Vildirect: IncomeTax-caselaws-2015-VIL-1046-ITAT-VPT

2015-VIL-1046-ITAT-VPT

Income Tax Appellate Tribunal VISAKHAPATNAM

I.T.A.No.453/Vizag/2012

Date: 06.11.2015

SRI VENKATA RAMA SAI DEVELOPERS VISAKHAPATNAM

DCIT CENTRAL CIRCLE-1 VISAKHAPATNAM

Appellant by : Shri G.V.N. Hari, AR
Respondent by : Smt. D. Komali Krishna, DR

BENCH

SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER

JUDGMENT

2. The brief facts of the case, are that the assessee is a partnership firm, which is engaged in the business of real estate developer filed its return of income for the assessment year 2007-08 on 28.10.2007 declaring total income of Rs. 3,03,209/-. During the course of search proceedings conducted u/s 132 of the Income-tax Act, 1961 (hereinafter called ‘Act’) in the case of M/s. Classique Farms & Estates, Visakhapatnam on 12.9.2007, it was noticed that the assessee has sold land admeasuring 40 acres situated at Maddi village, Visakhapatnam district to M/s. Classique Farms & Estates, Visakhapatnam for a consideration of Rs. 48 lakhs. During the course of search operation, certain incriminating documents were found and seized, wherein certain financial transactions were recorded. From these seized materials, the A.O. found that M/s. Classique Farms & Estates has paid amount over and above the sale consideration shown in the sale deed for the purchase of the property from the assessee firm. Based on these findings, the assessing officer has reasons to believe that income chargeable to tax has escaped assessment and hence, issued notice u/s 148 of the Act on 8.8.2008. In response to notice, the assessee filed a letter and requested to treat the return filed on 28.10.2007 may be treated as return filed in response to notice u/s 148 of the Act. During the course of assessment proceedings, the A.O. noticed that the assessee firm has sold 40 acres of land situated at Maddi village to M/s. Classique Farms & Estates on 31.12.2006 for a valuable consideration of Rs. 48 lakhs. Further, the seized documents from the office of M/s. Classique Farms & Estates reveals that the actual consideration paid for purchase of the said land was at Rs. 2,84,00,000/- @ Rs. 7,10,000/- per acre as against the declared sale consideration of Rs. 48 lakhs in the sale deed. Consequent to search proceedings, statement u/s 132(4) of the Act was recorded from Sri M.V.V. Satyanarayana and Shri Rapeti Govind, partners of M/s. Classique Farms & Estates. In the statement recorded u/s 132(4) of the Act, the partners of the said firm admitted that the seized materials shown at page nos.41,42,83 & 84 of annexure A/C,F&D seized from the business premises of M/s. Classique Farms & Estates indicates the financial transaction entered into between by our firm with M/s. Sri Venkatarama Sai Developers and the amount written therein is the cash payments made by us over and above the amounts shown in the sale deed for purchase of the said property. Page no.84 of seized materials shows that Rs. 62 lakhs was paid by cheques drawn on Bank of Baroda and Rs. 1,38,00,000/- was paid in cash on various dates beginning from 2.1.2007 to 10.2.2007. Similar materials were also seized from the business premises of M/s. M.V.V. Builders, a group concern of M/s. Classique Farms & Estates. As per the seized papers page nos.40,50,51,53 & 55 of annexure/MVVB/6 shows that total payment of Rs. 1,01,10,000/-was shown on various dates in the name of Shri Pattabhiram, Managing Partner of the assessee firm. When these seized materials were confronted to the partners of firm i.e. Shri M.V.V. Satyanarayana and Shri Rapeti Govind, they have confirmed that the said payments are made in cash to Shri V. Pattabhiram, Managing partner of the assessee firm for purchase of land. The relevant portion of the statement as culled out from the assessment order is reproduced hereunder:

Q. 4. After going through Annex/N W516, it is observed that Rs. 1,01,10,000/- is paid to Sri Pattabi garu from 02-01-2007 to April, 2007. Please identify this person. Further, the name of Mr.Pattabhi did not appear in the registered document of N/s Classique Farms & Estates ( where macid! Site is located. Pleased give details? The payments made to Mr. Pattabbi on different dates along with the amounts are listed below.

Date	Amount (Rs.)
02-01-2007	10,00,000
02-01-2007	25,00,000
08-01-2007	25,00,000
08-01-2007	11,00,000
11-01-2007	10,00,000
12-01-2007	13,00,000
10-02-2007	2,00,000
10-02-2007	5,00,000

Ans. Mr. Pattabhi is one of the partners in N/s Venkatarama Sal Developers. N/s Venkatarama Sal Developers has obtained GPA from the land owners of a Maddi Site to the extent of 40 Acres. The above amounts shown in the Annexure are paid in cash and these payments are out of the books of account. I have already disclosed my portion of unaccounted investment in this Classique Farms & Estates on the date of search operations i.e. 12-09-07.

Statement of Mr.Rapeti Govind recorded on 09-10-07

Q. 10. Please go through sheet no 42 and give details and also mention the person who has written it?

Ans. I have written this sup. The names & addresses are related to Maddi Site. i.e. Palm Meadows.

Q.11. Please go through back side of sheet no 42 and also sheet no 83 & 84 and explain the contents therein.

Ans These sheets are written by me. The amounts written on sheet no 84 are cash payments and cheque payments made to M/s Venkatarama Sal Developers by us i.e. M/s Classique Farms & Estates. However, 1 have already admitted an unaccounted income of Rs. 2.21 Crores as my portion of investment for the Asst. Year 2007-08 on the day of search i.e. 12.9.07. The noting in sheet no.84 shows that 40 acres @ 1.90 lacs per acre which comes to sum of Rs. 76 laks is the registered value. However, this portion of land was registered at Rs. 48 laks. Further, Rs. 178 laks was paid in cash out of which Rs. 40 laks was deducted. Which is written Rs. 138 laks as seen in sheet no.84.”

3. During the course of assessment proceedings, the A.O. issued summons to Shri V. Pattabhiram and questioned about the said transaction. However, shri. V. Pattabhiram the partner of the assessee firm has denied having received any money in cash in excess of what is recorded in the sale deed. The relevant portion of his statement is reproduced as under:

“Statement of Mr. Ch. Venkata Pattabhi Ram recorded on 16.10.07:

Q.6 Please go through sheet nos 55,53,51,50, and 40 of Annex MVB/6 seized in the business premises of M/s MVV Builders, Visakhapatnam. (Partner of M/s. Classique Farms & Estates) wherein certain amounts were written as “Paid to Pattabhi garu” Please confirm whether the name written as “Pattabhi garu” is your name or not.

Confirm whether the name written as “Pattabhi garu” is your name or not.

Ans. Yes the name written “Pattabhi garu” is my name only. I have received an amount of Rs. 48 laks only from the sales of lands at Maddi village from M/s. Classique Farms & Estates.

Q.7 Please go through sheet nos.84,83 and 42 of Annex. A/CFE/2 seized in the business premises of M/s. Classique Farms & Estates and identity whether the nothings belong to your or not?

Ans. As appearing from this sheet, it is written that Rs. 138 lakhs is paid as per sheet no.84. We have received an amount of Rs. 62 laks by way of cheques as in sheet no.83, out of which, we have repaid Rs. 15 lakhs to M/s. Classique Farms & Estates on 28.3.07 through Union Bank of India, MVP Colony, Visakhapatnam. As per sheet no.42 again it is written that Rs. 62 lakhs is paid to M/s. Venkatarama Sai Developers, whereas I have not received the cash of Rs. 178 lakhs as reflected in sheet no.83 of the Annexure.

Q.8 It is very clear from sheet nos.83 & 84 and also sheet no.42 that the noting are related to your firm M/s. Venkatarama Sai Developers. When you are able to identify the portion of amount given to the firm in cheque, why cannot the amount given is cash be treated as amount received by you?

Ans. We have received the amounts in cheques only.”

4. Subsequently, based on the statements recorded from the partners of both the firms, the A.O. issued show cause notice to assessee firm asking it to explain as to why the consideration received in cash could not be assessed as undisclosed income for the assessment year in question. In response to said notice, the assessee firm reiterated that nothing in excess of registered sale consideration was received by it. During the course of assessment proceedings, the assessee firm requested for cross examination of Shri M.V.V. Satyanarayana and as per the assessee’s request, the A.O. allowed to cross examine Shri M.V.V. Satyanarayana on 24.12.2009. Relevant portion of the cross examination is reproduced as under:

“Q.1 How many acres of land has been purchased from us and how much have you paid per acre.

Ans. (Shri M.V.V. Satyanarayana) we have purchased 40 acres from you Rs. 7.10 lakhs per acre.

Q.2 How you have paid the consideration?

Ans. Rs. 48 lakhs is paid through Cheque, the rest is paid by cash. Rs. 1.01 crores is paid by me to you and the rest is given to you by my partner.

Q.3 Have you taken receipts for the consideration paid to us by cheques.

Ans. Yes. There is 48 lakhs receipt proof. But there is no receipt for the balance amount.

Q.4. Whether you have taken receipt for Cheque payment. Why have you not taken receipt for cash payment? Ans. We have not taken receipt for cash payment made.

Q.5 When was the cash given before or after registration? Ans. Cash was given to you before registration.

Q.6 Without registration or document proof how did you give us that much cash?

Ans. I do not know but we have paid.”

5. The assessing officer after considering the evidences available in the seized material and also statements given by the partners of M/s. Classique Farms & Estates, held that the assessee’s contention that there is no on money received by it from the sale of the said land is not acceptable. Therefore, the A.O. made an addition of Rs. 2,79,10,000/- towards alleged on money received by the firm from M/s. Classique Farms & Estates as income from other sources and completed the assessment.

6. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before CIT(A), the assessee has raised three grounds. From ground no.2 it agitated the validity of reassessment proceedings and from ground no.3 challenged the issue on merits. During the appellate proceedings, the assessee made elaborate written submissions. As far as the validity of reopening is concerned, the assessee contended that the Assessing Officer issued notice only on the basis of the information received from investigation wing, except information from the investigation wing, there is no tangible material or prima facie case before Assessing Officer to come to the conclusion that there is an escapement of income. The assessee further contended that it has purchased the said property in the year 2005 and within a span of short period of 2 years, there is no possibility of getting such a huge price for the same property. It has further contended that simply on the basis of information received from investigation wing, A.O. cannot reopen the assessment u/s 148 of the Act without independently examining the issue.

7. On merits, the assessee argued that it has received sale consideration of Rs. 48 lacs only mentioned in the registered sale deed and the same was admitted it in the return of income filed by it for the relevant assessment year. Over and above, no cash payment was received by it for sale of the said property. It is further argued that during the course of cross examination of the partner of vendee firm, the firm could not produce any independent evidence for having paid cash, except there are loose sheets found in the premises of the vendee firm wherein some financial transactions are recorded in the name of the one of the partner of the assessee firm. The assessee further contended that even according to the statements of the partners of the vendee firm, the consideration is Rs. 7,10,000/- per acre and for 40 acres and the total consideration works out to Rs. 2,84,00,000/-. Taking into account the declared consideration of Rs. 48 lakhs in the sale deed, the difference would be Rs. 2,36,00,000/- only but, the assessing officer did not even bother to enquire what is the nature of the entries found in the seized materials, because in any case the on money could not have exceeded Rs. 2,36,00,000/-. The assessee further submitted that the Assessing Officer has taken into account Rs. 38 lakhs paid to one Smt. P. Radhika into the firm’s hands as amount received by the firm without mentioning any reasons as to how this amount alleged to have been paid to Smt. P. Radhika could be considered as on money in the hands of the assessee firm. To support his contentions, the assessee placed its reliance in the case of Jawaharbhai Atmaram Hathiwala Vs. ITO (2010) 128 TTJ 36 (UO).

8. However, the CIT(A) did not convinced with the explanations offered by the assessee, held dismissing the assessee’s appeal i.e. both on validity of the reopening of the assessment as well as on merits of the issue. While confirming the assessment order, the CIT(A) held that it is not uncommon that on money is paid and received in real estate transactions and the same would be only within the knowledge of the buyer and the seller. Under these circumstances, it may not be expected that income tax officer is to bring out exact nature of the transactions in the nature of signed cash receipts, etc. The CIT further held that it is a well known fact and an open secret that there is a lot of black money involved in real estate transaction and the cash component is more in case of the lands situated in outskirts of big cities and towns. The CIT(A) further held that the entries in the seized materials when taken into the totality of the circumstances, clearly points out that the unaccounted cash was paid in the said transactions except primary evidence of payment of cash, all other details like date of cheques, the parties involved in the transactions and the area of the land are exactly matched with the transaction with that of seized papers found in the premises of the purchaser firm. While doing so, the CIT(A) drawn inference from section 114 of the Indian Evidence Act and held that circumstantial evidence is more important than direct evidence in deciding the tax matters. For the reason stated in his order, the CIT(A) confirmed the assessment order and dismissed the assessee’s appeal. Aggrieved by the CIT(A)’s order, the assessee is in appeal before us and raised the following grounds:-

Ground No.1: The, order of the Learned Commissioner of Income Tax (Appeals), Visakhapatnam is contrary to the facts and law applicable to the case of the appellant- firm.

Ground No.2: The Learned Commissioner of Income Tax (Appeals), Visakhapatnam ought to have held that the notice issued under the provisions of section 148 of the Income Tax Act, 1961 is invalid and consequently the entire reassessment proceedings are void-ab-initio.

Ground No.3: The Learned Commissioner of Income Tax (Appeals), Visakhapatnam is not justified in confirming the addition of Rs. 2,79,10,000 made by the Assessing Officer, on account of alleged onmoney being received by the appellant-firm towards sale of 40 acres of land situated at Maddi Village.

Ground No.4: Without prejudice to the above, the Learned Commissioner of Income Tax (Appeals), Visakhapatnam is not justified in not appreciating the assertions of the partners of the vendee firm, in which it was stated that the sale consideration has been settled at! 7,10,000/- per acre total of which works out to Rs. 2,84,00,000/- out of which ! 48,00,000/- is paid through cheque. Thus beyond any imagination the alleged cash portion would not have exceeded! 2,36,00,000/-.

Ground No.5: Without prejudice to the above, the Learned Commissioner of Income Tax (Appeals), Visakhapatnam is not justified in confirming the action of the assessing officer in considering an alleged amount of Rs. 38,00,000/- paid by the vendee firm to Smt.P.Radhika as on money in the hands of the appellant-firm.

Ground No.6: The Learned Commissioner of Income Tax (Appeals), Visakhapatnam is not justified in confirming the action of the Assessing Officer in levying interest under the provisions of section 234B of the Income Tax Act, 1961.

9. From these grounds of appeal, the assessee has raised two issues i.e. validity of reopening of the assessment and addition on merits. Now let us first take up the issue of validity of reopening of the assessment.

10. During the course of hearing, the Ld. A.R. submitted that the assessment order passed u/s 143(3) r.w.s. 147 of the Act is bad in law. The Assessing officer issued notice on the basis of information received from the investigation wing. The assessing officer did not conduct any independent enquiry or his opinion is not based on any tangible material so as to form a belief of escapement of income. The A.R. further submitted that the assessing officer ignored the fact that the appellant has purchased a property in 2005 and within such a short period, the appellant could not have made so much profit. Therefore, the A.O. did not make any attempt to find out how much was the consideration paid by the assessee when the property was purchased and what was the consideration received at the time of sale. Simply on the basis of information received from the investigation wing issued notice u/s 148 of the Act to reopen the assessment, therefore, the assessment order passed u/s 143(3) r.w.s 147 of the Act should be quashed. On the other hand, the Ld. D.R. strongly supported the order of the CIT(A).

11. We have heard both the parties, perused the material available on record and also considered the orders of the authorities below. In this case, the assessing officer has reopened the assessment based on the information received from the Investigation wing of the department consequent to the search conducted in the case of M/s Classic Farms & Estates. The assessee’s contention is that the A.O. reason to believe is not based on any material evidence available with him because, he has purely relied upon the report sent by the Investigation officer, therefore, his order is not valid in law. We have considered the arguments of the assessee and also gone through the assessment order. We find that section 147 of the Act authorises the assessing officer to assess or re- assess income chargeable to tax, if he has reason to believe that the income for any assessment year has escaped assessment. The primary requirement of section 147 of the Act is that there should be formation of belief by the assessing officer coupled with material evidence. If the A.O. has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that income had escaped assessment. The A.O. at the time of issuing notice u/s 148 of the Act is not necessarily to establish the fact that there is an escapement of income. But what is necessary is that there must be some relevant material on which the formation of opinion is arrived at by the assessing officer. In the instant case, the A.O. formed his opinion based on the information received from the investigation wing of the department and which is the valid basis for issuing notice u/s 148 of the Act. It is not necessary for the A.O. to conduct independent enquiry and gather material to form his opinion. Material may come from within the assessment records or from outside the assessment record. But what is important is that there should be some cogent material, which suggests that there is an escapement of income chargeable to tax. Therefore, the A.O. has rightly formed his opinion based on the information received from the investigation wing of the department. The CIT(A) has elaborately discussed on the issue and rejected the assesse arguments. Therefore, we upheld the reopening of the assessment and reject the ground raised by the assessee.

12. The next issue arises for our consideration, is whether the CIT(A) is right in confirming the additions made by the assessing officer towards alleged on money received by the assessee based on third party statement relied upon by the assessing officer. The factual matrix of the issue is that there was a search in the case of M/s. Classique Farms & Estates. During the course of search proceedings, certain incriminating documents were found. The seized documents reveals that the assessee has sold lands for a consideration of Rs. 48 lakhs and also received on money of Rs. 2,79,10,000/-. During the course of assessment proceedings, the A.O. recorded statements from the partners of the vendee firm u/s 132(4) of the Act. During the course of investigation, the partners of the vendee firm have admitted that they have paid on money to the assessee firm for purchase of property. On cross examination, the partners of the assessee firm denied for having received the on money and stated that they did not receive other than what is stated in the sale deed.

13. Admittedly, in the assessee case, there was no search. The seized document found during search at the premises of M/s. Classique Farms & Estates is a loose sheet, wherein certain financial transactions were recorded in the name of one of the partner of the assessee firm. Admittedly, the loose sheet found at the vendee firm was written by one Mr. Ramu, an employee of the firm. Based on the said document and also admission made by the partners of the vendee firm, the A.O. acted upon and came to the conclusion that the on money was paid to the assessee firm towards sale of property. At the time of assessment proceedings, the partners of the assessee firm categorically denied having received the on money right from the beginning. The assessee contended that the seized document found in the premises of M/s. Classique Farms & Estates is neither in the hand writing of any of the partners of the firm nor is found in the premises of the assessee firm, and the same is written by an employee of the vendee firm, therefore cannot be used as evidence against it. Besides the seized loose sheet, no other document is in the possession of the A.O. to show that the assessee has received on money from the purchaser. The A.O. has not made any attempt to find out some reliable and cogent material evidence on record to support his findings or to corroborate the statements of the vendee firm. The assessee firm denied having received the money over and above what is stated in the sale deed.

14. The A.R. of the assessee rightly pointed out that the sale deed registered in the Office of the Sub-Registrar clearly shows that the consideration of Rs. 48 lakhs was fixed for the property and which was exchanged through proper banking channel. It was not a case of revenue that the value shown in the sale deed is not the real value of the property because the value declared in the sale deed is the market value of the property fixed by the State Government authorities for determining the stamp duty payable to the Government for registering the properties and also which was accepted by the registering authority.

Further, there is no evidence to show that there is under valuation of property and section 50C of the Act is invoked while completing the assessment. The A.O. merely acted upon the statement given by the third party, which was totally denied by the partners of the assessee firm. It was a settled position of law that unless the statement is tested under the cross examination, the same cannot be considered as evidence against the assessee. The A.O. used the admission of partners of vendee firm made in the statement u/s 132(4) of the Act in their case, against the assessee. But, the A.O. failed to note that admission of other parties cannot be considered as conclusive evidence against the assessee, unless there is a corroborative evidence on record, because the maker of statement can bind himself but how he binds others from his statement without there being any further evidence on record.

15. In the present case on hand, except loose sheet found in the premises of third party and admission made by the third party in their assessment proceedings, there is no other evidence on record to prove that on money is paid. The assessing officer, without brought on record any evidence to prove that on money is exchanged between the parties, merely harping upon the loose sheet and the third party admission, which cannot be considered as conclusive evidence against the assessee to bring the on money to tax as undisclosed income. The A.O. is required to bring further evidence on record to show that actual on money is exchanged between the parties, but literally failed to do so. The A.O. did not conduct any independent enquiry relating to the value of the property instead, merely relied upon the statement given by the purchasers of the property, which is not correct. Further, there is no proof of origin and destination of on money. The A.O. failed to prove the source of the purchasers as to how the money was arranged and also failed to prove the deployment of unaccounted money by the vendee firm by any form of evidence. Under these circumstances, based on paper jottings as conclusive evidence on money cannot be brought to tax as income from undisclosed sources.

16. Now coming to the observations of the CIT(A). The CIT(A) while confirming the assessment order, observed that it is uncommon that on money paid/received in real estate transactions. The CIT(A) further observed that it is a well known fact and open secret that there is a lot of black money involved in the real estate transactions and particularly cash component is more in the lands situated in outskirts of the big cities. We do not agree with the findings of the CIT(A) for the reason that assessments cannot be made or taxes cannot be levied on the basis of the theory of probability. To tax any particular income, there must be some material evidence to show that the income is accrued or arises to the particular assesse. Unless, there is a proof, the department cannot collect the tax on the admission of the tax payer alone. The CIT, at one stage held that there is no need of direct or primary evidence, even if there is a circumstantial evidence, based on circumstantial evidence, the A.O. come to the conclusion and decide the issue accordingly. We do not agree with the stand taken by the CIT(A), for the simple reason that to tax any particular receipt, primary evidence is very much necessary and unless there is a primary evidence, circumstantial evidence cannot be considered as a conclusive evidence against any person to tax any particular receipt. Circumstantial evidence plays an important role in income tax proceedings, where the A.O. needs to estimate the income based on some evidence available for part of the year, then remaining period estimation can be made based on evidence available. But, payment/receipt of on money is purely a factual issue which cannot be decided based on circumstantial evidence.

17. Now coming to the case laws relied upon by the assessee counsel, the assessee’s counsel at the time of hearing relied upon plethora of case laws in support of his contentions.

18. The A.R. relied upon ITAT Hyderabad `A’ Bench decision in the case of Smt. K.V. Lakshmi Savitri Devi Vs. ACIT (2012) 148 TTJ 517, wherein the Tribunal under similar circumstances held as under:

Admittedly there was no search action in the case of the assessee. It is a loose slip containing certain entries recording the payment which was found at the premises of CRK. It does not contain either date of payment or name of the person who has made the payment. According to the Department, CRK denotes C. Radha Krishna Kumar and KRK denotes K. Rajani Kumari. However, no name of the assessee was found in the louse sheet. The property was purchased from P w/c CRK for a disclosed consideration of Ps. 65 lakhs by the assessee. The property has been registered and the sale deed was executed for a consideration of Ps. 65 lakhs on 21st Aug., 2006 which consideration has been accepted by the State registration authorities. Further nothing was brought on record to show that there was any invoking of s. 50C while completing the assessment in the case of the seller. There is no evidence other than the seized material marked as 'A/CRK104' where relevant entries are made at Rs. 1,65,00,000. The seized material was not found at the premises o the assessee and there is no corroborative material to suggest that the assessee has actually paid Rs. 1.65 çrores towards purchase consideration of the property. The assessee and her brother categorically denied the payment of any money over and above Rs. 65 lakhs. The AO placed hi reliance on the statement of 5, who is a third party. The evidence brought on record by the Department is not enough to fasten additional tax liability on the assessee. As seen from the above document this is just a handwritten loose document and the handwriting is also not of the assessee and the loose document was found at the premises of a third party. The burden is on the Department to prove conclusively that the loose document belongs to the assessee. There is no presumption in law that the assessee has actually paid Rs. 165 lakhs towards purchase of the property. The undisclosed income in this case is to be computed by the AO on the basis of the available material on record. It should not be based on conjectures and surmises. As of now, the material considered by the AO for making the addition of Ps. 1 crore is seized material marked a 'A/CRK104' and the statement of S. This loose sheet found at the premises of CRK is not enough material to sustain this addition. The seized material found during the course of search and the statement recorded are some piece of evidence to make the addition. The AO has to establish the link between the seized material and other books of account to the assessee. The seized material and statement of CRK cannot be conclusive evidence to make this addition. The entire case herein is depending upon the rule of evidence. There is no conclusive presumption to say that actual consideration passed on between the parties is actually Rs. 165 lakhs. The assessee as well as her brother stated in their respective statements that the consideration passed between the parties is only Rs. 65 lakhs. In spite of this the AO proceeded to conclude that the seized material is conclusively reflecting the payment of consideration at Rs. 165 lakhs. The Department herein i required to establish the nexus of the seized material to the assessee. As stated earlier there is no date and name of the assessee. The allegation of the Department is that the seized material denotes the payment made by the assessee to the purchaser for purchase of the property. However, no such narration or name of the assessee was found in the seized material. The Department is not able to unearth any document or material or any corroborative material to show that the assessee herein actually paid Ps. 165 lakhs for purchase of the property. The Department has not brought on record the date on which the payment was made and the source from which ii is paid and/or any details of bank account from where the cash was withdrawn. Without any of these details, the Department has taken a view that the assessee has paid Ps. 165 lakhs for purchase of the property. The Department cannot draw inference on the basis of suspicion, conjectures and surmises. Suspicion, however strong cannot take place of material in support of the finding from the AO. The AO should act in a judicial manner, proceed with judicial spirit and come to a judicial conclusion. The AO is required to act fairly as a reasonable person and not arbitrarily and capriciously. The assessment made should have enough material and it should stand on its own legs. The basis for addition cannot be only the loose sheet or a third party statement.

In the absence of corroborative material, and/or circumstantial evidence, the addition cannot be sustained. Thus, no addition can be made on a dumb document and noting on loose sheet. It should be supported by the evidence on record and the evidence on record is not sufficient to support the Revenue's action. In a block assessment undisclosed income has to be determined or the .basis of the material and evidence detected in the course of the search action. The circumstances surrounding the case are not strong enough to justify the addition made by the Department. The burden of proving the actual consideration in the purchase of property is on the Revenue. Considering the entire facts of the case, the Revenue has failed to discharge its duty, instead made up a case on surmises and conjectures which cannot be allowed. Under these circumstances, there is no reason to confirm the addition of Rs. 100 lakhs towards on-money payment.

Accordingly, the addition of Rs. 100 lakhs is deleted.-CIT vs. P.V. Kalyanasundaram (2006) 203 CTR (Mad) 449: (2006) 282 ITR 259 (Mad) relied on”

19. The Hon’ble A.P. High Court in the case of Smt. K.V. Lakshmi Savitri Devi Vs. ACIT in ITTA 563 of 2011, upheld the order of the ITAT Hyderabad Bench. The Hon’ble High Court while, deciding the issue in favour of the assessee held as under:

“We are of the view that the Tribunal has rightly held that the registered document dt. 21.8.2006 unde4r which the respondent purchased the above property showed that only Rs. 65.00 lakhs was paid to the vendor by the respondent; that there was no evidence to show that the respondent had paid Rs. 1.00 crore in cash also to the vendor; that no presumption of such payment of Rs. 1.00 crore in cash can be drawn on the basis of an entry found in a diary/loose sheet in the premises of C. Radha Krishna Kumar which is not in the respondent’s handwriting and which did not contain the name of the respondent or any date of payment or the name of the person who made the payment. It rightly held that the Revenue failed to establish the nexus of the seized material to the respondent and had drawn inferences based on suspicion, conjectures and surmises which cannot take the place of proof. We also agree with the Tribunal that the assessing officer did not conduct any independent enquiry relating to the value of the property purchased and the burden of proving the actual consideration in the purchase of the property is on the Revenue and it had failed to discharge the said burden.”

20. The A.R. further relied upon the ITAT Ahmedabad `C' Bench decision in the case of Jawaharbhai Atmaram Hathiwala Vs. ITO reported in (2010) 128 TTJ 36, wherein under similar set of facts, the Hon’ble ITAT decided the issue in favour of the assessee as under:

“The assessee has claimed to have made payment of Rs. 1,01,687/- only upto 31st March, 1999 and has consistently taken the stand that it has not paid balance amount of Rs. 3,81,414/- as stated in the seized document. No evidence could be brought on record by the Revenue to show that in fact the assessee had paid the amount of Rs. 3,81,414/- to OD. No document containing signature of the assessee or handwriting of the assessee to corroborate the above making of payment by the assessee was found during the course of the search. Even at time of cross examination by the assessee the partner of OD could not produce any evidence that the amount written in the seized document was in fact received from the assessee. As the assessee has categorically denied to have made any payment in excess of Rs. 1,01,687/- upto 31st March, 1999 in respect of purchase of flat the said denial cannot be brushed aside without bringing any positive material on record. Merely recording made by a third party or statement of a third party cannot be treated as so sacrosanct so as to read as a positive material against the assessee. In view of the above the CIT(A) was not justified in confirming addition to the extent of Rs. 3,81,414/- in the hands of the assessee. Therefore the addition of Rs. 3,81,414/- is deleted. Asst. CIT Vs. Prabhat Oil Mills (1995) 52 TTJ (Ahd) 533 relied on; K.P. Varghese Vs. ITO (1981) 24 CTR (SC) 358: (1981) 131 ITR 597 (SC) applied.”

21. In yet another case, the ITAT Hyderabad `B’ bench in the case of DCIT (Central Circle)-6 Vs. B. Vijay Kumar in ITA No.930 & 931 of 2009 held the issue in favour of the assessee as under:

11. We have heard rival submissions, perused the material submitted before us and also perused the orders of the revenue authorities. On a reading of the assessment order, it is absolutely clear that the addition has been made entirely on the basis of the photocopy of the sale agreement seized from the residence of the assessee in course of search and seizure operation. Undisputedly, the sale agreement is only photocopy and has not been signed by the assessee. The assessee has also raised serious allegation regarding the seizure of the impugned document and filed affidavit before DDIT (Inv.) asserting that the said document was planted by an officer of the department also named by the assessee in the affidavit. However, such allegation of the assessee has not at all been enquired into and has been met with complete silence by the department. From the materials on record, it is very clear that the AO has failed to lay his hands on any credible evidence to establish the fact that the assessee has purchased the property for a consideration of R s . 1,68, 00,000/ - as mentioned in the photo copy of sale agreement seized in course of search and seizure operation. The assessee has produced before the AO registered sale deeds in support of its claim that they had purchased the property for a consideration of Rs. 23.50 lakhs.

When the AO alleges that the assessee has paid more than what has been declared in the registered sale deed because the fair market value of the asset as on the date of transaction exceeds full value of consideration declared by the assessee then it is for the AO to prove that the value declared by the assessee is understated . In the appeal before us, excepting the photo copy of sale agreement, there is no other evidence on record found as a result of search or brought on record on the basis of enquiry conducted by the AO which could establish the fact that the actual consideration passed between the parties is not as mentioned in the registered sale deed but as per the sale agreement found during search operation. It is also an interesting fact to note that in the statement recorded from the assessee u/s 132(4) the revenue authorities have not put any question with regard to the sale agreement seized at the time of search and seizure operations. Smt. R. Nalini Devi also in her statement further clearly stated that the property was sold at Rs. 23.50 lakhs and not at the rate of Rs. 1.68 crores. The Hon'ble Supreme Court in the case of K.P. Verghese reported in 131 ITR 597 has held that onus is on t h e department to prove that the assessee has understated the value of the property and has paid more than what is mentioned in the registered sale deed. The Hon'ble Supreme Court in the case of Moosa S. Madha and Azam S. Madha vs. CIT ( 89 ITR 65) has held that photocopies have little evidentiary value. Therefore, photocopies of any document cannot by itself be considered as evidence for purpose of making addition in assessment proceedings. The AO is required to bring further evidence on record to show that the sale agreement was actually acted upon by the parties. This is because of the fact. when the AO is going to make an addition, there should be sufficient evidence brought on record to support such addition. No addition can be made on conjectures and surmises. As seen from the assessment order, the AO has adopted value of the property at the Rs. 7000/- per sq. yard on the date of transaction. For adopting such a valuation, the AO has not conducted any enquiry or brought any materials on record to show that the value of the property on the date of transaction was actually Rs. 7000 per sq. yard. On the other hand, the assessee has demonstrated with supporting evidence that the value of the land on the date of transaction was the rate mentioned in the registered sale deed and for which the property was sold. The assessee has also produced sufficient evidence to show that the- re was dispute going on regarding the legal right over the property which also had an effect on the fair market value of the property. It is also pertinent to mention here that the assessee had filed his return f income for the assessment years under dispute much prior to the date of search declaring the purchase of land in question at the consideration mentioned in the registered sale deeds. 155) far as the AO's observations on the loose sheets recovered from the residence of Smt. Nalini Devi are concerned, the CIT (A) after duly examining them has given a conclusive finding that the assessee's name has no where been mentioned in those documents nor the amount of Rs. 109.48 lakhs represents the expenditure incurred by Smt Nalini Devi. However, the amount was found to be the summary of the balance of various accounts operated by the family members of Smt. Nalini Devi. We find that the CIT (A) in his elaborate and well reasoned order has dealt with all these aspects and came to a finding on fact that the AO has made the addition purely on conjectures and surmises and not on the basis of any material or evidence brought on record. On examining the facts and materials before us, we are of the view that the finding arrived by the CIT (A) is just and proper and in accordance with the principles of law laid down by the Hon'ble Supreme Court and Hon'ble High Courts which are cited before him. We therefore find no necessity to interfere with the finding of the CIT (A) on this issue. Hence the grounds raised by the revenue for the years under consideration are dismissed.”

22. The Hon’ble A.P. High Court in ITA No.232 of 2013 in the case of CIT Vs. Smt. R. Nalini Devi has upheld the order of the ITAT Hyderabad Bench. The Hon’ble High Court while, considering the issue held as under:

“We have heard the learned counsel for the appellant and gone through the impugned judgement and order of the learned Tribunal. It appears, the Assessing Officer had relied on a photocopy of an unsigned sale agreement in order to find that consideration amount has been paid at Rs. 1,68,00,000/-. Therefore, this amount was not disclosed. The learned Tribunal has correctly concluded that unsigned photocopy of the agreement for purchase of the property cannot be a material to rely on, when the registered sale deed has been produced and the same shows that the property was purchased at a price of Rs. 23,50,000/-. This registered sale deed was disclosed at the time of original assessment. According to us, the agreement of sale loses its force, the moment registered sale deed is executed. If the property has been purchased at a higher price than that of mentioned in the purchase deed, then the onus is on the Assessing Officer to establish that, as has been rightly concluded by the Tribunal on this issue. Moreover, photocopy of the unsigned agreement has got no evidentiary value. The Assessing Officer has done a guess work while coming to the conclusion that the price of the property is more than mentioned in the sale deed. There must be some material and basis to conclude that the purchase has been made at an under valuation.”

23. The Hon’ble Supreme Court in the case of CIT Vs. P.V. Kalyana Sundaram (2007) 294 ITR 49, under the similar circumstances held in favour of the assessee. The Hon’ble Supreme Court, while deciding the issue in favour of the assessee held as under:

“We have heard learned counsel for the parties and have gone through the record. It is true that the Division Bench of the High Court has borrowed extensively from the orders of the Tribunal and the Commissioner and passed them off as if they were themselves the author(s). We feel that quoting from an order of some authority particularly a specialized one cannot per se be faulted as this procedure can often help in making for brevity and precision, but we agree with Mr. Vahanvati to the extent that any “borrowed words” used in a judgement must be acknowledged as such in any appropriate manner as a courtesy to the true author(s). Be that as it may, we are of the opinion that the three questions reproduced above can, in no way, be called substantial questions of law. The fact as to the actual sale price of the property, the implication of the contradictory statements made by Rajarathinam or whether reliance could be placed on the loose sheets recovered in the course of the raid are all question of fact. We therefore find no infirmity in the order of the High Court. Accordingly, we dismiss the appeal.”

24. Considering the total facts and circumstances of the case and also applying the ratios of the judgements cited above, we are of the opinion that the A.O. is not correct in coming to the conclusion that the on money is exchanged between the parties based on a loose sheet found in the premises of a third person and also admission by a third person. To sustain the addition, the A.O. should have conducted an independent enquiry about the value of the property and ascertain whether any under valuation is done, if so what is the correct value of the property. Further, the A.O. did not brought on record any evidence to support his contention to say that there is on money exchanged between the parties. In the absence of proper enquiry and sufficient evidences, we find no reason to confirm the addition made by the A.O. Therefore, we reverse the CIT(A) order and direct the Assessing Officer to delete the addition.

25. In the result, the appeal filed by the assessee is partly allowed.

The above order was pronounced in the open court on 6th Nov’15.

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