GOMATHESWARAN KALLAPPA GOUNDER,COIMBATORE vs. PCIT, COIMBATORE-1, COIMBATORE

आयकर अपीलीय अधिकरण, ‘सी’ न्यायपीठ, चेन्नई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI श्री एस एस विश्वनेत्र रवि, न्याविक सदस्य एवं श्री एस. आर. रघुनाथा, लेखा सदस्य के समक्ष BEFORE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1885/Chny/2026 ननिाारण वर्ा / Assessment Year: 2022-23 Gomatheswaran Kaliappa Gounder, The PCIT-1, Flat No.4A Windchine Apartment, vs. Coimbatore. 248/3, Race Course, Coimbatore – 641 018. [PAN: AFXPG-9306-B] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/Appellant by : Mr. S. Sridhar, Advocate and Mr. N. Arjunraj, Advocate प्रत्यर्थी की ओर से/Respondent by : Ms. Nayani Swapna, CIT

सुनवाई की तारीख/Date of Hearing : 03.07.2026 घोर्णा की तारीख/Date of Pronouncement: 03.08.2026 आदेश /O R D E R PER S.R. RAGHUNATHA, AM : This appeal filed by the assessee is directed against the order dated 29.03.2026 passed by the Principal Commissioner of Income Tax, Coimbatore – 1 (hereinafter referred as the “ld.PCIT”) u/s.263 of the Income-tax Act, 1961 (hereinafter referred to as “the Act for the Assessment Year 2022-23, whereby the scrutiny assessment order dated 21.03.2024 passed u/s.143(3) r.w.s 144B of the Act has been directed to modify.

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tax of Rs.42,24,150/-, the net consideration receivable was Rs.2,01,54,34,402/- , which was realised as to Rs.1,94,94,45,225/- on 25.03.2021, Rs.6,35,28,099/- on 23.08.2021 and Rs.24,61,678/- on 04.03.2022. These facts are borne out by the record and have never been disputed by the revenue at any stage.

Date Bank Transferee Amount (Rs.) 25.03.2021 RBL Bank Smt. G. Sreelatha 99,67,00,000 26.03.2021 RBL Bank Smt. G. Sreelatha 67,00,000 31.03.2021 State Bank of India Smt. G. Sreelatha 1,00,00,000 25.03.2021 RBL Bank Gomatheswaran HUF 84,33,00,000 26.03.2021 RBL Bank Gomatheswaran HUF 1,00,00,000 26.03.2021 State Bank of India Gomatheswaran HUF 96,00,000

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Date Bank Transferee Amount (Rs.) Total 1,87,63,00,000

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increase in capital of Rs.31,99,97,776/-, and (ii) Rs.6,44,20,000/- being 10% of the sums of Rs.64,42,00,000/- received from Smt.Sreelatha, aggregating to Rs.9,64,19,777/-, assessed as unexplained money u/s.69A r.w.s 115BBE of the Act. The total income was determined at Rs.23,73,71,107/- and a demand of Rs.6,63,60,007/- was raised. Penalty proceedings u/s.270A and 271AAC of the Act were initiated. 10. Aggrieved, the assessee filed an appeal in Form No.35 on 19.04.2024 bearing Acknowledgement No.180959800190424 before the National Faceless Appeal Centre (paperbook, page 275), challenging both the additions, namely, the addition of Rs.3,19,99,777/- towards the increase in capital and the addition of Rs. 6,44,20,000/- towards the sums received from Smt.Sreelatha (Statement of Facts at page 283 and Grounds of Appeal at page 285 of the paperbook). 11. While the said appeal was so pending, the ld.PCIT issued a show cause notice u/s.263 of the Act on 16.03.2026 (paperbook, page 723), proposing to hold the assessment order to be erroneous and prejudicial to the interests of the revenue on the ground that, once the AO had doubted the creditworthiness of the three persons, he ought to have added the entire sums received from them instead of restricting the addition to 10%. The assessee filed a detailed reply on 23.03.2026 running to twenty-two pages (paperbook, pages 728 to 749), together with a supplementary reply (paperbook, page 750) and annexures. The impugned order came to be passed on 29.03.2026 setting aside the assessment order with a direction to the AO to bring to tax the entire sums aggregating to Rs.171.02 crores. 12. The reasoning of the ld.PCIT, is contained in paragraphs 3, 7, 8, 9 and 11 of the impugned order and the same is summarised hereunder: (i) The assessee had obtained "loans" of Rs.64.42 crores from Smt.Sreelatha, Rs. 22.50 crores from Smt. Madhavi Gomateshwaran and Rs.84.10 crores from Gomatheshwaran HUF, aggregating to Rs.171.02 crores;

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(ii) The AO had, at pages 7, 9 and 11 of the assessment order, recorded a specific finding that the creditworthiness of these three persons was not established; (iii) Creditworthiness cannot be partially established and partially unestablished; therefore, once such a finding was recorded, the entire sums ought to have been added as unexplained credits, and the failure to do so rendered the assessment order erroneous and prejudicial to the interests of the revenue; (iv) The bar in Section 263(1) of the Act was not attracted because the issues contested in the pending first appeal were, according to the ld.PCIT, "entirely different" from the issues involved in the revision proceedings. 13. Shri S.Sridhar, the Ld.AR appearing for the assessee, took us through the reply dated 23.03.2026 filed before the ld.PCIT, appearing at pages 726 to 749 of the paperbook, and in particular the submissions at pages 728 to 749 thereof, and advanced the following contentions. 14. It is pertinent to note, at the threshold itself, that the impugned order does not contain even a whisper of discussion regarding the fund flow statements, capital account, ledger accounts and bank statements furnished by the assessee at pages 742 to 748 of its reply dated 23.03.2026 before the ld. PCIT. The order neither examines nor deals with the evidentiary value of these documents, despite their direct relevance to the issue under consideration. 15. First, that the very subject matter sought to be revised, namely, the taxability of the increase in capital of Rs.31,99,97,776/- and of the sums received from Smt.Sreelatha of Rs.64,42,00,000/-, was the subject matter of the appeal pending before the First Appellate Authority, and therefore the exercise of revisional jurisdiction was barred by the Explanation to Section 263(1)(c) of the Act. Reliance was placed on the judgment of the jurisdictional High Court of Madras reported in 409 ITR 567. 16. Secondly, that Section 69A of the Act, which was the charging provision invoked in the assessment, itself requires the satisfaction of the AO as to whether the explanation offered by the assessee is satisfactory, and such

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satisfaction of the AO cannot be substituted by the satisfaction of the ld.PCIT in exercise of revisional powers. 17. Thirdly, that the view taken by the AO was, in any event, one of the possible views permissible in law, and reliance was placed on GKN Sinter Metals Ltd. vs. ACIT, 371 ITR 225 (Bom). 18. Fourthly, that the present case is at the highest one of inadequate enquiry and not of lack of enquiry, that clauses (a) and (b) of Explanation 2 to Section 263 of the Act cannot be imported into the facts of the present case, and reliance was placed on PCIT vs. Clix Finance India Pvt. Ltd., ITA No. 1428/2018 (Del) dated 01.03.2024, PCIT vs. Shivshahi Punarvasan Prakalp Ltd., ITA No. 397 of 2018 (Bom) dated 05.08.2022, Marico Ltd. vs. ACIT, Writ Petition No. 1917 of 2019 (Bom) dated 21.08.2019, CIT vs. Vellore Institute of Technology, 175 taxmann.com 277 (Mad), and Aroni Commercials Ltd. vs. DCIT, 362 ITR 403 (Bom). 19. Fifthly, and on merits, that the sums received from wife, daughter and HUF were not loans at all but were the assessee’s own funds, already subjected to capital gains tax in the AY 2021-22, which had been parked with the family members and were merely returned to him; that the entire movement was through banking channels; that the transactions were accounted as drawings in the Proprietor’s Current Account and not as loans; that in respect of each of the three persons the sums transferred by the assessee to them exceeded the sums received back from them; that the source of the source therefore stood conclusively established; and that the sum of Rs.84.10 crores stated to have been received from the HUF was in fact received on 31.03.2021 and therefore falls outside the previous year relevant to the A.Y. under consideration. Reliance was also placed on S.Krishna Kumar vs. ACIT, T.C.(A) No. 237 of 2012 (Mad) dated 22.11.2024, for the proposition that the revisional authority must itself examine the record and make such enquiry as it considers necessary.

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no application to the A.Y under consideration; but even if it applied, it stands discharged on these facts. 27. It is noticed that the transactions made in the earlier year even though brought to the notice of the ld.PCIT during revision proceedings as well as before AO during original assessment proceedings were completely ignored in the impugned order. We note that in the previous year relevant to the A.Y. under consideration the assessee transferred to each of the three persons sums far exceeding what he received back from them. 28. There is a further and more fundamental difficulty in the way of the revenue, which appears to have escaped the attention of both the AO and the ld.PCIT. Section 69A of the Act applies where the assessee "is found to be the owner of any money … and such money … is not recorded in the books of account, if any, maintained by him for any source of income". The condition that the money should not be recorded in the books of account is a jurisdictional pre- condition and not a formality. 29. In the present case, every rupee sought to be taxed is recorded in the books of account of the assessee. The receipts appear in the audited bank accounts, in the ledger accounts of the three persons maintained in the assessee’s books (paperbook, pages 478, 504 and 521), and in the Proprietor’s Current Account forming part of the audited financial statements (paperbook, pages 172 and 748). Indeed, it is precisely because these amounts were recorded in the books that the increase in capital became visible to the CASS system and the case came to be selected for scrutiny in the first place. Money that is recorded in the books cannot simultaneously be money "not recorded in the books" within the meaning of Section 69A of the Act. The deeming fiction therefore has no application, and the additions made and directed to be enhanced are without the authority of law. 30. Moreover, the ld.PCIT has directed the AO to bring to tax, in the A.Y.2022-23, a sum of Rs.84.10 crores stated to have been received from Gomatheshwaran HUF. The bank statement of the assessee maintained with

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RBL Bank in Account No. 307778147491, at page 522 of the paperbook, shows that this sum of Rs. 84,10,00,000/- was received on 31.03.2021. That date falls in the financial year 2020-21, relevant to the A.Y.2021-22, and outside the previous year relevant to the A.Y. under consideration. A direction to assess in the A.Y. 2022-23 an amount admittedly received in the A.Y.2021-22 is unsustainable in law and is, by itself, demonstrative of a total non-application of mind to the record. 31. The direction of the ld.PCIT, if implemented, would produce a result that the law cannot countenance. The assessee received Rs.2,11,20,75,000/- from the offer for sale and has paid tax on the resultant capital gains of Rs.2,01,44,17,843/- in the A.Y.2021-22. If the same corpus, having been temporarily parked with his wife, daughter and HUF and returned to him, is now taxed a second time as unexplained money at the maximum marginal rate u/s.115BBE of the Act, the same money would suffer tax twice over in the hands of the same person. It is a first principle of the law of income tax that the same income cannot be taxed twice and in the present case, the direction of the Ld.PCIT had resulted in double taxation of the same sum. 32. For all these reasons, we hold, on merits, that no taxable income whatsoever arises in the hands of the assessee on account of the subject transactions with Smt.G.Sreelatha, Ms.Madhvi Gomathieswaran and Gomatheswaran HUF. The sums received by the assessee from them during the previous year relevant to the A.Y.2022-23 represent the return of the assessee’s own funds, which had already suffered tax as capital gains in his hands in the A.Y.2021-22, which were routed entirely through banking channels, which are recorded in the books of account of both the payers and the payee, and in respect of which the source, and the source of the source, stands fully established on the record. 33. Having held that there is no unexplained money u/s.69A of the Act demonstrated on the facts of the present case, we now deem it fit to examine the legal issues raised in the present appeal. The first legal issue raised is with

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respect to the Explanation to Section 263(1)(c) of the Act which provides that where any order passed by the AO had been the subject matter of any appeal, the powers of the Principal Commissioner under the sub-section "shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal". The plain effect of the provision is that the revisional power survives only in respect of matters which have not been considered and decided in appeal; it does not survive in respect of matters which are the subject matter of the appeal. 34. The ld.PCIT has sought to escape this bar by holding, in paragraph 9 of the impugned order, that "the issues in both these proceedings are entirely different", the appeal being against the addition of Rs.3,19,99,777/- and Rs.6,44,20,000/-, whereas the revision proceedings are on the failure of the AO to add the entire loans. With respect, this reasoning cannot be sustained. What is under appeal before the First Appellate Authority is the taxability, in the hands of the assessee, of the increase in the capital account of Rs.31,99,97,776/- and of the sums of Rs.64,42,00,000/- received from Smt.Sreelatha. What the ld.PCIT has directed to be examined and taxed is the very same increase in capital and the very same sums received from Smt.Sreelatha, the only difference being one of quantum, the AO having taken 10% and the ld.PCIT insisting upon 100%. 35. A difference in the quantum of an addition is not a difference in the subject matter. The question which the First Appellate Authority is seized of is whether any part of these credits is assessable as unexplained money u/s.69A of the Act. If the First Appellate Authority answers that question in the negative as, for the reasons we set out later in this order, it must then the entire foundation of the revision disappears. The ld.PCIT has, in substance, sought to enhance an addition which is pending consideration in appeal, a power which the statute has conferred upon the First Appellate Authority u/s.251(1)(a) of the Act and not upon the revisional authority. To permit the ld.PCIT to do so is to permit two authorities to adjudicate simultaneously upon the identical subject matter, with

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the attendant risk of conflicting decisions, which is precisely the mischief that the Explanation was designed to prevent. 36. The jurisdictional High Court of Madras in the decision reported in 409 ITR 567 has held that where the larger issue was pending before the Commissioner (Appeals), the Commissioner could not exercise power u/s.263 of the Act on account of the statutory bar, and that the assumption of jurisdiction in such circumstances was "wholly erroneous". Following the said ratio, we hold that the assumption of jurisdiction in terms of Section 263 of the Act during the pendency of the first appeal was wrong and untenable. 37. The second legal issue raised pertains to the second limb on which the impugned order rests is that the AO, having doubted creditworthiness, ought to have added the whole. Implicit in this is the suggestion of a failure of enquiry. The record does not bear this out even remotely. 38. The very reason for which the case was selected for scrutiny under CASS was "substantial increase in capital in a year". The AO issued three notices u/s.142(1) of the Act on 04.10.2023, 25.10.2023 and 24.01.2024, specifically calling for a valid justification for the increase in capital, the source of investment in capital of Rs.31,99,97,776/-, and the returns of income of the family members. He thereafter issued a show cause notice on 04.03.2024 and an issue letter on 12.03.2024, and held a video conference on 15.03.2024. The assessee responded to every one of these notices. He filed the capital accounts as on 31.03.2021 and 31.03.2022, the details of the offer for sale, the returns of income of Smt.Sreelatha, Ms.Nethra, Ms.Madhvi and the HUF, the confirmation letter of Smt.Sreelatha dated 14.03.2024 and the bank statements. The AO expressly verified the returns of income of the three persons, tabulated the amounts at page 7 of his order, recorded that Ms.Nethra had made no payment at all, and applied his mind to each transaction. 39. On this material, the AO declined to accept his own show cause proposal of Rs.51,32,57,776/- and reduced the addition to Rs.9,64,19,777/-. Where an AO issues a show cause notice proposing a particular addition and, after

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considering the reply, makes a materially smaller addition, the only inference possible is that he has applied his mind to the reply and has accepted it in part. 40. The law on this aspect is well settled. In Malabar Industrial Co. Ltd. v.CIT, 243 ITR 83, the Hon’ble Supreme Court held that where two views are possible and the AO has taken one view with which the Commissioner does not agree, the order cannot be treated as erroneous and prejudicial to the interests of the revenue unless the view taken by the AO is unsustainable in law. In CIT vs. Max India Ltd., 295 ITR 282, the Hon’ble Supreme Court reiterated the principle. The jurisdictional High Court in CIT vs. Vellore Institute of Technology, 175 taxmann.com 277, has held that once a notice is issued and the assessee complies, the absence of a discussion or finding in the assessment order means that the AO was satisfied with the explanation given, and that a revision in such circumstances amounts to an arbitrary exercise of power. To the same effect are Marico Ltd. (supra), GKN Sinter Metals Ltd. (supra) and Aroni Commercials Ltd. (supra). 41. Further, the Explanation 2 to Section 263 of the Act would not assist the revenue. Clause (a) thereof is attracted where an order is passed "without making inquiries or verification which should have been made". As the Delhi High Court explained in PCIT vs. Clix Finance India Pvt. Ltd. (supra), the clause does not require the enquiry or verification to be recorded in its entirety in the assessment order. Explanation 2 cannot be read as conferring an unfettered licence upon the revisional authority to characterise every enquiry with which it disagrees as no enquiry at all. At the highest, the case of the revenue is one of inadequate enquiry, and it is settled beyond controversy that inadequacy of enquiry does not clothe the revisional authority with jurisdiction u/s.263 of the Act. 42. The cases relied upon by the revenue on this aspect are all distinguishable on facts. In M.R.Apparels (supra) and Hemalatha Rajan (supra), the AO had not examined the relevant details at all. In Maithan International (supra), the assessee had produced only bank statements and letters of

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confirmation of outside creditors and nothing more, and the source of the source was never demonstrated. In Manju Devi Chourasia (supra), there was a rotation of money amongst relatives with no independent verification and no material as to the source of the funds in the hands of the lenders. In Bisakha Sales (supra), the assessee company had received share application money at an unjustified premium from parties whose creditworthiness was never established. In the case before us, as demonstrated, the source of the funds in the hands of the three persons is not merely established, it is the assessee’s own taxed money. 43. It follows from the finding recorded above that the second of the twin conditions u/s.263 of the Act that the order must be prejudicial to the interests of the revenue is not satisfied. As the Hon’ble Supreme Court explained in Malabar Industrial Co. Ltd. (supra), the phrase "prejudicial to the interests of the revenue" is of wide import but is not to be equated with every loss of revenue; it postulates that the revenue has been deprived of tax lawfully payable. Where, as here, no tax was lawfully payable on the sums in question at all, the failure of the AO to bring them to tax cannot possibly have caused prejudice to the revenue. A revision cannot be sustained for the purpose of directing an addition which is itself unsustainable in law. Both conditions must be satisfied cumulatively and concurrently. 44. Section 263(1) of the Act requires the revisional authority to "call for and examine the record", and to pass an order "after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary". As the Hon’ble Madras High Court observed in S.Krishna Kumar (supra), the exercise of power u/s.263 of the Act is to be by the revisional authority alone, and the error must be founded on the record as available to that authority. 45. In the present case, the assessee placed before the ld.PCIT a reply of twenty-two pages containing a transaction-wise, date-wise, bank-wise and page-wise tabulation of every rupee that moved between him and the three persons, together with the capital accounts, the breakup of drawings and a

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paperbook of approximately 600 pages. The impugned order does not refer to this material at all. It does not say that the tabulations are wrong; it does not say that the bank statements do not bear them out; it does not say that the source of the source is not established. It simply repeats that creditworthiness "cannot be partially established and partially unestablished" and directs the AO to add the whole. An order which passes over in complete silence the entirety of the assessee’s case on the facts cannot be said to be an order passed after examining the record within the meaning of Section 263(1) of the Act. 46. To summarise our conclusions (a) The subject matter of the revision, the taxability of the increase in capital and of the sums received from Smt.G.Sreelatha was the subject matter of the appeal pending before the First Appellate Authority, and the exercise of revisional jurisdiction in respect thereof is barred by the Explanation to Section 263(1)(c) of the Act; (b) The AO made a detailed enquiry into the very issues on which the revision is founded, called for and examined the capital accounts, the returns of the family members, the confirmation letter and the bank statements, and took a view which is a possible view; the case is not one of lack of enquiry, and Explanation 2 to Section 263 of the Act is not attracted; (c) On merits, no taxable income arises in the hands of the assessee on account of the subject transactions, the receipts being the return of the assessee’s own funds already subjected to tax in the A.Y.2021-22, duly reported, and fully explained as to source and source of source; (d) Section 69A of the Act has no application to money which is recorded in the books of account of the assessee; (e) The sum of Rs.84.10 crores was received on 31.03.2021 and cannot in any event be assessed in the A.Y.2022-23; and (f) Consequently, the assessment order dated 21.03.2024 cannot be held to be prejudicial to the interests of the revenue, the twin conditions are not cumulatively satisfied, and the assumption of jurisdiction u/s.263 of the Act fails;

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Order pronounced in the court on 03rd August, 2026 at Chennai.

Sd/- Sd/- (एस एस विश्िनेत्र रवि) (एस. आर. रघुनार्था) (S.S. VISWANETHRA RAVI) (S. R. RAGHUNATHA) न्याययक सदस्य/Judicial Member लेखा सदस्य/Accountant Member

चेन्नई/Chennai, ददनांक/Dated, the 03rd August, 2026. Devadas आदेश की प्रतिलिपि अग्रेपिि/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3.आयकर आयुक्त/CIT– Chennai/Coimbatore/Madurai/Salem 4. ववभागीय प्रनतननधि/DR 5. गार्ा फाईल/GF Digitally signed by DEVADAS DEVADAS GOPALANACHARY GOPALANACHARY Date: 2026.08.06 08:51:12 +05'30'