TaxTMI 
TaxTMI 
2025 (2) TMI 1664
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....s of appeal filed by the assessee in ITA No: 2119/Chny/2024 are as under: "1. The order of the CIT(A) dismissing the appeal challenging the order u/s.154 r.w.s.143(3) r.w.s.153C of the Act is erroneous as the same is contrary to the facts of the case and provisions of law. 2. The CIT(A) erred in dismissing the appeal by holding that the levy of interest is only consequential and that no separate order needed to be passed. 3. The CIT(A) erred in failing to see that the appellant had filed his ROI within the due date and thus no interest u/s.234A of the Act could be levied. 4. The CIT(A) ought to have annulled the order dated 21.01.2022 as the same was not in conformity with the directions issued by the CBDT. 5. The CIT(A) has erroneously dismissed the appeal without considering the fact that the rectification carried out by the AO was on a debatable. issue which was not apparent from the order of assessment. 6. The CIT(A) ought to have quashed the rectification order for the reason that the very initiation of the same was illegal in view of the ambiguous notice issued by the AO. 7. The CIT(A) ought to have deleted the in....
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....an Agencies and son of Mr.P.Neelraj, who is son-in-law of the chairman of the Trust M/s.Dhanalakshmi Srinivasan Charitable and Educational Trust. The search u/s.132 of the Act was launched in the case of Trust and its group on 15.02.2018. Offices of various entities connected with the group as well as residence of key individuals were covered in the search including the residence of Mr.P.Neelraj. The assessee is a doctor by profession and running a private hospital. The assessee had filed his return of income for the A.Y. 2017-18 on 26.10.2017 by declaring a total income of Rs. 16,91,070/-. Since the CPC pointed out certain defects in the return of income the assessee filed the revised return of income on 10.12.2018 admitting the same income. Again the revised return of income filed on 29.08.2018 based on certain defects pointed out by the CPC on 29.08.2018. During the search in the residential premises of assessee's father Mr.P.Neelraj, the loose sheet No.2 is a letter from SEBI dated 27.01.2017 in the name of the assessee was also seized. This letter contained the details of the bid value of Rs. 17,01,00,000/- paid by the assessee towards purchase of immovable property belonging ....
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....t on 26.07.16 as mentioned above) money was put into the account of these employees and was transferred to the bank account of Shri Vinoth. The purpose, evidently, is to create an impression of genuineness in the minds of those who would verify Vinoth's bank statement (and Vinoth's bank statement alone). Few of such instances are given in the following table: Sl. No From whose account funds transferred to Vinoth Amount transferred to Vinoth Date of transfer Cash deposit in the said account Date of cash deposit 1 N. Jayanthi 34,00,000 14/07/2016 34,00,000 14/07/2016 2 P.Neelraj 26,00,000 14/07/2016 26,00,000 14/07/2016 3 Ganesh Traders 12,50,000 25/07/2016 12,50,000 25/07/2016 4 K. Gunasekaran 60,00,000 26/07/2016 60,00,000 26/07/2016 5 R.Rajasekar 27,00,000 26/07/2016 27,00,000 26/07/2016 6 SPT& Co 40,00,000 26/07/2016 40,00,000 26/07/2016 13. From an analysis of these bank accounts, it is seen that in most of these accounts (ordinarily) have only a nominal balance: They could transfer such huge amounts say, 50 lakhs, 60 lakhs etc) only by v....
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....directly in Vinoth's account on or immediately preceding the date of transfer to SEBI - (for example 45 lakhs deposited on 26/07/2016 as discussed above) (2) Cash deposits in the bank accounts of individuals/entities which are immediately transferred to the account of Vinoth. (3) Funds credited into the account of an individual/entity from the bank account of a concern related to Dhanalakshmi Srinivasan group (whose Chairmnan is Vinoth's grand-father). These funds are immediately transferred to Vinoth's account. 17. Under these circumstances, it becomes evident that the entire arrangement is a sham. Source of funds that came to the bank account of Shri Vinoth (either as cash deposits or as fund transfers) remain unexplained. Only conclusion that can be drawn is that these were assessee's own money routed back to him in the garb of funds from several individuals/entities. Entire money used for purchase of property of Sahara group remains unexplained and is to be brought to tax in the hands of assessee in the manner as laid out under section 69A. 18. Therefore, the said amount of Rs. 17,01,00,000 was proposed to be assessed in the h....
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....hara group and purchased by the assessee on auction. 6.3.4 The contention of the appellant is that the single addition made in the order passed is an addition of Rs. 17,01,00,000/- being the sum advanced for purchase of land conducted by SEBI. The fact regarding the advancement of Rs. 16,83,99,000/- towards the e- auction after the deduction of TDS of Rs. 17,00,989/- and remittance of the same to the Central government Account was very much disclosed to the department much before the date of search and subsequent recording of satisfaction. The appellant is claiming that the seized letter from SEBI does not constitute incriminating material for the following reasons:- (i) The appellant had paid the auction amount of Rs. 16,83,99,000/- after deducting TDS @ 1% of Rs. 17.00,989/- (ii) The appellant had remitted the TDS deducted to the credit of the Central Government, (iii) The TDS deducted clearly finds place in the Form 26AS of the appellant for this year, (iv) The appellant had filed his ROI 27.10.2017 declaring income of Rs. 16,91,070/- and claiming total refund of Rs. 14,00,520/- as he had deducted TDS of Rs. 18,31,395/- inclusive of T....
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....ial found as a result of search to make addition towards unsecured loans take and declared in regular return of income filed for relevant assessment year." 6.3.8 From the above observation of the jurisdictional tribunal, it can be seen that on the basis of the information already in possession with the department by way of the contents disclosed in the return of income filed u/s 139(1) of the Act, any material which co-relates or indicate the same can in no way be treated as an "incriminating material". 6.3.9 Further as relied upon by the appellant the decision of the Hon'ble Karnataka High Court in the case of CIT vs. S. Ramachandran and Co. [2012] 209 Taxman 107 (Karnataka) which squarely applies to the facts of the appellant, the relevant portion of the decision is extracted hereunder; "However, the material on record would, clearly show that the said firms which have made payment according to the Revenue, to the assessee, have deducted the tax at source and the same is intimated to the Department. therefore, when the Department had knowledge about the payment made to the assessee and deduction of tax made at source the said income cannot be said i....
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....faction based on any other incriminating material (other than loose sheet sl.no. 2 of the seized material) for the relevant assessment year, as envisaged u/s 153C of the Act. 6.3.11 As the AO has considered the letter received from SEBI as the incriminating material and recorded satisfaction to invoke the provisions of section 153C of the Act when the same transaction as mentioned in the said letter was already declared in the return of income much prior to the date of search the same letter cannot have the character of an "incriminating material". Accordingly the notice u/s 153C of the Act dated 25.11.2019 for the AY 2017-18 issued by the AO by treating the same an incriminating material has no legs to stand and the order passed based upon such defective satisfaction note cannot survive. Accordingly the ground raised by the appellant upon the issue of recording of defective satisfaction is treated as allowed on legality." 6.1 Adjudication of ld.CIT(A) on merits of the case : 6.6.7 The undersigned upon careful examination of the bank statements and the order of the AO is of the considered view that the Ao has not established the fact that the Appellant's ow....
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....the creditors, there can be no case to treat the bid amount as unexplained money in the hands of the Appellant. In this regard the decision of the Hon'ble Guiarat High Court, in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360/[2003] 127 Taxman 523, is relied upon, the Hon'ble Gujarat High Court has held that the onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors', the proper course Would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor)". 6.6.9 From the above bank statement, it can be seen that the Appellant has repaid the loans taken from the creditors, thus, there exists no question to treat the creditors as bogus and making addition as unexplained as per the provisions of section 69A of the Act. In view of the above findings and the judicial precedents, the undersigned is of the considered view that the Appellant had received loans from his....
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....e same have been made and done in the absence of incriminating material. It is pertinent to note that incriminating material is necessary to make the addition for this year as no assessments were pending in the assessee's case for the A.Y.2017-18 and also the limitation for service of notice u/s.143(2) of the Act had expired. The relevant dates and events are as under; Sl. Date Event 1. 27.10.2017 ROI filed by the Respondent u/s.139(1) of the Act 2. 10.02.2018 1st Revised ROI filed by the Respondent u/s.139(5) of the Act 3. 15.02.2018 Search in the case of Dhanalakshmi Srinivasan Group 4. 30.09.2018 Expiry of limitation to issue notice u/s.143(2) of the Act for the above two ROls 5. 03.09.2018 2nd Revised ROI filed by the Respondent u/s.139(5) of the Act 6. 30.09.2019 Expiry of limitation to issue notice u/s.143(2) of the Act for the 2nd Revised ROI 7. 20.11.2019 Order passed by the PCIT u/s.127 of the Act centralizing the Respondent's case 8. 25.11.2019 Notice u/s.153C of the Act issued by the AO 8.1 The ld.AR further stated that the above dates and events, it becomes clear that the ROls fi....
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....(Pages 3 to 9 of PB). Since the CPC pointed out certain defects in the ROI, he filed one more ROI on 10.02.2018 (Page 15 of PB) admitting the same income. Again, one more ROI was filed on 03.09.2018 (Page 18 of PB) again admitting the same income returned in the earlier two ROIs. 8.2 The ld.AR stated that the ROI was taken up by CPC Bengaluru and TDS aforesaid was not allowed in an intimation dated 30.06.2019 (Page 19 of PB). Therefore, the assessee filed letter dated 02.07.2019 (Page 24 of PB) with the CIT, TDS, Chennai seeking refund of the entire TDS amount claimed. The assessee had explained the circumstances under which the refund came to be claimed. The assessee has stated that he had purchased in open auction by the Securities Exchange Board of India (SEBI) land at Tiruchirapalli and in accordance with the conditions of the auction he paid Rs. 16,83,99,000/- net after deducting TDS @ 1% of Rs. 17,01,000/- in accordance with section 194IA of IT Act. This assessee had even approached the Dy CIT, CPC vide his communication dated 21.02.2018. 8.3 The ld.AR further submitted that the information in this seized letter is not something that came to the knowledge of the Departm....
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....isclosed income is a sine qua non for invocation of Section 153 of the Act." 8.6 Furthermore, the ld.AR stated that the satisfaction note has to be tested on a standalone basis and no additions or improvements can be made to the same. This has been so held by this Hon'ble Tribunal in ACIT vs. Arunachalm Srinivasan in ITA No.1527/Chny/2023; "17. It has to be kept in mind that when the challenge is to the validity of the satisfaction note which the AO has recorded to assume jurisdiction, we have to examine the satisfaction recorded as it is. There are case laws which throws light in the context of examining the legal validity of Satisfaction recorded by the AO while re-opening the assessment u/s. 147 of the Act. It is settled law that reasons as recorded for reopening the reassessment are to be examined on a 'stand-alone' basis. Neither anything can be added to the reasons so recorded nor any thing can be deleted from the reasons so recorded. The Hon'ble Bombay High Court in the case of Hindustan Lever Ltd. (2004) 268 /TR 332 have, inter alia, held "it is needless to mention that the reasons are required to be read as they were recorded by the AO. No subst....
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.... arrived at by the AO and incriminating material found during the course of search and thus, in our considered view, the satisfaction note recorded by the AO as required under provisions of Sec. 153C of the Act, is not in accordance with law and further, notice issued by the AO on the basis of said incorrect satisfaction is illegal ab initio and liable to be quashed." 8.8 The ld.AR submitted that the letter seized merely refers to the purchase consideration advanced by the assessee and the refund of the same. It does not contain anything incriminating in nature. Similarly, in the case of DCIT vs Avinash Singla [2025] 170 taxmann.com 786 (Chandigarh - Trib.), a letter issued by SEBI to the assessee was found which warned the assessee that he had transacted in shares whose prices were manipulated. Based on this letter, the AO added the capital gains from the sale of these shares as bogus income of the assessee. On appeal to the ITAT, the Hon'ble tribunal deleted the addition by stating as under; "14. With the assistance of the ld. Representatives we have gone through the record carefully. Admittedly, nothing was found during the course of search except a warning lette....
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.... office and provide an explanation. 8.10 Further, the ld.AR submitted that the declaration under the IDS, 2016 was made way back on 12.10.2016. Nothing deposed by the assessee's father contained any new information, let alone information which incriminated the assessee in any way. In any case, this statement was not even referred to in the satisfaction note and the same also could not have formed the basis for initiation of proceedings u/s.153C of the Act as held by the Hon'ble Delhi High Court in CIT vs. Raj Pal Bhatia [2011] 333 ITR 315 (Delhi): "In the instant case, admittedly, during the search carried out at the premises of C no books of account or other documents or other assets pertaining to the assessees were found or seized. The entire foundation of the block assessment under section 158BD insofar assessee's were concerned, was the statement of C recorded during the course of search. Admittedly, statement of C was neither 'books of account' nor 'assets'. Statement was not the document which was found during search. In fact, it was the document which came to be created during the search as the statement was recorded at the time of sea....
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.... of the submissions made above, the ld.AR prayed that the order of the CIT(A) be upheld and the Departmental appeal be dismissed. 9. We have heard the rival contentions perused the materials available on record and gone through the orders of lower authorities. A search u/s.132 of the Act was conducted in the case of M/s.Dhanalakshmi Srinivasan Charitable and Educational Trust and its group on 15.02.2018. Offices of various entities connected with the group as well as residence of key individuals were covered in the search including the residence of Mr.P.Neelraj, son in law of the Chairman of the Trust. The assessee is a son of Mr.P.Neelraj. It is admitted fact that the assessee is a doctor and had filed his return of income for the A.Y. 2017-18 on 27.10.2017 and had been revised twice in response to notices issued by the CPC. Sl. Date Event 1. 27.10.2017 ROI filed by the Respondent u/s.139(1) of the Act 2. 10.02.2018 1st Revised ROI filed by the Respondent u/s.139(5) of the Act 3. 15.02.2018 Search in the case of Dhanalakshmi Srinivasan Group 4. 30.09.2018 Expiry of limitation to issue notice u/s.143(2) of the Act for the above two RO....
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....India (SEBI) land at Tiruchirapalli and in accordance with the conditions of the auction he paid Rs. 16,83,99,000/- net after deducting TDS @ 1% of Rs. 17,01,000/- in accordance with section 194IA of IT Act. This assessee had even approached the Dy.CIT, CPC vide his communication dated 21.02.2018. 9.4 Therefore, we agree with the ld.AR that the information in this seized letter is not something that came to the knowledge of the Department only due to the search and seizure. The fact that the assessee had deducted TDS of Rs. 17,01,000/- on the payments made towards SEBI find place in his Form 26AS for this year. Moreover, the assessee had claimed refund of the TDS in his various ROls filed for this year, of which the original ROI and the 1st revised ROI were filed prior to the search. This being the case, the seized letter did not reveal anything new to the Department and thus the same can never be touted as an incriminating material bringing to light some undisclosed income or undisclosed transaction. 9.5 We also note that as argued by the ld.DR, from "Annexure/SS/Loose Sheet/Seized Sl.No.1 dated 16.02.2018 Page no.2", the AO had referred to pages 1,4,5,6,7,8,9 of the same se....
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.... read as they were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded by him. He has to speak through the reasons." Their Lordships added that "the reason recorded should be self explanatory and should not keep the assessee guessing for reasons. Reasons provided the link between the conclusion and the evidence ..... ". Therefore, reasons are to be examined only on the basis of reasons as recorded by the AO. This analogy/ratio decidendi of the Hon'ble High court is applicable to the 'Satisfaction-Note' prepared by the AO when he recorded his satisfaction note in respect of a third person (assessee in this case) against whom he/AO proposed to invoke the special provision and issue notice under section 153C of the Act. 9.8 In the case on hand, the Page no.2 of the seized material is in no way incriminating against the assessee and hence the satisfaction recorded by the AO fails, making the satisfaction and all subsequent proceedings defective. Similar addition was deleted by this Hon'ble Tribunal in the case of M/s.KP Construction vs. A....
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....ds on the letter of SEBI which was missing in the case of Smt. Meenu Singla. The Assessing Officer, thereafter, he himself has not cross verified anything. He only followed some information available on the portal of the Revenue without cross verifying any circumstance. The Ld.CIT(A) appreciated the controversy in right prospective and rightly concluded that during the search no incriminating material was found demonstrating the alleged transactions as a bogus one. In view of above discussion, we do not find any merit in these appeals and they are dismissed." 9.10 Further, in the sworn statement of the assessee's father Mr.Neelraj to the question No.20, he stated that the assessee is a doctor and running a petrol bunk and the cash deposits were out of the collection of the bunk, as given below; Q. No.20: Here is the bank statement of Dhanalakshmi Srinivasan Agencies from 01.04.2016 till 15.02.2018. Many cash deposits have been made in this account. More specifically, cash has been deposited continuously on 26.07.2016 and 08.08.2016. Please explain the same. Answer: This bank account relates to my son's (Dr. N. Vinoth) petrol bunk by the name Dhanalakshmi Sr....