ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1,, VISAKHAPATNAM vs. Y.JOJI REDDY, HYDERABAD

The above captioned appeals and cross objections are relating to assessees of same group / family, therefore for the sake of convenience all these appeals are clubbed, heard together and disposed off by this consolidated order. Further, since the issues raised in all above appeals are different, therefore we proceed to dispose of each appeal separately.

This appeal is filed by the Revenue against order of Learned Commissioner of Income Tax (Appeals)-3, Visakhapatnam [hereinafter in short Ld.CIT(A)] in Page No. 2 , 326, 327 & 328/VIZ/2018 C.O. Nos. 59, 60 & 61/VIZ/2019 Joji Reddy Yeruva &Y. Lourdu Reddy dated 31.03.2018 for the A.Y.2007-08 arising out of the order passed under section 143(3) r.w.s.153C of Income Tax Act, 1961 (in short ‘Act’).

Brief facts of the case are that, assessee being an individual deriving income from civil construction works and from other sources, filed his return of income admitting an income of Rs. 9,35,880/- besides agricultural income of Rs.1,85,000/- for the A.Y. 2007-08. Consequent to the search and seizure operation under section 132 of the Act conducted in the case of M/s. Sai Lakshmi Township Pvt. Ltd., Visakhapatnam on 22.08.2008 certain incriminating material relating to the assessee were found and seized. Accordingly, notice under section 153C of the Act was issued to the assessee on 29.01.2010 and served on 09.02.2010 requiring the assessee to file the return of income for six (6) assessment years ranging from A.Y. 2003-04 to A.Y.2008-09. In response to the notice, assessee filed a copy of return of income for the A.Y.2007-08 on 22.09.2010 declaring the total income at Rs.9,35,880/- besides agricultural income of Rs. 1,85,000/-. Subsequently, notices under section 143(2) and 142(1) of the Act along with the questionnaire were issued on 23.09.2010 and served on 27.09.2010. In response to the notices, the Authorized Representative of the assessee appeared and filed the information called for. After examining and verification of the information furnished by the assessee’s representative,

Being aggrieved by the order of the Ld. Assessing Officer, assessee filed an appeal before Ld. CIT(A). Ld. CIT(A) after considering the submissions made by the assessee, partly allowed the appeal of the assessee.

Being aggrieved by the order of the Ld. CIT(A), Revenue is in appeal before us by raising following grounds of appeal: -

Ground Nos. 1 and 2 relates to the sources of the unsecured loans amounting to Rs. 74.02 Lakhs. Ld. Departmental Representative [hereinafter in short “Ld.DR”] submitted that assessee has not submitted bank statement copies and proved the creditworthiness which is essential condition for proving the genuineness of the unsecured loans. He pleaded that Assessing Officer has Page No. 4 , 326, 327 & 328/VIZ/2018 C.O. Nos. 59, 60 & 61/VIZ/2019 Joji Reddy Yeruva &Y. Lourdu Reddy rightly considered the unsecured loans as unexplained since genuineness and creditworthiness was not proved by the assessee beyond doubt. He therefore pleaded that the order of the Assessing Officer be upheld.

Per contra, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that the details of unsecured loans including the names, creditworthiness and genuineness of the loans already been filed before Ld.Assessing Officer and also before Ld. CIT(A). He submitted that the Ld.Assessing Officer ignored the evidences and proceeded to add Rs.74.02 Lakhs while framing the assessment considering it as unexplained. He further submitted that confirmation letters from various parties have been submitted in the paper book.

We have heard both the sides and perused the material available on record. Assessee has obtained unsecured loans to the extent of Rs.74.02 Lakhs for the purchase of property amounting to Rs.212.06 lakhs, from the following persons:-

With respect to Ground Nos. 3 and 4, Ld. DR submitted that the Ld.CIT(A) has estimated that the assessee would have spent 50%of the improvement cost of Rs. 42,28,500/- without going through the evidences for such expenditure. He therefore submitted that an amount of Rs.21,14,250/- allowed by the Ld. CIT(A) is not in accordance with law and he pleaded to be deleted.

Per contra, Ld.AR relied on the order of the Ld. CIT(A). Further he also submitted that the property was sold when it was under construction which is evidenced by the Annexure-I/A attached to the Sale Deed cum GPA dated 08.08.2006. Ld.AR therefore pleaded that assessee purchased the property which was under construction and hence he has incurred an expenditure of Rs.42,28,500/- to complete the building. He therefore pleaded that cost of improvement may be allowed.

We have heard both the sides and perused the material available on record. On perusal of the Sale Deed cum GPA dated 08.08.2006, it is noticed from the recitals that the vendors are the absolute owners of Ground Floors + Four Floors + Pent House, upto finishing level. However, in Schedule – I/A appended to the Page No. 8 , 326, 327 & 328/VIZ/2018 C.O. Nos. 59, 60 & 61/VIZ/2019 Joji Reddy Yeruva &Y. Lourdu Reddy Sale Deed Cum GPA dated 08.08.2006 it is mentioned as “Under Construction” for determination of Age of building. Further, assessee has not produced any documentary evidences for the cost of improvement incurred by the assessee which was also observed by the Ld. CIT(A) in Paragraph No. “(e)" at Page No.12 of the order which is extracted below:

The Ld.CIT(A) has erred in assuming that the assessee would have spent some money for completing the property. He further observed that no details were filed by the assessee relating to expenditure incurred for construction. In these circumstances, we find that the Ld. CIT(A) has erred in allowing 50% as cost of improvement on an estimate basis considering it as “reasonable”. The findings and observations of the Ld.CIT(A) are contradictory to the fact of the material available on record. We are therefore inclined to set-aside the order of the Ld. CIT(A) on this issue thereby allowing the grounds raised by the revenue. Ground Nos. 3 and 4 are allowed.

With respect to Ground Nos. 5 and 6 of grounds of appeal, we observe that these grounds are general in nature and needs no adjudication.

In the result, appeal of the revenue is allowed.

This appeal is filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals)-3, Visakhapatnam [hereinafter in short Ld.CIT(A)] in dated 31.03.2018 for the A.Y. 2008-09 arising out of the order passed under section 143(3) r.w.s. 153C of the Act.

Brief facts of the case are that, assessee being an individual deriving income from civil construction works and from other sources. Consequent to the search and seizure operation under section 132 of the Act conducted in the case of M/s. Sai Lakshmi Township Pvt., Ltd., Visakhapatnam on 22.08.2008 certain incriminating material relating to the assessee were found and seized. Accordingly, notices under section 153C of the Act was issued to the assessee on 29.01.2010 requiring the assessee to file the return of income for six (6) assessment years ranging from A.Y. 2003-04 to A.Y. 2008-09. In response to the notice, assessee filed a copy of return of income for the A.Y. 2008-09 filed on 22.09.2010 admitting the total income at Rs. 50,26,350/-. Subsequently, notices under section 143(2) and 142(1) of the Act along with the questionnaire were issued on 23.09.2010 and served on 27.09.2010. In response to the notices, the Authorized Representative of the assessee appeared and filed the information called for. Assessing Officer after examining the submissions made by the Page No. 11 , 326, 327 & 328/VIZ/2018 C.O. Nos. 59, 60 & 61/VIZ/2019 Joji Reddy Yeruva &Y. Lourdu Reddy assessee’s representative framed the assessment by making the following additions: -

Being aggrieved by the order of the Ld. Assessing Officer, assessee filed an appeal before Ld. CIT(A). Assessee’s Representative made various submissions before Ld. CIT(A), considering the submissions and explanations provided by the assessee’s representative, Ld. CIT(A) partly allowed the appeal of the assessee.

Being aggrieved by the order of the Ld. CIT(A), revenue is in appeal before us by raising following grounds of appeal: -

With respect to unsecured loans the Ld. DR relying on the order of the Assessing Officer stated that assessee has not proved the sources to the satisfaction of the Assessing Officer. He Further submitted that the assessee’s representative filed only confirmation letters from the lenders but has not provided any bank statements, neither proved the creditworthiness and genuineness of the payments made by the lenders before Assessing Officer. Ld.DR further submitted that the Ld. CIT(A) has generally mentioned passing remark that the assessee given a PAN details of creditors, pass books, passports and copies of return of income filed etc., however, the fact is except for the confirmation letters, these details were not provided before Assessing Officer. Ld. DR further submitted that Ld.CIT(A) has not passed a speaking order after considering the submissions made by the Ld.AR. Therefore, he pleaded that the additions made by the Assessing Officer amounting to Rs. 173.33 lakhs as loans from friends and relatives shall be sustained.

Per contra, Ld.AR submitted that assessee has provided confirmation letters from the creditors and the payments have been made through proper

We have heard both the sides and perused the material available on record. The facts of the case are, assessee has purchased 14.43 Acres by investing Rs.492.52 lakhs as stated below: -

The main contention of the Assessing Officer is that the assessee has not proved the sources of funds received from the creditors beyond doubt and to his satisfaction, but just providing the confirmation letters from the lenders, but neither providing any evidences to prove the creditworthiness and the genuineness of the transactions before the Assessing Officer. Further we also Page No. 14 , 326, 327 & 328/VIZ/2018 C.O. Nos. 59, 60 & 61/VIZ/2019 Joji Reddy Yeruva &Y. Lourdu Reddy found from the statements submitted before Assessing Officer, assessee has stated that he has invested Rs. 391.20 lakhs during the F.Y. 2007-08. However, before Ld.CIT(A) assessee has submitted that the investment as Rs.492.52 lakhs for purchase of 14.38 Acres. We find from the various submissions by the Ld.AR that the assessee has not stated actual facts before the Assessing Officer. Further we also find that the Ld. CIT(A) has made a passing remark that the PAN details of creditors, pass books, passports and copies of return of income filed before Assessing Officer but the Assessing Officer has not made any enquiry regarding the genuineness and credibility and reliability of the documents. The Ld.CIT(A) has not specified in his order regarding the verification of documents nor has directed the Assessing Officer to carry an enquiry calling for remand report. In these circumstances, we find that the Ld.CIT(A) has erred in deleting the addition of Rs. 173.33 lakhs being the loan from friends and relatives without passing a speaking order and therefore we are inclined to uphold the order of the Assessing Officer on this issue.

Similarly, with respect to the sale proceeds of plots of Highway Paradise which were used for investment. Ld. DR submitted that even though the assessee claimed receipts from sale of plots, assessee was subjected to tax audit under section 44AB of the Act but the books of accounts were never audited. Ld. DR further submitted that in the absence of audited figures the sales could not be relied upon and hence the Assessing Officer has computed the income of the Page No. 15 , 326, 327 & 328/VIZ/2018 C.O. Nos. 59, 60 & 61/VIZ/2019 Joji Reddy Yeruva &Y. Lourdu Reddy assessee by estimating the rate per sq. yard as mentioned by the assessee in his statement recorded during the survey proceedings. Therefore, he pleaded that the order of the Assessing Officer be upheld.

Per contra, Ld.AR submitted that the turnover from the sale of plots received by way of cheque and by way of cash amounting to Rs. 460.99 lakhs and Rs. 271.17 lakhs respectively and were offered in the Profit & Loss Account. Ld.AR further submitted that the Assessing Officer has not disputed the turnover declared by the assessee while filing the return of income. Ld.AR further submitted that the assessee received various advances for the sale of plots and the investment was made out of such cash advances received from various farmers. He therefore pleaded that the order of the Ld.CIT(A) be upheld on this issue.

We have heard both the sides and perused the material available on record. It is the contention of the Ld. DR that it has received advances from various farmers in the form of cash during the period February, 2007 to July, 2007. However, no such documentary evidences have been produced before us regarding the receipt of advances. Ld.CIT(A) in his order has observed as follows: - “(e) ……. The Authorized Representative of the appellant was asked to explain how the advances were received. He explained that the appellant had got approval for layout from the Government in February, 2007 to July, 2007. He also explained that the law permits the developer to receive advance before approval for layout. Such situation is not permissible after 2013 due to the change in law. I have perused the approval copies of Nathavalasa Venture and found merit in the submissions of the Authorized Representative of the appellant. Since

We find from the observations of the Ld. CIT(A) that, the Ld. CIT(A) has erred in assuming the receipt of advances which is emanating from the sale of plots. The Ld. CIT(A) has not passed a speaking order after verification of the books of accounts and has observed that the assessee is found to be “reasonable”. Further the Ld. CIT(A) also observed that the land of 14.43 Acres was purchased after the approval for layout and hence it can be construed that the advances are emanating from the sale of plots. Ld. CIT(A) has passed his observations on premises and assumptions without examining the facts placed before him. We therefore found that the order of the Ld. CIT(A) is not in accordance with law and hence we are inclined to set-aside the order of the Ld.CIT(A) and allow the ground raised by the revenue on this issue.

In the result, appeal filed by the revenue is allowed.

Coming to the appeal relating to A.Y. 2009-10, since facts in this case are mutatis mutandis, therefore the decision taken in for the A.Y.2008-09 is applicable to this assessment year also. Accordingly, appeal filed by the revenue is allowed.

In the result, appeal of the revenue is allowed.

This appeal is filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals)-3, Visakhapatnam [hereinafter in short Ld. CIT(A)] in dated 31.03.2018 for the A.Y. 2007-08 arising out of the order passed under section 143(3) r.w.s. 153C of the Act.

Brief facts of the case are that, assessee being an individual deriving income from civil construction works and from other sources. He filed his return of income admitting an income of Rs. 5,52,750/- besides agricultural income of Rs.1,12,000/- for the A.Y. 2007-08. Consequent to the search and seizure operation under section 132 of the Income Tax Act, 1961 (in short ‘Act’) conducted in the case of M/s. Sai Lakshmi Town Ship Pvt Ltd., Visakhapatnam on 22.08.2008 certain incriminating material relating to the assessee were found and seized. Accordingly, notices under section 153C of the Act was issued to the assessee on 29.01.2010 and served on 14.03.2010 requiring the assessee to file the return of income for six (6) assessment years ranging from A.Y.2003-04 to A.Y.2008-09. In response to the notice, assessee filed a copy of return of income for the A.Y. 2007-08 on 03.11.2010 admitting the same taxable income. Subsequently, notices under section 143(2) and 142(1) of the Act along with the questionnaire were issued and served on the assessee. The assessee entered into

Being aggrieved by the order of the Ld. Assessing Officer, assessee filed an appeal before Ld. CIT(A). Ld. CIT(A) after considering the submissions made by the assessee, Ld. CIT(A) deleted the additions made by the Assessing Officer by allowing the appeal of the assessee.

Being aggrieved by the order of the Ld. CIT(A), revenue is in appeal before us by raising following grounds of appeal: -

The only issue emanating from the grounds of appeal raised by the revenue is with respect to sources of the unsecured loans amounting to Rs.69,15,000/-. Ld. DR submitted that assessee has not submitted bank statement copies and proved the creditworthiness which is essential condition for proving the genuineness of the unsecured loans. He pleaded that Assessing Officer has rightly considered the unsecured loans as unexplained since genuineness and creditworthiness was not proved by the assessee beyond doubt. He therefore pleaded that the order of the Assessing Officer be upheld.

In the instant case the Ld.CIT(A) has casually observed as stated above and we are therefore not in agreement with the findings of the Ld.CIT(A). Therefore, we are inclined to set-aside the order of the Ld. CIT(A) on this issue and allow grounds raised by the revenue. Grounds raised by the revenue are allowed.

In the result, appeal of the revenue is allowed.

The assessee has filed the cross objections for various assessment years contesting the enhancement made by the Ld. CIT(A). The cross objections are filed on 18.04.2019. The Ld. CIT(A) passed the orders on 31.03.2018, and the Revenue filed the appeals on 18.06.2018, since the date of communication to the department was on 20.04.2018. Therefore, the assessee ought to have filed within the limitation period of 30 days (on or before 18.07.2018) with respect to filing of cross objections and 60 days (on or before 30.05.2018) with respect to filing of cross appeal / appeal. But assessee has filed the cross objection on 18.04.2019, therefore, there is a huge delay of 273 days (approximately).

Ld.AR submitted that after receipt of grounds of appeal filed by the Revenue the assessee filed cross objections within two days and hence there is no delay in filing the cross objection. Further, Ld.AR also submitted that assessee has not filed any appeal against the order of the Ld. CIT(A) and the assessee has raised only cross objections which should be considered as an appeal by the assessee. On this issue, he relied on the following case laws:

Per contra, Ld. DR submitted that the assessee preferred to file the cross objections against the order of the Ld. CIT(A) after receiving intimation of the appeal filed by the revenue. Ld. DR further submitted that the assessee is not actually interested in pursuing the appeal before the Tribunal. However, as an afterthought the assessee preferred to file the cross objections after the revenue filed the appeal before the Tribunal. Further, Ld. DR submitted that the assessee is aware of the revenue appeal and has filed cross objection with a huge delay of almost 273 days. He therefore pleaded that the cross objection is not maintainable and shall be dismissed.

We have heard both the sides and perused the material available on record. It is found from the records that the assessee opted to file cross objections belatedly on 18.04.2019 therefore there is a delay of 273 days (approximately). But the contention of the assessee is that there is no delay and within two days after the notice of the revenue appeal he has filed the cross objections.

The main contention of the Ld.AR is that he became aware of appeal filed by the Revenue only on 16.04.2019. However, on perusal of the material on record, we noticed that the Ld.AR has filed two letters for adjournment for the Page No. 24 , 326, 327 & 328/VIZ/2018 C.O. Nos. 59, 60 & 61/VIZ/2019 Joji Reddy Yeruva &Y. Lourdu Reddy hearing of cases posted on 21.01.2019 and 20.03.2019. Copy of the same is extracted below:

From the filing of the letters of adjournment by the assessee, it is obvious that the Ld.AR is having knowledge of the Revenue appeals on 21.01.2019 being the date of first adjournment filed by the Ld.AR. It is nothing but an afterthought of the assessee, who sought the appeal papers on 16.04.2019, for filing the cross objection in order to circumvent delay in filing the cross objections. Therefore, the contention of the Ld.AR that they are aware of the appeal proceedings only on 16.04.2019 is factually incorrect and could not be accepted. Further, we are also of the opinion that assessee ought to the have filed an appeal before the Tribunal in respect of the grievance arising out of the order of the Ld. CIT(A).

In the result, cross objections raised by the assessee are dismissed.

To sum-up, appeals filed by the revenue are allowed and the cross objections filed by the assessee are dismissed.