Validity of addition on account of unaccounted cash towards sale of land based on assessee’s acceptance during income tax raid

This was the issue which has arisen in a Revenue’s appeal in Hyderabad ITAT.

Short Overview of the case:

ACIT Vs V V Rajam

ITA No. 582/H/2017

The assessee had filed his return of income for relevant AY.

The case was selected for scrutiny and statutory notices were issued to the assessee.

Based on the specific information received by the AO that Sri Bukka Kanakaiah of Siddipet was carrying cash of Rs. 1,20,00,000/- to be delivered at Malakpet, Hyderabad.

A search was conducted and cash of Rs. 1,20,00,000/- found in his possession was seized.

 As he deposed during his statement that an amount of Rs. 1,00,50,116/- was already delivered in cash to Shri V.V. Rajam, of Malakpet, Hyderabad, to whom he intended to deliver the seized cash of Rs. 1.20 crores for the purpose of purchase of land at Siddipet, the assessee was searched u/s 132.

The AO completed the assessment u/s. 143(3) r.w.s. 153A assessing the unaccounted cash of Rs. 1,87,32,500/- and determined the total income at Rs. 2,00,26,590/-.

On appeal, the CIT (A) deleted the addition made by the AO.

Aggrieved Revenue filed appeal before the ITAT.

On appeal, the issue before Tribunal & its observastion / Ruling were as under:

Issue – Whether addition on account of unaccounted cash towards sale of land can be made based on assessee’s acceptance of such transaction during the course of search proceedings?

ITAT held it as Yes.

ITAT observed as under:

AO has observed that the assessee has purchased a land of 2 acres in survey No. 356/3E1/1 situated at Pragnyapur village, Gajwel Mandal, Medak District in his name for a consideration of Rs. 1.2 crore as well as purchased a house in Hyderabad in his wife’s name for a consideration of 80,00,000/-.

This transaction itself has accepted by the assessee during the course of search proceedings.

Therefore, the AO has rightly made the addition for unaccounted cash. The assessee has submitted before the CIT (A) wrong facts that in the particular land there was a well and bore-well, but, on perusal of the sale deed executed on 02/08/2012, nowhere it has been mentioned under the ‘Declaration’ that there is a well or bore-well.

When the property was purchased in 2001 was a dry agricultural land, but, subsequently, when sale was materialized on 02/08/2012, nowhere it is mentioned in the translated document that the land was agricultural land.

Before the CIT(A) the assessee has submitted agricultural operation is carried on and the source of irrigation for the agricultural operations is the open well and also a borewell situated in the land.

Therefore, the argument of the assessee that the said land is an agricultural land cannot be accepted.

Earlier the sale agreement was made on two times for a consideration of Rs. 62,00,116/- per acre and the same property has been sold on 02/08/2012 at Rs. 12,67,500/-, which is clearly proved that something has been concealed and during search the assessee clearly stated the actual facts which is clear from the statements recorded during the search and seizure.

Relying on the judgements of Supreme Court in the case of Sumati Dayal vs CIT, 2002-TIOL-885-SC-IT-LB and CIT vs Durga Prasad More, 2002-TIOL-877-SC-IT, it was decided to set aside the order of the CIT (A) and restore the order of AO in making the addition of Rs. 1,87,32,500/- on account of unaccounted cash towards sale of land.

 Accordingly, the grounds raised by the revenue on this issue are allowed.