YADAGIRI REDDY YARRAMADA,HYDERABAD vs. DCIT., CENTRAL CIRCLE-3(3), HYDERABAD

Succinctly stated, the assessee had filed his return of income for AY 2019-20 on 31/10/2019, declaring an income of Rs. 10,56,370/-.

Thereafter, a survey under section 133A of the Act was conducted on 02/03/2020 in the case of M/s. Mathrubhumi Infra, i.e., a firm in which the assessee is a partner. During the course of the survey proceedings, the assessee admitted additional income of Rs. 15 lakhs in his individual hands for the subject year and accordingly filed his revised return of 3 Yadagiri Reddy Yarramada vs. DCIT income under section 139(5) of the Act on 29/05/2020, declaring an income of Rs. 25,56,370/-. Subsequently, the AO framed the assessment vide his order dated 22/09/2021 under section 143(3) of the Act, and determined the assessee's income at Rs. 25,56,370/-.

Subsequently, the AO based on information unearthed during the course of the search and seizure operations conducted under section 132 of the Act at the residential premises of Smt. Jonnapalli Venkata Ramanasri on 10/12/2020, observed that as per a registered sale deed, registered with SRO, Pedda Amberpet vide Document No.1905/2019, dated 14/02/2019, which was found and seized during the course of the search proceedings, the assessee, along with one Sri K Vijay Kumar, had purchased land admeasuring Acres 09.26 Guntas situated in Survey No.281, Anajpur Village & Gramapanchayat, Abdullapurmet Mandal, Ranga Reddy District for a total consideration of Rs. 1,06,15,000/-. The AO observed that the assessee, along with the other co-purchaser, had paid a sale consideration of Rs. 1,06,15,000/-, viz., (i) through banking channels on different dates: Rs. 96,00,000/-; and (ii) the balance amount in cash: Rs. 10,15,000/- to the vendor Sri Gurjani Venkatesham. The AO observed that the aforesaid land was not disclosed in the balance sheet of the assessee for the year ending on 31/03/2019. Accordingly, the AO holding a conviction that the assessee, who, along with the aforesaid co-purchaser, viz., Sri K Vijay Kumar, had 4 Yadagiri Reddy Yarramada vs. DCIT purchased the subject land with equal ½ share each, had made the subject investment of Rs. 53,07,500/- (50% of Rs. 1,06,15,000/-) out of his unexplained income, initiated proceedings under section 147 of the Act. Notice under section 148 of the Act, dated 29/03/2023, was served upon the assessee. In response, the assessee filed his return of income on 18/07/2023, declaring an income of Rs. 25,56,370/-, i.e., as was originally returned.

The assessee, on being queried about the source of the investment made in the subject property, submitted that M/s. Mathrubhumi Infra, i.e., the firm in which he is a partner, had entered into an agreement to purchase the subject land. Elaborating further, it was submitted that though the aforesaid firm had issued cheques towards purchase consideration, the land was registered in his name and that of the other partner, viz., Sri K Vijay Kumar. It was submitted that as the assessee firm could not honor the cheques due to a slump in the market resulting from COVID, the cheques had remained unpaid. Although the assessee had sought time to submit the details regarding the source of the investment made in the aforesaid land, he thereafter failed to come forth with the requisite details.

The AO, in the absence of an explanation regarding the source of the investment in the subject property, held ½ share of the total investment amounting to Rs. 53,07,500/- (50% of Rs. 1,06,15,000/-) as 5 Yadagiri Reddy Yarramada vs. DCIT the assessee’s unexplained investment under section 69 of the Act. Accordingly, the AO, vide his order dated 28/02/2024, passed under section 147 of the Act, determined the assessee's income at Rs. 78,63,870/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success.

The assessee, 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.

Shri S Rama Rao, Advocate, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, sought liberty for admission of a deed of settlement executed on 14/05/2022 between the assessee and three other persons as additional evidence. The Ld. AR had drawn our attention to the assessee's application for admission of the aforesaid document as additional evidence. The Ld. AR submitted that, as the above-mentioned documents had a strong bearing on the adjudication of the core issue involved in the present appeal, which could not be filed before the lower authorities as they were, at the relevant point of time, not readily

We have given thoughtful consideration and are of the view that, as the documents filed by the assessee before us, prima facie, will have a bearing on the adjudication of the core issue involved in the present appeal, the same merits admission.

Shri S Rama Rao, Advocate, the Learned Authorized Representative (for short, “Ld. AR”), submitted that the purchase consideration for the subject property was initially paid vide 8 cheques by M/s. Mathrubhumi Infra (supra), as under:

The Ld. AR submitted that though two cheques (out of 8 cheques), viz., (i) Cheque No.000799, dated 12/02/2019 drawn on Union Bank of India: Rs.5,00,000/-; and (ii) Cheque No.000800, dated 12/02/2019 drawn on Union Bank of India: Rs.5,00,000/- were cleared,

The Ld.AR submitted that as the source of the investment made in the subject property was paid out of the duly explained sources, therefore, the AO was not justified in treating the same as an unexplained investment under section 69 of the Act. However, the Ld. AR, on being queried about the source of the cash payment of Rs. 10,15,000/- mentioned in the registered sale deed, dated 14/02/2019,

Per contra, the Ld. Sr-DR relied upon the orders of the authorities below.

We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties regarding the source of the investment made by the assessee towards the purchase of the subject property.

In our view, as the aforesaid “deed of settlement”, dated 14/05/2022, which has been admitted by us as additional evidence, was not there before the AO, therefore, in our view, the matter requires to be set aside to the file of the AO with a direction to readjudicate the issue after considering the same. As we have set aside the matter to the file of the AO for fresh adjudication after considering the “deed of settlement”, dated 14/05/2022, therefore, he is directed to also consider the explanation of the assessee regarding the source of his share of cash

We thus, in terms of our aforesaid deliberations, set aside the matter to the file of the AO with a direction to readjudicate the case. Before parting, we may herein observe that as we have set aside the matter to the file of the AO, we refrain from, advert to, and comment on the merits of the case. Needless to say, the AO shall, in the course of the set aside proceedings, afford a reasonable opportunity of being heard to the assessee.

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