Asst.Cit, Central Circle-5, Hyderabad vs Assessee

ITA No.965/Hyd/2014 : Assessment year 2008-09

Asst. Commissioner of Income- V/s. Shri G.Veera Sekhar Reddy, tax, Central Circle-5, Hyderabad Hyderabad

(PAN - AHAPG 3918 L)

(Appellant) (Respondent)

Cross Objection No.48/Hyd/2014 (in ITA No.965/Hyd/2014) : Assessment year 2008-09

Shri G.Veera Sekhar Reddy, V/s. Asst. Commissioner of Income-tax, Hyderabad Central Circle-5, Hyderabad

(PAN - AHAPG 3918 L)

(Cross Objector) (Appellant-in-Appeal)

Assessee by : Shri D.V.Anjaneyulu

Department by : Shri H.Phani Raju

Date of Hearing 26.5.2015 Date of Pronouncement 05.06.2015

ORDER

Per P.M.Jagtap, Accountant Member :

This appeal is preferred by the Revenue against the order of the learned Commissioner of Income-tax(Appeals) VII, Hyderabad dated 20.2.2014 and the same is being disposed of alongwith the cross objection filed by the assessee, being C.O.No.48/Hyd/2014.

2. The assessee in the present case is an individual. A search and seizure action under S.132 was conducted on his residential premises. Subsequently, a notice under S.153A was issued by the 2 ITA No.965/Hyd/2014 Shri G.Veera Sekhar Reddy, Hyderabad

Assessing Officer, in response to which return of income was filed by the assessee declaring total income of Rs.4,72,540 and agricultural income of Rs.3,00,000. In the assessment originally completed under S.143(3) read with S.153A, vide order dated 24.12.2010, the total income of the assessee was determined by the Assessing Officer at Rs.1,00,46,040. After having failed to succeed in the appeal filed before the learned CIT(A) against the said order of the Assessing Officer, appeal was preferred by the assessee before the Tribunal and the Tribunal vide its order dated 29.2.2012 passed in ITA No.1490/Hyd/2011 restored the issue involved in the appeal of the assessee relating to the investment made in the purchase of land to the Assessing Officer, with a direction to examine as to whether the relevant payments made by the assessee were towards purchase consideration or development charges.

3. As per the directions of the Tribunal, the Assessing Officer issued notice on 1.6.2012 requirimg the assessee to furnish the relevant details alongwith necessary supporting evidence. In reply, the following submission was made by the assessee-

"i) The land was originally intended to be purchased in the name of GSP infratech Development Limited vide sale agreement date 22.11.07, entered into by GSP Infratech Development Ltd with Azis Mohd Khan, Jameel Mohd Khan, Mateeen Sharif and Osman Salmad, who are partners in a partnership firm by name S.K. Builders and paid advance for the purchase of agricultural lands admeasuring 11.18 acres in survey no.309,310,311 situated at Narkhoda Village, Shamshabad mandal, R.R. Distt.

ii) The sale agreement was later cancelled and sale deeds have been executed in the name of Smt.Vijayalakshmi and Sri 3 ITA No.965/Hyd/2014 Shri G.Veera Sekhar Reddy, Hyderabad

G.Veera Sekhar Reddy. The company had categorically contended that the agreement was cancelled and was never acted upon.

iii) We further submit that on request of Mr.Jameel Ahmed Khan the partner of SK Builder an amount of Rs.80,22,500/-

was paid in the form of cheques to the partners of SK Bilders and there relatives and the purchase of land was shown as land development charges."

Keeping in view the above submissions made by the assessee, the payments of Rs.80,22,500 claimed to be made by the assessee to M/s. SK builders were verified by the Assessing Officer and on such verification, he found that payment only to the extent of R.14,00,000 was made by the assessee to the partners of M/s. S.K.Builders while the balance amount of Rs.66,22,500 was paid to other persons who had no relationship with M/s. SK Builders. Though the assessee claimed that these payments were made to the other persons on the request of Shri Jameel Ahmed Khan, partner of S.K. Buidlers, this claim of the assessee was not accepted by the Assessing Officer, in the absence of any documentary evidence to support and substantiate the same. He held that the payments so made to the other persons other than the partners of M/s. SK Builders could not be considered as payments made towards the purchase of plot and accordingly, the amount of Rs.66,22,500 was added by him to the total income of the assessee treating the same as unexplained investment in the order dated 22.3.2013 passed under S.143(3) read with S.254 of the Act.

4. Against the order passed by the Assessing Officer under S.143(3) read with S.254, assessee again went in appeal before the learned CIT(A) and after considering the submissions made by the 4 ITA No.965/Hyd/2014 Shri G.Veera Sekhar Reddy, Hyderabad

assessee as well as the material available on record, the learned CIT(A) deleted the addition of Rs.66,22,500 made by the assessee for the following reasons given in paragraph Nos.6.1 and 6.2 of his impugned order.

"6.1 The Vendor M/s. SK Builders and their partner Sri Azeeez Ahmed khan has issued a letter to the AO in response to a notice issued u/s. 131. In this letter, it was clearly stated that the total sale consideration is Rs.3,37,77,500/-. A confirmation letter was also given in which it was stated as under:

" CONFIRMATION LETTER

We the undersigned partners of SK Builders confirm that we have received an amount of Rs.66,22,500/- out of the total consideration of Rs.3,37,77,500/- in the name of the following persons at our request Sl Name of the Date Ch.No. Amount(Rs) No. person

1. Munwar 22.11.07 266950 15,00,000 Hussain

2. Iqbal Unnisa 22.11.07 974512 15,00,000

3. Mohd Irfan 22.11.07 266949 5,00,000 Mohd Irfan 22.11.07 974521 5,00,000 Mohd Irfan 18.01.08 266845 5,01,000 Mohd Irfan 18.01.08 266846 5,02,000 Mohd Irfan 19.01.08 266847 4,98,000 Mohd Irfan 19.11.08 266848 4,99,000

4. Moin Shareef 22.11.07 974523 6,22,500 TOTAL 66,22,500 5 ITA No.965/Hyd/2014 Shri G.Veera Sekhar Reddy, Hyderabad

We also confirm that we have admitted the entire sale consideration of Rs.3,37,77,500/-."

6.2 The Hon'ble ITATs directions were to verify whether the payments were relatable to land or not. From the assessment order it is evident that the Assessing Officer has accepted 14 lakhs and disallowed the balance Rs.66.22 lakhs only because the payments were made persons other than land owners. From the letter of the vendor it is evident that the entire sale consideration of Rs.3.37 crore which the AO does not dispute, was received by them and even the payments made to others were as per their instructions. The amount is thus relatable to the purchase of land. Hence, the addition of Rs.66,22,500/- is therefore, deleted."

5. Aggrieved by the order of the learned CIT(A), the Revenue has preferred this appeal before the Tribunal on the following ground-

"On the facts circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.66,22,500/- on the basis of a confirmation letter issued by the partners of M/s. S.K. Builders which constitutes additional evidence and without giving an opportunity to AO to examine the said confirmation letter which is in violation of Rule 46A of IT Rules, 1962."

6. We have heard the arguments of both the sides and also perused the relevant material on record. The only grievance of the Revenue as projected in the solitary substantive ground raised in this appeal is that the additional evidence filed by the assessee in the form of a confirmation letter issued by the partners of M/s. SK Builders for the first time before the learned CIT(A) was relied upon by him to give 6 ITA No.965/Hyd/2014 Shri G.Veera Sekhar Reddy, Hyderabad

relief to the assessee without affording any opportunity to the Assessing Officer to verify the same. In this regard, the Learned Departmental Representative has invited our attention to the relevant portion of the orders of the Assessing Officer as well as the learned CIT(A) to point out that the said confirmation letter was not filed by the assessee before the Assessing Officer and the same was filed for the first time before the learned CIT(A). He has contended that the learned CIT(A) has given the relief to the assessee by deleting the entire addition of Rs.66,22,500 made by the Assessing Officer relying on the said confirmation letter, which clearly constituted additional evidence, without giving any opportunity to the Assessing Officer to verify the same. He has contended that there is thus clear violation of Rule 46A of the Income- tax Rules, 1962 by the learned CIT(A) and his impugned order therefore, be set aside and the matter be restored to the file of the Assessing Officer for giving him an opportunity to verify the confirmation letter.

7. The learned counsel for the assessee, on the other hand, has submitted that the confirmation letter issued by the partners of M/s.SK Builders was already there before the Assessing Officer and the same therefore, did not constitute additional evidence filed by the assessee before the learned CIT(A) for the first time, as alleged by the Learned Departmental Representative. He has invited our attention to the copy of the said confirmation letter placed in paper-book at page No.16 and submitted that the same was filed before the Assessing Officer alongwith a letter, copy of which is placed at page Nos.14 and 15 of the paper-book.

8. After considering the rival submissions and perusing the relevant material on record, we find merit in this appeal filed by the Revenue. A perusal of the copy of the relevant confirmation letter 7 ITA No.965/Hyd/2014 Shri G.Veera Sekhar Reddy, Hyderabad

placed at page no.16 of the assessee's paper-book shows that the same does not contain any date. Even the letter stated to be filed by the assessee before the Assessing Officer, a copy of which is placed at pages 14 and 15 of the paper-book is also undated and the same does not contain anything to show that the relevant confirmation letter was filed by the assessee before the Assessing Officer alongwith the said letter. On the other hand, there is a clear mention made by the Assessing Officer on page 3 of the assessment order that the claim of the assessee of having paid the amount of Rs.66,22,500 to persons other than the partners of M/s. SK Builders on the request of M/s.SK Builders, was not supported by any evidence filed by the assessee. We therefore, are inclined to accept the contention of the Learned Departmental Representative that the relevant confirmation letter was filed by the assessee for the first time before the learned CIT(A) and the same constituting additional evidence was relied upon by the learned CIT(A) to give relief to the assessee without giving any opportunity to the Assessing Officer to verify the same. There is thus a clear violation of Rule 46A of the Income-tax Rules, 1962 by the CIT(A), and his impugned order is therefore, liable to be set aside. We accordingly set aside the impugned order of the learned CIT(A) and restore the matter to the file of the Assessing Officer for deciding the same afresh after verifying the relevant confirmation letter filed by the assessee. Needless to observe, the Assessing Officer shall afford sufficient opportunity of being heard to the assessee.

9. As regards the cross objection filed by the assessee, it is observed that the same is filed merely to support the impugned order of the learned CIT(A). As a result of our decision rendered above, while disposing of the appeal of the revenue, setting aside the order of the learned CIT(A), the Cross objection filed by the assessee has become infructuous, and the same is accordingly dismissed.

8 ITA No.965/Hyd/2014 Shri G.Veera Sekhar Reddy, Hyderabad

10. In the result, Revenue's appeal is treated as allowed and assessee's Cross objection is dismissed.

Pronounced in the court on 5th June, 2015

Sd/- Sd/-

(Saktijit Dey) (P.M.Jagtap) Judicial Member Accountant Member

Dt/- 5th June, 2015

Copy forwarded to:

1. Shri G.Veera Sekhar Reddy, C/o. Anjaneyulu & Co., Chartered Accountants, 30 Bhagya Lakshmi Nagar, Hyderabad 500 080

2. Asst. Commissioner of Income-tax Central Circle 5, Hyderabad

3. Commissioner of Income-tax(Appeals) VII, Hyderabad

4. Commissioner of Income-tax Central Hyderabad

5. Departmental Representative, ITAT, Hyderabad.

B.V.S