VIRAJ REALITY PRIVATE LIMITED,NASHIK vs. THE ASSISTANT COMMISSIONER OF INCOME TAX (ACIT), CENTRAL CIRCLE-1, NASHIK, NASHIK

First we take up cross appeals vide ITA No.3098/PUN/2025 (by the assessee) & 3284/PUN/2025 (by the Revenue) for assessment year 2020-21 as the lead case.

Facts of the case, in brief, are that the assessee is a company engaged in the business of sale and purchase of land, plots and development of land. It specializes in purchase of litigated agricultural or raw plot of land and develops roads after resolving the litigated issues, creates layouts of saleable plots and sells the plots to the end users for residential projects, townships. It is also involved in construction of residential flats as well as commercial shops. The group, as a part of its modus operandi, to buy land has formed many companies to transact through these

A search and seizure action u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was conducted in ‘Viraj Group of cases’ on 20.04.2023 at the residential premises of its directors, key employees and members of Viraj family during which various incriminating documents and digital data were found and seized. Consequent upon the search action, the case was selected for verification based on available information in the documents seized during the search action. Accordingly, a notice u/s 148 of the Act was issued and duly served on the assessee on 31.03.2024 in response to which the assessee filed its objections vide letter dated 10.05.2024 and requested for reasons for satisfaction and copy of approval granted by the DGIT(Inv), Pune. The Assessing Officer disposed of the objections raised by the assessee vide letter dated 24.05.2024 requesting the assessee to file return of income in response to the notice u/s 148 of the Act so as to enable him to provide the desired documents.

The assessee in response to the same filed its return of income on 26.06.2024 and vide letter dated 08.07.2024 requested the Assessing Officer for providing the desired documents. The Assessing Officer provided the desired documents / information and also disposed of the objections raised by the assessee. Thereafter, the Assessing Officer issued statutory notice u/s 143(2) of the Act. The assessee filed its objections challenging assumption of jurisdiction by the

Subsequent to the issue of notice u/s 142(1) of the Act the assessee requested the Assessing Officer to provide the details of quantification of transactions identified during the post search enquiry which were provided to the assessee. During the course of assessment proceedings the assessee raised objections stating that the office premises at 3rd Floor, Abhayankar Towers, MG Road, Nashik searched by Party No. YO-1(1) by Search Team is in the name of S.C Pawar, Advocate. Further, the office premises at Anandvalli, Behind Petrol Pump, Near Makaloo Hotel, Gangapur Road, Nashik searched by Party No.YO-2 by Search Team, are third party premises and are neither owned by the assessee nor by any of the entities of the 'Viraj Group'. Accordingly, findings of incriminating documents found and seized from office premises of 'Viraj Group' is incorrect. Vide response dated 10.03.2025, the assessee reiterated the issue citing reliance on the statement of Shri Rohit Manilal Shah recorded u/s 132(4) of the Act, wherein he stated that the premises YO-2 is not on rent or owned by Viraj Group and the premises is owned by Vilas Joshi. The assessee drew the attention of the Assessing Officer to

However, the Assessing Officer rejected the above arguments of the assessee on the ground that one of the directors of the Viraj group of companies namely Shri Karan Rajendra Shah and member of Viraj family and the key person who looks after overall administration work, accounts, financial transactions, banking etc. in his answers to Q.Nos.10, 11, 12, 30, 31 and 33 recorded on oath u/s 132(4) of the Act on 24.04.2023 has owned up the documents and accepted that the premises YO-1(1) and YO-2 are rented by the Viraj group where books of account

So far as the issue of rent payment and its verification is concerned, the Assessing Officer noted that what is self-evident by admission of party, need not be verified. According to him, in view of the testimony of Shri Rohit Manilal Shah and Shri Karan Rajendra Shah, the matter has already been put to rest that the books of account of Viraj group and the individuals were kept at the premises which the assessee is now stating that the same is third party premises. Since the Viraj group has already owned up the seized documents and the contents during the proceedings u/s 131(1A) vide letter dated 28.07.2023 signed by Shri Karan Rajendra Shah in his capacity as Director proposing to tax the income arising from the documents found and seized from the disputed premises proportionately in the hands of M/s. Viraj Estates Pvt Ltd and M/s. Viraj Realty Pvt Ltd., therefore, he rejected the objections raised by the assessee.

During the course of assessment proceedings the Assessing Officer further noted that Shri Karan R. Shah in his answer to question No.31 recorded u/s 132(4) of the Act on 24.04.2023 while explaining the entries of handwritten cash book had categorically stated that the credit entries with ‘VR' notation represent different ‘Viraj Group' entities like M/s VEPL, VRPL, etc. He had further stated that it also includes individuals, proprietorship concerns, firms and all other entities falling under Viraj Group and that credit entries with 'VR' notation represent cash of his group altogether. He had further stated that any other entry that states "Karan”, "Viraj” etc. also represent cash of his group. During the post search proceedings the assessee in response to the queries raised by the Assessing Officer submitted the basis for categorization of transactions of entries recorded in Handwritten Cash Book based on seized documents identifying individual wise / entity wise / company-wise transactions. He, therefore, rejected the claim of the assessee that the documents found and seized from the premises of YO-1(1) and YO-2 of Viraj group are from the third party premises and not owned by the Viraj group entities.

The Assessing Officer observed that during the course of search action various incriminating documents and digital evidences were found and seized from the business premises situated at 4th Floor, Abhyankar Towers, M.G Road, Nashik (Party No.YO-01 of Viraj Group, marked by Search Team), office premises situated at 3rd Floor, Abhyankar Towers, MG Road, Nashik (Party No.YO-1(1) of Viraj Group, marked by Search Team) and office premises at Anandvalli, Behind Petrol Pump, Near Makaloo Hotel, Gangapur Road, Nashik (Party No. YO-2 of

The Assessing Officer on analysis of the seized documents in digital data noted that the entries in the seized handwritten cash book which are maintained digitally by the entities of ‘Viraj Group’ under file name ‘CON’ & ‘V89’ by reducing two zeros. The entries made therein are those which have taken place under the umbrella of Viraj Group. During the post search proceedings, the entries made in the handwritten cashbooks, Tally Data in files V89 and "CON”, data found in Pen drives found with the employees of Viraj Group and data in loose chits was exported in Excel format /digitized as Digital Cash Book (DCB) to assist reading the entries having several narrations. The Digital Cash Book (DCB) was prepared during post search proceedings incorporating the contents of the found & seized documents. On examination of the seized material the Assessing Officer noted that the seized material found from 19 premises having economic sense has found place in the DCB. He observed that the DCB has entries on both sides i.e. receipts and expenditure. The entries in the handwritten cashbook were stated to be maintained since the year 2008 and contain the transactions of debit and credit that are kept outside the regular books of account. On examination of entries in the DCB based on various details found during the course of search, post search enquiries, submissions of the assessee, the Assessing Officer noted that the assessee has received on-money, the details of which are as under: SN PROJECT PARTICULARS Flat & Shop FY Amount FY ENTITY wise 1 VERTEX Sandesh Tambat UNKNOWN 2019-20 30,00,000 Viraj Reality Pvt Ltd 2 VERTEX Banti Kir SHOP NO 03 2019-20 50,000 Viraj Reality Pvt Ltd 3 VERTEX Chiman SHOP NO 05 2019-20 1,96,76,000 Viraj Reality Pvt Ltd Sadwani 4 VERTEX Deepak Pingle SHOP NO 03 2019-20 1,58,50,000 Viraj Reality Pvt Ltd

Consdering the quantification of Rs.4,00,97,000/- he asked the assessee to explain as to why the amounts should not be taxed in the hands of the assessee. The assessee raised objections stating that those documents were found and seized from the third party premises which do not belong to the assessee. Further, Shri Karan Rajendra Shah in the capacity of Director & key person of Viraj group vide letter dated 28.07.2023 during the post search proceedings u/s 131(1A) of the Act had proposed to apply peak theory on the entire record of DCB to arrive at the proportionate taxable income in the hands of M/s. Viraj Estates Pvt Ltd and M/s. Viraj Reality Pvt Ltd. It was argued that the receipts and payments be read in its entirety and requested to apply peak credit method on on-money receipts.

However, the Assessing Officer was not satisfied with the arguments advanced by the assessee and treated the receipts of on-money in cash of Rs.4,00,97,000/- towards sale of flats (CON) as taxable in the hands of the assessee.

Before the Ld. CIT(A), the assessee raised various legal grounds challenging certain jurisdictional issues such as JAO, DIN, approval u/s 151 etc. However, the Ld. CIT(A) rejected all the legal grounds raised before him. So far as the merit of the case is concerned, the Ld. CIT(A) directed the Assessing Officer to estimate 15% as net profit on gross receipts of on-money of shops / office / flats of Rs.4,00,97,000/-, thereby sustaining addition of Rs.60,14,550/- and deleting the balance amount of Rs.3,40,82,450/- by observing as under:

Aggrieved with such part relief granted by the Ld. CIT(A) the assessee as well the Revenue are in appeal by raising the following grounds: Grounds raised by the assessee in ITA No.3098/PUN/2025 1. The order of the learned Commissioner of Income Tax (Appeals) [CIT(A)] in so far as it is against the Appellant is contrary to the law, erroneous and unsustainable on the facts and in the circumstances of the case. 2. The learned CIT(A) erred in upholding the validity of the assessment order passed under Section 143(3) read with Section 147, despite the foundational order for the transfer of the case under Section 127(2), dated 06.06 2023, lacking a mandatory Document Identification Number (DIN), in violation of CBDT Circular No. 19/2019 The learned CIT(A) erred in not holding that the failure to follow the mandatory CBDT procedure renders all subsequent assessment proceedings by the Assessing Officer (AO) void ab initio. 3. Invalid Sanction/Approval under Section 151: The learned CIT(A) erred in holding the approval granted by the specified authority under Section 151 of the Income Tax Act, 1961, as valid, despite the approval being mechanical and perfunctory without independent application of mind to the reasons recorded by the AO. 4. The learned CIT(A) erred in not applying the mandatory faceless mechanism notified under Section 151A read with Section 144B to the issuance of all notices under Section 148, as required by law. 5. The mandatory approval under Section 148B was given mechanically and without application of mind, failing to follow jurisdictional High Court precedents, making the entire assessment order invalid and void ab initio 6. The learned CIT(A) erred in sustaining additions based solely on original, retracted statements, without addressing the authenticity, possession, and consistency of the core material they relate to (HCB, V89/CON files). 7. The learned CIT(A) erred in applying the statutory presumption of truth under Section 132(4A) or Section 292C to seized materials (Tally files "V89" and "CON") that were not found or seized from the appellant's possession or control, but from third-party premises. 8. The learned CIT(A) erred in sustaining additions related to alleged on- money without the department definitively establishing the movement of cash, identifying the ultimate recipient of funds, or providing corroborative evidence of actual transactions.

In ground of appeal No.1 the assessee has challenged the validity of assessment proceedings due to foundational jurisdictional defect in issuing notice u/s 143(2) of the Act.

After hearing both the sides, we find this ground is identical to the ground No.1 in the case of Viraj Estates Pvt Ltd. raised by the assessee vide ITA No.3001/PUN/2025 for assessment year 2014-15 We have already decided this issue and dismissed the same vide order of even date by observing as under: “30. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in ground of appeal No.1 has challenged the validity of assessment proceedings on the ground that the notice u/s 143(2) of the Act was issued before obtaining the approval of the concerned PCIT. However, it has been clarified by the Addl. CIT that since the Assessing Officer and the Range Head office are located at Nashik while the Pr.CIT’s office is in Nagpur, therefore, most correspondences for regular day-to-day functions are carried out through official email. However, for proper record maintenance, the same correspondence is also dispatched through post. It has been clarified that the correspondence regarding the approval for issuing notice was received by the Assessing Officer on 11.11.2024 which is prior to the issuance of notice u/s 143(2) of the Act. The screenshot has also been placed by the Revenue in the paper book. It has further been mentioned that the administrative approval dated 10.06.2024 for issue of notice u/s 143(2) of the Act was received by the office of the Assessing Officer on 14.06.2024 and the notice u/s 143(2) was dated 21.06.2024. Therefore, we do not find any merit in the argument of the Ld. Counsel for the assessee that the assessment is void ab initio on account of issue of notice u/s 143(2) of the Act before obtaining the administrative approval of the Pr.CIT. Consequently, the ground challenging the validity of the assessment as per ground No.1 is dismissed.”

Following similar reasonings, the ground of appeal No.1 raised by the assessee is dismissed.

Grounds of appeal No.2 and 4 raised by the assessee were not pressed by the assessee for which the Ld. DR has no objection. Accordingly, the same are dismissed as ‘not pressed’.

Ground of appeal No.3 relates to the validity of sanction / approval granted u/s 151 of the Act.

After hearing both the sides, we find this ground is identical to ground of appeal No.3 raised in the case of Viraj Estates Pvt Ltd vide ITA No.3001/PUN/2025 for assessment year 2014-15. We have already decided this issue and dismissed the same vide order of even date by observing as under: “37. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Hon’ble Delhi High Court in the case of PCIT vs. Agroha Fincap Ltd. (supra) has held that where the competent authority used ‘Yes, I am convinced it is a fit case for reopening of assessment u/s 147 by issuing notice u/s 148’, same would satisfy mandate of section 151. The relevant observations of the Hon’ble High Court read as under: “20. So it must be held, that the language “Yes, I am convinced it is a fit case for re-opening the assessment u/s 147 by issuing notice u/s 148 satisfies the mandate of Section 151A of the Act in this case. The Tribunal has clearly erred in not appreciating the above language used by the Competent Authority while granting approval. Hence, the impugned order dated 07.07.2023 passed by the ITAT allowing the appeal filed by the Respondent/Assessee is untenable and is liable to be set aside. We order accordingly. The substantial question of law is decided in favour of the Appellant/Revenue and against the Respondent/Assessee.” 38. In view of the above decision of the Hon’ble Delhi High Court cited (supra) and in view of any contrary material brought to our notice by the Ld. Counsel for the assessee that the specified authority has not applied his mind, we do not find any infirmity in the order of the Ld. CIT(A) upholding the sanction/approval u/s 151 of the Act. The ground No.3 raised by the assessee is accordingly dismissed.”

Following similar reasonings, the ground of appeal No.3 raised by the assessee is dismissed.

Ground of appeal No.5 relates to the mechanical approval given u/s 148B of the Act.

After hearing both the sides, we find this ground is identical to the ground of appeal No.6 raised in the case of Viraj Estates Pvt Ltd vide ITA No.3001/PUN/2025 for assessment year 2014-15. We have already decided this issue and dismissed the same vide order of even date by observing as under: “51. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. The grievance of the assessee in the instant case is that the mandatory approval u/s 148B of the Act was given mechanically and without application of mind. A perusal of the record shows that this ground was never raised before the Ld. CIT(A). Further, it is also not a legal issue and requires verification of facts from the record. Therefore, at the threshold itself this ground is not admitted for adjudication. Even otherwise also, nothing has been placed on record to suggest that the Assessing Officer or Addl. CIT did not go through the relevant seized material and other material available in their possession or records including the approvals. Therefore, we do not find any merit in the allegation of the assessee of non-application of mind by the Assessing Officer or the Addl. CIT in absence of any evidence before us. Ground No.6 raised by the assessee is accordingly dismissed.”

Following similar reasonigns, the ground of appeal No.5 raised by the assessee is dismissed.

In ground of appeal No.6 the assessee has challenged the evidentiary value of the statement recorded u/s 132(4) of the Act.

After hearing both the sides, we find this ground is identical to the grounds of appeal No.7, 10 and 15 raised in the case of Viraj Estates Pvt Ltd vide ITA No.3001/PUN/2025 for assessment year 2014-15. We have already decided this issue and dismissed the same vide order of even date by observing as under:

Following similar reasonings, the ground of appeal No.6 raised by the assessee is dismissed.

In ground of appeal No.7, the assessee has challenged the order of the Ld. CIT(A) confirming the addition made by the Assessing Officer based on material seized from the third party premises.

After hearing both the sides we find this ground is identical to the ground of appeal No.8 raised in the case of Viraj Estates Pvt Ltd vide ITA No.3001/PUN/2025 for assessment year 2014-15. We have already decided this issue and dismissed the same vide order of even date by observing as under:

Following similar reasonings, the ground raised by the assessee is dismissed.

The remaining grounds raised by the assessee and the Revenue are identical to the similar grounds raised in ITA No.3001/PUN/2025 for assessment year 2014- 15 in the case of Viraj Estates Pvt Ltd. In the said decision vide order of even date we have held that no separate addition on the basis of the entries found in the DCB/HCB is to be made in the hands of any of the entities / individuals of the Viraj group and the addition is to be made in the hands of M/s. Viraj Estates Pvt Ltd applying the theory of peak credit. The relevant observations at para 130 read as under: “130. In view of the above and in the light of our discussion in the preceding paragraphs and following the legal principles regarding the rotation of funds, we find no justification for the artificial segregation of entries emanating from the singular seized cash books i.e. HCB / DCB. The only scientific method to be applied in such a situation is to apply the theory of peak credit. Therefore, the additions sustained on gross basis by the Assessing Officer which have been partially sustained on estimate basis by the Ld. CIT(A) @ 17% for plots / lands and 15% for flats and shops for different years are directed to be deleted. Similarly, the addition made by the Assessing Officer u/s 69A which have been partly sustained by the Ld. CIT(A) is also directed to be deleted. The Assessing Officer is directed to recompute the income strictly by applying the unified peak credit method as directed below: 1) The Assessing Officer shall prepare a single unified and chronologically sequenced cash ledger incorporating all the entries found in the seized DCB / HCB for the year under consideration. This single ledger must amalgamate all the entries previously adopted by the Assessing Officer for peak computation together with the remaining entries specifically including the ‘V A/c’ and ‘V Exp’ entries, the unidentified entries and all alleged on-money receipt and payment entries relating to plots, lands, flats and shops. No entry shall be excluded or maintained in a separate pool.

In view of the above, no separate addition in the hands of the present assessee is to be made. The grounds raised by the assessee are accordingly allowed and the grounds raised by the Revenue are dismissed.

Identical grounds have been raised by the assessee in ITA Nos.3099 & 3100/PUN/2025. In view of our discussion in the preceding paragraphs the legal grounds raised by the assessee are dismissed and the grounds challenging the addition on merit are allowed.

In the result, all the three appeals filed by the assessee are partly allowed and the appeal filed by the Revenue is dismissed.