TaxTMI 
TaxTMI 
2025 (11) TMI 738
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....of the Act ignoring the fact that the detailed modus operandi of the transactions related to transfer and posting of PWD engineers had been explained by Shri Shailendra Rameshchandra Rathi (one of key employee) working in office of Rucha sub-group and also digital evidences found from his iPhone, were corroborated with order for transfer and posting issued by the Govt. of Maharashtra, PWD Department?" 3. Brief facts of the case are that the assessee, an Individual Government employee working as Senior Engineer with PWD Department, Maharashtra deriving Income from salary, house property and Other sources filed Return declaring income of Rs. 39,44,610/-.His case was reopened u/s 148 of the Act consequent to a search u/s. 132 of the Act conducted in Rucha Group and others. During the search, certain incriminating materials relating to cash given by the Engineers of PWD including the assessee for influencing their transfer were found. One such entry was found from iPhone of Sri Shailendra Rathi, an employee of Rucha Group. Another set of documents was also found from the premises Avish Atal. Both indicated that cash of Rs. 3,50,00,000/- was paid by the assessee for his transfer and ....
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....e assessee as well as third party had denied to have entered into any transaction. Further, no corroborative evidence was brought on record by the department to suggest that the transaction took place. In view of the same, the Hon'ble Bombay High Court, upholding the order of Tribunal, held that no addition could be made in the hands of assessee on the basis of loose papers found during the course of search at the premises of the third party. Further, the Co-ordinate Bench of ITAT at Delhi in the case of Pramod Pandey in 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 only in the case of a person from whose possession the document or material has been found. In the case of the assessee, the addition u/s. 69C in respect of cash payment made for transfer and posting had been made by the AO on the basis of data seized from i-phone of Shri Rathi and the document seized from premises of Shri Atal. Identical addition u/s. 69C was made by the AO on the basis of the same documents in another case. The ld.CIT(A) on identical facts deleted the addition made u/s. 69C. As the addition made by the AO in the case of the asses....
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....ns are identical and are further corroborated by an independent document viz. Transfer/Posting order of the PWD Department, Maharashtra which tallied with the posting sought and granted, and the amount paid by the applicant, as noted in the books of the 'broker'/'agent'. It is submitted that the AO has also independently identified and linked the name of the assessee appearing in the seized material by perusing the list of engineers of the PWD Dept. as listed on their website. In respect of the cited decisions by the assessee, it is claimed that they were distinguishable on facts and are not applicable in case of the assessee. In the case of Shri Atul B Chavan, relief has been granted on grounds that cross-examination of witness was not allowed. However in the impugned CIT(A) order, this ground of the assessee had been dismissed by the ld.CIT(A). In both the cited cases, it has been mentioned by the appellate authority that the two employees/brokers Shri Rathi and Shri Wadepalle had retracted their statement. This was not perceived in the instant case, from the order of either the AO or the ld.CIT(A).Additions in one of the quoted cases (Sharad Rajbhoj) was made under section 69A a....
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....rtment?" 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?" "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 detailed modus operandi of the transactions related to transfer and posting of PWD engineers had been explained by Shri Shailendra Rameshchandra Rathi (one of key employee) working in office of Rucha sub-group and also digital evidences found from his iPhone, were corroborated with order for transfer and posting passed by the Govt. of Maharashtra, FWD Department?" "Whether on the facts of the case and in law, the Ld. CITA) 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 exp....
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.... 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 assessee was asked to explain the seized documents found during the search at Rucha Group and was also asked to explain the source of cash paid for obtaining the desired posting. 2.3 In response, the assessee's denied having paid any amount in relation to any transfer and posting in the PWD Department to any person at any point in time. Both assessee's in response submitted that, the transfer and posting in the PWD Department was strictly done as per the rules and regulations of Maharashtra Government Servants Regulation of Transfers and Prevention of Delay in Discharge of Official Duties Act, 2005. The assessee further submitted that no private person was involved in the entire process of transfer and posting and accordingly, the question of paying any amount to anyone does not arise. Further, both assessee's denied....
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.... 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 was added in the hands of the assessee in ITA No. 5663/Mum/2024 Aggrieved by the order of the Ld. AO assessee preferred appeal before the Ld. CIT(A). 3. The Ld. CIT(A) after considering the facts in both assessee's case and submissions filed by them, noted that, the statement of Shailendra Rathi was retracted post search proceedings. It was also noted that, the alleged seized material were obtained from the residential premises of Avish Atal, and that the statement of Mr. Avish Atal was not discussed by the Ld. AO in the assessment order. The Ld.CIT(A) observed that, the addition were made by the Ld.AO relying on statement of third party, and on the basis of material found during the course of the search on third party. The Ld.CIT(A) took note of the fact that, statements were retracted subsequently. By referring to various judicial ....
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....bai - 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. Ans. Sir these pages are pertaining to transfers and postings of officers (i.e., designations of Deputy Engineer, Executive Engineer, Superintendent Engineer and Chief Engineer) in the PWD Department, Maharashtra. If any officer wants a desired posting then they approach us. For posts in Mumbai and Pune, the amounts are higher while the amounts for other areas are lower. Once an officer approaches us, then we take details of the post/place which that officer wants. Then I give this list to Prashant Nilawar. I don't know what he does with this list. He then returns another list to me, which I give to the desk officer in PWD. Then this list is moved upwards and gets finalized. Sir, for getting these posts, the officers pay amounts in cash varying from Rs. 5 lakhs to Rs. 1 crores. Once t....
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....g 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 administration. These engineers express their desired postings to the concerned officers in the Mantralya. These Engineers subsequently contact Shri Prashant P Nilawar through WhatsApp / Facetime and just intimate that they have met the concerned officer in Mantralaya. List of all such interested Engineers who have communicated with Shri Prashant P Nilawar is made and then communicated to me through WhatsApp. Subsequently, I meet the Deputy Secretary in the department and discuss to confirm that all the names in the list have been sent through his reference. Subsequently, the references of such Engineers are discussed and possibilities of their transfers to the desired posts are explored. Thus, from the said list the final list of Engineers is prepared who can be accomm....
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...."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 independent evidence, which may be in the form of an independent departmental enquiry, and the same is completely absent in the present case. Thus, it is evident that the sole basis for making the addition in the hands of the assessee were the statements recorded of the third party and documents found from the third party. From the perusal of the aforesaid statements, recorded during the search proceedings, it is further pertinent to note that it was alleged that the PWD Engineers contacted Shri Prashant P Nilawar, the partner of Rucha Consultancy LLP, through WhatsApp/FaceTime and informed about the desired postings. However, from the perusal of the assessment order, it is evident that Shri Prashant P Nilawar was neither examined nor any statement recorded during t....
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....nt 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 across a sort of a ledger maintained by the firm known as Vasu Films of Madras containing certain entries, which had been seized by the income-tax authorities from the premises of that firm at Madras, and relying on those entries he took the view that the assessee must have concealed her real income by not showing certain payments for which no receipts were passed by her and he made the additions of Rs. 60,550 Rs. 75,000 and Rs. 75,000 to the income returned in each of the three assessment years respectively. For drawing the inference that she must have received income without passing receipts the Income-tax Officer relied upon the two entries which appeared on one page of that ledger of Vasu Films, which read as follows:....................... In the statemen....
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....ed in ignoring the entries in the ledger of Vasu Films relating to the payment made by the said firm to the assessee. In our view, the question has been framed by the department so as to give it a colour of a question of law, for, in our view, having regard to the manner in which the Tribunal has dealt with the said entries, it cannot be said that the Tribunal has ignored the entries in the ledger of Vasu Films relating to the socalled payments made by the firm to the assessee. In fact, the Tribunal has discussed these entries appearing in the ledger of Vasu Films and has given substantial reasons as to why it was not inclined to accept the entries as reliable entries for accepting the case of the department. inter alia, it pointed out that the ledger containing the said entries had not been produced before it, that no corresponding entries were there in the day-book of the relevant period and that Vasu Films did not rely on this ledger in the course of its own assessment proceedings but for its own assessment proceedings different set of books had been relied upon as genuine set of books. As regards the evidence of the two witnesses on which reliance was placed by the department, ....
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....l to the absence of a day-book containing the corresponding entries. In the first place it must be pointed out that this is not the only reasons for rejecting the entries but the Tribunal has given other sufficient reasons for rejecting the same. But even with regard to this reason which has been given by the Tribunal, though it may be contended that since the entries in the ledger pertained to the payments in "black" no corresponding entries could be found in the day-book which was meant to be produced before the income- tax authorities, still the fact remained that the day-book from out of the other set of books (not intended to be produced) which must have contained the corresponding entries was not available and, in the absence of that, mere production of ledger entries would be of no avail, as there would be no guarantee about the truthfulness or genuineness of the entries in the ledger. Moreover, entries in books of account--whether in day-book or in the ledger--are merely corroborative evidence and in the absence of proper corroborative evidence the primary direct evidence would alone be required to be scrutinized and that evidence in this case consisted of the testimony of ....
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....mage of a 5 rupee note and it does not have any reference to any sum of money as stated by Sh. Shailendra Rathi. The addition has been made only on the basis of the material found from Sh. Rathi and the statement of Sh. Shailendra Rathi, which has been retracted. The assessee has consistently denied of any such transaction having taken place. In fact, Sh. Shailendra Rathi in his statement has himself stated that the transaction could not take place. As already stated, while deciding the earlier ground, no addition can be made simply on the basis of a third party statement without corroborating it with independent evidence. In the case of Naren Premchand Nagda v. ITO [ITA No. 3265 (Mum.) of 2015, dated 8.7.2016], a search was conducted at the premises of a builder. The statement of key person of the group was recorded who stated that the assessee had paid cash to the group. When the statement of the key person was put to the assessee, he denied of making any payment in cash. However, the department made addition by relying on the statement of key person of the group. The Hon'ble Mumbai ITAT relying on series of judicial pronouncements held in the case of Naren Premchand Nag....
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.... presumption u/s 132(4A) or 292C of the Act could be taken only in the case of a person from whose possession the document or material has been found. 7.3.5 In the case of Straptex (India) (P.) Ltd. v Dy. CIT [2003] 84 ITD 320 (Mum- Trib.), the Hon'ble Mumbai ITAT also held that the presumption u/s 132(4A) is only in respect of the person in whose possession the books or documents are found. While utilizing such documents in the case of any other person, there could not be any presumption about the correctness of such books of accounts. 7.3.6 Also, the Hon'ble Kolkata ITAT in the case of Atul Tantia v DCIT (ITA No. 492/Kol/2021 order dated 28.03.2023) has also held that no addition can be made on the basis of messages from SMS or WhatsApp between two persons unless there is corroborative evidence on record. The relevant extracts are as under: We have perused the decisions of the Co-ordinate Benches of the Tribunal and found that the ratio of law laid down is that no addition can be made on the basis of messages from SMS or WhatsApp between two persons unless there is corroborative evidences on record. Thus it is seen that the Hon'ble Courts have clearly h....
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....ttempt by the AO to link the same with the assessee by way of an independent evidence. Accordingly, in light of the decisions relied upon by the learned CIT(A) in the impugned order, we are of the considered view that the addition of Rs. 5 lakh made under section 69A of the Act has rightly been deleted by the learned CIT(A). Before concluding, it is pertinent to note that the learned CIT(A) also took into consideration the decisions wherein it was held that the presumption under section 132(4A) of the Act could only be taken in the case of the person from whose possession the document or material has been found and since, in the present case, the documents were found from the possession of the third party, such a presumption cannot be extended to the assessee. " 4.2 The Ld. DR submitted that, the documents seized from the search premises is evident enough to show cash payments were made by both assessee's to Rucha Group, based on which these assessee's were posted with the PWD department under Government of Maharashtra. The Ld. DR also placed reliance on modus-operandi of the cash transaction received by the Rucha Group from these assessee's statements recorded he thus veh....
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....ority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for ....