TaxTMI 
TaxTMI 
2026 (6) TMI 418
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...., the same were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity. 2. The assessee firm has raised common grounds of appeal in all the assessment years. Therefore, for the sake of brevity, grounds of appeal filed for the A.Y. 2016-17 in ITA No.661/Hyd/2026 are re-produced as under: "1. The Learned CIT(Appeals) erred in both law and facts while passing the Order. 2. On the facts and circumstances of the case and in law, the Ld.CIT (Appeals) is not correct in not appreciating that the assessment order u/s 143(3) r.w.s 147 of the Income Tax Act ("Act") is void ab initio as the re-assessment proceedings initiated by the issue of notice u/s 148 without due compliance with the requirements of sections 148 and 149(1)(b) is without jurisdiction and unsustainable in law. 3. On the facts and circumstances of the case and in law, the Ld.CIT (Appeals) is not justified in rejecting the plea of the appellant that the assessment order u/s 143(3) r.w.s 147 of the Act is void ab initio, as the prior approval for the issue of notice u/s 148 was accorded by the specified authority u/s 151 in a mechanical ma....
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....o not have evidentiary value in the absence of corroborative evidence. 10. The Ld.CIT(Appeals) is not justified in rejecting the plea of the appellant that AO erred in relying on the data patterns in the seized material with regard to some transactions, without appreciating the explanation furnished by the appellant. 11.On the facts and circumstance of the case, the Assessment order which was confirmed by Learned CIT(A) has been passed with surmises and conjectures. 12. Without prejudice to the above grounds, Ld. CIT (Appeals) is not justified in rejecting the plea of the appellant that AO erred on facts and in law in excessively estimating the additional income arising out of unaccounted cash receipts as quantified by him at 16% of such receipts as against estimation made by the assessee at 10% of the admitted quantum of unaccounted cash receipts. 13. Any other legal grounds or factual grounds that may be urged at the time of hearing of the appeal." 3. The brief facts of the case are that the assessee, M/s. Vamsiram Builders and Developers Private Limited, formerly known as M/s. Vamsiram Builders, a partnership firm, is engaged in the busines....
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....o Shri Sameer Yegge Kadel. He further stated that he is not aware of the contents and the same is known to Vamsiram Group only. 4. During the course of search proceedings at the residence of Shri Regu Venkata Vara Prasad, Manager (Accounts & Finance), in his sworn statement recorded under Section 132(4) of the Act, from 06.12.2022 to 10.12.2022 and during the course of post-search examination on 07.12.2022, in response to Question Nos. 19 and 20, he stated that part of the sale consideration is received in cash and record of such cash transactions are maintained by Shri Atla Chandrashekar, Assistant Manager (Accounts). Based on the statement of Shri Regu Venkata Vara Prasad, summons was issued to Shri Atla Chandrashekar to appear before the Authorized Officer at the corporate office of M/s. Vamsiram Group on 07.12.2022. In response to the summons, when he appeared at the corporate office of M/s. Vamsiram Group, a statement under Section 131 of the Act, was recorded by the Authorized Officer and in response to Question No. 6, Shri Atla Chandrashekar confirmed the maintenance of cash transactions in diary and Excel sheets. The Authorized Officer requisitioned Shri Atla Chandrashek....
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....ich he deposed that there was no suppression of two digits and further stated that, he had not authorised Shri Atla Chandrashekar and Shri Regu Venkata Vara Prasad to maintain pen drives. The search was temporarily concluded on 11.12.2022. Subsequently, the assessee group obtained the copies of sworn statements from the Investigation Department. The prohibitory order at the corporate office was revoked on 08.02.2022 and the search was concluded on the same day. During the search proceedings, two mobile phones brought by Shri Sameer Yegge Kadel, which were kept under prohibitory order, were seized and inventorised as Annexure A/ENX01/PO/01. On 09.02.2023 Shri Atla Chandrashekar and Shri Regu Venkata Vara Prasad filed retracting affidavits before the DDIT (Investigation) and further detailed additional affidavits were filed on 17.03.2023 and 05.04.2023 respectively. 5. Consequent to the search, the assessment has been reopened on the ground that there was information which suggested that income chargeable to tax had escaped assessment in the case of the assessee. Accordingly, the A.O., after recording the reasons, issued notice under Section 148 of the Act, on 22.12.2023 after obt....
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....A.O. also referred to the relevant seized material in the assessment order and enquiries conducted with various persons and observed that the enquiry conducted in respect of few transactions relating to landlord payments, rent payments, receipts from sale of scrap and payments to certain professionals, revealed that the amounts were recorded after truncating two zeroes. The assessee was provided with copies of statements recorded from various customers and vendors relied upon by the AO. The assessee, after receipt of copies of statements recorded, filed objections with regard to each customer from whom statements were recorded and stated that the statements recorded from eighteen parties are not valid and do not have any evidentiary value. 7. The A.O. after considering the relevant explanations coupled with the statements recorded from various persons and also relying upon the enquiries conducted with eighteen parties, observed that, the cash book maintained by Shri Atla Chandrashekar and Shri Regu Venkata Vara Prasad clearly demonstrates the receipts and payments after suppressing two zeroes and the same has been confirmed from the statements of eighteen parties, including vend....
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....wise total receipts for A.Ys. 2016-17 to 2019-20 and the same has been tabulated in para 15.6 of the assessment order. 8. The A.O. further noted that, the assessee has worked out total receipts as per the seized cash book and offered additional income @ 10% profit on such total receipts. However, the assessee failed to justify adoption of 10% profit from the seized cash receipts. The A.O. further noted that although the assessee claims that only petty transactions are recorded in the incriminating material, but it is clearly established that the seized material relates to complete transactions of the group, i.e., unaccounted receipts on sale of residential flats and commercial spaces and the quantum of such receipts is very huge when compared to petty transactions like scrap etc. Therefore, taking into account the relevant accounting method followed by the assessee for disclosing income and also considering the relevant financial statements filed by the assessee along with the return of income, the A.O. observed that, the assessee on an average, has declared net profit of 19.43% and the median percentage of said net profit was worked out to 16.05%. Therefore, taking into account....
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....l these assessment years, the A.O. had made a detailed proposal to the specified authority seeking approval and on perusal of the detailed proposal, the specified authority i.e., DGIT (Investigation), Hyderabad accorded approval for issuance of notice as per Section 151 of the Act. Therefore, the contention of the assessee that approval by the specified authority was issued in a mechanical manner is not borne out from the record and thus, rejected the grounds taken by the assessee. 11. The Ld. CIT(A) had also rejected the grounds taken by the assessee on the issue of addition made towards estimation of profit at 16% on total receipts computed as per unaccounted cash book found during the course of search and held that upon noticing the detailed reasons given by the A.O. in the assessment order coupled with evidence relied upon for making the additions including the statements recorded from various parties and their subsequent retractions, examination of eighteen parties, including vendors and service providers and their cross-examination, it is very clear that there are enough evidence to prove that there was truncating of two zeroes while recording receipts and payments in the ....
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....e relevant assessment years and therefore, the provisions of Section 149(1)(b) of the Act, are applicable. The learned counsel for the assessee submitted that for assumption of jurisdiction under Section 148 of the Act beyond a period of three years, the A.O. has to satisfy the mandatory jurisdictional conditions prescribed under Section 149(1)(b) of the Act. The learned counsel for the assessee submitted that as per the provisions of Section 149(1)(b), the income escaping assessment shall be represented in the form of an asset, expenditure in respect of a transaction or an entry or entries in the books of accounts and unless the said jurisdictional conditions are fulfilled, the notice issued under Section 148 of the Act, is invalid and void ab initio. 15. CA. MV Prasad, learned counsel for the assessee submitted that the term "asset" has been specifically defined in Explanation to Section 149 of the Act to include immovable property, shares and securities, loans and advances and deposits in bank account. The learned counsel for the assessee submitted that in the present case, while recording reasons for reopening the assessment, the A.O. has not identified any undisclosed asset....
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....reasons recorded or assessment order has the A.O. identified any undisclosed asset or entries in the books of accounts representing escaped income exceeding Rs. 50,00,000/-. The learned counsel for the assessee submitted that the A.O. merely harped upon receipts without identifying the specific asset or entries in books of accounts and therefore, the jurisdictional requirement prescribed under Section 149(1)(b) of the Act, has not been fulfilled. 17. CA MV Prasad, learned counsel for the assessee by relying upon the decision of the Hon'ble Supreme Court in the case of Arun Kumar & Ors. Vs. Union of India & Ors. reported in 286 ITR 89 (SC) submitted that existence of jurisdictional facts is sine qua non for assumption of jurisdiction and unless jurisdictional facts exist, no authority can confer jurisdiction upon itself. The learned counsel for the assessee submitted that fulfilment of conditions prescribed under Section 149 of the Act, constitutes jurisdictional facts and unless the said conditions are fulfilled, notice issued under Section 148 of the Act is liable to be quashed. The learned counsel for the assessee further by relying upon the decision of the Hon'ble Supreme Cou....
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....r Naik, and the learned Sr.A.R., Dr. Sachin Kumar, on the other hand, submitted that the provisions of Section 148 of the Act, as amended by the Finance Act, 2021 w.e.f. 01.04.2021, is a deeming fiction and as per Explanation 2(i) to Section 148 of the Act, where search is initiated under Section 132 of the Act, the A.O. shall have deemed information up to 3 years and, therefore, the arguments of the learned counsel for the assessee that the reasons recorded by the A.O. should establish escapement of income on the face of the reasons recorded, is incorrect. The Ld. CIT-DR further submitted that, the newly inserted Section 148 by the Finance Act, 2021 is information driven and further subsequent amendment in 2022, by insertion of relevant Explanation has widened the definition of 'escapement of income'. In the present case, there is a separate warrant in the case of the assessee and others and as per the warrant, Panchanama was drawn and therefore, Explanation 2(i) is applicable for the assessment years upto 3 three years and beyond three years, the A.O. has recorded reasons which clearly show information which suggests escapement of income in the form of an 'asset' or expenditure o....
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....ated by the A.O. on the undisclosed receipts constitute an asset for the purpose of Section 149 of the Act and, therefore, the A.O. has rightly considered the documents found during the course of search and found that information suggests escapement of income for the relevant assessment years as per the provisions of Section 148 of the Act. 20. The Ld. CIT-DR, further referring to the decision of the Hon'ble Supreme Court in the case of Director of Income-tax (IT)-1, Mumbai Vs. American Express Bank Ltd., in Civil Appeal No. 8291 of 2015, submitted that taxing statutes must be strictly interpreted so as to give clear and unambiguous meaning. The legislative intent is primarily to be gathered from the specific words used by the Legislature. Therefore, going by the newly inserted provisions of Section 148 of the Act, it is very clear that where there is a search under Section 132 of the Act, the A.O. shall be deemed to have information which suggests escapement of income up to three years and only in cases of reopening of assessment beyond three years, the A.O. should form a reasonable belief of escapement of income which represents an 'asset' or entries in the books of accoun....
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.... shall not apply in a case for the relevant assessment year beginning on or before 1st day of April, 2021 if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021. If a notice u/s 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021. Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021. Provided ....
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.... shares and securities, loans and advances, deposits in bank account. (1A) Notwithstanding anything contained in sub-section (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1) has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous year relevant to the assessment years within the period referred to in clause (b) of sub-section (1), a notice under section 148 shall be issued for every such assessment year or re-assessment or recomputation, as the case may be. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151." 22. Section 149 of the Act stipulates the limitation for issuing notice u/s 148. The normal time limit as provided u/s 149(1)(a) is 3 years from the end of the relevant A.Y. However, if the case which fall in the ambit of sub clause (b) of section 149(1) of the Act, the time limit is extended up to 10 years from the end of the relevant A.Y subject to the....
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....transaction in cash and not the transactions of other then cash. Therefore, these details found in the cash book would not constitute the books of account or parallel/duplicate books of account and consequently would not fall in the ambit of sub clause (iii) of clause (b) of section 149(1) of the I.T. Act. 24. Further, once the case of the assessee does not fall in the ambit of clause (b) of section 149(1) of the Act, then the reasons recorded by the Assessing Officer for reopening of the assessment giving the details of undisclosed income as quantified by the ADIT (Inv) Unit- I, reveals that the Assessing Officer has recorded his satisfaction in the reasons mechanically without application of mind so far as the correct amount of escaped income for each of the assessment years. This non-application of mind at the time of recording the reasons also corroborated by the fact that in the assessment order, the Assessing Officer has determined the escaped income for each A.Y on estimation basis. Even if for the sake of argument, it is presumed that the quantum of escaped income for each A.Y was more than Rs. 50 lakhs and the Assessing Officer at the time of recording the reasons was n....
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....provided in sub clause (i) and sub clause (iii) of clause (b) of section 149(1) of the Act satisfied. It is pertinent to note that the seized material in question is only a cash book maintained by the employees and none of the transactions as found in the seized material is representing any asset in existence at the time of the search & seizure action or even at the time of the assessment. It is not the case of the Department that any cash equivalent to the alleged undisclosed income/income escaped assessment was either found or converted into any other asset. Therefore, the Assessing Officer has completely failed to bring the case of the assessee in the ambit of sub clause (i) of clause (b) of section 149(1) of the I.T. Act. Further, the seized material is not in the nature of books of account, therefore, the details recorded in the seized material would not constitute as entry or entries in the books of account. Therefore, we are of considered view that the provisions of section 149 of the Act explicitly state that the AO should be satisfied regarding the fulfilment of the conditions specified there in, such requirement of satisfaction of the AO is implicit by necessary implicati....
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....the Assessment Order about the asset or entries in the books of accounts, in our considered view, notice issued u/s. 148 of the Act does not satisfy the conditions specified u/s. 149(1)(b) of the Act and thus, in our considered view, notice issued by the AO u/s. 148 of the Act for the AY 2016-17 to 2019-20, not complying the provisions of section 149 of the Act are bad in law and legally unsustainable. 27. The assessee has relied upon the decision of ITAT, Hyderabad Bench in the case of M/s. ACE Tyres (P.) Ltd. Vs. ACIT in ITA Nos.1084 to 1088 and 1207/Hyd/2025 for A.Ys. 2014-15 to 2019-20, wherein the coordinate Bench of the Tribunal on identical set of facts, has held as under: "23. The Assessing Officer in the reasons recorded for reopening of the assessment stated that the income chargeable to tax represented in the form of an asset and an entry/entries in the books of account as per the provisions of section 149(1)(b) of the Act. Therefore, the Assessing Officer proposed to bring the case of the assessee in sub-clause(i) and sub-clause (iii) of clause (b) of section 149(1) of the Act. From the details of the transactions as found in the Laptop, it is clear that the....
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....ch A.Y was more than Rs. 50 lakhs and the Assessing Officer at the time of recording the reasons was not supposed to undertake a detailed or depth examination of evidence collected during the search, the prima facie undisputed fact is that the details of unaccounted cash receipts and cash payments found during the course of search & seizure action were not specifically attributed to each of the group companies and further only the receipts found in the said seized material are taken into consideration for arriving to the conclusion that the income of more than Rs. 50 lakhs for each of the companies has escaped assessment. The Assessing Officer has proceeded on the basis of the details provided by the ADIT (Inv) and not proceeded on the basis of the seized material containing these transactions of unaccounted cash receipts and payments. The reasons recorded by the Assessing Officer manifest that no such minimum verification was done by the Assessing Officer regarding the nature of the transaction, the net outcome of the receipt and payment as recorded in the said seized material, apportionment of the amounts of receipts and payments to each of the group companies to quantify the inc....
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....ount." 28. The assessee has also relied upon the decision of Hon'ble High Court of Delhi in the case of Mohd. Athar Anjum Vs. ACIT reported in (2025) 174 taxmann.com 337 (Delhi), wherein a similar view has been taken by the Hon'ble Delhi High Court and in paras 8, 9, 11, 14, 15, 17, 18 and 20 held as under: "The principal controversy to be addressed in the instant case is whether the issuance of notice under section 148 is within the period of limitation as prescribed under section 149(1). [Para 8] According to the assessee, the alleged income, which had escaped assessment during financial year 2017-18 was less than 50,00,000; therefore, the assessments for assessment year 2018-19 could not be reopened after the expiry of three years from the end of the relevant assessment year. However, it is noted that the Assessing Officer had held to the contrary. The order dated 31-3-2024 issued under section 148A(d) indicates that the Assessing Officer had proceeded on the basis that the income that had allegedly income that has escaped assessment for assessment years 2015-16, 2016-17, 2017-18, 2019-20 and 2020-escaped assessment during the assessment year 2018-19 was....
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....ccordingly allowed and the impugned order passed under section 148A(d); the notice issued under section 148 and the impugned assessment order are set aside. [Para 20]" 29. The assessee has also relied upon the decision of Hon'ble Delhi high Court in the case of M/s. Huawei Telecommunications (India) Company Pvt. Ltd., Vs. ACIT (supra), wherein the Hon'ble Delhi High Court on identical set of facts, has held as under: "As seen from the above, even when the Assessing Officer is in possession of material which is likely to be incriminating for more than one assessment year, he has to necessarily record the reasons to reopen assessment qua each of the assessment years. It is only through such reasons recorded that a co-relation can be made between the material gathered during the search, and a particular assessment year. Any issuance of notice without fulfilling such jurisdictional mandate would amount to a „fishing and roving enquiry‟, which cannot be permitted. 165. Since the reasons stated in the satisfaction note for AY 2013-14 are devoid of merit and as the Revenue cannot be permitted to justify issuance of notice for AY 2013-14 by relying upon the reas....
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....Act, and according to Section 131(3), the authority who has issued summons may impound and retain in its custody for such period as it feels fit any books of accounts or other documents produced before the authority. However, the same cannot be seized as in the present case and therefore, the material relied upon by the A.O. and seized from the possession of Shri Sameer Egge Kadel without following due procedure, is incorrect and consequently makes the assessment proceedings null and void in law. 32. The Ld. CIT-DR, in response to the arguments of the learned counsel for the assessee, submitted that even though the search proceedings are illegal, the evidences collected during the course of search cannot be ignored and the same can be considered, as held by the Hon'ble Supreme Court in the case of Dr. Prathap Singh and another Vs. Director of Enforcement and others reported in (1985) 155 ITR 166 (SC) that illegality of a search does not vitiate the evidences collected during the course of search. The only requirement is that the Court or the authority before which such material or evidence is placed has to be cautious and circumspect in dealing with such material as evidence....
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....thority in any proceedings under this Act. In the present case, the material was not found in the possession of Vamsiram Group, and the Investigation Department cannot seize the alleged material because the material was not found in the premises for which search warrant had been issued. Since the A.O. has relied upon the material which was not seized from the premises of the assessee, the A.O. can only proceed on the basis of provisions of Section 148A of the Act, by following due procedure, but not as per the provisions of Section 148 and Explanation 2(i) thereto, as canvassed by the Department. 34. In our considered view, going by the provisions of Section 131(1A) of the Act, the Principal Director General or Director General or Deputy Director General or Assistant Director General or authorised officer referred to in Section 132(1), before taking action under clauses (i) to (v) of the said sub-section, if he has reason to suspect that any income has been concealed or is likely to be concealed by any person or class of persons within his jurisdiction, then for the purpose of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the pow....
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....019-20 are bad in law and liable to be quashed. Thus, we quash notice u/sec.148 and consequent assessment orders passed by the Assessing Officer for the Assessment years 2016-17 to 2019-20. 36. The next issue that came up for our consideration from the grounds of appeal of the assessee for A.Ys. 2020-21 to 2022-23 is validity of notice issued under Section 148 of the Act, and consequent assessment orders passed by the A.O. in light of section 148 and proviso provided thereon. 37. CA, MV Prasad, learned counsel for the assessee submitted that the Ld. CIT(A) is not justified in dismissing the ground taken by the assessee on the issue of validity of assessment order passed by the A.O in light of provisions of section 148 of the Act, without fulfilling the prescribed conditions and consequently, the assessment order passed by the A.O is void ab initio. The ld. Counsel for the assessee submitted that the A.O invoked explanation (2) clause (i) of section 148 of the Act, on the presumption that once a search is initiated under section 132 of the Act on or after the 1st day of April, 2021, in the case of the assessee, the A.O shall be deemed to have the information which suggests tha....
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.... Income Tax (TS-5518-HC-2022(DELHI)-O). The assessee had also relied upon the decision of the Hon'ble Karnataka High Court in the case of Smt. Vasanthi Ramdas Pai vs. Income Tax Officer (TS-5059-HC-2024(Karnataka)-O). The assessee also relied upon the decision of the Hyderabad Benches in the case of M/s. ACE Tyres (P) Ltd vs. Assistant Commissioner of Income Tax in ITA Nos. 1084 to 1088 and 1207/Hyd/2025. 38. The Ld. CIT-DR, on the other hand, referring to the reasons given by the Ld. Pr. CIT, Central for forwarding the proposal of initiation of proceedings under section 147 of the Act, for approval of the DGIT (Inv.) had given elaborate reasons and satisfaction that during the course of search and seizure action under section 132 of the Act it was found that the assessee has unaccounted cash receipts from sale and the assessee had admitted undisclosed income for the year under consideration. These unaccounted cash receipts have resulted in suppression of income and escapement of income for the relevant A.Y. Therefore, from the reasons recorded by the A.O for issuance of notice under section 148 of the Act, it is very clear that the A.O had arrived at a satisfaction regardin....
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....nd that the A.O has considered information received in pursuant to the search & seizure action conducted under section 132 of the Act in the case of Vamsiram Group of companies and quantification of undisclosed income for the A.Y 2020-2021 to 2022-23 and formed a reasonable belief of escapement of income by virtue of clause (i) of explanation 2 of section 148 of the Act, on the ground that the A.O shall be deemed to have the information which suggest the income chargeable to tax has escaped the assessment in the case of the assessee for the relevant A.Y. From the reasons recorded by the A.O, it is undisputedly clear that the A.O while arriving at the undisclosed income harped on the material seized and undisclosed income quantified by the DDIT(Inv), without even any verification as to what is nature of escaped income and whether it pertains to the assessment year in question or not. The Assessing Officer in all the Assessment years from Asst Year 2016-17 to 2022-23 have not quantified the income escapement in writing the reasons for reopening. Without quantification of income escapement leads to violation of provision of Section 147. The scope of deemed information under Explanatio....
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....edure. For the Assumption of Jurisdiction under Section 147, it is necessary to know the quantum of income escaping Assessment and the relevant assessment year so as to evaluate whether it satisfies condition under Section 149(1). If Search U/s 132 does not reveal the quantum of income and relevant Assessment Year, it may not be possible to infer that the AO has correctly assumed Jurisdiction u/s 147 to proceed U/s 148. In absence of information about the quantum of income and the Assessment year in which income has escaped assessment assumption of Jurisdiction cannot be fulfilled. Accordingly, the other plausible interpretation can be that the notice under Section 148 cannot be issued automatically to the person searched. The Assessing Officer now needs to apply his mind and while seeking approval under Section 151 from the specified authority, demonstrate that the information obtained/discovered during search suggests that income has escaped assessment under Explanation is for the relevant Assessment year for which notice under Section 148 proposed to be issued. Such demonstration can be possible only when the AO has examined the seized assets/ documents, and records in writing t....
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....this regard the Hon'ble Bombay High court in CIT Vs Jet Airways (I) Limited held that "The Explanation 3 cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147 since an explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory". The Hon'ble Karnataka High court in N. Govindaraju Vs ITO [2015] 60 Taxmann.com 333 held that "Orthodox function of an 'Explanation' is to explain the meaning and effect of the main provision. It is different in nature from a 'proviso', as the latter excepts, excludes or restricts, while the former explains or clarifies and does not restrict the operation of the main provision. It is true that an 'Explanation' may not enlarge the scope of the section, but it also does not restrict the operation of the main provision. Its purpose is to clear the cobwebs which may make the meaning of the main provision blurred. Ordinarily the purpose of insertion of an 'Explanation' to a section is not to limit the scope of the main provision but to explain or clarify and to clear the doubt or ambiguity in it." 43. The assessee ....
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....relevant A.Y. Further, on observations of the reasons recorded, we find that the A.O invoked clause (i) of explanation (2), whereas in the present clause (iii) and (iv) of explanation (2) of section 148 is applicable because, the A.O has quantified the escaped income on the basis of material found in the residential premises of Shri Ramesh Kumar Sanaka, Sr. Accounts Manager of the assessee company and therefore, the A.O should have arrived at a satisfaction that the said seized material belongs to the assessee which suggested escapement of income for the relevant A.Y. This is because, although there is a deeming provision of information for issuance of notice under section 148 of the Act where search is conducted under section 132 of the Act, but because of 1st proviso of section 148 of the Act, the A.O shall ascertain from the information gathered during the course of search that income chargeable to tax has escaped the assessment in the case of the assessee for the relevant A.Y. Going by the proviso to section 148 of the Act, Explanation 2 provides only a limited relaxation and the 1st proviso to section 148 put a negative condition on the A.O with the rider that information whic....
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....f attendant circumstances and record relevancy and a prima facie opinion linking such material establishing escapement of income at the hands of the assessee. The information which is derived from the incriminating material in the instant case, does not establish live link. The information is absolutely vague and unspecific and the rate mentioned in the loosepaper is attempted to be imposed upon the petitioner after a period of four years on the basis of sale deed registered on 12.10.2021. The statement of Shri Bavadiya does not mention the name of the petitioner. There is no link, even remotely, found with Bsafal Group or City Estate Management India or City Procon Realtors Private Limited. All these aspects are very relevant, and are required to be examined before roping the petitioner in reassessment. Thus, in our considered opinion, the provisions of Section 148 of the Act are not attracted, hence the action of the respondents in re-opening of the assessment requires to be quashed." 46. Therefore, from the above provisions of section 148 of the Act and the ratios of the case laws discussed herein above, it is very clear that no notice under section 148 shall be issued automa....
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....as identified the seized material i.e. Excel sheet found in the premises of searched person. Second one is which suggests that the income chargeable to tax has escaped Assessment that is the Assessing Officer observed the contents in the excel sheet and found that the petitioner has paid on money for the purchase of flat from the builder who is searched person and such amount paid is the income which has escaped the Assessment. The third ingredient is relevant Assessment year, the Assessing Officer while taking approval from the PCIT has written satisfaction to the extent of relevant Assessment year and issued notice for the concerned Assessment year. Hence in the case dealt by Hon'ble High court the petitioner is the person other than the searched person and the Assessing Officer who is the Jurisdictional Officer has complied the three conditions while obtaining the approval for issue of notice U/s 148. In the present case, the Assessing Officer failed to bring the three ingredients laid down in the proviso to Section 148 while issuing notice U/s 148. On observation of the reasons recorded, the Assessing Officer has not demonstrated the income escapement from the information in th....
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....submitted that the seized material relied upon by the A.O. consists of diary entries, loose sheets and excel sheets found in the pen drives seized from Shri Atla Chandrashekar and the same contains certain rough notings relating to receipts and payments. The learned counsel for the assessee submitted that the entries contained in the seized material are actual figures and there is no evidence to suggest that the figures were recorded after truncating two zeroes. The learned counsel for the assessee submitted that the A.O., without any independent corroborative evidence, presumed that all the entries recorded in the seized material represent figures after suppressing two digits and proceeded to multiply the entire receipts and payments by hundred which is arbitrary and contrary to facts on record. 52. The learned counsel for the assessee submitted that there is an overlapping period between the diary entries and excel sheets maintained in the pen drives and when both the records are compared, the figures recorded therein tally with each other and nowhere indicate suppression of two zeroes. The learned counsel for the assessee submitted that if really the assessee had followed the....
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.... the assessee submitted that although certain opportunities were provided, the cross-examination was incomplete and ineffective and therefore the statements recorded from third parties cannot be relied upon against the assessee. 54. The learned counsel for the assessee submitted that the A.O. selectively relied upon certain isolated transactions relating to rent payments, scrap sales and payments to vendors and attempted to generalise the same for all transactions recorded in the seized material. The learned counsel for the assessee submitted that even in respect of such transactions, there is no conclusive evidence to establish that all entries maintained in the seized material represent figures after multiplying by hundred. The learned counsel for the assessee submitted that the A.O. ignored various inconsistencies, contradictions and discrepancies in the statements recorded from third parties. The learned counsel for the assessee submitted that the presumption available under Sections 132(4A) and 292C of the Act is only a rebuttable presumption and the same cannot be extended to presume that all figures recorded in the seized material represent figures after truncating two ze....
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....(SC) * Bhima Tima Dhotre Vs. The Pioneer Chemical Co. reported in (1968) 70 BOMLR 683 * Bannalal Jat Constructions (P.) Ltd. Vs. ACIT reported in 106 taxmann.com 127 (Raj.) * Roshan Lal Sancheti Vs. PCIT reported in 150 taxmann.com 228 (SC) * MAC Public Charitable Trust Vs. PCIT reported in 144 taxmann.com 54 (Madras) * CIT Vs. Ravi Mathur in D.B. Income Tax Appeal No. 67/2002 * PCIT Vs. Swati Bajaj reported in 139 taxmann.com 352 (Calcutta) 57. The Ld. CIT-DR, referring to various judicial precedents, including the decision of Hon'ble Rajasthan High Court in the case of CIT Vs. Ravi Mathur reported in (2017) 1 WLC (Raj.) and also the decision of the Hon'ble Delhi High Court in the case of M/s. Huawei Telecommunications India Company Pvt. Ltd. Vs. ACIT reported in (2025) 173 taxmann.com 396 (Delhi HC) submitted that statements recorded under Section 132(4) of the Act, have evidentiary value as held by various Courts, including the Hon'ble Kerala High Court in the case of CIT Vs. Hotel Meriya. Therefore, once there is a clear admission in the statements recorded under Section 132(4) coupled with evidences found during ....
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....rpose of assessment. 59. The ld. CIT(DR) further submitted that there is no merit in the arguments of the learned counsel for the assessee on the issue of estimation of 16% profit on unaccounted cash receipts found during search, because evidences found during the course of search in the form of excel sheets clearly shows unaccounted cash receipts from sale of residential flats and commercial spaces and also expenditure incurred in cash for the purpose of business. Further, enquiries conducted by the A.O., during the course of post search investigation and assessment proceedings clearly demonstrates recording receipts and payments by suppressing two 'zeros' which is clearly evident from 131 statement recorded from 18 third parties in respect of landowners, co-partners, service providers and in respect of rental payments. Further, the evidence found during the course of search in the form of cash receipts and vouchers, also supports the case of the A.O. that the assessee was recording cash receipts and payments by supressing two 'zeros'. Therefore, the A.O. has rightly ignored subsequent retraction filed by two employees and denial statement of Shri B. Subba Reddy, CMD of the ass....
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.... the statement at the date of search are also retracted by their statements by filing detailed reasons and such affidavit has been filed within a period of 60 days at the first available opportunity and therefore, the Assessing Officer ought not to have relied upon those evidences for the purpose of making additions. 61. Admittedly, the appellant company has not disputed the excel sheets and pendirve found during the course of search and entries recorded in the excel sheets. However, the appellant company has only disputed the version of the Assessing Officer in adding two zeros to the entries recorded therein on the ground that there is no corroborative evidence with the Assessing Officer supporting the contention that the appellant has recorded entries after truncating last two zeros. We have gone through the relevant excel sheets found during the course of search which are available in the paper book filed by the assessee which contains various kinds of receipts including cash received from sale of flats and commercial space and miscellaneous income and also various expenses incurred for the purpose of business of the assessee including vendors payments, payment to other part....
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.... any further evidence the additions made by the Assessing Officer by estimating 16% profit on total cash receipts as per cash book found during the course of search by adding two zeros is incorrect and cannot be upheld in view of specific retraction of the employees and also denial of the Managing Director of the appellant group. Although, the learned Assessing Officer and the learned CIT(A) ignored the retraction filed by the employees of the assessee company on the ground that the subsequent retraction statements filed by them is only an afterthought and is without any basis, but in our considered view, going by the timing of the statements filed by the employees and the detailed affidavits filed by them in support of their retraction, we are of the firm view that the Assessing Officer ought to have consider their retraction statements before proceeding with the estimating gross receipts by adding two zeros in the absence of supporting evidence. 62. Coming back to another reason given by the Assessing Officer to support his findings in respect of the estimation of gross receipts by adding two zeros. The Assessing Officer conducted post-search enquiries with reference to the en....
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....arties it cannot be presumed that the remaining several thousand entries appearing in the ash book are also recorded after reducing last two zeros. This fact is further strengthened by the fact that the Assessing Officer has not provided or denied the opportunity of cross examination of the 18 parties when the appellant has specifically asked the Assessing Officer to provide an opportunity to cross-examination of the parties who gave the statements against the assessee. In the absence of any evidence contrary to the claim of the assessee, in our considered view, only on the basis of statement of few persons that too without cross examination to the assessee, the reasons given by the Assessing Officer to make the additions by adding two zeros cannot be accepted. We further note that the admission all other parties cannot be considered as conclusive evidence against the assessee unless there is corroborative evidence on record since the maker of the statement can bind himself but he cannot bind others with his statement without there being any further evidence on record and this legal principle is supported by the decision of ITAT, Visakhapatnam Bench in the case of P. Koteswara Rao ....
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.... recorded during the course of search, specifically denied the allegation that the assessee had recorded transactions after suppressing two zeroes and further denied authorising any employee to maintain parallel books of account in the form of pen drives. The statement of the Managing Director, being the key person of the group, has greater evidentiary value and the same could not have been ignored by the A.O. while completing the assessment. The A.O. proceeded on pure assumptions and presumptions without carrying out any scientific or forensic examination of the digital material seized during the course of search. No expert opinion was obtained to establish manipulation or coding pattern in the excel sheets or diaries. In the absence of any corroborative evidence, the theory adopted by the A.O. regarding truncating two zeroes is unsustainable in law. Therefore, we are of the considered view that, the reasons given by the AO to allege that entries in cash book are recorded by suppressing two zeros is without any basis and cannot be accepted in total. 65. Coming back to another aspect of the issue. The AO had also supported his case of suppression of two zeros in light few evi....
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....r the Revenue. The learned DR relied upon Judgment of Hon'ble Allahabad High Court in the case of Moti Lal Padampat Udyog Ltd vs. CIT [2007] 293 ITR 565 (Alld.HC) and Hon'ble Calcutta High Court decision in the case of Kisanlal Agarwalla vs. Collector of Land Customs AIR 1967 Cal. 80 and argued that cross-examination is not an absolute or indispensable requirement. In our considered view, the case law relied upon by the learned DR is not applicable going by the facts of the present case, because the said Judgments cited by the learned DR can no longer be considered since they were rendered prior to the Judgment of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CCE (supra). The learned DR has also placed reliance on the Judgment of Hon'ble Calcutta High Court in the case of PCIT vs. Swathi Bajaj [2022] 139 taxmann.com 352 (Calcutta-HC). We find that, once again the above decision is distinguishable on facts because in the said case it was held that assessee have not been shown to be prejudiced on account of non-furnishing of the investigation report or non-production of the persons for cross-examination. However, in the case of the appellant company herein, t....
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....as adopted the profit declared by the assessee as basis for estimating the profit on suppressed turnover as per cash book found during the course of search and estimated 16% profit on total cash receipts. The assessee has challenged the 16% profit rate estimated by the Assessing Officer on the ground that the Assessing Officer has adopted 16% profit without any basis and going by the nature of business of the assessee and the past financial results, the assessee has fairly declared 10% profit on total cash receipts. In our considered view the assessee has failed to file any evidence to justify 10% profit adopted on total unaccounted cash receipts. Further, the assessee firm and company itself have recorded or disclosed on average 15% profit for last several financial years. Further, in unaccounted receipts normally the profit percentage is little higher side when compared to the profit declared by the assessee on declared transactions, because general administrative and other overhead expenses are mostly recorded in the regular business transactions. Since the appellant has failed to conclusively prove 10% profit rate adopted for disclosing additional income on unaccounted cash rec....
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....ade to the above company except denying the evidences, therefore, the AO was right in making addition u/s. 69 r.w.s.115BB of the Act. Therefore, he submitted that the addition made by the AO should be upheld. 72. We have heard both the parties, and perused the reasons given by the AO to make additions towards cash payment of Rs. 2 Cr. To M/s. Unique Inflatables Ltd. towards development of land at Survey No.92 situated at Nanakaramguda, Serilingampalli, RR District. The AO made additions on the basis of cash receipts found during the survey conducted in the case of Shri Ramdugu Ramdev Rao, MD of M/s. Unique Inflatables Ltd. The assessee neither disputed the transaction of development of land in Survey No.92 nor explained the cash payments to M/s. Unique Inflatables Ltd., except by making a vague argument that the signed cash receipts found from the third-party premises cannot be used as a evidence for making additions u/s. 69 of the Act. This is the transaction of development of land in Survey No.92 is not disputed by the assessee. In our considered view, the cash receipts found during the course of survey in the case of M/s. Unique Inflatables Ltd., is a clear evidence of paymen....
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....c., for the purpose of estimating the profit for the Assessment. Years 2022-23 to 2023-24. 74. The next issue that came up for our consideration from Ground No.7 of assessee appeal for the AY 2022-23 is addition of Rs. 50 lakhs u/s. 69 of the Act towards cash payment to M/s. Unique Inflatables Ltd. 75. An identical issue has been considered by us in the case of M/s Vamsiram Builders and Developers Pvt. Ltd. (Formerly known as Vamsi Ram Builders) for the AY 2019-20 in ITA No.664/Hyd/2026. Except for figures, the facts and issues exactly identical. The reasons given by us in preceding paragraph No.73 shall mutatis mutandis applies to this appeal as well. Therefore, for similar reasons, we are inclined to uphold the additions made by the AO u/s. 69 of the Act towards cash payment to M/s. Unique Inflatables Ltd. and reject the ground taken by the assessee. 76. The next issue that came up for our consideration from Ground No.7 of assessee appeal for the AY 2023-24 is addition of Rs. 2 Crs. u/s. 69 of the Act towards cash payment to M/s. Unique Inflatables Ltd. 77. In so far as the assessment year 2023-2024 is concerned, the Assessing Officer made addition of Rs. 2 crore of c....