THE ITO, WARD - 2(2),, VIJAYAWADA vs. M/S SHUBHADARSI ESTATES,, VIJAYAWADA

आदेश /O R D E R

PER D.S. SUNDER SINGH, Accountant Member:

This appeal is filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Vijayawada vide Appeal No.140/CIT(A)/VJA/2011-12 dated 27.03.2013 for the Assessment Year (A.Y.)2005-06.

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the balance amount of Rs.1.78 crores was on-money paid in cash to Shri P.Sankara Rao towards purchase of agricultural land as well as the vacant site of 1930 sq.yds.. Shri P.Sankara Rao, Managing partner of the assessee firm also agreed that he has received Rs.1.78 crores in cash as additional consideration and also accepted to admit the same as additional income for the relevant assessment year. The statement was recorded from Shri P.Sankara Rao on 21.12.2006 and the assessee agreed the same as additional income. In this case, 20 acres of agricultural land located at Medchal was sold by Shri P.Sankara Rao @Rs.15 lakhs per acre and 1930 sq.yds of vacant land located at Kanur, Vijayawada was also sold for a sum Rs.1.07 crores by way of two different sale deeds dated 07.03.2007. The assessee recorded only the registered sale consideration both for purchase and sale of the land in its books of accounts. Subsequently, the assessee retracted from the admission of additional income and the acceptance of on-money of Rs.1.78 crores was admitted in the statement recorded on his own on 21.12.2006. The AO completed the assessment holding that the assessee had received on-money and apportioned the on-money component of Rs.1,56,11,475/- towards sale of vacant site at Kanur in the hands of Shubhadarsi Estates and the sum of Rs.21,88,525/- in the hands of Peddu Sankaraa Rao towards sale of agricultural land.

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followed by the AO for apportioning the amount attributable to the sale of vacant site related to the assessee. For ready reference, we extract relevant part of the order of the Ld.CIT(A) which reads as under : 5. I have seen the submissions made by the appellant, gone through the assessment order besides perusing all other material available on record including the case laws relied upon. The question in this appeal is whether the on-money admitted by the appellant represents income concealed or not. I find from the records the following : a) No material was found during the course of search and seizure operations that the appellant received any additional consideration other than the amount recorded in the books of account.

b) The addition was made purely on the basis of the admission made by the appellant at the time of search and seizure operations which was retracted by the appellant himself.

c) There is no evidence on record to show that there is any additional consideration received. The total on-money consideration said to have been received relates to two different assets – (i) a capital asset which is exempt from tax and (ii) the capital asset sold by the appellant and the bifurcation is not available in the seized documents. The Assessing Officer could not provide any scientific method of division and the Hon’ble Tribunal while deciding the issue stated that even the percentage attributable to the impugned asset may be zero. Therefore, the-learned AR mentioned that it is a mere imagination of receipt of on-money and an estimation of the same for the purpose of assessment in the case of the appellant. I find, there is no concealment of income and the concealment of income is not established and the penalty is accordingly cancelled.” 6. Aggrieved by the order of the Ld.CIT(A), the revenue is in appeal before this Tribunal. During the appeal hearing, the Ld.DR vehemently argued that in this case, there is clear concealment of income. The Ld.DR further submitted that the addition made by the AO was enhanced by the

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Ld.CIT(A) and partly confirmed by the Hon’ble ITAT. The purchaser of the vacant land Shri Saibabu, Managing director of Jayadarshini Housing (P) Ltd. has confirmed the payment of money of Rs.1.78 crores which was accepted by the assessee in his statement recorded u/s 131 on 21.12.2006. Subsequently also, the assessee has confirmed the receipt of on-money and taken support of cash flow for receipt of on-money for various investments as discussed in the penalty order such as source of investment for property of Rs.7,13,000/- and Rs.22,000/-. Further, the Ld.DR invited our attention to para No.11 of the penalty order, wherein, further, the statement was recorded after 15 days gap on 05.01.2007 and Shri P.Sankara Rao has confirmed the additional income admitted. Therefore, by taking us to recitals of the various paragraphs specifically from paragraph No.6.2, 9, 10, 11 and 14, the Ld.AR submitted that it is undisputed fact that the assessee had accepted the on-money payment from Shri G.Saibabu for sale of agricultural land as well as the sale of vacant site, therefore, argued that there is clear case of concealment, hence, requested to set aside the order of the Ld.CIT(A) and restore the penalty order.

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having evidentiary value which cannot be ignored. In the instant case, initially both the Managing Director of Jayadarshini Housing (P) Ltd. who had purchased the land from the assessee as well as the Managing partner of the assessee firm had agreed that there was on-money payment. On appeal, the Hon’ble ITAT has also confirmed the on-money payment. However, the Hon’ble ITAT has reduced the undisclosed income in the hands of the assessee firm. As far as the on money is concerned, since both the parties have agreed, it is established that on money was paid in the transaction. The AO referred this issue in para No.6.2 of the penalty order, wherein, the assessee admitted the receipt of on money amounting to Rs.1.78 crores and admitted the same as additional income in the statement recorded on 21.12.2006. For the sake of clarity and convenience we extract relevant part of the penalty order which reads as under : “6.2 Sri P.Sankararao, Managing partner of firm got confused because he was asked details of several properties. But it can be seen from statement reproduced below that he was only asked about two Properties one sold by assessee firm, another sold by himself. Even in state of confusion he can't concede figure of 1.78 crores when total registered sale consideration for both properties is only Rs 1.22 Crones (Rs.15 Iakhs + Rs.1.07 çrores). Relevant extract of statement dated 21-12-2006 reproduced below where assessee admitted additional consideration proves this point clearly. Q.No.5: What is the business connection between Subhadarsi Estates, Yourself and Jayadashiini Housing Pvt., Ltd; Hyderabad? Ans: In the year, 2003, myself has purchased around Ac.20 of Agri. Land at Ravalcole Village, Medchal Mandal, Rangareddy dist. Later, in the year 2004, the same was sold to Sri Gorla SaiBabu of Jayadarsini Housing (P) Ltd.,

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Hyderabad (JDHPL). Further, in the year 2004-05, 1930 Sq. Yds. of vacant land situated at Kanuru Village was also transferred to Jayadarsini Housing (P) Ltd, and this transaction was reflected In the books of account. However, the transaction regarding the purchase of safe of land at Ravulacole Village was not reflected in the books of account. Q.No.6 : It is seen from the statement of Sri SaiBabu, the Mg, Director of JDHPL, he has paid around 1.78 croresin excess of the registered value of the above said transactions towards sale consideration. Do you agree and have you received this amount? Ans: Yes, I do confirm that I have received around Rs. 1.78 crore in excess of the registered value of the transaction for both the sales. This was received by cash."

7.1. In para No.9 of the penalty order, the AO stated that the assessee also taken the credit for sources of acquisition of immovable property as per the seized material bearing page Nos.127-136 from the additional income disclosed on account of on money of Rs.1.78 crores received from the sale of the property to M/s Jayadarshini Housing Private Ltd. For the sake of clarity and convenience, we extract relevant part of the para Nos. 9 and 10 of the penalty order which reads as under :

“Q.No.11: What is the source of investment of the above said property of Rs.7,13,000/- and Rs.22,000/-. Ans: This was invested out of the sales consideration of Rs.1.78

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crores received from Sri G SaiBabu of "Jayadarsini Housing Pvt., Ltd.,".

"Q No 21 During the course of search proceedings it was noticed that you have purchased around Ac.20.00 of land at Medchel, Hyderabad In the year 2002-03 and it was subsequently sold to JayadarsiniHousingi in the year 2004.05. What is the source of investment of the said land purchase? Ans: The total consideration paid by me at the time of purchase was Rs.10 laklis. This was made out of my own money where you have found in the form of receipts that was answered in the earlier question. Later, "Shubhadarsi Housing Pvt., Ltd" could not do any real estate. activity all the transactions were not mentioned in the books of account Subsequently the above said land Was sold to "Jayadarslnl Housing Pvt., Ltd" for a registered value of Rs.15 lakhs. However, the excess cash received for this transaction and for another transaction, I have already admitted in the reply to the Q.No. 6."

7.2. After 15 days of gap another statement was recorded from P.Sankara Rao, wherein he confirmed the receipt of on money amounting to Rs.1.78 crores and admitted the same as additional income which is evidenced from the from penalty proceedings. We reproduce hereunder para No.11 of the penalty order of the AO which reads as under :

“Q.No5; Do you want to say anything else? During the course of search proceedings conducted in my case as well as in

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the group cases, several receipts worth of Rs.2.3 crores was found and seized from the residential premises of Sri C V B S N Prasad (Bandar Prasad). I have already stated that the firm Subhadarsi Estates and the company Subhadarsi Housing Pvt., Ltd., intended to do real estate business in the year 2001-02 to 2002-03 for which, I have introduced the capital in the form of these receipts. Since, we could not do any business activity; this was neither reflected in any books of account nor in any other accounts. Hence, it was subsequently particularly Subhadarsi Housing Pvt., Ltd was closed in the month of Dec., 2003. Under these circumstances I voluntarily disclose this as my income. Further, I also request you to consider the peak as my concealed income. I have already disclosed an amount of Rs.1.78 crores that was received from Jayadarsini Housing Pvt., Ltd, for transfer of the Kanuru site as well as for the sale of 20 acres of land at Medchal, over and above the registered value. This also,) will offer voluntarily in the respective assessment years. Kindly give me immunity from penalty proceedings for the above said disclosure.'

7.3. Shri Gorla Saibabu the vendee also has accepted that he has paid a sum of Rs.1.78 crores for purchase of the property of vacant site and agricultural land from Shri P.Sankara Rao. However, neither Shri Sankara Rao nor Saibabu have furnished the exact payment towards the vacant site and agricultural land, but in principle accepted that the total payment made was Rs. 3.00crores out of which cash component is 1.78 crores and the amount accounted in the books of account was 1.22 crores. We also reproduce hereunder the relevant para No.14 of the penalty order which reads as under : 14. Other explanation of assessee is that "Sri G. Saibabu has not given details of additional consideration received property wise. What Sri G.Saibabu stated was that he paid in all 1.78 Crores. There is no indication that what is the amount paid for 1930 Square yards sold by Sri Peddu Sankaraa Rao, Managing Partner of M/s. Subhadarsi Estates and what is the amount paid for 20 Acres of

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land sold by Sri Peddu Sankara Rao Managing Partner of M/s.Subhadarsi Estates. On the other hand Sri P.Sankararao, managing partner of assessee firm stated that he received entire amount of Rs.1.78 Crores. Therefore basing on statement of managing partner of firm Sri P.Sankara Rao, addition can't be made in hands of assessee firm. "Sri G.Saibabu in his statement dated 09-11-2006 dearly stated that consideration for both properties put together was negotiated. Exact bifurcation was not decided. Relevant extract of statement of Sri G.Saibabu is as under: "Q.No.l1: Please go through the above replies. When Sri P.Sankara Rao has paid Rs.4 lakhs for 1000 Sq. Yds., you have stated that for purchase of Ac.20.00 of land for a consideration of Rs. 15 lakhs was paid by the company. It is not relevantly matching. Please explain? Ans : Sir, I want to correct my earlier replies. In the year 2004-05 there were two transactions took place between me i.e. Jayadarsini Housing Pvt Ltd., and Sri P Sankara Rao i.e. purchase of agricultural land belonging to Sri P Sankara Rao of M/s Subhacfarsi Estates situated at Hyderabad, Ravalkole Village(Ac.20.00) and a site situated at Kanuru Village admeasuring 1920 Sq.Yds. Both the properties were purchased by Javadarsini Housing Pvt., Ltd, over all consideration of R5.3 crores was negotiated together. However the Ac.20.00 of land was registered for a consideration of Rs.15 lakhs and the Kanuru site was registered for Rs.1.07 crores. However, the exact bifurcation was not decided. The balance payment was made by me in cash only. Q.No. 12; Please once again- go through the above replies given by you and confirm the same? Ans: Yes, I once again confirm that my above reply is true. The total consideration for the above transactions was Rs.3 crores. However, the registered value is only Rs.1.22 crores for both the properties. The difference in amount I voluntarily pay tax. 7.4. From the above extracts of the penalty order and the admission given by Shri P.Sankara Rao, Managing partner of the assessee firm and the Managing Director of Jayadarshini Housing Pvt. Ltd., it is established beyond doubt that the on money was paid towards sale of land and this issue was confirmed by the ITAT in the assessee’s own case in I.T.A. No.179/Vizag/2010 dated 28th June 201 and appropriated the unaccounted payment towards the sale of vacant land at Rs.27.15 lakhs in

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the ratio of 15:85 for vacant land and agricultural land. Though the payment was towards the exempt land as well as the vacant site, the payment of unaccounted money was passed on to the assessee towards the sale of agricultural land and the vacant site, which is established from the statements recorded from both the vendor and the vendee. Once the vendor and vendee have accepted the receipt and the payment of unaccounted money, subsequent retraction has no relevance and it is a valid piece of evidence. It is admitted fact that after completion of the search also, the assessee has admitted the additional income towards receipt of sale of land and taken the credit for application of income towards the investments. Therefore, we are unable to accept the contention of the Ld.CIT(A) that without bifurcation of the exact amount, the receipt of on-money does not lead to concealment. Similarly, the observation of the Ld.CIT(A) that no material was found during the course of search also is not acceptable, since, both the parties have agreed the payment and receipt of unaccounted money and the assessee has explained the application of unaccounted money towards the source for investment made to various other properties as observed from the recitals of the penalty order. Hence, we hold that this is a clear case of concealment of income which attracts penalty u/s 271(1)(c) of the Act and we have no

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hesitation to uphold the order of the AO. The Ld.AO has levied the penalty on concealment of income of Rs.1,61,71,166/- which was the addition enhanced by the Ld.CIT(A) in its appellate order. Since the Tribunal has adopted the correct method for appropriation of on money towards the sale of vacant land at Rs.27.15 lakhs, we uphold the imposition of penalty on the concealed income of Rs.27.15 lakhs against the levy of penalty on concealed income of Rs.1.61 lakhs. Accordingly we set aside the order of the Ld.CIT(A) and confirm the penalty to the extent of addition of Rs.27.15 lakhs and direct the AO to revise the penalty.

Order pronounced in the open court on 11th January, 2019.

Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नदनधंक /Dated :11.01.2019 L.Rama, SPS

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आदेश की प्रनतनलनप अग्रेनर्त/Copy of the order forwarded to:- 1. ननधधाऩरती / The Assessee –M/s Shubhadarsi Estates, D.No.39-9-1, Sailok Complex, Temple Street, Labbipet, Vijayawada 2. रधजस्व / The Revenue–Income Tax Officer, Ward-2(2), Vijayawada 3. The Commissioner of Income Tax (Central), Hyderabad 4. The Commissioner of Income Tax-(Appeals),Vijayawada नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम / 5. DR, ITAT, Visakhapatnam 6. गधर्ा फ़धईल / Guard file

आदेशधनुसधर / BY ORDER // True Copy //

Sr. Private Secretary ITAT, VISAKHAPATNAM