RAJENDER REDDY GUNNA ,HYDERABAD vs. DY. COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE-6, HYDERABAD

Brief facts of the case are that, the assessee is an individual, running a xerox shop in the name of M/s SVS Xerox, 11-13-193/3/1B, Dwarka Nagar, R.K. Puram, Hyderabad by engaging some employees. The assessee had filed his return of income for the assessment year 2007- 2008 admitting total income of Rs.4,33,020/-. A search and seizure operation under section 132 of the Income Tax Act, 1961 [in short “the Act”] was conducted at the business and residential premises of the assessee on 22.08.2018. Consequent to search and seizure operation, notice under section 153A of the Act were issued for assessment years

During the course of assessment proceedings, the assessee was again given an opportunity to explain the impounded book A/SVS/BUS/14. In response, the assessee submitted that, these are receipts from various persons for carrying-out their work and what we received is only

The Assessing Officer after considering the relevant submissions of the assessee and also taken note of impounded book observed that, the assessee could not explain the contents recorded in the document with relevant evidences. Although, the assessee and his employees initially admitted that, the amounts recorded in the book pertains to receipts towards allotment of land to beneficiaries from Andhra Pradesh Bhoodan Yagna Board or M/s. Vinoba Nagar Development Society, but, subsequently the assessee changed his stand and argued that, the 10 ITA.Nos.1846 to 1851/Hyd./2019 amounts recorded in the book relates to receipts from various persons for settlement of their land disputes and he incurred various expenses and offered net commission income in his return of income filed for the relevant year. Further, the assessee once again changed his stand and came with an argument that, credits appearing in the seized material are of the Firm. The Assessing Officer after considering the relevant explanations of the assessee had come to the conclusion that, the assessee has received various amounts from different parties for land transactions and the same has not been recorded in his books of accounts. Although, the assessee claims to have recorded receipts in the name of the Firm, but, upon perusal of relevant details submitted by the assessee, it is noticed that, the Firm claims to have been formed on 25.03.2007, but, the return for the assessment year 2008-2009 was filed only on 12.11.2009 i.e., almost 15 months after the date of survey/search. Further, the Firm has obtained PAN vide their application dated 09.10.2009 i.e., after the date of search and survey. Though, the assessee claims that, return 11 ITA.Nos.1846 to 1851/Hyd./2019 was filed in the status of “Firm” considering the contents of the impounded book, but the fact remains that, the receipt in the book starts from 11.01.2005 pertains to assessment year 2005-2006. Since the assessee has failed to offer proper explanation with regard to the contents of book found during the course of search, the Assessing Officer observed that, the amount recorded in the books pertains to receipts towards land transactions and the same has not been offered for taxation. The Assessing Officer had also took support from the provisions of Section-132(4A) of the Income Tax Act, 1961 and Section-114 of the Indian Evidence Act and observed that, once a document or books of account are found in the possession of the assessee in the course of search, it will be presumed that, such document belongs to searched-person and contents of the searched documents are true. Therefore, rejected the arguments of the assessee and made addition of Rs.3,44,22,300/- towards undisclosed income from land transactions. The relevant observations of the Assessing Officer are as under:

The role of organization furnished claims that it was established in the year 2003 under the Chairmanship of Rajender Reddy and other partners. The terminology of 'chairman' 'partners' and 'proprietor' are inter-contradictory and each of these statuses mentioned denote certain status to this organization.

One more intriguing fact to show that the status of the firm is a clear after-thought of the assessee is that after forming the firm in the year 2007, the PAN for the said firm was obtained vide their application dated 09.10.2009, i.e., before filing the returns of income. It is not understood why the firm has taken such a long time to get its PAN, though it started its activities from 25.03.2007, going by the assessee's version.

Though the assessee claims that a return was field return in the status of firm considering the contents of the impounded book for the Assessment Year 2008-09, the receipts in the book start from 11.01.2005, 1.e., right from the Assessment Year 2005-06. However, no returns of income for the Assessment Years 2005-06 to 2007-08 are not filed. The reason for not filing the return of income for the earlier Assessment Years is obvious as the time for filing the return of income has lapsed by the time the assessee pretended to file the return as status of firm. 7. Even the returns filed for the Assessment Year 2008-09 and 2009-10 are belated and the assessee clearly mentions the number of seized material in the said returns. The reasons for filing such return shows the intention of the assessee to distract the attention from the main issues involved in the seized material. 8. The assessee instead of explaining the contents of the seized material found in his premises, throwing the onus on the Department to prove the seized book and the contents therein as belonging to him. As was said by the assessee himself in the above written submission dated 24.12.2010, the seized book was found in his premises containing the writings of his employees, who admitted that the transactions were noted as per the direction of their employer and the funds they dealt with belong to the assessee only. Therefore, the seized material and the analysis made above testifies that the contents therein 15 ITA.Nos.1846 to 1851/Hyd./2019 belong to the assessee only in his individual capacity and not to any other persons in any other capacity.

Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A). Before the learned CIT(A), the assessee has filed detailed written submissions on the issue which has been reproduced at para 4.1 at page 10 to 14 of the CIT(A) order. The sum and substance of the arguments of the assessee before the learned CIT(A) are that, the Assessing Officer erred in making addition of Rs.3,44,22,300/- towards undisclosed income from the land transactions on the basis of Lokpriya book found during the survey, even though, the entries 17 ITA.Nos.1846 to 1851/Hyd./2019 contained in the said book does not belongs to the assessee and further, the same has been offered in the hands of the Firm for the assessment year 2008-2009. The learned CIT(A) after considering the relevant submissions of the assessee and also taken note of relevant book called Lokpriya found and impounded during the search observed that, the assessee has failed to offer any explanation with regard to amount received from various persons for allotment of land from Andhra Pradesh Bhoodan Yagna Board or M/s. Vinoba Nagar Development Society. Although, the assessee claimed to have received the amount in the name of the Firm and offered to tax, but, upon perusal of the relevant reasons given by the Assessing Officer, it appears that, the introduction of Firm in the subsequent stage of proceedings is only an afterthought which is evident from the date of creation of the Firm, subsequent filing of return of income after obtaining the Firm's PAN. Therefore, the learned CIT(A) observed that, the mere submissions of the assessee during appellate proceedings is not acceptable in view of clear findings from the Assessing Officer that, the document 18 ITA.Nos.1846 to 1851/Hyd./2019 found during the survey clearly shows unaccounted income pertains to land transactions. Thus, rejected the arguments of the assessee and sustained the addition made by the Assessing Officer towards undisclosed income from land transactions. The relevant observations of the learned CIT(A) are as under:

Sri Gurpreet Singh, Learned DR for the Revenue, on the other hand, supporting the order of the Assessing Officer and CIT(A) submitted that, Lokpriya book containing 381 pages found during the course of survey clearly shows unaccounted land transactions of the assessee. Sri B. Sriramulu employee of the assessee very categorically explained the entries contained in the notebook and stated that, certain people have come and paid money for the purpose of allotment of land at Andhra Pradesh Bhoodan Yagna Board or M/s. Vinoba Nagar Development Society. He further stated that, one Mr. Raghava Rao has paid an amount of Rs.2,50,80,000/-. The Assessing Officer has cross-examined Mr. Raghava Rao and recorded his statement under section 131 of the Act, where he has 22 ITA.Nos.1846 to 1851/Hyd./2019 confirmed amount paid to the assessee for land transactions. The Assessing Officer has analysed the transactions and came to the conclusion that, the assessee has received money from various people for land transactions, but, same has not been reported in the return of income for the relevant assessment years. Although, the assessee has come out with different versions at subsequent stages and introduced a Firm, but, the fact remains that, the Firm has taken PAN in the year 2009 after search and survey and has filed return of income for the assessment year 2008-2009, but, the transactions in the notebook is from assessment year 2005-2006. The assessee could not explain the relevant facts. Therefore, the Assessing Officer has rightly assessed the undisclosed income from land transactions and thus, the order of the Assessing Officer and CIT(A) should be upheld.

We have heard both the parties, perused the material on record and the orders of the authorities below. We have also carefully considered the relevant documents found during the course of survey titled ‘Lokpriya’ book 23 ITA.Nos.1846 to 1851/Hyd./2019 containing 381 pages, which is available in the paper book filed by the assessee. It is an admitted fact that, during the course of survey, a book containing 381 pages with various entries has been found and impounded. A statement from Sri B. Sriramulu, the Author of the book has been recorded, where he has explained the contents of book and admitted that, entries relates to amount received by the assessee towards land transactions. A statement from the assessee was also recorded where he has confirmed the statement of Sri B. Sriramulu and also explained that, he has received amounts towards land transactions. Although, the assessee came to a different argument at subsequent stages of proceedings, but, the fact remains that, the arguments of the assessee that, he has received money from various people for settlement of land disputes and paid various amounts for the purpose of various expenditure and only receives commission income, is not substantiated with relevant evidences. Although, the Counsel for the Assessee refers to certain entries contained in very same book and claimed that, these are the expenditure pertains to land 24 ITA.Nos.1846 to 1851/Hyd./2019 transactions, in our considered view, unless the assessee reconcile each and every entry recorded in the said book with reference to nature of expenditure, the arguments of the assessee that, he has incurred various expenditure out of amount received from various persons, cannot be accepted. Further, the assessee has once again changed his stand and come-out with the explanation that, entries contained in Lokpriya book is relates to a Firm and the same has been considered for the assessment year 2008- 2009 and also part of the transactions pertains to M/s. Vinoba Nagar Development Society. We, once again do not agree with the arguments of the Counsel for the Assessee for the simple reason that, the assessee is making an oral argument without any documentary evidences to substantiate his claim with entries contained in the book pertains to Firm and M/s. Vinoba Nagar Development Society either by filing the financial statements of society or explaining the entries contained in the book with reference to the books of accounts of the Firm. Further, as narrated by the Assessing Officer, the so-called Firm was 25 ITA.Nos.1846 to 1851/Hyd./2019 incorporated or formed on 25.03.2007 and the return of income for the assessment year 2008-2009 was filed only on 12.11.2009 i.e., almost 15 months after the date of survey/ search. Further, the Firm has obtained PAN vide their application dated 09.10.2009 i.e., before filing the return of income, whereas the transactions recorded in the Lokpriya book starts from 11.01.2005 i.e., right from assessment year 2005-2006. If at all the arguments of the assessee is correct that, the transactions pertains to Firm, the assessee should have filee the return of income of the Firm from assessment year 2005-2006 onwards. Therefore, in our considered view, the assessee could not explain the transactions with relevant evidences and, therefore, the arguments advanced by the Learned Counsel for the Assessee in light of Partnership Firm and M/s. Vinoba Nagar Development Society is only an afterthought and cannot be accepted. Further, in respect of the arguments of the Learned Counsel for the Assessee that, the total amount recorded in the seized book is only Rs.2,18,69,800/-, but, not Rs.3,49,22,300/- as claimed by the AO, in our 26 ITA.Nos.1846 to 1851/Hyd./2019 considered view, once again the Counsel for the Assessee made an argument on the basis of abstract prepared from the seized book without there being any reconciliation with reference to each and every entry in the said book. Therefore, in our considered view, the assessee has failed to reconcile the entries to arrive at a receipt of Rs.2,18,69,800/- and thus, the arguments of the Counsel for the Assessee on this ground are rejected.

Coming back to the arguments of the assessee that, the Assessing Officer has made addition only on the basis of statement of employees and the assessee. We once again reject the arguments of the Counsel for the assessee on the ground that, the addition made by the Assessing Officer is not only on the basis of statement of Mr. B. Sriramulu, an employee or the Appellant, but, it is based on the documents found during the course of survey, where a clear explanation has been given by the Author of the document with reference to the cash received from various parties for the purpose of land transactions. This fact has been further strengthened by the cross-examination of Mr. 27 ITA.Nos.1846 to 1851/Hyd./2019 Raghava Rao, where, in a statement recorded under section 131 of the Act, he has admitted payment of money to the assessee for land transactions. Further, the assessee had also in his initial statement has admitted that, he has developed 10 acres of land and received 200 plots from Mithra Associates and the amount recorded in the books pertains to the land transactions. Although, the assessee claims that, statement given by the employee and assessee has been subsequently withdrawn by filing a retraction statement, in our considered view, the retraction filed by the assessee without any valid explanation, cannot be accepted. Moreover, as per the legal presumption contained under section 132(4A) of the Act, when a document or books of accounts are found in the possession of an assessee in the course of search or survey, it will be presumed that, such documents belongs to searched-person and the contents of such documents are true and further, the signature or every other part of such document is in the handwriting of any particular person. Therefore, in our considered view, the arguments of the Counsel for the Assessee in light of 28 ITA.Nos.1846 to 1851/Hyd./2019 decision of Hon’ble High Court of Telangana and Andhra Pradesh in the case of Gajjam Chinna Yellappa (supra) and decision of Hon’ble Supreme Court in the case of CIT vs., S. Khader Khan Son (supra), is devoid of merit and cannot be accepted.

In this view of the matter and considering he facts of the case, we are the considered view that, the Assessing Officer has rightly made addition towards undisclosed income from land transactions on the basis of ‘Lokpriya’ book found and impounded during the course of survey. The learned CIT(A) after considering the relevant facts, has rightly sustained addition made by the Assessing Officer. Thus, we are inclined to uphold the order of the learned CIT(A) on this issue and reject the ground taken by the assessee.

The Next issue that came-up for consideration from ground nos.2 to 5 of assessee’s appeal is addition of Rs.1,30,94,500/- towards unexplained cash credits.

During the course of assessment proceedings, the Assessing Officer called-upon the assessee to explain the credits in the bank account of four individuals and also as to why the same should not be treated as unexplained cash credit. In response, the assessee submitted that, credits in bank accounts pertains to Partnership Firm of Sri G. Rajender Reddy and others and the same has been considered for assessment years 2008-2009 to 2009-2010. The Assessing Officer after considering the relevant 31 ITA.Nos.1846 to 1851/Hyd./2019 submissions of the assessee and also taking note of relevant bank accounts found during the course of search observed that, the assessee and his employees in their statements recorded during the course of search and survey admitted that, these credits pertains to the assessee for his land transactions. Although, the assessee claims to have accounted the said receipts in the hands of Partnership Firm, but, upon perusal of relevant details, it was noticed that, the Firm is claimed to have been formed on 25.03.2007, but, the return of income for the assessment year is 2008-2009 was filed only on 12.11.2009 i.e., almost 15 months after the date of survey/search. The Assessing Officer further noted that, the Firm had taken PAN vide their application dated 09.10.2009 i.e., before filing return of income. Therefore, observed that, if at all the bank account transactions pertains to Firm, then, the assessee could not explain as to why the said credits not rooted through the bank account of the Firm and also the return of income of the Firm has not been filed from the assessment year 2005- 2006. The Assessing Officer rejected the 32 ITA.Nos.1846 to 1851/Hyd./2019 arguments of the assessee and also took support from the legal presumption contained under section 132(4A) of the Act and observed that, the assessee has failed to offer any explanation with regard to credits appearing in the bank account of employees and thus, quantified the amount of Rs.1,30,94,500/- and made addition as unexplained cash credits of the assessee. The relevant findings of the Assessing Officer are as under:

Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A) and filed detailed written submissions on the issue which has been reproduced at para-5.2 at pages-27 and 28 of the learned CIT(A) order. The sum and substance of the arguments of the assessee before the learned CIT(A) are that, credits appearing in bank account of employees pertains to Partnership Firm and the same has been offered in the hands of the Firm for the assessment year 2008-2009. The learned CIT(A) after considering the relevant submissions of the assessee and also taken note of relevant bank accounts 49 ITA.Nos.1846 to 1851/Hyd./2019 found during the course of survey observed that, although, the assessee claims to have accounted credits in bank account in the name of the Firm, but, failed to prove his contentions with credible evidence. The so-called Firm was formed on 25.03.2007 and the Firm has obtained PAN in the year 2009 i.e., before filing the return of income. If at all the Firm was in existence, then, there is no necessity for the assessee to credit the Firm receipts, in the bank account of the employees. Since, the assessee is unable to explain the credits in the bank account of the employees with relevant details, the Assessing Officer has rightly assessed the credits in bank account as unexplained credits of the assessee. Thus, rejected the arguments of the assessee and sustained the addition made by the Assessing Officer. The relevant observations of the CIT(A) are as under:

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. During the course of search, bank account in the name of four individuals viz., Mr. V. Sreenu, Mr. S. Shyam Kumar, Mr. B. Sriramulu and Mr. K. Srinivas Reddy in three different banks i.e., Corporation Bank, Andhra Bank and HDFC Bank were found. A statement was recorded from all four individuals, where they have admitted that, credits in bank account pertains to the assessee. The bank account found during the course of search and statement of four individuals were confronted to assessee and statement under section 132(4) of the Act was recorded, where he has admitted that, credits in bank account of employees is unaccounted income and also agreed to pay tax on the same. The Assessing Officer made addition towards credit in bank account on the basis of admission of employees coupled with the statement recorded from the assessee. Although, the assessee came-out with a different 56 ITA.Nos.1846 to 1851/Hyd./2019 argument at subsequent stages that, credits in bank account pertains to Partnership Firm, but, the Assessing Officer has negated the arguments of the assessee, in light of date of formation of Partnership Firm and subsequent application filed for obtaining PAN and date of filing the return of income for the assessment year and noted that, assessee has filed return of income for the Firm for the assessment year 2008-2009, after the date of search and it is only an afterthought. Therefore, from the findings recorded by the Assessing Officer in light of documents found during the course of search, it is very clear that, the credits in the bank accounts of the employees of the assessee are pertains to unaccounted transactions of the assessee for the relevant assessment year.

Having said so, let us come back whether credits in the bank accounts of the assessee are standalone transactions pertains to uncounted income of the assessee or it was out of unaccounted income from land transactions. Learned Counsel for the Assessee referring to relevant bank account statements and ‘Lokpriya’ book found during the 57 ITA.Nos.1846 to 1851/Hyd./2019 course of survey argued that, there are periodic deposits and withdrawals from the bank account of the employees and if we go through the entries contained in ‘Lokpriya’ book found during the course of search with corresponding cash deposit in bank account of the employees, there is one- to-one nexus between the receipts and credits in bank account and, therefore, the Assessing Officer is erred in making separate addition for undisclosed income from land transactions on the basis of ‘Lokpriya’ book and separate addition on the basis of credits found in the bank account of the employees. We find that, the transactions recorded in the ‘Lokpriya’ book and credits appearing in the bank account of employees are pertains to same period. Further, upon verification of credits in the bank account, we find that, there are periodical cash deposits and other credits and also periodical withdrawals from the said bank accounts. Since, there is a nexus between the credits in bank account of the employees and entries recorded in ‘Lokpriya’ book, in our considered view, the arguments of the assessee that, credits in bank account of employees is 58 ITA.Nos.1846 to 1851/Hyd./2019 out of receipts recorded in the ‘Lokpriya’ book is acceptable. Further, upon perusal of withdrawal from bank account, the Assessing Officer himself has admitted the fact that, the assessee has withdrawn amounts from bank account of the employees for the purpose of construction of B.Ed College and also for construction of M/s. Vinoba Nagar Development Society. From the observations of the Assessing Officer, it is undisputedly clear that, there is a nexus between the undisclosed income from land transactions as per ‘Lokpriya’ notebook and credits in the bank account of the employees. Thus, in our considered view, the arguments of the assessee that, telescoping benefit should be given to additions made towards credits in bank account against addition made towards undisclosed land transactions should be allowed. Thus, we direct to the Assessing Officer to allow the benefit of telescoping towards additions made on account of unexplained cash credit of Rs.1,30,94,500/- towards additions made on account of undisclosed income from land transactions on the basis of ‘Lokpriya’ notebook found during the course of survey.

During the course of search at the residential premises of the assessee, certain photocopies of donor cheques in favour of CBIT and letters addressed to CBIT, Gandipet, Hyderabad were found. The assessee was asked to explain the banker cheques and in response to question no.11, he stated that, he has paid an amount of Rs.5,00,000/- as donation to CBIT for admission of his son Mr. Krishna Chandra for BE course. This amount of Rs.5,00,000/- was paid by 10 individuals who are his friends and relatives. The assessee had also given details of persons who gave money. During the course of assessment proceedings, the Assessing Officer called-upon the assessee to explain the source for donation paid to CBIT. In response, the assessee submitted that, he has paid donation in financial year 2006-2007 and refunded the money to 10 persons during the financial year under consideration. The Assessing Officer after considering the relevant submissions 60 ITA.Nos.1846 to 1851/Hyd./2019 of the assessee observed that, on-going through the photocopies of banker chequs for Rs.50,000/- each in 10 numbers, totalling to Rs.5,00,000/- it is noticed that, they are all issued by ICICI Bank, Dilsukhnagar Branch, Hyderabad. Further, only the letters accompanying them are signed by different individuals. This fact clearly demonstrates that, the assessee has only given 10 different names to explain the source for the payment of donation for admission to his son, whereas the entire amount is paid by assessee out of his unexplained and unaccounted sources. He, therefore, rejected the arguments of assessee and made addition of Rs.5,00,000/- towards donation paid to CBIT out of undisclosed income.

Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A). Before the learned CIT(A). the assessee has reiterated his submissions made before the Assessing Officer. The CIT(A) after considering the relevant submissions of the assessee, sustained the addition made by the Assessing Officer on the ground that, the assessee could not explain the source for 61 ITA.Nos.1846 to 1851/Hyd./2019 donation paid to CBIT and further the so-called 10 persons who claimed to have been paid donation could not file any evidence to prove the source. Therefore, the learned CIT(A) sustained the addition made by the Assessing Officer.

Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.

CA, P. Murali Mohan Rao, Learned Counsel for the Assessee submitted that, the learned CIT(A) erred in sustaining the addition made by the Assessing Officer towards donation, even though, the assessee has explained the source out of known source of income and amount received from friends and relatives. Learned Counsel for the Assessee further made an alternative argument and submitted that, the Assessing Officer has made addition towards unaccounted income from land transactions, and the said money is available for explaining source for donation. Therefore, he submitted that, addition made by the Assessing Officer should be deleted.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The assessee has paid Rs.5,00,000/- donation to CBIT for getting admission to his son in BE course. Although, initially the assessee claims to have explained the source out of money received from 10 individuals and also furnished their names, but, could not substantiate his claim with relevant evidences. Even before us, the assessee could not furnish any details to substantiate his claim that, 10 people have paid Rs.50,000/- each towards donation. Therefore, we cannot 63 ITA.Nos.1846 to 1851/Hyd./2019 accept the argument of the assessee. Further, in so far as alternative argument of the assessee that, if at all, the addition is sustained towards donation paid to CBIT, then, benefit of telescoping should be allowed out of addition made towards undisclosed income from land transactions, in our considered view, the Assessing Officer has made addition towards undisclosed income from land transactions of Rs.3,44,22,300/- which is available with the assessee to explain the source for donation of Rs.5,00,000/- paid to CBIT. Further, the benefit of telescoping can be allowed, in case, any addition is made towards income and expenditure on the basis of seized material. Since, the addition towards donation is also from the very same seized material, which is the basis for making addition towards undisclosed income from land transactions, in our considered view, the alternative submission of the assessee for the benefit of telescoping should be accepted. Thus, we direct the Assessing Officer to allow benefit of telescoping out of undisclosed income from land transactions to donation paid to CBIT for Rs.5,00,000/- and delete the addition.

During the course of statement recorded under section 131 of the Act on 11.02.2008, the assessee in his reply to question no.17 stated that, he has received an amount of Rs.45 lakhs by way of cash from Sri Murali Goud in the financial year 2006-2007 for settlement of litigation of land of 45 acres owned by Sri Murali Goud at Guntur village Hayat Nagar Mandal, Ranga Reddy District in Survey Nos. 278/2, 278/3, 278/9, 278/5 and 278/6. During the course of assessment proceedings, the Assessing Officer called- upon the assessee to explain as to why addition shall not be made towards commission received from land settlement. In response, the assessee submitted that, amount mentioned in his statement is Rs.4-5 lakhs and not Rs.45 lakhs and further, this amount pertains to the financial year 1999- 2000 and was already admitted in the return of income filed for the relevant assessment year. The Assessing Officer after considering the relevant submissions of the assessee and 65 ITA.Nos.1846 to 1851/Hyd./2019 also taking note of statement recorded during the course of search under section 131 of the Act on 01.12.2008 observed that, the explanation of the assessee with regard to commission income are contradictory and are far from truth. The assessee in the statement very clearly admitted having received Rs.45 lakhs for land settlement. The subsequent argument that, it is not Rs.45 lakhs, but, only Rs.4-5 lakhs is devoid of merit. Further, the argument of the assessee that, the amount pertains to financial year 1999- 2000 and the same was admitted in the Firm's return is also incorrect. Thus, rejected the arguments of the assessee and made addition of Rs.45 lakhs towards undisclosed income from commission. On appeal, the learned CIT(A) sustained the addition made by the Assessing Officer.

Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.

CA, P. Murali Mohan Rao, Learned Counsel for the Assessee referring to the return of income filed by the assessee for the assessment year 2007-2008 submitted that, the assessee has admitted gross receipt of 66 ITA.Nos.1846 to 1851/Hyd./2019 Rs.89,22,582/- which includes commission from real estate business. Further, the assessee has explained the relevant details to the Assessing Officer, but, the Assessing Officer without considering the relevant details, has simply made the addition. The learned CIT(A) without giving any reasons sustained the addition towards commission income from land transactions. Therefore, he submitted that, the addition made by the Assessing Officer and sustained by the learned CIT(A) should be deleted.

Sri Gurpreet Singh, learned Sr. AR for the Revenue, on the other hand supporting the order of the learned CIT(A) submitted that, the assessee has admitted receipt of Rs.45 lakhs from one Sri Murali Goud for land settlement and the same is outside the books of accounts of the assessee. The argument of the Counsel for the Assessee that, this amount is included in the gross receipts offered for the year under consideration is devoid of merit going by the statement recorded from the assessee. The Assessing Officer and the learned CIT(A) after considering the relevant facts, has rightly made addition towards undisclosed 67 ITA.Nos.1846 to 1851/Hyd./2019 income from commission and thus, the order of the learned CIT(A) should be upheld.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. During the course of search, in the statement recorded under section 131 of the Act, dated 01.12.2018, the assessee, in reply to question no.17 stated that, he has received an amount of Rs.45 lakhs by way of cash from one Sri Murali Goud for settlement of litigation in land admeasuring 45 acres owned by Sri Murali Goud at Kuntloor Village, Hayat Nagar Mandal, Ranga Reddy District, bearing Survey Nos. 278/2, 278/3, 278/9, 278/5 and 278/6, which is very clear from the statement recorded, which is part of the assessment order. During the course of assessment proceedings, the assessee has taken a new argument and claimed that, amount mentioned in his statement is not Rs.45 lakhs, but, it is only Rs.4-5 lakhs and further, the amount pertains to financial year 1999- 2000 and was already admitted in the return of income filed for the relevant assessment year in the capacity of G.

The assessee has raised the following grounds in the instant appeal :

The first issue that came-up for consideration from ground nos.2 to 4 of assessee’s appeal is addition towards undisclosed income from land transactions of Rs.13,00,000/-.

We find that, an identical issue has been considered by us in assessee’s own case for the assessment year 2007-2008 in ITA.No.1848/Hyd/2019. But for the figures and facts, the issues involved in this appeal are identical to the issue which we have considered for the assessment year 2007-2008. The reasons given by us in 71 ITA.Nos.1846 to 1851/Hyd./2019 preceding paragraph nos.12 to 14 shall mutatis mutandis apply to this appeal ITA.No.1846/Hyd./2019 for the assessment year 2005-2006 as well. Therefore, for similar reasons we are inclined to uphold the order of the learned CIT(A) and sustained addition made by the assessing officer towards undisclosed income from land transactions.

The next issue that came-up for consideration from ground nos.5 and 6 of assessee’s appeal is addition towards unexplained investment in house property for Rs.9,08,650/-

During the course of search proceeding, it is noticed that, Mr. Krishna Chandra, son of the assessee had made an investment for purchase of residential Flat-404, 5th Floor, Subhalaxmi Apartments, Green Hills Colony, Kothapet, Hyderabad in January 2005. The assessee was asked to clarify the source for such investment and in response, the assessee admitted that, investment was made by him and that, the total consideration including the registration fee and modification of Flat comes to Rs.9.08 lakhs. The assessee further stated that, source for the above 72 ITA.Nos.1846 to 1851/Hyd./2019 investment is paid out of the HUF funds of Rs.2,15,000/- was paid by his mother Smt. Andalamma and balance of Rs.93,650/- was made by his wife Smt. Vijaya Lakshmi. The Assessing Officer after considering the submissions of the assessee observed that, the claim of the assessee that, his mother handled the funds of HUF and the HUF has the sources of Rs.6,00,000/- cannot be accepted. From the assessment years 2003-2004 to 2009-2010, the assessee has filed return of income in the status of HUF and Sri G. Rajendra Reddy being has Karta of the HUF. The income returned in the earlier assessment year is very meagre going by the return of income filed for the assessment years 2003- 2004 to 2005-2006. From the above, it is seen that, the argument of the assessee that, HUF was having funds of Rs.6,00,000/-, lacks credibility and, therefore, the argument of the assessee cannot be accepted. Thus, rejected the arguments of the assessee and made addition of Rs.9,08,650/- to the total income of the assessee.

CA, P. Murali Mohan Rao, Learned Counsel for the Assessee submitted that, the learned CIT(A) erred in sustaining the addition of Rs.9,08,650/- as unexplained investment in purchase of Flat held by assessee’s son Mr. Krishna Chandra, though, there is no evidence that, the assessee has invested the same. Therefore, he submitted that, the addition made by the Assessing Officer should be deleted.

Sri Gurpreet Singh learned Sr. AR for the Revenue, on the other hand. supporting the order of the Assessing Officer and the learned CIT(A) submitted that, in the statement recorded during the course of search, the assessee has clearly stated that, he has made investment for purchase of house property and also explained the source out of funds received from HUF and amount paid by his wife and mother. However, could not file any evidence to 74 ITA.Nos.1846 to 1851/Hyd./2019 justify his case. Therefore, the Assessing Officer has made the addition towards unexplained investment in house property and the learned CIT(A) after considering the relevant facts, has rightly sustained the addition made by the Assessing Officer. Therefore, he submitted that, the addition made by the Assessing Officer should be upheld.

We have heard both the parties, perused the materials on record and through the orders of the authorities below. We have also considered relevant reasons given by the Assessing Officer to make addition of Rs.9,08,650/- as unexplained investment in purchase of Flat held in the name of Mr. Krishna Chandra, the son of the assessee. In the statement recorded during the course of search, the assessee clearly stated that, he has made the investment in Flat in the name of his son and the source was, out of amount received from HUF, from his wife and mother. Therefore, the argument of the assessee that, there is no evidence with the Assessing Officer to come to the conclusion that, investment is made by the assessee is not based on any evidence is incorrect and cannot be accepted.

The assessee has raised the following grounds in the instant appeal :

The only issue that came-up for consideration from ground nos.2 to 5 of assessee’s appeal is addition towards undisclosed income from land transactions for Rs.31,26,000/-.

We find that, an identical issue has been considered by us in assessee’s own case for the assessment year 2007-2008 in ITA.No.1848/Hyd./2019. But for the figures and facts, the issues involved in this appeal are identical to the issue which we have considered for the assessment year 2007-2008. The reasons given by us in preceding paragraph nos.12 to 14 shall mutatis mutandis apply to this appeal ITA.No.1847/Hyd./2019 for the assessment year 2006-2007 as well. Therefore, for similar 78 ITA.Nos.1846 to 1851/Hyd./2019 reasons we are inclined to uphold the order of the learned CIT(A) and sustain addition made by the assessing officer towards undisclosed income from land transactions.

In the result, appeal ITA.No.1847/Hyd./2019 of the assessee assessment year 2006-2007 is dismissed.

The assessee has raised the following grounds in the instant appeal :

The first issue that came-up for consideration from ground nos.2 to 5 of assessee’s appeal is, addition 80 ITA.Nos.1846 to 1851/Hyd./2019 towards undisclosed income from land transactions for Rs. 2,69,73,000/-.

We find that, an identical issue has been considered by us in assessee’s own case for the assessment year 2007-2008 in ITA.No.1848/Hyd./2019. But for the figures and facts, the issues involved in this appeal are identical to the issue which we have considered for the assessment year 2007-2008. The reasons given by us in preceding paragraph nos.12 to 14 shall mutatis mutandis apply to this appeal ITA.No.1849/Hyd./2019 for the assessment year 2008-2009 as well. Therefore, for similar reasons we are inclined to uphold the order of the learned CIT(A) and sustain addition made by the assessing officer towards undisclosed income from land transactions.

The next issue that came for consideration from ground no.6 of assessee’s appeal is, addition of Rs.42,41,280/- towards unexplained cash credit.

We find that, an identical issue has been considered by us in assessee’s own case for the assessment 81 ITA.Nos.1846 to 1851/Hyd./2019 year 2007-2008 in ITA.No.1848/Hyd./2019. But for the figures and facts, the issues involved in this appeal are identical to the issue which we have considered for the assessment year 2007-2008. The reasons given by us in preceding paragraph nos.21 and 22 shall mutatis mutandis apply to this appeal ITA.No.1849/Hyd./2019 for the assessment year 2008-2009 as well. Thus, we direct to the Assessing Officer to allow the benefit of telescoping towards additions made on account of unexplained cash credit of Rs.42,41,280/- towards additions made on account of undisclosed income from land transactions on the basis of ‘Lokpriya’ notebook found during the course of survey. Accordingly, ground no.6 of the assessee is allowed.

The next issue that came-up for consideration from ground no.7 of assessee’s appeal is, addition towards donation from undisclosed income of Rs.50,00,000/- lakhs paid to M/s Vinoba Development Society.

The facts with regard to the impugned dispute are that, during the course of search at the residence of the 82 ITA.Nos.1846 to 1851/Hyd./2019 assessee it was found finding that, the assessee is acquainted with the land dealings as Coordinator of Andhra Pradesh Bhoodan Yagna Board and also actively engaged with M/s. Vinobha Nagar Development Society, dealing in real estates. Further, the contents in the impounded material A/SVS/BUS/14, shows donation payment to M/s Vinoba Development Society. Sri G. Rajender Reddy was asked about his contribution to the above society. In the statement under section 132(4) recorded on 22.08.2008, he stated that, he has made total contribution of Rs.50 lakhs to M/s. Vinobha Nagar Development Society for the period from December 2005 to till the year 2008. He has neither given any further details on the expenditure, manner in which he has contributed the said amount of Rs.50 lakhs to the Society. He has also not given any source from where he has drawn this amount and made the said contribution to the Society. During the course of assessment proceedings, the Assessing Officer called-upon the assessee to explain the source for donations paid to M/s. Vinobha Nagar Development Society. In response, the assessee submitted 83 ITA.Nos.1846 to 1851/Hyd./2019 that, he is only an Office Bearer of the Society, and he was instrumental in Society get substantial amount of funds, but he has not made any donation to the Society. The Assessing Officer after considering the relevant submissions of the assessee observed that, except making some vague claims about his stature and his principal's, the assessee has not replied to the points raised on the statement given under oath under section 132(4) of the Act and thus, rejected the explanation of the assessee and made addition of Rs.50 lakhs towards donation from undisclosed income.

On appeal, the learned CIT(A) sustained the addition.

CA, P. Murali Mohan Rao, Learned Counsel for the Assessee submitted that, the learned CIT(A) erred in sustaining the addition towards donation from undisclosed income without appreciating the fact that, there is no evidence with the Assessing Officer to allege that, the assessee has made donations for the year under consideration. Further, the so-called donations claimed to have been paid by the assessee, is not based on any 84 ITA.Nos.1846 to 1851/Hyd./2019 evidence found during the course of search and only based on the admission of the assessee in the statement. Going by the reply of the assessee, it is vague in nature, where the assessee claims to have paid donation from December 2005 to till 2008 that is up-to the date of the search. The Assessing Officer without even taking any details about the payment, has simply made the addition on the basis of statement of the assessee. In this regard, he relied upon decision of Hon’ble High Court of Telangana and Andhra Pradesh in the case of Gajjam Chinna Yellappa vs., Income Tax Officer [2015] 370 ITR 671 and also the Judgment of Hon’ble Supreme Court in the case of CIT, Salem vs., S. Khader Khan Son [2013] 352 ITR 480 (SC). The Learned Counsel for the Assessee has further made an alternative argument and submitted that, if at all the addition towards donation from undisclosed income is sustained, then, the benefit of telescoping should be allowed out of additions made towards undisclosed income from land transactions.

Sri Gurpreet Singh learned Sr. AR for the Revenue, on the other hand supporting the order of the 85 ITA.Nos.1846 to 1851/Hyd./2019 CIT(A) submitted that, the assessee could not explain the nature and source for donations paid to M/s. Vinobha Nagar Development Society. In absence of any explanation from the assessee, the Assessing Officer has rightly treated donations as undisclosed income of the assessee and the learned CIT(A) after considering the facts, has rightly sustained the addition made by the Assessing Officer. Therefore, he submitted that, the addition made by the Assessing Officer should be upheld.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to fact that, the addition made by the Assessing Officer towards donations from undisclosed income is neither based on any evidence collected during the course of search nor clear admission from the assessee, which is evident from the statement recorded during the course of search, where the assessee has given a vague reply and stated that, he has paid donation of Rs.50 lakhs from December 2005 to 2008 i.e., up-to the date of search. Further, there is no clear 86 ITA.Nos.1846 to 1851/Hyd./2019 particulars as to date, on which, such donation was paid by the assessee and further, whether said donation was paid in cheque or cash. In absence of any evidence, in our considered view, the addition made by the Assessing Officer only on the basis of statement of the assessee, cannot be sustained. This principle is supported by the decision of Hon’ble High Court of Telangana and Andhra Pradesh in the case of Gajjam Chinna Yella vs., ITO (supra), where, it has been clearly held that, “where assessment order was passed on sole basis of statements recorded during the course of survey and after retraction of the statements, the Assessing Officer did not produce any other material to support understatement of sale consideration of land, the assessment order was to be set aside”. Similar view has been taken by the Hon’ble Supreme Court in the case of CIT, Salem vs., S. Khader Khan Son (supra), where it has been clearly held that, “addition made solely on the basis of statement recorded during the course of survey, cannot be sustained, unless the said statement is supported by corroborative evidence”. In the present case, there is no dispute with 87 ITA.Nos.1846 to 1851/Hyd./2019 regard to the fact that, the addition made by the Assessing Officer towards donations, out of undisclosed income, is neither supported by any evidence nor based on admission of the assessee. Therefore, the addition made by the Assessing Officer towards donation from undisclosed income cannot be sustained.

Further, assuming for a moment, the donations out of undisclosed income need to be sustained, still the assessee can get the benefit of telescoping towards additions made on account of undisclosed income from land transactions, where the Assessing Officer has made addition of Rs.2,69,73,000/- for the year under consideration. If we consider the addition towards undisclosed income from land transactions, which is sufficient to explain the so-called donations paid to M/s. Vinobha Nagar Development Society. Therefore, on this count also, addition made by the Assessing Officer cannot be sustained. The learned CIT(A) without considering the relevant facts, has simply sustained the addition made by the Assessing Officer. Therefore, we set-aside the order of the learned CIT(A) and direct the 88 ITA.Nos.1846 to 1851/Hyd./2019 Assessing Officer to delete the addition made towards donation from undisclosed income.

In the result appeal ITA.No.1849/Hyd./2019 of the assessee for the assessment year 2008-2009 is partly allowed.

The assessee pleads the following substantial grounds in the instant appeal :

The learned CIT(A) further failed to appreciate that it is settled law that every receipt cannot be revenue receipt 89 ITA.Nos.1846 to 1851/Hyd./2019 or that it is income and further erred in not considering the submissions about the discrepancy by the AO in considering the amount as against the claim of the assessee that the receipts are considered in the hands of the firm and amount is also not correctly arrived at.

The only issue that came-up for consideration from ground nos.2 to 5 of assessee’s appeal is addition towards undisclosed income from land transactions for Rs. 1,16,44,500/-.

In the result, appeal ITA.No.1850/Hyd./2019 of the assessee for the assessment year 2009-2010 is dismissed.

“The order of the learned CIT(A) in confirming the order of the AO is not only erroneous both on facts and in law.

Brief facts of the case are that, during the course of assessment proceedings, the Assessing Officer has disallowed capital expenditure of Rs.84,695/- towards purchase of mobile phones, further, since TDS has not been made on certain payments, the AO disallowed a sum of Rs.89,000/- and Rs.1,13,680/- towards accounting charges and advertisement respectively, u/s 40(a)(ia) of the Income Tax Act, 1961 which have been debited in the P & L A/c and added to the total income of the assessee vide order dated 22.03.2013 u/sec.143(3) r.w.s.147 of the Income Tax Act, 1961.

On being aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A) and the learned CIT(A) after considering the relevant submissions of 92 ITA.Nos.1846 to 1851/Hyd./2019 the assessee, partly allowed the appeal of the assessee by directing the Assessing Officer to allow depreciation at the rates allowable to a computer on mobile phone of Rs.84,695/-. Further, the learned CIT(A) directed the Assessing Officer to allow accounting charges amounting to Rs.89,000/- and with regard to advertisement expenses, the learned CIT(A) sustained the addition made by the Assessing Officer.

Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal challenging the addition of Rs.1,13,680/- sustained by the learned CIT(A) on account of advertisement expenses.

CA, P. Murali Mohan Rao, Learned Counsel for the Assessee submitted that, the learned CIT(A) was failed to appreciate that the assessee is dealing with only laying out of plots, survey, fixing of boundaries and, therefore, the assessee had not paid amounts exceeding the threshold limit for advertisement and thereby, erred in not accepting the ledger extracts produced about the payments for 93 ITA.Nos.1846 to 1851/Hyd./2019 advertisements which are writing on walls etc. Learned Counsel for the Assessee submitted that, although, the Assessing Officer has applied provisions of sec.40(a)(ia) of the Income Tax Act, 1961 and disallowed the expenditure for non-deduction of TDS, but, the fact remains that, in none of the cases the amount paid by the assessee does not exceed the specified limit and thus, there is no requirement of TDS and consequently, the addition cannot be made u/sec.40(a)(ia) of the Income Tax Act, 1961. Therefore, he submitted that, the addition sustained by the learned CIT(A) should be deleted.

Sri Gurpreet Singh learned Sr. AR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, for advertisement expenses, the assessee could not furnish any evidence to prove that payment to individual person does not exceed the specified limit for deducting TDS u/sec.194C of the Income Tax Act, 1961. The learned CIT(A) after considering the relevant facts, has rightly sustained the addition made by the 94 ITA.Nos.1846 to 1851/Hyd./2019 Assessing Officer and thus, the order of the learned CIT(A) should be upheld.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The assessee has debited an amount of Rs.1,13,680/- towards advertisement expenses. The Assessing Officer disallowed advertisement expenses on the ground that, assessee has failed to deduct TDS u/sec.194C of the Income Tax Act, 1961. The assessee claims that payment to individual persons does not exceed the sum specified u/sec.194C of the Act for making TDS and, therefore, when the assessee has furnished relevant ledger extract copies and proved that, all payments are below the threshold limit for application of sec.194C, then, the learned CIT(A) ought to have deleted the addition made by the Assessing Officer. We find that, assessee except making oral statement that, payment made to individual person does not exceed the specified limit by furnishing ledger account, but, could not file any evidence to justify his case that, amount debited under the Head “Advertisement Expenses” does not 95 ITA.Nos.1846 to 1851/Hyd./2019 come under the provisions of sec.194C of the Income Tax Act, 1961. Therefore, we are of the considered view that, there is no error in the reasons given by the learned CIT(A) to sustain the addition made by the Assessing Officer towards advertisement charges. Thus, we are inclined to uphold the order of the learned CIT(A) and reject the ground taken by the assessee.

In the result, appeal ITA.No.1851/Hyd./2019 of the assessee for the assessment year 2007-2008 is dismissed.

To sum up, appeals ITA.Nos.1848 and 1849/ Hyd./2019 of the Assessee are partly allowed and ITA.Nos.1846, 1847, 1850 and 1851/Hyd./2019 of the Assessee are dismissed. A copy of this common order be placed in the respective case files.