2025 (9) TMI 1181 - AT - Income Tax

Sections 69A/69C additions deleted where no seized assets, no evidence of undisclosed consideration and inadmissible loose records

ITAT upheld CIT(A)'s deletions of additions under ss. 69A/69C, finding no seized money, bullion or jewellery and no evidence that higher undeclared ... Undisclosed money u/s 69A - difference between Actual cost and sale deed value mentioned in booking form treated as undisclosed income - CIT(A) deleted addition - HELD THAT:- We find force in the observations made by CIT(A) that there has been no money, bullion found during the search and survey action. Neither jewellery and/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 section 69A are not getting satisfied at all. We find force in the observations so made by CIT(A). In support of such observation, CIT(A) has perfectly placed reliance upon the case law cited supra. We also find no evidence of money trail of the booking chart cum instalment schedule. Assessee putforth his arguments very precisely by bringing out the facts justifying the deletion of addition made by CIT(A) as aforesaid and we agree with him. Decided against revenue. Unexplained money u/s 69C - difference between estimated sale consideration in booking form of the customers and the final sale deed value - CIT(A) deleted addition - HELD THAT:- AO was not justified in making addition when there is no booking by the customer and hence the addition can sustain on the basis of booking by the customer. As can be seen from the chart tabulated above, there is no booking by the customers but only booking form is available. CIT(A) was indeed justified in deletion of addition. DR failed to bring on record any material to disagree with the submissions so made by the learned Counsel for the assessee. Unexplained money u/s 69A - addition was made by the Assessing Officer on the basis of on–money received from the customers by the assessee - HELD THAT:- The customers, who were summoned, have categorically denied having paid any on–money to the assessee and the same was accepted by the Investigation Department but added the same to the income of the assessee without considering the explanation given by the assessee. Against the impounded documents, the AO failed to bring on record any corroborative evidence to show that the higher consideration was actually received by the assessee outside the books of account to match with the figures of difference appearing in loose sheet by way of booking forms. AO even failed to examine the issue properly by cross–examining with the customers who booked the Flats if he was not in consonance with the inquiries of Investigation Department. Before us also, nothing was brought on record to rebut the arguments of the learned Counsel for the assessee. Therefore, we decline to interfere with the observations of CIT(A). further reliance on electronic evidences without certificate under section 65B of the Evidence Act, 1872, is not permissible. Decided against revenue. Addition based on loose paper and dumb documents - HELD THAT:- As decided in Sunil Kumar Sharma [2024 (2) TMI 116 - KARNATAKA HIGH COURT] a sheet of paper containing typed entries 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 in COMMON CAUSE AND OTHERS v. UNION OF INDIA [2017 (1) TMI 1164 - SUPREME 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. ISSUES PRESENTED AND CONSIDERED 1. Whether additions under section 69A of the Income Tax Act can be sustained solely on the basis of seized 'loose papers' / 'dumb documents' (booking forms / jotting / WhatsApp images) absent tangible money, bullion, jewellery or other valuable articles and absent corroborative evidence. 2. Whether entries/notings in booking forms, estimates or WhatsApp images seized from third-party premises constitute admissible evidence or 'books of account' for the purpose of making additions under sections 69A / 69C. 3. Where seized documents contain notings allegedly reflecting on-money, what is the burden of proof on Revenue and the requirements of corroboration (including witness statements of persons whose names appear on seized papers)? 4. Admissibility and evidentiary value of electronic material (WhatsApp images) seized during search in absence of certificate under section 65B of the Evidence Act. 5. Whether additions under section 69C (unexplained expenditure) require separate adjudication when not pressed before the appellate tribunal. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of additions under Section 69A based solely on seized loose papers / dumb documents Legal framework: Section 69A applies where a taxpayer is found to be the owner of money, bullion, jewellery or other valuable article not recorded in books of account and unexplained by the taxpayer; additions under section 69A therefore presuppose existence/possession (ownership) of tangible valuables. Precedent treatment: The Court/Tribunal followed and relied upon authoritative decisions (including CBI v. V.C. Shukla and Common Cause) holding that loose sheets/diary/jottings are not 'books of account' and are of limited evidentiary value; other decisions cited (Durga Kamal Rice Mills; Ravi Kumar; several ITAT and High Court decisions) support deletion where additions rested solely on uncorroborated loose papers. Interpretation and reasoning: The Tribunal accepted the CIT(A)'s finding that no cash, bullion, jewellery or other valuables were found in possession of the assessee and that the seized material mainly comprised booking forms, estimates and WhatsApp images which are 'dumb documents' or loose notings prepared as estimates by marketing staff. The Tribunal reasoned that section 69A's limbs are not attracted absent ownership/possession of tangible valuables and that therefore additions cannot be based solely on such jotting/estimate sheets. The Tribunal further observed the lack of money-trail and absence of any independent corroborative evidence that the notings materialised into actual unaccounted receipts. Ratio vs. Obiter: Ratio - Additions under section 69A cannot be sustained solely on the basis of loose papers/dumb documents when there is no finding of ownership/possession of money, bullion, jewellery or other valuable article and when no corroborative evidence connects the notings to actual unaccounted receipts. (Followed decisions on inadmissibility/limited value of loose sheets.) Obiter - Observations on the nature of booking forms as 'estimates' and commercial practice regarding negotiation of sale value. Conclusions: Deletion of additions under section 69A was upheld; Revenue's grounds challenging deletion were dismissed in respect of the additions based solely on seized loose papers. Issue 2 - Admissibility / evidentiary value of booking forms, jotting and WhatsApp images as 'books of account' Legal framework: Section 34 of the Evidence Act and principles on admissibility of entries in books of account require that entries be in regularly kept books; a 'book' generally denotes collected/fixed sheets (not loose scraps). Presumptions under section 292C (if invoked) are rebuttable and do not substitute proof of income. Precedent treatment: The Tribunal applied Supreme Court and High Court authorities (including CBI v. V.C. Shukla; Common Cause) holding that loose sheets and unbound notes are not admissible as 'books of account' and, even where entries in books are admissible, they are not alone sufficient to fasten liability without independent corroboration. ITAT precedents cited similarly treat such seized jotting as 'dumb documents' lacking evidentiary value unless corroborated. Interpretation and reasoning: The Tribunal agreed with the CIT(A) that booking forms were estimates prepared by marketing executives and not definitive sale records; WhatsApp images were reproductions of these estimates. Loose/unbound notings lacked signatures, dates, consistency with sale deeds and therefore could not be treated as reliable proof of on-money receipts. The Tribunal stressed that even if treated as admissible, entries in books need independent evidence to prove the factual transaction they purport to record. Ratio vs. Obiter: Ratio - Loose sheets, unsigned jotting and impounded WhatsApp images reflecting estimated figures are 'dumb documents' and cannot, without corroborative material, form the sole basis for additions; entries not in regularly kept books lack probative value for assessing undisclosed income. Obiter - Comments on commercial practices regarding booking forms and negotiation of final sale consideration. Conclusions: The booking forms and WhatsApp images lacked evidentiary value to sustain additions; the CIT(A)'s deletions were affirmed. Issue 3 - Burden of proof and necessity of corroboration when seized documents bear names/figures Legal framework: Where the AO relies on seized documents, the burden lies on Revenue to bring corroborative evidence to demonstrate that the notings recorded resulted in unaccounted income; statements of persons named in seized notings and other objective trails (cash entries, bank deposits, promissory notes) are necessary to convert suspicion into proof. Precedent treatment: ITAT and High Court authorities were followed to hold that when seized writings are unintelligible/cryptic, the burden shifts to the Revenue to substantiate the notings; presumption under section 292C is rebuttable and cannot substitute corroboration. Interpretation and reasoning: The Tribunal accepted that customers summoned by the investigation denied any payment of on-money and that the Investigation Department accepted their replies; the AO nonetheless made additions without producing corroborative evidence (cash receipts, bank entries, statements contradicting customers). Tribunal found AO's examination and cross-verification to be inadequate and noted failure to confront named persons or produce independent material tying the notings to unaccounted receipts. Ratio vs. Obiter: Ratio - Revenue must produce corroborative independent evidence to establish that entries in seized loose papers resulted in undisclosed income; absent such corroboration, the onus to prove does not shift to the assessee to a degree that sustains addition. Obiter - Procedural expectations regarding cross-examination of named persons and use of investigation statements. Conclusions: Additions based on uncorroborated notings were not sustainable; CIT(A)'s deletion was upheld because Revenue failed to discharge its burden. Issue 4 - Admissibility of electronic evidence (WhatsApp images) without certificate under section 65B of the Evidence Act Legal framework: Electronic records are subject to the requirements of the Evidence Act (section 65B) for admissibility; absence of proper certificate undermines reliance on such electronic material. Precedent treatment: The Tribunal invoked the principle that reliance on electronic evidence without compliance with section 65B is not permissible. Interpretation and reasoning: The Tribunal noted that impugned additions were partly based on WhatsApp images obtained from a third party's iPhone but that proper certification required for electronic evidence was not produced; combined with their character as images of estimated booking forms, the Tribunal found them inadmissible/unreliable for making additions. Ratio vs. Obiter: Ratio - Electronic evidences must comply with statutory certification requirements before being relied upon; absence of such compliance negates admissibility. Obiter - Observations on combined weakness of electronic reproduction plus absence of corroboration. Conclusions: Electronic images were not sufficient to sustain additions; this formed part of the basis for upholding deletions. Issue 5 - Non-adjudication of unexplained expenditure under Section 69C where not pursued Legal framework: Appellate courts address grounds pressed by parties; issues not raised before the tribunal or not pursued on appeal may be left undetermined. Interpretation and reasoning: The Tribunal recorded that the unexplained expenditure under section 69C was allowed by the CIT(A) but Revenue did not press that ground before the Tribunal; accordingly the Tribunal refrained from adjudicating that addition further. Ratio vs. Obiter: Ratio - Appellate adjudication confined to grounds raised and argued; unpressed grounds may be left intact without further adjudication. Obiter - None. Conclusions: Issue of section 69C addition was not decided afresh because Revenue did not contest it before the Tribunal. Overall Conclusion The Tribunal upheld the first appellate authority's deletions of additions made under section 69A (and declined to interfere on grounds concerning evidentiary value of seized documents, burden and corroboration, and admissibility of electronic images), found that seized loose papers/dumb documents and WhatsApp images lacked the requisite evidentiary value and corroboration to sustain additions, and dismissed the Revenue appeal. The Tribunal followed Supreme Court and High Court precedents on non-admissibility/limited value of loose sheets and reiterated that suspicion or uncorroborated jotting cannot take the place of proof of undisclosed income.