Shri K Ravinder Reddy, Hyderabad V. Dy.CIT, Central Circle-6, Hyderabad

ITA 403/HYD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2626 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 28-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO; U MINICHANDRAN ITA NO H AN
• Keywords: Unexplained investment; Business income; Search and seizure; Charitable institution; Fair market value; Deemed dividend; Documents seized
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER S.NO. ITA NO. AY ASSESSEE RESPONDENT 1 & 2 343 & 344/H/13 2007-08 & 2008-09 DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 6, HYDERABAD. K. KRANTHI KIRAN REDDY, HYDERABAD. PAN AIGPK 4038 C 3 & 4 404 & 405/H/13 2007-08 & 2008-09 K. KRANTHI KIRAN REDDY, HYDERABAD. PAN AIGPK 4038 C DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 6, HYDERABAD 5 & 6 402 & 403/H/13 2007-08 & 2008-09 K. RAVINDER REDDY, HYDERABAD. PAN ADOPK 7300 A DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 6, HYDERABAD 7 & 8 345 & 346/H/13 2007-08 & 2008-09 DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 6, HYDERABAD K. RAVINDER REDDY, HYDERABAD. PAN ADOPK 7300 A 9 407/H/13 2008-09 K. PRIYAMVADA REDDY, HYD. PAN AGTPK 0205 A DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 6, HYDERABAD 10 348/H/13 2008-09 DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 6, HYDERABAD K. PRIYAMVADA REDDY, HYD. PAN AGTPK 0205 A ASSESSEE BY : SHRI A. SRINIVAS REVENUE BY : SHRI K.J. RAO & SMT. U. MINICHANDRAN 2 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS DATE OF HEARING 23-02-2017 DATE OF PRONOUNCEMENT -03-2017 O R D E R PER BENCH: ALL THESE APPEALS ARE PERTAINING TO THREE DIFFEREN T ASSESSES AND ARE FILED BY THE RESPECTIVE ASSESSEES AS WELL AS TH E REVENUE DIRECTED AGAINST THE ORDERS OF CIT(A) 1, HYDERABAD, FOR AS SESSMENT YEARS 2007-08 & 2008-09. AS IDENTICAL ISSUES ARE INVOLVE D IN ALL THESE APPEALS, THEY WERE CLUBBED AND HEARD TOGETHER, THER EFORE, A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. ITA NOS. 404 & 405/HYD/2013 FOR AYS 2007-08 & 2008- 09 IN CASE OF SHRI K. KRANTHI KIRAN REDDY. ITA NOS. 402 & 403/HYD/2013 FOR AY 2007-08 AND 2008 -09 IN CASE OF SHRI K. RAVINDER REDDY. ITA NO. 407/HYD/2013 IN CASE OF SMT. K. PRIYAMVADA REDDY FOR AY 2008-09. 2. THE FOLLOWING COMMON GROUNDS HAVE BEEN RAISED W ITH REGARD TO AGRICULTURAL INCOME IN ALL THE APPEALS OF THE ASSES SEES: 2. THE A.O OUGHT NOT TO HAVE TREATED THE AGRICULTUR AL INCOME AS INCOME FROM OTHER SOURCES AND BROUGHT THE SAME TO T AX. 3. THE APPELLATE COMMISSIONER OUGHT NOT TO HAVE CON FIRMED THE ORDER OF THE A.O IN TREATING THE AGRICULTURAL INCOM E AS INCOME FROM OTHER SOURCES. 4. THE APPELLATE COMMISSIONER OUGHT NOT HAVE GIVEN RELIEF TO THE EXTENT OF RS.10,50,000/- BEING AGRICULTURAL INCOME AND TAXING THE BALANCE AS INCOME FROM OTHER SOURCES. 3. TO DISPOSE OF THESE GROUNDS, WE REFER TO THE FAC TS FROM THE CASE OF SHRI K. KRANTHI KIRAN REDDY IN ITA NOS. 404 & 40 5/HYD/2013. 3 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS 3.1 AS REGARDS GROUND NOS. 2, 3 & 4, PERTAINING TO THE ADDITION OF RS. 55,11,895/- AND RS. 38,30,000/- TOWARDS AGRICUL TURAL INCOME, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SHOWN IN THE RECEIPTS AND PAYMENTS A/C, CASH RECEIPTS FROM JP AGRO FARMS DURING THE YEAR. HE NOTED THAT CASH HAD BEEN DEPOSITED INTO THE BANK A/C OF THE ASSESSEE. HOWEVER, NO EVIDENCE FOR SALE OF AGRICULT URAL PRODUCE OR AGRICULTURAL EXPENDITURE WAS FOUND IN THE OFFICE OR RESIDENTIAL PREMISES OF THE ASSESSEE DURING THE SEARCH. THE ASS ESSING OFFICER NOTED THAT IN HIS STATEMENT RECORDED U/S.132(4) OF THE ACT, SHRI K.RAVINDER REDDY, MANAGING DIRECTOR OF THE GROUP CO MPANIES, HAD STATED THAT HIS BROTHER IN LAW, DR. JITENDER REDDY IS LOOKING AFTER ALL HIS AGRICULTURAL MATTERS, AND THEREFORE, HE DID NOT HAVE ANY PAPERS OR VOUCHERS RELATING TO AGRICULTURAL OPERATIONS. ACCOR DINGLY, IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS R EQUESTED TO FILE EVIDENCE/CONFIRMATION IN RESPECT OF RECEIPTS APPEAR ING IN THE RECEIPTS AND PAYMENTS A/C, WHICH WERE CLAIMED AS CASH RECEIP TS REPRESENTING SALE OF AGRICULTURAL PRODUCE. 3.2 THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFICER THAT THE AGRICULTURAL EXPENDITURE OF RS. 20,77,771/- AND RS. 7,79,025/-, RESPECTIVELY, IN TH ESE YEARS HAD BEEN MET BY M/S. JANAPRIYA ENGINEERS SYNDICATE, A PARTNE RSHIP FIRM, WHEREIN THE ASSESSEE IS A PARTNER, DEBITING SUCH AM OUNTS TO THE CAPITAL A/C OF THE PARTNER IN THE FIRM BY WAY OF A JOURNAL ENTRY. HOWEVER, NO EVIDENCE IN SUPPORT OF AGRICULTURAL REC EIPTS AND AGRICULTURE EXPENDITURE TOWARDS TILLING, CULTIVATI ON, ETC COULD BE FILED. THEREFORE THE AO TREATED THE RECEIPTS FROM JP AGRO FARMS OF RS.55,11,895/- AND RS.38,30,000/- AS INCOME FROM OT HER SOURCES AND ADDED TO THE INCOME OF THE ASSESSEE FOR THE ASSESSM ENT YEARS 2007- 08 AND 2008-09. 4. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE A SSESSEE HAD 4 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS RECEIVED AGRICULTURAL INCOME OF RS.55,11,895/- AND RS.38,30,000/- IN THE ASSESSMENT YEARS 2007-08 AND 2008-09 DIRECTLY, WHICH WERE REFLECTED IN THE CASH FLOW STATEMENT SUBMITTED BEFO RE THE AO. THE EXPENDITURE OF RS. 20,77,771/- AND RS. 7,79,024/- T OWARDS AGRICULTURAL OPERATIONS HAD BEEN MET BY M/S JANAPRIYA ENGINEERS SYNDICATE, WHEREIN THE ASSESSEE IS A PARTNER. HE CLAIMED THAT THE AMOUNTS STATED ABOVE WERE EXTRACTED BY THE AO FROM THE CASH FLOW STATEMENTS ITSELF AND TREATED AS INCOME FROM OTHER SOURCES, EV EN WHILE THE EXPENDITURE WAS IGNORED, HOLDING THAT NO DETAILS WE RE FURNISHED. 4.1 THE AR OF THE ASSESSEE SUBMITTED THAT IN THE AS SESSEES OWN CASE FOR OTHER AYS, IN RESPECT OF SIMILAR ADDITIONS MADE IN THE ORDER U/S 143(3) RWS 153A, THE CIT(A), IN HIS COMMON ORDE R, DATED 21/02/2012, HAS DIRECTED THE AO TO FOLLOW THE SAME METHODOLOGY OF TREATING A PORTION OF AGRICULTURAL INCOME AS NON AG RICULTURAL INCOME. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) FOLLOWING THE DECISION OF HIS PREDECESSOR IN ASSESS EES OWN CASE HELD AS FOLLOWS: 8.3 DESPITE THE FACT THAT THE METHODOLOGY STATED AB OVE IS NOT ACCEPTABLE, IT CANNOT BE DENIED THAT THE ASSESSEE H AS NOT BEEN FOUND HAVING SOLD ANY OF THE LAND HOLDINGS IN THESE YEARS. IT CANNOT BE DENIED THAT THE LANDS OWNED BY THE TWO FA RMS HAVE AGRICULTURAL POTENTIAL. CONSIDERING THE SET UP AND THE POTENTIAL, IT IS ALSO LOGICAL TO ACCEPT THAT AGRICULTURAL OPERATI ONS WERE CARRIED THEREON. THEREFORE, A PART OF THE AGRICULTURAL INCO ME SHOWN BY THE ASSESSEE IS INDEED TO BE CONSIDERED AS GENUINE. IN THIS REGARD, IT IS SEEN THAT THE HON'BLE JURISDICTIONAL INCOME-TAX APPELLATE TRIBUNAL IN THE CASE OF MS. T. KALPANA RE DDY & ANR. (ITA NO.469/HYDJ2009) HAVE OPINED THAT NORMALLY 1 A CRE OF LAND CULTIVATED WITH MANGO TREES WOULD FETCH RS.15,000/- - PER ACRE IN A YEAR. THEY HAVE ALSO HELD THAT IT IS ALSO COMMON TO FETCH RS. 10,000/- PER ACRE WITH REGARD TO PADDY CULTIVATION. ACCORDINGLY, IN TERMS OF THE SAID JUDICIAL PRONOUNCEMENT, THE MA XIMUM INCOME PER ACRE COULD BE RS.15,000/- PER YEAR. HOWE VER, CONSIDERING THE FACT THAT THE AGRICULTURAL LANDS OF THE ASSESSEE ARE ORGANIZED INTO AGRICULTURAL FARMS, WHEREIN AGRI CULTURE CAN BE CONDUCTED IN A MORE SCIENTIFIC AND PRODUCTIVE MANNE R, BY EVEN USING MULTIPLE CROPPING, THE AVERAGE YIELD PER ACRE FROM THE SAID 5 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS FARMS CAN BE TAKEN AT RS.20,000/-. AT THE SAID RATE , THE TOTAL INCOME FROM 210 ACRES OF LAND COMES TO RS. 42,00,00 0/- (210 X 20,000). ASSUMING THAT THE ASSESSEE AND THREE OTHER S HAD EQUAL SHARE OF LAND HOLDING, THE ASSESSEE'S SHARE COMES T O RS. 10,50,000/-. ACCORDINGLY, AGRICULTURAL INCOME TO T HE EXTENT OF RS. 10,50,000/- IN EACH YEAR IS ACCEPTED, WHILE THE REM AINING INCOME SHOWN OF RS. 44,61,895/- (55,11,895-10,50,000) AND RS.27,80,000/- (38,30,000-10,50,000) IN THE ASSESS MENT YEARS 2007-08 AND 2008-09, RESPECTIVELY, IS CONSIDERED IN COME FROM OTHER SOURCES. THE GROUNDS IN THIS REGARD ARE THERE FORE DECIDED PARTLY IN FAVOUR OF THE ASSESSEE. 6. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED APPEAL BEFORE US. LD. AR SUBMITTED THAT THE ISSUE IN DISPU TE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AYS 2002-03 TO 2006-07. 7. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITI ES. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. WE OBSERVED THAT THE ASSESSEE HAS DISCLO SED THE AGRICULTURAL INCOME IN EARLIER YEARS AND THE ASSESS MENTS REACHED FINALITY ALSO AS UNDER: AY AGR. INCOME DECLARED BY THE ASSESSEE ASSESSED BY THE AO AS INCOME FROM OTHER SOURCES SUSTAINED BY THE CIT(A) AS INCOME FROM OTHER SOURCES ASSESSEE GOT RELIEF 2002- 03 27,32,717 27,32,717 3,85,000 23,47,717 2003- 04 33,49,392 33,49,392 - 33,49,392 2004- 05 36,90,044 36,90,044 - 36,90,044 2005- 06 36,48,223 36,48,223 5,11,000 31,37,223 2006- 07 32,97,322 32,97,322 4,65,000 28,32,322 NOTE: AO COMPLETED ASSESSMENTS FOR AY 2003-04 & 200 4-05 U/S 143(3) 6 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS EXCESSIVE INCOME SUSTAINED BY THE CIT(A) COMES TO A N AVERAGE OF 14% OUT OF AGRICULTURAL INCOME DECLARED BY THE A SSESSEE. IN THE CURRENT APPEALS UNDER CONSIDERATION 2007- 08 55,11,895 55,11,895 44,61,895 10,50,000 2008- 09 38,30,000 38,30,000 27,80,000 10,50,000 AS PER THE ABOVE STATEMENT, IN THE AYS 2003-04 AND 2004-05, ASSESSEE HAS DISCLOSED/CLAIMED AGRICULTURAL INCOME WHICH WAS VERIFIED BY THE AO AND DISALLOWED CERTAIN PORTION A S EXCESSIVE. FOLLOWING THE ABOVE FINDINGS, THE CIT(A) AND COORDI NATE BENCH HAS DISALLOWED CERTAIN PORTION AS EXCESSIVE IN OTHER AS SESSMENTS. SIMILARLY IN THE AYS UNDER CONSIDERATION I.E. 2007- 08 AND 2008-09, BY FOLLOWING THE EARLIER DIRECTION OF THE COORDINATE B ENCH, WE SUGGEST THAT SIMILAR DISALLOWANCE CAN BE APPLIED FOR THE SA KE OF CONSISTENCY. OVER THE YEARS, ASSESSEE HAD DISCLOSED SIMILAR INCO ME CONSISTENTLY WHICH WAS ACCEPTED BY THE DEPARTMENT. THE LD. CIT(A ) HAS BROUGHT IN FINDINGS OF ITAT IN THE CASE OF T. KALPANA REDDY & ANR. WE CANNOT APPLY THE SAME IN THE GIVEN CASE BY ASSUMING THAT T HE AGRICULTURAL YIELD WILL BE SIMILAR IN ALL THE CASES. THE INCOME FROM AGRICULTURE CANNOT BE PRESUMED WITHOUT HAVING DATA OR SCIENTIFI C STUDY. THERE ARE CASH CROPS AND NON CASH CROPS INVOLVED. FOR THE SAK E OF CONSISTENCY, WE DIRECT THE AO TO APPLY THE EARLIER DECISION OF I TAT AND DISALLOW THE EXCESS CLAIM TO THE EXTENT OF 14%. 9. THE FOLLOWING COMMON GROUND RAISED IN ALL THE AS SESEES APPEALS RELATING TO DEEMED DIVIDEND. 5. THE A.O OUGHT NOT TO HAVE TREATED THE AMOUNTS RE CEIVED FROM THE COMPANIES IN WHICH THE ASSESSEE IS A SHAREHOLDE R AS DEEMED DIVIDEND, IN SPITE OF THE FACT THAT THE APPE LLATE COMMISSIONER HAS GIVEN A DIRECTION TO THE A.O TO DE CIDE THE MATTER AFTER VERIFICATION. 7 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS 10. THE FACTS AS TAKEN FROM SHRI K. KRANTHI REDDY A RE THAT IN THE ASSESSMENT YEAR 2007-08, THE ASSESSING OFFICER NOTI CED THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS.10 LAKHS AS A DVANCE/LOAN FROM ENGINEERS REDDY HOMES PVT LTD. THE ASSESSEE HA D ALSO RECEIVED LOAN OF RS.50 LAKHS FROM ENGINEERS SYNDICA TE INDIA PVT LTD (ESIPL). IT WAS NOTED THAT THE ASSESSEE HAD TO RECE IVE LOAN OF RS.9,80,000/- FROM ESIPL, WHEREAS HE HAD RECEIVED R S.50 LAKHS. THEREFORE, THE ADVANCE/LOAN GIVEN BY THE SAID COMPA NY TO THE ASSESSEE DURING THE YEAR 2006-07 CAME TO RS. 40,20, 000/-. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS HA VING MORE THAN 20% SHAREHOLDING IN THE ABOVE COMPANIES AND THAT BO TH OF THEM WERE HAVING ADEQUATE RESERVES TO ADVANCE .THE SAID LOANS TO THE ASSESSEE. HE THEREFORE PROPOSED TO TREAT THE SAME AS DEEMED D IVIDEND U/S.2(22)(E) OF THE ACT. 10.1 IT WAS SUBMITTED BEFORE HIM THAT THE AMOUNTS H AD BEEN PAID BY THE COMPANIES ON ACCOUNT OF PAYMENTS TO BE MADE TO THE LANDLORDS ON BEHALF OF THE COMPANY FOR PURCHASE OF LANDS. BUT THE TRANSACTIONS DID NOT MATERIALIZE AND THE AMOUNTS WERE RETURNED B ACK BY THE ASSESSEE TO THE COMPANY. 10.2 ON A CONSIDERATION OF THE ABOVE EXPLANATION, H OWEVER, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO SUBSTANTIATE THE SAME. ACCORDINGLY, INV OKING THE PROVISIONS OF SEC.2(22)(E), THE AMOUNTS OF RS.10 LA KHS AND RS.40,20,000/- FROM THE SAID COMPANIES WERE TREATED AS DEEMED DIVIDEND, LEADING TO ADDITION OF RS. 50,20,000/- IN THE ASSESSMENT YEAR 2007 -08. 10.3 IN THE ASSESSMENT YEAR 2008-09, THE ASSESSING OFFICER NOTICED FROM THE DETAILS THAT AN ADVANCE OF RS.17,23,033/- HAD BEEN RECEIVED BY THE ASSESSEE FROM ESIPL. IT WAS SEEN THAT THOSE WERE PAYMENTS MADE BY ESIPL ON BEHALF OF THE ASSESSEE TOWARDS HIS PERSONAL 8 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS EXPENDITURE AND DEBITED TO HIS A/C. SINCE THE ASSES SEE WAS HOLDING MORE THAN 10% SHARES IN THE SAID COMPANY AND THE CO MPANY HAD SUFFICIENT RESERVES AS ON 31-3-2008, HE PROPOSED TO TREAT THE SAME AS DEEMED DIVIDEND. AS NO EXPLANATION WAS SUBMITTED, T HE AMOUNT OF RS. 17,23,033/- WAS TREATED AS DEEMED DIVIDEND AND ADDED IN AY 2008-09. 11. BEFORE THE CIT(A), IT WAS SUBMITTED THAT ESIPL MAINTAINS ACCOUNTS BOTH AT THE HYDERABAD HEAD OFFICE AND BANG ALORE BRANCH OFFICE. ASSESSEE CONTENDED THAT IN AY 2007-08, THE AO CONSIDERED THE PAYMENT OF RS. 50 LAKHS BY ESIPL (HYD.) SHOWN O N THE RECEIPTS SIDE OF THE RECEIPTS AND PAYMENTS STATEMENT OF THE ASSESSEE, BUT IGNORED RS.64 LAKHS PAID BY THE ASSESSEE TO THE COM PANY'S BANGALORE BRANCH. IT WAS CLAIMED THAT THE COMPANY B EING A SINGLE ENTITY, THERE WAS NO EFFECTIVE DEBIT. BESIDES, IT W AS CLAIMED THAT FUNDS HAD FLOWN FROM/THROUGH THE ASSESSEE TOWARDS THE BUS INESS NEEDS OF THE COMPANY IN WHICH HE HAS SUBSTANTIAL INTEREST AN D USED FOR THE PURPOSE OF BUSINESS OF THE COMPANY ITSELF. 11.1 IN RESPECT OF THE ASSESSMENT YEAR 2008-09 ALS O, THE AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ASSESS ING OFFICER CONSIDERED DEBITS ALONE OF RS.17.23 LAKHS AND IGNOR ED THE CREDITS, INCLUDING THE OPENING CREDIT BALANCE. REFERRING TO THE RECEIPTS AND PAYMENTS STATEMENT, HE SUBMITTED THAT ON THE RECEIP TS SIDE, RS.2.20 LAKHS WAS SHOWN AS RECEIVED FROM ESIPL (HYD), THE B ALANCE BEING DEBITS BY WAY OF JOURNAL ENTRIES. HE STATED THAT TH E AMOUNTS SPENT BY THE ASSESSEE FOR THE PURPOSE OF BANGALORE WORKS WER E ACCOUNTED FOR IN THE BRANCH BOOKS, DULY CREDITING HIS A/C AND AMO UNTS PAID TO THE ASSESSEE FROM THE HEAD OFFICE WERE DEBITED TO HIS A / C IN THE BOOKS OF HO. IT WAS ARGUED THAT THE COMPANY BEING A SINGL E ENTITY, IN ESSENCE, THERE WAS NO EFFECTIVE DEBIT. THE AUTHORIS ED REPRESENTATIVE POINTED OUT THAT AS ON 31-3-2007, THERE WAS DEBIT B ALANCE OF RS.40,20,000/- IN THE HO BOOKS AND A CREDIT BALANCE OF RS71,21,225/- 9 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS AT BANGALORE, REFLECTING A NET CREDIT BALANCE OF RS .31,01,225/-. ACCORDINGLY, IT WAS SUBMITTED THAT THE OPENING BALA NCE ITSELF BEING RS. 31,01,225/- AND THE TOTAL DEBITS BEING RS.17,23 ,033/- ONLY, THE ASSESSEE HAS NEVER RECEIVED ANY FUNDS FROM THE COMP ANY. IT WAS FURTHER CONTENDED THAT AS PER THE A/C COPY, THE FUN DS HAVE FLOWN FROM/THROUGH THE ASSESSEE TOWARDS THE BUSINESS NEED S OF THE COMPANY WHEREIN HE HAS SUBSTANTIAL INTEREST AND AS SUCH USED FOR THE PURPOSE OF BUSINESS OF THE COMPANY. ACCORDINGLY, HE CLAIMED THAT THE PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE. 12. LD. CIT(A) MADE THE FOLLOWING OBSERVATIONS IN HIS ORDER. AS REGARDS THE ADVANCE/LOAN OF RS.10 LAKHS FROM M/S.EN GINEERS REDDY HOMES PVT. LTD., FROM THE COPY OF ACCOUNTS SUBMITTE D BY THE ASSESSEE, THE CIT(A) OBSERVED THAT THE ASSESSEE HA D AN OPENING DEBIT BALANCE OF RS. 5 LAKHS AS ON 1-4-2006. SUBSEQ UENTLY, HE FURTHER RECEIVED RS.10 LAKHS FROM THE SAID COMPANY BY CHEQU E ON 9-6-2006. THE CLOSING DEBIT BALANCE OF THE SAID ACCOUNT AT TH E YEAR END WAS RS.15 LAKHS. UNDER THE CIRCUMSTANCES, NO INFIRMITY CAN BE SAID TO EXIST IN THE TREATMENT OF THE ADVANCE/LOAN OF RS.10 LAKHS FROM THE SAID COMPANY DURING THE YEAR AS DEEMED DIVIDEND IN THE ASST. YEAR 2007 -08. 12.1 AS REGARDS THE AMOUNTS RECEIVED FROM M/S. ENGI NEERS SYNDICATE INDIA PVT. LTD,(ESIPL), THE CIT(A) OBSERVED AS FOLL OWS: IT IS AN ESTABLISHED POSITION OF LAW THAT WITHDRAWAL OVER AN D ABOVE CREDIT BALANCE, WHICH A SHAREHOLDER/DIRECTOR HAS WITH THE COMPANY, CAN ONLY BE TREATED AS THE 'DEEMED DIVIDEND'. RELIANCE IN TH IS REGARD CAN BE PLACED ON THE DECISION IN THE CASE OF C.I.T. VS. P. SARADA 154 I.T.R. 387 (MAD). IN THE CASE OF C.I.T. VS. P.K. BADYANI ( 76 I.T.R. 369) (BOM) ALSO, IT HAS BEEN EXPLAINED THAT IF THE SHARE HOLDER HAS A CURRENT A/C WITH A COMPANY, THE POSITION REGARDING EACH DEBIT WILL HAVE TO BE CONSIDERED INDIVIDUALLY, AS IT MAY OR MA Y NOT BE ALONE. IN SUCH A CASE, THE DEBIT BALANCE OF THE SHAREHOLDER W ITH THE COMPANY AT 10 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS ANY POINT OF TIME CANNOT BE TAKEN TO REPRESENT AN A DVANCE/LOAN BY THE COMPANY; NOR CAN THE AMOUNT AT THE PREVIOUS YEAR BE ALONE TAKEN AS LOAN. ACCORDINGLY, THE STAND TAKEN BY THE REPRESENT ATIVE OF THE ASSESSEE IS INDEED IN CONSONANCE WITH THE LEGAL POS ITION. HOWEVER, ON GOING THROUGH THE STATEMENT OF ACCOUNT OF THE AS SESSEE WITH ESIPL, BANGALORE, IT IS SEEN THAT WHILE THERE WAS A N OPENING CREDIT BALANCE OF RS.7,31,211/-, THE SUBSEQUENT CREDITS HA VE COME IN CASH ONLY, RESULTING IN THE CLOSING CREDIT BALANCE OF RS .71,21,225/-. ACCORDINGLY, EXCEPT FOR THE ENTRY WITH REGARD TO TH E REMUNERATION RECEIVED BY HIM FROM THE COMPANY, THE CONTENTION OF PAYMENT OF RS.64 LAKHS TO THE BANGALORE BRANCH IS NOT VERIFIAB LE. ON THE OTHER HAND, THE HYDERABAD ACCOUNT CLEARLY SHOWS THAT AS A GAINST THE OPENING CREDIT BALANCE OF RS.9,80,000/-, THE ASSESS EE WAS PAID RS.50 LAKHS BY CHEQUE ON 25/09/2006. LIKEWISE, IN THE LED GER ACCOUNT FOR THE FINANCIAL YEAR 2007-08, THOUGH SEVERAL PERSONAL EXPENSES OF THE ASSESSEE HAVE BEEN DEBITED ON ACCOUNT OF PAYMENT TH EREOF BY THE COMPANY, THE CREDIT ENTRIES SHOWN THEREIN ARE MOSTL Y UNVERIFIABLE, AS THE MODE OF PAYMENT IS CASH OR JOURNAL ENTRIES. THE REFORE, IN THE ABSENCE OF EVIDENCE REGARDING GENUINENESS OF CREDIT BALANCE CLAIMED AS APPEARING IN THE BANGALORE ACCOUNT, THERE IS IND EED PAYMENT OF LOAN/ADVANCE TO THE ASSESSEE BY THE SAID COMPANY DU RING THE YEAR, WHICH IS REQUIRED TO BE BROUGHT TO TAX AS DEEMED DI VIDEND IN THE ASST.YEARS 2007-08 & 2008-09. HOWEVER, CONSIDERING THE FACT THAT BOTH BANGALORE AND HYDERABAD OFFICES ARE PART OF TH E SAME ENTITY, THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE ACCOUNT COPIES OF THE ASSESSEE IN BOTH THE OFFICES OF ESIPL AND ARRIVE AT THE NET DEBIT BALANCE, AFTER CONSIDERING VERIFIABLE ENTRIES OTHER THAN CASH, AND TREAT THE SAME AS THE DEEMED DIVIDEND IN THE ASSESSMENT Y EARS 2007-08 AND 2008-09. THE GROUNDS RAISED IN THIS REGARD ARE, THEREFORE, DECIDED PARTLY IN FAVOUR OF THE ASSESSEE, SUBJECT T O SUCH VERIFICATION. 13. THE LD. AR SUBMITTED THAT THE ISSUE UNDER CONSI DERATION IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS 11 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2002-03 TO 2006-07 IN ITA NOS. 684 TO 688/H/12 VIDE ORDER DATED 30/11/2016 WH EREIN THE COORDINATE BENCH DISMISSED THE GROUND RAISED BY THE REVENUE OBSERVING AS UNDER: 30. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL FACTS ON RECORD. THERE IS NO DISPUTE WITH REGARD TO APPLICATION OF PROVISIONS OF SECTIONS 2(22)(E) IN T HIS CASE. CIT(A) HAS ADJUDICATED THAT THERE EXISTS CREDIT BALANCE IN THE BOOKS OF ACCOUNT OF THE RESPECTIVE COMPANY, IN FAVOUR OF THE ASSESSEE, IT HAS TO BE ADJUSTED TO ARRIVE AT THE NET AMOUNT, WHI CH CAN BE TREATED AS DEEMED DIVIDEND. THE MUTE QUESTION BEFOR E US IS WHETHER THE PAYMENT ITSELF WILL AMOUNT TO DEEMED DI VIDEND OR THERE CAN BE ROOM FOR MAKING ANY ADJUSTMENT AS ADJU DICATED BY THE CIT(A). AS PER THE PROVISIONS OF SECTION 2(22)( E) ANY PAYMENT BY A COMPANY, OF ANY SUM, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL O WNER OF SHARES, HOLDING NOT LESS THAN 10% OF THE VOTING POW ER. AT THE SAME TIME IN EXCLUSION CLAUSE (II), IT EXCLUDES ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER BY A COMPANY IN THE ORDI NARY COURSE OF ITS BUSINESS. THE MEANING ORDINARY COURSE CAN BE BUSINESS OF FINANCING OR COULD BE IN THE ORDINARY RUNNING OF TH E BUSINESS SAY DIRECTORS MAY BE DEALING ON BEHALF OF COMPANY, IN T HAT PROCESS THEY WILL TAKE ADVANCE FOR THAT PURPOSE. THESE KIND OF ADVANCES AND RELATING CREDIT IN THEIR RESPECTIVE ACCOUNT SHO ULD BE EXCLUDED. LD. AO IS NOT TRACING THE ACTUAL ADVANCE PAYMENT TO DIRECTOR RATHER, HE TAKES ONLY THE DEBIT BALANCES W ITHOUT CONSIDERING THE CREDIT BALANCES. WHEN THE DIRECTOR IS REPRESENTING AND HABITUALLY TAKING MONEY AND RETURN ING IT, AT THIS SITUATION, ONE HAS TO TAKE THE NET BALANCE. THE MUT E POINT TO CONSIDER IN DEALING WITH THE DEEMED DIVIDEND IS, WH ETHER THE DIRECTOR TAKES THE UNDUE ADVANTAGE BY TAKING ADVANC E FROM THE COMPANY. IN THE GIVEN CASE, THERE IS NO SPECIFIC WI THDRAWAL BY THE DIRECTOR AS ADVANCES. IT IS ACCUMULATION OF SMA LL ADVANCES, IN THIS CASE, THE DEPARTMENT HAS TO CONSIDER THE NET A DVANCE TAKEN BY THE DIRECTOR. HENCE, THE FINDINGS OF THE CIT(A) IN THIS CASE IS FOUND TO BE PROPER. THE GROUND RAISED BY THE DEPART MENT IS DISMISSED. 30.1 MOREOVER, THE SPECIFIC ADVANCE TAKEN BY THE DI RECTOR, THEN ONLY THE CREDIT ENTRY IN THE BOOKS CAN BE ADDED AS DEEMED DIVIDEND THAT IN THE PRESENT CASE THERE IS NO SPECI FIC CREDIT FOR LOAN. HENCE, ONLY THE NET BALANCE ALONE CAN BE TREA TED AS DEEMED DIVIDEND. 14. THE LD. DR, ON THE OTHER HAND, NEITHER CONTROVE RTED NOR BROUGHT ANY CONTRARY DECISION IN THIS REGARD. 12 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS 15. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. AS THE ISSUE IN THE EARLIER YEARS IS IDE NTICAL TO THAT OF ISSUE IN HAND, RESPECTFULLY FOLLOWING THE DECISION OF COO RDINATE BENCH (WHEREIN BOTH THE MEMBERS ARE SIGNATORIES), WE ALLO W THIS GROUND OF APPEAL OF THE ASSESSEES. WITH REGARD TO RENTAL INCOME 16. IN THE CASE OF K. KRANTHI KIRAN REDDY, THE FOLL OWING GROUNDS HAVE BEEN RAISED: 6. THE A.O ERRED AND ACTED AGAINST LAW AND FACTS OF THE CASE IN ESTIMATING RENTS THAT HAVE NEVER BEEN EARNED BY THE ASSESSEE AND BRINGING THE SAME TO TAX ON AN ESTIMATED BASIS. 7. THE APPELLATE COMMISSIONER ERRED IN CONFIRMING T HE ABOVE ESTIMATION OF RENTS MADE BY THE A.O. 16.1 IN THE CASE OF SHRI K. RAVINDER REDDY, THE FOL LOWING GROUNDS HAVE BEEN RAISED: 6. THE A.O ERRED AND ACTED AGAINST LAW AND FACTS OF THE CASE IN ESTIMATING RENTS THAT HAVE NEVER BEEN EARNED BY THE ASSESSEE AND BRINGING THE SAME TO TAX ON AN ESTIMATED BASIS IN RESPECT OF THE HIMAYATNAGAR PROPERTY AMOUNTING TO RS.3,37,554 /- 7. THE A.O ERRED AND ACTED AGAINST LAW AND FACTS OF THE CASE IN ESTIMATING RENTS THAT HAVE NEVER BEEN EARNED BY TH E ASSESSEE AND BRINGING THE SAME TO TAX ON AN ESTIMATED BASIS IN RESPECT OF THE NAGOLE PROPERTY AMOUNTING TO RS.3,48,6001- 8. THE A.O ERRED AND ACTED AGAINST LAW AND FACTS OF THE CASE IN ESTIMATING RENTS THAT HAVE NEVER BEEN EARNED BY THE ASSESSEE AND BRINGING THE SAME TO TAX ON AN ESTIMATED BASIS IN RESPECT OF THE MARUTHI NAGAR PROPERTY AMOUNTING TO RS.5,28,301 /- 9. THE A.O ERRED AND ACTED AGAINST LAW AND FACTS OF THE CASE IN ESTIMATING RENTS THAT HAVE NEVER BEEN EARNED BY THE ASSESSEE AND BRINGING THE SAME TO TAX ON AN ESTIMATED BASIS IN RESPECT OF THE BANGALORE PROPERTY AMOUNTING TO RS. 21,98,607/- . 16.2 IN THE CASE OF K. PRAYAMVADA, THE FOLLOWING GR OUNDS HAVE BEEN RAISED: 13 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS GROUND NOS. 6, 7, 8 & 9 ARE PERTAINING TO THE ADDIT ION IN RESPECT OF HIMAYATNAGAR PROPERTY AMOUNTING TO RS. 6,18,358/ -, RS. 4,70,400/- IN RESPECT OF NAGOLE PROPERTY, ADDITION OF RS. 6,79,168/- IN RESPECT OF MARUTHI NAGAR PROPERTY AND ADDITION OF RS. 10,75,200/- IN RESPECT OF BANGALORE PROPERTY. 17. THE FACTS AS TAKEN FROM SHRI K. KRANTHI KIRAN R EDDY ARE THAT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD S HOWN RENT RECEIVED OF RS.4,74,680/- IN RESPECT OF SCHOOL BUIL DING LOCATED AT MIYAPUR, HYDERABAD AND OF RS. 4,02,680/-, IN RESPEC T OF SCHOOL BUILDING LOCATED AT ATTAPUR, HYDERABAD IN THE SAID TWO YEARS. THE ASSESSEE'S AUTHORIZED REPRESENTATIVE STATED THAT NO RENTAL AGREEMENTS HAD BEEN ENTERED INTO IN RESPECT OF ANY OF THE SCHOOL BUILDINGS. CONSIDERING THE FACT THAT THE AREAS OF T HE SCHOOL BUILDINGS WERE 22000 SQUARE FEET AND 33000 SQUARE FEET RESPEC TIVELY, THE ASSESSING OFFICER NOTED THAT THE RATE COMES TO RS. 1.78 AND RS. 1.11 PER SQUARE FOOT, PER MONTH ONLY, RESPECTIVELY, WHIC H WAS CONSIDERED BY THE AO AS LOW. THE ASSESSEE EXPLAINED THAT BOTH THE SCHOOLS WERE BEING RUN BY JANAPRIYA GROUP OF COMPANIES, AND HENC E THE RENT CHARGED WAS LOW, AS THE PREMISES WERE GIVEN FOR EDU CATIONAL AND CHARITABLE PURPOSES. HOWEVER, APPLYING THE PROVISIO NS OF SEC.23, THE ASSESSING OFFICER ADOPTED THE RATE OF RS.10/- PER S QUARE FOOT PER MONTH, WHEREBY MONTHLY RENT FOR BOTH THE BUILDINGS CAME TO RS.5,20,000/-. ACCORDINGLY, THE EXCESS OF TOTAL ANN UAL RENT RS.62,40,000/-, OVER THE RENT ADMITTED OF RS.8,77,3 60/- IN THESE YEARS, WAS ADDED AFTER ALLOWING STATUTORY DEDUCTION U/S.24, LEADING TO ADDITION OF RS.37,53,848/- IN BOTH THE YEARS. 18. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFER RED APPEAL BEFORE THE CIT(A). DURING THE COURSE OF APPELLATE PROCEEDI NGS, THE AUTHORISED REPRESENTATIVE REITERATED THE ABOVE CONT ENTIONS AND FURTHER SUBMITTED THAT TO CALCULATE THE ANNUAL VALU E UNDER SECTION 23, THE RIGORS OF SECTION 22 MUST BE FULFILLED. HE SUBM ITTED THAT SECTION 22 READS THAT THE ANNUAL VALUE OF A PROPERTY CONSISTIN G OF ANY BUILDINGS, 14 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER, OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON B Y HIM THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME TAX, SHALL BE CHA RGEABLE TO INCOME TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. HE SUBMITTED THAT AS PER THE ABOVE DEFINITION OF SECTION 22, THAT POR TION OF PROPERTY OCCUPIED FOR THE PURPOSES' OF ANY BUSINESS OR PROFE SSION CARRIED ON SHALL NOT BE CHARGEABLE TO INCOME TAX. IT WAS STATE D THAT THE ASSESSEE IS A PARTNER IN THE FIRMS WHICH ARE CARRYING ON BUS INESS FROM THE SAID PREMISES, AND THIS IS EVIDENT FROM THE ORDER OF THE AO, THIS BEING THE CASE, THEN THERE IS NO QUESTION OF THE SAME BEING C HARGEABLE TO INCOME TAX UNDER SECTION 22 ITSELF. THE AUTHORISED REPRESENTATIVE AVERRED THAT IF SECTION 22, WHICH IS THE CHARGING S ECTION, IS NOT APPLICABLE THEN THE CALCULATION OF ANNUAL VALUE UND ER SECTION 23 DOES ARISE AT ALL. ACCORDINGLY, IT WAS CLAIMED THAT THE ACTION OF THE AO IN DETERMINING THE ANNUAL VALUE AND PROCEEDING TO TAX THE PROPERTY ON A HIGHER RENT IS NOT TENABLE IN LAW. THE AUTHORISED R EPRESENTATIVE OF THE ASSESSEE ALSO RELIED ON THE DECISION IN THE CAS E OF CIT VS. H.S. SINGHAL AND SONS 253 ITR 653 (DELHI). 18.1 WITHOUT PREJUDICE TO THE ABOVE SUBMISSION, THE AUTHORISED REPRESENTATIVE SUBMITTED THAT THE METHODOLOGY OF TH E A.O IN DETERMINING THE RENT AT RS.10 PER SQUARE FOOT IS FL AWED. SECTION 23 (L)(A) DOES NOT GIVE THE AO UNFETTERED POWERS TO DE TERMINE THE FAIR MARKET VALUE. THE A.O HAS TO KEEP MANY FACTORS IN M IND WHICH DEFLATE OR INFLATE THE RENTAL VALUE. THIS BEING THE CASE TH E AO HAS NOT GIVEN ANY COGENT REASON AS TO WHY HE HAS ADOPTED RS.10/-. HE HAS NOT GIVEN ANY COMPARABLE INSTANCES IN THE NEARBY AREA N OR HAS HE MADE AN ATTEMPT TO FIND THE VALUE AS PER THE MUNICIPAL R ATES. HE HAS JUST ADOPTED THE VALUE AT RS.10 AND COME TO A CONCLUSION THAT THE RATE IS REASONABLE. IF AT ALL THE VALUE HAS TO BE ADOPTED U NDER SECTION 23(1) OF THE I.T. ACT, THEN IT HAS TO BE ON A SCIENTIFIC BASIS AND NOT ON THE WHIMS OF THE ASSESSING OFFICER AND THAT IT HAS BEEN LAID DOWN IN A 15 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS NUMBER OF CASES THAT THE ANNUAL RATEABLE VALUE UNDE R THE LOCAL MUNICIPAL LAWS WILL BE A GOOD INDICATOR FOR DETERMI NING THE ANNUAL VALUE. IT WAS THEREFORE SUBMITTED THAT THE ADDITION S MADE ON ACCOUNT OF DETERMINING THE ANNUAL VALUE BE DELETED AS THE A SSESSEE IS OCCUPYING THE SAME FOR HIS BUSINESS PURPOSES, OR AL TERNATIVELY, THE ANNUAL VALUE HAS TO BE DETERMINED AS PER THE PROVIS IONS OF LAW AND NOT AS PER THE ESTIMATE OF THE AO. 19. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) FOLLOWING THE DECISION OF HIS PREDECESSOR IN ASSESS EES OWN CASE, OBSERVED AS UNDER: 11.1 CONSIDERING THE FACTS OF THE CASE AND THE DEC ISION OF THE HON'BLE HIGH COURT OF CALCUTTA CITED BY MY PREDECES SOR, I ALSO HOLD THAT THE ASSESSEE'S CASE DOES NOT FALL UNDER T HE EXEMPTED CATEGORY OF SEC.22, AS THE BUSINESS IS NOT RUN BY T HE ASSESSEE ITSELF BUT BY A SOCIETY CONSISTING OF 5 MEMBERS. ON THE OTHER HAND, IT CANNOT BE DISPUTED THAT WHILE THE RENTAL S HOWN BY THE ASSESSEE IN THESE YEARS IS ALSO ABYSMALLY LOW, EVEN THE ASSESSING OFFICER HAS NOT CITED ANY COMPARABLE INST ANCE OF THE LOCALITY FOR JUSTIFYING THE RATE OF RS.10/- PER SQU ARE FOOT AND ARRIVING AT THE FAIR RENTAL VALUE IN VIEW OF THE MA RKET CONDITIONS. IN TANDEM WITH THE VIEW TAKEN BY MY PREDECESSOR IN EARLIER YEARS THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO RE- COMPUTE THE RENTAL INCOME FROM THESE PROPERTIES IN BOTH THE ASS ESSMENT YEARS 2007-08 AND 2008-.09, AFTER CONSIDERING 10% A PPRECIATION OF RENT IN EACH YEAR OVER THE RENTAL ARRIVED AT FOR THE ASSESSMENT YEAR 2006-07 AFTER VERIFICATION OF COMPARABLE CASES , AS DIRECTED IN THE EARLIER APPELLATE ORDER. THIS GROUND IS THER EFORE DECIDED PARTLY IN FAVOUR OF THE ASSESSEE, SUBJECT TO SUCH V ERIFICATION AND RECOMPUTATION. 20. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE S AID GROUNDS HAVE BEEN DECIDED AGAINST THE ASSESSEE BY THE COO RDINATE BENCH IN ASSESSEES OWN CASES FOR AYS 2002-03 TO 2006-07. 21. THE LD. DR RELIED ON THE ORDERS OF REVENUE AUTH ORITIES. 16 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS 22. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE COORDINATE BENCH CONSIDERED THIS ISS UE IN DETAIL AND HELD AGAINST THE ASSESSEE AS BELOW: 8.5 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL FACTS ON RECORD. ASSESSEE HAS LET OUT THIS BUILDING AT NAGOLE ON RENT TO AN EDUCATION SOCIETY IN WHICH ASS ESSEE IS A MANAGING TRUSTEE. HOWEVER, IT WILL NOT AMOUNT TO RU NNING OF BUSINESS BY ASSESSEE ON SUCH PROPERTY. AS PER THE P ROVISIONS OF SECTION 22, THE CONDITION TO GET EXEMPTION IS THAT THE PROPERTY SHOULD BE IN OCCUPATION OF THE OWNER FOR THE PURPOS E OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM, THE PROFI TS OF WHICH ARE CHARGEABLE TO INCOME TAX. IN THE PRESENT CASE, RUNN ING A SCHOOL IS NOT THE BUSINESS OF THE ASSESSEE NOR THE INCOM E OF THE EDUCATIONAL SOCIETY IS CHARGEABLE TO INCOME TAX, AT LEAST, IT HAS NOT BROUGHT ON RECORD TO SHOW THAT THE ABOVE BUSINE SS PROFITS ARE CHARGEABLE TO INCOME-TAX. IN OUR CONSIDERED VIEW, T HE EDUCATIONAL SOCIETY IS A SEPARATE TAXABLE ENTITY AN D, THEREFORE, NOTHING TO DO WITH THE ASSESSEE, HENCE, THE CONTENT ION OF THE ASSESSEE IS REJECTED AND THE FINDINGS GIVEN BY THE CIT(A) ON THIS ISSUE ARE PROPER. ACCORDINGLY, THIS GROUND RAISED B Y THE ASSESSEE IS REJECTED. 22.1 CONSIDERING THE ABOVE FINDINGS, THE GROUND IN RESPECT OF K. KRANTHI KIRAN REDDY, WE UPHOLD THE FINDINGS OF CIT( A) ON THIS ISSUE AND DISMISS THE GROUNDS RAISED IN THIS REGARD IN BO TH THE YEARS UNDER CONSIDERATION. 22.2 AS REGARDS GROUND NO. 6 IN CASE OF SHRI K. RAV INDER REDDY IN AY 2007-08 & 2008, SIMILAR ISSUE AROSE IN ASSESSEE S OWN CASE FOR AYS 2002-03 TO 2006-07, WHEREIN THE GROUND RAISED B Y ASSESSEE IS ALLOWED BY THE COORDINATE BENCH BY OBSERVING AS UND ER: 7.5 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL FACTS ON RECORD. THE FACTS ARE, ASSESSEE O WNS THE PROPERTY ALONG WITH HIS WIFE, LET OUT A PORTION OF THE PROPERTY TO THE FIRM IN WHICH HE IS A PARTNER. ASSESSEE CLAIMS THAT BEING A PARTNER IN THE BUSINESS, HE OCCUPIES SUCH PORTION O F THE PROPERTY AS USED FOR RUNNING A BUSINESS BY HIMSELF AND CLAIM ING DEDUCTION U/S 22 OF THE ACT. BY GOING THROUGH VARIOUS JUDICIA L PRONOUNCEMENTS ON THIS MATTER, WE FIND THAT EXEMPTI ON OF INCOME FROM PROPERTY USED FOR ASSESSEES BUSINESS MUST ALS O BE GRANTED IN CASE WHERE THE PROPERTY OF THE ASSESSEE IS USED BY A PARTNERSHIP BUSINESS IN WHICH THE ASSESSEE IS ALSO A PARTNER. IN 17 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS THE FOLLOWING CASES, THE RESPECTIVE HIGH COURTS HAV E HELD THE DECISION ON THIS ISSUE, IN FAVOUR OF THE ASSESSEE, THEY ARE AS FOLLOWS: 1. CIT VS. THOMAS [1990] 181 ITR 256 (KER.) 2. CIT VS. SYYED ANWAR HUSSAIN, [1990] 186 ITR 749 (PAT.) 3. CIT VS. RABINDRANATH BHOL [1995] 211 ITR 799 (O R.) 4. CIT VS. MUSTAFA KHAN 270 ITR 601 (ALL.) 7.6 AT THE SAME TIME, IN THE FOLLOWING CASES, THE H IGH COURTS OF KARNATAKA AND CALCUTTA DECIDED IN FAOVUR OF THE REVENUE: 1. CIT VS. GURUSWAMY (K.N.) [1984] 146 ITR 34 (KAR N.) 2. PRODEEP KUMAR BOTHRA (SUPRA) 7.7 AS THERE IS NO JURISDICTIONAL HIGH COURTS DECI SION ON THIS MATTER, WE ARE BOUND TO FOLLOW THE DECISION OF OTHE R HIGH COURTS. SINCE VARIOUS HIGH COURTS HAVE HELD DIFFERENT VIEWS , WE ARE BOUND TO FOLLOW THE DECISION WHICH IS FAVOURING TO THE ASSESSEE AS PER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD., 88 ITR 192 (SC) . FOLLOWING THE ABOVE DECISION, WE ADJUDICATE THIS MATTER IN FAVOUR OF THE ASSESSEE FOLLOWING THE DECISION OF THE ALLAHABAD HI GH COURT IN THE CASE OF MUSTAFA KHAN (SUPRA). HENCE, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. AS THE FACTS IN THESE YEARS ARE IDENTICAL TO THAT O F AYS 2002-03 TO 2006-07, THIS GROUND IS ALLOWED IN BOTH THE YEARS U NDER CONSIDERATION. 22.3 AS REGARDS GROUND NO. 7 PERTAINING TO NAGOLE P ROPERTY RENT, SIMILAR ISSUE AROSE IN 2006-07, WHEREIN THE COORDIN ATE BENCH REJECTED THIS GROUND BY OBSERVING AS UNDER: 8.5 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. ASSESSEE HAS LET OUT THIS BUILDING AT NAGOLE ON RENT TO AN EDUCATION SOCIETY IN WHICH ASS ESSEE IS A MANAGING TRUSTEE. HOWEVER, IT WILL NOT AMOUNT TO RU NNING OF BUSINESS BY ASSESSEE ON SUCH PROPERTY. AS PER THE P ROVISIONS OF SECTION 22, THE CONDITION TO GET EXEMPTION IS THE P ROPERTY SHOULD BE IN OCCUPATION OF THE OWNER FOR THE PURPOSE OF AN Y BUSINESS OR PROFESSION CARRIED ON BY HIM, THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME TAX. IN THE PRESENT CASE, RUNNING A SCHOO L IS NOT THE BUSINESS OF THE ASSESSEE NOR THE INCOME OF THE EDU CATIONAL SOCIETY IS CHARGEABLE TO INCOME TAX, AT LEAST, IT H AS NOT BROUGHT ON RECORD TO SHOW THAT THE ABOVE BUSINESS PROFITS A RE CHARGEABLE TO INCOME-TAX. IN OUR CONSIDERED VIEW, THE EDUCATIO NAL SOCIETY IS A SEPARATE TAXABLE ENTITY AND, THEREFORE, NOTHING T O DO WITH THE ASSESSEE, HENCE, THE CONTENTION OF THE ASSESSEE IS REJECTED AND 18 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS THE FINDINGS GIVEN BY THE CIT(A) ON THIS ISSUE ARE PROPER. ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE IS REJECTED. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH IN AY 2006-07, THIS GROUND OF ASSESSEE IS DISMISSED. 22.4 AS REGARDS GROUND NO. 8 PERTAINING TO RENT ON MARUTHI NAGAR IN CASE OF SHRI K. RAVIDENDER REDDY, SIMILAR ISSUE ARO SE IN AY 2006-07 WHEREIN THE COORDINATE BENCH REJECTED THIS GROUND B Y OBSERVING AS UNDER: 9.4 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. ASSESSEE HAS LET OUT THIS BUILDING AT MARUTHI NAGAR ON RENT TO A CHARITABLE SOCIETY IN WH ICH ASSESSEE IS A MANAGING TRUSTEE. HOWEVER, IT WILL NOT AMOUNT TO RUNNING OF BUSINESS BY ASSESSEE ON SUCH PROPERTY. AS PER THE P ROVISIONS OF SECTION 22, THE CONDITION TO GET EXEMPTION IS THE P ROPERTY SHOULD BE IN OCCUPATION OF THE OWNER FOR THE PURPOSE OF AN Y BUSINESS OR PROFESSION CARRIED ON BY HIM, THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME TAX. IN THE PRESENT CASE, RUNNING A CHARI TABLE SOCIETY IS NOT THE BUSINESS OF THE ASSESSEE NOR THE INCOME O F THE CHARITABLE SOCIETY IS CHARGEABLE TO INCOME TAX, AT LEAST, IT HAS NOT BROUGHT ON RECORD TO SHOW THAT THE ABOVE BUSINESS P ROFITS ARE CHARGEABLE TO INCOME-TAX. IN OUR CONSIDERED VIEW, T HE CHARITABLE SOCIETY IS A SEPARATE TAXABLE ENTITY AND, THEREFORE , NOTHING TO DO WITH THE ASSESSEE, HENCE, THE CONTENTION OF THE ASS ESSEE IS REJECTED AND THE FINDINGS GIVEN BY THE CIT(A) ON TH IS ISSUE ARE PROPER. ACCORDINGLY, THIS GROUND RAISED BY THE ASSE SSEE IS REJECTED. AS THE ISSUE UNDER CONSIDERATION IS MATERIALLY IDEN TICAL TO THAT OF AY 2006-07, FOLLOWING CONCLUSIONS OF COORDINATE BENCH IN THAT YEAR, WE REJECT THIS GROUND OF APPEAL IN BOTH THE YEARS UNDE R CONSIDERATION. 22.5 AS REGARDS GROUND NO. 9 RELATING TO ADDITION O N ACCOUNT OF RENT IN RESPECT OF BANGALORE PROPERTY, AS THIS GROUND IS SIMILAR TO GROUND NOS. 6, 7 & 8 (SUPRA), FOLLOWING THE CONCLUSIONS DR AWN THEREIN, WE REJECT THIS GROUND OF ASSESSEE IN BOTH THE YEARS UN DER CONSIDERATION. 19 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS 22.6 AS REGARDS GROUND NOS. 6, 7, 8 & 9 PERTAINING TO THE ADDITIONS IN RESPECT OF HIMAYAT NAGAR PROPERTY, NAGOLE PROPERTY, MARUTHI NAGAR PROPERTY AND BANGALORE PROPERTY RAISED IN THE CASE OF K. PRIYAMVADA, AS THESE GROUNDS ARE MATERIALLY IDENTICAL TO THAT O F GROUND NO. 6, 7, 8 & 9 RAISED IN THE CASE OF SHRI K. RAVINDER REDDY, F OLLOWING THE CONCLUSIONS DRAWN THEREIN, GROUND NO. 6 IS ALLOWED AND GROUND NOS. 7, 8 & 9 ARE REJECTED. 23. WITH REGARD TO INTEREST CLAIM, IN THE CASE OF K . KRANTHI KIRAN REDDY, THE FOLLOWING GROUNDS HAVE BEEN RAISED: 8. THE A.O ERRED IN DISALLOWING THE INTEREST PAID O N HOUSING LOANS AMOUNTING TO RS. 11,19,101/- 9. THE APPELLATE COMMISSIONER ERRED IN CONFIRMING T HE DISALLOWANCE OF INTEREST MADE BY THE A.O. 23.1 IN THE CASE OF K. RAVINDER REDDY, THE FOLLOWIN G GROUNDS HAVE BEEN RAISED: 10. THE A.O ERRED IN DISALLOWING THE INTEREST PAID ON HOUSING LOANS AMOUNTING TO RS.21,98,607/- 11. THE APPELLATE COMMISSIONER ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST MADE BY THE A.O. 23.2 GROUNDS NO. 10 & 11 RELATING TO THE DISALLOWA NCE OF INTEREST OF RS. 29,22,210/- IN THE CASE OF K. PRAYAMVADA REDDY. 24. AS THESE GROUNDS ARE SIMILAR, WE REFER TO THE F ACTS FROM SHRI K. KRANTHI KIRAN REDDY. THE ASSESSING OFFICER NOTED TH AT IN THE FINANCIAL YEAR 2006-07, THE ASSESSEE, ALONG WITH HI S PARENTS, HAD PURCHASED A HOUSE AT JUBILEE HILLS FOR RS.9,50,00,0 00/-, AVAILING A LOAN OF RS.2,50,00,000/- FROM BANK. THE ASSESSEE WA S HAVING 1/3 RD SHARE THEREIN AND HAD SHOWN RENT OF RS.4,02,680/- A ND RS.3,30,600/-, IN THOSE YEARS RESPECTIVELY, IN HIS HANDS, AND AT T HE SAME TIME CLAIMING HIS SHARE OF BANK INTEREST AT RS. 11,19,10 1/- AND RS.14,73,713/-, RESPECTIVELY. IT WAS ADMITTED THAT NO RENTAL AGREEMENT 20 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS HAD BEEN ENTERED INTO WITH THE TENANTS OF THE HOUSE AND FURTHER THAT IT WAS NOT POSSIBLE TO SUBMIT ANY CONFIRMATION REGARDI NG THE RENT SO RECEIVED, AS THE TENANT WAS NOT AVAILABLE. IN THE A BSENCE OF RENTAL AGREEMENT OR CONFIRMATION, THE ASSESSING OFFICER FE LT THAT IT WAS NOT POSSIBLE TO VERIFY WHETHER THE HOUSE HAD ACTUALLY B EEN LET OUT DURING THE YEAR. THEREFORE, THE INTEREST CLAIM OF RS. 11,1 9,101/- AND RS.14,73,713/- WAS DISALLOWED IN THE ASSESSMENT YEA R 2007-08 AND 2008-09 RESPECTIVELY. 25. DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE A SSESSEE HAD DISCLOSED RENT FROM THE SAID PROPERTY IN BOTH THE Y EARS, WHICH WAS APPEARING IN THE CASH FLOW SUBMITTED. HE ARGUED THA T THE ASSESSING OFFICER COULD NOT HAVE TAXED THE RENT AND AT THE SA ME TIME, DISALLOWED THE INTEREST CLAIM. HE ALSO ARGUED THAT THE ADDITIO NS U/S.2(22)(E) ETC. WERE MADE ON THE BASIS OF THE SAME CASH FLOW STATEM ENT AND ONLY A PART OF IT COULD NOT BE ACCEPTED, WHILE IGNORING CE RTAIN ITEMS. THE AUTHORIZED REPRESENTATIVE CONTENDED THAT IT IS A WE LL SETTLED LAW THAT WHERE A PROPERTY IS LET OUT AND INCOME THERE FROM I S ACCEPTED, THE TOTAL INTEREST PAID FOR THE SAME HAS TO BE ALLOWED, EVEN IF THE RENT IS RECEIVED FOR A PART OF THE PERIOD. 26. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) OBSERVED THAT THERE IS NO DISPUTE ON THE PART OF T HE ASSESSEE THAT DESPITE HAVING SHOWN THE 'RENTAL INCOME' CONTENDEDL Y RECEIVED FROM THE ABOVE PROPERTY, THE ASSESSEE COULD NOT FURNISH ANY DOCUMENTARY OR EVEN ANY OTHER RELIABLE EVIDENCE TO PROVE THAT T HE PREMISES HAD ACTUALLY BEEN LET OUT. MERE PRESENTATION OF CERTAIN INCOME AS INCOME FROM A PARTICULAR HOUSE PROPERTY CANNOT BE CONSIDER ED AS AN EVIDENCE OF ACTUAL LETTING OUT EXCEPT DECLARING THE RENT IN CASH FLOW STATEMENT. ACCORDINGLY, FINDING NO MERIT IN THE CONTENTIONS, T HE CIT(A) CONFIRMED THE DISALLOWANCE OF INTEREST BY THE ASSESSING OFFIC ER AND DISMISSED THE GROUNDS OF ASSESSEE. 21 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS 27. LD. AR SUBMITTED THAT THE ASSESSEE HAS PURCHASE D THE PROPERTY ALONG WITH HIS PARENT WITH THE HELP OF LOAN TAKEN F ROM BANK. SINCE THE SAME PROPERTY WAS USED FOR AVAILING LOAN AND THE PR OPERTY WAS LET OUT. ASSESSEE HAS RIGHTLY SHOWN AS RENTAL INCOME AN D CLAIMED INTEREST EXPENDITURE. 28. LD. DR RELIED ON THE ORDER OF AO. 29. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE ASSESSEE HAS TAKEN LOAN FROM BANK TO PROCURE THE PROPERTY AND INCURRED INTEREST EXPENDITURE. ASSESSE E HAS ALSO SHOWN RENTAL INCOME BUT WITHOUT ANY DOCUMENTARY EVIDENCE TO SHOW THAT THE PROPERTY WAS ACTUALLY LET OUT. IN OUR CONSIDERED VI EW, THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY DOCUMENTARY EVIDENCE TO SHOW THAT THE PROPERTY HAS ACTUALLY LET OUT. WE ARE NOT IN A POSI TION TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE PROPERTY WAS AC TUALLY LET OUT. IN THE INTEREST OF JUSTICE, WE DIRECT TO THE AO NOT TO CONSIDER THE RENTAL INCOME AS WELL AS INTEREST EXPENDITURE FOR CALCULAT ING THE TAXABLE INCOME OF THE ASSESSEE. HENCE, GROUNDS RAISED BY TH E ASSESSEES ARE ACCORDINGLY DISMISSED. 30. IN ITA NO. 402/H/2013 FOR AY 2007-08 IN CASE OF SHRI K. RAVINDER REDDY, GROUND NOS. 12 & 13 ARE AS UNDER: 12. THE A.O ERRED IN ADDING AN AMOUNT OF RS.1,48,00 ,000/- AS UNEXPLAINED INCOME. 13. THE APPELLATE COMMISSIONER ERRED IN CONFIRMING THE ABOVE ADDITION OF RS.1,48,00,000/- 31. DURING THE COURSE OF SEARCH AND SEIZURE OPERATI ON, IT WAS NOTICED THAT THE ASSESSEE HAD PURCHASED AC. 9.05 GT S. OF LAND AT BADANGPET VILLAGE FOR RS. 1,46,00,000/- AND PAID TH E CONSIDERATION IN CASH. AFTER GOING THE THROUGH SEIZED MATERIAL/DOCUM ENTS BEING 'AGREEMENT OF SALE DATED 3-11-2006', THE ASSESSEE I N HIS STATEMENT 22 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS DATED 2-4-2008 STATED THAT THE SAID PAYMENTS WERE M ADE IN CASH TO MR. RAM REDDY AND T.MADAN MOHAN REDDY, HE SUBMITTED THAT THE 'AGREEMENT OF SALE' WERE ENTERED INTO BY M/S. JANAP RIYA ENGINEERS SYNDICATE (FIRM) PRESENTLY M/S. JANAPRIYA PROPERTIE S LTD IN THE FINANCIAL YEAR 2006-07 AND THE PAYMENTS IN CASH WER E MADE ON BEHALF OF THE SAID COMPANY. HE ADMITTED THAT THE PA YMENTS WERE NOT ACCOUNTED FOR IN THE BOOKS OF JANAPRIYA PROPERTIES PVT LTD OR ANY OTHER GROUP CONCERN AND THAT THE SOURCES FOR THE IN VESTMENT WERE UNACCOUNTED BUSINESS RECEIPTS OF HIMSELF AND JANAPR IYA ENGINEERS SYNDICATE LTD. ACCORDINGLY, HE OFFERED RS.2 LAKHS I N HIS OWN HANDS FOR THE FINANCIAL YEAR 2004-05 AND RS.49,50,000/- IN TH E HANDS OF M/S. JANAPRIYA ENGINEERS SYNDICATE LTD FOR THE ASSESSMEN T YEAR 2006-07. WITH REGARD TO THE BALANCE OF RS.87.45 LAKHS MADE D URING THE FINANCIAL YEAR 2007-08, HE STATED THAT THE SAME WAS MADE OUT OF THE CASH WITHDRAWN FROM ING VYSYA BANK OF GROUP CONCERN S. HE ALSO SUBMITTED A STATEMENT CONTAINING DETAILS OF WITHDRA WALS FROM THE BANK AND THE PAYMENTS MADE TO THE LAND OWNERS ON VARIOUS DATES. HE ALSO STATED THAT HE WOULD FURNISH COMPLETE DETAILS OF CA SH PAYMENTS TILL DATE TO MR. T.RAJASEKHAR REDDY. 31.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER PROPOSED TO TAX THE AMOUNT OF RS. 1,46,00,0 00/- IN THE HANDS OF THE ASSESSEE, AS THE LANDS WERE REGISTERED IN HI S NAME AND FROM THE SALE AGREEMENT IT WAS SEEN THAT THE ENTIRE AMOU NT HAD BEEN PAID ON 3-11-2006, RECEIPT WHEREOF HAD BEEN ACKNOWLEDGED BY THE VENDORS SEPARATELY. THE ASSESSING OFFICER NOTED THA T IN HIS STATEMENT THE ASSESSEE HAD STATED THAT THE BALANCE OF RS.87.4 5 LAKHS WAS PAID IN THE FINANCIAL YEAR 2007-08. HOWEVER, AS PER THE SEIZED AGREEMENT, THE ENTIRE AMOUNT STOOD PAID BEFORE 3-11-2006 ITSEL F AND THE PAYMENTS WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. THEREFORE, HE BROUGHT TO TAX THE BALANCE OF RS.1,44,00,000/-, AFT ER EXCLUDING RS. 2 LAKHS PAID IN THE EARLIER YEAR, IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED INVESTMENT FOR THE ASSESSMENT YEAR- 200 7-08. 23 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS 31.2 THE ASSESSING OFFICER FURTHER NOTICED THAT AS PER SEIZED ANNEXURE A/JES/18, THE ASSESSEE HAD PURCHASED LANDS AT BADANGPET AND PAID RS.4 LAKHS TO SHRI N.SATYANARAYANA AND SHR I YADAGIRI. IN HIS STATEMENT DATED 2-4-2008, THE ASSESSEE ADMITTED THA T THE SAID PAYMENTS WERE IN CASH AND NOT ACCOUNTED FOR. HE OFF ERED THE SAME TO TAX IN THE HANDS OF JESL ON THE GROUND THAT THOSE W ERE MADE BY THE COMPANY OUT OF ITS UNACCOUNTED RECEIPTS. HOWEVER, S INCE THE LANDS WERE REGISTERED IN THE NAME OF THE ASSESSEE, THE AS SESSING OFFICER TAXED THE SAME AS UNEXPLAINED INVESTMENT IN THE HAN DS OF THE ASSESSEE. ACCORDINGLY, AN ADDITION OF RS.4 LAKHS WA S MADE. 31.3 THE ASSESSING OFFICER FURTHER NOTICED THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO PROVE THAT THE BALANCE AMOUNTS WERE PAID IN THE FINANCIAL YEAR 2007-08. WHEREAS THE AGR EEMENT OF SALE CUM GPA CLEARLY SHOWED THAT THE PAYMENT WAS MADE BE FORE 3-11- 2006. HE NOTED THAT IT WAS ON THAT DATE THE VENDORS GAVE POSSESSION AND GPA AND REGISTERED THE LANDS IN FAVOUR OF THE A SSESSEE. IN THE LIGHT OF THE DECISION OF THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF KERALA LIQUOR CORPORATION VS. COMMISSIONER OF INCOM E-TAX (222 ITR 333) AS ALSO THAT OF THE HON'BLE INCOME-TAX APPELLA TE TRIBUNAL, MADRAS IN T.S.KUMARA SAMY VS. ACIT (65 ITD 188) AND THE HON'BLE INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD IN THE CAS E OF SMT. KESARI BAI VS. ITO, 32 ITD 1 (TM) AND FURTHER THAT OF THE HON'BLE INCOME-TAX APPELLATE TRIBUNAL,MUMBAI IN P.R.PATEL VS. DEN 78 I TD 51, THE ASSESSING OFFICER CONCLUDED THAT IN VIEW OF THE PRO VISIONS OF SEC.132(4A), THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH ARE PRESUMED TO BE CORRECT. ACCORDINGLY, THE TOTAL SALE CONSIDERATION PAID IN CASH TOWARDS THE ABOVE TRANSACTIONS OF RS. 1,48, 00,000/- WAS ADDED TO THE TOTAL INCOME. 32. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS, IT WAS SUBMITTED THAT THE 24 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS SEARCH AND SEIZURE OPERATION IN THE ASSESSEE'S CASE TOOK PLACE ON 19-2-2008, AND THEREFORE, FINANCIAL YEAR 2007-08, R ELEVANT TO THE ASSESSMENT YEAR 2008-09 WAS STILL OPEN. THE AUTHORI SED REPRESENTATIVE STATED THAT THE ASSESSEE HAD CATEGOR ICALLY BROUGHT ON RECORD BEFORE THE DDIT, THE SOURCES FOR THE PAYMENT IN RESPECT OF THE AGREEMENT FOR RS.1,46,00,000/- BEING UNEXPLAINED IN COME AND WITHDRAWALS FROM BANK. HE STATED THAT THE UNEXPLAIN ED INCOME PART WAS OFFERED IN THE ASSESSEE'S HANDS FOR THE FINANCI AL YEAR 2004-05 AND IN THE HANDS OF JESL FOR THE FINANCIAL YEAR 200 6-07. WITH REGARD TO THE WITHDRAWALS FROM BANK, THE ASSESSEE HAD FILE D A CASH FLOW STATEMENT BEFORE THE DDIT, EXPLAINING WITHDRAWALS F ROM BANKS AS SOURCE AND PAYMENTS TO VARIOUS LANDLORDS AS ITS APP LICATION. IT WAS AVERRED THAT THE AMOUNTS IN THE BANKS WERE THE BUSI NESS RECEIPTS OF THE COMPANIES TO WHOM THE SAID BANK ACCOUNTS BELONG ED. HE ARGUED THAT THE ASSESSING OFFICER ADDED RS.1,44,00,000/- A FTER EXCLUDING RS.2 LAKHS OFFERED AS UNEXPLAINED INVESTMENT BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06, SHOWING THAT THE ADDITION WAS BASED ON THE ADMISSION OF THE ASSESSEE AND NOT ON THE AGREEM ENT OF SALE. ACCORDINGLY, HE CLAIMED THAT THAT ASSESSING OFFICER SHOULD HAVE ALSO ACCEPTED THE ADMISSION OF RS.49,50,000/- IN THE HAN DS OF JESL AND HIS EXPLANATION REGARDING THE BALANCE AMOUNTS. ACCO RDINGLY, HE CLAIMED THAT THE ASSESSEE HAD BROUGHT THE FACTUAL P OSITION ON RECORD, REBUTTING THE AGREEMENT OF SALE. HE POINTED OUT THA T ON ONE HAND THE ASSESSING OFFICER STATED THAT THE ENTIRE CONSIDERAT ION WAS PAID ON THE DATE OF AGREEMENT AND IS UNEXPLAINED, WHILE ON THE OTHER HAND, HE PROCEEDED TO GIVE CREDIT TO THE INCOME OF RS.2 LAKH S, ADMITTED IN THE EARLIER YEAR. ACCORDINGLY, HE MAINTAINED TH AT THE ASSESSING OFFICER SHOULD HAVE GIVEN CREDIT FOR THE ADMISSION BEFORE T HE DDIT AND NOT TAKEN THE ROUTE OF EVIDENTIARY VALUE OF THE SEIZED MATERIAL, AS IN VIEW OF THE ESTABLISHED LAW, SUCH EVIDENCE IS REBUTTABLE , WHICH THE ASSESSEE HAD REBUTTED. 25 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS 32.1 WITH REGARD TO THE OTHER AMOUNT OF RS.4 LAKHS, IT WAS SUBMITTED THAT IN THE COURSE OF POST SEARCH PROCEEDINGS, SUCH AMOUNT WAS ALSO OFFERED TO TAX IN THE HANDS OF THE JESL. 33. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) OBSERVED AS UNDER: 35.0 I HAVE GONE THROUGH THE FACTS OF THE CASE AND SUBMISSIONS MADE BY THE ASSESSEE. IT HAS NEVER BEEN DISPUTED BY THE ASSESSEE THAT THE LAND AT BADANGPET, PURCHASED FROM MR.RAM REDDY AND MR.T.MADAN MOHAN REDDY FOR RS.1,46,00,000 /- AS PER THE AGREEMENT OF SALE CUM GPA DT.3-11-2006, WAS REG ISTERED IN HIS NAME. IT IS ONLY ON THE BASIS OF THE AVERMENTS IN THE STATEMENT BEFORE THE INVESTIGATION WING THAT THE AS SESSEE HAS TRIED TO SUBSTANTIATE THAT IT MADE BY M/S JANAPRIYA ENGINEERS SYNDICATE, PRESENTLY M/S.JANAPRIYA PROPERTIES LTD. HOWEVER, ONE CANNOT LOSE SIGHT OF THE FACT THAT AT NO STAGE, IT COULD BE DEMONSTRATED THAT ANY PART OF SUCH CONSIDERATION HA D GONE OUT OF THE BANK ACCOUNTS OF M/S JANAPRIYA ENGINEERS SYNDIC ATE, WHICH CAN LEND ANY CREDENCE TO THE ASSESSEE'S CONTENTION . ADMITTEDLY, THE ENTIRE CONSIDERATION. WAS PAID IN CASH. UNDER T HE CIRCUMSTANCES, THE ASSESSEE CLAIMED IN THE STATEMEN T DT.2-4- 2008 THAT THE PAYMENTS WERE ON BEHALF OF THE SAID C OMPANY, SUCH CLAIM IS NOT SUBSTANTIATED BY ANY CONTEMPORANE OUS ACCOUNTING ENTRY. ON THE OTHER HAND, IT WAS CATEGOR ICALLY ADMITTED THAT THE PAYMENTS WERE NOT ACCOUNTED FOR I N THE BOOKS OF THE SAID CONCERN OR ANY OTHER GROUP CONCERN. WHI LE THE ASSESSEE HIMSELF CATEGORICALLY ADMITTED THAT THE IN VESTMENT WAS PARTLY MADE OUT OF HIS OWN UNACCOUNTED BUSINESS REC EIPTS, NO EVIDENCE COULD EVER BE SUBMITTED TO PROVE THE CONTE NTION THAT THE UNACCOUNTED BUSINESS RECEIPTS OF JANAPRIYA ENGI NEERS SYNDICATE LTD. WERE ALSO UTILIZED TO MAKE THE SAID INVESTMENT. ACCORDINGLY, IT IS CLEAR THAT WHILE THE ASSESSEE GR OSSLY FAILED TO REBUT THE PRESUMPTION U/S.132(4A) THAT AROSE FROM T HE CATEGORICAL RECITAL IN THE AGREEMENT OF SALE SEIZED IN THE COURSE OF SEARCH, HE COULD NOT SUBSTANTIATE THE CONTENTION S RAISED IN HIS STATEMENT WITH ANY EVIDENCE. UNDER THE CIRCUMSTANCE S, NO INFIRMITY CAN BE SAID TO EXIST IN THE RELIANCE OF T HE ASSESSING OFFICER ON THE SAID SEIZED AGREEMENT OF SALE. 35.1 FURTHER, IT IS SEEN THAT IT IS ALSO NOT IN DIS PUTE THAT AS PER THE ABOVE REFERRED AGREEMENT OF SALE, THE ENTIRE CO NSIDERATION OF RS.1,46,00,000/- HAD BEEN PAID ON THE DATE OF AGREE MENT ITSELF AND THE VENDORS HAD EVEN CATEGORICALLY ACKNOWLEDGED THE SAME. WHILE IT IS VERY LIKELY THAT AN INITIAL PAYMENT OF RS.2,00,000/- OUT OF THE SAME COULD HAVE BEEN MADE BY THE ASSESSEE HI MSELF IN THE FINANCIAL YEAR 2004-05, THERE IS NOTHING TO SUB STANTIATE THAT 26 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS ANY OTHER PART, INCLUDING THE SUM OF RS.49,50,000/- OFFERED IN THE HANDS OF M/S.JANAPRIYA ENGINEERS SYNDICATE LTD. FOR THE ASSESSMENT YEAR 2006-07, WAS PAID BY ANY PERSON OTH ER' THAN THE ASSESSEE HIMSELF. ACCORDINGLY, THE ACTION OF TH E ASSESSING OFFICER IN BRINGING TO TAX THE BALANCE INVESTMENT O F RS.1,44,00,000/- IN THE HANDS OF THE ASSESSEE IS UP HELD. 35.2 LIKEWISE, EVEN IF THE CASH OF RS.4,00,000/- PA ID AND SRI YADGIRI FOR ANOTHER LAND AT BADANGPET WAS OFFERED I N THE HANDS OF JESL, NO CONTEMPORANEOUS DOCUMENTARY EVIDENCE COULD BE FURNISHED AT ANY STAGE TO ESTABLISH THE CONTENTION THAT SUCH INVESTMENTS WERE MADE BY THE SAID COMPANY OUT OF IT S UNACCOUNTED RECEIPTS. RATHER, IN THIS CASE ALSO, TH E LANDS WERE UNDISPUTEDLY REGISTERED IN THE NAME OF THE ASSESSEE ONLY. ACCORDINGLY, THE ADDITION OF RS.4 LAKHS ON ACCOUNT OF SUCH UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE IS ALSO UPHELD. 34. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US. 35. LD. AR REITERATED THE SUBMISSIONS WHAT WERE SUB MITTED BEFORE THE CIT(A). 36. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 37. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE AO MADE THE ADDITION BASED ON THE DO CUMENT SEIZED DURING SEARCH. AS PER THE AGREEMENT FOR SALE, THE S ALE CONSIDERATION WAS PAID PRIOR TO 03/11/2006 I.E. IN AY 2007-08. TH E FACT REMAINS THAT THE WHOLE TRANSACTION WAS COMPLETED INVOLVING ONLY CASH. HENCE, THERE IS NO DOCUMENTATION TO PROVE WHERE THE PAYMEN TS WERE MADE. THE ASSESSEE CLAIMS THAT THESE WERE PAID FROM THE I NCOME OF SELF AND THE COMPANY WHERE HE IS ASSOCIATED. SINCE THE PROPE RTY IS REGISTERED IN THE NAME OF THE ASSESSEE, THE ADDITION CAN BE MA DE ONLY IN THE HANDS OF THE ASSESSEE. THE ASSESSEE CLAIMS THAT AS DISCLOSED BEFORE DDIT, THE SOURCES OF SUCH PAYMENT AND ACCORDINGLY T HE INCOMES WERE DISCLOSED IN THE ASSOCIATE COMPANIES AS WELL AS ASS ESSEES OWN 27 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS HAND. WE DO NOT HAVE RECORDS OF THE ASSOCIATE COMPA NIES, TO VERIFY WHETHER IT IS DISCLOSED IN THEIR RETURN OF INCOMES. THE INCOME CAN BE TAXED ONLY ONCE, ACCORDINGLY, THE INCOME DECLARED B Y THE ASSESSEE IN THE ASSOCIATE COMPANIES SHOULD BE EXCLUDED. IN OUR CONSIDERED VIEW, THE WHOLE INCOME SHOULD BE TAXED IN THE HANDS OF AS SESSEE AS THE PROPERTY WAS REGISTERED IN THE NAME OF THE ASSESSEE . IF THE REVENUE ACCEPTED THE INCOME AS DISCLOSED BY THE ASSESSEE AN D ASSOCIATED COMPANIES, THE PORTION WHICH WAS ALREADY TAXED SHOU LD BE ELIMINATED IN THE ASSESSEES HAND. CONSIDERING THE FACT THAT I NCOME CAN BE TAXED ONLY ONCE, WE DEEM IT FIT AND PROPER TO REMIT THIS ISSUE BACK TO THE FILE OF THE AO TO DETERMINE INCOME WHICH WAS AL READY DISCLOSED AND BALANCE SHOULD BE TAXED IN THE HANDS OF ASSESSE E. THE GROUNDS RAISED ARE ALLOWED FOR STATISTICAL PURPOSES. 38. AS REGARDS GROUND NOS. 12 & 13 RELATING TO THE ADDITION OF RS. 48,50,000/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN BHONGIR LAND IN AY 2008-09 IN THE CASE OF SRI K. RAVINDER REDDY, TH E ASSESSING OFFICER NOTED THAT AS PER THE PURCHASE AGREEMENT DA TED 17-9-2007, SEIZED AS ANNEXURE A/JES/18 DATED 9-2-2008, THE ASS ESSEE, ALONG WITH HIS SON, HAD PURCHASED LAND AT BHUVANGIRI AND PAID CASH OF RS.80 LAKHS WHICH WAS NOT RECORDED IN THEIR BOOKS O R THE BOOKS OF ANY COMPANY. IT WAS ALSO NOTICED THAT THE PAYMENT OF RS .80 LAKHS WAS NOT APPEARING IN THE RECEIPTS AND PAYMENTS A/C. SINCE T HE LANDS WERE PURCHASED JOINTLY, TAKING THE ASSESSEE'S SHARE AT 5 0%, RS.40 LAKHS WAS BROUGHT TO TAX AS UNEXPLAINED INVESTMENT IN THE ASSESSMENT YEAR 2008-09. 39. DURING THE COURSE OF APPELLATE PROCEEDINGS, IT WAS SUBMITTED THAT THIS ISSUE HAS BEEN DEALT WITH IN THE HANDS OF M/S. JANAPRIYA ENGINEERS SYNDICATE LTD AND ADDED IN THEIR HANDS. H E ARGUED THAT IN ANY SEARCH, THE STATEMENT RECORDED BY THE INVESTIGA TING OFFICER IS THE FOUNDATION OF SUBSEQUENT PROCEEDINGS. IN THIS CASE, THE SEARCH WAS PRIMARILY ON JANAPRIYA GROUP OF CONCERNS AND A STAT EMENT WAS 28 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS RECORDED FROM MR. RAVINDER REDDY, THE MD AND ASSESS EE'S FATHER. HE STATED THAT SHRI RAVINDER REDDY IN HIS STATEMENT DA TED 2-4-2008 HAD OFFERED THE AMOUNT CONCERNED IN THE HANDS OF JESL, CATEGORICALLY EXPLAINING THAT THE AMOUNTS WERE DRAWN FROM THE BAN K A/C OF JESL. HE ARGUED THAT EVEN THOUGH THE ASSESSING OFFICER MA DE ADDITIONS IN RESPECT OF AGRICULTURAL INCOME ON THE BASIS OF SAME STATEMENT, HE IGNORED ANOTHER PART REGARDING INVESTMENTS IN LAND . 40. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED AS UNDER: 41. I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE ARGUMENTS OF THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE. E VEN IF IT HAD BEEN STATED IN THE STATEMENT RECORDED IN THE COURSE OF SEARCH THAT THE BHONGIR LAND, FOR WHICH THE TOTAL PAYMENT OF RS.80 LAKHS HAD BEEN MADE IN CASH, PERTAINED TO M/S. JESL, SUCH STATEMENT WAS ONLY AN ASSERTION WHICH WAS REQUIRED TO BE SUBS TANTIATED WITH DOCUMENTARY EVIDENCE. MERE AFFIRMATION OF THIS KIND IN A STATEMENT ULS.132(4), SANS ANY DOCUMENTARY EVIDENCE , CANNOT BE CONSIDERED AS AN EVIDENCE IN ITSELF. IT HAS NOT BEE N DISPUTED THAT THE TRANSACTION WAS NOT RECORDED IN THE BOOKS OF AN Y COMPANY, INCLUDING JESL, NOR THE PAYMENT OF RS.80 LAKHS WAS NOT APPEARING IN THE BOOKS OR THE RECEIPTS AND PAYMENTS A/C OF THE ASSESSEE. UNDER THESE CIRCUMSTANCES, IT IS CLEAR TH AT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM THAT THE INVESTMENT HAD BEEN MADE OUT OF THE SOURCES OF THE JESL ITSELF AND FOR THAT COMPANY ONLY. AS AGAINST THIS, UNDISPUTEDLY, THE LA NDS WERE PURCHASED JOINTLY BY THE ASSESSEE, CONFERRING 50% T ITLE OVER THE PROPERTY TO THE ASSESSEE ONLY. SINCE SOURCES FOR SU CH INVESTMENT REMAINED UNEXPLAINED, NO INFIRMITY CAN BE SAID TO E XIST IN TREATMENT OF SUCH INVESTMENT AS UNEXPLAINED INVESTM ENT FOR THE ASSESSMENT YEAR 2008-09. THE GROUND RELATING TO SUCH CONTENTION IS THEREFORE DECIDED AGAINST THE ASSESSE E. 41. A FURTHER ADDITION OF RS.8.50 LAKHS WAS MADE IN THE ASSESSMENT YEAR 2008-09(PART OF GROUND NOS. 12 & 13) IN VIEW O F THE SEIZED MATERIAL IN ANNEXURE NO.A/JES/18, SHOWING THAT THE ASSESSEE HAD PURCHASED LANDS AT BADANGPET BY PAYING RS.8,50,000/ - IN CASH TO SHRI N.SATYANARAYANA. THE ASSESSEE IN HIS STATEMENT DATE D 2-4-2008 ADMITTED THAT THE ABOVE PAYMENTS WERE NOT ACCOUNTED FOR IN THE 29 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS BOOKS OF ACCOUNT TILL THE DATE OF SEARCH, THOUGH IT WAS CLAIMED THAT THOSE WERE MADE OUT OF WITHDRAWALS FROM VYSYA BANK A/C OF VARIOUS COMPANIES. AS THE LANDS WERE REGISTERED IN THE NAME OF THE ASSESSEE, THE ASSESSING OFFICER PROPOSED TO TAX THE UNACCOUNTED PAYMENTS OF RS.8.50 LAKHS IN THE HANDS OF THE ASSES SEE. SINCE THE ASSESSEE FAILED TO FILE ANY SATISFACTORY EXPLANATIO N OR EVIDENCE TO THE LETTER DATED 10-11-2009 ON THIS ISSUE, THE ADDITION OF RS.8.50 LAKHS WAS MADE. 42. DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E AUTHORISED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT EXPLA NATION WITH REGARD TO THE SAID INVESTMENT WAS ALSO LIKE BHONGIR LAND AS THE SAME HAS BEEN DEALT WITH IN THE HANDS OF JESL AND ADDED IN THE HANDS OF THE SAID COMPANY. 43. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) OBSERVED THAT UNDISPUTEDLY, THE LANDS WERE PURCHAS ED IN THE NAME OF THE ASSESSEE, CONFERRING TITLE OVER THE PROPERTY TO THE ASSESSEE ONLY. SINCE SOURCES FOR SUCH INVESTMENT REMAINED UNEXPLAI NED, NO INFIRMITY CAN BE SAID TO EXIST IN TREATMENT OF SUCH INVESTMEN T AS UNEXPLAINED INVESTMENT FOR THE ASSESSMENT YEAR 2008-09. THE GRO UND RELATING TO SUCH CONTENTION WAS THEREFORE, DECIDED AGAINST THE ASSESSEE. 44. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE ISSUES IN GROUNDS 12 & 13 ARE SIMILA R TO THE ISSUES ALREADY ADJUDICATED IN PARA 37. ACCORDINGLY, THIS G ROUND IS ALLOWED FOR STATISTICAL PURPOSES. 45. AS REGARDS GROUND NOS. 14 & 15 IN THE ASSESSME NT YEAR 2008- 09 IN THE CASE OF SRI K. RAVINDER REDDY, RELATING T O THE ADDITION OF RS.57,16,000/- ON ACCOUNT OF CASH FOUND FROM THE RE SIDENCE OF THE ASSESSEE IN THE COURSE OF SEARCH, THE ASSESSING OFF ICER NOTED THAT THE ASSESSEE HAD FAILED TO SUBMIT ANY EXPLANATION I N THIS REGARD ON 30 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS THE DATE OF SEARCH AND STATED THAT HE WOULD VERIFY THE FACTS AND SUBMIT AN EXPLANATION. ON BEING REQUIRED TO EXPLAIN THE SAME, THE ASSESSEE IN HIS STATEMENT DATED 8-4-2008 FURTHER CO NTENDED THAT HE WOULD FILE THE RECONCILIATION STATEMENT IN RESPECT OF THE CASH BALANCES AVAILABLE ON 19-2-2008 IN THE HANDS OF THE FIRMS/COMPANIES/INDIVIDUALS. HOWEVER, THE ASSESSEE AGAIN FAILED TO EXPLAIN THE CASH. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSEE SUBMITTED THAT THERE WERE WITHDRAWALS MADE FROM VARIOUS BANKS BY THE GROUP COMPANIES AND THAT THE CASH WAS OUT OF THE SAME. IT WAS SUBMITTED THAT ON THE DATE OF SEARCH, AS PE R THE BOOKS OF ACCOUNT OF THE GROUP COMPANIES, IF ANY CASH IS AVAI LABLE, THE SAME CAN BE CONSIDERED. HOWEVER, THE ASSESSING OFFICER N OTICED THAT THE BOOKS OF ACCOUNT OF THE GROUP COMPANIES WERE NOT CL OSED AND NO CASH BALANCES HAD BEEN DRAWN. ACCORDINGLY, HE OPINE D THAT THE BOOKS WERE UNRELIABLE AND THE CASH WITHDRAWALS COULD NOT BE LINKED WITH THE CASH FOUND AT THE RESIDENCE. ACCORDINGLY, THE CASH OF RS.57,16,000/- WAS CONSIDERED AS UNEXPLAINED AND ADDED TO THE TOTA L INCOME OF THE ASSESSEE. 46. DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E AUTHORISED REPRESENTATIVE OF THE ASSESSEE ARGUED THAT THE CASH BALANCES OF THE COMPANIES/FIRMS AND OTHER CONCERNS WAS FOUND AT THE ASSESSEE'S RESIDENCE AS HE WAS THE MANAGING DIRECTOR OF THE CO MPANIES AND PARTNER OF FIRMS. HE CONTENDED THAT CASH BALANCES WERE EXPLAINED IN DETAIL AT THE TIME AS PERTAINING TO AGRICULTURAL IN COME, ADVANCES RECEIVED FROM CUSTOMERS WHICH WERE ACCOUNTED IN THE COMPANIES BOOKS ETC. THE AUTHORISED REPRESENTATIVE SUBMITTED THAT SUCH EXPLANATION WAS ACCEPTED BY THE DDLT AND RELEVANT E NTRIES WERE PASSED IN THE BOOKS OF ACCOUNT. ACCORDINGLY HE CLAI MED THAT THE CASH STOOD EXPLAINED. 47. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) OBSERVED AS UNDER: 31 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS 38.0 I HAVE GONE THROUGH THE FACTS OF THE CASE AND SUBMISSIONS OF THE ASSESSEE. IT IS CLEAR THAT DESPITE CLAIMING THAT THE CASH BALANCES OF THE COMPANIES/FIRMS AND OTHER CONCERNS WERE FOUND AT THE ASSESSEE'S RESIDENCE AS HE WAS THE MANAGING DIRECTOR OR PARTNER THEREOF, THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE SUCH CONTENTION WITH ANY CONTEMPORANEOUS DOCUMENTAR Y EVIDENCE. IT IS ALSO CLEAR THAT IN THE BOOKS OF ACC OUNTS/CASH BOOK OF NONE OF THEM, THE FACT OF ALLEGED REMOVAL OF CAS H FROM THEIR BUSINESS PREMISES TO THE ASSESSEE'S RESIDENCE WAS F OUND RECORDED ON THE DATE OF SEARCH. EVEN IF THE ASSESSE E MADE CERTAIN CONTENTIONS BEFORE THE INVESTIGATION WING I N THIS REGARD, MERE AVERMENTS TO THIS EFFECT COULD NOT HAVE SUFFIC ED AND ENTITLED THE ASSESSEE TO MAKE ENTRIES ON THIS ACCOUNT SUBSEQ UENTLY. ACCORDINGLY, IT IS CLEAR THAT WHILE THE CONTENTION OF CASH BELONGING TO VARIOUS COMPANIES/FIRMS IS ONLY AN AFT ER-THOUGHT, IT CANNOT BE DISPUTED THAT THE ASSESSEE COULD NOT SUBS TANTIATE THE SOURCE OF CASH FOUND AT HIS RESIDENCE ON THE DATE O F SEARCH. THEREFORE, THE TREATMENT OF CASH OF RS.57,16,000/- SO FOUND AS UNEXPLAINED IS UPHELD AND THE GROUNDS RAISED IN THI S REGARD ARE DECIDED AGAINST THE ASSESSEE. 48. LD. AR SUBMITTED THAT THE ASSESSEE HAD ALREADY EXPLAINED TO THE AO AS WELL AS CIT(A) THAT THE GROUP COMPANIES H AD WITHDRAWN CASH. THE DETAILS ARE PART OF PAPER BOOK ( REFER PA GE 28). THE SOURCES ARE ALREADY EXPLAINED. 49. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 50. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE ASSESSEE HAS SUBMITTED THE CASH BOOK , BANK BOOK AND CASH FLOW BEFORE THE LOWER AUTHORITIES TO SHOW THE SOURCE OF CASH ON HAND. IT IS WORTH TO NOTE THAT THE CASH BOOK AND BA NK BOOK REFLECTS NEGATIVE BALANCES, NO DOUBT, THERE ARE HUGE WITHDRA WALS AND RECEIPTS IN THE BOOKS. CONSIDERING THE FACT THAT THE CASH BO OK CARRIES NEGATIVE BALANCE, IT CANNOT BE TAKEN AS PROPER PROOF. MOREOV ER, THE ASSESSEE HAS SHOWN THE EXCESS CASH AND BANK BALANCE ON MONTH LY/YEARLY SUMMARY. THIS IS JUST A SUMMARY OF TRANSACTION. IT HAD FAILED TO EXPLAIN WITH COGENT MATERIAL TO PROVE THE SOURCE OF CASH BALANCE ON HAND. WE ARE NOT IN A POSITION TO APPRECIATE THE EV IDENCE PUT FORTH BY 32 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS THE ASSESSEE. ACCORDINGLY, GROUNDS RAISED BY THE AS SESSEE ARE DISMISSED. NOW WE DEAL WITH THE APPEALS OF THE REVENUE 1. APPEALS OF THE REVENUE IN THE CASE OF SRI K. KRA NTHI REDDY FOR AYS 2007-08 AND 2008-09 IN ITA NOS. 343 & 344/HYD/1 3 2. APPEALS OF THE REVENUE IN THE CASE OF SHRI K. RA VINDER REDDY FOR AYS. 2007-08 & 2008-09 IN ITA NOS. 345 & 346/HY D/13. 3. APPEAL OF THE REVENUE IN THE CASE OF SMT. PRIYAM VADA REDDY FOR AY 2008-09 IN ITA NO. 348/HYD/13. 51. IN ALL THESE APPEALS, THE REVENUE HAS RAISED TH E FOLLOWING GROUNDS: 1) THE CIT(A) HAS ERRED ON BOTH THE FACTS AND LAW. 2) THE CIT(A) OUGHT TO HAVE HELD THAT THE ONUS IS O N THE ASSESSEE TO PROVE HIS CLAIM OF AGRICULTURAL INCOME, WHICH WAS NOT DISCHARGED BY THE ASSESSEE AND THE ENTIRE INCOME SH OWN AS AGRICULTURAL INCOME HAS TO BE TREATED AS INCOME FRO M OTHER SOURCES. 3) THE CIT(A) HAS ERRED IN LAW IN HOLDING THAT ONLY CLOSING DEBIT BALANCES AT THE END OF THE YEAR AFTER CONSIDERING T HE CREDIT ENTRIES DURING THE YEAR HAS TO BE TAKEN FOR ARRIVIN G OF THE DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE U/S 2(22)( E) OF THE IT ACT, INSTEAD OF THE TOTAL AMOUNTS CREDITED BY THE COMPAN Y TO THE ACCOUNT OF THE ASSESSEE. 4) ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F APPEAL HEARING. 52. BEFORE US, THE LD. AR SUBMITTED THAT THE SAID T WO GROUNDS HAVE BEEN COVERED BY THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR AYS 2002-03 TO 2006-07 (APPEALS FILED BY THE REVENUE), THEREFORE, THE SAME MAY BE FOLLOWED IN THESE YEARS ALSO. 53. LD. DR DID NOT CONTROVERT THE SUBMISSIONS OF TH E LD. AR OF THE ASSESSEE NOR BROUGHT ANY CONTRARY DECISION IN THIS REGARD. 33 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS 54. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. AS SUBMITTED BY THE LD. AR, IN ASSESSEE S OWN CASE FOR AYS 2002-03 TO 2006-07, THE REVENUE HAS RAISED SIMI LAR GROUNDS, FOR THE SAKE OF CONVENIENCE, WE REPRODUCE THE GROUNDS R AISED IN EARLIER AYS.: 1) THE CIT(A) HAS ERRED ON BOTH THE FACTS AND LAW. 2) THE CIT(A) OUGHT TO HAVE HELD THAT THE ONUS IS O N THE ASSESSEE TO PROVE HIS CLAIM OF AGRICULTURAL INCOME, WHICH WAS NOT DISCHARGED BY THE ASSESSEE AND THE ENTIRE INCOME SH OWN AS AGRICULTURAL INCOME HAS TO BE TREATED AS INCOME FRO M OTHER SOURCES. 3) THE CIT(A) HAS ERRED IN LAW IN HOLDING THAT ONLY CLOSING DEBIT BALANCES AT THE END OF THE YEAR AFTER CONSIDERING T HE CREDIT ENTRIES DURING THE YEAR HAS TO BE TAKEN FOR ARRIVIN G OF THE DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE U/S 2(22)( E) OF THE IT ACT, INSTEAD OF THE TOTAL AMOUNTS CREDITED BY THE COMPAN Y TO THE ACCOUNT OF THE ASSESSEE. 4) ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F APPEAL HEARING. 54.1 SINCE, SIMILAR ISSUES AND GROUNDS ARE RAISED B Y REVENUE, WE ARE BOUND TO FOLLOW THE FINDINGS OF EARLIER DECISION. T HE FINDINGS ARE AS BELOW: FOR GROUND NO. 2: 24. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL FACTS ON RECORD. THE AGRICULTURAL INCOME W AS TREATED AS OTHER INCOME DUE TO THE FACT THAT THERE WAS NO MATE RIAL FOUND DURING SURVEY TO CORROBORATE THE EVIDENCE TO SHOW T HAT ASSESSEE HAS ACTUALLY CARRIED OUT AGRICULTURAL ACTIVITIES. BUT THE ASSESSEE HAS DISCLOSED AGRICULTURAL INCOME IN ALL THE YEARS. ONLY IN AY 2003-04 AND AY 2004-05, THERE WAS SCRUTINY ASSESSME NT AND IN WHICH THE AO HAS VERIFIED THE RECORDS AND MADE ADJU STMENTS TO THE AGRICULTURAL INCOME. HE PARTLY ACCEPTED AGRICUL TURAL INCOME AND HE TREATED PART OF THE INCOME AS INCOME FROM OT HER SOURCES. IT SHOWS THAT THE AO HAD APPLIED HIS MIND AND DETER MINED THE AGRICULTURAL INCOME. THE SAME CANNOT BE DENIED SIMP LY BECAUSE ASSESSEE COULD NOT SUBMIT ANY EVIDENCE DURING SEARC H. IN OUR CONSIDERED VIEW, THE DEPARTMENT CANNOT HAVE TWO VIE WS ON THE 34 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS SAME MATTER. THE AO IN THE EARLIER ASSESSMENT, DETE RMINED THE AGRICULTURAL INCOME AFTER APPLYING HIS MIND. NOW, T HE PRESENT AO CANNOT DOUBT THE WISDOM OF THE EARLIER AO. CONSIDER ING THE ABOVE, THE INCOME DETERMINED U/S 143(3) HOLDS GOOD FOR ASSESSMENT U/S 153A ALSO. TAKING THE FINDINGS OF LD . CIT(A) IN ASSESSMENT U/S 143(3) AS STANDARD AND ACCEPT THE AG RICULTURAL INCOME IN AY 2002-03, 2005-06 AND 2006-07. HENCE, G ROUNDS RAISED BY THE DEPARTMENT ARE DISMISSED. FOR GROUND NO. 3: 30. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL FACTS ON RECORD. THERE IS NO DISPUTE WITH REGARD TO APPLICATION OF PROVISIONS OF SECTIONS 2(22)(E) IN T HIS CASE. CIT(A) HAS ADJUDICATED THAT THERE EXISTS CREDIT BALANCE IN THE BOOKS OF ACCOUNT OF THE RESPECTIVE COMPANY, IN FAVOUR OF THE ASSESSEE, IT HAS TO BE ADJUSTED TO ARRIVE AT THE NET AMOUNT, WHI CH CAN BE TREATED AS DEEMED DIVIDEND. THE MUTE QUESTION BEFOR E US IS WHETHER THE PAYMENT ITSELF WILL AMOUNT TO DEEMED DI VIDEND OR THERE CAN BE ROOM FOR MAKING ANY ADJUSTMENT AS ADJU DICATED BY THE CIT(A). AS PER THE PROVISIONS OF SECTION 2(22)( E) ANY PAYMENT BY A COMPANY, OF ANY SUM, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL O WNER OF SHARES, HOLDING NOT LESS THAN 10% OF THE VOTING POW ER. AT THE SAME TIME IN EXCLUSION CLAUSE (II), IT EXCLUDES ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER BY A COMPANY IN THE ORDI NARY COURSE OF ITS BUSINESS. THE MEANING ORDINARY COURSE CAN BE BUSINESS OF FINANCING OR COULD BE IN THE ORDINARY RUNNING OF TH E BUSINESS SAY DIRECTORS MAY BE DEALING ON BEHALF OF COMPANY, IN T HAT PROCESS THEY WILL TAKE ADVANCE FOR THAT PURPOSE. THESE KIND OF ADVANCES AND RELATING CREDIT IN THEIR RESPECTIVE ACCOUNT SHO ULD BE EXCLUDED. LD. AO IS NOT TRACING THE ACTUAL ADVANCE PAYMENT TO DIRECTOR RATHER, HE TAKES ONLY THE DEBIT BALANCES W ITHOUT CONSIDERING THE CREDIT BALANCES. WHEN THE DIRECTOR IS REPRESENTING AND HABITUALLY TAKING MONEY AND RETURN ING IT, AT THIS SITUATION, ONE HAS TO TAKE THE NET BALANCE. THE MUT E POINT TO CONSIDER IN DEALING WITH THE DEEMED DIVIDEND IS, WH ETHER THE DIRECTOR TAKES THE UNDUE ADVANTAGE BY TAKING ADVANC E FROM THE COMPANY. IN THE GIVEN CASE, THERE IS NO SPECIFIC WI THDRAWAL BY THE DIRECTOR AS ADVANCES. IT IS ACCUMULATION OF SMA LL ADVANCES, IN THIS CASE, THE DEPARTMENT HAS TO CONSIDER THE NET A DVANCE TAKEN BY THE DIRECTOR. HENCE, THE FINDINGS OF THE CIT(A) IN THIS CASE IS FOUND TO BE PROPER. THE GROUND RAISED BY THE DEPART MENT IS DISMISSED. 30.1 MOREOVER, THE SPECIFIC ADVANCE TAKEN BY THE DI RECTOR, THEN ONLY THE CREDIT ENTRY IN THE BOOKS CAN BE ADDED AS DEEMED DIVIDEND THAT IN THE PRESENT CASE THERE IS NO SPECI FIC CREDIT FOR 35 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS LOAN. HENCE, ONLY THE NET BALANCE ALONE CAN BE TREA TED AS DEEMED DIVIDEND. 55. AS THE ISSUES UNDER CONSIDERATION ARE MATERIALL Y IDENTICAL TO THAT OF AYS 2002-03 TO 2006-07, FOLLOWING THE DECIS ION OF THE COORDINATE BENCH IN THOSE YEARS, WE DISMISS THE GR OUNDS OF APPEAL RAISED BY THE REVENUE IN ALL ITS APPEALS. 56. IN THE RESULT, ALL THE APPEALS OF REVENUE ARE D ISMISSED. 57. TO SUM UP, ASSESSEES APPEALS ARE PARTLY ALLOW ED FOR STATISTICAL PURPOSES AND REVENUES APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 21 ST APRIL, 2017 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 21 ST APRIL, 2017 KV COPY TO:- 1. SHRI K. RAVINDER REDDY, 8-2-120/86, PLOT NO. 11 & 12, KEERTHI AND PRIDE TOWERS, ROAD NO. 2, BANJARA HILLS, HYDERABAD 34. 2. SMT. PRIYAMVADA REDDY 2. SHRI K. KRANTHI KIRAN REDDY, 3. DCIT, CC 6, HYD. 4. ACIT, CC 2, HYDERABAD 5. CIT(A) 1, HYDERABAD 6. CIT (CENTRAL), HYD. 7. DR, ITAT, HYDERABAD 8. GUARD FILE 36 ITA NO. 402/H/13 AND OTHERS SHRI K. RAVINDER REDDY, HYD. AND OTHERS S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER