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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”, HYDERABAD
Before: SHRI LALIET KUMAR, HON’BLE & SHRI G. MANJUNATHA, HON’BLE
O R D E R PER LALIET KUMAR, J.M.
This appeal is filed by the assessee, feeling aggrieved by the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi, dated 13.11.2024 for the AY 2019-20 on the following grounds :
“1. The order of the Ld. CIT(A) is erroneous in law as well as facts of the case.
2. The Ld. CIT(A) has rejected the submissions of the Appellant as well as the remand report of the AO on an assumption and presumption basis which is bad in law.
3. The Ld. CIT(A) ignored the evidences for the cash found at the time of Search which was accepted by the AO in the remand report.
4. The Ld. CIT(A) has no jurisdiction to reject the explanations and evidences submitted by the Appellant when the same having accepted by the AO.
The Ld. CIT(A) without considering the detailed submissions along with the supporting evidences, upheld the order of the Assessing Officer which cannot be held as a valid assessment and such an order of the Ld. CIT(A) is against the facts of the case.
Although the Assessing Officer has not made any adverse comments in the entire remand report, the Ld. CIT(A) has only allowed to reduce the addition by Rs.10,00,000/- without any proper basis and hence the order cannot be held as valid and the Ld. CIT(A) ought not to have upheld the addition made by the Assessing Officer u/s 69A of the IT Act.
7. The Ld. CIT(A) ought to have considered the fact that the Appellant has explained the issue with documentary evidences. Without considering the same, the Ld. CIT(A) upheld the rest of the addition of Rs.1,21,11,000/- (Rs 1,31,11,000/- - Rs.10,00,000) which is not tenable and is liable to be deleted.
8. The Ld. CIT(A) ought to have considered that the addition upheld u/s 69A of the IT Act for Rs.1,21,11,000/- is without any supporting material on record and therefore the addition is liable to be deleted.
9. Further the remand report is also very clear with no adverse remarks with respect to the facts of the case and the AO has accepted the explanations after duly considering the entire submissions made by the Appellant. But the Ld. CIT(A) without considering the same has only accepted to reduce the addition by Rs.10,00,000/-in an ad hoc manner without any basis and therefore the order is liable to be quashed and the addition upheld by the Ld. CIT(A) for Rs.1,21,11,000/-is liable for deletion.”
Facts of the case, in brief, are that a search and seizure operation under section 132 of the Income Tax Act, 1961, was conducted on 13.02.2019 in the case of the assessee, an individual, along with Smt. G. Neelamma and others. As a result, the case was centralized to the DCIT, Central Circle-1(3), Hyderabad. Subsequently, a notice under section 142(1) was issued, requiring the assessee to file the return of income for the relevant assessment year. In response, the assessee filed a return on 01.03.2021, declaring a total income of 'Nil'. Further notices under sections 142(1) and 143(2) were issued, but the assessee did not furnish the required information. During post-search proceedings, the assessee admitted an amount of ₹1,16,11,000 as undisclosed income, as he could not explain its source. Additionally, he claimed that ₹15,00,000 was derived from agricultural income, but he failed to provide documentary evidence to substantiate this claim. Since no verifiable proof was submitted during the investigation or assessment proceedings, the entire cash amount of ₹1,31,11,000 found at the assessee's residence was treated as unexplained income under section 69A of the Act and added to the total income. Accordingly, Assessing Officer completed the assessment u/s 143(3) of the Act and passed assessment order on 09.06.2021.
Feeling aggrieved by the order passed by the assessing officer, assessee filed appeal before the Ld. CIT(A), who granted part relief to the assessee.
Feeling aggrieved with the order of ld.CIT(A), assessee is now in appeal before us.
5. Before us, the ld.AR has submitted that during the appellate proceedings, the assessee had filed additional evidence before the LD.CIT(A) as mentioned in Para 5.1 of the LD.CIT(A)’s order. The LD.CIT(A) called for a Remand Report from the AO on the additional documents submitted by the assessee. The AO provided the Remand Report, which was captured by the LD.CIT(A) in Pages 24 to 26 of the paper book. Thereafter, assessee filed a rejoinder to the remand report on 07.11.2024 submitting that the assessee has explained the source of cash found during the course of search and therefore, no addition is required to be made. However, the LD.CIT(A) rejected the submissions of assessee as well as remand report and partly granted relief to the assessee. The findings of the LD.CIT(A) given in Paras 7.3.3 to 7.3.5, which is to the following effect :
“7.3.3. I had carefully perused the assessment order, grounds of appeal additional evidence and the remand report furnished by the AO. The additional evidences furnished are analysed below: (i) Rs. 55,00,000/-: The development agreement was executed on 31.05.2016 between the appellant being the first party/landlord and Sri K. Mahendar Reddy, Sri J. Srinivas Reddy, Sri. J. Gangadhar Yadav and Sri. Trishul Reddy being second party/Developers. On page no. 7 of the development agreement in para no. 9, it is mentioned as follows: “9 The Second party today paid a sum of Rs. 75,00,000/- (Rupees Seventy Five Laksh only) as refundable and interest free security deposit to the First Party in the following manner.
(i) Rs. 10,00,000/- by way of Cheque No. 141704 of Axis Bank, Kompally (ii) Rs. 5,00,000/- by way of Cheque No. 061770 of Union Bank of India, Bowenpally, Branch Dt: 30.05.2016 (iii Rs. 5,00,000/- by the Cheque No. 000013 of Union Bank of India, Bowenpally, Branch Dt: 30.05.2016 (iv) Rs. 55,00,000/- (Rupees fifty five lakh only) by way of cash on 31.05.2016." As per the agreement, Rs. 75,00,000/- was paid by the developers as refundable and interest free security deposit to the landlord. Out of Rs. 75,00,000/-Rs. 20,00,000/- was paid by way of three cheques all were dated 30.05.2016. Rs. 55,00,000/- was paid by cash and it is mentioned that it is paid on 31.05.2016. AO in the remand report had mentioned that since three transactions by way of cheque were made through banking channels and were reflected in assessee's bank account, the cash payment of Rs. 55,00,000/- also can be inferred to be genuine as the cash payment is appearing along with the transactions through banking channel. This argument of the AO is not acceptable for the following reasons: (i) The search was conducted on 13.02.2019, however, in the development agreement it is mentioned that the cash was received on 31.05.2016. It is highly improbable that the appellant was maintaining the cash received on 31.05.2016 for more than 32 months i.e. till 13.02.2019 the date when the search was conducted on the appellant. (ii) The appellant has not brought anything on record to prove that the cash seized during the search is the same cash which was received on 31.05.2016. (iii) During assessment proceeding and during earlier appellate proceedings, appellant did not submit before the authorities that the cash received on 31.05.2016 is the part of the cash seized on 13.02.2019. After lapse of more than 5 years now appellant is coming with the theory that the source of cash seized during search is linked to the cash received at the time of executing development agreement. During post search proceedings appellant had admitted an amount of Rs. 1,16,11,000/- as undisclosed income. The current submission is nothing but afterthought and purely based on conjectures and surmises.
7.3.4. Rs. 45,00,000/-:- The appellant submitted that the Rs. 45,00,000/- was received from Developers which is as given below: S.No. Particulars Date Amount 1 At the time of Development May 2016 55,00,000 agreement 2 After the agreement – amount 5,00,000 received from 1. K. Mahender Reddy Dec, 2016 5,00,000 2. J. Srinivas Reddy Dec, 2016 10,00,000 3. T. Gangadar Reddy. Dec, 2016 7,50,000 4. K. Mahender Reddy Mar, 2018 7,50,000 5. J. Srinivas Reddy Mar, 2018 7,50,000 6. T. Gangadar Reddy Mar, 2018 10,00,000 TOTAL 1,00,00,000 In support of the contention, appellant submitted confirmation letters from the developers. The contention of the appellant is not acceptable for the following reasons: (i) There are four persons who are second party/developers as per the development agreement. As per para 9 of the development agreement all the four persons are entitled for a share in the developed area/plots. However, from the above table it is seen only three persons are said to have given cash to the appellant. No reasons were submitted as to why the fourth person i.e. Sri J. Thrishul Reddy (second party no. 4) has not given cash if the cash payments were part of the development agreement. (ii) On perusal of the confirmation letters, it is noticed that Rs. 20,00,000/- was given during December, 2016 and Rs. 25,00,000/- was given during March, 2018. Whereas the development agreement was executed on 31.05.2016. In this development agreement, it is recorded that Rs. 75,00,000/- will be given as refundable and interest free security deposits to the land owner by the developers and such payment of Rs. 75,00,000/- is recorded as given on 30.05.2016 and 31.05.2016. In such a scenario, the basis for payment cash of Rs. 45,00,000/- by the developers is not brought out on the record. No agreement/arrangement entered by the developer and the land owner for payment of Rs. 45,00,000/- was submitted during appellate proceedings. Mere confirmation letter from the developers would not suffice in absence of documentary evidence reflecting the purpose of payment of Rs. 45,00,000/-. (iii) Further, if at all it is to be said that the cash of Rs. 45,00,000/- was received from the developers during December,2016 and March, 2018, it is farfetched to imagine that the same cash was maintained by the appellant till the date of search i.e. on 13.02.2019.
7.3.5. Rs. 31,11,000/-:- The appellant submitted that he and his family owns around 54 acres of agricultural land and is earning agricultural income and contended that the source for Rs. 31,11,000/-is from the agricultural income/savings. In support of this, appellant submitted the patta passbook and receipts issued by agricultural marketing market company for purchase of agricultural produce. The receipts furnished by the appellant pertain to F.Ys 2016-17, 2017-18 and 2018-19. The main source of income for the appellant is agricultural income. All the expenditure in a given F.Y has to be borne from the agricultural income itself. The appellant has not furnished any cash flow statement which would depict cash receipt and expenditure. Therefore, it is hard to believe that the agricultural income of F.Ys 2016-17, 2017-18 and 2018-19 is maintained without any expenditure till the date of the search. Further, if it is to be said that the appellant was certain that part of the cash seized was sourced from the agricultural income nothing prevented him to put the same before the AO and Ld. CIT(A) in earlier proceedings. But, however, it cannot be denied that the appellant might have received some agricultural income from the agricultural lands owned by him. In view of this, an amount of Rs. 10,00,000/- can be said to be received from the agricultural income and accordingly AO is directed to reduce Rs. 10,00,000/- from the addition made of Rs. 1,31,11,000/-. In view of this, grounds of appeal no. 3 and 5 are partly allowed.
7.4. The ground no. 4 is vague and no written submission in support of this ground have been made in the appellate proceedings. The ground of appeal no. 4 is infructuous.
7.5. In the result, the appeal is partly allowed.”
6. The ld.AR further submitted that once the AO has satisfied with respect to the amount mentioned in the registered Joint Development Agreement (JDA), which is available from page 100 onwards, more particularly at page 114, whereby the assessee has received Rs.55 lakhs in cash from K. Mahender Reddy, J. Srinivas Reddy, and T. Gangadhar Yadav, as recorded in the JDA. Further, the assessee had filed the details of other amounts namely, to an extent of Rs.45 lakhs received in December, 2016 from the above said persons and had also filed the confirmation letters showing that the amount was received by the assessee pursuant to the JDA from the said persons. The LD.CIT(A) has rejected the submissions of the assessee without appreciating the fact that the Hon'ble Karnataka High Court in the case of CIT Vs. D.M. Purnesh it its order dt.17.02.2020 reported in 426 ITR 169, wherein it was held that when the CIT(A) directs a remand report and the AO accepts the assessee's submissions, then the CIT(A) is bound to consider the same while disposing of the appeal. The relevant portion of the said order is to the following effect :
“8. Section 250(4) of the Income Tax Act provides that the Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the (Assessing) Officer to make further inquiry and report the result of the same to the Commissioner(Appeals). When the assessee produced the material before the Commissioner of Income Tax (Appeals), the Commissioner, in exercise of power under Section 250(4) of the Act, directed the Assessing Officer to submit the Remand Report. The relevant extract of the remand report reads as under: "Addition as long term capital gain - Rs.2,94,26,600/-(point 7) The assessee's argument in this regard are acceptable. Addition as income from other sources - Foreign Travel-Rs.1,12,475/-( Point 11) The assessee has filed certificate issued by the Director of M/s Classic Coffee & Spices (P) Ltd., wherein it is stated that Sri. D.M. Purnesh, Director was requested to represent the Company and attend Specialty Coffee Association of America's Trade Show and Conference at Boston, U.S.A. in April 2003. Further, it is stated that the expenditure of Rs.1,12,475/-has been posted under the head of account 'business promotion expenses' of the company. The argument of the assessee in this regard may be accepted. On addition of Rs.84,61,055/ The assessee's Chartered Accountant Sri Kiron has stated that the cheque deposits in assessee's Savings account are all transfers from within the family members, firms and companies wherein He is either a partner or a director. The assessee's submissions may be accepted. Addition as income from other sources- unexplained investment in Harey estate of Rs.9,45,000/-(Point 15) Assessee's submissions may be accepted."
Thus, from perusal of the report submitted by the Assessing Officer himself, it is evident that, if the Remand Report is accepted with regard to long term capital gains, then addition as income from other sources and income from other sources is also accepted, therefore, the question of law framed in this regard namely, substantial questions of law No.3, 4, 5 and 8 do not arise for consideration in this appeal, as the Commissioner of Income Tax (Appeals) has passed the order on the aforesaid Remand Report and the order passed by the Commissioner of Income Tax(Appeals) has been accepted by the Income Tax Appellate Tribunal.”
Similarly, the Hon'ble Madras High Court on identical facts, in the case of Smt. B. Jayalakshmi and ACIT reported in (2018) 96 taxmann.com 486, has held as under :
“9. Firstly, we have to take note of the fact that the issue canvassed before us, is a jurisdictional issue, which could be raised at any point of time. Secondly, the Tribunal was required to consider as to whether it had jurisdiction to entertain the appeal filed by the Revenue against the order passed by the CIT (A), which itself was based upon a remand report. As noticed above, the order passed by the Tribunal is a verbatim repetition of the assessment order, dated 29.03.2001. Thus, the Tribunal was required to consider the correctness of the order passed by the CIT (A) and if had been done in a proper prospective, the Tribunal would have noticed that the order allowing the assessee's appeal by the CIT (A) was based on the remand report. If this had been taken note of, the Tribunal would have to consider as to whether the appeal by the Revenue was maintainable before it. In the case of Jivatlal Purtapshi (supra), it was held that the department having agreed to delete the amount from the assessment and having considered the deletion before the Appellate Assistant Commissioner, cannot be aggrieved by that part of the order to enable it to file an appeal before the Tribunal and therefore, such an appeal, neither competent nor capable of being entertained by the Tribunal.
In the case of Ramanlal Kamdar v. CIT [1977] 108 ITR 73 (Mad.), the appeal before the Hon'ble Division Bench of this Court was against the order passed by the ITAT, Bangalore Bench and one of the substantial question of law which was framed for consideration, was "whether on the facts and circumstances of the case, it has been rightly held that the proceedings under Section 154, were rightly invoked." The Division Bench held that the reference itself was incompetent for the reason that in the original assessment for the year 1962-63, a mistake at crept in while making out interest under Section 139(1)(iii). Thereafter, the Income Tax Officer issued a notice to the assessee proposing to rectify the mistake under Section 154 and calling upon the objections of the assessee. The said notice expressly referred to the tax effect which would result as a consequence of the rectification. The mistake was that instead of treating the assessee as an unregistered firm for the purpose of calculating the interest, the Income Tax Officer had treated the assessee as a registered firm. The assessee appeared before the Income Tax Officer and stated that he had no objection to revision proposed by the Income Tax Officer. Thereafter, the Income Tax Officer passed an order rectifying the mistake under Section 154 of the Act. Notwithstanding the admission before the Income Tax Officer, the assessee preferred an appeal before the Appellate Assistant Commissioner of Income Tax. The appeal was dismissed upholding the order of the Income Tax Officer. The assessee preferred further appeal to the Income Tax Appellate Tribunal. The Tribunal also dismissed the appeal. It is thereafter, at the instance of the assessee, the above question was referred by the Tribunal for consideration of the Hon'ble Division Bench. The Division Bench opined that the appeals to the Appellate Assistant Commissioner and to the Tribunal by the assessee were incompetent, since the assessee appeared before the Income Tax Officer and stated that the assessee had no objection to the proposed revision and once the assessee has stated that it had no objection to the proposed revision and the Income Tax Officer had also revised them the original assessment as proposed by him, the assessee could not be said to be aggrieved by the order of the Income Tax Officer. It was further pointed out. that only if the assessee was aggrieved by the order of the Income Tax Officer, he had the right to file an appeal before the Appellate Assistant Commissioner and once the assessee could not have had any grievance in view of the statement made by the partner, the appeal to the Appellate Assistant Commissioner was incompetent and equally the appeal to the Tribunal was incompetent and consequently, it was held that the reference to the Court on the second question said to arise out of order of the Tribunal is also incompetent. In the case of Banta Singh Kartar Singh (supra), a similar question arose in an order under Section 271(1)(c) of the Act. The Division Bench of the High Court of Punjab & Haryana, placing reliance on the decision of the Mumbai High Court in Jivatlal Purtapshi's case (supro), held that an order based on agreement cannot give rise to grievances and the same cannot be agitated in appeal.
In Cochin Malabar Estates & Industries Ltd.'s case (supra), one of the question which arose for consideration before the Division Bench of the High Court of Kerala was whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the consent by the assessee will not confer jurisdiction on the Income Tax Officer to pass rectification order under Section 154 of the Act, it was held that the appeal filed by the assessee before the CIT (A) itself is incompetent, since the assessee cannot be considered as a person aggrieved by the order passed under Section 154.
In the light of the above, we are of the clear view that the question of law as framed for consideration in the appeals, TCA Nos.819 to 821 of 2010, should have been re-framed or in the alternative, the subsidiary question arising out of the question framed namely as to whether the appeal before the Tribunal was competent, was required to be decided. That apart, since the issue touches upon the jurisdiction of the Tribunal to entertain an appeal, the Tribunal ought to have first answered the said question before proceeding to take up the other issues.
As already noticed, the Tribunal verbatim repeated the order passed by the Assessing Officer, dated 29.03.2001, and ignored the remand report, dated 25.11.2002 and the findings rendered by the CIT (A) based on such remand report. Thus, if such is the situation, the appeal itself would have been incompetent. Hence, this question, which touches upon the jurisdiction of the Tribunal, has not been considered by the Tribunal, we are inclined to review the judgment and remand the matter to the Tribunal for fresh consideration.
In the result, the Review Petitions are allowed and the judgment dated 30.09.2013, in Tax Case (Appeal) Nos.819 to 821 of 2010 is reviewed and recalled and the appeals stands disposed of, by remanding the matter to the Tribunal to decide the question of its jurisdiction to entertain the appeals filed by the Revenue against the orders of the CIT (A). In the event, the Tribunal decides the question in favour of the Revenue, it shall reconsider the other issues after opportunity to the Revenue and assessee.
One more submission made by the learned Senior counsel for the petitioner is with regard to the monetary limits for filing appeals by the department before the Tribunal. Relying upon circular No.21 of 2015, dated 10.12.2015, issued by the CBDT, it is submitted that for the revenue to maintain an appeal before the Appellate Tribunal, the monetary limit has been fixed as Rs.10,00,000/- and on this ground also, the appeal is not maintainable. It is open to the assessee to canvass such a point before the Tribunal during the hearing.”
Per contra, the Ld.DR relied on the orders of the lower authorities.
9. We have heard the rival submissions and perused the material on record. Admittedly, in the present case, the assessee has executed a Joint Development Agreement on 31-05-2016, whereby the assessee has received a sum of Rs. 55 lakhs in cash from Shri K. Mahender Reddy and others and the Assessing Officer in the Remand Report has not disputed the payment of cash of Rs.55 lakhs as genuine transaction. However, the LD.CIT(A) has rejected the contention of the assessee as well as the mentioning that it was highly improbable for the assessee to keep such a huge cash pursuant to the JDA dated 31-05-2016, which was found during the course of search on 13.02.2019. It was also not brought on record by the AO that the cash found during the course of the search was the same cash given by the said persons to the assessee. It was submitted that this information was given after a lapse of five years and, therefore, cannot be accepted. Similar reasoning was given by the LD.CIT(A) with respect to the explanation of the assessee regarding the receipt of Rs. 45 lakhs from these persons, namely K. Mahender Reddy and others, which was received in December, 2016.
In the present case, it is not disputed by the AO that the cash of Rs. 1 crore was duly explained by the assessee on account of the JDA entered into between the assessee and other persons, namely, K. Mahender Reddy and others. It was the only case of the LD.CIT(A) that there is a time gap of more than 32 months between the entering of the JDA and that of the recovery of cash during the course of the search. Though, it is correct that it is highly improbable for any person to keep such a huge amount of cash in his premises after it was received pursuant to the JDA, however, it is equally true that there are no rules or regulations preventing any assessee from keeping such cash, which was duly accounted for and explained, in his premises. Furthermore, we are of the opinion that the LD.CIT(A) having co-terminus powers, should have examined the persons, namely K. Mahender Reddy and others to ascertain whether the said cash was given by them or not. However, the LD.CIT(A) neither disputed the receipt of the cash by the assessee from these persons nor embarked upon making any enquiry from these persons, namely K. Mahender Reddy and others. In the absence of any contrary evidence brought on record by the LD.CIT(A), it is difficult to disregard the Remand Report given by the AO, wherein the genuineness of the cash was admitted. Furthermore, the LD.CIT(A) failed to make further enquiries in the case after receiving the Remand Report to bring on record any evidence disputing the genuineness of the amount. In light of the above, we are of the considered opinion that the assessee was able to explain the source of the amount found during the course of the search with cogent evidence, which was acknowledged and accepted by the AO. Accordingly, the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 13th February, 2025.