TaxTMI 
TaxTMI 
2025 (6) TMI 1124
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....consideration the assessee has declared an income of Rs. 6,59,920/- only in the income tax return. 4. Subsequently, a search under section 132 of the Act dated 17-01-2019 was carried out in the case of M/s Dharwad Mishra Pedha and Food Processing Industry and its group (i.e. Mishra Group). The residential premises of the assessee was also covered under search proceedings. During the search at the residential premises of Manager Accounts and Finance of Mishra Group namely Shri Giridhar Ladhha, certain documents were found which were marked as A/GL/01, A/GL/02, A/GL/05 and A/GL/10. Annexure A/GL/01 contains the information about the loan received in cash and bank by M/s Dharwad Mishra Pedha and Food Processing Industry from various party as well repayment of such loan and interest thereon. The assessee name was also appearing in such documents indicating the loan provided by him to M/s Dharwad Mishra Pedha and Food Processing Industry through banking channel as well through cash. 5. The materials found from the premises of Shri Giridhar Ladhha were confronted to the assessee and his wife, Smt. Anita Katiger while recording his statement under section 132(4) of the Act to which he (....
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....o 18 of the assessment order in tabular form. The AO vide show cause notice dated 08-03-2021 proposed making the impugned addition. 8. The assessee in response to the show cause notice contended that no material in relation to cash transaction with Mishra Group was found in the search. The assessee also contended that Shri Giridhar Laddha was not connected to the business operations of Dharwad Mishra Group and, therefore, had no involvement in any financial transactions related to the group. The assessee claimed that any financial records or transactions appearing in the documents maintained by Shri Giridhar Laddha's were unrelated to their business and did not warrant any tax implications for them. The assertion was that Shri Laddha had no role in managing or handling the financial affairs of the business, thereby dismissing any allegations of undisclosed transactions linked to him. 9. The assessee further requested permission to cross-examine Shri Giridhar Laddha, who was identified as the Manager, Accounts & Finance in the Mishra Group. This request was based on seized materials and statements that admitted cash investments made by the assessee in the Mishra Group. The assesse....
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....Gopal (1979), Kishori Lal v. Mt. Chaltibai (1959), and Basant Singh v. Janki Singh (1967) to emphasize that admissions are effective proof of facts unless proven otherwise by the assessee. The AO also determined that the admissions made by Shri Sanjay Ganesh Mishra and Shri Giridhar Laddha were corroborated by documentary evidence seized during search proceedings under Section 132 of the Act. These documents, including printed reports, handwritten records, and tally backups, were maintained by the Accounts Manager of Mishra Group and contained clear details of investments made by the assessee through both banking channels and cash transactions. Additionally, the assessee partially accepted the evidence regarding banking channel transactions but denied or remained silent on transactions related to cash investments. The AO interpreted this selective acceptance as an attempt to evade accountability for the cash transactions. 13. Furthermore, the AO observed that undisclosed incomes, as identified were not included in the assessee's total income computation for the Assessment Year 2014-15. Thereby, the AO determined that the cash investment of Rs.9,59,00,000/- was unexplained under Se....
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....antial additions. Hence, the assessee before the learned CIT(A) challenged the AO's reliance on third-party documents, denied any involvement in cash investments, and emphasized the lack of direct evidence linking him to the transactions. Based on these arguments, he urged the learned CIT(A) to delete the addition and quash the assessment order. 19. The learned CIT(A) after considering the facts in totality concluded that the addition of Rs.9,59,00,000 was unjustified and had to be deleted. The key finding of the learned CIT(A) are summarized in below paragraphs. 20. The learned CIT(A) found that the AO made the addition based on documents seized from the premises of Shri Giridhar Laddha, who was the Accounts & Finance Manager of the Mishra Group. However, no such documents were found at the assessee's premises, nor was there any direct evidence linking the assessee to the alleged cash investment. The learned CIT(A) was of that view that as per the provisions of Section 132(4A) of the Act, the burden of explaining the seized material lies with the person from whose custody it is recovered. Since the documents were recovered from Shri Giridhar Laddha's premises, the responsibi....
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....n, accordingly, denying cross-examination rendered the assessment proceedings unfair. The learned CIT(A) in this regard referred the judgment of The Hon'ble Supreme Court, in the case of Andaman Timber Industries vs. CCE reported in 62 taxmann.com 3, and held that not allowing cross-examination of witnesses relied upon by the tax authorities renders the assessment invalid. Accordingly, the CIT(A) held that the AO's refusal to grant cross-examination made the entire basis of the addition legally unsustainable. 25. The ld. CIT(A) further observed that a search was conducted at the assessee's premises on 17.01.2019, but no evidence of any cash investment was found. This was a crucial point because if the assessee had actually made a cash investment of Rs.9,59,00,000, some physical or documentary evidence should have been found at his premises. The absence of such evidence strongly indicates that the AO's assumption was incorrect. The AO ignored this fact and still proceeded with the addition based on third-party documents, which was unjustified. 26. Based on the above findings, the CIT(A) concluded that the AO's addition of Rs.9,59,00,000/- under Section 69 r.w.s. 115BBE was complet....
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....the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 31. We have heard the rival contentions of both the parties and carefully considered the facts of the case, the documentary evidence, the statements recorded, the decisions of the AO and the learned CIT(A), and accordingly we proceed to record our findings on the issues raised in the present appeal. 31.1 The entire basis of the AO's addition of Rs.9,59,00,000/- as unexplained investment under Section 69 of the Act rests upon documents seized from the residential premises of Shri Giridhar Ladhha, who was the Accounts & Finance Manager of the Mishra Group. It is a settled principle of law that as per the provision of section 132(4A) of the Act, any documents or books of accounts found during a search are presumed to belong to the person from whose possession they are recovered, unless proven otherwise. In this case, the seized documents were found at the premises of Shri Giridhar Ladhha and not at the premises of the assessee. The AO applied the presumption that the entries in the documents, specifically the ones containing the initials "GK," referred to the assessee, ....
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....g the evidentiary value of such statements, correctly noted that retracted statements have little evidentiary value unless they are supported by independent corroborative evidence. 31.5 It is well settled by the Hon'ble Supreme Court in case of P. M Aboobacker vs. CIT reported in 81 taxmann.com 299 that a statement made under pressure or coercion cannot be used as sole evidence unless independently corroborated. In the present case, the AO did not produce any additional material evidence apart from the initial statement, which was later retracted. The reliance placed by the AO on a statement that was subsequently withdrawn was misplaced, and therefore, the ld. CIT(A) rightly held that no addition could be made based solely on an uncorroborated and retracted statement. 31.6 It is also pertinent to note that a fundamental principle of natural justice is that an assessee must be allowed to cross-examine any witness whose statements are relied upon for making an addition. In the present case, the AO denied the assessee's request to cross-examine Shri Giridhar Ladhha, citing reasons such as the COVID-19 pandemic and time limitations for completing the assessment. The Hon'ble Supreme C....