M/s Crescent Real Estates, Hyderabad V. JCIT, Hyderabad

ITA 494/HYD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3330 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSHASREE ANANTA KRISHNAN
• Assessee Lawyers: K C DEVADAS
• Keywords: Unexplained investment; Capital asset; Depreciation; Income from undisclosed sources; Loose papers; Opportunity of cross examination; Question of law; Fair market value; Valuation report
• Section: 133A; 68; 69; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.494/HYD/2010 : ASSESSMENT YEAR 2006-0 7 M/S. CRESCENT REAL ESTATES, HYDERABAD. (PAN AAACQ O733 H) VS JOINT COMMISSIONER OF INCOME-TAX, RANGE-8, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.C. DEVADAS RESPONDENT BY : SMT. SUSHASREE ANANTA KRISHNAN O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-III, HYDERAB AD DATED 26.2.2010 FOR THE ASSESSMENT YEARS 2006-07. 2. EFFECTIVE GROUNDS OF THE ASSESSEE IN THIS APPEAL READ AS FOLLOWS- 1. ON FACTS AND CIRCUMSTANCES FO THE CASE, THE COM MISSIONER(APPEALS) ERRED IN ESTIMATING NET PROFIT ON TOTAL BILLS OF RS.2,90,48,890/- AT 12%. 2. ON FACTS AND CIRCUM STANCES OF THE CASE, THE COMMISSIONER(APPEALS) WAS NOT JUSTIFIED IN CONFIRMI NG THE ASSESSMENT OF SUM OF RS.69,45,000/-, WITHOUT PROPERLY APPRECIATING PROVISIONS OF LAW AND FACTS O F THE CASE. 3. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER(APPEALS) WAS NOT JUSTIFIED IN CONFIRM ING THE ASSESSMENT OF SUM OF RS.2,12,28,000/-, WITHOUT ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 2 PROPERLY APPRECIATING PROVISIONS OF LAW AND FACTS O F THE CASE. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A FIRM WHICH DERIVES INCOME FROM BUSINESS IN REAL ESTATE. IT HAS FILED ITS RETURN OF INCOME ON 31.3.2007 SHOWING INCOME OF RS.32,9 5,380. THOUGH THE RETURN WAS INITIALLY PROCESSED UNDER S.143(1 ) OF THE ACT, THE SAME WAS TAKEN UP FOR SCRUTINY. 4. A SURVEY OPERATION UNDER S.133 OF THE ACT WAS CARR IED OUT IN THE BUSINESS PREMISES OF THE ASSESSEE ON 30.8.2006, DURI NG THE COURSE OF WHICH INCRIMINATING MATERIAL WAS FOUND AND IMP OUNDED. THE SURVEY ALSO REVEALED THAT THE ASSESSEE HAS NOT MAINTAI NED ITS BOOKS OF ACCOUNT FOR DIFFERENT FINANCIAL YEARS PROPERLY AND THE CASH BOOK AND LEDGER, WHICH ALONE WERE MAINTAINED, TOO WE RE INCOMPLETE, WITH THE CASH BOOK CONTAINING ENTRIES ONLY EXPENSES WITHO UT RECORDING THE RECEIPTS. THE ASSESSING OFFICER, THEREFORE, IN THE SCRUTINY ASSESSMENT CONCLUDED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT RELIABLE. THOUGH THE ASSESSEE HAS PREPARED A RECONCILIATION OF BOOKS OF ACCOUNT AFTER OBTAINING COPI ES OF IMPOUNDED DOCUMENTS AND OTHER STATEMENTS, THE ASSESSING OFF ICER FOUND SUCH RECONSTRUCTED ACCOUNTS AND RECONCILIATION STATEMEN TS, TOO NOT RELIABLE AND ACCORDINGLY REJECTED THE SAME. 5. THE ASSESSING OFFICER NOTED THAT THE IMPOUNDED DOCUMENTS AS PER ANNEXURE 13, CONTAIN TWO RECEIPTS. THE I MPOUNDED DOCUMENT AT PAGE 24 AS PER THE SAID ANNEXURE, IS A RECE IPT DATED 20.3.2006 SIGNED BY ONE SHRI S.VENKAT REDDY, AS PER W HICH HE HAS RECEIVED AN AMOUNT OF RS.10,00,000 IN CASH TOWARDS SALE OF AGRICULTURAL LAND IN SY. NOS.116, 124,125, 126 AND 12 7 ADMEASURING IN ALL TO 5 ACRES AND 21 GUNTAS, SITUATED AT DUBBACHERLA VILLAGE, ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 3 RAJENDRA NAGAR MANDAL FOR RS.99,45,000. THE ASSESSING OFFICER FURTHER NOTED THAT DOCUMENTS AT PAGES 25 TO 27 OF THE ABOVE IMPOUNDED MATERIAL, PERTAIN TO ANOTHER RECEIPT ISSUED IN THE NAMES OF FIVE PERSONS, NAMELY, (1) SHRI V.SANJEEVA REDDY, S/O. NARAYANA REDDY, (2) SHRI J.SRIDHAR REDDY, S/O. SHRI SAI REDD Y (3) SHRI K.GOPAL REDDY S/O. SHRI KISTA REDDY (4) SHRI M.JANARDHAN RED DY, S/O. SHRI STATYANARAYANA REDDY AND (5) SHRI M.PRAMOD REDDY, S /O. SHRI SATYANARAYANA REDDY. THE ASSESSING OFFICER FURTHER NOT ED THAT AS PER THE SAID RECEIPT, FOUR PERSONS HAVE RECEIVED AN AGGREGA TE AMOUNT OF RS.19,00,000 THROUGH CHEQUES DRAWN ON BANK OF INDIA, M ALAKPET, HYDERABAD AND THE SAID AMOUNT WAS PAID VIDE THREE CHEQ UES FOR RS.5,00,000 EACH DATED 20.3.2006 ISSUED IN THE NAMES OF SHRI V.SANJEEVA REDDY, SHRI K.GOPAL REDDY LAND SHRI M.JA NARDHAN REDDY AND ANOTHER CHEQUE OF THE SAME DATE FOR RS.4,00,000 WA S ISSUED IN THE NAME OF SHRI M.PRAMOD REDDY AND AS PER THE SAID R ECEIPT THE SAME AMOUNTS WERE RECEIVED BY THEM FROM M/S. CRESCENT REA L ESTATE DEVELOPERS, REPRESENTED BY SHRI V.MASTAN SAHEB, AND ACCO RDING TO THE ASSESSING OFFICER, THE SAID RECEIPT RELATES TO SALE CONSID ERATION IN RESPECT OF THE AGRICULTURAL LAND IN SURVEY NO.116/1, 120, 124, 125, 126 AND 127 TOTALLING TO 13 ACRES AND 23 GUNTAS SITUAT ED IN DUBBACHERLA VILLAGE. THE ASSESSING OFFICER OBSERVED THAT AS PER THE SAID RECEIPT OUT OF THE TOTAL SALE CONSIDERATION OF RS.2, 49,78,000 A SUM OF RS.80,00,000 HAS ALREADY BEEN RECEIVED BY THEM A ND THEY HANDED OVER PHYSICAL POSSESSION OF THE AGRICULTURAL LAND. SHE FURTHER NOTED THAT THIS RECEIPT DATED 20.11.2005 HAS NOT BEEN SIGNED BY THE ABOVE FIVE PERSONS. 6. DURING THE COURSE OF SURVEY, MANAGING PARTNER OF T HE ASSESSEE FIRM, SHRI V.KHADER BASHA WAS EXAMINED, AND WHEN CONFR ONTED WITH THE ABOVE TWO RECEIPTS, HE EXPRESSED IGNORANCE ABOUT THE SAME. THE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 4 ASSESSING OFFICER FURTHER NOTED THAT LATER A SURVEY OPERA TION WAS CONDUCTED ON 1.9.2006 IN THE PREMISES OF SHRI S.VANKAT REDDY AND IN HIS STATEMENT RECORDED DURING THE SAID SURVEY, HE CONFIR MED SALE OF AGRICULTURAL LAND ADMEASURING 5 ACRES AND 21 GUNTAS AT D UBBACHARLA VILLAGE, TO THE ASSESSEE FOR RS.99,45,000 AND RECEIPT OF RS.10,00,000 IN CASH FROM THE ASSESSEE AS PER THE SAID RECEIPT FOUND IN THE PREMISES OF THE ASSESSEE. HE FURTHER SUBMITTED THAT OUT OF THE ABOVE AMOUNT OF SALE CONSIDERATION, HE RECEIVED RS.30,00,000 IN THE FORM OF CHEQUES AND THE BALANCE AMOUNT OF RS.69,45,000 IN CASH FR OM THE ASSESSEE ON DIFFERENT DATES. IN THE SWORN STATEMENT OF SHRI V.KHADER BASHA, RECORDED SUBSEQUENT TO SURVEY ON 4.9.200 6, HE CONFIRMED PURCHASE OF LAND ADMEASURING 5.21 ACRES AT DUHB BACHEARLA VILLAGE FOR RS.99,45,000 AND MAKING PAYMENT OF RS.30, 00,000 THROUGH CHEQUES AND THE BALANCE AMOUNT OF RS.69,45,000 IN CASH TO SHRI S.VENAKT REDDY. THE ASSESSING OFFICER FURTHER NOT ED THAT SHRI KHADER BASHA HAS FURTHER STATED THAT SUCH LAND WAS PURCHA SED AT THE RATE OF RS.18,000 PER ACRE AND THE ENTIRE TRANSACTION W AS COMPLETED IN THE MONTH OF MARCH, 2006. 7. AS FOR THE SECOND RECEIPT RELATING TO PURCHASE OF LAN D FOR RS.2,49,78,000, SHRI KHADER BHASHA STATED IN HIS STATE MENT THAT HE HAS ENTERED INTO AN AGREEMENT WITH ONE DR.JIYAUDDIN AND ANOTHER SHRI M. SATYANARAYANA REDDY, SAMSHABAD (LAND OWNERS) IN NOVEMBER 2005 FOR PURCHASE OF 13 ACRES AND 22 GUNTAS OF AGRICULTURAL LAND AT DUBBACHERLA BELONGING TO THEM AT THE RATE OF RS.1,50,000 PER ACRE. HE FURTHER SUBMITTED THAT THOUG H THE MARKET VALUE OF THE LAND WAS RS.4 TO 5 LAKHS PER ACRE, HE PURCH ASED THE SAME AT RS.1,50,000 PER ACRE DUE TO SOME LITIGATIONS IN VOLVED THEREIN. HE FURTHER SUBMITTED THAT THE SAME LAND WAS G IVEN FOR DEVELOPMENT IN DECEMBER, 2005 TO THE ABOVE FIVE PERS ONS, WHOSE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 5 NAMES APPEARED IN THE SAID RECEIPT, AND A SUM OF RS.19,0 0,000 WAS PAID TO THE ABOVE PERSONS THROUGH CHEQUES FOR THE DEVE LOPMENT OF THE LAND. HE HOWEVER CONTENDED THAT THE AMOUNT OF RS .2,49,78,000 MENTIONED IN THE SAID RECEIPT WAS NOT CORRECT. 8. AS FOR THE PAYMENT OF RS.69,45,000 MADE TO SHRI S.VENKAT REDDY, IT WAS SUBMITTED BEFORE THE ASSESSING OFF ICER THAT SUCH AMOUNT WAS PAID IN CASH TO HIM DURING 18.3.2006 TO 28.3.2006 AFTER MAKING CASH WITHDRAWALS FROM BANK ACCOUNT WITH BA NK OF INDIA MALAKPET BRANCH IN MARCH, 2006. THE ASSESSING OFFICER EXA MINING THIS ASPECT OF THE MATTER, NOTED THE WITHDRAWALS MADE FROM THE BANK ACCOUNT IN PARA 3.5 OF THE ASSESSMENT ORDER ON PAGE 8 THE REOF. HOWEVER, SHE NOTED THAT THERE WERE NO ENTRIES IN THE CASH BOOK OF THE ASSESSEE RELATING TO SUCH PAYMENTS CLAIMED TO HAVE BE EN MADE IN THE MONTH OF MARCH, 2006. FURTHER, SINCE SHRI VENKAT REDDY IN HIS STATEMENT RECORDED ON 4.9.2006 STATED THAT HE HAS RECEI VED THE AMOUNTS IN CASH DURING THE PERIOD FROM JANUARY, 2006 T O MARCH, 2006, VIDE LETTER DATED 26.10.2006 THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAID CASH PAYMENTS AMOUNT ING TO RS.69,45,000 SHOULD NOT BE TREATED AS MADE OUT OF THE UNACCOUNTED INCOME IN THE HANDS OF THE ASSESSEE. THE ASSESSEE VIDE L ETTER DATED 7.11.2006 SUBMITTED THAT IT WAS PREPARING THE CASH BOOK ON THE BASIS OF BANK STATEMENTS. LATER, BY LETTER DATED 8.12.206 , IT WAS SUBMITTED THAT AFTER OBTAINING THE COPIES OF STATEMENT OF SALES, THEY HAVE DRAWN PROFIT AND LOSS ACCOUNT IN RECONCILIATION WITH THE BANK STATEMENT TO ARRIVE AT THE TAXABLE INCOME AND NO BALA NCE SHEET COULD BE PREPARED AS THE RELEVANT LEDGER AND OTHER RECORDS W ERE NOT IN THEIR POSSESSION. IT WAS ALSO SUBMITTED THAT WHILE COMPUTI NG TOTAL INCOME, 20% OF CASH PAYMENTS MADE TO SHRI S.VENKAT REDD Y WAS ADDED BACK UNDER S.40A(3) OF THE ACT. THE ASSESSING OFFI CER ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 6 HOWEVER, HAS NOT ACCEPTED THE SUBMISSIONS OF THE ASSESSEE. SH E NOTED THAT AS PER THE LEDGER ACCOUNT OF SHRI S.VENKAT REDDY, PREPARED BY THE ASSESSEE SUBSEQUENTLY, CASH PAYMENTS AMOUNT ING TO RS.69,45,00 WERE RECORDED ON FOUR DIFFERENT DATES, VI Z. 20.3.2006 (RS.10,00,000), 22,3.2006(RS.15,00,000), 23.3.2006(23 ,45,000) AND 23.3.2006(RS.21,00,000). SHE FURTHER NOTED THAT AS P ER THE LEDGER ACCOUNT OF SHRI S.VENKAT REDDY, CONTAINED IN THE IMPOU NDED LEDGER OF THE ASSESSEE FOR THE PERIOD 1.4.2005 TO 31.3.2006, T HERE WERE CHEQUE PAYMENTS OF RS.7,81,000 AND RS.12,19,000, BOTH M ADE ON 15.2.2006 AND OF RS.10,00,000 MADE ON 10.3.2006. SH E FURTHER NOTED THAT THOUGH THE CASH BOOK CONTAINS THE WITHDRAWAL S FROM THE BANK ACCOUNT WITH BANK OF INDIA, THERE ARE NO ENTRIES RELATING TO PAYMENTS MADE. ACCORDING TO THE ASSESSING OFFICER, IF SUCH AMOUNTS WERE INTENDED FOR MAKING CASH PAYMENTS TO SHRI S.VENKA T REDDY, THE ASSESSEE WOULD HAVE MADE CORRESPONDING ENTRIES IN THE LEDG ER ACCOUNT. SHE ALSO NOTED THAT DURING THE POST SURVEY PR OCEEDINGS IN THE CASE OF SHRI S.VENKAT REDDY, THE LATTER HAS PRODU CED COPIES OF RECEIPTS IN SUPPORT OF CASH PAYMENTS MADE BY HIM, OUT OF SALE CONSIDERATION OF RS.69,45,000 RECEIVED BY HIM FROM SHRI KAHADER BASHA, AS PER WHICH HE HAS PAID CASH OF RS.17,45,000 ON 1 .3.2006 AND OF RS.21,50,000 ON 2.3.2006 TO SHRI GOPAL REDDY OF SHAMSHABAD AND ON 14.2.006 HE HAS PAID CASH OF RS.30,80,000 TO TW O OTHER PERSONS, NAMELY, SRIR T.RAMESH AND SHRI DAYANAND. THE ASSESSING OFFICER FURTHER NOTED THAT AS PER THE ENTRIES AT PAGE 72 OF THE NOTE IMPOUNDED NOTE BOOK NO.8, IMPOUNDED FROM THE PREMISE S OF SHRI S.VENKAT REDDY, HE HAS RECEIVED CASH OF RS.20,00,00 ON 14.2.2006 FROM SHRI KHADER BHASHA. THE ENTRIES ON THAT PAGE CO NTAIN THE DENOMINATIONS OF CURRENCY NOTES FOR THE TOTAL AMOUNT OF RS.20,00,000 RECEIVED ON THAT DATE. IN THIS VIEW OF THE MATTER, T HE ASSESSING OFFICER CONCLUDED THAT SHRI S.VENKAT REDDY HAS RECEIVED CASH ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 7 PAYMENTS PERTAINING TO SALE OF 56 ACRES AND 21 GUNTAS O F LAND MADE BY HIM TO THE ASSESSEE FIRM, MUCH BEFORE 18.3.2006 AND T HE CASH WITHDRAWALS MADE BY THE ASSESSEE FORM ITS BANK ACCOUNT AFTE R 18.3.2006 WERE NOT MEANT FOR MAKING PAYMENTS TO SHRI S.VENKAT REDDY. SHE FURTHER NOTED THAT THOUGH THE ASSESSEE HAS SH OWN PAYMENTS OF RS.69,45,000 IN CASH TO SHRI S.VENKAT REDDY , IN ITS RECONSTRUCTED BOOKS OF ACCOUNT, SHOWING THEM AS MADE OUT O F CASH WITHDRAWALS FROM ITS BANK ACCOUNT, THE SAME CANNOT BE ACCEP TED. IN THE CIRCUMSTANCES, OBSERVING THAT BOOKS OF ACCOUNT WERE NOT UPDATED BY THE ASSESSEE TILL THE TIME OF SURVEY OPERATI ONS CONDUCTED ON 30.8.2006 AND IT WAS ONLY FOLLOWING THE SURVEY OPE RATION THAT THE ASSESSEE HAS PREPARED ITS BOOKS OF ACCOUNT, ACCOUNTING FOR ALL THE UNACCOUNTED PAYMENTS IN ONE WAY OR THE OTHER, AND OBSE RVING THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE FOR THE CASH PAYMENT OF RS.69,45,000 MADE BY THE ASSESSEE TO SHRI S.VENKAT REDDY DURING THE FINANCIAL YEAR 2005-06, THE ASSESSING OFFICER HELD T HE SAID AMOUNT WAS UNEXPLAINED INVESTMENT OF THE ASSESSEE, AND ACCORDINGLY ADDED THE SAME UNDER S.69A OF THE ACT. 9. AS FOR THE OTHER RECEIPT, THE ASSESSING OFFICER NOTED THAT STATEMENTS OF SHRI M.JANARDHAN REDDY, SHRI M.PRAMOD REDDY AND SHRI V.SANJEEVA REDDY, WHOSE NAMES APPEAR IN THE SAID RECEIPT AS PER PAGE NUMBERS 25 TO 27 OF THE IMPOUNDED DOCUMENTS AS PER ANNEXURE 13 WERE RECORDED ON 11.9.2006. WHEN CONFRON TED WITH THE SAID RECEIPTS, WHILE SHRI V.JANARDHAN REDDY AND SRHI M .PRAMOD REDDY EXPRESSED IGNORANCE ABOUT THE SAME, THE LATTER AD MITTED THAT HE HAS TAKEN UP 2.5 ACRES LAND AT DUBBACHARLA VILLAGE F OR DEVELOPMENT IN NOVEMBER/DECEMBER, 2005 AND WAS PAID A N AMOUNT OF RS.8.70 LAKHS VIDE THREE CHEQUES BY THE ASSESSEE FOR TH E SAID PURPOSES. HE SUBMITTED THAT SUCH WORK INVOLVED FELLING OF TREES, ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 8 REMOVALS OF BOULDERS AND LEVELING OF LAND AND THE DEV ELOPMENT WORK ASSIGNED TO HIM WAS COMPLETED IN MARCH, 2006. SHRI SAN JEEVA REDDY IN HIS STATEMENT SUBMITTED THAT HE HAS ENTERED INTO AGREEMENT WITH THE ASSESSEE FOR DEVELOPMENT OF THE SAID LAND AT DUBBACHARLA VILLAGE AND WAS PAID AN AMOUNT OF RS.9,70, 000 AS ADVANCE FOR THE SAME. SHRI K.GOPAL REDDY, WHOSE STA TEMENT WAS RECORDED ON 31.8.2006, STATED THAT HE AND HIS FRIENDS M ADE A PROPOSAL IN THE MONTH OF DECEMBER, 2005 FOR SALE OF AG RICULTURAL LAND AT MAHESWARAM, AND HE RECEIVED A SUM OF RS.5,00,000 BY CHEQUES TOWARDS THIS TRANSACTION. WHEN CONFRONTED WITH THE SECOND RECEIPT IN QUESTION, HE STATED THAT THE SAME WAS A COPY OF RECEIPT G IVEN BY THEM ACKNOWLEDGING RECEIPT OF RS.19,00,000 BY HIM AND HIS FRIENDS, OUT OF TOTAL CONSIDERATION OF RS.2,49,78,000 FROM SHRI MASTAN SAHEB FOR SALE OF 13 ACRES 32 GUNTAS OF LAND AT DUBBACHARLA VI LLAGE. WHEN ASKED ABOUT HIS SHARE IN THE SAID TOTAL SALE CONSIDERATIO N, HE STATED THAT THOUGH HE KNOWS THAT THE SALE CONSIDERATION IS RS.2, 49,78,000, HE IS NOT AWARE OF THE SAME HE WAS NOT ACTIVELY ENGAGED IN THE SAID ACTIVITY. 10. THE OWNER OF 25% OF 13.23 ACRES OF LAND AT DUBBA CHARLA VILLAGE, SHRI M.SATYANARAYANA REDDY, AS NOTED BY THE ASSESSING OFFICER, WAS RECORDED UNDER S.131 ON 25.9.2006. HE SU BMITTED THAT HE ALONGWITH DR.JIAUDDIN, HAVE PURCHASED THE SAID LAND AT RS.1,50,000 PER ACRE, AND THAT DUE TO PROBLEMS LIKE PR OTECTED TENANCY AND OTHER COURT CASES IN THE SAID LAND, THEY HAV E DECIDED TO SELL THE SAME TO SHRI KHADER BASHA, OF M/S. CRESCENT REAL ESTATES AND DEVELOPERS AT RS.1,50,000 PER ACRE. THE ASSESSING OFFI CER FURTHER NOTED THAT ON 20.11.2006, STATEMENT OF SHRI JIAUDDIN , WHO IS OWNER OF 75% OF THE SAID LAND OF 13.23 ACRES AT DUBBACHARLA V ILLAGE, WAS RECORDED , WHEREIN HE STATED THAT HE ALONGWITH SHRI S ATYANAARAYANA ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 9 REDDY PURCHASED VACANT LAND OF 13.23 ACRES FOR A CONSIDER ATION OF RS.20,36,500 VIDE SALE DEED DATED 22.10.2005. LATER THEY SOLD THE SAID VACANT LAND OF 13.23 ACRES TO M/S. CRESCENT REAL ESTAT ES, VIDE SALE DEED EXECUTED ON 25.3.2006 FOR SALE CONSIDERATION O F RS.20,36,500. WHEN ASKED BY THE ASSESSING OFFICER ABOUT T HE SALE OF LAND IN THE SAME AREA AND IN THE SAME SURVEY NOS. BY SH RI S.VENKAT REDDY OF SHAMSHABAD AT A RATE OF RS.18,00,000 PER ACRE TO M/S. CRESCENT REAL ESTATES, HE SUBMITTED THAT AS HE CAME TO KNO W ABOUT PROTECTED TENANCY IN THE SAID LAND AND THE FACT OF THE VENDOR, SHRI T.VIDYANAND ENTERING INTO AGREEMENT OF SALE IN RESPECT OF THE SAID LAND, HE SOLD AWAY THE SAID LAND AT A RATE OF RS.1,50, 000 PER ACRE TO M/S. CRESCENT REAL ESTATE. ON FURTHER QUERIES RAISED BY THE ASSESSING OFFICER, HE HAS SUBMITTED THAT THERE WERE NO TRE ES ON THE SAID LAND AND HE HAS SOLD AWAY THE VACANT LAND TO M/S. CRESCENT REAL ESTATES IN MARCH, 2006 AND THAT HE DID NOT INCUR ANY EX PENDITURE WITH REGARD TO PROTECTED TENANCY AND OTHER LITIGATION INVO LVED IN THE SAID LAND. WHEN CONFRONTED WITH THE NAMES OF THE FIVE PE RSONS MENTIONED IN THE RECEIPT, HE STATED THAT HE DOES NOT KNOW THEM. 11. FURTHER DURING THE ASSESSMENT PROCEEDINGS, STATEME NT OF SHRI KHADER BASHA WAS AGAIN RECORDED UNDER S.131 OF THE ACT ON 19.12.2008. AT THAT STAGE, WHEN CONFRONTED WITH THE SECOND RECEIPT AT PAGE NOS.25, 26 AND 27 OF THE IMPOUNDED DOCUMENTS, HE REITERATED THAT HE IS NOT AWARE OF THE SAID RECEIPT. WHEN QUESTIONED AS TO HOW HE CAN DENY HAVING ANY KNOWLEDGE ABOUT THE SAID RECEIPT WHEN THE ASSESSEE FIRM OF WHICH HE IS A PARTNER, HAS GIVEN POST DATED CHEQUES FOR CERTAIN DEVELOPMENTS IN THE SAID LAND TO THO SE PERSONS, HE SUBMITTED THAT THEY WERE NOT LAND OWNERS. HE STATED THAT THOSE PERSONS WHOSE NAMES WERE APPEARING IN THE SAID RECEIPT WE RE LOCAL INFLUENTIAL PERSONS, AND THEIR SERVICES WERE UTILISED FO R DEVELOPMENT ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 10 OF LAND. HE JUSTIFIED THE LESSER RATE OF RS.1,50,000 PE R ACRE BY STATING THAT IT WAS DUE TO VARIOUS DISPUTES INVOLVED IN THE SAID LAND. HE ALSO STATED THAT SINCE THE NAME OF SHRI MASTAN SAHEB W AS MENTIONED IN THE SAID RECEIPT, HE MAY BE AWARE OF SUCH RECEIPT. 12. THE ASSESSING OFFICER ALSO RECORDED THE STATEMENT OF SHRI MASTAN SAHEB, WHO IS BROTHER OF SHRI KHADER BASHA ON 2 2.12.2008. IN HIS STATEMENT HE SUBMITTED THAT IN THE MONTH OF SE PTEMBER, 2005, SHRI SANJEEVA REDDY ALONG WITH OTHER PERSONS HA VE COME TO HIM WITH A PROPOSAL FOR SALE OF 13.23 ACRES OF LAND AT DUBBACHARLA VILLAGE. HE FURTHER STATED THAT THEY HAVE STATED THAT THEY ARE LOCAL PERSONS IN THAT AREA AND THE LAND HAS VARIOUS PROBLEMS, BUT PROMISED TO CLEAR OF ALL THOSE PROBLEMS AND HANDOVER PEACEFUL P OSSESSION OF THE LAND FOR A SALE CONSIDERATION OF RS.2,49,78,000. HE STATED THAT HE ACCEPTED SUCH PROPOSAL AND GAVE SOME TOKEN ADVANCE TO T HEM, WITHOUT CONSULTING HIS BROTHER SHRI KHADER BASHA. LATE R, WHEN HIS BROTHER CAME TO KNOW ABOUT SUCH DEAL, HE STATED, HIS BR OTHER ENQUIRED ABOUT THOSE PERSONS AND FOUND THAT THEY WERE NOT COMPETENT TO CLEAR THE LITIGATION PENDING IN THAT DEA L. HE STATED THAT HIS BROTHER TOOK UPON HIMSELF THE TASK OF CLEARING ALL LITIGATION AND THUS THE ORAL AGREEMENT MADE TO THOSE PERSONS STATED IN THAT RECEIPT, WAS TERMINATED. BUT AS THE LAND WAS INITIALLY SHOWN BY THOSE PERSONS TO HIM, HE CONVINCED HIS BROTHER TO ALLOT SOME DEVELOP MENT WORKS TO THOSE PERSONS. WHEN ASKED BY THE ASSESSING OFFICER, AS TO WHE THER HE WAS AWARE OF THE REAL OWNERS OF THAT LAND, WHEN HE EN TERED INTO ORAL DEAL WITH THOSE PERSONS, HE REPLIED IN THE NEGATIVE. HE FURTHER STATED THAT WHEN HIS BROTHER INTERVENED IN THE MATTER, HE S ETTLED THE TRANSACTIONS WITH THE REAL OWNERS AND CLEAR THE PENDING LITIGATIONS FOR WHICH THE ASSESSEE INCURRED EXPENDITURE OF RS.40,00,000 P AID THROUGH CHEQUES, RECORDED IN THE BOOKS OF ACCOUNT OF THE FIRM. HE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 11 FURTHER SUBMITTED THAT THE PROPERTY WAS FINALLY REGIST ERED IN THE NAME OF THE FIRM IN MARCH, 2006. WHEN FURTHER ASKED BY T HE ASSESSING OFFICER AS TO WHY SUCH RECEIPT DATED 20.11.2005 WAS PREP ARED AND FOUND IN THEIR PREMISES, HE SUBMITTED THAT EVEN BEFORE THE ISSUANCE OF THOSE CHEQUES FOR RS.19,00,000, POSTED DATED CHEQUES F OR RS.23,50,000 WERE ISSUED TO THOSE PERSONS EARLIER. HE SUBM ITTED THAT THOSE PERSONS WANTED THE COMMITMENT TO BE PUT IN W RITING AND THUS THEY BROUGHT THAT RECEIPT TO THEIR OFFICE IN A FL OPPY ACKNOWLEDGING THE CHEQUE PAYMENTS AND DEMANDING FURTHE R PAYMENT. 13. DURING THE ASSESSMENT PROCEEDINGS ON 22.12.2008, AF TER PRODUCING SHRI K.GOPALA REDDY AND FILING A LETTER, T HE ASSESSEE REQUESTED FOR PROVIDING OPPORTUNITY TO CROSS-EXAMINE SH RI K.GOPALA REDDY IN THE PRESENCE OF THE ASSESSING OFFICER. DURING TH E SAID CROSS EXAMINATION BY SHRI KHADER BASHA, MANAGING PARTNER O F THE ASSESSEE FIRM, SHRI GOPALA REDDY SUBMITTED THAT HE ALONG WITH HIS FRIENDS HAD APPROACHED SHRI MASTAN SAHEB FOR SELLING THE LAND OF 1 3.23 ACRES AT A SALE CONSIDERATION OF RS.2,39,78,000 AND THE SAID SALE RE CEIPT MIGHT HAVE BEEN PREPARED BY THEM IN CONNECTION WITH SUCH TRA NSACTION. HE FURTHER SUBMITTED THAT HE AND HIS FRIENDS HAD PLANNE D TO SELL THE SAID LAND AFTER CLEARING ALL LITIGATIONS AND HAVE TAKE N SOME ADVANCES IN THE FORM OF POST DATED CHEQUES. ON QUERY OF SHRI K HADER BASHA AS TO HOW IN HIS STATEMENT RECORDED BY THE DEPARTMENT ON 31.8.2006, HE HAS CONFIRMED THAT THE SALE CONSIDERATION IS RS.2,49,7 8,000, HE STATED THAT THE SAID RECEIPT WAS SHOWN TO HIM BY THE OFF ICERS OF THE DEPARTMENT AND HE ONLY CONFIRMED THAT HE RECEIVED RS.5 ,00,000 THROUGH CHEQUES MENTIONED IN THE RECEIPT. HE FURTHER STATED THAT HE ONLY REFERRED TO THE INITIAL OFFER MADE BY HIS FRIEN DS OF RS.2,49,78,000, WHICH DID NOT WENT THROUGH. ON QUERY RAISED BY THE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 12 ASSESSING OFFICER AS TO WHAT EVIDENCE HE IS HAVING TO SA Y THAT THE DEAL DID NOT MATERIALISE, SHRI K.GOPALA REDDY HAD G IVEN A STATEMENT WHICH, THE ASSESSING OFFICER REPRODUCED IN PARA 4.10.2 OF THE ASSESSMENT ORDER. STILL, THE ASSESSING OFFICER WAS NOT CONVI NCED WITH THE TRUTHFULNESS OF THE STATEMENT OF SHRI GOPAL REDDY, AND REFERRING TO THE STATEMENT GIVEN BY HIM EARLIER ON 31.8.2006, NOTED THAT SHRI GOPAL REDDY HAS COME UP WITH A STORY, WHICH IS ENTIRELY MOTIVATED. SHE FURTHER NOTED THAT EVEN THE STORY PRESENTED BY SH RI MASTAN SAHEB WAS MOTIVATED ONE AND THE SAME WAS AN AFTER THOU GHT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ALSO RECORDED THE STATEMENT OF SHRI JIAUDDIN ON 4.12.2008. IN THE SAID STATEMENT SHRI JIAUDDIN JUSTIFIED THE SALE PRICE OF RS.1 .5 LAKH PER ACRE, AS AGAINST THE VERY SAME PRICE AT WHICH THE LAND IN QUESTION WAS PURCHASED, BY STATING THAT THERE WAS PT CASE AND COURT CASES. HE HOWEVER, COULD NOT ADDUCE ANY DOCUMENTARY EVIDENCE A S TO THE EXISTENCE OF THE SUCH CASES PENDING AGAINST THE LAND. IN THE ABSENCE OF ANY EVIDENCE, WHEN ASKED BY THE ASSESSING OFFICER AS TO HOW HE CONVINCED HIMSELF ABOUT THE LITIGATIONS WITH REGARD TO THE LAND IN QUESTION, SHRI JIAUDDIN STATED THAT THE SHRI GOPAL R EDDY, LOCAL HEAD OF THAT VILLAGE HAS INFORMED THEM THAT THE LAND WAS V EERED UNDER PT, AND ALSO STATED THAT SUCH EVIDENCE RELATING TO LAND LIT IGATION MIGHT BE AVAILABLE WITH SHRI KHADER BASHA. WHEN ASKED AS TO WH ETHER HE KNOWS THE FIVE PERSONS, NAMELY, SHRI SANJEEVA REDY, SH RI SREEDHAR REDDY, SHRI GOPAL REDDY, SHRI JANARDHAN REDDY AND S HRI PRAMOD REDDY, HE STATED THAT HE KNOWS ONLY SHRI GOPAL REDDY, WHO IS THE LOCAL HEAD IN THAT VILLAGE AND HE DOES NOT KNOW THE OTHER PERSONS. WHEN ASKED BY THE ASSESSING OFFICER AT THIS STAGE, AS TO H OW IN THE SALE DEED, SRHI SREEDHAR REDDY HAS SIGNED A WITNESS, HE MERELY STATED THAT HE IS NOT AWARE. ASKED ABOUT THE MODE OF PAYMENT RECEIVED FROM M/S. CRESCENT REAL ESTATE AND DEVELOPERS FO R SUCH LAND ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 13 TRANSACTION, HE SUBMITTED THAT HE HAS RECEIVED THE AMOU NT OF RS.15,27,375 IN CASH FROM SHRI KHADER BASHA, AND THOUGH CHEQUE NUMBERS ARE MENTIONED IN THE SALE DEED, THE SAME WERE NEVER ENCASHED AND HE RECEIVED THE SALE CONSIDERATION IN CASH O NLY. THE ASSESSING OFFICER ALSO RECORDED THE STATEMENT OF SHRI M.SATYANARAYANA REDDY ON 25.11.2008. DURING HIS STAT EMENT BEFORE THE ASSESSING OFFICER, SHRI M. SATYANARAYANA REDDY FEIGN ED IGNORANCE ABOUT THE RECEIPT. HE ALSO EXPRESSED THAT HE IS NOT KNOW ANY OF THE FIVE PERSONS, VIZ. SHRI SANJEEVA REDY, SHRI SREEDHAR REDDY, SHRI GOPAL REDDY, SHRI JANARDHAN REDDY AND SHRI PRAMOD R EDDY, BY NAME, AND WHEN ASKED AS TO HOW SHRI SRIDHAR REDDY HA S SIGNED THE SALE DEED AS A WITNESS, HE STATED THAT ON BEING ASKED BY SHRI JIAUDDIN, HE SIGNED THOSE PAPERS WITHOUT VERIFYING TH E FACTS. ASKED AS TO THE MODE OF PAYMENT RECEIVED FROM M/S. CRESCENT RE AL ESTATES FOR THE LAND TRANSACTION, HE STATED THAT HE HAS NOT R ECEIVED ANY PAYMENT DIRECTLY FROM THAT FIRM OR FROM SHRI KHADER BASHA, AND HE HAS RECEIVED HIS SHARE OF RS.5,00,000 IN CASH IN TWO INSTAL MENTS FROM SHRI JIAUDDIN. 14. IN THE COURSE OF ASSESSMENT ON 20.12.2008, THE ASSESSING OFFICER AGAIN RECORDED THE STATEMENT OF SHRI KHA DER BASHA UNDER S.131 OF THE ACT. IN THE SAID STATEMENT, HE STA TED THAT HE HAS NO IDEA WHEN THE RECEIPT DATED 20.11.2005 SHOWING TOT AL SALE CONSIDERATION AT RS.2,49,78,000 WAS PREPARED. REFERRI NG TO THE NOTING IN THAT RECEIPT AN AMOUNT OF RS.80,00,000 WAS RECEIVED HE SUBMITTED THAT THE SAME MAY BE THEIR STRATEGY TO PUT M ORE PRESSURE ON THEM TO GET MORE AMOUNT AS ADVANCE. HOWEVER, DURIN G SUCH STATEMENT HE SUBMITTED TO PURCHASE PEACE, THE ASSESSEE IS DE CLARING AN AMOUNT OF RS.37,50,000 AS ADDITIONAL INCOME TO COV ER ALL OMISSIONS AND COMMISSIONS COMMITTED IN THE RETURN OF INCOME. THE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 14 ASSESSING OFFICER AFTER CONSIDERING TOTALITY OF THE FACTS AN D CIRCUMSTANCES OF THE CASE AND THE STATEMENTS RECORDED FROM VA RIOUS PERSONS AT VARIOUS STAGES PRIOR TO AND DURING THE ASSESSMENT PROCEEDINGS, CONCLUDED THAT THE LAND ADMEASURING 13.23 ACRES AT DUBBACHARLA VILLAGE WAS ACTUALLY SOLD FOR A SALE CONSIDER ATION OF RS.2,49,78,000 AS PER THE SECOND RECEIPT CONTAINED IN TH E IMPOUNDED DOCUMENTS. SINCE OUT OF THE SAID AMOUNT OF RS.2,49,72,0 00, THE ASSESSEE HAS ISSUED CHEQUES FOR RS.37,50,000 IN FAVOUR OF FIV E PERSONS MENTIONED IN THE SAID RECEIPT, THE ASSESSING OFFICER HELD THAT THE BALANCE AMOUNT OF RS.2,12,28,000 SHALL BE TREATED AS UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE IN THE PURCHA SE OF 13.23 ACRES OF LAND AT DUBBACHERLA. SHE ACCORDINGLY A DDED THE SAID AMOUNT OF RS.2,12,28,000 AS UNEXPLAINED INVESTMENT UN DER S.69A OF THE ACT, DULY TAKING NOTE OF THE FACT OF THE ASSESSEE OFF ERING ADDITIONAL INCOME OF RS.37,50,000 DURING THE ASSESSMENT PROCEEDINGS AS AGAINST THE ABOVE AMOUNT. 15. THE ASSESSING OFFICER FURTHER, REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE UNDER S.145(3) OF THE ACT, NOTED THAT THE ASSESSEE HAS SHOWN TOTAL RECEIPTS FROM SALE OF LANDS AND DI FFERENT PROJECT DURING THE YEAR AT RS.2,90,48,890, AND ESTIMAT ING THE NET PROFIT ON SUCH RECEIPTS AT 12.5% , THE ASSESSING OFFICER COMPUTED THE INCOME FROM SUCH RECEIPTS AT RS.36,31,111. OBSERVING THAT IN THE RETURN OF INCOME, THE ASSESSEE HAS VOLUNTARILY OFFERED RS. 1,25,000 TOWARDS COMMISSION AND OMISSIONS, SHE HELD THAT THE SAME SH ALL ALSO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. TAKING IN TO ACCOUNT THE SAID AMOUNT OF RS.36,31,111 TOWARDS NET PROFIT FRO M SALE OF LAND AND CONSTRUCTION RECEIPTS AND ADDING BACK THE SUM OF RS.1,2 5,000 OFFERED BY THE ASSESSEE IN THE RETURN, THE SUM OF RS.69, 45,000 TOWARDS UNEXPLAINED INVESTMENT IN PURCHASE OF LAND, ME NTIONED AS ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 15 ON-MONEY PAID TO SRHI S.VENAKAT REDDY AND THE SUM OF RS.2,12,28,000 TOWARDS UNEXPLAINED INVESTMENT UNDER S. 69A OF THE ACT IN THE PURCHASE OF 13.23 ACRES OF LAND, THE ASSESSING O FFICER COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.3,19,29, 111 , VIDE ORDER OF ASSESSMENT DATED 26.12.2008 PASSED UNDER S.14 3(3) OF THE ACT. 16. ON APPEAL BEFORE THE CIT(A), ASSESSEE RAISED ELABOR ATE CONTENTIONS CONTESTING THE ADDITIONS MADE BY THE ASSESSING OFFICER AND ALSO FILED DETAILED WRITTEN SUBMISSIONS. THE CIT(A ) FORWARDED A COPY OF THE WRITTEN SUBMISSIONS OF THE ASSESSEE ALONG THE PA PER BOOK FILED BY THE ASSESSEE, WITH A DIRECTION TO MAKE NECESSARY ENQUIRIES AND VERIFICATION IN THE MATTER AND TO SUBMIT A DETAIL ED REMAND REPORT ON SUCH SUBMISSIONS OF THE ASSESSEE. IN RESPONSE, THE ASSESSING OFFICER VIDE HIS LETTER DATED 7.1.2010 FURNISHED THE R EMAND REPORT. THE SAID REMAND REPORT WAS FORWARDED TO THE ASSESSEE AND AFTER HEARING THE APPEAL THEREAFTER, THE CIT(A) HAS PASSED T HE IMPUGNED ORDER DATED 26.2.2010. THE CIT(A) IN THE FIRST PLACE DIRECTED THE ASSESSING OFFICER TO COMPUTE THE NET PROFIT APPLYING A RA TE OF 12%, AS AGAINST 12.5% ADOPTED BY THE ASSESSING OFFICER ON THE GR OSS RECEIPTS OF THE ASSESSEE OF RS.2,90,48,890. WHILE THUS DIRECTING T HE ASSESSING OFFICER, HE DELETED THE SEPARATE ADDITION OF RS.1,25,0 00 MADE BY THE ASSESSING OFFICER BASED ON THE ADDITIONAL INCOME OFFERED B Y THE ASSESSEE IN THE RETURN OF INCOME. THE CIT(A), THEN DEAL ING WITH THE ADDITION OF RS.69,45,00 MADE TOWARDS UNEXPLAINED INVE STMENT UNDER S.69A OF THE ACT, TAKING NOTE OF THE CHEQUE PAYMENTS M ADE BY THE ASSESSEE, CONCLUDED THAT THE BALANCE AMOUNT OF RS.69,45,000 WAS PAID IN CASH FROM UNEXPLAINED SOURCES, I.E. INCOME WHICH WAS NOT ACCOUNTED FOR IN THE BOOKS BY THAT TIME, THE SAME HAVE NOT BEEN RECORDED EITHER IN THE CASH BOOK OR IN THE LEDGER OF T HE ASSESSEE FIRM ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 16 FOR THE RELEVANT YEAR. HE ACCORDINGLY HELD THAT THE ASSE SSING OFFICER HAS BEEN JUSTIFIED IN ADDING BACK THE SAID AMOUNT TREA TING THE SAME AS UNEXPLAINED INVESTMENT MADE IN THE PURCHASE OF LAND. HE THUS CONFIRMED THE ADDITION OF RS.69,45,000 MADE BY THE ASSE SSING OFFICER UNDER S.69A OF THE ACT. THE CIT(A) THEN PROCEEDED TO DEAL WITH THE ADDITION OF RS.2,12,28,000 MADE TOWARDS UNEXPLAIN ED INVESTMENT TIN PURCHASE OF 13.23. ACRES OF LAND AT DUBBACHARLA VILL AGE, RAJENDRANAGAR MANDAL, RR DISTRICT BY THE ASSESSEE-FIRM. AFTER DETAILED CONSIDERATION OF THE MATTER IN PARA 7.1 TO 7 .6 ON PAGES 26 TO 33 OF HIS ORDER, IN THE LIGHT OF THE DECISIONS OF THE A PEX COURT IN THE CASE OF CIT V/S. DURGA PRASAD MORE (82 ITR 540) AND SUM ATI DAYAL V/S. CIT(214 ITR 801) AND OF THE TRIBUNAL IN THE CASE OF MRS. MALINI RAMNATH RELE V/S. ITO (205 ITR (AT) 52), UPHELD THE ADDITION OF RS.2,12,82,000 , MADE BY THE ASSESSING OFFICER TO THE IN COME OF THE ASSESSEE, TREATING THE SAME AS THE UNEXPLAINED INVESTMENT OF THE ASSESSEE UNDER S.69A OF THE ACT. 17. AGGRIEVED BY THE ADDITIONS CONFIRMED BY THE CIT( A), ASSESSEE HAS FIELD THE PRESENT APPEAL BEFORE US, WITH THE GROUNDS OF APPEAL ALREADY EXTRACTED IN PARA 2 HEREINABOVE. 18. THE FIRST ISSUE THAT ARISES FOR CONSIDERATION I N THIS APPEAL RELATES TO ESTIMATION OF NET PROFIT ON TOTAL B ILLS OF RS.2,90,48,890 AT 12%. 19. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT DISALLOWANCE OF PAYMENTS TO PARTNERS AUTHORISED BY TH E PARTNERSHIP DEED IS NOT JUSTIFIED. HE SUBMITTED THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 17 AND ESTIMATING THE NET PROFIT AT 12.5% ON THE GROSS RE CEIPTS ADMITTED BY THE ASSESSEE. IT IS FURTHER STATED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN NOT ALLOWING DEDUCTION TOWARDS PARTNERS REMUNERATION, INTEREST PAYABLE TO PARTNERS AS PER THE PARTNERSHIP DEED AND FOR DEPRECIATION CLAIMED IN THE RET URN. IT IS ALSO SUBMITTED THOUGH THE CIT(A) REDUCED THE ESTI MATION OF PROFIT MADE BY THE ASSESSING OFFICER BY APPLYING A RA TE OF 12.5% BY DIRECTING THE ASSESSING OFFICER TO APPLY A RATE O F 12%,EVEN THE RATE OF 12% ADOPTED BY THE CIT(A) IS ON HIGHER SID E AND NO COMPARABLE CASE HAS BEEN CITED IN SUPPORT OF THE RATE ADOPTED BY THE CIT(A). THE LEARNED AR RELIED IN THE JUDGE MENT IN THE CASE OF CIT VS. BISHAMBHAR DAYAL & CO. (210 ITR 118) (ALLAHABAD HC) FOR THE PROPOSITION THAT WHEN THE INCO ME WAS COMPUTED BY APPLYING THE FLAT RATE AND THE ASSESSEE HAD FURNISHED THE PRESCRIBED PARTICULARS FOR THE CLAIM IN RES PECT OF DEPRECIATION, THE DEPRECIATION SHOULD BE ALLOWED SEPA RATELY AND DEDUCTED OUT OF THE GROSS PROFIT. HE ALSO RELIED ON THE JUDGEMENT OF KERALA HIGH COURT IN THE CASE OF SAMURAI TECHNO TRADING COMPANY (PVT.) LTD. VS. CIT (KER. HC) 37 DTR 38 6 (KER HC) WHEREIN IT WAS HELD THAT IN THE ABSENCE OF CREDI BLE BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAS RIGHTLY INVOKED TH E PROVISIONS OF SECTION 145 (3) OF THE ACT TO MAKE ASSESSMENT ON ESTIMATION BASIS IN TERMS OF SECTION 145, THE TRIBUNA L WAS JUSTIFIED IN ESTIMATING THE INCOME AT 8% OF THE TURN OVER FROM THE BUSINESS OF CIVIL WORK MAY BE TAKING THE GUIDELI NES FROM SECTION 44AD. HOWEVER, NO SEPARATE ADDITION IS CALLE D FOR UNDER THE HEAD OTHER INCOME. THE DR RELIED ON THE ORDER OF THE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 18 LOWER AUTHORITIES AND ALSO JUDGEMENT IN THE CASE OF I NDWELL CONSTRUCTIONS VS. CIT (232 ITR 776) (AP HC). 20. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. IN THIS CASE, THE GROSS RECEIPTS OF THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION IS AT RS.2,90,48,890/-. THE ASSESSEE DECLARED NET PROFIT AT RS.38,55,724/- BEFORE REDUCING INTEREST AN D REMUNERATION TO PARTNERS. THE ASSESSING OFFICER ESTI MATED INCOME AT 12.5% OF THE GROSS RECEIPTS AT RS.36,31,11 1/- AND FURTHER MADE ADDITION OF RS.1,25,000/- AS VOLUNTARILY OFFERED BY THE ASSESSEE TOWARDS COMMISSIONS AND OMISSIONS IN TH E BOOKS OF ACCOUNTS. THE ASSESSING OFFICER HAS NOT GIVEN DE DUCTION TOWARDS INTEREST AND REMUNERATION TO PARTNERS AND TOWARD S DEPRECIATION. IN OUR OPINION, WHEN THE PROFIT HAVE BEEN DETERMINED BY APPLYING OF A FLAT RATE, THE ASSESSEE I S ENTITLED FOR INTEREST AND REMUNERATION PAID TO THE PARTNERS AS STIPUL ATED IN THE PARTNERSHIP DEED SUBJECT TO PROVISIONS OF SECTIO N 40(B) OF THE IT ACT. HOWEVER, ANY DEDUCTION ALLOWABLE UNDER THE PROVISIONS OF SECTION 30 TO 38, BE DEEMED TO HAVE BE EN ALREADY GIVEN FULL EFFECT TO AND NO FURTHER DEDUCTION BE ALLO WABLE. WE PLACE RELIANCE ON THE FOLLOWING JUDGEMENTS FOR THIS P ROPOSITION: 1. CIT VS. SUPREME BUILDERS (303 ITR 1) (P & H HC) 2. MALIYEKKAL CONSTRUCTION CO. VS. CIT (260 ITR 333) ( KER HC) 3. CIT VS. JAIN CONSTRUCTION CO. (245 ITR 527) (RAJASTHA N HC) ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 19 21. FURTHER, WE MAKE IT CLEAR THAT IF THE INCOME DECLARED BY THE ASSESSEE IS HIGHER THAN THE INCOME COMPUTED BY THE LOWER AUTHORITIES BY APPLYING THE FLAT RATE AT 12% OF GROSS RECEIPTS, AND THEREAFTER GIVING THE DEDUCTIONS TOWARDS INTEREST AND REMUNERATION PAID TO PARTNERS IN TERMS OF SECTION 40(B), THE INCOME DECLARED BY THE ASSESSEE IS TO BE CONSIDERED INSTEAD OF COMPUTATION OF INCOME UNDER THIS IMPUGNE D ISSUE MADE BY THE LOWER AUTHORITIES. 22. THE NEXT ISSUE INVOLVED IN THIS APPEAL RELATES TO AN ADDITION OF RS.69,45,000 TOWARDS UNEXPLAINED INVESTM ENT UNDER S.69A OF THE ACT. REITERATING THE CONTENTIONS URGE D BEFORE THE LOWER AUTHORITIES, LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ASSESSEE HAS PAID THE BALANCE AMOUNT OF RS .69,45,000 TO SHRI S.VENKATA REDDY TOWARDS PURCHASE PRICE OF THE LAND OF 5.21 ACRES PURCHASED FROM HIM IN THE MONTH OF MARCH, 2006. HE SUBMITTED THAT IN THE RECEIPT DATED 20.3.2006 SIGN ED BY SHRI S.VENKAT REDDY FOR PURCHASE OF 5 ACRES AND 21 GUNTAS OF AGRICULTURAL LAND AT DUBBACHERLA, WHICH WAS FOUND IN T HE PREMISES OF THE ASSESSEE AT THE TIME OF SURVEY, WHICH EVIDENCED THE RECEIPT OF RS.10 LAKHS BY SHRI S.VENKAT REDDY FROM THE ASSESSEE, THE SALE CONSIDERATION WAS MENTIONED AT RS.99,45,000. EXPLAINING THE TRANSACTION, LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED THAT AN AMOUNT OF RS.30 LAKH S WAS PAID BY THE ASSESSEE TO SHRI S.VENKAT REDDY THROUGH CHEQUE S AND THE SAME WAS RECORDED IN THE BOOKS OF ACCOUNT IMPOUN DED DURING THE COURSE OF SURVEY. THE BALANCE AMOUNT OF RS.69,45,000 WAS PAID TO THE VENDOR IN CASH, AFTER W ITHDRAWING ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 20 THE AMOUNT FORM THE BANK. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THE BOOKS OF ACCOUNT WERE WRITTEN PARTLY , AND ON ACCOUNT OF DEATH OF THE MANAGING PARTNER ON 2.7.2005 AND RECONSTITUTION OF THE FIRM ON 21.7.2005, THE NEW MAN AGING PARTNER COULD NOT SET RIGHT THE THINGS IN TIME. TH OUGH IT WAS ADMITTED THAT THERE WERE CERTAIN LAPSES IN MAINTAINI NG THE BOOKS OF ACCOUNT, IT WAS STATED THAT THE UPDATED CASH BOO KS AND LEDGER WERE PRODUCED BEFORE THE ASSESSING OFFICER FOR CONSIDERATION. THE LEARNED COUNSEL FOR THE ASSESSE E SUBMITTED IN ANY EVENT THAT THE VENDOR , SHRI S.VENKAT REDDY C ONFIRMED HAVING RECEIVED THE TOTAL SALE CONSIDERATION OF RS.99 ,45,000 IN A CONFIRMATION LETTER WHICH WAS SUBMITTED BEFORE THE TH EN ASSESSING OFFICER ON 8.12.2006. HOWEVER, RELYING O N THE STATEMENT OF SHRI S.VENKATA REDDY DATED 4.9.2006 WHE REIN HE STATED REGARDING RECEIPT OF AMOUNTS IN CASH FROM THE ASSESSEE DURING JANUARY 2006 TO MARCH 2006 AND RELYING ON THE SU PPOSED PAYMENTS MADE BY HIM ON DIFFERENT DATES AND ON THE BASIS OF NOTINGS RECORDED AT PAGE 72 OF AN IMPOUNDED BOOK, T HE ASSESSING OFFICER HAS WRONGLY MADE THE ADDITION OF RS.69,45,000, WHICH WAS CONFIRMED BY THE CIT(A). H E SUBMITTED THAT THE OBSERVATIONS OF THE ASSESSING OFF ICER IN SUPPORT OF THIS ADDITION ARE BASED ON MERE SURMISES AN D CONJECTURES AND NOT BASED ON ANY FACTS. HE SUBMITTE D THAT THE ASSESSEE IS NOT RESPONSIBLE FOR THE PAYMENTS MADE BY THE VENDOR SHRI S.VENKAT REDDY, WHO MIGHT BE HAVING HIS S OURSES TO DISCHARGE HIS OWN COMMITMENTS AND THE ASSESSING OFFICER BASED ON INSCRIPTIONS/NOTINGS IN THE DIARY OF SHRI S.V ENKAT ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 21 REDDY AND BASED ON THE DETAILS OF PAYMENTS MADE BY HIM TO HIS CLIENTS ON DIFFERENT DATES, CANNOT MAKE THE IMPUGNED ADDITION OF RS.69,45,000. HE SUBMITTED THAT THE ASSESSEE HAS FI LED CONFIRMATION LETTER FROM SHRI S.VENKAT REDDY ACKNOWLEDG ING RECEIPT OF RS.99,45,000 AND AS PER THE SAID CONFIRMAT ION, SHRI S.VENKAT REDDY HAS RECEIVED CASH OF RS.10 LAKHS ON 20.3.2006, RS.15,00,000 ON 20.2.2006, RS.23,45,000 ON 20.3.200 6 ;AND RS.21,00,000 ON 25.3.2006, AND WHEN THE ASSESSING O FFICER HERSELF OBSERVED THAT THE CASH BOOK AND THE LEDGER M AINTAINED BY THE ASSESSEE WERE INCOMPLETE, NO ADVERSE INFERENC E CAN BE DRAWN ON ACCOUNT OF THE FACT THAT THE ABOVE CASH PAY MENTS DID NOT FIND PLACE IN THE CASH BOOK OF THE ASSESSEE, AN D AS SUCH, THE ADVERSE OBSERVATIONS OF THE ASSESSING OFFICER IN THAT BEHALF ARE UNWARRANTED AND CANNOT JUSTIFY THE IMPUGNED ADDITION OF RS.69,45,000. CONSIDERING THE CONFIRMATION GIVEN BY S HRI S.VENKAT REDDY AND ALSO BOOKS OF ACCOUNT OF THE ASS ESSEE, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A DDITION OF RS.69,45,000 MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE CIT(A) BE DELETED. HE SUBMITTED THAT THE STATEM ENTS MADE BY THE ASSESSEE DURING THE SURVEY PROCEEDINGS ARE NOT CONCLUSIVE AND IT IS OPEN TO THE ASSESSEE TO ESTABL ISH BY FILING COGENT EVIDENCE THAT THE SAME WAS NOT CORRECT. FOR TH IS PROPOSITION, HE RELIED ON THE JUDGEMENT OF CHATTISGA RH HIGH COURT IN THE CASE OF INCOME TAX OFFICER VS. VIJAY KU MAR KESAL (327 ITR 497) (CHATTISGARH HC) AND JUDGEMENT OF HONBL E GUJARAT HIGH COURT IN THE CASE OF KAILASHBEN MANHARLA L CHOKSHI VS. CIT (328 ITR 411) (GUJ. HC). FURTHER, HE SUBMITT ED THAT NO ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 22 EVIDENCE COULD BE USED AGAINST THE ASSESSEE WITHOUT GIVING AN OPPORTUNITY TO CONTROVERT THE SAME AND AN OPPORTUNITY TO CROSS EXAMINE THE CONCERNED PARTIES HAS NOT BEEN GIVEN TO THE ASSESSEE. FOR THIS PROPOSITION, HE RELIED ON THE JUDG EMENT OF THE HONBLE SUPREME COURT IN THE CASE OF KISHINCHAND CHELLARAM VS. CIT (BOM) 125 ITR 743) (SC) . FURTHER, HE PLAC ED RELIANCE ON THE FOLLOWING JUDGEMENTS: 1. CIT VS. K.C. MALHOTRA (304 ITR 149) (P&H) 2. CIT VS. FAIZAN SHOES P LTD. (304 ITR 156 (MAD.) 3. CIT VS. KHAZAN SINGH & BROS. (304 ITR 243) (P&H) 4. CIT VS. PUNJAB KESARI HOSIERY FACTORY (304 ITR 247) 5. CIT VS. GIRISH CHAUDHARY (296 ITR 619) (DEL.) 6. CIT VS. A.K. DAGA & SONS (296 ITR 623) 7. CIT VS. RAJEEV SHUKLA (296 ITR 743) (MP) 8.CIT VS. V.B. AGGARWAL (296 ITR 750) (DEL.) 9. MAYA SPINNING LTD. VS. DCIT (306 ITR (AT) 137 (IN DORE) 10. ACIT VS. VINOD GOEL & OTHERS (306 ITR (AT) 157) (AMRITSAR) 11. RAMNORD RESEARCH LABORATORIES P LTD. VS. WTO (305 ITR 299) (BOM. HC) 23. ON THE OTHER HAND, THE DEPARTMENTAL REPRESENT ATIVE SUBMITTED THAT THERE IS NO BASIS TO ACCEPT THE CONTE NTIONS OF THE ASSESSEES COUNSEL THAT THE ASSESSEE HAS ACTUALLY P AID THE AMOUNT AS FOLLOWS: ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 23 DATE : 20.3.2006 RS.10 LAKHS 22.3.2006 RS.15 LAKHS 23.3.2006 RS.23.45 LAKHS 25.3.2006 RS.21 LAKHS 24. HE SUBMITTED THAT INITIALLY, AT THE TIME OF SU RVEY CONDUCTED IN ITS PREMISES ON 30.8.2006 WHEN CONFRONT ED WITH THE SAID SIGNED RECEIPTS FROM SHRI S. VENKATA REDDY AT PAGE 24 OF THE IMPOUNDED DOCUMENTS AS PER ANNEXURE 13, SHRI K HADER BASHA, MANAGING PARTNER OF THE ASSESSEE FIRM HAS FEIGNE D IGNORANCE ABOUT THE SAME. HOWEVER, LATER, FOLLOWING SU RVEY CONDUCTED U/S 133A OF THE ACT, IN THE PREMISES OF SH RI S. VENKAT REDDY ON 1.9.2006, SHRI KHADER BASHA, SUBSEQUENTLY ON 4.9.2006, HAS ADMITTED PURCHASE OF LAND AT A CONSID ERATION OF RS.99,45,000/-, FROM THE SAID PERSON DURING THE PREVIO US YEAR. AS NOTED BY THE ASSESSING OFFICER, SHRI S. VENKAT RED DY, IN HIS STATEMENT WHILE STATING THAT A SUM OF RS.30 LAKHS W AS RECEIVED THROUGH CHEQUES, HAS SUBMITTED THAT THE BALANCE AMOU NT OF RS.69,45,000/- WAS RECEIVED IN CASH DURING THE PERIOD FROM JANUARY TO MARCH 2006. HOWEVER, THE ASSESSEE HAS CONTE NDED THAT IT HAS MADE THE BALANCE PAYMENT TO HIM IN CASH IN MARCH, 2006. ALL THE CHEQUE PAYMENTS MADE BY THE ASSESSEE TO THE EXTENT OF RS.30 LAKHS, IS REFLECTED IN THE BOOKS OF ACCOUNTS OF SHRI S. VENKAT REDDY, AS PER THE IMPOUNDED LEDGER ACCO UNT OF ASSESSEE FIRM FOR THE PREVIOUS YEAR. IT IS ALSO FACT THAT A SUM OF RS.20 LAKHS HAS BEEN RECEIVED BY SHRI S. VENKAT REDDY FROM SHRI KHADER BASHA ON 14.2.2006. THE RECEIPT OF THE SA ID ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 24 AMOUNT SHOWING THE DENOMINATION OF THE CURRENCY NOTE S ETC., ARE CLEARLY RECORDED AT PAGE 72 OF THE SAID IMPOUNDED DOCUMENTS. HOWEVER, SUCH CASH PAYMENT MADE BY THE ASSESSEE IS NOT RECORDED/SHOWN IN THE LEDGER ACCOUNT O F SHRI VENKAT REDDY. ACCORDING TO DR, IT IS TO BE INFERRED THAT THE ASSESSEE HAS MADE PAYMENTS OUT OF UNEXPLAINED SOURC ES BEFORE 20.3.2006. 25. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. DURING THE COURSE OF SUR VEY, U/S 133A OF THE IT ACT A RECEIPT FOR RS.10 LAKHS DATED 2 0.3.2006 WAS FOUND WHICH WAS SIGNED BY SHRI S. VENKAT REDDY F OR PURCHASE OF 5 ACRES 21 GUTAS OF AGRICULTURAL LAND AT DUBBERACHERALA VILLAGE. THE TOTAL CONSIDERATION MENTI ONED THEREIN WAS RS.99.45 LAKHS. DURING THE COURSE OF SU RVEY, THE ASSESSEE PLEADED IGNORANCE OF THIS TRANSACTION. HOWEV ER, LATER IT WAS STATED THAT TOTAL CONSIDERATION IS 99.45 LAKH S AND THE PAYMENT WAS MADE OUT OF WITHDRAWAL FROM BANK OF INDI A, MALAKPET BRANCH WHICH IS AS FOLLOWS: DATE MODE OF PAYMENT AMOUNT IN RS. 17.2.2006 BANK 7,81,000 17.2.2006 BANK 12,19,000 15.3.2006 BANK 10,00,000 20.3.2006 CASH 10,00,000 22.3.2006 CASH 15,00,000 23.3.2006 CASH 23,45,000 ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 25 25.3.2006 CASH 21,00,000 --------------------------------------------------- ----------- TOTAL 99,45,000 --------------------------------------------------- ---------- 26. ACCORDING TO THE REVENUE AUTHORITIES, THE ABOVE AMOUNT WAS NOT REFLECTED IN THE CASH BOOK FOUND DURIN G THE COURSE OF SURVEY AND THE ASSESSEE FORCED TO ADMIT THES E TRANSACTIONS ONLY ON ACCOUNT OF SURVEY IN THE CASE O F SHRI S. VENKAT REDDY. FURTHER, SHRI S. VENKAT REDDY HAS STATE D THAT HE HAD RECEIVED THE CASH FROM THE ASSESSEE DURING THE PERIOD FROM JANUARY 2006 TO MARCH 2006, WHEREAS, THE ASSESSEE H AS STATED THAT THE ENTIRE PAYMENT HAS BEEN MADE BY MARCH 2006. FURTHER, THE CHEQUE PAYMENT OF RS.30 LAKHS WAS FOUND PLACE IN THE CASH BOOK. HOWEVER, THE BALANCE CASH PAYMENT OF RS.69.45 LAKHS WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. FURTHER, THERE WAS AN EVIDENCE AS MARKED AT NOTE BOOK NO.8 IMPOUNDED FROM THE PREMISES OF SHRI S. VENKA T REDDY WHICH SHOWS THE RECEIPT OF RS.20 LAKHS FROM SH RI KHADER BASHA ON 14.02.2006 AND THE LOWER AUTHORITIES HAVE TA KEN A PLEA THAT THE SAID AMOUNT WAS UTILISED BY SHRI S. VE NKAT REDDY AS FOLLOWS: I) ON 1.3.2006, SHRI S. VENKAT REDDY HAD PAID CASH OF RS.17,45,000 TO SHRI GOPAL REDDY OF SHAMSHABAD II) ON 2.3.2006, SHRI S. VENKAT REDDY HAD PAID CASH OF RS.21,50,000/- TO SHRI GOPAL REDDY OF SHAMSHABAD III) ON 14.2.2006, SHRI VENKAT REDDY HAD PAID CASH TOF RS.30,80,000 TO SHRI T. RAMESH AND SHRI DAYANAND ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 26 27. FROM THE ABOVE INFORMATION, THE LOWER AUTHORITIES DREW INFERENCE THAT THE IMPUGNED PAYMENT OF RS.99.45 LAKHS WAS MADE BEFORE 18.3.2006 AND THE CASH WITHDRAWALS MA DE FROM BANK ACCOUNTS SUBSEQUENT TO 18.3.2006, DO NOT HAVE ANY RELEVANCE TO THE TRANSACTIONS. IN OUR OPINION, THE CO NCLUSION DRAWN BY THE LOWER AUTHORITIES IS NOT APPROPRIATE. THE PRIMARY BASIS OF ADDITION IS THE STATEMENT RECORDED FROM SHRI S. VENKAT REDDY ON 4.9.2006 WHICH IS BEHIND THE BACK OF THE A SSESSEE AND NOTE BOOK IMPOUNDED FROM HIS PREMISES REGARDING THE EN TRY OF RS.20 LAKHS RECEIVED FROM THE ASSESSEE. HOWEVER, THE L OWER AUTHORITIES IGNORED THE CONFIRMATION LETTER FROM THE VE NDOR SHRI S. VENKAT REDDY WHEREIN HE HAS CONFIRMED THE DATE O F PAYMENTS. FURTHER, THERE ARE ENOUGH WITHDRAWALS FROM THE BANK ACCOUNT OF BANK OF INDIA, MALAKPET BRANCH AS F OLLOWS: DATE AMOUNT 18.3.2006 9 LAKHS 22.2.2006 9 LAKHS 23.3.2006 17 LAKHS 24.3.2006 20 LAKHS 25.3.2006 13 LAKHS 28.3.2006 5 LAKHS --------- TOTAL 73 LAKHS ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 27 28. ACCORDING TO THE LOWER AUTHORITIES, THESE WITHDR AWALS MIGHT HAVE USED FOR SOME OTHER PURPOSES. BUT THE LOW ER AUTHORITIES HAVE NOT BROUGHT ANY MATERIAL TO SHOW THAT THE ASSESSEE HAS EXPENDED THAT WITHDRAWALS FOR ANY PURPO SE THAN FOR THE PURPOSE MAKING IMPUGNED PAYMENT. THE ASSESSE E HAS ALSO BROUGHT ON RECORD THAT THE BOOKS OF ACCOUNTS OF T HE ASSESSEE WAS NOT COMPLETELY WRITTEN ON THE DATE OF S URVEY ON ACCOUNT OF SAD DEMISES OF THE MANAGING PARTNERS ON 2. 7.2005 AND THE FIRM WAS RECONSTITUTED ON 21.7.2005 WITH A N EW MANAGING PARTNER AND HE COULD NOT SET RIGHT THE THING S AS THE TEAM WORKING WITH THE EARLIER PARTNER LEFT THE SERVICE AND ACTUALLY IT TOOK SOMETIME TO SET RIGHT THE THINGS. NON COMPLETION OF ACCOUNTS IS FOUND TO BE BONA FIDE. F URTHER, IF SHRI S. VENKAT REDDY MADE CERTAIN PAYMENTS AS STATED ABOV E, THAT ITSELF CANNOT BE THE REASON TO PRESUME THAT FUND WAS FLOWED FROM THE ASSESSEES SIDE WITHOUT ANY SUPPORTING EVIDE NCE. THE ASSESSEE IS NOT RESPONSIBLE TO EXPLAIN THE SOURCE OF PAYMENT OF SHRI S. VENKAT REDDY. MORESO, SHRI S. VENKAT REDDY HA S HIMSELF GIVEN CONFIRMATION LETTER CONFIRMING THE DATE OF PAYMENTS. BEING SO, THE CONTRADICTORY STATEMENT GIVE N BY HIM CANNOT BE RELIED FOR THE PURPOSE OF MAKING THE IMPUGNE D ADDITION BY THE CIT(A). THE ENTRIES FOUND IN THE DI ARY WHICH BELONGS TO SHRI S. VENKAT REDDY ALSO CANNOT BE THE R EASON FOR ADDITION IN THE HANDS OF THE ASSESSEE. THIRD PARTY S TATEMENT CANNOT BE ACTED UPON WITHOUT GIVING AN OPPORTUNITY T O THE ASSESSEE TO CONTROVERT THE SAME. IN OUR OPINION, NO RE LIANCE COULD BE PLACED ON THE CONTRADICTORY STATEMENT MADE B Y SHRI S. ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 28 VENKAT REDDY OR THE LOOSE SHEETS/ DIARIES TO MAKE T HIS ADDITION. THE STATEMENT MADE BY VENDOR SHRI S. VENKAT REDDY ARE CONFLICTING NATURE AND IT WAS NOTHING BUT OBVIOU S EFFORT TO SAVE FURTHER ENQUIRIES FROM THE DEPARTMENT AND THAT COUL D NOT BE THE BASIS FOR THE ADDITION. THE BURDEN OF PROVING THE ACTUAL PAYMENT WAS THAT OF THE REVENUE. THERE IS A ENOUGH WITHDRAWALS FROM THE ASSESSEE FROM ITS BANK ACCOUNT A ND THERE IS NO EVIDENCE REGARDING THE UTILISATION OF THE WITHD RAWALS. IN THESE CIRCUMSTANCES, IT IS NATURAL TO INFER THAT THE WITHDRAWALS OF FUND FROM BANK WAS ACTUALLY USED FOR MAKING PAYMENT T O SHRI S. VENKAT REDDY AND DUE CREDIT TO BE GIVEN TO THESE BA NK WITHDRAWALS. AT THIS POINT, WE FEEL IT APPROPRIATE TO PLACE RELIANCE ON THE JUDGEMENT OF HONBLE SUPREME COURT IN T HE CASE OF CIT VS. P.V. KALYANASUNDARAM (294 ITR 49) (SC) WHE REIN OBSERVED THAT RELIANCE ON THE CONTRADICTORY STATEMENT MADE BY THE VENDOR OR LOOSE SHEETS CANNOT BE PLACED AND THEREB Y CONFIRMED THE JUDGEMENT OF MADRAS HIGH COURT WHEREIN H ELD THAT THE BURDEN OF PROVING ACTUAL CONSIDERATION IN S UCH A TRANSACTION WAS THAT OF THE REVENUE. THE ASSESSING O FFICER DID NOT CONDUCT ANY INDEPENDENT ENQUIRY RELATING TO THE VALUE OF THE PROPERTY PURCHASED. HE MERELY RELIED ON THE STATEMENT G IVEN BY THE SELLER. THE DELETION OF ADDITION WAS JUSTIFI ED. FURTHER, IN THE CASE OF K.P. VARGHESE VS. INCOME TAX O FFICER (131 ITR 597) WHEREIN HELD THAT THE PROVISIONS SECTIO N 52(2) OF INCOME TAX ACT CAN BE INVOKED ONLY WHERE THE CONSIDE RATION FOR THE TRANSFER OF CAPITAL ASSET HAS BEEN UNDERSTATED BY THE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 29 ASSESSEE, OR, IN OTHER WORDS, THE FULL VALUE OF CONSI DERATION IN RESPECT OF THE TRANSACTION IS SHOWN AT A LESSER FIGURE THAN THAT ACTUALLY RECEIVED BY THE ASSESSEE, AND THE BURDEN OF PROVING SUCH UNDERSTATEMENT OR CONCEALMENT IS ON THE REVENUE. THE SUB SECTION HAS NO APPLICATION IN THE CASE OF AN HO NEST AND BONA FIDE TRANSACTION WHERE THE CONSIDERATION RECEIVED BY T HE ASSESSEE HAS BEEN CORRECTLY DECLARED OR DISCLOSED BY HI M. IN VIEW OF THE ABOVE DISCUSSION, IN OUR OPINION ADD ITION TOWARDS UNEXPLAINED INVESTMENT MADE IN THE PURCHASE OF LAND AT RS.69.45 LAKHS IS UNCALLED FOR AND THE SAME IS DELET ED. 29. AS FOR THE OTHER ADDITION OF RS.2,12,28,000 M ADE BY THE ASSESSING OFFICER UNDER S.69A OF THE ACT, LEARNED COUNSEL SUBMITTED THAT DURING THE SURVEY OPERATION ON 30.8.200 6, THE ASSESSING OFFICER RECORDED THE STATEMENT OF MANAGING PARTNER OF THE ASSESSEE FIRM, SHRI KHADER BASHA, WHO CONFIRMED TH AT LAND TO THE EXTENT OF 13.23 ACRE PURCHASED FORM SHRI MOHD. JIAUDDIN AND SHRI M.SATYANARAYANA REDDY WAS FOR A CONSIDERATION OF RS.20,36,500 VIDE SALE DEED DATED 25.3.2006. HE STAT ED THAT THE ASSESSEE HAS PAID VARIOUS AMOUNTS AGGREGATING TO RS.44,70,000, TOWARDS DEVELOPMENT CHARGES TO SHRI M.JANARDHAN REDDY, SHRI SRIDHAR REDDY, SHRI PRAMOD REDDY, SHRI GOPAL REDDY AND SHRI SANJEEVA REDDY. LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT DURING SURVEY OPERATION A FLOPPY WAS FOUND IN THE PREMISES OF THE ASSESSEE, WHICH CON TAINED AN UNSIGNED RECEIPT FROM THE ABOVE PERSONS, WHICH STATES THAT THEY ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 30 HAVE RECEIVED AN AMOUNT OF RS.19,00,000 BY WAY OF CH EQUES FROM BANK OF INDIA, MALAKPET BRANCH DATED 20.3.2006 F ROM THE ASESSEE, REPRESENTED BY SHRI V.MASTAN SAHEB ON ACCOU NT OF TRANSACTION OF AGRICULTURAL LAND ADMEASURING 13.23 ACRES , SITUATED AT DUBBACHERLA VILLAGE, OUT OF THE SALE CON SIDERATION OF RS.2,49,78,000 AND IT FURTHER STATED THAT RS.80,00,0 00 HAS ALREADY BEEN RECEIVED BY THEM AND THEY HANDED OVER TH E PHYSICAL POSSESSION OF THE ABOVE SAID AGRICULTURAL LA ND. IN THE STATEMENT RECORDED FROM HIM, THE MANAGING PARTNER HAS EXPRESSED IGNORANCE ABOUT THE SAID RECEIPT. DURING TH E COURSE OF HIS STATEMENT ON 4.9.2006, HE CLARIFIED THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH SHRI JIAUDDIN AND SHRI STAYANARAYANA REDDY IN THE MONTH OF NOVEMBER, 2005 FO R PURCHASE OF 13.23 ACRES OF AGRICULTURAL LAND AT DUBBAC HERLA VILLAGE AT RS.1.25 LAKSH PER ACRE, BUT DENIED THE C ONTENTS OF THE UNSIGNED RECEIPT AND STATED THAT HE HAS GIVEN THAT LAND FOR DEVELOPMENT IN THE MONTH OF DECEMBER, 2005. LEARNED COUNSEL SUBMITTED THAT THE AMOUNT OF RS.19 LAKHS AP PEARING IN THE RECEIPT AS PAYMENT TO THE FIVE PERSONS WAS PAID TOWARDS DEVELOPMENT OF THE LAND, THOUGH THE AMOUNT OF RS.2, 49,78,000 MENTIONED IN THE SAID RECEIPT AS TOTAL CONSIDERATION IS NOT CORRECT. IN THE STATEMENT RECORDED DURING THE COURSE OF POST SURVEY OPERATIONS, ALL THE FIVE PERSONS HAVE DENIED H AVING SOLD THE LAND TO THE ASSESSEE, BUT CONFIRMED THAT THEY H AVE RECEIVED THE AMOUNTS MENTIONED IN THE RECEIPT AS DEVELOPMENT CHARGES. REFERRING TO THE STATEMENT OF SHRI GOPAL REDDY RECORDED ON 31.8.2006 RELIED ON BY THE ASSESSING OFFICER IN THE A SSESSMENT ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 31 ORDER, IT WAS SUBMITTED THAT THERE WERE LOT OF DEFICI ENCIES AND DEFECTS IN THE SAME, INASMUCH AS IT IS NOT KNOWN AS TO WHO HAS RECORDED THE SAID STATEMENT AND IN WHOSE PRESENCE TH E SAME WAS RECORDED AND AS SUCH THE VALIDITY OF THE STATEM ENT ITSELF IS DOUBTFUL. IN ANY EVENT, IT IS SUBMITTED THAT DURING THE COURSE OF CROSS-EXAMINATION BY THE PARTNER OF THE ASSESSEE FIRM, SHRI GOPAL REDDY DENIED HAVING SOLD THE LAND AT RS.2,49, 78,000. IT WAS FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSEE PRODUCED DEVELOPMENT AGREEME NTS ENTERED INTO BETWEEN THE ASSESSEE AND SHRI M.JANARDHAN REDDY, SHRI V.SANJEEVA REDDY FOR DEVELOPMENT OF THE LAND, W HICH WAS UNDER AGREEMENT OF SALE BY THE VENDORS OF THE SAID LA ND, SHRI MOHD JIAUDDIN AND SHRI M.SATYANARAYANA REDDY AND THE ASSESSEE ALSO FILED AFFIDAVITS OF SHRI JANARDHANA RED DY AND SHRI SREEDHAR REDDY. IT WAS SUBMITTED THAT THE ASSESSEE G OT SETTLED THE PROBLEM OF ENCROACHMENT BY ENTERING INTO A MEMORAND UM OF UNDERSTANDING IN THE PRESENCE OF LOCAL LEADERS W ITH THE CONCERNED PARTIES VIDE MEMORANDUM OF UNDERSTANDING IN THE MONTH OF APRIL, 2006. IT WAS ALSO SUBMITTED THAT IN HIS STATEMENT RECORDED ON 19.12.2008, SHRI KHADER BASHA HAS EXPLAINED THE CIRCUMSTANCES AND THE FACTS RELATING TO PURCHASE OF THE SAID LAND AT THE RATE OF RS.1.50 LAKHS PER AC RE. LATER IN HIS STATEMENT ON 22.12.2008, HE REITERATED THE SAME POSITION AND SUBMITTED THAT THE DEAL OF PURCHASE WAS NOT THROU GH AS THE RECEIPT IS UNSIGNED AND PAYMENTS MADE TO THE FIVE PE RSONS WERE ENTIRELY IN CHEQUES AND ARE REFLECTED IN THE BOOKS O F ACCOUNT OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT SHRI MAS TAN SAHEB, ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 32 THE PARTNER OF THE FIRM, IN HIS STATEMENT RECORDED ON 22.12.2008 HAS CLARIFIED THE TOTAL TRANSACTION. IT WAS ALSO SUB MITTED THAT SHRI M.SATYANARAYAN REDDY AND SHRI MOHD JIAUDDIN, IN TH EIR STATEMENTS RECORDED ON 25.11.2008 AND 4.12.2008 HAVE STATED THAT THEY HAVE SOLD AGRICULTURAL LAND ADMEASURING 13.2 3 ACRES TO THE ASSESSEE FOR A CONSIDERATION OF RS.1.5 LAKHS P ER ACRE. IN THIS VIEW OF THE MATTER, IT IS STATED THAT THE ADDIT ION MADE BY THE ASSESSING OFFICER IS BASED ON MERE ASSUMPTIONS A ND PRESUMPTIONS AND AS SUCH THE CIT(A) WAS NOT JUSTIFIE D IN UPHOLDING THE SAME. IN ANY EVENT, THE LEARNED COUN SEL FOR THE ASSESSEE SUBMITTED THAT WHAT WAS FOUND WAS ONLY AN UNSIGNED RECEIPT, WHICH TOO CONTAINED ONLY A NARRATION AS TO CO NSIDERATION BEING RS.2,49,78,000. LEARNED COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE UNSIGNED RECEIPT HAS NO DOCUMENT ARY VALUE AND THE FIVE PERSONS MENTIONED IN THE SAID UNSIGNED RECEIPT ARE NOT THE OWNERS OF THE LAND IN QUESTION. OUT OF THE FIVE PERSONS NAMED IN THE SAID RECEIPT, THREE HAVE DENIED HAVING ANY KNOWLEDGE OF THE TRANSACTION IN THE COURSE OF THE STA TEMENT RECORDED FROM THEM BY THE ASSESSING OFFICER. IN THE A BSENCE OF ANY CORROBORATIVE EVIDENCE, EITHER FOUND AT THE TIME O F SURVEY OR BROUGHT ON RECORD SUBSEQUENTLY BY THE DEPARTMENT INDICATING THAT THE ORIGINAL VENDORS HAVE RECEIVED A NYTHING MORE THAN THE APPARENT CONSIDERATION AS PER THE SALE DEED, MUCH LESS CONSIDERATION OF RS.2,49,78,000 FOUND MENTIONED IN T HE UNSIGNED RECEIPT FOUND AT THE TIME OF SURVEY, THE AD DITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) , IS ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 33 UNJUSTIFIED AND UNCALLED FOR. HE RELIED ON THE FOLL OWING JUDGEMENTS 1. CIT VS. KHAZAN SINGH & BROTHERS (304 ITR 243) P & H HC) WHEREIN HELD THAT ENTRIES MADE IN THE DIARY WERE IMAGINARY, AND NO RELIANCE COULD HAVE BEEN PLACED ON SUCH ENTRIES FOR THE PURPOSE OF CONSTITUTING A BASIS FOR RECORDING ON ASSESSMENT ORDER. THEREFORE NO QUESTION OF LAW AROSE AS THE ORDER OF THE TRIBUNAL WAS BASED ON PU RE FINDINGS OF FACT, 2. CIT VS. DINERS BUSINESS SERVICES PVT. LTD. ( 263 ITR 1) (BOM. HC) WHEREIN HELD THAT MARKET RATE DETERMINED BY THE ASSESSING OFFICER IS ARBITRARY WITHOUT BRINGING COMPARABLE CASES. 3. CIT VS. ATAM VALVES (P) LTD. (332 ITR 468 (P&H) WHEREI N HELD THAT EVEN THOUGH THE EXPLANATION OF THE ASSESS EE THAT THE LOOSE PAPER DID NOT RELATE TO PAYMENT OF WAG ES DURING THE YEAR IN QUESTION MAY NOT BE ACCEPTED, IN T HE ABSENCE OF ANY OTHER MATERIAL, THE LOOSE SHEETS BY THEMSELVES WERE NOT ENOUGH TO MAKE ADDITION AS PER THE ESTIMATE OF THE ASSESSING OFFICE AND TO THAT EXTENT ASSESSED BY THE ASSESSING OFFICER, WAS NOT CALLED F OR AND IT WAS PARTLY LIABLE TO SET ASIDE. 4. CIT VS. SMT. P.K. NOORJAHAN (237 ITR 570) WHEREIN HE LD THAT IN THE INSTANT CASE, THE TRIBUNAL HAD HELD THAT THE DISCRETION HAD NOT BEEN PROPERLY EXERCISED BY THE INC OME TAX OFFICER AND THE APPELLATE ASSISTANT COMMISSIONER TAKING INTO ACCOUNT THE CIRCUMSTANCES IN WHICH THE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 34 ASSESSEE WAS PLACED AND THE TRIBUNAL HAD FOUND THAT THE INVESTMENTS COULD NOT BE TREATED AS INCOME OF THE ASSESSEE. THE HIGH COURT HAD AGREED WITH THE SAID VIEW OF THE TRIBUNAL. THERE WAS NO ERROR IN THE FINDINGS RECORDE D BY THE TRIBUNAL. SECTION 69 COULD NOT BE INVOKED IN RESPECT OF THE INVESTMENTS OF THE ASSESSEE. 5. MM FINANCES PVT. LTD. VS. DCIT (107 TTJ CHENNAI 200) WHEREIN HELD THAT NO ADDITION COULD BE MADE IN THE HANDS OF THE ASSESSEE ON THE BASIS OF THE STATEMENT MADE BY THE THIRD PARTY AND THE UNSIGNED AGREEMENT AND DUMB LOOSE SLIPS SEIZED FROM HIS RESIDENCE, IN THE ABSENC E OF ANY CORROBORATIVE MATERIAL TO SHOW PAYMENT OF ANY UNDISCLOSED CONSIDERATION BY THE ASSESSEE TOWARDS PURCHASE OF LAND. 6. BANSAL STRIPS (P) LTD. VS. ACIT (100 TTJ 665) (DEL.) WHEREIN HELD THAT ADDITION U/S 68 BASED ON LOOSE PA PERS FOUND DURING SEARCH THOUGH AUTHENTICITY WHERE OF BEIN G DOUBTFUL HELD THAT IN THE ABSENCE OF ADEQUATE MATERI AL AS TO THE NATURE AND OWNER SHIP OF TRANSACTION, THE AL LEGED UNDISCLOSED INCOME COULD NOT BE ADDED U/S 68 TO THE INCOME TO BE ASSESSED IN THE HANDS OF THE ASSESSEE, MERELY BY ARITHMETICALLY TOTALLING THE VARIOUS FIGURE S JOTTED DOWN ON LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH. 30. FURTHER, HE SUBMITTED THAT THE LAND IS LOCATED AWAY FROM THE MAIN ROAD AND THE SELLER IS UNDER COMPULS ION ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 35 TO SELL THIS PROPERTY ONLY TO THE ASSESSEE WHO HAS P URCHASED THE FRONT PORTION OF THIS LAND. THE IMPUGNED LAND IS ALSO SUBJECT MATTER OF LITIGATION AND THERE ARE 30 PERSONS H OLDING LEASE AGREEMENTS UNDER PROTECTED TENANCY ACT. THE ASS ESSEE HAD TO USE A LOT OF HIS INFLUENCE TO SETTLE THE DIS PUTES AND ALSO SPENT SUBSTANTIAL AMOUNT TOWARDS COMPENSATION T O THEM. HE DREW OUR ATTENTION TO THE EXPENSES SPENT ON T O SETTLE THE DISPUTES AND OTHER EXPENDITURE AT RS.2,10, 97,375/- THE DETAILS WAS PLACED ON RECORD AT PAPER BOOK PAGE N O. 232 AS FOLLOWS: DUBBACHERALA PROJECT TO LAND PURCHASED AND DEVELOPMENT 2,08,72,375 BY WORK IN PROGRE SS 2,10,97,375 AT DUBBACHERALA TO REGISTRATION EXPENSES 2,25,000 ------------------------ -- -------------- 2,10,97,375 2,10,97,375 -------------------------- --- -------------- 31. ACCORDING TO HIM THERE IS NO UNACCOUNTED INVESTMEN T IN THE DUBBERCHERALA LAND. THE PAYMENT TO SHRI V. SANJ EEV REDDY AT RS.4,70,000/-, SHRI V.S. REDDY RS.5,00,000, SHRI PROM ODH REDDY RS.8,70,000/- AND SHRI GOPAL REDDY, RS.9,70,000/- WH ICH ARE TO BE CONSIDERED AS COST OF LAND INCLUDED IN THE ABOVE PROJECT CO ST. FURTHER HE SUBMITTED THAT A SUM OF RS. 40 LAKHS WAS P AID ON 25.03.2006 AND REFLECTED IN THE BOOKS OF ACCOUNTS A ND THESE PAYMENTS WERE MADE TO THE PROTECTED TENANTS UNDER THE TENANCY ACT WHO WERE IN OCCUPATION OF THE LAND. HE DREW OUR ATTENTION TO PB.86, 154 AND 178. FINALLY, HE SUBMI TTED THAT THE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 36 ASSESSING OFFICER SUBMITTED THAT THE ADDITIONS ARE MADE MERELY ON SURMISES AND CONJECTURE, THEREFORE THEY ARE DESERVED TO BE DELETED. TO MAKE THE ADDITION THE ASSESSING OFFIC ER RELIED UPON THE NOTINGS IN THE PERSONAL DAIRY OF SRI S. VENKAT RE DDY, WHO IS NOT A PARTY TO NOTINGS IN THE SECOND TRANSACTION, INV OLVING 13.23 ACRES OF LAND. 32. FURTHER THE ASSESSING OFFICER ALSO RELIED UPON TH E STATEMENT OF SHRI K. GOPAL REDDY, WHICH WAS SUBSEQU ENTLY DENIED AND MOREOVER THE STATEMENT RECORDED ON 31.8.200 6, HAS NO EVIDENTIARY VALUE AS IT IS NOT KNOWN WHO HAS RECO RDED THAT STATEMENT, IN WHOSE PRESENCE IT IS RECORDED IS APPAREN TLY NOT AVAILABLE. 33. HE SUBMITTED THAT THE DOCUMENT ON WHICH THE REVENUE RELIED UPON IS AN UNSIGNED DOCUMENT, THEREFORE , HAS NO EVIDENTIARY VALUE IN THE FACTS AND CIRCUMSTANCES OF T HE CASE. ACCORDING TO HIM, THE ASSESSING OFFICER HAS NOT DOUBT ED THE CORRECTNESS OF THE GROSS RECEIPTS, THEREFORE, NO FURTHER INCOME HAS BEEN GENERATED. 34. THE LEARNED AR SUBMITTED THAT THE DOCUMENTS PRODUCED IN SUPPORT OF THE CONTENTION WERE MERELY REJEC TED/NOT CONSIDERED WITHOUT GIVING ANY VALID REASONS. HE RELI ED ON THE FOLLOWING JUDGEMENTS: ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 37 A) AMAR SINGH BAKSHI (HUF) VS. ACIT (2003) 263 ITR 75) (DEL.) WHEREIN IT WAS HELD THAT THE PROVISIONS OF THE INDIAN EVIDENCE ACT ARE NOT STRICTLY APPLICABLE TO TH E PROCEEDINGS UNDER THE INCOME TAX ACT, BUT THE BROAD PRINCIPLES OF THE LAW OF EVIDENCE APPLY TO SUCH PROCEEDINGS. FURTHER, AN ENTRY IN THE BOOKS OF ACCOUN TS MAINTAINED IN THE REGULAR COURSE OF BUSINESS IS RELEVA NT FOR PURPOSES OF CONSIDERING THE NATURE AND IMPACT OF A TRANSACTION, BUT NOTINGS ON SLIPS OF PAPER OR LOOSE SH EETS OF PAPER CANNOT FALL IN THIS CATEGORY. NOTING ON LOO SE SHEETS OF PAPER ARE REQUIRED TO BE SUPPORTED/CORROBORATED BY OTHER EVIDENCE WHICH MAY INCLUDE THE STATEMENT OF A PERSON, WHO ADMITTEDLY I S A PARTY TO THE NOTINGS. A FURTHER DISTINCTION HAD TO BE DRAWN BETWEEN SLIPS OF PAPER OR LOOSE SHEETS FOUND FRO M THE POSSESSION OF THE ASSESSEE AND SIMILAR DOCUMENTS FOUND FROM A THIRD PERSON. IN CASE THE STATEMENT OF THE THIRD PERSON IS RECORDED WITH REFERENCE TO THE NOTING S, THEN SUCH A STATEMENT UNDOUBTEDLY HAS TO BE CONFRONT ED TO THE ASSESSEE AND HE IS TO BE ALLOWED AN OPPORTUNI TY OF CROSS EXAMINATION. IN THE PRESENT CASE, THE DOCUMENT IN QUESTION HAD NOT BEEN FOUND FROM THE ASSESSEES POSSESSION, BUT FROM THE POSSESSION OF A AND UNDOUB TEDLY NO OPPORTUNITY OF CROSS EXAMINATION HAD BEEN ALLOWED TO THE ASSESSEE AND IT HAD CLEARLY EMERGED FROM THE RECORD THAT THE TESTIMONY OF A WAS NOT CREDIBLE AT ALL SINC E IN THREE SEPARATE STATEMENTS HE HAD INDICATED DIFFERENT ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 38 FIGURES, HIS SECRETARY G, HAD GIVEN YET ANOTHER FIGUR E AND IN PROCEEDINGS BEFORE THE TWO DIFFERENT COURTS AT DELHI AND DHANBAD, HE HAD GIVEN A DIFFERENT PICTURE ALTOG ETHER AND, LASTLY, IN HIS INCOME TAX ASSESSMENT HE HAD RETRACTED FROM ALL HIS EARLIER STATEMENTS AND HAD CATEGORICALLY STATED THAT THE DOCUMENTS WHICH WHICH HAD BEEN SIGNED BOTH BY HIM AND BY THE ASSESSEE CONTAIN ED ANY PROJECTIONS AND PURPORTED FIGURES IN RESPECT OF THE PROPERTY IN QUESTION. IN OTHER WORDS, THE ENTIRE ADDIT ION IN THE HANDS OF THE ASSESSEE WAS BASED ON THE DOCUM ENTS FOUND BUT THERE WAS NO EVIDENCE TO SUPPORT THE REVENUES CASE THAT A HUGE FIGURE WHATEVER BE ITS QUANTUM OVER AND ABOVE THE FIGURE BOOKED IN THE RECORDS AND ACCOUNTS CHANGED HANDS BETWEEN THE PARTIES. NO ADDITION COULD THEREFORE BE MADE TO THE INCOME OF TH E ASSESSEE. B) RAMESH PERSHAD VS. INSPECTING ASSISTANT COMMISSIONER (28 ITD 550 ) (HYD.) WHEREIN IT WAS HELD THAT IN THE INSTANT CASE AS THE DEPARTMENT HAD NOT BROUGHT ON RECO RD ANY MATERIAL TO IMPEACH THE FINDINGS OF THE ITO THA T THE FAIR MARKET VALUE OF THE PROPERTY WAS NOT MORE THAN RS.4.56 LAKHS, AND HAVING TAKEN NOTE OF DIFFERENT VALUATIONS AS GIVEN BY THE VALUATION OFFICERS OF THE DEPARTMENT ITSELF, THE ITO HAD RIGHTLY CONCLUDED THAT NO EXTRA MONEY PASSED FROM THE ASSESSEE TO THE SELLER AN D THE APPARENT CONSIDERATION WAS THE REAL CONSIDERATION. ONCE THIS CONCLUSION WAS REACHED, THERE WAS ABSOLUT ELY ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 39 NO SCOPE FOR MAKING A PROTECTIVE ADDITION ON THE GROUN D THAT THE APPELLATE AUTHORITY MIGHT TAKE A DIFFERENT V IEW OF THE TRANSACTION. THEREFORE, THE CIT(A) WAS JUSTIFIED IN DELETING THE PROTECTIVE ADDITION. HOWEVER, HIS ACTIO N OF DIRECTING THE IAC TO REDO THE ASSESSMENT AFRESH WAS NO T JUSTIFIED BECAUSE THE ORDER PASSED BY THE ITO WAS FOU ND TO BE FAIR AND REASONABLE IN THE LIGHT OF THE MATERIA L ON RECORD AND NO CASE WAS MADE OUT BY THE DEPARTMENT TO WARRANT SETTING ASIDE THE ORDER. THEREFORE, THE ORDER OF THE CIT(A) IN THIS RESPECT WAS TO BE SET ASIDE. ACCORDINGLY, THE ADDITION OF RS.85,150/- MADE ON A PROTECTIVE BASIS WAS TO BE DELETED. C) INCOME TAX OFFICER VS. JEWELS EMPORIUM (1994) 48 ITD 164 (IND.) WHEREIN IT WAS HELD THAT BY RECORDING STATEMENT OF THE PARTNER OF THE FIRM ON OATH AND PREPARING INVENTORY OF THE STOCK DURING SURVEY OPERATIONS U/S 133A, THE INSPECTOR ACTED BEYOND THE PURVIEW OF HI S POWER AND HIS ACTION WAS ILLEGAL. WHEREIN IT WAS HELD THAT THE EXPRESSION INCOME TAX AUTHORITY APPEARING IN SEC TION 133A, INTER ALIA FOR THE PURPOSES OF CLAUSE (I) OF SU B SECTION (1), CLAUSE (I) OF SUBSECTION (3) AND SUB S ECTION (5), INCLUDES AN INSPECTOR OF INCOME TAX, IF SO AUT HORISED BY ANY SUCH AUTHORITY. UNDER CLAUSE (I) OF SUB SECTI ON (1), THE INSPECTOR CAN CLAIM FACILITY TO INSPECT SUC H BOOKS OF ACCOUNTS OR OTHER DOCUMENTS AS HE MAY REQUIRE AND WHICH MAY BE AVAILABLE AT THE PLACE OF BUSINESS. U NDER CLAUSE (I) OF SUB SECTION (3), HE MAY PLACE MARKS OF ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 40 IDENTIFICATION ON THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS INSPECTED BY HIM AND MAKE OR CAUSE TO BE MADE EXTRACTS OR COPIES THERE FROM. THUS, APPARENTLY, THE INSPECTOR ACTED THE PURVIEW OF HIS POWERS IN AN IL LEGAL MANNER IN THE INSTANT CASE. FURTHERMORE, THERE WAS N O PROPRIETY IN MAKING ADDITION U/S 69B WHEN THE STOCK WA S FOUND LESS THAN THAT REFLECTED IN THE BOOKS OF ACCOU NTS. 35. THE DR SUBMITTED THAT THE DOCUMENTS RELIED BY THE ASSESSING OFFICER TO MAKE THIS ADDITION ARE NOT MERE SCRIBBLING. THE SAME RELATES TO IMPORTANT INFORMATION RELATING TO PURCHASE OF LAND MEASURING ABOUT 13.23 ACRES AT DUBBERACHERALA VILLAGE BY THE ASSESSEE SHOWING THE AMOUNT OF CONSIDERATION FOR THE SAME. THE DETAILS IN THE RECEIPTS WERE CAREFULLY WORD ED AND NEATLY TYPED DOCUMENTS SPECIFYING THE SALE CONSIDERA TION AND AMOUNT RECEIVED THEREON. IN THOSE DOCUMENTS, THERE IS SPECIFIC INFORMATION SHOWING THE NAMES OF THE 5 PERSONS TO WHO M THE ASSESSEE HAS PURCHASED THAT LAND AND ALSO THE AMOUN T OF PAYMENTS MADE THROUGH POSTED DATED 4 CHEQUES, DELIVE RED TO THOSE PERSONS. THE SAME WAS FOUND FROM ONE ALMIRAH KEPT IN THE OFFICE PREMISES OF THE ASSESSEE DURING THE COURSE OF SURVEY ON 30.8.2006. THE ASSESSEE HAS ACCEPTED THE PART OF THE PAYMENTS MENTIONED IN IMPUGNED RECEIPTS AND IT IS NO T ACCEPTING ANOTHER PART OF THE PAYMENTS MENTIONED THE REON WHICH IS VERY SURPRISING FACTS. FURTHER, IMMEDIATELY AFTER THE SURVEY WHEN STATEMENT OF SHRI GOPAL REDDY WHICH WAS RE CORDED ON 31.8.2003, HE HAS CONFIRMED THE TOTAL CONSIDERATIO N AT ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 41 RS.2,49,78,000/-. IN THE SAID RECEIPT, IT WAS MENT IONED THAT THE SALE CONSIDERATION WAS FINALISED AT RS.2,49,78 ,000/-, THIS WAS FINALISED BY SHRI MASTANA SAHEB, PARTNER OF THE AS SESSEE FIRM. IN THE SAID RECEIPT, 5 PERSONS HAVE ADMITTED REC EIPT OF RS.80 LAKHS FROM THE ASSESSEE AND HANDING OVER OF THE POSSESSION OF THE SAID LAND TO THE ASSESSEE. THE S AID AMOUNT TOWARDS THE SALE CONSIDERATION AND ALSO THE FACT OF M AKING PAYMENT OF RS.80 LAKHS TO THOSE PERSONS HAS ALSO BE EN ADMITTED BY SHRI MASTANA SAHEB AS SEEN FROM HIS STATEMENT RECO RDED BY THE ASSESSING OFFICER ON 22.12.2008. OUT OF RS.80 LAKHS, IT WAS EXPLAINED BY SHRI MASTANA SAHEB THAT RS.42.5 LAKHS W AS PAID THROUGH POST DATED CHEQUES AND BALANCE OF RS.37.5 LA KHS WHICH COULD BE EXPLAINED BY HIS BROTHER SHRI KHADER BASHA. FURTHER, IT WAS STATED BY THE ASSESSEE AS WELL AS SHRI VENKAT REDDY THAT THE LAND WAS SOLD AT RS.18 LAKHS PER ACRE. ACCORDING TO THE DR THERE IS NO REASON TO PRESUME THAT THE MARKET PRICE OF THE IMPUGNED LAND IS AT RS.1.5 LAKHS WHERE THE NEARBY LANDS WERE SOLD AT RS.18 LAKHS PER ACRE. HE SUBMITTED THAT THERE IS NO EVIDENCE REGARDING ANY COURT CASES PENDING AGAINST T HIS MAN. FURTHER, HE SUBMITTED THAT THERE IS EVIDENCE REGARDING THE PAYMENT OF IMPUGNED AMOUNT AS DEVELOPMENT CHARGES. THE PLEA OF THE ASSESSEE IS THAT THE AMOUNT MENTIONED I N THE RECEIPTS WERE RELATING TO DEVELOPMENT WORKS IS ONLY AF TER THOUGHT. HAD THAT BEEN THE CASE, THE RECEIPT WOULD H AVE CLEARLY MENTIONED THAT THE AMOUNTS PAID TO THEM WAS TOWARDS DEVELOPMENT AND NOT TOWARDS SALE CONSIDERATION OF LAN D. HE SUBMITTED THAT AS PER VALUATION REPORT DATED 15.6.2000 , GOVT. ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 42 APPROVED VALUER REPORTED THAT THE LAND PRICE IN THAT LO CALITY IS AROUND RS.45 LAKHS TO RS.60 LAKHS PER ACRE. AS PER T HIS REPORT, THE FAIR MARKET VALUE OF DEVELOPMENT WORKS UNDERTAKEN O N THE LAND AS ON THE DATE OF INSPECTION IS AROUND RS.9.88 LAKHS. BEING SO, THE ARGUMENT OF THE ASSESSEE IS THAT THE RECEIPTS RELATING TO DEVELOPMENT WORKS IS HAVING NO MERITS. 36. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE, THE M AIN BASIS FOR ADDITION OF RS.2,12,82,000/- IS THE UNSIGNED RECEIP T 20.11.2005 WHICH IS REPRODUCED HEREIN BELOW: 1. SHRI V. SANJEEVA REDDY S/O NARAYANA REDDY AGED ABOU T 44 YEARS, OCCUPATION, BUSINESS, R/O 6-3-39/A/2, PREM NAGAR, H YDERABAD. 2. SHRI J. SRIDHAR REDDY, S/O SAI REDDY, AGED ABOUT 34 YEARS, OCCUPATION, BUSINESS R/O , PENDYALA VILLAGE, MAHESW ARAM, MANDAL, RR DISTRICT. 3. SRI K. GOPAL REDDY, S/O KISTA REDDY, AGED ABOUT 47 YEARS, OCCUPATION, BUSINESS R/O, 7-21, SANGEETH NAGAR COLO NY, KUKATPALLY, HYDERABAD. 4. SRI M. JANARDHAN REDDY, S/O SATYANARAYANA REDDY, AG ED ABOUT 40 YEARS, OCCUPATION, BUSINESS R/O 6-3-39/A/2, PREM NA GAR, HYDERABAD 5. SHRI M. PRAMODH REDDY, S/O SATYANARAYANA REDDY, AGE D ABOUT 38 YEARS, OCCUPATION, BUSINESS, R/O 6-3-39/A/1, PREM N AGAR, HYDERABAD. HAVE RECEIVED AN AMOUNT OF RS.19,00,000/- (RUPEES N INETEEN LAKHS ONLY) BY WAY OF BANK OF INDIA, MALAKPET, HYDERABAD CHEQUE S ALL DATED 20 MARCH 2006 BEARING NOS.1 NO.437644 FOR RS.5,00,000.00 IN FAVOUR OF SHRI V. SANJEEVA REDDY, NO./2 437645 FOR RS.5,00,000.00 IN FAVOUR OF SHRI K. GOPAL REDDY, 3. NO.437646 FOR RS.5,00,000.00 IN FAV OUR OF SHRI M. JANARDHAN REDDY , 4. 477647 FOR RS.4,00,000.00 IN F AVOUR OF SHRI P. PRAMODH REDDY FROM THE VENDEE M/S CRESENT REAL ESTA TE AND DEVELOPERS REPRESENTED BY SRHI V. MATAN SAHEB S/O LATE V. KARE EM SAHEB ON ACCOUNT OF SALE TRANSACTION OF AGRICULTURAL LAND IN SURVEY NO.116/1 ADMEASURING ACRES 2.05 GUNTAS, SURVEY NO.120/ ADMEASURING AC.7. 26 GTS. SURVEY NO.124 ADMEASURING AC.1.00 GTS. SURVEY NO.125 ADMEA SURING AC.0.28 GTS., SURVEY NO.126/ ADMEASURING AC.1.02 GTS. AND SURVEY NO.127 ADMEASURING AC.1.02 GTS. TOTAL ADMEASURING AC.13.23 GTS. SITUA TED AT DUBBACHARLA VILLAGE AND GRAM PANCHAYAT, MAHESHWARAM MANDAL, RR DISTRICT OUT OF THE TOTAL SALE CONSIDERATION AMOUNT OF RS.2,49,78,000.0 0 (RUPEES TWO CRORE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 43 FORTY NINE LAKHS SEVENTY EIGHT THOUSAND ONLY) A SUM OF RS.80,00,000.00 (RUPEES EIGHTY LAKHS ONLY) HAS ALREADY BEEN RECEIVE D BY US AND HANDED OVER THE PHYSICAL POSSESSION OF THE ABOVE SAID AGRI CULTURAL LAND. THIS RECEIPT IS SIGNED BEFORE THE FOLLOWING WITNESS ES AT HYDERABAD. VENDORS 1. SRI V. SANJEEVA REDDY 2. SRI J. SRIDHAR REDDY 3. SRI K. GOPAL REDDY 4. SRI M. JA NARDHAN REDDY 5. SRI M. PRAMOD REDDY DATED: 20.11.2005 WITNESSES 37. THE ABOVE RECEIPTS WAS FOUND IN A FLOPPY WHIC H WAS ON THE COMPUTER TABLE AND THEREAFTER PRINT OUT WAS TAK EN DURING THE COURSE OF SURVEY. DURING THE COURSE OF SURVEY, S TATEMENT OF SHRI V, KHADHER BASHA, MANAGING PARTNER OF ASSESSEE F IRM WAS RECORDED 30.8.2006 AND HE HAS STATED THAT HE DO ES NOT KNOW ANYTHING ABOUT THE ABOVE SAID RECEIPTS AS SEEN FROM THE QUESTION NO.16 OF HIS SWORN STATEMENT. ONCE AGAIN, SWORN STATEMENT WAS RECORDED ON 4.9.2006 FROM HIM WHEREIN HE STATED THAT HE HAS ENTERED INTO AN AGREEMENT WITH DR. JIAUDDIN AND SRI M. SATYANARAYANA REDDY, SHAMSHABAD LAND OWNER S IN THE MONTH OF NOVEMBER, 2005 FOR THE PURCHASE OF 13AC RES AND 23 GUTAS OF AGRICULTURAL LAND SITUATED AT DUBBACHARALA VILLAGE BELONGING TO THEM AT RS.1.5 LAKHS PER ACRE. HE HAS ALSO STATED THAT THE ACTUAL MARKET VALUE WAS RS.4 LAKHS TO 5 LAK HS PER ACRE, BUT HE HAS PURCHASED AT RS.1.5 LAKH PER ACRE SINCE THE RE WERE CERTAIN LITIGATION LIKE PROTECTIVE TENANCY, COURT CASE AND ENCROACHMENT PROBLEM. THE NAMES APPEARED IN THE RECEI PTS ARE NOT VENDORS AND THEY ARE PERSONS TO WHOM THE LAN D WAS ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 44 GIVEN FOR DEVELOPMENT. LATER, ON 11.9.2006 THE IMPUG NED RECEIPT WAS CONFRONTED TO SHRI M. JANARDHAN REDDY WHO H AS STATED THAT HE IS NOT AWARE OF THE RECEIPT. ON THE SAME DAY, STATEMENT WAS RECORDED FROM SHRI M. PRAMODH REDDY WHO HA S STATED THAT HE HAS TAKEN UP THE LAND OF 2.5 ACRES AT DUBBACHARALA VILLAGE FOR DEVELOPMENT DURING NOVEMBER/DECEMBER, 2005 AND WAS PAID AN AMOUNT OF R S.2.7 LAKHS BY CHEQUE DURING NOVEMBER/DECEMBER, 2005, ANOTH ER RS.2 LAKHS BY CHEQUE DURING DECEMBER/JANUARY, 2006 AND RS.4 LAKHS IN MARCH, 2006. REGARDING THE IMPUGNED RECEIPT DATED 20.11.2005, HE HAS STATED HE IS NOT AWARE OF THIS RE CEIPT. ON THE SAME DAY STATEMENT OF SHRI SANJEEVA REDDY RECORDE D WHO HAS STATED THAT HE HAD NOT ENTERED INTO ANY AGREEMENT WITH THE LANDOWNERS OR WITH THE ASSESSEE FIRM FOR SALE OF LAND. HOWEVER, HE ENTERED INTO AN AGREEMENT WITH THE ASSESSEE FOR DEVELOPMENT OF THIS LAND AND HE WAS PAID AN AMOUNT OF RS.2.70 LAKHS AS ADVANCE IN DECEMBER, 2005. FURTHER, A STAT EMENT OF SHRI K. GOPAL REDDY WAS RECORDED ON 31.8.2006 WHO HA S STATED THAT THE IMPUNGED RECEIPT IS A COPY OF RECEIPT GIVEN BY THEM FOR ACKNOWLEDGING THE RECEIPT OF RS.19 LAKHS OUT OF SALE CONSIDERATION OF RS.2,49,78,000/- FROM SHRI MASTANA S AHEB FOR SALE OF 13 ACRES AND 23 GUNTAS SITUATED AT DUBBACHAR ALA VILLAGE. HOWEVER, HE FAILED TO GIVE THE BIFURCATION OF THE SA LE CONSIDERATION. LATER, A STATEMENT FROM SHRI N. SATYAN ARAYAN REDDY WAS RECORDED ON 25.9.2006. HE IS THE OWNER OF 25% OF IMPUGNED LAND. HE HAS STATED THAT THE IMPUGNED LAN D WAS SOLD AT RS.1.5 LAKH PER ACRE TO THE ASSESSEE. ON 20.11.2 006, SWORN ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 45 STATEMENT OF SHRI JIAUDDIN WAS RECORDED WHO IS OWNER OF 75% OF THE IMPUGNED LAND. HE STATED THAT ALONG WITH SHRI M . SATYANARAYANA REDDY HE SOLD THE IMPUGNED LAND TO THE ASSESSEE VIDE SALE DEED EXECUTED ON 25.3.2006 FOR A SALE CONSIDERATION OF RS.20,36,500/-. THE STATEMENT OF SHRI GOPAL REDDY RECORDED ON 31.8.2006 WAS CONFRONTED TO THE SH RI KHADHER BASHA IN THE COURSE OF ASSESSMENT PROCEEDING S WHO HAS STATED THAT SHRI GOPAL REDDYS STATEMENT WAS REC ORDED BEHIND HIS BACK AND HE IS NOT AWARE AS TO HOW HE HAS STATED THE SALE CONSIDERATION AT RS.2,49,78,000/-. HE REQUESTE D THE ASSESSING OFFICER TO ALLOW AN OPPORTUNITY TO CROSS EXA MINE SHRI GOPAL REDDY. FURTHER, A STATEMENT OF SHRI MASTAN SAH EB, BROTHER OF SHRI KHADER BASHA WAS RECORDED ON 22.12.2008. ON CONFRONTING THE IMPUGNED DATED 20.11.2005, HE STATED THAT DURING THE MONTH OF SEPTEMBER, 2005 SHRI SANJEEVA REDD Y ALONG WITH OTHER PERSONS CAME TO HIM WITH A PROPOSAL TO SELL 13.23 ACRES OF LAND AT DUBBARCHARALA VILLAGE. AS THE Y WERE NOT THE LAND OWNERS, HE ENQUIRED AS TO IN WHAT CAPACITY THEY PROPOSED TO SELL THE LAND. THEY STATED THAT THEY AR E THE LOCAL PERSONS IN THAT AREA AND THE LAND HAD VARIOUS PROBLEMS LIKE ENCROACHMENTS, PROTECTED TENANCY, COURT CASES ETC. TH EY PROMISED TO CLEAR UP ALL THESE PROBLEMS AND HAND OVER P EACEFUL POSSESSION OF THE LAND FOR A SALE CONSIDERATION OF RS.2,49,78,000/-. WITHOUT CONSULTING HIS BROTHER, HE ACCEPTED THE PROPOSAL AND GAVE SOME TOKEN ADVANCE TO THEM, BU T AS A SURETY HE GAVE THEM POST DATED CHEQUES ONLY. LATER, WHEN HIS BROTHER CAME TO KNOW ABOUT THE DEAL, HE ENQUIRED ABOU T THESE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 46 PERSONS AND FOUND THAT THEY WERE NOT RESOURCEFUL ENOUG H TO CLEAR THE LITIGATION PENDING IN THE DEAL,. HIS BROTHE R THEN TOOK UPON HIMSELF TO CLEAR OFF ALL THE LITIGATIONS AND TH US THE ORAL AGREEMENT MADE WITH THE PERSONS STATED IN THE RECEIP T WAS TERMINATED. BUT AS THE LAND WAS INITIALLY SHOWN BY THESE PERSONS TO HIM, HE CONVINCED HIS BROTHER TO ALLOT CE RTAIN DEVELOPMENT WORKS TO THESE PERSONS, IN LIEU OF THE ADVANCE ALREADY GRANTED TO THEM IN THE FORM OF POST DATED CHEQ UES. FURTHER, REGARDING THE RECEIPT, HE STATED THAT AS PER RE CEIPT, THE POST DATED CHEQUES OF RS.19,00,000 WERE ISSUED IN FAVOUR OF THESE PERSONS. BUT, EVEN BEFORE THE ISSUE OF THESE CHEQUES OF RS.19,00,000 POST DATED CHEQUES OF RS.23,50,000/- W ERE ISSUED TO THESE PERSONS EARLIER. THESE PERSONS WANTED THE COMMITMENT TO BE PUT INTO WRITING, HENCE, THEY BROUGH T THIS RECEIPT IN THEIR OFFICE IN A FLOPPY ACKNOWLEDGING THE CHEQUE PAYMENTS AND DEMANDING MORE PAYMENT. AS PER THIS RE CEIPT, A SUM OF RS.80,00,000 HAS ALREADY BEEN RECEIVED BY THES E PARTIES BY 20.11.2005. FURTHER, ON 22.12.2008, ON CROSS EXAMI NATION OF SHRI K. GOPAL REDDY BY SHRI KHAHER BASHA, SHRI K. G OPAL REDDY HAS STATED THAT HE ALONG WITH HIS FRIENDS HAD APPROACHED HIS BROTHER SHRI MASTAN SAHEB TO SELL THE LAND OF 13. 23 ACRES FOR A CONSIDERATION OF RS.2,49,78,000/- AND THE RECEI PT MIGHT HAVE BEEN PREPARED BY HIS FRIENDS IN CONNECTION WITH T HE TRANSACTIONS. HE ALSO CONFIRMED THAT HE IS NOT THE OWNER OF THE LAND BUT HE ALONG WITH HIS FRIENDS HAD PLANNED TO SE LL THE LAND, AFTER CLEARING ALL LITIGATION ASSOCIATED WITH IT AND ALSO TOOK SOME TOKEN ADVANCE IN THE FORM OF POST DATED CHEQUES, BUT THE DEAL ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 47 COULD NOT BE CARRIED THROUGH AS THE PROBLEM WAS BEYOND THEIR CAPACITY. FURTHER, SHRIU K. GOPAL REDDY HAS STATED AS FOLLOWS: I WANT TO CLARIFY THAT THE LAND AT DUBBACHARALA VI LLAGE WAS NEVER OWNED BY ME NOR BY MY FRIENDS. WE NEVER HAD EVEN ANY POWER OF ATTORNEY FOR THE SAID LAND. AS M Y FRIENDS WERE LOCAL INFLUENTIAL PEOPLE IN THE AREA, THEY MADE AN OFFER TO SRI MASTAN SAHEB FOR RS.2,49,78,000 IN LIEU OF CLEARING ALL THE ENCROACHMENTS, PROTECTED TENANCY AND OTHER COURT CA SES AND HAND OVER PEACEFUL POSSESSION OF THE LAND. BUT SRI KHADER BASHA LATER USED HIS OWN INFLUENCE AND WE WERE OUT OF THE SCENE. IT IS LEARNT THAT THE ACTUAL LAND OWNERS HA VE DIRECTLY DEALT WITH CRESCENT REAL ESTATES AND CLOSED THE DEA L. AS WE COULD NOT DELIVER THE GOODS, WE WERE GIVEN CERTAIN DEVELOPMENTAL WORKS IN THE LAND AS COMPENSATION, BE CAUSE INITIALLY THE LAND WAS SHOWN TO THE PARTY BY MY FRI ENDS ONLY. THE FACT THAT I WAS NEVER MADE A GPA HOLDER IN THE SAID LAND AND ONLY ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S CRESCENT REAL ESTATES PROVES THAT THE DEAL NEVER WE NT THROUGH IN THE ORIGINAL FORM. THESE FACTS CAN BE CONFIRMED FROM THE LAND OWNERS. 38. THE ABOVE STATEMENT MADE BY SHRI K. GOPAL REDD Y IS CONTRARY TO THE EARLIER STATEMENT MADE ON 31.8.2006 WHE REIN HE HAS STATED THAT THE SALE CONSIDERATION WAS RS.2,49,7 8,000/-. FURTHER, SHRI M. SATYANARAYANA REDDY WHO IS THE OWNER O F THE 25% OF THE PROPERTY STATED ON 25.11.2008 THAT HE IS NO T AWARE OF THE SALE CONSIDERATION OF RS.2,49,78,000/- AND AL SO STATED THAT HE DOES NOT KNOW SHRI V. SANJEEV REDDY, J. SRIDH AR REDDY, SHRI K. GOPAL REDDY, SHRI M. JANARDHAN REDDY AND SHRI M. PRAMODH REDDY. HE ALSO STATED THAT SHRI J. SRIDHAR REDDY HAS SIGNED THE SALE DEED AS WITNESS AS HE WAS CALLED BY SHRI JAIUDDIN. FURTHER, AT ALL TIMES, SHRI K. KHADHER BASHA STATED THAT ALL THE PAYMENTS MADE TO SHRI SANJEEV REDDY & O THERS MENTIONED IN THE IMPUGNED RECEIPTS IS RELATING TO DE VELOPMENT ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 48 WORK AND IT WAS PAID THROUGH CHEQUE AND WAS DULY REFLE CTED IN THEIR BOOKS OF ACCOUNT. ON THE SAME DAY ON 22.12. 2008, HE HAS STATED THAT THE AMOUNT MENTIONED AT RS.80 LAKHS IS ONLY TO PUT MORE PRESSURE ON THEM TO GET MORE AMOUNT AS ADVAN CE AND HE HAS OFFERED ADDITIONAL INCOME RS.37.5 LAKHS TO T HE ALREADY FILED RETURN TO COVER ALL OMISSIONS AND COMMISSIONS CO MMITTED BY THEM. THE STATEMENT RECORDED FROM SHRI VENKAT REDD Y ON 19.12.2008 WHEREIN HE HAS STATED THAT HE HAS NO DEA LING WITH SHRI JAIUDDIN AND SHRI SATYANARAYANA REDDY AND ALSO STA TED THAT HE HAS NO IDEA ABOUT THE IMPUGNED RECEIPTS. HE ALSO DENIED THE EARLIER STATEMENT DATED 1.9.2003 WHEREIN HE HAS STATED THAT DR.JAIUDDIN AND SATYANARAYANA REDDY RECEI VED RS.14 LAKHS PER ACRE FOR THE LAND MEASURING 13 ACRES AN D 23 GUNTAS FROM SHRI KHADHER SAHEB IN HIS PRESENCE. THU S, THE STATEMENT GIVEN BY SHRI VENKAT REDDY IS CONTRADICTORY IN NATURE WHICH CANNOT BE RELIED UPON. FURTHER, DR. JAIUDDIN A ND SHRI M. SATYANARAYANA REDDY HAS CATEGORICALLY STATED THAT THE Y DO NOT KNOW THE FIVE PERSONS WHOSE NAMES ARE MENTIONED IN TH E IMPUGNED RECEIPTS THOUGH SHRI J. SRIDHAR REDDY HAS SIGN ED THE SALE DEED AS WITNESS. THEY ALSO STATED THAT THEY H AVE NOT RECEIVED ANY AMOUNT OVER AND ABOVE THE RECORDED SALE CONSIDERATION IN THE SALE DEED AND STATED THAT THE A SSESSEE FIRM MIGHT HAVE ENTERED INTO AN AGREEMENT WITH OTHER PARTI ES FOR SALE CONSIDERATION OF RS.2,49,78,000/-. 39. BUT THE ISSUE BEFORE US NOW REMAINS THAT WHETH ER THE UNSIGNED RECEIPT DATED 20.11.2005 IS ENOUGH TO SUSTAIN THE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 49 ADDITION. AS SEEN FROM THE IMPUGNED RECEIPT, IT IS J UST A TYPED UNSIGNED RECEIPT WHICH WAS AVAILABLE IN A FLOPPY AND FOUND ON A COMPUTER TABLE IN THE COURSE OF SURVEY AT THE ASSESSE E PREMISES AND ITS PRINT OUT WAS TAKEN. ON EXAMINATION OF VARI OUS PARTIES, AS MENTIONED IN THE EARLIER PARAS OF THIS ORDER, EACH ONE HAS GIVEN A CONTRADICTORY STATEMENT AND WHICH CANNOT BE RE LIED UPON. THE IMPUGNED RECEIPT IS ONLY CIRCUMSTANTIAL E VIDENCE WHICH REQUIRED TO BE CORROBORATED WITH OTHER EVIDENCE. THOUGH THERE IS NO NECESSITY IN LAW THAT THE ASSESSING OFF ICER IS SUPPOSED TO DISCHARGE TAX LIABILITY BY DIRECT EVIDENC E ONLY, THERE SHOULD BE ENOUGH EVIDENCE TO SUPPORT THE ADDITION. THE ADDITION IS TO BE MADE BY THE ASSESSING OFFICER ON T HE BASIS OF MATERIAL AVAILABLE ON RECORD. IT IS VERY IMPORTANT TO HAVE ENOUGH EVIDENCE OR CONCLUSIVE EVIDENCE TO SUSTAIN TH E ADDITION. WHEN THE ASSESSEE GIVES AN EVASIVE REPLY THE ASSESS ING OFFICER HAS TO MAKE CERTAIN ESTIMATION OF THE INCOME. BUT T HE ESTIMATION SHOULD BE REASONABLE CORRESPONDING TO THE M ATERIAL AVAILABLE ON RECORD. IT SHOULD NOT BE BASED ON CON JECTURES AND SURMISES. IN THE PRESENT CASE, THE IMPUGNED RECEIPT IS AN UNSIGNED DOCUMENT AND THE PARTIES MENTIONED THEREIN WERE NOT THE VENDORS WHO HAVE EXECUTED THE SALE DEED. ACTUA LLY, THE REAL VENDORS ARE DR.JAIUDDIN AND SHRI M. SATYANARAYANA R EDDY. BOTH THESE VENDORS HAVE CONFIRMED THAT THE SALE CONSI DERATION WAS AT RS.20,36,500/- AND THE SAME SAID TO BE DISCL OSED BY THEM IN THEIR RETURN. THIS AMOUNT IS TALLIED WITH THE SALE DEED EXECUTED ON 25.3.2006. IT IS ALSO BROUGHT TO OUR NO TICE THAT THE STATE REGISTRATION AUTHORITY HAS ACCEPTED THE CON SIDERATION ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 50 OF RS.20,36,500/- AS SALE DEED AS VALID CONSIDERATIO N FOR THE PURPOSE OF STAMP DUTY AND IT WAS DULY REGISTERED FOR THIS VALUE. FURTHER, ON APPRAISAL OF THE SWORN STATEMENTS OF VARIOU S PARTIES, WE FOUND THAT THEY ARE IN CONTRADICTORY NATURE; WE CANN OT PLACE RELIANCE ON THE STATEMENT THOUGH THEY ARE SOME PIECE OF EVIDENCE WHILE MAKING AN ASSESSMENT BUT IT IS REBUT TABLE AND DOES NOT GIVE A DEFINITE AUTHORITY AND CONCLUSIVE EV IDENCE TO SUSTAIN THE ADDITION. THE ASSESSEE IS HAVING A RIGH T TO REBUT THE SAME BY PRODUCING ENOUGH EVIDENCE IN SUPPORT OF ITS C LAIM. IN THE PRESENT CASE, THE ASSESSEE HAS GIVEN BONA FIDE E XPLANATION THAT THE BROTHER OF ONE OF THE PARTNER NAMELY SHRI MASTA N SAHEB WRONGLY ENTERED INTO DEAL WITH SHRI SANJEEV REDDY & OTHERS WITHOUT THE KNOWLEDGE OF SHRI KHADHER BASHA , PARTNER O F THE ASSESSEE FIRM TO PURCHASE THE IMPUGNED LAND FOR A CONS IDERATION OF RS.2,49,78,000/-. LATER, WHEN THEY CAME TO KNOW THAT THE PERSON NAMED IN THE RECEIPTS WERE NOT RESOURCEFUL, THE Y GONE OUT OF THE DEAL AND WENT INTO DEAL DIRECTLY WITH DR. JAIUDDIN AND SHRI M. SATYANARAYANA REDDY FOR A CONSIDERATION OF RS.20,36,500/-. MEANWHILE, THEY HAVE INCURRED VARIOUS EXPENSES TOWARDS DEVELOPMENT AND TO SETTLE THE LITIG ATIONS AND THE SAME WAS REFLECTED IN THE BOOKS OF ACCOUNTS. HO WEVER, THE DEPARTMENT HAS TAKEN A PLEA THAT THE SALE CONSIDERAT ION IS AT RS.2,49,78,000/-. WE ARE UNABLE TO APPRECIATE THE CO NTENTIONS OF THE DEPARTMENT SINCE THE ASSESSING OFFICER DID NO T ABLE TO ESTABLISH THE NEXUS OF THIS UNSIGNED RECEIPT TO THE SALE TRANSACTION. THE SALE DEED WAS EXECUTED BY NONE OF THE PARTIES MENTIONED IN THE IMPUGNED RECEIPTS AND THEY ARE STRA NGERS TO ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 51 THE SALE DEED. BEING SO, HOW THIS RECEIPT IS RELEV ANT TO THE SALE TRANSACTIONS? THE DEPARTMENT HAS NOT PROVED NEXUS OF THESE RECEIPTS WITH ANY COGENT MATERIALS. HAD BEEN THE PARTI ES MENTIONED IN THE RECEIPTS ENTERED INTO ANY AGREEMENT O F SALE WITH ORIGINAL OWNER I.E. DR. JAIUDDIN OR SHRI M. SATYANA RAYANA REDDY, OR IF THEY HAD ANY GENERAL POWER OF ATTORNEY ON THEIR BEHALF, THEN WE COULD HAVE ACCEPTED THE CONTENTIONS OF THE DEPARTMENT. THE DEPARTMENT HAS ALSO NOT TRACED ANY SA LE AGREEMENT BY THOSE PARTIES WITH THE ASSESSEE. THE D EPARTMENT WITHOUT TRACING ANY SALE AGREEMENT ENTERED BY THE ASSE SSEE WITH THOSE NAMED IN THE RECEIPTS CANNOT COME TO THE CONCLUSION THAT THE ASSESSEE HAS ENTERED INTO SALE TRANSACTIONS WITH THOSE PARTIES. THE INFERENCE DRAWN BY THE ASSESSING OFFICER IS NOT BASED ON ANY FACTUAL POSITION AND ALSO THERE IS NO E VIDENCE THAT THE DEAL WAS MADE WITH THE 5 PERSONS NAMED IN THE IM PUGNED RECEIPT OR TWO OWNERS ENTERED INTO A SALE AGREEMENT W ITH THESE 5 PERSONS ON ANY OCCASION. THE UNSIGNED RECEIPT IS A DUMB DOCUMENT AND CANNOT BE RELIED UPON FOR MAKING ADDITI ON IN THIS CASE. THE DEPARTMENT CANNOT DRAW INFERENCE ON THE B ASIS OF SUSPICION CONJECTURE AND SURMISE. SUSPICION, HOWEVE R STRONG CANNOT TAKE PLACE OF MATERIAL IN SUPPORT OF THE FINDI NGS OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHOULD ACT IN A JUDICIAL MANNER, PROCEED WITH JUDICIAL SPIRIT AND SHOULD COME TO A JUDICIAL CONCLUSION. THE ASSESSING OFFICER IS REQUIR ED TO ACT FAIRLY AS A REASONABLE PERSON AND NOT ARBITRARY AND CAPRICIOUSLY . ASSESSMENT MADE SHOULD HAVE ADEQUATE MATERIAL AND IT SHOULD STAND ON ITS OWN LEGS. THE UNSIGNED RECEIPT FOUND DURING THE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 52 COURSE OF SURVEY IS REQUIRED TO BE SUPPORTED BY OTHER CORROBORATED EVIDENCE. FURTHER, THE STATEMENTS REQUIRED T O BE RECORDED FROM ALL THE PARTIES CONCERNED MENTIONED IN THE DOCUMENTS FOUND IN THE COURSE OF SURVEY AND THOSE ST ATEMENTS SHOULD BE CONFRONTED TO THE ASSESSEE AND THE ASSESSE E HAS TO BE GIVEN AN OPPORTUNITY FOR CROSS EXAMINATION. IN THE PRESENT CASE, THOUGH THE ASSESSING OFFICER RECORDED THE SWORN STATEMENT FROM FEW PARTIES, BUT THESE PARTIES GIVEN CONTRADICTORY STATEMENT WHICH CANNOT BE RELIED UPON FOR SUSTAINING THE ADDITION. THE EVIDENCE ON RECORD, IS NOT SUFFICIENT TO SUPPORT OR TO HOLD THAT THE SALE CONSIDERATION WAS AT RS.2,49,7 8,000. IN OUR OPINION, WHERE THE CONSIDERATION PAID BY THE ASSE SSEE HAS BEEN UNDERSTATED, THE BURDEN OF PROVING SUCH AN UNDERSTATEMENT IS ON REVENUE. THE PROVING OF SUCH AN UNDERSTATEMENT SHALL REQUIRE TO BE DISCHARGED BY THE RE VENUE WITH COGENT MATERIALS. IN THE PRESENT CASE, WHEN TH E CONSIDERATION HAS BEEN ACCEPTED BY THE STATE REGISTRA TION AUTHORITY, AND THERE IS NO EVIDENCE THAT THE ASSESSE E HAS PAID MORE THAN MENTIONED IN THE SALE DEED TO THE VENDORS AND THE TRANSACTION IS HONEST AND BONA FIDE TRANSACTION AND F ULL VALUE OF CONSIDERATION PAID BY THE ASSESSEE CORRECTLY DISCLOSE D TO THE STATE REGISTRATION AUTHORITY, THE LOWER AUTHORITIES HAVE NO REASON TO HOLD THAT ANY PART OF CONSIDERATION IS NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IN THE CASE OF SUMATI DAYAL VS. CIT (1995) (214 ITR 801), WHEREIN THEIR LORD SHIPS HAVE OBSERVED AS UNDER: ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 53 AS LAID DOWN BY THIS COURT THE APPARENT MUST BE CONS IDERED THE REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BEL IEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUTHORIT IES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES T O FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY A PPLYING THE TEST OF HUMAN PROBABILITIES. 40. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR OPINION, THE APPAREN T CONSIDERATION MENTIONED IN THE SALE DEED EXECUTED ON 25.3.2006 AT RS.20,36,500/- IS TO BE CONSIDERED AS REAL CONSIDERATION IN THE ABSENCE OF ANY COGENT MATERIAL A GAINST THE CONSIDERATION MENTIONED IN THE SALE DEED. IN THE CAS E OF CIT VS. DURGA PRASAD MORE (82 ITR 540) (SC) THERE ARE OBSERVATIO NS REGARDING INFERENCE OF FACTS TO BE DRAWN IN PARTICULAR CIRCUMSTANCE. BUT WE DO NOT THINK THAT THIS CASE IS MATERIAL FOR DECIDING THE PRESENT CASE. THE VALUE OF EACH PROPERT Y DEPENDS UPON THE LOCATION, SIZE, PROXIMITY TO CITY, APPROACH ROAD, PENDING LITIGATIONS AND OTHER ASPECTS. THE LOWER AUT HORITIES WITHOUT BRINGING ANY AGREEMENT BETWEEN THE ASSESSEE WITH FIVE PERSONS MENTIONED IN THE RECEIPTS OR ANY AGREEMENT BY THE LAND OWNER WITH THOSE FIVE PERSONS, THEY CAME TO A CONCLU SION THAT THE APPARENT CONSIDERATION IS RS.2,49,78,000/- WHIC H IS ONLY WRONG ASSUMPTIONS OF FACTS. THE ASSESSEE HAS REPEATE DLY STATED THAT THE PAYMENTS MENTIONED WERE MADE TOWARDS DEVELOPMENT OF LAND AND FOR CLEARING THE LITIGATIONS EMBEDDED WITH THE PROPERTY. FURTHER, AS WE HAVE HELD IN EARLIER PARAS, THE ITA NO.494/H/2010 M/S. CRESCENT REAL ESTATES, HYDERABAD 54 RECEIPT IS AN UNSIGNED PAPER AND ALSO THERE IS NO REF ERENCE OF ANY AGREEMENT BETWEEN THE PARTIES MENTIONED THEREIN A ND THERE IS NO EVIDENCE THAT THE ASSESSEE HAS PAID MORE MONEY THAN WHAT IS MENTIONED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, AS SUCH THE APPARENT CONSIDERATION MENTION ED IN THE SALE DEED IS TO BE CONSIDERED AS REAL CONSIDERATION. BEING SO, ADDITION MADE U/S 69A IS TO BE DELETED. 41. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED ON : 13. 5.2011 SD/- SD/- (G.C. GUPTA) (CHANDRA POOJARI) VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 13 TH MAY, 2011 COPY FORWARDED TO: 1. M/S. CRESCENT REAL ESTATES, 9-4-77/A/236/A, A1- HASMATH C OLONY, LANE BESIDE BANDHAN FUNCTION HALL, TOLICHOWKI, HYDERABAD . 2. JOINT COMMISSIONER OF INCOME-TAX, RANGE-8, HYDER ABAD 3. CIT(A)-III, HYDERABAD. 4. COMMISSIONER OF INCOME-TAX II, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. B.V.S/NP