Gadiraju Venkata Subba Raju, Hyderabad V. THE DCIT, CENTRAL CIRCLE-1, Visakhapatnam

ITA 360/VIZ/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5928 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Search and seizure; Loose papers; Document seized; Cost of acquisition; Competent authority; Documents seized
• Section: 54F; 153A; 148; 54; 132

Judgement Text

ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.360/VIZAG/2013 ASSESSMENT YEAR : 2008-09 GADIRAJU VENKATA SUBBA RAJU HYDERABAD VS. DCIT CENTRAL CIRCLE-1 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AGDPG 1278R ITA NO.361/VIZAG/2013 ASSESSMENT YEAR : 2008-09 GADIRAJU BANGARAMMA HYDERABAD VS. DCIT CENTRAL CIRCLE-1 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.ABHPG 4791N ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SHRI K.V.N. CHARYA, CIT(DR) DATE OF HEARING : 25.02.2014 DATE OF PRONOUNCEMENT : 05.03.2014 ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER:- THESE APPEALS ARE BY TWO DIFFERENT ASSESSEES AGAIN ST SEPARATE ORDERS OF CIT(A) PERTAINING TO THE ASSESSMENT YEAR 2008-09. SINCE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED A ND TAKEN UP FOR DISPOSAL FOR THE SAKE OF CONVENIENCE . 2. FIRST WE WILL TAKE UP THE APPEAL IN CASE OF GADI RAJU VENKATA SUBBARAJU IN ITA 360/VIZAG/2013. THE ASSESSEE HAS RAISED 11 GROUNDS. GROUND NO.11 BEING A GENERAL GROUND IS NOT REQUIRED TO BE ADJUDI CATED. AT THE OUTSET, THE LD. A.R. SUBMITTED BEFORE US THAT HE WOULD NOT LIKE TO PRESS GROUND NOS.1,2,3&4. IN VIEW OF SUCH SUBMISSION OF THE LD. A.R., THESE GROUNDS ARE DISMISSED AS NOT PRESSED. IN GROUND NO.5, THE ASSES SEE HAS CHALLENGED THE ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 2 INITIATION OF PROCEEDING U/S 153C OF THE INCOME-TAX ACT IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND AT THE TIME OF SEARCH. 3. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE ARE THE ASSESSEE IS AN INDIVIDUAL. ON 09.01.2009 A SEARCH AND SEIZURE OPE RATION U/S 132 OF THE ACT WAS CONDUCTED IN CASE OF ONE SRI GADIRAJU RAMAKRISH NAM RAJU AND M/S. VAIBHAV EMPIRE PVT. LTD., VISAKHAPATNAM. AS STATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, DURING THE AFORESAID SEARC H AND SEIZURE OPERATION, CERTAIN INCRIMINATING DOCUMENTS RELATING TO THE ASS ESSEE WERE FOUND AND SEIZED, AS A RESULT OF WHICH, A NOTICE U/S 153C OF THE ACT WAS ISSUED TO THE ASSESSEE ON 20.09.2010 CALLING UPON HIM TO FILE HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER DISPUTE AS WELL AS PRECEDING ASSESSMENT YEARS STARTING FROM 2003-04. IN RESPONSE TO THE NOTICE IS SUED U/S 153C OF THE ACT, THE ASSESSEE FILED HIS RETURN OF INCOME ON 21.10.20 10 DECLARING TOTAL INCOME OF RS.51,15,783/- WHICH INCLUDED LONG TERM CAPITAL GAIN OF RS.49,81,625/-. IN COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON GOING THROUGH THE SEIZED MATERIALS NOTED THAT THE SEIZED MATERIAL S MARKED AS ANNEXURE- A/GRR/PO/1 CONTAINED A SALE DEED AS PER WHICH ASSES SEE SOLD A HOUSE PROPERTY AT DOOR NO.24-1-31, SAMBAMURTHY ROAD, 2 ND LANE, BABUJIPET, VIJAYAWADA ADMEASURING 979 SQ.YDS. WITH 1120 SQ.FT. OF RCC STRUCTURED AREA TO M/S. MINERVA GRAND HOTELS PVT. LTD. ON 14.11.200 7. THE SEIZED MATERIAL ALSO CONTAINED DETAILED COMPUTATION OF CAPITAL GAIN IN CASE OF THE ASSESSEE AND HIS MOTHER SMT. G. BANGARAMMA IN THE HAND WRITI NG OF SHRI GADIRAJU RAMAKRISHNAM RAJU, THE FATHER OF THE ASSESSEE. DUR ING THE SEARCH PROCEEDINGS, A STATEMENT WAS RECORDED FROM SRI GADI RAJU RAMAKRISHNAM RAJU. IN COURSE OF RECORDING OF THE STATEMENTS, HE W AS SPECIFICALLY ASKED ABOUT DISCLOSURE OF CAPITAL GAINS AND PAYMENT OF AD VANCE TAX/SELF ASSESSMENT TAX IN THAT REGARD. IN REPLY TO SUCH QUERY, SHRI G ADIRAJU RAMAKRISHNAM RAJU ACCEPTED THE TRANSACTION IN THE SALE DEED TO BE GEN UINE AND ALSO STATED THAT NO RETURN OF INCOME HAS BEEN FILED NOR TAXES HAVE B EEN PAID THEREON. HE FURTHER STATED THAT THE TOTAL SALE CONSIDERATION IS RS.3 CRORES, OUT OF WHICH AN AMOUNT OF RS.79,94,448/- WAS DISCLOSED AS CAPITAL G AINS AFTER CLAIMING EXEMPTION U/S 54 OF THE ACT TO THE TUNE OF RS.2,07 ,84,000/-, OUT OF THE GROSS ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 3 CAPITAL GAINS OF RS.2,87,78,448/-. IT WAS FURTHER S TATED BY HIM THAT THE ASSESSEE AND SMT. G. BANGARAMMA HAD PLANNED TO CONS TRUCT RESIDENTIAL HOUSE AND AVAILED THE BENEFIT U/S 54 OF THE ACT. T HE ASSESSING OFFICER NOTED THAT IN THE RETURN OF INCOME FILED FOR THE ASSESSME NT YEAR UNDER DISPUTE, THE ASSESSEE HAD ADMITTED NET INCOME FROM CAPITAL GAINS AT RS.49,81,625/- AFTER CLAIMING INDEXED COST OF ACQUISITION OF RS.14,80,65 5/- AND EXEMPTION U/S 54 OF THE ACT TO THE TUNE OF RS.2,35,37,720/-. HOWEVE R, NO DOCUMENTARY EVIDENCE WAS PRODUCED FROM THE ASSESSEES SIDE IN R ESPECT OF COST OF ACQUISITION OR IN RESPECT OF EXEMPTION CLAIMED U/S 54 OF THE ACT. THE ASSESSING OFFICER, THEREFORE, IN ORDER TO EXAMINE T HE CLAIM OF COST OF ACQUISITION AND EXEMPTION CLAIMED U/S 54 OF THE ACT , CALLED UPON THE ASSESSEE TO FURNISH COMPLETE DOCUMENTARY EVIDENCE S UCH AS COPY OF SALE DEED OF THE ORIGINAL ASSET SOLD AND SALE DEED IN RE SPECT OF NEW ASSET PURCHASED. FROM THE INFORMATION SUBMITTED BY THE A SSESSEE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE ALONG WITH LATE D ANTULURI ANNAPURNA HAD PURCHASED TWO ASSETS AS UNDER: DATE OF PURCHASE OF ORIGINAL ASSET NAME OF THE SELLER EXTENT AND AREA DETAILS OF PROPERTY PURCHASE VALUE 04.01.1988 Y. SRINIVASA RAO AND OTHERS 490 SQ.YARDS WITH A HOUSE OF 832 OF SQ.FT. RCC ROOF AT VIJAYAWADA HOUSE PROPERTY RS.1,84,900/- 12.01.1988 -DO- 489 SQ.YARDS VACANT LAND RS.1,22,500/- 4. THESE TWO PROPERTIES WERE SOLD TO M/S. MINERVA G RAND HOTELS PVT. LTD. FOR A TOTAL CONSIDERATION OF RS.3 CRORES ON 14.11.2 007. HE FURTHER NOTED THAT OUT OF THE SALE CONSIDERATION OF THE AFORESAID PROP ERTIES, THE ASSESSEE HAS PURCHASED TWO ASSETS THROUGH POSSESSORY SALE AGREEM ENT-CUM-GPA DATED 22.12.2007 EXECUTED BY SRI DATLA VENKATA SATYANARAY ANA RAJU AND SHRI DATLA GOPI KRISHNAM RAJU IN FAVOUR OF THE ASSESSEE. THE ASSET SOLD BY ABOVE NAMED PERSONS ARE 959 SQ.YDS. AND 773 SQ.YDS. (TOTA L 1732 SQYDS.) PERTAINING TO THE SAME SURVEY NUMBER I.E. SURVEY NO .10/5A PART OF CHINAWALTAIR, VISAKHAPATNAM WITH ACC SHED IN ONE PA RT STATED TO HAVE BEEN ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 4 JOINTLY CONSTRUCTED BY THEM FOR A SALE CONSIDERATIO N OF RS.2,07,84,000/-. THE ASSESSING OFFICER NOTED THAT THOUGH THE TWO ASS ETS WERE SOLD THROUGH A SINGLE DEED BUT THE SELLERS SHRI DATLA VENKATA SATY ANARAYANA RAJU AND SHRI DATLA GOPI KRISHNAM RAJU RECEIVED THE SALE CONSIDER ATION SEPARATELY AMOUNTING TO RS.1,15,08,000/- AND RS.92,76,000/- RE SPECTIVELY. THE SALE DEED FURTHER MENTIONED THAT THE PROPERTIES ARE CONT IGUOUS FORMING A SINGLE BLOCK OF THE TOTAL EXTENT OF 1732 SQ.YDS. SUBSEQUE NTLY, THE VENDORS JOINTLY GOT CONSTRUCTED A RESIDENTIAL HOUSE, WHICH WAS ASSE SSED TO TAX AS DOOR NO. 2- 48-7 VIDE ASSESSMENT NUMBER 39000/1907. HOWEVER, T HE ASSESSING OFFICER OBSERVED THAT AS PER THE HOUSE TAX PASS BOOK ISSUED BY THE MUNICIPAL CORPORATION, VISAKHAPATNAM WITH PROPERTY TAX ASSESS MENT NO.39000/1907 FROM THE YEAR 2004 ONWARDS, THE PROPERTY WITH ACC R OOF SHED WAS ASSESSED TO TAX ONLY IN THE NAME OF SRI DATLA VENKATA SATYAN ARAYANA RAJU. HOWEVER, IN THE REGISTERED SALE DEED, THE SELLERS CLAIMED TO HAVE JOINTLY CONSTRUCTED A RESIDENTIAL HOUSE WHICH IS ASSESSED TO TAX. ON CON SIDERING THE AFORESAID FACTS, THE ASSESSING OFFICER WAS OF THE VIEW THAT T HE ASSESSEE SOLD TWO PROPERTIES AND PURCHASED TWO PROPERTIES FROM TWO PA RTIES THROUGH A COMMON GPA AND GOT REGISTERED THE PROPERTIES THROUGH A SIN GLE DEED SO AS TO CLAIM EXEMPTION OF CAPITAL GAINS IN RESPECT OF THE TOTAL SALE CONSIDERATION OF THE TWO PROPERTIES SOLD. THE ASSESSING OFFICER FURTHER WAS OF THE VIEW THAT AS THE ASSESSEE HAS SOLD ONE VACANT LAND AND ONE HOUSE PRO PERTY AND PURCHASED TWO VACANT SITES WITH 1000 SQ.FT. ACC SHED CONSTRUC TED IN ONE OF THE PROPERTIES, IT IS NOT CLEAR WHETHER THE ASSESSEE IS CLAIMING EXEMPTION U/S 54 OR 54F OF THE ACT. THE ASSESSING OFFICER OPINED TH AT IN ANY CASE OF THE MATTER, THE ASSESSEES CLAIM IS NOT ALLOWABLE EITHE R U/S 54 OR 54F OF THE ACT AS THE ASSESSEE HAS NOT PURCHASED RESIDENTIAL HOUSE PROPERTY NOR CONSTRUCTED ANY RESIDENTIAL HOUSE THEREIN SINCE ACCORDING TO TH E ASSESSING OFFICER, THE ACC ROOF SHED IS ONLY A TEMPORARY STRUCTURE CONSTRUCTED FOR THE PURPOSE OF SECURITY OF THE PROPERTY. THE ASSESSING OFFICER FU RTHER NOTED THAT THE ASSESSEE ALONG WITH OTHER FAMILY MEMBERS ENTERED IN TO AN AGREEMENT WITH M/S. VAIBHAV GOLD COAST PVT. LTD., VISAKHAPATNAM VI DE AGREEMENT DATED 2.8.2008 I.E. JUST AFTER 3 DAYS FROM THE DATE OF PU RCHASE OF THE NEW ASSET FOR DEVELOPMENT OF THE PROPERTY ALONG WITH AN ADJOINING PROPERTY OF OTHER FAMILY ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 5 MEMBERS TOTALING TO 18251.4 SQ.YDS. FOR DEVELOPING A MULTI-STORIED BUILDING COMPRISING OF 21 FLOORS WITH A SHARING RATIO OF 58. 5% AND 41.5% TO THE OWNERS OF THE LAND AND THE DEVELOPER RESPECTIVELY. HE ALSO NOTED THAT FOR THIS PURPOSE, THE ASSESSEE AND THE OTHER OWNERS AGR EED TO RECEIVE RS.21 CRORES AS REFUNDABLE ADVANCE IN TERMS WITH THE SAID AGREEMENT AND IN FACT THEY HAVE RECEIVED RS.6 CRORES THROUGH CHEQUES DRAW N ON ING VYSYA BANK LTD., VISAKHAPATNAM. FROM THIS, THE ASSESSING OFFI CER INFERRED THAT BY ENTERING INTO THE DEVELOPMENT AGREEMENT, THE ASSESS EE HAS INTENDED TO ALIENATE THE PROPERTY FOR DEVELOPMENT PURPOSE AND H E HAS NO INTENTION TO CONSTRUCT A RESIDENTIAL HOUSE PROPERTY AS INTENDED BY THE ACT. HE THEREFORE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE PROPOSIN G TO DISALLOW THE CLAIM OF EXEMPTION U/S 54 OF THE ACT. THOUGH THE ASSESSEE S UBMITTED A DETAILED EXPLANATION OBJECTING TO DISALLOWANCE OF EXEMPTION U/S 54 OF THE ACT, THE ASSESSING OFFICER HOWEVER REJECTING SUCH EXPLANATIO N OF THE ASSESSEE DISALLOWED THE EXEMPTION CLAIMED U/S 54 OF THE ACT OBSERVING AS UNDER:- 1) THE ASSESSEE CONTENDS THAT THE ORIGINAL ASSET IS A SINGLE UNIT THOUGH REGISTERED IN TWO PIECES WHICH IS NOT ACCEPTABLE AS THE ORIGIN AL PROPERTIES WERE PURCHASED ON DIFFERENT DATES FOR DIFFERENT SALE CONSIDERATIONS A ND THE SCHEDULED PROPERTIES ARE AS DESCRIBED IN THE SALE DEEDS ARE ONE IS HOUSE PROPERTY AND THE OTHER ONE I S A VACANT LAND. HENCE, THEY ARE TWO DIFFERENT PROPERTIES. 2) THE ASSESSEE SUBMITTED THAT THE SALE OF ORIGINAL ASSETS RESULTED IN CAPITAL GAINS AND FOR AVAILING THE EXEMPTION U/S.54, A HOUSE WAS PURCHASED FROM FATHER AND SON THROUGH A COMMON SALE DEED AS THE FATHER AND SON WE RE JOINT HOLDERS OF THE HOUSE PROPERTY. THE ASSESSEE SUBMITTED THAT THE SAID HOUS E IS SPREAD ON BOTH THE EXTENTS OF 959 SQ.YARDS AND 773 SQ.YARDS AND IS NOT SITUATE D ONLY IN ONE PART AS STATED IN YOUR LETTER. AS SUCH IT IS SUBMITTED THAT THE ASSES SEE HAS SOLD ONLY ONE HOUSE PROPERTY WITH LAND APPURTENANT THERETO AND PURCHASE D ANOTHER HOUSE PROPERTY WITH LAND APPURTENANT THERETO. THE ASSESSEE'S SUBMI SSION IS NOT CORRECT AS THE SALE CONSIDERATION WAS PAID TO THE SELLERS, TWO DIF FERENT OWNERS THROUGH TWO DIFFERENT CHEQUES PROPORTIONATE TO THE VALUE OF THE ASSET THEY HAVE SOLD. FURTHER, AS SEEN FROM THE HOUSE TAX PASS BOOK, THE PROPERTY WHICH IS HAVING ACC-ROOFED SHED WAS ASSESSED TO TAX IN THE NAME OF SHRI D.V.SA TYANARA'YANA RAJU ONLY AND NOT IN THE JOINT NAMES OF SHRI D.V.SATYANARAYANA RA JU AND SHRI D.GOPIKRISHNAM RAJU WHICH CLEARLY INDICATES THAT THE TWO PROPERTIE S ARE INDEPENDENT AND DIFFERENT PROPERTIES. 3) FURTHER, IN THE STATEMENT GIVEN THE ASSESSEE'S F ATHER, SHRI GADIRAJU RAMAKRISHAM RAJU RECORDED U/S.132(4) OF THE I.T. AC T ON 4.2.2009, HE CATEGORICALLY STATED THAT HE WOULD CONSTRUCT A RESI DENTIAL HOUSE ON THE PROPERTY ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 6 PURCHASED IN ORDER TO AVAIL EXEMPTION U/S.54 OF THE I.T. ACT, 1961 VIDE HIS ANSWER TO Q.NO.6 OF HIS STATEMENT) 'Q.NO.6 YOUR SON ALSO HAD TRANSFERRED PROPERTY A T VIJAYAWADA M/S. MINERVA HOTELS PVT. LTD., HAS HE OFFERED IT TO TA X. FURNISH DETAILS THEREOF. ANS. MY SON, SHRI G. V. SUBBA RAJU, SOLD HIS PROPER TY AT VIJAYAWADA TO M/S.MINERVA HOTEL PVT. LTD., FOR RS.3,00,00,000/-, THE GROSS CAPITAL GAIN ARISING THEREOF IS RS. 2,87,78,448/-. HOWEVER, HE H AD BOUGHT A PROPERTY AT MVP COLONY, (1732 SQ.YARDS) AND 1000 SQ.FT ACC ROOFED P ROPERTY) FOR RS.2,07,84,000/-. WE_PLAN_TO_CONSTRUCT_A RESIDENCE AND AVAIL TAX BENEFIT OF SECTION 54 OF THE I.T. ACT, 1961. THUS, HE IS ENTI TLED CONSTRUCT WITHIN 3 YEARS FROM DATE OF TRANSFER.' FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE HAS C ATEGORICALLY ADMITTED THAT HE WOULD CONSTRUCT A RESIDENTIAL HOUSE IN ORDER TO AVA IL EXEMPTION U/S.54 OF THE I.T. ACT AND AGREED IN PRINCIPLE THAT THE ACC ROOFED SHE D CONSTRUCTED IN AN AREA OF 1000 SQ. FT IS NOT A RESIDENTIAL HOUSE BUT ONLY A T EMPORARY STRUCTURE 4) IN HIS SUBMISSION MADE VIDE HIS LETTER DATED 15.12.2010, THE ASSESSEE CONTENDED THAT THE AGREEMENT ENTERED INTO WITH M/S. VAIBHAV GOLD COAST PVT. LTD., IS NOT A TRANSFER. HE SUBMITTED THAT REINVEST MENT WAS MADE FOR CLAIMING DEDUCTION U/S.54 ON 22.12.2007 IN A HOUSE PROPERTY AND TILL DATE, I HAVE NOT ALIENATED/TRANSFERRED THE SAID PROPERTY AND BY 22.12.2010, THE SAID PERIOD OF 3 YEARS WILL BE OVER. HE SUBMITTED THAT THE AGREEMENT WITH VAIBHAV GOLD COAST PVT. LTD., HAS NOT TAKEN EFFECT TILL DATE EXCEPTING THE ADVANCES RECEIVED FROM THEM BY SHRI GADIRAJU RAMAKRISHNAM RAJU. I HAVE NEITHER REC EIVED ANY ADVANCE NOR HAVE PARTED WITH ANY POSSESSION RIGHTS. FOR ALIENATION O F PROPERTY, THERE MUST BE A TRANSFER WITHIN THE MEANING OF SECTION 2(47). MERE INTENTION TO SELL THE PROPERTY IS NOT ENOUGH TO DENY EXEMPTION U/S.54. SINCE THE AGRE EMENT HAS NOT PROCEEDED WITH FURTHER, MERE INTENTION DOES NOT PRECLUDE THE ASSESSEE FROM CLAIMING EXEMPTION U/S.54 OR U/S.54F. THE ABOVE CONTENTION OF THE ASSESSEE IS NOT ACCEPTA BLE BECAUSE AFTER PURCHASE OF THE NEW ASSET ON 31.7.2008. WITHIN TWO DAYS I.E., ON 2.8.2008, THE ASSESSEE ALONG WITH OTHER FAMILY MEMBERS HAS ENTERE D INTO AN AGREEMENT WITH M/S.VAIBHAV GOLD COAST PVT. LTD., VISAKHAPATNAM. AS PER THE AGREEMENT, THE DEVELOPER SHALL CONSTRUCT A MULTI-STORIED BUILDING IN THE SAID LAND, SUBJECT TO APPROVAL BY THE COMPETENT AUTHORITY, COMPRISING 21 FLOORS (EXCLUDING FLOORS MEANT FOR PARKING) WITH APARTMENTS BY INVESTING THE IR OWN FUNDS. THE SAME TOGETHER WITH THE LAND SHALL BE SHARED BY BOTH THE PARTIES IN THE PROPORTION OF 41.5% FOR THE BENEFIT OF THE OWNERS AND 58.5% FOR T HE DEVELOPERS IN THE CASE OF EXCLUSIVELY RESIDENTIAL COMPLEX CONSTRUCTED. IN CAS E THE COMPLEX COMPRISES BOTH COMMERCIAL AND RESIDENTIAL FLATS, THEN, THE SHARING RATIO SHALL BE 40% FOR THE BENEFIT OF THE OWNERS AND 60% FOR THE BENEFIT OF TH E DEVELOPER IN THE RESIDENTIAL PART OF THE BUILT UP AREA TOGETHER WITH PROPORTIONA TE SHARE IN THE LAND AND EQUAL PROPORTION I.E.,50% FOR THE BENEFIT OF THE OWNER AN D 50% FOR THE BENEFIT OF THE DEVELOPER IN THE COMMERCIAL PART OF THE COMPLEX TOG ETHER WITH PROPORTIONATE SHARE IN THE LAND. IN THE AGREEMENT, AS PER CLAUSE 14, THE CONSTRUCTION OF THE COMPLEX SHALL BE COMPLETED WITHIN A PERIOD OF 36 MO NTHS FROM THE DATE OF THE ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 7 DEVELOPMENT AGREEMENT TO BE ENTERED INTO BETWEEN BO TH THE PARTIES ON 2.8.2008 WHICH MEANS THE ASSESSEE HAS HANDED OVER THE POSSESSION OF THE PROP ERTY TO THE DEVELOPER THROUGH THIS AGREEMENT AND WITH AN AGREEM ENT TO COMPLETE THE CONSTRUCTION WITHIN 3 YEARS FROM THE DATE OF AGREEM ENT. HENCE, THE CONTENTION OF THE ASSESSEE MADE IN THIS REGARD THAT THE SAID PROP ERTY WAS NOT ALIENATED/TRANSFERRED AND BY 22.12.2010 THE SAID PE RIOD OF 3 YEARS WILL BE OVER AND THE AGREEMENT WITH M/S. VAIBHAV GOLD COAST PVT.LTD., HAS NOT TAKEN EFFECT TILL DATE AND HE HAS NOT RECEIVED ANY ADVANCE EXCEPTING THE ADVANCES RECEIVED BY HIS FATHER, SHRI G. RAMAKRISHNAM RAJU IS NOT ACCEPTABLE. ON THE DATE THE AGREEMENT WAS ENTERED INTO, THE ASSESSEE HAS HANDED OVER THE POSSESSION OF THE PROPERTY TO THE DEVELOPER ALONG WITH OTHERS. HOWEVER, FOR WANT OF CLEARANCE FROM THE GOVERNMENT DEPARTMENTS FOR CONSTRUCTION OF MULTI-ST ORIED COMMERCIAL/RESIDENTIAL COMPLEX COMPRISING OF 21 FLOORS, THE PROJECT MIGHT NOT HAVE STARTED AND COMPLETED WITHIN THREE YEARS WHICH DOES NOT MEAN THE ASSESSEE HAS NOT ALIENATED/TRANSFERRED THE RIGHTS OF THE PROPERTY. HENCE, WITHIN THE PERIOD OF THREE YEA RS AS STIPULATED IN THE ACT, THE ASSESSEE HAS TRANSFERRED HIS RIGHTS OV ER THE PROPERTY TO THE DEVELOPER FOR CONSTRUCTION OF MULTI-STORIED COMMERCIAL/RESIDE NTIAL COMPLEX ON THE NEW ASSET OF THE ASSESSEE AND ALSO THE ADJOING LAND BELONGING TO OTHERS' WHO ARE PARTY TO THE DEVELOPMENT AGREEMENT. AGAINST THE TRANSFER THE ASSESSEE FAMILY ALSO RECEIVED THE ADVANCE OF RS.6 CRORES FROM M/S. VAIBH AV GOLD COAST PRIVATE LIMITED WHICH IS A PART OF AGREEMENT AND THE MONEY IS STILL WITH THE A SSESSEE TILL DATE. 5) THE ASSESSEE IN HIS SUBMISSIONS DATED 15.12.2010 FURTHER CONTENDED THAT THE DEPARTMENT IN ITS LETTER POINTED OUT THAT THE ASSESSEE DID NOT SHOW INCOME FROM HOUSE PROPERTY IN THE RETURNS OF INCOME FOR THE EARLIER ASSESSMENT YEARS AND THE PRO PERTY SHOULD CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY TO CLAIM EXEMPTION U/S.54 AND DRAWN ATTENTION TO THE CBDT CI RCLE NO.538 DATED 12.7.1989. AS PER THE SAID CIRCULAR, INCOME OF SELF -OCCUPIED RESIDENTIAL HOUSE IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUS E PROPERTY EVEN THOUGH IN CERTAIN CIRCUMSTANCES SUCH INCOME MAY BE COMPUTED AT NIL OR AT NEGATIVE FIGURE BY VIRTUE OF SECTION 23(2) R. W.S.24. A PERSON IS THEREFORE ENTITLED TO CLAIM EXEMPTION U/S.54 EVEN I N RESPECT OF SELF- OCCUPIED RESIDENTIAL HOUSE. AS ALREADY STATED THE S AID RESIDENTIAL HOUSE IN VIJAYAWADA WHICH I HAVE SOLD IS SELF-OCCUP IED RESIDENTIAL HOUSE. THE ASSESSEE HAS RIGHTLY QUOTED THE CBDT CIRCULAR T HAT THE PROPERTY SOLD SHOULD BE SHOWN UNDER THE HEAD INCOME FROM HOUSE PROPERTY EITHER AS SELF- OCCUPIED OR AS LET OUT PROPERTY. BUT, AS SEEN FROM THE RETURNS OF INCOME FILED FOR THE A.Y.2003-0 4 ONWARDS, THE ASSESSEE HAS NOT DECLARED THE ORIGINAL ASSET AS SEL F-OCCUPIED PROPERTY AS ADMITTED BY HIM EXCEPT OTHER PROPERTY FROM WHICH HE HAS BEEN DERIVING RENTAL INCOME AND OFFERED THE SAME TO TAX WHICH MEANS BUT FOR THE SEARCH AND SEIZURE OPERATION, IN THE CASE O F HIS FATHER, SHRI G. RAMAKRISHNAM RAJU, ON 9.1.2009, THE SALE TRANSAC TION AS WELL AS ESCAPEMENT OF LONG TERM CAPITAL GAINS WOULD NOT HAV E COME TO THE NOTICE OF THE DEPARTMENT. ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 8 5. IN ADDITION TO THE DISALLOWANCE MADE U/S 54 OF TH E ACT, THE ASSESSEE ALSO MADE ONE MORE ADDITION OF RS.43,30,135/-. HOW EVER SINCE SUCH ADDITION IS NOT SUBJECT MATTER OF APPEAL BEFORE US THERE IS NO NECESSITY TO DEAL WITH IT. BEING AGGRIEVED OF THE ASSESSMENT ORDER SO PASSED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), TH E ASSESSEE CHALLENGED THE ASSESSMENT ORDER BOTH ON THE JURISDICTIONAL ISSUE O F MAINTAINABILITY OF PROCEEDING U/S 153C OF THE ACT AS WELL AS MERITS O F DISALLOWANCE OF EXEMPTION U/S 54 OF THE ACT. SO FAR AS THE ISSUE R EGARDING LEGALITY OF INITIATION OF PROCEEDING U/S 153C OF THE ACT, THE C IT(A) HELD AS UNDER: THE ASSESSEE SOLD THE ABOVE TWO PROPERTIES TO A SI NGLE PARTY I.E., M/S. MINERVA GRAND HOTELS PVT. LTD., FOR A TOTAL CONSIDERATION O F RS.3,00,00,000/- ON 14.11.2007. OUT OF THE SALE CONSIDERATION IN RESPECT OF SALE OF THE ABOVE TWO PROPERTIES, THE ASSESSEE HAS PURCHASED TWO ASSETS THROUGH POSSESSOR Y SALE AGREEMENT COUPLED WITH GENERAL POWER OF ATTORNEY DATED 22.12.2007, EXECUTE D BY SHRI DATLA VENKATA SATYANARAYANA RAJU AND SHRI DATLA GOPI KRISHNAM RAJ U IN FAVOUR OF THE ASSESSEE. THE ABOVE NAMED TWO PERSONS HAVE SOLD THEIR TWO ASSETS I.E. 959 SQ.YARDS AND 773 SQ.YARDS (TOTAL 1732 SQ.YARDS) COVERED IN THE SAME SURVEY NUMBER I.E., SURVEY NO.10/5A PART OF CHINA WALTAIR, VISAKHAPATNAM, WITH ACC SHED M ONE PART STATED TO HAVE BEEN JOINTLY CONSTRUCTED BY THEM FOR A SALE CO NSIDERATION RS.2,07,84,000/-. THOUGH THE TWO ASSETS WERE SOLD THOUGH A SINGLE DEE D, THE SELLERS NAMELY SHRI DVS RAU AND SHRI DGK RAJU RECEIVED THEIR SALE CONSIDERA TION SEPARATELY AMOUNTING TO RS.1,15,08,0007- AND RS,92,76,0007- RESPECTIVELY AS SEEN FROM THE SALE DEED THROUGH CHEQUE NO.692342 DATED 25.11.2007 AND CHEQU E NO.692343 DATED 25.11.2007 RESPECTIVELY). IN THE SALE DEED IT WAS M ENTIONED THAT THE PROPERTIES ARE CONTIGUOUS FORMING A SINGLE BLOCK OF THE TOTAL EXTENT OF 1732 SQ.YARDS. SUBSEQUENTLY, THE VENDORS JOINTLY GOT CONSTRUCTED A RESIDENTIAL HOUSE AND ASSESSED TO TAX BEARING D.NO.2-48-7, ASST. NO.3900071907. BUT, AS SEEN FROM THE HOUSE TAX PASS BOOK ISSUED BY THE MUNICIPAL CORPORATION, VISAKHAPATNAM, WITH PROPERTY TAX ASST.NO.3900071907 FROM THE YEAR 2004 ONWARDS, THE PROPERTY WITH ACC ROOF SHED WAS ONLY ASSESSED TO TAX IN THE NAME OF SHRI D .V. SATYANARAYANA RAJU. HOWEVER, IN THE REGISTERED SALE DEED THE SELLERS CL AIMED TO HAVE JOINTLY CONSTRUCTED A RESIDENTIAL HOUSE AND ASSESSED TO TAX . 6. THE LD. A.R. SUBMITTED BEFORE US THAT THE PROCE EDING U/S 153C OF THE ACT WAS INITIATED SOLELY ON THE BASIS OF THE REGIST ERED SALE DEED DATED 14.11.2007 AND A COMPUTATION OF INCOME MADE BY THE ASSESSEES FATHER SRI GADIRAJU RAMAKRISHNAM RAJU IN CASE OF THE ASSESSEE AND SMT. BANGARAMMA. THE LD. A.R. SUBMITTED THAT THE REGISTERED SALE DEE D IS A PUBLIC DOCUMENT AND UNDER NO CIRCUMSTANCES CAN BE CONSIDERED AS AN INCRIMINATING MATERIAL. SO FAR AS THE COMPUTATION OF INCOME IN THE HAND WRI TING OF SRI GADIRAJU RAMAKRISHNAM RAJU IS CONCERNED, THE LD. A.R. SUBMIT TED THAT THE SAME ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 9 CANNOT BE CONSIDERED TO BE AN INCRIMINATING MATERIA L SINCE THE ASSESSEE, IN FACT HAS DISCLOSED THE CAPITAL GAIN FROM SALE OF PR OPERTY IN THE RETURN FILED IN THE IMPUGNED ASSESSMENT YEAR. THE LD. A.R. SUBMITT ED THAT THE CONDITION PRECEDENT FOR INITIATION OF PROCEEDING U/S 153C OF THE ACT IS NOT SATISFIED IN CASE OF THE ASSESSEE AS NO MONEY, BULLION, JEWELLER Y OR OTHER VALUABLE ARTICLES OR THINGS OR BOOKS OF ACCOUNTS OR ANY OTHER DOCUMEN T SEIZED DURING THE SEARCH AND SEIZURE OPERATION BELONGED TO THE ASSESS EE AND FURTHERMORE, THEY CANNOT BE CONSIDERED TO BE IN THE NATURE OF INCRIMI NATING MATERIAL. IN SUPPORT OF SUCH CONTENTION, THE LD. A.R. RELIED UPO N A DECISION OF THE ITAT, VISAKHAPATNAM BENCH IN CASE OF ACIT VS. SRI RAMA ED UCATIONAL TRUST IN ITA NO.31 TO 35/VIZAG/2012 DATED 13.12.2013. 7. THE LD. D.R. SUBMITTED THAT THE SATISFACTION NOT E OF THE ASSESSING OFFICER CLEARLY ESTABLISHES THAT INCRIMINATING MATE RIAL BELONGING TO THE ASSESSEE WERE FOUND AND SEIZED IN THE SEARCH AND SE IZURE PROCEEDING WHICH CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO INITIATE PROCEEDING U/S 153C OF THE ACT. IT WAS CONTENDED THAT THE ASSESSEE DID NOT FILE HIS RETURN OF INCOME WITHIN THE DUE DATE AS PROVIDED U/S 139(1) O F THE ACT. ONLY AFTER THE INCRIMINATING MATERIALS WERE FOUND AND SEIZED AS A RESULT OF SEARCH AND SEIZURE OPERATION, THE ASSESSEE FILED HIS RETURN OF INCOME AT A BELATED STAGE DISCLOSING CAPITAL GAIN. HE THEREFORE SUBMITTED TH AT BECAUSE OF THESE FACTS IT BECOMES CLEAR THAT IF THE INCRIMINATING MATERIAL WO ULD NOT HAVE BEEN FOUND DURING SEARCH AND SEIZURE OPERATION, THE ASSESSEE W OULD NOT HAVE DISCLOSED THE CAPITAL GAIN. IT WAS CONTENDED THAT THE CONTENT ION OF THE LD. A.R. THAT REGISTERED SALE DEED BEING A PUBLIC DOCUMENT CANNOT BE CONSIDERED TO BE BELONGING TO THE ASSESSEE OR AN INCRIMINATING MATER IAL IS NOT TENABLE AS EVERY REGISTERED DOCUMENT CANNOT BE SUPPOSED TO BE DISCLO SED TO THE DEPARTMENT. IT WAS SUBMITTED THAT THE SALE DEEDS ONLY CAME TO LI GHT AS A RESULT OF SEARCH AND SEIZURE OPERATION, WHICH OTHERWISE WOULD NOT HA VE BEEN DISCLOSED TO THE DEPARTMENT BY THE ASSESSEE. 8. IN HIS REJOINDER, THE LD. A.R. REBUTTING THE CONT ENTION OF THE DEPARTMENTAL REPRESENTATIVES SUBMITTED THAT THE ASS ESSEE HAS SUBMITTED HIS RETURN OF INCOME WITHIN THE TIME ALLOWED UNDER THE STATUTE. HENCE, IT CANNOT ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 10 BE PRESUMED THAT THE ASSESSEE WOULD NOT HAVE DISCLO SED THE CAPITAL GAIN FROM SALE OF THE PROPERTY. IT WAS FURTHER CONTENDED BY THE LD. A.R. THAT SINCE PROVISIONS CONTAINED U/S 148 OF THE ACT AND 153C OF THE ACT ARE MUTUALLY EXCLUSIVE, WHERE ACTION CAN BE INITIATED U/S 148 OF THE ACT, THE PROVISIONS OF SECTION 153C OF THE ACT CANNOT BE INVOKED. HE THER EFORE CONTENDED THAT THE PROCEEDING INITIATED U/S 153C OF THE ACT IS VOID. 9. WE HAVE HEARD THE CONTENTIONS OF THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIA LS ON RECORD. WE HAVE ALSO CAREFULLY APPLIED OUR MIND TO THE DECISIONS RELIED UPON BY THE PARTIES. IT IS APPARENT FROM THE ASSESSMENT ORDER THAT THE ASSESSI NG OFFICER HAS PROCEEDED U/S 153C OF THE ACT. HOWEVER, WE MAY OBSERVE THAT WHILE DEALING WITH ASSESSEES GROUND ON THIS ISSUE IN PARA-7 OF HIS OR DER EXTRACTED HEREIN ABOVE, THE CIT(A) HAS RECORDED A FINDING OF FACT THAT WARR ANTS WERE IN THE NAME OF THE ASSESSEE. HENCE, IF SEARCH AND SEIZURE OPERATI ON WAS CONDUCTED IN PURSUANCE OF SUCH WARRANT, NOTICES U/S 153A OF THE ACT HAD TO BE MANDATORILY ISSUED TO THE ASSESSEE. IF THAT IS THE CONCLUSION O F THE CIT(A), THEN THE VERY EDIFICE OF THE ASSESSMENT ORDER U/S 153C OF THE ACT WOULD COLLAPSE, BECAUSE ONCE THE WARRANT IS IN THE NAME OF THE ASSESSEE, TH EN IT IS TO BE PRESUMED THAT SEARCH AND SEIZURE OPERATION U/S 132 OF THE AC T WAS INITIATED IN CASE OF THE ASSESSEE AND AS A NATURAL COROLLARY, ASSESSING OFFICER SHOULD HAVE PROCEEDED U/S 153A OF THE ACT AND NOT 153C OF THE A CT AS HAS BEEN DONE IN THE PRESENT CASE. HENCE, IN THIS PREMISES ALONE, T HE ASSESSMENT ORDER PASSED U/S 153C OF THE ACT CANNOT SURVIVE. BE THAT AS IT MAY, IT IS VERY MUCH CLEAR FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS PROCEEDED U/S 153C OF THE ACT PRIMARILY RELYING UPON TWO SEIZED M ATERIALS I.E. THE REGISTERED SALE DEED COPY DATED 14.11.2007 AND THE COMPUTATION OF INCOME IN THE HAND WRITING OF SRI GADIRAJU RAMAKRISHNAM RAJU. SO FAR AS REGISTERED SALE DEED IS CONCERNED, IT CANNOT BE CONSIDERED TO BE AN INCRIMI NATING MATERIAL BELONGING TO THE ASSESSEE. SIMILARLY, THE COMPUTATION OF INC OME IN THE HAND WRITING OF SRI GADIRAJU RAMAKRISHNAM RAJU ALSO CANNOT BE CONSI DERED INCRIMINATING MATERIAL OR A DOCUMENT BELONGING TO THE ASSESSEE. ON THE OTHER HAND, IT SHOWS A CLEAR INTENTION OF THE ASSESSEE TO FILE HIS RETURN OF INCOME FOR WHICH TIME IS AVAILABLE U/S 139(4) OF THE ACT AS ON DATE OF SEARCH. NO OTHER ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 11 MATERIAL WHATSOEVER WAS RECOVERED. IN THAT VIEW OF THE MATTER, THE CONDITION PRECEDENT FOR INITIATION OF PROCEEDING U/S 153C OF THE ACT IS NOT SATISFIED. FOR SUCH CONCLUSION, WE DRAW SUPPORT FROM THE ORDER PAS SED BY THE COORDINATE BENCH IN THE CASE OF CIT VS. SRI RAMA EDUCATIONAL T RUST (SUPRA), WHEREIN THE COORDINATE BENCH HELD AS UNDER: 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS OF THE CASE AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO EXAMINED THE DECISIONS RELIED UPON BY THE PARTIES. ADMITTEDLY, IN THE PRESENT CASE, THE AO HAS INITIATED PROCEEDINGS UNDER SECTION 153C OF THE ACT. THEREFORE, IT IS CLEAR THAT THERE IS NO SEARCH ACTION IN THE CASE OF THE A SSESSEE. SECTION 153 C OF THE ACT READS AS UNDER: 153C(1) NOTWITHSTANDING ANYTHING CONTAINED IN SECT ION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151, AND SECT ION 153, WHERE THE AO IS SATISFIED THAT ANY MONEY, BULLION, JEWELL ERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOC UMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON REFERRE D TO IN SECTION 153A, THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSE TS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT AO SHALL PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSES S OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A 10. A PLAIN READING OF THE AFORESAID PROVISION MAKE S IT CLEAR THAT TWO CONDITIONS HAVE TO BE SATISFIED FOR INITIATING PROC EEDINGS UNDER SECTION 153C OF THE ACT. FIRSTLY, THE AO MUST BE SATISFIED THAT TH E MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER T HAN THE PERSON REFERRED TO IN SECTION 153A. SECONDLY, AFTER BEING SATISFIED THAT IT BELONGS TO A PERSON OTHER THAN THE PERSONS TO WHOM SEIZED, HE SHALL HANDOVER THE SEIZED MATERIAL TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON AND T HAT AO SHALL PROCEED AGAINST SUCH OTHER PERSON BY ISSUING NOTICE FOR ASSESSING O R REASSESSING FOR SUCH MATERIAL. THUS, THE PRIMARY CONDITION FOR ASSUMPTI ON OF JURISDICTION UNDER SECTION 153C OF THE ACT IS THE SEIZED MATERIALS MUST BELONG TO THE PERSON AGAINST WHOM PROCEEDINGS UNDER SECTION 153C IS SOUGH T TO BE INITIATED. AS WOULD BE EVIDENT FROM THE ASSESSMENT ORDER, THE AO HAS REFERRED TO PAGES 31, 32 & 61 OF THE SEIZED DOCUMENT WITH IDENTIFICATION MARK TH/HNR/2. ON GOING THROUGH THE SAID SEIZED MATERIALS, COPIES OF WHICH ARE PLACED BEFORE US, IT IS TO BE NOTED THAT THE SEIZED MATERIALS AT PAGE 31 IS A RECEIPT OF M/S. HNR CONSTRUCTIONS ACKNOWLEDGING THE RECEIPT OF RS.1,50, 000/- FROM ONE SHRI K. BANGARRAJU . SIMILARLY, PAGE 32 IS ALSO RELATING T O HNR CONSTRUCTIONS MENTIONING CERTAIN DISBURSEMENT SCHEDULE GIVEN BY S HRI R.KRISHNA MOHAN, LICENSED ENGINEER TOTALING TO RS.20 LAKHS. PAGE 61 ALSO MENTIONS CERTAIN FIGURES IN HANDWRITING. IN NONE OF THE DOCUMENTS, T HERE IS ANY REFERENCE TO THE ASSESSEE. THEREFORE, IT CANNOT BE SAID THAT THESE DOCUMENTS BELONG TO THE ASSESSEE. IN THE REMAND REPORT, SUBMITTED BEFORE T HE CIT(A), IN THE COURSE OF APPEAL PROCEEDINGS, THE AO HOWEVER HAS TAKEN A DIFF ERENT STAND BY STATING THAT ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 12 THE INITIATION OF PROCEEDINGS UNDER SECTION 153C AS PER THE NOTING IN THE APPRAISAL REPORT IS ON THE BASIS OF PAGE 64 OF THE SEIZED DOCUMENT WHICH IS A LETTER DATED 10.12.2004. PERUSAL OF THE SAID LETTE R, COPY OF WHICH IS PLACED IN THE PB, WOULD REVEAL THAT IT IS NOTHING BUT A CERTI FICATE ISSUED BY THE CHAIRMAN OF THE MANAGING TRUSTEE OF THE ASSESSEE TRUST CERTI FYING THE WORKS ENTRUSTED TO H.N.R. CONSTRUCTIONS. THEREFORE, ON PERUSAL OF THE AFORESAID DOCUMENTS, IT WOULD CLEARLY REVEAL THAT THE DOCUMENTS CONSIDERED BY THE AO FOR INITIATION OF PROCEEDINGS U/S.153C DO NOT BELONG TO THE ASSESSEE. IN THE AFORESAID CIRCUMSTANCES, IN OUR VIEW PROCEEDINGS UNDER SECTION 153C OF THE ACT COULD NOT HAVE BEEN INITIATED BY THE AO ONLY ON THE BASIS OF SO CALLED SEIZED DOCUMENTS AS REFERRED TO BY HIM WHICH, IN OUR VIEW, DO NOT BE LONG TO THE ASSESSEE. AT THIS STAGE, IT WOULD BE WORTHWHILE TO LOOK INTO THE FIND ING OF FACTS RECORDED BY THE CIT(A) IN THIS REGARD, WHICH IS EXTRACTED HEREUNDER : 6. I HAVE CONSIDERED THESE ARGUMENTS AND ALS O PERUSED THE DOCUMENTS ON THE BASIS OF WHICH SATISFACTION IS SAID TO BE ARRIVED A T BY AO. PAGE NO.31 OF TH/HNR/2 IS A RECEIPT OF HNR CONSTRUCTIONS WHICH REFLECTS RE CEIPT OF RS.1,50,000/- FROM SRI K.BANGRAJU VIDE A CHEQUE TO WARDS PLOT ADVANCE. PAGE NO.32 ALSO BELONGS TO HNR CONSTRUCTIONS WHICH SHOWS THE DISBURSEMENT SCHEDULE GIVEN BY LICENSED ENGINEER SRI K.KRISHNA PRASAD. THIS PERTAINS TO HNR CONSTRUCTIONS AND IT ALSO HAS NOTHING TO DO WITH THE ASSESSEE. THE ENTIRE PAYMENT SHOWN ON THE PAPER TOTAL-UP TO AROUND RS.10 TO RS.12 LAKHS AND THERE IS NOTHING IN THIS PAPER TO SHOW THAT THIS BE LONGS TO THE ASSESSEE TRUST OR HAS ANY CONNECTION WITH IT. PAGE 61 CONTAINS C ERTAIN CALCULATIONS WHICH DO NOT SUGGEST THAT IT HAS ANYTHING TO DO WITH ASSESSE E TRUST. PAGE NO. 64 IS NO DOUBT A LETTER SIGNED BY THE CHAIRMAN AND MANAGING TRUSTEE OF SRI RAMA EDUCATIONAL TRUST. THE LETTER IS A CERTIFICATE ISSUED TO WHOM-S O-EVER IT MAY CONCERN, CERTIFYING THAT CERTAIN WORKS OF CONSTRUCT ION ARE ENTRUSTED TO M/S.HNR CONSTRUCTION, A PROPRIETORSHIP CONCERN OF SRI TANGI HARI NARAYANA. THIS THOUGH IS ON ASSESSEE'S LETTER HEAD IS A GENER AL CERTIFICATE WHICH IS ISSUED TO HNR CONSTRUCTION AND THERE IS NOTHING EITHER INC RIMINATING IN THIS DOCUMENT SUGGESTING ANY UNACCOUNTED TRANSACTI ONS. THIS CERTIFICATE ONLY SAYS WHAT IS ALREADY DECLARED IN THE BOOKS OF ACCOU NTS OF ASSESSEE. IN MY OPINION IF 153C PROCEEDINGS CAN BE INITIATED BASED ON SUCH GENERAL LETTERS THAT WOULD BE STRETCHING THE LAW A BIT TOO FAR. IF THAT IS THE INTENTION OF THE LAW- MAKERS THEN 153C PROCEEDINGS CAN BE INITIATED AGAINST ALL ASSESSES WHOSE LETTER HEADS/VISITING CARDS ARE FOUND DURING THE SE ARCH. TO ILLUSTRATE THE MATTER, IF SOME PERSON IS SEARCHED AND DURING THE SEARCH PR OCEEDINGS, IF BANK STATEMENTS, LIC POLICY CERTIFICATES OR SHARE CERTIF ICATES ETC ARE FOUND, IT DOES NOT MEAN THAT 153C PROCEEDINGS CAN BE INITIATED 'AG AINST THOSE BANKS/LIC/ COMPANIES TO WHICH THE SHARES BELONG. SIMILARLY F ROM ANY PERSON SEARCHED MANY PURCHASE BILLS WOULD BE FOUND. ALL THOSE BILL S WILL BE ON LETTER HEADS OF THOSE CONCERNS AND WOULD BE SIGNED AND STAMPED. THI S WOULD NOT ENTAIL THE AO TO PROCEED AGAINST ALL SUCH CONCERNS U/S.153C, SIM PLY BECAUSE THESE ARE ALSO THE DOCUMENTS ON THE LETTER HEAD OF THOSE CONC ERNS AND ARE SIGNED BY THE PERSONS THEREIN. THIS IN MY OPINION WOULD BE RIDICULOUS INTERPRETATION OF THE WORD 'ANY DOCUMENTS' AS FOUND IN SEC. 153C. THIS DEFINITELY DOES NOT SE EM TO BE THE INTENTION OF THE LAW-MAKERS IN DRAFTING THE SAID SECTION. ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 13 11. AS CAN BE SEEN FROM THE AFORESAID EXTRACTED POR TION OF THE ORDER OF THE CIT(A), THE CIT(A) AFTER EXAMINING THE SEIZED MATER IAL HAS GIVEN A CATEGORICAL FINDING THAT THE SO CALLED SEIZED MATERIALS BY NO S TRETCH OF IMAGINATION COULD BE SAID TO BE BELONGING TO THE ASSESSEE. THIS FACT UAL FINDING OF THE CIT(A) REMAINS UNCONTROVERTED. IN THE AFORESAID FACTUAL B ACKGROUND, WE WILL NOW EXAMINE THE RATIO LAID DOWN IN VARIOUS DECISIONS OF HIGH COURTS AND DIFFERENT BENCHES OF THE TRIBUNAL. 12. IN THE CASE OF VIJAYBHAI N CHANDRANI (SUPRA), T HE HONBLE GUJARAT HIGH COURT HELD AS UNDER: 12. ON A PLAIN READING OF THE AFORESAID PROVISIONS IT IS APPARENT THAT SS. 153A, 153B AND 153C LAY DOWN A SCHEME FOR ASSESSMEN T IN CASE OF SEARCH AND REQUISITION. SEC. 153A DEALS WITH PROCEDURE FOR ISSUANCE OF NOTICE AND ASSESSMENT OR REASSESSMENT IN CASE OF TH E PERSON WHERE A SEARCH IS INITIATED UNDER S. 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS ARE REQUISITIONED UNDER S. 1 32A AFTER THE 31ST DAY OF MAY, 2003. SEC. 153B LAYS DOWN THE TIME- LIM IT FOR COMPLETION OF ASSESSMENT UNDER S. 153A. SEC. 153C WHICH IS SIMILA RLY WORDED TO S. 158BD OF THE ACT, PROVIDES THAT WHERE THE AO IS SAT ISFIED THAT ANY MONEY, BULLION, JEWELLERY _OR OTHER VALUABLE ARTICL E OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONG S OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN S. 153A HE SHALL PROCEED AGAINST 'EACH SUCH OTHER PERSON AND ISSUE SUCH OTH ER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON. HOWEVER, THERE IS A DISTINCTION BETWEEN THE TWO PROVISIONS IN AS MUCH A S UNDER S. 153C NOTICE CAN BE ISSUED ONLY WHERE THE MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONG TO SUCH OTHER PERSON, WHEREAS UNDER S. 158BD IF THE AO IS SATISFIED THAT ANY UNDISCLOSED INCOME BEL ONGS TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WA S MADE UNDER S. 132 OR WHOSE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS WERE REQUISITIONED UNDER S. 132A, HE SHALL PROCEED AGAINST SUCH OTHER PERSON UNDER S. 158BC. 13. THUS A CONDITION PRECEDENT FOR ISSUING NOTICE UNDER S. 153C AND ASSESSING OR REASSESSING I NCOME OF SUCH OTHER PERSON, IS THAT THE MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED SHOULD BELONG TO SUCH PERSON. IF THE SAID REQUIREMENT IS NOT SATISFIED, RESORT CANNO T BE HAD TO THE PROVISIONS OF S. 153C OF THE ACT. 14. EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGH T OF THE AFORESAID STATUTORY SCHEME, IT IS AN ADMITTED POSITION AS EME RGING FROM THE RECORD OF THE CASE, THAT THE DOCUMENTS IN QUESTION, NAMELY THE THREE LOOSE PAPERS RECOVERED DURING THE SEARCH PROCEEDINGS DO NOT BELONG TO THE PETITIONER. IT MAY BE THAT THERE IS A REFERENCE TO T HE PETITIONER IN AS MUCH AS HIS NAME IS REFLECTED IN THE LIST UNDER THE HEADING 'SAMUTKARSH MEMBERS DETAILS' AND CERTAIN DETAILS AR E GIVEN UNDER DIFFERENT COLUMNS AGAINST THE NAME OF THE PETITIONE R ALONG WITH OTHER MEMBERS, HOWEVER, IT IS NOBODY'S CASE THAT THE SAID DOCUMENTS BELONG ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 14 TO THE PETITIONER. IT IS NOT EVEN THE CASE OF REVEN UE THAT THE SAID THREE DOCUMENTS ARE IN THE HANDWRITING OF THE PETITIONER. IN THE CIRCUMSTANCES, WHEN THE CONDITION PRECEDENT FOR ISS UANCE OF NOTICE IS NOT FULFILLED ANY ACTION TAKEN UNDER S. 153C OF THE ACT STANDS VITIATED. 13. THE ITAT HYDERABAD BENCHES IN THE CASE OF M/S. SHOURI CONSTRUCTION (SUPRA), FOLLOWING THE AFORESAID DECISION OF HONBL E GUJARAT HIGH COURT HELD THAT UNLESS THERE IS MATERIAL BELONG TO THE ASSESSE E, INITIATION OF PROCEEDINGS UNDER SECTION 153C IS INVALID. 14. IN THE CASE OF DCIT VS. ASP SOFTWARE SOLUTIONS (SUPRA), THE ITAT HYDERABAD, WHERE BOTH THE MEMBERS ARE PARTIES, IN P ARA 29 OF THE ORDER EXPRESSED THE VIEW THAT IF THE SEIZED DOCUMENTS DO NOT ESTABLISH ANY INCRIMINATING EVIDENCE OF UNDISCLOSED INCOME, PROVI SIONS OF SECTION 153C CANNOT BE INVOKED. 15. THE OTHER DECISIONS RELIED UPON BY LD A.R. ALSO SUPPORT THE ABOVE VIEW. THEREFORE, CONSIDERING THE FACTS OF THE ASSESSEES CASE IN THE LIGHT OF RATIO LAID DOWN IN THE AFORESAID DECISIONS, IT BECOMES CLEAR T HAT THE SEIZED MATERIALS DO NOT BELONG TO THE ASSESSEE. THAT BESIDES, THERE AR E NO INCRIMINATING MATERIALS INDICATING ANY UNDISCLOSED INCOME OF THE ASSESSEE, WHICH COULD HAVE ENABLED THE AO TO INVOKE THE PROVISIONS OF SECTION 153C OF THE ACT. THIS BECOMES FURTHER CLEAR FROM THE FACT THAT THE INCOME WERE DE TERMINED FOR THE ASSESSMENT YEARS 2001-02, 2002-03 & 2003-04 ONLY ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN APPROVED UNDER SECTION 10(23C ) OF THE ACT. THE DETERMINATION OF INCOME HAS ABSOLUTELY NO RELATION OR RELEVANCE TO THE SEIZED MATERIALS. SO FAR AS THE ASSESSMENT YEARS 2004-05 AND 2005-06 ARE CONCERNED, PERUSAL OF THE ASSESSMENT ORDERS PASSED IN THOSE YEARS WOULD REVEAL THE FACT THAT THE DETERMINATION OF INCOME IS ON THE BASIS OF THE IMPOUNDED MATERIALS AS A RESULT OF SURVEY AND NOT O N THE BASIS OF ANY SEIZED MATERIALS BELONGING TO THE ASSESSEE. IN THE AFORES AID CIRCUMSTANCES, THE PRE CONDITIONS FOR ASSUMING JURISDICTION UNDER SECTION 153C ARE NOT SATISFIED. SO FAR AS THE DECISIONS RELIED UPON BY LD D.R. IN SUPP ORT OF HIS CONTENTION, AFTER CAREFULLY APPLYING OUR MIND TO THE RATIO LAID DOWN THEREIN, WE OBSERVE THAT THE DECISIONS ARE DISTINGUISHABLE ON FACTS AND DO NOT A PPLY TO THE FACTS OF THE ASSESSEES CASE. IN THAT VIEW OF THE MATTER, WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN HOLDING THE INITIATION O F PROCEEDINGS UNDER SECTION 153C TO BE AB INITIO VOID AND CONSEQUENTLY ANNULLIN G THE ASSESSMENTS FOR ALL THE AFORESAID ASSESSMENT YEARS. ACCORDINGLY, WE UP HOLD THE SAME BY DISMISSING THE GROUNDS TAKEN BY THE DEPARTMENT. 10. THE ITAT DELHI BENCH IN CASE OF V.K. FISCAL SER VICES PVT. LTD. VS. DCIT IN ITA NOS.5460 TO 5465/DEL/2012 ON A CONSPECTUS OF DECISIONS OF DIFFERENT HIGH COURTS AS WELL AS DIFFERENT BENCHES OF ITAT AL SO EXPRESSED THE VIEW THAT IN ABSENCE OF INCRIMINATING MATERIAL BELONGING TO A SSESSEE, PROCEEDING U/S 153C CANNOT BE INITIATED. HONBLE A.P. HIGH COURT IN A JUDGEMENT DATED 12.7.2003 IN ITA NO.266 OF 2013 IN CASE OF M/S. HYD ERABAD HOUSE PVT. LTD. ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 15 UPHELD THE DECISION OF THE ITAT HYDERABAD BENCH, WH EREIN IT IS HELD THAT COMPUTATION OF UNDISCLOSED INCOME U/S 153A/153C OF THE ACT MUST BE IN REFERENCE TO THE INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH. 11. THIS ISSUE CAN ALSO BE LOOKED AT FROM ANOTHER A NGLE. IT IS NOT DISPUTED THAT THE ASSESSEE IN THE RETURN OF INCOME FILED HAS DISCLOSED THE CAPITAL GAIN ARISING OUT OF THE SALE OF THE PROPERTY. WHILE THE LD. D.R. HAS CONTENDED THAT ONLY BECAUSE OF SEIZURE OF INCRIMINATING MATERIAL D UE TO SEARCH AND SEIZURE OPERATION, THE ASSESSEE CAME FORWARD TO DISCLOSE TH E CAPITAL GAIN IN THE RETURN FILED AT A BELATED STAGE, IT IS THE CONTENTI ON OF THE ASSESSEE THAT THE ASSESSEE HAS FILED THE RETURN OF INCOME WITHIN THE TIME PERMITTED UNDER THE STATUTE. IN FACT A DRAFT COMPUTATION OF INCOME ON THIS CAPITAL GAINS WAS FOUND DURING THE SEARCH WHICH DEMONSTRATED THAT THE ASSES SEE WAS READYING HIMSELF TO FILE HIS RETURN OF INCOME. HENCE, IT CA NNOT BE SAID THAT THE ASSESSEE HAS DISCLOSED THE CAPITAL GAIN ONLY AS A R ESULT OF SEARCH. IN THIS REGARD, WE MAY OBSERVE THAT THE CONTENTION OF THE L D. D.R. IS NOT TENABLE. IT IS NOT DISPUTED THAT THE ASSESSEE HAS TIME TO FILE HIS RETURN OF INCOME AS ON THE DATE OF SEARCH I.E. 9.1.2009, WITHIN THE PERIOD ALLOWED UNDER THE STATUTE U/S 139(4) OF THE ACT. THEREFORE, IT CANNOT BE PRE SUMED THAT THE ASSESSEE WOULD NOT HAVE DISCLOSED THE CAPITAL GAIN WHICH WAS DISCLOSED ONLY AS A RESULT OF SEARCH. IT IS A FACT ON RECORD THAT THE AO HAS A CCEPTED THE SALE CONSIDERATION DISCLOSED BY THE ASSESSEE. THE ENHAN CEMENT IN INCOME DETERMINED BY THE AO IS NOT BECAUSE OF SUPPRESSION OF INCOME OR NON DISCLOSURE OF INCOME BY THE ASSESSEE BUT DUE TO DIS ALLOWANCE OF EXEMPTION CLAIMED U/S 54 OF THE ACT. THEREFORE, CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT IN THE FACTS OF THE PRESENT CASE, INITIATION OF PROCEEDINGS U/S 153C OF THE ACT IS NOT MAINTAINABLE. ACCORDINGLY, THE ASSESSEES GROUND ON THIS ISSUE DE SERVES TO BE ALLOWED. 12. SINCE WE HAVE UPHELD THE ASSESSEES GROUND ON T HE LEGAL ISSUE OF VALIDITY OF PROCEEDING INITIATED U/S 153C OF THE AC T, THERE WAS NO NEED TO GO INTO THE MERITS OF THE DISALLOWANCE OF EXEMPTION CL AIMED U/S 54 OF THE ACT. HOWEVER, CONSIDERING THE FACT THAT THE PARTIES WERE HEARD AT LENGTH ON THE SAID ISSUE, WE THINK IT PROPER TO ALSO RECORD OUR F INDING IN RESPECT THERE TO. THE LD. A.R. TAKING US THROUGH THE RELEVANT FACTS S UBMITTED THAT THE ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 16 ASSESSING OFFICER HAS DENIED EXEMPTION U/S 54 OF TH E ACT, BASICALLY ON THE FOLLOWING REASONS: 1) ASSESSEE HAS SOLD TWO PROPERTIES (ORIGINAL ASSETS) AND PURCHASED TWO SEPARATE PROPERTIES I.E. (I) A LAND AND ANOTHER A L AND WITH HOUSE. 2) THE SO CALLED HOUSE IS ACTUALLY A TEMPORARY STRUCTU RE, HENCE CONDITIONS OF SECTION 54 OF THE ACT IS NOT SATISFIED. 3) FOR CLAIMING EXEMPTION U/S 54 OF THE ACT THE RESIDE NTIAL HOUSE MUST BE EITHER OCCUPIED BY ASSESSEE OR DERIVING INCOME FROM HOUSE PROPERTY. 4) THE ASSESSEE HAS ENTERED INTO A DEVELOPMENT AGREEME NT WITHIN 3 DAYS OF PURCHASE OF PROPERTY WHICH CLEARLY SHOWS THE INT ENTION OF THE ASSESSEE IS TO COMMERCIALLY EXPLOIT THE PROPERTY AN D NOT TO CONSTRUCTION OF A RESIDENTIAL HOUSE. 13. THOUGH, THE CIT(A) AGREED WITH THE ASSESSEE THA T STATUTORY PROVISIONS DO NOT REQUIRE THAT THE HOUSE PROPERTY SOLD SHOULD HAVE BEEN GENERATING INCOME IN THE PAST. HOWEVER, THE CIT(A) ULTIMATELY UPHELD THE VIEW OF THE AO IN DENYING EXEMPTION CLAIMED U/S 54 OF THE ACT. 14. THE LD. A.R. COUNTERING EACH OF THE REASONS FOR DENIAL OF EXEMPTION SUBMITTED BEFORE US THAT THE ASSESSEE HAS ACTUALLY SOLD A SINGLE PROPERTY AND NOT TWO PROPERTIES AS CONCLUDED BY THE ASSESSING OF FICER. DRAWING OUR ATTENTION TO THE TRANSLATED COPIES OF SALE DEEDS TH ROUGH WHICH THE ASSESSEE HAD PURCHASED THE ORIGINAL ASSET SUBMITTED THAT THO UGH IT WAS A SINGLE PROPERTY BUT IT WAS SOLD BY THE ORIGINAL OWNERS TO THE ASSESSEE IN THE YEAR 1988 THROUGH TWO SALE DEEDS. THE LD. A.R. REFERRIN G TO THE ANTECEDENT OF THE PROPERTY AS DESCRIBED IN THE SALE DEEDS SUBMITTED T HAT THE SCHEDULE OF THE PROPERTY AS GIVEN IN THE SALE DEEDS REFER TO THE SA ME PLOT AND ALSO REFER TO A SINGLE SALE DEED UNDER WHICH THE PROPERTY WAS PURCH ASED BY THE PREVIOUS OWNERS FROM WHOM ASSESSEE HAD PURCHASED THE PROPERT Y. SO FAR AS THE SECOND OBJECTION OF THE ASSESSING OFFICER THAT THE ASSESSEE HAD PURCHASED TWO PROPERTIES, ONE A PLOT OF LAND AND ANOTHER RESI DENTIAL HOUSE IS CONCERNED, THE LD. A.R. SUBMITTED BEFORE US THAT THE PROPERTY IS ACTUALLY A SINGLE PROPERTY BELONGING TO TWO PERSONS. IN THIS CONTEXT , HE REFERRED TO THE SALE ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 17 DEED, A COPY OF WHICH IS AT PAGE 34 AND 36 OF THE P APER BOOK. REFERRING TO THE SCHEDULE A PROPERTY AS MENTIONED IN THE SALE DE ED, THE LD. A.R. SUBMITTED THAT THE ENTIRE PROPERTY IS ACTUALLY ONE PROPERTY AND ALSO ASSESSED BY THE MUNICIPAL TAX AS ONE PROPERTY. THE SUB REGI STRAR HAS ALSO CONSIDERED IT AS A SINGLE PROPERTY WHILE VALUING IT FOR STAMP DUTY PURPOSES. SO FAR AS THE THIRD OBJECTION OF THE ASSESSING OFFICER THAT IT IS NOT A RESIDENTIAL HOUSE BUT A TEMPORARY CONSTRUCTION IS CONCERNED, THE LD. A.R. S UBMITTED THAT WHEN THE SUB-REGISTRAR FOR STAMP DUTY PURPOSES HAS VALUED BY CONSIDERING IT AS A RESIDENTIAL HOUSE, IT CANNOT BE CONSIDERED AS A TEM PORARY STRUCTURE. THE LD. A.R. REFERRING TO A PHOTOGRAPH OF THE HOUSE IN QUES TION, AT PAGE 63 OF THE PAPER BOOK, SUBMITTED THAT IT IS A HABITABLE ACCOMO DATION WITH TWO BED ROOMS, A KITCHEN AND CANNOT BE CONSIDERED TO BE A T EMPORARY STRUCTURE. IT WAS FURTHER SUBMITTED THAT THE PROPERTY IN QUESTION IS PART OF THE ENTIRE LAND, HENCE IT CANNOT BE CONSIDERED TO BE TWO SEPARATE PR OPERTIES. SO FAR AS THE LAST OBJECTION OF THE ASSESSING OFFICER THAT THE IN TENTION OF THE ASSESSEE IS NOT TO CONSTRUCT ANY HOUSE BUT TO ALIENATE THE PROPERTY FOR GIVING IT FOR DEVELOPMENT UNDER DEVELOPMENT AGREEMENT, THE LD. A. R. SUBMITTED THAT THOUGH THE FINAL SALE DEED WAS EXECUTED DURING THE RELEVANT FINANCIAL YEAR BUT THE ASSESSEE WAS GIVEN POSSESSION OF THE PROPERTY O N 22.12.2007 AS PER CLAUSE 7 OF THE SAID AGREEMENT. THEREFORE, THE INT ENTION OF THE ASSESSEE THAT HE HAS PURCHASED THE PROPERTY FOR CONSTRUCTION PURP OSES IS VERY MUCH CLEAR. IT WAS FURTHER CONTENDED THAT EVEN THE DEVELOPMENT A GREEMENT ALSO ULTIMATELY COULD NOT GO THROUGH AND HAD TO BE CANCE LLED AND WAS NOT ACTED UPON. THEREFORE, THE ASSESSING OFFICER WAS INCORRE CT IN OBSERVING THAT THE ASSESSEE HAD NO INTENTION OF CONSTRUCTING A HOUSE P ROPERTY ON THE LAND SO AS TO ENTITLE IT TO AVAIL EXEMPTION U/S 54 OF THE ACT. IN SUPPORT OF SUCH CONTENTION, THE ASSESSEE RELIED UPON A NUMBER OF DE CISIONS WHICH ARE AS UNDER: 1. V.A. THARABAI VS. DCIT (2012) 14 ITR (TRIB) 15 (CHENNAI) 2. ACIT VS. NARENDRA MOHAN UNIYAL (2009) 34 SOT 15 2 (DEL) 3. SUBHASH CHAND KAPOOR VS. ITO (2010) 46 DTR (AGR A) (TRIB) 314 4. RAVINDRA K. MARIWALA VS. JCIT (2003) 81 TTJ (MU M) 589 ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 18 15. THE LD. AR REFUTING THE FINDING OF THE AO THAT ASSESSEE HAS PURCHASED TWO SEPARATE PROPERTIES (NEW ASSETS), ONE A LAND AN D ANOTHER A HOUSE, HENCE THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 54, SUBMITTED THAT ASSESSEE ACTUALLY HAS PURCHASED A LAND WITH A HOUSE AND NOT TWO SEPARATE PROPERTIES. IN THIS CONTEXT, THE LD. AR DREW OUR ATTENTION TO TH E SALE AGREEMENT DATED 22.12.2007 AND FINAL SALE DEED DATED 31.7.2008, AT PAGES 34 AND 52 OF PAPER BOOK, SUBMITTED THAT DESCRIPTION OF THE PROPERTY IN THE CONCERNED DOCUMENTS CLEARLY SHOW THAT IT IS A SINGLE PROPERTY BELONGING TO BOTH THE VENDORS. THE LD. AR REFERRING TO THE SITE PLAN, AT PAGE 64A OF T HE PAPER BOOK, SUBMITTED THAT THE SITE PLAN CLEARLY SHOWS THAT THE HOUSE WAS EQUALLY OCCUPYING PORTIONS OF LAND BELONGING TO BOTH THE VENDORS. HENCE, MERE LY BECAUSE THE MUNICIPAL TAX RECEIPT IS IN THE NAME OF ONE OF THE BROTHERS I T CANNOT BE INFERRED THAT THE HOUSE ENTIRELY BELONGS TO HIM. THE LD. AR THEREFOR E SUBMITTED THAT THE DENIAL OF EXEMPTION U/S 54 IS WHOLLY UNJUSTIFIED. 16. THE LD. D.R. ON THE OTHER HAND STRONGLY SUPPORT ING THE REASONING OF THE ASSESSING OFFICER SUBMITTED THAT THE FACTS NARR ATED BY THE ASSESSING OFFICER CLEARLY ESTABLISH THAT THE PROVISIONS OF EI THER SECTION 54 OR SECTION 54F OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE. IT W AS CONTENDED BY THE LD. D.R. THAT THE CONDITION PRECEDENT FOR AVAILING EXEM PTION U/S 54 OF THE ACT IS, THE ORIGINAL ASSET SOLD BY THE ASSESSEE SHOULD BE A RESIDENTIAL HOUSE ALONG WITH LAND APPURTENANT THERETO. HOWEVER, THE ACC RO OF STRUCTURE CANNOT BE CONSIDERED AS A RESIDENTIAL HOUSE AS IT IS A TEMPOR ARY STRUCTURE. THEREFORE, SECTION 54 OF THE ACT IS NOT ATTRACTED. IN THIS CO NTEXT, HE RELIED UPON A DECISION OF THE ITAT VIZAG BENCH IN CASE OF ITO VS. SMT. ROHINI REDDY 313 ITR 346 (2010). THE LD. D.R. FURTHER SUBMITTED THA T THE INTENTION OF THE ASSESSEE IS ALSO CLEAR FROM THE FACT THAT ONLY AFTE R A PERIOD OF 3 DAYS THE NEW ASSET WAS GIVEN TO A DEVELOPER FOR DEVELOPMENT PURP OSES UNDER A DEVELOPMENT AGREEMENT. THEREFORE, THE INTENTION OF THE ASSESSEE IS NOT TO CONSTRUCT A RESIDENTIAL HOUSE BUT TO EXPLOIT THE AS SET FOR COMMERCIAL PURPOSES. IT WAS SUBMITTED THAT ONLY IF THE CAPITA L GAIN IS INVESTED FOR THE PURPOSE OF PURCHASE OR CONSTRUCTION OF A RESIDENTIA L HOUSE THEN EXEMPTION ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 19 U/S 54 OF THE ACT IS AVAILABLE. IN THIS CONTEXT, T HE LD. D.R. RELIED UPON THE FINDING OF THE CIT(A) IN PARAS 14.3 TO 14.5 OF THE ORDER. 17. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IALS ON RECORD. WE HAVE ALSO CAREFULLY APPLIED OUR MIND TO THE DECISIO NS RELIED UPON BY THE PARTIES. ON A PERUSAL OF THE ENGLISH VERSION OF TH E SALE DEEDS OF THE ORIGINAL ASSETS SOLD BY THE ASSESSES, WHICH DESCRIBES THE AN TECEDENTS OF THE PROPERTY SOLD, CLEARLY INDICATES THAT THE PROPERTY IN QUESTI ON IS ACTUALLY A SINGLE PROPERTY INITIALLY PURCHASED VIDE SALE DEED DATED 2 8.6.1942 VIDE REGISTERED DOCUMENT NO.2040/1942. THE SCHEDULE OF PROPERTY AT PAGE 114 AND 119 ALSO MAKES IT CLEAR THAT THE PROPERTY IN QUESTION IS A S INGLE PROPERTY THOUGH IT HAS BEEN SOLD UNDER TWO SEPARATE DOCUMENTS. HOWEVER, T HAT BY ITSELF WOULD NOT MAKE IT TWO SEPARATE PROPERTIES. THAT BESIDES THE SITE PLAN OF THE PROPERTY AT PAGE 10 OF THE PAPER BOOK, WHICH IS PART OF THE ORI GINAL SALE DEED, CLEARLY SHOWS THAT THE PROPERTY IS A SINGLE PROPERTY CONSIS TING OF A STRUCTURE FACING THE ROAD AND VACANT LAND IN THE BACKYARD. THEREFOR E, IT CANNOT BE CONSIDERED TO BE TWO SEPARATE PROPERTIES AS CONCLUDED BY THE A SSESSING OFFICER AND ALSO AFFIRMED BY THE CIT(A). SO FAR AS THE CONCLUSION O F THE REVENUE AUTHORITIES THAT IT IS ONLY A TEMPORARY STRUCTURE AND CANNOT BE CONSIDERED AS A RESIDENTIAL HOUSE, WE ARE NOT ABLE TO AGREE WITH THE SAME. THE MATERIALS ON RECORD CLEARLY SHOW THAT THE STRUCTURE STANDING OVER 1000 S.FT. CANNOT BE CONSIDERED TO BE A TEMPORARY STRUCTURE CONSTRUCTED FOR THE SEC URITY OF THE PROPERTY. THE PHOTOGRAPH AS WELL AS THE LAY OUT PLAN OF THE STRUC TURE CLEARLY SHOWS THAT IT IS A RESIDENTIAL HOUSE WITH TWO BED ROOMS, KITCHEN AND OTHER AMENITIES. THEREFORE, THE CONCLUSION DRAWN BY THE DEPARTMENTAL AUTHORITIES ARE WITHOUT ANY BASIS. IF THE AO HAD ANY DOUBT WITH REGARD TO T HE NATURE OF THE HOUSE PROPERTY, HE SHOULD HAVE UNDERTAKEN A PHYSICAL VERI FICATION FOR ASCERTAINING THE CORRECT FACT. WITHOUT MAKING ANY ENQUIRY THE A O CANNOT COME TO A CONCLUSION MERELY ON PRESUMPTIONS AND SURMISES. SO FAR AS THE INTENTION OF THE ASSESSEE IN GIVING THE PROPERTY FOR DEVELOPMENT IS CONCERNED, IT IS TO BE HELD THAT SUCH CONCLUSION IS ALSO NOT TENABLE. FI RSTLY, BECAUSE IT IS NOT ESTABLISHED ON RECORD THAT THE DEVELOPMENT AGREEMEN T WAS ACTUALLY ACTED UPON AND EVEN ASSUMING THAT IT WAS ACTED UPON, THE FACT REMAINS THAT BY ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 20 GIVING THE PROPERTY FOR DEVELOPMENT, THE ASSESSEE A LSO WOULD HAVE BENEFITTED AS HE WOULD HAVE RECEIVED DEVELOPED PROPERTY AS PER THE TERMS OF THE DEVELOPMENT AGREEMENT, WHICH SATISFIES THE CONDITIO N OF SECTION 54 OF THE ACT. SECONDLY THE ASSESSEE HAD PURCHASED A HOUSE W ITH THE HELP OF POSSESSORY CUM GPA ON 22.12.2007 AND DEVELOPMENT AG REEMENT WAS ENTERED INTO ON 2.8.2008. HENCE, IT CANNOT BE SAID THAT WITHIN 3 DAYS OF PURCHASE, THE ASSESSEE HAS GIVEN THE PROPERTY FOR D EVELOPMENT. THIS CONCLUSION IS FACTUALLY INCORRECT. SO FAR AS THE D ECISION OF VIZAG BENCH IN CASE OF ITO VS. SMT. ROHINI REDDY (SUPRA), THE SAME HAS BEEN DECIDED CONSIDERING THE PARTICULAR FACTS INVOLVED IN THAT C ASE. HONBLE BENCH AFTER CONSIDERING THE NATURE OF PROPERTY, HELD THAT THE S TRUCTURE STANDING OVER THE PROPERTY CANNOT BE CONSIDERED AS A RESIDENTIAL HOUS E. HOWEVER, THE FACTS AND MATERIALS IN THE PRESENT CASE CLEARLY INDICATE THAT THE PROPERTY CONCERNED IS A RESIDENTIAL HOUSE WITH ALL THE AMENITIES. ONL Y BECAUSE IT HAS ACC ROOF, IT CANNOT BE CONSIDERED TO BE A TEMPORARY STRUCTURE. THE DECISIONS RELIED UPON BY THE ASSESSEE ALSO SUPPORT SUCH VIEW. SO FAR AS AOS FINDING THAT ASSESSEE HAS PURCHASED TWO SEPARATE PROPERTIES (NEW ASSET) I S CONCERNED, THE SAME IS ALSO FOUND TO BE CONTRARY TO THE MATERIALS ON RECOR D. THE MATERIALS ON RECORD, SUCH AS SALE DEED, SITE PLAN ETC. CLEARLY D EMONSTRATE THE ASSESSEE PURCHASED A SINGLE PROPERTY, BEING A LAND WITH BUIL DING. IN ANY CASE OF THE MATTER, WE ARE OF THE VIEW THAT, CLAIM OF EXEMPTION U/S 54 IN THE IMPUGNED ASSESSMENT YEAR CANNOT BE DENIED CONSIDERING THE FA CT THAT THE ASSESSEE HAS INVESTED THE CAPITAL GAIN IN PURCHASING A PROPERTY WITH AN INTENTION TO CONSTRUCT A RESIDENTIAL HOUSE. THEREFORE, BEFORE E XPIRY OF THE PERIOD OF THREE YEARS AS ALLOWED U/S 54 FOR CONSTRUCTION, THE AO CA NNOT DENY SUCH EXEMPTION TO ASSESSEE. THEREFORE, CONSIDERING THE TOTALITY O F FACTS AND CIRCUMSTANCES IN THE LIGHT OF RATIO DECIDED IN THE DECISIONS RELIED UPON BY THE LD. A.R., WE ARE OF THE VIEW THAT ASSESSEE WILL BE ENTITLED TO EXEMP TION U/S 54 OF THE ACT. 18. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 21 ITA NO.361/VIZAG/2013: 19. GROUND NOS.5 AND 6 TO 10 ARE IDENTICAL TO SIMIL AR GROUNDS RAISED IN ITA NO.360/VIZAG/2013. FOLLOWING OUR DECISION THEREIN, WE ALLOW THE GROUNDS. IN ADDITION TO THE AFORESAID GROUNDS, LD. A.R. IN COUR SE OF HEARING RAISED ONE MORE ISSUE BY CONTENDING THAT WHILE CLAIMING EXEMPT ION U/S 54 OF THE ACT, THE ASSESSEE HAD RESTRICTED THE CLAIM TO ONE PROPER TY PURCHASED FOR RS.1,97,52,000/- ON 31.7.2008 AND DID NOT MAKE THE CLAIM IN RESPECT OF INVESTMENT MADE IN ANOTHER PROPERTY PURCHASED ON 24 .3.2008 FOR RS.61,60,000/-. THE LD. A.R. SUBMITTED THAT SINCE THE ASSESSING OFFICER HAS DEALT WITH THE RELEVANT FACTUAL DETAILS RELATING TO THE INVESTMENT MADE IN THE ABOVE TWO PROPERTIES WHICH IS AVAILABLE IN PARA 5 O F THE ASSESSMENT ORDER, THE ISSUE CAN BE DECIDED ON THE BASIS OF THE MATERI ALS ALREADY ON RECORD. THE LD. A.R. SUBMITTED THAT THE ASSESSEE UNDER A BONAFI DE BELIEF THAT THE EXEMPTION HAS TO BE RESTRICTED TO INVESTMENT IN ONE RESIDENTIAL HOUSE HAS NOT CLAIMED EXEMPTION U/S 54 OF THE ACT IN RESPECT OF B OTH THE PROPERTIES. HOWEVER, SINCE THE ISSUE HAS BEEN DECIDED BY DIFFER ENT HIGH COURTS HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIM OF EXEMPTIO N EVEN FOR MORE THAN ONE HOUSE, THE ASSESSEE IS NOW RAISING THE CLAIM. IN S UPPORT OF SUCH CONTENTION, THE LD. A.R. RELIED UPON THE FOLLOWING DECISIONS: 1. CIT VS. GITA DUGGAL (2013) 357 ITR 153 (DEL) 2. CIT VS. D. ANANDBASAPPA (2009) 309 ITR 329 (KAR) 3. CIT VS. SMT. K.G. RUKMINI AMMA (2011) 331 ITR 21 1 (KAR) 4. CIT VS. SYED ALI ADIL (2013) 352 ITR 418 (AP) 20. THE LD. D.R. HOWEVER OBJECTED TO THE CONTENTION OF THE LD. A.R. BY CONTENDING THAT FIRSTLY THE ISSUE IS BEING RAISED F OR THE FIRST TIME AND SECONDLY BECAUSE THE ASSESSEE HAS TO ESTABLISH THAT BOTH THE PROPERTIES ARE ADJACENT TO EACH OTHER. 21. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD. IT IS A FACT THAT IN PARA 5 O F THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MENTIONED THAT THE ASSESSEE H AD PURCHASED TWO ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 22 PROPERTIES, ONE BEING A PROPERTY PURCHASED FOR RS.1 ,97,52,000/- ON 31.7.2008 AND ANOTHER HOUSE PROPERTY ADMEASURING 37 2 SQ.YDS. FOR RS.61,60,000/- ON 24.3.2008. HOWEVER, IT IS ALSO A FACT THAT THE ASSESSEE NEITHER CLAIMED EXEMPTION U/S 54 OF THE ACT IN RESP ECT OF THE SECOND PROPERTY IN THE RETURN OF INCOME NOR THE ISSUE WAS EITHER RA ISED AT THE ASSESSMENT STAGE OR BEFORE THE CIT(A). THIS ISSUE IS BEING RA ISED FOR THE FIRST TIME. AS THIS IS A LEGAL CLAIM AND IT IS NOT DISPUTED THAT T HE FACTS ARE ON RECORD, WE ARE OF THE CONSIDERED OPINION THAT THIS CLAIM SHOULD BE ADMITTED BY RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F NATIONAL THERMAL POWER CORPORATION VS. CIT 229 ITR 383. IF NEITHER THE ASS ESSING OFFICER NOR THE CIT(A) HAD EXAMINED THIS ISSUE AND FACTUAL ASPECTS RELATING TO THE NATURE AND LOCATION OF BOTH THE PROPERTIES IS REQUIRED TO BE L OOKED INTO, WE COULD NOT HAVE IN THE NORMAL COURSE RECORDED A CONCLUSIVE FIN DING ON THIS ISSUE WITHOUT REMITTING IT TO THE AO. SINCE WE HAVE ALLOWED ASSE SSEES APPEAL BOTH ON THE LEGAL ISSUE AS WELL AS ON MERITS OF CLAIM OF EXEMPT ION U/S 54 AND AS THE AO HAS DISCUSSED THE FACTS IN HIS ORDER AND ONLY APPLI CATION LAW TO THOSE FACTS REMAINS, REMITTING THIS ISSUE TO THE AO WILL BE AN EXERCISE IN FUTILITY. HOWEVER, SUFFICE TO SAY THAT, AS PER THE DECISIONS RELIED UPON BY THE LD. A.R. INCLUDING THE DECISION OF THE JURISDICTIONAL HIGH C OURT IN CASE OF CIT VS. SYED ALI ADIL 352 ITR 418 EXEMPTION U/S 54/54F WOULD BE AVAILABLE EVEN IN CASE OF INVESTMENT IN MORE THAN ONE HOUSE IF THEY ARE NOT O NLY CONTIGUOUS/ADJACENT TO EACH OTHER BUT ALSO IN DIFFERENT FLOORS OF SAME BUILDING. 22. IN THE RESULT, BOTH THE APPEALS IN ITA NO.360/VI ZAG/2013 AND ITA NO. 361/VIZAG/2013 ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON FIFTH MAR14 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 5 TH MARCH, 2014 ITA NO.360/V/2013 G.V.S. RAJU, HYD., ITA NO.361/V/2013 G. BANGARAMMA, HYD. 23 COPY TO 1 GADIRAJU VENKATA SUBBA RAJU, C/O P. THIMMA RAJU, FLAT NO.301, D.NO.8-2- 4-1/C/9, JVR BANJARA HILLS AVENUE, PLOT NO.9, BANJA RA HILLS, HYDERABAD 2 GADIRAJU BANGARAMMA, C/O P. THIMMA RAJU, FLAT NO. 301, D.NO.8-2-4- 1/C/9, JVR BANJARA HILLS AVENUE, PLOT NO.9, BANJARA HILLS, HYDERABAD 3 DCIT CENTRAL CIRCLE-1, VISAKHAPATNAM 4 THE CIT (CENTRAL), HYDERABAD 5 THE CIT(A)-I, HYDERABAD 6 THE ADDL. CIT, CENTRAL RANGE, VISAKHAPATNAM 7 THE DR, ITAT, VISAKHAPATNAM. 8 GUARD FILE. BY ORDER (B. VENU GOPAL) SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM