K. Preshit Reddy Rep. by GPA holder K. Shantha Kumar Reddy, Hyderabad, Secunderabad V. ITO, Ward-4(2), Hyderabad, Hyderabad

ITA 615/HYD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6657 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 01-05-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 06-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment
• Section: 147; 131; 148; 132

Judgement Text

IN T HE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO S . 614 & 615 /HYD/201 7 ASSESSMENT YEAR: 2007 - 08 1. K. PRADEEP REDDY R EP. BY GPA HOLDER K. SHANTHA KUMAR REDDY, HYDERABAD. PAN A JNPK5668G 2. K. PRESHIT REDDY REP. BY GPA HOLDER K. SHANTHA KUMAR REDDY, HYDERABAD. PAN AULPK 8837G VS. INCOME - TAX OFFICER, WARD 6 ( 2 ) , HYDERABAD. - DO - ( APPELLANT S ) (RESPONDENT) ASSESSEE BY : SHRI M.V. ANIL KUMAR REVENUE BY : S MT. V. RAJITHA DATE OF HEARING : 0 1 / 0 5 /201 9 DATE OF PRONOUNCEMENT : 29 / 0 7 / 201 9 O R D E R PER S . RIFAUR RAHMAN , A .M. : BOTH T H E S E APPEAL S FILED BY THE ASSESSEE S ARE DIRECTED AGAINST THE ORDER S OF CIT(A) 1 , BOTH DATED 23 / 1 2 /201 6 , HYDERABAD FOR AY 20 0 7 - 08. SINCE IDENTICAL ISSUE IS INVOLVED IN BOTH THESE APPEALS, THE SAME WERE CLUBBED AND HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. 2. BRIEF FACTS OF THE CASE , AS TAKEN FROM K. PRADEEP REDDY (ITA NO. 614/HYD/17) ARE, AO RECEIVED INFORMATION FROM ADDL. CIT, CENTRAL RANGE 1, HYDERABAD THAT ASSESSEE PURCHASED A LAND OF 133 SQ. YARDS FROM MS. NIHARIKA REDDY, D/O M. CHANDRA REDDY FOR A CONSIDERATION OF RS. 28,59,500/ - AGAINST THE REGISTERED VALUE OF RS. 2 ITA NO S . 614 & 615 /HYD/1 7 K. PRADEEP REDDY & K. PRESHIT REDDY, HYD. 5.5 LAKHS. S MT. L. JAYA REDDY WAS SEARCHED U/S 132 OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT) AND DURING POST SEARCH PROCEEDINGS, IT CAME TO LIGHT THAT THE VENDOR I.E. MS. NIHARIKA REDDY IS THE FAMILY MEMBER OF MR. L. JAYA REDDY AND SOLD THE ABOVE PROPERTY @ RS. 21,500/ - PER SQ.YARD. ASSESSEE HAS PURCHASED THE PORTION OF THE ABOVE PROPERTY FOR THE VALUE OF RS. 5.5 LAKHS. WITH THE ABOVE INFORMA TION, NOTICE U/S 148 WAS ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO THE ABOVE NOTICE, ASSESSEE FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 8,500/ - ON 29/04/2014 FOR THE AY 2007 - 08. SUBSEQUENTLY, THIS CASE WAS CONVERTED INTO SCRUTINY BY ISSUING NOTICE U/S 143(2) TO THE ASSESSEE. IN RESPONSE, AR OF THE ASSESSEE, SHRI K. SANTHA KUMAR REDDY, FATHER OF ASSESSEE AND GPA HOLDER FILED RELEVANT INFORMATION AS CALLED FOR. AR OF THE ASSESSEE FILED A COPY OF GPA TO REPRESENT HIS SON I.E. THE ASSESSEE. THE DETAILS OF THE REOPENING OF THE CASE IS COM MUNICATED TO THE AR OF THE ASSESSEE. IN RESPONSE, AR OF THE ASSESSEE SUBMITTED A COPY OF THE SALE DEED AND BANK STATEMENT AND FURTHER SUBMITTED THAT ASSESSEE IS NRI WORKS AT USA, NEW JERSEY STATE AND WORKING F OR NOMURA SECURITIES, NEW YORK. AR OF THE ASSESSEE STATED THAT ASSESSEE PURCHASED PLOT BEARING 133 SQ.YARDS FOR RS. 5.5 LAKHS ONLY. THEN, AO SHOWED A STATEMENT OF SMT. L. JAYA REDDY, LANDLORDS, WHO CONFIRMED THE SALE OF LAND @ RS. 21,500/ - PER SQ.YARD AN D HE WAS ALSO SHOWN OTHER BUYERS STATEMENT RECORDED U/S 131 OF THE ACT, WHO , ALSO CONFIRMED THAT THEY BOUGHT THE LAND @ RS. 21,500/ - PER SQ.YARD FROM THE LANDLORDS. IN RESPONSE, ASSESSEE REPLIED VIDE HIS LETTER DATED 10/03/2015 THAT THEY PURCHASED THE PLOT OF LAND FROM M/S SMR BUILDERS, WHO ARE CONSENTING PARTY IN THE SALE DEED, WHICH IS SUBMITTED BEFORE THE AO. 2.1 AO WROTE A LETTER TO DCIT, CENTRAL CIRCLE FOR SEEKING EVIDENCE IN SUPPORT OF PURCHASE OF PLOT BY THE ASSESSEE FOR RS. 21,500/ - PER SQ.YARD. I N RESPONSE, DCIT, CENTRAL CIRCLE HAS FORWARDED ASSESSMENT ORDER PASSED IN THE CASE OF SRI MARUKULA CHANDRA REDDY, FATHER OF 3 ITA NO S . 614 & 615 /HYD/1 7 K. PRADEEP REDDY & K. PRESHIT REDDY, HYD. VENDOR MS. NIHARIKA REDDY FOR AY 2007 - 08, WHEREIN ASSESSEE THEREIN HAS ADMITTED THE SALE PRICE OF THE PLOT AT RS. 21,500/ - PER SQ.YARD. IN V IEW OF THE ABOVE OBSERVATIONS, ASSESSMENT WAS COMPLETED BY ADOPTING THE RATE OF RS. 21,500/ - PER SQ.YARD FOR PLOT CONSISTING OF 133 SQ.YARDS, ARRIVED AT AN AMOUNT OF RS. 23,09,500/ - AND TREATING THE SAME AS UNEXPLAINED INVESTMENT, MADE THE ADDITION IN THE HANDS OF THE ASSESSEE. 3. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), LD. AR OF THE ASSESSEE SUBMITTED THAT ASSESSEE HAS PURCHASED A PLOT CONSISTING OF 133 SQ.YARDS FROM MRS. MARUKULA NIHARIKA AND M/S SMR BUILDERS PVT. LTD. (CONFIRMING PARTY) VIDE REGISTERED DOCUMENT NO. 25682/06, DATED 19/12/2006 FOR A C ONSIDERATION OF RS. 5.5 LAKHS PAID THROUGH CHEQUE NO. 173058, DATED 08/12/2006, PAID TO THE SMR BUILDERS PVT. LTD. AND STATED THAT NO FURTHER PAYMENTS IN CASH OR OTHERWISE WERE MADE TOWARDS PURCHASE OF THE SAID PROPERTY. 5. AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND BANK STATEMENTS SUBMITTED BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO WITH THE OBSERVATION THAT SELLER HAS ACCEPTED VALUATION OF RS. 21,500/ - PER SQ.YARD AND THE ASSESSEES BANK STATEMENTS SHOW THAT ASSESSEE HAS M ADE PAYMENT OF RS. 9 LAKHS ON 08 TH NOVEMBER, 2006, RS. 3 LAKHS ON 24/11/2006 AND RS. 1 LAKH ON 08/12/2006 BEFORE MAKING PAYMENTS TO SMR BUILDERS OF RS. 5.5 L AKHS. SHE FURTHER OBSERVED THAT ON 28/06/2006, THERE WAS A CASH WITHDRAWAL OF RS. 2 LAKHS AND THE TOTAL COMES TO RS. 15 LAKHS, BEFORE THE PAYMENT OF RS. 5.5 LAKHS (REGISTERED VALUE). FURTHER, SHE OBSERVED THAT THE SALE CONSIDERATION FOR 133 SQ.YARDS IS LES S THAN THE DEVELOPMENT RIGHTS OR COST ATTACHED, MOU WAS ENTERED BY THE LAND OWNERS WITH SMR BUILDERS. 4 ITA NO S . 614 & 615 /HYD/1 7 K. PRADEEP REDDY & K. PRESHIT REDDY, HYD. 6. AGGRIEVED WITH THE ABOVE ORDER OF CIT(A), THE ASSESSEE PREFERRED AN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ASSESSING OFFIC ER ERRED IN LAW AND ON FACTS OF THE CASE IN ISSUING NOTICE U/S 148 OF THE ACT IN ABSENCE OF ANY MATERIAL ON RECORD TO BELIEVE THAT YOUR APPELLANT HAS PAID ANY EXTRA AMOUNT. CONSEQUENTLY THE ASSESSMENT IS BAD IN LAW. 2. YOUR APPELLANT SUBMITS THAT NO EVID ENCE IS AVAILABLE WITH THE DEPARTMENT THAT YOUR APPELLANT PAID ON - MONEY TO THE SELLERS AND THAT NO STATEMENT WAS GIVEN BY ANY PERSON, THAT YOUR APPELLANT GAVE ANY ON - MONEY. THE ADDITION MAY BE DELETED. 3. EVEN ASSUMING THAT SUCH STATEMENT WAS GIVEN BY AN Y PERSON THE SAME WAS NOT PUT TO YOUR APPELLANT AND SUCH DEPOSITION WAS NOT SUBJECT TO CROSS EXAMINATION FOR RELIANCE BY THE DEPARTMENT. THEREFORE THE ADDITION MAY BE DELETED. 4. THE CIT(A) AS WELL AS THE AO ERRED IN LAW AND ON FACTS BY RELYING ON STATEM ENT RECORDED U/S 131 OF THE ACT FROM BUYERS, WHICH ITSELF IS NOT AN EVIDENCE AND WITHOUT GIVING AN OPPORTUNITY TO EXAMINE THE SAME, THE ASSESSMENT IS BAD IN LAW. 5. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE GPA HOLDER CONFIRMED THAT NO EXTRA AMOUNT WAS PAID AND IN ABSENCE OF ANY EVIDENCE OR SEIZED MATERIAL IN SUPPORT OF RECEIPT OF EXTRA MONEY FROM YOUR APPELLANT, ADDITION OF RS. 23,09,500/ - MAY BE DELETED. 6. THE CIT(A) AS WELL AS THE AO OUGHT TO HAVE GIVEN AN OPPORTUNITY TO THE GPA HOLDER TO PERUSE THE ASSESSMENT ORDER OF SRI MARUKA CHANDRA REDDY, FATHER OF VENDOR MS NIHARIKA REDDY, TO REBUT THE SAME. 7. THE CIT (A) AS WELL AS THE AO OUGHT TO HAVE APPRECIATED THE FACT THAT YOUR APPELLANT HAD PURCHASED THE LAND FROM SMR BUILDERS AS PER THE SALE DEED, WHEREAS THE ASSESSING OFFICER IS RELYING ON THE DEPOSITIONS/STATEMENT, OF OTHER BUYERS AND OTHERS NOT EVEN MS. NIHARIKA REDDY, THEREFORE THE ADDITION IS BAD IN LAW. 8. THE CIT (A) AS WELL AS THE AO HAVING ACCEPTED THE STATEMENTS OF OTHER BUYE RS, OUGHT TO HAVE ACCEPTED THE SUBMISSIONS OF THE GP HOLDER THAT YOUR APPELLANT HAS NOT PAID ANY EXTRA MONEY, THE ADDITION MAY BE DELETED. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING YOUR APPELLANT PRAYS THAT THE HON'BLE MEM BERS MAY 5 ITA NO S . 614 & 615 /HYD/1 7 K. PRADEEP REDDY & K. PRESHIT REDDY, HYD. BE DELETE THE ADDITIONS/DISALLOWANCE OR PASS SUCH ORDERS DEEMED FIT. 7. AT THE TIME OF HEARING, LD. AR OF THE ASSESSEE BROUGHT TO OUR NOTICE THE FACTS OF THE CASE AND SUBMITTED THAT ASSESSEE HAS PURCHASED THE PROPERTY AND NOT SOLD THE PROPERTY. HE SUBMITTED THAT IN PROCEEDINGS U/S 147 IS WRONG. HE BROUGHT TO OUR NOTICE THE SAL E DEED ENTERED BETWEEN SMT. MARUKULA NIHARIKA AS VENDOR AND SMR BUILDERS PVT. LTD AS CONFIRMING PARTY AND ASSESSEE. HE SUBMITTED THAT ASSESSEE HAS BOUGHT THE ABOVE PROPERTY FROM THE BUILDER AND NOT FR O M LANDLORD. EVEN THOUGH, THE SALE DEED SHOWS SMR BUILD ERS AS CONFIRMING PARTY, ASSESSEE HAS PURCHASED THE PROPERTY ONLY CONTACTING THE SMR BUILDERS . THE ASSESSEE HAS NO CONTACT WITH LANDLORD. HE SUBMITTED THAT ASSESSMENT WAS REOPENED WITH WRONG NOTION AND MADE ADDITION AS UNEXPLAINED INVESTMENT. FURTHER, HE B ROUGHT TO OUR NOTICE PARA 3 OF THE CIT(A)S ORDER, IN WHICH, SHE HAS CONFIRMED THE ADDITIONS MADE BY THE AO AND SUBMITTED THAT CIT(A) CONFIRMED WITH WRONG COMMENTS. FURTHER, HE SUBMITTED THAT CIT(A) HAS NOT GIVEN ANY FINDING ON SECTION 147 PROCEEDINGS. FUR THER, HE SUBMITTED THAT THE ABOVE ADDITION WAS MADE IN CONNECTION WITH THE PROCEEDINGS U/S 132 OF THE ACT, FINDINGS IN THE SEARCH PROCEEDINGS IN CASE OF SMT. L. JAYA REDDY. HE SUBMITTED THAT THE PROCEEDINGS SHOULD HAVE INITIATED U/S 153C OF THE ACT AND NOT U/S 147 OF THE ACT. IN THIS REGARD, HE RELIED ON THE FOLLOWING CASE LAW: 1. G. KOTESWARA RAO, VS. DCIT, 64 TAXMAN 159 (VIZAG TRIB.) 2. INCOME - TAX OFFICER VS. LAKHMANI MEWAL DAS, 103 ITR 437 (SC) 3. ITO VS.CHINTAN JADAVBHAI PATEL, 91 TAXMANN.COM 426 (SC) 8. LD. DR, ON THE OTHER HAND, OBJECTED TO THE SUBMISSIONS OF THE LD. AR THAT PROCEEDINGS SHOULD HAVE BEEN INITIATED U/S 153C OF THE ACT AND HE SUBMITTED THAT THERE WAS NO DOCUMENT FOUND DURING THE SEARCH RELEVANT TO ASSESSEE. THEREFORE, INITIATION OF PROCEEDINGS U/S 147 IS PROPER AND FURTHER HE SUBMITTED THAT ASSESSEE WAS GIVEN 6 ITA NO S . 614 & 615 /HYD/1 7 K. PRADEEP REDDY & K. PRESHIT REDDY, HYD. PROPER OPPORTUNITY BY THE AO AND BASED ON THE INCREMENTAL AND CIRCUMSTANTIAL EVIDENCE AVAILABLE WITH THE AO, THE ADDITION WAS MADE BY THE TAX AUTHORITIES. 9. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT THE VENDOR SMT. MARUKULA NIHARIKA AND CONFIRMING PARTY I.E. M/S SMR BUILDERS PVT. LTD. OFFERED TO SELL UNDIVIDED SHARE OF 133 SQ.YARDS OUT OF 1112 SQ.YARDS AT PLOT NO. 4 IN SURVE NO. 79, SITUATED AT GACHIBOWLI VILLAGE, SANGA REDDY MANDAL AND MUNICIPALITY, RR DIST. FOR A TOTAL CONSIDERATION OF RS. 5,50,000/ - AND ASSESSEE ACCEPTED THE PURCHASE OF UNDIVIDED SHARE OF 133 SQ.YARDS WITH AN INT ENT TO GIVE IT ON DEVELOPMENT TO M/S PRUTHVIRAJ PROJECTS PVT. LTD.. A SEPARATE DEVELOPMENT AGREEMENT BETWEEN ASSESSEE ALONG WITH OTHER CO - PURCHASERS AND M/S PRUTHVIRAJ PROJECTS PVT. LTD. WAS EXECUTED, AFTER REGISTRATION OF ABOVE SAID SALE DEED. ACCORDINGLY , ASSESSEE PAID AN AMOUNT OF RS. 5.5 LAKHS TO M/S SMR BUILDERS FOR THE COST OF THE ABOVE LAND. ASSESSEE HAS PAID DIRECTLY TO M/S SMR DEVELOPERS AND ASSESSEE HAS NOT ENTERED INTO ANY SORT OF AGREEMENT WITH VENDOR MRS. M. NIHARIKA. 9.1 BASICALLY, ASSESSEE HAS ENTERED INTO AGREEMENT WITH M/S SMR BUILDERS AND ITS ASSOCIATES M/S PRUTHVIRAJ PROJECTS PVT. LTD. WITH THE INTENTION TO PURCHASE LAND AND CONSTRUCT BUILDING . ACCORDINGLY, AS PER THE ADVICE OF M/S SMR BUILDERS, ASSESSEE HAS PAID COST OF THE LAND. IT IS IMPORTANT TO NOTE THAT M/S SMR BUILDERS IS TECHNICAL VENDOR IN THIS CASE AND ASSESSEE HAS NO CONTACTS WITH THE LANDLORD (I.E. VENDOR) AS PER THE SALE DEED. IN OUR VIEW, ASSESSEE MUST HAVE PAID CONSOLID ATED AMOUNT FOR THE BUILT UP AREA WITH COST OF LAND. SINCE ASSESSEE HAS NO DIRECT CONTACT WITH THE ACTUAL VENDOR, ASSESSEE HAS ACTED UPON THE ADVICE OF M/S SMR BUILDERS AND PAID THE AMOUNT TO M/S SMR BUILDERS. THEREFORE, ANY AMOUNT DECLARED BY THE VENDOR I .E. SMT. M. NIHARIKA IN HER RETURN OF INCOME CANNOT BE INFERRED THAT ASSESSEE SHOULD HAVE MADE THE PAYMENT. SINCE THERE IS A MIDDLE AGENCY I.E. 7 ITA NO S . 614 & 615 /HYD/1 7 K. PRADEEP REDDY & K. PRESHIT REDDY, HYD. M/S SMR BUILDERS ARE INVOLVED AND THE ACTUAL AGREEMENT IS BETWEEN M/S SMR BUILDERS AND THE VENDOR. AS PER THE SALE DEED, M/S SMR BUILDERS ARE CONFIRMING PARTY, BUT, IN ACTUAL, M/S SMR BUILDERS HAS SOLD THE LAND TO THE ASSESSEE AND COLLECTED THE DUE AMOUNT. THEREFORE, IT CLEARLY ESTABLISHES THAT M/S SMR BUILDERS ARE THE VENDOR AND THE DEVELOPERS OF THE LAND. SINCE, VEND OR HAS DECLARED THE SALE VALUE @ RS. 21,500/ - IT SHOULD BE VERIFIED WITH M/S SMR BUILDERS NOT WITH THE ASSESSEE. THEREFORE, THE AO HAS PRESUMED THAT ASSESSEE HAS PAID SALE PROCEEDS TO THE VENDOR AND IF THERE IS ON MONEY, IT IS PRESUMED THAT ASSESSEE HAS MAD E THE PAYMENT. WHEREAS, ASSESSEE HAS ENTERED AGREEMENT WITH M/S SMR BUILDERS TO CONSTRUCT BUILDING ON THE UNDIVIDED SHARE OF LAND OUT OF 1112 SQ.YARDS OF PLOT AND THE ASSESSEE MIGHT HAVE FOLLOWED INSTRUCTIONS FROM M/S SMR BUILDERS AND SPLIT UP THE OVERALL PRICE AGREED WITH BUILDER IN LAND COST AND CONSTRUCTION COST . THEREFORE, ASSESSEE CANNOT BE PRESUMED TO HAVE MADE ON - MONEY TO THE VENDOR. FURTHER, THERE IS NO EVIDENCE THAT VENDOR HAS RECEIVED ANY PROCEEDS FROM THE ASSESSEE, WHEREAS, ASSESSEE HAS NO CONTA CTS WITH THE VENDOR AND ASSESSEE HAS ENTERED AGREEMENT ONLY WITH M/S SMR BUILDERS. THEREFORE, IF ANY PRESUMPTION HAS TO BE APPLIED, THEY SHOULD APPLY THE PRESUMPTION ON THE TRANSACTION WITH M/S SMR BUILDERS AND VENDOR AND NOT WITH THE ASSESSEE. THEREFORE, ADD ITION MADE IN THE HANDS OF THE ASSESSEE IS NOT PROPER AND ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADDITION OF RS. 23,09,500/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD ARE ALLOWED. 10. A S THE FACTS AND GROUNDS OF APPEAL IN ITA NO. 615/HYD/2017 ARE MATERIALLY IDENTICAL TO THAT OF ITA NO. 614/HYD/2017, FOLLOWING THE DECISION THEREIN, WE DIRECT THE AO TO DELETE THE ADDITION OF RS. 23,09,500/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT. 8 ITA NO S . 614 & 615 /HYD/1 7 K. PRADEEP REDDY & K. PRESHIT REDDY, HYD. 11. IN THE RESULT, BOTH THE APPEALS UNDER CONSIDERATION ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29 TH JULY , 201 9 . SD/ - SD/ - ( P. MADHAVI DEVI ) (S . RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 29 TH JULY , 201 9 KV C OPY TO: - 1) SHRI K. PRADEEP REDDY, 2) K. PRESHIT REDDY, C/O M. ANANDAM & CO., CAS, 7A, SURYA TOWERS , SD ROAD, SECUNDERABAD 500 003 3 ) ITO, WARD 4 ( 2 ) , HYDERABAD 4 ) CIT(A) 1, HYDERABAD. 5 ) PR. CIT - 1 , HYD. 6 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 7 ) GUARD FILE