M/S VCV BUILDERS PRIVATE LIMITED ,THENI V. CIT (A)- 19 , CHENNAI

ITA 732/CHNY/2022

AI Insights

The case involves multiple appeals by V. Churchil and VCV Builders Private Limited against the assessments made by the ACIT, Central Circle -2, Madurai, following a search and seizure operation under the Income-Tax Act, 1961. The primary contention was the method of quantifying assessable income from several real estate projects, which were assessed based on loose sheets and statements recorded during the search. The Tribunal found that the methodology adopted by the Assessing Officer led to unrealistic profit rates and directed a reassessment based on more reasonable estimates, taking into account various factors affecting each project.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 831057 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 26-08-2022
• Laws Referred To: Income-Tax Act, 1961, Income-Tax Rules, 1962
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS; C.I.T
• Assessee Lawyers: N. ARJUN RAJ
• Keywords: Business income; Unexplained investment; Cost of acquisition; Rule of consistency; Retraction; Principle of natural justice; Search and seizure; Loose papers; Competent authority
• Section: 153A

Judgement Text

"आयकर अपील य अ धकरण, ‘बी’ \u000eयायपीठ, चे\u000eनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI \u0015ी एस एस \u0018व\u001aवने\u001b र\u0018व, \u000eया यक सद य एवं \u0015ी एस. आर. रघुनाथा, लेखा सद य क े सम% BEFORE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.:727 to 730/Chny/2022 नधा&रण वष& / Assessment Years: 2009 -10 to 2012-13 V. Churchil, 412, Electronic City-1, Koduvilarpatti, Theni – 625 531. vs. ACIT, Central Circle -2, Madurai. [PAN: AFYPC-8311-D] (अपीलाथ(/Appellant) ()*यथ(/Respondent) आयकर अपील सं./ITA Nos.:732 to 737/Chny/2022 नधा&रण वष& / Assessment Years: 2008 -09 to 2013-14 VCV Builders Private Limited, 13, Post Office Odai Street, Theni – 625 531. vs. ACIT, Central Circle -2, Madurai. [PAN: AACCV-6790-P] (अपीलाथ(/Appellant) ()*यथ(/Respondent) अपीलाथ( क, ओर से/Appellant by : Shri. N. Arjun Raj, Advocate )*यथ( क, ओर से/Respondent by : Shri. Shiva Srinivas, C.I.T. सुनवाई क, तार ख/Date of Hearing : 04.11.2025 घोषणा क, तार ख/Date of Pronouncement : 21.01.2026 आदेश /O R D E R PER BENCH: The captioned appeals are filed by the assessees’ against the orders dated 29.06.2022 and 28.06.2022 of the learned Commissioner of Income Tax (Appeals)-19, Chennai (in short “the ld.CIT(A)”) respectively for the following A.Ys. as detailed below: Printed from counselvise.com :-2-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 a) V. Churchil ITA Nos.:727 to 730/Chny/2022 A.Ys.: 2009 -10 to 2012-13 b) VCV Builders Private Limited ITA Nos.:732 to 737/Chny/2022 A.Ys. 2008 -09 to 2013-14 2. Since, facts are identical and issues are common, for the sake of convenience, these appeals filed by the assessee are heard together and are being disposed off, by this consolidated order. 3. The issue in the captioned appeals being interlinked and emanating from the same search conducted on 30.10.2012 in the residential and business premises of V. Churchil & M/s VCV Builders Private Limited, the appeals are taken up together for adjudication. 4. The brief facts of the present case are that Shri V. Churchil, (in short “the Individual”) is engaged in the business of real estate at Theni and he is one of the directors of M/s.VCV Builders Pvt Ltd (in short “the Company”) which is also engaged in the real estate business in Theni. 5. A search and seizure was carried out at the business premises of the two assesse(s) at No.13, Post Office Odai Street, Theni on 30.10.2012 by execution of the Warrant of authorization tils 132 of the Income-Tax Act, 1961 and rule 112(1) of the Income-Tax Rules, 1962 dated 26.10.2012. Simultaneously search was also carried out in the residence of Shri V.Churchil and Smt.T.Vijayalakshmi, promoters and directors of the VCV Builders P. Ltd. 6. Consequent to the search proceedings, the proceedings were initiated u/s.153A of the Act by way of issuance of notice u/s.153A of the Act for both the individual as well as the company for the assessment year(s) under dispute. 7. The assessees had originally raised the following grounds of appeal challenging the order of the ld.CIT(A) as detailed below: Printed from counselvise.com :-3-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 V. Churchil I.T.A. Nos.:727 & 728/Chny/2022 (A.Y. 2009 -10 & 2010-11) 1. The order of the Ld. CIT(A) is contrary to law and facts of the case, and is therefore unsustainable 2. The Ld. CIT(A) and the Ld. Assessing Officer erred by making addition on the basis of surmises and conjectures. Digital Garden 3. The Ld. CIT(A) and the Ld. Assessing officer erred in considering a flat rate of Rs.6,500/- per cent as purchase cost for the entire area without any basis and without considering the fact that it is not possible to purchase from different parties at a same rate spread over a period of time. 4. The Ld. CIT(A) and the Ld. Assessing officer failed to consider the retraction statement filed by the appellant. 5. The Ld. CIT(A) and the Ld. Assessing Officer failed to consider the diary noting (seized material) showing that average price of the plots sold were around Rs.41,000/- 6. The Ld. CIT(A) and the Ld. Assessing Officer failed to understand that all the plots cannot be sold at the same rate and various factors such as proximity to the road, direction (facing) of the plot etc., need to be taken into consideration in this regard. 7. The Ld. CIT(A) and the Ld. Assessing officer failed to consider the brokerage expenses and commission expenditure actually incurred by the appellant. 8. The assessment and appeal are completed without considering all the facts of the issue on hand and the submissions made during the course of the Assessment and Appellate proceedings and therefore the additions made to income are not justified. 9. The Learned CIT(A) erred in levying consequential interest u/s.234B and 234C of the Act. 10. The Appellant craves leave to add, alter, amend, modify or withdraw any or all of the grounds of appeal either at the time of the hearing of this appeal or before the hearing of this appeal. I.T.A. Nos.:729 & 730/Chny/2022 (A.Y. 2011-12 & 2012-13) 1. The order of the Ld. CIT(A) is contrary to law and facts of the case, and is therefore unsustainable. 2. The Ld. CIT(A) and the Ld. Assessing Officer erred by making addition on the basis of surmises and conjectures. Digital Garden 3. The Ld. CIT(A) and the Ld. Assessing officer erred in considering a flat rate of Rs.6,500/- percent as purchase cost for the entire area without any basis and without Printed from counselvise.com :-4-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 considering the fact that it is not possible to purchase from different parties at a same rate spread over a period of time. 4. The Ld. CIT(A) and the Ld. Assessing officer failed to consider the retraction statement filed by the appellant. 5. The Ld. CIT(A) and the Ld. Assessing Officer failed to consider the diary noting (seized material) showing that average price of the plots sold were around Rs.41,000/- 6. The Ld. CIT(A) and the Ld. Assessing Officer failed to understand that all the plots cannot be sold at the same rate and various factors such as proximity to the road, direction (facing) of the plot etc., need to be taken into consideration in this regard. 7. The Ld. CIT(A) and the Ld. Assessing officer failed to consider the brokerage expenses and commission expenditure actually incurred by the appellant. Lakshmi Narayana Nagar 8. The L.d. CIT(A) and the Ld. Assessing officer failed to consider that the appellant has not invested any money in the project, but had just helped Mr.D. Balamurugan in layout conversion and sale of land. 9. The Ld. CIT(A) and the Ld. Assessing Officer failed to prove that the money was invested by the appellant into this impugned project and there is no corroborative evidence for such investment. 10. The Ld. CIT(A) and the Ld. Assessing officer failed to consider the retraction statement filed by the appellant. 11. The Ld. CIT(A) and the Ld. Assessing officer failed to consider that the appellant was only in receipt of commission and same was duly offered to tax in respective years. 12. The Ld. CIT(A) and the Ld. Assessing Officer erred by relying on the statement given by Mr.D.Balamurugan that the investment was borne equally between him and the appellant, thereby concluding that the investment was made by the appellant. 13. The additions made are merely based on allegation, without any corroborative evidence and hence not tenable in Law. 14. The assessment and appeal are completed without considering all the facts of the issue on hand and the submissions made during the course of the Assessment and Appellate proceedings and therefore the additions made to income are not justified. 15. The Learned CIT(A) erred in levying consequential interest w/s.234B and 234C of the Act. 16. The Appellant craves leave to add, alter, amend, modify or withdraw any or all of the grounds of appeal either at the time of the hearing of this appeal or before the hearing of this appeal. Printed from counselvise.com :-5-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 VCV Builders Private Limited ITA Nos.:732 to 735/Chny/2022 (A.Ys. 2008 -09 to 2011-12) 1. The order of the Learned Commissioner of Income-tax (Appeals) is contrary to law and facts of the case, and is therefore unsustainable. 2. The Ld. CIT(A) and Ld. Assessing Officer has erred by adopting uniform rates for all the plots while computing sale value without considering the fact that the unapproved plots were sold at lesser rate as compared to approved plots. 3. The Ld. CIT(A) and Ld. Assessing Officer has failed to bring any material on record to establish that the appellant company had received an amount of Rs. 12,34,28,387/- in respect of sale transaction of the said plots. 4. The Ld. CIT(A) and Ld. Assessing Officer has erred in including sales made by Mr.L. Murugan in the sales of the Appellant company without considering the fact that it is a consideration for plots obtained. 5. The Ld.CIT(A) and Ld. Assessing Officer erred by considering the Power agent sales also as the appellant company's own sales ignoring the fact that the power of attorneys were registered document and that the appellant company was acting as a power agent of the real and beneficial owner of the land. 6. The Ld. CIT(A) and Ld. Assessing Officer erred by treating the land sold on behalf of land owners as owned by the appellant company without bringing any material on record with regard to the ownership of the said land to the appellant company. 7. The Ld. CIT(A) and Ld. Assessing Officer erred by adopting average value at higher rate based on incomplete records and on available samples. 8. The Ld. CIT(A) and Ld. Assessing Officer has erred in computing cash deficit with a wrong presumption that the land sold in the capacity of power agent was purchased by the appellant company and also erred in not considering the advance received from the customers, accumulated sale proceeds and profits from the other projects. 9. The Ld. CIT(A) and Ld. Assessing Officer has erred in considering the closing stock of the land at 100 cents without considering the fact that the stock that is lying with the appellant company is to the extent of 25 cents and the same relates to land held in the capacity of power agent. 10. Without prejudice to the above, even if the power sales are to be considered as appellant’s own sales, the entire amount of sales cannot be taken as income of the appellant’s company. 11. The Ld. CIT(A) and the Ld. Assessing Officer erred in adopting extrapolation technique and making arbitrary additions on the basis of incomplete incriminating materials. 12. The assessment and appeal are completed without considering all the facts of the issue on hand and the submissions made during the course of the Assessment and Appellate proceedings and therefore the additions made to income are not justified. Printed from counselvise.com :-6-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 13. The Ld. CIT(A) and Ld. Assessing Officer erred in levying consequential interest of Rs.43,21,654/- u/s.234A and Rs.62,58,948/- u/s.234B of the Act. 14. The Appellant craves leave to add, alter, amend, modify or withdraw any or all of the grounds of appeal either at the time of the hearing of this appeal or before the hearing of this appeal. ITA No.:736/Chny/2022 (A.Y. 2012-13) 1. The order of the Learned Commissioner of Income-tax (Appeals) is contrary to law and facts of the case, and is therefore unsustainable. Project-Electronic City-2 2. The Ld. CIT(A) and Ld. Assessing Officer has erred by adopting uniform rates for all the plots while computing sale value without considering the fact that the unapproved plots were sold at lesser rate as compared to approved plots 3. The Ld. CIT(A) and Ld. Assessing Officer has failed to bring any material on record to establish that the appellant company had received an amount of Rs. 12,34,28,387/- in respect of sale transaction of the said plots. 4. The Ld. CIT(A) and Ld. Assessing Officer has erred in including sales made by Mr.L. Murugan in the sales of the Appellant company without considering the fact that it is a consideration for plots obtained. 5. The Ld.CIT(A) and Ld. Assessing Officer erred by considering the Power agent sales also as the appellant company's own sales ignoring the fact that the power of attorneys were registered document and that the appellant company was acting as a power agent of the real and beneficial owner of the land. 6. The Ld. CIT(A) and Ld. Assessing Officer erred by treating the land sold on behalf of land owners as owned by the appellant company without bringing any material on record with regard to the ownership of the said land to the appellant company. 7. The Ed. CIT(A) and Ld. Assessing Officer erred by adopting average value at higher rate based on incomplete records and on available samples. 8. The Ld. CIT(A) and Ld. Assessing Officer has erred in computing cash deficit with a wrong presumption that the land sold in the capacity of power agent was purchased by the appellant company and also erred in not considering the advance received from the customers, accumulated sale proceeds and profits from the other projects. 9. The Ld. CIT(A) and Ld. Assessing Officer has erred in considering the closing stock of the land at 100 cents without considering the fact that the stock that is lying with the appellant company is to the extent of 25 cents and the same relates to land held in the capacity of power agent. 10. Without prejudice to the above, even if the power sales are to be considered as appellant’s own sales the entire amount of sales cannot be taken as income of the appellant's company. Printed from counselvise.com :-7-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 11. The Ld. CIT(A) and the Ld. Assessing Officer erred in adopting extrapolation technique and making arbitrary additions on the basis of incomplete incriminating materials Project-VCV Township 12. The Ld. CIT(A) and Ld. Assessing Officer has erred in adopting an average rate based on certain loose sheet without taking into consideration the retraction statement of the appellant. 13. The Ld. CIT(A) and Ld. Assessing Officer failed to consider the fact that the project is located in a remote area and that the appellant was able to sell the plot at Rs.25,000 per cent only as compared to the rate adopted by the AO at Rs 90,000 per cent. 14. The Ld. CIT(A) and Ld. Assessing Officer erred in considering the no of cents sold in the project at 330 cents as against 265 cents, without considering the fact that the difference of 65 cents belonged to the director of the appellant company and same was sold in his individual capacity 15. The Ld. CIT(A) and Ld. Assessing Officer has ignored the cost of development expenses of Rs. 135 lakhs spent by the appellant company without considering the quantum of work and extent of the project 16. The assessment and appeal are completed without considering all the facts of the issue on hand and the submissions made during the course of the Assessment and Appellate proceedings and therefore the additions made to income are not justified. 17. The Ld. CIT(A) and Ld. Assessing Officer erred in levying consequential interest of Rs. 14,28,386/-us.234A, Rs.51,42,188/-w/s.234B and Rs.53,429/- u/s 234C of the Act. 18. The Appellant craves leave to add, alter, amend, modify or withdraw any or all of the grounds of appeal either at the time of the hearing of this appeal or before the hearing of this appeal. ITA No.:737/Chny/2022 (A.Y. 2013-14) 1. The order of the Learned Commissioner of Income-tax (Appeals) is contrary to law and facts of the case, and is therefore unsustainable. 2. The Ld. CIT(A) and Ld. Assessing Officer has erred in adopting an average rate based on certain loose sheet without taking into consideration the retraction statement of the appellant. 3. The Ld. CIT(A) and Ld. Assessing Officer failed to consider the fact that the project is located in a remote area and that the appellant was able to sell the plot at Rs.25,000 per cent only as compared to the rate adopted by the AO at Rs.90,000 per cent. 4. The Ld. CIT(A) and Ld. Assessing Officer erred in considering the no of cents sold in the project at 330 cents as against 265 cents, without considering the fact that the difference of 65 cents belonged to the director of the appellant company and same was sold in his individual capacity Printed from counselvise.com :-8-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 5. The Ld. CIT(A) and Ld. Assessing Officer has ignored the cost of development expenses of Rs.135 lakhs spent by the appellant company without considering the quantum of work and extent of the project. 6. The assessment and appeal are completed without considering all the facts of the issue on hand and the submissions made during the course of the Assessment and Appellate proceedings and therefore the additions made to income are not justified. 7. The Appellant craves leave to add, alter, amend, modify or withdraw any or all of the grounds of appeal either at the time of the hearing of this appeal or before the hearing of this appeal. 8. The assessees had also filed identical additional grounds of appeal in all the appeals for both the assessees which is extracted below: “CONCISE / ADDITIONAL GROUNDS OF APPEAL 1. The order of the CIT (Appeals), Chennai – 19 dated 29.06.2022 for the above mentioned Assessment Year is contrary to law, fact and in circumstances of the case. 2. The CIT(Appeals) – 19, Chennai erred in impliedly confirming the search assessment on jurisdiction in terms of Section 153A of the Act without assigning proper reasons and justification and further ought to have appreciated that that the order of search assessment completed in terms of Section 153A of the Act was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 3. The CIT(Appeals) – 19, Chennai erred in impliedly confirming the validity of initiation of the assessment under Section 153A of the Act in the absence of seized material during the course of the search incriminating the appellant herein without assigning proper reasons and justification. 4. The CIT (Appeals), Chennai – 19 erred in confirming the additions made by the assessing officer based on mere suspicion and surmises without any verification to the materials available on record and further ought to have appreciated that the reliance placed upon the sworn statements recorded from the appellant while rejecting the explanation offered thereafter in the absence of any independent corroborative materials in support of such statement recorded from the appellant would vitiate the disputed addition made in its entirety. 5. The CIT (Appeals), Chennai – 19 failed to appreciate that the addition made by the assessing officer had completely distorted the financial statements resulting in exorbitant/ unrealistic rate of profit thereby vitiating the related findings in the impugned order and further ought to have appreciated that the unrealistic assessable income quantified by the assessing officer is completely in defiance to the principles of fairness in taxation thereby negating such addition. 6. The CIT (Appeals), Chennai – 19 failed to appreciate that the entire computation of taxable total income was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law. Printed from counselvise.com :-9-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 7. The CIT (Appeals), Chennai – 19 failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law. 8. The Appellant craves leave to file additional grounds/arguments at the time of hearing.” 9. Ld.AR for the Assessees objected to the quantification adopted by the Assessing Officer for various projects by referring to the deficiencies in the methodology adopted by the Assessing Officer. 10. Per Contra, the ld.DR argued for confirming the assessment made by the Assessing Officer. 11. Having heard the rival submissions, the core issue raised in all the appeals pertains to the quantification of the assessable income emanating from various projects carried out by the individual and the company. During the course of search, it was found that neither the individual nor the company had maintained any books of accounts in electronic or physical form. The Assessing Officer while framing the assessment had placed reliance on the loose sheets found at the time of search along with the statements recorded from the individual. 12. The issue for consideration relates to the quantification of the assessable income from 6 projects carried out by the individual and the company, which is assessed across various assessment years by the Assessing Officer: 1) Digital Garden - Assessed in the hands of the individual 2) Electronic City – 1 - Assessed in the hands of the individual 3) Kandamannur Vallal Nagar - Assessed in the hands of the individual 4) Lakshminarayana Nagar Project - Assessed in the hands of the individual 5) Electronic City – 2 - Assessed in the hands of the company 6) VCV Township- Assessed in the hands of the company 13. With regard to each of the projects, the dispute resolves around the selling price, purchase price, extent of ownership and other related cost leading to the quantification of such assessable income from such projects. It is an undisputed fact that the assessee had not maintained books of accounts both Printed from counselvise.com :-10-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 in electronic or physical form and the quantification adopted by the Assessing Officer is solely based on the statements recorded at the time of search and certain loose sheets. 14. Ld. AR for the Assessee(s) pointed out that the methodology adopted by the Assessing Officer had resulted in determining profits at an exorbitant rate thereby requiring interference. He further pleaded for estimation of reasonable profit for assessment for the reasons shown and elaborated during the course of the open court hearing. 15. To ascertain the actual assessable income for the purpose of taxation, we deal with each of the projects separately to adjudicate the issues emanating therefrom. (1) Digital Garden (Assessed & considered in the hands of V.Churchil): 16. It is seen from records that the project Digital Garden was carried out in the land situated at Unjampatti Village for an extent of 6.96 acres of land by the individual. The quantum of purchase cost and sale cost is being disputed in the present appeal(s) for determining the profit earned from the said project. 17. The search party in the context of the project Digital Garden on the analysis of the seized materials put a question to the Director of the Company in Question No.19 of the sworn statement dated 27.12.2012 in the post search enquiry and according to the search party, the total extent of the project quantified at 6.96 acres having 5.35 acre as saleable area plots was purchased at a cost of Rs.45,24,000/-. The development cost incurred for plotting was quantified at Rs.20,88,000/- while arriving at the sale consideration at Rs.2,38,45,967/-. In the process, the search party quantified the profit from Digital Garden at Rs.1,72,33,967/- (which works out to around 72.27%) and the said understanding of the search team (captured at Page 361 of the Paperbook) was accepted by the Individual with an undertaking to submit accurate quantification of the profit for assessment. Printed from counselvise.com :-11-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 18. The Assessing Officer while framing the assessment had quantified the profit earned from the said project at Rs.1,92,14,464/- on a turnover of Rs.2,58,26,464/- by rejecting the plea of the Assessee for re-computation of such profits. 19. Before us, the Ld.AR by placing reliance on the additional grounds of appeal argued that the assessment of Rs.1,92,14,464/- on a turnover of Rs.2,58,26,464/- had resulted in determining the profit at an exorbitant rate of 74.30% and submitted that such an assessment of unrealistic profit is opposed to fairness in principles of taxation. 20. Having perused the documents placed before us, we find that the adoption of disputed sale price and purchase price is solely based on the sworn statement recorded at the time of search and neither the search team nor the Assessing Officer had brought on record any independent corroborative evidence establishing the flow of cash for such sum. Further, we find that the Assessing Officer having adopted the sale value at a higher rate solely based on the statement, had rejected the plea of the Assessee for claim of deduction towards purchase and improvement cost for want of evidence. 21. We find that neither the Assessing Officer nor the Assessee had placed on record proper corroborative evidence for determining the profit from the said project and in the absence of such direct independent evidence, we are unable to subscribe to the computation adopted by the Assessing Officer and the Assessee. Further, as stated in the preceding paragraphs, it is also confirmed by both the parties that the Assessee had not maintained proper books of accounts relating to any of the projects. In such factual background, we do not see any reason to remand the matter to the file of Assessing Officer which would only prolong the litigation especially considering the fact that the proceedings relate to old assessment years. Printed from counselvise.com :-12-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 22. In such circumstances, we are of the view that the only possible remedy to determine the profit from such project is by estimating the income on the turnover considering various factors relatable to each of the projects and to reduce the litigation in the interest of both the Revenue and assessee. 23. With respect to Digital Garden, on perusal of the records we note the following factors for estimating the business income: (1) The project is located 9 Kms from Theni (2) The Assessee had certain unsold plots from the project. (3) The plots sold were unapproved at the said point in time facing complexity in marketing. (4) Common roads were created by the Assessee as part of the project and 20 feet mud roads were formed without providing any further amenities. (5) The provision for roads as mentioned above had restricted the saleable area around 65% out of the purchase land / project land. (6) The project was not located near the National Highway (NH-85). (7) The construction of houses was of remote possibility in view of the complexities in obtaining building plan approvals. 24. The above factors persuade the Bench to go into the fair estimation of the profit for assessment as the Revenue had arbitrarily fixed the profit which works out to around 74% of the disputed turnover. As stated by the ld.AR based on the delay in implementation of the project, as could be seen from the commercial perspective is a complete failure. In view of the above factual aspects, we find that a reasonable estimate of 10% from the said project would meet the ends of justice and give quietus to the present proceedings. 25. On a closer reading of the orders passed by the AO as well as the ld.CIT(A) on this issue, the Assessee took a stand by projecting the turnover from this project at Rs.2,26,09,864/- as against the turnover adopted by the Revenue at Rs.2,58,26,464/- based on their understanding of the search materials. 26. As we are not getting into the validity of the search materials as well correctness of the turnover from the project under consideration, the turnover Printed from counselvise.com :-13-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 quantified by the Revenue even though is highly disputable, the difference between the figures adopted by the Assessee and the Revenue around 10%, we are inclined to adopt the turnover considered by the Revenue at Rs.2,58,26,464/- in view of our estimation of profit at 10%. The income from the said project shall be assessed at Rs.25,82,646/- being 10% of the turnover as estimated by the revenue in the following manner: S. No. Asst Year Income As per AO (%) Proportionate Income to be assessed 1 2009-10 Rs. 1,07,61,545/- 56% Rs. 14,46,282/- 2 2010-11 Rs. 19,21,704/- 10% Rs. 2,58,265/- 3 2011-12 Rs. 28,82,557/- 15% Rs. 3,87,397/- 4 2012-13 Rs. 36,51,240/- 19% Rs. 4,90,703/- 5 TOTAL Rs. 1,92,17,046/- 100% Rs. 25,82,646/- 27. Accordingly, we direct the Assessing Officer to adopt the profit from the project ‘Digital Garden’ as tabulated above for the respective assessment years to arrive at the total income of the individual. Hence, the grounds raised by the Assessee are partly allowed. (2) Electronic City – 1 (Assessed & considered in the hands of V.Churchil): 28. It is seen from records that the project Electronic City – 1 was carried out in the land situated at Koduvilarpatti Village by the individual assessee. The quantum of assessable profit determined by the Assessing Officer is disputed in the present appeal(s). 29. We find that the Assessing Officer had determined the profit derived from the entire project at Rs.16,70,000/- on a turnover of Rs.1,42,27,000/-. The Assessing Officer in the said project had also carried out independent enquiry for determining the income from the project and considering the reasonable profit determined of Rs.1,67,000/- for the impugned A.Y.2009-10 by the Assessing Officer, we are inclined to dismiss the ground raised by the Assessee. Therefore, we confirm the addition made by the AO of Rs.1,67,000/- Printed from counselvise.com :-14-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 being the profit relatable to the Assessment Year 2009-10 and dismiss the corresponding grounds raised by the Assessee. (3) Kadamannur Vallar Nagar (Assessed & considered in the hands of V.Churchil): 30. The Assessing Officer based on the notebook seized from the office premises of the private limited company had brought to tax a sum of Rs.1,77,000/-. The Assessee had not seriously objected to the present addition and hence we dismiss the ground raised in this regard. (4) Lakshminarayana Nagar (Assessed & to be considered in the hands of V. Churchil): 31. The main issue with respect to the project carried out at Lakshminarayana Nagar pertains to the ownership of such project. According to the Revenue, the project was carried out by one Mr. D.Balamurugan along with the assessee and the profit from such project should be assessed equally based on details furnished by Mr. D.Balamurugan during the course of his assessment proceedings. 32. In the absence of the details emanating from the search in the case of D.Balamurugan, as both the sides had not furnished any details from the search records, the Bench after noticing the fact of the Assessee herein filed a return of income by reporting commission from the said project to the tune of Rs.4,21,000/-. 33. The basis of the assessment is admittedly focussed on the disputed seized material forming part of the search records of D.Balamurugan and apart from the statement recorded from him. The seized material and the statement both in vernacular language and translated version was placed on record for our consideration. Printed from counselvise.com :-15-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 34. On going through the seized material, there is nothing discernible to support / substantiate the quantification made by the Assessing Officer in the hands of the Assessee for making the disputed addition. In fact, the said seized material at best could be considered as rough note. 35. There should not be an assessment solely based on mere suspicion and surmises and hence the theory of the Assessee acting as facilitator gets substantiated. 36. Further, the conclusion reached on that the Assessee being a facilitator is further fortified in view of the absence of any ownership & other documents in the name of the Individual for the said project. In fact, the power of attorney obtained by Mr.D.Balamurugan which is placed on record at Page No.417 of the paperbook (translated copy at Page No. 969 of the paperbook) establishes the fact that the individual Assessee has acted only as a facilitator, in view of his role as a witness to the said document. 37. On the cumulative consideration of the facts, we hereby accept the stand of the Assessee as a facilitator to this project and by approving the reporting of commission income as part of the return of income filed, we hold that there is no warrant for separate addition for this project either as an investor or as a joint developer in the absence of direct evidence. In view of the above, we order for deleting the addition made to the extent of Rs.28,75,658/- for the assessment year 2011-12 and Rs.23,65,250/- for the assessment year 2012-13 in the hands of the Individual. (5) Electronic City – 2 (Assessed & considered in the hands of M/s.VCV Builders P. Ltd): 38. It is seen from records that the project Electronic City – 2 was carried out in the land situated at Koduvilarpatti Village for an extent of 25.21 acres of land by the company. The quantum of purchase cost and sale cost along with the Printed from counselvise.com :-16-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 extent of ownership are being disputed in the present appeal(s) for determining the profit earned from the said project. 39. The search party in the context of the project Electronic City – 2, on the analysis of the seized materials put a question to the Director(individual) of the Company in Question No.19 of the sworn statement dated 27.12.2012 in the post search enquiry and according to the search party, the total extent of the project quantified at 25.83 acres having 165 plots was purchased at a cost of Rs.5,66,46,800/-. The development cost incurred for plotting was quantified at Rs.1,71,23,987/- while arriving at the sale consideration at Rs.10,38,09,587/-. In the process, the search party quantified the profit from Electronic City – 2 at Rs.3,00,38,800/- (which works out to around 28.93%) and the said understanding of the search team (captured at Page 361 of the Paperbook) was accepted by the Assessee’s director with an undertaking to submit accurate quantification of the profit for assessment. 40. Thereafter, the Assessee filed a retraction which was also referred to in the assessment order(s) at Para 5.2 (for AY 2009-10) and in the retraction, the Assessee quantified the project extent at 25.21 acres. The Assessee in the said retraction statement quantified 10.56 acres for common amenities such as roads, parks etc and the balance 14.65 acres was considered to be saleable area. The Assessee further brought to the notice of the search party that out of the saleable area, 2.69 acres were subjected to approval from the competent authority and balance 11.94 acres were unapproved at that point in time. 41. In the said retraction, the Assessee had quantified the cost of purchase at Rs.25,200/- per cent by giving reasons and quantified the sale consideration at Rs.7,41,55,270/- (for 13.65 acres by showing the balance as unsold plots). The profit for assessment from the said project was quantified at Rs.46,12,648/- across four assessment years under consideration. The retraction statement and the working are placed on record in the paperbook at Page No.370 and 381. Printed from counselvise.com :-17-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 42. In the assessment order, the Assessing Officer at Para 5.1 (for AY 2009- 10) based on his understanding of the search records observed as follows: “5.1 The assessee submitted before the undersigned that this project was at Koduvilarpatti village at about 25.21 acres and not 25.83 acres as admitted by him in the sworn statement. Out of the above 25.21 acres, 22.04 acres of lands were in the name of the company, 68 cents were in the name of Shri.V.Churchill and 2.49 acres on Power. The lands were purchased on various dates from FY 2007- 08 TO 2010-11. Major segments were purchased during 2007-08 and 2008-09 and developed into layout during 2008-09. Out of the above 25.21 acres, 1260 cents were allotted for Roads, Parks and Common usage and the remaining 1261 cents were converted into House plots - out of which 269.64 cents were in approved layouts and 991.36 cents in unapproved layout. In the sworn statement cost of purchase has been recorded at uniform rate of Rs.25,200/- per cent. The assessee stated that though it was higher than the actual cost, they agreed to the rate of purchase adopted.” 43. At Para 6, the Assessing Officer arrived at the sale consideration as per the seized notebook at Rs.10,38,09,587/- which is extracted hereinafter: 6.1 With respect to the sale of plots in the above project, during the search at the residence of Shri V Churchil on 30.11.2012, a note book containing the sale details of plots in the project 'Electronic City-2 was seized vide Annexure ANN/SMP/B84D/ S-5. As per the seized note book referred above, the sale of plots for different years Were arrived as under: 44. After putting the said quantification to the Assessee in the assessment and upon considering the objections raised by the Assessee, the AO accepted the revised sale consideration at Rs.7,77,77,213/- at Para 6.7 which is reproduced as follows: Printed from counselvise.com :-18-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 45. At this juncture, the Assessing Officer obtained information about the sale from the office of the SRO, Theni and concluded that the Assessee had sold to the extent of 15.27 acres. For 9.02 acres, the sale consideration was quantified at Rs.7,08,05,485/- by adopting the sale consideration as per seized material. 46. In the process, the AO computed artificially quantified the sale consideration for the remaining 6.25 acres by adopting average selling price as per the following table at Para 6.11: 47. On the cumulative reasoning / approach of the AO in the assessment order the total sale consideration was worked out at as under: 48. In Para 7.1, the Assessing Officer had quantified the year-wise profit for assessment from the said project as follows: Printed from counselvise.com :-19-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 49. In the first appeal, the Assessee questioned the adoption of the purchase price by resorting to estimation as well question the selling price adopted by the AO on various grounds. In the process, the Assessee had brought to the notice of the appellate authority that the sale quantified by the Assessing Officer included the sales made in the capacity as power holder. The elaborate contentions of the Assessee were rejected after obtaining remand report from the Assessing Officer without providing fair consideration of such objections raised. 50. We find that the approach of the Revenue at various stages as culled out herein before was not primarily based on direct evidence forming part of the search records and the Assessee repeatedly argued that the loose sheets and other seized material relating to the project Electronic City – 2 could not be considered as valid evidence for the purpose of computing income for assessment for the assessment years under consideration. In this regard, the Assessee cited numerous decisions to fortify its theory of reckoning the disputed materials as dumb documents. 51. On the other hand, the ld.DR vehemently supported the working adopted by the Assessing Officer and pleaded for rejecting the grounds raised by the Assessee before us. Printed from counselvise.com :-20-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 52. The facts pertaining to this project were in a way assembled by the Assessing Officer partly taking information / details from the search records, partly from SRO data and for final computation resorted to estimation / extrapolation understandably by applying theory of preponderance of probability. 53. The truncated approach of the Assessing Officer which we refer to as assembling of data for arriving at the profit at Rs.5,15,05,605/- for a turnover of Rs.12,34,28,387/- working around 44% is challenged before us on its correctness by the Assessee in the appeals relating to the assessment years 2009-10 to 2012-13. 54. On the face of it, the approach of the Assessing Officer is not sound enough for arriving at the profit in the context of testing the principles of fairness in taxation and at the same breath the computation adopted by the Assessee had its own deficiencies and inaccuracies as elaborately pointed out by the Revenue in the open court hearing. 55. At this juncture, we refer to a recent decision rendered by this Bench in ITA No.1213/Chny/2025 dated 28.10.2025 arrived the profit percentage at 1.54% in the context of an assessee engaged in the business of construction and selling residential apartments. Even though the said decision taken by this Bench may not apply directly to the facts of the present case where the assessee before us is engaged in the business of plotting and selling housing plots as well helped other owners to get into the project understandably for earning commission income, we find that there is every reason for us reject to the computation of profit arrived at by the Revenue as well as the Assessee for estimating the profit for assessment at a reasonable rate with a view to safeguard the interest of the Revenue as well to end the protracted litigation commencing from the date of search in October 2012. Printed from counselvise.com :-21-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 56. Before we apply the percentage of profit for assessment, we embark upon the methodology for quantifying the turnover from this project Electronic City – 2 and the power sales for 6.21 acres for which the documentary evidence were brought to our notice forming part of the paperbook, while claiming commission income therefrom at 2% is completely ignored by the Assessing Officer while quantifying the turnover for this project at 12.34 crores. 57. There is another component of exchange between the Assessee and Mrs.Manimozhi for a land component of more than 2 Acres forming part of the project making tremendous dent into the computation made by the Assessing Officer. 58. The Assessing Officer had determined the sale consideration of Rs.12,34,28,387/- on three components namely actual sale made by the Assessee, power sale on behalf of the landowners, sale on exchanged land. We find that the profit arrived at on the said turnover for taxation is erroneous and require our interference. 59. The Assessee during the course of the hearing had bifurcated the turnover adopted by the Assessing Officer into the abovementioned three components as follows: S. No. Particulars Extent Bifurcated Amount (%) 1 Actual Sale 702 Rs. 5,67,43,109 /- 45.97% 2 Power sale on behalf of landowners 621 Rs. 5,01,95,827/- 40.67% 3 Sale of exchanged land 204 Rs. 1,64,89,451/- 13.36% 4 TOTAL 1527 Rs. 12,34,28,387/- 100% 60. The mistake in the approach of the Assessing Officer is explicit from the above table furnished by the Assessee and there cannot be uniform profit adoption for assessment and as a consequence we are compelled to interfere in the matter both in the context of arriving at the turnover and reasonable profit for assessment. Printed from counselvise.com :-22-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 61. In order to achieve finality to the dispute, in the peculiar facts and circumstances of the case, we estimate the profit for direct sale on the turnover of Rs.5,67,43,109/- at 5% as against the profit arbitrarily arrived at by the Revenue at 44%, estimate the commission at 2% for the turnover to the tune of Rs.5,01,95,827/- for sales effected on behalf of others by obtaining power of attorney. 62. Insofar as the profit for the third component of land obtained through exchange, we appreciate the stand of the Assessee on the excess cost spent for such exchange to make that land component as part of the project by estimating the profit at 3% of the said turnover of Rs.1,64,89,451/-. 63. The total income assessable from the above project shall be at Rs.43,36,080/- from three different components of land which is tabulated below: 64. In nutshell, based on the above findings and reasoning, the Assessing Officer is directed to assess the profit for the AY 2009-10 to AY 2012-13 as follows: S. No. Asst Year As per AO (%) Proportionate Income to be assessed 1 2009-10 Rs. 55,00,560/- 10% Rs. 4,33,608/- 2 2010-11 Rs. 2,58,52,635/- 47% Rs. 20,37,957/- 3 2011-12 Rs. 1,26,51,289/- 23% Rs. 9,97,298/- 4 2012-13 Rs. 1,10,01,121/- 20% Rs. 8,67,216/- 5 TOTAL Rs. 5,50,05,605/- 100% Rs. 43,36,080/- S. No. Particulars Direct Sale POA Sales Exchange Sales 1 Turnover 5,67,54,898 5,01,86,953 1,64,86,535 2 Rate of profit esimated 5% 2% 3% 3 Income assessable 28,37,745 10,03,739 4,94,596 Printed from counselvise.com :-23-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 65. We are conscious of the fact for recording the reasons for estimating the profit at 5% and in this regard, the Assessee highlighted the following peculiar facts relating to the Electronic City – 2: (1) The project is located 5 Kms from Theni. (2) The plots sold were unapproved at the said point in time facing complexity in marketing. (3) Common roads were created by the Assessee as part of the project and 20 feet mud roads were formed without providing any further amenities. (4) The provision for roads as mentioned above had restricted the saleable area around 60% out of the purchase land / project land which is also admitted by the Assessing Officer. (5) The project was not located near the National Highway and situated in a village road. (6) The large extent (around 25 acres) of the project unlike Digital Garden would have complexities specifically aggregation of land, time consumed for marketing impacting the finance cost drastically. 66. The above factors persuaded us to estimate the profit at 5% for this project relating to the component of direct sale. Insofar as the other two components, we have estimated the profit at a reasonable percentage to give quietus to the long drawn / protracted litigation. (6) VCV Township: 67. The next project, VCV Township assessed in the hands of the Company has an impact in the computation for two assessment years namely assessment year 2012-13 & 2013-14. 68. In the sworn statement recorded on 27.12.2012 during the post search proceedings, the search team posed the question pertaining to the present project by reckoning the profit for assessment at Rs. 2,55,83,936/- on a turnover of Rs.3,10,00,000/- which works to around 82.5%. 69. In the retraction statement filed by the Assessee during the post search enquiry, the project was executed in 42.69 acres of land. It was also stated that Printed from counselvise.com :-24-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 10.18 acres of land were utilized for creating common facilities including mud roads thereby the saleable area was quantified at 31.52 acres. 70. During the assessment year 2012-13, the plots aggregating to 2.12 acres and for the assessment year 2013-14, the plots aggregating to 0.54 acres were stated to be sold as reflected in the retraction statement (Page 371 of the Paperbook). In the retraction statement, the Assessee had also enclosed the computation by arriving at the profit at Page 383 of the Paperbook wherein the profit was quantified at Rs.18,45,003/- on a turnover of Rs.66,50,750/-. 71. The Assessing Officer had arrived at the total sale value and profit for assessment as follows in both the assessment orders (extract from the assessment order for the AY 2012-13): 72. There are certain seized materials referred to by the Assessing Officer pertaining to the above project as per our reading of two assessment orders Printed from counselvise.com :-25-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 and based on those documents the Assessing Officer had quantified the turnover at Rs.3,10,00,000/- for arriving at the profit at Rs.2,55,83,936/-. 73. There are several issues raised by the Assessee pertaining to the purchase cost, development cost and selling price for which the Revenue had taken an average selling rate of Rs.90,000/- per cent and the relevant portion of the assessment order for the assessment year 2012-13 is extracted hereinafter: 74. The average rate of Rs.90,000/- being the sale price is understandably taken from the sworn statement and not from any incriminating material brought to our notice by the Revenue. Similarly, there are discrepancies relating to the extent of sale in the two assessment years. Insofar as the development expenditure and purchase cost the assessing officer had not given any reasons or material either to substantiate his working or to reject the claim of enhanced rates adopted by the Assessee. 75. Applying the rule of consistency, we adopt the turnover determined by the Revenue and apply uniform percentage of 5% as profit in contra distinction to the exorbitant & arbitrary rate of 90% adopted by the Assessing Officer to meet the ends of justice and to give quietus to a long drawn litigation emanating from the search conducted in the month of October 2012. 76. In the peculiar facts and circumstances of the case, the profit from the project shall be @ 5% on the turnover of Rs.3,10,00,000/- amounting to Printed from counselvise.com :-26-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 Rs.15,50,000/- and accordingly, we direct the Assessing Officer to assess the profit for the respective assessment years as follows by deleting the profit estimated at Rs.2,80,93,793/-. S. No. Asst Year Profit arrived by the AO (%) Proportionate Income to be assessed 1 2012-13 Rs. 2,66,65,363/- 94.92% Rs. 14,71,190/- 2 2013-14 Rs. 14,28,430/- 5.08% Rs. 78,810/- 3 TOTAL Rs. 2,80,93,793/- 100% Rs. 15,50,000/- (7) Unexplained investment: 77. The next addition disputed in the present appeals relates to the standalone addition made in the hands of Company by the Assessing Officer for AY 2008-09 & AY 2009-10 relating to cash deficit quantified for the projects carried out by the Assessee. 78. The methodology adopted by the Assessing Officer to extrapolate the cash flow based on his understanding of the projects have been rejected in the earlier paragraphs and in our view, there is no necessity for a separate addition especially in the context of estimating the income determined for various projects carried out by the Assessee. 79. Hence, the purchase cost, the other cost for development would get subsumed into the estimation adopted by the preceding paragraphs thereby fortifying the deletion of those additions from the computation in the respective assessment years. 80. In such peculiar facts and circumstances of the case, we direct the Assessing Officer to delete the additions made in the hands of Company on account of unexplained investment u/s.69 of the Act to the tune of Rs.2,19,76,920/- and Rs.1,43,75,200/- for the assessment years 2008-09 & 2009-10 respectively. Printed from counselvise.com :-27-: I.T.A. Nos.:727 to 730/Chny/2022 & I.T.A.Nos.732 to 737 /Chny/2022 81. In the result, all the four appeals filed by the individual in ITA Nos.:727 to 730/Chny/2022 for A.Ys. 2009-10 to 2012-13 and six appeals filed by the Company in ITA Nos.732 to 737/Chny/2022 for A.Ys. 2008-09 to 2013-14 are partly allowed. Order pronounced in the open court on 21st January, 2026 at Chennai. Sd/- Sd/- (एस एस \u0018व\u001aवने\u001b र\u0018व) (S.S. VISWANETHRA RAVI) \u000eया यक सद य/Judicial Member (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) लेखा सद य/Accountant Member चे\u000eनई/Chennai, 0दनांक/Dated, the 21st January, 2026 SP आदेश क, ) त2ल\u0018प अ3े\u0018षत/Copy to: 1. अपीलाथ(/Appellant 2. )*यथ(/Respondent 3.आयकर आयु4त/CIT– Chennai/Coimbatore/Madurai/Salem 4. \u0018वभागीय ) त न ध/DR 5. गाड& फाईल/GF Printed from counselvise.com "