MR. MOHAN MATHEW,COIMBATORE vs. ITO, NCW-4(4), COIMBATORE

That the addition made u/s 69A is purely based on third party information which was neither corroborated with any evidence nor was the appellant allowed to cross examine the said party. The appellant was unaware of the statement or excel sheet data that was used against him until he received the notice and assessment order depriving him of opportunity of cross examination

It is contended by the appellant that the impugned assessment orders have been passed in a pre-determined manner relying upon the unauthorized data found in Excel Sheet, which do not have any evidentiary value. Therefore, principles of natural justice has been violated by the respondent while passing the impugned assessment orders as well as while issuing the consequential demand notices and no opportunity to rebut the thing-party statement or evidentiary material was provided.

That the learned authorities failed to consider that the appellant had discharged the primary onus by denying the transaction and the burden then lay on the department to prove otherwise with cogent evidence 5. That the findings of the lower authorities are perverse and not supported by any material on record.

That the addition based on suspicion, presumption, and surmise is bad in law and deserves to be deleted.

Brief facts of the case are as follows: There was a search and seizure operation u/s.132 of the Act on Kuantum Papers Ltd :- 3 -: on 09.02.2024. According to the Revenue, seized data from laptop of Vice President of Kuantum Papers Ltd., revealed an Excel Sheet titled “Cash Flow for the years 2016-17 to 2023-24”, which shows cash payment to the assessee during the relevant assessment year for a sum of Rs.4,50,000/-. Accordingly, the case of the assessee was reopened by issuance of notice u/s.148 of the Act on 29.03.2024 for the assessment year 2020-21. The assessee replied on 11.06.2024 stating that assessee had already filed his return of income disclosing all the payments received and was not aware of the alleged cash receipt of Rs.4,50,000/- from Kuantum Papers Ltd. The AO however, rejected the objections of the assessee and completed the assessment u/s.147 r.w.s.144 of the Act vide order dated 29.03.2025, wherein he had made addition of Rs.4,50,000/- as cash received from Kuantum Papers Ltd., not disclosed in the return of income.

Aggrieved by the assessment completed, assessee filed appeal before the First Appellate Authority (FAA). Before the FAA, assessee denied having any cash receipt and claimed all the payments received from Kuantum Papers Ltd., was via bank transfer and was fully declared in his return of income filed. It was :- 4 -: further submitted that there is no direct evidence of cash payment received by the assessee and no addition can be made solely on the basis of third party ledger. It was also submitted that assessee was not provided with the statement recorded from the third party thereby denying an opportunity to cross examine the person from whom statement was recorded. In support of the assessee’s contention that addition should not be made merely on third party ledger without any corroborative evidence, the assessee relied on various judicial pronouncements (extracted at page 26 of the impugned order of the FAA). The FAA, however rejected the contentions of the assessee and confirmed the addition of Rs.4,50,000/-. The relevant finding of the FAA reads as follows:-

Aggrieved by the order of the FAA, assessee has filed the present appeal before the Tribunal. The Ld.AR reiterated the submissions made before the income-tax authorities. :- 5 -: 6. The Ld.DR strongly supported the orders of the AO and the FAA.

We have heard rival submissions and perused the materials available on record. The assessee is a retired Colonel of the Indian Army. For the relevant assessment year, he had received defense pension. The assessee was also engaged in providing consultancy services in operation of Resorts and House boats. Assessee admittedly had disclosed in his return of income a sum of Rs.18.3 lakhs from Kuantum Papers Ltd., as consultancy charges.

The case of the AO is that assessee has not disclosed Rs.4,50,000/- (cash receipt) in his return of income. The AO had stated that during the course of search operation in the case of Kuantum Papers Ltd., an excel sheet in the computer of Vice President (Finance) revealed payment of sum of Rs.4,50,000/- to the assessee. It is also stated by the AO that a sworn statement was recorded from the MD of Kuantum Papers Ltd., which confirmed the cash payment to assessee. The assessee had totally denied having received any cash payments. The assessee had submitted that the only mode of payment receipt from Kuantum :- 6 -: Papers Ltd., was through bank transfers in his Indian Overseas Bank account and all the receipts have been duly disclosed in his return of income filed.

It is an admitted fact that assessee was not provided with the details of the seizure made in case of the third party namely M/s. Kuantum Papers Ltd. Assessee was unaware of the statement recorded or the excel sheet data which was used against him until he received the assessment order, thereby depriving him an opportunity of cross-examination the person from the statement was recorded. In the instant case, addition has been solely based on seizure of third party ledger and the statement recorded. The assessee was not provided with any of the material and was not given an opportunity to cross-examine the person from whom the Department has taken a statement. The Hon’ble Supreme Court in the case of M/s. Andman Timber Industries vs. Commissioner of Central Excise, Kolkata – II reported in (2015) 281 CTR 241 (SC) had held that failure to give the assessee the right to cross-examine witnesses whose statements are relied upon results in breach of principles of natural justice and held that is a serious flaw which renders the :- 7 -: order a nullity. It is clear from the impugned order of FAA, addition has been made only on the circumstantial evidence which has not been supported by any corroborative materials. The assessee has not provided with material relied on by the AO for making the addition. In the facts of the instant case, we are of the view that addition is based on mere circumstantial evidences without any direct or corroborative materials. Hence, we delete the addition of Rs.4,50,000/-. It is ordered accordingly.

In the result, the appeal filed by the assessee is allowed.

Ĥ×यथȸ/Respondent 3. आयकर आयुÈत /CIT, Coimbatore 4. ͪवभागीय ĤǓतǓनͬध/DR

गाड[ फाईल/GF.