DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), CHENNAI, CHENNAI vs. CHITRAVEL VETRIMARAN, CHENNAI

O R D E R

PER GEORGE GEORGE K, VICE PRESIDENT:

& 905/Chny/25 - Chitravel Vetrimaran 7. The assessee preferred an appeal before the CIT(A) and filed detailed ground-wise written submissions which are reproduced from page 10 to 20 of the impugned order. After considering the submissions of the assessee and referring to various case law, the CIT(A) deleted the addition by observing as under: UPON LEGALITY 6.2.2 Before going to adjudicate the various grounds raised it is essential to bring on record the circumstances that necessitated the AO to contemplate addition in the case of the appellant. The case of the appellant emanates from the search u/s 132 of the Act carried out on 05.02.2020 in the case of Shri. G.N. Anbuchezian, (who is known to be the main financier of the Tamil Nadu Film Industry) and others. During the course of search proceedings, certain incriminating materials in the form of loose sheets were found and seized. On examination of the loose sheets, the search tear.. observed that the loose sheets contained noting made by Shri G N Anbuchezian of his daily cash transactions with various other parties from his Chennai office. 6.2.3 On further examination of the incriminating material seized vide annexure no. ANN/PP/RA/LS/S-30 from Shri. Aravindan Ramalingam at No. AA-35, 3rd Street, Anna Nagar, Chennai 600040 and loose sheet seized vide annexure no. ANN/KM/GNA-YOG/LS/S-56 & 59 from Shagun Villa, No. 12, Yogambal Street, Flat No.4, 1st Floor, T. Nagar, Chennai -17, it was seen that Shri. G. N. Anbuchezhian has entered into various cash transaction with the appellant. 6.2.4 It was also observed that the appellant received loan by way of cash and has repaid the same with interest to Shri. G. N. Anbuchezhian. As the incriminating materials seized from the above said search and seizure operation pertained to the appellant for the years under consideration the AO, on the basis of the findings of the search recorded satisfaction to initiate assessment proceedings and issued notice u/s 153C of the Act for the AY(s) 2016-17 to 2020-21. 6.2.5 During the course of appellate proceedings, the appellant made a detailed submission to support the above grounds, the relevant extract of the same is reproduced here as under. "The learned Assessing Officer failed to communicate the satisfaction note of the Assessing Officer of the searched person before the issue of show cause letter and the Assessing Officer further erred in camouflaging and passing the order as if u/s. 153C r.w.s. 143 (3) of the Act, while utilizing the loose sheets against the appellant as if it was an incriminating material. The Assuming of jurisdiction u/s 153C of the Act, in the absence of satisfaction note of the AO of the searched person renders the assessment ab initio void. The learned assessing officer erred in not following the principle of natural justice while passing the assessment order.

& 905/Chny/25 - Chitravel Vetrimaran The Appellant submits that in the absence of any satisfaction note recorded by Ld. AO of searched person framing of assessment u/s 153C is not sustainable in law. The appellant relied on the decision of Hon'ble Supreme Court in the case of M/s. Super Malls Pvt. Ltd. Vs. PCIT-8 (115 Taxmann.com 105) dated 05-03-2020. The Appellant also relied on CBDT Circular No.24/2015 dated 31-12-2015 which state that for the purpose of Sec. 158BD, the recording of satisfaction is prerequisite and satisfaction note must be prepared by AO before he transmits the record to the other AO who has jurisdiction over such person. The CBDT has also accepted the position that this principle would apply to proceedings u/s 153C also. It is a well settled law that for initiate the Proceedings u/s 153C, recording of a valid satisfaction note is mandatory and in the absence of the same, the entire assessment Proceedings would be void ab-inito. The Hon'ble supreme court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No. 3958 of 2014 dated 12-3-2014 (2014) 43 taxmann.com 446 (SC) held that "the satisfaction note could be prepared at any of the following stages: (a) at the time of or along with the intimation of proceedings against the searched person under section 158BC of the Act: or (b) in the course of the assessment proceedings under section 158BC of the Act: or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person The appellant submits the above guidelines of the Hon'ble Supreme Court, apply for the proceedings u/s. 153C of the IT Act, for the purpose of assessment of income of other than the searched person. The appellant further submits that even if the AO of the searched person and the "Other person" is one and the same, then also the AO is required to record the satisfaction note as has been held by the Courts. The appellant is relied upon the decision of the Hon’ble Income Tax Appellate Tribunal "C" Bench, Chennai, has held in the case of L. Ammini, Salem vs ACIT, Central Circle, Salem on 23 August, 2023 as under: "In the present case, undisputedly, no satisfaction has been recorded by AO of search person I.e. Shri Madanlal D Chawla. Therefore, the jurisdiction acquired for AY s 2010-11 to 2012-13 U/S 153C stood violated by law and liable to be quashed. We order so. The corresponding grounds raised have been rendered stand allowed". (Copy of relevant case law is attached in Annexure-1) The appellant submits that the action of the Assessing Officer to camaflouge the absence of the satisfaction note of the searched person appears to be not made in ignorance of the provisions of sec. 153C of the Act or through inadvertence. The omission renders the initiation of the Proceedings u/s 153C of the Act void and the assessment proceeding is required to be quashed. If the Satisfaction Note recorded by the AO of the searched person actually existed, no reason was given in the order assessment as to why it was not put to Appellant for rebuttal or otherwise." 6.2.6 The undersigned has carefully examined the issue under consideration. The appellant in the grounds has raised an issue that the appellant was not provided the & 905/Chny/25 - Chitravel Vetrimaran copy of satisfaction note recorded by the AO in the case of the searched person and himself. The undersigned during the course of appellate proceedings has obtained the copy of the satisfaction note recorded in the case of the appellant and shared with the appellant. 6.2.7 Further in respect of the satisfaction note recorded in the case of the "searched person", the undersigned found that the AO of the such" searched person" and the appellant were one and the same. Upon perusal of the assessment records, it is observed that the AO as the jurisdictional AO of the "searched person" has recorded satisfaction note prior to recording of satisfaction note in the case of the appellant on similar lines. Accordingly, the ground raised upon the issue of not recording satisfaction in the case of "searched person" and with respect to the non- furnishing of satisfaction to the appellant is unsustainable. 6.2.8 The appellant after receipt of the satisfaction note recorded in the case of the appellant has raised another issue that the AO has recorded common satisfaction for the years under consideration which is not valid in the eyes of law. The undersigned has carefully examined the issue raised by the appellant. During the course of appellate proceedings, the appellant made a detailed submission to support the above grounds, the relevant extract of the same is reproduced here as under. "Further, the appellant submits that the assessing officer has recorded a common satisfaction note for the assessment year 2014-15 to 2020-21. The appellant submit that a combined Satisfaction Note as drawn by the AO in the present case would not satisfy the statutory requirements of Section 153C of the Act. The appellant also submits that the AO is obliged to draw a Satisfaction Note independently in respect of each of the relevant Assessment Year based on material gathered in the course of the search. It is also submitted that it is the law that, there cannot be a common satisfaction note for all seven assessment years and, satisfaction note must be an independent satisfaction note satisfying the statutory preconditions provided in the Act for each of the Assessment years. In this regard, the Appellant is relied on the judgment rendered by the Supreme Court in Commissioner of Income Tax-III vs. Singhad Technical Education Society Reported in 397 ITR 344 (Copy of judgment is Attached in Annexure 2). It is submitted that such kind of common, general and vague satisfaction note, admittedly stated to be bulky, could not be made a basis for assuming jurisdiction under section 153C of the Act. It is also submitted that to satisfy the burden imposed by establishing not only that the documents alleged to be relating/pertaining to the assessee are 'incriminating' but must also be shown that such document wise with the assessment years under consideration. The appellant is relied on the decision of Hon'ble ITAT (Delhi) in the case of wisdom Realtors P. Ltd (2019)

70. ITR 181 held thus, no incriminating material was found during the course of search so as to proceed against the assessee under Section 153C. It was a general satisfaction recorded, and the Assessing Officer was not justified in proceeding against the assessee under 5. 153C of the Act. (AY. 2006-07 to 2008-09) The appellant submit that the material on the basis of which the satisfaction is reached should not be vague, indefinite, distant or remote. This was so held in the case of CIT v. Radhey Shyam Bansal (2011) 11 taxmann.com 294/200 Taxmann 138 (Mag.) (Delhi) in the context of recording satisfaction u/s 158BD. in CIT v. Smt. Nirmala Keshwani (2015) 123 DTR (All) 177, it was held that recording of & 905/Chny/25 - Chitravel Vetrimaran satisfaction is not a mere formality but involves application of mind. It is submitted in the AO initiate the Proceedings based on the third party information should establish a prima facie nexus with the seized material in possession of the Department and mere mention of the word "satisfied" in the order sheet or the note sheet will not meet the requirement. It was held in the case of Pepsi Foods Pvt Ltd v. ACIT (2014) 52taxmann.com 220/(2015) 231 Taxmann 58(Delhi) The appellant further relied upon the decision of Hon'ble the jurisdictional tribunal in the case of ACIT, Central Circle-1, Trichy vs. Arunachalam Srinivasan in dated 31.05.2024 for the AY 2014-15 has dismissed the revenue and held as under. "in the light of the blinding judicial precedent of Hon'ble Apex Court (supra), and having found that "Satisfaction Note' prepared by the AO to invoke jurisdiction u/s 153C of the Act For AY 204-15 does not satisfy the requirement of law as stipulated u/s. 153C of the Act, the very assumption of the jurisdiction u/s 153 of the Act for assessment for AY 2014-15 is held to be bad in the eyes of law as rightly held by the Ld. CIT (A), which impugned action is confirmed and Revenue Appeal stands dismissed." The appellant submit that in the absence of separate satisfaction note discharging the ingredients provided in section 153C of the Act, the proceedings based on notice issued u/s 153C of the Act is illegal, invalid and unsustainable in law." 6.2.9 The undersigned on examination of the satisfaction recorded by the AO in the case of the appellant to initiate assessment proceedings u/s 153C of the Act noted that, the AO at Col. 5(a) has simply mentioned "Documents (Loose Sheet)" and at Col No. 5(b) described the seized material simply as "Documents containing details of cash transactions". The AO at Col 7 of the satisfaction note has narrated the following:- I am satisfied that the incriminating material seized as per annexures above belong to Shri. Chitravel Vetrimaran and have a bearing in determination of the Total income of the Shri. Chitravel Vetrimaran," and further the AO at Col 8 of the satisfaction note has described the assessment years involved to be AY 2014-15, AY 2015-16, AY 2016-17, AY 2017-18, AY 2018-19, AY 2019-20 and AY 2020-21. 6.2.10 From the above satisfaction note prepared by the AO for the year under consideration, it can be deciphered that the seized material in the form of loose sheet containing the details of cash transactions. Further it can be seen that the AO has prepared such satisfaction for a block period 2014-15 to 2020-21 and not separately for each assessment year wise. 6.2.11 Now the issue before the undersigned is whether the above satisfaction note based upon which proceedings u/s 153C of the Act has been initiated is legally tenable or not. In general, before invoking the provisions of section 153C of the Act, the AO should have recorded a satisfaction note by describing as to how the incriminating materials found during the course of search made the AO to believe that income has not been disclosed hitherto in the return of income and the same has a bearing in determination of taxable income in the case of the Appellant for the assessment year(s) under consideration.

& 905/Chny/25 - Chitravel Vetrimaran 6.2.12 At this juncture it is pertinent to bring on record that in the case of the appellant for the years under consideration, the AO without specifically mentioning the nature of incriminating material and more particularly about the specific year under consideration in the satisfaction note has initiated assessment proceedings by issuing notice u/s. 153C of the Act for the AY(s) 2014-15 to 2019-20. 6.2.13 The word "satisfaction" is not defined in the Act. It refers to the state of mind and it should get reflected in a tangible form when it is reduced to writing. It refers to a conclusion drawn or a finding recorded on the material available. The satisfaction should reflect that, on the basis of the material belonging to the third party, there is a prima facie case for fastening tax liability on the appellant. Such satisfaction may not be final or conclusive. It may be subjective satisfaction, but it must be capable of being tested on an objective parameter. It must have a rational nexus to the liability of the third person under the Act though not conclusive. The material on the basis of which the satisfaction is reached should not be vague, indefinite, distant or remote. This was so held in the case of CIT v. Radhey Shyam Bansal [2011] 11 taxmann.com 294/200 Taxman 138 (Mag.) (Delhi) in the context of recording satisfaction u/s 158BD. In CIT v. Smt. Nirmala Keshwani [2015] 123 DTR (AII) 177. it was held that recording of satisfaction is not a mere formality but involves application of mind. 6.2.14 It is essential, therefore, that at the stage of initiating the proceedings, the jurisdictional AO of the third party should peruse the information received and establish a prima facie nexus with the seized material, information in possession of the department and circumstances of the case. This would show application of mind. In a proceeding u/s 153C, the AO of the "searched person must arrive at a clear satisfaction that the document seized belongs to other person". After such satisfaction, the document is handed over to AO of the "other person". Mere mention of the word "satisfied" in the order sheet or the note sheet will not meet the requirement. The note must demonstrate the reasons on the basis for the satisfaction. This was so held in the case of Pepsi Foods Pvt Ltd v. ACIT [2014] 52taxmann.com 220/[2015] 231 Taxmann 58(Delhi) 6.2.15 From the above discussion, it is very clear that the seized material relied upon by the AO in the present case to record satisfaction note is defective in nature. It is a settled law that for initiating proceedings u/s.153C, recording of a valid satisfaction note is mandatory and in the absence of the same, the entire proceedings would be void ab-initio. The same was held by the Hon'ble Supreme Court in the case of CIT vs. Calcutta Knitwears [2014] 362 ITR 673 (SC). Wherein the Hon'ble Apex Court had at paragraph 44 of its order held that; "44. In the result, we hold that for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person." 6.2.16 By following the above decision of the Hon'ble Apex Court, CBDT issued a Circular No.24 of 2015 dated 31.12.2015 stating that the guidelines of the Hon'ble Supreme Court regarding, recording of satisfaction has to be complied strictly. Vide para 5 of the Circular, the Board directed that pending litigations with regard to recording of satisfaction u/s.153C should be withdrawn / not pressed if the same does not meet the guidelines laid down by the Apex Court.

& 905/Chny/25 - Chitravel Vetrimaran 6.2.17 Further, the satisfaction to be assessment year-specific and incriminating evidence-specific. In the case of CIT v. Sinhgad Technical Education Society [2015] 63 taxmann.com 14/235 Taxman 163 (Bombay), issue of notice u/s 153C of the Act was held as illegal. The Court observed that the satisfaction should be assessment year-specific and incriminating evidence-specific. It was held that the satisfaction should indicate the assessment year and the incriminating evidence relatable to that assessment year. A general satisfaction, which is vague, will not meet the requirement of law to initiate the proceedings u/s 153C. This case emphasises the need for closer scrutiny of seized papers and establishing a co-relation. While holding so, the Hon'ble High Court has observed as under.- "The tribunal has found that incriminating material seized and stated to be pertaining to all six assessment years did not establish any co-relation document-wise with the assessment year in question. In other words, the tribunal concluded that the present matter indicates that the issue of notice could be on the basis that there is specific incriminating information in possession of the Assessing Officer. It is in these circumstances that the tribunal found and as indicated in paragraph 8 of the impugned order that the revenue's assertion that the Assessing Officer is empowered under the statute to assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted and therefore the satisfaction which is recorded in the satisfaction note is enough, is erroneous. Therefore, the notice cannot be upheld and such stand of the revenue cannot be accepted. The reasons, therefore are to be found in paragraph 9 and 10 of the impugned order, if certain items pertain to assessment year 2004-05 or thereafter then it cannot be assumed, that the documents seized or incriminating material giving information are specific and to all assessment years. The tribunal found that they were concluded assessments. They could not have been disturbed. The documents in question are neither incriminating ones nor unaccounted transactions of the assessee. They also did not relate to the four assessment years. It is in these circumstances that the tribunal found that it will not be possible to uphold the stand of the revenue that overall approach in matters of concealment by the group assessee and all the discoveries of the search on Shri Navale and it concerns, will have to be taken into account while forming the satisfaction. The satisfaction note was very closely examined and the reasons assigned by the Assessing Officer were found to be silent about the assessment year in which specific incriminating information or unaccounted or undisclosed hidden information was discovered or seized by the revenue from the assessee. In the circumstances, the general satisfaction and as recorded in the note is not enough. The tribunal has found that with regard to cash and jewellery, the explanation of the assessee was that he had agricultural properties and derived agricultural income. That income was utilised to acquire jewellery that was belonging to him and his family. With regard to cash and stated to be recovered from the students for granting admissions, we do not find that any inquiries were made. There is absolutely nothing to indicate as to in which educational courses, the education is imparted and institution-wise. Whether the admissions are granted to the technical courses merit-wise or on the basis of marks obtained in XIlth standard HSC exam. If any fee structure is approved and cash component is therefore collected over and above the sanctioned fees are matters which ought to have been gone into and there cannot be a general or vague satisfaction as is relied upon. 6.2.18 The above judgement has been affirmed by the Hon’ble Apex Court in the Case of CIT v. Sinhgad Technical Education Society [2017] 84 taxmann.com 290/250 Taxman 225 (SC) by holding as under; & 905/Chny/25 - Chitravel Vetrimaran "18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred." 6.2.19 In the absence of any prima facie satisfaction for the particular year under consideration, the consequent proceedings-initiated u/s 153C of the Act by the AO can no longer hold good. As it is evident from the satisfaction note recorded, the AO has not referred to any seized material which is incriminating in nature for the relevant AY(s) concerned. The consequence is that the AO has not recorded satisfaction to the effect that the Appellant's income for the particular year is to be determined on the basis of any incriminating material. In the absence of such valid satisfaction, notice u/s.153C of the Act ought not to have been issued for the years under consideration as the jurisdictional aspects envisaged in section 153C of the Act are not satisfied. 6.2.20 Further in a similar case, where the facts and circumstances were squarely applicable to the facts of the present case, the jurisdictional tribunal in the case of ACIT, Central Circle-1, Trichy vs. Arunachalam Srinivasan in dated 31.05.2024 for the AY 2014-15 has dismissed the revenue. appeal by holding as under. "In the light of the binding judicial precedent of Hon'ble Apex Court (supra), and having found the ‘Satisfaction Note’ prepared by the AO to invoke the provision u/s 153C of the Act for AY 2014-15 does not satisfy the requirement of law as stipulated u/s. 153C of the Act, the very assumption of the jurisdiction u/s 153C of the Act for assessment of AY 2014-15 is held to be bad in the eyes of law as rightly held by the Ld CIT(A), which impugned action is confirmed and Revenue Appeal stands dismissed." The Hon'ble Tribunal while delivering the above order has relied upon the decision of the Hon'ble Apex Court CIT v. Sinhgad Technical Education Society [2017] 84 taxmann.com 290/250 Taxman 225 (SC) which is discussed supra. 6.2.21 In view of the above discussions, the undersigned is of the considered view that the AO has passed the order u/s 153C of the Act without a valid satisfaction note and made addition without relying upon any incriminating material as mandated in the provision of section 153C of the Act. In the back drop of the above decision(s) of & 905/Chny/25 - Chitravel Vetrimaran the Hon'ble Apex Court, and the jurisdictional tribunal, the undersigned in order to uphold the principles of Judicial Discipline, the decision of the Hon'ble Apex Court referred supra is respectably followed in the case of the Appellant too. Accordingly, the grounds raised by the Appellant upon this issue are hereby treated as allowed. As the grounds raised by the Appellant upon assumption of jurisdiction which happens to be the root cause of the addition made was allowed therefore, it is held that the AO lacked jurisdiction to invoke the provisions of section 153C of the Act for the AY(s) 2016-17 to 2020-21. UPON MERITS 6.3 Ground Nos. 4 &

5. (AY(s) 2016-17 to 2020-21) 6.3.1 During the course of the assessment proceedings, the AO observed that the seized material in the form of daily cash book maintained by Shri. G. N. Anbuchezhian, wherein he had meticulously recorded the cash transactions taken place day in and out. The aforesaid cash book evidences the advancement of cash loan to the assessee and receipt back to Shri. G. N. Anbuchezhian for the years under consideration. Accordingly, the AO vide notice u/s 142(1) of the Act called for from the assessee to state whether the said cash transaction had been accounted in his books of accounts and required the assessee to explain the source for the cash repayment to Shri. G. N. Anbuchezhian with supporting evidences for the AY(s) 2016- 17 to 2020-21. 6.3.2 The assessee was also required to show cause as to why the cash repayment should not be added to his total income. In response to the show cause notice u/s 142(1) of the Act. The assessee responded by submitting that the assessee was not covered during the search u/s 132 of the Act in the cxase of Shri G. N. Anbuchezhian and the department has issued notice u/s 153C of the Act on the basis of the loose sheets seized during the course of search in the case of Shri. G. N. Anbuchezhian. The assessee also submitted that the loose sheet will not amount to incriminating document for the purpose of issue of notice u/s 153C of the Act. The assessee also stated that there were no cash transactions with Shri. G. Ν. Anbuchezhian as mentioned in the notice(s) and that the assessee neither borrowed nor repaid any cash loan with Shri. G. N. Anbuchezhian as stated in the notice. The assessee submitted that mere noting in the loose sheets by third party will not amount to incriminating documents for issue of notice u/s 153C of the Act and no additions could be made as mentioned in the notice and has relied of various case laws in support of the contentions. 6.3.3 The AO rejected the assessee's contentions for the following reasons viz.. The denial of transactions with Shri. G. N. Anbuchezhian was vague and unsupported by evidence. The seized materials, along with explanations from the author, clearly indicate that the assessee took a cash loan from Shri. G. N. Anbuchezhian and repaid in cash. The Supreme Court decision in the case of Common Cause vs. Union of India was deemed irrelevant because the seized documents in this case were systematic accounts, not just loose sheets, and had been explained logically by the author during the search.

& 905/Chny/25 - Chitravel Vetrimaran Shri. G. N. Anbuchezhian had acknowledged the transaction before the ITSC, further supporting its authenticity. Given the informal nature of the transaction, formal accounting was not expected. The sworn statement during the search provided clarity. Based on the evidence and the principle of the preponderance of probability, it was inferred that the assessee repaid the loan using the source of which could not be explained. 6.3.4 The AO after rejecting the above submissions of the assessee proceeded to treat the amount(s) of loan repaid as unexplained money u/s 69A of the Act and added the same to the assessee's total income for the respective assessment years. On examination of the grounds raised

, it can be seen that the appellant has agitated upon the addition(s) made u/s 69A of the Act on the basis of the narrations contained in the loose sheets which was found and seized from a third party premise. As evident in the assessment order, the AO, by relying upon the narrations contained in the seized materials i.e. loose sheets seized from third party premises, alleged that the assessee had engaged in cash transactions with Shri. G. N. Anbuchezian, taking AO, it can be seen that the appellant has repaid loans availed from Shri. G. N. Anbuchezian. Accordingly, the assessee was asked to explain the source of funds for these cash transactions. The assessee denied the allegations and contended that the documents seized were mere loose sheets and did not constitute incriminating material to justify additions under Section 153C of the Act. 6.3.5 The AO rejected the assessee's contentions, by stating that the seized documents were more than mere loose sheets and observed that the seized material was in the nature of systematic noting of daily cash transactions maintained by Shri G. N. Anbuchezhian. The AO further held that these noting were found to contain entries related to the appellant, including cash loans received by the assessee and the subsequent repayment of these loans, along with interest, over the years. 6.3.6 The AO further relied on the statement of Shri G. N. Anbuchezhian, who acknowledged the transactions before the Income Tax Settlement Commission (ITSC). The AO also noted that the entries in the seized documents had been corroborated by the sworn statements of Shri G. N. Anbuchezhian, which were made during the search proceedings. The AO after rejecting the assessee's submissions proceeded to make addition(s) to the income by invoking the provisions of Section 69A of the Act, treating the cash repayments as unexplained money. The details of the additions for the respective AY(s) are as follows: Sl.No. AY Amount added u/s 69A of the Act (Rs.) 1 2016-17 31,00,000/- 2 2017-18 92,50,000/- 3 2018-19 70,00,000/- 4 2019-20 90,00,000/- 5 2020-21 5,00,000/- 6.3.7 During the course of appellate proceedings, the Appellant has submitted a detailed submission agitating the addition made u/s 69A of the Act for all the years under consideration. The undersigned has carefully examined the issue under consideration. On examination of the submission made, it can be seen that the appellant disputes the use of loose, unsigned, and unauthenticated sheets as evidence & 905/Chny/25 - Chitravel Vetrimaran of alleged cash transactions. Further, these loose sheets, treated as a cash book by the AO, lacked any corroborative material and, therefore, do not constitute reliable evidence. The appellant has cited the Supreme Court ruling in Common Cause v. UOI, which held that loose papers or sheets are not sufficient to hold a person accountable for tax liabilities. 6.3.8 Further, the appellant contended that the assessment order(s) were framed based on third-party information from the searched person, without any corroboration. The addition(s) made as unexplained cash transactions under Section 69A of the Act was made solely based on these loose sheets for all years under consideration. The appellant strongly contended that the burden of proof lies with the AO to substantiate such transactions with concrete evidence, which was not done. The AO based the assessment on the doctrine of preponderance of probability, assuming the loose sheets to be valid evidence of cash transactions. The appellant contends that this doctrine cannot be the sole basis for creating a tax liability unless corroborated by other evidence, which was absent in this case. The appellant also submitted that the AO did not follow the principles of natural justice, by failing to provide an opportunity for the appellant to rebut or challenge the evidence, particularly the loose sheets. No consequential investigation or recording of the appellant's statement was carried out. 6.3.9 The undersigned has carefully examined the issue under consideration. A search u/s 132 of the act was carried out in the case Shri G. N. Anbuchezhian and others on 05.02.2020. During the course of search, certain loose sheets maintained by Shri G. N. Anbuchezhian (who happens to be the author of the narrations made therein), the various transactions entered with various persons / parties, one among them is the appellant. As per the seized material it was found that the appellant has repaid loan taken from Shri G. N. Anbuchezhian during the various financial years under consideration by way of cash including interest. 6.3.10 As evident in the assessment order, other than the loose sheets seized, there exists no other evidence corroborating the appellant has repaid such loans taken. In this regard the appellant has made a detailed submission upon this issue which is reproduced here as under. "It is submitted that no consequential search, survey or other investigation was carried out in the hands of the Appellant and also no statement was recorded by the AO by way issue of summons for recording of a statement etc. The Appellant submits that all Cine Financiers who advance huge loans in crores, have the inevitable practice of taking securities such as pro notes, property documents etc, from the borrowers. In the Appellant's case' except for the seized loose sheets, the Assessing Officer found and seized no other documents as relating to the alleged transactions in the loose sheets. This itself would go to prove that no such cash advances were either received or paid back." 6.3.11 It is an undisputed fact that the documents seized from third party premises may have a bearing upon the person from whom such materials were seized. In the event, if it were to truly possess a guaranteed proof in respect of other person, the Authorised Officers who undertook the search would have examined the Appellant and a deposition to such effect would have been obtained from the appellant. When this exercise has been omitted to be undertaken, it clearly illustrates that the addition was made on suspicion. As brought out by the appellant, when a huge loans are taken, & 905/Chny/25 - Chitravel Vetrimaran Obviously the lender would have taken securities such as pro notes, property documents etc, from the borrowers. The search team have not come across such corroborative evidences to conclusively prove that the appellant has borrowed funds and repaid it with interest. 6.3.12 The appellant during the course of assessment proceedings, in response to the show cause notice issued has completely denied the alleged cash transactions and has produced before the AO, books of accounts, bank statements etc and the AO has not made any findings upon it. In this scenario the question to be answered is whether the AO is right in making the addition on the basis of the noting / narration found in the loose sheet which was seized from a third-party premise. It is found appropriate to highlight that the benefit of presumption u/s 292C of the Act is only with reference to the person searched and it cannot be extended to any other person other than the person searched like that of the Appellant. Therefore, the contents of the loose sheets may possess value based on presumption u/s 292C of the Act, in the case of the searched person and by no stretch of imagination, does the same can be applied to facts and case of the Appellant. 6.3.13 It is a well-established legal principle that a loose sheet found and seized from a third-party premises, without any corroborating evidence or material on record, and without a finding that such document has translated into actual transactions resulting in undisclosed income for the appellant, cannot be relied upon for the purpose of assessments made pursuant to a Search and Seizure action. 6.3.14 It is appropriate to bring on record the observations of Apex court in the case of K.P. Varghese 131 ITR 597 where in it has been held that "it is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the Revenue. To throw the burden of showing that there is no understatement of the consideration, on the assessee would be to cast an almost impossible burden upon him to establish the negative, namely that he did not receive any consideration beyond that declared by him". 6.3.15 Further, that the burden is on the Revenue to prove that the income sought to be taxed is within the taxing provisions and there was in fact income, are propositions which are well settled by the Supreme Court in the case of ParimisettiSeetharamamma v. CIT [1965] 57 ITR 532 which reiterates these propositions. This is very important burden and must be discharged by revenue strictly. There should not be reverse burden on tax payer to prove the negative. 6.3.16 Although the burden of proof is not static, in assessment proceedings- especially in search-related cases the initial onus lies on the appellant. In this case, the appellant has discharged that initial burden by submitting that he has not availed any cash loans and repaid the same by way of cash. Presumptions requiring rebuttal were once drawn, there is no discretion vested in the AO to reject the appellant's claim once this initial burden has been met. As evident in the assessment order, the AO has not chosen to examine the assessee u/s 131 of the Act and cross verify the findings of the search. 6.3.17 It is significant that the Investigation Officer has also failed to cross verify the findings of the search with the appellant. The appellant came to know about the findings of the search only when the notice u/s 153C of the Act was served upon him. The appellant took cognizance of the facts only upon the receipt of the show cause notice from the AO. The AO has merely acted based on the documents seized, and has & 905/Chny/25 - Chitravel Vetrimaran not made any efforts to bring on record any independent/corroborative evidence to show that the alleged re-payments were actually made, before jumping into any conclusion. In particular the AO has failed to ascertain the amounts availed as loan so as to repay the same along with interest. In the absence of any such details, considering the repayment alone can only be a presumption. Further, the AO has observed in the assessment order that "source of repayment of cash loan along with interest needed verification. Para 3.1 of the assessment order. As evident in the assessment order, no such verification has been carried out. 6.3.18 It may be appreciated that the said loose sheet relied upon by the AO was neither seized from the premises of the Appellant nor was the same found to be in the handwriting of the Appellant. Such material seized in the case of a third party which is not in the hand writing of the Appellant does not constitute adequate evidence to draw any adverse inference against the Appellant, in the absence of any other corroborative evidence. This proposition has been laid down by the Hon'ble Delhi High Court in the case of CIT Vs Sant Lal [2020] 118 taxmann com 432 (Del) , wherein it was held therein that where a diary was seized in search of the premises of a third party allegedly containing entries of hundi transactions on behalf of various parties including the assessee, no addition could be made based on the said entries since the diary was neither found from premises of assessee nor was it in handwriting of assessee and revenue failed to produce any other cogent material to link the assessee to the diary. The ratio of the said decision is squarely applicable to the case of the Appellant as the AO has not referred to any cogent evidence applicable to the case of the Appellant. As the AO has not referred to any cogent material to corroborate that the entries made in the loose sheet seized from a third party which are purportedly the transactions made by the Appellant. 6.3.19 A narration made in a loose sheet by a third person with scant details cannot be used to fasten tax liability upon the person. In the absence of any corroborative evidence to attribute the entries to such a person. Such seized material is liable to be treated as a unsubstantiated, unsupported or unverified document, which does not have any evidentiary value in respect of the entries found therein, unless corroborative evidence is available which can provide necessary reliable basis for deciphering that the narration contained in the seized material have actually taken place. 6.3.20 At this juncture, it would be relevant to refer to the decision of Hon'ble ITAT, Jabalpur in the case of ACIT Vs Satyapal Wassan [TS-5104-ITAT-2007(Jabalpur)-0] (2008) 5 DTR 0202, wherein the Hon'ble ITAT stressed the Importance of gathering corroborative evidence in support of the contents of a document, particularly when the document is bereft of necessary details and is not complete in all respects, by stating as under: "For the sake of argument if we accept the submission of the learned Departmental Representative that the learned CIT(A) erred in accepting fresh evidence then what is left after ignoring those affidavits is the bare document No. 7 with the bare details as referred to above. The moot question now arises is whether any addition can be made on the basis of that document. We have already pointed out that this document is bereft of necessary details about year of transaction, ownership of transaction, nature of transaction, necessary code for deciphering the figures. It may be possible that a document may not be complete in all respects as the businessmen or tax evaders may choose to record minimum details on a document and keep the rest in their & 905/Chny/25 - Chitravel Vetrimaran memory. It is the duty of the AO to carry out necessary investigations by correlating the impugned document with other documents seized, with regular books of account, with record kept by outside agencies, such as banks or financial institutions or debtors/creditors and finally, by recording the statements of concerned parties so as to fill up the gaps in confirming the inference arising from the documents for a proper charge of tax. Such correlation is necessary unless the document is capable of speaking giving full details so as to enable any intelligent person to find out the nature of transaction, the year of transaction, the ownership of the transaction and quantum thereof. Even in that situation, it is necessary to give opportunity to the assessee to offer his explanation and investigation be carried out to strengthen the direct inference arising from this document." 6.3.21 The proposition that addition cannot be made merely on the basis of entries in loose sheets found in the premises of a third party without bringing on record independent evidence to corroborate such entries has been reiterated in several decisions. Some of the decisions to this effect are MM Financiers (P) Ltd Vs. DCIT (2007) 107 TTJ (Chennai) 200, Regency Mahavir Properties Vs ACIT [2018] 169 ITD 35 (ITAT-Mumbai), ACIT Vs. Katrina Rosemary Turcotte [2017] 190 TTJ 681 (ITAT- Mumbai), DCIT Vs. Vipin Aggarwal [2017] 83 taxmann.com 6 (ITAT Chandigarh), S.P Goyal Vs DCIT [2002] 82 ITD 85 (ΤΜ) ΙΠΑΤ, Τ.S Venkatesan Vs ACIT [2000] 74 ITD 298 (Cal) and Monga Metals (P) Ltd Vs ACTT [2000] 67 TTJ 247 (All). 6.3.22 In particular, it is of critical importance that the evidence to corroborate the entries indicating payments in the seized material found with a third party is available with specific reference to the fact regarding actual transfer of money from the said third party to the recipient named in the said entries in the seized material. The Hon'ble ITAT, Mumbai held in the case of Riveria Properties Private Limited Vs ITO in that the AO is required to bring further evidence on record to show that the money was actually exchanged between the parties in a case where there is no other evidence on record to prove that on-money was paid except the loose sheet found in the premise of a third party and admission made by the third party. The relevant part of the said decision is reproduced as under:

6. In the present case on hand, except loose sheet found in the premises of third party and admission made by the third party in their assessment proceedings, there is no other evidence on record to prove that on money is paid. The assessing officer, without brought on record any evidence to prove that on money is exchanged between the parties, merely harping upon the loose sheet and the third party admission, which cannot be considered as conclusive evidence against the assessee to bring on money to tax as undisclosed income. The AO is required to bring further evidence on record to show that actual on money is exchanged between the parties. but literally failed to do so. The A.O. did not conduct any independent enquiry relating to the value of the property instead, merely relied upon the statement given by the purchasers of the property, which is not correct. Further, there is no proof of origin and destination of on money. The A.O failed to prove the source of the purchasers as to how the money was arranged and also failed to prove the deployment of unaccounted money by the seller by any form of evidence. Under these circumstances, based on paper jottings as conclusive evidence on money cannot be brought to tax as income from undisclosed sources."

& 905/Chny/25 - Chitravel Vetrimaran 6.3.23 As per the decisions of the Hon'ble Apex Court in the cases of CBI Vs. VC Shukla & Others (1998) 3 SCC 410, Common Cause (A Registered Society) Vs. Union of India (2017) 77 taxmann.com 254 (SC) and Dhakeshwari Cotton Mills Lids. CIT (1954) 26 ITR 775 (SC) corroborative evidence is essential to support the evidence found in third party premise. In order to properly appreciate the issue, it is useful to refer to the following extract from the decision of Hon'ble Apex Court in the case of Dakeswari Cotton Mills Ltd Vs. CIT (1954) 26 ITR 775 (SC): "As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence, a court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of Section 23 of the Act, the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh (supra)". 6.3.24 As evident from the decisions cited above, though it is true that the provisions of Evidence Act do not apply with the same rigor to the Income Tax proceedings, but the AO is not entitled to make a pure guess and make an assessment without reference to any evidence/material. It follows there from that addition cannot be made unless there is corroborative evidence to validate the entries found in the material seized from a third party. 6.3.25 As discussed supra, the seized material relied upon by the AO primarily is the narrations contained in the loose sheets. The AO cannot arrive at any conclusion solely on the basis of this loose sheet that the Appellant have actually repaid loan(s) availed by way of cash. When there is no corroborative evidence to prove that the payments noted in the seized material have actually materialised and transfer of money has actually taken place between the concerned parties. There exists no case for the AO to make any addition on the basis of such entries found in the seized loose sheets and therefore the addition(s) made on the basis of the entries found in the loose sheets for the years under consideration is unsustainable. UPON 69A of the Act 6.5 The A.R. during the course of Appellate Proceedings has strongly argued that the provisions of section 69A of the Act will not apply to the facts of the Appellant's case. The undersigned has duly considered the submission and argument advanced by the A.R. in this regard. While going through the assessment order it can be seen that the AO attempted to treat the loan amount(s) repaid by the Appellant as "unexplained money" by invoking the provisions of section 69A of the Act. Before going into the merits, it is essential to bring it on record the relevant provision of section 69A of the Act. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money. bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money. bullion, jewellery or other valuable article, or the explanation offered by him is not, in & 905/Chny/25 - Chitravel Vetrimaran the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. 6.6 On a plain reading of the section would reveal that it is the money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article in respect of which the appellant is found to be the owner, then the provisions of section 69A will squarely apply. Further there are two essential ingredients, i.e. the assessee should be the owner and the other is that such money, bullion, jewellery or valuable article found. Thus, to invoke the provisions, these two essentials things are to be taken into consideration. Further, the assessee should explain the nature and source to the satisfaction of the AO. 6.7 In the case of the appellant, what the search team has found is not any money, bullion, jewellery or valuable article but has come across only certain loose sheets containing narrations of transactions as repayment of loan by the Appellant. In this regard, it is significant to rely upon the decision of the Hon'ble Apex court in the case of D.N.Singh (2023 (5) TMI 746; 454 ITR 595], wherein it has been held that fixed deposit receipts seized during search are merely documents evidencing debt due to the assessee and would not carry any inherent market value and hence cannot be brought within the meaning of the term 'other valuable article'. 6.8 The Gujarat High Court in the case of BhagwandasNarayandas has held as under :- "... the question is whether the fixed deposit receipts and documents of title relating to an immovable property are the things or articles which can be evaluated in terms of money. Obviously, a document of title relating to an immovable property or even a fixed deposit receipt issued by a bank in favour of a particular person are merely the documents of title which, though possessing much evidentiary value, do not possess any intrinsic market value." ……….. "There is nothing in the record to show that the fixed deposit receipts, which are seized in this case, carry any inherent market value with them. They are merely the documents evidencing the debt due to the assessee." 6.9 Further the Hon'ble Apex Court while delivering the judgement in this case has endorsed the view of the Gujarat High Court in the case of BhagwandasNarayandas [98 ITR 194 (1973)]. The Hon'ble Apex Court has observed as under. The Court approves the view taken by the High Court of Gujarat in BhagwandasNarayandas (supra) that a document of title to immovable property or a fixed deposit receipt would not qualify as other valuable article." ………… "Valuable, therefore, cannot be understood as anything which has any value. The intention of the law-giver in introducing Section 69A was to get at income which has not been reflected in the books of account but found to belong to & 905/Chny/25 - Chitravel Vetrimaran the assessee. Not only it must belong to the assessee, but it must be other valuable articles." "The concept of other valuable articles' may evolve with the arrival in the market of articles, which can be treated as other valuable articles on satisfying the other tests. 6.10 The above cited judicial decisions of the Hon'ble Apex Court goes on to prove that even the fixed deposit receipts found during the course of search cannot partake the character of any money, bullion, jewellery or valuable article. In the case of the Appellant what the search team found is only loose sheets. Obviously, such evidence will not have the character of money, bullion, jewellery or valuable article as envisaged in the provisions of section 69A of the Act. 6.11 In view of the above decision of the Hon'ble Apex Court, the undersigned is of the considered view that since nothing in the form of any money, bullion, jewellery or valuable article were found during the course of search, there can be no case to treat the evidence found about the repayment of the alleged loan will fetch the character of unexplained money as provided under section 69A of the Act. In view of this the undersigned is not inclined to accept the observation of the AO to treat the same as unexplained money u/s 69A of the Act. 6.12 As the AO has failed to bring any cogent and corroborative evidence to substantiate the findings of the search that the appellant has repaid loans by way of cash, the addition(s) made by the AO for the years under consideration u/s 69A of the Act are unsustainable on merits. Accordingly, the grounds raised by the Appellant upon this issue are hereby treated as allowed and the AO directed to delete the addition(s) of Rs. 31,00,000/-, Rs.92,50,000/-, Rs, 70,00,000/-, Rs. 90,00,000/-, Rs. 5,00,000/- for the AY(s) 2016-17, 2017-18, 2018-19, 2019-20 & 2020-21.

8. Aggrieved by the above order of the CIT(A), the Revenue preferred present appeals before the Tribunal for AY 2017-18 & 2019-20.The ld. DR submitted that the CIT(A) failed to note that on examination of incriminating material seized from Shri Aravindan Ramalingam and loose sheet seized during the course of search in the case of Shri G.N. Anbuchezhian, the Assessing Officer recorded satisfaction under section 153C of the Act on 29.08.2022 that prima facie fact of cash transactions, in dispute, Shri G.N. Anbuchezhian had entered into various cash transactions being cash loan with the assessee and the assessee has repaid the cash loan along with & 905/Chny/25 - Chitravel Vetrimaran interest. The ld. DR argued that the satisfaction to be recorded before issuing notice under section 153C of the Act is only a prima facie satisfaction for existence of evidences indicating incomes that have escaped assessment and are by no means conclusive as to the actual escapement and the end-result of such fact-finding. The ld. DR relied on the judgement of the Hon’ble Supreme Court in the case of CIT v. Sinhgad Technical Education Society (supra), wherein, it was held that the assessment was completed under section 153C of the Act without establishing any correlation with the incriminating material seized and argued that in the present case, the Assessing Officer has completed the assessment based on the incriminating material seized and pleaded that the same is very much within the provisions of section 153C of the Act without taking cognizance of the judgement of the Hon’ble Supreme Court in the case of Ms. U.K. Pants (overseas) Ltd. reported in 15 taxmann.com 108. The ld. DR argued that the CIT(A) ought not to have been relied on the order of the Tribunal in the case of Arunachalam Srinivasan, since the Department has preferred further appeal against the Tribunal order.

On further appeal by the Department against the decision of the Hon’ble High of Karnataka in SLP (Civil) Diary No(s). 23406 of 2024, the Hon’ble Supreme Court dismissed the same as reported in 469 ITR 271 (SC) in the case of DCIT v. Sunil Kumar Sharma. In view of the above case law, the argument of the ld. DR stands rejected.

Order pronounced in the open court on 22nd October, 2025 at Chennai.