SRI BALAJI BUILDERS,,SECUNDERABAD vs. THE ACIT, RAJAHMUNDRY

आदेश / O R D E R

PER Bench:

These appeals filed by the assessee are directed against order

passed by the Commissioner of Income Tax (Appeals) {CIT(A)}, Guntur

vide ITA No.444&445/CIT(A)/GNT/10-11 dated 24.2.2014 for the

assessment years 2008-09 & 2009-10. Since, the facts are identical and

ITA No.111&112/Vizag/2015 M/s. Sri Balaji Builders, Kakinada issues are common, they are clubbed, heard together and disposed-off

by way of this common order for the sake of convenience.

ITA 111/Vizag/2015 (A.Y. 2008-09):

the assessee on 3.2.2009. Consequently, the A.O. issued notice u/s

153C of the Income Tax Act, 1961 (hereinafter called as 'the Act') and

completed the assessment u/s 143(3) r.w.s. 153C of the Act on total

income of ` 45,53,768/-.

6/4, Narasanna nagar, Kakinada in 1011 sqare yards of site taken on

development basis from the land lord and as per the agreement the

assessee has to construct 34 flats in total built up area of 29600 square

feet and to hand over 9 flats with built up area of 8662 sq. feet to the

land lord. The assessee would get his share of 20938 square feet. As per

the enquiries conducted by the AO from Shri VVS Venugopal who has

purchased two flats consisting of 1307 square feet and 630 sq feet has

stated that, he had agreed for payment of consideration of Rs.24.50 lacs

which works out Rs.1264/ peer sft. Therefore the AO determined the

sale price at Rs.1250/- per sft and worked out the realizable value of

Rs.2,61,72,500/- for assesse’s share of 20938 sft and cost of

construction was estimated at Rs.650/- for sft. During the year under

ITA No.111&112/Vizag/2015 M/s. Sri Balaji Builders, Kakinada consideration the assessee sold 12 flats with built up area of 14,261 sft

and the AO estimated the proportionate sale consideration at

Rs.1,78,26,250/- @ 1250 per sft and the cost of construction of the sold

flats was estimated at Rs.1,31,04,482/- and arrived at the profit of

Rs.47,21,768/- and made the addition of Rs.40,15,931/- being the

difference amount.

before this Tribunal and raised the following grounds against the order

of the CIT(A).

27,14,240/-. During the appellate proceedings the Ld. CIT(A) examined

the statements recorded from the flat buyers and observed that there

was difference in the stated consideration of the buyers and the 3

ITA No.111&112/Vizag/2015 M/s. Sri Balaji Builders, Kakinada consideration admitted by the assessee in the books of accounts. The

consideration received varied from Rs. 905/- per sft to Rs.1109/- per sft.

After analyzing the information, the Ld CIT(A) worked out the

undisclosed consideration at Rs.190/- per sft and accordingly estimated

the undisclosed consideration at Rs.27,14,240/- for the area sold during

the year and confirmed the addition to the extent of Rs.27,14,240/- and

deleted the balance addition.

before us. During the appeal hearing, the assessee raised the validity of

assessment made u/s 153C r.w.s. 143(3) of the Act in the absence of

incriminating material. During the appeal hearing, the Ld. A.R.

submitted that the A.O. made the addition entirely on surmises and

assumptions and on estimation basis and there was no incriminating

material found during the course of search what so ever relating to the

assessee for assessment year 2008-09. Hence, the issue of notice u/s

153C of the Act without incriminating material required to be quashed

and relied on Hon’ble Supreme Court judgement in the case of CIT Vs.

Sinhagad Technical Education Society, [2017] 84 taxmann.com 290 (SC)

wherein the Hon’ble Supreme Court upheld the order of the Hon’ble

Bombay High Court in quashing the notice u/s 153C of the Act.

ITA No.111&112/Vizag/2015 M/s. Sri Balaji Builders, Kakinada 7. On the other hand, the Ld. D.R. supported the orders of the lower

authorities.

on record and gone through the orders of the authorities below. In the

assessee’s case, the assessment was completed on estimation of income

in respect of the flats sold on the basis of the statements recorded from

the flat buyers Mr. V.V.S. Venugopal and others u/s 131 of the Act. The

AO observed that the books of accounts were not located during the

search/ survey proceedings, hence held that the assessee was not

maintaining the books of accounts and accordingly initiated the

proceedings u/s 153C of the act. However it was contended that the

assessee was maintaining the regular books of accounts and the same

were duly audited by the qualified accountant and the assessee had filed

the return of income as per the books of accounts for the AY 2008-09 on

01/10/2008. The assessee also produced the books of account before

the assessing officer which were examined by the AO during the

assessment proceedings. The AO has neither made any effort to locate

the books of accounts nor recorded the statement from the accountant

who audited the books of accounts at the time of survey. Therefore the

observation of the AO that the assessee was not maintaining the books

of accounts was not based on any basis hence cannot be accepted.

ITA No.111&112/Vizag/2015 M/s. Sri Balaji Builders, Kakinada Merely because of the books of accounts could not be traced at the time

of survey/search, it cannot be presumed that the books of accounts are

not maintained unless all out efforts are made and clear finding is given.

Therefore we are of the view that the assessee was maintaining the

books of accounts and on the date of survey the department could not

locate the books of accounts. From the above discussion it is

established that the assessee has maintained the books of accounts.

There was no incriminating material found during the course of search in

respect of assessment year 2008-09 in the premises of the searched

person with regard to the suppression of income or inflation of

expenditure. The statement recorded u/s 132(4) of the Act related to

the assessment year 2009-10 but not related to the A.Y.2008-09. Now it

is settled issue that for initiating the proceedings u/s 153C of the Act, it

is incumbent upon the A.O. to have the incriminating material

evidencing the undisclosed income. In the assessee’s case no such

evidence was found during the course of search in the group cases. As

per the provisions of section 153C of the Act, it is mandatory to have the

satisfaction of the A.O. that money, bullion, jewellery or other valuable

article or thing or any books of accounts, documents seized or

requisitioned pertains to or relates to the assessee, which means that

unless there is an incriminating material belonging to the assessee is

ITA No.111&112/Vizag/2015 M/s. Sri Balaji Builders, Kakinada found, the action u/s 153C of the Act is not permissible. In the

assessee’s case there was no incriminating material found and seized

from the premises of the group cases. Therefore, we hold that the

notice issued u/s 153C of the Act is not sustainable and accordingly

quashed. This view is upheld by the Hon’ble Supreme Court in the case

of CIT Vs. Sinhagad Technical Education Society (Supr). Respectfully

following the judgement of the Hon’ble Supreme Court, we hold that the

notice issued u/s 153C of the Act is unsustainable and accordingly

quashed.

ITA No.112/Vizag/2015 (A.Y. 2009-10):

the assessee on 3.2.2009. Consequently, the notice u/s 153C of the Act

was issued in this case and the assessment was completed u/s 143(3) of

the Act on total income of ` 16,13,333/-. During the search proceedings

u/s 132 of the Act, the assessee had admitted the additional income of `

20 lakhs u/s 132(4) of the Act and accordingly filed the return of

income. However, the assessing officer completed the assessment

estimating the income. Aggrieved by the order of the A.O., the assessee

went on appeal before the CIT(A) and the Ld. CIT(A) sustained the

addition of ` 10,69,700/- and deleted the balance amount.

ITA No.111&112/Vizag/2015 M/s. Sri Balaji Builders, Kakinada 11. Aggrieved by the order of the CIT(A), the assessee is in appeal

before this Tribunal and the assessee has raised the following grounds

against the order of the CIT(A).

that the assessee had admitted additional income of ` 20 lakhs during

the course of search and accordingly filed the return of income which

was more than the income estimated by the A.O., hence there is no

necessity to the A.O. to re-compute the income by estimation.

However, during the appeal hearing, the Ld. A.R. has not pressed the

grounds of appeal, therefore, the appeal is dismissed as not pressed.

ITA No.111&112/Vizag/2015 M/s. Sri Balaji Builders, Kakinada 13. In the result, the appeal filed by the assessee for the A.Y. 2008-09

is allowed and the appeal for the A.Y. 2009-10 is dismissed. The above order was pronounced in the open court on 10th Jan’18.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 10.01.2018 VG/SPS आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:- 1. अपीलाथ� / The Appellant – M/s. Sri Balaji Builders, C/o M. Anandam & Co., Chartered Accountants, 7A, Surya Towers, S.P. Road, Secunderabad. 2. ��याथ� / The Respondent – The ACIT, Central Circle, Rajahmundry 3. आयकर आयु+त / The CIT, Guntur 4. आयकर आयु+त (अपील) / The CIT (A), Guntur 5. #वभागीय ��त�न.ध, आय कर अपील�य अ.धकरण, #वशाखापटणम / DR, ITAT, Visakhapatnam 6. गाड� फ़ाईल / Guard file आदेशानुसार / BY ORDER // True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM