Sonopix Productions Private Limited Vs ACIT (ITAT Hyderabad)
Hyderabad ITAT Remands ₹2.15 Crore Alleged On-Money Addition: Findings in Developer’s Own Appeal Crucial Where Addition Is Based Solely on Documents Seized From Developer
The Hyderabad ITAT in Sonopix Productions Pvt. Ltd. v. ACIT, Central Circle 3(2), ITA No.1138/Hyd/2025, AY 2023-24 considered an addition of ₹2.15 crore towards alleged cash/on-money received by the assessee from the developer, Suchir India Constructions Pvt. Ltd., in connection with the “Giza Polis” project at Kothur. The addition arose entirely from loose sheets found during a survey at the developer’s premises. The assessee’s Managing Director had categorically denied receiving any cash or on-money.
Interestingly, the developer’s Managing Director, Shri Yadugiri Kiran Kumar, also categorically denied having made any cash/on-money payment to the assessee. The Tribunal therefore rejected the assessee’s plea that failure to permit his cross-examination violated natural justice, observing that Revenue had not relied upon his statement for making the addition; rather, the addition was based solely upon the seized documents. Consequently, no prejudice arose from denial of cross-examination.
On merits, however, the Tribunal noted an important circumstance. The very documents forming the sole basis of the ₹2.15 crore addition were seized from the developer, and the developer’s own appeal concerning those documents was still pending before the CIT(A), who had already called for a remand report from the AO.
The ITAT held that the findings ultimately recorded in the developer’s appellate proceedings regarding the “genuineness, nature and evidentiary value” of the seized documents would have a direct bearing on the assessee’s case. To avoid conflicting findings on the very same seized material, the Tribunal restored the issue to the CIT(A) for fresh adjudication after considering the outcome of the developer’s appeal.
Importantly, the ITAT did not delete or uphold the ₹2.15 crore addition on merits. It expressly kept all contentions of both sides open and directed the CIT(A) to decide the matter afresh after giving the assessee adequate opportunity of hearing. The appeal was accordingly allowed for statistical purposes.
Cases Discussed
- SVS Projects India Pvt. Ltd. Vs. ACIT (ITAT Hyderabad), ITA Nos.2139 to 2141/Hyd/2025 dated 30.04.2026
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by Sonopix Productions Private Limited (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-11, Hyderabad (“Ld. CIT(A)”) dated 02.06.2025 for the A.Y. 2023-24.
2. The assessee has raised the following grounds of appeal:
“1. The learned CIT Appeals had erred in confirming the order passed by the Assessing Officer under section 143(2) of the Income Tax Act, 1961.
2. The learned CIT Appels erred in confirming the assessment order passed under section 143(3) which was barred by limitation as per the provisions of section 153 of the Income Tax Act, 1961, and therefore deserves to be quashed.
3. The learned CIT Appeals erred in confirming the order passed by the AO in treating the alleged cash amount of ₹2,15,00,000/- as income from other sources under section 56 of the Income Tax Act, 1961, based solely on uncorroborated and unsigned loose sheet found from a third party’s premises.
4. The authorities erred in law and on facts in making the addition relying solely on a loose sheet (page 166 of Annexure A/SIPL/OFF/01) impounded during survey at Suchir India Constructions Pvt. Ltd., which neither bears the appellant’s signature nor has been corroborated by any independent evidence or financial trail.
5. The assessment was concluded in violation of principles of natural justice as the appellant was not afforded the opportunity to cross-examine the person from whose premises the document was seized or the alleged author of the noting.
6. The learned authorities failed to produce any tangible evidence such as cash trail, utilization, deposit, or corresponding asset creation to support the alleged cash receipt by the appellant.
7. The authorities erred in disregarding binding judicial precedents that Loose Sheets without supporting evidence, especially when not recovered from the assessee’s premises, are not valid basis for making additions.
8. The alleged income has not been found recorded in the books of the appellant, nor has any cash been found or demonstrated to be in the possession or use of the appellant.
9. The learned authorities had completed the assessment without issuing an opportunity of being heard and finalized the order by considering an amount of Rs. 2,15,00,000/- as income from other sources and determined the tax liability as Rs.66,54,025/- and issued a demand notice u/s 156 of Income Tax Act’ 1961.
10. The initiation of penalty proceedings under section 270A and 271DA for alleged cash transaction is premature, arbitrary, and without any legal basis or factual corroboration.
11. The order of learned commissioner of Income -Tax (appeals) is erroneous to the extent it is prejudicial to the appellant.
12. Requested to accept the additional evidences during the course of appeal proceedings. 13. Any other ground that may be urged at the time hearing.”
3. The brief facts of the case are that the assessee is a company, filed its return of income for Assessment Year 2023-24 on 30.12.2023 declaring total income at Nil. In connection with the search and seizure operation conducted under section 132 of the Income-tax Act, 1961 (“the Act”) on 17.08.2022 in the case of Vasavi Group, a survey operation under section 133A of the Act was conducted on 18.08.2022 at the business premises of M/s Suchir India Constructions Private Limited (“the developer”). On the basis of the seized documents found from the premises of the developer, the Learned Assessing Officer(“Ld. AO”) observed that the developer had made cash payments to the assessee in respect of the “Giza Polis” project situated at Kothur, wherein the assessee was the land owner. During the post-survey enquiries, the statement of Shri Arekatla Prasad, Managing Director of the assessee-company, was recorded under section 131 of the Act on 02.02.2023. In the said statement, Shri Arekatla Prasad admitted that the assessee had entered into a development agreement with the developer for development of “Giza Polis” project in respect of land admeasuring 11 acres and 33.25 guntas owned by the assessee. However, he categorically denied having received any cash or on-money from the developer. Based on the seized material, the case of the assessee was selected for complete scrutiny and notice under section 143(2) of the Act dated 14.06.2024 was issued by the Ld. AO. During the course of assessment proceedings, the Ld. AO observed that out of the total cash/on-money reflected in the seized documents, an amount of ₹2,15,00,000 pertained to the year under consideration. Accordingly, the Ld. AO treated the said amount as unexplained receipt in the hands of the assessee and completed the assessment under section 143(3) of the Act vide order dated 12.02.2025 assessing the total income of the assessee at ₹2,15,00,000.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT (A). The Ld. CIT (A) confirmed the addition made by the Ld. AO and dismissed the appeal of the assessee.
5. Aggrieved by the order of the Ld. CIT (A), the assessee is in further appeal before this Tribunal. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that the only issue arising out of the present appeal relates to the addition of ₹2,15,00,000 made by the Ld. AO on account of alleged on-money received by the assessee from the developer. The Ld. AR first raised a legal ground challenging the validity of the assessment order on the ground that despite a specific request made by the assessee, no opportunity of cross-examination of Shri Yadugiri Kiran Kumar, Managing Director of the developer, was provided either by the Ld. AO or by the Ld. CIT (A). Inviting our attention to the last para at page no. 13 of the order of the Ld. CIT (A), it was submitted that the request for cross-examination was specifically raised before the first appellate authority but the same was not acceded to. It was, therefore, contended that the assessment order is liable to be quashed being in violation of the principles of natural justice.
6. On merits, the Ld. AR invited our attention to page nos. 74 and 75 of the paper book and submitted that the impugned documents are merely loose sheets seized from the premises of the Developer i.e. a third party. It was contended that no corroborative evidence has been brought on record by the Revenue to establish that the assessee had actually received any cash from the developer. Therefore, the contents of the loose sheets, in the absence of any independent corroborative evidence, cannot be relied upon for making an addition in the hands of the assessee. It was further submitted that the addition has been made solely on the basis of the seized loose sheets without any supporting evidence. In support of the said contention, reliance was placed on the decision of the Coordinate Bench of this Tribunal in the case of SVS Projects India Pvt. Ltd. Vs. ACIT in ITA Nos.2139 to 2141/Hyd/2025 dated 30.04.2026.
7. Without prejudice to the above submissions, the Ld. AR further submitted that the appeal in the case of the developer is still pending before the Ld. CIT (A) and the Ld. CIT (A) has called for a remand report from the Ld. AO. According to him, the findings recorded in the case of the developer would have a direct bearing on the issue involved in the present appeal. Therefore, he prayed that the issue may be restored to the file of the Ld. CIT(A) for fresh adjudication after considering the findings recorded in the proceedings of the developer.
8. Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities. As regards the legal objection relating to non-grant of cross-examination, the Ld. DR invited our attention to the statement of Shri Yadugiri Kiran Kumar, Managing Director of the developer, placed at page nos. 79 to 90 of the paper book and, in particular, Question Nos.8 and 9 together with the answers thereto appearing at page nos. 81 and 82 of the paper book. It was submitted that Shri Yadugiri Kiran Kumar had categorically denied having made any cash or on-money payment to the assessee. Further, the Ld. AO has not relied upon the said statement while making the impugned addition. According to the Ld. DR, the addition has been made solely on the basis of the seized documents and not on the basis of the statement of the Managing Director of the developer. Hence, there was no occasion for granting cross-examination.
9. On merits, the Ld. DR invited our attention to the seized documents placed at page nos. 74 and 75 of the paper book. It was submitted that the page no. 74 contains complete details of all the plots registered in “Giza Polis” project including plot numbers, area in square yards, registration document numbers and dates of registration. The correctness of these particulars has not been disputed either by the developer or by the assessee. Referring to page no. 75 of the paper book, the Ld. DR submitted that the document records the name of the project, total project area of 33,196 square yards, agreed rate of ₹12,000 per square yard, total consideration payable by the developer to the assessee, bifurcation of the consideration into cheque payments and cash payments, date-wise cheque payments aggregating to ₹6,97,75,000, date-wise cash payments aggregating to ₹7,27,00,000 and the balance amount payable through cheques as well as cash. It was submitted that the entire working contained in the seized document is systematic, internally consistent and there is no discrepancy in any part of the working. He further submitted that the assessee has accepted the correctness of the project details, project area and cheque receipts of ₹6,97,75,000 recorded in the seized document and has disputed only the entries relating to cash payments. Therefore, once the substantial contents of the seized document stand admitted by the assessee, the assessee cannot selectively deny only the cash component without producing any material to discredit the seized document. Accordingly, he prayed for confirmation of the addition.
10. We have heard the rival submissions and perused the material available on record including the case laws relied upon. The first issue requiring our consideration is whether the assessment order is liable to be quashed for non-grant of cross-examination of Shri Yadugiri Kiran Kumar, Managing Director of the developer. We do not find any merit in the aforesaid contention of the assessee. We have carefully gone through the statement of Shri Yadugiri Kiran Kumar placed at page nos. 79 to 90 of the paper book and particularly Question Nos.8 and 9 together with the answers appearing at page nos. 81 and 82, which is to the following effect:
11. On perusal of the above, we find that Shri Yadugiri Kiran Kumar has categorically denied having made any cash or on-money payment to the assessee. Further, the Revenue has also not relied upon the said statement while making the impugned addition. The addition has been made solely on the basis of the seized documents recovered from the premises of the developer. Therefore, in our considered opinion, where no reliance has been placed upon the statement of a witness while making an addition, the question of granting cross-examination of such witness does not arise. Since no adverse inference has been drawn against the assessee on the basis of the statement of Shri Yadugiri Kiran Kumar, the assessee has not suffered any prejudice on account of non-grant of cross-examination. Therefore, we hold that there is no violation of the principles of natural justice in the facts of the present case. Accordingly, the legal ground raised by the assessee is rejected.
12. Coming to the merits of the addition, we find that the Ld. AR has made an alternate submission that the appeal filed by the developer against the assessment order is still pending before the Ld. CIT(A) and that the Ld. CIT(A) has already called for a remand report from the Ld. AO in the case of the developer. According to the Ld. AR, the findings that may ultimately be recorded in the appellate proceedings of the developer would have a direct bearing on the adjudication of the present appeal, since the impugned addition has been made solely on the basis of the seized documents found from the premises of the developer. Having considered the rival submissions, we find considerable force in the alternate contention advanced by the Ld. AR. Admittedly, the very basis of the addition in the hands of the assessee is the seized material recovered from the premises of the developer. As submitted by the Ld. AR, the appellate proceedings in the case of the developer are still pending before the Ld. CIT(A), who has already called for a remand report from the Ld. AO. The findings recorded in the appellate proceedings of the developer with regard to the genuineness, nature and evidentiary value of the seized documents are likely to have a direct bearing on the adjudication of the issue involved in the present appeal. In these peculiar facts and circumstances, in the interest of justice and to avoid conflicting findings on the very same seized material, we deem it appropriate to set aside the impugned issue to the file of the Ld. CIT(A). The Ld. CIT(A) shall adjudicate the issue afresh after taking into consideration the outcome of the appellate proceedings in the case of the developer and after affording adequate opportunity of being heard to the assessee. We make it clear that we have not expressed any opinion on the merits of the addition and all the contentions of both the parties are left open for adjudication before the Ld. CIT(A). Accordingly, the impugned order of the Ld. CIT(A) on this issue is set aside and the matter is restored to the file of the Ld. CIT(A) for fresh adjudication in accordance with law.
13. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 7th August, 2026.
