Ashok Niranjan Ashok Residency Housing Division, CHENNAI V. DCIT, CHENNAI

ITA 597/CHNY/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5540 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 09-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Search and seizure; Document seized; Documents seized
• Section: 143(3); 153A; 13; 153C

Judgement Text

आयकर अपीलीय अिधकरण, ‘ए’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI Įी महावीर ͧसंह, उपाÚय¢ एवं डॉ एम एल मीना, लेखा सदèय के सम¢ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND Dr. M.L. MEENA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 597/CHNY/2017 िनधाᭅरण वषᭅ /Assessment Year: 2010-11 Shri Ashok Niranjan – Ashok Residency Housing Division, No.1/460, Mount Poonamallee Road, Ayyappanthangal, Chennai – 600 056. PAN: AAMFA 0303L v. The DCIT, Central Circle – III(1), Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri S. Sridhar, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri Guru Bashyam, CIT स ु नवाई कȧ तारȣख/Date of Hearing : 15.03.2022 घोषणा कȧ तारȣख/Date of Pronouncement : 31.03.2022 आदेश /O R D E R PER BENCH: This appeal by the assessee is arising out of the order of Learned Commissioner of Income Tax (Appeals)-19, Chennai in ITA No.219/14-15 dated 20.01.2017. The assessment was framed by the DCIT, Central Circle – III(1), Chennai for the assessment year 2010-11 vide order dated 30.03.2014 u/s. 143(3) r.w.s. 153C r.w.s. 153A of the Income Tax Act, 1961 (hereinafter ‘the Act’). 2 I.T.A. No.597/Chny/2017 2. The first issue in this appeal of assessee is as regards to the order of CIT(A) in restricting the addition made by the AO to the extent of Rs.16,13,857/- as against the addition made by AO of Rs.32,27,715/- in regard to on money receipts. For this assessee has raised Ground Nos.1 to 4, which need not to reproduce. 3. Brief facts are that a search and seizure action was carried out in the group cases of assessee on 21.06.2011 in the office premises. During the course of search in the office premises of the assessee books and documents were seized vide ANN/PM/B&D/S-2 (sheets 1 to 215). During the course of search, assessee’s partner Shri S. Asokan deposed before the search party and in his sworn statement recorded on 21.06.2011, he narrated that Rs.46,70,660/- is the share of consideration belonging to the assessee. The relevant question Nos.14 & 15 and answers reproduced in the assessment order are being reproduced for the sake of clarity:- Q.14 In page No.1 of the seized material ANN/PM/B&D/S-2, a notings were made. Please go through the same and explain the contents. Ans. Rs.46,70,663 is the share of the consideration to Mr.K. Niranjanaiah for the sale of plot No.01 to 13 and Plot No.28 to 38 & 84 to Mr. Palani Q.15 What is the extent of the land sold and at what rate it was sold? Ans. It is 53379 sq.ft. at the rate of Rs.175 per sq.ft. amounting to Rs.93,41,325. 3 I.T.A. No.597/Chny/2017 Subsequently, Shri S. Asokan vide letter dated 05.07.2011 stated as under:- “The land measuring 206664 sq.ft. was sold to M/s. VGN at the rate of Rs.175/- per sq.ft. likewise the firm had sold 23909 sq.ft. to Shri Palani & his brothers at the rate of Rs.60/- per sq.ft. This was because the land sold to Palani & his brothers was undeveloped and required filling-up, leveling etc., in order to buy peace with the department, we shall be offering Rs.40,70,000* and Rs.27,49,535/- as additional income in the hands of S. Asokan and in the partnership firm, M/s. Ashok Niranjan-Ashok Residency Housing Division, respectively. *Rs.40,70,000 was the cash seized from the residence of Shri S. Asokan. The AO noted that a sum of Rs.40,70,000/- was cash seized from the residence of Shri S. Asokan. The assessee in its return of income admitted sale of 23909 sq.ft., of land i.e., Plot No.28 to 38 and 74 to one Shri K.P. Palani & his brothers vide Doc.No.8355 to 8358 of 2009 dated 25.09.2009 for a total consideration of Rs.9,56,360/-. According to assessee, this land was sold at the rate of Rs.40/- per sq.ft., only. But as per seized documents the sale rate is Rs.175/- per sq.ft. The AO noted that sum of Rs.27,49,535/- at the rate of Rs.115 per sq.ft. of 23909 sq.ft., offered vide letter dated 05.07.2011 was not admitted by the assessee in its return of income. Therefore, the AO issued show cause notice that as to why a sum of Rs.32,27,715/- at the rate of Rs.140/- per sq.ft., whereas the actual rate is Rs.175 – Rs.40 admitted rate per sq.ft., be not added to the returned income of the assessee. The assessee first tried to explain that sale of plots in the layout of plot 4 I.T.A. No.597/Chny/2017 bearing no.28 to 38 and 74 was very slow and therefore, the firm wanted to dispose the plots at the best rates available and that was Rs.40 per sq.ft., instead of Rs.175/-. But, the assessee alternatively offered a sum of Rs.32,27,715/- to tax to buy peace with the Department. The AO has not believed the explanation of the assessee and added the difference of Rs.32,27,715/- as unaccounted income of the assessee. Aggrieved, assessee preferred appeal before the CIT(A). 4. The CIT(A) after going through the seized documents noted that the amounts to be shared equally between two partners i.e., Shri K. Niranjaniah and Shri S. Asokan because both are partners of 50% each. Therefore, he restricted the addition to the extent of Rs.16,13,857/- by observing in para 6 as under:- 6. As per the grounds of appeal filed, the assessee has requested for telescoping this amount of Rs.32,27,715 as having been explained and offered to taxation in the hands of Shri S. Ashokan, one of the partners. However, it is seen that the amount would not have gone entirely to Shri S. Ashokan as per clear notings in page No. 215 of seized document ANN/PN/B&B/S-2 brought out by the AO in paragraph 4.2 of his order. Here, it is very clear that the amounts were shared equally between two partners Shri K. Niranjaniah and Shri S. Ashokan being 50% partners each. To this extent, the assessee is not correct in claiming that the entire amount of Rs.32,27,715 is contained in the amount offered for taxation in the hands of Shri S. Ashokan. However, assessee should be given the benefit of having received 50% of the profit and having offered the same in the returns of income. To this extent, the addition deserves to the reduced by an amount of Rs.16,13,857 as already offered to taxation in the hands of one of the partners. The balance amount of Rs.16,13,857/- is held as continued to be assessed in the hands of the firm. Assessee gets part relief. 5 I.T.A. No.597/Chny/2017 Aggrieved, now assessee is in appeal before the Tribunal. 5. We have heard rival contentions and gone through the facts and circumstances of the case. The assessee’s counsel has not disputed the rate of plot sold at Rs.175/- in the layout of plot Nos.28 to 38 and 74. He only pleaded mercy that a further estimate can be made because all plots cannot be sold at the rate of Rs.175/- and assessee himself have declared the rate at Rs.40 per sq.ft. Admittedly, the Revenue is not in appeal against deletion of addition by CIT(A) to the extent of 50% holding that the same is to be equally divided between two partners namely Shri K. Niranjaniah and Shri K. Asokan. Now limited issue before us is whether the amount of Rs.16,13,857/- being 50% share of Shri S. Asokan, the assessee, is explained or unexplained. Admittedly, these are found during the course of search from the documents seized. It is revealed that the plots are sold at the rate of Rs.175 per sq.ft., and selling area is 23909 sq.ft., sold to Shri K.P. Palani & Brothers in the financial year 2009-10 relevant to this assessment year 2010-11. We noted that the AO has rightly made addition in the hands of the assessee based on evidences gathered during the course of search which are not rebutted by the assessee. Hence, we confirm the orders of lower authorities on this issue and this issue of assessee’s appeal is dismissed. 6 I.T.A. No.597/Chny/2017 6. The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in making addition of rate difference of sale value between the developer and the land owners amounting to Rs.38,55,200/-. For this, assessee has raised Ground Nos.5 to 10, which need not be reproduced. 7. Brief facts relating to this issue are, the AO noted that as regards to land sold of 29744 sq.ft., to Shri M.N. Palani @ Rs.175/- per sq.ft. (plot Nos.1 to 13 and shop No.1), as per the seized documents the assessee claimed that this stretch of land was sold to Shri M.N. Palani in assessment year 2008-09 for a sum of Rs.9,00,000/-. The AO noted that during this assessment year these plots were directly sold by Shri M.N. Palani to M/s. VGN Developers Pvt. Ltd. (hereinafter the ‘VGN’) and the encumbrance certificate were furnished to substantiate the sale by Shri M.N. Palani to VGN. The AO noted that this is a fact. As per seized records Shri M.N. Palani has sold these plots to VGN this year but he presumed that Shri S. Asokan and Shri Niranjanaiah have shared this sale consideration at the rate of Rs.175/- per sq.ft., on sale of these plots. According to AO, 50% share of sale consideration has been paid to Shri Niranjanaiah before 29.03.2010. Accordingly the AO inferred that after having sold the extent of land of 29744 sq.ft., to Shri M.N. Palani in assessment year 2008-09, the assessee has unofficially repurchased the plots with an understanding to execute the 7 I.T.A. No.597/Chny/2017 sale deed in term of the firm’s nominees which is the industry practice. Accordingly, the AO estimated the undisclosed income at Rs.38,55,200/- as under:- “Therefore the consideration of Rs.5205200 (29744 x 175) is treated as revenue receipts of the assessee firm and considering that the firm should have spent to repurchase the land from Mr.Palani who bought it from the firm for Rs.9,00,000 in A.Y.2008-09, the probable cost in A.Y.2010-11 is estimated at Rs.1350000 (50% increase) and the difference of Rs.3855200 (5205200 minus 1350000) is assessed to tax as undisclosed income of the assessee.” Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) just confirmed the action of the AO. Aggrieved, now assessee is in appeal before the Tribunal. 8. Before us the ld.counsel for the assessee argued from the assessment order and stated that the AO is just making inference that the land to the extent of 29744 sq.ft. sold to Shri M.N. Palani at the rate of Rs.175/- i.e., plot Nos. 1 to 13 and shop No.1 has per the seized documents are repurchased from Shri M.N. Palani. The ld.counsel for the assessee stated that there is no seized material qua with and he requested the Bench to ask the ld.DR to produce any evidence that this land was repurchased. Further, the ld.counsel for the assessee stated that the assessee has already offered a sum of Rs.40.70 lakhs and this is noted by the AO in his order at para 4.4. 8 I.T.A. No.597/Chny/2017 The AO referred to assessee’s letter dated 05.07.2011 and the ld.counsel for the assessee referred are as under:- “The land measuring 206664 sq.ft. was sold to M/s. VGN at the rate of Rs.175/- per sq.ft. likewise the firm had sold 23909 sq.ft. to Shri Palani & his brothers at the rate of Rs.60/- per sq.ft. This was because the land sold to Palani & his brothers was undeveloped and required filling-up, leveling etc., in order to buy peace with the department, we shall be offering Rs.40,70,000* and Rs.27,49,535/- as additional income in the hands of S. Asokan and in the partnership firm, M/s. Ashok Niranjan-Ashok Residency Housing Division, respectively. *Rs.40,70,000 was the cash seized from the residence of Shri S. Asokan. The ld.counsel stated that even if presumption is accepted, the assessee has already offered a sum of Rs.40.70 lakhs, the same should be allowed against the offer made by assessee vide letter dated 05.07.2011. 9. On the other hand, the ld.CIT-DR relied on the assessment order, but could not produce any seized documents relating to resale of this extent of land of 29744 sq.f.t., by Shri M.N. Palani to the assessee. 10. We have heard the rival contentions and gone through the facts and circumstance of the case. This extent of land of 29744 sq.ft., was sold by assessee to Shri M.N. Palani in assessment year 2008-09 i.e., Plot Nos. 1 to 13 & Shop No.1. The fact regarding sale by assessee to Shri M.N. Palani is recorded in the seized documents but there is no 9 I.T.A. No.597/Chny/2017 mention of repurchase by assessee of the same land. The AO has just made inference and nothing else. As the AO has drawn inference only and there is no iota of evidence having assessee repurchased the land from Shri M.N. Palani, no addition on the basis of conjecture and surmises be made. Hence, we delete the addition and reverse the orders of lower authorities on this issue and allow this issue of assessee’s appeal 8. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the court on 31 st March, 2022 at Chennai. Sd/- (डॉ एम एल मीना) (Dr. M.L. MEENA) लेखा सद᭭य /ACCOUNTANT MEMBER Sd/- (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 31 st March, 2022 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.