DCIT, CC-1, JAIPUR vs. M/S. DANGAYACH HOTELS PRIVATE LIMITED, JAIPUR

jktLo dh vksj ls@ Revenue by : Shri B. K. Gupta (CIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.R. Sharma (C.A) & Shri R.K. Bhatra (C.A) a lquokbZ dh rkjh[k@ Date of Hearing : 27/07/2021 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 22/10/2021 vkns'k@ ORDER & CO. No. 03/JP/2020 2 M/s Dangayach Hotels Pvt. Ltd.

PER: VIKRAM SINGH YADAV, A.M.

This is an appeal filed by the Revenue and the cross objection by the assessee company against the order of the ld. CIT(A)-4, Jaipur dated 03.10.2019 for the assessment year 2011-12.

2. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A)-4, Jaipur is justified in ignoring the transactions found in the pen drive and deleting the addition of Rs. 4,40,00,000/- made by the AO on account of unexplained cash loans provided by the assessee company.

3. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A)-4, Jaipur is justified in ignoring the transactions found in the pen drive and deleting the addition of Rs. 6,16,000/- made by the AO on account of unaccounted interest earned by the assessee company.

That on the facts and in the circumstances of the case, the Ld. CIT(A) is wrong, unjust and has erred in law in not adjudicating various legal contentions specifically reliance on judgment of Hon’ble ITAT, Jaipur Bench in case of Navratan Kothari (ITA No. 425/JP/2017) on applicability of Sec. 153C of the I.T. Act, 1961 in case of the respondent.” & CO. No. 03/JP/2020

3. M/s Dangayach Hotels Pvt. Ltd.

reply of the assessee company is of routine nature having no evidence to contradict the information available with the Revenue and the assessee company has failed to substantiate the onus cast upon him about the cash loan transactions of Rs 4,40,00,000/-.

Land Developers Pvt. Ltd. Further, PAN No. of the company was also written in the excel file. On further examination of these pen drives, it was also found that amount of transaction was mentioned after suppressing ‘five zeros’ i.e. Rs. 4,40,00,000/- was mentioned as 440.00 in the form of different entries. In these pen drives, it was also mentioned, as for which period and on what rate of interest, the amount was advanced to the borrowers.

7. The Assessing Officer, thereafter, referred to the statement of Sh. Ramesh Chand Maheshwari recorded u/s 131 of the Act dated 08.11.2017 and reproduced certain questions and replies so submitted by him. The Assessing Officer further stated that after search operations, Ramesh Manihar Group and its associates have filed their application before the Income Tax Settlement Commission. In their application filed before the Settlement Commission, they have surrendered the income so earned as commission on account of these un-recorded or unaccounted transactions and due taxes has also been paid. The Assessing Officer basis the said application filed by the Ramesh Manihar Group stated that it can clearly be deduced that the assessee company also made transactions with the said group and has advanced loans which were out of books to earn interest income and none of these transactions were recorded in the books of the assessee company.

examination is not an absolute right and depends upon facts and circumstances of the each case and in the instant case, the assessee company has been allowed ample opportunity but it has failed to furnished any evidence contradicting the information available with the Revenue and no substantive material has been produced by the assessee company.

challenging the jurisdiction and legality of the order so passed by the Assessing officer as well as merits of the case. The ld. CIT(A) while disposing off the assessee company’s grounds challenging & CO. No. 03/JP/2020

7. M/s Dangayach Hotels Pvt. Ltd. the reopening the assessment u/s 147 of the Act stated that the Assessing Officer has rightly assumed jurisdiction u/s 147 of the Act for the reason that the information along with documents collected during search on Sh. Ramesh Manihar could easily result into Assessing officer forming a belief of escapement of income on the part of the assessee company. The ld. CIT(A) also dismissed the ground taken on behalf of the assessee company relating to issuance of notice U/s 148 without obtaining proper sanction u/s 151 stating that A/R of the assessee company has not been able to put forth any cogent reason or evidences leading up to the conclusion that the approval taken by the Assessing Officer u/s 151 of the Act was not proper. Therefore, grounds challenging reopening of the assessment u/s 147 and issuance of notice u/s 148 of the Act without seeking proper sanction were dismissed by the ld. CIT(A) and against the said findings, the assessee company is not in appeal before us. However, another ground of appeal taken by the assessee company relating to initiation of proceedings u/s 148 as against 153C was not adjudicated upon and against the same, the assessee company is in cross-objection before us.

so taken by the assessee company challenging such addition, the ld. CIT(A) firstly referred to the statement of Sh. Ramesh Chand Maheshwari recorded u/s 132(4) during the course of search at his premises on 07.01.2016 and stated that though the Assessing Officer has reproduced certain questions and answers of the said statement in the assessment order, however, neither during the course of search by the Investigation wing nor during assessment proceedings by the & CO. No. 03/JP/2020

8. M/s Dangayach Hotels Pvt. Ltd.

Assessing Officer, any question was put to Sh. Ramesh Chand Maheshwari as to what ‘HMD’ stand for and against the name ‘HMD’, no address or telephone number is found to have been recorded. The ld CIT(A) stated that in what circumstances and on what basis or evidence the name ‘HMD’ is inferred as to the appellant herein is not forthcoming. The name of appellant as individual is appearing only in the records maintained under the filename ‘Ankoot’ which was stated to be for the purpose of sending invitation card as per answer to question No. 31 of the above referred statement. The ld CIT(A) further stated that on perusal of extracted statement in the assessment order or in the entire statement of Sh. Ramesh Chandra Maheshwari, he do not find any answer which suggested the appellant herein is found to have advanced such loan. The seized material only refers to ‘HMD’ as having given advances. However on examination of entire material, he is unable to relate the material to the appellant herein. When a particular material is found from a third-party, before drawing any adverse inference against a person other than from whom such material is found, it is a necessary condition that a specific question needs to be put to the person from whom such material is found as to whom and who it relates to such other person. Statement during the course of search was recorded u/s 132(4) by officer of the Investigation wing. In the said statement, reading it in entirely, it is not forthcoming as to any reference to the appellant herein. Even further statement of Ramesh Chand Maheshwari was recorded by the AO having jurisdiction over him under section 131 dated 8.11.2017 and not by the Assessing officer having jurisdiction over the assessee company. In said statement also, there is no reference to ‘HMD’ being considered as ‘Dhangyanch Hotels & CO. No. 03/JP/2020 9 M/s Dangayach Hotels Pvt. Ltd.

Pvt. Ltd’. During the course of assessment proceedings, the appellant specifically asked the Assessing officer to point out which portion of the statement on the basis of which it is concluded as to involvement of the appellant in providing cash loan. The Assessing officer is completely silent on the same. If the Assessing officer wants to draw any adverse inference against any other person based on such statement, it was incumbent upon him to relate such statement to the appellant and also to provide an opportunity of cross examination of such person.

Officer was directed to delete the addition of Rs. 4.4 crores being considered as an amount advanced by way of cash loans and not recorded in the books of accounts and consequent addition towards interest which was presumed to have been earned was also directed to be deleted. Against the said findings of the ld CIT(A) deleting the additions, the Revenue is now in appeal before us.

and accordingly no proceedings U/s 148 can be initiated thereon. The notice issued U/s 148 is wrong and bad in law. The reassessment notice on the basis of material found in search can be issued through recourse to Section 153C only and not by invoking provisions of Section 147/148. The provisions of Section 153C are over-riding in nature and contain non obstante clause for Sections 139, 147, 148, 149, 151 and 153 of the Act. It was submitted that Section 147 and 153C are not interchangeable but are mutually exclusive sections, it is not the choice of the Revenue to invoke either of the two sections at its whims and fancies. The scope of the two sections has been legislated differently with a definite purpose. In support, the reliance was placed on the Co-ordinate Benches decisions in case of Shri Navrattan Kothari (ITA No. 425/JP/2017), ITO vs. Arun Kumar Kapoor [2011] 140 TTJ 249 (Asr), G. Koteswara Rao [2015] 64 taxmann.com 159 (Visakhapatnam-Trib) and Rajat Shubra Chatterji vs. ACIT (ITA No. 2430/Del/2015). It was submitted that ld. CIT(A) without any cogent basis, has not adjudicated the aforesaid legal contentions so raised by the assessee company on applicability of Sec. 153C of the I.T. Act, 1961 in the instant case and in light of the aforesaid submissions, the contentions so advanced may be accepted and the whole of the reassessment proceedings may be set-aside as the same were wrongly initiated under section 148 instead of section 153C and thus, violating the extant provisions of law.

information/documentation received by the Assessing officer from DCIT, Central Circle, 3 which were collected/seized during the course of search u/s 132 conducted in the case of Ramesh Maniar Group, however, it is not in every case that the Assessing officer can take recourse to section 153C for carrying out the reassessment proceedings as there are conditions specified in section 153C which needs to be fulfilled and only in such cases where the conditions so specified are fulfilled, the Assessing officer can take recourse to section 153C of the Act. It was submitted that in the instant case, the conditions specified in section 153C are not fulfilled as no satisfaction has been recorded by the Assessing officer of the searched person and no seized material has been handed over to the Assessing officer of the assessee company and hence, basis receipt of information/documentation and subsequent enquiries and investigation conducted during the course of search, the Assessing officer recorded the reasons for escapement of income and initiated the proceedings u/s 147 by issuance of notice u/s 148 of the Act. It was submitted that even though the ld CIT(A) has not disposed off the assessee’s contentions and ground of appeal so taken in this regard, however, similar contentions were raised by the assessee during the reassessment proceedings while filing its objections to the reasons so recorded before the Assessing officer and the latter has disposed off the said contentions vide its order dated 18.10.2018 holding that no such satisfaction of the Assessing officer of the searched person was recorded and the pen drives seized during the search doesn’t pertain to the assessee but Shri Ramesh Manihar who has also owned up the same and only information was disseminated to the jurisdictional Assessing officer and on that basis, proceedings u/s 148 were initiated & CO. No. 03/JP/2020

14. M/s Dangayach Hotels Pvt. Ltd. after recording of reasons to believe that income has escaped assessment. It was accordingly submitted that there is no infirmity in action of the Assessing officer in assumption of jurisdiction u/s 147 instead of section 153C of the Act. In support, reliance was placed on the Coordinate Benches decision in case of Shailesh S. Patel vs ITO Ward-5, Palanpur [2018] 97 taxmann.com 570 (Ahd) and decision of the Hon’ble Madras High Court in case of Karti P. Chidambaran vs Principal DIT(Investigation), Unit 3(2), Chennai [2021] 128 taxmann.com 116 (Mad).

Assessing officer recorded the reasons for escapement of income and initiated the proceedings u/s 147 by issuance of notice u/s 148 of the Act.

search pertains or pertain to, or any information contained therein, relates to any other person other than the person who has been searched. Once such a satisfaction is recorded, the books of account or documents or assets seized are required to be handed over to the Assessing Officer having jurisdiction over such other person. Thereafter, the Assessing Officer having jurisdiction over such other person has to record his own satisfaction that the books of account or documents seized have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A. Once the said satisfaction is recorded, he can then proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A of the Act.

person, the Assessing officer could not by himself have invoked the provisions of section 153C of the Act. Therefore, the mere fact that proceedings have been initiated basis receipt of information from DCIT Central Circle -3 Jaipur and the incriminating documents/material found during the course of search from a third party, Ramesh Manihar Group, it cannot be said that the Assessing officer has to necessarily exercise jurisdiction under section 153C of the Act as the same is subject to satisfaction of various conditions as we have discussed supra and which have not been fulfilled in the instant case. We are therefore of the considered view that in the peculiar facts and circumstances of the present case, there is no infirmity in action of the Assessing officer in not initiating the proceedings u/s 153C of the Act. In the result, sole ground of appeal in assessee company’s cross objection is dismissed.

taken in cash from the lenders and the same was advanced to the borrowers in cash, and they earned commission on these transactions. It was further submitted that various incriminating documents were found and seized by the Investigation wing of the department, which includes loose papers, pen drives etc. On analysis of the seized documents particularly pen drives, it has been noted by the Assessing officer that one pen drive is having names in short/code word ‘Jagat.xlsx’ that names of the lenders as well as borrowers were found in code name or maybe say in short name likewise ‘Hari Mohan Dangayach’ the assessee company as ‘HMD’. This short name is again verifiable with another pen drive namely ‘from & to group.xlsx’, where name of the assessee company ‘HMD’, is mentioned along with his full name of the assessee company ‘Hari Mohan Dangayach’ is mentioned along with his promoter company name Green Fire Exports, Dangayach Hotels P. Ltd, Kamlesh Dangayach, Serveall Land Developers P. Ltd, Emsaru Constructions P. Ltd., Green Star Constructions P. Ltd. Serve All Land Developers Pvt. Ltd. Accordingly, it was established that the assessee company M/s Dangayach Hotels Ltd was the only person which has given its unaccounted cash through its director, Shri Hari Mohan Dangayach for lending through the Ramesh Manihar Group. On further examination of these pen drives, it was also found that amount of transaction was mentioned after suppressing ‘five zeros’ i.e. Rs. 4,40,00,000/- was mentioned as 440 in the form of different entries. In these pen drives, it was also mentioned, as for which period and on what rate of interest, the amount was advanced to the borrowers. It was accordingly submitted that based on such corroboration, the excel sheet notings extracted from the Jagat. XIs from the PEN drive in & CO. No. 03/JP/2020 19 M/s Dangayach Hotels Pvt. Ltd. possession of Ramesh Manihar revealed that these are related to the assessee company.

the Assessing Officer rightly stated that the right of cross examination is not an absolute right and depends upon facts and circumstances of the each case and in the instant case, the assessee company has been allowed ample opportunity but he has failed to furnished any evidence contradicting the information available with the Revenue and no substantive material has been produced by the assessee company. It was alternatively submitted that where the Bench so decide that the assessee company be provided an opportunity of cross-examination, the matter may be remanded to the file of the Assessing officer to provide such an opportunity and merely on this ground, the additions cannot be deleted and assessment proceedings set-aside.

submitted that the order of the ld CIT(A) be set-aside and that of the AO be sustained.

Jakhar [2005] 98 TTJ (Amritsar) which was rendered on the basis of Hon’ble Supreme Court decision in famous case of Jain Hawala diaries reported as CBI v. V.C. Shukla AIR 1998 SC 1406 wherein it was held as under:- “Provisions of Section 34 of the Evidence Act, was considered for the purposes of the expression “entries in books of account”, “books of account”. In this case, which is also known as ‘Jain Hawala Diaries case”, the Supreme Court came to the conclusion that entries in notebooks are admissible evidence u/s 34 of the Evidence Act but loose sheets of papers are not “books” and hence entries in loose sheets of papers are not admissible evidence at all. Apex Court came to the conclusion that entries in books of accounts has “probative value” and “corroborative evidence”, the Court on the facts came to the conclusion that entries made in Jain Hawala Diaries though admissible u/s 34, but truthfulness, thereof, was not proved by any independent evidence.” “there are no evidence against the assessee company except diary, note book and loose sheet with regard to payment and evidence of such a nature could not be converted into legal evidence against the assessee company. Therefore, the very foundation of initiation of reassessment proceedings disappeared in the instant case and, accordingly, the addition would also not survive.

entries which is a requirement to fasten the liability. It is open to any unscrupulous person to make any entry any time against anybody’s name unilaterally on any sheet of paper or computer excel sheet. Even if it were to be assumed that the appearance of names in the seized papers is reason enough for the Assessing officer to re-open assessment, in the absence of any other information, it is definitely not enough information to make an addition. The assessment order clearly reflect the approach of the Assessing officer. It is based completely on hypothesis and conjunctures wherein a fanciful discussion regarding the role of cash dealings relating to purchase and sale of properties is discussed. In Para 18, the Assessing officer goes on record to admit that the addition is not based upon irrefutable evidences and that the traces and it is imprints in whatever form which ought to be appreciated and a conclusion drawn therefrom. Therefore, the Assessing officer has sought to make addition in the hands of the assessee company admittedly upon the basis of the ‘traces and imprints’ that are clearly at best circumstantial. The evidentiary value of the entire material relied upon by the Assessing officer is suspect and despite carrying out through investigation, the Assessing officer in the re-assessment proceedings has failed to uncover any damning evidence against the Appellant. It was further held that from the above submitted facts, it is evident that the said details given in reasons recorded give no indication even by which it could lead to the presumption that there is any connection of the assessee company with the said alleged notings on alleged lose papers allegedly found from Shri Ramesh Manihar not there is any indication or legal corroborative material that the said alleged notings pertain to assessee company. As & CO. No. 03/JP/2020 26 M/s Dangayach Hotels Pvt. Ltd. submitted above, the statement of Shri Ramesh Manihar was neither recorded in assessee company’s presence nor any opportunity to cross examination is allowed and as such the said statement does not have any evidentiary value to reopen the assessee company’s case. Thus these notings allegedly so made by Ramesh Manihar cannot be used for making any presumption or cannot be a material to be used against assessee company. In the case of Prarthana Construction Pvt. Ltd. Vs. DCIT (2001) 70 TTJ (Ahd.)122, it was held that the department cannot be justified in resting its case on loose papers and documents found from the residence of third party even if such documents contain narration of transaction with assessee company. The same view was taken by ITAT, Jaipur Bench, Jaipur in case of Ambeshwar Grih Nirman Sahkari Samiti Ltd. Vs. DCIT (2003) 78 TTJ 94. In case of Shri L.K. Advani Vs. Central Bureau of Investigation 1997 CRI, L.J. 2559, it was held that “there is another aspect of the matter. It has been observed above that the entries in the book of account by themselves are not sufficient enough to fasten the liability on the head of a person against whom they are produced. They are not a substantive piece of evidence. The said entries in the books of account can be used only by way of corroboration to other pieces of evidence which is led by a party. Admittedly there is no evidence with the prosecution besides the alleged entries in the diaries and in the loose sheets as conceded by the Learned counsel for the C.B.I. Thus the alleged entries in the books of account by themselves are of no avail to the prosecution.”

assessee company’s case as per reasons recorded it is apparent and evident and an accepted fact by the Assessing officer that the loose papers were found in the possession of Shri Ramesh Manihar and hence the primary onus of explaining the documents lies upon him and not the assessee company. In any case the impugned noting in loose papers and corresponding figures ascribed upon it can at best be described as ’dumb’ documents that suffer from the lack of corroboration. The assessee company relies upon the Judgments of the Hon'ble Delhi High Court in CIT Vs. Vatika Landbase [2016] 383 ITR 320 (Delhi) which state that the documents like projection statements found during search can be at best termed as ‘Dumb Documents’ which in the absence of corroboration cannot be relied upon as substantive evidence and in CIT v. S.M. Aggarwal [2007[ 293 ITR 43 (Delhi), it was held that seized documents without corroborative evidence are to be considered ‘Dumb Documents’ that cannot be relied upon and made basis of addition. Similar propositions have been laid down by the Hon'ble ITAT, Jaipur Bench in the case of DCIT v. Countrywide Buildstate (P) Ltd. v. [2013] 59 SOT 11 (Jaipur-Trib) and DCIT v. Rajat Agarwal [2012] 144 TTJ 753 (Jaipur – Trib). Thus extracts of the excel Sheet and details from pen-drives are nothing but dumb documents, not admissible as evidence and on the basis of which, no addition can be made in the hands of assessee company.

Sh. Ramesh Manihar were found by the investigation / search team, as alleged in the reasons recorded for issuing a notice under section 148 of Income Tax Act to the assessee company. The facts and submissions are verifiable from the assessment order passed u/s 153A r.w.s. 143 (3) of the I. T. Act, 1961.

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 65B (2).”

were subsequently deleted by the Raipur Bench of the Tribunal (ITA No. 178 to180/RPR/2014 dated 01.07.2019) and it was observed by the Tribunal that no material was found to show that the amount contained in the data was paid by the assessee firm at any point of time. Resultantly, in the absence of any corroborative evidences no addition can be made.

with whom transactions were undertaken by him. Thus, the possibility of Ramesh Manihar giving loan in cash to different persons out of his own cash accumulation but mentioning name of some other persons to come clean at any point of time cannot be ruled out. In the reply to question number 31 Ramesh Manihar expressly stated that the excel sheets consisting the details of different persons such as name, address, phone numbers etc. were only prepared for the purpose of sending invitation cards. The same has been prepared and maintained by the receptionist. That the same has no link what so ever with the regular business carried out by him, including any records maintained thereon. Ramesh Manihar in his statements u/s 132 (4) specifically admitted cash loans belonging to him. Therefore, when Ld. A.O. is treating the amount belonging to assessee company, heavy onus lies on Ld. A.O. to prove the same.

of alleged payment. The SLP filed by department was dismissed by Hon'ble Supreme Court.

“5. We have heard Mrs. Kavin Gulati, learned senior counsel appearing for the assessee company, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue. 6. According to us, not allowing the assessee company to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the & CO. No. 03/JP/2020 34 M/s Dangayach Hotels Pvt. Ltd. impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee company was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee company disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee company. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee company. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their expenses-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.

passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view of the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice.”

addition of Rs. 4,40,00,000/- made by Ld. AO. Thus, it is requested to that order of ld. CIT(A) on this ground may kindly be upheld.

parties and it has earned interest thereon and the same has remain unaccounted in assessee company’s books of accounts.

“Where in the financial year immediately preceding the assessment year, the assessee company has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee company offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee company of such financial year.”

group to third parties. And once it is established that these two conditions are satisfied regarding money so invested belongs to the assessee company and making investment by the assessee company by way of cash loans and not recording in its books of accounts, in such a situation, an opportunity may be provided to the assessee company calling for its explanation about the nature and source of such investment. And where either no explanation has been furnished by the assessee company or the explanation so offered is not found satisfactory in the opinion of the Assessing officer, the said investment may be deemed to the income of the assessee company for such financial year. Looking at it from another perspective, we find that where in response to show-cause notice, the assessee company had categorically denied making any such investment through Ramesh Manihar Group and then, in such a scenario, how can the assessee company lead any evidence in support of a transaction which it denied having executed and undertaken at first place. Therefore, we agree with the contentions advanced by the ld A/R that the initial onus lies on the Assessing officer to establish through positive evidence that the assessee company has infact invested the money by way of cash loans through Ramesh Manihar Group and the amount so invested belongs to the assessee company and therefore, we believe that merely stating that the same has not been recorded in the books of accounts so maintained by the assessee company is not sufficient enough to discharge the initial burden cast on the Assessing officer.

the information and other material/documentation available with the Assessing officer prior to initiation of the reassessment proceedings as well as analysis/examination thereof during the course of reassessment proceedings and besides, other information/documentation relied upon by the Assessing officer during the course of reassessment proceedings to arrive at his findings and which forms the basis of subject addition of undisclosed investment in the impugned order. These include information received from DCIT Central Circle-3 Jaipur prior to recording of reasons and issuance of notice u/s 148, copy of extracts of excel sheets/data found in 18 pen drives during the course of search u/s 132 from the premises of Shri Ramesh Manihar and found relevant to the assessee company, copy of statement of Shri Ramesh Chand Maheshwari alias Shri Ramesh Manihar recorded during the course of search u/s 132(4) dated 7.01.2016, copy of statement of Shri Ramesh Chand Maheswari alias Shri Ramesh Manihar subsequently recorded u/s 131 dated 8.11.2017.

transactions. Thereafter, talking specifically about certain transactions, it has been stated that these transactions have been noticed regarding the assessee company wherein the assessee company has paid cash loans of Rs 25 crores to various persons through Ramesh Manihar group and has earned interest on the said amount. If we look at the data so provided in form of a table in the information so received from DCIT Central Circle-3 Jaipur and as also recorded in the reasons by the Assessing officer, we find that it list down certain transactions on various dates and has various columns with heading “T”, “@”, “AT” and certain figures have been stated under each heading corresponding to various dates, and thereafter, has two columns with heading “from” and “TO” wherein under column “from”, “HMD” has been stated and under column “TO”, certain names again in abbreviated form has been stated. On perusal of the said data, it is not discernible as to what kind and nature of transactions the said data depicts as everything is in abbreviated form, what “T” stand for, what “@” stand for, what “AT” stand for, what “HMD” stand for, what is the linkage of “HMD” with other persons whose name are again written in abbreviated form, and how this data and so called transactions are related to the assessee company and how the figures so depicted represent and add up to a figure of Rs 4.4 crores in form of cash transactions are again not discernable even from close reading of the said data. Thereafter, it has been stated that the details of the aforesaid lender are as per Annexure 2 of the supplementary report and the same has been reproduced in form of another table, under the heading “codework in master Jagat.xlsx”, “HMD” has been written; under the heading “name of the lender”, Hari Mohan” has been written; under the heading “related data & CO. No. 03/JP/2020 42 M/s Dangayach Hotels Pvt. Ltd. of the lender”, “Jagdish ji” has been written; under the heading “From and To” Group.xlsx”, name of following entities namely Green Fire Exports, Dangayach Hotels P. Ltd, Kamlesh Dangayach, Serveall Land Developers P. Ltd, Emsaru Constructions P. Ltd., Green Star Constructions P. Ltd., Serve All Land Developers Pvt. Ltd have been stated; thereafter, mobile number and two PAN numbers have been stated. We find that the said data and information so contained therein is unclear, vague, in abbreviated and codified form and points mainly to a person by name of “HMD” whose name found mention in both the tables and not the assessee company and therefore the said data per se on a standalone basis cannot constitute as tangible and cogent material/evidence in possession of the Assessing officer establishing the fact that it is the assessee company which has lent its money in cash through Ramesh Manihar Group unless the same is analysed and examined thoroughly and necessary linkage is established with the assessee company.

admittedly stated in code name or abbreviated form and it has been claimed by the Revenue that “HMD” stands for the “Hari Mohan Dangayach”. The said data was then compared with data in other pen drives namely “from and two group.xlsx”, where full name of the assessee “Hari Mohan Dangayach” is mentioned along with his promoter company names of Green Fire Exports, Dangayach Hotels P. Ltd, Kamlesh Dangayach, Serveall Land Developers P. Ltd, Emsaru Constructions P. Ltd., Green Star Constructions P. Ltd., Serve All Land Developers Pvt. Ltd. Further, Pan No. of the assessee company was also written in the excel file. The Assessing officer has further stated that on examination of these pen drives, it is found that the amount of transactions were mentioned after suppressing five zeros and different individual entries totaling to Rs 440 actually means and reflect a total figure of Rs 4.4 crores. The Assessing officer has thereafter referred to the statement of Shri Ramesh Chand Maheshwari recorded u/s 132(4) and subsequently u/s 131 during the course of his assessment proceedings and also the application filed by Ramesh Manihar Group before the Settlement Commission where they surrendered their commission income on such unrecorded and unaccounted transactions and due taxes have been paid. Basis the same, the AO has reached his final conclusion and recorded a finding that the assessee i.e, M/s Dangayach Hotels Pvt. Ltd” through its director Shri Hari Mohan Dangayach (HMD) had advanced a sum of Rs 4.4 crores in cash which is not recorded in its books of accounts through Ramesh Manihar group @ 0.70% interest and the same was thus brought to tax. & CO. No. 03/JP/2020 44 M/s Dangayach Hotels Pvt. Ltd.

company and the same have actually been undertaken by the assessee company through Ramesh Manihar Group and the contents therein are found as correct and authentic and stand duly corroborated by independent evidences.

“iz’u 30 ryk’kh ds nkSjku vkids dsfcu ls 18 iSu MªkbZOl feyh gS tks fd AS Exh-1 ls AS Exh.18 rd vafdr dh xbZ gSA bu PEN Drives esa dbZ Excel Files tSls fd mnkgj.k ds rkSj ij A44xX.AS Exh.1 File name NOV JAGAT, Annex. AS Exh. 2 File name AT-UPT030-NOV FOR UPDATE o Annex. AS Exh.8 File name AX-UPTO 30-NOV FOR UPDATE ikbZ xbZ gSA mijksdr fy[khr rhuksa EXCEL Files ds fizaV vkmVl mnkgj.k ds rkSj vkidks fn[kk, tk jgs gSA d`i;k buesa vafdr ENTRIES dks foLrkj iwoZd le>kb,\ mRkj eSusa mijksDr rhuksa EXCEL QkbZyksa ds fizaV vkmVl ns[k fy, gSA buesa ntZ izfof"B;ksa dh tkudkjh eSa iwoZ esa iwNs x, iz-la[;k 20]21]22]23]24]25 o 26 ds mrj esa igys gh crk pqdk gwWaA ;g lHkh transactioons ,d gh izd`fr ds gS vkSj dS’k yksu ds ysu nsu ls lacaf/kr gS vkSj buesa vafdr jkf’k;kWa 1000@& ds :i esa gS tSls 50 dk eryc 50]000@& :i;s 200 dk eryc 2]00]000@& :i;s gSA vr% esjk tckc mijksDr iz- ds mrjksa ¼20 ls 26 rd½ tSlk gh ekuk vkSj le>k tkosaA vkSj lHkh 18 PAN DRIVES esa ,d gh izdkj gh ;kuh dS’k yksu dh izfof"V;kWa ntZ gSA iz’u 31 vkids }kjk dS’k yksu ds ysu&nsu ls lacaf/kr lHkh nLrkostksa esa vafdr ntZ fofHkUu uke ftuesa ls dqN dksM Hkk"kk esa Hkh gS] ;g crk;k x;k gS fd ;g yksx NksVs&eksVs foØsrk@;k O;kikjh gSA bl laca/k esa vkidks crk;k tkrk gS fd vkids OFFICE tks fd 203, jruklkxj] tkSgjh cktkj t;iqj esa fLFkr gS] ogkWa & CO. No. 03/JP/2020 48 M/s Dangayach Hotels Pvt. Ltd. ls losZ dh dk;Zokgh ds nkSjku fjlsI’kfu"V ¼Receptionist½ ds dEi;wVj ls ,d Excel QkbZy feyh gS ftlesa fd dbZ O;kikfj;ksa ds uke o irs fy[ks x, gSA ;g QkbZy “copy of New Update 2015 Neha ds uke ls feyh gSA bl QkbZy esa fy[ks gq, uke vkSj vkids dS’k yksu ls lacaf/kr cjken nLrkostksa Annex.AS.Exh.1 ls 18 vkSj Exh.20 bR;kfn esa fy[ks gq, ukeksa ls feyrs gS vkSj ,slk yxrk gS fd ,d gh O;fDr dk uke lHkh dS’k yksu ls lacaf/kr nLrkostksa esa ntZ gSA mnkgj.k ds rkSj ij Receptionist dEi;wVj dh QkbZy Cash loan ls lacaf/kr nLrkostksa esa uke ------------------------------------------------------------------ ------------------------------------------------------------- - ¼1½ Rajesh Tambi R Tambi C/0 KL Tambi & co., 1839, 12, Gangour Ka Rasta, Johari Bazar, Jaipur ¼2½ Kamal Chand Surana K Surana C/o Surana Jewellers, B-7E, Surana Enclave, Ram Singh Road, Jaipur (3) Rajesh Dhadda, R. Dhadda C/o R.K. Jewellers, 304, Ratna Sagar MSB Ka Rasta, Johari Bazar, Jaipur. blh rjg ls vkidks dbZ mnkgj.k fn[kk, tk jgs gSA bl ckjs esa d`i;k viuh fVIi.kh nhft,\ mRkj 31 ;g ,d egt brsQkd gSA Receptionist ds computer dh QkbZy esa vafdr uke o irs Greeting Card, Invitation Card oxSjg Hkstus ds fy, fy[ks x, gSA budk O;kikj o Account ls dksbZ laca/k ugh gSA”

word and names as found in various pen drives/excel files found in the receptionist’s computer, he has stated that the name and address so found in excel files in the receptionist computer was prepared for the purpose of sending greetings/invitation cards and has no linkage with the accounts and business dealing. Finally, in reply to Q. No. 36, we find that he has put forth his willingness to surrender the undisclosed investment in the form of cash loans and also the incidental interest income as part of his income. We therefore find that in his statement recorded u/s 132(4), Shri Ramesh Chand Maheshwari has talked about loan financing through formal banking channels and loan financing in form of cash. As far as loan financing in cash is concerned which is under examination before us, the Investigation officer has asked him series of questions and confronted him with the pen drives so seized during the course of search and Shri Ramesh Chand Maheshwari has stated clearly and consistently that loan financing has been done jointly with Manmohan Bangla in their personal capacity where their own money is lent on interest to various parties from time to time and has explained the modalities of such cash financing and how the accounts thereof are maintained in computers and pen drives. Therefore, we are unable to understand as to how the Assessing officer has reached to a conclusion that basis such statement recorded u/s 132(4) that Shri Ramesh Chand Maheshwari and his partner Shri Manmohan Bagla were involved in cash loan transactions where the amounts were taken in cash from the lenders and the same was advanced to the borrowers in cash and have earned commission income on these transactions, and has recorded a consequential finding that since & CO. No. 03/JP/2020 50 M/s Dangayach Hotels Pvt. Ltd. name of “HMD” is found in the excel sheets, it represent the assessee company through its director, Shri Hari Mohan Dangayach (HMD) and the assessee company has made the transactions of lending unaccounted money through the Ramesh Manihar group and earned interest income thereon. We therefore find that there is a clear disconnect between the findings of the AO and the statement of Ramesh Chand Maheshwari recorded on oath u/s 132(4) of the Act, and data so found in the pen drives which is claimed by the AO as relating to cash loan financing by the assessee company through Ramesh Manihar cannot thus be held to be corroborated by the statement of Shri Ramesh Chand Maheshwari recorded under Section 132(4) of the Act.

whatever amount was given as cash loans was his and Manmohan Bangla’s own money which is given on interest and which on receipt, is again given on interest. We therefore find that there has been a change in stand of Shri Ramesh Chand Maheshwari where even in respect of cash loan financing, he has stated that he acts as a mediator and facilitator between the lenders and borrowers and thus earns commission income instead of interest income on amount advanced in their personal capacity as stated earlier. Basis such statement and filing of petition before the Settlement Commission where these cash loan financing transactions have been claimed and shown as transactions undertaken by Shri Ramesh Chand Maheshwari on commission basis, the AO has taken cognizance of the same and held that since name of “HMD” is found in the excel sheets, it represent the assessee company through its director Shri Hari Mohan Dangayach (HMD) and the assessee company also made his transactions of lending unaccounted money through the said group and earned interest income thereon. We therefore find that there is a total disconnect and variance between the two statements and change of stand of Shri Ramesh Chand Maheshwari in his statement recorded u/s 132(4) and the statement subsequently recorded u/s 131 of the Act after a gap of almost 21 months and the Assessing officer in the instant case has effectively placed reliance on the subsequent statement recorded u/s 131 ignoring the earlier statement recorded u/s 132(4) of the Act.

Revenue and appropriate authorities to ponder and examine, and is in any case beyond the scope of impugned matter under consideration, the question that arises for consideration is whether the Assessing officer can be held justified in placing reliance on such shifting stand of Shri Ramesh Chand Maheshwari in his own two statements which put a question mark on reliability of his statements and can it be said that the data so found in the pen drives relates to cash loan financing of various lenders stand corroborated by the statement of Shri Ramesh Chand Maheshwari recorded under Section 131 of the Act. The assessee company has also challenged the same stating that such statement was never confronted to it during the course of reassessment proceedings and even an opportunity of cross- examination of Shri Ramesh Chand Maheshwari so demanded was not provided by the Assessing officer.

categorically referred the name of the assessee company or that the assessee company provided cash loans through his Group to different persons. Therefore, the finding of the AO that data so found in the pen drives relates to cash loan financing by the assessee company through Ramesh Chand Maheshwari stand corroborated by the statement of Shri Ramesh Chand Maheshwari recorded under Section 131 of the Act cannot be accepted.

providing an opportunity of cross-examination. The assessee company is not privy to the application filed before the Settlement Commission and proceedings before the Settlement Commission and therefore, the findings of the Settlement Commission cannot be said to bind the assessee company and for that matter, the jurisdictional Assessing officer who has to record his own independent findings considering the facts and circumstances of the present case. We therefore agree with the findings of the ld CIT(A) that mere admission by one person before the Settlement Commission cannot bind the another person in absence of any nexus between the person admitting and the other person.

adverse inference as regards the investment made by the assessee company for purchase of the property under consideration and additions made by lower authorities were deleted and the relevant findings of the Coordinate Bench read as under:-

“14. We shall now take up the case of the assessee company on merits and deliberate on the validity of the addition of Rs. 2.23 crore made by the A.O on the ground that the assessee company had made a payment of "on money" for purchase of flats from M/s Lakeview developers. We have perused the facts of the case and the material available on record on the basis of which the addition of Rs. 2.23 crore had been made in the hands of the assessee company. We have further deliberated on the material placed on record and the contentions of the ld. A.R to drive home his contention that no payment of any "on money" was made by the assessee company for purchase of flats from M/s Lakeview Developers. We find that the genesis of the conclusion of the A.O that the assessee company had paid "on money" of Rs. 2.23 crore for purchase of property under consideration is based on the contents of the pen drive which was seized from the residence of an ex-employee of Hiranandani group. We have perused the print out of the pen drive (Page 42 of APB) and find ourselves to be in agreement with the view of the ld A.R that though against the heading "Amount of on money paid" the name, address and PAN No. of the assessee company is mentioned alongwith the details of the property purchased by him, viz. Flat no.2501 in "Somerset" building from Lakeview Developers (a Hiranandani group concern), however, the same would not conclusively prove suppression of investment and payment of "on money" by the assessee company for purchase of the property under consideration. We find that the information as emerges from the print out of the pen drive falls short of certain material facts, viz. date and mode of receipt of 'on money', who had & CO. No. 03/JP/2020 56 M/s Dangayach Hotels Pvt. Ltd. paid the money, to whom the money was paid, date of agreement and who had prepared the details, as a result whereof the adverse inferences as regards payment of "on money" by the assessee company for purchase of the property under consideration remain uncorroborated. We further find that what was the source from where the information was received in the pen drive also remains a mystery till date. We find that Sh. Niranjan Hiranandani in the course of his cross- examination had clearly stated that neither he was aware of the person who had made the entry in the pen drive, nor had with him any evidence that the assessee company had paid any cash towards purchase of flat. We have deliberated on the fact that Sh. Niranjan Hiranandani in his statement recorded on oath in the course of the Search & seizure proceedings had confirmed that the amounts aggregating to Rs. 475.60 crore recorded in the pen drive were the on-money received on sale of flats, which was offered as additional income under Sec. 132(4) and thereafter offered as such for tax in the petition filed before the Settlement commission. We are of the considered view that there is substantial force in the contention of the ld. A.R that mere admission of the amounts recorded in the pen drive as the additional income by Sh. Niranjan Hiranandani, falling short of any such material which would inextricably evidence payment of "on money" by the assessee company would not lead to drawing of adverse inferences as regards the investment made by the assessee company for purchase of the property under consideration. We rather hold a strong conviction that the very fact that the consideration paid by the assessee company for purchase of the property under consideration when pitted against the 'market value' fixed by the stamp valuation authority is found to be substantially high, further fortifies the veracity of the claim of the assessee company that his investment made towards purchase of the property under consideration was well in order. We are of the considered view that though the material acted upon by the & CO. No. 03/JP/2020 57 M/s Dangayach Hotels Pvt. Ltd. department for drawing of adverse inferences as regards payment of "on money" by the assessee company formed a strong basis for doubting the investment made by the assessee company for purchase of the property under consideration, but the same falling short of clinching material which would have irrefutably evidenced the said fact, thus, does not inspire much of confidence as regards the way they have been construed by the lower authorities for drawing of adverse inferences in the hands of the assessee company. We thus are of a strong conviction that as the material relied upon by the lower authorities does not corroborate the adverse inferences drawn as regards the investment made by the assessee company, therefore, the same cannot conclusively form a basis for concluding that the assessee company had made payment of "on money" for purchase of the property under consideration. We thus in the backdrop of our aforesaid observations are of the considered view that the adverse inferences drawn by the A.O as regards payment of "on money" of Rs. 2.23 crore by the assessee company for purchase of Flat No. 2501 from M/s Lakeview Developers are based on of premature observations of the A.O, which in the absence of any clinching evidence cannot be sustained. We thus are unable to subscribe to the view of the lower authorities and set aside the order of the CIT (A) sustaining the addition of Rs. 2.23 crores in the hands of the assessee company.”

Unless such corroborative evidences were brought on record, the present additions are not justified. Nowhere in the excel sheets found during the course of search in case of Ramesh Manihar Group and relied upon by the AO, it could be established that “HMD” as mentioned in those documents stand for the assessee company. No trail of documents or corroborative evidences could be established in this regard. The extracts of the excel sheets on which reliance had been placed were found from the computers of employees of Shri Ramesh Manihar. Those employees were never examined independently by the AO to find out whether “HMD” as mentioned in such excel sheets represent assessee company. There is no positive confirmation or concrete evidence available with the AO, in the form of acceptance by the parties alleged to have received loans that they have actually received loans, in cash, which was provided by the assessee company through Ramesh Manihar Group. Leaving aside a positive confirmation from the recipients of the loan, the AO has not been able to establish even the identity of the persons alleged to have received loans from the assessee company. There is shifting stand of Shri Ramesh Chand Maheshwari in his two statements recorded u/s 132(4) and u/s 131 of the Act. We find that in his latter statement recorded u/s 131, he has stated that cash loan financing is undertaken in their personal capacity where they acted as a mediator/facilitator. This is unlike his earlier statement u/s 132(4) where he had stated that cash loan financing is done jointly with Manmohan Bagla in their personal capacity and whatever amount was given as cash loans was his and Manmohan Bangla’s own money which is given on interest and which on receipt, is again given on interest. We therefore find that there & CO. No. 03/JP/2020 59 M/s Dangayach Hotels Pvt. Ltd. has been a change in stand of Shri Ramesh Chand Maheshwari where even in respect of cash loan financing, he has stated that he acts as a mediator and facilitator between the lenders and borrowers and thus earns commission income instead of interest income on amount advanced in their personal capacity as stated earlier. Even no question was even put to Shri Ramesh Chand Maheshwari as to what “HMD” stand for and there is no response by him either in his entire statement which suggests that the assessee company has advanced cash loan through Ramesh Manihar Group. Therefore, the data so found in the excel sheets doesn’t stand corroborated by Shri Ramesh Chand Maheshwari’s statements as well. Even where the AO wishes to place reliance on such statement recorded u/s 131, neither a copy of said statement was provided to the assessee company nor an opportunity of cross examining Shri Ramesh Chand Maheshwari was provided to the assessee company inspite of specific request made by the assessee company during the course of assessment proceedings. The ld CIT(A) has rightly held that relying upon the statement and not providing cross examination to find out any involvement of the person affected by such statement is a gross violation of principles of natural justice which renders such reliance a nullity and if such statement is discarded, there remain no evidence to hold that the appellant has given any such advance to the tune of Rs. 4.4 crores. Merely extracts of excel sheet do not provide any evidence of the allegation made by the AO against the assessee company. Thus, mere fact that there were certain entries found from record of third party is not sufficient to make addition on the ground that assessee company had made unexplained investments. The ld CIT(A) has rightly held that though cognizance may & CO. No. 03/JP/2020 60 M/s Dangayach Hotels Pvt. Ltd. be taken in respect of entries by third-party in the assessment of other person so as to initiate inquiry for assessment, yet when there is no finding that such entries are in fact pertaining to such third person only which should be emanating from the entries itself or from the person who has recorded such entry, no cognizance can be taken so as to fasten tax liability on such third person.

“8. We have heard rival contentions and perused the material available on record. Undisputedly, on the basis of a print out taken from the computer back–up of Ms. Sandhya Ramchandra, it was concluded by the Assessing Officer that the assessee company has received an amount of Rs. 2,50,000 in cash for & CO. No. 03/JP/2020 61 M/s Dangayach Hotels Pvt. Ltd. appearing as a host at an ICC event in Sidney. It is very much clear that apart from this document, there was no other evidence before the Assessing Officer to indicate that the assessee company has received cash amount in question. It is a fact that in course of search as well as post search proceedings, the assessee company was confronted with seized material and the assessee company categorically stated to have neither appeared as a host in the said event nor received any cash from Matrix. In fact, an Affidavit was also filed on behalf of Matrix categorically stating that no such cash payment of Rs. 2,50,000 was made to the assessee company. Thus, from the aforesaid facts, it is to be seen that the addition was made on the basis of a print out taken from the computer of a third party who happened to be an employee of Matrix and there are no other corroborative evidence brought on record to prove the fact that the payment mentioned in the seized material was actually received by the assessee company. On the contrary, the passport submitted by the assessee company clearly established the fact that neither she had travelled to Sidney in relevant period nor hosted the ICC event for which she was supposed to receive cash payment. It is further relevant to observe, even Ms. Sandhya Ramchandra, from whose computer such print out was taken had stated before the Departmental Authorities that she was not aware of the fact mentioned in the said Annexure as it was for a period prior to her appointment in Matrix. In these circumstances, simply relying upon a untested / unverified document and without any other corroborative evidence to demonstrate that the assessee company has actually received cash payment of Rs. 2,50,000 for hosting an event in Sidney, the addition, in our view, is unsustainable. Therefore, we uphold the order of the learned Commissioner (Appeals) on this issue by dismissing the ground raised.”

Tribunal where it was held that the addition has been made by the assessing officer on the basis of the screenshot of journal entry dt. 4-9- 2007 taken from the tally data in the pen drive found during the course of search and the printout of the details of land which has been reproduced by the assessing officer and other than these two materials, since no evidence has been brought on record by the Assessing officer and since nothing was found during search establishing any investment/payment made by the assessee company, the two evidences relied upon by the Assessing officer, on a standalone basis cannot form the basis for invoking section 69. Therefore, it was held that provisions section 69 are not attracted as neither the Assessing officer discharged the initial burden cast upon him to prove investment nor any material has been brought on record to this effect and additions were held to be rightly deleted by the ld CIT(A) and the relevant findings of the Coordinate Bench read as under:-

“8. The learned counsel of the assessee company submitted before us that in assessment year 2008-09, addition of Rs. 10,06,43,054 comprises of two additions, one of Rs. 7,32,98,821 and the other of Rs. 2,73,44,233. The facts relating to both the additions are different and therefore both these additions need to be adjudicated at length. We observe that the addition of Rs. 7,32,98,821 has been made by the assessing officer on the basis of the screenshot of journal entry dt. 4-9-2007 taken from the tally data in the pen drive and the printout of the details of land which has been reproduced by the assessing officer on page Nos. 2 and 3 of the assessment order as table 1. Other than these two materials, there is no other basis for making addition, which is undisputed fact as per record also accepted by the learned Commissioner Departmental Representative. The assessing officer has made addition invoking section 69. As held inCIT v. Naresh & CO. No. 03/JP/2020 63 M/s Dangayach Hotels Pvt. Ltd.

Khattar (HUF) (supra) and CIT v. Dinesh Jain HUF (supra), the initial burden is on the Revenue to establish that there is any investment, which has not been recorded in books and in respect which the assessee company is not able to give satisfactory explanation to the assessing officer. As rightly contended by learned Authorised Representative of the assessee company, neither the journal entry nor the details of land were reproduced in table 1 on page Nos. 2 and 3 of the assessment order to establish that any investment was made by die assessee company firm. The journal entry dt. 4-9-2007 is only an accounting entry passed for introducing the land as capital contribution by the partners who purchased the lands and therefore, this cannot be considered as evidence of investment. It is undisputed that neither during search nor during the assessment proceedings, any material was found to show that the amount contained in the journal entry was paid by the assessee company firm to anyone at any time. Therefore, only on the basis of journal entry, section 69 could not have been invoked. As regards the details of land given on page Nos. 2 and 3 of assessment order as table 1, it merely contains some details about different lands and it does not contain even a whisper about any investment or payment made by anyone. We observe that the inference has been drawn by the assessing officer only on the basis of the three figures mentioned at the end of the table, on page No. 3 of the assessment order. This, in our considered view, cannot be considered to be evidence of payment/investment. It is undisputed that during search or thereafter during the assessment proceedings, no material was found or brought on record evidencing that the three figures referred to above represent any actual investment/payment by the assessee company. As rightly contended by the learned Authorised Representative of the assessee company, that the details given in the chart are not evidence of any payment/investment. Since no evidence has been brought on record by the assessing officer and since nothing was found during search establishing any investment/payment made by the & CO. No. 03/JP/2020 64 M/s Dangayach Hotels Pvt. Ltd. assessee company, the two evidences relied upon by the assessing officer, on a standalone basis, in our considered view, cannot form basis for invoking section 69. Therefore, we hold that provisions section 69 are not attracted as neither the assessing officer discharged the initial burden cast upon him to prove investment nor any material has been brought on record to this effect.

8.1 A perusal of the journal entry dt. 4-9-2007, which has been one of the basis for addition, shows that through this journal entry, the lands was purchased by the two persons named in the journal entry and was being introduced as their capital contribution in the partnership firm. Since, these journal entries have been relied upon by the assessing officer. Thus, it has remained undisputed that the lands were not purchased by the assessee company but by the two persons as named in the journal entry. When the lands were not purchased by the assessee company firm, any question of payment of “on money” does not arise in the case of assessee company firm. As rightly contended by learned Authorised Representative of the assessee company, that all the lands, except one, described in the assessment order on page Nos. 2 and 3, were purchased prior to formation of the assessee company firm. We observe that in para 3 of the assessment order, the assessing officer has himself mentioned that the assessee company firm was formed on 4-9- 2007. As evident from different entries of land given in table 1 in the assessment order, the date of purchase in all the cases, except in one case, falls prior to 4-9-2007. In other words, the seized material itself shows that the lands were purchased prior to formation of the assessee company firm, in this background also, we fail to see how any case can be made out of payment of “on money” by the assessee company. There is yet another convincing reason that in all the three years under appeal, there were no sales affected by the assessee company firm and the business of the assessee company firm had not even started, & CO. No. 03/JP/2020 65 M/s Dangayach Hotels Pvt. Ltd. which is also evidenced by the profit & loss account of the three years placed at page Nos. 309, 311 and 337 of the paper book. These profit & loss accounts have remained undisputed by the assessing officer. We are inclined to agree with the argument of learned Authorised Representative of the assessee company that when the source of revenue for the assessee company was not there, it cannot be perceived that the assessee company could have earned any undisclosed income and made any undisclosed investment. In CIT v. Smt. P.K. Noorjahan (supra), on behalf of the Revenue, it was argued that the word “may” in section 69 should be read as “shall” against which Hon’ble Supreme Court observed that it was unable to agree. Hon’ble Supreme Court thereafter held that the use of the word “may” clearly indicates that the intention of Parliament in enacting section 69 was to confer a discretion on the Income Tax Officer in the matter of treating the source of investment which has not been satisfactorily explained by the assessee company as the income of the assessee company and the Income Tax Officer is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee company is found to be satisfactory. The question whether the source of the investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case. In that case, the Tribunal held that the discretion had not been properly exercised by the Income Tax Officer and the AAC in taking into account the circumstances in which the assessee company was placed. Hon’ble Supreme Court observed that it did not find any error in the said finding recorded by the Tribunal. In Smt. Rajabai B Kadam v. Asstt. CIT (supra) it was found that the assessee company, who was a minor, was found carrying cash of Rs. 1,18,500 by the police Department. The assessee company thereafter died. In pursuance to the reassessment notice, his mother filed return declaring nil income and she could not explain the money which was recovered from her minor son. Co-ordinate Bench held that there is no material on record to suggest that the & CO. No. 03/JP/2020 66 M/s Dangayach Hotels Pvt. Ltd. minor could earn said money just within a period of 2 months after leaving his school. It was in these facts and circumstances that the addition was held to be not justified, relying upon the decision of Hon’ble Supreme Court in the case of Smt. P.K. Noorjahan (supra). If we apply the ratio of aforesaid two decisions to the facts of the present case, we find that when the source of income/revenue for the assessee company was missing in the sense that the business had not even started during all the three years and since during search, nothing was found to establish that the assessee company had any undisclosed income from any other source, the discretion vested in the assessing officer should have been exercised in favour of the assessee company and the addition should not have been made. We also observe that the assessing officer has not made any enquiry whatsoever from different vendors of the lands and not even from the two persons named in the journal entry, who, as per the journal entry, introduced their lands as capital contribution in the partnership firm. In absence of any enquiry whatsoever, no addition could have been made only on the basis of inference. It is a settled position of law that for making addition under section 69, there has to be some material establishing actual investment and therefore it is not justified to invoke the section merely on the basis of inference.

8.1.1 In view of all the above reasons, we hold that the assessing officer was not justified in making addition of Rs. 7,32,98,821 on account of the lands described on page Nos. 2 and 3 of the assessment order. We, therefore, deem it proper to confirm the findings of learned Commissioner (Appeals) on this issue and hold that he was justified in deleting the addition.

8.2. Next the addition of Rs. 2,73,44,233 comprised in the total addition of Rs. 10,06,43,054, we observe that the addition has been made by the assessing officer on the basis of printout of tally data found in the pen drive seized from the residence of Shri Kishore Atlani. The printout contains details of 32.68 acres of land & CO. No. 03/JP/2020 67 M/s Dangayach Hotels Pvt. Ltd. and the details have been reproduced as table 2 in the assessment order, on page Nos. 4 and 5. We observe that apart from this printout found during search, no other corroborative material in the form of cash book ledger etc. was found during search. A perusal of the details shows that the lands were purchased over a period of three years, from different persons. It is not the case of assessing officer that details of payment of individual lands were also found during search. What is to be noted is, apart from the chart found, no other corroborative evidence was found during search. It is not the case of assessing officer that any books of accounts and other details supporting the entries in the printout were found during search or brought on record during the assessment proceedings. It is not also the case of assessing officer that any other details in respect of different lands like details of payment to the persons etc. were found during search. Although it is stated that tally data was found in the pen drive, corresponding books of accounts in such tally data were not found as there is no reference of any such corroborative books in the assessment order. We agree with the argument of learned Authorised Representative of the assessee company that if any unaccounted investment was made in respect of so many lands, from so many persons that too spread over a period of three years, some other corroborative material like account of the parties, details of individual payments etc. must also have been maintained and found during search and in absence of any such corroborative material, the contents of the pen drive/chart does not inspire confidence. It is also worth noting that there is no finding of fact recorded by the assessing officer about any unaccounted assets or unaccounted expenses or excess cash found during search. Considering all the facts, it comes out that apart from the printout in the form of chart, there is no other evidence in support of the addition made by assessing officer and the chart, by itself, does not constitute any material/evidence to establish unaccounted payment. As held by us earlier, for invoking section 69, the initial burden is on the & CO. No. 03/JP/2020 68 M/s Dangayach Hotels Pvt. Ltd.

Revenue to establish that any unaccounted investment was made by the assessee company. This mandatory requirement of law is missing in the present case and so the addition is not justified.

8.2.1 It is seen that the details of the lands are contained in the printout obtained from the pen drive. When complete details were available with the assessing officer, the assessing officer could have conducted independent enquiry from the vendors, which also does not appear to have been done. On the contrary, the assessee company submitted affidavit of two vendors before the assessing officer and the assessing officer did not even cross- examine them to verify the facts. In absence of any cross examination of the deponents of the two affidavits, the contents of the affidavit become conclusive. 8.2.2 While considering the explanation of assessee company about the entries in the pen drive being fake, made by one Shri Ajay Atlani, it is noteworthy to consider that no enquiry whatsoever appears to have been conducted either from the said Shri Ajay Atlani or from Shri Kishore Atlani, from whose residence the pen drive was found. The assessee company explained the circumstances under which the entries were made in the tally data in the pen drive by Shri Ajay Atlani. All these facts and assertions have remained uncontroverted. The assessee company explained some of the contents of the tally data in pen drive to demonstrate that the entries found in pen drive are fake. Before us. during the course of hearing, learned Authorised Representative of the assessee company filed a summarised form of his explanation in the form of a chart. The explanation given to the assessing officer was to the effect that some of the entries in the pen drive do not match with the entries in regular books in the sense that in some cases, payments are mentioned to be made in cash in the pen drive while such payments are established to have been made through cheque in the regular books; that land situated at Labhandi is shown to have been sold to one Shri Suresh G. Atlani while actually, the land was sold to & CO. No. 03/JP/2020 69 M/s Dangayach Hotels Pvt. Ltd. one Shri Vijay Kumar Motwani through registered sale deed, copy whereof has been placed at page Nos. 161 to 176 of paper book; that likewise, some entries were found in the pen drive which mentions that the payments were made through Bank of Baroda and State Bank of India, Pandri Tarai Branch while the assessee company explained that nobody in the group of assessee company had any account in any branch of Bank of Baroda and that the cheque number in respect of payment made through State Bank of India did not relate to any bank account held by the concerned person in that bank and similarly other many discrepancies were pointed out before the assessing officer. All these explanations were rejected by the assessing officer without giving any reason whatsoever. However, for rejecting the explanation of assessee company, it was incumbent upon the assessing officer to have given detailed reasons for not accepting the same and in absence of any reason given, we do not approve the action of the assessing officer.”

In the result, both the appeal filed by the Revenue and cross- objections filed by the assessee company are dismissed in light of aforesaid directions.