Shri D.S.KARUNAKAR REDDY, Hyderabad v. Dy. Commissioner of Income Tax, Hyderabad

ITA 753/HYD/2011 | 2003-2004
Pronouncement Date: 30-11-2011 | Result: Dismissed

Appeal Details

RSA Number 75322514 RSA 2011
Assessee PAN AHCPC0573C
Bench Hyderabad
Appeal Number ITA 753/HYD/2011
Duration Of Justice 7 month(s) 1 day(s)
Appellant Shri D.S.KARUNAKAR REDDY, Hyderabad
Respondent Dy. Commissioner of Income Tax, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted SMC
Tribunal Order Date 30-11-2011
Assessment Year 2003-2004
Appeal Filed On 28-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B' HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER I .T.A. NO. 752/HYD/2011 A.Y. 2002-03 I .T.A. NO. 753/HYD/2011 A.Y. 2003-04 I .T.A. NO. 754/HYD/2011 A.Y. 2004-05 I .T.A. NO. 755/HYD/2011 A.Y. 2005-06 I .T.A. NO. 756/HYD/2011 A.Y. 2006-07 I .T.A. NO. 757/HYD/2011 A.Y. 2007-08 SHRI D.S. KARUNAKAR REDDY HYDERABAD PAN: AHCPC0573C VS. DY. COMMISSIONER OF I.T. CENTRAL CIRCLE-6 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI V. SIVA KUMAR RESPONDENT BY: SMT. K. MYTHILI RANI DATE OF HEARING: 11.10.2011 DATE OF PRONOUNCEMENT: 30.11.2011 O R D E R PER CHANDRA POOJARI AM: THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE CIT(A)-I HYDERABAD DATED 23 .02.2011 FOR ASSESSMENT YEARS 2002-03 TO 2007-08. SINCE ALL THE APPEALS BELONG TO ONE ASSESSEE THE SAME WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST COMMON GROUND IN THESE APPEALS IS WITH REGARD TO TREATMENT OF AGRICULTURAL INCOME DECLARED BY THE AS SESSEE AS INCOME FROM OTHER SOURCES. 3. THERE WAS A SURVEY IN THE CASE OF THE ASSESSEE O N 17.10.2007. THEREAFTER THE ASSESSING OFFICER ISSUED NOTICE U/S. 153A OF INCOME-TAX ACT 1961. IN RESPONSE TO THE NOTICE THE ASSESSEE FILED THE RETURNS OF INCOME FOR THESE ASSESSMENT YEARS WHEREIN THE ASSES SEE DECLARED AGRICULTURAL INCOME AS FOLLOWS: I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 2 A.Y. AGRICULTURAL INCOME DECLARED (RS.) 2002-03 38 260 2003-04 29 870 2004-05 60 900 2005-06 40 460 2006-07 24 900 2007-08 31 500 (ADDL. GROUND) 4. THE ABOVE INCOME WHICH HAS BEEN DECLARED BY THE ASSESSEE AS AGRICULTURAL INCOME HAS BEEN TREATED BY THE ASSESSI NG OFFICER AS INCOME FROM OTHER SOURCES. ACCORDING TO THE LEARNE D COUNSEL FOR THE ASSESSEE THE ASSESSEE IS OWNING THE AGRICULTURAL P ROPERTY WHICH HAS BEEN PURCHASED ON 16.3.2000 FROM ONE MR. MULA VENKA TESH GOUD AND OTHERS IN THE VILLAGE OF PEDDA MANGALARAM MOINABAD MANDAL RANGA REDDY DISTRICT SITUATED IN SY. NO. 212 213 AND 214 ADMEASURING ABOUT 12 ACRES 14 GUNTAS. ACCORDING TO THE AR AGRICULTU RAL OPERATIONS HAVE BEEN CARRIED OUT IN THESE ASSESSMENT YEARS AND THE ASSESSEE EARNED AGRICULTURAL INCOME AND THE ASSESSING OFFICER WITHO UT BRINGING ANY MATERIAL CONTRARY TO THE ASSESSEE'S CLAIM TREATED THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE AS INCOME FROM OTHE R SOURCES. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE PATTADAR PASS BOOK AND CERTIFICATE ISSUED BY THE VRO SHOWS THAT THE AS SESSEE HAS EARNED AGRICULTURAL INCOME AND THE SAME HAS TO BE TREATED AS AGRICULTURAL INCOME. HE SUBMITTED THAT THE ASSESSING OFFICER WITHOUT GIVING THE OPPORTUNITY TO PRODUCE NECESSARY EVIDENCE IN SUPPOR T OF THE CLAIM OF THE ASSESSEE DECIDED THE ISSUE AGAINST THE ASSESSEE . HE SUBMITTED THAT THE ASSESSEE PURCHASED AGRICULTURAL LAND WITH A VIEW TO CARRY ON AGRICULTURAL OPERATIONS. DURING THE PERIOD OF HOLD ING THE LAND THE ASSESSEE CARRIED ON AGRICULTURAL OPERATIONS ON THE LANDS PURCHASED BY HIM. HOWEVER LATER ON HE DECIDED THAT HIS PROFESS ION OF EARNING COMMISSION ON REAL ESTATE ACTIVITY WAS MORE SUITABL E BECAUSE HE WAS NOT IN A POSITION TO CARRY ON AGRICULTURAL OPERATIO NS BY HIMSELF ON THE ENTIRE LAND DUE TO HIGH COST OF MAINTENANCE HE PRO POSED TO SELL A PART I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 3 OF THE LAND. SINCE NO PARTY WAS COMING FORWARD TO PURCHASE THE LAND IN ACRES THE SAME WAS DIVIDED INTO BITS OF 1000 SQ. Y ARDS FOR DEVELOPING THEM INTO ORCHARDS WITH A VIEW TO SELL THE LAND EAS ILY. THE ASSESSEE SOLD SUCH ORCHARD LAND DURING THE YEARS UNDER CONSI DERATION. THE SAID BITS OF LAND WERE SOLD ALONG WITH ORCHARDS THROUGH M/S.PINK ESTATES PRIVATE LIMITED AND THE SAID COMPANY IS MAINTAINING THE FRUIT BEARING TREES ON BEHALF OF THE MEMBERS WHO PURCHASED THE OR CHARDS. LAND REMAINING WITH THE ASSESSEE WAS USED FOR AGRICULTUR AL PURPOSES AND THE ASSESSEE DERIVED INCOME FROM AGRICULTURAL OPERA TIONS. THE ASSESSEE SUBMITTED THAT EVEN NOW THE ENTIRE LAND CO NTAINS ORCHARDS OF FRUIT BEARING TREES. THOUGH INITIALLY THE ASSESSEE CULTIVATED PADDY VEGETABLES ETC. HE LATER ON CONCEIVED THE IDEA OF GROWING ORCHARDS. THE INCOME FROM AGRICULTURE ON SUCH LAND IS ADMITTE D AS AGRICULTURAL INCOME AND THE GAIN ON SALE OF THE LAND WAS CLAIMED AS EXEMPT. THE ASSESSING OFFICER TREATED THE GAIN ON SALE OF THE L ANDS AS BUSINESS INCOME. THE LANDS SOLD BY THE ASSESSEE ARE AGRICUL TURAL LANDS AND AGRICULTURAL OPERATIONS WERE BEING CARRIED OUT PRIO R TO SALE AND EVEN AFTER THE DATE OF SALE. IT IS ALSO NOTEWORTHY THAT PERMISSION FOR CONVERSION FOR NON AGRICULTURAL USE WAS NOT AVAILAB LE FOR THE SAID LAND. THE ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THA T THE LANDS IN QUESTION ARE MUCH BEYOND THE 8 KM FROM THE MUNICIPA L LIMITS AND ALSO BEING AGRICULTURAL LANDS THE GAIN OUGHT TO HAVE BE EN TREATED AS EXEMPT FROM TAX. . 5. THE LEARNED DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE THOUGH T HE ASSESSEE PLACED ON RECORD BEFORE THE LOWER AUTHORITIES REGARDING TH E PURCHASE OF PROPERTY AS AGRICULTURAL LAND NO MATERIAL HAS BEEN PLACED TO SHOW ACTUALLY CARRYING OUT OF THE AGRICULTURAL OPERATION S. MORE SO THE AGRICULTURAL INCOME IS NOT SUPPORTED BY SALE OF AGR ICULTURAL PRODUCE. THE ASSESSEE PRODUCED PATTADAR PASS BOOK AND CERTIF ICATED ISSUED BY THE VRO WHICH HAS BEEN OBTAINED IN MAY 2010 AND IT DOES NOT I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 4 INDICATE ON WHAT BASIS THE AUTHORITIES HAVE CERTIFI ED THAT AGRICULTURAL OPERATIONS WERE CARRIED ON IN THESE ASSESSMENT YEAR S IN THE IMPUGNED LAND AND EARNED AGRICULTURAL INCOME. FURTHER AS A MATTER OF FACT THE ASSESSEE HAS SUB-DIVIDED THE LAND INTO PLOTS AND SO LD TO VARIOUS PARTIES. THOUGH THE ASSESSEE MADE A CLAIM THAT THE LAND WAS DIVIDED INTO PLOTS FOR THE PURPOSE OF GROWING FRUIT ORCHARD S NO EVIDENCE HAS BEEN FILED. IN SPITE OF THIS THE ASSESSEE HAD SOL D THE PLOTS. BEING SO THERE IS NO CORROBORATIVE EVIDENCE PLACED BY THE AS SESSEE REGARDING AGRICULTURAL OPERATIONS CARRIED ON BY THE ASSESSEE AS SUCH WE ARE UNABLE TO APPRECIATE THE ARGUMENT OF THE LEARNED CO UNSEL FOR THE ASSESSEE AND THIS GROUND OF THE ASSESSEE IN ALL THE SE APPEALS IS DISMISSED. 7. THE NEXT COMMON GROUND IS WITH REGARD TO TREATME NT OF INCOME ON SALE OF AGRICULTURAL LAND AS BUSINESS INCOME IN ALL THESE APPEALS. IN THESE ASSESSMENT YEARS THE ASSESSEE SOLD PLOTS. AC CORDING TO THE ASSESSEE THESE PLOTS ARE AGRICULTURAL LAND AND INCO ME DERIVED FROM THE SALE OF THESE PLOTS CANNOT BE CONSIDERED AS INCOME IN VIEW OF THE PROVISIONS OF SECTION 2(14)(III) OF THE ACT AND EXE MPTED FROM CAPITAL GAIN. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTE D BEFORE US THAT THE INTENTION OF THE ASSESSEE WAS TO CARRY ON AGRIC ULTURAL OPERATIONS AND NOT TO TREAT THE SAME AS STOCK-IN-TRADE. ACTUA LLY AGRICULTURAL OPERATIONS WERE CARRIED ON IN THIS LAND. SINCE THE ASSESSEE WAS NOT IN A POSITION TO CARRY ON THE AGRICULTURAL OPERATIONS BY HIMSELF ON THE ENTIRE LAND DUE TO HIGH COST OF MAINTENANCE HE PRO POSED TO SELL A PART OF SUCH LAND. FOR THE PURPOSE OF CONVENIENCE HE D IVIDED THE LAND INTO SMALL PLOTS AND SOLD THEM ACCORDINGLY. THE PURPOSE OF DIVIDING THE LAND INTO PLOTS IS FOR EASE OF SALE. THE PROPERTY IS LOCATED BEYOND 8 KM FROM MUNICIPAL LIMITS AND IS EXEMPTED FROM TAX. HE RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF ASSOCIATED TECHNI PL ASTICS P. LTD. VS. DCIT [62 ITD 212 (DEL)] WHEREIN IT WAS HELD THAT SE LLING SOMETHING AT A PROFIT A PROFIT IS THE MOTIVE OR INTENTION OF EVERY ONE WHETHER IT IS AS A BUSINESSMAN AS A TRADER OR AS A PERSON WHO DOES NO T FALL IN ANY OF THESE CATEGORIES AND IS SOMEONE WHO IS NOT EVEN REM OTELY CONNECTED. I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 5 BUT EVERY PROFIT EARNING ACTIVITY DOES NOT NECESSAR ILY MEAN THAT IT IS ON COMMERCIAL OR BUSINESS ACCOUNT OR AN ADVENTURE IN T HE NATURE OF TRADE. ACCORDING TO HIM THIS PROPOSITION IS SQUARELY APPL ICABLE TO THE FACTS OF THIS CASE. LATER HE RELIED ON THE JUDGEMENT OF SU PREME COURT IN THE CASE OF SAROJ KUMAR MAZUMDAR V. CIT [37 ITR 242 (SC )] WHEREIN IT WAS HELD THAT THE PROBABILITY THAT THE PROPERTY MIG HT APPRECIATE TO VALUE DOES NOT NECESSARILY LEND ITSELF TO THE INFERENCE T HAT THE TRANSACTION WAS A VENTURE IN THE NATURE OF TRADE AS DISTINGUIS HED FROM A CAPITAL INVESTMENT. 8. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE FOLLOWING DECISIONS: I) M.V. CHANDRASEKHAR VS. DCIT [91 ITD 543 (BANG.)] . II) CIT VS. SOHAN KHAN & MOHAN KHAN [304 ITR 194 (R AJ)]. III) ITO VS. ANTHONY JOHN PEREIRA [24 SOT 459 (MUM) ]. IV) CIT VS. SURESH CHAND GOYAL [298 ITR 277 (163 TA XMAN 54) (MP)]. 9. ON THE OTHER HAND THE LEARNED DR SUBMITTED THAT THE ASSESSEE PURCHASED THE LAND IN MARCH 2000 AND IMMEDIATELY I N THE SUCCEEDING YEAR HE STARTED SELLING THE LAND DIVIDING THE SAME INTO SMALL PLOTS. ACCORDING TO HIM THE INTENTION OF THE ASSESSEE IS TO SELL PLOTS AND EARN INCOME THAT IS NOTHING BUT BUSINESS IN REAL ESTATE AND EARN INCOME AND UNDER ANY STRETCH OF IMAGINATION IT CANNOT BE CONSI DERED AS SALE OF AGRICULTURAL LAND. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE ASSESSEE BOUGHT THE LAND IN MA RCH 2000 ABOUT 12 ACRES BY 3 DIFFERENT SALE DEEDS AND IMMEDIATELY IN THE SUCCEEDING YEAR STARTED SELLING THE LAND DIVIDING THE SAME INTO SMA LL PLOTS. THUS THE INTENTION OF THE ASSESSEE IS TO DO BUSINESS IN REAL ESTATE. IN SPITE OF THIS ASSESSEE MADE AN ARGUMENT BEFORE US THAT THE I NTENTION OF THE ASSESSEE IS TO CARRY ON THE AGRICULTURAL OPERATIONS . HOWEVER AS SEEN FROM THE EARLIER PARA THERE WAS NO EVIDENCE THAT TH E LAND WAS PUT FOR ACTUAL AGRICULTURAL OPERATIONS. WE MUST SEE WHETHE R A LAND HAS BEEN PUT TO USE FOR AGRICULTURE PURPOSE FOR A REASONABLE SPAN OF TIME PRIOR TO I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 6 THE RELEVANT DATE AND FURTHER WHETHER ON THE RELEVA NT DATE THE LAND WAS INTENDED TO BE PUT TO USE FOR AGRICULTURE PURPOSES FOR A REASONABLE SPAN OF TIME IN FUTURE. AS THE ASSESSEE DIVIDED TH E AGRICULTURAL LAND INTO SMALLER PLOTS AND SOLD TO VARIOUS PERSONS ADM ITTEDLY FOR UTILISATION FOR NON AGRICULTURE PURPOSES. EVEN ASSUMING WITHOU T ADMITTING IF AGRICULTURE OPERATIONS WERE CARRIED ON WITHIN THE S AID SPAN OF TIME IT WAS ONLY A STOP GAP ARRANGEMENT. THE LAND BEING RE GISTERED AS AGRICULTURE LAND IN THE REVENUE RECORDS IS NOT CONC LUSIVE TO HOLD THAT THE LAND IS AGRICULTURE LAND IN THE ABSENCE OF ANY EVIDENCE THAT IT WAS PUT TO AGRICULTURE USE. IN OUR OPINION THE ASSESS EE HAD NO INTENTION TO CARRY ANY AGRICULTURAL OPERATIONS AND DIVIDED THE A GRICULTURAL LANDS INTO SMALL PLOTS AND SOLD THEM FOR NON AGRICULTURE PURPO SE. THUS IT IS CLEAR THAT THE ASSESSEE ONLY CARRIED ON THE BUSINESS OF R EAL ESTATE AND THE SALE OF SUCH LAND BY MAKING INTO SMALL PLOTS IS NOT HING BUT ADVENTURE IN THE NATURE OF TRADE AND INCOME GENERATED FROM THE S ALE OF THE LAND IS TO BE CONSIDERED AS BUSINESS INCOME. THIS GROUND OF T HE ASSESSEE IN ALL THE APPEALS IS DISMISSED. 11. THE NEXT GROUND IN A.Y. 2006-07 & 2007-08 IN IT A NOS. 756 & 757/HYD/2011 IS WITH REGARD TO TREATMENT OF DEPOSIT OF CHEQUES INTO BANK ACCOUNT AS UNEXPLAINED INCOME. BRIEF FACTS OF THE ISSUE ARE THAT IN A.Y. 2006-07 THE ASSESSEE MADE DEPOSIT IN THE BA NK ACCOUNT AT RS. 66 10 200. ACCORDING TO THE ASSESSEE THIS IS NOTHI NG BUT ADVANCE RECEIVED FROM CUSTOMERS FOR SALE OF PLOTS. SIMILAR LY IN A.Y. 2007-08 THE ASSESSEE MADE A DEPOSIT OF RS. 14 45 416. THE ASSE SSING OFFICER TREATED THESE AMOUNTS AS UNEXPLAINED BANK DEPOSITS. ON APPEAL FOR THE A.Y. 2006-07 THE CIT(A) DIRECTED THE ASSESSING OFFICER TO TREAT RS. 14 53 600 WHICH IS IN THE FORM OF CHEQUE AS UNEXPLA INED BANK DEPOSIT. FOR THE A.Y. 2007-08 HE SIMILARLY DIRECTED THE ASS ESSING OFFICER TO TREAT RS. 7 60 000 WHICH IS IN THE FORM OF CHEQUE A S UNEXPLAINED BANK DEPOSIT BEING SOURCE IS NOT EXPLAINED. REGARDING T HE CASH DEPOSIT IN AYS 2005-06 2006-07 2007-08 (ITA NOS. 755 TO 757/ HYD/2011) HE DIRECTED THE ASSESSING OFFICER TO CONSIDER ONLY PEA K CREDIT AND TREAT I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 7 THEM AS UNEXPLAINED DEPOSIT. AGAINST THIS THE ASSE SSEE IS IN APPEAL BEFORE US FOR THESE ASSESSMENT YEARS. 12. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS HAVING ENOUGH INCOME TO DEPOSIT THE SAM E INTO THE BANK ACCOUNT AND TREATING THE DEPOSIT AS INCOME IN ADDIT ION TO TREATING THE AGRICULTURAL INCOME AS NON-AGRICULTURAL INCOME WOUL D AMOUNT TO DOUBLE ADDITION OF THE SAME AMOUNT AND THE SAME SHOULD BE AVOIDED. 13. THE LEARNED DR RELIED ON THE ORDERS OF THE LOWE R AUTHORITIES. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FOR THE ASSESSMENT YEAR 2006- 0-7 THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF CHEQUE DEPOSIT OF R S. 14 53 600. BEING SO THE UNEXPLAINED DEPOSIT OF CHEQUES INTO B ANK ACCOUNT AT RS. 14 53 600 IS TO BE CONSIDERED AS UNEXPLAINED DEPOSI T. SIMILARLY FOR THE ASSESSMENT YEAR 2007-08 THE ASSESSEE COULD NOT EXPL AIN THE SOURCE OF RS. 7 60 000 AND THE SAME HAS TO BE CONSIDERED AS U NEXPLAINED INCOME OF THE ASSESSEE. SIMILAR IS THE POSITION I N RESPECT OF THE CASH DEPOSIT IN THE ASSESSMENT YEAR 2005-06 2006-07 AND 2007-08 AND THE PEAK CASH DEPOSIT HAS TO BE CONSIDERED AS UNEXPLAIN ED INCOME OF THE ASSESSEE FOR THESE ASSESSMENT YEARS. THIS GROUND O F THE ASSESSEE IS DISMISSED IN ALL THESE APPEALS. 15. THE NEXT GROUND IN ITA NO. 756/HYD/2011 IS WITH REGARD TO TREATMENT OF AMOUNT PAID TO SHRI MUTYAM REDDY RS. 1 LAKH AND RS. 2 LAKHS TOWARDS KANAKAMAMIDI PROPERTY AS UNEXPLAINED INCOME. 16. BRIEF FACTS OF THE ISSUE ARE THAT AS PER THE SE IZED DOCUMENT PAGE NOS. 68 AND 69 BEARING NO. A/DSKR/SR/04 THE ASSESSE E PAID RS. 2 LAKHS FOR PURCHASE OF LAND AT KANAKAMAMIDI ON 4.5.2 005 AND RS. 1 LAKH TO SHRI MUTYAM REDDY AND THE SAME WAS TREATED AS UNEXPLAINED INVESTMENT. THE LEARNED COUNSEL FOR THE ASSESSEE S UBMITTED DURING THE APPELLATE PROCEEDINGS THAT THE ASSESSEE PROPOS ED TO PURCHASE AGRICULTURAL LAND AT KANAKAMAMIDI VILLAGE JOINTLY W ITH ONE SRI D. I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 8 MAHESH KUMAR. ACCORDING TO THE UNDERSTANDING THE A SSESSEE HAD ISSUED A CHEQUE FOR RS. 20 LAKHS AND THE SAME COULD NOT BE HONOURED. THE CHEQUE BOUNCED AND THE ENTIRE ACTIVITY WAS THER EAFTER TAKEN BY SRI D. MAHESH KUMAR. THE AR SUBMITTED THAT THE ASSESSE E DID NOT MAKE ANY PAYMENT FOR ACQUISITION OF LAND AT KANAKAMAMIDI VILLAGE. HE DREW OUR ATTENTION TO THE LETTER DATED 11.12.2009 FROM S RI MAHESH KUMAR WHEREIN IT WAS SPECIFICALLY MENTIONED THAT THE ENTI RE LAND WAS TAKEN OVER BY HIM AND THAT THE ASSESSEE DID NOT MAKE ANY PAYMENT FOR THE ACQUISITION OF THE LAND. THEREFORE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 2 00 000 WH ICH WAS PAID ON 9.5.2005. AS REGARDS PAYMENT OF RS. 1 00 000 TO MU TYAM REDDY IT WAS SUBMITTED THAT THE SAID PAYMENT WAS MADE FROM O UT OF INCOME DERIVED. THE AR SUBMITTED THAT THE ASSESSEE DID NO T MAINTAIN REGULAR BOOKS OF ACCOUNT. FURTHER THE DEPARTMENT DURING THE COURSE OF SEARCH DID NOT FIND ANY INVESTMENT IN THE EARLIER YEARS AND THEREFORE THE INCOME DERIVED IN THE EARLIER YEARS WAS AVAILAB LE FOR THE ASSESSEE FOR MAKING SUCH PAYMENTS. 17. ON THE OTHER HAND INSOFAR AS PAYMENTS MADE TO MUTYAM REDDY THE DR SUBMITTED THAT IN THE ABSENCE OF ANY RECEIPT AND PAYMENT ACCOUNT IT IS NOT POSSIBLE TO VERIFY WHETHER THE A SSESSEE HAD SUFFICIENT CASH BALANCE TO MEET THE PAYMENT MADE. AS SUCH THE ABOVE ADDITION IS TO BE SUSTAINED. 18. AS REGARDS PAYMENT MADE FOR PURCHASE OF LAND DA TED 9.5.2005 AMOUNTING TO RS. 2 00 000 IT WAS SUBMITTED BY THE D R THAT THE CONTENTION OF THE ASSESSEES COUNSEL THAT THE ASSES SEE HAS NOT MADE ANY PAYMENT FOR PURCHASE OF LAND AT KANAKAMAMIDI VI LLAGE AND IN FACT THE ENTIRE ACTIVITY OF PURCHASE OF LAND AT KANAKAMA MIDI WAS TAKEN OVER BY SRI D. MAHESH KUMAR IS NOT CORRECT. APPARENTLY THERE WAS ANOTHER TRANSACTION SHOWING PAYMENT OF RS. 20 LAKHS FOR PUR CHASE FOR LAND AT KANAKAMAMIDI VILLAGE AND THE ASSESSEE IN COURSE OF THE ASSESSMENT PROCEEDINGS HAD FILED A CONFIRMATION LETTER FROM D. MAHESH KUMAR. IN THE SAID LETTER ADDRESSED TO DCIT CENTRAL CIRCLE-6 HYDERABAD SRI I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 9 MAHESH KUMAR (PAN: AKLPD9732H) HAD CONFIRMED THAT H E ALONG WITH THE ASSESSEE HAD PROPOSED TO BUY AGRICULTURAL LAND SITUATED AT KANAKAMAMIDI VILLAGE AND PAID SOME ADVANCE. LATER ON DUE TO FINANCIAL PROBLEMS THE ASSESSEE HAD NOT ARRANGED T HE REQUIRED FUND AND ALL THE CHEQUES ISSUED BY HIM WERE BOUNCED FOR LACK OF FUNDS. HE HAD TAKEN OVER THE ENTIRE LAND AND PAID TO THE RESP ECTIVE FARMERS. THE ASSESSING OFFICER HAS RELIED ON THIS LETTER FROM MR . MAHESH KUMAR AND NO ADDITION WAS MADE IN RESPECT OF THE PAYMENT OF R S. 20 LAKHS FOR PURCHASE OF LAND OF 16 ACRES WHILE MAKING THE ASSES SMENT FOR A.Y. 2005-06. THE CIT(A) OBSERVED THAT THE SAID 20 LAKH S WAS PAID IN RESPECT OF LANDS PROPOSED TO BE PURCHASED FROM J. G AL REDDY J. CHANDRA REDDY J. KRISHNA REDDY J. EESWAR REDDY J . MALLA REDDY J. YADI REDDY AND J. VENKATA REDDY. HOWEVER AS PE R PAGE 68 AND 69 OF THE SEIZED PAPER A/DSKR/SR/04 THE PAYMENT OF TOTAL RS. 2 LAKH WAS MADE BY THE ASSESSEE BY CASH ON 9.5.2004 TO A. ANJAIAH S/O. PENTAIAH FOR PURCHASE OF 1 ACRE OF LAND IN SURVEY N O. 26/A. THUS THIS TRANSACTION IS DIFFERENT FROM THE TRANSACTION EARLI ER CONFIRMED BY MAHESH KUMAR. ACCORDINGLY THE EXPLANATION FILED B Y THE ASSESSEE IS NOT ACCEPTABLE IN THE ABSENCE OF SPECIFIC CONFIRMAT ION FROM MAHESH KUMAR IN THIS REGARD. THEREFORE THE ADDITION OF R S. 2 LAKHS MADE BY THE ASSESSING OFFICER BASED ON THE SEIZED DOCUMENT PAGE NO. 68 AND 69 OF A/DSKR/SR/04 IS TO BE CONFIRMED. REGARDING T HE ADDITION OF RS. 1 LAKH IN THE ABSENCE OF RECEIPT & PAYMENT A/C. I T IS NOT POSSIBLE TO VERIFY THE AVAILABILITY OF CASH TO MEET THE PAYMENT S MADE. THUS ENTIRE ADDITION OF RS. 3 LAKHS CONFIRMED BY THE CIT(A) IS JUSTIFIED. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS SEEN FROM THE ORDERS OF TH E LOWER AUTHORITIES THERE IS A SEIZED MATERIAL IN THE FORM OF PAGES NOS . 68 AND 69 OF A/DSKR/SR/04 FOR MAKING ADDITION OF RS. 2 00 000 AN D THE ASSESSEE WAS NOT ABLE TO CONTROVERT THE FINDINGS OF THE CIT( A) ON THIS ISSUE. AS SUCH THE FINDING OF THE CIT(A) IS CONFIRMED. REGA RDING ADDITION OF RS. 1 LAKH IN THE ABSENCE OF RECEIPTS AND PAYMENT A/C. IT IS NOT POSSIBLE TO I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 10 VERIFY THE AVAILABILITY OF CASH BALANCE TO MEET THI S IMPUGNED PAYMENT. ACCORDINGLY THIS GROUND OF THE ASSESSEE IS DISMISS ED. 20. THE NEXT COMMON GROUND IN ALL THE APPEALS IS WI TH REGARD TO CHARGING OF INTEREST U/S. 234A AND 234B OF THE ACT WHICH IS CONSEQUENTIAL AND MANDATORY. ACCORDINGLY THIS GROU ND IS DISMISSED. 21. THE NEXT GROUND IN ITA NO. 755/HYD/2011 IS WITH REGARD TO CONFIRMATION OF ADDITION OF RS. 19 LAKHS MADE BY TH E ASSESSING OFFICER WITH REGARD TO PAYMENT TO MUTYAM REDDY (RS. 1.5 LAK HS) PURCHASE OF LAND (RS. 7.5 LAKHS) AND PAYMENT TO MIRZA IQBAL (RS . 10 LAKHS). 22. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ADDITION COMPRISES OF THREE ITEMS OF RS. 4 50 000 RS. 2 00 000 AND RS. 1 00 000 IDENTIFIED AT PARAS 3.2 3.3 AND 3.5 OF THE ASSESSMENT ORDER FOR A.Y. 2005-06. THE EXPENDITURE OF RS. 1 0 0 000 IDENTIFIED AT PARA 3.2 IS A DOUBLE ENTRY AND IS LIABLE TO BE IGNO RED. AS REGARDS THE AMOUNTS OF RS. 2 00 000 AND RS. 4 50 000 IT IS SUBM ITTED THAT THE ASSESSEE PROPOSED TO PURCHASE AGRICULTURAL LANDS AT KANAKAMAMIDI VILLAGE JOINTLY WITH ONE SRI MAHESH KUMAR. AS PER MUTUAL UNDERSTANDING THE ASSESSEE PAID A SUM OF RS. 20 00 000 BY WAY OF CHEQUE WHICH COULD NOT BE HONOURED. LATER THE ENTI RE ACTIVITY WAS TAKEN OVER BY SRI MAHESH KUMAR. THE IMPUGNED AMOUNT S MENTIONED ABOVE WERE ALSO PUT UP BY SRI MAHESH KUMAR. BASED ON THE LETTER OF SRI MAHESH KUMAR BEFORE THE ASSESSING OFFICER THE A SSESSING OFFICER ACCEPTED THE EXPLANATION OF THE ASSESSEE. THE ASSE SSING OFFICER HAVING ACCEPTED THE EXPLANATION OF THE ASSESSEE OUG HT NOT TO HAVE REJECTED THE EXPLANATION IN RESPECT OF TRANSACTIONS PERTAINING TO THE SAME VILLAGE JOINTLY STARTED WITH SRI MAHESH KUMAR BUT TAKEN OVER BY HIM LATER ON. THE LEARNED COUNSEL FOR THE ASSESSEE DRAWN ATTENTION OF THE BENCH TO THE EVIDENCE AT PAGES 2 TO 6 OF THE PA PER BOOK WHICH SHOW THAT IT IS SRI MAHESH KUMAR WHO ULTIMATELY PUR CHASED THE LAND FROM SMT. P. SHOBHARANI TO WHOM AN AMOUNT OF RS. 1 00 000 IS STATED TO HAVE BEEN PAID OUT OF ASSESSEE'S FUNDS. HE ALSO DREW THE ATTENTION OF THE BENCH TO THE SALE DEED EXECUTED BY SRI A. AN JAIAH TO WHOM THE I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 11 ASSESSEE IS STATED TO HAVE PAID RS. 2 00 000 VIDE R ECEIPTS AT PAGES 7 AND 8 OF THE PAPER BOOK. SIMILAR IS THE POSITION W ITH THE TRANSACTION WITH SRI P. RAMREDDY WHO IS THE OWNER OF AGRICULTUR AL LANDS IN CONTIGUOUS SURVEY NOS. IN KANAKAMAMIDI VILLAGE. HE SUBMITTED THAT THE CIT(A) OUGHT TO HAVE ACCEPTED THE EXPLANATION O F THE ASSESSEE ON THE BASIS OF THE EVIDENCE ON RECORD. ACCORDINGLY H E SUBMITTED THAT THE ADDITION OF RS. 7 50 000 MAY BE DELETED. 23. REGARDING TRANSACTIONS WITH SRI MIRZA IQBAL AHM ED (RS. 10 00 000) THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ASSESSING OFFICER FOUND A PAPER SHOWING THAT ADVANC E OF RS. 10 00 000 WAS PAID TO SRI MIRZA IQBAL AHMED AND OTH ERS FOR PURCHASE OF LAND AT PUPPALAGUDA. HE MADE ADDITION OF RS. 10 00 000 DISREGARDING THE ASSESSEE'S SUBMISSION THAT THE ENT IRE CONSIDERATION FOR THE TRANSACTION OF PURCHASE OF LAND FROM SRI MI RZA IQBAL AND OTHERS WAS PAID BY DEMAND DRAFTS AT A LATER DATE AND THAT THE AMOUNT OF RS. 10 00 000 WAS IN FACT NOT PAID AND IT STOPPED AT TH E STAGE OF PROPOSAL ITSELF. SRI MIRZA IQBAL AHMED AND OTHERS FILED AFF IDAVITS (VIDE ITEM 10 IN THE PAPER BOOK-1). THE CIT(A) REFUSED TO ACCEPT TH E EXPLANATION OFFERED BY THE ASSESSEE. THE LEARNED COUNSEL FOR T HE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE MEMORANDUM OF UND ERSTANDING DATED 6.7.2007 AND AGREEMENT OF SALE DATED 24.8.2007 WHIC H CLEARLY SHOW THAT THE ENTIRE CONSIDERATION FOR THE LAND PURCHASE D FROM SRI MIRZA IQBAL AHMED AND OTHERS WAS PAID BY WAY OF DEMAND DRAFTS A ND THE ALLEGED ADVANCE IS NOT FORMING PART OF THE CONSIDERATION FO R SALE. ACCORDINGLY THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE LIGHT OF THE CONCRETE EVIDENCE AVAILABLE IN THE RECORD THE ADDI TION OF RS. 10 00 000 MAY BE DELETED. 24. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A ). 25. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. INSOFAR AS PAYMENTS MADE TO MUTYAM REDDY ARE CONCERNED THE ASSESSING OFFICER HAS RELIE D ON THE SEIZED DOCUMENT A/DSKR/SR/06 PAGE 17 TO 220 WHICH IS AN AG REEMENT OF SALE I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 12 WHEREIN SRI MUTYAM REDDY ALONG WITH OTHERS HAVE ENT ERED INTO AN AGREEMENT WITH THE ASSESSEE FOR SALE OF PROPERTY AT PUPPALAGUDA VILLAGE FOR A CONSIDERATION OF RS. 22.525 CRORES AN D THE ASSESSEE IN PURSUANCE OF THE SAME HAS PAID RS. 1 LAKH BY CASH. HOWEVER AS PER THE MONEY RECEIPT AT PAGE 13 TO 16 OF THE SAID ANNE XURE SRI MUTYAM REDDY AND OTHERS HAVE RECEIVED A TOTAL SUM OF RS. 2 50 000 AS PART PAYMENT OUT OF WHICH RS. 1.50 LAKHS HAS BEEN PAID O N 24.5.2004 AND 25.11.2004 AND THE BALANCE RS. 1 LAKH HAS BEEN PAID IN THE FY 2005- 06 RELEVANT TO THE A.Y. 2006-07. THE ASSESSEE DOES NOT DISPUTE THE PAYMENT AS WELL BUT STATES THAT THE SAID PAYMENT HA S BEEN MADE FROM OUT OF THE INCOME GENERATED IN EARLIER YEARS. IN T HE ABSENCE OF ANY RECEIPT AND PAYMENT ACCOUNT IT IS NOT POSSIBLE TO VERIFY WHETHER THE ASSESSEE HAD SUFFICIENT CASH BALANCE TO MEET THE PA YMENT MADE. ACCORDINGLY THE ADDITION OF RS. 1.5 LAKH MADE BY T HE ASSESSING OFFICER IS SUSTAINED. 26. AS REGARDS PAYMENT MADE FOR PURCHASE OF LAND DA TED 22.5.2004 AND 6.12.2004 AGGREGATING TO RS. 7.5 LAKHS THE ASS ESSEE CONTENDED THAT HE HAS NOT MADE ANY PAYMENT FOR PURCHASE OF LA ND AT KANAKAMAMIDI VILLAGE AND IN FACT THE ENTIRE ACTIVI TY OF PURCHASE OF LAND AT KANAKAMAMIDI VILLAGE WAS TAKEN OVER BY SRI D. MA EHSH KUMAR. APPARENTLY THERE WAS ANOTHER TRANSACTION SHOWING P AYMENT OF RS. 20 LAKHS FOR PURCHASE OF LAND AT KANAKAMAMIDI VILLAGE AND THE ASSESSEE IN COURSE OF ASSESSMENT PROCEEDINGS HAD FILED A CON FIRMATION LETTER FROM D. MAHESH KUMAR. A COPY OF THE SAME WAS FILED IN THE PAPER BOOK IN COURSE OF THE FIRST APPELLATE PROCEEDINGS. IN THE SAID LETTER ADDRESSED TO DCIT CENTRAL CIRCLE-6 HYDERABAD SRI MAHESH KUMAR HAS CONFIRMED THAT HE ALONG WITH THE ASSESSEE HAD P ROPOSED TO BUY AGRICULTURAL LAND SITUATED AT KANAKAMAMIDI VILLAGE AND PAID SOME ADVANCE. LATER ON DUE TO FINANCIAL PROBLEM THE AS SESSEE HAD NOT ARRANGED THE REQUIRED FUND AND ALL THE CHEQUES ISSU ED BY HIM WERE BOUNCED FOR LACK OF FUNDS. HE HAD TAKEN OVER THE E NTIRE LAND AND PAID TO THE RESPECTIVE FARMERS. THE ASSESSING OFFICER H AS RELIED ON THIS LETTER FROM MR. MAHESH KUMAR AND NO ADDITION WAS MA DE IN RESPECT OF I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 13 THE PAYMENT OF RS. 20 LAKHS FOR PURCHASE OF LAND OF 16 ACRES AS EVIDENT FROM PAGE 79 AND 80 OF A/DSKR/SR/04. THE SAID RS. 20 LAKHS WAS PAID IN RESPECT OF LANDS PROPOSED TO BE PURCHASED F ROM J. GAL REDDY J. CHANDRA REDDY J. KRISHNA REDDY J. EESWAR REDDY J. MALLA REDDY J. YADI REDDY AND J. VENKATA REDDY. HOWEVER AS PER PAGE 75 OF THE SEIZED PAPER A/DSKR/SR/04 THE PAYMENT OF TOTAL RS. 2 LAKH WAS MADE BY THE ASSESSEE BY CASH ON 22.5.2004 FOR P URCHASE OF LAND IN SURVEY NO. 31 FROM P. NARSIMHA REDDY AND ANOTHER PERSON. ACCORDINGLY THIS TRANSACTION IS DIFFERENT FROM THE TRANSACTION EARLIER CONFIRMED BY MAHESH KUMAR. ACCORDINGLY THE EXPLAN ATION FILED BY THE ASSESSEE IS NOT ACCEPTABLE IN THE ABSENCE OF SPECIF IC CONFIRMATION FROM MAHESH KUMAR IN THIS REGARD. THEREFORE THE ADDITI ON OF RS. 2 LAKHS MADE BY THE ASSESSING OFFICER BASED ON THE SEIZED D OCUMENT PAGE NO. 75 OF A/DSKR/SR/04 IS CONFIRMED. 27. SIMILARLY THE ADDITION OF RS. 4.5 LAKHS MADE O N 6.12.2004 EVIDENCED BY RECEIPT AT PAGE NO. 88 OF A/DSKR/SR/04 WAS ALSO MADE IN CASH AND THE RECIPIENT CLEARLY STATED THAT THE A MOUNT WAS RECEIVED AS ADVANCE FOR LAND ADMEASURING 1 AC RE 23 GUNTAS I N SURVEY NO. 31 SITUATED AT KANAKAMAMIDI VILLAGE. THEREFORE THE E XPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE AND THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. AS REGARDS THE ADDITION OF R S. 1 LAKH MADE AS PER PARA 3.2 OF THE ASSESSMENT ORDER AT PAGE NO. 2 IS A LSO NOT DULY EXPLAINED AND HENCE ADDITION OF THE SAME IS CONFIRM ED. 28. AS REGARDS PAYMENT OF RS. 10 LAKHS TO MIRZA IQB AL AHMED THE ASSESSING OFFICER HAS RELIED ON PAGE-75 OF THE SEIZ ED DOCUMENT A/DSKR/SR/06. AS PER THE SAME THE ASSESSEE HAS EN TERED INTO AN AGREEMENT OF SALE WITH MIRZA IQBAL AHMED AND OTHERS FOR PURCHASE OF LAND ADMEASURING 5 ACRES 6 GUNTAS IN NARSINGI VILLA GE. CLAUSE-2 OF THE AGREEMENT CLEARLY SHOWS THAT THE ASSESSEE IN PURSUA NCE OF THE AGREEMENT HAS PAID RS. 10 LAKHS IN CASH AS ADVANCE. THE SAID AGREEMENT HAS BEEN SIGNED BY THE ASSESSEE AS WELL A S THE VENDORS. DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS TH E ASSESSEE I.T.A. NOS. 752-757/HYD/2011 SHRI D.S. KARUNAKAR REDDY ======================= 14 SUBMITTED COPY OF THE AFFIDAVITS FROM MIRZA IQBAL A ND OTHERS WHO DENIED TO HAVE RECEIVED THE SAME AMOUNT. THE CIT(A) DID N OT ACCEPT THE AFFIDAVITS AS THE SAME WERE NOT SUBMITTED DURING TH E COURSE OF ASSESSMENT PROCEEDINGS. THE SAID AFFIDAVITS ARE DA TED 17.5.2010. FURTHER THE AGREEMENT OF SALE CLEARLY SHOWS THAT T HE ASSESSEE HAD PAID THE AMOUNT IN CASH AND THE VENDORS HAD RECEIVE D THE SAME IN CASH. THEREFORE THE SUBSEQUENT RETRACTION IS NOT BELIEVABLE ESPECIALLY WHEN THE SAME WAS NOT FILED DURING THE ASSESSMENT P ROCEEDINGS BEFORE THE ASSESSING OFFICER. ACCORDINGLY THE ADDI TION MADE BY THE ASSESSING OFFICER IN RESPECT OF PAYMENT OF RS. 10 L AKHS TO MIRZA IQBAL AHMED AND OTHERS IS SUSTAINED. THE ENTIRE ADDITION OF RS. 19 LAKHS MADE BY THE ASSESSING OFFICER IS CONFIRMED. THIS GROUND IS DISMISSED. 29. IN THE RESULT ALL THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER 2011. SD/- SD/- SD-/- (G.C. GUPTA) VICE PRESIDENT SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD DATED THE 30 TH NOVEMBER 2011 COPY FORWARDED TO: 1. SHRI D.S. KARUNAKAR REDDY C/O. SHRI S. RAMA RAO ADVOCATE FLAT NO. 102 DOOR NO. 3-6-643 SHRIYA'S ELEGANCE ST. NO. 9 HIMAYATHNAGAR HYDERABAD-500 0 29. 2. THE DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRC LE-6 HYDERABAD. 3. THE CIT(A)-I HYDERABAD. 4. THE CIT (CENTRAL) HYDERABAD. 5. THE DR B BENCH ITAT HYDERABAD TPRAO