DEPUTY COMMISSIONER OF INCOME TAX, HYDERABAD vs. M/S PRESTIGE AVENUES LIMITED, HYDERABAD

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

The captioned cross-appeals filed by the assessee company and Revenue are directed against the order passed by the Commissioner of Income Tax (Appeals)-VII, Hyderabad, dated 15/02/2011, which in turn arises from the order passed by the A.O. U/s. 143(3) of the Income Tax Act, 1961 (“the Act”) dated 31/12/2008 for A.Y 2007-08. The assessee company has assailed the impugned order on the following grounds of appeal before us:
1. The order of the CIT(A)-VII, Hyderabad insofar as it went against the appellant is erroneous both on facts and in law.
2. The Ld. CIT(A) ought to have deleted the entire addition of Rs.
3,30,00,000/- without sustaining an amount of Rs. 3,14,20,425/- on account of the alleged deficit cash noticed.
3. The CIT ought to have appreciated the fact that search took place on 30/11/2006 and the books of account were closed on 31/3/2007
band in the said accounts transactions relating to the disclosure U/s.
132(4) of the additional income of Rs. 3.30 Crs were taken into account which resulted in admitting ultimate higher income and as such further addition of Rs. 3.30 crs amounts to double addition.
4. The CIT(A) ought to have appreciated that the cash found during the course of the search was satisfactorily explained by the appellant, which fact was accepted by the Assessing Officer.
5. The CIT(A) ought to have appreciated the fact that the A.O. having originally proposed the addition as ‘unexplained excess cash’ had upon satisfactory explanation of the cash position by the appellant, changed the track to treat / ad the amount as ‘deficit cash’ and as such the addition made is purely on ad-hoc basis and not on facts.
6. Craves leave to urge / raise any ground that might be necessary at the time of hearing.”

The Revenue on the other hand has assailed the impugned order on the following grounds of appeal before us:
1. “The Learned CIT(A) erred in deleting the addition to extent of Rs.
15,79,075/- out of the undisclosed income added of Rs. 3,33,00,000. 2. The Learned CIT(A) erred in deleting the addition of Rs. 42,62,400/- towards unexplained investment in the purchase of Khadthal/Maisigandi lands even though the same was added on the basis of evidentiary value of documents and surrounding circumstances.
3. The Learned CIT(A) erred in deleting the addition of Rs. 45,79,111/- towards unexplained investment in the purchase of Kharkalpahad lands event though the same was added on the basis of the evidentiary value of documents and surrounding circumstances.
4. The Learned CIT(A) ought to have appreciated the fact that the assessee failed to furnish the corroborative evidence to substantiate that the investment towards acquisition of lands was made from out of known sources of income.
5. The Learned CIT(A) ought to have appreciated the fact that the assessee failed to discharge the onus cast upon it to prove that the contents in the seized documents were incorrect and the rebut the presumption with evidence that the details in the seized documents do not relate to him.
6. Any other ground that may be urged at the time of hearing.”

assessee company for the subject year i.e., A.Y 2007-08, which however was being offered for tax in two years viz., (i). A.Y: 2007-08 - income under the head “other sources”: Rs. 3,14,20,425/-; and (ii).
A.Y 2006-07- unexplained investment in properties situated at Meerkhanpet and Kadthal/Maisigandi sites: Rs. 15,79,075/-. It was further stated in the letter that considering the aforesaid additional income that was being offered by the assessee company i.e., A.Y 2006-
07 (Rs. 15,79,075/-) and A.Y 2007-08 (Rs. 3,14,20,425/-), the declaration of the additional income of Rs. 3.30 crores that was made in the statement recorded U/s. 132(4) of the Act, dated 30/11/2006
was complied with.
4. During the course of the assessment proceedings, the A.O.
observed, that in the course of the search proceedings conducted U/s.
132 of the Act at the premises of the assessee company, i.e., 4th Floor,
Tirumala Towers, Himayat Nagar, Hyderabad on 30/11/2006, cash amounting to Rs. 3,00,46,700/- was found. It was further observed by him that an amount of Rs. 3 crores out of the aforesaid amount was seized by the Department during the search proceedings. Also, the A.O. observed that Sri M. Venkateswara Rao, Managing Director of the assessee company in his statement recorded U/s. 132(4) of the Act, dated 30/11/2006, had declared an additional income of Rs. 3.30
crores in the hands of the assessee company for the subject year i.e.
A.Y 2007-08. 5

Kadthal/Maisigandi during the subject year @ Rs. 16,000/- per acre.
However, the A.O. by drawing support from some certain seized documents had adopted the purchase consideration at Rs. 3.5 lac to Rs. 4 lac per acre and made a consequential addition towards unexplained investment of Rs. 42.62 lacs (supra) U/s. 69A of the Act.
14. Ostensibly, it was claimed by the assessee company that the purchase consideration that had exchanged hands for the aforesaid property was evidenced by the registered sale deeds wherein the sellers had admitted having received the complete sale consideration.
Apart from that, the assessee company had claimed that the investment made towards purchasing the subject land was duly disclosed in its financial statements for the year under consideration.
Accordingly, the assessee had based on the aforesaid facts claimed that in the absence of any material with the A.O. which would prove that any “on-money” i.e., any amount over and above the sale consideration disclosed in the sale deed was paid by the assessee company for purchasing the subject property, no adverse inferences qua the veracity of its claim of having purchased the same at the value disclosed in the registered purchase deeds could be drawn. Apart from that, the assessee company had in the proceedings before the CIT(A) tried to dispel the reliance that was drawn by the A.O from the seized documents/statements based on which he had doubted the veracity of the purchase transactions, as under:

“5.4
The assessee’s counsel further argued that since the Assessing
Officer’s assumption emerged solely from the contents of the above mentioned documents, it should be seen as to what these documents /
statement contain. The next noting in the said seized documents relating to this is as under:
(a)
Pages 42 to 45 of Annexure/PAL/MEL/4- The said document contains information relating to ownership of the land. There is no dispute on this issue that the assessee company had acquired 65.01 Acres of land
(53.27 acres AY 2006-07 and 11.04 acres during AY 2007-08).
(b)
Excel spreadsheet document PRK/New Folder/ Networth of Annexure
A/PAL/MEL/PO/2: This is a rough working statement called “company networth statement” showing certain figures of the land, etc. A reference to this indicate that neither dates nor year are mentioned. The figures in the said sheet do not denote either rupees or other denominations. On a cursory look it appears like rough noting sheet. The figures noted therein if added by two zeroes as was done by the Assessing Officer, they do not measure up to any reality. In addition to the same at no place it was mentioned that the purchase consideration of Maisagandi lands was of the order of Rs. 3.5 lakhs to Rs. 4 lakhs per acre as assumed by the A.O.
(c)
The admission of Sri P. Ravikumar in his sworn deposition dated
18/04/2007. It has to be submitted that the inference drawn by the Assessing Officer from the said deposition is totally at variance to the facts stated by Shri P. Ravikumar in the said sworn deposition; and with a view to make facts clear, an extract of the said sworn deposition is as under:
Q.2)
Please give the details of Mysigandi/Kadthal Project undertaken by M/s. Bhuvi Ventures P Ltd?
Ans) Approximately starting from the month of July, 2006 onwards, M/s.
Bhuvi Ventures P Ltd purchased through registered sale deed (and through the services of M/s. Prestive Avenues Ltd) land to an extent of around 40
acres at Kadthal Village Mahaboobnagar Disst, from various farmers for a consideration about Rs. 25,000/- to Rs. 30,000/- per acre. After acquiring the land, M/s. Bhuvi Ventures P Ltd has sold almost the entire land to various parties on different dates through registered sale deeds. The source for the above acquisition is from the equity amounting to Rs. 1.20 Crs pertaining to the shareholders of Bhuvi Ventures P Ltd.
Q.3)
How much profit M/s. Bhuvi Ventures P Ltd earned from Mysigandi /
Kadthal Lands?
Ans.) M/s. Bhuvi ventures P Ltd earned approximately a profit of Rs.
2,00,000/- to Rs. 3,00,000/- from the Mysigandi / Kadthal lands).
Q.4) when was the last piece of land of Mysigandi / Kadthal lands was sold by M/s. Bhuvi Ventures P[ Ltd and what is the extent of that lands. Als please state to whom it was sold and for what consideration?
Ans:) M/s. Bhuvi Ventures P Ltd has sold the last piece of land (at Mysigandi
/ Kadthal measuring about 6 acres @ Rs. 35,000/- per acre to one Mr. Rami
Reddy, Hyderabad during February, 2007. 5.5. In the said sworn statement, what all the assessee stated is about the transactions relating to the land deals in Mysigandi. He had categorically stated that the lands were purchased by the company; explained as to how the source for purchase consideration was met; and had also stated the probably profit earned out of the said deal. Nowhere he stated that the lands were purchased at the rates assumed by the Assessing Officer. All this is mere assumption of the Assessing Officer. The Assessing Officer could not substantiate his allegations of purchase consideration with reference to any acceptable evidence. Thus, there is no basis whatsoever for the Assessing
Officer to bring to tax Rs. 42,62,400/- as unaccounted receipt.”

the A.O. U/s. 69A of the Act. For the sake of clarity, the observations of the CIT(A) are culled out as under:
“5.6. I have considered the appellant’s submissions. The appellant’s representative had also drawn my attention to the copies of the seized paper
PRK/New Folder/Meeting/Networth, Annexure A/PAL/MEL/PO/2 as also copy of the sworn deposition recorded on 18/04/2007. As rightly stated by the appellant, the seize3d document did not contain details such as date, month or year and as such it is difficult to conclude that the notings made therein related to the assessment year under consideration. Apart from this the A.O. could not conduct any other investigation such as examining the parties concerned (which even the appellant requested) bring in any other positive material so as to substantiate his conclusions. Instead of taking the issue to its logical end, obviously, the A.O. slipped into an error in quoting a piece on the admission dated 18/04/2007. The A.O. stated something against the appellant based on what was never admitted either in the sworn statement dated 18/04/2007 or in any other submissions filed before the Assessing Officer. Since the A.O. relied upon only these documents which do not support his stand and as the A.O. could not gather any other positive evidence for making addition of Rs. 42,62,400/- it is apparent that the addition is made on pure surmise and assumption. The addition of Rs.
42,62,000/- is therefore deleted.”

cannot be contradicted by adducing any oral evidence.
Therefore, the order of the Tribunal does not suffer from any legal infirmity in reaching to the conclusion that the amount shown in the registered sale deed was received by the vendors and deserves to be added to the gross income of the assessee-appellant."

We thus, in the backdrop of our aforesaid observations find no infirmity in the view taken by the CIT(A), who after scrutinizing the seized documents and the statement dated 18/04/2007, had observed, that as there was no material available on record that would evidence that the assessee company had paid “on-money” of Rs. 42.62
lacs for purchase of 11.04 acres of land (out of Survey Nos. 260, 266
and 267) at Village Kadthal, therefore, the addition made by the A.O.
u/s 69 was liable to be vacated, uphold his view. The Ground of Appeal No.2 filed by the Revenue is dismissed.
(B). Unexplained investment towards the purchase of 2.30
acres of land (out of Survey Nos. 123 and 262) at Village
Karkalpahad: Rs. 45,79,111

cash of Rs. 30 lacs, had concluded that the subject land was purchased by the assessee company involving “on-money” payment of Rs. 45,79,111/-.
18. On a perusal of the record, it transpires that the assessee company had claimed before the CIT(A) that the aforesaid “agreements to sell” and also the receipt relied upon by the A.O. were not related to it as it was not a party to both the documents. Rather, it was the claim of the assessee company that it had purchased the subject land from the different land owners and not from the parties mentioned in the “agreement to sell” as was referred by the A.O. Also, the assessee company had claimed that as the landowners/sellers had acknowledged the receipt of the sale consideration disclosed in the registered sale deed before the Sub-