ACIT CC -6(1), MUMBAI, BKC, MUMBAI vs. AJAYKUMAR BABURAO BHOSALE, AHMEDNAGAR

Per: Smt. Beena Pillai, J.M.:

The present appeals filed by the revenue against order dated
26/08/2024 and 23/08/2024 passed by CIT(A)-54, Mumbai for assessment year 2021-22 in case of both assessee’s on following grounds of appeal
ITA No. 5663/Mum/2024, (A.Y. 2021-22) i "Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition made by the AO of Rs.
1,25,00,000/-u/s 69C of the Act by ignoring the fact that the detailed modus operandi of the transactions related to transfer and posting of PWD engineers had been explained by Shri Shailendra Rameshchandra
Rathi (one of key employee) working in office of Rucha sub-group and also digital evidences found from his iPhone, were corroborated with order for transfer and posting passed by the Govt. of Maharashtra,
PWD Department?"
ii. "Whether on the facts of the case and in law, the Ld. CIT(A) erred in holding that the addition cannot be made by placing reliance on a statement of third party and on material found from the third party in the hands of the assessee in absence of any evidence linking such material to the assessee even though it is clearly seen from the search proceedings that the evidences found from iPhone of Shri Shailendra
Rathi and he had explained the contents of the said documents during the search proceedings and these documents were further corroborated with order for transfer and posting passed by the Govt. of Maharashtra,
PWD Department?"
iii. "Whether on the facts of the case and in law, the Ld. CIT(A) has erred in relying on such cases in which the facts are different from the present case?"
ITA No. 5666/Mum/2024, (A.Y. 2021-22)
“i. "Whether on the facts and in the circumstances of the case and in law the Ld. CIMA) has erred in deleting the addition meds by the AO of I.T.A. No.5663 & 5666/Mum/2024

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Rs. 2,50,00,000/-u/s 69C of the Act by ignoring the fact that the detailed modus operandi of the transactions related to transfer and posting of PWD enginears had been explained by Shri Shailendra
Rameshchandra Rathi (one of key employee) working in office of Rucha sub-group and also digital evidences found from his iPhone, were corroborated with order for transfer and posting passed by the Govt. of Maharashtra, FWD Department?"
"Whether on the facts of the case and in law, the Ld. CITA) erred in holding that the addition cannot be made by placing reliance on a statement of third party and on material found from the third porty in the hands of the assessee in absence of any evidence linking such material to the assessee even though it is clearly seen from the search proceedings that the evidences found from iPhone of Shri Shailendra
Rathi and he had explained the contents of the said documents during the search proceedings and these documents were further corroborated with order for transfer and posting passed by the Govt. of Maharashtra,
PWD Department?"
"Whether on the facts of the case and in law, the Ld. CIT(A) has erred in relying on such cases in which the facts are different from the present case?
Brief facts of the case are as under:
2. Both assessees before this Tribunal are individuals and had filed their return of income for the year under consideration on 08/03/2022 declaring total income of Rs. 17,03,720/- in ITA No.
5666/Mum/2024. The assessee in ITA No. 5663/Mum/2024
filed his return of income on 16/12/2021 declaring total income of Rs. 11,98,890/-.
2.1 From assessment records it is noted that a search action conducted under section 132 of the Act, in case of Rucha Group run by Shri. Prashant Nilawar, GNP Group run by Shri. Girish
Pawar and Jairaj Group run by Shri. Jairaj Shah. During the course of the search certain incrementing material relating to cash given by the assessees for influencing their transfer were found. On the basis of such material and statement recorded

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during the search, notice u/s. 148 was issued to both the assessees before us on 13/03/2023 after recording reasons and after obtaining necessary approval from the transferring authority. In response to the notice issued u/s. 148, both assessee’s filed return on 12/04/2023 declaring total income of Rs. 17,03,720/- in ITA No. 5666/Mum/2024 and the assessee in ITA No. 5663/Mum/2024 filed the return of income on 14/04/2023 declaring total income at Rs. 11,98,890/-.
2.2 The Ld. AO noted that, during the search action, digital evidence relating to transfer and posting of the assessee’s being
PWD engineers were found in the phone of one Shailendra Rathi alleged to be one of the key employees of the Rucha Group at its Pune office. Explaining the image retrieved from the phone, Shri
Shailendra Rathi in his statement recorded during the search action submitted that the same contains the name of the officials of PWD Engineers who had made full payments for the transfer.
Further, another employee of Rucha Group, i.e., one Ravi
Wadepalle, in his statement recorded under section 132(4) of the Act stated that, some of the documents belonging to Rucha
Group were kept at the premises of one Avish Atal. Accordingly, during search action at the premises of Avish Atal, incriminating documents were found and seized. When these documents were confronted, to Ravi Wadepalle, it was explained that, they contained details of cash paid by the PWD Engineers being assessee’s before us for their transfer to desired location. Since the name, i.e. Sharad Rajbhoj (SE)/ S.N. Rajbhoj, appeared in the documents, the assessee was asked to explain the seized

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documents found during the search at Rucha Group and was also asked to explain the source of cash paid for obtaining the desired posting.
2.3 In response, the assessee’s denied having paid any amount in relation to any transfer and posting in the PWD Department to any person at any point in time.
Both assessee’s in response submitted that, the transfer and posting in the PWD Department was strictly done as per the rules and regulations of Maharashtra Government Servants Regulation of Transfers and Prevention of Delay in Discharge of Official
Duties Act, 2005. The assessee further submitted that no private person was involved in the entire process of transfer and posting and accordingly, the question of paying any amount to anyone does not arise. Further, both assessee’s denied having knowledge of any person's name mentioned in the notice and the group on which the search was conducted. The assessee further submitted that, there is no information in the documents recovered during the search action to identify the assessee as a person referred to therein. It is thus submitted that, no link was established between the assessee and the group searched to support the allegation made against them.
2.4 The Ld. AO vide order dated 25/01/2024 & 24/01/2024
passed under section 143(3) r/w section 147 of the Act disagreed the submissions of both assessee’s by placing reliance on statements recorded on oath under section 132(4) of the Act and the documents found during the search. The Ld. AO concluded

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that, all the persons whose name is appearing in the documents are Engineers working with PWD. Further, the Ld. AO held that, the name of persons mentioned in the document seized during the search contains names of the assessee, and the parties whose statements were recorded during the search explained that, the names mentioned in the seized documents are PWD Engineers.
Further, the Ld. AO, by referring to the transfer and posting order dated 07/08/2020 passed by the Government of Maharashtra
PWD, wherein both assessee’s were transferred as per the choice posting, held that, both clearly establishes that the name mentioned in the seized documents are the name of both assessee’s.
2.5 Further, in case of assessee in ITA No. 5663/Mum/2024 by referring to statement of Ravi Wadepalle, Ld.AO held that the amount paid by the assessee, written as "125" in the documents found during the search, represents cash paid by the assessee of Rs. 125 lakhs. Also in case of the assessee in ITA No.
5666/Mum/2024 referring to the statement of Ravi Wadepalle, the Ld.AO held that, amount mentioned are in lakhs that is “50”means 50 lakhs. Therefore, the based on the facts and the statements recorded during the search Ld.AO concluded that, the assessee paid an amount which is written as “300” in two separate documents mentioned at page 39 to 42 of Annexure A-2
represents the cash paid by the assessee of Rs. 250 Lakhs.
2.6 The Ld. AO thus rejected the explanation by both assessees denying any cash payments. The Ld.AO further held that the assessee has not made any submission as to how his name

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appeared in both the evidence seized, i.e. evidence found from the mobile of Shailendra Rathi and the premises of Avish Atal. It was thus held that, both evidence found from different places corroborates with each other as both the evidence shows the identical amount paid by the assessee. The Ld. AO thus treated
Rs. 2,50,00,000/- as unexplained expenditure u/s. 69C in the hands of the assessee in ITA No. 5666/Mum/2024 and Rs.
1,25,00,000/- was added in the hands of the assessee in ITA No.
5663/Mum/2024
Aggrieved by the order of the Ld. AO assessee preferred appeal before the Ld. CIT(A).
3. The Ld. CIT(A) after considering the facts in both assessee’s case and submissions filed by them, noted that, the statement of Shailendra Rathi was retracted post search proceedings. It was also noted that, the alleged seized material were obtained from the residential premises of Avish Atal, and that the statement of Mr. Avish Atal was not discussed by the Ld. AO in the assessment order. The Ld.CIT(A) observed that, the addition were made by the Ld.AO relying on statement of third party, and on the basis of material found during the course of the search on third party. The Ld.CIT(A) took note of the fact that, statements were retracted subsequently. By referring to various judicial pronouncements, as noted from pages 28-41 of the impugned order, wherein it was held that, documents/material found from the premises of a third party or the statement of third party cannot be relied on to make additions in the hands of the assessee, the Ld.CIT(A) held that, in the present case, there is no I.T.A. No.5663 & 5666/Mum/2024

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independent evidence corroborating such material/statement and linking such materials with the both assessee’s.
3.1 The Ld. CIT(A) held that the additions were made in the hands of both the assessees by the Ld. AO relying on statement of third party without there being any kind of independent linking such material with both the assessees. In the absence of any independent evidence with the material found from the third party premises or the statements recorded of the third party, the additions made by the Assessing Officer stood deleted.
Aggrieved by the order of the Ld. CIT(A) the revenue is in appeal before this Tribunal against both the impugned orders.
4. At the outset Ld. AR submitted that the assessees before this Tribunal are admittedly engineers with the public works department under Government of Maharashtra. It is also an admitted fact that, vide order dated 07/08/2020 bothe the assessees were transferred. However, the assessee have always denied any cash payments as alleged by revenue to Rucha Group in order to felicitate the transfers and postings in the PWD department.
4.1 At the outset, the Ld. AR submitted that only issue arising from consideration in both the appeals pertains to the addition deleted by the Ld. CIT(A)made u/s. 69(C) of the Act, on account of alleged cash transaction by assessee’s. The Ld. AR submitted that, under similar and identical facts and circumstances this Tribunal in case of another assessee in ITA No. 5661/Mum/2024
for assessment year 2021-2022 vide order dated 24/01/2025

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considered identical additions on similar facts by observing as under:
“9. We find that during the search, the statement of Shri Ravi
Wadepalle, an employee of Rucha Group, was recorded on oath under section 132(4) of the Act, the relevant portion of which relied upon by the AO is reproduced as follows: –
“Q.10 I am showing you loose paper folder A2 which is seized from the residence of Shri Avish Atal, i.e., from A-1304, Dioro, Lodha New Cuffe
Parade, Wadala (E), Mumbai - 400037. Please go through the said folder and confirm that the documents in this folder are the same as documents which were sent by you to be kept with Avish Atal.
Ans. Yes I confirm the same. Q.13 Please refer to page numbers 39 to 42 of Annexure A2 and page numbers 87, 90 to 93, 95, 112, 149 to 166
of Annexure A3. Please explain the contents on these pages.
Ans. Sir these pages are pertaining to transfers and postings of officers
(i.e., designations of Deputy
Engineer,
Executive
Engineer,
Superintendent Engineer and Chief Engineer) in the PWD Department,
Maharashtra. If any officer wants a desired posting then they approach us. For posts in Mumbai and Pune, the amounts are higher while the amounts for other areas are lower. Once an officer approaches us, then we take details of the post/place which that officer wants. Then I give this list to Prashant Nilawar. I don't know what he does with this list.
He then returns another list to me, which I give to the desk officer in PWD. Then this list is moved upwards and gets finalized. Sir, for getting these posts, the officers pay amounts in cash varying from Rs. 5 lakhs to Rs. 1 crores. Once the posting of the officer is confirmed in the transfer order, then the officer pays the cash amount to us. Sometimes he delivers the amount to us, sometimes we pick it up from him. The collection of these amounts is done by Sonu (Lalit) Mishra and Pawan
Mishra. Then I don't know what is done with these amounts.”
10. We further find that when the seized documents were confronted to Shri Shailendra Rathi, he stated on oath under section 132(4) of the Act, as follows: –
“these details were received from the office of PWD ministry, However, I am not sure about the exact person. These are the details of the amounts received in cash from various officers and contractors. The list has: been summarised as Sheet A and Sheet B. Sheet A is the detail of officers and contractors who had fully paid their amount receivable and Sheet B is the detail of officers and contractors from whom partial payment or no payment has been received."

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perusal of the aforesaid statements, recorded during the search proceedings, it is further pertinent to note that it was alleged that the PWD Engineers contacted Shri Prashant P Nilawar, the partner of Rucha Consultancy LLP, through WhatsApp/FaceTime and informed about the desired postings. However, from the perusal of the assessment order, it is evident that Shri Prashant P Nilawar was neither examined nor any statement recorded during the search proceedings. At this stage, it is also pertinent to note that the Revenue has not disputed the fact that the statements recorded during the search proceedings were subsequently retracted. Therefore, in the facts and circumstances of the present case, it becomes all the more necessary for the Revenue to substantiate the addition with independent evidence, which is completely lacking in the present case.
As regards the contention of the Revenue that the documents found at the premises of Shri Shailendra Rathi are corroborated with the documents found at the premises of Shri Avish Atal, it is pertinent to note that during the search Shri Ravi Wadepalle admitted that the documents pertaining to Rucha Group are also kept at the residence of Shri Avish Atal. Thus, it is evident that both documents pertain to the Rucha Group which were kept at different places and the same cannot be treated as corroborating each other. Therefore, we agree with the findings of the learned
CIT(A), based on various judicial pronouncements, that documents/material found from the premises of a third party or the statement of a third party cannot be relied upon to make additions in the hands of the assessee unless such material statement is corroborated by independent evidence linking such material to the assessee. Further, we find merits in the findings of the learned CIT(A) that such material could have been a reason for starting an investigation, however, the AO simply relied on material/statement found/recorded during the search proceedings without corroborating the same with any kind of independent evidence linking such material with the assessee. Thus, we are of the considered view that the AO did not make any attempt to confirm that such money was paid by the assessee and merely relied on the documents/statements found/recorded during the search to make the impugned additions.
Further, the decisions relied upon by the learned Departmental
Representative in the case of B.Kishore Kumar v/s CIT, reported in [2015] 62 taxmann.com 215(SC) and in the case of Madhav Gems (P)
Ltd. v/s ITO, reported in [2021] 434 ITR 684 (Guj.) are distinguishable on facts as in the present case there was no search on the assessee and there was no independent inquiry by the AO on the information

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received from the search on third party. Thus, the aforesaid decisions are not applicable to the present case.
13. Before concluding, gainful reference can be made to the decision in the case of ACIT v/s Miss Lata Mangeshkar, [1974] 97 ITR 696 (Bom.), wherein while dismissing the Revenue’s appeal in a case wherein additions were made on the basis of documents seized and statements recorded from the third party, the Hon’ble Juri ictional
High Court observed as follows: –
“The Income-tax Officer came across a sort of a ledger maintained by the firm known as Vasu Films of Madras containing certain entries, which had been seized by the income-tax authorities from the premises of that firm at Madras, and relying on those entries he took the view that the assessee must have concealed her real income by not showing certain payments for which no receipts were passed by her and he made the additions of Rs. 60,550, Rs.
75,000 and Rs. 75,000 to the income returned in each of the three assessment years respectively. For drawing the inference that she must have received income without passing receipts the Income-tax Officer relied upon the two entries which appeared on one page of that ledger of Vasu Films, which read as follows:
"20-9-1962
16/8
To Lata
Mangeshkar
800 W plus
L.F.
Rs.

700 B
102
1,500
11-6-1963
16/5
To Lata
123
2,000

B
123
2,000".
In the statements recorded of one N. Vasudev Menon, the managing partner of Vasu Films, and one C.S. Kumar, the firm's
Bombay manager, the entries were explained by them by stating that the letter "W" put against the figures mentioned in the entries represented payment in "white" while the letter "B" put against some items indicated payment in "black". The assessee was given an opportunity to cross-examine these persons. The Income-tax
Officer accepted the entries as showing that payments had been received by the assessee for which receipts had not been passed by her and these payments were outside the books of account and he also relied upon the statements made by these two persons. The Appellate Assistant Commissioner confirmed the additions made by the Income-tax Officer. Before the Tribunal it was contended on behalf of the assessee that the entire evidence on which the lower authorities had relied merely created suspicion that the assessee might have accepted the payments in "black" but it did not take the place of proof. The Tribunal after

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appreciating all the pieces of evidence that were relied upon by the department in support of its case came to the conclusion that the evidence was not sufficient to prove even a single instance where the assessee could be said to have received money in "black" for which she did not pass a receipt. The other evidence was of a general character suggesting that the practice of receiving part remuneration in black was prevalent among cine stars which was of no avail to prove any specific instance against the assessee. The only specific evidence which required scrutiny was that furnished by the two entries and the statements of N.
Vasudev Menon and C.S. Kumar. On a scrutiny of the two entries as well as the evidence of the two witnesses the Tribunal took the view that even that evidence did not carry the department's case any further and in that view of the matter the Tribunal deleted the additions made by the Income-tax Officer. The department has sought the reference to this court on three questions of law which are said to arise out of the Tribunal's order and out of the three questions which appear at page 6 of the application and in respect whereof rule has been issued, questions Nos. 2 and 3 are really dependent upon the answer to the first question as to whether on the facts and circumstances of the case the Tribunal was justified in ignoring the entries in the ledger of Vasu Films relating to the payment made by the said firm to the assessee. In our view, the question has been framed by the department so as to give it a colour of a question of law, for, in our view, having regard to the manner in which the Tribunal has dealt with the said entries, it cannot be said that the Tribunal has ignored the entries in the ledger of Vasu Films relating to the socalled payments made by the firm to the assessee. In fact, the Tribunal has discussed these entries appearing in the ledger of Vasu Films and has given substantial reasons as to why it was not inclined to accept the entries as reliable entries for accepting the case of the department. inter alia, it pointed out that the ledger containing the said entries had not been produced before it, that no corresponding entries were there in the day-book of the relevant period and that Vasu Films did not rely on this ledger in the course of its own assessment proceedings but for its own assessment proceedings different set of books had been relied upon as genuine set of books. As regards the evidence of the two witnesses on which reliance was placed by the department, the Tribunal has pointed out that so far as N. Vasudev Menon was concerned, he had no personal knowledge of the actual payments

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made to the assessee and, therefore, his evidence could not carry the case of the department any further and so far as the Bombay manager, C.S. Kumar, was concerned it came to the conclusion that though he purported to say that he had made the payments in "black" to the assessee—payments corresponding to the entries to be found in the ledger—his evidence suffered from serious infirmities, which have been pointed out by the Tribunal in its reasons. It pointed out that as the Bombay manager he used to receive amounts from Madras from out of which he used to make disbursements in Bombay but he maintained no account in respect of the same which made it difficult to rely on his evidence.
The other serious infirmities in his evidence are to be found in paragraph 7 of the Tribunal's order. Mr. Joshi for the department had also mainly relied upon this evidence and did not press the other evidence which was of a general character. However, having regard to the reasons which have been given by the Tribunal for disbelieving the two witnesses and for rejecting the entries that were found in the ledger of Vasu Films, we feel that the conclusion reached by the Tribunal purely rests on the appreciation of evidence and no questions of law arise. Mr. Joshi tried to urge before us that in paragraph 5 of its order the Tribunal has found fault with the entries appearing in the ledger on the ground that there were no corresponding entries in the day-book of the firm covering the same period and the Tribunal further observed that no attempt was made to explain the absence of relevant entries in the daybook and for that reason the Tribunal rejected the entries in the ledger on which reliance was placed. Mr. Joshi tried to urge that, after all, the entries in the ledger were the entries in a book which was not meant for being disclosed to the income-tax authorities because it contained the entries pertaining to the payment in "black" and the day-book for the relevant period that was available was a day-book meant for being produced before the taxing authorities as it contained entries pertaining to all legal and white payments and naturally in such day-book no corresponding entries would be found. So no importance should have been attached by the Tribunal to the absence of a day-book containing the corresponding entries. In the first place it must be pointed out that this is not the only reasons for rejecting the entries but the Tribunal has given other sufficient reasons for rejecting the same. But even with regard to this reason which has been given by the Tribunal, though it may be contended that since the entries in the ledger pertained to the I.T.A. No.5663 & 5666/Mum/2024

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payments in "black" no corresponding entries could be found in the day-book which was meant to be produced before the income- tax authorities, still the fact remained that the day-book from out of the other set of books (not intended to be produced) which must have contained the corresponding entries was not available and, in the absence of that, mere production of ledger entries would be of no avail, as there would be no guarantee about the truthfulness or genuineness of the entries in the ledger. Moreover, entries in books of account—whether in day-book or in the ledger—are merely corroborative evidence and in the absence of proper corroborative evidence the primary direct evidence would alone be required to be scrutinized and that evidence in this case consisted of the testimony of C.S. Kumar and the evidence of that witness was found to be thoroughly unreliable by the Tribunal.
After all, the entries in the day-book or the ledger would be a corroborative piece of evidence and once the direct evidence of the person who is said to have made payments in "black" to the assessee is disbelieved, we do not think that any value could be attached to the entries in the ledger or to the entries in the day- book even if one had been produced. In the circumstances, we feel that the questions which are sought to be referred arise out of a finding of fact recorded by the Tribunal on pure appreciation of evidence.”
14. Accordingly, in view of the aforesaid findings, we find no infirmity in the findings of the learned CIT(A) in deleting the addition of Rs.1,25,00,000 made by the AO under section 69C of the Act.
15. Further, as regards the addition of Rs.5 lakh made by the AO under section 69A of the Act, we find that the AO placed reliance upon the WhatsApp chat between the assessee and Shri Shailendra Rathi found from the mobile of Shri Shailendra Rathi. However, the assessee denied any such transaction having taken place between him and Shri
Shailendra Rathi. It is evident from the record that during the assessment proceedings, the assessee sought a complete set of statements of Shri Shailendra Rathi to examine the same and also sought the opportunity to cross-examine Shri Shailendra Rathi.
However, the AO merely on the statement of Shri Shailendra Rathi that the assessee asked him to deliver Rs. 5 lakh to Nashik made the additions in the hands of the assessee under section 69A of the Act. In further appeal, the learned CIT(A) deleted the addition, inter-alia, on the basis that in his statement Shri Shailendra Rathi stated that the transaction of delivering Rs.5 lakh could not take place and in any case, the entire statement was subsequently retracted by Shri

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Shailendra Rathi. The learned CIT(A) further noted that the WhatsApp chat had only an image of a Rs.5 note. Thus, on the basis that the said image was not corroborated with any independent evidence, the learned CIT(A) deleted the addition by placing reliance upon various judicial pronouncements as noted in pages 43-44 of the impugned order. The relevant findings of the learned CIT(A) are reproduced as follows: -
“7.3 It is seen that the whatsapp chat only has an image of a 5
rupee note and it does not have any reference to any sum of money as stated by Sh. Shailendra Rathi. The addition has been made only on the basis of the material found from Sh. Rathi and the statement of Sh. Shailendra Rathi, which has been retracted.
The assessee has consistently denied of any such transaction having taken place. In fact, Sh. Shailendra Rathi in his statement has himself stated that the transaction could not take place. As already stated, while deciding the earlier ground, no addition can be made simply on the basis of a third party statement without corroborating it with independent evidence. 7.3.1 In the case of Naren Premchand Nagda v. ITO [ITA No. 3265 (Mum.) of 2015, dated 8.7.2016], a search was conducted at the premises of a builder. The statement of key person of the group was recorded who stated that the assessee had paid cash to the group. When the statement of the key person was put to the assessee, he denied of making any payment in cash. However, the department made addition by relying on the statement of key person of the group. The Hon'ble Mumbai ITAT relying on series of judicial pronouncements held in the case of Naren Premchand Nagda v.
ITO (supra) that in the absence of any evidence found against the assessee, no addition can be made on the basis of documents found from the premises of third party and the statements recorded during the course of search conducted in third party premises. In this case the transaction of purchase of property by the assessee from the builder had not been denied by the assessee. Further, the cheque payment was also reflected in the seized notings. Inspite of this, the addition made on the basis of notings in respect of cash transaction was not confirmed by the Hon'ble Mumbai ITAT. 7.3.2 In the case of Jawaharbhai Atmaram
Hathiwala v. ITO [2010] 128 TTJ 36 (Ahd.), addition was made by relying on seized material and statement of a third party without bringing any other evidence on record. The Hon'ble
Ahmedabad Tribunal deleted the addition by observing that no evidence could be brought on record by the Revenue to show that I.T.A. No.5663 & 5666/Mum/2024

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in fact the assessee had paid 'on money' to the developers. No document containing signature of the assessee or handwriting of the assessee to corroborate the above making of payment by the assessee was found during the course of the search. Merely recording made by a third party or statement of a third party could not be treated as so sacrosanct so as to read as a positive material against the assessee. Therefore, addition in the hands of the assessee on account of 'onmoney' was held to be not justified.
7.3.3 In the case of Asstt. CIT v. Prabhat Oil Mills [1995) 52 TTJ
533 (Ahd. - Trib.), the department relied upon certain notings in the seized diary found from the premises of third party and contended that the assessee had made sales outside the books of accounts. However, the assessee denied of having made any sales outside the books of accounts. The Hon'ble Ahmedabad
Tribunal held that once the assessee denies the transaction, the onus was on the Assessing Officer to prove with corroborative evidence that the entries in the seized diary represented sales outside books of accounts. The Hon'ble Tribunal further held that mere entries in the accounts of third party was not sufficient to prove that assessee had indulged in transaction outside books of accounts
7.3.4 Further, the Coordinate Bench of ITAT at Delhi in the case of Pramod Pandey v. Asstt. CIT [ITA No. 4295 (Delhi) of 2012, dated
6.12.2013] also held that presumption u/s 132(4A) or 292C of the Act could be taken only in the case of a person from whose possession the document or material has been found. 7.3.5 In the case of Straptex (India) (P.) Ltd. v Dy. CIT [2003] 84 ITD 320
(Mum- Trib.), the Hon'ble Mumbai ITAT also held that the presumption u/s 132(4A) is only in respect of the person in whose possession the books or documents are found. While utilizing such documents in the case of any other person, there could not be any presumption about the correctness of such books of accounts. 7.3.6 Also, the Hon'ble Kolkata ITAT in the case of Atul
Tantia v DCIT (ITA No. 492/Kol/2021 order dated 28.03.2023) has also held that no addition can be made on the basis of messages from SMS or WhatsApp between two persons unless there is corroborative evidence on record. The relevant extracts are as under: We have perused the decisions of the Co-ordinate
Benches of the Tribunal and found that the ratio of law laid down is that no addition can be made on the basis of messages from SMS or WhatsApp between two persons unless there is corroborative evidences on record. 7.4 Thus it is seen that the I.T.A. No.5663 & 5666/Mum/2024

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Hon'ble Courts have clearly held that documents/material found from the premises of a third party or a statement of a third party cannot be relied upon to make additions in the hands of the assessee, unless such material or statement is corroborated by independent evidence linking such material to the assessee. In the present case it is seen that the addition of Rs. 5,00,000/- u/s.
69A of the Act has been made by the AO relying on the statement of a third party, which in any case has been retracted. Moreover, in his statement, the third party had stated that the transaction could not take place. Also, the addition has been made on the basis of material found being whatsapp chat during the course of the search conducted on a third party. The Hon'ble Courts have clearly held that no addition can be made on the basis of messages from SMS or WhatsApp between two persons unless there is corroborative evidence on record. The assessee has consistently denied having any knowledge of the contents of the impugned material. It is seen that while such material could have been a reason for starting an investigation, the AO has simply relied on such material found from the premises of a third party and relied on third party statement to make the addition without corroborating it with any kind of independent evidence linking such material with the assessee. As per the plethora of Court judgments discussed above, such an act is not permitted under the law. The Hon'ble Supreme Court in the case of Umacharan
Shaw and Bros v CIT (1959) 37 ITR 271 held that suspicion, however strong, cannot take the place of evidence. Similarly, raising presumption itself does not amount to proof. Presumption, however strong, cannot take the place of evidence as held in the case of Pooja Bhatt 66 TTJ (Mum) 817 and in the case of D.M
Kamani HUF 65 TTJ (Pat) 504. Thus, in the absence of any independent evidence linking the assessee with the material found from a third party or a third party statement, the addition made by the AO on the basis of such third party statement or material found from the third party cannot be sustained. The addition made by the AO of Rs. 5,00,000/- u/s 69A is deleted and the ground of appeal is allowed.”
16. From the perusal of the record, it is evident that the addition of Rs.5 lakh was made merely on the basis of the document found during the search on the third party and there was no attempt by the AO to link the same with the assessee by way of an independent evidence.
Accordingly, in light of the decisions relied upon by the learned CIT(A) in the impugned order, we are of the considered view that the addition

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of Rs.5 lakh made under section 69A of the Act has rightly been deleted by the learned CIT(A). Before concluding, it is pertinent to note that the learned CIT(A) also took into consideration the decisions wherein it was held that the presumption under section 132(4A) of the Act could only be taken in the case of the person from whose possession the document or material has been found and since, in the present case, the documents were found from the possession of the third party, such a presumption cannot be extended to the assessee. ”
4.2 The Ld. DR submitted that, the documents seized from the search premises is evident enough to show cash payments were made by both assessees to Ruch Group, based on which these assessees were posted with the PWD department under Government of Maharashtra. The Ld. DR also placed reliance on modus-operandi of the cash transaction received by the Rucha
Group from these assessees statements recorded he thus vehemently supported this additions and prayed for confirming the same.
We have perused the submissions advance by both sides based on records places before us.
5. It is noted that, the additions made by the revenue in both the assessees arises out of seized materials found from search premises of Rucha Group, GNP Group and Jairaj Group. On perusal of the assessment order in case of both the assessees it is noted that, the Assessing Officer relied on the following seized materials and statements:
“A. Seized Material / Images / Loose Papers / Documents
• Found and seized from the residence of Mr. Avish Atal
• Found and seized from the mobile of Shri Shailendra Rathi.

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B. Statements recorded of:
• Mr. Javed Shaikh, recorded on 23-09-2021
• Mr. Shailendra Rathi, recorded on 25-09-2021
• Mr. Ravindra Wadepalle (Appellant was not made aware of date of recording of statement)”
5.1 Further on perusal of the assessment order it is noted that nowhere in the statements no corroborative evidences were unearth by the Assessing Officer in order to substantiate the statements recorded of Javed Shaikh, Shailendra Rathi and Ravindra Wadepalle. However, it is based on the statements alone that the additions were made by the Assessing Officer in the hands of the assessee’s before us.
5.2 On perusal of the assessment order it is also noted that, assessee sought for cross-examination of the witnesses which was rejected by the Ld. AO, without giving any reasons by only stating that, the statements recorded explains the details modus operandi of the transaction related to transfers and posting of the PWD engineers.
5.3 In our view the Ld. AO came to the conclusion without verifying and making any further efforts, and this approach by the Ld. AO is in clear violation of principles of natural justice. On this aspect, we refer to the decision of Hon’ble Supreme Court in case of Andaman Timber Industries vs. CEC reported in 281 ITR
241 wherein, Hon’ble Supreme Court held that, by not providing opportunity of cross-examining the witness whose statements were relied on by the assessing officer, amounts to violation of principles of natural justice. We refer to the following observation by Hon’ble Supreme Court as under:

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“ According to us, not allowing the assessee to cross-examine the witnesses 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 inasmuch as it amounted to violation of principles of natural justice because of which the assessee 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 disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee.
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. 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 ex-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.”
5.4 Once the assessee disputed the correctness of the statement and wanted to cross-examine the witness which was denied, the Ld. AO, cannot pass any orders based on such statements, as it is not sustainable in eyes of law. It is also noted that in the statement recorded of Avish Atal in question No. 13, it is recorded that, the collection of the amount were done by Sonu (Lalit)
Mishra and Pavan Mishra along with Avish Atal and others.
However, the persons referred to in the answer given to question
13, were also not subjected to examination in order to place any identification regarding the assessee’s having paid any alleged cash.

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Mumbai:
Dated: 31/01/2025
Poonam Mirashi,
Stenographer

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Copy of the order forwarded to:
(1)The Appellant
(2) The Respondent
(3) The CIT
(4) The CIT (Appeals)
(5) The DR, I.T.A.T.By order