D.S.Kodandaram, Hyderabad v. The Asst. CIT, Central Circle, Tirupathi

CO 91/HYD/2010 | 2000-2001
Pronouncement Date: 30-12-2010 | Result: Dismissed

Appeal Details

RSA Number 9122523 RSA 2010
Assessee PAN AADHD1455M
Bench Hyderabad
Appeal Number CO 91/HYD/2010
Duration Of Justice 1 month(s) 28 day(s)
Appellant D.S.Kodandaram, Hyderabad
Respondent The Asst. CIT, Central Circle, Tirupathi
Appeal Type Cross Objection
Pronouncement Date 30-12-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-12-2010
Date Of Final Hearing 07-12-2010
Next Hearing Date 07-12-2010
Assessment Year 2000-2001
Appeal Filed On 02-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NOS. 1139 TO 1145/HYD/2010 ASSESSMENT YEAR 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 THE ACIT CENTRAL CIRCLE TIRUPATHI VS. DR. DS KODANDA RAM (HUF) MADANAPALLE (PAN AADHD 1455 M) (APPELLANT) (RESPONDENT) CO.NOS.60 TO 65 & 91/HYD/2010 ARISING OUT OF ITA NOS.1140 TO 1145/HYD/2010 ASSESSMENT YEAR 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 DR. DS KODANDA RAM (HUF) MADANAPALLE (PAN AADHD 1455 M) VS. THE ACIT CENTRAL CIRCLE TIRUPATHI (APPELLANT) (RESPONDENT) ITA NOS. 1135 1136 1137 & 1138/H/2010 ASSESSMENT YEAR 2001-02 2002-03 & 2003-04 THE ACIT CENTRAL CIRCLE TIRUPATHI VS SMT. D. SARASWATHI (HUF) MADANAPALLE PAN AFTPD 7881 E (APPELLANT) (RESPONDENT) CO.57 58 59 & 92/H/2010 ARISING OUT OF ITA NOS.1135 1136 1137 & 1138/H/20 10 ASSESSMENT YEAR 2001-02 2002-03 & 2003-04 SMT. D. SARASWATHI (HUF) MADANAPALLE PAN AFTPD 7881 E VS THE ACIT CENTRAL CIRCLE TIRUPATHI (APPELLANT) (RESPONDENT) ITA NOS.1146 TO 1152/H/2010 ASSESSMENT YEAR 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 THE ACIT CENTRAL CIRCLE TIRUPATHI VS DR. DS ANANDA BABU (HUF) MADANAPALLE PAN ABHPD 1823 G (APPELLANT) (RESPONDENT) ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 2 2 CO. NOS.66 TO 72/H/2010 ARISING OUT OF ITA NOS.1146 TO 1152 /H/2010 ASSESSMENT YEAR 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 DR. DS ANANDA BABU (HUF) MADANAPALLE PAN ABHPD 1823 G VS THE ACIT CENTRAL CIRCLE TIRUPATHI (APPELLANT) (RESPONDENT) ITA NO.1113 1114 1115/HYD/2010 ASSESSMENT YEAR 2003-04 2004-05 2005-06 THE ACIT CENTRAL CIRCLE TIRUPATHI VS DR. DS ANANDA BABU MADANAPALLE PAN ABHPD 1823 G (APPELLANT) (RESPONDENT) CO.54 55 & 56/HYD/2010 ARISING OUT OF ITA NO.1113 1114 1115/HYD/2010 ASSESSMENT YEAR 2003-04 2004-05 2005-06 DR. DS ANANDA BABU (INDIVIDUAL) MADANAPALLE PAN ABHPD 1823 G VS THE ACIT CENTRAL CIRCLE TIRUPATHI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K.V.N. CHARYA SR.DR SHRI V. SRINIVAS CIT RESPONDENT BY: SHRI RAMA RAO ADVOCATE O R D E R PER BENCH: THESE ARE CROSS APPEALS PREFERRED BY THE REVENUE AS WELL AS BY THE ASSESSEE ARE DIRECTED AGAINST DIFFER ENT ORDERS PASSED BY THE CIT(A)-HYDERABAD AND PERTAINS TO ASSESSMENT YEARS 2 000-01 2001-02 2002-03 2003-04 2004-05 2005-06 AND 2006-07. SI NCE CERTAIN ISSUES INVOLVED IN THESE CROSS APPEALS ARE COMMON IN NATUR E THEY ARE CLUBBED TOGETHER HEARD TOGETHER AND DISPOSED OFF VIDE THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 3 3 2. BRIEF FACTS OF THESE CASES ARE THAT THE FIRST 3 APPELLANT- ASSESSEES ARE HUFS AND THE OTHER ONE IS RELATING TO THE INDIVIDUAL ASSESSEE. THE ASSESSMENTS WERE REOPENED UNDER S.15 3C FOR ASSESSMENT YEARS 2000-01 TO 2006-07 SUBSEQUENT TO THE SEARCH A ND SEIZURE OPERATIONS UNDER S.132 OF THE ACT IN THE PREMISES O F DR. D.S. ANANDA BABU AND HIS SON AT MADANAPALLE. THE RETURNS FILE D IN RESPONSE TO THE NOTICE UNDER S.153C WERE TAKEN UP FOR SCRUTINY UNDE R S.143(2) READS WITH S.142(1) ALONGWITH QUESTIONNAIRES. THE ASSESSEES HAVE DECLARED AN OPENING BALANCE AS CAPITAL ON 1.4.1999 AND EXPLAINE D THIS BALANCE AS ACCRUALS FROM INCOMES. THESE MONIES WERE INVESTED AS ADVANCES TO GARDENS LOANS TO DR..D.S.ANANDA BABU (INDIVIDIDUAL ) AND SMT.D.S.VIJAYA AND CASH ON HAND. THE ASSESSEE-HUF BESIDES INCOMES FROM SEASONAL BUSINESS ALSO DECLARED INCOMES FROM AGRICULTURE IN ALL THE SEVEN ASSESSMENT YEARS. THE ASSESSEE HUFS HAVE EXPLAINED THE AGRICULTURAL OPERATIONS HAVING BEEN CARRIED ON LANDS TAKEN ON LE ASE AND HAVING DERIVED INCOME FROM SUCH OPERATIONS. HOWEVER THE ASSESSING OFFICER HAS NOT ACCEPTED THE CLAIMS OF THE ASSESSEES REGARDING ACCUMULATION OF OPENING BALANCE OF CAPITAL AS ON 1.4.1999 AND ALSO THE GENUINENESS OF THE CLAIMS OF THE ASSESSEES HAVING TAKEN THE LANDS ON L EASE. ACCORDINGLY MAKING ADDITIONS ON ACCOUNT OF OPENING BALANCE NOT ACCEPTED AND AGRICULTURAL INCOME DISBELIEVED COMPLETED THE ASSE SSMENTS UNDER S. 153C READ WITH S.143(3). DETAILS OF INCOMES ADMITTED BY THE ASSESSEE IN RESPONSE TO NOTICES UNDER S.153C OF THE ACT AND ASS ESSED BY THE ASSESSING OFFICER ARE TABULATED HEREUNDER DISCLOSED: D S ANANDA BABU (HUF) ASSESSMENT YEAR INCOME/AGRICULTURAL INCOME ADMITTED IN THE RETURNS FILED IN RESPONSE TO NOTICE TO NOTICE UNDER S.153A INCOME ASSESSED BY THE ASSESSING OFFICER INCOME AGRICULTURAL INCOME ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 4 4 2000-01 40 000 89 000 3 79 000** 2001-02 56 000 90 000 1 46 000**** 2002-03 98 000 95 000 1 93 000**** 2003-04 99 000 96 000 1 95 000**** 2004-05 98 660 91 000 1 89 660**** 2005-06 1 02 700 1 50 000 2 51 700**** 2006-07 1 64 650 2 40 500 3 54 890**** ** AGRICULTURAL INCOME DISBELIEVED AND ADDED AS INCOME FROM OTHER SOURCES; AND AS AGAINST OPENING BALANCE CLAIMED AS CAPITAL OF RS.13 60 800 ONLY RS.11 10 800 WAS ACCEPTED AND BA LANCE OF RS.2 50 000 ADDED. **** AGRICULTURAL INCOME ADMITTED WAS DISBELIEVED AND AD DED AS INCOME FROM OTHER SOURCES. D S KODANDA RAM (HUF) ASSESSMENT YEAR INCOME/AGRICULTURAL INCOME ADMITTED IN THE RETURNS FILED IN RESPONSE TO NOTICE TO NOTICE UNDER S.153A INCOME ASSESSED BY THE ASSESSING OFFICER INCOME AGRICULTURAL INCOME 2000-01 46 000 90 000 5 91 400** 2001-02 55 000 95 000 1 50 000**** 2002-03 1 00 000 87 000 1 87 000**** 2003-04 1 02 000 1 10 000 2 12 000**** 2004-05 2005-06 2006-07 ** AGRICULTURAL INCOME DISBELIEVED AND ADDED AS INCOM E FROM OTHER SOURCES; AND AS AGAINST OPENING BALANCE CLAIMED AS CAPITAL OF RS.12 43 300 ONLY RS.9 90 300 WAS ACCEPTED AND BAL ANCE OF RS.2 50 000 ADDED. 2.1. OPENING BALANCE CLAIMED AS CAPITAL OF RS.10 55 400 ONLY RS.6 00 000 WAS ACCEPTED AND BALANCE OF RS.4 45 000 ADDED. SMT. D SARASWATHI (HUF) ASSESSMENT INCOME/AGRICULTURAL INCOME ADMITTED INCOME ASSESSED ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 5 5 YEAR IN THE RETURNS FILED IN RESPONSE TO NOTICE TO NOTICE UNDER S.153A BY THE ASSESSING OFFICER INCOME AGRICULTURAL INCOME 2000-01 47 000 82 000 12 19 000** 2001-02 1 10 000 84 000 1 94 000**** 2002-03 1 14 000 86 000 2 00 000**** 2003-04 1 18 000 89 000 2 07 000**** 2004-05 95 500 - 2005-06 2006-07 ** AGRICULTURAL INCOME DISBELIEVED AND ADDED AS INCOM E FROM OTHER SOURCES; AND AS AGAINST OPENING BALANCE CLAIMED AS CAPITAL OF RS.11 90 000 ONLY RS.1 00 000 WAS ACCEPTED AND BAL ANCE OF RS.10 90 000 ADDED. **** AGRICULTURAL INCOME ADMITTED WAS DISBELIEVED AND AD DED AS INCOME FROM OTHER SOURCES 5. IT WAS STATED BY THE ASSESSEE THAT MADANAPALLI IS A SMALL TOWN WITH A POPULATION OF 1.07 512. THOUGH IT IS A TOU RIST CENTRE THE LOCAL POPULATION IS QUITE SMALL. THE ASSESSEES FATHER WAS ORIGINALLY WORKING AS SR. ACCOUNTANT OFFICER IN APSEB AND RETIRED FROM SE RVICE IN THE YEAR 1991 ON A COMPLETION OF 58YEARS. WHILE SERVING APSEB I N HIS INDIVIDUAL CAPACITY HE ALSO RUN A KIRANI SHOP ALONG WITH HIS B ROTHER. THE SHOP WAS SOLD AND HIS SHARE WAS INVESTED IN HIS AGRICULTURAL OPERATIONS AND HE MOVED TO MADANAPALLI. THE ASSESSEE HEREIN AND THE FAMILY MEMBERS HAVE OBTAINED LANDS FROM VARIOUS PERSONS ON LEASE. THE PARTICULARS WITH REGARD TO THE DATE ON WHICH THE LEASE AGREEMENT WAS ENTERE D INTO EXTENT OF THE LAND TAKEN ON LEASE CROPS GROWN AND THE YEAR FROM WHICH THE LESSEES HAVE CULTIVATED THE SAID LAND IS AS FOLLOWS: S.NO. YEAR OF AGREEMENT NAME & ADDRESS OF THE LESSER NAME AND ADDRESS OF THE LESSEE EXTENT OF LAND CROPS GROWN 1 1990 V.V. RAMAIAH MEKULAPALLI DS KODANDARAM 9.67 - ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 6 6 VILLAGE 2 5.9.1990 N. SAMBASIVA REDDY BANDLA MADANAPALLI DS ANANDA BABU PADDY TAMATO RAGULU GROUND NUT 3 1990 K. RAMANA REDDY REDDYVARIPALLLI DS KODANDARAM 9 ACRES RAGHULU PADDY AND MANGO CROP 4 1996 KV BHASKAR AND OTHERS GURRAMKONDA VILLAGE DS SARASWATHI 9 ACRES MANGO GARDEN 6. THERE WERE LEASE AGREEMENTS BETWEEN THE LESSEE S AND THE LESSER AND THE SAID LEASE AGREEMENTS SPECIFIED THE NUMBER OF YEARS OF LEASE THE AMOUNT OF LEASE RENT PAYABLE FOR EACH YE AR AND THE AMOUNT OF ADVANCE TO BE PAID. IT CAN BE SEEN FROM THE ABOVE DETAILS THAT THE FAMILY MEMBERS HAVE COMMENCED THE AGRICULTURAL LANDS ON LE ASE. THE PERIOD ALMOST SYNCHRONIZED WITH THE RETIREMENT OF THE ASSE SSEES FATHER AND THE ASSESSEE COMING OUT OF GOVT. SERVICE. ALL THE FAMI LY MEMBERS COLLECTIVELY WORKED FOR ESTABLISHMENT OF THE ASSESSEE. FOR THI S PURPOSE THEY CHOSE THE AGRICULTURE AS A BETTER CHOICE AND TOOK LANDS ON LE ASE. THE FAMILY MEMBERS HAVE PAID ADVANCES TO THE LESSERS AND ALSO PAID LEASE RENTALS. 7. THE FAMILY MEMBERS ALSO CARRIED ON BUSINESS OF TRADING IN SEASONAL FRUITS OR THE CROPS PRODUCED IN THE AREA. AS THEY WERE SELLING THEIR OWN PRODUCE THEY HAVE ALSO COLLECTED THE PRO DUCE FROM THE FIELDS AROUND AND SOLD THE SAME IN THE MARKET. SUCH INCOM ES HAVE BEEN ADMITTED IN THE RETURNS OF INCOME FIELD. THE RETUR NS OF INCOME WERE FILED FROM THE ASSESSMENT YEAR 2001-02 AND ONWARDS. THE RETURNS WERE FILED ON 17.3.2003 ABOUT THREE YEAR PRIOR TO THE DATE OF SEARCH. THE SAID RETURNS CONSISTS OF THE DETAILS OF INCOME DERIVED F ROM EACH SOURCE RECEIPTS ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 7 7 AND PAYMENTS ACCOUNT FOR THE YEAR UNDER CONSIDERATI ON AN THE BALANCE SHEET DRAWN AS ON THE LAST DATE OF THE PREVIOUS YEA R. 8. THE SAID FAMILY MEMBERS HAVE PROVIDED THEIR OW N FUNDS FOR THE PURPOSE OF CONSTRUCTION OF THE BUILDING MADANAP ALLI FOR THE DOCTOR TO CARRY ON HIS PROFESSION ACTIVITY. THE PERSON HOWEV ER PROVIDED THE AMOUNT IN THE CAPACITY AS HUF IS THE FATHER AS KARTHA OF H UF AND HIS MOTHER. HIS MOTHER IN LAW PROVIDED THE FUNDS FROM THE RETIREMEN T BENEFITS DERIVED BY HER HUSBAND. THE AMOUNTS WERE PERIODICALLY COLLECT ED FROM THE AGRICULTURISTS FROM OUT OF THE ADVANCES PAID AND P AID THE SAME TO THE ASSESSEE HEREIN SO AS TO ENABLE HIM TO PROSECUTE HI S PROFESSION FURTHER BY CONSTRUCTING THE BUILDING. THE INCOME TAX AUTHORIT IES CONDUCTED SEARCH AND SEIZURE OPERATIONS AT THE PREMISES OF THE ASSES SEE HEREIN IN 18.1.2006. THE ASSESSEE ALSO RECEIVED AN AMOUNT OF RS.20 LAKHS EACH FROM S/SHRI A.V. RAMANA REDDY T. REDDANNA & SMT. K . VIJAYA LAKSHMI OUT OF WHICH RS.15 LAKHS EACH WAS EARLIER PAID BY T HE ASSESSEE TO THEM. THE EMPLOYEES AND THE FAMILY MEMBERS ARE ALL ASSESS ED TO TAX AND FILED THE RETURNS OF INCOME SHOWING THEIR RESPECTIVE INCO MES INCLUDING THE AGRICULTURAL INCOME. THE ASSESSING OFFICER DID NOT CONVERT THE CASES TO SCRUTINY FOR THE ASSESSMENT YEARS UNDER CONSIDERATI ON AND THE RETURNS OF INCOME FILED BY THE ASSESSEE HEREIN THE FAMILY MEM BERS AND THE EMPLOYEES WERE PROCESSED U/S 143(1). THE IT AUTHOR ITIES CONDUCTED SEARCH AND SEIZURE OPERATIONS ON 18.1.2006 DURING T HE COURSE OF SEARCH AND SEIZURE OPERATIONS NO INCRIMINATING MATERIAL WA S FOUND BY THE AUTHORITIES. THE AUTHORITIES COULD NOT LOCATE ANY DATA TO SHOW THAT THE ASSESSEE CONCEALED ANY PART OF HIS PROFESSIONAL INC OME. THE AUTHORITIES ACCEPTED THE INCOME ADMITTED UNDER PROFESSION. THE RE IS NO OTHER SOURCE EXCEPT AGRICULTURAL INCOME. THE AUTHORITIES LATER CONDUCTED ENQUIRIES WITH REFERENCE TO THE RETURNS OF INCOME ALREADY FILED. IN RESPONSE TO THE NOTICE ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 8 8 U/S 153A AND 153C THE RETURNS OF INCOME WERE FILED ON THE DATES AS MENTIONED. 9. IN SO FAR AS DR. D.S. ANAND BABU IS CONCERNED THE ASSESSING OFFICER DISBELIEVED THE GIFTS RECEIVED FROM FAMILY MEMBERS/EMPLOYEES AND ALSO MADE ADDITION ON ACCOUNT OF DIFFERENCE IN THE CASE OF CONSTRUCTION. THE DETAILS OF GIFTS ADDED BY THE ASSESSING OFFICER ARE AS UNDER: NAME OF THE DONOR ASSESSMENT YEAR 2002- 03(RS.) ASSESSMENT YEAR 2003- 04(RS.) ASSESSMENT YEAR 2004- 05(RS.) ASSESSMENT YEAR 2005- 06 (S.) DS ANAND BABU (HUF) 1 50 000 15 000 - - DS KODANDARAM (FATHER) - 20 48 000 - - SMT. D. SARASWATHI - 17 00 000 - - DS GOPALAKRISHNA (UNCLE) - 2 50 000 - - B RAJESWARAMMA (MOTHER IN LAW) - 1 98 000 - - AV RAMANAREDDY - - 5 00 000 - T. REDDANNA - - 5 00 000 - K. VIJAYALAKSHMI - - 5 00 000 - TOTAL 1 50 000 42 11 000 15 00 000 - GRAND TOTAL = RS.58 65 000 10. IN SO FAR AS THE ASSESSEES MOTHER IN LAW SMT . B. RAJESWARAMMA IS CONCERNED SHE IS AN ASSESSEE AND IS ASSESSED TO TAX. SHE FILED A LETTER OF CONFIRMATION AND THE ASSESSIN G OFFICER DID NOT DISPUTE THE FACTS STATED IN THE LETTER OF CONFIRMATION. ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 9 9 11. IN SO FAR AS THE GIFTS RECEIVED FROM THE ASSE SSEES UNCLE HE CONFIRMED THE GIFTS. HE IS A FATHERS BROTHER. HE RETIRED AS EE & R&B AND STATED THAT FROM OUT OF RETIREMENT BENEFITS HE GIFT ED THE SAID AMOUNT THROUGH CHEQUE. HE IS ALSO AN ASSESSEE ON FILE. 12. IN SO FAR AS THE FAMILY MEMBERS ARE CONCERNED THE ASSESSEE IS SUBMITTED DETAILED EXPLANATION W.R.T. THE ARGUMENTS MADE BY THE DEPARTMENTAL REPRESENTATIVE. THE DEPARTMENTAL REPR ESENTATIVE DURING HIS ARGUMENTS RAISED VARIOUS CONTENTIONS. EACH OF HIS CONTENTION IS EXPLAINED BY THE ASSESSEE AS UNDER: 13. AGGRIEVED BY THE ADDITIONS MADE IN THE HANDS OF EACH OF THE THREE HUFS AS WELL AS DR. D.S. ANAND BABU FOR THE ASSESSMENT YEARS UNDER APPEAL ASSESSEES PREFERRED APPEALS BEFORE TH E CIT(A) WHO DELETED OF ADDITIONS MADE BY THE ASSESSING OFFICER VIZ. (I) D ISBELIEVING PART OF THE OPENING BALANCE CLAIMED BY THE ASSESSEE HUFS FOR TH E ASSESSMENT YEAR 2004-05; AND (II) DISBELIEVING THE AGRICULTURAL INC OMES ADMITTED BY THE ASSESSEE HUFS. THE CIT(A) ALSO DELETED ADDITION MA DE IN THE HANDS OF DR. D.S. ANAND BABU IN ALL THE ASSESSMENT YEARS. HOWE VER CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER REGARDING THE A SSUMPTION OF JURISDICTION U/S 153A OF THE IT ACT. AGGRIEVED BY THE RELIEF GRA NTED BY THE CIT(A) REVENUE PREFERRED THE PRESENT APPEALS BEFORE US WH EREAS AGAINST THE INITIATION OF THE PROCEEDINGS U/S 153A THE ASSESSE ES HEREIN ARE FILED THE CROSS OBJECTIONS. 14. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT THE ASSESSEE HAD NO ESTABLISHMENT FOR THE ALLEGED AGRIC ULTURAL OPERATIONS. THEY DO NOT OWN LAND; THE LAND WAS ALLEGEDLY TAKEN ON LEASE AND NOT EVIDENCED BY ANY INDEPENDENT EVIDENCE. HE SUBMITTE D THAT THERE WAS NO EVIDENCE FOUND DURING THE COURSE OF SEARCH REGARDIN G AGRICULTURAL OPERATIONS. ACCORDING TO DR IT IS IMPROBABLE OF T HE FAMILY MEMBERS ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 10 10 WILLING TO OR ENGAGED IN AGRICULTURAL OPERATIONS PA RTICULARLY BECAUSE THE ASSESSEE IS A BUSY DOCTOR AND HIS FATHER IS A 74 YE ARS OLD RETIRED STATE GOVT. EMPLOYEE. THE DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE FAMILY EXPLAINS THE SOURCE FOR THE GIFTS AS ADVANCE S REALIZED. THIS IS A CONTRARY TO THE CLAIM THAT THE ADVANCES WERE PAID T O TAKE THE LANDS ON LEASE. NO ACCOUNTS HAVE BEEN MAINTAINED IN THE HUF CAPACITY FOR CROSS VERIFICATION. THE ASSESSEE DID NOT REBUT THE CONCL USIONS OF THE ASSESSING OFFICER AND ALSO NOT ANSWERED THE QUERIES RAISED IN THE SHOW CAUSE LETTER. HE SUBMITTED THAT THE ASSESSING OFFICER RAISED CERT AIN QUESTIONS ON THE CREDIBILITY OF THE ASSESSEES CLAIM OF GIFTS RECEIV ED AND SUCH QUESTIONS WERE NOT ANSWERED EITHER BEFORE THE ASSESSING OFFICER OR CIT(A) BY THE ASSESSEE. HE SUBMITTED THAT THE BANK ACCOUNTS HAVE BEEN EXCLU SIVELY OPENED FOR THIS TRANSACTION ONLY AND NO OTHER TRANSACTION IS RECORD ED IN THE ACCOUNTS. THE ADDRESS IN THE BANK PASS BOOK IS THAT DR. D.S ANAND BABU AND THE INCOME TAX RETURNS HAVE BEEN FILED FOR THE ASSESSMENT YEAR 2001-02 AND ONWARDS AND IN ALL CASES THE SAME WAS FILED ON 17.3.2003 A ND THE PAN CARDS OF SMT. VIJAYALAKSHMI SHRI D. KODANDARAM SRI AV RAMA NA REDDY AND SMT. DS SARASWATI WERE FOUND IN THE RESIDENCE OF THE ASS ESSEE THE BALANCE SHEET OF SHRI D.S ANAND BABU (HUF) DOES NOT SHOW A BANK BALANCE AND ON PROBABILITIES IT HARDLY STANDS TO REASON THAT SHRI D.S KODANDARAMAN IS A RETIRED GOVT. EMPLOYEE AGED 74 YEARS AND SMT. SARAS WATI ABOUT 70 YEARS PARENTS OF A LEADING DOCTOR IN THE AREA WOULD BE IN THE BUSINESS OF SELLING BETEL LEAVES TAMARIND JAGGERY ETC. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO RELIED ON THE FOLLOWING JUDGEME NTS: 1. PUNJAB & HARYANA HC IN THE CASE OF SOMNATH MAINI VS . CIT (306 ITR 414) 2. DCIT VS. SMT. PHOOLWATI DEVI (AT) ( DELHI ) (314 IT R 1) 3. CIT VS. P. MOHANAKLA (291 ITR 278) (SC) 15. HE FURTHER SUBMITTED THAT IT IS DIFFICULT TO ACCEPT A SITUATION WHERE A HUF MAKES A GIFT TO ITS KARTA. THE KARTA H AS A FIDUCIARY ROLE AND ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 11 11 RESPONSIBILITY. IF HE HELPS HIMSELF THROUGH GIFTS FROM THE FAMILY IT WOULD BE LIKE FENCE EATING THE CROP. HE SUBMITTED THAT SOME INDIVIDUALS HAVE STATED THAT THE ASSESSEES FAMILY MEMBERS HAVE TAKEN THEIR LANDS ON LEASE. BUT NO INDEPENDENT EVIDENCE IN THIS RESPECT HAS BEEN TR ACED. HE SUBMITTED THAT THE ASSESSEE IS A BUSY DOCTOR AND HIS FATHER I S AN AGED RETIRED GOVT. EMPLOYEE. THE ASSESSEE WITHOUT ABSOLUTELY NO KNOWN SKILL INCLINATION OR CAPABILITY TO UNDERTAKE POTENTIALLY RISKY AGRICULTU RAL OPERATIONS WITH NO RECORD OF ANY LABOUR SUPPORT AND FURTHER STANDS TO REASON THAT IN EVERY SUCH CONCLUSIVE TRANSACTION THERE IS BOUND TO BE SU PERFICIAL LEVEL OF AGREEMENT BETWEEN THE ALLEGED LESSOR AND LESSEE. TH E LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER RELIED ON THE F OLLOWING JUDGEMENTS: 1. SMT. PRABHAVATI S. SHAH VS. CIT (231 ITR 1 7) (BOM . HC) WHEREIN IT WAS HELD THAT NOTHING PREVENT AAC FROM MAKING FURTH ER ENQUIRIES. 2. KAPURCHAND SHRIMAL VS. CIT (131 ITR 451 460) (SC) 3. CIT VS. BEGUM NOOR BANU ALLADIN (204 ITR 166) (AP H C) 4. CIT VS. KANPUR COAL SYNDICATE (53 ITR 225) (S C) 5. CIT VS. NIRBHERAM DALURAM (1997) (224 ITR 610) ( S C) 6. CIT VS. T T KRISHNAMACHARI & CO. (223 ITR 224) (MAD . HC) 16. ON THE OTHER HAND THE LEARNED COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE ASSESSEE IN THE PRESENT CASE IS IN HIS CAPACITY AS KARTHA AND THE FAMILY MEMBERS HAVE TAKEN THE AGRICU LTURAL LANDS ON LEASE FORM VARIOUS VILLAGES NEARBY MADANAPALLE. THE PL ACES ARE FAMOUS FOR FRUITS AND VEGETABLES. THERE IS NO ESTABLISHMENT F OR AGRICULTURAL OPERATIONS AS LONG AS THE AGRICULTURAL LANDS WERE I N THEIR POSSESSION BECAUSE OF THE LEASE HOLD RIGHTS. HE SUBMITTED THA T SOME OF THE AGRICULTURAL LANDS WERE IN THEIR POSSESSION IN THE YEAR 1990. THEY DO NOT OWN LAND; HOWEVER THEY POSSESSED LEASE HOLD LANDS. THE LEASE IS EVIDENCED BY LEASE DEEDS EXECUTED BY THE LESSORS AND THE LESS EES. THE INSPECTORS OF THE DEPARTMENT HAVE INSPECTED ON TWO DIFFERENT OCCA SIONS THE VILLAGES WHERE THE AGRICULTURAL LANDS ARE SITUATED AND RECOR DED THE STATEMENTS FROM THE LESSOR AND THE NEIGHBORS. ALL OF THEM CON FIRMED THE FACT OF ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 12 12 LEASING THE LANDS TO THE ASSESSEE HEREIN AND THE FA MILY MEMBERS. THEREFORE IT CANNOT BE SAID THAT THERE IS NO INDEP ENDENT EVIDENCE THAT THE LESSORS HAVE STATED THE EXTENT OF LAND LEASED AND T HE LEASE RENTALS THE PERIOD OF LEASE. THEY ALSO PROVIDED COPIES OF THE LEASE DEEDS ALONG WITH LETTER OF CONFIRMATION TO THE INSPECTORS. THE INSP ECTORS DIRECTLY CONTACTED THE LESSORS AND THEY PROVIDED ALL THE INFORMATION. HE SUBMITTED THAT THIS CLEARLY INDICATES THAT THERE IS AMPLE EVIDENCE TO S HOW THAT THE ASSESSEE AND HIS FAMILY MEMBERS HAVE TAKEN AGRICULTURAL LAND S ON LEASE AND DERIVED AGRICULTURAL INCOME. HE FURTHER SUBMITTED THAT THE EXTENT OF OPERATION IS VERY SMALL. THE ASSESSEE OFFERED AGRI CULTURAL INCOME FOR EACH OF THE YEAR AND IN MAJORITY OF THE CASES THE AGRIC ULTURAL INCOME IS BELOW RS. ONE LAKH PER YEAR. THEREFORE THE OPERATIONS C ANNOT BE CONSIDERED AS COMPLEX ON LARGE SCALE. HE ALSO SUBMITTED THAT THE IT AUTHORITIES AT THE TIME OF SEARCH AND SEIZURE OPERATIONS HAVE NOT LIST ED THE MATERIAL FOUND BUT HAVE LISTED THE ITEMS SEIZED BUT DID NOT LIST A NY MATERIAL AS FOUND AND LEFT. THIS IS CLEARLY INDICATES THAT THE AUTHORITI ES HAVE NOT TAKEN INVENTORY OF THE MATERIAL FOUND BUT NOT SEIZED. THEREFORE TH E LEARNED DEPARTMENTAL REPRESENTATIVE IS NOT CORRECT IN MENTIONING THAT TH ERE IS NO EVIDENCE FOUND DURING THE COURSE OF SEARCH. THE FACT THAT THE AUT HORISED OFFICER CONDUCTED ENQUIRIES WITH THE LESSORS THROUGH HIS INSPECTORS S HOW THAT THE INFORMATION WAS AVAILABLE FOR HIM. 17. THE AUTHORISED REPRESENTATIVE FOR THE ASSESSE E FURTHER SUBMITTED THAT THE LANDS WERE TAKEN ON LEASE IN THE YEAR 1990 1996 MUCH EARLIER TO THE PRESENT DAY SITUATION. THE DEPA RTMENT CANNOT CONSIDER THE PRESENT SITUATION FOR HAVING TAKEN THE LANDS ON LEASE AT THAT POINT OF TIME. THE FACT AS PREVAILING IN THE YEAR 1990 WERE TO BE CONSIDERED FOR APPRECIATION OF THE REASONS. DR. D.S. ANAND BABU W AS A GOVT. EMPLOYEE AND RESIGNED IN 1998. HE WAS RUNNING ONLY A CLINIC AT THE RELEVANT POINT OF TIME AND EVEN HIS FATHER WAS FREE AND ABLE TO ATTEN D TO WORK AS HE RETIRED ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 13 13 FROM SERVICE IN THE YEAR 1991 AND WAS ONLY 58 YEARS . THEY ARE BASICALLY BELONGING TO COMMUNITY OF AGRICULTURISTS. FURTHER THE LEASE WAS FOR A LONGER PERIOD OF ABOUT 20 YEARS AND THE OPERATIONS WERE BEING CARRIED ON FROM THE YEAR OF LEASE AND ONWARDS. THE WOMEN ALSO ARE WILLING TO CARRY ON THE AGRICULTURAL OPERATIONS FOR THEM BY SUPERVIS ING THE LANDS. THEY ARE HABITUATED FOR AGRICULTURAL OPERATIONS. THEREFORE IT CANNOT BE SAID THAT IT IS IMPROBABLE OR IMPOSSIBLE FOR THE FAMILY MEMBERS TO CARRY ON SUCH ACTIVITY. THERE IS NO DOUBT THAT THE ASSESSEE AND THE FAMILY MEMBERS HAVE PAID THE ADVANCES TO THE AGRICULTURISTS WHEN THE LA NDS WERE TAKEN ON LEASE. BUT SUCH PAYMENTS WERE MADE DURING 1990-96. THE SAID AMOUNTS HAVE BEEN COLLECTED BACK AS THE LEASE PERIOD WAS DR AWING NEARER AND THE AMOUNTS ARE REQUIRED BY THEM. HE SUBMITTED THAT THE BOOKS ARE NOT MAINTAINED BY THE FAMILY MEMBERS OR THE HUF AS THEY WERE NOT CARRYING ON ANY REGULAR BUSINESS ACTIVITY BUT ARE CARRYING O N ONLY THE AGRICULTURAL OPERATIONS AND TRADING IN SEASONAL FRUITS ON A SMAL L SCALE. THE ASSESSEE FILED THE WRITTEN SUBMISSIONS WHICH HAVE NOT BEEN E XTRACTED BY THE CIT(A). IN THE WRITTEN SUBMISSIONS THE ASSESSEE HAS ANSWER ED ALL THE QUERIES RAISED BY THE ASSESSING OFFICER. THE ASSESSING OFF ICER DID NOT COUNTER THE CONTENTIONS OF THE ASSESSEE. EVEN IN THE EXPLANATI ON SUBMITTED BEFORE THE ASSESSING OFFICER. SUCH REPLIES HAVE BEEN PROVIDED. THE ASSESSEE CATEGORICALLY STATED THAT THE ASSESSING OFFICER CON DUCTED ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITH THE LESS ORS OF THE LAND AND FOUND THAT THE FACTS STATED BY THE DONORS ARE TRUE. THE ASSESSEE ALSO FILED A STATEMENT RECORDED BY THE INSPECTORS OF THE DDI A ND THE INSPECTOR ATTACHED TO THE ASSESSING OFFICER WHO HAVE CATEGORI CALLY STATED THAT WHAT WAS EXPLAINED BY THE ASSESSEE IS TRUE. THE ASSESSE E ALSO STATED THAT THE ASSESSING OFFICER DID NOT DENY THOSE FACTS I.E. THE FACT OF CONDUCTING THE ENQUIRY AND THE RESULT OF SUCH ENQUIRY. ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 14 14 18. THE AUTHORISED REPRESENTATIVE FOR THE ASSESSE E FURTHER SUBMITTED THAT THE ASSESSEE CATEGORICALLY STATED TH AT THE FAMILY MEMBERS HAVE CARRIED ON AGRICULTURAL OPERATIONS ON THE LEAS E HOLD LANDS. HE PROVIDED THE ADDRESSES OF THE LESSER THE AREA OF T HE LAND AND ALL SUCH OTHER DETAILS REQUIRED. THE ASSESSING OFFICER AND THE DY. DIRECTOR OF INCOME TAX CONDUCTED ENQUIRIES WITH THE LESSER OF T HE LAND AND ALSO WITH THE NEIGHBORS AND FOUND THAT THE CLAIM OF THE ASSES SEE IS TRUE. IT IS ALSO A FACT THAT THE FAMILY MEMBERS FILED THE RETURNS OF I NCOME MUCH EARLIER TO THE DATE OF SEARCH SHOWING THE GIFTS. IN THE CIRCU MSTANCES THE ASSESSEE HAS REBUTTED THE CONTENTIONS OF THE ASSESSING OFFIC ER RAISED IN HIS LETTER. DURING THE COURSE OF ENQUIRIES CONDUCTED BY THE DEP ARTMENT AND THE ASSESSING OFFICER WHAT WAS PROVED IS THAT THE HUF O F THE ASSESSEE AND ALL OTHERS HAVE CARRIED ON AGRICULTURAL OPERATIONS ON T HE LEASED LANDS AND DERIVED INCOME. THE DEPARTMENT AND THE ASSESSING O FFICER COULD NOT GATHER ANY DATA CONTRARY TO THE SUBMISSIONS MADE OR THE CL AIM MADE BY THE ASSESSEE. THEREFORE IT IS NOT CORRECT TO MENTION T HAT CLAIM WAS NOT PROVED AND THE CONCLUSIONS DRAWN BY THE ASSESSING OFFICER AS THE CONCLUSIONS DRAWN BY THE ASSESSING OFFICER AS CONCLUSIONS ON TH EIR PART ARE NOT BASED ANY EVIDENCE. HE FURTHER SUBMITTED THAT NO OTHER T RANSACTIONS HAVE BEEN MAINTAINED. THE DONORS DEPOSITED ALL THEIR AMOUNTS AVAILABLE IN THE BANK ACCOUNT AND THERE AFTER ISSUED CHEQUES IN FAVOUR OF THE ASSESSEE. THE DONORS EARLIER PAID ADVANCES TO THE LAND OWNERS DUR ING 1990-96. THE SAID AMOUNTS HAVE BEEN REFUNDED. THE INCOMES FROM AGRIC ULTURAL HAVE ALSO BEEN DEPOSITED IN THE BANK ACCOUNT. THE DONORS THE REAFTER ISSUED CHEQUES. ALL THESE TRANSACTIONS HAVE BEEN RECORDED IN THE BANK ACCOUNTS. THEREFORE IT IS NOT CORRECT TO SAY THAT THE BANK A CCOUNTS HAVE BEEN EXCLUSIVELY OPENED ONLY FOR THIS PURPOSE. THERE IS NO DOUBT THAT ALL THE TRANSACTIONS ARE NOT PROCESSED THROUGH THE BANK ACC OUNTS. BUT THE SAME TIME IN SPITE OF THE SEARCH SEIZURE OPERATIONS THE DEPARTMENT COULD NOT GATHER ANY DATA TO PROVE THAT THE SAID AMOUNTS WERE PAID BY THE ASSESSEE ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 15 15 AND REPRESENT HIS PROFESSIONAL INCOME. HE FURTHER SUBMITTED THAT THE DONORS ARE THE ASSESSEE IN HIS CAPACITY AS KARTHA ( HUF) THE ASSESSEES FATHER IN HIS CAPACITY AS HUF THE ASSESSEES MOTHER IN LAW AND THE EMPLOYEES. ALL OF THEM HAVE THE ADDRESS OF THE ASS ESSEE ALONE FOR THEIR BANKING OPERATIONS. THERE IS NOTHING UNUSUAL PARTI CULARLY IN VIEW OF THE FACT THAT ALL OF THEM EITHER STAY WITH HIM OR WORK FROM THE SAID PLACE. THE RETURNS OF INCOME FOR THE ASSESSMENT YEARS 2001-02 2002-03 AND 2003- 04 WERE FILED ON THE SAME DATE WELL WITHIN THE TIME U/S 139(4) OF THE IT ACT. THE INCOMES HAVE BEEN ASSESSED IN THEIR ASS ESSMENTS. THE ONLY OBJECTION OF THE ASSESSING OFFICER WAS THE RECEIPT COUNT NOT BE PROVIDED AS AGRICULTURAL INCOME BUT COULD BE OTHER SOURCE OF IN COME. THEREFORE THE FILING OF RETURN OF INCOMES HAS BEEN ACCEPTED BY TH E DEPARTMENT. IN RESPONSE TO NOTICE U/S 153C THE DONORS HAVE FILED THE SAME RETURNS AS WERE FILED EARLIER AND ASSESSMENTS HAVE BEEN MADE A LMOST ACCEPTING THE FIGURES SO ADMITTED THOUGH THE HEAD OF INCOME IS MO DIFIED FROM AGRICULTURE TO OTHER SOURCES. THE ASSESSING OFFICER ALSO DID N OT FIND THAT THERE IS ANY SPECIFIC SOURCE FOR THEM. THIS IS ALSO INDICATES T HAT THE DEPARTMENT ACCEPTED THE RETURNS OF INCOME AND MADE ASSESSMENT U/S 153C OF THE ACT HENCE THE SOURCES OF THE DONORS SHOULD NOT HAVE BEE N DISPUTED. HE SUBMITTED THAT THE FIRST THREE ARE THE EMPLOYEES OF THE ASSESSEE AND WERE WORKING WITH THE ASSESSEE. THEREFORE THEIR PAN CA RDS SHOULD BE AVAILABLE AT THE HOSPITAL. AS THE HOSPITAL WAS UNDER CONSTRU CTION SOME OF THE BELONGING OF THE HOSPITAL WORK WERE KEPT AT THE RES IDENCE OF THE ASSESSEE. THEREFORE THE MATERIAL BELONGING TO THE EMPLOYEES WERE ALSO AVAILABLE AT THE PREMISES OF THE ASSESSEE. THIS CANNOT BE THE G ROUND TO DOUBT THE GENUINENESS OF THE TRANSACTIONS. WITH REGARD TO SM T. D. SARASWATHI SHE IS AN IT ASSESSEE AND MOTHER IN LAW OF THE ASSESSEE . THEREFORE AVAILABILITY OF THE PAN CARD AT THE PREMISES OF THE ASSESSEE IS NOT UNUSUAL. WITH REGARD TO THE BANK TRANSACTIONS OF THE FAMILY MEMBERS IT IS OBSERVED THEY HAVE BEEN CLOSED ONCE THE PURPOSE IS OVER. TH IS APPLIED ONLY TO THE ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 16 16 FAMILY MEMBERS OF THE ASSESSEE. IT IS SUBMITTED TH AT EARLIER THE DOCTOR WAS MAINTAINING ONLY A SMALL CLINIC. HE COMMENCED CONSTRUCTIONS OF THE HOSPITAL 60% OF WHICH IS USED FOR THE LODGE. THER EFORE HE IS CONCENTRATING EITHER ON CONSTRUCTION OF OR ON MAINT AINING OF THE HOSPITAL. DURING THE PROCESS OF CONSTRUCTION HE IS MAINTAINE D THE EXISTING CLINIC AND NURSING HOME BESIDES SUPERVISING THE CONSTRUCT ION WHICH WAS DONE BOTH BY THE ASSESSEE AND HIS PARENTS. THE TERM OF THE LEASE WAS ALSO EXPIRING. AT THE TIME OF TAKING OF THE LANDS ON LE ASE IN 1990 THE ASSESSEES FATHER WAS ABOUT 58 YEARS OLD WHEREAS IN 2006 HE WAS 74 YEARS OLD. THE TERM OF LEASE WAS ALSO EXPIRING. IN THE CIRCUMSTANCES THE ACTIVITY OF AGRICULTURE WAS REDUCED AFTER CONTINUING THE SAM E FOR MORE THAN 15 YEARS. THOUGH THERE WAS REDUCTION IT WAS NOT TOTA LLY STOPPED. THEREFORE THERE WAS NOT MUCH OF BANKING TRANSACTIONS AFTERWAR DS. BUT THE BANK ACCOUNTS HAVE NOT CLOSED. SHRI D.S ANAND BABU (HUF ) DID NOT HAVE A SEPARATE BANK ACCOUNT. THE A.R FURTHER SUBMITTED T HAT THE INCOME ADMITTED BY THEM ON SEASONAL BUSINESS ACTIVITY IS A CCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDERS PASSED. THERE IS NO DISPUTE WITH REGARD TO THE SAID INCOME ADMITTED; THEY HAVE CARRIED ON THE ACTIVITY OF SELLING THE PRODUCTS OF THE NEIGHBOURING VILLAGE S ALONG WITH THEIR OWN PRODUCTS. THE SAID INCOME IS SHOWN AS INCOME FROM BUSINESS. THEY HAVE NOT MAINTAINED ANY BOOKS OF ACCOUNT AND HENCE THER E CANNOT BE ANY DOUBT ABOUT THE GENUINENESS OF THE TRANSACTIONS ONL Y BASED ON SUCH PROBABILITIES. THE IMPORTANT FACT TO BE NOTED IS T HAT WHEN THE ACTIVITY WAS COMMENCED MR. KODANDARAM WAS ONLY 58 YEARS AND SMT. SARASWATHI WAS ONLY 56 YEARS OF AGE. HE SUBMITTED THAT THE RELIAN CE PLACED BY THE DR IN THE CASE OF SOM NATH MAINI VS. CIT (306 ITR 414) P& H HC) IS MISPLACED. THE SAID DECISION IS WITH REGARD TO THE TREATMENT OF INCOME ON SALE OF SHARES EITHER UNDER THE HEAD CAPITAL GAIN OR BUS INESS. THE APPLICATION OF PROBABILITIES IN THE CASE OF THE ASSESSEE IS CONCER NED; THE ASSESSEE WAS ORIGINALLY EMPLOYED IN GOVT. SERVICE. HE TRIED TO ESTABLISH HIS OWN ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 17 17 PROFESSION. HE RESIGNED FROM GOVT. SERVICE AND STA RTED HIS OWN CLINIC. THEREAFTER HE DEVELOPED IT INTO A SMALL NURSING HOM E. HE HAS ESTABLISHED A LITTLE BIGGER HOSPITAL. FOR THIS PURPOSE BOTH HI S PARENTS AND MOTHER IN LAW PROVIDED FUNDS FOR ESTABLISHING SUCH HOSPITAL. THE FACTS IF ONE READS WOULD CLEARLY INDICATE THAT ALL THE MEMBERS OF THE FAMILY SUPPORTED HIM IN ESTABLISHING THEIR OWN HOSPITAL. IN THE PROCESS TH EY HAVE TO EARN SOME INCOME. THEREFORE THEY HAVE CHOSEN THEIR AGE OLD PROFESSION AGRICULTURE; TAKEN ON LEASE THE AGRICULTURAL LANDS AND STRIVED H ARD FOR 15 YEARS FROM 1990 AND ONWARDS. WOULD IT AMOUNT TO ANY HUMAN PRO BABILITIES?. THE CIT(A) IS NOT CORRECT IN MENTIONING THAT THE ACTION OF THE PARENTS OF THE ASSESSEE IS IN ANY WAY AGAINST HUMAN PROBABILITIES. HE FURTHER SUBMITTED THAT THE RELIANCE PLACED BY THE CIT-DR IN THE CASE OF DCIT VS.SMT. PHOOLWATI DEVI (314 ITR 1 (AT) (DEL.) IS ALSO MISPL ACED. IN THE SAID CASE THE HONBLE ITAT FOUND THAT THE CREDITORS COULD NOT HAV E PAID SUCH LARGE SUMS FOR SUCH LONGER PERIODS WITHOUT INTEREST. HOWEVER IN THE CASE OF THE ASSESSEE THE DONORS ARE ALSO STAYING WITH HIM AND A LL OF THEM TOGETHER ARE INTEREST IN THE DEVELOPMENT OF THE HOSPITAL. THERE FORE THE SAID CASE HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. F URTHER HE SUBMITTED THAT THE JUDGEMENT IN THE CASE OF CIT VS. P. MOHANKALA ( 291 ITR 278) (SC) IS ALSO NOT APPLICABLE TO THE FACTS OF THE CASE. IN THE SAID CASE THE HONBLE SUPREME COURT FOUND THAT THE ASSESSING OFFICER ARRI VED AT THE CONCLUSION. IT IS CONFIRMED BY THE CIT(A) AND ITAT. SUCH AN OB SERVATION IS BASED ON ANY MATERIAL ON RECORD AND NOT IN CONJUNCTURE OR SU RMISE. IN SUCH CIRCUMSTANCES THE HON'BLE SUPREME COURT HELD THAT THE MERE PROCESSING THE TRANSACTION THROUGH BANKING CHANNEL BY ITSELF I S NOT ENOUGH. IN THE PRESENT CASE THE ASSESSEE HAS DERIVED AMOUNTS BY A LL THE PERSONS FROM AGRICULTURAL OPERATIONS IS PROVED AND THE ENQUIRIES REVEALED THAT THEY POSSESS SUBSTANTIAL INCOME. THEY HAVE PROVIDED THE FUNDS FOR ESTABLISHING THE HOSPITAL BY THE ASSESSEE WHO ARE ALL ALMOST FAM ILY MEMBERS OF THE ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 18 18 ASSESSEE. THE FACTS WERE ENTIRELY DIFFERENT AND TH EREFORE THE SAID CASE DOES NOT APPLY TO THE ASSESSEE. 19. THE AUTHORISED REPRESENTATIVE FURTHER SUBMITT ED THAT THE LEADING CASE ON HINDU WILLS AND GIFTS IS THE TAGORE CASE DECIDED BY THE JUDICIAL COMMITTEE IN 1872 WHEREIN IT IS DECIDED TH AT A HINDU MAY GIVE OR BEQUEATH HIS PROPERTY FOR ANYONE HE LIKES. HOWEVER THE SAID GIFT IS TO BE SUBJECT TO PROVISIONS OF SECTION 368. THE PROVISIO NS OF SECTION 368 MENTIONS THAT A HINDU CANNOT TRANSFER BY WAY OF WIL L SO AS TO DEPRIVE HIS WIFE OR ANY OTHER PERSON TO MAINTENANCE. WHEN SUCH A PROVISION OF MAINTENANCE IS NOT REQUIRED TO HIS WIFE OR ANY OTHE R FEMALE MEMBERS THERE IS NO SUCH RESTRICTION EITHER IN SECTION 368 OR IN SECTION 379 OR ANY OTHER LEGAL PRONOUNCEMENTS. FURTHER WHAT WAS GIVEN BY TH E HUF WAS THE INCOME DERIVED BY IT FROM THE PROPERTY AND NOT THE PROPERTY ITSELF. SEC. 395 MENTIONS THAT THE INCOME CAN BE GIFTED BY THE H UF AS LONG AS NO DISSENT IS MADE BY ANY PERSON. IF THERE IS NO DISS ENT FROM ANY OTHER MEMBER SUCH GIFT BECOMES ABSOLUTE. IF THERE IS ANY OBJECTION TO THE GIFT IT SHALL BE FROM THE FAMILY MEMBERS OF KODANDARAM THE FATHER OF THE ASSESSEE AND IT CANNOT BE FROM THE CIT(A). IT IS F URTHER SUBMITTED THAT EVEN IF SUCH GIFT WERE TO BE INVALID IN THE EYES OF LAW THE SAME HAS TO BE TREATED AS AVAILABLE WITH THE ASSESSEE. IF ANY ONE CLAIMS AGAINST THE ASSESSEE THE SAME MAY HAVE TO BE REFUNDED. THE LEG ALITY OF THE TRANSACTION WOULD NOT AFFECT THE GENUINENESS OF THE TRANSACTION AND THE AVAILABILITY OF FUNDS. THIS IS FACTUALLY NOT TRUE. THE INSPECTORS HAVE VISITED VILLAGES OF ALL THE LESSORS AND THE LANDS. ALL THE LESSORS HAVE STATED THAT THEY LEASED OUT THEIR PROPERTIES DURING 1990-96 TO THE FAMILY MEMBERS OF THE ASSESSEE. THEY HAVE ALSO STATED THE AMOUNT OF ADVANCES RECEIVED BY THEM THE LEASE RENTALS RECEIVED ETC. THEY HAVE AL SO STATED THE NATURE OF CROPS GROWN. THEY PROVIDED THE PAHANI PATRAS AND A COPY OF THE LEASE AGREEMENT ENTERED INTO BY THEM WITH THE FAMILY MEMB ERS. THEY ALSO ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 19 19 ANNEXED THE CERTIFICATES SHOWING THE FACT THAT THEY POSSESS THE AGRICULTURAL LANDS. ALL THESE CIRCUMSTANCES WOULD CLEARLY INDIC ATE THAT THEY HAVE PROVIDED SUBSTANTIAL EVIDENCE TO PROVE THE CLAIM MA DE BY THE ASSESSEE. THE PROPERTIES TAKEN ON LEASE DURING 1990-96 WHEN T HE FATHER OF ASSESSEE WAS ACTIVE AND HIMSELF WAS NOT SO BUSY IN THE PROFE SSIONAL ACTIVITY. ALL THIS IS A MERE IMAGINATION AND SURMISE OF THE DEPAR TMENTAL REPRESENTATIVE AND NO WHERE MENTIONED IN THE ASSESSMENT ORDER OR I N THE ORDER OF THE CIT(A). IN SO FAR AS THE SKILL IS CONCERNED THE A SSESSEE BELONGS TO THE AGRICULTURAL FAMILY. INCLINATION IS WHAT CAN BE PR OVED BY THE FACT THAT TAKING THE PROPERTY ON LEASE AND THE FACT OF CULTIV ATION OF THE SAME. THE CAPABILITY IS CLEAR FROM THE FACT THEY HAVE EARNED MONEY IN THE PROCESS OF CARRYING ON THE AGRICULTURAL OPERATIONS. THE INSPE CTORS VISITED THE PREMISES THRICE. THEY FOUND THAT THE PROPERTY WAS UNDER CULTIVATION BY THE FAMILY MEMBERS AND THESE FACTS ARE NOT SUPERFIC IAL. THE INSPECTORS DURING THE COURSE OF EXAMINATION DID NOT EVEN AN IO TA OF DOUBT. IN THE CIRCUMSTANCES IT IS INCORRECT FOR THE LEARNED DEPAR TMENTAL REPRESENTATIVE TO MENTION THAT THE AGREEMENT IS SUPERFICIAL. IF THE ARGUMENTS WERE TO BE SUPERFICIAL WHY THE THIRD PARTIES HAVE APPEARED BE FORE THE AUTHORITIES AND MENTION THE FACT. THIS WOULD BE CORRECT IF THE REA L FACTS ARE MISSING IN THE FILE AND THE ASSESSING OFFICER DID NOT CARRY ON ANY ENQUIRY OF HIS OWN. THE RETURN OF INCOME WERE FILED PRIOR TO THE DATE OF SE ARCH. IN THE RETURNS OF INCOME THEY HAVE STATED CATEGORICALLY THAT THE AMOU NTS HAVE BEEN GIFTED TO THE ASSESSEE. ALL THE FAMILY MEMBERS ARE VERY CLOS E RELATIVES. IT IS STATED THAT IN THE RETURNS OF INCOME THAT THEY TOOK ON LEA SE THE AGRICULTURAL LAND AND DERIVED AGRICULTURAL INCOME BESIDES BUSINESS IN COME. THE FACT THAT TAKING THE PROPERTY ON LEASE WAS EXAMINED ONCE BY T HE DDI IMMEDIATELY AFTER SEARCH AND LATER CONDUCTED BY THE ASSESSING O FFICER. THEY CONTACTED THE LAND OWNERS THE HEAD OF THE VILLAGE THE NEIGH BOURS AND RECORDED THE STATEMENTS. THEY OBTAINED LEASE DOCUMENTS PAHANI P ATRIKAS AND LETTERS OF CONFIRMATION FROM ALL THE PERSONS CONTACTED. THE O NLY OBSERVATION OF THE ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 20 20 CIT(A) IS THAT WHAT WAS BROUGHT ON RECORD HAS NOT B EEN DISCUSSED IN THE ASSESSMENT ORDER. THE CIT(A) HAS ALSO NO OPPORTUNI TY TO UTILIZE THE PLENARY POWERS POSSESSED BY HIM. THE CIT(A) MENTION ED THAT THE ASSESSING OFFICER MADE MECHANICAL ADDITIONS WITHOUT CONSIDERI NG THE MATERIAL ON RECORD. WHETHER THE ASSESSING OFFICER BROUGHT ON R ECORD ALL THE FACTS. THE MOMENT THE ANSWER IS YES WHETHER THE ASSESSING O FFICER BROUGHT ALL SUCH FACTS WHICH HE HAS GATHERED IN THE REMAND REPORT OR IN THE ASSESSMENT ORDER. THE CIT(A) HAS THE ADVANTAGE OF LOOKING INT O THE FACTS BROUGHT ON RECORD AND LOOKING INTO THE ASSESSMENT ORDER AND RE MAND REPORT. HE CONCLUDED THAT THEY ARE NOT BASED ON THE FACTS GATH ERED BY THE ASSESSING OFFICER. IN SUCH CIRCUMSTANCES THE CIT(A) IS JUST IFIED AND HIS ACTION OF REJECTION OF THE REMAND REPORT WITHOUT SENDING IT B ACK IS PROPER. 20. HE SUBMITTED THAT THE CIT(A) HAS ALL THE FACT S BEFORE HIM BEFORE HIM THE ASSESSMENT ORDER THE REMAND REPORT WRITTEN SUBMISSIONS AND FURTHER WRITTEN SUBMISSIONS MADE BESIDES THE E VIDENCE PRODUCED BY THE ASSESSEE AND GATHERED BY THE ASSESSING OFFICER. BASED ON THAT THE OBSERVATIONS WERE MADE AS THERE IS NO REQUIREMENT T O CONDUCT ANY FURTHER ENQUIRY. IN THE CASE OF SMT. PRABHAVATHI S. SHAH VS . CIT (231 ITR 1) (BOM. HC) WAS HELD THAT NOTHING PREVENT AAC FROM MAKING FURTHER ENQUIRIES. THIS WAS IN THE CIRCUMSTANCE WHEN THE AAC ARBITRAR ILY REFUSED TO MAKE AN ENQUIRY IN THE CASE WHERE THE FACTS AND CIRCUMST ANCES SO DEMANDED. THE QUESTION TO BE NOTICED IS WHETHER THE CASE DESE RVES TO BE FURTHER EXAMINED BY WAY OF AN ENQUIRY WHETHER ALL THE ENQU IRIES WERE CONDUCTED OR NOT. ALL THE ENQUIRIES NECESSARY WERE CONDUCTED BY THE ASSESSING OFFICER HIMSELF AND THE RESULT OF THE ENQUIRY IS AVAILABLE ON RECORD. THEREFORE THE CIT(A) TO MAKE FURTHER ENQUIRY IN THE MATTER. HE SU BMITTED THAT THE RELIANCE PLACED BY THE DR IN THE CASE OF SMT. PRABH AVATI S. SHAH VS. CIT (231 ITR 1) (BOM. HC) IS ALSO MISPLACED. HE SUBMITT ED THAT THE DECISION OF BOMBAY HIGH COURT IS DISTINGUISHABLE TO THE FACTS O F THE ASSESSEES CASE. ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 21 21 ACCORDING TO THE LEARNED AR THE RATIO OF JUDGEMENT IN THE CASE OF KAPURCHAND SHRTIMAL VS. CIT (131 ITR 451) (SC) IS A LSO NOT APPLICABLE. IN THE CASE OF THE ASSESSEE ALL SUCH ENQUIRIES THAT AR E REQUIRED HAVE BEEN CARRIED OUT BY THE ASSESSING OFFICER. THE SAME IS AVAILABLE ON RECORD. WHEN THE FACTS ARE SO CLEARLY BROUGHT ON RECORD THR OUGH THE ENQUIRIES THERE IS NO FURTHER REQUIREMENT FOR THE CIT(A) TO F URTHER INVESTIGATE IN THE MATTER. IF ONLY THE ASSESSING OFFICER HAD NOT CARR IED ON ANY ENQUIRY AND IF THERE IS ANY ERROR THEN SUCH ENQUIRY CAN BE MADE BY THE CIT(A). FURTHER WHEN ALL THE ENQUIRIES HAVE BEEN CARRIED ON THERE I S NO SUCH REQUIREMENT AT ALL. THE QUESTION WHICH IS TO BE SEEN IS WHETHE R SUCH REQUIREMENT IS THERE OR NOT. FROM THE FACTS MENTIONED ABOVE IT IS CLEAR THAT THERE IS NO SUCH REQUIREMENT FOR THE CIT(A) TO HAVE ANY FURTHER ENQUIRIES DONE. THEREFORE THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION. IN SO FAR AS PROBABILITIES ARE CONCERNED HE SUBMITTED THAT THE FAMILY WAS A MIDDLE CLASS FAMILY. ONE OF THEM HAS COMPLETED HIS MBBS J OINED GOVT. SERVICE. ALL THE FAMILY MEMBERS TOGETHER DESIRED TO HAVE THE IR OWN ESTABLISHMENT OF RUNNING A HOSPITAL. THE DOCTOR RESIGNED FROM THE G OVT. SERVICE AND STARTED HIS OWN PROFESSION. THE PROBABILITY IS THAT ALL TH E FAMILY MEMBERS WOULD WORK AND PROVIDE THE FUNDS FOR FURTHERANCE OF THAT OBJECTIVE SET BY THE FAMILY MEMBERS. IN THE CIRCUMSTANCES THE OBSERVAT ION OF THE DEPARTMENTAL REPRESENTATIVE IS NOT JUSTIFIED AND TH E ORDER OF THE CIT(A) MAY THERE BE CONFIRMED. IN SO FAR AS THE OUTSIDERS ARE CONCERNED THE THREE MEMBERS ARE NOT TOTALLY OUTSIDERS. THEY ARE THE EM PLOYEES OF THE ASSESSEE. THEY HAVE STATED THAT THE ASSESSEE KEPT AN AMOUNT OF RS.15 LAKHS EACH WITH THEM IN THE PAST AND THE SAME WAS R ETURNED TO THE DOCTOR. THE SAID AMOUNT OF RS.15 LAKHS WAS OFFERED BY THE A SSESSEE IN THE RETURN OF INCOME FILED BY HIM AND THE SAID AMOUNT IS TAXED . ONLY THE AMOUNT OF RS.5 LAKHS EACH TO BE CONSIDERED NOW. THE SAID AMO UNT IS TAXED IN THE ASSESSMENT OF THE SAID EMPLOYEES BY THE ASSESSING O FFICER AND INCLUDED RS.5 LAKHS AS THEIR INCOME. COPIES OF THE ASSESSME NT ORDERS WOULD SHOW ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 22 22 THAT THE AMOUNT OF RS.5 LAKHS EACH WAS TAXED IN THE IR ASSESSMENT. THE ASSESSEE FURTHER SUBMITTED THAT EARLIER TO THE ESTA BLISHMENT OF THE HOSPITAL THE DOCTOR WAS RUNNING A NURSING HOME. E STABLISHMENT OF A BETTER HOSPITAL WOULD HELP THE EMPLOYEES AND SAID I N THE PROCESS THEY HAVE ALSO PARTICIPATED IN PROVIDING FUNDS TO THE ASSESSE E. THEY GOT PREPARED TO PAY TAX ON THE AMOUNT GIVEN BY THEM AND FILED THE R ETURNS OF INCOME PROPERTY. THE GIFTS HAVE BEEN GIVEN TO THE ASSESSE E. THE DATES OF FILING OF THE RETURNS OF INCOME BY THEM THE INCOME ADMITTED AND THE INCOME ASSESSED BY THE ASSESSING OFFICER ARE FURNISHED. IT IS CLEAR FROM THE FACTS THAT THEY HAVE THE REQUIRED FUNDS WHICH HAVE BEEN I NVESTED FOR THE PURPOSE OF CONSTRUCTION OF THE HOSPITAL. 21. THE ASSESSEE IN ITS CROSS OBJECTION CONTENDED THAT THE ASSESSMENT ORDER PASSED U/S 153A IS BAD IN LAW SIN CE IT IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND U/S 132 OF THE IT ACT. 22. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMI TTED THAT SEARCH CONDUCTED AT THE ASSESSEES PREMISES IS ITSE LF SUFFICIENT TO ASSUME JURISDICTION U/S 153A OF THE ACT AND HE RELIED ON T HE JUDGEMENTS SHIVNATH RAI HARNARAIN (I) LTD. VS. DCIT (ITAT DEL.) (304 IT R 271 (AT) AND SHYAM LATA KAUSHIK VS. ACIT (AT ) DELHI (114 ITD 305). 23. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. IN ITA NO.1114/H/2010 THE GRI EVANCE OF DEPARTMENT IS DELETION OF RS.15 LAKHS GIFT RECEIVED FROM THREE EMPLOYEES AT RS.5 LAKH EACH. U/S 68 IF ANY AMOUNT FOUND CREDIT IN THE B OOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION SUCH CREDIT HAS TO BE PROPERLY EXPLAINED REGARDING THEIR NATURE AND SOURCES OF SUCH CREDIT. IF THE EXPLANATION OFFERED BY THE ASSESSEE IN THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFACTOR Y IT IS ONLY THEN THE SUM ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 23 23 SO CREDITED MAY BE TREATED AS INCOME OF THE ASSESSE E IN THE PREVIOUS YEAR. BEING SO WHEN THE ASSESSEE OFFERED NO EXPLANATION OR EXPLANATION NOT REASONABLE OR UNACCEPTABLE ON APPRECIATION OF FACTS THEN IT IS TO BE TREATED INCOME OF THE ASSESSEE. IN THE PRESENT CASES THE ASSESSEE SAID TO BE RECEIVED A SUM OF RS.5 LAKH EACH FROM SHRI A.V. RAM ANA REDDY SHRI REDDANNA AND SMT. K. VIJAYALAKSHMI. ALL THESE PERS ONS ARE SAID TO BE EMPLOYEES OF THE ASSESSEE WHO WERE RECEIVING A MEAG ER AMOUNT OF SALARY IN THE RELEVANT PERIOD OF TIME. THESE PERSONS HAVE OPENED THE BANK ACCOUNTS ONLY TO TRANSACT THESE GIFTS THROUGH BANK ACCOUNTS. THE INTRODUCER OF THESE BANKS ACCOUNTS OF THESE PERSON S IS ONLY ONE PERSON I.E. DR.D.S. ANAND BABU. CASH HAS BEEN REMITTED TO THESE ACCOUNTS A DAY BEFORE THE GIFT. THE ACCOUNT DOES NOT CARRY CASH B ALANCE OR ANY TRANSACTION OTHER THAN AMOUNT NEEDED FOR ACCOMMODAT ING THE GIFT. THE ADDRESS GIVEN TO THE BANK IS ALSO THAT OF DR. D.S.. ANAND BABU. FURTHER THE PAN CARDS OF THESE PERSONS WERE ALSO FOUND AT T HE RESIDENCE OF DR.D.S ANAND BABU. IN OUR OPINION THE EXPLANATION GIVEN BY THE ASSESSEE REGARDING THE GENUINENESS OF TRANSACTION IS UNACCEP TABLE. THE BURDEN IN THIS CASE IS ON THE ASSESSEE TO PROVE THE GENUINENE SS OF THE TRANSACTION WHICH IS NOT DISCHARGED SATISFACTORILY. THE GIFTS WERE NOT REAL IN NATURE. THE SURROUNDING CIRCUMSTANCES SHOWS THAT THESE GIFT S ARE MADE TO BELIEVE TRANSACTIONS. THE MATERIAL AVAILABLE ON RECORD SHO WS THAT THE ASSESSEE ROUTED HIS OWN MONEY THROUGH THESE BOGUS GIFTS. TH E CONCLUSIONS REACHED BY THE ASSESSING OFFICER ARE BASED ON PROPER APPREC IATION OF THE FACTS AND THE MATERIAL AVAILABLE ON RECORD AND SURROUNDING CI RCUMSTANCES. THE DOUBT NATURE OF THE TRANSACTION AND THE MANNER IN W HICH THE SUMS WERE FOUND CREDITED IN THE BOOKS OF ACCOUNT MAINTAINED B Y THE ASSESSEE HAVE BEEN DULY CONSIDERED BY US AND IN OUR OPINION THE SE GIFTS HELD TO BE NOT REAL ONES THOUGH IT CAME BY WAY OF CHEQUES. ACCORD INGLY IN OUR OPINION THE GIFTS RECEIVED FROM THE ABOVE THREE PERSONS AT RS.5 LAKH EACH TO BE ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 24 24 TREATED AS INCOME OF THE ASSESSEE. THE GROUND RAISE D BY THE REVENUE IS ALLOWED. ITA NO.1114/H/2010 IS ALLOWED. 24. THE ISSUE IN ITA NO.1113/H/2010 IS WITH REGA RD TO DELETION OF ADDITION IN RESPECT OF GIFT RECEIVED FROM DR.D.S AN AND BABU (HUF) AT RS.15 LAKHS DR.DS KODANDARAM (HUF) AT RS.19.5 LAKHS SMT . B.A. SARASWATHI AT RS.15 LAKHS SHRI GOPALAKRISHNA AT RS.2.5 LAKHS AND SMT B. RAJESWARAMMA AT RS.1.98 LAKHS. IN THESE CASES THE ABOVE PARTIES ARE CLOSE RELATIVES OF THE ASSESSEE AND THESE PARTIES C ONFIRMED THE GIVING OF GIFTS. THE ASSESSEE EXPLAINED THAT THE ABOVE DONOR S GENERATED INCOME THROUGH AGRICULTURAL OPERATION AND THE AGRICULTURA L LAND FOR THIS PURPOSE HAVE BEEN TAKEN BY THEM ON LEASE FROM VARIOUS PARTI ES. THE ASSESSING OFFICER DISBELIEVED IT ON THE REASON THAT THERE IS NO ENTRY IN ADANGAL IN RESPECT OF ANY LEASE OF THE AGRICULTURAL LAND FROM WHOM THE AGRICULTURAL LAND HAS BEEN TAKEN ON LEASE. THE AGRICULTURAL INC OME SHOWN BY THESE PARTIES ARE AS FOLLOWS: NAME OF THE PARTY ASSESSMENT YEAR AGRICULTURAL I NCOME 1. KODANDARAM HUF 2000-01 - 2001-02 RS.95 000 2002-03 RS.87 000 2003-04 RS.1 10 000 2. SMT. D. SARASWATHI 2001-02 RS.84 000 2002-03 RS.86 000/- 2003-04 RS.89 000 3. DR.DS ANAND BABU 2000-01 RS.89 000 2001-02 RS.90 000 2002-03 RS.95 000 2003-04 RS.96 000 2004-05 RS.91 000 ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 25 25 2005-06 RS.1 15 000 2006-07 RS.2 40 500 25. AS SEEN FROM THE ABOVE THE ASSESSING OFFICER WAS OF THE OPINION THAT THIS IS A FICTITIOUS INCOME. HOWEVER IT IS THE FACT THAT IN ALL THE ABOVE CASES EXCEPT SHRI ANANDA BABU (HUF) FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 THE RETURNS WERE FILED BEFORE T HE DATE OF SEARCH I.E. 18.1.2006. THE ABOVE PARTIES HAVE TAKEN THE AGRICU LTURAL LAND ON LEASE WHICH IS EVIDENCED BY THE LEASE DEED. THE INSPECTO R OF THE DEPARTMENT HAD CARRIED OUT THE ENQUIRY AND RECORDED THE STATEMENT FROM THE LESSOR AS WELL AS FROM THE VILLAGERS WHO HAVE CONFIRMED THE FACT O F LEASING THE LAND TO THE ASSESSEE. THE LESSORS HAVE STATED ABOUT THE EXTENT OF LAND LEASED THE LEASE RENTALS AND THE PERIOD OF LEASE. THE AGRICUL TURAL INCOME DECLARED BY THE DONOR IS VERY SMALL IN MOST OF CASES IT IS LES S THAN RS.1 LAKH. IN OUR OPINION THE EVIDENCE BROUGHT ON RECORD IS NOT ENOU GH TO SAY THAT THE ABOVE PARTIES HAVE NO AGRICULTURAL INCOME TO MAKE G IFT TO THE ASSESSEE. MORESO THIS IS THE ASSESSMENT U/S 153A OF THE ACT AS A RESULT OF SEARCH ACTION. IN THE CIRCUMSTANCES THERE IS MORE BURDEN CAST ON THE DEPARTMENT TO SHOW THAT THE GIFTS SHOWN BY THE ASSE SSEE IS FICTITIOUS. THE ABOVE DONORS HAVING FILED THE RETURN OF INCOME BEFO RE THE DATE OF SEARCH AND THEY WOULD NOT HAVE ANTICIPATED THE SEARCH ACTI ON AT THE PREMISES OF DR.DS ANANDA BABU. FURTHER THE HUGE OPENING BALAN CE IS AVAILABLE WITH THEM TO MAKE GIFTS TO THE ASSESSEE. AFTER CONSIDER ING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND MATERIAL AVAILABLE ON RECORD WE ARE OF THE OPINION THAT THE ABOVE PARTIES VIZ. DR.DS ANANDA BABU (HUF) SHRI KODANDARAM (HUF) SMT. D. SARASWATHI IS HAVING CREDI T WORTHINESS TO MAKE GIFT TO THE ASSESSEE. THE GIFT MADE BY THESE PARTIES CANNOT BE CONSIDERED AS BOGUS. THE DELETION OF ADDITION BY THE CIT(A) IS JUSTIFIED IN THESE THREE PERSONS CASES. SIMILAR IS THE POSITI ON IN THE CASE OF GIFT FROM SHRI GOPALA KRISHNA AT RS.2.50 LAKHS AND SMT. LATE B. RAJESWARAMMA AT ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 26 26 RS.1.98 LAKHS WHICH ARE SUBSTANTIATED BY THE ASSES SEE. THESE PERSONS ARE INCOME TAX ASSESSEE AND CLOSE RELATIVES OF THE ASSE SSEE WHO HAVE CONFIRMED THE GIFTS. ACCORDINGLY WE ARE INCLINED TO CONFIRM THE ORDER OF THE CIT(A) ON THIS TWO GIFTS ALSO. THE ASSESSING O FFICER IS REQUIRED TO COMPUTE THE INTEREST U/S 234B & C IN ACCORDANCE WIT H LAW WHILE PASSING THE GIVING EFFECT ORDER. ITA NO.1113/H/2010 IS ALLOWED . 26. THE GRIEVANCE OF THE REVENUE IN ITA NO.1115/H /2010 IS WITH REGARD TO DETERMINATION OF COST OF CONSTRUCTION. T HE ASSESSEE ADMITTED THE COST OF CONSTRUCTION OF HIS HOSPITAL CUM-LODGE IN MADANAPALLE TOWN AT RS.96.7 LAKHS. THE DVO DETERMINED THE COST OF CONS TRUCTION AT RS.109.82 LAKHS. THERE WAS A DIFFERENCE OF RS.13.90 LAKHS. IN OUR OPINION STATE PWD RATE IS APPROPRIATE AND IT IS TO BE APPLIED SIN CE THE CONSTRUCTION IS AT MOFUSIL AREA AND ALSO THE ASSESSEE IS ENTITLED FOR SELF-SUPERVISING CHARGES AT 7.5% AS THE ASSESSEE CARRIED OUT THE WORK IN LO CAL AREA BY HIMSELF. THOUGH HE IS A DOCTOR IT CANNOT BE SAID THAT HE HA S NOT SUPERVISED THE CONSTRUCTION HIMSELF. THE SELF SUPERVISION CARRIED OUT BY HIM HAD DEFINITELY RESULTED IN PURCHASE COST OF MATERIALS A ND EXPENDITURE TOWARDS LABOUR. ACCORDINGLY WE DIRECT THE ASSESSING OFFIC ER TO RE-COMPUTE THE COST OF CONSTRUCTION. THUS REVENUE APPEAL IN ITA NO.1115/H/2010 IS PARTLY ALLOWED. 27. IN REVENUE APPEALS ITA NOS. ITA NOS.1146 TO 1152/H/2010 ITA NOS. 1135 1136 1137 & 1138/H/2010 ITA NOS.11 39 TO 1145/HYD/2010 THE ISSUE IS ONLY RELATING TO TREATM ENT OF AGRICULTURAL INCOME AS INCOME OF ASSESSEES . WE HAVE GONE THR OUGH THE ENTIRE FACTS OF THE CASE AND IN ALL THE ABOVE CASES THE ASSESSEES WERE DECLARED AGRICULTURAL INCOME AS TABULATED IN EARLIER PARAS O F THIS ORDER AND THE RETURNS WERE FILED BEFORE THE DATE OF SEARCH. HOW EVER IN THE CASE OF SHRI ANANDA BABU (HUF) FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 THE ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 27 27 RETURNS WERE FILED AFTER THE DATE OF SEARCH I.E. 18 .1.2006. EXCEPT IN THE CASE OF DR.D.S ANANDA BABU (HUF) THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE IS RANGING FROM RS.80 000 TO RS.1 10 0 00/-. HOWEVER IN CASE OF DR. D.S ANANDA BABU (HUF) ASSESSEE DECLARED AGR ICULTURAL INCOME AT RS.1.5 LAKHS AND RS.2.4 LAKHS FOR THE ASSESSMENT YE AR 2005-06 AND 2006- 07 RESPECTIVELY WHICH IS VERY HIGHER SIDE. AS HELD IN EARLIER PARA IN OUR OPINION IT IS FAIR TO ACCEPT THE AGRICULTURAL INCO ME DECLARED BY THE ASSESSEE IN THE ABOVE YEARS IN RESPECT OF ALL THE A SSESSEES EXCEPT IN THE CASE OF DR. D.S ANANDA BABU (HUF) ASSESSEE DECLARE D AGRICULTURAL INCOME AT RS.1.5 LAKHS AND RS.2.4 LAKHS FOR THE ASSESSMENT YEAR 2005-06 AND 2006-07 RESPECTIVELY WHICH IS VERY HIGHER SIDE. CO NSIDERING THE TOTAL FACTS WE DIRECT THE ASSESSING OFFICER TO DETERMINE THE AG RICULTURAL INCOME AT RS.1 LAKH EACH FOR THESE TWO ASSESSMENT YEARS AND BALANC E TO BE TREATED AS INCOME OF THE ASSESSEE. ACCORDINGLY ALL THE REV ENUE APPEALS IN ITA NOS. 1146 TO 1150/H/2010 ITA NOS. 1135 1136 1137 & 11 38/H/2010 ITA NOS.1139 TO 1145/HYD/2010 ARE DISMISSED AND ITA N OS.1151 & 1152/H/2010 WHICH ARE PARTLY ALLOWED. 28. NOW COMING TO THE CO NOS.54 TO 59 & CO.92/H/2 010 CO.NOS.60 TO 65 & CO.91/HYD/2010 AND CO.NOS.66 TO 72/H/2010 WHEREIN THE ASSESSEE CHALLENGING THE INITIATION OF PROCEEDINGS U/S 153A OF THE IT ACT. U/S 153A OF THE ACT TO MAKE AN ASSES SMENT THERE IS NO NECESSITY ANY SEIZED MATERIAL FOUND DURING THE COUR SE OF SEARCH. UNDER SECOND PROVISO TO S.153A PENDING ASSESSMENT OR RE-A SSESSMENT PROCEEDINGS IN RELATION TO A ANY ASSESSMENT YEAR FA LLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN S.153A(B) OF THE ACT SHALL ABAIT. THUS THE ASSESSING OFFICER GETS JURISDICTION FOR SI X ASSESSMENT YEARS REFERRED TO IN S.153A (B) OF THE IT ACT FOR MAKING ASSESSMENT. IN VIEW OF THIS WE DO NOT FIND ANY MERIT IN THE ARGUMENTS OF T HE ASSESSEE COUNSEL ACCORDINGLY ALL THE CROSS OBJECTIONS FILED BY THE ASSESSEES ARE DISMISSED. ITA NOS.1113 & OTHER 41 APPEALS/H/2010 SHRI ANAND BABU SMT. D SARASWATHI & OTHERS MADANA PALLE 28 28 IN THE RESULT REVENUE APPEALS IN: 1. ITA NO. 1113 & 1114/H/2010 IS ALLOWED 2. ITA NOS. 1115 1151 & 1152/HYD/2010 ARE PARTLY ALLO WED 3. ITA NOS. 1135 TO 1138 1139 TO 1145/HYD./2010 AND 1146 TO 1150 ARE DISMISSED. CROSS OBJECTIONS : CO NOS.54 TO 59 & 92/HYD/2010 60 TO 65 & 91/HYD/20 10 & COS. 66 TO 72/HYD/2010 ARE DISMISSED. ORDER PRONOUNCED IN THE OPE N COURT :30.12.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 30 TH DECEMBER 2010 COPY FORWARDED TO: 1. SMT. D. SARASWATHI COOPERATIVE COLONY MADANAPA LLE-517 325. 2. 2. THE ACIT CENTRAL CIRCLE KT ROAD THIRUPATHI 3. CIT(A)- THIRUPATHI 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP