DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(4), CHENNAI vs. PERIYASAMY ANBUNATHAN, KARUR

account books, the assessee, in his statement u/s 132(4) of the Act had

admitted that, these account books related to his real estate and finance

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 3 ::

commission business, and that the cash found was also generated in his

own business, which was not shown in his books of accounts. In his

subsequent statement dated 02.07.2016, the assessee was enquired

about the monies received by several finance firms controlled by him, to

which, he is found to have stated that, these were business loans taken

by him from the entities of one Shri Parasmal Lodha [in short ‘PLA’]

against his personal guarantee. Reading of his several statements

recorded in the course of search and the post-search enquiries, it is seen

that, the assessee had, at all times, maintained that, he was engaged in

real estate & finance business and that, the account book(s) ID marked

ANN/FAY/CPA/B&D/S-1 seized from his premises contained entries of his

business activities. Thereafter, much later (after a gap of one year) on

03.04.2017, the assessee is noted to have been again summoned by the

Revenue u/s 131 of the Act. In his statement recorded on 03.04.2017,

the assessee is first noted to have partially retracted all his previous

statement(s) and, this time around, he stated that, the account book(s)

and the amounts mentioned against ‘RV’, ‘RV-I’, ‘RV-III’, ‘RV-IV’, ‘RV

Gopi’, ‘RV Wife’ denoted one Shri Natham R Vishwanathan [in short

‘NRV’]. The assessee further stated that, the transactions conducted

through the bank accounts of the 38 finance firms binds him entirely.

Though having said so, he further averred that, after deducting the

transactions with RVS institutions and inter-banking transactions, the

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 4 ::

balance amount of Rs.205 crores transacted in these finance firms

actually belonged to Shri NRV, which was withdrawn by him in cash, and

paid directly at NRV’s residence. In the same statement, the assessee

further admitted to unaccounted income from finance business of Rs.34

crores qua certain entries found noted in the account books ID marked

ANN/FAY/CPA/B&D/S-1. It is seen that, another statement was given by

the assessee on 10.04.2017. The assessee, in this statement, is found to

have provided the details of his unaccounted income. The assessee also

gave year-wise break-up of his unaccounted investment and interest

income found noted in these account books, which according to him,

totaled to Rs.40.77 crores. Apart from the foregoing, the assessee also

admitted to additional unaccounted income of Rs.30.90 crores relating to

the cash paid for the purchase of Hind Mercantile Corp Pvt Ltd. However,

on 09.05.2017, the assessee is found to have retracted his statements

dated 03.04.2017 & 10.04.2017 to the extent that the entries of Rs.205

crores (which he earlier claimed related to Shri NRV) represented

cheques/RTGS received by his 38 finance firms in their own proprietary

capacity and offered that these firms will pay appropriate taxes thereon.

The assessee is noted to have filed a duly sworn affidavit reiterating his

original statement that, the entries found in the account book(s) related

to his business activities. The assessee is also noted to have filed

affidavits from the partners of these finance firms and a separate letter

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 5 ::

explaining the manner of disclosure of additional income of Rs.205 crores.

It is seen that, upon this retraction, the assessee was again summoned

by the Revenue u/s 131 of the Act and in his cross-examination recorded

on 06.06.2017, he is found to have confirmed his original statement

recorded u/s 132(4) of the Act. The assessee also categorically affirmed

that, the account book(s) and the loans received by his finance firms

belonged to him and that he had voluntary disclosed income of Rs.205

crores to tax. Overall, therefore the assessee is found to have admitted

unaccounted income of Rs.71.67 crores [Rs.40.77 crores + Rs.30.90

crores] in his own hands and unaccounted income of Rs.205 crores in the

hands of the respective finance firms. [Then assessee by a letter dated

28.12.2018 inter alia is noted to have again retracted his statement dated

09.05.2017 and reiterated his earlier statement dated 03.04.2017 &

10.04.2017 that the entries of Rs.205 crores related to Shri NRV, which

facts will be discussed infra]

AO is noted to have issued notice(s) u/s 153A of the Act all dated

05.02.2018 inter alia for AYs 2014-15 to 2017-18. It was brought to our

notice that, the assessee had admitted and offered to tax unaccounted

income of Rs.40,77,13,731/- in the returns of income filed u/s 153A of

the Act. The details of the additional income declared in the income-tax

return(s) filed by the assessee is noted to be as follows:-

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 6 ::

Asst Year Additional Income offered u/s 153A

2014-15 32,81,86,787

2015-16 6,39,58,781

2016-17 1,55,68,163

2017-18 -

Total 40,77,13,731

AO which are in dispute in the cross appeals for AYs 2014-15 to 2017-18

are as follows:

Particulars 14-15 15-16 16-17 17-18

Notings found in account 273,96,25,060 247,31,20,000 book(s) ID marked ANN/FAY/CPA/B&D/S-1 on protective basis

Unaccounted income from - 12,82,07,552 - - finance & commission business

Unaccounted investment in - - 39,78,00,000 - property from HMCPL

Addition on account of cash - - - 4,87,33,820 found and seized

ITA No.1529/Chny/2025. The AO vide notice u/s 142(1) of the Act dated

12.11.2018 and show cause dated 26.02.2019 & 22.07.2019 had required

the assessee to reconcile the amounts appearing in the ledger accounts of

the seized books ID marked ANN/FAY/CPA/B&D/S-1 and show proof of

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 7 ::

handing over the said sum of money to Shri NRV. It is seen that, the

assessee had again retracted his statement dated 09.05.2017 &

06.06.2017 vide letter(s) dated 28.12.2018 & 25.11.2019 and he

submitted that, the transactions conducted through his finance firms

totaling to Rs.205 crores belonged to Shri NRV and that he had only

received the same on his behalf and handed it over to him. The assessee

thus claimed that, the amount(s) found noted against code names ‘RV’,

‘RV-I’, ‘RV-III’, ‘RV-IV’, ‘RV Gopi’, ‘RV Wife’ belonged to Shri NRV. Taking

note of these submissions put forth by the assessee, the AO observed

that, the AO of Shri NRV in his income-tax assessment(s) framed u/s

153C/143(3) of the Act dated 31.12.2018, had already brought to tax the

entries found noted against code names ‘RV’, ‘RV-I’, ‘RV-III’, ‘RV-IV’, ‘RV

Gopi’, ‘RV Wife’ aggregating to Rs.498 crores in his hands. The AO

accordingly reproduced the entire order passed in the matters of Shri NRV

in the impugned order(s) noting that the entries found in the account

book(s) had been substantively assessed to tax in the hands of Shri NRV

by way of his unaccounted income. The AO however observed that, since

Shri NRV had denied such receipts, the said amount was to be

protectively assessed to tax in the hands of the assessee across AYs

2014-15 to 2017-18. On appeal, the Ld. CIT(A) observed that, as the

substantive addition made in the hands of Shri NRV had been confirmed,

the protective addition made in the hands of the assessee did not stand

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 8 ::

and therefore deleted the same. Aggrieved, the Revenue in now in appeal

before us.

substantive addition(s) made in the hands of Shri NRV is deleted, then

the protective addition(s) so made in the hands of the assessee, be

directed to be substantively assessed. The Ld. AR for the assessee, on the

other hand, vehemently contended that, the account books maintained by

him and found from his premises, actually contained notings belonging to

Shri NRV and that it had been rightly brought to tax in the hands of the

latter. The Ld. AR thus prayed that the order of Ld. CIT(A) deleting the

protective addition(s) be upheld. The Ld. AR also filed written submissions

which has been taken on record, wherein inter alia assessee is noted to

have justified his action of not naming Shri NRV as the beneficiary of the

transactions entered in his seized account-books, since he was a serving

minister and the assessee was under pressure not to divulge the name of

Shri NRV at the time of search. He further submitted that later on when

Shri NRV was not holding any government post, he mustered courage to

reveal his name as the beneficiary of coal-commission in his later

statements. Therefore no weightage should be attributed to his statement

recorded u/s 132(4), instead the statements given on 03.04.2017,

10.04.2017, 28.12.2018 & 25.11.2019 should be considered as his true

disclosure regarding the notings made in the seized account books.

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 9 ::

Therefore, the Ld AR doesn’t want us to interfere with the action of Ld

CIT(A) deleting the protective addition.

observed that, the order(s) of the lower authorities on the impugned

issue is simply based on the assessment(s) framed u/s 153C/143(3) in

the matters of Shri NRV dated 31.12.2018 wherein the notings found in

the account books ID marked ANN/FAY/CPA/B&D/S-1 was stated to

pertain to Shri NRV and added as his undisclosed income. The AO, in the

matters of the assessee, is found to have simply reproduced the findings

recorded in the assessment order(s) of the Shri NRV and concluded that,

no addition was warranted in the hands of the assessee as the same had

been substantively assessed to tax in the hands of NRV. However, as

because Shri NRV had denied the receipts, the said amount was

correspondingly assessed on protective basis in the hands of the assessee

by the AO.

ITA Nos. 1321 to 1324, 1556 & 1597/Chny/2025, has quashed the notice

issued u/s 153C of the Act against Shri NRV and the consequent

proceedings initiated against him u/s 153C of the Act for AYs 2014-15 to

2017-18 was held to be a nullity by order dated 22.01.2026. The Tribunal

is noted to have allowed the legal challenge raised by Shri NRV, and inter

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 10 ::

alia held that the AO’s assumption of jurisdiction u/s 153C of the Act

against him (Shri NRV) was invalid, as neither was there any material

found in the course of search which related/pertained to him i.e. Shri NRV

nor was there any incriminating material unearthed having a bearing on

the total income of Shri NRV. Hence, the satisfaction note(s) recorded by

the AO to issue notice u/s 153C against Shri NRV was held to be invalid

and unjustified in as much as the material seized from the third parties

including that of assessee did not contain any information which could be

said to suggest any receipt of coal commission or that any amounts was

being collected by Shri NRV from the assessee. Hence, the notice issued

u/s 153C of the Act by AO against Shri NRV was held to be without

jurisdiction for the reasons given therein and consequent assessment

orders framed were quashed being non-est in the eyes of law. Since the

substantive assessment(s) framed in the hands of Shri NRV has been

quashed, the order(s) passed by the Ld. CIT(A) deleting the

corresponding protective addition(s) in the hands of the assessee is set

aside.

It is further observed that, as because the impugned addition(s) 10.

had already been substantively added in the hands of Shri NRV vide

order(s) dated 31.12.2018, the AO of the assessee, did precious little

while framing the assessment of the assessee. Rather, he simply followed

the assessment order(s) of Shri NRV and mechanically added the

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 11 ::

amount(s) protectively in the hands of the assessee. We find that, the AO

had clearly failed in his duties to discharge his dual functions of both

investigator and adjudicator. The AO did not independently examine or

analyze any of the account book(s) seized from the premises of the

assessee, while framing his assessment. We find that, the AO had simply

brushed aside all these evidences/statements etc. and framed the

impugned protective assessment in a copy-paste mechanical manner.

Similarly, the Ld. CIT(A) is also found to have passed a non-speaking

order simply deleting the protective addition, without any discussion on

the facts of the case.

facts & evidences by the lower authorities, in the fitness of the matters

and fairness to both parties, we set aside the protective addition(s) made

in the hands of the assessee and send back the matters back to the file of

the AO to consider the issue afresh, after considering the seized account

book(s) and all the several statements given by the assessee u/s 132(4)

& 131 of the Act, affidavits, letters etc. The AO shall pass assessment

order after objectively considering the seized material and

submissions/evidences filed by the assessee in this matter. We may add

that while framing the assessment(s), the AO should not be influenced by

any of the observations made by us above and also in the case of Shri

NRV by order dated 22.01.2026 (supra). Needless to say, the assessee

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shall be afforded sufficient opportunity of hearing, in this regard.

Accordingly, the appeal of the Revenue for AY 2014-15 stands partly

allowed.

ITA No. 1488/Chny/2025 (Assessee’s Appeal - A.Y 2015-16) ITA No. 1595/Chny/2025 & CO No.45/Chny/2025 (Revenue's Appeal and Assessee’s Cross Objection - A.Y 2015-16)

has inter alia raised legal grounds challenging to the validity of the

assessment(s) framed by the AO u/s 153A of the Act and since these

legal issue(s) goes to the root of the matter, we deem it fit to adjudicate

the appeal of the assessee first.

2 is that, the assessment order dated 31.12.2019 passed by the AO u/s

153A/143(3) of the Act is barred by limitation and therefore deserves to

be quashed. According to the Ld. AR, having regard to the date of search

i.e. 22.04.2016, the income-tax assessment(s) for AY 2015-16 was

barred by limitation on 31.12.2018. The Ld. AR claimed that, though the

AO had mentioned in the impugned order that, the time limit stood

extended as a consequence of request for Exchange of information under

Double Taxation avoidance Agreement (DTAA) and Multilateral

Convention on Mutual Administrative Assistance in Tax matters (MAC)

made by the AO with the foreign competent authority, but according to

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 13 ::

him, no such reference was made by the AO. The Ld. AR pointed out that,

the AO was only able to provide letter dated 22.11.2018 issued by the AO

to the Pr.CIT, Central-1 and the letter dated 28.11.2018 sent by Pr.CIT,

Central-1 to the Joint Secretary (FT & TR-IV-II), but the copy of the letter

addressed to the Competent Authority by FT & TR, Ministry of Finance or

any copy of communication received from such foreign authority was not

provided by the AO. The Ld. AR accordingly claimed that, in absence of

any evidence of reference made / letter issued to foreign competent

authority, the AO was not entitled to avail the extended period of

limitation, as provided in Explanation 1(x) to Section 153 of the Act. The

Ld. AR thus argued that, that the impugned order being barred by

limitation deserves to be quashed.

We have heard both the parties and perused the material placed 14.

before us. It is observed that, the AO had raised this contention before

the Ld. CIT(A) as well, who had rejected the same by observing as

under:-

“8.1.1 As per explanation 1(x) of Section 153, the time limit for completion of assessments gets extended by one year or the date of information so received, whichever is less; once a reference u/s 90 / 90A was made to. The relevant clause of explanation 1 of section 153 is reproduced hereunder:

Explanation 1 - (x) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 14 ::

requested is last received by the Principal Commissioner or Commissioner or a period of one year, whichever is less; or

8.1.2 As a reference was made u/s 90A in the case of the appellant, the explanation 1(x) comes into play and the assessment of the appellant gets extended by one year. Therefore, the assessment passed on 31.12.2019 in the appellant's case is well within the prescribed time limits. The appellant also contended that any reference u/s 90A should be made before three months from the time barring date as per CBDT Circular and the AO had not mentioned any dates of reference in the assessment order. However, as per the guidelines in the said Circular, there is no bar in making a reference within a period less than three months from the time barring date, and in such circumstances, the reasons should be mentioned by the competent authority. Therefore, the ground No.2, 3 & 4 raised by the appellant in this regard are dismissed.

tabulated details of the reference made by the Joint Secretary, FT&TR,

New Delhi in the matters of the assessee to various foreign competent

authorities along with the dates on which last information was received by

PCIT. Having taken note of these contemporaneous facts, we find that,

the contention of the assessee that, there was no reference ever made by

FT&TR to foreign authority or that no information was received from the

competent authorities, is found to be factually erroneous. In light of the

evidences furnished by the Revenue, we are of the considered view that,

the AO was indeed entitled to avail the benefit of extended period of

limitation as set out in Explanation 1(x) to Section 153 of the Act, and

thus the time limit for framing the impugned assessment stood extended

by one (1) year i.e., 31.12.2019. Accordingly, the impugned order dated

31.12.2019 passed by the AO is held to be within the period of limitation.

Hence, this legal plea of the assessee stands dismissed.

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 15 ::

The assessee had also filed additional grounds in the course of 16.

hearing wherein he has objected to the manner in which the approval was

accorded by the Addl/ Jt. CIT u/s 153D of the Act. The assessee has

contended that, the approval had been given in mechanical manner and

without application of mind and therefore the assessment order(s) passed

u/s 153A/143(3) of the Act was required to be quashed ab initio. In

support, the Ld. AR has relied on several decisions, which has been cited

in his written submissions.

brought any material on the record to demonstrate that there was non-

application of mind by the Range Head while approving the case under

section 153D of the Act. The Ld. DR contended that, the claim of non-

application of mind must be proven by a finding of fact, for which the

assessee must provide the corroboratory evidence to demonstrate the

non-application of mind and mere allegation was not sufficient. The Ld.

DR claimed that, the allegation of the Ld. AR that the approval was a

mechanical exercise and without application of mind by the Range Head

was not correct as in Central Charges all search and seizure assessments

were regularly supervised and monitored by the Range Head periodically.

The Ld. DR submitted that, the AO and the Range Head both had followed

various instructions/guidelines of the Board for completion of the search

and seizure assessments and the assessment order was finalized by the

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 16 ::

AO after obtaining approval under section 153D of the Act from the Range

Head, who approved the order after due examination and verification. It

was further submitted that, the approval granted by the Addl. CIT was in

the nature of administrative power. According to Ld. DR, the Range Head

while approving the order under section 153D of the Act was not required

to examine or adjudicate upon the rights or obligations of the assessee,

but only considers whether the AO had done assessment as per the

provisions of section 153A of the Act. The Ld. DR claimed that, the

approval accorded by the Range Head u/s 153D of the Act was in

accordance with law and therefore the impugned assessment order(s)

passed u/s 153A/143(3) of the Act was legally valid and did not warrant

any interference.

We have gone through the relevant provisions of law and perused 18.

the decisions cited by both the parties. We find that, this legal plea has

been raised for the first time by the assessee before us. Apart from

making empty allegation, it is seen that, the assessee is unable to show

us any evidence or material which would suggest that the approval was

granted by the Range Head in a mechanical manner. Further, we agree

with the Ld. DR that, the approval granted by the Additional

Commissioner of Income Tax is in the nature of administrative power. The

Range Head while examining the matter u/s 153D does not examine or

adjudicate upon the rights of obligations of the assessee, but only

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 17 ::

considers whether the Assessing Officer has fulfilled the requirements of

section 153A/153C. The case of the Revenue finds support from the

decision of the Hon'ble Karnataka High Court in the case of Rishabchand

Bhansali v. DCIT reported in [2004] 267 ITR 577, wherein it was held as

under:-

"4.2 thirdly the order passed by the Joint Commissioner granting previous approval under the proviso to Section 158BG is in exercise of administrative power on being satisfied that the order of assessment has been made in accordance with the provisions of Chapter XIV-B. The previous approval is purely an internal matter and it does (SIC-not) Kailash Gahlot decide upon any rights of the assessee. The It. CIT, while examining the matter under the proviso to Section 1588G does not examine or adjudicate ирon the rights or obligations of the assessee, but only considers whether the AD has fulfilled the requirements of Chapter XIV."

Court in the case of PPC Business & Products (P) Ltd. (2017) 398 ITR 71

wherein it was categorically held that, the approval accorded u/s 153D of

the Act is not a quasi-judicial order and the absence of elaborate

reasoning in the approval does not by itself vitiate assessment.

Delhi in the case of Kailash Gahlot Vs DCIT in ITA No. 3431/Del/2023

dated 24.10.2025 has elaborately dealt with this legal issue and answered

the same in favour of the Revenue, by holding as under:-

“14. We have heard both parties and have perused the material available on the record. The phrase "application of mind" which is at the core of the controversy here is a well-established expression in jurisprudence. In legal Kailash Gahlot parlance, approval and sanction

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 18 ::

are two different words having distinct shades of meaning depending on context wherein they are used (statutory interpretation, administrative law, corporate law, or criminal procedure). Approval is a formal expression of assent, usually given after an act is done, ratifying or confirming it. It is in the nature of post-facto recognition or confirmation. Approval often refers to supervisory/confirmatory consent by the higher authority. Whereas, Sanction is mandatory and jurisdictional without which, the proceedings are invalid. Sanction is more than mere approval. The Hon'ble Supreme court in the cases of Marathwada University v. Seshrao Balwant Rao Chavan, (1989) 3 SCC 132, Life Insurance Corporation of India v. Escorts Ltd., (1986) 1 SCC 264 and Kalpanath Rai vs State (1997) 8 SCC 732 have held that "approval" generally conveys a sense of confirmation of an act already done, while "sanction" conveys a prior permission or authorization before the act is done. The Hon'ble Supreme court in the case of Regional Manager v. Pawan Kumar Dubey, AIR 1976 SC 1766 have held that the approval and sanction are not synonymous. The context and statutory language wherein these words used determine the scope of these words; "sanction" and "approval". The word 'approval' instead of 'sanction' has been used in section 153D of the Act.

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 19 ::

considered as vitiated. In view of the presumption under 114(e) of the Indian Evidence Act, 1872 and the burden on the person challenging the non-application of mind and requirement of demonstrating the prejudice Kailash Gahlot caused due to such non-application of mind, if any, it is manifest that the validity of any approval must be tested rather than searching for an application of mind in such statuary orders, which is already presumed under 114(e) of evidence Act. Even otherwise, once the burden is on the party claiming non-application of mind, it will be easier to test the non-application of mind in any proceedings rather than ascertaining the reverse. The Ld. AR has not at all been able to rebut the presumption available under 114(e) of Evidence Act, 1872 by demonstrating as to how there has been non- application of mind in the approval order passed under section 153D of the Act. In the instant case, nothing has been placed on record to suggest that the Ld. AO and the Ld. Addl. CIT didn't go through the relevant seized material and other material available in their possession/records including the appraisal reports. The allegation of non-application of mind has been made merely on the basis of absence of recitals of these acts in the body of the approval order under section 153D of the Act.

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 20 ::

"9.27 It is a well settled principle of law emerging from a catena of decisions of this Court, including Supreme Court Employees' Welfare Association v. Union of India & Anr. and State of Punjab v. Davinder Pal Singh Bhullar, that the dismissal of a S.L.P. in limine simply implies that the case before this Court was not considered worthy of examination for a reason, which may be other than the merits of the case. Such in limine dismissal at the threshold without giving any detailed reasons, does not Kailash Gahlot constitute any declaration of law or a binding precedent under Article 141 of the Constitution."

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 21 ::

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 22 ::

held that the approval under section 153D of the Act is administrative in nature. It does not require elaborate reasoning. The absence of detailed discussion in the approval under section 153D of the Act does not make the assessment invalid, unless it is shown that there was no application of mind at all. The requirement is only that the approving authority applies its mind before granting approval. The Hon'ble Delhi High Court in the case of PPC Business & Products (P) Ltd. (supra) has categorically held that it is not a quasi-judicial order and elaborate reasoning in the approval under section 153D of the Act does not by itself vitiate assessment. Further, Hon'ble Delhi High Court in the case of Pepsi Foods (P) Ltd (2014) 367 ITR 112 (Del) has held that the function of the approving authority under section 153D of the Act is administrative to ensure that assessments framed by subordinate officers are not arbitrary. The Kailash Gahlot Hon'ble Supreme Court in the case of Sahara India (Firm) (2008) 300 ITR 403 has held that where approval is statutory but administrative, it need not record elaborate reasoning. Its purpose is supervisory control, not adjudication. It is equally a well- settled position on the law of precedent that a ruling of a court is to be read, understood and interpreted in the context of not only the issue that was under adjudication but also in the context of the points of arguments canvassed by both the sides. Though there is plethora of judicial precedents on this aspect, it will suffice here to reproduce the relevant part of the judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works (P) Ltd.; 198 ITR 297, which is self- explanatory:

"It is neither desirable nor permissible to pick out a word or sentence from the judgment of this court, divorced from the context the question under consideration and treat it to be the complete law declared by this court. ....".

"9. .......What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in the judgement. Every judgment must be read as applicable to the particular facts proved, since the generality of the expressions which may be found there is not intended to be exposition of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found.

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 23 ::

exposition of Kailash Gahlot law. Law cannot afford to be static and therefore, Judges are to employ an intelligent interpretation in the use of precedents........."

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 24 ::

Respectfully following the decisions (supra), we reject this legal 21.

issue raised by the assessee and hold that the assessment order(s) were

passed after obtaining valid approval in terms of Section 153D of the Act.

Hence, the additional grounds raised by the assessee is also rejected.

Ld. CIT(A)’s action of confirming addition of Rs.12,82,07,552/- by way of

unaccounted income from finance & commission business, out of the total

addition of Rs.15,23,51,330/- made by the AO. Briefly stated, the AO, in

the impugned order, had observed that, the assessee had admitted to

undisclosed interest income of Rs.6,39,58,781/- in his return of income

filed u/s 153A of the Act. However, on analysis of the trial balance

furnished by the assessee vis-à-vis the account book no. 3 of ID mark

ANN/FAY/CPA/B&D/S-1, the AO noted that certain amounts were not

reflected in the trial balance totaling to Rs.15,23,51,330/-. The AO thus

required the assessee to explain the same. In response, the assessee

submitted that, few of the entries related to RVS Trust in which he was

earlier a trustee and that some of the entries represented hand loans

given and received back by him. The AO however was of the view that,

the assessee was not able to substantiate his explanation with evidence /

confirmation and therefore added the impugned sum of

Rs.15,23,51,330/- by way of his unaccounted income from his finance

and commission business. On appeal, the Ld. CIT(A) partly confirmed the

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 25 ::

addition to the extent of Rs.12,82,07,552/-. Aggrieved by the order of Ld.

CIT(A), the assessee is now in appeal before us.

before us. It is observed that, before the Ld. CIT(A), the assessee had

reiterated the submissions before the AO and pleaded that, some of these

transactions did not relate to him but RVS Trust and that some of them

were borrowings and repayments of hand loans in the same year. We find

that the Ld. CIT(A) elaborately analyzed each of the noting(s) added by

the AO in light of the explanation & material furnished by the assessee

and rendered the following findings, which are as under:-

“10.2 The quantum of addition made and the reply of the appellant for the difference of entries between the trial balance and the seized books are summarized and discussed point-wise hereunder:

10.2.1. The first claim of the appellant is that the amount appearing in the name of Mathalai Muthu AE at Rs.10,00,000/- is a receipt from the said person and the amount was given to Sri Gopi on the instruction of Sri R. Viswanathan; that he was only an agent for transfer of funds from Mathalai Muthu to Sri Viswanathan. The entry in page 9 of the seized book with name Marutha Muthu shows b/f figure of Rs.10 lakhs and that the same was paid on 26.12.2014. However, in the absence of further details that this entry was part of information furnished by the appellant on 28.12.2018 (based on which the actual receipts in the hands of Sri R. Viswanathan were determined) and any further evidences, the addition made by the AO on this count is confirmed.

10.2.2. The second claim against VLa/c account amount of Rs.5,58,21,222l- is that the sum represents transactions relating to RVS Trust, Trichy in which he is a trustee and the transactions have taken place through banking channels. Page 10 of the seized book show that there are certain transactions with name RVS. There is an opening / brought forward credit balance of Rs.8,71,00,000/- and there are corresponding payments from 06.09.2014 to 17.02.2015 as under:

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 26 ::

Date Narration Amount

06.09.2014 (RVS)… Amt 50,00,000

09.09.2014 RTGS Schools 75,00,000

11.09.2014 -do- 1,00,00,000 -do- 29.09.2014 2,00,00,000 -do- 23.09.2014 1,00,00,000 -do- 24.09.2014 25,00,000 -do- 17.02.2015 8,21,222

Total 5,58,21,222

However, no further evidences in this regard are furnished that the transactions are made through the bank account but submitted that these transactions are not related to him. Therefore, as the transactions and the relevant payments of Rs.5,58,21,222/-are appearing in the seized note books of the appellant, the AO had rightly made the addition in this regard. Accordingly, the same is confirmed.

10.2.3. The next claim of the appellant against addition of Rs.3,75,000/- as appearing in the name of Malleeswaran is that he advanced a sum of Rs.7,30,000/- to Sri Malleeswaran and received back Rs.3,75,000/- on two dates and the outstanding balance is Rs.3,55,000/-. It was also submitted that the total advanced amount of Rs.7.30 lakhs was admitted as additional income for the Asst. Year 2014-15. Page 12 of the seized book evidence the claim of the appellant with regard to total advance, receipt of 1,87,500/- on two occasions and the balance receivable at Rs.3.55 lakhs. Since the gross loan amount was already considered for addition in the Asst. Year 2014-15, no further addition on this count is warranted and the AO is directed to delete this portion of the addition made.

10.2.4. The fourth claim is that he received Rs.5 lakhs from Sakthivel AE (RR) and the entry is a b/f figure from earlier years and on 01.12.2014 the total amount was repaid. Page 13 of the seized note book evidence the b/f figure at Rs.5 lakhs and a payment was made on 01.12.2014, bringing down the closing balance to Nil. Since the amount paid are towards the earlier loan taken, no addition is called for and the addition made with regard to this payment of Rs.5 lakhs is directed to be deleted.

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 27 ::

10.2.5. Page 24 (inner column out of three columns after the narration column show two figures of Rs.1,23,59,124/- and Rs.8,14,000/-. The AO had considered these two figures as paid by the appellant during the year and made the addition. However, there is an opening balance / brought forward debit balance of Rs.79,49,124/- and the appellant made further payments of Rs.1,00,000/-, 25,10,00,000/- and Rs.18,10,000/- on different dates thereafter, taking the total debit balance to Rs.1,23,59,124/-. This amount was repaid by RVS School on 24.11.2014 and the debit balance has become NIL.

The total payments by the appellant during the year are Rs.44,11,000/- leaving apart the b/f balance of Rs.79,49,124/-. During hearings, the AR contended that that if at all the sources were to be explained for the payments made by the appellant, the same has to be restricted to these payments of Rs.44.11 lakhs, since the subsequent payments would automatically be considered as paid out of balances received back from RVS.

The AO is directed to verify whether the opening balance is the b/f figure as on 31.03.2014, and if so, restrict the addition to Rs.44,11,000/-.

10.2.4. The fourth claim is that he received Rs.5 lakhs from Sakthivel AE (RR) and the entry is a b/f figure from earlier years and on 01.12.2014 the total amount was repaid. Page 13 of the seized note book evidence the b/f figure at Rs.5 lakhs and a payment was made on 01.12.2014, bringing down the closing balance to Nil. Since the amount paid are towards the earlier loan taken, no addition is called for and the addition made with regard to this payment of Rs.5 lakhs is directed to be deleted.

10.2.5. Page 24 (inner column out of three columns after the narration column) show two figures of Rs.1,23,59, 124/- and Rs.8,14,000/. The AO had considered these two figures as paid by the appellant during the year and made the addition. However, there is an opening balance / brought forward debit balance of Rs.79,49, 124/- and the appellant made further payments of Rs.1,00,000/-, 25,10,00,000/- and Rs. 18,10,000/- on different dates thereafter, taking the total debit balance to Rs.1,23,59,124l-. This amount was repaid by RVS School on 24.11.2014 and the debit balance has become NIL.

10.2.6. As regards the addition made towards TNPL at Rs.63,61,330/-, it is the claim of the appellant that these transactions are not related to his business but made between TNPL and another Sri Muthu Krishnan, a contractor running the canteen of TNPL. However, in the absence of any further details, the transaction is treated as belonging to the business of

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 28 ::

the appellant and the addition made by the AO on this count is confirmed.

10.2.7. Rs.10,00,654/- was added in the name of Sri Muthusamy. In this regard, it was submitted by the appellant that he borrowed an amount of Rs.10 lakhs on 29.10.2014, repaid Rs.9.50 lakhs on 31.10.2014 and the balance on 01.11.2014. Page 71 of the seized note book evidences that an amount of Rs.10 lakhs was credited on 29.10.2014, as reduced by the amount of Rs.9.50 lakhs on 31.10.2014 leaving the balance Rs.50,000/- as credit balance, which was later reduced to NIL. Since the pattern of entries show that it is a credit balance (loan obtained), the addition made by the AO in this regard is directed to be deleted.

10.2.8. The same is the case with regard to addition of Rs.45,00,000/- in the name of RR Er. The appellant initially obtained a loan of Rs.25 lakhs on 31.10.2014 and repaid the same on 01.11.2014. Likewise, another amount of Rs.20 lakhs was obtained as a loan and repaid later. Since the entries evidence that loans were obtained, showing credit entries, the amount of Rs.45 lakhs be deleted from the overall addition made by the AO.

10.2.9. The next addition of Rs.5,11,20,000/- is against the name of Meenakshi Mission. In this connection, it is the claim of the appellant that the DD received from Meenakshi Mission in favour of others was paid by him and in the process received commission of Rs.25 lakhs and offered the same for taxation. The submissions made by the appellant are considered. Page 79 of the seized book, under the name Meenatchi Mission evidences this transaction of initial payment and later receipt, which raises the question for source for initial payment. Since the appellant had not adduced any sources for such payment, the same is treated as paid out of unaccounted income. Further, the appellant claims that the commission earned is included in the total income admitted. However, no evidences for this inclusion of commission on this transaction were filed by the appellant.

During the course of appeal hearings, the AR of the appellant contended that there is payment of Rs.4,13,00,000/- on 12.11.2014 as per the seized page 79 and further amounts of Rs.73,20,000/- and Rs.25,00,000/- were paid later, which was intervened by receipt of Rs.4,86,00,000/- and therefore the sources have to be explained to the extent of Rs.4,13,00,000/- and not the entire payment of Rs.5,11,00,000/-. This version of the appellant is acceptable and therefore, the addition to the extent of Rs.4,13,00,000/- is confirmed as no sources were explained.

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 29 ::

The appellant also submitted that he had earned a commission of Rs.25 lakhs on this transaction and the same was already admitted as income. The AO is directed to verify whether the income admitted constitutes this amount and if it is found as not included, the same may be added.

10.2.10. Against the addition of Rs.50,00,000/- it is the claim of the appellant that this amount was received from KCP of Karur and paid to Sri Jayaraman and he is not related to this transaction. Since no evidences were furnished in respect of this transaction except claiming that he is not related to this transaction, the amount of Rs.50 lakhs is treated as amount lent by the appellant out of unaccounted income and accordingly, the addition to this extent is confirmed.

10.2.11. An amount of Rs.20 lakhs is added as unaccounted income, being amount lent to Sri Kathappan Natham. In this connection, the appellant submitted that he has given a hand loan on 12.03.2015 and the same was returned later. However, as the sources for such loan was not explained, the addition made by the AO is confirmed to this extent.

10.2.12 The same is the position with regard to the balance hand loans of Rs.15 lakhs and Rs.1 crore given to Sri Senthilnathan and Sri Ramamoorthy. Except claiming that these are hand loans advanced and later received back, the appellant has not furnished any sources for the same. Therefore, the additions made at Rs.15 lakhs and Rs. 1crore by the AO are confirmed.”

independent or tangible material to controvert the above findings of the

Ld. CIT(A). Rather, the Ld. AR raised an alternate plea contending that

these notings may be telescoped against the undisclosed income of

Rs.34,88,17,470/- and Rs.8,57,66,420/- offered to tax in AYs 2014-15 &

2015-16 respectively. According to us, this alternate plea was never

raised by the assessee before any of the lower authorities and the same

required factual verification. The Ld. DR has rightly contended that, it is

required to be verified whether the undisclosed income offered to tax by

the assessee in his return(s) of income had already been utilized to

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 30 ::

explain some other noting(s) found in the account book(s) or not, and if

that be so, then the same cannot again be telescoped against the

impugned addition. Furthermore, we have also set aside the protective

addition(s) made by the AO in relation to the noting(s) found in the same

account book(s). Overall therefore, we consider it fit to remit this matter

back to the file of the AO for factual verification and allow the telescoping

sought by the assessee if the same is found to be in accordance with law.

With these directions, this ground raised by the assessee is allowed for

statistical purposes.

and cross-objections filed by the assessee in CO No.45/Chny/2025. It is

observed that, the Revenue’s appeal and the cross objections of the

assessee relates to the Ld. CIT(A)’s action of deleting the protective

addition(s) made by the AO in respect of the notings found in the account

books ID marked ANN/FAY/CPA/B&D/S-1 seized from the premises of the

assessee, which was substantively added in the hands of Shri NRV. After

considering the rival submissions, it is observed that, except variation in

figures, the reasoning adopted by the AO for making the protective

addition and the Ld. CIT(A) to justify deletion of the same is verbatim

same as in AY 2014-15.

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 31 ::

Following our reasons and conclusions recorded while deciding 26.

identical grounds raised by the Revenue in AY 2014-15 (supra), we set

aside the order of Ld. CIT(A) and remit the issue back to the file of the AO

to consider the same afresh, on the same lines as directed in Para No.11

above. We therefore allow the Revenue’s appeal for statistical purposes

and dismiss the cross objections of the assessee.

ITA No. 1489/Chny/2025 (Assessee’s Appeal - A.Y 2016-17) ITA No. 1596/Chny/2025 & CO No.46/Chny/2025 (Revenue's Appeal and Assessee’s Cross Objection - A.Y 2016-17)

for AY 2016-17. It is seen that, Ground Nos. 1 & 2 and the additional

grounds raised by the assessee are challenging the legal validity of the

impugned order on the ground of (a) being barred by limitation and (b)

for want of valid approval u/s 153D of the Act. The facts involved and the

argument(s) raised by both the sides are identical and common to the

grounds raised in AY 2015-16. Following our decision rendered in Ground

No. 1 & 2 and additional grounds in AY 2015-16 (supra), we dismiss these

grounds raised by the assessee in AY 2016-17 as well.

Ground No. 3 of the asssessee’s appeal and Ground No. (iv) to (vi) 28.

of the Revenue’s appeal relates to the addition of Rs.39.78 crores made

by way of unaccounted investment in property. The facts as noted are

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 32 ::

that, the assessee had entered into a property transaction with Mr. V

Duraisamy / M/s Hind Mercantile Corp Pvt Ltd towards which the assessee

had paid Rs.39.78 crores. The AO observed that, Mr. V Duraisamy had

deposed that, he had received Rs. 2 crores in cheque and balance of

Rs.37.78 crores in cash towards purchase of landed property at

Yashwantpura, Bangalore which was owned by M/s Hind Mercantile Corp

Pvt Ltd. The AO further noted that, the assessee, in his statement(s)

recorded on 03.04.2017 & 10.04.2017, had submitted that, sum of Rs.8.8

crores was given in cheque and balance of Rs.30.98 crores in cash and

had offered to pay tax on the cash component. The assessee however did

not do so in the return of income filed u/s 153A of the Act. When

confronted with the foregoing, the assessee is noted to have claimed that,

this transaction did not pertain to him but the 32 finance firms who had

entered into the agreement with M/s Hind Mercantile Corp Pvt Ltd and

therefore no inference could be drawn in his hands. The AO, not being

satisfied with the explanation given by the assessee, added the entire

amount of Rs.39.78 crores by way of unexplained investment in his

hands. On appeal, the Ld. CIT(A) is found to have partly confirmed the

addition to the extent of Rs.26,49,71,000/-. Being aggrieved by the order

of Ld. CIT(A), both the assessee and Revenue are in appeal before us.

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 33 ::

We have heard both the parties and perused the material placed 29.

before us. Having gone through the facts placed before us, it is observed

by us that, the assessee in his statement dated 03.04.2017 had admitted

that, he had paid sum of Rs.39.78 crores to HMCPL and Vetridurai of VMD

Enterprises Pvt Ltd through his brother-in-law, for purchase of land owned

by HMCPL. The assessee further added the aforesaid payment included

the loan already given by him to Shri Vetridurai and the interest which

had accrued thereupon. The assessee, thereafter, in his statement dated

10.04.2017, is found to have claimed that, Rs.26.40 crores was paid in

cheque and balance Rs.13.38 crores in cash. After deducting the sum of

Rs.8.80 crores given already as loan, the assessee is found to have

offered balance sum of Rs.30.98 crores to tax. The assessee however did

not offer the same in his return of income. According to the assessee, the

transaction of purchase of property was between HMCPL and the finance

firms and that he was not a party to the transaction and therefore no

addition was permissible in his hands. We however are unable to

countenance this plea of the assessee. The account book(s) wherein the

impugned notings were found was seized from the possession of the

assessee which contained details of cash amount(s) paid to HMCPL /

Vetridurai. The assessee is also found to have admitted to making the

payments and the statement(s) were also not retracted. It is also found

that, the assessee in his answer to Q No. 9 of his statement dated

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 34 ::

03.04.2017 had categorically asserted that, the transactions happening in

these finance firms were at his behest and directions and shall bind him

entirely. In view of the foregoing therefore, we are unable to agree with

the Ld. AR that, the tax consequence of the impugned unaccounted

transaction was to be inferred in the hands of the finance firms and not

the assessee.

We now turn our attention to the quantification of unaccounted 30.

investment made by the assessee in purchase of property. We

countenance the Ld. CIT(A)’s findings to the extent that, the amount of

Rs.39.78 crores inter alia included the loan of Rs.2.5 crores advanced to

Vetridurai as on 01.04.2013 which along with interest stood at

Rs.4,98,29,000/- as on 14.07.2014 (Rs.5 crores approx.) and the said

amount was appearing in the balance sheet of the assessee as well.

Accordingly, the amount to the extent of Rs.4,98,29,000/- was rightly

treated as explained and hence could not be added in the hands of the

assessee. The relevant findings of Ld. CIT(A) taken note of by us is as

follows:-

“10.3 …. It is during the course of statement recorded on 03.04.2017, the appellant in response to question No.11, stated that the amounts given in respect of HMCPL property include the loan amounts already given to Sri Vetridurai (S/o Sidhai Duraisamy), including interest. In support of the above, the appellant relied upon page No.154 showing the account of Sri Sidhai Duraisamy. The entries in the said page evidence that there was a bif figure of Rs.2,50,00,000/- as on 01.04.2013, the same has gone upto Rs.4,98,29,000/- as on 14.07.2014, which was rounded off, indicating adjustment (against the

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 35 ::

above property transaction), leaving a balance of Rs.5 crores, which was appearing in the Balance Sheet of the appellant, under debtors list as on 31.03.2016. Considering the above evidences, which are part of seized material, the claim of the appellant to this extent is accepted and the amount of RS.4,98,29,000/- is directed to be deleted from the overall addition made by the AO on this count….”

Rs.8.30 crores which was paid by cheques by the finance firms on the

ground that, the source credits had been substantively assessed to tax in

the hands of Shri NRV and therefore addition of the said amount in the

hands of the assessee amounted to double taxation of the same. The Ld.

CIT(A) is accordingly noted to have confirmed the addition of remaining

sum of Rs.26,49,71,000/- [39,78,00,000 – 4,98,29,000 – 8,30,00,000].

As noted by us earlier, the substantive assessment of Shri NRV has been

quashed by this Tribunal and the corresponding protective addition(s)

made in the hands of the assessee has been set aside back to the file of

the AO (infra). However, if the source credits i.e., the amount(s) paid by

the finance firm(s) and/or the income embedded therein, are added in the

hands of the assessee, then it would result in double taxation of the same

amount by way of unaccounted investment as well. Further, if any

additional income is brought to tax in the set aside proceedings, the same

would also be available for being telescoped against this unaccounted

investment. Thus, though in principle, we uphold that the unaccounted

investment made in property purchased from HMCPL is liable to be taxed

in the hands of the assessee, but, in fitness of the matters, we set aside

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 36 ::

the limited issue of quantification of the unaccounted investment back to

the file of the AO. The AO is required to be correctly re-compute and

ascertain the quantum of unaccounted investment, in light of our

aforesaid findings. The AO shall also allow the benefit of telescoping, after

considering the facts objectively and if the assessee is found to be entitled

to the same as per law. Needless to mention, the assessee shall be given

sufficient opportunity to explain his case and would be free to furnish any

new evidences or details in support of his claim. Accordingly, the grounds

taken by the assessee and the Revenue in this regard, are partly allowed

for statistical purposes.

and cross-objections filed by the assessee in CO No.46/Chny/2025 in AY

2016-17. It is observed that, the Revenue’s appeal and the cross

objections of the assessee relates to the Ld. CIT(A)’s action of deleting

the protective addition(s) made by the AO in respect of the notings found

in the account books ID marked ANN/FAY/CPA/B&D/S-1 seized from the

premises of the assessee, which had been substantively added in the

hands of Shri NRV. After considering the rival submissions, it is observed

that, except variation in figures, the reasoning adopted by the AO for

making the protective addition and the Ld. CIT(A) to justify deletion of

the same is verbatim same as in AY 2014-15.

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 37 ::

Following our reasons and conclusions recorded while deciding 33.

identical grounds raised by the Revenue in AY 2014-15 (supra), we set

aside the order of Ld. CIT(A) and remit the issue back to the file of the AO

to consider the same afresh, on the same lines as directed in Para No.11

above. We therefore allow the Revenue’s appeal for statistical purposes

and dismiss the cross objections of the assessee.

ITA No.1536/Chny/2025 (Revenue's Appeal - A.Y 2017-18)

CIT(A)’s action of deleting the protective addition(s) made by the AO in

respect of the notings found in the account books ID marked

ANN/FAY/CPA/B&D/S-1 seized from the premises of the assessee, which

was substantively added in the hands of Shri NRV. After considering the

rival submissions, it is observed that, except variation in figures, the

reasoning adopted by the AO for making the protective addition and the

Ld. CIT(A) to justify deletion of the same is verbatim same as in AY 2014-

identical grounds raised by the Revenue in AY 2014-15 (supra), we set

aside the order of Ld. CIT(A) and remit the issue back to the file of the AO

to consider the same afresh, on the same lines as directed in Para No.11

above. We therefore allow the Revenue’s appeal for statistical purposes

and dismiss the cross objections of the assessee.

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 38 ::

Ground No. 2 of the appeal of the Revenue is against the action of 35.

Ld. CIT(A) deleting the addition of Rs.4,87,33,820/- made in relation to

unaccounted cash found and seized in the course of search. As noted

earlier, during the course of search conducted on 22.04.2016, cash

aggregating to Rs.4,87,33,820/- was found and seized from the assessee,

which he had offered as his income. The AO however noted that, the

assessee did not admit any additional income towards the cash seized in

his return of income and therefore added the same as his undisclosed

income in the impugned AY 2017-18. On appeal, the Ld. CIT(A) was

pleased to delete the same. Being aggrieved, the Revenue is now in

appeal before us.

before us. Before adverting to the facts of the case, we first take note of

the principle of telescoping which has since been judicially approved by b

the Hon'ble Supreme Court in the case of Anantharam Veerasinghaiah &

Co. Vs CIT (123 ITR 457). In the decided case, it was held that where the

assessee offers any income on ad hoc basis, then such income is

commonly described as intangible addition; but it is very much a part of

assessee's real income as disclosed in his account books and has the

same concrete existence. The Hon'ble Court held that, that the secret

profits or undisclosed income of an assessee earned in the same or an

earlier assessment year may constitute a secret fund, even though

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 39 ::

concealed, from which the assessee may draw subsequently for meeting

expenditure or introducing amounts in his account books. The intangible

additions were held to be available to the assessee as the regular book

profits pro could be. The Apex Court thus held when the unexplained cash

deficits and the cash credits can be reasonably attributed to a pre-existing

pre existing fund of concealed profits or by reference to concealed income

earned in that very year then no addition is warranted on account of such

cash deficits or cash credits.

jurisdictional Hon'ble Madras High Court in the case of S K. Muralidhar Vs

CIT (51 ITR 757). In the decided case the AO had initially made an

addition by way of inflation of purchases in the hands of the assessee

across AYs 1947-48 48 to 1950-51. Thereafter, the AO came in

possession of information that the assessee had lent certain amounts in

mortgage in the name of his brother and also made investment in name

of his wife and daughter in an entity 'S', for which separate additions were

made in AYs 1949-50 & 1950-51. On appeal, the AAC is noted to have

held that there was no justification in making the subsequent addition as

it stood justified out of the addition made on account inflated purchases in

AYs 1947-48 1947 to 1950-51. On further appeal, the Tribunal upheld the

action of AO. On appeal by the assessee, the Hon'ble High Court is noted

to have elaborately discussed the theory of telescoping of income against

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 40 ::

investment / expenditure and allowed the assessee's claim by holding as

under:-

"The question in issue is quite simple and yet the Tribunal misdirected itself and went wrong. It is a hard fact that for the two years 1947-48 and 1948-4949 a total addition of Rs. 52,230 was made by the department in computing the assessable income. This was, therefore, treated as the real income of the assessee for the years in question. There was nothing notional or fictional about it. However convenient convenient it might be to describe the addition as "intangible" as has been done by the department and the Tribunal, the fact is that it was found to have accrued to the assessee and was not merely supposed to have been earned by him. Once the addition is made the department is fixed to the position that the assessee earned the amount in the relevant year. There can be no relaxation from that position and we have no doubt that the department cannot deviate from or wriggle out of it without departing from ordinary standards andards of justice and fair play. If in such a case the assessee points to that addition as the source from which he got a particular amount which he is called upon to explain, the department is bound to accept it as exceedingly likely and probable, consistent with its previous act in treating the addition as income, unless it be that it is possible to say that the source was not available to the assessee. The onus of proving this would be on the department. Otherwise, it would amount to the departmentt saying, "heads I win, tails you lose".

The decision of the Andhra High Court in Lagadapati Subba Ramaiah v. Commissioner of Income-tax Income tax [1956] 30 ITR 593 is a case in point. In that case the assessee was a shareholder of a private limited company styled the he Nellore Bus Transport Co. Ltd. According to the books of the company its profits for its entire period of existence, that is to say, for the years of account ending with 31st December, 1946, 31st December, 1947, 31st December, 1948, May, 1949, amounted in all to Rs. 34,352. The revenue declined to accept the books of the company and estimated its income at a higher sum on which tax to the tune of Rs. 62,000 was assessed and paid. The company purported to issue the dividend warrants to its shareholders aggregating to a sum of Rs. 1,16,280. The assessee stated that he got the dividends of Rs. 6,800 and Rs. 4,800 for the account years ending with 31st December, 1946, and 31st December, 1947, respectively, the dividends having been declared by the company on 2nd March, 1949. The assessee, however, claimed a refund on the basis of only one dividend warrant dated June 9, 1949, for Rs. 6,800. The department as well as the Tribunal rejected the claim of the assessee. The view taken was that after the payment of income- tax of Rs. 62,000 levied on the company there were no funds available with it out of which, dividends could have been declared and paid. The question before the High Court was whether the assessee was not entitled to a refund of tax in respect of the dividends in question. In dealing with the matter, Viswanatha Sastri J. observes thus at page 599:

"In the present case, it is somewhat difficult to say that there were no profits of the company out of which a dividend could have been paid. When the revenue authority levied a tax of Rs. 62,000 on the company, it proceeded on the basis

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that the books of the company which showed a total income of only Rs. 34,532 for all the four years of its existence were unreliable and that the bulk of the company's profits had been kept outside its books. Now those secret profits less the income-tax income paid, therefore, would be available with the company for distribution as dividends. Once the secret profits had been assessed to tax, it would have been open to the company to bring those profits into the books and distribute them, or what remained after payment of tax, as dividends.... Having assessed the company on a large sum as its undisclosed income, it cannot, at the same breath, say that these profits did not in fact exist because they did not appear from the company's books and could not, therefore, have been available for the payment of dividends. Among common men, such an attitude would be regarded as blowing hot and cold or playing fast and loose."

The order of the Tribunal shows that it has missed the real point for decision. The only question that the Tribunal had to decide was whether the assessee could have derived the amount of Rs. 52,230 from the prior years which according to the department the assessee did earn. The Tribunal does not say, nor would the materials on record enable it to say, that the sum was not available to the assessee either to advance the mortgage loan in the name of Murugesa Mudaliar or for the other advances. If there had been any evidence to show that the assessee devoted that amount for other purposes it may well be that the mortgage loan and other advances were made from an unexplained or undisclosed source. But that is not so in the present case. The Tribunal's conception of "intangible additions" is somewhat queer and we confess our inability to appreciate it. The Tribunal observes in its order :

"Intangible additions, as the name itself suggests, are purely matters of estimate which may err on the wrong side for the department. For wantwa of proper evidence, additions on account of deficiency of gross profit or other defects may be made but this would not mean putting in possession of the assessee their equivalent in hard cash available for expenditure or investment. It may be said that having suffered a harsh assessment in a particular year, the assessee's case should be considered sympathetically in the subsequent year when an investment of the nature we are discussing is brought to light." Additions are no doubt made very often on estimate basis. But it can never be said, or at any rate the department cannot contend, that the amount of the addition is not the real income but something which the assessee may not have earned. It is wholly illogical for the department to contend that the addition was only for purposes of taxation and that it should never be taken as true income of the assessee. We must point out that the Tribunal is wrong in thinking that an assessee suffers a "harsh assessment" when his income is computed by making additions.

Such an assessment is perfectly within the four corners of the Act and there is no reason to suppose that it is in any way inequitable or unjust. We are also unable to understand the real scope of a sympathetic treatment of the assessee in the matter of assessment to tax. The assessee is either liable to tax or not, and if he is really liable to tax he cannot get rid of it by pleading equity or by invoking the sympathy of the assessing authority. The faulty reasoning of the Tribunal was certainly not conducive to a correct conclusion in the matter. In our opinion, there are no materials for the addition of Rs. 40,000 and Rs. 12,230 in

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respect of the two assessment years 1949-50 1949 and 1950-51 51 respectively, and that the order of the Tribunal cannot be sustained."

jurisdictional Madras High Court in the case of CIT v. K. S. M Guruswamy

Nadar and Sons, [1984] 149 ITR 127. In the decided case also, it was

held that when there are two separate additions additions viz., one on

account of suppression of profit and another on account of cash credit,

then it is open to the assessee to explain that, the suppressed profits had

been brought in as cash credits and has to be telescoped into the other.

Bombay High Court in the case of CIT vs J.J. Gandhi (39 CTR 127). In this

judgment also, the Hon'ble High Court had approved the theory of

telescoping and held that it could be applied in cases where additions in

relation of unexplained money/investment are sought to be made in the

hands of the assessee. The Hon'ble Court explained that if an addition

towards undisclosed income was made and the AO also seeks to make

certain addition in relation to unexplained investment then, it can be

treated by the assessee that the unexplained investment is sourced out of

the undisclosed income already taxed.

The principle which emerges from the above is that, the same 40.

income should not be taxed twice i.e. once at at the time of generation

and thereafter at the time of application for making investment or any

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 43 ::

undisclosed asset. Having regard to this settled legal position, we now

come back to the facts of the case. From the discussions set out above, it

is not in dispute that, the assessee had offered income by way of receipts

from repayment of cash loans and interest income aggregating to

Rs.40,77,13,731/- across AYs 2014-15 to 2017-18. It is not the case of

the Revenue that, these items of intangible addition(s) have been

telescoped by the assessee against any other unexplained expenditure or

asset found in the course of search. Hence, applying the judicially

approved principle of telescoping, according to us, the assessee is entitled

to telescope the unaccounted income offered to tax in the return(s) of

income for AYs 2013-14 to 2017-18 against the seized cash of

Rs.4,87,33,820/-. For such reasons, we confirm the order of Ld. CIT(A)

deleting the impugned addition. Before parting, it may be clarified that,

the amount(s) of undisclosed income which was offered to tax by the

assessee, to the extent being telescoped against the seized cash, will not

be available for telescoping against any other noting(s) of any

unexplained expenditure or investment, if any, found or deduced in

relation to the issue(s) set aside back to the file of the AO. With these

observations, this ground of the Revenue is dismissed.

assessment(s) of this assessee, supra, the AO should be untrammeled by

any of the observations made by us above and also in the case of Shri

ITA No.1488/Chny/2025 (AY 2015-16) & Others Periyasamy Anbunathan :: 44 :: NRV by order dated 22.01.2026 against assessee as well as any observation, if any, made against assessee in the case of Shri R. Gobinath. The AO to independently evaluate the material/evidence and after hearing the assessee to frame the assessment as directed supra in accordance to law.

Order pronounced on the 23rd day of January, 2026, in Chennai.

Sd/- Sd/- (एस. आर. रघुनाथा) (एबी टी. वक�) (ABY T. VARKEY) (S.R.RAGHUNATHA) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER

चे�ई/Chennai, �दनांक/Dated: 23rd January, 2026. TLN आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF