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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI N.K.CHOUDHRY, HON’BLE & SHRI D.S. SUNDER SINGH, HON’BLE
Per Bench : These appeals are filed by the revenue against the orders of the Commissioner of Income Tax (Appeals) [CIT(A)]-3, Visakhapatnam in Appeal No.302/2019-20/CIT(A)-3/VSP/2020-21 dated 07.10.2020 for the Assessment Year (A.Y.) 2015-16 and Appeal No.533/2019-20/CIT(A)- 3/VSP/2020-21 dated 07.10.2020 for the Assessment Year (A.Y.) 2017-18. Cross Objections are filed by the assessee. Since the facts are identical, these appeals are clubbed, heard together and a common order is being passed for the sake of convenience as under.
In this case, the Revenue filed the grounds of appeal originally along with Form 36 and later revised the grounds through letter dated 20.05.2021. As per the request of the Revenue, the revised grounds of appeal are taken for adjudication : The revised grounds raised by the department as under:
The Ld.CIT(A) erred in deleting the addition on unaccounted income from sale of Villas of Rs.3,94,47000/- by relying on the ITATs order in the assessee’s case for the AY 2016-17, wherein ITAT has held that employee of the assessee Sri Lanka Anil Kumar as third party, without giving credence to the evidences found in his residence.
The Ld.CIT(A) erred in deleting the addition on unaccounted income from sale of plots of R5.24,80,88,660/- by relying on the JTATs order in the assessee’s case for the AY 2016-17, wherein ITAT failed to appreciate the fact that the then CIT(A) deleted the additions by admitting additional evidence i.e., MOU entered into with M/S Kranthi Properties, without giving opportunity to AO.
3 ITA No.241&242/Viz/2020 and CO No.20&21/Viz/2021, A.Y.2015-16 & 2017-18 M/s Navaratna Estates, Visakhapatnam
The Ld.CIT(A) erred in deleting the addition of Rs.8,99,900/- on account of bogus sub-contract expenses by ignoring the fact that Sri K.S.N.Murthy in his statement has admitted that cash withdrawn through bearer cheques and was handed over to M/s Navaratna Estates.
The Ld.CIT(A) also erred ignoring the direct evidence that a self cheque forRs.13,75,000/- was issued in the name of Sri Maheedhar who has an account of M/s.Navaratna Estates who has withdrawn the amount which proves beyond doubt that the sub- contract expenses were nothing but accommodation entries for withdrawing cash.
The Ld.CIT(A) further erred in ignoring the statement of admission of Sri M.Y.Subramanyam, a partner of M/s.NavaratnaEsates wherein he has admitted Rs.8,99,900/-ad additional income.
Any other ground of appeal that may arise at the time of hearing.
Original assessment was completed for the 2015-16 u/s 153C by an order dated 29.12.2017 and the assessee filed appeal and the matter travelled to the ITAT. The ITAT following the order of the juri ictional High court in the case of CIT Vs.Shetty’s Pharmaceuticals & Biologicals Ltd. [2015] 57 taxmann.com 282 (Andhra Pradesh) and the case of CIT-III Vs. Sri Rao Subba Rao (HUF) in ITTA No.254 of 2014 dated 15.04.2014 and other decisions discussed in the order held that the assumption of juri iction u/s 153C without recording the reasons is invalid, accordingly upheld the order of the Ld.CIT(A) and dismissed the appeal of the revenue. Since, the abated assessment got revived as per the provisions of section 153A of the Act, the AO completed the revived assessment on the basis of information available on record. Originally, the case was selected for 4 ITA No.241&242/Viz/2020 and CO No.20&21/Viz/2021, A.Y.2015-16 & 2017-18 M/s Navaratna Estates, Visakhapatnam limited scrutiny and later the case was converted to complete scrutiny with the approval of the Pr.CIT.
Identical issues are involved for the A.Y.2015-16 and 2017-18 in respect of on money on sale of villas of Blue Marino Project and sale of plots of ‘Sea Pearl’ project as per the details given hereunder : 2015-16 2017-18 On money on sale of villas Rs.3,94,47,000/- Rs.1,65,25,000/- “Blue Marino” project Unaccounted income from Rs.24,80,88,660/- Rs.51,94,450/- Sale of plots For the sake of convenience, facts are extracted from the A.Y.2015-16. 3. Ground No.1 is related to the addition of Rs.3,94,47,000/- representing on-money received by the assessee for sale of plots & villas of Blue Marino project. The assessee has constructed 154 villas in Chepalauppada area under the project name ‘Blue Marino’. The project was developed in two phases i.e. Phase I and Phase II. Each villa was allotted the land admeasuring 150 sq.yds with individual duplex home with uniform design for all villas at Chepalauppada. The assessee started selling villas in the F.Y. 2013-14. Search u/s 132 was conducted in the business premises of Lanka Anil Kumar, the marketing executive of the firm and survey u/s 133A was conducted on 24.11.2015 in the case of Navaratna
5 ITA No.241&242/Viz/2020 and CO No.20&21/Viz/2021, A.Y.2015-16 & 2017-18 M/s Navaratna Estates, Visakhapatnam Estates at D.No.10-1-29, Sampath Vinayaka Temple Road, Visakhapatnam. Certain incriminating material was found and impounded as per order No.ACIT/Kkd/Survey/133A(3)(ia)/2015-16 dated 25.11.2015. Statement was recorded from Sri Manchukonda Yethiraja Subrahmanyam, one of the partners of the assessee firm. Statement is also recorded and subsequently on 11.12.2015 from Sri Manchukonda Yethiraja Subrahmanyam. On the basis of incriminating material found during the course of survey and the statements recorded, the AO worked out the unaccounted receipts on estimation basis at Rs.9,84,55,000/-. Search u/s 132 was conducted in the case of Lanka Anil Kumar and found certain incriminating material. The AO worked out the unaccounted receipts to the extent of Rs.3,94,47,000/- for sale of 45 villas for the Financial Year 2014-15 relating to the A.Y.2015-16 on the basis of incriminating material found from Shri Lanka Anil Kumar. The nature of material found from the premises of Lanka Anil Kumar was loose sheets containing the details villa No., Name of the customer, amount paid, amount due etc. on one side of the page (front page) and on reverse side of the page, hand written notings of Anil Kumar were made with villa no, amount paid, document value etc.. which was discussed in detail in the assessment order by the AO. As per the statement given by Shri Lanka Anil Kumar, page No.6,7 and 8 contained the details of registered sale price and 6 ITA No.241&242/Viz/2020 and CO No.20&21/Viz/2021, A.Y.2015-16 & 2017-18 M/s Navaratna Estates, Visakhapatnam on reverse side of the page contain the details of agreed price. On the basis of above material and the statement recorded from Shri Lanka Anil Kumar, the AO estimated the receipt of on money @ Rs.3,94,47,000/- on sale of villas and issued show cause notice. Mr.Suresh Kumar Jain, Managing Partner, objected for estimation of unaccounted sale price and also did not accept the statement of Shri Lanka Anil Kumar stating that the statement of Shri Lanka Anil Kumar has no relevance with the assessee’s affairs. Mr.Suresh Kumar Jain, Managing Partner also stated that the statement of Shri Manchukonda Yatiraja Subrahmanyam is invalid since, he was not in good health. Shri Suresh Kumar Jain bluntly stated that the entries made in the books of accounts are correct and he does not know the entries in the loose sheets found in the residence of Shri Lanka Anil Kumar and he further stated that whatever Shri Lanka Anil Kumar has stated in the statement were not relevant to the affairs of Navratna Estates, hence submitted that the addition cannot be made on the basis of statement recorded from Lanka Anil Kumar or Shri M.Y.Subrahmanyam. However, the AO rejected the argument of the assessee and held that Rs.3,94,47,000/- worked out to be unaccounted receipts as per the material found during the course of search in the residence of Lanka Anil Kumar and accordingly made the addition.
7 ITA No.241&242/Viz/2020 and CO No.20&21/Viz/2021, A.Y.2015-16 & 2017-18 M/s Navaratna Estates, Visakhapatnam
Against the order of the AO the assessee went on appeal before the CIT(A) and the Ld.CIT(A) deleted the addition following the order of this Tribunal in the assessee’s own case for the A.Y.2016-17. Against which the department is in appeal before this Tribunal.
During the appeal hearing, the Ld.DR supported the order of the AO and submitted that Lanka Anil Kumar is an employee of the firm and the material found and statement recorded from the employee is very much relevant to the assessee’s case. As per the statement recorded there was an element of cash component in sale of villas which was not accounted in the books of accounts, hence, argued that the addition needs to be sustained.
On the other hand, the Ld.AR relied on the orders of the Ld.CIT(A) and argued that no interference is called for in the order of the Ld.CIT(A).
We have heard both the parties, perused the material placed on record. Identical issue has come up before this Tribunal in the assessee’s own case for the A.Y. 2016-17 and after having discussed the issue in detail, the Hon’ble ITAT has deleted the addition holding that there was no material to support the order of the AO for assessment of unaccounted income. For the sake of clarity and convenience, we extract relevant para
8 ITA No.241&242/Viz/2020 and CO No.20&21/Viz/2021, A.Y.2015-16 & 2017-18 M/s Navaratna Estates, Visakhapatnam No.17 to 17.6 in I.T.A. No. 618/Viz/2018 and 612/Viz/2018 dated 22.01.2020 for the A.Y.2017-18. “17. We have heard both the parties and perused the material placed on record. The AO has taken reference to seized material found during the course of search and initially proposed to make the addition of Rs.3,66,75,000/- as per page No.25 of the assessment order relying on the following documents : (a) Page No.54 of Annexure – A/NRE/Survey/Buss/01 (b) Page No.48 of Annexure-A/NRE/Survey/Buss/01 (c) Soft copy of email to Kalyan Suri on 17.02.2014 (d) Soft copy of email dt.10.11.2014 to Kalyan Mannuru of Brick and Mortar (e) Reverse side of page No.50 of Annexure-BMHP/133A/Navaratna
The Ld.CIT(A) examined the above seized documents and found that none of the documents evidence the receipt of on money by the assessee. The Ld.CIT(A) in para No.6.2(v) discussed in detail with regard to facts of page Nos.48 and 54 of Annexure-A/NRE/Survey/Buss/01 and given a finding that it does not contain the details like villa number, name of the customer, date of agreement, date of payment etc. and it is a quotation for sale of villas. The assessee also explained that the price mentioned on the seized paper was a quotation to the customers which is subject to negotiations and inclusive of the stamp duty, registration fee etc.. Hence, the Ld.CIT(A)viewed that the same cannot be taken as an evidence for receipt of on money over and above the registered price.
The next document was soft copy of email addressed to Kalyan Mannuru of Brick and Mortar, wherein Lanka Anil Kumar had asked to change the price from Rs.53 lakhs to Rs.54 lakhs. The Ld.CIT(A) observed that Brick and Mortar is web based advertising agency for real estate transactions and the assessee had requested them to mention price quotation at Rs.54 lakhs which does not indicate payment of on money or receipt of on money. The documents bearing No. Annexure BMHP/133A/Navaratna does not contain any specific information regarding receipt of on money on account of sale of villas. Therefore, the Ld.CIT(A) found that on the basis of above documents it cannot be presumed that the assessee had received on money without having the corroborating evidence. The AO has considered the sale price of Rs.53 lakhs for 23 villas for the A.Y.2016-17 on the basis of page No.54 of Annexure-A/NRE/Survey/Buss/01 and issued show cause notice but did not take the same for computing the income or for arriving at unaccounted income. Different amounts were mentioned in the material found during the course of search regarding the sale price of the villas. One quotation shows 53.00 lacs and another document shows at Rs.50 lakhs and 60 lakhs. At the end the AO also did not place reliance on the above documents for arriving at the undisclosed income. During the appeal hearing also the department could not place any evidence to controvert the finding of the Ld.CIT(A). We also observe from the seized material or impounded material marked as Annexure NRE/Survey/buss/01 , BMHP/133A/Navaratna, page
9 ITA No.241&242/Viz/2020 and CO No.20&21/Viz/2021, A.Y.2015-16 & 2017-18 M/s Navaratna Estates, Visakhapatnam No.50 and other email correspondence that there was no indication or evidence to support the receipt of on money by the assessee. Therefore, we do not find any reason to disagree with the Ld.CIT(A). With regard to seized or impounded documents mentioned in para No.17 of this order, the Department also did not place any material to controvert the findings of Ld.CIT(A) on this issue. Further though the AO referred the above impounded or seized material and ultimately dropped the proposal and relied on page No.6 to 8 of LAK/01 found and seized from the residence of Sri Lanka Anil Kumar for assessment of undisclosed income in respect of Blue Marino Project. The AO estimated the undisclosed income at Rs.263.03 lakhs comprising of 25 villas and Rs.237 lakhs comprising of 15 villas on the basis of page No.6 to 8 of annexure LAK/01 found and seized from the residence of Sri Lanka Anil Kumar. The Ld.CIT(A) found from the seized material that there was indication of on money received in respect of plot No.122 and plot No.139. In respect of plot No.122 sale price was assessed at Rs.52.50 lakhs against the registered price of 36.25 lakhs, showing the difference amount of Rs.16.25 lakhs which was confirmed by the Ld.CIT(A) holding that there was on money receipt to the extent of Rs.16.25 lakhs. Similarly in the case of plot No.139, sale price was assessed at Rs.44.25 lakhs against the document price of Rs.36.25 lakhs. Thus there was a difference of Rs.8 lakhs which was confirmed by the Ld.CIT(A).
Mr.Yethiraja Subramanyam admitted the receipt of on money on sale of villas and admitted the undisclosed income of Rs.1.90 crores for the impugned assessment year but later on retracted from the admission. Other partner, Sri Suresh Kumar Jain did not accept the admission stating that he was not in good health. The AO also did not consider the admission given by Mr.M.Y.Subramanyam for making the addition. Mr.Subramanyam also did not give the details of on money received with details of villa No, name of the customer, sale price, the document price etc.. the assessing officer also did not make any cross enquiries to ascertain the consideration received over and above the documented price from the buyer. In the circumstances the statement and quotations referred by the AO cannot be taken at it’s face value to hold that the assessee had received the on money over and above the sale price.
The assessing officer mainly placed his reliance on the document seized from Sri Lanka Anil Kumar in annexure: LAK/01 page No.6 to 8. Page No.6 reverse side shows the sale price and registered price of the villas. Front side page shows some notings and lumpsum amount against the villa No.122 and 139 which reads as under: 122 VO 52.00 16.00 paid 139 DT VT 44.25 8.25 paid
On the basis of above notings, the Ld.CIT(A) considered that there was an element of on money receipt, as recorded on page No.6 of the seized material which was found from the residence of Sri Lanka Anil Kumar marked as LAK/01. During the course of statement recorded from Sri Lanka Anil Kumar, he had stated that page No.6 to 8 related to the information of villa of buyers and major part of the amounts were collected. Sri Suresh Kumar Jain in the statement, confronted with him, completely denied having received any on money and stated that statement
10 ITA No.241&242/Viz/2020 and CO No.20&21/Viz/2021, A.Y.2015-16 & 2017-18 M/s Navaratna Estates, Visakhapatnam given by Anil kumar has no relevance to affairs of the firm and whatever stated by Lanka Anil Kumar was wrong. The AO did not make any cross verification of the statement given by Sri Suresh Kumar Jain with Sri Lanka Anil Kumar or with any of the buyers of the villas to ascertain the receipt of on money. The above scribbling found and seized as annexure LAK/01 does not indicate any on money except giving leads to consider the total sale consideration could be Rs.52.00 lacs in case of Villa No.122 and Rs.44.25 lacs in the case of villa No.139. Since the material was found in the residence of Lanka Anil Kumar the presumption is not available to hold that contents were related to the assessee firm unless it is established by the revenue. Therefore, merely on the basis of scribbling, it cannot be presumed that the assessee had received the on money without having support of the corroborating evidence. Since the total consideration in page No.6 (reversed side) tallies with the registered document, which was registered before Sub