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TMI Blog2025 (2) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... r which it was submitted that this is out of agriculture income. This shows that the cheque payments were not disputed and transactions described in the loose sheets were explained by the assessee, therefore, the loose sheets cannot be termed as dumb documents as submitted by the Ld AR relying on case of V.C.Shukla [1998 (3) TMI 675 - SUPREME COURT] and reliance of on the case of Sunil Kumar Sharma [2024 (2) TMI 116 - KARNATAKA HIGH COURT] Hence, the submissions of the Ld AR on the aspect of quality of the loose papers found during the search as dumb documents cannot be accepted. Addition u/s 69A - The onus is on the assessee to explain the nature of income as reflected in the loose sheets captioned as Farm Account which was seized. This was not properly explained by the assessee. The details found in sheets shows that the funds pertaining to Farm account without specifically mentioning the nature of transactions thereon. Hence the cash transactions reflected thereon become undisclosed income in the hands of the assessee for AY 2011-12. But it is pertinent to note that these amounts which are treated as undisclosed income of the assessee would be available as a cash source for ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und raised by the Revenue is dismissed. Coming to the ground raised by the assessee, after considering the nature of transactions and information available on record, we observe that these are financial transactions made by the assessee which corroborates with various information available on the material found during search, therefore, we are inclined to sustain the above addition. Accordingly, ground no.1(b) raised by the assessee is dismissed. Addition u/s 68 - addition of peak credit - HELD THAT:- Material available on record is a running account sheet maintained by the assessee for the purpose of deposit and removal of cash in the locker. Since it is a running account, the AO has taken only the total receipts which are mentioned on the left hand side and treated the same as undisclosed income u/s 68 - The approach of the AO cannot be accepted. The information found during the search has to be appreciated the way it is maintained, the transactions contained are receipts as well as payment and it carried the closing balance of the respective dates. Therefore, we are inclined to accept the findings of the ld. CIT (A) that it is a running account and only peak credit has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issues are common and the appeals are connected, therefore, the same are heard together and being disposed off by this common order. First we take up ITA No.1095/Del/2023 for AY 2011-12 as lead case. 3. Brief facts of the case are, a search and seizure operation under section 132 of the Income-tax Act, 1961 (for short 'the Act') was conducted by the Investigation Wing on 01.12.2018 in Faquir Chand Lockers and Vaults Pvt. Ltd. group of cases. Assessee's locker no.393, Khari Baoli, Delhi-110 006, was also covered and searched under section 132 (1) of the Act. The cases were centralized u/s 127 of the Act. The AO observed that the relevant assessment year falls within the provision of the Fourth Proviso to section 153A of the Act as the seized documents or evidence revealed that the income represented in the form of asset, which was escaped assessment amounts to or is likely to an amount of Rs. 50,00,000/- or more in the relevant assessment year or in aggregate in the relevant assessment years. Accordingly, notice u/s 153A of the Act was issued to the assessee on 29.01.2021. In response, the assessee filed its return of income. Further assessee revised its return of income declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding that the assessee has made payment through cheques which were cleared through his bank account and Rs. 3 lakhs as accumulated agricultural income for past years. Accordingly, he sustained the addition of Rs. 8,68,540/- i.e. Rs. 18,68,540/- minus Rs. 7 lakhs and Rs. 3 lakhs. With regard to jurisdictional issue raised u/s 153A of the Act, relating to Fourth Proviso to section 153A of the Act, ld. CIT (A) dismissed the ground by observing as under :- "5.2 Applicability of this proviso in the case of the applicant; i. Search operation u/s 132 of the Act was conducted by the Department on 1.12.2018 in Faquir Chand Lockers and Vaults Pvt Ltd. group of cases. The appellant was covered as he was also having locker number 393 with this company. ii. From the incriminating papers found from this locker, it was observed that the appellant has concealed the income for AY 2011-12 to the extent of Rs. 82,31,000/- which is more than the limit of Rs. 50 lakhs. iii. The entries on these loose sheets indicate investment in Farm House i.e. an asset as defined in Explanation 2 of this proviso under the head "land or building or both". 5.3 In view of the above discussion, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the search pertaining to this year was page no. 128 of Annexure A-1. The entries on that page are extracted by the AO on pages 3 to 6 of the assessment order. That material is not cognizable material as per the rulings of the apex Court in the cases of CBI vs. V.C.Shukla (1998) Taxman.com 2155(SC) and Common Cause vs. UOI (2017) 394 ITR 220(SC). These decisions stand reiterated by the apex Court in Pr. CIT vs. Sunil Kumar Sharma (2024) 165 taxmann.com 846(SC). Appended below are the relevant extracts from those decisions on this point:- CBI vs. V.C.Shukla:- "Section 34 of the Act reads as under:- "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 into which the court has to inquire but such statements shall not alone be sufficient evidence to charge any person with liability." 20. 'Book' ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as 'book' for they can be easily detached and replaced. In dealing with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r more. In the subject case, the entries in the seized paper 128 has been totalled by the AO at Rs. 86.86 lacs. He does so without noticing that a figure of Rs. 50.41 lacs which itself was the sum total of the entries prior to that figure on that paper stands re-added to make up the figure of Rs. 86.86 lacs. The correct figure for consideration would thus be Rs. 86.86 lacs minus Rs. 50,41 lacs i.e. Rs. 36.45 lacs, which indeed is the figure reckoned in the assessment. Obviously since this remainder figure of Rs. 36.45 lacs is less than Rs. 50 lacs the AO could not have assumed jurisdiction over this case for this year. • Page 128 of Annexure A-1 is a dumb document for want of narration, description, dates and other material particulars. It could not, therefore, be taken cognizance of in the assessment. • Absence of any asset which was relatable to those entries on the seized paper, the requirement as envisaged under Explanation 2 to subsection( 1) of S.153A of the Act remained unfulfilled. In sum, therefore, since the material recovered from the locker in the form of loose paper did not constitute any evidence or even if it did, it did not indicate any escapement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the locker no.393 and documents found are in the form of loose papers. Further he brought to our notice provisions of section 292C of the Act as per which it is presumed that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belonging to such person and the contents of such books of account and documents are true. He submitted that it is presumed that material found in the locker are belonging to the assessee and he relied on the decision of PCIT vs Ojjus Medicare Pvt Ltd (Delhi) [ITA 52/2024 dated 3.4.2024] and submitted that this decision will be applicable to all the grounds under consideration. 10. Considered the rival submissions and material placed on record. Let us first address the issue raised by the assessee in the AY 2011-12. It was submitted that the 4th Proviso of Sec.153A covers the period commencing from the searched assessment year and not from subsequent to the searched assessment year as held in the case of Ojjus Medicare Pvt Ltd (supra). Therefore, in the given case, the search was conducted on 1.12.2018. The relevant searched assessment year is AY 2019-20. Therefore, the relevant AYs for the purpose of 4t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. With regard to Ground no (b), the issue contested is on merit. On careful consideration of the facts available on record, we observe that the loose papers found during the search, the written caption on the loose papers shows that it is written as Farm Account and not as perceived by the AO that is Farm House Account. There is considerable difference between the two. The AO has made the addition on the basis that the assessee has invested the funds in the construction of Farm House, whereas the assessee has submitted that investment in farm house was made out of agricultural income and past savings. Therefore, it was disputed on the addition proposed by the AO u/s 69. 13. After careful consideration, we observe that during the course of search, loose sheets containing Farm Account were seized. When this was confronted with the assessee, the assessee explained that construction of Farm House was carried out by him out of past savings and agricultural income derived by the assessee. This statement was disbelieved by the revenue on the ground that assessee had disclosed agricultural income of Rs 41,460/- only and no Khasra, Khatuni or Form J was filed by the assessee. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to AYs 2012-13& 2013-14 and Grounds No.(c) and (d) are consequential in nature as decided in AY 2011-12. Therefore, the appeals being ITA Nos.1143& 1144/Del/2023 for AYs2012-13 & 2013-14 respectively filed by the assessee are partly allowed. 18. In AY 2014-15, facts are exactly similar in AY 2011-12 as stated above. The issue raised by the assessee in Ground No.(a) of AY 2014-15is exactly similar to Ground (b) of AY 2011-12, therefore, our above findings in AY 2011-12 are applicable mutatis mutandis to AY 2014-15 and Ground No.(b) of AY 2014-15 is consequential in nature as decided in AY 2011-12. Therefore, the appeal being ITA No.1145/Del/2023 for AY 2014-15 filed by the assessee is partly allowed. 19. Now we take assessee as well as Revenue's appeal for AY 2019-20. 20. Relevant facts are, assessment was completed in this assessment year also by relying on the documents and material found in search proceedings carried in the case of Faquir Chand Lockers and Vaults Pvt. Ltd. Group of cases. The assessee has filed return of income declaring an income of Rs. 188,69,190/- on 24.10.2019. Notices u/s 143(2) and 142(1) were issued and served upon the assessee. In response, ld. AR f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -wise details and chart before the AO and as per the chart, the assessee has done business of Rs. 86 lakhs not Rs. 175,00,000/-. After considering the submissions of the assessee, the AO observed that the assessee in his statement u/s 132(4) of the Act dated 01.12.2018 stated that he used to keep the cash in trust custody i.e. in his locker on commission basis and in the same submission, he also stated that he lends money to anyone normally for two months. According to the AO, the assessee himself has made contradictory statements. He observed that the assessee has not provided the source of loan of Rs. 1,75,00,000/- and if the amount pertained to above discussion is considered as third party's money then also the details of the loan of the party concerned is not provided by the assessee. He rejected the plea of the assessee of Rs. 86 lakhs as no evidence was submitted in support of the same. Accordingly, he proceeded to make addition of Rs. 1,75,00,000/- as unexplained money u/s 69A of the Act. 22. Further the AO observed that during the search proceedings, four undated cheques signed by Avadh Aggarwal totaling to Rs. 1.40 crores were seized from the locker. Out of which, two che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned the addition of Rs. 1,55,00,000/-. With regard to addition of Rs. 1.75 crores, he sustained the addition of Rs. 86 lakhs instead of Rs. 1.75 crores. With regard to addition of Rs. 1.40 crores, he deleted the addition by observing as under :- "7.3 The fact of the case is that these cheques were not encashed by the appellant as these were found in original. The ld. AO could not justify why she is treating this amount as unexplained money in the hands of the appellant particularly when cheques were not all cashed. No efforts were made by the ld. AO to locate Mr. Avadh Aggarwal to understand why he had left these cheques with the appellant, one simple observation can be made that this was the money of Mr. Avadh Aggarwal and it was laying in his bank account. Had there been any transaction between the appellant and Mr. Avadh Aggarwal in terms of cash or kind like purchase of property etc., Mr. Avadh Aggarwal would have certainly taken back these cheques as these were signed cheques. Finding the cheques in original in locker of the appellant by the search party establishes that no such transaction in lieu of these cheques had taken place. 7.4 In view of the above discussion and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,89,49,052/- was raised u/s 143(3) of the Act on 25.09.2021. Before completion of the assessment, there was no existing liability on assessee's side. Accordingly, the contentions raised by the assessee are not found to be sustainable and accordingly dismissed. 27. Aggrieved with the above order, both assessee and Revenue are in appeal before us raising following grounds of appeal :- "ASSESSEE'S APPEAL (ITA NO.1146/Del/2023) 1. On the facts and in the circumstances of the case and in law the Ld. CIT (Appeals) erred in confirming the following additions:- a. Rs. 1,55,00,000/- on account of alleged unexplained income by invoking section 69 of the Act r.w.s. 115BBE even though the same was duly declared in the return of income; b. Rs. 86,00,000/- as unexplained money by invoking section 69A of the Act; c. Rs. 1,74,25,900/- as unexplained money by invoking section 69A of the Act; d. In omitting to telescope the inter-dependant additions as regard in the facts of the case; 2. On the facts and in the circumstances of the case and in law the Ld. CIT (Appeals) erred in - a. not directing allowance for credit for taxes paid out of seized amounts of Rs. 1,55,00,000/- from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Therefore, the said sum of Rs. 1.55 crores may please be directed to be assessed at normal rates being business income voluntarily surrendered by the assessee who has also explained the nature in source thereof. Ground No. (b) is against the taxing of Rs. 86 lakhs as undisclosed money by invoking section 69A of the Act. The discussion by the AO on this issue is contained between pages 6-9 of the assessment order in para 7 therein. The Ld.CIT(A) has confirmed the findings of the AO as per observations contained in his order in para 6 therein. These amounts as detailed in page No. 41-42 are the sums advanced which were later received back. They are an integral part of the recovery of cash of Rs. 1.55 crores from the Locker. With the amount of Rs. 1.55 crores having been subjected to tax, the said sum of Rs. 86 lakhs which stood embedded in cash recovery cannot be put to tax again. Doing so would militate against the principle of double taxation. The said amount, therefore, merits be deleted. Ground No. c& d are with regard to entries on loose paper they cannot constitute material evidence for making any valid addition. Without prejudice to the foregoing, in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .40 crores and loose sheet containing details of movement of cash maintained by the assessee kept in the locker during the period for the total amount of Rs. 871,67,456/-. 31. With regard to ground no.1(a) of assessee's appeal, the issue of cash found during the search was the main item found in the locker along with the details of loan given to various parties, we observe that the assessee has declared the cash found during the search as additional income in his return of income and also submitted the information and source of the same. The AO also acknowledged the same and it was submitted that the assessee was handling the cash for commission from various persons, however, the AO himself rejected the same and treated the cash found and transactions carried on by the assessee as business. Since the assessee himself declared the above cash as additional income and explained the nature of transactions, the fact is that the assessee whether maintained the cash for a fees or as treated by the AO as assessee's own cash and meant for financial transactions, it clearly indicate that the cash found during the search is relating to the business carried by the assessee. Therefore, the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue is dismissed. 34. Coming to the ground raised by the assessee, after considering the nature of transactions and information available on record, we observe that these are financial transactions made by the assessee which corroborates with various information available on the material found during search, therefore, we are inclined to sustain the above addition. Accordingly, ground no.1(b) raised by the assessee is dismissed. 35. Ground No.1(c )& 1(d) of assessee's appeal is also connected with Ground No.3 raised by the Revenue. During search proceedings, certain loose sheets were found in the locker wherein assessee has recorded various transactions left hand side and right hand side and as per the explanation and information gathered from the assessee, it was noticed that on the left hand side, the assessee records the receipts of cash which were kept in the locker and the transactions recorded on the right side denotes the outcome of cash which were maintained in the record. The sheets found during the search have opening balance of Rs. 17 lakhs and the closing balance of Rs. 14 lakhs. The detailed transactions are reproduced at pages 14 to 20 of the appellate orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs AY 2013-14 Rs. 39.40 lakhs AY 2014-15 Rs. 38.16 lakhs Total Rs. 175.04 lakhs As discussed in detail at para no.14, on the issue of available cash with the assessee which was sustained by the AO found during the search in the earlier assessment years are available with the assessee to invest in the business. Technically, the above cash is available with the assessee and intangible benefit have to be extended to the assessee to the extent the addition made in the earlier assessment years. Therefore, on corroborating the peak credit with the cash available with the assessee shows that the assessee has cash in the business to carry on the financial activities during this year of operation. Therefore, we are inclined to give credit of the same and delete the addition sustained by the ld CIT(A) in the sum of Rs 1,74,25,900/-. Accordingly, the grounds raised by the assessee are allowed. 38. Coming to the issue of cheques relating to ground no.2 of revenue, which was found in the possession of the assessee which are not encashed. We observe that merely the relevant cheques were found with the assessee, the AO proceeded to make the addition. We noticed that the Ld CIT(A) has o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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