ITAT Chennai Upholds ₹19.50 Lakh Addition Against Pebblebrook Ecoenergies Over Unexplained Cash Credits
The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) on 26 October upheld an addition of Rs. 19.50 lakh as unexplained cash credit against Pebblebrook Ecoenergies Energy Pvt. Ltd. and dismissed three connected appeals involving Hills Garden Pvt. Ltd., Greenwood Farms Pvt. Ltd. and Avinash Plantations Pvt. Ltd. for Assessment Year 2016-17.
A Bench comprising Accountant Member Inturi Rama Rao and Judicial Member Manu Kumar Giri held that an addition under Section 68 of the Income Tax Act, 1961, can be sustained in an unabated assessment year when seized material supports the addition and the taxpayer fails to explain the source of the cash credits. It observed:
“The addition of Rs.19,50,000/- is supported by material found during the search and is not liable to be deleted merely on the ground that the assessment year is unabated. The assessee has also failed to furnish a satisfactory explanation regarding the nature and source of the cash credits”.
Pebblebrook Ecoenergies had filed its income tax return declaring a loss of Rs. 23,057. Following a search and seizure operation conducted on 16 October 2019 in cases connected with the N.K.V. Krishna Group, the Income Tax Department seized Tally data maintained by the group's accounts manager, Saravana Kumar.
The seized records reflected cash receipts of Rs. 19.50 lakh in the company's bank ledger on 29 March 2016, under the narration “Land Advance Received”.
On 21 March 2024, the Principal Commissioner of Income Tax passed an order under Section 263, directing the Assessing Officer to examine the source of the cash credits. The Assessing Officer subsequently added the entire Rs. 19.50 lakh under Section 68, noting that the company had failed to provide the identities and addresses of the persons allegedly providing the land advances or documentary evidence establishing the source of the receipts.
The Commissioner of Income Tax (Appeals), Chennai-18, upheld the addition and dismissed the company's appeal.
Before the Tribunal, the company challenged the validity of the original assessment order passed under Section 153A read with Section 143(3) and contended that the revision order under Section 263 and the consequential assessment should be set aside.
On the merits, the company argued that the amount represented land advances received in cash, duly recorded in its books of account and disclosed in its audited financial statements. It also contended that Assessment Year 2016-17 was an unabated assessment year and, relying on the Supreme Court's decision in PCIT v. Abhisar Buildwell (P.) Ltd., argued that an addition under Section 153A could not be made without incriminating material found during the search.
The company further sought the benefit of telescoping, arguing that substantial additional income had been considered in settlement proceedings involving other group entities, including Rs. 13 crore in the case of Golden Shelters Pvt. Ltd.
Rejecting the challenge to the consequential assessment, the Tribunal observed that the company had not demonstrated that the revision order under Section 263 had been set aside or had otherwise ceased to operate.
On the addition under Section 68, it found that the seized Tally data and Annexure III specifically recorded the Rs. 19.50 lakh transaction. It also considered the sworn statement of Saravana Kumar and the corroborative statement of N.K.V. Krishna concerning the transactions reflected in the seized material.
The Bench held that the company had failed to establish the identities of the alleged land-advance providers or furnish supporting documentary evidence explaining the source of the cash receipts.
It also rejected the plea for telescoping, finding that the company had not established a factual connection between the specific cash receipts of Rs. 19.50 lakh and the additional income considered in settlement proceedings involving other group entities.
Finding no infirmity in the order of the Commissioner of Income Tax (Appeals), the Tribunal upheld the addition against Pebblebrook Ecoenergies. Applying the same findings to the connected appeals filed by Hills Garden Pvt. Ltd., Greenwood Farms Pvt. Ltd. and Avinash Plantations Pvt. Ltd., it dismissed all four appeals.
Accordingly, the ITAT upheld the addition and dismissed all four appeals.
For Appellant: Rakesh Joshi, CA
For Revenue: R. Anita, CIT