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Facts
A survey was conducted at the business premises of the assessee company, which resulted in the seizure of a loose sheet titled "SARATH KUMAR SUSPENSE". This document listed amounts related to individual and entities for FYs 2014-15, 2015-16, and 2016-17. The directors admitted to withdrawing funds for personal use.
Held
The Tribunal held that the CIT(A) was justified in deleting the addition made under Section 69C. The addition was based on a loose sheet and statements recorded during survey, which lacked corroborative evidence. The transactions were duly recorded in the company's books prior to the search and reflected in filed returns.
Key Issues
Whether the addition made by the Assessing Officer under Section 69C of the Act, based on a loose sheet and director's statements, was justified without corroborative evidence.
Sections Cited
69C, 131, 132, 133A, 142(1), 153C, 292C, 132(4A), 139
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI JAGADISH
आदेश / O R D E R
PER MANU KUMAR GIRI, JM:
The captioned appeal by the revenue is arising out of the order of the Ld. Commissioner of Income Tax (Appeals) Chennai-19, dated 09.05.2025 for AY 2015-16.
The revenue has raised the following grounds of appeal:
1. The Order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts and in law.
2. The Ld.CIT(A) erred in deleting the addition of Rs.2,07,55,873/- u/s 69C of the Act on account of unexplained expenditure without any specific findings to the contrary.
The Ld.CIT(A) erred in not taking cognizance of the fact that the assessee has not retracted the sworn statement recorded u/s 131 of the Act on the impugned transaction & also the decison of Hon'ble Madras High Court in the case of Thiru. A. J. Ramesh Kumar Vs Dy. CIT (2022) 441 ITR 495 (Mad) (HC)/(2022) 139 taxmann.com 190 (Mad), where it held that the mere fact that the appellant retracted the statement could not make the statement unacceptable and that "the burden lay on the appellant to show that the admission made by him in the statement earlier at the time of survey was wrong. Such retraction, however, should be supported by a strong evidence stating that the earlier statement was recorded under duress and coercion, and this has to have certain definite evidence to come to the conclusion indicating that there was an element of compulsion for appellant to make such statement."
The Ld.CIT(A) erred in not appreciating that burden of proof lay on the assessee in consonance with the presumptions entailing u/s 132(44) & 292C of the Act vis-à-vis the sworn statements and the impounded material found during the course of search including the loose sheets pertaining to the impugned transactions & failed to appreciate and follow the Principle of law enunciated therein.
The Ld.CIT(A) erred in not giving opportunity under Rule 46A of the I.T.Rules 1962 despite recording in the order that the assessee has provided evidence to the fact that the impugned transactions were already recorded in the books prior to the date of survey but never gave an opportunity to the Assessing Officer as to what the evidence was, thereby violating the provisions of Rule 46A of I.T.Rules, in respect of new evidences brought in at the appellate stage for the first time.
For these grounds and any other ground including amendment of grounds that may be raised during the course of appeal proceedings, the Order of the Ld CIT(Appeals) may be set aside and that of the Assessing Officer may be restored.
Brief facts of the case are that a search was conducted u/s.132 of the Income Tax Act on 11.04.2017 at the residential premises of Shri R.
Sarath Kumar and Smt. Radhikaa Sarath Kumar. This search was a follow-up to a previous search on another group of cases. Subsequently, a survey was carried out u/s. 133A of the Act at the business premises of the assessee company, where the couple are directors. The company is involved in producing and telecasting TV serials. During the survey, a loose sheet titled "SARATH KUMAR SUSPENSE" was found and seized.
This document outlined amounts for the FYs 2014-15, 2015-16, and 2016-17 against various individuals and entities. When confronted with (AY 2015-16) ACIT Vs M/s Radaan Media Works India Limited :: 3 :: the document, the assessee provided a statement u/s.131 of the Act on 13.04.2017. In the statement, it was asserted that a sum of Rs.63,38,205/- was to be adjusted in the books for the FY 2016-17. The remaining amount of Rs.4,71,77,248/- was identified as funds withdrawn by the directors for personal use. This included Rs.2,98,77,248/- attributed to Shri R. Sarathkumar and Rs.1,73,00,000/- to Smt. Radhikaa Sarath Kumar. Based on the findings arising from the search-initiated assessment proceedings, the Assessing Officer (AO) issued notices u/s. 153C of the Act for the relevant assessment years. In response, the assessee submitted returns of income. The AO sought additional details by issuing notices u/s. 142(1) for each assessment year. The assessee did not respond to these notices. Consequently, the AO issued a detailed show cause notice dated 30.11.2019 based on the survey findings for each year. The assessee company submitted its response to the show- cause notice on 05.12.2019. After reviewing the assessee’s submissions, the AO rejected them. The AO noted that both directors, Shri R. Sarath Kumar and Smt. Radhika Sarath Kumar, had admitted in their statements that they withdrew funds from the company on various occasions and used them for personal commitments. The AO observed that the assessee’s explanations were an afterthought and did not correspond to the amounts withdrawn. Therefore, the AO concluded that the source of the cash withdrawals recorded in the suspense account remained The additions made are summarised below:
AY Amount Treated as Director Withdrawals (Rs.) 2015-16 2,07,55,873 2016-17 1,79,21,775 2017-18 84,99,600 Total 4,71,77,248 After making the above additions, the AO finalized the assessment proceedings and passed orders u/s. 143(3) read with section 153C of the Act on 31.12.2019 for assessment years 2015-16, 2016-17, and 2017-18.
On further appeal to ld.CIT(A), the assessee submitted that the assessee, Radaan Media Works India Ltd., had originally filed its returns of income for the relevant assessment years declaring either nil income or business losses. Pursuant to the issuance of notices u/s.153C of the Act, the assessee filed revised returns maintaining the figures originally declared. The Assessing Officer (AO), however, completed assessments u/s.153C r.w.s 143(3), making additions of Rs.2,07,55,873/- (AY 2015- 16), Rs.1,79,21,775/- (AY 2016-17), and Rs.84,99,600/- (AY 2017-18).
These amounts were treated by the AO as unexplained income on the ground that they represented withdrawals made by the directors, Smt. R.
Radhikaa and Shri R. Sarathkumar. The assessee has categorically disputed these additions, asserting that the amounts in question were business-related advances to the directors, duly recorded in the (AY 2015-16) ACIT Vs M/s Radaan Media Works India Limited :: 5 :: company’s books of account prior to the date of search (11.04.2017).
Ledger extracts, bank statements, financial statements, and other supporting documentation were furnished to substantiate the genuineness and business purpose of these advances. Assessee further submitted that despite the documentary evidence produced, the AO relied primarily upon statements recorded during survey and post-survey proceedings, which the assessee contends lack evidentiary value in view of the settled law laid down by the Hon’ble Supreme Court in CIT v. S. Khader Khan Son and Common Cause v. Union of India. The assessee further submitted that the AO wrongly invoked section 69C and applied a punitive tax rate of 60%, even though the impugned sums did not constitute unexplained expenditure or unaccounted income, but rather identifiable business advances. The assessee accordingly prayed for deletion of the additions and acceptance of the originally filed returns on the basis of judicial precedent and contemporaneous accounting records. The additions were made on the basis of a survey conducted u/s.133A at the business premises of the assessee, during which certain loose sheets titled “SARATH KUMAR SUSPENSE” were allegedly impounded. These sheets reflected aggregate withdrawals of Rs.4,71,77,248/- by the two directors across FYs 2014-15 to 2016-17. In the course of the survey, the directors stated u/s.131 that a portion of these withdrawals (Rs.63,38,205/-) was intended to be adjusted in the books for FY 2016-17, while the balance (AY 2015-16) ACIT Vs M/s Radaan Media Works India Limited :: 6 :: had been utilised personally. Relying upon these statements, the AO treated the withdrawals as personal in nature and assessed them as unexplained income of the company for the relevant assessment years.
The ld.AR before the ld.CIT(A), opposed the additions, reiterating that the impugned amounts were business and production-related advances given to the directors in the ordinary course of business. These advances were duly reflected as current assets under “Advances” in the books of account and corresponding entries appeared in the directors’ accounts. All such entries stood recorded prior to the date of search. The AO’s principal contention was that the directors admitted to personal use of the funds in their post-search statements. The AR, however, demonstrated through comprehensive documentation that:
• The transactions formed part of regular business activity.
• The amounts were duly recorded in the books of account and in income tax returns filed well before the date of search
(11.04.2017).
• Bank statements, ledger accounts, income tax returns, financial statements, and production agreements corroborated the assessee’s claims.
• The statements recorded during survey/post-survey proceedings were made under compulsion, lacked evidentiary value, and could not be the sole basis for (AY 2015-16) ACIT Vs M/s Radaan Media Works India Limited :: 7 :: making additions unless corroborated by material evidence, as held by the Supreme Court.
The AR before the ld.CIT(A) further submitted that the advances were properly classified in the company’s books under “Advance-Current Liabilities,” and reciprocally under “Advances (Current Assets)” in the directors’ accounts. These formed part of the regular financial affairs of the assessee and were reflected in returns filed u/s.139 for the relevant assessment years. The entries clearly predated the search, thereby demonstrating bona fides and absence of concealment. No material evidence was brought on record by the AO to establish that the impugned amounts constituted unaccounted income or were siphoned for undisclosed personal use. The loose sheets and the statements recorded during survey proceedings lacked statutory sanctity in view of the Supreme Court’s judgment in CIT v. S. Khader Khan Son (2013) 352 ITR
The AO also failed to produce corroborative evidence to justify taxing the impugned amounts in the hands of the assessee. Considering the contemporaneous accounting records, the nature of the underlying transactions, and their prior disclosure in returns filed before the search, it is evident that the sums in question were in the nature of trade and production-related advances. They do not represent taxable receipts. The AO’s contrary inference is unsupported, lacking independent verification and any examination into the commercial substance of the transactions.
The assessee asserts that the AO has placed undue and disproportionate reliance on statements obtained from the assessee and her husband during the survey u/s. 133A. These statements formed the sole or primary basis of the additions, despite being uncorroborated by any independent evidence, rendering the conclusions drawn by the AO unsustainable.
On appeal before us, the Ld. Departmental Representative (DR)
strongly supported the order of the Assessing Officer and submitted that the Ld. CIT(A) erred both on facts and in law in deleting the addition of Rs.2,07,55,873/- made u/s 69C of the Act. It was contended that the addition was based on incriminating material found during survey proceedings conducted pursuant to a search u/s 132. A loose sheet titled “SARATH KUMAR SUSPENSE” was impounded, which clearly reflected withdrawals by the directors over multiple financial years. When confronted with this document, both directors, in their sworn statements recorded u/s 131 of the Act, categorically admitted that the amounts withdrawn were utilised for personal purposes, except for a small portion proposed to be adjusted later. The Ld. DR submitted that the assessee never retracted these sworn statements in a legally acceptable manner.
Relying on the judgment of the Hon’ble Madras High Court in Thiru A.J.
Ramesh Kumar v. DCIT (441 ITR 495), it was argued that a mere denial at a later stage cannot invalidate an admission unless supported by (AY 2015-16) ACIT Vs M/s Radaan Media Works India Limited :: 9 :: cogent evidence of coercion or duress, which is conspicuously absent in the present case. It was further argued that the presumptions under sections 132(4A) and 292C squarely apply to the impounded material and statements, and the burden squarely lay on the assessee to rebut the same with credible evidence. According to the Revenue, the assessee failed to discharge this burden. The Ld. DR also submitted that the Ld.
CIT(A) violated Rule 46A by accepting fresh evidence allegedly showing that the transactions were recorded in the books prior to the date of search, without affording the AO an opportunity to examine or rebut such evidence. Accordingly, it was prayed that the order of the Ld. CIT(A) be set aside and the assessment order be restored.
Per contra, the Ld. Authorised Representative (AR) reiterated the submissions made before the Ld.CIT(A) and strongly supported the impugned appellate order passed by ld.CIT(A). It was submitted that the impugned amounts represent business-related advances given to the directors in connection with production and other commercial activities of the assessee company. These advances were duly recorded in the regular books of account, reflected in ledger accounts, bank statements, financial statements, and income tax returns filed much prior to the date of search (11.04.2017). The Ld. AR emphasized that the AO made the additions solely on the basis of statements recorded during survey/post-survey proceedings, without bringing on record any independent corroborative (AY 2015-16) ACIT Vs M/s Radaan Media Works India Limited :: 10 :: evidence to establish that the amounts constituted unexplained expenditure or unaccounted income of the assessee. Relying on the judgments of the Hon’ble Supreme Court in CIT v. S. Khader Khan Son (352 ITR 480) and Common Cause v. Union of India, it was contended that statements recorded during survey proceedings have no evidentiary value unless supported by tangible material. The loose sheet relied upon by the AO, by itself, does not establish undisclosed income, especially when the transactions are already reflected in the books. It was further submitted that section 69C was wrongly invoked, as there was neither any unexplained expenditure nor any finding that the assessee incurred expenditure outside its books. The AO also failed to demonstrate how the impugned advances lost their character as recorded business transactions. As regards Rule 46A, the Ld. AR submitted that all the evidences relied upon by the ld.CIT(A) were part of the regular books of account and statutory records already available with the AO, and hence no violation of Rule 46A arises. Accordingly, it was prayed that the order of the Ld. CIT(A) be upheld.
We have heard the rival submissions and perused the material available on record. The issue before us is whether the Ld. CIT(A) was justified in deleting the addition of Rs.2,07,55,873/- made u/s 69C of the Act for AY 2015-16. It is an undisputed fact that the impugned addition has been made primarily on the basis of a loose sheet found during (AY 2015-16) ACIT Vs M/s Radaan Media Works India Limited :: 11 :: survey proceedings and statements recorded from the directors u/s 131 of the Act. It is also a matter of record that the assessee has produced ledger accounts, bank statements, financial statements, and income tax returns to demonstrate that the amounts in question were recorded in the books of account prior to the date of search. The Assessing Officer has not brought on record any material evidence to establish that these amounts represented unaccounted expenditure or income of the assessee. Merely because the directors, in their statements, stated that the amounts were utilised for personal purposes, the same cannot override contemporaneous documentary evidence maintained in the regular course of business. The Hon’ble Supreme Court in CIT v. S.
Khader Khan Son has clearly held that statements recorded during survey proceedings, by themselves, do not have evidentiary value unless corroborated by independent material. In the present case, no such corroboration has been brought on record by the AO. We also find merit in the contention of the assessee that section 69C is inapplicable, as there is no finding of any expenditure incurred outside the books of account.
The transactions being duly recorded and disclosed in returns filed prior to search, the very foundation of the addition fails. As regards the Revenue’s objection on Rule 46A, we find that the evidences relied upon by the Ld.
CIT(A) are part of the regular books of account and statutory records, and no new or additional evidence dehors the assessment record has been (AY 2015-16) ACIT Vs M/s Radaan Media Works India Limited :: 12 :: admitted so as to vitiate the appellate proceedings. In view of the above facts and legal position, we find no infirmity in the order of the Ld. CIT(A) in deleting the addition made u/s 69C of the Act. Accordingly, the grounds raised by the Revenue are dismissed.
In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 10TH day of February, 2026 at Chennai.
Sd/- Sd/- (मनु कुमार िग�र) (जगदीश) (MANU KUMAR GIRI) (JAGADISH) �या�यक सद)य/JUDICIAL MEMBER लेखा सद)य/ACCOUNTANT MEMBER