TaxTMI 
TaxTMI 
2024 (4) TMI 348
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....f Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The Ld.CIT(A) erred in deleting the addition of Rs. 3,65,16,500/- made towards undisclosed income representing the amounts received from M/s. SRS Mining based on the seized materials and Sworn statement of Shri. K.Srinivasulu and Shri. Nagarathinam. 2.1 The Ld.CIT(A) erred in accepting the explanation of the assessee that there is no mention anywhere in the statement of Shri. Srinivasulu that the assessee was recipient of payments shown against the abbreviated names, without considering the fact that the assessing officer has clearly mentioned in the Para 7.12 of the order that Shri. Srinivasulu admitted in his sworn statement dated 10.12.2016 that those note books were maintained by him and the entries found were incidental expenses to various persons. In response to Q.No.4, he has stated that "OPS Ramesh" represents "PA to OPS". The CIT(A) failed to appreciate that the assessee is commonly referred to as "OPS" and served as the PWD Minister in the Government of Tamil Nadu during the period the payments were made. 2.2 The Ld.CIT(A) erred in holding that seized document is "dumb docum....
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....encies. Hence, the retraction of statement by Shri. Shrinivasulu, after a gap of 106 days was not relied upon by the assessing officer. 2.6. The Ld.CIT(A) failed to appreciate that the assessing officer has correctly arrived presumption u/s. 132(4A) and 292C of the Act in respect of the materials seized during the course of search, which was further strengthened by sworn statement recorded from Shri. Srinivasulu. 2.7 The Ld.CIT(A) erred in failing to appreciate that there is no such restrictive interpretation in the Section 132(4A) and Sec.292C that the presumption of correctness are applicable only in respect of the books of accounts/documents seized in the premises of searched person and not from third party. 2.8 The Ld.CIT(A) has sought to cast doubts on the veracity of entries made in the note book seized from the possession of Shri Srinivasulu. The Ld.CIT(A) failed to appreciate that several of the entries in the note book denoting expenses and bank deposits have been verified during post search proceedings and found that the same was maintained by the searched firm to arrive at the profits earned from unaccounted business of sand mining carried out ....
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....withdrawn later on and another notice u/s 153C was issued. The written submissions have also been filed during the course of hearing which have duly been considered while disposing-off these appeals. Reliance has been placed on various judicial pronouncements, the copies of which have been placed on record. 3. Having heard rival submissions, oral as well as written and upon perusal of case records including various judicial pronouncements as cited before us, our adjudication would be as under. The assessee being a resident individual served as Public Work Department (PWD) Minister and also the Finance Minister in the Tamilnadu Government. An assessment was framed against the assessee for AY 2016-17 u/s 153C of the Act on 28-09-2021 wherein certain addition was made and the same forms part of subject matter of present appeal before us. 4. Assessment Proceedings 4.1 The assessment was so framed against the assessee pursuant to search and seizure action by department u/s 132 in the case of M/s SRS Mining, Shri J. Sekar Reddy, Shri K. Rethinam and Shri S. Ramachandran at T. Nagar on 08-12-2016. During search proceedings in the case of Shri Sekar Reddy, certain incriminating ma....
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.... length and breadth of the state since December, 2013. All the loading contracts and sand yard licenses were awarded to the friends, relatives of friends identified by the partners of the firm. Some of the other persons who were working for M/S SRS Mining and who were close to partners were Shri S. Nagarathinam and Shri K. Srinivasulu. Shri S. Nagarathinam was bank employee and because of his banking experience, he was made in-charge of cash godowns of M/s SRS Mining at Chennai. He was entrusted to keep proper records of all the receipts and payments of the group. Shri K. Srinivasulu was close and trusted aide of Shri J. Sekar and he reported to Shri J.Sekar and looked after the incidental payments to various influential / political persons as advised by him. 4.5 During the course of search operations, various diaries, notebooks, digital evidences and loose sheets were seized which include daily statement of sand yards, matrix note book maintained by Shri S. Nagarathinam, cash book maintained by S. Nagarathinam, Oswal Note books maintained by K. Srinivasulu and monthly statements. The statement was analyzed and it was concluded by Ld. AO that the entries in the daily statements ....
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....o payments under the names of various influential persons, officials and politicians involved in the management of sand mining in the state and even others when considered necessary. A peculiar feature was that a set of officials / officers / politicians were paid every month a fixed sum according to their importance ranging from Rs. 2 Lacs per month to Rs. 2 Crores per month. This regularity in payment of incidental charges highlights the clout and political patronage M/s SRS Mining was enjoying while running the sand mining business. A yard wise breakup of the cash received was also given on the right side. The daily statement of sand yards was compared with the Matrix notebook maintained by Shri S. Nagarathinam and it was found that the amount sent to head office from each sand yards tally exactly with the receipts shown in the matrix notebooks against the respective yard. 4.8 Another set of books of accounts called the cash books were also seized which were maintained by Shri S. Nagarathinam. The same has been tabulated in para 7.9 of the assessment order. These were prepared by Shri S. Nagarathinam in his own writing from entries in the matrix notebooks as mentioned earlier....
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....s alleged by Ld. AO that these payments were made to the assessee. These payments were also corroborated by notings maintained by Shri Nagarathinam. The details of these payments have been tabulated at Para 7.13 of the assessment order. It was thus evident that the assessee received illegal payments from M/s SRS Mining in lieu of continued political patronage and for enjoying unhindered mining contracts and sand yard licenses. The total of such payments for this year aggregated to Rs. 365.16 Lacs. 4.11 The assessee assailed the assumption of jurisdiction by Ld. AO and denied having received any such payment. The assessee also alleged that no enquiry was conducted before forming the aforesaid satisfaction. However, Ld. AO rejected the same on the ground that the satisfaction was arrived at after going through the materials seized from the persons covered u/s 153A and the statement recorded during the course of search. The books were thoroughly analyzed and a conclusion was reached that the same had bearing on determination of total income of the assessee. The recordings in loose sheets were chronologically and regularly maintained during the course of business. The incriminating ....
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....payments, the assessee has failed to disclose the amount of Rs. 3,65,16,500/- in his return of income filed u/s 153C and has not explained the source too. Therefore, this amount represents his unexplained and undisclosed income for AY 2016-17 and the same is taxed in his hands. Penalty proceedings is initiated against the assessee u/s 271(1)(c) of the Act on this issue for concealment of particulars of his income. 4.16 The assessment for AY 2017-18 has been framed on similar lines. The Ld. AO made addition for alleged payments made by the firm to the assessee. The Ld. AO made another addition of undisclosed income. The same was on the basis of loose sheets which were found from Bazullah Road, Yogambal Street as well as from the resident of Shri T. Shanmugasundaram (an employee of M/s SRS Mining). It was noted that seized material from residential premises of Shri T. Shanmugasundaram contained same details of receipts and distribution of cash as mentioned in the material seized from the business premises. As per the incriminating material, the assessee had given a sum of Rs. 217 Crores for distribution to various constituencies in Tamilnadu for Election expenditure through M/s SR....
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.... recorded u/s 132(4) were retracted, the same would still be valid evidence since the same was recorded on the basis of factual and specific reference to the seized records. The assessee's request for cross-examination could not be considered since the witnesses had retracted the statement. Finally, the additions were made with the following observations: - 8.20 In this background, in the absence of any satisfactory explanation by the assessee, after examining the seized records and considering the sworn statement recorded u/s 132(4) of the Act and after giving due opportunity of being heard to the assessee, the amount of paid Rs. 217,00,00,000/- by Shri O. Paneerselvam to SRS mining represents his undisclosed income. The amount was paid for distribution in various constituencies in Tamilnadu during the course of Tamilnadu Assembly Election, 2016. On verification and analysis of his return of income it is found that these transactions are not reflected and disclosed in the return of income. The assessee has been unable to explain the nature and source of this money given by him to SRS Mining. Therefore, this amount is treated as unexplained and undisclosed income of the as....
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....zure operations the residential premises of Shri T. Shanmugasundaram, employee, of M/s. SRS Mining was also subjected to action u/s 132 of the Act on the same day i.e., 08.12.2016. During the course of search at this premises, incriminating loose sheets were found and seized. The seized materials seized this residential premises vide Annexure ANN/VK/TS/LS-S-1, at page Nos. 81, 78, 7 and 3 contain the same details of receipt and distribution of cash as also mentioned in the seized material vide Annexure/ANN/KGAR/MPKSSR/LS/S-1, as mentioned above are available. In view of the above, the loose sheets seized pertain to and it relates to Shri O Panneerselvam, which has the bearing on the determination of his total income for the A. Y 2017-18. Similarly, the seized materials vide Annexure. ANN/KGAR/MPKSSRIB&D/S-1,2,3 and 11 seized from No.47 &49, VBC Solitaire, 3 Floor, Bazullah Road, T.Nagar, Chennai - 600017 and Annexure ANN/ MPK/NS/B&D/S-3,17;19 and 20 seized from New No.26, Old No.14, Yogambal Street, T.Nagar, Chennai- 600017 contain the details of unaccounted cash receipt to M/s. SRS Mining by Shri. O.Pannerselvam. Therefore, this case squarely falls under the provisions....
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....assuming jurisdiction to issue notice u/s 153C. Therefore, the assumption of jurisdiction was a valid one. The argument that there was delay in communication of satisfaction was also rejected on the ground that no prejudice was caused to the assessee. The case law of Hon'ble High Court of Madras in the case of Cognizant Technologies Solutions Ltd. as referred to by the assessee was held to be distinguishable on fact. 5.4 Another legal ground raised by the assessee was that Finance Act 2021 had substituted the provisions of Sec.153C by the newly amended provisions of Sec.148 for making assessment in respect of searches initiated on or after 01.04.2021 and therefore, the provisions of Sec.153C could not be invoked for completing pending search assessment as on 01.04.2021 in the absence of specific sunset clause in Sec.153C / 153B permitting the same. The Ld. CIT(A) held that prior to the amendment made by the Finance Act, 2021, the search assessments were required to be made u/s 153A / 153C in respect of searched persons and other persons respectively. The Finance Act, 2021 has made amendments to the Income Tax Act in respect of the assessment procedures for search cases in respec....
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....dumb document would not be sustainable. There was no evidence that the entries in the said documents have actually materialized into real transactions. The presumption of 292C would not apply against the assessee since he was not the searched person. The seized material would have no evidentiary value since it did not contain the acknowledgement of the assessee or his signature. It was also contended by the assessee that the statement of Shri K. Srinivasulu did not directly implicate the assessee in as much as he merely explained the meaning of the name described as 'OPS Ramesh' in the seized material and he never stated that the assessee was the actual beneficiary of the transactions noted in the seized material. The assessee pointed that Shri S. Ramesh, in statement recorded on 24-03- 2021, has categorically denied his involvement in any of the monetary transactions alleged against the assessee and the same was omitted to be considered by Ld. AO. It was also contended that during search on M/s SRS Mining, no statement of the partners of the said firm regarding the contents of the seized material was recorded and relied upon. The Ld. AO ignored the retraction made by Shri K. Srini....
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.... presumption that the abbreviation 'OPS' found in the seized material refers to the assessee Shri O. Pannerselvam, based on the short name popularly used in the press and media to refer to the assessee. However, drawing such a presumption without having any independent corroborative evidence that the acronym 'OPS' used in the seized material refers only to the assessee and not to any other person whose name may have the same acronym, could not be sustained. In the absence of any corroborative evidence, the inference drawn by AO was, therefore, a mere conjecture which could not be accepted to fasten huge tax liability on the assessee on account of such inference. The main issue that arise for determination is that whether such entries found against the name of 'OPS Ramesh' in the material seized from a third-party could be used to draw adverse inference against the assessee, without anything more on record in corroboration of the same. 5.7 The aforesaid seized material as relied upon by Ld. AO was seized from the premises of a third-party during the course of search conducted in the case of the said third-party. The said material was neither seized from the premises of the assess....
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.... of irrelevant or inadmissible entry falsely made, by any unscrupulous person or business house that too not kept in regular books of account but on random papers at any given point of time. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily. The aforesaid decision of Hon'ble Supreme Court stresses the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found in loose sheets ....
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....essment order. 5.9 The Ld. CIT(A) also concurred that the statement of Shri K. Srinivasulu u/s 132(4) would not serve as corroborative evidence in respect of entries in the seized material. That person gave a general statement that the entries represent incidental expenses paid to various persons. When there were numerous pages and entries in the seized material, such a general statement would not inspire confidence for drawing any conclusion in respect of specific entries appearing therein allegedly with the abbreviated name of the assessee to conclude that the entries represent payment made to the assessee only. There was nothing in the statement even to remotely suggest that the entries appearing with the abbreviated name actually represent payment made to the assessee. The statement merely stated that the entries were maintained on the instructions of the partners of M/s SRS mining. It was very clear that Shri K. Srinivasulu had no first-hand knowledge of the payments noted in the seized material and had merely noted whatever was told to him by the partners. In such a situation, the statement would serve a very limited purpose of ascertaining the identity of the person who m....
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....Court of Madras praying for issue of directions to the AO to permit the assessee to cross-examine the witness being relied upon by Ld. AO. The writ petition was dismissed vide order dated 27.12.2018. The Hon'ble Court held that there was no infirmity in the order of AO in refusing the request for cross-examination since the witness turned hostile. The Hon'ble Court further observed that if AO was to rely on the statement of Shri K. Srinivasulu which is in favor of the revenue, the AO has to let in other reliable evidence to corroborate the same. Similarly, the Hon'ble Court in the case of M/s SRS mining Vs UOI (141 Taxmann.com 272), at para 9, observed that the statement of Shri K Srinivasulu could not be relied upon as he turned hostile by giving specific retraction statement and there was no need to accord permission to cross-examine him in view of the said reason. Considering these observations, it was to be held that the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. 5.11 In the present case, AO did not rely on any other corroborative evidences except for relying on the ....
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....search conducted in the case of a third-party is not sustainable in the absence of any evidence to corroborate the notings in the seized material. The said decision was squarely applicable to the facts of the present case. 5.15 It was finally held by Ld. CIT(A) that seized material was in the nature of dumb document which did not contain complete and unambiguous information to arrive at any conclusion based solely on the said material that the assessee was in receipt of the payments found noted therein against the name 'OPS Ramesh'. There was no corroborative evidence to support and supplement the details in the seized material to conclusively establish that the name 'OPS Ramesh' found in the seized material refers to the assessee only. There was no corroborative evidence to prove that the payments noted in the seized material have actually materialized and transfer of money has actually taken place between the concerned parties. In view of all these reasons, it was to be held that Ld. AO had not discharged the onus to prove that the assessee was actually in receipt of the payments reflected in the seized material with reliable and cogent independent evidences to corroborate the....
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.... distributed ANN/VK/TS/LS/S-1 3,7,7 8, 81 Details of amounts distributed to 18 constituencies ranging from Rs. 10 lakhs to Rs. 50 lakhs. Each of these loose sheets contain the heading "OPS Ramesh list" ANN/VK/TS/LS/S-2 98- 113 Acknowledgements given by candidates of some of constituencies regarding receipt of money. 6.2 The conclusion of Ld. AO was based on entries made in above loose sheets. The AO inferred that the amount of Rs. 217 Crores found noted as receipts at page No.70 of the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-I represents the amount received by M/s. SRS Mining from the assessee. Further, AO inferred that the expenditure of Rs. 217.65 Crores by way of distribution of amounts to various constituencies as found noted at page Nos.65 to 69 of seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-1 as well as at page Nos.67 to 71 of seized loose sheets vide ANN/VK/TS/LS/S-I represents the expenditure incurred out of the receipt of Rs. 217 Crores from the assessee. However, upon perusal of the contents of the aforesaid seized material, it could be noted that the name of the assessee did not appear in any of the relevant loose sheets taken into cons....
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.... reasoning given by the AO only tantamount to a wild allegation and a sweeping statement which was not substantiated by any evidence. There is no place for such surmises and conjectures in making an assessment. 6.3 The Ld. CIT(A) further noted that AO relied on the statement of Shri. K. Srinivasulu recorded u/s 132(4) on 08.12.2016 and 10.12.2016 in support of the inference that the notings in the seized material found in the names of 'OPS Ramesh' or 'Ramesh' pertain to the transactions of the assessee. Shri K.Srinivasulu was a trusted aide of Shri. J.Sekar Reddy (partner of M/s. SRS Mining) and the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-I were found in his possession and control during the course of the search at the business premises of M/s SRS Mining. In the statement dated 10.12.2016, Shri K. Srinivasulu stated in his answer to Q.No.4 that the name 'OPS Ramesh' found in the seized notebook vide ANN/KGAR/MPKSSR/B&D/S-I denotes ''PA to OPS'. However, Shri K.Srinivasulu did not explain or elaborate in the said statement regarding what the acronym 'OPS' stands for. It was therefore quite apparent that AO had merely made a presumption that the abbreviation 'OPS' found ....
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....ble for drawing any adverse inference against the assessee, in the absence of any other independent corroborative evidence. 6.5 Regarding AO's reliance on the statement u/s. 132(4) recorded on 09.12.2016 from Shri T. Shanmugasundaram (accountant of M/s SRS Mining) for the purpose of drawing the inference that the assessee paid Rs. 217 Crores to M/s. SRS Mining for the purpose of distribution to various constituencies, Ld. CIT(A) observed that AO had referred to the relevant parts of his statement at paras 8.3 and 8.9 of the assessment order for AY 2017-18 and reproduced the answers given by the said person to Q. Nos. 27 and 12 of the said statement. Upon perusal of the same, it was evident that Shri. T. Shanmugasundaram had explained the contents of page Nos.67 to 71 of the seized loose sheets vide ANNNK/TS/LS/S-1 by stating that the same contain the details of amount of Rs. 217.65 Crores distributed to the candidates of various constituencies. He also confirmed in the said replies that the relevant loose sheets were in his handwriting and that the said notings were made during the period of Tamilnadu Assembly Elections in 2016. On careful examination of the said answers reprodu....
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....as noted therein in the material seized from a third-party could be used to draw adverse inference against the assessee merely on the basis of statement of Shri. K.Srinivasulu, without any independent corroborative evidence to establish that the said payments were made by the assessee to M/s. SRS Mining for the purpose of distribution to various constituencies. 6.8 The aforesaid seized material as relied upon by Ld. AO was seized from the premises of a third-party during the course of search conducted in the case of the said third-party. The said material was neither seized from the premises of the assessee nor was the same found to be in the handwriting of the assessee and therefore, the same would not constitute adequate evidence to draw any adverse inference against the assessee, in the absence of any other corroborative evidence. This proposition was laid down by Hon'ble Delhi High Court in the case of CIT vs. Sant Lal (118 Taxmann.com 432) wherein it was held that when a diary is seized in search of the premises of a third patty allegedly containing entries of hundi transactions on behalf of various parties including the assessee, no addition could be made based on the ....
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....we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily. The aforesaid decision of Hon'ble Supreme Court stresses the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found in loose sheets and note books regarding the payments allegedly made to important constitutional functionaries so that the process of law is not abused by unscrupulous persons in order to achieve ulterior goals. Therefore, it was important that the corroborative evidence was available on record in support of the entries in the seized material found in the premises of third- party. 6.9 It was further held by Ld. CIT(A) that the said seized material as used against the assessee did not contain complete information to facilitate drawing of such an inference. The information available merely con....
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....tendent when he was lodged in the Jail. In the retraction letters, it was claimed that the earlier statement was given under coercion and duress and in a state of mental shock, depression and physical exhaustion at the relevant point of time due to continuance of search action continuously for more than 3 days without a break and he not being allowed to sleep or to take rest. He further stated that he was not allowed to read the typed statement and his signature was obtained by force. He stated that he never paid any money to various persons as recorded in the typed assessment. He also stated that he signed the statement to end the prolonged ordeal of intimidation, harassment and mental torture. Shri K. Srinivasulu reiterated his retraction in the course of statement u/s 131 as recorded by Ld. AO on 30-03-2021 during the course of assessment proceedings. The retraction was rejected by Ld. AO without any valid reasons. 6.11 It was further noted by Ld. CIT(A) that similar additions were made in the case of another assessee by the name Shri P. Ramamohan Rao. That assessee sought cross-examination during the course of assessment proceedings. However, Shri K. Srinivasulu became non-c....
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....n the seized material to conclusively establish that the name "Ramesh" found in the seized material refers to the appellant only. There is no corroborative evidence to prove that the payments noted in the seized material have actually materialised and transfer of money has actually taken place. In view of these reasons, it is required to be considered that the AO has not discharged the onus cast on the revenue to prove that the appellant has actually made the payments reflected in the seized material with reliable and cogent independent evidences to corroborate the entries in the seized material. 98. In view of the detailed discussion hereinabove, it is held that the addition made in the assessment order for AY 2017-18 towards undisclosed income represented by unaccounted payments made to M/s SRS mining for the purpose of distribution to various constituencies is not sustainable on facts. Hence, the AO is directed to delete the said addition of Rs. 217 crores. Ground Nos. 3.4 and 6 additional Ground Nos.6.1, 6.2, 8.1, 8.2, 9, 11.1, 11.2, 12.1, 12.2, 13.1, 13.2 and 13.3 are allowed in so far as they relate to the issue mentioned above. Ground No.5 and additional Ground Nos.....
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....ch operations, various diaries, notebooks, digital evidences and loose sheets were seized which include daily statement of sand yards, matrix note book maintained by Shri S. Nagarathinam, cash book maintained by S. Nagarathinam, Oswal Note books maintained by K. Srinivasulu and monthly statements. The statement was analyzed and it was concluded by Ld. AO that the entries in the daily statements of yard owners matched completely with the daily statement of hire charges maintained by M/s SRS Mining. Similarly, the entries in the daily statement of yard match exactly with the receipts in Matrix notebooks. Further, the expenditure entries in the Matrix Note books match exactly with the cash book of Nagarathinam and Oswal notebooks maintained by K. Srinivasulu. Thus, there was not just one but three levels of corroboration available for the seized material and therefore, these entries would represent actual state of affairs of various financial and business transactions. The said material was not isolated loose sheets and the entries were not random, isolated or irregular in nature. They were systematic records of daily events maintained over a prolonged period of time on regular basis.....
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....ments for running its business. 11. In the note books, the assessee was vaguely described as 'OPS' and 'OPS Ramesh'. The codes were deciphered by Ld. AO by relying on the statement made by one Shri K. Srinivasulu u/s 132(4) in whose possession those incriminating books and documents were found. Shri K. Srinivasulu is stated to be an employee of M/s SRS Mining who maintained diaries / note-books on the instructions of partners of M/s SRS mining. Shri K. Srinivasulu stated that these codes represent 'PA to OPS'. Since the assessee was popularly known as 'OPS' in media and press, Ld. AO formed an opinion that this code would refer to the assessee only and no one else. Though the assessee denied having undertaken any transactions with the group, Ld. AO continued to allege that the aforesaid payments were received by the assessee and certain amounts were paid by the assessee to the aforesaid group. 12. Pertinently, Shri K. Srinivasulu retracted from earlier statements vide his letters dated 21-03-2017 and 23-03-2017 which was sent by him through Jail Authorities. Another witness i.e., Shri Shanmugasundaram also retracted from his statement. The Ld. AO held that the retraction was ....
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....reviation was commonly used to refer to the assessee. The same was sufficient enough to form required satisfaction for assumption of jurisdiction u/s 153C. The findings of Ld. CIT(A) has already been enumerated by us in preceding para 5.3. 14. So far as the merits of quantum addition is concerned, the findings of Ld. CIT(A) have been enumerated by us in detail in preceding paragraphs. The Ld. CIT(A), upon perusal of the relevant entries in the seized material, concurred that the name of the assessee did not appear in any of the entries so considered by Ld. AO to be pertaining to the assessee. All the entries so considered by AO merely contain an abbreviation viz. 'OPS Ramesh'. The Ld. AO relied on the statement of Shri K. Srinivasulu u/s 132(4) dated 10.12.2016 to conclude that the said name of 'OPS Ramesh', in the seized material, refers to the assessee. Shri K. Srinivasulu explained in his statement that the name 'OPS Ramesh' in the seized material was used to denote 'PA to OPS' and since the assessee was popularly referred to in the media / press and by the general public as 'OPS', Ld. AO drew inference that the payments noted in the seized material with the name 'OPS Ramesh'....
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....ries made in the material seized from a third-party which are purportedly the transactions made by the said third-party with the assessee. The other decisions including the decision of Jabalpur Bench of Tribunal in the case of ACIT vs. Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] further supports this proposition. Similarly, Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. Vs ITO (ITA No.250/Mum/2013) held that AO was required to bring further evidence on record to show that the money was actually exchanged between the parties in case where there was no other evidence on record to prove that on-money was paid except the loose sheets found in the premise of third-party and admission made by the third-party. Also, Hon'ble Supreme Court in the case of Common Cause vs. UOI (supra) stressed the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found in loose sheets and note books regarding the payments allegedly made to important constitutional functionaries so that the process of law is not abused by unscrupulous persons in order to achieve ulterior goals. Therefore, it was important that the corrobor....
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.... and nothing more. Since the entries were made on the instructions of the partners, it is the partners who were required to explain the exact identity of the recipients, the nature of payments, the purpose of payments and the identity of the person who made the payments etc. However, there is no material on record which would show that any of the partners was examined with regard to relevant entries in the seized material. There was no reference to any such statement of the partners in the assessment order. Therefore, the statement of Shri K. Srinivasulu could barely be considered as corroborative evidence against the assessee with regard to the entries in the seized material. This was further fortified by the fact that the said statement was retracted vide letters dated 21-03-2017 and 23-03-2017 addressed to DDIT (Inv.) which was submitted by Shri K. Srinivasulu through the Jail Superintendent when he was lodged in the Jail. In the retraction letters, it was claimed that the earlier statement was given under coercion and duress and in a state of mental shock, depression and physical exhaustion at the relevant point of time due to continuance of search action continuously for more ....
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.... on any other corroborative evidences except for relying on the statement of Shri K. Srinivasulu since in the sworn statements of three other partners recorded on 08-12-2016, no questions were posed to them at all regarding the seized material allegedly containing the details of incidental charges paid to various persons. It was thus evident that no other corroborative evidence was available in record in respect of notings in the seized material. Therefore, the impugned addition could not be sustained merely relying on this statement. The conclusions of Ld. CIT(A), in this regard, find our concurrence. 18. Further, the assessee could not be expected to discharge a reverse burden as per legal principles laid down by Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO (131 ITR 597) holding that onus of establishing that the conditions of taxability are fulfilled would be on revenue and throwing this burden on the assessee would be to cast an almost impossible burden upon him to establish the negative. Therefore, it was onus of Ld.AO to establish that the assessee was in receipt of payments as noted in the seized material. This burden was not discharged by revenue in the pre....
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....concerned, it could be observed that the impugned addition has been made based on the entries found in the loose sheets seized from the office premises of M/s SRS Mining coupled with statement of Shri K. Srinivasulu u/s 132(4) (from whose possession the material was seized) with regard to the contents of the said seized material, entries found in the loose sheets seized from the residential premises of Shri T. Shanmugasundaram (accountant of M/s. SRS Mining) and the statement of Shri. T. Shanmugasundaram u/s 132(4) dated 09.12.2016 with regard to the contents of the said seized material. The Ld. CIT(A), upon perusal of seized material, rendered factual finding. It was noted by Ld. CIT(A) that Ld. AO inferred that the amount of Rs. 217 Crores found noted as receipts at page No.70 of the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-I represents the amount received by M/s. SRS Mining from the assessee. Further, AO inferred that the expenditure of Rs. 217.65 Crores by way of distribution of amounts to various constituencies as found noted at page Nos.65 to 69 of seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-1 as well as at page Nos.67 to 71 of seized loose sheets vide ANN/VK/TS/LS/S-I....
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.... found in the seized notebook denotes ''PA to OPS'. However, Shri K. Srinivasulu did not explain or elaborate in the said statement regarding what the acronym 'OPS' stands for. Further, this statement was a retracted statement. Considering the observation of Hon'ble High Court of Madras in Writ Petition of Shri P. Rama Mohan Rao, his statement, on standalone basis, would have no evidentiary value. If AO was to rely on this statement, he was to let in other reliable evidence to corroborate the same. Similar were the directions of Hon'ble Court in the case of M/s SRS mining Vs UOI (141 Taxmann.com 272). Therefore, the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. In the present case, AO relied on reply of Shri K. Srinivasulu to Q.No.13 wherein he stated that page Nos.65 to 70 of the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-1 contain details of total amount of Rs. 217 Crores as received from the PWD Minister Shri. O. Pannerselvam and that the said amount was distributed to various constituencies. However, the name of the assessee was not found noted anywhere in the relev....
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....ion made by the AO in the assessment order regarding the subsequent retraction of the said statement by Shri T. Shanmugasundaram and the reference made to an independent professional forensic expert for the purpose of establishing that the said retraction is factually incorrect, would have no relevance to the issue under consideration. The statement of Shri T. Shanmugasundaram, therefore, would not lend any assistance to the case of revenue to draw any adverse inference against the assessee by treating the same as corroborative evidence. We endorse this view also. 23. Lastly, it could be noted that Ld. AO issued summons to Shri. S. Ramesh, the then PA to the assessee and recorded his statement u/s 131 on 24.03.2021. The fact that 'Ramesh' as found noted at page No.70 of the seized material ANN/KGAR/MPKSSR/LS/S-1 containing the details of receipts totaling to Rs. 217 Crores, was confronted to him. However, Shri Ramesh completely denied having any knowledge of or nexus with the transactions noted in the seized material and stated that he did not know as to why his name had been scribbled in the seized material. He also stated that he had no relation with concerned parties and that....
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....ion would not arise against third parties unless the same is supported by corroborative evidences. 25. The Hon'ble Karnataka High Court in its recent decision titled as CIT vs. Sunil Kumar Sharma (159 Taxmann.com 179; 22.01.2024) held that 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. The Hon'ble Court referred to the decision of Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla (3 SCC 410) as well as another decision in Common Cause vs. UOI (supra) while arriving at such a conclusion. The Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla (AIR SC 410) held that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon'ble Supreme Court is that independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case. 26. Considering all these facts, we are of the considered opinion t....
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....o provide the actual satisfaction note, if any, recorded till date despite a specific request made by the assessee during assessment proceedings. The Ld. CIT(A) wrongly accepted that there was satisfaction recorded. But the details such as the date on which the satisfaction was recorded, who recorded, whether the signature was appended on the satisfaction note, whether such satisfaction note was made by AO of M/s SRS mining. The detail when satisfaction note was transmitted to the AO of the assessee was not provided. In notice u/s 142(1), AO has recorded the gist of the satisfaction note, which contains three paras wherein the order extracted by CIT(A) has two more paras i.e., para no.4 and 5, which apparently has been inserted subsequent to that. Further, no DIN was generated and the fact that the CIT(A) has not mentioned the date of the satisfaction note would go to show that the reasons recorded never existed in the first place. Further, the department has not placed any record / material to prove that all the conditions relating to recording of satisfaction have been complied with. The Ld. AR submitted that non-supply of reasons recorded by AO before completion of assessment pr....