RAMESH BABU SEGU,HYDERABAD vs. ACIT., CENTRAL CIRCLE -1(1), HYDERABAD.
Facts
The assessee, engaged in real estate services, filed an income tax return for AY 2018-19. A search and seizure operation led to the discovery of unaccounted cash transactions and receipts. The Assessing Officer (AO) made additions under Section 69C of the Income Tax Act for alleged unaccounted cash payments and also recomputed long-term capital gains.
Held
The Tribunal held that the seized pen drive and cash book lacked evidentiary value due to the absence of a valid certificate under Section 65B of the Indian Evidence Act, rendering them inadmissible. Similarly, the receipts lacked the assessee's signature and were not corroborated by independent evidence. Consequently, the addition of Rs. 39,18,000/- under Section 69C was deleted. For long-term capital gains, the Tribunal admitted additional evidence and remanded the issue to the AO for fresh adjudication.
Key Issues
1. Whether the additions made under Section 69C based on a seized pen drive and receipts are sustainable without valid evidentiary backing. 2. Whether the computation of long-term capital gains is correct, considering the fair market value and cost of construction.
Sections Cited
69C, 153C, 143(2), 80C, 132, 153A, 65B, 65A, 59
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A’ Bench, Hyderabad �ी �वजय पाल राव, उपा� य� एवं �ी मधुसूदन साव�डया, लेखा सद� य के सम� । BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आ.अपी.सं /ITA No.137/Hyd/2025 (�नधा�रण वष�/Assessment Year:2018-19) Ramesh Babu Segu, Vs. ACIT, Hyderabad. Central Circle-1(1), PAN: AMRPS2069N Hyderabad. (Appellant) (Respondent) �नधा�रती �वारा/Assessee by: Sri K A Sai Prasad, CA राज� व �वारा/Revenue by:: Ms. Payal Gupta, Sr. AR सुनवाई क� तार�ख/Date of hearing: 11/02/2026 घोषणा क� तार�ख/Pronouncement: 13/02/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.: This appeal is filed by Shri Ramesh Babu Segu (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-11, Hyderabad (“Ld. CIT(A)”), dated 19/11/2024 for the Assessment Year (“A.Y.”) 2018-19.
The assessee has raised the following Grouds of appeal:
“1a. The order of the Learned First Appellate Authority in not correct either on facts or in law and in both, 2a. The Learned First Appellate Authority erred in law and on facts by upholding the additions made by the Assessing Officer under Section 69C of the Income Tax Act, amounting to INR. 39,18,000/.
ITA No. 137/Hyd/2025 Ramesh Babu Segu 2b. The Learned First Appellate authority is not justified in rejecting the claim of appellant that the seized receipts totalling amounting to INR 39,18,000/-do not belonging to the appellant. 3a. The Learned First Appellate Authority is not justified in confirming the additions of INR 1,41,54,990 towards Long Term Capital gain on Sale of Immovable property made by the Assessing Officer. 3b. The Learned First Appellate Authority is not justified in confirming the decision of the assessing officer in restricting the cost of Land to INR 760 per Square yard from INR 1000 per Square yard claimed by the appellant. 3c. The Learned First Appellate Authority is not justified in confirming the decision of the assessing officer in restricting the cost of construction to INR 300 per Square yard from INR 831 per Square yard claimed by the appellant. 4a. The Appellant prays for leave to add or amend or alter any of the grounds at the time of hearing of appeal.”
The brief facts of the case are that the assessee is an individual engaged in the business of real estate services. The assessee filed his return of income for the assessment year 2018–19 on 31.08.2018, declaring total income of Rs.6,59,820/-. Subsequently, a search and seizure operation under section 132 of the Income Tax Act, 1961 (“the Act”) was conducted on 28.01.2020 in the case of Polisetty Somasundaram Group. During the course of search, certain unaccounted cash book and receipt vouchers were found and seized from the business premises of Polisetty Somasundaram. On the basis of the said seized material and the statement of the Managing Partner of Polisetty Somasundaram, Shri Polisetty Shyam Sundar, recorded on 08.06.2020, the Learned Assessing Officer (“Ld. AO”) observed that the assessee was allegedly involved in unaccounted cash transactions with Polisetty Somasundaram aggregating to Rs.2,21,18,000/- pertaining to assessment years 2014–15 to Page 2 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu 2018–19. Accordingly, notice under section 153C of the Act was issued to the assessee on 29.08.2022. In response thereto, the assessee filed return of income for assessment year 2018–19 on 08.03.2023, declaring total income of Rs.8,87,820/-. The Ld. AO thereafter issued notice to the assessee under section 143(2) of the Act on 10.03.2023. After considering the submissions of the assessee, the Ld. AO, on the basis of seized material, alleged that the assessee had made unaccounted cash payment of Rs.39,18,000/- to Polisetty Somasundaram during the year under consideration and accordingly added the same in the hands of the assessee under section 69C of the Act. The Ld. AO further recomputed the long-term capital gains arising from sale of immovable property by rejecting the fair market value adopted by the assessee as on 01.04.2001 and made an addition of Rs.1,41,54,990/-. The Ld. AO also made additions of Rs.13,440/- on account of business income and Rs.50,000/- on account of disallowance under section 80C of the Act. Accordingly, the assessment was completed by the Ld. AO under section 153C of the Act vide order dated 27.03.2023, determining the total income of the assessee at Rs.1,90,24,250/-.
Aggrieved with the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A), who confirmed the additions challenged before him. Hence, the Ld. CIT(A) dismissed the appeal of the assessee.
Aggrieved with the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. The ground nos. 1(a) and 4(a) of the appeal of the assessee are general in nature and require no separate adjudication.
Page 3 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu 6. The ground nos. 2(a) and 2(b) of the appeal of the assessee are related to the addition of Rs.39,18,000/- under Section 69C of the Act. In this regard, the Learned Authorised Representative (“Ld. AR”) submitted that the addition of Rs.39,18,000/- has been made by the Ld. AO solely on the basis of a cash book extracted from a seized pen drive and two receipts seized from the premises of Polisetty Somasundaram, a third party. As regards the evidentiary value of the said seized pen drive, the Ld. AR invited our attention to the decision of the Visakhapatnam Bench of the Tribunal in the case of Polisetty Somasundaram Vs. DCIT in ITA Nos. 172 to 180/Viz/2023 dated 18.08.2023, wherein the Tribunal categorically held that the contents of the seized pen drive and the cash book generated therefrom do not have evidentiary value in the absence of a valid certificate under section 65B of the Indian Evidence Act, 1872. It was submitted that the said finding was rendered in the case of the very person from whose premises the pen drive was seized. It was contended that when the pen drive has been denied independent evidentiary value in the case of Polisetty Somasundaram himself, the same pen drive cannot be relied upon to make an addition in the hands of the assessee, who is a third party, in the absence of any independent corroborative evidence. The Ld. AR further relied on the decision of this Tribunal in the case of Purushottam Naidu Lekkala Vs. ACIT in ITA No. 608/Hyd/2023 dated 11.06.2024, wherein it has been held that digital evidence, without independent corroboration, cannot form the sole basis for making an addition.
Page 4 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu 7. The Ld. AR further invited our attention to the two receipts seized from the premises of Polisetty Somasundaram and reproduced by the Ld. CIT(A) at page 23 of his order. It was submitted that these receipts were treated by the lower authorities as corroborative evidence in support of the pen drive. However, on perusal of the said receipts, it would be evident that there is no signature of the assessee on either of the receipts. The Ld. AR also invited our attention to para no. 3 of the assessment order in the case of another person i.e., Cheekati Ramaiah, wherein the Ld. AO had reproduced similar receipts seized from the same party i.e., Polisetty Somasundaram. It was submitted that all the receipts bear identical signatures of two persons, which clearly establishes that the signatures do not belong to the assessee. Further, the Ld. AR drew our attention to para nos. 4.2 and 4.3 of the assessment order, wherein reference is made to the statement of Shri Polisetty Shyam Sundar recorded under section 132(4) of the Act, stating that advances aggregating to Rs.2,21,18,000/- were received from the assessee. However, in para no. 4.4 of the assessment order, reference is made to the statement of Shri Yeluri Chandra Sekhar Rao, Manager (Finance) of M/s. Polisetty Somasundaram recorded during the assessment proceedings, who stated that the amounts received from the assessee were towards principal and interest. It was submitted that there is a clear and irreconcilable contradiction between the two statements, which has not been reconciled by the Revenue. It was further submitted that all the material relied upon by the Revenue has been seized from the premises of a third party, does not bear the signature of the assessee, and
Page 5 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu has not been corroborated by any independent evidence belonging to the assessee. Accordingly, it was prayed that the addition be deleted.
Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities. She submitted that the two receipts seized from the premises of Polisetty Somasundaram contained the name of the assessee and the amounts mentioned therein, and therefore constituted corroborative evidence. She further submitted that the receipts contained three signatures and not two, as contended by the assessee, and accordingly prayed for confirmation of the addition.
In rejoinder, the Ld. AR invited our attention to para no.4.4 of the order of the Ld. AO, wherein the statement of Shri Yeluri Chandra Sekhar Rao is reproduced, and submitted that the so-called third signature appearing on the receipts matches with the signature of Shri Yeluri Chandra Sekhar Rao, thereby again establishing that no signature of the assessee appears on the receipts. Accordingly, the Ld. AR prayed before the Bench to delete the addition of Rs.39,18,000/-.
We have carefully considered the rival submissions and perused the material available on record. We observed that the addition of Rs.39,18,000/- in the hands of the assessee has been made primarily on the basis of (i) a cash book extracted from a seized pen drive and (ii) two receipts seized from the premises of Polisetty Somasundaram. In this regard, we have gone through the para nos. 37 to 46 of the order of the Visakhapatnam Bench of the Tribunal in
Page 6 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu the case of Polisetty Somasundaram Vs. DCIT (supra), which is to the following effect:
Page 7 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu
Page 8 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu
Page 9 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu
Page 10 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu
Page 11 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu
Page 12 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu
Page 13 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu
Page 14 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu
On perusal of above, we find that the Tribunal has categorically denied evidentiary value to the seized pen drive and the cash book extracted therefrom due to the absence of a valid certificate under section 65B of the Indian Evidence Act and also quashed the assessment order of the Ld. AO made under section 153A of the Act. Therefore, in our considered view, once the seized pen drive has been held to be inadmissible in law, the same cannot be independently used as evidence in any case, including in the hands of a third party.
Further, as regards the contention of the Revenue that the two receipts constitute corroborative evidence, we have gone through the receipts Page 15 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu reproduced by the Ld. CIT(A) at page no.3 of its order, which is to the following effect:
We have also gone through the similar receipts reproduced by the Ld. AO in the case of Cheekati Ramaiah at para no.3 of that order, which is to the following effect:
Page 16 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu
On perusal of the above three receipts, we find that all the receipts bear the signatures of identical persons. Further, when the receipts bearing the identical signatures have been relied on two different cases of two different assessees, in our considered view the signatures on the receipts does not belong to the assessee. Further, the signature of third person appearing on the receipts as submitted by the Ld. DR and as demonstrated by the assessee, match with the signature of Sri Yeluri Chandra Sekhar Rao. Therefore, the said receipts although may be treated as corroborative evidence in the case of Polisetty Somasundaram but cannot be treated as corroborative evidence against the assessee. Further, we have also gone through the relevant statement of Shri Polisetty Shyam Sundar recorded under section 132(4) of the Act extracted at page no.4 of the order of Ld. AO which is to the following effect:
Page 17 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu
We have also gone through the relevant statement of Shri Yeluri Chandra Sekhar Rao extracted at page no.5 of the order of Ld. AO, which is to the following effect:
Page 18 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu 16. On perusal of above both the statements, we find that there is a clear and material contradiction between the two statements. While Shri Polisetty Shyam Sundar stated that advances were received from the assessee, Shri Yeluri Chandra Sekhar Rao stated that the amounts were received towards principal and interest. This contradiction has not been reconciled or explained by the Revenue, thereby further weakening the evidentiary value of the material relied upon by the Ld. AO.
In addition to above facts, all the documents and material relied upon by the Revenue have been seized from the premises of a third party, do not bear the signature of the assessee, and are not supported by any independent corroborative evidence belonging to the assessee. In such circumstances, the addition made merely on the basis of such third-party material and contradictory statements cannot be sustained in the hands of the assessee. Therefore, we hold that the Revenue has failed to bring on record any independent corroborative evidence to justify the addition of Rs.39,18,000/- under section 69C of the Act. Hence, the Ld. AO is directed to delete the addition of Rs.39,18,000/-. Accordingly, ground nos.2(a) and 2(b) raised by the assessee are allowed.
Ground Nos. 3(a) to 3(c) raised by the assessee relates to the addition of Rs.1,41,54,990/- made by the Ld. AO on account of long-term capital gain arising from sale of an immovable property. In this regard, the Ld. AR submitted that during the year under consideration, the assessee sold an immovable property to Polisetty Somasundaram and related persons for a total sale
Page 19 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu consideration of Rs.2,30,00,000/-. It was further submitted that the corresponding land was originally purchased by the assessee on 21.06.1993. For the purpose of computing long-term capital gain, the assessee adopted the fair market value (“FMV”) as on 01.04.2001. The assessee adopted the FMV of land at the rate of Rs.1,000 per square yard for 396 sq. yards of land, aggregating to Rs.3,96,000/-, and accordingly computed the indexed cost of acquisition of land at Rs.10,77,120/-. Similarly, the assessee adopted the FMV of the building constructed on the said land as on 01.04.2001 at the rate of Rs.831.18 per sq. ft. for 9,618 sq. ft. of constructed area, aggregating to Rs.79,94,400/-, and computed the indexed cost of construction at Rs.2,17,44,768/-. On this basis, the assessee computed long-term capital gain at Rs.1,78,112/-. However, the Ld. AO, relying upon a certificate issued by the Joint SRO, Nallapadu, adopted the FMV of land as on 01.04.2001 at Rs.760 per sq. yard and the FMV of the building at Rs.300 per sq. ft. Accordingly, the Ld. AO adopted the FMV of land at Rs.3,00,960/- and the FMV of the building at Rs.28,85,400/-, computed the indexed cost of land and building at Rs.86,66,898/-, and determined the long-term capital gain at Rs.1,43,33,102/-, resulting in an addition of Rs.1,41,54,990/-. The Ld. AR submitted that the FMV of land as well as the cost of construction of the building adopted by the Ld. AO is not correct. In this regard, the assessee filed additional evidence before the Tribunal along with a petition for admission, namely:
a. A valuation report of a registered valuer certifying the FMV of the building as on 01.04.2001 at Rs.76,67,697/-; and
Page 20 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu b. A certificate obtained under the Right to Information Act from the joint SRO, Nallapadu, certifying the FMV of land as on 01.04.2001 at Rs.1,520 per sq. yard.
Accordingly, it was submitted that these additional evidences go to the root of the issue and directly affect the computation of taxable long-term capital gain. The Ld. AR therefore prayed that the additional evidence be admitted and the issue be set aside to the file of the Ld. AO for fresh verification.
Per contra, the Ld. DR objected to the admission of the additional evidence. She submitted that the assessee has failed to demonstrate any reasonable cause for not producing these evidences before the Ld. AO or the Ld. CIT(A), and therefore the additional evidence should not be admitted.
In rejoinder, the Ld. AR submitted that the FMV of land varies depending upon the location and locality, and only after obtaining information under RTI, the assessee came to know that the land value applicable to the assessee’s specific locality was higher than the rate adopted by the Ld. AO. Similarly, the cost of construction depends upon the quality and nature of construction, whereas the Ld. AO had mechanically adopted a standard rate without considering the specific features of the assessee’s building. Therefore, sufficient cause existed for not producing the additional evidence before the lower authorities.
We have carefully considered the rival submissions and perused the material placed on record. The issue before us relates to determination of the
Page 21 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu FMV of land and cost of construction of the building as on 01.04.2001, which forms the basis for computation of long-term capital gain. The assessee has filed additional evidence in the form of a valuation report of a registered valuer for the building and an RTI-based certificate from the joint SRO, Nallapadu for the land value. We find merit in the contention of the Ld. AR that the FMV of land varies based on location, and the cost of construction depends upon the nature and quality of construction. We further find that the additional evidences filed by the assessee have a direct bearing on the computation of capital gains and go to the very root of the issue. We are also satisfied that the assessee has explained sufficient cause for not producing these evidences before the lower authorities, as the need to obtain RTI-based valuation and a registered valuer’s report arose only after the assessment order was passed adopting values which, according to the assessee, did not reflect the correct FMV applicable to the specific property. Therefore, in the interest of substantial justice, and considering that the additional evidence materially affects the tax liability, we deem it appropriate to admit the additional evidence. At the same time, since verification of such evidence is required, the matter needs to be restored to the file of the Ld. AO. Hence, we set aside the issue of computation of long-term capital gain arising from sale of the immovable property to the file of the Ld. AO, with a direction to re-adjudicate the issue afresh after examining the additional evidence filed by the assessee and after providing adequate opportunity of being heard to the assessee. Accordingly, ground nos. 3(a) to 3(c) raised by the assessee are allowed for statistical purposes.
Page 22 of 23
ITA No. 137/Hyd/2025 Ramesh Babu Segu 22. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 13th February, 2026.
Sd/- Sd/- (VIJAY PAL RAO) (MADHUSUDAN SAWDIA) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad, dated: 13th February, 2026 Okk, Sr. PS Copy to: S.No Addresses 1 Ramesh Babu Segu, Plot No.78, Road No.2, Banjarahills, Hyderabad, Telangana-500034. 2 Asst. Commissioner of Income Tax, Central Circle-1(1), Aayakar Bhavan, Basheerbagh, Hyderabad, Telangana-500004. 3 Pr. CIT, Central Circle, Hyderabad. 4 DR, ITAT Hyderabad Benches 5 Guard File By Order KAMALA Digitally signed by KAMALA KUMAR KUMAR ORUGANTI Date: 2026.02.13 ORUGANTI 16:04:39 +05'30'
Page 23 of 23
