VASUNDARA RESIDENCY PVT LTD,SHIVAMOGGA vs. INCOME TAX OFFICER, WARD 1 & TPS, SHIVAMOGGA

आयकर अपीलीय अधिकरण, बेंगलुरू पीठें, बेंगलुरू INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE BENCH: B BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No. 701/Bang/2026 (निर्धारण वर्ा/Assessment Year: 2011-12) VASUNDARA RESIDENCY INCOME TAX OFFICER, PVT LTD WARD 1 & TPS SHIVALI, CHURCH ROAD, INCOME TAX OFFICE, 2ND CROSS, GOPALA, Vs. SHARAVATHI NAGAR, SHIVAMOGGA-577204, SHIVAMOGGA-577201, KARNATAKA KARNATAKA अपीलधर्थी Appellant प्रत्यर्थी Respondent Permanent Account Number of Assessee: AADCV5681N अपीलधर्थी द्वारा/Appellant represented by: Sri. Gowrish Bhargav K V - CA प्रत्यर्थी द्वारा/Respondent represented by: Sri. Pradeep S - Addl. CIT सुनवाई की तारीख / Date of conclusion of hearing: 28-Jul-2026 घोषणा की तारीख / Date of pronouncement: 22-Oct-2026 आदेश / ORDER PER SHRI PRASHANT MAHARISHI, VICE PRESIDENT 1. This appeal by Vasundara Residency Pvt. Ltd. (the assessee) for Assessment Year 2011–12 is directed against the appellate order dated 29 December 2025 passed by the Commissioner of Income Tax (Appeals), Panaji, Goa [the ld. CIT (A)]. By the impugned order, the learned CIT (A)

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 dismissed the assessee’s appeal against the reassessment order passed under sections 143(3) and 147 of the Income-tax Act, 1961, confirming an addition of ₹1,65,00,000. Aggrieved, the assessee is in appeal before us.

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 4. The Learned Assessing Officer erred in law and on facts in making the impugned addition by relying upon entries in an alleged incriminating diary, wherein several dates of alleged payments precede the date of incorporation of the Appellant company (11/01/2011), and without collecting or bringing on record any independent incriminating material to establish that such alleged payments, if any, were made by the Appellant.

6.1 The Learned Assessing Officer and the Learned CIT(A) erred in law and on facts in making and sustaining the impugned addition solely on the basis of a statement recorded from third party and entries in a diary written by him, without establishing any direct or independent nexus between the Appellant and the alleged cash transactions.

6.2 The lower authorities failed to recognize that the third party who provided the statement clearly admitted that the diary entries were simply personal notes made in his own handwriting, based on instructions from the actual parties involved in the sale of land and the settlement of creditors related another party. Furthermore, the

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 individual who gave the statement was neither the owner of the land nor directly involved in executing the transactions in question.

6.3 The authorities below further failed to appreciate that no statement was recorded from person who was the principal person executed the transactions, nor from party to whom the transactions relates, thereby rendering the entire addition based on incomplete, unilateral and untested evidence.

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 from and owned by Sri A.R. Shivaprakash, thereby rendering the impugned appellate order perverse and liable to be set aside.

(Total tax effect: Rs.1,54,56,101/-)

On the basis of above grounds and other grounds which may be urged at the time of hearing with the consent of the Honorable Tribunal, it is prayed that the order passed under section 250, to the extent it is against the Appellant, be quashed and relief sought be granted.

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 acknowledged receipt of their dues by affixing their seals and signatures in a seized diary, which also recorded sale proceeds received by cheque and in cash. One entry concerned industrial land at Survey No. 20/2, Machenahalli Industrial Area, Shimoga Taluk, allegedly purchased by the assessee for ₹1.92 crore, comprising ₹1.65 crore in cash and ₹27 lakh by cheque. The assessee recorded only ₹29.11 lakh toward the property and did not account for the alleged cash component. As the company was incorporated on 11 January 2011 and had no known source for that payment, the Assessing Officer formed the belief that income chargeable to tax had escaped assessment under section 147. After obtaining the sanction of the Principal Commissioner of Income Tax, Davangere, notice under section 148 was issued on 28 March 2018 and duly served. The assessee did not initially file a return. By letter dated 18 July 2018, it stated that its return for AY 2011–12 had been filed on 16 July 2018 under acknowledgement No. 794620291160718 and requested the recorded reasons for reopening. Verification showed that nil income had been declared. The recorded reasons were supplied by letter dated 19 July 2018 and served on 20 August 2018. Notices under sections 143(2) and 142(1), issued on 16 August 2018 and served on 20 August 2018, required the assessee to furnish details by 27 August 2018. 5. The seized materials and the statement recorded during the search under section 132 in the case of M/s Shashiprakash Arecanut Company indicated that Sri A.S. Shashinath and two others had sold immovable properties formerly belonging to Sri R. Lakshman Swamy, proprietor of M/s Laxminarayana Betalnut Company, to discharge that concern’s debts to traders and commission agents. About 76 creditors acknowledged receipt of their dues by affixing their seals and signatures in the seized diary, which

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 also recorded sale proceeds received by cheque and in cash. One entry concerned industrial land at Survey No. 20/2, Machenahalli Industrial Area, Shimoga Taluk, allegedly purchased by the assessee company for ₹1.92 crore, comprising ₹1.65 crore paid in cash and ₹27 lakh by cheque. The property was registered before the Sub-Registrar, Shimoga, on 30 March 2011 under document No. SMG-1-106390-2010-11. The assessee accounted for only ₹29.11 lakh, inclusive of stamp duty and registration charges, and did not record the alleged cash component. The Assessing Officer therefore proposed to treat ₹1.65 crore as unexplained investment under section 69B of the Income-tax Act, 1961. Despite opportunities granted through the notice under section 142(1) dated 16 August 2018 and subsequent letters, the assessee did not initially respond to the proposal but filed a letter on 27 November 2018. In that letter, the assessee questioned the reliability of the entry on page 50 of the seized diary. It noted that, in the statement of Sri A.R. Shivaprakash recorded under section 132(4) on 24 November 2015, transactions on page 24 relating to VAT-Babu for ₹1,36,39,000 and on page 29 relating to K. Srinivas Bhat for ₹30,24,000 were specifically discussed, whereas the larger transaction on page 50 was not put to him. The assessee contended that the page 50 entries were subsequent insertions, were not present at the time of search, and may have been made to cover the concerned parties’ business transactions. It accordingly requested that the reassessment proceedings be dropped. 6. In his statement recorded under section 132(4) on 24 November 2015, Sri A. R. Shivaprakash explained the diary' s contents and the modus operandi reflected therein. The statement was illustrative, not exhaustive, and discussed only one or two entries; it also indicated that the sellers and buyers of the other properties recorded in the diary had followed the same

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 method. The assessee' s contention was therefore rejected. The Assessing Officer further observed that the statement showed that sites in Survey No. 2/1, Gopala, Shimoga, and industrial land at Machenahalli, Shimoga, had been sold for consideration exceeding the registered value, with the excess received in cash from various purchasers, including the assessee company. This conclusion was also supported by the application of the sale proceeds toward discharging the landowner Sri Lakshman Swamy' s liabilities and expenses, namely sundry creditors of ₹ 5,22,43,310, a SAMMCO Bank loan of ₹ 51,13,398, site- development expenses of ₹ 81,47,792, compensation of ₹ 1,15,00,000, and bank deposits of ₹ 20,00,000 in the names of late Sri A. S. Shashinath, Sri Pradeep G. Shastry, and Sri Srinivas Sharma, aggregating to ₹ 7,90,04,500. The repayment of ₹ 5,22,43,310 to Sri Lakshman Swamy' s sundry creditors was recorded in seized diary A- ARS/03, with the recipients’ signatures and seals acknowledging payment; many creditors also confirmed receipt during reassessment proceedings and reflected the transactions in their returns. On this basis, the Assessing Officer held that the assessee had purchased the Machenahalli industrial land for ₹ 1,92,00,000, of which ₹ 1,65,00,000 was paid in cash over and above the registered value. In summary, the sale proceeds received by cheque and in cash from the sites and industrial land were applied toward clearing Sri Lakshman Swamy's outstanding liabilities of ₹ 9,87,65,837 under the conditional agreement entered into with Sri A. S. Shashinath and others. Since liabilities of about ₹9 crore could not, according to the Assessing Officer, have been discharged without the cash component, the creditors’ acknowledgements were treated as proof that part of the sale consideration had been received in cash. The Assessing Officer therefore concluded that all purchasers, including the assessee company, had made

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 cash payments and brought ₹ 1,65,00,000, representing the cash paid for the Machenahalli industrial land, to tax as unexplained investment under section 69B of the Income- tax Act, 1961. 7. Before the learned CIT(A), the appellant contended that the addition of ₹1,65,00,000 was unjustified, resting solely on a seized diary that did not belong to the appellant. It maintained that it had neither received any cash over and above the registered sale consideration nor undertaken any unrecorded transaction, and that all transactions were duly reflected in its regular books and supported by registered sale deeds. According to the appellant, the diary was uncorroborated, and no independent evidence established that its entries represented cash receipts by the appellant. The appellant further submitted that the statements relied upon by the Assessing Officer were those of third parties and could not be used against it without affording an opportunity for cross-examination. It denied the contents of those statements and asserted that it had made no direct admission of receiving unaccounted cash. Mere diary entries, unsupported by evidence such as cash flows, bank deposits, or confirmations from buyers, could not by themselves sustain the addition. The appellant also contended that the liabilities repaid and expenses incurred were met from disclosed sources and regular business receipts, and that the Assessing Officer had failed to establish any nexus between the alleged cash receipts and the appellant. As the Department had not discharged its burden of conclusively proving receipt of unaccounted income, the appellant sought deletion of the addition of ₹1,65,00,000. 8. The learned CIT(A) held that the addition was supported by incriminating material seized during the search, namely a handwritten diary and loose

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 sheets containing systematic and contemporaneous entries relating to the appellant’s land transactions. The materials recorded the purchasers’ names, plot and survey numbers, transaction dates, cheque and cash components of the consideration, and the application of cash toward repayment of sundry creditors, settlement of loans, and development expenses. Relying on specific diary entries, the Assessing Officer found that cash receipts aggregating to ₹1,65,00,000 from the sale of the appellant’s land were not reflected in its regular books. The CIT(A) observed that the seized papers related to the appellant’s properties and business activities and that the appellant had not disputed that the recorded transactions concerned land owned and sold by it. Under the presumption applicable to documents found during a search, such documents and their contents are presumed to belong to the person to whom they relate and to be true unless rebutted by cogent evidence. The appellant merely denied ownership of the diary without producing documentary evidence or a plausible explanation disproving the entries or showing that the diary belonged to another person. Such an unsupported denial was held insufficient to rebut the presumption. The CIT(A) further found that statements recorded under oath from persons connected with the transactions corroborated the seized material by admitting receipt of cash over and above the registered value and explaining its use for repayment of liabilities and development expenses. Those statements were consistent with the diary and loose sheets, were not validly retracted, and were not shown by the appellant to be incorrect or involuntary. The appellant also failed to explain satisfactorily the source of the cash used to repay sundry creditors and meet the recorded expenses, or to reconcile those entries with its regular books. The difference between the registered and actual

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 consideration therefore remained unexplained. Considering the seized diary, loose sheets, corroborative statements, and surrounding circumstances cumulatively, the CIT(A) concluded that the appellant had received unaccounted cash not recorded in its books. Referring to section 292C of the Income-tax Act, 1961, the CIT(A) held that, in the absence of cogent rebuttal, the diary was rightly presumed to pertain to the appellant, and its contents could be relied upon. Accordingly, the Assessing Officer was justified in treating ₹1,65,00,000 as unexplained investment and bringing it to tax. Finding no infirmity in the assessment, the CIT(A) rejected the appellant’s grounds and confirmed the addition. 9. The Assessee is represented by Mr. Gowrish Bhargava K V, Chartered Accountant, who filed a paper book containing 239 pages and also placed a written submission amongst those pages. He also attached several judicial precedents therein. 10. On appeal, the learned AR relied on the written submissions and contended that a search was conducted in the case of M/s Shashiprakash Arecanut Company, during which the statement of its partner, Shri A.R. Shivaprakash, was recorded on 24 November 2015 and alleged incriminating material relating to Assessment Year 2011–12 was found. Although the search and the consequential assessment proceedings in that case had concluded, notice under section 148 was issued to the appellant only on 28 March 2018, nearly three years after the search. According to the learned AR, this delay casts serious doubt on the bona fides, jurisdictional validity, and basis of the reassessment under sections 147 and 148, particularly because the material relied upon arose from a search governed by the special provisions applicable to search assessments. It was

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 therefore submitted that section 153C, read with section 153A, alone applied and that the assumption of jurisdiction under sections 147 and 148 was invalid. The learned AR further contended that the learned CIT(A) failed to adjudicate or record any finding on the appellant’s specific legal ground challenging the invocation of section 147 instead of section 153C, thereby rendering the appellate order non-speaking, perverse, and unsustainable in law. 11. On merits, the learned AR submitted that the diary seized from M/s Shashiprakash Arecanut Company has little evidentiary value. The appellant, incorporated only on 11 January 2011, is not named in the diary; four entries pre-date its incorporation, while the remaining entries merely record dates and figures without identifying the payer. Nothing establishes that the appellant paid cash exceeding the recorded consideration of ₹27,00,000 for the industrial land at Survey No. 20/2, Machenahalli Industrial Area, Shimoga Taluk.The Assessing Officer merely presumed that the references to “Machenahalli,” the figures, and the dates represented cash payments by the appellant. The diary was seized from a third party, bears no signature or acknowledgement, and does not identify the appellant, the payer, the property, the nature of the transaction, or any cash payment. No independent evidence corroborates its contents or links the appellant to the alleged payment of ₹1,65,00,000. A third-party statement and diary entries, without corroboration or an opportunity for cross-examination, cannot constitute substantive evidence; the diary is therefore a “dumb document.” Reliance was placed on Dy. CIT v. Sunil Kumar Sharma (2024) 159 taxmann.com 179 (Kar), DCIT v. Vavipalayam Selvaraju Thennarasu, ITA No. 1153/Chny/2024, K.V. Laxmi Savitri Devi v. ACIT, 60 DTR 148, Sri Prakash Bhajandas Talreja v. DCIT, ITA Nos. 1061 to 1066/Bang/2023,

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 Sri Dinakara Suvarna v. DCIT, IT Appeal No. 16 of 2015, and Shri Dalavai Audikesavulu Srinivas, Legal Heir of Late Smt. D.A. Sathyaprabha v. DCIT, ITA Nos. 1049 and 1050/Bang/2025. These decisions hold, in substance, that lose sheets of third-party diary entries lacking names, dates, signatures, context, or corroboration cannot, by themselves, sustain an addition. The Assessing Officer acknowledged that Shri A.R. Shivaprakash’s statement under section 132(4) merely illustrated the alleged modus operandi and was not an exhaustive account of each transaction. Shri Shivaprakash stated that he had only made diary noting on the instructions of Shri Shashinath, a GPA holder who handled the transactions and later died. Shri Shivaprakash neither owned the property nor executed the transactions and had no independent knowledge of them. No statement was recorded from Shri Lakshman Swamy, the owner, or from the persons who executed the transactions. The Assessing Officer nevertheless inferred, without corroboration, that cash sale proceeds were used to discharge liabilities and expenses and that the appellant had made the alleged payment. The Revenue thus failed to discharge its burden under section 69B of proving, through cogent and independent evidence, that the appellant invested more than the consideration recorded in the sale deed. The complete material and statements relied upon were also not furnished despite requests; new parties, confirmations, and transactions were referred to only in paragraphs 3.5 to 3.7 of the assessment order. This denied the appellant an effective opportunity to rebut the material or cross-examine the witnesses, in breach of natural justice. The learned CIT(A) further misconstrued the case by repeatedly treating it as one in which the appellant sold land and received unaccounted cash, although the addition concerned an alleged cash payment for purchasing

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 land. The order is internally inconsistent: it treats ₹1,65,00,000 as unaccounted sale consideration but ultimately confirms the same amount as unexplained investment. It also wrongly applies section 292C to presume that diary ARS/5 belonged to the appellant, although it was seized from and admittedly belonged to Shri A.R. Shivaprakash, and incorrectly attributes the repayment of creditors and expenses to the appellant. Accordingly, the appellant submitted that the addition rests solely on assumptions, an uncorroborated third-party statement, and an unreliable diary, and is therefore unsustainable. It prayed that the order under section 250 be quashed and the addition of ₹1,65,00,000 be deleted. 12. The learned Departmental Representative supported the orders of the lower authorities. He submitted that the assessee’s contention that proceedings ought to have been initiated under section 153C, instead of section 148, was self-contradictory because the assessee also contended that the seized diary did not belong to it but was seized from and belonged to Shri A.R. Shivaprakash. According to him, section 153C would apply only if Shri A.R. Shivaprakash's Assessing Officer had recorded satisfaction that the seized documents belonged to or pertained to the assessee and had forwarded them to the assessee’s Assessing Officer. That was not the case here. The assessee’s Assessing Officer merely received information arising from the search, made independent inquiries, verified the material, and formed the belief that income had escaped assessment. Section 153C was therefore inapplicable, and the Assessing Officer had validly invoked section 148 of the Income-tax Act. 13. On the merits, the learned Departmental Representative submitted that the assessee had produced no material of substance either before the Assessing

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 Officer or the learned CIT(A) and had merely questioned the credibility of the assessment order and the information obtained during the search proceedings. Referring specifically to paragraph 3.1 of the assessment order, he submitted that the order adequately demonstrated how the Assessing Officer had examined the information received and the assessee’s objections. He further contended that the assessee had not requested cross-examination of any party during the assessment proceedings and had offered no substantive rebuttal, apart from making allegations against the Assessing Officer. He therefore submitted that the Assessing Officer's addition of ₹1,65,00,000, confirmed by the learned CIT(A), deserved to be upheld. 14. We have carefully considered the rival submissions, the orders of the lower authorities, the relevant material in the paper book, and the judicial precedents relied upon. On examining the facts, we find that the cited decisions, including the decision of the Rajasthan High Court relied upon by the assessee, are distinguishable and do not apply to the present case. 15. The assessee’s first objection is that the Assessing Officer ought to have invoked section 153C rather than section 148 of the Act. To examine this contention, it is necessary to consider the relevant facts. During FY 2015– 16, a search under section 132 was conducted in the case of M/s Shashiprakash Arecanut Company, and certain seized materials were forwarded to the Assessing Officer for verification in the cases of other parties. Those materials, read with the statement of Shri A.R. Shivaprakash recorded during the search, indicated that Shri A.S. Shashinath and two others had sold immovable properties formerly belonging to Shri R. Lakshman Swamy, proprietor of M/s Laxminarayana Betalnut Company,

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 to discharge that concern’s debts to traders and commission agents. About 76 creditors acknowledged receipt of their dues by affixing their seals and signatures in the seized diary. Shri Shivaprakash’s statement also explained the nature and contents of that document. 16. The diary recorded repayments to 76 creditors of M/s Laxminarayana Betalnut Company, each of whom acknowledged receipt by affixing a seal and signature. The diary was seized during the search of M/s Shashiprakash Arecanut Company. Verification of the seized material indicated that properties belonging to Shri R. Lakshman Swamy, proprietor of M/s Laxminarayana Betalnut Company, had been transferred to discharge the concern’s debts. The assessee purchased one such property—industrial land at Survey No. 20/2, Machenahalli Industrial Area, Shimoga—for a total consideration of ₹1.92 crore. According to the diary, the assessee paid ₹1.65 crore in cash and ₹27 lakh by cheque but accounted only for the cheque component and did not record the alleged cash payment. The diary further indicated that the proprietor applied the consideration received toward repayment of the concern’s creditors, who acknowledged receipt of the amounts. 17. However, the assessee itself maintains that the diary found during the search of Shri A.R. Shivaprakash belonged to him and merely recorded payments allegedly received from the assessee. No material belonging to or pertaining to the assessee was shown to have been seized during that search. Section 153C, which applies when material belonging to or pertaining to an assessee is found during a search of another person, was therefore inapplicable. Nevertheless, the information arising from the search indicated that income chargeable to tax had escaped assessment,

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 justifying proceedings under section 148. The assessee was furnished with the material and details sought during reassessment but did not challenge the validity of those proceedings before the Assessing Officer. It cannot simultaneously contend that no seized material belonged to or pertained to it and that proceedings should have been initiated under section 153C. The judicial decisions relied upon by the learned AR, including the Rajasthan High Court decision, are distinguishable because, unlike the present case, they concerned material found during a search that belonged to or pertained to the assessee. We therefore reject the objection to the invocation of section 148. Accordingly, Grounds No. 1- 3 of the appeal are dismissed.

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12 19. The assessee’s contention that the alleged payments pre-dated its incorporation is untenable. The assessee purchased and recorded the property in its books, while the seller confirmed a sale consideration of ₹1,92,50,000. The seller also explained that the assessee used ₹1,65,00,000 received in connection with the sale to discharge liabilities owed to 76 creditors, who confirmed receipt of the payments. 20. The burden therefore lay on the assessee to rebut this evidence with cogent material, including by producing the seller or otherwise disproving the alleged cash payment of ₹1.65 crore. Nevertheless, in the interests of justice, we restore grounds 4 to 8 to the Assessing Officer for fresh consideration, directing the assessee to substantiate its claim that it did not pay ₹1.65 crore to the seller. The Ld. AO is directed to consider the findings of the ld. CIT (A) as well as the Tribunal before deciding this issue. 21. The ground no. 9 concerning the levy of interest and initiation of penalty proceedings are consequential and premature, respectively, and are therefore dismissed. 22. In the result, the appeal filed by the Assessee is partly allowed. Order pronounced in the open court on 22nd October, 2026.

Sd/- Sd/- KESHAV DUBEY PRASHANT MAHARISHI JUDICIAL MEMBER VICE PRESIDENT Bangalore Dated: 22.10.2026 *TNTS*

ITA 701/BANG/2026 VASUNDARA RESIDENCY PVT LTD A Y 2011-12

Copy to: VASUNDARA RESIDENCY PVT LTD SHIVALI, CHURCH ROAD, 1 2ND CROSS, SHARAVATHI NAGAR, SHIVAMOGGA-577201, KARNATAKA INCOME TAX OFFICER, WARD 1 & TPS 2 INCOME TAX OFFICE, GOPALA, SHIVAMOGGA-577204, KARNATAKA 3 THE PCIT / CIT, 4 THE CIT(APPEALS) 5 THE D.R., ITAT, BANGALORE BENCH BY ORDER

ASSISTANT REGISTRAR I.T.A.T., BANGALORE

P G Digitally signed by P G RAJANI RAJANI Date: 2026.10.30 16:32:35 +05'30'