M/S. LA VIE ESTATE LLP,CHENNAI vs. ACIT, CENTRAL CIRCLE-1(2), CHENNAI

At the threshold, we observe that there is a delay of 60 days in the filing of the appeal against the assessment order by the assessee. The assessee has furnished an affidavit explaining that the assessee was not aware of the impugned orders passed by the ld.CIT(A) during the relevant period. Upon perusal of the affidavit and after affording due opportunity of hearing from both parties, we are satisfied that the assessee has demonstrated sufficient and reasonable cause for not presenting the appeals within the statutory period prescribed under law. Accordingly, in the interest of justice, the delay in filing the appeals is hereby condoned, and the appeal is admitted for adjudication on merits.

The following grounds of appeal raised by the assessee:

On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in restricting the action of the Learned Assessing Officer in making an addition to the extent of Rs.1,91,00,000/-u/s.68 of the Income Tax Act, 1961, as alleged unexplained credit, without considering the facts and circumstances of the case.

On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in invoking the provision of Section115BBE of the Act, without considering the facts and circumstances of the case.

The appellant craves leave to add, amend, alter or delete the said ground of appeal.

The brief facts of the case are that the assessee is a domestic company and owns of coffee estates. The assessee had filed its return of income u/s.139(1) of the Act on 21.08.2019 declaring a loss of Rs.39,200/- for the A.Y.2019-20. A Search and Seizure operation under section 132 of the IT Act was carried out at residential/business premises in the cases of M/s Golden Shelters Private Ltd, NKV Krishna Group on 16.10.2019. During the course of search and seizure action at the office premises located at No.33, Shaffee Mohammed Road, Nungambakkam, Chennai -600 006, it was found that there are 137 concerns for which books of accounts are maintained in the Rutland Towers office. During the course of Search action at No. 46/2, Naickmar Street, West Mambalam, Chennai, it was found that Mr.Saravana Kumar has been maintaining tally data of 64 agricultural companies, where in it was identified that there were cash deposits and introduction of share application money.

Sri Bagavan, Mr. NKV Krishna and Mrs. Preetha Krishna were conducting wellness Programmes, homams, meditations and other related activities and from these activities unaccounted income was generated by way of cash. Total value of unaccounted receipts is worked out at Rs.630 crores. Mr NKV Krishna’s friend and also director in the group companies Mr. Badri Naryana Kota was entrusted with the task of handling unaccounted transactions and unaccounted cash of Mr. NKV Krishna.

A pendrive was found and seized vide ANN/KP/BNC/ED/S1-(3) on 17.10.2019 from the residence of Mr.Badri Narayan Kota, which contains a folder named “Data” containing unaccounted cash receipts, payments and unaccounted foreign currency exchanges done under the direction of Mr. NKV Krishna. The relevant portion of Mr. Badri Narayan Kota’s sworn statement dated 16.10.2019 is reproduced below: “Q.12 During the course of search proceedings, a red color SanDisk Pen drive was found from your bag. The same is seized vide annexure Ann/KP/BNC/ED/S-1(3) dated 17/10/2019. The pen drive contains a folder "Data" in which excel sheets are found in subfolders. Please explain the contents of these excels.

During the course of search, year wise unaccounted cash receipts, amount claimed to be deposited in banks were tabulated. Out of the total cash receipts of Rs.630,73,26,325/-, a sum of Rs. 221,09,63,850/- was deposited in bank and balance unaccounted receipts available was Rs.409,63,62,475/-, Mr.Badri Narayan Kota in his statement recorded on 16.10.2019 had confirmed that Rs.409,63,62,475/- is the total unaccounted cash receipts utilized for various investments. This is stated by him in his answer to Q.No. 23 and 25 of his sworn statement. The same is reproduced below: “A. 23 Sir, I have gone through the details, excel files and related data and examined the same in detail. I confirm that the working of cash receipts which are not accounted in books of any of our concerns above is correct. I confirm that Rs.409,63,62,475/-is the total unaccounted cash receipts which was utilized for on money payments on land purchases, expenses related to foreign transactions, personal expenses of Shri NK V Krishna and similar activities. All such details of utilization of money are also available in the excel files from which the unaccounted receipts are quantified.”

On confronting Mr NKV Krishna about the above statement of Mr Badri Narayan Kota, Mr NKV Krishna had confirmed and stated that Rs.409,63,62,475/- is the unaccounted cash receipts for the years FY 2014-15 to FY 2019-20. The assessee group has generated huge unaccounted income by way of cash, which are introduced in the group companies.

It is pertinent to mention that Mr.Saravana Kumar, Accounts Manager of the group Companies, was maintaining the records of unaccounted transactions and Benami properties documents. Mr.Saravana Kumar has confirmed in his sworn statement about the cash deposits and introduction of share application money. The source for the cash deposits are unaccounted cash introduced as unsecured loans in the respective companies.

Moreover, Mr. Saravana Kumar has explained the modus operandi that the land was acquired in the name of the faculty members of the training program conducted by M/s Golden Shelters P Ltd for which sale consideration was paid in cash. Subsequently, the same land was transferred into the names of 16 agricultural companies without paying any sale consideration wherein the same was introduced as share application money by the seller. Thereafter the share application money was converted as preferential shares In the names of the concerns of Mr. NKV Krishna.

Mr. NKV Krishna, during the post search proceedings u/s.131 dated 24.10.2019, has confirmed and concurred with the statement of Mr.Saravana Kumar wherein it was stated that the source for the cash deposits in the group companies, share capital and sale consideration for the purchase of the lands by the faculty members is unaccounted cash. Mr. Saravana Kumar, Accounts Manager for the group companies, has furnished the details such as unaccounted cash introduced as share application money, advance / unsecured loan in respect of 137 companies on 19.10.2019. The assessee company is also one such company where unaccounted cash is brought in either as share capital or advance / unsecured loans.

The assessee's case was notified to Central Circle - 1(2), Chennai and was centralized to this charge. A notice u/s.153A of the Act, calling for return of income, was issued to the assessee and the same was served. In response to the notice issued u/s.153A of the Act, the assessee filed return of income on 05.05.2021 admitting a loss of Rs. 39,200/-. Subsequently, a notice u/s.142(1) of the Act dated 25.09.2021 was issued and served on the assessee. Thereafter, the AO passed the assessment u/s.153A of the Act vide order dated 30.09.2021 by making addition of Rs.1,96,00,000/- u/s.69A of the Act, thereby determining the income of Rs.1,96,00,000/- by holding as under:

Aggrieved by the order of the AO the assessee preferred an appeal before the ld.CIT(A). The assessee submitted that the AO has erred in making the addition of Rs.1.96 crores by treating the same as alleged unexplained income, without appreciating the fact and circumstances of the case. Though the AO has not found any such money transferred to the assessee during the :-7-:

On perusal of the submissions made by the assessee the ld.CIT(A) has confirmed the addition by passing an order dated 27.06.2025 by holding as under:

Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us.

The ld.AR for the assessee assailing the action of the ld.CIT(A) submitted that the ld.CIT(A) has erred in confirming the additions made by the AO. The ld.AR in support of his arguments filed a paper book of 79 pages containing the Income Tax return and computation of income for the A.Y. 2019-20, Audited Financial statements for the A.Y.2018-19 & 2019-20, Land transfer registered agreements between partners and the assessee, ledger account of the partner in the books of assessee to show the transactions of the land transfer. The ld.AR contended that firstly the ld.CIT(A) has revised the additions from Rs.1.96 crores to Rs.1.91 crores without any cogent reasons or materials found during the appellate proceedings. Further, as per the audited financial statements furnished before the authorities, there was no such amounts introduced to the business by any of the parties or the revenue found any incriminating material during the search to conclude such findings. The ld.AR drew our attention to the Audited financial statements for the A.Y. 2018-19 (Page 75 to 79 of the Paper book) and A.Y.2019-20 (Page 03 to 07 of the Paper book) and shown that there is no amount of cash deposits in the books and the partners’ capital accounts shows only the land transfer transactions during the impugned assessment year.

The ld.AR contended that mere statement of Mr.Saravana Kumar, Accounts Manager for the group companies, is the basis for addition mad by the AO, without correlating to any of incriminating materials or the financial statements. Mr.Saravana Kumar, Accounts Manager was deposed in the sworn

In view of the above arguments the ld.AR prayed for deleting the additions by setting aside the order of the ld.CIT(A).

Per contra, the ld.DR for the revenue submitted that the modus operandi of the assessee’s group in investing the unaccounted money has been unearthed during the search. Accordingly, the GSPL group has taken the benefit of deductions before the IBS to the tune of Rs.22.50 crores, stating that these amounts has been introduced as capital in various group entities, wherein the said amounts will be offered to tax. However, the group entities including

1 The unaccounted income of Rs.63,63,738/- introduced in the form of land by the partner is unaccounted in the hands of the assessee as it is part of the unaccounted income of the NKV Krishna/ Kalki Bhagawan group which was layered through the partner as partners capital to the assessee as per the modus followed by the group. The 1.91 Cr includes Rs 63,63,738/- as well. The Interim Settlement Boad (IBS) has given relief for the whole of 1.91 Cr that was the sum as per Sl. No 129 of the Annexure IV of the seized documents. Therefore, the double deduction cannot be granted to the Assessee and the CIT(A) has correctly brought it on record and did not allow the double relief to the assessee entity.

2 The unaccounted income that is already allowed as relief by the IBC (Rs. 1.91 Cr) includes the unaccounted income introduced in the form of the land Rs.63,63,738/- and is to be assessed in the hands of the assessee.

3 The Hon. ITAT may consider the merits of the case holistically and uphold the order of the CIT(A) and render justice.”

In view of the above arguments and written submissions the ld.DR prayed for confirming the order of the ld.CIT(A) by dismissing the appeal of the assessee.

We have heard the rival submissions, perused the orders of the lower authorities and carefully considered the material placed on record, including the paper book filed by the assessee and the submissions of the Revenue. The solitary issue arising for adjudication is whether the addition of Rs.1,91,00,000/- sustained by the ld.CIT(A) on account of alleged unexplained introduction of funds/investments in the assessee LLP can be sustained solely on the basis of statements recorded from third parties and a general chart contained in Annexure-IV, without any corroborative incriminating material relatable to the assessee and without establishing any actual receipt of money by the assessee during the relevant previous year.

At the outset, it is an undisputed fact that the assessee had filed its return of income declaring a loss and the assessment for the impugned assessment year stood completed. The entire addition has been made on the basis of statements recorded from Shri Saravana Kumar, Accounts Manager of the group concerns, Shri Badri Narayan Kota and Shri N.K.V. Krishna during the course of search proceedings conducted in the group cases. The Revenue has not brought on record any seized document evidencing receipt of cash, unsecured loan, share application money or any other unexplained credit by the assessee during the relevant assessment year.

On perusal of the audited financial statements placed before us, we find that the assessee has consistently contended that no amount of Rs.1.91 crores was introduced into its books during the relevant year. The capital account and :-15-:

It is a settled proposition of law that addition cannot be sustained merely on the basis of a statement unless such statement is supported by cogent and corroborative material. The Hon'ble Supreme Court in Common Cause v. Union of India [(2017) 394 ITR 220 (SC)] held that entries in loose sheets or private documents, without independent corroboration, do not constitute conclusive evidence. Similar principles have been laid down by the Hon'ble Supreme Court in CBI v. V.C. Shukla [(1998) 3 SCC 410], wherein it was held that loose sheets by themselves do not have evidentiary value unless corroborated by independent evidence.

Further, the Hon'ble Supreme Court in Andaman Timber Industries v. CCE [(2015) 62 taxmann.com 3 (SC)] has categorically held that where an addition is founded upon statements of third parties, denial of opportunity of cross-examination strikes at the root of the assessment and constitutes violation of principles of natural justice. In the present case, there is nothing on record to show that the assessee was afforded effective opportunity to cross- examine Shri Saravana Kumar or Shri Badri Narayan Kota, whose statements form the sole foundation of the impugned addition.

We further find considerable force in the contention of the assessee that the addition sustained by the ld.CIT(A) is itself based on presumptions and contradictions. While the AO made an addition of Rs.1.96 crores, the ld. CIT(A) reduced the same to Rs.1.91 crores solely by referring to Annexure-IV and observations contained in the order of the Interim Board of Settlement. However, neither the AO nor the ld.CIT(A) has identified any specific entry in :-16-:

The reliance placed by the ld.CIT(A) on the proceedings before the Interim Board of Settlement is also misplaced. Relief granted or disclosure made in the hands of another assessee or group concern cannot automatically constitute evidence for making an addition in the hands of the present assessee unless the Revenue independently establishes that the impugned amount was actually received, invested or enjoyed by the assessee. Tax liability has to be determined on the basis of evidence pertaining to the concerned assessee and not on assumptions arising from settlement proceedings of other entities.

We also find that Annexure-IV merely contains a tabulation allegedly prepared by Shri Saravana Kumar. Such a chart, without supporting books of account, vouchers, bank records, cash-flow statements or corroborative evidence, cannot by itself establish that unexplained income accrued to or was received by the assessee. The law is well settled that suspicion, however strong, cannot take the place of proof.

The Hon’ble Delhi High Court in CIT v. Kabul Chawla - 380 ITR 573 (Delhi), subsequently affirmed in principle by several judicial pronouncements, has held that additions in proceedings u/s.153A of the Act must be based upon incriminating material found during search relatable to the assessee. Similar views have been expressed by the Hon'ble juri ictional High Court and various benches of the Tribunal that completed assessments cannot be disturbed in the absence of incriminating material directly pertaining to the assessee.

In the present case, we find that no incriminating document evidencing receipt of Rs.1.91 crores by the assessee has been brought on record. The addition is founded entirely on third-party statements and general allegations regarding the modus operandi of the group. Such material, in our considered opinion, is insufficient to sustain an addition under the Act, particularly when the assessee's books of account and audited financial statements do not reflect the alleged transaction and the Revenue has failed to establish any direct nexus between the alleged unaccounted cash and the assessee.

Accordingly, considering the totality of facts and circumstances of the case, the settled legal position governing additions based solely on third-party statements and uncorroborated documents, and in the absence of any independent incriminating material establishing receipt or introduction of unexplained money in the hands of the assessee, we hold that the addition of Rs.1,91,00,000/- sustained by the ld. CIT(A) is unsustainable in law. We therefore set aside the order of the ld.CIT(A) and direct the AO to delete the addition.

In the result, the appeal of the assessee is allowed.