P.N. PANDIAN,CHENNAI vs. ACIT, CENTRAL CIRCLE-3(2), CHENNAI

The CIT (Appeals), Chennai - 18 failed to appreciate that having taken on record the fact of the appellant being a Power of Attorney appointed by M/s Annai Builders Real Estate P Ltd, the consequential addition made in the hands of the appellant in the absence of accrual of consequential income there on should accordingly be reckoned as bad in law.

The CIT (Appeals), Chennai 18 failed to appreciate that having not adhered to the prescription of faceless regime, the consequential assessment passed should be reckoned as bad in law.

The order of the CIT (Appeals), Chennai - 18 dated 14.12.2020 vide DIN & Order No. ITBA/APL/M/250/2020-21/1028985553(1) for the above mentioned Assessment Year is contrary to law, fact and in circumstances of the case.

Brief fact of the present case is that the assessee is an employee of M/s.Annai Builders Real Estate Pvt Ltd. A search and seizure operation u/s.132 of the Act was conducted on 04.10.2017 in the case of M/s.Annai Builders Real Estate Private Limited, the assessee and others during which the residence of the assessee was also covered.

Thereafter, search assessment order came to be passed u/s.153A of the Act for several years including A.Y.2014-15 & 2017-18. The assessee had filed his return of income on 16.08.2019 in response to notice u/s.153A of the Act by declaring total income at Rs.3,36,705/- for A.Y.2014-15 and Rs.2,71,800/- for A.Y.2017-18.

The assessee in the said return of income filed in response to Notice u/s.153A of the Act had claimed allowance u/s.10 of the Act from salary and Chapter VIA deduction aggregating to Rs.1,66,041/- & Rs.1,53,108/- for A.Y.2014-15 and A.Y.2017-18, which allowances came to be disallowed by the AO as the same were not claimed by filing a return of income u/s.139 of the Act.

The Income Tax Department during the course of search in the premises of the assessee had found and seized gold jewellery which was inventorised and valued at Rs.25,59,104/- by the Central Government approved valuer vide ANN/PS/PNP/JEW/F dated 04.10.2017.

The assessee being aggrieved by the aforesaid assessment order(s) passed for A.Y. 2014-15, 2017-18 & 2018-19, had challenged the same by filing

In relation to the addition of profits from sale of land by the assessee as income of the assessee, the assessee submitted that initially the land situated at Nanmangalam was purchased by Mrs.N.Jayalaxmi vide Sale Deed dated 22.07.1983 in Document No.3295/83 and thereafter had sold the same to Mr.R.Sridharan vide Sale Deed dated 22.08.2005 in Document No. 3986/2005. Mr.Sridharan vide general power of attorney dated 27.06.2008, registered as Doc No.1067/08, has appointed Assessee as his Power Agent to develop and sell the said property.

The assessee submitted that on bare reading of the General Power of Attorney dated 27.06.2008, it would be evident that the sole owner of the property is Mr.R.Sridharan and further the General Power of Attorney was executed to convey, sell, transfer and assign the property to the intending purchasers as and when required and further the owner of the said land had not received any consideration for executing this General Power of Attorney.

The assessee thereafter in the capacity of Power Agent had entered into Joint Development Agreement dated 09.08.2010 with M/s.Amman Constructions for construction of apartments on the said property and according to terms of said development agreement, the builder delivered the agreed share of apartments. The assessee however was unable to sell the property in the capacity of Power Agent and accordingly had granted letter of authorization to M/s.Annai Builders Real Estate Private Limited for marketing and sell the flats

Thus, the assessee submitted that above chain of events, it would be clear beyond doubt that the assessee had not earned any income out of the above transaction in view of the fact that the assessee had not paid any consideration to the Land Owner while executing the GPA and later he had given the letter of Authorisation to M/s.Annai Builders Real Estate Private Limited only on account of the assessee’s inability to sell the property.

With regard to the appeal for the A.Y.2018-19, the assessee before the ld.CIT(A) had contended that the gold seized from the premises of the assessee had belonged to the family members and the quantum of jewellery seized being 865.500 grams, the same was within the prescribed quantity of gold considered allowable as per the Instruction No. 1994 dated 11.05.1994 and accordingly pleaded that the nature and source for the gold seized stood explained by the assessee. Moreover, the assessee had submitted that gold jewellery seized was the 'Stridhan' of the woman in his family and from the Assessee's elder sister. The assessee also placed reliance on the customary practice of gifting women with the gold ornaments/jewellery at the time of 'Vidai' (farewell) and gifts on auspicious occasion of birth of child in substantiating the source of the same.

The Ld.CIT(A) vide impugned appellate order(s), in so far as the issue of disallowance of claim of allowance in terms of Section 10 of the Act from salary and Chapter VIA deduction aggregating to Rs.1,66,041/- & Rs.1,53,108/- for A.Y. 2014-15 & 2017-18 is concerned, had observed that the income of the assessee would necessarily have to be calculated in terms of Section 4, Section 5 r.w.s 17 r.w.s 10 of the Act and in view of the fact that the AO had not disputed the assessee’s claim of incurrence of expenditure towards rent coupled with the :-8-: ITA. Nos.:1143 to 1145 /Chny/2025 details of PF substantiated by the assessee, had directed the same to be deleted in the computation of taxable total income.

With respect to the addition of profit from sale of plots as income of the assessee, the Ld.CIT(A) had held that the income accruing from the sale of aforesaid plots would arise in the hands of the assessee and that mere reporting of the same in the respective return(s) of income filed M/s.Annai Builders Real Estate Private Limited would not automatically discharge the liability of reporting the same in the hands of the assessee herein.

With regard to the addition pertaining to the gold seized in the premises of the assessee, taking into consideration had estimated that the 500 grams of jewellery stood explained and the balance was to be sustained as unexplained investment in the hands of the assessee herein.

The assessee being aggrieved by the order of the Ld.CIT(A) for all three assessment years, had filed the present appeals. It is seen that the Registry had pointed out that there is a delay in filing the present 3 appeals against the order(s) of the ld.CIT(A) before us. During the course of hearing of the 3 appeals on 13.08.2025, had recorded the following observations in the order sheet”. “At the time of hearing this appeal , it is brought to our notice that the appeal has been belatedly filed by 1,432 days delay and Assessee has filed affidavit and application for condonation delay. Having considered the contents of the same, we find that there is sufficient cause for delay. 453 days delay stands exempted due to Covid-19 pandemic read with suo- motto order of Hon’ble Supreme court on the issue and the balance 973 days delay has been explained by the assessee which reasons will be stated in the final order while disposing their appeal and so, we condone the delay in filing of this appeal . According to the Ld.AR the addition made by the AO has already suffered taxation in the hands of M/s.Annai Builders Real estate pvt. Ltd. and therefore the addition made in the Hands of the assessee is bad in law because it is double addition. This fact need to be verified by the assessing officer and therefore we are calling for the remand report from jurisdictional assessing officer (JAO) ACIT central circle 3(2) Chennai. The Ld.AR to file all the details required to support his contention raised(Supra). Let the remand report given by AO by 08.09.2025, copy of which will be served upon the LD.AR and the AR to file his reply before 14.09.2025 Let the case be listed for hearing on 15.09.2025 as Part Heard. दोनों प#ों को खुले �ायालय म, सूिचत िकया। Both parties are informed in the open court.”

The Tribunal had accordingly called for a remand report from the office of the AO and the AO in the remand report dated 08.09.2025 had recorded the following observations:

Assessee’s Submissions before this Office: The ld.AR of the assessee, Shri S.Sridhar has made the submissions along with relevant documents before this office vide letter dated 22.08.2025. After careful consideration of the assessee’s submission and thorough verification of the assessment records, it is found that the sale proceedings for the properties at Nanmangalam land of Rs.31,36,000/- and Rs.19,56,500/- for the A.Y.2014-15 and 2015- 16 respectively has been declared by M/s.Annai builders Real Estate Pvt. Ltd. in their return of income for respective assessment years, but the sale proceeds of Rs.48,72,765/- for the A.Y.2017-18 has not been declared and considered for taxation in the hands of M/s.Annai builders Real Estate Pvt. Ltd. 7.1 The relevant excerpts of the assessment order for the A.Y. 2014-15 is attached below:

The assessee in response to the said remand report vide their rejoinder dated 23.09.2025 had submitted as follows: The assessee is in receipt of the remand report dated 08.09.2025 issued in consequence to the directions of the Hon'ble Income Tax Appellate Tribunal and in this regard, the Assessee / Respondent submits as under:

The assessing officer in the remand report with respect to the addition made for the assessment year 2014-15 had stated as under:

It is evident that the income assessed for the Assessment Year: 2014-15 has already been offered in the return of income filed by M/s.Annai Builders Real Estate Private Limited and therefore, it is pleaded for deleting the addition of Rs.29,38,839 for A.Y.2014-15 considering the above findings rendered by the AO in the remand report.

With respect to the addition made for the A.Y. 2017-18, the AO in the remand report had rendered findings that the sale of property at Nanmangalam had not been assessed to tax in the hands of the M/s.Annai Builders Real Estate Pvt.Ltd. and the same is extracted below: “In accordance with the above discussions made with respect to the assessment proceedings for the A.Y. 2017-18, the assessee has failed to produce any other documentary evidence with respect to the taxability of undisclosed income to the tune of Rs. 48,72,765/- relating to the sale of property at Nanmangalam.

In this regard, the assessee submits that the above findings rendered by the AO were based on mere suspicion and surmises solely based on the findings rendered in the assessment order without appreciating any of the facts placed before the AO during the remand proceedings.

The assessee further submits that he was only a power agent for the subject property and not the owner, thus submitting that the income should not be taxed in his hands.

The assessee during the remand proceedings had placed on record the 2 paper books filed before us, in support of his stand, wherein the details of the income offered by M/s.Annai Builders Real Estate Private Limited in the return of income filed for the A.Y. 2017-18 were captured including the financials, relevant ledger account as well as the breakup of the disputed sum added in the hands of the assessee herein confirming that the said sum were already offered to tax in the hands of the company.

The said details were not considered by the AO in a holistic manner and accordingly it is pleaded for taking into consideration the above submissions as well as the documentary evidence filed and further it is pleaded for deleting the addition made for the A.Y.2017-18 erroneously in the hands of the assessee herein and thus render justice.”

The Ld.AR during the course of hearing had argued that the documentary evidence filed before the AO during the remand proceedings would prove the fact of the sale consideration received sale of property at Nanmangalam were offered in the hands of the M/s.Annai Builders Real Estate Pvt Ltd for the respective assessment years and hence the addition made in the hands of the :-14-: ITA. Nos.:1143 to 1145 /Chny/2025 assessee as well as sustained by the Ld.CIT(A) would tantamount to double addition, which is contrary to the fundamental principles of taxation. The Ld. AR argued that the said sum / receipt is being subjected to twice in the hands of the assessee even after the rightful entity had already offered to tax in their return of income. The Ld. AR accordingly had pleaded to allow the appeal of the assessee.

Per contra, the Departmental Representative supported the remand report furnished by the AO as and pleaded for rejecting the contentions of the assessee.

We have heard rival contentions perused the material available on record and gone through the orders of the authorities below. This Tribunal vide its daily order dated 13.08.2025 had condoned the delay in filing the 3 appeals for the assessment years under consideration and hence the same are being adjudicated on merits.

The assessee is an employee of M/s.Annai Builders Real Estate Pvt Ltd. A search and seizure operation u/s.132 of the Act was conducted on 04.10.2017 in the case of M/s.Annai Builders Real Estate Private Limited, the assessee and others during which the residence of the assessee was also covered. Thereafter, search assessment order came to be passed u/s.153A of the Act for several years including A.Y.2014-15 & 2017-18. The assessee had filed his return of income on 16.08.2019 in response to notice u/s.153A of the Act by declaring total income at Rs.3,36,705/- for A.Y.2014-15 and Rs.2,71,800/- for A.Y.2017-18.

We find that the assessee had claimed allowance u/s.10 of the Act from salary and Chapter VIA deduction aggregating to Rs.1,66,041/- & Rs.1,53,108/- for A.Y.2014-15 and A.Y.2017-18, which allowances came to be disallowed by the AO as the same were not claimed by filing a return of income u/s.139 of the Act.

Further, the AO had added the following tabulated sums as profit from sale of land arising in the hands of the assessee in consequent to sale of flats to (a)Naveen Kuppusamy/ Singoda Kuppusamy (b) Chidambaram (c) Dharmaraj for the A.Ys.2014-15, 2015-16 & 2017-18.

We note that for the A.Y.2018-19 being the year of search (search date being 04.10.2017), the assessee had filed his return of income u/s.139 of the Act on 31.08.2018 in declaring total income of Rs.4,13,500/-.

It is noted that during the course of search in the premises of the assessee had found and seized gold jewellery which was inventorised and valued at Rs.25,59,104/- by the Central Government approved valuer vide ANN/PS/PNP/JEW/F dated 04.10.2017. The assessee during the course of lifting of Prohibitory Order on 22.11.2017 in response to the questions put forth regarding the source of the Gold Jewellery had stated that the same had belonged to his family members and that there were no purchase invoices / bills in support of the same. The AO passed the assessment order dated 30.12.2019 u/s.143(3) of the Act by making an addition of Rs.25,59,104/- being the value of the jewellery found and seized at the premises of the assessee in determining total income at Rs.29,72,604/-.

On appeal the Ld.CIT(A) in respect of claim of allowance u/s.10 of the Act from salary and Chapter VIA deduction aggregating to Rs.1,66,041/- & Rs.1,53,108/- for A.Y.2014-15 & 2017-18 is concerned, had observed that the income of the assessee would necessarily have to be calculated u/s.4, Section 5 r.w.s 17 r.w.s 10 of the Act and in view of the fact that the AO had not disputed the assessee’s claim of incurrence of expenditure towards rent coupled with the details of PF substantiated by the assessee, had directed the same to be deleted in the computation of taxable total income.

We also find that in respect to the addition of profit from sale of plots as income of the assessee, the Ld.CIT(A) had held that the income accruing from the sale of aforesaid plots would arise in the hands of the assessee and that mere reporting of the same in the respective return(s) of income filed M/s.Annai Builders Real Estate Private Limited would not automatically discharge the liability of reporting the same in the hands of the assessee herein.

Further, the addition pertaining to the gold seized in the premises of the assessee, the ld.CIT(A) taking into consideration that the 500 grams of jewellery stood explained and the balance was to be sustained as unexplained investment in the hands of the assessee herein.

Further, we find that the AO in the remand report had rendered a categorial finding that M/s.Annai Builders Real Estate Pvt. Ltd. had offered to tax the disputed sum added as income of the assessee in their return of income for the assessment year: 2014-15 & 2015-16 and the same is found to be accepted and not interfered with by the AO while passing the search assessment order(s) in terms of Section 153A of the Act in the hands of the said company. Thus, once this is an admitted fact and accepted by the Income Tax Department, the addition made in the hands of the assessee herein should not survive. Hence, as a result, we direct the AO to delete the addition made in this regard for A.Y.2014-15.

With regard to the similar addition made for A.Y.2017-18, we find that the unlike the observations recorded in the body of search assessment order(s) passed u/s.153A of the Act for the previous years in the hands of M/s.Annai Builders Real Estate Pvt Ltd, wherein the reporting of sums received from sale of plots at Nanmangalam being offered to tax in the respective return(s) of income, such observation were not recorded in the search assessment order passed u/s.153A of the Act for the simple reason that the return of income for the said assessment year was filed in terms of Section 139(4) of the Act on 13.03.2018 in declaring total income at Rs.3,87,72,610/- and search in their premises on 04.10.2017. Hence, the question of recording of offering “additional income” as recorded in the earlier assessment years would not arise for the said assessment year and the same would not automatically result in rejection of the assessee’s submissions.

We find that the assessee had filed the financials of the said company for the Assessment Year: 2017-18 during the remand proceedings, wherein the ledger account for the sales booked for the Nanmangalam project, the bifurcation of the same and the breakup of the same in the balance sheet demonstrates the fact that the company had indeed offered to tax the said sums in the return of income filed for Assessment Year 2017-18. We are convinced that the impugned income had already suffered tax in the hands of the company and separate addition made in the hands of the Assessee would only tantamount to double addition. Hence, as a result, we also direct the AO to delete the addition made in this regard for Assessment Year: 2017-18.

In so far as the appeal for the Assessment Year 2018-19 is concerned, we find that the Ld.CIT(A) had partly allowed the claim of the assessee by estimating the extent of explained jewellery to the tune of 500 grams by rejecting to accept the benchmark specified in the CBDT Instructions. We find that the ld.CIT(A) had not disproved the explanation offered by the assessee during the appellate proceedings and however had estimated the extent of jewellery for :-18-: ITA. Nos.:1143 to 1145 /Chny/2025 which source stands explained at 500 grams. According to us, the estimation made by the ld.CIT(A) is arbitrary and without any basis or justification. The assessee had explained the source for the jewellery relating to the family members who had received the jewellery at the time of their marriage. Considering the family background of the Assessee and further considering the findings of the ld.CIT(A) in accepting the stand of the assessee partly, we deem it fit that explanation offered by the assessee deserves to be accepted. Hence, we are inclined to delete the estimated addition sustained by the ld.CIT(A) by allowing the grounds of appeal filed by the Assessee.

In the result all the three appeals of the assessee are allowed.