TaxTMI 
TaxTMI 
2026 (3) TMI 777
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....ogether raising similar arguments on these issues. Accordingly, for the sake of convenience and brevity, we dispose all the appeals by this consolidated order. 3. Before we advert to the grounds taken in the cross-appeals, it would first be relevant to cull out the basic background facts of the case. Search was conducted u/s 132 of the Act upon the assessee on 22.04.2016 in the course of which, inter alia, six (6) account book(s) were found and seized vide ANN/FAY/CPA/B&D/S-1 and also cash of Rs. 4.77 crores was found. When enquired regarding the contents of these account books, the assessee, in his statement u/s 132(4) of the Act had admitted that, these account books related to his real estate and finance commission business, and that the cash found was also generated in his own business, which was not shown in his books of accounts. In his subsequent statement dated 02.07.2016, the assessee was enquired about the monies received by several finance firms controlled by him, to which, he is found to have stated that, these were business loans taken by him from the entities of one Shri Parasmal Lodha [in short 'PLA'] against his personal guarantee. Reading of his several statemen....
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....ng his original statement that, the entries found in the account book(s) related to his business activities. The assessee is also noted to have filed affidavits from the partners of these finance firms and a separate letter explaining the manner of disclosure of additional income of Rs. 205 crores. It is seen that, upon this retraction, the assessee was again summoned by the Revenue u/s 131 of the Act and in his cross-examination recorded on 06.06.2017, he is found to have confirmed his original statement recorded u/s 132(4) of the Act. The assessee also categorically affirmed that, the account book(s) and the loans received by his finance firms belonged to him and that he had voluntary disclosed income of Rs. 205 crores to tax. Overall, therefore the assessee is found to have admitted unaccounted income of Rs. 71.67 crores [Rs. 40.77 crores + Rs. 30.90 crores] in his own hands and unaccounted income of Rs. 205 crores in the hands of the respective finance firms. [Then assessee by a letter dated 28.12.2018 inter alia is noted to have again retracted his statement dated 09.05.2017 and reiterated his earlier statement dated 03.04.2017 & 10.04.2017 that the entries of Rs. 205 crores r....
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....dy brought to tax the entries found noted against code names 'RV', 'RV-I', 'RV-III', 'RV-IV', 'RV Gopi', 'RV Wife' aggregating to Rs. 498 crores in his hands. The AO accordingly reproduced the entire order passed in the matters of Shri NRV in the impugned order(s) noting that the entries found in the account book(s) had been substantively assessed to tax in the hands of Shri NRV by way of his unaccounted income. The AO however observed that, since Shri NRV had denied such receipts, the said amount was to be protectively assessed to tax in the hands of the assessee across AYs 2014-15 to 2017-18. On appeal, the Ld. CIT(A) observed that, as the substantive addition made in the hands of Shri NRV had been confirmed, the protective addition made in the hands of the assessee did not stand and therefore deleted the same. Aggrieved, the Revenue in now in appeal before us. 7. The Ld. DR appearing for the Revenue contended that, if the substantive addition(s) made in the hands of Shri NRV is deleted, then the protective addition(s) so made in the hands of the assessee, be directed to be substantively assessed. The Ld. AR for the assessee, on the other hand, vehemently contended that, the a....
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....nal is noted to have allowed the legal challenge raised by Shri NRV, and inter alia held that the AO's assumption of jurisdiction u/s 153C of the Act against him (Shri NRV) was invalid, as neither was there any material found in the course of search which related/pertained to him i.e. Shri NRV nor was there any incriminating material unearthed having a bearing on the total income of Shri NRV. Hence, the satisfaction note(s) recorded by the AO to issue notice u/s 153C against Shri NRV was held to be invalid and unjustified in as much as the material seized from the third parties including that of assessee did not contain any information which could be said to suggest any receipt of coal commission or that any amounts was being collected by Shri NRV from the assessee. Hence, the notice issued u/s 153C of the Act by AO against Shri NRV was held to be without jurisdiction for the reasons given therein and consequent assessment orders framed were quashed being non-est in the eyes of law. Since the substantive assessment(s) framed in the hands of Shri NRV has been quashed, the order(s) passed by the Ld. CIT(A) deleting the corresponding protective addition(s) in the hands of the assessee....
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....d since these legal issue(s) goes to the root of the matter, we deem it fit to adjudicate the appeal of the assessee first. 13. The first legal challenge raised by the assessee in Ground Nos. 1 & 2 is that, the assessment order dated 31.12.2019 passed by the AO u/s 153A/143(3) of the Act is barred by limitation and therefore deserves to be quashed. According to the Ld. AR, having regard to the date of search i.e. 22.04.2016, the income-tax assessment(s) for AY 2015-16 was barred by limitation on 31.12.2018. The Ld. AR claimed that, though the AO had mentioned in the impugned order that, the time limit stood extended as a consequence of request for Exchange of information under Double Taxation avoidance Agreement (DTAA) and Multilateral Convention on Mutual Administrative Assistance in Tax matters (MAC) made by the AO with the foreign competent authority, but according to him, no such reference was made by the AO. The Ld. AR pointed out that, the AO was only able to provide letter dated 22.11.2018 issued by the AO to the Pr.CIT, Central-1 and the letter dated 28.11.2018 sent by Pr.CIT, Central-1 to the Joint Secretary (FT & TR-IV-II), but the copy of the letter addressed to the C....
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....ecretary, FT&TR, New Delhi in the matters of the assessee to various foreign competent authorities along with the dates on which last information was received by PCIT. Having taken note of these contemporaneous facts, we find that, the contention of the assessee that, there was no reference ever made by FT&TR to foreign authority or that no information was received from the competent authorities, is found to be factually erroneous. In light of the evidences furnished by the Revenue, we are of the considered view that, the AO was indeed entitled to avail the benefit of extended period of limitation as set out in Explanation 1(x) to Section 153 of the Act, and thus the time limit for framing the impugned assessment stood extended by one (1) year i.e., 31.12.2019. Accordingly, the impugned order dated 31.12.2019 passed by the AO is held to be within the period of limitation. Hence, this legal plea of the assessee stands dismissed. 16. The assessee had also filed additional grounds in the course of hearing wherein he has objected to the manner in which the approval was accorded by the Addl/ Jt. CIT u/s 153D of the Act. The assessee has contended that, the approval had been given in ....
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....ranted by the Range Head in a mechanical manner. Further, we agree with the Ld. DR that, the approval granted by the Additional Commissioner of Income Tax is in the nature of administrative power. The Range Head while examining the matter u/s 153D does not examine or adjudicate upon the rights of obligations of the assessee, but only considers whether the Assessing Officer has fulfilled the requirements of section 153A/153C. The case of the Revenue finds support from the decision of the Hon'ble Karnataka High Court in the case of Rishabchand Bhansali v. DCIT reported in [2004] 267 ITR 577, wherein it was held as under:- "4.2 thirdly the order passed by the Joint Commissioner granting previous approval under the proviso to Section 158BG is in exercise of administrative power on being satisfied that the order of assessment has been made in accordance with the provisions of Chapter XIV-B. The previous approval is purely an internal matter and it does (SIC-not) Kailash Gahlot decide upon any rights of the assessee. The It. CIT, while examining the matter under the proviso to Section 158BG does not examine or adjudicate upon the rights or obligations of the assessee, but on....
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....d to the AO only. Only directions issued under section 144A of the Act by the Range Head are binding. Therefore, while giving approval under section 153D of the Act, the Kailash Gahlot Range Head does not enter the realm of appellate jurisdiction and hence cannot go into the legal merits of the additions proposed in the draft order or other jurisdictional issues. Hence, the application of mind by approving authority must be ascertained in the limited context only. 16. The Hon'ble Delhi High Court (Full Bench), in the case of Kelvinator of India Ltd. 123 Taxmann 433 (FB), on the basis of the statutory presumption under section 114(e) of the Indian Evidence Act, 1872, had drawn a presumption in the Income Tax matter that all official actions were performed regularly unless controverted by the corroboratory evidence. Thus; in the present case, the onus is on the assessee to rebut that the Addl. CIT while approving the case had not applied his mind. The Hon'ble Supreme Court, in the cases of State of Bihar vs PP Sharma AIR 1991 SC 1260, State of MP vs Harishankar Bhagwan (2010) 8 SCC 655, CS Krishnamurthy vs State of Karnataka AIR 2005 SC 2790 and State of Maharashtra ....
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....ich directly affect the rights & liabilities of the assessee under the Act, unlike the approval under section 153D of the Act which is an administrative approval by the supervisory authority confirming the proposed assessment order of the AO, who has valid jurisdiction. As discussed above, the sanction is quite different than that of approval. Hence, the case laws relied upon by the Ld. AR are in different context; hence, loss relevance. 18. The dismissal of SLP has no binding force in terms of Article 141 of the Constitution of India. Consequently, it has no binding precedent value, in contradiction with a reasoned order of the Hon'ble Supreme Court or an order passed in appeal. Reliance is placed on the decisions of the Hon'ble Supreme Court in the cases of Kunhayammed 245 ITR 360 and Khoday Distilleries Ltd. 104 taxmann.com 25 (SC)]. The Hon'ble Supreme Court, in the case of State of Orissa and Another v. Dhirendra Sundar Das And Others - [(2019) 6 SCC 270 (SC)] has clarified this position with the following observations at Para 9.27: "9.27 It is a well settled principle of law emerging from a catena of decisions of this Court, including Supreme Cou....
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....e seen qua the procedure only as per the SOPs issued by CBDT and not qua the recitals about his own actions in relation to what was seen by him or how did he reach the satisfaction before granting such approval under section 153D of the Act. Nowhere under the Act, any procedure and manner of granting approval under scheme of section 153A to 153D of the Act has been prescribed. This again suggest that these oversight procedures are meant to safeguard the interest of Revenue and not meant to interfere with tax liability. 22. After the search, the search conducting Assistant/Deputy Director of Income Tax (Investigation) goes through the entire seized material and flags the core incriminating seized material with his analysis and proposed course of action to be taken in a very detailed manner in the form of a report known as 'Appraisal Report', which is handed over to the AO along with seized material and copy of the said 'Appraisal Report' is always endorsed to the concerned Principal Commissioner/Commissioner of Income Tax and Range Head/Addl. CIT/Joint CIT as per the SOP. Such 'Appraisal Report' normally Kailash Gahlot contains scanned copies of the ....
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....ourt has held that the approval under section 153D of the Act is administrative in nature. It does not require elaborate reasoning. The absence of detailed discussion in the approval under section 153D of the Act does not make the assessment invalid, unless it is shown that there was no application of mind at all. The requirement is only that the approving authority applies its mind before granting approval. The Hon'ble Delhi High Court in the case of PPC Business & Products (P) Ltd. (supra) has categorically held that it is not a quasi-judicial order and elaborate reasoning in the approval under section 153D of the Act does not by itself vitiate assessment. Further, Hon'ble Delhi High Court in the case of Pepsi Foods (P) Ltd (2014) 367 ITR 112 (Del) has held that the function of the approving authority under section 153D of the Act is administrative to ensure that assessments framed by subordinate officers are not arbitrary. The Kailash Gahlot Hon'ble Supreme Court in the case of Sahara India (Firm) (2008) 300 ITR 403 has held that where approval is statutory but administrative, it need not record elaborate reasoning. Its purpose is supervisory control, not adjudicatio....
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....e SOP was substantively not followed by the Range Head while approving the assessment under section 153D of the Act and how it led to serious prejudice affecting the rights & liabilities of the assessee. The word 'each assessment year' in section 153D of the Act refers to the AYs mentioned in section 153A(1)(b) of the Act. Hence, once the assessment orders are being made for six AYs under section 153A(1)(b) of the Act, the approval under section 153D of the Act has also to be for each of six years but in no way it is stating that such approvals has to be through separate letters for each AY. The word "each' is not to be read qua approval but it is qua assessment order for each of relevant AYs. It is a many- to-one mapping as many times there may be common/interlacing of issues, both factual and legal running across multiple years of the same assessee or various assessees of the same searched group. 26. In view of the above discussion and case laws relied by us, we are of the considered view that the approval under section 153D of the Act is administrative in nature and any defect/error having crept therein is a curable one and not fatal. However, in the case in....
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....n and received back by him. The AO however was of the view that, the assessee was not able to substantiate his explanation with evidence / confirmation and therefore added the impugned sum of Rs. 15,23,51,330/- by way of his unaccounted income from his finance and commission business. On appeal, the Ld. CIT(A) partly confirmed the addition to the extent of Rs. 12,82,07,552/-. Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before us. 23. We have heard both the parties and perused the material placed before us. It is observed that, before the Ld. CIT(A), the assessee had reiterated the submissions before the AO and pleaded that, some of these transactions did not relate to him but RVS Trust and that some of them were borrowings and repayments of hand loans in the same year. We find that the Ld. CIT(A) elaborately analyzed each of the noting(s) added by the AO in light of the explanation & material furnished by the assessee and rendered the following findings, which are as under:- "10.2 The quantum of addition made and the reply of the appellant for the difference of entries between the trial balance and the seized books are summarized and discussed po....
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....st. Year 2014-15. Page 12 of the seized book evidence the claim of the appellant with regard to total advance, receipt of 1,87,500/- on two occasions and the balance receivable at Rs. 3.55 lakhs. Since the gross loan amount was already considered for addition in the Asst. Year 2014-15, no further addition on this count is warranted and the AO is directed to delete this portion of the addition made. 10.2.4. The fourth claim is that he received Rs. 5 lakhs from Sakthivel AE (RR) and the entry is a b/f figure from earlier years and on 01.12.2014 the total amount was repaid. Page 13 of the seized note book evidence the b/f figure at Rs. 5 lakhs and a payment was made on 01.12.2014, bringing down the closing balance to Nil. Since the amount paid are towards the earlier loan taken, no addition is called for and the addition made with regard to this payment of Rs. 5 lakhs is directed to be deleted. 10.2.5. Page 24 (inner column out of three columns after the narration column show two figures of Rs. 1,23,59,124/- and Rs. 8,14,000/-. The AO had considered these two figures as paid by the appellant during the year and made the addition. However, there is an opening balance ....
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....he appellant and the addition made by the AO on this count is confirmed. 10.2.7. Rs. 10,00,654/- was added in the name of Sri Muthusamy. In this regard, it was submitted by the appellant that he borrowed an amount of Rs. 10 lakhs on 29.10.2014, repaid Rs. 9.50 lakhs on 31.10.2014 and the balance on 01.11.2014. Page 71 of the seized note book evidences that an amount of Rs. 10 lakhs was credited on 29.10.2014, as reduced by the amount of Rs. 9.50 lakhs on 31.10.2014 leaving the balance Rs. 50,000/- as credit balance, which was later reduced to NIL. Since the pattern of entries show that it is a credit balance (loan obtained), the addition made by the AO in this regard is directed to be deleted. 10.2.8. The same is the case with regard to addition of Rs. 45,00,000/- in the name of RR Er. The appellant initially obtained a loan of Rs. 25 lakhs on 31.10.2014 and repaid the same on 01.11.2014. Likewise, another amount of Rs. 20 lakhs was obtained as a loan and repaid later. Since the entries evidence that loans were obtained, showing credit entries, the amount of Rs. 45 lakhs be deleted from the overall addition made by the AO. 10.2.9. The next addition of Rs.....
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....5 and the same was returned later. However, as the sources for such loan was not explained, the addition made by the AO is confirmed to this extent. 10.2.12 The same is the position with regard to the balance hand loans of Rs. 15 lakhs and Rs. 1 crore given to Sri Senthilnathan and Sri Ramamoorthy. Except claiming that these are hand loans advanced and later received back, the appellant has not furnished any sources for the same. Therefore, the additions made at Rs. 15 lakhs and Rs. 1 crore by the AO are confirmed." 24. At the time of hearing, the Ld. AR was unable to bring any other independent or tangible material to controvert the above findings of the Ld. CIT(A). Rather, the Ld. AR raised an alternate plea contending that these notings may be telescoped against the undisclosed income of Rs. 34,88,17,470/- and Rs. 8,57,66,420/- offered to tax in AYs 2014-15 & 2015-16 respectively. According to us, this alternate plea was never raised by the assessee before any of the lower authorities and the same required factual verification. The Ld. DR has rightly contended that, it is required to be verified whether the undisclosed income offered to tax by the assessee in his ret....
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....n to the grounds raised in AY 2015-16. Following our decision rendered in Ground No. 1 & 2 and additional grounds in AY 2015-16 (supra), we dismiss these grounds raised by the assessee in AY 2016-17 as well. 28. Ground No. 3 of the assessee's appeal and Ground No. (iv) to (vi) of the Revenue's appeal relates to the addition of Rs. 39.78 crores made by way of unaccounted investment in property. The facts as noted are that, the assessee had entered into a property transaction with Mr. V Duraisamy / M/s Hind Mercantile Corp Pvt Ltd towards which the assessee had paid Rs. 39.78 crores. The AO observed that, Mr. V Duraisamy had deposed that, he had received Rs. 2 crores in cheque and balance of Rs. 37.78 crores in cash towards purchase of landed property at Yashwantpura, Bangalore which was owned by M/s Hind Mercantile Corp Pvt Ltd. The AO further noted that, the assessee, in his statement(s) recorded on 03.04.2017 & 10.04.2017, had submitted that, sum of Rs. 8.8 crores was given in cheque and balance of Rs. 30.98 crores in cash and had offered to pay tax on the cash component. The assessee however did not do so in the return of income filed u/s 153A of the Act. When confronted with ....
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....he Ld. AR that, the tax consequence of the impugned unaccounted transaction was to be inferred in the hands of the finance firms and not the assessee. 30. We now turn our attention to the quantification of unaccounted investment made by the assessee in purchase of property. We countenance the Ld. CIT(A)'s findings to the extent that, the amount of Rs. 39.78 crores inter alia included the loan of Rs. 2.5 crores advanced to Vetridurai as on 01.04.2013 which along with interest stood at Rs. 4,98,29,000/- as on 14.07.2014 (Rs. 5 crores approx.) and the said amount was appearing in the balance sheet of the assessee as well. Accordingly, the amount to the extent of Rs. 4,98,29,000/- was rightly treated as explained and hence could not be added in the hands of the assessee. The relevant findings of Ld. CIT(A) taken note of by us is as follows:- "10.3 .... It is during the course of statement recorded on 03.04.2017, the appellant in response to question No.11, stated that the amounts given in respect of HMCPL property include the loan amounts already given to Sri Vetridurai (S/o Sidhai Duraisamy), including interest. In support of the above, the appellant relied upon page No.15....
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.... to the same as per law. Needless to mention, the assessee shall be given sufficient opportunity to explain his case and would be free to furnish any new evidences or details in support of his claim. Accordingly, the grounds taken by the assessee and the Revenue in this regard, are partly allowed for statistical purposes. 32. We now come to the Revenue's appeal in ITA No.1596/Chny/2025 and cross-objections filed by the assessee in CO No.46/Chny/2025 in AY 2016-17. It is observed that, the Revenue's appeal and the cross objections of the assessee relates to the Ld. CIT(A)'s action of deleting the protective addition(s) made by the AO in respect of the notings found in the account books ID marked ANN/FAY/CPA/B&D/S-1 seized from the premises of the assessee, which had been substantively added in the hands of Shri NRV. After considering the rival submissions, it is observed that, except variation in figures, the reasoning adopted by the AO for making the protective addition and the Ld. CIT(A) to justify deletion of the same is verbatim same as in AY 2014-15. 33. Following our reasons and conclusions recorded while deciding identical grounds raised by the Revenue in AY 2014-15 (su....
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....essee offers any income on ad hoc basis, then such income is commonly described as intangible addition; but it is very much a part of assessee's real income as disclosed in his account books and has the same concrete existence. The Hon'ble Court held that, that the secret profits or undisclosed income of an assessee earned in the same or an earlier assessment year may constitute a secret fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. The intangible additions were held to be available to the assessee as the regular book profits pro could be. The Apex Court thus held when the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing pre existing fund of concealed profits or by reference to concealed income earned in that very year then no addition is warranted on account of such cash deficits or cash credits. 37. Gainful reference in this regard may be made to the decision of the jurisdictional Hon'ble Madras High Court in the case of S K. Muralidhar Vs CIT (51 ITR 757). In the decided case the AO had initially made an addition by way of ....
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....h Court in Lagadapati Subba Ramaiah v. Commissioner of Income-tax Income tax [1956] 30 ITR 593 is a case in point. In that case the assessee was a shareholder of a private limited company styled the he Nellore Bus Transport Co. Ltd. According to the books of the company its profits for its entire period of existence, that is to say, for the years of account ending with 31st December, 1946, 31st December, 1947, 31st December, 1948, May, 1949, amounted in all to Rs. 34,352. The revenue declined to accept the books of the company and estimated its income at a higher sum on which tax to the tune of Rs. 62,000 was assessed and paid. The company purported to issue the dividend warrants to its shareholders aggregating to a sum of Rs. 1,16,280. The assessee stated that he got the dividends of Rs. 6,800 and Rs. 4,800 for the account years ending with 31st December, 1946, and 31st December, 1947, respectively, the dividends having been declared by the company on 2nd March, 1949. The assessee, however, claimed a refund on the basis of only one dividend warrant dated June 9, 1949, for Rs. 6,800. The department as well as the Tribunal rejected the claim of the assessee. The view taken was that ....
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....nfess our inability to appreciate it. The Tribunal observes in its order : "Intangible additions, as the name itself suggests, are purely matters of estimate which may err on the wrong side for the department. For wantwa of proper evidence, additions on account of deficiency of gross profit or other defects may be made but this would not mean putting in possession of the assessee their equivalent in hard cash available for expenditure or investment. It may be said that having suffered a harsh assessment in a particular year, the assessee's case should be considered sympathetically in the subsequent year when an investment of the nature we are discussing is brought to light." Additions are no doubt made very often on estimate basis. But it can never be said, or at any rate the department cannot contend, that the amount of the addition is not the real income but something which the assessee may not have earned. It is wholly illogical for the department to contend that the addition was only for purposes of taxation and that it should never be taken as true income of the assessee. We must point out that the Tribunal is wrong in thinking that an assessee suffers a "harsh as....