Loading judgment…
Facts
The Revenue appealed against the CIT(A)'s order deleting an addition of Rs. 2,00,00,000/- made under Section 69A of the Income Tax Act. The addition was based on an Excel sheet found during a search at a third-party premises, allegedly showing an unaccounted loan advanced by the assessee.
Held
The Tribunal held that the addition was unsustainable as it was solely based on an Excel sheet found at a third-party premises, with no corroborative evidence linking the assessee. The Tribunal noted that the AO failed to conduct proper enquiries or gather evidence to establish the loan transaction.
Key Issues
Whether an addition under Section 69A can be made solely based on entries in an Excel sheet found at a third-party premises without corroborative evidence and proper enquiry?
Sections Cited
143(3), 153A, 132, 132(4), 292C, 69A, 68, 153C
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI ABY T VARKEY & SHRI S. R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM:
1. This appeal by the Revenue and the cross-objection by the assessee are directed against the order of the Learned Commissioner of Income Tax (Appeals)-19, Chennai [hereinafter referred to as the “ld.CIT(A)”] dated 12.03.2024, arising out of the assessment order dated 29.12.2019 passed u/s.143(3) r.w.s 153A of the Income-tax Act, 1961 [hereinafter referred to as “the
:-2-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024 Act”] by the Deputy Commissioner of Income Tax, Central Circle-2, Trichy [hereinafter referred to as the “AO”], for the Assessment Year 2014-15.
The grounds of appeal raised by the Revenue are as under: -
The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law.
2. The Ld.CIT(A) erred in deleting the addition u/s.69A of Rs.2,00,00,000/- made towards unaccounted loans advanced to Mr.Seetharaman, Managing Director of M/s.Viswas Promoters Pvt Ltd. 2.1 The Ld.CIT(A) erred in failing to appreciate that the addition was made based on the basis of incriminating material in the form of pendrive containing excel sheets seized during the course of search in the case of M/s. Viswas Promoters Pvt Ltd. 2.2 The Ld.CIT(A) erred in holding that the seized material relied on by the AO was found and seized at third party premises and not by the assessee firm or authorized persons and in the absence of corroborative evidences, such excel sheets can only be in the nature of dumb document. The CIT(A) failed to appreciate that the said excel sheet contains name of the assessee, date of loan, % of interest, interest paid in cash, interest payment through cheque etc. Hence, the reliance placed by the CIT(A) on various decisions with regard to addition made on dumb document is not applicable to facts of the case. 2.3 The CIT(A) erred in falling to appreciate that the decision of V.C.Shukla case is not applicable to the proceedings under Income tax Act since the same was rendered in the proceedings under Prevention of corruption Act referring the Indian Evidence Act. But in the Income tax search proceedings, provision of Sec.132(4A) and 292C of the Act is applicable with reference to materials seized during the search. There is no restriction in the statue for applying the said presumption in respect of documents seized from third party premises. 2.4 The Ld.CIT(A) failed to appreciate that the assessee had not submitted source for advancing loan of Rs.2,00,00,000/- either during assessment proceedings or appellate proceedings.
3. For these grounds and any other ground including amendment of grounds that may be raised during the course of appeal
:-3-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024 proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.
The grounds of cross objections raised by the assessee are as under: -
1. The order of the Hon’ble Commissioner of Income tax (Appeals) is correct on facts and is in accordance with law.
2. Re: Addition not based on corroborative evidence a. The Hon’ble CIT(A) correctly deleted the addition of Rs.2,00,00,000/- made under section 69A as the same was based on excel sheet found in the premises of some other party and not based on any corroborative evidence. b. The Hon’ble CIT(A) has rightly appreciated that no evidence of the loan allegedly granted to M/s. Visvas Promoters P Ltd., was found during the search conducted in the cross objector’s premises. c. The Hon’ble CIT(A) has rightly appreciated that the addition made is not in accordance with law as no opportunity was provided to the cross objector to cross-examine the person whose statement the learned assessing officer relied upon to make addition.
3. Re: Validity of proceedings a. The addition of Rs.2,00,00,000/- was made based on allegedly incriminating documents found during search in the premises of a person other than the cross-objector, and hence, the proceedings ought to have been initiated u/s 153C b. When separate proceedings u/s.153C by issuing notice was not initiated, the order of assessment passed u/s.153A making addition is not valid as the mandated procedures for conduct of proceedings has not been followed by the learned assessing officer.
Prayer For the above grounds, and any other grounds that may be adduced during appellate proceedings, the defendant prays that the order of the Hon’ble CIT(A) may be upheld.
:-4-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024 4. The brief facts, as emerging from the records, are that a search and seizure operation u/s.132 of the Act was conducted in the case of M/s.Viswas Promoters Private Limited, Madurai, on 29.11.2017. In the course of the said search proceedings, an Excel sheet maintained in electronic form, were found and seized. Upon perusal of the said seized material, it was observed that the sheet contained various notings relating to cash loans advanced and repayments made thereon, inclusive of interest payments, allegedly pertaining to the financial transactions of Shri S. Seetharaman, Managing Director of the searched entity, with various persons.
On examination of the seized data, the AO noticed that, as per the said document, the assessee had purportedly advanced a sum of Rs. 2,00,00,000/- in cash to Shri S. Seetharaman during the month of January 2014, which amount was subsequently reduced to Rs.1,00,00,000/- in June 2016.
Relying upon the said entries, the AO issued a show cause notice to the assessee, proposing to treat the alleged amount of Rs.2,00,00,000/- as unexplained loan u/s.69A of the Act, being unaccounted cash loan advanced by the assessee.
In response to the said notice, the assessee categorically denied having advanced any cash loan either to Shri S.Seetharaman or to M/s.Viswas Promoters Private Limited. It was contended that the document in question was a mere loose sheet or third-party record seized from the premises of another
:-5-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024 person, and in the absence of any corroborative material or independent evidence linking the assessee to the alleged transaction, no adverse inference could legally be drawn against it. The assessee further requested for opportunity of cross-examination of Shri S.Seetharaman.
The AO, however, did not accept the above submissions. According to the AO, the seized Excel sheet found at the premises of M/s.Viswas Promoters Private Limited clearly recorded various loan transactions involving M/s.CFC and other related entities, including the present assessee. The AO also referred to the statement of Shri S. Seetharaman, recorded u/s.132(4) of the Act during the course of search, wherein, in response to Question No. 5, he had stated that a loan had been arranged from Karur through one Shri D.S.Senthivel, whose name also appeared in the seized records.
Taking note of the above, the AO held that the assessee’s objections lacked substance. It was observed that due opportunity had been granted to the assessee to examine the seized material and statements relied upon, and therefore, the contention that the addition was made in violation of the principles of natural justice was devoid of merit. The AO further held that the request for cross-examination of Shri S. Seetharaman was not tenable, since the addition was not made solely on the basis of his statement but was supported by contemporaneous documentary evidence seized during the course of the search. According to the AO, the statement of Shri S. Seetharaman merely corroborated and explained the entries recorded in the seized Excel sheet,
:-6-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024 which, by itself, was self-explanatory and specifically mentioned the assessee’s name and the quantum of loan.
In light of the foregoing discussion, the AO concluded that the assessee had, in fact, advanced unaccounted cash of Rs.2,00,00,000/- to M/s.Viswas Promoters Private Limited, and accordingly, treated the same as unexplained money u/s.69A of the Act. Consequently, the AO completed the assessment for the A.Y. 2015-16 u/s.153A r.w.s 143(3) of the Act on 29.12.2019, assessing the total income of the assessee at Rs. 2,00,00,000/-.
Aggrieved of the above addition, assessee carried the matter in appeal before the ld.CIT(A) who vide order dated 12.03.2024 deleted the addition made by the AO.
The ld.CIT(A) has deleted the impugned addition after observing that the excel sheet relied upon by the AO was not recovered from the premises of the assessee but was found from the premises of a third party. The ld.CIT(A) noted that in the absence of any corroborative evidence linking the contents of the said excel sheet with the assessee, no adverse inference could be drawn merely on the basis of such document found from a third party. The ld.CIT(A) further held that a mere narration or entry made in an excel sheet by an unknown person, without supporting details or independent verification, cannot form the sole basis for fastening tax liability upon the assessee. It was also observed that during the course of search conducted at the premises of the :-7-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024 assessee, the search team did not come across any incriminating material or evidence suggesting that the assessee had actually advanced any such loans or received any interest thereon. In view of these findings, the ld.CIT(A) concluded that the addition of Rs.2,00,00,000/- made by the AO u/s.69A of the Act was unsustainable and accordingly directed its deletion.
Aggrieved of the above order of the ld.CIT(A), the Revenue is in appeal before us.
The ld.DR, appearing on behalf of the Revenue, vehemently supported the findings and conclusions arrived at by the AO. Accordingly, the ld.DR prayed that the order of the ld.CIT(A) be set aside and the assessment order passed by the AO be upheld in toto.
Per contra, the ld.AR supported the findings and conclusions arrived at by the ld.CIT(A) and prayed that the order so passed by the ld.CIT(A) be upheld by dismissing the appeal preferred by the Revenue.
We have carefully considered the rival submissions and the documentary evidences placed on record. It is an undisputed fact that the addition made by the AO is solely based on the entries contained in an Excel sheet found during the course of search in the case of a third party, namely M/s. Viswas Promoters Private Limited. It is also admitted that the said document was neither authored by the assessee nor recovered from his premises. We find that on identical facts, this Tribunal, in the case of DCIT v. No.1 Auto Finance in to :-8-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024 658/Chny/2025 vide order dated 06.08.2025, has upheld the deletion of similar additions made u/s.69A of the Act on the basis of uncorroborated Excel sheet entries found during the course of search in the case of M/s.Viswas Promoters Private Limited. The relevant operative portion of the said order, which has a direct bearing on the issue before us, reads as under:
“17.14 We have heard the rival contentions, perused the materials available on record and gone through the orders of the authorities below. The sole issue that arises for our consideration is the validity of addition of Rs.1,00,00,000/- and consequential interest of Rs.2,48,000/- made by the AO and deleted by the Ld.CIT(A). The AO made an addition in the hands of the assessee on the basis of excel sheet noting maintained by Shri S.Seetharaman of M/s.Viswas Promoters Private Limited. In his sworn statement, Shri S.Seetharaman has clearly stated that the loan from Karur parties was arranged through Shri Senthilvel. Thus, Shri S.Seetharaman has never deposed that the assessee has advanced loan of Rs.1.00 crore either to him or to M/s.Viswas Promoters Private Limited. 17.15 We have observed that the AO has never conducted any enquiry with Shri Senthilvel, in spite of being named by Shri S.Seetharaman in his sworn statement. The AO has also not conducted an enquiry to ascertain the actual lender. The assessee cannot be expected to prove the negative. Further, it is not the case of the AO with credible evidence to demonstrate that the assessee has actually advanced loan to either Shri S.Seetharaman or M/s.Viswas Promoters Private Limited. Thus, in our considered view that the statement of Shri S.Seetharaman is irrelevant in making an addition in the hands of the assessee. 17.16 The AO has made an addition on the basis of excel sheet found at the premises of third party. The assessee has denied advancing loan to Shri S.Seetharaman. The AO has not brought any other corroborative evidence on record to prove that the assessee has advanced cash loan to Shri S.Seetharaman. The excel sheet was neither authored by the assessee nor found from the premises of the assessee. The name of the assessee in the excel sheet found at third party premises can only trigger the enquiry and that itself is not sufficient to establish the ownership of investment as unexplained. The mere fact that there were certain entries found from the records of third party is not sufficient to make addition on the ground that assessee had made unexplained investments.
:-9-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024
17.17 The Ld.CIT(A) has rightly relied upon the decision of the coordinate bench of Tribunal in the case of DCIT v. Appu Direct Pvt Ltd (ITA Nos. 665 & 666 / CHNY / 2023 dated 24.01.2024) for the proposition that cash transactions recorded in excel sheets found during the course of search proceedings cannot be added in the absence of corroborative evidence. We find that the coordinate bench of Tribunal has held as under:
“10. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We have also carefully considered reasons given by the AO to make additions towards alleged cash transactions as per seized excel sheets found in the possession of Shri. P.Karthikeyan, an employee of Christy group of companies. The three excel sheets based on which undisclosed income of the assessee has been worked out by the AO was found in the electronic devices seized from Shri. P. Karthikeyan, an employee of M/s. Christy Fried Gram Industry, during the course of search conducted in Christy group of cases. The seized material is therefore in the nature of materials seized in case of third party. Further, said material being a typed excel sheets in electronic form, the same is not in the handwriting of any partners or other employees of the assessee firm and the seized material does not contain any acknowledgement of the assessee with regard to the entries found therein, in respect of transactions allegedly made by the Christy group of concerns with assessee firm. Further, no other evidences including sale bills, cash receipts, unaccounted purchase bills etc, were found neither during the course of search of Christy group of concerns or during the course of search in the business premises of the assessee to corroborate the entries found in the excel sheets. Besides the same, it is noticed that no evidences of undisclosed asset, undisclosed expenditure including undisclosed investment etc were found in the course of search in the business premises of the appellant.
It is therefore evident that, no documentary or other evidences to corroborate the entries of cash receipts and payments in the excel sheets were found to support the findings of the AO that said transactions are unaccounted transactions and are outside the books of accounts of the assessee. We further noted that, the AO neither during the assessment proceedings has made any reference to statements recorded u/s. 132(4) of the Act during the course of search in Christy group of cases or in the case of the assessee with reference to excel sheets found during the course of search to verify the contents recorded therein.
:-10-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024
Neither the person from whom said documents was found was examined nor the appellant or its partners was confronted with those evidences to verify the contents therein. From the above, it is clear that the AO has made additions towards cash transactions u/s. 69A of the Act, without there being any corroborative evidence to strengthen the entries recorded in excel sheet found during the course of search on third party.
Therefore, we are of the considered view that no additions can be made u/s. 69A of the Act, on the basis of evidences found in the possession of third party, without examining contents of said documents from the person from whom said documents was found and also from the assessee and its partners. The evidences relied upon by the AO in the form of excel sheets does not constitute adequate evidence to draw adverse inference against the assessee, 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] 118Taxman.com 432, where it has been clearly held that the assessee cannot be put to any liability on the action of a third person where the material was not found from the premises of the assessee nor was in the handwriting of the assessee, since, the third person may write the name of any person at his sweet will and the revenue did not make any effort to gather or corroborate evidence in this relation.”
17.18 We also rely on the judgment of the Hon’ble Delhi High Court in the case of CIT v. Sant Lal [2020] 423 ITR 1 (Del), wherein the Hon’ble Court has held that the assessee cannot be fasten with the liability on the basis of third-party material in the absence of any cogent material. In the case of the assessee the AO neither conducted proper enquiry to identify the actual lender nor made an effort to gather or corroborate evidence to establish that the assessee has actually advanced cash loan to either Shri S.Seetharaman or to M/s. Viswas Promoters Private Limited. Respectfully following the same, we are of the considered view that the findings of the Ld.CIT(A) cannot be found faulted with and hence we do not find any reason to interfere with the findings of the Ld.CIT(A).
17.19 In view of the foregoing facts, circumstances, and legal position discussed hereinabove, we are of the considered opinion that the Ld.CIT(A) has correctly appreciated the material on record and has rightly deleted the additions of Rs.1,00,00,000/- and Rs.2,48,000/- made by the AO on account of alleged unaccounted loan and interest respectively, in the hands of the assessee for the AY 2015-16. The Ld.CIT(A)'s findings are based on cogent reasoning which have not been effectively rebutted by the Revenue. In the absence of any :-11-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024 perversity or material irregularity in the order passed by the Ld.CIT(A), we find no merit in the grounds of appeal raised by the Revenue with respect to the impugned additions.”
17. We observe that the facts of the present case are pari materia with those in the case of No.1 Auto Finance (supra). In the present case also, the impugned addition is based solely on the unverified digital notings contained in an Excel sheet found from a third-party premise. The AO has not conducted any further enquiry to ascertain the authenticity or veracity of the entries. No independent evidence such as cash flow statements, bank transactions, or confirmations from either side were brought on record to substantiate that any loan or cash transaction actually took place between the assessee and M/s.
Viswas Promoters Private Limited or its representatives.
We further note that the person from whose custody the document was found, namely Shri S. Seetharaman, in his sworn statement, has not stated anywhere that the assessee had advanced any loan to him or to M/s.Viswas Promoters Private Limited. On the contrary, he had specifically mentioned that the loans from the “Karur parties” were arranged through one Shri Senthilvel, whose statement the AO has admittedly not recorded. Thus, there is a clear lack of nexus between the seized material and the assessee.
It is a settled position in law that addition u/s.69A or section 68 of the Act cannot be sustained merely on the basis of entries appearing in documents found during search of a third party, unless such entries are corroborated by independent evidence or are found to have a direct nexus with the assessee.
:-12-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024 This principle has been consistently upheld by various judicial fora, including the decision of the Hon’ble Delhi High Court in CIT v. Sant Lal [2020] 423 ITR 1 (Del), wherein it was held that an assessee cannot be saddled with tax liability merely on the basis of documents found in possession of a third party, particularly when such documents are neither in the handwriting of the assessee nor recovered from his premises, and when the Revenue has failed to corroborate the contents thereof through independent evidence.
The Hon’ble High Court has further observed that a person may at his sweet will write any name in a loose sheet or document, and such unauthenticated notings, by themselves, do not constitute admissible or reliable evidence against another person unless duly supported by corroborative material.
In the instant case, the AO has proceeded to make the addition purely on surmise and conjecture, without conducting any enquiry to establish the ownership of the impugned sum or to prove that the assessee was the actual source of the alleged loan. The Excel sheet, being an electronic document found in the possession of a third party, at best constitutes an information which may warrant investigation, but cannot form the sole basis of an addition unless corroborated by credible material.
Further, no adverse inference can be drawn against the assessee merely because the assessee’s name appears in a third-party document. The absence
:-13-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024 of any corroborative evidence, coupled with the non-examination of the relevant persons such as Shri Senthilvel and the failure to establish the movement of funds, renders the addition wholly unsustainable in law.
We also find force in the reasoning adopted by the ld.CIT(A), who, relying on the coordinate Bench decision in DCIT v. Appu Direct Pvt. Ltd. (ITA Nos. 665 & 666/Chny/2023 dated 24.01.2024), held that uncorroborated cash transactions recorded in seized Excel sheets found during the course of search proceedings cannot be the sole basis for making addition u/s.69A of the Act.
In view of the foregoing facts and the binding judicial precedents cited above, we hold that the addition of Rs.2,00,00,000/- made by the AO towards unexplained loans u/s.69A of the Act, being solely based on notings in an Excel sheet found at the premises of a third party, is unsustainable in law. We are of the considered opinion that the ld.CIT(A) has correctly appreciated the evidentiary position and has rightly deleted the impugned addition. We find no infirmity, perversity, or material irregularity in the order passed by the ld.CIT(A) which warrants our interference. Accordingly, the grounds raised by the Revenue are devoid of merit and are dismissed.
Since we have already upheld the order of the ld.CIT(A) deleting the impugned addition on merits, the cross objections of the assessee with regard to the validity of the proceedings-initiated u/s.153A of the Act having become academic, is not being separately adjudicated and is accordingly left open.
:-14-: ITA. No.:1390 /Chny/2024 & CO No.61/Chny/2024
In the result, the appeal of the Revenue and Cross-Objections of the assessee are dismissed.
Order pronounced in the open court on 13th October, 2025 at Chennai.