ASHOK NIRANJAN ASHOK RESIDENCY HOUSING DIVISION,CHENNAI vs. DCIT, CHENNAI

This appeal by the assessee is arising out of the order of Learned Commissioner of Income Tax (Appeals)-19, Chennai in dated 20.01.2017. The assessment was framed by the DCIT, Central Circle – III(1), Chennai for the assessment year 2010-11 vide order dated 30.03.2014 u/s. 143(3) r.w.s. 153C r.w.s. 153A of the Income Tax Act, 1961 (hereinafter ‘the Act’).

Brief facts are that a search and seizure action was carried out in the group cases of assessee on 21.06.2011 in the office premises. During the course of search in the office premises of the assessee books and documents were seized vide ANN/PM/B&D/S-2 (sheets 1 to 215). During the course of search, assessee’s partner Shri S. Asokan deposed before the search party and in his sworn statement recorded on 21.06.2011, he narrated that Rs.46,70,660/- is the share of consideration belonging to the assessee. The relevant question Nos.14 & 15 and answers reproduced in the assessment order are being reproduced for the sake of clarity:- Q.14 In page No.1 of the seized material ANN/PM/B&D/S-2, a notings were made. Please go through the same and explain the contents. Ans. Rs.46,70,663 is the share of the consideration to Mr.K. Niranjanaiah for the sale of plot No.01 to 13 and Plot No.28 to 38 & 84 to Mr. Palani

The CIT(A) after going through the seized documents noted that the amounts to be shared equally between two partners i.e., Shri K. Niranjaniah and Shri S. Asokan because both are partners of 50% each. Therefore, he restricted the addition to the extent of Rs.16,13,857/- by observing in para 6 as under:- 6. As per the grounds of appeal filed, the assessee has requested for telescoping this amount of Rs.32,27,715 as having been explained and offered to taxation in the hands of Shri S. Ashokan, one of the partners. However, it is seen that the amount would not have gone entirely to Shri S. Ashokan as per clear notings in page No. 215 of seized document ANN/PN/B&B/S-2 brought out by the AO in paragraph 4.2 of his order. Here, it is very clear that the amounts were shared equally between two partners Shri K. Niranjaniah and Shri S. Ashokan being 50% partners each. To this extent, the assessee is not correct in claiming that the entire amount of Rs.32,27,715 is contained in the amount offered for taxation in the hands of Shri S. Ashokan. However, assessee should be given the benefit of having received 50% of the profit and having offered the same in the returns of income. To this extent, the addition deserves to the reduced by an amount of Rs.16,13,857 as already offered to taxation in the hands of one of the partners. The balance amount of Rs.16,13,857/- is held as continued to be assessed in the hands of the firm. Assessee gets part relief.

We have heard rival contentions and gone through the facts and circumstances of the case. The assessee’s counsel has not disputed the rate of plot sold at Rs.175/- in the layout of plot Nos.28 to 38 and 74. He only pleaded mercy that a further estimate can be made because all plots cannot be sold at the rate of Rs.175/- and assessee himself have declared the rate at Rs.40 per sq.ft. Admittedly, the Revenue is not in appeal against deletion of addition by CIT(A) to the extent of 50% holding that the same is to be equally divided between two partners namely Shri K. Niranjaniah and Shri K. Asokan. Now limited issue before us is whether the amount of Rs.16,13,857/- being 50% share of Shri S. Asokan, the assessee, is explained or unexplained. Admittedly, these are found during the course of search from the documents seized. It is revealed that the plots are sold at the rate of Rs.175 per sq.ft., and selling area is 23909 sq.ft., sold to Shri K.P. Palani & Brothers in the financial year 2009-10 relevant to this assessment year 2010-11. We noted that the AO has rightly made addition in the hands of the assessee based on evidences gathered during the course of search which are not rebutted by the assessee. Hence, we confirm the orders of lower authorities on this issue and this issue of assessee’s appeal is dismissed.

Brief facts relating to this issue are, the AO noted that as regards to land sold of 29744 sq.ft., to Shri M.N. Palani @ Rs.175/- per sq.ft. (plot Nos.1 to 13 and shop No.1), as per the seized documents the assessee claimed that this stretch of land was sold to Shri M.N. Palani in assessment year 2008-09 for a sum of Rs.9,00,000/-. The AO noted that during this assessment year these plots were directly sold by Shri M.N. Palani to M/s. VGN Developers Pvt. Ltd. (hereinafter the ‘VGN’) and the encumbrance certificate were furnished to substantiate the sale by Shri M.N. Palani to VGN. The AO noted that this is a fact. As per seized records Shri M.N. Palani has sold these plots to VGN this year but he presumed that Shri S. Asokan and Shri Niranjanaiah have shared this sale consideration at the rate of Rs.175/- per sq.ft., on sale of these plots. According to AO, 50% share of sale consideration has been paid to Shri Niranjanaiah before 29.03.2010. Accordingly the AO inferred that after having sold the extent of land of 29744 sq.ft., to Shri M.N. Palani in assessment year 2008-09, the assessee has unofficially repurchased the plots with an understanding to execute the 7 sale deed in term of the firm’s nominees which is the industry practice. Accordingly, the AO estimated the undisclosed income at Rs.38,55,200/- as under:- “Therefore the consideration of Rs.5205200 (29744 x 175) is treated as revenue receipts of the assessee firm and considering that the firm should have spent to repurchase the land from Mr.Palani who bought it from the firm for Rs.9,00,000 in A.Y.2008-09, the probable cost in A.Y.2010-11 is estimated at Rs.1350000 (50% increase) and the difference of Rs.3855200 (5205200 minus 1350000) is assessed to tax as undisclosed income of the assessee.”

On the other hand, the ld.CIT-DR relied on the assessment order, but could not produce any seized documents relating to resale of this extent of land of 29744 sq.f.t., by Shri M.N. Palani to the assessee.

We have heard the rival contentions and gone through the facts and circumstance of the case. This extent of land of 29744 sq.ft., was sold by assessee to Shri M.N. Palani in assessment year 2008-09 i.e., Plot Nos. 1 to 13 & Shop No.1. The fact regarding sale by assessee to Shri M.N. Palani is recorded in the seized documents but there is no 9 mention of repurchase by assessee of the same land. The AO has just made inference and nothing else. As the AO has drawn inference only and there is no iota of evidence having assessee repurchased the land from Shri M.N. Palani, no addition on the basis of conjecture and surmises be made. Hence, we delete the addition and reverse the orders of lower authorities on this issue and allow this issue of assessee’s appeal

In the result, the appeal filed by the assessee is partly allowed.