MADHUSUDAN REDDY PASHAM,HYDERABAD vs. ACIT, CIRCLE-9(1), HYDERABAD

The learned CIT(A) ought to have appreciated that the expenditure incurred by the appellant is in the course of ordinary business and the same is allowable u/s 37(1) of the Act.

The learned CIT(A) ought to have appreciated that the profit arises on the land transaction has been duly accounted in the assessee which is evident from the Profit & loss A/c filed before during the course of first appeal proceedings.

The learned CIT(A) ought to have appreciated that the cash deposits for the impugned assessment year are nothing but the advances received and sales made by the appellant during the year under consideration.

Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

During the course of hearing, CA, P. Murali Mohan Rao, Learned Counsel for the Assessee submitted that, in the grounds of appeal ITA.No.427/Hyd./2025, the assessee has raised general ground nos.1, 2, 5 and 18, which need not be adjudicated, to which, the Learned DR has no objection. We are, therefore, of the view that, ground of appeal nos.1, 2, 5 and 18 need not be adjudicated as they are general in nature.

Brief facts of the case are that, the assessee is an individual and engaged in real estate business, filed the original return of income on 24.02.2007 declaring total

Under identical set of facts, for the assessment year 2007-2008, the Assessing Officer has made additions on account of unexplained investment/deficit cash balance amounting to Rs.8,66,20,135/-; addition on account of profit earned out of real estate transactions amounting to 10 ITA.Nos.427, 428 & 429 /Hyd./2025 Rs.1,79,27,807/-; addition on account of undisclosed profit earned out of real estate transaction amounting to Rs.80 lakhs and addition of unexplained cash credits u/sec.68 of the Act amounting to Rs.2,09,64,300/- and assessed the total income of the assessee at Rs.13,35,12,240/- vide order dated 24.12.2018 passed u/sec.143(3) r.w.s.153A r.w.s.254 of the Income Tax Act, 1961.

Similarly, for the assessment year 2008-2009, under identical set of facts, the Assessing Officer has made additions on account of unexplained investment/deficit cash balance amounting to Rs.2,03,91,600/-; addition on account of profit earned out of real estate transactions amounting to Rs.3,44,80,000/-; addition on account of undisclosed profit earned out of real estate transaction amounting to Rs.88 lakhs and addition of unexplained cash credits u/sec.68 of the Act amounting to Rs.8,61,09,145/- and assessed the total income of the assessee at Rs.14,97,80,750/- vide order dated 24.12.2018 passed u/sec.143(3) r.w.s.153A r.w.s.254 of the Income Tax Act, 1961.

In a nut-shell, the Assessing Officer has made the following additions as per the old assessment order passed u/sec.143(3) r.w.s.153A of the Income Tax Act, 1961 vide order dated 31.12.2019 in the hands of the assessee i.e., Madhusudan Reddy Pasham for the assessment years 2006-2007, 2007-2008 and 2008-2009 and as per the new assessment order dated 24.12.2018 passed u/sec.143(3) r.w.s.153A r.w.s.254 of the Income Tax Act, 1961, pursuant to the directions of the Tribunal. A.Y. Additions made under Old New respective Heads Assessment Assessment. Additions. Additions 1. Unexplained investment/deficit 89,35,110 1,10,74,435 cash balance 2006- 2. Profit earned out of 2007 real estate transaction 3,00,000 28,00,000 3. Unexplained cash credits u/sec.68 of the 1,00,94,500 1,00,94,500 IT Act 1. Unexplained investment/deficit 15,23,285 8,66,20,135 cash balance 2. Profit earned out of real estate transaction 1,37,03,257 1,79,27,807 2007- 3. Disallowance of loss 3,35,01,000 -- 2008 4. Undisclosed Profit

Aggrieved by the Order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.

Ground nos.1 to 6 are general in nature and do not require any specific adjudication.

The first issue that came up for our consideration from ground numbers 7 to 11 of the assessee's appeal is addition of Rs. 1,10,74,435/- towards unexplained investment.

The facts with regard to the impugned dispute are that, during the course of search proceedings on 09.10.2007, certain incriminating materials were found and seized from the premises of the assessee. During the course of assessment proceedings, the A.O. observed that, as per the seized material, the assessee has made various expenditures and advance for purchase of land amounting to Rs. 2,86,74,435/-. Details of analysis of seized material and corresponding payment has been tabulated in page numbers 4 to 6 of the assessment order. The total of some payments aggregating Rs. 2,86,74,435/- was computed by the A.O. The A.O. had also considered the source for the above payment as per the seized materials and also cash flow statement to the tune of Rs. 1,76,00,000/- which includes amount received towards Gachibowli land for Rs. 70,00,000/-, advance received from Shri P. Mahendra Reddy at Rs. 76,00,000/- and advance received from Shri Pratap Reddy at Rs. 30,00,000/-. The difference amount of Rs. 1,10,74,435/- (Rs. 2,86,74,435/- (-) Rs. 1,76,00,000/-)

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

The learned Senior A.R. for the Revenue, Shri A.P. Babu, on the other hand, supporting the orders of the A.O. and Ld. CIT(A), submitted that, the assessee was non- cooperative both at assessment and appellate stage, which is evident from the discussion of the A.O. where the assessee has not furnished any details in response to notices issued by the A.O. to explain the contents of the seized material. Further, during the course of appellate proceedings, the assessee claimed to have furnished cash flow statement along with revised total income statement,

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the 20 ITA.Nos.427, 428 & 429 /Hyd./2025 relevant return of income filed by the assessee in response to the notice issued under Section 153A of the Income-tax Act and income declared thereon, the original assessment order passed by the A.O. under Section 143(3) r.w.s. 153A of the Income-tax Act, the direction of the Tribunal in the order in dated 21.04.2017 and the subsequent assessment order passed by the A.O. under Section 143(3) r.w.s. 153A dated 24.12.2018. There is no dispute with regard to the fact that in the original assessment order, the A.O. made addition of Rs. 89,35,110/- towards unexplained investment/deficit cash balance and the same has been enhanced to Rs. 1,10,74,435/- in the present assessment proceedings. The A.O. has considered all the seized materials and the amounts referred to therein to arrive at a total payment towards various expenses, including advances to purchase of land, payment to brokers etc. to the tune of Rs. 2,86,74,435/-. The A.O. had also considered source to the tune of Rs. 1,76,00,000/- as per the seized material which includes, sale of Gachibowli land, advance received from P.

Be that as it may. The assessee has furnished workings of seized materials referred to by the A.O. and also compared with the amounts considered by the A.O. and 23 ITA.Nos.427, 428 & 429 /Hyd./2025 amounts paid by the assessee and reflected in the cash flow statement and difference. The assessee has tabulated the amount referred to in the seized material for the year under consideration and has worked out the amount paid by the assessee and related to his business at Rs. 1,45,22,768/- and balance of Rs. 1,43,51,667/- pertains to third parties on which the assessee is not liable to offer any explanation. Going by the analysis submitted by the assessee, we find that, in few cases, the assessee along with third parties has paid advances for purchase of land and as per the seized material, the name of the other parties is also referred. The assessee considered the payment in equal proportion to the other persons and the only amount pertains to the assessee’s share has been considered as his investment towards advance for purchase of land or expenditure incurred towards payment to broker etc. Since the very same seized material contains details of investment by other person, in our considered view, the A.O. ought to have considered only the share of the assessee towards payment for purchase of land or expenditure incurred towards

During the course of set-aside assessment proceedings, the assessee has submitted cash flow statement in which it is stated that, Gachibowli land was sold for Rs. 70,00,000/-. The relevant document for sale of land was also found in the seized material at Annexure AMR/PMR/RES/11 at page nos. 85 to 88. As per the said agreement, the assessee has entered into purchase of land admeasuring of Ac.1.0 guntas from Smt. S. Lakshmi, vide agreement dated 23.09.2003, for a total consideration of Rs. 42,00,000/- and has paid advance payment of Rs. 10,00,000/- only. Later on, the said land was directly sold to the prospective buyer for a consideration of Rs. 70,00,000/-. By virtue of this transaction, the assessee has earned profit of Rs. 28,00,000/-. During the course of assessment proceedings, the A.O. called upon the assessee to submit relevant details 26 ITA.Nos.427, 428 & 429 /Hyd./2025 with evidence, but the assessee has not submitted any details. Therefore, the A.O. made addition of Rs. 28,00,000/- towards profit earned from sale of land at Gachibowli.

On appeal, the Ld. CIT(A) confirmed the additions made by the A.O., holding that, the assessee could not furnish any evidence to substantiate revised statement of total income filed along with profit and loss account showing sale of land at Gachibowli and also any other evidences to justify its case.

The learned counsel for the assessee submitted that, the Ld. CIT(A) has erred in sustaining the addition made by the A.O. of Rs. 28,00,000/- towards profit from sale of land without appreciating the fact that the assessee has considered said sale of Gachibowli land in the profit and loss account and after all expenditure has reported net profit of Rs. 4,02,190/- and the same has been offered to tax in the return of income filed for the relevant assessment year. The learned counsel for the assessee further submitted

The learned Senior A.R. for the Revenue, on the other hand, supporting the order of the A.O. and the Ld. CIT(A) submitted that, the assessee himself has admitted sale of land at Gachibowli for Rs. 70,00,000/- and the purchase cost of land was Rs. 42,00,000/- and the difference amount of Rs. 28,00,000/- was the profit earned by the assessee out of sale of land at Gachibowli. Although the assessee claims that the above sale has been included in the regular books of accounts and the profit has been offered to tax, but the 28 ITA.Nos.427, 428 & 429 /Hyd./2025 fact remains that the assessee has filed different set of financial statements at different levels and the authenticity of the financial statements cannot be accepted. The A.O. and the Ld. CIT(A), after considering the relevant facts, has rightly made addition towards profit earned from sale of land at Gachibowli and thus, the order of the Ld. CIT(A) should be upheld.

We have heard both parties, perused the material available on record and had gone through the authors of the authorities below. There is no dispute with regard to the sale of land at Gachibowli for Rs. 70,00,000/- and the purchase of above land from Smt. S. Lakshmi for a consideration of Rs. 42,00,000/-. In fact, both the purchase and sales have been reported by the assessee in their financial statements and claimed that, the assessee has earned only profit of Rs.4,02,190/- out of the sale of land at Gachibowli. The A.O. made addition of Rs. 28,00,000/- towards profit earned from sale of land on the ground that, as per the documents available on record, the assessee has 29 ITA.Nos.427, 428 & 429 /Hyd./2025 sold the land for a consideration of Rs. 70,00,000/-, whereas the purchase cost of the above land was Rs. 42,00,000/-.

We find that, although the assessee claims to have included the sale of land in its financial statements and books of account, but the financial statements and books of account of the assessee cannot be accepted because, the assessee has filed different sets of financial statements at different stages. At the same time, we cannot accept the profit computed by the A.O. at Rs. 28,00,000/- towards the sale of Gachibowli land, because the A.O. has not allowed any expenditure against the profit earned from the sale of land. It is an admitted fact that the assessee was in the real estate business and was engaged in development and buying and selling of land. The A.O. himself has noted from the seized material that the assessee was engaged in the business of purchase and sale of land and in the course, has paid advances to various persons for purchase of land and also incurred various expenditures including payment

The next issue that came up for our consideration from ground numbers 14 to 17 of the assessee's appeal is addition of Rs. 1,00,94,500/- towards unexplained cash credits under Section 68 of the Income-tax Act, 1961.

During the course of assessment proceedings, the A.O. noticed that, the assessee had made cash deposits into various bank accounts, including bank accounts held with Development Credit Bank and Kotak Mahindra Bank. The A.O. has tabulated total amount of cash deposits in both

On appeal, the Ld. CIT(A) confirmed the additions made by the A.O. on the ground that the assessee could not satisfactorily explain the cash flow statements along with relevant evidence.

The learned counsel for the assessee, referring to the cash flow statements, submitted that, the assessee has prepared cash flow statements in respect of various bank accounts, including Syndicate Bank Account, Development Credit Bank Account, and Kotak Mahindra Bank Account, and arrived at a total cash deposit of Rs. 1,15,31,500/- and 33 ITA.Nos.427, 428 & 429 /Hyd./2025 as against this, the assessee has sufficient cash withdrawals from the very same bank accounts to the tune of Rs. 2,40,54,700/-. The A.O. conveniently considered the cash deposits into bank account as unexplained investment and has ignored the cash withdrawals from the very same bank account, even though, the bank statements clearly indicate the cash withdrawals on various occasions. Since there are sufficient cash withdrawals from the very same bank account, unless the A.O. makes out a case that, the cash withdrawals are for some other purposes, the availability of cash to explain cash deposits, cannot be rejected. Therefore, he submitted that, the additions made by the A.O. towards unexplained cash credits on cash deposited into bank account should be deleted.

The learned Senior A.R. for the Revenue, on the other hand, supporting the order of the Ld. CIT(A), submitted that, the assessee could not substantiate the cash flow statements prepared in respect of various bank accounts with relevant evidences. Further, the assessee could not 34 ITA.Nos.427, 428 & 429 /Hyd./2025 match one-to-one cash withdrawals and cash deposits into the very same bank account during the assessment proceedings, which is evident from the assessment order, where the assessee did not furnish or prepare statements for the bank accounts for verification by the A.O. Since the cash flow statements are not authenticated one and not backed by any evidence, the A.O. has rightly considered the cash deposits ignoring the cash withdrawals from the very same bank account. The Ld. CIT(A), after considering the relevant facts, has rightly sustained the addition made by the A.O. because, the assessee could not file any evidences to substantiate his case. Therefore, he submitted that, the additions made by the A.O. and sustained by the Ld. CIT(A) should be upheld.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the relevant additions made by the A.O. towards cash deposit into the bank accounts at Development Credit Bank (DCB)

Ground nos.1 to 6 are general in nature and require no separate adjudications.

The first issue that came up for our consideration from ground nos.7 to 11 of the assessee’s appeal is addition of Rs. 8,66,20,135/- towards unexplained investment.

During the course of assessment proceedings, the A.O. noted from the seized material found during the course of search that, the assessee has made various payments towards expenses in the nature of payment to brokers, advances to purchase of land, etc. to the tune of Rs. 14,32,20,135/-. The A.O. has analyzed the seized material from A/PMR/Res/1 to A/PMR/Res/13 and has worked out total expenditure of Rs. 14,32,20,135/- and the details of the same has been produced in pages 4 to 7 of the assessment order. The A.O. had also considered the source for the above said payment from the very same seized

Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has furnished revised statement of total income, cash flow statement, and other evidences, and argued that the A.O. has wrongly computed total payments as per seized documents at Rs. 14,32,20,135/- and made addition of Rs. 8,66,20,135/- even though the assessee has furnished material to show that the actual payments made by the assessee were different from what has been 39 ITA.Nos.427, 428 & 429 /Hyd./2025 computed by the A.O. During the course of appellate proceedings, the Ld. CIT(A) forwarded the written submissions of the assessee along with the evidences to the A.O. for a remand report. In response, the A.O. submitted his remand report and observed that, the assessee has not furnished any additional evidence to explain his case. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of the workings of unexplained investment prepared by the A.O., sustained the additions made towards unexplained investment of Rs. 8,66,20,135/- by holding that the assessee has not submitted any reply or evidence to explain the contents of seized material and also the basis for various payments including payments to brokers and advances for purchase of land.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

The learned Senior A.R. for the Revenue, on the other hand, supporting the orders of the A.O. and Ld. CIT(A), submitted that, the assessee was non-cooperative both at assessment and appellate stages and did not furnish proper details in response to notices issued by the A.O. He further submitted that, the cash flow statement furnished by the assessee was not supported by proper evidence and that the assessee has furnished different cash flow statements at different stages, which created ambiguity. Therefore, the A.O. has rightly assessed the income on the basis of seized material and computed unexplained investment at Rs. 8,66,20,135/-, and the Ld. CIT(A) has correctly sustained the addition.

We have heard both parties, perused the material available on record and had gone to the orders of the authorities below. The A.O. had computed a sum of Rs. 14,32,20,135/- towards various expenditures, including payment to brokers, advance payment for purchase of land,

The assessee has furnished a cash flow statement and claimed that, the A.O. has wrongly computed total payments as per the seized material at Rs. 14,32,20,135/-, but in fact the actual payment of the assessee related to his business is only at Rs. 12,84,22,745/-. The assessee has furnished a Chart explaining each and every page of seized documents with reference to the amount considered by the 43 ITA.Nos.427, 428 & 429 /Hyd./2025 A.O., payment by the assessee and recorded in cash flow statement, and the amount not pertains to the assessee and pertains to third parties. The assessee has computed third party payment at Rs. 1,47,97,390/- and upon perusal of the relevant payments, we find that, in some cases, the assessee has entered into agreement for purchase of land and paid advance along with third parties like in earlier year. The A.O. has considered the entire amount as per the seized material to the share of the assessee, even though the other two parties are having equal amount of share in the property and investment. Since the documents clearly show the investment by the assessee and the third party and the entire amount as considered by the A.O. on the basis of the seized material cannot be accepted. Since the assessee has analysed the seized material and compared with amounts considered by the A.O. and the exact amount related to the assessee, the difference amount of Rs.1,47,97,390/- should be excluded from the amount of investments/expenditure of Rs.14,32,20,135/- computed by the A.O. If we exclude the amount related to the third party at Rs. 1,47,97,390/-, the 44 ITA.Nos.427, 428 & 429 /Hyd./2025 net amount of total expenditure of the assessee as per the seized material works out to Rs. 12,84,22,745/-. Further, if we accept the assessee’s argument of investment as per seized material of Rs. 12,84,22,745/-, the assessee needs to explain the source for the above investment. The A.O. has accepted the source to the tune of Rs. 5,66,00,000/- towards the sale of lands and refund of advance from various persons in the assessment order. If we consider the source to the tune of Rs. 5,66,00,000/-, the assessee needs to explain the balance amount of Rs. 7,18,22,745/- towards various payments and expenditure as admitted by the assessee himself. The assessee has furnished a cash flow statement and in the cash flow statement, the assessee has considered the source in the form of sale of land, refund of advances and also the advance received from Shri Moinuddin for Rs. 1,20,00,000/-, Dhatri Constructions for Rs. 3,00,50,000/-, and from S. Ramachandra Reddy for Rs. 1,85,00,000/-, and claimed that, the above advances were part of the material found during the course of search.

The next issue that came up for our consideration from ground no.12 of the assessee’s appeal is addition of Rs.1,79,27,807/- towards profit earned from sale of land.

During the course of set-aside proceedings, the assessee has submitted a cash flow statement, in which it is stated that, Dubacherla land was sold for Rs. 78,00,000/- and Mansenpalli land was sold at Rs. 3,15,00,000/-. Further, as per the seized material and latest cash flow statement submitted by the assessee on 28.09.2018, Dubacherla land was sold at Rs. 78,00,000/- and the purchase cost of the above land was stated at Rs. 21,35,450/-. The copy of the said agreement dated 06.10.2003 was also seized vide Annexure A/PMR/Res/07, page nos.99–102. The A.O., on the basis of the seized material coupled with cash flow statement filed by the 48 ITA.Nos.427, 428 & 429 /Hyd./2025 assessee, has computed the profit from sale of Dubacherla land at Rs. 56,64,550/- (Rs.78,00,000/- (-) Rs.21,35,450/-). Similarly, the assessee has entered into Sale-cum-GPA for 45 acres of land, which was registered in assessee's son’s name, for a total consideration of Rs. 3,15,00,000/- vide document No. 21506/2006, 21507/2006 and 21508/2006. The assessee originally purchased total land admeasuring 151 acres vide agreement of Sale-cum-GPA dated 30.06.2006 from Amarkant Saxena, Dilip Saxena and Ashok Saxena, for a consideration of Rs. 5,87,00,000/- and the copy of the said agreement was seized vide Annexure A/PMR/Res/10, page nos. 71–84. In the cash flow statements submitted by the assessee on 19.12.2018, the cost of purchase of land at Mansenpalli was stated at Rs. 6,05,01,000/-. This purchase includes Rs. 18,01,000/- for registration of 45 acres of land. The A.O. after considering the total purchase of land and registration expenses, has worked out the cost of purchase of 45 acres of land at Rs. 1,92,36,643/-. The assessee has considered the sale consideration of Rs. 3,15,00,000/-. The A.O. deducted the 49 ITA.Nos.427, 428 & 429 /Hyd./2025 cost of purchase of land at Rs. 1,92,36,643/- and arrived profit from sale of 45 acres of land at Mansenpalli for Rs. 1,22,63,367/-. Thus, the A.O. made addition towards profit on sale of land at Rs. 1,79,27,917/- (Rs. 56,64,550/- + Rs. 1,22,63,367/-).

On appeal, the Ld. CIT(A) confirmed the additions made by the A.O. on the ground that the assessee could not justify the cash flow statements furnished during the course of assessment proceedings and the appellate proceedings with relevant evidences.

The learned counsel for the assessee, Shri P. Murali Mohan Rao, C.A., submitted that, the Ld. CIT(A) erred in sustaining additions made by the A.O. towards profit from sale of land separately, even though, the assessee has considered sale of land at Dubacherla and Mansenpalli, land including Gudimalkapur land and Saidabad land, in his profit and loss account and has declared net loss of Rs. 3,00,00,000/-. The learned counsel for the assessee further

The learned CIT-DR for the Revenue, Ms. U. Mini Chandran, on the other hand, supporting the order of the Ld. CIT(A), submitted that, the assessee has filed revised trading, profit and loss account and claimed that, he has incurred loss from the sale of land. The cash flow statements and revised profit and loss account filed by the assessee are not substantiated with relevant evidences. On the other hand, the evidences available with the A.O. clearly show that, the assessee has earned profit from sale of land at Dubacherla and Mansenpalli. Since the assessee has 51 ITA.Nos.427, 428 & 429 /Hyd./2025 failed to explain the above transactions with relevant evidences, the A.O. has rightly assessed the profit as per the documents. The Ld. CIT(A), after considering the relevant submissions, has rightly sustained the additions made by the A.O. Therefore, she submitted that, the additions made by the A.O. should be upheld.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has sold land at Dubacherla for Rs. 78,00,000/- and also sold 45 acres of land at Mansenpalli for Rs. 3,15,00,000/-. It is also an admitted fact that the assessee had originally purchased 151 acres of land under a Sale-cum-GPA for Rs. 5,87,00,000/- and, out of the said land, 45 acres had been registered in the name of the assessee’s son for the above consideration. Further, the cost of purchase of 45 acres has been determined at Rs. 1,92,36,643/-. On the basis of the seized material and the cash flow statement, the A.O. has computed profit from 52 ITA.Nos.427, 428 & 429 /Hyd./2025 Mansenpalli land at Rs. 1,22,63,367/- and profit from Dubacherla land at Rs. 56,64,550/-, thereby arriving at total profit of Rs. 1,79,27,917/-. Although the assessee claims that, the above transactions have been included in the profit and loss account and that the assessee has declared net profit after considering expenditure incurred in connection with the real estate business, the revised financial statements filed at different stages could not be substantiated with relevant evidences. At the same time, the seized material clearly indicates that the assessee has incurred various expenditures including payments to brokers, liaisoning activities, registration expenses and other incidental charges. Therefore, merely because the cash flow statement and financial statements were not accepted, it cannot be held that no expenditure was incurred in connection with these sale transactions. Accordingly, in our considered view, 50% of the profit computed by the A.O. in respect of Dubacherla and Mansenpalli should be allowed as expenditure and the balance 50% is sustained. Therefore, out of the addition

Insofar as the undisclosed profit earned out of real estate transactions as admitted by the assessee in his statement in Question No. 13 of his statement recorded under Section 132(4) of the Income-tax Act, we find that, the assessee has clearly admitted profit from sale of land at Gudimalkapur and Saidabad, and the same has been considered in the cash flow statements filed along with the revised trading, profit and loss account filed during the course of reassessment proceedings. Although the assessee claims that, he has incurred loss from sale of the above lands, but the fact remains that the revised profit and loss account filed by the assessee is not substantiated with relevant evidences. Since we have already estimated profit from sale of land in case of Dubacherla land and Masanapalli land, in our considered view, a similar treatment has to be given towards profit earned by the 54 ITA.Nos.427, 428 & 429 /Hyd./2025 assessee out of sale of Gudimalkapur and Saidabad lands. The A.O. has made an addition of Rs. 80,00,000/- towards profit from the sale of above two lands on the basis of the assessee’s statement, however not considered the expenditure related to the said transactions, even though the assessee has incurred various expenditures towards payment to brokers, etc. Since the seized material itself shows expenditure incurred by the assessee towards sale of land, in our considered view, a reasonable amount of expenditure should be allowed against the profit earned from sale of land at Gudimalkapur and Saidabad. Consistent with the view taken by us in respect of Dubacherla and Mansenpalli lands, we consider it reasonable to allow 50% of the profit as expenditure. Thus, out of the addition made by the A.O. towards undisclosed profit earned from sale of lands at Gudimalkapur and Saidabad land, we allow relief to the assessee to the tune of Rs.40,00,000/- and the balance amount of Rs.40,00,000/- is confirmed.

During the course of assessment proceedings, the A.O. noticed substantial cash deposits in the assessee’s bank accounts maintained with Development Credit Bank and Kotak Mahindra Bank during the financial year 2006–07. As per the A.O., cash deposits of Rs. 1,50,000/- were made in Development Credit Bank and Rs. 2,08,14,300/- were made in Kotak Mahindra Bank, aggregating to Rs. 2,09,64,300/-. The A.O. issued notices calling upon the assessee to explain the source of these deposits. Since the assessee did not furnish any explanation with supporting documentary evidence and the cash flow statement did not include these deposits, the A.O. treated the above amount as unexplained under Section 69 of the Income-tax Act, 1961 and made the addition accordingly.

The learned counsel for the assessee, referring to the cash flow/funds flow statements, submitted that, the addition made by the A.O. under Section 69 is contrary to the directions of the Hon’ble ITAT, which had specifically directed the A.O. to compute income only on the basis of incriminating material found during the course of search, whereas the present addition is based merely on regular

The Ld. CIT-DR, on the other hand, supporting the orders of the A.O. and Ld. CIT(A), submitted that, the assessee could not substantiate the cash flow statement with any documentary evidence and could not establish a clear one-to-one nexus between withdrawals and deposits. It was submitted that, the assessee failed to substantiate its claim of advances or business receipts with books of 58 ITA.Nos.427, 428 & 429 /Hyd./2025 account or evidences and, therefore, the A.O. rightly made the addition under Section 69. The Ld. CIT(A), after considering the relevant facts, had correctly sustained the addition.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. The A.O. has made addition of Rs. 2,09,64,300/- towards unexplained cash credits on the ground that, the assessee could not explain the source for cash deposits made into Development Credit Bank and Kotak Mahindra Bank. It is the contention of the assessee that the A.O. has wrongly computed the deposits in both the bank accounts and the actual deposits aggregate only to Rs. 1,91,14,300/- and that there are cash withdrawals of Rs. 1,71,23,103/- from the very same bank accounts. Further, in earlier year the assessee was having excess cash withdrawal when compared to cash deposits and such excess cash withdrawal is available to explain the shortfall for the year under consideration. The assessee has 59 ITA.Nos.427, 428 & 429 /Hyd./2025 furnished analysis of bank statements and cash flow/funds flow statements demonstrating that, cash deposits and cash withdrawals are part of the same business cycle and that there is sufficient availability of cash to explain the deposits. The A.O. has conveniently taken only the deposits for the purpose of Section 69 addition and has ignored the cash withdrawals from the very same bank accounts. Since there are sufficient cash withdrawals from the very same bank accounts, which substantially cover the cash deposits, and since the A.O. has not made out a case that such cash withdrawals were utilized for any other purposes, in our considered view, the explanation of the assessee with regard to source for cash deposits out of cash withdrawals from the very same bank accounts deserves to be accepted. The A.O., without appreciating the relevant facts, has mechanically made the addition and the Ld. CIT(A), without appreciating the relevant facts, simply sustained the addition. Accordingly, we set aside the order of the Ld. CIT(A) and direct the A.O. to delete the addition made under Section 69 of the Income-tax Act, 1961.

Ground No. 19 raised by the assessee is with regard to carry forward of loss of Rs. 3,35,01,000/-. Since the additions made by the A.O. on account of unexplained cash credits have already been deleted while adjudicating grounds nos. 15 to 18, the returned loss as claimed by the assessee stands restored. Accordingly, this ground becomes consequential and does not require any separate adjudication.

In the result, the appeal filed by the assessee for A.Y. 2007-08 is partly allowed for statistical purposes.

Ground nos.1 to 6 are general in nature and requires no specific adjudication and as such, the same are dismissed.

The facts with regard to the impugned dispute are that during the course of search proceedings, certain incriminating materials were found and seized from the premises of the assessee. During the course of assessment proceedings, the A.O. observed that, as per the seized material, the assessee has made various expenditures and advances for purchase of land amounting to Rs. 3,28,91,600/-. Details of analysis of seized material and corresponding payment has been tabulated in the assessment order. The total of some payments aggregating Rs. 3,28,91,600/- was computed by the A.O. The A.O. had also considered the source for the above payment as per the seized materials to the tune of Rs. 1,25,00,000/- being amount received towards sale of Vattinagulapally land. The 62 ITA.Nos.427, 428 & 429 /Hyd./2025 difference amount of Rs. 2,03,91,600/- (Rs. 3,28,91,600/- (-) Rs. 1,25,00,000/-) was assessed as unexplained investment under Section 69 of the Income-tax Act, 1961.

Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has furnished revised statement of total income, cash flow statement, and other evidences, and argued that, the A.O. has wrongly computed the total payments as per seized documents at Rs. 3,28,91,600/- and made addition of Rs. 2,03,91,600/-. During the course of appellate proceedings, the Ld. CIT(A) has forwarded the written submissions of the assessee along with the evidences to the A.O. for a remand report. In response, the A.O. submitted his remand report and observed that, the assessee has not furnished any additional evidence to explain his case. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of the workings of the unexplained investment by the A.O., sustained additions made towards unexplained investment

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

The learned counsel for the assessee submitted that, the Ld. CIT(A) has erred in sustaining additions made by the A.O. towards unexplained investment of Rs. 2,03,91,600/- without appreciating the fact that, as per the revised analysis of the seized material, only Rs. 1,34,95,600/- pertains to the assessee and the remaining amount of Rs. 2,03,96,000/- relates to third parties wherever the assessee had jointly paid advances for purchase of land with others. The learned counsel further referring to the revised analysis of seized material submitted that, the A.O. has considered the total amount referred to in seized documents and 64 ITA.Nos.427, 428 & 429 /Hyd./2025 worked out Rs. 3,28,91,600/- towards unexplained investment whereas as per the very same seized material, the assessee has paid the amount to the tune of Rs. 1,34,95,600/- and the remaining amount pertains to third parties. Since the A.O. has not computed the income on the basis of the seized material in its proper perspective, the additions made by the A.O. should be deleted.

The Ld. CIT-DR for the Revenue, on the other hand, supporting the orders of the A.O. and Ld. CIT(A), submitted that, the assessee was non-cooperative both at assessment and appellate stage, which is evident from the discussion of the A.O. where the assessee has not furnished any details in response to notices issued by the A.O. to explain the contents of the seized material. It was further submitted that, the assessee has filed different workings at different stages and therefore the same cannot be relied upon. Since there are inconsistencies and discrepancies in the workings filed by the assessee, the A.O. has rightly assessed the income on the basis of seized material. The Ld. CIT(A) after

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the assessment order passed by the A.O. There is no dispute with regard to the fact that the A.O. has considered all the seized materials and the amounts referred to therein to arrive at total payment towards various expenses, including advances to purchase of land, payment to brokers etc. to the tune of Rs. 3,28,91,600/-. The A.O. had also considered source to the tune of Rs. 1,25,00,000/- and arrived at a difference of Rs. 2,03,91,600/- (Rs. 3,28,91,600/- minus Rs. 1,25,00,000/-) and assessed the same under Section 69 of the Income-tax Act, 1961.

We have given our thoughtful consideration to the reasons given by the A.O. to make addition of Rs. 2,03,91,600/- under Section 69 of the Act, in light of 66 ITA.Nos.427, 428 & 429 /Hyd./2025 various arguments of the assessee and we ourselves do not fully subscribe to the reasons given by the A.O. for the simple reason that, the A.O. has not given any specific break-up of what is the amount of expenditure incurred by the assessee and what is the amount given for purchase of land. The A.O. has added all the sums referred to in the seized material and considered total payment of Rs. 3,28,91,600/- and out of which allowed credit to the extent of source of Rs. 1,25,00,000/- and balance amount of Rs. 2,03,91,600/- treated as unexplained investment. There are no details as to the nature of expenditure and no details as to payment of advance for purchase of land to particular person. Therefore, on this count itself, the additions made by the A.O. towards unexplained investment cannot be sustained.

Be that as it may. The assessee has furnished workings of seized materials referred to by the A.O. and has worked out the amount pertaining to him at Rs. 1,34,95,600/- and the balance amount of Rs. 2,03,96,000/- pertains to third

The next issue that came up for our consideration from ground no. 12 of the assessee's appeal is the addition of Rs. 3,44,80,000/- towards profit earned from sale of land at Lemuru.

During the financial year relevant to A.Y. 2008-09, the assessee has sold land at Lemuru for a total consideration of Rs. 3,93,50,000/- and admitted total profit of Rs.28,70,000/- from the sale transaction. The assessee has claimed that, the cost of purchase of the said land was Rs. 3,64,80,000/-. During the course of the set-aside proceedings, the assessee has been requested to submit complete details of purchase and sale of the land along with documentary evidences. However, after giving various opportunities, the assessee did not furnish all the relevant details with supporting documents. The A.O., therefore, considered the cost of purchase of land as per the seized

On appeal, the learned CIT(A) sustained the addition made by the A.O.

Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before us.

The learned counsel for the assessee, referring to the revised Trading, Profit and Loss Account filed by the assessee for the year ending 31.03.2008, submitted that, the assessee has considered the sale proceeds of land at Lemuru along with the opening stock-in-trade and purchases during the year and reported nil profit. Further, the assessee had also computed stand alone profit from sale of land at Lemuru and after considering cost of Rs. 3,64,80,000/-, reported net profit of Rs. 28,70,000/-. All

The Ld. CIT-DR for the Revenue, on the other hand, supporting the order of the A.O. and the learned CIT(A), submitted that, the assessee did not furnish satisfactory evidence in support of the revised Trading, Profit and Loss Account showing nil profit from sale of land at Lemuru. Further, the assessee has also failed to file relevant evidences in support of purchase cost of Rs. 3,64,80,000/- to arrive at profit from sale of land at Rs.28,70,000/-. In absence of relevant details, the A.O. and Ld. CIT(A) has 71 ITA.Nos.427, 428 & 429 /Hyd./2025 rightly made addition towards profit from sale of land and thus, the order of Ld. CIT(A) should be upheld.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the sale consideration received for Rs. 3,93,50,000/- for sale of land at Lemuru. In fact, the assessee has admitted the said sale consideration during the set-aside assessment proceedings as well as reassessment proceedings, which is evident from the cash flow statement filed by the assessee. The dispute is only with regard to the cost of purchase of the above land. The A.O. has considered the cost of land at Rs. 48,70,000/- as per the seized documents, whereas the assessee has claimed that, the actual cost of purchase of land at Lemuru was Rs. 3,64,80,000/-. The assessee has considered the cost of land as per the seized documents and other evidence filed before the A.O. including relevant copies of sale deeds for purchase of lands. However, the A.O. has considered only cost as per the seized documents and 72 ITA.Nos.427, 428 & 429 /Hyd./2025 ignored the other evidences filed by the assessee. Since the documents filed by the assessee clearly show the cost of purchase of land at Lemuru for Rs.3,64,80,000/-, in our considered view, the A.O. ought to have accepted the profit reported by the assessee for Rs.28,70,000/-. Even though the assessee has filed nil profit as per revised profit and loss account, but the said profit and loss account cannot be accepted without there being any substantive evidences. Since the A.O. has made addition by taking only cost as per seized documents, ignoring the other evidence filed by the assessee and further, the other evidence filed by the assessee clearly shows cost of land at Rs. 3,64,80,000/-, the profit earned by the assessee for Rs.28,70,000/- alone can be taxed. Further, the A.O. has taxed entire profit earned from the sale of land even though the assessee claims that, he has incurred various expenditure towards payment to brokers and other expenses. We find that, in earlier year also, we have considered the very same issue and after considering relevant seized material, we find that, the assessee has incurred certain expenditure towards

The next issue that came up for our consideration from Ground Nos. 13 and 14 of the assessee’s appeal is undisclosed profit from sale of land at Vattinagulapalli.

During the course of search proceedings, the assessee admitted the profit on sale of land situated at 74 ITA.Nos.427, 428 & 429 /Hyd./2025 Vattinagulapalli. As per the statement recorded under Section 132(4) of the Income-tax Act, dated 20.11.2007, the assessee admitted profit of Rs. 88,00,000/- on sale of the said land. As per the details available in the seized material, the assessee had purchased the said land for Rs. 37,00,000/- and the same was sold for Rs. 1,25,00,000/- during the very same financial year relevant to A.Y. 2008– 09. Since the assessee is engaged in the business of real estate, the A.O. was of the view that the said transaction cannot be treated as a mere investment transaction and the profit arising therefrom has to be treated as business income. During the course of set-aside proceedings, the assessee was requested to furnish complete details of purchase and sale of land along with supporting documentary evidences. However, the assessee failed to submit any satisfactory evidences in support of his claim. Accordingly, the A.O. treated the profit of Rs. 88,00,000/- arising from sale of Vattinagulapalli land as undisclosed business income and added the same to the total income of the assessee.

On appeal, the assessee contended that, the transaction relating to the sale of Vattinagulapalli land was already recorded in the regular books of account as business income and that the sworn statement recorded under Section 132(4) was subsequently retracted. The Ld. CIT(A), however, observed that, the admission made by the assessee in the sworn statement recorded under Section 132(4) is a strong piece of evidence and the retraction made subsequent thereto without any corroborative evidences cannot be accepted. The Ld. CIT(A) further observed that, the seized documents clearly indicate the purchase of land for Rs. 37,00,000/- and sale of the same for Rs. 1,25,00,000/- and that the assessee failed to establish that the profit of Rs. 88,00,000/- was already offered to tax in the regular books of account. Accordingly, the Ld. CIT(A) upheld the action of the A.O. and sustained the addition of Rs. 88,00,000/-.

The learned CIT-DR for the Revenue, on the other hand, supporting the orders of the A.O. and the Ld. CIT(A), submitted that, the assessee has categorically admitted the profit of Rs. 88,00,000/- in his sworn statement and that 77 ITA.Nos.427, 428 & 429 /Hyd./2025 the same is based on seized material. It was further submitted that, the assessee failed to establish the exact expenditure incurred in connection with the sale of land by producing documentary evidences. Therefore, the A.O. was justified in bringing the entire profit of Rs. 88,00,000/- to tax as undisclosed business income and the Ld. CIT(A) has rightly sustained the same.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has sold land situated at Vattinagulapalli for a consideration of Rs. 1,25,00,000/- and had purchased the same for Rs. 37,00,000/-, thereby resulting in profit of Rs. 88,00,000/-. It is also an admitted fact that the assessee is engaged in the business of real estate. The seized material found during the course of search clearly indicates that, the assessee has incurred various expenditures including payments to brokers, development expenses, liaison charges, registration expenses and other

In view of the above discussion, in our considered view, a reasonable amount of expenditure is required to be allowed against the profit earned by the assessee from sale of land at Vattinagulapalli. Since neither the assessee nor the A.O. could conclusively establish the exact expenditure incurred and the seized material itself shows incurring of various expenditures in real estate transactions, we consider it reasonable to allow 50% of the profit earned by the assessee as expenditure. Accordingly, out of the addition of Rs. 88,00,000/- made by the A.O. towards undisclosed profit earned from sale of land at Vattinagulapalli, the assessee is allowed relief to the extent of Rs. 44,00,000/- and the balance amount of Rs. 44,00,000/- is sustained. Thus, the order of the Ld. CIT(A) is modified to this extent

The next issue that came up for our consideration from Ground Nos. 15 to 18 of the assessee’s appeal relates to the addition of Rs. 8,61,09,145/- towards unexplained cash credits under Section 69 of the Income-tax Act, 1961.

During the course of assessment proceedings, the A.O. noticed that, in the bank account of the assessee, various cash deposits and other credits aggregating to Rs. 8,61,09,145/-. The A.O. further noted that, the assessee has made cash deposits of Rs. 57,69,000/- in Development Credit Bank Account No.02710200000365 and further sum of Rs. 8,61,09,145/- in Axis Bank Account No.515010200000833. The A.O. further noted that, the above cash deposits and credits are not considered in the cash flow statement submitted by the assessee on 19.12.2018. During the course of set aside proceedings, the assessee was asked to explain the source for cash deposits with documentary evidence. Since the assessee has not filed

On appeal, the Ld. CIT(A) sustained the additions made by the A.O. by holding that the assessee could not furnish relevant evidence to prove the source for deposits and other credits into bank account.

Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before us.

The learned counsel for the assessee submitted that, the Ld. CIT(A) erred in sustaining the additions made by the A.O. towards cash deposits and other credits into Development Credit Bank and Axis Bank account without appreciating the fact that, the assessee has explained the credits in Development Credit Bank out of cash withdrawals from the very same bank account by filing relevant receipts and payments. The learned counsel for the assessee further submitted that, in respect of Axis Bank account no. 5150102000000833, the above bank account does not 81 ITA.Nos.427, 428 & 429 /Hyd./2025 belong to the assessee and in fact, the said account is in the name of M/s. Madhu Infotech, but not in the name of the assessee. Further, the A.O. has also considered the credits in the bank account which are received from foreign remittances and the same has already been considered in regular books. Since the credits considered by the A.O. in Axis Bank does not pertain to the assessee, and further the credits in Development Credit Bank has already been explained out of known sources of income or receipts, the addition made by the A.O. should be deleted.

The learned CIT-DR for the Revenue, on the other hand, supporting the order of the learned CIT(A), submitted that, the assessee had filed different sets of cash flow statements at different stages, which is evident from the revised cash flow statement filed by the assessee. In the absence of supporting evidences, the A.O. has rightly rejected the financial statements due to lack of evidentiary value. Further, the assessee claims that, the Axis Bank account No. 5150102000000833 is not belongs to the assessee.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. The A.O. has considered the cash deposits and others credits in Development Credit Bank and Axis Bank. The bank account held with Development Credit Bank is in the name of the assessee and in the said bank, the A.O. has considered cash deposits of Rs. 57,69,000/-. The assessee has filed cash flow statement along with receipt and payment account of Development Credit Bank and as per the details submitted by the assessee for the financial year 2007–08, the assessee has made cash 83 ITA.Nos.427, 428 & 429 /Hyd./2025 deposits of Rs. 61,15,562/- which includes cash deposits of Rs. 57,69,000/- in Development Credit Bank and cash deposits of Rs. 3,21,562/- into Axis Bank. As against this, the assessee has huge cash withdrawals from Development Credit Bank and Axis Bank for Rs. 3,65,12,782/-. Since the cash withdrawals from the above bank accounts are in excess of cash deposits into Development Credit Bank and further, the A.O. has not made out a case that such cash withdrawals in earlier accounts had spent for any other purpose, in our considered view, the explanation of the assessee with regard to source for cash deposits into bank account out of previous withdrawals should be accepted. Therefore, we direct the A.O. to delete the addition made towards cash deposits into Development Credit Bank for Rs. 57,69,000/-.

Coming to cash deposits and other credits in Axis Bank account No. 5150102000000833 for Rs. 8,03,40,145/-. The assessee has furnished relevant bank account statement held with Axis Bank and upon perusal of the relevant bank account statement, we find that, the said bank account is 84 ITA.Nos.427, 428 & 429 /Hyd./2025 held in the name of M/s. Madhu Infotech. The assessee claims that, the said bank account does not belong to the assessee and its business affairs and if at all any credits or cash deposits are found in the said bank account, the bank account holder should explain the same. We find that, there is no dispute with regard to the argument of the assessee that the Axis Bank account is in the name of M/s. Madhu Infotech. However, the facts are not clear as to whether M/s. Madhu Infotech is a proprietary concern of the assessee or belongs to any other person or any partnership firm which can be considered separately. Since the facts are not clear and the A.O. has considered the bank account held in the name of another person, in our considered view, these facts need to be verified by the A.O. to ascertain the ownership of the bank account. Further, the A.O. had also considered various credits, in the above bank account including foreign inward remittances through US Dollars and the assessee claims that, the above credits have already been explained by the above firm. Since there are disputes about the ownership of the account and also the credits 85 ITA.Nos.427, 428 & 429 /Hyd./2025 considered by the A.O. in the bank account, in our considered view, this issue needs to be verified by the A.O. with reference to the relevant evidences filed by the assessee. Thus, we set aside this issue to the file of the A.O. and direct the A.O. to verify the claim of the assessee in the light of the relevant bank account statement held in the name of M/s. Madhu Infotech and also various other credits considered by the A.O. including foreign inward remittances. The A.O. is also directed to consider the cash flow statement filed by the assessee explaining the source for credits in the bank account and decide the issue as per law.

In the result, the appeal of assessee in for A.Y. 2008-09 is partly allowed for statistical purposes.