TaxTMI 
TaxTMI 
2025 (2) TMI 1355
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.... merits. 3. The Revenue has raised the following legal grounds: 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The Ld.CIT(A) erred in deleting the addition of 11,50,00,000/- made as undisclosed income u/s.69A in respect of cash received by the assessee outside the books from the partners of M/s.S.R.S.Mining in the property transaction as evidenced by the material seized during the course of search In the case of M/s.S.R.S.Mining. 2.1 The Ld.CIT(A) erred in observing that the addition has been made without bringing any cogent or corroborative evidence on record, without appreciating that the addition was made on the basis of diary seized during the course of search in the case of M/s.S.R.S.Mining and the admission made by the assessee in his sworn statement recorded u/s.132(4) during the course of search in the residential premises of the assessee. The seized material and sworn statement u/s.132(4) corroborates each other. 2.2 The CIT(A) failed to appreciate that the assessee had not substantiated his claim that the amount received as advance had been returned. Further the asses....
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....nd formal records of transaction of such nature would not be done for obvious reasons. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored. 4. The assessee has raised the following legal grounds in Cross-Objection: Following grounds of Cross-objection are without prejudice to each other and assessee's arguments in Department's appeal: 1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not declaring the assessment order passed by the AO as bad in law and is null and void. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not considering the submissions filed by the assessee that no incriminating material was found during the course of search for the captioned assessment year. 3. The assessment order was time barred and hence, is void ab initio. The cross-objector craves leave to add to, amend, alter or delete the foregoing grounds of cross-objection. 5. Brief facts....
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....d to have informed the AO that the apartments booked by the partners of M/s SRS Mining had been cancelled and that the payments received from them had been refunded. It was also submitted that, the LLP had not received any monies apart from the monies received through banking channel. 7. In light of the above, the AO is noted to have observed that, the assessee's retraction was an after-thought and that when it was recorded initially (his original statement), it was given without any influence, but later in collusion with partners of M/s SRS Mining, he had retracted the statement without any valid reason. The AO, therefore, on the basis of the original statement of the assessee and the material seized from the premises of M/s SRS Mining held that the assessee was in receipt of monies of Rs. 11.50 crores which he added u/s 69A of the Act. On appeal, the Ld. CIT(A) was pleased to delete the said addition. Aggrieved by the order of the Ld. CIT(A), the Revenue is now in appeal before us. The assessee is noted to have filed cross objections supporting the action of the Ld.CIT(A) on certain legal grounds, which have already been noted supra. 8. Assailing the action of Ld. CIT(A....
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.... noting's found in a loose paper seized from M/s SRS Mining was stray noting's made in pencil. It was contended that, there was no acknowledgment, signature etc. of the assessee on that page, which would suggest that the assessee had actually received the monies. According to him, therefore stray noting's of figures by the third party, without any noting in handwriting of the assessee or his signature etc., cannot be straightaway inferred that monies had exchanged hands. He further argued that, it was an admitted fact that the project was being developed by M/s Kara Property Ventures LLP and that the apartments were to be sold by them and therefore on- monies, if any, could be inferred only in the hands of LLP and not the assessee. The Ld. AR contended that, it is well settled in law that right income is to be brought to tax, in the hands of right person, and that when the Revenue was aware that the appellant had not sold these flats, the on-monies could not have been legally added in his hands. He further contended that, in spite of these facts being known to the Revenue, the Revenue didn't bother to make any enquiries from M/s Kara Property Ventures LLP for almost....
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....AO as well. Having regard to these contemporaneous facts, we find that the Ld. CIT(A) had rightly held that, the presumption of payment of on-monies lacked foundation for the reason that, no such apartment was ultimately sold and therefore one cannot infer taxation of on-monies on a phantom transaction. We thus concur with the following findings of Ld. CIT(A) on this score itself: - "6.7 ... In the statement recorded from the partners of M/s SRS Mining, it is evident that even though the partners have admitted about the payment of advance for purchase of flats at One Crest, the transaction was not completed and the advance amount was returned. Neither the Authorised Officer nor the AO has brought on record whether the property in consideration was actually purchased by them. However the AO in the assessment order has treated the sum of Rs. 11.50 crores as on-money paid to the appellant and brought to tax as the undisclosed income of the appellant u/s 69A of the Act. It is significant to bring on record that when the ultimate purchase of the property was not materialized, the presumption of the AO that on-money paid upon such `phantom transaction' lacks foundation of ma....
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....enue vehemently contended during the course of hearing that the CIT(A) ought to have affirmed both the impugned additions in the assessee's hands as per the Assessing Officer's stand. We make it clear that there is not even an indication in the Revenue's grounds that the impugned additions pertain to the assessee himself than his company M/s. VNR Infrastructure Limited. Hon'ble apex court's landmark decision in ITO v. C H Atchaiah [1996] 84 Taxman 630/218 ITR 239 (SC) held long back that the Assessing Officer can and he must, tax the right person and the right person alone. By 'right person' it is meant the person who is liable to be taxed according to law with respect to a particular income. By the connotation of 'right person', it is meant the person who is liable to be taxed, according to law, with respect to a particular income. And that the expression 'wrong person' is obviously used as an antithesis of the expression 'right person' only. We observe that this assessee is the 'Managing Director' of M/s. VNR Infrastructure Limited. And that it is this latter entity which the fact is engaged in all the business activity(....
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....ng. It is observed that, the assessee had explained before the AO that, he was only shown a diary found from the premises of one Mr. Sekar Reddy wherein there were certain pencil entries noting his name against certain cash payments, but there was no acknowledgment on that sheet against the amounts by the assessee. According to him therefore, such stray notings could not be treated as corroborative evidence to infer undisclosed income in the hands of the assessee. The AO is noted to have acknowledged this objection of the assessee, but had not specifically controverted the same but rejected it as an after-thought. We find that, the Ld. CIT(A) had examined the said noting's and rightly found the same to be dumb in nature, by holding as under :- "6.8 The next issue arising out of the addition is that the evidence relied upon by the AO seized from the third party premise lacks evidentiary value. The Appellant in the submission before the AO has made a submission in this regard, the relevant portion of the submission as brought out by the AO in the assessment order is reproduced as under :- "I remember that the documents with reference to which the question No. 17....
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....s it in handwriting of assessee and revenue tallied to produce any other cogent material to link the assessee to the diary. The ratio of the said decision is squarely applicable to the case of the Appellant since the AO had not referred to any cogent material to corroborate the entries made in the material seized from a third-party, which were purportedly the transactions made by the said third- party with the Appellant. 6.12 At this juncture, it is pertinent to rely upon the decision of Jabalpur Bench of Tribunal in the case of ACIT vs Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-0] and the decision rendered by the Hon'ble Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. Vs ITO (ITA No,250/Mum/2013) where in it was held that the AO was required to bring further evidence on record to show that the money was actually exchanged between the pailies in case where there was no other evidence on record to prove that on-money was paid except the loose sheets found in the premise of third-party and admission made by the third-party. Also, the Hon'ble Supreme Court in the case of Common Cause vs. UOI held as under :- We are constrained to observe that t....
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....of such payments and the precise identity of the recipient. In the absence of such essential and critical information, it could not be Inferred that the payments were made to the Appellant and that the said amounts represent the income of the Appellant. It could also not be inferred with a reasonable degree of certainty that the payments were made to Appellant. An entry made in a diary or notebook by a third person with scant details cannot be used to fasten tax liability on the Appellant, in the absence of any corroborative evidence to attribute the entries to Appellant. Such seized materials liable to be treated as as 'dumb document', which would not have any evidentiary value in respect of the entries found therein, unless corroborative evidence is available which can provide necessary reliable basis for deciphering the nature and character of the said entries. Another fact was that the Appellant did not acknowledge receipt of any such payment by way of appending his signature / initial against the said payments. If a third party unilaterally makes entries in a diary/note book showing payments to a person to suit his convenience, the payments could not be inferred to hav....
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....ne's name on his own sweet will in his diary and therefore such noting on stand-alone basis along with the biased statement of the searched person cannot be used as reliable evidence against the assessee. 18. We also gainfully refer to the decision of coordinate bench of this Tribunal, Ahmedabad in the case of Jawaharbhai Atmaram Hathiwala v. ITO (128 TTJ 36). In this case, addition was made by relying on seized material and statement of third party without bringing any other evidence on record. The Tribunal deleted the addition. The relevant portion of the order of Tribunal is as under :- "Held that no evidence could be brought on record by the Revenue to show that in fact the assessee had paid 'on money' to the developers. No document containing signature of the assessee or handwriting of the assessee to corroborate the above making of payment by the assessee was found during the course of the search. Merely recording made by a third party or statement of a third party could not be treated as so sacrosanct so as to read as a positive material against the assessee. Therefore, addition in the hands of the assessee on account of 'on-money' was not jus....
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....able to the facts of the present case. In the decided case also, the AO had made additions based on noting's found in papers seized from the premises of M/s SRS Mining, which was deleted by Ld. CIT(A) and the aforesaid appellate order was upheld by this Tribunal, by holding as under :- "14. So far as the merits of quantum addition is concerned, the findings of Ld. CIT(A) have been enumerated by us in detail in preceding paragraphs. The Ld. CIT(A), upon perusal of the relevant entries in the seized material, concurred that the name of the assessee did not appear in any of the entries so considered by Ld. AO to be pertaining to the assessee. All the entries so considered by AO merely contain an abbreviation viz. 'OPS Ramesh'. The Ld. AO relied on the statement of Shri K. Srinivasulu u/s 132(4) dated 10.12.2016 to conclude that the said name of 'OPS Ramesh', in the seized material, refers to the assessee. Shri K. Srinivasulu explained in his statement that the name 'OPS Ramesh' in the seized material was used to denote 'PA to OPS' and since the assessee was popularly referred to in the media / press and by the general public as 'OPS'....
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.... ratio of the said decision was squarely applicable to the case of the assessee as the Ld. AO has not referred to any cogent material to corroborate the entries made in the material seized from a third-party which are purportedly the transactions made by the said third-party with the assessee. The other decisions including the decision of Jabalpur Bench of Tribunal in the case of ACIT vs. Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] further supports this proposition. Similarly, Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. Vs ITO (ITA No.250/Mum/2013) held that AO was required to bring further evidence on record to show that the money was actually exchanged between the parties in case where there was no other evidence on record to prove that on-money was paid except the loose sheets found in the premise of third-party and admission made by the third-party. Also, Hon'ble Supreme Court in the case of Common Cause vs. UOI (supra) stressed the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found in loose sheets and note books regarding the payments allegedly made to important constitutional ....
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....was told to him by the partners. In such a situation, the statement would serve a very limited purpose of ascertaining the identity of the person who made the entries and nothing more. Since the entries were made on the instructions of the partners, it is the partners who were required to explain the exact identity of the recipients, the nature of payments, the purpose of payments and the identity of the person who made the payments etc. However, there is no material on record which would show that any of the partners was examined with regard to relevant entries in the seized material. There was no reference to any such statement of the partners in the assessment order. Therefore, the statement of Shri K. Srinivasulu could barely be considered as corroborative evidence against the assessee with regard to the entries in the seized material. This was further fortified by the fact that the said statement was retracted vide letters dated 21- 03-2017 and 23-03-2017 addressed to DDIT (Inv.) which was submitted by Shri K. Srinivasulu through the Jail Superintendent when he was lodged in the Jail. In the retraction letters, it was claimed that the earlier statement was given under coercion....
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....atement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. In the present case, Ld. AO did not rely on any other corroborative evidences except for relying on the statement of Shri K. Srinivasulu since in the sworn statements of three other partners recorded on 08-12-2016, no questions were posed to them at all regarding the seized material allegedly containing the details of incidental charges paid to various persons. It was thus evident that no other corroborative evidence was available in record in respect of notings in the seized material. Therefore, the impugned addition could not be sustained merely relying on this statement. The conclusions of Ld. CIT(A), in this regard, find our concurrence. 18. Further, the assessee could not be expected to discharge a reverse burden as per legal principles laid down by Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO (131 ITR 597) holding that onus of establishing that the conditions of taxability are fulfilled would be on revenue and throwing this burden on the assessee would be to cast an almost impossible burden upon him t....