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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
PER S. BALAKRISHNAN, Accountant Member :
The captioned appeal is filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeal)-3, Visakhapatnam [Ld. CIT(A)] in DIN & Order No. ITBA/APL/S/250/2022-23/1044460595(1), dated 3/8/2022 arising out of the order passed by the Ld. AO U/s. 153A of the Income Tax Act, 1961 dated 26/9/2021 for the AY 2017-18.
Briefly stated the facts of the case are that the assessee is engaged in the business of manufacturing and processing of coconut husk based products filed its return of income for the AY 2017-18 on 31/10/2017 admitting a total loss of Rs. 21,66,184/.
Subsequently, a search action U/s. 132 of the Act was conducted in the case of the assessee at the registered office of the assessee along with its group concerns of M/s. Vijayanagar Biotech Pvt Ltd. Consequent to the search action U/s. 132, this case was centralized with Central Circle-1, Visakhapatnam vide order of the Pr. CIT-1, Visakhapatnam U/s. 127 of the Act in F.No. Pr.
3 CIT/1/VSP/127/2020-21, dated 4/11/2020. The Ld. AO issued a notice U/s. 153A of the Act on 25/2/2021 calling for the return of income. As there was no response, another notice U/s. 142(1) was issued calling for the information along with the detailed questionnaire. In response to the notice U/s. 142(1), the assessee partly submitted the information as required by the Ld. AO on 11/9/2021. During the course of assessment proceedings, the assessee claimed that it has filed its return of income on 26/8/2021 at the e-filing portal but the Ld. AO observed that the assessee has not verified the return electronically / physically.
During the course of search at the registered premises of the assessee, the Ld. AO noticed that certain incriminating material was found and seized vide Annexure-A/VBPL/OFFICE/02 regarding the sale of land admeasuring 1250.83 sq yds at Madhurawada, Visakhapatnam. The Director of the company Sri Datla Raghava Raju was required to explain about the details of sale where he has submitted the sale documents. The Ld. AO on perusal of the sale documents submitted by the Director observed that the assessee has sold land into 4 parts to 4 buyers for a consideration of Rs. 46,90,315/- each aggregating to Rs. 1,87,62,450/-. The Ld. AO found that the assessee has disclosed this amount while filing the return of income. Further, the Ld.
4 AO noticed that the SRO value as per section 50C of the Act for the plot of land is Rs. 56,29,000/- per document and concluded that the assessee has disclosed Rs. 9,38,385/- less than the stamp duty value and issued a show cause notice as to why this difference of Rs. 37,53,540/- (Rs. 9,38,385 X 4) cannot be taxed as capital gains. Since the assessee did not furnish any agreement, as claimed by the assessee, with respect to the said property, the Ld/ AO added back Rs. 37,53,540/- to the total income of the assessee as per the provisions of section 50C of the Act. Further, the Ld. AO observed that as per page 66 of the seized material in A/DVR/VSP/02 seized at the residence of D.
Vivekananda Raju, the assessee has received Rs. 1,62,60,700/- in “black” from the four buyers of the above mentioned land. The Ld. AO not accepting the explanation of the assessee added Rs. 1,62,60,700/- to the total income of the assessee under the head ‘income from other sources’. Further, Annexure seized vide A/DVR/VSP/02, the Ld. AO found that the assessee has sold Flat No. 302 in the multi-storied apartment of V.I.P. Towers for a consideration of Rs. 1,01,19,000/-which was disclosed in the return of income filed by the assessee. However, based on the seized material, the Ld. AO found that an amount of Rs. 31,40,000/- has been received by way of cash which is mentioned
5 as “black” in the above mentioned seized material and the same was added to the total income of the assessee as unexplained receipts. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A), Visakhapatnam.
Before the Ld. CIT(A), the assessee has also raised a legal ground that the assessment was completed by the Ld. AO u/s. 143(3) r.w.s 153A of the Act without issuing notice U/s. 143(2) of the Act. The assessee’s Representative also made written submissions before the Ld. CIT(A) regarding the additions made by the Ld. AO. Considering the written submissions made by the assessee’s Representative, the Ld. CIT(A) allowed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal.
The Revenue has raised the following grounds of appeal:
(i) The Ld. CIT(A) erred in not appreciating the fact that the assessee company had filed the return of income on 26/8/2021 to the notice u/s. 153A issued on 25/2/2021 and the same was e-verified on 19/9/2021 ie a few days before the due date for finalization of search assessment, during which period the minimum time of 15 days required for the assessee to comply to a notice U/s. 143(2) was not available. (ii) The Ld. CIT(A) erred in not appreciating the fact that the assessee company had never furnished any such alleged agreement between the parties in the month of March, 2016 for verification with 6 regard to the addition made U/s. 50C of Rs. 37,53,540/- during the course of assessment proceedings and this fact was clearly mentioned in para 6.7 of the assessment order. Accordingly, there is a clear infringement of Rule 46A as the AO has not been provided with an opportunity to examine the fresh evidence. (iii) The Ld. CIT(A) erred in not appreciating the fact that there was a clear documentary evidence in the form of material seized from the residence of Director of the company, wherein the contents were also clear about the property and the registered sale price exactly matched with the amount mentioned under the column “while” though the dates were not mentioned in the said document. It was clearly mentioned in the said document that part of the amount was “already received” against both white and black amounts, at a particular point of time. Further, the facts of this case are totally different from that of the case relied upon by the Ld. CIT (A) wherein there was no identification of the property. In the instant case, the immovable property was clearly identified as ‘Madhurawada Plots’. (iv) The Ld. CIT(A) erred in failing to appreciate that there was a clear documentary evidence in the form of seized material with regard to the addition of Rs. 31,40,000/- on sale of flat bearing No. 302, VIP Towers, wherein the sale consideration of Rs. 1,01,19,000/- was mentioned as while and the corresponding cash potion (over and above the sale consideration admitted in the registered sale deed) was mentioned at Rs. 31,40,000/-. (v) Any other ground that may be urged at the time of hearing.”
With respect to Ground No.2, the Ld. DR submitted that the assessee has entered into 4 registered sale deeds during December, 2016 and January, 2017. The Ld. DR further
7 submitted that the SRO value as per section 50C of the Act as on 1/6/2016 was Rs. 15,000/- per sq yd and hence this rate should be adopted while computing the capital gains. The Ld. DR relied on the order of the Ld. AO and pleaded that the decision of the Ld. AO on this ground may be upheld.
Per contra, the Ld. AR submitted that the assessee has entered in to an agreement with the prospective buyers and advance consideration was received by the assessee during the March 2016 itself. The Ld. AR further submitted that the SRO value of the property as on March, 2016 stood at 1,87,62,450/- for the four plots. The Ld. AR further pleaded that the receipt of advances was also mentioned in the sale deeds submitted before the Ld. AO. The Ld. AO just relied on the date of registration of the sale deed but has failed to appreciate the date of agreement / date of advance received by the assessee during March, 2016 wherein the value as per section 50C stood at Rs. 1,87,62,450/- as admitted by the assessee while filing the return of income. He therefore pleaded that the order of the Ld. CIT (A) be upheld.
We have heard both the parties and perused the material available on record as well as the orders of the Ld. Revenue Authorities. We find that the Ld. AO has relied on the date of 8 registration of the sale deed for making the addition U/s. 50C of the Act while framing the assessment U/s. 143(3) r.w.s 153A of the Act. The Ld. AO has merely relied on the loose sheets seized during the search operations. The Ld. AO also failed to record any corroborative evidences in his findings with respect to the additions made by him. The fact that the advance received by the assessee is mentioned in the sale deed entered into by the assessee was ignored by the Ld. AO. The Ld. AO has merely relied on the date of registration of sale deed while making the addition U/s. 50C of the Act which was registered during December, 2016 and January, 2017. Since the agreement to sell has been entered into as early as March 2016, and the consideration agreed and advance of Rs. 80,00,000/- has been received by the assessee, the delay in registering the sale deed, and in the mean time increase in the value for the purposes of Section 50C, shall not alter the agreed consideration. The Ld. CIT(A) has rightly considered the advances received by the assessee during March 2016 for the sale of 4 plots and accordingly has directed the Ld. AO to adopt the Fair Market Value as on the date of the agreement between the assessee and the vendees. We are therefore in concurrence with the decision of the Ld. CIT(A) and find that no interference is required in the 9 decision of the Ld. CIT(A) on this issue and this ground no.2 raised by the Revenue is dismissed.
With respect to second limb of ground No.2 raised by the revenue that the Ld. CIT(A) has violated the provisions of Rule 46A by not providing an opportunity to the Ld. AO to examine the fresh evidence, the Ld. CIT(A) in his order has observed that the advance amount was recorded in the sale deeds which was available before the Ld. AO at the time of assessment proceedings. In the absence of any additional evidence filed before the Ld. CIT(A), we find that there is no requirement of complying with the provisions of Rule 46A by the Ld. CIT (A) and hence we find that the Ld. CIT(A) has acted within his powers.
With respect to Ground No.3 regarding the addition of Rs. 1,62,60,700/- towards alleged on-money, the Ld. DR submitted that the Ld. AO has relied on the loose sheets vide Annexure- A/DVR/VSP/02 as per the screen shot available in page 8 of the Assessment Order. The Ld. DR invited our attention to the screen shot and submitted that the assessee has received an amount of Rs. 1,62,60,700/- for the sale of Madhurawada Plot in “Black”. He therefore pleaded that the Ld. AO has rightly considered the amount as on-money and has added it to the total
10 income of the assessee. Further, the Ld. DR submitted that the same screen shot vide “white” portion mentions the consideration as 1,87,62,450/-, which matches with the four sale deed entered into by the assessee and hence it pertains to the same plot of land sold by the assessee. The Ld. DR pleaded that the order of the Ld. AO be upheld.
Per contra, the Ld. AR submitted that the loose sheets does not contain any details regarding the date of payments and the amount to whom it was paid. Therefore, the Ld. AR submitted that it is a dumb document and the addition cannot be made on such incomplete document. The Ld.AR also referred to the sworn in statement by Vivekananda Raju who has stated that the loose sheets was not either written by him or any one of the employees of the assessee-company. The Ld. AR therefore pleaded that the order of the Ld. CIT(A) be upheld.
We have heard both the sides and perused the material available on record. We find that the loose sheets, extracted as screen shot in the Ld. AO’s order, are undated and no details like date of payment or to whom the amount was paid is not mentioned in the loose sheets. Further, the sale deeds executed by the assessee clearly mentions the consideration received and admitted by the assessee while filing the return of income. The Ld.CIT(A) in para 7.2 of his order relied on the case of Sri Badam Bhogalinga Swamy and others of the jurisdictional Bench of the Tribunal in to 10/Viz/2021. We reproduce herein below the findings of the Ld. CIT(A) on this ground:
“7.2 From the loose sheet as was submitted by the counsel it cannot be ascertained as to the details of payments and date of payment and to whom the amount was paid as was pointed out by the appellant. It was brought to my notice the consideration admitted by the appellant is clearly appearing in the registered sale deeds and hence under the circumstances there is no merit in ignoring the value appearing on the registered sale deeds and considering the amount appearing in the loose sheet that does not contain any relevant details. In the case of ACIT, Central Circle-1, Visakhapatnam v. Badam Bhogalinga Swamy reported in & 09/VIZ/2021 the Hon'ble jurisdictional Tribunal, Visakhapatnam held in para 6 of the order as under:
We have heard both the parties and perused the material placed on record. In the instant case, the assessees have purchased the plots for a consideration of Rs.6,42,000/- each from R.K. Megastructures P. Ltd., at Dakamarri each admeasuring 183.33 sq.yds. The sale consideration registered in the sale deed was Rs.6,42,000/- for each plot. According to the AO, the assessee has made the payment of Rs. 10,08,315/- over and above the sale consideration registered in the sale deed. The AO heavily placed reliance on the loose sheets found during the course of search marked as page no.35 of annexure- A/PDPPL/Vskp/Office/01, wherein certain rough notings were made. It is settled issue that loose sheets does not convey any meaning without having corroborative evidence: In the instant case, though certain notings were made with regard to cash payment, however, no details were mentioned with regard to plot number, payer, payee and the purpose of payment etc. The assessee has denied having made any payment over and above the sale consideration recorded in the sale deed. Unless there is tangible evidence, merely on the basis of loose sheet which does not have any details do not convey any meaning for making the addition. It is settled issue that the sale consideration recorded in the sale deed needs to be adopted for the purpose of payments made to the vendor as decided by Hon'ble Punjab and Haryana High Court in the case of Paramjit Singh vs. ITO (185 taxman 273) and the order of the coordinate bench of ITAT, Hyderabad in dated 13.07.2017. Therefore, we hold that the Ld. CIT(A) has rightly deleted the 12 addition and we uphold the order of the Ld.CIT(A) and the dismiss the ground of the revenue on this issue. Considering the above facts of records and the judicial pronouncements ground no.6 is allowed.”
We find that the Ld. CIT(A) has relied on the various judicial pronouncements and has deleted the addition made by the Ld. AO in the absence of any corroborative evidence brought in by the Ld. AO. We therefore are of the view that no interference is required in the order of the Ld. CIT(A) on this ground and hence the Ground No.3 raised by the Revenue is dismissed.
We respect to Ground No.4 regarding the addition of Rs. 31,40,000/-, the Ld. AO again relied on the seized Annexure – A/DVR/VSP/02 which mentions Rs. 31,40,000/- as Black Money received. We have adjudicated Ground No.3 in the preceding paragraphs of this order where the Ld. AO has relied on the dumb document while making additions. The Ld. CIT(A) again relying on the jurisdictional Bench in the case of Badam Bhogalinga Swamy & Others (supra) has deleted the addition and hence we find no reason to interfere in the order of the Ld. CIT(A) on this ground.
13 11. Ground No.5 is general in nature and therefore needs no adjudication.
Ground No.1 with respect to legal issue where the Ld. AO has not issued notice U/s. 143(2) raised by the Revenue needs no adjudication as this Bench has dismissed the appeal of the Revenue on merits.
In the result, appeal of the Revenue is dismissed.
With respect to Cross Objection raised by the assessee, since it is supportive in nature to the decision of the Ld. CIT(A), considering the outcome of the Revenue’s appeal the adjudication of the Cross Objections becomes infructuous.
Pronounced in the open Court on the 29th March, 2023.