SHYAM SUNDAR POLISETTY,GUNTUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, GUNTUR

PER BENCH:

All the captioned appeals are filed by the assessee against the orders of the Ld. Commissioner of Income Tax (Appeals)-3, Visakhapatnam [Ld. CIT(A)] in the following DIN & Order Nos.

Sl DIN & Order No. Date of order AY No 1 ITBA/APL/S/250/2023-24/1054062901(1) 30/6/2023 2013-14 2 ITBA/APL/S/250/2023-24/1054063437(1) 30/6/2023 2014-15 3 ITBA/APL/S/250/2023-24/1054063740(1) 30/6/2023 2015-16 4 ITBA/APL/S/250/2023-24/1054064028(1) 30/6/2023 2016-17 5 ITBA/APL/S/250/2023-24/1054064681(1) 30/6/2023 2017-18 6 ITBA/APL/S/250/2023-24/1054064911(1) 30/6/2023 2018-19 7 ITBA/APL/S/250/2023-24/1054065097(1) 30/6/2023 2019-20 8 ITBA/APL/S/250/2023-24/1054065249(1) 30/6/2023 2020-21

All these orders are arisen out of the orders passed U/s. 143(3) of

the Income Tax Act, 1961 [the Act]. Since the assessee has

raised identical grounds in all these appeals involving the similar

issues, these appeals are clubbed, heard together and disposed of

in this consolidated order.

filing these appeals before the Tribunal. With respect to belated

filing of the appeals, the assessee filed petitions for condonation

of delay along with the affidavits in all the appeals under

consideration and the relevant portion of the affidavits which is

identical is extracted herein below for reference:

“A. The appellant is unaware about the receipt of order since no SMS message has been received to his mobile stating that the appellate order has been uploaded. B. Later on, our Authorized Representative has obtained the appeal order in the month of September and advised us about necessity of filing of further appeal. C. As the September month is the last date for filing the returns of income, we along with our finance team were engaged in finalizing the accounts of the group. In this process we inadvertently missed the due date for filing the

3 appeal before Hon’ble ITAT. Later upon enquiry of our auditor, we realized the mistake and immediately preferred the appeal with delay of 50 days. D. Since this being an inadvertent mistake for which we profusely request your Honours to excuse the appellant for filing the appeal with delay and admit such appeal. E. Therefore it is earnestly submitted that the delay occurred is neither intentional nor deliberate. ……” F.

filing the appeals before the Tribunal beyond the prescribed time

limit, we find that the assessee was prevented by a reasonable

and sufficient cause to file the appeals within the stipulated

time. Therefore, we hereby condone the delay of 58 days in filing

all the present appeals of the assessee before the Tribunal and

proceed to adjudicate the appeals on merits.

for the AY 2013-14 as a lead appeal.

14 are that the assessee, an individual, is a managing partner of

flagship firm M/s. Polisetty Somasundaram and the main person

of the Polisetty Somasundaram Business Group has filed his

return of income for the AY 2013-14 on 06/03/2016 declaring an

amount of Rs. 7,00,000/- as total income. A search and seizure

operation U/s. 132 / 133A of the Act was conducted on the

4 tobacco exporting group based in Guntur, Andhra Pradesh ie.,

Polisetty Somasundaram Group on 28/01/2020. As a part of

search operations conducted U/s. 132 of the Act in the group

case of M/s. Polisetty Somasundaram, a search operation U/s.

132 of the Act was conducted at the business premises at D.No.

8-24-31, Mangalagiri Road, Guntur and residence of Sri Polisetty

Shyam Sundar. The case was centralized to ACIT / DCIT vide

order U/s. 127 of the Act vide F.No. 127/Pr.CIT/VJA/2020-21

issued by the Ld. Pr. CIT, Vijayawada on 16/02/2021.

Subsequently, a notice U/s. 153A was issued to the assessee on

27/11/2021 and in response, the assessee filed a return of

income on 04/12/2021 declaring a total income of Rs. 7 lakhs as

admitted in the original return of income filed on 6/3/2016.

During the course of search proceedings, in the case of M/s.

Polisetty Somasundaram Group, it was found by the Revenue

that Sri Shyam Sundar was involved in huge cash transactions

with M/s. Polisetty Somasundaram and the details of which are

not recorded in his regular books of account. It was further

observed from the unaccounted cash book maintained by M/s.

Polisetty Somasundaram, Mr. Polisetty Sham Sundar was

received Rs. 23,72,49,340/- from M/s. Polisetty Somasundaram

outside his books over the period from AY 2012-13 to 2019-20.

5 However, it was also observed by the Revenue that the assessee

has not admitted any of the above receipts in the return of

income filed in response to the notice U/s. 153A of the Act.

Hence, a notice U/s. 143(2) was issued on 17/03/2022. Further,

notice U/s. 142(1) was also issued on 3/2/2022 and the assessee

was asked to furnish the details. Since there was no response

from the assessee, the Ld. AO issued another notice U/s. 142(1)

of the Act on 18/2/2022 requesting the assessee to explain as to

why the unaccounted transactions done by Sri Polisetty Shyam

Sundar with M/s. Polisetty Somasundaram were not admitted as

additional income by Sri Shyam Sundar in his return filed U/s.

153A of the Act. In reply vide letter dated 27/03/2022, the

assessee stated that the unaccounted cash receipts by Sri

Polisetty Sham Sundar from M/s. Polisetty Somasundaram were

not his income. Later on the Ld. AO, asked the assessee to

furnish the details of foreign investments made by him and to

explain as to why the provisions of Black Money Act should not

be invoked in his case. In reply, the assessee submitted that the

assessee had made the investments amounting to US $ 102000

through his HUF status and routed through his bank account

maintaining with Indian Overseas Bank, Guntur Main Branch.

The assessee also submitted that the investment made in the

6 foreign company was also disclosed in his income tax returns for

the year under consideration. The assessee further submitted

that the foreign exchange remittances were made as per the limit

prescribed by the Reserve Bank of India and they were duly

reflected in the books of accounts. The assessee also submitted

before the Ld. AO that in his case the provisions of Black Money

Act are not applicable considering the facts and circumstances of

the case. The Ld. AO did not agree with the submissions of the

assessee and came to the conclusion that the during the course

and search scrutiny proceedings it was revealed that most of the

expenses were cash expenses which are in violation of the

provisions of section 40A(3) of the Act, section 269SS and 269T

of the Act. Hence, the Ld. AO held that the cash expenses are not

allowable expenditure which were disallowed in the hands of

M/s. Polisetty Somasundaram firm and since the impugned

expenditure is not allowable in the hands of the firm, taxing the

same in the hands of the partner would amount to double

addition and therefore, the Ld.AO made an addition of Rs.

2,25,13,508/- on protective basis towards withdrawal from M/s.

Polisetty Somasundaram treating as income in the hands of the

assessee. The Ld. AO also made an addition of Rs.

11,48,96,159/- on substantive basis and determined the

assessed income at Rs. 13,81,09,667/-. Aggrieved by the order

of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A).

On appeal, the Ld. CIT(A) with regard to the addition of

Rs.2,25,13,508/- sustained the addition of 20% of the impugned

expenses in the hands of the assessee, while observing that in

the case of M/s. Polisetty Somasundaram Firm a similar addition

of 20% was sustained in the hands of the firm and thereby to

maintain consistency, the Ld. CIT(A) has sustained 20% of the

impugned expenditure in the hands of the assessee on protective

basis. Aggrieved by the order of the Ld. CIT(A), the assessee is in

appeal before the Tribunal by raising the following grounds of

appeal:

“1. The Ld. CIT(A) erred in both law and facts. 2. On the facts and circumstances of the case, Ld. CIT(A) erred in the addition of Rs. 45,02,702/- made towards withdrawals from M/s. Polisetty Somasundaram treating it as income in the hands of the assessee is against the law and liable to be deleted. 3. On the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the addition of 20% of the withdrawals as there is no substantive addition in the hands of firm M/s. Polisetty Somasundaram and there is no dispute with regard to the receipts. 4. On the facts and circumstances of the case, Ld. CIT(A) erred in confirming the addition of Rs. 20% of the withdrawals as the amount is withdrawn after admitting the income. 5. On the facts and circumstances of the case, Ld. CIT(A) erred in confirming the addition of 20% of withdrawals

8 based on the seized annexure A/PSS/CORP/18 which was not valid evidence as finding was given by Hon’ble ITAT, Visakhapatnam in the case of M/s. Polisetty Somasundaram. 6. Any other ground that may be urged at the time of hearing of the appeal.”

by the assessee is to tax 20% of the withdrawals by the assessee

from the firm M/s. Polisetty Somasundaram on protective basis.

At the outset, the Ld. Authorized Representative [AR] argued that

the assessee has withdrawn these amounts from the capital

account maintained with the firm M/s. Polisetty Somasundaram.

However, in the case of the firm M/s. Polisetty Somasundaram,

the income has been taxed based on the seized material. The

same amounts have been withdrawn by the assessee and the Ld.

AO proposed to tax the assessee on protective basis. Further, the

Ld. AR argued that the Ld. CIT(A) has granted relief to the extent

of 80% by confirming 20% of Rs.2,25,13,508/- as income of the

assessee. On this issue, the Ld. AR further submitted that the

same amount has been taxed @ 20% in the hands of the firm and

therefore it cannot be subjected to tax on protective basis in the

hands of the assessee based on the withdrawals from the firm

M/s. Polisetty Somasundaram. The Ld. AR therefore pleaded that

9 the addition made by the Ld. AO and confirmed by the Ld. CIT(A)

be deleted.

heavy reliance on the order of the Ld. CIT(A) and pleaded to

uphold the same.

available on record as well as the orders of the Ld. Revenue

Authorities. It is an admitted fact that 20% of the amount of

Rs.2,25,13,508/- has been subjected to tax in the hands of the

firm M/s. Polisetty Somasundaram. It was also confirmed by the

order of this Bench of the Tribunal in ITA No.173/Viz/2023 (AY:

2013-14). Therefore, the same amount cannot be taxed in the

hands of the assessee on protective basis. It is a trite law that

any income shall be subjected to tax only once in the hands of

the assessee. On this issue, we find that the Ld. CIT(A) has

subjected another 20% in the hands of the assessee wherein the

same amount has already been subjected to tax in the hands fo

the firm M/s. Polisetty Somasundaram on substantive basis

which was also confirmed by the order of this Bench of the

Tribunal in ITA No. 173/Viz/2023 (supra). We extract below the

relevant paras from the Tribunal’s order dated 18/8/2023 for

reference:

“52. Ground Nos. 5 and 6 raised by the assessee on merits and they are extracted herein below: “5. On the facts and circumstances of the case, the Ld. CIT(A) is not justified in allowing deduction of expenditure towards purchases of tobacco as reflected in the seized material to the extent of 80% of such expenditure only instead of allowing the entire expenditure though the sales admitted in the books could not have been made without effecting such purchases and though the said sales have not been disputed by the Revenue. 6. On the facts and circumstances of the case, the Ld. CIT(A) is not justified in allowing deduction towards the expenditure represented by the debit entries without narration in the seized material to the extent of 40% of such expenditure only without providing any justified for limiting the deduction to the said extent instead of allowing the entire expenditure any by disregarding the provisions of section 132(4A) that deem that the contents of the seized material are true.”

11 and it is included in the gross profit. Hence, the Ld. AR pleaded to restrict the estimation to 12.5% instead of 20%. However, since the legal grounds raised by the assessee have been adjudicated in favour of the assessee, as per the foregoing paragraphs and hence adjudication of the grounds raised vide Ground No. 5 and 6 on merits needs no separate adjudication.”

decision of allowing the grounds raised by the assessee in ITA No.

173/Viz/2023 (supra) in the case of the firm M/s. Polisetty

Somasundaram was contested by the Revenue in any higher

judicial forums. We therefore find no merit in the argument of the

Ld. Revenue Authorities and thereby direct the Ld. AO to delete

the addition made on protective basis in the hands of the

assessee. Accordingly, we are inclined to allow the grounds No.1

to 4 and 6 raised by the assessee. Ground No.5 is a legal ground

and the same is not adjudicated as the other grounds raised by

the assessee are allowed in favour of the assessee. It is ordered

accordingly.

14 is allowed.

to 2020-21, the assessee has raised identical grounds involving

the similar issues. Therefore, our decision given while

12 adjudicating the assessee’s appeal for the AY 2013-14 mutatis mutandis applies to the appeals filed by the assessee for the AYs 2014-15 to 2020-21 also. Accordingly, the appeals filed by the assessee for the AYs 2014-15 to 2020-21 are allowed.

Sd/- Sd/- (दु�वू� आर.एल रे�डी) (एस बालाकृ�णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) �या�यकसद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER Dated :28.02.2024 OKK - SPS आदेश क� ��त�ल�प अ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee – Sham Sundar Polisetty C/o. CA M V 1. Prasad, D.No. 60-7-13, Ground Floor, Siddhartha Nagar, 4th Lane, Vijayawada, Andhra Pradesh – 520010. राज�व/The Revenue – The Deputy Commissioner of Income Tax, 2. Central Circle-1, 3rd Floor, Raj Kamal Complex, Lakshmipuram Main Road, Guntur, Andhra Pradesh – 520002. 3. The Principal Commissioner of Income Tax, आयकर आयु�त (अपील)/ The Commissioner of Income Tax 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, �वशाखापटणम/ DR, ITAT, 5. Visakhapatnam गाड� फ़ाईल / Guard file 6. आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam