CHANDRESH VISHANJI PANDIT,RAJKOT vs. DCIT / ACIT-2(1), RAJKOT

Grounds of appeal raised by the assessee are as follows: 1. The Ld. CIT(A) erred on facts as also in law in the dismissing of ground of appeal relating to initiation of Action u/s. 148 of the Act. 2. The Ld. CIT(A) erred on facts as also in law in confirming the addition of Rs.7,00,000/- made by alleging that appellant had paid on money through cash of Rs.7,00,000/- for purchase of property in the project R K Empire. The addition u/s 69 of the Act may kindly be deleted. 3. Brief facts qua the issue are that as per the information available with the Department that the assessee had made cash transaction for property in project named "RK Empire developed by M/s R K Infralink LLP. Therefore, on the basis of above information, case of the assessee was reopened for assessment and notice u/s 148 of the Act was issued on 31.03.2023 after recording reason and obtaining the necessary approval of competent authority. The appellant filed the return of Income on 22.04.2023 declaring total income of Rs.5,95,400/- in response to the notice u/s 148 of Income Tax Act, 1961. During the assessment proceedings, AO issued notices u/s 143(2) & 142(1) of the Act, to the assessee on various dates. In response the assessee filed written submission alongwith Bank account statement, bank book and computation. The assessee stated that in his reply he was never engaged in any monitory or non-monitory transactions in R. K. Infralink. He pleaded that statement EMP 0425 does not belong to him and there is no involvement on his part. Besides, the excel sheet found during search does not contain name of the assessee. The assessee claimed that modus operandi was inconclusive and there was lack of corroborative evidences. The above plea of the assessee was rejected by Assessing Officer. The Assessing Officer concluded that excel sheet found during the search mentioned that that the assessee has paid 'ON MONEY in Office No.425 in project named RK Empire treating as booked by the assessee and ON MONEY paid by him. Therefore, an amount of Rs.7,00,000/- was treated as unexplained investment u/s.69 to be taxed with provisions of section 115BBE of the Income Tax Act 1961 to the total income.

Being aggrieved by the said order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A), but remained unsuccessful. Therefore, assessee is left with no other alternative but to knock on the doors of the Tribunal with this appeal praying for justice.

I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel for the assessee argued that the seized digital data did not contain assessee’s name and the ledger EMP 0425 had no nexus with him. The addition was made merely on the basis of third-party statement and digital data seized from another person and no cross-examination opportunity was provided. The entries pertained to earlier years in the excel sheet which is neither signed by the assessee nor signed by the seller, therefore, no addition should be made based on dump document. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in my earlier para and is not being repeated for the sake of brevity.

I have considered submissions of both the parties. I note that issue under consideration is squarely covered in favour of the assessee by the decision of the Coordinate Bench of ITAT Rajkot in the case of M/s. RC Buildcon/ M/s. RC Heights Pvt. Ltd. vide ITA Nos. 941/RJT/2024, for Assessment Year, 2019-20 & 2021-22, wherein, Co-ordinate Bench of ITAT held as follows: “16. We note that the excel sheet, which was found from the third party’s premises, the opportunity of cross- examination ought to have been provided to the assessee. The owner of such excel sheet was the third party, therefore opportunity of cross examination was compulsory, to examine the veracity of excel sheet, as such excel sheet was neither signed by the assessee nor signed by the opposite party and moreover assessee`s name is not getting reflected on such excel sheet. We note that the assessee has strongly objected that until & unless, an opportunity of cross-examination is granted, such adverse material cannot be used against the assessee. This is strongly objected that until & unless, an opportunity of cross-examination is granted, such adverse material cannot be used against the assessee, as he said excel sheet was found from third party premises, hence, opportunity of cross-examination is necessary. Undoubtedly, apart from this excel -sheet, there is no positive evidence brought on record by the assessing officer to substantiate his findings that the assessee has actually received money out of books of accounts, hence, an opportunity of cross examination was mandatory in the assessee`s case under consideration. 17. It is settled law that any additions made in absence of providing opportunity of cross examinations of persons, whose statement has been relied upon for making the additions is in violation of natural justice, hence cannot be sustained. The Hon'ble Supreme Court of India, in the case of Krishnachand Chelaram Vs. CIT 125 ITR 713 (SC) and Andaman Timber Industries Vs. Commissioner of Central Excise (2015) 281 CTR 0241 (SC) has held that additions without providing the opportunity of cross examination is in violation of natural justice. Thus, we note that additions made in absence of providing opportunity of cross-examination of the persons, whose statement has been relied upon for making the additions is violation of principle of natural justice. We also note that not allowing the assessee to cross examine the witness by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity. We note that same view was expressed by the Hon`ble Calcutta High Court in the case of Eastern Commercial Enterprises 210 ITR 103 (Cal), wherein it was held that it is a trite law that cross examination is the sine qua-non of due process of taking evidence and no adverse inference can be drawn against the party unless the party is put on notice of the case made out against him. Therefore, the addition made by the assessing officer, on this score, only, needs to be deleted. 18. We note that the assessee has contended that the addition made by the assessing officer is just based on the excel file data found and seized from the third party. The addition cannot be made without rejecting the audited books of account u/s 145(3) of the Act. We note that no tangible documents, loose papers found during the course of search. So far, the excel sheet is concerned, there is no signature of the assessee as well as authorized partner of M/s Vivan Infraspace LLP. The Assessing Officer one side has observed that perusal of the excel sheet revealed that the assessee- company has not reported entire receipts, as appearing from the seized excel sheet. Matching of entries on the seized excel -sheet found from the third- party with those on the accounting ledger of the assessee and of M/s Titanium Buildcon LLP (developer of the project The City Centre) has no any nexus in the case since the assessee has worked with company, M/s Titanium Buildcon LLP and has no relevance with any document seized in the form of data/transactions recorded in the excel file from third-party. In absence of any instance of transactions being pointed out by the assessing officer, there is nothing for rebuttal by the person receiving such notice from the assessing officer. A person can offer rebuttal with evidence only where the department provides the details of the transactions which they consider to have led to cash receipt by the assessee. Merely comparing the excel sheet found from the third- party with the accounts of assessee- company, will not be an instance to prove that the assessee- company has received cash from the third- party. The well settled legal position is that a non- speaking document without any corroborative material, evidence on record and finding that such document has materialized into transactions giving rise to income of the assessee which had not been disclosed in regular books of account by such assessee, has to disregarded for the purposes of assessments to be framed pursuant to search and seizure action. From the search and seizure perspective, such non speaking seized documents are referred to as "Dump Documents". 19. Therefore, we find that no arbitrary addition to the income of the assessee can be made by the Assessing Officer based on the dump documents, loose papers containing scribbling, rough/vague notings in the absence of any corroborative material, evidence recorded and finding that such dump documents had materialized into transactions giving rise to income of the assessee, which had not been disclosed in regular books of accounts by the assessee. For that reliance is placed on the judgement of the Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO [1981] 7 Taxman 13/131 ITR 597 held that the fictional receipt cannot be deemed to be receipt in the absence of any cogent material to support the factum of actual receipt. Moreover, the Hon'ble High Court of Delhi in case of CIT vs. D.K. Gupta [2008] 174 Taxman 476 upheld the order of the Tribunal wherein it was held that Ad-hoc/Dumb Documents without any corroborative evidence and finding, that the alleged documents nave materialized into transactions cannot be deemed to be the income of the assessee. The Hon'ble Calcutta Bench of ITAT in case of T.S. Venkatesan v. Asstt. CIT [2000] 74 ITD 298 held that in the absence of corroborative evidence, addition of undisclosed income could not be made simply on the basis of entries on loose papers recovered from the residence of a third- party and certain general statements of said party. Therefore, the well settled legal position is that a non- speaking document referred to as a "Dump Document" without any corroborative material, evidence on record, has to disregarded for the purposes of assessments to be framed u/s 153A and 153C of the Act. The aforementioned legal position also gathers support from the Judgement of the Hon'ble Supreme Court in case of CBI v. V.C. Shukla 1998 taxmann.com 2155 popularly known as Jain Hawala Case wherein it was held that any presumption of transaction on some vague, tenuous and dubious entries in a sheet of paper is not rational and hence legal unless there is corroboration by corresponding entry in regular accounts of both the parties to the transaction. In this case it was held that entries in Jain Notebooks held on facts admissible under section 34, but file containing loose sheets of papers are not "book" and hence entries therein not admissible under section 34 of the evidence Act. Further it was also held in this case that entries in books of account shall not alone be sufficient evidence to charge any person with liability. The above view further gathers reinforcement from the judgment of the Hon'ble Supreme Court in case of Common Cause v. Union of India [2017] 77 taxmann.com 245/245 Taxman 214/394 ITR 220 popularly known Sahara dairies and Aditya Birla diaries case. In this case, the Hon'ble Supreme Court, following the judgment rendered in case of V.C. Shukla (supra), laid down the following principles: (i) Entries in loose papers/sheets are irrelevant and not admissible under section 34 of the Evidence Act. It is only where the entries are in the books of account regularly kept, depending on the nature of occupation, that those are admissible; (ii) As to the value of entries in the books of account, such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. Even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability. (iii) The meaning of account book would be spiral notebook/ped but not loose sheets.

As the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench, of ITAT Rajkot in the case of M/s. RC Buildcon/ M/s. RC Heights Pvt. Ltd. (supra), wherein it was held that addition should not be made based on the excel sheet, which was neither signed by the purchaser, nor signed by the seller, and while delivering the judgement, the Tribunal has relied on the judgement of the jurisdictional Hon’ble High Court of Gujarat in the case of Kaushik Nanubhai Majithia R/Tax Appeal No. 20 of 2024 order dated 06.03.2024. Since the issue is covered in favour of the assessee, and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench (supra). I find no reason to interfere in the said order of the Coordinate Bench (supra), therefore, respectfully following the binding decision of the Coordinate Bench (supra), I delete the addition and allow the appeal of the assessee.

In the result, appeal of the assessee, is allowed.