Aparna Duddukunta, Hyderabad, Hyderabad V. DCIT, CC-6 (now CC-1(3), Hyderabad, Hyderabad

ITA 917/HYD/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7017 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 31-07-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Capital asset; Gift; Business income; Search and seizure; Additional evidence; Cost of acquisition; TDS
• Section: 2(14); 132

Judgement Text

ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 1 OF 16 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS.917 & 918/HYD/2017 ASSESSMENT YEARS: 2011-12 & 2012-13 SMT. APARNA DUDDUKUNTA HYDERABAD PAN:AEGPD3262B VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 6 (NOW CC-1(3) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI S. RAMA RAO REVENUE BY : SRI Y.V.S.T. SAI, CIT-DR DATE OF HEARING: 01/08/2019 DATE OF PRONOUNCEMENT: 29/10/2019 ORDER PER SMT. P. MADHAVI DEVI, J.M. BOTH ARE ASSESSEES APPEALS FOR THE A.YS 2011-12 & 2012-13 AGAINST THE COMMON ORDER OF THE CIT (A)-11, HYDERABAD, DATED 30.03.2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, I NDIVIDUAL, IS THE WIFE OF SRI D. SREEDHAR REDDY, MD OF SAI SUD HIR INFRASTRUCTURES LTD, HYDERABAD. THE ASSESSEE FILED HER RETURN OF INCOME FOR THE A.Y 2011-12 ON 01.09.2012 DECLARING AN INCOME OF RS.1,73,461/-. FOR THE A.Y 2012-13, SHE FILED HER R ETURN OF INCOME ADMITTING AN INCOME OF RS.1,53,85,950/-. ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 2 OF 16 3. THERE WAS A SEARCH AND SEIZURE OPERATION U/S 132 OF THE I.T. ACT IN THE GROUP CASES OF M/S. SAI SUDHIR INFRASTRUCTURES LTD ON 30.11.2011 AND SMT. D. APARNA REDDY, THE ASS ESSEE HEREIN WAS ALSO COVERED U/S 132 ON THE SAID DATE. C ONSEQUENT TO SEARCH AND SEIZURE OPERATION, A NOTICE U/S 153C, DA TED 29.11.2012 WAS ISSUED TO THE ASSESSEE CALLING FOR R ETURN OF INCOME FOR THE A.YS 2006-07 TO 2011-12. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED HER RETURN OF INCOME U/S 153C FOR THE A.Y 2011-12ON 24.12.2013 ADMITTING AN INCOME OF RS. 1,73,460/- AND ALSO FILED THE RELEVANT DETAILS BEFORE THE AO. THE AO OBSERVED THAT DURING THE RELEVANT FINANCIAL YEAR, THE ASSESS EE HAS SOLD AGRICULTURAL LAND ADMEASURING 44.15 ACRES SITUATED AT GRAMADATLA VILLAGE, T. VEERAPURAM PANCHAYAT, RAYADU RGA MANDAL, ANANTAPUR DISTRICT BY ENTERING INTO A LONG TERM LEASE FOR 99 YEARS WITH M/S. SAI SUDHIR ENERGY LTD AND RECEIV ED A CONSIDERATION OF RS.10,67,53,833/- AND THAT THE SAI D AMOUNT IS CLAIMED AS NOT TAXABLE SINCE THE ASSET SOLD IS AN A GRICULTURAL LAND. 4. ON VERIFYING THE MATERIAL SEIZED AND THE DETAILS SUBMITTED, THE AO OBSERVED THAT THE ASSESSEE HAD PU RCHASED THESE LANDS, WHICH ARE CLAIMED TO BE AGRICULTURAL I N NATURE, FOR A CONSIDERATION OF RS.61,81,000/- AND THE SOURCES FOR THE SAME WAS SAID TO BE OUT OF THE AMOUNT RECEIVED FROM HER HUSB AND. WHEN ASKED TO FURNISH THE CONFORMATION, THE ASSESSEE COU LD NOT PRODUCE THE SAME AND THEREFORE, THE AO CONCLUDED TH AT THE INVESTMENT IS UNEXPLAINABLE AND HE BROUGHT THE INVE STMENT OF RS.61,81,000/- TO TAX U/S 69 OF THE I.T. ACT AS UNE XPLAINED INVESTMENT. ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 3 OF 16 5. THEREAFTER, HE PROCEEDED TO CONSIDER THE NATURE OF INCOME ARISING FROM THE ALLEGED AGRICULTURAL LAND. HE OBSERVED THAT IN THE COMPUTATION STATEMENT FOR THE A.Y UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN AGRICULTURAL INCOME OF RS.80,000/-. THE ASSESSEE WAS ASKED TO PRODUCE THE EVIDENCE IN RESPECT OF AGRICULTURAL INCOME ALONG WITH THE DOCUM ENTARY EVIDENCE IN RESPECT OF THE OWNERSHIP OF AGRICULTURA L LAND. IN RESPONSE TO THE SAME, THE ASSESSEE SUBMITTED THAT H ER MOTHER-IN- LAW OWNED 16.31 ACRES OF MANGO GARDEN AS PART OF HU F PROPERTY. OUT OF THE INCOME FROM THE MANGO GARDEN DURING THE YEAR, (THE ASSESSEE HAS RECEIVED A SUM OF RS.80,000/-) WHICH H AS BEEN REFLECTED IN HER RETURN AS AGRICULTURAL INCOME. OBS ERVING THAT THE ASSESSEE HAS NOT ADDUCED AN Y EVIDENCE TO PROVE THA T THE INCOME WAS RECEIVED FROM HUF EXCEPT STATING TO BE SO, THE AO TREATED THE AGRICULTURAL INCOME RETURNED BY THE ASSESSEE AS IN COME FROM OTHER SOURCES AND BROUGHT IT ALSO TO TAX ALONG WIT H THE ADDITIONAL EVIDENCE IN PROOF OF THE LOAN TAKEN FROM THE ASSESS EES HUSBAND OF RS.65.00 LAKHS. AGGRIEVED, THE ASSESSEE PREFERRED A N APPEAL BEFORE THE CIT (A). THE CIT (A) CALLED FOR A REMAND REPORT FROM THE AO, WHO IN THE REMAND REPORT, CONFIRMED THAT RS.1.0 0 CRORE WAS TRANSFERRED FROM THE BANK A/C OF M/S. SAI SUDHIR IN FRASTRUCTURE LTD INTO THE A/C OF SHRI D. SREEDHAR REDDY WHO IN T URN (BY WAY OF RTGS) TRANSFERRED RS.65.00 LAKHS TO THE ASSESSEES A/C AND THAT THE VENDORS OF THE LAND HAVE BEEN PAID THROUGH THIS BANK A/C ONLY. TAKING THE SAME INTO CONSIDERATION, THE CIT ( A) HAS ACCEPTED THE RECEIPT OF MONEY FROM SHRI D. SREEDHAR REDDY AN D THEREFORE, DELETED THE ADDITION OF RS.61,81,000/-. 6. THEREAFTER, THE CIT (A) OBSERVED THAT DURING THE FINANCIAL YEAR RELEVANT TO THE A.Y 2012-13, THE AO HAS BROUGHT TO ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 4 OF 16 TAX A SUM OF RS.10,29,90,809/- AS AN ASCERTAINABLE BUSINESS RECEIPTS RELATABLE TO THE TRANSFER OF 44.15 ACRES O F LAND TO M/S. SAI SUDHIR ENERGY LTD AND THAT THE AOS FINDINGS IN THE MATTER ARE CONTAINED AT S.NO.4 OF PAGE 2 TO PAGE 6 OF THE ASSE SSMENT ORDER. HE OBSERVED THAT THE ASSESSEE ACQUIRED 45.15 ACRES OF LAND AFTER EXECUTING THE REGISTERED SALE DEEDS DATED 17.1.2011 FOR A TOTAL CONSIDERATION OF RS.61,81,000/-. THE ASSESSEE THEN ENTERED INTO A LEASE AGREEMENT DATED 16.3.2011 WITH M/S. SAI SUDHI R ENERGY LTD (SSEL IN SHORT) FOR A LEASE RENT OF RS.2000/- PER M ONTH PER ACRE FOR A PERIOD OF 99 YEARS AND THE TERMS AND CONDITIO NS OF THE LEASE AGREEMENT ARE AS UNDER: 9.1 THE ASSESSEE ACQUIRED 44.15 ACRES OF LAND AT GRAMADATLA VILLAGE, T.VEERAPURAM PANCHAYAT IN ANANT APUR DISTRICT FROM SIX VENDORS AFTER EXECUTING REGISTERE D SALE DEEDS DT. 17/01/2011 FOR A TOTAL CONSIDERATION OF RS.61,8 1,000/-. THIS PROPERTY IS THE SAME PROPERTY THAT IS DISCUSSE D EARLIER IN THIS ORDER AT PARA NO. 7 ABOVE. THE ASSESSEE THEN E NTERED INTO A LEASE AGREEMENT DT.16/03/2011 WITH SS EL. A COPY OF THIS LEASE DEED IS AVAILABLE IN THE PAPER BOOK FROM PAGE 263 TO 265. IN THIS AGREEMENT, WHERE THE LESSEE SSEL IS REPRESENTED BY ITS CHIEF OPERATING OFFICER SRI P. U DAYA SANKAR, THE CONSIDERATION AGREED FOR THE LEASE IS R EDUCED TO WRITING AS UNDER: 'A) THE LESSEE HAS. AGREED TO PAY LEASE RENT OF RS.2,5 00/- (RUPEES TWO THOUSAND FIVE HUNDRED ONLY) PER MONTH P ER ACRE. B) THE LESSEE HAS AGREED TO PAY THE LEASE RENT FOR 99 YEARS IN ADVANCE AT THE TIME OF EXECUTION OF THE LEASE DEED, AMOUNTING TO RS.13,11,25,500/- (RUPEES THIRTEEN CROR ES ELEVEN LAKHS TWENTY FIVE THOUSAND FIVE HUNDRED ONLY ). C) THE LESSEE FURTHER AGREED TO ALLOT EQUITY SHARES OF M/S. SAI SUDHIR ENERGY LTD. TO THE LESSOR OR TO THE FAMILY MEMBERS OF THE LESSOR AS RECOMMENDED BY LESSOR TO THE EXTENT OF NUMBER OF EQUITY SHARES OPTED BY THE LESSOR AND ADJUST THE SHARE SUBSCRIPTION AMOUNT AGAINST LEASE RENT PAYABLE TO LESSOR. D) IF ANY LEFTOVER AMOUNT OVER AND ABOVE THE NUMBER OF EQUITY SHARES ALLOTTED, THE LESSEE WILL PAY BY WAY O F CASH TO THE LESSOR. ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 5 OF 16 E) THE LESSEE HAS AGREED TO ALLOT 4~0~923 SHARES AT R S.10/-- EACH BEFORE 31ST MARCH, 2011 AND THE BALANCE 48,03,9 22/- SHARES AT RS.10/- EACH AFTER 1ST APRIL, 20111 TOWARD S LEAST RENT. F) THE POSSESSION OF THE LAND WILL BE HANDED OVER TO THE LESSEE IMMEDIATELY AFTER EXECUTION OF THE LEASE DEED ' 7. SUBSEQUENTLY ON 17.3.2011, A SUPPLEMENTARY LEAS E DEED TO THE ORIGINAL LEASE DEED WAS ENTERED INTO ON 16.03.2011. IN THIS AGREEMENT ALSO, THE LESSEE COMPANY WAS REPRESE NTED BY ITS CEO SHRI P. UDAY SHANKAR AND THE TERMS AND CONDITIO NS ARE AS UNDER: 9.1.1 SUBSEQUENTLY, ON 17/03/2011 A SUPPLEMENTARY LEASE DEED TO THE ORIGINAL LEASE DEED DT.16/03/2011 WAS ENTERED INTO. IN THIS AGREEMENT ALSO THE LESSEE COM PANY IS REPRESENTED BY ITS COO SRI P UDAYA SANKAR. THE LEAS E CONSIDERATION REDUCED TO WRITING 1 READS AS UNDER: A) THE LESSEE HAS AGREED TO PAY LEASE RENT OF RS.24, 434/- (RUPEES TWENTY-FOUR THOUSAND FOUR HUNDRED AND TWENT Y- FOUR ONLY) PER ANNUM PER ACRE. B) THE LESSEE HAS AGREED TO PAY THE LEASE RENT FOR 99 YEARS IN ADVANCE AT THE TIME OF EXECUTION OF THE LEASE DEED, AMOUNTING TO RS.10,67,53,833/- (RUPEES TEN CRORES S IXTY I SEVEN LAKHS FIFTY-THREE THOUSAND EIGHT HUNDRED AND THIRTY-THREE ONLY). C) THE LESSEE AND LESSOR FURTHER AGREED THAT THE CONSIDERATION MENTIONED IN SUB-CLAUSE (B) ABOVE RS.10,67,53,833/- SHALL BE DISCHARGED BY ISSUE OF 9 6,07- 845/- NO EQUITY SHARES (FACE VALUE OF RS.L0/-EACH) OF M/S. SAI SUDHIR ENERGY LTD TO THE LESSOR AT ITS FACT VALUE A FTER DEDUCTION OF TDS AMOUNT OF RS.L,06, 75,383/-. D) THE LESSEE HAS AGREED THAT OUT OF TOTAL 96,07-845/- EQUITY SHARES MENTIONED IN 'SUB CLAUSE C' ABOVE 48,03, 923/ - EQUITY SHARES SHALL BE ALLOTTED BY 31 ST MARCH, 2011 AND THE BALANCE 48,03,922 EQUITY SHARES AFTER 1 ST APRIL 2011 TOWARDS LEASE RENT ON A WRITTEN APPLICATION BY THE LESSOR . E) INCOME TAXES SHALL BE DEDUCTED FROM THE TOTAL CONSIDERATION AND WILL BE DEBITED TO THE LESSOR AT AP PLICABLE RATES. F) THE POSSESSION OF THE LAND WILL BE HANDED OVER TO THE LESSEE IMMEDIATELY AFTER EXECUTION OF THE LEASE DEED I. E. BEFORE MARCH 31,2011. ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 6 OF 16 8. IN KEEPING WITH THE ABOVE AGREEMENTS, THE LESSEE COMPANY, SSEL ALLOTTED 48,03,923 SHARES WITH A FACE VALUE OF RS.10/- VALUED AT RS.4,80,39,230/- ON 28.03.2011 AN D WAS ALLOTTED THE REMAINING 48,03,923 SHARES VALUED AT RS.4,80,39,230/- ON 2.4.2011. AN AMOUNT OF RS.1,06, 75,383/- WAS ALSO RETAINED TOWARDS TDS. THUS, THE CIT (A) CO NCLUDED THAT THE ASSESSEE HAS RECEIVED RS. 1,06,75,383/- IN WHAT WAS RECORDED AS ADVANCE OF THE RENTAL INCOME ATTRIBUTABLE TO 99 YEARS LEASE RENTAL RECEIVABLE IN RESPECT OF 44.15 ACRES OF LAND AT GRAMADATLA VILLAGE. 9. THE CIT (A) ALSO OBSERVED THAT SUBSEQUENTLY ON 2.7.2011, ANOTHER LEASE DEED WAS PREPARED WHEREBY T HE ASSESSEE AGREED TO LEASE 44.15 ACRES OF LAND TO THE SAME LES SOR, SSEL, AND THAT THE LEASE DEED IS REGISTERED AS DOCUMENT NO.18 00/2011 WITH THE SUB REGISTRAR, RAIDURG. HE OBSERVED THAT THE LE SSEE COMPANY WAS REPRESENTED BY ASSESSEES HUSBAND SHRI D. SREED HAR REDDY, WHO IS ALSO A DIRECTOR IN THE COMPANY AND AS PER TH E LEASE FOR 99 YEARS COMMENCING FROM 1.4.2011 TO 31.03.2110, THE T ERMS AND CONDITIONS ARE AS UNDER: A) THE LESSEE HAS AGREED TO PAY LEASE RENT OF RS.24,424/- (RUPEES 24,424/- (RUPEES TWENTY FOUR THOUSAND FOUR HUNDRED AND TWENTY FOUR ONLY) PER ANNUM. NO ADVANCE PAID. B) THE LESSEE HAS AGREED TO PAY THE LEASE RENT FOR 99 YEARS IN ADVANCE AT THE TIME OF EXECUTION OF THE LE ASE DEED AMOUNTING TO RS.24,17,976/- (RUPEES TWENTY FOUR LAKHS SEVENTEEN THOUSAND NINE HUNDRED AND SEVENTY-SIX ONLY) AND THE LESSOR HEREBY ACKNOWLEDGE THE RECEIPT OF THE SAME. C) INCOME TAXES SHALL BE DEDUCTED FROM THE TOTAL CONSIDERATION AND WILL BE DEBITED TO THE LESSOR AT APPLICABLE RATES. ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 7 OF 16 10. SUBSEQUENTLY, ON 8.7.2011, THE ASSESSEE EXECUTE D A REGISTERED SALE DEED VIDE DOCUMENT NO.1883/2011 IN FAVOUR OF THE ASSESSEE AS LESSEE COMPANY SSEL, AND THE CONSIDERAT ION IS MENTIONED AT RS.24,17,976/- PAID BY CHEQUE NO.52742 2 DATED 8.7.2011. AGAINST THIS BACKDROP OF FACTS, THE AO HA D TREATED THE AGGREGATE VALUE OF THE SHARES RECEIVED AT RS.10,67, 53,833/- AND THE SALE CONSIDERATION OF RS.24,17,976 AS THE CONSI DERATION RECEIVED AND AFTER REDUCING THE SAME BY WAY OF COST OF ACQUISITION OF THE LAND AT RS.61,81,000/-, THE BALANCE OF AMOUN T OF RS.10,29,90,809/- AS TREATED AS TAXABLE INCOME. THE AO ALSO RELIED UPON THE STATEMENT OF THE M.D OF THE COMPANY SHRI D. SREEDHAR REDDY, RECORDED DURING THE COURSE OF SEARC H U/S 132(4) ON 29.12.2011, WHEREIN HE STATED THAT THE SALE CONS IDERATION OF RS.10,67,53,833/- FOR THE SALE OF 44.15 ACRES OF LA ND TO M/S. SSEL IS IN THE FORM OF ALLOTMENT OF EQUITY SHARES A ND RS.24,17,976/- WAS BY WAY OF CHEQUE/DD AND THE ASSE SSEE DID NOT PAY ANY ADVANCE TAX TILL THE DATE OF SEARCH AND THAT HE HAS ADMITTED THE INCOME OF RS.10,29,90,809/- AS INCOME FOR THE FINANCIAL YEAR 2011-12. SINCE THE INCOME ADMITTED D URING THE COURSE OF SEARCH WAS NOT DISCLOSED IN THE RETURN OF INCOME FILED BY THE ASSESSEE SUBSEQUENT TO THE SEARCH, THE AO REQUI RED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE LAND SHOULD BE EXEMPTED FROM CAPITAL GAIN TAX AND AS TO WHY IT CANNOT BE TA XED AS BUSINESS INCOME. THE ASSESSEE STATED THAT THE LAND WAS AGRIC ULTURAL IN NATURE SINCE THE AGRICULTURAL OPERATIONS WERE CARRI ED OUT AT THE TIME OF ACQUISITION AS WELL AS AT THE TIME OF SALE AND SINCE THE LAND IS NOT WITHIN THE SPECIFIED DISTANCE, THE LAND WAS NOT A CAPITAL ASSET IN TERMS OF SECTION 2(14) OF THE I.T. ACT. IT WAS ALSO SUBMITTED THAT THE ASSESSEE WAS NOT IN THE BUSINESS OF PURCHASE AND SALE OF LAND AND THEREFORE, THE SALE OF LAND SH OULD NOT BE ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 8 OF 16 TREATED AS A BUSINESS ACTIVITY I.E. THE REAL ESTATE ACTIVITY AND THAT THERE WAS NO CAPITAL GAIN THAT WAS LIABLE TO TAX. T HE AO DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND OBSER VED THAT THE ASSESSEE HAD PURCHASED THE LAND IN JANUARY, 2011 AN D SOLD THE SAME IN JULY, 2011, I.E. WITHIN A SHORT SPAN OF SIX MONTHS AND THEREFORE, THERE WAS A PROFIT MOTIVE IN THE ACTIVIT Y OF PURCHASE AND SALE OF LAND. HE, THEREFORE, TREATED IT AS BUSINESS INCOME ASSESSABLE TO TAX IN THE FINANCIAL YEAR 2011-12 REL EVANT TO THE A.Y 2012-13 BEING THE YEAR IN WHICH THE SALE WAS REGIST ERED. 11. BEFORE THE CIT (A), THE ASSESSEE HAD STATED TH AT IF THE LEASE DEED DATED 16.3.2011 WERE TO BE CONSIDERED, T HEN ONLY THE LEASE RENTAL PERTAINING TO THE YEAR IN CONSIDERATIO N HAS TO BE BROUGHT TO TAX AND IF THE TRANSACTION IS TO BE CONS IDERED AS SALE ON 8.7.2011, THEN THE SALE CONSIDERATION ALONE I.E. 24,17,976/- CAN BE CONSIDERED AS SALE CONSIDERATION. IT WAS ALS O SUBMITTED THAT THE LAND WAS AGRICULTURAL LAND WHICH WAS SITUA TED IN THE REMOTE AREA AND THERE WAS NO INTENTION OF THE ASSES SEE TO CARRY ON ANY BUSINESS ACTIVITY AND IT WAS NOT A CAPITAL A SSET WITHIN THE MEANING OF SECTION 2(14) OF THE I.T. ACT. THE CIT ( A) CONSIDERED THE ISSUE AT LENGTH AND OBSERVED THAT AT THE TIME OF EX ECUTION OF THE LEASE DEEDS DATED 16.3.2011 AND 17.3.2011, THE LEAS E RENTALS WERE FIXED AND SUBSEQUENTLY THE LEASE WERE CONVERTE D INTO A SALE IN THE SUBSEQUENT A.Y. HE OBSERVED THAT THE ASSESSE E HAS BEEN ALLOTTED EQUITY SHARES WORTH RS.10,67,50,833/- AND ALSO RS.24,17,976/- TOWARDS THE SALE CONSIDERATION. HE A LSO OBSERVED THAT THE ASSESSEE HAD PURCHASED THE LAND AT RS.61,8 1,000/- AND SUBSEQUENTLY THE LAND WAS SOLD WITHIN SIX MONTHS FO R A CONSIDERATION OF RS.24,17,976/- AND THERE WAS NO RE ASON GIVEN FOR THE SALE AT A SUCH LOW PRICE. HE THEREFORE, WAS OF THE OPINION ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 9 OF 16 THAT THE AMOUNT RECEIVED TOWARDS THE SHARES WITHIN FINANCIAL YEAR RELEVANT TO THE A.Y 2011-12 IS TO BE TREATED AS THE INCOME OF THE ASSESSEE U/S 56(2)(VII)(C)(I) OF THE I.T. ACT AND A LSO THE TDS RETAINED BUT NOT REMITTED TO THE GOVT. A/C AMOUNTIN G TO RS.1,06,75,383/- ALSO HAS TO BE TREATED AS INCOME O F THE ASSESSEE IN THE FINANCIAL YEAR 2011-12 I.E DURING THE A.Y 20 12-13. HE ACCORDINGLY ISSUED A NOTICE FOR ENHANCEMENT OF THE INCOME. THE ASSESSEE FILED HER WRITTEN SUBMISSIONS AND AFTER CO NSIDERING THE SAME, THE CIT (A) HELD THAT FOR THE A.Y 2011-12, TH E SUM OF RS.4,80,39,230/- AND ALSO A SUM OF RS.1,06,75,383/- IS TO BE BROUGHT TO TAX AND THE BALANCE OF THE AMOUNT I.E. RS.4,80,39,220/- IS ASSESSABLE AS THE INCOME FROM O THER SOURCES U/S 56(2)(VII)(C)(I) OF THE I.T. ACT FOR THE A.Y 20 12-13. THUS, THE INCOME FOR THE A.Y 2011-12 WAS ENHANCED. WHILE THE APPEAL AGAINST THE INCOME ASSESSED FOR THE A.Y 2012-13 WAS PARTLY ALLOWED. AGAINST THIS DECISION OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US FOR BOTH THE A.YS. 12. THE AO IN THIS CASE, ALSO TREATED A SUM OF RS.8 0,000/- DECLARED BY THE ASSESSEE AS AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES AS WAS DONE IN THE A.Y 2011-12. IN AD DITION TO THE ABOVE, ANOTHER ISSUE WHICH IS INVOLVED IN THE A.Y 2 012-13 IS THE ADDITION OF RS.53,24,455/- ON ACCOUNT OF UNEXPLAINE D SOURCES FOR THE GOLD JEWELLERY FOUND AT THE TIME OF SEARCH. THE CIT (A) HAD GRANTED PARTIAL RELIEF OF RS.38,71,455/- AFTER ALLO WING THE EXTENT ON GOLD JEWELLERY IN THE HANDS OF THE ASSESSEE AND HER FAMILY MEMBERS. AGAINST THE ADDITION CONFIRMED BY THE CIT (A), THE ASSESSEE IS ALSO IN APPEAL BEFORE US. THEREFORE, TH E GROUNDS OF APPEAL FOR THE A.Y 2011-12 AND THE GROUND OF APPEAL FOR THE A.Y 2012-13 ARE GIVEN BELOW: ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 10 OF 16 A.Y 2011-12 1 THE ORDER OF THE LEARNED CIT (A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO ENHANCE THE INCOME FOR THE ASSESSMENT YEAR 2011-12. 3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE PROVIDED PROPER OPPORTUNITY BEFORE PASSING THE ORDER ENHANCING THE INCOME FOR THE YEAR UNDER CONSIDERATION, 4) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE COMPANY SAI SUDHIR ENERGY LIMITED ALLOTTED 96,07,845/- EQUITY SHARES OF THE FACE VALUE OF RS.10/- EACH WITHOUT ANY CONSIDERATION WHEN FACTS SHOW OTHERWISE. 5) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE PROVISIONS OF SEC.56(2)(VII)(C)(I) OF THE I.T.ACT ARE APPLICABLE TO THE FACTS OF THE CASE AND FURTHER ERRED IN HOLDING THAT AN AMOUNT OF RSA,80,39,230J- RECEIVED ON 31.03.2011 WOULD FORM PART OF THE INCOME OF THE APPELLANT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE SEEN THAT THE SHARES WERE NOT ALLOTTED WITHOUT ANY CONSIDERATION. 6) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO SEE THAT THE SHARES WERE ALLOTTED AGAINST CONSIDERATION AND THE BALANCE IN THE BOOKS OF ACCOUNT REMAINED PAYABLE BY THE APPELLANT TO SAI SUDHIR ENERGY LIMITED. ( 7) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE TDS OF RS.L,06,75,383J- PROVIDED IN THE NAME OF THE APPELLANT REPRESENTS THE INCOME OF THE APPELLANT WITHOUT CONSIDERING THE FACT THAT THE SAID AMOUNT DOES NOT REPRESENT THE INCOME OF THE APPELLANT. 8) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE PROVIDED OPPORTUNITY TO THE APPELLANT BEFORE THE COMMISSIONER OF INCOME- TAX (APPEALS) ENHANCED THE ASSESSMENT BY A DIFFERENT VIEW THAT THE PROVISIONS OF SEC.56 (2)(VII)(C)(I) OF THE I.T.ACT. ARE APPLICABLE. 9) ANY OTHER GROUND OR GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 11 OF 16 A.Y 2012-13 1) THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS ERRONEOUS TO THE EXTENT IT IS PREJUDICIAL TO THE APPELLANT. 2) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE PROVIDED PROPER OPPORTUNITY BEFORE TREATING A PART OF THE ADDITION AS AN ADDITION IX] S 56(2)(VII)(C)(I) OF THE I.T.AC T. 3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING ADDITION OF RS.14,55,000/- OUT OF RS.53,26,455/- MADE BY THE ASSESSING OFFICER DISBELIEVING THE EXPLANATION SUBMITTED WITH REGARD TO THE GOLD JEWELLERY AVAILABLE AT THE PREMISES OF THE APPELLANT. 4) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE COMPANY SAI SUDHIR ENERGY ALLOTTED 96,07,845/- EQUITY SHARES OF THE FACE VALUE OF RS.10/- EACH WITHOUT ANY CONSIDERATION PARTICULARLY WHEN THE FACTS SHOW OTHERWISE. 5) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE PROVISIONS OF SEC.56(2)(VII)(C)(I) OF THE I.T.ACT ARE APPLICABLE TO THE FACTS OF THE CASE AND FURTHER ERRED IN HOLDING THAT AN AMOUNT OF RS.4,80,39,220/- RECEIVED ON 31.03.2011 WOULD FORM PART OF THE INCOME OF THE APPELLANT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION PARTICULARLY WHEN NO SHARE WAS RECEIVED BY THE APPELLANT WITHOUT CONSIDERATION. 6) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO SEE THAT THE SHARES WERE ALLOTTED AGAINST CONSIDERATION AND THE BALANCE IN THE BOOKS OF ACCOUNT REMAINED PAYABLE BY THE APPELLANT TO SAI SUDHIR ENERGY LIMITED. 7) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE PROVIDED OPPORTUNITY TO THE APPELLANT BEFORE A VIEW IS TAKEN THAT THE PROVISIONS OF SEC.56 (2)(VII)(C)(I) OF THE I.T.ACT. ARE APPLICABLE TO THE VALUE OF SHARES ALLOTTED TO THE APPELLANT PARTICULARLY WHEN THE APPELLANT RECEIVED SHARES AGAINST CONSIDERATION. 8) ANY OTHER GROUND OR GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 12 OF 16 13. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORI TIES BELOW EXTENSIVELY WHILE THE LEARNED DR SUPPORTED THE ORDE RS OF THE AUTHORITIES BELOW. 14. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THERE ARE TWO ADDITIONS AND THE ASSESSEE HAS ACCEPTED THE ADDITIONS MADE UNDER THE HEAD INC OME FROM OTHER SOURCES OF THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE. THE FIRST ISSUE IS THE ADDITION MADE ON A CCOUNT OF UNEXPLAINED INVESTMENT IN GOLD JEWELLERY. WE FIND T HAT DURING THE COURSE OF SEARCH, THE TOTAL GOLD JEWELLERY FOUN D IN THE PREMISES OF THE ASSESSEE WAS WORTH RS.2,26,26,455/-. IN A ST ATEMENT RECORDED DURING THE COURSE OF SEARCH, THE HUSBAND O F THE ASSESSEE OFFERED TO ADMIT THE ADDITIONAL INCOME OF RS.1,36,4 7,165/- TO TAX AFTER EXCLUDING THE AMOUNT OF RS.36,52,835/- WHICH WAS TRANSFERRED THROUGH RTGS FOR WHICH EVIDENCE WAS PRO DUCED. SINCE THE BALANCE OF THE AMOUNT WAS NOT OFFERED TO TAX ON THE GROUND THAT THE CBDT NOTIFICATION NO.37/C DATED 20. 05.1978 ALLOWED ONLY CERTAIN AMOUNT OF GOLD IN THE HANDS OF EACH OF THE ASSESSEES, THE AO BROUGHT THE JEWELLERY WHICH IS NO T EXPLAINED TO TAX. BEFORE THE CIT (A), THE ASSESSEE EXPLAINED TH AT THE ASSESSEE HAILS FROM RAYALSEEMA WHEREIN GIFTING OF GOLD AT TH E TIME OF MARRIAGE AND OTHER CEREMONIES WAS A COMMON PRACTICE . SHE SUBMITTED THAT THE JEWELLERY BELONGED TO HER OTHER FAMILY MEMBERS BESIDES HER OWN STHRIDHAN. THE AFFIDAVIT OF HER FATHER, FATHER-IN-LAW AND MOTHER-IN-LAW WERE FURNISHED AS A DDITIONAL EVIDENCE. THE CIT (A), AFTER EXAMINING THE AFFIDAVI T AND EVIDENCE FURNISHED AND AFTER CALLING FOR A REMAND REPORT FRO M THE AO, ACCEPTED THE ASSESSEES CONTENTION WITH REGARD TO T HE GOLD RECEIVED AT THE TIME OF MARRIAGE AND ALSO IN THE PO SSESSION OF THE ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 13 OF 16 FATHER-IN-LAW OF THE ASSESSEE. HOWEVER, IN RESPECT OF THE GOLD ALLEGEDLY BELONGING TO THE MOTHER-IN-LAW OF THE ASS ESSEE SMT. E. PADMAVATHAMMA IS CONCERNED, HE DID NOT ACCEPTED THE CONTENTION OF THE ASSESSEE AS AT THE TIME OF SEARCH , SMT. PADVAVATHAMMA WAS RESIDING WITH HER SON AT KURNOOL AND THE GOLD BELONGING TO HER MOTHER-IN-LAW WAS IN THE LOCK ER AT KURNOOL. HE HELD THAT SINCE SHE WAS NOT RESIDING WITH HER SO N AT HYDERABAD, ENTIRE JEWELLERY COULD NOT HAVE BEEN KEP T IN THE LOCKER AT HYDERABAD. HE THEREFORE, CONFIRMED THE ADDITION TO THE EXTENT OF RS.14,55,000/-. THOUGH THE LEARNED COUNSEL REITE RATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, WE A RE NOT CONVINCED WITH THE OWNERSHIP OF THE JEWELLERY OF SM T. E. PADMAVATHAMMA AS THE JEWELLERY FOUND AT THE TIME OF SEARCH WAS WITHOUT ANY CORROBORATIVE EVIDENCE. THEREFORE, GROU ND OF APPEAL NO.3 AGAINST SUCH ADDITION IS REJECTED. 15. AS REGARDS GROUND RELATING TO THE ADDITION U/S 56(2)(VII)(C)(I) OF THE I.T. ACT, WE HAVE BROUGHT O UT THE RELEVANT FACTS ALREADY IN THE PARAGRAPHS ABOVE. THE LEARNED COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE SHARES WERE ALLOTTED TO THE ASSESSEE ON THE EXECUTION OF THE LEASE DEED AND THEREFORE, A T THE TIME OF ALLOTMENT OF SHARES, IT CANNOT BE STATED THAT THEY WERE ALLOTTED WITHOUT ANY OR VALID CONSIDERATION. THEREFORE, ADDI TION U/S 56(2)(VII)(C)(I) OF THE I.T. ACT IS NOT WARRANTED. HE SUBMITTED THAT THE SALE DEED HAS BEEN EXECUTED IN THE FINANCIAL YE AR RELEVANT TO THE A.Y 2012-13 FOR A SALE CONSIDERATION AND THEREF ORE, ONLY SUCH SALE CONSIDERATION CAN BE BROUGHT TO TAX IN THE A.Y 2012-13 AND NOT THE AMOUNT RECEIVED BY THE ASSESSEE BY WAY OF A LLOTMENT OF SHARES. HE ALSO SUBMITTED THAT ON THE EXECUTION OF THE SALE DEED, THE AMOUNT RECEIVED BY THE ASSESSEE BY WAY OF ALLOT MENT OF SHARES ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 14 OF 16 HAS BEEN CONVERTED INTO A LOAN AND IT IS STILL SHOW N AS PAYABLE BY THE BOOKS OF SSEL. HE, THEREFORE, SUBMITTED THAT TH E AMOUNT REMAINED PAYABLE BY THE ASSESSEE AND THUS CANNOT BE TREATED AS BUSINESS INCOME OF THE ASSESSEE. THE LEARNED DR H OWEVER, SUPPORTED THE ORDERS OF THE CIT (A). WE FIND THAT T HE FIRST LEASE AGREEMENT WAS ENTERED ON 16.03.2011 AND IT WAS SUBS EQUENTLY MODIFIED ON THE NEXT DAY I.E. ON 17.3.2011. BY VIRT UE OF BOTH THE LEASE DEEDS, THE LEASE RENTAL WAS FIXED FOR 99 YEAR S WHICH WAS AGREED TO BE PAID UPFRONT AND THE CONSIDERATION WAS TO BE PAID BY WAY OF ALLOTMENT OF EQUITY SHARES OF SSEL AND THE B ALANCE WAS TO BE PAID TO THE LESSOR. WE FIND THAT PURSUANT TO SUC H AN AGREEMENT, 48,03,923 SHARES WERE ALLOTTED TO THE AS SESSEE BY 31.03.2011 AND THE BALANCE OF 48,03,922 SHARES AT R S.10/- EACH WERE ALLOTTED AFTER 1.4.2011. THEREFORE, IT IS SEEN THAT THE CONSIDERATION AT THE TIME OF ALLOTMENT OF SHARES, W AS THE LEASE RENTAL PAYABLE TO THE ASSESSEE AS PER THE TERMS AND CONDITIONS OF THE AGREEMENT. IT IS THEREAFTER I.E. ON 2.7.2011 FA LLING IN THE FINANCIAL YEAR 2011-12 THAT THESE TERMS WERE MODIFI ED BY MODIFYING THE RENT PAYABLE AT RS.24,425/- PER ANNUM FOR A PERIOD OF 99 YEARS AND THIS LEASE DEED WAS CONVERTED INTO THE SALE DEED ON 8.7.2011, FIXING THE SALE CONSIDERATION AT RS.24 ,17,976. THE CIT (A) HAS TREATED THE VALUE OF THE SHARES RECEIVE D IN THE A.Y 2011-12 AND ALSO IN THE A.Y 2012-13 AS THE INCOME F ROM OTHER SOURCES U/S 56(2)(VII)(C)(I) OF THE I.T. ACT ON THE GROUND THAT THE ASSESSEE HAS RECEIVED THE SHARES WITHOUT ANY CONSID ERATION. WE ARE UNABLE TO AGREE WITH THIS FINDING OF THE CIT (A ) BECAUSE THE SHARES WERE ALLOTTED ON 28.3.2011 AND ON 02.04.2011 RESPECTIVELY IN TERMS OF THE LEASE DEEDS. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE DURING THE COURSE OF ARGUM ENTS, UNDER THE LEASE DEEDS, ONLY THE LEASE RENT RECEIVABLE FOR THE RELEVANT A.YS ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 15 OF 16 CAN BE BROUGHT TO TAX. DUE TO THE EXISTENCE OF VALI D LEASE DEEDS, THE TRANSACTION OF ALLOTMENT OF THE SHARES TOWARDS CONSIDERATION OF LEASE RENT CANNOT BE TREATED AS A TRANSACTION WI THOUT ANY OR ADEQUATE CONSIDERATION. THEREFORE, THE ADDITIONS U/ S 56(2)(VII)(C)(I) OF THE I.T. ACT ARE NOT SUSTAINABLE. FURTHER, THE C ONTENTION OF THE ASSESSEE THAT THE VALUE OF THE SHARES RECEIVED IS T O BE CONVERTED INTO A LOAN AFTER THE SALE DEED IS EXECUTED IS ALSO APPEALING TO US. ON A QUERY BY US, IT IS SUBMITTED THAT THE COMPANY SSEL HAS BEEN SHOWING THE VALUE OF THE SHARES ALLOTTED TO TH E ASSESSEE AND THE MONEY RECEIVABLE AS A LOAN FROM THE ASSESSEE TO THE COMPANY AND THE ASSESSEE HAS ALSO BEEN SHOWING THE SAME AS PAYABLE TO M/S. SSEL IN HER BOOKS OF ACCOUNT. THEREFORE, A LOA N CANNOT BE CONSIDERED AS A BENEFIT RECEIVED BY THE ASSESSEE WI THOUT ANY CONSIDERATION. IN VIEW OF THE ABOVE, WHAT CAN BE BR OUGHT TO TAX IS ONLY THE LEASE RENTAL RECEIVABLE BY THE ASSESSEE FO R THE RELEVANT FINANCIAL YEAR. THE AO IS THEREFORE DIRECTED TO COM PUTE THE LEASE RENTAL IN THE RESPECTIVE RELEVANT A.YS AND BRING IT TO TAX. 16. AS REGARDS AMOUNT OF RS.1,06,75,383/- WHICH WAS RETAINED TOWARDS THE TDS BROUGHT TO TAX AS INCOME FROM OTHER SOURCES, THE ADDITION TO THAT EXTENT IS CONFIRMED. SIMILARLY IN THE A.Y 2012-13, IT IS ONLY LEASE RENTAL THAT IS LIABLE TO BE TAXED. AS REGARDS THE SALE CONSIDERATION OF RS.24,17,976 IS C ONCERNED, THE ASSESSEE HAS CLAIMED IT TO BE SALE CONSIDERATION ON SALE OF AGRICULTURAL LAND. THE AO IS THEREFORE, DIRECTED TO VERIFY WHETHER THE SAID LAND WAS RECORDED WAS AGRICULTURAL LAND BO TH AT THE TIME OF THE PURCHASE OF THE PROPERTY AND ALSO AT THE TIM E OF THE SALE AND IF IT IS FOUND TO BE RECORDED AS AGRICULTURAL L AND, THEN THE SALE CONSIDERATION CANNOT BE BROUGHT TO TAX IN A.Y 2012- 13. THEREFORE, ITA NOS 917 AND 918 OF 2019 APARNA DUDDUKUNTA HYDER ABAD. PAGE 16 OF 16 THE GROUNDS OF APPEAL FOR THE A.YS 2011-12 AND 2012 -13 AGAINST THE ADDITIONS ARE PARTLY ALLOWED FOR STATISTICAL PU RPOSES. 17. IN THE RESULT, ASSESSEES APPEALS FOR BOTH THE A.YS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER, 2019. SD/- SD/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 29 TH OCTOBER, 2019. VINODAN/SPS COPY TO: 1 SMT. APARNA DUDDUKUNTA, FLAT NO.S-3, 8-2-603/B/4, BANJARA HILLS, HYDERABAD 500034 2 DY.CIT, CENTRAL CIRCLE 6(NOW DCIT CC-1(3) AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 3 CIT (A)-11 HYDERABAD 4 PR. CIT CENTRAL, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER