VENOD PROPERTIES (P) LTD. vs. DCIT, CENTRAR CIRCLE-8,

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ITA 4087/DEL/2001Status: DisposedITAT Delhi31 August 2026AY 1997-199812 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that protective additions are unsustainable when the income is already taxed substantively. It also ruled that unexplained cash credits and interest thereon should be deleted if the creditors are directors and their identity/creditworthiness is not seriously disputed. Depreciation claims were allowed, and certain business expenses were partially disallowed.

What were the facts?

The appeals involved multiple assessment years and block periods for three assessees: Venad Properties (P) Limited, Adarsh Kumar, and S. Krishna Kumar (HUF). The core of the disputes revolved around additions made by the Assessing Officer, including protective additions, disallowance of business expenses, interest on loans, depreciation, and unexplained cash credits.

What were the issues?

The key issues were the validity of protective additions, the treatment of loans from directors, the allowability of business expenses and depreciation, and the assessment of undisclosed income based on seized documents.

Which sections of the Income-tax Act were involved?

Section 68,Section 158BC,Section 143(3),Section 158BD,Section 292C,Section 154,Section 158BB(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI

Before: SHRI SATBEER SINGH GODARA & SHRI NAVEEN CHANDRA

For Appellant: CA Sh. Gagan R. Khandelwal, Adv
Hearing: 21.08.2026Pronounced: 21.08.2026

Heard together (2 matters)

ITA No. 1342/DEL/2000
ITA No. 3550/Del/2002

Read from the judgment's own cause title. This page is filed under one of them.

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 1342/DEL/2000; Assessment Year: 1996-97 with ITA No. 4087 & 4088/DEL/2001; Assessment Year: 1997-98 & 1998-99 With ITA No. 3550/Del/2002; Assessment Year: 1999-2000 with IT(SS)A No. 12/Del/2011; Block Period: 01.04.1986 to 06.11.1996 Venad Properties (P) Limited, Vs Deputy Commissioner of “Ushus”, Jawahar Nagar, Income Tax, Thiruvananthapuram 695041, Central Circle-8, Kerala New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACV9021F & IT(SS)A No. 183/Del/2003; Block Period: 01.04.1986-06.11.1996 Adarsh Kumar, Vs Deputy Commissioner of C-12, Greater Kailash Enclave-I, Income Tax, New Delhi Central Circle-8, Mayur Bhawan New Delhi (APPELLANT) (RESPONDENT)

& IT (SS)A No. 325/Del/2005; Block Period: 01.04.1986 to 06.11.1996 S. Krishna Kumar (HUF), Vs Deputy Commissioner of C-12, Greater Kailash Enclave-I, Income Tax, New Delhi- 110048 Central Circle-8, ARA Centre, Jhandewalan New Delhi (APPELLANT) (RESPONDENT) PAN No. AABHS1398L

Assessee by: Sh. Rajiv Khandelwal, CA Sh. Gagan R. Khandelwal, Adv. Revenue by : Sh. Vikram Singh Sharma, CIT DR

Date of Hearing: 21.08.2026 Date of Pronouncement: 21.08.2026 ORDER PER SATBEER SINGH GODARA, JM: The instant batch of seven cases involves the three assesses herein M/s Venad Properties Private Limited, Adarsh Kumar and S. Krishna Kumar, HUF. This company’s/appellant’s in the ITA Nos. 1342/DEL/2000, 4087 & 4088/DEL/2001, 3550/Del/2002, IT(SS)A No. 12/Del/2011 in the company/appellant’s name arises against the Commissioner of Income Tax(Appeals), New Delhi’s order no. 46/1999-2000, 14/2001-02, 13/2001-02, 54/2002-03 dated 19.10.2001,10.06.2002, 24.12.2010 whereas the latter twin assessees have preferred their single appeal each IT(SS)A Nos. 183/Del/2003 & 325/Del/2025 against the Commissioner of Income Tax (Appeals) order dated 11.01.1982 & 09.10.2001; respectively. Relevant proceedings herein are u/s 158BC r.w.s. 143(3) of the Income Tax Act, 1961; hereinafter referred to as, “the Act”.

Heard both the parties. Case files perused. We proceed assessee/assessment year-wise for the sake of brevity and convenience. 2 | P a g e

VENAD PROPERTIES PRIVATE LIMITED: ITA Nos. 1342/DEL/2000 & 4087/DEL/2001 : We notice during the course of hearing that the impugned 2. search herein happens to be the common one carried out by the learned departmental authorities on 06.11.1996. And that so far as the assessee/company’s first and foremost twin assessment years 1996-97 and 1997-98 having as many ITA Nos. 1342/Del/2010 & ITA No. 4387/Del/2001 are concerned, there does not appear to be much a dispute between the parties that the Assessing Officer has framed his assessments in issue inter alia making only “protective” additions in its hands for the reason that he had already added the same on substantive basis in the other assessment year(s). The Revenue is indeed very fair in not disputing this clinching factual position. That being the case, we hereby quote Lalji Haridas Vs. ITO (1961) 43 ITR 387 (SC) wherein their lordships have settled the law long back that such a protective addition gets attracted only in an instance when there any doubt in the learned Assessing Officer’s mind as to in whose hands a particular item of income ought to be taxed. We hereby reiterate the fact that that learned departmental authorities have admittedly made the very addition(s) on protective and substantive basis in the assessee’s hands only. We thus find no reason to sustain these protective addition(s) in the assessee’s instant former twin appeals ITA No.

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1342/Del/2000 for A.Y. 1996-97& ITA No. 4087/Del/2001 in assessment year 1997-98 which are hereby accepted in very terms therefore.

ITA No. 4088/Del/2001: 3. The assessee pleads the following substantive grounds in the instant appeal:

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Both the parties next invite our attention to the learned CIT(A) impugned lower appellate discussion upholding the Assessing Officer’s assessment findings; as follows:

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It is in this factual backdrop that the Revenue vehemently supports the above impugned findings inter alia disallowing/adding the assessee’s business expenses., interest on loans, depreciation and miscellaneous expenses involving varying sums.

4.

Mr. Khandelwal on the other hand, takes us to the assessment discussion at page 1 para 2 itself that the assessee had duly derived income from purchase/development and sale of landed properties for the relevant previous year. These admitted assessment findings have gone unrebutted from the Revenue side. The fact also remains that the assessee does not appear to have pleaded and proved its business expenditure claim of Rs. 8,90,939/- to the entire satisfaction of the learned lower authorities. Be that as it may, we are of the considered view that 6 | P a g e

a lump sump disallowance of Rs. 1 lakh only would be just and proper with a rider that the same shall not be treated as a precedent. The assessee gets relief of Rs. 7,90,939/- in other words.

5.

Next comes the twin additions of loan credits as well as interest thereupon. Learned Assessing Officer at page 5 in paragraphs 11 & 12 observes that its creditors are Sh. Padam Kumar and Smt. Vimla Padam Kumar whose genuineness and creditworthiness could not be proved. The assessee, on the other hand, has all along claimed both of them to be its directors only which has gone unrebutted from the Revenue side before us. We are of the considered view in this factual backdrop that in absence of any serious issue of identity, genuineness and creditworthiness, both the learned lower authorities’ impugned action treating the corresponding credits coming from the assessee’s directors’ side as well as the interest thereupon, could not have been added as unexplained and not allowable. We thus delete the impugned unexplained loan credits addition of Rs 6,64,045/- and interest payments amounting to Rs. 10,74,682/-, in very terms.

6.

The third issue between parties herein is that of depreciation disallowance amounting to Rs. 1,87,774/-. The Revenue case in

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support thereof is that the assessee had not carried out any actual business activity so as to be entitled for the same. We have already dealt with the very findings in the preceding paragraphs against the department(supra). We thus find merit in the assessee’s/company’s claim regarding the depreciation amount of Rs. 18,77,774/- which is hereby accepted.

7.

Learned counsel does not press for miscellaneous expenses written-off amount relief of Rs. 6,804/- keeping in mind smallness thereof. Upheld accordingly. This assessee’s appeal ITA No. 4088/Del/2001 is partly allowed.

ITA No. 3550/Del/2002

8.

Both the parties submit very fairly that the assessee has raised its twin substantive grounds inter alia claiming interest expenses amounting to Rs. 10,53,188/- and unexplained cash credits/loans of Rs. 30,000/- borrowed from Mrs. Supriya Vijay Kumar; respectively. There does not appear to be an issue between the parties that learned CIT(A) detailed discussion in para 4.2 at page 3 herein relies upon the corresponding findings in the preceding assessment years 1996-97 to 1998-99 wherein the assessee has already succeeded(supra). We accordingly delete the impugned interest disallowance of Rs. 10,53,188/- in very terms.

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9.

Now comes the latter issue of unexplained cash credits/loans of Rs. 30,000/- coming from Mrs. Supriya Vijay Kumar, director which is hereby deleted as per our preceding detailed discussion.

Learned counsel does not press for the assessee’s remaining grounds. Its instant appeal ITA No. 3550/Del/2002 is partly accepted.

IT(SS) A No. 12/Del/2011 10. Both the parties very fairly submit before us that the assessee/appellant seeks to reverse the learned lower authorities’ respective findings inter alia making various additions of unsecured loans, payments in foreign-exchange and expenses deposited to P/L account in the former category and those based on the alleged seized documents MA- 20, 52, 51, 54 etc under the latter head involving varying sums. Learned counsel’s first and foremost argument is that the above former category deals with those items which already formed part of the assessee’s books audited very well before the search which has not been disputed at the Revenue’s behest. So far as the latter head is concerned, the assessee’s case is that the searched premises is at Thiruvananthapuram does not happen to be its office; and therefore, the learned departmental authorities ought to have invoked section 158BD of the Act. And also the said alleged material nowhere indicates its undisclosed income so as

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to be assessed in its hands. He takes us to some receipts issued by the Thiruvananthapuram Tennis Club to buttress the point that the assessee company nowhere finds any mention therein. The Revenue in the other hand submits that some of the said seized documents carry the assessee’s name as well. The fact however remains that section 292C of the Act carrying presumption of correctness qua such seized documents does not apply qua the third party. And that the learned departmental authorities have admittedly failed to corroborate the said seized documents with the help of such supportive evidence against the assessee all along. Faced with this situation, we, hereby quote (2026) 188 taxmann.com 391 (Delhi) Sun Aero Limited vs PCIT deciding the very question in the assessee’s favour and against the department that the special provision of Chapter XIV (B) is aimed to provide the mode of assessment of undisclosed income which has been actually detected as a result of search. Their lordships further referred to para 18 in ACIT vs Hotel Blue Moon (2010) 321 ITR 362(SC) whilst deciding the instant issue against the department. We hold in this factual backdrop that all these impugned additions made in the assessee’s hands in both former and latter head (supra) in law and in facts. The same are accordingly directed to be deleted. Its instant appeal IT(SS)A No. 12/Del/2004 succeeds therefore.

SHRI ADARSH KUMAR IT(SS) A No. 183/Del/2003 10 | P a g e

11.

The assessee’s sole substantive ground raised in the instant appeal challenges the learned lower authorities’ action making section 68 unexplained cash credits addition of Rs. 21.60 lakhs involving 10 parties for the relevant block period. That being the case, learned counsel refers to the assessee’s statement of affairs as on 31.03.1993, 1994 & 1995 as well as the corresponding “computations” the he had been duly disclosing these loans all along very well before the date of search herein i.e. 06.11.1996. We thus rely on our preceding detailed discussion to conclude that such an addition based on the assessee’s already disclosed books of account is not sustainable. Deleted accordingly. This assessee’s appeal IT(SS)A No. 183/Del/2003 is allowed

S. KRISHNA (HUF) IT(SS)A No. 325/Del/2005

12.

We notice at the outset that the sole substantive issue between the parties herein is that of correctness of the learned Assessing Officer’s section 154 rectification order dated 09.10.2001 that the assessee is not entitled for deduction of its disclosed income from undisclosed one in light of section 158BB(1)(c) of the Act. We are of the considered view that such a debatable issue requiring detailed adjudication could hardly form subject matter of section 154 rectification in light of T.S. Balaram, ITO vs. Volkart Brothers & others (SC) 82 ITR 50. We 11 | P a g e

accordingly reject the Revenue’s vehement contentions supporting the same in very terms. This assessee’s appeal IT(SS) A No. 325/Del/2025 is accepted.

No other ground or argument has been pressed before us.

13.

These three assessees’ respective appeals ITA Nos. 1342/DEL/2000, 4087/DEL/2001 are allowed & ITA No. 4088/DEL/2001 with ITA No. 3550/Del/2002 are partly allowed. IT(SS)A No. 12/Del/2011 & IT(SS)A Nos. 183/Del/2003 & 325/Del/2025 are allowed; in above terms. A copy of this common order be placed in the respective case files.

Order pronounced in the open court on 21.08.2026 .

Sd/- Sd/- (NAVEEN CHANDRA) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 31.08.2026 *Pooja Mittal, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR

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