ON RECORD AT PAGE NO.119 OF ASSESSEE'S PAPER - BOOK. F ) 1 ACRE 19 GUNTAS WAS UNDER WATER LOGGING, AS EVIDENCED BY THE CERTIFICATE ISSUED BY HYDERABA D URBAN DEVELOPMENT AUTHORITY DATED 7.1.2010 PLACED AT PAGE NOS.170 AND 171 OF THE ASLSESSEE'S PAPER - BOOK THE CIT(A) WAS OF THE OPINION THAT AS PER STAMP DUTY VALUE, LAND ADMEASURING 20 GUNTAS SOLD TO SHRI SRINIVAS HAS TO BE VALUED AT RS.49.50 LAKHS ; THE LAND SOLD TO SHRI ANJANA KUMAR OF 37.5 GUNTAS TO BE VALUED AT RS.97.82 LAKHS; LAND REGISTERED IN FAVOUR FO THE ASSESSEE AND SHRI KARUNAKAR REDDY MEASURING 5 ACRES TO BE VALUED AT RS.4.95 CRORES; NOT TO CONSIDER THE VALUE FOR 1 ACRE AND 19 GUNTAS, WHICH IS NOT TRACEABLE , AND THE BALANE 1 ACRE AND 10 GUNTAS WHICH IS SAID TO BE WATER LOGGED BY THE ASLSESSEE TO BE VALUED AT RS.1 CRORE, ON THE BASIS OF VALUATION REPROT FROM DISTRICT VALUATION OFFICER. THUS, THE CIT(A) VALUED THE ABOVE LAND AT RS.7,37,32,000 ( BEING AGGREGATE OF RS.49,50,000 + 92,82,000+ 4,95,00,000+1,00,00,000) AND ASSESSEE'S SHARE WAS ARRIVEED AT 50% OF THIS FIGURE AT RS.3,68,66,000. SINCE THE ASSESSEE HAS ALREADY OFFERED RS.13,37,500, BE BROUGHT TO TAX THE BALANCE AMOUNT OF RS.3,55,28,500 AS CONSTITUTING INCOME OF THE ASSESSEE WITHIN THE MEANING OF S.2(24)(IV) OF THE INCOEM - TAX ACT. ACCORDING TO THE CIT(A) T HE ASSESSEE, BEING A DIRECTOR OF M/S. MALI FLOREX LTD., PLAYED A KEY ROLE IN THE PU R CHASE AND SALE OF LANDS DONE BY M/S. DEMI RE ALTORS, AND HE HAS PAID RS.4.2 CRORES PER ACRE OF LAND AND ON THE BASIS OF WRITTEN SUBMISSION OF TH E AUTHORISED ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 12 REPR E SENTATIVE OF THE D EMI R E ALTORS AND ITS PARTNER SHRI KARUNAKAR REDDY, HE CAME TO THE CONCLUSION THAT LAND WAS T R ANSFERRED WITHOUT CONSIDERATION T O FOUR PERSONS NAMELY, THE ASSESSEE SHRI D.S.KARUNAKAR REDDY, SHRI D.MUKUND RAO AND SHRI K.SRINIVASULU FOR THE SERVIC E S RENDERED BY THEM. SINCE THE M/S. D EMI R E ALTORS SOLD THE LAND TO DLF AT RS.12.5 CRORES PER ACRE ON 22.8.2007, AND ON THE SAME DATE AGRE EMENT OF SALE - CUM - IRREVOCABLE GPA WAS EXECUTED BETWEEN M/S. D EMI R E ALTORS AND THE FOU R PERSONS NAMED ABOVE, THE ASSESSING OFFICER COMPUTED THE TOTAL CONSIDERATION AT RS.136,62,50,000, OUT OF WHICH ASSESSEE S SHARE OF 50% OF THE ABO V E WAS COMPUTED AT R S .6 8,31,25,000. THE CIT(A) OBSERVED THAT THE MAIN PLAYERS IN THE LAND TRANSACTIONS ARE M/S. D EMI R E ALTORS AND M/S. MALI FLOREX LTD. H E ALSO PREFERRED TO CONSI D ER THE VALUE OF LAND SO OBTAINED UNDER THE GPA IN THE HANDS OF THESE TWO PERSONS, AS THEY OBTAINED C ONSIDERATION FOR THE SERVICES AND ACTIVITIES CAR R IED ON BY THEM TO FULFIL THE COMMITMENTS AS PER THE CON T RACT ENTE RE D INTO WITH DLF GROUP OF COMPANIES. ACCORD I NG L Y, HE GAVE DIRE C TIONS TO THE ASSESSING OFFICER TO TAKE APPROPRIATE ACTION TO CON S ID E R THE LAN D VALUE IN THE HANDS OF TH E SE TWO ASSESSEE S, VIZ. D EMI R E ALTORS AND MALI FLOREX LTD. HOWEVER, HE OBSERVED THAT THE AMOUNT OFFERED BY THE ASSESSEE FOR TAXATION FOR ACQUISITION OF THE PROPERTY AT A CONSI D ERATION WHICH WAS LOWER THAN THE MARKET VALUE CONSTI TUTED AND THIS COULD BE BROUGHT TO TAX UN D ER S.2 (24)(IV) OF THE ACT. THE PROVISION S OF S.2 ( 24) (IV ) READ AS FOLLOWS - ' 2. (1).,..(23). (24)..'INCOME' INCLDUES - (I)(III) (IV) THE VALUE OF ANY BENEFIT OR PERQUISITE, WH E THER CONVERTIBLE INTO M ONEY OR NO T OBTAIN E D FROM A COMPANY EITHER BY A DIRECTOR OR BY A PERSON WHO HAS A SUBST A NTIAL INTER E ST IN THE COMPANY , OR BY A RELA T I V E OF THE DIRE C TOR OR SUCH PERSON AND ANY SUM PAID BY ANY SUCH COMPANY, IN RESPECT OF ANY OBLI G ATION WHICH BUT FOR SUCH PAYMENT WOULD HAVE BEEN PAYABLE BY THE DIRECTOR OR OTHER PERSON AFORESAID.' ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 13 AS PER THE ABOVE PROVISION, IF AN ASSESSEE GOT ANY BENEFIT, WH E TH E R CONVERTIBLE INTO MONEY OR NOT FROM A COMPANY, WHEN HE IS A DIRECTOR, OR HAVIN G SUBSTANTIAL INTEREST IN T HE COMPANY, OR BY A RELATIVE OF A DIRECTOR OR SUCH OTHER PERSON, AND ANY SUM PAID BY ANY SUCH COMPANY IN RESPECT O F ANY OTHER OBLIGATION, WHICH, BUT FOR SUCH PAY M ENT, WITHOUT BEING PAYABLE BY DIRECTOR OR OTHER PERSONS. IN TH E PR E SENT CASE, THE IMPUGNED PR OPERTY WAS ACQUIRED, VIDE AGREEMENT OF SALE LCUM IRRECVOCABLE GENERAL POWER ATTORNEY DATED 22.8.2007, BY THE ASSESSEE TOGETEHR WITH SHRI D.S.KARUNAKAR REDDY, SHRI K.SRINIVASULU AND SHRI B.MUKUND RAO, IN THEIR INDIVIDUAL CAPACITIES, AND AS SUCH, THE ASSESS EE HAS NOT DERIVED ANY BENEFIT FROM THE COMPANY , IN WHICH HE IS A DIRECTOR, SO AS TO ATTRACT THE PROVISIONS OF S.2(24)( IV) OF THE INCOME - TAX ACT. THAT BEING SO, SINCE THE A SSESSEE HAS NOT DERIVED THE BENEFIT FROM THE COMPANY WHEREIN HE IS A DIRECTOR OR IN WHICH HE WAS HAVING SUBSTANTIAL INTERST, IN OUR OPINION, THE PROVISIONS FO S.2(24)(IV) CANNOT BE INVOKED. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IT COULD BE ALTERNATIVELY BROUGH T TO TAX UN D ER S.56 OF THE IT ACT. WE HAVE ALSO CAREFULLY GON E THROUGH THE PROVISIONS OF S.56(VII) OF THE ACT. THIS PROVISION WAS INTRODUCED BY FINANCE (NO.2) ACT, 2009 WITH EFFECT FROM 1.10.2009 . THE CASE BEFO R E US, BEING RELEVANT FOR ASSESSMENT YEAR 2008 - 09, THE SAID PROVISION ALSO CANNOT HAVE ANY APPLICATION TO T HE FACTS OF THE PRESENT CASE. THE DEPARTMENT CANNOT LEVY TAX ON INCOME, WHICH IS ONLY HYPOTHETICAL AND DOES NOT MATERIALISE AS HELD BY TH E SUPREME COU R T IN THE CASE OF GODHRA ELECTRIC COMPANY LTD. V/S. CIT (225 ITR 746). BEING SO, THE ASSESSING OFFICER C ANNOT BRING TO TAX THE DIFFER E NCE BETWEEN THE BOOK VALUE OF ANY PART OF THE ASSET ACQUIRED AND THE PRICE PAID FOR THE SAME AS REVENUE RECEIPT. IT CANNOT BE SAID THAT THE ASSESSEE MADE ANY PROFIT AT ALL BY ONE FROM THE PURCHASE OF ANY OF THE ASSET. THE NO TIONAL DIFFER E NCE CANNOT BE ADDED AS INCOME OF THE ASSESSEE , AND THE ASSESSEE COULD MAKE ANY PROFIT FROM THE SALE OF SUCH ASSET. THERE IS ALSO NOTHING ON RECORD TO SHOW THAT SHRI D.MUKU N D RAO OR SHRI SRINIVASULU RAO ARE THE BENAMI O F THE ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 14 ASSESSEE . BEING S O, IN OUR OPINION, THE VALUE OF THE BALANCE LAND, CANNOT BE BROUGHT TO TAX ON THE BASIS OF STATEMENT OF THI R D PARTY GATH E RED BY THE ASSESSING OFFICER . HO W EVER, WE HASTEN TO MAKE IT CLEAR THAT WHEN ANY BENEFIT OR GAIN IS ACTUALLY REALIZED BY THE ASSESSEE , THE SAME IS TO BE BROUGHT TO TAX. CONSEQUENTLY, THE DIRECTION OF THE CIT(A) TO TREAT THE BENEFIT DERIVED IN ACQUIRIN G PROPERTY FOR CONSID E RATION LOWER THAN MARKET VALUE AS INCOM E OF THE ASSESSEE UNDER S.2(24)(IV) OF THE ACT CANNOT B E APPROVED. IN THIS VIEW OF THE MATTER, IT IS REDUNDANT FOR US TO EXAMINE THE FURTHER EXERCISE MADE BY THE CIT(A) IN THE IMPUGNED ORDER TO ARRIVE AT THE ACTUAL QUANTUM OF ADDITION TO BE SUSTAINED ON ACCOUNT OF SUCH PROFIT OR GAIN DERIVED BY THE ASSESSEE IN KIND IN TERMS OF S. 2(24)(IV) OF THE ACT. ACCORDINGLY, WE DELETE THE EVE N THAT PART OF THE ADDITION OF RS.3,55,28,500/ - , WHICH HAS BEEN SUSTAINED BY THE CIT(A). CONSEQUENTLY, THE GROUNDS RAISED BY THE ASSESSEE AGAIN S T SUCH DIRECTIONS ARE ALLOWED, AND GROUNDS OF THE REVENUE AGAINST THE ACTION OF THE CIT(A) IN DELETING PART OF THE ADDITION MADE BY THE ASSESSING OFFICER ARE REJECTED. 26. THE NEXT ISSUE INVOLVED IN THESE APPEALS RELATES TO THE ACTION OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.5 CRORES MADE BY THE ASSESSING OFFICER. 27. FACTS IN BRIEF RELATING TO THIS ISSUE ARE THAT THE ASSESSEE HAD INVESTED AN AMOUNT OF RS.2,00,00,000 ON 27.6.2007 IN SAI SURYA REALTORS CHENNAI. IN TERMS OF THE MOU DRAWN ON 27.6.2007, THE SAID SAI SURYA REALTORS HAD TO DO A B USINESS VENTURE IN REAL ESTATE AND THAT ON COMPLETION OF THE VENTURE, THE ASSESSEE WOULD BE ELIGIBLE FOR A PROFIT OF RS.5 CRORES; AND AS A MATTER OF SECURITY, POST DATED CHEQUES FOR RS.7 CORES WERE HANDED OVER TO THE ASSESSEE. THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE PROFIT OF RS.5 CRORES IN THAT VENTURE IS TAXABLE ON ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 15 DUE BASIS AND ACCORDINGLY BROUGHT TO TAX THE SAID SUM OF RS.5 CRORES BY MAKING AN ADDITION IN THAT BEHALF. 28. ON APPEAL, THE CIT(A), RELYING ON THE DECISION OF THE MADRAS HIG H COURT IN THE CASE OF ROHINI HOLDING P. LTD. V/S. CIT (202 TAXMAN 341), AND OBSERVING THAT MERE NON - ENCASHMENT OF CHEQUES BY ITSELF CANNOT BE A POINTER TO SUGGEST THAT THE DOCUMENT HAS NO RELEVANCE FOR BEING CONSIDERED, CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 29. AGGRIEVED BY THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE, ASSESSEE IS IN APPEAL BEFORE US. 30. WE HAVE CONSIDE R ED RIVAL SUBMI S SION S AND P E RUSED THE MATERIAL AVAILAB L E ON RECORD. AS PER THE MOU ENTERED INTO BY THE ASSESS EE WITH SHRI SAI SURYA REALTORS ON 27.6.2007, THE ASSESSEE MADE AN INVESTMENT OF RS.2 CRORE IN REAL ESTATE BUSIN E SS. AGAIN S T THIS THE ASSESSEE HAS TO RECEIVE RS.7 CRORES ON A FUTURE DATE, AND AS A SECURITY, ASSESSEE RECEIVED FROM SAI SURYA REALTORS POST DATED CEHQUES. ASSESSEE PLEADED BEFORE US THAT THIS SUM OF R S .7 CRORES, RETURNING OF RS.2 CRORES INVESTED BY THE ASSESSEE, AND THE PROFIT OF RS.5 CRORES. THE ASSESSING OFFICER TREATED THE AMOUN T OF RS.5 CRORES REPR E SEN T ED BY POST DATED CHEQUES AS PROFIT FROM REAL ESTATE BUSIN E SS IN THE ASSESSMENT YEAR UN D ER CON S IDERATION. ASSESSEE PLEADED BEFORE US THAT THE PROPOSED TRANS A CTION HAS NO T MATERIALISED AND THE POST DATED CHEQUES HAVE NOT BEEN ENCASHED, AND THE ASSESSING OFFICER HAS NO T BROUGHT ON RECORD, T HE TRANS A CTIONS CARRIED ON BY SAI SURYA R E ALTORS ON THE BASIS OF MOU ENTERED INTO BY THE ASSESSEE WITH THEM AND DETAILS OF ACTUAL PAYM E NTS , IF ANY , MADE BY THEM TO THE ASSESSEE. IF THE R E VENUE AUTHORITI E S INTEND TO TAX ANY AMOUNT IN TERMS OF THE SAID MOU, IT IS INCUMBENT UPON THEM TO BRING ON RECORD ANY COGENT EVIDENCE OR MATERIAL TO SUPPORT THE AC T UAL RECEIPT OF ANY SUM BY THE ASSESSEE F RO M SAI SURYA REALTORS IN TERMS OF THE SAID ITA NO. 291 & 337 /HYD/ 12 SHRI S.NARAYAN REDDY, HYDERABAD 16 MOU, OR AT LEAST A RIGHT WHI C H CRYSTALISED IN FAVOUR OF THE ASSESSEE TO RECE IVE ANY SUM IN TERMS OF THE SAID MOU. IF THE ASSESSEE JUST RECEIVED THE POST DATED CHEQUES TO PROTECT ITS INTEREST IN THE MOU, THE SAME CANNOT BE BROUGHT TO TAX . IT IS EVIDENT FROM THE MATERIAL ON RECORD THAT IT IS ONLY THE SIGNING OF THE MOU AND THE REC EIPT OF THE POST DATED CHEQUES THAT HAVE TAKEN PLACE DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2008 - 09, AND THERE IS NOTHING ON RECORD TO INDICATE ANY SUM OR BENEFIT HAVING BEEN ACTUALLY RECEIVED OR RECEIVABLE BY THE ASSESSEE ON ACCOUNT OF THE T RANS A CTIONS MADE BY SAI SURYA REALTORS IN TERMS OF THE SAID MOU. IN THE CIRCUMSTANCES, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER . WHEN THE ASSESSEE ACTUALLY RECEIVES ANY SUM OR BENEFIT OR WHEN ANY RIGHT CRYSTALISES IN FAVOUR OF THE ASSESSEE T O RECEIVE ANY SUM OR BENEFIT IN TERMS OF THE SAID MOU, THE SAME MAY BE BROUGHT TO TAX BY THE R E VENU E AUTHO R ITI E S IN THE RELEVANT YEAR. 31. IN THE RESULT, WHILE ASSESSEE 'S APPEAL IS ALL O WED, R E VENUE'S APPEAL IS DISMI S SED. ORDER PRONOUNCED IN THE COURT ON 2 9.11.2013 SD/ - SD/ - ( SAKTIJIT DEY ) ( CHANDRA POOJARI ) JUDICIAL MEMBER. ACCOUNTANT MEMBER. D T/ - 29 TH NOVEMBER, 201 3 COPY FORWARDED TO: 1. SHRI S. NARAYAN REDDY, 4 - 51/L/988, POT NO.88, LUMBINI SLN SPRINGS, GACHC HIBOWLI, HYDERABAD 500 032 2 . DY COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 6, HYDERABAD 3. 4. 5. COMMISSIONER OF INCOME - TAX(APPEALS) I, HYDERABAD COMMISSIONER OF INCOME - TAX CENTRAL, HYDERABAD DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD B.V.S .