TaxTMI 
TaxTMI 
2025 (12) TMI 666
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..... 2. Facts of the Case 2.1 The Assessing Officer framed reassessments after issuing notices under section 148 and completing proceedings under section 143(3) read with section 147. The basis for reopening in all years was the material seized during a search conducted in the Venus Group on 10.03.2015, particularly the seizure of a diary/cash book from the premises identified as the Terrace of Crystal Arcade/Crystal Plaza, C.G. Road, Ahmedabad. The Assessing Officer recorded that this diary was not a casual jotting but a systematically maintained unaccounted day-to-day cash book of the Venus Group, containing entries of cash receipts and cash payments made by various concerns of the Venus Group to outside parties, including the assessee company. 2.2 The Assessing Officer has recorded the details of the seized diary and supporting vouchers. He noted that the unaccounted cash book contained entries continuously from 01.01.2007 to 07.03.2015. The dates in the diary were written in coded form by preponing the actual dates of transactions by ten years, whereas the day and month remained the same. The amounts recorded were also in coded form by systematically omitting two zeros, s....
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....in cash from one "Kalpesh Patel" appearing in decoded form under the description "Against EC". These three cash receipts were recorded in the seized cash book on decoded dates 8-06-10, 9-06-10 and 11-06-10 for coded amounts of Rs. 1.75 crore Rs. 1.25 crore and Rs. 1.00 crore respectively. The Assessing Officer correlated these amounts with the ledger of the assessee and found that Sunderdeep Builders, a Venus Group concern, had made corresponding RTGS payments to the assessee on 09.06.2010, 10.06.2010, 11.06.2010 and 14.06.2010. These payments were of Rs. 1,00,00,000/- Rs. 90,00,000/- Rs. 1,00,00,000/- and Rs. 1,00,00,000/- respectively. Based on this correlation, the Assessing Officer held that the assessee had paid cash of Rs. 4 crore to the Venus Group and received cheque payments in return, which constituted accommodation entries. The amount of Rs. 4 crore was therefore treated as unexplained cash credit under section 68. 2.6 The Assessing Officer thereafter examined further seized vouchers relating to entries classified as "Against EC" in Annexures A-86 and A-129 for various dates in financial year 2010-11, showing cash payments aggregating to Rs. 5,80,00,000/- to the asses....
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.... Sr. No. Particulars A.Y. 2011-12 A.Y. 2012-13 A.Y. 2014-15 1 Date of filing Original Return 30.09.2011 29.09.2012 31.12.2015 2 Returned Income in Rs. 1,36,69,866/- 2,82,34,740/- 5,37,42,938/- 3 Date of Issuance of notice u/s 148 31.03.2017 30.03.2017 30.03.2017 4 Addition u/s 68 of the Act in Rs. 4,00,00,000/- 7,50,00,000/- 1,00,00,000/- 4 Addition u/s 69A of the Act in Rs. 5,80,00,000/- Without prejudice also added above sum u/s 69A of the Act 2,00,00,000/- 5 Assessed Income in Rs. 11,16,69,870/- 10,32,34,740/- 8,37,42,940/- 4. The assessee carried the matter in appeals before the CIT(A), challenging both the validity of the reopening of assessments under section 147 and the additions made under sections 68 and 69A on facts and in law. The CIT(A) upheld the validity of reopening under section 147 for all assessment years. He recorded that the Assessing Officer had initiated reassessment proceedings solely on the basis of seized unaccounted cash book and supporting vouchers found during the search in the Venus Group at the premises known as Terrace of Crystal Arcade/Crystal P....
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....s, or incriminating material indicating unaccounted dealings with Venus Group were found from the assessee's premises. The CIT(A) held that the entries recorded in the seized diary do not tally with the entries recorded in the regular books of account of the assessee. Even cumulatively, the decoded figures did not match the actual transactions during any year under appeal. The AO had decoded the seized papers by assuming that the name "Kalpesh Patel" mentioned therein referred to the director of the assessee-company, although such assumption was unsupported and in several places the word "Ganesh" was suffixed to the name "Kalpesh Patel", further weakening the AO's inference. The CIT(A) also recorded that no corroborative statement was obtained from the writer of the seized diary or from any person of Venus Group establishing that the seized entries pertained to the assessee. No person had admitted that the cash noted in the seized diary related to the assessee. In absence of any statement or other evidentiary link, the seized diary constituted at best a third-party document, and in law, entries in books of a third person without corroboration cannot be used against another assessee....
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....ok was found, and there was no evidence of cash withdrawal or cash deposits corresponding to the alleged cash transactions. After analysing the entries, statements, seized papers, and legal position, the CIT(A) held that the seized diary constituted a "dumb document", incapable of supporting additions under section 68 or section 69A. Accordingly, the additions of Rs. 4 crore (s.68) and Rs. 5.80 crore (s.69A) for A.Y. 2011-12 were deleted in full. 4.4 For A.Y. 2012-13 and A.Y. 2014-15, the learned CIT(A) recorded similar findings. It was noted that the assessee had substantial opening debit balances receivable from Sunderdeep Builders and Venus Infrastructure & Developers Ltd., to whom further advances were made during the respective years and from whom repayments were also received through banking channels. The CIT(A) examined the seized diary entries relied upon by the Assessing Officer and found that the decoded cash figures did not tally with the accounted loan transactions as per the assessee's regular books. As in A.Y. 2011-12, the seized cash book did not contain the name of the assessee, no incriminating document was found from the assessee's premises, and there was neith....
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....elopers Ltd., demonstrating the year-wise opening debit balances, advances made through banking channels, and repayments received during the relevant previous year. It was submitted that the complete loan cycle was duly reflected in the regular books of account of the assessee, that all entries were supported by cheque transactions, and that no cash transactions, as alleged by the Assessing Officer on the basis of the seized diary found from the premises of the Venus Group, were relatable to the assessee. 5.2 The learned Departmental Representative (DR), on the other hand, placed strong reliance on the order of the Assessing Officer. It was submitted that the additions were made on the basis of seized material found during the search on the Venus Group and that the decoded entries clearly indicated cash receipts and payments relatable to the assessee. The DR accordingly contended that the CIT(A) erred in deleting the additions. 5.3 We have carefully considered the rival submissions, the assessment orders, the detailed appellate orders passed by the learned CIT(A), and the material placed in the paper book. The core question arising in all three appeals filed by the Revenue is....
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.... Alleged Receipts of Rs.4,00,00,000/- treated as unexplained cash credit under section 68 Annexure Date decoded Name written Amount decoded AO's inference A-129 p.161 10-Oct-2011 Kalpesh 1,75,00,000 Receipt of cash A-129 p.166 11-Oct-2011 Kalpesh 1,25,00,000 Receipt of cash A-129 p.167 11-Oct-2011 Kalpesh 1,00,00,000 Receipt of cash Alleged Payments of Rs. 5,80,00,000/- treated as unexplained money under section 69A Annexure Date decoded Name written Amount decoded AO's inference A-86 p.9 24-Sep-2010 Kalpesh 2,00,00,000 Cash paid A-86 p.110 25-Aug- 2010 Kalpesh 60,00,000 Cash paid A-129 p.21 21-Aug- 2010 Kalpesh 1,50,00,000 Cash paid A-86 p.111 11-Oct-2010 Kalpesh 1,50,00,000 Cash paid 6. The CIT(A) examined the year-wise loan transactions and noted that the decoded cash receipts of Rs. 4 crore do not match the cheque receipts of Rs. 11.95 crore recorded in books. Further, the decoded cash payments of Rs. 5.80 crore do not match the advances of Rs. 8.10 crore given to Venus Infrastructure and Developers Ltd. The figures do not reconcile ....
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....nt from the writer or from any person of the Venus Group. The cheque transactions recorded in the assessee's books are accepted, but the AO has presumed parallel cash movement without evidence. The decoded figures relied on by the AO do not match the assessee's actual books even in aggregate. For example, in A.Y. 2011-12, the decoded cash receipts of Rs. 4 crore do not reconcile with the cheque receipts of Rs. 11.95 crore; similarly, decoded cash payments of Rs. 5.80 crore do not reconcile with the advances of Rs. 8.10 crore made through banking channels. Similar mismatches exist in all years. The seized diary being a third-party document, in absence of corroboration, cannot form the sole basis of additions under section 68 or section 69A. This principle is well settled by the decisions of the Hon'ble Supreme Court and various High Courts, including the decisions relied upon by the CIT(A). 6.2 In conclusion, it is also pertinent to record that the Assessing Officer has proceeded on a fundamentally incomplete appreciation of the assessee's books of account. The ledgers placed before the authorities clearly demonstrate substantial opening debit balances running into several crores....
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....inadmissible in the absence of compliance with the statutory requirements governing admissibility, and they possess no independent evidentiary value in income tax proceedings. It is further settled that even where entries occur in a book of account regularly maintained in the ordinary course of business, such entries by themselves do not constitute sufficient evidence to fasten liability unless they are supported by independent corroborative material establishing the truth and the factual nexus of the entry with the person sought to be taxed. The burden always lies on the Revenue to establish that the document is authentic, that it pertains to the assessee, and that the underlying transaction actually took place, resulting in a real flow of funds or benefit to the assessee. These precedents consistently hold that the statutory presumption available under section 132(4A) does not extend to documents found from third parties, and in the absence of examination of the author of the document or any person connected with the entries, no addition can be based on such material. Loose sheets or notings lacking essential particulars are described as "dumb documents", incapable of supporting ....