2025 (2) TMI 1558 - AT - Income Tax

Corroboration requirement: third party loose sheets cannot alone sustain unexplained investment assessments; revenue must produce independent linkage.

Assessment challenged an unexplained investment addition based on loose sheets seized from a third party locker; the legal issue is whether such third ... Unexplained investment in the purchase of property - entries found in material seized in the locker belonging to third party - loose sheets seized from a third-party locker - reliability on dumb document - HELD THAT:- The loose sheets numbered 01 to 16 were shown to these persons who confirmed having received the cheque amounts which has also been confirmed by the assessee and his wife. However, none of the person has made any admission of exchange of on-money on the land transactions. The impugned additions are merely on deduction by AO that since cheque payments were tallying, the other payments as mentioned therein must also have exchanged between the parties to the transaction. Except for this deduction, there is no corroborative material with AO to support the aforesaid allegations. None of the party has made any admission of exchange of on-money. The findings of CIT(A) are that the loose sheets contain some unconnected persons’ name also with huge amount written against those names. None of the loose sheets carried any date or name of the assessee or description / attributes of land so purchased to establish the nexus of the assessee with these transactions. In terms of statement of Shri Pandian, the loose sheets contained details of various civil suits of their clients being dealt with by his senior Shri Senthil. Therefore, the notings would necessarily be pertaining to those persons / cases only and names and numbers mentioned therein pertain to some civil suits and recovery suits pending amongst themselves which were handled by Shri Pandian and his senior Shri S. Senthil. Pertinently, there is no material to show that the assessee has any legal disputes or having any pending recovery suits or other suits pertaining to the land purchased by the assessee. Also, there is no confirmation / statement from any person nor any corroborative evidence to support the impugned additions. We concur with the findings of CIT(A) that the loose sheets lacked dates, assessee’s name or land details making it unclear. The losses sheets had no signatures, dates or clear context making it ambiguous. The impugned additions have been made merely on presumptions by AO. AO merely filtered some amounts and correlated it with the property transaction made by the assessee and her spouse without bringing on record any corroborative evidence. The aforesaid loose sheets were neither seized from the premises of the assessee nor were the same in the handwriting of the assessee. Therefore, such a material would not constitute adequate evidence to draw any adverse inference against the assessee in the absence of any other corroborative evidence. A narration made in a loose sheet by a third-person with scant details could not be used to fasten tax liability upon the person whose name does not appear at all in the sheets. In the absence of any corroborative evidence to attribute the entries to such a person, such a material would be nothing but a dumb document which do not have any evidentiary value in respect of the entries found therein unless corroborative evidence was available which could provide necessary reliable basis for deciphering the nature and character of the said entries. Adjudication of CIT(A) that the loose sheets were nothing but dumb document, could not be faulted with. No such addition could be made in the hands of the assessee solely on the basis of these documents when there is no other corroborative evidence on record to support the notings. Decided in favour of assessee. Issues: Whether the addition of Rs. 10,39,38,614 made as unexplained investment in respect of on-money alleged in loose sheets seized from a third-party locker is sustainable as against the assessee for Assessment Year 2015-16.Analysis: The appeals arise from additions made by the Assessing Officer based on loose sheets recovered from a third-party bank locker which recorded cheque and cash entries allegedly relating to various land transactions. The loose sheets contained cheque entries that matched sale deed amounts but also contained numerous undated, unsigned notings and names of unrelated persons with large amounts noted against them. The loose sheets were neither seized from the assessee's premises nor shown to be in the assessee's handwriting. Statements of the locker-holder and the senior advocate who maintained the sheets explained that the notings related to civil suits and partition matters of other clients, and the persons shown the sheets admitted only to the cheque amounts and did not admit any cash/on-money transactions. The Assessing Officer drew inferences equating other scribbled cash entries to on-money and apportioned the alleged cash by reference to cheque proportions to arrive at the addition. The appellate authorities and the Tribunal applied settled principles that a third-party loose sheet without signatures, dates, context or corroborative evidence is a dumb document whose entries cannot, by themselves, be the basis for charging unexplained income; the burden to establish taxability lies on the revenue and requires corroboration to link seized entries to the assessee. The Tribunal considered relevant authorities and found that the Assessing Officer did not produce independent corroborative evidence showing that the cash entries represented actual payments by the assessee or that the entries pertained to the assessee's transactions.Conclusion: The addition of Rs. 10,39,38,614 as unexplained investment is unsustainable and is deleted; the appeal by revenue is dismissed (decision in favour of the assessee).