AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 112
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....ssee and Revenue has more or less raised common grounds of appeal in all their respective captioned appeals. Therefore, for the sake of brevity, the grounds of appeal filed by the assessee in ITA.No.2139/Hyd/2025 and grounds of appeal filed by the Revenue in ITA No.2358/Hyd/2025 for the assessment year 2020-21, respectively, are reproduced as under: "1. On the facts and circumstance of the case, Learned CIT(A) erred in both law and facts while passing the appellate order u/s. 250 of Income Tax Act, 1961. 2. On the facts and Circumstance of the case, Learned CIT(A) was not justified in considering the entries in the alleged material seized from a third party, as unaccounted business receipts of the appellant and estimating the Income of Rs. 1,41,66,500/- @10% on the alleged receipts of Rs. 14,16,65,000/-. 3. On the facts and circumstances of the case, Learned CIT(A) has not appreciated the law & fact that the statement recorded u/s. 132(4) from the third person(s) is not binding on the appellant company for fastening any liability. 4. On the facts and circumstances of the case, Learned CIT(A) and the Assessing Officer have not appreciated the law ....
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....of the assessee. During the course of search in the different premises of M/s. Vamsiram Group, the evidence found in the form of diary and pen drive shows certain transactions recorded in cash which contain payments to the assessee. Further, during the survey proceedings at the residence of B. Venkata Subba Rao, the Managing Director of the assessee company, an unregistered agreement of sale between the assessee company and M/s. Vamsiram Builders was found. As per the agreement of sale, the assessee company has purchased commercial space from M/s. Vamsiram Suvarna Durga Tech Park for a consideration of Rs. 6,47,35,200/-. On examination of the incriminating evidence seized from M/s. Vamsiram Group, it is found that both cash receipt and cash payment entries were recorded in the evidence. Further, during the course of search proceedings in the case of M/s. Vamsiram Builders Group, statements were recorded from Shri Chandrashekar Atla, Manager (Accounts) and Shri Regu Venkata Vara Prasad, Accounts Manager, and in response to specific questions, they deposed that the seized material contains unaccounted transactions and also further deposed that there is suppression of two zeros while ....
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....the AO. 5. The AO, after considering the relevant submissions of the assessee and also taking note of the documents found during the course of search, observed that, from the evidences found during the course of search, it is clear that M/s. Vamsiram Group has indulged in cash transactions and the said cash transactions are recorded by truncating last two zeros. During the course of search proceedings, Accounts Personnel, who recorded/supervised transactions, namely, Shri Chandrashekar Atla and Shri Regu Venkata Vara Prasad, have deposed on oath that while recording transactions, the last two zeros were suppressed and explained in detail the actual amounts in the detailed statements recorded. The recorded entries were verified and signed by Shri B. Venkata Subba Rao, Main Promoter cum Managing Director of M/s. M/s. Vamsiram Group. Although, Shri Chandrashekar Atla and Shri Regu Venkata Vara Prasad filed retraction statements before the Investigating Officer immediately after the closure of search, but the Investigating Officer considered the retraction statements as generalized statements that too after passage of substantial time and therefore, cannot be considered. Therefore, ....
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....Since the documents were found from the premises of third party, the presumption as per section 132(4A) as well as section 292C of the Act, is not applicable and the assessee is not required to explain the contents recorded in the seized material. Further, the AO has also not brought any corroborative evidences to support the statements recorded during the course of search to establish that the assessee has received cash payments for carrying out civil works. 7. The Ld. CIT(A), after considering the submissions of the assessee and also taking note of various evidences found during the course of search, observed that from the extracts of the seized material found during the course of search, it is noticed that the transactions in the loose sheets were recorded under the heading Table 1, Sl.No., Dates, F.Y., Particulars, Receipts and Payments. The dates are recorded chronologically, particulars legibly and with specific details, referring to the payments/receipts. In such nature of the notings in the loose sheets, where the transactions in the loose sheets was recorded chronologically in a specific particulars of receipts and payments, it can be stated that the loose sheets are no....
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....fit on total receipts, which works out to Rs. 1,41,66,500/- and the balance amount has been deleted. 9. Aggrieved by the order of the Ld. CIT(A), the assessee as well as the revenue are now in appeal before us. 10. The Ld. counsel for the assessee, Shri M.V. Prasad, C.A. submitted that the Ld. CIT(A) erred in rejecting the explanation of the assessee with regard to evidentiary value of the documents found in the premises of M/s. Vamsiram Group, even though it is a settled principle of law as held by various Courts that the provisions of section 132(4A) and section 292C of the Act, is not applicable in respect of documents found from the premises of a third party. In the present case, the AO made addition on the basis of diary and pen drive found from the premises of M/s. Vamsiram Group and alleged that there are certain cash payments to the assessee company for carrying out civil works and the same has been recorded after truncating last two zeros, but fact remains that the above documents are not in the handwriting of the assessee and were not found from the premises of the assessee. Therefore, once a document is not found in the premises of the assessee company, the content....
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.... to the Managing Director of M/s. Vamsiram Group or to the employees, and the statements recorded were general in nature and therefore, cannot be considered as conclusive evidence for payment of cash. In this regard, he relied upon the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Sant Lal reported in (2020) 118 taxmann.com 432 (Delhi) and also the decision of the Hon'ble Bombay High Court in the case of PCIT Vs. Umesh Ishrani (2019) 108 taxmann.com 437 (Bom). He also relied on the following case laws : • Gavireddygari Aparna Kalyani and Others Vs. ACIT reported in ITA Nos. 3-26/Hyd/2023 and others dated 28.02.2023. • ACIT Vs. Katrina Rosemary Turcotte reported in (2017) 190 TTJ 681 (ITAT Mumbai Bench). • ACIT Vs. Anand Jaikumar Jain reported in (2023) 147 taxmann.com 125 (ITAT Mumbai) • Naren Premchand Nagda Vs. ITO reported in IT Appeal No. 3265 (Mum.) of 2015, dated 8-7-2016 (ITAT Mumbai) • MM Financiers (P) Ltd. Vs. DCIT reported in (2007) 107 TTJ 200 (ITAT Chennai) • Pradeep Amrutlal Runwal Vs. TRO reported in [2014] 47 taxmann.com 293 (ITAT Pune) • Prarthana Constructi....
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....iram Group and the assessee company in cash and the same was not recorded in the regular books of account maintained by the assessee company. Further, the maker of the document explained that the entries in the diary had been recorded by truncating last two zeros. The AO, on the basis of evidence found during the course of search coupled with the statements recorded from the employees, has arrived at total cash payments received by the assessee company from M/s. Vamsiram Group for carrying out works and treated the same as unexplained cash receipts. The learned Sr. A.R. although accepted the reasons given by the AO to treat the cash receipts on the basis of documents found during the course of search, but observed that the AO erred in treating the above cash payments as business receipts of the assessee and estimating 10% profit without any basis and also without giving any valid reasons. The documents found during the course of search only contain details of the cash payments made by M/s. Vamsiram Group to the assessee company. However, it do not show any expenditure incurred by the assessee company. Therefore, the inference drawn by the Ld. CIT(A) that the entire amount of cash r....
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....ntire amount of cash payments culled out from the seized diary has been treated as unexplained cash receipts of the assessee company and added back to the total income. On appeal, the Ld. CIT(A) accepted the reasons given by the AO to treat the unexplained cash receipts. However, the Ld. CIT(A) estimated 10% profit on total cash receipts on the ground that the entire cash receipts cannot be treated as income of the assessee company, because the assessee company has received cash for carrying out construction work and without incurring expenditure, the revenue cannot be earned. 15. We have gone through the relevant arguments of learned counsel for the assessee and we found that, the additions made by the AO are on the basis of documents found from the premises of a third party. It is a well-established principle of law by the decisions of various Courts that the documents found from the premises of a third party, the rebuttable presumption as per section 132(4A) and section 292C of the Act, is not applicable. Therefore, it is necessary for the AO to support the addition with further corroborative evidence in cases, where any addition is made on the basis of third party informatio....
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....do not subscribe to the reasons given by the AO for the simple reason that, the loose sheets found during the course of search from third party premises were neither in the handwriting of the assessee nor containing any signature of the assessee. Once the documents are neither in the handwriting of the assessee nor bearing any signature of the assessee, then on the basis of third party statements without any confrontation to the assessee for its rebuttal, the additions cannot be made. In the present case, no such corroborative documentary evidence by way of signed receipts or otherwise was unearthed during the course of search and there is no reference to any corroborative evidence in the assessment order. Although the AO sought to rely upon the statements of the employees of M/s. Vamsiram Group as corroborative oral evidence, the said statements lack any evidentiary value, because these statements were retracted subsequently. Further, there is no specific question about the payment made to the assessee company was put to the Managing Director of M/s. Vamsiram Group or to the employees of M/s. Vamsiram Group Builders, therefore, the generalized statements recorded from the employee....
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....orative evidence. It is an admitted fact that the sole basis for the AO to make addition is the documents found from the premises of M/s. Vamsiram Group. The AO has not referred to any independent corroborative documentary evidence in support of his conclusions in the assessment order. The Hon'ble Bombay High Court in the case of PCIT Vs. Umesh Ishrani (supra) considered an identical issue and held that the additions made by the AO on the basis of entries found in loose sheets without any corroborative evidence are not sustainable. In the present case, it is an admitted fact that the AO during the course of assessment proceedings neither carried out any further enquiries to ascertain the nature of entries contained in the diary nor brought on record any independent corroborative evidence like cash receipts or bills submitted by the assessee company so as to conclude that M/s. Vamsiram Builders has made cash payments for carrying out civil works. The AO has not brought on record any evidence to prove that there is an exchange of cash between the parties. It is very important for the AO to bring further evidence, including cash receipts, to support the entries contained in the seized....
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.... record any supporting evidence to reach to the above conclusion that the documents found during the course of search show clear transactions between the assessee company and M/s. Vamsiram Group. Further, the Ld. CIT(A) has relied upon the statements of Shri Chandrasekhar Atla and Regu Venkata Vara Prasad, but fact remains that the above two persons have retracted their statements and filed retraction statements before the Investigating Officer. Once the initial statements recorded have been subsequently retracted by filing affidavits, then there is no evidentiary value for the initial statements unless the statements recorded at the time of search are further corroborated by any independent evidence. Since there is no corroborative evidence before the AO and Ld. CIT(A) to support the finding of cash payments to the assessee company, in our considered view, the conclusion drawn by the Ld. CIT(A) that there is clear evidence of cash payments, is contrary to the material available on record and cannot be accepted. 20. Coming back to the appeals of the Revenue. The revenue has challenged the estimation of 10% net profit by the Ld. CIT(A). The Ld. CIT(A), having accepted the finding....
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....of the Ld. CIT(A) and direct the AO to delete the additions made towards alleged cash receipts as income of the assessee. 22. In the result, the appeal filed by the assessee for AY 2020-21 is allowed and the appeal filed by the revenue is dismissed. ITA Nos.2140/Hyd/2025 and ITA No.2359/Hyd/2025 - for A.Y. 2022-23. 23. The facts and issues involved in these appeals filed by the assessee and revenue, respectively, are identical to the facts and issues, which we had considered in assessee's own case for A.Y. 2020-21 in ITA Nos.2139/Hyd/2025 and 2358/Hyd/2025. The reasons given by us in preceding paragraph nos. 14 to 21 shall mutatis and mutandis apply to the appeals filed by the assessee and revenue for A.Y. 2022-23. Therefore, for similar reasons, we direct the A.O. to delete the addition made towards alleged cash receipts as unexplained income of the assessee and estimation of 10% net profit on the said alleged cash receipts. 24. In the result, the appeal filed by the assessee in ITA No.2140/Hyd/2025 is allowed and the appeal filed by the Revenue in ITA No.2359/Hyd/2025 is dismissed. ITA Nos.2141/Hyd/2025 and ITA No.2360/Hyd/2025 - for A.Y. 2023-24. 25. The facts ....