SIVA MOHAN REDDY PARVATHREDDY,HYDERABAD vs. DCIT, CENTRAL CIRCLE-3(2), HYDERABAD

The Ld. CIT(A) should have deleted the addition as the AO has not followed the directions of the Hon'ble ITAT, Hyderabad for making the addition and accordingly the addition made by the AO is liable to be deleted.

The Appellant craves to add/leave/alter/modify any other Found of appeal during the course of hearing.”

Succinctly stated, the assessee had filed his return of income for A.Y. 2015-16 on 23.07.2017, declaring an income of Rs. 8,42,61,175/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Section 143(2) of the Act.

Search and seizure proceedings were conducted on the assessee under Section 132 of the Act on 21.11.2017, and as a result thereof, the assessment proceedings that were initiated in its case under Section 143(2) of the Act got abated. Notice under Section 153A of the Act, dated 29.05.2018, was issued to the assessee. In compliance, the assessee filed his return of income on 20.08.2018, disclosing his income at Rs. 8,42,61,180/-, i.e. as was originally returned.

The A.O. observed that certain incriminating material was found and seized during the course of search proceedings bearing No. 48 of Annexure/A/PSMR/Hyd/17-18/2. The A.O. observed that the assessee, on being confronted with the aforesaid document, had responded that a commercial space of 30,840 sq. ft. belonging to him in Imperial Towers, Hyderabad, was sold in Assessment Years 2015-16, 2016-17, and 2018-19. Further, the A.O. observed that the assessee had, in his statement recorded u/s 132(4) of the Act, dated 23.11.2017, admitted to have received Rs. 2,500/- per sq. ft in cash over and above the value that was received by him on the sale of the subject property as per the registered deeds. Accordingly, the assessee had, inter alia, for the A.Y. 2016-17, voluntarily offered an additional income of Rs. 3,84,70,000/-.

The A.O. observed that the assessee had, thereafter, not offered the aforesaid additional income of Rs. 3.84 crore (approx.) in his respective returns of income filed in response to notice under Section 153A of the Act. On being queried, it was the claim of the assessee that he had, vide an “affidavit”, dated 13.01.2018, retracted the disclosure that was obtained from him during the 5 Siva Mohan Reddy Parvathreddy course of the search proceedings through coercion. Elaborating further, the assessee submitted that he had in his “affidavit” deposed that his sworn statement, dated 23.11.2017 was not voluntary, and the seized document bearing no.48 (supra) was got forcibly prepared. However, the A.O. did not accept the submission of the assessee and made an addition of Rs. 3.84 crores (supra) in the respective years as his unexplained business receipts.

Aggrieved, the assessee carried the matter in appeal before the CIT(A), who, vide his order dated 21.09.2020 allowed the appeal of the assessee.

Subsequently, the Department filed an appeal before the Tribunal, which, vide its order, dated 29.08.2022, restored the issue to the file of the A.O. with a direction to decide the issue by conducting further inquiries, either by calling information or by issuance of summons to various other parties, as he deems fit, on the basis of the details given by the assessee, and decide the issue as per facts and law.

Consequent to the order of the Tribunal, the A.O. passed the order under Section 153A r.w.s. 254 of the Act, dated 10.07.2023, wherein the addition made by him in the original assessment order passed under Section 143(3) r.w.s. 153A of the Act, dated 30.12.2019 for the subject year i.e. AY 2015-16, was reduced to Rs. 57,50,000/-, which, in turn, was based on the contents of the seized document bearing no.48 (supra).

Aggrieved, the assessee has assailed the order passed by the A.O. under Section 153A r.w.s. 254 of the Act, dated 10.07.2023, and carried the matter in appeal before the CIT(A), but without success.

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

The controversy involved in the present appeal lies in a narrow compass, i.e., as to whether or not the A.O./CIT(A) are right in law and on the facts of the case in sustaining an addition of Rs. 57.50 lacs (supra) in the hands of the assessee.

Ostensibly, during the course of search proceedings, a document bearing number 48 (supra) was found and seized, which inter alia read as under:

The A.O., in the course of the set-aside proceedings, observed that the aforementioned document revealed beyond doubt that the assessee had sold “Unit No.5A” (Ground Floor), admeasuring 2,300 sq. ft., to Shri RBN Murthy @ Rs. 8,000 per sq. ft., i.e., for a total sale consideration of Rs.1,92,50,000/-, (including three car parking and other services), as against the sale consideration of Rs.1,35,00,000/- that was claimed by him to have been received from the aforementioned person. Elaborating further on his contention, the A.O. observed that though the assessee had claimed to have sold “Unit No. 5A” to Shri R.B.N. Murthy @ Rs. 5,870/- per sq.ft, as per the aforementioned document No. 48 (supra) seized in the course of the assessment proceedings, the same was sold @ Rs. 8,000 per sq. ft.

On a perusal of the record, we find that the Tribunal, in the course of the first round of litigation, had set aside the matter to the file of the A.O., vide its consolidated order passed in & 61/Hyd/2021, dated 29.08.2022, with a specific direction to decide the issue regarding the alleged receipt of “On money” by the assessee, aggregating to Rs. 7.71 crores for A.Y. 2015-16 to A.Y 2017-18 (i.e including the subject year), by conducting further enquiries either by calling for information or by issuance of summons to several parties. Accordingly, the A.O., in compliance to the directions of the Tribunal, had issued summons to certain persons mentioned at Serial Numbers 1, 2, 3, 4, 5, 6, 7, and 9, appearing in the “Chart” culled out by the A.O. at Page 4 of his assessment order, and recorded their statements.

Also, as is discernible from the record, we find that the A.O. had in the course of the set-aside proceedings recorded the statement of Shri RBN Murthy i.e the purchaser of “Unit No. 5A”. Shri RBN Murthy (supra) was confronted with the statement of the assessee, viz., Shri Siva Mohan Reddy that was earlier recorded under Section 132(4) of the Act, dated 23.11.2017, wherein he, in reply to Question No. 23 of his statement, had admitted of having received “On money” of Rs. 2,500/- per sq. ft. in cash over and above the registered value, on sale of commercial space admeasuring 30,840 sq. ft belonging to him in Imperial Towers, Hyderabad during A.Y 2015-16 to A.Y 2017-18. However, we find that Shri RBN Murthy (supra), in his statement recorded under Section 131 of the Act, upon being confronted with the aforesaid seized material, viz., document bearing no.48 (supra) and also the statement of Shri Siva Mohan Reddy recorded under Section 132(4) of the Act, dated 23.11.2017, had declined of having paid any amount over and above the sale consideration mentioned in the registered sale deed. Apart from that, we find that Shri Siva Mohan Reddy, i.e., the assessee, in his statement recorded under Section 131 of the Act, in the course of the set- 14 Siva Mohan Reddy Parvathreddy aside proceedings, had also declined to have received any cash over and above the amount mentioned in the registered sale deed. Although, we find that the A.O. had stated that the statements of persons at Sr. Nos. 1, 2, 3, 4, 5, 6, 7, and 9, were recorded under Section 131 of the Act in the course of the set-aside proceedings, but, he had nowhere stated in his order that either of the said persons had claimed to have paid any amount over and above that mentioned in the respective registered sale deeds. Also, the Ld. D.R. has not placed before us any material which would prove to the contrary. On the contrary, we find that the assessee, in his submissions filed before the CIT(A), had claimed that neither of the aforementioned parties had in their respective statements claimed to have paid to the assessee any excess consideration for the purchase of the respective properties.

On a perusal of the record, we find that it is the claim of the assessee that his statement recorded under Section 132(4) of the Act, dated 23.11.2017, wherein he had, in reply to Question No. 23, admitted to have received “On money” on the sale of commercial space admeasuring 30,840 sq. ft in Imperial Towers, Hyderabad, over and above the registered value during A.Ys.

On a perusal of the record, we find that the Tribunal, in the first round of litigation, while disposing of the appeal of the assessee for A.Y. 2015-16 to A.Y. 2017-18, vide its consolidated order in & 61/Hyd/2021, dated 29.08.2022, while dealing with the issue of the addition of Rs. 7.71 crores (supra) that was made in the hands of the assessee on account of alleged receipt of “On money”, which he had admitted in his statement recorded under Section 132(4) of the Act, dated 23.11.2017, had set aside the matter with a specific observation that the CIT(A)

At this stage, we may herein observe that, though the assessee, vide his statement recorded on oath under Section 132(4) of the Act, dated 23-11-2017, in reply to Question No. 23, had admitted of having received “On money” of Rs.2,500/- per sft. in cash over and above the registered value, that was received by him on sale of commercial space of 30,840 sq. ft. belonging to him in Imperial Towers, that was sold during the A.Y. 2015-16 to A.Y. 2017-18, but he had thereafter retracted from his statement vide an “affidavit” that was filed with the Investigation Wing on 13-01- 2018. On a perusal of the record, it transpires that the assessee had alleged that his statement under Section 132(4) of the Act, dated 23-11-2017, wherein he had admitted of having received “On money” on the sale of the subject property, was recorded under coercion. Also, the assessee had alleged that the seized document, viz., Document No. 48 (supra), based on which the payment of “On money” of Rs. 57.50 lacs (supra) was inferred by the AO was forcibly prepared.

We may further observe that, pursuant to the directions of the Tribunal in the first round of litigation, the AO had during the course of the set aside proceedings recorded the statement of Shri Siva Mohan Reddy, i.e., the assessee, who had denied of having received any cash over and above that recorded in his books of accounts. Further, Shri RBN Murthy (supra) on being confronted with the seized Document No. 48, and also the earlier statement of assessee recorded in the course of the search proceedings under Section 132(4) of the Act, dated 23-11-2017, wherein he had admitted of having received “On money”, had declined of having paid any amount to the assessee over and above the sale consideration of Rs. 1.35 crores that was paid by him through cheque.

We are further of the view that, on a perusal of the seized document, i.e., Document No. 48 (supra), nothing can be safely gathered which would conclusively and irrefutably establish that cash amounting to Rs. 57.70 lacs (supra) was paid by Shri RBN Murthy (supra) to the assessee over and above the sale consideration of Rs.1.35 crores (supra), that was remitted through cheque for the purchase of the subject property, i.e., “Unit No. 5A:

On a perusal of the seized document, it transpires that the same refers to the impugned sale consideration for “Unit No. 5A”, (Ground Floor), in the name of Shri RBN Murthy (supra) along with certain calculation, wherein as against the area of 2300 sq. ft. on being multiplied by Rs. 8,000/- an amount of Rs. 1.85 crores is mentioned, which is further supplemented by certain amounts, viz. three car parking (Rs.4,50,000/-) and other services (Rs. 4,00,000/-), therein giving a total of Rs. 1.92 crores, against which it is mentioned that Rs.1.35 crores received through 20 Siva Mohan Reddy Parvathreddy cheque. Although at first blush, the contents of the aforesaid seized document would make one infer that the balance sale consideration of Rs. 57.50 lacs would also have changed hands, but in the absence of any irrefutable documentary evidence/material such a view cannot be summarily approved. We say so, for the reason that there is nothing mentioned in the aforementioned seized Document no. 48 (supra) which would indicate that the balance amount was paid/received in cash. Also, the fact that the aforementioned document might be a rough working/noting, and, thus, merely a dumb document, also cannot be ruled out. Further, the probability that the contents of the seized Document No. 48 (supra) might be the purported sale transaction, which, though, did not materialize, as such, can also not be ruled out. Our aforesaid conviction is fortified by the fact that both the assessee and Shri RBN Murthy (supra) had denied of having received or paid any cash amounting to Rs. 57.50 lacs over and above the sale consideration of Rs. 1.35 crores (supra), recorded qua the sale of the subject property in the books of accounts.

Also, we find that though in the first round of litigation the Tribunal had specifically directed the A.O to carry out further enquiries and call for information by issuing summons to other parties as he may deem fit, but there is nothing available on record or brought to our notice that any of the other parties to whom the assessee had sold units/flats during the subject year were found to have paid any amount over and above that was disclosed in the registered sale deeds.

Considering the totality of the facts involved in the present case, viz., (i) that the assessee had retracted his statement that was recorded under Section 132(4) of the Act on 23.11.2017, wherein he had admitted of having received “On money” on the sale of commercial space of 30,840 sq. ft. belonging to him in Imperial Towers, that was sold during the A.Y. 2015-16 to A.Y. 2017-18, and had vide his “affidavit”, dated 13.01.2018 filed before the Investigation Wing claimed that his aforesaid statement was recorded under pressure and coercion, and also the seized document was forcibly prepared; (ii) that the assessee in his statement recorded under Section 131 of the Act in the course of the assessment proceedings, had declined of having received any 22 Siva Mohan Reddy Parvathreddy cash over and above that recorded in the registered sale deed; (iii) that Shri RBN Murthy (supra), on being confronted with the earlier statement of the assessee recorded under Section 132(4) of the Act, dated 27.03.2017 and also the incriminating document i.e. Document No. 48 (supra), had declined of having paid any cash to the assessee; (iv). the contents of the seized document i.e. Document No. 48 (supra) do not irrefutably evidence that the subject property was sold by the assessee for a consideration received over and above that disclosed in the registered sale deed i.e. Rs. 1.35 crore; (v). that nothing has been place on record which would reveal that the other parties to whom the assessee had sold units/flats in the commercial complex i.e., the parties listed at Serial Nos. 2, 3, 4, 5, 6, 7 and 9, had, in their respective statements recorded under Section 131 of the Act, in the course of the set-aside assessment proceedings, had stated that they had paid any amount to the assessee over and above that recorded in the respective registered sale deeds; and (vi). that the party at Serial No.8, who vide his written reply forwarded by post had also not come up with any adverse statement regarding the veracity of the sale consideration claimed by the assessee to have been 23 Siva Mohan Reddy Parvathreddy received from him i.e., over and above that was recorded in the registered sale deed, we are of the considered view that there could have been no justification to conclude that the assessee had sold the subject property, i.e., “Unit No. 5A”, involving “On money” of Rs.57.50 lacs, as alleged by the Assessing Officer.

In the present case, as the A.O., as directed by the Tribunal vide its consolidated order in & 61/Hyd/2021, dated 29.08.2022, had failed to place on record any material which could conclusively establish that the assessee had sold “Unit No. 5A” to Shri RBN Murthy (supra) for a consideration over and above the disclosed sale consideration of Rs. 1.35 crores (supra) that was received by him through cheque and disclosed in the registered deed, therefore, there could have been no justification for the A.O. to have remained guided by his doubts and suspicions to make an addition of Rs. 57.50 lacs (supra) in his hands.

We thus, in terms of our aforesaid deliberations, set aside the order of the CIT(A) and vacate the addition of Rs. 57.50 lacs (supra) made by the A.O. vide his order passed under Section 153A r.w.s 254, dated 10.07.2023. 24 Siva Mohan Reddy Parvathreddy

Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations.