TaxTMI 
TaxTMI 
2024 (5) TMI 438
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....y, grounds of appeal filed for assessment year 2016- 17 in ITA No. 743/Chny/2023 are reproduced as under: "1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2 The Ld.CIT(A) erred in deleting the addition made towards undisclosed cash transaction from undisclosed sources amounting to Rs.8,03,12,500/- made on the* basis of entries pertaining to the assessee firm in the excel sheets found in the electronic devices seized during the course of search in the case of Christy group of companies. 2.1 The Ld.CIT(A) erred in observing that material seized from third party in the search conducted in the case of the said third party did not have any evidentiary value as there were no corroborative evidences to substantiate the entries in the seized materials, without appreciating that the assessee was having regular business transactions with M/s.Christy fried gram (ie) used to give broken rice and sago for conversion work and further Shri.TS Kumarasamy, Prop:Christy Fried Gram and Mr. Valleeswaran accepted that generation of unaccounted cash and unaccounted expenses were maintained by Shri.Karthikeyan of Fi....
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....Gram Industry. The said electronic device contains three excel sheets with notings of transactions between the assessee and M/s Christy group of concerns for the assessment years 2016-17 to 2018-19. The Assessing Officer of the searched person and the Assessing Officer of the assessee are one and the same and therefore, based on seized material, the Assessing Officer recorded satisfaction u/s. 153C of the Act for assessment years 2016-17 to 2018-19, in respect of material pertains to the appellant on 07.01.2021 for the purpose of assuming jurisdiction u/s. 153C of the Act. As per satisfaction note recorded by the Assessing Officer of the searched person u/s. 153C of the Act, on the basis of electronic device seized at the residence of Shri. P. Karthikeyan vide Annexure ANN/GV/PK/ED/S, the Assessing Officer recorded his satisfaction that the relevant seized material containing details of cash transactions for the appellant has a bearing on the determination of total income of the appellant for the assessment years 2016-17 to 2018-19 and accordingly, notice u/s. 153C of the Act was issued. In response to notice u/s. 153C of the Act, the assessee has filed its return of income for ass....
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..... The Assessing Officer, while computing total amount of cash transactions has appended two zeros into cash transactions appearing in seized material, i.e. excel sheet for two assessment years and worked out unaccounted cash transactions for three assessment years and made additions u/s. 69A of the Act. The relevant findings of the Assessing Officer are as under: 7. The entries in the xl sheet titled 'others.xls' with sub sheet Varal transactions for the period 09.12.2016 to 31.03.2017 (FY:2016-17) are reproduced below: Varalaximi A/c Cash A/c Transfer S.N Date Particulars Cr's Dr's Cr's Dr's 1 09.12.16 To cash 15000 2 13.12.16 To cash 5000 3 Dec-16 salary 2810 4 Chennai A/c 1500 5 Jan -17 & Feb -17 5650 6 18.01.17 Varalaximi A/c Tranf 100000 7 Varalaximi A/c Tranf 100000 8 Varalaximi A/c Tra....
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....o the fy 2017-18 (AY 2018-19) are 3,16,905 with two zero less, that is Rs. 3,16,90,500/- Thus, as per this xl sheet for AY 2017-18 the cash transactions were for Rs. 2,80,00,000/- and for AY 2018-19: Rs. 2,64,000/- plus Rs. 3,16,90,500/- totaling Rs. 3,19,54,500/-. 7.1 As per xl sheet titled 'CBM/xls' sub sheet 2 the entries are: Christy A/c S/No Date Particulars Cr's Dr's 1 14.05.15 By Cash Varalaximi 50000 2 18.05.15 By Cash Varalaximi 25000 3 19.05.15 By Cash Varalaximi 25000 4 20.05.15 By Cash Varalaximi 25000 5. 21.05.15 By Cash Varalaximi 20000 6 23.05.15 By Cash Varalaximi 45000 7 25.05.15 By Cash Varalaximi 23000 8 26.05.15 By Cash Varalaximi 27000 9 27.05.15 By Cash Varalaximi 20000 10 30.05.15 By Cash Varalaximi 20000 11 03.06.15 By Cash Varalaximi 20000 12 15.06.16 To Cash Varalaximi 30000 13 16.03.15 To Cash Varalaximi 2000....
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....; To pay Christy to Varalaximi - 200000 The cash payments found are Rs. 4,00,00,000/- for AY 2016-17 and for AY 2017-18: Rs. 50,00,000/-. Besides the interest received outside the books for AY 2016-17 is Rs. 48,12,500/- and for AY 2017-18 is Rs. 1,87,500/- From the above xl sheets the assessment year wise cash transactions including receipt of interest outside the books of accounts are: AY Total 2016-17 8,03,12,500 2017-18 3,31,87,500 2018-19 3,19,54,500 8. In the absence of any credible reply from the assesse, it is inferred that, these are the assessee's cash transactions outside the books of accounts from undisclosed sources. Hence, these sums are added to the total income of the assesse for the respective years." 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has challenged additions made by the Assessing Officer towards alleged cash transactions not recorded in the books of accounts of the assessee, on the basis of seized excel sheets u/s. 69A of the Act. The assessee has also filed certain additional evidences....
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.... have evidentiary value, since they were not found in the premises of the assessee. The ld. CIT(A) further observed that, no corroborative evidence like cash receipts, unaccounted purchase bills or sale bills etc., were found which is matching the alleged cash transactions recorded in the excel sheets found in the possession of Shri. P. Karthikeyan. Further, no evidences were found during the course of search in the premises of the assessee that corroborate transactions noted in the excel sheets seized in the premises of Shri. P. Karthikeyan. Further, the Assessing Officer, did not make any reference in the assessment order to the statement recorded u/s. 132(4) of the Act, in the search proceedings of M/s. Christ group of cases to corroborate evidences contained in excel sheets. Further, neither the person from whose possession said documents were found was examined, nor the excel sheets were confronted to the assessee and its partners to verify the veracity of such documents. The ld. CIT(A), further held that there is no iota of any evidences in the seized material regarding the nature and purpose of alleged cash receipts and payments. Therefore, the CIT(A) opined that in absence ....
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....y group of industries stated that author of Pendrive is Shri. P. Karthikeyan and entries made as unaccounted cash book relates to cash transactions at Rs. 4 crores and the entries are made by appending two zeros in the value. The Assessing Officer on the basis of statement recorded from employees of Christy group coupled with evidences collected during the course of search clearly makes out a case of unaccounted cash transactions outside the books of accounts which needs to be assessed u/s. 69A of the Act, but the ld. CIT(A) without appreciating relevant facts simply deleted additions made by the Assessing Officer. 8. The Ld. Counsel for the assessee, Shri. M.V. Prasad, CA supporting the order of the CIT(A) submitted that, there is no basis for the Assessing Officer to make additions u/s. 69A of the Act, on the basis of excel sheet found in the possession of Shri. P. Karthikeyan, who is an employee of Christy group. The Ld. Counsel for the assessee, further submitted that there is no evidentiary value to excel sheets seized from the third party which are not corroborated by independent evidences like sale bills, cash receipts etc either found in the possession of third party or ....
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.... But, fact remains that his statement is with reference to cash book called 'ErandumThall' found during the course of search in the case of M/s. Christy group of cases. In response to specific question, he has admitted that value has been recorded removing two zeros in the 'ErandumThall'. Based on such admission, the Assessing Officer inferred that the assessee has removed two zeros to value of the cash transactions recorded in excel sheets, without understanding the fact that the statement of Shri. HariHara Krishnan and the cash book found therein is nothing to do with the business of the assessee. The ld. CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer and their order should be upheld. 10. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We have also carefully considered reasons given by the AO to make additions towards alleged cash transactions as per seized excel sheets found in the possession of Shri. P. Karthikeyan, an employee of Christy group of companies. The three excel sheets based on which undisclosed income of the assessee has been worked out b....
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.... of said documents from the person from whom said documents was found and also from the assessee and its partners. The evidences relied upon by the AO in the form of excel sheets does not constitute adequate evidence to draw adverse inference against the assessee, in the absence of any other corroborative evidence. This proposition has been laid down by the Hon'ble Delhi High Court in the case of CIT vs Sant Lal [2020] 118Taxman.com 432, where it has been clearly held that the assessee cannot be put to any liability on the action of a third person where the material was not found from the premises of the assessee nor was in the handwriting of the assessee, since, the third person may write the name of any person at his sweet will and the revenue did not make any effort to gather or corroborate evidence in this relation. 11. The revenue contended that since, bank entries in seized excel sheets are matched with books of accounts, cash transactions recorded in excel sheets should be considered as belongs to the assessee. In our considered view, the contention of the department that merely because the notings of bank transactions in the excel sheet have matched with the bank stateme....
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....ayments/receipts and the purpose of said payments/receipts. Therefore, in our considered view unless the AO makes out a case that alleged cash receipts and payment pertains to transactions of assessee which constitute income or expenditure, no addition can be made on the basis of said documents. In this connection, it would be relevant to refer to the decision of ITAT Jabalpur in the case of ACIT vs Satyapal Wassan [2008] 5 DTR 0202, wherein it was held that importance of gathering corroborative evidence in support of the contents of a document, particularly when the document is bereft of necessary details and is not complete in all respects. The proposition that addition cannot be made merely on the basis of entries in loose sheets found in the premises of a third party without bringing on record independent evidence to corroborate such entries has been reiterated in several decision, like MM Financiers (P) Ltd vs DCIT [2007] 107 TTJ (Chennai) 200, Regency Mahavir Properties vs ACIT [2018] 169 ITD 35 (ITAT Mumbai), DCIT vs Vipin Aggarwal [2017] 83 Taxmann.com 6 (ITAT Chandigarh), S.P Goyal vs DCIT [2002] 82 ITD 85 TM ITAT, T.S. Venkatesan vs ACIT [2000] 74 ITD 298 (Cal) and Monga ....
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....has denied that there are any transactions outside the books of accounts. Therefore, once the appellant firm has denied the transaction outside the books of accounts, the AO has to prove with evidence that alleged cash transactions recorded in excel sheets were belongs to the assessee. However, no such effort was made by the investigation department and the AO. In this regard, it is necessary to refer to the decision of Hon'ble Allahabad High Court in the case of CIT vs Shadi Ram Ganga Prasad, SP Kanodia and Smt. Premlatha Kanodia [2011] 9 Taxmann.com 193 (Allahabad), where it has been held that the loose papers found from the possession of a person during the search can be used to raise a presumption against the said person only. The Hon'ble High Court further held that, contents of the said loose sheets cannot be held against the parties whose names appear therein, unless the person from whose possession it was recovered admits in his statement that the entries in the loose sheet relate to the transaction made by such parties. A similar view has been taken by Hon'ble High Court of Delhi in the case of CIT vs Vivek Aggarwal [2015] 56 Taxmann.com 7, where it has been held that, no ....
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....reference to certain documents found during the search in the case of Christy group of cases is nowhere relates to assessee and assessee business. Further, the statement of Shri. Harihara Krishnan, cannot be relied upon to take adverse inference against the assessee, unless said statement is confronted to the assessee. Further, on careful examination of statement of Shri. Harihara Krishnan and more particularly question no. 21, it is noted that apart from explaining specific transaction of cash payment through RRM found noted at page no. 107 of loose sheet bunch, he had also furnished a general explanation with regard to the entire unaccounted cash book maintained by Christy group. But fact remains that, the excel sheet relied upon by the AO to make additions did not form part of unaccounted cash book referred to by Shri. Harihara Krishnan in his statement. The seized excel sheets are in the nature of ledger account in the name of the appellant, which are different from the unaccounted cash book. Therefore, in our considered view it is not appropriate to arrive at a conclusion that the amounts noted in the excel sheets have to be understood by adding two zeros at the end without ha....
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....ropriate to aggregate said receipts as well as payments for the purpose of determining the undisclosed income. Since, the cash payments are made out of cash receipts to the extent of the available cash receipts, aggregating the cash receipts as well as cash payments for determining the undisclosed income results in exaggerated amount of such income. It is further noted that, when the AO is not able to identify the nature of cash receipts or payments then the best is to net off the cash receipts against the cash payments to arrive at undisclosed income. Therefore, in our considered view, findings of the facts recorded by the ld. CIT(A) in Para 66 & 67 of their order with regard to the manner of computing undisclosed income appears to be reasonable and acceptable. The above findings with regard to the quantification of the undisclosed income is without prejudice to the finding rendered earlier in this order that the addition made in respect of alleged undisclosed income towards cash transactions as per seized material is unsustainable in absence of any corroborative evidence. 15. In this view of the matter and considering facts and circumstances of this case, we are of the conside....