JAYAPRAKASH,CHENNAI vs. DCIT, NCC-8(1), CHENNAI

The Assessee raised the following grounds of appeal : “1. The order of the Commissioner of Income Tax (Appeals), Chennai ('CIT(A)') u/s. 250 of the Income Tax Act, 1961 is opposed to law, facts and circumstances of the case.

Briefly, the facts of the case are that the appellant is an Individual. The Return of Income for the Assessment Year 2013- 14 was filed on 27.09.2013 disclosing total income of Rs.18,25,000/-. Subsequently, based on the information that the appellant purchased a property situated at Plot No.38, K.K.Salai, Kaveri Rangan Nagar, Saligramam, Chennai, the Assessing Officer formed an opinion that income got escaped assessment from tax, accordingly, a notice u/s.148 of the Act was issued on 03.10.2019. Against the said Return of Income, the assessment was completed by the Assessment Unit of the Department (hereinafter called ‘AO’) vie order dated 11.09.2021 passed u/s.143 r.w.s 147 read with section 144B of the Income Tax Act, 1961 at a total income of Rs.2,48,25,000/- after making addition of Rs.2,30,00,000/- on account of unexplained cash credit u/s.68 of the Income Tax Act, 1961.

Being aggrieved by the above assessment order, the appellant filed a Writ Petition before the Hon’ble High Court of Madras challenging the very validity of the assessment order. The Hon’ble High Court of Madras had quashed the assessment order, however, remanded the matter back to the file of Assessing Officer for fresh assessment. Pursuant to the order of the remand order made by the Hon’ble High Court of Madras, the Assessing Officer issued notice u/s.142(1) of the Act calling for certain information, the appellant was called-upon to explain to explain the source of the investment of Rs.2,30,00,000/- on immovable property. The appellant stated that the source of investment was made out of the advance amount received against the sale of various properties. However, the Assessing Officer had rejected the above explanation by holding that the appellant had failed to furnish any documentary evidence in support of the explanation offered. He further proceeded to hold that the appellant had failed to prove the identity and the creditworthiness of the creditors as well as genuineness of the transaction. Accordingly, Assessing Officer made addition of Rs.2,30,00,000/- as unexplained cash credit and taxed the same under the provisions of section 115BBE of the Act.

Being aggrieved by the above assessment order, the appellant preferred an appeal before the Learned CIT(A), contending that the very initiation of reassessment proceedings u/s.148 are bad in law as they are prompted by mere change of opinion on the same facts which were already available on record. It was further contended that the Assessing Officer ought not have made addition of Rs.2,30,00,000/- invoking the provisions of section 68 of the Act, even though the appellant had discharged the onus of proving the identity, creditworthiness of the creditors and genuineness of the transaction. However, the ld.CIT(A) rejected the above contentions and dismissed the appeal by confirming the addition placing reliance on the following decisions :  S.Hastimal v CIT [1963] 49 ITR 273 (Mad)  Mehta Pankh & Co. v CIT [1956] 30 ITR 181 (SC)  CIT v. Jauharimal Goel [2005] 147 taxman 448 (All.)  Tolaram Dage C/7 CIT [1966] 59 ITR 632 (Assam)  CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC)  Sarogi Credit Corporation v. CIT 1975 CTR (Pat)1: (1976) 103 ITR 344 (Pat)  CIT v. Ram Narain Goel [1997] 92 Taxman 259(P&H) Hon’ble Bombay High Court.

Being aggrieved by the order of the Learned CIT(A), the appellant is in appeal before us in the present appeal. The Learned Counsel submits that the very initiation of re- assessment proceedings are bad in law, in as much as, the re- assessment was sought to be reopened beyond the period of four(04) years from the end of the relevant assessment year without any tangible fresh material suggesting escaped income from assessment to tax. He further submitted that when the Assessing Officer had not made addition in respect of items which are recorded in the reasons for reopening, no further addition can be made in support of this proposition, the learned AR relied on the following decisions :  CIT Vs. Jet Airways (I) Ltd [2011] 331 ITR 236  Hon’ble High Court of Madras in the decision of Tractors & Farm Equipment Ltd 409 ITR 369 (Madras) 7. On the merits, the learned Counsel submits that even though the appellant had established the source of the investment made of Rs.2,30,00,000/- the Assessing Officer ought not have made addition. The appellant is not under obligation to establish the source of source of the money received for the investment made on immovable property.

On the other hand, Learned DR submits that the appellant had failed to establish the source of investment made on the purchase of immovable property, therefore, the Assessing Officer had rightly made the addition. The Learned CIT(A) after proper appreciation of the facts of the case and evidence on record, he had confirmed the addition by passing a very reasoned order. Therefore, no interference by this Tribunal is called-for.

We heard rival submissions and perused the material available on record. The first ground of appeal challenges the very validity of the initiation of re-assessment proceedings on the ground that in the absence of any fresh tangible material indicating escapement of income from assessment to tax. However, from the reasons recorded copy of which is placed at page no.62 of the paper book, it would be very clear that the information had come into the possession of the Assessing Officer that the appellant had purchased a property for a consideration of Rs.2,30,00,000/- on 22.03.2013 from one Smt.Shanta Anantaraman.

The said Smt.Shanta Anantaraman i.e.seller had originally executed a Power of Attorney in favour of the appellant’s wife Mrs.Nimmi J. Later-on, i.e. on 19.06.2013, the appellant’s wife who is Power of Attorney holder Mrs. Nimmi J executed sale deed vide document no.3886/2013 in favour of the appellant for a consideration of Rs.1,58,40,000/-. It had come to the knowledge of the Assessing Officer that seller of the property had disclosed the consideration of Rs.2,30,00,000/- in the Income Tax Return filed by them. However, the Assessing Officer of the opinion that the appellant got the property registered for a consideration of Rs.1,58,40,000/- lesser than the Fair Market Value of Rs.2,30,00,000/-. Therefore, he was of the opinion that difference amount of Rs.71,60,000/- was assessable to tax under the provisions of section 56(2)(vii)(b) of the Act, accordingly sought to reopen the assessment.

The contention of the appellant that there was no fresh tangible material brought on record suggesting escapement of income cannot be accepted for the reason that the appellant had failed to demonstrate before us that the information referred to above was already in the possession of Assessing Officer at the time of processing the original Return of Income under the provisions of section 143(1) of the Act. Therefore, it cannot be said that there was no fresh tangible material, accordingly, contention of the appellant is rejected. Accordingly, this ground of appeal no.2 stands dismissed.

The ground of appeal no.3 challenges the validity of the reassessment proceedings on the ground that without making any addition in respect of an item which formed part of the reasons recorded, no further additions can be made. We had carefully perused the reasons recorded which form part of the foundation for reopening the assessment. The Assessing Officer sought to reopen the assessment in order to make addition of Rs.71,60,000/- under the provisions of section 56(2)(vii)(b) of the Act. It is a settled position of law that the validity and legality of the proceedings for the reassessment under Income Tax Act resorted to by the Income Tax Department must be tested and determined based only on reasons recorded by Assessing Officer for the purpose of initiating reassessment proceedings u/s.148 of the Act. In this regard, reliance can be placed on the decision of Hon’ble Supreme Court in Sanand Properties (P) Ltd vs. Jt.CIT & Ors [2026] 488 ITR 337 (SC) dated 12.05.2026. Therefore, the ground of appeal no.3 raised by the appellant stands dismissed.

The next ground of appeal relates to the merits of addition of Rs.2,30,00,000/- made by the Assessing Officer. Admittedly, the appellant purchased immovable property for a consideration of Rs.2,30,00,000/- and the said consideration was paid out of cash credit loans received and credited in the bank account maintained with Bank of India in the name of Sole Proprietary Concerns Arvind Builders. When the appellant was called-upon to explain the source of the cash credits, the only explanation offered by the appellant was that the investment was made out of advances received against the sale of immovable properties. The appellant had not explained the source of the cash credits and from whom it was received. Thus, the appellant had failed to prove the three essential ingredients i.e. identity of the creditors, creditworthiness of the creditors and the genuineness of the transaction. In the above circumstances, the Learned CIT(A) had rightly applied the ratio of the following decisions :  CIT Vs. United Commercial and Industrial Company Pvt. Ltd.(Cal).  CIT Vs. Precision Finance P Ltd(Cal) and  Sumati Dayal (SC) 14. We do not find any perversity or any illegality in the findings of the Learned CIT(A), therefore, we do not find any merit in the contentions of the appellant.

In the result, appeal filed by the assessee stands dismissed. Order pronounced in the open Court on 14th August, 2026.