9911796707
TMI Blog2025 (1) TMI 1176X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Ground no.1, raised by the Revenue is hereby dismissed. Addition u/s 69A based on loose paper seized during the search - HELD THAT:- No addition ought to have been made on account of amount mentioned on loose paper. Assessee had mentioned the same during the assessment proceedings but the AO failed to considered the same while passing the assessment order and resultantly the addition was made to the income of the assessee. W Assessee has enclosed therewith the photocopy of Document, and the same entries are reconciled in the books of account and yet the addition was made. Addition to the income cannot be made by the Assessing Officer based on the dumb documents, loose paper containing scribbling, rough/vague notings in the absence of any corroborative material, evidence on record and finding that such dumb documents had materialized into transactions giving rise to income of the assessee which had not been disclosed in the regular books of account by the assessee. No effective arguments could be made by DR to rebut the arguments. Decided against revenue. Undisclosed cash receipts - Addition based on document found and impounded from the business premises of M/s.Tirupati Deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclined to interfere in the findings of the learned CIT(A). Consequently, grounds is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... are also part of the final sale deed as such the agreement to sale reflect the correct amount of transaction and prove that the assessee has received on money in the said transaction. 13. Any other grounds that may be raised during the course of appellate proceedings." 3. Facts in Brief:- In the present case, the assessee is a Partnership Firm. As could be seen from the first appellate order, a search and seizure action under section 132 of the Income Tax Act, 1961 "the Act") was conducted on 25/06/2019, in the case of Shri Prashant Bongirwar. During the course of search and seizure operation, several incriminating documents related to the assessee were found and seized from the residential premises of Shri Prashant Bongirwar. On 24/10/2017, the assessee has filed its return of income for the year under consideration declaring total income of ₹ 34,88,760. Statutory notice dated 16/09/2020, under section 153C of the Act, was issued and served upon the assessee, in response to which, on 25/09/2020, the assessee again filed its return of income for the year under consideration declaring total income at ₹ 34,88,760. Subsequently, notice under section 143(2) of the Act d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has been framed as unexplained money under section 69A of the Act; iv) Ground no.4, - Addition of ₹ 37,45,500, being unexplained money under section 69A of the Act; v) Ground no.5, - Addition made of ₹ 71,93,600, being unexplained money under section 69A of the Act; vi) Ground no.6, - Addition made of ₹ 22,50,000 being unexplained money under section 69A of the Act; vii) Ground no.7, - Addition made of ₹ 26,00,000, being unexplained money under section 69A of the Act; and viii) Ground no.8, - Addition made of ₹ 10,00,000, being unexplained expenditure under section 69C of the Act. 6. Before us, the learned Departmental Representative ("the learned D.R.") opened up his arguments by vehemently assailing the impugned order by submitting that the additions are based on the documentary evidences which were unearthed during the course of search. This clearly represented undisclosed income and the learned CIT(A) had fallen into error in allowing the impugned additions. He prayed that the assessment order be restored in its entirety. 7. The learned Counsel appearing for the assessee, per-contra, reiterated the submissions made before the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible item present in form of money i.e.hard cash, bullion, jewellery or other valuable article. It is most humbly submitted that ownership is one of the major Considerations for making addition under Section 69A dealing with money, etc., owned by the assessee and found in his possession. In the instant case, there has been no money, bullion found during the search and survey action. Neither jewellery or valuable items found from possession of the assessee, nor it is found the assessee is the owner of any kind of money, bullion, jewellery etc. The limbs of Sec 69A is not getting satisfied at all. Addition u/s 69A can only be made when the assessee found to be in possession of money, bullion, jewellery, etc. not recorded in the books of accounts of the assessee. Further, whatever documents are found are loose papers and dumb documents. No reliance can be placed on such loose papers Therefore, in the present case the addition which is not premised on any cash, bullion, jewelry or other valuable item but is purely based on some vague noting cannot be a source for making additions under Sec 69A of the Income Tax Act, 1961. 1. The addition made by the Assessing Officer based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is undated, not in handwriting of any of the partners of the firm, impounded scribbings contains incorrect facts as to the area of flats as compared to actual sale deed, have no acceptable narration and do not bear the signature of the any of the partners or any other party, they are in the nature of dumb documents having no evidentiary value and cannot be taken as sole basis for determination of undisclosed income of the assessee. No addition ought to be made simply on the basis of uncorroborated noting and scribbling on loose sheets of papers. It was further stated that t the loose papers based on which the Ld AO has made the addition are merely projections and cannot partake the character of undisclosed income of the assessee without any further evidences. 6. Also, During post search enquiries, The Deputy Director of Income Tax (Investigation) had called for information from customers and cross-examined whose agreement to sale was found or whose notings were found on loose paper during search and seizure. Statement of all the "customers" of assessee were recorded by the Deputy Director of Income Tax (Investigation) wherein they had stated that all the payments were made as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but had not been considered by the learned A.O while passing the assessment order and addition of Rs. 10,00,000/- was made to the income of the assessee. The Assessing Officer ignored the reply submitted by assessee while passing the assessment order. It is submitted that under section 69C, the burden squarely lies on the Revenue to establish that the assessee had made alleged payments so as to warrant addition under section 69C of the Act. It was submitted that the burden of proof had not been discharged by the Revenue by leading any material, what so ever, and thus, the addition so made needed to be deleted. 8. The learned Counsel for the assessee in support of his arguments placed reliance on the series of case laws which are as follows:- 1. Hon'ble Kerla High Court Order in the case of Bhasy vs Thoman, where reference was taken from Prem Singh V. Birbal [2006 (2) KLT 863 (SC)] the Apex Court held that there is a presumption that a registered document is validly executed. 2. Hon'ble Calcutta High Court in the case of Durga Kamal Rice Mills vs CIT(paper book page no.30) it was observed that Section 69A deals with unexplained money of which the assessee is found to be th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court Order in the case of CIT vs. S. M. Aggarwal(paper book page no.58) it was held that the documents recovered during the course of search from the assessee are dumb documents and there are concurrent findings of Commissioner of Income Tax (Appeals) and the Tribunal to this effect. Since the conclusions are essentially factual, no substantial question of law arises for consideration. 8. Hon'ble ITAT Jaipur in the case of Shri Ashok Dharendra vs. DCIT (paper book page no.98,99) it was held that the addition is made on mere conjecture and surmises without any corroborative material. It is a settled law that the presumption whosoever strong may be but it cannot take place of proof and thus the A.O. has acted more on suspicion and doubt than on evidence. It is settled principle of law that suspicion however strong cannot take the place of evidence. In following cases it has been time and again held that suspicion howsoever cannot take place of evidence. The AO has interpreted a dumb document having no legal validity as per his suitability and addition based on this paper deserves to be deleted more particularly when the paper itself contained errors and addition is made merely a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment carried out in pursuance of search, no addition can be made simply on the basis of uncorroborated noting in loose papers found during search because the addition on account of alleged on-money receipts made simply on the basis of uncorroborated noting and scribbling on loose sheets of papers made by some unidentified person and having no evidentiary value, is unsustainable and bad-in-law. As such, the same is deleted. 11. Hon'ble ITAT Hyderabad in the case of Smt. K.V. Lakshmi Savitri Devi vs ACIT (paper book page no.143) it was held that the basis for addition cannot be only the loose sheet or a third party statement. In the absence of corroborative material, circumstantial evidence, we are not in a position to sustain the addition. In our opinion, no addition can be made on a dumb document and noting on loose sheet. It should be supported by the evidence on record and the evidence on record is not sufficient to support the Revenue's action. 12. Hon'ble Supreme Court of India in the case of CIT vs P.V. Kalyanasundaram (paper book page no.147) it was observed that the notings on the loose pieces of paper on the basis of which the initial suspicion with regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the diaries found with the assessee contained various reminders, appointments, notings / jottings which any businessman in normal course would make note of in respect of offers received and what he intends to look into. The tribunal was of the view that merely because there were notings of offers does not mean that the transactions had actually taken place. The tribunal noted that in such a situation, the burden shifted on the revenue to prove that the replies filed by the assessee were not correct and that the notings / jottings had resulted into income which had not been disclosed in the regular books of accounts. The tribunal returned a finding of fact that there is no corroborative or direct evidence to presume that the notings / jottings had materialised into transactions giving rise to income not disclosed in the regular books of accounts. 16. Hon'ble Delhi High Court Order in the case of CIT vs. Shri Girish Choudhary(paper book page no.186) it was held that the document Annexure A-37 recovered during the course of search in the present case is a dumb document and lead us nowhere. Thus, the Tribunal rightly deleted the addition of Rs. 48 lacs made by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e given a dispassionate consideration to the arguments made by the rival parties and perused the material available on record thoroughly along with the impugned orders. 10. Insofar as ground no.1 is concerned, which relates to the addition made of ₹ 16,73,500, on account of unexplained money under section 69A of the Act, the Assessing Officer has dealt with this issue vide assessment order at Para-3 / Page-38 to 40 wherein the Assessing Officer has made addition. On appeal by the assessee, the learned CIT(A) directed to delete the addition vide Page-114 to 116 of his order. The addition aggregating to ₹ 16,73,500, was made on account of difference between agreement to sale value and final sale deed value which has been framed as unexplained money under section 69A, as per Para 3 of assessment Order. We find that the document exhibited at B/36, as referred to in said Para contained details regarding agreement to sale and final sale deed with respect to Flat no.104, "B" Wing of Kanyakapuran Project of the assessee. During the course of assessment proceeding, the assessee had stated that on the request of customer agreement to sale were prepared for ₹ 36,73,500, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Shri Prashant Bongirwar, Partner of the assessee firm, in his statement given to the Dy. Director of Income Tax (Investigation). However, later on, the customer informed the assessee regarding non-eligibility for higher loan amount. Therefore, customer requested the assessee to execute sale deed for actual agreed consideration of ₹ 25.00 lakh and not as per the agreement to sale value. During the course of hearing, the learned Counsel for the assessee had submitted that the assessee had mentioned the same during the assessment proceedings, but the Assessing Officer had not considered the same while passing the assessment order and the addition of ₹ 2.50 was made to the income of the assessee. The customer was not cross-examined at any point of time to dislodge the assessee's submissions. The learned D.R. could not bring any corroborative material or evidence to controvert the submissions so made by the learned Counsel for the assessee to enable this Bench to take a view other than the view taken by the learned CIT(A). Hence, keeping this in view, we find no infirmity in the impugned order passed by the learned CIT(A) is hereby upheld by deleting the addition. Ground n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is hereby dismissed. 13. Ground no.4, raised by the Revenue relates to the addition of ₹ 37,45,500, being unexplained money under section 69A of the Act. During the course of hearing, the learned Counsel for the assessee invited our attention to Para-6 / Page-47 to 48 of the assessment order, wherein the Assessing Officer has made addition. However, we find that the learned CIT(A) has directed to delete the addition. The learned Counsel for the assessee stated that the addition to total income of ₹ 37,45,500, was made on account of difference between total flat cost and agreement/sale deed value framed as undisclosed income under section 69A of the Act as per Para-6 of Assessment Order. We further find that the document no.B-2/1 as referred to in said Para contains papers having details of enquiry of bookings prepared by marketing executive. The executive explains the total cost to be incurred by the customer to make the flat ready for occupation. The actual cost of flat mentioned by the executive was an estimate of the total cost to be borne by the customer in order to make the flat ready for occupation. The amount mentioned in the loose paper was not the sale value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apers are not matching with the actual transactions and cannot be relied upon. The assessee had mentioned the same during the assessment proceedings but had not been considered by the Assessing Officer while passing the assessment order and resultantly the addition of ₹ 37,45,500, was made to the income of the assessee. The learned Departmental Representative could not make any effective arguments to counter the arguments made by the learned Counsel for the assessee to enable this Bench to reverse the impugned order. We, therefore, see no legal infirmity in the impugned decision of the learned CIT(A) warranting interference at the instance of the Revenue. Accordingly, upholding the impugned order passed by the learned CIT(A), we dismiss ground no.4, raised by the Revenue. 17. Insofar as ground No.5 is concerned, the issue relates to the addition made of ₹ 71,93,666, being unexplained money under section 69A of the Act. While going through the material available on record, we find that the Assessing Officer has dealt with this issue in the assessment order at Para-7 / Page-49 & 50, wherein he made the said addition. The learned CIT(A), however, directed to delete the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Revenue. 18. With regard to ground no.6, the issue for our adjudication relates to the addition made of ₹ 22.50 lakh being unexplained money under section 69A of the Act. This addition was made on account of notings framed as unexplained money under section 69A as per Para-8 of Assessment Order. At Page-15 of document exhibited at B-2/21, contains merely rough notings. The amount mentioned in this loose paper is not the actual sale value of the flat. The actual sale value is negotiated with the customer and it is decided accordingly. No addition ought to be made simply on the basis of uncorroborated noting and scribbling on loose sheets of papers. Hence, no addition ought to have been made on account of amount mentioned on loose paper. The assessee had mentioned the same during the assessment proceedings, but had not been considered by the learned Assessing Officer while passing the assessment order and the addition of ₹ 22.50 lakh was made to the income of the assessee. In the above grounds, grounds no.1 to 6, the Assessing Officer made addition relying on the dumb documents, loose paper containing scribbling, rough/vague notings in the absence of any corrobo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material provided and the order of the learned Single Judge delivered on 12.08.2022, it is evident that the income that has escaped assessment and notices under Section 153C of the Income Tax Act, 1961, were solely issued based on loose sheets and documents which are termed as 'diaries' found during the search. The applicability of Section 69A of the Act arises only when the principles laid down under Section 68 of the Act are satisfied. Section 68 states that there must be books of accounts or any books with credit entry. The said Act reads thus: "Section 68: Where any sum is found credited in the books of an assessee maintained for any previous years and the assessee offers no explanations about nature and source thereof or the explanation offered by him is not, in the opinion of the assessing officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year." The language of the Law is vague and subjective, thus making us rely on an Apex court decision in the case of CBI vs. V.C. Shukla ((1998) 3 SCC 410), wherein the relevant portion reads thus: "Collection of sheet fastened or bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relevant - Entries in book of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the court has to inquire but such statements shall not alone be sufficient evidence to charge any person with liability." 17. From a plain reading of the Section it is manifest that to make an entry relevant thereunder it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still, the statement made therein shall not alone be sufficient evidence, still, the statement made therein shall not along be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value for charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which we are concerned, fulfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion had been completed by same is relevant for the purpose of decision of this case also. This court has considered the entries in Jain Hawala Diaries, note books and file containing loose sheets of papers not in the form of "books of accounts" and has held that such entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and that only where the entries are made in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible. 279. It has further been laid down in V.C. Shukla case as to value of entries in the books of account, that such statements shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. It has been held that even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability. 280. This court has further laid down in V.C. Shukla that meaning of account book would be spiral note book/pad but not loose sheets. The following extract being relevant is quoted herein below: (SCC pp.423-27, paras 14 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey were not regularly kept. It was urged by him that the words 'regularly kept' mean that the entries in the books were contemporaneously made at the time the transactions took place but a cursory glance of the books would show that the entries were made therein long after the purported transactions took place. In support of his contentions he also relied upon the dictionary meanings of the words 'account' and 'regularly kept'. 281. With respect to evidentiary value of regular account book, this Court has laid down in V.C. Shukla, thus: (SCC p.433, para 37) "37. In Beni Vs. Bisan Dayal [ A. I. R 1925 Nagpur 445] it was observed tat entries in book s of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate an din absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal Vs. Ram Rakha [ A. I. R. 1953 Pepsu 113] the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation was submitted by the assessee and hence, the same is treated as undisclosed cash receipts by the assessee and treated as unexplained money under section 69A of the Act which was added to the total income of the assessee. Before us, the learned Departmental Representative could not make any effective arguments on this ground. Even he could not adduce and corroborative material rebutting the decision of the learned CIT(A). The learned Counsel for the assessee in support of its claim reiterated the arguments made before the authorities below and prayed that the order of the learned CIT(A) be upheld on this count. The addition to total income of ₹ 26 lakh was made by the Assessing Officer on account of document found and impounded from the business premises of M/s.Tirupati Developers, which was framed as unexplained money under section 69A as per Para-10 of Assessment order. We find that the transactions are duly accounted in the books of Tirupati Developers through the capital account of Shri Prashant Bongirwar, the common Partner in both the firms. The assessee had mentioned the same during the assessment proceedings, but had not been considered by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecline to interfere with the order passed by the learned CIT(A). Thus, ground no.8, raised by the Revenue is dismissed. 22. Grounds no.9, 10 and 11, are directed towards whether loose sheets are admissible as evidences on the basis of which the addition is sustainable. Their Lordships of the Hon'ble High Court of Karnataka have dilated on the issue in Sunil Kumar Sharma (supra), the relevant portion of the said judgment is reproduced below:- "21. Both the Appellant-Revenue and Respondent-Assessee entered appearance and submitted their arguments extensively. On hearing the learned counsel for both the parties, this Court finds it relevant to examine the following questions that arises for consideration in these writ appeals, which are as under: 1) Whether 'Loose Sheets' and 'Diary' have any evidentiary value? 2) Whether Centralization is in violation of Section 127 of the Income Tax Act, 1961, is valid? 3) Whether the Notice under Section 153C of the Income Tax Act, 1961 is valid herein? As regards Question No.1: Upon reading the material provided and the order of the learned Single Judge delivered on 12.08.2022, it is evident that the income that has es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the aforementioned aspects, we have carefully examined the law declared by the Hon'ble Apex Court with regard to acceptance of diaries/loose sheets by the respondent-Revenue. In the case of CBI Vs. VC SHUKLA (MANU/SC/0168/1998), at paragraphs 16 to 18 of the judgment, it is observed thus: "16. To appreciate the contentions raised before us by the learned counsel for the parties it will be necessary at this stage to refer to the material provisions of the Act. Section 3 declares that a fact a relevant to another when it is connected with the other in any of the ways referred to in the provisions of the Act relating to the relevancy of facts; and those provisions are to be found in Section 6 to 55 appearing in Chapter II. Section 5, with which Chapter II opens, expressly provides that evidence may be given in any suit or proceeding of the existence or non-existence of every fact in issue and the facts declared relevant in the aforesaid section, and of no others. Section 34 of the Act reads as under:- "34. Entries in books of account when relevant - Entries in book of account, regularly kept in the course of business, are relevant whenever they refer to a matter int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed collectively in one volume. It is easier however to say what is not a book for the purposes of S. 34, and I have no hesitation in holding that unbound sheets of paper in whatever quantity, though filled up with one continuous account, are not a book of account within the purview of S.34." 24. The aforesaid approach is in accordance with good reasoning and we are in full agreement with it. Applying the above tests, it must be held that the two spiral note books (MR 68/91 and 71/91) and the two spiral pads (MR 69/91 and MR 70/91) are "books" within the meaning of Section 34, but not the loose sheets of papers contained in the two files (MR 72/91 and MR 73/91)." 25. The Hon'ble Supreme Court in the case of COMMON CAUSE AND OTHERS v. UNION OF INDIA, reported in (2017) 11 SCC 731, at paragraphs 278 to 282 of the judgment, has observed thus: "278. With respect to the kind of materials which have been placed on record, this Court in V.C. Shukla case has dealt with the matter though at the stage of discharge when investigation had been completed by same is relevant for the purpose of decision of this case also. This court has considered the entries in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e small pads are 'books' within the meaning of Section 34. He, however, strongly disputed the admissibility of those books in evidence under the aforesaid section on the ground that they were neither books of account nor they were regularly kept in the course of business. he submitted that at best it could be said that those books were memoranda kept by a person for his own benefit. According to Mr. Sibal, in business parlance 'account' means a formal statement of money transactions between parties arising out of contractual or fiduciary relationship. Since the books in question did not reflect any such relationship and, on the contrary, only contained entries of monies received from one set of persons and payment thereof to another set of persons it could not be said, by any stretch of imagination that they were books of account, argued Mr. Sibal. He next contended that even if it was assumed for argument's sake that the above books were books of account relating to a business still they would not be admissible under Section 34 as they were not regularly kept. It was urged by him that the words 'regularly kept' mean that the entries in the books were co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. Following the law declared by the Hon'ble Apex Court, we are of the view that the action taken by the respondent / Revenue against the Assessee based on the material contained in the diaries/loose sheets, are contrary to the law declared by the Hon'ble Apex Court. In that view of the matter, impugned notices issued under Section 153C of the Act, based on the loose sheets/diaries are contrary to law, which require to be set aside in these writ appeals, as the same are void and illegal." 23. In line with the ratio decidendi, grounds no.9, 10 and 11 are dismissed holding that loose sheets are dumb documents. 24. Vide ground no.12, the Revenue is raising the issue that transactions in agreement to sale are sacrosanct vis-a-vis registered sale deeds no account that some cheque payments are tallying. It is manifest from the order that the assessee had duly explained the circumstances explaining the difference in case of Narendra Deshmukh as regards to the difference in cheque payment. No contrary evidences ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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