Addition u/s 69A is not sustainable where the assessee explains the source of cash found in his possession and had also offered the same for taxation.

These appeals are filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Guntur for the Assessment Year (A.Y.) 2010-11 and 2009-10 and by the assessee for the A.Y.2004-05 to 2008-09. For the sake of convenience, these appeals are clubbed, heard together and a common order is being passed as under.

2. All the grounds, in this appeal are related to the cash found and seized during the course of search amounting to Rs.2,94,17,500/-. A search u/s 132 was carried out in this case on 19.05.2009, consequent to search action, in the case of Sri Koganti Durga Prasad on 18.05.2009, while he was present at Gandhi Cooperative Urban bank Ltd., Museum Road, Vijayawada on 18.05.200 with the cash of Rs.2,94,17,500/- in his possession. When enquired about the source of cash, he explained that the cash does not belong to him but withdrawn from the bank lockers of four persons as per the details given in page No.2 of the assessment order as under:

S.No. Locker Number Name of Owner

1. B 1/2 Sri Nukkanti Sudheer Babu

2. B 1/3 Sri Vemuri Venkata Rao

3. B 3/2 Sri Abburapu Upendra

4. B 3/3 Sri Koganti Veera Venkata Nageswara Rao

2.1. He further submitted that the cash was withdrawn from the lockers on the instructions of managing partner Sri Koganti Venkata Ramaiah. Therefore, consequential search u/s 132, was conducted in the case of Sri Vemuri Venkata Rao on 19.05.2009 being one of the locker owners. During the course of search, two diaries pertaining to calendar years 2008 and 2009 were found and seized as Annexure A/VVR/Res/01 and A/VVR/Res/02 which contained the details of real estate transactions carried out by the assessee. The assessee was asked to explain the activity of the business and the sources of funds and he explained that he was engaged in the real estate business and entered into the agreements for purchase and sale of immovable properties, giving token advances and later on he used to search for the prospective buyers and sold the lands at higher prices, on finding the suitable buyer. Registration of the property was done by the original owners. A statement was recorded from the assessee on 19.05.2011 and he had admitted that the sum of Rs.2,94,17,500/- cash found in possession of Sri Koganti Durga Prasad was belonging to him. The Assessing Officer (AO) also made enquiries with other locker owners, who have confirmed that the cash found was belonging to the assessee Mr. Venkata Rao. However, the AO found that assessee omitted to admit the cash of Rs.2,94,17,500/- in the return of income filed for the A.Y 2010-11. Therefore, the AO asked the assessee as to why the sum of Rs.2,94,17,500/- should not be treated as undisclosed income in the hands of the assessee for the A.Y.2010-11. In response to show cause notice, the assessee had submitted that the said sum of Rs.2,94,17,500/- was already admitted as income for the A.Y.2009-10, hence, no further addition was warranted in the A.Y.2010-11. Not being convinced with the explanation of the assessee, the AO made the addition of Rs.2,94,17,500/- as unexplained cash found during the course of search and completed the assessment.

3. Against which the assessee filed appeal before the CIT(A) and the Ld.CIT(A) deleted the addition made by the AO observing that the said amount of Rs.2,94,17,500/- was admitted by the assessee for the A.Y.2009- 10, hence, taxing the same amount in the A.Y.2010-11 would amount to double taxation. Therefore, deleted the addition made by the AO and allowed the appeal of the assessee.

4. Aggrieved by the order of the Ld.CIT(A), the revenue filed appeal before this Tribunal.

5. We have heard both the parties and perused the material placed on record. In the instant case, as observed from the order of the Ld.CIT(A), the assessee had already admitted the said sums as income for the A.Y.2009- 10. On perusal the paper book filed by the assessee in page No.2, the assessee filed the computation of income and admitted the net profit of Rs.2,94,17,500/- and claimed that the same amount was lying in the bank lockers. He further stated that there was no business carried on by the assessee subsequently. The AO made the addition of the same amount in the A.Y.2010-11 without bringing any evidence to show that the said amount of Rs.2.94 crores was spent by the assessee for any other purpose. Having conducted the search u/s 132, it is needless to mention that the department needs to produce the evidence to tax the sum which was already admitted as income either applied for expenditure or made as investment . No such evidence was brought on record by the department. The CIT(A) also has given a clear finding that the said amount is not permissible to tax in the impugned assessment year. For the sake of clarity and convenience, we extract para No.6.3 of the order of the Ld.CIT(A) which reads as under :

“6.3. There is considerable force in the arguments rendered by the appellant. The Assessing Officer has not brought on record any evidence to prove that the cash seized of Rs 2,94,17,500/- on 18.05.2009, should be taxed in the Asst Year 2010-11 only. Further, the appellant has offered the cash seized as income in the Asst: Year 2009-10 and paid taxes thereon. The cash seized i.e. Rs 2,94,17,500/- during the search proceedings closely corresponds to the total income of Rs.2,94,17,990/- - that has been declared by the appellant for the Asst Year 2009-10. In other words, the appellant has already declared the entire cash seized as income for the Asst. Year 2009-10. Hence, I am of the opinion that the income already declared by the appellant in one assessment year cannot be brought to tax in other assessment year, which leads to double taxation, unless there is a clear and conclusive evidence that there is no link between the income declared for Asst Year 2009-10 and the cash seized. The Assessing Officer has not brought out any evidence on record to show that some other activity has been carried out during the Asst Year 2010-11, which has resulted in the cash seizure of Rs 2,94,17,500/-The Assessing Officer is clearly taxing the income twice i.e. for the Asst Year 2009-10 and 2010-11, leading to double taxation of the same income which is against the cannons of law. In absence of any such evidence brought out by the Assessing Officer that the cash seized does not represent income already offered for the Asst.Year 2009-10, the addition made by the Assessing Officer on account of deemed income u/s 69A of the Act is only based on presumptions and conjectures and not based on facts. Therefore, the Assessing Officer is directed to delete the addition so made, as the appellant has already offered the said income in the Asst.Year 2009-10.”

5.1. As discussed earlier, the assessee had offered the sum of Rs.2,94,17,500/- as income for the A.Y.2009-10 representing the profit on sale of lands. The assessee also explained that he kept the said sum in lockers and did not carry on any business activity during the year. As per section 69A of the Act the cash found in the possession of the assessee for which the assessee fails to offer any explanation required to be taxed. In the instant case the assessee had explained the source of cash found in his possession and also offered the same for taxation in the A.Y.2009-10. The AO made the addition of same amount which was already taxed by the AO for the A.Y.2009-10 and taxing the same amount in 2010-11 is nothing but double taxation which is not permitted by the law. The department also did not place any evidence to show that the cash seized does not represent the income offered for the A.Y.2009-10. Therefore, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld.

6. Appeal of the revenue for the A.Y. 2010-11 is dismissed.

7. All the grounds in this appeal are related to the addition of Rs.8,40,00,000/- made u/s 40A(3) of the Act which was deleted by the Ld.CIT(A). In this case, search u/s 132 was conducted in the case of Sri Koganti Durga Prasad on 18.05.2009. Consequently, search action also was undertaken in the case of the assessee on 19.05.2009. During the course of search, diaries marked as Annexure A/VVR/Res/01 and A/VVR/Res/02 were found and seized which contained the details of real estate transactions recorded by the assessee. A statement u/s 132 was recorded by the AO from the assessee on 19.05.2009. In the statement recorded, the assessee had accepted that the amounts recorded in the diaries related to the advances paid for purchase of lands. The details of the transactions recorded are as under :

Date Narration Transaction Amount Rs.

11.06.2008 Kondapur land advance given 50,00,000

26.06.2008 Kondapur land advance + net profit 75,00,000

02.07.2008 Serilingampally land advance given 75,00,000

26.08.2008 Serilingampally land advance + net profit 1,05,00,000

03.09.2008 Madhapur land advance given 50,00,000 Kondapur land advance given 55,00,000

04.10.2008 Madhapur land advance + net profit 70,00,000

07.10.2009= Kondapur land advance + net profit 85,00,000

13.10.2008 Maheswaram land advance

7.1. The AO compiled the cash book, purchase ledger and sales register from 01.04.2008 to 31.03.2009 from the seized diaries and worked out the aggregate transactions of Rs.10,80,00,000/- made during the financial year ending 31.03.2009. The AO was under the impression that the advances given to the vendors constitute the purchases and refund of advances with profit takes the character of sales. Since, the assessee made payments exceeding Rs.20,000/- in cash in all the transactions the AO viewed that the cash payments made to the vendors to the extent of Rs.8,40,00,000/- for purchase of lands, forms part of stock in trade for the A.Y. 2009-10, thus viewed, it was not an allowable expenditure as per section 40A(3) of the act. Therefore, the AO asked the assessee to explain as to why the said amount of Rs.8,40,00,000/- should not be brought to tax u/s 40A(3) of the Act and the assessee filed explanation stating that he has made the payment originally towards investment for short term capital gains and he has never had any intention to do the real estate business. Therefore, submitted that there is no case for making the addition u/s 40A(3) of the act. However, the AO did not accept the contention of the assessee that he was not in the real estate business and found from the conduct and the volume of transactions made by the assessee that the assessee was into real estate business, hence, held that the payment made by the assessee amounting to Rs.8,40,00,000/- was nothing but cash purchases, hence made the addition of Rs.8,40,00,000/- u/s 40A(3) of the Act.

8. Against which the assessee went on appeal before the CIT(A) and the Ld.CIT(A) observed that there was no purchase or sale transaction in the instant case. The assessee had only entered into agreement by giving token advance as per seized diaries and the entries in diaries also does not suggest the purchase or sale of land. The Ld.CIT(A) found that as per the Transfer of Property Act, in case of tangible immovable property exceeding the value of Rs.100/- required to be made only through registered instrument but not by unregistered documents. The Ld.CIT(A) further observed that in the transaction, neither there was a part performance u/s 53A of the Transfer of Property Act nor there was a registered agreement as required for transfer of immovable properties. Therefore, held that neither the sale nor real estate business was carried on by the assessee and the payment made as advance does not constitute purchase of stock in trade. Accordingly held that there is no case for making the addition u/s 40A(3), thus deleted the addition. The finding of the Ld.CIT(A) in brief is as under :

(i) No books of accounts were maintained by the appellant and all that was found during the course of search was a diary with rough notings.

(i) In the absence of books of accounts, the income would amount to estimation and the provisions of Section 40A(3) do not apply to estimation cases in view of judicial pronouncements mentioned earlier in this order.

(ii) The seized document indicates only payment of advance, Which does not amount to sale and consequential purchase in view of Accounting Standard 9 and the judicial pronouncements discussed in para 17.9.

9. Against which the department filed appeal before this Tribunal. During the appeal hearing, the Ld.DR submitted that the assessee is engaged in the real estate business and the volume of the transaction and the conduct of the assessee establishes the same. Though the assessee submitted that he has made the investments, the volume does not show that he had made the investments. During the year under consideration, the assessee has made the transactions to the extent of Rs.10.80 crores, out of which the advances given works out to Rs.8.40 crores and sales amounted to Rs.10.80 crores. It is noted in the diary that the advances were received along with the profit on 26.08.2008, 04.10.2008, 21.03.2009 which clearly establishes the purchase and sale of transaction, therefore, contended that the Ld.CIT(A) is not correct in holding that the assessee has given the token advances, but not purchased the lands. Though the Transfer of Property Act mandates the registration of the immovable property, there is a prevalent practice in Andhra Pradesh and Telangana with regard to entering unregistered agreements. Therefore, the presumption of the Ld.CIT(A) that the assessee has not completed the purchase and sale transaction is incorrect. Since the assessee is engaged in the real estate business and made the payments for purchase of lands in excess of Rs.20,000/- otherwise than crossed cheque, the entire payments made in the guise of advances required to be disallowed u/s 40A(3) of the Act. Thus, the Ld.DR argued that the AO rightly held that the payment made for purchase of lands to the extent of 8.40 crores attracts the provisions of section 40A(3) of the Act. The Ld.DR further submitted that as discussed earlier in this order, the assessee has not maintained the books of accounts but recorded the entire transactions in the note book. Therefore, the AO compiled the sales ledger and purchase ledger and profit and loss account, hence the same cannot be found fault with the AO. When the entire information is available on record, the AO is free to compile the information, therefore, argued that the information made available in the loose sheets or in the note book required to be considered as books of accounts. Accordingly requested to set aside the order of the Ld.CIT(A) and allow the appeal of the revenue.

10. On the other hand, the Ld.AR submitted that the AO disallowed the sum of Rs.8,40,00,000/- u/s 40A(3) of the Act. Section 40A(3) is intended to prevent unaccounted money being used for clandestine activities. In the case of the assessee, there were no such transactions to invoke the provisions of section 40A(3) of the Act. All the transactions were recorded in the note book and made available to the AO. The assessee has not maintained any books of accounts, did not claim any expenditure, only given token advances which should not be considered as purchase or sale, since no purchase or sale is involved in the assessee’s case, hence, there is no case for expenditure to be disallowed u/s 40A(3) of the Act. The Ld.AR argued that the notings made in the diary should not be taken as purchase or the sale transaction, notings were made without having any details such as name of the person to whom the advances were given, extent of land, rate of land, survey number, the total agreed consideration, advances paid, balance payable etc. In the absence of above details, notings made in the diary can only be considered at it’s face value of advances, but not purchases. As rightly observed by the Ld.CIT(A), the land transactions required to be registered before the Sub Registrar for purchase and sale if the value of the property exceeds Rs.100/-. In the absence of registered document and taking possession of land, there cannot be any purchase or sale of immovable property. In the instant case, though the AO viewed that the assessee is engaged in the purchase and sale of lands, no evidence was brought on record to show that the assessee had purchased and sold the lands. Not even a single instance was brought on record to show that the assessee has purchased or sold the land. Therefore, argued that there was no purchase or sale of land in the assessee’s case. The assessee has only made token advances for purchase of land and later, after finding the buyer, the land was sold and the original owner has registered the land and the assessee had received the advance along with the profit and the same was offered to tax. Since the assessee did not claim any expenditure in respect of purchase, there is no case for invoking section 40A(3) of the Act, thus, argued that the Ld.CIT(A) rightly held that there was no purchase or sale transaction, hence requested to uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue.

11. We have heard both the parties and perused the material placed before us. The limited issue in this case is whether the token advances made by the assessee for purchase of land constitute the expenditure for purchase of land or not? The department’s contention is that, since, the assessee had received back the advance along with the profit, the advance given by the assessee constitutes purchases and the advance received back along with the profit, constitutes sale transaction. In the instant case, no evidence was found during the course of search evidencing any purchase or sale of land with the registered/unregistered documents such as sale deed, sale agreement, or purchase agreement or sale agreement cum possession etc. either for purchase of land or for sale of land. The only material found by the department was the diary containing the details of land advances given by the assessee on various dates as mentioned in the assessment order in the earlier paragraphs. In the diary there was noting of advance paid for the lands of Nanakramguda, Kokapet , Serilingampally etc., but no other details were available. Similarly, the assessee also made noting regarding receipt of the advance along with the profit. As per the notings, the assessee made substantial sums as profits in the short period. The AO compiled the cash book ledger, purchase ledger and sales ledger as per the notings in the diary and held that the advances paid for purchase of land were nothing but amounts paid for purchase of lands which is to be regarded as purchase expenditure. Similarly, the AO held that receipt of advance along with profit constitutes the sale transaction. Thus held that the amounts paid for purchase of land exceeding Rs.20,000/- required to be taxed as disallowance of expenditure u/s 40A(3) of the Act. Accordingly disallowed the sum of Rs.8.40 crores and added back to the income. In the instant case, the assessee had neither maintained the books of accounts nor claimed the expenditure to make the disallowance u/s 40A(3) of the Act. Even the note books do not contain the details of incidental expenditure, such as salaries, taxes, wages, travelling expenditure, stamp duty and other expenses relatable to business. In the circumstances, compiling the accounts taking the notings of token advance and the amounts received back is absurd and incorrect. The assessee had only given the token advances and received back the amounts with some profit as per the diaries. The movable properties are purchased by payment of purchase price and taking delivery of the goods. The purchase of movables is completed on payment of the agreed consideration and taking delivery of the property intended to be purchased. On delivery of the property ownership vests with the buyer. Whereas in the case of immovable property, the purchase transaction is completed when the buyer makes the payment, gets the document registered in his favour i.e. sale deed registered and taking the property in his possession. This view is supported by the stamps and Registration act as weel as transfer of property act. Therefore, the conditions to be satisfied for acquiring the immovable property are agreement for purchase, payment of purchase consideration, registration of document for purchase of the property, taking delivery of the property and holding possession of the property. Apart from the above, the property also required to made mutation in the concerned records of village/municipality/panchayat/revenue etc. Unless the property gets registered and possession is taken, the buyer do not get the title over the property and is barred from entering into any transaction with the third party. So long as the title does not vest with the buyer, he cannot transfer the title to the any other party. For the purpose of acquiring any immovable property, the details such as name of the person from whom the property is purchased, description of the property, extent of land, survey number, location, boundaries etc., are required and to be reduced in writing on purchase document. It is also necessary to verify with regard to encumbrance, legal title held by the vendor before purchase of the property. More or less, the same process is required for sale of the property. Sale transaction completes as and when the consideration is received, the document registered transferring the property in favour of the buyer and delivering the possession of the property to the buyer. Any immovable property with the value of over and above Rs.100 required to be registered as held by the Ld.CIT(A). The Ld.CIT(A) discussed at length in his order, how the immovable property is transacted, whether registration is necessary or not, whether the transactions recorded in the diary amounts to purchase and sale of immovable property or not etc. in detail in the order. In the instant case, as discussed above, during the course of search, the diary was found with the notings of land advances given and the advances received along with the profit. The assessee has stated during the course of recording the statements and in the assessment proceedings that he was engaged in the real estate business as middle man and giving token advances and after finding the prospective buyer, the property was sold by the original owner of the land and the property got registered by the original owner of the land. After completion of the sale transaction the assessee was receiving back the advances given by him along with the profit. Except notings made in the diary with regard to giving token advances for purchase of land in various places such Nanakramguda, Kokapet, Kondapur, Sarilingampalli, Madhapur etc., no other details were mentioned in the diary such as name of the person with whom the land transaction was entered, extent of land, rate per square yard, total consideration, boundaries etc.. There was no mention with regard to taking possession of the property also. In the circumstances, the transactions mentioned in the diaries, neither gives any indication of purchase of land or sale of land.

11.1. Section 2(47) of Income Tax Act defines transfer as under:

(47)“transfer", in relation to a capital asset, includes,-

(i) the sale, exchange or relinquishment of the asset; or

(ii) the extinguishment of any rights therein; or

(iii) the compulsory acquisition thereof under any law; or

(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock- in- trade of a business carried on by him, such conversion or treatment;] 6 or]

(v) 7 any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of As far as capital asset is concerned there is case for application of section 40A(3) of the Act. Even if the transaction is to be considered as part performance , Transfer of property act, Section 53A says that if a person makes a agreement with another and lets the other person act on the behalf of the contract; such a person creates an equity himself that can not be resisted on the mere grounds of absence of formality in the evidence or contract of such a transfer. .The essentials of part performance u/s 53A are asunder:

a) There must be a written contract for transfer of an immovable property signed by or on behalf of the transferor. The doctrine can not be applied if there is a void agreement or no agreement.

b) There must be consideration;

c) The contracts should give out the terms of the transfer with reasonable certainty;

d) The transferee must have taken possession as a result of this contract or continued in possession if he was already in possession of the property;

e) The transferee must have done some act in furtherance of the contract. Acts done prior to the agreement or independent of it can not be deemed to be part performance of the contract; and

f) The transferee should have performed his part of the deal or be willing to perform it.

In the instant case, notings made by the assessee in the diary do not satisfy the conditions of transfer either as per transfer of property act or Income Tax Act. Even the same cannot held as transfer within the meaning of Income Tax Act, since, there was no indication of sale, exchange or relinquishment of the asset or any transaction involving the allowing of possession of any immovable property to be taken or retained in part performance, as the essentials of part performance are absent. Therefore, mere mention of land advance cannot constitute purchase of immovable property.

11.2. The assessee has neither maintained the books of accounts nor claimed any expenditure. Section 40A(3) is invoked if the assessee incurs, the expenditure in excess of Rs.20,000/- paid otherwise than crossed cheque. In the instant case, the assessee stated initially, that he made the advances with an intention of investment. Though search was conducted in the assessee’s premises, the department did not lay its hands on any Sri Vemuri Venkata Rao, Vijayawada evidence to show that the assessee has in fact purchased the lands and sold the same and made an organized activity of purchase and sale of lands to hold that the assessee has engaged in the business activity. Though the AO has stated that the advances constitute purchase, no agreement, no bills were found by the department. In the absence of any agreement, registered or unregistered, evidencing the purchase of land with specific details such as name of the owner, extent of land, total consideration and taking possession of the land by the buyer, mere noting in the diary for payment of token advance cannot be treated as the purchase transaction. Unless the purchase transaction is completed with registration and taking possession of the land, the transaction cannot be treated as sale orpurchase as envisaged in section 54 of Transfer of Property Act or section 2(47) of the Income Tax Act. Further as per Section 17 of the Registration Act, 1908, all transactions that involve the sale of an immovable property for a value exceeding Rs 100, should be registered. No such registered document was found by the department during the course of search. Since no evidence was placed by the department, supporting the purchase of land, we are unable to accept the contention of the Ld.DR that the token advances made by the assessee acting as middleman as purchaser.

The Sri Vemuri Venkata Rao, Vijayawada practice of making token advances and finding the buyer is very much prevalent practice in the states of Andhra Pradesh and Telangana. Therefore, as rightly observed by the Ld.CIT(A) acting as middleman forpurchase and sale of land also constitutes business. In the instant case, the material was found indicating the advances paid by the assessee during the course of search. Mere payment of advances for purchase of land cannot be treated as the purchase unless the transaction is complete. As per the presumption, the notings made in the seized documents are true and correct. The assessee did not maintain the diary for the sake of the department and he maintained the diary for personal use. Therefore whatever notings made in the diary required to be considered as true and correct unless there is material to establish otherwise. In the instant case, the department did not place any evidence to show that the notings made in the diary were incorrect or partially correct. Therefore, we hold that the transactions recorded in the notings are nothing, but the token advances given for purchase of land and received back along with profit, thus, the same cannot be treated as purchase and sale transactions. Section 40A(3) is not applicable in the case of advances given for purchase of land.

Therefore, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. The appeal of the revenue on this ground is dismissed.

12. In this case, the assessee did not file the returns of income originally, hence the AO issued the notice u/s 153A of the Act and in response to which the assessee filed the returns of income for the impugned assessment years as under :

A.Y. Returned Income

2004-05 nil

2005-06 nil

2006-07 nil

2007-08 20

2008-09 50

13. Subsequently, the AO has taken up the case for scrutiny and completed the assessment on total income as under :

A.Y. Assessed Income

2004-05 1,56,000

2005-06 17,15,000

2006-07 6,30,000

2007-08 1,50,020

2008-09 1,60,050

14. In the assessments made u/s 143(3) r.w.s. 153A, the AO rejected the assessee’s claim for agricultural income and assessed the agricultural income as regular income. Thus made the following additions to the returned income.

A.Y. Addition made

2004-05 1,56,000

2005-06 17,15,000

2006-07 6,30,000

2007-08 1,50,000

2008-09 1,60,000

15. The assessee went on appeal before the CIT(A) and the Ld.CIT(A) allowed the relief of Rs.2 lakh for the A.Y.2006-07 and sustained the remaining additions for the assessment years under consideration.

16. Against which the assessee filed appeal before this Tribunal. During the appeal hearing, the Ld.AR submitted that the assessee is an agriculturist having no other income for the assessment years consideration, hence, the assessee is not obliged to furnish the return of income as per the Income Tax Act, since the agricultural income is exempt. The assessee filed the return of income in response to notice u/s 153A. The Ld.AR further submitted that during the course of search, the AO has not found any incriminating material evidencing the unaccounted income and for the assessment year 2004-05, 2008-09, the additions were made without having the seized material. Therefore, argued that the additions made without having seized material required to be deleted as per the decided case laws. The assessee also relied on the following decisions of this Tribunal :

(a) ITAT Delhi in the case of Amar Chand Gupta I.T.A.No.3401/Del/2009

(b) ITAT Visakhapatnam in the case of L Suryakantham, I.T.A. No.300/Viz/012

(c) ITAT Visakhapatnam in the case of Bhashyam Ramakrishna, I.T.A.No.440/Viz/2013

(d) ITAT Hyderbad in the case of Midwest Gold Ltd., , I.T.A. No.1064/H/2014

(e) Hon’ble High Court of Calcutta in the case of Giridharilal Goenka, , I.T.A. No.179 ITR 122 (Cal)

(f) Hon’ble High Court of Delhi in the case of Pepsico India Holdings (P) Ltd. 50 Taxmann.com 299

(g) ITAT, Hyderabad in the case of Rajkumar Birla, I.T.A. No.945/Hyd/2012

(h) ITAT, Hyderabad in the case of Anil Kishore Agarwal, I.T.A. No.493/Hyd/2011

16.1. The Ld.AR further argued that the assessee is an agriculturist and has not maintained the books of accounts. The AO has made the addition u/s 68 which is bad in law. As per sub section 12A of section 2 of the Income Tax Act, the Act defines books of accounts and from the definition of books of accounts, it is understood that the bank statement issued by the bank to its customers cannot be held to be books of accounts maintained by the assessee. Therefore, submitted that the AO is not permitted to make addition u/s 68 in respect of the deposits made in the bank account. The assessee relied on the decision of ITAT Delhi in the case of Vinesh Maheswari Vs. Income Tax Officer [2019] 103 taxmann.com 274 (Delhi- Trib). Accordingly argued that the addition made by the AO is bad in law and requested to delete the same.

17. On the other hand, the Ld.DR submitted that in the instant case, the assessee has not filed the return of income, hence the question of concluding assessment does not arise. In the absence of filing the return of income, it cannot be presumed that after expiry of time limit for issue of notice u/s 143(2), the assessments gets completed. Further, the Ld.DR submitted that the assessee has furnished the return of income in response to notice u/s 153A of the Act. Once the return of income is furnished, the AO is permitted to examine the issues, books of accounts and information and make the assessments on the basis of information furnished by the assessee. Therefore, submitted that the AO has rightly examined the issues contained in the returns of income filed by the assessee and the information made available during the course of assessment proceedings and completed the assessment as per law which was confirmed by the Ld.CIT(A). Therefore, argued that the Ld.CIT(A) rightly upheld the assessment made by the AO, hence no interference is called for.

18. With regard to additions made u/s 68 of the Act, the AO relied on the orders of the lower authorities and the sections of the Act.

19. We have heard both the parties and perused the material placed on record. In the instant case, the assessee claimed to be an agriculturist and having agricultural income, which was not controverted by the department with tangible evidence. The agricultural income is exempt from taxation. Since, the assessee is having only agricultural income, the assessee is not obliged to file the return of income. In the instant case for the assessment years 2004-05 to 2008-09 the time limit for issue of notice u/s 143(2) got expired by the time search conducted. Since the time limit for issue of notice u/s 143(2) was expired, the assessments for the A.Y.2004-05 to 2007-08 required to be considered as unabated and completed assessments. As per the decided case laws, the AO is not permitted to make addition in the case of completed assessment without having the seized material. Identical issue was considered by the Tribunal in the case of Sri Rayapati Venkata Koteswara Prasad Vs. ACIT, Central Circle, Vijayawada in I.T.A. No.566/Viz/2014 dated 27.09.2017 and held that no addition is permitted in the case of completed assessments without having the seized material. For the sake of clarity and convenience we extract relevant part of the order of this Tribunal in para No.7, 8, 9 and 10 which reads as under:

“7. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. In this case, search u/s 132 of the Act was carried out on 8.2.2006 and by the time search was conducted, the time limit for issue of notice u/s 143(2) of the Act got expired. The return was processed u/s 143(1) of the Act. Therefore, the assessment was completed in respect of assessment for the assessment year 2001-02. This Tribunal in the case of Y.V. Anjaneyulu Vs. DCIT (Central Circle), Vijayawada in ITA Nos.513 & 514/Vizag/2013 held that there is no case for making addition u/s 153BA r.w.s. 143(3) of the Act, if no incriminating material was found during the course of search in completed assessments.

This Tribunal while passing the order in the cited case has relied on the decision of ITAT Special Bench in the case of All Cargo Global Logistics Limited Vs. DCIT (2012) 137 ITD 287 and the decision of Hon’ble A.P. High Court in the case of CIT Vs. M/s. AMR India Limited in ITTA No.354 of 2014 dated 12.6.2014.

8. The similar issue has been considered by the Hon’ble ITAT Kolkata bench in the case of Smt. Yamini Agarwal Vs. DCIT (Central Circle)-3, Kolkata reported in 83 Taxman.com 209 after considering the decision of special bench ruling in the case of All Cargo Logistics and the decision of Hon’ble Karnataka High Court in the case of Canara Housing and the Bombay High Court decision in the case of Anil Kumar Bhatia expressed a view that in respect of assessments completed prior to the date of search the scope of proceedings u/s 153A of the Act has to be confined only to the material found in the course of search. For the sake of convenience, we extract the relevant para-25 & 26 of the cited order.

25. We therefore hold that the scope of the proceedings u/s.153A in respect of assessment year for which assessment have already been concluded and which do not abate u/s.153A of the Act, that the assessment will have to be confined to only incriminating material found as a result of search. The next aspect to be considered is as to when returns of income filed u/s.139 of the Act are shown to have been accepted without an intimation u/s.143(1) of the Act or without any notice issued u/s.143(2) of the Act within the time limit contemplated by the proviso thereto, can be said to be assessment proceedings concluded that have not abated u/s.153A of the Act. Section 153A of the Act, uses the expressing "pending assessment or reassessment". When a return is filed and when neither an acknowledgement or intimation u/s.143(1)of the Act is issued nor a notice u/s.143(2) of the Act is issued within the time limit laid down in the proviso to Secc.143(2) of the Act, the proceedings initiated by filing the return are closed. In the present case, the period for issuing the notice u/s 143(2) elapsed. Therefore the process has attained the finality which can only be assailed u/s 148 or 263 of the Act. It can thus be concluded that making of an addition in an assessment under section 153A of the Act, without the backing of incriminating material, is unsustainable even in a case where the original assessment on the date of search stood completed by absence of issue of intimation under section 143(1) of the Act or by not issuing notice u/s.143(2) of the Act within the time limit laid down in the proviso to Sec.143(2) of the Act, results in an assessment proceedings and where such assessment proceedings are completed prior to the date of search then they do not abate in terms of the Second Proviso to section 153A(1) of the Act. The decision of the ITAT Kolkata Bench rendered in the case of Shri Bishwanath Garodia (supra) on identical facts of the case as that of the Assessee in the present case, clearly supports our conclusions as above.

26. In the light of the discussion above, our conclusion is that in the present case, the issue dealt with by the AO in the assessment order u/s.153A of the Act, could not and ought not to have been examined by the AO in the assessment proceedings u/s.153A of the Act as the said issue stood concluded with the assessee's return of income being accepted prior to the date of search and no notice having been issued u/s.143(2) of the Act within the time limit laid down in that section. Such assessment did not abate on the date of search which took place on 28.3.2008. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s.153A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment years could not have been subject matter of proceedings u/.s.153A of the Act. Consequently, the said various additions made in the orders of Assessment ought not to have or could not be made by the AO. Gr.No.1 raised by the Assessee in both the appeals are accordingly allowed.”

9. The ITAT, Visakhapatnam allowed the appeal on similar facts in the case of P. Rama Raju Vs. DCIT Central Circle-1, Visakhapatnam in ITA Nos.424, 425 & 426/Vizag/2013 dated 31.7.2017 following the case of Y.V. Anjaneyulu Vs. DCIT, Central Circle, Vijayawada (supra)

10. The Ld. D.R’s argument that the assessee has accepted that the additions were made during the course of search & seizure operation relating to unsecured loans is not acceptable since in the assessment order, the assessing officer has not brought on record any evidence found during the course of search relating to the additions made. On verification of the assessment order, it is evident that the addition was made on the basis of the entries made in the regular books of accounts but there was no reference with regard to the seized material. Hence, the reliance of the Ld. D.R. on statement of facts that the assessment was made on the basis of seized material is not correct. Ld. D.R. further argued the legal position subsequent to the introduction of provisions u/s 153A of the Act and 153C of the Act for search assessments the incriminating material not necessary is not tenable. This issue has been considered by the special bench in the case of All Cargo Logistics Limited cited (supra) and answered that the assessment u/s 153A of the Act will be made on the basis of incriminating material. Therefore, the argument of the Ld. D.R. lacks merit on this issue. As discussed earlier, in this appeal no addition was made on the basis of seized material and the assessment got completed and the assessee’s case is squarely covered by the decision of this Tribunal cited (supra) and the decision of Hon’ble special bench in the case of All Cargo Global Logistics Limited. Therefore, we set aside the orders of the Ld. CIT(A) and allow the appeal of the assessee.”

19.1. Similar view was taken by this Tribunal in the case of L.Suryakantham Vs. ACIT in I.T.A. No.300 to 305/Viz/2012 dated 19.04.2016 and Y.V.Anjaneyulu Vs. DCIT, Central Circle in I.T.A. No.513&514/Viz/2013 dated 09.06.2017 and by the Coordinate Bench of Hyderabad in the case of Midwest Gold Ltd. in I.T.A. No.1288/H/2014 to 1293/H/2014. In the instant case, as seen from the order of the AO as well as the CIT(A), the AO made the addition disbelieving the agricultural income as well as the unexplained cash deposits from the bank account. No evidence was brought on record with regard to incriminating material found during the course of search to support the additions made by the AO in the assessment order. Therefore the appeals are covered by the decision of this Tribunal in the case of Sri Rayapati Venkata Koteswara Prasad (supra), hence, we hold that the addition made by the AO is bad in law accordingly the same are deleted. The appeals of the assessee for the A.Y. 2004-05 to 2007-08 are allowed.

19.2. Since we have deleted the addition for having not supported by the seized material, we consider it is not necessary to adjudicate the issue of assessee’s argument on addition made u/s 68 of the Act.2008-09 20. For the A.Y.2008-09, the time limit for filing the return of income was 31.07.2008 and the time is available for issue of notice u/s 143(2) by the time search was conducted, hence the AO is permitted to take up the search assessments and examine the issues by issue of notice u/s 153A. For the assessment year 2008-09, the assessee filed the return of income declaring total income of Rs.1,60,000/- which was brought to tax by the AO holding that the assessee has not carried out any agricultural operations. Hence, the income was assessed as income from other sources.

21. Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) confirmed the addition.

22. We have heard both the parties and perused the material placed on record. The assessee has stated that he has taken the land on lease from Agnikula Kshatriya Sangam, Jupudi Village, Ibrahimpatnam Mandal and cultivated paddy, maize etc. There were no lease agreements, no bills, no vouchers produced by the assessee before the AO or CIT(A). The President of Agnikula Kshatriya Sangam also denied having given the lands on lease. No other evidence was brought on record by the assessee to hold that the assessee had in fact cultivated the agricultural land. The Ld.CIT(A) in his order observed that the assessee failed to establish the onus regarding genuineness of the claim before the Income Tax department. During the appeal hearing also, the assessee failed to place any material to show that he had carried out the agricultural operations. Therefore, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. In the result, appeal of the assessee is dismissed.

23. In the result, appeals of the revenue are dismissed for the A.Y.2009- 10 and 2010-11 and appeals of the assessee for the A.Y.2004-05 to 2007-08 are allowed and the appeal for the A.Y. 2008-09 is dismissed. Order pronounced in the open court on 29th January, 2020.