DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE SALEM vs. KRISHNAN MANGAIARKARASI, NAMAKKAL

The brief facts of the case emanating from the records are that the assessee, Shri V.Natarajan, is the Chairman of M/s.Pavai Varam Educational Trust, which is running various educational institutions. A search u/s 132 of the Act was conducted on 27.12.2016 in the case of the assessee and M/s.Pavai Varam Educational Trust. During the course of search, it was found that a sum

The assessee filed his original return of income for the A.Y.2017-18 on 19.03.2018. The case of the assessee was selected for scrutiny and notices u/s.143(2) of the Act was issued to the assessee. During the course of assessment proceedings, the AO considered the amount of Rs.33.02 crores of fees recorded in the books of M/s.Pavai Varam Educational Trust as unexplained cash credits u/s.68 of the Act in the hands of the Trust. Further, in order to protect the interest of revenue, the amount of Rs.13 crores, initially admitted by the assessee in his individual hands, was added protectively in the hands of the assessee as unexplained credit u/s.68 of the Act.

The AO had also noticed from the return of income for the A.Y.2017-18 that the assessee had shown interest expenditure of Rs.17,47,241/-. The

Further, the AO notice from the return of income filed that the assessee had disclosed Rs.45,37,557/- as “income from other sources”. However, in the receipts and payments account furnished later by the assessee, the amount of Rs.45,37,557/- was shown as “tuition income”. When called upon to explain the discrepancy and produce evidence for the income from other sources, the assessee failed to file any explanation for the same. In the sworn statement dated 07.12.2018, while answering to question No.4, the assessee admitted that Rs.45,37,557/- was income from other sources only but it was mistakenly recorded as tuition income in the integrated receipts & payments account. The assessee had also stated in reply to Q.6 of the sworn statement that the books of account were not maintained for AY 2017-18 and evidences of income from other sources were not properly maintained. On examination of the bank statements, the AO found that cash deposits were made from 01.04.2016 to 31.03.2017 on various dates, most of which were transferred to M/s.Pavai Varam Educational Trust. Thus, the AO was of the opinion that the said amount of Rs.45,37,557/- was nothing but the cash credit to create the source for the investment in M/s.Pavai Varam Educational Trust. As no evidence was produced to substantiate the source of the amount and no supporting

Aggrieved by the order of the AO the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A) the assessee raised various grounds in respect of both substantial additions as well as the protective assessment and filed the return arguments. In respect of legal issue raised by the assessee, the ld.CIT(A) upheld the order of the AO passed u/s.143(3) of the Act, against the claim of the assessee that the order should have been passed u/s.153A of the Act. On perusal of the submission of the assessee, the ld.CIT(A) deleted the protective addition by the AO observing that the assessee had later retracted the admission and declared an amount of Rs.15 crores under PMGKY in the hands of the Trust. Further noted that the AO has already assessed the balance amount of Rs.18.02 crores (Rs.33.02 crores minus Rs.15 crores) as unexplained cash credits u/s 68 of the Act in the hands of the Trust. Further, the addition was restricted in hands of the trust to Rs.16.10 crores and held as under: “7.3.1. This ground is raised by the appellant against the addition of Rs.13,00,00,000/- as unexplained credit u/s.68 r.w.s. 115BBE of the Act on protective basis. On perusal of the assessment order, it is seen that M/s Pavai Varam Educational Trust had recorded fees receipts of Rs.33,02,05,959/- for November 2016, in order to explain the source for the cash deposits made during the demonetization period. During the course of search, the appellant had deposed in his sworn statement dated 27.12.2016 that Rs.23 crores was introduced by the him and his wife, Smt. Mangairkarasi into the fee receipt account to clear bank overdues. Subsequently, the appellant and his wife had filed separate affidavits dated 30.12.2016 declaring the undisclosed income of Rs.13 crores and Rs.10 crores respectively in their individual hands. In sworn statement dated 23.02.2017 also, the appellant had admitted the said amount of Rs.23 crores as unaccounted cash introduced by the appellant and Smt. Mangairkarasi. However, the AO did not consider the said amount of Rs.23 crores as source for the amount of Rs.33.02 crores recorded in the books of the Trust and treated the entire amount as unexplained cash credits u/s.68 of the Act in the hands of the Trust. Simultaneously, the AO had made the protective addition of admitted amount of Rs.13,00,00,000/- in the hands of the appellant. 7.3.2. I have perused the assessment order and the details available on record.

In respect of the substantial additions made, the ld.CIT(A) confirmed the action of the AO holding as under:

Aggrieved by the order of the ld.CIT(A) in dismissing the claim of the asseseee, the assessee filed an appeal before us and raised the following grounds of appeal in ITA No.3813/Chny/2025:

The ld.DR for the revenue assailing the action of the ld.CIT(A), submitted that the ld.CIT(A) has erred in deleting the protective addition made without ensuring that the substantive addition are confirmed. The ld.DR supporting the AO’s order relied on the decision of Hon'ble Madras High Court in the case of Thiru.A.J.Ramesh Kumar v. Dy. CIT (2022) 441 ITR 495 (Mad.) (HC)/(2022) 139 taxmann.com 190 (Mad.), wherein it held that the mere retraction of statement will not make the statement unacceptable & held that “the burden lay on the appellant to show that the admission made by him in the statement earlier at the time of survey was wrong. Such retraction, however, should be supported by a strong evidence stating that the earlier statement was recorded under duress and coercion, and this has to have certain definite evidence to come to the conclusion indicating that there was an element of compulsion for appellant to make such statement”.

The ld.DR contended that the Ld.CIT(A) erred in granting partial relief to the assessee by deleting a portion of the addition made towards unexplained

Further, the ld.DR submitted that the Ld.CIT(A) erred in partly deleting the addition made on account of unexplained deposits without properly appreciating the findings recorded by the AO in the Remand Report. The AO had specifically reiterated that the assessee failed to furnish any credible evidence to substantiate or corroborate the source of the fees allegedly collected and deposited. The Ld.CIT(A) failed to appreciate that the burden of proving the nature and source of the deposits squarely rested upon the assessee, and in the absence of any supporting documentary evidence, the assessee had failed to discharge such onus.

According to ld.DR, the Ld.CIT(A) erred in deleting the addition made on account of unexplained cash credits without recording any specific finding of fact to rebut the conclusions drawn by the AO. The Ld.CIT(A) failed to appreciate that the assessee had not furnished any corroborative evidence or supporting

Per contra the ld.AR submitted that the order passed by the ld.CIT(A) deleting the protective addition of Rs.13,00,00,000/- is well-reasoned, based on undisputed facts available on record, and does not warrant any interference. The Revenue has failed to appreciate that the impugned addition of Rs.13 crores was made merely on a protective basis in the hands of the assessee. The very foundation of a protective assessment is that the income in question is simultaneously subjected to substantive assessment in another hand and the Revenue entertains doubt regarding the person in whose hands such income is ultimately assessable. Once the substantive assessment reaches finality or the income is otherwise brought to tax in a particular hand, the protective assessment cannot survive independently.

According to ld.AR, in the present case, the entire controversy emanates from the cash receipts of fees of Rs.33.02 crores recorded in the books of M/s.Pavai Varam Educational Trust during the demonetization period. The AO himself treated the said receipts as unexplained cash credits u/s.68 of the Act in the hands of the Trust. Thus, the substantive addition was admittedly made in the hands of the Trust and not in the hands of the assessee. The ld.AR further

He also brought to our attention that the ld.CIT(A) has further noted that the assessee subsequently retracted the admission and that an amount of Rs.15 crores was declared under the PMGKY Scheme in the hands of the Trust. Further, the balance amount was also subjected to assessment in the hands of the Trust u/s.68 of the Act. Thus, the Revenue itself has chosen the Trust as the taxable entity in respect of the disputed cash receipts. The ld.AR further submitted that the same income cannot be subjected to taxation repeatedly in different hands once the Revenue has taken a conscious stand regarding the person assessable thereto. The object of a protective assessment is only to safeguard the interests of the Revenue pending determination of the correct person liable to tax. It is not intended to create an additional or parallel tax liability once substantive assessment has been made.

The ld.CIT(A) has also taken note of the appellate order passed in the case of the Trust, wherein the addition was restricted to Rs.16,10,26,067/- after granting credit for genuine fee collections. Thus, even at the appellate stage, the issue relating to the cash receipts stood adjudicated in the hands of the Trust. Consequently, continuation of the protective addition in the hands of the assessee would result in manifest double taxation of the same subject matter, which is impermissible under law. It is further submitted by the ld.AR that no

The ld.CIT(A), after examining the entire factual matrix, correctly concluded that the cash receipts of Rs.33.02 crores had already been subjected to assessment proceedings in the hands of the Trust and, therefore, the protective addition of Rs.13 crores in the hands of the assessee could not be sustained. The findings recorded by the ld.CIT(A) are findings of fact based on the material available on record and have not been shown by the Revenue to be perverse or contrary to law.

Accordingly, the ld.AR prayed that the order of the ld.CIT(A) deleting the protective addition of Rs.13,00,00,000/- be upheld and the grounds raised by the Revenue be dismissed.

On the other hand, the Ld.AR placed reliance on the order of the Ld.CIT(A) and submitted that the issue has been adjudicated in accordance with the provisions of law, warranting no interference by the Tribunal. The Ld.AR contended that the Ld.CIT(A) had duly appreciated the facts and circumstances of the case and rightly deleted the addition made on a protective basis, as there remains no dispute or ambiguity that the impugned transactions pertain to the Trust. It was further submitted that, since the substantive assessment in respect of the same transactions had also been adjudicated by the Ld.CIT(A), the

We have heard the rival submissions, perused the orders of the lower authorities and carefully considered the material available on record along with the paper book filed by the assessee. The sole issue arising for our consideration in the Revenue's appeal is whether the ld.CIT(A) was justified in deleting the protective addition of Rs.13,00,00,000/- made by the AO in the hands of the assessee u/s.68 of the Act.

The undisputed facts emerging from the record are that during the course of search proceedings conducted u/s.132 of the Act, the assessee had initially stated that a sum of Rs.23 crores was introduced by him and his wife into the fee receipt account of M/s.Pavai Varam Educational Trust. Based on such statement, the AO made a protective addition of Rs.13 crores in the hands of the assessee. Simultaneously, the AO treated the entire sum of Rs.33.02 crores recorded as fee receipts in the books of M/s.Pavai Varam Educational Trust as unexplained cash credits u/s.68 of the Act and assessed the same substantively in the hands of the Trust.

The ld.CIT(A), after appreciating the factual matrix in its entirety, deleted the protective addition by observing that the substantive addition in respect of the very same receipts had already been made in the hands of the Trust and, therefore, continuation of the protective addition in the hands of the assessee was not legally sustainable.

At the outset, it is pertinent to note that during the pendency of the present appeal, the appeal filed by the Trust and the revenue on the issue of substantive addition of Rs.33.02 crores made in the hands of M/s.Pavai Varam Educational

We further find considerable force in the reasoning adopted by the ld.CIT(A) that the admission made by the assessee during the course of search was only in the context of explaining the source of cash introduced into the books of the Trust. However, the AO consciously rejected such explanation and chose to assess the entire receipts in the hands of the Trust. Therefore, after having rejected the assessee's explanation and treating the receipts as income of the Trust, the Revenue cannot simultaneously seek to sustain a protective addition in the hands of the assessee in respect of the very same amount.

We are unable to accept the contention advanced by the Revenue that, upon deletion of the substantive addition in the hands of the trust, the same ought to be sustained in the hands of the assessees, namely the trustees, in whose cases protective assessments have been framed. On the facts and

The contention of the Revenue that the assessee had failed to discharge the burden cast upon him u/s.68 of the Act is also devoid of merit in the present case. The substantive addition itself having been deleted by the Tribunal as stated supra in the case of the Trust, the very basis on which the Revenue sought to invoke section 68 in relation to the impugned receipts no longer survives. Once the source transaction itself has been adjudicated upon and deleted in substantive proceedings, there remains no unexplained credit capable of being assessed protectively in another person's hands.

The Revenue has heavily relied upon the decision of the Hon'ble Madras High Court in the case of Thiru A.J.Ramesh Kumar v. Dy.CIT reported in 441 ITR 495 (Mad.) to contend that a mere retraction of a statement does not dilute its evidentiary value. There can be no quarrel with the proposition laid down by the Hon'ble High Court. However, in our view, the said decision is distinguishable on facts. In the present case, the controversy is not required to be adjudicated solely on the validity or otherwise of the retraction. The crucial

Therefore, even assuming that the original statement retains evidentiary value, the same by itself cannot justify continuation of a protective addition in the absence of any surviving substantive assessment or any independent material establishing that the amount represented unexplained income of the assessee in his individual capacity. We may also observe that the Revenue's argument based on the presumptions contained u/s.132(4A) and 292C of the Act does not advance its case. The presumptions under the aforesaid provisions are rebuttable presumptions and operate only to aid the process of assessment. Such presumptions cannot override the final adjudication of the substantive issue by a competent appellate forum. Once the substantive addition relating to the very same receipts has been deleted by the Tribunal in the hands of the Trust, the Revenue cannot continue to rely upon such presumptions to sustain a protective addition in the hands of the assessee.

It is equally well settled that the same income cannot be subjected to taxation repeatedly in different hands unless there exists clear statutory authority. The Hon'ble Supreme Court in the case of ITO v. Ch. Atchaiah reported in 218 ITR 239 (SC) has held that the Department must assess the right person and the right income. Once the Revenue itself had treated the receipts as belonging to the Trust and proceeded accordingly, there was no occasion to sustain a parallel protective addition in the hands of the assessee after the substantive proceedings had attained finality.

On perusal of our findings in the case of trust as stated supra, we have found that “the assessee has completely explained the nature and source of the

In the result, the appeal filed by the Revenue stands dismissed.

In respect of the assessee’s appeal the ld.AR submitted the following arguments on the basis of respective additions and filed a paper book consisting of 57 pages having written submissions, chart for additions made and relief given by ld.CIT(A), copy of letters filed with the investigation wing for admission and rebuttal along with the affidavits, copies of income returns and financials for the year ending 31/03/2015, 31/03/2016 & 31/03/2017.

It is further submitted by the ld.AR that section 68 applies only where any sum is found credited in the books of the assessee and the assessee either offers no explanation about the nature and source thereof or the explanation offered is found unsatisfactory. In the present case, the AO has not identified any specific credit entry in the books which remained unexplained. The addition has been made merely because the assessee could not furnish supporting evidence regarding the precise source of income that had already been voluntarily offered to tax. The ld.CIT(A) has proceeded on the basis that absence of supporting evidence automatically converts a disclosed income into an unexplained cash credit u/s.68 of the Act. Such an approach is contrary to law. At best, the amount could remain assessed as income under the head under which it was offered, but the same cannot be re-characterized as unexplained cash credit without establishing the foundational requirements of section 68.

It is further submitted that there is no finding that the impugned cash deposits represented monies received from any identified creditor, accommodation entry provider, or any other unexplained source. The Revenue has merely drawn an adverse inference on account of lack of supporting evidence. Such inference may justify examination of the nature of income but does not automatically attract section 68 of the Act.

The ld.AR also argued that the assessee has been filing the income tax returns on year on year basis and declared the similar income of ‘Tuition Income’ in his returns filed in the past years as detailed: A.Y. 2015-16 Rs.10,65,969/- A.Y. 2016-17 Rs.38,70,800/- Further, after the assessment of the above said years, the issue reached the tribunal and the Tribunal in its order dated 31.10.2025 has confirmed the claim of the assessee.

The ld.CIT(A) has observed that the assessee did not furnish sufficient evidence to establish nexus between the borrowings and professional receipts. However, no detailed examination of fund flow, utilization of borrowed funds, mixed use of funds, or business exigencies has been undertaken. The disallowance has been confirmed solely on the ground that the assessee could not substantiate the claim to the satisfaction of the authorities. Further the ld.AR submitted that where borrowed funds are utilized in a composite manner for various activities of the assessee, including professional and income-generating activities, a complete disallowance is not warranted. At the highest, a reasonable proportionate disallowance may be considered after proper verification of utilization of funds. Further, the statement recorded during assessment proceedings only indicates that certain loans were utilized towards house property investments. Such statement by itself does not establish that the entire interest expenditure was unrelated to the assessee's professional activities. No independent investigation or verification was carried out by the AO to establish exclusive non-business utilization of all borrowed funds.

The ld.CIT(A) has also observed that the assessee had claimed deduction of Rs.1,50,000/- while computing income from house property. However, the existence of such claim does not automatically justify disallowance of the entire balance interest expenditure unless a clear nexus is established between each borrowing and its utilization. The ld.AR therefore submitted that the authorities below have confirmed the disallowance without carrying out the necessary

In view of the above submissions, the addition of Rs.45,37,557/- u/s.68 r.w.s 115BBE of the Act and the disallowance of interest expenditure of Rs.17,47,241/- may kindly be deleted and the appeal of the assessee may be allowed.

Per contra, the ld.DR for the revenue relied on the order of the authorities and prayed for confirming the same.

We have heard the rival submissions and perused the material available on record. The issue for consideration in assessee’s appeal is whether the amount of Rs.45,37,557/-, which was admittedly disclosed by the assessee in the return of income, could be assessed as unexplained cash credit u/s.68 of the Act.

The undisputed facts reveal that the assessee had disclosed a sum of Rs.45,37,557/- in the return of income filed for the assessment year under consideration. The AO noticed that while the said amount was disclosed as income from other sources in the return of income, it was reflected as tuition income in the receipts and payments account. Since the assessee could not furnish satisfactory supporting evidence regarding the precise nature of the income, the AO treated the same as unexplained cash credit u/s.68 of the Act and subjected it to tax u/s.115BBE of the Act. The ld.CIT(A) confirmed the action of the AO.

We further find that the AO has not brought on record any material to establish that the impugned amount represented an unexplained credit received from any creditor or represented any accommodation entry or undisclosed source. The entire addition is founded on the premise that the assessee could not produce supporting evidence regarding the nature of income. Such deficiency may justify examination of the appropriate head of income but cannot by itself justify invocation of section 68 of the Act.

A significant aspect that cannot be overlooked is that the amount in question already forms part of the income voluntarily disclosed by the assessee in the return of income. It is an undisputed fact that the assessee has consistently disclosed similar receipts as tuition income in the preceding assessment years. The material available on record demonstrates that income of an identical nature was offered to tax in Assessment Years 2015-16 and 2016-17. We further note the submission of the ld.AR that, while adjudicating the assessee's appeals for the earlier assessment years, the Tribunal had accepted the assessee's treatment of similar receipts under the relevant head

We therefore hold that the authorities below were not justified in treating the disclosed income of Rs.45,37,557/- as unexplained cash credit u/s.68 of the Act. Accordingly, the addition of Rs.45,37,557/- made u/s.68 of the Act is directed to be deleted. Since we have deleted the addition itself, the question of applying the provisions of section 115BBE of the Act to the said amount becomes merely academic and does not require separate adjudication.

Coming to the next issue raised in appeal, we have carefully considered the rival contentions on the issue disallowance of Interest Expenditure of Rs.17,47,241/-. The AO disallowed the interest expenditure claimed by the assessee on the ground that the loans in respect of which interest was paid had no nexus with the professional income earned by the assessee.

The records reveal that the assessee claimed interest expenditure comprising SBI Mortgage Loan Interest of Rs.4,75,227/-, Jewel Loan Interest of Rs.1,12,500/- and Tata Capital Loan Interest of Rs.11,59,516/-. During the course of examination u/s.131 of the Act, the assessee himself admitted that the

The burden of proving the allowability of expenditure claimed under the Act squarely rests upon the assessee. When a claim for deduction is made, the assessee is required to establish not only the factum of expenditure but also its nexus with the income-earning activity. In the present case, except making general submissions, no material has been placed before us to rebut the factual findings recorded by the AO and affirmed by the ld.CIT(A).

The contention of the ld.AR that the matter may be restored for fresh verification is also not acceptable. The assessee had adequate opportunity before both the lower authorities to substantiate the claim. Even before us, no additional evidence or fund-flow statement has been produced to establish that the loans were utilized for professional purposes. Therefore, no useful purpose would be served by restoring the matter to the file of the AO.

Having regard to the categorical admission made by the assessee regarding utilization of the loans for investment in house property and the absence of any evidence establishing nexus with professional income, we find

In the result, the assessee's appeal is partly allowed.

The brief facts of the case emanating from the records are that the assessee, Smt.K.Mangaiarkarasi, is one of the trustees of M/s.Pavai Varam Educational Trust, which is running various educational institutions. A search u/s.132 of the Act was conducted on 27.12.2016 in the case of the assessee and M/s.Pavai Varam Educational Trust. During the course of search, it was found that a sum of Rs.33,02,05,959/- was recorded as fees receipts for November 2016 in M/s.Pavai Varam Educational Trust, whereas the fee collection for the other months was comparatively very low. When questioned, Shri V.Natarajan, the Chairman of the Trust, in his sworn statement dated 27.12.2016, explained that Rs.23 crores was introduced by him and his wife, Smt.Mangairkarasi (both are trustees of M/s.Pavai Varam Educational Trust) into the fee receipt account to clear bank overdues. Further, in sworn statement dated 23.02.2017, Shri V.Natarajan had admitted the said amount of Rs.23 crores as unaccounted cash introduced by him and the assessee Smt.Mangairkarasi. Meanwhile, the assessee and his wife had filed separate affidavits dated 30.12.2016 declaring the undisclosed income of Rs.13 crores and Rs.10 crores respectively in their individual hands. Subsequently, Shri V.Natarajan filed retraction letter on 30.03.2017 and 12.04.2017 before the Director of Income Tax (Inv.), Chennai and the Joint Director of Income Tax (Inv.), Coimbatore respectively, stating that the amount of Rs.23 crores was

The assessee filed her original return of income for the A.Y.2017-18 on 19.03.2018. The case of the assessee was selected for scrutiny and notices u/s.143(2) of the Act was issued to the assessee. During the course of assessment proceedings, the AO considered the amount of Rs.33.02 crores of fees recorded in the books of M/s.Pavai Varam Educational Trust as unexplained cash credits u/s.68 of the Act in the hands of the Trust. Further, in order to protect the interest of revenue, the amount of Rs.10 crores, initially admitted by the assessee in her individual hands, was added protectively in the hands of the assessee as unexplained credit u/s.68 of the Act.

The AO had also noticed from the return of income for the A.Y.2017-18 that the assessee had shown interest expenditure of Rs.8,42,946/-. The assessee had claimed expenses in the name of SBI Mortgage Loan Interest of Rs.6,35,235/- and corporation bank Mortgage loan Interest of Rs.2,07,711/-. The assessee has deposed in his sworn statement dated 07.12.2018 that the SBI Mortgage Loan and corporation bank Mortgage loan was obtained for the purpose of investment in the house property and the interest claimed in respect of the amount of Rs.2,07,711/- may be considered for the deduction and the balance amount of Rs.6,35,235/- was agreed for disallowance. The AO verified the contention of the assessee in respect of interest expenses of Rs.2,07,711/- and the same was found to be maintainable. Accordingly, the AO disallowed the interest expenditure amounting to Rs.6,35,235/- as per provisions of section 37 of the Act.

Further, the AO notice from the return of income filed that the assessee had disclosed Rs.11,81,284/- as “income from other sources”. Further, an

The assessee had furnished before the AO that an amount of Rs.29,27,800/- was the tuition fees. When called upon to explain the discrepancy and produce evidence, the assessee failed to file any explanation for the same. In the sworn statement dated 07.12.2018, while answering to question No.9, the assessee admitted that Rs.29,27,800/- was income from other sources only but it was mistakenly recorded as tuition income in the integrated receipts & payments account. The assessee had also stated in reply to Q.3 of the sworn statement that the books of account were not maintained for AY 2017-18 and evidences of income from other sources were not properly maintained. On examination of the bank statements, the AO found that cash deposits were made from 01.04.2016 to 31.03.2017 on various dates, most of which were transferred to M/s Pavai Varam Educational Trust. Thus, the AO was of the opinion that the said amount of Rs.29,27,800/- was nothing but the cash credit to create the source for the investment in M/s.Pavai Varam Educational Trust. As no evidence was produced to substantiate the source of the amount and no supporting documents were found during the search, the sum of Rs.29,27,800/- was treated as unexplained credit u/s.68 of the Act and the AO concluded the assessment u/s.143(3) of the Act dated 29.12.2018 by making the following additions: - Income from business or profession Rs. 6,35,235/- - Unexplained cash credit u/s.68 Rs. 29,27,800/- - Income assessed u/s.68 (protective asst.) Rs.10,00,00,000/- 65. Aggrieved by the order of the AO the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A) the assessee raised various grounds in respect of both substantial additions as well as the protective assessment and

In respect of the additions made by the AO as disallowance of interest under the head business income and an unexplained cash credit u/s.68 of the Act, the ld.CIT(A) has confirmed the additions holding as under: “7.4.1. This ground relates to the addition of Rs.29,27,800/- u/s 68 r.w.s. 115BBE of the Act. During the course of assessment proceedings, the AO found that the appellant had offered an amount of Rs.29,27,800/- as income from other sources as arising out of tuition income. In this regard, the AO had asked the appellant to furnish the details/evidence for the said income offered in her return of income. In response, the appellant did not furnish any evidence for the claim that she had earned such income from the tuition activities. Therefore, the AO had summoned the appellant u/s 131 of the Act and recorded a sworn statement on 07.12.2018. In the sworn statement recorded, the appellant had stated that the said amount was in fact in the nature of income from other sources whereas, it was mistakenly recorded as tuition income in the integrated receipts and payments accounts. The appellant was also provided with one more opportunity by the AO to furnish any evidence related to the earning of income from other sources of Rs.29,27,800/-. However, the appellant could not produce any evidence with respect to the said amount offered as income from other sources. Further, the AO had also examined the bank account statement of the appellant and found that the appellant had deposited cash in her bank account from 01.04.2016 to 31.03.2017 and transferred most of the amount to M/s Pavai Varam Educational Trust. Therefore, the AO was of the opinion that the appellant could not explain the nature and source of the cash credited into her bank account of Rs.29,27,800/- as offered under the head 'Income from Other Sources' is nothing but unexplained cash credit of the appellant and taxed u/s 68 r.w.s. 115BBE of the Act. 7.4.2. During the course of appeal proceedings, the appellant's AR had appeared and filed the written submission dated 09.10.2025 filed during the hearing held on 10.10.2025. Prior to that, there was another written submission filed by the appellant dated 'nil' with regard to the pending appeal in her case (both are already reproduced above). On perusal of the submissions made by the appellant and her AR, it is noted that the appellant did not make any specific submission with regard

Aggrieved by the order of the ld.CIT(A) in dismissing the claim of the asseseee, the assessee filed an appeal before us and raised the following grounds of appeal in ITA No.3812/Chny/2025: 1. On the facts and circumstances of the case the order of first appellate authority dated 25.11.2025 is opposed to the facts of the case and is not legally not maintainable. 2. On the facts and circumstances of the case, the lower authorities are not justified in invoking the provisions of section 115BBE of the Act for the A.Y.2017-18 when the above section came into operation from 01.04.2017 and it is not applicable for the above A.Y. In this connection following case laws are relied upon, a. Decision of Hon'ble Madras High Court in the case of S.M.I.L.E Microfinance Limited Vs. ACIT in W.P NO. 2078 of 2020 and 1742 of 2020 by order dated 19.11.2024. b.Decision of ITAT Delhi Bench in the case of DCIT, Circle 19(1), Delhi Vs. Rai Bhadur Narainsingh Sugar Mills Limited in ITA No.3027/DEL/2024 reported in 213 ITD 222. c.Decision of ITAT Chennai Bench in the case of Comal Ramachandran Gayathri Vs. DCIT, Non-Corporate Circle 10(1), Chennai in ITA No: 1268/CHNY/2025. d.Decision of Hon'ble Apex Court in the case of Karimtharuvi Tea Estate Limited Vs. State of Kerala reported in 60 ITR 262 (SC) wherein it has been held that any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force.

Similarly, aggrieved by the deletion of the protective additions by the ld.CIT(A), the Revenue preferred an appeal before us, by raising the following grounds of appeal in ITA No.744/Chny/2026:

The facts, issues and grounds of appeal raised by the revenue in the present appeal is identical to the facts, issues and grounds of appeal raised in ITA No.735/Chny/2026 (supra). The adjudication given by us in the said appeal in para Nos. 21 to 35 (supra) is mutatis mutandis applicable to this case also. Therefore, we are of the considered opinion that the protective addition of Rs.10,00,00,000/- made in the hands of the assessee has lost its very substratum. The deletion of the substantive addition of Rs.33.02 crores in the case of M/s.Pavai Varam Educational Trust completely fortifies the conclusion arrived at by the ld.CIT(A). We find no perversity, factual infirmity or legal error in the order of the ld.CIT(A) warranting our interference. Accordingly, we uphold the order of the ld.CIT(A) deleting the protective addition of Rs.10,00,00,000/- and dismiss all the corresponding grounds raised by the Revenue.

In the result, the appeal filed by the Revenue stands dismissed.

In respect of the assessee’s appeal the ld.AR submitted the following arguments on the basis of respective additions and filed a paper book consisting of 58 pages having written submissions, chart for additions made and relief given by ld.CIT(A), copy of letters filed with the investigation wing for admission

It is further submitted by the ld.AR that section 68 applies only where any sum is found credited in the books of the assessee and the assessee either offers no explanation about the nature and source thereof or the explanation offered is found unsatisfactory. In the present case, the AO has not identified any specific credit entry in the books which remained unexplained. The addition has been made merely because the assessee could not furnish supporting evidence regarding the precise source of income that had already been voluntarily offered to tax. The ld.CIT(A) has proceeded on the basis that absence of supporting evidence automatically converts a disclosed income into an unexplained cash credit u/s.68 of the Act. Such an approach is contrary to law. At best, the amount could remain assessed as income under the head under which it was offered, but the same cannot be re-characterized as

It is further submitted that there is no finding that the impugned cash deposits represented monies received from any identified creditor, accommodation entry provider, or any other unexplained source. The Revenue has merely drawn an adverse inference on account of lack of supporting evidence. Such inference may justify examination of the nature of income but does not automatically attract section 68 of the Act.

Without prejudice, the assessee submits that once the amount has already been included in the returned income and offered to tax, the provisions of section 68 of the Act should not be invoked merely to subject the same income to a harsher rate of taxation u/s.115BBE of the Act. The substance of the transaction and the voluntary disclosure made by the assessee ought to be considered in a fair and reasonable manner. Accordingly, the addition of Rs.29,27,800/- u/s.68 r.w.s 115BBE of the Act deserves to be deleted. b) Disallowance of Interest Expenditure of Rs.6,35,235/- : 76. The ld.AR submitted that the AO and the ld.CIT(A) erred in disallowing the interest expenditure of Rs.6,35,235/- without properly appreciating the facts of the case and the manner in which the assessee's affairs were conducted. The authorities below have proceeded primarily on the basis of certain answers recorded during the course of the statement u/s.131 of the Act. However, it is settled law that additions and disallowances cannot be sustained merely on the basis of isolated statements without examining the surrounding facts and documentary evidence.

The ld.AR submitted that the authorities below have confirmed the disallowance without carrying out the necessary factual examination required under the Act. In the interest of justice, the matter may either be restored to the file of the AO for fresh verification or appropriate relief may be granted after considering the actual utilization of the borrowed funds.

In view of the above submissions, the addition of Rs.29,27,800/- u/s.68 r.w.s 115BBE of the Act and the disallowance of interest expenditure of Rs.6,35,235/- may kindly be deleted and the appeal of the assessee may be allowed.

We have heard the rival submissions and perused the material available on record. The issue for consideration in assessee’s appeal is whether the amount of Rs.29,27,800/-, which was admittedly disclosed by the assessee in the return of income, could be assessed as unexplained cash credit u/s.68 of the Act.

The facts, issues and grounds of appeal raised by the assessee in the present appeal is identical to the facts, issues and grounds of appeal raised in ITA No.3813/Chny/2026 (supra). The adjudication given by us in the said appeal in para Nos. 48 to 53 (supra) is mutatis mutandis applicable to this case also. Therefore, we are of the considered opinion that the addition of Rs.29,27,800/- made u/s.68 of the Act is not sustainable under the law, as the same has already been offered as income under the head ‘Income from other sources’ Accordingly, we delete the addition made u/s.68 of the Act and direct the AO to accept the income shown under the head income from other sources by allowing the corresponding grounds raised by the assessee. Since we have deleted the addition itself, the question of applying the provisions of section 115BBE of the Act to the said amount becomes merely academic and does not require separate adjudication.

The next issue relates to the disallowance of interest expenditure amounting to Rs.6,35,235/-. The assessee claimed the aforesaid interest expenditure as deductible expenditure. However, during the course of assessment proceedings and in the statement recorded u/s.131 of the Act, it emerged that the borrowed funds were utilized towards acquisition and investment in house property. The assessee was specifically required to

Before us also, apart from general submissions regarding mixed utilization of funds and absence of detailed verification, no material has been placed to establish the direct nexus between the borrowings and professional receipts. The burden to prove the allowability of expenditure rests upon the assessee. In the absence of supporting evidence showing business or professional utilization of the borrowed funds, the claim cannot be allowed merely on presumptions.

We further find that the statement recorded during assessment proceedings indicates utilization of borrowed funds towards house property investments. The assessee has not produced any fund-flow statement, bank- wise utilization details or other corroborative evidence to rebut the findings recorded by the AO. Therefore, the authorities below were justified in concluding that the interest expenditure was not incurred for the purposes of the assessee's profession.

Considering the entirety of facts and circumstances, we do not find any infirmity in the order of the ld.CIT(A) sustaining the disallowance of interest expenditure amounting to Rs.6,35,235/-. Accordingly, the disallowance is upheld and this ground of appeal is dismissed.