2024 (4) TMI 348 - AT - Income Tax

Assessment u/s 153C - undisclosed receipts as allegedly received by the assessee - addition made towards undisclosed income based on the seized materials and Sworn statement of persons (from whose possession the material was seized) with regard to the contents of the said seized material - evidentiary value of statement recorded in search - CIT(A) deleted addition - HELD THAT - As seized material was in the nature of dumb document which did not contain complete and unambiguous information to arrive at such a conclusion that the assessee was in receipt of the payments found noted therein against the name OPS Ramesh . There was no corroborative evidence to support and supplement the details in the seized material to conclusively establish that the name OPS Ramesh found in the seized material refers to the assessee only. There was no corroborative evidence to prove that the payments noted in the seized material have actually materialized and transfer of money has actually taken place between the concerned parties. In view of all these reasons, the addition of alleged receipts by the assessee from M/s SRS Mining has rightly been deleted by Ld. CIT(A). We endorse the view of Ld. CIT(A), in this regard. Upon perusal of the contents of the aforesaid seized material, it could be noted that the name of the assessee did not appear in any of the relevant loose sheets taken into consideration by the AO while drawing such an inference.Though the name of the assessee was not found noted in any of the relevant seized loose sheets and the names of OPS Ramesh or Ramesh were found noted only in some of the seized loose sheets, AO held that the entries in the said seized loose sheets reflected the transactions of the assessee only by giving the reasoning that the assessee was able to earn money on account of his official position as PWD Minister and distributed the same through M/s SRS Mining for political gain on account of the control exercised by the PWD department over sand quarry mining activity in the State of Tamilnadu and in view of the fact that M/s SRS Mining controlled the entire sand mining activities in the state. The reasoning given by the AO only tantamount to a wild allegations and a sweeping statement which is not substantiated by any evidence. There is no place for such surmises and conjectures in making an assessment. The above factual findings remain uncontroverted before us and therefore, we concur with aforesaid factual findings of Ld. CIT(A). So far as the statement of Shri. K. Srinivasulu recorded u/s 132(4) is concerned, he merely stated that OPS Ramesh found in the seized notebook denotes ' PA to OPS . However, Shri K. Srinivasulu did not explain or elaborate in the said statement regarding what the acronym OPS stands for. Further, this statement was a retracted statement. Considering the observation of Hon ble High Court of Madras in Writ Petition of Shri P. Rama Mohan Rao 2018 (12) TMI 1990 - MADRAS HIGH COURT his statement, on standalone basis, would have no evidentiary value. If AO was to rely on this statement, he was to let in other reliable evidence to corroborate the same. As in statement of Shri. T. Shanmugasundaram (accountant of M/s SRS Mining), did not make any reference to the name of the assessee in his answers. In fact, Shri T. Shanmugasundaram did not speak anything about the source of the amount which was distributed to various constituencies. It was, therefore, clear that AO could not have drawn any support from the statement of Shri. T. Shanmugasundaram for arriving at such an adverse inference against the assessee. Another fact is that this statement has also been retracted and the retraction has been reiterated by Shri T. Shanmugasundaram in summons issued by Ld. AO u/s 131 during the course of assessment proceedings. Therefore, entire discussion made by the AO in the assessment order regarding the subsequent retraction of the said statement and the reference made to an independent professional forensic expert for the purpose of establishing that the said retraction is factually incorrect, would have no relevance to the issue under consideration. AO issued summons to Shri. S. Ramesh, the then PA to the assessee and recorded his statement u/s 131 - AO did not make any mention in the assessment order regarding the fact of recording the statement of Shri Ramesh during the assessment proceedings and the contents of the said statement. In the absence of any attempt to discredit the said statement with cogent evidences in the assessment order, the said statement could not be disregarded in appreciating the evidences on record while adjudicating the issue under consideration. The said fact favors the case of the assessee. Material has been seized from a third-party and the presumption of Sec.132(4A) r.w.s. 292C would arise qua the searched person or qua the person who was found in the possession or control of such documents. Such a presumption was not applicable to a person other than the searched persons as held by Hon ble Bombay High Court in the case of ACIT vs. Latha Mangeshkar 1973 (6) TMI 13 - BOMBAY HIGH COURT There is a statutory presumption with regard to books of accounts, documents, money, bullion, jewellery or other valuable article or thing found in possession or control in the course of the search that the same belong to such person. It is quite clear that the presumption of Sec. 132(4A) would arise only against the person making the said statement and in whose possession such incrimination material or books of accounts have been found. This presumption would not arise against third parties unless the same is supported by corroborative evidences. As decided V.C. Shukla 1998 (3) TMI 675 - SUPREME COURT an independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case We endorse the findings of Ld. CIT(A). In the result, both the appeals of the revenue stand dismissed.

Summary

Issues Involved:
1. Validity of the assumption of jurisdiction u/s 153C.
2. Legality of additions based on search findings and seized materials.
3. Evidentiary value of statements and corroborative evidence.
4. Retraction of statements and their impact on the assessment.

Summary of Judgment:

1. Validity of the Assumption of Jurisdiction u/s 153C:
The assessee challenged the legal validity of the satisfaction note recorded by the Assessing Officer (AO) for initiating proceedings u/s 153C, arguing that it was based on "reasons to suspect" rather than "reasons to believe." The CIT(A) rejected this ground, confirming that the AO had examined the seized material and found it contained details of unaccounted cash receipts by the assessee from M/s SRS Mining. The AO's satisfaction was based on prima-facie belief, which is sufficient for assuming jurisdiction u/s 153C.

2. Legality of Additions Based on Search Findings and Seized Materials:
The AO made additions based on entries in notebooks and loose sheets seized from M/s SRS Mining, alleging that the assessee received undisclosed payments. The CIT(A) found that the name of the assessee did not appear in the seized material, which only contained abbreviations like "OPS Ramesh." The AO's inference that these abbreviations referred to the assessee was based on presumption without any corroborative evidence. The CIT(A) held that such entries in seized material from a third party, without corroborative evidence, could not be used to fasten tax liability on the assessee.

3. Evidentiary Value of Statements and Corroborative Evidence:
The AO relied on the statement of Shri K. Srinivasulu u/s 132(4), who maintained the seized documents. However, the CIT(A) noted that Srinivasulu's statement did not directly implicate the assessee and was retracted later. The CIT(A) emphasized that corroborative evidence is required to validate entries in seized material, especially when it is from a third party. The statement of Srinivasulu, being retracted and uncorroborated, could not serve as reliable evidence against the assessee.

4. Retraction of Statements and Their Impact on the Assessment:
Both Shri K. Srinivasulu and Shri T. Shanmugasundaram retracted their statements, claiming coercion and duress. The AO dismissed these retractions, but the CIT(A) found them credible, noting the lack of corroborative evidence to support the original statements. The CIT(A) referred to judicial precedents, including the Supreme Court's decision in CBI vs. V.C. Shukla, which requires independent corroborative evidence for entries in regular books of accounts.

Conclusion:
The ITAT upheld the CIT(A)'s decision, dismissing the revenue's appeals and the assessee's cross-objections. The tribunal agreed that the seized material was a "dumb document" without corroborative evidence and that the retracted statements could not be relied upon. The assumption of jurisdiction u/s 153C was found valid, but the additions based on search findings were not sustainable due to lack of corroborative evidence.