INCOME TAX OFFICER, WARD-1, DINDIGUL, DINDIGUL vs. SUBRAMANIAN PALANISAMY, DINDIGUL

PER SS VISWANETHRA RAVI, J.M :

This appeal by the Revenue and cross appeal filed by the

assessee are against the order dated 26.03.2025 passed by the Learned

Commissioner of Income Tax [herein after “CIT(A)”], National Faceless

Appeal Centre(NFAC), Delhi, for the assessment year 2021-22.

:-2-: ITA No. 2080 /Chny/2025 & CO No. 94/Chny/2025 2. We find that this appeal was filed with a delay of 58 days. The

Revenue filed an affidavit explaining the reasons to condone the said

delay. On perusal of the same and upon hearing both the parties, we

find the reasons stated by the Revenue are bonafide which really

prevented the Revenue in filing the appeal in time. Thus, delay of 58

days condoned.

income declaring a total income of Rs.25,79,550/- and agricultural

income of Rs.4,97,050/-. On noticing large cash deposits and

purchase/sale of properties, the AO under scrutiny issued notices u/s.

143(2) and 142(1) of the Income-tax Act, 1961 (hereinafter “the Act”).

The assessee filed reply dated 18.11.2022 in respect of proposed

addition on account of cash deposits, purchase of property and

disallowance of standard deduction. Considering the reply, the AO held

that the assessee failed to prove the source of cash deposits, investment

and receipts on salary and proceeded to make three additions and added

the same to the total income of the assessee while determining total

income at Rs.3,48,61,050/- as against returned income at Rs.25,79,550/-

vide its order dated 17.12.2022 passed u/s. 143(3) r.w.s. 144B of the Act.

The assessee not satisfied with the order of the AO challenged the same

before the ld.CIT(A) along with additional evidences. The ld.CIT(A)

sought remand report and considering the remand and submissions of

:-3-: ITA No. 2080 /Chny/2025 & CO No. 94/Chny/2025 the assessee, the ld.CIT(A) deleted the additions made by the AO. As

aggrieved by the order of the ld.CIT(A), the Revenue is before us.

on account of cash deposits.

deleting the addition on unexplained cash deposits treating as

unexplained money u/s. 69A of the Act, despite the fact that the company

in which the assessee is a director was also holding the separate account

in its name and amounts deposited in the assessee- individual account

was claimed without any corroborative evidence. Further, he submits

that the ld.CIT(A) failed to appreciate the fact that the cash deposits

claimed to be pertaining to the company is not reflected in the books of

accounts of the company. He vehemently argued that the ld.CIT(A)

failed to appreciate the fact that the audit report of the company reveals

that it had transactions with the assessee only to the extent of

Rs.6,00,000/- and not amounts deposited in the bank account of the

assessee. Further, he argued that the ld.CIT(A) failed to appreciate the

fact that the account no. 5020003130342 in the name of the assessee in

which cash deposits were made, is not found recorded in the books of

accounts of the assessee company. The ld.DR further referred to page

no. 12 of the impugned order and submits that the AO did not examine

:-4-: ITA No. 2080 /Chny/2025 & CO No. 94/Chny/2025 the bank account of the assessee and the AO has power to examine the

account of the company in the present proceedings. He submits that the

assessee did not submit account of the company to the AO intentionally.

He argued that the issue requires re-examination and may be remanded

to the file of the AO for a fresh verification in respect of the company’s

account and prayed to allow grounds raised by the Revenue.

furnished every detail to the AO in the original proceedings as well as

remand proceedings relating to source of cash deposit. The ld.AR drew

our attention to the page no. 3 of the assessment order and submits that

the assessee is a director in M/s. Maniiway City Developers Pvt Ltd,

which is engaged in purchase, development and sale of real estate

properties. For seamless operation of day-to-day activities of the said

company, the assessee has been authorised to transact on behalf of the

said company. The cash deposits as found by the AO in the current

account of assessee are relating to construction charges of the said

company which was deposited in assessee’s account on behalf of the

assessee. Further, he argued that all the income received by the

assessee on behalf of the company and all the money expended by the

assessee on behalf of the company are regularly booked and reconciled

by the said company. Further, he submits income of any nature received

by the assessee on behalf of the company is promptly disclosed as

:-5-: ITA No. 2080 /Chny/2025 & CO No. 94/Chny/2025 income in the books of accounts of the company and various amounts

received by cash remitted to assessee’s current account by various

parties towards construction charges and amenities which are duly

accounted. The ld.AR submits that the assessee furnished every detail

related to source of cash deposits even then the AO observed no

satisfactory explanation proving and establishing the source of cash

deposits, is not justified. Further, he drew our attention to the page no.

14 of the ld.CIT(A) and argued that the same submissions as made by

the AO were reiterated before the ld.CIT(A) and considering the material

evidence at page no. 189, 295, 302 & 303 supporting the claim of the

assessee, the ld.CIT(A) deleted the addition. He prayed to dismiss

ground nos. 2 to 5 of the Revenue.

We find as contended by the ld.AR that the assessee furnished every

detail before the AO in the assessment proceedings vide his reply dated

18.11.2022, which is reproduced by the AO in his order at page no.3. On

perusal of the same, we note that the assessee held the overdraft

account sanctioned in his individual capacity for business purposes,

since the facility of such nature is not available in the name of company

which is engaged in real estate business such as private builders,

developers of land etc. Further, the assessee referred to master circular

issued by the RBI barring private builders and effect on all scheduled

:-6-: ITA No. 2080 /Chny/2025 & CO No. 94/Chny/2025 banks which the overdraft facility was sanctioned in assessee’s name to

facilitate business transactions of the company in which the assessee is

a director. We find that the statement of overdraft account is placed at

page no. 115 to 138 of paper book, vol-II. Further, the ledger account of

Nachipalayam Triupur in the books of company is placed at page no. 139

of paper book, vol-II showing purchase made from the assessee vide

document no. 1545 dated 01.03.2021 for a consideration of

Rs.52,52,000/-. We find the said registered document is placed at page

no. 140 to 145 of paper book, vol-II. Further, we find the details of cash

deposits relating to 14 parties at page no. 189 of paper book, vol-II

showing cash deposits into assessee’s account as against the total value

of properties. The details of cash deposits are provided in page no. 295

and 302 & 303 of paper book, vol-II. On perusal of the registered

documents at page no. 295, we note that the purchaser therein remitted

cash deposit into assessee’s account which is also reflecting in the

ledger account of such purchaser in page no. 303 of paper book, vol-II,

which clearly demonstrates that the contention of the assessee that

various amounts deposited in cash into assessee’s current account by

various parties is towards the construction charges and amenities which

were inturn booked and reconciled by the said company. Further, it

supports the contention of the assessee that income of any nature

received by him on behalf of the company is disclosed as income in the

books of accounts of the company. Further, we find the receipt of

:-7-: ITA No. 2080 /Chny/2025 & CO No. 94/Chny/2025 cash from various parties, the party account is credited and the current

account of the director is debited again the party account is debited and

the sales account is credited giving effect to the entire transactions which

is reflecting from the ledger copies of each party who deposited amounts

in the account of the assessee. Therefore, we hold the amounts

recorded as sales in the books of company were received by the

assessee in his account and the same has been duly recorded as debit

to the assessee’s current account maintained in the books of the

company. Therefore, the addition made by the AO rightly deleted by the

ld.CIT(A) and is justified. Thus, ground no. 2 to 5 raised by the Revenue

fails and dismissed.

addition by the ld.CIT(A) on account of purchase of three properties in

the facts and circumstances of the case.

system, the AO asked the assessee to provide details such as

description of properties, mode of payments made to purchase of

properties along with copy of bank statement reflecting the said debit

entries and source of funds for investment with reference to properties

involving consideration of Rs.75,00,000/- and Rs.20,50,000/- under the

jurisdiction of Dharampuram and another property of Rs.52,52,000/-

:-8-: ITA No. 2080 /Chny/2025 & CO No. 94/Chny/2025 under Thottipalayam. The assessee furnished his reply vide submissions

dated 18.11.2022, which is reflected in page no. 5 of the assessment

order. On perusal of the same, it was specifically explained that the said

contract for purchase of said properties executed by him on behalf of M/s.

Maniiway City Developers Pvt Ltd by utilising the income earned by it

which is rooted through assessee’s own HDFC bank account. Further, it

was explained that the said transactions are properly recorded and

reconciled in the books of accounts of the said company on the dates of

documents. A specific reason was given for execution of said contracts

on assessee’s individual capacity that the company M/s. Maniiway City

Developers Pvt Ltd is not in a position to obtain credit facility from banks

and the HDFC bank came forward to extend the credit facility on

assessee’s personal capacity only. Accordingly, the assessee opened

the current account in his name and the said current facility is utilised

only to run the affairs of the said company. In support of the said

contention, the assessee furnished copies of ledger and copies of

registered documents were also furnished. The AO was of the opinion

that the assessee did not sign as a director in the said document and no

corroborative evidence filed in proof of source of investment. Further, the

AO also observed that there was no signature on the copies of ledgers.

We find the same set of arguments were reiterated before the ld.CIT(A)

which are reproduced in page no. 14 & 15 of the impugned order. On

perusal of the same, it is noted that M/s. Maniiway City Developers Pvt

:-9-: ITA No. 2080 /Chny/2025 & CO No. 94/Chny/2025 Ltd is closely held private limited company. Since, the said company is in

the business of real estate mainly dealing with farmers who were not

competent with the type of transactions and the said company authorised

the assessee who is director to transact in their own name during

exigency, supporting resolution copy duly signed by the director was

furnished. It was argued that the said resolution itself is a valid proof that

the director can purchase the property in his name on behalf of the

company and as such the actual entries were recorded in the books of

accounts of the company. There is no dispute with regard to entries on

purchase of properties under consideration are duly not accounted in the

books of the company which has been demonstrated along with

necessary documentary evidences before the AO as well as the ld.CIT(A).

page no. 139 and 148 of the paper book, wherein the ledger account of

said properties were recorded in the books of accounts of M/s. Maniiway

City Developers Pvt Ltd. On perusal of the page no. 139 of the paper

book, which is a ledger account for Dharampuram property, wherein a

journal entry was passed debiting of Rs.52,52,000/- to the account of

assessee on 04.03.2021 same “being purchased made from

Subramaniyan 432 A/c for Nachipalayam (Tirupur Veerpandi Doc No.

1545/01.03.2021”, which clearly shows the details of purchase of

property on 01.03.2021 were entered in the books of accounts on

:-10-: ITA No. 2080 /Chny/2025 & CO No. 94/Chny/2025 04.03.2021. Further, on perusal of ledger account at page no. 148 of the

paper book which clearly shows that the two properties in Pollachi road

on 26.02.2021 for consideration of Rs.1,20,50,000/- and Rs.50,00,000/-

on account of “being purchase made from Subramaniayan 432 A/c for

Pollachi road vide document 2080/26.02.2021 and 2079/26.02.2021

respectively”. Further, an advance of Rs.25,00,000/- was adjusted

debiting to the account of assessee vide journal entry on 26.02.2021

itself. Therefore, we find force in the arguments of ld.AR that the said

properties were purchased by the assessee in his own capacity, but for

M/s. Maniiway City Developers Pvt Ltd, which were recorded in the books

of accounts of the assessee supporting resolution passed by the said

company. Therefore, we find no infirmity in the order of the ld.CIT(A)

deleting the addition made in the hands of the Revenue by recording his

reasons vide para no. 6.1 of the impugned order. Thus, ground no. 6 to 8

raised by the Revenue are dismissed.

giving benefit of standard deduction on account of salary. The AO asked

the assessee to furnish appointment letter, Form-16, copy of bank

statement reflecting receipt of monthly salary. The assessee filed his

submission vide reply dated 18.11.2022, annexing the copy of account

for showing credit of salary vide Annexure-II. The AO found the same as

not acceptable and the said document is neither signed by the company

:-11-: ITA No. 2080 /Chny/2025 & CO No. 94/Chny/2025 nor does it has the authorised stamp. Accordingly, the AO denied the

standard deduction of Rs.50,000/- . Before the ld.CIT(A), the assessee

filed Form 26A under rule 31ACB issued by M/s. Maniiway City

Developers Pvt Ltd stating remuneration of Rs.20,40,000/- to the account

of assessee without deduction of the tax. Further, an Annexure-A was

also annexed to the said letter showing the payee furnished return of

income relevant to the directors remuneration (Salary) accounted and

payment of tax thereon. Therefore, we find no infirmity in the order of the

ld.CIT(A) considering the Form 26A and Annexure-A in granting standard

deduction of Rs.50,000/- to the assessee. Thus, ground no. 9 raised by

the Revenue dismissed.

CO No: 94/Chny/2025:

The assessee filed an affidavit explaining the reasons to condone the

said delay. On perusal of the same and upon hearing both the parties,

we find the reasons stated by the assessee are bonafide which really

prevented the assessee in filing the cross objection in time. Thus, delay

of 39 days condoned.

the impugned order passed by the ld.CIT(A). Since, we have taken a

decision upholding the order of the ld.CIT(A) in Revenue’s appeal,

:-12-: ITA No. 2080 /Chny/2025 & CO No. 94/Chny/2025 therefore, grounds raised in cross objection becomes academic requiring no adjudication. Thus, cross objection filed by the assessee is

dismissed.

by the assessee are dismissed. 02nd June, 2026 at Chennai. Order pronounced on

Sd/- Sd/- (एस एस. आर आर. रघुनाथा रघुनाथा) (यस यसयस यसिव�ने� िव�ने�रिव रिव) एस एस आर आर रघुनाथा रघुनाथा यस यस यस यस िव�ने� िव�ने� रिव रिव (S. R. RAGHUNATHA) (SS VISWANETHRA RAVI) लेखा लेखासद�यकेसम� लेखा लेखा सद�यकेसम� सद�यकेसम�/Accountant Member सद�यकेसम� �याियक �याियकसद�य �याियक �याियक सद�य सद�य/ Judicial Member सद�य 02nd June, 2026. Chennai, Dated: JPV

Copy to: 1. Appellant 2. Respondent/Cross Objector 3. CIT - Chennai/Coimbatore/Madurai/Salem. 4. DR 5. GF

PRASANNA Digitally signed by PRASANNA VANI JETTY VANI JETTY Date: 2026.06.09 12:51:00 +05'30'