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Facts
The assessee company was subjected to search proceedings. The Assessing Officer (AO) made additions on account of alleged unaccounted sales of residential plots and SCOs, and unexplained expenditure/investment in land, based on digital data and documents seized from third parties. The Commissioner of Income Tax (Appeals) deleted some additions but confirmed others.
Held
The Tribunal held that additions made solely on the basis of documents or digital data seized from third parties, without any corroborative evidence found from the assessee's premises, cannot be sustained. Reliance on statements of third parties without allowing cross-examination was also deemed improper. Valuation reports obtained from private individuals and not from the DVO, and reports pertaining to commercial property used for residential property estimations, were also found to have no legal sanctity.
Key Issues
Whether additions made based on evidence found from third parties without corroboration from assessee's premises and without allowing cross-examination are valid; and whether valuation reports from private individuals and for commercial properties can be used to estimate value for residential properties.
Sections Cited
132, 147, 69C, 115BBE, 69B, 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, CHANDIGARH
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
O R D E R Manoj Kumar Aggarwal (Accountant Member) 1.1 Aforesaid cross-appeals for Assessment Year (AY) 2020-21 arises out of an order of Learned Commissioner of Income Tax (Appeals)-5. Ludhiana 2 dated 29-11-2024 in the matter of an assessment framed by Ld. AO u/s 147 of the Act on 29-03-2024. 1.2 The grounds raised by the revenue readas under:
1. Whether upon facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.74,92,20,640/- instead of Rs.120,50,94,950/- made by the AO on account of unaccounted sale of residential plots on the basis of logical & rational extrapolation based on evidences and incriminating material seized from various premises during the search?
2. Whether upon facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the facts of the case as well as seized documents in respect of Plot No.286 & 287 which can establish that the assessee company has sold residential plots @ Rs. 61,000/- per Sq. yard which is more than disclosed price and the said documents have also been accepted by CIT(A) during A.Y. 2021-22 but the extrapolation calculated on such documents has not been considered by CIT(A)-5 Ludhiana?
3. Whether upon facts and circumstances of the case and in law, the Ld. CIT(A) was justified in relying on its own order for A.Y. 2021-22 wherein Ld. CIT(A) relied upon the decision of Hon’ble Punjab and Haryana High Court in the case of V.M. Spinning Mills reported in (2011) 16 atxmann.com 199 to deny the benefit of extrapolation as facts of the case of assessee differ from the referred case and AO has relied on the additional evidence and investigation to come to conclusion that the assessee is indulging in large scale under valuation and hence, extrapolation is required?
4. Whether upon facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 2,72,54,800/- made by the AO on account of unaccounted scale of SCOs on the basis of logical & rational extrapolation based on evidences. 1.3 The grounds raised by the assessee read as under: 1. a) That the Ld. CIT(A) has erred in confirming the addition of Rs.7,08,51,000/- on account of unexplained expenditure u/s 69C r.w.s 115BBE of the Income Tax Act on account of agricultural land purchased from Sh. Gurmeet Singh and his family members and calculating the total investment in the land purchased from Sh. Gurmeet Singh and his family at Rs.9,10,00,000/-, against the consideration of Rs.2,01,49,000/- as declared and, thus, sustaining the addition of Rs. 7,08,51,000/- as unaccounted investment in the purchase of land from Sh. Gurmeet Singh and his family members is not proper. b) That the Ld. CIT(A) has failed to appreciate that Sh. Gurmeet Singh during the course of statement recorded by the Assessing Officer has denied the alleged consideration as adopted by the Ld. AO. c) That the Ld. CIT(A) has also erred in replying upon the data as found from the premises of third party namely, Sh. Ajay Prabhakar for sustaining the addition of unexplained investment to the tune of Rs.7,08,51,000/- u/s 69B of the Income Tax Act.
That the Ld. CIT(A) has erred in sustaining the addition of Rs.94,03,774/- on account of certain digital data of Sh. Ravi Kapoor, third party, and which is against the facts and circumstances of the case.
3 3. That the Ld. CIT(A) has failed to appreciate, that the said digital data has no evidentiary value in view of the recent judgment of Hon’ble Apex Court that no reliance could be placed on ‘whatsapp chat’/ ‘digital data’.
1.4 The Ld. AR, at the outset submitted that the impugned issues stood fully settled by Tribunal in assessee’s own case for AY 2021-22 vide & 1036/Chd/2024 common order dated 17-07-2025 which has also been followed for AY 2019-20 in vide order dated 03-09-2025. The copies of the decisions have been placed on record. The said position could not be controverted by Ld. CIT-DR who placed on record copy of Panchnama in the case of Shri Ravi Kapoor and Shri Ajay Prabhakar to contend that the document should be considered to be found during search on the assessee only. Having heard rival submissions and upon perusal of case records, the appeals are disposed- off as under. Proceedings before lower authorities 2.1 The assessee group was subjected to search action u/s 132 on 16-11- 2021. The original return of income was filed by the assessee u/s 139(1) on 02-11-2020 declaring income of Rs.234.30 Lacs. Post search proceedings, notice u/s 148 was issued by Ld. AO to the assessee on 26-03-2023 and the assessee offered same return of income. The assessee is stated to be engaged in real estate business. The main issue as identified by Ld. AO was sale and purchase of plots below market rate. The Ld. AO referred to assessment proceedings of AY 2021-22 to take the same view in this year. On the basis of search findings, it was alleged that the assessee received on-money on sale of residential plots and under reported the sales in the regular books of account. The Ld. AO referred to the valuation report of Shri 4 Harbans Singh Sekhon which was confronted to Shri Jagjit Singh Grewal (director of the assessee company). The Ld. AO then referred to the statement of Shri Ajay Kumar Prabhakar of M/s Prabhakar Associates and proprietor of M/s Ajay Kumar stamp vendor and also to the statement of Shri Raj Kumar Sachdeva partner of M/s Prabhakar Associates. The Ld. AO then referred to the digital evidences found from Shri Ravi Kapoor who was stated to be key person of the assessee group. The material as seized from the premises of Shri Ravi Kapoor was referred by Ld. AO to bolster its allegations. Though the assessee refuted the allegations of Ld. AO, the same stood rejected by Ld. AO. Finally, Ld. AO applied estimated rate of Rs.32,000/- per square yards for 63 numbers of residential plots as sold by the assessee during this year and made addition of alleged on-money for Rs.74.92 Crores. Similar estimation was made for sale of SCOs and the addition, in this regard, was quantified at Rs.2.72 Crores. 2.2 The third addition was for unexplained expenditure u/s 69C for Rs.94.03 Lacs which was on the basis of digital data as found and seized from Shri Ravi Kapoor. Based on his statement, Ld. AO proceeded to make impugned addition. Shri Ravi Kapoor was stated to be involved in day-to- day business affairs of the assessee though the assessee denied the same. However, Ld. AO computed unexplained expenditure of Rs.94.03 Lacs and added the same to the income of the assessee u/s 69C. 2.3 The last addition was unaccounted investment in land for Rs.7.08 Crores which was based on a ledger found from the residential premises of Shri Ajay Kumar Prabhakar. On the basis of the same, Ld. AO alleged that the assessee made cash payment to the seller Shri Gurmit Singh Bhangu.
5 The assessee stated that the documents did not bear the signatures of the assessee and same was not found from assessee’s premises. The assessee also stated that Shri Ajay Kumar Prabhakar was independent deed writer only. However, these arguments stood rejected by Ld. AO who made the addition of unexplained investment in the hands of the assessee. Aggrieved, the assessee preferred further appeal against the assessment so framed by Ld. AO. 2.4 The Ld. CIT(A) upheld the reopening of the assessment and dismissed the legal grounds as raised by the assessee. The addition of alleged on-money on sale of 63 residential plots was deleted by Ld. CIT(A) by relying on first appellate order for AY 2021-22. It was observed that there was no incriminating material for this year for this year and therefore, the impugned addition could not be sustained. Similarly, the addition of alleged on-money on sale of SCOs was deleted by Ld. CIT(A) by relying on first appellate order for AY 2021-22. It was observed that the addition was made merely on the basis of valuation report. The additions qua unexplained expenditure u/s 69C for Rs.7.08 Crores & Rs.94.03 Lacs respectively was also confirmed by relying on first appellate order for AY 2021-22. Aggrieved, the assessee as well as revenue is in further appeal before us. Our findings and Adjudication 3. We find that the cross appeals for AY 2021-22, having identical issues on merits, has been adjudicated by Tribunal vide & 1036/Chd/2024 common order dated 17-07-2025 as under: - 59. We have considered the arguments on merits of the Ld. Counsel and CIT (DR) and we have also gone through the Brief Synopsis, the paper books in three Volumes, judgment set as filed by the assessee’s counsel. We have also gone through the order of AO and CIT(A). The facts are not disputed and as highlighted, while dealing with the legal grounds of appeal of the assessee, that all the 6 additions as made by the AO are on the basis of documents / digital data recovered from the premises of Sh. Ajay Kumar Prabhakar, independent deed writer and his associate Sh. Raj Kumar Sachdeva and Sh. Ravi Kapoor, an independent broker, the document recovered from Sh. Devinder Ghai and on the basis of statements of Sh. Ajay Prabhakar, Raj Kumar Sachdeva. It is also a fact that the above persons are not the employees of the assessee company and they are not even the partners /directors in the company. They are carrying on their independent business. Sh. Ajay Kumar Prabhakar is into the profession of ‘deed writer’ since 1996. During the year, the assessee had sold 72 plots in his colony and all the registration deeds have been executed as per circle rates. In so far as, the valuation reports as procured by the AO from different persons, who had bought the plots from the company, such plot holders for the purposes of raising the loan by them from the Financial Institutions, had themselves prepared the valuation reports for construction of houses etc. The valuation reports are from structure designers, Chartered Engineers and not from the DVO as stated by the AO in his order. These valuers are Private persons and their reports have no legal sanctity. The ‘Home buyers’ are independent persons, not related to Assessee Company or to the directors of company and, as such, such valuation reports as obtained from third parties by the AO during assessment has no link or connection with the assessee. If such parties have submitted inflated valuation reports to the Financial Institution for raising loan, it cannot form the basis for making the addition on account of sales of plot in the hands of the assessee. Further, none of such reports was recovered from the premises of the assessee, except one report of Sh. Harbans Singh Sekhon, as being discussed in later paragraph.
60. We have also gone through the statement of Sh. Jagjit Singh director of company, wherein, he has explained the specified purpose of exchange of land with ‘Aayali Kalan Co-operative Agricultural Multiple Society. The transaction for the purposes of exchange of land cannot be taken as base for the rate of plots. Further, that valuation report which has been reproduced in the order of the AO is of a commercial property as mentioned in the said report and the AO has estimated the value on that basis for residential property. So, there is lot of difference between the rate of residential and commercial proper. Further, we find that the CIT (A) has dealt this issue at page 89 in his order as under:- “vii I have also gone through the above said valuation report reproduced at page 6 to 8 of the assessment order and I find that even otherwise this valuation report is of a commercial property as mentioned in the said report and whereas the estimation has been made by the Ao in respect of residential properties. It is a fact that there is a vast difference between the prices of the residential and commercial properties. This fact has been mentioned and admitted by the AO as well in the assessment order. Further, the said Valuer has not given any basis of the value arrived at by him @Rs. 30,000/ per sq. yards. Thus, the said valuation cannot form the basis for adopting the value of Rs. 38,500/- per sq. yards. Thus, I am of the firm opinion that firstly the valuation reports in the names of third parties, as obtained by the Assessing Officer from the different banks have no evidentiary value since they were neither found from the premises of the assessee and not related to the assessee. As regards, the valuation report of Sh. Harbans Singh, the same was for commercial property and no comparable cases have been cited by any of the Chartered Engineer/ Valuers in any of the report and even by Sh.Harbans Singh wherein he has just adopted the valuation on ad-hoc basis for a very specific purpose of exchange of property. viii) The statement of Sh. Jagjit Singh Grewal, Director of the company recorded on 28.03.2022 is also very much relevant wherein he had explained and detailed the purpose of obtaining the valuation report from Sh. Harbans Singh Sekhon. This is duly supported by the actual transaction of the land executed by the assessee and, thus there is nothing incriminating against the assessee viz a viz the Valuation Report of Sh. Harbans Singh Sekhon.” We conquer with the said findings of the CIT(A) as reproduced above and as such, no adverse view could be drawn on account of such valuation reports as procured by the AO from plot holders or of Sh. Harbans Singh Sekhon.
61. As regards the statements of Sh. Ajay Kumar Prabhakar and Sh. Raj Kumar Sachdeva, they are carrying on independent business of ‘deed writing’ since 1996 much before the company started its 7 business of real estate in 2007-08. Sh. Ajay Prabhakar had filed an affidavit retracting his earlier statement. No cross examination has been allowed to the assessee. Reliance by the assessee on the judgment of Punjab & Haryana High Court in the case of DSG Papers (P) Ltd. reported in [2024] 161 taxmann.com 568 and to the Apex Court in the case of CIT Vs Odeon Builders reported in 418 ITR 315, in which, it has been held that no reliance could be placed on the statement recorded at the back of the assessee, without affording any opportunity of cross-examination. Findings of CIT(A) in following paragraphs at page 82 & 83 of his order is reproduced as under: - ix). Similarly, the AO has referred to the statements of two persons namely Sh. Raj Kumar Sachdeva and Sh. Ajay Kumar Prabhakar. In this regard, it is observed that heavy reliance has been placed by the AO on the statement of these two persons without allowing any cross- examination to the assessee. The AR has submitted that such reliance is misplaced as per the binding judgment of the Hon'ble Apex Court in the case of Kishan Chand Chela Ram reported in 125 ITR 713 and Andaman Timber Industries reported in 281 TIR 214 and other judgments as perthe written submissions furnished by the assessee. It has been held in many cases that cross examination is not required in the case of each & every person if the facts are supported by the documents. The AO has mentioned that Sh. Ajay Kumar Prabhakar and Sh. Raj Kumar Sachdeva have been de-facto working for the appellant as they were the deed writers associated with the plots sold by the appellant. The AR has submitted that these are independent persons doing independent activities. Another important aspect of valuing the land by the Assessing Officer on the basis of statements of Sh. Ajay Kumar Prabhakar(independent Stamp Vendor and Deed Writer) and of Sh. Raj Kumar Sachdeva who is a partner in Prabhakar Associates and working with Sh. Ajay Kumar Prabhakar is that both the above persons are independently self employed are not occupying any post in the assessee company. They are carrying on independent business of Stamp Vendor and working since 1996 much prior to the coming in existence of the assessee which company was formed in 15th June, 2005 and such persons are engaged in the profession and rendering their professional services to the private parties and they are not the officials of the assessee company. x). Reliance by the assessee on the different case laws regarding the evidentiary value of the statement as recorded during search is further supported by the latest judgment of the Chandigarh Bench of the ITAT in the case of Jagbir Singh Nehra in vide order dated 11.06.2024 and thus, looking into these facts & circumstances, merely on the basis of the statement without any documentary evidence, the estimation of rate of Rs. 38,500/- per sq. yards as applied by the AO does not seem to be in order. I agree with the contentions of the assessee that mere statement, that too of a third party, without any other corroborative evidence, cannot have much of evidentiary value.”
62. Further, we have also gone through the judgements relied upon by the assessee of the jurisdictional Bench in the case of ‘Sh. Jagbir Singh Nehra’ and of ‘Gurdip Cycle Industries’ as cited ‘supra’ and of the Hon’ble Supreme Court in the case of ‘Mantri Share Brokers Pvt. Ltd.’. Thus, merely on the basis of statement recorded during search and without any documentary evidence or any corroborating evidence found from the premises of assessee during the course of search, no addition could be made in the hands of assessee. We have also considered one unsigned agreement found from the ‘Pen Drive’ of Sh. Ajay Prabhakar between, Smt. Asha Garg and Smt. Minni Bhanda and for, we are in agreement with the finding of CIT(A) as per the following paragraph at page 83 & 84 of his order:- xi). As regard the one unsigned agreement found from the pen-drive of Sh.Ajay Kumar Prabhakar between Smt. Asha Garg and Smt. Mini Jain in respect of one plot at Sunview Enclave, it is observed that this agreement has no link or connection with the assessee company. Further, it is not signed by either of the parties. The statement of Smt. Asha Garg and Smt. Mini Jain were recorded by the AO during assessment proceedings wherein they had denied having entered into any agreement. Thus, under such circumstances, this cannot form 8 as a basis for estimating the sale value of residential plots by the assessee at Rs.38,500/- per sq. yards in the colony. xii. Further, the assessee as per the company record had sold Plot No. 51 to Smt. Mini Jain on 06.06.2018 and that copy of the sale deed has been furnished at page 508 to 511 of the paper book and thus, this shows that the assessee had no link with the said plot during the year under assessment. This agreement relied upon by the AO does not have evidentiary value in the case of the appellant as it is between two independent parties, executed only after one of the party, has already purchased it from the appellant. Thus, the terms & conditions of the agreement of this party cannot be said to have binding effect on the appellant, as the appellant is neither in the picture nor have any say in this transaction.
63. Further, we find that the reliance by the CIT(A) on the judgment of Punjab & Haryana High Court in the case of Sh. C.S. Atwal reported in [2015] 59 taxman.com 359, judgement of Apex Court in the case of ‘Nishant Construction Pvt. Ltd’., reported in 101 taxmann.com 180 and of the Delhi High Court in the case of CIT Vs Sant Lal, reported in 118 taxmann.com 432 are quite relevant to the issue. Besides, the judgment of Apex Court in the case of K.P. Varghese, as cited supra. We also find that the rates of plot in the colony, are dependent on a number of factors like, location, East Phase, Road side view and many other considerations and it is a fact that no evidence of ‘on money’ have been found during the course of search. Over and above the registered consideration and, as such, the extrapolation as made by the AO has rightly been deleted by the CIT(A) in respect of 70 plots, following binding judgement of Punjab & Haryana High Court in the case of V.M. Spinning Mill Vs CIT, reported in 16 taxmann.com 199 and the relevant part of the judgment is being reproduced as below:- “The Ld. Tribunal in further appeal by the Revenue as well as by the Assessee rejected the contention of the assessee in respect of addition of sales through 17 sale bills amounting to Rs.1,11,99,427/- and affirm the finding that such sales were made outside the books of accounts. However, it held that there is no justification to infer that the assessee would have undertaken sales outside the books of accounts during this rest of financial year also, therefore, the assessment of unrecorded sales were limited to Rs. 1,11,99,427/- representing 17 unrecorded sale bills alone. The Tribunal partly granted relief, when it made addition of Rs. 20 lacs on account of unexplained investment made towards the working capital as against Rs.71,07,100/- added by the Assessing Officer and upheld by the Commissioner of Income Tax. The same view has upheld by the High Court.”
64. As regards the sustaining of addition of Rs. 5,50 crores, in respect of purchase of plot by Smt. Parveen Bhanda and Smt. Surbha Bhanda as per para (xxx) of the order of CIT(A), We find that Sh. Ravi Kapoor has owned that data from his mobile as belonging to him during search and later on, no enquiries have been made from purchaser of the plot. Sh. Manu Gupta, director has also denied his signatures on the digital data of third party and nothing has been found from assessee company during search. The original slip has not been produced nor any hand writing expert report is there. The said addition as sustained by the CIT(A) is not justified at all.
65. We also find that it is an accepted fact that no incriminating material was found from the premises of the assessee and the said addition was sustained by the CIT(A) on the basis of ‘digital data’ found from Sh. Ravi Kapoor, who is not an employee of assessee company. He is a property dealer (broker) and he has been disclosing income from his property dealings in his returns of income in Asstt. Year 2020- 21 and in the return filed for Asstt. Year 2021-22. He had disclosed an income of Rs. 44 lacs and which has been accepted by AO and even for Asstt. Year 2022-23, he has disclosed an income of Rs. 60 lacs and all such income has been accepted by the department. Copies of such evidence has been placed in the Paper Book. We also find that Sh. Ravi Kapoor has accepted that the said ‘digital data’ belongs to him only in respect of his property business and even he has denied about any signatures of Sh. Manu Gupta as per ‘digital data’. Sh. Manu Gupta has also denied his signatures on the same. Further, there is nothing on record about the enquiries or statements of Smt. Praveen Bhanda and Surbhi Bhanda and no adverse view have been taken in their cases. Since these evidences having been recovered from the third party, namely Sh. Ravi Kapoor and no satisfaction have also been recorded by 9 the AO before relying upon such material in the case of assessee on which assessment has been framed u/s 143(3). Even the section 132(4) clearly states that the document has to be considered in the hands of person, from whom, such document has been found. No corroborative evidence has been found from the assessee. Various judgments as relied upon by the Ld. Counsel as cited ‘supra’ of the Odeon Builders, Sh. Amarjit Singh, DSG Papers (P) Ltd. and different Benches of the ITAT are very much relevant, besides the judgment of Sh. Ashwani Kumar Jain, as cited ‘supra’.
Reference maybe made in this context to the judgment of Hon’ble Supreme Court in the case of CBI Vs V.C, Shukla & Others (1998) 3 SCC 410, wherein, the Supreme Court considered as to whether the contents of the diary impounded from third party could lead to prove charge against the accused under the prevention of Corruption Act (1998). It was held that as per section 132(4), a person from whom possession, such documents are found, the contents of such documents have to be considered to be belonging to him only. Further neither, Sh. Ravi Kapoor nor Ajay Prabhakar or Devinder Ghai have alleged that documents from them belong to ‘Homelife Buildcon Pvt.Ltd., and, thus, under such circumstances, the said documents as recovered from Sh. Ravi Kapoor & others can not be used against the assessee company. Further, no enquiries have been made from Praveen Banda and Surbhi Banda. Therefore, in the light of above said facts, the sustaining of addition of Rs. 5.55 crore as confirmed by the CIT (A) in para {xx} is deleted and the assessee succeeds on this issue. Also, as per finding given by us on legal ground of appeal, no satisfaction having been drawn by AO, the whole basis of making addition is not justified.
As regards, the deletion of addition of Rs.4,54,00,000/-, the same has been deleted by the CIT(A) as per ground of appeal 4 in department appeal, we have considered the finding of CIT(A) on this issue from page 94 to 97 of his order and the facts are the same in, as much as, on the basis of valuation report submitted by purchaser of SCO to the bankers. The rate of sale of SCO have been adopted for the year under consideration at enhanced value. These facts are identical to our findings with regard to deletion of addition, while dealing with the Ground No. 1 to 3 of the department appeal and ground No. 1 of the assessee's appeal. We have held that no such basis can be adopted on such valuation reports and neither any extrapolation can be made. Thus, this ground of appeal in the department appeal is dismissed as per our finding given above while deciding ground No. 1 to 3 of the department appeal.
68. As regards ground No.5 & 6, which corresponds to the ground No. 3 (a) (b) (c) of the assessee’s appeal, we have considered the arguments of both parties and the order of authorities below and find that the addition has solely been based on the basis of ‘digital data’ found from the search carried out on Sh. Ajay Prabhakar, a deed writer. No corroborated or linking evidence has been found from the assessee company or from the premises of directors Sh. Jagjeet Singh Grewal or Sh. Manu Gupta.
69. We also find that no opportunity of cross examination have been afforded to the assessee on the basis of such digital data recovered from Sh. Ajay Prabhakar. Merely on the basis of some entries of payment through banking channels being made to Sh. Gurmit Singh by the assessee company on certain dates, the addition u/s 69 have been made in the hands of assessee company and it has been sustained by the CIT(A) to the extent of on money allegedly being paid to one Sh. Gurmit Singh, from whom, the land had been purchased. No corroborating or any other evidence has been found from the premises of assessee. Even Sh. Gurmit Singh had appeared before the AO and copy of his statement has been filed before us. He has completely denied any dealings with Sh. Ajay Prabhakar. He has not agreed to the cash payment or other evidences, which have been reproduced at various pages in the assessment order as having been found from the premises of Sh. Ajay Prabhakar in digital mode. The CIT(A) has rightly held that the author of the document could have prepared these papers for his own benefit or to lure certain parties to enter into certain transactions, in such seized papers from the third party, on which there is no name of the company or its representative, no presumption that the contents of the documents reflect any unaccounted transactions entered by the assessee company can be drawn. Further, in the digital data, found from the third party, the name is mentioned as Gurmeet Singh and not Gurmit Singh, from whom the land has been purchased. Even Sh. Gurmit Singh has stated before the AO that he does not know the directors of assessee company. Even, Sh. Jagjit Singh Grewal and Sh. Manu Gupta have denied any cash amount being paid to Sh. Gurmit Singh as per noting 10 seized from Sh. Ajay Prabhakar. Though, the CIT(A) has deleted the extrapolation in respect of land purchased during the year on the basis of above evidence, but he has sustained the addition of Rs.2.05 crore on the basis of digital data in the hands of assessee. As submitted above, that no addition could be made on the basis of third party document specially when, no satisfaction has been drawn by the Assessing Officer while framing the assessment of the assessee company, as per case laws as cited above, no addition could be made on the basis of third party evidence, without any corroborated evidence found from the assessee company.
Further, there being no satisfaction being framed by the AO on this issue, no cognizance could be taken of such document recovered from third party. Further any conclusion drawn on the basis of discovery of evidence and the statement recorded u/s 132(4) is confined to the person from whose possession such document is found and such document cannot bind the third person as in the present case. It is a fact that no cross examination was allowed of Sh. Ajay Prabhakar, from whose premises such documents were recovered. The assessee is not expected to know why that person has made such entries of third person. The reliance by the assessee on the judgment of Sh. V.C. Shukla case of the Hon’ble Apex Court is quite apt to the above issue. Besides that no cross examination has been allowed of Sh. Ajay Prabhakar and further Sh. Gurmit Singh have also not agreed to any ‘on money’ having been received by him, thus, on the basis of finding given by the AO and the CIT(A) and the evidence possessed by revenue has hardly any worth of credence and on that basis, no addition can be made in the hands of assessee both on legal and on facts of the case, thus, the ground of appeal
as taken by the department by way of Ground No. 5 & 6 are dismissed and while ground as raised by the assessee bearing
3. (a),(b) & (c) are allowed as per above.
The last ground of appeal
No. 3,
4. (a) (b) are again on the fact that recovery of certain documents found from Sh. Ravi Kapoor and Sh. Devinder Ghai. There is no linking of the evidence found from the premises of Sh. Ravi Kapoor and Sh. Devinder Ghai with the business of the assessee. Even, Sh. Ravi Kapoor and Sh. Devinder Ghai have, nowhere, stated that the contents of the documents as mentioned in the seized belong to the assessee company. The seized data from the residence of Sh. Ravi Kapoor was found from his ‘email.id’ should belong to Sh. Ravi Kapoor only and merely on the basis of certain abbreviation, the authorities below have presumed that such contents of documents belong to assessee, addition has not only been made in the hands of assessee company, but similar addition has been made in the hands of Sh. Ravi Kapoor also of the same amount in his assessment for Asstt. Year 2021-22 by the same AO. The AO has also mentioned in his order that similar addition has been made in the case of Sh. Ravi Kapoor at page 111 of his order. This amounts to double addition.
72. We have already elaborated above the provisions of section 132(4) and the evidence found from third party on the basis, of which, no adverse view can be drawn in the hands of the assessee. Further, neither Sh. Ravi Kapoor nor Sh. Davinder Ghaihad stated that the said documents belong to assessee company and the judgment of ITAT in the case of Sh. Amarjit Singh in is applicable to the facts and circumstances of the case. Further Sh. Ravi Kapoor in his statement categorically owned such document belonging to him while dealing with legal ground it has been held that no satisfaction had been drawn by the AO, with regard to documents recovered from third party. No satisfaction had also been drawn by AO before confronting such documents as held above, the addition as sustained by the CIT(A) at Rs. 1,41,50,000/- is hereby deleted both on legal and on merits. The provisions of section 115BBE are not applicable as such either.
73. With regard to addition of Rs. 33,95,000/-, the presumption has been drawn by the AO and CIT(A) that ‘M/s JKB India’, where name has been mentioned on one piece of paper seized from Sh. Devinder Ghai, where the name of ‘Sh. Devinder Ghai’ is there. The finding by AO/CIT(A) that JKB is group company of ‘HomelifeBuildcon Pvt. Ltd.’ is misplaced and this finding is based only on presumption/assumption. Further, the document has to be read as a whole. It is also settled law that the assessee has no idea as to what kind of record, the third party is maintaining and in what manner. Moreover, no direct/indirect link has been established by the AO/CIT(A) that such document belong to assessee company. The same addition was made in the hands of Sh. Devinder Ghai u/s 68. Thus, wrong conclusion has been drawn in the case of assessee on the basis of such document. The finding 11 of CIT(A) about the confirmation of addition is again on presumption and assumption and we have no hesitation in deleting said addition as sustained by CIT(A).
We find that the impugned order for this year substantially follows the first appellate order for AY 2021-22 wherein the assessee’s appeal has been allowed not only on merits but also on legal grounds whereas the appeal of the revenue has been dismissed by the bench. The bench, inter-alia, observed that the additions were on the basis of documents / digital documents recovered from the premises of Shri Ajay Prabhakar (an independent deed writer) and his associate Shri Raj Kumar Sachdeva and Shri Ravi Kapoor (an independent broker) as well as on the statements of these persons. However, these persons were not employees or partner / director in the assessee-company. They were carrying on independent businesses. The valuer reports of private persons had no legal sanctity. Such valuation reports as obtained from third-parties had no link or connection with the assessee. It was further held at para-60 that exchange transaction could not be taken as the basis of rate of plots as sold by the assessee. No adverse view could be drawn on the basis of valuation reports. Shri Ajay Prabhakar retracted his statement and his cross- examination was not allowed to the assessee which was against settled legal position. No addition could be made without any documentary evidence or any corroborating evidence found from the premises of the assessee. Accordingly, detailed findings were rendered on each of the impugned additions. Finally, the assessee’s appeal was allowed whereas the revenue’s appeal was dismissed. Facts being pari-materia the same in this year, taking the same view, we uphold the order of Ld. CIT(A) in 12 deleting the addition of on-money on sale of residential plots and SCOs. The twin additions of explained expenditure as sustained in the impugned order stand deleted. We find that the aforesaid decision of Tribunal for AY 2021-22 (supra) has subsequently been followed by Tribunal in department’s appeal for AY 2019-20 vide order dated 03-09-2025. The arguments of Ld. CIT-DR that considering the Panchnamas of Shri Ravi Kapoor & Shri Ajay Prabhakar, the same should be considered to be found during search on assessee, could not be accepted in view of earlier finding of the Tribunal as aforesaid. Therefore, we are inclined to take the same view as taken by co-ordinate bench in AYs 2021-22 and AY 2019-20.