JUGALKISHORE BANARASILAL SARAF,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX- CENTRAL CIRCLE-2(1), MUMBAI, MUMBAI

We have heard counsels for both the parties, perused the material placed on record, judgment cited before us and also the order passed by the revenue authorities. From the records, we notice that a search and seizure action u/s 132 of the Act was carried out in the case Polisol-Apurva / Hemani / LNG Group on 18.11.2021 by Investigation Wing, Vapi. During the search proceedings some excel sheets were found from the employee Shailesh Desai which depict name of ‘Artek Saraf’ which describe cash loan and interest working relating to the assessee at page No. 11 to 14 of E-3 (Excel sheet), Further statement of Shailesh Desai was recorded wherein vide Q.13 he confirmed the excel sheet relating to cash loan and interest to the assessee. Therefore the addition of Rs. 1,00,00,000/- was made on account of cash loan given to Shailesh Desai and Rs. 25,16,782/- on account of cash interest received was made u/s 69A of the Act which was deleted the same by Ld. CIT(A).

Now after hearing the parties at length, we found that the sole basis for making the additions in the hands of assessee is the ‘excel sheet’ found during the course of search. In this regard, the AO relied on Q.13 of statement of Shailesh Desai which pertain to Excel Sheet No. E-4 whereas the excel sheet referred in respondent case is Page No. 11 to 14 of E-3 (Excelsheet) ‘Artek Saraf’. Hence, no statement of Shailesh Desai was recorded on excel sheet No. E-4. Further in Q.13 of the statement he has nowhere accepted the cash loan from the assessee. Therefore, reliance of AO on the statement of Shailesh Desai is ill founded. Even nowhere in statement of the Shailesh Desai recorded u/s 132(4) of the Act he accepted that assessee had given cash loan to him and paid interest on that. Apart Shailesh Desai had filed an affidavit in support that no cash loan was ever received from the assessee and the same was submitted during the cause of assessment proceeding for A.Y 2019-20, A.Y 2020-21 and A.Y 2021-22. Even for A.Y 2022-23, the AO himself recorded statement of Shailesh Desai u/s 131 on 12.02.2024 at back of the assessee wherein also the said Shailesh Desai denied having received any cash loan from the assessee.

Further nowhere in excel sheet copies the name of assessee was mentioned, which could give inference that sheet pertain to the assessee. The excel sheet named as ‘Artek Saraf’which AO decoded the word ‘Artek’ as ‘Artke Surfin Chemicals Ltd’ and on perusal of MCA portal it was found that Artek Surfin Chemicals Ltd has only one director namely ‘Harivats Saraf’. Thus the real identity of whom this excel sheet pertain was not duly established. Thus in our view lose excel sheet found from third party cannot be relied upon for making addition in the hands of assessee without any corroborative evidence.

From the totality of the facts the said excel sheet does not indicate assessee’s name. Even excel sheet table is not showing that the entries are of cash loans as nowhere word cash is mentioned. Thus this document can be considered as ‘dump document’ without cogent evidence and no addition can be made on the basis of the dumb document.

It is important to note that AO has not carried out any independent enquiries, more particularly when the assessee had categorically denied the transactions and had provided affidavit of Shailesh Desai.

Even otherwise during the course of assessment the assessee had asked for cross examination of parties whose deposition was relied upon by AO vide letter dated 29.01.2024. But, no such permission was granted thus denial of cross examination of parties violates the principal of natural justice. As per settled law no addition could be made unless the assessee is put to notice about such adverse materials and allowing cross examination of the parties whose statement is root cause of saidaddition. Reliance relied in this regard is placed upon the decision in case of Andman Timber Industries 281 CTR 241 (SC)

It is also important to mention here that unsigned excel sheet was neither found at the premises of the Assessee nor he was author of these sheets. Therefore, no presumption u/s 132(4A) r.w.s. 292C be drawn and even there is no direct link between the entries in the said excel sheet and the assessee, even Shailesh Desai had not taken the name of the Assessee. Thus in the absence of such a crucial linkage, addition cannot be made in the case of the Assessee. Reliance in this regard is placed upon the decision in the case of Kailashben Manharlal Choksi Vs. CIT, [2008] 174 taxman 466, held that “statement recorded u/s 132(4) during the search operation is not voluntary statement, and may not be given weightage at the time of assessment after search”

Another important fact was brought to our notice, during the course of hearing that even the penalty levied u/s 271D on allegation of receiving cash loan from assessee was deleted in the hands of Shailesh Desai by Ld. CIT(A) vide its order dated 27.12.2024. Thus, when the excel sheet was not treated as corroborative evidence in hands of party from where such sheet was recovered, then the same cannot be relied upon in making addition in the hands of assessee.

After considering the totality of the facts and circumstances and while relying upon then decisions in the following cases:

Ground No. 4, raised by the revenue relates to challenging the order of Ld. CIT(A) in restricting the additions made by the AO with regard to indexed cost of improvement.

We have heard the counsels for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. From the records, we found that Ld. CIT(A) dealt in this ground in detail in para 10 to 10.2 which is reproduced herein below:

After having gone through the facts of the present case, we found that AO has also admitted that the assessee had incurred cost of improvement since the land was situated at hills of Lonavala which requires more cost in terms of transportation and labour for doing land improvement. Although assessee has failed to submit the complete details, nevertheless under the peculiar facts and circumstances Ld. CIT(A) has rightly restricted the disallowance @ 25% as the rate of 50%. Consequently, this ground raised by the revenue stands dismissed.

No new facts or circumstances have been placed on record before us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, we see no reasons to interfere into or to deviate from the lawful findings so recorded by Ld. CIT(A). Hence, the grounds raised and by the revenue stands dismissed.

Since the additions made in these appeals also pertains to the same excel sheet and also the same assessee therefore our decision in will apply mutatis mutandis. Consequently, the appeals filed by the assessee is allowed.

In the result, the appeal filed by the revenue stands dismissed and the appeal filed by the assessee stands allowed.