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TMI Blog2024 (7) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO before making additions u/s. 69A of the Act. Further, the appellant firm has denied that there are any transactions outside the books of accounts. Therefore, once the appellant firm has denied the transaction outside the books of accounts, the AO has to prove with evidence that alleged cash transactions recorded in excel sheets were belongs to the assessee. However, no such effort was made by the investigation department and the AO. As in Shadi Ram Ganga Prasad, SP Kanodia and Smt. Premlatha Kanodia [ 2010 (4) TMI 1199 - ALLAHABAD HIGH COURT] where it has been held that the loose papers found from the possession of a person during the search can be used to raise a presumption against the said person only - the said loose sheets cannot be held against the parties whose names appear therein, unless the person from whose possession it was recovered admits in his statement that the entries in the loose sheet relate to the transaction made by such parties. As no efforts were made by the department to establish the nexus of the assessee with the undated and unsigned printout found during the search and to corroborate the contents of the said printout to arrive at a definite conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available cash receipts, aggregating the cash receipts as well as cash payments for determining the undisclosed income results in exaggerated amount of such income. It is further noted that, when the AO is not able to identify the nature of cash receipts or payments then the best is to net off the cash receipts against the cash payments to arrive at undisclosed income. Therefore, findings of the facts recorded by the ld. CIT(A) with regard to the manner of computing undisclosed income appears to be reasonable and acceptable. Thus additions made by the AO u/s. 69A of the Act towards alleged cash transactions recorded in excel sheets found during the course of search proceedings of Christy Group in the premises of Shri. P. Karthikeyan, without there being any corroborative evidence is unsustainable in law. The ld. CIT(A), after considering relevant facts has rightly deleted additions made by the AO - Decided in favour of assessee. - SHRI MAHAVIR SINGH, HON BLE VICE PRESIDENT AND SHRI MANJUNATHA. G, HON BLE ACCOUNTANT MEMBER For the Appellant : Shri. Nilay Baran Som, CIT For the Respondent : Shri. M. V. Prasad, CA ORDER PER MANJUNATHA. G, ACCOUNTANT MEMBER: 1. These three appeals fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciating that the material seized from third party is in the form OI excel sheet, clearly referring name of assessee as Appu both in the name of excel sheets and in its contents. Further the assessee is also in the similar line of business carried out by Christy group. 2.4 The Ld.CIT(A) failed to appreciate that the AO clearly mentioned in the assessment order that assessee group was maintaining two set of accounts Tally 1 and Tally 2 and also in the practice of replacing the invoices not checked by any Government authorities in the accounted Tally. This proved that the assessee is in the practice of indulging in unaccounted cash transactions. 2.5 The Ld.CIT(A) erred in holding that while considering the aggregate cash receipts as undisclosed income, the cash payments should be taken into consideration for computing the undisclosed income only when they are made in excess of cash balance available out of the cash receipts, without appreciating that the assessee was disputing the cash receipts itself and did not provide reconciliation of receipts and payments, supported by invoices/other evidences. For these grounds and any other ground including amendment of grounds that may be rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and received from the assessee works out to Rs. 33 crores for assessment year 2018-19 and Rs. 72 crores for assessment year 2019-20. Excel sheet titled Annex-3-Appu-CGE-Running account contains transactions for the period 22.03.2017 to 23.06.2017 relevant to assessment year 2018-19 and said cash transactions works out to Rs. 97 lakhs. Excel sheet titled Appu revised format.xls subsheet cash recd paid contains transfers and receipts with M/s. Appu Direct Pvt. Ltd for the period 03.01.2017 to 01.03.2017 and the entries marked as Appu towards cash transactions works out to Rs. 3,18,39,413/- for assessment year 2017-18. During the course of assessment proceedings, the Assessing Officer issued show- cause notice dated 03.02.2021 and called upon the assessee to explain the transactions contained in excel sheets. The assessee vide letter dated 16.02.2021 sought a copy of satisfaction note and seized materials relied upon. In the letter dated 16.02.2021, the assessee has denied any transactions outside the books of accounts. The assessee also stated that Shri. Palanisamy was an engineer working with M/s. Neyveli Lignite Corporation Limited and cannot be a partner in the concern as alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The cash given to Appu comes to Rs. 3,44,413/- and cash received from Appu comes to Rs. 3,14,95,000/- (Total: Rs. 3,18,39,413/-) for AY:2017-18. 5. As there was no response, a showcause was issued on 03.02.2021, on the issues involved. The assessee vide letter dated 16.02.2021, sought the copy of satisfaction and seized materials relied upon. In the letter dated 16.02.2021, the assessee had denied any transactions outside the books of accounts. The assessee also stated that Shri.Palanisamy was an Engineer working with M/s. Neyveli Lignite Corporation and cannot be a partner in the concern while he is service. It was also stated that the statement was taken on coercion. The assessee also denied any knowledge of Shri. P. Karthikeyan of M/s. Christy group. The assessee stated that, until AY:2019-20 the turnover of the firm had not exceeded Rs. 40 Cr at any point of time. Taking into the latest machinery capacity as on 31.03.2019, even if the plant has been put into operation for the entire 24 hours in a calendar year of 365/366 days the turnover alleged in the showcause could not be achieved. 6. The copies of the satisfaction note, seized materials and other documents relied upon by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is inferred that these are cash transactions outside the books of accounts out of undisclosed sources. Accordingly, they are added to the total income of the assessee in the respective assessment years. 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has challenged additions made by the Assessing Officer towards alleged cash transactions not recorded in the books of accounts of the assessee, on the basis of seized excel sheets u/s. 69A of the Act. The assessee has also filed certain additional evidences including the alleged cash transactions considered by the Assessing Officer for working out unexplained money u/s. 69A of the Act for all three assessment years. During the course of appellant proceedings, the ld. CIT(A) called for remand report from the Assessing Officer as regards the manner of working out of aggregate cash transactions of the appellant as per the seized excel sheet for all three assessment years. The Assessing Officer, furnished the details of working of cash transactions in the remand report dated 07.03.2023 and explained how cash transactions has been worked out by appendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the assessment order to the statement recorded u/s. 132(4) of the Act, in the search proceedings of M/s. Christ group of cases to corroborate evidences contained in excel sheets. Further, neither the person from whose possession said documents were found was examined, nor the excel sheets were confronted to the assessee and its partners to verify the veracity of such documents. The ld. CIT(A), further held that there is no iota of any evidences in the seized material regarding the nature and purpose of alleged cash receipts and payments. Therefore, the CIT(A) opined that in absence of any corroborative evidence to strengthen the alleged cash transactions recorded in excel sheets, the additions cannot be made u/s. 69A of the Act. Thus, directed the Assessing Officer to delete additions made u/s 69A of the Act, towards cash transactions as per seized excel sheets. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 7. The Ld. DR, Shri. Nilay Baran Som, CIT, supporting the order of the Assessing Officer submitted that, the ld. CIT(A) erred in deleting the additions made towards undisclosed cash transactions from undisclosed sources made on the basis of entries pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer. 8. The Ld. Counsel for the assessee, Shri. M.V. Prasad, CA supporting the order of the CIT(A) submitted that, there is no basis for the Assessing Officer to make additions u/s. 69A of the Act, on the basis of excel sheet found in the possession of Shri. P. Karthikeyan, who is an employee of Christy group. The Ld. Counsel for the assessee, further submitted that there is no evidentiary value to excel sheets seized from the third party which are not corroborated by independent evidences like sale bills, cash receipts etc either found in the possession of third party or in the search proceedings of the assessee, so as to make addition u/s. 69A of the Act. The Ld. Counsel for the assessee further submitted that, the so called excel sheets were found in the premises of third party, but the Assessing Officer neither verified the evidences nor confronted those evidences to the appellant for its examination. Further, the Assessing Officer not tested those evidences by recording any statement from the person from whose possession said evidences were found. Further, the evidence found during the course of search in the third party premises does not indicate any unaccounted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer and their order should be upheld. 10. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We have also carefully considered reasons given by the AO to make additions towards alleged cash transactions as per seized excel sheets found in the possession of Shri. P. Karthikeyan, an employee of Christy group of companies. The three excel sheets based on which undisclosed income of the assessee has been worked out by the AO was found in the electronic devices seized from Shri. P. Karthikeyan, an employee of M/s. Christy Fried Gram Industry, during the course of search conducted in Christy group of cases. The seized material is therefore in the nature of materials seized in case of third party. Further, said material being a typed excel sheets in electronic form, the same is not in the handwriting of any partners or other employees of the assessee firm and the seized material does not contain any acknowledgement of the assessee with regard to the entries found therein, in respect of transactions allegedly made by the Chri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee nor was in the handwriting of the assessee, since, the third person may write the name of any person at his sweet will and the revenue did not make any effort to gather or corroborate evidence in this relation. 11. The revenue contended that since, bank entries in seized excel sheets are matched with books of accounts, cash transactions recorded in excel sheets should be considered as belongs to the assessee. In our considered view, the contention of the department that merely because the notings of bank transactions in the excel sheet have matched with the bank statements it does not mean that the notings of cash transactions are also genuine. The reason is that though bank statements serves as corroborative evidence for proving transfer entries, but there are no corroborative evidence like sale bills, cash receipts and invoices etc in the cash entries in excel sheets. Notings by way of cash transactions are highly suspicious in nature because they are susceptible for embezzlement and also prone to create prejudice to the concerned parties. Therefore, in our considered view, the reasons given by the AO to make additions u/s. 69A of the Act on the basis of entries in excel she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not complete in all respects. The proposition that addition cannot be made merely on the basis of entries in loose sheets found in the premises of a third party without bringing on record independent evidence to corroborate such entries has been reiterated in several decision, like MM Financiers (P) Ltd vs DCIT [2007] 107 TTJ (Chennai) 200, Regency Mahavir Properties vs ACIT [2018] 169 ITD 35 (ITAT Mumbai), DCIT vs Vipin Aggarwal [2017] 83 Taxmann.com 6 (ITAT Chandigarh), S.P Goyal vs DCIT [2002] 82 ITD 85 TM ITAT, T.S. Venkatesan vs ACIT [2000] 74 ITD 298 (Cal) and Monga Metals (P) Ltd vs ACIT [2000] 67 TTJ 247 (All). 12. The ld. DR, has strongly argued in light of ground no. 2.3 of revenue that contents of excel sheets refers the name of Appu which clearly shows unaccounted cash transactions of the assessee with Christy group of companies. In this regard, it is pertinent to note that material seized in the form of excel sheets were found in the premises of third party. Hence, to draw presumption that the transactions were related to the assessee is not legally permissible in view of non-applicability of the provisions of section 132(4A)/292C of the Act to other than the searche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the possession of a person during the search can be used to raise a presumption against the said person only. The Hon ble High Court further held that, contents of the said loose sheets cannot be held against the parties whose names appear therein, unless the person from whose possession it was recovered admits in his statement that the entries in the loose sheet relate to the transaction made by such parties. A similar view has been taken by Hon ble High Court of Delhi in the case of CIT vs Vivek Aggarwal [2015] 56 Taxmann.com 7, where it has been held that, no efforts were made by the department to establish the nexus of the assessee with the undated and unsigned printout found during the search and to corroborate the contents of the said printout to arrive at a definite conclusion that the assessee derives such alleged income. The Hon ble High Court of Bombay in the case of PCIT vs Umesh Israni [2019] 108 Taxmann.com 437 held that, the entries of the loose papers which were seized were not corroborated with any other evidence on record and no enquiry or verification was made and thus, no additions can be made u/s. 69A of the Act. 13. Coming back to ground no. 2.4 and 2.5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire unaccounted cash book maintained by Christy group. But fact remains that, the excel sheet relied upon by the AO to make additions did not form part of unaccounted cash book referred to by Shri. Harihara Krishnan in his statement. The seized excel sheets are in the nature of ledger account in the name of the appellant, which are different from the unaccounted cash book. Therefore, in our considered view it is not appropriate to arrive at a conclusion that the amounts noted in the excel sheets have to be understood by adding two zeros at the end without having further evidence apart from the statement of Shri. Harihara Krishnan. We further noted that, the AO himself has not added two zeros to the amounts found noted in two excel sheets namely Appu revised format.xls sub sheet cash received paid relevant to assessment year 2017-18 and Annex-3-Appu-CFL.xls sub sheet running account relevant to assessment year 2018-19. Further, the ld. CIT(A) has recorded categorical findings that in the remand report the AO did not furnish any explanation regarding selective treatment only to the figures found in one excel sheet out of three excel sheets. In the rejoinder, the appellant explaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para 66 67 of their order with regard to the manner of computing undisclosed income appears to be reasonable and acceptable. The above findings with regard to the quantification of the undisclosed income is without prejudice to the finding rendered earlier in this order that the addition made in respect of alleged undisclosed income towards cash transactions as per seized material is unsustainable in absence of any corroborative evidence. 15. In this view of the matter and considering facts and circumstances of this case, we are of the considered view that additions made by the AO u/s. 69A of the Act towards alleged cash transactions recorded in excel sheets found during the course of search proceedings of Christy Group in the premises of Shri. P. Karthikeyan, without there being any corroborative evidence is unsustainable in law. The ld. CIT(A), after considering relevant facts has rightly deleted additions made by the AO. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue for assessment years 2017-18, 2018-19 2019-20. 16. The assessee has filed cross objections in support of order of the ld. CIT(A) for all three assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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