SRINIVASA REDDY YETURU,HYDERABAD vs. DCIT, CENTRAL CIRCLE-1(2), HYDERABAD

Consequent to search, the case was selected for scrutiny and during the course of assessment proceedings, the A.O called upon the assessee to explain as to why addition shall not be made towards on money paid for purchase of land. In response, the assessee submitted that although he has agreed to purchase 5 acre 1 guntas of land from Shri Arvind Kumar Bhalgat, through his agreement holder Shri Kotha Kapu Prabhakar Reddy, but finally, he has purchased only 2 acre 20 guntas of land at the agreed rate of Rs.4,68,582/- only. The assessee further contented that agreement of sale found during the course of search is not signed by the assessee, therefore, the question of making additions on the basis of the said agreement does not arise. The A.O after considering the relevant submissions of the assessee and also taking note of agreement of sale dated 31/10/2021 and the cash receipt found during the course of search observed that, the submissions of the assessee that he has purchased the land @ Rs.1,87,433/- per acre as against the agreed price of Rs.1,51,00,000/- per acre is contrary to the facts on record and also highly improbable. Further, the argument of the assessee that the agreement of sale was not signed by him is Page 3 of 15 devoid of any merit because, the agreement was found in his possession which is duly attached by the cash receipts issued by the seller and therefore, the non-signing of the agreement by the assessee does not change the factual position that the assessee has paid Rs.2,00,00,000/- crores for purchase of land. Therefore, rejected the explanation of the assessee and made addition of Rs.2,00,00,000/- under section 69A of the Act as unexplained investment. The A.O has also made an addition of Rs.60,000/- towards deduction claimed under section 80D to the extent of Rs. 10,000/- and deduction claimed under section 80EE to the extent of Rs.50,000/-, in aggregate to Rs. 60,000/- for not submitting any evidence.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT (A). Before the Ld. CIT (A), the assessee made detailed written submissions on this issue which have been reproduced at para 5.1 on pages 8 to 11 of the Ld. CIT (A)’s order. The sub and substance of arguments of the assessee before Ld. CIT (A) is that the A.O has erred in making addition towards the alleged cash payment of Rs.2,00,00,000/- crore under section 69A of the Act on the basis an agreement of sale dated 31/10/2021 and attached cash receipts without appreciating fact that sale agreement was not signed by the assessee. The assessee had also challenged the additions made towards disallowance of deductions claimed under section 80D and 80EE of the I.T. Act, 1961.

The Ld. CIT (A), after considering the relevant submissions of the assessee and also taking note of the reasons given by the A.O, sustained the additions made by the A.O on the ground that, as per the agreement of sale dated 31/10/2021, the assessee has agreed to purchase the land @ Rs.1.51 crores per acre, whereas argues that he has purchased only 2 acre 20 guntas for a consideration of Rs. Rs.4,68,582/- only @ Rs.1,87,433/- per acre. However, the evidence found during the search clearly shows that the assessee has agreed to purchase 1 acre of land @ Rs.1.51 crores and also paid a sum of Rs.2 crore by way of cash on 31/10/2021 to the agreement holder. From the above, it is very clear that the assessee has paid on-money of Rs.2 crores for purchase of land and the source for the same has not been explained by the assessee. Although, the assessee claimed to have renegotiated the price but, going by the evidence on record and the price paid for the purchase of the land as per the registered sale deed, by no stretch of imagination, it can be said that the vendor agreed to sell one acre of land for Rs.1,87,433/-, when it was already agreed upon to sell at Rs.1,51,00,000/-. Therefore, rejected the explanation of the assessee and sustained the addition made by the A.O. The Ld. CIT (A) had also rejected the explanation of the assessee with regard to the addition towards the disallowance claimed under section 80D of the I.T. Act, on the grounds that, although the assessee claimed Rs.35,000/- deduction u/s 80D, but furnished the evidence to the extent of Rs.25,000/- only. Since no evidence has been furnished by the Page 5 of 15 assessee for balance deduction, the A.O has rightly disallowed sum of Rs.10,000/- towards deduction claimed under section 80D of the Act. Similarly, the assessee did not furnish any supporting evidence in respect of deduction u/s 80EE of the Act, therefore, the ld. CIT(A) rejected the explanation of the assessee and sustained the addition made by the A.O towards deduction u/s 80EE of the Act, for Rs. 50,000/-. In other words, the CIT(A) sustained addition of Rs. 60,000/- 7. Aggrieved by the order of the Ld. CIT (A), the assessee is in appeal before the Tribunal.

The learned Counsel for the assessee, Shri M.V. Prasad, C.A, referring to the grounds of appeal filed by the assessee and more particularly, ground no.2 submitted that the assessment order passed by the A.O under section 143(3) of the Act, dated 27/09/2024 is barred by limitation going by the provisions of sec 153 of the I.T. Act, 1961. The learned Counsel for the assessee submitted that the assessment order, in question, before us is for the A.Y 2022-23. The A.O issued notice under section 143(2) of the I.T. Act on 20/06/2023. The search in the present case was conducted on 4/1/2023. As per the provisions of sec 153(1) of the I.T. Act, the time limit for completion of the assessment is 21 months from the end of the A.Y, in which the income was first assessable. Further, as per the 4th proviso to section 153 of the Act, which was inserted by the Finance Act, 2021 in respect of an order of assessment relating to A.Y

The Ld. Sr. AR for the Revenue, on the other hand, supporting the orders of the Ld. CIT (A) submitted that, there is no merit in the argument of the learned Counsel for the assessee because, the assessment order passed by the A.O on 27/09/2024 is well within the limitation period provided under section 153 of the Act for passing the assessment order which is evident from clause (xii) of Explanation (1) to section 153 of the Act, where the period not exceeding 180 days commencing from the date on which a search is initiated under section 132 of the Act and ending on the date on which the books of account are handed over to the A.O having jurisdiction of the assessee shall be excluded. In the present case, the search was conducted on 4/1/2023 and the A.O has handed over the seized material on 22/08/2023. Although the A.O has taken 231 days for handing over the seized material to the A.O of the assessee but, as per clause (xii) of Explanation (1), it should not exceed 180 days and if we add 180 days to the normal time limit provided under section 153(1) of the I.T. act, then the time limit available for the A.O to complete the assessment was up to 27/09/2024 and the A.O has rightly passed the assessment order on 27/09/2024. Therefore, the argument of the learned Counsel for the assessee that the order passed by the A.O is beyond the limitation and barred by limitation is devoid of any merit and cannot be accepted.

We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. It is an admitted fact that a search & seizure operation under section 132 of the I.T. Act was carried out in the case of the assessee on 4/1/2023. It is also an admitted fact that the seized material is handed over to the A.O on 22/08/2023, which is evident from the letter of the A.O dated 22/03/2024. The normal time limit for completion of the assessment under section 153(1) of the Act is 21 months from the end of the A.Y in which the income was first assessable. Fourth proviso to section 153 inserted by the Finance Act, 2021 reduced the time limit from 21 months to 12 months in respect of an order of assessment relating to the A.Y commencing on or after 1/4/2022. In other words, as per section 153 and 4th proviso provided thereon, the time limit for completion of the assessment for the A.Y 2022-23 is 12 months from the end of the A.Y, in which the income is first assessable. In the present case, the Asst. Year involved is Asst. Year 2022-23 and time limit for completion of assessment is 12 months from the end of the A.Y 2022-23 i.e. up to 31/03/2024. However, the case of the assessee falls under clause (xii) of Explanation (1) to section 153 of the Act, because a search and seizure operation was conducted under section 132 of the Act on 4/1/2023 and as per clause (xii) of Explanation (1) to section 153, the period (not exceeding 180 days) commencing from the date of search initiated under section 132 of the Act and ending on the date on which the books of account or other document are handed over to the A.O

In the present case, search was conducted on 4/1/2023. The A.O of the assessee received seized material on 22/08/2023. As per clause (xii) of Exp. (1) to section 153 of the Act, the period commencing from 4/1/2023 to 22/08/2023 shall be excluded for the purpose of computing the limitation period. Admittedly, the period starting from 4/1/2023 and up to 22/08/2023 falls in two financial years i.e. (i) from 4/1/2023 to 31/03/2023 falls under financial year 2022-23 and (ii) date commencing from 1/4/2023 to 22/08/2023 falls in financial year 2023-24. In the present case, admittedly, the limitation period for completing the assessment starts from 1/4/2023 and in fact the A.O had issued notice under section 143(2) of the Act on 20/06/2023. The time taken by the A.O for handing over the books of account and other materials from 4/1/2023 to 22/08/2023 is 231 days. As per clause (xii) of explanation (I) of section 153, the period taken by the A.O shall not exceed 180 days. As we have already noted in the earlier paragraphs of this order, Exp.(1) of clause (xii) is only an exclusion clause and therefore, whatever time lost by the A.O in the limitation period