TaxTMI 
TaxTMI 
2024 (3) TMI 1455
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.... 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The order of assessment passed u/s. 153C of the Act is bad in law and void-ab-initio in as much the conditions precedent to invoke the provisions of sec. 153C of the Act viz., the discovery of any assets / documents in course of search conducted in the case of any person that belongs to the appellant and is relevant for computing the income of the appellant for the year under appeal is totally absent and consequently the impugned assessment order passed deserves to be cancelled. 3. Without prejudice to the above, the order of assessment passed u/s. 153C of the Act is bad in law and void-ab-initio in as much as the conditions precedent to invoke the provisions of sec. 153C of the Act viz., the satisfaction that the material seized has a bearing on the assessment of income for the year under appeal has not been established by the learned A.O. and consequently, there is no valid satisfaction reached for taking up proceedings u/s. 153C of the Act for the year under appeal. 4. The learned CIT[A] i....
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....celled. 6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. 3. Ground No. 1 is general in nature, which do not require any adjudication. 4. First, we will take up the common ground Nos. 2 & 3 in ITA Nos. 1061, 1062, 1063 & 1065/Bang/2023 with regard to the fact that the condition precedent to invoke the provisions of section 153C of the Act is not satisfied. 5. In ITA Nos. 1061, 1062, 1063 & 1065/Bang/2023 except in ITA No. 1066/Bang/2023 for the assessment 2018-19, there was legal ground questioning the assessment order framed u/s 153C of the Act as much as the condition precedent to invoke the provisions of section 153C of the Act has not been satisfied. 6. Facts of the issue are that the assessee, Shri Prakash Bhajandas Talreja is an individual and has been carrying on the business of money lending. A search was conducted u/s 132 of the Act on 21.09.2017 at his premises by strength of warrant in case of M/s Coffee Day....
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....e ld. CIT(A), challenging the assessment order both on validity of framing assessment u/s 153C of the Act and addition made towards unexplained investment u/s 69 of the Act. The ld. CIT(A) has confirmed the order of the ld. AO. Now the contention of the assessee is that the ld. AO has recorded the satisfaction on the basis of following documents: Sl. No. Description of the Seized document Annexure/Sl.No./Pg.No.etc. 1. Pink folder marked as Annexure A/KMD/01 containing loose sheets serially numbered from 1 to 83 found and seized from the Residence of Shri K.M. Deekshith at No. 19, PMR Residency, Vysya Bank Layout, 34th Main, 4th Cross, JP Nagar, Bangalore Annexure : A/KMD/01 Page No. 38 and 43 2. Brown folder marked as Annexure A/CCDGLT8/1 containing loose sheets serially numbered from 1 to 134 found and seized from the office of M/s. Coffee Day Global Ltd. At No. 23/2, Coffee Day Square, Vittal Mallya Road, Bangalore Annexure : A/CCDGLT8/1 Page No. 108, 109, 129, 131 6.2 Considering the above documents for recording satisfaction u/s 153C of the Act, he recorded satisfaction as below: "A statement u/s 132(4) of the I.T. Act was recorded from Shri Prakash Talreja on 21.0....
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....) of the Act from K.M. Deekshith as well as V.G. Siddartha of M/s. Coffee Day Global Ltd. for recording the satisfaction and the same has been considered for framing assessment u/s 153C of the Act and the same to be upheld. 7.1 The ld. D.R. submitted that a search action u/s. 132 of the Act was conducted on 21st September 2017 by the strength of warrant issued in the case of M/s. Coffee Day Global Limited, to search the office premises of M/s. Coffee Day Global Limited, No. 23/2, Coffee Day Square, Vital Mallya Road, Bengaluru-56000l and to search the residential premises of Shri. K. M. Deekshith, at No. 19, PMR Residency, Vysya Bank Layout, 34th Main, 4th Cross, J.P. Nagar, Bengaluru. The residence of the assessee Shri. Prakash Bhajandas Talreja at Flat No. 31, Embassy Court, High Grounds, Crescent Road, Sampangi Ram Nagar, Bengaluru-560001 was also covered during the search proceedings in connection with the Group case of M/s. Coffee Day Global Limited, M/s. Coffee Day Enterprises Limited & Late Shri. V.G. Sidddhartha and others (M/S. Coffee Day Group). 7.2 During course of search proceedings certain incriminating documents were found and seized. A notice u/s. 153C of the Act f....
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....indicate the assessment year and corresponding incriminating evidence related to the assessment years. It was submitted that a general satisfaction, will not meet the requirement of law to initiate the proceedings u/s 153C of the Act. The ld. AO needs to correlate between the seized material and the satisfaction recorded where the seized materials were not in the name of assessee, no action could have been undertaken in case of assessee u/s 153C of the Act and the entries in the seized materials should show that there was a loan transaction between the parties. Further, the contention of the ld. A.R. is that the admission of Late V.G. Siddartha or K.M. Deekshith who are being the third parties which were recorded u/s 132(4) of the Act cannot be used against the assessee as it cannot be conclusive evidence against the assessee unless there is corroborative evidence on record, because the maker of the statement can bind himself, but how he binds others from his statements without there being any further evidence on record. At this point, it is appropriate to note the ratio laid down by order of the Tribunal in case of P. Koteswara Rao, Visakhapatnam Vs. DCIT, Central Circle, Visakhap....
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....ion 50C of the Act is invoked while completing the assessment. The A.O. merely acted upon the statement given by the third party which was totally denied by the assessee. It is a settled position of law that unless statement is tested under cross examination, the same cannot be considered as evidence against the assessee. The A.O. used the admission of partners of purchaser firm made u/s 132(4) of the Act in their case against the assessee, but failed to note that admission of other parties cannot be considered as conclusive evidence against the assessee, unless there is a corroborative evidence on record, because the maker of statement can bind himself, but how he bind others from his statement without there being any further evidence on record." 12. In the present case on hand, except loose sheet found in the premises of M/s. M.V.V. Builders and admission made by the third party in their assessment proceedings, there is no other evidence on record to prove that on money is paid to the assessee towards purchase of site. We further noticed that Sri M.V.V. Satyanarayana, while deposing before the investigating officer has stated that he has paid money to Sri P. Koteswara Rao towar....
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....' Bench, in the case of K.V. Lakshmi Savitri Devi Vs. ACIT (2012) 148 TTJ 157. The coordinate bench of this Tribunal, under similar circumstances held as under: "Admittedly there was no search action in the case of the assessee. It is a loose slip containing certain entries recording the payment which was found at the premises of CRK. It does not contain either date of payment or name of the person who has made the payment. According to the Department, CRK denotes C. Radha Krishna Kumar and KRK denotes K. Rajani Kumari. However, no name of the assessee was found in the louse sheet. The property was purchased from P w/c CRK for a disclosed consideration of Ps. 65 lakhs by the assessee. The property has been registered and the sale deed was executed for a consideration of Ps. 65 lakhs on 21st Aug., 2006 which consideration has been accepted by the State registration authorities. Further nothing was brought on record to show that there was any invoking of s. 50C while completing the assessment in the case of the seller. There is no evidence other than the seized material marked as 'A/CRK104' where relevant entries are made at Rs. 1,65,00,000. The seized material was not foun....
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....of the property. However, no such narration or name of the assessee was found in the seized material. The Department is not able to unearth any document or material or any corroborative material to show that the assessee herein actually paid Ps. 165 lakhs for purchase of the property. The Department has not brought on record the date on which the payment was made and the source from which ii is paid and/or any details of bank account from where the cash was withdrawn. Without any of these details, the Department has taken a view that the assessee has paid Ps. 165 lakhs for purchase of the property. The Department cannot draw inference on the basis of suspicion, conjectures and surmises. Suspicion, however strong cannot take place of material in support of the finding from the AO. The AO should act in a judicial manner, proceed with judicial spirit and come to a judicial conclusion. The AO is required to act fairly as a reasonable person and not arbitrarily and capriciously. The assessment made should have enough material and it should stand on its own legs. The basis for addition cannot be only the loose sheet or a third party statement. In the absence of corroborative material, an....
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.... in the purchase of the property is on the Revenue and it had failed to discharge the said burden." 16. The Hon'ble Supreme Court, in the case of CIT Vs. P.V. Kalyana Sundaram (2007) 294 ITR 49, under similar circumstances held in favour of the assessee. The Hon'ble Supreme Court, while deciding the issue in favour of the assessee held as under: "We have heard learned counsel for the parties and have gone through the record. It is true that the Division Bench of the High Court has borrowed extensively from the orders of the Tribunal and the Commissioner and passed them off as if they were themselves the author(s). We feel that quoting from an order of some authority particularly a specialized one cannot per se be faulted as this procedure can often help in making for brevity and precision, but we agree with Mr. Vahanvati to the extent that any "borrowed words" used in a judgement must be acknowledged as such in any appropriate manner as a courtesy to the true author(s). Be that as it may, we are of the opinion that the three questions reproduced above can, in no way, be called substantial questions of law. The fact as to the actual sale price of the property, the implication of....
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....ion 153C Assessing Officer of the searched person must be "satisfied" that, inter alia, any document seized or requisitioned "belongs to" a person other than the searched person. That thereafter, AO may transmit the records/documents/things/papers etc. to the Assessing Officer having jurisdiction over such other person. After receipt of the aforesaid satisfaction and upon examination of such other documents relating to such other person, the jurisdictional Assessing Officer may proceed to issue a notice for the purpose of completion of the assessment under Section 158BD and the other provisions of Chapter XIV-B shall apply. (para 6) It cannot be disputed that the aforesaid requirements are held to be mandatorily complied with. There can be two eventualities. It may so happen that the Assessing Officer of the searched person is different from the Assessing Officer of the other person and in the second eventuality, the Assessing Officer of the searched person and the other person is the same. Where the Assessing Officer of the searched person is different from the Assessing Officer of the other person, there shall be a satisfaction note by the Assessing Officer of the searched pers....
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....n - assessee. He is also satisfied that the documents/pen drive are seized from the searched person. He is also satisfied that the documents so seized from the residence of the searched person belonged to the assessee-other person. Therefore, the Assessing Officer was satisfied and it is specifically mentioned that the documents so seized belonged to the assessee - the other person. Therefore, it cannot be said that the mandatory requirements of Section 153C, in the facts and circumstances of the case, have not been complied with. The satisfaction note by the Assessing Officer clearly states that the documents so seized belonged to the other person - the assessee and not the searched person. Thus, the High Court is justified in observing that the requirement of Section 153C has been fulfilled. On facts, we are in complete agreement with the view taken by the High Court on the requirement of Section 153C being fulfilled by the Assessing Officer before initiating the proceedings under Section 153C. (para 6.2) Conclusion: In case where Assessing Officer of searched person and other person is the same, it is sufficient by Assessing Officer to note in satisfaction note that documen....
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....her hand, there is prima facie satisfaction at the end of ld. AO of the present assessee is to be reached that to suggest that there is undisclosed income in the hands of present assessee. Hence, we do not find any merit in this ground of the appeals of the assessee and the same is dismissed in all these appeals. 9. Next common grounds in Ground No. 4, 4.1, 4.3 & 4.4 in all these appeals in ITA Nos. 1061, 1062, 1063 & 1065/Bang/2023 except in ITA No. 1066/Bang/2023 with regard to alleged addition made u/s 69 of the Act as unexplained money towards alleged advance made by assessee in cash to M/s. Shivan & Co. is without any valid seized material. 9.1 The ld. A.R. for the assessee submitted that the AO has relied upon loose sheets, unsigned entries in note books to hold that the assessee has advanced loan in cash which is unaccounted. The loose sheets, scribbled note books cannot be treated as incriminating material unless they are corroborated with cogent evidences. The loose sheets, note pads, etc., relied upon by the assessing officer are not speaking ones. They are dumb documents. They cannot be relied upon to frame the assessment orders. The observation of AO would mean that t....
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....reme Court in the case of Mohd. Yusuf & Anr. v. D. & Anr- AIR 1968 Bom. 112 has observed that the evidence of the contents contained in document is hearsay evidence unless the writer thereof is examined before the Court. The Hon'ble Court, therefore, held that the attempt to prove the contents of the document by proving the signatures of the handwriting of the author thereof is to set at nought, the well-recognised rule that hearsay evidence cannot be admitted. 9.3 He submitted that the Tribunal in ACIT v. Layers Exports P. Ltd [20171 53 ITR (Trib) 416 (Mumbai) held as under: - "33. In entirety of the matter, we are of the view that an addition in assessments carried out pursuant to search action u/s 132 of the Act has to be related to cogent and positive materials found during search which prove conclusively that the assessee has either earned an income or made an investment which has not been recorded in his regular books of account or that his case is covered under any of the deeming provisions contained in sections 68, 69, 69A to 69D of the Act. However, additions cannot be sustained merely on the basis of rough noting made on few loose sheets of Papers unless the AO bri....
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....w loose sheets of papers. " 9.4 In view of the aforesaid, the ld. A.R. submitted that since the impugned seized papers are undated, have no acceptable narration and do not bear the signature of the assessee or any other party, they are in the nature of dumb documents having no evidentiary value and cannot be taken as a sole basis for determination of undisclosed income of the assessee. When dumb documents like the present loose sheets of papers are recovered and the AO wants to make use of it, the onus rests on the AO to collect cogent evidence to corroborate the noting therein. The AO has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the seized papers reveal the unaccounted money payments of the assessee. Further, no circumstantial evidence in the form of any unaccounted cash, jewellery or investments outside the books of account was found in course of search in the case of assessee. Thus, the impugned addition was made by the AO on grossly inadequate material or rather no material at and as such, deserves to be deleted. Hence, an assessment carried out in pursuance of search, no addition can be made simply on....
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....awn by the AO is based on surmises and conjectures. The inferences are outcome of a prejudicial or speculative reading of the material not supported by any independent, cogent and reliable evidences. The AO sought to rely on undated, unsigned dumb loose sheets which are not reliable material at all held in the decision quoted above. 9.9 He submitted that the presumption under section 292C is with reference to books of accounts, other documents, money, bullion, jewellery or another valuable article or thing. The loose sheets, scribbled note-pads do not qualify as books of accounts and other documents. That being the case, the presumption contained in section 292C of the Act cannot be applied by the AO merely because the loose sheets, note-pads are seized from the premises of the assessee. Therefore, the burden is cast upon the AO to prove that the loose sheets or note pads belong to the assessee. There is nothing in the loose sheets, note pads to hold that they belong to the assessee. The loose sheets / note pads do not contain name of the assessee or seal of the assessee. Neither the authorised officer nor the assessing officer have discharged the burden cast upon them to prove th....
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....t eventualities stated in section 132(1)(a)/(b) exist. Therefore, section 132(4A) cannot come into play. Consequently, section 292C does not apply. 9.13 Without prejudice to the above, he submitted that assessment u/s 153C have been made in the case of the assessee relying upon the very same material. Under such circumstances, the presumption under section 292C gets automatically rebutted. Section 153C(1) stat.es that where the Assessing Officer of the searched person is satisfied that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A. Therefore, if the material seized belongs to or pe....
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....assessment in an arbitrary and capricious manner. 9.15 He submitted that the AO while rebutting the contentions of the assessee that assessment cannot be made under sec 153C in the absence of incriminating material has stated that material evidence found, have been discussed at length in the various paragraphs relating to advance made by assessee. He submitted that the discussion which the AO refers to in the above-mentioned counter is also general in nature. He has only made bald assertions that the assessment has been made based on incriminating material found during the course of search. It is not enough to state that the material seized is incriminating. It should be demonstrated that it is so. It can be demonstrated only if a reasonable person would be able to state categorically without mincing any that the material represents undisclosed income or an undisclosed asset. 9.16 He submitted that as stated earlier, it is stated that the AO made additions in an arbitrary manner in which he has extrapolated the income though the seized material doesn't show the quantum of advance or date of advance or AY in which it was advanced or the name or address of assessee. These submi....
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....ary to look for those material which give maximum possible detail with respect to quantum of advance money being made and that "It is again reiterated that the only purpose of considering certain evidences for the purpose of quantification is to deliver most reasonable possible estimation and the one close to reality." In the assessment order, the assessing officer has stated that "The estimation is both scientific and reasonably accurate. Had the truth been brought forward by the assessee, it would have been more accurate to the decimal values. 9.18 Further, he submitted that the AO is merely trying to justify his estimation of unaccounted cash advances. He has conceded that he has not found "directly incriminating evidence." If he has not found any directly incriminating evidence, he cannot make any addition in section 153C assessment. The whole principle of an assessment which is preceded by search is that an officer specified in section 132(1) has reason to believe in consequence of information in his possession that any of the eventualities stated in section 132(1)(a) to (c) exist. So, there are two stages: one stage, where the authorizing officer has information in his posse....
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....t the seized material has not been analysed by the AO financial year-wise. He has made a consolidated analysis and has considered the same for all years. As a result, there is discord between the discussion made in respect of seized material and the table wherein the alleged unaccounted cash generated has been tabulated year- wise. He submitted that the analysis of the seized material should be made year-wise considering the true spirit of the provisions pertaining to search and seizure. If a consolidated analysis is made for all the 5 years involved, it would be end-up being a subjective analysis rather than an objective analysis. An objective an analysis alone would help in determining whether the seized material would qualify as incriminating material warranting an addition in the assessment Under section 153C for a particular year. Otherwise, one would end-up be making addition for one assessment year based upon the analysis for another assessment year. This is against the letter and spirit of the provisions dealing with search, seizure and consequent assessment. 9.20 He submitted that as can be seen from the decision in Singhad Technical Education Society's case [2015] 37....
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....ty to cross-examine the person who has given statement. Reliance is placed on the Hon'ble Delhi High Court in Principal Commissioner of Income-tax, Delhi-2 v. Best Infrastructure (India) (P.) Ltd' [2017] 84 taxmann.com 287 (Delhi) / [2017] 397 ITR 82 (Delhi). 9.24 The Hon'ble Tribunal in M/S Fateh Chand Charitable Trust CIT (Exemptions) Lucknow 2016 (4) TMI 1119 - ITAT Lucknow / (20161 49 ITR Trib) 276 held that it is settled position of law that any evidence collected at the back of the assessee cannot be used adversely unless and until it is confronted to the assessee and the assessee is allowed to cross-examine the witness, if any. It was similarly held in M/S Obulapuram Mining Company Pvt. Ltd. v. DCIT 2016 (7) 'PMI 1435 - ITAT Bangalore. 9.25 He submitted that in the next judgment of the Hon'ble Delhi High Court rendered in the case of CIT Vs Pradeep Kumar Gupta also, it was held by the Hon'ble Delhi High Court that it was mandatory for the revenue to produce A for cross examination by the assessee on the specific demand in this regard and thereafter, it was held that the violation of the revenue to produce A for cross examination by the assessee assu....
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....rein it was held that two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted, which is in line with the supreme court judgement in the case of CIT vs Vegetable Products, 88 ITR (SC). This is a well-accepted construction recognised by various courts. 9.28 He submitted that the Assessee neither had the occasion to look into those statements nor an opportunity to cross-examine those persons. In short, "no one shall be condemned unheard". The principles of natural justice are a jural postulate and has been enshrined in the maxin 'Audi alteram partem'. It is the second long arm of natural justice, which protects the little man from the arbitrary actions of the administrative authorities. There must be fairness on the part of the deciding authority. According to this principle, reasonable opportunity must be given to a person before taking any action against him. He should be disclosed the evidence to be utilised against him and should be given an opportunity to rebut the evidence produced by the other party unless he waived that right. The Court normally requests that an objection be taken as soon as the pre....
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....he assessee must be informed of the material and must be given an adequate opportunity of explaining it The statements made by Achaldas and Poonamchand before the Income-tax Officer were material on which the income-tax authorities could act provided that the material was disclosed and the assessees had opportunity to render their explanation in that behalf." 9.31 By not furnishing the copy of statements Mr. Deekshith referred to in Assessment orders, it is implied that the assessing officer has not relied upon any other statement. Even in the assessment orders, assessing officer has made reference only to these two statements. Therefore, though the assessing officer mentioned in assessment order these only 2 statements appear to have been relied upon. The statements obtained from this person is invalid as they have been recorded without authority. Even the assessing has not obtained any statement from any other person from the assessee side. He relied solely upon the statements recorded by the authorized officer. This means that it is as good as not having obtained statement from any other person. He submitted as stated that in the earlier submissions, the assessee has also estab....
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....ness of the statement of Mr. Deekshith. These submissions do not imply even remotely that the assessee is acknowledging that statements made by Mr. R M Deekshith are true. 9.35. He submitted that certain statements have been obtained by the authorised officer after the completion of search. These statements cannot be relied upon as they are invalid as submitted earlier. The reliability of the statements obtained from Mr. K M Deekshith have been mentioned at various places in these submissions. The AO has relied on the statement of Mr. K M Deekshith in the assessment order to the effect where in spite of the assessee denying the contents of the notebooks and assessee also vide letter dated 11.11.2019 has denied all entries from the seized material and from the same it can be concluded that such notebooks are not admissible as evidence. He submitted that the assessee has not admitted any entry in the seized material. The assessee reiterated the submissions made earlier. 9.36 Mr. K M Deekshith's admission is not an admission by the assessee. He has made the statement in his personal capacity. It is submitted that mere admission of the entry in the notebooks do not make them evid....
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....nation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession Of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such Examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search A statement of a person, which is not relatable to any incriminating doc....
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.... projected by her in the return of income for the year under consideration. Thus, to be brief and explicit, though the reopening of the case of the assessee in the backdrop of the aforesaid factual matrix cannot be faulted with, however such stand-alone information, i.e., the statement of Sh, Mukesh Chokshi (supra), cannot be allowed to form the sole basis for dislodging the claim of the assessee in respect of the LTCG reflected by her in the return of income for the year under consideration. We would not hesitate to observe that the lower authorities which have rushed through the facts to arrive at a conclusion on the basis of principle of preponderance of human probability, had however absolutely failed to appreciate that the said principle could have been validly applied only on the basis of a considerate view as regards the facts of the case in totality, and not merely on the basis of the standalone statement of the aforesaid third party, viz. Sh. Mukesh Choksi." 9.42 He relied on the judgement of the Hon'ble Gujarat High Court in the case of Kailashben Manharlal Chokshi v. Commissioner of Income-tax [2008] 174 Taxman 466 (Gujarat) held as under:"- "26. In view of what h....
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....." 9.43. He submitted that based on the above analysis, the AO has made assessments in the case of the above-mentioned assessee under section 153C of the Act. The AO stated that the payments evidenced by the seized material are not verifiable and on the other hand, he makes addition on the ground that the seized material evidencing payments are adequate to make additions in the hands of the assessee. The very fact that the AO has made these assessments would show that the assessing officer has no incriminating material to prove that any funds of the assessee have been advanced to M/s Coffee Day Global Limited. This would lead only to two possibilities; one, unaccounted cash has not been paid by the assessee at all and the other possibility is that the unaccounted cash was never available with the assessee as claimed by the AO. Reason is if the funds have neither been advanced by the assessee, then cash should have been lying with him. During the course of search no cash was seized. Where did the cash go? If the AO had reason to believe that the funds are advanced based on the seized material, he would have made a substantive addition staring the documents like Loan Agreements, Pro....
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....llegations, the only fall out would be that no unaccounted cash was ever there in the first place. But the assessing officer has not accepted the contention that the alleged advancing of money could never be possible considering there is no physical existence of the same. By applying the theory of elimination, the only possibility is that advancing of such money never took place. 9.47 At the cost of repetition, he submitted that the AO erred in relying upon materials maintained by others even though the assessee had not advanced any cash. The said material does not belong to the-assessee. He submitted therein that the seized materials constitute only loose sheets and scribblings containing unsigned entries are dumb documents and cannot be treated as incriminating material to make any addition. The assessee reiterates the submissions made in respect of the above-mentioned grounds. 9.48 He submitted that the above allegations of the AO are not tenable. The assessee denied the allegation that it has advanced any cash loan to M/s Coffee Day Global Limited. The evidence brought on record by the department is sketchy and cannot be relied upon to show that the assessee has advanced any ....
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....ekshith alone was denied. 9.52 He submitted that the above observations of the AO are not legally tenable. The right to cross-examine is not dependent upon the assessee's relationship with the third party. The right to cross- examine is dependent upon the fact that the statement of a party is used to the prejudice of the assessee. Therefore, mere fact that the statement sought to be relied upon by the assessing officer is that of a third party would not deprive the assessee of his right to cross-examine. Therefore, the ratio of the decisions relied upon by the assessee squarely apply. Moreover, it is assessee's prerogative to decide whom he wants to cross- examine. For the proposition that the right to cross-examine is not restricted only to those cases where the deponent / witness is a third party, reliance is placed on the decision of Smt. Madhu Gupta v. DCIT 2006 (2) TMI 496 - ITAT MUMBAI / [2006] 8 SOT 691 (Mum.) and Gargi Din Jwala Prasad v. CIT [1974] 96 ITR 97 (All). 9.53 He submitted that in Sunrise Tooling Systems Pvt.Ltd v. ITO 2012 (11) TMI 1081 - ITAT Delhi, the Tribunal held as under: - "The opportunity of cross-examining, Sh. Nitin Aggarwal, a partner of S....
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.... to M/s Coffee Day Global Limited. In the assessment order, the AO has extracted page 6 of A/CCDGL/T8 and observed as under: "The above exhibit is an image of seized material A/CCDGL/T8, Page No. 6 which has information tabulated about the "Various scribblings and numbers and names of different people for year 2017". 9.56 In reading the above, it can easily be inferred that the initials PBT cannot be construed as the assessee and it's not in good faith to presume it to be the name of the assessee. From this sheet of seized material, it can also be seen there are various names mentioned except for the assessee and in such scenario it would not be prudent to assume as per the whims and fancy of the AO that the said initial is that of the assessee and make additions basing the decision on such loose sheets that are dumb and not to be taken while considering the assessment as they are not preliminary evidence to prove that any cash loan was advanced by the assessee. 9.57 The said page 6 does not contain any details about the unsecured cash loan made by the assessee nor proof of such alleged advancement. The AO merely presumed that the entire amount shown under demand column is ....
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....ble evidence. 9.61 He submitted that in the assessment order, the AO relied upon reply to query from the statement under section 132(4) of Mr. KM Deekshith recorded on 27.11.2017 which is as under: - "In the sworn statement u/s 132(4) of the Income-tax Act, 1961 recorded from Mr. K M Deekshith during the course of search operation u/s 132 dt: 27.11.2017 he was asked about his role and responsibilities in M/s Coffee Day Global Limited. From the above statement of Mr. K M Deekshith it cannot be inferred that the assessee has advance loan in cash. The fact that Mr. K M Deekshith has stated that he was in charge of collecting unsecured cash loans^ on the direction of Late Shri V G Siddhartha has no merit because it is just hearsay which has no evidence or proof to back his statement. Therefore, without proof of evidence, the assessee cannot be held liable for such obnoxious statements which have no merit when considered or taken into account in isolation." 9.62 He submitted that merely because Mr. K M Deekshith has made a statement that unsecured cash loan was advanced by the assessee, it is not sufficient. It is necessary to corroborate with external evidence. The perusal of the....
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.... of PBT does not mean that the entries therein have been made at the behest of the assessee. The AO cannot blow hot and cold. 9.67 He submitted that as far as the documents referred to in various seized material, the assessee has already stated that he has nothing to do with them and they cannot be relied on to make any allegations against him. Further, he submitted that there are lot of loose ends and contradictions in the theory advanced by the AO to support his allegation that assessee has advanced cash loan. The AO stated in his order based on third party statement that the assessee advanced cash loan for a return of 1.95% per month which is not been proved. Therefore, the theory advanced by the AO regarding alleged advancement of cash do not have legs to stand and hence, all allegations based on such pillars should naturally fall. In view of the above, he submitted that the allegations of the AO that the assessee has advanced cash loan are perverse being not based upon any evidence are liable to be quashed. 9.68 Now, to rebut the allegations regarding payment of interest made to assessee for one year Mr. K M Deekshith has made vague statements stating "I am not able to remem....
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....on to any particular transaction. In these circumstances, no addition can be made on the basis of such document. 9.72 He submitted that in the case of CIT v. M/S Khosla Ice & General Mills 2013 (1) TMI 451 - Punjab & Haryana High Court, the Hon'ble Court held that assessee rightly contended that the impugned document was a non-speaking document in as much as it does not contain any intelligible narration in support of the inference drawn by the Assessing Officer that it reflected cash advance carried out by the assessee outside the regular books of account. When a dumb document, is to be made the basis to fasten tax liability on the assessee, the burden is on the AO to establish with corroborative evidence that the nature of entries contained therein reflect income and also that such income was in the control of the assessee. Thus, AO has to establish, with necessary corroborative evidence, that various entries contained in the seized document reflect cash advance effected by the assessee. Considering the entirety of circumstances, in the absence of any material to support the nature and ownership of the entries found in the seized document, no addition is permissible in the h....
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.... to support his claim against another. In Hira Lal v. Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 of Evidence Act so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. ....
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.... material seized belongs to the searched person as the assessing officer by his own action of making assessment under section 153C in the case of trustees relying upon the very same seized material. 9.78 He submitted that the Delhi Tribunal in Vijay Kumar Aggarwal v. ACIT 2017 (5) TMI 1354 held that it is clear that the presumption of facts u/s 292C of the Act is rot a mandatory or compulsory presumption but a discretionary presumption. Since, the word used in the said Section is "may be" and not "shall". Secondly, such a presumption is rebuttable presumption and not a conclusive presumption because it is a presumption of fact not a presumption of law. In the present case, the assessee from the very beginning stated that the documents found during the course of search did not belong to him. 9.79 Therefore, the addition made by the AO is only on the basis of surmises and conjecture without bringing any cogent material on record to substantiate that the assessee was engaged in the business of gold and jewellery and the AO had not brought any material on record to substantiate that the denial of the assessee was false. Unless the burden of proving that the materials and cash belong ....
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.... the only basis of issuing the Show-Cause Notice, (para 8)" 9.81 He submitted that the Delhi Tribunal in the case of Veena Gupta v. ACIT in ITA No. 5662/Del/2018 dated 27.11.2018 relying on the above judgment of Hon'ble Supreme Court in the case of Andaman Timber Industries (supra) quashed the assessment order on the reason of not providing cross-examination of witnesses whose statements were recorded. 9.82 He submitted that the Hon'ble Supreme Court in the case of Mehta Parikh & Co. v. CIT, 30 ITR 181 held as under: - "In the instant case a mere calculation of the nature indulged in by the TTO or the AAC was not enough, without any further scrutiny, tto dislodge the position taken up by the assessee, supported as it was, by the entries in the cash book and the affidavits put in by the assessee before the AAC. The Tribunal also fell into the same error. It could not negative the possibility of the assessee being in possession of a substantial number of these high denomination currency notes. It, however, considered that it was impossible for the assessee to have had 61 such notes in the cash balance in their hands on 12-11946, and then it applied a rule of the thumb treat....
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....portunity of cross examination to assessee, who on other hand, had prima facie discharged initial burden of substantiating purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and fact of payment through cheques, VAT Registration of sellers and their Income-tax Return - He held that purchases made by assessee was acceptable and disallowance was to be deleted - Tribunal dismissed revenue's appeal - High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings - Whether no substantial question of law arose from impugned order of Tribunal - Held, yes [Para 4] [In favour of assessee]" 9.84. He submitted that the Hon'ble High Court of Karnataka in Kothari Metals v. ITO, 377 ITR 581 (Karn) held as under: - "Held, allowing the appeal, that the non-furnishing the reasons for re-opening an already concluded assessment goes to the very root of the matter. Since such reasons had not been furnished to the assessee, even though a request for them had been made, proceedings for the re-assessment could not have been taken further on this ground alone. Besides this, the statement of ....
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....rds and we find that this Shri Sukla was examined by a number of officers. The Assistant Director of Investigation examined him on August 4, 1987, and in reply to question No. 2 in that deposition he confirmed that he was a dealer in lubricating oil since 1977. In reply to question No. 3, he confirmed having been assessed to income-tax. Again, in reply to question No. 4, he explained that he used to purchase lubricating oil from different garages as well as through various brokers. Such lubricating oil was processed by him in his factory for sale. All payments were received by him through account payee cheques. In reply to question No. 5, he stated that he had seven full-time employees whose names are mentioned by him. He also claimed to have maintained books of account like sales books, purchase books, cash books and sale bills. In reply to question No. 18, he, on his own, stated that his big customers were the Reliance Oil Mills and Eastern Commercial Enterprises, the assessee, in the present reference. As for his cash withdrawals, he explained that his business required ready cash for purchase of raw materials which explained his large drawings of cash from the bank. Learned cou....
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....ee may feel necessary to rebut the case against him. As a result, we decline to answer the question." 9.86. He submitted that as held by the Hon'ble Calcutta High Court in the above judgment, in the present case, Mr. Nagaraj cannot be considered as a reliable witness. More so, when the assessee was not given any opportunity to cross-examine him. In this regard, he also placed reliance on the decision of the Hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT, 125 ITR 713 (SC) wherein it was held that evidence collected from witness cannot be considered without giving opportunity of cross-examination to the assessee. 9.87. He submitted that in this case also, the addition made by the AO is based on unsubstantiated loose sheets and jottings without proper cross-examination of the person who has admitted the contents therein. Being so, it cannot be stated as full-proof of material evidence to substantiate the addition. The seized documents do not support the AO's contention that assessee has advanced cash loan to M/s Coffee Day Global Limited. Going through the entire facts of the case it creates only a suspicion in the minds of the AO that the assessee has....
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....see on the basis of uncorroborated writings in the loose papers found during the course of search cannot be sustained. The evidence on record is not sufficient to uphold the stand of AO that assessee has advanced unaccounted cash loans in the guise of carrying on money lending activities. 9.90. He submitted that the contention of the AO that cross-examination of parties whose statements were relied on by the AO to frame the assessment need not be given. On the other hand, if it is required to be given, the issue may be remitted back to the AO to give such opportunity. For this purpose, we rely on the judgment of the Hon'ble Allahabad High Court in the case of Moti Lal Padampat Udyog Ltd. v. CIT, 293 ITR 565 (All) wherein it was held that: "It was not in dispute that the adverse material which was found by the Income-tax authorities during the course of search in the business premises of 'V' had been confronted to the assessee who was having regular business dealing with the said firm. Some of the entries, recorded in the rough cash book seized during the search operation, tallied with the entries recorded in the regular books of account of the assessee as also that o....
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....The order of the Assessing Officer though was vitiated by an illegality which supervened, not at the initial stage of the proceedings but during the course of it and, therefore, assessment could neither be annulled, nor the addition could be deleted because of that illegality or irregularity. The matter was required to be set aside to be reprocessed and restart from that stage of illegality/irregularity. [Para 14] Therefore, the order of the Assessing Officer on this issue was to be set aside with a direction to him that the statement of 'S' should be made available to the assessee. The assessee must be allowed cross-examination of the said person and thereafter the matter be decided afresh on the basis of the result of the cross-examination. [Para 22] From the discussion above, it was evident that merely by reason of want of cross-examination, the addition cannot be deleted. It will be an addition liable to be challenged and corrected. An omission to serve notices or any defect in the service of notices does not efface or erase the liability to pay tax where such liability is created by distinct substantive provisions (charging sections). Any such omission or defect may re....
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....ERLINK "https://indiankanoon.org/doc/105761717/" Investments (P) Ltd. 165 ITD 27 (Delhi - Trib.) (SB) wherein it was held that when two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted, which is in line with the Supreme Court judgment in the case of CIT v. Vegetable Products, 88 ITR 192 (SC). This is a well- accepted construction recognized by various courts. 9.94. Being so, he submitted that the seized material relied by the assessing officer for sustaining addition is not speaking one in itself and also not speaking in conjunction with some other evidence which the authorities found during the course of search or post search investigation. Thus, the well settled legal position is that a non-speaking document without any corroborative material, evidence on record and finding that such document has not materialised into transactions giving rise to income of the assessee which had not been disclosed in the regular books of accounts of the assessee has to be disregarded for the purpose of assessment to be framed pursuant to search and seizure action. In these cases, moreover the documents are relied upon by the....
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....d assets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets. 10. The ld. D.R. submitted that the incriminating material was found from the residence of K.M. Deekshith and at the chamber of K.M. Deekshith in office premises of M/S. Coffee Day Limited. He submitted that the person in whose possession seized document was found is the proper person to explain it and presumption is invoked by the section 292C. He relied upon the decision of this Hon'ble Bench in the case of Trishul Buildtech Infrastructure (P) Ltd. Vs JCIT, the relevant paragraph reproduced below: "30. We have considered the above submission and are of the view that the same is without any merit. As we have already seen, in a statement K.P. Shetty recorded in the post search proceedings, K.P. Shetty clearly admitted that the entries in the seized diaries were made on his instructions. It is for him to explain the entries in the seized diaries. In fact, in respect of some of the entries in the seized diaries, the assessee declared undisclosed income for various assessment years. In these circumstances, the assessee cannot disown the entries i....
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....in the satisfaction note. So, on this basis, he is challenging the whole proceedings as void-ab-initio. 10.4 He submitted that the satisfaction note and assessment order are two different document and their nature is different. The former is internal document to communicate within the officers for initiating proceedings and the latter is external document to pass the order by the receiving officer. The satisfaction note purpose is to transmit the record from the Officer of searched person before he transmits record to other Assessing Officer who has jurisdiction over such other person under section 153C is prepared, its purpose end there. This initiates the power to assessing officer to takeover the case and decide it upon his own merits by considering all the relevant seized material. assessee is only empowered to contend if no satisfaction is recorded. The Assessee has very well contended it before the CIT(A) and this contention of the assessee have been examined and CIT(A) has reproduced the satisfaction note. 10.5 He submitted that the seized material was confronted to Shri K M Deekshith in the sworn statement u/s.132(4) at office premises of M/s. Coffee Day Global Ltd. Also,....
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....Day Enterprises Ltd. Q.No. 3 During the course of search proceedings at your residence and also in office certain incriminating documents related to unsecured loans were found and seized as CCDGLT8/l. AI am showing you the same. Please go through it and explain. Ans: Sir, I have gone through the documents seized in office premises and also the data maintained in my laptop. These are the parties who have given unsecured loans in both cash and cheque. The unsecured loan has been collected by me under directions of Mr. V G Siddhartha. Q.No.4. Please state the names of the parties who have given unsecured loan in cash and cheque as per the seized document and data maintained by you in laptop. Ans: The names of the parties who have given unsecured loans in cash and cheque are as follows: * Prakash Talreja * Mahesh Ramchand * Chaman Lal Q.No.5. Please the amount of cash loan taken from the above mentioned parties and also state the rate of interest to be paid. Ans: Sir the amount of cash loan taken from the parties are as follows: Prakash Talreja- 12.75 crores in cash Mahesh Ramchand-6.90 crores in cash Chaman Lal-3 crores in cash These cash loans have been col....
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....nce cash loans also. Irrespective of the way loan is given by the party, the promissory note is issue to them and no record of the same is maintained by us. 10.10 Statement recorded u/s 131 at Office of DDIT, unit-3(3) Q.No.3: I am showing you, your statement recorded u/s 132(4) of the Income Tax Act 1961 during search proceedings in the case of Shri VG Siddhartha, M/S Coffee Day Enterprises Ltd., M/S Coffee Day Global Ltd. on 21/09/2017. Please go through and confirm the same. Ans: Yes, I have gone through the statement and I confirm that the statement deposed by me is true and I abide by it. Q.No.4. I am showing you the folder marked as A/KMD/OI containing loose sheets serially numbered from I to 83 which is found and seized during the course of search proceedings u/s. 132 of the Income Tax Act, 1961 in the case of Shri V G Siddhartha, M/S Coffee Day Enterprises Ltd., M/S Coffee Day Global Ltd. at your residence on 21.09.2017. Please go through and confirm the same. Ans: Yes, I have gone through it and confirm that the folder marked as A/KMD/OI containing loose sheets serially numbered from I to 83 are found and seized during the course of search proceedings u/s. 132 of....
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....e remaining principle amount of Rs. 6 crore the interest was paid is Rs. 18 lakhs at the rate of interest of 3% per month. However, the actual; interest of Rs. 10.85 lakhs was paid to M. Avinash Amarlal and the whole transaction has happened in cheques. Page No. 23 contains the details of the cash withdrawn from bank to make payments to labor and other expenses pertaining to estates day to day activities. However, I am not aware about the bank from which cash is withdrawn. These all estates are elated to Mr. V G Siddhartha. Page No. 29 contains the details of the loan of Rs. 10 crore taken from Mrs. Urmila Shah at the rate of 10% for 13 days. This mail is sent by Mr. Amal Vora, account handler for Mrs. Urmila Shah, asking to courier postdated cheques from Mr. V G Siddhartha. From the page No. 36 to 43 contain the details of payment made to various parties as mentioned in the Page No. 46 contains the details of the payments made to various persons. However, I am not able to recall the name of parties, whom and how it was paid. In the page No. 49, loan amount of Rs. 4,94,00,000/- is received from Lakshmi Vilas bank on the personal guarantee of Mr. V. G. Siddhartha and the s....
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.... Café Coffee Day. Ans. I am working in Café Coffee Day as office boy for the last 15 years. I am reporting to Sri K.M. Dixit, Accountant. I am taking care of banking transactions like RTGS, Cheque Transfer, drawing and disbursement of petty Cash. I am also handling the cash for the company. I generally hand over the cash to the persons namely Chamanlal, Prakash Talreia, Mamta Ajila. Q.No.7 Please provide the details of cash paid to Shri Prakash Talreja and Chamanlal. Also give the details of their address. Ans. As per the instruction of my Boss Shri Deekshith K M, I used to hand over the cash to both the parties Shri Prakash Talreja and Chamanlal. These transactions are in the range between 10 lakhs and 50 lakhs and frequency of these cash collection was 2 to 3 times in a month. They generally used to come to our office of Coffee Café Day (CCD) at Coffee Day Square, Vittal Mallya Road Bangalore to take the cash. Many times they have received the cash at the bank after withdrawls from the bank at the same time. However, I don't know the address of the above person as most of the transaction used to happen at our CCD office or in the bank itself. Q.No....
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.... Officer felt it was futile to call summon again the same person when the statement is very clear and specific and points out to the assessee. 10.16 The ld. D.R. submitted that the CIT(A) has duly considered the assessee's plea to provide an opportunity to cross-examine Mr. K.M. Deekshith, directed the AO u/s.250(4) to allow the assessee to crossexamine and it is pertinent to note that the Assessing Officer summoned Mr. K.M. Deekshith on 18.10.2023. In response to the summon Mr. K M Deekshith appeared before the AO for cross-examination however, the assessee did not appear. The assessee vide letter dated 19.10.2023 refused to examine and flimsy reason and the same can be seen in the Para 8.4.3 of the CIT(A) order. It is submitted that the CIT(A) has very wide power and he can exercise the AO's power and it is within his ambit. In this support, I would like to place reliance on the M/S S.D. Traders vs Commissioner of Income Tax & Anr., the relevant paragraph is reproduced below: 29. The Apex Court has also affirmed that power of Commissioner (Appeals) cannot be restricted and in the case of Jute Corporation of India Ltd. (supra) held that the power of the Commissioner (Ap....
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....018-19 dated 7.3.2019 was issued and served on the assessee requiring to file the return of income within 15 days from the date of service of notice. In response to notice u/s 153C of the Act, the return for these years was filed on 26.3.2019. The ld. AO while framing the assessment relied on the seized materials marked as A/KMD/01 page Nos. 65, 66, 70 & 107 found at the residence of Shri K.M. Deekshith which is reproduced at para 11.14 of this order. 11.1 According to the ld. AO, the above seized documents contain the cash loan transaction between the assessee and the M/s. Coffee Day Global Ltd. Group. It was noted by the ld. AO that there were certain cash receipts by V.G. Siddartha. These receipts of cash were confronted with Mr. K.M. Deekshith in the sworn statement recorded on oath u/s 132 of the Act. Mr. K.M. Deekshith in his statement recorded on oath disposed that he has received a cash loan of Rs. 12.75 crores from the assessee Shri Prakash Bhajandas Talreja. Further, he also confirmed that interest payment of Rs. 3 Crores in cash made to Mr. Prakash Bhajandas Talreja during the financial year 2014-15 to 2016-17 and Rs. 10 lakhs in the financial year 2017-18. On being con....
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....nts without any corroborative evidence to allege that there were cash loan transactions between assessee and M/s. Coffee Day Global Ltd. or with this Group. 11.5 In the case of Mahesh Reddy Vs. ACIT in ITA No. 1236/Hyd/2012, Gyan Kumar Agrawal Vs. ACIT 60 DTR 241, Dhatrii Constructions Pvt. Ltd Vs. DCIT in ITA No. 2185/Hyd/2011, ITO Vs. Kranti Impex Pvt. Ltd., Mumbai in ITA No. 2229/Mum/2013 dated 28.12.2018, PCIT Vs. Umesh Israni 108 Taxmann.com 437 (Bom), DCIT Central Circle Vs. Sri Krishna Yadav 12 taxmann.com 4 (Hyd), Gayatri Enterprises Vs. ITO 116 Taxmann.com 359 (Guj), ITO Vs. Bharat A. Mehta 60 taxmann.com 31 (Guj), CIT Vs. Vineet Gupta 46 taxmann.com 439 (Del), CIT Vs. K.V. Laxmi Savitri Devi Vs. ACIT 60 DTR 148, wherein held that no addition can be made on the basis of loose papers which does not contain the name and date of payment. The department is precluded in drawing inference on the basis of suspicion, conjectures and surmises and no addition can be made on the basis of such document or loose slips. 11.6 In the case of K.V. Laxmi Savitri Devi Vs. ACIT 6o DTR 148 it was held by the ITAT Hyderabad Bench that "No addition can be made on the basis of a loose paper whi....
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....ee's income on basis of a document seized in course of search, in view of fact that document seized was both undated and unsigned and even taken at face value did not lead to further enquiry on behalf of Assessing Officer, impugned order of Tribunal deleting addition was to be confirmed. Where Assessing Officer in course of block assessment proceedings made addition in respect of unexplained investment relating to purchase of property, in absence of any incriminating evidence with respect to payment over and above reported amount, addition so made deserved to be deleted. 11.10 In the case of HIGH COURT OF DELHI Commissioner of Income-tax-XIV v. Vivek Aggarwal [2015] 56 taxmann.com 7 (Delhi) the Assessing Officer has resorted to make the addition on mere loose paper without corroborative evidence. The document which does not describe and express any meaning cannot be relied upon by the Assessing Officer. 11.11 It was held by Hon'ble Delhi High court in the case of CIT Vs Sant Lal vide [2020] 118 Taxmann.com 432 that "13. In view of the aforesaid facts and the concurrent findings given by the CIT (A) and ITAT, it is evident that the Revenue has not been able to produce an....
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....minating material used for the purpose of issuing notice u/s 153C of the Act by recording the satisfaction. Even otherwise, there was no mentioning of the assessee's name and figure of loan alleged to be lent by the assessee in the loose slips. The seized material considered for assessment is lacking the following material particulars: * Name of the person making the payment * The date of payment * Details of amount paid * The purpose for which it was paid * Details of the recipient of money * Signature of the recipient * Payer of the money * Any authentication by any competent person. 11.16 All the seized materials relied by the ld. AO for framing assessment conspicuously silent on all the above said counts and in the light of above said information, nothing can be inferred holding that the same is a making of cash advance by assessee to M/s. Coffee Day Global Ltd. or M/s. Shivan & Co. and these seized materials cannot be used as evidence or incriminating material for the purpose of determining the undisclosed income of the assessee u/s 153C of the Act. The alleged incriminating evidence found at the premise of Shri K.M. Deekshith and on questioning Shri K.M. Deek....
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....hey have admitted that these transactions in their return of income and that could be the base for addition in the hands of present assessee and it is not necessary to give any cross examination of the parties involved herein. More so, the ld. CIT(A) has called the assessee for cross examination of Shri K.M. Deekshith which is not availed by the present assessee. In our opinion, admission of the third party could not be enforceable against the other party u/s 153C of the Act. Further, the ld. AO pressed the assistance of Mr. R. Sendhil's statements recorded u/s 131 of the Act on 21.09.2017 to support his action without providing an opportunity of examining/cross-examining him, which is mandatory requirement under the Evidence Act. The ld. AO also pressed the service of section 292C of the Act. In our view, the section 292C of the Act only be invoked against such person in whose premises/possession, the said incriminating material was found during the course of search action u/s 132 of the Act. 11.18 The word "such person" used in section 292C of the Act is only referrable to the person in whose premises the things or materials were found in possession or control at the time of sea....
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....ctures and surmises. 11.19.1 Further, it was also on record the reply of the assessee in letter dated 11.11.2019, wherein stated as follows: 11.19.2 The above letter itself shows that assessee had never admitted the transaction between assessee and M/s. Coffee Day Global Group. Even before us, the ld. D.R. was not able to corroborate the addition with any supportive and cogent materials to suggest the cash loan advanced by the present assessee to M/s. Coffee Day Global Ltd. Group. 11.20 In the case of Dreamcity Buildwell (P.) Ltd. reported in [2019] 110 taxmann.com 28 (Delhi), in the identical facts, Hon'ble High Court of Delhi had deleted the additions with the following reasoning:- "15. It can straightaway be noticed that the crucial change is the substitution of the words 'books of account or documents, seized or requisitioned belongs to or belong to a person other than the person referred to in Section 153A' by two clauses i.e. a and b, where clause b is in the alternative and provides that 'such books of account or documents, seized or requisitioned' could 'pertain' to or contain information that 'relates to' a person other than a p....
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....y else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction'. * In the present case the search took place on 5th January 2009. Notice to the Assessee was issued under Section 153 C on 19th November 2010. This was long prior to 1st June, 2015 and, therefore, Section 153C of the Act as it stood at the relevant time applied. In other words, the change brought about prospectively with effect from 1st June, 2015 by the amended Section 153C (1) of the Act did not apply to the search in the instant case. Therefore, the onus was on the Revenue to show that the incriminating material/documents recovered at the time of search 'belongs' to the Assessee. In other words, it is not enough for the Revenue to show that the documents either 'pertain' to the Assessee or contains information that 'relates to' the Assessee. * In the present case, the Revenue is seeking to rely on three documents to justify the assumption of jurisdiction under Section 153 C of the ....
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....000-01 to 2003-04 covered by notice under Section 153C of the Act. There is a specific purpose in taking note of this aspect which would be stated by us in the concluding paragraphs of the judgment. * In these appeals, qua the aforesaid four Assessment Years, the assessment is quashed by the ITAT (which order is upheld by the High Court) on the sole ground that notice under Section 153C of the Act was legally unsustainable. The events recorded above further disclose that the issue pertaining to validity of notice under Section 153C of the Act was raised for the first time before the Tribunal and the Tribunal permitted the assessee to raise this additional ground and while dealing with the same on merits, accepted the contention of the assessee. * First objection of the learned Solicitor General was that it was improper on the part of the ITAT to allow this ground to be raised, when the assessee had not objected to the jurisdiction under Section 153C of the Act before the AO. Therefore, in the first instance, it needs to be determined as to whether ITAT was right in permitting the assessee to raise this ground for the first time before it, as an additional ground. * The ITAT p....
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....he revenue cannot take help of the admission made by late Shri V.G. Siddartha in his return of income to fasten the liability on the present assessee. The law is fairly settled with respect to which the basis on which the addition can be made u/s 153C of the Act as neither statement of K.M. Deekshith/late Shri V.G. Siddartha or nor on the basis of return filed by other assessee including late Shri V.G. Siddartha and the addition should be solely based on incriminating material corroborated with cogent evidence and the return filed by late Shri V.G. Siddartha u/s 153A of the Act could not be said to be the incriminating document or evidence for the purpose of making addition u/s 153C of the Act, those documents not belong to or pertain to or relate to the present assessee and having no bearing in determination of undisclosed income of the present assessee. 11.23 Further, there was also allegation that the assessee categorically asked the cross examination at the time of hearing before ld. AO at the time of assessment. The ld. AO recorded on this issue as follows: "The contention of assessee to cross examine relied by persons is impossible to verify as the key person late Shri V.G....
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....unaccounted in the hands of both the assessees. In our opinion, there is no question of cross examination of K.M. Deekshith as it is noted that the loose slips found in the possession of K.M. Deekshith is unsubstantiated and no legs to stand as itself. Hence, it is highly improbable and incongruous to assume the cash loan transaction between assessee and M/s. Coffee Day Global Ltd. Group as the entries in the loose slips are not supported by any corroborative materials and it cannot determine year of taxation and liability. In our opinion, the incriminating documents relied by the ld. AO cannot be considered as relatable reliable evidence to determine the tax liability of the assessee. As the revenue has failed to produce any corroborative evidence to support these transactions between the assessee and M/s. Coffee Day Global Ltd. Group. In the light of above, no addition can be made in the hands of the assessee only on the basis of conjectures, surmises and presumptions. As there was no cogent incriminating material or admissible evidence pertaining to these assessment years under consideration as it belongs to the assessee, the addition cannot be made. The statement recorded u/s 1....
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....nnot expand the scope of section 153C of the Act by availing any external aid. In other words, they can rely only upon any document used for the purpose of recording satisfaction while issuing the notice u/s 153C of the Act. As discussed earlier, in the present case, there is no valid seized document, which bears the date, or name or year or the exact amount when it was paid. In the absence of such specific information pertaining to the assessment year under consideration, it is not possible for us to uphold the order of the lower authorities. In view of the above, we are of the opinion that the addition was made by ld. AO sustained by ld. CIT(A) in these assessment years without any corroborative evidence other than the loose slips found during the course of search action at the premises of K.M. Deekshith. 11.26 At this point, we rely on the order of the Tribunal in the case of ACIT Vs. Manchukonda Shyam in ITA 87/Viz/2020 dt.23.09.2020 wherein the Tribunal at paras 6 and 6.1 has held as under : "6. We have heard both the parties, gone through the orders of the authorities below. Shri Lanka Anil Kumar is an employee of M/s Navaratna Estates Ltd. A search u/s 132 was conducted i....
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....asis of notings and loose sheets found from third parties and the statement of third parties, the additions cannot be made without having corroborative / independent evidences. For the sake of clarity and convenience, we extract relevant part of the order of Ld.CIT(A) in para No. 6.2 of page No. 13 which reads as under: "6.2. I have considered the assessment order and submissions of the appellant. It is seen that the addition made by the AO is solely based on the social media (whatsapp) messages exchanged between the appellant and Mr. Anil Kumar, an employee of M/s Navaratna Estates. A statement u/s.132 recorded from Mr. L, Anil Kumar during the course of Search during which Mr. L. Anil Kumar was questioned and he explained the nature and 'details of messages exchanged by him with the appellant. The messages contain details of transactions in digits. Those were explained to be in lakhs of rupees and the transaction was loans advanced by the appellant to Mr.L. Anil Kumar whereas the appellant explained the same to be in thousands of rupees which were given for miscellaneous expenses. Mr.L. Anil Kumar also took similar stand in his assessment proceedings and said that the state....
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....n the loose papers/sheets are not "books of accounts" and has no evidentiary value u/s 34 of the Indian Evidence Act. The Hon'ble Supreme Court dismissing the writ petition filed by Common Cause, a registered society, refused to give nod to investigate against the Sahara and Birla Groups in the alleged payoff scandal. The factual setting of the case are that, a search was conducted by the CBI in the premises of Birla Groups, as a result of which, certain incriminating materials and an amount of Rs. 25 crores were recovered. CBI referred the matter to Income Tax Department. In another search, the IT department recovered certain incriminating materials and unaccounted money of Rs. 135 crores from Sahara Group of Companies. Allegedly the department recovered certain print out of excel sheets showing that Rs. 115 crores were paid to several public figures. The settlement commission granted immunity to the Sahara Group of Companies on ground that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives, etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print o....
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....amination of party's concerned. 12. The ld. A.R. submitted that in this case, the addition made by the AO is based on unsubstantiated loose sheets and jottings without proper cross examination of the person who has admitted he contents therein. Being so, it cannot be stated as full proof of material evidence to substantiate the addition. Hence, seized documents do not support the AO's contention that assessee has advanced any kind of unsecured loans in cash. It also does not suggest that the assessee has received any sort of interest on the alleged unsecured loan in cash. Going through the entire facts of case it only creates a suspicion in the minds of the revenue authorities but however, this suspicion is not enough to hold the assessee towards advancing of unsecured cash loan in the absence of concrete evidence bought on record by the authorities concerned. The loose sheets and jottings cannot replace any form of material evidence which is not brought on record by the authorities. 12.1 He submitted that the reliance placed by the Assessing Officer which is loose slips containing irregular noting which have no evidential value. These loose slips are not a book or a document so ....
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....ed the order in a very mechanical manner placing reliance on the unsigned loose slips which have no evidential value in the eyes of law. It does not reflect on what date the alleged transaction took place and who has advanced the money. As seen from the seized material these are just handwritten loose documents and department has not verified handwriting of seized material from the government examiner or from directorate of forensic science, Government of India. The undisclosed income of assessee computed on basis of such documents which is not direct evidence or conclusive evidence to make addition in hands of assessee u/s 69A of Income Tax Act, 1961. The AO has not established the link between seized material and assessee's books of accounts. Being so it cannot be considered as conclusive evidence. The word "may be presumed" appearing in Sec.132(4A) gives an option to the assessing officer to presume things but is rebuttable and does not give definite authority and conclusive evidence. The assessee has every right to rebut the same. The entire case depends on rule of evidence. Since, there is no evidence found with assessee by search party or by post enquiry by AO with regard to ....
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....hith and at his chamber in the office, evidences of receipts and payment of cash found has no relevance to the assessee. Therefore, the addition made by the AO is only on the basis of surmises and conjecture without bringing any cogent material on record to substantiate that the assessee had engaged in the business of providing unsecured cash loan and the Assessing Officer had not brought any material on record to substantiate that the denial of the assessee was false. 13. The ld. D.R. submitted that the ld. CIT(A) during the course of appellate proceedings required the assessee to cross examine Mr. K.M. Deekshith which was not availed by the assessee. Hence, this ground to be dismissed. 13.1 The ld. D.R. referred to the orders passed by the ld. AO for the relevant AYs. He submitted that the ld. AO in his order observed that the search action u/s 132 of the Act, conducted in the case of M/s. Coffee Day Global Limited, certain incriminating documents were found and seized. The incriminating documents found at one of the premises covered i.e residence of Mr. K.M Deekshith which contained evidence of receipts and payment of cash. These receipts of cash were confronted with Mr. K.M D....
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....ious statements which are not valid and reliable. d) The A.O cannot use the statements as evidence to make the additions, as the relevant statement and cross examination opportunity is not provided to the assessee. The principles of natural justice have been violated. e) The statements recorded post search have no evidentiary value and cannot be relied for making additions. f) There is no documentary evidence to support the statement of Mr. K M Deekshith. g) The additions cannot be made solely on the basis of statement of third party. h) The initials PBT cannot be presumed to be the assessee. The order is passed in a mechanical manner without verifying the authenticity of initials PBT. i) The loose sheets extracted do not reveal anything and the additions have been made on suspicion. j) Various case laws have been relied on the above claims made. 13.3. Further, he drew our attention to the observation of the ld. CIT(A) wherein observed that the claims made by the assessee are misplaced. He further noticed that since the facts relied upon are incorrect, the case laws relied also do not apply to the facts of the case. He observed that in the instant case, the search te....
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....ties are not hindered by conduct of search, it can be invoked both before and after conduct of search ". 13.6 He further submitted that the claim of the assessee that the loose sheets do not reveal anything, the additions are made in arbitrary manner, on presumption, and merely on the basis of third parry statements is also misplaced as the additions have been made based on transactions revealed by actual evidences found and unearthed during search and corroborated with statements of Sri. K M Deekshith and Sri. V G Siddhartha. 13.7 He further submitted that in the case of Mahabir Prasad Rungta v. Commissioner of Income-tax (Appeals), Ranchi, [2014] 43 taxmann.com 328 (Jharkhand), the Hon'ble HC held that loose sheets seized during search sometimes contain valuable information and thus those are to be regarded as ' documents' there is presumption raised under section 132(4A) regarding documents seized and in light of such presumption, assessee ought to have produced other documents to disprove entries made in loose sheets. Since assessee had not adduced any rebuttal evidence to show that entries made in diary/loose sheets were not income in hands of assessee, addition ....
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....oncurrent findings of fact and the Tribunal upheld the additions, there is no reason warranting interference with the order of the Tribunal. The appeal is dismissed and the substantive questions are answered against the assessee.[Para 23}" 13.8 He submitted that in the case of Commissioner of Income-tax, Chennai v. T. Rangroopchand Chordia. 2016] 69 taxmann.com 202 (Madras), the Hon'ble HC held that loose sheets seized constitutes 'documents' under section 132(4). 13.9 He submitted that in the case of M. Vivek v. Deputy Commissioner of Income Tax Central Circle-2(i/c), Trichy (432 ITR 53), the Hon'ble Madras, HC held that loose sheets picked up during search under section 132, falls within definition of 'document', mentioned in section 132(4) and therefore, it has got evidentiary value. 13.10 He submitted that the Hon'ble Bengaluru Tribunal in the case of Deputy Commissioner of Income-tax. Circle 11(3), Bengaluru v. Geneva Industries Ltd. [2018] 90 taxmann.com 406 (Bengaluru - Trib.). Held that where addition was made to income of assessee on account of unexplained investments on basis of loose sheets found during search on its premises, since assessee had me....
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....eekshith. I beg to state that at the stage of assessment itself I've asked for cross examination of Sri V G Siddhartha and Sri K M Deekshith which was not provided by concerned Assessing Officer, Now you've issued a summon to provide an opportunity to cross examine Sri K M Deekshith. It is to be noted that the primary party was Late Sri VG Siddhartha who is no more. Now the cross examination is impossible to perform and what is done cannot be undone as of now as Sri V G Siddhartha is no more. Hence in this case, it is total violation of principles of natural justice which has resulted in miscarriage of justice. In view of the-above fact, we request you to quash the Assessment order itself as the cross examination is not possible at this stage due to sudden death of Sri VG Siddhortha. Further the cross examination of Sri K M Deekshith won't serve any fruitful purpose. 13.16 The AO in his report has dated 20.10.2023, stated that the reason mentioned by the assessee for not utilizing the opportunity of cross examination is misleading, since the issue of cross examination of Mr. K M Deekshith was specifically raised during the assessment proceeding and also in the appell....
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....r: 10. The assessee's response has been analysed and is found to be not acceptable due to the reasons discussed as follows. The assessee has Stated that that he has not lent any amount by cash to M/s Shivan and Co. Whatever sums were advanced to was only through cheques / RTGS and the same was accounted in the name of Mr Sri Madhusudhan S Patel (assessee's brother in-law) for whom the Power of Attorney. The total amount lent on behalf of Sri Madhusudhan was Rs. 2,06,60,000/- as on 18/12/2017, This claim of assessee is incorrect as seized material recovered from the premise of Mr K M Deekshith clearly prove that the assessee-is in the business of financing unsecured loans and significant part of the same was done in cash. Relevant seized material is reproduced above. Assessee has also argued that addition cannot be made merely on the basis of presumption, surmises and conjectures he further stated that no addition can be made on the basis of presumption and based on the statement of another party. This contention of the assessee is incorrect as the addition is noton presumptions and a statement of the third party. The addition is based on tangible seized material and clear....
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....otective assessment in the hands of the assessee. 13.23 Considering the above facts, the ld. D.R. submitted that the observation of the ld. CIT(A), that the additions made in this case are on account of relevant evidence unearthed during the course of search and further corroborated with statements of other persons involved in the said transactions. The assessee has been given opportunity to cross examine the concerned person, which he wished to forego. The additions have been clearly brought out in the assessment order, due opportunity has been granted to the assessee before passing the assessment order and the additions made are duly reasoned as well. In view of the above facts, there do not appear to be any reasons to call for interference in respect of the additions made in the AYs under reference. 14. We have heard both the parties and perused the materials available on record. As we have already held that the addition is based on the loose slips found during the course of search action at the residence of Shri K.M. Deekshith and the statement recorded from K.M. Deekshith and late Shri V.G. Siddartha, which is having no evidentiary value under Indian Evidence Act and accordi....
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.... an additional income of Rs. 1 Crore was admitted as additional income for the above-mentioned assessment year. Certain documents were discovered and seized during search proceedings. When confronted with the same the assessee gave sufficient explanations for the same. Also the documents found are apart of the books of accounts of the assessee. The Ld AO observed that the assessee admitted additional income based on certain statements seized materials and discrepancies observed during search. However, the Ld AO failed to note that the return of income was not due as on the date of search for the relevant assessment year and the income declared would have been filed notwithstanding the search proceedings. The replies provided by the assessee had been rejected by the Ld AO and the penalty has been levied u/s 271AAB of the Act. The ld. A.R. stated before ld. CIT(A) that the Ld AO has acted mechanically and has not objectively evaluated the case. This is clearly evident from the fact that the ld. AO failed to look into the submissions made which are in favour of the assessee. The ld. AO rejected the assessee's plea that he had cooperated with the concerned officials and disclosed the m....
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....m of Rs. 1 Crores to tax in A. Y. 2016-17. It naturally follows that but for the search proceedings, the additional income of Rs. 1 Crores would have gone unnoticed and escaped assessment. 10.3. Also, as per explanation to Section 271 AAB, '"undisclosed income " means- (i) any income of the specified previous pear represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has- (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year or (B) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the dare of search, or (ii) any income of the specified previous year represented, either wholly by any entry in respect of an expense recorded in the book of account documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the se....
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....vy penalty u/s 271MB of the Act as there is no undisclosed income of the appellant, which is a pre-requisite for the levy of penalty u/s 271MB of the Act. The Explanation to the provisions of Section 271MB defines "undisclosed income" as under: 271AAB. .... "undisclosed income" means - (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has - . (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the [Principal Chief Commissioner of] Chief Commissioner of [Principal Commissioner or] Commissioner before the date of search; or (jj) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and wou....
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....vident that there is no incriminating material representing any undisclosed income found during the course of search of Rs. 1,00,00,000/-. In fact, even the learned A.O. has stated that there is material evidence of undisclosed income at least to the extent of Rs. 20,50,000/-, thus affirming the fact that there is no incriminating material representing any undisclosed income of Rs. 1,00,00,000/-. 21.3 He submitted that coming to the observation of the learned A.O. that the statement by the assessee u/s.132[4] is a document as per Explanation to Section 271AAB and 'that the said statement contains entry in respect of certain income which does not form part of books of accounts or documents found at the time of search, it is submitted that no such entry has been pointed out by the learned A.O. and that considering the statement u/s.132[4] as a document as per Explanation to Section 271AAB is entirely erroneous and opposed to the provisions of the Act. 21.4 Thus, he submitted that in the absence of any concealed / undisclosed income or assets of the assessee that was either found or seized during search, it be cannot be considered that the additional income of Rs. 1,00,00,000/- ....