TaxTMI 
TaxTMI 
2025 (4) TMI 2001
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....nding. The Group consists of 77 firms, formed in Oct 2008, with an initial capital of Rs. 90.09 lakhs. The assessee and his family members were partners in all 77 firms. The firms filed their income tax returns regularly. A search operation u/s.132 of the Act was carried out on 11.11.2010 in the premises of the M/s. Cholan Auto Finance and its group. The loan liability on the date of search was Rs. 29,32,89,250/-. Out of the above, the group of firms voluntarily offered a sum of Rs. 3,61,35,890/- as their income for the F.Y. 2008-09, 2009-10 and 2010-11 and filed revised returns for all 77 firms. In the course of assessment, post search, additional sum of Rs. 2,76,44,321/- was considered as income of the group of firms and assessment orders were passed in the hands of all 77 firms on 30.03.2013. 3. Another search operation u/s.132 of the Act was carried out in the premises of M/s. Cholan Auto Finance from 10.08.2017 to 13.08.2017 and in the course of search, a bunch of loose sheets depicting financial position of the group as at 30.06.2017 was found and seized. During the course of search, it was claimed by few partners and accountant of the group of the firms Mr.Sakthivel, in t....
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.... appeal. The ld.CIT(A), first converted the protective addition as substantive addition in the hands of the assessee and thereafter, by accepting the contention of the assessee, held that the amount in question was only opening balance and consequently, directed the AO to delete the addition. 9. Aggrieved by the order of the ld.CIT(A), the Revenue filed an appeal. The Grounds raised by the Revenue are as under: "1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2 The Ld.CIT(A) erred in deleting the substantive addition of Rs. 86,75,000/- towards assessee's unaccounted deposit u/s.69A in M/s.Cholan Auto Finance as a partner of the firm as evidenced by incriminating material seized during the course of search vide loose sheet titled as "CAF balance sheet-30.06.2017", contents of which were confirmed by Shri. K.Sakthivel, accountant of firm and Shri. A.Vijayan, Manager cum partner of the firm 2.1. The Ld.CIT(A) relied on his own order in No.CIT(A)- 19/10982/2019-20 dated 27/02/2024 for AY 2018-19 against the order u/s.143(3) in the case of M/s.Cholan Auto Finance in which protective addition....
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.... the amounts contributed). The order of the Coordinate bench in the case of The ACIT Vs P. Selvaraj ITA 1241/CHNY/2024 dated 13.12.2024 is as under: "10. ............................................................... ................................................................................................... The Revenue raised the issue of deleting the addition of Rs. 2,50,00,000/- towards unaccounted deposits introduced by the assessee into the firm u/s.69A of the Act. As already observed, based on the loose sheet seized, the AO made addition of Rs. 22,22,50,000/- as the income of the assessee protectively by invoking section 69 of the Act. Simultaneously, substantive additions were made in the hands of the partners also. In the hands of the assessee - respondent herein, substantive addition of Rs. 2,50,00,000/- was made u/s.69A of the Act. The contents of the loose sheet, relied on by the AO, is reproduced for the sake of clarity: 11. Before the ld.CIT(A) the assessee contented that the addition made by the AO in the hands of the assessee protectively is unsustainable in law for the following reasons: a. The amount in ....
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....onths cannot be relating to the F.Y. under consideration. It is proved that the deposit was not made during the period under consideration and it is the opening balance as on 01.04.2017. 6.4.17 The undersigned in the order passed u/s 250 of the Act in the case of M/s.Cholan Auto Finance for the A.Y. 2018-19, in DIN & Order No. ITBA/APL/S/250/2023-24/1061601766(1) dated 27.02.2024 has held that the deposit amount narrated in the loose sheet seized is nothing but the opening balance of the partnership firm M/s. Cholan Auto Finance. Further, the undersigned in the said order has categorically held that the corresponding cumulative amount of Rs. 22,22,50,000/- being the deposit is the opening balance and not introduced during the financial year relevant to the A.Y. 2018-19, and has allowed the relevant Grounds of Appeal. Further, in the said order the A.O. was directed to delete the addition of Rs. 22,22,50,000/- in the hands of the Firm M/s.Cholan Auto Finance. As the amount of Rs. 2,50,00,000/- is subsumed in the amount of Rs. 22,22,50,000/- the undersigned is of the considered view that there exists no need to consider the amount of Rs. 2,50,00,000/- in the hands of the App....
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....e to be taken into consideration. Further, the assessee should explain the nature and source to the satisfaction of the AO. 6.4.21 In the case of the appellant, what the search team has found is not any money, bullion, jewellery or valuable article but has come across only the details of deposit amounting to Rs. 2.50 Crores said to be made in the name of the Appellant. In this regard the Appellant has relied upon the decision of the Hon'ble Apex court in the case of D.N.Singh [2023 (5) TMI 746; 454 ITR 595], wherein it has been held that fixed deposit receipts seized during search are merely documents evidencing debt due to the assessee and would not carry any inherent market value and hence cannot be brought within the meaning of the term 'other valuable article'. Further the Hon'ble Apex Court while delivering the judgement in this case has endorsed the view of the Gujarat High Court in the case of BhagwandasNarayandas [98 ITR 194 (1973)]. The Hon'ble Apex Court has brought out that: ...... " The Court approves the view taken by the High Court of Gujarat in BhagwandasNarayandas (supra) that a document of title to immovable property or a fixed deposit receipt would not qu....
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....dingly, the ground raised by the Appellant upon this issue is treated as allowed." 14. Before us, the ld.DR relied on the orders of the AO and prayed for setting aside of the order of the ld.CIT(A). Further, the Ld.DR contended that the ld.CIT(A) granted the relief to the assessee based on the recasted balances from the books of account, which amounts to fresh submissions and fresh evidence which is in violation of Rule 46A of the Income Tax Rules 1962. 15. Per contra, the Ld.AR contended that the contents of the seized material clearly demonstrate that the amount in question was opening balance and the same cannot be added as income of the current year in appeal u/s.69A of the Act. Further, the ld.AR submitted that the Ld.DR did not bring any other corroborative evidence other than seized material to support the additions made. Further, the Ld. AR, however, contended that during the course of search, the books of account of all 77 firms maintained in "foxpro" software were seized as per panchanama dated 13.08.2017 read with "Annexure ANN/MP/CAF/ED/SPage1". Further, it was submitted that statements were recorded from Mr.K.Murugesan, few of the other partners of th....
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....the assessee u/s.69A of the Act and we find no infirmity in the order of the ld.CIT(A) in so far as his direction to delete the addition made by the AO and hence, we uphold the same. 17. The next ground of invoking the provisions of section 69A of the Act, the Ld.DR relied on the order of the AO. However, the Ld.AR relied on the ruling of the Hon'ble Supreme Court in the case of D.N.Singh [2023 (5) TMI 746; 454 ITR 595]. We find force in the submission of the Ld.AR that the amount of deposit made by the partner into the firm would not fall under the provisions of section 69A of the Act and therefore, we find no infirmity in the order passed by the ld.CIT(A) in holding that the addition made u/s.69A of the Act is invalid. 18. Thus, all the grounds raised by the Revenue, relating to addition of Rs. 2,50,00,000/- made by the AO towards unaccounted deposits in the hands of the assessee, directed to be deleted by the ld.CIT(A), are hereby dismissed. 14. From the above, we observe that the facts and circumstances of the case of Mr.Palaniappan Sekar in ITA No.1241/CHNY/2024 & C.O.No.39/Chny/2024 for the A.Y.2018-19 (supra), are identical to the facts in the present appeal and ....