Dy.CIT, Cen. Cir. -1(1), Pune, V. Shri C.P. Mohandas,

ITA 358/PUN/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56458 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 04-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JATINDER KAUSHAL
• Assessee Lawyers: P D KUDWA
• Keywords: Income from undisclosed sources; Document seized; Opportunity of being heard; Additional evidence; Documents seized
• Section: 143(3); 153A; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 358 /PN/2008 (ASSTT. YEAR: 2001-02) THE DY.COMMISSIONER OF INCOME-TAX ... APPELLANT CENTRAL CIR-1(1), PUNE V. SHRI C.P. MOHANDAS RESPONDENT VIJAY HOUSE 599 SACHAPEER STREET, PUNE-411 001 PAN : AAXPM1656M ITA NO. 357 /PN/2008 (ASSTT. YEAR: 2002-03) THE DY.COMMISSIONER OF INCOME-TAX ... APPELLANT CENTRAL CIR-1(1), PUNE V. SHRI C.P. MOHANDAS RESPONDENT VIJAY HOUSE 599 SACHAPEER STREET, PUNE-411 001 PAN : AAXPM1656M ITA NO. 381/PN/2008 (ASSTT. YEAR: 2002-03) SHRI C.P. MOHANDAS APPELLANT VIJAY HOUSE 599 SACHAPEER STREET, PUNE-411 001 PAN : AAXPM1656M V. ACIT ... RESPONDENT CENTRAL CIR-1(1), PUNE ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 2 ASSESSEE BY : SHRI. P.D. KUDWA DEPARTMENT BY : SHRI JATINDER KAUSHAL DATE OF HEARING : 3.8.11 DATE OF PRONOUNCEMENT: 3.10.11 ORDER PER I.C. SUDHIR, JM ITA NO. 358/PN/2008 THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER O N THE FOLLOWING GROUNDS : 1. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,30,000/- MADE ON ACCOUNT OF UNDISCLOSED SALE OF LAND OF SMT NANDI TA DOGARA. 2. THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALL OW COST OF LAND FROM UNACCOUNTED SALE OF LAND AMOUNTING TO RS. 3,50,000/ - AFTER VERIFICATION OF CLAIM OF ASSESSEE. 3. THE LD. CIT(A) ERRED IN ALLOWING RELIEF OF RS. 5,70,230/- OUT OF TOTAL ADDITION OF RS. 12,99,400/- MADE BY THE ASSESSING O FFICER HOLDING THE SAME AS INCOME OUT OF AGRICULTURAL INCOME TREATED AS FRO M UNDISCLOSED SOURCES. GROUND NO. 1 2. THE RELEVANT FACTS ARE THAT DURING THE COURSE OF SEARCH PAPERS IN BUNDLE NO. 1 WERE SEIZED FROM THE OFFICE PREMISES OF THE ASSESSE E. PAGE NO. 62 TO 71 OF THIS BUNDLE CONTAIN A SALE DEED DATED 27.10.2000 BETWEEN SMT. NANDITA DOGRA AND SHRI GAJANAN LAXMAN BALWADKAR FOR SALE OF 5 R LAND AT SURVEY NO. 19/3A/2 FOR RS. 2,50,000/-. THE SALE DEED WAS EXECUTED BY THE ASSE SSEE SHOWING AS POWER OF ATTORNEY HOLDER OF SMT. NANDITA DOGRA . THE A.O WA S NOT AGREEABLE TO THIS EXPLANATION OF THE ASSESSEE AND MADE ADDITION OF RS . 2,30,000/- ON ACCOUNT OF SALE ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 3 OF LAND OF MRS. NANDITA DOGRA. THE CONTENTION OF T HE ASSESSEE REMAINED THAT THE AMOUNT OF RS. 2,30,000/- WAS NOT HIS INCOME AND WAS A LIABILITY PAYABLE TO MRS. NANDITA DOGRA. THE ASSESSEE, HOWEVER, COULD NOT FU RNISH CONFIRMATION FROM SMT. NANDITA DOGRA DURING THE COURSE OF ASSESSMENT PROCE EDINGS AS HE DID NOT RECEIVE THE SAME WITHIN THE TIME AVAILABLE FOR ASSESSMENT. HE, HOWEVER, SUBMITTED CONFIRMATION FROM SMT. NANDITA DOGRA, DURING THE CO URSE OF FIRST APPELLATE PROCEEDINGS, AS THE ASSESSEE RECEIVED CONFIRMATION FROM SMT. NANDITA DOGRA THAT DUES WERE PAID ON 5.3.2007 BY THE ASSESSEE. THE AS SESSEE REQUESTED THAT THE SAID CONFIRMATION MAY BE ADMITTED AS ADDITIONAL EVIDENC E UNDER RULE 46A OF THE I.T. RULES AS THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE SAME BEFORE THE A.O AS SMT. NANDITA DOGRA WAS/ AND IS AW AY IN U.K. IT WAS STATED THAT SMT. NANDITA DOGRA IS ASSESSED TO INCOME-TAX AND HE R ADDRESS AS WELL AS PAN WERE QUOTED. IT WAS ALSO SUBMITTED THT A COPY OF 7/12 E XTRACT WAS SUBMITTED TO THE A.O AT THE TIME OF EXAMINATION OF ADDITIONAL EVIDENCE B Y THE A.O. IT WAS SUBMITTED FURTHER THAT THE MUTATION HAS TAKEN PLACE AFTER THE SALE OF THE PROPERTY OWNED BY SMT. NANDITA DOGRA IN THE NAME OF THE PURCHASER. THUS, IT WAS PLEADED THAT THE SUBJECT RS.2,30,000/- IS GENUINE LIABILITY OF THE A SSESSEE AND NOT HIS INCOME. OTHER SUBMISSIONS HAVE ALSO BEEN MADE BY THE ASSESSEE WHI CH HAVE BEEN REPRODUCED BY THE LD CIT(A) IN FIRST APPELLATE ORDER. BEING CONV INCED WITH THOSE EXPLANATION, THE LD CIT(A) HAS DELETED THE ADDITION. 3. IN SUPPORT OF THE GROUND, THE LD. D.R. HAS BAS ICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. THE LD. A.R., ON THE OTHER HAND, TRIED TO JUSTIFY THE FIRST APPELLATE ORDER. 4. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW, WE FIND THAT THE LD CIT(A) HAS PASSED A REASONED ORDER ON THE ISSUE. T HE A.O DISBELIEVED THE EXPLANATION OF THE ASSESSEE THAT SMT. NANDITA DOGRA HAD SOLD 5 R LAND IN QUESTION ON 27.10.2000 THROUGH HIM AS A POWER OF ATTORNEY HO LDER, ON THE BASIS THAT IT IS HIGHLY IN PROBABLE THAT A PERSON WHO HAD SOLD LAND ON 27.10.2000, HAD NOT ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 4 COLLECTED THE AMOUNT OF RS.2,30,000/- TILL DATE. T HE A.O ALSO DISBELIEVED THE ASSESSEE SINCE THE ASSESSEE FAILED TO SUBMIT ANY CO NFIRMATION FROM SMT. NANDITA DOGRA. WE, HOWEVER, FIND THAT DURING THE COURSE OF FIRST APPELLATE PROCEEDING, THE ASSESSEE WAS ABLE TO FILE CONFIRMATION LETTER ISSUE D FROM SMT. NANDITA DOGRA, WHO, DURING THE COURSE OF ASSESSMENT PROCEEDING WAS IN L ONDON AND THE ASSESSEE COULD NOT PROCURE HER CONFIRMATION WITHIN THE TIME LIMIT PROVIDED BY THE A.O. CERTAIN MATERIAL FACTS HAVE NOT BEEN REBUTTED BY THE REVENU E THAT THE LAND IN QUESTION STOOD IN THE NAME OF SMT. NANDITA DOGRA IN THE REVE NUE RECORD. OUT OF THE AMOUNT OF RS.2,30,000/- RECEIVED ON ACCOUNT OF SALE OF THE PROPERTY BY THE ASSESSEE, AN AMOUNT OF RS. 2,00,000/- WAS RECEIVED BY THE ASSESS EE THROUGH CHEQUE NO. 627121 DATED 5.10.2000 DRAWN ON BANK OF MAHARASHTRA, BALE WADI BRANCH AND FURTHER AMOUNT OF RS. 30,000/- WAS RECEIVED IN CASH AS MENT IONED ON THE SALE DEED. SMT. NANDITA DOGRA HAS CONFIRMED THAT ON 7.7.2000, SHE H AD APPOINTED ASSESSEE AS A DULY CONSTITUTED POWER OF ATTORNEY HOLDER FOR COMPL ETING THE TRANSACTION OF LAND. SHE CONFIRMED THAT SHE HAD ENTERED INTO AN AGREEMEN T TO SALE WITH SHRI GAJANAN LAXMAN BALWADKAR AND UTTAM MOHAN PHULE ON 10.7.1977 FOR SALE OF 5 R LAND IN QUESTION FOR RS. 2,50,000/- AND RECEIVED RS. 20,000 /- AGAINST THIS AGREEMENT. SHE HAS FURTHER AFFIRMED THAT THE ASSESSEE HAD EXECUTED THE SALE DEED ON 27.10.2000 AND RECEIVED THE BALANCE AMOUNT OF RS. 2,30,000/- O N HER BEHALF BUT THE AMOUNT WAS NOT COLLECTED BY HER, AS AT PRESENT, SHE IS NO T IN INDIA. SMT. NANDITA DOGRA HAS ADDRESSED THIS CONFIRMATION LETTER DATED 6.3.20 07 TO THE A.O. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT LD CIT(A) HA S RIGHTLY COME TO THE CONCLUSION THAT THE AMOUNT OF RS. 2,30,000/- WAS A LIABILITY A ND CANNOT BE SAID TO BE INCOME OF THE ASSESSEE BECAUSE IT IS IN CONNECTION WITH SALE OF LAND STANDING IN THE NAME OF SMT. NANDITA DOGRA. THE LD CIT(A) HAS THUS RIGHTLY DELETED THE ADDITION OF RS. 2,30,000/- MADE BY THE A.O. THE FIRST APPELLATE OR DER ON THE ISSUE IS REASONED ONE, HENCE WE ARE NOT INCLINED TO INTERFERE THEREWITH. THE SAME IS UPHELD. GROUND NO. 1 IS ACCORDINGLY REJECTED. ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 5 GROUND NO.2 5. THE A.O. MADE ADDITION OF RS.3,50,000/- ON ACCOU NT OF UNRECORDED SALE OF LAND AT S.NO. 8/2/2, LOHEGAON. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT THE ASSESSEE HAD SOLD A PLOT OF LAND OUT OF THE SURVEY NO. 9/2/2 LOHEGAON TO SHRI. K.B. JOSHI FOR RS.3,50,000/-. THE A.O NOTED THAT ASSESSEE HAD TAK EN POSSESSION OF THE LAND IN F.Y. 1997-98 THROUGH POWER OF ATTORNEY AND HAD PAID CONSIDERATION TO THE FARMERS, BUT THE ASSESSEE HAD NOT CREDITED THE SALE PROCEEDS OF RS. 3,50,000/- TO THE SALE ACCOUNT. HE ACCORDINGLY ADDED RS. 3,50,000/- IN TH E TOTAL INCOME OF THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE REMAINED THAT THE P LOT IN QUESTION WAS SOLD TO SHRI K.B. JOSHI BY SALE DEED DATED JANUARY 2001 EXECUTE D BY THE ASSESSEE FOR A CONSIDERATION OF RS. 3,50,000/-. THE ASSESSEE HAD ACQUIRED RIGHT IN THE 101 R LAND AT S.NO. 9/2/2 LOHEGAON AND 214 R OF LAND AT S.NO . 12/2/1/2 FROM SHRI R.B. MOZE BY PAYING TOTAL CONSIDERATION OF RS. 25,00,000/- FO R 315 R OF LAND. THIS LAND WAS THE SUBJECT OF ADDITION IN A.Y. 1998-99 WHEREIN ON ACCOUNT OF SEIZED DOCUMENTS AT SL. NO. 2, BUNDLE NO.3, THE ENTIRE CONSIDERATION W AS DETERMINED AT RS. 25,00,000/- FOR THE SUBJECT PROPERTY. ON THIS, THE COST OF 10 1 R LAND FOR S.NO. 9/2/2/ LOHEGAON WORKS OUT TO RS. 14,72,540/0 AND FOR 214 R FOR S. NO.12/2/1/2 WORKS OUT TO RS.10,27,460/-. THE PROPORTIONATE COST OF THE 2 0 R PLOT OF LAND SOLD TO SHRI K.B. JOSHI WORKS OUT TO RS.2,91,580/-. IT WAS CONTENDED THAT THE ACTION OF THE A.O IN MAKING THE ADDITION ON ACCOUNT OF SALE CONSIDERATIO N OF THE PLOT SOLD TO SHRI K.B. JOSHI WITHOUT ALLOWING PROPORTIONATE COST OF RS. 2, 91,580/- IS NOT VALID AND PLEADED FOR DIRECTION FOR ALLOWING COST OF RS.2,91,580/- FR OM THE SALE CONSIDERATION OF RS.3,50,000/- ADDED BY THE A.O. CONSIDERING THIS S UBMISSION, THE LD CIT(A) HAS DIRECTED THE A.O TO VERIFY THE CLAIM OF THE ASSESSE E THAT PAYMENT IN RESPECT OF PURCHASE OF LAND ON SALE OF WHICH, AMOUNT OF RS. 3, 50,000/- WAS RECEIVED DURING THE A.Y. UNDER APPEAL, HAS BEEN MADE IN F.Y. 1997-98 RE LATING TO A.Y. 1998-99 AND SUCH PAYMENT WAS CLAIMED AS DEDUCTION DURING THE A.Y. 19 98-99. IT HAS BEEN MADE CLEAR ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 6 BY THE LD CIT(A) THAT IF THIS CLAIM OF ASSESSEE IS FOUND TO BE CORRECT, THE A.O WILL ALLOW THE ASSESSEE THE COST OF LAND SOLD ON PROPORT IONATE BASIS. WE THUS FIND THAT THE LD CIT(A) HAS DIRECTED THE A.O TO ALLOW THE CLA IMED COST AFTER VERIFICATION OF ITS CORRECTNESS BY THE A.O. WE THUS DO NOT FIND INFIRM ITY IN THE FIRST APPELLATE ORDER ON THE ISSUE. THE SAME IS UPHELD. THE GROUND NO. 2 IS ACCORDINGLY REJECTED. GROUND NO.3 7. IN THIS GROUND, THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER WHEREBY LD CIT(A) HAS ALLOWED RELIEF OF RS.5,70,230/- OUT OF T OTAL ADDITION OF RS.12,99,400/- MADE BY THE A.O BY TREATING THE CLAIMED AGRICULTUR E INCOME AS INCOME FROM UNDISCLOSED SOURCES. 8. BEFORE THE LD CIT(A), THE ASSESSEE POINTED OUT T HAT AN IDENTICAL ISSUE WAS RAISED IN THE A.Y. 1998-99 WHEREIN THE A.O HAD MAD E SIMILAR DISALLOWANCE. FOLLOWING THE SAME, A SIMILAR DISALLOWANCE HAS BEEN MADE BY THE A.O DURING THE A.Y. UNDER CONSIDERATION. IT WAS FURTHER POINTED O UT THAT THE SAID ASSESSMENT ORDER FOR THE A.Y. 1998-99 WAS QUESTIONED BEFORE THE LD CIT(A) AND BEING CONVINCED WITH THE SUBMISSION OF THE ASSESSEE, THE LD CIT(A) HAS G IVEN PART RELIEF TO THE ASSESSEE VIDE ORDER DATED 28.9.2007. BASED ON THE SAME, THE LD CIT(A) HAS ESTIMATED THE AGRICULTURE INCOME DURING THE YEAR AT RS. 5,70,230/ - OUT OF THE CLAIMED AGRICULTURE INCOME OF RS. 17,59,300/-. THUS, THE REMAINING INCO ME OF RS.12,99,400/- HAS BEEN HELD TO BE INCOME FROM UNDISCLOSED SOURCES. LD CIT (A) HAS ALSO ACCEPTED THE INCOME FROM MANGO TREES AT RS.1,19,000/-. THIS RELI EF GIVEN BY THE LD CIT(A) HAVE BEEN QUESTIONED BY THE REVENUE BEFORE US. 9. IN SUPPORT OF THE GROUND, THE LD. D.R. HAS BASIC ALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. HE REFERRED CONTENTS OF PARA NOS . 23 & 24 OF THE ASSESSMENT ORDER WITH THIS SUBMISSION, THAT BOGUS BILLS WERE F OUND DURING THE COURSE OF SEARCH. ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 7 THE LD CIT(A) HAS GIVEN RELIEF WITHOUT APPRECIATIN G THE SAME. THE LD. A.R., ON THE OTHER HAND, TRIED TO JUSTIFY FIRST APPELLATE ORDER. HE POINTED OUT THAT THE LD CIT(A) HAS GIVEN RELIEF OUT OF THE ADDITION MADE BY THE A. O BY DISALLOWING THE CLAIMED AGRICULTURE INCOME ON THE BASIS OF ASSESSMENT ORDER FOR THE A.Y. 1998-99. THE ASSESSEE HAD PREFERRED FIRST APPEAL AGAINST THE SA ID ASSESSMENT ORDER FOR THE A.Y. 1998-99 WHEREIN THE LD CIT(A) HAD GIVEN RELIEF. TH E REVENUE DID NOT QUESTION THE SAME BEFORE THE TRIBUNAL. FOLLOWING THE SAID DECIS ION, THE LD CIT(A) DURING THE YEAR HAS GIVEN RELIEF. THUS, THE REVENUE SHOULD NO T HAVE ANY GRIEVANCE THERETO. 10. HAVING GONE THROUGH THE ORDER OF THE AUTHORITIE S BELOW, WE FIND THAT THE A.O MADE THE ADDITION IN QUESTION FOLLOWING ITS EARLIER ORDER ON THE ISSUE FOR THE A.Y. 1998-99. THE LD CIT(A) ON THE BASIS OF ESTIMATION, HAD GIVEN PART RELIEF TOWARDS THE CLAIMED AGRICULTURE INCOME IN THE A.Y. 1998-99. FOLLOWING THE DECISION TAKEN THEREIN, THE LD CIT(A) DURING THE YEAR HAS GIVEN PA RT RELIEF TOWARDS THE CLAIMED AGRICULTURE INCOME. IT APPEARS THAT THE ASSESSEE H AD BASICALLY CLAIMED AGRICULTURE INCOME FROM RUBBER TREES, MANGO TREES, COCONUT TREE S AND OTHERS. THE ASSESSEE CLAIMED AGRICULTURE INCOME AT RS.17,59,300/- DURING THE SEARCH PROCEEDINGS AT FARM HOUSE AT PALAKKAD, KERALA, WHEREIN THE STATEMENTS O F SHRI T. RADHAKRISHNAN WERE RECORDED. ON THE BASIS OF THESE STATEMENTS OF SHRI RADHAKRISHNAN, IT WAS FOUND THAT BOGUS SALE BILLS HAVE BEEN PROCURED AND HAVE B EEN SENT TO THE ASSESSEE WHICH THE ASSESSEE HAD ACCOUNTED FOR AS HIS AGRICULTURAL INCOME. THIS ISSUE WAS RAISED AND DEALT IN DETAIL IN THE ASSESSMENT ORDER FOR A.Y . 1998-99 IN ASSESSEES CASE. THE A.O CAME TO THE CONCLUSION THAT THE ASSESSEE HAD SH OWN INFLATED AGRICULTURAL INCOME ON THE BASIS OF BOGUS SALE BILLS PROCURED BY THE AS SESSEE. THE DIFFERENCE BETWEEN THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE IN HI S RETURNS OF INCOME AND THAT WORKED OUT IN THE ASSESSMENT ORDER FOR A.Y. 1998-99 WAS TREATED AS UNDISCLOSED INCOME FROM THE LAND BUSINESS OF THE ASSESSEE. THE ASSESSMENT YEAR-WISE WORKING OF THE DIFFERENCE IS AS UNDER : ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 8 ASST.YEAR AGRL. INCOME SHOWN BY T HE ASSESSEE AGRICULTURAL INCOME AS WORKED OUT ABOVE DIFFERENCE TO BE TREATED AS INCOME FROM UNDISCLOSED SOURCES. 1998 - 1999 20,67,000 4,13,910 16,53,090 1999 - 2000 10,40,143 4,29,240 6,10,903 2000 - 2001 14,55,300 4,44,570 10,10,730 2001 - 2002 17,59,300 4,5 9,900 12,99,400 2002 - 2003 12,21,600 5,51,880 6,69,720 2003 - 2003 17,04,222 5,97,870 11,06,352 2004 - 2005 12,96,326 7,35,840 5,60,486 DURING THE YEAR, THE ASSESSEE HAD SHOWN AGRICULTURE INCOME AT RS.7,59,300/- WHEREAS THE SAME HAS BEEN WORKED OUT BY THE A.O AT RS.4,59,900/-. THUS THE DIFFERENCE OF RS. 12,99,400/- WAS ADDED BY THE A.O. DURING THE YEAR, ASSESSEE CLAIMED INCOME OF RS.4,00,000/- ON SLAUGHTER TAPPIN G OF 1500 TREES. THE A.O DOUBTED THIS CLAIM ON THE BASIS OF STATEMENTS OF SH RI. T. RADHAKRISHNAN RECORDED DURING THE COURSE OF SEARCH. FROM THIS STATEMENT, THE A.O DREW AN INFERENCE THAT THE CLAIMED AGRICULTURE INCOME WAS INFLATED. THERE WAS NO OTHER MATERIAL TO SUPPORT THE ALLEGED INFLATION. CONSIDERING THIS MATERIAL A SPECT, THE LD CIT(A) HAS ESTIMATED THE INCOME FROM SLAUGHTER TAPPING OF 1500 TREES AT RS.3,50,000/-. THE LD CIT(A) HAS ESTIMATED RS.50,000/- TOWARDS THE EXPENDITURE O N PLANTATION, MAINTENANCE AND UP-KEEPING OF NEW TREES AND THUS HE HAS WORKED OUT NET INCOME FROM SLAUGHTER TAPPING AT RS. 3,00,000/- 11. REGARDING INCOME FROM THE REMAINING TREES, WHIC H WERE NOT SLAUGHTER TAPPED, THE LD CIT(A) HAS FOLLOWED THE FIRST APPELL ATE ORDER ON THE ISSUE FOR THE A.Y. 1998-99. ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 9 12. REGARDING THE LAND AND NUMBER OF TREES FROM WH ICH INCOME HAS BEEN COMPUTED BY THE A.O, THE OBSERVATION OF THE LD CIT( A) AFTER VERIFICATION OF THE RECORDS IS THAT THE ASSESSEE HAS BEEN SHOWING INCOM E FROM 23 ACRES OF LAND ON WHICH NUMBERS OF RUBBER TREES ARE 4640. HOWEVER, A .O HAS CONSIDERED INCOME FROM 18 ACRES OF LAND HAVING 3650 TREES ONLY IN CAS E OF THE ASSESSEE. AS PER THE REVENUE RECORD, 18 ACRES OF LAND ARE IN THE NAME OF THE ASSESSEE. THE CONTENTION OF THE ASSESSEE REMAINED THAT HE IS HAVING INCOME FROM 30 ACRES OF LAND HAVING 6140 TREES AS CONTAINED IN ANNEXURE 1 PREPARED ON T HE BASIS OF ANNEXURE TO PANCHNAMA WHICH HAS BEEN REPRODUCED BY THE LD CIT(A ) IN ITS FIRST APPELLATE ORDER. DURING THE A.Y. 1998-99, THE A.O WAS DIRECTED TO VE RIFY THE FACTUAL POSITION. IN RESPONSE THERETO, IT WAS STATED BY THE A.O VIDE ORD ER SHEET ENTRY DATED 17.9.2007 THAT IT WAS VERIFIED AND FOUND THE NUMBER OF RUBBER TREES AS CONTAINED IN ANNEXURE 1 OF THE WRITTEN STATEMENT OF THE ASSESSEE. IT WAS SUBMITTED THAT THIS FIGURE MATCHES WITH FIGURES AS CONTAINED IN ANNEXURE-B TO PANCHNAMA PREPARED UNDER SIGNATURE OF DDIT (INVESTIGATION), PUNE. ASSESSEE FURTHER CONTENDED THAT HE IS ALSO SHOWING INCOME FROM LAND OF SAVITRIAMMA (MOTHER) (7 ACRES- 1500 TREES); MS. KIRTI (DAUGHTER) (1.25 ACRE 300 TREES); V. UNNIRAMAN NA IR (FATHER) AND SAVITRIAMMA (MOTHER) ( 2 ACRES 290 TREES); SETHUMADHAVAN (BRO THER) (1.75 ACRES 400 TREES);, P. CHANDRAKALA (WIFE) ( 3 ACRES 600 TREES); AND C .P. UNNIKRISHNAN (BORHTER ( 5.5 ACRES 1250 TREES). IT WAS CONTENDED THAT OUT OF THESE TREES, 1500 STOOD IN THE LAND ADMEASURING 7 ACRE BELONGING TO SMT. SAVITRIAM MA WERE SUBJECTED TO SLAUGHTER TAPPING. IT WAS CONTENDED BY THE ASSESSE E THAT THE INCOME FROM AGRICULTURE LAND BELONGING TO THE SAID PERSONS ARE BEING SHOWN BY THE ASSESSEE BECAUSE THESE PERSONS HAVE ALLOWED THE ASSESSEE TO USE THE LAND AND ENJOY INCOME FROM THE SALE. IT WAS SUBMITTED THAT THESE PERSONS HAVE NEVER SHOWN ANY INCOME FROM THE ABOVE SAID LAND. CONSIDERING THESE SUBMIS SIONS AND FOLLOWING THE FIRST APPELLATE ORDER ON THE ISSUE FOR THE A.Y. 1998-99, THE LD CIT(A) HAS DIRECTED THE A.O TO VERIFY THE CLAIM OF THE ASSESSEE THAT INCOME FROM TREES ON THE LAND INVENTORIZED IN ANNEXURE-B TO PANCHNAMA DRAWN AT PALAKKAD, KERALA, DURING THE ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 10 COURSE OF SEARCH ARE STANDING IN NAMES OF HIS PARE NTS, AND OTHERS, AND INCOME THEREFROM HAS NOT BEEN CLAIMED BY THEM AND IF THE CLAIM OF THE ASSESSEES IS FOUND TO BE CORRECT INCOME FROM TREES ON THE LAND OF THES E PERSONS SHALL BE INCLUDED IN THE AGRICULTURE INCOME OF THE ASSESSEE FOR THE RATE PURPOSE. REGARDING THE AGRICULTURE INCOME IN CASE OF MS. KIRTI, MINOR DAUG HTER OF THE ASSESSEE, THE LD CIT(A) HELD THAT THE ASSESSEE HAS RIGHTLY CLUBBED HER INCOME FROM AGRICULTURE U/S. 64 OF THE ACT. 13. THE LD CIT(A) CONSIDERING THE TOTALITY OF THE F ACTS AND CIRCUMSTANCES OF THE CASE ON THE ISSUE HAS ALSO HELD THAT THE ASSESSEE D ESERVES TO BE ALLOWED DEDUCTION OF 35% ON ACCOUNT OF EXPENSES FROM GROSS RECEIPTS E STIMATED BY THE A.O AS AGAINST SUCH ALLOWANCE OF 30% ESTIMATED BY THE A.O. THE L D CIT(A) HAS BASED HIS FINDING ON THE DECISION TAKEN IN THIS REGARD BY THE FIRST A PPELLATE AUTHORITY IN THE A.Y. 1998- 99 WHICH HAS NOT BEEN QUESTIONED BY THE REVENUE. T HE LD CIT(A) HAS, HOWEVER, UPHELD THE FINDINGS OF THE A.O ESTIMATING THE GROSS RECEIPT PER RUBBER TREE APPRECIATING THE OBSERVATION OF THE A.O THAT THE AS SESSEE IS BASICALLY A BUSINESS MAN AND THEREFORE IT IS NOT EXPECTED FROM HIM TO GI VE MUCH ATTENTION TOWARDS AGRICULTURE, HENCE ONLY THE BENEFIT OF MINIMUM GROS S RECEIPT FROM SALE OF RUBBER IS GIVEN. LD CIT(A) FURTHER DIRECTED TO TAKE THE RUBB ER TREES AT 4640 (AFTER DEDUCING THE TREES WHICH WERE SUBJECTED TO SLAUGHTER TAPPING ) AND SUBJECT TO THE VERIFICATION OF ASSESSEES CLAIM THAT INCOME FROM RUBBER TREES G ROWN ON LAND STANDING IN THE NAMES OF SMT. SAVITRIAMMA, SHRI UNNIRAMAN NAIR AND SHRI SETHUMADHAVAN HAS NOT BEEN CLAIMED IN INDIVIDUAL ASSETS OF THESE PERSONS OR HAS NOT BEEN OTHERWISE ENJOYED BY THESE PERSONS FOR THE PURPOSE OF THEIR H OUSEHOLD EXPENSES, ALLOW THE CLAIM OF THE ASSESSEE. 14. REGARDING INCOME FROM COCONUT TREES AND MANGO T REES, THE LD CIT(A) HAS REPRODUCED THE SUMMARY OF INVENTORY OF COCONUT TREE S, MANGO TREES AND OTHER TREES FOUND AND INVENTORIZED AT THE TIME OF SEARCH AND CONTAINED IN ANNEXURE B TO ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 11 PANCHNAMA AT PAGES 29 & 30 OF THE FIRST APPELLATE ORDER. THE LD CIT(A) HAS NOTED FROM THE SUMMARY THAT THE COCONUT TREES ARE LOCATED ON THE LAND OWNED BY ASSESSEE, WHEREAS OUT OF 34 MANGO TREES, 18 MANGO TREES ARE LOCATED ON THE LAND STANDING IN THE NAME OF MS. KIRTI, A MINOR DAUGHTER OF THE ASSESSEE. LD CIT(A) HAS OBSERVED THAT THE A.O HAS MERELY HELD THAT INCOME F ROM SUCH COCONUT TREES AND MANGO TREES WAS UTILIZED FOR INCURRING EXPENDITURE IN CONNECTION WITH RUBBER PLANTATION AND THEREFORE, AS AGAINST 33% EXPENDITUR E, WITH REFERENCE TO GROSS RECEIPT OF RUBBER, THE A.O ALLOWED 30% EXPENDITURE. THE LD CIT(A) FOLLOWING THE DECISION OF FIRST APPELLATE AUTHORITY IN THE A.Y. 1998-99 IN THIS REGARD, HAS ESTIMATED THAT ONE COCONUT TREE SHALL YIELD 150 COCONUTS IN A YEAR AND AFTER DEDUCTING OF EXPENSES, NET INCOME FROM COCONUT WOULD BE AT RS. 3 .25 PER COCONUT FOR A.Y. UNDER CONSIDERATION. THUS, HE WORKED OUT INCOME OF RS.68 ,250/- FROM 140 COCONUT TREES PER ANNUM FOR THE A.Y. UNDER CONSIDERATION I.E. 20 01-02. 15. REGARDING MANGO TREES, THE LD CIT(A) OBSERVED T HAT ASSESSEE HAS WORKED OUT SUCH INCOME AT RS.5000/- MINIMUM AND MAXIMUM AT RS.10,000/- PER TREE PER ANNUM. ON ACTUAL BASIS, SUCH INCOME HAS BEEN WORKE D AT RS. 80,000/- AND RS.16,000/- TAKING INTO ACCOUNT ONLY 16 MANGO TREES , WHEREAS THE NUMBER OF SUCH TREES AS PER THE SUMMARIZED TABLE WAS FOUND AT 34. SINCE THE ASSESSEE HAD NOT MAINTAINED ANY RECORDS IN RESPECT OF INCOME FROM MA NGO TREES, THE LD CIT(A) FOUND IT REASONABLE TO WORK OUT NET INCOME FROM EACH MANG O TREE AT THE RATE OF RS.3500/- AFTER DEDUCTING OF EXPENSES. HE ACCORDINGLY HAS WO RKED OUT INCOME FROM MANGO TREES DURING THE YEAR AT RS.1,19,000/-. THE LD CI T(A) HAS FURTHER DIRECTED THAT THE DIFFERENCE BETWEEN THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE IN RETURN OF INCOME AND AS COMPUTED IN ACCORDANCE WITH HIS DIREC TION IN THE APPELLATE ORDER SHALL BE ASSESSED AS INCOME OF THE ASSESSEE FROM UNDISCLO SED SOURCES. 16. CONSIDERING THE ABOVE FINDINGS GIVEN BY THE LD CIT(A), WE FIND THAT IT IS BASED UPON THE AREA OF LAND AND NUMBER OF TREES FOU ND DURING THE COURSE OF SEARCH ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 12 AND ESTIMATION OF INCOME AT LOWER POSSIBLE LEVEL KE EPING IN MIND THAT IT WAS NOT POSSIBLE FOR THE ASSESSEE TO GIVE THE EXPECTED ATT ENTION TO THE AGRICULTURAL ACTIVITIES SINCE HE WAS HAVING OTHER BUSINESS ALSO AND THE JUS T EXPENSES WHICH ARE REQUIRED TO CULTIVATE THE ABOVE AGRICULTURAL ACTIVITIES LIKE PL ANTATION OF TREE, AND ITS MAINTENANCE ETC.. THE FIRST APPELLATE ORDER ON THE ISSUE AS DI SCUSSED ABOVE IS REASONED ONE AND HENCE WE ARE NOT INCLINED TO INTERFERE THEREWITH. THE SAME IS UPHELD. THE GROUND NO. 3 IS ACCORDINGLY REJECTED. 17. IN RESULT, APPEAL IS DISMISSED. ITA NO. 357/PN/2008 18. THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDE R ON THE FOLLOWING GROUNDS : 1. THE LD. CIT(A) ERRED IN DELETING THE ADDITION O F RS. 15,00,000/- MADE BY THE ASSESSING OFFICER BEING UNACCOUNTED PAYMENTS MADE TO SHRI KISAN GANPAT BACHUDE AS EVIDENCED IN THE SEIZED DOCUMENTS . 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 16,15,126/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF EXPENSES CLAIMED AS COST OF IMPROVEMENT. GROUND NO. 1 19. THE RELEVANT FACTS ARE THAT THE A.O MADE ADDITI ON OF RS. 15,00,000/- ON ACCOUNT OF PAYMENT MADE TO SHRI KISAN GANPAT BUCHAD E ON THE BASIS OF PAGE NO. 23 OF BUNDLE NO. 3 SEIZED AT THE RESIDENCE OF THE ASSE SSEE DESCRIBING THE LIABILITIES OF LAND OWNERS. THE A.O DID NOT AGREE WITH THE EXPLA NATION OF THE ASSESSEE THAT SUBJECT PAGE NO. 23 OF BUNDLE NO. 3 CONTENDS JOTTI NGS OF THE LIABILITIES TO THE LAND OWNERS AND OF NOT THE UNACCOUNTED CASH PAYMENTS. T HE LD CIT (A) HAS, HOWEVER, DELETED THE ADDITION BEING CONVINCED WITH THE EXPL ANATION OF THE ASSESSEE. ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 13 20. IN SUPPORT OF THE GROUND, THE LD. D.R. HAS BASI CALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. HE REFERRED CONTENTS OF PARA NOS . 5 TO 8 OF THE ASSESSMENT ORDER IN THIS REGARD. THE LD. A.R., ON THE OTHER HAND, T RIED TO JUSTIFY THE FIRST APPELLATE ORDER. 21. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW, WE FIND THAT THE A.O HAS DEALT WITH THE ISSUE IN PARA NOS. 5 TO 8 OF THE ASSESSMENT ORDER. THE ADDITION IS BASED UPON THE NOTINGS ON PAGE NO. 23 OF THE SEIZED BUNDLE NO.3 I.E. A DIARY. THE NOTINGS AS REPRODUCED IN PARA NO. 5 OF THE ASSESSME NT ORDER ARE AS UNDER : KISSAN + VASSANT GANKAT 4,00,000/- LIFT LOAN 8,00,000/- SUSHILA 3,00,000/ - 15,00,000/- KISSAN & BROTHERS--------------- 1,00 ,000/- PAID ON 12/06/2003. IN HIS STATEMENT RECORDED ON 25.6.2003, DURING THE COURSE OF SEARCH PROCEEDINGS, THE ASSESSEE EXPLAINED THE NOTINGS AS UNDER : PAGE NO. 23 CONTAINS NOTINGS IN RESPECT OF PROPERT Y AT VILLAGE MURUNJI ADMEASURING 6 ACRES APPROXIMATELY PURCHASED FROM MR. KISAN DONDIBA BUCHADE AND OTHERS. I DONT REMEMBER THE EXACT CON TENTS OF THE SALE DEED WHICH WERE EFFECTED ABOUT ONE YEAR BACK. THIS NOTI NGS ARE IN RESPECT OF MORTGAGE DEED AGAINST THE LAND FOR RS. 4 LAKH, LOAN FROM LIFT IRRIGATION SOCIETY AT RS. 8 LAKH AND PAYMENT TO SMT. SUSHILA, A FAMILY MEMBER FOR RELINQUISHMENT OF HER RIGHTS. THE TOTAL AMOUNT PAY ABLE ON THE ABOVE ACCOUNT IS RS. 15 LAKHS, OUT OF WHICH AN AMOUNT OF RS. 1 LA KH HAS BEEN PAID ON 12/06/2003. THE BALANCE AMOUNT AT RS. 14 LAKHS IS STILL TO BE PAID. I WISH TO STATE THAT ALL THESE ITEMS/PAYMENTS ARE NOT REFLECT ED IN THE SALE DEED EXECUTED, WHICH I WILL VERIFY AND FURNISH THE CORRE CT INFORMATION. AGAIN, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE EXPLAINED THE ENTRIES AS UNDER : ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 14 THERE ARE NOTINGS OF FACTS RELATED TO LAND FOR WHI CH DEVELOPMENT AGREEMENT EXECUTED ON 06/07/2001 WITH DAGADU MAHADU BUCHADE AND OTHERS (32 NAMES) FOR SURVEY NO. 31/1/1 MARUNJEE. (I) KISAN DHONDIBA BUCHADE IS KRISHNAJI DHONDIBA BUCHAD E (PARTY NO. 15 IN AGREEMENT) WHO IS COMMONLY KNOWN AS KISAN. (II) VASANT IS VASANT HANUMAN BUCHADE (PARTY NO. 11 AGRE EMENT) (III) GANKAT 400000- IT IS JUST NOTING THAT THERE IS CHA RGE ON THE LAND AMOUNTING TO RS. 4,00,0 00/- LIFT LOAN 800000- IT IS NOTING THAT THE LAND OWNE R IS HAVING LIFT LOAN OF RS.8,00,000/- SUSHILA 300000- IT IS NOTING THAT SUSHILA (PARTY NO.4) IS HAVING LIABILITY OF RS. 3,00,000/- (IV) KISAN & BROTHERS 100000- PAID ON 12/06/2003. THIS PAYMENT OF RS.1,00,000/- IS NOT RECORDED IN THE BOOKS OF ACCOU NTS AND HENCE OFFERED FOR TAXATION. THE A.O NOTED THAT THE ASSESSEE HAS OFFERED ONLY RS . 1,00,000/- FOR TAXATION WHEREAS THE ASSESSEE HAD ENTERED INTO A DEVELOPMENT AGREEMENT ON 6/7/2001 WITH TOTAL 33 LAND OWNERS. THE NAMES, WHICH ARE RECORDE D ON THE SEIZED DOCUMENT ARE ALSO APPEARING IN THE DEVELOPMENT AGREEMENT. THE AG REEMENT WAS MADE FOR RS. 27,00,000/-. FROM THE PERUSAL OF SEIZED DOCUMENTS AND STATEMENTS OF THE ASSESSEE, THE A.O NOTED THAT THERE WAS ENCUMBERANCE OF RS. 50 ,00,000/- ON THE LAND. HE NOTED FURTHER THAT IN HIS STATEMENT, THE ASSESSEE HAS ADMITTED THAT THESE PAYMENTS ARE NOT REFLECTED IN THE AGREEMENT. THE A.O, THUS, DREW AN INFERENCE THAT BEFORE ENTERING INTO DEVELOPMENT AGREEMENT, THE ASSESSEE H AS PAID TO THE OWNERS RS. 15,00,000/- TO CLEAR THE TITLE OF LAND. SUBSEQUENTL Y, THE ASSESSEE HAS FURTHER MADE PAYMENT OF RS. 1,00,000/- TO KISSAN & BROTHERS ON 1 2.6.2003, WHICH WAS ADMITTED TO BE UNACCOUNTED BY THE ASSESSEE. THE A.O INFERRE D THAT THE PAYMENT OF RS.1,00,000/- IS OVER AND ABOVE THE LIABILITY OF R S. 15,00,000/-. THE A.O HAS NOTED FURTHER THAT THE ASSESSEE HAS SUBMITTED THAT LIFT I RRIGATION LOAN AMOUNT WAS PAID BY HIM BY CHEQUE ON 28.5.2004, BUT THE ASSESSEE HAS NO T SUBMITTED ANY EXPLANATION ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 15 WITH REGARD TO PAYMENT AGAINST GANKAT (RS.4,00,000/ -) AND PAYMENT TO SUSHILA (RS.3,00,000/-). THE A.O. NOTED THAT IT IS WELL KN OWN FACT THAT A SUBSTANTIAL AMOUNT OF CASH IS RECEIEVED OR PAID AT THE TIME OF SALE O R PURCHASE OF IMMOVABLE PROPERTY, SPECIFICALLY THE LAND. FROM THE SEIZED DOCUMENT, I T IS CLEAR THAT THE ASSESSEE HAS PAID AN AMOUNT OF RS. 15,00,000/- ON OR BEFORE 6.7. 2001, I.E. THE DATE OF AGREEMENT AND AMOUNT OF RS. 1,00,000/- WAS PAID ON 12.6.2003. THE A.O HAS ACCORDINGLY MADE ADDITION OF RS. 15,00,000/- IN THE A.Y. 2002-0 3 AND ADDITION OF RS. 1,00,000/- IN THE A.Y. 2004-05 AS UNDISCLOSED INCOME OF THE AS SESSEE. 22. THE LD CIT(A) HAS DELETED THE ADDITION AFTER DI SCUSSING THE ISSUE IN DETAIL. THE CONCLUDING PARA NO. 4.3 OF THE FIRST APPELLATE ORDER IS BEING REPRODUCED HEREUNDER FOR A READY REFERENCE : 4.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED MATERIAL ON RECORD. FROM THE NOTINGS CONTA INED ON PAGE NO. 23 OF BUNDLE NO. 3 WHICH ARE BASIS OF ADDITION MADE BY TH E ASSESSING OFFICER, IT IS CLEAR THAT ONLY IN RESPECT OF AN AMOUNT OF RS. 1,00 ,000/- THE WORD PAID ON 12/06/2007 IS MENTIONED. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE STATEMENT RECORDED AT THE TIME OF SEARCH OF SHRI C. P. MOHANDAS WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN PARA 5 OF THE ASSESSMENT ORDER EXTRACTED SUPRA, AND FROM THE SUBMISSION OF THE APP ELLANT MENTIONED HEREINBEFORE, IT IS ABSOLUTELY CLEAR THAT THERE I S NO COGENT BASIS FOR CONCLUSION OF THE ASSESSING OFFICER THAT THE ENTIR E AMOUNT OF RS. 15 LAKH HAS BEEN PAID AT THE TIME OF DEVELOPMENT AGREEMENT EXE CUTED ON 06-07-2001. THE OBSERVATION OF THE ASSESSING OFFICER THAT IT IS WELL KNOWN FACT THAT SUBSTANTIAL AMOUNT IN CASH IS RECEIVED OR PAID AT T HE TIME OF SALE OR PURCHASE OF IMMOVABLE PROPERTY, SPECIFICALLY THE LAND, CANN OT BE A BASIS FOR MAKING ADDITIONS. SUCH ASPECTS ONLY PROVIDE CLUE FOR INVE STIGATION. ANOTHER NOTABLE ASPECT IS THAT THE SEIZED MATERIAL IN THIS GROUP OF CASE SHOWS OUTSTANDING LIABILITY IN RESPECT OF SALES EFFECTED. ON GIVEN F ACTS, IT IS CLEAR THAT THE ASSESSING OFFICER HAS FAILED TO ADDUCE ANY COGENT M ATERIAL IN RESPECT OF HIS CONCLUSION THAT THE ENTIRE AMOUNT OF RS. 15 LAKH WA S PAID ON OR BEFORE THE DATE OF DEVELOPMENT AGREEMENT WHICH IS 06-07-2001. ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 16 IN VIEW OF THE FOREGOING DISCUSSION AND CONSIDERING THE SUBMISSION OF THE APPELLANT AND TAKING INTO ACCOUNT THE CONTENT O F THE SEIZED MATERIAL AND THE FACT THAT SUCH AMOUNT IS SUBSEQUENTLY PAID BY T HE APPELLANT THROUGH ACCOUNT PAYEE CHEQUE, IT IS CLEAR THAT THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF INFERENCE THAT ENTIRE AMOUN T OF RS. 15 LAKH HAS BEEN PAID ON OR BEFORE THE DATE OF DEVELOPMENT AGREEMEN T IS NOT JUSTIFIED ON FACTS AND CANNOT BE SUSTAINED. ACCORDINGLY, ADDITION MAD E BY THE ASSESSING OFFICER IS HEREBY DELETED. APPELLANT SUCCEEDS IN GR OUND NO. 1 OF APPEAL. 23. WE FIND THAT CERTAIN BASIC FACTS ON THE BASIS O F WHICH, THE LD CIT(A) HAS DELETED THE ADDITION HAVE NOT BEEN REBUTTED BEFORE US BY THE DEPARTMENT. THESE BASIC FACTS ARE THAT IN THE NOTINGS ON PAGE NO. 23 OF BUNDLE NO. 3, ONLY IN RESPECT OF AN AMOUNT OF RS. 1,00,000/-, THE WORD PAID ON 12. 6.2007 IS MENTIONED; THERE IS NO COGENT BASIS FOR CONCLUSION OF THE A.O THAT THE ENTIRE AMOUNT OF RS. 15,00,000/- HAS BEEN PAID AT THE TIME OF DEVELOPMENT AGREEMENT EXECUTED ON 6/7/2001; THE AMOUNT IS SUBSEQUENTLY PAID BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUE. NOTING THESE MATERIAL FACTS, AND THE GENERAL OBSERVATION O F THE A.O THAT SUBSTANTIAL AMOUNT IN CASH IS RECEIVED OR PAID AT THE TIME OF SALE OR PURCHASE OF IMMOVABLE PROPERTY ESPECIALLY, THE LAND, CANNOT BE A BASIS FOR MAKING ADDITION, WE ARE OF THE VIEW THAT LD CIT(A) HAS RIGHTLY DELETED THE ADDITION IN ABSEN CE OF SUFFICIENT EVIDENCE TO JUSTIFY THE ADDITION. WE THUS ARE NOT INCLINED TO INTERFER E WITH THE FINDING OF THE LD CIT(A) ON THE ISSUE. THE SAME IS UPHELD. GROUND NO. 1 IS ACCORDINGLY REJECTED. GROUND NO.2 24. THE A.O DISALLOWED THE CLAIMED EXPENSES OF RS. 16,15,126/- MADE ON ACCOUNT OF PAYMENT OVER AND ABOVE THE AGREEMENT O F PRICE OF THE LAND REPRESENTING COMPENSATION PAYMENT TO THE LAND OWNE RS TO SETTLE VARIOUS CLAIMS AND AVOID LITIGATION. THE LD CIT(A) HAS DELETED THE S AME AFTER DISCUSSING THE EXPLANATION OF THE ASSESSEE IN DETAIL. THE A.O H AS DEALT WITH THE ISSUE IN PARA NO. 18 OF THE ASSESSMENT ORDER. THE LD CIT(A) HAS DIS CUSSED THE ISSUE IN PARA NOS. 7 TO 7.2 OF THE FIRST APPELLATE ORDER AND HAS GIVEN H IS FINDING IN PARA NO. 7.3 THEREOF. ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 17 25. THE LD. D.R. HAS BASICALLY PLACED RELIANCE ON T HE ASSESSMENT ORDER WHEREAS FIRST APPELLATE ORDER HAS BEEN RELIED UPON BY THE L D. A.R. 26. THE ASSESSEE CLAIMED THAT PAYMENT OF RS. 16,15, 126/- WAS MADE OVER AND ABOVE THE AGREEMENT PRICE TO SETTLE VARIOUS CLAIMS AND AVOID LITIGATION. THE DETAILS OF THE LAND PURCHASE AND PAYMENTS MADE OVER AND AB OVE AGREEMENT PRICE SUBMITTED BEFORE THE AUTHORITY BELOW ARE AS UNDER : SURVEY NO/ AREA AGREEMENT PAID FOR LIFT LOAN/ NAME OF THE FARMER PRICE LITIGATION 25/2A/2 MARUNJI 81R 480000 490000 SADASHIV SHANKA MURKUTE 26/1 MARUNJI 80R 1800000 35000 SURYAJI RANGU BUCHADE 31/1/1 MARUNJI 76R 2138000 18230000 DAGDU MADHU BUCHADE 13/2/1 & 13/4+13 MARUNJI 124R 1600000 262450 SONBA GANPAT JAGTAP 31/13 MARUNJI 58R 1632000 111000 DAGDU MAHADU BUCHADE 13/13 MARUNJI 39R 400000 135250 CHINDU KASHIRAM JAGTAP 14/11 MARUNJI 64R 960000 277140 MOTIRAM RAKHMAJI KALOKHE - 31/14 MARUNJI 97R 2730000 219000 DAGDU MAHADU BUCHADE IT IS CONTENDED THAT THE PAYMENTS TO THE LAND OWNER /BANK ARE MADE BY CHEQUES WHICH ARE APPEARING IN THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEE. IT IS POINTED OUT THAT THE ASSESSING OFFICER HAS NOT DISP UTED THE GENUINENESS OF THE PAYMENT AND PARTIES. THE PROPORTIONATE COST CLAIME D BY THE ASSESSEE W.R.T. LAND SOLD DURING THE FINANCIAL YEAR 2001-2002 AS BELOW: ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 18 S.NO. 25/2AJ2, MARUNJI LAND SOLD 26R(490000 1 81R X 26) RS. 157274/- S.NO. 26/1, MARUNJI LAND SOLD 8R(35000 1 80R X 8R ) RS. 3496/- S.NO.31/1/1,MARUNJI LAND SOLD 41.80R(1823000 1 76 R X 41.8R) RS. 1002614/- S.NO.13/2/1, MARUNJI-LANDSOLD 72.22R(262450 1 124RX 72.22R) RS. 152817/- & 13/4+13 S.NO. 31/13, MARUNJI LAND SOLD 11R(111000 1 58R X IIR) RS. 21043/- S.NO. 13/3, MARUNJI LAND SOLD 12.89R(135250 1 39R X 12.89R) RS. 44689/- S.NO. 14/1/1, MARUNJI LAND SOLD 34.83 R (277140 1 64R X 34.83R) RS.150814/- S.NO.34/14 MARUNJI-LAND SOLD 36.50R (2190001 97R X 36.50R) RS. 82380/- ------------------------ TOTAL RS. 16,15,127/- ----------- ----------- 27. IT WAS SUBMITTED THAT THE SUBJECT PAYMENTS THOU GH IN EXCESS OF THE AGREEMENT VALUE WERE INCURRED OUT OF BUSINESS EXPED IENCY AND WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE TO MEET OUT T HE REQUIREMENTS OF SECTION 37 OF THE ACT. IT WAS SUBMITTED THAT THE ASSESSEE IS CAR RYING ON REAL ESTATE BUSINESS AND IT HAS TO MANAGE SEVERAL FACTORS AND SALE THE LAND WITHIN A REASONABLE PERIOD TO MAKE PROFIT. HE CANNOT AFFORD DELAY IN RESOLVING ISSUES ARISING WITH LAND OWNERS AS FORMALITIES BEFORE GOVERNMENT AUTHORITIES AND LITI GATION IN COURTS ARE TIME CONSUMING, EXPENSIVE AND SEVERELY AFFECT THE PROFIT ABILITY OF THE BUSINESS. THE A.O DID NOT AGREE WITH THE ABOVE EXPLANATION AND HELD T HAT ALL THE EXPENDITURE INCURRED BY THE ASSESSEE CANNOT BE TREATED AS BUSINESS EXPE NDITURE. HE HAS NOTED FURTHER THAT THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION AS TO WHY THE PAYMENT WAS MADE OVER AND ABOVE THE AGREEMENT. THE LD CIT(A) HAS DE LETED THE ADDITION ACCEPTING THE EXPLANATION OF THE ASSESSEE, AS DISCUSSED ABOVE . IN THIS REGARD, THE LD CIT(A) HAS NOTED THAT THE IRRESISTIBLE CONCLUSION IS THAT ADDITIONAL EXPENDITURE OF RS.16,15,127/- IS IN RESPECT OF AND IN RELATION TO LAND WHICH IS STOCK-IN-TRADE OF ASSESSEE. THE GENUINENESS OF THIS EXPENDITURE IS NO T IN DOUBT AND THE BUSINESS PURPOSE OF THIS EXPENDITURE BECOMES CLEAR FROM THE SUBMISSION OF THE ASSESSEE. WE ALSO HAVE NO REASON TO DOUBT THE ABOVE EXPLANATION OF THE ASSESSEE. UNDER THESE ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 19 CIRCUMSTANCES, WE ARE OF THE VIEW THAT LD CIT(A) H AS RIGHTLY DELETED THE ADDITION, WHICH WAS BASED UPON THE GENERAL OBSERVATION OF THE A.O. THE FIRST APPELLATE ORDER IN THIS REGARD IS THUS UPHELD. GROUND NO. 2 IS ACC ORDINGLY REJECTED. 28. IN RESULT, APPEAL IS DISMISSED. ITA N O. 381/PN/2008 29. THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORD ER ON THE GROUND THAT LD CIT(A) HAS ERRED IN HOLDING THAT THE COST OF RS.5,5 7,883/- OF PLOTS OF LAND AT S.NO. 24/4-A AND 24/3 BALEWADI WOULD NOT BE ALLOWED AGAIN ST SALE PROCEEDS OF RS.2,74,000/- THEREOF IN ASSESSMENT U/S. 153A RELYI NG ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERIN G WORKS PVT. LTD., 198 ITR 297(SC). 30. THE RELEVANT FACTS ARE THAT THE AUTHORITIES BEL OW HAVE ADDED AND SUSTAINED RS.5,51,883/- BY DISALLOWING THE CLAIM OF COST OF L AND. THE ASSESSEE IN THE ACCOUNTS ACCOMPANYING HIS ORIGINAL RETURN RECORDED THE FOLL OWING SALES OF LAND SL NO. SURVEY NO. AREA SALES AMOUNT 1 S.NO.24/4A, BALEWADI 39.98R RS.2 3,40,000/- 2 S.NO.24/3,BALEWADI 3R RS. 4,00,000/- RS.27,40,000 ========== THE ASSESSEE SUBMITTED THAT HE INADVERTENTLY DID NO T CLAIM THE COST OF LAND AT RS.5,51,883/- AGAINST THE ABOVE SALES. IN THE RETU RN FILED U/S. 153A, THE ASSESSEE CLAIMED COST OF RS.5,51,883/- AGAINST THE SALES. A .O. DISALLOWED THE CLAIM RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. SUN ENGINEERING PVT. LTD. (SUPRA). THE A.O HELD THAT IN THE RE-ASSESSME NT PROCEEDINGS/ PROCEEDINGS U/S. 153A, THE ASSESSEE IS NOT ALLOWED TO MAKE ADDITIONA L CLAIMS CORRESPONDING TO WHICH NO ADDITIONAL INCOME OR ESCAPED INCOME HAS BEEN CRE DITED TO THE RECTIFICATION P & L ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 20 ACCOUNT. HE HELD THAT THE PROCEEDINGS U/S. 153A O F THE I.T. ACT ARE AS GOOD AS THE RE-ASSESSMENT PROCEEDINGS. HE HELD FURTHER THAT SE CTION 147, BEING FOR THE BENEFIT OF THE REVENUE AND NOT FOR THE ASSESSEE, THE ASSESS EE CANNOT BE PERMITTED TO CONVERT THE RE-ASSESSMENT PROCEEDINGS INTO AN APPEA L OR REVISION AND SEEK RELIEF IN RESPECT OF ITEM EARLIER REJECTED OR CLAIMED RELIEF IN RESPECT OF ITEMS NOT CLAIMED IN THE ORIGINAL ASSESSMENT PROCEEDINGS, UNLESS RELATAB LE TO ESCAPED INCOME. THE LD CIT(A) HAS UPHELD THE SAME. 31. ON PERUSAL OF THE ORDERS OF THE AUTHORITIES BEL OW, WE FIND THAT THE ASSESSEE HAD FILED ITS ORIGINAL RETURN OF INCOME ON 10.5.200 4 I.E. BEYOND THE TIME ALLOWED U/S. 139(4). IT WAS TREATED AS NON-EST AND NO ASSE SSMENT U/S. 143(3) HAD TAKEN PLACE IN RESPECT OF THIS RETURN. IN RESPONSE TO NO TICE U/S. 153A, THE ASSESSEE COMPUTED HIS INCOME BASED ON ACTUAL SALE TRANSACTIO NS AND CORRESPONDING COSTS AND DECLARED THE SAME IN THE RETURN FILED U/S. 153A. A S FIGURE OF SALES OF PLOT AT S.NO.24/A, BALEWADI WAS ALREADY APPEARING IN BOOKS SEIZED BY DEPARTMENT, THE ASSESSEE CONVENIENTLY PRESENTED ACCOUNTS INTO 2 PAR TS VIZ. (1) AS APPEARING IN THE BOOKS AND (2) IN A RECTIFICATION ACCOUNT SHOWING CORRESPONDING COST OF SALE TRANSACTIONS. WE ARE OF THE VIEW THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERING PVT. LTD. (SUPRA) R ELIED UPON BY THE AUTHORITIES BELOW IS NOT HELPFUL TO THE REVENUE UNDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS THE ASSESSEE WAS NOT MAKING ANY CLAIM SEEKI NG REVIEW OF ANY ISSUE ALREADY CONCLUDED IN AN EARLIER ASSESSMENT. INCORRECT FIGU RES WHICH HAD INADVERTENTLY CREPT INTO THE ACCOUNTS ENCLOSED WITH THE ORIGINAL RETURN FILED ON 10.5.2004, WHICH WAS NON-EST WERE MERELY CORRECTED TO REFLECT CORRECT FI GURES OF TRANSACTION AND THE INCOME EARNED. UNDISPUTEDLY, THE ASSESSEE WAS CARR YING ON PROPERTY DEVELOPMENT BUSINESS WHOSE PROFITS WERE ASSESSABLE UNDER THE H EAD PROFITS AND GAINS OF BUSINESS. IT IS WELL SETTLED POSITION THAT INCOME- TAX IS A TAX UPON INCOME, PROFITS OR GAINS AND IT IS NOT TAX ON GROSS RECEIPTS. THERE I S DIFFERENCE BETWEEN ASSESSMENT OF INCOME ESCAPED ASSESSMENT AS CONTEMPLATED U/S. 147 AND ASSESSMENT IN SEARCH ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 21 CASES U/S. 153A. U/S. 153A, FOLLOWING A SEARCH, IN COME OF 6 A.YS. PRECEDING THE YEAR OF SEARCH ARE CONSIDERED FOR ASSESSMENT AFRE SH. IN THE CASE OF INCOME ESCAPING ASSESSMENT U/S. 147, IT IS ONLY THE ESCAPE D INCOME WHICH IS THE SUBJECT OF RE-ASSESSMENT. UNDISPUTEDLY, IN THE PRESENT CASE, ASSESSMENT HAS BEEN FRAMED U/S. 153A READ WITH SECTION 143(3) OF THE ACT ON THE BA SIS OF THE RETURN FILED BY THE ASSESSEE IN RESPONSE TO NOTICE ISSUED U/D. 153A OF THE ACT. THUS, THE DISCLOSURE AND CLAIM MADE THEREIN REQUIRE CONSIDERATION WHILE FRAMING THE ASSESSMENT. THE ADDITIONS IN SUCH ASSESSMENT ARE MADE ON THE AMOUNT IN DIFFERENCE BETWEEN THE DISCLOSURE/CLAIM MADE IN THE RETURN AND ACTUALLY F OUND BY THE A.O. WE ARE THUS OF THE VIEW THAT THE A.O WAS NOT JUSTIFIED IN IGNORING THE CLAIMED COST OF RS. 5,51,883/- WITHOUT EXAMINING THE CORRECTNESS OF THE SAME. WE THUS SET ASIDE THE MATTER TO THE FILE OF THE A.O TO EXAMINE THE CORRECTNESS OF THE C LAIMED COST OF RS. 5,51,883/- AND DECIDE THE ISSUE AFRESH AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN OTHER WORDS, IF THE A.O FINDS THAT THE CLAIMED C OST OF RS.5,51,883/- IS CORRECT, THE SAME WILL BE ALLOWED WHILE COMPUTING THE INCOME OF THE ASSESSEE RELATING TO THE CONNECTED SALES OF THE LAND. THE GROUND IS THUS AL LOWED FOR STATISTICAL PURPOSES. 32. IN RESULT, APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. 33. IN SUMMARY, ITA NOS. 357 & 358/PN/2008 ARE DISM ISSED AND ITA NO. 381/PN/2008 IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 3RD OCTOBER 2011. SD/- SD/- (D.KARUNAKARA RAO) ACCOUNTANT MEMBER (I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 3RD OCTOBER, 2011 US ITA . NO 357, 358/PN/2008 ETC., SHRI C.P. MOHANDAS. A.Y. 2001-02,2002-03 ETC. PAGE OF 22 22 COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (CENTRAL), PUNE 4. THE CIT(A)-I, PUNE 5. THE D.R. B BENCH, PUNE 5. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE