TaxTMI 
TaxTMI 
2026 (9) TMI 1637
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....21 27.03.2026 07.09.2024 143(3) r.w.s.147 2. 6743/Del/2026 (Revenue's appeal) - Do - - Do - - Do - - Do - 3. 3445/Del/2025 (Assessee's appeal) 2021-22 30.03.2025 28.01.2024 143(3) 4. 4514/Del/2025 (Revenue's appeal) - Do - - Do - - Do - - Do - 2. At the outset, it is observed that both the appeals filed by the revenue are with the delay of few days. The appeal for AY 2020-21 was delayed by 19 days and the appeal for AY 2021-22 was delayed by 21 days for which separate applications for condonation of delay were filed. 3. Before us, the ld. CIT DR submits that the AO was stuck up in time barring matters of block assessment proceedings and in various audit matters. He thus submits that considering the heavy workload due to high pendency of time barring assessment matters and other judicial and audit matters, the delay was occurred and, it is therefore humbly requested to condone the delay of 19 days in filling the Appeal before the Tribunal for AY 2020-21 and 21 days delay in AY 2021-22. 4. Per contra, ld. AR for the assessee has not objected to the request made by the revenue for condonation of delay in filing bo....
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.... Ahmedabad 28.5.2022 31.5.2022 102-104 vii) 145, M.G. Road, Kolkata 28.5.2022 29.5.2022 105-119 viii) 9A/23, WEA, Channa Market, Karol Bagh, Delhi 28.5.2022 31.5.2022 120-127 ix) T-48/1, Panchpara Road, Bartalla, Railline, Matia Bridge, Kolkata 28.5.2022 29.5.202 128-151 x) Locker No. 41, HDFC Bank, Chandni Chowk 19.7.2022 19.7.2022 152-156 xi) Locker No. PH-15, PNB Bank, Surajmal Vihar, Delhi 18.7.2022 18.7.2022 157-161 xii) Locker No. PH-83, PNB Bank, Surajmal Vihar, Delhi 18.7.2022 18.7.2022 162-166 9. Thereafter, the jurisdiction over the case of assessee was transferred from Kolkata to Delhi in terms of the order passed u/s. 127 of the Act dated 11.11.2022. The assessee received the notice u/s. 148 followed by various notices issued from time to time which were duly replied by the assessee. At the fag-end of the proceedings i.e. on 14.03.2024, an order u/s. 142(2A) of the Act was passed referring the matter for special audit and M/s O.P. Bagla & Co., Chartered Accountants were appointed to undertake special audit in the case of the assessee and their report was obtained and su....
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.... IX/6506, 6507, 6508 commenced on 28.03.2022, on 01.06.2022, various documents and digital data annexed as Annexure-A (containing annexures A1 to A 62) were found and seized. It is further submitted that in the Panchnama, it is stated that due to the sensitivity of the case, the same is being taken to the control room and as some proceedings related to digital data forensic are still running. Ld. AR drew our attention to Annexure-A dated 01.06.2022 prepared at premises No. IX/6506, 6507, 6508 where total 62 Annexure marked as Anx. A-1 to A-62 were found and seized by the Department. He specifically drew our attention to S. No. 60 which is "one external SSD" containing data of various digital devices and the first item is "HP23GB Pen-drive". 15. The Ld. AR submits that as per Panchnama dt. 01.06.2022 and its Annexure containing 62 items, no reference was made of the seizure of any "HP 32 GB Pen-drive" separately by the Department and only its data was taken in the external SSD as per S. No. 60 of Annexure-A dated 01.06.2026. The Ld. AR submits that when the search was commenced on 28.05.2022 at premises No. IX/6506, 6507, 6508 where Mr. Rakesh Chajjer was present and Mr. Sanjeev ....
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....el books of account in the name JSK. I would also like to state that the pen drive is delivered to Accountants department (3rd or 4th floor of the building 6508 Gandhi Nagar) of JM Jain every day in morning and received back in the evening. The direction in this regard has been passed by JM Jain (owner of the JM Jain Group). Question No.18:- Please state the content and owner of the pen drive. Answer:-In this regard. I would like to state that the pen drive has data related to parallel books of account in the name JSK. The working and backup is done by accounts department in the pen drive on daily basis. This pen drive has the data of parallel books of accounts in the name of "JSK". The pen drive (Which is sent to accounts) is inserted in the server of SAP and only after that we can access the parallel books and make debit and credit entries in the customer's account. The owner of this pen drive is Jeetmal Jain (owner of JM Jain Group). 17. Ld. AR submits that as per the Panchanama prepared at business premises No. IX/6506, 6508 on 01.06.2022, data of the Pen-drive was copied in one SSD whereas no such Pen-drive was ever seized/ brought on record, however o....
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....ion and answers are identical, thus, submits that such statements cannot be relied upon. 21. With respect to the validity of the digital evidences, Sh. Ashwani Kumar, Ld. AR drew our attention to section 65B of the Indian Evidence Act, 1872 and submits that as per section 65B of the Indian Evidence Act, 1872, certain pre condition are required to apply with for the electronic evidence to be admitted as a valid evidence. In this regard the ld. AR made a detailed written submission which is reproduced as under: 54. In terms of section 65B(1) of the Indian Evidence Act, 1872 ("Evidence Act"), any information contained in an electronic record, which is printed on paper, stored, recorded or copied in optical or magnetic media produced by a computer is deemed to be a document (under the said Evidence Act), only if the conditions mentioned in section 65B(2) are satisfied. 55. Relevant excerpts of the provisions in section 65B of the Evidence Act are reproduced below for ready reference: "65B. Admissibility of electronic records. -- (1) Notwithstanding anything contained in this Act, any information contained in an electronic record which is printed on a paper....
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....ying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this subsection it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it." 56. On a careful reading of the aforesaid provision, it will kindly be noticed that certain preconditions of section 65B of the Evidence Act would be required to be complied with in order for the electronic record(s) to be admitted and considered as evidence; one of the fundamental requirements is that there must be a certificate from the person having lawful control and occupying position in relation to operation of the device On a careful reading of the aforesaid provision, it will kindly be noticed that certain which confirms certain facts. 57. Section 65B(4) of the Evidence Act provides that if the electronic evidence is to be used in any judicial proceeding, a certificate shall have to be produced which identifies the electronic record and gives particulars of the device involved in the pro....
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....m surroundings etc. iv) If possible, a serial number should be pasted on the digital device so that it can be related to the exact case, date and the section under which it is searched. v) The panchas should have some knowledge about various digital devices. A writing should be included from panchas stating that they have been explained the various digital devices that have been identified and also the various procedures used in Forensic Collection. vi) Digital Evidence Collection form should be properly and duly filled before seizing the digital data. Original Digital Evidence should be collected and all the entries in Digital Evidence Collection Form should be filed up and signatures should be taken by the assessee and two witnesses. vii) The chain of custody form should be filed up, which is a key document that should be mandatorily filed up to ensure that integrity of the data cannot be questioned by any court of law. viii) In case Digital Evidence is a mobile phone, the Mobile Phone Evidence Collection Form should be filed up. ix) The Most Important, the 'Hash Value' should be recorded in the panchnama and the asses....
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....ere is nothing brought on record to allege/ suggest that Mr. Rakesh Chhajer was in lawful control or possession or occupation of such pen- drive; (c) Thirdly, Witnesses to 65B certificate are the one who signed Panchnama for premises No. 6506 to 6508, i.e., persons (drivers) based in Haryana; (d) Fourthly, contents of 65B certificate are vague inasmuch as it vaguely states that "was lawfully controlled and used by employee to store and process information...." without specifying who is the employee, who as in lawful control, etc.; Being so, the above 65B Certificate issued by Mr. Rakesh Chhajer cannot, in our respectful submission, be considered to be valid certificate in compliance with the mandatory statutory requirement of section 65B(2)/(4) of the Evidence Act. The certificate so issued is, therefore, no certificate in the eyes of law and hence, cannot be relied upon. 65B Certificate not provided for subsequent usage of seized pen-drive by Investigation Wing/ Assessing officer - JSK Server/ Pendrive and information contained therein is, therefore, not admissible as evidence 66. Pertinently, aforesaid 65B certificate is only in suppor....
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....ong with section 65B(4) were not followed while obtaining the certificate under section 65B of Evidence Act; and (iv) contended that in the present case, no evidence was provided by the revenue to establish that the data copied onto the seized pen-drive originated from the specific system attributed to the cashier. The Department argued that the Digital Evidence collection form was obtained from the assessee's premises during the search operations and that the system had been identified by the search party. Countering the same, the assessee submitted that there was no evidence in support of the claim of the Department that the same system was used by the assessee's cashier. In the aforesaid factual background, after considering the law laid down by the apex Court, the Tribunal agreed with the contention of the assessee; it was held that reliance upon inadmissible seized material or evidence without satisfaction of conditions stipulated in section 65B(2) along with section 65B(4), i.e., certificate under section 65B of the Evidence Act, about the contents of the pen-drive and the person from whose custody it was seized, is not permissible; therefore, the in....
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....antly, the same is signed by one Mr. Aditya Arora, who is stated to be Digital Forensic Examiner. There is no identification of how the said person (Mr. Aditya Arora) was present; as per the Panchnama, Mr. Aditya Arora is not the part of the team of the "Authorized Officer" or "Other officials who assisted the authorized officers" [list of persons at pg.43 of PB]. 75.2 Pertinently, 'Electronic Evidence & Examination details' signed by Mr. Aditya Arora are not signed by any of the officers who were part of the search team, and there is no rubber stamp of the officers/ Department which is there in the Panchnama; therefore, there is no authenticity of such document. Further, Mr. Aditya Arora has never been examined by AO and nor has the appellant been given any opportunity of cross examination of the said person. 75.3 Moreover, in the aforesaid Electronic Evidence & Examination details', no examination is mentioned except for backup of data. Even if it is assumed that any backup was taken (without admitting), there is no reference in the Panchnama of back-up being taken. The Panchnama rather contradicts Mr. Aditya Arora's 'Electronic Evidence & Examination d....
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....etent to understand the process followed and hence, were incompetent to sign as witness - the entire process was thus compromised; (f) 65B Certificates: have not been prepared. 79. It is respectfully submitted that violation of the Digital Evidence Investigation Manual while handling the so-called digital evidence, renders the digital evidence as not admissible as evidence and hence, cannot be relied upon at all. 80. The Madras High Court in case of Saravana Selvarathnam Retails (P.) Ltd. Vs CIT(A): W.P. Nos. 9753, 9757, 9761 & 11176 of 2023 dated 23.02.2024 held that following of Digital Evidence Investigation Manual is mandatory for the tax Department without any exemption. 81. Emphatic reliance in this regard is placed on the recent judgment of the Delhi Bench of the Tribunal in the case of Arti Garg vs. DCIT: ITA No. 3143/Del/2025 dt. 14.01.2026 wherein it was held that if while collecting and using digital evidence, the extensive provisions provided in CBDT Digital Evidence Investigation Manual are not followed then the evidence lack legal sanctity and sufficient veracity. The Tribunal noted that the CBDT Manual aims to apprise tax ....
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....7 SSC 1,and observed that in the said decision the Hon'ble Supreme Court, while explaining the mandatory nature of section 65B(4) of the Indian Evidence Act applied following two Latin maxims :- (i) impotentiaexcusatlegem; (ii) lex non cogitadimpossibilia, and thereafter held that these two maxims are the foundation with regard to admissibility of electronic evidences and though section 65B(4) of the Evidence Act is mandatory, yet, it would all depend on the facts of each case, how the same could be said to have been duly complied with. Accordingly, in the said case of Suresh Kumar (supra), the Hon'ble Supreme Court considered the 'substantial compliance' of section 138C(4) to be sufficient and, therefore, we can firmly conclude that if, in the case of the Income-tax Act, 1961, there are no specific provisions with regard to admissibility of electronic evidences, then, the Manual issued by the Board would substantially hold the ground and the tax authorities are supposed to ensure that there is at least substantial compliance of the Manual to make the electronic evidence relevant and admissible under the law and thus pass judicial scrutiny in appellate jurisdictions. Therefore, con....
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.... ............. 16. We can further see that there are various provision under the Income Tax Act 1961 akin to provision under the Evidence Act like section 131 of the Act giving powers regarding discovery, production of evidence, section 132(4A) presumption as to books of account and documents, section 132A of the Act giving power to requisition books of account, section 136 of the Act specifically mentioning that proceedings before income-tax authorities to be judicial proceedings, provision of section 250(4) of the Act and Rule 46A of admitting additional evidences, Section 278E of the Act giving rise to presumption as to culpable mental state, section 292C of the Act giving rise to presumption as to assets, books of account definitely recognize some of the basic principles of Evidence Act by specific adoptions in the Income-tax Act, 1961. The presumption attached to statements recorded u/s. 143(4) of the Act. Then, though affidavits are not included in the definition of 'evidence' in section 3 of the Evidence Act however, the same are frequently called for and relied in the assessment proceedings. 17. Thus we are of considered view that certain R....
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....is fortified by the Hon'ble Supreme Court decision in Addl. Director General Adjudication v. Suresh Kumar and Co. Impex Pvt. Ltd. [Civil Appeal Nos.11339-11342 of 2018, dated 20-8-2025] where recently, the Hon'ble Supreme Court has dealt with the case of relevancy and admissibility of electronic evidences in the proceedings under the Customs Act, 1962 wherein the provisions of section 138C of the Customs Act, 1962 regarding admissibility of electronic evidences has been accepted subject to availability of certificate to be obtained in accordance with the sub-section (4) of section 138C of this Act of 1962. The Hon'ble Supreme Court observed that section 65B(4) of Indian Evidence Act is parimateria to section 138C(4) of the Act of 1962 and, further relied the decision of the Hon'ble Supreme Court in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal (2020) 7 SSC 1,and observed that in the said decision the Hon'ble Supreme Court, while explaining the mandatory nature of section 65B(4) of the Indian Evidence Act applied following two Latin maxims :-(i) impotentiaexcusatlegem; (ii) lex non cogitadimpossibilia, and thereafter held that these two maxims are the fo....
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....wn to be signed by the assessee mentioning the name Vimal, while assessee is Balar Marketing and authorized official Keshaw Kishore Anand, Dy. Director of Income-tax (Inv.), Unit-2(4), Delhi along with signature of the engineer/examiner. Two witnesses are also there, however, their signatures are dated 24th March, 2021. The list of inventory is shown to be dated 24.03.2021. The so-called certificate u/s. 65B are also dated 24.03.2021. In continuity to the above, as the Panchnama document are examined they are shown to be witnessed on 25.03.2021. 33. At the same time, the statement of Shri Vimal Kumar Jain was recorded u/s. 132(4) of the Act and the same is shown to be recorded on 23.03.2021 at 4 PM during the search. This statement is shown to be recorded by Shri Keshaw Kishore Anand. The statement shows that after putting 14 questions on 23.03.2021 at 8.30 PM, recording of statement was closed. This statement shows that Mr. Vimal Kumar Jain was not confronted with any of the digital devices seized or any evidence extracted at time of search. It can be observed that thereafter on 24.03.2021 the statement was continued further starting at 4.30 PM and was recorded by Sh....
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....ution initiated the process of collection of digital evidences form two phones in accordance with mandate of Manual and general principles of law, regulating collection of electronic evidence and to maintain its sanctity throughout, till it is ultimately relied in assessment and if needed at stage of judicial scrutiny. However, the attempt was either half hearted, if not to be presumed to be thwarted half way to prejudice of assessee. It is established that that tax authorities applied some provisions and instructions of the Manual, at time of search but, failed to maintain the records as per the instructions in Manual for Panchnama, mobile device collection form, certificate u/s. 65B of the Evidence Act and most importantly the chain of custody form. 39. More particularly, and at the cost of repetition, with regard to the certificate u/s. 65B, it can be observed that the same is merely a certificate of the expert about due process adopted while data was backed up from the impugned devices to the devices in which the data was cloned. However, subsequently, as to how the data was retrieved and relevant incriminating evidences were extracted from the devices by whom, have no....
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.... law are made. The due course here certainly is the instructions in Manual. Even if it is claimed by ld. DR to be not binding the aforesaid discussion has firmly established that the assessment though being a quasi judicial exercise had to be on the basis of evidences whose veracity can be tested in subsequent proceedings, like appeal or judicial review. This gives us an opportunity to hold that even if the case of revenue is accepted that strict principles or rules of Evidence Act are not applicable or there is no necessity of certificate u/s. 65B, still in order to give and add credibility to the conclusions drawn on the digital evidences the AO should ensure that there is substantive compliances of the Manual and not just by way of eye wash. 41. Thus we have no hesitation to hold that assessment has been framed on the basis of material, allegedly retrieved from digital devices, but which are not admissible under law so as to be relied for drawing conclusions, of fact in dispute, being proved on scales of probability even. The corresponding grounds by which assesse challenges the assessment order being framed on inadmissible electronic evidences thus deserves to be susta....
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....ful. Therefore, JSK Server is not the credible evidence to be relied upon for making any addition in the hands of the assessee. However, the majority of additions were made on the basis of JSK Server. Further, the lower authorities have failed to locate and connect any entry with the assessee. He therefore, prayed that in absence of any corroboration of the entries found noted in the JSK Sever, no addition could be made in the hands of the assessee. 23. It is further stated by ld. AR that special auditor also in its report observed that JSK Server is not the reliable document. In the last, the Ld. AR submits that an admission was obtained from the assessee for additional income of Rs. 100.00 crores based on the data recorded in the JSK server found in the so called Pen-drive. The said admission was later explained by the assessee in terms of the letter written on 24.08.2022 wherein the assessee had categorically stated that true income will be worked out at the time of filing return of income thus, it cannot be said that the figures noted in the JSK Server are true and correct. The ld. AR has summerised the entire arguments as under: Conclusions/ Summary: For t....
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....sessee in this regard and placed haeavy reliance on the observations made by the Ld. CIT(A). It is therefore, submitted that the entire additions have rightly been made and requested for the confirmation of the same. 26. We have carefully considered the rival submissions and perused the material available on records. The primary dispute in the present appeal, according to the assessee was that whether the data copied from the "HP 32GB Pen-drive" stated to have been found at the business premises of the Assessee in the course of search carried out, its authenticity and reliability as the assessee has vehemently disputed the existence of such Pen drive. It is pertinent to note that majority of the additions were made solely on the basis of the data available in the pen drive, which according to the AO was tally data referred to as JSK Server in the assessment order and therefore this issue is the core center of entire controversy/ dispute between the Assessee and the Revenue. Accordingly we first proceed to consider and decide this dispute, which would be relevant for the adjudication of other grounds of appeal specifically raised by the Assessee challenging various additions made....
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....mal have to be considered after ignoring the decimal. Our attention is further drawn to the fact that in the statements recorded during the search, assessee voluntarily offered a sum of Rs. 100 crores and therefore, authenticity and reliability of the data seized in Pen drive cannot be questioned. 29. It is in this background, we first proceed to decide the issue of credibility and reliability of the pen-drive/ JSK server and data contained therein which, as stated above, which is the core controversy and very basis of the entire additions made by the AO. 30. On perusal of the records, it is observed that search in the case of the Assessee was commenced on 28.05.2022 at the business premises of Assessee bearing No. IX/6506, IX/6507 and IX/6508, Subhash Mohalla, Nehru Gali, Gandhi Nagar, Delhi (referred as 'Premises-1'). At premises-1, one Mr. Rakesh Chajjer was present to whom the warrant of authorization was shown and search was commenced at about 1.05 P.M. This fact is further confirmed from the perusal of panchnama prepared and placed at page 43 onwards of the PB. The search team enquired about Mr. Sandeep Dugar who was apparently not available when the search had commence....
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....it was seized vide panchanam prepared for other Premises 1. i.e. at at IX/6506, IX/6507 and IX/6508 and not at premises No.2 i.e. No. IX/6504 that too on 31.06.2022. 33. It is important to note here that as per the panchnama prepared at Premises-1 on 01.05.20222, the pen-drive is included in the list at Sr.No.60 where, it referred as a folder existing in one SS Drive, and not as a device itself thus it is not known whether such Pen drive was ever seized or not. Further as stated above, as per the running panchnama 2, the Pen drive was found on 01.06.2022 which is part of panchnama prepared at Premises-1 i.e. IX/6506, IX/6507 and IX/6508. It is further noticed that the critical digital evidence, including the pen-drive which was found on 01.06.2022, were taken out of the search premises to the control room. The relevant para of Running Panchnama 2 indicating such movement is reproduced as under: " Running Panchnama 2 ..................... ..................... On date 01.06.2022, during the course of search proceedings, some digital and physical evidences annexed as Annexure A1 to A62 are found. Considering the sensitivity of the case the same is being taken ....
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.... certificate was issued on 01.06.2022, copy placed at page 579 of PB. The same is reproduced as below: 36. Except the aforesaid 65B certificate, no other 65B certificate was prepared for the seizure of the pen-drive which too is full of discrepancies / defects. Firstly, the certificate is issued by Mr. Rakesh Chajjer, certifying the contents of the same though as per the search team, the pen-drive was found from the possession and control of Mr. Sandeep Dugar and not from Sh. Rakesh Chajjer. In fact, no query with respect to the pen-drive was ever put to Mr. Rakesh Chajjer, whose statements are placed at page 396 of PB. Secondly, the certificate vaguely states that the pen-drive was "lawfully controlled and used by the employee", without even stating the name of the so-called employee who was in lawful control of the pen-drive and used the same for storing and processing the information. Thirdly, the two witnesses mentioned in the above certificate are the same witnesses whose names are in the panchnama in respect of Premises-1, wherein their complete name and addresses are recorded. As per the same, both panchas are resident of Karnal, Haryana and the search was conducted at th....
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....ind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities; (c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and (d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities. ............................. (4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say, -- (a) identifying the electronic record containing the statement and describing the manner in which it was produced; (b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electron....
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....[2014] 10 SCC 473 has dealt with the case of relevancy and admissibility of electronic evidences and mandatory compliance of section 65B(4) of Indian Evidence Act. The relevance of 65B certificate is also elaborated by the Apex Court in Arjun Pandit Rao Khotkar v. Kailash Kushanrao Gorantyal [2020] 7 SCC 1. 40. In Polisetty Somasundaram vs. DCIT: 226 TTJ 1, the Vishakhapatnam Bench of Tribunal held that where pursuant to a search operation, carried out at premises of assessee, a pen drive was seized from cashier of assessee, since investigation agency only obtained a certificate about details of pen drive and person from whose custody it was seized and except those details nothing was there in certificate and also said certificate was not completely filled up by revenue authorities, thus it could be said that four conditions stipulated in section 65B(2) i.e., (a) to (d) along with section 65B(4) of Indian Evidence Act, 1872 were not followed while obtaining certificate and therefore, said certificate was not a valid certificate in eyes of law and thus such digital material could not be relied in assessment. 41. Having regard to the importance attached to the requirements of t....
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....ectronic evidence, at a minimum, requires that; i. No data has been added, changed, deleted from the seized information evidence. ii. The seized /information evidence was duplicated exactly and completely. iii. A reliable and validated duplication process was used. iv. All media were secure and safe. ............ 2.9.3 For Authentication and Seizure of Evidence -Mathematical Hashing: Mathematical hashing is equivalent to one-way encryption. Every digital evidence at the lowest level translates into a big numerical number. When the digital device or data is encrypted using a hashing algorithm, it results in a new number of a fixed length called the 22 dark message digest. The hashing algorithm has some unique characteristics, which are as follows: .................. 6.2- Seizure / Impounding of the Digital Evidences under Search/Survey If the on-site technical help is not available, the officer in charge should plan for seizure of the digital evidence so that the same can be sent to the forensic laboratory for analysis in later on stage. Proper Seizure memo and Seizure Proceedings must be drawn....
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.... on when all it was opened and so on. This is very important since the assessee may level charges of tampering and fabrication of evidence and it would be difficult to prove the integrity of the evidence, if the chain of custody is not maintained. It is advisable to maintain a Chain of Custody form along with Digital Evidence Collection Form. A Model Chain of Custody form is enclosed below: ............" 42. On perusal of the above mentioned extracts of the manual, the first and foremost requirement is the importance of the seizure memo which should clearly and categorically and in no ambiguous terms records the exact details of digital evidence found during the course of search. The CBDT manual clearly states that the seizure memo must clearly reflect one person from the technical side, one from the assessee's side and two independent witnesses who were part of the search and seizure proceedings, the unique device number should be mentioned, chain of custody and digital evidence collection forms must be prepared and preserved, the digital evidence must be photographed, the panchas in whose presence the seizure memo is recorded should be the person having some knowledge....
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....ity. It was held that in absence of reliable and admissible evidence, additions were not unsustainable. The relevant observations of the Bench are extracted hereunder: "13. To deal with the issue further as to how far the Evidence Act is applicable or not to the assessment proceedings under the Act, in more comprehensive manner, we take note of certain provisions of the Income Tax Act 1961, which indicate as to how, though not strictly applicable, the jurisprudential concepts of law of evidence, as enshrined under the Evidence Act, find their place, in proceedings under the Income Tax Act 1961.Thereby establishing that in assessment proceedings also these jurisprudential concepts of law of evidence are relevant and need to be followed. 13.1 In this regard, the foremost thing to consider is that section 3 of the Evidence Act describes 'evidence' with inclusive definition by bringing in scope all statements as oral evidences and all documents including electronic records as documentary evidences. The Income Tax Act 1961, however, independently does not define 'evidence', relevant and admissible for assessment proceedings. So the concept of evidence a....
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....ich he has received from assessee or gathered in enquiry, make an assessment. Very apparently, like the use of the word 'matter before it' in section 3 of the Evidence Act, sub-section (3) of section 143 of the Act also uses the phrase 'relevant material.' 13.8 Thus, to our mind, when it is said the provisions of Evidence Act are not applicable on the quasi judicial authority, what is meant is that the strict rules of proof of a fact in a particular manner only is not applicable. As for instance a Will, as per section 68 of the Evidence Act being a document required to be attested can be used in evidence only when one of the attesting witnesses at least has been examined for the purpose of proving its execution. However, in quasi judicial proceedings, like assessment, such strict mode of proof of Will is not necessary. That does not dispense with applicability of rules of fairness, prudence and natural justice which are foundation of evidence law. 13.9 As for our discussion with regard to this aspect we may mention here that under the Assessment proceedings the admission may be in the form of statements recorded at time of search and seizure under ....
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....ndatory nature of section 65B(4) of the Indian Evidence Act applied following two Latin maxims :-(i) impotentia excusat legem; (ii) lex non cogitadimpossibilia, and thereafter held that these two maxims are the foundation with regard to admissibility of electronic evidences and though section 65B(4) of the Evidence Act is mandatory, yet, it would all depend on the facts of each case, how the same could be said to have been duly complied with. 20. Accordingly, in the said case of Suresh Kumar (supra), the Hon'ble Supreme Court considered the 'substantial compliance' of section 138C(4) to be sufficient and, therefore, we can firmly conclude that if, in the case of the Income tax Act, 1961, there are no specific provisions with regard to admissibility of electronic evidences, then, the Manual issued by the Board would substantially hold the ground and the tax authorities are suppose to ensure that there is at least substantial compliance of the Manual to make the electronic evidence relevant and admissible under the law and thus pass judicial scrutiny in appellate jurisdictions. ............ 25. We thus come to a stage where it becomes relevant t....
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....nstructions in Manual for Panchnama, mobile device collection form, certificate u/s. 65B of the Evidence Act and most importantly the chain of custody form. 39. More particularly, and at the cost of repetition, with regard to the certificate u/s. 65B, it can be observed that the same is merely a certificate of the expert about due process adopted while data was backed up from the impugned devices to the devices in which the data was cloned. However, subsequently, as to how the data was retrieved and relevant incriminating evidences were extracted from the devices by whom, have not been certified. In fact that required maintaining correct record of chain of custody, so as to show that when the data was retrieved or any extract taken during assessment proceedings the same were corroborated by hash values as recorded at time of making the working copy. The purpose of section 65B of Evidence Act is to provide a certificate to the computer output stating identity of the electronic record describing the manner in which the output electronic record was produced. The certificate should indicate particulars of the electronic device involved, like in the case in hand the two phones ....
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....e conclusions drawn on the digital evidences the AO should ensure that there is substantive compliances of the Manual and not just by way of eye wash. 41. Thus we have no hesitation to hold that assessment has been framed on the basis of material, allegedly retrieved from digital devices, but which are not admissible under law so as to be relied for drawing conclusions, of fact in dispute, being proved on scales of probability even. The corresponding grounds by which assessee challenges the assessment order being framed on inadmissible electronic evidences thus deserves to be sustained." 46. Further the coordinate benches of Delhi Tribunal in the cases of LSL Tools (P) Ltd v. ACIT in ITA No.5644/DEL/2024 vide order dated 30.10.2025 and in the case of Arti Garg vs. DCIT in ITA No. 3143/Del/2025 vide order dt. 14.01.2026 has held in favour of adherence to CBDT Manual and section 65B of Evidence Act and further held that the failure to comply renders the digital evidences inadmissible to make any addition. 47. Thus by respectfully following the settled legal position as stated above to the facts of the present case, in respect of the pen-drive, it is observed that only ....
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....ticed by us, is that along-with 65B certificate, Electronic Evidence and Examination Details are available on record as placed in the paper book. We deem it appropriate to reproduce the content of the said form and extract of source disk details annexed as under: 50. On perusal of the aforesaid, it is noticed that the said document has been signed by one Mr. Aditya Arora whose designation is mentioned as Digital Evidence Examiner and is also signed by Mr. Rakesh Chajjer and the same two witnesses who are residents of Karnal, Haryana. From the perusal of the panchnama it is observed that it nowhere records the presence of Mr. Aditya Arora as part of search team at any of the premises searched. Further, the most important fact is that the above details also has the reference of Sr. No. of the source disk, which in the present case is HP 32GB Pen-drive, and such details are basically mentioned for the purpose of identification of the digital evidence. It is rather surprising to note that the Sr. No. of the pen-drive is mentioned as "12345678123456781234567812345678" (fifth items from top of the title "Source Disk"), which is apparently and clearly a fictional number assigned to the....
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.... Act, 2009 made the following observations in respect of panchas being the driver of Assistant Controller: "21. We have already held that Sections 100(4) and 100(5) Cr.P.C are applicable to the present case. Accordingly, the presence of two respectable independent witnesses from the locality was mandatory. It is significant to note that such witnesses may also be drawn from a different locality, provided they meet the requirements of independence and respectability. In the present case, however, the driver of the Assistant Controller - being a party to the inspection -acted as a witness, which is in violation of law. Although the respondents claimed that no one from the locality was forthcoming, there is nothing on record to indicate who was approached, when such request was made, whether a written request was given, and what further action was taken. The seizure mahazar also fails to support the respondents' case, as it records none of the claims now relied upon in their defence. It is settled law that where the initial proceedings are vitiated, all subsequent proceedings are unsustainable. Any act in violation of law cannot be brushed aside on the ground that no prejudic....
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....anual, the search team has to photograph the digital evidence however the same was not complied with. 6. No safeguards as contained in the CBDT Manual have been found to be followed. 55. In the entirety of such circumstances, we are of the considered opinion that the pen-drive purportedly found from the search premises completely lost its evidentiary value and cannot be admitted or relied upon as the primary evidence/ material for the purpose of making any addition against the Assessee. Thus any addition made solely on the basis of the said pen-drive cannot be sustained and is hereby directed to be deleted. 56. It is further observed that the assessing officer has not referred to even a single transaction which may be claimed to be contained in the pen-drive/ JSK Server which may have any relation/ link with the Assessee. Rather the comparison/ link is tried to be established in the assessment order between the transaction in the pen drive and the bank account of a third party and not of the Assessee. There is neither any corroboration of any entry in the JSK Server with the regular books of accounts maintained by the Assessee and transactions in Assessee's regular b....
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....ied against the Assessee, more particularly when serious doubts were raised about the authenticity, credibility and reliability of the pen-drive itself as discussed in detail herein above. Moreover, the presumption u/s. 292C is rebuttable and therefore, simply on the basis of application of said rebuttable presumption, adverse inference cannot be drawn against the assessee. It is also a matter of fact that in para 5 of the assessment order, AO himself has raised serious doubts about the reliability of the contents of the very same pen-drive/ JSK Server. The AO observed that JSK Server was not based on sound and establish accounting principles, the data/ transactions contained therein does not represents the true states of affairs, the nature of accounts could not be identified, there are over statement of figures, the nature/ narration of the transactions were not specified in the ledgers, the nature of the accounts could not be determined etc. Similar observations were recorded in the report of the special auditor wherein, the special auditor has specifically commented upon various dummy/ adjustments entries being made in the JSK Server/ Pen-drive and also the non-reliability of t....
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....wers as highlighted by the Ld. AR, which is unlikely where statements are taken in fair and transparent manner. 60. Now coming to the issue of admission of additional income of Rs. 100 crores obtained from the Assessee. It is noted that the so-called offer was made by the Assessee vide letter dated 24.08.2022 filed before Investigation Wing and reference to the said offer was later made in his statement of the Assessee recorded on 19.10.2022. The said letter is placed at pages 235 & 236 of the PB. Few extracts of statement dated 19.10.2022 of the Assessee: 61. On perusal of the aforesaid, it is observed that there is reference of the additional income of Rs. 100 crores for the first time in the letter dated 24.08.2022 which is after the conclusion of search on 18.07.2022 (as per last panchnama). Further in the said letter it is clearly stated by the assessee that he had no knowledge about the contents of the pen-drive and had written this letter in view of some differences of income appearing between some raw data and that recorded in the books of accounts as informed to him by his accounts team. The letter clearly shows that the offer made was tentative in nature and more fo....
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.... in the statement recorded u/s. 132(4) is not sufficient to make any addition in the hands of the assessee. The relevant extracts of the decision are extracted hereunder: "14. It is a settled proposition of law that mere statement u/s. 132(4) or u/s. 131 is not sufficient to make an addition. A statement made must be relatable to incriminating material found during the search or the statement must be made relatable to some material by subsequent inquiry/investigations. 15. Hon'ble Supreme Court in the case of Pullangode Rubbers Produces CO Ltd (supra) has observed as under: ............. 16. The crux of the aforesaid decision is that a declaration or disclosure made by the person is binding unless it is rebutted by the person by furnishing valid evidences. In the present case, assessee admitted certain income in the statements recorded u/s. 132(4) of the Act which was later retracted and reasons for such retraction was explained by making detailed submission with the help of explanation of seized material which does not indicate any incriminating material. Thus, the appellant retracted the statement recorded u/s. 132(4) of the Act showing the....
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....the Assessee by not disclosing the same in the return of income. In such circumstances, the said offer cannot be made the basis of justifying any addition being made in the hands of the Assessee. 67. In view of above discussion and after considering the entirety of the facts of the case, we are of the considered view that heavy reliance placed by the AO on the pen-drive/ JSK Server for making additions is not at all sustainable in law. There is indeed serious doubt about the credibility, authenticity and reliability of the contents of the pen-drive more so, in the absence of proper 65B certificate, compliance of CBDT Digital Manual and apparent contradictions and grave procedural irregularities during the course of search. There is no independent material brought on record to show that Assessee had entered into any transaction outside the regular books of account as is being sought to be projected in the assessment order by relying upon the pen drive. The allegations that the assessee was dealing in cash and heavy cash was received and paid while acting as a broker/ agent is not at all supported by any reliable material/ evidence found as a result of search or brought on record ....
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.... 292C of the Act. As a sequitur, addition made on the basis of any transactions/ data found in the said pen-drive/ JSK Server is per-se unsustainable. For the said reason alone, the addition made is bad in law and deserves to be deleted at the threshold. 142. Further, since the relevant data does not belong to the appellant, the appellant is not and cannot be expected to explain the contents thereof. It is one of the fundamental principles of law that law cannot compel a person to do the impossible i.e. lex non cogit ad impossibilia. 143. Without prejudice to the aforesaid, it is submitted as under: Re (b): Addition in absence of corroborative evidences- invalid 144. On perusal of the assessment order and the special audit report, based on the data in the JSK server, primarily the following income allegedly earned in cash by the assessee as a commission agent is added as unaccounted income of the assessee: • Commission charged from vendors/ customers on account of assistance in finding fabrics, garments and other products captured in following ledger accounts: - 'Margin A' and 'Margin' Account [Commission set at default 3% c....
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....be nothing but a failed attempt to somehow made additions of fictional amount. - Pertinently, even as per Special Auditor and AO, there are numerous dummy accounts and the manner in which the accounts are maintained, it is not possible to arrive at any taxable income. - One 'cash in hand' ledger in the so-called JSK Server is relied upon by the assessing authority and also the special auditor. In this regard, it submitted that - (i) the same is not credible as even the balance in the said account did not corroborate with cash in hand found during the search; (ii) there are multiple nature of entries in the said account and not merely cash which doubts the very nature of the said account; (iii) that apart, on perusal of the said account provided to the appellant, it appears that the term 'cash' has loosely been used even for banking or other book entries, and may not be related to cash/ currency exchange transaction. There is no corroboration, much less concrete, of cash income earned by the appellant. - No evidence of cash receipt or payment such as any cash parchi/ receipt, rukka etc. was found during the course of search much less any document signed by....
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....egard, it is submitted that such an attempt to corroborate is futile, failed and unsustainable. In this regard, the appellant seals to highlight certain apparent inconsistencies hereunder: • Corroboration is sought to be made inter-se between documents found in the JSK Server, authenticity of which is highly doubtful; • There is no corroboration whatsoever of any transaction in the JSK Server with the books of the appellant- absence of such corroboration or any linkage with movement of cash, the authenticity and creditability transactions in JSK Server cannot be proved- the same is thus not more than a dumb data for all purposes; • Be that as it may, even the documents referred for inter-se corroboration is unreliable inasmuch as: • At page 33 (pg 2541 of PB) of Special Audit Report, one voucher dated 13.03.2020 is given and on page 34, corresponding ledger extract is mentioned. It would be relevant to note that the name, description, quantity etc. in the two documents do not match. • At page 36 (pg 2544 of PB) of Special Audit Report, some loose paper is extracted wherein amount is mentioned as Rs. 1,66,557 in respec....
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....juncture, it is most important to juxtapose the balances in the trial balance as per so-called JSK Server and the net income computed by the Special Auditor and AO: Balances of Income and Expenditure, as per Trial Balance in JSK Server is extracted hereunder (refer pages 61-62 of Special Audit Report (pg 2569-2570 of PB): • The computation/ quantification of income and expense as done by Special Auditor and adopted by the AO is snipped as under: Income at page 93-94 of Special Audit Report (pg 2601-2602 of PB) snipped: Sr. No. Account Head Nature of Transactions Amount (in Crores) [Computed by Auditee] Amount (in Crores) [Recalculated] Remarks 1 Margin A Credit Side of Margin A 57.96 57.96 Less: Opening Balance Adjustment 14.18 14.18 Effective Figure 43.78 43.78 Less: Commission Reversed on Sales Return 0.95 0.09 Refer Note - 1 Sub - Total (A) 42.83 43.69 2 Margin Woolen LDH Credit Side of Margin Woolen LDH 3.02 3.02 ....
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.... 0.47 Separate consideration has been given in TOR - 4. 740008 OSIA FAB (Debit Side) 4.14 740010 OSIA ENT (Debit Side) 2.86 910022 DD Comm (Debit Side) 2.09 TOTAL 22.76 On perusal of the aforesaid summary as well as detailed trail balance extracted by the special auditor as per JSK Server and the computation by the special auditor as adopted by the AO, it is clear as under: • • From perusal of the above analysed/ summary trail balance stated to be found in JSK Server, it is evident that the gross debits in the Revenue (Rs. 171,75,03,383) are much more than the credits (Rs.166,13,81,578); thus, in fact, there appears to be a net loss of (Rs. 5,61,21,805). While computing the revenues, the special auditor has, however, computed revenues/ income by only considering the credit balance (and making some adjustments)- the debit balance has been ignored for the purposes of revenue. • While on the other hand and in direct contradiction to the approach as per while revenues are computed, for most of the expenses, the net balance (debit less credit) has been considered. • Furthermore, ....
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....e that Revenue can cherry pick the items suitable to it to make a case adverse to the appellant; no part of seized material can be ignored; the debits/ expenditure recorded in the serized material must also be allowed in computing the alleged undisclosed income [refer CIT v. Piara Singh [1980] 124 ITR 40 (SC)] 157. Reliance in this regard is also placed on the decision of the jurisdictional Delhi High Court in CIT vs. Indeo Airways (P) Ltd.: 349 ITR 85 (Del) wherein it has been held that where receipts recorded in searched documents are believed to be income, entries of expenditure recorded therein are also to be believed without asking for more evidence for such expenditure. The relevant observations of the Court are extracted hereunder: "If the revenue was of the opinion that the expenses claimed towards "green boxes" was inadmissible or was excessive, or not genuine, in order to reject the entries in the books of account and other documents of the assessee, seized during the search, it ought to have relied on other materials. Having once drawn the presumption that the contents of the documents (of the assessee) taken into possession during the search were true,....
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.... expenditure part of such expenses. Hon'ble Delhi High Court in 349 ITR 85 (del) in CIT versus Indeo Airways private limited on identical question about the allowability of the claim of the assessee of expenditure found during the course of search in seized documents but not recorded in the books of accounts where the income is also recorded which has been taxed by the revenue, has held as under ........... 23. Therefore, in case of the documents found during the course of search in possession of the assessee the presumption lies for all the purposes in any proceedings under this act that contents of such books of accounts and documents are true. The law nowhere provides that such presumption is only available to the revenue. It also applies equally in favour of the assessee also. If any party either revenue or the assessee, would like to state otherwise, then they have to prove it with more credible and strong evidences to prove contrary. It is not an inviolable rule applicable to all situations and to all cases, that every seized document should be corroborated before any addition can be made based on it. If calculations and computations have been made in the se....
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....n [2022] 2 SCC 25 and Premalata @ Sunita v. Naseeb Bee: Civil Appeal Nos. 2055-2056 of 2022, dated on 23-3-2022. 165. It is emphatically reiterated that as per the summary of the JSK Server prepared by Special Auditor and relied upon by AO, the following position emerges: (a) Revenue - (Rs. 5,61,21,805)- negative (b) Expenses - (Rs.2,07,59,485)- negative therefore, there is no taxable amount even as per JSK Server. 166. For the aforesaid reason, once the debits as found in the so-called JSK Server are considered, no additional income can be assessed in the hands of the appellant, and for this reason too the impugned addition is liable to be deleted in toto. Re (d): In any case, incorrect quantification of income- excess addition made by the AO 167. Further without prejudice, from the perusal of data in JSK Server as shown to the appellant, it appear that even the quantification of income of alleged unaccounted business income of Rs. 41.25 crores is, even otherwise, wrong. 168. The total revenue computed by AO is as under: No. (Rs. in crores) As per AO A. Margin A ....
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.... the special auditor in the special audit report given pursuant to directions issued under section 142(2A) of the IT Act. On perusal of the special audit report, placed at 2518 to 2812, it is noted that the auditor has given its analysis about the contents of the pen-drive in Part-B titled as "Segregation of transactions in accounts of JSK Server as income, expenditure, asset, liability and dummy/ adjustment entries". In the said part, the special auditor has initially concluded that the appellant to be acting as a commission agent and acted as an intermediary between the seller and buyer for which it was earning commission on the gross value of the transactions executed. Thereafter, the special auditor has taken note of the following summary of transaction: Trial Balance Heads Debit (In Rs. ) Credit (In Rs. ) Closing Balance (In Rs. ) Asset 4576,62,33,535 4320,91,59,411 255,70,74,124 Liability 1978,71,63,659 2237,96,00,103 -259,24,36,444 Revenue 171,75,03,383 166,13,81,578 5,61,21,805 Expenditure 32,72,46,865 34,80,06,350 -2,07,59,485 Total 6759,81,47,442 6759,81,47,442 73. The special auditor has th....
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....re the debit balances as appearing in the trial balance/ summary accounts relied upon and picked up the credit balances solely for making addition. 76. It is settled law that the paper/ material should be considered in its entirety and not in a piecemeal manner. In the present case, it is observed that that the AO, while relying upon the findings/ observations of the special auditor, considered only credit balances, and ignored the debit balances in the very same account. We further noticed that the special auditor has given various instances of dummy accounts being maintained in the so-called called JSK Server. He has given his own analysis of first classifying certain accounts as dummy accounts and then observing that the dummy accounts need to be ignored. If the transactions in the Pen-drive/ JSK Server were reliable and authentic and in fact have to be relied upon for making any addition then there ought to be some explanation about the so-called dummy accounts and what exactly is meant by the dummy accounts and why such accounts have to be excluded. The very purpose of the special audit would have been to identify such aspects, whereas the auditor himself appears to be clue....
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....pellant 174. It is respectfully reiterated that the appellant has demonstrated that the existence of so called pen-drive/ JSK Server is under doubt; there are fundamental fallacies as far as the authenticity, reliability and veracity of the so-called pen-drive/ JSK Server is concerned; in any case, it cannot be alleged that the JSK Server/ pen drive belong to the appellant and hence there cannot be any presumption against the appellant in terms of section 292C of the Act. As a sequitur, addition made on the basis of any transactions/ data found in the said pen-drive/ JSK Server is per-se unsustainable. For the said reason alone, the addition made is bad in law and deserves to be deleted at the threshold. 175. Further, since the relevant data does not belong to the appellant, the appellant is not and cannot be expected to explain the contents thereof. It is one of the fundamental principles of law that law cannot compel a person to do the impossible i.e. lex non cogit ad impossibilia. 176. Without prejudice to the aforesaid, it is submitted as under: Re (b): Entries recorded in Neel Ratan Sarkar account only notional in nature and in any case unco....
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....n credit and debit adjustment entries) which makes the balance of the account as Nil. Thus, the entry is clearly an adjustment or balancing entry in the so-called parallel books and cannot be given color of any explained cash credit as alleged by the assessing officer and the special auditor. (iii) It is alleged that the corresponding debit of the aforesaid entry of Rs. 6,90,589.29 is reflected in the 'cash in hand' account. In this regard, it is submitted that from the analysis of the cash in hand account in the JSK Server, the same appears to have multiple notional or adjustment entries and does not probably reflect cash receipts and payments; the cash in hand ledger is also a notional account with multiple adjustment entires. The said fact is glaringly evident from the fact that cash in hand shown as per the said account was not even close to what was found during the course of search; no allegation of any unaccounted cash arising from JSK Server or any addition in that regard has been made. Had the entries in the said account been real or belonged to the appellant, the corresponding cash should have been found during the course of search on the premises of the appellan....
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....e cash profits/ income itself. 182. It is settled law that once the undisclosed income/ profits are brought to tax, no separate addition for cash credits/ unexplained cash can be made in the hands of the assessee [refer principle of telescoping, Anantharam Veerasinghaiah & Co. V. CIT: 123 ITR 457 (SC)]. 183. Reference in this regard may be made to following judgments: • CIT V. Tyaryamal Balchand: 165 ITR 453 (Raj.): "It is clear from the law discussed above, that the Income-tax Officer was within his right to tax the amount of Rs. 16,950 as income from undisclosed source, even though he had added the amount of Rs. 18,117 in addition to the profit shown by the respondent-firm in its account books. However, in the present case, the respondent was well within his rights to plead that this amount of Rs. 16,950 is covered by the intangible income assessed at Rs. 18,117 and added to the income of the firm and apart from this, since for the last preceding three years, substantial additions amounting to Rs. 32,797 have been made, the amount of Rs. 16,950 could be taken as having come out of such intangible additions. In the case reported in [1980] 12....
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.... 18/49, East Patel Nagar, have come out of professional receipts only. As these amounts have already been considered and taken by the assessee while filing the return in response to notice under section 158BC of the Act, no separate addition on account of suppressed professional receipts was called for." • • Kantilal & Bros V. ACIT: 52 ITD 412 @ 419 (Pune) "16. ..............It is a cardinal principle of law that no one should be twice harassed for the same cause. This principle is canonized in a well known legal dictum: "NEMO DEBET BIS VEXARI PRO EADEM CAUSA" The general conspectus of the main plank of Shri Sathe's argument was that the piece of paper impounded from the premises of Kant Electronics, reflected only the borrowings of the assessee. These borrowings were 80tilized by the assessee for acquiring the assets found during the search. It would be contrary to the canons of law to tax twice the same amount, i.e., borrowings and cost of assets. Borrowings were 80tilized to acquire assets. ..............Once the contention of assessee that the amount as reflected in the 'seized paper' represents borrowings o....
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....e/ JSK server and while adjudicating the grounds of appeal No. 2 and 3, we have already held that the contents of the Pen-drive/ JSK server cannot be relied upon for making any addition. Thus following the said observations, this addition has no legs to stand. That apart, However, in the larger interest, the ledger relied upon to make the addition is reproduced as under: 81. It is observed that the special auditor and AO has referred to the last transaction dated 31/12/2019 with the details "TRF OSIA ENT Accumulated From Beginning of This Year". Based on the said entry, the impugned addition has been made for multiple reasons. Firstly, even as per the special auditor, the Neel Ratan Sarkar is a dummy account. If that be so, where is the question of any addition being made on the basis of the said ledger. Secondly, the ledger relied upon by the Revenue nowhere refers to the amount being received by the appellant as cash credit, as alleged by the AO. On the other hand, the narration mentioned against the amount refers "TRF OSIA ENT Accumulated From Beginning of This Year", without any reference of cash/ receipt. Thirdly, there is no reason/ rationale given in the assessment order,....
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.... • The assessee has changed his stance on explanation regarding 'Z Account' inasmuch as it was first explained that the same relates to disclosure made by the family of the assessee under Income Disclosure Scheme, 2016 (IDS), while later the explanation was changed to that the 'Z Account' represents 'liability'. Accordingly, the assessee is trying to mislead the Department about true nature of the account. • Since Z Account is grouped under the set of accounts having account code starting with letter 'CL', the nature of Z account is also loan account. • Contention of the assessee that entries posted on 1st May represent only opening balances carried forward from prior year was incorrect as numerous regular entries are posted in JSK server on 1st May (snipped at page 49 of impugned order). • Assessee has failed to identify the party to whom 'Z Account' represents; assessee has failed to explain why it is not a loan account; assessee has failed to establish the creditworthiness of party which represents 'Z' account in reference to credit of Rs. 150 crores; assessee has failed to specify the FY to which the opening balance of Rs. 150 c....
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....t is one of the fundamental principles of law that law cannot compel a person to do the impossible i.e. lex non cogit ad impossibilia. 193. Without prejudice to the aforesaid, it is submitted as under: Re (b): 'Z Account' appears to be dome dummy account with notional/ adjustment entry and is in any case uncorroborated- thus addition not sustainable 194. The ledger of 'Z' Account for the financial year 2019-20, as incorporated @ page 45 of the reassessment order, is snipped hereunder for ready reference: 195. On perusal of the aforesaid account, it is respectfully submitted that there appears a solitary entry in the so-called 'Z Account' on 01.05.2019 of Rs. 15,000,000 (with '.'). Importantly, there is nothing in the said account which substantiates or even suggest of any actual flow of money/ amount/ cash corresponding to the said entry; in fact, there exist no corresponding entry on any date in the 'cash in hand' ledger in the so-called JSK Server corresponding to the aforesaid entry in the 'Z Account'; there is no allegation or even indication in the assessment order of the special audit report as to how could the aforesaid entry in 'Z Account....
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....carried over (para 6.17) and that the nature of Z accounts remains unjustified (para 6.18). It is also noticed that entry is a journal entry, and it is not even alleged that there is anything to indicate receipt of any money. 199. The aforesaid facts undoubtedly prove that the impugned entry in the Z Account is clearly fictional, notional or is in the nature of adjustment entry and is, in any case, not corroborated by any material or evidence of receipt of cash. The entire addition is based on assumptions, surmises and conjectures without even shoeing how the entry represents loan received and if yes, from whom and when. Being so, such addition without any material, much less corroborative evidence, is bad in law and liable to be deleted at the threshold. Legal position in this regard is detailed supra and is not repeated herein again for the sake of brevity [refer CBI v. V.C. Shukla & Ors.: (1998) 3 SCC 410]. 200. For the aforesaid reason alone, the impugned addition calls for being dropped at the threshold. Re (c): Section 68 applicable not applicable on mere book entries without actual receipt of 'sum'- since no credit/ money actually received, section....
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....ssessee to prove by cogent and proper evidence the nature and source of the money so received. 204. The Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. P. Mohankala: 291 ITR 278, while explaining the true nature and scope of section 68 of the Act, held there has to be credit of amount in the books maintained by an assessee. The pertinent observation of their Lordships is as follows: "The question is what is the true nature and scope of section 68 of the Act? When and in what circumstances would section 68 of the Act come into play? A bare reading of section 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessees offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessees in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessees of that previous year. " (emphasis supplied) 205. It will kindly be appreciated that the expression "sum" is used in section 68 of the Act....
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....e State Excise Rules to the State Government and had deposited another sum of Rs. 30,000 as a wholesale security deposit with the State Government. The question arose whether the sum of Rs. 60,000 credited to the account of Thiagarajan and treated as his capital contribution should be treated as undisclosed income of the firm. The Tribunal found that even before the commencement of the business of the firm on July 16, 1981, Thiagarajan had paid Rs. 60,000 as security deposit and licence fees with the Government which was given credit in his capital account. The Tribunal further held that it was not a case of cash credit at all and the provisions of section 68 are not attracted. The Tribunal, therefore, held that the amount of Rs. 60,000 cannot be referred to as the undisclosed income of the firm as Thiagarajan had given a statement that the said amount was given by him even before the commencement of the business of the firm for the purpose of carrying on the business. We find that the Appellate Tribunal has arrived at the conclusion that the sum of Rs. 60,000 was not the undisclosed income of the firm on the basis of the materials available on record and on the basis of t....
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....e appellant. The AO's view that the genuineness of a transaction cannot be certified till the mode of payment is established cannot be held to be a thumb rule. In the case of book entries/adjustments there is no question of mode of payment or actual receipt of money from one party to another. Book entry transfer means transfer only through the respective accounts in the books of the concerns. After the transfer the firm has shown reduced balance in the case of Pritam Goel and an increased balance in the case of Suren Goel even though these has been no physical withdrawal of Rs. 20 lacs from Sh. Pritam Goel's account. The AO's observation that the transaction is sham is thus, misconstrued. The liability of Rs. 20 lacs has been established to be genuine as the amount has been taken as a loan from Sh. Pritam Goel. In view of the observations made above, it is held that the addition of Rs. 20 lacs made u/s. 68 is totally unjustified. Accordingly the addition is deleted." 4. The Revenue is now in appeal before us against the aforesaid findings of ld. CIT(A). The ld. DR supported the findings of AO while the ld. AR on behalf of the assessee relied upon the order of the ....
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....esaid entry in the 'Z Account'; there is no allegation or even indication in the assessment order or the special audit report as to how could the aforesaid entry in 'Z Account' be related to any amount/ sum received by the appellant. Thus, in absence of any amount/ sum/ money/ cash being received/ averred, there cannot be any addition qua the said amount in the hands of the appellant under section 68 of the Act. 212. Applying the aforesaid legal position to the present case, it is reiterated that provisions of section 68 of the Act are not applicable in respect of mere book entry, not backed by any amount/ sum of money. Re (d): Addition u/s. 68 cannot be made qua opening credits/ balances - applies only in the year in which money actually received/ credited 213. Strictly without prejudice, the aforesaid, it is submitted, may also be examined/ looked at from another angle. It is trite law that section 68 of the Act applies only in the year in which the sum of money is received and credited in the accounts of the assessee and not in any other year. 214. In the present case, it is evident from the records of JSK Server that entry does not belong to ....
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....ration but merely transfer of closing balance of earlier year to be posted as opening balance of relevant year. It is relevant to note that while posting of opening balance entries as on 01.05.2019 is accepted for all other ledger accounts, in respect of Z Account, the special auditor and the assessing officer has alleged that the impugned entry is not carried forward of balance but is a regular entry, without any reason being assigned for the same. The said conduct in fact shows that the special auditor and the assessing officer are somehow desperate to make addition of the impugned entry in the books of account for the year under consideration. As regards reference made to certain regular entries made on 01.05.2019 in the JSK Server at page 41 of the impugned order, it is submitted that from the details made available it is noticed that the same is not comparable to the entry in the Z account as the said referred entries are of "RC" series while Z Account represent "JE" Series entry (which is same for all posting of opening balances). • It is not even alleged that there was any corresponding entry is reflected as on 01.05.2019 in the cash in hand ledger acco....
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....duced in the form of advance against breeding stallions owned by the Assessee and thus these credit entries did not relate to the year under consideration for being considered under Section 68 of the Act. Since it is a finding of fact recorded by the CIT(A) that this credit balance appearing in the accounts of the Assessee, does not pertain to the year under consideration, under these circumstances, the Assessing Officer was not justified in making the impugned addition under Section 68 of the Act and as such no fault can be found with the order of the Tribunal which has endorsed the decision of the CIT(A). The above being the position, no fault can be found with the view taken by the Tribunal. Thus, the order of the Tribunal does not give rise to a question of law, must less a substantial question of law, to fall within the limited purview of Section 260-A of the Act, which is confined to entertaining only such appeals against the order which involves a substantial question of law. Accordingly, the present appeal filed by the Revenue is, hereby, dismissed" (emphasis supplied) • CIT v. Prameshwar Bohra: 301 ITR 404 (Raj.): The assessee credit....
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.... • DCIT v. Satish Chandra Pandey: ITA No.525/lkw./2010 (Luck. ITAT) • Parsoli Corporation Ltd. v. DCIT: ITA No.1431/Mum./2010 (Mum. ITAT) 220. Applying the aforesaid well settled legal position to the undisputed facts, the only inevitable conclusion that can, in our submission, be drawn is that since no amount was credited in the purported Z Account in year under consideration, section 68 of the Act cannot be applied in the relevant year, i.e., AY 2020-21. 221. For the aforesaid reason, too, the addition of alleged sum of Rs. 150 crores made in terms of section 68 of the Act, qua Z account, being without jurisdiction, is not warranted. Re (e): Rebuttal to the allegations/ averments of the assessing officer 222. The observations/ allegations made by the assessing officer in the books of accounts are as briefly discussed and rebuttal hereunder: Allegations of the AO Remarks/ Rebuttal The assessee has changed his stance on explanation regarding 'Z Account' inasmuch as it was first explained that the same relates to disclosure made by the family of the assessee under Income Disclosure Scheme, 2016 (IDS), while later the ex....
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.... authority, there appears to be no apparent inconsistency. Perceivably, income declared under IDS by the family members of the assessee could have been recorded in the so called 'Z Account' in earlier year by some employee [clearly not on instructions of the appellant as the data does not belong to the appellant]; the same could thus be a kind of capital account in so-called JSK Server- since capital is reflected on liability side, the same was stated to be financial liability by the employee/ consultant, on analyzing data of cloned JSK Server provided. Thus, there is no inconsistency or flipping stands of the assessee as such. For the aforesaid cumulative reasons, no adverse inference can be drawn against the appellant on account of change in stance before the assessing authority on Explanation qua Z Account. There is no movement of sale/ purchase in these accounts during the year. Since Z Account is grouped under the set of accounts having account code starting with letter 'CL', the nature of Z account is also loan account; as per the submission of the assessee that Z account is a liability. The said conclusion drawn by the assessing officer is not based on any rationale....
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....dentify the party to whom 'Z' account represents; assessee has failed to explain why it is not a loan account; assessee has failed to establish the creditworthiness of party which represents 'Z' account in reference to credit of Rs. 150 crores; assessee has failed to specify the FY to which the opening balance of Rs. 150 crores, if any, relates; assessee has failed to bring on record the relevant documents such as ledger of 'Z' account for FY 2018-19, balance sheet/ trial balance for FY 2018-19 or confirmation from third party to which 'Z' account relates to establish that credit entry represented opening balance. The appellant has, at the outset, denied the ownership and contents of JSK Server and thus there cannot be any failure on part of the assessee to explain the nature of Z Account. Considering that impugned entry in Z Account is mere posting of closing balance of earlier year as opening balance for the relevant year, there is no fresh credit or receipt of sum/ money during the year under consideration. Moreover, since Z Account appears to be some dummy/ adjustment/ notional account for adjustment entries/ purposes (detailed supra); the impugned entry therein does n....
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....ies in the Pen-drive/ JSK Server is completely unreliable and cannot be made the basis for making any addition/ drawing any adverse inference. Further, the date mentioned in the above ledger is "01/05/2019", which means 01st May 2019. On the perusal of the records, it is noticed that the special auditor as well as the assessing officer have at various places stated that entry of 01.05.2019 in the JSK Server is actually the opening balance brought forwards from the preceding year. If that being so, the entry in the above "Z" account should have been considered as an opening balance and on that basis, there can be no justification for making any addition of the same in current year. Further as per the narration given in the general ledger itself the entry represents "accumulated from beginning of this year" which clearly depicts also that the amount has been accumulated in the earlier years and brought forward from earlier years and therefore, no addition could have been for the same in the year under appeal. There is no reference of any amount having been received in the current year in order to justify the same as cash credit. Lastly, the party to whom this ledger pertains has not ....
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....eliability and veracity of the so-called pen-drive/ JSK Server is concerned; in any case, it cannot be alleged that the JSK Server/ pen drive belong to the appellant and hence there cannot be any presumption against the appellant in terms of section 292C of the Act. As a sequitur, addition made on the basis of any transactions/ data found in the said pen-drive/ JSK Server is per-se unsustainable. For the said reason alone, the addition made is bad in law and deserves to be deleted at the threshold. 229. Further, since the relevant data does not belong to the appellant, the appellant is not and cannot be expected to explain the contents thereof. It is one of the fundamental principles of law that law cannot compel a person to do the impossible i.e. lex non cogit ad impossibilia. 230. Without prejudice to the aforesaid, it is submitted as under: Re (b): Entry dated 01.05.2019 recorded in each of the ledger accounts is only notional/ adjustment entry and is in any case uncorroborated- thus addition not sustainable 231. The extracts of the aforesaid ledger account of Usha Choraria, found from the so-called JSK server, are reproduced as under for read....
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....ally received, section 68 is not applicable 236. As explained in detail above, it is reiterated that section 68 of the Act applies if and only if "any sum" is found credited in the books, "source" whereof is not satisfactorily explained by the assessee, and not to any "book entry" simplicitor [refer Commissioner of Income Tax Vs. P. Mohankala: 291 ITR 278]. 237. In the present case, on perusal of extracts of the ledger accounts of various parties, (refer reproduction supra), it is respectfully submitted that all the entries dated 01.05.2019 in no manner whatsoever substantiate or even suggest of any actual flow of money/ amount/ cash corresponding to the said entries; in fact, there exist no corresponding entries in the 'cash in hand' ledger in the so-called JSK Server corresponding to the aforesaid entries in the respective accounts; there is no allegation or even indication in the assessment order of the special audit report as to how could the aforesaid entries be related to any amount/ sum received by the appellant. Thus, in absence of any amount/ sum/ money/ cash being received/ averred, there cannot be any addition qua the said amount in the hands of the app....
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....said fact is easily discernible from the following: • The "Details" column in each of the ledger account mentions as under in respect of the entry in question: "Karni Fabrics (CL) Accumulated From Beginning of This Year" • The narration "Accumulated From Beginning of This Year" invariably means opening balance of respective ledger account as at the beginning of the year and no other interpretation whatsoever of the said phrase is comprehensible. • As per the findings of the special auditor, the accounting in JSK Server is not made as per normal accounting practice; the carried forward of balance is not done on standard date 01.04.2019 but as on 01.05.2019; closing balance are posted as opening balance of respective accounts as on 01.05.2019 (explained supra). • No corresponding entry is reflected as on 01.05.2019 in the cash in hand ledger account. 245. On perusal of the aforesaid, it may be appreciated that, during the financial year 2019-20, no fresh credits were made to any of the purported ledger accounts. The impugned entry in each of the ledger accounts, as appearing on 01.05.2019, ostensibly pertains to ac....
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.... challenged the addition of Rs. 66,92,230/- made under section 69A of the Act on account of alleged cash receipt on the basis of certain WhatsApp chats. 249. Vide paras 17 to 17.10 of the impugned reassessment order, the assessing officer has made addition of Rs. 66,92,230/- under section 69A of the Act on account of the following unaccounted cash receipts allegedly on the basis of Whatsapp chats not shown in JSK Server as under: Date Amount (in Rs. ) 14.08.2019 3,89,000 27.02.2020 1,03,230 20.06.2019 50,00,000 22.11.2019 12,00,000 Total 66,92,230 250. The excerpts of such Whatsapp chats have been reproduced by the special auditor @ pages 298 to 301 of his special audit report (pg 2806 to 2809 of PB). 251. The aforesaid addition has been upheld by the CIT(A) holding that the chats are not vague or intangible entries and no plausible explanation has been furnished by the assessee; the CIT(A) also held that section 65B of the Evidence Act does not apply to assessment proceedings. 252. The aforesaid addition made by the AO and upheld by the CIT(A) deserves to be deleted for the following reasons: Submissi....
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.... or expenditure. We have gone through those WhatsApp messages, which is available in the assessment order and we find that nothing could be made out from those messages. In some messages, it was written inward on various dates and some tonnes. In some messages, it was written in outward in tonnes. From those messages, the AO given his own meaning and inferred with tonne means lakhs, inward means cash received for distribution and outward means cash distributed. The AO had also in his own meaning for some other contents recorded in WhatsApp messages and inferred cash distribution timings, shift change timings, etc., and concluded that the assessee has received so much cash and distributed so much of cash to various persons in the process. The AO neither bring on record from which person, the assessee has received cash and to whom the assessee has distributed cash. The AO neither made out a case of source for cash and destiny of cash distributed by the assessee We find that neither the AO has found any physical cash distribution to voters nor examined any of the photo identity card holding to ascertain the fact that cash was distributed to them. Further, the AO had relied upon the Wh....
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....) Specific reference is also made to the decision of the Supreme Court in the case of Common Cause (A registered Society) vs. Union of India: 394 ITR 220 (SC) wherein various hard disks, pen drives etc. recovered running raids were held to be not admissible under the Evidence Act. The relevant extracts of the judgment are as under: "22. In case of Sahara, in addition we have the adjudication by the Income Tax Settlement Commission. The order has been placed on record along with I.A.No.4. The Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc. do not comply with the requirement of the Indian Evidence Act and are not admissible evidence. It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated, non-genuine was proved....
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.... the income of an appellant. These chats, without proper validation and context, cannot be deemed reliable or sufficient for making any determination regarding the assessee's financial transactions or income. It is further imperative to note that it is well-settled law that a non-speaking or 'dumb' document, without any corroborative material or evidence, cannot be used as a basis for apprehending an escapement of income from assessment. Legal precedent underscores the importance of relying on clear, corroborated, and authenticated evidence when making any determinations regarding income assessments. Chats that do not provide a clear, verifiable link to the assessee's financial activities are legally inadequate for substantiating claims of undisclosed income or financial discrepancies. 255. Therefore, in absence of any credible, reliable and verified documents, the impugned addition made, merely relying on the electronic evidence, without any corresponding statement of the persons recorded, is wholly untenable and unjustified. 256. That apart and without prejudice, it is submitted that once the assessing officer has added unaccounted income recorded in JSK....
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.... 6, the Revenue has challenged the action of ld. CIT(A) in deleting the disallowance made on account of bad debts and other expenses made by the AO by invoking the provisions of sections 36, 37 and 40A(3) of the Act. The AO had disallowed the expenditure totalling to Rs. 22,70,12,191/- which comprise of two components - (1) bad debts of Rs. 3,41,21,191/- and (2) other expenses of Rs. 19,05,00,000/-. 100. Heard the parties and perused the material available on records. The bad debts was disallowed by holding that the conditions of section 36(2) are not satisfied while the expenses were disallowed for lack of supporting vouchers and details. The AO further held that expenses to the extent of Rs. 11,45,76,938/-are alternatively disallowable under section 40A(3) of the Act by alleging that such expenditure were in cash beyond the prescribed threshold limit. The CIT(A) has deleted the aforesaid additions and disallowances by holding that since the income recorded in the JSK server is brought to tax, expenditure recorded therein should be deductible since income and expenditure are two sides of the same coin. 101. It is a matter of fact that all the disallowances made by the AO out....
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....e. 105. We have heard both the parties and perused the material available on record. The payment was made towards SAP license fee and customization fees for already installed accounting software and thus is routine payment for annual upgradation. Such expenditure should be allowed as revenue expenditure. The Delhi High Court in the case of CIT v. Amway India Enterprises reported in 346 ITR 341 (Del.) has allowed expenditure on purchase of software applications such as MS office software, antivirus software, lotus notes etc. as revenue expenditure. Since even outright purchase of software are allowed by the Courts to be revenue in nature, the annual license fee and customization charges of SAP should in our view be allowed as revenue expenditure. Therefore, we uphold the order of Ld. CIT(A) on this issue. Accordingly, ground of appeal No. 8 raised by the Revenue is dismissed. 106. Ground of appeal No. 9 relates to disallowance to prior period expenses amounting to Rs. 60,317/- . 107. We have heard both the parties and perused the material available on record. Since there is no averment that such expenditure was claimed by the assessee as deduction in any earlier year, the s....
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....t the expenditure incurred on the repair and maintenance of rented premises is allowable expenditure. Further the AO has not disputed the usage of the subject property for the purpose of business and allowed the rent paid as business expenditure. Considering these facts, we are in agreement with the observations of ld. CIT(A) that the said expenditure were incurred wholly and exclusively for the purposes of business and under business expediency. Accordingly, the ground of appeal No. 11 of the Revenue is dismissed. 112. Ground of appeal No. 12 relates to the disallowance of Rs. 46,870/-made out of electricity expenses holding the same as personal expenditure. The ld. CIT(A) has deleted the same by holding that there is no prohibition on use of residential premises for business purposes. After hearing both the parties we concur with the findings of ld. CIT(A) that mere classification of premises as residential in the electricity bill is not conclusive for making disallowance of such expenditure particularly when it is not the case that the assessee is using the said premises situated at Ahmedabad for his residence. Moreover, the fact that assessee resides in Delhi has never been ....
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....30% of Rs. 9,25,867/-) has rightly been deleted by ld. CIT(A) and the said order is hereby confirmed. Regarding the remaining expenditure of Rs. 8,52,950/- from the table given in the assessment order, the nature of the expenditure appears to be mainly of maintenance charges. It is not seen from the records as to why tax was not deducted by the assessee on such payment particularly when the same is required to be deduction u/d 194C of the Act on maintenance charges. In absence of any plausible explanation for non deduction of tax on such payments, we restored the disallowance to the extent of Rs. 2,55,885/- (30% of Rs. 8,52,950/-). Accordingly, the ground of appeal No. 14 of the revenue is partly allowed. 118. Grounds of appeal Nos. 15 to 20 raised by the revenue are having title as "Questions of law for consideration of the Hon'ble ITAT". It appears that the revenue has misconstrued the Tribunal as the Hon'ble High Court whereas the Tribunal is the last fact-finding authority and considers both the factual and legal aspects. Further the issues raised have already been answered while deciding various grounds of appeal of the revenue and of the assessee's also. Thus no separate a....
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....o 5 of the assessee are thus allowed. 125. Grounds of appeal No.6 is with respect to the reduction of deduction claimed u/s. 80JJAA of the Act by Rs. 23,061/-. 126. Heard both the parties and perused the material available on record. The assessee has claimed deduction u/s. 80JJAA at Rs. 13,32,523/- and necessary audit report in Form 10DA was also filed along with calculation of deduction claimed. The AO has raised the dispute about the quantification of the deduction claimed and reduced the amount of deduction. Before us, no new argument was made by the Ld. AR and has reiterated the same arguments as were made before the lower authorities. Considering the entirety of facts, we find no merits in the arguments of the ld. AR for the assessee and accordingly this ground of appeal is dismissed. 127. The ground No.7 relates to the disallowance of Rs. 1,61,759/- being the amount paid in cash in excess of Rs. 10,000/- as prescribed u/s. 40A(3) of the Act. 128. Heard the both the parties at length and perused the material available on record. It was submissions of the assessee that though the payments were recorded on a single day in excess of Rs. 10,000/-, however, each individ....
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....order stood confirm by the Hon'ble Supreme Court by rejecting the SLP filed by the Revenue. Thus, we hold that no disallowance to the extent of payment of Rs. 3,53,007/- could be made u/s. 40(a)(ia) of the Act. Regarding the remaining disallowance, in absence of any plausible explanation, we uphold the disallowance to this extent. The Grounds of appeal No.8 & 9 are thus partly allowed. 131. Ground No. 10 is not pressed and thus the same is dismissed. 132. Ground No.11, 12 & 13 the assessee has challenged the validity of the assessment order passed u/s. 143(3), though the search was carried out after 01.04.2021 and, therefore, as per the assessee, the assessment should have been completed u/s. 148 of the Act. The assessee further challenged the validity of assessment order as barred by limitations and passed without DIN. 133. Before us, Shri Ashwani Kumar, ld. AR for the assessee, submits that in the instant case since the search was carried out on 28.5.2022, the search year would be FY 2022-23 relevant to Asstt. Year 2023-24 and as per Explanation 2(i) of section 148, the assessment year under appeal falls well within the period of three preceding assessment years, therefo....
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....mmissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee where the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person. 136. From the plain reading of the above explanation, it is conferred that the assessment ought to have been mad....
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....ntage Enterprises Pvt. Ltd. in ITA No. 5458/Del/2025 dt. 29.12.2025 by following the judgement of coordinate Chandigarh bench of Tribunal in the case of Homelife Buildcon (P.) Ltd. Vs. DCIT, reported in (2025) 176 taxmann.com 614 (Chandigarh - Trib.) and in case of Jamna Das Nikkamal Jain Saraf Pvt. Ltd. Vs DCIT in ITA No. 403/Chd./2025 dt. 04.11.2025 has held as under: Heard both the parties. Case files perused. 2. We notice at the outset that there arises the first and foremost issue of validity of the impugned section 143(3) assessment itself framed by the learned DCIT, Central Circle-II, Noida as per the assessee's pleadings in its appeal ITA No.5458/Del/2025. A combined perusal of both these case files indicates that the assessee/appellant is engaged in the business of manufacturing and sale of flexible packaging material etc. It has filed its return for the impugned assessment year 2022-23 on 29.10.2022, declaring loss of Rs. 64,53,88,702/-. And the same was taken for scrutiny. The learned departmental authorities thereafter carried out section 132 search action as well as section 133A survey in its case on 21.02.2023. There is further no dispute that th....
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....Explanation reads that if a search is initiated, "the Assessing Officer shall be deemed to have information suggesting escapement of income for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated." 13.1 Therefore, the only permissible statutory course was to issue notice u/s. 148 and obtain prior approval u/s. 148B before passing assessment order. 13.2 As the Assessing Officer completed the assessment under section 143(3) of the Act without issuing the notice under section 148 of the Act. Therefore, the question before us is whether the assessment proceedings initiated under section 143(3) of the Act can be validly continued and completed after a search under section 132 has been conducted in the case of the same assessee, without following the procedure prescribed under section 148 (Explanation 2) of the Act. 13.3 In our considered opinion, the answer lies in the scheme of the Act itself. Section 143 provides the general framework for regular assessment, whereas sections 147-148 (post-2021 regime) deal with reassessment based on information suggesting escapement of income, in....
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.... in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be issued after the expiry of three months from the end of the financial year in which the return is furnished. 13.6 This position finds substantial support from the ratio of various decisions of Hon'ble High Court and Hon'ble Supreme Court. The Courts unanimously held that once a search has been conducted and proceedings are triggered under section 153A, the Assessing Officer cannot continue parallel proceedings under section 143(3) or section 147 for the same assessment year, because the entire assessment for that year stands merged in the search assessment. The Courts emphasized that the existence of a special procedure for assessment consequent to a search is a complete code in itself; therefore, ordinary assessments abate and cannot coexist with the search-based assessment. 13.7 Drawing this analogy to the current regime, it is evident that when ....
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....e, we are of the considered view that the assessment for the impugned assessment year i.e. for AY 2021-22 ought to have been completed u/s. 147 of the Act after following the procedure as provided in section 148 and 148B of the Act which has not been done in the instant case. Therefore, the assessment order so passed u/s. 143(3) is invalid order and is hereby quashed. The ground of appeal No. 11 is this allowed. Since we have already allowed the legal ground of appeal taken by the assessee, the other legal grounds of appeal No. 12 & 13 become infructuous and thus not adjudicated. 140. Ground of appeal No. 14 is against the reference made for the Special Audit. This issue has already been considered and decided while adjudicating the assessee's appeal in AY 2020-21 in ITA No.4602/Del/2026 which observations are while deciding the grounds of appeal No.10, which observations are applied mutatis mutandis. 141. Grounds of Appeal No.15 and 16 are identical to the Grounds of appeal No.11 taken in AY 2021-22 by the assessee wherein ITA No. 4602/Del/2026 made detailed discussion which are mutatis mutandis applied. 142. Grounds of appeal No.17 is with respect to levy of interest u/s....
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.... of the assessee in ITA Nos. 4602/Del/2026 for AY 2020-21 and 3445/Del/2025 for AY 2021-22 are partly allowed and the appeal of the Revenue in ITA Nos. 6743/Del/2026 for AY 2020-21 is partly allowed and ITA NO. 4514/Del/2025 for AY 2021-22 is dismissed. Order pronounced in the open court on 16.09.2026. ============= Document 1 CERTIFICATE U/S 65B OF THE INDIAN EVIDENCE ACT. 1872 1, RAKESH CHHAJER (PAN: AJSPC6138M) state that I work at IX/6506, IX/6507, IX/6508, Subhash Mohalla, Nehru Gali, Gandhi Nagar, Delhi (here after referred to as Premise) and "HP 32GB PENDRIVE" (here after referred to as Electronic Evidence) was lawfully controlled and used by the employee to store and process information in regular course of activities. I further state that aforementioned electronic evidence was operating in its regular working condition and that the information contained in it is accurate to the best of my knowledge. Paketchor 1/6/22 Signature of Assesse/Party: Name of Assesse/Party: RAKESH CHHAJER wil Sen 1-6-22 W2: Jaginas 1-6-22 Document 2 Electronic Evidence & Examination details Evidence Details: HP 32GB PENDRIVE, Model: hp v220w, S/N: 20150910705000000....
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....p), Please furnish your explanation with supporting documentary evidences. Ans Sir, I'am not aware of the meaning of [SK. Our employees might have given this nomenclature to some transactions as contain in pen drive for the purpose of convenience. This happen as I had decentralized day to day operations to the employees, the size of business operation being very large. However, we already offered an income of Rs. 100 crores considering the data in pen drive and other seized material. Q.8 During the search proceedings dated 28.05.2022 in the case of jeetmal Choraria, Jai Choraria, IM Jain LIP, Ratna Textiles LLP at IX/6506, IX/6507, IX/6508, Subhash Mohalla, Nehru Gali, Gandhi Nagar, Delhi, statement of Sh. Rakesh Chajjer and Sh. Shreyans kumar Bhatera was recorded under section 132(4) of the Act. Both Sh. Rakesh Chajjer and Sh. Shreyans Kumar Bhatera are accountant and Customer Relation manager of JM Jain LLP. During the recording of statement, they submitted that the newly found office is "JSK Data Center* where direct billing is done and data regarding cash transactions in the direct billing is recorded in such data center and they report the same to Sh. [eetmal ....
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....Solanki). Please offer your comments on the same. Ans It is submitted that our business operations are located all over the country. A large number of our employees are engaged in the sales, accounts and other departments to handle such large business operations. In such situation, as already stated in my letter dated 24.08.2022, it is not possible for me to monitor the micro level transactions undertaken by each employee such as Nand Kishore Solanki, Sandeep Duggar etc. Document 5G/L Acct/BP Code Name Local Currency · Indian Rupee· Debit Local Currency · Indian Rupee - Credit Local Currency - Indian Rupee · Balance Revenue 1,71,75,03,383 1,66,13,81,578 5.61.21,805 R10000 Gross Revenue 1,71,75,03,383 1.66,13,81,578 5,61,21,805 Indirect Inc 12,40,31,255 12,40,31,255 - Margin A 63,08,12,180 57,95,82,119 5,12,30,061 Margin 3.69,85,452 3,96,50,054 -26,64,602 Margin (Woolen LDH) 2,53,10,489 3,01,95,714 -48,85,225 OSIA FAB 35,05,74,016 34,12,22,784 93.51.232 OSIA ENT 3,76,41,259 3,45,51,426 30,89,833 OLD Margin 506 . 506 Neel Ratan Sarkar 51,21,48,226 51.21.48,226 . Expenditure 32,72,46,865 34,80,06,350 -2,07,59,485 E10000 Direct Expenses ....
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....4,124 Tour Expenses (All Branches) 29,32,995 10,09,099 19,23,896 Nagpur Expenses 78,81,489 34,75,476 44,06,013 Jaipur Expenses 76,84,941 29,67,778 47,17,163 Rounded Off 30,117 8 30,109 1. Document 8 TEST19 General Ledger Date 31/05/23 Tima 13:45 VAT Number Cross-Section Properties: Posting Detc From: 01/04/19 To 31/03/20 Value Date FIORE To Document Date From: To By Roconciliation Al Troncactione Additional Ciocc-Section by Trone. Chorpo: No Revenue 740016 Periodic Opening Balance: Neel Ratan Sarkar Post. Date Due Date Typa Trans. Ref. 1 Details Contra Acct Debit Crodi Balance ILC) 0 1/05/10 01/05/10 J. 76004 Indirect Ecp+ Walofare 740005 21,871.86 21,871.86 Exp 19/06/19 19/06/19 FC 59330 12409 Incoming Payments - 500015 43,771.03 -65,642.89 740016 TRF dd comm. 19/06/19 10/06/19 RC 09351 12417 TRF MARGIN A 500015 1.417,913.38 -1.483.55627 19/06/19 19/06/19 HC 95418 12423 TRF OSIA FAB 500015 215,234.852 -1,698,791.16 19/06/10 10/06/10 FC 00477 12430 TRF RICDELHI 500015 40.36 -1,608,831.51 10/06/10 10/06/10 PE 004E7 31821 TRF ANAND PACKING 500015 42,361.27 -1.666,474.24 19/00/10 10/06/10 PG 04-401 31323 TR....
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....IL ANAND PACKING - BEUTE ........... ........ - TO TROSA ENT THE ROLRATA CRF. 500015 -015.105. 18 H 0 p 149031 ...... FRF ORA FAE 8.366.090 P 9 TIV ORA ENT ----- ........ .......... . ....... .. Forms Closing Babres! 0.00 Total Egal of All Transactions IN4 5.123,482 20 INH 5121,422.20 Document 10 TEST19 Date 15/06/24 Time 14:57 VAT Number General Ledger Cross Section Properties: Posting Date From: 01/04/19 To 31/03/20 Value Date From: To Document Date From: To By Reconciliation: All Transactions Additional Cross-Section by Trans. Charac .: No Z Customer CL0000011 Periodic Opening Balance 0.00 Post Date Due Date Type Trans. Ref. 1 Details Contra Acct Debit Credit Balance (LC) 01/05/19 01/05/19 01/05/19 JE 76876 Kami Fabrics (CL) Accumulated From Beginning of This Year CCL000010 15,000,000.00 15,000,000.00 -15,000,000.00 ... Periodic Closing Balance: -15,000,000.00 OB Debit Credit Total Total of All Transactions: INR 15,000,000.00 INR -15,000.000.00 VU VYWWV WU Document 11 Mn: jeetmal Choraria [ACOPCZ....
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....TR) Sundry Creditors 30.40.93,471 . 14 IKB Exports (1KB) Sundry Creditors 38,32.51,851 . 15 Aditya Inc. (MS) Sundry Creditors 27.82,79,800 = 16 USA Clothing (US) Sundry Creditors 9,96,79,560 - 17 Yuvraj Textiles (CL) Sundry Creditors . 18,33,892 18 Indirect Inc. Income and Expenses 12,40,31.255 . 19 Welfare Expenses Income and Expenses 6,87,28,510 - TOTAL 3,76,70,84,14,000 5,26,70,84,14,000 Net Balance Required 1.50,00,00,00,000 6.19. Hence, from the above, it has been observed that the auditee was having differences in the balances as on 01.05.2019 amounting to INR 150 crores (ignoring "]. The same has been introduced to Z account Despite multiple requests for clarification and supporting evidence, the auditee has not provided any explanation for the nature of the Z account or the justification for its balance. Consequently, the nature and source of this account remained unclear. (This space has been left blank intentionally) O.P. Bagla & Co. LLP 197 | Part - B | TOR 6 Document 13 However, further examination of the trial balance of the subsequent year i.e., F.Y. 2020-21, revealed that the auditee had carried forward the balances was not done on the....
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....mber Cross- Section Prepares Pewno Dale Vidue Date ---- De By Reconciliation -- From 01/04/19 Te 31413/20 To - Fe AR Transactions Additional Cross-Section by Trins. Charme. Ne Customer CL0000001 USHA CHORARIA Perques Opereng Balance 9.99 Cm. Aest - --- .......; - .......... 8.000.29 summa ... Perante Closing Bala == -5.000.30 08 Debit Credit Total Toga cof An Transat-wie INR 5.000 % INF -5.000 30 Document 16L2000 - Scrap & Surplus 700010 - Guj Cottons (AH) 35.761,582.67 2,502.630.71 5,774,968.01 35,761,582.67 2,502,830.71 5,774,968.01 700012 - PB Hosiery (LD) 700014 - Denim House (DL) 10,278,110.55 10,278,110.55 700016 - Kids World (BB) 4,111,771.01 4,111,771.01 700018 - Girls World (HT) 2,422,716.65 2,422,716.65 700020 - TMBL Agency (TR) 3.040,934.71 3,040,934,71 700022 - IKB Exports (KB) 3.832,618.51 3.832,518.51 700024 - Aditya Inc. (MS) 2.782,798.00 2,782,798.00 700025 - USA Clothing (US) 996,795.60 998,755.60 700028 - Yuvraj Textiles (CL) 18,338.92 18,338.92 L3000 - Loan & Fund's 600001 - Z 17,175,033.83 17.175.033.83 AAAAAAAAA 561,218.05 561,218.....