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

Brief facts of the case are as follows:

The assessee is an individual and is a film director by profession. The assessee filed its return of income for the AY 2017-18 on 11.01.2018 admitting a total income of ₹.48,42,310/-. A search and seizure operation under section 132 of the Act was conducted in the Shri G.N.Anbuchezian & others on 05.02.2020. During the search proceedings, various incriminating materials were seized in which Shri G.N.Anbuchezian had noted down the details of daily cash transactions, he had with so many parties that happened from his Chennai office. On examination of the same, the search parties viewed that the assessee has entered into loan transaction with Shri G.N. Anbuchezian, who is the main financier of the Tamil Nadu Film Industry. On analysis of seized material, the Department was of the view that the assessee had entered into cash transaction with Shri. G.N. Anbuchezhian, which had a bearing on determination of total income of the assessee. Therefore, the case was centralized vide notification no. 125/2021-22 dated 27.03.2022 and proceedings under section 153C of the Act was initiated in the case of assessee. Notice under section 153C of the 3 I.T.A. Nos. 904 & 905/Chny/25 - Chitravel Vetrimaran

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

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.

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.

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.

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 7 I.T.A. Nos. 904 & 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.

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 juri ictional 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.

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.

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:-

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.

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.

2.14 It is essential, therefore, that at the stage of initiating the proceedings, the juri ictional 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)

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;

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.

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.-

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;

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 juri ictional aspects envisaged in section 153C of the Act are not satisfied.

2.20 Further in a similar case, where the facts and circumstances were squarely applicable to the facts of the present case, the juri ictional tribunal in the case of ACIT, Central Circle-1, Trichy vs. Arunachalam Srinivasan in ITA No. 1527/Chny/2023 dated 31.05.2024 for the AY 2014-15 has dismissed the revenue. appeal by holding as under.

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 12 I.T.A. Nos. 904 & 905/Chny/25 - Chitravel Vetrimaran the Hon'ble Apex Court, and the juri ictional 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 juri iction which happens to be the root cause of the addition made was allowed therefore, it is held that the AO lacked juri iction to invoke the provisions of section 153C of the Act for the AY(s) 2016-17 to 2020-21. UPON MERITS

3 Ground Nos. 4 & 5 (AY(s) 2016-17 to 2020-21)

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.

3.3 The AO rejected the assessee's contentions for the following reasons viz.. I.T.A. Nos. 904 & 905/Chny/25 - Chitravel Vetrimaran

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.

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.

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:

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

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.

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.

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.

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,

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.

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.

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".

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.

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.

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 16 I.T.A. Nos. 904 & 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.

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.

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.

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:

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).

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 ITA No.250/MUM/2013 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:

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."

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):

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.

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.

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 19 I.T.A. Nos. 904 & 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 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.

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'.

8 The Gujarat High Court in the case of BhagwandasNarayandas has held as under :-

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.

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.

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.

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 21 I.T.A. Nos. 904 & 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.

The ld. DR further submitted that the CIT(A) failed to consider the observations of the Assessing Officer that the receipts and payments have been recorded on day-to-day basis in the seized material meticulously, the day-wise/page-wise total was also found therein and the incriminating

Per contra, the ld. AR Shri Arjun Raj, Advocate has submitted that based on a wild allegation that the Respondent-assessee, Shri Chitravel Vetrimaaran had undertaken transactions with Shri G.N. Anbuchezian, a person covered by an action under section 132 of the Act, the Assessing Officer made an addition of ₹.92,50,000/- under section 69A r.w.s115BBE of the Act in the order passed under section 153C of the Act dated 15.03.2023 for AY 2017-18 in the hands of the assessee.By reiterating the submissions as made before the CIT(A), and relying upon the “Satisfaction Note” recorded by the Assessing Officer, the ld. AR has submitted that the 23 I.T.A. Nos. 904 & 905/Chny/25 - Chitravel Vetrimaran

In reply to the arguments of the ld. DR, the ld. AR has submitted that the Assessing Officer failed to appreciate that the significance on evidentiary value as per section 292C of the Act is applicable only to the person searched and not in respect of any person other than the person searched.In the appellate order, the CIT(A) has acknowledged the contentions of the assessee that prima facie satisfaction for issue of notice under section 153C of the Act does not exist in the case under consideration.

On merits with regard to the addition made under section 69A of the Act, the ld. AR has submitted that since the very basis for initiating

We have considered the rival contentions and perused the material available on record. Admittedly, there was no search conducted under section 132 of the Act in the case of the assessee. But, however, in the assessment order, the Assessing Officer made addition in the hands of the assessee towards alleged various cash transactions being cash loan and its repayment of ₹.92,50,000/- to Shri G.N. Anbuchezhian based on the materials seized during the course of search conducted under section under section 132 of the Act in the case of third party viz., Shri G.N. Anbuchezhian & others on 05.02.2020 by relying upon loose sheets seized vide annexure No. ANN/KM/GNA-YOG/LS/S-56 & 65 from the premises of Shri G.N. Anbuchezhian, wherein, there is a mention of receipt of ₹.92,50,000/- from the assessee.

Now, the first point at issue is with regard to the assumption of juri iction of the Assessing Officer without recording independent satisfaction for the year under consideration. On perusal of the consolidated satisfaction note of the Assessing Officer, we find no description of the seized documents/assets, etc. without establishing any bearing on the 25 I.T.A. Nos. 904 & 905/Chny/25 - Chitravel Vetrimaran assessee is brought on record. The recording of satisfaction is not a mere formality. On an identical issue in similar facts and circumstances of the case, the Coordinate Bench of this Tribunal, in the case of Shri Rangamani Krishnan v. DCIT in ITA Nos. 453 to 457/Chny/2025 vide order dated 17.07.2025, as relied on by the ld. AR and placed on record at pages 67 to 125 of the paper book, observed that the satisfaction should be recorded by the Assessing Officer as per the juri ictional requirement and the details are reproduced herein below: a. It must be in writing, dated, and signed by the Assessing Officer.

It is a settled proposition of law that the satisfaction of the Assessing Officer, as required under section 153C(1) of the Act, must not only be 26 I.T.A. Nos. 904 & 905/Chny/25 - Chitravel Vetrimaran contemporaneous and in writing, but must also be specifically relatable to each independent assessment years. This view is duly fortified by the Hon’ble Supreme Court in the case of Super Malls Pvt. Ltd. v. PCIT [(2020) 423 ITR 281 (SC)], wherein it was laid down that the satisfaction contemplated under section 153C of the Act is a sine qua non for the assumption of juri iction and must be recorded distinctly for each year. We are of the considered opinion that a failure to do so, strikes at the root of the assessment. Moreover, the Hon’ble Delhi High Court in Pepsi Foods Pvt. Ltd. v. ACIT [(2014) 367 ITR 112 (Del)] and the Hon’ble Supreme Court in Calcutta Knitwears [(2014) 362 ITR 373 (SC)] have emphasized that the Assessing Officer must demonstrate a live and direct nexus between the seized material and the relevant assessment year in respect of the “other person,” which cannot be presumed in the absence of year-specific satisfaction.

Further, on perusal of case law, placed at page 1 of the paper book-1 filed by the ld. Counsel for the assessee, in the case of DCIT v. Sunil Kumar Sharma (supra) at para 53 of the decision, the Hon’ble High Court of Karnataka has held as under: 53. Further, satisfaction note is required to be recorded under section 153C of the IT Act for each Assessment Year and in the impugned proceedings, a consolidated satisfaction note has been recorded for different Assessment Years, which also vitiates the entire assessment proceedings. In 27 I.T.A. Nos. 904 & 905/Chny/25 - Chitravel Vetrimaran view of all these findings, it is said that the appeals do not have any substance for seeking intervention as sought for by the appellant/ Revenue.

In the present case, prima facie, we find that no search under section 132 of the Act was conducted in the case of the assessee and further, the Assessing Officer drawn a consolidated “satisfaction note”covering multiple years without individualized reference to incriminating material for each year, fails to meet the juri ictional mandate. Further, we also find that the satisfaction note recorded is for common and undifferentiated across assessment years. There is neither indication of any year-wise evaluation of material nor there is any year-specific linkage between the seized documents and the income allegedly escaping assessment for each year.

In this case, we find that a blanket satisfaction drawn by the Assessing Officer, which is contrary to statutory requirements and judicial interpretation, is unacceptable as a valid juri iction under section 153C of the Act and hence in our considered view the entire proceeding which is based on such consolidated satisfaction note recorded by the Assessing

We have also considered the contention of the ld. DR to reverse the order of the CIT(A) for the reason that the decision of this Tribunal, which was followed in the impugned order, in the case of ACIT v. Arunachalam Srinivasan (supra), has not been accepted by the Department and preferred further appeal before the Hon’ble High Court of Madras. The above contention of the ld. DR is not acceptable for the reason that the ld. DR could not produce any higher court’s decision having reversed or modified the order of this Tribunal (supra) and just because the Department preferred

Since the assessment orders passed under section 153C of the Act for both the assessment years are not maintainable, the grounds raised on merits with regard to the addition made under section 69A of the Act is not adjudicated and are left open for both the assessment years 2017-18 & 2019-20. 21. In the result, both the appeals filed by the Revenue are dismissed.

अपीलाथᱮ/Appellant

ᮧ᭜यथᱮ/Respondent 3. आयकरआयुᲦ /CIT, Chennai/Salem 4. िवभागीयᮧितिनिध/DR 5. गाडᭅफाईल/GF.