ACIT, CENTRAL CIRCLE-2(4),HYDERABAD, HYDERABAD vs. RUTUJA PROJECTS, NIZAMABAD

Succinctly stated, the assessee firm, which is engaged in the business of building and development of residential flats, had filed its return of income for AY 2019-20 declaring an income of Rs.1,000/-.

Search and seizure operations were conducted in the case of Dr. Amidyala Lingaiah, which in turn was an offshoot of a search conducted under section 153A of the Act on “Yashoda Group” on 22/12/2020. 4. During the course of the search proceedings conducted on Dr. Amidyala Lingaiah (supra), the search officials had seized a loose sheet, viz., Page-24 of Annexure A/LA/RES/01, the contents of which apparently pertained to the assessee firm. Thereafter, the AO of the searched person, being satisfied that the information contained in the seized document, viz., Page-24 of Annexure A/LA/RES/01 pertained to M/s. Rutuja Projects, i.e., the assessee firm, and the same had a bearing on the determination of the latter’s income for AY 2018-19 to AY 2021-22, forwarded the seized material to the AO of the “other person”, i.e., the assessee firm, who after recording a satisfaction note under section 153C of the Act, dated 29/06/2022 initiated proceedings and issued a notice to the assessee firm.

During the course of the assessment proceedings, the AO observed that the contents of the seized document, viz., Page-24 of Annexure A/LA/RES/01, inter alia, referred to the investment made by the assessee firm towards the purchase of a Plot No.6, Survey No 313 & 316, Block No. 1, Kanteshwar, Nizamabad admeasuring 244.16 sq yds (out of total area of 698.66 sq yds) jointly with M/s. Shiva Balaji Associates. The AO observed that based on the contents of the aforesaid seized document, the total consideration worked out to Rs.1,26,96,320/-, out of which the assessee’s share of 67% worked out to Rs.85,06,534/-, which included a cash payment of Rs.71,22,984/-.

The AO further observed that the assessee firm, along with M/s Shiva Balaji Associates (supra), had during the subject year purchased two immovable properties, wherein his share of purchase consideration worked out at Rs.1,05,96,934/-, as under:

The AO, after deliberating on the explanation of the assessee firm, did not find favor with the same. It was observed by him that the ACIT vs. M/s. Rutuja Projects seized document, viz., Page-24 of Annexure A/LA/RES/01, was seized from the premises of Dr. Amidyala Lingaiah, i.e., the person from whom the assessee firm had admittedly purchased the land. The AO observed that it was not the case of the assessee firm that the material was seized from an unknown and unrelated third party. Also, it was observed by him that the 244.16 sq yds (out of the total land admeasuring 698.66 sq yds) purchased by the assessee firm from Dr. Amidyala Lingaiah (supra), tallied with the area of land as mentioned in the seized document, viz., Page-24 of Annexure A/LA/RES/01. Apart from that, it was observed that Dr. Amidyala Linigaiah (supra) had, as per the registered sale deeds, stated to have sold the entire land of 698.66 sq yds for a consideration of Rs. 47,92,000/-, viz. (i) vide sale deed No. 9948/2018 to Shri Krishna Kanth Amandand; and (ii). vide sale deed No. 9949/2018 to the assessee firm and M/s. Shiva Balaji Associates. It was observed that the aggregate of the sale consideration paid by the above-mentioned parties to the seller through cheques, amounting to Rs. 47,92,000/-, was mentioned in the seized document, viz., Page-24 of Annexure A/LA/RES/01. Accordingly, the AO, based on the contents of the seized document, observed that the assessee firm had purchased the subject property from Dr. Amidyala Lingaiah (supra) at Rs. 52,000/- per sq yd, amounting to Rs. 85,06,534/-. Apart from that, the AO observed that the assessee had also purchased land admeasuring 60 Sq. yards at Survey No.312 of Kanteshwar Shivar, Mandal Nizamabad District vide sale ACIT vs. M/s. Rutuja Projects deed No.3928/2019, dated 08/03/2019 from Shri S Madhukar Reddy and Shri S Prakash Reddy. The AO, based on his conviction that the said land falling in the vicinity of the land purchased by the assessee from Dr. Amidyala Lingaiah (supra) would also have been purchased at the same rate of Rs. 52,000/-per Sq. yard, determined the assessee's investment at Rs. 20,90,400/-. The AO, based on his aforesaid deliberations, concluded that the assessee firm had, during the subject year, made a total investment of Rs. 1,05,96,934/- towards the purchase of the aforementioned properties. Thereafter, the AO, vide his order dated 19/03/2024 under Section 153C of the Act, determined the total income of the assessee firm at Rs. 1,05,97,934/-.

Aggrieved, the assessee firm carried the matter in appeal before the CIT(A).

Ostensibly, the CIT(A) observed that the AO, except for relying on the contents of the seized document, viz., Page-24 of Annexure A/LA/RES/01, had failed to place on record any supporting evidence which would reveal that any on-money was paid by the assessee firm for purchasing the property admeasuring 244.16 sq yds from Dr. Amidyala Lingaiah (supra). Also, it was observed that the AO had without placing on record any material evidencing payment of any cash with respect to the other property, i.e., land at Survey No.312 of Kanteshwar Shivar, Mandal Nizamabad District that was purchased by the assessee firm vide sale deed No.3928/2019, dated 08/03/2019 from Shri S Madhukar ACIT vs. M/s. Rutuja Projects Reddy and Shri S Prakash Reddy had without any basis summarily adopted the purchase rate per sq yard based on the purchase rate that was adopted by him w.r.t the land purchased by the assessee firm from Dr. Amidyala Lingaiah (supra) and had most arbitrarily worked out the impugned investment made at Rs.20,90,400/-.

Also, the CIT(A) observed that based on the contents of the seized document, viz., Page-24 of Annexure A/LA/RES/01, the AO while framing the assessment in the case of the seller, viz., Dr. Amidyala Lingaiah (supra) had made an addition in his case by adopting the sale rate of the property @ Rs.52,000/- per sq yd, which, however was on an appeal in the latter’s case vacated by the CIT(A) on the ground that the seized document was a “dumb document” and no independent material was placed on record by the AO to support his conviction that any on- money was received from the purchasers. Also, it was observed that the AO, while framing the assessment in the case of the seller, i.e., Dr. Amidyala Lingaiah (supra), had recorded the statement of the purchasers wherein both of them had denied having paid any on-money, i.e., amount over and above the sale consideration recorded in the registered sale deeds for purchasing the subject property. The CIT(A) further observed that the Revenue being aggrieved with the order of the CIT(A) in the case of Dr. Amidyala Lingaiah (supra) had carried the matter in appeal before the Tribunal, which vide its order passed in the case of ACIT, Central Circle-2(2), Hyderabad vs. Sri Lingaiah Amidyala ACIT vs. M/s. Rutuja Projects in ITA No.702/Hyd/2022, dated 26/04/2023 had approved the CIT(A) order and dismissed the appeal of the Revenue.

The CIT(A) based on his aforesaid observations, viz., (i) that the AO while framing the assessment in the case of the assessee firm had failed to place on record any independent material which would support his conviction that any on-money, i.e., amount over and above the sale consideration recorded in the registered sale deed was paid by the assesee firm for purchasing the subject property, i.e., 244.16 sq yds from Dr. Amidyala Lingaiah (supra); and (ii) that the addition made based on the contents of the same seized document, viz., Page-24 of Annexure A/LA/RES/01 was vacated by the CIT(A) while disposing the appeal in the case of Dr. Amidyala Lingaiah (supra), which order had thereafter been approved by the Tribunal vide its order passed in the case of ACIT, Central Circle-2(2), Hyderabad vs. Sri Lingaiah Amidyala in ITA No.702/Hyd/2022, dated 26/04/2023, vacated the addition made by the AO.

Also, we find that the CIT(A) taking cognizance of the fact that the AO had failed to place on record any independent material which would support the payment of any on-money for purchase of the second property, viz., land at Survey No.312 of Kanteshwar Shivar, Mandal Nizamabad District, vide sale deed No.3928/2019, dated 08/03/2019 from Shri S Madhukar Reddy and Shri S Prakash Reddy, vacated the impugned addition that was made by the AO.

The Revenue, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us.

We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.

Dr. Sachin Kumar, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) at the threshold of hearing of the appeal submitted that a bare perusal of the seized document, viz., Page-24 of Annexure A/LA/RES/01 seized in the course of the search proceedings conducted in the case of Dr. Amidyala Lingaiah (supra), revealed beyond any scope of doubt that the contents of the same pertained to the property which the assessee firm had jointly purchased with M/s. Shiva Balaji Associates from the aforesaid searched person. Elaborating on his contention, the Ld. Sr-DR submitted that not only the total area of the subject property, i.e.,698.66 sq yds but also the aggregate of the payments made by the aforementioned purchasers through cheques aggregating to Rs. 47,92,000/- tallied with the area of the plot and the payments made by the said respective purchasers to the aforementioned seller as was recorded in the registered sale deeds No.9949/2018 and 3928/2019. The Ld. Sr-DR to buttress his contention ACIT vs. M/s. Rutuja Projects had taken us through the copies of the aforesaid sale deeds, Pages 1- 19 of the Department’s Paper Book (DPB), which fortified his aforesaid contention. The Ld. Sr-DR submitted that as the aforesaid material aspect had not been considered by the Tribunal while disposing of the appeal in the case of the seller, viz., Dr. Amidyala Lingaiah (supra) vide its order passed in ITA No.702/Hyd/2022, dated 26/04/2023, therefore, considering the facts now being placed before the Tribunal in the present case, the earlier order of the Tribunal is distinguishable. The Ld. Sr-DR to support his contention that if the contents of the seized document tally with those mentioned in the registered sale deed, then the same can safely be acted upon, had relied upon the order of the ITAT, Delhi Bench “G” in the case of DCIT vs. Shiram Consultants India (P) Ltd (2023) 147 taxmann.com 457 (Delhi-Trib.). Also, he had pressed into service the order of the Hon’ble High Court of Jharkhand in the case of Mahabir Prasad Rungta vs. Office of the Commissioner of Income Tax (Appeals), Ranchi & Another 2014 SCC ONLINE JHAR 44 214 AIR JHAR R 3 139. The Ld. Sr-DR submitted that as a perusal of the contents of the seized document, viz., Page-24 of Annexure A/LA/RES/01 proved to the hilt the factum of on-money paid by the assessee firm for purchasing the subject property, therefore, the AO had rightly made the addition by acting upon the same, which, however had wrongly been vacated by the CIT(A).

Per contra, Shri C. Maheswar Reddy, CA, Learned Authorized Representative (for short, “Ld. AR”) for the assessee firm vehemently objected to the contentions advanced by the Ld. Sr-DR. It was submitted that the CIT(A) had rightly vacated the addition, inter alia, for the reason that the AO, except for relying upon the unsubstantiated contents of the seized document, viz., Page-24 of Annexure A/LA/RES/01, had failed to place on record any independent material which would irrefutably evidence the payment of on-money by the assessee firm for purchasing the subject property. The Ld. AR submitted that the CIT(A) after taking cognizance of the fact that the addition made in the hands of Dr. Amidyala Lingaiah (supra), i.e., the seller, which in turn was based on the contents of the aforesaid seized document, viz., Page-24 of Annexure A/LA/RES/01 had been vacated by the CIT(A), for the reason that the same was held to be a “dumb document” which could not justify the impugned addition based on a stand alone basis. The Ld. AR to buttress his contention had taken us through the relevant observations of the CIT(A). It was submitted that the order of the CIT(A) vacating the impugned addition had thereafter been upheld by the Tribunal, which had dismissed the appeal filed by the Revenue in the case of the seller, viz., Dr. Amidyala Lingaiah, in ITA No.702/Hyd/2022, dated 26/04/2023. Elaborating further on his contention, the Ld. AR submitted that as the Department has failed to place on record any material which would distinguish the facts involved in the case of the assessee firm as against ACIT vs. M/s. Rutuja Projects that of the seller, i.e., Dr. Amidyala Lingaiah, to the extent reliance was placed on the contents of the seized document, viz., Page-24 of Annexure A/LA/RES/01, there could be no justification for taking a different view as against that arrived at by the Tribunal while disposing of the appeal in the case of the seller, viz., Dr. Amidyala Lingaiah in ITA No.702/Hyd/2022, dated 26/04/2023. The Ld. AR submitted that as the CIT(A) had, based on the facts involved in the present appeal, taken a well-reasoned view and vacated the impugned addition, therefore, the appeal filed by the Revenue being devoid and bereft of any substance is liable to be dismissed.

We have thoughtfully considered the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the material available on record.

Admittedly, it is a matter of fact borne from the record that the AO except for relying upon the contents of the seized document, i.e., a loose sheet, viz., Page-24 of Annexure A/LA/RES/01, has failed to place on record any independent material which would corroborate his view that the assessee firm had paid on-money for purchasing the subject property from Dr. Amidyala Lingaiah (supra). Apart from that, we find that based on the contents of the seized documents, viz., Page-24 of Annexure A/LA/RES/01, the AO while framing the assessment in the case of the seller, viz., Dr. Amidyala Lingaiah (supra) had made an addition in his case based on his view that he had sold the subject ACIT vs. M/s. Rutuja Projects property @ Rs.52,000/- per sq yd and not at the value disclosed by him in the registered sale deed. As observed herein above, the aforesaid addition made by the AO in the case of Dr. Amidyala Lingaiah (supra) has been vacated by the CIT(A), which order had thereafter been upheld by the Tribunal vide its order passed in ITA No.702/Hyd/2022, dated 26/04/2023. We concur with the view taken by the CIT(A) in the present case before us that the AO, except for relying upon the unsubstantiated contents of the seized document, viz., Page-24 of Annexure A/LA/RES/01, has failed to place on record any documentary evidence which would irrefutably substantiate his view that the assessee firm had paid on-money for purchasing the subject property. At this stage, we are reminded of the judgment of the Hon’ble High Court of Punjab & Haryana in the case of Paramjit Singh vs. ITO [2010] 195 Taxman 273 (Punjab & Haryana), wherein it has been held that the contents of a registered sale deed cannot be dislodged on the basis of oral or hearsay evidence. The Hon’ble High Court, while concluding as herein above, had drawn support from Sections 91 and 92 of the Indian Evidence Act, 1872. For the sake of clarity, we deem it apposite to cull out the observation of the Hon’ble High Court, as under:

We thus, are of firm conviction that now when it has been the claim of the assessee firm that it had not paid any on-money, i.e., amount in excess of that disclosed in the registered sale deed for which it had purchased the subject property from Dr. Amidyala Lingaiah (supra), the AO was by no means justified to dislodge the said claim without placing on record any irrefutable secondary evidence which would disprove to the hilt the veracity of the said claim. Also, we find that our view that adverse inferences cannot be drawn on a standalone basis by relying upon the contents of a dumb document seized in the course of the search proceedings is supported by the judgment of the Hon’ble Juri ictional High Court in the case of Principal Commissioner of Income Tax (PCIT) vs. Tarun Kumar Goyal in ITA No. 243 of 2022, dated 24th August, 2022. In the said case, the Hon’ble High Court, finding no element of perversity in the view taken by the Tribunal, which had held that the impugned addition of on-money payment made in the assessees' hands on the basis of a mere dumb document, which is not corroborated by any other evidence, was not sustainable, dismissed the revenue’s appeal.

Be that as it may, we also cannot remain oblivion of the fact that now when the seized document, viz., Page-24 of Annexure A/LA/RES/01, has been held by the Tribunal while disposing of the appeal in the case of seller, viz., ACIT vs. Sri Lingaiah Amidyala, ITA No.702/Hyd/2022, dated 26/04/2023 as a “dumb document”, the said impugned seized document cannot be acted upon for arriving at a view to the contrary qua the consideration paid by the assessee firm, i.e., the purchaser for the same sale transaction, specifically when no independent corroborative material to the contrary has been placed on record by the Revenue.

We thus, in terms of our aforesaid deliberations, finding no infirmity in the view taken by the CIT(A), who had rightly based on his observations vacated the addition made in the hands of the assessee firm, uphold his order.

Resultantly, the appeal filed by the Revenue, being devoid and bereft of any substance, is dismissed.

We shall now take up the cross-objection filed by the assessee firm. While dealing with the Revenue’s appeal in ITA No.1689/Hyd/2025, AY 2019-20, in the foregoing paragraphs of this order, we have upheld the view taken by the CIT(A) and dismissed the appeal of the Revenue. Accordingly, in terms of our aforesaid observations, the present cross- ACIT vs. M/s. Rutuja Projects objection filed by the assessee firm supporting the view taken by the CIT(A) is allowed.

In the result, the appeal filed by the Revenue is dismissed, and the Cross-Objection filed by the assessee firm is allowed in terms of our aforesaid observations.

The Principal Commissioner of Income Tax, Central Circle, Hyderabad.

"वभागीय""त"न"ध, आयकरअपील"यअ"धकरण /DR,ITAT, Hyderabad.

The Commissioner of Income Tax 6. गाड"फ़ाईल / Guard file