SHRI J. SRINIVASAN,,CHENNAI vs. ACIT, CENTRAL CIRCLE - 3 (2),, CHENNAI

PER BENCH: The bunch of ten appeals filed by two different assessees

are directed against separate, but identical orders of the

learned Commissioner of Income Tax (Appeals)-19, Chennai,

dated 29.08.2019 & 29.11.2019 and pertain to assessment

years 2009-10 to 2015-16 and 2011-12 to 2013-14 respectively.

2 ITA No. 113 to 119/Chny/2020 & ITA Nos.354 to 356/Chny/2020

Since, facts are identical and issues are common, for the sake

of convenience, these appeals were heard together and are

being disposed off, by this consolidated order.

more or less raised common grounds of appeal for all these

assessment years, therefore, for the sake of brevity, grounds of

appeal filed for the assessment year 2009-10 are reproduced

as under:-

“1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interest of the appellant and at any rate is opposed to the principles of equity, natural justice and fair play. 2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction. 3. For that the Commissioner of Income Tax Appeals failed to appreciate that the additions made are without any link to the seized material. 4. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer had rejected the revised financial statements and books of account even though they presented a correct picture of the financial position of the appellant. 5. For that the Commissioner of Income Tax (Appeals) ought to have rejected the “net worth” method adopted by the Assessing Officer for determination of income. 6. For that the Commissioner of Income Tax (Appeals) erred in preparing the statement of affairs by considering partly seized

ITA No. 113 to 119/Chny/2020 & ITA Nos.354 to 356/Chny/2020

material, partly original financial statements and partly the revised financial statements in the application of net worth method for determination of income.

4 ITA No. 113 to 119/Chny/2020 & ITA Nos.354 to 356/Chny/2020

Method of computation of income was being followed and the question of allowability of specific deductions is of no relevance. 16. For that the appellant objects to the levy of interest under sections 234A, 234B and 234C.”

relevant to assessment year 2009-10 are that the assessee is

engaged in the business of money lending, constriction of

apartments and chit fund business. A search and seizure

operation u/s.132 of the Income Tax Act, 1961, was conducted

on 28.01.2015 at the residential and business premises of the

assessee. During the course of search, certain incriminating

materials were found and seized and based on incriminating

materials, a sworn statement u/s.132(4) of the Act dated

24.03.2015 was recorded from the assessee. In the sworn

statement, the assessee has offered undisclosed income of

Rs. 28,92,75,497/- for the assessment years 2009-10 to 2015-

DDIT vide letter dated 15.09.2015. Consequent to search,

notice u/s.153A of the Income Tax Act, 1961, was issued for

six assessment years immediately preceding assessment years

in which search took place. The assessee did not respond to

5 ITA No. 113 to 119/Chny/2020 & ITA Nos.354 to 356/Chny/2020

notice issued u/s.153A of the Act, despite number of reminders

issued to the assessee. Finally, a letter dated 09.12.2016 was

issued to the assessee to complete assessment on the basis

of net worth method in absence of regular books of account.

The assessee finally complied with notice u/s.153A of the Act,

and filed return of income on 20.12.2016 and declared total

income of Rs,1,03,72,719/-. The assessment has been

completed u/s.143(3) r.w.s 153A of the Income Tax Act, 1961,

on 29.12.2016 and determined total income at Rs.6,71,74,890/-

by making additions towards undisclosed income of

Rs.5,68,02,171/- on the basis of net worth method. The

assessee challenged the assessment order before the first

appellate authority and challenged additions made by the

Assessing Officer towards undisclosed income on the basis of

net worth method, but could not succeed. The learned CIT(A),

rejected arguments of the assessee and sustained additions

made by the Assessing Officer by holding that the assessee

has failed to substantiate his claim with necessary evidences,

including books of account to reconcile undisclosed income

determined by the Assessing Officer on the basis of net worth

6 ITA No. 113 to 119/Chny/2020 & ITA Nos.354 to 356/Chny/2020

method. Aggrieved by the learned CIT(A) order, the assessee

is in appeal before us.

learned CIT(A) has erred in confirming additions made by the

Assessing Officer towards undisclosed income on the basis of

net worth method, ignoring various evidences filed by the

assessee, including books of account prepared for the relevant

assessment years explaining source for various investments

and expenses. The learned AR further submitted that the

assessee has prepared books of account and explained source

for investments. Further, the Assessing Officer has considered

certain assets which were acquired prior to assessment year

2009-10 and made additions on the basis of net worth method

by allowing deductions towards income declared by the

assessee in the return of income filed for the relevant

assessment years. Since, the Assessing Officer as well as

learned CIT(A) have failed to consider reconciliation filed by

the assessee explaining undisclosed income computed by the

Assessing Officer, appeals may be set aside to the file of the

7 ITA No. 113 to 119/Chny/2020 & ITA Nos.354 to 356/Chny/2020

Assessing Officer to give another opportunity of hearing to the

assessee to explain his case.

order of the learned CIT(A) submitted that the assessee neither

filed necessary details nor produced books of account to

explain undisclosed income computed by the Assessing Officer.

Further, the assessee has not maintained regular books of

account. In absence of books of account, the Assessing Officer

left with no option, has computed undisclosed income on net

asset method basis. Therefore, there is no error in the reasons

given by the learned CIT(A) to sustain additions made by the

Assessing Officer. However, he fairly agreed that if at all, the

issue needs to be set aside, then it should be set aside to the

file of the learned CIT(A) to reconsider the issue in light of

various evidences filed by the assessee.

available on record and gone through orders of the authorities

below. Admittedly, the Assessing Officer has computed

8 ITA No. 113 to 119/Chny/2020 & ITA Nos.354 to 356/Chny/2020

undisclosed income on the basis of net worth method, when the

assessee has failed to produce necessary books of account

and other details to reconcile various incriminating materials

found during the course of search. It was the explanation of the

assessee that while making additions towards undisclosed

income, the Assessing Officer has considered certain assets,

which were acquired before the assessment year 2009-10 for

which the assessee has filed reconciliation explaining each and

every item of assets considered by the Assessing Officer in

light of evidences and argued that certain assets are outside

impugned assessment year.

find that during the course of search various incriminating

materials were found and seized which needs to be thoroughly

examined by the Assessing Officer in light of explanation

furnished by the assessee. However, the Assessing Officer has

determined undisclosed income on the basis of net worth

method without considering explanation furnished by the

assessee on certain incriminating materials found during the

course of search. Admittedly, the assessee has made

9 ITA No. 113 to 119/Chny/2020 & ITA Nos.354 to 356/Chny/2020

disclosure of undisclosed income on the basis of net worth

method and admitted undisclosed income of Rs.28,92,75,497/-

for the assessment years 2009-10 to 2015-16. The Assessing

Officer had also determined undisclosed income on the basis of

net worth method, but there is difference between undisclosed

income computed by the assessee, when compared to

undisclosed income determined by the Assessing Officer for all

assessment years. Before the learned CIT(A), the assessee

claimed that he has reconstructed his books of account with

reference to seized materials and has reconciled undisclosed

income determined by the Assessing Officer to the undisclosed

income offered by the assessee in returns filed in response to

notice issued u/s.153A of the Act. The learned CIT(A) rejected

books of account on the ground that same were reconstructed

after date of search and said finding appears to be reasonable.

However, when the assessee has filed reconciliation explaining

difference in undisclosed income computed by the Assessing

Officer when compared to undisclosed income returned by the

assessee with certain explanation, then the learned CIT(A)

ought to have been entertained arguments of the assessee. In

10 ITA No. 113 to 119/Chny/2020 & ITA Nos.354 to 356/Chny/2020

this case, learned CIT(A) has summarily rejected arguments of

the assessee and sustained additions made by the assessee

towards undisclosed income on net worth method. Therefore,

we are of the considered view that the assessee should get

one more opportunity before lower authorities to explain his

case. The learned DR vehemently argued and requested to set

aside appeals to the learned CIT(A) to re-examine claim of the

assessee. Therefore, considering complexity involved in the

case, we deem it appropriate to set aside appeals of the

assessee to the file of the learned CIT(A) and direct the CIT(A)

to reconsider the issues afresh in light of various additional

evidences filed by the assessee, including reconciliation filed for

explaining undisclosed income computed by the Assessing

Officer. Further, the learned CIT(A) may call for remand report

from the Assessing Officer, if necessary. Therefore,

considering complexity involved in these appeals and also to

give one more opportunity to the assessee, we are of the

considered view that the appeals need to go back to the file of

the learned CIT(A) to give one more opportunity of hearing to

the assessee to explain his case.

11 ITA No. 113 to 119/Chny/2020 & ITA Nos.354 to 356/Chny/2020

assessment year 2009-10 is treated as allowed for statistical

purposes.

ITA Nos.114 to 119/Chny/2020 (A.Y.2010-11 to 2015-16):

119/Chny/2020 are identical to the facts and issues which we

have already considered in ITA No.113/Chny/2020 for the

assessment year 2009-10. The reasons given by us in the

preceding paragraphs of ITA No.113/Chny/2020 shall mutatis

mutandis apply to these appeals, as well. Therefore, for similar

reasons, we set aside these appeals also to the file of the

learned CIT(A) and direct the CIT(A) to consider the issues de

novo, in accordance with law, after giving reasonable

opportunity of hearing to the assessee.

assessment years 2010-11 to 2015-16 are treated as allowed

for statistical purposes.

ITA Nos.354 to 356/Chny/2020 (A.Y. 2011-12 to 2013-14):

356/Chny/2020 are identical to the facts and issues which we

12 ITA No. 113 to 119/Chny/2020 & ITA Nos.354 to 356/Chny/2020

have already considered in the case of Mr.J.Srinivasan in ITA

No.113/Chny/2020 for the assessment year 2009-10. The

reasons given by us in the preceding paragraphs of ITA

No.113/Chny/2020 shall mutatis mutandis apply to these

appeals, as well. Therefore, for similar reasons, we set aside

these appeals also to the file of the learned CIT(A) and direct

the learned CIT(A) to consider the issues de novo, in

accordance with law, after giving reasonable opportunity of

hearing to the assessee.

assessment years 2011-12 to 2013-14 are treated as allowed

for statistical purposes.

Order pronounced in the open court on 18th March, 2022 Sd/- Sd/- (वी.दुगा� राव) (जी.मंजुनाथ) (V.Durga Rao) (G.Manjunatha) $या�यक सद&य /Judicial Member लेखा सद&य / Accountant Member चे$नई/Chennai, )दनांक/Dated 18th March, 2022 DS आदेश क� ��त+ल,प अ-े,षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु.त (अपील)/CIT(A) 4. आयकर आयु.त/CIT 5. ,वभागीय ��त�न2ध/DR 6. गाड� फाईल/GF.