DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), CHENNAI, CHENNAI vs. SHANMUGHAM THIAGARAJAN, CHENNAI

ITA 2575/CHNY/2026Status: DisposedITAT Chennai16 October 2026AY 2019-20104 pages
AI SummaryDismissed

What were the facts?

The Revenue filed appeals against the orders of the CIT(A) for Assessment Years (AYs) 2019-20 and 2020-21, arising from assessment orders passed by the AO. These appeals stemmed from a search and seizure operation conducted on November 3, 2020, which covered the premises of M/s. IG3 Group and Shri Shanmugham Thiagarajan. During the search at M/s. IG3 Infra Limited, an Excel file was found containing entries of cash receipts, payments, and balances, aggregating to Rs. 13,51,22,303/-. Physical cash of Rs. 71,11,060/- was also found, significantly exceeding the book balance. Statements were recorded from Shri R. Ramamoorthi and Smt. Rukmini Thiagarajan, who admitted to cash receipts and their use for company purposes, though the AO inferred that expenditure recorded in books was not genuine to the extent of cash received back.

What did the Tribunal hold?

The Tribunal held that the CIT(A) was justified in restricting the additions to 25% of the amounts originally assessed by the AO. The Tribunal reasoned that while seized electronic records, loose sheets, and sworn statements are relevant and can constitute evidence, the AO had not satisfactorily established the nexus between the entire cash receipts and the expenditure claimed in the regular books. Furthermore, the AO had not undertaken proper entity-wise segregation, adequately examined the possibility of cash withdrawals from disclosed sources, or considered the circulation of funds. The seized Excel sheet itself suffered from material inconsistencies and discontinuities, impairing its reliability. The Tribunal noted that the CIT(A) had taken cognizance of the seized material, statements, physical cash, and the assessee's failure to furnish a complete reconciliation, and had sustained a portion of the additions. The Revenue failed to demonstrate that the factual findings of the CIT(A) were perverse or that the entire gross receipts represented independently taxable transactions. Therefore, the Tribunal upheld the CIT(A)'s estimate and dismissed all grounds raised by the Revenue. The additions were restricted to Rs. 92,44,394/- and Rs. 2,28,72,571/- for AYs 2019-20 and 2020-21 respectively, with the balance additions directed to be deleted.

What were the issues?

1. Whether the Tribunal can uphold the CIT(A)'s decision to restrict additions to 25% of the amounts assessed by the AO, when the Revenue contends that the entire gross receipts represented undisclosed income or inadmissible expenditure. Assessee's Contention (implied from the CIT(A)'s decision and the Tribunal's reasoning): The assessee argued that the seized Excel sheet contained inconsistencies and that a substantial portion of the cash received back was utilized for business purposes. The CIT(A) accepted this explanation partially, restricting the additions. Revenue's Contention: The Revenue argued that the seized electronic records, loose sheets, and sworn statements constituted sufficient evidence for making additions. They relied on judicial authorities like B. Kishore Kumar v. DCIT and Smt. N. Saroja v. ACIT, asserting that admissions and seized records, along with statutory presumptions, should lead to the acceptance of the entire gross receipts as taxable income or inadmissible expenditure. The Revenue sought restoration of the entire additions made by the AO.

Which sections of the Income-tax Act were involved?

Section 132,Section 132(4),Section 143(3),Section 153A

AI-generated summary — verify with the full judgment below

आयकरअपील"यअ"धकरण ’सी’ "यायपीठ,चे"नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI "ी मनु कुमार िग"र, "ाियक सद" एवं "ी एस. आर. रघुनाथा लेखा सद" BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER

आयकर अपील सं./ITA No. 2575 & 2576/Chny/2026 "नधा"रण वष"/AYs: 2019-20, 2020-21 The DCIT, Central Circle 2(2) v. SHANMUGHAM THIAGARAJAN Income Tax Investigation No.6 ,Prithvi Avenue, Building, Ground Floor, 2nd Street, Abhiramapuram, Room No B4, No-46, MG Road, West Chennai, Nungambakkam,Chennai-600034 Chennai-600018 [PAN: ADCPC 5420 H] (अपीलाथ"/Appellant-Revenue) (""यथ"/Respondent- Assessee) आयकर अपील सं./ITA No. 2577 & 2578/Chny/2026 "नधा"रण वष"/AYs: 2019-20 & 2020-21 The Dy. CIT, Central Circle 2(2) IG3 INFRA LIMITED, Income Tax Investigation 2, Thoraipakkam Pallavaram, Building, Ground Floor, 2 Kanchipuram, Oggiam Room No B4, No-46, MG Road, Thoraipakkam, Nungambakkam,Chennai-600034 Oggiamthoraipakkam S.O, Chennai-600097, T.N [PAN: AABCE 2840 C] (अपीलाथ"/Appellant-Revenue) (""यथ"/Respondent- Assessee)

अपीलाथ" क" ओर से/ Appellant by : Mr. R. Venkataraman, CA ""यथ" क" ओर से /Respondent by : Ms. Nayani Swapna, CIT, DR सुनवाई क" तार"ख/Date of H

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