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TMI Blog2024 (4) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... , the purpose of such payment and precise identity of the assessee. There was no mention in the seized material as to whether the payment was made to a particular person in his own right or it was paid to him on behalf of another person. In the absence of such essential and critical information, it could not be inferred with a reasonable degree of certainty that the payments were made to a person whose abbreviated names appeared therein and the said amount represents the income of the said persons including the assessee. An entry made in the diary or notebook by a third-person with scant details could not be used to fasten the tax liability on the persons whose abbreviated name appears therein, in the absence of any corroborative evidence. Such seized material was liable to be treated as dumb document which would not have any evidentiary value in respect of entries found therein in the absence of corroborative evidence which can provide necessary reliable basis for deciphering the nature and character of the said entries. The addition made on the basis of such a dumb document could not be sustained. We concur with these observations of Ld. CIT(A). Even if the statement of Shri K. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The grounds taken by the Revenue in AY 2015-16 read as under: 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2.1 The Ld. CIT(A) erred in deleting the addition of Rs. 12,00,00,000/- made towards payment received from M/s S.R.S. Mining and associates based on the incriminating material seized from the premises of SRS Mining. 2.2 The Ld. CIT(A) erred in accepting the explanation of the assessee that there is no mention anywhere in the statement of Shri Srinivasulu that the assessee was recipient of payments shown against the abbreviated names, without considering the fact that the assessing officer has clearly mentioned in the Para 3.2 of the order that Shri Srinivasulu admitted in his sworn statement dated 10.12.2013 that those note books were maintained by him as per the instructions of partners of M/s S.R.S. Mining and the entries found were incidental expenses to various persons. In response to Q. No.4, he has stated that "HW" represents "High Way Minister". The CIT(A) failed to appreciate that the assessee was the Highway Minister in the Government of Tamil Nadu during the period the payments were made. 2.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case the learned CIT(A) erred in upholding the assumption of jurisdiction by the learned AO under section 153C and therefore not quashing the assessment order passed by him under section 143(3) read with section 153C when the learned AO had failed to record the necessary and valid satisfaction mandated under section 153C. As is evident, the sole issue that arises for our consideration is additions made by revenue based on search findings. The assessee is challenging the jurisdiction of Ld. AO on various legal grounds besides supporting impugned order on merits. 3.3 The Ld. CIT-DR, drawing attention to various grounds of appeal, supported the additions made in the assessment order whereas Ld. AR while supporting the impugned order on merits, assailed the validity of assessment proceedings on legal grounds. The Ld. AR submitted that no proper satisfaction was drawn by Ld. AO before assuming jurisdiction u/s 153C. To support the submissions, reliance has been placed on various judicial decisions, the copies of which have been placed on record. 3.4 The Ld. CIT-DR has filed written submissions wherein it has been submitted that earlier proceedings u/s 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Both the officers have recorded their satisfaction after analyzing the incriminating material seized by the department. Therefore, the claim that Ld. AO only copied the contents of the satisfaction drawn by AO of the searched person was incorrect. The conclusion drawn by both officers is based on the same material and hence the assessee is not correct in claiming that the AO of the assessee has failed to apply his independent thought and judgment before drawing such satisfaction. Further, it cannot be termed as borrowed satisfaction. The Ld. CIT-DR further submitted that the entries found in seized material were recorded and maintained by Shri. K. Srinivasulu on instructions of partners of M/s SRS Mining. Accordingly, Shri K. Srinivasulu is the correct person to explain the entries in seized material and hence, the statement has been recorded from Shri. K. Srinivasulu. Further, retractions from his statement may be due to pressure from parties i.e., political leaders as mentioned in the seized material and hence, the same need not be entertained. It has further been held that AO has recorded satisfaction note after going through the seized material and after independently applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed by the partners / employees of M/s SRS mining in sworn statements recorded u/s 132(4) of the Act. Upon perusal of seized material which contained Oswal note book, certain entries were found relatable to the assessee, the then Highway Minister during the period 2014 to 2016. These entries have been tabulated in para 3.1 of the assessment order. 4.2 The Ld. AO noted that a sworn statement was recorded from Shri K. Srinivasulu, an associate of Shri Sekar Reddy on 10-12-2016 wherein in response to question no.3, he stated that entries in the three Oswal note books were maintained by him as per the instructions of partners Shri S. Ramachandran, Shri J. Sekar and Shri K. Rethinam. He submitted that the entries were incidental expenses paid to various persons. 4.3 Considering the same, a notice u/s 153C was issued by Ld. AO to the assessee on 23-07-2021 which was followed by statutory notices u/s 143(2) and 142(1) wherein the assessee was directed to substantiate its case. In response, the assessee filed his return of income on 16-08-2021 declaring the same income as admitted in the return of income originally filed u/s 139. The assessee, opposing the allegation of Ld. AO, de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the author of the entries, during the course or search. Hence, inferences are drawn not on the basis of surmises but on the basis of evidences and the explanations furnished. (iv) It is to be noted that Shri Srinivasulu is a close associate of Shri Sekar Reddy of M/s. SRS Mining and looking after his operations. The nature of seized materials are undisclosed account books containing monthly income-expenditure accounts. Considering the nature of the transactions and the nature of the personalities involved, maintenance of Formal, clear and unambiguous books of accounts cannot be expected in such transactions. for obvious reasons. Sworn statement given during the course of search only will give the correct picture, as the deponent is free to depose the actual facts known to him/her without being under the compulsive influence of his/her masters. Further, no other logical explanation has been given for the entries found in the seized materials, 4. In this case, due to the nature of entries as aforesaid and its explanation furnished by Shri. Srinivasulu, author of the entries based on the hypothesis of preponderance of probability, it can be understood that, the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in public service. The name and designation of the public servants involved were confirmed by the partners/employees of M/s SRS Mining in their sworn Statements recorded from them u/s 132(4) of the lncome Tax Act, 1961. 3. The Table in Para 4 below lists the illegal payments made on various dates to the public servant who was me, Date Name of the Public Servant as mentioned in the seized material Amount Rs. 16.08.2016 HW 30000000 06.09.2016 HW 30000000 15.06.2016 HW 2000000 16.08.2016 HW 60000000 16.08.2016 HW 30000000 04.02.2016 HW(M) 20000000 23.03.2016 HW(M) 20000000 06.09.2016 HW 30000000 05.10.1016 HW 30000000 26.07.2016 HW(M) 70000000 01.09.2014 HW(M) 20000000 09.10.2014 HW(M) 20000000 03.11.2014 HW(M) 20000000 04.12.2014 HW(M) 20000000 04.02.2015 HW(M) 20000000 03.03.2015 HW(M) 20000000 04.04.2015 HW(M) 20000000 04.05.2015 HW(M) 20000000 05.06.2015 HW(M) 20000000 04.07.2015 HW(M) 20000000 06.08.2015 HW(M) 20000000 04.09.2015 HW(M) 20000000 01.10.2015 HW(M) 20000000 04.11.2015 HW(M) 20000000 18.12.2015 HW(M) 20000000 24.03.2016 HW(M) 20000000 22.02.2016 HW/S 20000000 18.01.2016 HW/S 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction note that the assessee was in receipt of the payments as found noted in the seized material. The satisfaction required u/s 153C was in the nature of primafacie satisfaction only and there was no requirement that the satisfaction was to be based on conclusive establishment of the fact that the seized material had bearing on the determination of total income of the assessee. This proposition was analogous to the well settled position of law with regard to the reasons recorded for reopening of assessment u/s. 147 of the Act. In the present case, the inference drawn by the AO in the satisfaction note prima-facie arose from the contents of the seized material and the statement of Shri. K. Srinivasulu with regard to the said seized material. Since the statement of Shri K. Srinivasulu explained that the person referred to as "HW" in the seized material meant the 'Highways Minister' and since the assessee acted as Highways Minister during the relevant period, the same could be considered to be adequate reason for arriving at the prima-facie inference that the payments found noted against the person referred to as "HW" in the seized material have been received by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objection that there were parallel proceedings u/s 147 & 153C was also rejected on the ground that the notices u/s 148 were issued on 24-04-2021 for AYs 2016-17 & 2017-18 and on 28-06-2021 for AY 2015-16. The reassessment proceedings for AYs 2015-16 & 2016-17 abated on issuance of notice u/s 153C on 23- 07-2021. The reassessment proceedings for AY 2017-18 were dropped on 22-07-2021 i.e., prior to issuance of notice u/s 153C. The proceedings for AYs 2015-16 & 2016-17 shall abate as per first proviso to Sec.153C read with second proviso to Sec.153A.Therefore, there was no parallel proceedings as alleged by the assessee. The reassessment proceedings were already dropped prior to issuance of notice u/s 153C. The other legal grounds as urged by the assessee were also dismissed. However, the same are not relevant here since no arguments have been made on those grounds. Aggrieved by rejection of legal grounds, the assessee is in further appeal before us. 5.5 On merits, the assessee contended that the seized material was in the nature of dumb document which would not possess any stand-alone evidentiary value since it did not contain the complete particulars of the relevant transactions an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar circumstances. 5.6 The assessee further submitted that in the seized material, nowhere the name of the assessee was specified. The same only carried the abbreviation "HW(M)" as having received payments. The only evidence that linked the assessee with the seized material was the statement made by Shri K. Srinivasulu which was later on retracted on the ground that the statement was obtained under pressure. The Ld. AO erred in attaching standalone evidentiary value to the said statement without their being any solid corroborative evidence on record. The assessee referred to the decision of Hon'ble Supreme Court in the case of Common Cause vs. UOI (77 Taxmann.com 245) as well as another decision in Andaman Timber Industries vs CCE (62 Taxmann.com 3) to support its submissions. 5.7 The Ld. CIT(A), upon perusal of relevant entries in the seized material, concurred that the name of the assessee did not appear ion any of the entries considered by AO to be pertaining to assessee. All the entries contained only the abbreviations "HW" or "HW(M)" and different extensions of the same. The Ld. AO merely relied on the statement made by Shri K. Srinivasulu u/s 132(4) to decipher that "HW" wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiary value in respect of entries found therein in the absence of corroborative evidence which can provide necessary reliable basis for deciphering the nature and character of the said entries. To support the conclusion, Ld. CIT(A) referred to the decision of Jabalpur Bench of Tribunal in the case of ACIT vs Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] and also various other decisions which have been enumerated in paras 45 & 46 of the impugned order. Further, Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. Vs ITO (ITA No.250/Mum/2013) held that AO was required to bring further evidence on record to show that the money was actually exchanged between the parties in case where there was no other evidence on record to prove that on-money was paid except the loose sheets found in the premise of third-party and admission made by the third-party. Also, Hon'ble Supreme Court in the case of Common Cause vs. UOI (supra) held as under: - We are constrained to observe that the Court has to be on guard while ordering investigation against any important constitutional functionary, officers or any person in the absence of some cogent legally cognizable material. When the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee to conclude that the entries represent payment made to the assessee only. There was nothing in the statement even to remotely suggest that the entries appearing with the abbreviated name actually represent payment made to the assessee. The statement merely stated that the entries were maintained on the instructions of the partners of M/s SRS mining. It was very clear that Shri K. Srinivasulu had no first-hand knowledge of the payments noted in the seized material and had merely noted whatever was told to him by the partners. In such a situation, the statement would serve a very limited purpose of ascertaining the identity of the person who made the entries and nothing more. Since the entries were made on the instructions of the partners, it is the partners who were required to explain the exact identity of the recipients, the nature of payments, the purpose of payments and the identity of the person who made the payments etc. However, there was no material on record which would show that any of the partners was examined with regard to relevant entries in the seized material. There was no reference to any such statement of the partners in the assessment order. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idering these observations, it was to be held that the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. 5.11 In the present case, AO did not rely on any other corroborative evidences except for relying on the statement of Shri K. Srinivasulu since in the sworn statements of three other partners recorded on 08-12-2016, no questions were posed to them at all regarding the seized material allegedly containing the details of incidental charges paid to various persons. It was thus evident that no other corroborative evidence was available in record in respect of notings in the seized material. 5.12 The Ld. CIT(A) also concurred that the assessee denied having any transaction with the groups and therefore, he could not be expected to discharge a reverse burden as per legal principles laid down by Hon'ble Supreme Court in the case of K.P. Varghese vs ITO (131 ITR 597) holding that onus of establishing that the conditions of taxability are fulfilled would be on revenue and throwing this burden on the assessee would be to cast an almost impossible burden upon him to establish the negati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S mining and its partners on 08-12-2016. During the course of search action, certain incriminating material was found which was marked as ANN/MPK/NS/B&D/S-19 and 20 and ANN/KGRA/MPKSSR/B&D/S-1 to 3 from the premises of M/s SRS mining. During the course of search, a sworn statement was recorded u/s 132(4) from Shri K. Srinivasulu who acted as an employee of M/s SRS mining and who is stated to have made entries in the Oswal & other notebooks as found during the course of search. These entries were maintained by him at the instructions of partners of M/s SRS mining. The abbreviations "HW" and "HW(M)" were marked against certain entries and Shri K. Srinivasulu admitted that the same referred to Highway Minister. However, he has not specifically named the assessee in the sworn statement. The name of the assessee also does not specifically figure in the seized material. However, Ld. AO, by deciphering the abbreviations solely on the basis of statement of Shri K. Srinivasulu alleged that such money was paid to the assessee who acted as Highway Minister at the relevant point of time. The conclusions of Ld. AO are solely based on the deposition of Shri K. Srinivasulu. It is pertinent to not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresented by the abbreviation HM). The Ld. AO also concluded that the denial by the assessee was not backed by any logic or evidence. In the present case, the entries were found recorded in a systematic manner and logically explained by the authors of the entries during the course of search. Considering this fact, it was to be concluded that the inference was not on the basis of surmises but on the basis of evidences and the explanations furnished during the course of search proceedings. We find that though the burden was on AO to prove its allegations, a negative burden was casted on the assessee to establish that such transactions had not happened and the assessee had not received the impugned amount from the searched group. The same run contrary to the decision of Hon'ble Supreme Court in the case of K.P. Varghese vs ITO (131 ITR 597) as enumerated by us in preceding paragraph 5.12. The Hon'ble Court held that onus of establishing that the conditions of taxability are fulfilled would be on revenue and throwing this burden on the assessee would be to cast an almost impossible burden upon him to establish the negative. 9. We further find that during appellate proceedings, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at part of the evidence of Shri K. Srinivasulu which is in their favour they have to let in other reliable evidence to corroborate the same. During the course of the arguments, it was informed by the learned Senior Counsel that the copies of the evidence had not been provided to the petitioner and this court directs the respondents to give copies of the evidence to the petitioner. 5. I do not find any infirmity in the order of the respondent in refusing the request for cross examination since the witness had turned hostile to the respondent's contentions. Needless to state that in the light of the amendment to Section 154 by insertion of Sub Section (2) by the Act 2 of 2006 w.e.f. 16.04.2006, it is well open to the petitioner to work out his right in accordance with law on receipt of the evidence directed to be given. 6. In the result, this writ petition shall stand dismissed. No costs. Consequently, connected Miscellaneous Petition is closed. In the said case, that assessee preferred Writ Petition before Hon'ble High Court of Madras praying for issue of directions to the AO to permit the assessee to cross-examine the witness being relied upon by Ld. AO. The Writ Petition has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch essential and critical information, it could not be inferred with a reasonable degree of certainty that the payments were made to a person whose abbreviated names appeared therein and the said amount represents the income of the said persons including the assessee. An entry made in the diary or notebook by a third-person with scant details could not be used to fasten the tax liability on the persons whose abbreviated name appears therein, in the absence of any corroborative evidence. Such seized material was liable to be treated as dumb document which would not have any evidentiary value in respect of entries found therein in the absence of corroborative evidence which can provide necessary reliable basis for deciphering the nature and character of the said entries. The addition made on the basis of such a dumb document could not be sustained. We concur with these observations of Ld. CIT(A). 12. For the sake of discussion, even if the statement of Shri K. Srinivasulu was to be considered, we find that the statement of Shri K. Srinivasulu do not directly implicate the assessee. He has only maintained the diary on the instructions of partners of M/s SRS Mining and his role is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the, manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under Section 132 or the requisition under Section 132A. For instance, in the present case, with reference to the Puri Group of Companies, such date will be 5.1.2009. However, in the case of the other person, which in the present case is the petitioner herein, such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment Year 2022-23. As per relevant statutory provisions of Sec.153A, Ld. AO would have jurisdiction u/s 153C to assess or reassess the total income of the assessee for 6 Assessment Years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. In other words, Ld. AO would have jurisdiction to assess the income of the present assessee only from AY 2016-17 onwards and not before that. Therefore, respectfully following the aforesaid decision of Hon'ble Supreme Court, we would hold that assessment for AY 2015-16 was without jurisdiction. The same is accordingly liable to be quashed. We order so. The corresponding grounds raised in assessee's appeal for AY 2015-16 stands allowed. 17. Another legal argument of assessee for all the years is that there was no satisfaction drawn by Ld. AO of the assessee before assuming jurisdiction u/s 153C. In our opinion, Ld. AO was free to evaluate and adopt the satisfaction recorded by AO of searched person and could concur with the same. In the present case, satisfaction has been received by AO of the assessee on 15-07-2021 which is primarily derived from the statement of S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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