RAJESH MOHANBHAI PATEL,AHMEDABAD vs. THE ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD

आयकरअपीलीयअधिकरण, अहमदाबादनयायपीी IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’C’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI TR SENTHIL KUMAR, JUDICIAL MEMBER

Assessment IT(SS)A No. Name of Appellant Name of Respondent Sr. Year No. Rajesh Mohanbhai Patel, 31, Sujan Bunglow, The Assistant No.138 & 2014-15 Nr. Shreyas Commissioner of 1-2. 139/Ahd/2021 & Foundation, Income Tax, 2015-16 Ambawadi Central Circle-1(2), Ahmedabad-380006. Ahmedabad PAN: AGCPP8630R Rajesh Mohanbhai Patel, The Deputy 31, Sujan Bunglow, No.168 & 2014-15 Commissioner of Nr. Shreyas 3-4. 169/Ahd/2021 & Income Tax, Central Foundation, 2015-16 Circle-2(4), Ambawadi Ahmedabad Ahmedabad-380006. PAN: AGCPP8630R Ghanshyam Mohanbhai Patel, Prop. Of Suryam The Deputy Developers, 901, Commissioner of Suryaketu Towers, Nr. 5. No.68/Ahd/2021 A.Y. 2014-15 Income Tax, Central Sambhav Press, Circle-2(4), Junges Bunglow, Ahmedabad Bodakdev, Ahmedabad- 380015. PAN: ABBPP5403G Assessee by : Shri Biren Shah, A.R Revenue by : Shri Kamlesh Makwana, C.I.T DR सुनवाईकीतारीख/Date of Hearing : 22/11/2023 घोषणाकीतारीख/Date of Pronouncement: 31/01/2024 आदेश/O R D E R PER BENCH: The captioned appeals have been filed at the instance of the Revenue and the Assessee against the separate orders of the Learned CIT(Appeals)-11,

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Ahmedabad, arising in the matter of the assessment order passed under s. 143(3) r.w.s. 153A of the Income Tax Act, 1961 (here-in-after referred to as "the Act").

3.1 During the search at the residence of the assessee, certain loose papers/sheets marked as page 33 to 41 of annexure A-1 in the form of printed copy of computerized data was found. The impugned sheet contained details of cash transactions, being cash receipt and cash payments for the period pertaining to FYs 2013-14 and 2014-15. The amount, dates and names etc. were noted in coded form in such impounded sheet. However, the AO decoded the same and accordingly worked out the amount of cash payments and receipt for the year under consideration i.e. A.Y. 2014-15 at Rs. 9,36,64,261/- and 8,59,80,251/- respectively.

3.2 The assessee before the AO submitted that, in his statement recorded under section 132(4) of the Act dated 31st January 2015, he has explained that impugned loose sheets/papers found from his residence are rough papers and he

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is not aware of noting made on those papers. Therefore, no inference should be drawn from these papers unless any direct or indirect connection is established to his audited books of account.

3.3 However, the AO found that the loose sheets/papers were found from the assessee’s residence, therefore the presumption under section 292C of the Act is drawn that the same belongs to the assessee and content of the same are true. Further, the impugned sheets were printed copy of computerized data wherein cash transaction were noted in the form of opening balance, cash in, cash out and at the end total of cash in and cash out. The sheets also contain check marks by the pencil as usually done for accounting checks. Therefore, the same cannot be said to be a rough noting. Furthermore, there is correlation of entries recorded on those sheets, such as there is entry noted as “GMP Singapore Exp” for Rs. 2.85 Lakhs as on 7th June 2014 and on the other hand, Shri Ghanshayam Mohanbhai Patel has made investment in Singapore based company. Thus, the expense recorded for Rs. 2.85 Lakhs corelates. Likewise, the assessee has carried out his share trading activity through the broker namely Natraj Share Broker and the seized loose sheets contains the entry of cash payment of Rs. 14,198/- on 25-2- 2014 to Natraj Share Broker.

3.4 Thus, the AO in view of the above held that the loose sheets found from the residence of the assessee are not rough noting as claimed by the assessee but the same represent unaccounted cash receipts and payments of the assessee. The AO considering the facts i.e. the cash payments of Rs. 9,36,64,261/- is higher than the cash receipt, held that the amount of cash payment is to be added to the total income of the assessee as unexplained cash and accordingly added the same.

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5.1 The assessee further submitted that the AO has not provided any basis for interpreting/decoding of contents recorded on seized papers. The AO interpreted the ‘GMP” noted on such papers as transaction with Shri Ghanshayambhai Mohanlal Patel who is a good friend. In the ordinary course of business, he has advances money to Shri Ghanshayambhai M Patel as and when required on interest, but all the transactions were carried out through banking channel and duly recorded in his books of accounts as well as in books of Shri Ghanshayam Bhai Patel. Likewise, page 34 of seized paper contains an entry as “Insurance Range Rover 22.1” against which the amount noted as 43.00. By the logic adopted by the AO, the impugned entry is to be interpreted as range rover insurance paid in cash for Rs. 4300/- only whereas on the other hand, the actual insurance premium of Range Rover stands at Rs. 2.05 Lakh paid through banking channel which is duly recorded in books. Same page also contain “Jagguar Installment” and the AO interpreted that installment of car paid in cash outside books whereas car installment regularly paid through banking channel which was duly recorded in books. Thus, the inference drawn by the AO based on loose papers are misplaced. The assessee also submitted that no working and the basis of amount derived by the AO has been provided.

5.2 The assessee further submitted that after search, he enquires from his staff about seized papers being an office boy who was also doing accounting work has admitted that he has maintained such rough noting for accounting purpose. To this effect the assessee submitted the affidavit of his office boy.

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13.1 After going through the assessment order, finding of learned CIT-A and the arguments advanced by the ld. AR and the ld. DR, which have been elaborated in the preceding paragraph, the 1st controversy arises for our adjudication whether the documents impounded during the search represents the dumb documents and therefore based on the same no addition is warranted in the given fact and circumstances. In this regard, we have perused the documents impounded during the search and notes certain glaring facts as detailed below: i. These are recorded in a systematic manner in Excel form. ii. In many cases, the dates are appearing. iii. There are appearing total receipts and payments with the closing balances. iv. The entries reflected in the impounded documents are written in coded form. v. There are several entries written in coded word as “GM” which were assumed by the AO as Shri Ghanshayam Mohanbhai Patel, a close friend of the assessee having several transactions entered with the assessee. vi. Sheets also contain entries with respect to car such insurance , car repair, and parking vii. There were several entries as interest and commission in payment side to different parties whose names were in coded form. 13.2 From the conjoint reading of the above facts, it is transpired that these documents contain certain relevant information which should be meaningful. But the difficulty is that all the entries are written in the coded form and therefore the same requires to be decoded in scientific and meaningful manner so as to draw a logical inference based on these entries recorded in the impounded documents. Certainly, the primary onus lies upon the assessee to explain the entries in a meaningful manner.

13.3 The primary contention of the assessee is that these seized documents were dumb documents which were prepared by his office boy, involved in

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accounting work, for the purpose of his reference. To this effect, the affidavit of the accountant was also furnished wherein it was explained as under: As, I was assisting to main accountant therefore these sheets were helpful to me in remembering the transaction and at the time of finalization of accounts. That these sheets are maintained in a rough manner so that I cannot forget anything to be endorsed at the time of accounting to the main accountant. Thus, these sheets were provisional and not final one. After finishing the accounting of the amounts enumerated in the sheets into the respective ledgers, I used to destroy it as the same are being entered in the accounts of Shri Rajeshbhai Patel. That the sheets maintained by me were for my own purpose and it was nothing but rough papers for my personal ease. 13.4 Likewise, a paper book containing pages from pages 68 to 362 was also prepared explaining each and every entry recorded in the impounded documents. But the irony is this that none of the authorities below has gone in the understanding of the explanation furnished by the assessee. In other words, the explanation furnished by the assessee has not been verified either by the AO/ ld. CIT-A during the assessment proceedings or during the appellate proceedings. Thus, in the absence of such verification, no infirmity in the explanation furnished by the assessee was pointed out by the authorities below. Accordingly, a question strikes to our mind whether we should set aside the matter to the file of any of the authorities below for the necessary verification. Before doing so, in the interests of justice and fair play and to avoid multiple proceedings, we thought fit to verify the contents of the explanation furnished by the assessee in the form of paper book on random basis. On verification of the explanation furnished by the assessee, we find that most of the entries reflected in the impounded documents were claimed to be carried out through the banking channel which were duly disclosed in the books of account maintained by the assessee and audited under section 44AB of the Act. In our considered view, the entries which have been carried out through the disclosed bank accounts or other entries duly recorded in the books cannot be considered as income based on impounded documents. As such the entries appearing in the bank statement, duly recorded in books, the same should be made subject to verification as per the provisions of law

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independent of the seized documents. As such, no adverse inference can be drawn about such entries recorded in the impounded documents which were carried out through the banking channel and duly recorded in audited books of account.

13.5 Likewise, the some of the entries contained in the seized paper not explained by the assessee and which do not give to the meaningful inference after decoding, the same cannot be made subject to the additions until and unless these are not corroborated by some material information. Even the CBDT time to time has discourage the assessing authority to make addition in arbitrary manner or based on statement or surrender during the course of search/survey. In this regard the instructions issued by the CBDT in F.NO. 286/2/2003-IT(Inv.11) dated 10-03-2003 and F.NO. 286/98/2013-IT(Inv.11) dated 09-01-2014 would be relevant to be looked into. Further the Higher Judicial forum has time and again held that the no addition merely on the basis of noting in diary/loose paper etc. can be made unless other corroborative material brought on record by the revenue to hold that the assessee earned unaccounted income. In this regard reference can be made to judgment of Hon’ble Gujarat High court in the case of CIT vs. Maulikkumar K Shah reported in 307 ITR 137 wherein it was held that: “Notings in the seized diary found from the premises were the only material on the basis of which the Assessing Officer had made the impugned additions. The Assessing Officer had not brought any corroborative material on record to prove that such sales were made and 'on-money' was received by the assessee outside the books of account. The Assessing Officer had not examined any purchaser to whom the sales of shops were effected. Onus heavily lay on the revenue to prove with corroborative evidence that the entries in the seized diary actually represented the sales made by the assessee. Such onus had not been discharged by the revenue. Mere entries in the seized material were not sufficient to prove that the assessee had indulged in such a transaction. The inference of the Assessing Officer that the assessee has received 'on-money', was merely based on suspicion and surmises and there was no material whatsoever to support the conclusion of the Assessing Officer that the assessee had in fact received any 'on- money'. The addition as made by the Assessing Officer being based on mere presumptions and assumptions and without any corroborative evidence, could not be sustained. 13.6 We also draw support and guidance from the order of Mumbai ITAT in case of DCIT vs. Padmasree DR D.Y. Patil University in ITA No. 3264 to

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3668/Mum/2022 where with respect to evidentiary value of loose paper found in the course of search was held as under:

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reason that same are already part of books of account on which assessee has offered income. Thus, in view of the above and after considering the facts, we hold that no addition is liable to me made in the given facts and circumstances based on seized materials. Hence, the ground of appeal of the assessee is allowed whereas the ground of appeal of the Revenue is hereby dismissed.

13.8 In the result, the appeal of the assessee is allowed whereas the appeal of the Revenue is hereby dismissed.

Coming to IT(SS) No. 139 and 169/Ahd/2021 appeals by the assessee i.e. Shri Rajesh Mohanbhai Patel and by the revenue for the AY 2015-16

Coming to IT(SS)A No. 68/Ahd/2021 an appeal by the revenue in the case assessee namely Shri Ghansayam Mohanbhai Patel.

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18.1 The AO during the assessment proceeding found that certain loose sheets containing unaccounted cash transaction were found at the residence of Shri Rajesh Mohanbhai Patel. The impugned sheets also contain transactions pertaining to the present assessee. The details of such transactions are produced by the AO on page 6 of his order. Accordingly, the AO made addition of Rs. 2,53,66,800/- to the total income of the assessee by observing as under:

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I, therefore, hold that the cash receipt Rs.23900000/- represent assessee income from undisclosed source of income as per the provision of section 68 of the I.T Act. Similarly, the excess cash payments in relation to cash receipts Rs.14,66,800/- represent unexplained investment from undisclosed source of the assesee utilized for such payments, the source of which is not explained. Accordingly, an addition of Rs.2,53,66,800/- made on this issue. 19. The aggrieved assessee preferred an appeal before the learned CIT(A).

19.1 The learned CIT(A) after considering the facts in totality deleted the addition made by the AO on the legal ground by holding that no incriminating material whatsoever was found on the assessee’s premises. The materials referred by the AO were found from the premises of third party namely Shri Rajesh Mohanbhai Patel which was utilized against the assessee by the AO without following the provision of section 153C of the Act.

19.2 The learned CIT(A) also deleted the addition made by the AO on the merit by observing as under: 8.1 With regard to the ground of appeal No.2 on merits, the appellant contended that he is regularly maintaining books of accounts and also produced complete details of transaction during the course of remand proceedings, there is no dispute over the genuine transaction between Rajesh M Patel and Ghanshyam M Patel. The appellant contended further that the documents seized from the premises of third party are not binding upon him as presumption u/s.292C is not applicable in respect of documents found from third party premises. The documents found at the premises of Rajesh M Patel do not contain name of the appellant and the same are not in the handwriting of the appellant and not signed by the appellant or by anyone on her behalf. In such circumstances, using these documents against the appellant is unjustified. The appellant cited several case laws in which it has been held that the documents found 8.1 With regard to the ground of appeal No.2 on merits, the appellant contended that he is regularly maintaining books of accounts and also produced complete details of transaction during the course of remand proceedings, there is no dispute over the genuine transaction between Rajesh M Patel and Ghanshyam M Patel. The appellant contended further that the documents seized from the premises of third party are not binding upon him as presumption u/s.292C is not applicable in respect of documents found from third party premises. The documents found at the premises of Rajesh M Patel do not contain name of the appellant and the same are not in the handwriting of the appellant and not signed by the appellant or by anyone on her behalf. In such circumstances, using these documents against the appellant is unjustified. The appellant cited several case laws in which it has been held that the documents found from the premises of third party cannot be made basis for making additions in the hands of the appellant. These facts show that the loose papers found the premises of Shri Rajesh M Patel is not reliable. Keeping in view the above discussion, the additions made by the AO considering the GM as Ghanshyambhai M Patel

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shown in the loose papers found and involvement of appellant in the said transaction on pure guess work and presumption is not genuine and not found legally and factually unsustainable for the reasons mentioned above, hence, additions made by the AO at Rs.2,53,66,800/- are deleted on merits also. 20. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us.

20.1 Both the landed AR and the DR before us vehemently supported the order of the authorities below as favourable to them.

21.1 Be that as may be, we, in the above case of Shri Rajesh Mohanbhai Patel, have held that the seized documents are without any corroborative materials, so no addition is warranted in the given case as well. Furthermore, most of the entries recorded in such documents were already recorded in the books of accounts of Shri Rajesh Mohanbhai Patel. Likewise, the same documents were already used for the purpose of addition in the hands of Shri Rajesh Mohanbhai Patel. As such, the facts of Shri Rajesh Mohan Bhai Patel being identical to the facts of the case on hand, so no addition is warranted in view of the finding given in Para 12 of this order. Hence the ground of appeal of the Revenue is dismissed.

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Order pronounced in the Court on 31/01/2024 at Ahmedabad.

Sd/- Sd/- (TR SENTHIL KUMAR) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 31/01/2024 Manish