Telangana High Court
Smt.B.Renuka vs Joint Cit on 21 August, 2025
Author: P.Sam Koshy
Bench: P.Sam Koshy
THE HONOURABLE SRI JUSTICE P.SAM KOSHY
AND
THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA
INCOME TAX TRIBUNAL APPEAL No.128 of 2008
JUDGMENT:
(per the Hon’ble Sri Justice P.Sam Koshy)
Heard Mr. A.V.A. Siva Kartikeya, learned counsel, representing
Mr. A.V. Krishna Koundinya, learned counsel for the appellant, and
Ms. K. Mamata Choudary, learned Senior Standing Counsel for Income
Tax Department appearing on behalf of the respondent.
2. The instant appeal under Section 260A of the Income Tax Act, 1961
(for short, the ‘Act’) has been filed by the appellant / assessee challenging
the order passed by the Income Tax Appellate Tribunal, Hyderabad Bench
‘A’ (for short, the ‘ITAT’) in I.T. (S.S.) A.No.148/Hyd/2002, for the block
period 1989-90 to 1998-99 and 01.04.1999 to 27.07.1999, decided on
08.06.2007.
3. Vide the impugned order, the ITAT partly allowed the appeal
preferred by the appellant to the extent of the findings of the Assessing
Officer so far as the levy of surcharge under proviso to Section 113 of the
Act which according to the ITAT could had been levied as Section 113 of
the Act was introduced only w.e.f. 01.06.2002 and, therefore, surcharge
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could not had been levied upon in cases where search was itself carried
out before the introduction of proviso to Section 113 of the Act. However,
the ITAT disallowed the contention of the appellant and maintained the
order passed by the Assessing Officer and that by the Commissioner of
Income-tax (Appeals)-I, Hyderabad (for short ‘CIT (Appeals)’) to the
extent of the value of the property being determined at Rs.1,99,26,696/-
and not Rs.1,09,84,081/-.
4. As has been mentioned earlier, the matter pertains to the block
period 1989-90 to 1998-99 and 01.04.1999 to 27.07.1999.
5. The brief facts of the case are that, search and seizure proceedings
were initiated by the Department under Section 132 of the Act. The
Department found certain incriminating materials such as cash books,
ledgers and other documents and, subsequently, a notice under Section
158BD of the Act was issued to the appellant. In response to the said
notice, the appellant filed its return of income in Form No.2B declaring
undisclosed income as ‘nil’ for the aforesaid block period. Later on, notices
under Section 142(1) and 143(2) of the Act were issued by the
Department calling upon the appellant to produce evidences and
explanations. Based upon the response given by the appellant, the
Department added an amount of Rs.7,75,000/- to be the undisclosed
income by way of financial transaction with one Sri B.Naganna,
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unaccounted investment made in Meridian school property for an amount
of Rs.17,78,523/- and rental income received from Meridian school
property amounting to Rs.5,10,000/-; all totaling to Rs.30,73,523/-.
6. Aggrieved by the above additions made by the Assessing Officer,
the appellant preferred an appeal before the CIT (Appeals) and it was
contended that the appellant along with Sri B. Naganna had subscribed
for a private chit and the starting chit was drawn by the appellant. Out of
the said amount, the appellant used to pay monthly installments to the
chit fund. Hence, the appellant prayed for deletion of this amount of
Rs.7,75,000/- from the income of the appellant.
7. Likewise, it was contended by the appellant that the total payment
made to the landlord in the process of purchasing of Meridian school
property was Rs.1,09,84,081/-. Whereas, the landlord has shown the
value of the property sold to be Rs.1,99,22,696/-. Meanwhile, the
appellant and others had also proposed to acquire the entire property,
besides the property purchased by them from Meridian school property
and therefore, the landowner might have added the value of the property
to Rs.1,99,26,696/-. But the proposed acquiring of the property besides
Meridian educational society somehow failed and the sale did not
materialize.
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8. It was further contended by the appellant that the Department has
also seized certain day-to-day cash transactions maintained by their
accountant. Further, during the search and seizure operation, no cash
payments were found to have been made in all these transactions and,
therefore, the appellant prayed for deletion of an amount of
Rs.17,88,523/- which was added by the Assessing Officer.
9. The CIT (Appeals) upon due verification of the facts, and on due
scrutiny of the documents and explanations provided by the appellant,
found that the explanations given by the appellant were not satisfactory
or unacceptable. It was the observation of the CIT (Appeals) that these
amounts were not reflected in regular returns of income filed by the
appellant and therefore, it had to be treated as unaccounted income
earned by the appellant in the past. The CIT (Appeals) also found that the
appellant has not been able to produce cogent and strong piece of
evidence, both in respect of having subscribed the chits and also having
received any gifts etc. In the absence of which, a presumption has to be
drawn that the amount of Rs.7,75,000/- represents investment out of
undisclosed sources of income and affirmed the additions of the said
amount made by the Assessing Officer.
10. The explanation given by the appellant was that the value of
property purchased by her from Meridian educational society was
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Rs.1,09,84,081/- and not Rs.1,99,26,696/- as was projected by the
landowner of the said society, and found it to be unacceptable explanation
of there being an in-between negotiations for adjacent lands, the process
of which might have been added by the society in their books of accounts
while showing the sale of property to the appellant.
11. The said explanation was found to be unacceptable for the simple
reason that the manner of entries made in the books of accounts of
Meridian educational society as to whether there was a complete breakup
given of tallying the amount of cheque payment made by the appellant of
Rs.1,09,84,081/- and an amount of Rs.69,80,000/- was added and below
which there was also registration charges reflected at Rs.19,64,615/-. All
of which added together comes to Rs.1,99,28,696/-.
12. The aforesaid entries got substantiated from further material which
was collected in the course of seizure that is part of the diary entry which
reflected that, of this Rs.1,99,28,696/-, there was a total amount paid of
Rs.1,87,50,000/- with a balance shown at Rs.11,76,690/-. Again there
was an additional Rs.6,00,000/- payment made reducing the balance
amount payable at Rs.5,76,696/- and there was yet another entry which
showed that of the total amount payable of Rs.1,93,50,000/- only a
balance of Rs.5,76,696/- was left to be paid. Therefore, the CIT (Appeals)
taking into consideration Sub-Section 4(A) of Section 132 of the Act
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disallowed the contentions raised by the appellant and in the process
treated the amount of Rs.89,42,611/- as an unaccounted investment.
13. The said finding given by the CIT (Appeals) was also tested by the
appellant before the ITAT and the ITAT also found that the explanation
given by the appellant was not satisfactory or did not have much force.
14. The learned counsel for the appellant had relied upon the following
judgments in support of his contentions, viz.,
1) Commissioner of Income Tax vs. Engineers India Limited 1;
2) B. J. Services Co. Middle East Ltd. vs. Assistant Commissioner
of Income-tax 2;
3) Common Cause (A Registered Society) and Others vs. Union
of India and Others 3;
4) Deputy Commissioner of Income-tax and Another vs. Sunil
Kumar Sharma 4; and
5) Deputy Commissioner of Income-Tax and Another vs. Sunil
Kumar Sharma 5.
15. The contention of the learned counsel for the appellant primarily
was, firstly the search and seizure was not carried out at the premises of
1
(2014) 16 Supreme Court Cases 420
2
[2016] 380 ITR 138 (Uttarakhand)
3
[2017] 394 ITR 220 (SC)
4
[2024] 469 ITR 197 (Karn)
5
[2024] 469 ITR 271 (SC)
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the appellant and secondly, the nature of search and seizure was on loose
sheets of paper or entries made in a diary which again did not belong to
the appellant. Therefore, on both these counts those materials would be
wholly irrelevant so far as evidence admissible under Section 34 of the
Indian Evidence Act and also does not carry any evidential value.
16. However, when we look into the material facts of the present case,
it would reveal that the premises where the search and seizure was
conducted in fact belonged to the appellant’s husband namely Sri B.S.
Neelakanta. Further, the so-called transactions carried out in the name of
Meridian educational society also belongs to the family of the appellant
where the appellant’s husband is the secretary and her uncle is the
chairman of the said society respectively.
17. Because the search and seizure was carried out in the premises
which was substantially under the control of the appellant’s husband and
seizure also being made in the course of search of the said premises; the
relevance of those documents and articles seized receives more relevance
and importance, unlike the facts in the judgments which were relied upon
by the learned counsel for the appellant where the nexus between the
person from whose custody the documents were received and the name
of the individuals reflected were quite different. Moreover, apart from the
fact that the search and seizure was conducted at the premises of the
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appellant’s husband, it is also relevant to mention that even the
educational institution in whose name the transactions relating to
investments have been made also belong to the same family i.e. the
appellant, as it is all are relatives who are managing the affairs of the said
educational society including her uncle and her husband.
18. In the aforesaid factual backdrop and the judgments relied upon by
the learned counsel for the appellant being distinguishable on facts itself,
we are of the considered opinion that the concurrent findings given by the
Assessing Officer which have been affirmed by the CIT (Appeals) does not
warrant interference. The instant appeal therefore fails and is accordingly
dismissed. The question of law raised stands answered in favour of the
Revenue and against the appellant. No costs.
19. As a sequel, miscellaneous petitions pending if any, shall stand
closed.
_____________
P.SAM KOSHY, J
_________________________
NARSING RAO NANDIKONDA, J
Date: 21.08.2025
GSD