PRAVEENA JAWAHAR,CHENNAI vs. ACIT CENTRAL CIRCLE 1(1), CHENNAI

Since identical facts and issues are involved in both these appeals, these appeals were heard together and dispose of by this common order. For the sake of clarity and convenience the facts relevant in the ITA No.541/CHNY/2026 are stated herein:

The Assessee raised the following grounds of appeal : “1. The order of the Commissioner of Income Tax(Appeals), in so far as it is against the assessee is contrary to law, erroneous and unsustainable on the facts of the case.

The CIT(A) erred in confirming the addition of Rs.1,30,15,400/-as deemed income under sec.69B of the Act.

The CIT(A) failed to appreciate that the assessee had offered to tax as undisclosed income of Rs.1,30,78,170 in the return filed u/s.148 consequent to search and as per the statement recorded during search and the further addition confirmed is merely on surmises and conjectures and needs to be deleted.

The CIT(A) further failed to appreciate that the land at Ambani Nagar was taken possession by paying an advance amount and further payments were made as and when advances were received from prospective purchasers and also by M/s.Vasantham Promoters and hence the addition u/s.69B is unjustified.

The CIT(A) further failed to appreciate that the project was developed and marketed by M/s.Vasantham Promoters since the assessee had no means for marketing the plots and the addition made in assessee's hands is unsustainable on the facts of the case.

The CIT(A) further failed to appreciate that the lands purchased are stock-in-trade of the business and cannot be subjected to addition as unexplained investment u/s.69 by the officer.

The CIT(A) further failed to appreciate that while the addition made by AO u/s.69 was wrong, the appellate authority confirming the addition as deemed income u/s.69B of the Act, only reveals that the addition was wrongly made in the hands of assessee.

The CIT(A) further failed to appreciate that the addition sustained is not based on any seized material but only on assumptions as to the investment made by the assessee, for which due explanations were furnished and the mere rejection of the explanations cannot justify the addition in the hands of assessee.

The CIT(A), in any view of the matter, ought to have considered the explanations of assessee in the proper perspective and deleted the addition made by the officer u/s.69 of the Act.”

Briefly, the facts of the case are that the appellant is an Individual engaged in the business of buying and selling of plots. The appellant had not filed regular Return of Income under the provisions of section 139 of the Income-tax Act, 1961 for the Assessment Year 2014-15. Based on the incriminating material unearthed as a result of Search and Seizure Operations conducted under the provisions of 132 of the Act in the case of M/s.Vasanth promoters and its proprietor Mr.P.Jawahar on 17.11.2021, the Assessing Officer formed an opinion that income got escaped assessment from tax, accordingly a notice u/s.148 was issued on 30.03.2023calling upon the appellant to file the Return of Income. In response to notice u/s.148 of the Act, the appellant filed the Return of Income on 24.04.2023 disclosing income at Rs.1,30,78,170/-. Against the said Return of Income, the assessment was completed by the ACIT, Central Circle-1(1), Chennai vide order dated 30.03.2024 passed u/s.147 r.w.s 143(3) of the Income-tax Act at a total income of Rs.2,60,93,570/-. While doing so, the Assessing Officer made addition of Rs.1,30,15,400/- being the amount invested on purchase of properties situated at Ambani Nagar on 25.04.2013 as unexplained investment. The Assessing Officer rejected the explanation of the appellant that the said property was purchased out of the advances received against the sale of the properties. The Assessing Officer also brought to tax the addition at the rate prescribed u/s.115BBE of the Act.

Being aggrieved by the above assessment order, an appeal was filed before the Learned CIT(A) contending that the Assessing Officer ought not have made addition as unexplained investment, in as much as, the appellant had offered the same in the Return of Income filed in response to notice u/s.148 of the Act. The appellant offered to tax the income earned based on the contents of seized material in the case of Search and Seizure Operations conducted in the case of M/s.Vasant Promoters. The appellant further contended that the provision of section 115BBE of the Act have no application, in as much as, there was no undisclosed income as the income is already credited to profit and loss account offered to tax under head “Business Income”. However, the Learned CIT(A) confirmed the addition by holding that the appellant had received advances from customers subsequent to date of launch of the project i.e.09.06.2013 and there is no evidence on record to support the claim that funds used for the purchase of plots in Ambani Nagar originated from prospective buyers. However, the Learned CIT(A) held that the provisions of section 115BBE of the Act have no application to the subject income as the same was derived under head “Income from Business”. Thus, the appeal filed by the assessee came to be partly allowed by the Learned CIT(A).

Being aggrieved by that part of the order of the Learned CIT(A) which is against the assessee, the appellant is in appeal before us in the present appeal before us. It is contended that the Learned CIT(A) ought to have appreciated that the appellant purchased the property land at Ambani Nagar by taking possession of the property by paying the advances of Rs.1,48,300/- and the sale consideration was discharged out of the money received from advances from prospective buyers, M/s.Vasant Promoters and the sale consideration was discharged by Cheque payment, therefore, he further submitted that the provisions of section 69B of the Act have no application, in as much as, the purchase consideration was discharged through banking channels and the sources of the investments is clearly shown in the books of accounts maintained by the assessee. He further contended that mere rejection of the explanation does not lead to the addition. Thus, he prays that the order of the Lower Authorities should be reversed.

On the other hand, the Learned Sr.DR vehemently opposed the above submissions and submits that the Learned CIT(A) had passed a reasoned order after taking into consideration the submissions filed by the appellant, therefore, the order of the Learned CIT(A) should be sustained.

We heard rival submissions and perused the material available on record. The solitary issued that arises for our consideration is whether the Learned CIT(A) was justified in sustaining the addition of Rs.1,30,15,400/- as unexplained investment on purchases of land at Ambani Nagar. Admittedly, the appellant took the possession of the property at Ambani Nagar in the previous year by making the advance payment of Rs.1,48,300/-. It is explained that the property was purchased out of the advances received from the prospective buyers and also M/s.Vasant Promoters who are marketing the plots on behalf of the appellant. It is also admitted fact that the consideration was paid through Cheques and Demand Drafts. The appellant had been maintaining the books of accounts and the transactions are duly reflected in the books of accounts maintained by the appellant. It appears that these facts were clearly stated vide assessee’s letter dated 17.02.2024. On reading of the assessment order, it appears that the Assessing Officer had not believed the explanation of the appellant merely for the reason that collection of the advance amount of Rs.1.3 crores in the span of 24 days even without purchase of property was a remote possibility. The tone and tenor of the findings of the Assessing Officer clearly reveal that the addition is made merely on the basis of the suspicion, surmises, presumptions. Since the transaction was clearly shown in the books of accounts and therefore, it cannot be said that it is unexplained income of the appellant and the explanation offered by the appellant as to the source of the investment is a plausible explanation and the Lower Authorities ought to have accepted the explanation, therefore, we direct the Assessing Officer to delete the addition.

In the result, appeal filed by the Assessee in ITA No.541/CHNY/2026 stands allowed.

In the result, appeal filed by the Assessee in ITA No.542/CHNY/2026 stands allowed.

To sum up, both appeals filed by the Assessees in are allowed. Order pronounced in the open Court on 01 September, 2026.