MADHUSUDAN REDDY PASHAM,HYDERABAD V. ACIT, CIRCLE-9(1), HYDERABAD

ITA 427/HYD/2025

AI Insights

The case involves multiple appeals by Madhusudan Reddy Pasham against the orders of the CIT(A) for the assessment years 2006-2007, 2007-2008, and 2008-2009. The primary issues revolved around additions made by the Assessing Officer under various sections of the Income-tax Act, including unexplained investments and profits from real estate transactions. The Tribunal examined the evidence, including seized materials and cash flow statements, and found discrepancies in how the Assessing Officer and CIT(A) interpreted these documents. The Tribunal's decision involved a detailed analysis of the financial transactions related to real estate and the corresponding legal provisions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791558 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A.P.BABU
• Assessee Lawyers: P. MURALI MOHAN RAO
• Keywords: Set aside; Business income; Additional evidence; Reassessment proceedings; Business expenditure; Corroborative evidences; Unexplained cash credit; Unexplained investment; Cost of acquisition; Document seized; Documents seized; Retraction; Search and seizure; Source of fund
• Section: 143(3); 153A; 68; 69; 37(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “A” BENCH: HYDERABAD BEFORE SHRI MANJUNATHA G, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA.Nos.427, 428 & 429/Hyd./2025 Assessment Years 2006-2007, 2007-2008 & 2008-2009 Madhusudan Reddy Pasham, Hyderabad. PIN – 500 060. PAN AEWPP0306E Telangana. vs. The ACIT, Circle-9(1), Hyderabad. (Appellant) (Respondent) For Assessee : CA, P. Murali Mohan Rao For Revenue : Sri A.P. Babu, Sr. A.R. Ms. U. Mini Chandran, CIT-DR Date of Hearing : 10.09.2025 Date of Pronouncement : 10.12.2025 ORDER PER MANJUNATHA G. : The above three appeals ITA.Nos.427, 428 and 429/Hyd./2025 are filed by a single assessee viz., ‘Madhusudan Reddy Pasham’ against the separate Orders dated 28.02.2025 and 01.03.2025 of the learned CIT(A)-12, Hyderabad, relating to the assessment years 2006-2007, 2007-2008 & 2008-2009, respectively. Since common Printed from counselvise.com 2 ITA.Nos.427, 428 & 429 /Hyd./2025 issues are involved in all these three appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity. 2. First, we take-up appeal ITA.No.427/Hyd./2025 as “lead” appeal, for the assessment year 2006-2007, in which, the assessee has raised the following grounds : 1. “The order of the CIT (Appeals)-12, Hyderabad dated 25-02-2025 is erroneous both en facts and in law to the extent it is prejudicial to the interests of the appellant. 2. The Ld. CIT(A) erred in dismissing the appeal. 3. The learned CIT(A) ought to have appreciate that additions made by the AO must be confined to the incriminating material found during the course of search. 4. The learned CIT(A) ought to have appreciated that the appellant has withdrawn the statement alleged to be given u/s 132(4) vide dated 27.08.2009. 5. The learned CIT(A) ought to have appreciated that the AO erred in making the additions, without scrupulously following the directions of the Hon'ble ITAT vide order dated 21-04-2017. 6. The learned CIT(A) ought to have appreciated that the additions made during the set aside proceedings must be confined to the directions given by the Hon'ble ITAT, and any enhancements in the additions will lead to the violation of directions of Hon'ble ITAT. Printed from counselvise.com 3 ITA.Nos.427, 428 & 429 /Hyd./2025 7. The learned CIT(A) erred in upholding the addition of Rs.1,10,74,435/-towards unexplained investment. 8. The learned CIT(A) ought to have appreciated that the expenditure incurred by the appellant is in the course of ordinary business and the same is allowable u/s 37(1) of the Act. 9. The learned CIT(A) ought to have appreciated that the assessee has submitted the cash flow workings which proves the source of expenditure. 10. The learned CIT(A) ought to have appreciated that the expenditure is recorded in Receipts and Payments statement and stands explained, it cannot be added as unexplained investment. 11. The learned CIT(A) ought to have appreciated that the appellant cannot generate the business income without incurring the expenditure for the same. 12. The learned CIT(A) erred in upholding the addition of Rs.28,00,000/- towards profit earned in sale of land. 13. The learned CIT(A) ought to have appreciated that the profit arises on the land transaction has been duly accounted in the assessee which is evident from the Profit & loss A/c filed before during the course of first appeal proceedings. 14. The learned CIT(A) erred in upholding the addition of Rs.1,00,94,500/- towards un explained cash credits. 15. The learned CIT(A) ought to have appreciated that the cash deposits for the impugned assessment year are nothing but the advances received and sales made by the appellant during the year under consideration. Printed from counselvise.com 4 ITA.Nos.427, 428 & 429 /Hyd./2025 16. The learned CIT(A) ought to have appreciated that the unexplained deposits are nothing but part of business receipts and the invocation of Sec 68 is not applicable. 17. The learned CIT(A) ought to have appreciated that entire profit will be arrived when the venture is completed and as all the lands have not been sold the profit cannot be arrived. 18. Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.” 3. During the course of hearing, CA, P. Murali Mohan Rao, Learned Counsel for the Assessee submitted that, in the grounds of appeal ITA.No.427/Hyd./2025, the assessee has raised general ground nos.1, 2, 5 and 18, which need not be adjudicated, to which, the Learned DR has no objection. We are, therefore, of the view that, ground of appeal nos.1, 2, 5 and 18 need not be adjudicated as they are general in nature. 4. Brief facts of the case are that, the assessee is an individual and engaged in real estate business, filed the original return of income on 24.02.2007 declaring total Printed from counselvise.com 5 ITA.Nos.427, 428 & 429 /Hyd./2025 income of Rs.4,89,000/- for the impugned assessment year 2006-2007. A search and seizure operation u/sec.132 of the Income Tax Act, 1961 [in short “the Act”] was conducted in the residential premises of the assessee on 09.10.2007. Consequent to search, notice u/sec.153A, dated 26.06.2008 was issued to the assessee and in response, the assessee had filed his return of income for the assessment year 2006- 2007 on 18.08.2009, declaring total income of Rs.50,59,365/-. The Assessing Officer passed the assessment order u/sec.143(3) r.w.s.153A of the Income Tax Act, 1961, on 31.12.2009 and the total income of the assessee was assessed at Rs.2,43,88,970/- by making the additions to the income returned i.e., Unexplained investment/deficit cash balance amounting to Rs.89,35,110/-; Profit earned out of real estate transaction amounting to Rs.3,00,000/- and unexplained cash credits u/sec.68 of the Income Tax Act, 1961, amounting to Rs.1,00,94,500/-. Printed from counselvise.com 6 ITA.Nos.427, 428 & 429 /Hyd./2025 4.1. Aggrieved by the assessment order, the assessee filed an appeal before the learned CIT(A) and the Ld. CIT(A) had allowed the appeal of the assessee vide Order no.ITA No.0460, 0462 to 0466/CIT(A)/GNT/09-10 dated 15.06.2011. Aggrieved with the orders of the Ld. CIT(A), the Department went in appeal before the Hon'ble ITAT. The assessee also filed cross appeal before the ITAT on the ground that, the CIT(A) has not accepted the revised computation. Thereafter, the Hon'ble ITAT in it’s combined order bearing Nos.1070 to 1075/Hyd/12 (Department) and 1373 to 1375/Hyd/12 (Assessee) had set-aside the orders of the Assessing Officer and CIT(A) for the impugned three assessment years 2006-07, 2007-08 and 2008-09 and restored the same to the file of the Assessing Officer to examine the facts and determine afresh considering the law on the issues. 4.2. After receiving order of the Tribunal, a notice u/sec.142(1) of the Act, dated 20.08.2018 was issued to the assessee requesting to submit relevant details as directed by Printed from counselvise.com 7 ITA.Nos.427, 428 & 429 /Hyd./2025 the Tribunal. However, the assessee has not responded to the notices. Again on 07.09.2018, another notice u/sec.142(1) of the Act issued. In response, the assessee filed a request letter for adjournment along with copy of cash flow statement. However, as the assessee has not submitted the requisite details with evidences another notice u/sec.142(1) of the Act, dated 12.10.2018 was issued through speed post, but, again the assessee failed to respond to the said notice. To give another Final opportunity, fresh notice u/sec.142(1) of the Act was issued to the assessee on 01.11.2018 and the same was served on assessee through notice server on 03.11.2018. However, the assessee has not filed any reply nor asked for the adjournment. Finally, to ensure compliance summons u/sec.131 of the Act dated 16.11.2018 were issued to the assessee and called-upon the assessee to attend the office on 22.11.2018 with requisite details. In response to the summons, the assessee attended the case on 22.11.2018 and requested for the adjournment as he is not having the requisite details. Considering the request of the assessee the Printed from counselvise.com 8 ITA.Nos.427, 428 & 429 /Hyd./2025 case was adjourned to 27.11.2018, however, on this occasion also, the assessee seek another adjournment. To give fair opportunity, the case was finally adjourned to 03.12.2018. However, on this occasion also, the assessee has not attended the Office nor submitted any details and evidence in support of his claim made before Tribunal. Therefore, the Assessing Officer had given final opportunity to the assessee on 12.12.2018, calling upon the assessee to furnish all details and evidences in terms of the directions of the Tribunal. In reply, the assessee had filed letter dated nil, received in the O/o. Assessing Officer on 19.12.2018. In the said reply, the assessee has not furnished any fresh document nor put-forth any specific arguments in support of any issue. Further, the details and evidences submitted on 19.12.2018, were nothing, but, photocopies of the certain papers, which were earlier submitted, from which, there were no inference could be drawn from the reply produced. Therefore, the Assessing Officer observed that, from the above, it is very much clear that, after giving sufficient time-limit and opportunities, the assessee has not Printed from counselvise.com 9 ITA.Nos.427, 428 & 429 /Hyd./2025 submitted any details and evidence in support his statement and income for the impugned assessment year 2006-2007. Therefore, the Assessing Officer after examining the documents placed on record, made addition on account of unexplained investment at Rs.1,10,74,435/- which is the differential amount on account of payments to brokers and advances to purchase of land etc., [i.e., Rs.2,86,74,435/- (-) Rs.1,76,00,000/-]; addition on account of profit earned out of real estate transaction amounting to Rs.28 lakhs and addition on account of unexplained cash credits u/sec.68 of the Act amounting to Rs.1,00,94,500/- and assessed the total income of the assessee at Rs.2,44,58,020/- vide order dated 24.12.2018 passed u/sec.143(3) r.w.s.153A r.w.s.254 of the Income Tax Act, 1961. 5. Under identical set of facts, for the assessment year 2007-2008, the Assessing Officer has made additions on account of unexplained investment/deficit cash balance amounting to Rs.8,66,20,135/-; addition on account of profit earned out of real estate transactions amounting to Printed from counselvise.com 10 ITA.Nos.427, 428 & 429 /Hyd./2025 Rs.1,79,27,807/-; addition on account of undisclosed profit earned out of real estate transaction amounting to Rs.80 lakhs and addition of unexplained cash credits u/sec.68 of the Act amounting to Rs.2,09,64,300/- and assessed the total income of the assessee at Rs.13,35,12,240/- vide order dated 24.12.2018 passed u/sec.143(3) r.w.s.153A r.w.s.254 of the Income Tax Act, 1961. 6. Similarly, for the assessment year 2008-2009, under identical set of facts, the Assessing Officer has made additions on account of unexplained investment/deficit cash balance amounting to Rs.2,03,91,600/-; addition on account of profit earned out of real estate transactions amounting to Rs.3,44,80,000/-; addition on account of undisclosed profit earned out of real estate transaction amounting to Rs.88 lakhs and addition of unexplained cash credits u/sec.68 of the Act amounting to Rs.8,61,09,145/- and assessed the total income of the assessee at Rs.14,97,80,750/- vide order dated 24.12.2018 passed u/sec.143(3) r.w.s.153A r.w.s.254 of the Income Tax Act, 1961. Printed from counselvise.com 11 ITA.Nos.427, 428 & 429 /Hyd./2025 7. In a nut-shell, the Assessing Officer has made the following additions as per the old assessment order passed u/sec.143(3) r.w.s.153A of the Income Tax Act, 1961 vide order dated 31.12.2019 in the hands of the assessee i.e., Madhusudan Reddy Pasham for the assessment years 2006-2007, 2007-2008 and 2008-2009 and as per the new assessment order dated 24.12.2018 passed u/sec.143(3) r.w.s.153A r.w.s.254 of the Income Tax Act, 1961, pursuant to the directions of the Tribunal. A.Y. Additions made under respective Heads Old Assessment Additions. New Assessment. Additions 2006- 2007 1. Unexplained investment/deficit cash balance 89,35,110 1,10,74,435 2. Profit earned out of real estate transaction 3,00,000 28,00,000 3. Unexplained cash credits u/sec.68 of the IT Act 1,00,94,500 1,00,94,500 2007- 2008 1. Unexplained investment/deficit cash balance 15,23,285 8,66,20,135 2. Profit earned out of real estate transaction 1,37,03,257 1,79,27,807 3. Disallowance of loss 3,35,01,000 -- 4. Undisclosed Profit Printed from counselvise.com 12 ITA.Nos.427, 428 & 429 /Hyd./2025 earned out of real estate transaction 80,00,000 80,00,000 5. Unexplained cash credits u/sec.68 of the IT Act 2,09,64,300 2,09,64,300 2008- 2009 1. Unexplained investment/deficit cash balance 1,30,00,000 2,03,91,600 2. Profit earned out of real estate transaction 3,44,80,000 3,44,80,000 3. Undisclosed Profit earned out of real estate transaction 88,00,000 88,00,000 4. Unexplained cash credits u/sec.68 of the IT Act 8,61,09,145 8,61,09,145 8. Aggrieved by the assessment orders dated 24.12.2018, the assessee preferred appeals before the learned CIT(A). Before the learned CIT(A), during the course of appellate proceedings, the appellant has filed written submissions consisting of copies of revised computation of income, trading and Profit & Loss account and cash flow statement. The learned CIT(A) vide letter dated 06.09.2021 had forwarded the written submissions to the jurisdictional Assessing Officer i.e., ACIT Circle-9(1), Hyderabad to Printed from counselvise.com 13 ITA.Nos.427, 428 & 429 /Hyd./2025 examine the submissions filed by the appellant and to submit a remand report. In response, the Assessing Officer had submitted the remand report through Range Head on 29.01.2025. Further, the assessee had also filed his rejoinder to the remand report. The learned CIT(A) after considering the submissions of the assessee, remand report of the Assessing Officer and rejoinder of the assessee to the remand report, had dismissed the appeals of the assessee for the assessment years 2006-2007, 2007-2008 and 2008- 2009 and sustained the additions made by the Assessing Officer. 9. Aggrieved by the Order of the learned CIT(A), the assessee is now, in appeal before the Tribunal. 10. Ground nos.1 to 6 are general in nature and do not require any specific adjudication. 11. The first issue that came up for our consideration from ground numbers 7 to 11 of the assessee's appeal is addition of Rs. 1,10,74,435/- towards unexplained investment. Printed from counselvise.com 14 ITA.Nos.427, 428 & 429 /Hyd./2025 12. The facts with regard to the impugned dispute are that, during the course of search proceedings on 09.10.2007, certain incriminating materials were found and seized from the premises of the assessee. During the course of assessment proceedings, the A.O. observed that, as per the seized material, the assessee has made various expenditures and advance for purchase of land amounting to Rs. 2,86,74,435/-. Details of analysis of seized material and corresponding payment has been tabulated in page numbers 4 to 6 of the assessment order. The total of some payments aggregating Rs. 2,86,74,435/- was computed by the A.O. The A.O. had also considered the source for the above payment as per the seized materials and also cash flow statement to the tune of Rs. 1,76,00,000/- which includes amount received towards Gachibowli land for Rs. 70,00,000/-, advance received from Shri P. Mahendra Reddy at Rs. 76,00,000/- and advance received from Shri Pratap Reddy at Rs. 30,00,000/-. The difference amount of Rs. 1,10,74,435/- (Rs. 2,86,74,435/- (-) Rs. 1,76,00,000/-) Printed from counselvise.com 15 ITA.Nos.427, 428 & 429 /Hyd./2025 was assessed as unexplained investment under Section 69 of the Income-tax Act, 1961. 13. Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has furnished revised statement of total income, cash flow statement, and other evidences, and argued that, the A.O. has wrongly computed the total payments as per seized documents at Rs. 2,86,74,435/- and made addition of Rs. 1,10,74,435/- even though the A.O. has made additions towards unexplained investments/ deficit cash balance in the original assessment order at Rs. 89,35,110/-. During the course of appellate proceedings, the Ld. CIT(A) has forwarded the written submissions of the assessee along with the evidences to the A.O. for a remand report. In response, the A.O. submitted his remand report on 29.01.2025 and observed that, the assessee has not furnished any additional evidence to explain his case. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of the workings of the Printed from counselvise.com 16 ITA.Nos.427, 428 & 429 /Hyd./2025 unexplained investment by the A.O., sustained additions made towards unexplained investment of Rs. 1,10,74,435/- by holding that, the assessee has not submitted any reply or evidence to explain the contents of seized material and also source for various payments including payments to brokers and advance payment for purchase of land. 14. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal. 15. The learned counsel for the assessee, Shri P. Murali Mohan Rao, C.A., submitted that, the Ld. CIT(A) has erred in sustaining additions made by the A.O. towards unexplained investment of Rs. 1,10,74,435/- without appreciating the fact that, the assessee has explained the source for the above investments by filing relevant cash flow statement and as per the cash flow statement filed by the assessee, the advance towards purchase of land, the other advances and investments were only at Rs. 1,45,22,768/-, but not Rs. 2,86,74,435/-, as computed by the A.O. The Printed from counselvise.com 17 ITA.Nos.427, 428 & 429 /Hyd./2025 learned counsel for the assessee further referring to the order of the Tribunal in ITA No. 1373/Hyd/2012 dated 21.04.2017 and cash flow statement submitted by the assessee, submitted that, the Tribunal had set aside the matter to the file of the A.O. with a direction to compute the income either on the basis of seized material or on the basis of cash flow statement furnished by the assessee if cash flow statement considers all seized material. The assessee has considered all the seized material found during the course of search and prepared a cash flow statement, and as per the said cash flow statement, the assessee has explained the total investments made for purchase of land, other advances and investments. Therefore, making separate additions towards unexplained investment without providing any details is incorrect. The learned counsel for the assessee further referring to the details of analysis of seized material, submitted that, the A.O. has considered each and every seized material found during the course of search and also analysed the payment and found that, the A.O. has considered the total amount referred to in seized Printed from counselvise.com 18 ITA.Nos.427, 428 & 429 /Hyd./2025 documents and worked out to Rs. 2,86,74,435/- towards unexplained investment whereas as per the very same seized material, the assessee has paid the amount to the tune of Rs. 1,45,22,768/- and the remaining amount of Rs. 1,43,51,967/- is not relates to assessee and either pertains to third parties wherever the assessee has paid advance for purchase of land jointly with others. Since the A.O. has not computed the income on the basis of the seized material, the additions made by the A.O. should be deleted. 16. The learned Senior A.R. for the Revenue, Shri A.P. Babu, on the other hand, supporting the orders of the A.O. and Ld. CIT(A), submitted that, the assessee was non- cooperative both at assessment and appellate stage, which is evident from the discussion of the A.O. where the assessee has not furnished any details in response to notices issued by the A.O. to explain the contents of the seized material. Further, during the course of appellate proceedings, the assessee claimed to have furnished cash flow statement along with revised total income statement, Printed from counselvise.com 19 ITA.Nos.427, 428 & 429 /Hyd./2025 but the same has been examined by the A.O. and claimed that, the cash flow statement submitted by the assessee is not supported by necessary evidences. Further the assessee has filed different cash flow statements at different levels, which is evident from the return of income filed by the assessee in response to the notice issued under Section 153A of the Act, cash flow statement filed during original assessment proceedings and cash flow statement filed during reassessment proceedings. Since there are inconsistencies and discrepancies in the cash flow statement filed by the assessee, the A.O. has rightly assessed the income on the basis of seized material. The Ld. CIT(A) after considering the relevant facts has rightly sustained the addition made by the A.O. Therefore, he submitted that, the addition made by the A.O. should be sustained. 17. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the Printed from counselvise.com 20 ITA.Nos.427, 428 & 429 /Hyd./2025 relevant return of income filed by the assessee in response to the notice issued under Section 153A of the Income-tax Act and income declared thereon, the original assessment order passed by the A.O. under Section 143(3) r.w.s. 153A of the Income-tax Act, the direction of the Tribunal in the order in ITA No. 1373/Hyd/2012 dated 21.04.2017 and the subsequent assessment order passed by the A.O. under Section 143(3) r.w.s. 153A dated 24.12.2018. There is no dispute with regard to the fact that in the original assessment order, the A.O. made addition of Rs. 89,35,110/- towards unexplained investment/deficit cash balance and the same has been enhanced to Rs. 1,10,74,435/- in the present assessment proceedings. The A.O. has considered all the seized materials and the amounts referred to therein to arrive at a total payment towards various expenses, including advances to purchase of land, payment to brokers etc. to the tune of Rs. 2,86,74,435/-. The A.O. had also considered source to the tune of Rs. 1,76,00,000/- as per the seized material which includes, sale of Gachibowli land, advance received from P. Printed from counselvise.com 21 ITA.Nos.427, 428 & 429 /Hyd./2025 Mahendra Reddy and advance received from Pratap Reddy aggregating to Rs. 1,76,00,000/- and has arrived at a difference of Rs. 1,10,74,435/- (Rs. 2,86,74,435/- minus Rs. 1,76,00,000/-) and claimed that, the assessee could not offer any explanation with regard to the source of such investment and therefore, assessed the difference of Rs. 1,10,74,435/- under Section 69 of the Income-tax Act, 1961. 18. We have given our thoughtful consideration to the reasons given by the A.O. to make addition of Rs. 1,10,74,435/- under Section 69 of the Act, in light of various arguments of the assessee along with evidence including cash flow statement and we ourselves do not fully subscribe to the reasons given by the A.O. for the simple reason that, the A.O. himself has computed different amount of unexplained investment at different stages of assessment proceedings which is evident from additions made during the original assessment proceedings and additions made during the present assessment proceedings. Further, the A.O. refers to all the payments referred to in Printed from counselvise.com 22 ITA.Nos.427, 428 & 429 /Hyd./2025 the seized material which includes payment for various expenses like payment to brokers, advance for purchase of land, etc. In other words, the A.O. had not given any specific break-up of what is the amount of expenditure incurred by the assessee and what is the amount given for purchase of land. The A.O. has added all the sums referred to in the in seized material and considered total payment of Rs. 2,86,74,435/- and out of which, allowed credit to the extent of source of Rs. 1,76,00,000/- and balance amount of Rs. 1,10,74,435/- treated as unexplained investment. First of all, there is no detail as to the nature of expenditure incurred by the assessee in the workings provided by the A.O. There are no details as to payment of advance for purchase of land to particular person. Therefore, on this count itself, the additions made by the A.O. towards unexplained investment cannot be sustained. 19. Be that as it may. The assessee has furnished workings of seized materials referred to by the A.O. and also compared with the amounts considered by the A.O. and Printed from counselvise.com 23 ITA.Nos.427, 428 & 429 /Hyd./2025 amounts paid by the assessee and reflected in the cash flow statement and difference. The assessee has tabulated the amount referred to in the seized material for the year under consideration and has worked out the amount paid by the assessee and related to his business at Rs. 1,45,22,768/- and balance of Rs. 1,43,51,667/- pertains to third parties on which the assessee is not liable to offer any explanation. Going by the analysis submitted by the assessee, we find that, in few cases, the assessee along with third parties has paid advances for purchase of land and as per the seized material, the name of the other parties is also referred. The assessee considered the payment in equal proportion to the other persons and the only amount pertains to the assessee’s share has been considered as his investment towards advance for purchase of land or expenditure incurred towards payment to broker etc. Since the very same seized material contains details of investment by other person, in our considered view, the A.O. ought to have considered only the share of the assessee towards payment for purchase of land or expenditure incurred towards Printed from counselvise.com 24 ITA.Nos.427, 428 & 429 /Hyd./2025 payment to broker. If we consider the assessee’s share of investment as claimed by the assessee, the net payment made by the assessee for the year under consideration is only at Rs. 1,45,22,768/- as against this, the A.O. himself has considered the source to the tune of Rs. 1,76,00,000/-. If we consider the source available for explaining the investment, still the assessee is having excess source and therefore, in our considered view, the additions made by the A.O. towards unexplained investment of Rs. 1,10,74,435/- cannot be sustained. Since the assessee has made payment of Rs.1,45,22,768/- out of the source of Rs.1,76,00,000/-, the reasons given the A.O. to treat the balance amount of Rs.1,10,74,435/- as unexplained investment cannot be sustained. The Ld. CIT(A) without appreciating the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside the order of the Ld. CIT(A) on this issue and direct the A.O. to delete the addition of Rs. 1,10,74,435/- made under Section 69 of the Income-tax Act, 1961. Printed from counselvise.com 25 ITA.Nos.427, 428 & 429 /Hyd./2025 20. The next issue that came up for our consideration from ground numbers 12 and 13 of the assessee's appeal is addition of Rs. 28,00,000/- towards profit earned in sale of land at Gachibowli. 21. During the course of set-aside assessment proceedings, the assessee has submitted cash flow statement in which it is stated that, Gachibowli land was sold for Rs. 70,00,000/-. The relevant document for sale of land was also found in the seized material at Annexure AMR/PMR/RES/11 at page nos. 85 to 88. As per the said agreement, the assessee has entered into purchase of land admeasuring of Ac.1.0 guntas from Smt. S. Lakshmi, vide agreement dated 23.09.2003, for a total consideration of Rs. 42,00,000/- and has paid advance payment of Rs. 10,00,000/- only. Later on, the said land was directly sold to the prospective buyer for a consideration of Rs. 70,00,000/-. By virtue of this transaction, the assessee has earned profit of Rs. 28,00,000/-. During the course of assessment proceedings, the A.O. called upon the assessee to submit relevant details Printed from counselvise.com 26 ITA.Nos.427, 428 & 429 /Hyd./2025 with evidence, but the assessee has not submitted any details. Therefore, the A.O. made addition of Rs. 28,00,000/- towards profit earned from sale of land at Gachibowli. 22. On appeal, the Ld. CIT(A) confirmed the additions made by the A.O., holding that, the assessee could not furnish any evidence to substantiate revised statement of total income filed along with profit and loss account showing sale of land at Gachibowli and also any other evidences to justify its case. 23. The learned counsel for the assessee submitted that, the Ld. CIT(A) has erred in sustaining the addition made by the A.O. of Rs. 28,00,000/- towards profit from sale of land without appreciating the fact that the assessee has considered said sale of Gachibowli land in the profit and loss account and after all expenditure has reported net profit of Rs. 4,02,190/- and the same has been offered to tax in the return of income filed for the relevant assessment year. The learned counsel for the assessee further submitted Printed from counselvise.com 27 ITA.Nos.427, 428 & 429 /Hyd./2025 that the additions made by the A.O. was already a part of regular books of accounts of the assessee and the same has been duly offered to tax. The assessee has consistently shown such transactions as business income and reported profit after all expenditure. The A.O. without allowing any expenditure simply made additions towards profit earned from sale of land at Rs. 28,00,000/- even though the said income has already been suffered due to tax. Therefore, he submitted that, the additions made by the A.O. should be deleted. 24. The learned Senior A.R. for the Revenue, on the other hand, supporting the order of the A.O. and the Ld. CIT(A) submitted that, the assessee himself has admitted sale of land at Gachibowli for Rs. 70,00,000/- and the purchase cost of land was Rs. 42,00,000/- and the difference amount of Rs. 28,00,000/- was the profit earned by the assessee out of sale of land at Gachibowli. Although the assessee claims that the above sale has been included in the regular books of accounts and the profit has been offered to tax, but the Printed from counselvise.com 28 ITA.Nos.427, 428 & 429 /Hyd./2025 fact remains that the assessee has filed different set of financial statements at different levels and the authenticity of the financial statements cannot be accepted. The A.O. and the Ld. CIT(A), after considering the relevant facts, has rightly made addition towards profit earned from sale of land at Gachibowli and thus, the order of the Ld. CIT(A) should be upheld. 25. We have heard both parties, perused the material available on record and had gone through the authors of the authorities below. There is no dispute with regard to the sale of land at Gachibowli for Rs. 70,00,000/- and the purchase of above land from Smt. S. Lakshmi for a consideration of Rs. 42,00,000/-. In fact, both the purchase and sales have been reported by the assessee in their financial statements and claimed that, the assessee has earned only profit of Rs.4,02,190/- out of the sale of land at Gachibowli. The A.O. made addition of Rs. 28,00,000/- towards profit earned from sale of land on the ground that, as per the documents available on record, the assessee has Printed from counselvise.com 29 ITA.Nos.427, 428 & 429 /Hyd./2025 sold the land for a consideration of Rs. 70,00,000/-, whereas the purchase cost of the above land was Rs. 42,00,000/-. 26. We find that, although the assessee claims to have included the sale of land in its financial statements and books of account, but the financial statements and books of account of the assessee cannot be accepted because, the assessee has filed different sets of financial statements at different stages. At the same time, we cannot accept the profit computed by the A.O. at Rs. 28,00,000/- towards the sale of Gachibowli land, because the A.O. has not allowed any expenditure against the profit earned from the sale of land. It is an admitted fact that the assessee was in the real estate business and was engaged in development and buying and selling of land. The A.O. himself has noted from the seized material that the assessee was engaged in the business of purchase and sale of land and in the course, has paid advances to various persons for purchase of land and also incurred various expenditures including payment Printed from counselvise.com 30 ITA.Nos.427, 428 & 429 /Hyd./2025 to brokers. Since the assessee is into the real estate business, the possibility of incurring certain expenditure including payment to brokers cannot be ruled out. Further, the seized material found during the course of search itself indicates various expenditures, including payment to brokers and further, the A.O. has also considered payments to brokers at Rs. 7,28,160/- in the profit and loss account. Although the financial statements of the assessee are not considered for the purpose of assessment for lack of supporting evidence, in our considered view, the A.O. should have allowed deduction towards certain expenditure, including payments to brokers more particularly when the A.O. himself has noted form the seized material that the assessee has incurred expenditure towards payment to borkers. Since the assessee has earned profit of Rs. 28,00,000/- from sale of land at Gachibowli, in our considered view, certain portion of expenditure needs to be allowed against the profit. Since both the parties, neither the assessee nor the A.O. has conclusively proved that, there is no expenditure related to said profit, in our Printed from counselvise.com 31 ITA.Nos.427, 428 & 429 /Hyd./2025 considered view, 50% of profit should be allowed as expenditure incurred by the assessee to earn profit. Therefore, we direct the A.O. to allow deduction of expenditure of Rs. 14,00,000/- and restrict the addition towards profit from sale of land at Gachibowli to Rs. 14,00,000/-. In other words, out of the addition made by the A.O. for Rs. 28,00,000/-, the assessee gets a relief of Rs. 14,00,000/- and the balance amount of Rs. 14,00,000/- is sustained. 27. The next issue that came up for our consideration from ground numbers 14 to 17 of the assessee's appeal is addition of Rs. 1,00,94,500/- towards unexplained cash credits under Section 68 of the Income-tax Act, 1961. 28. During the course of assessment proceedings, the A.O. noticed that, the assessee had made cash deposits into various bank accounts, including bank accounts held with Development Credit Bank and Kotak Mahindra Bank. The A.O. has tabulated total amount of cash deposits in both Printed from counselvise.com 32 ITA.Nos.427, 428 & 429 /Hyd./2025 the bank accounts at Rs. 1,00,94,500/-. The A.O. further noted that, in the cash flow statement submitted by the assessee as on 19.12.2018, the above cash deposited into bank account are not considered. Therefore, taking note of relevant cash flow statement submitted by the assessee, the A.O. made addition of Rs. 1,00,94,500/- towards cash deposits as unexplained cash credits under Section 69 of the Income-tax Act, 1961. 29. On appeal, the Ld. CIT(A) confirmed the additions made by the A.O. on the ground that the assessee could not satisfactorily explain the cash flow statements along with relevant evidence. 30. The learned counsel for the assessee, referring to the cash flow statements, submitted that, the assessee has prepared cash flow statements in respect of various bank accounts, including Syndicate Bank Account, Development Credit Bank Account, and Kotak Mahindra Bank Account, and arrived at a total cash deposit of Rs. 1,15,31,500/- and Printed from counselvise.com 33 ITA.Nos.427, 428 & 429 /Hyd./2025 as against this, the assessee has sufficient cash withdrawals from the very same bank accounts to the tune of Rs. 2,40,54,700/-. The A.O. conveniently considered the cash deposits into bank account as unexplained investment and has ignored the cash withdrawals from the very same bank account, even though, the bank statements clearly indicate the cash withdrawals on various occasions. Since there are sufficient cash withdrawals from the very same bank account, unless the A.O. makes out a case that, the cash withdrawals are for some other purposes, the availability of cash to explain cash deposits, cannot be rejected. Therefore, he submitted that, the additions made by the A.O. towards unexplained cash credits on cash deposited into bank account should be deleted. 31. The learned Senior A.R. for the Revenue, on the other hand, supporting the order of the Ld. CIT(A), submitted that, the assessee could not substantiate the cash flow statements prepared in respect of various bank accounts with relevant evidences. Further, the assessee could not Printed from counselvise.com 34 ITA.Nos.427, 428 & 429 /Hyd./2025 match one-to-one cash withdrawals and cash deposits into the very same bank account during the assessment proceedings, which is evident from the assessment order, where the assessee did not furnish or prepare statements for the bank accounts for verification by the A.O. Since the cash flow statements are not authenticated one and not backed by any evidence, the A.O. has rightly considered the cash deposits ignoring the cash withdrawals from the very same bank account. The Ld. CIT(A), after considering the relevant facts, has rightly sustained the addition made by the A.O. because, the assessee could not file any evidences to substantiate his case. Therefore, he submitted that, the additions made by the A.O. and sustained by the Ld. CIT(A) should be upheld. 32. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the relevant additions made by the A.O. towards cash deposit into the bank accounts at Development Credit Bank (DCB) Printed from counselvise.com 35 ITA.Nos.427, 428 & 429 /Hyd./2025 and Kotak Mahindra Bank. The A.O. has considered the cash deposits into above two banks on the ground that, the above cash deposits are not included in the cash flow statements prepared by the assessee for the year under consideration. It was the argument of the assessee that the assessee has prepared cash receipts and cash payments in respect of Syndicate Bank, DCB, and Kotak Mahindra Bank, and as per the analysis of the bank statements, for a period from April 2005 to March 2006, the assessee has made cash deposits of Rs. 1,15,31,500/-. As against this, the assessee has withdrawn cash from the very same bank accounts to the tune of Rs. 2,40,54,700/-. The assessee has furnished analysis of bank statements and as per the Chart filed by the assessee, there are cash deposits and cash withdrawals in the DCB and Kotak Mahindra Bank, which is evident from the relevant bank account statements which is available in the paper book filed by the assessee. The A.O. conveniently has taken cash deposits into bank account of Rs. 1,00,94,500/-. However, he ignored the cash withdrawals from the very same bank account, which is Printed from counselvise.com 36 ITA.Nos.427, 428 & 429 /Hyd./2025 more than the cash deposits into bank account. Since there are sufficient cash withdrawals from the very same bank accounts, which is in excess of the amount cash deposited into bank account considered by the A.O., and further, the A.O. has not made out a case that the cash withdrawn from the bank has been spent for any other purposes, in our considered view, the explanation of the assessee with regard to source for cash deposits into bank account out of cash withdrawals from the very same bank account should be accepted. The A.O. without appreciating the relevant facts has simply made addition of Rs.1,00,94,500/- under Section 69 of the Act. The Ld. CIT(A), without appreciating the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside the order of Ld. CIT(A) on this issue and direct the A.O. to delete additions made towards cash deposits of Rs. 1,00,94,500/- under Section 69 of the Income-tax Act, 1961. 33. In the result, the appeal filed by assessee in ITA No.427/Hyd/2025 for A.Y. 2006-07 is partly allowed. Printed from counselvise.com 37 ITA.Nos.427, 428 & 429 /Hyd./2025 ITA No.428/Hyd/2025 for A.Y. 2007-08. 34. Ground nos.1 to 6 are general in nature and require no separate adjudications. 35. The first issue that came up for our consideration from ground nos.7 to 11 of the assessee’s appeal is addition of Rs. 8,66,20,135/- towards unexplained investment. 36. During the course of assessment proceedings, the A.O. noted from the seized material found during the course of search that, the assessee has made various payments towards expenses in the nature of payment to brokers, advances to purchase of land, etc. to the tune of Rs. 14,32,20,135/-. The A.O. has analyzed the seized material from A/PMR/Res/1 to A/PMR/Res/13 and has worked out total expenditure of Rs. 14,32,20,135/- and the details of the same has been produced in pages 4 to 7 of the assessment order. The A.O. had also considered the source for the above said payment from the very same seized Printed from counselvise.com 38 ITA.Nos.427, 428 & 429 /Hyd./2025 material to the tune of Rs. 5,66,00,000/-, which includes receipts from sale of Mansanpalli land for Rs. 3,15,00,000/-, sale of Saidabad land for Rs. 45,00,000/-, sale of Gudimalkapur land for Rs. 1,08,00,000/-, sale of Dubacherla land for Rs. 78,00,000/- and refund of advances of Rs. 20,00,000/-. The A.O. has worked out the difference of Rs. 8,66,20,135/- (Rs. 14,32,20,135/- – Rs. 5,66,00,000/-) and the difference has been treated as unexplained investment under Section 69 of the Income-tax Act, 1961. 37. Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has furnished revised statement of total income, cash flow statement, and other evidences, and argued that the A.O. has wrongly computed total payments as per seized documents at Rs. 14,32,20,135/- and made addition of Rs. 8,66,20,135/- even though the assessee has furnished material to show that the actual payments made by the assessee were different from what has been Printed from counselvise.com 39 ITA.Nos.427, 428 & 429 /Hyd./2025 computed by the A.O. During the course of appellate proceedings, the Ld. CIT(A) forwarded the written submissions of the assessee along with the evidences to the A.O. for a remand report. In response, the A.O. submitted his remand report and observed that, the assessee has not furnished any additional evidence to explain his case. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of the workings of unexplained investment prepared by the A.O., sustained the additions made towards unexplained investment of Rs. 8,66,20,135/- by holding that the assessee has not submitted any reply or evidence to explain the contents of seized material and also the basis for various payments including payments to brokers and advances for purchase of land. 38. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal. Printed from counselvise.com 40 ITA.Nos.427, 428 & 429 /Hyd./2025 39. The learned counsel for the assessee submitted that, the Ld. CIT(A) has erred in sustaining additions made by the A.O. towards unexplained investment of Rs. 8,66,20,135/- without appreciating the fact that the assessee has explained the source for the above investments by filing relevant cash flow statement and other evidences. He further submitted that, the A.O. has wrongly considered the total expenditure at Rs. 14,32,20,135/- on the basis of seized material although the assessee has actually made payments which are much less than the amount worked out by the A.O. The learned counsel further submitted that, the receipts from sale of Mansanpalli land, Saidabad land, Gudimalkapur land, Dubacherla land, as well as the refund of advances aggregating to Rs. 5,66,00,000/- have been duly explained and supported, and therefore the difference arrived at by the A.O. does not represent unexplained investment. He also argued that the A.O. has considered several items which pertain to third parties and not to the assessee, and consequently the additions made towards unexplained investment are liable to be deleted. Printed from counselvise.com 41 ITA.Nos.427, 428 & 429 /Hyd./2025 40. The learned Senior A.R. for the Revenue, on the other hand, supporting the orders of the A.O. and Ld. CIT(A), submitted that, the assessee was non-cooperative both at assessment and appellate stages and did not furnish proper details in response to notices issued by the A.O. He further submitted that, the cash flow statement furnished by the assessee was not supported by proper evidence and that the assessee has furnished different cash flow statements at different stages, which created ambiguity. Therefore, the A.O. has rightly assessed the income on the basis of seized material and computed unexplained investment at Rs. 8,66,20,135/-, and the Ld. CIT(A) has correctly sustained the addition. 41. We have heard both parties, perused the material available on record and had gone to the orders of the authorities below. The A.O. had computed a sum of Rs. 14,32,20,135/- towards various expenditures, including payment to brokers, advance payment for purchase of land, Printed from counselvise.com 42 ITA.Nos.427, 428 & 429 /Hyd./2025 etc., on the basis of seized material, and the same was tabulated at page nos. 4 to 7 of the assessment order. The A.O. had also considered the source to the tune of Rs.5,66,00,000/- from the very same seized material towards sale of land, advances from sale of Mansanpalli land for Rs. 3,15,00,000/-, sale of Saidabad land for Rs. 45,00,000/-, sale of Gudimalkapur land for Rs. 1,08,00,000/-, sale of Dubacherla land for Rs. 78,00,000/- and refundable advances for Rs. 20,00,000/-. The A.O. computed the difference of Rs. 8,66,20,135/- and the same has been assessed as unexplained investment under Section 69 of the Income-tax Act, 1961. 42. The assessee has furnished a cash flow statement and claimed that, the A.O. has wrongly computed total payments as per the seized material at Rs. 14,32,20,135/-, but in fact the actual payment of the assessee related to his business is only at Rs. 12,84,22,745/-. The assessee has furnished a Chart explaining each and every page of seized documents with reference to the amount considered by the Printed from counselvise.com 43 ITA.Nos.427, 428 & 429 /Hyd./2025 A.O., payment by the assessee and recorded in cash flow statement, and the amount not pertains to the assessee and pertains to third parties. The assessee has computed third party payment at Rs. 1,47,97,390/- and upon perusal of the relevant payments, we find that, in some cases, the assessee has entered into agreement for purchase of land and paid advance along with third parties like in earlier year. The A.O. has considered the entire amount as per the seized material to the share of the assessee, even though the other two parties are having equal amount of share in the property and investment. Since the documents clearly show the investment by the assessee and the third party and the entire amount as considered by the A.O. on the basis of the seized material cannot be accepted. Since the assessee has analysed the seized material and compared with amounts considered by the A.O. and the exact amount related to the assessee, the difference amount of Rs.1,47,97,390/- should be excluded from the amount of investments/expenditure of Rs.14,32,20,135/- computed by the A.O. If we exclude the amount related to the third party at Rs. 1,47,97,390/-, the Printed from counselvise.com 44 ITA.Nos.427, 428 & 429 /Hyd./2025 net amount of total expenditure of the assessee as per the seized material works out to Rs. 12,84,22,745/-. Further, if we accept the assessee’s argument of investment as per seized material of Rs. 12,84,22,745/-, the assessee needs to explain the source for the above investment. The A.O. has accepted the source to the tune of Rs. 5,66,00,000/- towards the sale of lands and refund of advance from various persons in the assessment order. If we consider the source to the tune of Rs. 5,66,00,000/-, the assessee needs to explain the balance amount of Rs. 7,18,22,745/- towards various payments and expenditure as admitted by the assessee himself. The assessee has furnished a cash flow statement and in the cash flow statement, the assessee has considered the source in the form of sale of land, refund of advances and also the advance received from Shri Moinuddin for Rs. 1,20,00,000/-, Dhatri Constructions for Rs. 3,00,50,000/-, and from S. Ramachandra Reddy for Rs. 1,85,00,000/-, and claimed that, the above advances were part of the material found during the course of search. Printed from counselvise.com 45 ITA.Nos.427, 428 & 429 /Hyd./2025 43. As we have already noted in the earlier year, the assessee has furnished a different set of cash flow statements at different stages of proceedings, although the assessee has considered the source accepted by the A.O. in the cash flow statements, but still the assessee needs to explain the advances claimed to have received with relevant evidences. Although the assessee claims that, the above advances from three persons are from the very same seized material, but the facts are not clear. If the assessee's contention is accepted and as per the seized material, the assessee has received advances from Shri Moinuddin for Rs. 1,20,00,000/-, Dhatri Constructions for Rs. 3,00,50,000/-, and from S. Ramachandra Reddy for Rs. 1,85,00,000/-, the assessee gets source to the tune of Rs. 6,05,50,000/-. Further, the assessee has also considered cheque deposit of Rs. 1,33,67,500/- to explain the advances towards purchase of land and other advances towards investment. We are not sure whether the said cheque payments are part of seized material or regular books of accounts of the assessee. This fact also needs to be examined by the A.O. Printed from counselvise.com 46 ITA.Nos.427, 428 & 429 /Hyd./2025 Since the assessee claims source to the tune of Rs. 7,39,17,500/- (i.e. Rs. 1,20,00,000/- + Rs. 3,00,50,000/- + Rs. 1,85,00,000/- + Rs. 1,33,67,500/-), which is in excess of the shortfall or difference computed by the A.O. for Rs. 7,18,22,745/-, then the additions made by the A.O. towards unexplained investment stands fully explained. However, since the facts with regard to advances claimed to have been received by the assessee from various persons are emanating from the seized material or not and further, the other credit considered by the assessee for Rs. 1,33,67,500/- towards cheque deposit also needs to be examined by the A.O., in our considered view, this issue needs to be examined by the A.O. for further verification. Thus, we set aside the issue of addition towards unexplained investment under Section 69 of the Act for Rs. 7,18,22,745/- and direct the A.O. to verify the claim of the assessee towards advance received from the above three persons to explain the source of investment and decide the issue as per law. In case the assessee is able to satisfy the A.O. with relevant evidences, then A.O. is directed to Printed from counselvise.com 47 ITA.Nos.427, 428 & 429 /Hyd./2025 consider the explanation of the assessee and delete the addition made towards unexplained investment under Section 69 of the Income-tax Act, 1961. 44. The next issue that came up for our consideration from ground no.12 of the assessee’s appeal is addition of Rs.1,79,27,807/- towards profit earned from sale of land. 45. During the course of set-aside proceedings, the assessee has submitted a cash flow statement, in which it is stated that, Dubacherla land was sold for Rs. 78,00,000/- and Mansenpalli land was sold at Rs. 3,15,00,000/-. Further, as per the seized material and latest cash flow statement submitted by the assessee on 28.09.2018, Dubacherla land was sold at Rs. 78,00,000/- and the purchase cost of the above land was stated at Rs. 21,35,450/-. The copy of the said agreement dated 06.10.2003 was also seized vide Annexure A/PMR/Res/07, page nos.99–102. The A.O., on the basis of the seized material coupled with cash flow statement filed by the Printed from counselvise.com 48 ITA.Nos.427, 428 & 429 /Hyd./2025 assessee, has computed the profit from sale of Dubacherla land at Rs. 56,64,550/- (Rs.78,00,000/- (-) Rs.21,35,450/-). Similarly, the assessee has entered into Sale-cum-GPA for 45 acres of land, which was registered in assessee's son’s name, for a total consideration of Rs. 3,15,00,000/- vide document No. 21506/2006, 21507/2006 and 21508/2006. The assessee originally purchased total land admeasuring 151 acres vide agreement of Sale-cum-GPA dated 30.06.2006 from Amarkant Saxena, Dilip Saxena and Ashok Saxena, for a consideration of Rs. 5,87,00,000/- and the copy of the said agreement was seized vide Annexure A/PMR/Res/10, page nos. 71–84. In the cash flow statements submitted by the assessee on 19.12.2018, the cost of purchase of land at Mansenpalli was stated at Rs. 6,05,01,000/-. This purchase includes Rs. 18,01,000/- for registration of 45 acres of land. The A.O. after considering the total purchase of land and registration expenses, has worked out the cost of purchase of 45 acres of land at Rs. 1,92,36,643/-. The assessee has considered the sale consideration of Rs. 3,15,00,000/-. The A.O. deducted the Printed from counselvise.com 49 ITA.Nos.427, 428 & 429 /Hyd./2025 cost of purchase of land at Rs. 1,92,36,643/- and arrived profit from sale of 45 acres of land at Mansenpalli for Rs. 1,22,63,367/-. Thus, the A.O. made addition towards profit on sale of land at Rs. 1,79,27,917/- (Rs. 56,64,550/- + Rs. 1,22,63,367/-). 46. On appeal, the Ld. CIT(A) confirmed the additions made by the A.O. on the ground that the assessee could not justify the cash flow statements furnished during the course of assessment proceedings and the appellate proceedings with relevant evidences. 47. The learned counsel for the assessee, Shri P. Murali Mohan Rao, C.A., submitted that, the Ld. CIT(A) erred in sustaining additions made by the A.O. towards profit from sale of land separately, even though, the assessee has considered sale of land at Dubacherla and Mansenpalli, land including Gudimalkapur land and Saidabad land, in his profit and loss account and has declared net loss of Rs. 3,00,00,000/-. The learned counsel for the assessee further Printed from counselvise.com 50 ITA.Nos.427, 428 & 429 /Hyd./2025 referring to various evidences submitted that, the assessee has considered sale consideration as computed by the A.O., however reported net loss after considering the purchase cost of land and other expenses. However, the A.O. only considered sale consideration and allowed purchase cost without considering other expenses incurred by the assessee. Therefore, he submitted that, a reasonable amount of profit may be estimated from the sale of above land. 48. The learned CIT-DR for the Revenue, Ms. U. Mini Chandran, on the other hand, supporting the order of the Ld. CIT(A), submitted that, the assessee has filed revised trading, profit and loss account and claimed that, he has incurred loss from the sale of land. The cash flow statements and revised profit and loss account filed by the assessee are not substantiated with relevant evidences. On the other hand, the evidences available with the A.O. clearly show that, the assessee has earned profit from sale of land at Dubacherla and Mansenpalli. Since the assessee has Printed from counselvise.com 51 ITA.Nos.427, 428 & 429 /Hyd./2025 failed to explain the above transactions with relevant evidences, the A.O. has rightly assessed the profit as per the documents. The Ld. CIT(A), after considering the relevant submissions, has rightly sustained the additions made by the A.O. Therefore, she submitted that, the additions made by the A.O. should be upheld. 49. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has sold land at Dubacherla for Rs. 78,00,000/- and also sold 45 acres of land at Mansenpalli for Rs. 3,15,00,000/-. It is also an admitted fact that the assessee had originally purchased 151 acres of land under a Sale-cum-GPA for Rs. 5,87,00,000/- and, out of the said land, 45 acres had been registered in the name of the assessee’s son for the above consideration. Further, the cost of purchase of 45 acres has been determined at Rs. 1,92,36,643/-. On the basis of the seized material and the cash flow statement, the A.O. has computed profit from Printed from counselvise.com 52 ITA.Nos.427, 428 & 429 /Hyd./2025 Mansenpalli land at Rs. 1,22,63,367/- and profit from Dubacherla land at Rs. 56,64,550/-, thereby arriving at total profit of Rs. 1,79,27,917/-. Although the assessee claims that, the above transactions have been included in the profit and loss account and that the assessee has declared net profit after considering expenditure incurred in connection with the real estate business, the revised financial statements filed at different stages could not be substantiated with relevant evidences. At the same time, the seized material clearly indicates that the assessee has incurred various expenditures including payments to brokers, liaisoning activities, registration expenses and other incidental charges. Therefore, merely because the cash flow statement and financial statements were not accepted, it cannot be held that no expenditure was incurred in connection with these sale transactions. Accordingly, in our considered view, 50% of the profit computed by the A.O. in respect of Dubacherla and Mansenpalli should be allowed as expenditure and the balance 50% is sustained. Therefore, out of the addition Printed from counselvise.com 53 ITA.Nos.427, 428 & 429 /Hyd./2025 made by the A.O. for Rs. 1,79,27,807/-, the assessee gets a relief of Rs. 89,63,958/- and the balance amount of Rs. 89,63,959/- is sustained. 50. Insofar as the undisclosed profit earned out of real estate transactions as admitted by the assessee in his statement in Question No. 13 of his statement recorded under Section 132(4) of the Income-tax Act, we find that, the assessee has clearly admitted profit from sale of land at Gudimalkapur and Saidabad, and the same has been considered in the cash flow statements filed along with the revised trading, profit and loss account filed during the course of reassessment proceedings. Although the assessee claims that, he has incurred loss from sale of the above lands, but the fact remains that the revised profit and loss account filed by the assessee is not substantiated with relevant evidences. Since we have already estimated profit from sale of land in case of Dubacherla land and Masanapalli land, in our considered view, a similar treatment has to be given towards profit earned by the Printed from counselvise.com 54 ITA.Nos.427, 428 & 429 /Hyd./2025 assessee out of sale of Gudimalkapur and Saidabad lands. The A.O. has made an addition of Rs. 80,00,000/- towards profit from the sale of above two lands on the basis of the assessee’s statement, however not considered the expenditure related to the said transactions, even though the assessee has incurred various expenditures towards payment to brokers, etc. Since the seized material itself shows expenditure incurred by the assessee towards sale of land, in our considered view, a reasonable amount of expenditure should be allowed against the profit earned from sale of land at Gudimalkapur and Saidabad. Consistent with the view taken by us in respect of Dubacherla and Mansenpalli lands, we consider it reasonable to allow 50% of the profit as expenditure. Thus, out of the addition made by the A.O. towards undisclosed profit earned from sale of lands at Gudimalkapur and Saidabad land, we allow relief to the assessee to the tune of Rs.40,00,000/- and the balance amount of Rs.40,00,000/- is confirmed. Printed from counselvise.com 55 ITA.Nos.427, 428 & 429 /Hyd./2025 51. The next issue that came up for our consideration from ground nos. 15 to 18 of assessee’s appeal is addition of Rs. 2,09,64,300/- towards unexplained cash credits being deposited into bank accounts under Section 69 of the Income-tax Act, 1961. 52. During the course of assessment proceedings, the A.O. noticed substantial cash deposits in the assessee’s bank accounts maintained with Development Credit Bank and Kotak Mahindra Bank during the financial year 2006–07. As per the A.O., cash deposits of Rs. 1,50,000/- were made in Development Credit Bank and Rs. 2,08,14,300/- were made in Kotak Mahindra Bank, aggregating to Rs. 2,09,64,300/-. The A.O. issued notices calling upon the assessee to explain the source of these deposits. Since the assessee did not furnish any explanation with supporting documentary evidence and the cash flow statement did not include these deposits, the A.O. treated the above amount as unexplained under Section 69 of the Income-tax Act, 1961 and made the addition accordingly. Printed from counselvise.com 56 ITA.Nos.427, 428 & 429 /Hyd./2025 53. On appeal, the assessee contended that, the cash deposits represented business advances; however, no supporting agreements, invoices, ledgers or evidences from buyers were furnished. The Ld. CIT(A) observed that, the seized material and financial statements examined by the A.O. did not reveal any sales or transactions justifying such deposits and the cash flow statement also did not include these receipts. The Ld. CIT(A) further noted contradictions in the assessee’s financial statements and, in the absence of any documentary explanation for the sources of cash, sustained the addition of Rs. 2,09,64,300/- and dismissed grounds 15 to 18. 54. The learned counsel for the assessee, referring to the cash flow/funds flow statements, submitted that, the addition made by the A.O. under Section 69 is contrary to the directions of the Hon’ble ITAT, which had specifically directed the A.O. to compute income only on the basis of incriminating material found during the course of search, whereas the present addition is based merely on regular Printed from counselvise.com 57 ITA.Nos.427, 428 & 429 /Hyd./2025 bank statements which were already available during scrutiny and do not form part of the seized incriminating material. Further, it was submitted that, the A.O. has incorrectly computed deposits by taking Rs. 15,00,000/- instead of Rs. 1,50,000/- for Development Credit Bank and Rs. 1,94,64,300/- instead of Rs. 1,89,64,300/- for Kotak Mahindra Bank and the correct total deposits aggregate only to Rs. 1,91,14,300/-. It was further submitted that, there were cash withdrawals of Rs. 1,71,23,103/- from the very same bank accounts, which were utilized for brokerage, commission and other business expenditure, as evident from the funds flow statement filed for the year under consideration. 55. The Ld. CIT-DR, on the other hand, supporting the orders of the A.O. and Ld. CIT(A), submitted that, the assessee could not substantiate the cash flow statement with any documentary evidence and could not establish a clear one-to-one nexus between withdrawals and deposits. It was submitted that, the assessee failed to substantiate its claim of advances or business receipts with books of Printed from counselvise.com 58 ITA.Nos.427, 428 & 429 /Hyd./2025 account or evidences and, therefore, the A.O. rightly made the addition under Section 69. The Ld. CIT(A), after considering the relevant facts, had correctly sustained the addition. 56. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. The A.O. has made addition of Rs. 2,09,64,300/- towards unexplained cash credits on the ground that, the assessee could not explain the source for cash deposits made into Development Credit Bank and Kotak Mahindra Bank. It is the contention of the assessee that the A.O. has wrongly computed the deposits in both the bank accounts and the actual deposits aggregate only to Rs. 1,91,14,300/- and that there are cash withdrawals of Rs. 1,71,23,103/- from the very same bank accounts. Further, in earlier year the assessee was having excess cash withdrawal when compared to cash deposits and such excess cash withdrawal is available to explain the shortfall for the year under consideration. The assessee has Printed from counselvise.com 59 ITA.Nos.427, 428 & 429 /Hyd./2025 furnished analysis of bank statements and cash flow/funds flow statements demonstrating that, cash deposits and cash withdrawals are part of the same business cycle and that there is sufficient availability of cash to explain the deposits. The A.O. has conveniently taken only the deposits for the purpose of Section 69 addition and has ignored the cash withdrawals from the very same bank accounts. Since there are sufficient cash withdrawals from the very same bank accounts, which substantially cover the cash deposits, and since the A.O. has not made out a case that such cash withdrawals were utilized for any other purposes, in our considered view, the explanation of the assessee with regard to source for cash deposits out of cash withdrawals from the very same bank accounts deserves to be accepted. The A.O., without appreciating the relevant facts, has mechanically made the addition and the Ld. CIT(A), without appreciating the relevant facts, simply sustained the addition. Accordingly, we set aside the order of the Ld. CIT(A) and direct the A.O. to delete the addition made under Section 69 of the Income-tax Act, 1961. Printed from counselvise.com 60 ITA.Nos.427, 428 & 429 /Hyd./2025 57. Ground No. 19 raised by the assessee is with regard to carry forward of loss of Rs. 3,35,01,000/-. Since the additions made by the A.O. on account of unexplained cash credits have already been deleted while adjudicating grounds nos. 15 to 18, the returned loss as claimed by the assessee stands restored. Accordingly, this ground becomes consequential and does not require any separate adjudication. 58. In the result, the appeal filed by the assessee for A.Y. 2007-08 is partly allowed for statistical purposes. ITA No.429/Hyd/2025 for A.Y. 2008-09 59. Ground nos.1 to 6 are general in nature and requires no specific adjudication and as such, the same are dismissed. Printed from counselvise.com 61 ITA.Nos.427, 428 & 429 /Hyd./2025 60. The first issue that came up for our consideration from ground numbers 7 to 11 of the assessee's appeal is addition of Rs. 2,03,91,600/- towards unexplained investment being payment to brokers, advances to purchase of land, etc., as per the seized documents. 61. The facts with regard to the impugned dispute are that during the course of search proceedings, certain incriminating materials were found and seized from the premises of the assessee. During the course of assessment proceedings, the A.O. observed that, as per the seized material, the assessee has made various expenditures and advances for purchase of land amounting to Rs. 3,28,91,600/-. Details of analysis of seized material and corresponding payment has been tabulated in the assessment order. The total of some payments aggregating Rs. 3,28,91,600/- was computed by the A.O. The A.O. had also considered the source for the above payment as per the seized materials to the tune of Rs. 1,25,00,000/- being amount received towards sale of Vattinagulapally land. The Printed from counselvise.com 62 ITA.Nos.427, 428 & 429 /Hyd./2025 difference amount of Rs. 2,03,91,600/- (Rs. 3,28,91,600/- (-) Rs. 1,25,00,000/-) was assessed as unexplained investment under Section 69 of the Income-tax Act, 1961. 62. Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has furnished revised statement of total income, cash flow statement, and other evidences, and argued that, the A.O. has wrongly computed the total payments as per seized documents at Rs. 3,28,91,600/- and made addition of Rs. 2,03,91,600/-. During the course of appellate proceedings, the Ld. CIT(A) has forwarded the written submissions of the assessee along with the evidences to the A.O. for a remand report. In response, the A.O. submitted his remand report and observed that, the assessee has not furnished any additional evidence to explain his case. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of the workings of the unexplained investment by the A.O., sustained additions made towards unexplained investment Printed from counselvise.com 63 ITA.Nos.427, 428 & 429 /Hyd./2025 of Rs. 2,03,91,600/- by holding that, the assessee has not submitted any reply or evidence to explain the contents of seized material and also source for various payments including payments to brokers and advance payment for purchase of land. 63. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal. 64. The learned counsel for the assessee submitted that, the Ld. CIT(A) has erred in sustaining additions made by the A.O. towards unexplained investment of Rs. 2,03,91,600/- without appreciating the fact that, as per the revised analysis of the seized material, only Rs. 1,34,95,600/- pertains to the assessee and the remaining amount of Rs. 2,03,96,000/- relates to third parties wherever the assessee had jointly paid advances for purchase of land with others. The learned counsel further referring to the revised analysis of seized material submitted that, the A.O. has considered the total amount referred to in seized documents and Printed from counselvise.com 64 ITA.Nos.427, 428 & 429 /Hyd./2025 worked out Rs. 3,28,91,600/- towards unexplained investment whereas as per the very same seized material, the assessee has paid the amount to the tune of Rs. 1,34,95,600/- and the remaining amount pertains to third parties. Since the A.O. has not computed the income on the basis of the seized material in its proper perspective, the additions made by the A.O. should be deleted. 65. The Ld. CIT-DR for the Revenue, on the other hand, supporting the orders of the A.O. and Ld. CIT(A), submitted that, the assessee was non-cooperative both at assessment and appellate stage, which is evident from the discussion of the A.O. where the assessee has not furnished any details in response to notices issued by the A.O. to explain the contents of the seized material. It was further submitted that, the assessee has filed different workings at different stages and therefore the same cannot be relied upon. Since there are inconsistencies and discrepancies in the workings filed by the assessee, the A.O. has rightly assessed the income on the basis of seized material. The Ld. CIT(A) after Printed from counselvise.com 65 ITA.Nos.427, 428 & 429 /Hyd./2025 considering the relevant facts has rightly sustained the addition made by the A.O. Therefore, she submitted that, the addition made by the A.O. should be sustained. 66. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the assessment order passed by the A.O. There is no dispute with regard to the fact that the A.O. has considered all the seized materials and the amounts referred to therein to arrive at total payment towards various expenses, including advances to purchase of land, payment to brokers etc. to the tune of Rs. 3,28,91,600/-. The A.O. had also considered source to the tune of Rs. 1,25,00,000/- and arrived at a difference of Rs. 2,03,91,600/- (Rs. 3,28,91,600/- minus Rs. 1,25,00,000/-) and assessed the same under Section 69 of the Income-tax Act, 1961. 67. We have given our thoughtful consideration to the reasons given by the A.O. to make addition of Rs. 2,03,91,600/- under Section 69 of the Act, in light of Printed from counselvise.com 66 ITA.Nos.427, 428 & 429 /Hyd./2025 various arguments of the assessee and we ourselves do not fully subscribe to the reasons given by the A.O. for the simple reason that, the A.O. has not given any specific break-up of what is the amount of expenditure incurred by the assessee and what is the amount given for purchase of land. The A.O. has added all the sums referred to in the seized material and considered total payment of Rs. 3,28,91,600/- and out of which allowed credit to the extent of source of Rs. 1,25,00,000/- and balance amount of Rs. 2,03,91,600/- treated as unexplained investment. There are no details as to the nature of expenditure and no details as to payment of advance for purchase of land to particular person. Therefore, on this count itself, the additions made by the A.O. towards unexplained investment cannot be sustained. 68. Be that as it may. The assessee has furnished workings of seized materials referred to by the A.O. and has worked out the amount pertaining to him at Rs. 1,34,95,600/- and the balance amount of Rs. 2,03,96,000/- pertains to third Printed from counselvise.com 67 ITA.Nos.427, 428 & 429 /Hyd./2025 parties on which the assessee is not liable to offer any explanation. Going by the analysis submitted by the assessee, we find that, in few cases, the assessee along with third parties has paid advances for purchase of land and as per the seized material, the name of the other parties is also referred. The assessee considered the payment in equal proportion and only his share has been considered as his investment. Since the very same seized material contains details of investment by other persons, in our considered view, the A.O. ought to have considered only the share of the assessee. If we consider the assessee’s share of investment at Rs. 1,34,95,600/- and the source already considered by the A.O. along with other explained credits available on record, the assessee is having excess source and therefore the additions made by the A.O. towards unexplained investment of Rs. 2,03,91,600/- cannot be sustained. The Ld. CIT(A) without appreciating the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside the order of the Ld. CIT(A) on this issue and Printed from counselvise.com 68 ITA.Nos.427, 428 & 429 /Hyd./2025 direct the A.O. to delete the addition of Rs. 2,03,91,600/- made under Section 69 of the Income-tax Act, 1961. 69. The next issue that came up for our consideration from ground no. 12 of the assessee's appeal is the addition of Rs. 3,44,80,000/- towards profit earned from sale of land at Lemuru. 70. During the financial year relevant to A.Y. 2008-09, the assessee has sold land at Lemuru for a total consideration of Rs. 3,93,50,000/- and admitted total profit of Rs.28,70,000/- from the sale transaction. The assessee has claimed that, the cost of purchase of the said land was Rs. 3,64,80,000/-. During the course of the set-aside proceedings, the assessee has been requested to submit complete details of purchase and sale of the land along with documentary evidences. However, after giving various opportunities, the assessee did not furnish all the relevant details with supporting documents. The A.O., therefore, considered the cost of purchase of land as per the seized Printed from counselvise.com 69 ITA.Nos.427, 428 & 429 /Hyd./2025 documents A/PMR/Res/03, page no.2 and A/PMR/Res/4 page nos. 7 to 19 and the total of such cost was Rs. 48,70,000/-. The A.O. after considering relevant details has computed profit form sale of land at Lemuru for Rs. 3,93,50,000/- and added to the total income. 71. On appeal, the learned CIT(A) sustained the addition made by the A.O. 72. Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before us. 73. The learned counsel for the assessee, referring to the revised Trading, Profit and Loss Account filed by the assessee for the year ending 31.03.2008, submitted that, the assessee has considered the sale proceeds of land at Lemuru along with the opening stock-in-trade and purchases during the year and reported nil profit. Further, the assessee had also computed stand alone profit from sale of land at Lemuru and after considering cost of Rs. 3,64,80,000/-, reported net profit of Rs. 28,70,000/-. All Printed from counselvise.com 70 ITA.Nos.427, 428 & 429 /Hyd./2025 these evidences, including copies of purchase and sale deeds and the revised accounts, were available on record before the A.O., however, the A.O. conveniently taken the cost as per seized documents and ignored the other documentary evidence filed by the assessee, including the relevant copies of deeds for purchase of lands and other expenses incurred by the assessee. Therefore, he submitted that the addition made by the A.O. towards profit from sale of land at Lemuru should be deleted. 74. The Ld. CIT-DR for the Revenue, on the other hand, supporting the order of the A.O. and the learned CIT(A), submitted that, the assessee did not furnish satisfactory evidence in support of the revised Trading, Profit and Loss Account showing nil profit from sale of land at Lemuru. Further, the assessee has also failed to file relevant evidences in support of purchase cost of Rs. 3,64,80,000/- to arrive at profit from sale of land at Rs.28,70,000/-. In absence of relevant details, the A.O. and Ld. CIT(A) has Printed from counselvise.com 71 ITA.Nos.427, 428 & 429 /Hyd./2025 rightly made addition towards profit from sale of land and thus, the order of Ld. CIT(A) should be upheld. 75. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the sale consideration received for Rs. 3,93,50,000/- for sale of land at Lemuru. In fact, the assessee has admitted the said sale consideration during the set-aside assessment proceedings as well as reassessment proceedings, which is evident from the cash flow statement filed by the assessee. The dispute is only with regard to the cost of purchase of the above land. The A.O. has considered the cost of land at Rs. 48,70,000/- as per the seized documents, whereas the assessee has claimed that, the actual cost of purchase of land at Lemuru was Rs. 3,64,80,000/-. The assessee has considered the cost of land as per the seized documents and other evidence filed before the A.O. including relevant copies of sale deeds for purchase of lands. However, the A.O. has considered only cost as per the seized documents and Printed from counselvise.com 72 ITA.Nos.427, 428 & 429 /Hyd./2025 ignored the other evidences filed by the assessee. Since the documents filed by the assessee clearly show the cost of purchase of land at Lemuru for Rs.3,64,80,000/-, in our considered view, the A.O. ought to have accepted the profit reported by the assessee for Rs.28,70,000/-. Even though the assessee has filed nil profit as per revised profit and loss account, but the said profit and loss account cannot be accepted without there being any substantive evidences. Since the A.O. has made addition by taking only cost as per seized documents, ignoring the other evidence filed by the assessee and further, the other evidence filed by the assessee clearly shows cost of land at Rs. 3,64,80,000/-, the profit earned by the assessee for Rs.28,70,000/- alone can be taxed. Further, the A.O. has taxed entire profit earned from the sale of land even though the assessee claims that, he has incurred various expenditure towards payment to brokers and other expenses. We find that, in earlier year also, we have considered the very same issue and after considering relevant seized material, we find that, the assessee has incurred certain expenditure towards Printed from counselvise.com 73 ITA.Nos.427, 428 & 429 /Hyd./2025 payment to brokers and other expenses in relation to his business of real estate and by considering the relevant facts has directed the A.O. to estimate 50% profit earned from business as expenditure incurred for earning the income. Therefore, for this year also, we direct the A.O. to allow 50% profit of the profit as expenditure and tax balance only 50% profit from sale of lands. In other words, the assessee gets relief of 50% out of profit declared for Rs.28,70,000/-. The Ld. CIT(A) without appreciating relevant facts, simply sustained the additions made by the A.O. Thus, we set aside the order of Ld. CIT(A) on this issue and direct the A.O. to assess profit from sale of land at Lemuru at Rs. 14,35,000/- as against the addition made at Rs. 3,44,80,000/-. 76. The next issue that came up for our consideration from Ground Nos. 13 and 14 of the assessee’s appeal is undisclosed profit from sale of land at Vattinagulapalli. 77. During the course of search proceedings, the assessee admitted the profit on sale of land situated at Printed from counselvise.com 74 ITA.Nos.427, 428 & 429 /Hyd./2025 Vattinagulapalli. As per the statement recorded under Section 132(4) of the Income-tax Act, dated 20.11.2007, the assessee admitted profit of Rs. 88,00,000/- on sale of the said land. As per the details available in the seized material, the assessee had purchased the said land for Rs. 37,00,000/- and the same was sold for Rs. 1,25,00,000/- during the very same financial year relevant to A.Y. 2008– 09. Since the assessee is engaged in the business of real estate, the A.O. was of the view that the said transaction cannot be treated as a mere investment transaction and the profit arising therefrom has to be treated as business income. During the course of set-aside proceedings, the assessee was requested to furnish complete details of purchase and sale of land along with supporting documentary evidences. However, the assessee failed to submit any satisfactory evidences in support of his claim. Accordingly, the A.O. treated the profit of Rs. 88,00,000/- arising from sale of Vattinagulapalli land as undisclosed business income and added the same to the total income of the assessee. Printed from counselvise.com 75 ITA.Nos.427, 428 & 429 /Hyd./2025 78. On appeal, the assessee contended that, the transaction relating to the sale of Vattinagulapalli land was already recorded in the regular books of account as business income and that the sworn statement recorded under Section 132(4) was subsequently retracted. The Ld. CIT(A), however, observed that, the admission made by the assessee in the sworn statement recorded under Section 132(4) is a strong piece of evidence and the retraction made subsequent thereto without any corroborative evidences cannot be accepted. The Ld. CIT(A) further observed that, the seized documents clearly indicate the purchase of land for Rs. 37,00,000/- and sale of the same for Rs. 1,25,00,000/- and that the assessee failed to establish that the profit of Rs. 88,00,000/- was already offered to tax in the regular books of account. Accordingly, the Ld. CIT(A) upheld the action of the A.O. and sustained the addition of Rs. 88,00,000/-. Printed from counselvise.com 76 ITA.Nos.427, 428 & 429 /Hyd./2025 79. The learned counsel for the assessee submitted that, the assessee is engaged in the business of real estate and has incurred various expenditures towards brokerage, development expenses, liaison charges, site expenses and other incidental charges in connection with the sale of Vattinagulapalli land. It was further submitted that, what can be brought to tax is only the real income earned by the assessee after allowing the expenditure incurred in connection with the said transaction and not the gross profit. It was further submitted that, even in the absence of complete supporting evidences, reasonable estimation of expenditure is required to be made considering the nature of the real estate business carried on by the assessee. Therefore, the learned counsel prayed for reasonable relief to be granted to the assessee. 80. The learned CIT-DR for the Revenue, on the other hand, supporting the orders of the A.O. and the Ld. CIT(A), submitted that, the assessee has categorically admitted the profit of Rs. 88,00,000/- in his sworn statement and that Printed from counselvise.com 77 ITA.Nos.427, 428 & 429 /Hyd./2025 the same is based on seized material. It was further submitted that, the assessee failed to establish the exact expenditure incurred in connection with the sale of land by producing documentary evidences. Therefore, the A.O. was justified in bringing the entire profit of Rs. 88,00,000/- to tax as undisclosed business income and the Ld. CIT(A) has rightly sustained the same. 81. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has sold land situated at Vattinagulapalli for a consideration of Rs. 1,25,00,000/- and had purchased the same for Rs. 37,00,000/-, thereby resulting in profit of Rs. 88,00,000/-. It is also an admitted fact that the assessee is engaged in the business of real estate. The seized material found during the course of search clearly indicates that, the assessee has incurred various expenditures including payments to brokers, development expenses, liaison charges, registration expenses and other Printed from counselvise.com 78 ITA.Nos.427, 428 & 429 /Hyd./2025 incidental charges in connection with real estate transactions. Therefore, merely because the assessee could not fully substantiate the actual expenditure incurred with documentary evidences, it cannot be held that no expenditure was incurred at all in earning the above profit from sale of land. 82. In view of the above discussion, in our considered view, a reasonable amount of expenditure is required to be allowed against the profit earned by the assessee from sale of land at Vattinagulapalli. Since neither the assessee nor the A.O. could conclusively establish the exact expenditure incurred and the seized material itself shows incurring of various expenditures in real estate transactions, we consider it reasonable to allow 50% of the profit earned by the assessee as expenditure. Accordingly, out of the addition of Rs. 88,00,000/- made by the A.O. towards undisclosed profit earned from sale of land at Vattinagulapalli, the assessee is allowed relief to the extent of Rs. 44,00,000/- and the balance amount of Rs. 44,00,000/- is sustained. Thus, the order of the Ld. CIT(A) is modified to this extent Printed from counselvise.com 79 ITA.Nos.427, 428 & 429 /Hyd./2025 and the A.O. is directed to restrict the addition to Rs. 44,00,000/-. 83. The next issue that came up for our consideration from Ground Nos. 15 to 18 of the assessee’s appeal relates to the addition of Rs. 8,61,09,145/- towards unexplained cash credits under Section 69 of the Income-tax Act, 1961. 84. During the course of assessment proceedings, the A.O. noticed that, in the bank account of the assessee, various cash deposits and other credits aggregating to Rs. 8,61,09,145/-. The A.O. further noted that, the assessee has made cash deposits of Rs. 57,69,000/- in Development Credit Bank Account No.02710200000365 and further sum of Rs. 8,61,09,145/- in Axis Bank Account No.515010200000833. The A.O. further noted that, the above cash deposits and credits are not considered in the cash flow statement submitted by the assessee on 19.12.2018. During the course of set aside proceedings, the assessee was asked to explain the source for cash deposits with documentary evidence. Since the assessee has not filed Printed from counselvise.com 80 ITA.Nos.427, 428 & 429 /Hyd./2025 evidence, the A.O. has made addition of Rs. 8,61,09,145/- under Section 69A of the Income-tax Act. 85. On appeal, the Ld. CIT(A) sustained the additions made by the A.O. by holding that the assessee could not furnish relevant evidence to prove the source for deposits and other credits into bank account. 86. Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before us. 87. The learned counsel for the assessee submitted that, the Ld. CIT(A) erred in sustaining the additions made by the A.O. towards cash deposits and other credits into Development Credit Bank and Axis Bank account without appreciating the fact that, the assessee has explained the credits in Development Credit Bank out of cash withdrawals from the very same bank account by filing relevant receipts and payments. The learned counsel for the assessee further submitted that, in respect of Axis Bank account no. 5150102000000833, the above bank account does not Printed from counselvise.com 81 ITA.Nos.427, 428 & 429 /Hyd./2025 belong to the assessee and in fact, the said account is in the name of M/s. Madhu Infotech, but not in the name of the assessee. Further, the A.O. has also considered the credits in the bank account which are received from foreign remittances and the same has already been considered in regular books. Since the credits considered by the A.O. in Axis Bank does not pertain to the assessee, and further the credits in Development Credit Bank has already been explained out of known sources of income or receipts, the addition made by the A.O. should be deleted. 88. The learned CIT-DR for the Revenue, on the other hand, supporting the order of the learned CIT(A), submitted that, the assessee had filed different sets of cash flow statements at different stages, which is evident from the revised cash flow statement filed by the assessee. In the absence of supporting evidences, the A.O. has rightly rejected the financial statements due to lack of evidentiary value. Further, the assessee claims that, the Axis Bank account No. 5150102000000833 is not belongs to the assessee. Printed from counselvise.com 82 ITA.Nos.427, 428 & 429 /Hyd./2025 However, the fact is not clear whether the account in the name of M/s. Madhu Infotech is the proprietary concern of the assessee or any other concern. Since the bank account is in the name of M/s. Madhu Infotech and not in the name of the assessee, this fact may be verified by the A.O. to decide the issue. Therefore, she submitted that, this issue should be restored to the file of A.O. for further verification and to decide in accordance with law. 89. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. The A.O. has considered the cash deposits and others credits in Development Credit Bank and Axis Bank. The bank account held with Development Credit Bank is in the name of the assessee and in the said bank, the A.O. has considered cash deposits of Rs. 57,69,000/-. The assessee has filed cash flow statement along with receipt and payment account of Development Credit Bank and as per the details submitted by the assessee for the financial year 2007–08, the assessee has made cash Printed from counselvise.com 83 ITA.Nos.427, 428 & 429 /Hyd./2025 deposits of Rs. 61,15,562/- which includes cash deposits of Rs. 57,69,000/- in Development Credit Bank and cash deposits of Rs. 3,21,562/- into Axis Bank. As against this, the assessee has huge cash withdrawals from Development Credit Bank and Axis Bank for Rs. 3,65,12,782/-. Since the cash withdrawals from the above bank accounts are in excess of cash deposits into Development Credit Bank and further, the A.O. has not made out a case that such cash withdrawals in earlier accounts had spent for any other purpose, in our considered view, the explanation of the assessee with regard to source for cash deposits into bank account out of previous withdrawals should be accepted. Therefore, we direct the A.O. to delete the addition made towards cash deposits into Development Credit Bank for Rs. 57,69,000/-. 90. Coming to cash deposits and other credits in Axis Bank account No. 5150102000000833 for Rs. 8,03,40,145/-. The assessee has furnished relevant bank account statement held with Axis Bank and upon perusal of the relevant bank account statement, we find that, the said bank account is Printed from counselvise.com 84 ITA.Nos.427, 428 & 429 /Hyd./2025 held in the name of M/s. Madhu Infotech. The assessee claims that, the said bank account does not belong to the assessee and its business affairs and if at all any credits or cash deposits are found in the said bank account, the bank account holder should explain the same. We find that, there is no dispute with regard to the argument of the assessee that the Axis Bank account is in the name of M/s. Madhu Infotech. However, the facts are not clear as to whether M/s. Madhu Infotech is a proprietary concern of the assessee or belongs to any other person or any partnership firm which can be considered separately. Since the facts are not clear and the A.O. has considered the bank account held in the name of another person, in our considered view, these facts need to be verified by the A.O. to ascertain the ownership of the bank account. Further, the A.O. had also considered various credits, in the above bank account including foreign inward remittances through US Dollars and the assessee claims that, the above credits have already been explained by the above firm. Since there are disputes about the ownership of the account and also the credits Printed from counselvise.com 85 ITA.Nos.427, 428 & 429 /Hyd./2025 considered by the A.O. in the bank account, in our considered view, this issue needs to be verified by the A.O. with reference to the relevant evidences filed by the assessee. Thus, we set aside this issue to the file of the A.O. and direct the A.O. to verify the claim of the assessee in the light of the relevant bank account statement held in the name of M/s. Madhu Infotech and also various other credits considered by the A.O. including foreign inward remittances. The A.O. is also directed to consider the cash flow statement filed by the assessee explaining the source for credits in the bank account and decide the issue as per law. 91. In the result, the appeal of assessee in ITA No.429/Hyd/2025 for A.Y. 2008-09 is partly allowed for statistical purposes. Printed from counselvise.com 86 ITA.Nos.427, 428 & 429 /Hyd./2025 92. To sum up, appeals of assessee in ITA Nos.427/Hyd/2025 is partly allowed and ITA Nos. 428 and 429/Hyd/2025 are partly allowed for statistical purposes. Order pronounced in the open Court on 10.12.2025. Sd/- Sd/- [RAVISH SOOD] [MANJUNATHA G] JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 10th December, 2025 TYNM Copy to 1. Madhusudan Reddy Pasham, Hyderabad – 500 060. C/o. P. Murali & Co. Chartered Accountants, 6-3-655/1/3, Somajiguda, Hyderabad - 500 082. 2. The ACIT, Circle-9(1), Hyderabad. 3. Pr. CIT-4, Hyderabad. 4. The DR ITAT “A” Bench, Hyderabad. 5. Guard File. //By Order// Printed from counselvise.com "