ITO, CHENNAI vs. KAIPATHUR VENKATAKRISNAN, CHENNAI

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ITA 520/CHNY/2026Status: DisposedITAT Chennai02 June 202610 pages

In favour of the Revenue: the Revenue's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO had no jurisdiction to make the addition of Rs. 5 crore during the 'giving effect' proceedings. The First Appellate Authority (FAA) was justified in deleting this addition as the AO exceeded his authority by raising a fresh issue beyond the scope of the ITAT's directions.

What were the facts?

The Assessing Officer (AO) made an addition of Rs. 5 crore to the assessee's income as 'Income from Other Sources' while giving effect to a previous ITAT order. This addition was made despite the ITAT having previously dismissed the Revenue's appeal on the grounds that no property transfer occurred, thus no capital gains arose.

What were the issues?

Whether the AO has the jurisdiction to make a fresh addition during the process of giving effect to an ITAT order, and if the deletion of such an addition by the CIT(A) was justified.

Which sections of the Income-tax Act were involved?

Section 250,Section 143(3),Section 147,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE KAND SHRI INTURI RAMA RAO

Hearing: 01.06.2026Pronounced: 02.06.2026

Heard together (2 matters)

C.O. No.13/CHNY/2026
I.T.A.No.520/CHNY/2026

Read from the judgment's own cause title. This page is filed under one of them.

आदेश /O R D E R

PER GEORGE GEORGE K, VICE PRESIDENT:

This appeal filed by the Revenue and the cross objection filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated

- 2 - ITA No.520/CHNY/2026 & CO No.13/CHNY/2026 Kaipathur Venkatakrishnan 09.10.2025, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2008-09.

2.

The appeal filed by the Department is delayed by 30 days. The AO has filed an affidavit stating therein the reasons for belated filing of this appeal. On perusal of the reasons stated in the condonation petition, we are of the view that there is sufficient cause for late filing of this appeal and no latches can be attributed to the Department. Hence, we condone the delay in filing this appeal and proceed to dispose off the appeal on merits.

3.

We shall first adjudicate the appeal filed by the Revenue. The solitary issue raised by the Revenue is whether the First Appellate Authority (FAA) is justified in deleting the addition of Rs.5,00,00,000/- The AO had made addition of Rs.5,00,00,000/- while giving effect to the consolidated order of the Tribunal dated 04.09.2024 in ITA No.1458/CHNY/2018 & ITA No.1537/CHNY/2018. The relevant narration of facts and the reasoning of the AO in making the addition of Rs.5,00,00,000/- reads as follows:- 1. The assessee, an individual, had filed the return of income for AY 2008-09 on 31.07.2008 admitting a total income of Rs.1,07,640/-. The case was reopened

- 3 - ITA No.520/CHNY/2026 & CO No.13/CHNY/2026 Kaipathur Venkatakrishnan u/s 148 and the assessment u/s 143(3) r.w.s 147 was completed on 18.03.2014 making addition of Rs.74,09,91,105/- under the head LTCG. The total income was assessed at Rs.74,10,98.744/- raising a demand of Rs.28,88,01,808/-.

2.

During the course of assessment proceedings it was seen that the assessee had sold immovable property along with his father and had failed to admit the gains thereon. The assessee admitted to have received a sum of Rs.5 crore as his share (50%) in the sale consideration. Since the assessee was not a joint owner and his name was included only as abundant caution, protective assessment was made in assessee's hands on 18.03.2014 assessing income at Rs.74,10,98,744/-.

3.

Since the substantive assessment made in the hands of the assessee's father was upheld, the CIT(A) in his order in ITA No.72/CIT(A)-12/2014-15 dated 16.02.2018 deleted the above addition made. The order giving effect to the CIT(A) order was passed on 28.03.2018 and income was revised to Rs. 1,07,640/-.

4.

Against the CIT(A) order, Department filed appeal before the ITAT. The Tribunal upheld the C'IT(A) order in its order in ITA No.1537/CHNY/2018 dated 13.02.2019. Since the assessee's father appeal was pending before the ITAT on the same issue, Department filed miscellaneous petition before the ITAT which was accepted.

5.

The ITAT in its combined order in ITA NO.1458/Chny/2018 (Ass) & ITA No.1537/Chny/2018 (Rev) dated 04.09.2024 has dismissed the Department's appeal. In this case the the Hon'ble Supreme Court vide order dated 04.05.2022 in Civil Appeal Nos.2752 &2753 of 2022 upheld the order of Hon'ble Madras High Court in WP No.33462 of 2014 cancelling the sale deed No.2179 of 2007 dated 05.07.2007 registered under SRO, Alandur ITAT held that since there was no transfer of property the consequential Long Term Capital Gains does not arise and dismissed the appeal filed.

6.

However the ITAT has not denied that the assessee received a sum of Rs.5 crore as his share in the sale consideration in the impugned transaction. Since the transfer has been held void abinitio, the sum of Rs.5 crore is treated as 'Income under the head Other Sources' and brought to tax. Accordingly, the order giving effect to the ITAT is passed and the income is revised as under:

- 4 - ITA No.520/CHNY/2026 & CO No.13/CHNY/2026 Kaipathur Venkatakrishnan Assessed Income s per assessment order u/s 74,10,98,744 143(3) of the I.T Act 1961 on 18.03.2014 Less: Relief granted by the order of ITAT on 74,09,91,105 04.09.2024 Add: Income from ‘Other Sources’ 5,00,00,000 Total Assessed Income as per order of ITAT 5,01,07,640 u/s 254 on 04.09.2024 Tax payable on total income (incl. 1,49,81,292 surcharge and cess) Add: Surcharge 14,98,129 Add: EC 4,94,383 Net Tax Liability 1,69,73,804 Add: Interest u/s.234B 1,22,21,136 Gross Demand 2,91,94,940 Less: Regular Payment Tax Credit 27.04.2015 85,490 Less: Regular Payment Tax Credit 21.05.2015 9,130 Less: Regular Payment Tax Credit 16.12.2015 25,220 Less: Regular Payment Tax Credit 13.11.2017 17,690 Demand Payable 2,90,57,410

4.

Aggrieved, assessee filed appeal before the First Appellate Authority (FAA). The FAA deleted the addition of Rs.5,00,00,000/- by observing as under:- “6.2 The facts of the case are clear from the detailed submission of the appellant. In brief, the issue is that the matter of appeal travelled up to the Hon’ble ITAT. The Hon’ble ITAT dismissed the appeal of the department. Earlier the Ld. CIT (appeal) had deleted the addition made to the income of the appellant. While giving effect to the order of the Hon’ble ITAT, the Ld. AO reduced the relief which had been allowed earlier by the Ld. CIT(A). However he proceeded to make an addition of Rs. 5 crores by stating that the Hon’ble ITAT had not denied that the appellant received the sum of Rs. 5 crores. Although it is an order giving effect to appeal order of the Hon’ble ITAT, it has been passed in a manner as if it is an assessment order. The basic appeal is against this addition. It has been claimed that the Ld. AO had no jurisdiction for making this addition. Such addition can be made only in order u/s 143(3) or 147 only. It has therefore been requested to delete the

- 5 - ITA No.520/CHNY/2026 & CO No.13/CHNY/2026 Kaipathur Venkatakrishnan addition. I have gone through the entire matrix of the facts. From the order of the Hon’ble ITAT there is no word that they had intended to make the addition of Rs. 5 crores. This addition had neither been made by the AO in the original assessment nor by the Ld. CIT(A) in the appeal order. The Hon’ble ITAT has not stated anything regarding the same in its order. Therefore the AO has no occasion or jurisdiction to raise this issue afresh while giving appeal effect. In the appeal effect order the AO is supposed to just execute the directions of the Hon’ble ITAT. He has no authority to go beyond that. By resorting to make such an addition he has clearly gone beyond his authority for which there is no justification. As such the same is liable to be deleted and the appellant deserves relief from the same. The appeal of the appellant is therefore allowed and this addition is directed to be deleted.”

5.

Aggrieved by the above order of FAA, the Revenue has filed the present appeal before the Tribunal raising the following grounds:- The order of the Ld.CIT(A) is contrary to the facts and circumstances of the case. 2. The Ld. CIT(A) erred in law and on facts in holding that the Assessing Officer had no occasion or jurisdiction to make the addition of Rs. 5 Crores as "Income from Other Sources" in the order giving effect to the Hon'ble ITAT's order u/s 254 dated 17.10.2024. 3. The Ld. CIT(A) failed to appreciate that the core issue in the proceedings was the taxation of gains arising from the transfer of immovable property, including the receipt of sale consideration by the assessee. 4. The Ld. CIT(A) failed to appreciate that the Hon'ble ITAT's order did not deny the assessee's receipt of Rs.5 Crores as his 50% share in the sale consideration, nor did it mention any refund of such amount to the buyer despite the cancellation of the sale deed by the Hon'ble Supreme Court vide order dated 04.05.2022 and thus the AO was well within jurisdiction to tax the retained amount as income from other sources. 5. The Ld. CIT(A) erred in law and on facts in observing that the addition of Rs.5 Crores was neither made in the original assessment order nor in the CIT(A)'s earlier order, which is factually incorrect as the reopening u/s 148 was precisely on the basis of the assessee's failure to disclose the transfer and

- 6 - ITA No.520/CHNY/2026 & CO No.13/CHNY/2026 Kaipathur Venkatakrishnan receipt of consideration and this 5 Crores was part sale consideration admitted by the assessee. 6. The Ld. CIT(A) failed to appreciate that the ITAT's dismissal of the department's appeal was solely on the ground of no 'transfer' post SC cancellation, but the undisputed receipt and retention of Rs. 5 Crores by the assessee renders it taxable as income from other sources, especially when no evidence of refund was placed on record. 7. The Ld. CIT(A) erred in law and on facts in holding that the Hon'ble ITAT did not intend to make the addition of Rs.5 Crores ignoring the ITAT's failure to provide treatment of the sale consideration received, which was the core issue for reopening the case. 8. The Ld. CIT(A) erred in law and on facts in deleting the addition without examining the merits of taxability of Rs.5 Crores as "Income from Other Sources" which represents consideration received in a transaction which was retained by the assessee without refund after the Honble Supreme Court's decision. 9. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld.CIT(A) be set aside and that of the Assessing Officer be restored.

6.

The Ld.DR relied on the grounds raised.

7.

The assessee has filed a paper-book enclosing therein the case laws relied on, the consolidated order of the Tribunal in ITA No.ITA No. 1458 & 1537/Chny/2018, etc. The Ld.AR reiterated the submissions made before the FAA.

8.

We have heard rival submissions and perused the material on record. In the instant case, substantive assessment was made in the hands of the deceased father of the assessee. The protective

- 7 - ITA No.520/CHNY/2026 & CO No.13/CHNY/2026 Kaipathur Venkatakrishnan assessment was made in the hands of the assessee. The Tribunal, vide its combined order dated 04.09.2024 in ITA Nos.1458/CHNY/2018 and 1537/CHNY/2018, while adjudicating the substantive assessment in the case of the assessee’s deceased father, took note of the judgment of the Hon’ble Supreme Court dated 04.05.2022, whereby Sale Deed No.2179 of 2007 registered before SRO, Alandur was cancelled. Accordingly, the Tribunal held that, since there was no transfer of property in the eyes of law, no consequential Long Term Capital Gains could arise, and thereby, partly-allowed the appeal filed by deceased father. In the case of the assessee, where the assessment was made on a protective basis, the Tribunal dismissed the Revenue’s appeal by observing as under:- “28. We have heard both the parties and perused the records. And since we have noted that the action of the AO adding LTCG (on protective basis) in the hands of assessee (Shri K.Venkatakrishnan) was in respect of sale-deed registration No.2179/2007 dated 05.07.2007 of immovable property registered at Sub-Registrar, Alandur, which registration has been cancelled/expunged by the Hon’ble Supreme Court as noted (supra) and therefore, the substantive addition confirmed by Ld.CIT(A) in the hands of late father Shri legal K.S.Deendayalu Reddy has been ordered to be deleted on principle in the maxim “sublato Fundmento Credit opus” meaning in case a foundation is removed, the super-structure falls. Therefore, on the very same reasoning, when the substantive addition itself will not survive in the eyes of law, fate of protective addition will be same. Therefore, the impugned action of the Ld.CIT(A) is upheld on the aforesaid reasons and hence, we dismiss the appeal of the Revenue.”

- 8 - ITA No.520/CHNY/2026 & CO No.13/CHNY/2026 Kaipathur Venkatakrishnan 9. As rightly pointed out by the FAA, the AO, in the original assessment order, had not made any addition of Rs.5,00,00,000/- under the head “Income from Other Sources”. The issue involved in the original assessment proceedings was confined to the question whether the transfer of the asset was liable to Long Term Capital Gains tax or not. Further, the assessment in the hands of the assessee was made only on a protective basis. The FAA, in the original appellate proceedings, had deleted the addition and had not sustained the same on a substantive basis in respect of the alleged receipt of Rs.5,00,00,000/-. Moreover, the Tribunal, in its order dated 04.09.2024, had not rendered any finding or issued any direction as to whether the said amount could be brought to tax as “Income from Other Sources”. Therefore, the AO had no jurisdiction to introduce a completely new issue while passing the order giving effect to the Tribunal’s directions. It is a settled principle of law that, while passing an order giving effect to the directions of the Tribunal, the AO is confined strictly to implementing such directions and cannot travel beyond the scope of the order of the Tribunal. By treating the amount of Rs.5,00,00,000/- as “Income from Other Sources”, the AO clearly exceeded the jurisdiction vested in him.

- 9 - ITA No.520/CHNY/2026 & CO No.13/CHNY/2026 Kaipathur Venkatakrishnan Hence, we find that the FAA was fully justified in deleting the said addition.

10.

On identical facts, the Hon’ble Allahabad High Court in the case of S.P. Kochhar vs. ITO reported in [1984] 145 ITR 255 (Allahabad) had observed as follows:- “15…………..When the remand is made by the Tribunal the position is different. The powers of the Tribunal are confined to the subject-matter of appeal as constituted by the original grounds of appeal and such additional grounds as may be raised by the leave of the Tribunal. Thus, when the Tribunal allows the appeal and sets aside the assessment and remands the case for making a fresh assessment, the power of the ITO is confined to such subject- matter only. He cannot take up the questions which were not the subject-matter of appeal before the Tribunal. This will be so even though no specific direction has been given by the Tribunal. If a specific direction is given, then there is no scope whatsoever for the ITO to travel beyond those directions or restrictions.”

11.

In the present case, admittedly, the Tribunal, in its order dated 04.09.2024, had not made any observation with regard to the receipt of Rs.5,00,00,000/- and had deleted the addition towards Long Term Capital Gains which had been made on a protective basis in the hands of the assessee. It has also been submitted by the Ld. AR that, in the case of the deceased father, the Revenue had not made any substantive addition in respect of the amount of Rs.5,00,00,000/- (as income from other sources). Therefore, since the AO while passing

- 10 - ITA No.520/CHNY/2026 & CO No.13/CHNY/2026 Kaipathur Venkatakrishnan the order giving effect to the Tribunal’s order, made a fresh addition which was beyond the scope of the Tribunal’s directions, we find no infirmity in the order of the FAA deleting the same. Accordingly, the order of the FAA is upheld.

CO No.13/CHNY/2026 12. We find that the grounds raised in the Cross Objection pertain to the reopening of assessment, which does not arise from the subject matter of the present proceedings. In view of the above, we find no merit in the cross objection. Accordingly, the same is dismissed.

13.

In the result, the appeal filed by the Revenue and the cross objection preferred by the assessee are dismissed.

Order pronounced in the open court on 2nd June, 2026 at Chennai.

Sd/- Sd/- (जॉज� जॉज� के) (इंटूर� रामा राव) (INTURI RAMA RAO) (GEORGE GEORGE K) लेखा सद�य/ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT चे�नई/Chennai, �दनांक/Dated, the 2nd June, 2026 RSR, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. िनधा�रती /Assessee 2. राज� /Revenue 3. आयकर आयु�त /CIT, Chennai 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF. By Order Digitally signed by REKHA REKHA SENTHIL RAJ SENTHIL RAJ Date: 2026.06.04 17:36:47 +05'30'

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