DCIT, Hyderabad v. Sri M.Ramakrishna Reddy, Hyderabad

ITA 1021/HYD/2009 | 2004-2005
Pronouncement Date: 27-12-2011 | Result: Dismissed

Appeal Details

RSA Number 102122514 RSA 2009
Assessee PAN AABHM2104C
Bench Hyderabad
Appeal Number ITA 1021/HYD/2009
Duration Of Justice 2 year(s) 3 month(s) 8 day(s)
Appellant DCIT, Hyderabad
Respondent Sri M.Ramakrishna Reddy, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 27-12-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 27-12-2011
Date Of Final Hearing 23-06-2011
Next Hearing Date 23-06-2011
Assessment Year 2004-2005
Appeal Filed On 18-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBE R AND SMT. ASHA VIJAYARAGHAVAN JUDICIAL M EMBER. ITA NO. ASSESSMENT YEAR APPELLANT RESPONDENT 1014/HYD/2009 2000-01 DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE -2 HYDERABAD SHRI M.V.SUBRAMANYESWARA REDDY(HUF) HYDERABAD (PAN AABHM 2104 C) 1015/HYD/2009 2005 - 06 1016/HYD/2009 1018/HYD/2009 2002 - 03 2003-04 DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE -2 HYDERABAD SHRI M.RAMAKRISHNA REDDY L/R OF LATE B.RAMI REDDY(INDL) HYDERABAD ((PAN AABHB 1951 Q) 1017/HYD/2009 2003 - 04 DY. COMMISSION - ER OF INCOME-TAX CENTRAL CIRCLE -2 HYDERABAD SHRI M.RAMAKRISHNA REDDY (HUF) L/R OF LATE B.RAMI REDDY(HUF) HYDERABAD (PAN AABHB 1951 Q) 1019/HYD/2009 1020/HYD/2009 2004-05 2005-06 DY. COMMISSION- ER OF INCOME-TAX CENTRAL CIRCLE -2 HYDERABAD SMT. HARINUITHA REDDY HYDERABAD (PAN AATPM 6617 M) 1021/HYD/2009 1022/HYD/2009 2004-05 2005-06 DY. COMMISSION- ER OF INCOME-TAX CENTRAL CIRCLE -2 HYDERABAD SHRI RAMAKRISHNA REDDY HYDERABAD (PAN AATPM 6618 M) APPELLANTS BY : SMT. K.MYTHILI RANI RESPONDENT BY : SMT. P .MURALI MOHANA RAO DATE OF HEARING 17 10.2011 DATE OF PRONOUNCEMENT 27.12.2011 O R D E R PER ASHA VIJAYARAGHAVAN JUDICIAL MEMBER THERE ARE NINE APPEALS IN THIS BUNCH. THEY ARE D IRECTED AGAINST SEPARATE ORDERS OF THE CIT(A)-III HYDERABA D ALL DATED 8.7.2009/1.7.2009. ASSESSMENT YEARS INVOLVED ARE FR OM 2000-01 TO ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 2 2005-06. SINCE COMMON ISSUES ARE INVOLVED THESE A PPEALS ARE BEING DISPOSED OFF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.1014/HYD/2009 : ASSESSMENT YEAR 2000-01 2. IN THIS APPEAL DIRECTED AGAINST THE ORDER OF TH E CIT(A) DATED 8.7.2009 THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE ADDITION OF RS 4 00 000/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMEN T IN PURCHASE OF PLOT IN THE NAME OF MINOR SON. 3. FACTS OF THE CASE IN BRIEF IN RELATION TO THI S ISSUE ARE THAT THE ASSESSEE WAS FOUND TO HAVE PURCHASED A PLOT AT MADH APUR FOR RS.4 00 000/- IN THE NAME OF HIS MINOR SON SRI. M. RAMAKRISHNA REDDY . ON BEING ASKED ABOUT THE SOURCE OF INVESTMENT IT WAS EXPLAINED BY THE A SSESSEE THAT THE SALE CONSIDERATION WAS PAID BY CHEQUE AND THE TRANSACTIO N WAS DULY RECORDED IN HIS ACCOUNT BOOKS. HOWEVER THE ASSESSING OFFICER DID NOT FIND THE EXPLANATION SATISFACTORY AND TREATED THE INVESTMENT AS .UNEXPLA INED. DURING THE APPEAL PROCEEDINGS LD AR FILED THE COPIES OF SALE DEED C ASH BOOK LEDGER AND THE BANK STATEMENT EVIDENCING THE PAYMENTS MADE BY CHEQ UE AND DULY RECORDED IN THE ACCOUNT BOOKS. IT WAS SUBMITTED THAT THE SAID ACCOUNT BOOKS WERE SEIZED DURING SEARCH AND THE AO WITHOUT VERIFYING THE SAME MADE THE ADDITION. 4. ON APPEAL THE CIT(A) DELETED THE ADDITION MAD E BY THE ASSESSING OFFICER OBSERVING AS FOLLOWS:- ON DUE VERIFICATION OF THE EVIDENCES PRODUCED BY T HE ASSESSEE I AM CONVINCED THAT THE SOURCE OF INVESTMENT IN THE SAID LAND WAS SATISFACTORILY EXPLAINED BY THE ASSESSEE. THE PAYMENTS WERE MADE BY CHEQUE WHICH WERE DULY REFLECTED IN THE ASSESSEES BANK STATEMEN T AND HIS BOOKS OF ACCOUNT. HENCE THE ADDITION MADE BY THE AO IS DELE TED. ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 3 5. THE SECOND ISSUE INVOLVED IN THIS APPEAL IS A GAINST THE ADDITION OF RS 3 40 000/- MADE ON ACCOUNT OF UNEXPLAINED INVEST MENT IN PURCHASE OF LAND AT MADHAPUR. 6. FACTS IN RELATION TO THIS ISSUE ARE THAT DURIN G THE ASSESSMENT PROCEEDINGS THE ASSESSEE EXPLAINED THAT THE INVEST MENT WAS MADE BY CHEQUE AND DULY REFLECTED IN THE BANK STATEMENT AND ACCOU NT BOOKS. HOWEVER THE AO WAS NOT SATISFIED WITH THIS EXPLANATION. HE MADE T HE ADDITION HOLDING THAT THE RETURN OF INCOME FILED BY THE ASSESSEE DID NOT REFL ECT ANY WITHDRAWAL FOR MAKING THE SAID INVESTMENT. 7. DURING THE APPEAL PROCEEDINGS BEFORE THE CIT(A ) LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FILED TH E COPIES OF SALE DEED RELEVANT BANK STATEMENT AND CASH BOOK TO SHOW THAT THE PAYMENTS ARE DULY RECORDED IN THE BOOKS OF ACCOUNT AND PROPERLY EXPLA INED. THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER HOLDING AS FOLLOWS:- ON THE PERUSAL OF THE EVIDENCES FILED BY THE AR I AM SATISFIED THAT THE ASSESSEE HAS FILED SATISFACTORY EXPLANATION AND EV IDENCES TO EXPLAIN THE SOURCE OF INVESTMENT IN THE SAID LAND. THE AO HAS MADE THE ADDITION WITHOUT VERIFYING THE ACCOUNT BOOKS OF THE ASSESSEE SEIZED DURING THE SEARCH. THE RETURN OF INCOME IS NOT MEANT TO PROVI DE THE INFORMATION ABOUT ALL THE DEPOSITS AND WITHDRAWALS MADE IN THE BANK ACCOUNTS OF THE ASSESSEE. THE ADDITION MADE BY THE AO IS ACCORDING LY DELETED 8. THE THIRD ISSUE INVOLVED IN THIS APPEAL BEFORE US IS AGAINST THE ADDITION OF RS.4 00 000/- MADE ON ACCOUNT OF UNEXPL AINED INVESTMENT IN PLOT AT MADHAPUR IN THE NAME OF MINOR DAUGHTER DURING THE ASSESSMENT YEAR 2000-01. 9. THE CIT(A) DELETED THIS ADDITION HOLDING AS F OLLOWS:- THE FACTS OF THE ISSUE ARE SAME AS MENTIONED IN RE SPECT OF GROUND OF NO.1 IN PARA 2 ABOVE. THE INVESTMENT MADE IN THE PLOT I S DULY REFLECTED IN THE BANK STATEMENT AND RECORDED IN THE BOOKS OF ACCOUN TS SEIZED DURING SEARCH. THE SOURCE OF THIS INVESTMENT IS SATISFACT ORILY EXPLAINED BY THE ASSESSEE. HE ADDITION MADE BY THE AO IS DELETED ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 4 10. AGGRIEVED BY THE RELIEFS GRANTED BY THE CIT(A ) IN RELATION TO THE ABOVE THREE ISSUES THE DEPARTMENT HAS FILED APPEAL FOR THE ASSESSMENT YEAR 2000-01 AND HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- 1. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS UNEXPLAINED INVESTMENT IN THE PURCHASE OF PLOT OF RS. 4 00 000/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASE OF SITE AT MADHAPUR OF RS. 3 40 000/- HE HAS ALSO ERRED IN DELETING ADDITION MADE OF RS 4 00 000/- TOWARDS UN EXPLAINED INVESTMENT IN PURCHASE OF PLOT AT MADHAPUR IN THE N AME OF HIS MINOR DAUGHTER. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE SOURCE S FOR THE INVESTMENT WERE SATISFACTORILY UNEXPLAINED BY THE A SSESSEE. 3. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE FAC T THAT THE ASSESSEE DID NOT PROPERLY EXPLAINED THE SOURCES EXC EPT MERE SAYING THAT THE PAYMENTS WERE MADE THROUGH BANK AND THE TRANSACTIONS WERE RECORDED IN THE BOOKS OF ACCOUNT. 4. THE LEARNED CIT(A) OUGHT TO HAVE NOT ADMITTED THOSE FRESH EVIDENCES SUBMITTED BY THE ASSESSEE WHICH IS AGAINS T RULE 46 OF THE I.T. ACT. 11. WE HEARD BOTH THE PARTIES. IT IS MENTIONED BY THE CIT(A) AT PARA 2.2. AT PAGE 2 OF HIS ORDER THAT DURING THE APPELLA TE PROCEEDING. THE LD.AR FILED THE COPIES OF SALE DEED CASH BOOK LEDGER A ND THE BANK STATEMENT EVIDENCING THE PAYMENTS MADE BY CHEQUE AND DULY REC ORDED IN THE ACCOUNTS BOOKS. THE CIT(A) HAS ALSO OBSERVED THAT THE SAID ACCOUNT BOOKS WERE SEIZED DURING SEARCH AND THE ASSESSING OFFICER MADE THE A DDITION WITHOUT VERIFYING THE SAME. IN THE CIRCUMSTANCES WE ARE OF THE OPINION THAT THE ADDITIONAL EVIDENCE WAS NOT PLACED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND HENCE THE LEARNED CIT(A) OUGHT NOT TO HAVE ADMITTED FRESH EVI DENCES AND SHOULD HAVE FOLLOWED THE PROCEDURE UNDER RULE 46A OF THE INCOME TAX RULES. 12. FURTHER THE LEARNED CIT(A) AT PARA 3. 2 AT PA GE 3 OF THIS ORDER HAS OBSERVED AS FOLLOWS:- ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 5 DURING THE APPEAL PROCEEDINGS LD.AR FILED THE COP IES OF THE SALE DEED RELEVANT BANK STATEMENT AND CASH BOOK TO SHOW THAT THE PAYMENTS ARE DULY RECORDED IN THE BOOKS OF ACCOUNT AND PROPERLY EXPLAINED 13. HERE AGAIN THE CIT(A) HAS VIOLATED THE PRO VISIONS OF RULE 46A OF THE INCOME TAX RULES. AGAIN WITH RESPECT TO ADDITI ON OF RS.4 LAKHS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PLOT AT MADHAP UR IN THE NAME OF MINOR DAUGHTER THE CIT(A) HAS DECIDED THE ISSUE ON THE SAME LINES AS IN THE CASE OF THE MINOR SON OF THE ASSESSEE WHICH HAS BEEN DISC USSED AT 10 HEREIN ABOVE. 14. IN THESE CIRCUMSTANCES WE SET ASIDE THE ORDE R OF THE CIT(A) ON THESE ISSUES AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER THE EVIDENCES PRODUCED BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE CIT(A) AND AS SUCH WAS NOT AVAILABLE BEFORE HIM EA RLIER AND THEREAFTER DECIDE THE ISSUES IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 15. IN THE RESULT THIS APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. ITA NO.1015/HYD/2009 : ASSESSMENT YEAR 2005-06 16. IN THIS APPEAL FOR THE ASSESSMENT YEAR 2005- 06 THE GRIEVANCE OF THE REVENUE IN THE GROUNDS OF APPEAL IS AGAINST T HE ADDITION OF RS 15 18 341/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE CO NSTRUCTION OF PUNNAIAH PLAZA WHICH HAS BEEN DELETED BY THE CIT(A). 17. THE CIT(A) HAS DELETED THE IMPUGNED ADDITI ON OF RS.15 18 341 WITH THE FOLLOWING OBSERVATIONS:- SIMILAR ISSUE ON THE SAME SET OF FACTS WAS DEALT I N THE APPELLATE ORDER DATED 1.7.2009 IN ITA NOS. 0396 TO 0398/CIT(A) III/08-09 IN THE CASE OF SRI. M. RAMAKRISHNA REDDY. FOR THE DETAILED REASONS GIVEN THEREIN THE ADDITION MADE ON THIS ACCOUNT IS DELETED. ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 6 18. AGGRIEVED THE DEPARTMENT HAS FILED AN BEFORE US WITH THE FOLLOWING GROUNDS OF APPEAL 1. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION M ADE BY THE ASSESSING OFFICER TOWARDS ASSESSEES UNDERSTATEMENT IN COST OF CONSTRUCTION IN PUNNAIAH PLAZA BASING ON THE SEIZ ED MATERIAL. 2. THE CIT(A) ERRED IN CONCLUDING THAT THE A.O. ESTIMA TED THE COST OF CONSTRUCTION ON PRESUMPTION AS THE ESTIMATION WAS M ADE BASED ON THE SEIZED DOCUMENT AND THE RATE ADOPTED BASED ON THE V ALUED AS PER SEIZED DOCUMENT ONLY. 19. WE HAD HEARD BOTH THE PARTIES. IN THE CASES OF SHRI Y.SHIVARAMA KRISHNA IN ITA NO 969-970/HYD/08 THE CO-ORDINATE B ENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS:- SEARCH AND SEIZURE OPERATIONS WERE CONDUCTED ON 07. 10.2004. IN THE PREMISES OF THE PERSON RELATING TO SUJANA GROUP OF COMPANIES INCLUDING THE ASSESSEE. DURING THE COURSE OF SEARCH OPERATIO NS SOME MATERIAL WAS FOUND FROM THE RESIDENCE OF ONE SHRI C.V.RAMANA REDDY. THE ASSESSING OFFICER ON THE BASIS OF THE PRESUMPTION U NDER SECTION 132(4) OF THE ACT MADE ADDITIONS IN THE HANDS OF THE PRESENT ASSESSEE. HOWEVER ON APPEAL THE CIT(A) HELD THAT PRESUMPTION UNDER S EC.132(4) IS APPLICABLE ONLY IN RESPECT OF PERSONS FROM WHOSE CU STODY OR POSSESSION SEIZED MATERIAL WAS FOUND AND IT CANNOT BE APPLIED TO THIRD PARTIES THE CIT(A) PLACED RELIANCE ON THE THIRD MEMBER DECISION OF THIS TRIBUNAL IN THE CASE OF RAMA TRADERS V/S FIRST ITO (1982) 32 T TJ (PATNA) 483 (TM) WHEREIN IT WAS HELD THAT PRESUMPTION PROVIDED IN SE CTION 132(4) IS ONLY IN RESPECT OF PERSONS FROM WHOSE CUSTODY THE DOCUME NT WAS SEIZED AND THE PRESUMPTION CANNOT BE EXTENDED TO THIRD PARTIES . SINCE THE CIT(A) FOUND THAT THE PRESUMPTION CANNOT BE EXTENDED TO TH IRD PERSONS FOLLOWING THE THIRD MEMBER DECISION OF THIS TRIBUNA L CITED ABOVE WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON THI S ISSUE. WE ACCORDINGLY UPHOLD THE SAME AND REJECT THE GROUNDS OF REVENUE O N THIS ISSUE 20. FACTS AND CIRCUMSTANCES OF THE CASE ON HAND B EING IDENTICAL RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE CO -ORDINATE BENCH OF THIS TRIBUNAL WE FIND NO MERIT IN THE GRIEVANCE OF THE REVENUE IN THIS APPEAL. REVENUES GROUNDS IN THIS APPEAL ARE ACCORDINGLY RE JECTED. 21. IN THE RESULT THIS APPEAL OF THE REVENUE IS DISMISSED. ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 7 ITA NOS.1016/HYD/2009 : ASSESSMENT YEAR 2002-03 ITA NOS.1018/HYD/2009 : ASSESSMENT YEAR 2003-04 22. EFFECTIVE GRIEVANCE OF THE REVENUE IN THESE A PPEALS RELATE TO THE ADDITIONS MADE BY THE ASSESSING OFFICER BY ESTIMAT ING THE INCOME AS A PERCENTAGE OF TURNOVER AFTER REJECTING THE BOOK RE SULTS DISCLOSED BY THE ASSESSEE. 23. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE IS IN THE BUSINESS OF CONSTRUCTION IN THE NAME OF HIS PROPRIETARY CONC ERN M/S.BRR CONSTRUCTIONS. IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2001-02 THE ASSESSEE DISCLOSED WORK IN PROGRESS OF RS.20 80 000 AND DECL ARED NET PROFIT OF RS.93 849 IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2002-0 3 THE ASSESSEE DISCLOSED INCOME OF RS.2 03 320 ON SALES TURNOVER OF RS.57 49 600. IN THE RETURN FOR ASSESSMENT YEAR 2003-04 THE ASSESSEE DISCLOSED INC OME OF RS.1 61 060/- ON SALES TURNOVER OF RS.78 91 100. DURING THE ASSESSME NT PROCEEDINGS THE ASSESSEE EXPLAINED TO THE ASSESSING OFFICER THAT THE TOTAL S ALES TURNOVER OF THIS CONCERN IN THREE YEARS WAS OF RS.1 36 40 700. THE SALES WER E DULY RECORDED IN THE BOOKS OF ACCOUNT WHICH WERE DULY AUDITED. A COPY OF THE AUDIT REPORT U/S.44AB WAS ALSO SUBMITTED TO THE ASSESSING OFFICER. HOWEVER THE ASSESSING OFFICER REJECTED THE BOOK RESULT ON THE GROUND THAT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT AND NECESSARY VOUCHERS. HE ESTIMATED THE INCOME @ 15% ON THE WORK IN PROGRESS AND SALES TURNOVER SHOWN IN EACH YEAR A ND ACCORDINGLY MADE AN ADDITION OF RS.3 12 000/- FOR ASSESSMENT YEAR 2001 -02 OF RS.8 62 440/- FOR ASSESSMENT YEAR 2002-03 AND OF RS.62 665/- FOR AS SESSMENT YEAR 2003-04. 24. DURING THE APPEAL PROCEEDINGS BEFORE THE CIT( A) LEARNED AUTHORIZED REPRESENTATIVE FILED THE WRITTEN SUBMISS IONS STATING THAT THE ASSESSEE HAD MAINTAINED REGULAR BOOKS OF ACCOUNT FO R ALL THE THREE YEARS UNDER CONSIDERATION WHICH WERE DULY AUDITED. COPY OF THE AUDITED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET WERE FILED ALONG WITH THE RETURNS OF INCOME. THE SALES TURNOVER AND COST OF LAND OF RS.54 00 000/- S HOWN IN THE BOOKS HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER. HENCE IT WAS SUBMITTED THAT THERE ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 8 WAS NO SCOPE WHATSOEVER FOR ASSESSING OFFICER TO ES TIMATE THE INCOME @ 15% OF SALES TURNOVER. HE VEHEMENTLY OPPOSED THE ESTIMATI ON OF INCOME ON WORK IN PROGRESS IN ASSESSMENT YEAR 2001-02. THE LEARNED AU THORIZED REPRESENTATIVE FILED COPIES OF AUDITED ACCOUNTS DURING THE APPEAL PROCEEDINGS. 25. THE CIT(A) DELETED THE IMPUGNED ADDITIONS MADE BY THE ASSESSING OFFICER BY OBSERVING AS FOLLOWS:- I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE ASSE SSEE AND THE MATERIAL AVAILABLE ON RECORD. I DO NOT AGREE WITH THE CONTE NTION OF THE LD.AR THAT IF THE BOOKS OF ACCOUNT ARE AUDITED THE SAME CANNOT B E REJECTED AND INCOME CANNOT BE ESTIMATED. IT IS THE DUTY OF THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND VOUCHERS FOR VERIFICATION OF THE AO. I N THIS CASE THE SAME WERE NOT PRODUCED BEFORE THE AO DURING THE ASSESSME NT PROCEEDINGS. HENCE I UPHOLD THE ACTION OF THE AO REJECTING THE BOOK RESULT AND ESTIMATING THE INCOME HOWEVER THE INCOME ESTIMATE D @ 15% OF THE SALES TURNOVER IS ON HIGHER SIDE. THE AO HAS NOT GIVEN AN Y BASIS OR REASON FOR ADOPTING THE NET PROFIT RATE OF 15%. THE VARIOUS CO URTS AND TRIBUNALS ESPECIALLY THE ITAT HYDERABAD IN THE CASE OF M.BHA SKAR REDDY (ITA NO 168/H/2006 ORDER DATED 19/120.2007) HAVE APPROVED T HE NET PROFIT RATE OF 8% OF THE SALES TURNOVER MADE IN AY 2002-03 AND 200 3-04. NO PROFIT CAN BE ESTIMATED ON THE WORK IN PROGRESS SHOWN IN AY 2001- 02. THE ADDITION MADE IN THE AY 2001-02 IS ACCORDINGLY DELETED. TH E INCOME IN OTHER TWO YEARS ARE TO BE REWORKED OUT BY THE AO AS DIRECTED ABOVE 26. AGGRIEVED THE DEPARTMENT HAS FILED THE PRESE NT APPEALS BEFORE THE TRIBUNAL. 27. EFFECTIVE GROUNDS OF THE REVENUE IN THESE APP EALS READ AS FOLLOWS- 1. THE LD CIT(A) ERRED IN HOLDING THAT ESTIMATION OF INCOME @ 15% OF THE SALES TURNOVER BY THE ASSESSING OFFICER IS ON HIGHE R SIDE. 2. THE LD. CIT(A) ERRED IN ALLOWING RELIEF BY DIRECTIN G THE ASSESSING OFFICER TO DETERMINE THE NET PROFIT @ 8% OF THE SALES TURNOVER ASSESSMENT YEAR 2002-03. 28. WE HAVE HEARD BOTH PARTIES. WE FIND NO INFIR MITY IN THE ORDER OF THE CIT(A) AS THE CIT(A) HAS ADOPTED THE NET PROFI T RATE OF 8% FOR CONSTRUCTION BUSINESS FOLLOWING THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN SIMILAR CASES AS OF THE ITAT HYDERABAD IN THE CASE OF M.BASKARA RED DY IN ITA NO ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 9 168/HYD/2006. WE ACCORDINGLY UPHOLD THE ORDERS OF THE CIT(A) AND REJECT THE GROUNDS OF THE REVENUE IN THESE APPEALS. 29. IN THE RESULT BOTH THESE APPEALS ARE DISMIS SED. ITA NO.1017/HYD/2009 : ASSESSMENT YEAR 2003-04 30. THE ONLY EFFECTIVE GRIEVANCE OF THE REVENUE I N THIS APPEAL DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX(APPEALS) DATED RELATES TO ADDITION MADE ON ACCOUNT OF CAPITAL GAIN S WHICH HAS BEEN DELETED BY THE CIT(A). 31. FACTS OF THE ISSUE ARE THAT IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2003-04 ASSESSEE OFFERED LONG TERM CAPITAL GAINS OF RS.15 01 473 ON SALE OF HIS UNDIVIDED SHARE OF LAND IN YOUSUFGUDA. THE ASSESSEE OWNED THIS LAND JOINTLY WITH SRI.M. KOTI REDDY WHI CH WAS GIVEN FOR DEVELOPMENT TO M/S BRR CONSTRUCTIONS. THE SALE VAL UE OF LAND WAS DETERMINED AT RS. 54 00 000 50% OF WHICH WAS SHOWN IN THE HA NDS OF THE ASSESSEE HUF. IN LIEU OF THE LAND TRANSFERRED TO M/S BRR CONSTRUC TIONS THE ASSESSEE RECEIVED FLAT NO.501 ALONG WITH THE APPURTENANT LANDS. THE FLAT WAS VALUED AT RS.16 00 000 AND THE SAME WAS CLAIMED AS DEDUCTION U/S 54F OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT THE APPURTENANT LAN D ADMEASURING 2 830 SQ. FT. WAS THE EXTRA GAIN TO THE ASSESSEE WHICH SHOULD BE TAXED AS LONG TERM CAPITAL GAINS. HE VALUED THE SAID APPURTENANT LAND AT RS 2 3 20 600 @ RS. 410/- PER SQ. FT. AND ADDED THE DIFFERENTIAL AMOUNT TO THE INCOME RETURNED. 32. IN HIS WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A) LEARNED AUTHORISED REPRESENTATIVE STATED THAT CAPITAL GAINS TAX IS LEVIABLE ON THE SALE OF LAND JOINTLY HELD WITH SRI. M. KOTI REDDY. THE EN TIRE LAND WAS TRANSFERRED TO THE DEVELOPER M/S BRR CONSTRUCTIONS FOR RS.54 00 000/- THIS AMOUNT WAS ACCEPTED AND ALLOWED AS COST OF LAND BY THE ASSESSI NG OFFICER IN THE ASSESSMENT OF SRI. B. RAMI REDDY PROPRIETOR OF M/S BRR CONSTRU CTIONS. THE LONG TERM CAPITAL GAIN HAS TO BE COMPUTED IN RESPECT OF LAND TRANSFERRED 50% OF WHICH ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 10 AMOUNTING TO RS.27 00 000 HAS BEEN OFFERED FOR TAX. THE VALUE OF FLAT NO. 501 AND APPURTENANT LAND SHOWN IN THE PARTITION DEED DATED 16.8.2002 WAS FOR THE PURPOSE OF REGISTRATION OF PARTITION DEED BETWE EN THE ASSESSEE AND SRI. M. KOTI REDDY. THE SAME CANNOT BE TAXED AS LONG TERM CAPITAL GAINS/LD/ AR FILED THE COPIES OF PARTITION DEED TO SUPPORT THE CONTENT ION. 33. THE CIT(A) DECIDED THIS ISSUE IN FAVOUR OF TH E ASSESSEE IN THE FOLLOWING MANNER- I HAVE DULY CONSIDERED THE SUBMISSION OF THE ASSE SSEE AND THE MATERIAL AVAILABLE ON RECORD. AO HAS CONFUSED THE COMPUTATION OF CAPITAL GAINS ARISING ON THE SALE OF UNDIVIDED SHARE OF LAND AT YOUSUFGUDA WITH THE MARK ET VALUE OF FLAT AND APPURTENANT LAND RECEIVED FROM THE DEVELOPER AS MENTIONED IN TH E PARTITION DEED. AO HAS NOT DISPUTED THE SALE VALUE OF LAND TAKEN AT RS. 27 00 000/- AS WELL AS THE COST OF ACQUISITION OF THE SAID LAND AT RS.11 98 527/- SHOW N BY THE ASSESSEE IN THE COMPUTATION OF CAPITAL GAINS. THE ENTIRE LAND WAS TRANSFERRED TO THE DEVELOPER FOR A CONSIDERATION OF RS 54 00 000/- HENCE THE CAPITAL G AINS CAN ONLY BE RS 15 01 473/- IN THE HANDS OF ASSESSEE. IN LIEU OF THE SALE CONSID ERATION OF LAND THE OWNERS GOT FOUR FLATS ALONG WITH APPURTENANT LANDS WHICH WAS PARTI TIONED BETWEEN THE CO-OWNERS VIDE PARTITION DEED DATED 16.8.2002. FOR REGISTRATION PU RPOSES THE FLATS APPURTENANT LANDS WERE VALUED AT DIFFERENT RATES DEPENDING ON THE FLOORS. THIS VALUE CANNOT BE TAKEN AS THE SALE VALUE OF THE LAND TRANSFERRED BY THE ASSESSEE TO THE DEVELOPER. THE SAME CAN ONLY BE TAKEN IF THE FLATS AND APPURTENANT LANDS RECEIVED BY THE OWNERS ARE SUBSEQUENTLY SOLD BY THEM AT THAT RATE GIVING RISE TO FURTHER CAPITAL GAINS. HENCE THE ADDITION OF RS. 22 22 073/- MADE ON THE SALE OF AFORESAID LAND IS ILLOGICAL AND CANNOT BE SUSTAINED. THE ADDITION MADE BY THE AO IS ACCORDINGLY DELETED. 34. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE U S. 35. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPE AL ARE AS FOLLOWS- 1. THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS . 22 22 073/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LONG TERM CA PITAL GAINS NOT DISCLOSED BY THE ASSESSEE. 2. THE LD. CIT(A) ERRED IN APPRECIATING THE FACT THAT THE ASSESSING OFFICER DETERMINED THE FULL VALUE OF THE CONSIDERATION ON T HE BASIS OF THE PARTITION DEED AS PER PROVISIONS OF SECTION 48 OF T HE I.T. ACT. 3. THE LD. CIT(A) ERRED IN NOT CONSIDERING FACT THAT T HE PROPERTY WAS GIVEN ON DEVELOPMENT JOINTLY BY THE ASSESSEE AND SR I. M. KOTI REDDY (INDL) AND IN TURN THE ASSESSEE HAS RECEIVED DEVEL OPED AREA AS PER PARTITION DEED. THIS IS NOTHING BUT FULL VALUE OF CONSIDERATION FOR THE PURPOSE OF SECTION 48 OF THE I.T. ACT. ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 11 36. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT THE ASSESSEE HAS OWNED THIS LAND JOINTLY WITH SHRI M.KOTI REDDY AND IT WAS GIVEN FOR DEVELOPMENT TO M/S.BRR CONSTRUCTIONS. THE SALE VALU E OF THE LAND WAS DETERMINED AT RS.54 00 000 50% OF WHICH WAS SHOWN IN THE HANDS OF ASSESSEE HUF. IN LIEU OF THE LAND TRANSFERRED TO M/S.BRR CO NSTRUCTIONS THE ASSESSEE RECEIVED FLAT NO.501 ALONG WITH THE APPURTENANT LA NDS. THE FLAT WAS VALUED AT RS.16 LAKHS AND THE SAME WAS CLAIMED FOR DEDUCTION U/S.54F OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT THE APPURTENANT LAN D ADMEASURING 2 830 SQ. FT. WAS THE EXTRA GAIN TO THE ASSESSEE WHICH SHOULD BE TAXED AS LONG TERM CAPITAL GAINS. HE VALUED THE SAID APPURTENANT LAND AT RS 2 3 20 600 @ RS. 410/- PER SQ. FT. AND ADDED TO THE INCOME RETURNED. 37. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI M URALI MOHANA RAO SUBMITTED THAT THE ENTIRE LAND WAS TRANSFERRED TO T HE DEVELOPER BRR CONSTRUCTIONS FOR RS.64 LAKHS AND THIS AMOUNT WAS ACCEPTED AND ALLOWED AS COST OF LAND BY THE ASSESSING OFFICER IN THE ASSESS MENT OF SHRI V.RAMI REDDY PROPRIETOR OF BRR CONSTRUCTIONS AND HENCE LONG TERM CAPITAL GAIN HAS TO BE COMPUTED ON THAT BASIS IN RESPECT OF LAND TRANSFER RED AND 50% OF IT AMOUNTING TO RS.27 LAKHS HAS BEEN OFFERED FOR TAX. 38. THE LEARNED COUNSEL FURTHER SUBMITTED THAT TH E VALUE OF FLAT NO. 501 AND THE APPURTENANT LAND SHOWN IN THE PARTITION DEED DATED 16.08.2002 WAS FOR THE PURPOSE OF REGISTRATION OF THE PARTITIO N DEED BETWEEN THE ASSESSEE AND SHRI KOTI REDDY AND THE SAME CANNOT BE TAXED AS LONG TERM CAPITAL GAINS. 39. WE FIND THAT THE ASSESSING OFFICER HAS NOT DI SPUTED THE VALUE OF THE LAND TAKEN AT RS.27 LAKHS AS WELL AS COST OF AC QUISITION OF THE LAND SHOWN BY THE ASSESSEE IN THE COMPUTATION OF CAPITAL GAINS. T HE ENTIRE LAND WAS TRANSFERRED TO THE DEVELOPER FOR RS.54 LAKHS AND HE NCE THE CAPITAL GAINS IN THE HANDS OF THE ASSESSEE WORKS OUT TO RS.15 01 473/. THE OWNERS GOT FOUR FLATS ALONG WITH APPURTENANT LANDS IN LIEU OF SALE CONSID ERATION OF FLATS WHICH WAS PARTITIONED BETWEEN THE CO-OWNERS. FOR REGISTRATION PURPOSE THE FLATS AND ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 12 APPURTENANTS LANDS WERE VALUED AT DIFFERENT RATES D EPENDING UPON THE FLOORS. THIS VALUE HAS BEEN WRONGLY TAKEN AS THE SALE VALUE OF THE LAND TRANSFERRED BY THE ASSESSEE TO THE DEVELOPER BY THE ASSESSING OFFI CER AND THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. IN THIS VIEW OF THE MATTER WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE DEPARTMENTAL APPEAL. 40. IN THE RESULT THIS APPEAL OF THE REVENUE IS DISMISSED. ITA NO.1019 & 1921/HYD/2009 : ASSESSMENT YEAR 2004-05 41. SINCE SMT HARINITHA REDDY RESPONDENT IN ITA N O.1019/HYD/2009 IS THE SISTER OF SHRI M.RAMAKRISHNA REDDY RESPONDE NT IN ITA NO.1021/HYD/2009 AND THEY ARE JOINT OWNERS OF A PR OPERTY IN RELATION TO WHICH TAX DISPUTE HAS ARISEN FOR CONSIDERATION IN T HESE APPEALS. SINCE THE DISPUTE IS COMMON THESE APPEALS ARE DISPOSED OFF T OGETHER. 42. THE FACTS OF THE ISSUE IN DISPUTE ARE THAT TH E ASSESSEE SHRI RAMAKRISHNA REDDY SOLD 1800 SQ. YDS OF LAND JOI NTLY OWNED BY HIM WITH HIS SISTER SMT. M. HARINITHA REDDY FOR RS. 63 52 500/ - AND DECLARED HALF OF HIS SHARE AT RS 31 76 250/- AFTER DEDUCTING INDEXED CO ST OF ACQUISITION LONG TERM CAPITAL GAINS WAS COMPUTED AT RS. 30 20 598/- THE S AID AMOUNT WAS INVESTED IN A NEW PROPERTY NAMED PUNNAIAH PLAZA AT RD. NO.2 BANJARA HILLS HYDERABAD VIDE REGISTERED SALE DEED DATED 14.8.2004. THE ASS ESSEE CLAIMED DEDUCTION UNDER S.54F BUT THE SAME WAS DISALLOWED BY THE ASS ESSING OFFICER ON THE GROUND THAT THE NEW PROPERTY PURCHASED WAS NOT A RE SIDENTIAL PROPERTY AS REQUIRED UNDER S.54F. 43. IN HIS WRITTEN SUBMISSION FILED DURING THE A PPEAL PROCEEDINGS BEFORE THE CIT(A) THE LEARNED AUTHORIZED REPRESENT ATIVE FOR THE ASSESSEE STATED THAT THE PROPERTY PURCHASED BY THE APPELLANT WAS A RESIDENTIAL PROPERTY AS EVIDENT FROM THE CONSTRUCTION PLAN APPROVED BY M CH GUARANTEE ISSUED BY THE BANK APPROVAL OF DIRECTOR GENERAL OF FIRE SERVI CES AND GOVT. G.O. ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 13 PERMITTING THE CONSTRUCTION OF RESIDENTIAL COMPLEX. LEARNED AUTHORIZED REPRESENTATIVE ALSO FILED COPIES OF ALL THESE EVID ENCES AS ADDITIONAL EVIDENCES AS PER THE PROVISIONS OF RULE 46A. 44. THE AFORESAID ADDITIONAL EVIDENCES WERE FORWA RDED TO THE ASSESSING OFFICER FOR VERIFICATION AND COMMENTS VID E CIT(A)S OFFICE LETTER DATED 17.3.2009. THE ASSESSING OFFICER VIDE HIS LETTER D ATED 4.5.2009 OBJECTED TO THE ADMISSION OF ADDITIONAL EVIDENCES THOUGH NO COMMEN TS WERE OFFERED ON THE VERACITY AND RELEVANCE OF THE EVIDENCES. 45. THE CIT(A) BY THE IMPUGNED ORDER HOWEVER ACC EPTED THE CLAIM OF THE ASSESSEE FOR RELIEF UNDER S.54F OF THE ACT IN THE FOLLOWING MANNER- I HAVE DULY CONSIDERED THE SUBMISSIONS AND EVIDENCE S FILED BY THE APPELLANT AND OTHER MATERIAL AVAILABLE ON RECORD. AO HAS REFERRED TO THE REGISTERED SALE DEED DATED 14.8.2004 SEIZED VIDE ANNEXURE NO.A/MVSR/4/P AGE NO.38 BY WHICH THE APPELLANT AND HIS SISTER MS. M. HARINITHA REDDY HAD PURCHASED 5840 SQ/FT/ OF UNFINISHED STRUCTURE OF WESTERN BLOCK OF THIRD FLOO R OF THE COMPLEX ALONG WITH COVERED PARKING OF 480- SQ.FT. AND UNDIVIDED SHARE OF 160 SQ.YDS OF LAND. THE PERUSAL OF THIS SALE DEED CLEARLY SHOWS THAT THE SA ID PROPERTY WAS A RESIDENTIAL PROPERTY AS EVIDENT FROM THE NARRATIONS GIVEN ON PA GE 4 5 6 & 14 OF THE SALE DEED. PARA 10 ON PAGE 14 OF THE DEED READS AS UNDER: 10. THAT THE SALE DEED EXECUTED BY THE VENDORS IN FAVO UR OF THE PURCHASERS LIMITS THE OWNERSHIP OF THE PURCHASERS TO THE RESI DENTIAL UNIT OF AN EXTENT OF 5840 SQ.FT. COMPRISING OF SHELL CONSISTING OF C OLUMNS BEAMS LINTELS BRICK WORK AND SLAB LOCATED IN THE THIRD FLOOR OF SAID RESIDENTIAL BUILDING CONSTRUCTED BY THE VENDORS AN EXTENT OF ABOUT 480- SQ.FT. OF COVERED CAR PARKING SPACE IN THE BASEMENT TOGETHER WITH OPEN SP ACES AND COMMON AREAS WITHIN THE PREMISES AND MORE PARTICULARLY DES CRIBED IN THE SCHEDULE PROPERTY ANNEXED TO THIS SALE DEED. THE PLAN ATTACHED TO THE SALE DEED SHO WS THE CONSTRUCTION OF BEDROOMS KITCHEN DINING STUDY ETC. THESE FACTS CLEARLY SHOW THAT TH E PROPERTY PURCHASED BY THE APPELLANT WAS A RESIDENTIAL PROPERTY. THERE WAS NO BASIS FOR THE AO TO INFER THAT THE PROPERTY PURCHASED WAS A COMMERCIAL PROPERTY. 2.5. THE ADDITIONAL EVIDENCES FILED BY THE APPELL ANT ARE ALLOWED TO BE ADMITTED AS THE SAME ARE CRUCIAL AND RELEVANT TO DECIDE TH E ISSUE. AO WAS GIVEN DUE OPPORTUNITY TO EXAMINE THE SAME AS REQUIRED UNDER R ULE 46A. IT IS EVIDENT FROM THE MCH PERMISSION DATED 10.5.2000 THAT THE CONSTRU CTION OF SAID PROPERTY WAS APPROVED AS RESIDENTIAL COMPLEX. SIMILARLY THE BAN K GUARANTEE FOR SECURITY DEPOSIT DATED 15.5.2000 GIVEN BY STATE BANK OF INDI A TO MCH ALSO REFERRED THE SAID PROPERTY AS RESIDENTIAL COMPLEX. THE PERMISSI ON/ NO OBJECTION CERTIFICATE GIVEN BY THE FIRE SERVICE DEPARTMENT VIDE ITS LETT ER DATED 11.1.1999 ALSO SPECIFICALLY AND REPEATEDLY REFERRED THE PROPERTY A S A RESIDENTIAL COMPLEX. THE MEMORANDUM OF UNDERSTANDING DATED 14.1.2001 ENTERED FOR THE JOINT DEVELOPMENT ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 14 AND CONSTRUCTION OF THE SAID PROPERTY ALSO REFERRED TO THE CONSTRUCTION OF RESIDENTIAL COMPLEX. 2.6. IN VIEW OF THE AFORESAID EVIDENCES I HOLD THA T THE PROPERTY PURCHASED BY THE APPELLANT WAS A RESIDENTIAL PROPERTY AND THEREFORE THE APPELLANT WAS ELIGIBLE FOR DEDUCTION U/S 54F OF THE ACT. IT IS IMMATERIAL TH AT THE PROPERTY WAS SUBSEQUENTLY LEASED OUT TO M/S APP LAB TECHNOLOGIES P. LTD. WHICH MIGHT HAVE USED THE PROPERTY FOR NON RESIDENTIAL PURPOSES. I A M SUPPORTED IN MY VIEWS BY THE DECISION OF ITAT DELHI IN THE CASE OF MAHAVIR PRAS AD GUPTA VS JCIT (2006) 5 SOT 353. WHERE THE ASSESSEE LET OUT THE NEW PROPERTY F OR COMMERCIAL USE DUE TO WHICH AO DISALLOWED THE CLAIM OF DEDUCTION U/S 54F. HON BLE TRIBUNAL HELD THAT THE ONLY REQUIREMENT OF SEC. 54F IS THE CONSTRUCTION OR PURC HASE OF A RESIDENTIAL HOUSE BY THE ASSESSEE. THE USE OF THE PROPERTY IS NOT THE R ELEVANT CRITERIA TO CONSIDER THE ELIGIBILITY OF SEC. 54F BENEFIT. IT WAS HELD THAT M ERE NON RESIDENTIAL USE WOULD NOT RENDER A PROPERTY INELIGIBLE FOR BENEFIT U/S 54F IF IT IS OTHERWISE A RESIDENTIAL HOUSE. IF IT IS CAPABLE OF BEING USED FOR THE PURP OSE OF RESIDENCE THEN THE REQUIREMENT OF SEC 54F IS SATISFIED HONBLE TRIBU NAL DISTINGUISHED SEC 54F FROM SEC 54 OF THE ACT WHERE THE USER OF THE PREMISE AS A RESIDENCE IS A CONDITION. IN THIS CASE TRIBUNAL ALLOWED THE DEDUCTION U/S 54F T O THE ASSESSEE ON THE PURCHASE OF BASEMENT FLOOR OF PROPERTY WHICH WAS ALLEGEDLY U SED FOR NON RESIDENTIAL PURPOSES. IT WAS HELD THAT SINCE BASEMENT FLOOR OF PROPERTY WAS CAPABLE OF BEING USED AS RESIDENTIAL ACCOMMODATION ASSESSEE WAS ENTI TLED FOR DEDUCTION U./S 54F OF THE ACT. CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE DEDUCTION U/S 54F IS ALLOWED TO THE APPELLANT. 46. AGGRIEVED THE DEPARTMENT HAS FILED THE PRESENT APPEALS. 47. GROUNDS OF APPEALS RAISED BY THE DEPARTMENT IN THESE APPEALS READ AS FOLLOWS- 1. THE LEARNED CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S 54F CLAIMED BY THE ASSESSEE TREATING THE PROPERTY PURCHASED BY THE ASSESSEE WAS CAPABLE OF BEING USED AS RESIDENTIAL ACCOMMODAT ION. 2. THE LEARNED CIT(A) OUGHT NOT HAVE ADMITTED THOSE FR ESH EVIDENCES SUBMITTED BY THE ASSESSEE WHICH IS AGAINST RULE 46 OF THE I.T. ACT. IN THIS CONNECTION THE DECISION OF HONBLE MADRAS H IGH COURT IN THE CASE OF CIT VS KRISHNAVENI AMMAL HAS BEEN RELIED AS THE ASSESSEE WAS IN POSSESSION OF CERTAIN MATERIAL THAT WAS NOT SUBMITTED BEFORE THE ASSESSING OFFICER WHEN IT WAS CALLED. 3. THE CIT(A) OUGHT TO HAVE CONSIDERED THE SALE DEED FOR PURCHASE OF THE PROPERTY WHICH CLEARLY EMPHASIZE THAT THE PROPE RTY PURCHASED IS COMMERCIAL ACCOMMODATION AND NOT RESIDENTIAL ACC OMMODATION AND HENCE NOT CAPABLE FOR ALLOWING DEDUCTION U/S 54 F OF THE I.T. ACT. ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 15 48. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT THE CIT(A) HAS ACCEPTED THE CLAIMS OF THE ASSESSEES FOR RELIEF U NDER THE PROVISIONS OF S.54F OF THE ACT KEEPING IN VIEW THE FOLLOWING FACTUAL ASPE CTS OF THE MATTER- A) PERUSAL OF THE SALE DEED SHOWS THAT THE PROPERTY WA S A RESIDENTIAL PROPERTY ESPECIALLY THE NARRATION AT PARA 10 AT PAG E 14 OF THE DEED WHICH HAS BEEN REPRODUCED BY THE CIT(A) AT PAGE 4 A T PARA 2.4 OF HIS ORDER. B) THE PLAN ATTACHED TO THE SALE DEED SHOWS THE CONSTR UCTION OF BED ROOM KITCHEN STUDY ETC. SHOWING THAT THE PROPERTY IS RESIDENTIAL ONE. C) THE MCH PERMISSION DATED 10.05.2000 HAS APPROVED TH E PROPERTY AS RESIDENTIAL COMPLEX D) THE BANK GUARANTEE FOR SECURITY DEPOSIT GIVEN BY ST ATE BANK OF INDIA TO MCH ALSO REFERS TO THE PROPERTY AS RESIDENTIAL C OMPLEX. E) PERMISSION / NO OBJECTION CERTIFICATE GIVEN BY THE FIRE SERVICE DEPARTMENT ALSO REFERS TO THE PROPERTY AS RESIDENTI AL COMPLEX F) THE MEMORANDUM OF UNDERSTANDING DATED 14.01.2001 EN TERED FOR THE JOINT DEVELOPMENT AND CONSTRUCTION OF THE SAID PROP ERTY ALSO REFERS TO THE CONSTRUCTION OF RESIDENTIAL COMPLEX. WE FIND NO INFIRMITY IN THE VIEW TAKEN BY THE CIT(A ) AS TO THE RESIDENTIAL NATURE OF THE PROPERTY PURCHASED BY THE ASSESSEES CONSIDE RING THE FACTUAL ASPECTS NOTED ABOVE. EVEN THOUGH THE PROPERTY WAS SUBSEQUE NTLY LEASED OUT TO M/S.APP LAB TECHNOLOGY P LTD AND IT HAS BEEN USED FOR NON-RESIDENTIAL PURPOSES ON THAT GROUND THE DEDUCTION U/S.54F CAN NOT BE DENIED. MERE NON RESIDENTIAL USE SUBSEQUENTLY WOULD NOT RENDER THE P ROPERTY INELIGIBLE FOR BENEFIT U/S.54F IF IT IS OTHERWISE A RESIDENTIAL P ROPERTY AS HELD BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MAHAVIR PRASAD GUPTA VS JCIT (5 SOT 353). RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRI BUNAL WE ARE OF THE OPINION THAT THE CIT(A) HAD RIGHTLY ALLOWED DEDUCTION U/S.5 4F. ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 16 49. FURTHER WE FIND THAT THERE IS NO MERIT IN TH E GROUNDS RAISED BY THE DEPARTMENT WITH RESPECT TO RULE 46 OF THE I.T R ULES AS THE CIT(A) HAD GIVEN DUE OPPORTUNITY TO THE ASSESSING OFFICER BY REMANDING THE MATTER TO EXAMINE THE EVIDENCES AS REQUIRED UNDER RULE 46A OF I.T. RULES AND THEREFORE THERE CANNOT BE ANY GRIEVANCE FOR THE DEPARTMENT ON THAT COUNT. 50. CONSEQUENTLY BOTH THESE APPEALS OF THE DEPART MENT ARE DISMISSED. ITA NO.1020/HYD/2009 : ASSESSMENT YEAR 2005-06 ITA NO.1022/HYD/2009 : ASSESSMENT YEAR 2005-06 51. IN BOTH THESE APPEALS THE ONLY EFFECTIVE GRIE VANCE OF THE DEPARTMENT RELATES TO ADDITIONS MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PURCHASE OF A PROPERT Y. 52. THE APPELLANT ALONG WITH HIS SISTER PURCHASED RESIDENTIAL UNIT ADMEASURING 5840 SQ. FT. ALONG WITH COVERED PARKING OF 480 SQ.FT. IN PUNNAIAH PLAZA FOR A CONSIDERATION OF RS.40 00 000/- VIDE RE GISTERED SALE DEED DATED 14.8.2004. THE ASSESSING OFFICER HELD THAT THE PURC HASE CONSIDERATION WAS GROSSLY UNDERSTATED. IT WAS OBSERVED THAT THE SAID PROPERTY WAS VALUED AT RS.1 48 00 000/- IN THE DIARY SEIZED AT THE RESIDEN CE OF ONE SRI. HARSHAVARDHAN REDDY S/O SRI P.R. GOPALA KRISHNA REDDY VIDE ANNEXU RE NO.A/PHVR/34-PAGES 46-48. IT WAS FURTHER OBSERVED BY THE ASSESSING O FFICER THAT THE SAID PROPERTY WAS LEASED OUT TO M/S APP LABS TECHNOLOGIES P. LTD . @ RS 24 PER SQ.FT. PER MONTH GIVING RATE OF RETURN ON CAPITAL AT 34% WH ICH WAS NOT ONLY ILLOGICAL BUT WAS ALSO IMPOSSIBLE. ASSESSING OFFICER ALSO NOTED T HAT A PLOT EXISTING OPPOSITE TO PUNNAIAH PLAZA WAS AUCTIONED BY HUDA FOR RS. 1 42 0 00 PER SQ. YD. ON 20.2.2006. HE THEREFORE CONCLUDED THAT THE ACTUA L INVESTMENT OF THE ASSESSEES IN THE SAID PROPERTY WAS ONLY RS 1 48 00 000. SINCE THE ASSESSEE AND HIS SISTER HAD SHOWN THE INVESTMENT ONLY AT RS 40 0 0 000 THE ASSESSING OFFICER CONCLUDED THAT THERE WAS GROSS UNDERSTATEMENT AND ACCORDINGLY TREATING THE DIFFERENCE OF RS. 1 08 00 000 AS UNDISCLOSED INVES TMENT ARRIVED AT THE ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 17 UNEXPLAINED INVESTMENT LIABLE TO BE ADDED IN THE HA NDS OF BOTH THESE ASSESSEES AS SUCH AT 50% THEREOF VIZ. RS.54 00 000 AND ACCO RDINGLY BROUGHT THE SAME TO TAX IN THE HANDS OF THE ASSESSEES. 53. ON APPEAL THE CIT(A) DELETED THE ADDITIONS OF RS.54 00 000 MADE BY THE ASSESSING OFFICER AS ABOVE WITH THE FOLLOWI NG REASONING- I HAVE DULY CONSIDERED THE APPELLANTS SUBMISSIONS AND PERUSED THE RELEVANT SEIZED DOCUMENTS. IT IS AN UNDISPUTED FAC T THAT NO EVIDENCE OF ON- MONEY PAYMENT BY THE APPELLANT WAS FOUND DURING SEA RCH AT ANY OF THE PREMISES. NEITHER THE SELLER NOR THE PURCHASER STAT ED OR ACCEPTED THE ON MONEY TRANSACTIONS. IN SUCH CIRCUMSTANCES ONUS IS ON THE AO TO PROVE THE PAYMENT OF ON MONEY AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF K.P. VERGHESE (131 ITR 597). ONE SUCH CASE CAME UP BEFORE THE HONBLE MADRAS HIGH COURT IN CIT VS P.V. KALYANA SUNDARAM ( 282 ITR 259) WHERE THE TRIBUNAL HAD ACCEPTED THE ASSESSEES PLEA THAT NO ON MONEY PAYMENT WAS MADE THOUGH THE OTHER PARTY TO THE TRANSACTION .ACCEPTED RECEIPT AND THE MARKET VALUE WAS ALSO SIGNIFICANTLY HIGHER THAN THE VALUE RECORDED IN THE SALE DEED. IT WAS HELD BY THE HONBLE COURT THAT THE PAYMENTS OVER AND ABOVE THE AMOUNT MENTIONED IN THE REGISTERED DO CUMENT THOUGH WIDELY PREVALENT WOULD REQUIRE INVESTIGATION TO ESTABLISH THE SAME WHERE SUCH PAYMENT WAS DENIED SINCE THE BURDEN OF PROVING THAT THE APPELLANT IS NOT REAL FALLS ON THE REVENUE. THERE CAN BE NO PRESUMPT ION OF ON MONEY PAYMENT. THE DECISION OF THE HONBLE MADRAS HIGH C OURT WAS AFFIRMED BY THE APEX COURT IN THE DECISION REPORTED IN 294 ITR 49. SIMILAR RATIO WAS LAID DOWN BY THE HONBLE RAJASTHA N HIGH COURT IN THE CASE OF CIT VS RAJA NARENDRA ( 210 ITR 250) & CIT V S BHANWARLAL MURWATIYA (2008) (215 CTR 489) WHERE IT WAS HELD TH AT EVEN IF IT WERE TO BE ASSUMED THAT THE PRICE OF THE LAND WAS DIFFERENT THAN THE ONE RECITED IN THE SALE DEED UNLESS IT IS ESTABLISHED ON RECOR D BY THE DEPARTMENT THAT AS A MATTER OF FACT THE CONSIDERATION AS ALLEGED BY THE DEPARTMENT DID PASS TO THE SELLER FROM THE PURCHASER IT CANNOT BE SAID THAT THE DEPARTMENT HAD ANY RIGHT TO MAKE AN ADDITION. AN ALLEGATION THAT THE ASSESSEE HAD PAID A CONSIDER ATION LARGER THAN WHAT IS INDICATED IN THE REGISTERED SALE DEED CANNOT BE LIGHTLY MADE SINCE THE LAW OF EVIDENCE WOULD PLACE THE BURDEN ON THE REVEN UE. THIS WAS THE POINT CONSIDERED IN CIT VS SATINDER KUMAR (250 ITR 484) ( P & H) IN THAT CASE THE REVENUE RELIED UPON N IMPOUNDED DIARY OF A PROPERTY DEALER RECORDING TRANSACTION IN THE PROPERTY LOCATED IN THAT VERY AR EA BUT THE INFORMATION THEREIN APPARENTLY DID NOT RELATE TO THE VERY PROPE RTY UNDER CONSIDERATION. IT WAS HELD THAT THE IMPOUNDED DIARY OF THE PROPERTY DEALER RECORDING ACTUAL TRANSACTIONS IN PROPERTIES LOCATED IN THAT VERY AREA HAD NO EVIDENTIARY VALUE. IT WAS ALSO OBSERVED THAT TH E REVENUE HAS ALSO NOT MADE ANY ENQUIRIES FROM THE PROPERTY DEALER VENDOR ETC TO ESTABLISH THAT THE ASSESSEE PAID ANY AMOUNT OVER AND ABOVE THE APP ARENT CONSIDERATION TO PURCHASE THE SAID PLOTS. THE CASE ILLUSTRATES NO T ONLY A RULE OF EVIDENCE ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 18 BUT ALSO POINTS OUT THE RESPONSIBILITY OF THE REVEN UE TO BRING HOME CONCEALMENT BY PROPER ENQUIRIES WHERE APPARENT RE ASONS EXIST TO ASSUME SUCH CONCEALMENT WHICH HAS NOT BEEN ESTABLISHED. THE SAME BENCH OF THE PUNJAB AND HARYANA HIGH COURT ALSO DELIVERED AN IDENTICAL JUDGMENT IN THE CASE OF CIT VS MNITIN KUM AR *248 OTR 478). THE ADDITION MADE U/S 69 ON ESTIMATED BASIS OVER AND AB OVE THE STATED CONSIDERATION IN THE SALE DEED WAS DELETED AS NO EV IDENCE WAS FOUND DURING THE COURSE OF SEARCH THAT THE ASSESSEE HAD P AID MORE AMOUNT THAN WHAT WAS STATED IN THE DOCUMENT. THE HONBLE ITAT BANGALORE IN THE CASE OF SMT. BHANU R . SHAH VS DCIT (2004) (3 SOT 792) H ELD THAT ADDITION IGNORING THE DOCUMENT VALUE AND ESTIMATING THE VAL UE WAS NOT SUSTAINABLE UNLESS THERE WAS A POSITI9VE EVIDENCE THAT THE DOCU MENT VALUE WAS UNDERSTATED.. I ALSO AGREE WITH THE ARGUMENT OF THE LD. A.R. THA T DOCUMENT FOUND FROM A THIRD PERSON CANNOT BE USED FOR ADDITION IN THE AS SESSMENT OF THE ASSESSEE. IN THE CASE OF AMARJEET SINGH BAKSHI (263 ITR (AT) 75 (DEL) THE HONBLE THIRD MEMBER HELD THAT HO ADDITION CAN BE S USTAINED ON THE BASIS OF NOTINGS ON A SLIP OF PAPER FOUND IN THE PREMISES OF A THIRD PARTY. IT WAS HELD THAT WHAT WAS FOUND ON A SLIP OF PAPER OR A LO OSE SHEET IS NOT COVERED BY ANY RULE UNDER THE EVIDENCE ACT . IN THE ABSENCE OF ANYTHING MORE TO CORROBORATE THE INFERENCE DRAWN ON THE BASIS OF A N OTING ON A SLIP OF PAPER THE ADDITION COULD NOT BE SUSTAINED. IT WAS HELD IN THE CASE OF RAMA TRADERS V ITO (32 TTJ 483) TM(PAT) THAT PRESUMPTION CAN BE DRAWN AGAINST PERSON FROM WHOM BOOKS SEIZED BUT NOT AGAIN ST ANY THIRD PERSON . THIS DECISION WAS FOLLOWED BY HONBLE ITAT HYDERABA D IN THE CASE OF SHRI.V.Y. SIVARAMAKRISHNA (SUPRA) . IN FACT THE HON BLE SUPREME COURT IN THE CASE OF P.R. METRANI VS CIT (287 ITR 209) HELD THAT THE PRESUMPTION U/S 132 (4A) IS NEITHER CONCLUSIVE NOR APPLICABLE TO TH E ASSESSMENT PROCEEDINGS.. THE DOCUMENT SEIZED FROM THE RESIDENCE OF SHRI HA RSHAVARDHAN REDDY RELIED UPON BY THE AO WAS IN RESPECT OF SOME DISPUT E WITH SRI. P. PRABHAKAR REDDY WHERE THE PROPERTY IN PUNNAIAH PLAZ A WAS PROPOSED TO BE EXCHANGED WITH SOME PROPERTY IN OOTY AND SHARES IN HPS HOTELS. IN THAT CONTEXT THE PROPERTY OF PUNNAIAH PLAZA WAS VALUED A T RS 1.48 00 000/- THE SEIZED DOCUMENT NO WHERE MENTIONED THAT THE ACT UAL CONSIDERATION PAID FOR THIS PROPERTY WAS RS 1 48 00 000/- IN THE ABSENCE OF A POSITIVE EVIDENCE BROUGHT ON RECORD BY AO THAT APPELLANT PAI D ON MONEY IN THE PURCHASE OF SAID PROPERTY THE ADDITION MADE ON ACC OUNT OF UNEXPLAINED INVESTMENT CAN NOT BE SUSTAINED. THE ADDITION OF RS 54 00 000/- IS ACCORDINGLY DELETED 54. THE NEXT GRIEVANCE OF THE DEPARTMENT IN THESE APPEALS FOR ASSESSMENT YEAR 2005-06 AGAINST THE ADDITION OF RS. 12 85 487 MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF TH E PROPERTY IN PUNNAIAH PLAZA. ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 19 55. FACTS IN BRIEF RELATING TO THIS ISSUE ARE THA T THE ASSESSING OFFICER MADE THE IMPUGNED ADDITIONS ON THE BASIS OF COST O F CONSTRUCTION OF PUNNAIAH PLAZA DETERMINED IN THE ASSESSMENT ORDER OF SHRI. P ..R. GOPALA KRISHNA REDDY CO-OWNER. DURING THE SEARCH PROCEEDINGS AT THE PREM ISES OF SHRI. P.R. GOPALA KRISHNA REDDY A DOCUMENT WAS SEIZED VIDE ANNEXURE NO.PRGK/A/2-PAGE NO..86 TO 88 CONTAINING THE DETAILS OF EXPENDITURE INCURRED UP TO 30.6.2005 IN THE CONSTRUCTION OF PUNNAIAH PLAZA. THE TOTAL COST OF CONSTRUCTION INCURRED TILL 30.6.2005 WAS MENTIONED AT RS 4 17 90 346. FURTHER EXPENDITURE OF RS 1.66 CRORES WAS TO BE INCURRED FOR CENTRALIZED AIR-COND ITIONING WHICH WAS TO BE REIMBURSED BY THE LESSEE M/S. APP LABS TECHNOLOGIES P. LTD. AS PER MOU DATED 14.12.2002. THE INSTALMENT OF RS 83 00 000 WAS PAID ON THE DATE OF MOU AND BALANCE OF RS 83 00 000/- WAS TO BE PAID ON SUBMISS ION OF PROOF OF PLACING ORDER FOR THE EQUIPMENTS. IT WAS OBSERVED BY THE AS SESSING OFFICER THAT THE APPELLANT SPENT ONLY RS 49.23 LAKHS TILL 30.6.2005 AS PER ACCOUNTS. HE THEREFORE INFERRED THAT BALANCE AMOUNT OF RS.1 16 76 030 WAS NOT ACCOUNTED FOR BY THE ASSESSEE. THE ASSESSING OFFICER THEREFO RE ESTIMATED THE TOTAL COST OF CONSTRUCTION OF PUNNAIAH PLAZA AT RS 5 34 66 376 AND ACCORDINGLY WORKED OUT THE COST PER SQ. FT. AT RS 932.60 56. THE ASSESSING OFFICER TAKING NOTE OF THE INV ESTMENTS MADE BY THESE TWO ASSESSEES AND THE SHARES OF THE ASSESSEES IN THE TOTAL AREA OF CONSTRUCTION THE ASSESSING OFFICER APPLYING A RATE OF RS. 933 PER SQ. FT. DETERMINED THE UNDERSTATEMENT OF COST OF CONSTRUCTI ON AT RS.12 85 487 IN THE CASE OF SHRI M.RAMAKRISHNA REDDY AND AT RS.12 84 61 3 IN THE CASE OF SMT.HARNITA REDDY AND ACCORDINGLY MADE THE ADDITIO NS IN THAT BEHALF. 57. AGGRIEVED BY THE ABOVE ADDITIONS ASSESSEES PLEADED BEFORE THE CIT(A) THAT THE CONSTRUCTION OF PUNNAIAH PLAZA WAS DONE AS PER MOU WHEREIN THE AMOUNT WAS CONTRIBUTED BY VARIOUS INDIVIDUALS/O WNERS IN CERTAIN RATIO. AS PER MOU THE COST OF CONSTRUCTION AND THE LEASE RENT OF 2 ND 3 RD & 4 TH FLOOR WAS TO BE SHARED WITH 1 ST & GROUND FLOOR IN THE RATIO OF 1.2 : 1 + 2:1. HEN CE THE ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 20 UNIFORM COST OF CONSTRUCTION CANNOT BE APPLIED IN R ESPECT OF ALL THE FLOORS. IT WAS FURTHER CONTENDED THAT THERE WAS NO BASIS FOR T HE AO TO ARRIVE AT A CONCLUSION THAT A SUM OF RS 1 16 76 030 WAS SPENT U NACCOUNTED FOR CENTRALIZED AIR CONDITIONING OF THE BUILDING. THE EXPENSES WERE TO BE INCURRED BY LESSEE M/S APP LAB TECHNOLOGIES P. LTD AS PER MOU DATED 14 .12.2004. LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE FILED CO PIES OF AUDITED ACCOUNTS OF M/S P. RAJASREE & OTHERS FOR ASSESSMENT YEARS 2005 -06 TO 2007-08 TO SHOW THAT THE COST OF CONSTRUCTION OF PUNNAIAH PLAZA SHOWN IN THE AUDITED ACCOUNTS AND THE SEIZED DOCUMENTS WERE ONE AND THE SAME AND NO U NACCOUNTED EXPENDITURE WAS INCURRED BY THE OWNERS IN THE CONSTRUCTION. 58. THE CIT(A) DELETED THE DISPUTED ADDITIONS MADE BY THE ASSESSING OFFICER IN THE FOLLOWING MANNER (AS TAKEN FROM THE ORDER OF THE CIT(A) IN THE CASE OF SHRI RAMAKRISHNA REDDY) ON DUE CONSIDERATION OF THE RELEVANT DOCUMENTS I FIND FORCE IN THE ARGUMENT OF THE APPELLANT THE CONSTRUCTION ACCOUN T STATEMENT SEIZED FROM THE RESIDENCE OF SHRI. P.R. GOPALAKRISHNA REDDY CON TAINS THE YEAR WISE DETAILS OF CONSTRUCTION EXPENSES INCURRED FROM F.Y . 1998-99 TO 30.6.2005. THE TOTAL COST OF CONSTRUCTION UP TO 30.6.2005 WAS MENTIONED AT RS 4 17 90 346/- THE TOTAL COST OF CONSTRUCTION UP TO 30.3.2005 I WAS RS 3 71 69 349/- THE SAME WAS MENTIONED AT RS 3 70 09 219/- IN THE AUDITED ACCOUNTS FOR YEAR ENDING 30.3.2005. IT IS ALSO NOTE D THAT THE COST OF CONSTRUCTION INCURRED IN F.Y: 2004-05 AS PER AUDITE D ACCOUNTS WAS RS 1 93 19 209/- WHILE THE SAME WAS MENTIONED AT RS 1 93 17 695/- IN THE SEIZED DOCUMENT. THIS IT IS EVIDENT THAT THE COST OF CONSTRUCTION MENTIONED IN THE SEIZED DOCUMENT AND IN THE AUDITED ACCOUNTS WAS ALMOST SAME. THE AO DETERMINED THE HIGHER COST OF CONSTRUCTION BY PR ESUMING THAT THE OWNERS OF THE PUNNAIAH PLAZA INCURRED UNACCOUNTED EXPENDITURE FOR CENTRALIZED AIR CONDITIONING OF THE BUILDING. THERE IS NO BASIS FOR SUCH PRESUMPTION OF THE AO. IT IS ALSO ILLOGICAL TO PRES UME UNACCOUNTED EXPENDITURE IN CENTRALIZED AIR CONDITIONING SINCE T HE ENTIRE COST OF CENTRALIZED AIR CONDITIONING WAS TO BE REIMBURSED B Y M/S APP LABS TECHNOLOGIES P. LTD. THE COST OF CONSTRUCTION DETER MINED BY AO @ RS 933 PER S.FT WAS WITHOUT ANY VALID BASIS . NO ADDITION U/S 69 ON ACCOUNT OF UNEXPLAINED INVESTMENT CAN BE SUSTAINED ON PRESUMPT IONS AND SURMISES. IT IS ALSO PERTINENT TO MENTION THAT THE TOTAL INVESTM ENT MADE BY THE APPELLANT IN THE CONSTRUCTION OF THE SAID PROPERTY WAS RS 11 29 935/- AS ON 30.3.2006 AS PER THE AUDITED ACCOUNTS OF M./S P. RAJASREE & O THERS WHERE THE TOTAL COST OF CONSTRUCTION OF THE PROPERTY WAS SHOWN AT R S 4 58 1 700/- ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 21 CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES OF TH E CASE THE ADDITION OF RS 12 85 487/- MADE BY THE AO IS DELETED. THE GROUN D RAISED BY THE APPELLANT IS ACCORDINGLY ALLOWED 59. AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A) ON THIS ISSUE THE DEPARTMENT IS AN APPEAL BEFORE US. 60. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE APPELLANT PURCHASED A SEMI CONSTRUCTED PROPERTY AS EVIDENT FR OM THE SALE DEED. HE FURTHER INVESTED A SUM OF RS 11 91 000 IN THE CONST RUCTION OF THE SAID RESIDENTIAL UNIT. AT THE TIME OF PURCHASE THERE WA S A DISPUTE OVER THE SANCTION PLAN DUE TO WHICH A STAY ORDER WAS PASSED BY THE HO NBLE HIGH COURT. HENCE THE PROPERTY PURCHASED BY THE APPELLANT CANNOT BE C OMPARED WITH THE PREVAILING MARKET RATE AS CONTENDED BY THE AO. SIM ILARLY THE COMPARISON MADE BY THE AO WITH THE HUDA AUCTION ON SUBSEQUENT DATE WAS ALSO NOT JUSTIFIED . 61. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT NO ADDITION CAN BE MADE ON THE BASIS OF A DOCUMENT SEI ZED FROM THE PREMISES OF A THIRD PERSON I.E. SHRI HARSHVARDHAN REDDY. THE SEI ZED DOCUMENT REFERRED TO CERTAIN SETTLEMENT WITH SHRI. P. PRABHAKAR REDDY I N WHICH THE APPELLANT WAS NOT A PARTY. THE APPELLANT WAS NOT AWARE OF THE SA ID DISPUTES AND WAS NOT AWARE OF THE SAID SEIZED DOCUMENT. NO EVIDENCE WAS FOUND DURING SEARCH SHOWING THAT THE APPELLANT HAD MADE ANY AMOUNT OVER AND ABOVE THE PURCHASE CONSIDERATION MENTIONED IN THE REGISTERED SALE DEED . HENCE NO ADDITION CAN BE MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE SA ID PROPERTY. THE LD COUNSEL FOR THE ASSESSEE RELIED ON THE THIRD MEMBER DECISION OF ITAT PATNA IN THE CASE OF RAMA TRADERS VS ITO (32 TTJ 483) AND DE CISION OF ITAT HYDERABAD IN THE CASE OF SHRI. Y. SHIVARAMA KRISHNA (ITA NO. 9 69 -970/HYD/08 ORDER DATED 7.11.2008) 62. THE LEARNED DEPARTMENTAL REPRESENTATIVE SMT. MYTHILI RANI RELIED ON THE ORDER OF THE ASSESSING OFFICER. ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 22 63. WE HAD HEARD BOTH THE PARTIES. IN THE CASE O F SHRI Y.SHIVARAMA KRISHNA IN ITA NO 969-970/HYD/08 RELIED UPON BY TH E LD COUNSEL FOR THE ASSESSEE IT HAS BEEN HELD BY THE CO-ORDINATE BENC H OF THIS TRIBUNAL HAS HELD AS FOLLOWS:- SEARCH AND SEIZURE OPERATIONS WERE CONDUCTED ON 07. 10.2004. IN THE PREMISES OF THE PERSON RELATING TO SUJANA GROUP OF COMPANIES I NCLUDING THE ASSESSEE. DURING THE COURSE OF SEARCH OPERATIONS SOME MATERIAL WAS FOUND FROM THE RESIDENCE OF ONE SHRI C.V.RAMANA REDDY. THE ASSESSING OFFICER O N THE BASIS OF THE PRESUMPTION UNDER SECTION 132(4) OF THE ACT MADE ADDITIONS IN T HE HANDS OF THE PRESENT ASSESSEE. HOWEVER ON APPEAL THE CIT(A) HELD THAT PRESUMPTION UNDER SEC.132(4) IS APPLICABLE ONLY IN RESPECT OF PERSONS FROM WHOSE CUSTODY OR POSSESSION SEIZED MATERIAL WAS FOUND AND IT CANNOT BE APPLIED TO THIR D PARTIES THE CIT(A) PLACED RELIANCE ON THE THIRD MEMBER DECISION OF THIS TRIBU NAL IN THE CASE OF RAMA TRADERS V/S FIRST ITO (1982) 32 TTJ (PATNA) 483 (TM) WHER EIN IT WAS HELD THAT PRESUMPTION PROVIDED IN SECTION 132(4) IS ONLY IN R ESPECT OF PERSONS FROM WHOSE CUSTODY THE DOCUMENT WAS SEIZED AND THE PRESUMPTION CANNOT BE EXTENDED TO THIRD PARTIES. SINCE THE CIT(A) FOUND THAT THE PRESUMPTIO N CANNOT BE EXTENDED TO THIRD PERSONS FOLLOWING THE THIRD MEMBER DECISION OF THI S TRIBUNAL CITED ABOVE WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISS UE. WE ACCORDINGLY UPHOLD THE SAME AND REJECT THE GROUNDS OF REVENUE ON THIS ISSU E 64. INASMUCH AS THE ABOVE DECISION OF THE TRIBUNAL COVERS THE ISSUE IN FAVOUR OF THE ASSESSEE RESPECTFULLY FOLLOWING THE SAME WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). WE ACCORDINGLY REJECT THE GROUNDS OF THE REVENUE IN THESE APPEALS. 65. IN THE RESULT THESE TWO APPEALS OF THE DEPAR TMENT ARE DISMISSED. 66. TO SUM UP OUT OF THE NINE APPEALS FILED BY TH E REVENUE WHILE ITA NO.1014/HYD/2011 IS ALLOWED FOR STATISTICAL PURPOSE S THE REMAINING EIGHT APPEALS ARE DISMISSED. PRONOUNCED IN THE COURT ON 27.12.2011 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER. JUDICIAL MEMBER. DATED 27 TH DECEMBER 2011 ITA NO..1014 TO 1022/HYD/2011 SHRI M.SUBRAMANYESWARAA REDDY- (HUF) AND OTHERS HYDERABAD 23 COPY FORWARDED TO: 1. SHRI M.V.SUBRAMANYESWARA REDDY(HUF) 8-3-224/G/A- 1/501 BRR COMPLEX MADHURA NAGAR HYDERABAD. 2. SHRI M.RAMAKRISHNA REDDY L/R OF LATE B.RAMI REDDY(INDL) 8-3-224/G/A-1/501 BRR COMPLEX MADHURA NAGAR HYDERABAD 3 . SHRI M.RAMAKRISHNA REDDY ( HUF ) L/R OF LATE B.RAMI REDDY(HUF) 8-3-224/G/A-1/501 BRR COMPLEX MADHURA NAGAR HYDERABAD 4. SMT. HARINITHA REDDY 8-3-224/G/A-1/501 BRR COMPLE X MADHURA NAGAR HYDERABAD 5. SHRI RAMAKRISHNA REDDY 8-3-224/G/A-1/501 BRR COMPLEX MADHURA NAGAR HYDERABAD 6. DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE -2 HYDERABAD 7. COMMISSIONER OF INCOME - TAX (APPEALS) - III HYDERABAD 8. 9. COMMISSIONER OF INCOME-TAX-III HYDERABAD DR ITAT HYDERABAD B.V.S.