TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 341
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....0/- made towards undisclosed investment u/s.69 and Rs. 1,08,00,000/- towards income from other sources, on the ground that the Assessing Officer (AO) lacked jurisdiction to invoke the provisions of section 153C without considering the fact that the AO has properly recorded satisfaction basing on the documents viz., loose sheets containing financial transactions in the form of loan advanced by the assessee and interest received by him, was seized from the residence of Smt. R. Ezhilarasi in connection with the search in M/s. Dhanalakshmi Srinivasan Group. 3. The Ld. CIT (A) erred in observing that additions were made merely on the basis of statements recorded during the course of search uncorroborated by other evidence, without appreciating the fact that the statements were given under oath to explain the contents of the seized loose sheets and the explanation offered by the assessee further strengthened the contents in the seized material and the admissions made by the assessee Shri. R.Natarajan, Shri.M. Jayaraman and Shri.A. Sekar under oath are exactly in agreement with the specific details viz., date, name, amount, phone number and description such "paid" mentioned in th....
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....come admitting income of Rs. 6.65 Lacs. The Ld. AO made addition on account of unexplained income / investments for Rs. 625.84 Lacs in an assessment order passed on 23-12-2019 which was confirmed in first appeal vide order dated 25-01-2020. The Tribunal restored that matter back to the file of Ld. AO in ITA No.201-207/Chny/2021 dated 18-01-2023 with a direction to AO to provide the copies of seized material as well as copies of sworn statements. In the second round, these directions were complied with and another assessment has been framed which is in further challenge before us. 3.2 In the assessment order, Ld. AO has alleged that the assessee had advanced cash loan of Rs. 6 Crores to Shri P. Mani (Director of Dhanalakshmi Srinivasan Group) during the year from 2012 to 2017. The assessee's friend Shri M. Jayaraman also gave similar cash loan of Rs. 4 Crores to Shri P. Mani through the assessee. The assessee as well as Shri Jayaraman has allegedly received interest on these loans at the rate of 18%. The year-wise calculation of loan given and interest received by the assessee has been tabulated in para-3 of the assessment order. The details of cash loans were stated to be gather....
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....nts, modus operandi and sequence of transactions. In the satisfaction note, it has clearly been brought out by Ld. AO that the said document had bearing on determination of total income of the assessee. Therefore, assumption of jurisdiction u/s 153C was correct. The addition was based not only on the basis of statement of the assessee and Shri M. Jayaraman but also on the basis of detailed working as emanated from speaking documents which matched with the admission made by the assessee and Shri M. Jayaraman. The allegation that the statements were given under stress or duress was not acceptable since assessee did not give any evidences thereof at the time of retraction. The retraction was filed after lapse of 11 months from the date of search which was unacceptable. Finally, the loan amount of Rs. 517.84 Lacs pertaining to this year was added as unexplained investment u/s 69 whereas interest amount of Rs. 108 Lacs as allegedly received by the assessee was added as 'Income from other sources'. Similar assessment was framed in the case of other assessee. Appellate Proceedings 4.1 During appellate proceedings, the assessee assailed the impugned additions on legal grounds as well....
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....ument as relied upon by Ld. AO was seized at third-party premises. Upon perusal of the loose sheets, it could be observed that this document per se do not contain any substance to substantiate the fact that the assessee had actually advanced a sum of Rs. 6 Crores as loan to receive interest upon such loan. The same was not supported by any corroborative evidences. The Ld. CIT(A) referred to the decision of Jabalpur Tribunal in the case of ACIT vs. Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] which mandate collection of corroborative evidences. It was held therein that when the documents is bereft of necessary details about year of transaction, ownership of transaction, nature of transaction, necessary code for deciphering the figures then the same could not be relied upon. It is the duty of Ld. AO to carry out necessary investigations by correlating the impugned document with other documents to fill up the gaps in confirming the inference arising from the documents for a proper charge of tax. Such correlation is necessary unless the document is capable of giving full details so as to enable any intelligent person to find out the nature of transaction, the year of transaction, t....
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.... be made unless there is corroborative evidence to validate the noting found in the material seized from a third party. 4.4 In the present case, Ld. AO merely relied upon loose sheet which was found and seized at third-party premises. Such loose sheets were to be categorized as dumb document only. Merely by relying on this material, no conclusion could be made that the assessee actually advanced loan and received interest on such loan. There was no corroborative evidence to prove that the noting in the seized material had actually materialized and transfer of money has actually taken place between the concerned parties. 4.5 It was further agitated by the assessee that during the course of search proceedings in the case of the assessee, no Promissory note, Cheque, Bond or any document was seized by the officer from the assessee. The assessee also pleaded that the statement of Shri A. Sekar was very vague and no credence could be placed on the same. The assessee relied on various judicial decisions to support its submissions. The same include the decision of Chennai Tribunal in the case of M.M. Financers (P) Ltd. vs. DCIT (107 TTJ (Chennai) 200) holding that no addition could b....
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....aman was subsequently retracted and therefore, the action of Ld. AO in relying upon those statements was incorrect. It was further held that the assessee vide letter dated 04-09-2023 specifically requested for cross-examination of Shri A. Sekar which was not provided. The Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CICE (281 CTR 0241) held that not allowing assessee to cross-examine witnesses by adjudicating authority though statements of those witnesses were made as basis of impugned order, amount to serious flaw which make impugned order nullity as it amounted to violation of principles of natural justice. 4.8 It was also observed by Ld. CIT(A) that in answer to Q. No.28, Smt. R. Ezhilarasi categorically stated that the author of the seized loose sheet was either Shri P. Mani or Shri Senthil Kumar and also claimed that the loose sheets seized was handed over by Shri Senthil Kumar for safe custody. However, neither investigation officer nor Ld. AO had any occasion to verify the same with Shri. P. Mani or Shri Senthil Kumar. Further when the statement was recorded from Shri. P Mani, there was no question posed to him about the noting of alleged transaction....
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....ation Society vs. ACIT [2011] 140 TTJ 233 (Pune) for the reason that the seized material mentioned in the satisfaction note did not relate to the specific AY under consideration. The above decision was upheld by the Hon'ble Bombay High Court and then by the Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society [2017] 397 ITR 344 (SC). Therefore, in the absence of any prima facie satisfaction for the particular year under consideration, the consequent proceedings-initiated u/s 153C of the Act by the AO would no longer hold good. The satisfaction with reference to incriminating material for few years would not entitle AO to initiate proceedings u/s.153C in respect of all 4 years preceding the year of the search. As was evident from the satisfaction note recorded, the AO did not specify the relevant year to which the seized material related to. Consequently, it was to be concluded that Ld. AO had not recorded proper satisfaction with due application of mind. In the absence of such satisfaction, notice u/s.153C of the Act ought not to have been issued for the AYs 2012-13 to 2017-18 as the jurisdictional aspects in Sec. 153C was not satisfied. Therefor....
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....f 11 months only. It could also be seen that in the set aside proceedings, the assessee has demanded cross-examination of other party which has not been provided to the assessee. The same run contrary to the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CCE (281 CTR 0241) holding that not allowing assessee to cross-examine witnesses by adjudicating authority though statements of those witnesses form the basis of impugned order, amounts to serious flaw which make impugned order nullity as it amounted to violation of principles of natural justice. Viewed from this angle, the assessment is to be considered as nullity and the impugned additions would be unsustainable on this legal ground alone. 7. Proceeding further, upon perusal of satisfaction note u/s 153C, it has duly been noted by Ld. CIT(A) that the same has proceeded on wrong assumption of facts. In column No.5, Ld. AO assumed that the seized material was seized from the residence of the assessee and in column no. 6, it was stated that the assessee was one of the directors of Dhanalakshmi Srinivasan Group. The correct facts were that the loose sheets were seized from the residence of Smt. R. E....
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....ed the impugned sum to receive interest upon such loan. The said fact was not supported by any corroborative evidences. Therefore, the ratio of decision of Jabalpur Tribunal in the case of ACIT vs. Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] as well as the decision of Mumbai Tribunal in the case of Riveria Properties Private Limited Vs ITO (ITA No.250/MUM/2013) would apply. In these cases, it was held that corroborative evidences would be required and Ld. AO would be required to bring further evidence on record to prove that there was actual advancement of loans. No independent enquiries were conducted in this regard and Ld. AO merely relied upon the statement. The statement of the assessee already stood retracted. The copy of sworn statement of Smt. R. Ezhilarasi has been placed on page nos. 177 to 192 of the paper-book. The seized material Page Nos. 273 to 309 of loose sheets vide ANN/PV/RE/LS/S were confronted to her in Q. No.28. She replied as under: - Ans. I have gone through these pages shown to me. These sheets were given to me by Shri Senthil Kumar, GM to keep in my custody. I do not know anything about the contents of these sheets. I could identify that the h....