Sri. K. Jagan Mohan Reddy, Hyderabad vs Department Of Income Tax

Income-tax Officer, Ward - Sri K. Jagan Mohan Reddy, 11(4), Hyderabad Hyderabad

PAN - AGKPK 3424C (Appellant) (Respondent)

Revenue by Shri Rajat Mitra Assessee by Shri A.V. Raghuram

Date of hearing 10-12-2014 Date of pronouncement 07-01-2015

O RDE R

PER SAKTIJIT DEY, J.M.:

Aforesaid appeal of the department is directed against order dated 10/08/20123 of ld. CIT(A)-VI, Hyderabad for the assessment year 2007-08.

2. Though the department has raised as many as 7 grounds, but, the only issue arising out of the grounds raised is relating to addition of Rs. 25 lakhs made by AO and deleted by ld. CIT(A).

3. Briefly the facts relating to the issue in dispute are, assessee is an individual. A survey was conducted in case of M/s S.V. Constructions u/s 133A on 31/01/2008. During the survey, a copy of agreement of sale dated 18/11/2006 was found which revealed that assessee along with three others have entered into an agreement of sale for purchase of 56 acres 24.5 guntas of land at Bogaram Village, 2 ITA No. 166 6/Hyd/20 12 Shri K. Jagan Moahn Red dy

Keesara Mandal, R.R. District and paid an advance of Rs. 4.90 crores. It was admitted by assessee during survey, out of the aforesaid total sale consideration, assessee's share was Rs. 1,22,50,000. Assessee also filed his return of income disclosing the aforesaid investment made by him and assessment in case of assessee was also completed u/s 143(3) on 30/06/09. Subsequently, during the assessment proceeding in case of Shri G. Sanjeeva Reddy, Managing Partner of M/s SV Constructions for the AY 2007-08, AO while verifying the copy of agreement of sale dated 18/11/06 noticed that the payment by assessee and other three partners is not Rs. 4.90 crores, but, they paid Rs. 5.90 crores. Thus, the excess payment of Rs. 1.00 crore was not admitted during the survey out of which assessee's 1/4 th share comes to Rs. 25 lakhs. As aforesaid investment was not disclosed, AO alleging escapement of income, reopened the assessment u/s 147 of the Act by issuing a notice u/ 148 on 17/03/11. In response to the said notice, assessee vide letter dated 13/04/11 requested AO to treat the return filed by him earlier as return in response to notice u/s 148 of the Act. During the assessment proceeding, when AO called upon assessee to explain the sale consideration mentioned in the agreement of sale dated 18/11/06 and the payment receipts evidencing such payment which were marked as page no. 44, 45 & 46, enclosed to the agreement of sale evidencing such payment, assessee submitted that an advance of Rs. 3.90 crores was paid to the vendors at the time of execution of agreement of sale on 18/11/06. However, when the agreement was drafted, all the vendors were not available to execute the agreement, therefore, an amount of Rs. 1 crore forming part of advance amounting to Rs. 3.94 crores was paid and temporary (kachha) receipt was obtained from the vendors present at that time with an understanding that the balance amount was to be paid after all the vendors execute the agreement. It was submitted that balance amount of Rs. 2.90 crores was also paid after all vendors have executed the agreement and total sum amounting to Rs. 3.90 crores was paid as mentioned in 3 ITA No. 166 6/Hyd/20 12 Shri K. Jagan Moahn Red dy

typed receipt duly acknowledged by 14 vendors. It was submitted, immediately on execution of the typed receipt, original temporary receipt for Rs. 1 crore was returned to the parties acknowledging the said receipt. Thus, advance paid on execution of agreement of sale was only Rs. 3.90 crores including Rs. 1 crore mentioned in the temporary receipt. It was submitted by assessee that the agreement of sale was entered with 14 members and unless all the parties acknowledged receipt of the amount, buyers could not pay the amount. It was submitted, receipt No. 44 was signed by two members and subsequently purchasers paid an amount of Rs. 2.90 crores and made one receipt for consolidated amount of Rs. 3.90 crores including Rs. 1 crore paid earlier as per receipt signed by two members. Thus, it was submitted by assessee that alleged amount of Rs 1 crore over and above Rs. 4.90 crores, admitted at the time of survey, was not paid. AO, however, did not find the explanation of assessee not convinced, hence, rejected the same. AO noted that as per the agreement of sale dated 18/11/06, it is clear that assessee along with three others have paid an amount of Rs. 3.90 crores, which is acknowledged vide receipt dated 18/11/06 in page no. 46. AO observed that, subsequently, as a part of first instalment of the balance amount of Rs. 2 crores, assessee and others have paid Rs. 1 crore as per page no. 45 without mentioning the date, but, mentioning the agreement of sale dated 18/11/06. Again on 21/12/06, they have paid remaining amount of Rs. 1 crore as per page 44. Thus, total payment made to the owners of the land was Rs. 5.90 crores. Accordingly, AO came to conclusion that the amount of Rs. 1 crore paid over and above, the disclosed sale consideration of Rs. 4.90 crores should have been apportioned equally amongst the four persons including assessee. Assessee's share of 25% of 1 crore being Rs. 25 lakhs was, therefore, treated as undisclosed investment and added to the income of impugned assessment year. Being aggrieved of such addition, assessee preferred appeal before ld. CIT(A).

4 ITA No. 166 6/Hyd/20 12 Shri K. Jagan Moahn Red dy

4. Ld. CIT(A) taking note of the fact that similar addition made in case of other persons, who along with assessee had purchased the property, was deleted in their cases by his predecessor, followed the same, and deleted the addition made in case of assessee. Being aggrieved, the department is before us.

5. Ld. DR submitted before us that the order of ld. CIT(A) in case of Shri G. Sanjeeva Reddy, has been reversed by the ITAT vide order dated 25/01/12 in ITA Nos. 509 to 511/Hyd/10. Thus, it was submitted that addition made by AO is to be restored.

6. Ld. AR though agreed to the fact that similar additions made in case of other purchasers have been sustained by ITAT reversing the decision of ld. CIT(A), but, he nevertheless tried to make out a case that actual sale consideration paid was Rs. 4.90 crores and not Rs. 5.90 crores. In this context, ld. AR relied upon a confirmation letter dated 31/12/10 issued by Shri P. Ramachandra Reddy, one of the vendors, affidavit dated 14/02/08 of the vendors and sale deeds evidencing cancellation of sale agreement dated 18/11/06. Ld. AR also filed a petition requesting for admission of these documents as additional evidences.

7. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. During the assessment proceeding of Shri G. Sanjeeva Reddy, one of the co-purchasers along with assessee, on examining the agreement of sale dated 18/11/06 along with receipts marked as page 44, 45 & 44, AO found that actual sale consideration paid by purchasers was to the tune of Rs. 5.90 crores and not Rs. 4.90 crores as claimed during the survey operation. Accordingly, addition of Rs. 25 lakhs each was made by AO in case of three other co purchasers of the land, namely, Shri Y. Sanjeeva Reddy, Shri Balanarashimha, 5 ITA No. 166 6/Hyd/20 12 Shri K. Jagan Moahn Red dy

and Shri G. Sanjeeva Reddy. However ld. CIT(A) deleted the additions. Being aggrieved of the order passed by ld. CIT(A), department came in appeal before ITAT in ITA Nos. 509 & 5011/Hyd/2011. The Tribunal after perusing the agreement of sale dated 18/11/06 and the receipts executed by vendors marked as page 44, 45 & 46 concluded that purchasers have paid an amount of Rs. 1 crore over and above Rs. 4.90 crores disclosed by them towards sale consideration. The finding of the Tribunal is as under:

"6. We have heard both the parties and considered the material available on record. In this case there is a valid receipt issued by Shri P Ram Sunder Reddy and Ms. P. Karuna for Rs. 1 crore. This amount has been received from the purchaser viz., Shri Y. Sanjeeva Reddy, S/o. Shri Sathi Reddy, M. Balanarsimha Reddy, s/o. late Adivi Reddy, Shri G. Sanjeeva Reddy, S/o. late G. Malla Reddy, K. Jaganmohan Reddy, s/o. late Anji Reddy. This receipt bears no date, however, was witnessed by two persons and signed by 2 vendors of 14 vendors viz., 1. P. Rama Sunder Reddy and 2. Smt. P. Karuna. The contention of the assessees' counsel is that this receipt of Rs. 1 crore has been included in the subsequent receipt which is signed by 14 parties on 18th November, 2006 for Rs. 3,90,00,000/-. As such the total payment made by the assessee towards purchase of 56 acres and 24 guntas of land at Bogaram village, Keesara Mandal is as follows.

18-11-2006 Rs. 3.90 Crores 21-12-2006 Rs. 1.00 Crores

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Total Rs. 4.90 Crores

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7. According to the learned authorised representative of the assessee, the receipts found during the course of survey as document at page-44 (undated receipt) at Rs. 1 crore is only signed by two parties viz., Shri P Ram Sunder Reddy and Ms. P. Karuna and this is not a valid receipt and this payment of Rs. 1 crore has been included in the receipt dated 18-11-2006 at Rs. 3.90 crores and the total consideration is to be considered at Rs. 4.90 crores. This contention of the assessee's counsel holds no merit. The sale agreement copy dated 18-11-2006 where it is mentioned that the assessee has made an amount of Rs. 3.90 crores and this is evidence by an independent receipt dated 18-11- 2006 marked as document marked on page No. 46 found during the course of survey. Further, Rs. 1 crore has 6 ITA No. 166 6/Hyd/20 12 Shri K. Jagan Moahn Red dy

been paid which is evidenced by an independent receipt found during the course of survey marked as page No. 45 wherein there was no mention of date of payment but with reference to the original Sale Deed dated 18-11-2006 and finally another amount of Rs. 1 crore has been paid on 21-12-2006 advanced by separate receipt found during the course of survey which was marked as page No. 44. As seen from the receipt dated 18- 11-2006 for Rs. 3.90 crores, this is an independent payment and why the assessee has taken two parties signatures on second receipt of Rs. 1 crore namely Shri P Ram Sunder Reddy and Ms. P. Karuna when all the 14 persons to the agreement are available on the same day for the receipt of money paid vide receipt found during the course of survey marked as page-

46. Being so, the contention of the assessee's counsel that when agreement was drafted, all the vendors are not available to execute the receipt, therefore, an amount of Rs. 1 crore forming part of the above said advance of Rs. 3.90 crores was paid and temporary receipt was obtained from the vendor presented at that time and the balance of Rs. 2.90 crores only paid, is incorrect and cannot be relied. Hence, in our opinion, we are not inclined to hold that the receipt dated 18-11-2006 for Rs. 3.90 crores is inclusive of Rs. 1 crore and these two receipts namely, Page No. 46 dated 18-11-2006 for Rs. 3.90 crores and receipt undated page No. 45 for Rs. 1 crore to be considered as independent and separate receipts and thus total consideration to be considered as Rs. 5.90 crores, considering page Nos. 46, 45 and 44 and not Rs. 4.90 crores. Accordingly, this amount is to be assessed in collectively all the assessees cases according to their share and therefore the deletion of addition made by the CIT (A) in all these cases is not justified and we uphold the order of the assessing officer and reverse the orders of the CIT (A) for the assessment year under consideration. Therefore, this common ground of the Revenue is allowed."

8. Thus, as can be seen from the aforesaid extracted portion from the order of Tribunal, the coordinate bench of this Tribunal while considering similar additions in case of other co-purchasers of the land, has given a categorical finding that the amount of Rs. 1 crore was paid over and above disclosed sale consideration of Rs. 4.90 and accordingly, restored the addition made by AO. In the present case, the facts are materially same and moreover, ld. CIT(A) has also deleted the addition by simply relying upon the order passed by the first appellate authority in case of one of the co-purchasers, namely, 7 ITA No. 166 6/Hyd/20 12 Shri K. Jagan Moahn Red dy

Y. Sanjeeva Reddy and G. Sanjeeva Reddy. In the aforesaid facts and circumstances, respectfully following the order of the coordinate bench as referred to hereinabove, we reverse the order of ld. CIT(A) and restore the addition of Rs. 25 lakhs made by AO. As far as the additional evidences sought to be relied upon by ld. AR, we are not inclined to entertain them at this stage. As can be seen, the confirmation letter dated 31/12/10 and the affidavit by vendors dated 14/02/08 were prior to the order passed by coordinate bench in case of other co-purchasers and in fact was prior to the assessment order and order of ld. CIT(A), however, at no stage, they were brought to the notice of AO or ld. CIT(A). Even they were not brought to the notice of ITAT while deciding the case of other co-purchasers. In the aforesaid facts and circumstances, we are not inclined to entertain the plea of assessee for considering them as fresh evidences. Accordingly, grounds raised by department are allowed. The order of CIT(A) is set aside and that of AO is restored.

9. In the result, appeal of the department is allowed.

Pronounced in the open court on 07/01/2015.

Sd/- Sd/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Hyderabad, Dated: 7 th January, 2015 kv Copy to:-

1) ITO, Ward - 11(4), 'D' Block, 5 th Floor, IT Towers, AC Guards, Hyderabad

2) Sri K. Jagan Mohan Reddy, 1-9-69/35, Dr. AS Rao Nagar, ECIL Post Hyderabad - 500 004

3) CIT(A)-VI, Hyderabad

4) CIT-V, Hyderabad

5) The Departmental Representative, I.T.A.T., Hyderabad.