M/S. H & F GAMES PVT. LTD.,BELLANDUR, MARATHAHALLI, BENGALURU. vs. DEPUTY COMMISSIONER OF INCOME TAX - CENTRAL CIRCLE - 1(2), BENGALURU, BENGALURU

7. The AO was not correct in not considering the interest on loan as allowable expenditure as the Appellant has identified the parties from whom loans has taken and also submitted their Name and PAN etc.

8. The A.O. has failed to send letters for confirmation of loans taken from Lenders and also interest paid to them by invoking provisions of section 133(6), as all the lenders. Name and Address were provided during the course of Assessment Proceedings by the Appellant.

9. The Appellant objects the levy of Interest u/s.234A and B consequential to the above additions.

10. The Appellant craves leave to add, to alter. to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal.

11. Wherefore on the above grounds and on such other grounds the Appellant prays the Appellate Authority to delete the additions as above and may pass such other as the Appellate Authority deems fit Grounds of appeal

for Assessment Year 2014-15: The Appellant objects to the Assessment Order on the following grounds in so far as it is prejudicial to the Appellant as it is opposed to law and circumstances of the case

1. The notice issued u/s.148 is bad in law as the A.O. has not supplied Reasons recorded for re- opening of Assessment along with notice u/s.148.

2. The Assessment order passed u/s.148 is bad in law as the A.O. has not recorded the satisfaction himself before issuing of notice Page 3 of 11 u/s.148. Whether the income has escaped as contemplated u/s.147 rws 148.

5. The A.O. was not correct in making addition for entire cash deposits into bank account to the tune of Rs.1,25,30,000/- without considering the Appellant explanation for sources for the same.

6. The A.O. was not correct in not considering the Interest on loan Rs. 1,46,07,000/-paid to lenders, which was claimed in Return of Income filed.

7. The AO was not correct in not considering the interest on loan as allowable expenditure as the Appellant has identified the parties from whom loans has taken and also submitted their Name and PAN etc.

9. The Appellant objects the levy of Interest u/s.234A and B consequential to the above additions.

10. The Appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal. Wherefore on the above grounds and on such other grounds the Appellant prays the Appellate Authority to delete the additions as above and may pass such other as the Appellate Authority deems fit 2. At the outset of hearing, it was noticed that the appeal filed by the assessee before the Tribunal is delayed. In this regard, assessee has filed an application dated 07.10.2025 stating the reason for delay in filing appeal before the Tribunal. On going through the above application, we noted that the assessee had sufficient reason and reasonable cause for delay in filing appeal before the Tribunal. Therefore, relying on the judgment of the Hon’ble Supreme Court in the case of Collector of Land Acquisition Vs. MST Katiji Page 4 of 11 and Others, (1987) 2 SCC 107 : 1987 (2) SC, the delay in filing the appeal is condoned.

3. The grounds raised in these appeals are similar in both the appeals and were heard together. For the sake of convenience, we first take up and its decision shall apply mutatis mutandis to the other appeals also except the figures reported in the order.

5. A search was conducted on 28.8.2017 in the case of Mr. D.S. Nandish. During the course of statement u/s. 132(4), Mr. Nandish reaffirmed the statement recorded u/s. 131 of the Act, and agreed to disclose additional income towards unexplained cash deposits. A survey was conducted on 04.05.2017 in the case of Mr. D.S. Nandish. During the course of statement u/s. 131 of the Act, Mr. Nandish he agreed for offer additional income towards unexplained cash deposits. Accordingly, the AO made addition u/s. 68 of the Act. Further the AO noted from the financial statements submitted by the Director during the scrutiny proceedings that the assessee has sundry creditors in the balance sheet and assessee has paid interest on such creditors without deducting TDS and claimed expenditure on return filed manually on Page 5 of 11 30.09.2021. The assessee had not furnished the details of business activity being carried out and as to how the interest expenses is connected to the business operation of the assessee company. The assessee was asked to justify the loans and advances appearing in the balance sheet. But the assessee could not substantiate and interest paid on such creditors was disallowed u/s. 37 of the Act as claimed by the assessee in its return of income manually filed on 19.01.2021 which was treated as defective. The AO further noted that no TDS has been made on such interest.

7. The ld. counsel for the assessee reiterated the submissions made before the lower authorities and submitted that before reopening the case u/s. 147/148, proper approval was not obtained as mandated u/s. 151 of the Act. He further submitted that the AO has wrongly issued notice u/s. 148. He further submitted that as Mr. D.S. Nandish has stated in the sworn statement that the entire cash deposits in the assessee's bank account are deposited by him, hence it should be assessed in the hands of Mr. Nandish, not in the hands of the appellant company. The AO has made addition of entire cash deposits in the bank account whereas the net income should have been added. The entire cash deposits are not the income of the assessee. The assessee as paid interest on such loans taken and interest paid thereon has not been allowed. Page 6 of 11 The AO has wrongly applied section 68 of the Act and the mandatory condition of section 68 has not been fulfilled. The ld. counsel relied on the judgment of the co-ordinate bench in the case of N9 sports & leisure Holdings Pvt. Ltd. & Hungry and Foolish Intellectual Proprieties Pvt. Ltd. Vs. DCIT, CC (1)(2) in to 1570/Bang/2024, to 1575 / Bang/ 2024 for the AY 2013-14 to 2015-16 and submitted that the facts are identical in the case of the assessee.

8. On the other hand, the ld. DR relied on the order of the lower authorities and submitted that during the course of appellate proceedings, the entire objections raised by the assessee have been complied and copy of reasons recorded were submitted to the assessee. The notice has been issued u/s 148 on the basis of statements recorded during the survey proceedings which is very much clear from the copy of reasons recorded but not on the basis of search, therefore the arguments advanced by the ld. AR regarding its validity is not correct. The ld. CIT(A) has incorporated in his order the reasons recorded and copy of approval granted by the Pr.CIT u/s. 151 of the Act. He further submitted that the assessee did not filed its return of income in response to the notice u/s 148 and on 19.01.2019 after expiry of long time period as allowed in the notice therefore the AO has rightly treated the return as defective return and income. The AO was not bound to consider the income shown reported in manual return. The ld. DR relied on the order in the case of Singhad Education Society reported in [2017] 84 taxmann.com290 (SC) and the judgment in the case of Abhisar Buildwell (supra) at para No.3.1 (iii). He further submitted that the AO before reopening the case has followed the procedure in entirety. The DIN is also quoted in the respective documents. He further submitted that during the course of assessment proceedings, the assessee was unable to provide the details of cash deposits in terms of section 68 of the Act. He further submitted that in the case of interest payment, the Page 7 of 11 assessee has not deducted TDS and genuineness of the payment is also doubted. Therefore, the AO has also doubted the genuineness of expenditure incurred by the assessee for want of proper evidence. Therefore the AO has correctly disallowed interest expenditures as claimed in the ITR.

" Reasons for reopening of the Assessment in case of M/s H & F Games P Ltd for Asst Year 2013-14 u/s 147 of I T Act 1.Brief Details of the assessee: The assessee is not filling its return of income.. 2.Brief Details of the information collected/received by the AO : Survey u/s 133A of the Income-tax Act, 1961 was carried out in the case of M/s Xentrix Studios P Ltd on 03.05.2017. During the survey, it was found that Shri D S Nandish had floated several companies/firms/business concerns and utilised the bank accounts of these entities for depositing unaccounted and unexplained cash. It was also found that none of these entities were carrying any business activities, nor maintaining any books of account for the transactions in bank accounts and also not filing their returns of income. Shri D S Nandish accepted in his statement that entire cash deposits in these bank accounts were made by him from his unaccounted sources of income. During survey, it was found that there were cash deposits of Rs.51,09,000/- in the bank account of M/s. H & F Games P. Ltd during the Fin Year 2012-13. In absence of any books of accounts, documentary evidence or explanation to Page 8 of 11 show the sources of unaccounted cash deposits, Mr D S Nandish admitted to disclose an additional income of Rs.51,09.,000/- in the hands of M/s H&F Games P. Ltd.N 9 Sports & Leisure Holdings P Ltd in the capacity of promoter/director of the company. 3.Analysis of information collected/ received : From the above information received, it is clear that M/s H & F GAMES P Ltd was having other income for Asst Year 2013-14 and had not declared the same in its return of income. 4.Enquiries made by the AO as sequel to information collected /received : On verification from the ITD system, it is found that no return of income filed for Asst Year 2013-14 by the assessee company does not declared its true income.

"68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : [Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:"

"From the definition of 'books' or 'books of account', it is abundantly clear that books of account means regular books of account maintained by the assessee for any previous year to record day to day transactions of its business including ledgers, day-books, cash books, account books and other books. The term other books does not mean to include some dumb documents like diary, note book or deleted entries of computer CPU. The term other books refers to any other books which are relevant and in consonance with ledgers, day-books, cash books, account books, etc. Therefore, in order to include any other books of account maintained by the assessee within the ambit of term 'other books', those books must be relevant in the business of the assessee to keep track of transactions. Hence, other books refers to in the ordinary course of any business of the assessee are stock books maintained in the ordinary course of business to record movement of stocks, books of account maintained for recording salary and wages as required under the Wages Act and other statutory books prescribed under any other law. But, it does not include diary, note book and some other dumb documents maintained by any person for any reason. Thus, diary, note book and retrieved data from computer CPU are not books or books of account as defined under section 2(12A) and hence, those diary, note book and retrieved data cannot be considered as books for invoking provisions of sections 68 and 69/69A/69C."