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2025 (3) TMI 215 - AT - Income TaxAssessment u/s 153C - Addition of on-money sum going by the contents of the seized material - HELD THAT - Revenue s instant sole substantive ground has to be declined only as the above seized document which is neither signed by the assessee nor its name is mentioned therein could be held as belonging to it nor contents lead to any inference of actual on-money payment forming subject matter of addition in the assessee s hands. Unaccounted cash payment - AY 2007- 08 - CIT(DR) is indeed very fair in taking us to the assessment findings dated 30.12.2009 at pages 2 and 3 wherein same rough jottings and alleged map was seized from the searched person which is indeed in the nature of dumb document only in light of Girish Chaudhary 2007 (5) TMI 176 - DELHI HIGH COURT . We wish to reiterate here that the above seized document merely indicates some rates than pinpointing any specific on-money payment or receipt; as the case may be involving the assessee. Faced with this situation we are of the considered view that the learned CIT(A) has rightly accepted the assessee s contentions directed against the impugned addition. Mandation to record satisfaction - AY 2008-09 Revenue could hardly dispute the clinching fact that AO had recorded his section 153C satisfaction against the assessee. That being the clinching case we quote section 153C(1) 1st proviso that the addition of search in such an instance is to be construed as reference to the date of receiving the books of account or documents by the AO having jurisdiction over such other person and hold that once the assessee s assessment for the impugned assessment year 2008-09 was pending in light of its return filed on 02.12.2008 the departmental authorities could not have assessed it under the normal provisions u/s 143(3) going by Ojjus Medicare (P) Ltd. 2024 (4) TMI 268 - DELHI HIGH COURT and Jasjit Singh 2023 (10) TMI 572 - SUPREME COURT Disallowing the assessee s bad debts u/s 36 or business loss u/s 28 - CIT(A) has made it clear in his lower appellate discussion that the assessee had indeed made advances in the real estate and land purchases business which stood written off as the corresponding transactions could not be materialized. He accordingly concludes that the said claim indeed amounts to the assessee s loss in the ordinary course of its business.CIT(DR) is indeed very fair in not disputing the assessee s claim on merits regarding bad debts forming subject matter of addition before us. We thus reject Revenue s instant sole substantive ground herein on merits as well.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include: 1. Whether the seized documents from a third party could be used to initiate proceedings under section 153C of the Income-tax Act, 1961 against the assessee. 2. Whether the addition of Rs. 8.99 crores as on-money payment based on notings in a seized diary was justified. 3. Whether the addition of Rs. 20.97 crores as unaccounted cash payment was justified based on the seized documents. 4. Whether the assessment for the year 2008-09 could be framed under section 143(3) when proceedings under section 153C were initiated. 5. Whether the disallowance of bad debts or business loss amounting to Rs. 2.48 crores was justified. ISSUE-WISE DETAILED ANALYSIS 1. Seized Documents and Section 153C Proceedings - Relevant Legal Framework and Precedents: Section 153C proceedings are applicable when documents seized during a search belong to a person other than the one searched. The presumption of correctness under section 292C applies to documents found during a search. - Court's Interpretation and Reasoning: The Tribunal noted that the seized documents did not mention the assessee's name and thus could not be held as belonging to the assessee. The presumption of correctness under section 292C applies to the person from whom the documents were seized, not the assessee. - Conclusion: The Tribunal held that the initiation of section 153C proceedings was not justified as the documents did not belong to the assessee. 2. Addition of Rs. 8.99 Crores as On-Money Payment - Relevant Legal Framework and Precedents: The addition was based on notings in a diary maintained by a third party. The burden of proof lies with the Revenue to establish the receipt of on-money. - Court's Interpretation and Reasoning: The Tribunal found that the notings were ambiguous and lacked corroborative evidence. The diary was maintained by a third party, and the assessee was not given an opportunity to cross-examine the person who maintained it. - Conclusion: The addition was deleted as it was based on assumptions without corroborative evidence. 3. Addition of Rs. 20.97 Crores as Unaccounted Cash Payment - Relevant Legal Framework and Precedents: Similar to the previous issue, the addition was based on rough jottings seized from a third party. - Court's Interpretation and Reasoning: The Tribunal referred to precedents indicating that such documents are considered "dumb documents" if they do not indicate specific transactions involving the assessee. - Conclusion: The addition was not justified as the documents did not specifically indicate any on-money payment involving the assessee. 4. Assessment for 2008-09 under Section 143(3) - Relevant Legal Framework and Precedents: Section 153C proceedings should take precedence over section 143(3) when initiated. The assessment should be based on the date of receiving the documents by the assessing officer. - Court's Interpretation and Reasoning: The Tribunal noted that the assessment under section 143(3) was not justified as the proceedings under section 153C were pending. - Conclusion: The assessment for 2008-09 could not be framed under section 143(3). 5. Disallowance of Bad Debts or Business Loss - Relevant Legal Framework and Precedents: Bad debts or business losses are allowable if they arise in the ordinary course of business. - Court's Interpretation and Reasoning: The Tribunal found that the advances made in the real estate business were written off as the transactions did not materialize, thus constituting a business loss. - Conclusion: The disallowance was not justified, and the claim was allowed as a business loss. SIGNIFICANT HOLDINGS - The Tribunal emphasized that documents seized from a third party cannot be used to initiate section 153C proceedings unless they clearly belong to the assessee. - The addition of Rs. 8.99 crores was deleted as it was based on assumptions without corroborative evidence. - The addition of Rs. 20.97 crores was not justified as the seized documents did not specifically indicate any on-money payment involving the assessee. - The assessment for 2008-09 could not be framed under section 143(3) due to pending section 153C proceedings. - The disallowance of bad debts or business loss was not justified, and the claim was allowed as a business loss.
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