The Income Tax Officer, Hyderabad V. Shri Rajendra Prasad Uppalapati, Hyderabad

ITA 768/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66274 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: I RAMA RAO
• Keywords: Unexplained cash credit; Capital asset; Business income; Search and seizure; Opportunity of being heard; Period of limitation; Validity of assessment; Procedural lapse; Reassessment proceedings
• Section: 143(3); 2(14); 142(1); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO 637/HYD/2011 ASSESSMENT YEAR : 2007-08 RAJENDRA PRASAD, U. HYDERABAD. PAN: AAFPU 4903 R ... APPELLANT VS. DCIT, CIR-5(1), AAYAKAR BHAVAN, ...RESPONDENT HYDERABAD. ITA NO 768/HYD/2011 ASSESSMENT YEAR : 2007-08 DCIT, WARD-5(1), HYDERABAD. ... APPELLANT VS. RAJENDRA PRASAD, U. HYDERABAD. PAN: AAFPU 4903 R ... RESPONDENT ASSESSEE BY : SHRI I. RAMA RAO DEPARTMENT BY : SHRI V. SRINIVAS 2 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. DATE OF HEARING : 05-07-2012 DATE OF PRONOUNCEMENT: 07-09-201 2 ORDER PER SAKTIJIT DEY, J.M.: THESE CROSS APPEALS ARE BY THE ASSESSEE AS WELL AS DEPARTMENT ARE DIRECTED AGAINST THE ORDER DATED 3-2 -2011 PASSED IN ITA NO.0326/DC-5(1)/CIT(A)-V/2009-10 AND THEY PERTAIN TO THE ASSESSMENT YEAR 2007-08. FOR THE S AKE OF CONVENIENCE, THESE ARE CLUBBED TOGETHER AND DISPOSE D OF BY THIS COMMON ORDER. FIRST LET US DEAL WITH ASSESSEE S APPEAL. ITA NO.637/HYD/2011 (ASSESSEES APPEAL) :- 2. GROUND NOS. 1 AND 7 ARE GENERAL IN NATURE AND NE EDS NO ADJUDICATION. 3. IN GROUND NO.2, THE ASSESSEE HAS RAISED A LEGAL ISSUE WHICH READS AS UNDER:- THE LD. CIT (A) OUGHT TO HAVE HELD THE ASSESSMENT PROCEEDINGS WERE BARRED BY LIMITATION INASMUCH AS T HE NOTICE U/S 143(2) WAS NOT ISSUED WITHIN THE PRESCRI BED TIME LIMIT. 4. BRIEFLY THE FACTS ARE THE ASSESSEE, AN INDIVIDUA L DERIVED INCOME FROM BUSINESS FROM COMMISSION AND BROKERAGE IN THE REAL ESTATE SECTOR. THE ASSESSEE DURING THE RELEVA NT ASSESSMENT YEAR HAS ALSO STARTED A NEW VENTURE OF P LOTTING LAND AND SELLING THEM ON INSTALMENT BASIS TO PROSPE CTIVE CUSTOMERS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE 3 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. ASSESSEE FILED ITS RETURN OF INCOME DECLARING A TOT AL INCOME OF RS.7,10,450. THE RETURN WAS INITIALLY PROCESSED U/ S 143(1) OF THE ACT. SUBSEQUENTLY, ON 22-1-2009 THE AO ISSUE D A NOTICE U/S 142(1) CALLING FOR CERTAIN INFORMATION. IN RESPONSE TO THE NOTICE, THE ASSESSEE APPEARED BEFORE THE AO ON 18-2- 2009. THEREAFTER, A NOTICE U/S 143(2) WAS ISSUED O N 9-9- 2009 BY THE AO REQUIRING THE ASSESSEE TO PRODUCE B OOKS OF ACCOUNTS AND OTHER DOCUMENTS IN SUPPORT OF HIS RETU RN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEAR. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE APPEARED AND THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 30-12-2009 DETERMINING THE TOTAL INCOME AT RS.2,08,86,720 AFTE R MAKING VARIOUS ADDITIONS AND DISALLOWANCES. THE ASSESSEE BEING AGGRIEVED OF THE ASSESSMENT ORDER, FILED AN APPEAL BEFORE THE CIT (A) RAISING VARIOUS GROUNDS ONE OF THEM BEING T O THE EFFECT THAT THE ASSESSMENT ORDER PASSED U/S 143(2) IS NULL AND VOID SINCE THE NOTICE U/S 143(2) WAS NOT ISSUED WITHIN THE PRESCRIBED TIME PROVIDED UNDER THE STATUTE. TH E CIT (A) AFTER CONSIDERING THE CONTENTIONS RAISED BY THE ASS ESSEE REJECTED THE ARGUMENTS ON THE GROUND THAT SINCE THE ASSESSEE HAS PARTICIPATED IN THE PROCEEDINGS AND FU LLY CO- OPERATED DURING THE ASSESSMENT PROCEEDINGS WITHOUT RAISING ANY OBJECTION WITH REGARD TO BELATED ISSUANCE OF NO TICE U/S 143(2), THE ASSESSEE CANNOT RAISE ANY OBJECTION WIT H REGARD TO THE ISSUANCE OF NOTICE U/S 143(2) IN VIEW OF THE PROVISIONS CONTAINED U/S 292BB OF THE ACT. THE CIT (A) FURTHE R TOOK NOTICE OF THE FACT THAT THE ASSESSMENT ORDER U/S 14 3(3) WAS PASSED WITHIN THE PERIOD OF LIMITATION. 4 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. 5. THE LEARNED AR FOR THE ASSESSEE SUBMITTED BEFORE US BOTH ORALLY AND THROUGH ELABORATE WRITTEN SUBMISSIO NS THAT SECTION 292BB OF THE ACT HAVING BEEN INTRODUCED BY THE FINANCE ACT, 2008 W.E.F. 1-4-2008, IT WILL ONLY APP LY TO THE ASSESSMENT YEAR 2008-09 AND SUBSEQUENT ASSESSMENT Y EARS. THE ASSESSMENT YEAR UNDER DISPUTE IN THE PRESENT CA SE BEING 2007-08 THE PROVISIONS OF SECTION 292BB ARE NOT AP PLICABLE. THE LEARNED AR RELYING UPON A DECISION OF SPECIAL B ENCH OF ITAT IN THE CASE OF KUBER TOBACCO PRODUCTS PVT. LTD . VS. DCIT (310 ITR (AT) 300) CONTENDED THAT SECTION 292B B BEING SUBSTANTIVE IN NATURE HAS TO BE APPLIED PROSPECTIVE LY FROM THE ASSESSMENT YEAR 2008-09. THE LEARNED AR FURTHER CONTENDED THAT THE DECISION OF PUNJAB & HARYANA HIG H COURT IN THE CASE OF OM SONS INTERNATIONAL VS. CIT (201 1) 60 DTR 300 HOLDING THAT THE PROVISIONS OF SECTION 292BB ARE PROCEDURAL IN NATURE AND HENCE WILL APPLY TO ALL PR OCEEDINGS PENDING ON 1-4-2008 HAVING NOT CONSIDERED THE ISSUE IN THE LIGHT OF THE JUDGMENTS OF HONBLE SUPREME COURT IN THE CASE OF KARIM THARUVI TEA ESTATE LTD.,VS. STATE OF KERA LA 60 ITR 262, HITENDRA VISHNU THAKUR VS. STATE OF MAHARASHTR A, AIR 1994 SC 2623,CIT VS. SCINDIA STEAM NAVIGATION CO. ( 42 ITR 589). IT HAS TO BE CONSIDERED AS A JUDGMENT PER CU RIUM AND SHOULD NOT BE FOLLOWED. THE LEARNED AR FURTHER SUB MITTED THAT THE DECISION OF THE CO-ORDINATE BENCH OF THE T RIBUNAL IN THE CASE OF M/S NAVAYUGA SPATIAL TECHNOLOGIES PVT. LTD. VS. DCIT (ITA NO.1557/HYD/2010 DATED 26-12-2011 CANNOT ALSO BE CONSIDERED TO BE LAYING CORRECT PROPOSITION OF L AW SINCE IT 5 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. HAS MISREAD THE JUDGMENT OF SPECIAL BENCH OF ITAT I N CASE OF KUBER TOBACCO PVT. LTD VS. DCIT (SUPRA). THE LEARNED AR HAS ALSO RELIED UPON VARIOUS JUDGMENTS IN SUPPORT O F HIS ARGUMENTS OF NOT FOLLOWING THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF OM SONS INTERNAT IONAL VS. CIT (2011) 60 DTR (P&H) 393 AND CO-ORDINATE BENCH O F THE TRIBUNAL IN THE CASE OF M/S NAVAYUGA SPATIAL TECHNO LOGIES PVT. LTD. (SUPRA). THE LEARNED AR SUBMITTED THAT T HE NOTICE U/S 143(2) IS THE VERY FOUNDATION FOR ASSUMING JURI SDICTION BY THE AO FOR INITIATING ASSESSMENT PROCEEDINGS. THE L EARNED AR RELYING UPON A JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF HOTEL BLUE MOON REPORTED IN 321 ITR 362 SU BMITTED THAT ISSUE OF NOTICE U/S 143(2) OF THE ACT GOES TO THE VERY ROOT OF THE JURISDICTION AND THEREFORE ANY VIOLATIO N OF THE PROVISIONS OF SECTION 143(2) OF THE ACT CANNOT BE T REATED AS MERE PROCEDURAL IRREGULARITY AND THEREFORE NOT CURA BLE. THE LEARNED AR RELYING UPON THE DECISION OF ALLAHABAD H IGH COURT IN THE CASE OF CIT VS. MUKESH KUMAR AGRAWAL 345 I TR 29 SUBMITTED THAT IN A CASE WHERE NOTICE U/S 143(2) O F THE ACT WAS ISSUED BELATEDLY, NON CONSIDERATION OF SECTION 292BB BY THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN HOTEL BLUE MOON CASE (SUPRA) WILL STILL BE APPLICABLE EVE N THOUGH THE HONBLE SUPREME COURT DID NOT CONSIDER THE EFF ECT OF SEC. 292BB. THE LEARNED AR FURTHER RELIED UPON A JU DGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DCIT V S. MAXIMA (344 ITR 204) WHICH HAS FOLLOWED THE HONBLE SUPREM E COURTS DECISION IN THE CASE OF HOTEL BLUE MOON AND HELD THAT UNSIGNED NOTICES U/S 143(2) HAS TO BE TREATED AS NO NOTICE AT 6 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. ALL AND PROCEEDINGS INITIATED AS A CONSEQUENCE THER EOF IS ALSO INVALID. THE LEARNED AR IN HIS WRITTEN SUBMISSIONS HAS ALSO RELIED UPON VARIOUS OTHER JUDGMENTS AND DECISIONS O F THE TRIBUNAL IN SUPPORT OF HIS CONTENTION. 6. THE LEARNED DR, ON OTHER HAND, IN HIS WRITTEN SUBMISSIONS SUBMITTED THAT SINCE THE ASSESSEE IN PU RSUANCE TO NOTICE ISSUED U/S 143(2) HAS APPEARED AND PARTIC IPATED IN THE ASSESSMENT PROCEEDINGS WITHOUT RAISING ANY OBJE CTION WITH REGARD TO THE ISSUANCE OF NOTICE. THE ASSESSE E IS DEEMED TO HAVE WAIVED HISRIGHT TO OBJECT IN VIEW OF THE PRESUMPTION CREATED U/S 292BB OF THE ACT. THE LEARN ED DR FURTHER CONTENDED THAT SECTION 292BB OF THE ACT BEI NG PROCEDURAL IN NATURE IS APPLICABLE TO ALL PENDING P ROCEEDINGS AS ON 1-4-2008. IN SUPPORT OF SUCH CONTENTION, THE LEARNED DR RELIED UPON THE DECISION OF HONBLE PUNJAB & HAR YANA HIGH COURT DECISION IN THE CASE OF OM SONS INTERNAT IONAL VS. CIT (60 DTR 393) AND THE DECISION OF THE ITAT, HYDERABAD BENCH IN THE CASE OF M/S NAVAYUGA SPATIAL TECHNOLOG IES PVT. LTD., HYDERABAD (SUPRA). THE LD. DR RELYING UPON A JUDGMENT OF IN THE CASE OF K.J. THOMAS VS. CIT 301 ITR 3 01 SUBMITTED THAT WHERE THE ASSESSMENT WAS COMPLETED A FTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE AND THE ASSESSMENT ORDER WAS PASSED WITHIN THE PERIOD OF LI MITATION, THEN THERE IS NO PREJUDICE CAUSED TO THE ASSESSEE B Y DELAYED ISSUANCE OF NOTICE U/S 143(2) AND THE ASSESSMENT PROCEEDINGS CANNOT BE HELD TO BE INVALID ON THAT GR OUND. THE LEARNED DR ALSO RELIED ON A JUDGMENT OF HONBLE SUP REME COURT IN THE CASE OF DEEPAK AGRO FOODS VS. STATE OF 7 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. RAJASTHAN, (2008) TOIOL 134 IN THIS REGARD. THE LE ARNED DR DISTINGUISHING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HOTEL BLUE MOON SUBMITTED THAT IN THAT CASE, NO NOTICE U/S 143(2) WAS AT ALL ISSUED AND THE HONBLE SUPREME COURT HAD NOT OCCASION TO CONSIDER THE PROVISIONS O F SECTION 292BB OF THE ACT. SIMILARLY, IN CASE OF CIT VS. MU KESH KUMAR AGRAWAL (SUPRA) 29 IT IS A CASE OF NO NOTICE U/S 143(2) AND IN CASE OF DCIT VS. MAXIM (345 ITR 204 NOTICE W AS UNSIGNED AND TREATED AS NO NOTICE AND GUJARAT HIGH COURT ALSO DID NOT CONSIDER THE PROVISIONS OF SECTION 292 BB OF THE ACT. THE LEARNED DR SUBMITTED THAT THE BELATED ISS UANCE OF NOTICE U/S 143(2) IS A PROCEDURAL DEFECT AND IS CUR ABLE. 7. WE HAVE HEARD RIVAL SUBMISSIONS PERUSED THE MATE RIAL ON RECORD AND ALSO CONSIDERED THE ELABORATE WRITTEN SUBMISSIONS FILED BY THE RESPECTIVE PARTIES. WE AL SO EXAMINED THE DECISIONS CITED AT THE BAR. ON PROPER APPRECIATION, THE FOLLOWING DATES ARE REPRODUCED BE LOW:- 30-11-2007 - RETURN OF INCOME FILED BY THE ASS ESSEE FOR ASSESSMENT YEAR 2007-08. 9-9-2009 - NOTICE U/S 143(2) ISSUED BY THE CIT 1-12-2008 ONE YEAR EXPIRED FROM THE DATE OF FILIN G OF THE RETURN. 8. IT IS THE CONTENTION OF THE LEARNED AR THAT FOR VALID INITIATION OF PROCEEDINGS NOTICE U/S 143(2) SHOULD HAVE BEEN ISSUED BY 1-12-2008. THE REVENUE DOES NOT DISPUTE THE FACT THAT THE NOTICE U/S 143(2) WAS ISSUED ON 9-9-2009 I.E. 8 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. BEYOND ONE YEAR FROM THE DATE OF FILING OF THE RETU RN. HOWEVER, IT IS THE CONTENTION OF THE LEARNED DR THA T SINCE THE ASSESSEE HAS PARTICIPATED IN THE ASSESSMENT PROCEED INGS AND FULLY COOPERATED FOR COMPLETION OF THE ASSESSMENT W ITHOUT RAISING ANY OBJECTION WITH REGARD TO BELATED ISSUAN CE OF NOTICE U/S 143(2), IT IS PRECLUDED U/S 292BB TO RA ISE SUCH AN ISSUE AFTER COMPLETION OF THE ASSESSMENT PROCEEDING S BEFORE THE APPELLATE FORUM. SECTION 292 BB OF THE ACT WAS BROUGHT TO THE STATUTE BY THE FINANCE ACT, 2008 W.E.F. 1-4- 2008. THE SPECIAL BENCH OF ITAT IN THE CASE OF KUBER TOBBACCO (P) LTD. (SUPRA) HELD THAT SECTION 292BB IS APPLICABLE TO TH E ASSESSMENT YEAR 2008-09 AND SUBSEQUENT YEARS. HOWE VER, PUNJAB & HARYANA HIGH COURT IN THE CASE OF OM SONS TECHNOLOGIES VS. CIT 60 DTR 393 HELD THAT THE PROVI SIONS OF SECTION 292BB SHALL BE APPLICABLE TO ALL THE PEN DING PROCEEDINGS AS ON 1-4-2008. A CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.1557/HYD/2010 DATED 26-12-2011 I N CASE OF M/S NAVAYUGA SPATIAL TECHNOLOGIES PVT. LTD . VS DCIT (SUPRA) ALSO HAD AN OCCASION TO CONSIDER IDENTICAL ISSUE. THE ITAT AFTER CONSIDERING THE PROVISIONS OF SECTION 29 2BB HELD THAT THE MISTAKE ON ACCOUNT OF BELATED SERVICE OF NOTICE IS A CURABLE MISTAKE AND THE PROVISION U/S 292BB IS APPL ICABLE TO ALL THE PENDING PROCEEDINGS IRRESPECTIVE OF THE ASS ESSMENT YEARS TO WHICH THEY RELATE. THE FINDING OF THE ITA T IN THIS REGARD IS EXTRACTED HEREUNDER FOR THE SAKE OF CONVE NIENCE. AS FOR GROUND NO.2(B), WE FIND THAT THE PLEA WITH REGARD TO BELATED THE SERVICE OF NOTICE U/S 143(2), VIZ., MORE THAN 12 MONTHS AFTER THE MONTH OF FILING OF THE RETURN, WAS NOT RAISED BEFORE THE AO DURING 9 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. THE ASSESSMENT PROCEEDINGS, AND SUCH A PLEA IS RAISED FOR THE FIRST TIME IN THE APPELLATE PROCEEDINGS, THAT TOO BEFORE THIS TRIBUNAL. IN VIE W OF THE PROVISIONS OF S. 292BB, MISTAKE ON ACCOUNT OF BELATED SERVICE OF NOTICE IS A CURABLE MISTAKE. SINCE THE ASSESSEE HAS NOT RAISED SUCH A PLEA BEFORE THE AO, AND FULLY PARTICIPATED IN THE ASSESSMENT PROCEEDINGS, THE SO-CALLED MISTAKE IN SERVING THE NOTICE U/S 143(2) OF THE ACT, STOOD CURED, ON ACCOUNT OF THE ASSESSEES ACTION IN IGNORING THE SAME AND PARTICIPATING IN THE PROCEEDINGS BEFORE THE AO. LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED BEFORE US THAT THE RECENTLY INSERTED PROVISION OF S. 292BB, EFFECTIVE FROM 1 ST APRIL, 2008, IS APPLICABLE ONLY FROM THE ASSESSMENT YEAR 2008-09 ONLY, AND SINCE THE PRESENT APPEAL RELATES TO ASSESSMENT YEAR 2005- 06, THE SAVING PROVISION OF THAT SECTION DOES NOT COME TO THE RESCUE OF THE DEPARTMENT. WE ARE AFRAID, SUCH A PLEA CANNOT BE ACCEPTED, FOR THE REASON THAT THE PROVISION OF S. 292BB IS ONLY A PROCEDURAL ONE, AND AS SUCH, IT APPLIES TO ALL THE PENDING PROCEEDINGS, IRRESPECTIVE OF THE ASSESSMENT YEARS, TO WHICH THEY RELATE, AS HELD BY THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF OM SONS INTERNATIONAL VS. CIT (2011) 60 DTR ( P& H) 393, WHEREIN IT WAS HELD- . .. THE PROVISION HAS BEEN MADE EFFECTIVE FROM 1 ST APRIL, 2008 AND THEREFORE, SHALL APPLY TO ALL PENDING PROCEEDINGS. THE CBDT ISSUED CIRCULAR NO.1 OF 2009 DT. 27 TH MARCH, 2009 (2009) 222 CTR (ST) 69: (2009) 310 ITR (ST) 42) GIVING EXPLANATORY NOTES ON THE PROVISIONS RELATING TO DIRECT TAXES CONTAINED IN FINANCE ACT, 2008 CLAUSE 42.7 (AT P. 86 OF THE REPORT) IS RELEVANT WHICH RELATES TO APPLICABILITY OF THIS PROVISION AND READS THUS -: 42.7 APPLICABILITY: THIS AMENDMENT HAS BEEN MADE APPLICABLE W.E.F. 1 ST APRIL, 2008. THIS MEANS THAT THE PROVISION OF NEW S. 2923BB 10 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. SHALL APPLY TO ALL PROCEEDINGS WHICH ARE PENDING ON 1 ST APRIL, 2008, ............ WE ARE ALSO SUPPORTED IN THIS BEHALF BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN KUBER TOBACCO PRODUCTS (P ) LTD. VS. DCIT (117 ITD 273), WHEREIN IT WAS HELD THAT BY INSERTION OF S. 292BB, RIGHT OF THE ASSESSEE TO CHALLENGE THE VALIDITY OF ASSESSMENT OR REASSESSMENT PROCEEDINGS DURING THE COURSE OF APPELLATE PROCEEDINGS HAS BEEN TAKEN AWAY BY THE STATUTE W.E.F. 1-4-2008. IN THIS VIEW OF THE MATTER, WE FIND NO MERIT IN GROUND NO.2(B) OF THE ASSESSEE, WHICH IS ACCORDINGLY REJECTED. 9. THE CO-ORDINATE BENCH WHILE COMING TO SUCH A CONCLUSION HAS FOLLOWED THE JUDGMENT OF HONBLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF OM SONS INTERNATIONAL VS. CIT (SUPRA), THE CO-ORDINATE BENC H HAD ALSO TAKEN NOTE OF THE SPECIAL BENCH DECISION IN TH E CASE OF TOBACCO PRODUCTS (SUPRA). NOW, THE ISSUE ARISES WHEN THERE ARE TWO VIEWS, ONE BY THE HONBLE HIGH COURT AND ANOTHER BY SPECIAL BENCH OF ITAT ON IDENTICAL ISSUE WHICH HAS TO BE GIVEN A PRECEDENCE CONSIDERING THE HIERAR CHICAL JUDICIAL SYSTEM IN OUR COUNTRY THE VIEW OF THE HON BLE HIGH COURT HAS TO GET PRECEDENCE OVER THE SPECIAL BENCH OF THE ITAT. THE CONTENTION OF THE LEARNED AR THAT THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IS TO BE CONSIDERED AS PER IN CURIAM, CANNOT BE ACCEPTED, FO R THE SIMPLE REASON THAT THIS TRIBUNAL IS NOT COMPETENT T O HOLD 11 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. A JUDGMENT OF THE HIGH COURT AS PER IN CURIAM. WE ALSO FIND THAT THE DECISIONS RELIED UPON BY THE LEARNED AR IN THE CASE OF HOTEL BLUE MOON (321 ITR 362), CIT VS. MUKESH KUMAR AGRAWAL (345 ITR 29) AND MAXIMA SYSTEMS (344 ITR 204) ARE FACTUALLY DISTINGUISHABLE IN THE SENSE THAT IN THOSE CASES NOTICE U/S 143(2) WAS NOT AT ALL ISSUED AND SECTION 292BB WAS NOT CONSIDERED. CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT RAIS ED ANY OBJECTION BEFORE THE AO WITH REGARD TO ISSUANCE OF NOTICE U/S 143(2) AND THE ASSESSMENT ORDER HAS BEEN PASSED WITHIN THE PERIOD OF LIMITATION, WE ARE OF THE VIEW THAT THE ASSESSEE IS PRECLUDED FROM RAISING THE VALIDITY OF INITIATION OF PROCEEDINGS BEFORE THE APPELLATE FORU M IN VIEW OF THE SPECIFIC BAR U/S 292 BB OF THE ACT. FOR SUCH A PROPOSITION, WE FOLLOW THE DECISION OF HONBLE PUNJ AB & HARYANA HIGH COURT IN THE CASE OF OM SONS INTERNATI ONAL (SUPRA) AND THE DECISION OF THE CO-ORDINATE BENCH O F THE TRIBUNAL IN THE CASE OF M/S NAVAYUGA SPATIAL TECHNOLOGIES PVT. LTD. (SUPRA). HENCE, THE GROUND RAISED BY THE ASSESSEE IS THEREFORE REJECTED/DISMIS SED. 10. GROUND NO.3 READS AS UNDER :- WITHOUT PREJUDICE TO THE ABOVE GROUND, THE LD. CIT (A) OUGHT NOT HAVE UPHELD THE ADDITION OF RS.25,10, 787 INASMUCH AS THE TRANSACTION TOOK PLACE IN THE EARLI ER 12 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. YEARS AND INCOME DOES NOT BELONG TO THE APPELLANT AND IN ANY EVENT IT IS AN AGRICULTURAL INCOME. 11. FACTS OF THIS ISSUE ARE THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR CLAIMED TO HAVE SOLD AGRICULTURAL LAND TO THE EXTENT OF AC.67.27 GUNTAS SITUATED AT VARIOUS PLACES UNDER DIFFERENT SALE DEE DS FOR A CONSIDERATION OF RS.1,68,43,871/- AFTER DEDUCTING THE COST OF LAND AMOUNTING TO RS.25,67,662/-, PROFIT OF RS.1,42,03,213/- WAS DERIVED FROM SALE OF LAND FOR THE FINANCIAL YEAR 2005-06 AND 2006-07. APART FROM THE AFORESAID SALE OF THE LAND, THE ASSESSEE ALSO RECEI VED AN AMOUNT OF RS.25,10,787/- TOWARDS SALE OF OTHER LAND S. IN COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED T HE ASSESSEE TO FURNISH DETAILS IN SUPPORT OF HIS CLAIM THAT THE LAND SOLD WAS AGRICULTURAL LANDS. AS OBSERVED B Y THE AO SINCE THE ASSESSEE DID NOT PRODUCE ANY DOCUMENT WITH REGARD TO THE LAND IN QUESTION, THE AO ADDED THE AMOUNT OF RS.25,10,787/-. THE ASSESSEE BEING AGGRIEVED OF THE ADDITION MADE BY THE AO, FILED AN APPEAL BEFORE THE CIT (A). THE CIT (A) ALSO SUSTAI NED SUCH ADDITION BY HOLDING THAT IN ABSENCE OF ANY DET AILS, THE ASSESSEES CLAIM CANNOT BE ACCEPTED AND THE INC OME HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES AGAINST WHICH NO EXPENSES ARE ALLOWABLE. IN HIS WR ITTEN SUBMISSIONS, THE LEARNED AR HAS CONTENDED THAT ALL THE 13 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. DETAILS WERE SUBMITTED BEFORE THE AO. THE LEARNED AR HAS FURTHER CONTENDED THAT THE GAINS ARISING OUT OF SALE OF AC.22.13 CENTS ARE PERTAINING TO THE ASSESSMENT YEAR 2006-07 AND NOT THE ASSESSMENT YEAR UNDER DISPUTE. IT IS FURTHER CONTENTION OF THE LEARNED AR THAT THE LA ND SOLD BEING AGRICULTURAL LAND IS NOT A CAPITAL ASSETS U/S 2(14) OF THE ACT AND THEREFORE THE ADDITION IS NOT SUSTAINAB LE. 12. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED TH AT SINCE THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE W ITH REGARD TO THE CLAIM OF SALE OF LAND, THE AO WAS JU STIFIED IN TREATING THE AMOUNT OF RS.25,10,787 AS UNDISCLOS ED INCOME OF THE ASSESSEE. 13. WE HAVE HEARD RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS SEEN FROM THE O RDERS OF THE CIT (A) AS WELL AS THE AO, THE ADDITION WAS MADE ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PRODU CE ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE LAND SOLD WAS AGRICULTURAL LAND. FROM THE INFORMATION CLAIME D TO HAVE BEEN FILED BEFORE THE AO WHICH IS AT PAGE-65 O F THE PAPER BOOK SUBMITTED BEFORE US, IT IS SEEN THAT AT SERIAL NO.8, THE ASSESSEE HAS SIMPLY MENTIONED OTHERS LA ND AGAINST PROFIT EARNED WAS RS.25,10,787/- FOR THE ASSESSMENT YEAR 2007-08, EXCEPTING THIS, THERE IS N O OTHER DETAILS WITH REGARD TO THE EXTENT AND NATUR E OF LAND SOLD AND WHETHER ANY AGRICULTURAL ACTIVITY WAS CARRIED ON THOSE LANDS BY THE ASSESSEE OR NOT. IT IS THE 14 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. CONTENTION OF THE LEARNED AR BEFORE US THAT THE LAN D IN QUESTION WAS AGRICULTURAL LAND AND IT WAS SOLD IN T HE ASSESSMENT YEAR 2006-07. CONSIDERING THE CONTENTIO NS OF THE LEARNED AR, WE THINK IT PROPER TO RESTORE TH IS ISSUE TO THE FILE OF THE AO FOR EXAMINING THE CLAIM OF TH E ASSESSEE AFRESH. WE DIRECT THE ASSESSEE TO PRODUCE NECESSARY DOCUMENTARY EVIDENCES IN SUPPORTS OF ITS CLAIM THAT THE AMOUNT RECEIVED WAS TOWARDS SALE OF AGRICU LTURAL LAND AND THE LAND WAS SOLD IN THE ASSESSMENT YEAR 2006- 07. THE AO SHALL CONSIDER THE EVIDENCES PRODUCED B Y THE ASSESSEE AND EXAMINE HIS CLAIM KEEPING IN VIEW OF T HE GUIDELINES LAID DOWN BY THE HONBLE SUPREME COURT I N THE CASE OF SARIFABIBI MOHAMED IBRAHIM VS. CIT 204 I TR 631. IF THE ASSESSEE IS ABLE TO SATISFY THE TESTS LAID DOWN IN THE AFORESAID JUDGMENT, THEN THE ASSESSEES CLAI M CAN BE ACCEPTED. THIS GROUND RAISED BY THE ASSESSEE IS SET ASIDE. 14. IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED TH E DISALLOWANCE OF VARIOUS EXPENSES MADE BY THE AO WHI CH ARE SUSTAINED BY THE CIT (A). THE EXPENSES CLAIMED ARE UNDER THE FOLLOWING HEADS:- I) DEVELOPMENT EXPENSES RS. 17,16,000 II) SALARIES RS.2,70, 800 III) SURVEY EXPENSES RS. 74,000 15 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. IV) MISC. EXPENSES RS.75,000 IN COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND T HAT THE ASSESSEE HAD CLAIMED LAND DEVELOPMENT EXPENSES OF RS.34,31,907/-. THE AO FOUND FROM THE BOOKS OF THE ASSESSEE THAT THE ADVANCES WERE RECEIVED FROM CUSTOMERS AGAINST SALE OF PLOTS FROM THE MONTH OF A PRIL, 2006 MUCH BEFORE THE REGISTRATION OF THE LAND. OBSE RVING THAT THE ASSESSEE HAS NOT CLAIMED ANY LAY OUT EXPEN SES FOR DEVELOPMENT OF SUCH LAND TO SELL THEM AS PLOTS, THE AO ASKED THE ASSESSEE TO PRODUCE BILLS AND VOUCHER S IN SUPPORT OF ITS CLAIM OF LAND DEVELOPMENT EXPENSES. SINCE THE ASSESSEE DID NOT PRODUCE ANY BILLS AND VOUCHERS AN AMOUNT OF RS.17,60,000/- WAS DISALLOWED OUT OF TOTA L EXPENDITURE CLAIMED BY THE ASSESSEE TO TUNE OF RS.34,31,907/-. SIMILARLY, THE AO DISALLOWED A SUM OF RS.2,70,800/- FROM TOTAL EXPENSES OF RS.6,77,000 TOWARDS PAYMENT OF SALARY IN THE ABSENCE OF PRODUC TION OF RELEVANT INFORMATION BY THE ASSESSEE. OUT OF SU RVEY EXPENSES OF RS.1,84,790/- THE AO DISALLOWED A SUM O F RS.74,000/- SINCE THE ASSESSEE DID NOT PRODUCE INFORMATION CALLED FOR LIKE BILLS AND VOUCHERS DETA ILS OF LAND ON WHICH SURVEY WAS MADE ETC. OUT OF THE MISC ., EXPENSES CLAIMED TOWARDS POSTAGE AND TELEGRAM, STAF F WELFARE, OFFICE MAINTENANCE, PRINTING AND STATIONER Y ETC., THE AO DISALLOWED A SUM OF RS.75,000/- IN THE ABSEN CE OF PRODUCTION OF PROPER EVIDENCE BY THE ASSESSEE. BEF ORE 16 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. THE CIT (A), THE ASSESSEE CONTENDED THAT THE DISALLOWANCE MADE BY THE AO WOULD MAKE THE PROFIT V ERY HIGH WHICH IS IMPROBABLE IN SUCH LINE OF BUSINESS. THE CIT (A) SUSTAINED THE DISALLOWANCES MADE BY THE AO ON THE GROUND THAT THE ASSESSEE FAILED TO PRODUCE EVEN A SINGLE VOUCHER OR DETAILS WITH REGARD TO THE EXPENS ES INCURRED. THE LEARNED AR HAD SUBMITTED BEFORE US T HAT OUT OF SALE PROCEEDS OF RS.1,05,33,600/- THE ASSESS EE HAD DISCLOSED A PROFIT OF RS.8,10,453. IF THE ADDI TION OF RS.21,35,800/- WOULD BE SUSTAINED THEN THE NET PROF IT FROM THE BUSINESS WILL WORK OUT TO ABOUT 28% WHICH IS ABNORMALLY HIGH AS AGAINST THE NORMAL RATE OF PROFI T OF 9% IN THE SIMILAR NATURE OF BUSINESS. THE LEARNED AR FURTHER CONTENDED THAT THE AO WAS NOT JUSTIFIED IN MAKING AD HOC DISALLOWANCE WITHOUT REJECTING THE BOOKS OF ACCOUNTS OR BRINGING ANY COMPARABLE CASES OR EVIDEN CES JUSTIFYING THE ADDITION. THE LEARNED AR IN SUPPORT OF SUCH CONTENTION RELIED UPON A DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. MAHARAJA SHREE ONED MILLS LTD. (192 ITR 565) AND THE DECISION OF ITAT IN THE CASE OF R. MAHESWAR NAIDU VS. ADDL. CIT, ITA NO. 302/HYD/2011 DATED 30-3-2012. 15. THE LEARNED DR SUBMITTED THAT IN THE ABSENCE OF PROPER EVIDENCE, THE ADDITION WAS JUSTIFIED. 17 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. 16. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, THE AS SESSEE HAS NOT PRODUCED ANY EVIDENCE SUCH AS VOUCHERS AND BILLS OR ANY OTHER MATERIAL IN SUPPORT OF THE EXPEN SES CLAIMED. THOUGH THE AO DOES NOT DISPUTE THE FACT T HAT THE ASSESSEE HAS INCURRED SUCH EXPENSES, AT THE SAM E TIME, IN THE ABSENCE OF PROPER EVIDENCE THE EXPENDI TURE CLAIMED TO HAVE BEEN INCURRED BY THE ASSESSEE CANNO T BE ACCEPTED IN TOTO. HOWEVER, THE DISALLOWANCE MADE B Y THE AO UNDER THE AFORESAID HEAD APPEARS TO BE ON HI GHER SIDE. CONSIDERING THE TOTALITY OF FACTS AND THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT INTEREST OF JUSTICE WILL BE MET IN RESTRICTING THE DISALLOWANCE UNDER T HE AFORESAID HEADS TO AN AGGREGATE AMOUNT OF RS.10 LAK HS. HENCE, THIS GROUND IS ALLOWED IN PART. 17. SO FAR AS THE GROUND NO.5 REGARDING DISALLOWANC E FOR RS.75,000 OUT OF MISC. EXPENSES IS CONCERNED, IT I S SEEN THAT THE SAID DISALLOWANCE HAS BEEN INCLUDED AS A P ART OF RS.21,35,800/- CONSIDERED BY THE CIT (A) IN PARA 6. 3 AND 6.3.1 OF HIS ORDER. THEREFORE, NO SEPARATE DISALLO WANCE AGAIN COULD BE MADE OF THE AFORESAID AMOUNT. HENCE, WE REVERSE THE FINDINGS OF THE CIT (A) ON THIS ISSUE. THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 18. GROUND NO.6 RELATES TO ADDITION OF RS.5,20,000 /- BEING THE DIFFERENCE IN THE CASH BOOK. BRIEFLY THE FACTS ARE THE AO WHILE EXAMINING THE COMPUTERISED CASH BO OK 18 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOUND A DEF ICIT CASH BALANCE ON 25-6-2006 WHERE THE CLOSING BALANCE WAS SHOWN IN THE FOLLOWING MANNER:- DEBIT BALANCE RS.51,10,707 CREDIT BALANCE RS.55,46,411 IT HAS BEEN ALLEGED BY THE AO THAT TO COVER UP THE DEFICIT, THE ASSESSEE MADE SOME ENTRIES ON 25-6-20 06 AMOUNTING TO RS.5,20,000/-. WHEN THE AO ASKED THE ASSESSEE TO EXPLAIN THE DETAILS FOR THE AFORESAID D EPOSITS, THE ASSESSEE COULD NOT EXPLAIN NOR COULD PRODUCE OR IGINAL RECEIPTS FOR THE SAME. THE AO THEREFORE CAME TO A CONCLUSION THAT THE CASH BROUGHT INTO THE CASH BOOK WAS NOTHING BUT AN ENTRY TO COVER UP DEFICIT OF CASH BA LANCE AVAILABLE. HE THEREFORE ADDED THE AMOUNT OF RS.5,20,000/- TO THE TOTAL INCOME. THE CIT (A) SUS TAINED THE ADDITION BY OBSERVING THAT THE ASSESSEE HAS FAI LED TO OFFER ANY EXPLANATION REGARDING THE DIFFERENCE EVEN DURING THE APPELLATE PROCEEDINGS. 19. THE LEARNED AR SUBMITTED BEFORE US THAT THE AMO UNT WAS RECEIVED FROM THE BUYER OF THE PLOTS AND PASS B OOK NUMBERS MENTIONED IN CASH BOOK INDICATING THE SALE RECEIPTS. THEREFORE THE AO WITHOUT MAKING PROPER 19 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. ENQUIRY COULD NOT HAVE MADE THE ADDITION. THE LEAR NED AR FURTHER CONTENDED THAT IF THE AO DOUBTED THE SAL E RECEIPTS THEN THE SAME SHOULD HAVE BEEN REDUCED FRO M THE GROSS RECEIPTS CREDITED TO THE PROFIT &LOSS A/C . 20. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED TH E ORDERS OF THE REVENUE AUTHORITIES IN THIS REGARD. 21. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS ON RECORD. IT IS SEEN FROM THE ASSESSMEN T ORDER THAT THE AO HAS SIMPLY MADE THE ADDITION WITH OUT MAKING A PROPER ENQUIRY TO FIND OUT WHETHER THE ENT RIES INDICATED ACTUAL RECEIPT OF THE AMOUNT OR NOT. WH EN PASS BOOK NUMBERS HAVE BEEN MENTIONED AGAINST THE ENTRIES, THE AO SHOULD HAVE CALLED FOR PASS BOOKS F OR CROSS VERIFICATION. THE CIT (A) HAS ALSO NOT DEAL T WITH THIS ISSUE IN A PROPER MANNER. IN THE AFORESAID CIRCUMSTANCES, WE CONSIDER IT PROPER TO RESTORE THE ISSUE BACK TO THE FILE OF THE AO WHO SHALL MAKE CROSS VERIFICATION OF PASS BOOKS MENTIONED AGAINST THE EN TRIES AND FIND OUT THE VERACITY OF THE ENTRIES MADE IN TH E CASH BOOK. THE AO SHALL AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF THE ASS ESSEE IS SET ASIDE. 22. IN THE RESULT, THE APPEAL IS ALLOWED IN PART. ITA NO.768/HYD/2011 (DEPARTMENTAL APPEAL) : 20 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. 23. GROUND NOS. 2 AND 3 RELATE TO DELETION OF AN AM OUNT OF RS.1,07,59,582/- BY THE CIT (A) WHICH WAS ADDED BY THE AO TOWARDS PROFIT FROM REAL ESTATE BUSINESS. 24. BRIEFLY THE FACTS ARE THE ASSESSEE WAS HAVING AGRICULTURAL LAND AGGREGATING TO AC.67.27 CENTS SPR EAD OVER VARIOUS PLACES IN MALKAPUR VILLAGE OF CHOUTTUP PAL MANDAL, NALGONDA DISTRICT. THE LAND IN QUESTION WAS STATED TO HAVE BEEN ACQUIRED BY THE ASSESSEE IN THE YEAR 1999 FOR THE PURPOSE OF CULTIVATION AND THE ASSESSE E WAS DECLARING AGRICULTURAL INCOME FROM THE SAID LAND. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER DISPUTE, THE ASSESSEE SOLD THE LAND AND EARNED A PR OFIT OF RS.1,07,59,588/-. THE ASSESSEE CLAIMED THE GAIN OU T OF SALE OF LAND AS EXEMPT ON THE GROUND THAT THE LAND SOLD BEING AGRICULTURAL LAND IS NOT CAPITAL ASSET WITHI N THE MEANING OF SECTION 2(14) OF THE ACT. THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE LAN DS IN QUESTION WERE SOLD AND REGISTERED IN THE NAME OF VA RIOUS REAL ESTATE COMPANIES AND FIRMS THAT APART THE REGISTRATIONS WERE EFFECTED ONLY AFTER SEPT. 2006. HOWEVER, THE ASSESSEE THOUGH WAS HOLDING THE LANDS TILL SEPT. 2006 NO AGRICULTURAL INCOME FOR THE ASSESSMEN T YEAR 2007-08 HAS BEEN SHOWN. THE AO FURTHER OBSERV ED THAT THE ASSESSEE FAILED TO PRODUCE ANY BILLS OR VO UCHERS EITHER TOWARDS SALE OF AGRICULTURE PRODUCE OR EXPEN SES 21 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. INCURRED TOWARDS CULTIVATION AND EARNING OF AGRICUL TURAL INCOME. IT HAS BEEN FURTHER NOTED BY THE AO THAT T HE MAJOR LANDS WERE SOLD TO REAL ESTATE COMPANIES AND FIRMS AND ARE MEANT FOR PLOTTING AND DEVELOPING FOR SALE AS PLOTS. THE AO FURTHER CAME TO A FINDING THAT THE ASSESSEE HIMSELF MIGHT HAVE DEVELOPED THE SAID LAN D WELL BEFORE THEY WERE SOLD AS PLOTS WHICH FACILITA TED COMING FORWARD OF REAL ESTATE COMPANY AND THE FIRM FOR PURCHASING SUCH LAND BY OFFERING LUCRATIVE PRICE W HICH THE LAND OTHERWISE WOULD NOT HAVE FETCHED. THE AO THEREFORE TREATED THE GAIN ARISING OUT OF THE SALE OF LAND AMOUNTING TO RS.1,07,59,588/- AS BUSINESS INCOME AN D ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. 25. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE CIT (A). BEFORE THE CIT (A), THE ASSESSEE CONTENDED TH AT THE LANDS ARE PURELY AGRICULTURAL SINCE THEY ARE SITUA TED IN DIFFERENT VILLAGES OF NALGONDA DISTRICT AND ARE SI TUATED 50 KM TO 60 KM AWAY FROM HYDERABAD MUNICIPALITY. T HE NATURE OF LAND HAS BEEN RECORDED BY THE REVENUE DEPARTMENT OF GOVERNMENT OF ANDHRA PRADESH IN THE PATTADAR PASS BOOKS AS AGRICULTURAL LANDS. THE SUB - REGISTRAR OFFICE HAS ALSO CLASSIFIED THESE LANDS AS AGRICULTURAL LANDS. THE PRICE AT WHICH THE LAND W AS SOLD WAS ALSO AS PER THE PRICE FIXED BY THE SUB-REGISTRA R FOR THE AGRICULTURAL LANDS. IT WAS FURTHER CONTENDED T HAT THE LANDS WERE SOLD IN ACRES AND GUNTAS AND NOT IN SQ. YARDS 22 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. BASIS. IT WAS ALSO CONTENDED THAT THE ASSUMPTION O F THE AO THAT SINCE THE LANDS WERE SOLD TO REAL ESTATE COMPANIES AND FIRMS, THE NATURE OF LAND IS NOT AGRICULTURAL, IS CONTRARY TO LAW. THE CIT (A) AFTE R CONSIDERING THE CONTENTIONS RAISED BY THE ASSESSEE CAME TO A CONCLUSION THAT THE LANDS ARE SITUATED MORE TH AN 50 KM AWAY FROM HYDERABAD AND IT HAS BEEN CLASSIFIED B Y THE REVENUE DEPARTMENT AS AGRICULTURAL LANDS, THE S UB- REGISTRARS OFFICE HAS ALSO CLASSIFIED THEM AS AGRI CULTURAL LANDS. THE CIT (A) FURTHER RECORDED A FINDING THAT THE AO IN HIS ORDER HAS NOT BROUGHT A SINGLE EVIDENCE TO S HOW THAT THE LANDS IN QUESTION WERE DEVELOPED, PLOTTED AND THEN SOLD BY THE APPELLANT. JUST BECAUSE HE LANDS WERE SOLD TO REAL ESTATE COMPANIES DOES NOT MEAN THAT TH E ASSESSEE HAD DEVELOPED IT AS COMMERCIAL LAND AND TH EN SOLD IT. THE CIT (A) FURTHER OBSERVING THAT THE AS SESSEE AS DOING AGRICULTURAL OPERATIONS ON THE LAND AND WA S DISCLOSING AGRICULTURAL INCOME FROM YEAR TO YEAR, T HERE WAS NO BASIS FOR THE AO TO HOLD THAT THE LANDS SOLD WERE NOT AGRICULTURAL LAND. ON THE AFORESAID CONSIDERATI ON, HE DELETED THE ADDITION OF RS.1,07,59,558/-. 26. THE LEARNED DR SUBMITTED BEFORE US THAT THE ASSESSEE DID NOT CARRY OUT ANY AGRICULTURAL OPERATI ONS ON THE LAND. IT WAS CONTENDED FURTHER THAT THE ASSESSE E ALL ALONG WAS STAYING AT HYDERABAD THAT APART THE ASS ESSEE ADMITTED THAT HE IS ENGAGED IN THE BUSINESS OF 23 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. DEVELOPING AND PLOTTING LANDS AND THEREAFTER SELLI NG THEM. THE LEARNED DR FURTHER SUBMITTED THAT THE SA LE OF LAND TO THE REAL ESTATE COMPANIES IS ALSO A CRUCIAL FACTOR TO DETERMINE THE INTENTION OF THE ASSESSEE AND ALSO THE NATURE AND CHARACTER OF THE LAND. 27. THE LEARNED AR FOR THE ASSESSEE JOINING ISSUE, SUBMITTED BEFORE US THAT THE ASSESSEE WAS HOLDING T HE LAND FOR THE PERIOD OF MORE THAN 10 YEARS AND WAS A LSO CULTIVATING THE LAND EVER SINCE THEY WERE ACQUIRED. THE ASSESSEE IS ALSO OFFERING AGRICULTURAL INCOME FROM YEAR TO YEAR. THE LEARNED AR CONTENDED THAT THE AO HAS MAD E THE ADDITION PURELY ON CONJECTURES AND SURMISES BY ASSUMING THAT THE ASSESSEE HAS SOLD THE LAND TO REA L ESTATE COMPANIES AFTER DEVELOPING AND PLOTTING THEM . THE LEARNED AR SUBMITTED THAT THE NATURE AND CHARTE R OF THE LAND HAVE BEEN RECORDED AS AGRICULTURAL LAND IN THE REVENUE RECORDS AND PATTADAR PASS BOOKS. IT IS THE FURTHER CONTENTION OF THE LEARNED AR THAT THE LANDS SOLD BEING AGRICULTURAL LAND, IT CANNOT BE TREATED AS CA PITAL ASSET U/S 2(14) OF THE ACT AND GAINS FROM THE SALE OF LAND CANNOT BE BROUGHT TO TAX UNDER ANY HEAD OF INCOME INCLUDING BUSINESS INCOME. THE LD. AR SUBMITTED T HAT THE ASSESSEE HAS SATISFIED ALL THE TESTS LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIDDHARTH J. DESAI 139 ITR 628 AND ALSO THE HONBLE SUPREME COURT IN THE CASE OF SARIFABIBI MOHAMMED 24 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. IBRAHIM VS. CIT (204 ITR 631). THE LEARNED AR FUR THER RELIED UPON THE DECISIONS OF THE ITAT, HYDERABAD BE NCH IN THE CASE OF DCIT VS. MISS K. RADHIKA ITA NO. 41 6 TO 418/HYD/2011 AND IN THE CASE OF RAJPUSHPA PROPERIES & OTHERS VS. ACIT, ITA NO. 1761/HYD/2011 DATED 18- 5- 2012. 28. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND HAVE ALSO CONSIDERED WRITTEN SUBMISSION OF THE LEARNED AR. IT IS AN UNDISPUTED FACT THAT DURING THE RELEVANT FINANCIAL YEAR, THE ASSESS EE HAD SOLD LAND TO THE EXTENT OF AC.67.27 CENTS SITUATED AT DIFFERENT PLACES OF MALKAPUR, CHOUTUPPAL MANDAL OF NALGONDA DISTRICT. IT HAS BEEN THE CLAIM OF THE AS SESSEE THAT THE LANDS SOLD WERE AGRICULTURAL LAND AND THER EFORE IS NOT A CAPITAL ASSET AS DEFINED U/S 2(14) OF THE ACT. THE CLAIM OF THE ASSESSEE HAS BEEN SINCE THE LANDS ARE SITUATED MORE THAN 50KM AWAY FROM HYDERABAD MUNICIPALITY AND HAVE BEEN RECORDED AS AGRICULTURAL LAND IN THE REVENUE RECORDS AS WELL AS THE PATTADAR PASS BOOK, THEY HAVE TO BE TREATED AS AGRICULTURAL LANDS ONLY. IT HAS BEEN THE FURTHER CLAIM OF THE ASSESSEE THAT THE AS SESSEE HAS BEEN DECLARING AGRICULTURAL INCOME FROM THE AGRICULTURAL OPERATIONS CARRIED OUT IN THOSE LAND. HOWEVER, AS CAN BE SEEN FROM THE ASSESSMENT ORDER, THE ASSESSEE DID NOT PRODUCE ANY EVIDENCES WITH REGARD TO 25 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. THE AGRICULTURAL INCOME EARNED NOR ANY BILLS OR VO UCHERS ARE PRODUCED WITH REGARD TO THE EXPENSES INCURRED TOWARDS EARNING OF AGRICULTURAL INCOME. IT IS ALSO A FACT THAT THE ASSESSEE HAS CLAIMED LAND DEVELOPMENT EXPENSES BUT NO DETAILS ARE AVAILABLE ON RECORD AS TO FOR DEVELOPMENT OF WHICH LAND, THESE EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE. IT IS ALSO A FACT THAT TH E LAND SOLD WERE SCATTERED OVER DIFFERENT PLACES IN VILLAG E MALKAPUR. NO MATERIAL IS AVAILABLE ON RECORD TO IN DICATE WHETHER AGRICULTURAL OPERATIONS WERE CARRIED ON OV ER ALL THE LANDS SOLD BY THE ASSESSEE AND WHAT SHOULD BE T HE AVERAGE ANNUAL YIELD FROM CULTIVATION OF SUCH LAND AND WHAT IS THE REASONABLE INCOME FROM SALE OF PRODUC E CULTIVATED IN SUCH AGRICULTURAL LAND. THE AO HAS N OT MADE ANY ENQUIRIES IN THIS REGARD. THE CIT (A) HAS ALSO ACCEPTED THE CONTENTION OF THE ASSESSEE SIMPLY ON T HE GROUND THAT THE LANDS HAVE BEEN RECORDED AS AGRICUL TURAL LANDS IN REVENUE RECORDS AND THE ASSESSEE HAS SHOWN AGRICULTURAL INCOME IN ITS RETURN. HOWEVER, THE CI T (A) HAS FAILED TO EXAMINE WHETHER THE AGRICULTURAL INCO ME SHOWN BY THE ASSESSEE WILL BE THE EXPECTED INCOME F ROM CULTIVATION OF 67 ACRES OF LAND OR NOT. NEITHER T HE CIT (A) NOR THE AO HAS EXAMINED THIS ASPECT IN THE LIGH T OF GUIDELINES LAID DOWN BY THE HONBLE SUPREME COURT I N THE CASE OF SARIFABIBI MOHAMED IBRAHIM(SUPRA). IT IS A FACT ON RECORD THAT APART FROM TAKING SHELTER BEING THE FACT THAT SOME AMOUNT OF AGRICULTURAL INCOME WAS DISCLOS ED IN 26 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. THE RETURN OF INCOME FILED FOR THE EARLIER ASSESSME NT YEAR, THE ASSESSEE HAS FAILED TO PRODUCE ANY OTHER EVIDENCE TO SUBSTANTIATE THE CLAIM THAT AGRICULTURA L OPERATIONS WERE CARRIED ON BY HIM IN ALL THE LAND S OLD BY HIM. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THA T THE ENTIRE 67 ACRES OF LAND WAS UNDER CULTIVATION BEFORE IT WAS SOLD BY THE ASSESSEE. IT HAS NOT BEEN ENQUI RED INTO AS TO WHETHER THE INCOME DECLARED FROM AGRICUL TURAL OPERATIONS CARRIED ON IN THE LAND SOLD BORE ANY RAT IONALE PROPORTION TO THE EXTENT OF THE LAND HOLDING. ANOT HER MATERIAL FACT WHICH THE AO HAS DEALT WITH BUT HAS COMPLETELY BEEN OVERLOOKED BY THE CIT (A) IS THAT F OR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE HAS NOT SHOWN ANY AGRICULTURAL INCOME. THEREFORE, IT HAS T O BE ASCERTAINED THAT AS ON THE DATE OF SALE WHETHER THE LANDS IN QUESTION WERE PUT TO AGRICULTURAL USE OR NOT. I T HAS NOT BEEN ASCERTAINED AS TO WHETHER THE LANDS IN QU ESTION EVEN THOUGH RECORDED AS AGRICULTURAL LAND IN REVENU E RECORDS BUT ACTUALLY WHETHER IT WAS USED FOR AGRIC ULTURAL PURPOSES OR NOT. IT HAS ALSO NOT BEEN ASCERTAINED WHETHER AN AGRICULTURIST WOULD HAVE PURCHASED THE LAND FOR AGRICULTURAL PURPOSES AT THE PRICE AT WHICH THE LAND WAS SOLD AND WHETHER THE ASSESSEE WOULD HAVE EVER SOLD THE LAND VALUING IT AS A PROPERTY YIELDING AGRICULT URAL PRODUCE ON THE BASIS OF ITS YIELD. THESE ASPECTS H AVE NOT AT ALL BEEN EXAMINED EITHER BY THE AO OR BY THE CIT (A) WHILE COMING TO THEIR RESPECTIVE CONCLUSIONS. IN TH E 27 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. AFORESAID FACTUAL SITUATION, WE ARE OF THE VIEW THA T NECESSARY FACTS ARE REQUIRED TO BE BROUGHT ON RECOR D FOR COMING TO A DEFINITE CONCLUSION AS TO WHETHER THE L AND IN QUESTION IS ACTUALLY AGRICULTURAL LAND OR NOT. WE THEREFORE CONSIDER IT PROPER TO RESTORE THE MATTER BACK TO THE AO WHO SHALL EXAMINE THE ISSUE AFRESH AFTER CAL LING FOR NECESSARY INFORMATION NOT ONLY FROM THE ASSESSE E BUT HE MAY ALSO CONDUCT INDEPENDENT ENQUIRY KEEPING IN MIND THE TESTS LAID DOWN BY THE HONBLE SUPREME COU RT IN THE CASE OF SARIFABIBI MOHAMED IBRAHIM (SUPRA ) AND THE ORDER PASSED BY THE ITAT, PUNE BENCH IN ITA NO.1492/PN/2008 IN THE CASE OF MRS. SUNANDA U. CHAUDHARY VS. ITO WHERE THE HONBLE ACCOUNTANT MEMB ER IS THE AUTHOR OF THE ORDER. THE AO SHALL PASS A REA SONED ORDER AFTER AFFORDING A REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. THE GROUND RAISED BY THE DEPARTMENT IS SET ASIDE. 29. GROUND NO.4 RELATES TO AN ADDITION OF RS.2,50,0 00 MADE BY THE AO WHICH WAS DELETED BY THE CIT (A). I N THE ASSESSMENT ORDER, THE AO FOUND A DIFFERENCE BET WEEN THE ADVANCES PAID TO LANDLORDS AS APPEARING IN THE BALANCE-SHEET AND IN THE LEDGER EXTRACTS. HE ADDED DIFFERENTIAL AMOUNT OF RS.2,50,000/- BY OBSERVING T HAT THE ASSESSEE HAS FAILED TO EXPLAIN THE DISCREPANCY. THE CIT (A) DELETED THE ADDITION BY OBSERVING THAT THE AO 28 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. HAVING NOT FOUND ANY UNEXPLAINED CREDIT WAS NOT JUS TIFIED IN MAKING THE ADDITION WITHOUT EVEN VERIFYING THE E NTRIES. 30. WE HAVE HEARD RIVAL SUBMISSIONS AND EXAMINED TH E MATERIALS ON RECORD. IT IS SEEN THAT THE AO HAS MA DE THE ADDITION ONLY BECAUSE OF THE DIFFERENCE ON ACCOUNT OF SUNDRY DEBTORS. ANY DISCREPANCY BY ITSELF CANNOT B E A GROUND FOR ADDITION WITHOUT PROVING THE FACT THAT S UCH DISCREPANCY HAS RESULTED IN AN UNDISCLOSED INCOME. AS HAS BEEN OBSERVED BY THE CIT (A) THE AO HAS NOT ALL EGED THAT THERE ARE ANY UNEXPLAINED CREDITS ON THIS ACCO UNT. IN THESE CIRCUMSTANCES, WE AGREE WITH THE FINDINGS OF THE CIT (A) THAT THE ADDITION OF RS.2,50,000/- IS UN-CA LLED FOR. HENCE THE GROUND RAISED BY THE REVENUE ON THI S ISSUE IS REJECTED/DISMISSED. 31. GROUND NO.5 RELATES TO THE DISALLOWANCE OF RS.1 0 LAKHS MADE BY THE AO WHICH WAS DELETED BY THE CIT ( A). BRIEF FACTS OF THIS ISSUE ARE WHILE EXAMINING THE L EDGER ACCOUNT RELATING TO M/S BALAJI REAL ESTATES, THE AO FOUND THAT THE CUSTOMERS ADDRESSES WERE NOT NOTED IN THE LEDGER. HE THEREFORE ASKED TO FURNISH FULL DETAILS REGARDING THE TRANSACTIONS MADE WITH THE SAID FIRM. AS ALLEGED BY THE AO IN THE ABSENCE OF ANY SUBSTANTIVE REPLY FROM THE ASSESSEE, HE DISALLOWED AN AMOUNT OF RS.10 LAKHS FROM THE TOTAL TRANSACTIONS OF RS.1,27,46,875 /- ON THE GROUND THAT THE ASSESSEE MIGHT HAVE MADE UNREGISTERED TRANSACTIONS AND EARNED PROFIT WHICH W AS 29 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. NOT DISCLOSED TO THE INCOME-TAX DEPARTMENT. THE CI T (A) DELETED SUCH ADDITION ON THE GROUND THAT IT HAS BEEN MADE PURELY ON CONJECTURES AND SURMISES WITHOUT BRI NG ANY SUPPORTING MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE IN FACT HAS DONE ANY UNREGISTERED TRANSACT ION AND EARNED PROFITS. 32. WE HAVE HEARD RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT OU T OF TOTAL TRANSACTION OF RS.1,27,46,875, THE AO HAS MAD E AD HOC DISALLOWANCE OF RS. 10 LAKHS BY OBSERVING THAT THE ASSESSEE MIGHT HAVE MADE UNREGISTERED TRANSACTIONS. THE AO HAS NOT BROUGHT EVEN A SINGLE INSTANCE OF A N UNREGISTERED TRANSACTION MADE BY THE ASSESSEE. THE AO HIMSELF WAS NOT CERTAIN WHETHER THE ASSESSEE IN FAC T HAS MADE UNREGISTERED TRANSACTION THEREFORE HE HAS USED THE WORD MIGHT HAVE. WHEN THE AO IS ACCEPTING ALMOST 90% OF THE TRANSACTION, THERE IS NO JUSTIFICATION O N HIS PART TO MAKE A DISALLOWANCE OF RS.10 LAKHS ON PURE CONJECTURES AND SURMISES. WE THEREFORE UPHOLD THE ORDER OF THE CIT (A) AND DISMISS THE GROUND RAISED BY THE REVENUE. 33. GROUND NO.6 PERTAINS TO DELETION BY THE CIT (A) OF AN AMOUNT OF RS.30 LAKHS MADE TOWARDS UNDISCLOSED INVESTMENT. FACTS OF THE ISSUE ARE THE AO WHILE 30 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. EXAMINING THE BOOKS OF ACCOUNTS CAME ACROSS THE TRANSACTIONS PERTAINING TO INVESTMENT AMOUNTING TO RS.30 LAKHS. THE AO ADDED THE AMOUNT OF RS.30 LAKHS BY OBSERVING THAT THE ASSESSEE COULD NOT EXPLAIN WHERE THE INVESTMENTS WERE MADE AND THE PURPOSE OF INVESTMENT . THE CIT (A) WHILE DEALING WITH THE ISSUE FOUND THAT THE AO HAS NOT FOUND ANY DEFECT OR DEFICIENCY IN THE B OOKS OF ACCOUNTS AND THE INVESTMENTS WERE MET OUT OF THE AMOUNT REFLECTED IN THE BOOKS OF ACCOUNTS. THE CI T (A) THEREFORE DELETED THE ADDITION ON THE REASONING THA T WHEN ACCOUNTED FOR MONEY WAS SPENT FOR CERTAIN INVESTMENT, NO ADDITION CAN BE MADE. 34. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS THE CONTENTION OF THE L EARNED AR THAT THE INVESTMENT WAS MADE BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUE TO M/S KINNERA CONSTRUCTIONS. A COPY OF THE LEDGER EXTRACT WAS AL SO BROUGHT TO OUR NOTICE. HOWEVER, THE AO DOES NOT DIS PUTE THE FACT THAT THE INVESTMENT WAS MADE FROM AVAILAB LE SOURCE AS PER THE BOOKS OF ACCOUNTS AND NOTHING WAS FROM OUTSIDE THE BOOKS AND THE ASSESSEE BEFORE US H AS ALSO DEMONSTRATED THAT THE PAYMENT WAS MADE TO M/S KINNERA CONSTRUCTIONS THROUGH ACCOUNT PAYEE CHEQUE. SINCE THE INVESTMENT HAS BEEN MADE OUT OF ACCOUNTED FOR MONEY, ADDITION MADE BY THE AO WAS WITHOUT ANY BASI S. 31 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI. IN THE AFORESAID CIRCUMSTANCES, THE CIT (A) WAS JUS TIFIED IN DELETING THE ADDITION. WE THEREFORE DISMISS THE GROUND RAISED BY THE REVENUE. 35. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS ALS O PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 07-09-2012. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 7 TH SEPT., 2012. COPY TO:- 1) SHRI RAJENDRA PRASAD UPPALAPATI, 34/A, RR TOWERS , CA LANE, HYDERABAD. 2) DCIT-5(1), 5 TH FLOOR, AAYAKAR BHAVAN, HYDERABAD. 3) CIT (A)-V, HYDERABAD. 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. JMR* 32 ITA NOS. 637 AND 738 OF 2011 RAJENDRA PRASAD UPPALAPATI.