DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, HUBBALLI. vs. SHRIYA PROPERTIES, HUBBALLI

PER KESHAV DUBEY, JUDICIAL MEMBER:

These cross appeals by the revenue and assessee are directed against the order of the ld. CIT(A)-2, Panaji, Goa dated 22/07/2024 vide DIN: ITBA/APL/M/250/2024-25/1066891788(1) for the AY 2015-16 and against the common order of the ld. CIT(A)-2, Panaji,

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 2 of 36 Goa dated 25/07/2024 vide DIN- ITBA/APL/M/250/2024- 25/1067030734(1) for the AY 2017-18, vide DIN- ITBA/APL/M/250/2024-25/1067030599(1) for the AY 2018-19 & vide DIN- ITBA/APL/M/250/2024-25/1067030886(1) for the AY 2019-20 as tabulated below passed under section 250 of the Income Tax Act, 1961( in short “The Act”). Since common issues are involved in all these appeals, these are clubbed together, heard together and disposed of by this common order for the sake of convenience & brevity.

Appeals against Orders of Assess- CIT(A)-2, DIN & Sl.No. ITA No. Assessee Revenue PAN ment Panaji-2 Order No. No. year passed u/s 250 of the I.T. Act, 1961 (Dated) 1. 2033/Bang/ Shriya DCIT ACEFS 2015-16 22.7.2024 ITBA/APL/M/250/2024- 2024 Properties, Central 9497D 25/1066891788(1) Hubballi Circle Hubballi 2. 2034/Bang/ Shriya DCIT ACEFS 2019-20 25.7.2024 ITBA/APL/M/250/2024- 2024 Properties, Central 9497D 25/1067030886(1) Hubballi Circle Hubballi 3. 2084/Bang/ Shriya DCIT ACEFS 2017-18 25.7.2024 ITBA/APL/M/250/2024- 2024 Properties, Central 9497D 25/1067030734(1) Hubballi Circle Hubballi 4. 2085/Bang/ Shriya DCIT ACEFS 2018-19 25.7.2024 ITBA/APL/M/250/2024- 2024 Properties, Central 9497D 25/1067030599(1) Hubballi Circle Hubballi 2C. 2086/Bang/ Shriya DCIT ACEFS 2019-20 25.7.2024 ITBA/APL/M/250/2024- 2024 Properties, Central 9497D 25/1067030886(1) Hubballi Circle Hubballi

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 3 of 36

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 4 of 36 ASSESSMENT YEAR 2015-16

3.1 The assessee firm filed its original return of income for the AY 2015-16 on 18/12/2015 declaring total income of Rs.15,15,580/-. The said return of income was processed & accordingly intimation u/s 143(1) of the Act was passed by accepting the returned income. It is worthwhile here to note that no regular assessment u/s. 143(3)/144/147 of the Act was carried out in the case of the assessee for the assessment year 2015-16.

3.2 A search and seizure action u/s.132 of the Actwas initiated in the case of the assessee on 16/08/2018. As search action u/s. 132 of the Act was initiated in the case of the assessee, the provisions of section 153A of the Act are applicable in the case of the assessee and therefore, notice u/s. 153A of the Act was issued & served to the assessee on 28/08/2020 requiring the assessee to furnish its return of income within 35 days from the date of service of the said notice. In response to the said notice u/s. 153A of the Act, the assessee furnished a return of income 21/09/2020 declaring the same total income of Rs.15,15,580/- as declared in its original return of income. Accordingly, the notices u/s 143(2) as well as u/s. 142(1) of the Act was issued to the assessee on 16/10/2020 requiring the assessee to furnish the details. Further, the notices u/s. 142(1) of the Act/ show cause notices were also issued on 25/01/2021 and 15/06/2021 calling for the details and requiring the assessee to explain as to why certain issues should not be held against the assessee. In response to the said notices, the AR of the assessee appeared & furnished the required details. The AO after affording full opportunity to the assessee concluded the assessment proceedings & made the following additions-

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 5 of 36 Sl. Nature of addition Amount of Material relied upon by No addition the AO for making the (Rs.) addition 1 Disallowance of partner’s 90,000 Partnership deed submitted remuneration u/s.40(b) of during the course of the Act as Salary assessment proceedings. increased only w.e.f 22/08/2014 vide revised deed.So, difference of (1040000 -950000) added. Para 6.2 of Page 4 of the Assessment Order

2 Estimated disallowance of 7,00,817 Audited Balance Sheet 20% of Sundry Creditors amounting to Rs. 35,04, 086/- in the absence of confirmation letters Para 7.2 on Page 5 of the Assessment Order

3 Negative cash balance 13,28,999 Cash Book from Books of added u/s.69C r.w.s Account furnished during 115BBE of the Act as exp. the course of assessment incurred are without any proceedings source

Para 8.1 on Page 6 of the Assessment Order

4 Disallowance u/s.40a(ia) 9,22,215 Audited Balance Sheet of the Act as the explanation is not supported by any documentary evidences, So 30% of 30,74,050/- disallowed. Para 9.2 on Page 7 of the Assessment Order

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 6 of 36 Sl. Nature of addition Amount of Material relied upon by No addition the AO for making the (Rs.) addition 5 Service tax payable 1,00,000 Audited Balance Sheet disallowed u/s.43B of the Act as the payments were made after due date which was 31.10.2015.

Para 10.2 on Page 8 of the Assessment Order

6 Disallowance of 2,16,116 Books of Account proportionate interest furnished during the @12% on the loans& course of assessment Advances given to Shri proceedings Nitin Tumkur (18,00,963* 12%) u/s.36 of the Act Para 11.1 on Page 9 of the Assessment Order

7 Unreconciled difference in 2,81,256 Books of Account the balance of Sri Suraj furnished during the Alawandi as a sundry course of assessment creditor [14,04,016- 11,22, proceedings 760]

Para 12.1 on Page 10 of the Assessment Order

8 Alleged on-money receipt 1,22,40,000 Primarily on the basis of from the buyers. retracted sworn statement of Shri Suraj Alawandi, Para 13.1 to 13.26 on Managing Partner of the Pages 11 to 35 of the assessee firm. Assessment Order.

9 Understatement of closing 59,55,102 Audited Profit & Los stock under Shriya Account Statement Mansion Project & Shriya Paradise even assuming

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 7 of 36 Sl. Nature of addition Amount of Material relied upon by No addition the AO for making the (Rs.) addition no profit [ 40,18,392 + 19, 36,710 ]

Para 14.1 on Page 36 of the Assessment Order

10 Disallowance of 4,26,274 Audited Balance Sheet depreciation in the absence of documentary evidences for purchase of fixed assets.

Para 15.1 on Page 37 of the Assessment Order 2,22,60,780

Thus, the AO completed the assessment proceedings u/s 143(3) r.w.s. 153A of the Act vide Order dated 17/08/2021 on a total assessed income of Rs. 2,37,76,359/-.

No incriminating material relevant to the assessment year (i) under consideration found during the course of the search.

(ii) There was no reference to seized material pertaining to AY 2015-16.

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 8 of 36

The addition towards on-money receipts were made on the (iii) basis of few cash receipts found pertaining to the AY’s 2017-18 to 2019-20.

(iv) The contention of the assessee was accepted as no addition can be made in the case of completed/unabated assessment in the absence of incriminating material found during the course of search – In support, the ld. CIT(A) relied upon the judgment of the Hon’ble Supreme Court in the case of PCIT v. Abhisar Buildwell (P) Ltd. [2023] 149 Taxmann.com 399 (SC).

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 9 of 36 course of search u/s 132 of the Act for the AY 2015-16. Further, the ld. AR also relied upon the judgement of PCIT v. Abhisar Buildwell (P) Ltd (supra) and submitted that the assessee firm had filed its return of income originally on 18.12.2015 and the time limit to issue notice u/s.143(2) of the Act against the said return was expired on 30.09.2016. The Return of Income was duly processed u/s.143(1) of the Act. The Search took place on 16.08.2018. Thus, as on the date of search, no assessments were pending in the case of the assessee for the AY 2015-16 and accordingly, the impugned assessment year falls under the category of completed/unabated assessment. Lastly, the ld. AR submitted that the AO had made an addition of Rs.1,22,40,000/- towards estimated on-money receipts pertaining to projects Shriya Mansion and Shriya Enclave. It is submitted that none of the materials as referred to by the AO in the assessment order either relating to the impugned assessment year or to the projects Shriya Mansion and Shirya Enclave. Thus, there is no incriminating material for the impugned assessment year evidencing the receipt of on-money for the projects against which estimated addition had been made by the AO. The AR submitted that in the absence of incriminating material evidencing receipt of on-money for the impugned assessment year, addition of Rs.1,22,40,000/- made by the AO is devoid of merits and liable to the deleted which the Ld. CIT(A) had righty deleted.

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 10 of 36 any seized material unearthed during the course of search u/s 132 of the Act and the addition is not supported by any material other than statement recorded u/s 132(4)of the Act that too which was later on retracted by the assessee alleging that the declaration of Rs.7,15,50,000/- for the AY 2014-15 to AY 2019-20 was forcibly taken by the search team without any incriminating material by means of coercive, threats & pressure. On going through the order of the assessment, we take note of the fact that almost all additions except alleged on-money were made by the AO for the AY 2015-16 based on the books of accounts, Audited financial statements & the details/documents furnished during the course of the assessment proceedings which has nothing to do with the incriminating material. Thus, the only addition of alleged ‘on-money’ is claimed by the AO to be based on the incriminating material unearth during the course of search & seizure. The claim of the AO is that during the course of the search & seizure operations u/s 132 of the Act, incriminating evidences regarding unaccounted receipt of ‘on- money’ by both the assessee firm as well as by Shri Suraj Alawandi were found & seized at the business premises of the assessee firm on 16/08/2018. The claim of the assessee as well as the contention of the ld. CIT(A) are that there was neither any incriminating material relevant to AY 2015-16 were found during the course of search nor there was even any reference to seized material pertaining to AY 2015-16 in the assessment order also. On going through the order of assessment passed by the AO, we observed that the addition towards ‘on-money’ receipts was primarily made on the basis of retracted sworn statement of Shri Suraj Alawandi, Managing Partner of the assessee firm which was recorded on the basis of the following materials found during the course of the search:

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 11 of 36 • WhatsApp conversation relating to receipt of cash of Rs. 2,00,000/- from Shri Soma Shekhar on 09.10.2017 (AY 2018-19).

• WhatsApp conversation relating to receipt of cash in May and June, 2018 (AY 2019-20).

• Cash receipt of Rs.3,00,000/- dated 17.12.2016 (AY 2017-18).

• Cash receipt of Rs.4,00,000/- dated 25.06.2018 (AY 2019-20).

• Loose sheets page numbering 111 to 119 marked as A- 1/SP/03 relating to projects Shriya Elite and Shriya Solitaire (Not relating to AY 2015-16).

• Statement of Smt. Priyabharati Shivakumar Betageri relating to cash payment of Rs.4,00,000/- on 25.06.2018 in respect of project Shriya Elite (AY 2019- 20).

9.1 The AO has made an addition of Rs.1,22,40,000/- for the AY 2015-16 towards the estimated on-money receipts pertaining to projects Shriya Mansion and Shriya Enclave. Thus, as can been seen above none of the materials as referred to by the AO in the assessment order either relating to the impugned assessment year or to the projects Shriya Mansion and Shirya Enclave. Thus, we are of the considered opinion that there was no incriminating material for the impugned assessment year evidencing the receipt of ‘on- money’ for the projects against which estimated addition has been made by the AO for AY 2015-16. The AO had relied upon only the

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 12 of 36 sworn statements of Sales executive & another employee including of Shri Suraj Alawandi, Managing Partner of the assessee firm. However, these statements were not corroborated with any evidence for the impugned assessment year. There was not even a whisper of seizure of the excess cash during the course of search. The onus to prove that the assessee had received on-money is on the department. However, in the assessment order there is no discussion of excess cash as compared to cash in hand as per the books of account was found. If excess cash had been found during the course of search, the statements, whatsApp message become relevant. Before us, the ld. DR heavily relied upon the whatsApp messages, however we find that none of the messages are related to the AY 2015-16. Thus, in the absence of any incriminating material evidencing receipt of on-money for the impugned assessment year 2015-16, the addition of Rs.1,22,40,000/- as made by the AO is devoid of merits. The addition made on the basis of the uncorroborated sworn statements is not sustainable and are liable to be deleted. The facts in the case of B. Kishore Kumar vs. DCIT, Chennai (supra) as heavily relied upon by the Revenue is quite distinguishable with the facts of the present case as the assessee himself retracted by alleging that the declaration of Rs.7,15,50,000/- for the AY 2014-15 to AY 2019-20 was forcibly taken by the search team without any incriminating material by means of coercive, threats & pressure.

9.2 Now coming to question whether the assessment year under consideration is completed/unabated assessment? We take note of the fact that the assessee firm filed its original return of income for the AY 2015-16 on 18/12/2015 declaring total income of Rs.15,15,580/-. The said return of income was processed & accordingly intimation u/s 143(1) of the Act was passed by accepting the returned income. We also take a note of the fact that

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 13 of 36 no regular assessment u/s. 143(3)/144/147 of the Act was carried out in the case of the assessee for the assessment year 2015-16. The notice u/s.143(2) of the Act for the AY 2015-16 was barred by limitation on 30.09.2016. It is also an undisputed fact that a search and seizure action u/s.132 of the Act was initiated in the case of the assessee only on 16/08/2018. The relevant facts as discussed above are presented through the tabular form for ease of reference & convenience-

S. No Particulars Date / Details 1 Date of Search 16.08.2018 2 Return of Income filed originally on 18.12.2015 3 Time limit to issue notice u/s.143(2) 30.09.2016 expired on 4 On going assessments on the date of No the search 5 Status of the assessment of the Unabated / impugned assessment year on the completed date of the search assessment

9.3 At this stage, it is appropriate to analyze the scope of section 153A of the Act. The scope of provisions of section 153A of the Act could be summarized as follows as per the order of the Mumbai Special Bench in the case of All Cargo Global Logistics Ltd. Vs. Deputy Commissioner of Income-tax (23 taxmann.com 103):- Scenario Scope of Section 153A 1. No return of income is filed by Since no return has been filed, the assessee (whether or not the entire income shall be time limit to file return of income regarded as undisclosed income. has expired. Consequently, AO would have the authority/jurisdiction to assess the entire income, similar to jurisdiction in regular assessment u/s 143(3). No requirement to restrict to documents found during the course of search.

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 14 of 36 2. Return of Income just filed by Since return filed is even the assessee – return yet to be pending to be processed, the processed u/s 143(1) – Time return would be treated as limit for issue of notice u/s pending before the AO. 143(2) not expired. Consequently, AO would have authority/jurisdiction to assessee the entire income, similar to jurisdiction in regular assessment u/s 143(3). 3. Return of Income filed by the Since intimation is not akin to assessee – return processed and assessment and time limit for intimation issued u/s 143(1) – notice u/s 143(2) has not Time limit for issue of notice u/s expired, even though return has 143(2) not expired. been processed, it will be case where return has not attained finality.

Consequently, AO would have authority/jurisdiction to assess the entire income, similar to jurisdiction in regular assessment u/s 143(3). 4. Return of income filed by the Return of income of the assessee assessee. Intimation passed or shall be treated as having being not u/s 143(1) and time limit for accepted and attained finality. issue of notice u/s 143(2) has AO loses jurisdiction to verify the expired. return of income.

Since, no assessment would be pending there would be no abatement of any proceedings.

Accordingly, the scope of assessment u/s 153A would be restricted to incriminating material found during the course of search.

Accordingly the scope of assessment under section 153A would cover the pending return filed as well and would not be

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 15 of 36 restricted to incriminating material found during the course of search. 6. Assessment u/s 143(3) Since regular assessment completed. proceedings have been completed & are not pending, there would be no abatement of proceedings.

AO loses jurisdiction to review the completed assessment. Accordingly, the scope of assessment u/s 153A would be restricted to incriminating material found during the course of search. 7. Proceedings u/s 147 pending Pending where: assessment/reassessment (a) Assessment originally proceedings u/s 147 would completed u/s 143(3) abate and would OR converge/merge in proceedings (b) No assessment earlier u/s 153A. completed u/s 143(3) Accordingly, the powers of the AO, in both the cases, shall extent to: (a) Assess income that would validly be assessed in the pending proceedings u/s 147, and

9.4 In the light of above, it is to be noted that the assessment year under consideration falls under category (4) in the above chart. Thus, it is appropriate to observe the facts of present case. As seen from the assessment order, the alleged seized materials found during the course of search do not reflect any undisclosed income made by ld. AO for the AY 2015-16 and it is solely based on the statement recorded u/s 132(4) of the Act which was later on retracted. In the case of assessment u/s 153A of the Act, the completed assessment can be tinkered only if there is incriminating material found during the course of search. Therefore, as in the AY 2015-16, there was no incriminating material suggesting the

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 16 of 36 additions made by ld. AO. Though the AO is justified in issuing notice u/s 153A of the Act consequent to search action u/s 132 of the Act on 16/08/2018, however to make an addition in case of completed assessment year, there should be a positive seized material/incriminating material found during the course of search action. We observed that almost all additions except alleged on- money were made by the AO for the AY 2015-16 based on the books of accounts, Audited financial statements & the details/documents furnished during the course of the assessment proceedings which has nothing to do with the incriminating material. In the absence of such seized material/incriminating material, the AO is precluded from making any additions as rightly held by the ld. CIT(A). Thus, we have no hesitation but to uphold the order of the ld. CIT(A).

ASSESSMENT YEAR 2019-20

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 17 of 36

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 18 of 36

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 19 of 36 13.1 First we take the Revenue’s appeal in ITA No. 2034/Bang/ 2024 for the AY 2019 – 20 for adjudication.

1 Disallowance of 6,00,000 Appellant could not partner’s remuneration produce any counter u/s.40(b) of the Act evidence or cogent argument [Para 12, P.32] [Para 6.1 on Pages 3,4 of the Assessment Order]

2 Estimated disallowance 22,88,227 Addition deleted and the (20%) of Sundry same has been contested Creditors by Department. [Para 7.2 on Page 5 of the Assessment Order]

3 Disallowance of excess 3,10,648 Appellant could not interest u/s.40(b) produce any counter

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 20 of 36 S. Nature of addition Amount CIT(A) adjudication No of [reference in CIT(A) addition order] (Rs.) [Para 8.1 on Page 6 of evidence or cogent the Assessment Order] argument [Para 12, P32]

4 Disallowance 29,921 Appellant could not u/s.40A(3) of the Act produce any counter [Para 9 on Page 6,7 of evidence or cogent the Assessment Order] argument [Para 12, P32]

5 Unsecured loans – 40,61,000 Appellant could not addition u/s.68 produce any counter [Para 10.1 on Page 7,8 evidence or cogent of the Assessment argument [Para 12, P32] Order]

6 Addition on account of 58,83,000 Rs.4,00,000/- based on alleged on-money whatsapp chat confirmed receipts and the balance is [Para 11.26 on Page 32 deleted. The issue is of the Assessment agitated by both Order] Department and the assessee [Paras 9 and 10, Pgs. 27- 30]

7 Disallowance 1.06,200 Appellant could not u/s.40(a)(ia) produce any counter evidence or cogent argument [Para 12, P32]

[Para 12 on Page 32 of the Assessment Order]

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 21 of 36 S. Nature of addition Amount CIT(A) adjudication No of [reference in CIT(A) addition order] (Rs.)

8 Addition u/s.69C- 1,46,160 Appellant could not stamp duty and produce any counter registration charges evidence or cogent [Para 13.1 on Page 33 argument [Para 12, P32] of assessment order]

9 Capital introduction by 55,99,970 Managing partner, partners – u/s.68 Mr.Suraj Alwandi’s [Para 14.2 on Page 34 contribution amounting to of assessment order] Rs.22,99,970/ deleted, balance was confirmed [Para 13, P.33]

10 Inter-account 88,18,148 Addition deleted by discrepancy CIT(A), contested by [Para 15.1 on Page 37 Department of assessment] [Para 14.2, P.35]

15.1 Ground no. 2 as raised by the Revenue relates to the deletion of alleged on-money received by the assessee firm. Before us, the ld. DR contended that the addition of on-money amounting to Rs. 54,83,000/- was made based on the seized material and statement of Shri Suraj Alawandi recorded u/s. 132(4) of the Act and therefore ld. CIT (A) grossly errored in deleting the addition made on account of on-money received.

15.2 The ld. AR on the other hand vehemently submitted that the allegation of said unaccounted receipts is mainly based on

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 22 of 36 whatsApp messages. Further ld. AR submitted that the opportunity to cross examine the witnesses testifying alleged receipt of unaccounted cash against Sriya Group was also not afforded as per the evidence procedure. It was also submitted that the declaration from Mr. Suraj Alawandi was not voluntary but was allegedly by force and the same was retracted on 28.08.2018 by Sri Suraj Alawandi. The ld. AR submitted that no substantial evidence such as excessive cash or any incriminating documents found as a result of search. Lastly, it was submitted that neither any sale instances for estimating the said per square foot rate was given by the AO for corroborating witness evidences to estimate as such nor any enquiry in association with valuation officer was made as per the guidelines for valuation of immovable property.

15.3 We have heard the rival submission and perused the material available on record. The genesis of the addition is primarily the sworn statement given by the Managing Partner, Mr. Suraj Alawandi wherein, he had admitted to the fact that on-money had been received with respect to the real estate projects undertaken by the assessee firm. The assessee firm had undertaken 7 projects for the construction of flats at Hubli, namely, Shriya Enclave, Shriya Paradise, Shriya Mansion, Shriya Samrudhi, Shriya Sankalp, Shriya Sannidhi and Shriya Solitaire. These projects were undertaken between assessment years 2013-14 and 2019-20. The Sales executive, Mr. Ramakrishna Kammannavar and employee, Shri Manjayya S. Hiremath of the assessee firm were interrogated and their statements were recorded on 16.08.2018. They admitted that the difference between the circle rate and the contracted rate was accepted in cash. Based on the above admission, the Managing Partner, Mr. Suraj Alawandi also deposed that cash was accepted in the nature of on-money and the same was not reflected in the books of account.

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 23 of 36 15.3.1 The ld. CIT(A) however observed that the only instance where the evidence for on-money receipt was that the transaction with Mr. Naveen Kumar involved unaccounted cash of Rs. 4,00,000/- in respect of a flat in the project ‘Shriya Solitaire’ based on a WhatsApp message dated 16.06.2018. Based on the depositions of Mr. Suraj Alawandi and others, the AO concluded that the assessee was regularly receiving on-money in cash which was not accounted in their regular books of account. Therefore, based on the sworn statement of Mr. Suraj Alawandi, the estimated rate of on-money was reckoned and accordingly based on the project area, the total amount of on-money for all the projects was estimated at Rs.5,64,30,000/-. Based on the total area sold during the year under consideration, i.e., 11,766 sq. ft. pertaining to the project ‘Shriya Solitaire’, the on-money for the impugned year was estimated at Rs. 58,83,000/- [11766 sq. ft * Rs. 500 per sq. ft].

15.3.2 We are of the considered opinion that the entire edifice of the addition on account of on-money is the sworn statement by the Managing Partner and the details given by him. There is no evidence brought on record to suggest that the sum as estimated was actually received with respect to the said projects. Therefore, the statements relied upon were not corroborated or backed by any documents. In such a scenario, it is not justifiable to make such a addition based on pure estimation alone. In our opinion such an addition would have no legs to stand on and was rightly deleted by the ld. CIT(A). Further, as rightly noted by the ld. CIT(A) that even after Mr. Suraj Alawandi had retracted his statement; no effort was made by the AO to ascertain the actual on-money that was received. The AO went on to extrapolate on the basis that unaccounted cash has been received with respect to all sale transactions and did not restrict the addition to that which was inferred from the seized material i.e., receipt and the WhatsApp

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 24 of 36 communication. Therefore, a solitary instance of receipt of alleged on-money cannot be the basis for inferring that the same would be received at the same rate in all cases of sale of flats.

15.3.3 Further, as rightly pointed by the ld. CIT(A) that the addition was primarily based on estimation of income which can be done only in a case where the books of account have been rejected in terms of Section 145(3) of the Act. However, the books of account have not been rejected and hence an addition of this nature based on estimation is not justified. We are of the considered opinion that the addition cannot be made on the basis of sworn statements and estimation. Further, the entire addition is only based on extrapolation of data obtained from the WhatsApp chats and based on the probability that on-money is received in the impugned projects. The actual receipt of on-money in these projects has not been corroborated or established by any means. Further, as rightly contended by the AR of the assessee an opportunity to cross examine the witness testifying the alleged receipt of unaccounted cash was also not afforded to the assessee firm. In view of the above, we find no infirmity in sustaining the addition only to the extent of Rs. 4,00,000/- by the ld. CIT(A) and accordingly, this ground of the revenue is dismissed.

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 25 of 36 16.1 The ld. AR of the assessee vehemently submitted that the assessee had furnished the books of account, ledger copies and bank account statements of the assessee firm as well as Mr. Suraj Alawandi during the course of assessment proceedings. The ld. CIT(A) also noted that the net difference in the accounts, on verification was only Rs.39,683/- which could be rectified by passing relevant entries and accordingly, prayed that the deletion of Rs. 88,18,148/- may be sustained.

16.2 We have heard the rival submissions and perused the materials available on record. It was submitted by the AR of the assessee that the difference in account balances were subjected to the reconciliation. The assessee had furnished the books of account, ledger copies and bank account statements of the assessee firm as well as Mr. Suraj Alawandi during the course of assessment proceedings. The ld. CIT(A) had noted that the net difference in the accounts, on verification was only Rs.39,683/- which could be rectified by passing relevant entries. The ld. CIT(A) also noted that this discrepancy could only be considered as errors to be rectified and as such, will not have any revenue impact. We are in complete agreement with the observations as noted by ld. CIT(A) in deleting the addition of Rs. 88,18,148/- and accordingly, we upheld the order of ld. CIT(A) and dismiss this ground of Revenue.

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 26 of 36 the fact that the addition of Rs. 22,88,227/- was made on account of unproved sundry creditors u/s. 41(1) of the Act.

17.1 Before us the ld. AR of the assessee submitted that the balances appearing in the books were cumulative figures and pertained to several assessment years. The AR of the assessee submitted that the assessee had filed confirmation letters in respect of few creditors during the course of assessment proceedings. Since all confirmation letters were not filed, the AO disallowed 20% of the closing balance of Rs. 1,14,41,137/- i.e., Rs. 22,88,227/- by treating this as unproved creditors. Further, the AR of the assessee also submitted that the AO made a random enquiry regarding the genuineness of the creditors and that no effort was made to identify specific cases where the explanation of the credits was not satisfactory.

17.2 We have heard the rival submission and perused the materials available on record. During the course of assessment proceeding, the AO had asked the assessee to file the confirmation letters of all the parties shown as sundry creditors. The assessee furnished confirmation letters from 8 of these creditors and stated that most of them were running accounts for purchases. The AO had found discrepancies in the balance shown in respect of four creditors for which the assessee stated that these differences were subjected to reconciliation as these were running accounts. It is contended by the AR of the assessee that no inquiries were conducted by the AO and AO had also not pointed out specific discrepancies. Further, AR of the assessee submitted that most of these creditors were either repaid in subsequent years or offered to tax the outstanding credits as extinguishment of liability u/s. 41(1) of the Act. We are of the considered opinion that the estimated addition @ 20% of the outstanding creditors is highly unjustifiable

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 27 of 36 especially when some of the confirmation letters were not filed by the Assessee. We also agree with the contention of the ld. CIT(A) that the AO had not made any independent verification nor considered the argument of the assessee that these were running accounts and required reconciliation. Thus, the action of the ld. CIT(A) in deleting the said addition is justified and the same is being upheld. In the result, this ground of the Revenue is also dismissed.

18.1 Before us, the ld. AR of the assessee submitted that during the year under consideration, two partners, namely Mr. Suraj Alawandi and Mr. Satish Davalgi had introduced Rs. 22,99,970/- and Rs. 33,00,000/- respectively in the assessee firm. Since the credits were not satisfactorily explained, the AO made an addition of Rs.55,99,970/- u/s.68 of the Act. Further the ld. AR submitted that, the assessee had furnished a copy of the bank account statement where the credits were reflected along with ledger but the AO was not satisfied due to absence of confirmation letters and accordingly prayed to delete the entire addition.

18.2 We have heard the rival submission and perused the materials available on record. During the year under consideration, two partners, namely Mr. Suraj Alawandi and Mr. Satish Davalgi had introduced Rs. 22,99,970/- and Rs. 33,00,000/- respectively in

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 28 of 36 the assessee firm. Since the credits were not satisfactorily explained, the AO made an addition of Rs.55,99,970/- u/s.68 of the Act. The assessee had produced the copy of Bank statement along with ledger account copy however, in the absence of confirmation letter, along with documentary evidences, the AO had treated the same as unexplained cash credit and added u/s 68 of the Act. We are of the considered opinion that during the course of assessment proceeding, the assessee had submitted the ledger along with the books of accounts. Further, the assessee had also submitted the bank statements where the credits were reflected. Further, since search was conducted in the case of Mr. Suraj Alawandi also, the AO was aware of his existence and the return and books of account were available with the AO for verification. In view of the above, we are of the considered opinion that the addition on this count is not justified merely because confirmation letters could not be furnished. Accordingly, we upheld the order of the ld. CIT(A) in deleting the addition of Rs. 22,99,970/- to the extent of the capital introduced by Mr. Suraj Alawandi, the managing partner. In the result, this ground of the Revenue is also dismissed.

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 29 of 36 furnish all the relevant details before the AO in order to explain the source of funds of Mr. Satish Davalgi to introduce capital in the assessee firm.

21.1 The ld. CIT(A) has stated that the details relating to Satish Davalgi were not available with the AO and assessee was required to file details requested by the AO and hence confirmed the said addition.

21.2 Before us, it was submitted by the AR of the assessee that Mr. Satish Davalgi is also an assessee and is filing his returns regularly although he was not covered by the search. Further, the ld. AR submitted that due to paucity of time and lack of coordination between the partners during the relevant time, the confirmation also could not be furnished during the stage of first appeal proceedings. This being so, in the interest of justice and equity and as requested by the ld. AR of the assessee, we deem it fit and proper to remit this issue to the file of AO to decide afresh in accordance with law. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. In the result, this ground of appeal of the assessee is partly allowed for statistical purposes.

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 30 of 36 law. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. In the result, this ground of appeal of the assessee is partly allowed for statistical purposes.

ASSESSMENT YEAR 2017 – 18

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 31 of 36 143(3) r.w.s 153A of the Act vide order dated 17.08.2021 assessing the total income of the assessee firm at Rs.1,50,66,841/- as detailed below:

S. Nature of addition Amount CIT(A) adjudication No of [reference in CIT(A) addition order] (Rs.)

1 Unexplained credit 24,00,000 Appellant could not [Para 7.1 of the produce any counter Assessment Order] evidence or cogent argument.

2 Estimated 7,13,617 Addition deleted and the disallowance (20%) of same has been Sundry Creditors contested by [Para 6.2 of the Department for AY 2019 Assessment Order] – 20.

3 Disallowance of excess 2,14,030 Appellant could not interest u/s.40(b) produce any counter [Para 10.1 of the evidence or cogent Assessment Order] argument.

4 Disallowance 10,90,662 Appellant could not u/s.40(a)(ia) of the Act produce any counter [Para 9.3 of the evidence or cogent Assessment Order] argument.

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 32 of 36 S. Nature of addition Amount CIT(A) adjudication No of [reference in CIT(A) addition order] (Rs.)

5 Addition on account of 95,80,000 Addition deleted and the alleged on-money same has been receipts contested by [Para 11.26of the Department for AY 2019 Assessment Order] – 20.

25.1 With regard to Ground No. 2 & 5 of the table above related to Estimated disallowance (20%) of Sundry Creditors and Addition on account of alleged on-money receipts respectively, the findings and ratio as decided for AY 2019 – 20 shall mutatis mutandis apply to the present appeal also as the evidences relied upon and the arguments put forth by the assessee are exactly similar to that of AY 2019 – 20. In the result, these two grounds of the assessee are allowed.

25.2 Further with regard to Ground Nos. 1, 3, 4 & 6 of the table as above, the ld. AR of the assessee vehemently submitted before us that the details relating to the above grounds could not be collated due to paucity of time. This being so, in the interest of justice and equity and as requested by the ld. AR of the assessee, we deem it fit and proper to remit these issue to the file of AO to decide afresh in

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 33 of 36 accordance with law. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. In the result, these grounds of appeal of the assessee are partly allowed for statistical purposes.

ASSESSMENT YEAR 2018 – 19

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 34 of 36

28.1 We on the similar findings for AY 2019 – 20 also uphold the decision of ld. CIT(A) and direct the AO to delete the estimated

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 35 of 36 addition of Rs. 62,86,400/- and treat only Rs. 3,00,000/- as additional income in the hands of the Assessee.

28.2 Further, with regard to other grounds, total amounting to Rs. 57,67,278/-, the ld. CIT (A) for want of any counter evidence produced by the assessee or cogent arguments made to claim any relief sustained the additions and accordingly dismissed all other grounds. Before us, the ld. AR of the assessee vehemently submitted that the details relating to the above grounds could not be collated due to paucity of time. This being so, in the interest of justice and equity and as requested by the ld. AR of the assessee, we deem it fit and proper to remit these issue to the file of AO to decide afresh in accordance with law. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. In the result, these grounds of appeal of the assessee are partly allowed for statistical purposes.

Order pronounced in the open court on 25th May, 2026

Sd/- Sd/- (Prashant Maharishi) (Keshav Dubey) Vice President Judicial Member

Bangalore, Dated: 25th May,2026. VG/SPS

ITA Nos.2033, 2034, 2084, 2085 & 2086/Bang/2024 Shriya Properties, Hubballi Page 36 of 36

Copy to:

By order

Asst. Registrar, ITAT, Bangalore.