DEPUTY COMMISSIONER OF INCOME TAX, HYDERABAD vs. M/S PRESTIGE AVENUES LIMITED, HYDERABAD
Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”, HYDERABAD
Before: SHRI LALIET KUMAR & SHRI MADHUSUDAN SAWDIAAssessment Year: 2006-07
PER LALIET KUMAR, J.M:
This appeal is filed by the Revenue feeling aggrieved by the order passed by the Commissioner of Income Tax (Appeals)
– VII, Hyderabad dated 15.02.2011 for the AY 2006-07. 2
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The grounds raised by the Revenue read as under :
“1. On the circumstances and facts of the case, the CIT(A) erred in allowing the appeal of the assessee.
The learned CTT(A) erred in deleting the addition of Rs. 1,32,00,000/- towards unexplained investment in meerkhanpet project even though the same was added on the basis of evidentiary value of seized material and surrounding, circumstances.
The learned CIT(A) erred in deleting the addition of Rs. 1,90,88,225/- towards unexplained investment in the purchase of Khadthal/ Maisigandi lands even though the same was added on the basis of evidentiary value of seized material and surrounding circumstances.
The learned CIT(A) erred in deleting the addition of Rs. 87,00,000/- towards unexplained investment in the purchase of Salaravulapalli village lands even though the same was added on the basis of evidentiary value of documents and surrounding circumstances.
The learned CIT(A) erred in deleting the addition of Rs. 43,56,000/- towards unexplained investment in the purchase of Pinjerla lands even though the same was added on the basis of evidentiary value of documents and surrounding circumstances.
The learned CIT(A) erred in deleting the addition of Rs. 1,35,49,825/- towards unexplained investment in the purchase of Subhanpur lands even though the same was added on the basis of evidentiary value of documents and surrounding circumstances.
The learned CIT(Appeals) 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.
The learned CIT(A) ought to have appreciated the fact that the assessee failed to discharge the onus lied upon it to prove that the contents in the seized documents were incorrect and the rebutted the presumption with evidence that the details in the seized documents does not relate to him.
The learned CIT(A) ought to have appreciated the fact that the tax authorities are entitled to pierce the veil of a transaction secreted behind a legal document and look at the reality of the transaction going behind the legal façade and the recital in the registered document cannot be a 3 ITA 763/Hyd/2011
guiding factor when it is a usual experience that payment of on money is a part of real estate transaction and fact of life.”
The brief facts of the case are that assessee is a company filed its return of income for A.Y. 2006-07 through e-filing on 29.11.2006 declaring a total income of Rs.14,35,980/-. The return was processed u/s 143(1) of the Act on 28.07.2007. Search operation u/s 132 of the Act was conducted in Prestige Avenues Group of cases on 30.11.2006, wherein this case was covered u/s 153A of the I.T. Act. Accordingly, notice u/s 153A of the Act was issued calling for return of income. In response, assessee filed its return of income on 15.12.2008 declaring an income of Rs.30,15,050/-. In response to notices issued u/s 143(2) and 142(1) of the Act, assessee submitted information as called for. After verifying all the information provided by the assessee and the material available on record, Assessing Officer completed the assessment. During the assessment, Assessing Officer found that assessee had made unexplained investments in Meerkhanpet Project to the tune of Rs.1,32,00,000/- and accordingly, added the same to the returned income. Assessing Officer also found that assessee made unexplained investments to the tune of Rs.1,90,88,225/- in purchase of Kadthal / Maisigandi lands, Rs.2,45,000/- in Prestige Rai Towers, Rs.70,93,332/- in purchase of Karkal Pahad lands, Rs.87,00,000/- in purchase of Sarlaravulapalli lands, Rs.43,56,000/- for purchase of Pinjerla lands and Rs.1,35,49,825/- for purchase of Subhanpur lands and hence, added all these to the total income returned and thereby
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assessed the total income at Rs.6,92,47,423/-. Accordingly, passed assessment order on 31.12.2008 u/s 143(3) r.w.s. 153A of the Act.
Aggrieved with such assessment order, the assessee has filed an appeal, before the LD.CIT(A), who granted part relief to the assessee.
Aggrieved with the order of LD.CIT(A), the Revenue is now in appeal before us.
1. Ground no.1 is general in nature and requires no adjudication.
GROUND NO.2
With respect to Ground No. 2, the Ld.DR submitted that the addition of Rs. 1,32,00,000/- towards unexplained investment in the Meerkhanpet project was based on credible evidence found during the search and seizure operation. The Ld.DR has drawn our attention to 4.2 of the order of LD.CIT(A), which is to the following effect :
“4.2. I have considered the assessee's arguments/submissions. The appellant's representative had also drawn my attention to the copies of all the seized papers as also the sworn deposition referred to by the Assessing officer. As rightly stated by the appellant, the seized document
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did not contain any details to suggest that the purchase of lands under consideration was made at the rate of Rs. 13,00,000/- per acre as assumed by the Assessing officer. The Assessing Officer had apparently picked up the figure of 13000 noted in seized document PRK/New
Folder/Meeting/Networth and adopting the encoding of figures suspected by him to have taken place, interpolated the figure of 13000 to 13,00,000 and had accordingly adopted the purchase consideration of the lands at Rs. 13,00,000/-, per acre. As argued by the assessee's representative, the said sheet of paper do not contain any details such as date, month or year and whether the figures related to transaction in rupees, etc. As such it is difficult to conclude that the notings made therein related to the assessment year under consideration; and that as argued by the assessee's representative, if the figures noted therein were added with two zeros as was done by the Assessing Officer, they do not measure up to any reality. 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. That apart for purposes of assuming he encoding theory the A.O. relied upon certain transactions noted in a piece of paper which lack authenticity since correctness of either the said paper nor the entries noted therein was never put to proof by the Assessing
Officer. Instead of taking the issue to its logical end, obviously, the AO had struck to his assumption to encoding of figures. Even while quoting from the averments from the sworn deposition the AO stated something against the appellant based on what was never admitted either in the sworn statement or in any other submissions filed before the Assessing officer. Since the A.O. relied upon only these documents (discussed above) which do not support his stand and as the A.O. could not gather any other positive evidence for estimating the purchase consideration at Rs. 13
lakhs per acre as against Rs. 1 lakh per acre accounted by the assessee, it is apparent that the addition of Rs. 1,32,00,000/- is made on pure surmise and assumption. The addition of Rs. 1,32,00,000/- is therefore deleted. Hence, this ground of appeal is allowed.”
1 The Ld.DR contended that the seized documents, including MOUs and spreadsheets recovered from the laptop of Sri P. Ravi Kumar, a director of the assessee company, clearly indicated that the actual purchase price of the land was Rs. 13,00,000/- per acre, as opposed to the Rs. 1,00,000/- per acre recorded in the registered sale deeds. The DR emphasized that duplicate books of 6 ITA 763/Hyd/2011
accounts maintained by the assessee, corroborated by the seized material, established that the disclosed figures were encoded at 1/100th of the actual amounts paid.
2. On the other hand, ld.AR mainly submitted that the addition of Rs. 1,32,00,000/- towards alleged unexplained investment in the Meerkhanpet project is unjustified, as the figures relied upon by the Assessing Officer are based on assumptions and interpretations of seized documents, which lack corroborative evidence. The seized documents do not provide sufficient details to support the AO’s assumption that the purchase of lands was made at Rs. 13,00,000 per acre, as they lacked essential information such as dates and whether the amounts were in rupees. The AO incorrectly interpolated the figure of 13000 to Rs. 13,00,000, which does not align with any reality. Further, the ld.AR submitted that the registered sale deeds clearly reflect the actual consideration paid, and there is no material evidence to suggest otherwise. The ld.AR pointed out that the seized documents, being unauthenticated, cannot form the sole basis for additions. Additionally, the AO failed to conduct further investigations, such as examining the concerned parties or providing any positive material to substantiate his conclusions, leading to a conclusion based purely on assumptions and surmise, without any concrete evidence and therefore, the addition made by the Assessing Officer should be deleted.
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3. We have heard the rival submissions and perused the material on record. In the present case, the assessee submitted that the purchase of the impugned property was evidenced by 5 registered documents registered with the Sub-