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Facts
The case involves appeals arising from a common order of the CIT(A). The assessee and her husband were subjected to search proceedings which led to additions made by the AO. The additions include unexplained cash credits and disallowance of agricultural income.
Held
The Tribunal held that the legal grounds raised by the assessee regarding jurisdiction under Section 153A were dismissed as the assessment years involved were abated. Regarding the merits, the Tribunal allowed the benefit of unutilized telescoping to delete the additions related to unsecured creditors and agricultural income for the relevant assessment years.
Key Issues
Whether the additions made by the AO under Section 153A and 68 are justified, and whether the benefit of telescoping can be applied to reduce or delete these additions.
Sections Cited
153A, 68
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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S. R. RAGHUNATHA
आदेश /O R D E R
PER BENCH:
These appeals by assessee and revenue arises out of common order passed by learned Commissioner of Income Tax (Appeals)-19. Chennai (in
:-2-: ITA. Nos.: 3329 to 3331/Chny/2018, 67/Chny/2019 short “the ld.CIT(A)”) on 08.10.2018 in the matter of separate assessment framed by the AO.
We take up assessee's appeal in for Assessment Year (A.Y.) 2012-13 wherein the assessment has been framed u/s.144 r.w.s. 53A of the Act on 31.03.2016. These appeals were heard along with appeals of assessee's husband (deceased) i.e. Shri D.R. Balakrishna Raja for A.Ys.2011-12 to 2014-15 in ITA Nos.91 to 94/Chny/2019 which are separately disposed-off.
The grounds raised by the assessee are as under:
The order of the Commissioner of Income tax (Appeals) is contrary to law, facts and circumstances of the case. 2.1 The Commissioner of Income-tax (Appeals) erred in upholding the action of the assessing officer in assuming jurisdiction under section 153A of the Act. 2.2 The Commissioner of Income tax (Appeals) ought to have appreciated that in the absence of incriminating material found during search, the Assessing Officer cannot frame an assessment under section 153A of the Act 2.3 The Commissioner of Income tax (Appeals) ought to have appreciated that the Assessing Officer has exceeded his jurisdiction by considering other issues, which were not part of the search proceedings. 2.4 In any event, the Assessing Officer is precluded from passing assessment order under section 153A of the Act in respect of unabated assessments. 3.1 The Commissioner of Income tax (Appeals) erred in confirming the addition of Rs.2,01,17,425/- as unexplained cash credit under section 68. 3.2 The Commissioner of Income tax (Appeals) ought to have appreciated that Rs.2,01,17,425/- is nothing but the money which was received by the director of the company (Shri Balakrishna Raja) from Mr. G. Rajendran (Proprietor of GRT) towards the relinquishment of right in the "Sola Raja Dhanushkodi Raja Thayammal Memorial Education Trust". 3.3 The Commissioner of Income tax (Appeals) ought to have appreciated that Shri Balakrishna Raja has disclosed the income of Rs 37.37 crores in his sworn statement for various bogus credits in his account and for the groups. Accordingly, once the bogus credit is taxed in the appellant's hand, the same cannot be assessed again as undisclosed income in the appellant hand for the second time.
:-3-: ITA. Nos.: 3329 to 3331/Chny/2018, 67/Chny/2019
3.4 The Commissioner of Income tax (Appeals) erred in not granting the full telescopic benefit to the appellant.
The solitary issue before our consideration is addition made by the AO based on search proceedings. The deceased assessee Late Smt.B.Devahie is represented by Dr.Balakrishna Raja (Legal Representative). The Form No.36 have been revised for all the years accordingly.
The brief facts of the case are that pursuant to search action u/s.132 of the Act in the case of BKR group of cases on 16.05.2013, the assessee was also covered under search. During the course of assessment proceedings, notice u/s.153A of the Act was issued to the assessee on 29.11.2013. In response to the same, the assessee filed her original return of income as filed on 31.03.2013 declaring a total income of Rs.2.72 Lakhs. The notices u/s. 143(2) and 142(1) of the Act were also issued from time to time calling for details from the assessee.
On verification of the return of income along with the enclosures the AO observed that the assessee has shown unsecured creditors of Rs.1067.11 Lakhs. Hence, the Assessing Officer asked the assessee to file the corresponding details in support of the creditors. Since, the assessee failed to substantiate the unsecured creditors, the AO added the incremental cash credit of Rs.312.11 lakhs to the income of the assessee u/s.68 of the Act and levied the taxes accordingly.
The Assessing Officer also disallowed the agricultural income claimed by the assessee to the extent of Rs.224.15 Lakhs in the A.Y.2013-14 and brought to tax the same as ‘income from other sources’. Similarly, in A.Y.2014-15, the AO disallowed the agricultural income claim of the assessee to the tune of Rs.49.64 Lakhs and brought to tax the same as ‘income from other sources’.
:-4-: ITA. Nos.: 3329 to 3331/Chny/2018, 67/Chny/2019
Aggrieved by the order of the AO, the assessee preferred appeal for all the assessment years which were disposed-off by the Ld.CIT(A) by a common order dated 08.10.2018.
Before the ld.CIT(A), the assessee filed additional evidence and hence the ld.CIT(A) sought for remand report from the AO. The assessee also raised emphatically a legal ground that in the absence of any incriminating material, no addition could be made. However, Ld.CIT(A) rejected the plea on the ground that the presence of seized material was not a pre-requisite for issuing notices u/s.153A of the Act. Hence, the ld.CIT(A), considering various judicial decisions in support of his view, the aforesaid legal ground of the assessee was rejected.
Further, on merits of addition made by AO u/s. 68 of the Act for A.Y. 2012- 13 for Rs.312.11 Lakhs, the Ld.CIT(A) noted the factual matrix of the addition and observed that unsecured creditors were remaining unpaid and getting accumulated year after year. It was further observed by Ld.CIT(A) that the amount of Rs.110.94 Lakhs was received from Shri Balakrishna Raja whereas another amount of Rs.108.95 Lakhs was received from M/s.BKR Hotels & Resorts Pvt. Ltd. (BHRPL). ‘Further the ld.CIT(A) also observed that M/s.BRHPL was only a shell company and therefore, such advances could not be considered as genuine. The audited financials of that entity did not reflect any such loans. Shri Balakrishna Raja reflected the loans in his financials statements and therefore, the same was genuine. In view of the above discussion, the claim to the extent of Rs.110.94 Lakhs was accepted and the balance addition of Rs.201.17 Lakhs was confirmed.
:-5-: ITA. Nos.: 3329 to 3331/Chny/2018, 67/Chny/2019 11. In respect of the issue of agricultural income treating it as ‘Income from other Sources’ for A.Ys. 2013-14 & 2014-15, the Ld.CIT(A) observed that the assessee had land holding of 2.80 acres only. Against the same, the Ld.CIT(A) estimated income of Rs.20,000/- per acre per annum. The same reduced the disallowance to the tune of Rs.223.59 Lakhs for A.Y.2013-14. For AY 2014-15, the disallowance was reduced to Rs.49.08 Lakhs. Further, the Ld.CIT(A) allowed telescoping benefit of sundry creditors against the addition sustained. The balance of sundry creditors as on 31.03.2013 was Rs.872.49 Lakhs, whereas this balance as on 31.03.2012 was Rs.1,067.11 Lakh. The opening balance was considered for the purpose of computing unexplained cash credit u/s. 68 of the Act for the F.Y. 2012-13. Some of the opening balances / sundry creditors were liquidated during the year. Such withdrawal of funds from the books would be available with the assessee in the form of cash and would become source for any subsequent introduction in its books as loan / sundry creditors. For this year, such liquidation was to the extent of Rs.194.62 Lakh and therefore, telescoping benefit thereof would be available to the assessee against agricultural income as sustained. After allowing the telescoping benefit, the impugned disallowance of Rs.223.59 Lakhs was further reduced to Rs.28.96 Lakhs. However, no benefit of telescoping was allowed for A.Y.2014- 15.
Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us. The revenue is also in appeal for the A.Y.2013-14 against the relief given by the ld.CIT(A) on account of telescoping.
The Ld.AR for the assessee advanced arguments and assailed the impugned addition on legal grounds as well as on merits of additions. Whereas the Ld.DR for the revenue has supported the findings given by lower authorities.
:-6-: ITA. Nos.: 3329 to 3331/Chny/2018, 67/Chny/2019 14. We have heard the rival arguments perused the material available on records and gone through the orders of the lower authorities. Having gone through the facts, it emerges that the assessee and her husband were subjected to search action on 16.05.2013 wherein certain incriminating documents were found and seized. Based on the same, the additions have been made in the hands of the assessee and her husband. In the hands of Shri Balakrishna Raja, the AO has made an addition of Rs.34.21 Crores in A.Y.2011- 12. The said amount was not accounted for in the books of accounts but used for introduction of capital, unsecured loans etc. in group entities including in the financials of the present assessee. The amount of Rs.7.55 Crores was stated to be transferred to the present assessee Smt.B.Devahie as unsecured loans. The Ld.CIT(A) confirmed the addition of Rs.20.00 Crores but held that the amount of Rs.14.21 Crores being arising on sale of agricultural land would be exempt from tax. In cross-appeals, we have adjudicated that the entire sum arose out of sale of agricultural land and the same would be exempt from tax.
In the present case, we are of the view that the Ld.CIT(A) has considered all the issues in correct perspective. The legal grounds raised with respect to jurisdiction u/s.153A of the Act, we do not find any infirmity in the impugned order. It could be seen that A.Ys.2012-13 to 2014-15 are abated assessment years and hence it was open for the AO to call for any details and make an addition on any of the issue. Therefore, the legal grounds raised by the assessee are dismissed.
In respect of merits of the case also, the Ld.CIT(A) has rendered factual findings and after examining the financial statements, arrived at a conclusion that the incremental sundry creditors of Rs.201.17 Lakh remained unsubstantiated for A.Y.2012-13. The estimation of agricultural income of Rs.20,000/- per acre per annum is quite reasonable and no interference is required on the same.
:-7-: ITA. Nos.: 3329 to 3331/Chny/2018, 67/Chny/2019
Further, we observed that the Ld.CIT(A) has granted telescoping benefit of sundry creditors liquidated in earlier years and reduced the agricultural income addition to the extent of Rs.28.96 Lakh for A.Y.2013-14 and to the extent of Rs.49.08 Lakh for A.Y.2014-15.
It is pertinent to note that, while adjudicating the appeals of Shri Balakrishna Raja, there is an unutilized telescoping benefit available of Rs.1138.08 Lakh for AY 2011-12 as under:
On the issue of agricultural income, the Ld.CIT(A) examined the assessee’s land holdings and found that from F.Ys. 2010-11 to 2013-14, the total land held by the assessee was 23.49 acres. The Ld.CIT(A) estimated agricultural income at Rs.20,000/- per acre per annum and made the relevant adjudication. In our considered opinion, this estimation is reasonable. Accordingly, the additions confirmed by Ld. CIT(A) are as follows:
A Y Extent of Total Agricultural Excess claim Land Expected Income as treated as Income @ claimed by the other income 20000/- per assessee acre 2011-12 23.49 Acre Rs.4.70 Lacs Rs.4,80 Lacs Rs.0.10 Lacs 2012-13 23.49 Acre Rs.4.70 Lacs Rs.4.82 Lacs Rs.0.12 Lacs 2013-14 23.49 Acre Rs.4.70 Lacs Rs.332.23 Rs.327.53 Lacs Lacs 2014-15 23.49 Acre Rs.4.70 Lacs Rs.57.60 Lacs Rs.52.90 Lacs
The Ld. CIT(A) granted further relief on the ground that in A.Y. 2013-14, there was a net reduction in sundry creditors amounting to Rs.145.04 lakh, indicating that these creditors were liquidated during the year. This amount could subsequently be reintroduced in the books in different forms. Accordingly, against the agricultural income of Rs.327.53 lakh as sustained, a telescoping benefit of Rs.145.04 lakh was allowed to the assessee, resulting in a net addition of Rs.182.49 lakh for A.Y. 2013-14.
Further, as noted in para 62 (supra), the unutilized telescoping benefit of Rs.1,373.38 lakh from A.Y. 2011-12 is available for A.Ys. 2013-14 and 2014-15. Applying this benefit, the remaining addition of Rs.182.49 lakh for A.Y. 2013-14 and the addition of Rs.52.90 lakh for A.Y. 2014-15 are deleted. Consequently, the corresponding grounds are disposed of, and the unutilized telescoping benefit now stands at Rs.1,138.08 lakh (Rs.1,373.38 lakh less Rs.182.49 lakh and Rs.52.90 lakh).
:-8-: ITA. Nos.: 3329 to 3331/Chny/2018, 67/Chny/2019 19. Since the amount so admitted by the assessee group has been sourced for introduction of capital / unsecured loans / creditors, the benefit of unutilized telescoping would be available to present assessee who is stated to be partial beneficiary of the same. The addition as sustained by the Ld.CIT(A) is as detailed below :
A.Y.2012-13 Rs.201.17 Lakhs. A.Y.2013-14 Rs. 28.96 Lakhs A.Y.2014-15 Rs. 49.08 Lakhs
Aforesaid three amounts, put together, are less than the unutilized telescoping of Rs.1,138.08 Lakh. Therefore, by granting the telescoping benefit, we delete all the three additions. Hence, all these appeals stand disposed of accordingly. No other ground has been pressed in the appeals.
Order pronounced in the open court on 19th January, 2026 at Chennai.
Sd/- Sd/- (मनु कुमार �ग�र) (एस. आर. रघुनाथा) (MANU KUMAR GIRI) (S.R.RAGHUNATHA) �या�यक सद�य/Judicial Member लेखा सद�य/Accountant Member
चे�नई/Chennai, 8दनांक/Dated, the 19th January, 2026 SP
:-9-: ITA. Nos.: 3329 to 3331/Chny/2018, 67/Chny/2019