M/S. SRI RATHINA VINAYAGA PROPERTY PROMOTORS,COIMBATORE vs. ITO, NON CORP WARD 3(1), CBE

आदेश / O R D E R PER MANU KUMAR GIRI, JM:

This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), CIT(A), Chennai-18, [hereinafter referred to as “the Ld.CIT(A)”], dated 31.10.2025 for the Assessment Year (hereinafter referred to as "AY”) 2017-18. 2. Assessee has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law the Ld. Commissioner of Income-tax (Appeals) erred in failing to appreciate that the Order passed u/S 143(3) r.w.s 147 by the Ld. Assessing Officer is

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 2 :: erroneous on the facts and the merits of the case and provisions of Law as well and hence requires to be quashed. 2. That the Ld CIT(A) erred in sustaining the addition made by the AO, when it was consciously appreciated that the additions made relating to commission cannot be brought to tax on its cessation, when the same has not been debited to the P&L A/c as expenditure. 3. That the Ld.CIT(A) erred in failing to appreciate that the appellant is proscribed from utilizing any benefit under IDS-2016 as per section 196(e)Finance Act 2026, and hence the provisions of sections 181 to 199 of Finance Act 2026, are inapplicable. 4. That the Ld.CIT(A) erred in failing to appreciate that when no valid declaration is filed in Form No. 1 of IDS r.w.s 183(1) and as a consequence when no Form No. 2 was issued to acknowledge that the declaration is valid, all other conditions are inapplicable and there is no mandate to comply with them. 5. That the Ld CIT(A) erred in failing to appreciate that when no valid declaration is filed in Form No. 1 of IDS r.w.s 183(1) the provisions of section 197(b) cannot be invoked and the additions made as a result that relates to A.Y. 2015-16 and 2016-17 needs to be nullified. 6. That the Ld. CIT(A) erred in failing to appreciate that the assessment cannot be made solely based on the confession made while deposing a statement, without being corroborated further. 7. That the Ld. CIT(A) erred in failing to appreciate that an assessment has no legs to stand when the declaration is obtained under threat. 8. That the Ld. CIT(A) erred in failing to realize that the taxes imposed by the AO is without any authority of law and thus defeats the purpose and intention of Article 265 of the Constitution of India. 9 For those and other reasons that may be adduced at the time of hearing, it is prayed by the Appellant that the Hon'ble Tribunal may be pleased to delete the unjust and inexplicable additions and thus render justice.

3.1 A survey u/s. 133A of the Income Tax Act, 1961 was conducted at the business premises of the assessee on 20.09.2016. During the course of survey, a sworn statement was recorded from one of the partners, Shri Velusamy, wherein he admitted that the assessee had retained 25% of the advances received from customers who either

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 3 :: defaulted in payment of installments or withdrew from the purchase of plots and that such retained amounts had not been offered to tax. Based on the statement recorded, the partner admitted an aggregate undisclosed income of Rs.1,02,57,490/- relatable to three AYs, namely Rs.24,66,880/- for AY 2015-16, Rs.53,64,732/- for AY 2016-17 and Rs.24,25,878/- for AY 2017-18.

3.2 Subsequent to the survey, the assessee filed Form No.1 under the Income Declaration Scheme, 2016 (IDS) on 14.10.2016 declaring undisclosed income of Rs.78,31,610/- pertaining to AYs 2015-16 and 2016-17. However, the assessee paid only a part of the tax liability amounting to Rs.8,81,060/- and did not pay the balance tax, surcharge and penalty contemplated under the Scheme.

3.3 Since the income returned for AY 2017-18 did not include either the amount admitted during survey or the income declared under IDS, the Assessing Officer (AO) reopened the assessment u/s. 147 of the Act. During reassessment proceedings, the assessee submitted that it had opted for the IDS on professional advice and had already paid taxes thereunder. On verification, the AO found that only partial payment had been made and, therefore, invoking section 197(b) of the Finance Act, 2016, treated the undisclosed income declared under IDS as income chargeable to tax in AY 2017- 18. In addition, the AO separately brought to tax the sum of Rs.24,25,878/- admitted during the survey pertaining to the year under consideration. Consequently, a total addition of Rs.1,02,57,488/- was made. The AO observed that the assessee had voluntarily admitted undisclosed income during the survey

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 4 :: proceedings and had subsequently reiterated the admission by filing Form No.1 under the Income Declaration Scheme. According to the AO, filing of the declaration under IDS constituted an unequivocal admission that the income disclosed therein had escaped taxation. The AO further noted that the assessee had failed to comply with the mandatory conditions of the Scheme by not paying the entire tax, surcharge and penalty within the prescribed time. In view of section 197(b) of the Finance Act, 2016, the undisclosed income declared under IDS automatically became chargeable to tax under the normal provisions of the Income Tax Act in the previous year in which the declaration had been made, namely AY 2017- 18.Accordingly, the AO brought to tax Rs.78,31,610/- declared under IDS and also added Rs.24,25,878/- admitted during survey for AY 2017-18, holding that both represented undisclosed income of the assessee.

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 5 :: accounting method consistently followed by it. When customers cancelled the bookings, the assessee retained 25% of the advances only to recover the brokerage already paid to agents and therefore no income accrued. The ld.CIT(A), however, held that such explanation was inconsistent with the declaration made under IDS wherein the assessee itself had admitted these very amounts as undisclosed income. The ld.CIT(A.) further observed that the assessee had consciously filed Form No.1 under IDS after obtaining professional advice from its Chartered Accountant and had even paid part of the taxes under the Scheme. Therefore, the subsequent attempt to retract the earlier admission by attributing ignorance of accounting principles to the partner was not believable and appeared to be an afterthought. The ld.CIT(A.) also held that failure to pay the taxes under IDS clearly attracted section 197(b) of the Finance Act, 2016 and justified bringing the disclosed income to tax under the normal provisions. However, while sustaining the additions, the ld.CIT(A) held that the AO was not justified in assessing the amounts u/s. 69 read with section 115BBE. Since the receipts arose directly from the assessee's regular real estate business, they constituted undisclosed business income and were liable to be assessed under the head "Profits and Gains of Business or Profession" under the normal provisions of the Act.

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 6 :: The second issue relates to the addition of Rs.24,25,878/- based solely upon the survey statement and whether such addition can be sustained in the absence of independent corroborative material. A further issue concerns the true nature of the retained amounts, namely whether they constitute taxable business income or merely represent recovery of prepaid commission already reflected in the balance prescribed for real estate developers whereby customer advances are reflected as liabilities and commission paid to brokers is shown as sheet.

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 7 :: ordinate Bench of the Tribunal in Jagathesh vs. ACIT in ITA Nos.1565 & 1566/Chny/2025 dated 30.12.2025 wherein, on identical facts, the Tribunal held that in the absence of proof of service of Form No.2, the provisions of section 197(b) were inapplicable and the additions made on the basis of IDS declaration were liable to be deleted. It was also contended that the addition for AY 2017-18 was based only upon the survey statement without any independent corroborative material and therefore deserved to be deleted.

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 8 :: 8. We have heard the rival submissions, perused the orders of the lower authorities and carefully gone through the material available on record. We have also considered the written submissions filed by both the parties as well as the decision of the Co-ordinate Bench of this Tribunal in the case of Jagathesh Vs. ACIT in ITA Nos.1565 & 1566/Chny/2025 dated 30.12.2025, heavily relied upon by the ld.Authorised Representative which held as under: 21. Now coming to the other issues in the case, the assessee has raised the following: 1. That no fresh tangible material was available before the AO for issue of notice u/s.148 of the Act. 2. That the notice issued u/s.148 of the Act by the Jurisdictional Assessing Officer (JAO) is liable to be quashed. 3. That the approval obtained from PCIT is not valid approval as per the provisions of section 151(ii) of the Act. 4. That the addition made u/s.69A of the Act is untenable in law. 5. That the levy of tax u/s.115BBE of the Act at higher rates is not applicable for AY 2017-18. 6. That the declaration filed by the assessee was made invalid by not issuing Form 2 and it would not be fair to treat the declaration as void. 22. Adverting to the merits of the case the following were the arguments of either parties and our decision on the various aspects. 23. At the outset the Ld.AR contended that there was no fresh tangible material which lead to the reopening of the assessment for the impugned assessment year. The Ld.DR on the other hand stated that the filing of Form 1 under the Income Disclosure Scheme, 2016 [IDS] and the non payment of tax / surcharge / penalty thereafter would constitute fresh tangible material since the Form 1 under the IDS 2016, clearly stated that the assessee had income which had not been disclosed. 24. The Ld.DR also stated that in the event of non payment of taxes under the IDS 2016, section 197(b) of the Finance Act 2016 would deem the amount of incomes stated in the Form 1 as income assessable in A.Y.2017- 18 as per section 197(b) of the Finance Act 2016. …………………………………………………… ………………………………………………….. 41. As far as the issue of invocation of the provisions of section 197(b) of the Finance Act, 2016 to make addition of the undisclosed income declared in Form 1 under IDS, 2016, as income in the assessment year 2017-18 u/s.69A of the Act, since the tax / surcharge / penalty on the income declared in Form 1 was not paid within the specified due date and charging the same to tax at higher rates as per the provisions of section 115BBE of the Act, one has to see, whether in the facts and circumstances the non payment of tax / surcharge / penalty pursuant to filing of Form 1 under IDS,

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 9 :: would be a good reason for invocation of section 197(b) of the Finance Act 2016. 42. The facts leading to this are that the assessee filed a declaration in Form 1 under IDS on 30.09.2016. In the said form the assessee declared an aggregate income of Rs.14,55,65,400/- for A.Ys.2008-09 to 2016-17. It is an admitted fact that the assessee has not paid the tax / surcharge / penalty that are payable under the IDS as contemplated u/s.s 184 and 185 of the Finance Act 2016. The Finance Act 2016 in section 186 prescribes the manner of declaration and section 187 provides for the time for payment of tax / surcharge / penalty. Section 187(3) clearly provides that if the declarant fails to pay tax / surcharge / penalty in respect of the declaration made u/s.187 on or before the date specified under sub section (1) the declaration shall be deemed never to have been made under the IDS, 2016. 43. Section 197(b) provides that where a declaration is made u/s.183 and tax / surcharge / penalty referred to in sections 184 and 185 of the Finance Act 2016 are not paid within the time specified in section 187, the undisclosed income shall be chargeable to tax under the Income Tax Act in the previous year in which the declaration is made. The declaration in the instant case has been filed on 30.09.2016 i.e. in the previous year relevant to A.Y.2017-18. 44. In the light of these facts, the Ld.AR submitted that while the taxes have not been paid within the dates specified u/s.187(1), the provisions of section 192 of the Finance Act 2016 specifically provides that the declaration is not admissible in evidence against the declarant and that therefore the declaration cannot be used to reopen the assessment or to make any addition on the basis of such declaration. 45. The Ld.AR further contended that the Form 2 as contemplated by Rule 4(3) of the Income Declaration Scheme Rules, 2016 [IDS Rules], has not been served on the assessee and that therefore the question of payment of tax / surcharge / penalty does not arise. This being so, there was no scope for invocation of section 197(b) of the Finance Act 2016, the Ld.AR submitted. 46. The Ld.DR on the other hand submitted that the assessee was well aware of the amount of taxes to be paid and invited the attention of the Bench to the statement of facts filed before the ld.CIT(A) where the assessee has stated as follows: “The applicant filed a declaration in Form 1 under “The Income Declaration Scheme Rules, 2016 on 30.09.2016 on the last date specified for filing the declaration but was unable to pay the necessary taxes within the time stipulated under the scheme.” 47. The Ld.DR further submitted that the assessee having admitted that he is aware of the quantum of tax / surcharge / penalty to be paid, but which he was unable to pay before the time stipulated in the scheme has now claimed that the Form 2 was not issued by the department quantifying the taxes to be paid. 48. The Ld.DR therefore submitted that the issue is a mixed question of law and facts and cannot be raised for the first time at the stage of ITAT. Without prejudice the Ld.DR, as directed by the Bench produced the records subsequent to the assessee filing the Form 1 as contemplated by

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 10 :: section 183 of Finance Act 2016 and also the Form 2 issued by the ld.PCIT being the Designated Authority. 49. We have perused the records and considered the arguments of both sides. At the outset the preliminary issue raised is with regard to the admission of grounds raised on the non-service of Form 2 by the Designated Authority, for the first time before the ITAT. The main plank of the argument is that the issue is a mixed question of law and facts which involves examination of the records and that therefore these grounds are not deserved to be adjudicated at this stage. In this connection the Hon’ble SC in National Thermal Power Co. Ltd. v CIT [1998] 229 ITR 383 (SC) has held that the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. 50. In rendering this decision the Hon’ble Supreme Court has observed as follows: 5. Under section 254 of the Income-tax Act, 1961, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is, thus, expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal u/s. 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department have a right to file an appeal/crossobjections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. 51. Further the Hon’ble Madras HC in CIT v Indian Bank 2015 55 taxmann.com 372 (Madras) has held that the assessee has the right to raise additional grounds and if the same is beneficial to the assessee, the same should be considered by the Tribunal. 52. We find that the grounds which are raised are purely based on material already available on record before the department and do not involve any fresh material or facts being admitted. Therefore, relying on the decisions of the Hon’ble Supreme Court and Madras High Court (supra) we deem it fit to admit these grounds. 53. As already stated the Ld.DR has furnished before us the Form 2 issued by the ld.PCIT being the Designated Authority under the IDS, 2016. There is however no proof that the said Form 2 has been served on the assessee. In this background one has to be examine as to whether the non service of Form 2 would be an impediment on the invocation of the provisions of section 197(b) of the Finance Act 2016. 54. Before proceeding to discuss this aspect, we find that the Ld.AR has urged before us that since the Tax / Surcharge / Penalty as contemplated in section 184 / 185 of the FA 2016 have not been paid, by virtue of section 187(3) the declaration is deemed never to have been made and that

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 11 :: therefore suchdeclaration cannot be admitted in evidence against the assessee. We do not find any force in the argument of the Ld.AR since section 187(3) provides that where the tax / surcharge / penalty in respect of a declaration made u/s.183 is not paid within the specified date, the same shall be deemed never to have been made. 55. Section 192 provides that a declaration cannot be admitted in evidence. Once it is admitted that the declaration is deemed never to have been made, the said Form 1 will constitute material that is admissible in evidence against the declarant, since the said Form 1 is no longer a declaration as contemplated u/s.183 of the FA 2016. Any other view of the matter would render section 197(b) of the Act nugatory and would mean that in no case where the tax / surcharge / penalty are not paid within the date specified under the scheme the amounts shown under the IDS, 2016 can be treated as income chargeable to tax of the previous year in which the declaration is made. We, therefore, hold that the declaration filed in Form 1 and pursuant to which taxes have not been paid can be used and is admissible in evidence against a declarant. 56. Now turning to there being no service of Form 2 given that proof has not been furnished before us, we turn to Rule 4 of the IDS, Rules which reads as follows: 4. (1) A declaration of income or income in the form of investment in any asset u/s. 183shall be made in Form-1. (2) The declaration shall be furnished:—(a) electronically under digital signature; or(b) through transmission of data in the form electronically under electronic verification code; or(c) in print form, to the concerned Principal Commissioner or the Commissioner who has the jurisdiction over the declarant. (3) The Principal Commissioner or the Commissioner shall issue an acknowledgement in Form-2to the declarant within fifteen days from the end of the month in which the declaration u/s. 183 has been furnished. (4) The proof of payment of tax, surcharge and penalty made pursuant to the acknowledgement issued by the Principal Commissioner or the Commissioner shall be furnished by the declarant to the such Principal Commissioner or Commissioner in Form 3. (5) The Principal Commissioner or the Commissioner shall grant a certificate in Form-4 to the declarant within fifteen days of the submission of proof of full and final payment of tax, surcharge along with penalty by the declarant u/s. 187 of the Act in respect of the income so declared. (6) The Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing the form in the manner specified in sub-rule (2). Explanation.—For the purposes of this rule "electronic verification code" means a code generated for the purpose of electronic verification of the person furnishing the return of income as per the data structure and standards specified by Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems). 57. Rule 4(3) specifically provides that the ld.PCIT / CIT shall issue acknowledgement in Form 2 to the declarant within 15 days from the end of the month in which the declaration u/s.183 is furnished. It is beyond doubt that Rule 4(3) has been complied with in as much as the declaration in the instant case has been made on 30.09.2016 and Form 2 has been issued on 06.10.2016 which is within the time contemplated under Rule 4(3) of the

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 12 :: IDS Rules. We however notice that sub rule (4) of Rule 4 of the IDS Rules provides that proof of payment of tax / surcharge / penalty made pursuant to the acknowledgment issued by the ld.PCIT / CIT. The question that therefore needs to be answered is whether it would suffice if the Form 2 is issued or whether the From 2 has to be served on a declarant for the time to start ticking for the payment of tax / surcharge / penalty and where the non- payment of the same within the time specified in the scheme would render the declaration never to have been made, thereby triggering the application of section 197(b) of the FA 2016. 58. In this connection as already mentioned the intimation of payment u/s.187(1) of the Finance Act 2016 in respect of the IDS, 2016 is to be in Form 3. The relevant portion of the Form 3 reads as follows: To, The Principal Commissioner / Commissioner ………………………………. Sir / Madam, 1. Pursuant to the acknowledgement received from you in Form 2 vide Certificate F.No.-------------- dated --------------, the detail of payments made are as under: 59. A plain reading of the Form 3 clearly shows that the payment of the tax / surcharge / penalty are made pursuant to an acknowledgement received by a declarant in Form 2 from the ld.PCIT / CIT. Therefore, it is clear that if an acknowledgement in Form 2 is not received by a declarant the question of filing Form 3 and the payment of tax / surcharge / penalty pursuant to the declaration in Form 1 u/s.183 of the FA 2016 does not and cannot arise. This being so, one will have to conclude that where the Form 2 is not served on the declarant the question of payment of tax / surcharge / penalty as contemplated by Sections 184 & 185 of IDS 2016 does not arise. 60. In the instant case there is no doubt that the Form 2 has been issued. Can in the circumstance there be a presumption that the Form 2 has been served on the assessee. In this connection one may notice the provisions of section 292BB of the Income Tax Act. Section 292BB of the Act specifically provides that where an assessee has appeared in any proceeding or cooperated in any enquiry under the Income Tax Act relating to an assessment or reassessment, such assessee shall be precluded from taking any objection in any proceedings or inquiry under the Income Tax Act that the notice was not served upon him or not served upon him in time or served upon him in an improper manner, unless he has raised such objection before completion of such assessment or reassessment. It can be seen that section 292BB is only applicable to the Income Tax Act and cannot be extended to the Finance Act, 2016. Therefore, the benefit of section 292BB of the Act will not be availablewhile interpreting the service or otherwise of acknowledgement in Form 2 as contemplated by the Finance Act 2016 read with the Rules framed thereunder. 61. Therefore in the absence of any provisions corresponding to section 292BB of the Income Tax Act in the Finance Act 2016, it would lead to the irresistible conclusion that the burden of having served the notice in the present case having not been discharged by the revenue, there can be no valid service and consequently the provisions of section 197(b) cannot be triggered for an addition to be made in the A.Y. relevant to the previous year in which the declaration under IDS was made on the basis of a failure

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 13 :: to make payment of tax / surcharge / penalty as contemplated by sections 184 & 185 of the Finance Act 2016 62. Having observed so, we have to necessarily conclude that in the facts and circumstances of the case the Form 2 having not been served on the assessee, section 187(3) and 197(b) have no application. Since section 197(b) has no application, we hold that the addition of a sum of Rs.14,55,65,400/- u/s.69A of the Act made in the assessment framed u/s.147 r.w.s 144 of the Act could not have been made by invoking the provisions of section 197(b) of the Finance Act 2016. 63. We therefore direct the AO to delete the addition of Rs.14,55,65,400/- as income u/s.69A of the Act by allowing the grounds of appeal raised by the assessee. 64. Though we have decided that the income is not chargeable to tax under the provisions of section 69A of the Income Tax Act, it would not be out of place to mention that even if an addition is made u/s.69A of the Act, the provisions of section 115BBE of the Act for charging higher rates of tax cannot be invoked for the assessment year 2017-18. 65. On this issue, the Hon’ble Madras High Court in the case of S.M.I.L.E Microfinance Limited v ACIT 2024 SCC OnLine Mad 8416 has held as under: “16. The next contention raised by the Ld. Senior Counsel is that the u/s. 115BBE the rate of tax imposed is increased from 30% to 60% and the same is applicable with effect from 01.04.2017 onwards as per the amendment. Therefore, the same is applicable to any transaction from 01.04.2017 onwards and nor prior to any transactions prior to 01.04.2017. Since in the present case all alleged transactions are for the period from 08.11.2016 to 30.12.2016, hence the erstwhile rate of tax 30% only is applicable. But the contention of the revenue is that the amendment was with effect from 01.04.2017 and hence the same is applicable for the financial year 2016- 2017 and the assessment year 2017-2018. Further the amendment to section 115BBE is directly related to demonetization which would be evident from objects and reasons for such amendment. In order to consider the same, the objects and reasons of Taxation Laws (Second Amendment) Bill 2016 is extracted hereunder: ………… 17. In the aforesaid objects and reasons nowhere it is stated that due to “demonetization” the unaccounted money ought to be charged 60% rate of tax. It only states that step had been taken to curb black money by withdrawing Specified Bank Notes of denomination of Rs.500 and Rs.1000. And also states the people may find illegal ways of converting their black money into black again, hence as per experts advice heavy penalty ought to be levied. From the language of the object “that instead of allowing people to find illegal ways of converting their black money into black again”, it is evident that the government is intended to impose the same for future transactions. Especially the use of word “again” in the object would clearly indicate it is for future transactions i.e. from 01.04.2017. Therefore this Court is of the considered opinion that the revenue is empowered to impose 60% rate of tax for the transactions from 01.04.2017 onwards and not prior to the said cut-off date. And for prior transaction the revenue is empowered to impose only 30% rate of tax.” 66. The same view has also been taken by the Co-ordinate Bench of Tribunal in Kandasamy Kuppusamy v ITO 2025 (5) TMI 210 - ITAT

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 14 :: Chennai by relying on the aforesaid decision of the Hon’ble Madras High Court. 67. We therefore hold that the enhanced rate of 60% prescribed in section 115BBE of the Act is applicable only for transactions that have taken place on or after 01.04.2017 i.e., from assessment year 2018-19 onwards and not for transactions that have taken place in the previous year relevant to AY 2017-18. 68. In the result the appeal of the assessee in ITA No.1566 of 2025 is partly allowed.

8.1 The facts leading to the present dispute are not in controversy. The assessee is a partnership firm engaged in the business of purchase of lands, development thereof into plots and sale of plots on instalment basis. A survey u/s. 133A of the Act was conducted on 20.09.2016. During the course of survey, a sworn statement was recorded from one of the partners wherein it was admitted that the assessee had retained 25% of the advances received from customers who had defaulted in payment of instalments or withdrawn from the purchase of plots and that such retained amounts had not been offered to tax. The partner accordingly admitted an aggregate additional income of Rs.1,02,57,490/- relatable to AYs 2015-16 to 2017-18.

8.2 Subsequent thereto, the assessee filed Form No.1 under the Income Declaration Scheme, 2016 declaring undisclosed income of Rs.78,31,610/- pertaining to AYs 2015-16 and 2016-17. It is also an admitted position that the assessee did not remit the entire tax, surcharge and penalty payable under the Scheme. The AO invoking section 197(b) of the Finance Act, 2016, brought to tax the income disclosed under IDS amounting to Rs.78,31,610/- in AY 2017-18 and also added a further sum of Rs.24,25,878/- admitted during survey relating to the relevant previous year. Thus, the total addition worked out to Rs.1,02,57,488/-.

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 15 :: 8.3 Before us, the ld.Authorised Representative (AR) assailed the additions principally on two grounds. Firstly, it was submitted that the addition of Rs.78,31,610/- by invoking section 197(b) of the Finance Act, 2016 is contrary to law inasmuch as no acknowledgement in Form No.2 as contemplated under Rule 4(3) of the Income Declaration Scheme Rules, 2016 had ever been served upon the assessee. According to the ld. AR, in the absence of service of Form No.2, the liability to pay tax under the Scheme never arose and consequently section 197(b) could not have been invoked. Secondly, it was argued that the addition of Rs.24,25,878/- rests solely upon the survey statement. The assessee has consistently maintained that the retained amounts merely represent recovery of brokerage already paid to agents and reflected as prepaid expenses in the balance sheet. Since such commission was never claimed as expenditure in the Profit and Loss Account, the subsequent recovery thereof cannot partake the character of income. It was submitted that except the survey statement, no independent material has been brought on record by the AO to dislodge the books of account maintained by the assessee. 8.4 Per contra, the ld. Departmental Representative (DR) strongly supported the orders of the authorities below. According to him, the survey admission stood fully corroborated by the declaration voluntarily filed by the assessee under the Income Declaration Scheme. The assessee cannot be permitted to approbate and reprobate by first admitting the income under IDS and thereafter contending that the same does not represent income. The ld. DR further submitted that failure to remit the taxes prescribed under the Scheme automatically attracted section 197(b) of the Finance

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 16 :: Act, 2016 and, therefore, the AO was fully justified in bringing the disclosed income to tax in AY 2017-18. 8.5 We have given our thoughtful consideration to the rival submissions. The first issue that falls for our consideration is whether the AO was justified in invoking section 197(b) of the Finance Act, 2016.We find that this very issue came up for consideration before the Co-ordinate Bench of this Tribunal in the case of Jagathesh Vs. ACIT (ITA Nos.1565 & 1566/Chny/2025 dated 30.12.2025).The Co-ordinate Bench had occasion to examine the entire statutory framework governing the Income Declaration Scheme comprising sections 183, 187, 192 and 197 of the Finance Act, 2016 together with Rule 4 of the Income Declaration Scheme Rules, 2016.The Tribunal held that although issuance of Form No.2 by the Designated Authority is mandatory, mere issuance would not suffice unless the same is proved to have been served upon the declarant. The Tribunal observed that Rule 4(4) specifically contemplates payment of tax pursuant to the acknowledgement received in Form No.2 and, therefore, unless the acknowledgement is actually received by the declarant, the obligation to make payment cannot arise. Consequently, failure to pay taxes in such circumstances cannot trigger section 197(b) of the Finance Act, 2016.The Tribunal further held that unlike the Income Tax Act, the Finance Act, 2016 does not contain any provision similar to section 292BB dispensing with proof of service and, therefore, the burden squarely rests upon the Revenue to establish due service of Form No.2.

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 17 :: 8.6 In the present case also, the assessee has specifically contended that Form No.2 was never served upon it. Except relying upon the declaration filed by the assessee, the Revenue has not placed any material before us evidencing service of Form No.2.The factual matrix before us is thus identical to that considered by the Co-ordinate Bench in Jagathesh (supra). Respectfully following the aforesaid decision, which is binding on us in the absence of any contrary decision brought to our notice, we hold that invocation of section 197(b) of the Finance Act, 2016 is not sustainable. Accordingly, the addition of Rs.78,31,610/- made by the AO solely by invoking section 197(b) deserves to be deleted.

8.7 The next issue relates to the addition of Rs.24,25,878/-. We find that the addition has been made exclusively on the basis of the statement recorded during the course of survey. The assessee has explained that in the course of its business, advances received from customers are shown as liabilities and commission paid to brokers is carried under the head "Prepaid Expenses". Whenever customers discontinue the purchase, the brokerage already paid is recovered by retaining a portion of the advance. According to the assessee, such recovery merely results in adjustment of a balance sheet item and does not give rise to taxable income. Whether the said accounting treatment is ultimately acceptable or otherwise, the fact remains that the AO has not brought on record any independent material to demonstrate that the impugned amount represented income outside the books of account. No defects have been pointed out in the books of account. No investigation has been conducted with reference to the ledger accounts or balance sheet entries relied upon by the assessee. The addition rests entirely upon the

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 18 :: statement recorded during survey. It is now well settled by a catena of judicial pronouncements that though a statement recorded during survey constitutes a relevant piece of evidence, the same, in the absence of corroborative material, cannot by itself constitute the sole basis for making an addition. More particularly, when the assessee has furnished an explanation supported by its books of account, the burden lies upon the Revenue to establish that such explanation is incorrect.In the present case, except relying upon the survey statement, no corroborative material has been brought on record. Therefore, the addition of Rs.24,25,878/- also cannot be sustained.

8.8 The ld. CIT(A), while sustaining the additions, has directed that the income be assessed as undisclosed business income instead of u/s. 69 read with section 115BBE. In view of our finding that the additions themselves are unsustainable, the question regarding the head of income or applicability of section 115BBE has become purely academic. Nevertheless, we may observe that the co- ordinate Bench in Jagathesh Vs. ACIT, following the judgment of the Hon'ble Madras High Court in S.M.I.L.E. Microfinance Ltd., has held that the enhanced rate prescribed u/s. 115BBE has no application to AY 2017-18.

8.9 In the light of the foregoing discussion, and respectfully following the decision of the co-ordinate Bench in Jagathesh Vs. ACIT (ITA Nos.1565 & 1566/Chny/2025 dated 30.12.2025) on the identical legal issue relating to the applicability of section 197(b) of the Finance Act, 2016, we hold that the addition of Rs.78,31,610/- made pursuant to the declaration filed under the Income Declaration

ITA Nos. 3850/Chny/2025 (AYs 2017-18) M/s Sri Rathina Vinayaga Property Promotors Vs ITO NCW 3(1) :: 19 :: Scheme is unsustainable. Further, since the addition of Rs.24,25,878/- has been made solely on the basis of the statement recorded during survey without any independent corroborative material, the same is also liable to be deleted. Accordingly, we direct the Assessing Officer to delete both the additions. The grounds raised by the assessee are allowed. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on the 23rd day of July 2026, in Chennai.

Sd/- Sd/- (इंतूरी रामा राव) (मनु कुमार िग�र) (INTURI RAMA RAO) (MANU KUMAR GIRI) लेखा सद*य/ACCOUNTANT MEMBER �या�यक सद*य/JUDICIAL MEMBER

चे�नई/Chennai, +दनांक/Dated: 23rd July, 2026. SNDP, Sr. PS

आदेश क! ��त,ल-प अ.े-षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF SANDEE Digitally signed by SANDEEP P KUMAR Date: 2026.07.28 KUMAR 11:34:47 +05'30'