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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri A. Mohan Alankamony & Shri S.S. Godara
O R D E R Per S. S. Godara, J.M. This assessee’s appeal for A.Y. 2009-10 arises from the Commissioner of Income Tax (Appeals) – 11, Hyderabad’s order dated 28.12.2018 in case No.27/2017-18/DCIT CC-1(2)/CIT(A)- 11/2018-19/Hyd involving proceedings u/s 143(3) r.w.s 153A r.w.s. 147 of the Income Tax Act, 1961 [in short, ‘the Act’].
Case called twice. None appears at assessee’s behest. He is accordingly proceeded ex-parte.
We have heard the Revenue represented by learned CIT DR Dr. Rajendra Kumar and perused the case file. The assessee’s sole substantive grievance on merits pleaded herein challenges correctness of both the lower authorities’ action making unexplained investment addition of Rs.63,10,000/- in the nature of “on-money” payment for purchase of plot(s) in Emaar Hills Township Pvt. Ltd.
Learned CIT DR vehemently contended during the course of hearing that even the CBI has also filed its main as well as supplementary charge-sheet(s) before the learned Special Judge involving M/s. Emaar Hills Township Pvt. Ltd indicating various instances of on-money payments including this assessee. Mr. Rajendra Kumar also sought to place reliance upon various incriminating statements / evidence in support of the impugned addition.
We note in this factual backdrop that the very issue had arisen before the tribunal in ITA 1397/Hyd/2019 Talluri Venkata Krishna Kishore Vs. ACIT decided on 16.12.2021 in assessee’s favour and against the department as follows : “3. The brief facts of the case are that the assessee is an individual engaged as Director in M/s. Infobahn Corporation Limited deriving income from salary, house property, business and income from other source. The assessee filed his return of income for the relevant AY on 3/2/2011 admitting total income of Rs. 22,97,212/-. Subsequently the case was taken up for scrutiny and the notice U/s. 148 was issued to the assessee on 18/11/2013 and thereafter assessment was completed U/s. 143(3) r.w.s 147 of the Act vide order dated 31/3/2015.
4. The Central Bureau of Investigation had conducted investigation into the affairs of EHTPL Group and filed a charge sheet. In that investigation it was revealed that one of the entities of EHTPL Group viz., M/s. Stylish Homes Real Estate Pvt Ltd represented by its Director Shri Koneru Rajendra Prasad and Shri Tummala Rangarao were selling villa plots at a 2 price higher than what is recorded in the MoU / Allotment letter or registered document. As per the admission of Sri T. Ranga Rao it was revealed that the assessee had paid Rs. 2,49,15,000 in cash over and above the recorded price of Rs. 83,05,000 for purchase of plot No. A-18 admeasuring 1661 sq yds. The rate of the plot recorded in the documents was Rs. 5000 per sq yd while as the assessee has paid on money of Rs. 15,000 per sq yd. When the matter was put up before the assessee, the assessee denied for having paid on money to the vendors. The Ld. AO cross examined Mr. T. Ranga Rao wherein he confirmed the statement given before the CBI that assessee had paid on money for the purchase of the plot. However, the assessee denied paying on money in the transaction. Based on the statement of Sri T. Ranga Rao and certain other individuals of EHTPL Group before the CBI and the Revenue the Ld. AO came to the conclusion that the assessee had paid on money of Rs. 2,49,15,000 in cash for purchase of the property. Thereafter, relying on the decisions of the Hon’ble Supreme Court in the case CIT vs. Durga Prasad More reported in 82 ITR 540 and in the case Juggittal Kamlapet vs. CIT reported in 73 ITR 702 made addition of Rs. 2,49,15,000 in the hands of the assessee invoking the provisions of section 69 of the Act by observing as follows:
It is now a settled law that evidence are to be adduced by the assessee which may be direct or circumstantial or both. However, in this case under consideration, cumulative impact of all the facts must be taken into account. The Assessing Officer is not bound by any technical rules of law of evidence and may rely on circumstantial evidence as it is not always possible to have positive and conclusive evidence. He can take into consideration all relevant evidences in a wider sense than strictly legal. Further, for deciding the issue of this nature, there cannot be one general or universal proposition of law which could be the guiding yardstick in the matter. The surrounding circumstances, preponderance of probability, and presumption of facts based on common human experience in life should be the guiding principle. In view of the above discussion, the cash component of Rs. 2,49,15,000 at Rs. 15,000 per sq yd for purchase of 1661 sq yds, over and above the recorded price of Rs. 83,05,000/- at Rs. 5,000/- per sq yd is brought to tax as unexplained investment U/s. 69 of the Act made towards purchase of villa plot in Emaar Hills Township.
5. On appeal, the Ld. CIT(A) held the order of the Ld.AO to be appropriate based on the fact that certain other individuals had purchased the property at a higher value and accordingly confirmed the addition.
6. Before us the Ld. AR vehemently argued stating that the entire addition was made only based on the statement of third party and without any other material evidence. The Ld. AR further submitted that there was no other tangible material relied by the Ld. Revenue Authorities for making such additions in the hands of the assessee and confirming the same. The Ld. AR in his written submission had made the following submission:
(i) The statement of Mr. T. Ranga Rao is no conclusive as it cannot have any evidentiary value as it is without any corroborating evidence. Reliance was also placed in the decision of the Hon’ble jurisdictional High Court in the case Guruvindapalli Anna Rao and Three..vs. State of Andhra Pradesh vide order dated 6/3/2003 reported in 2003(2)ALD Cri 60, 2003 (1) ADL Cri 536. (ii) In the cross-examination Mr. T. Ranga Rao confirmed that there was no documentary evidence to prove that he has received on money from the assessee for the sale of the property to the assessee. (iii) The CBI had neither made any investigation on the assessee nor filed any charge sheet against him for any irregularities. (iv) The Ld. AO has not pointed out any tangible materials in order to justify his presumption that the assessee has paid on money for purchase of the land.
7. The Ld. DR on the other hand argued in support of the orders of the Ld. Revenue Authorities.
We have heard the rival submissions and carefully perused the materials on record. After hearing both the parties and perusing the materials on record, it is apparent that the addition is made in the hands of the assessee only based on the investigation made by the CBI with respect to EHTPL Group of concerns and the statement recorded from some of the Directors of the ETHPL Group. Further, it is also crystal clear that there is no other tangible material to corroborate with the statement of Sri T. Ranga Rao in order to establish that the assessee had paid on money for the purchase of the land. It is pertinent to mention that in various decisions of the Higher Judiciary and the Tribunal on the earlier instances it was held that addition cannot be made only on the basis of presumption without any corroborating evidence. Similarly, it was also held that addition cannot be made only on the basis of the statement given by the third party without any other tangible material to justify the same. Further, this bench of the Tribunal in to 1590/Hyd/2014 for the AY 2007-08, 2009-10 and 2010-11 in the case of DCIT vs. Sri A. Krishna Prasad vide order dated 15/11/2017 upheld the order of the ld. CIT (A) deleting the addition made on identical issue by observing as follows: “4. Thereafter, the AO proceeded to consider that the assessee has invested an amount of Rs.3.39 crores for purchase of a villa from M/s. Emmar Hills Townships Pvt. Ltd and that this amount includes a cash of Rs.2,54,25,000 paid by the assessee over and above the registered value of Rs.84,75,000. He observed that the assessee had admitted payment of Rs.80,51,250 on different dates but has failed to submit any details of payments made in cash. The assessee’s explanation as to why the cash payment should not be brought to tax was called for. The assessee denied making any payment in cash over and above the amount mentioned and reflected in the registered agreement of sale. The AO however, did not accept the assessee’s contention and held that the cash payment of Rs.2,24,25,000 is proportionately attributable to three different A.Ys i.e. A.Ys 2007- 08, 2009-10 & 2010-11 equally. Thus, he made the addition 4 of Rs.84,75,000 in each of the A.Ys as unexplained investment and brought it to tax.
5. Aggrieved, the assessee preferred appeals before the CIT (A) for all the three A.Ys, by challenging the validity of the assessment proceedings and also the additions made by the AO. The CIT (A) vide orders dated 11.06.2014 for all the A.Ys, held the re-assessment proceedings u/s 147 of the Act to be void on the ground that the AO did not have any material to corroborate that “on money” has been paid by the assessee towards purchase of the villa and that income of Rs.3,39,00,000 has escaped the assessment for the A.Ys 2007-08, 2009-10 & 2010-11. He held that prima facie quantification of the income which has escaped assessment is an essential requirement u/s 149 of the Act and in the absence of date of payment with evidence, the previous year in which the transaction falls cannot be ascertained. The other ground on which he has held the reopening of the assessment to be bad in law are that there is no tangible material in the possession of the AO of the assessee that the income of the assessee has escaped assessment but the AO has reopened the assessment only on the basis of the information received from another AO and the satisfaction recorded is based only on a possibility and presumption. The CIT (A) also observed that the assessee had raised detailed objections to the reopening of the assessment before the AO, but the AO has rejected the same without passing a speaking order. Further, he also observed that the assessee had sought an opportunity to cross examine Mr. Tummala Ranga Rao, but the AO not afforded such an opportunity to the assessee even though he was relying on such statement to make the addition. Thus, for all these reasons, the CIT (A) held the reopening of the assessment to be bad in law. Thereafter, he also proceeded to consider the merits of the additions made by the AO and observing that there is no evidence on record that the sum of Rs.3,39,00,000 has escaped the assessment, he deleted the addition. Against these findings of the CIT (A) for all the three A.Ys, the Revenue is in appeal before us.
The learned DR, while relying upon the order of the AO submitted that Mr. T. Ranga Rao, who is a Director of M/s. Stylish Homes Real Estates Pvt. Ltd, in his statement before the Court, had clearly stated that he has collected the amounts in cash over and above the registered sale consideration mentioned in the registered agreements of sale and that it was on the basis of these statements that the assessments have been reopened in the case of the assessee. In support of his contention that where there is material found during the course of search in the case of another person, on the basis of which the re-assessment proceedings are initiated, such proceedings are valid, he placed reliance upon the decision of the Hon'ble Bombay High Court in the case of Bright Star Syntex (P) Ltd vs. ITO, reported in (2016) 71 Taxmann.com 64 (Bom). Further, he submitted that similar issue had arisen in the case of Mr. G. Mahesh Babu and the Hon'ble jurisdictional High Court in the appeals filed by both the Revenue as well as Mr. Mahesh Babu, vide orders dated 6.1.2017, has upheld the order of the Tribunal in remanding the matter back to the file of the AO to give the assessee an opportunity to cross examine Shri Tummala Ranga Rao and further directed that if it is found that the AO is able to establish, on the basis of evidence gathered, that the assessee had paid on-money to the extent quantified by him, then he can make the addition u/s 69B of the Act and if there is no evidence available on record to directly link the assessee towards payment of on- money, then merely on the basis of the fact that some other buyers have accepted payment of on-money, no addition can be made.
The learned DR submitted that in the case of the assessee also, the matter may be remanded back to the file of the AO for fresh examination in the light of the directions given by the Tribunal in the case of Mr. Mahesh Babu.
8. The learned Counsel for the assessee, on the other hand, supported the orders of the CIT (A) and submitted that for reopening of the assessment after a period of four years on the basis of material available on record, the AO has to satisfy himself that the income of the assessee has escaped assessment and that it is due to the fault of the assessee to disclose fully and truly all material facts necessary for the estimation of his income. The learned Counsel for the assessee submitted that the assessee has filed his returns of income for all the three years and even in the Wealth Tax returns, the assessee has disclosed the asset. He also submitted that the assessee has made the payment only of Rs.84,75,000 to M/s Emmar Hills Township Ltd, by way of cheques, and the sources for the said payments have been explained by the assessee to the authorities below and all the payments have been reflected in the books of account and also explained during the re-assessment proceedings. Therefore, according to him, the AO had no material, whatsoever, to come to the conclusion that there was escapement of income due to the fault of the assessee to disclose fully and truly all material facts. He also submitted that the satisfaction recorded by the AO is not on the basis of any material which has subsequently come to his possession but it is actually on the basis of the letter written by another AO and hence can at best be termed as “borrowed satisfaction”. Further, he also submitted that the AO has relied upon the statement of one Mr. Tummala Ranga Rao, to make addition without giving the assessee an opportunity to cross examine such a person. He placed reliance upon the decision of the Hon'ble Bombay High Court in the case of Hindustan Lever Ltd. Vs. ACIT reported in 268 ITR 332, for the proposition that the AO of the assessee alone has to reach to the conclusion that there was escapement of income and also as to whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of his income for the relevant A.Y. He therefore, submitted that the order of the CIT (A) is to be upheld. Having regard to the rival contentions and the material on record, we find that the AO has resorted to reopening of the assessment for all the three years solely on the basis of the letter received by him from ACIT, Circle 2(3), Hyderabad. In the reasons recorded, it mentioned that the assessee has made payment of Rs.3.39 crores for purchase of a villa, but has not disclosed the said investment in his return of income, thereby, there is a failure on the part of the assessee to disclose fully and truly all material facts for the assessment of his income for the relevant A.Y. The assessee is an individual and in the returns of income filed by him, the assessee is supposed to disclose his income of the relevant financial year and pay taxes thereon, and there is no requirement to disclose the 6 investments in assets made by him. The assessee was required to file the Wealth Tax return disclosing the assets owned by him. As long as the assessee is able to satisfactorily explain the sources for his investments, no addition can be made. We find that in response to the notice u/s 148, the assessee has explained the sources to the extent of Rs.80,50,250, but the AO has made the addition though the assessee has clearly denied having made any payment in cash. As recorded by the CIT (A), the AO has not brought on record, any evidence as to how and when the assessee has made payment of any cash for the purchase of the villa. The AO has unilaterally apportioned the alleged cash payment equally amongst the three A.Ys. Such a procedure is not envisaged under the law. The AO is required to bring on record, the quantum of investment and the mode of investment made during the relevant previous year before making any addition to the returned income of the assessee. No such evidence has been brought on record by the AO. The Hon'ble Courts have held that the AO of the relevant assessee has to record his reasons before reopening of the assessment and where the reopening of assessment is after four years, he is required also to record that the income has escaped the assessment due to the failure on the part of the assessee to disclose all material facts. The AO of the assessee before us has not brought on record any material on the basis of which he had satisfied himself that the assessee has not disclosed the material facts due to which there is an escapement of income for the relevant A.Y.
The Hon'ble Bombay High Court in the case of Hindustan Lever Ltd (cited Supra) has held that the AO of the assessee alone has to reach to the conclusion as to whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of his income for the relevant A.Y. and has held that “the reasons recorded should be clear and unambiguous and should not suffer from any vagueness as the reasons are the manifestations of the mind of the AO. The reasons recorded should be self-explanatory and should not keep the assessee guessing as the reasons provide the link between the conclusions and the evidence. The AO, in the event of challenge to the reasons, must be able to justify based on the material available on record and he must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that A.Y, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the AO cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the Court, on the strength of the affidavit or oral submissions advanced”. Thus, the re-assessment proceedings in the case before us are not sustainable. Even on merits, there is no evidence brought on record to show that the assessee had the sources for such payments in cash and that the assessee has failed to disclose the same in his return of income. Therefore, both on the validity of the re- assessment as well as the addition deleted by the CIT (A), we do not find any reason to interfere with his order.
Since the facts and the issue are identical in the case of the assessee also with respect to the purchase of the plot in the same project and based on our observations hereinabove, we hereby hold that the addition 7 made by the Ld. AO for Rs. 2,49,15,000 invoking the provisions of section 69 of the Act is not justifiable. Therefore, we hereby direct the ld. AO to delete the addition made on this count. Accordingly, Grounds no.1 & 2 are disposed off in favour of the assessee. Since Ground no.3 10 relates to levy of interest U/s. 234A and 234B of the Act being consequential in nature, it is accordingly, disposed off.”
We adopt the foregoing detailed discussion mutatis mutandis to accept the assessee’s instant sole substantive grievance on merits. The impugned unexplained investment addition of Rs.63,10,000/- stands deleted therefore.
6. This assessee’s appeal is partly allowed in above terms.
Order pronounced in the Open Court on 8th February, 2022.