ACIT., CENTRAL CIRCLE-2(2), HYDERABAD vs. VARALA JANGA REDDY, HYDERABAD

Ůित रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.

The captioned appeals filed by the revenue arises from the respective orders passed by the Commissioner of Income Tax
(Appeals)-12, Hyderabad dated 04.03.2024, which in turn arises from the orders passed by the Assessing Officer (A.O) under Section 153C AND Section 153C r.w.s 144 of the Income tax Act, 1961 (for short, “Act”) for A.Y 2081-19 and A.Y 2019-20, dated 30.03.2023. As common issues are involved in the present appeals, therefore, the same are being taken up and disposed of vide a consolidated order.
We shall first take up the appeal filed by the revenue in ITA No.
585/Hyd/2024 for A.Y. 2018-19, and the order therein passed shall apply mutatis mutandis for the purpose of disposing of the other appeal. The revenue has assailed the impugned order on the following grounds of appeal before us:
“1. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) erred in drawing certain presumptions which are not correct?
2. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) erred in law while comparing the estimation in the hands on the Spectra Group has failed to distinguish the fact it involved in sale of plot, not in aggregation?
3. Whether on the facts and circumstances of the case and in law,.
the Id. CIT(A) erred in law in failing to verify the outward movement of cash portion of transaction to the different parties from whom loan was aggregated for which the assessee has not filed any confirmation from the said parties evidencing the receipt of cash?
4. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) failed to distinguish the fact that while in the seized material found in the Spectra Group there is mention of outward movement of cash to the land aggregators which is not indicative in the case of the assessee?
5. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) erred in law that the estimation in the hand of the Spectra
Group cannot be extended to the assessee, who is land aggregator and could not furnish confirmation from land sellers?
6. Any other ground that may be urged at the time of hearing.”

(emphasis supplied by us)
On a perusal of the statement of Shri. Jagan Mohan (supra), we find that the fact that mediators/aggregators were engaged by “Spectra
Group” and the routing of cash payments through them for onward payments to the farmers, development work etc., was admitted by him.
13. We have given thoughtful consideration and are of the view that in the backdrop of the statement of Shri. Jagan Mohan,
Managing Director of Spectra Group, recorded on 17.08.2021, it can safely be concluded that the assessee was one of the aggregator/mediator who was rendering services in his said capacity to “Spectra group”. Our conviction is fortified by the fact that even the cheque payments made by the “Spectra group” to the land owners were routed through the assessee. We are of the view that the order of the CIT(A) strikes a fair balance, as taxing the entire receipts as the income of the assessee, when he demonstrably had acted as a mediator, would lead to manifest injustice and double taxation. We are of the view that, as “Spectra Group”, being the ultimate beneficiary, had already been assessed separately on the whole of the receipts in the hands of the assessee, i.e., the aggregator/mediator, would give a distorted picture of his real income. We further concur with the CIT(A) that as the role of aggregator/mediator involves specialized services of land pooling and negotiation, for which they are reasonably remunerated, therefore, the income of the present assessee in the backdrop of the view taken by him in the case of identically placed aggregators/mediators, as had surfaced in the course of the search proceedings conducted on the same “Spectra Group”, viz. M/s Sylns
Agro Developers (A.Ys. 2016–17 to 2019–20), M/s Krishi Housing
(A.Ys. 2016–17 to 2020–21), and M/s Sunshine Estate (A.Ys. 2019–
20 to 2021–22), wherein their income was determined by him in the range of 6% to 10% of their receipts, could also fairly be estimated in the case of the present assessee at 10% of his unaccounted cash receipts, i.e., at Rs. 27,85,750/- (10% of Rs. 2,78,57,500/). We may herein observe that the view taken by the CIT(A) in the aforesaid similarly placed mediators/aggregators, wherein their income was estimated by the CIT(A) at 10% of their receipts, had thereafter been approved by the Tribunal in the case of ACIT, Central Circle 2(2),
Hyderabad Vs. Bhoomika Agro Farms (P) Ltd. & Ors., ITA No.
381/Hyd/2023, dated 30/09/2024. For the sake of clarity, we deem it apposite to cull out the observations of the Tribunal, as under:
“11. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. During search, in Spectra
Group of cases on 23.3.2021, copy of sale agreement dated 14.08.2019 and certain cash receipts were found and seized at the residential premises of Shri
Gampa Arun Kumar, Director of Spectra Groups. Further, a Scan disk pen drive of 5GB was also found and seized from the office premises of Spectra Group.
On verification of sale agreement dated 14.8.2019 between the appellant company and Spectra Group, the appellant company agreed to sell agricultural land admeasuring 300 acres in various survey Nos situated in Cherukuru and Peddapur villages, Weldanta Mandal, Nagarkurnool Distt. for the amount of Rs.170,60,00,000/-. A statement was recorded from Shri P Shashikant Reddy, of Bhoomika Agro Farms (P) Ltd on 29.07.2021 and confronted copy of sale agreement dated 14.8.2019 and cash payments received from Spectra Group as per excel sheets found in Pen Drive. In response to a specific question, he has confirmed the sale agreement between appellant company and M/s.
Spectra Group for the sale of 300 acres of land and also confirmed sale consideration referred to therein. He has further confirmed the amount received from Spectra Group as per the excel sheet found in Pen Drive including amount received through Cheques/RTGS and amount received by cash. However, he further stated that the appellant company works as Mediator/Aggregator of land for Spectra Group and whatever amount received from Spectra Group is either for payment to landowners towards purchase of land or expenditure incurred for development works at site.
12. The Assessing Officer made addition towards amount received from Spectra Group as undisclosed income of the assessee on the ground that the appellant could not furnish relevant evidence to prove that it was acting as an agent/aggregator/mediator for Spectra Group. According to the Assessing
Officer, although appellant does not own entire parcel of land before entering into agreement with Spectra Group, but the appellant fails to prove the outward movement of cash portion of amount received from Spectra Group to different parties from whom the land was aggregated. Therefore, he opined that in that it was acting as a Mediator/Aggregator for M/s. Spectra Group and the amount received from them is towards payment to landowners/farmers for purchase of land and also for various expenditure incurred at site.
13. We have given our thoughtful consideration to the reasons given by the Assessing Officer to make additions towards undisclosed amount received in cash from M/s. Spectra Group as income of the appellant and also reasons given by the learned CIT (A) to estimate 10% income on total undisclosed cash receipts received from above company in light of the argument of the learned
Counsel for the assessee. We have also carefully gone through the sale of agreement dated 14.8.2019 between the appellant company and M/s Spectra
Group. As per recitals of the sale agreement 14/08/2018, the appellant is having land bank in the name of respective owners mentioned in the registered document being entered into MOU and sale agreement with them and are the absolute owners of parcels of land being entered into sale deeds and peaceful possession and enjoyment of properties total admeasuring 300 acres. The agreement also provides for details of land including place of land, survey Nos.
and extent. From the recitals of the agreement, it is very clear that at the time of entering into the agreement with Spectra Group, the appellant did not own
300 acres of land. Further, it was very clear that the appellant was holding a land bank in the name of respective owners either by way of MOU, sale agreement or agreement cum GPA. Since the agreement itself provides clarity on the ownership of the land, that appellant was not owner of the entire land transferred to Spectra Group, in our considered view the arguments of the assessee that it acted as Mediator/Aggregator for pooling land to Spectra Group appears to be reasonable and bonafide. Therefore, to this extent, we fully agreed with the findings of facts recorded by the learned CIT (A).
14. Having said so, let’s come back to what is the transaction between the appellant and Spectra Group. M/s. Spectra Group is a real estate developer and identifies land through its own source and through certain mediators approach the group. The mediator’s pool the land from various farmers and consolidate before development of the same. All the requisite approval towards conversion of land and other regulatory measures were initiated at this point by the mediator in coordination with the group companies. Thereafter, the marketing team of the group starts selling to the customers. From the modes-operandi of Spectra
Group, it appears that pooling of the land by the mediators and development of the land and sales to the customers by Spectra Group happens simultaneously.
This fact is further strengthened by the fact that Spectra Group sells plots to various customers on an instalment basis by taking initial advance and balance in various instalments from customers. In this process, the role of the appellant is to acquire land where the group identifies land from various farmers/land owners by entering into sale agreement or Sale agreement cum GPA or MOU and finally transfers land to Spectra Group directly from the farmers to Spectra
Group or through AGPA in the name of the appellant and transfer to Spectra and subsequently transferred to Spectra Group. In this regard, it is noted that, the learned CIT (A) has recorded a categorical finding in light of certain sample sale deeds between the appellant and Spectra Groups and observed that in many cases, the land has been directly registered in the name of Spectra Group by the land owners and in few cases land has been registered through AGPA by appellant company to Spectra Group and in very few cases the land has been directly registered by the appellant company to Spectra Group. The learned CIT (A) further observed that the consideration as per sale deed between landowners and Spectra Group and the appellant and Spectra Group is almost similar with minor difference. Therefore, in our view, going by the modes operandi of Spectra Group and role of appellant, there is no doubt of whatsoever in our mind to the argument of the learned Counsel for the assessee that, the appellant only works as a mediator/aggregator for land and whatever amount received from Spectra Group including unaccounted cash receipts is on behalf of Spectra Group to be paid to land owners for purchase of land. This fact is further strengthened by the statement recorded from Shri P Shashikant
Reddy representative of Bhoomika Agro Farms (P) Ltd, where he has categorically stated that the appellant works as a Mediator/Aggregator for land pooling to M/s. Spectra Group and further, the company also works as a supervisor for developmental work in the proposed sites. Therefore, we are of the considered view that the findings of the facts recorded by the learned CIT
(A) in light of sale of agreement dated 14.08.2019, statement recorded from appellant and their representatives and also various evidences brought on record by the appellant that the appellant is a mediator/aggregator for land pooling to M/s Spectra Group and whatever the amount received from Spectra
Group is finally paid or transferred to land owners is reasonable and acceptable.
15. We further note that the learned CIT (A) in his order also reproduced the sources of funds for the appellant as per their bank account which was substantially received from M/s Spectra Group and the same has been paid for procurement of land. All the above factors clearly demonstrate that the assessee company is acting as a Mediator for procurement of land at the behest of the Spectra Group without any doubt. Therefore, in our considered view, the Assessing Officer having noticed the fact that the agreement itself provides for aggregating land and to be transferred to Spectra Group at later stage and also to the fact that the land is directly registered in the name of Spectra Group from the land owners, is erred in disbelieving the argument of the assessee that the amount received from Spectra Group in cash has been either paid to land owners for purchase of land or for the purpose of expenses incurred towards development of land. In our considered view, if we go by the additions made by the Assessing Officer and tax levied in the hands of the assessee company, which is multiple times than the income of the ultimate beneficiaries i.e. Spectra
Group. Therefore, going by the nature of the business carried on by the assessee and industry standard, no person or developer can make such a huge amount of profit from this line of business within a short period of time. We companies. Further, the Assessing Officer of the Spectra Group has estimated profit at 15% of total turnover/gross receipts reported by the company for various A.Ys. Therefore, going by the above facts, we are of the considered view that when the ultimate beneficiary itself is not able to make more than 15%
profit on its total business, it is difficult to accept the reasons given by the Assessing Officer that the appellant makes such a huge profit from purchase and sale of land within a short period. Therefore, we are of the considered view that the learned CIT (A), after considering relevant facts, has rightly estimated
10% income on total undisclosed cash receipts from Spectra Group as income of the assessee. Thus, we are inclined to uphold the findings of the learned CIT
(A) and reject the grounds taken by the Revenue as well as the grounds of Cross Objections taken by the assessee.
16. In the result, appeals filed by the Revenue and Cross Objections filed by the assessee for both the Asst. years are dismissed.”

We find that the CIT(A) had, in all fairness, adopted a consistent approach qua the estimation of the income of the assessee, which in absence of any facts distinguishing his case from those of the other aggregators/mediators, is in line with the principle of consistency as had been emphasized by the Hon’ble Supreme
Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR
321 (SC).
14. We, thus, in terms of our aforesaid deliberations, finding no infirmity in the view taken by the CIT(A), who, in our view, had in all fairness scaled down the addition in the case of the assessee to 10%
of the unaccounted receipts, uphold his order.
15. In the result, the appeal of the revenue being devoid and bereft of any substance is dismissed.
ITA 586/Hyd/2024
AY 2019-20

Hyderabad, dated 30.09.2025. #**L.Rama /SPS

आदेशकी Ůितिलिप अŤेिषत/ Copy of the order forwarded to:-

आदेशानुसार / BY ORDER

Sr. Private Secretary
ITAT, Hyderabad