TaxTMI 
TaxTMI 
TaxTMI 
2025 (1) TMI 1653
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....om his iPhone, were corroborated with order for transfer and posting passed by the Govt. of Maharashtra, PWD Department?" ii. "Whether on the facts of the case and in law, the Ld. CIT(A) erred in holding that the addition cannot be made by placing reliance on a statement of third party and on material found from the third party in the hands of the assessee in absence of any evidence linking such material to the assessee even though it is clearly seen from the search proceedings that the evidences found from iPhone of Shri Shailendra Rathi and he had explained the contents of the said documents during the search proceedings and these documents were further corroborated with order for transfer and posting passed by the Govt. of Maharashtra, PWD Department?" iii. "Whether on the facts of the case and in law, the Ld. CIT(A) has erred in relying on such cases in which the facts are different from the present case?" ITA No. 5666/Mum/2024, (A.Y. 2021-22) "i. "Whether on the facts and in the circumstances of the case and in law the Ld. CIMA) has erred in deleting the addition meds by the AO of Rs. 2,50,00,000/-u/s 69C of the Act by ignoring the fact that the d....
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....4/2023 declaring total income at Rs. 11,98,890/-. 2.2 The Ld. AO noted that, during the search action, digital evidence relating to transfer and posting of the assessee's being PWD engineers were found in the phone of one Shailendra Rathi alleged to be one of the key employees of the Rucha Group at its Pune office. Explaining the image retrieved from the phone, Shri Shailendra Rathi in his statement recorded during the search action submitted that the same contains the name of the officials of PWD Engineers who had made full payments for the transfer. Further, another employee of Rucha Group, i.e., one Ravi Wadepalle, in his statement recorded under section 132(4) of the Act stated that, some of the documents belonging to Rucha Group were kept at the premises of one Avish Atal. Accordingly, during search action at the premises of Avish Atal, incriminating documents were found and seized. When these documents were confronted, to Ravi Wadepalle, it was explained that, they contained details of cash paid by the PWD Engineers being assessee's before us for their transfer to desired location. Since the name, i.e. Sharad Rajbhoj (SE)/ S.N. Rajbhoj, appeared in the documents, the asses....
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...., written as "125" in the documents found during the search, represents cash paid by the assessee of Rs. 125 lakhs. Also in case of the assessee in ITA No. 5666/Mum/2024 referring to the statement of Ravi Wadepalle, the Ld.AO held that, amount mentioned are in lakhs that is "50"means 50 lakhs. Therefore, the based on the facts and the statements recorded during the search Ld.AO concluded that, the assessee paid an amount which is written as "300" in two separate documents mentioned at page 39 to 42 of Annexure A-2 represents the cash paid by the assessee of Rs. 250 Lakhs. 2.6 The Ld. AO thus rejected the explanation by both assessees denying any cash payments. The Ld.AO further held that the assessee has not made any submission as to how his name appeared in both the evidence seized, i.e. evidence found from the mobile of Shailendra Rathi and the premises of Avish Atal. It was thus held that, both evidence found from different places corroborates with each other as both the evidence shows the identical amount paid by the assessee. The Ld. AO thus treated Rs. 2,50,00,000/- as unexplained expenditure u/s. 69C in the hands of the assessee in ITA No. 5666/Mum/2024 and Rs. 1,25,00,00....
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....eted by the Ld. CIT(A)made u/s. 69(C) of the Act, on account of alleged cash transaction by assessee's. The Ld. AR submitted that, under similar and identical facts and circumstances this Tribunal in case of another assessee in ITA No. 5661/Mum/2024 for assessment year 2021-2022 vide order dated 24/01/2025 considered identical additions on similar facts by observing as under: "9. We find that during the search, the statement of Shri Ravi Wadepalle, an employee of Rucha Group, was recorded on oath under section 132(4) of the Act, the relevant portion of which relied upon by the AO is reproduced as follows: - "Q.10 I am showing you loose paper folder A2 which is seized from the residence of Shri Avish Atal, i.e., from A-1304, Dioro, Lodha New Cuffe Parade, Wadala (E), Mumbai - 400037. Please go through the said folder and confirm that the documents in this folder are the same as documents which were sent by you to be kept with Avish Atal. Ans. Yes I confirm the same. Q.13 Please refer to page numbers 39 to 42 of Annexure A2 and page numbers 87, 90 to 93, 95, 112, 149 to 166 of Annexure A3. Please explain the contents on these pages. ....
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.... I look into Transfer and Postings of Engineers in PWD Department. I also look into some land aggregation works which included site visits, collecting documents, search reports of the land deals that are to be finalised. Q.11 Please state to whom do you report in M/s Rucha Consultancy LLP and who gives you directions time to time regarding your work? Ans. Sir, most of the time I report to Sh.Prashant Prakash Nilawar, the partner of Rucha Consultancy LLP and sometimes to legal advisers, Pankaj Gawande. I receive directions time to time from Sh. Prashant Prakash Nilawar. Q.26. In response to Q.10, you have stated that you are also involved in the Transfer and Postings work. In this regard, please explain in detail the modusoperandi regarding Transfer and Posting in departments of Maharashtra Government. Ans. Sir, Shri Prashant P Nilawar has good contacts in the PWD Department of Government of Maharashtra which he uses in getting the desired postings to the interested Engineers. The interested Engineers in the rank of Chief Engineers, Superintending Engineers and Executive Engineers, approach the Mantralaya and meet the Under Secretary/Deputy Secretary in administrat....
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....ficers pay amounts in cash varying from Rs. 5 lakh to Rs.1 crore. However, in the present case, it is alleged that the assessee paid an amount of Rs. 1,25,00,000, which is in excess of the amount stated in the statement. We find that apart from the aforesaid statements and documents as noted above, there is no further examination by the Revenue to link the assessee to the material/statements found/recorded during the search proceedings. In order to support its contention, the AO has also placed reliance upon the transfer order dated 07/08/2020 passed by the Government of Maharashtra, transferring the assessee from District Satara to District Nashik. However, we are of the considered view that the transfer order cannot by itself be said to fall within the category of "independent evidence", which can be said to corroborate the documents found during the search as the said transfer order does not implicate the assessee. We are of the considered view that the documents found during the search proceedings, which were found at the premises of the third party and not the assessee, only raise suspicion against the assessee and, therefore, such a suspicion requires further corroboration by....
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....king such material with the assessee. Thus, we are of the considered view that the AO did not make any attempt to confirm that such money was paid by the assessee and merely relied on the documents/statements found/recorded during the search to make the impugned additions. Further, the decisions relied upon by the learned Departmental Representative in the case of B.Kishore Kumar v/s CIT, reported in [2015] 62 taxmann.com 215(SC) and in the case of Madhav Gems (P) Ltd. v/s ITO, reported in [2021] 434 ITR 684 (Guj.) are distinguishable on facts as in the present case there was no search on the assessee and there was no independent inquiry by the AO on the information received from the search on third party. Thus, the aforesaid decisions are not applicable to the present case. 13. Before concluding, gainful reference can be made to the decision in the case of ACIT v/s Miss Lata Mangeshkar, [1974] 97 ITR 696 (Bom.), wherein while dismissing the Revenue's appeal in a case wherein additions were made on the basis of documents seized and statements recorded from the third party, the Hon'ble Jurisdictional High Court observed as follows: - "The Income-tax Officer came ac....
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...." for which she did not pass a receipt. The other evidence was of a general character suggesting that the practice of receiving part remuneration in black was prevalent among cine stars which was of no avail to prove any specific instance against the assessee. The only specific evidence which required scrutiny was that furnished by the two entries and the statements of N. Vasudev Menon and C.S. Kumar. On a scrutiny of the two entries as well as the evidence of the two witnesses the Tribunal took the view that even that evidence did not carry the department's case any further and in that view of the matter the Tribunal deleted the additions made by the Income-tax Officer. The department has sought the reference to this court on three questions of law which are said to arise out of the Tribunal's order and out of the three questions which appear at page 6 of the application and in respect whereof rule has been issued, questions Nos. 2 and 3 are really dependent upon the answer to the first question as to whether on the facts and circumstances of the case the Tribunal was justified in ignoring the entries in the ledger of Vasu Films relating to the payment made by the said fir....
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....ibunal purely rests on the appreciation of evidence and no questions of law arise. Mr. Joshi tried to urge before us that in paragraph 5 of its order the Tribunal has found fault with the entries appearing in the ledger on the ground that there were no corresponding entries in the day-book of the firm covering the same period and the Tribunal further observed that no attempt was made to explain the absence of relevant entries in the daybook and for that reason the Tribunal rejected the entries in the ledger on which reliance was placed. Mr. Joshi tried to urge that, after all, the entries in the ledger were the entries in a book which was not meant for being disclosed to the income-tax authorities because it contained the entries pertaining to the payment in "black" and the day-book for the relevant period that was available was a day-book meant for being produced before the taxing authorities as it contained entries pertaining to all legal and white payments and naturally in such day-book no corresponding entries would be found. So no importance should have been attached by the Tribunal to the absence of a day-book containing the corresponding entries. In the first place it must b....
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....ete set of statements of Shri Shailendra Rathi to examine the same and also sought the opportunity to cross-examine Shri Shailendra Rathi. However, the AO merely on the statement of Shri Shailendra Rathi that the assessee asked him to deliver Rs. 5 lakh to Nashik made the additions in the hands of the assessee under section 69A of the Act. In further appeal, the learned CIT(A) deleted the addition, inter-alia, on the basis that in his statement Shri Shailendra Rathi stated that the transaction of delivering Rs.5 lakh could not take place and in any case, the entire statement was subsequently retracted by Shri Shailendra Rathi. The learned CIT(A) further noted that the WhatsApp chat had only an image of a Rs.5 note. Thus, on the basis that the said image was not corroborated with any independent evidence, the learned CIT(A) deleted the addition by placing reliance upon various judicial pronouncements as noted in pages 43-44 of the impugned order. The relevant findings of the learned CIT(A) are reproduced as follows: - "7.3 It is seen that the whatsapp chat only has an image of a 5 rupee note and it does not have any reference to any sum of money as stated by Sh. Shailendra ....
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....s so sacrosanct so as to read as a positive material against the assessee. Therefore, addition in the hands of the assessee on account of 'onmoney' was held to be not justified. 7.3.3 In the case of Asstt. CIT v. Prabhat Oil Mills [1995) 52 TTJ 533 (Ahd. - Trib.), the department relied upon certain notings in the seized diary found from the premises of third party and contended that the assessee had made sales outside the books of accounts. However, the assessee denied of having made any sales outside the books of accounts. The Hon'ble Ahmedabad Tribunal held that once the assessee denies the transaction, the onus was on the Assessing Officer to prove with corroborative evidence that the entries in the seized diary represented sales outside books of accounts. The Hon'ble Tribunal further held that mere entries in the accounts of third party was not sufficient to prove that assessee had indulged in transaction outside books of accounts 7.3.4 Further, the Coordinate Bench of ITAT at Delhi in the case of Pramod Pandey v. Asstt. CIT [ITA No. 4295 (Delhi) of 2012, dated 6.12.2013] also held that presumption u/s 132(4A) or 292C of the Act could be taken ....
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....ithout corroborating it with any kind of independent evidence linking such material with the assessee. As per the plethora of Court judgments discussed above, such an act is not permitted under the law. The Hon'ble Supreme Court in the case of Umacharan Shaw and Bros v CIT (1959) 37 ITR 271 held that suspicion, however strong, cannot take the place of evidence. Similarly, raising presumption itself does not amount to proof. Presumption, however strong, cannot take the place of evidence as held in the case of Pooja Bhatt 66 TTJ (Mum) 817 and in the case of D.M Kamani HUF 65 TTJ (Pat) 504. Thus, in the absence of any independent evidence linking the assessee with the material found from a third party or a third party statement, the addition made by the AO on the basis of such third party statement or material found from the third party cannot be sustained. The addition made by the AO of Rs. 5,00,000/- u/s 69A is deleted and the ground of appeal is allowed." 16. From the perusal of the record, it is evident that the addition of Rs.5 lakh was made merely on the basis of the document found during the search on the third party and there was no attempt by the AO to link the s....
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....on the statements alone that the additions were made by the Assessing Officer in the hands of the assessee's before us. 5.2 On perusal of the assessment order it is also noted that, assessee sought for cross-examination of the witnesses which was rejected by the Ld. AO, without giving any reasons by only stating that, the statements recorded explains the details modus operandi of the transaction related to transfers and posting of the PWD engineers. 5.3 In our view the Ld. AO came to the conclusion without verifying and making any further efforts, and this approach by the Ld. AO is in clear violation of principles of natural justice. On this aspect, we refer to the decision of Hon'ble Supreme Court in case of Andaman Timber Industries vs. CEC reported in 281 ITR 241 wherein, Hon'ble Supreme Court held that, by not providing opportunity of cross-examining the witness whose statements were relied on by the assessing officer, amounts to violation of principles of natural justice. We refer to the following observation by Hon'ble Supreme Court as under: " According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the sta....