V SATHYAMOORTHY&CO,ERODE vs. DCIT, CENTRAL CIRCLE -2, COIMBATORE

आयकर अपीलीय अिधकरण “सी” �ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, CHENNAI माननीय �ी एबी टी. वक�, �ाियक सद" एवं माननीय �ी मनोज कुमार अ'वाल ,लेखा सद" के सम)। BEFORE HON’BLE SHRI ABY T. VARKEY, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM 1. आयकरअपील सं. / ITA No.1019/Chny/2024 (िनधा*रण वष* / Assessment Year: 2015-16) & 2. आयकरअपील सं./ ITA No.1020/Chny/2024 (िनधा*रण वष* / Assessment Year: 2016-17) M/s. V. Sathyamoorthy & Co. DCIT बनाम/ 41, Patel Road, Central Circle-2, Vs. Near Blood Bank, Erode-638 001. Coimbatore. �थायीलेखासं./जीआइआरसं./PAN/GIR No. AACFV-0222-D (अपीलाथ�/Appellant) : (� थ� / Respondent) अपीलाथ� की ओर से/ Assessee by : Shri S. Sridhar (Advocate)- Ld.AR � थ� की ओर से/Revenue by : Shri R. Clement Ramesh Kumar (CIT)-Ld. DR सुनवाईकीतारीख/Date of Hearing : 29-07-2024 घोषणाकीतारीख /Date of Pronouncement : 18-09-2024 आदेश / O R D E R Per BENCH: 1.1 Aforesaid appeals by assessee for Assessment Years (AY) 2015- 16 & 2016-17 arises out of separate orders of learned first appellate authority. Facts as well as issues are stated to be substantially the same in both the years. 1.2 First, we take up assessee’s appeal for AY 2015-16 which arises out of an order passed by learned Commissioner of Income Tax

(Appeals), Chennai-20, [CIT(A)] on 31-03-2024 in the matter of an assessment framed by Ld. Assessing Officer (AO) u/s 143(3) r.w.s. 153A of the Act on 04-05-2022. 1.3 The grounds raised by the assessee read as under: - 1. The order of the CIT (Appeals) - 20, Chennai dated 31.03.2024 vide DIN & Order No. ITBA/APL/S/250/2023-24/1063745498(1) for the above-mentioned Assessment Year is contrary to law, fact and in circumstances of the case. 2. The CIT (Appeals) - 20, Chennai erred in confirming the assumption of jurisdiction under Section 153A of the Act and further erred in confirming the search assessment order passed in terms of Section 153A of the Act without assigning proper reasons and justification. 3. The CIT (Appeals) - 20, Chennai failed to appreciate that the search assessment completed by making the disputed addition(s) in the absence of valid incriminating seized material relatable to such addition(s) should be reckoned as nullity in law and further ought to have appreciated that the judicial trend in this regard was completely over looked and brushed aside in passing the impugned order there by vitiating the related findings. 4. The CIT (Appeals) - 20, Chennai failed to appreciate that the search assessment order under consideration was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 5. The CIT (Appeals) - 20, Chennai erred in directing the Assessing Officer to assess a sum of Rs.68,00,000/- in the hands of the appellant firm being amount relatable to the Esha Apartments project which was reduced in the return of income filed in response to notice issued u/s 153A of the Act in view of such sum being assessed in the hands of the Appellant's partner(s) in their individual capacity without assigning proper reasons and jurisdiction. 6. The CIT (Appeals) - 20, Chennai failed to appreciate that the disputed sum was rightly reduced by the appellant in the return of income filed in response to the notice issued u/s 153A of the Act and further ought to have appreciated that the explanation offered by the appellant for such reduction was not considered in proper perspective by the First Appellate Authority there by vitiating the related findings in the related findings. 7. The CIT (Appeals) - 20, Chennai failed to appreciate that the disputed addition of Rs.68,00,000/- would amount to enhancement within the scope of Section 251 of the Act and the procedure laid down in relation there to was not scrupulously followed and further ought to have appreciated that such procedural irregularity should be reckoned as fatal there by negating the addition made. 8. The CIT (Appeals) - 20, Chennai failed to appreciate that the disputed sum enhanced by the First Appellate Authority would fall outside the scope and power of Section 251 of the Act there by negating the addition made in relation there to. 9. The CIT (Appeals) - 20, Chennai failed to appreciate that the disputed component was already. forming part of the income credited to the P & L account there by fortifying the plea for such reduction in the return of income filed in response to notice issued u/s 153A of the Act and further ought to have appreciated that the perverse finding of fact recorded in Para 7.4.22 in this regard was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law. 10. The CIT (Appeals) - 20, Chennai failed to appreciate that in any event the disputed sum in the present appeal and the addition originally made by the Assessing officer could not be assessed in the hands of the appellant firm and further ought to have appreciated

that the disputed sum was already offered in the hands of the individual partners in the Returns of income filed by them for the Assessment year under consideration in response to notice issued u/s 153A of the Act. 11. The CIT (Appeals)-20, Chennai failed to appreciate that the addition made in the hands of the appellant firm would tantamount to double addition especially in view of the admitted fact that the said sum being assessed in the hands of the Partners in their individual capacity there by negating the related findings. 12. The CIT (Appeals)- 20, Chennai failed to appreciate that the loose sheets relied upon by the lower authorities had no evidentiary value there by vitiating the related findings. 13. The CIT (Appeals)- 20, Chennai failed to appreciate that the entire re computation of the taxable total income on various facets was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law. 14. The CIT (Appeals)-20, Chennai failed to appreciate that there was no effective/reasonable opportunity granted before passing the impugned order and search assessment order and further ought to have appreciated that any order passed in violation to the Principles of Natural Justice should be reckoned as nullity in law.

As is evident, the sole issue that fall for our consideration is addition arising out of search proceedings in the case of the assessee. 1.4 The Ld. AR advanced arguments and referred to various case laws to support the case of the assessee. The Ld. CIT-DR also advanced arguments and supported the orders of lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 2.1 The assessee being resident firm filed return of income u/s 139(1). The assessee was subjected to search action u/s 132 on 28-10-2020. Accordingly, an assessment was framed u/s 143(3) r.w.s. 153A on 04- 05-2022 making addition of Rs.106 Lacs. Post search-proceedings, notice u/s 153A was issued to the assessee on 30-04-2021. The assessee disclosed additional income of Rs.12.97 Lacs. 2.2 During search proceedings, certain books and documents were seized vide annexure ANN/KKM/VSCO/B&D/S-3 and S-4 which allegedly contained sales receipts from various parties for sale of Esha

Apartments, Namakkal. The land was owned by two partners of the assessee-firm i.e., Shri S. Anandavadivel and Shri S. Aravindan whereas the construction was done by the assessee. The party-wise amount received from sale of flats was maintained in excel sheet wherein the payment was stated to be received through banking channels as well as in cash. The payments received form banking channels was accounted for in the books of the assessee. The partners admitted that cash receipt of Rs.26.30 Lacs was accounted in the books of the assessee whereas the remaining cash receipts were not accounted. The relevant portion of sworn statement recorded from Shri S. Anandavadivel has been extracted on page-3 of the assessment order. 2.3 The Ld. AO quantified the unaccounted cash receipts for this year at Rs.106 Lacs. For AY 2016-17, the unaccounted cash receipts were quantified at Rs.53 Lacs. The assessee opposed the addition of the same on the ground that aggregate amount for FYs 2012-13 to 2016-17 as mentioned in the seized material was Rs.214.40 Lacs whereas Ld. AO proposed addition of Rs.294.84 Lacs. It was explained that land was held in the name of two partners. The assessee constructed 28 flats in this year. Among those flats, only 12 flats were sold during all these years whereas the remining flats were still held by the assessee. The assessee submitted that the income from the flats was offered by the individual partners. All the receipts as per the seized material were only accounted receipts and the same was duly recorded in the respective sale deeds of flats in the name of two partners. The copies of sale deeds were also furnished. It was submitted that the amount mentioned in the sale deeds were accounted and there was no difference in the documents value and the accounted value and the seized material. The

assessee reconciled the party-wise & date wise receipts with value of sale as per registered sale deeds. It was submitted that value of sale was admitted in the year of sale under the head ‘capital gains’. The gain from land being long term capital assets was computed separately whereas short terms capital gains were computed on sale of construction portion. 2.4 However, Ld. AO observed that the assessee constructed Esha Apartment on land owned by two partners. The construction expenses were accounted in the books of the assessee. Though the land was in the name of two partners, the construction was done by the assessee. The receipt from sale of land was accounted for in the hands of the assessee and the assessee received sale consideration from buyers. Therefore, the amount of Rs.106 Lacs was added to the income of the assessee as undisclosed income. Similar assessment was framed for AY 2016-17. Appellate Proceedings 3.1 The assessee assailed the action of Ld. AO during the course of appellate proceedings by way of elaborate written submission which has been extracted in the impugned order. The assessee reiterated that the two partners purchased the land in 2012, obtained approval for construction of the apartment on the said land and the apartments were constructed by them in their individual status. It was also submitted that the partner constructed 28 flats out of which 12 flats were registered in AY 2021-22 whereas 15 flats were gifted to the parents of the partners. The capital gains arising there-from were duly accounted for in the hands of both partners for AYs 2016-17, 2017-18, 2018-19 and 2020-21. The Ld. AO scrutinized the return of partners and accepted the same. It was

also submitted that sale consideration on sale of flats would become taxable only in the year in which the sale deeds were registered and not in the year in which the advance amount was received. Since the capital gains were duly offered by the partners, the impugned addition in the hands of the assessee would be unsustainable. Mere noting in the seized sheets and sworn statement could not be a ground for addition. 3.2 The Ld. CIT(A), in para 7.4.8, concurred that two partners admitted capital gains on sale of flats during AYs 2016-17 to 2020-21 in respective returns of income filed u/s 153A. The Ld. AO had accepted the same. The sale consideration and construction receipts were admitted therein for Rs.565.35 Lacs which was much more than the ‘cash receipts’ as arrived at by Ld. AO. 3.3 The Ld. CIT(A) also concurred that mere advances would not become taxable. The same would be taxable only in the year in which registration of flat was done in the name of customers. The partners offered income on sale of flats in the year of entering into registered deeds. No finding was rendered by Ld. AO as to how much expenditure was debited by the assessee in its books towards cost of Esha Apartment. Therefore, the impugned addition would be unsustainable in the hands of the assessee. 3.4 The assessee also submitted that it offered advances receipts of Rs.105.08 Lacs from sale of flats during AYs 2013-14 to 2016-17 and therefore, the same was to be excluded from its income. For this year, the assessee is stated to have offered advance of Rs.68 Lacs to tax in regular return of income. It was also established by the assessee that the advances received through cheques was directly credited to partner’s capital account. Therefore, reduction thereof as claimed in the

return of income should be granted to the assessee. However, the same was not allowed by Ld. CIT(A) on the ground that the assessee failed to establish that such advances were offered to tax as stated by it. The Ld. CIT(A) also held that proceedings u/s 153A are analogous to the proceedings u/s 147 to the extent that these proceedings are for the benefit of the revenue and not for the benefit of the assessee. The assessment proceedings initiated on the basis of action u/s 132 could not be utilized by the assessee to seek relief not claimed earlier. Similar claim of Rs.6 Lacs was denied in AY 2016-17. Aggrieved as aforesaid, the assessee is in further appeal before us in both the years. Our findings and adjudication 4. The material facts are not in dispute. Upon perusal of orders of lower authorities, it could be seen that the income arising from sale of Esha Apartments has finally been assessed in the hands of the two partners of the assessee-firm. The sale consideration has been offered on the basis of sale deeds. Further, sale consideration as reflected by the two partners is much more than the ‘cash receipts’ as quantified by Ld. AO. It is trite law that income cannot be doubly taxed. From the facts, it emerges that the assessee offered a portion of sale receipts to tax. However, post-search, the income from Esha Project has been offered by the partners in their individual hands since the land was held by them. The same has been accepted by Ld. AO in their respective assessments also. In other words, the income arising from this project has been taxed in the hands of individual partners. In such a scenario, the same could not be taxed again in the hands of the assessee. It is not a question of seeking additional relief as concluded by Ld. CIT(A). It is the question of taxing the income in the rights hands. Once income has been assessed

in a particular assessment which has attained finality, the same could not be added again in the hands of the other assessee. Therefore, the aforesaid reduction in income as claimed by the assessee cannot be denied. The Ld. AR has placed on record ledger extracts to show that these receipts were offered by the assessee. Therefore, Ld. AO is directed to grant the reduction of income as claimed by the assessee. We order so. 5. No arguments have been advanced on legal grounds. Further, no defect has been shown in the jurisdiction of Ld. AO. The corresponding grounds raised by the assessee stand dismissed. 6. Both the appeals stand allowed. Order pronounced on 18th September, 2024 Sd/- Sd/- (ABY T. VARKEY) (MANOJ KUMAR AGGARWAL) �ाियक सद" /JUDICIAL MEMBER लेखा सद" / ACCOUNTANT MEMBER चे5ई Chennai; िदनांक Dated :18-09-2024 DS आदेश की Iितिलिप अ'ेिषत / Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयु>/CIT Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाडCफाईल/GF