JOINT COMMISSIONER OF INCOME TAX (OSD), CENTRAL CIRCLE-1(4), BENGALURU, BENGALURU vs. SIRI ECO STAY PRIVATE LIMITED, BENGALURU

In its appeal, the Revenue has raised the following grounds: - a) Whether the Ld. CIT(A) erred in restricting the addition made u/s 69A of the Income tax Act, 1961 by directing the Assessing Officer to tax only the net profit element on undisclosed cash receipts, without appreciating that the assessee failed to explain the nature and source of cash found recorded in seized material and all the related expenses were already booked in the books of accounts. b) Whether the Ld. CIT(A) failed to appreciate that the addition was based on incriminating material seized during search and admission made in statement recorded u/s 132(4), which have strong evidentiary value and justify taxation of the entire amount as deemed income u/s 69A. c) Whether the Ld. CIT(A) erred in applying profit estimation principles applicable to business income, ignoring that section 69A is a deeming provision and the burden to explain the source of money remained undischarged by the assessee. d) Any other grounds, that may be argued during the course of hearing.

The brief facts of the case are that on the basis of the search conducted under section 132 of the Act on M/s Rashi Eco Tourism Pvt. Ltd., wherein certain material pertaining to the assessee was found and seized, proceedings under section 153C of the Act were initiated in the case of the assessee vide notice dated 11.02.2021. In response to the said notice, the assessee filed its return of income on 08.03.2021 declaring a total income of Rs. NIL. Subsequently, statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. On the basis of the material found during the course of search and the statements of the Director and Accountant of the assessee, it was noticed that the assessee received cash payments from customers for sale of Villas at Chikamangaluru. After considering the submissions of the assessee, the Assessing Officer (“AO”), vide order dated 31.08.2021, passed under section 153C r.w.s. 143(3) r.w.s. 153D of the Act, considered the cash of Rs. 1,03,00,000/- received by the assessee as undisclosed receipts and made an addition under section 69A of the Act on a substantive basis. Without prejudice to the above addition, the AO also made a protective addition of Rs. 1,03,00,000/- on the basis that the cash received by the assessee is business income. Accordingly, the AO assessed the total income of the assessee at Rs. 2,06,00,000/- by considering additions both on account of substantive and protective basis. On this total income of Rs. 2,06,00,000/-, the AO computed tax of Rs. 61,81,000/-.

The learned PCIT(A), vide impugned order, dismissed the jurisdictional grounds raised by the assessee. However, while deciding the grounds raised on merits, the learned PCIT(A) treated the cash receipts as unaccounted business income of the assessee. Accordingly, the learned PCIT(A) directed the AO to bring to tax only the net profit on such cash receipts. Being aggrieved, the Revenue is in appeal before us. On the other hand, the assessee has also filed Cross-Objection. 3

During the hearing, the learned Authorised Representative (“learned AR”) submitted that the tax effect involved in the Revenue’s appeal is below the monetary limit of Rs. 60,00,000/-, as applicable to appeals before the Tribunal, as prescribed by the CBDT. The learned AR submitted that the learned PCIT(A) treated the cash receipts as unaccounted business income of the assessee, and thus upheld the addition which was made by the AO on a protective basis. The learned AR submitted that the addition on a protective basis was to the tune of Rs. 1,03,00,000/-. Therefore, the tax effect on the said addition is below the prescribed monetary limit for filing the appeal by the Revenue before the Tribunal.

On the other hand, learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the AO.

We have considered the submissions of both sides and perused the materials available on record. At the outset, it is pertinent to note the findings of the learned PCIT(A) on merits, which are reproduced as follows for ready reference: - “6.0 Grounds on merits: The AO relied on the seized material from the laptop of the accountant. The agreement mentioned that Rs. 5 lakhs were paid in cash on 7/9/2012 by Sri. Shankar Narayana to the appellant. The AO noted that in the case of Nanjunda Prasad and Manjunatha, there were receipts for cash payments along with dates of cash payments. Hence the AO brought to tax an amount of Rs. 12 lakhs as unexplained money u/s 69A of the Act. Alternately, if the cash payments are treated as advances, then the same should be taxed as undisclosed business income of the appellant as the same were received during the year under consideration. Accordingly, the AO made an addition of Rs. 12,00,000/- on protective basis.

Thus, the learned PCIT(A) held that the said cash receipts represent the unaccounted business income of the assessee. Having arrived at this conclusion, the learned PCIT(A) directed the AO to bring to tax only the net profit on the said cash receipts.

In the grounds raised in the present appeal, the Revenue has challenged the findings of the learned PCIT(A) in restricting the addition made under section 69A of the Act and directing the AO to tax only the net profit element.

At this stage, we may note that although the AO added both the substantive and protective additions of Rs. 1,03,00,000/- each and assessed the total income of the assessee at Rs. 2,06,00,000/- as against Rs. NIL income declared by the assessee in its return. However, when the same amount is considered as taxable under two different heads, and one is considered as substantive while the other is considered as protective addition, we are of the considered view that then, while computing the total income, only the substantive addition can be made to the total income, as the protective addition becomes relevant only if, in case, the substantive addition is subsequently quashed. However, in the present case, the AO added the same amount, being the cash received by the assessee, twice, which is completely contrary to the settled principles of taxation which prohibit double addition of the same amount and thus, the final computation of total income by the AO, in our considered view, is incorrect.

Since the only permissible addition to the total income of the assessee on a substantive basis is Rs. 1,03,00,000/- under section 69A of the Act, which has further been restricted vide impugned order, and the Revenue is in appeal against the same, we are of the considered view that the tax effect needs to be computed on the said addition instead of computing the same by making the addition twice.

During the hearing, in order to substantiate its submission that the tax effect in respect of the amount of Rs. 1,03,00,000/- is less than the monetary limit of Rs. 60,00,000/- for filing the appeal by the Revenue before the Tribunal, the learned AR furnished the following computation: - Particulars Amount (in Rs.) Total income assessed A 2,06,00,000 Tax on total income assessed B 66,83,670

Since in this appeal, the Revenue has only raised the grounds challenging the findings of the learned PCIT(A) directing the AO to only bring to tax the net profit by applying profit estimation principles applicable to business income in respect of cash receipt of Rs. 1,03,00,000/-, we are of the considered view that the tax effect in the appeal filed by the Revenue is below the monetary limit of Rs. 60,00,000/-, applicable to appeals before the Tribunal, as per CBDT Circular No. 9 of 2024, dated 17.09.2024. Therefore, in view of the aforesaid, the Revenue’s appeal deserves to be dismissed. However, the Revenue is granted the liberty to seek withdrawal of the order if, at a later point in time, it is found that the appeal falls under any of the exceptions provided in the Circular referred to above.

In the result, the appeal by the Revenue is dismissed.

As the appeal by the Revenue is found to be non-maintainable, the Cross-Objection filed by the assessee is dismissed as infructuous.

To sum up, the appeal by the Revenue and the Cross-Objection by the assessee are dismissed. Order pronounced in the open court on 06-Oct-2026.