SYED MOHAMMED ASAD ULLAH HUSSAINI,HYDERABAD vs. ACIT, CENTRAL CIRCLE-2(3), HYDERABAD

The Ld. CIT(A) erred by not appreciating the fact that the assessee has not entered in any agreement of sale with Mr. G. Shyam Prasad in the assessment year under consideration and there is no signature of the assessee on the said agreement to prove the acceptance of the assessee, without which the contract becomes void abinitio.

Thereafter, the AO observed that the assessee had not filed his return of income under Section 139(1) of the Act for the year under consideration. Initially, the AO was not able to trace the assessee’s PAN and therefore allotted a temporary PAN “GMQPM7805B” and recorded satisfaction under Section 153C of the Act on 22.03.2021 and issued notice on the same date. Subsequently, the AO came across the assessee’s correct PAN “ABFPH0148G” and, after seeking the assessee’s response, wherein he conveyed that he had no objection to proceedings being continued under his correct PAN, issued a fresh notice under Section 153C of the Act dated 14.03.2022.

In response, the assessee filed his return of income for the subject year, i.e., AY 2016-17, on 23.03.2022, declaring an income of Rs. 3,57,100/-. Notices under Sections 143(2) and 142(1) were thereafter issued by the AO, and in response, some details were filed by the assessee.

The AO noted that Page nos. 76 and 77 of Annexure A/MAS/Loc169 /AB/KB/02 contained a declaration dated 12.06.2015 signed by Shri G. Shyam Prasad Reddy, wherein he had admitted receipt of a hand loan of Rs. 1.75 crores from five persons, including the assessee. As per the declaration, a sum of Rs. 1.50 crores was advanced in cash, and against this Shri. G. Shyam Prasad Reddy (supra) had mortgaged his two flats and two mulgies. The balance amount of Rs. 25 lakhs was stated to be a further loan for which cheques Nos. 097677 and 097678 drawn on the SBI Branch: Gunfoundry were issued by the borrower. Shri. G. Shyam Prasad Reddy, i.e., the borrower, had also undertaken that the dishonour of the aforementioned cheques would attract consequences under Section 138 of the Negotiable Instruments Act and that, in case of default, he would not object to the lenders taking possession of the properties that were offered as security.

Another document that was seized in the course of the search proceedings, i.e., Page 89 of Annexure A/MAS/Loc169 /AB/KB/02, written in the handwriting of Shri G. Shyam Prasad Reddy, recorded that the assessee had paid Rs. 25 lakhs towards the purchase of 300 sq. yards of land in Survey Nos. 218/11(p), 218/12(p), and 218/13(p) situated at Kondapur.

The AO issued show-cause notices (SCN’s) proposing certain additions, viz. (i) Rs. 35 lakhs, i.e., 1/5th of Rs. 1.75 crores (supra) as unexplained money under Section 69A of the Act; and (ii) Rs. 25 lakhs (supra) as unexplained investment under Section 69 of the Act. The assessee submitted that he had no knowledge of the seized documents and was not a party to the subject transactions. The AO rejected the assessee’s explanation and held a firm conviction that the seized documents were self-explanatory, signed by the borrower/seller, contained specific details of the properties and cheque numbers, and clearly referred to the assessee.

The AO thereafter framed the assessment vide his order passed under Section 143(3) r.w.s. 153C of the Act and assessed the total income of the assessee at Rs. 63,57,100/-, i.e., after making the aforementioned additions, viz. (i). addition of cash loan (1/5th share) advanced to Shri G. Shyam Prasad Reddy: Rs. 35 lakhs; and (ii). addition u/s 69 of the unexplained investment in property: Rs. 25 lakhs.

Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, despite several notices, neither the assessee nor his representative participated in the appellate proceedings. Also, no written submissions or supporting evidence were filed in the course of the appellate proceedings. The CIT(A), therefore, decided the appeal on merits on the basis of the material available on record and confirmed the additions.

The assessee, being aggrieved with the CIT(A) order, has carried the matter in appeal before us.

We have heard the Ld. Authorised representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.

Per contra, the Learned Departmental Representative (for short, “Ld. DR”) objected to the seeking of the condonation of the delay involved in filing of the present appeal. The Ld. DR submitted that as the assessee had failed to substantiate his explanation leading to the delay in filing of the present appeal based on irrefutable material, therefore, the same does not merits to be condoned.

We have thoughtfully considered the contentions of the Learned Authorized Representatives of both parties regarding the issue of delay involved in filing of the present appeal.

Although, we are of a firm conviction that the assessee appellant ought to have remained vigilant regarding his on going appellate proceedings and the disposal of the same, but at the same time based on the facts deposed by him in his affidavit are of the view that the impugned delay in filing of the present appeal is backed by bona fide reasons and not prompted by any lackadaisical conduct on his part. Our aforesaid view that a liberal approach should be taken while considering the application seeking condonation of delay is supported by the judgment of the Hon’ble Supreme Court in the case of Vidya Shankar Jaiswal vs. The Income Tax Officer, Ward-2, Ambikapur in Special Leave Petition (Civil) Nos. 26310-26311/2024, dated 31st January, 2025. The Hon'ble Apex Court while setting aside the order of the Hon'ble High Court of Chhattisgarh, which had approved the declining of the condonation of delay of 166 days by the Income-Tax Appellate Tribunal, Raipur Bench, had observed, that a justice-oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay involved in filing the appeal. We thus, in terms of our aforesaid observations, condone the delay involved in the filing of the present appeal.

Before us, the assessee has raised several legal and factual grounds. The primary jurisdictional objection raised by the Ld. AR is that the satisfaction under Section 153C was recorded by the AO after an alleged delay of more than 20 months from completion of assessment in the case of the searched person, and therefore, the proceedings were invalid. The Ld.AR, in support of his contention, had relied on a host of judicial pronouncements. It is also contended that the seized documents do not belong to the assessee, are “dumb documents”, and do not bear his signature. On merits, it is argued that the assessee had neither advanced any hand loan nor made any investment in any property as had wrongly been inferred by the AO without any basis.

We have given thoughtful consideration and carefully considered the record. We note that the AO recorded satisfaction and issued notice under Section 153C on 22.03.2021 on the PAN allotted by him, as the assessee’s PAN was not available. This is well before the date of completion of the assessment in the case of the searched person, i.e., 23.04.2021. Later, upon discovering the correct PAN, the AO afforded an opportunity to the assessee, and the assessee expressly conveyed that he had no objection to the continuation of proceedings under his correct PAN. The issuance of a fresh notice on 14.03.2022 is only a procedural continuation of the already initiated proceedings under Section 153C of the Act. We find no substance in the Ld. AR’s contention that the AO had assumed jurisdiction after 20 months from the completion of the assessment in the case of the searched person.

As regards whether the seized documents satisfy the condition for initiation under Section 153C, we find that the declaration dated 12.06.2015 is signed by the borrower and contains specific details— names of lenders, flat numbers, mulgy numbers, cheque numbers, and a clear admission of the financial transaction. The second document relating to Rs. 25 lakhs investment is in the handwriting of the seller. The documents were found from the premises of the assessee’s father-in- law, who is closely related to the assessee. In such circumstances, we agree with the AO and CIT(A) that the documents cannot be treated as dumb documents and sufficiently relate to the assessee for the purposes of Section 153C.

On merits, the assessee has not placed any material to explain the source of Rs. 35 lakhs or Rs. 25 lakhs. The assessee merely denied knowledge of the transactions. These bald denials, without producing any supporting evidence, cannot overcome the detailed declarations made by the borrower/seller admitting receipt of the sums. No bank statements, cash flow statements, confirmations, or contrary evidence have been filed before the AO, CIT(A), or even before us. We, thus, find no infirmity in the action of the AO in treating Rs. 35 lakhs as unexplained money under Section 69A of the Act and Rs.25 lakhs as unexplained investment under Section 69 of the Act.

We note that the assessee has also raised several general grounds regarding natural justice and non-consideration of his submissions. However, the record shows that repeated opportunities were given by the CIT(A), but the assessee did not appear or file any material. In these circumstances, the assessee cannot now complain of the denial of an opportunity of being heard to him by the authorities below.

Having examined both the legal and factual issues, we hold that the assumption of jurisdiction under Section 153C was valid and the additions made on the basis of seized material are sustainable.

Accordingly, the appeal filed by the assessee is dismissed.