Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: Shri Rama Kanta Panda & Shri Laliet Kumar
Per Shri Laliet Kumar, J.M. This is the second round of litigation whereby the assessee has challenged the order passed by the Learned Commissioner of Income Tax (Appeals)-1, Hyderabad, dated 21.02.2019 for the AY 2007-08, on the following grounds (1) The order of the Ld Commissioner of Income Tax (Appeals)-1, Hyderabad ['CIT(A)'] in sustaining the addition of Rs. 421akhs is totally unsustainable both on facts and evidence on record. (2) The CIT (A) erred in confirming the addition of Rs. 42 lakhs while admitting the findings in the remand proceedings of the Assessing Officer in the first round of appeal and therefore, the addition of Rs. 42 lakhs must be deleted. - (3) The CIT (A) having found, as a matter of fact, that in the first round of appeal her predecessor CIT (A) had not given any reason for accepting the findings of the AO in the remand proceedings, and the Hon'ble Tribunal vide order dated 29.7.2016 arising out of 'B'
2 ITA.No.575/Hyd/2019 Bench set-aside the appeal to the file of the CIT (A) to re-consider the same in accordance with law and adequate reasoning after taking into consideration the rejoinder of the appellant, erred in confirming the addition of Rs. 42 lakhs on the same ground as the predecessor.
(4) The Ld CIT (A) not having disputed the identity of the lenders, genuineness of the transaction and creditworthiness of the persons who advanced the amounts to the appellant erred in confirming the addition of Rs, 42 lakhs.
The assessee has preferred an appeal before the Tribunal vide ITAT No.384/Hyd/2015, however the said appeal of the assessee was remanded by the Tribunal vide observation dated 29.07.2016 with the following directions “5. Having regard to the rival contentions and the material on record, we find that the assessee has explained the sources of Rs.14.00 lakhs as the sale proceeds he has received on sale of his land. Assessee has further submited the copies of the sale deed and also the bank statement to explain the source. However, neither the AO, nor the Cit (A) have commented on the acceptability or otherwise of the said source of income. Further as regards the creditworthiness of the creditors, we find that there are certain inconsistencies in their depositions before the AO in the remand proceedings, but the existence and the identity of the parties have clearly been established. Though the assessee has filed a rejoinder to the remand report, the CIT (A) has clearly not considered the same as there was no mention of the same in the order of the CIT (A). The CIT (A) has also not given any reason for accepting the findings of the AO in the remand proceedings. In view of the same, we deem it fit and proper to set aside the order of the CIT (A) and remand the same to the file of the CIT (A) for reconsideration in accordance with law after taking into consideration the rejoinder filed by the assessee. Needless to mention that the assessee shall be given a fair opportunity of hearing. The other two grounds with regard to the registration charges and the family expenditure shall be treated as properly explained in view of the bank a/c copy of the assessee and also the reply of Shri M.A. Mateen to the notice u/s 133(6) of the Act, in proof of the contention of the assessee that the sale proceeds of the land sold by the assessee was sufficient source for the said investment after verification of the same.”
3. Thereafter, in terms of remand order of the Tribunal , assessee appeared before ld.CIT(A) and filed various documents. The ld.CIT(A) vide impugned order had dismiss the appeal and confirmed the addition. The paragraph 10 of the ld.CIT(A) held as under:-
3 ITA.No.575/Hyd/2019 “ I have carefully considered the facts of the case, the assessment order, Remand report, submissions of appellant to the Remand Report and ITAT order. As per the Remand Report, even though the appellant submitted confirmation letters and sworn statement recorded by the AO, then also the Assessing Officer concluded these parties having no creditworthiness and genuineness and also concluded that the appellant received the advance money in cash neither the appellant carried out real estate business nor plot were sold nor repaid the amounts. Therefore, all the submissions furnished were not considered. Further, the appellant failed to furnish any confirmation letters or details in support of proof of creditworthiness of the two parties, i.e, Mr.K.Manik Reddy of Rs. 4 lakhs and Mr. Syed Yusuf of Rs.4 lakhs. Hence, all the submissions of appellant were not accepted and hence addition made by the Assessing Officer to the extent of Rs.42,00,000/- confirmed.”
Feeling aggrieved by the order, assessee is in appeal before us. At the outset, the ld. AR had submitted that the assessee had filed the additional documents before the Tribunal in support of the case of the assessee with part of the paper book No.3 wherein, the assessee had filled documents pertaining to Mr.K.Manik Reddy to prove creditworthiness etc
The ld. AR had drawn our attention to page 5 of the written submission, where the assessee has explained the status of each cash creditor in tabulation form which is to the following effect Name of the deponent Gist of statement Remark K Balwanth Reddy • Source of income from The derivations of AO as Rs.3,00,000 agriculture and salary of Jointed out in prepara son. (No.4) are incorrect as • Owns 7.25 acres of the witness has agricultural land and admitted to have total yeild is Rs.12 advanced the amount, lakhs during last 5 indicated the source years and confirmed the same in the deposition. There • Net savings of Agri is nothing in the income is Rs. 50,000. statement that the To one lakhs for year for Assessing officer in last 5 years. course of interrogation • No Bank account. has been able to • Admitted to have filed demolish the same confirmation letter except deriving some advancing RS.3,00,000 inference of his own. out of savings from There is nothing in the agricultural income report to prove that the • Aware of real estate creditworthiness is business of the assessee doubtful. Assessing • Admitted to have seen officer stated that the land taken for although he had given
4 ITA.No.575/Hyd/2019 development. confirmation letter for • Not I T assessee advance of RS.3,00,000, whereas in the sworn statement he has stated that he has given Rs4,00,000/-.This minor discrepancy has led the AO to belief that the transaction is not \ true. Having failed to counter the I evidence tendered / in examination, the Assessing Officer should not have disbelieved the statement of the deponent. G.Bhaktavatsalam • Source of income from The derivations of AO as pointed out in prepara Rs.3,50,000/- agriculture and floriculture (No.4) are incorrect as the witness has admitted to • Owns 8.34 acres of have advanced the agricultural land and total amount, indicated the yeild is Rs.4 lakhs (net) source and confirmed the per annum same in the deposition. There is nothing in the • Net savings of Agri statement that the income is Rs. 50,000 to Assessing officer in course one lakh for year for last 5 of interrogation has been years. able to demolish the same except deriving some • Bank account inference of his own. maintained. There is nothing in the report to prove that the • Admitted to have filed creditworthiness IS confirmation letter doubtful. Assessing officer advancing Rs.3,00,000 out stated that the "deponent of savings from agricultural had given confirmation income letter for RS.3,50,000,and in the sworn statement he • Aware of real estate has deposed that he paid business of the assessee Rs. 3,00,000/-. This statement of the AO ;s • Admitted to have seen wrong. 0.11 of the the land taken for statement states that I AO development. has shown confirmation I letter for Rs. 3,00,000. • Not I T assessee How AO could show confirmation letter of Rs. 3,00,000 which was not existing at all and again state in the remand report that the deponent has given confirmation letter for Rs. 3,50,000. This clearly manifests that AO has not paid proper
5 ITA.No.575/Hyd/2019 attention while examining the deponent. Having failed to counter the evidence tendered in examination, the Assessing officer should not have disbelieved the statement of the deponent K. Shankar Reddy • Source of income is The derivations of AO as Rs.4 lacs agriculture and dairy pointed out in the prepara (No.4) are incorrect as the • Owns 15.14 acres of witness has admitted to agricultural land have advanced the amount, indicated the • Agri income is Rs.1.5 source and confirmed the lakhs for year for last 5 same in the deposition. years. There is nothing in the statement that the • Net savings is Assessing Officer in course Rs.75,000/year of interrogation has been able to demolish the claim • No bank account of various deponents except deriving some • Admitted to have filed inference of his own. Therefore, truthfulness of confirmation letter the statements of witness advancing RS.4,00,000 cannot be assailed.
• Admitted that the assessee had experience in real estate
• Admitted to have seen the land taken for development
• Not I T assessee K Manik Reddy • Source of income is The derivations of AO as Rs. 3lacs labour contract and pointed out in prepara agriculture (No.4) are incorrect as the witness has admitted to • Owns 8 acres of have advanced the agricultural land amount, indicated the source and confirmed the • Net savings of Agri same in the deposition. income is Rs. 50,000 to The deponent is labour Rs.1,50,000 for year for contractor and owns last 5 years. agricultural land, car et. There is nothing in the • Bank account maintained statement that the in one bank Assessing officer in course of interrogation has been 6 ITA.No.575/Hyd/2019 • Owns a car able to demolish the same except deriving some • Admitted to have filed inference of his own. There is nothing in the confirmation letter report to prove that the advancing RS.3,00,000 creditworthiness is doubtful. It has been • Admitted to have seen mentioned that the the land taken for deponent had advanced development. only Rs.3,00,000 but not Rs.4,00,000 as stated in • I T assessee the statement. Having failed to counter the evidence tendered in examination, the Assessing officer should not have disbelieved the statement of the deponent.
Madan Mohan Reddy • Source of income is The derivations of AO as Rs.4 lacs agriculture floriculture, pointed out in prepara dairy and sheep breeding. (No.4) are incorrect as the witness has admitted to • Owns 34 acres of have advanced the agricultural land amount, indicated the source and confirmed the • Agri income is RS.1.5 same in the deposition. lakhs for year for last 5 The deponent is labour years. contractor and owns agricultural land, car et. • Total income from There is nothing in the agriculture is RS.5,00,000 report to prove that the and net saving per year creditworthiness is RS.2,00,000 to doubtful. Having failed to RS.2,50,000 counter the evidence tendered in examination, • Bank account maintained the Assessing Officer in one bank should not have disbelieved the statement • Owns a car of the deponent
• Admitted to have filed confirmation letter advancing Rs.4,00,000
• Admitted to have seen the land taken for development.
• Not I T assessee P.Dayananda Reddy • Source of income is The derivations of AO as Rs.4 lacs agriculture. pointed out in the prepara
7 ITA.No.575/Hyd/2019 (No.4) are incorrect as the • Owns 30 acres of witness has admitted to agricultural land have advanced the amount, indicated the • Agri income (net) is source and confirmed the Rs.zlakhs same in the deposition. There is nothing in the for year for last 5 years. statement that the Assessing officer in course • Net savings is of interrogation has been RS.1,00,000/year able to demolish the same except deriving some • Bank account in one inference of his own. bank Having failed to counter the evidence tendered in • Admitted to have filed examination, the Assessing officer should not have confirmation letter disbelieved the statement advancing Rs.4,00,000 of the deponent
• Not I T assessee M.Madhav Reddy The derivations of AO as! pointed out in the prepara • Source of income is from (No.4) are incorrect as the Railway contract and witness has admitted to agriculture Owns 10 acres have advanced the of agricultural land. amount, indicated the source and confirmed the • Agri income is Rs.1 to same in the ! deposition. .1.5 lakhs for year. There is nothing in the statement that the • Net savings is Assessing officer through RS.1,,25,000/year interrogation has been • Bank account able to demolish the same except deriving some • Admitted to have filed inference of his own. The confirmation letter most significant aspect of advancing Rs.4,00,000 the statement relates to • Admitted that the his creditworthiness as! assessee had experience in pointed out in answer to real estate Q.No.6 and 7. The extent of properties I acquired by • Admitted to have seen him would show that he the land taken for was a man of development. consideration means. As such a generalised I • I T assessee inference drawn by the I PANABOPM8153D Assessing officer is farthest from . truth and contrary • The most significant to facts t deposed. Having aspect of the sworn failed to counter the statement relates answer evidence tendered in to Q.NO.6&7. The answer examination, the Assessing shows that the deponent Officer should not have possesses one car, a three disbelieved the statement
8 ITA.No.575/Hyd/2019 bed room flat 10 Acres of of the deponent. agri land shares in blue chip companies and bank account M.Sathi Reddy • Source of income is The derivations of AO as Rs.2.5 lacs agriculture and floriculture pointed out in the prepara (No.4 ) are incorrect as the • Owns 4.12 acres of witness had admitted to agricultural land have advanced the amount, indicated the • Net Agri income is Source and confirmed the Rs.1.80 lakhs same in the deposition. There is nothing in 1e for year for last 5 years. statement that the Assessing Officer in course • Net savings is of interrogation has been RS.1,00,000/year able to demolish the same except deriving some • One bank account inference of his own. Having failed to counter • Admitted to have filed the evidence tendered in examination, the Assessing confirmation letter officer should not hive advancing RS.2,50,000 disbelieved the statement of the deponent • Admitted to have seen the land taken for development
• Not I T assessee K. Janardhan Reddy • Source of income from The derivations of AO as I profession as an advocate pointed out in the prepara and agriculture (No.4) I are incorrect as the Witness has admitted • Owns 21.37 acres of to have advanced the agricultural land amount, indicated the Source and confirmed the • Net savings is same in the deposition. Rs.1,00,000 to There is nothing in the Rs.1,50,000/year statement that the Assessing officer through • Bank account maintained interrogation has been able to demolish the same • Admitted to have filed except deriving some inference of his own. The confirmation letter most significant aspect of advancing RS.3,00,000 to the statement relates to the assessee. his creditworthiness as pointed out in answer to • Admitted that the Q.No.6 and 7. The extent assessee had experience in of properties acquired by real estate. him would show that he was a man of means. As 9 ITA.No.575/Hyd/2019 • Admitted to have seen such a generalised the land taken for inference drawn by the development Assessing officer is farthest from truth and • The most important point contrary to facts deposed. in the statement is the Having failed to counter answer given to Q.N06 the evidence tendered in and 7. In the answer to examination, the Assessing these questions, the officer should not have witness has stated that he disbelieved the statement owns two cars, a scooter, of the deponent and four houses in addition to 31 acres of land. He has maintained 5 accounts in various banks
• Income tax assessee having PAN AFWPK8436p M.Yadava Reddy Source of income is The derivations of AO as agriculture and dairy pointed out in the • Owns 4.12 acres of prepara(No.4) are agricultural I land incorrect as the witness has admitted to have • Agri income is Rs.75 advanced the . amount, thousand and dairy income indicated the source and Rs.75, 000 thousand for confirmed the same in the year for last 5 years. deposition. There is nothing in the statement • Net savings is that the Assessing officer Rs.1,00,000/year in course of interrogation has been able to demolish • Bank account maintained the claim of various deponents. except deriving • Admitted to have filed some inference " of his own. Therefore, confirmation letter truthfulness of the advancing Rs.2,00,000 statements of witness cannot be assailed. • Admitted that the assessee had experience in real estate.
• Admitted to have seen the land taken for development
The ld. AR for the assessee had submitted that the assessee has proved all the three ingredients of section.68 namely, identity (as the ld. AO has recorded the statement of all these persons during the assessment proceedings page No.19) onwards and 10 ITA.No.575/Hyd/2019 further the assessee had proved , the genuineness as these 10 persons had filled confirmation letters and creditworthiness ( as all these 10 persons were having land holding of sizeable sizes ). Thus assessee had discharged the onus , hence the order of ld.CIT(A) is required to be annulled and appeal of the assessee is to be allowed . The ld. AR, relied upon the decision of the Hon’ble Supreme Court in the case of CIT vs. Orissa Corporation (P) Ltd. 159 ITR 78, Anis Ahmad & sons vs CIT 297 ITR 441(SC), Tek Ram vs CIT 357 ITR 133(SC),, DCIT vs. Rohini Builders 256 ITR 360(Guj.HC), Addl.CIT vs. Bahri Brothers(P) Ltd. 154 ITR 244(Patna.HC), Khandelwal constructions vs. CIT 227 ITR 900 (Gauhati HC) and CIT vs. Text Hundred India(P) Ltd. (Del.HC) decisions in support of the case.
Further Ld.AR for the assessee had drawn our attention to the written submission filed by the assessee in support of the case on merit, it was submitted by the Ld.AR in the written submission that “2. Brief background leading to filing of appeal: Before offering the comments, we submit, in brief, the facts of the case leading to filing of appeal and CIT's direction to call for the remand report from the Assessing officer Assessee had entered into an agreement for purchase of land at Jalpalli Village, Saroornagar mandal, along with one Mr V T Vijaykumar and wished to jointly develop the same into housing plots. For this purpose, he paid RS.56,00,000 to land owners towards his share in the consideration and also paid the relevant share of stamp duty i.e. Rs.25,000. These amounts were met out of the funds from the following sources:
(i) Rs.42,00,000 - Advance received from prospective buyers(12 parties)
(ii)Rs.18,00,000 - Received back from Matheen of Akbarbag to whom the amount was advanced out of sale proceeds of agricultural lands by the appellant.
During the course of assessment the Assessing officer failed to give any opportunity to produce further r details to substantiate the claim of receiving advances which was utilized for purchase of land. While the assessee was in the process of collecting relevant details, the assessment was completed without affording sufficient time to prove the claim, No show cause notice was issued before addition. This resulted in making following additions.
11 ITA.No.575/Hyd/2019 (a)Unaccounted investment in land RS.56,00,000 (b) Unaccounted payment of stamp duty Rs. 25,000 (c) Family expenditure Rs, 1,75,000 3.1. Reasons for addition: The Assessing officer made the addition of advances of Rs,42,00,000 for the reason that advances were received in cash, that the venture did not take off, that advance amounts were not returned to various parties and that as on the date of receiving advances, the assessee did not hold any land but collected the advances. AO all along proceeded with wrong assumption that the amounts were received towards purchase of flat which is not correct since these advances were received from prospective buyer to buy developed house plots, With the above view the Assessing officer treated the advances of Rs.42,00,000 as unexplained investment without giving adequate opportunity to file details.
As regards the balance sum of RS.14,00,000, the same was out of sale proceeds of agricultural land for Rs.18,75.000/- This amount was advanced to one Matheen. Appellant received back the entire amount and the same was used in purchase of land for development into plots. It was the allegation of the AO that the assessee failed to produce the sale deed to prove his contention. Therefore, he treated the amount as unexplained. Here also adequate opportunity was not given to produce the document.
The Assessing officer made a further addition of Rs.25,000 towards stamp duty for purchase of land proposed to be developed for the reason that the assessee failed to produce any evidence when the assessee was not asked for furnishing the source.
The Assessing officer made an addition of Rs.1,75,000 towards unexplained house hold expenditure without giving any valid reasons and without asking the assessee to furnish any explanation.
4. Remand report and appellant's response: In course of appeal, the appellant contested all the additions. The learned CIT(A) called for a remand report from the Assessing officer and directed the AO to examine the persons who had advanced amounts to the assessee for purchase of land as the same was not done at the time of assessment and sufficient opportunity was not afforded to the assessee. Accordingly, these persons were summoned and examined. After collecting evidence from them, the Assessing officer in the remand report, is of the opinion that the amount of Rs.42,00,000 need be added to the income of the assessee as he was not satisfied with the facts stated in the deposition, although all the deponents affirmed to have given advance. The argument of the Assessing officer as indicated in the remand report to reach such an inference against the appellant are indicated below: (a) The persons who have advanced amounts were not income tax assessees. (b) The plea of agriculture income, which constituted the source of advance, is not believable. AO was of the opinion that after meeting their domestic expenses, there could be no savings to advance amounts.
12 ITA.No.575/Hyd/2019 (c) AO was of the opinion that the assessee was not in the business of real estate being an agriculturist. (d) No agreement was entered into with the prospective buyers who have advanced the amounts. (e) Approval was not obtained from HUDA for the proposed activity in real estate (D All the witnesses were 'heavily tutored'. (g) Amounts advanced are outstanding. (h) Transactions were made in cash but not through bank (i) The persons advancing the money had not seen the plots. (j) Their house hold expenses were not known (k) The assessee failed to substantiate the capacity of the persons to make advances. (l) It was observed that it was not possible to accept that villagers kept cash with them although some of them had bank accounts. (m) In and around the date of proposed purchase of land in July 2006, the assessee did not possess land which was purchased in October 2006. (n) The assessee did not have experience in real estate activities.
(o) No development was effected and development agreement was cancelled. (p) The assessing officer relied on the decision in the case of Durga Prasad More 82 ITR 540(8C) and 8mt 8umati Dayal v CIT 214 ITR 801 8C to advance the theory of human probability that the version of the assessee is not correct. “
On the other hand, the ld. DR had submitted that despite sufficient opportunity granted to the assessee, the assessee was not able to prove the genuineness and creditworthiness of these persons.
We have heard the rival contentions and gone through the records. In the present case, the assessee has received a sum of Rs. 42 lacs from the following persons
K.Balwanth Reddy 2.g.Bhaktavatsalam 3.K.Shankar Reddy 4.K.Manik Reddy 5.Madan Mohan Reddy 6.P.Dayananda Reddy 7.M.Madhav Reddy 8.M.Sathi Reddy 9.K.Janardhan Reddy 10.M.Yadava Reddy 11.Mr.K.Manik Reddy
13 ITA.No.575/Hyd/2019 12.Mr. Syed Yusuf 10. However, Mr.K.Manik Reddy and Mr. Syed Yusuf could not appear before the AO or before the ld.CIT(A) in the remand proceedings. Now, it is also the case of the ld. AR in the written submissions that Mr. Mahipal Reddy has already submitted his confirmation letter before us. The said confirmation letter was filed by the ld.AR for the assessee along with the covering letter dated 10.02.2022. The content of the said letter are as under:-