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Facts
A search operation on M/s. Polisetty Somasundaram group revealed a pen drive containing details of unaccounted cash transactions amounting to Rs.3,57,77,500/-. The Managing Director of Polisetty Somasundaram confirmed these transactions pertained to on-money received by the assessee, M/s. Shyam Sunder Tobacco. The Assessing Officer then made a protective assessment of this amount in the assessee's hands, as the main entity, Polisetty Somasundaram, had already admitted it as its income.
Held
The Tribunal upheld the CIT(A)'s decision to delete the addition in the assessee's hands. Since M/s. Polisetty Somasundaram had already admitted the Rs.3,57,77,500/- as its income, and that admission had attained finality, the protective assessment made in the assessee's hands could not be legally sustained.
Key Issues
Whether an addition made on a protective basis in the assessee's hands can be sustained when the same income has already been admitted by the principal entity and that admission has attained finality.
Sections Cited
143(3), 153C, 132(4), 65A, 65B, 110
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Income Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam
Before: Shri Ravish Sood & Shri Balakrishnan S.
(िनधा�रण वष�/Assessment Year:2016-17) Assistant Commissioner of Vs. Shyam Sunder Tobacco Income Tax, Company, Central Circle-1, Guntur. CR Buildings, K V Thota, PAN: AAIFS2024E Guntur-522004. (Appellant) (Respondent) िनधा�रती �ारा/Assessee by: Shri MV Prasad, CA राज� व �ारा/Revenue by: Shri Badicala Yadagiri, CIT-DR सुनवाई की तारीख/Date of 18/11/2025 Hearing: घोषणा की तारीख/Date of 21/11/2025 Pronouncement: आदेश / ORDER PER. RAVISH SOOD, JM: The present appeal filed by the revenue is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 25/06/2025 which in turn arises from the order passed by the Assessing Officer under section 143(3) r.w.s 153C of the Income-Tax Act, 1961 (for short, “the Act”), dated 28/03/2022 for the Assessment Year 2016-17. The revenue has assailed the impugned order on the following grounds of appeal before us:
1. The order of the Ld.CIT(A) is erroneous both on the facts and in law.
2. The Ld.CTT(A) has erred in summarily allowing the appeal of the assessee on sole ground of non-admissible seized material evidence used by the Assessing Officer during assessment proceedings u/s.153C consequent to search action conducted in the case of M/s.Polisetty Somasundaram group.
3. The Ld.CIT(A) erred in not considering the fact that the addition of Rs.3,57,77,500/-was made on the basis of information was found and seized material marked as pen drive vide in Annexure A/PSS/CORP/18 Page no.124 contains the details of certain unaccounted cash transactions made by M/s. Polisetty Somasundaram.
4. The Ld.CIT(A) erred in not considering the fact that during the assessment proceedings it was found that the firm of M/s.Polisetty Somasundaram has clearly noted down the transactions entered into with the assessee and the same was accepted in the sworn. statement u/s.132(4) recorded on 08.06.2020 from Sri Polisetty Shyam Sundar, Managing Partner of M/s.Polisetty Somasundaram as on money received by the one of the group concerns M/s.Shyam Sundar Tobacco.
5. The Ld.CIT(A) erred in giving a finding that the pen drive seized from the business premises of M/s.Polisetty Somasundaram group and marked as Annexure A/PSS/CORP/19 was an inadmissible digital evidence as held by Hon'ble ITAT in the case of M/s.Polisetty Somasundaram and hence the same can't be considered as a valid digital evidence in the case of the assessee. The Ld.CIT(A) ought to have appreciated the fact that the said decision of Hon'ble ITAT was not accepted by the Department and further appeal to Hon'ble High Court was filed and the same is pending adjudication as on date. The Ld.CIT(A) ought to have appreciated the fact that the finding of Hon'ble ITAT either had not attained any finality or accepted by the Department as on date and thus, relying on the said decision of Hon'ble ITAT would be adverse in the interest of Revenue.
6. The Ld.CIT(A) erred in allowing relief to the assessee by considering the decision of Hon'ble ITAT in the case of M/s. Polisetty Soma sundaram by ignoring the fact that the seized pen drive was an independent primary source of evidence u/s.6513 of Indian Evidence Act and when the extracts of the said pen drive were confronted to the key persons of M/s.Polisetty Somasundram group, he never raised an objection with regard to the contents of the said seized pen drive.
7. The Ld.CIT(A) erred in not appreciating the fact that the seized material marked as A/PSS/CORP/18 consists hard copies in the form of printouts of excel sheets. The Ld.CIT(A) ought to have appreciated the fact that though the seized material in the form of the pen drive marked as A/PSS/CORP/18 was in fact in the form of hard copies and thus it can't be ignored while allowing the relief to the assessee.
8. The Ld.CIT(A) erred in allowing relief to the assessee based on the decision of Hon'ble ITAT in the case M/s. Polisetty Somasundram group. Though the key person of the searched group i.e. Sri Polisetty Shyam Sunder of Polisetty Soma Sundram group, had confirmed the financial transactions done with the assessee in his sworn statement u/s.132(4) dated 08.06.2020.
9. The Ld.CIT(A) erred in allowing relief to the assessee that it had never questioned the validity of the seized material during the course of scrutiny proceedings, before Assessing Officer and it is only an afterthought. The Ld.CIT(A) ought not to have considered the afterthought claim made by the assessee and it was raised by the assessee only after the relief got by the searched person, M/s.Polisetty Somsundaram before Hon'ble ITAT on validity of seized material.
10. The CIT(A) has erred in not considering the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities in this case, the Pen drive. Reference is invited to the decision of Hon'ble Supreme Court in the case of Ambalal Sarabhai Enterprise Ltd Vs. KS Infra space LLP Limited and Another in Civil Appeal No(s). 9346 of 2019 dated 6th January, 2020, wherein pertaining to whatsapp evidence, the Hon'ble Supreme Court observed that "The WhatsApp messages, which are virtual verbal communications, are matters of evidence with regard to their meaning and its contents to be proved during trial by evidence in chief and cross-examination. The e-mails and WhatsApp messages will have to be read and understood cumulatively to decipher whether there was a concluded contract or not. In this case, there is a virtual verbal communication and the same is matter of evidence, as in case of evidence derived from mobile and by completion of transaction, a concluded contract and electronic evidences derived from laptop subsumes the same with conviction. 11. The Ld.CIT(A) has erred in not considering the evidence that was found and seized in the form of pen drive and print outs of excel sheets as the same has evidentiary value as per the provisions of Section 65A and Section 65B of Indian Evidence Act 1872. 12. The Ld.CIT(A) has erred in not considering the sworn statement of the key person of the searched group i.c. Sri Polisetty Shyam Sundar of Polisetty Soma Sundaram group recorded u/s.132(4) on 08.06.2020 wherein he had confirmed receipt of cash on various dates from the assessee’s and he also confirmed that all these cash transactions were outside regular books of accounts. Accordingly, he admitted the cash receipts as additional income in the hands of M/s.Polisetty Somasundaram. The Ld.CIT(A) ought to have considered the decision of Hon'ble Apex Court in the case of B. Kishore Kumar Vs. DCIT 62 Taxman.com.2015 (SC) (2015) wherein the Hon'ble Apex Court dismissed the SLP filed by the assessee thus wholly relying on 132(4) statement as strong piece of evidence.
The Ld. CIT(A) is not justified in allowing relief to the assessee without applying the decision of Hon'ble Apex Court in the case of Sumati Dayal v CIT (1995) 214 ITR 801 (SC), wherein it was held that Surrounding circumstances and test of applying human probabilities "Though an apparent must be considered real until it was shown that there were reasons to believe that the apparent was not real in the case where a party relied on self-serving recitals in document, it was for that party to establish the truth of those recitals. Taxing authorities were entitled to look into the surrounding circumstances to find out the reality of the recitals".
14. The Ld. CIT(A) is not justified in allowing relief without applying the decision of Hon'ble Apex Court in the case of CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) (546,547), wherein it was held that "Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or a Tribunal. Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of Human Probabilities. Human minds may differ as to reliability of a piece of evidence, but that sphere decision of the final fact-finding authority is made conclusive by law".
The Ld. CIT(A) is not justified in allowing relief without applying the decision of Chuharmal v. CIT [1988] 38 Taxman 190/172 ITR 250 (SC), the apex court upheld the finding of J.S. Parker v. V.B. Palekar [1974] 94 ITR 616 (Bom.) it was held that though the income tax authorities are not strictly bound by the rigors of technical rules of evidence, they are not precluded from invoking the principles contained in the Evidence Act whenever the occasion demands. Although the decision was rendered in the context of Section 110 of the Evidence Act.
The Ld.CIT(A) erred by not considering the fact that the Indian Evidence Act of 1872 defines "evidence" as: "all statements which the court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry; these are termed oral evidence and all documents, including electronic records, produced for the court's inspection." 17.. Any other ground that may be urged at the time of hearing.”
Succinctly stated, the assessee firm which is engaged in the real estate business had filed its return of income for AY 2016-17 on 15/10/2016 declaring an income of Rs.1,29,29,400/-. Search and seizure operations were conducted in the case of the assessee “M/s. Polisetty Somasundaram group of cases” on 28/01/2020 wherein a pen drive was found from the business premises of the searched concern, which was seized vide annexure A/PSS/CORP/19 and the contents of the pen drive were seized vide annexure A/PSS/CORP/18 which contained the details of the unaccounted cash transactions made by the afore mentioned searched concern.
Thereafter, the AO based on the seized material, a notice under section 153C of the Act, dated 04/12/2021 was issued to the assessee firm wherein it was called upon to file its return of income. In response, the assessee firm filed its return income for AY 2016-17 declaring an income of Rs.1,06,99,360/-.
During the course of the assessment proceedings, the AO observed that the afore mentioned seized annexure, viz., Annexure- A/PSS/CORP/18, PageNo.124 revealed as under:
Sl Date Cash receipts in no unaccounted cash book of M/s. Polisetty Somasundaram 1. 13-Aug-15 Rs.3,42,73,000 2. 26-Jun-15 Rs.15,04,500 Rs.3,57,77,500
Also, it was observed by him that during the course of the search proceedings, Sri P. Shyam Sunder, the Managing Director of M/s. Polisetty Somasundaram, in his sworn statement recorded under section 132 of the Act, dated 08/06/2020, had stated that the above mentioned cash transactions in his unaccounted cash book pertains to the on money received by one of his group concerns, viz., M/s. Shyam Sunder Tobacco, i.e., the assessee’s firm.
The AO observed that Shri P. Shyam Sunder (supra) in his statement recorded under section 132(4) of the Act, dated 08/06/2020 on being confronted that the seized material, viz., A/PSS/CROP/18 and A/PSS/CROP/19 seized from the business premises in the course of the search proceedings conducted on M/s. Polisetty Somasundaram group on 29/01/2020 claimed that the aforesaid amount of Rs.3,42,73,000/- was the on money received by one of its group concern, viz., M/s. Shyam Sunder Tobacco company.
The AO, further observed that M/s. Polisetty Somasundaram in the course of its assessment proceedings, had vide its reply dated 07/03/2022 admitted all the receipts on account of on money of group concerns in the hands of the main firm, i.e., M/s. Polisetty Somasundaram. The assessee firm in the course of the assessment proceedings had in reply to the show cause notice (SCN), dated 03/03/2022, inter alia, submitted before the AO that the aforesaid amount of Rs.3,57,77,500/- has already admitted as income in the case of M/s. Polisetty Somasundaram. Thereafter, the AO assessed the aforesaid amount of Rs.3,57,77,500/- (supra) in the hands of the assessee firm on a protective basis.
Aggrieved, the assessee firm had carried the matter in appeal before the CIT(A), who taking cognizance of the fact that the amount of Rs.3,57,77,500/- was admitted in the hands of M/s. Polisetty Somasundaram, and thus, the issue had reached finality, vacated the said addition that was made in the hands of the assessee firm on a protective basis.
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us.
We have heard the Learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record.
Admittedly, it is a matter of fact borne from record that the AO after taking cognizance of the fact that M/s. Polisetty Somasundaram, i.e., the main firm, had admitted the above mentioned receipts of Rs.3,57,77,500/- (supra) as its income for the subject year, therein in order to protect the interest of the revenue had assessed the said amount in the hands of the assessee firm on a protective basis.
We have given thoughtful consideration to the facts involved in the present case and concur with the CIT(A) that as M/s. Polisetty Somasundaram (supra) had admitted the receipts of Rs.3,57,77,500/- as its income, and the said issue had attained finality, therefore, the addition made in the hands of the assessee firm on a protective basis could not be sustained and had rightly been deleted.
13. We, thus, finding no infirmity in the order of the CIT(A), uphold his order.
In the result, appeal filed by the revenue is dismissed.
Order pronounced in the open court on 21st November, 2025.