TaxTMI 
TaxTMI 
2025 (1) TMI 1539
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....Rathi (one of key employee) working in office of Rucha sub-group and also digital evidences found from his iPhone, were corroborated with order for transfer and posting passed by the Gout. of Maharashtra, PWD Department?" "ii. Whether on the facts of the case and in law, the Ld. CIT(A) erred in holding that the addition cannot be made by placing reliance on a statement of third party and on material found from the third party in the hands of the assessee in absence of any evidence linking such material to the assessee even though it is clearly seen from the search proceedings that the evidences found from iPhone of Shri Shailendra Rathi and he had explained the contents of the said documents during the search proceedings and these documents were further corroborated with order for transfer and posting passed by the Gout. of Maharashtra, PWD Department?" "iii. Whether on the facts of the case and in law, the Ld. CIT(A) has erred in relying on such cases in which the facts are different from the present case?" "iv. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 5,00,000/- made by....
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....ha Group and was also asked to explain the source of cash paid for obtaining the desired posting. In response, the assessee denied having paid any amount in relation to any transfer and posting in the PWD Department to any person at any point in time. The assessee further submitted that the transfer and posting in the PWD Department was strictly done as per the rules and regulations of Maharashtra Government Servants Regulation of Transfers and Prevention of Delay in Discharge of Official Duties Act, 2005. The assessee further submitted that no private person was involved in the entire process of transfer and posting and accordingly, the question of paying any amount to anyone does not arise. Further, the assessee also denied having knowledge of any person's name in the notice and the group on which the search was conducted. The assessee further submitted that there is no information in the documents recovered during the search action to identify the assessee as a person referred to therein. It is thus submitted that no link has been established between the assessee and the group searched to support the allegation made against the assessee. 5. The Assessing Officer ("AO") vide o....
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....f the Act and added to the total income of the assessee. 6. The learned CIT(A), vide impugned order, partly allowed the appeal filed by the assessee and held that Shri Shailendra Rathi, who was alleged to be the employee of Rucha Group, is, in fact, a consultant to Rucha Group and not an employee. Further, the learned CIT(A) noted that the statement of Shri Shailendra Rathi was retracted post-search proceedings. The learned CIT(A) held that though the material was seized from the residential premises of Shri Avish Atal, however, the statement of Shri Avish Atal was not discussed by the AO in the assessment order. The learned CIT(A) held that the addition has been made by the AO relying on the statement of the third party and on the basis of material found during the course of the search on the third party and it is also a fact that those statements were retracted subsequently. By referring to various judicial pronouncements, as noted from pages 28-41 of the impugned order, wherein it has been held that documents/material found from the premises of a third party or the statement of a third party cannot be relied upon to make additions in the hands of the assessee, the learned CIT....
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....ment of Shri Shailendra Rathi, relied upon by the AO, is reproduced as follows: - Sr. No. Name Total Receivable Recd Till Date Balance Receivable Remark 15 ... ... ... ... ... 16 ... ... ... ... ... 17 Sharad Rajbhoh (SE) 125 125 Nil 8. Further, on the basis of the statement of Shri Ravi Wadepalle, an employee of Rucha Group, recorded under section 132(4) of the Act premises of Shri Avish Atal were searched and some incriminating documents pertaining to the transfer and posting of PWD Engineers were found and seized. The relevant extract of the documents seized from the residence of Shri Avish Atal, which has been relied upon by the AO, is reproduced as follows: - Sr. No. Name Designation Posting Decided Rec Balance Status Coordinator Category 8 ... ... ... ... ... ... ... ... ... 9 ... ... ... ... ... ... ... ... ... 10 S.N. RajbhoK SE Nashik 125 125 0.00 Done A 9. We find that during the search, the statement of Shri Ravi Wadepalle, an employee of Rucha Group, was recorde....
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....m partial payment or no payment has been received." 11. Further, another statement relied upon by the AO of Shri Javed Shaikh (one of the employees of Rucha Group) recorded under section 132 (4) of the Act is reproduced as follows: - "Q.10. What is your role and responsibility in M/s Rucha Consultancy LLP? Ans. Sir, my duties in M/s. Rucha Consultancy LLP involves dealing with the PWD department of Maharashtra regarding liaisoning works. The major works assigned to me in this regard is to make deal between Our Clients (Contractor) and PWD -Department. On behalf of this service Rucha consultancy earned 0.5% to 1% commission on sanctioned amount from PWD Department. Also, I look into Transfer and Postings of Engineers in PWD Department. I also look into some land aggregation works which included site visits, collecting documents, search reports of the land deals that are to be finalised. Q.11 Please state to whom do you report in M/s Rucha Consultancy LLP and who gives you directions time to time regarding your work? Ans. Sir, most of the time I report to Sh.Prashant Prakash Nilawar, the partner of Rucha Consultancy LLP and sometimes to legal ad....
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....ention of the transaction by these individuals with the assessee or any interaction with the assessee regarding his transfer and posting from District Satara to District Nashik. It is further pertinent to note that in his statement, Shri Ravi Wadepalle specifically mentioned that the amounts were collected by two individuals, i.e. Sonu (Lalit) Mishra and Pawan Mishra. However, it is evident from the record that there is no further examination of these individuals by the Department to find further the fact that the amount of Rs. 1,25,00,000 was paid by the assessee to facilitate his transfer and posting. At this stage, it is also relevant to note that Shri Ravi Wadepalle categorically stated that the officers pay amounts in cash varying from Rs. 5 lakh to Rs.1 crore. However, in the present case, it is alleged that the assessee paid an amount of Rs. 1,25,00,000, which is in excess of the amount stated in the statement. We find that apart from the aforesaid statements and documents as noted above, there is no further examination by the Revenue to link the assessee to the material/statements found/recorded during the search proceedings. In order to support its contention, the AO has a....
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....rroborating each other. Therefore, we agree with the findings of the learned CIT(A), based on various judicial pronouncements, that documents/material found from the premises of a third party or the statement of a third party cannot be relied upon to make additions in the hands of the assessee unless such material statement is corroborated by independent evidence linking such material to the assessee. Further, we find merits in the findings of the learned CIT(A) that such material could have been a reason for starting an investigation, however, the AO simply relied on material/statement found/recorded during the search proceedings without corroborating the same with any kind of independent evidence linking such material with the assessee. Thus, we are of the considered view that the AO did not make any attempt to confirm that such money was paid by the assessee and merely relied on the documents/statements found/recorded during the search to make the impugned additions. Further, the decisions relied upon by the learned Departmental Representative in the case of B.Kishore Kumar v/s CIT, reported in [2015] 62 taxmann.com 215(SC) and in the case of Madhav Gems (P) Ltd. v/s ITO, report....
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....lso relied upon the statements made by these two persons. The Appellate Assistant Commissioner confirmed the additions made by the Income-tax Officer. Before the Tribunal it was contended on behalf of the assessee that the entire evidence on which the lower authorities had relied merely created suspicion that the assessee might have accepted the payments in "black" but it did not take the place of proof. The Tribunal after appreciating all the pieces of evidence that were relied upon by the department in support of its case came to the conclusion that the evidence was not sufficient to prove even a single instance where the assessee could be said to have received money in "black" for which she did not pass a receipt. The other evidence was of a general character suggesting that the practice of receiving part remuneration in black was prevalent among cine stars which was of no avail to prove any specific instance against the assessee. The only specific evidence which required scrutiny was that furnished by the two entries and the statements of N. Vasudev Menon and C.S. Kumar. On a scrutiny of the two entries as well as the evidence of the two witnesses the Tribunal took the view tha....
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....the Bombay manager he used to receive amounts from Madras from out of which he used to make disbursements in Bombay but he maintained no account in respect of the same which made it difficult to rely on his evidence. The other serious infirmities in his evidence are to be found in paragraph 7 of the Tribunal's order. Mr. Joshi for the department had also mainly relied upon this evidence and did not press the other evidence which was of a general character. However, having regard to the reasons which have been given by the Tribunal for disbelieving the two witnesses and for rejecting the entries that were found in the ledger of Vasu Films, we feel that the conclusion reached by the Tribunal purely rests on the appreciation of evidence and no questions of law arise. Mr. Joshi tried to urge before us that in paragraph 5 of its order the Tribunal has found fault with the entries appearing in the ledger on the ground that there were no corresponding entries in the day-book of the firm covering the same period and the Tribunal further observed that no attempt was made to explain the absence of relevant entries in the daybook and for that reason the Tribunal rejected the entr....
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....on pure appreciation of evidence." 14. Accordingly, in view of the aforesaid findings, we find no infirmity in the findings of the learned CIT(A) in deleting the addition of Rs.1,25,00,000 made by the AO under section 69C of the Act. 15. Further, as regards the addition of Rs.5 lakh made by the AO under section 69A of the Act, we find that the AO placed reliance upon the WhatsApp chat between the assessee and Shri Shailendra Rathi found from the mobile of Shri Shailendra Rathi. However, the assessee denied any such transaction having taken place between him and Shri Shailendra Rathi. It is evident from the record that during the assessment proceedings, the assessee sought a complete set of statements of Shri Shailendra Rathi to examine the same and also sought the opportunity to cross-examine Shri Shailendra Rathi. However, the AO merely on the statement of Shri Shailendra Rathi that the assessee asked him to deliver Rs. 5 lakh to Nashik made the additions in the hands of the assessee under section 69A of the Act. In further appeal, the learned CIT(A) deleted the addition, inter-alia, on the basis that in his statement Shri Shailendra Rathi stated that the transaction of deli....
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.... 7.3.2 In the case of Jawaharbhai Atmaram Hathiwala v. ITO [2010] 128 TTJ 36 (Ahd.), addition was made by relying on seized material and statement of a third party without bringing any other evidence on record. The Hon'ble Ahmedabad Tribunal deleted the addition by observing that no evidence could be brought on record by the Revenue to show that in fact the assessee had paid 'on money' to the developers. No document containing signature of the assessee or handwriting of the assessee to corroborate the above making of payment by the assessee was found during the course of the search. Merely recording made by a third party or statement of a third party could not be treated as so sacrosanct so as to read as a positive material against the assessee. Therefore, addition in the hands of the assessee on account of 'onmoney' was held to be not justified. 7.3.3 In the case of Asstt. CIT v. Prabhat Oil Mills [1995) 52 TTJ 533 (Ahd. - Trib.), the department relied upon certain notings in the seized diary found from the premises of third party and contended that the assessee had made sales outside the books of accounts. However, the assessee denied of having made ....
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.... transaction could not take place. Also, the addition has been made on the basis of material found being whatsapp chat during the course of the search conducted on a third party. The Hon'ble Courts have clearly held that no addition can be made on the basis of messages from SMS or WhatsApp between two persons unless there is corroborative evidence on record. The assessee has consistently denied having any knowledge of the contents of the impugned material. It is seen that while such material could have been a reason for starting an investigation, the AO has simply relied on such material found from the premises of a third party and relied on third party statement to make the addition without corroborating it with any kind of independent evidence linking such material with the assessee. As per the plethora of Court judgments discussed above, such an act is not permitted under the law. The Hon'ble Supreme Court in the case of Umacharan Shaw and Bros v CIT (1959) 37 ITR 271 held that suspicion, however strong, cannot take the place of evidence. Similarly, raising presumption itself does not amount to proof. Presumption, however strong, cannot take the place of evidence as held....