IDLI YARRISWAMY,BELLARY vs. DCIT, CENTRAL CIRCLE-2(1), BANGALORE

आयकर अपीलीय अधिकरण, बेंगलुरू पीठें, बेंगलुरू INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE BENCH: A BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA 2284-2288/Bang/2025 (निर्धारण वर्ा/Assessment Year : 2006-07, 2007-08, 2008-09, 2009-10 & 2010-11) IDLI YARRISWAMY DCIT, 25TH WARD, CENTRAL CIRCLE-2(1), BELLARY ROAD CIRCLE, C R BUILDING, BESIDE SANTHOSH QUEENS ROAD, Vs. BRILLIANT SCHOOL, BANGALORE-560001, HOSPET, BALLARI-583201, KARNATAKA KARNATAKA अपीलधर्थी Appellant प्रत्यर्थी Respondent Permanent Account Number of Assessee: ACDPY9259N अपीलधर्थी द्वारा/Appellant represented by: Sri. V Srinivasan Advocate प्रत्यर्थी द्वारा/Respondent represented by: Sri. Somnath S Ukkali - CIT DR सुनवाई की तारीख / Date of conclusion of hearing: 06-Aug-2026 घोषणा की तारीख / Date of pronouncement: 21-Oct-2026 आदेश / ORDER PER BENCH 1) These five appeals by the assessee, Mr. Idli Yarriswamy [the assessee/appellant], relate to assessment years 2006-07 to 2010-11 and raise common issues. As the parties addressed their arguments accordingly, this order disposes of the appeals. By a consolidated order dated 22 August 2025, the learned CIT(A)-15, Bengaluru [the learned CIT (A)], dismissed the assessee’s appeals for these assessment years against the assessment orders dated 31 December 2019 passed by the Deputy Commissioner of Income Tax, Central Circle-2(1), Bengaluru (“the learned AO”), under section 143(3) read with sections 153A and 254 of the Income-tax Act, 1961. The assessee is therefore in appeal for all these assessment years. 2) The Assessee has raised the following grounds of appeal: ITA No. 2284/Bang/2025: AY 2006-07 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.

3.1 The learned CIT[A] ought to have appreciated that the aforesaid notings made did not relate to the year under appeal and hence, no addition ought to have been made in the impugned order passed for the assessment year 2006- 07 under the facts and in the circumstances of the appellant's case.

3.2 The addition made is purely on suspicion and surmise, assumptions and presumptions and is contrary to the principle of natural justice and hence, the same deserves to be deleted.

ITA No. 2285/Bang/2025: AY 2007-08

3.1 The addition made is purely on suspicion and surmise, assumptions and presumptions rejecting the explanation tendered by the appellant in course of the assessment proceedings and hence, the same deserves to be deleted.

3.2 Without prejudice to the above, the impugned addition made by estimating the business income at 60% of the gross credits is highly excessive and unreasonable and the same deserves to be reduced substantially.

ITA No. 2286/Bang/2025: AY 2008-09

3.1 The addition made is purely on suspicion and surmise, assumptions and presumptions rejecting the explanation tendered by the appellant in course of the assessment proceedings and hence, the same deserves to be deleted.

3.2 Without prejudice to the above, the impugned addition made by estimating the business income at 60% of the gross credits is highly excessive and unreasonable and the same deserves to be reduced substantially.

ITA No. 2287/Bang/2025 AY 2009-10

3.1 The addition made is purely on suspicion and surmise, assumptions and presumptions rejecting the explanation tendered by the appellant in course of the assessment proceedings and hence, the same deserves to be deleted.

3.2 Without prejudice to the above, the impugned addition made by estimating the business income at 60% of the gross credits is highly excessive and unreasonable and the same deserves to be reduced substantially.

ITA No. 2288/Bang/2025 AY 2010-11

3.1 The addition made is purely on suspicion and surmise, assumptions and presumptions rejecting the explanation tendered by the appellant in course of the assessment proceedings and hence, the same deserves to be deleted.

3.2 Without prejudice to the above, the impugned addition made by estimating the business income at 60% of the gross credits is highly excessive and unreasonable and the same deserves to be reduced substantially.

4.1 The learned CIT[A] ought to have appreciated that the aforesaid notings made did not relate to the year under appeal and hence, no addition ought to have been made in the impugned order passed for the assessment year 2010- 11 under the facts and in the circumstances of the appellant's case.

4.2 The addition made is purely on suspicion and surmise, assumptions and presumptions and is contrary to the principle of natural justice and hence, the same deserves to be deleted.

5.1 The addition made is purely on suspicion and surmise, assumptions and presumptions and is contrary to the principle of natural justice and deserves to be deleted.

3) Briefly, a search and seizure operation under section 132 of the Income- tax Act, 1961 (“the Act”) was conducted in the assessee’s case on 25 October 2010. Subsequent proceedings under section 153A for the relevant assessment years culminated in assessment orders passed under section 143(3) read with section 153A on 31 March 2013. The learned CIT(A) dismissed the assessee’s appeals on 16 March 2015. On further appeal, the ITAT, by order dated 25 April 2018, restored the matters to the Assessing Officer for fresh adjudication, holding that the assessments had been framed without affording the assessee a reasonable and sufficient opportunity to be heard, as he was then an undertrial prisoner and could not represent his case. Fresh assessment and appellate orders were thereafter passed and are now before us. 4) For assessment year 2006-07, the assessee, an individual, was engaged on a small scale in earning commission from iron-ore trading and arranging transport. As he did not maintain books of account, he consistently offered income on an estimated basis. Following the search under section 132 on 25 October 2010, a notice under section 153A was issued on 18 November 2011. In response, the assessee filed his return on 4 October 2012, declaring income of ₹2,20,000. Thereafter, scrutiny notices were issued. 5) During the assessment proceedings, the learned Assessing Officer called for details of expenses, receipts, and the basis for estimating the returned income. As the assessee did not initially respond, the Assessing Officer made additions of ₹1,05,79,000 as unexplained expenditure and ₹19,24,796 as unexplained bank credits. However, in the restored proceedings, the assessee furnished the required details on 26 October 2019. 6) The addition of ₹1,05,79,000, also made in the original assessment, was based on seized material A/IY/3, a pocket diary containing about ten written pages with various notings and scribblings. The Assessing Officer observed that the assessee was a key associate of Mr. Mahesh, a risk operator in Ballari, and a partner in M/s Lakshmi Venkateswara Minerals and M/s Lakshmi Venkateswara Transport, in which Mr. Mahesh was a key person. According to the Assessing Officer, the diary recorded a cash payment of ₹1,05,79,000 for financial year 2005-06. The assessee denied ownership of the diary and its contents, disputed that the notings represented monetary transactions, and questioned the consistency of the recorded dates. The Assessing Officer rejected these contentions, observing that the assessee was involved in iron-ore transport, illegal mining, trading, and transportation; had produced no documentary evidence of purchases or related expenditure; and maintained no regular books of account. He therefore treated the loose sheets and diary as records of the assessee’s business and rejected the contention that the entries were merely dumb notings. As the diary had been recovered from the assessee’s premises, he also invoked the presumptions under sections 132(4A) and 292C of the Act. He distinguished the judicial precedents relied upon by the assessee because no books existed against which the seized entries could be correlated and held that circumstantial evidence could be relied upon where direct evidence was difficult to produce or required corroboration. Since the identity of the writer and the circumstances in which the document was prepared were within the assessee’s exclusive knowledge, the Assessing Officer held that the burden was on the assessee to rebut the entries. In the absence of such rebuttal, he made the addition of ₹1,05,79,000. 7) The second addition concerned the estimation of income from credits in the assessee’s Union Bank of India savings account ending in 2397. The Assessing Officer noted deposits of ₹41,255 on 4 September 2005, ₹1,00,000 on 5 October 2005, and ₹6,12,276 on 31 March 2006; the first two were cash deposits, and the third was a transfer. The assessee explained that ₹41,255 represented receipts from parties for commission- based iron-ore sales and that an estimated income of ₹1,05,000 had already been offered in return. He stated that the cash deposit of ₹1,00,000 came from savings accumulated since his employment began in 2001 and from the commission and transportation business commenced in 2004. He further explained that ₹6,12,276 was an advance from Lucky Minerals for procuring material; ₹2,00,000 was withdrawn on the same day and ₹4,12,000 on 3 April 2006, and the advance was repaid because the material could not be supplied. Thus, according to the assessee, the amount was a refunded advance and not turnover. The Assessing Officer rejected these explanations for want for books of account and documentary evidence. Considering the assessee’s trading activity and treating iron-ore purchases as an expense, he estimated net profit at 60% of the bank credits. From total credits of ₹4,52,119, he deducted the declared business income of ₹2,00,000 and added ₹2,52,119 as business income. Accordingly, by order dated 31 December 2019 under section 143(3) read with sections 153A and 254 of the Act, he assessed total income at ₹1,10,51,119 against returned income of ₹2,20,000 under both sections 139 and 153A, comprising additions of ₹2,52,119 as business income and ₹1,05,79,000 as income from other sources. 8) Aggrieved by the assessment order, the assessee appealed to the learned CIT(A), who confirmed both the addition of ₹1,05,79,000 and the addition to business income, and dismissed the appeal. The assessee is therefore before us on appeal. 9) The learned authorised representative, Shri V. Srinivasan, Advocate, filed a 98-page paper book comprising the panchanama dated 25 October 2010; copies of the assessee’s returns of income; the chronological orders of the Assessing Officer, the CIT(A), and the ITAT in the first round of proceedings; and the assessee’s reply in the restored assessment proceedings. He relied on the seized material at pages 56 to 66, the decision of the Hon’ble Supreme Court in Abhisar Buildwell Private Limited, 454 ITR 212, and the written submissions filed before the learned CIT(A) at pages 86 to 98. 10) The learned authorised representative submitted that no incriminating material was found during the search and, therefore, no assessment could have been made under section 153A of the Act. Referring to the seized material at pages 56 to 66 of the paper book, he stated that page 56 was merely the diary cover; page 57 contained only the seizure notation; page 58 recorded a mobile number, 9342108992, without financial information; page 59 contained the address of McNally Bharat Engineering; page 60 bore the dates 5 August 2010, 10 November 2009, and 10 November 2005 but no financial information; page 61 was similar to page 59; and page 62 likewise contained no financial information. Page 63, according to him, recorded cash of ₹16,30,270 and expenses of ₹16,32,188, which did not support the addition of ₹1,05,79,000. He submitted that none of the remaining pages contained material supporting that addition. Referring to paragraph 5 of the original assessment order, in which the Assessing Officer stated that seized material A/IY/3 recorded a cash payment of ₹1,05,79,000 for financial year 2005-06, he contended that no such payment appeared in the seized material. The addition, therefore, was not based on incriminating material found during the search and deserved to be deleted. 11) As regards the second addition, the learned authorised representative submitted that there was no basis for estimating income at 60% of the bank credits, as the deposits had been fully explained and the assessee had already offered income arising from them. He therefore contended that the addition, being subsumed in the returned income, should be deleted. 12) So far as the estimation of profit at the rate of 60% of such bank deposit, he left the issue to the wisdom of revenue and did not advance any further argument. 13) Shri Somnath S. Ukkali, learned CIT-DR, relied on the orders of the Assessing Officer and the learned CIT(A). Regarding the addition of ₹1,05,79,000 as unexplained income, he submitted that it was based on loose sheets found during the search. 14) Regarding the second addition, he submitted that, since the assessee had not maintained books of account, the authorities were justified in estimating business income at 60% of the bank deposits. Referring specifically to paragraph 7.3 of the learned CIT(A)’s order, he contended that the assessee was engaged in the iron-ore mining, trading, and transportation business and that credits aggregating approximately ₹16.5 crore were found in four bank accounts. He argued that the Assessing Officer had adopted a reasonable approach by treating only 60% of the deposits as unexplained business income. He further submitted that it was implausible for a person carrying on business of nearly ₹17 crore to produce no supporting evidence, even during the second round of proceedings. He therefore urged that the addition be sustained. 15) During the hearing, the learned CIT-DR was asked to identify the figure of ₹1,05,79,000 in the seized material. He stated that he relied on the assessment order and the statements recorded therein as the basis for the addition. 16) We have carefully considered the rival submissions and perused the orders of the lower authorities. 17) Ground No. 1 is general in nature. As no arguments were advanced, it is dismissed. 18) Ground No. 2 challenges the legality of the search. The learned authorised representative submitted that, in view of the Explanation to section 132, the validity of the search could not be challenged before the Coordinate Bench and, therefore, did not press this ground. Accordingly, Ground No. 2 is dismissed as not pressed. 19) Ground No. 3 concerns the addition of ₹1,05,79,000 made by the Assessing Officer. To examine this issue, we refer to paragraph 5 of the original assessment order dated 31 March 2013, which reads as follows: “5. Mr. Yarriswamy is a key associate of Mr. Mahesh, a risk operator in Ballari. He is also a partner in M/s Lakshmi Venkateswara Minerals and M/s Lakshmi Venkateswara Transports, in which Mr. Mahesh is a key person. During the search in the case of Mr. Yarriswamy, seized material A/IY/3 disclosed a cash payment of ₹1,05,79,000 for financial year 2005-06. A detailed show-cause notice under section 142(1), dated 15 March 2013, required the assessee to reply by 20 March 2013. The assessee furnished no submission. When he appeared on 23 March 2013, he was questioned about the matter but offered no explanation. Accordingly, ₹1,05,79,000 is added as unexplained expenditure in the hands of Mr. Yarriswamy.” 20) In the set-aside assessment proceedings, the assessee denied ownership of the diaries and disputed their contents. He also denied that the notings represented monetary transactions, questioned the consistency of the recorded dates, and contended that the addition made in the original assessment was unsustainable. Thus, he denied having undertaken any monetary transaction reflected in the seized material. 21) We have also perused the assessee’s letter dated 26 October 2019, filed before the Assessing Officer. The assessee stated that he carried on small-scale iron-ore trading and transport commission activities, maintained no books of account, and therefore offered income on an estimated basis. In paragraph 12, he further stated that he had not admitted any undisclosed or additional income for any assessment year during the search. However, his partner, Shri K. Mahesh Kumar, by letter dated 28 March 2011, agreed to offer ₹25 crore in the hands of various firms and individuals of the group, including ₹1 crore in the assessee’s case for assessment year 2010-11. To honour that declaration, although it had been made without consulting him and despite no such income having been earned, the assessee offered ₹1 crore for assessment year 2010-11 in respect of his proprietary concern, M/s Jambunatheshwara Minerals. He maintained that no additional income was offerable for assessment year 2006-07 because no material indicated any undisclosed income. 22) Upon examining the seized material recorded in the paper book, we find no entry for ₹1,05,79,000 or any comparable amount. The Assessing Officer neither identified any specific seized document nor referred to any statement made by the assessee during the search, the original assessment proceedings, or the set-aside proceedings that supported the addition. Thus, the assessment order does not disclose either the basis of the addition or the seized document relied upon. 23) Even before us, the learned CIT-DR could not identify any evidence in the seized material that even remotely supported the addition of ₹1,05,79,000 to the assessee’s hands. 24) The learned CIT(A) likewise found no incriminating material during the search to support the addition of ₹1,05,79,000 as unexplained expenditure. Paragraph 6.3 of the appellate order contains no reference to such material. As recorded at page 19 of 38, the learned CIT(A) was specifically confronted with the contention that the seized material contained no monetary figures supporting the addition. Nevertheless, without identifying any seized material evidencing the amount, the learned CIT(A) confirmed the addition. 25) It is settled law that an addition in a concluded assessment may be made only on the basis of incriminating material found during the search. Here, no such material remotely indicates that ₹1,05,79,000 constituted the assessee’s unaccounted or undisclosed income. The addition is therefore based solely on conjecture and cannot be sustained. The decision of the Hon’ble Supreme Court in Abhisar Buildwell Private Limited [Supra] squarely addresses the issue in the assessee’s favour. 26) Accordingly, we find no basis to sustain the addition of ₹1,05,79,000. We allow Ground No. 3 because no incriminating material was found during the search on 25 October 2010 for assessment year 2006-07. As the assessment for that year had concluded, it could be disturbed only on the basis of incriminating material indicating the assessee’s unaccounted income. 27) Ground No. 4 concerns the addition of ₹2,52,119, arising from the estimation of business income at 60% of the credits in the assessee’s bank account. 28) In this regard, the learned AO, while considering the relevant assessment years, observed that the assessee was engaged in the trading and transportation of iron ore but had not maintained books of account. Even during the search, original assessment, and remand proceedings, the assessee produced neither books of account nor documentary evidence supporting the purchase of iron ore or transportation expenses. The search findings further indicated that the assessee purchased iron ore from unregistered dealers, apparently without the requisite permits. As the assessee failed to establish otherwise, the cost of such purchases could not be allowed as expenditure. The explanation that the bank credits represented cash on hand and past savings was also rejected for want of documentary evidence. However, the Assessing Officer accepted that the same income could not be taxed twice. He therefore deducted the income already offered by the assessee and estimated income at 60% of the balance bank deposits.

29) When the matter came before the learned CIT(A), he observed in paragraph 7.4 of the consolidated order that the assessee was engaged in illegal iron-ore mining and transportation. He noted that the purchases were also made without valid government permits and were therefore unlawful, as were the related transportation and other expenses. In these circumstances, he held that the Assessing Officer was justified in estimating income at 60% of the bank deposits. He further observed that the assessee’s actual receipts were likely higher, as income from the unaccounted sale of iron ore might also have been received outside banking channels. Since the Assessing Officer considered only the bank credits and estimated 60% of them as income, the learned CIT(A) upheld the Assessing Officer’s determination. 30) Upon careful consideration, we find that the assessee produced no evidence before us or the lower authorities, despite this being the second round of proceedings. Although the assessee claimed to have carried on business involving turnover of several crores of rupees, he maintained no books of account and furnished no evidence of purchases, the parties from whom goods were procured, the goods traded, or the buyers. Apart from stating that certain bank credits represented business receipts, the assessee provided no material concerning his trading activities. It is therefore evident that he failed to substantiate those activities with any supporting evidence. It is also undisputed that the iron ore sold by the assessee had to be extracted from mines, entailing excavation costs, royalty payments, and transportation expenses; however, no evidence of these expenses was produced. 31) In the absence of any evidence from the side of the assessee in two rounds of litigation before 6 authorities, we do not have material to upset the orders of the ld Lower authorities. Thus, we wholly agree with the orders of the ld. Lower authorities in estimating the assessee's profit at 60% of the bank credits, reduced by the income already offered by the assessee. 32) However, the Ld. AO has held that there should be no double addition and has been careful about this aspect. dl. AR submits that the transfer of ₹6,12,276 on 31 March 2006 was explained as an advance from Lucky Minerals for procuring material. As the material could not be supplied, ₹2,00,000 was returned the same day and ₹4,12,000 on 3 April 2006. The advance was thus repaid. Accordingly, this amount should be reduced from the amount of addition. The Ld AO has directed accordingly. Ground no 4 is thus partly allowed. 33) Ground No. 5, concerning the levy of interest, is consequential and is therefore dismissed. Ground No. 6 is general in nature; as no arguments were advanced, it is also dismissed. Accordingly, the assessee’s appeal for assessment year 2006-07 is partly allowed. 34) For assessment year 2007-08, the learned Assessing Officer found that the assessee had deposited ₹21,59,635 in his bank account. The assessee explained these deposits as recorded in paragraph 5.2 of the assessment order. After considering the explanation, the Assessing Officer estimated business income at 60% of the total bank credits and allowed credit for ₹2,00,000 already offered as income in the return. The assessee had declared business income of ₹2,00,000 in the returns filed under both sections 139 and 153A of the Act. Applying the 60% rate to the total credits, the Assessing Officer computed income at ₹12,95,781 and, after deducting the income already offered, made an addition of ₹10,95,781. The learned CIT(A) confirmed the addition. Having examined the deposits tabulated at page 4 of the assessment order, we accept the bank credits of ₹21,59,635, less ₹2,00,000 already offered as business income, as the assessee’s undisclosed receipts. Thus, for the reasons given by us in deciding Ground No. 4 of the appeal for AY 2006-07, we confirm the estimate of income at 60% of those receipts and direct the Assessing Officer to retain an addition of ₹10,95,781/- as business income over and above the ₹2,00,000 already declared. Accordingly, Ground No. 3 is dismissed. 35) Ground No. 1, being general in nature, was not pressed. Ground No. 4 is consequential, and Ground No. 5 is general; both are dismissed. Accordingly, the assessee’s appeal for assessment year 2007-08 is partly allowed. 36) In the assessee’s appeal for assessment year 2008-09, ITA No. 2286/Bang/2025, the learned Assessing Officer found that the assessee had made three cash deposits totalling ₹1,10,000 into his bank account. He estimated business income at 60% of those deposits and made an addition of ₹66,000. For reasons given in Ground No. 4 of the appeal for AY 2006-07, we confirm the addition of ₹66,000, and Ground No. 3 is dismissed. 37) Ground Nos. 1, 2, and 6, are either general or consequential, are dismissed. 38) Accordingly, ITA No. 2286/Bang/2025 for assessment year 2008-09 is partly allowed. 39) ITA No. 2287/Bang/2025 is the assessee’s appeal against the addition of ₹1,33,530, representing 60% of the unexplained deposits in his bank account, as confirmed by the learned CIT(A). The account showed cash deposits of ₹1,00,000 on 13 May 2008 and ₹50,000 on 11 March 2009, together with a clearing credit of ₹72,550 on 23 August 2008. The assessee contended that these amounts were covered by the commission income already disclosed. He had offered business income of ₹3,30,150 in the return filed under section 139 of the Act and revised it to ₹5,88,330 in the return filed under section 153A. For the reasons given by us in Ground No. 4 of the appeal for AY 2006-07, we confirm the addition of ₹1,33,530. Accordingly, Ground No. 4 and the sub-grounds under Ground No. 3 are dismissed. 40) Ground Nos. 1, 2, 5, and 6, being either general or consequential in nature, are dismissed. 41) In the result, the assessee’s appeal for assessment year 2009-10 is partly allowed. 42) ITA No. 2288/Bang/2025 is the assessee’s appeal challenging three additions: first, the estimation of 60% of the bank credits as business income; second, the addition of ₹3,12,84,800 as unexplained expenditure based on seized document Annexure A/IY/03, which the assessee contends could not have been made in his hands; and third, the addition of ₹2,20,955 as unexplained expenditure. 43) Ground No. 1 is general in nature. Ground No. 2, challenging the validity of the search, was not pressed. Ground No. 6 concerns the levy of interest under sections 234A, 234B, and 234C of the Act, while Ground No. 7 is general in nature. These grounds are accordingly dismissed. 44) Ground No. 3 challenges the addition of ₹6,15,74,800, arising from the estimation of 60% of the credits in the assessee’s bank accounts as business income. The assessee declared total income of ₹2,72,61,356 in the return filed under section 139 of the Income-tax Act and ₹3,74,17,199 in the return filed under section 153A on 4 October 2012.

The assessment completed under section 143(3) read with section 153A determined total income at ₹23,39,04,143. In the original assessment proceedings, the learned Assessing Officer added ₹16,49,81,871 as unexplained bank credits, ₹3,12,84,118 as unexplained expenditure, and ₹2,20,955 as unexplained expenditure, for a total of ₹19,64,86,944. 45) We first consider Ground No. 3, relating to the addition of ₹6,15,74,800. The assessee maintained six bank accounts and stated that he commenced iron-ore trading during the year. He offered business income of ₹2,68,14,323 from that activity, disclosing sales of ₹13,90,44,890 and transportation receipts of ₹32,21,520. In the return filed in response to the notice under section 153A, he estimated business income at ₹3,70,14,323 on total turnover of ₹15,13,56,610. However, he neither maintained nor produced books of account before the learned Assessing Officer. The assessee contended that most bank credits represented receipts from iron-ore sales to five parties. Lakshmi Vilas Bank account No. 13 contained credits of ₹14,76,35,090, against disclosed sales of ₹13,75,92,290, and therefore, according to him, reflected no unaccounted income. In Union Bank of India account No. 23902, he stated that the only cash deposit was ₹4,50,000 on 2 January 2010 and that transportation receipts of ₹32,21,520 had already been offered in the original return. As regards ICICI Bank account No. 135, opened on 25 November 2009, he explained that the initial cash deposit of ₹20,00,000 on 9 December 2009 came from cash on hand. That amount was withdrawn on 24 December 2009, and ₹25,00,000 was deposited on 25 February 2010. He further claimed that the additional income of ₹1,00,00,000 offered under section 153A covered these deposits, leaving no scope for a separate addition. He gave a similar explanation for the cash deposit of ₹50,00,000 made on 8 December 2009 in Axis Bank account No. 70544 and for the cash deposit in Axis Bank account No. 5880. He therefore submitted that, against disclosed turnover of ₹13,90,44,890, aggregate deposits of ₹16,49,81,871 in the six accounts could not be treated as unexplained income. 46) The learned Assessing Officer found aggregate deposits of ₹16,49,81,871 in these bank accounts and estimated 60% thereof, or ₹9,89,89,122, as business income. After allowing credit for ₹3,74,14,323 already declared in the return, he added the balance of ₹6,15,74,800. The learned CIT(A) confirmed the addition. 47) For the reasons stated while deciding Ground No. 4 for assessment year 2006-07, we find that the assessee failed to produce any evidence of purchases or expenses relating to mining, excavation, royalty, or transportation. Despite two rounds of proceedings before the lower authorities and the present appeal, the assessee has furnished no supporting material. In these circumstances, the Assessing Officer was justified in estimating business income at 60% of the bank credits. Given the unlawful nature of the business, the assessee cannot claim deductions for expenditure prohibited by law under Explanation 1 to section 37 of the Act. We therefore find no reason to interfere with the learned CIT(A) 's order. 48) For the reasons stated in earlier assessment years, we confirm the business profit of ₹6,15,74,800 at 60%, as estimated by the learned Assessing Officer. Ground No. 3 is accordingly dismissed. 49) Ground No. 4 challenges the addition of ₹3,12,84,800 as unexplained expenditure based on seized document Annexure A/IY/03. The assessee contends that no incriminating material supporting the addition was found during the search and that, as in assessment year 2006-07, the addition should therefore be deleted. 50) Paragraph 6 of the original assessment order dated 31 March 2013, passed under section 143(3) read with section 153A of the Income-tax Act, records that incriminating material was found during the search in the assessee’s case. According to the learned Assessing Officer, one such document, Annexure A/IY/03, recorded a cash payment of ₹3,12,84,118 by the assessee during financial year 2009-10. 51) The learned authorised representative referred to the assessee’s letter dated 22 November 2019 filed before the learned Assessing Officer. In paragraph 3.1, the assessee addressed the proposed addition of ₹3,12,84,118. He submitted that paragraph 6 of the original assessment order made the addition on the ground that seized material A/IY/03 recorded cash payments during the year, although he did not have access to a copy of the material seized on 25 October 2010. The material was a pocket notebook containing about ten written pages of notings and scribblings. The assessee denied that the entries were in his handwriting, said he did not know who made them, and suggested that a staff member or another person working with him at the relevant time might have written them. He further contended that the material did not establish any cash payment of ₹3,12,84,118. That figure was derived by aggregating ₹1,53,65,559 appearing against 10 November 2009 on page 4 and ₹1,59,18,559 appearing against the same date on page 5. According to the assessee, the entries contained only figures and dates, with no indication, rupee symbol, or currency abbreviation showing that the figures represented money. They therefore did not establish any cash payment and constituted only a dumb document. He further stated that page 4 contained the names Mahesh, referring to Shri K. Mahesh Kumar, and K. Sadasiva, his partners in Sri Lakshmi Venkateswara Minerals and Sri Lakshmi Venkateswara Transport, firms engaged in iron-ore trading and transportation. As more than ten years had elapsed and the entries were not in his handwriting, he could not recall their purpose. Similar entries appeared under “KKR,” referring to K. K. Ramesh Kumar, and “IY Sir,” referring to the assessee, I. Yarriswamy, bearing the same date but different figures. He argued that the reference to himself as “IY Sir” further indicated that he had not written the entries. He therefore requested the Assessing Officer not to presume that the figures represented cash payments or unexplained cash expenditure incurred by him during the year and not to make the proposed addition. 52) We have carefully considered the assessee’s contentions before the learned Assessing Officer. The impugned seized documents are placed at pages 26 and 27 of the paper books and contain the names of four partners. Against “KMSR” and “KSR,” the date 5 August 2010 appears with the figures 96.06.223. Against the date 10 November 2009, the figures 1,53,65,559 and 1,05,79,000 appear for “KM Sir” and “KSL,” respectively. On the next page, the other two partners, “KK Sir” and “IY Sir,” appear. Against the date 5 August 2010, the figures 59.33.601 and 77.31.233 are recorded for “KK Sir” and “IY Sir,” respectively. Against the date 10 November 2009, the figure 1,59,18,559 appears for “KK Sir,” while 73,95,744 appears for “IY Sir” against 10 November 2010. Significantly, the assessee’s own name is recorded as “IY Sir,” making it unlikely that he authored the entries. Further, the nature of the figures is not explained. Even if they are presumed to represent financial transactions, the figures relating to the other three people aggregate to ₹4,18,63,118, which does not correspond with the addition made by the learned Assessing Officer. The source and basis of the addition are therefore unascertainable. Accordingly, we find no justification for sustaining an addition not supported by the seized material available with the Assessing Officer. The assessee raised this contention before the learned CIT(A), as recorded in paragraph 6 of the appellate order, but it was not considered, and the addition was confirmed. We therefore hold that the lower authorities sustained the addition of ₹3,12,84,800 without adequate supporting material. Ground No. 4 is accordingly allowed. 53) Ground No. 5 concerns the addition of ₹2,20,955 as unexplained expenditure, which is similar to the addition of ₹3,12,84,118 considered above. Neither the learned Assessing Officer nor the learned CIT(A) could reconcile this amount with the seized material. For the reasons given while allowing Ground No. 4, we also direct that the addition of ₹2,20,955 be deleted. Ground No. 5 is accordingly allowed. 54) In the result, the assessee’s appeal for assessment year 2010-11, ITA No. 2288/Bang/2025, is partly allowed. 55) In the result, all the above appeals are disposed of as indicated above. Order pronounced in the open court on 21st October, 2026.

Sd/- Sd/- SOUNDARARAJAN K. PRASHANT MAHARISHI JUDICIAL MEMBER VICE PRESIDENT Bangalore Dated: 21.10.2026 *TNTS* Copy to: IDLI YARRISWAMY 25TH WARD, 1 BELLARY ROAD CIRCLE, BESIDE SANTHOSH BRILLIANT SCHOOL, HOSPET, BALLARI-583201, KARNATAKA DCIT, CENTRAL CIRCLE-2(1), C R BUILDING, 2 QUEENS ROAD, BANGALORE-560001, 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

Digitally signed P G by P G RAJANI Date: RAJANI 2026.10.30 16:19:32 +05'30'