Assessment Order Passed Beyond Limitation Period Invalid; Rs. 287 Crore Addition Based on Third-Party Seized Material Quashed: ITAT

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has granted major relief to Chennamaneni Mithun Chand by quashing an assessment order that had resulted in an addition of Rs. 287 crore under Section 56(2)(x) of the Income Tax Act. The bench of Vijay Pal Rao (Vice President) and Manjunatha G. (Accountant Member) has observed that the assessment itself was barred by limitation and also made significant observations regarding reliance on third-party seized material and uncorroborated statements. The dispute arose from search and seizure proceedings involving Phoenix Group and Sreenidhi Group, during which an Excel sheet and other documents allegedly recorded cash transactions of ₹405 crore in the name of the assessee. Based on these entries, the Assessing Officer concluded that the assessee had received ₹287 crore during AY 2022–23 and ₹118 crore during AY 2023–24 as unexplained receipts and sought to tax them under Section 56(2)(x) as money received without consideration. According to the department, the alleged cash transactions related to a 60-acre land deal at Moosapet, Hyderabad, involving Honer Group and Gulf Oil Company Limited (GOCL). Revenue authorities relied heavily upon entries found in a seized Excel workbook called “Receipts & Payments 11.04.2022” and statements of individuals associated with Phoenix and Sreenidhi Groups, including Naresh Girisala, who was stated to be handling cash transactions. The assessee strongly disputed the allegations and argued that no cash, unaccounted investment, or undisclosed assets were found during the search conducted in his own case. It was also argued that the alleged incriminating material was found not from his possession but from third parties. The assessee maintained that he had no role in the land transaction and no financial dealings with Phoenix, Sreenidhi, or Honer Groups. He further contended that entries made unilaterally by third parties in electronic records cannot be treated as evidence against him without independent corroboration. A major issue before the Tribunal concerned limitation under Section 153. The Tribunal noted that the assessment year involved was AY 2022–23 and the normal time limit for completing assessment was up to 31 March 2024. Revenue attempted to extend the limitation period on the ground that books and seized materials were handed over later to the jurisdictional Assessing Officer. However, the Tribunal rejected the department's interpretation and held that the exclusion provision under Explanation-1 to Section 153 merely compensates for time lost in obtaining records and cannot provide an additional period beyond what was actually lost within the limitation period. Since only 41 days were lost after commencement of the limitation period, the permissible extension could only move the deadline to 11 May 2024. Since the assessment order was ultimately passed on 27 September 2024, the Tribunal ruled that it was clearly time-barred and invalid. Apart from the limitation issue, the Tribunal also examined the evidentiary basis of the additions. It observed that the entire case rested upon documents found during searches conducted on Phoenix and Sreenidhi Groups and not on material seized from the assessee. The Tribunal pointed out that the alleged land transaction was between Honer Group and GOCL and that the assessee was not shown to be a buyer, seller, or participant in that transaction. Therefore, no explanation was provided by Revenue as to why the assessee would receive such huge cash amounts in relation to a transaction in which he had no established role. The Tribunal further noted that Naresh Girisala, whose statements had been relied upon by the department, had later retracted those statements and during cross-examination denied making cash payments to the assessee. He also claimed that earlier statements were made under pressure during search proceedings. The Tribunal observed that once such statements stood retracted, the department was left primarily with third-party material without independent corroboration. The Tribunal held that the assessment order dated 27 September 2024 was barred by limitation and therefore invalid. The order was set aside, giving substantial relief to the assessee. Case Details Case Title: Chennamaneni Mithun Chand Versus ACIT Citation: JURISHOUR-1300-ITA-2026(HYD) Case No.: ITA Nos.979 & 980/Hyd./2026 Date: 15.05.2026 Counsel For Appellant: Narender Kumar Naik, CIT-DR Counsel For Respondent: Dr. Sachin Kumar, Sr. AR Click Here To Read Order Read More: Decree Can Be Both Preliminary And Final In Substance: Supreme Court Restores Execution Proceedings

Assessment Order Passed Beyond Limitation Period Invalid; Rs. 287 Crore Addition Based on Third-Party Seized Material Quashed: ITAT

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