M/S. P.P. CONSTRUCTIONS,KARUR vs. ACIT, CENTRAL CIRCLE-3,, COIMBATORE

Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties

"Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner.

When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay.

There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk.

It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.

Further, since all the 61 appeals arise out of the same search proceedings, and the issues involved therein are common, identical, and interconnected, the appeals are being disposed of by way of a consolidated/common order, in the interest of convenience and judicial economy.

The brief facts giving rise to the present appeals are that a search and seizure operation u/s. 132 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) was carried out on 10.08.2017 in the cases of various entities and individuals belonging to the P.Palanisamy Group. During the course of the search, incriminating books of account, documents, unaccounted cash, and jewellery were found and seized. Inter alia, certain “Thittam Books” were & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 8 ::

Aggrieved by the assessment orders, the assessees preferred appeals before the Learned Commissioner of Income Tax (Appeals). By orders dated 31.07.2024, except in the case of PP Enterprises (Oddanchatram) wherein the appellate order was passed on 05.08.2024, the ld. CIT(A) upheld the substantive additions in all cases, while deleting the protective additions in the cases of PP Enterprises (Bengaluru) for Assessment Years 2016-17 to 2018-19 and PP Constructions for Assessment Year 2018-19.

During the course of hearing, the Learned Authorised Representative (hereinafter referred to as “the ld.AR”) for the assessees sought directions from the Tribunal for production of the sanctions, statutory approvals, and seized materials pertaining to all the assessees. The said direction was duly issued by us, pursuant to which the Learned Departmental Representative (hereinafter referred to as “the ld.DR”) complied and produced the requisite records. Both the ld.AR for the assessees and the ld.DR have placed detailed written submissions on record and have also filed various paper books in support of their respective contentions. The issues arising in the present appeals are dealt with assessee-wise in the succeeding paragraphs of this order.

In respect of the assessees whose assessments have been framed u/s.153C of the Act, the ld.AR has raised preliminary legal objections seeking annulment of the assessments on the grounds that: (i) the notices issued u/s.153C are based on a combined satisfaction, which is contrary to law and evidences non-application of mind; & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 10 ::

During the course of hearing, the ld.AR of the assessees submitted modified grounds as well as additional grounds of appeal

In the modified grounds of appeal, Ground No.3 pertains to the contention that the mandatory satisfaction contemplated u/s.153C of the Act has not been validly recorded, which issue is now taken up for adjudication. The ld.AR submitted that the notice issued u/s.153C in the present cases, a copy of which was furnished to the assessees by the ld.DR pursuant to the directions of the Tribunal during the course of hearing, is invalid in law. It was contended by the ld.AR that the satisfaction recorded is a composite/combined satisfaction, not specific to each assessment year, and further, it does not specify as to which seized material pertains to which assessment year. 8.1 In support, reliance was placed on the decision of the Delhi Tribunal in Pushpanjali Constructions (P.) Ltd. v. DCIT [128 ITR (Trib) 201 (Del)], with specific reference to paragraph 23, wherein it was held that a satisfaction note which is general, vague, and casual, without recording particulars of escapement of income, quantification thereof, or linkage to a specific assessment year, reflects lack of proper application of mind and is therefore bad in law, rendering the consequent assessment proceedings invalid.

The ld.AR further submitted that a proforma for recording satisfaction u/s.153C has been placed on record by the ld.DR. It was pointed out that the said proforma merely states that the seized documents pertain to the concerned assessee and does not disclose how such satisfaction was arrived at, nor does it indicate how the seized material has a bearing on the determination of total income, much less that it represents undisclosed income. 9.1 It was further submitted that the examination note, also placed on record by the ld.DR and stated to constitute the satisfaction u/s.153C, is undated, and therefore cannot be regarded as having been recorded prior to the issuance of notice u/s.153C. According to the ld.AR, the said examination note is at best a communication seeking approval from the Joint Commissioner, and cannot be equated with a legally valid satisfaction note as contemplated under the statute.

The ld.AR also placed reliance on the judgment of the Hon’ble Karnataka High Court in DCIT v. Sunil Kumar Sharma [259 taxmann.com 179 (Kar)], wherein it has been held that a consolidated satisfaction note vitiates the entire assessment proceedings. It was further submitted that the Special Leave Petition filed by the Revenue against the said judgment has been dismissed by the Hon’ble Supreme Court in DCIT v. Sunil Kumar Sharma [2024] 165 taxmann.com 546 (SC).

The ld.AR further relied upon the judgment of the Hon’ble Delhi High Court in Kishore Kumar Sharma v. ACIT [178 taxmann.com 315 (Del)], wherein it was held that failure on the part of the jurisdictional Assessing Officer to record reasons demonstrating how the seized material has a bearing on the determination of total income of the other person would invalidate the notice issued u/s.153C and all consequential proceedings. It was also submitted that the SLP filed by the Department against the said judgment was dismissed by the Hon’ble Supreme Court in ACIT v. Kishore Kumar Sharma [178 taxmann.com 661 (SC)].

Per contra, the ld.DR, through tabulated details filed along with written submissions, furnished assessee-wise particulars of seized material referred to in the satisfaction note and correlated the same with the relevant assessment years. It was submitted that the tabulation and analysis demonstrate that, even though the satisfaction note is consolidated, the Assessing Officer has, in substance, referred to incriminating material pertaining to each assessment year, thereby fulfilling the requirements of section 153C of the Act.

The ld.DR further referred to the judgment of the Hon’ble Karnataka High Court in DCIT v. Sunil Kumar Sharma (supra), contending that paragraph 36 reflects only the submissions of counsel and paragraph 53 constitutes obiter dicta rather than the ratio decidendi. Reliance was also placed on the decisions in Union of India v. Dhanwanti Devi (21.08.1996) and State of Orissa v. Dhirendra Sundar Das (Civil Appeal No. 4646 of 2019) to submit that dismissal of an SLP does not amount to declaration of law under Article 141 of the Constitution.

In rejoinder, the ld.AR controverted the submissions of the ld.DR and submitted that the Revenue is impermissibly attempting to supplement or improve the satisfaction note by providing fresh correlations and explanations through written submissions. It was pointed out that the assessee-wise tables mapping seized material to assessment years, as contained in Annexure-I to the written submissions of the ld.DR, were never part of the original satisfaction note. 14.1 It was emphatically submitted that such post-facto justification is not permissible in law, reliance being placed on several judicial precedents including Prashant Joshi v. ITO [2010] 1 taxmann.com 90 (Bom), East Coast Commercial Co. Ltd. v. ITO [1981] 128 ITR 326 (Cal), Hindustan Lever Ltd. v. R.B. Wadkar [268 ITR 332 (Bom)], ACIT v. Nirmal Bang Securities (P.) Ltd. [67 taxmann.com 57 (Bom)] and Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd. v. ACIT [146 taxmann.com 569 (Del)], affirmed by grant of SLP in [2024] 159 taxmann.com 389 (SC), for the proposition that reasons cannot be supplemented by subsequent explanations or affidavits.

With respect to the reliance placed by the ld.DR on Indian National Congress v. DCIT (supra), the ld.AR submitted that the said decision is factually distinguishable, as the satisfaction note reproduced in paragraph 18 of that judgement clearly demonstrates year-wise reference to incriminating material, including amounts and dates, which is conspicuously absent in the present cases. It was therefore submitted that the said decision does not advance the case of the Revenue. 15.1 Without prejudice, it was contended that where two views are possible, the view favourable to the assessee must be adopted, in light of the decisions of the Hon’ble Supreme Court in CIT v. Vegetable Products Ltd. [88 ITR 192 (SC)] and CIT v. Kulu Valley Transport Co. (P.) Ltd. [77 ITR 518 (SC)].

The ld.AR reiterated reliance on the judgment of the Hon’ble Karnataka High Court in DCIT v. Sunil Kumar Sharma (supra), contending that paragraph 53 of the said judgment clearly lays down that a consolidated satisfaction vitiates the assessment, which constitutes a binding ratio and not mere obiter. It was further submitted that the Pune Bench of the Tribunal in ACIT v. Subash Jivraj Jain (supra), after considering Indian National Congress v. DCIT (supra), has followed Sunil Kumar Sharma (supra), particularly noting the dismissal of the Revenue’s SLP by the Hon’ble Supreme Court.

The ld.AR further contended that the decision of the Hon’ble Supreme Court in CIT v. Calcutta Knitwears (supra) was rendered in the context of section 158BD of the Act, and therefore the principles laid down therein cannot be mechanically applied to proceedings u/s.153C of the Act. It was submitted that the satisfaction contemplated u/s.158BD necessarily pertains to a single assessment, namely, the determination of undisclosed income for the block period, whereas u/s.153C, separate assessments are required to be framed for each assessment year falling within the scope of the provision. 17.1 In support of this distinction, reliance was placed on the judgment of the Hon’ble Supreme Court in PCIT v. Abhishar Buildwell (P.) Ltd. [2023] 454 ITR 212 (SC), wherein it has been authoritatively held that, for the purposes of assessments u/s.153A/153C, the assessment years are to be classified into abated and unabated years, and that in respect of unabated years, additions can be made only on the basis of incriminating material found during the course of search. It was submitted that a necessary corollary of the said decision is that the relevant assessment years must be specifically identified and the satisfaction u/s.153C of the Act must be recorded with reference to each assessment year, which stands in clear contrast to the scheme of section 158BD, where a single satisfaction suffices for framing a block assessment.

We have carefully considered the rival submissions, perused the material available on record, and examined the orders of the lower authorities, along with the judicial precedents relied upon by both parties. The core issue that arises for our consideration is whether, for the purposes of section 153C of the Act, a separate satisfaction is required to be recorded for each assessment year, and whether the recording of a combined or consolidated satisfaction vitiates the assessment proceedings initiated thereunder. 18.1 At this juncture, it would be appropriate to first advert to the statutory provisions of section 153C of the Act, which read as under: “Assessment of income of any other person. 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 19 ::

The ld.DR, through a tabulation filed along with the written submissions, sought to correlate the seized material referred to in the satisfaction note with the respective assessment years, and thereby contended that the satisfaction recorded makes reference to the relevant years. However, it is an undisputed fact that the satisfaction recorded u/s.153C of the Act does not contain assessment year-wise particulars of the incriminating material proposed to be relied upon for the purpose of determination of total income. 19.1 In view of the ratio laid down in Prashant Joshi v. ITO [(2010) 1 taxmann.com 90 (Bom)], we hold that the ld.DR cannot seek to improve, supplement, or cure the defects in the satisfaction note by subsequently furnishing a tabulation mapping the seized material to the relevant assessment years. 19.2 As regards the reliance placed by the ld.DR on the decision of the Hon’ble Delhi High Court in Indian National Congress v. DCIT (supra), we find that the Hon’ble High Court has made the following observations: “24…………This too appears to suggest that while the notice could be composite and based on a common satisfaction note which encapsulates the incriminating material pertaining to the AYs' in & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 20 ::

Accordingly, even in Indian National Congress v. DCIT (supra), relied upon by the ld.DR, the Hon’ble Court has observed that the satisfaction note must encapsulate the incriminating material pertaining to the assessment years in question. In the present cases, such a requirement is conspicuously absent from the satisfaction notes recorded u/s.153C of the Act. As rightly pointed out by the ld.AR, the satisfaction note in Indian National Congress v. DCIT (supra) specifically referred to three assessment years, along with appropriate cross-references and dates of entries, as is evident from paragraph 18 of the said judgment. 20.1 In contrast, the satisfaction note in the instant cases does not disclose which seized material pertains to which assessment year and appears to have been recorded in a casual and mechanical manner. We further observe that the assessment orders refer to several incriminating materials which do not even find mention in the satisfaction note, thereby reinforcing the contention that the statutory requirement of recording proper satisfaction has not been complied with. 20.2 The submission of the ld.DR that voluminous material was seized and that adequate time was not available to record year-wise satisfaction cannot be accepted. The satisfaction notes in the cases of the assessee group were recorded between August 2019 and & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 21 ::

Turning to the issue of consolidated satisfaction, we note that while the decision in Indian National Congress v. DCIT (supra) may be cited against the assessees, the Hon’ble Karnataka High Court in DCIT v. Sunil Kumar Sharma [2024] 259 taxmann.com 179 (Kar) has taken a view favourable to the assessee, and has observed as follows: “53. Further, satisfaction note is required to be recorded u/s.153C of the IT Act for each Assessment Year and in the impugned proceedings, a consolidated satisfaction note has been recorded for different Assessment Years, which also vitiates the entire assessment proceedings. In view of all these findings, it is said that the appeals do not have any substance for seeking intervention as sought for by the assessee/Revenue.”

We further note that in ACIT v. Subash Jivraj Jain [2025 (7) TMI 1496 – ITAT Pune], the Pune Bench of the Tribunal observed that, notwithstanding the existence of conflicting judicial opinions, the view favourable to the assessee should be adopted, in conformity with the law laid down by the Hon’ble Supreme Court in CIT v. Naga Hills Tea Co. Ltd. [1973] 89 ITR 236 (SC) and A.P. Electrical Equipment Corporation v. The Tahsildar & Ors. (Civil Appeal Nos. 4526–4527 of 2024). The relevant passages of the decision are reproduced below: “21. We find when the Revenue challenged the above order of the Hon’ble Karnataka High Court in the case of DCIT vs. Sunil Kumar Sharma (supra), the Hon’ble Supreme Court in SLP (Civil) Diary No.21526of 2024 vide order dated 20th August, 2024 dismissed the SLP filed by the Revenue.

We find following the above decision, the Co-ordinate Bench of the Tribunal in the case of Shri Rajendra Rameshlal Gugale vs. PCIT vide for assessment year 2017-18, order dated 30.12.2024 has quashed the assessment proceedings by observing as under:

So far as the decision of the Hon’ble Delhi High Court in the case of Indian National Congress vs. DCIT (supra) relied on by Ld.DR is concerned, we find no doubt there is a favourable decision in favour of the Revenue on the issue of combined satisfaction. However, it has been held in various decisions that when there are two views & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 24 ::

Further, the Hon'ble Supreme Court recently in the case of M/s. A.P. Electrical Equipment Corporation vs. The Tahsildar & Ors. (supra) has held that if two decisions of this Court appear inconsistent with each other, the High Courts are not to follow one and overlook the other, but should try to reconcile and follow that decision whose facts appear more in accord with those of the case at hand. Following the above principle and considering the fact that the Hon'ble Supreme Court has dismissed the SLP filed by the Revenue in the case of DCIT vs. Sunil Kumar Sharma (supra), therefore, we follow the decision of the Hon’ble Karnataka High Court in the case of DCIT vs. Sunil Kumar Sharma (supra) and hold that the satisfaction note is required to be recorded u/s 153C for each assessment year and a consolidated satisfaction note recorded for different assessment years would vitiate the entire assessment proceedings. Since in the instant case a consolidated satisfaction note has been prepared for assessment years 2012-13 to 2018-19, therefore, such consolidated satisfaction note being not in accordance with law, the entire assessment proceedings are liable to be quashed. We hold and direct accordingly.” 23. Accordingly, it is evident that the Pune Bench of the Tribunal in ACIT v. Subash Jivraj Jain (supra) has followed the decision of the Hon’ble Karnataka High Court in DCIT v. Sunil Kumar Sharma (supra), and has held that a separate satisfaction note is required to be recorded u/s.153C for each assessment year. It was further held & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 25 ::

A similar view has been taken by the Pune Bench of the Tribunal in Rameshbhai Harilal Patel v. ACIT [TS-1229-ITAT-2025 (Pun)], where it has been held in relevant terms as follows: “27. We find an identical issue had come up before the Co-ordinate Bench of the Tribunal in the case of Chitra Narendra Parmar vs. ACIT & group of cases vide & 1269/PUN/2024 & ors, order dated 14.07.2025 for assessment years 2016-17 and 2017- 18, where the Tribunal, following the decision of the Hon’ble Karnataka High Court in the case of DCIT v. Sunil Kumar Sharma reported in 159 taxmann.com 179 (Kar.) and distinguishing the decision of the Hon’ble Delhi High Court in the case of Indian National Congress vs. DCIT (2024) 463 ITR 431 (Del), has quashed the assessment proceedings passed u/s.153C of the Act on account of combined satisfaction. The relevant observations of the Tribunal read as under:……………

Since in the instant case also the Assessing Officer has passed a combined satisfaction note for assessment years 2012-13 to 2018- 19, therefore, respectfully following the decision of the Co-ordinate Bench of the Tribunal in the case of Chitra Narendra Parmar vs. ACIT (supra) (to which both of us are parties), we hold that the assessment proceedings initiated u/s 153C of the Act on account of combined satisfaction are not valid in law and accordingly the same are quashed. Since the assessee succeeds on this legal ground, the grounds challenging the addition on merit are not being adjudicated being academic in nature. The appeal of the assessee is accordingly allowed.” 25. In a similar vein, the Jodhpur Bench of the Tribunal, in Anjana Constructions v. ACIT [2025] 128 ITR (Trib) 148 (Jodhpur), has also held as follows:

It is apparent from a plain reading of section 153C of the Act that the provision refers to “six assessment years immediately preceding the assessment year relevant to the previous year in which the search is concluded or requisition is made” and, additionally, to the “relevant assessment year or years” for which reference is made to section 153A(1) of the Act.

The Hon’ble Supreme Court, in CIT v. Calcutta Knitwears (supra), has emphatically held that while interpreting a statute, the Court is not entitled to add to or subtract from the language used by the legislature. Applying this principle, any attempt to construe section 153C by omitting the expression “relevant assessment year or years” would be impermissible. Conversely, the use of the expression “relevant assessment year or years” in section 153C plainly indicates that the satisfaction must be recorded with reference to each assessment year proposed to be brought within the ambit of section 153C. This interpretation is in consonance with the interpretative principles reiterated by the Hon’ble Supreme Court in paragraphs 26 and 34 of CIT v. Calcutta Knitwears (supra).

In light of the foregoing reasoning, and having regard to the fact that the Hon’ble Supreme Court has dismissed the Revenue’s SLP in DCIT v. Sunil Kumar Sharma (supra), we follow the decision of the Hon’ble Karnataka High Court in the said case and hold that the combined satisfaction recorded in the case of P.Palanisamy for Assessment Years 2010-11 to 2018-19 is contrary to the provisions of section 153C, which mandates separate satisfaction for each assessment year, and consequently vitiates the entire assessment proceedings. 28.1 In reaching this conclusion, we also rely on the principle laid down by the Hon’ble Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 TR 192 (SC), wherein it was held that where two interpretations are possible, the view favourable to the assessee should be adopted. Thus, the satisfaction recorded u/s.153C fails on two independent grounds: (i) it does not state the incriminating material vis-à-vis the relevant assessment year, as discussed in earlier parts of this order, and (ii) it is a consolidated satisfaction, contrary to statutory mandate, thereby vitiating the assessment proceedings for the assessment years 2010-11 to 2018-19 in the case of the assessee. 28.2 Even if the decision of the Hon’ble Delhi High Court in Indian National Congress v. DCIT (supra) is considered, it is clear that in that case, although the satisfaction note was combined, it nevertheless contained specific reference to incriminating material & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 28 ::

The next legal issue raised by the ld.AR, as Ground No.5 in the modified grounds, relates to the approval u/s.153D of the Act, which is challenged on the grounds that it was issued without application of mind, and further, that it is a composite approval, not in conformity with statutory requirements. It was contended that, for these reasons, the approval u/s.153D is invalid, and the assessments framed pursuant thereto are therefore bad in law.

The ld.AR submitted that the approvals granted u/s.153D by the Joint Commissioner of Income Tax (JCIT) were issued without any application of mind. The following points were advanced in the written submissions in support of this contention: 1) From the approvals granted, it can be seen that the approvals are in respect of 5 individuals namely L.Karuppusamy, P.Kuppuchamy, Sellamuthu Kabilan, Palanisamy Raghupathy, P.Palanisamy, whereas the approval granted talks only of the modus operandi of purported tax evasion by “assessee firm”. This clearly shows that there is no application of mind on the part of the JCIT in granting approval for the said approval does & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 29 ::

With regard to the last contention raised by the ld.AR, namely that the JCIT could not have understood Tamil and therefore could not have comprehended the seized material in Tamil, and consequently that the approval u/s.153D is devoid of application of mind, it is noted that the ld.DR has placed on record an affidavit sworn by Shri Narendra Kumar Naik, the approving authority for the assessment orders passed by the Assessing Officer. In the affidavit, Shri Naik has stated that the Assessing Officer, being a native of Tamil Nadu, had explained the contents of the seized documents wherever they were in the vernacular Tamil language, from time to time. 31.1 In view of the aforesaid affidavit, we are inclined to accept the explanation furnished by Shri Narendra Kumar Naik, and therefore the approval u/s.153D cannot be held to be lacking application of mind merely on the ground that Shri Naik did not know Tamil.

However, the ld.AR submitted that the approval u/s.153D in the case of the assessee (an individual) has been drafted in a generic manner, repeatedly referring to “assessee firm” and failing to address any issues specifically relevant to the assessee’s case. Further, it is noted that the approvals issued in respect of the P.Palanisamy Group contain arithmetical errors, inasmuch as the figures shown under the columns of detected income and returned income do not tally with the assessed income. In certain approvals, & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 31 ::

The approval u/s.153D in the case of P.Palanisamy is reproduced below, and the ld.AR stated that the approvals are verbatim identical across the group. It is further stated that, similar to the approval in the case of P.Palanisamy, the approvals issued in respect of the other four individuals, namely L.Karuppusamy, P.Kuppuchamy, Sellamuthu Kabilan and Palanisamy Raghupathy, refer exclusively to the modus operandi of the alleged tax evasion by the “assessee firm”, without dealing with the individual issues relevant to each assessee.

In support of the contention that the approvals u/s.153D of the Act were issued without application of mind and therefore the assessments framed thereunder are liable to be quashed, the ld.AR relied upon the following decisions: • ACIT v. Serajuddin & Co. [2023] 454 ITR 312 (Ori), SLP dismissed by the Hon’ble Supreme Court in ACIT v. Serajuddin & Co. [2024] 463 ITR 698 (SC); • PCIT v. Anuj Bansal [2024] 466 ITR 251 (Del), SLP dismissed by the Hon’ble Supreme Court in PCIT v. Anuj Bansal [2024] 466 ITR 254 (SC); • Gurvinder Singh Duggal v. ACIT [2024] 6 TMI 336 (ITAT Delhi); • S.P. Singla Constructions Pvt. Ltd. v. DCIT [2025] 1 TMI 1570 (ITAT Chandigarh); • ZTA Infratech Pvt. Ltd. v. DCIT/ACIT [2025] 10 TMI 143 (ITAT Delhi); • Umesh Sadashiv Thakre v. ACIT [2025] 175 taxmann.com 951 (ITAT Nagpur); • YRCE Educare Pvt. Ltd. v. ACIT [2025] 8 TMI 1363 (ITAT Nagpur); • Kehar Singh v. DCIT [2025] 126 ITR (Trib) 609 (Delhi); • Apple Commodities Ltd. v. DCIT [2025] 126 ITR (Trib) 623 (Delhi); • Pushpanjani Construction P. Ltd. v. DCIT [2025] 128 ITR (Trib) 201 (Del); • PCIT v. Believe Constructions (P.) Ltd. [2025] 180 taxmann.com 63 (Del); and • Dheeraj Chaudhary v. ACIT [2025] 178 taxmann.com 360 (Delhi Trib.).

The ld.AR further submitted that the approvals u/s.153D in the present cases are combined approvals, which is contrary to the specific statutory requirement. It was contended that such combined approvals vitiate the assessment proceedings, relying on the decisions in PCIT v. Sapna Gupta (supra), PCIT v. Shiv Kumar Nayyar [2024] 6 TMI 29 (Delhi High Court), Tish Consultants Pvt. Ltd. v. DCIT [2025] 7 TMI 173 (ITAT Delhi), Dheeraj Chaudhary v.

The ld.AR also relied on the decisions of the Hon’ble Gujarat High Court in CIT v. Purshottamdas T. Patel [1994] 209 ITR 52 (Guj) and the Hon’ble Supreme Court in Kalyankumar Ray v. CIT [1991] 191 ITR 634 (SC), submitting that assessment is an integrated process involving determination of both income and tax. Since section 153D mandates approval of the assessment, the income and tax computation must also be approved by the JCIT. It was submitted that the approval u/s.153D of the Act in the present case merely states that the tax computation is to be personally verified by the Assessing Officer, and does not actually approve the tax, thereby indicating that the assessment was not properly approved. Reliance was placed on the decisions of the Hon’ble Gujarat High Court and the Hon’ble Supreme Court (supra), and it was submitted that this defect renders the assessment void.

Per contra, the ld.DR submitted that the functional structure of the Investigation and Central Divisions must be appreciated, and that the Range Head had been continuously involved in the matter at every critical stage from recording satisfaction to issuance of the show-cause notice prepared in consultation with the Range Head. It was submitted that the approving authority would therefore have a comprehensive understanding of the issues well in advance, before & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 36 ::

That the Authorized Representative of the assessee Shri Haja Ali has appeared before me periodically and the relevant issues and seized documents were discussed in presence of the Assessing Officer G Karthikeyan. That, the Authorised Representative has also discussed regarding working of undisclosed income to apply before the Hon. Income Tax Settlement Commissioner (ITSC), however the assessee didn’t proceed with the application before ITSC.

That, I have constantly supervised the proceedings as Range Head and discussed issues from time to time with the Assessing Officer and therefore at the time of submitting the draft assessment order, I was well acquainted with the facts, issues and findings of the cases.

That, the approval has been accorded after due diligence and complete understanding of the facts and issues with prior application of mind and as per the Search and Seizure manual of CBDT dated 22.12.2006.”

On this point, the ld.AR placed reliance on the decision of the Third Member in Dheeraj Chaudhary v. ACIT [2025] 178 taxmann.com 360 (Delhi Tribunal), wherein it was held that mere participation in the assessment proceedings cannot be treated as evidence of application of mind on the part of the approving authority. The relevant extracts of the decision were reproduced and relied upon by the ld.AR as under: “20. I have gone through the order of learned Accountant Member and noted that in Paragraph 7, it is noted that the approval accorded by the Additional CIT u/s.153D of the Act is nothing but the culmination of day to day involvement of the Assessing Officer and the Additional CIT in search assessments. The relevant procedure noted by the learned Accountant Member reads as "The fact is that the AO and the Addl. CIT works as team members and the AO works under the supervision of the Addl. CIT. The team work gets culmination by the approval u/s.153D of the Act. Such involvement of the Addl. CIT in the search assessment is in routine in the Central Charges of the Income Tax Department where the search assessments are completed. It is not a case where the assessment records, other files, investigation folders, etc. of a search case change hands for the first time between the AO and the Addl. CIT at the time of approval of the search assessment. The detail mentioned above is based on my personal experience while working in each hierarchy (AO onwards) of the Central Charges of the Income Tax Department." The second aspect considered by the learned & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 38 ::

I note the above observations of learned Accountant Member and is of the view that assessment proceedings or any proceedings under the Act before the Assessing Officer which affect the levy of tax on the subject are judicial in nature. It is well-settled that the Assessing Officer upon whom jurisdiction has been conferred to make all orders judicially, has to act independently. The Assessing Officer, while framing assessment, cannot act on the advice given by an outsider even though he may be an authority higher in rank to him in official hierarchy. Higher authorities that include Additional CIT/JCIT under whom the Assessing Officer is administratively under control, are not entitled to give opinion or advice in regard to assessment proceedings being quasi-judicial in nature. This is, however, subject to the provisions of Section 144A of the Act, where the assessee or the Assessing Officer suo moto can refer the matter but, for that, he has to invoke this provision. This view is supported by Hon'ble Bombay High Court in the case of Dinshaw Darabshaw Shroff v. CIT [1943] 11 ITR 172, wherein it is held that although the Assessing Officer making an assessment is not acting as a court of law, it is clear that while framing assessment is acting in quasi-judicial capacity, and he ought to conform to the more elementary rules of judicial procedure, and in particular to conduct the case himself, and not allow somebody else, even his superior officer, to interfere in the conduct of the case. What to talk of superior authority, Hon'ble Supreme Court in the case of Union of India v. Tata Engineering &Locomotive Co. Ltd. 1997 taxmann.com 100 /AIR 1998 SC 287, 288, held that the Assessing Officer is entitled to complete the assessment as per the provisions of Section 143(3) of the Act and, for this purpose, he can call for and examine whatever document he & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 39 ::

I noted that the common thread discussed by Hon'ble Orissa High Court in the case of Serajuddin & Co.(supra), by Hon'ble Delhi High Court in the case of Anuj Bansal (supra) and by Hon'ble Allahabad High Court in the case of Sapna Gupta (supra) is that the requirement of previous approval of assessment by the Additional CIT/Joint CIT in terms of provisions of Section 153D of the Act being an inbuilt protection against any arbitrary or unjust exercise of power by the Assessing Officer, casts a very heavy duty on the said high ranking authority to see to it that the requirement of the previous approval, envisaged in the Section is not turned into an empty formality. Needless to say that before granting approval, the & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 40 ::

The ld.AR, relying upon the aforementioned decision of the Third Member of the Tribunal, submitted that the process of approval u/s.153D of the Act commences only after the draft assessment order has been prepared. Consequently, mere participation in the assessment proceedings cannot be treated as a ground to infer & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 41 ::

The ld.DR, on the other hand, placed reliance on the decision of the Delhi Tribunal in DCIT (ITA No. Kailash Gahlot v. 3431/Del/2023), particularly drawing attention to paragraphs 16, 19, 21, 22, 23, 24 and 25. It was argued that the burden of proving non-application of mind lies on the party asserting such non- application, and that approval u/s.153D is administrative in nature. Any defect or error in the approval, it was submitted, would be curable and not fatal to the proceedings. Reliance was also placed on the observation in Kailash Gahlot that the fact that approval was granted within a short span of time does not, by itself, indicate that it was given mechanically without application of mind, particularly where the approving authority is fully aware of the background material. Similar reliance was placed on the decision of the Allahabad Tribunal in Ramji Vaish v. DCIT (ITA Nos.36, 37, 38, 101, 125, 126, 127/ALLD/2023). On the issue of consolidated approval, the ld.DR also referred to the Investigation Manual dated 22.12.2006 to contend that a consolidated approval would suffice for the purposes of section 153D of the Act.

In rebuttal, the ld.AR furnished a table to demonstrate that the decisions relied upon by the ld.DR have been rendered inapplicable by the decision of the Third Member in Dheeraj Chaudhary v. ACIT [2025] 178 taxmann.com 360 (Delhi-Trib) (TM), the relevant portions of which have been reproduced in the written submissions.

We have carefully considered the rival submissions, perused the written submissions and examined the documents placed on record, including the affidavit filed by Shri Narendra Kumar Naik, JCIT, on behalf of the Revenue. At the outset, and without entering into the merits of the legal issue concerning section 153D of the Act, we note that the said affidavit seeks to explain the procedure followed in the search assessment proceedings and delineates the respective roles of the Assessing Officer and the Range Head. The ld.AR has, on the other hand, invited our attention to certain alleged clerical & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 46 ::

Upon consideration of the approval granted u/s.153D of the Act and the contents of the affidavit filed by the Range Head, we are of the view that the matter requires further verification, including an opportunity for cross-examination, before any conclusive finding can be rendered. Accordingly, we refrain from expressing any opinion on this aspect at this stage. The additional ground relating to section 153D raised by the assessee is, therefore, not adjudicated at present and is kept open.

Since the assessments are quashed on the basis of Grounds No.3, the other grounds raised

The same view has been reiterated by the Coordinate Bench of this Tribunal in Kandasamy Kuppusamy v. ITO 2025 (5) TMI 210 (ITAT Chennai), wherein reliance was placed upon the decision of the Hon’ble Madras High Court in S.M.I.L.E. Microfinance Limited (supra).

Accordingly, we hold that the enhanced rate of tax at 60% prescribed u/s.115BBE of the Act is not applicable to transactions that occurred prior to 1st April, 2017. II. P.Raghupathy – AYs 2011-12 to 2018-19 A.Y.

It is observed that the factual matrix relating to the issue of u/s.153C in the case of P.Raghupathy is identical to that of P.Palanisamy. Accordingly, the ratio of the decision rendered in the case of P.Palanisamy as held in para 28 to 28.2 (supra) shall apply mutatis mutandis to the appeals of P.Raghupathy for assessment years 2011–12 to 2018–19. Consequently, the assessment proceedings in the case of P.Raghupathy for AYs 2011–12 to 2018– & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 49 ::

The ld.AR has further contended that the higher rate of tax u/s. 115BBE cannot be invoked for assessment years prior to AY 2018– 19. Although this issue is now academic, having followed the decision of the Hon’ble Madras High Court in S.M.I.L.E. Microfinance Limited v. ACIT (SCC OnLine Mad 8416), we have held in the case of P. Palanisamy that the enhanced rate of 60% u/s. 115BBE is not applicable to transactions occurring before 01.04.2017. The ratio of that decision shall apply mutatis mutandis to the present case of the assessee. III. Sellamuthu Kabilan - AYs 2012-13 to 2018-19 A.Y.

It is observed that the facts pertaining to the issue u/s.153C in the case of Sellamuthu Kabilan are identical to those in the case of P.Palanisamy. Consequently, the ratio of the decision in the case of P.Palanisamy as held in para 28 to 28.2 (supra) shall apply mutatis & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 51 ::

Since the assessments are quashed on the basis of Grounds No.3, the other grounds raised by the assessee are not required to be adjudicated and are accordingly left open.

The ld.AR has further contended that the higher rate of tax u/s.115BBE of the Act cannot be invoked for assessment years prior to AY 2018–19. Although this issue is now academic, following the decision of the Hon’ble Madras High Court in S.M.I.L.E. Microfinance Limited v. ACIT (SCC OnLine Mad 8416), we have held in the case of P. Palanisamy that the enhanced rate of 60% u/s.115BBE of the Act is not applicable to transactions occurring before 01.04.2017. The ratio of that decision shall apply mutatis mutandis to the present case of the assessee. IV. L.Karuppusamy - AYs 2017-18 and 2018-19 A.Y.

It is observed that the factual circumstances relating to the issue u/s.153C of the Act in the case of L.Karuppusamy are identical to those in the case of P.Palanisamy. Accordingly, the ratio of the decision in the case of P.Palanisamy as held in para 28 to 28.2 (supra) shall apply mutatis mutandis to the appeals of L.Karuppusamy for assessment years 2017-18 and 2018-19. Consequently, the assessment proceedings in the case of the assessee for AYs 2017-18 and 2018-19 are hereby quashed on the ground that the satisfaction u/s.153C of the Act are consolidated in nature, thereby contravening the statutory provisions and having been issued without application of mind.

Since the assessments are quashed on the basis of Grounds No.3, the other grounds raised

It is observed that the factual matrix pertaining to the issue u/s.153C of the Act in the case of P. Kuppuchamy is identical to that in the case of P.Palanisamy. Consequently, the ratio of the decision in the case of P.Palanisamy as held in para 28 to 28.2 (supra) shall apply mutatis mutandis to the appeals of P.Kuppuchamy for assessment years 2014-15 to 2018-19. Accordingly, the assessment proceedings in the case of the assessee for AYs 2014-15 to 2018-19 are hereby quashed on the ground that both the satisfaction u/s.153C of the Act were issued on a consolidated basis, thereby contravening the statutory provisions and having been granted without application of mind.

Since the assessments are quashed on the basis of Grounds No.3, the remaining grounds raised

The ld.AR has also contended that the higher rate of tax u/s.115BBE cannot be invoked for assessment years prior to AY 2018-19. Although this issue is rendered academic, following the decision of the Hon’ble Madras High Court in S.M.I.L.E. Microfinance Limited v. ACIT (SCC OnLine Mad 8416), we have held in the case of P. Palanisamy that the enhanced rate of 60% prescribed u/s. 115BBE is not applicable to transactions occurring prior to 01.04.2017. The ratio of that decision shall apply mutatis mutandis to the present case. VI. PP Financiers (Oddanchatram) – AYs 2010-11 to 2018-19 A.Y.

Since we have refrained from adjudicating the legal issue of approval u/s.153D of the Act for the reason that the issue is kept open as held in the case of P.Palanisamy in para 42 and 43(supra), & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 56 ::

Before the lower authorities and before this Tribunal, the assessee has contended that the seized material does not belong to the assessee firm, but instead belongs to a consortium of lenders called the People Public Fund. However, there is no reference to the said “People Public Fund” in the seized material or in any of the sworn statements recorded from various persons, including partners and third parties. Conversely, the Assessing Officer has concluded that the seized books and documents belong to the assessee firm & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 57 ::

The Ld.AR strongly argued that the seized material, which forms the basis of the additions, does not belong to the assessee firm. He pointed out various inconsistencies and anomalies in the seized documents relied upon in the assessment order and submitted that there is no evidence to establish that the seized material belongs to or pertains to the assessee firm. He further submitted that even assuming, for the sake of argument, that the material pertains to the firm, no addition can be sustained in the hands of the firm because the alleged capital/contribution on which the proposed additions are based is not unexplained. The seized material itself records the names of the contributors, a fact which the Assessing Officer has acknowledged at several places in the assessment order.

The written submissions of the Ld.AR are reproduced below: “Based on the following points, it is most humbly submitted that there is no evidence to establish that the seized material belongs to or pertains to the assessee firm.

The seized pages referred to by the Assessing Officer do not contain any reference to the firm’s name, business details, address, PAN, or any other identifying particulars. The mere presence of the word “Partners” or initials does not ipso facto establish that the material belongs to the assessee firm. In absence of exclusive identification, mere mentioning of & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 58 ::

The Assessing Officer has attempted to establish ownership on the footing that some seized documents bear signatures purportedly belonging to one of the partners i.e, Shri.P.Palanisamy. However, the signatures appearing across different pages are inconsistent and do not match each other, nor do they correspond to the signatures appearing in the partnership deed. When the alleged signatures are visibly different and unverified, no legal inference of ownership can be drawn merely based on the same.

One page of the seized material makes a stray reference to a bank account and contains only a Swastik mark without any corresponding entries, accounting narration, or identifiable linkage. Such random notings, devoid of context, accounting relevance, or corroborative entries, cannot form the basis for presuming ownership or maintenance of books by the assessee firm.

The Assessing Officer’s reliance on minutes of the meeting to state that the seized material belongs to the firm is not tenable. The minutes contain signatures of multiple persons who are not partners of the assessee firm. Only a few correspond to partners of the firm. This shows that the document relates to a wider group or unconnected entities and not to the assessee firm. The presence of signatories who are not partners goes blatantly against the inference of the Assessing Officer that the seized books pertain to the assessee firm and consequently the seized books cannot be used to determine the income of the assessee firm. This coupled with point no.2 elaborated above clearly proves that the seized material does not belong to the assessee firm.

The individuals mentioned in the seized documents are partners in several entities and not exclusively in the assessee firm. Merely their names appearing in seized material does not conclusively prove that the books belong to the assessee firm.

The Ld.DR in the course of submissions stated that in a few instances, statements were recorded from the purported borrowers who confirmed that they had borrowed monies and repaid to the assessee firm. However, it may be noted that intentionally the Department has chosen not to take any action against such person for violation of sections 269SS & 269ST, which clearly shows that the statements have not even been relied on completely by the Department and that the Department is only trying to use a pick and choose to attack the assessee firm and let go of the persons who gave the statements. This can also be understood as some kind of an inducement given to the persons who gave the statement by not using it against them. Further these statements recorded in terms of section 131 lack evidentiary value.

The Ld.DR in the course of his submissions explained the modus operandi by stating that Shri.P.Palanisamy was the controlling person and that the books belong to the firm and these are regular books and not mere loose sheets. In this connection, it is most humbly submitted that these are not regular books maintained by the firm as alleged by the Ld.DR and it cannot be taken as belonging to the firm, particularly in the light of demonstrable evidence to show that the books do not belong to the firm in the preceding paras and the tables annexed to this submission. Though the Ld.DR in the course of his submissions urged that the books found in the firm’s premises must be taken as belonging to the firm, it is humbly submitted that no evidence was produced to show which books were belonging to which firm. At any rate, section 292C is only a presumption which is rebuttable and in the light of the overwhelming evidence to show that the books do not belong to the firm, the presumption u/s.292C cannot be & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 60 ::

The Assessing Officer has alleged that unexplained capital was introduced “under the guise of depositors.” However, a bare perusal of the seized material reference made by the Assessing Officer shows capital introduced as “PP” and “Partners”. There is nothing whatsoever in the seized material to suggest that the monies were introduced in the guise of depositors. The allegation is purely based on assumption and surmise, not on any concrete evidence. When the documents explicitly record partner contributions, attributing those amounts to fictitious depositors is beyond the contents of the seized material and legally untenable.

The Assessing Officer has referred to a statement recorded u/s.132(4), wherein it was affirmed that capital was introduced only by partners and unsecured loans were taken by partners from their own friends and relatives. This admission establishes that the funds, if at all, are traceable to the partners (even where it is not known how much belongs to each partner) and not to the firm. When the source and nature of funds are clearly stated to be personal contributions, such amounts cannot be added as unexplained income in the hands of the assessee firm, even where it is not known how much belongs to each partner.

Without prejudice to the above contentions, even if the presumption u/s.292C is invoked and it is presumed that the seized papers reflect true contents then any addition based on such presumption, cannot be made in the hands of the & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 61 ::

Copy of seized material named as “THITTAM DOC1 DDGL to THITTAM DOC5 DDGL” in the Pen Drive given by the Department is kept in S.No.2 of Paper Book 3 (Pages 2 to 50 of Paper Book 3). It is not known whether these documents belong to PP Financiers, Oddanchatram or PP Enterprises, Oddanchatram. It is unclear as to how the Assessing Officer has arrived at the quantum of addition based on the above documents is unclear.

Without prejudice to the above, amendment in section 115BBE increasing the rate of tax to 60% is not retrospectively applicable. The Hon’ble Madras High Court in S.M.I.L.E Microfinance Limited v ACIT 2024 SCC OnLine Mad 8416 (Pages 248 – 259 of Case Law Book 1) has categorically held that the rate of 60 percent is to be imposed only for the transactions from 01.04.2017. The above order of the Hon’ble Madras High Court has been followed in Naranbhai Samatbhai Bharwad, through legal heir Devrajbhai Naranbhai Bharwad v ITO in Ahd 2024 Ahmedabad ITAT (Pages 260 – 270 of CL book). Therefore the Ld. CIT(A) erred in upholding the rate of 60 percent for the A.Ys.2010-11 to 2017-18 when the same would be applicable only for the transactions from 01.04.2017 onwards i.e., from assessment year 2018-19.

The Ld.DR advanced detailed submissions regarding the modus operandi of the assessee group. It was submitted that Shri P.Palanisamy established multiple firms to conduct money-lending and chit business across various States. Although Shri P.Palanisamy was the principal shareholder in all such firms, he included other partners who were local persons as well as family members or friends of the managing partners. The local partner acted as the working partner and was responsible for day-to-day operations. The Ld.DR further submitted that the assessee group maintained a well- structured accounting system, with separate registers for each accounting domain, such as loan registers, loan repayment registers, etc. It was submitted that all firms followed a uniform two-digit suppression system, as evidenced from the assessment order, where receipts, expenditures, loan accounts and capital contributions were recorded using the same two-digit suppression method. This system was also reflected in the personal books of Shri P.Palanisamy and was confirmed by partners in their sworn statements. It was further submitted that upon verification of accounts, Shri P.Palanisamy initialed the monthly thittam books as “PP”. The Ld.DR also referred to the first appellate order where the full signature of Shri P.Palanisamy was extracted from a sale deed and compared with the initials in the thittam books to establish that Shri P. Palanisamy had signed the books, thereby indicating that the books belonged to the assessee firm.

During the hearing, the Ld.DR explained the accounting system maintained by the assessee, relying on the seized material from PP Financiers, Karur, and submitted that the same system was followed by all entities in the Group. It was explained that the assessee maintained a comprehensive accounting system consisting of daily registers, weekly registers, and monthly consolidated books containing profit and loss account and balance sheet. It was submitted that the books were maintained in proper format and consolidated figures were readily available. It was further submitted that the seized material reflected meticulous and accurate accounting across all firms and individual businesses, and demonstrated that the main partner, Shri P.Palanisamy, ensured thorough examination and monthly approval of accounts that he exercised complete control over the business and that no funds were siphoned off by employees or partners. The Ld.DR relied on the assessment order and the ld.CIT(A) order, and submitted that the Assessing Officer had invoked the presumption u/s.292C with detailed reasoning, asserting that the seized material found at the premises of the concerned assessee belonged to them. The Ld.DR also submitted that the retractions made by the partners of the assessee firms were recorded two years after their initial statements, and that the fictional entity was introduced only at that later stage; therefore, it was submitted that such retractions were not reliable on the facts of the case.

The relevant portions of the submissions of the Ld.DR, which are common to the assessee group, are reproduced below: “3. Submission on Establishment, management and Control of the business entities by Shri P. Palanisamy and the non-existence of the fictional entity: Facts of the case: [All the Assessment Orders, Ld. CIT(A) orders and Paper books (I to VI) filed by the Department and the submissions made during the hearings may be considered as a part and parcel of this Written Submissions.] The search and seizure operation U/s.132 of the Act conducted at the business premises of M/s.PP Group of firms, proprietorship concerns and the residential premises of Mr.P.Palanisamy and related persons on 10.08.2017. During the search and seizure operation, Incriminating materials were seized from the premises and sworn statements were recorded from the Partners, Employees and the debtors present at the premises. The modus operandi of the business operations and the extent of the unaccounted income was unearthed during the search and seizure operations.

Submission on the maintenance of accounting system of assessee group - As example PP Financiers, Karur: The Accounting Systems /Modus operandi maintained in the Group Entities:

The assessee submission before the AO and CIT(A) Assessee submission during the Assessment Proceedings and the findings of the Assessing Officer - on various legal matters:

The specific rebuttal advanced by the Ld.DR to the contentions raised by the Ld.AR, with respect to PP Financiers (Oddanchatram), is reproduced below: “M/s. P.P. Financiers Oddanchatram, The money lending License issued by the Tehsildar, Oddanchatram for money lending business was scanned and made part of the assessment order. The partnership deed, the seized books and documents at the business premises and registered office of the firm along with the sworn statements based on the seized materials clearly establishes the money lending and chit business of the firm.

We have heard the submissions of both parties and perused the written submissions, paper books and all materials placed on record. On a careful appraisal of the contentions advanced by the Ld.DR and the evidentiary materials available on record, it is manifest that even the Ld.DR has acknowledged that Shri P.Palanisamy was managing and controlling multiple entities/firms across different locations, which purportedly followed a uniform accounting pattern across the group. We are of the view that such admission, in itself, lends support to the assessee’s primary contention that mere references such as “PP / Partners” cannot, by themselves, conclusively establish that the seized documents belong to or pertain to the assessee firm, when there are multiple firms operating from each of the different locations (each of them having a different set of partners as is evidenced by the partnership deeds of the different firms furnished as part of the paper books filed by the assessee), unless there exists a clear and exclusive identification connecting the documents to the assessee, such as the firm’s name, address, PAN, business particulars, etc. The Ld. DR’s reference to bank account of the assessee being mentioned in one of seized materials cannot be taken as a conclusive evidence of books belonging to the assessee as we notice that the particular reference is to a page which has a big ‘swasthik symbol’ with no & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 73 ::

Further, the Ld.DR has pointed to the minutes of the meeting signed by Shri P.Palnisamy and S.Kabilan who are partners of the assessee firm and urged that this was a clear piece of evidence to show that the books belonged to the assessee firm. However, we find that on comparison of signatures in Page 2 of the Paper Book which has the partnership deed containing signature of all partners of the firm with the minutes of meeting at page 44 of Paper book, it can be seen that the minutes of the meeting has more signatories who are not partners of the assessee firm. We find that signatures in S.No.3,4,5 and 7 & 9 are not that of the partners of the assessee firm. When we questioned this, the Ld.DR responded that the minutes could have been signed by proxies. We find contradiction in the argument of the Ld.DR when on one hand reliance is placed on the signatures of partners in the minutes of the meeting as evidence of books belonging to the assessee and on the other hand other signatures that are there in the same seized material that does not & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 74 ::

We further find that reliance on the “thittam books” initialled as “PP” is not a reliable basis to connect the books to the assessee, for the reason the P.Palanisamy is partner in various firms across various locations and therefore presence of his initials alone does not conclusively prove that the books belong to the assessee. Additionally, the initials appearing on the pages referred to in the assessment order are not uniform, which further undermines the reliance placed on them. The pages referred to in the assessment order are reproduced below:

We note that these signature are not uniform and also do not match with the comparison of signatures made by the ld.CIT(A) (Comparing signature is not the domain of the ld.CIT(A), it is left to handwriting experts) which is reproduced below:

In the present matter, we find that the seized documents, as reproduced and relied upon in the assessment order, do not contain any explicit or specific reference to the assessee firm. It is an admitted fact that Shri P.Palanisamy is a partner in the assessee firm as well as in several other entities. Consequently, the conclusion that the seized books pertain to the assessee firm solely because they bear purported initials of Shri P.Palanisamy cannot be sustained in law, particularly when the said initials are not uniform and appear to differ across the seized material.

On the presumption u/s.292C we find that Section 292C uses the words “it may be presumed” and the Hon'ble Apex Court in P. R. Metrani v. CIT 287 ITR 209 (SC) explained the concept of presumptions and expression "may be presumed" as under- & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 78 ::

The surrounding circumstances, namely i) the absence of any exclusive identification of the assessee firm, ii) the admitted multiplicity of entities where Shri P.Palanisamy is a partner, iii) the unreliability of sole reference to a bank number referred in a blank page of the seized material as evidence, iii) presence of signature of non-partners in the minutes of the meeting and iv) the initials relied upon not being uniform in the seized materials, render the attribution of the seized material to the assessee firm speculative at best. Therefore, in the instant case, while there is evidence to the contrary, there is no evidence to show that the seized material belongs to or pertains to the assessee. More importantly, the seized & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 79 ::

However, it is noted that although the Ld.AR has raised several grounds on merits, no substantive submissions were made regarding the cash seized from the premises of the assessee amounting to Rs.79,56,500/- which has been added as unexplained money u/s.69A in the A.Y.2018-19. In view thereof, we hold that the cash belongs to the assessee from whose premises it was seized, and this ground of the assessee is accordingly dismissed.

On the next issue, the Ld.AR has contended that the enhanced rate of tax u/s.115BBE cannot be invoked for assessment years prior to AY 2018-19. Although this issue has become academic, following the decision of the Hon’ble Madras High Court in S.M.I.L.E Microfinance Limited v ACIT (SCC OnLine Mad 8416), we have held & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 80 ::

Since we have refrained from adjudicating the legal issue of approval u/s.153D of the Act for the reason that the issue is kept open as held in the case of P.Palanisamy in para 42 and 43(supra), we proceed to adjudicate the appeal on merits of the case. The year-wise additions made by the Assessing Officer are tabulated as follows: A.Y. Undisclosed Undisclosed Unexplained investment business income money u/s.69A u/s.69 u/s.28 Outstanding loan Chit income, Cash balance as per Thittam Interest income as per Thittam Note less salary Books added. expenses Cash seized computed by AO included in the year of search & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 81 ::

The Ld.AR contended, with considerable emphasis, that the seized materials relied upon by the Assessing Officer for making the aforementioned additions do not belong to, nor pertain to, the assessee firm. It was further submitted that the seized documents, as referred to in the assessment order, contain several inconsistencies and infirmities which undermine any inference that they relate to the assessee firm. Consequently, there is no cogent evidence to establish the nexus of the seized material with the assessee firm. Even assuming, arguendo, that the seized material is attributable to the assessee firm, it was submitted that no addition can be sustained in the hands of the firm since the entries relating to capital contributions/funds are not “unexplained”, given that the seized material itself records the names of the contributors. This aspect has also been acknowledged by the Assessing Officer at various places in the assessment order. The written submissions of the Ld.AR are reproduced below: “Based on the following points, it is most humbly submitted that there is no evidence to establish that the seized material belongs to or pertains to the assessee firm.

The AO contends that Shri.D.S.Palanisamy in response to Question 6 has stated that the books seized belong to PP Financiers, Karur. However the actual statement (English translation filed in the Paper Book) does not make any such admission. Even otherwise, the alleged statement stands retracted, nullifying any evidentiary value. Hence, reliance on such a statement to attribute ownership of books to the firm is both factually incorrect and legally untenable.

The Assessing Officer has attempted to establish ownership on the footing that some seized documents bear signatures purportedly belonging to one of the partners i.e, Shri.P.Palanisamy. However, the signatures appearing across different pages are inconsistent and do not match each other, nor do they correspond to the signatures appearing in the partnership deed. When the alleged signatures are visibly different and unverified, no legal inference of ownership can be drawn merely based on the same.

The AO has alleged that the seized material reflects attendance of partners in meetings, signatures, and payment of sitting fees, which allegedly proves that the books belong to the firm. However the partnership deed (Page 2 of the Paper Book) shows that the assessee firm has only 19 partners. In contrast, the seized documents record participation of 32, 28, and 29 individuals, including several persons who are not partners of the assessee firm, as established by comparing Page 23 (list of partners) with Pages 112, 113, and 114 (pages containing alleged meeting attendance records).

The seized material shows that profits are being equally divided among 18 individuals under the notation "Messiar’s Drawing." As against this, the partnership deed expressly sets out specific profit-sharing ratios among partners, which are unequal and distinct, thus establishing that the seized material does not belong to the assessee firm.

The individuals mentioned in the seized documents are partners in several entities and not exclusively in the assessee firm. Merely their names appearing in seized material does not conclusively prove that the books belong to the assessee firm.

The AO further relies on certain promissory notes (pronotes) found along with seized material to hold that the books belong to the assessee firm. It is most humbly submitted that at best, any addition based on such pronotes can be sustained only to the extent of pronotes found.

The Ld.DR in the course of submissions stated that in a few instances, statements were recorded from the purported borrowers who confirmed that they had borrowed monies and repaid to the assessee firm. However, it may be noted that intentionally the Department has chosen not to take any action against such person for violation of sections 269SS & 269ST, which clearly shows that the statements have not even been relied on completely by the Department and that the Department is only trying to use a pick and choose to attack the assessee firm and let go of the persons who gave the statements. This can also be understood as some kind of an inducement given to the persons who gave the statement by not using it against them. Further these statements recorded in terms of section 131 lack evidentiary value.

The Ld.DR in the course of his submissions explained the modus operandi by stating that Shri.P.Palanisamy was the controlling person and that the books belong to the firm and these are regular books and not mere loose sheets. In this connection, it is most humbly submitted that these are not regular books maintained by the firm as alleged by the Ld.DR and it cannot be taken as belonging to the firm, particularly in the light of demonstrable evidence to show that the books do not belong to the firm in the preceding paras and the tables annexed to this submission. Though the Ld.DR in the course of his submissions urged that the books found in the firm’s premises must be taken as belonging to the firm, it is humbly submitted that no evidence was produced to show which books were belonging to which firm. At any rate, section 292C is only a presumption which is rebuttable and in the light of the overwhelming evidence to show that the books do not belong to the firm, the presumption u/s.292C cannot be pressed into service to treat the books as belonging to the firm.

The Assessing Officer has alleged that unexplained capital was introduced “under the guise of depositors.” However, there is nothing whatsoever in the seized material to suggest that the monies were introduced in the guise of depositors. The allegation is purely based on assumption and surmise, not on any concrete evidence. When the documents explicitly record partner contributions, attributing those amounts to fictitious depositors is beyond the contents of the seized material and legally untenable.

Without any loan outstanding, interest alone has been computed for A.Ys.2014-15 and 2015-16, which clearly shows that the addition based on alleged seized material is without any logic or reasoning.

Without prejudice to the above contentions, even if the presumption u/s.292C is invoked and it is presumed that the seized papers reflect true contents then any addition based on such presumption, cannot be made in the hands of the assessee firm as the amounts appearing in the seized material only belong to the partners (even where it is not known how much belongs to each partner) appearing in the seized material, and not the firm as a whole. The firm cannot be taxed for contributions made by others. When the material itself identifies the contributors, there is neither scope nor justification for adding the amounts as unexplained income in the firm’s hands.

Copy of seized material named as “Thittam1 Karur and Thittam2 Karur” in the Pen Drive given by the Department is kept in S.No.3 of Paper Book 3 (Pages 51 to 97 of Paper Book 3). The above documents are just reproductions of assessment order. The Thittam books based on which the additions have been made are not available and it is not known how the Assessing Officer arrived at the amount of addition for each year.

Without prejudice to the above, amendment in section 115BBE increasing the rate of tax to 60% is not retrospectively applicable. The Hon’ble Madras High Court in S.M.I.L.E Microfinance Limited v ACIT 2024 SCC OnLine Mad 8416 (Pages 248 – 259 of Case Law Book 1) has categorically held that the rate of 60 percent is to be imposed only for the transactions from 01.04.2017. The above order of the Hon’ble Madras High Court has been followed in Naranbhai Samatbhai Bharwad, through legal heir Devrajbhai Naranbhai Bharwad v ITO in Ahd 2024 Ahmedabad ITAT (Pages 260 – 270 of CL book). Therefore the Ld. CIT(A) erred in upholding the rate of 60 percent for the A.Ys.2014-15 to 2017-18 when the same would be applicable only for the transactions from 01.04.2017 onwards i.e., from assessment year 2018-19.

The submissions advanced by the Ld.DR, which are common to the entire assessee group, have already been reproduced in Paras 69, 70 and 71 of this order. For the sake of brevity, these submissions are not reiterated herein. However, the submissions recorded in Paras. 69, 70 and 71 are taken on record and shall be treated as the submissions in respect of the assessee under consideration.

We have heard the rival arguments and perused the written submissions, paper books and all other materials placed on record. Upon careful consideration of the submissions of the Ld.DR and the material on record, it is apparent that even the Department acknowledges that Shri P.Palanisamy was operating and controlling multiple entities/firms across various locations, following a common accounting methodology. Such a fact, by itself, lends support to the & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 86 ::

The Ld.DR further drew reference to seized material vide reference ANN/KN/PPF/B7D/S dated 11.08.2017 of Sl.No.41 as evidence that partners have been appearing for meeting and collecting sitting fees. It was submitted that the books contain names of Partners of the assessee firm and other related person & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 87 ::

We further find that reliance on the “thittam” books being initialed as “PP” is not a reliable basis to connect the books to the assessee, for the reason the P.Palanisamy is partner in various firms across various locations and therefore presence of his initials alone does not conclusively prove that the books belong to or pertain to the assessee. Moreover, the initials appearing in the seized material are not uniform and differ from page to page, including the pages relied upon in the assessment order. Therefore, the reliance placed on such initials is legally untenable. The page referred to in the assessment order is reproduced below, which demonstrates that the signature of the Shri.P.Palanisamy does not correspond with the signature reproduced below:

Apart from the above, there are several pages of thittam books reproduced in the assessment order itself, which either does not contain any signature at all or the signature does not correspond to the signature of Shri.P.Palanisamy, which is reproduced below:

We note even where there are signatures, they are not uniform and also do not match with the comparison of signature made by the ld.CIT(A) (Comparing signature is not the domain of the ld.CIT(A), it is left to handwriting experts) which is reproduced below:

In the present matter, we find that the seized documents, as reproduced and relied upon in the assessment order, do not contain any explicit or specific reference to the assessee firm. It is an admitted fact that Shri P. Palanisamy is a partner in the assessee firm as well as in several other entities. Consequently, the conclusion that the seized books belong to or pertain to the assessee firm solely because they bear purported initials of Shri P. Palanisamy cannot be sustained in law, particularly when the said initials are not uniform and appear to differ across the seized material.

On the presumption u/s.292C we find that Section 292C uses the words “it may be presumed” and the Hon'ble Apex Court in P. R. Metrani v. CIT 287 ITR 209 (SC) explained the concept of presumptions and expression "may be presumed" as under- "22. A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume" and (iii) "conclusive proof". "May presume" leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. In this sense such presumption is also rebuttable. "Conclusive proof gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is irrebuttable presumption" Relying on the above decision of the Hon’ble Supreme Court, we find that the presumption u/s.292C by usage of the word “may” gives discretionary powers to adopt the presumption and also makes the presumption rebuttable.

The surrounding circumstances, namely i) the absence of any exclusive identification of the assessee firm, ii) the admitted multiplicity of entities where Shri P. Palanisamy is a partner iii) presence of signature of non-partners in the meeting of partners and payment of sitting fees to non-partners and iv) the initials relied upon not being uniform in the seized materials and further being absent in some sized materials, render the attribution of the seized & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 97 ::

We note that the Ld.AR has raised various grounds on merits but has not made any serious submissions regarding the cash seized from the premises of the assessee amounting to Rs.87,59,025/- which has been added as unexplained money u/s.69A in the & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 98 ::

The Ld.AR has further contended that the enhanced rate of tax u/s.115BBE cannot be invoked for assessment years prior to AY 2018-19. Although this issue has become academic, following the decision of the Hon’ble Madras High Court in S.M.I.L.E. Microfinance Limited v. ACIT (SCC OnLine Mad 8416), we have held in the case of P. Palanisamy that the enhanced rate of 60% prescribed u/s. 115BBE is not applicable to transactions that occurred before 01.04.2017. The ratio of the decision on this issue in P. Palanisamy shall apply mutatis mutandis to the case of the assessee.

The Ld.AR argued forcefully that the documents seized, upon which the Assessing Officer has based the impugned additions, do not belong to the assessee firm. It was contended that the seized records referred to in the assessment order are replete with inconsistencies and therefore do not provide any evidence to establish that they pertain to the assessee firm. It was further submitted that even if it is presumed that the seized material belongs to the assessee firm, no addition can be sustained on the basis of capital contributions or funds, which form the foundation of the additions, since the seized documents themselves disclose the identities of the contributors. This fact has also been acknowledged by the Assessing Officer at various points in the assessment order. The written submissions of the Ld.AR are reproduced below: “Based on the following points, it is most humbly submitted that there is no evidence to establish that the seized material belongs to or pertains to the assessee firm and even if it is presumed so, the addition cannot be made in the hands of the firm since the amounts brought in as capital / contribution, which form the basis of addition, is not unexplained as the & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 100 ::

The submissions advanced by the Ld.DR, which are common to the group of assessees, have already been reproduced in Paras 69, 70 and 71 of this order. For the sake of brevity, they are not reiterated herein. However, the submissions recorded in Paras 69, 70 and 71 are taken on record as the submissions in respect of the assessee currently under consideration.

We have heard the arguments advanced by both parties and perused the written submissions, paper books, and all materials on record. On a careful consideration of the submissions of the Ld.DR and the evidentiary material, it is apparent that even the Department concedes that Shri P.Palanisamy operated and controlled multiple entities/ firms across various locations, all of which purportedly followed a uniform accounting methodology. This admission, in itself, lends support to the assessee’s primary argument that mere references such as “PP / Partners” cannot, in the absence of exclusive and specific identification, cannot be & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 102 ::

In the present case, the seized material reproduced and relied upon in the assessment order does not contain any direct or specific reference to the assessee firm. Shri P.Palanisamy is admittedly a partner in the assessee firm as well as in several other firms; therefore, the inference that the seized books belong to or pertain to the assessee firm merely because they bear purported initials of Shri P.Palanisamy is not legally sustainable. This is particularly so when the alleged initials are not uniform and appear to vary across the seized material.

We further note that the Ld.DR has not specifically controverted the submission of the Ld.AR that the Assessing Officer sought to link the seized books/ loose sheets to the assessee firm by relying on the sworn statements of Shri G. Periasamy. A plain reading of the reproduced statements, along with the translations furnished by the Ld.AR, shows that Shri G.Periasamy does not admit that the seized material belongs to the assessee firm or forms part & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 103 ::

On the presumption u/s.292C we find that Section 292C uses the words “it may be presumed” and the Hon'ble Apex Court in P. R. Metrani v. CIT 287 ITR 209 (SC) explained the concept of presumptions and expression "may be presumed" as under- "22. A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume" and (iii) "conclusive proof". "May presume" leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. In this sense such presumption is also rebuttable. "Conclusive proof gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is irrebuttable presumption"

Therefore, even assuming that the presumption u/s.292C is invoked, it remains a rebuttable presumption, and the surrounding circumstances namely, i) the absence of exclusive identification of the assessee firm ii) the admitted multiplicity of entities where Shri P.Palanisamy is a partner and iii) contrary to the contention of the AO, G.Periasamy having not stated that the books belong to appellant, render the attribution of the seized material to the assessee firm speculative at best. Therefore in the instant case, there is no evidence to show that the seized material belongs to or pertains to the appellant. Most importantly, the seized material itself records the names of persons who introduced monies by way of capital contribution or funds. Once the documents identify the contributors, the foundational premise of treating such monies as “unexplained” in the hands of the firm becomes untenable. Consequently, any addition, if warranted and if at all permissible on the basis of such entries, can only be examined in the hands of the respective persons who introduced the capital or funds, and not in the hands of the assessee firm. Based on the foregoing, we hold that the additions based on the seized material cannot be sustained in the hands of the assessee. Accordingly, the assessee’s appeal is & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 105 ::

However, it is noted that the Ld.AR has raised several grounds on merits but has not made any substantive submissions regarding the cash seized from the premises of the assessee amounting to Rs.6,18,560/- which has been added as unexplained money u/s.69A in the A.Y.2018-19. Therefore, we hold that the cash belongs to the assessee from whose premises it was seized and dismiss this ground of the assessee.

On the next issue, the Ld.AR has contended that the provisions of section 115BBE, which prescribe higher rates of tax, cannot be invoked for assessment years prior to AY 2018-19. Although this issue has become academic, following the decision of the Hon’ble Madras High Court in S.M.I.L.E Microfinance Limited v. ACIT (SCC OnLine Mad 8416), we have held in the case of P. Palanisamy that the enhanced rate of 60% prescribed u/s. 115BBE is not applicable to transactions that occurred prior to 01.04.2017. The ratio of the decision on this issue in P. Palanisamy shall apply mutatis mutandis to the case of the assessee. IX. PP Enterprises (Bengaluru) – AYs 2016-17 to 2018-19 A.Y. ITA NO. (Assessee) ITA NO. (Department) 2016-17 - 2528 / Chny / 2024 2017-18 3382 / Chny / 2024 2529 / CHNY / 2024 2018-19 3383 / Chny / 2024 2530 / Chny / 2 Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 106 ::

Since we have refrained from adjudicating the legal issue of approval u/s.153D of the Act for the reason that the issue is kept open as held in the case of P.Palanisamy in para 42 and 43(supra), we proceed to adjudicate the appeal on merits of the case. The year-wise additions made by the Assessing Officer are tabulated as follows: A.Y. Unexplained Incremental Undisclosed Undisclosed Unexplained interest loan during investment business income money income the year u/s.69 u/s.28 u/s.69A u/s.28 added as unexplained investment u/s.69 (Protective (Protective (Substantive (Substantive (Substantive addition) addition) addition) addition) addition) Sum Unexplained Cash Seized mentioned as interest income loans and on loan of advances for Rs.2,17,45,000/- the period at 2.4% p.m 01.04.2016 to 05.02.2017 – as per ANN/ A3PP/1 2016-17 3,30,78,903 - - - - 2017-18 7,97,59,770 44,60,120 2,17,45,000 62,62,560 - 2018-19 6,95,89,691 22,92,67,570 - - 37,01,940 Total 18,24,28,364 23,37,27,690 2,17,45,000 62,62,560 37,01,940

The Ld.AR vehemently contended that the impugned addition has been made solely on the basis of loose sheets, without any corroborative material or supporting evidence. It was submitted & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 107 ::

The submissions advanced by the Ld.DR, which are common to the entire assessee group, have been reproduced in Paras 69, 70 and 71 of this order. For the sake of brevity, these submissions are not reiterated herein. However, the submissions recorded in Paras 69, 70 and 71 are taken on record and are treated as submissions made in respect of the assessee presently under consideration.

The Ld.DR’s specific rejoinder to the contentions raised by the Ld.AR, as they pertain to PP Enterprises (Bengaluru), is reproduced below: “M/s. P.P. Enterprises Bangalore The document marked a A-A3PP-1. Those seized documents are not loose sheets and the Hon’ble bench itself during the course of argument remarked that those are not loose sheets but extracts from tally software. Due to the huge volume of the books and documents, only sample pages were taken from each books and documents and scanned copies were made part of the assessment orders. Therefore, the argument of the assessee is devoid of any merits. The long standing employee and Manager Shri Karuppasamy had admitted that the accounts of Firm are in Tally. Hence the unaccounted loan based on the Tally ledger was added in PP Enterprises Firm.”

We have considered the arguments advanced by both parties and perused the written submissions, paper books, and all materials on record. On examining the substantive addition, it is observed that the complete set of documents constituting the seized material marked “A-A3PP-1”, as provided by the Department to the Ld.DR via pen drive, has been placed before this Tribunal in its entirety as & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 111 ::

On the presumption u/s.292C we find that Section 292C uses the words “it may be presumed” and the Hon'ble Apex Court in P. R. Metrani v. CIT 287 ITR 209 (SC) explained the concept of presumptions and expression "may be presumed" as under- "22. A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume" and (iii) "conclusive proof". "May presume" leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. In this sense such presumption is also rebuttable. "Conclusive proof gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is irrebuttable presumption"

Regarding the protective addition, it is noted that its foundation is the alleged entries found in the books/materials of PP Enterprises (a proprietary concern of Shri P.Palanisamy), which is a separate and distinct legal entity from the assessee firm, PP Enterprises, Bengaluru. The assessee firm has a different address and separate existence, a fact acknowledged even in the assessment order. The address of PP Enterprises, Bengaluru (firm) is 21, 1st Floor, 17th E Cross, LBS Nagar, Indiranagar 2nd Stage, Bengaluru–560038, whereas the address of PP Enterprises (proprietary concern) is No.22/1, 18th Cross, Lakshmipuram, Ulsoor, Bengaluru–560008. The protective addition was made based on materials seized from the premises of the proprietary concern and therefore are not based on any seized material that belongs to or pertains to the appellant firm. Therefore, the protective addition in the hands of the assessee firm was rightly deleted by the ld.CIT(A). We accordingly uphold the ld.CIT(A)’s decision and dismiss the Revenue’s appeals on this issue.

It is further noted that the Ld.AR raised several grounds on merits but did not advance substantial submissions regarding the cash seized from the premises of the assessee amounting to Rs.37,01,940/- which has been added as unexplained money u/s.69A in the A.Y.2018-19. Consequently, we hold that the cash belongs to the assessee from whose premises it was seized, and this ground of the assessee is dismissed.

On the next issue, the Ld.AR contended that the enhanced rate of tax u/s.115BBE cannot be invoked for assessment years prior to AY 2018-19. Although this issue has become academic, relying on the decision of the Hon’ble Madras High Court in S.M.I.L.E. Microfinance Limited v. ACIT (SCC OnLine Mad 8416), we have held in the case of P. Palanisamy that the higher rate of 60% prescribed u/s. 115BBE is not applicable to transactions occurring prior to 01.04.2017. The ratio of that decision is applied mutatis mutandis to the facts of the present case.

The facts pertaining to the issue u/s.153C in the case of PP Enterprises (Oddanchatram) mirror those in the case of P.Palanisamy, particularly with regard to the issuance of a combined satisfaction for assessment years 2017–18 and 2018–19, which is invalid. Accordingly, the ratio of the decision in P.Palanisamy as held in paras 28 to 28.2 (supra) applies mutatis mutandis to the present case. Having regard to the fact that the Hon’ble Supreme Court has dismissed the Special Leave Petition filed by the Revenue in DCIT v. Sunil Kumar Sharma (supra), we follow the decision of the Hon’ble Karnataka High Court in the same matter and hold that the & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 115 ::

Since we have refrained from adjudicating the legal issue of approval u/s.153D of the Act for the reason that the issue is kept open as held in the case of P.Palanisamy in para 42 and 43(supra), we proceed to adjudicate the appeal on merits of the case. The year-wise additions made by the Assessing Officer are tabulated as follows:

The Ld.AR strongly contended that the seized materials, upon which the Assessing Officer based the impugned additions, do not belong to or relate to the assessee firm. He highlighted various discrepancies and inconsistencies in the seized documents that were relied upon in the assessment order and argued that there is no evidence to connect the seized material exclusively to the assessee firm. Even if it is assumed, arguendo, that the seized material pertains to the assessee, the additions cannot be sustained because the alleged capital contributions or funds reflected in the seized material are not “unexplained.” The documents themselves clearly record the names of the persons who made the contributions, a fact which the Assessing Officer has also acknowledged at several places in the assessment order. The written submissions filed by the Ld.AR are reproduced below: “Based on the following points, it is most humbly submitted that there is no evidence to establish that the seized material belongs to or pertains to the assessee firm.

The Assessing Officer relies upon a statement of N.Sundaramoorthy referring to the alleged commencement of regular business of assessee firm on 04.09.2016. This is factually incorrect because the partnership deed itself was executed only on 19.12.2016. Hence, no business could have been carried out by the assessee firm before that date. The statement relied upon has been subsequently retracted and therefore reliance on this statement to attribute seized books & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 117 ::

The AO relies on a “consortium of lenders” list, which contains names of 38 persons. This fundamentally disproves that the books relate to the assessee firm, because as per the partnership deed, the assessee firm has only 18 partners. None of the firms in the assessee group has 38 partners. Therefore, the seized records do not pertain to the assessee firm or any firm within the group. This is conclusive proof that the seized records are not the books of the assessee firm

The AO has categorically stated that the firm “failed to explain source of capital introduced through Partners and through Depositors found in Thittam Notes,” thereby acknowledging that the source of the entries is partners. The seized entries do not represent transactions of the firm.

The individuals mentioned in the seized documents are partners in several entities and not exclusively in the assessee firm. Merely their names appearing in seized material does not conclusively prove that the books belong to the assessee firm.

The Ld.DR in the course of submissions stated that in a few instances, statements were recorded from the purported borrowers who confirmed that they had borrowed monies and repaid to the assessee firm. However, it may be noted that intentionally the Department has chosen not to take any action against such person for violation of sections 269SS & 269ST, which clearly shows that the statements have not even been relied on completely by the Department and that the Department is only trying to use a pick and choose to attack the assessee firm and let go of the persons who gave the statements. This can also be understood as some kind of an inducement given to the persons who gave the statement by not using it against them. Further these statements recorded in terms of section 131 lack evidentiary value.

The Ld.DR in the course of his submissions explained the modus operandi by stating that Shri.P.Palanisamy was the controlling person and that the books belong to the firm and these are regular books and not mere loose sheets. In this connection, it is most humbly submitted that these are not regular books maintained by the firm as alleged by the Ld.DR and it cannot be taken as belonging to the firm, particularly in the light of demonstrable evidence to show that the books do not belong to the firm in the preceding paras and the tables annexed to this submission. Though the Ld.DR in the course of his submissions urged that the books found in the firm’s premises must be taken as belonging to the firm, it is humbly submitted that no evidence was produced to show which books were belonging to which firm. At any rate, section 292C is only a presumption which is rebuttable and in the light of the overwhelming evidence to show that the books do not belong to the firm, the presumption u/s.292C cannot be pressed into service to treat the books as belonging to the firm.

The Assessing Officer has alleged that unexplained capital was introduced “under the guise of depositors.” However, there is nothing whatsoever in the seized material to suggest that the monies were introduced in the guise of depositors. The allegation is purely based on assumption and surmise, not on any concrete evidence. From books seized it can be seen that the credit entries are mentioned as receipt from Partners, PP & Anonymous When the documents explicitly record partner contributions, attributing those amounts to fictitious depositors is beyond the contents of the seized material and legally untenable

The Assessing Officer himself has reproduced the statement recorded u/s. 132(4) from Shri.N.Sundaramoorthy, wherein it is clearly admitted that the firm is funded only by Partners, and unsecured loans are arranged by partners from their own contacts, friends, and relatives. Therefore the capital / contributions to the firm stands fully explained and there is no scope to add any sum as unexplained in the hands of the firm.

Without prejudice to the above contentions, even if the presumption u/s.292C is invoked and it is presumed that the seized papers reflect true contents then any addition based on such presumption, cannot be made in the hands of the assessee firm as the amounts appearing in the seized material only belong to the partners (even where it is not known how much belongs to each partner) appearing in the seized material, and not the firm as a whole. The firm cannot be taxed for contributions made by others. When the material itself identifies the contributors, there is neither scope nor & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 120 ::

Copy of seized material named as “THITTAM DOC1 DDGL to THITTAM DOC5 DDGL” in the Pen Drive given by the Department is kept in S.No.2 of Paper Book 3 (Pages 2 to 50 of Paper Book 3). It is not known whether these documents belong to PP Financiers, Oddanchatram or PP Enterprises, Oddanchatram. It is unclear as to how the Assessing Officer has arrived at the quantum of addition based on the above documents.

Without prejudice to the above, amendment in section 115BBE increasing the rate of tax to 60% is not retrospectively applicable. The Hon’ble Madras High Court in S.M.I.L.E Microfinance Limited v ACIT 2024 SCC OnLine Mad 8416 (Pages 248 – 259 of Case Law Book 1) has categorically held that the rate of 60 percent is to be imposed only for the transactions from 01.04.2017. The above order of the Hon’ble Madras High Court has been followed in Naranbhai Samatbhai Bharwad, through legal heir Devrajbhai Naranbhai Bharwad v ITO in Ahd 2024 Ahmedabad ITAT (Pages 260 – 270 of CL book). Therefore the Ld. CIT(A) erred in upholding the rate of 60 percent for the A.Y.2017-18 when the same would be applicable only for the transactions from 01.04.2017 onwards i.e., from assessment year 2018-19.

The submissions of the Ld.DR that are common to the assessee group have already been reproduced in Paras 69, 70 and 71 of this order. For the sake of brevity, they are not reiterated & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 121 ::

The Ld.DR’s specific rebuttal to the contentions raised by the Ld.AR in respect of PP Enterprises (Oddanchatram) is reproduced below: “M/s. P. P. Enterprises Oddanchatram. In one of seized document termed as ANN/KN/PPF/B&D/S/S38/Pg86 there was a mention as P.Palanisamy and (PP) written next to it. It is not out of place to state that the Assessee/ Partner’s name is P.Palanisamy and “PP” is nothing but an acronym of his name. The relevant portion of seized material is attached below:

After hearing the rival contentions and perusing the written submissions, paper books and all other material on record, it is apparent that even the Ld.DR has acknowledged that Shri P.Palanisamy was managing and controlling multiple entities/firms across various locations, all of which purportedly followed a uniform accounting methodology. This admission, in itself, lends support to the assessee’s primary argument that mere references such as “PP / Partners” cannot, in the absence of exclusive and specific identification, establish that the seized documents belong to or pertain to the assessee firm, when there are multiple firms operating from each of the different locations (each of them having a different set of partners as is evidenced by the partnership deeds of the different firms furnished as part of the paper books filed by the assessee). For the documents to be attributable to the assessee, there must be clear indication such as the firm’s name, address, PAN, or other business particulars. The Ld. DR relied on the statement of Shri.N.Sundaramoorthy who has said in his statement that the regular business of the appellant commenced on 04.09.2016 and stated that the entries in the seized material also start from 04.09.2016 and therefore the books belong to be appellant firm. The Ld. AR has controverted this by enclosing the partnership deed in the Paper Book which shows that the appellant & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 123 ::

In the instant case, the seized material relied upon in the assessment order does not contain any direct or specific reference to the assessee firm. Since Shri P.Palanisamy is admittedly a partner in the assessee firm as well as in several other firms, the conclusion that the seized documents belong to the assessee firm merely because they bear alleged initials of Shri P.Palanisamy is not legally tenable. This is especially so where the purported initials are not consistent and vary across the seized documents.

On the presumption u/s.292C we find that Section 292C uses the words “it may be presumed” and the Hon'ble Apex Court in P. R. Metrani v. CIT 287 ITR 209 (SC) explained the concept of presumptions and expression "may be presumed" as under- "22. A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume" and (iii) "conclusive proof". "May presume" leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. In this sense such presumption is also rebuttable. "Conclusive proof gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is irrebuttable presumption"

The surrounding circumstances namely, i) the absence of exclusive identification of the assessee firm, ii) the admitted existence of multiple entities where Shri P.Palanisamy is a partner iii) Unreliability of statement of Shri.N.Sundaramoorthy iv) the consortium of lenders referring to 38 people while the assessee firm has only 18 partners, render any attribution of the seized documents to the assessee firm speculative at best. Therefore, in the instant case, there is no evidence to show that the seized material belongs to or pertains to the assessee. More importantly, the seized material itself records the names of persons who introduced funds as capital contributions. Where the documents identify the contributors, the foundational premise of treating such amounts as “unexplained” in the hands of the firm collapses. Consequently, any addition, if warrant and if at all permissible, can only be examined in the hands of the respective contributors and not in the hands of the assessee firm. In view of the above, the additions founded on the seized material cannot be sustained against the assessee. Accordingly, the appeals of the assessee are allowed on Ground Nos.6 and 10 of the modified grounds on merits, & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 126 ::

On the subsequent issue, the Ld.AR has contended that the enhanced rate of tax u/s.115BBE cannot be invoked for assessment years prior to AY 2018-19. Although this issue is now academic, following the decision of the Hon’ble Madras High Court in S.M.I.L.E. Microfinance Limited v. ACIT (SCC OnLine Mad 8416), we have held in P. Palanisamy that the enhanced rate of 60% u/s. 115BBE is not applicable to transactions occurring prior to 01.04.2017. The ratio of that decision applies mutatis mutandis to the present case.

Since we have refrained from adjudicating the legal issue of approval u/s.153D of the Act for the reason that the issue is kept open as held in the case of P.Palanisamy in para 42 and 43(supra), we proceed to adjudicate the appeal on merits of the case. The year-wise additions made by the Assessing Officer are tabulated as follows:

The Ld.AR contended with emphasis that the seized documents relied upon for making the impugned additions do not belong to, nor pertain to, the assessee firm. It was submitted that the seized material, as referred to in the assessment order, contains several inconsistencies and defects, and therefore does not furnish any evidence capable of establishing that the material is connected with the assessee firm.

It was further argued that even assuming, for the sake of argument, that the seized material belongs to the assessee firm, the additions cannot be sustained because the alleged capital contributions/advances on which the additions are based are not “unexplained”. The seized records themselves specifically identify the names of the persons who made such contributions, a fact that & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 128 ::

The written submissions of the Ld.AR are reproduced hereunder: “Based on the following points, it is most humbly submitted that there is no evidence to establish that the seized material belongs to or pertains to the assessee firm and even if it is presumed so, the addition cannot be made in the hands of the firm since the amounts brought in as capital / contribution, which form the basis of addition, is not unexplained as the seized material clearly refers to the names of the contributors which the Assessing Officer himself states in the assessment order.

On the substantive addition, it is most humbly submitted that the seized day book extracted by the Assessing Officer itself bears the heading “Amount credited as partners’ investment”, clearly demonstrating that the entries represent capital contributions made by individual partners, and not investments made by the assessee-firm. In absence of any nexus or evidence demonstrating that the firm has actually invested in Karur Apartment construction, the addition u/s. 69 in the hands of the firm is not sustainable.

Further, the Assessing Officer attempts to apply the “last two digits represent paisa” theory based on unrelated statements recorded in respect of Thittam notings, which are in no manner connected to PP Construction. Moreover, the AO himself has not applied the two digits theory while making the protective addition in assessee’s case. Having accepted its inapplicability in the protective addition, the AO cannot adopt it selectively to justify a substantive addition. Such contradictory application renders the addition arbitrary, speculative, and unsustainable.

Without prejudice to the above contentions, even if the presumption u/s.292C is invoked and it is presumed that the seized papers reflect true contents then any addition based on & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 129 ::

With respect to the protective addition of Rs.10,12,50,000 allegedly advanced towards purchase of land, the entire addition is based solely on loose sheets, which are unsigned, unverified, unauthenticated, and not correlated to the assessee firm. Loose papers do not constitute books of account and cannot by themselves form the basis of an addition without independent corroboration. There is no evidence of any such lands and being purchased, registered, or even of any agreement having been executed and therefore it is beyond preponderance of probabilities to assume the assessee has paid huge advance without any having executed any document in this regard. When no transaction has materialized, there is no “investment” capable of being taxed u/s. 69.

The Assessing Officer states that Shri.P.Ragupathy admitted that payment of Rs.10,12,50,000/- to land owners as advance to mark / reserve the property. It is most humbly submitted that the alleged admission of Shri.P.Ragupathy was recorded during survey u/s.133A and therefore the statement has no evidentiary value in law.

With reference to the seized material provided by the Department during the course of hearing before the Hon’ble Income Tax Appellate Tribunal, the assessee wishes to submit as follows:  On the substantive addition - Copy of seized material in Ann/KN/PPF/B&D/S-53 referred in the Assessment order of P.P.Constructions is kept in S.No.4 of Paper Book 3. This material is a mere loose sheet. This material has amounts that only add up to Rs.37,500/- (Page 12 of Paper Book-1 of assessment order of AY 2015- 16) whereas the total addition made based on reference to this sheet is 10,56,20,000/-.  On the protective addition - Copy of sworn statement of P.Raghupathy dated 11.08.2017 taken during survey proceedings u/s.133A is kept in S.No.6 of Paper Book 3. This is a statement recorded during the course of survey and signed by P.Raghupathy as Managing Partner of PP International. Therefore this statement cannot be relied upon to make addition in the hands of PP Constructions (Pages 123 to 138 of Paper Book 3).

Without prejudice to the above, amendment in section 115BBE increasing the rate of tax to 60% is not retrospectively applicable. The Hon’ble Madras High Court in S.M.I.L.E Microfinance Limited v ACIT 2024 SCC OnLine Mad 8416 (Pages 248 – 259 of Case Law Book 1) has categorically held that the rate of 60 percent is to be imposed only for the transactions from 01.04.2017. The above order of the Hon’ble Madras High Court has been followed in Naranbhai Samatbhai Bharwad, through legal heir Devrajbhai Naranbhai Bharwad v ITO in Ahd 2024 Ahmedabad ITAT (Pages 260 – 270 of CL book). Therefore the Ld. CIT(A) erred in upholding the rate of 60 percent for the A.Ys.2015-16 to 2017-18 when the same would be applicable only for the transactions from 01.04.2017 onwards i.e., from assessment year 2018-19.

The submissions advanced by the Ld.DR, which are common to the entire assessee group, have already been reproduced in Paras 69, 70 and 71 of this order. For the sake of brevity, the same are not reiterated herein. However, the Tribunal records that the submissions set out in Paras 69, 70 and 71 are taken on record and are deemed to apply to the present assessee as well.

The specific rebuttal submitted by the Ld.DR in response to the contentions of the Learned Authorised Representative in the case of PP Constructions (Karur) is reproduced below: “M/s. P. P. Construction Karur. The assessee stated that the suppression of two- digit system will not be possible here as this is a construction company. The & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 133 ::

We have heard the submissions of both parties and examined the written submissions, paper books, and all materials on record. On a careful analysis of the submissions of the Ld.DR and the material placed before us, it is apparent that even the Ld.DR acknowledges that Shri P.Palanisamy was managing and controlling multiple entities/firms across different locations, all following a common accounting pattern. This, by itself, supports the assessee’s principal contention that mere references such as “PP/Partners” in the seized material do not, by themselves, establish that the documents belong to the assessee firm when there are multiple firms operating from each of the different locations (each of them having a different set of partners as is evidenced by the partnership deeds of the different firms furnished as part of the paper books filed by the assessee). For such a conclusion to be drawn, there must be clear and exclusive identification linking the seized documents to the assessee, such as the firm’s name, address, PAN, business details, etc.

In the present case, we observe that the seized material relied upon in the assessment order does not contain any direct or specific reference to the assessee firm. It is an admitted fact that Shri P.Palanisamy is a partner in the assessee firm as well as in several other firms. Therefore, the inference that the seized books belong to the assessee firm merely because name of Shri P.Palanisamy appears in them is not legally sustainable. Moreover, the seized & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 136 ::

On the presumption u/s.292C we find that Section 292C uses the words “it may be presumed” and the Hon'ble Apex Court in P. R. Metrani v. CIT 287 ITR 209 (SC) explained the concept of presumptions and expression "may be presumed" as under- "22. A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume" and (iii) "conclusive proof". "May presume" leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. In this sense such presumption is also rebuttable. "Conclusive proof gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is irrebuttable presumption" Relying on the above decision of the Hon’ble Supreme Court, we find that the presumption u/s.292C by usage of the word “may”

The surrounding circumstances, namely the absence of exclusive identification of the assessee firm and the admitted multiplicity of entities where Shri P. Palanisamy is a partner, render the attribution of the seized material to the assessee firm merely speculative at best. Therefore, in the instant case, there is no evidence to show that the seized material belongs to or pertains to the assessee. Further, the seized material itself records the names of individuals who introduced monies as capital contribution or funds. Once the documents themselves identify the contributors, the foundational premise of treating the amounts as “unexplained” in the hands of the firm becomes untenable. Consequently, any addition, if at all warranted and if permissible on the basis of such entries, can only be examined in the hands of the respective persons who introduced the capital or funds, and not in the hands of the assessee firm. For the above reasons, we hold that the additions based on seized material cannot be made in the hands of the assessee. Accordingly, we allow the appeal of the assessee on Ground Nos.5 and 9 of the modified grounds on merits. The remaining grounds on merits are not adjudicated and are left open.

Regarding the protective addition of Rs.10,12,50,000/-, we find it to be wholly unsustainable both in law and on fact. The entire addition is based solely on loose sheets which are unsigned, & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 138 ::

On the next issue, the Ld.AR has contended that the enhanced tax rate u/s.115BBE cannot be invoked for assessment years prior to AY 2018–19. Although this issue becomes academic, following the decision of the Hon’ble Madras High Court in S.M.I.L.E Microfinance Ltd. v. ACIT (SCC OnLine Mad 8416), we have held in & ‘60’ Others Mr. P. Palanisamy M/s. P.P. Financiers Mr. P. Kuppuchamy Mr. L. Karuppusamy M/s. P.P. Enterprises Mr. Palanisamy Raghupathy M/s. P.P. Constructions Mr. Sellamuthu Kabilan :: 139 ::

In the result, appeal filed by the assessee and department are allowed or dismissed as per chart below.

अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF