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Facts
The assessee, Ramesh Rajpal HUF, had its assessment for AY 1994-95 revised based on diary entries seized during a search operation. These entries allegedly pertained to property transactions, including the sale of land at Village Asola, with a capital gain addition made to the assessee's income.
Held
The Tribunal held that the additions made by the Assessing Officer and confirmed by the CIT(A) were illegal and unsustainable. This decision was based on the principle of binding precedents, particularly the ITAT's prior orders in similar cases involving co-sellers where similar additions based on the same diary entries were deleted.
Key Issues
Whether additions to income based solely on diary entries, without corroborative evidence, are sustainable, especially when similar additions in the cases of co-sellers have been deleted by appellate authorities.
Sections Cited
132, 143(3), 250, 260A
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Income Tax Appellate Tribunal, “F” BENCH, DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR
O R D E R PER VIMAL KUMAR, JM:
The appeal filed by the assesse is against the order dated 24.09.2025 of the Ld. Commissioner of Income Tax (Appeals)-31, New Delhi (hereinafter
P a g e | Ramesh Rajpal HUF (AY 1994-95) referred to as “Ld. CIT(A)”), u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), arising out of order dated 30.12.2016 of the of the Ld. Assessing Officer/ITO Ward-28(1), New Delhi (hereinafter referred to as “Ld. AO”), u/s 143(3) r.w.s. 260A of the Act for Assessment Year 1994-95.
Brief facts of the case are that, the assessee is a Hindu Undivided Family (HUF) and had filed its return of income on 24/02/1995 declaring a total income of Rs. 4,21,840/-. Subsequently, a search and seizure operation was conducted at the office premises of Shri Surender Modi, Shri Lalit Modi, Shri L. N. Goyal, Shri Ramesh Rajpal and others, during which a diary containing details of various property transactions was seized.
Based on the said diary, it was alleged that the Appellant's land had been sold for an aggregate consideration of Rs. 1,41,00,000/-, purportedly adjusted against the consideration for the farm house purchased by Smt. Manju Rajpal.
The original assessment order dated 28/03/1997 was thereafter passed in the case of the Appellant, wherein capital gain was computed on the P a g e | Ramesh Rajpal HUF (AY 1994-95) alleged sale of joint land owned by Sh. Ramesh Rajpal (individual), Ramesh Rajpal HUF & Smt. Manju Rajpal and the Appellant's share of the consideration was worked out at Rs. 41,52,450/-. Consequently, a net addition of Rs. 39,32,850/- was made. Relying on the same diary found from the possession of Sh. Surender Modi, the Revenue also completed assessments in the cases of Smt. Manju Rajpal and Shri Ramesh Rajpal (individual & HUF). The capital gain working as alleged by the Assessing officer is as under:
Purchase Cost 1,27,000/- 135,500/- 130,500/- Share in Land 35.95% 29.45% 34.60% Sale Consideration 57,95,100/- 41,52,450/- 41,52,450/- Indexed Cost 3,06,470/- 2,19,600/- 2,19,600/- Addition made by 73,50,000/- 39,32,850/- 39,32,850/- AO-LTCG
P a g e | Ramesh Rajpal HUF (AY 1994-95) 5. However, while passing the assessment order dated 31/03/1999 in the case of Shri L. N. Goyal, no addition was made, acknowledging that the entries in the diary represented were mere notings by the Modis for their internal purposes. In fact, during cross-examination proceedings, both Shri Surender Modi and Shri Lalit Modi categorically denied having entered into any such property transactions. The copies of the assessment order and Office Note in the case of Shri L. N. Goyal are enclosed at PB Page 46-49.
Further, the Hon'ble Delhi Tribunal, while considering the Assessment order and the Office note recorded in the case of Shri L. N. Goyal, allowed the appeals filed by the Appellant as well as the other co-sellers, namely Shri Ramesh Rajpal and Smt. Manju Rajpal. The Tribunal categorically held that when the Revenue itself had examined the seized diary in the case of Shri L. N. Goyal and concluded that no addition could be made on the basis of such uncorroborated notings, the same diary could not simultaneously be relied upon to make additions in the hands of the Appellant or the other co-sellers. The Tribunal thus accepted that the entries in the diary were merely internal notings of the Modis and had no evidentiary value in establishing any actual property transaction.
P a g e | Ramesh Rajpal HUF (AY 1994-95)
Against the order of the Hon'ble Tribunal, the Revenue did not file any further appeal in the cases of Shri L. N. Goyal (ITA No. 4482/DEL/2000 dated 19/11/2003) and Smt. Manju Rajpal (ITA No. 3844/DEL/2000 dated 23/08/2005). However, in the cases of Shri Ramesh Rajpal and Ramesh Rajpal HUF (the Appellant), the Revenue preferred appeals before the Hon'ble Delhi High Court. The Hon'ble High Court, without expressing any opinion on the merits, remanded the matters back to the file of the Assessing Officer for fresh examination in accordance with law.
The Assessing Officer, without conducting any further enquiry or investigation and without dealing with or rebutting the Office Note recorded in the case of Shri L. N. Goyal and ITAT order in the case of Smt. Manju Rampal (Order dt. 23/08/2005), again passed the assessment order dated 30/12/2016, repeating the identical addition.
Against order dated 30.12.2016 of Ld. AO, the assessee filed appeal before the Ld. CIT(A) which was dismissed vide order dated 24.09.2025.
P a g e | Ramesh Rajpal HUF (AY 1994-95) 10. Being aggrieved, the appellant-assessee preferred present appeal on following grounds of appeal:-
1.1 That on the facts and circumstances of the case, the CIT(A) was not justified in upholding the impugned addition of Rs. 39,32,850/- made by the Assessing Officer on the alleged ground of long-term capital gain earned on sale of land at Village Asola, in complete disregard of the documentary evidence placed on record & findings recorded in the case of the other co-sellers & findings recorded in the case of other co-seller.
1.2 That the said addition, in the case of the co-seller, Sh. Manju Rajpal on identical allegations, having been deleted and the appeal allowed in favour of the said co-seller, renders the allegation raised by the Assessing Officer wholly unjustified, illegal and contrary to the settled position of law.
1.3 That in any case, the contents of the diary having been considered in the case of co- sellers, there is no valid basis to draw adverse inference in the case of the Appellant.
1.4 That the addition being founded merely on the unreliable contents of a diary allegedly seized from a third party, which carries no evidentiary value, is based purely on surmises and conjectures and cannot sustain in law.
1.5 That the addition of Rs. 39,32,850/- as made by the Assessing officer on the alleged ground of Long-term capital gain is illegal and not sustainable under law. 2 That the Orders passed by the lower authorities are not justified on facts and same are bad in law.
3 That the Appellant craves leaves to add, alter, amend, and forego any of the grounds of appeal at the time of hearing and to submit any other evidence as may be necessary for judicious adjudication of issue in dispute.
11. Ld. Authorized Representative for appellant-assessee submitted that, the orders passed by the Tribunal in the cases of Sh. L.N. Goyal and Smt. Manju Rajpal wherein additions made solely on basis of seized diary were deleted have attained finality. Copy of order of ITAT in ITA
P a g e | Ramesh Rajpal HUF (AY 1994-95) No.3844/Del/2000 titled as DCIT Vs. Mrs. Manju Rajpal dated 23.08.2005 is at Page No.41-45 of Paper Book and assessment order in case of Sh. L.N. Goyal is at Page 46-47 of Paper Book.
Ld. Departmental Representative submitted that Ld. AO was justified in making the addition of Rs. 39,32,850/- on account of capital gain from sale of Asola land based on the seized diaries.
I. The "Totality of Entries" Doctrine: A Principled Evidentiary Approach The assessee's paper book repeatedly emphasizes that CIT(A) and ITAT found "no mention of Asola land" in the diaries. However, this argument reflects a misapplication of textual analysis to evidentiary evaluation. In tax assessment, documentary evidence is not evaluated in isolation or by strict textual matching, rather, evidence is appraised through the lens of circumstantial inference and transactional reconstruction. The seized diaries contain a multi-entry transaction chain: Salochna Devi (original owner) S.M. Farms (P) Ltd. (Rs. 2.10 Crores] S.M. Farms-> L.N. Goel L.N. Goel (consideration undisclosed in diaries] Manju Rajpal [Rs. 3.55 Crores] Parallel entries reference "Asola" location and property details The legal principle is well-established: A series of related diary entries, when internally consistent and mutually corroborative, acquire collective evidentiary value even if no single entry explicitly states the transaction in question. This principle finds support in: CIT v. Kulwant Rai, 291 ITR 36 (Del): Court held that seized documents need not be rejected in toto merely because they originate from a third party; rather, the AO may extract inferences from internal consistency and verifiable facts within such documents. CIT v. S.M. Aggarwal, 293 ITR 43 (Del): The Court recognized that circumstantial evidence derived from seized records, when supported by collateral facts, can sustain additions even absent direct documentary reference to the specific transaction
P a g e | Ramesh Rajpal HUF (AY 1994-95) II. The Undisputed Cheque Entries as Corroborating Circumstance: A fact of paramount significance which the assessee's paper book conspicuously underplays-is that the assessee did not dispute cheque entries in the diaries, only cash entries. This selective challenge is highly probative of partial admission. Legal Principle: Admission by Conduct-When a party examines documentary evidence, selectively disputes portions, and remains silent on others, the undisputed portions acquire enhanced credibility. The party's own representative's conduct constitutes an implicit acceptance of the undisputed facts. The logical inference is: Cheque entries, being traceable and formally documented, would be easier to fabricate if the diaries were wholly unreliable The assessee, presumably having access to banking records, could have challenged cheque entries had they been false The fact that the assessee's challenge is limited to cash entries (inherently difficult to trace) suggests acceptance of the cheque-based transaction's reality By implication, the transaction chain-anchored in cheque entries-is factually real The AO's reasoning on this point is sound and has precedential support in: Addl CIT v. Sampatraj, 89 ITD 156 (Bangalore): The Tribunal held that selective non- objection to portions of evidence, combined with challenge to other portions, constitutes partial admission of the undisputed portions III. The "Man of Common Prudence" Test: Evidentiary Sufficiency: The CIT(A) correctly applied the principle articulated in evidence jurisprudence: When a documentary record contains multiple facts, some of which are verifiable through independent means, and those verifiable facts prove accurate, inferences regarding non-verifiable facts within the same record gain strength. In the current case: Verifiable facts in the diaries: Cheque payment dates, party names, location references, and transaction amounts Independent corroboration: S.M. Farms' own books evidenced receipt of Rs. 2.10 Crores; L.N. Goel's case acknowledgment of property transaction; Manju Rajpal's (wife of assessee) involvement as purchaser Inference: Incidental cash payment details and Asola location specifics, appearing alongside verifiable facts in a broker's diary, acquire credibility This principle is recognized in:
P a g e | Ramesh Rajpal HUF (AY 1994-95) CIT v. Dhakeswari Cotton Mills, 125 ITR 79 (Cal): Court held that when core facts in a document are independently verified, peripheral details in the same document may be inferred without additional corroboration.
From examination of record, in light of aforesaid rival contention, it is crystal clear that, the assessee, Ramesh Rajpal (HUF), filed a return of income for Assessment Year 1994-95 on 24.02.1995 declaring income of Rs. 4,21,840/-. Following search and seizure operations conducted on 17.11.1993 under Section 132, the Assessing Officer framed an assessment order dated 28.03.1997 under Section 143(3), assessing income at Rs. 41,91,257/-, thereby making an addition of Rs. 39,32,850/- on account of alleged unexplained capital gain from sale of land at Village Asola. The sole basis for this addition was diary entries recovered from the premises of Shri Surender Modi and Shri Lalit Modi (real estate brokers), who were subjected to simultaneous search operations. The diaries recorded transactions involving multiple parties, including the assessee, pertaining to property dealings in the National Capital Region.
The CIT(A), vide order dated 09.10.1997, deleted the addition of Rs. 39,32,850/-, observing that the assessee was not confronted with the seized material (diaries) and that no mention of Asola land appeared in those diaries. The Department appealed against this deletion before the ITAT, New Delhi,
P a g e | Ramesh Rajpal HUF (AY 1994-95) which vide order dated 27.02.2003 confirmed the CIT(A)'s deletion, holding that no addition could be sustained merely on the basis of rough notings in third-party diaries without corroborative evidence.
Aggrieved by the ITAT's order, the Department preferred an appeal under Section 260 before the Delhi High Court. The High Court, vide order dated 10.12.2015, rather than upholding or reversing the ITAT's decision, restored the matter to the Assessing Officer for re-examination of the whole issue after giving proper opportunity to the appellant. Critically, the High Court framed two law points, the second being: "Whether the ITAT has failed to appreciate that there is sufficient material on record justifying the additions made by the Assessing Officer."
In compliance with the High Court's remand, the Assessing Officer framed a fresh assessment order dated 30.12.2016.
The CIT(A), citing the Supreme Court's principle in B. N. Bhattacharjee (118 ITR 461) that appeals must be effectively pursued (not merely filed), and having considered the assessee's written submissions, confirmed the AO's addition vide order dated 24.09.2025.
P a g e | Ramesh Rajpal HUF (AY 1994-95) 18. The assessee filed a comprehensive paper book consolidating orders from five related cases (Ramesh Rajpal individual, Ramesh Rajpal HUF, Smt. Manju Rajpal, L.N. Goel, S.M. Farms Pvt. Ltd.), all assessed on the same diary basis. The paper book highlights that all five related assessees' additions were deleted appellate forums and includes the Department's office note in the L.N. Goel case stating diaries were "NOT AUTHENTIC AND NOT RELIABLE”.
In case of co-seller Smt. Manju Rajpal, ITAT, deleted similar addition on basis of seized diary had attained finality. Copy of order of ITAT in titled as DCIT Vs. Mrs. Manju Rajpal dated 23.08.2005 is at Page No.41-45 of Paper Book and assessment order in case of Sh. L.N. Goyal is at Page 46-47 of Paper Book and Office note giving reference to contents of diary at Page No.48-49. The similar additions were deleted. The appellant-assessee has claimed that the principal transaction mentioned in the diary concerns the alleged farm-house purchased by Smt. Manju Rajpal and the alleged “sale” of land at Village Asola was shown only as an incidental or adjusting entry linked to that main transaction. A Coordinate Bench of ITAT in case of Smt. Manju Rajpal had held that the diary entries lacked any P a g e | Ramesh Rajpal HUF (AY 1994-95) evidentiary value and granted relief to Smt. Manju Rajpal co-seller. The order in the case of Smt. Manju Rajpal has attained finality.
In view of above, material facts by following the principle of binding precedents, it is held that the orders of Ld. AO and Ld. CIT(A) being illegal are unsustainable and set aside.
Therefore, grounds of appeal are accepted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 09.04.2026