SRINIVAS RAO BOINIPALLY,HYDERABAD vs. ACIT, CENTRAL CIRCLE-2(4), HYDERABAD

आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A ‘ Bench, Hyderabad Before Shri R.K. Panda, Vice-President AND Shri Laliet Kumar, Judicial Member to 567/Hyd/2022 Assessment Years: 2014-15 to 2017-18 & 2019-20 to 2020-21 Shri Srinivas Rao Vs. ACIT Boinipally, Hyderabad Central Circle 2(4) Hyderabad (Appellant) (Respondent) PAN:ADAPB5985C Assessee by: Shri K.C. Devdas, CA Revenue by: Smt. T.H. Vijaya Laxmi, CIT(DR) Date of hearing: 14/09/2023 Date of pronouncement: 21/09/2023 O R D E R PER BENCH: The above batch of 6 appeals filed by the assessee are directed against the separate orders dated 26.08.2022 passed by the learned CIT(A)-12, Hyderabad u/s 153A of the I.T. Act for the A.Ys. 2014-15, 2015-16, 2016-17, 2017-18, 2018-19 and 2019- 20 respectively. Since identical grounds have been taken by the assessee in all these appeals, therefore, for the sake of convenience, all these appeals were heard together and are being disposed of by this common order.

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2. We take A.Y 2014-15 as the lead case and the grounds raised by the assessee read as under:

2.1 The Hon.CIT-A erred in confirming the addition made by the learned assessing officer in the form of alleged interest income of Rs.1,50,000 u/sec.69 [the learned assessing officer made the addition under section 69A/115BBE]- that was made purely based on assumptions and presumptions without correctly appreciating the nature of entries made in the said document (Annexure-4) which specifically indicates the source and its application which are not remotely connected with the appellant.

2.2. The Hon.CIT-A erred in confirming the addition without any discovery of undisclosed investment made by the Appellant and the year of investment.

2.3. The Hon.CIT-A is Wrong in not appreciating that section 69 obligates the learned AO to initially discharge the burden of proof of investment and year of investment while bringing to tax the alleged interest income of Rs.1,50,000. The learned AO invoked section 69A for making the addition of said amount.

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4. The Hon. CIT-A should have appreciated the well-established judicial precedent that the presumption howsoever strong should not take the place of proof and in the present case there is no proof/evidence brought out in the Assessment order.

5. The Hon.CIT-A ought to have appreciated that no addition should have been made on the basis of entry in third-party computer generated data sheet when the said data sheet is non-speaking in all respects and more specifically in relation to the appellant.

6. The Hon.CIT-A should have appreciated that for retrieval of the data from the third-party computer which does not belong to appellant the procedure laid down under Sec 65 A & 65 B of the Evidence Act and reiterated in Digital Manual available in Net ought should have rigorously been followed to before making use of the same in assessment.

7. The Hon. CIT-A ought to have appreciated that the learned AO has not furnished the details of evidence to appellant in spite of bringing to her notice and therefore the impugned assessment order which is nonspeaking in the matter of utilisation of evidence should have been set aside deleting the addition.

8. The learned CIT (A) ought to have appreciated that no attempt was made at the stage of post search enquiry or in course of assessment proceeding to corroborate the entries relating to the electronic data when appellant denied the entries as pertaining to him and in the absence of any corroboration, should have deleted the addition in the backdrop of the principle that electronic data cannot be made use of in the absence of any corroboration.

9. The learned CIT (A) ought to have appreciated that electronic data is not a primary evidence to be utilised in framing assessment unless required certificate under section 65A/65B is given while retrieving the data from the computer.

10. The learned CIT (A) should have appreciated that there is no whisper in the assessment as to why the assessment was made in the hands of appellant (Individual) and in the absence of any finding the stipulations of section 5 of the Act fails at the threshold level”.

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3. With regard to Ground No.1, the learned AR drew our attention to Page 1 of the Paper Book filed by the assessee wherein 4 pages of Panchanama to the following effect:

“LIMITATION - B.SRINIVASA RAO/B USHA RANI Date Panchanama / Other Document. 06-02-2020 1. Search u/sec. 132 of Income Tax Act, 1961 commenced at Residence. Joint Warrant includes and search commenced against Smt. B. Usha Rani, Prathima Infrastructure Limited,. Prathima Industries P Ltd.

3. PO w/sec. 132(3) dated 159, BOB, Masab Tank, Road No. 12, Banjara Hills, Hyderabad.

4. PO u/sec. 132(3) dated 06-02-2020-Locker 640 in Axis Bank - B. Harini.

7. Panchanama - Gopanapally Project Finally concluded. 09-02-2020 8. Panchanama-NetXCell Ltd. - Finally concluded. 10-02-20209. 9. @3 above, Release Order dated 10-02-2020 reg. Locker No. 159, BOB, Masab Tank.

10. Panchanama dated 10-02-2020 Search temporarily concluded at Residence BSR & BUR @ l above. 11-02-2020 11.Prathima Industries P Ltd.- Prathima House, Search Finally Concluded. @ above. 12-02-2020 12.Prathima Infrastructure Ltd - Search finally concluded at 1 AM. - @ above. 23-07-2020 13.@ 4 above, Release Order and Panchanama dated 23 07-2020- Locker 640 in Axis Bank - B. Harini. 14. @ 2 above - PO revocation &Panchanama at Residence.

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15.Panchanama - Search finally concluded at Residence @ 1 above. - Annexure 01, Page 01 shows the bills seized for the Jewellery @ 6 above submitted by party. Panchanama - includes Annexure 'A'-01 under both Seized and Not Seized also. Seized was originally NIL with Not Seized : Annexure-1, but later Seized NIL was struck off and made -01( to show Annexure 'A'-01, Page :01)

Whether 23-07-2020 Panchanama is to be considered for Limitation.

ITA 562 to 567 of 2022 Srinivas Rao Boinipally 3.1. Thereafter, the learned AR drew our attention to Page 6 and its rear side of the page, the following intimation was made by the assessee on 8.2.2022.

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ITA 562 to 567 of 2022 Srinivas Rao Boinipally 4.1 The contention of the learned AR was that there is no restrain order issued by the authorities by way of provisional order u/s 132(3) on 8.2.2020. It was submitted that the limitation for the purpose of Section 153B is required to be counted for passing the assessment order from the last date of Panchanama which was issued on 6.2.2020. It was submitted

ITA 562 to 567 of 2022 Srinivas Rao Boinipally that the assessment order passed by the Assessing Officer on 30.03.2022 is beyond the period of limitation provided by the Act.

4.2 In support of his case, the assessee filed the written submissions. The relevant portion of the written submissions reads as under :

“4.2. Time Limit for completion of assessment under section 153B of Act. The authorisation referred to clause (a) and clause (b) of section 153B(1) is deemed to have been executed on the conclusion of the search as recorded in the last panchanama drawn in relation to a person in whose name the warrant of authorization has bbeen issued. In the case of the assessee, the last Panchanama was drawn on 12- 02-2020. This is clearly indicated in the last Panchanama drawn in case of PIL. What is important to note is last panchanama drawn in case of a Person. Here the emphasis is person u/sec 2(31) of Act. A joint warrant does not refer to a ‘person’ and is not included in the definition. Hence, the view of the department is incorrect to treat joint warrant as a person. At the cost of repetition, the following aspects emerge. A joint warrant can be issued combining the names of more than one 'person' as mentioned in section 2(31). Section 292CC goes this far and no further because of restriction in the said section. It is meant to validate a warrant in joint names only to carry out search. Such a Jt warrant cannot be construed as having been issued against the person mentioned in sec. 2(31) of Act. Such a warrant cannot be deemed as having been issued including AOP and BOI who are person. The assessment shall be made separately in the names of each person mentioned in such joint authorisation. For the purpose of assessment each person in whose name appears in the Jt warrant is a separate person/entity and the joint warrant is not a person for the purpose of making assessment and reckoning limitation Time limit should be worked out taking into account date of final conclusion of the search as recorded in the last panchanama in the case of that particular person.

ITA 562 to 567 of 2022 Srinivas Rao Boinipally The AO was under a misconception that a joint warrant refers to single person ( as AOP of BOI) which was specifically prohibited by law under sec. 292 CC of Act. The AO has adopted two views- one for making assessment in the names of individual entities and another for reckoning the time limit for completion of assessment treating Jt warrant as person under sec.2(31) of Act. This is contradictory. Thus, in the guise of interpretation, AO cannot legislate to suit his convenience overriding the statutory provision. Taking all the above vital aspects in view, it is submitted that the working of limitation taking a joint warrant as person is illegal and assessments not sustainable. "The PO placed on 08-02-2020 in the residence of BSR & BUR was only a nominal PO in the hope to extend time limit for completion of assessment as the financial year changes. Hence the assessment based on this PO lifted on 23-07-2020 is only nominal and is therefore the assessment is barred by limitation. Even otherwise, It is a settled principle that mere participation in a proceeding does not amount to acquiescence or waiver of jurisdiction. The assessee while giving details of initiation and conclusion of search in a Table in its submission also brought this principle to the notice of AO that there is no estoppel against law and limitation has to be rightly calculated. The department adopted the last Panchanama dt 23-07-2020 and worked out the limitation as 31-03-2022. This is not legally correct. Thus, the last Search Warrant executed , in the humble opinion of the appellant that was initiated on 06-02-2020 u/sec.132 of the Act and finally concluded on 10-02-2020. Hence, the assessment completed as follows is barred by limitation. **Table left intentionally 5. What is the status of PO which was placed on 08-02-2020 and lifted on 23-07-2020 ? Kindly refer to the discussion above Para No.2.2-point no.4.2.

6. Import of Placing a nominal PO and execution of last warrant and drawing last Panchanama-Judicial precedents. As per sec. 132 of Act, a prohibitory order under section 132(3) of Act is placed where it is not practicable to seize any books of account, documents and other valuable articles(money, bullion,

ITA 562 to 567 of 2022 Srinivas Rao Boinipally jewellery )' and for reasons other than those under sub-sec. (1) of sec.132 of Act during course of search. 'Not practicable to seize should be for some good and sufficient grounds. It should not be a pretence and for oblique purposes. It is not a routine exercise as this expression suggests. The principle underlying the expression has the approval of Courts. It is a principle that if a thing is required to done in a particular way that should be done in that way or not at all. In the case of the appellant, following facts may kindly be appreciated.

The joint warrant of authorisation in the names of four persons as mentioned was last executed on 12-02-2020 in case of PIL as per categorical endorsement in the Panchanama. The searches were finally concluded as mentioned in this Panchanama. However, POs without Orders were kept in the residence (common) of BSR and BUR(other two persons) by putting jewellery and silver articles , which were valued and inventorised, in a cupboard (locker ) in the residence after due verification jewellery, tax returns, holding of family jewellery as per CBDT Instruction 1916, dated : 11-05¬1994. In other words, there was no valid reasons for placing a PO on 08-02-2020 and revoking the same on 23-07-2020. In such a situation one cannot take a plea that it was not practicable to seize the gold ornaments and its purchase bills on 08-02-2020 when the same were verified earlier and returned to the assessee as per endorsement in the Panchanama ( Enclosed along with submissions made for the asst. year 2014-15). · Further even on 23-07-2020, the department did not seize gold ornament or silver articles. No statement was recorded regarding purchase bills or gold ornaments as the department was aware that assets and purchase bills were explained on 08-02-2020 and the same were not in the nature of incriminating paper and undisclosed assets. There is an endorsement to the effect in the Valuation Report dt. 08-02-2020 that after valuation and taking evidence, jewellery was handed over/released to BUR. Thereafter the jewellery that was handed over to BUR was again taken back and put in PO without PO Orders. Such an attempt on the part of authorised officer does not accord to the stipulation of law and it shall be taken as an illegal attempt for prolonging the search beyond 31-03-2020 so as to get further time to complete the assessment. PO can be placed under section 132(3) only when it is not practicable to seize some articles. It should not be placed as a mechanical exercise say for getting extended time for completion of assessment. Since the last PO was completed on 08-02-2020 for all purposes, a nominal PO cannot extend the limitation for making assessment. Hence the assessment based on a nominal PO would not be taken as closure of search for the purpose time limit for completion of assessment. Taking into account the operation of last PO on 08-02¬2020 and Panchanama dated 10-

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02-2020 the time limit for completion of assessment was 30-09- 2021 as per TOLA 2020 in case of BSR and BUR also. Such being the case, the time limit for completion of assessment is on 30-09-2021 being the extended date as per TOLA 2020 but not 31-3-2022 when the AO completed the assessment. The assessment is thus barred by limitation on any count or view.”

5. Per contra, the learned DR drew our attention to the order passed by the learned CIT (A) and more particularly, paragraphs 5.1.1 page 6 & 7 to the following effect. It was submitted that the last Panchnama was drawn by the search team on 23.7.2022 when the loose papers/ bundle 1 to 48 were found and seized by the search party and therefore, the order passed by the authorities was within the period of limitation.

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10. Evidentiary value of digital Evidence [65A and 65B of Indian Evidence Act] of unsigned & unverified Excel sheets. · While passing the assessment order the learned assessing officer has not considered the import of sections 65A and 65B of Information Technology Act. In terms of Sec.60 of the Indian Evidence Act, computerized information is within the realm of hearsay evidence and therefore, not relevant at all by itself. In such cases either authority who has fed the information must be identified or he must appear personally and testify before the Court about the source of information. Hence, in the absence of any such corroboration, the evidence remained hearsay evidence, carrying no evidentiary value, in the absence of any corroboration. In a recent decision in the case of Vetrivel Minerals v.ACIT[2021] 179 taxmann.com 126(Madras), it was observed that electronic evidence is a secondary evidence and therefore it is required to follow the procedure while seizing and making use of electronic evidence. · When the entire assessment has been framed only on the basis of the so-called electronic record which are said to be copies of Excel Sheet, Excel work note book etc., non-compliance of Section 65(8) of the Indian Evidence Act renders the document inadmissible in the eye of law as held by the Supreme Court in the judgment reported in Anvar P.V vs. P.K.Basheer and others reported in (2014) 10 SCC 473. · Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure prescribed under Section 658. Section 658 deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the Section starts with a non obstante clause. Thus, notwithstanding

ITA 562 to 567 of 2022 Srinivas Rao Boinipally anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub- Section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under Section 658(2). Following are the specified conditions under Section 65E3(2) of the Evidence Act: (i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer; (ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity; (iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and (iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity. · Under Section 65B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied: (a) There must be a certificate which identifies the electronic record containing the statement; (b) The certificate must describe the manner in which the electronic record was produced; (c) The certificate must furnish the particulars of the device involved in the production of that record; (d) The certificate must deal with the applicable conditions mentioned under Section▪ 658(2) of the Evidence Act; and (e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device. · The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 658 of the Evidence Act are not complied with, as the law now stands in India." · Moreover, while extracting the data from the computer procedure as prescribed under section 69A and 69B of Indian Evidence has to be mandatorily followed. to obtained the certificate . Hence such electronic evidence has no evidentiary value as decided by the Apex Court . Finally, this confusion has been settled by a larger bench of the Supreme Court in Arjun Panditrao Khotkar vs Kailash Kushanrao Gorantyal,(2020) CIVIL APPEAL NOS. 20825-20826 OF 2017. where it was held that the procedure under Sections 65A and 65B is a code in itself and mandatory regarding admissibility of electronic evidence. Therefore, provisions of 65A and 65B should be followed to adduce the electronic evidence. AO made no attempt for corroboration although aspect was brought to his notice. Hence such electronic data cannot be made use of in the assessment and to make addition.”

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ITA 562 to 567 of 2022 Srinivas Rao Boinipally

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Addition of unexplained loan and loan interest Appellant is the prop of Pristine Estates a real estate project located at Sy. Nos. 159 & 162, Gopanapally (V), Serilingampally (M), Hyderabad. The premises of this entity was searched on 06- 02-2020 and finally closed on 08-02-2020. In course of search the personal computer used by two officers of their own namely- Harsha and Radhika were scanned by the AO and an image of hard disks of those two computers were seized. Later, On the basis of notings in the Excel sheets extracted from in portable hard disk by the AO , it was alleged that the appellant was carrying on money lending activity. Based on these excel sheets, the AO worked out the figures of Principal and interest assuming that the appellant was carrying on money lending business. Accordingly, interest income and unexplained principal were taxed in the hands of BSR for various assessment years. The addition are as follows: hands of BSR for various assessment years. The addition are as follows:

Assessment year Remark Unexplained Undisclosed principal ( in Rs.) interest(in.Rs.) 2014-15 1,50,000 Assessed by AO under section 69A , which was later changed to Section 69 by CIT-A 2015-16 63,26,184 5,85,000 Do 2016-17 3,60,000 Do 2017-18 2,55,000 Do 2018-19 0 Do 2019-20 3,65,000 Do 45,000 Do 2020-21 Page 25 of 34

In the light of the above facts it is submitted that the inferences drawn by the AO are based on pure suspicion to work out additional income as given here under · The computer does not belong to either the appellant or to PIL or to PIPL. These were employees' personal computers. · No where in the Excel sheet the name of the appellant appears. Neither in course of search nor in course of post search investigation nor in course of assessment proceeding any corroborative evidence was found that appellant was carrying on money lending business and the computer belong to Pristine Estates.

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· The notings in the Excel sheets indicates that loans advanced and interest realised relate to some unnamed or unidentified person(s). Appellant does not carry on money lending business. Although a comprehensive search was carried out in the residence of the appellant and in the premises of the company, no evidence was found corroborating carrying on of business of money lending. · The excel sheets were unsigned copies and does not indicate full details regarding name and addresses of the debtors or any supporting documents like loan agreements, promissory documents, stamped revenue receipts. · The appellant is not aware of identity a few nick names which were noted on the excel sheets. No evidence was brought in to prove any connection of the appellant with the transaction. · No legal evidence was found to show that money was advanced by the Appellant so as to fix liability on the appellant. · No enquiry was made to ascertain the addresses of debtors despite denial by the appellant that he ever carried on money lending activity. Not even an iota of evidence to link the amount advance to the appellant was found. · Merely because the said Excel sheet was found in a third party computer, it cannot be linked with the appellant to fasten a liability on the basis of a dumb document which is not speaking on all respects. · The extract was taken from the hard at the back of the appellant and without his knowledge or information to him. He was never questioned. · The laptop does not belong to the appellant since the appellant has not provided any laptop or computer to the project site and it is a third-party laptop computer. · The appellant maintains regular books of account or any data relating to the appellant are maintained by the Accountant at H.O., Plot No. 213, Prathima, Road No. 1, Film Nagar, Jubilee Hills, Hyderabad. The project only carries out operations, attends to customer queries, etc., and the payments, sale transaction etc., are done at H.O. · The Search Team have not questioned the person in whose control, operation, and possession of the computer at the project site to elicit any information of ownership of the computer or of the ownership of the data seized or discovered either during the course of search or post search investigation and during the assessment proceedings.

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· No attempt was made as to how the third-party computer person is related to the appellant, like an employee, creditor, service provider so as to establish any relation to the appellant / his business. Just because some person is in possession of a laptop computer and that person was present during search will not fasten any liability on the part of the appellant unless the identity of the possessor and the relation of data to appellant is established by the learned AO, especially when the search is at the back of the assessee. · The Search Team obtained a Statement from the person in control, operation, and possession of the computer at the project site, but it preferred not to question him even when the data was non-speaking, vague and no details are forth coming as to the nature of transaction, parties thereto, period of contract, sources for the transactions, who is the recipient if any receipt is shown etc. No attempt was made to gather facts even after the Search or during the Assessment Proceedings. · The Search Team also obtained a Statement from the appellant, but it preferred not to question him either during the search or thereafter. During the Assessment Proceedings, the appellant was questioned without providing any details of the computer, the details of the person who was in possession and operation of the said computer and operation at the time of search, the details of data appearing in the computer, etc., which was requested by the appellant. · Bald information of numbers without showing any means to ascertain the person, income, nature of transaction, parties to transaction, author of information, means of transaction execution, corroboration by way of any asset in any form in books of account, etc. is untenable. · Although there was some mention about 'Bangalore' in the Notice u/sec.142(1) of the Act no question was asked. The appellant submitted that he does not have any relation to Bengaluru stated by the learned AO to have been mentioned in the data either in individual capacity or in relation to his business. · It may be pertinent to mention here that although all the premises of offices of Prathima group were searched including that of residences of directors no corroborative evidence was found that the appellant was in any way connected with those unfamiliar persons and entries made in the computer. No question was put to him at any stage of the proceeding to elicit his reply. · The books of account of the appellant do not contain an iota of reference to the transactions referred to by the AO The appellant reiterated his submissions time and again and yet the learned AO went ahead and made the addition of the alleged amount of interest as the income of the appellant in an ad-hoc manner without any reason or support of law.

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· The learned AO erred in asking the appellant to explain third party data which is something impossible. To put it differently, the learned AO has asked the appellant to prove that he did not enter into certain transaction which in fact he never entered into those transactions at all nor his audited records or business show any relation to the said data. Can one be asked to prove the negative when he has not entered into those transactions and evidence was brought to his notice ? How can anyone disprove something which he did not do it all? In such a case, the onus is strictly on the learned AO to make a prima facie case, not mere allegations or presumptions and record the satisfaction of the facts linking the transaction to the appellant.”

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“Q.25 I am showing you Annexure-A/PIL/PE/SO/04, WD element 1.5 TB portable Hard Drive containing image of computer maintained by the accountant G Radha Kumari and image of your Microsoft essential laptop taken during the course of search & seizure u/s 132 of the Income Tax Act, 1961 conducted in the site premise of Pristine Estates situated at Survey No.159 & 162, Gopanpally Village, Serilingampalli Mandal, Hyderabad belonging to Prathima Group. Please confirm the same. Ans: Yes, I confirm the same.”

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ITA 562 to 567 of 2022 Srinivas Rao Boinipally was earned by him from the said business. In view of the above, the addition made in the hands of the assessee is liable to be deleted. Hence, we delete the addition in the hands of the assessee. Accordingly, ground nos. 2.1 to 2.3 are allowed.

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Order pronounced in the Open Court on 21st September, 2023.