Suppressed Sale Consideration Must Be Taxed As Capital Gains, Not As Unexplained Money.

ORDER

Ravish Sood, Judicial Member.- The present appeals filed by the abovementioned assessees are directed against the respective orders passed by the CIT(A)-12, Hyderabad, dated 30/10/2025, which in turn arises from the respective orders passed by the Assessing Officer (for short, “AO”) under section 153C of the Income-tax Act, 1961 (“the Act”) dated 21/02/2025 for A.Y. 2020-21. As the captioned appeals involve common issues, the same are being taken up and disposed of vide a consolidated order. We shall first take up the appeal filed by the assessee, viz. Mrs Tejal Kaushik Maisheri in ITA 2210/Hyd/2025 for AY 2019-20, and the order therein passed shall apply mutatis mutandis for disposing of the other appeal. The assessee has assailed the impugned order on the following grounds of appeal:

For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon’ble Tribunal may be pleased to quash the assessment as void ab initio and/or delete the additions made and/or provide such other relief as this Hon’ble Tribunal may deem fit.”

2. Succinctly stated, the assessee had filed her return of income for AY 2019-20 on 03/03/2020, declaring an income of Rs. 6,01,230/-.

3. Search and seizure operation under section 132 of the Act was conducted in the case of the Spectra Group of Companies on 23.03.2021. During the course of the said search proceedings, certain loose sheets marked as Annexure A/SIEPL/OFF/24, Pages 56 to 62, were found and seized from the premises of the “Spectra Group”. On examination of the aforesaid seized material, the AO observed that the documents comprised an “Agreement of Sale” pertaining to the open plots situated at Saidapur Village, Yadagirigutta Mandal, Yadadri Bhongir District, admeasuring 4,519 Sq. Yards (4,108.94 sq. meters), executed between the assessee and her husband, viz. Shri Kaushik Jaichand Maisheri, as seller, and Shri Kalluri Manohar Reddy, S/o Shri Raji Reddy, as purchaser.

4. The AO observed that the seized documents further revealed that pursuant to the aforesaid agreement, the assessee and her husband received 50 lacs on 26.04.2018 as part of the sale consideration from Shri Kalluri Manohar Reddy (supra). Also, the seized material contained a copy of the receipt acknowledging the aforesaid payment. However, the AO observed that the property, which was the subject matter of the aforesaid agreement, was ultimately sold by the assessee and her husband through registered sale deeds dated 22.06.2019 in favour of M/s Spectra India Eco Projects Pvt. Ltd. and not in favour of Shri Kalluri Manohar Reddy.

5. The AO holding a conviction that the assessee and her husband had failed to satisfactorily explain the nature and source of the aforesaid amount of Rs. 50 lacs, treated the same as their unexplained money under section 69A of the Act and made an addition of Rs. 25 lacs each in their respective hands.

6. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success.

7. The assessee aggrieved with the CIT(A) order has carried the matter in appeal before us.

8. We have heard the Ld. Authorised Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home her contentions.

9. Mrs Hemalatha K, CA, the Ld. Authorised Representative (for short, “AR”) for the assessee, at the threshold of hearing of the appeal assailed the validity of the jurisdiction assumed by the AO for framing the assessment vide his order passed under Section 153C of the Act, dated 11/05/2022. Elaborating on her contention, the Ld. AR submitted that as the AO of the searched person has recorded a consolidated satisfaction note for Assessment Years 2015-16 to 2021-22, there was no valid assumption of jurisdiction for framing the assessment under Section 153C of the Act. The Ld. AR took us through the satisfaction note dated 25/08/2023 of the ACIT, Central Circle 2(2), Hyderabad, i.e., the AO of the searched person, Page 1 to 6 of APB. The Ld. AR to buttress her contention relied upon the judgment of the Hon’ble High Court of Karnataka in Dy. CIT v. Sunil Kumar Sharma 469 ITR 197 (Karnataka) and submitted that the same has subsequently attained finality upon dismissal of the Revenue’s “Special Leave Petition” (SLP) by the Hon’ble Supreme Court in Dy. CIT v. Sunil Kumar Sharma 469 ITR 271 (SC). However, the Ld. AR, on being queried about the satisfaction note of the AO of the assessee, i.e. , the other person, based on which the assessment was framed, failed to place on record the same. It was submitted by her that the assessee had only been provided with a copy of the satisfaction note of the AO of the searched person. Apart from that, it was submitted that, as in the satisfaction note, the AO of the searched person has referred to the date of cash receipt as 18/04/2019, there was no justification to frame the impugned assessment for the subject year, i.e., AY 2019-20, in the absence of identification of any incriminating material relating to the assessee for the year under consideration. Elaborating further on her contention, the Ld. AR submitted that since the seized material was received by the AO of the assessee on 25.08.2023, i.e., after 01.04.2021, the provisions of section 153C could not have been triggered and thus, the proceedings ought to have been initiated and culminated under section 148 of the Act. Lastly, assailing the validity of the jurisdiction assumed by the AO for framing the assessment, the Ld. AR submitted that as the approving authority, viz. Additional Commissioner of Income Tax, Central Range-2, Hyderabad, had mechanically and without due application of mind granted his approval under Section 153D of the Act; the assessment order framed by the AO cannot be sustained and is liable to be vacated for want of a valid assumption of jurisdiction.

10. Coming to the merits of the case, the Ld. AR assailed the addition made by the AO de hors any irrefutable material which would establish receipt of an amount of Rs. 25 lacs by the assessee based on the impugned agreement to sell found in the course of the search proceedings from the premises of the Spectra group entity. Alternatively, it was submitted that there was no justification for the AO to have made the impugned addition under Section 69A of the Act.

11. Per Contra, the Ld. Senior Departmental Representative (for short, “Sr. DR”) vehemently objected to the Ld. AR’s contentions. It was submitted that the AO had rightly assumed jurisdiction and, after recording his satisfaction as required per the mandate of Section 153C of the Act, rightly framed the assessment. The Ld. Sr. DR submitted that as the assessee’s counsel has failed to factually substantiate her claim regarding the invalid assumption of jurisdiction by the AO of the assessee, the judicial pronouncements pressed into service by her will not carry the case of the assessee any further. Apropos the reference by the AO of the searched person in his satisfaction note of the cash receipt by the assessee on 18/04/2019, the Ld. Sr. DR submitted that the AO had referred to the said date in the context of the seized “agreement to sell” which was dated 18/04/2019. Elaborating further on her contention, the Ld. DR submitted that the seized “cash receipt” culled out by the AO in the assessment order clearly mentioned that the cash of Rs. 50 lacs was received by the assessee and her husband on 26/04/2018, i.e., period relevant to AY 2019-20. It was further stated that the AO, in his remand report dated 03/09/2025 filed before the CIT(A), had clarified the said issue. Rebutting the Ld. AR’s contention that since the seized material was received by the AO of the assessee on 25.08.2023, i.e., after 01.04.2021, the provisions of section 153C could not have been invoked and the proceedings ought to have been initiated under section 148 of the Act, the Ld. Sr. DR submitted that Section 153C(3) of the Act provides that the provisions of Section 153C shall not apply in relation to searches initiated under Section 132 or requisitions made under Section 132A on or after 01.04.2021. It was submitted by her that it is the date on which the search is conducted under Section 132 of the Act and not the date on which the seized material is received by the AO of the “other person” which is decisive about the framing of the assessment under Section 153C of the Act or the amended reassessment provisions introduced by the Finance Act, 2021. Carrying her contention further, the Ld. Sr. DR submitted that, as in the present case, the search in the Spectra Group case was initiated on 23.03.2021, the AO had rightly assumed jurisdiction and framed the assessment under Section 153C of the Act. The Ld. Sr. DR submitted that the aforesaid contention of the assessee’s counsel was totally misconceived and devoid and bereft of any substance.

12. Apropos the merits of the addition, the Ld. Sr. DR submitted that as the assessee in the course of the assessment proceedings had failed to furnish the requisite details to the AO, the latter had, in the absence of any explanation, held the amount of Rs. 25 lacs received by the assessee as her unexplained money under Section 69A of the Act. The Ld. Sr. DR, on being queried as to how the AO, after elaborating on the nature and the source of the amount of Rs. 50 lac received by the assessee and her husband had still held the same as their respective unexplained money under Section 69A of the Act, failed to come forth with any reply and reiterated that it was because of the failure of the assessee to furnish the requisite details in the course of the assessment proceedings. Also, the Ld. Sr. DR on being queried that now, when the amount received by the respective persons was the suppressed sale consideration of the subject property sold by them vide registered sale deeds dated 22.06.2019 to M/s Spectra India Eco Projects Pvt. Ltd., then how the same was assessed in the hands of the assessee during the year under consideration i.e., AY 2019-20, failed to come forth with any plausible reply. However, it was submitted by her that, if the amount is held to be the assessee’s income assessable in another year, a finding or direction to that effect be given while disposing of the appeal.

13. Admittedly, it is a matter of fact borne from record that Annexure A/SIEPL/OFF/24, Pages 56 to 62, comprising the “Agreement of Sale” and receipt evidencing payment of Rs.50 lacs, was found and seized from the premises of the “Spectra Group” during the search proceedings conducted on 23.03.2021. Apart from that, we find that though the “agreement to sell” was executed between the assessee and her husband on one hand and Shri Kalluri Manohar Reddy (supra) on the other, the subject property was ultimately conveyed through registered sale deeds dated 22.06.2019 in favour of M/s Spectra India Eco Projects Pvt. Ltd.

14. In our considered view, the very fact that the “agreement to sell” dated 18.04.2019, along with the receipt evidencing payment of Rs. 50 lacs dated 26.04.2018, was found during the search proceedings from the premises of the “Spectra Group”, strongly supports the fact that the subject transaction was intrinsically connected with the land acquisition activities of the Spectra Group. At this stage, we may observe that Spectra Group had engaged several intermediaries, negotiators, and land aggregators to identify lands, negotiate with landowners, and make advance payments on behalf of the group entities. In order to fortify our aforesaid observation, we may gainfully draw support from the order of the Tribunal in the case of ACIT, Circle 2(2), Hyderabad v. Bhoomika Agro Farms Pvt. Ltd. & Ors., dated 30/09/2024, wherein it is observed that M/s Spectra India Eco Projects Pvt. Ltd. (supra) had engaged the services of land aggregators who would identify lands, negotiate with the landowners, and make advance payments to them in the course of consolidation of land for and on behalf of the aforementioned company. We, thus, are of the view that in totality of the facts attending the present case before us read in the backdrop of the normal course of human conduct and applying the well-settled principle of preponderance of human probabilities, it can safely be concluded that Shri Kalluri Manohar Reddy (supra) was acting on behalf of the M/s Spectra India Eco Projects Pvt. Ltd. (supra) while negotiating and making the advance payment for acquisition of the subject land. Our aforesaid view is further fortified by the fact that the Revenue has nowhere alleged, nor is there any material available on record to suggest, that the advance amount of Rs.50 lacs received by the assessee and her husband was subsequently forfeited by them. In our view, had the amount been forfeited, the provisions of section 56(2)(ix) of the Act could have been attracted in the year of forfeiture. However, neither any such case has been made out by the Revenue, nor any fact in support thereof is discernible from the record.

15. We thus, in terms of our aforesaid observations, are persuaded to hold that the amount of Rs.50 lacs received by the assessee and her husband from Shri Kalluri Manohar Reddy (supra) represented part of the sale consideration on behalf of the eventual purchaser, viz. M/s Spectra India Eco Projects Pvt. Ltd., which acquired the property through registered sale deeds dated 22.06.2019.

16. Having held so, we are unable to comprehend the basis on which the AO has treated the aforesaid amount of Rs. 25 lacs each in the hands of the assessee and her husband as an unexplained money under section 69A of the Act. Section 69A can be invoked only where the assessee is found to be the owner of money and either offers no explanation regarding the nature and source thereof, or the explanation offered is found to be unsatisfactory. In the present case, the AO himself has categorically recorded in the assessment order that the amount of Rs.50 lacs represented the advance received by the assessee and her husband pursuant to the agreement to sell the subject property. Thus, the AO himself has acknowledged both the nature and the source of the receipt. In our view, once the AO had accepted that the amount represented advance sale consideration received in connection with the transfer of immovable property, it was not open for him to simultaneously conclude that the assessee had failed to explain the nature and source of the said money, as such a conclusion is inherently contradictory and self-defeating. We thus, in the backdrop of our aforesaid deliberations, are of the considered view that the impugned addition made by the AO under section 69A of the Act cannot be sustained.

17. In our view, as the amount of Rs. 25 lacs represented suppressed or undisclosed sale consideration in relation to the transfer of the subject property in the hands of the assessee, thus the same could only be brought to tax as part of the full value of consideration while computing “capital gains” arising from transfer of the subject property during the period relevant to Assessment Year 2020-21, and by no means could be assessed as her unexplained money under section 69A of the Act. We, thus, vacate the addition of Rs. 25 lac made by the AO under section 69A of the Act.

18. We shall now deal with the Ld. AR’s contention that the AO had wrongly assumed jurisdiction for framing the assessment under section 153C of the Act on the ground that the AO of the searched person has recorded a consolidated satisfaction note for Assessment Years 201516 to 2021-22. As observed by us hereinabove, the Ld. AR has placed reliance upon the judgment of the Hon’ble High Court of Karnataka in Sunil Kumar Sharma (supra), which has subsequently attained finality upon dismissal of the Revenue’s Special Leave Petition (SLP) by the Hon’ble Supreme Court in Sunil Kumar Sharma(supra). However, as the satisfaction note recorded by the AO having jurisdiction over the assessee, being the “other person”, is not available before us, we refrain from adjudicating this issue, and the said ground is accordingly left open.

19. Coming to the Ld. AR’s contention that since the seized material was received by the Jurisdictional Assessing Officer (JAO) on 25.08.2023, i.e., after 01.04.2021, the provisions of section 153C could not have been invoked and the proceedings ought to have been initiated under section 148 of the Act, we are unable to accept the same. Admittedly, Section 153C(3) of the Act provides that the provisions of Section 153C shall not apply in relation to searches initiated under Section 132 or requisitions made under Section 132A on or after 01.04.2021. However, in the present case, the search in the Spectra Group case was admittedly initiated on 23.03.2021, i.e., prior to 01.04.2021. In our view, the reference contained in the “1^st Proviso” to section 153C(1) of the Act, whereby the date of receipt of seized material by the AO of the other person is deemed to be the date of search, is only for the limited purpose of determining the assessment years that would in case of such “other person” abate under the “2^nd Proviso” to section 153A. We are of firm conviction that such deeming fiction cannot be extended for determining whether section 153C itself is applicable or excluded by virtue of section 153C(3). Rather, on a conjoint reading of sections 153C, 153A and the amended reassessment provisions introduced by the Finance Act, 2021, it can safely be concluded that the relevant date for determining applicability of section 153C(3) is the date of initiation of search and not the date of receipt of seized material by the AO of the other person. Since the search in the case of “Spectra group” was initiated on 23.03.2021, the proceedings initiated in the case of the assessee before us under section 153C of the Act, i.e., an offshoot of the search proceedings, cannot be held invalid merely because the seized material was handed over to the AO of the assessee after 01.04.2021. We, thus, find no substance in the aforesaid Ld. AR’s contention and dismiss the same.

20. We shall now take up the Ld. AR’s contention that as the approving authority, viz. Additional Commissioner of Income Tax, Central Range-2, Hyderabad, has mechanically and without due application of mind granted his approval as required under Section 153D of the Act; the assessment order framed by the AO cannot be sustained and is liable to be vacated for want of a valid assumption of jurisdiction.

21. We have given thoughtful consideration to the aforesaid claim of the assessee and are unable to persuade ourselves to concur with the same. We find that the assessment order specifically records that prior approval was obtained from the Additional Commissioner of Income Tax, Central Range-2, Hyderabad. In our view, the assessee, except for making a general allegation, has failed to bring on record any material to establish that the approving authority granted approval mechanically or without application of mind. We thus, in the absence of any cogent material substantiating such allegation, find no merit in the said ground and dismiss the same

22. We thus, in terms of our aforesaid deliberations on the specific issues based on which the impugned addition of Rs. 25 lacs made by the AO under Section 69A of the Act had been assailed by the Ld. AR before us, vacate the same.

23. Resultantly, the appeal filed by the assessee is partly allowed in terms of our aforesaid observations

24. As the facts and the issue involved in the present appeal remain the same as they were before us in ITA No. 2210/Hyd/2025, the order therein passed on all the issues shall apply mutatis mutandis for the purpose of disposing of the present appeal.

25. We thus, on the same terms, vacate the impugned addition of Rs. 25 lacs made by the AO under Section 69A of the Act.

26. Resultantly, the appeal filed by the assessee is partly allowed in terms of our aforesaid observations

27. In the result, both the aforementioned appeals, viz. ITA No. 2210/Hyd/2025 and ITA No. 2211/Hy/2025 are partly allowed in terms of our aforesaid observations.