ACIT,Central Circle - 9, Hyderabad V. M/s Penneru Agro Tech Pvt Ltd, Hyderabad

ITA 629/HYD/2014

• Counselvise Citation: 62922514 RSA 2014
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Keywords: Reopening of assessment; Unexplained investment; Business income; Depreciation; Search and seizure; Source of fund; Cost of acquisition; Tangible material; Difference of opinion; Corroborative evidences; Assessment record; Reason to believe; Change of opinion
• Section: 143(3); 234B; 147; 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER SL. NO. ITA NO. AY APPELLANT RESPONDENT 01 535/H/14 2002-03 M/S DANISHTA FARMS PVT. LTD., HYD. PAN AABCD 7523P ASST. COMMISSIONER OF INCOME-TAX(OSD), CENTRAL RANGE 1, HYD. 02 537/H/14 2002-03 M/S JESHTA GREEN- FIELDS PVT. LTD., HYD. PAN AABCJ 2423K INCOME-TAX OFFICER(OSD)-2, CENTRAL RANGE 1, HYD. 03 538/H/14 2002-03 M/S TUNGABHADRA GREENLANDS PVT. LTD., HYD. PAN-AABCT3785D INCOME-TAX OFFICER(OSD)-3, CENTRAL RANGE 1, HYD. 04 539/H/14 2002-03 M/S HASTHA BIO-TECH PVT. LTD., HYD. PAN-AABCH 2671Q INCOME-TAX OFFICER(OSD)-2, CENTRAL RANGE 1, HYD. 05 500/H/14 2002-03 M/S PARBATI AGRO- FARMS PVT. LTD., HYD PAN-AACCP 1719L INCOME-TAX OFFICER(OSD), CENTRAL RANGE 1, HYD. 06 501/H/14 2002-03 M/S BHARANI AGRO PVT. LTD., HYD. PAN-AACCB 1168P INCOME-TAX OFFICER(OSD)-3, CENTRAL RANGE 1, HYD. 07 686/H/14 2002-03 ADDL. COMMISSIONER OF INCOME-TAX, RANGE 3, HYD. M/S PARBATI AGRO- FARMS PVT. LTD., HYD PAN-AACCP 1719L 08. 687/H/14 2002-03 -DO- M/S BHARANI AGRO PVT. LTD., HYD. PAN-AACCB 1168P 09 536/H/14 2003-04 M/S SATABISHA AGRO PVT. LTD., HYD. PAN-AAHCS 1693K DY. COMMISSIONER OF INCOME-TAX, CENTRAL RANGE 9, HYD. 10 540/H/14 2007-08 M/S DHANISHTA BIOTECH PVT. LTD., HYD ASST. COMMISSIONER OF INCOME-TAX(OSD, CENTRAL RANGE 1, HYD. 2 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. 11 502/H/14 2007-08 M/S TUNGABHADRA GREENLANDS PVT. LTD., HYD. PAN-AABCT3785D INCOME-TAX OFFICER(OSD)-3, CENTRAL RANGE 1, HYD. 12 685/H/14 2007-08 ADD. COMMISSIONER OF INCOME-TAX, RANGE 3, HYD. M/S TUNGABHADRA GREENLANDS PVT. LTD., HYD. PAN- AABCT3785D 13 499/H/14 2007-08 M/S PENNERU AGRO TECH (P) LTD., HYD. PAN AACCP 1720F INCOME-TAX OFFICER(OSD), CENTRAL RANGE 1, HYD. 14 629/H/14 2007-08 ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 9, HYD. M/S PENNERU AGRO TECH (P) LTD., HYD. PAN AACCP 1720F ASSESSEE BY SHRI K.C. DEVDAS REVENUE BY SHRI RAJAT MITRA DATE OF HEARING 08-12-2014 DATE OF PRONOUNCEMENT 12-12-2014 O R D E R PER SAKTIJIT DEY, J.M.: THESE ARE BUNCH OF 14 APPEALS. THERE ARE CROSS APP EALS IN CASE OF FOUR DIFFERENT ASSESSEES AGAINST SEPARATE ORDERS OF LD. CIT(A)-VII, HYDERABAD PERTAINING TO AY 2002-03 & 20 07-08. REST 7 APPEALS ARE BY DIFFERENT ASSESSEES AGAINST SEPARATE ORDERS OF LD. CIT(A)-VII, HYDERABAD PERTAINING TO AY 2002-03, 200 3-04 AND 2007- 08. AS COMMON ISSUES ARE INVOLVED IN ALL THESE APPE ALS, THEY WERE CLUBBED AND HEARD TOGETHER, THEREFORE, WE FIND IT C ONVENIENT TO DISPOSE OF THESE APPEALS BY WAY OF A CONSOLIDATED O RDER. ITA NOS. 535, 537, 538, 539, 500 & 501/HYD/2014 2. THE ONLY COMMON ISSUE IN ITA NOS. 535, 537, 538 & 539/HYD/2014 AND ONE OF THE ISSUES IN ITA NOS. 500 & 501/HYD/2014 3 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. IS WITH REGARD TO VALIDITY OF PROCEEDING INITIATED U/S 147 OF THE ACT AND ASSESSMENT ORDER PASSED CONSEQUENT THERETO. 3. AS FACTS ARE IDENTICAL IN ALL THE APPEALS, FOR T HE SAKE OF BREVITY, WE WILL REFER TO THE FACTS AS INVOLVED IN ITA NO. 5 00/HYD/2014. 4. BRIEFLY THE FACTS ARE, ASSESSEE IS A COMPANY CAR RYING ON AGRICULTURAL AND ALLIED ACTIVITIES. ASSESSEE IS ONE AMONGST A NUMBER OF COMPANIES ESTABLISHED BY SHRI B. RAMALINGA RAJU, ERSTWHILE CHAIRMAN OF SATYAM COMPUTER SERVICES LTD., AND HIS FAMILY MEMBERS. FOR THE AY UNDER DISPUTE, ASSESSEE FILED I TS RETURN OF INCOME ON 01/11/02, DECLARING TOTAL INCOME OF RS. N IL. RETURN OF INCOME FILED BY ASSESSEE WAS SUBJECTED TO SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATE D 27/08/2004. 4.1. ON 7.01.2009 SHRI B. RAMALINGA RAJU, THE THEN CHAIRMAN OF SATYAM COMPUTERS LTD. CONFESSED TO HAVING FUDGED THE ACCOUNTS OF THAT COMPANY OVER THE LAST SO MANY YEARS WITH AN INTENTION TO DEFRAUD THE PUBLIC AT LARGE. SHRI B. RAMALINGA RAJU AND HIS FAMILY MEMBERS HAVE FLOATED MORE THAN 350 COMPANIES AND AS SESSEE- COMPANY IS ONE OF THEM. AS PER THE ANNUAL REPORT OF ASSESSEE- COMPANY FOR THE YEAR 2001-02, SMT. B. JHANSI RANI A ND SRI N. RAMA RAJU WERE ITS DIRECTORS. THE EFFECTIVE SHARE-HOLDER S AND THE CONTROLLING DIRECTORS IN ALL THE 350 PLUS COMPANIES ARE THE FAMILY MEMBERS OF SRI B. RAMALINGA RAJU. WITH THIS SCENARI O IN BACK GROUND, THE CASES ALREADY CENTRALIZED WITH THE ITO (OSD), C ENTRAL RANGE-1, HYDERABAD AND THE PRESENT CASE WAS RE-OPENED ON THE REASON THAT THE FUDGING OF ACCOUNTS BY SRI B. RAMALINGA RAJU WO ULD HAVE A DIRECT IMPACT ON THE CASE AND REVENUES RECORDED AND THE EX PENDITURE DEBITED IN THIS CASE ARE MANIPULATED TO EVADE INCOM E TAX. ACCORDINGLY, NOTICE U/S. 148 OF THE I.T. ACT DATED 26.3.2009 WAS ISSUED WHICH WAS SERVED ON ASSESSEE ON THE SAME DAT E. IN RESPONSE 4 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. TO THE NOTICE, ASSESSEE FILED A RETURN ON 21.05.200 9 AGAIN DECLARING NIL INCOME. 4.2. ASSESSEE OBJECTED TO REOPENING OF ASSESSMENT A ND ISSUANCE NOTICE UNDER SECTION 148 STATING THAT THE ASSESSMEN T CANNOT BE REOPENED AFTER EXPIRY OF 4 YEARS UNLESS THERE IS OM ISSION OR FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY AL L THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. IT WAS FURTHER SUBMITTED THAT THERE IS NO RECORD OR EVIDENCE THAT ANY INCOME OF ASSESSEE WAS SIPHONED OFF NOR THERE IS ANY EVIDENCE THAT ANY PARTICULAR INCOME HA S ESCAPED ASSESSMENT. THE ASSESSING OFFICER HOWEVER, REJECTED THE CONTENTION AND EXAMINED THE ACCOUNTS WHICH WERE ALREADY ACCEPT ED UNDER SECTION 143(3), THEREBY MAKING ADDITIONS OF INVESTM ENTS MADE IN THE LAND, CREDITS IN THE BANK ACCOUNT AND UNSECURED LOA NS. ACCORDINGLY, ASSESSMENT WAS COMPLETED U/S 143(3) READ WITH SECTI ON 147 BY DETERMINING THE TOTAL INCOME AT RS. 14,96,197.00 5. ASSESSEE OBJECTED BEFORE THE CIT(A) TO THE REOP ENING OF THE ASSESSMENT ON THE GROUND THAT THE PROVISIONS OF SECTION 148 HAVE BEEN WRONGLY INVOKED AND ACCORDINGLY, REOPENING IS NOT VALID IN LAW. ASSESSEE ALSO CHALLENGED THE MERIT OF THE ADDITIONS MADE BY AO. 6. THE LD. CIT(A) HAVING CONSIDERED THE SUBMISSION S OF THE ASSESSEE AND ALSO THE OBSERVATION OF THE ASSESSING OFFICER, OPINED THAT THE ASSESSING OFFICER HAD A REASON TO BELIEVE THAT THERE IS AN ESCAPEMENT OF INCOME, AND HENCE, THE REOPENING OF ASSESSMENT MADE BY A.O. IS IN ORDER. AS FAR AS ADDITIONS MADE ARE CONCERNED, THOUGH, LD. CIT(A) DELETED ALL THE ADDITIONS, HE NE VERTHELESS DIRECTED ASSESSING OFFICER TO EXAMINE WHETHER ASSESSEE HAS C LAIMED LAND DEVELOPMENT EXPENSES AS PART OF COST OF ACQUISITION IN THE YEAR OF SALE. 5 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. 7. LD. AR AND LD. DR AGREED BEFORE US THAT THE ISSU E IS SQUARELY COVERED BY THE ORDER PASSED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF OTHER GROUP COMPANIES FOR THE SAME ASSES SMENT YEAR. COPIES OF THE ORDERS WERE ALSO PLACED BEFORE THE BE NCH BY LD. AR. 8. WE HAVE HEARD THE PARTIES AND PERUSED THE RELEVA NT MATERIALS ON RECORD AS WELL AS ORDERS OF REVENUE AUTHORITIES. AS CAN BE SEEN THE REASONS FOR REOPENING ASSESSMENT AS RECORDED BY AO ARE AS UNDER: ON 7TH JANUARY, 2009, SRI B.RAMALINGA RAJU, EX-CHAI RMAN OF M/S,SCSL IN HIS LETTER SENT TO THE BOARD OF DIRECTORS WITH A COPY MARKED TO SEBI HAS STATED THAT BOOKS OF ACCOUNTS HAVE BEEN FUDGED FOR THE LAST SEVERAL YEARS. HE FURTHER STATED THAT THE REVENUES AND PROF ITS WERE MANIPULATED BY FALSIFICATION OF ACCOUNTS FOR THE LAST SEVERAL Y EARS. SWORN STATEMENT OF B RAMALINGA RAJU WAS RECORDED UNDER SEC.131 OF THE I. T.ACT, 1961 ON 21-02-2009 IN THE CENTRAL PRISON, CHANCHALGUDA, HYDERABAD. DURING THE COURSE OF INTERROGATION HE HA S CONFIRMED AND REITERATED THE FACTS AND FIGURES THAT WERE STATED I N HIS LETTER DATED 07. 01. 2009 ADDRESSED TO THE BOARD OF DIRECTORS. MEANI NG THEREBY, SRI B RAMALINGA RAJU HAS CONFESSED TO THE FACT THAT THE B OOKS OF ACCOUNTS HAVE BEEN FUDGED SYSTEMATICALLY FOR THE LAST SO MAN Y YEARS WITH AN INTENTION TO DEFRAUD THE PUBLIC AT LARGE. HE FURTHE R STATED THAT THE REVENUES AND PROFITS WERE MANIPULATED BY FUDGING TH E BOOKS OF ACCOUNTS. HE FURTHER INFORMED THAT HE HAS ARRANGED AN AMOUNT OF RS.1230 CRORES TO M/S. SCSL TO RUN THE OPERATIONS BY RAISIN G MONIES THROUGH PLEDGING OF SHARES OF M/S. MAYTAS INFRA LTD APART FROM PLEDGING OF SHARES OF M/S. SCSL. ALL THESE TRANSACTIONS WERE STATED TO BE OUTSIDE THE BOOKS OF ACCOUNTS. INFORMATION GATHERED REVEALED THAT THE REVENUES REC ORDED AND THE EXPENDITURE DEBITED IN THE CASE OF THE ASSESSEE ARE MANIPULATED TO EVADE INCOME TAX. THEREFORE I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX WHICH ESCAPED ASSESSMENT IS MORE THAN RS.1 LAKH (ONE LAKH) IN TERMS OF PROVISION CONTAINED IN SEC.149 R.W.S.148 OF THE I.T. ACT, 1961'. 9. ON PERUSAL OF THE ASSESSMENT ORDER, IT IS SEEN T HAT THE ADDITION ULTIMATELY MADE WHILE COMPLETING ASSESSMENT U/S 143 (3) READ WITH SECTION 147 OF THE ACT, HAS ABSOLUTELY NO NEXUS WIT H THE REASONS RECORDED. MOREOVER, IT IS A FACT ON RECORD THAT ACT ION U/S 147 OF THE ACT, WAS INITIATED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE 6 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. RELEVANT AY I.E. 2002-03. AS IN ASSESSEES CASE, TH E ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, ASS ESSMENT, IN TERMS WITH PROVISO TO SECTION 147, CAN ONLY BE REOP ENED BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT A Y IN A CASE WHERE ESCAPEMENT OF INCOME IS ON ACCOUNT OF FAILURE ON TH E PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR HIS ASSESSMENT. ON A PERUSAL OF THE REASONS RECORDED AS WELL AS ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTIO N 147 OF THE ACT, IT IS ABSOLUTELY CLEAR THAT NEITHER THERE IS ANY AL LEGATION BY AO THAT ESCAPEMENT OF INCOME WAS DUE TO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIALS FACTS NECESS ARY FOR HIS ASSESSMENT NOR THERE IS TANGIBLE MATERIAL IN POSSES SION OF AO TO SHOW THAT THERE IS ESCAPEMENT OF INCOME OR UNDER AS SESSMENT OF INCOME. MOREOVER, THE ADDITION ULTIMATELY MADE BY A O HAS NO NEXUS WITH THE REASONS RECORDED. IN THE AFORESAID FACTS AND CIRCUMSTANCES, REOPENING OF ASSESSMENT U/S 147 OF THE ACT, BEYOND A PERIOD OF FOUR YEARS FROM THE RELEVANT AY, THAT TOO IN ABSENCE OF TANGIBLE MATERIAL, IN OUR VIEW, IS INVALID IN LAW. A COORDINATE BENCH OF THIS TRIBUNAL WHILE CONSIDERING IDENTICAL ISSUE OF REOPENING OF ASSESSM ENT IN CASE OF OTHER GROUP COMPANIES FOR THE SELF-SAME ASSESSMENT YEAR IN ITA NOS. 1233/HYD/2011 AND OTHERS DATED 31/12/2013, HELD REO PENING OF ASSESSMENT TO BE INVALID ON THE FOLLOWING FINDING: 18. TO CONCLUDE, (I) THE RECORDING OF REASONS BEFORE THE ISSUE OF NO TICE UNDER SECTION 148 HAS ABSOLUTELY NO NEXUS WITH THE ASSESS MENT MADE. (II) THAT THE ASSESSMENT MADE UNDER SEC.143(3) CANN OT BE REOPENED UNDER SEC. 148 BEYOND PERIOD OF 4 YEARS AS THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLO SE FULLY AND TRULY ALL THE MATERIAL FACTS IN THE ORIGINAL ASSESS MENT ITSELF. (III) THE ASSESSING OFFICER HAD NO TANGIBLE MATERIA L TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM THE ORIGINAL ASSESSMENT. 7 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. (IV) THE REOPENING WAS ON WRONG FOUNDATION OF REASO NING OF THE FINANCIAL IMPLICATION BETWEEN THE ASSESSEE-COMPANY AND M/S. SATYAM COMPUTER SERVICES LIMITED, WHICH WAS NO T ESTABLISHED IN THE REASSESSMENT TO JUSTIFY THE REOP ENING. (V) AS CAN BE SEEN FROM THE ASSESSMENT ORDER, THE A SSESSMENT COMPLETED HAS NO RELATION AT ALL WITH THE REASONS F OR REOPENING. EVEN THOUGH ASSESSEE BELONGS TO SATYAM G ROUP OF COMPANIES, THERE IS NO EVIDENCE OF SIPHONING OF FUNDS OR ESCAPEMENT OF INCOME. WHAT THE ASSESSING OFFICER HA S DONE IN THE ASSESSMENT IS DENIAL OF THE EXPLANATIONS GIV EN BY THE ASSESSEE WITH REFERENCE TO VARIOUS INVESTMENTS MADE THROUGH THE BOOKS OF ACCOUNTS, VARIOUS CREDITS AND LOANS OBTAINED AND ALSO ADDITION TO FIXED ASSETS ON THE R EASON THAT THE EVIDENCES HAVE NOT BEEN FILED. THUS AS CAN BE S EEN FROM THE ORDER, THERE IS NO NEXUS AT ALL WITH REFERENCE TO THE REASONS FOR REOPENING AND THE ASSESSMENT COMPLETED. 19. HENCE, THERE BEING NO NEXUS OR LIVE-LIN K WITH THE REASONS RECORDED AND THE FORMATION OF BELIEF TO COME TO A CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME AND ALSO SINCE THE A SSESSMENT HAS BEEN REOPENED BEYOND THE PERIOD OF 4 YEARS WHEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TR ULY DISCLOSE ALL MATERIAL FACTS IN THE ORIGINAL ASSESSMENT ITSELF, A ND THERE BEING NO TANGIBLE MATERIAL FOR THE REOPENING OF THE ASSESS MENT, THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFI CER. WE, THEREFORE, HOLD THAT THE REOPENING OF THE JURISDICT ION UNDER SECTION 147 IS BAD IN LAW AND IS TO BE QUASHED. 10. SIMILAR ISSUE AGAIN CAME UP FOR CONSIDERATION I N CASE OF OTHER COMPANIES BELONGING TO THE SAME GROUP FOR THE SAME AY IN ITA NO. 482/HYD/14 AND OTHERS DATED 10/10/2014 IN CASE OF S ATABHISHA AGRO PVT. LTD. THE COORDINATE BENCH TAKING NOTE OF ITS E ARLIER DECISION IN OTHER GROUP COMPANIES HELD AS UNDER: 9. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT THE ASSESSMENT HAS ALREADY BEEN COMPLETED UNDER SEC TION 143(3) AFTER SCRUTINY WHICH HAS BECOME FINAL. THERE FORE REOPENING THE ASSESSMENT AFTER FOUR YEARS FROM THE END OF ASSESSMENT YEAR CAN ONLY BE DONE ONLY WHEN THERE IS FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY A ND TRULY ALL MATERIAL FACTS OF ANY PARTICULARS OF INCOME. AO DID NOT ALLEGE ANYTHING OF THAT SORT. THEREFORE DISALLOWING THE EXPENDITURE CLAIMS AND BRINGING TO TAX CREDITS WHIC H WERE ACCEPTED IN THE ASSESSMENT EARLIER COMES WITHIN THE 8 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. DOMAIN OF CHANGE OF OPINION. FOR THE CONCEPT OF C HANGE OF OPINION, THE SUPREME COURT HAS HELD IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 AS FOLL OWS : THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION OF SECTION 147 O F THE INCOME TAX ACT, 1961, BY THE DIRECT TAX LAWS (AMEND MENT) ACTS, 1987 AND 1989. AFTER THE AMENDMENT, THE ASSES SING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT, BUT THIS DOES NOT IMPLY THAT TH E ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF CHANGE OF OPINIO N MUST BE TREATED AS AN IN-BUILT TEST TO CHECK THE ABUSE O F POWER. HENCE, AFTER APRIL 1, 1989, THE ASSESSING OFFICER H AS POWER TO REOPEN AN ASSESSMENT, PROVIDED THERE IS TANGIBL E MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST H AVE A LINK WITH THE FORMATION OF THE BELIEF. DECISIONS OF THE DELHI HIGH COURT IN CIT V. KELVINATOR OF INDIA LTD. (2002) 256 ITR 1 (FB) AND CIT V. EICHER LTD. (2007) 294 IT R 310 AFFIRMED. '147. INCOME ESCAPING ASSESSMENT.IF THE AO HAS REA SON TO BELIEVE THAT ANY INCOME ME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SS. 148 TO 153, ASSESS OR REASSESS SU CH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS E SCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RE COMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANC E, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTE R IN THIS SECTION AND IN SS. 148 TO 153 REFERRED TO AS THE RE LEVANT ASSESSMENT YEAR).' AFTER THE AMENDING ACT, 1989, S. 147 READS AS UNDER : 4. ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MA DE TO S. 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TA X LAWS (AMENDMENT) ACT, 1987, REOPENING COULD BE DONE UNDE R ABOVE TWO CONDITIONS AND FULFILLMENT OF THE SAID CONDITIONS A LONE CONFERRED JURISDICTION ON THE AO TO MAKE A BACK ASSESSMENT, B UT IN S. 147 OF THE ACT (W.E.F. 1ST APRIL, 1989), THEY ARE GIVEN A GO BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THEREFORE, POST 1ST APRIL , 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAI LING WHICH, WE ARE 9 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. AFRAID, S. 147 WOULD GIVE ARBITRARY POWERS TO THE A O TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION ', WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEE P IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND P OWER TO REASSESS. THE AO HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFI LLMENT OF CERTAIN PRE-CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE AO. HENCE, AFTER 1ST AP RIL, 1989, AO HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MA TERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOM E FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO S. 147 OF THE ACT, AS QUOTED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPI NION' IN S. 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPRESENTATIONS FRO M THE COMPANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT RE- INTRODUCED THE SAID EXPRESSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN T HE AO. WE QUOTE HEREINBELOW THE RELEVANT PORTION OF CIRCULAR NO. 54 9, DT. 31ST OCT., 1989 [(1990) 82 CTR (ST) 1], WHICH READS AS FOLLOWS : '7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO R E-INTRODUCE THE EXPRESSION REASON TO BELIEVE IN S. 147. A NUM BER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF THE WORDS REASON TO BELIEVE FROM S. 147 AND THEIR SUBSTITUT ION BY THE OPINION OF THE AO. IT WAS POINTED OUT THAT THE ME ANING OF THE EXPRESSION, REASON TO BELIEVE HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SETTLED AND ITS OMISSION FROM S. 147 WOULD GIVE ARBITRARY POWERS TO THE AO T O REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THE SE FEARS, THE AMENDING ACT, 1989, HAS AGAIN AMENDED S. 147 TO REI NTRODUCE THE EXPRESSION HAS REASON TO BELIEVE IN PLACE OF THE WORDS FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION. OTHER PROVISIONS OF THE NEW S. 147, HOWEVER, REMAIN THE S AME.' 5. FOR THE AFORE-STATED REASONS, WE SEE NO MERIT IN THESE CIVIL APPEALS FILED BY THE DEPARTMENT, HENCE, DISMI SSED WITH NO ORDER AS TO COSTS 10. WE ALSO FIND THAT CIT(A) ERRED IN HOLDING THAT THE ASSESSING OFFICER HAD VALID REASONS TO REOPEN THE A SSESSMENT OF ASSESSEE-COMPANY TO EXAMINE THE VERACITIES AND FINA NCIAL 10 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. IMPLICATIONS BETWEEN ASSESSEE-COMPANY AND M/S. SATY AM COMPUTER SERVICES LIMITED. WE FIND THERE IS NO RATI ONALE NEXUS WITH SUCH STATEMENT BY SRI RAMALINGA RAJU AND REASS ESSMENT MADE. AS SEEN FROM THE ORDER OF AO EVEN THOUGH THE ASSESSMENT WAS REOPENED TO EXAMINE THE TRANSACTION BETWEEN M/S SATYAM COMPUTERS AND ASSESSEE, NO SUCH EXERCISE WAS UNDERTAKEN AND NO FINDINGS WERE GIVEN ON THAT ISSUE. THE ADDITIONS MADE ARE ROUTINE DISALLOW ANCES OUT OF ALREADY ALLOWED EXPENDITURE IN ORIGINAL ASSE SSMENT. THERE IS NO NEXUS BETWEEN THE REASONS RECORDED AND ADDITIONS MADE IN THE GUISE OF ESCAPEMENT OF INCOME . WE RELY UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GANGA SARAN & SONS P. LTD. VS. ITO AND OTHE RS 130 ITR 1 (SC) FOR THE PROPOSITION THAT IF THERE IS NO RATIONAL NEXUS BETWEEN THE REASONS AND THE BELIEF, SO THAT ON SUCH REASONS THE A.O. CANNOT HAVE REASON TO BELIEVE THAT ANY PART OF THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND SUCH ESCAPEMENT WAS BY REASON OF OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS, THE NOTICE ISSU ED BY THE A.O. IS TO BE STRUCK AS INVALID. AS THERE IS NO R ATIONAL NEXUS BETWEEN THE REASONS AND THE BELIEF, AND ON S UCH REASONS THE A.O. CANNOT HAVE REASON TO BELIEVE THAT ANY PART OF THE INCOME OF ASSESSEE HAS ESCAPED ASSESSMENT AND SUCH ESCAPEMENT WAS BY REASON OF OMISSION OR FAILURE ON THE PART OF ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS, THE NOTICE ISSU ED BY THE A.O. IS TO BE STRUCK DOWN AS INVALID. THE ASSESSING OFFICER HA D NO TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT TH ERE WAS ESCAPEMENT OF INCOME FROM THE ORIGINAL ASSESSMENT. THE ASSESSMENT MADE UNDER SEC. 143(3) HAS BEEN WRONGLY REOPENED UNDER SEC. 147 BEYOND PERIOD OF 4 YEARS, A S THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLO SE FULLY AND TRULY ALL THE MATERIAL FACTS IN THE ORIGINAL AS SESSMENT ITSELF. THE REOPENING WAS ON WRONG FOUNDATION OF RE ASONING OF THE FINANCIAL IMPLICATION BETWEEN THE ASSESSEE-C OMPANY AND M/S. SATYAM COMPUTER SERVICES LIMITED, WHICH WA S NOT ESTABLISHED IN THE REASSESSMENT TO JUSTIFY THE REOPENING. 11. THUS, THERE BEING NO NEXUS OR LIVE-LINK WITH THE REASONS RECORDED AND THE FORMATION OF BELIEF TO C OME TO A CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME AND ALSO SINCE THE ASSESSMENT HAS BEEN REOPENED BEYOND THE P ERIOD OF 4 YEARS WHEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL F ACTS IN THE ORIGINAL ASSESSMENT ITSELF, AND THERE BEING NO TAN GIBLE MATERIAL FOR THE REOPENING OF THE ASSESSMENT, THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFI CER. WE, 11 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. THEREFORE, HOLD THAT THE REOPENING OF THE ASSESSMEN T UNDER SECTION 147 IS BAD IN LAW AND IS TO BE QUASHED. AS FACTS AND ISSUES IN THE PRESENT APPEAL IS MATERI ALLY SAME, RESPECTFULLY FOLLOWING THE DECISIONS OF COORDINATE BENCHES, REFERRED TO HEREINABOVE, WE HOLD THAT REOPENING OF ASSESSMENT U /S 147 OF THE ACT IN THE PRESENT CASE BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF RELEVANT AY IS INVALID. CONSEQUENTIALLY, ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT HAS TO BE Q UASHED. ACCORDINGLY, WE DO SO. THUS, GROUNDS RAISED BY ASSE SSEE CHALLENGING THE VALIDITY OF THE PROCEEDING INITIATED U/S 147 OF THE ACT, ARE ALLOWED. 11. AS THE FACTS AND ISSUES IN ITA NOS. 535, 537, 5 38, 539 AND 501/HYD/2014 ARE MATERIALLY IDENTICAL TO THAT OF IT A NO. 500/HYD/2014 (SUPRA), FOLLOWING THE CONCLUSIONS/DECISION THEREIN , WE QUASH THE ASSESSMENT ORDERS PASSED U/S 143(3) READ WITH SECTI ON 147 OF THE ACT, IN ALL THE AFOREMENTIONED APPEALS 12. AS WE HAVE DECLARED THE REOPENING OF ASSESSMENT U/S 147 OF THE ACT TO BE INVALID AND CONSEQUENTLY QUASHED THE ASSESSMENT ORDERS, IMPUGNED ASSESSMENT ORDER TO BE INVALID, GR OUNDS RAISED BY ASSESSEE CHALLENGING CERTAIN DIRECTIONS OF LD. CIT( A) AND ON LEVY OF INTEREST U/S 234A & 234B IN THE AFORESAID APPEALS H AVE BECOME INFRUCTUOUS, HENCE, NOT REQUIRED TO BE ADJUDICATED UPON. 13. IN THE RESULT, ALL THE APPEALS BY ASSESSEES AR E ALLOWED. ITA NOS. 686 & 687/HYD/2014 14. THE DEPARTMENT HAS RAISED THE FOLLOWING EFFECTI VE GROUND, WHICH IS COMMON IN BOTH THE APPEALS: THE LD. CIT(A)-VII, HYDERABAD ERRED IN DECIDING THE APPEAL OF ASSESSEE WITHOUT ACCORDING AN OPPORTUNITY TO AO FOR THE VERIFICATION OF THE FRESH EVIDENCES PRODUCED BEFORE HIM DURING THE APPELLATE PROCEEDINGS 12 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. 15. AS WE HAVE QUASHED THE ASSESSMENT ORDERS PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT IN CORRESPONDING A PPEALS OF ASSESSEES, PRESENT APPEALS OF THE DEPARTMENT RAISIN G THE AFORESAID GROUND HAVE BECOME INFRUCTUOUS, THEREFORE, THE SAME ARE DISMISSED AS INFRUCTUOUS. 16. IN THE RESULT, DEPARTMENTS APPEALS IN ITA NO. 686 & 687/HYD/14 ARE DISMISSED. ITA NO. 536/HYD/2014 17. THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPE AL ARE SIMILAR TO THE GROUNDS RAISED IN ITA NO. 500/HYD/14 AND OTHERS WHEREIN WE HAVE ALLOWED THE APPEALS OF ASSESSEE BY QUASHING TH E ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 147 OF TH E ACT. IT IS ALSO NOT DISPUTED, IN THE PRESENT CASE ASSESSMENT HAS BEEN R EOPENED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR WITHOUT FULFILLING THE CONDITIONS OF PROVISO TO SECTION 147 OF THE ACT. MOREOVER, NEITHER THERE IS ANY TANGIBLE MATERIAL BEFORE THE A O FOR REOPENING THE ASSESSMENT NOR THE ADDITIONS ULTIMATELY MADE BY AO HAVE ANY NEXUS WITH THE REASONS RECORDED FOR REOPENING ASSESSMENT. ACCORDINGLY, FOLLOWING THE DECISION THEREIN, WE ALLOW THE GROUND S OF ASSESSEE. 18. IN THE RESULT, APPEAL IN ITA NO. 536/HYD/14 IS ALLOWED. ITA NO. 540/HYD/2014 19. GROUNDS RAISED BY ASSESSEE IN THIS APPEAL ARE A S UNDER: 1. THE LD. CIT(A) HAVING FOUND AS A MATTER OF FACT THAT THE SUM OF RS. 3,20,425 COULD NOT BE ADDED U/S 69 OF THE IT ACT, 1961 ERRED IN GIVING THE FOLLOWING FINDING/DIRECTION WHI CH IS NOT 13 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. NECESSARY FOR THE DISPOSAL OF THE APPEAL AND IS THE REFORE BE DELETED: I. THE ORDER OF CIT(A) AT PARAGRAGH 7.3. IN GIVING A FINDING/DIRECTION THAT THE ALLOWANCE OF EXPENDITURE AS COST OF ACQUISITION DEVELOPMENT CAN BE TAKEN UP AS AND W HEN THE LANDS ARE SOLD IN A FINDING DIRECTION NOT NECES SARY FOR THE DISPOSAL OF THE APPEAL AND THEREFORE IS TO BE D ELETED. II. THE DIRECTION OF CIT(A) AT PARAGRAPH 7.4 OF HIS ORDER DIRECTING THE APPELLANT TO FILE COMPLETE DETAILS OF THE EXPENSES AND SUPPORTING EVIDENCES TO THE NOTICE OF THE APPELLATE AUTHORITY BY 15 TH FEBRUARY, 2014 IN A FINDING WHICH IS NOT NECESSARY FOR THE DISPOSAL OF THE APPE AL AND THEREFORE TO BE DELETED. 20. BRIEFLY THE FACTS ARE, DURING THE SCRUTINY ASSE SSMENT PROCEEDING, IT WAS NOTICED BY AO THAT ASSESSEE HAS MADE ADDITION TO THE FIXED ASSETS BY MAKING INVESTMENTS IN LAND AMOU NTING TO RS. 3,20,425. AS ALLEGED BY AO, THE SAID ADDITION CLAIM ED TO BE ON ACCOUNT OF DEVELOPMENT EXPENSES INCURRED IN RESPECT OF LAND COULD NOT BE SUBSTANTIATED BY ASSESSEE BY FILING ANY SUPP ORTING EVIDENCE. AO, THEREFORE, TREATED THE SAID ADDITION TO THE FIX ED ASSETS AS UNEXPLAINED INVESTMENT OF ASSESSEE IN TERMS WITH SE CTION 69 OF THE ACT AND ADDED THE SAID AMOUNT TO THE TOTAL INCOME O F ASSESSEE FOR THE IMPUGNED AY WHILE COMPLETING ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DATED 24/12/2009. BEING AGGRIEVED OF THE ASSE SSMENT ORDER, SO PASSED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 21. LD. CIT(A) BEING CONVINCED WITH THE SUBMISSION S MADE BY ASSESSEE, HELD THAT ADDITION TO THE FIXED ASSETS RE PRESENTING DEVELOPMENT EXPENSES COULD NOT BE TREATED AS UNEXPL AINED AS THE SAME HAS FLOWN FROM APPLICATION OF FUNDS AS APPEARI NG ON THE ASSETS SIDE OF ASSESSEES BALANCE SHEET. LD. CIT(A) HELD T HAT SOURCE OF FUNDS FOR MAKING INVESTMENTS IN ADDITION TO THE FIX ED ASSETS THUS WAS DULY EXPLAINED AND THE SAME COULD NOT BE TREATED AS UNEXPLAINED INVESTMENT OF ASSESSEE U/S 69 OF THE ACT. HAVING H ELD SO, LD. CIT(A) PROCEEDED FURTHER TO HOLD THAT IF THE EXPENSES WERE CAPITALIZED THE 14 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. ALLOWABILITY OF THE SAME HAS TO BE CONSIDERED IN TH E SUBSEQUENT YEARS WHEN THE LAND IS SOLD. HE, THEREFORE, DIRECTED ASSE SSEE TO FILE THE COMPLETE DETAILS OF THE RELEVANT EXPENSES WITH SUPP ORTING EVIDENCE SO THAT THE CLAIM OF ASSESSEE ON ACCOUNT OF ADDITIO N TO FIXED ASSETS REPRESENTING COST OF ACQUISITION CAN BE CONSIDERED IN THE RELEVANT AY. BEING AGGRIEVED OF THIS DIRECTION OF LD. CIT(A), AS SESSEE HAS PREFERRED APPEAL BEFORE US. 22. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IALS ON RECORD AS WELL AS ORDERS OF REVENUE AUTHORITIES. SIMILAR I SSUE CAME UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH OF ITAT, HYDERABAD IN CASE OF M/S SATABISHA BIOTECH PVT. LTD., IN ITA NO. 485/HYD/2014, WHERE JM WAS ONE OF THE PARTY, AND THE TRIBUNAL ALL OWED THE GROUND RAISED BY ASSESSEE BY HOLDING AS UNDER: 7. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON R ECORD. AT THE OUTSET, LD. AR SUBMITTED BEFORE US THAT THE ISSUE I S SQUARELY COVERED BY THE DECISION OF SMC BENCH OF THIS TRIBUN AL IN CASE OF SOME OTHER GROUP COMPANIES, WHICH WAS SUBSEQUENT LY FOLLOWED BY DIVISION BENCH. COPIES OF ORDERS PASSED BY COORDINATE BENCHES WERE PLACED ON RECORD PERTAINING TO SAME AY. ON PERUSAL OF THE ORDER PASSED BY SMC BENCH OF THIS TRIBUNAL IN ITA NOS. 895, 896 & 198/HYD/2014 DATED 14/08/2014, WE FIND THAT THE TRIBUNAL WHILE DEALING WITH THE RELEVANT DIRECTION OF LD. CIT(A) HELD AS UNDER: 8. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PURSED THE RECORD. ADMITTEDLY, ASSESSEES HAVE M ADE INVESTMENTS IN FIXED ASSETS AND THE SOURCE OF SUCH INVESTMENTS WAS THE INFLOW AVAILABLE ON THE LIABILI TY SIDE OF THE BALANCE SHEET. SINCE THE ASSESSING OFFICER H AS NOT PROPERLY APPRECIATED THE FACTS, BEFORE THE LEARNED CIT(A), THE SOURCE WAS EXPLAINED, AND THE SAME WAS ACCEPTED BY THE LEARNED CIT(A). HAVING ACCEPTED THE SOURCE OF F UNDS, THERE CANNOT BE ANY ADDITION MADE IN THIS YEAR AND EVEN IN THE SUBSEQUENT YEAR, I.E. IN THE YEAR OF SALE, T HE SOURCE OF INVESTMENT CANNOT BE DISPUTED. THEREFORE, THE LE ARNED CIT(A) IS NOT JUSTIFIED IN GIVING DIRECTION TO THE ASSESSING OFFICER TO CONSIDER THE SOURCE OF INVESTMENT IN THE YEAR OF SALE. IN THESE CIRCUMSTANCES, WE SET ASIDE THE DIRE CTIONS OF THE LEARNED CIT(A) AND HOLD THAT IT IS NOT A FIT CASE FOR MAKING THE ADDITION UNDER S.69 OF THE ACT. 15 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. THIS DECISION WAS ALSO FOLLOWED BY A DIVISION BENCH OF THIS TRIBUNAL IN ITA NO. 498/HYD/14 DATED 24/09/14 IN CA SE OF M/S PUNARVASU GREENFILEDS PVT. LTD. WHILE SETTING ASIDE SIMILAR DIRECTION OF LD. CIT(A). THEREFORE, RESPECTFULLY FO LLOWING THE DECISIONS OF THE COORDINATE BENCHES AS AFORESAID, W E SET ASIDE THE DIRECTIONS GIVEN BY LD. CIT(A) FOR CONSIDERING THE SOURCES OF INVESTMENT IN THE YEAR OF SALE AND ALLOW THE GROUND RAISED BY ASSESSEE IN ALL THESE APPEALS. SINCE THE ISSUE IS IDENTICAL IN THE PRESENT CASE, R ESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE AFORESAID CASE, WE ALLOW THE GROUND RAISED BY ASSESSEE. 23. IN THE RESULT, APPEAL IN ITA NO. 540/HYD/14 IS ALLOWED. ITA NO. 502/HYD/14 24. IN THE AFORESAID APPEAL, ASSESSEE HAS CHALLENGE D THE DISALLOWANCES OF FOLLOWING EXPENDITURE/ALLOWANCES: 1. DEPRECIATION RS. 1,22,706 2. VEHICLE MAINTENANCE EXPENSES RS. 2,565 3. RAMARAJU NAGAR FLATS MAINTENANCE RS. 20,362 4. PROPERTY TAX (RS. 690 X 3) RS. 2,097 5. SITE EXPENSES RS. 10,480/- 25. BRIEFLY THE FACTS ARE, IN COURSE OF ASSESSMENT PROCEEDING, AO WHILE EXAMINING THE RETURN OF INCOME AND ACCOMPANYI NG DOCUMENTS NOTICES THAT ASSESSEE HAS CLAIMED CERTAIN EXPENDITU RE/ALLOWANCES. AS NOTED BY AO IN THE ASSESSMENT ORDER, IN SPITE OF SE VERAL NOTICES AND REMINDERS, SINCE ASSESSEE FAILED TO PRODUCE BOOKS O F ACCOUNT AND VOUCHERS FOR VERIFICATION, AO DID NOT ALLOW THE EXP ENDITURE/ALLOWANCE CLAIMED BY ASSESSEE WHICH ARE AS UNDER: 1. ADMINISTRATIVE EXPENSES RS. 56,946 2. DEPRECIATION RS. 1,27,706 16 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. 26. BEING AGGRIEVED OF THE DISALLOWANCES MADE BY AO , ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). LD. CIT(A) AFTE R CONSIDERING THE SUBMISSIONS OF ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD, FOUND THAT ASSESSEE HAS NOT COMMENCED ITS B USINESS ACTIVITIES IN THE YEAR UNDER CONSIDERATION AND THER E IS NO INCOME DERIVED FROM BUSINESS ACTIVITY, THEREFORE, ASSESSEE WILL NOT BE ELIGIBLE TO CLAIM DEPRECIATION. SIMILARLY, IN RESPECT OF ADM INISTRATIVE EXPENSES ALSO, LD. CIT(A) FOUND THAT OUT OF TOTAL ADMINISTRA TIVE EXPENSES OF RS. 56,122, AN AMOUNT OF RS. 20,362 IS TOWARDS FLAT MAI NTENANCE, WHICH CAN ONLY BE SET OFF AGAINST INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS ASSESSEE HAS NOT SHOWN ANY INCO ME FROM HOUSE PROPERTY, THE SAID AMOUNT OF RS. 20,362 CANNOT BE A LLOWED. LD. CIT(A) ALSO HELD THAT SITE EXPENSES OF RS. 10,480 C ANNOT BE ALLOWED AS IT IS CAPITAL IN NATURE. OUT OF THE BALANCE EXPE NSES, LD. CIT(A) HELD THAT AUDIT FEES, CERTIFICATION FEE, RATES AND TAXES ARE ALLOWABLE SINCE THEY ARE REQUIRED FOR STATUTORY COMPLIANCE. THUS, T HE TOTAL EXPENSES ALLOWED BY LD. CIT(A) IS RS. 19,618. SINCE ASSESSEE S FINAL INCOME ASSESSED WAS NIL, LD. CIT(A) DIRECTED FOR CARRY FOR WARD OF LOSS TO THE EXTENT OF RS. 19,618. 27. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. UNDISPUTEDLY, ASSESSEE HAS NOT COMMENCED ITS BUSINE SS ACTIVITIES DURING THE YEAR UNDER CONSIDERATION, HENCE, PREOPER ATIVE EXPENSES, WHATEVER HAS BEEN INCURRED, HAVE TO BE CAPITALIZED AS THERE WAS NO BUSINESS INCOME EARNED DURING THE YEAR AGAINST WHIC H IT CAN BE SET OFF. IN THE AFORESAID FACTS AND CIRCUMSTANCES, ASS ESSEES CLAIM OF EXPENDITURE/ALLOWANCES COULD NOT HAVE ENTERTAINED. IN THE AFORESAID VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). ACCORDINGLY, WE UPHOLD THE ORDER OF LD. CIT (A) DISMISSING THE GROUND RAISED BY ASSESSEE. 28. IN THE RESULT APPEAL IN ITA NO. 502/HYD/14 IS D ISMISSED. 17 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. ITA NO. 685/HYD/204 29. THE ONLY EFFECTIVE GROUND RAISED BY THE DEPARTM ENT IS THAT LD. CIT(A) ERRED IN DECIDING THE APPEAL OF THE ASSESSEE WITHOUT ACCORDING AN OPPORTUNITY TO THE AO FOR THE VERIFICATION OF TH E FRESH EVIDENCES PRODUCED BEFORE HIM DURING THE APPELLATE PROCEEDING S. 30. BRIEFLY THE FACTS ARE, DURING THE ASSESSMENT PR OCEEDING, AO WHILE EXAMINING THE BALANCE SHEET NOTICED THAT THER E IS INCREASE IN UNSECURED LOAN TO THE TUNE OF RS. 18,90,696 DURING THE YEAR. BY ALLEGING THAT ASSESSEE HAS NOT FURNISHED ANY EVIDEN CE TO EXPLAIN THE SOURCE OF UNSECURED LOAN, HE TREATED IT AS UNEXPLAI NED CREDIT U/S 68 AND ADDED TO THE INCOME OF THE YEAR. ASSESSEE CHALL ENGED THE ADDITION IN THE APPEAL PREFERRED BEFORE LD. CIT(A). 31. BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE CONTENDED THAT AN AMOUNT OF RS. 18,90,696 WAS RECEIVED FROM SHRI B. S URYANARAYANA RAU. IN SUPPORT OF SUCH CLAIM, ASSESSEE WAS ALSO FU RNISHED COPY OF ASSESSEES ACCOUNT IN THE BOOKS OF SHRI B. SURYANAR AYANA RAJU AND CORRESPONDING ENTRIES IN ASSESSEES BOOKS. CONFIRMA TION LETTER ALONG WITH RETURN OF INCOME COPY OF SHRI B. SURYANARAYANA RAJU AS WELL AS STATEMENT OF AFFAIRS AS ON 31/03/07 WAS SUBMITTED W HEREIN CREDIT ENTRY WAS SHOWN. 32. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD DELETED TH E ADDITION MADE BY AO AS NOT ONLY ASSESSEE HAS PROVED THE IDENTITY OF THE CREDITOR BUT ALSO GENUINENESS OF THE TRANSACTION AS WELL AS CRED ITWORTHINESS OF THE CREDITOR WAS ESTABLISHED. BEING AGGRIEVED OF THE AF ORESAID DECISION OF LD. CIT(A), DEPARTMENT IS BEFORE US. 33. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. 18 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. AS CAN BE SEEN FROM THE DISCUSSIONS MADE IN PARA 5 OF LD. CIT(A)S ORDER, FACTS AND EVIDENCES RELATING TO UNSECURED LO AN FROM SHRI B. SURYANARAYANA RAJU WERE ALSO PART OF THE RECORD BEF ORE AO. THEREFORE, WE DO NOT FIND ANY MERIT IN THE CONTENTI ON OF THE DEPARTMENT THAT LD. CIT(A) HAS CONSIDERED FRESH EVI DENCE WHILE DELETING ADDITION. IN VIEW OF THE AFORESAID, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) ON THIS ISSUE AND THE SA ME IS UPHELD BY DISMISSING THE GROUND RAISED BY REVENUE. 34. IN THE RESULT, APPEAL IN ITA NO. 685/HYD/2014 I S DISMISSED. ITA NO. 499/HYD/2014. 35. THE GROUND RAISED BY ASSESSEE IN THE AFORESAID APPEAL RELATES TO ACTION OF LD. CIT(A) IN CONFIRMING ASSESSMENT OF AGRICULTURAL INCOME SHOWN BY ASSESSEE AMOUNTING TO RS. 6,778 AS INCOME FROM OTHER SOURCES. 36. BRIEFLY, THE FACTS ARE, DURING THE ASSESSMENT P ROCEEDING, AO NOTICED THAT ASSESSEE HAS SHOWN INCOME OF RS. 6,77 8 FROM LEASE RENTALS AND HAS DEBITED AN AMOUNT OF RS. 18,729 AS ADMINISTRATIVE AND OTHER EXPENSES. AO ALLEGING THAT ASSESSEE FAILE D TO SUBSTANTIATE THE LEASE RENTAL INCOME, TREATED THE SAME AS INCOME FROM OTHER SOURCES. AO ALSO DISALLOWED THE EXPENDITURE CLAIMED OF RS. 18,729. BEING AGGRIEVED OF THE DECISION OF AO IN TREATING T HE LEASE RENTAL INCOME AS INCOME FROM OTHER SOURCES AND DISALLOWAN CE OF EXPENDITURE, ASSESSEE PREFERRED APPEAL BEFORE LD. C IT(A). 37. BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS SU BMITTED BY ASSESSEE THAT LAND WAS GIVEN ON LEASE FOR AGRICULTU RAL PURPOSES, HENCE, LEASE RENTAL INCOME RECEIVED BY ASSESSEE HAS TO BE TREATED AS AGRICULTURAL INCOME. LD. CIT(A), HOWEVER, DID NOT A CCEPT THE CLAIM OF ASSESSEE FOR THE REASON THAT ASSESSEE ITSELF DID NO T CLAIM IT AS 19 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. AGRICULTURAL INCOME AND HAS SHOWN IT AS BUSINESS RE CEIPT. HE, THEREFORE, FOUND NO INFIRMITY IN THE ASSESSMENT ORD ER FOR TREATING LEASE RENTAL INCOME AS INCOME FROM OTHER SOURCES. A S REGARDS ASSESSEES CLAIM OF ADMINISTRATIVE EXPENSES OF RS. 18,729, LD. CIT(A) AFTER VERIFYING THE DETAILS OF EXPENDITURE, HELD TH AT THE FEES RELATING TO CERTAIN STATUTORY OBLIGATIONS LIKE AUDIT, FILING OF RETURNS AND REGISTRATION FEES AND FILING FEES BEFORE ROC ARE AL LOWABLE EXPENDITURE. ACCORDINGLY, OUT OF TOTAL EXPENDITURE OF RS. 18,729, HE ALLOWED EXPENDITURE TO THE EXTENT OF RS. 8,000 THER EBY SUSTAINING THE DISALLOWANCE OF RS. 10,729. 38. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER S OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. A FTER GOING THROUGH THE OBSERVATIONS OF LD. CIT(A) IN THE CONTEXT OF FA CTS AND MATERIALS ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE DECISIO N OF LD. CIT(A). AS CAN BE SEEN FROM THE FACTS ON RECORD, ASSESSEE ITSE LF TREATED LEASE RENTAL INCOME AS BUSINESS INCOME, THEREFORE, THE CL AIM OF ASSESSEE THAT IT IS TO BE TREATED AS AGRICULTURAL INCOME CAN NOT BE ACCEPTED. SIMILARLY, DECISION OF LD. CIT(A) IN RESPECT OF ALL OWANCE OF ADMINISTRATIVE EXPENDITURE IS JUST AND REASONABLE A S HE HAS SUSTAINED A PART OF DISALLOWANCE MADE BY AO SINCE ASSESSEE CO ULD NOT SUBSTANTIATE ITS CLAIM FULLY. IN THE AFORESAID VIEW OF THE MATTER, ORDER PASSED BY LD. CIT(A) IS UPHELD DISMISSING THE GROUN D RAISED BY ASSESSEE. 39. IN THE RESULT, APPEAL IN ITA NO. 499/HYD/2014 I S DISMISSED. ITA NO. 629/HYD/2014 40. DEPARTMENT HAS RAISED THE FOLLOWING EFFECTIVE G ROUND: THE LD. CIT(A)-VII, HYDERABAD ERRED IN DECIDING THE APPEAL OF THE ASSESSEE WITHOUT ACCORDING AN OPPORTUNITY TO TH E AO FOR THE VERIFICATION OF THE FRESH EVIDENCES PRODUCED BEFORE HIM DURING THE APPELLATE PROCEEDINGS. 20 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. 41. WHILE COMPLETING THE ASSESSMENT, AO TREATED THE PROFIT OF RS. 34,72,000 ON SALE OF SHARES AS INCOME FROM BUSINESS AND DID NOT ACCEPT ASSESSEES CLAIM OF LONG TERM CAPITAL GAIN S HOWN AT RS. 13,54,394 FROM SALE OF SHARES. LD. CIT(A), HOWEVER, ALLOWED ASSESSEES CLAIM OF CAPITAL GAIN FROM SALE OF SHARE S. 42. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IALS ON RECORD. IT IS EVIDENT FROM THE IMPUGNED ORDER OF LD. CIT(A) , HE HAS COME TO HIS CONCLUSION ON CONSIDERATION OF FACTS AND MATERI ALS WHICH FORMED PART OF THE ASSESSMENT RECORD. LD. DR WAS NOT ABLE TO BRING TO OUR NOTICE, THE FRESH EVIDENCES ALLEGED TO HAVE BEEN CO NSIDERED BY LD. CIT(A). IN VIEW OF THE AFORESAID, WE ARE UNABLE TO SUSTAIN THE GROUND RAISED BY DEPARTMENT. ACCORDINGLY, WE DISMISS THE S AME. 43. IN THE RESULT, APPEAL IN ITA NO. 629/HYD/2014 I S DISMISSED. 44. TO SUM UP, APPEALS IN ITA NOS. 535, 537, 538, 5 39, 500, 501, 536, 540/HYD/2014 ARE ALLOWED AND APPEALS IN ITA NO S. 502, 685, 686, 687, 499 AND 629/HYD/2014 ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 12/12/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED:12 TH DECEMBER, 2014 KV 21 ITA NOS. 535 AND OTHERS M/S DANISHTA FARMS PVT. LTD. COPY TO:- 1. M/S DANISHTA FARMS PVT. LTD., PLOT NO. 89, ROAD NO. 9, JUBILEE HILLS, HYD.- 500 033 2. M/S JESHTA GREEN-FIELDS PVT. LTD., PLOT NO. 89, ROAD NO. 9, JUBILEE HILLS, HYD.- 500 033 3. M/S TUNGABHADRA GREENLANDS PVT. LTD., HYD 4. M/S HASTHA BIO-TECH PVT. LTD., PLOT NO. 89, ROAD NO. 9, JUBILEE HILLS, HYD.- 500 033 5. M/S PARBATI AGRO-FARMS PVT. LTD., FLAT NO. 304, SRI RAMANA ENCLAVE, MADHURANAGAR, SR NAGAR, HYD. 6. M/S BHARANI AGRO PVT. LTD., H.NO. 1-11-192, FLAT NO. 201, KAMALA ARCADE, SHAMLAL BUILDING, HYD. 7. M/S SATABISHA AGRO PVT. LTD., PLOT NO. 89, ROAD NO. 9, JUBILEE HILLS, HYD.- 500 033 8. M/S TUNGABHADRA GREENLANDS PVT. LTD., 102, DHANA NJAYA NEST, RAJIV NAGAR, YOUSUFGUDA, HYD. 9. M/S PENNERU AGRO TECH (P) LTD.,B-55, FLAT NO. 22 , SAI VAISHNAVI VIHAR, VENGALARAO NAGAR, HYD. 10.ITO(OSD)-2/3/ACIT(OSD)/DCIT, HYDERABAD 11. CIT(A)-VII, HYDERABAD 12. CIT (CENTRAL), HYDERABAD 13. THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.