SKANDHANSHI DEVELOPERS,KURNOOL vs. ACIT., CENTRAL CIRCLE-2(3), HYDERABAD

ITA 526/HYD/2025Status: DisposedITAT Hyderabad20 August 2025AY 2019-20106 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the seized material, including sale agreements, receipts, and ledger accounts, indicated cash payments to landlords not accounted for in the books. The existence of substantial cash transactions outside the regular books, coupled with the absence of day-to-day records in the seized material, made estimation an inevitable method for computing additional income. Consequently, the books of accounts maintained and audited regularly were no longer reliable, justifying rejection under Section 145(3). The Tribunal found that the AO's rejection of books and estimation of profits based on suppressed and disclosed turnover was justified. However, the Tribunal found that the CIT(A) had erred in reducing the profit rate on suppressed turnover from 18% to 15% and in not upholding the AO's estimation of 14% on disclosed turnover. The Tribunal also noted that the CIT(A) had erred in directing the AO not to disturb the profit margin on disclosed turnover despite inflated expenses. The Tribunal directed the AO to re-examine the estimation of profit on disclosed turnover, considering the profit margin declared by the assessee on disclosed turnover and the finding of inflated expenses. The Tribunal also held that it is only the reasonable profit earned, not the entire turnover, which gets taxed in cases of suppressed turnover. The Tribunal did not decide the issue of the nature of admission of additional income as it was subsumed within the estimation of income.

What were the facts?

This judgment concerns a batch of 30 appeals filed by various assessees and the Revenue against orders of the CIT(A)-12, Hyderabad, for assessment years 2019-20 to 2022-23. The appeals involve entities within the 'Skandhanshi Group', including Skanda Infra Projects India Private Limited, Skandhanshi Infra Projects India Private Limited, Skanda Infra Projects, Skandhanshi Developers, Skanda Builders, Skanda Developers & Builders, Skandhanshi Infra Projects, and Suresh Kumar Reddy Krishnapuram. A search and seizure operation under Section 132 of the Income Tax Act, 1961, was conducted on 05.01.2022, followed by survey actions under Section 133A. Seized material included loose sheets, electronic data, books, and documents. Statements were recorded. The assessee group voluntarily admitted additional income of Rs. 60 crores for assessment years 2018-19 to 2022-23. The Assessing Officer (AO) issued notices under Section 148, and the assessee filed returns declaring total income including the additional undisclosed income.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the CIT(A) erred in dismissing the assessee's grounds regarding the lack of evidence and unreliable nature of the seized material, which were described as non-speaking loose sheets without corroboration, and in concluding that suppressed turnover was detected from such material (Section 132, Section 145(3)). 2. Whether, on the facts and in the circumstances of the case, the CIT(A) erred in dismissing the ground related to the general and conditional nature of the admission of additional income, not based on specific evidence (Section 132(4)). 3. Whether, on the facts and in the circumstances of the case, the CIT(A) erred in holding a net profit rate of 15% as reasonable for undisclosed cash receipts, contrary to the assessee's peculiar facts (Section 145(3)). 4. Whether, in law, the CIT(A) was correct in holding that income should be estimated at 15% of undisclosed cash receipts, as against the 18% estimated by the AO (Section 145(3)). 5. Whether, in law, the CIT(A) erred in directing the AO not to disturb the profit margin declared by the assessee on disclosed turnover, despite a finding of inflated expenses against the disclosed turnover (Section 145(3)). 6. Whether, in law, the CIT(A) erred in not upholding the estimation of income at 14% on the disclosed receipts when the AO had rejected the books of accounts (Section 145(3)). Assessee's contentions: The seized material lacked specific details and corroborative evidence, making it unreliable for detecting suppressed turnover. The admission of additional income was voluntary, conditional, and made to avoid litigation, not based on specific evidence. The AO's estimation of income based on turnover was unreasonable, as only the profit component should be taxed. The assessee maintained regular, audited books of accounts. Revenue's contentions: The CIT(A) erred in reducing the estimated profit rate on suppressed turnover from 18% to 15% and in not upholding the AO's estimation of 14% on disclosed turnover after rejecting the books. The CIT(A) also erred in not disturbing the profit margin on disclosed turnover despite inflated expenses.

Which sections of the Income-tax Act were involved?

Section 132,Section 132(1),Section 132(1A),Section 132(3),Section 133A,Section 139,Section 144,Section 145(3),Section 148

AI-generated summary — verify with the full judgment below

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “B” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER

Sl. No. I.T.A.No. Name of Appellant Name of Respondent A.Y. Appealed against the Order of the CIT(A)-12, Hyderabad Dated 1. 514/Hyd./2025 Skanda Infra Projects India Private Limited, KURNOOL. PIN – 518 002 Andhra Pradesh PAN AAOCS8382G The ACIT, Central Circle 2(3), HYDERABAD. PIN – 500 004 2019-20 26.12.2024 2. 515/Hyd./2025 2020-21 26.12.2024 3. 516/Hyd./2025 2021-22 06.01.2025 4. 517/Hyd./2025 2022-23 26.12.2024 5. 518/Hyd./2025 Skandhanshi Infra Projects India Private Limited, KURNOOL. PIN – 518 002 Andhra Pradesh PAN AAWCS0746E The ACIT, Central Circle 2(3), HYDERABAD. PIN – 500 004 2019-20 26.12.2024 6. 519/Hyd./2025 2020-21 Appeal No.CIT(A), Hyderabad 12/10611/2 019-20 dated NIL 7. 520/Hyd./2025 2021-22 Dated 26.12.2024 8. 521/Hyd./2025 2022-23 26.12.2024 9. 308/Hyd./2025 The ACIT, Central Circle-2(3), HYDERABAD. PIN – 500 004 Skandhanshi Infra Projects India Private Limited, KURNOOL. PIN – 518 002 Andhra Pradesh PAN AAWCS0746E 2019-20 26.12.2024 10. 309/Hyd./2025 2020-21 Appeal No.CIT(A), Hyderabad 12/10611/2 019-20 dated NI

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