CV Varadaraj, Tirupathi V. ACIT, Central Circle, Tirupathi

ITA 653/HYD/2011

• Counselvise Citation: 65322514 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2002-2003
• Appeal Filed On: 15-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Unexplained investment; Sale consideration of property below Jantri Value; Unexplained expenditure; Search and seizure; Source of fund; Cost of acquisition
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER S.NO. ITA NO. A.Y. APPELLANT RESPONDENT 1. 653/H/11 2002-03 C.V. VARADARAJ, TIRUPATHI. PAN ABGPV4959G DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, TIRUPATHI. 2. 771/H/11 2004-05 DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, TIRUPATHI C.V. VARADARAJ, TIRUPATHI. PAN ABGPV4959G 3. 606/H/11 2005-06 -DO- -DO- 4. 654/H/11 2005-06 C.V. VARADARAJ, TIRUPATHI. PAN ABGPV4959G DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, TIRUPATHI. 5. 655/H/11 2006-07 -DO- -DO- 6. 656/H/11 2007-08 -DO- -DO- 7. 608/H/11 2007-08 DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, TIRUPATHI. C.V. VARADARAJ, TIRUPATHI. PAN ABGPV4959G ASSESSEE BY SHRI S. RAMA RAO REVENUE BY SHRI P. SOMASEKHAR REDDY DATE OF HEARING : 31-10-2013 DATE OF PRONOUNCEMENT : 20-12-2013 O R D E R PER BENCH: THESE ARE BUNCH OF APPEALS BY SHRI C.V. VARADARAJ IN HIS INDIVIDUAL STATUS FOR ASSESSMENT YEARS 2002-03 TO 2 007-08 AND CROSS APPEALS BY REVENUE. THERE ARE VARIOUS ISSUES CONTES TED BY ASSESSEE AND REVENUE IN THE APPEALS. SINCE COMMON ISSUES ARE INVOLVED, THESE APPEALS WERE HEARD TOGETHER AND THEREFORE THE SAME ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) 2. BRIEFLY STATED, THERE WAS A SEARCH & SEIZURE OPE RATION U/S 132 OF THE IT ACT CONDUCTED IN THE CASE OF ASSESSEE ON 27-09-2007. ASSESSEE HAD FILED A CASH FLOW STATEMENT, WHICH IS SAID TO BE WAYS AND MEANS ACCOUNT BEFORE THE INVESTIGATION AUTHORI TIES AS WELL AS BEFORE THE AO AND ON THE BASIS OF THE SAID STATEMEN T VARIOUS INCOMES WERE OFFERED. IN THE COURSE OF ASSESSMENT PROCEEDIN GS, THE AO DID NOT ACCEPT CERTAIN INCOMES, CERTAIN CREDITS AND ALS O MADE VARIOUS DISALLOWANCES AND ACCORDINGLY, ASSESSEE IS AGGRIEVE D IN THESE YEARS. LD CIT(A) GAVE RELIEF TO ASSESSEE IN APPEAL, SO REV ENUE IS AGGRIEVED ON SOME ISSUES. ITA NO. 653/HYD/2011 BY ASSESSEE FOR AY 2002-03 3. IN THIS YEAR ASSESSEE FILED RETURN OF INCOME DEC LARING THE INCOME OF RS. 1,45,000/- WHEREAS THE AO ASSESSED TH E SAME AT RS. 20,97,059/-. BEFORE THE LEARNED CIT(A), ASSESSEE HA D CONTESTED VARIOUS ADDITIONS MADE BY THE AO AND LEARNED CIT(A) -VII, HYDERABAD, HAD GIVEN SUBSTANTIAL RELIEF. THERE IS NO CROSS APP EAL FOR THIS ASSESSMENT YEAR BY THE REVENUE. ASSESSEE RAISED VAR IOUS GROUNDS. 4. GROUND NO. 1 IS PERTAINING TO SUSTAINING THE ADD ITION OF RS. 30,000/- BEING AGRICULTURAL INCOME. THIS GROUND WAS NOT PRESSED AS THE CIT(A), IN FACT, HAS GIVEN RELIEF VIDE PARA 5 O F HIS ORDER AND THE GROUND WAS WRONGLY RAISED. ACCORDINGLY, THIS GROUND IS PERMITTED TO BE WITHDRAWN. 5. GROUND NO. 2 PERTAINS TO THE ADDITION OF RS. 51, 059/- BEING DEPOSITS MADE IN THE SB ACCOUNT AT TIRUPATHI COOPER ATIVE BANK LTD. ASSESSEE HAD MADE DEPOSITS OF RS. 21,059/- AND RS. 30,000/- IN SB ACCOUNT NO. 39157 AND THE AO WAS OF THE OPINION THA T THE DEPOSITS WERE UNACCOUNTED AND, THEREFORE, TREATED THE SAME A S UNEXPLAINED CASH CREDITS. IT WAS THE SUBMISSION OF ASSESSEE BEF ORE THE LEARNED CIT(A) THAT THESE DEPOSITS WERE SHOWN IN WAYS AND M EANS STATEMENT 3 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) AND THE SOURCES ARE THE RECEIPTS FROM MONEY LENDING BUSINESS. IT WAS SUBMITTED THAT ASSESSEE COULD NOT COMPLETELY FURNIS H THE EXACT DETAILS OF DEPOSITS, BUT, SINCE THESE WERE SHOWN IN THE WAYS AND MEANS STATEMENT, BEING COVERED BY THE CLOSING BALAN CES AT THE END OF THE YEAR AND FURTHER AS THE INCOMES ARE ARRIVED AT BY WAY OF DIFFERENCE IN THE OPENING AND CLOSING BALANCES OF T HE ASSETS, THERE IS NO NEED TO MAKE SEPARATE ADDITION. THE LEARNED CIT( A), HOWEVER, DID NOT AGREE AND CONFIRMED THE SAME. 6. BEFORE US, ARGUMENTS WERE REITERATED AND SUBMITT ED THAT THE LEARNED CIT(A) WAS WRONG IN CONFIRMING THE DEPOSITS IN THE BANK ACCOUNT MADE DURING THE YEAR WHEN THE AO HAS ACCEPT ED THE WAYS AND MEANS STATEMENT BEING THE BASIS OF ASSESSMENTS IN ALL THE YEARS. FURTHER, IT WAS SUBMITTED THAT ASSESSEES INCOMES F ROM AGRICULTURAL OPERATIONS AND FROM MONEY LENDING WERE MORE THAN TH E DEPOSITS MADE IN THE BANK AND, THEREFORE, THE SAME CAN BE AC CEPTED AS OUT OF THE RECEIPTS WHICH ARE ALREADY TAXED. 7. THE LEARNED DR, HOWEVER, SUBMITTED THAT ASSESSEE IS NOT ABLE TO JUSTIFY THE SOURCE OF THE AMOUNTS. 8. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FA CTS AS BASED ON RECORD. THERE IS NO DISPUTE WITH REFERENCE TO TH E FACT THAT CONSEQUENT TO SEARCH, ASSESSMENTS HAVE BEEN COMPLET ED ON THE BASIS OF WAYS AND MEANS ACCOUNT AND ALSO VARIOUS ST ATEMENTS FURNISHED. ASSESSEE, IN FACT, ADMITTED OPENING AND CLOSING BALANCES IN THE WAYS AND MEANS STATEMENT. TECHNICALLY THE DE POSITS MADE INTO BANK ALSO CAME INTO THE NET ASSETS BEING OFFERED. M OREOVER, THE INCOME OFFERED DURING THE YEAR IS MORE THAN THE DEP OSITS MADE IN THE BANK ACCOUNT AND AS SEEN FROM ONE OF THE DEPOSITS O F RS. 21,059/-, IT COULD BE RENEWAL OF FIXED DEPOSIT OR ANY OTHER THIN G LIKE RECEIPTS FROM LIC, AS IT IS AN ODD AMOUNT, WHICH ASSESSEE SAYS IS UNABLE TO EXAMINE AT THIS POINT OF TIME. CONSIDERING THAT ASS ESSEES ACTIVITY IN 4 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) THE MONEY LENDING AND VARIOUS SOURCES OF INCOME, WE ARE INCLINED TO ACCEPT ASSESSEES CONTENTION THAT THE DEPOSITS ARE OUT OF THE INCOME EARNED. IN VIEW OF THIS, ADDITIONS MADE ARE DIRECTE D TO BE DELETED. GROUND NO. 2 RAISED ON THIS ISSUE IS ALLOWED. 9. IN THE RESULT APPEAL ITA NO. 653/HYD/2011 IS ALL OWED. ITA NO. 771/HYD/2011- APPEAL BY REVENUE FOR AY 20 04-05. 10. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CI T(A), HYDERABAD DATED 02-02-2011. REVENUE IS CONTESTING THE DELETI ON OF AN AMOUNT OF RS. 9,60,000/- BY THE CIT(A), DISALLOWED BY THE AO ON THE REASON THAT ASSESSEE HAS NOT FURNISHED ANY EVIDENCE. 11. IN THE WAYS AND MEANS STATEMENT, ASSESSEE HAD D EBITED AN AMOUNT OF RS. 9,60,000/- TOWARDS LAND DEVELOPMENT C HARGES. ASSESSEE WAS ASKED TO PRODUCE NECESSARY EVIDENCES T OWARDS EXPENSES LIKE BILLS AND VOUCHERS AND SINCE ASSESSEE WAS FAILED TO EXPLAIN/FURNISH EVIDENCES, THE SAME WAS TREATED AS UNEXPLAINED EXPENDITURE AND ADDED THE SAME TO THE INCOME OF ASS ESSEE. BEFORE THE LEARNED CIT(A) IT WAS CONTENDED THAT THE AO DID NOT UNDERSTAND THE CLAIM OF ASSESSEE IN THE CAPITAL ACCOUNT AND TR EATED THE EXPENDITURE DEBITED TO THE CAPITAL ACCOUNT AS INCOM E. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAD PURCHASED THE LAND AND HAD INCURRED THE EXPENSES TOWARDS EVICTION OF UNAUTHORIZED OCCUP ANTS. IT WAS SUBMITTED THAT ASSESSEE HAD SHOWN THE EXPENDITURE O UT OF HIS OWN MEANS AND THERE IS NO NEED TO DISALLOW THE EXPENDIT URE. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSE E AND VERIFYING THE FACTS AND CIRCUMSTANCES OF THE CASE, GAVE A FIN DING THAT ASSESSEE HAS INCURRED THE SAID EXPENDITURE OUT OF HIS OWN SO URCES AS COULD BE SEEN FROM THE WAYS AND MEANS STATEMENT AND ACCORDIN GLY HE DELETED THE ADDITION MADE ON THIS COUNT. 5 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) 12. AFTER CONSIDERING RIVAL CONTENTIONS, WE ARE NOT IN AGREEMENT WITH REVENUE CONTENTIONS. FIRST OF ALL, IT IS NOT K NOWN HOW THE AMOUNT CLAIMED IN THE CAPITAL ACCOUNT AS EXPENDITURE TOWAR DS LAND CAN BE TREATED AS UNEXPLAINED EXPENDITURE SO AS TO BRING T O TAX, AS WAS DONE BY THE AO. IF ASSESSEE DID NOT EXPLAIN THE EX PENDITURE, WHICH IS ADDED TO THE COST OF LAND, THE EFFECT WILL BE IN THE COMPUTATION OF INCOME AT THE TIME OF SALE OF LAND, BUT, THAT DOES NOT AUTHORIZE THE AO TO TREAT THE EXPENDITURE AS INCOME OF THE YEAR WHIC H ITSELF WAS RECORDED IN THE WAYS AND MEANS ACCOUNT. THEREFORE, THE VERY NATURE OF ADDITION MADE IS BAD IN LAW. WE ARE OF THE OPINI ON THAT THE LEARNED CIT(A) CORRECTLY DELETED THE ADDITION AND, HENCE, T HE GROUND RAISED ON THIS ISSUE BY THE REVENUE IS DISMISSED. 13. IN THE RESULT, APPEAL IN ITA NO. 771/HYD/2011 I S DISMISSED. ITA NOS. 606 & 654/HYD/2011 14. THESE ARE CROSS APPEALS FOR THE AY 2005-06 DIRE CTED AGAINST THE ORDER OF CIT(A) DATED 31-01-2011. ITA NO. 606/HYD/2011 APPEAL BY REVENUE 15. IN THIS APPEAL, REVENUE HAS RAISED TWO GROUNDS. GROUND NO. 2, WHICH IS MATERIAL FOR CONSIDERATION IS ON THE ISSUE OF NON-PAYMENT OF TAX ON ADMITTED INCOME U/S 249(4) CONTESTING THAT C IT(A) SHOULD NOT HAVE ENTERTAINED THE APPEAL. 16. ON THIS ISSUE, THE LEARNED COUNSEL EXPLAINED TH AT ASSESSEE HAD PAID THE TAX BEFORE THE APPEAL WAS HEARD BY THE CIT (A), THEREFORE, THE GROUND IS NOT MATERIAL. FACTS ON RECORD INDICATE TH AT ASSESSEE DISCHARGED THE TAX LIABILITY BY THE TIME CIT(A) HEA RD THE CASE. THEREFORE, WE ARE OF THE VIEW THAT SINCE THE ENTIRE DEMAND ADMITTED BY ASSESSEE WAS PAID BEFORE THE APPEAL WAS CONSIDER ED BY THE 6 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) LEARNED CIT(A), THIS GROUND RAISED BY REVENUE HAS N O MERIT. TAKING CLUE FROM THE PRINCIPLES LAID DOWN BY THE HONBLE S UPREME COURT IN THE CASE OF CIT VS. FILMISTAN LTD., 42 ITR 163, SIN CE ASSESSEE HAS PAID THE TAX BEFORE THE APPEAL WAS TAKEN UP BY THE LEARNED CIT(A), THE SAME CAN BE CONSIDERED AS PROPER APPEAL AFTER D UE CONDONATION, EVEN IF THERE WAS ANY DELAY IN PAYMENT OF TAX AFTER FILING OF APPEAL. WE, THEREFORE, DO NOT SEE ANY MERIT IN REVENUES GR OUND AND ACCORDINGLY THE SAME IS DISMISSED. 17. THE OTHER ISSUE CONTESTED BY REVENUE IN GROUND NO. 3 IS WITH REFERENCE TO ADDITION OF RS. 75 LAKHS. DURING THE C OURSE OF SEARCH OPERATION, MATERIALS FOUND AND SEIZED VIDE ANNEXURE PLACED AT PAGES 68 TO 71, WHEREIN IT INDICATED THAT ASSESSEE HAS RE CEIVED AN AMOUNT OF RS. 75 LAKHS AS ADVANCE ON SALE OF LAND OUT OF C ONSIDERATION OF RS. 1.05 CRORES. WHEN THE ASSESSEE ASKED TO EXPLAIN, IT WAS REPLIED THAT IT WAS A BOGUS DOCUMENT AND HE HAS NOT RECEIVED ANY MONEY AND, HENCE, FILED A SUIT BEFORE THE HONBLE COURT. SINCE THE ISSUE HAS NOT REACHED FINALITY, THE AO TREATED THE AMOUNT AS UNEX PLAINED CASH CREDIT AND ADDED TO THE INCOME RETURNED. THE LEARN ED CIT(A) CONSIDERING THE SUBMISSIONS OF ASSESSEE DELETED THE SAME BY HOLDING AS UNDER: 5.1 IT MAY BE SEEN THAT DURING SEARCH OPERATION IN APPELLANTS PREMISES, A DOCUMENT WITH REGARD TO SALE OF A PROPE RTY WAS FOUND. ACCORDING TO WHICH THE APPELLANT IS ALLEGED TO HAVE AGREED FOR SALE OF A PROPERTY FOR RS. 1.5 CRORES OU T OF WHICH RS. 75 LAKHS IS SAID TO HAVE BEEN RECEIVED BY THE APPEL LANT TOWARDS THE PROPOSED SALE OF THE PROPERTY. IT APPEARS THAT THE APPELLANT WAS DRAGGED TO LOK ADALAT, TIRUPATHI WHEREIN IT IS FINALIZED THAT THE APPELLANT IS AN ABSOLUTE OWNER OF THE PROPERTY AND THE PLAINTIFF HAVE NO CLAIM IN APPELLANTS PROPERTY VID E ORDER DATED 27-11-2007. IT MEANS THAT THE PROPERTY WAS NOT SOLD BY THE APPELLANT. THEREFORE, IT IS THE CLAIM OF THE APPELL ANT THAT THE SO CALLED SALE DEED WAS FORGED AND THE APPELLANT NEVER PROPOSED TO MAKE A SALE OF THE SAID PROPERTY AND HE DID NOT RECEIVE ANY CONSIDERATION LIKE RS. 75 LAKHS FROM THE PARTIES WH O ARE ALLEGED IN THE SAID BOGUS DOCUMENT. THEREFORE, IT APPEARS T O ME THAT THE COPY OF SALE DEED WHICH IS FURNISHED BEFORE ME DURING APPEAL PROCEEDINGS HAS NOT GIVEN ANY CREDENTIAL VAL UE FOR THE ALLEGED TRANSACTION OF SALE OF THE APPELLANTS PROP ERTY. THE 7 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) DOCUMENT IS NOT REGISTERED AND IT IS NOT PROPERLY A UTHENTICATED. FURTHER, IT APPEARS TO ME THAT BECAUSE OF THE ORDER PASSED BY LOK ADALAT WHO HAVE GIVEN A DECISION IN FAVOUR OF T HE APPELLANT CONFIRMING ALL THE RIGHTS IN THE SAID PROPERTY WHIC H IS ALLEGED TO HAVE BEEN ENTERED FOR SALE. THEREFORE, I AM INCLINE D TO ACCEPT THE AUTHORIZED REPRESENTATIVES EXPLANATION THAT TH ERE WAS NO PROPOSAL OF ANY SALE OF SAID PROPERTY AND ALSO THER E WAS NO RECEIPT OF ANY SALE CONSIDERATION BY THE APPELLANT AND IT IS ONLY A FAKE DOCUMENT. HENCE, IT CANNOT BE SAID THAT THE APPELLANT HAD RECEIVED RS. 75 LAKHS AS ADVANCE FOR SALE OF TH E LAND. MOREOVER, FROM THE ORDER OF THE LOK ADALAT, TIRUPAT HI, IT APPEARS THAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, T HE APPELLANT DID NOT SELL THE PROPERTY WHICH IS REFERRED BY THE AO. IT APPEARS THE SAID LAND IS SOLD DURING SUBSEQUENT ASSESSMENT YEAR. HENCE, THE ADDITION MADE BY THE AO IS DELETED. 18. AFTER CONSIDERING RIVAL CONTENTIONS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). FIRST OF AL L, IF ANY AGREEMENT FOR SALE WAS FOUND, THE PROCEEDS RECEIVED BY WAY OF ADV ANCE FOR SALE CANNOT BE TREATED AS INCOME UNLESS THE SALE HAS FRU CTIFIED. THIS AMOUNT CAN BE CONSIDERED IN COMPUTATION OF CAPITAL GAINS. IN THIS CASE, IN SPITE OF FACT THAT THE SAID DOCUMENT WAS F ORGED ONE AND ASSESSEE CONTESTED BEFORE THE COURT, THE AO TREATED THE SO CALLED ADVANCE RECEIVED FOR SALE OF LAND AS INCOME OF ASSE SSEE. THIS ACTION OF THE AO ITSELF IS NOT LEGALLY SUSTAINABLE AND ACC ORDINGLY WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROUND RAIS ED BY REVENUE ON THIS ISSUE. 19. IN THE RESULT, APPEAL IN ITA NO. 606/HYD/2011 I S DISMISSED. ITA NO. 654/HYD/2011 ASSESSEES APPEAL 20. IN THIS APPEAL, ASSESSEE HAS RAISED 3 GROUNDS. GROUND NO. 1 IS PERTAINING TO SUSTAINING THE ADDITION OF RS. 30,000 /- BEING AGRICULTURAL INCOME. ASSESSEE IS CONSTANTLY SHOWING AGRICULTURA L INCOME AND DURING THE YEAR UNDER CONSIDERATION HE HAS SHOWN O F RS. 30,000/- TOWARDS AGRICULTURAL INCOME. IN AY 2002-03, WHEN TH IS AMOUNT WAS DISALLOWED AND BROUGHT TO TAX AS INCOME FROM OTHER SOURCES, THE 8 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) LEARNED CIT(A) DELETED THE SAME ACCEPTING ASSESSEE S CLAIM OF AGRICULTURAL INCOME AND REVENUE IS NOT IN APPEAL IN THAT YEAR. IN AY 2003-04 AND 2004-05, THERE IS NO SUCH ISSUE EITHER BY ASSESSEE OR BY THE AO AND THIS AGRICULTURAL INCOME IN THOSE YEARS WERE ALSO ACCEPTED. HOWEVER, IN THE YEAR UNDER CONSIDERATION, THE LEARNED CIT(A) DID NOT ALLOW THE CLAIM AND CONFIRMED THE SA ME. ACCORDINGLY, THE GROUND IS RAISED. 21. HAVING CONSIDERED THE FACTS OF THE CASE AND THE FACT THAT CIT(A) HAS ACCEPTED THE AMOUNT OF RS. 30,000/- AS AGRICULT URAL IN AY 2002- 03 (GROUND RAISED IN THAT YEAR WAS WITHDRAWN BY ASS ESSEE), WE ARE OF THE OPINION THAT THE CLAIM OF AGRICULTURAL INCOME H AS TO BE ACCEPTED AS SUCH. THIS GROUND OF ASSESSEE IS ACCORDINGLY ALL OWED. 22. GROUND NO. 2 & 3 PERTAIN TO SUSTAINING ADDITION OF RS. 9,60,000/- REPRESENTING UNEXPLAINED EXPENDITURE ON LAND DEVELOPMENT. IN THE WAYS AND MEANS STATEMENT, ASSE SSEE HAD DISCLOSED THE LAND DEVELOPMENT CHARGES AT RS. 15,30 ,000/- IN THE ASSETS SIDE OF THE BALANCE SHEET AND THE AO TREATED THIS AMOUNT AS UNEXPLAINED EXPENDITURE IN HIS BRIEF ORDER. IT WAS SUBMITTED BY ASSESSEE THAT AN AMOUNT OF RS. 5,70,000/- WAS SPENT FOR FY 2002-03 RELEVANT TO AY 2003-04 AND THE AMOUNT OF RS. 9,60,0 00/- WAS SPENT IN FY 2003-04 RELEVANT TO AY 2004-05 AND THE AMOUNT OF COMPENSATION RECEIVED OUT OF ACQUISITION OF LAND BY THE GOVERNME NT WAS ALSO SHOWN IN THE WAYS AND MEANS ACCOUNT. THE LEARNED CIT(A) W HILE ACCEPTING THAT THE AMOUNT OF RS. 5,70,000/- HAD BEEN SPENT IN AY 2003-04, DELETED THE SAID AMOUNT BUT SUSTAINED THE AMOUNT OF RS. 9,60,000/-. 23. BEFORE US, IT WAS SUBMITTED THAT THE AMOUNT IS NOT EXPENDITURE IN THIS YEAR BUT THE EXPENDITURE IN AY 2004-05, THE DELETION OF WHICH RESULTED IN REVENUES APPEAL IN THAT YEAR. THE LEAR NED COUNSEL EXPLAINED THE FACTS AND SUBMITTED THAT THE LEARNED CIT(A) WRONGLY CONSIDERED FACTS AND CONFIRMED THE AMOUNT, WHICH HE SHOULD HAVE DELETED. 9 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) 24. HAVING CONSIDERED THE FACTS OF THE CASE, WE ARE IN AGREEMENT WITH THE CONTENTIONS OF ASSESSEE RAISED IN GROUND N O. 3. THE AMOUNTS OF RS. 5,70,000/- AND RS. 9,60,000/- CONSID ERED AS UNEXPLAINED INVESTMENT BY THE AO IN THIS YEAR WERE IN FACT SPENT IN EARLIER YEARS AND WAS SHOWN IN THE BALANCE SHEET AS DEVELOPMENT COST. THERE IS NO DISPUTE WITH REFERENCE TO THE AM OUNT OF RS. 5,70,000/- BEING SPENT AND SHOWN IN STATEMENTS FOR AY 2003-04 AND SIMILARLY THE AMOUNT OF RS. 9,60,000/- SHOWN IN STA TEMENTS FOR AY 2004-05. IN FACT, THE REVENUES APPEAL IN ITA NO. 7 71/HYD/2011 FOR AY 2004-05 WAS ON THE ADDITION OF SAME AMOUNT MADE BY THE AO AS UNEXPLAINED AMOUNT AND DELETION BY THE CIT(A). WE A RE OF THE OPINION THAT THE LEARNED CIT(A) MUST HAVE BEEN MISSED THE F ACT THAT THIS AMOUNT WAS NOT SPENT IN THIS YEAR BUT WAS ONLY REFL ECTED IN BALANCE SHEET AS DEVELOPMENT CHARGES. THEREFORE, WE ALLOW ASSESSEES GROUNDS AND DELETE THE SAID ADDITION. 25. IN THE RESULT, ASSESSEES APPEAL IN ITA NO. 65 4/HYD/2011 IS ALLOWED. ITA NO. 655/HYD/2011 APPEAL BY ASSESSEE FOR AY 20 06-07 26. THIS IS AN ASSESSEES APPEAL FOR AY 2006-07 WHE REIN THE AO MADE THE ADDITION OF RS. 2,50,000/- DEPOSITED BY W AY OF CHEQUE IN UCO BANK ACCOUNT AND FURTHER DEPOSITS IN TIRUPATI C OOPERATIVE BANK AT RS. 17,02,733/- AS UNEXPLAINED CASH CREDITS IN T HE BANK ACCOUNT. IT WAS THE SUBMISSION OF ASSESSEE THAT ASSESSEE OFF ERED INCOMES BASED ON WAYS AND MEANS STATEMENT AND THE CLOSING B ALANCES IN THE BANK ACCOUNT HAVE BEEN CONSIDERED IN THE STATEMENT AND, THEREFORE, NO SEPARATE ADDITION NEEDS TO BE MADE. THE AO DID N OT ACCEPT AND MADE THE ADDITION. THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO ON THE REASON THAT NONE WERE PRESENT ON BEHALF OF A SSESSEE WHEN THE CASE WAS POSTED. 10 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) 27. IT WAS SUBMITTED THAT THE LEARNED AR, WHO WAS A PPEARING FOR ASSESSEE, ONE MR. V. RAGHAVAN, EXPIRED AT THE RELEV ANT POINT OF TIME AND ASSESSEE WAS NOT PROPERLY REPRESENTED BEFORE TH E LEARNED CIT(A). IT WAS FURTHER SUBMITTED THAT ALL THESE DEP OSITS HAVE BEEN CONSIDERED IN THE WAYS AND MEANS STATEMENT AND, THE REFORE, IT IS NOT AN ITEM OF UNEXPLAINED INVESTMENT. 28. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE MATERIAL ON RECORD, WE ARE OF THE OPINION THAT THE MATTER REQUIRES RE- EXAMINATION BY THE LEARNED CIT(A). IN GROUND NO. 2, IT WAS SUBMITTED THAT ASSESSEE HAS SOUGHT EXTENSION OF TIME ON THE G ROUND THAT DUE TO POLITICAL DISTURBANCE, ASSESSEE COULD NOT APPEAR BE ING 71 YEARS OLD. IT WAS ALSO SUBMITTED THAT LEARNED COUNSEL WHO REPR ESENTED THE CASES BEFORE THE CIT(A) IN EARLIER YEARS COULD NOT APPEAR IN THIS YEAR. ASSESSEE SHOULD GET PROPER OPPORTUNITY TO DEFEND TH E CASE. ACCORDINGLY, WE ARE OF THE OPINION THAT APPEAL IS T O BE RESTORED TO THE FILE OF CIT(A) FOR CONSIDERING ASSESSEES SUBMISSIO NS, AFTER GIVING DUE OPPORTUNITY TO ASSESSEE. ACCORDINGLY, THE ISSUE OF ADDITIONS MADE ON DEPOSITS IS RESTORED TO THE FILE OF CIT(A) TO DECIDE THE SAME AFRESH. 29. THE ISSUE OF TREATING AGRICULTURAL INCOME AS SU CH IS DECIDED IN FAVOUR OF ASSESSEE BY THE LD. CIT(A). THE REVENUE HAS NOT CONTESTED IN CROSS APPEAL AND THIS DECISION OF THE CIT(A) IS IN ACCORDANCE WITH FACTS AND ORDERS IN EARLIER YEARS. TO THAT EXTENT I SSUE OF AGRICULTURAL INCOME HAS BECOME FINAL. THEREFORE, MATTER REGARDI NG ADDITION OF CASH CREDITS IN THE BANK ACCOUNT IS ONLY RESTORED T O THE FILE OF CIT(A) AND TO THAT EXTENT APPEAL IS CONSIDERED IS ALLOWED FOR STATISTICAL PURPOSES. 30. IN THE RESULT, THIS APPEAL IN ITA NO. 655/HYD/2 011 IS ALLOWED FOR STATISTICAL PURPOSES. 11 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) ITA NOS. 656 & 608/HYD/2011 31. THESE ARE CROSS APPEALS FOR AY 2007-08 BY ASSES SEE AS WELL AS REVENUE. ITA NO. 656/HYD/2011 BY ASSESSEE FOR AY 2007-08 32. IN THIS APPEAL, ASSESSEE CONTESTED VARIOUS ISS UES. IN GROUND NO. 1 THE ISSUE PERTAINS TO CLAIM OF AGRICULTURAL I NCOME OF RS. 30,000/-, WHICH WAS TREATED AS INCOME FROM OTHER S OURCES BY THE AO AND CONFIRMED BY THE CIT(A). THIS ISSUE WAS RECURRI NG IN NATURE AND IN SOME YEARS THE LEARNED CIT(A) ALLOWED THE AGRICU LTURAL INCOME TO BE TREATED AS SUCH WHEREAS IN OTHER YEARS LIKE AY 2 005-06 AND 2007- 08, HE CONFIRMED THE ACTION OF THE AO. CONSIDERING THAT ASSESSEE HAS AGRICULTURAL LANDS AND IS CONSISTENTLY SHOWING ONLY RS. 30,000/- AS AGRICULTURAL INCOME, WE DO NOT FIND ANY REASON TO D ISBELIEVE THE SAME AND CONSIDERING THE FACT THAT THE CIT(A) HAS ALLOWE D SIMILAR CLAIM OF ASSESSEE IN EARLIER YEARS, WE DIRECT THE AUTHORITIE S TO TREAT THE AGRICULTURAL INCOME AS SUCH. ACCORDINGLY, THIS GROU ND IS ALLOWED. 33. GROUND NO. 2 IS AS FOLLOWS: 1. CAPITAL GAINS: THE LEARNED CIT(A) WENT WRONG IN IGNORING THE SUBMISSIONS THAT THE IMPROVEMENTS MADE TO THE C APITAL ASSET IN ALL THE EARLIER YEARS ARE TO BE CONSIDERED FOR ARRIVING AT THE CAPITAL GAINS. THE APPELLANT SUBMITS THAT IN TH E ORIGINAL DEPOSITION MADE BEFORE THE INVESTIGATING OFFICIALS ALSO MAINTAINED THAT HE HAS TO VERIFY THE SAID DETAILS A ND SUBJECT TO SUCH VERIFICATION ONLY HE AGREED TO ABIDE BY THE HI GHER SALE PRICE AND RESULTANT CAPITAL GAIN. 2. THE LEARNED CIT(A) IS THEREFORE NOT CORRECT IN H OLDING THAT THE APPELLANT HAD AGREED TO OFFER CAPITAL GAINS OF RS. 3,30,28,722/- IN THE DECLARATION U/S 134(4), THE APPELLANT HAS NO T RETRACTED HIS EARLIER STATEMENT. 3. THE LEARNED CIT(A) HIMSELF IN EARLIER YEARS HAVE ACCEPTED SUCH EXPENDITURE WHICH WERE TREATED AS UNEXPLAINED INVESTMENT BY THE AO. 12 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) 33. ASSESSEE SOLD LAND OF 2.25 ACRES FOR RS. 2.37 C RORES. DURING THE DEPOSITION IN SEARCH AND SEIZURE PROCEEDINGS, A SSESSEE ACCEPTED THAT HE HAD RECEIVED ON MONEY OF RS. 1 CRORE. ASS ESSEE, HOWEVER, IN THE COMPUTATION OF INCOME SHOWN THE SALE CONSIDERAT ION RECEIVED BY WAY OF SALE DEED AT RS. 2,32,20,000/- AND ADDED RS. 1 CRORE RECEIVED THROUGH MIDDLEMEN AND TOTAL CONSIDERATION WAS TAKE N AT RS. 3,32,20,000/-. AS AGAINST THIS SALE CONSIDERATION, ASSESSEE CLAIMED COST OF ACQUISITION BY TAKING INDEXATION AT 95,53,4 74/- THEREBY OFFERING THE CAPITAL GAIN AT RS. 2,38,66,529/-. THE AO IN TH E COURSE OF ASSESSMENT PROCEEDINGS, ASKED ASSESSEE AS TO WHY TH E CAPITAL GAIN DECLARED IN THE STATEMENT SHOULD NOT BE BROUGHT TO TAX AND IN REPLY, ASSESSEE EXPLAINED THAT HE HAS GIVEN THE STATEMENT SUBJECT TO VERIFICATION OF ACTUAL DETAILS AND ACCORDINGLY THE CAPITAL GAIN WAS WORKED OUT AND THE RETURN WAS FILED OFFERING CAPITA L GAIN AT RS. 2,38,66,529/-. THE AO NOTICED THAT ASSESSEE HAS DE BITED VARIOUS AMOUNTS OF RS. 10.70 LAKHS IN 1993-94, RS. 5.40 LAK HS IN 1994-95, RS. 4.60 LAKHS IN 1996-97, RS. 4.60 LAKHS AND RS. 1 5.30 LAKHS FROM 2002-03 ON WARDS. WITHOUT CONSIDERING THE CLAIM OF INDEXATION OR EXAMINING THE COST OF ACQUISITION, LITIGATION EXPEN SES ETC., THE AO CONSIDERED THAT ASSESSEES CLAIM CANNOT BE ENTERTAI NED AND THE LONG TERM CAPITAL GAIN WAS DETERMINED AT RS. 3.30 CRORES AND HE MADE THE ENTIRE AMOUNT AS ADDITION TO THE TOTAL INCOME, WHIC H INCLUDED CAPITAL GAINS OF RS. 2.38 CRORES OFFERED BY ASSESSEE. 34. ASSESSEE CONTESTED BEFORE THE LEARNED CIT(A) TH AT THE ACTUAL CASH RECEIVED WAS RS. 3.32 CRORES AND THEREFORE THE ENTIRE AMOUNT COULD NOT HAVE BEEN TREATED AS CAPITAL OF ASSESSEE. FURTHER, LITIGATION EXPENSES UNDER THE EXPENSES AS CLAIMED WERE REALLY INCURRED BY ASSESSEE INCLUDING STAMP VALUE AND LITIGATION CHARG ES AND THE AO WITHOUT ANY EXAMINATION DID NOT CONSIDER THE CLAIM. THE LEARNED CIT(A) REJECTED THE CLAIM BY STATING AS UNDER: 7.1 IT IS SEEN THAT THE APPELLANT HAD TAKEN THE COS T OF THE PROPERTY AND ITS IMPROVEMENT EXPENSES, LEGAL EXPENS ES AND VARIOUS OTHER EXPENSES INCURRED BY THE APPELLANT WH ICH HAVE 13 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) BEEN TAKEN AS PER INDEXATION AND ARRIVED AT RS. 93, 53,471 THEREBY HE HAS OFFERED CAPITAL GAINS AT RS. 2,38,65 ,529/-. IT MAY BE FURTHER SEEN THAT THE APPELLANT HAD CLAIMED THE COST OF THE PROPERTY AT VARIOUS TIMES AND IT IS SEEN THAT THE C OST OF THE PROPERTY CLAIMED CANNOT BE TAKEN AS AUTHENTIC BECAU SE THE APPELLANT HAS NOT GIVEN ANY SUPPORTING DOCUMENTS ET C. THEREFORE, CAPITAL GAINS COMPUTED BY THE APPELLANT AT RS. 2,38,65,529/- WHICH IS INCLUDED IN THE INCOME RETUR NED CANNOT BE ACCEPTED. 7.2 FURTHER, IT IS SEEN THAT DURING DECLARATION MAK ING U/S 132(4) OF THE IT ACT, 1961, THE APPELLANT HAD AGREE D TO OFFER CAPITAL GAINS AT RS. 3,30,28,722/-. AT THAT POINT O F TIME, NO DOCUMENT COSTS TO THE LAND WAS REVEALED. HOWEVER, W HILE FILING THE RETURN OF INCOME, THE APPELLANT HAD MADE THE CL AIM FOR DEVELOPMENT CHARGES AND THEREBY, HE HAS OFFERED LES SER CAPITAL GAINS. THEREFORE, HAVING CONSIDERED THE FACTS OF TH E CASE, I AM OF THE VIEW THAT THE AO IS JUSTIFIED TO ASSESS CAPI TAL GAINS AT RS. 3,30,28,722/-. HOWEVER, THE AO IS DIRECTED TO COMPU TE CAPITAL GAINS SEPARATELY WHICH IS STATED TO HAVE BEEN INCLU DED IN INCOME RETURNED. THEREFORE, THIS GROUND OF APPEAL I S DISMISSED. 35. AFTER CONSIDERING RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT BOTH THE AO AND CIT(A) CONSIDERED THE ISSUE IN A CA SUAL MANNER. AO IS DUTY BOUND TO EXAMINE EACH CLAIM MADE BY ASSESSE E AND IN CASE THERE IS ANY UN-ASCERTAINABILITY, THEN ONLY HE CAN DISALLOW THE CLAIM. AS SEEN FROM THE ORDER OF THE AO, THE ADDITION MADE IS SO CASUAL THAT THE ADMITTED INCOME WAS NOT ADJUSTED. THEREFORE, TO THAT EXTENT OF RS. 2.38 CRORES THERE IS A DOUBLE ADDITION. BE THAT AS IT MAY, AT LEAST THE AMOUNT SPENT OF RS. 15,30,000/- TOWARDS DEVELOPMENT CHARGES CLAIMED IN THE WAYS AND MEANS STATEMENT IN THE YEAR S UNDER CONSIDERATION COULD HAVE BEEN CONSIDERED. EVEN THE LEARNED CIT(A)S ORDER IS ALSO VERY PECULIAR AS EVEN THE COST OF TH E PROPERTY CLAIM WAS REJECTED AS NOT AUTHENTIC, AS ASSESSEE HAS NOT GIVE N ANY SUPPORTING DOCUMENT. IN THE ABSENCE OF ANY DOCUMENT, UNDER THE PROVISIONS OF LAW ASSESSEE CAN CLAIM THE AMOUNT AT MARKET VALUE A ND AT LEAST THE CIT(A) COULD HAVE CONSIDERED THAT ISSUE OR REFERRED THE COST OF ACQUISITION TO A VALUER, IN CASE THE COST CLAIMED B Y ASSESSEE IS NOT AUTHENTIC. WITHOUT DOING ANYTHING, WE ARE UNABLE TO UNDERSTAND, HOW THE COST OF THE PROPERTY CAN BE DENIED TO ASSESSEE. AS ALREADY 14 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) STATED, THE ENTIRE AMOUNT RECEIVED BY ASSESSEE TOWA RDS SALE OF LAND WAS BROUGHT TO TAX, WITHOUT CONSIDERING ASSESSEES COMPUTATION ENCLOSED TO THE RETURN OF INCOME. THEREFORE, WE ARE UNABLE TO SUSTAIN THE ACTION OF THE AO AS WELL AS THE CIT(A). AS SEE N FROM THE COMPUTATION ITSELF, ASSESSEE ADMITTED 1 CRORE OF ON MONEY TO THE AMOUNT RECEIVED AS MENTIONED IN THE SALE DOCUMENTS AND TO THAT EXTENT ASSESSEE, HONORABLY ADMITTED THE ON MONEY RE CEIPT. ASSESSEE ALSO PROVIDED THE REGISTRATION VALUE IN THE COMPUTA TION, TAKING THE ACTUAL SALE VALUE OF RS. 3.32 CRORES WHICH IS MORE THAT REGISTRATION VALUE ( U/S50C) BUT, WITHOUT ANY DISCUSSION, THE A O TREATED AMOUNT OF RS. 3.37 CRORES AS SALE CONSIDERATION. THIS ALSO REQUIRES EXAMINATION BY THE AO AND, THEREFORE, IN ORDER TO C OMPUTE CAPITAL GAIN PROPERLY, AFTER DULY CONSIDERING VARIOUS CLAIM S OF THE ISSUE, THE ISSUE IS RESTORED TO THE FILE OF THE AO FOR FRESH C OMPUTATION OF CAPITAL GAINS. THE AO IS DIRECTED TO ADJUST THE AMOUNT OF R S. 2,38,66,529/- OFFERED BY ASSESSEE WHILE COMPUTING THE INCOME UNDE R THE HEAD CAPITAL GAINS, IF ANY ADDITION IS WARRANTED ON EXAM INATION OF CLAIMS. THIS GROUND CONSIDERED AS ALLOWED FOR STATISTICAL P URPOSES. 36. IN THE RESULT, APPEAL IN ITA NO. 656/HYD/2011 I S ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 608/HYD/2011- APPEAL BY REVENUE 37. IN THIS APPEAL REVENUE IS CONTESTING THE ISSUE THAT THE LEARNED CIT(A) FAILED TO NOTICE THAT ASSESSEE HAS NOT PAID THE TAX ON ADMITTED INCOME, THEREFORE, HE OUGHT TO HAVE DISMISSED THE A PPEAL AS PER SECTION 249(4) OF THE ACT. 38. BEFORE US, IT WAS SUBMITTED THAT ASSESSEE WAS T O PAY AN AMOUNT OF RS. 57 LAKHS TOWARDS TAX AND ASKED THE DE PARTMENT TO ADJUST FD OF RS. 60 LAKHS, WHICH WAS DONE ON 17-02- 2010, PRIOR TO THE APPEAL. SINCE THE AMOUNT WAS ADJUSTED BEFORE THE A PPEAL WAS TAKEN 15 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) UP, FOR THE REASONS DISCUSSED EARLIER AGAINST REVEN UE GROUND ON SIMILAR ISSUE IN AY 2005-06 IN ITA NO. 606/HYD/2011 (SUPRA), WE DO NOT FIND ANY REASON TO UPHOLD THE REVENUE CONTENTIO NS AND ACCORDINGLY, GROUND RAISED BY REVENUE IS DISMISSED. 39. IN THIS RESULT, APPEAL OF REVENUE IN ITA NO. 60 8/HYD/2011 IS DISMISSED. 40. TO SUM UP, ITA NOS. 653 & 654/HYD/2011 ARE ALLO WED, ITA NOS. 655 & 656/HYD/2011 ARE ALLOWED FOR STATISTICAL PURP OSES AND ITA NOS. 771, 606 & 608/HYD/2011 ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2013. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B. R AMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT M EMBER HYDERABAD, DATED: 20 TH DECEMBER, 2013. KV COPY TO:- 1) SHRI C.V. VARADARAJ, C/O SHRI S. RAMA RAO, ADVOC ATE, FLAT NO. 102, SHRIYAS RESIDENCY, ROAD NO. 9, H IMAYATNAGAR, HYDERABAD. 2) ACIT, CENTRAL CIRCLE, TIRUPATHI. 3) CIT(A)-VII, HYDERABAD. 4) CIT(CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 16 ITA NOS. 653, 771, 606, 654, 655, 656 & 608/HYD/1 1 SHRI C.V. VARADARAJI (IND.) DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER