RAJA REDDY NALLA,WARANGAL vs. DCIT, CENTRAL CIRCLE -1(3), HYDERABAD

At the outset, there is a delay of 18 days in filing ITA Nos. 2277/Hyd/2025 and 2278/Hyd/2025 for the assessment years 2016-17 and 2017-18, respectively, out of the three appeals filed by the assessee before the Tribunal. The assessee has filed separate affidavits explaining the reasons for the delay in filing the said appeals. The learned counsel for the assessee, Shri M. Poorna Chander Rao, C.A., referring to the affidavits filed by the assessee, submitted that the impugned order passed by the learned CIT(A), dated 16.09.2025, was received by the assessee and the appeals

It was further submitted that the delay in filing the appeals was neither wilful nor deliberate but occurred due to unavoidable circumstances beyond the control of the assessee. The learned counsel for the assessee submitted that the assessee is a 77-year- old individual having limited familiarity with technology and, therefore, was not aware that the appellate proceedings had been concluded and that the appellate order had already been passed. It was submitted that the assessee came to know about the appellate order only when his tax consultant, during the course of a visit to the Income-tax Department in connection with an unrelated matter, obtained a copy of the order. Immediately thereafter, the assessee contacted the learned counsel and took prompt steps to file the present appeals without any further delay. It was further submitted that the delay had occurred due to bona fide reasons beyond the control of the assessee and not on account of any deliberate negligence or mala fide intention. Accordingly, it was prayed that the delay of 18 days in filing the appeals may kindly be condoned in the interest of justice.

The learned Senior A.R. for the Revenue, Ms. T. Mythili, on the other hand, opposed the condonation petition filed by the assessee. She submitted that the assessee has failed to file the appeals within the prescribed period and, therefore, the delay may not be condoned. However, she fairly submitted that the issue may be decided in accordance with law on the basis of the facts and material available on record.

We have heard both the parties, perused the petition and affidavit filed by the assessee seeking condonation of delay of 18 days in filing the appeals before the Tribunal. We find that, the reasons explained by the assessee appear to be genuine and bona fide and come under 'sufficient cause'. We further find that, the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji, reported in 167 ITR 471 (SC), has laid down certain principles for condoning the delay and directed that a lenient approach should be followed to avoid dismissal of meritorious cases on technical grounds. Going by the principles laid down in Mst. Katiji (supra), and also considering the submissions of the assessee, we condone the delay of 18 days in filing the appeals before the Tribunal and admit the appeals for adjudication.

The brief facts of the case are that the assessee is an individual, who filed his return of income for A.Y. 2016-17 on 29.03.2017, admitting total income of Rs. 17,07,660/- and agricultural income of Rs. 10,00,000/-. In this case, a search and seizure operation under Section 132 of the Income-tax Act, 1961 was conducted on 09.08.2018 along with Moksha Infrastructure Private Limited Group of cases. Pursuant to the search, notice under Section 153A was issued on 18.03.2019, and in response, the assessee filed return of income on 15.04.2019 admitting total income of Rs. 25,48,660/- and agricultural income of Rs. 10,00,000/-, which included additional income of Rs. 8,41,000/- towards undisclosed income on account of interest income earned from money lending business. The assessment was completed under Section 143(3) r.w.s. 153A on 21.04.2021 determining the total income at Rs. 28,63,020/- by making an addition of Rs. 3,14,358/- towards long-term capital gain derived from transfer of property pursuant to the Joint Development Agreement (JDA). The assessee carried the matter in appeal before the Ld. CIT(A), and the Ld. CIT(A) disposed of the appeal by directing the A.O. to rework the capital gain derived from transfer of property. The A.O.,

Thereafter, penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961 were initiated, and a show cause notice under Section 274 r.w.s. 271(1)(c) was issued on 17.12.2021 to the assessee, requesting the assessee to show cause as to why an order imposing penalty under Section 271(1)(c) of the Act should not be passed. In response, the assessee submitted that the additional income offered during the course of search in respect of interest income from money lending business cannot be considered as concealment of income because the assessee had voluntarily surrendered the income and also filed a return of income in response to the notice issued under Section 153A. Once a return has been filed in response to the notice issued under Section 153A, the said return of income replaces the original return of income filed under Section 139(1) of the Act, and thus, in the absence of any addition towards the total income, penalty cannot be levied. The assessee also challenged the penalty proposed on the addition towards capital gain and submitted that

Aggrieved by the penalty order, the assessee preferred an appeal before the Ld. CIT(A) and challenged the penalty levied by the A.O. and argued that the voluntary surrender of income in respect of interest income derived from hand loans cannot be considered as concealment of income. The assessee further submitted that the A.O. issued a show cause notice for furnishing inaccurate particulars of income and levied penalty for concealment of income. From the above, it is very clear that the A.O. was not satisfied as to whether the assessee had furnished

The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of the various facts, deleted the penalty levied by the A.O. in respect of the addition towards capital gain derived from transfer of property pursuant to the JDA by holding that when there are divergent views on the issue of taxability of capital gain pursuant to the JDA on the date of signing the agreement and on the date of handing over possession of the super built-up area, and this anomaly has been clarified by the legislature by insertion of Section 45(5A) by the Finance Act, 2017 w.e.f. A.Y. 2018-19, it clearly shows that there was no clarity on this issue and, therefore, the stand taken by the assessee cannot be regarded as concealment of income or furnishing of inaccurate particulars of income so as to attract penalty under Section 271(1)(c) of the Act. Therefore, the Ld. CIT(A) directed the A.O. to delete the penalty levied on the addition made towards capital gain.

With regard to the addition of Rs. 8,41,000/- in respect of interest on cash loans, the Ld. CIT(A) held that the additional income admitted by the assessee in the return of income filed in response to the notice under Section 153A of the Act was not voluntary, but was offered upon noticing the relevant facts of undisclosed income based on various incriminating documents seized during the course of search. Therefore, the arguments of the assessee that voluntary surrender of income does not amount to concealment of income cannot be accepted. Accordingly, the Ld. CIT(A) rejected the explanation of the assessee and sustained the penalty levied under Section 271(1)(c) of the Act on the additional income offered by the assessee towards interest income on hand loans.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

The learned counsel for the assessee, Shri M. Poorna Chander Rao, C.A., submitted that the A.O. issued a show cause notice under Section 271(1)(c) of the Act, for furnishing inaccurate particulars of income and levied penalty for concealment of

The learned Senior A.R. for the Revenue, Ms. Mythili T. on the other hand, supporting the order of the Ld. CIT(A), submitted that, it is a clear case of concealment of particulars of income, which is evident from the relevant facts gathered during the course of search, where the incriminating material clearly shows undisclosed income on account of interest income derived from hand loans and the same has not been disclosed in the return of income filed for the year under consideration. The A.O., after considering the relevant facts, has rightly levied the penalty for concealment of particulars of income. Therefore, she submitted that the order of the A.O. and the Ld. CIT(A) should be upheld.

We have heard both parties, perused the material available on record, and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has admitted additional income towards interest income from unaccounted hand loans given to various parties and also filed the return of income under Section 153A of the Income-tax Act, 1961 and paid the relevant taxes. The A.O. levied penalty under Section 271(1)(c) by issuing a show cause notice under Section 274 r.w.s. 271(1)(c), dated 17.12.2021, wherein the A.O. issued the show

In the present case, there is no dispute with the fact that the show cause notice was issued for furnishing inaccurate particulars of income, whereas the penalty has been levied for concealment of particulars of income. Therefore, in our considered view, the show cause notice issued by the A.O. for one limb, i.e., furnishing of inaccurate particulars of income, and levying penalty under another limb, i.e., concealment of particulars of income, vitiates the entire penalty proceedings and thus, the penalty levied by the A.O. cannot be sustained. The Ld. CIT(A), without appreciating the relevant facts, simply upheld the penalty levied by the A.O. Thus, we set aside the order of the Ld. CIT(A) and delete the penalty levied by the A.O.

In the result, the appeal of the assessee for A.Y. 2016-17 is allowed.

The brief facts of the case are that the assessee is an individual, who filed his return of income for the relevant assessment year on 21.03.2018, admitting total income of Rs.28,31,930/- and agricultural income of Rs.10,50,000/-. In this case, a search and seizure operation under Section 132 of the Act was conducted on 09.08.2018 along with the group cases of M/s. Moksha Infracon Pvt. Ltd. and M/s. Kaveri Infra Projects Pvt. Ltd. on 09.08.2018. Pursuant to the search, notice under Section 153A was issued on 18.03.2019. During the course of the search operation, certain loose sheets and a diary were found, which contained details of purchase of a property from one Sri Chandramohan Reddy and payment of consideration. During the course of search, the assessee admitted additional income towards interest income and also deployment of unaccounted income derived from the finance business for purchase of property, including additional income of Rs. 55,00,000/- for the assessment year under consideration. The assessee filed the return of income in response to the notice issued under Section 153A admitting total income of Rs. 86,01,280/-, which included additional income

Subsequently, the A.O. passed an order under Section 154 of the Act on 21.03.2022 and levied tax on the additional income offered by the assessee by invoking the provisions of Section 115BBE of the Act. Aggrieved by the said order, the assessee preferred an appeal before the Ld. CIT(A), and the Ld. CIT(A) restored the matter to the file of the A.O. Thereafter, the A.O., after issuing notice under Section 154 of the Act and considering the objections of the assessee, passed a fresh order under Section 154 dated 31.01.2025 holding that, in the assessment order, the addition of Rs. 55,00,000/- towards purchase of the property had been treated as unexplained investment under Section 69 of the Act, and once the addition had been made under Section 69 of the Act, the tax ought to have been computed under Section 115BBE of the Act. Since the tax had been computed at the normal rates, the same constituted a mistake apparent from the record, which

Aggrieved by the order passed by the A.O. under Section 154 of the Act, the assessee preferred an appeal before the Ld. CIT(A) and submitted that the A.O. cannot pass an order under Section 154 and levy tax at 60% on the additional income offered by the assessee in the return of income filed under Section 153A of the Act, because the above issue is highly debatable as to whether the additional income offered by the assessee is to be treated as unexplained investment under Section 69 of the Act or as normal business income. The said issue has to be considered in the light of the relevant evidence found during the course of search coupled with the explanation of the assessee. Therefore, passing an order under Section 154 and levying tax at a higher rate in terms of Section 115BBE of the Act is incorrect.

The learned counsel for the assessee further submitted that the A.O. erred in passing an order under Section 154 of the Act and levying tax at a higher rate under Section 115BBE of the Act. He submitted that the issue as to whether the additional income offered by the assessee is assessable under Section 69 of the Act or under the head "Income from Business" is highly debatable and requires appreciation of the relevant facts and evidence found during the course of search. Therefore, the same cannot be brought within the scope of rectification under Section 154 of the Act. He further submitted that the assessee had explained the source of investment in the property out of the undisclosed income generated from the finance business and, therefore, the provisions of Section 69 of the Act are not applicable.

The learned Senior A.R. for the Revenue, on the other hand, supporting the order of the Ld. CIT(A), submitted that the A.O. has rightly exercised the powers conferred under Section 154 of the Act to rectify the mistake apparent from the record. She submitted that once the additional income had been treated as unexplained investment under Section 69 of the Act, in the assessment order, the tax was required to be computed in accordance with the

We have heard both parties, perused the material available on record, and had gone through the orders of the authorities below. There is no dispute with regard to the fact that during the course of search, certain loose sheets were found which contained details of unaccounted income derived from hand loans and also deployment of the said unaccounted income for purchase of properties. During the course of search, the assessee admitted additional income towards interest income and also deployment of unaccounted income derived from finance business for purchase of property, and also admitted additional income of Rs. 55,00,000/- for the assessment year under consideration, filed the return of income, and paid the relevant taxes. The assessment was completed under Section 143(3) r.w.s. 153A of the Act and the income returned by the assessee was accepted and tax was computed at the normal rates. However, the A.O. passed an order under Section 154 of the Act and levied tax at the higher rate of 60% in terms of Section 115BBE of the Act on the additional

The provisions of Section 154 of the Act deal with rectification of mistakes. Under Section 154, rectification is strictly restricted to a mistake apparent from the record which is patent, obvious, and self-evident, without requiring elaborate arguments or investigation. This principle is supported by the decisions of various Courts where it has been clearly held that where a case requires fresh investigation of facts or deliberation, the same cannot be considered as a mistake apparent from the record for the purpose of Section 154 of the Act. In the present case, there is no dispute with regard to the fact that during the course of search, the Department found certain incriminating material which contained undisclosed income, and the same has been accepted by the assessee. The assessee has also filed the return of income including the additional income offered during the course of search and also paid the relevant taxes. Therefore, once the A.O. completed the assessment under Section 143(3) r.w.s. 153A

Coming back to the issue on merits, admittedly, the assessee has admitted additional income under the head "Income from Business" and also paid taxes at the normal rate of tax. The

In this view of the matter, and considering the facts of the case, we are of the considered view that, the order passed by the A.O. under Section 154 of the Act for levying tax at a higher rate in terms of Section 115BBE of the Act is not maintainable, both on legal grounds as well as on merits. The Ld. CIT(A), without appreciating the relevant facts, simply upheld the reasons given by the A.O. Thus, we quash the order passed by the A.O. under Section 154 of the Act.

In the result, the appeal filed by the assessee for A.Y. 2017- 18 is allowed.

The facts are identical to the issue which we have considered for A.Y. 2017-18 in ITA No.2278/Hyd/2025. But for the figures, the issue is exactly identical. The reasons given by us in the preceding paragraph nos.22 to 25 are equally applicable to this appeal, as well. Accordingly, for similar reasons, we quash the order passed by the A.O. under Section 154 of the Act for A.Y. 2018-19.

In the result, the appeal filed by the assessee for A.Y. 2018- 19 is allowed.

To sum up, all the appeals of assessee are allowed.