DEPUTY COMMISSIONER OF INCOME TAX, NUNGAMBAKKAM vs. PINNATHEVAR PALANICHAMY, MADURAI

आदेश / O R D E R

PER ABY T. VARKEY, JM:

/Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::2 ::

2. The main grievance of the Revenue is against the action of the The main grievance of the Revenue is against the action of the The main grievance of the Revenue is against the action of the Ld.CIT(A) deleting the addition of Rs.20 Crores, made by AO a Ld.CIT(A) deleting the addition of Rs.20 Crores, made by AO a Ld.CIT(A) deleting the addition of Rs.20 Crores, made by AO alleging on- money received by the assessee for sale of immovable property at received by the assessee for sale of immovable property at received by the assessee for sale of immovable property at Madurai.

1. Sabapathy. The AO noted that, during the course of search, a pocket Sabapathy. The AO noted that, during the course of search, a pocket Sabapathy. The AO noted that, during the course of search, a pocket- book was found in the possession of Mr. Antony Francis Julian [Asst. ound in the possession of Mr. Antony Francis Julian [Asst. ound in the possession of Mr. Antony Francis Julian [Asst.

Manager, Purchase Department of M/s.Saravana Stores (Textiles)] which Manager, Purchase Department of M/s.Saravana Stores (Textiles)] which Manager, Purchase Department of M/s.Saravana Stores (Textiles)] which was seized and marked as [ANN/SK/SSSLLP/B&D/S was seized and marked as [ANN/SK/SSSLLP/B&D/S-2]. At Page No. 61 of 2]. At Page No. 61 of the said pocket-book, certain numbers were jotted down. Whe book, certain numbers were jotted down. Whe book, certain numbers were jotted down. When enquired about these noting’s, Shri Julian stated that, he had been maintaining the , Shri Julian stated that, he had been maintaining the , Shri Julian stated that, he had been maintaining the pocket-book for his MD, Shri R. Sabapathy, to record the loans taken by book for his MD, Shri R. Sabapathy, to record the loans taken by book for his MD, Shri R. Sabapathy, to record the loans taken by him from M/s. Swarna Shilipi. The AO observed that, the said statement him from M/s. Swarna Shilipi. The AO observed that, the said statement him from M/s. Swarna Shilipi. The AO observed that, the said statement of Shri Julian along with of Shri Julian along with pocket book was confronted to the MD, Shri R. pocket book was confronted to the MD, Shri R.

Sabapathy on 04.12.2021, wherein, he initially explained that, the Sabapathy on 04.12.2021, wherein, he initially explained that, the Sabapathy on 04.12.2021, wherein, he initially explained that, the noting’s therein related to the loan of Rs.25 crores which he had received therein related to the loan of Rs.25 crores which he had received therein related to the loan of Rs.25 crores which he had received from Mr. Rakesh of M/s. Swarna Shilipi in December, 2020 and, out of from Mr. Rakesh of M/s. Swarna Shilipi in December, 2020 and, out of from Mr. Rakesh of M/s. Swarna Shilipi in December, 2020 and, out of /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy which, he had paid Rs.20 crs. to the assessee for purchase of land at which, he had paid Rs.20 crs. to the assessee for purchase of land at which, he had paid Rs.20 crs. to the assessee for purchase of land at Madurai which was acquired for a total price of Rs Madurai which was acquired for a total price of Rs.50 Crs. and further .50 Crs. and further sum of Rs. 5 crores was was paid by him to Shri R. Saravanan Shri R. Saravanan for the land purchased by his sister at Perambur for a total price of Rs.21 Crs. purchased by his sister at Perambur for a total price of Rs.21 Crs. purchased by his sister at Perambur for a total price of Rs.21 Crs.

Sabapathy; and the assessee and the assessee, categorically denied having received any categorically denied having received any on-money of Rs.20 Cr from Shri R. Sabapathy on sale of the land at money of Rs.20 Cr from Shri R. Sabapathy on sale of the land at money of Rs.20 Cr from Shri R. Sabapathy on sale of the land at Madurai. The assessee further explained that, he along with his two sons Madurai. The assessee further explained that, he along with his two sons Madurai. The assessee further explained that, he along with his two sons & his sister’s son [viz., four (4) co ter’s son [viz., four (4) co-owners] had sold the property in owners] had sold the property in question admeasuring 249 cents on 22.01.2021 to Shri R. Sabapathy for question admeasuring 249 cents on 22.01.2021 to Shri R. Sabapathy for question admeasuring 249 cents on 22.01.2021 to Shri R. Sabapathy for a sale- consideration of Rs.49,70,04,000/ consideration of Rs.49,70,04,000/- (approximately Rs.50 crores), (approximately Rs.50 crores), which in its entirety was paid by him by way of De which in its entirety was paid by him by way of Demand Drafts (details mand Drafts (details given in sale-deed) and that no portion was paid in cash, and that the deed) and that no portion was paid in cash, and that the deed) and that no portion was paid in cash, and that the entire sale consideration formed part of their books of accounts. The entire sale consideration formed part of their books of accounts. The entire sale consideration formed part of their books of accounts. The assessee also pointed out that, the guideline value of the property was assessee also pointed out that, the guideline value of the property was assessee also pointed out that, the guideline value of the property was only Rs.2,010/- per sq per sq.ft. which works out to Rs.8,76,360/ .ft. which works out to Rs.8,76,360/- per cent, whereas, the property was sold for Rs.19,96,000/ whereas, the property was sold for Rs.19,96,000/- per cent viz., more per cent viz., more than double the guideline value [i.e. 2.28 times more than the guideline than double the guideline value [i.e. 2.28 times more than the guideline than double the guideline value [i.e. 2.28 times more than the guideline value]; for which the purchaser had also incurred additional char value]; for which the purchaser had also incurred additional char value]; for which the purchaser had also incurred additional charges by way of stamp duty & registration charges of Rs.5,46,78,440/ way of stamp duty & registration charges of Rs.5,46,78,440/ way of stamp duty & registration charges of Rs.5,46,78,440/- and that /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy the final purchase cost for Shri R. Sabapathy worked out to the tune of the final purchase cost for Shri R. Sabapathy worked out to the tune of the final purchase cost for Shri R. Sabapathy worked out to the tune of Rs.Rs.55,16,82,440/-. According to him therefore, there could not be any . According to him therefore, there could not be any . According to him therefore, there could not be any question/allegation of understate allegation of understatement of sale consideration. The assessee ment of sale consideration. The assessee also brought to the notice of the AO that, later on, Shri R. Sabapathy on also brought to the notice of the AO that, later on, Shri R. Sabapathy on also brought to the notice of the AO that, later on, Shri R. Sabapathy on 21.03.2022 (within 3 months of search) 3 months of search) has retracted his statement and has retracted his statement and stated that, the noting’s noting’s in the pocket book related to the cash sales in the pocket book related to the cash sales made by him which were parked made by him which were parked with Mr.Rakesh of M/s.Swarna Mr.Rakesh of M/s.Swarna Shilipi, and that he had not paid any further sum to the assessee, apart from the and that he had not paid any further sum to the assessee, apart from the and that he had not paid any further sum to the assessee, apart from the agreed consideration of Rs.49.70 crores plus stamp duty agreed consideration of Rs.49.70 crores plus stamp duty agreed consideration of Rs.49.70 crores plus stamp duty & registration charges. The assessee submitted a second re charges. The assessee submitted a second retracted statement of Shri R tracted statement of Shri R Sabapathy dated 05.12.2022 which was a sworn affidavit filed before Sabapathy dated 05.12.2022 which was a sworn affidavit filed before Sabapathy dated 05.12.2022 which was a sworn affidavit filed before notary public wherein he had affirmed that, he has purchased the notary public wherein he had affirmed that, he has purchased the notary public wherein he had affirmed that, he has purchased the property situated at Madurai on 22.01.2021 for a total cost of property situated at Madurai on 22.01.2021 for a total cost of property situated at Madurai on 22.01.2021 for a total cost of Rs.55,16,82,440/- which which includes includes registration registration charges charges of of Rs.5,46,78,440/- and gave the details of the said property at Madurai and gave the details of the said property at Madurai and gave the details of the said property at Madurai purchased from assessee & others, and also asserted that he did purchased from assessee & others, and also asserted that he did purchased from assessee & others, and also asserted that he didn’t pay any cash consideration (on any cash consideration (on-money) over and above what is mentioned in money) over and above what is mentioned in the registered Sale-Deed. Shri R. Sabapathy in his sworn affidavit also Deed. Shri R. Sabapathy in his sworn affidavit also Deed. Shri R. Sabapathy in his sworn affidavit also explained the reasons for his retraction from his original statement given explained the reasons for his retraction from his original statement given explained the reasons for his retraction from his original statement given on 04.12.2021, which according to him, was given under tremendous on 04.12.2021, which according to him, was given under tremendous on 04.12.2021, which according to him, was given under tremendous pressure he was undergoing during search and that, he was not pressure he was undergoing during search and that, he was not pressure he was undergoing during search and that, he was not in the right frame of mind when his statement was recorded u/s.132(4) of the right frame of mind when his statement was recorded u/s.132(4) of the right frame of mind when his statement was recorded u/s.132(4) of the /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::5 ::

Act. The assessee accordingly submitted before the AO, that no adverse Act. The assessee accordingly submitted before the AO, that no adverse Act. The assessee accordingly submitted before the AO, that no adverse inference should be drawn against him on the basis of such retracted inference should be drawn against him on the basis of such retracted inference should be drawn against him on the basis of such retracted statement of the MD which was recorded statement of the MD which was recorded on mistaken fact, particularly on mistaken fact, particularly when it was not backed by any corroborative evidence in as much as the when it was not backed by any corroborative evidence in as much as the when it was not backed by any corroborative evidence in as much as the noting’s in the pocket-book was dumb in nature. book was dumb in nature.

Sabapathy that, he had availed cash loan of Rs.25 crores from Mr. Rakesh Sabapathy that, he had availed cash loan of Rs.25 crores from Mr. Rakesh Sabapathy that, he had availed cash loan of Rs.25 crores from Mr. Rakesh of M/s. Swarna Shilipi and out of which he had paid R of M/s. Swarna Shilipi and out of which he had paid Rs.20 crores to the s.20 crores to the assessee as on-money for the purchase of immovable property. With money for the purchase of immovable property. With money for the purchase of immovable property. With these observations, the AO added the impugned sum of Rs.20 crores by these observations, the AO added the impugned sum of Rs.20 crores by these observations, the AO added the impugned sum of Rs.20 crores by way of on-monies received by the assessee on sale of his property and monies received by the assessee on sale of his property and monies received by the assessee on sale of his property and assessed the same to tax by way assessed the same to tax by way of long-term capital gains. Being term capital gains. Being aggrieved by the order of the AO, the assessee preferred an appeal aggrieved by the order of the AO, the assessee preferred an appeal aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same by observing before the Ld. CIT(A) who was pleased to delete the same by observing before the Ld. CIT(A) who was pleased to delete the same by observing as under: - /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::6 ::

“5. Decision:

I have perused the assessment order, grounds of appeal, wri I have perused the assessment order, grounds of appeal, written submissions tten submissions of the appellant, evidences filed before the Assessing Officer & during appeal of the appellant, evidences filed before the Assessing Officer & during appeal of the appellant, evidences filed before the Assessing Officer & during appeal proceedings and the case laws relied upon. In the first place, as evidenced proceedings and the case laws relied upon. In the first place, as evidenced proceedings and the case laws relied upon. In the first place, as evidenced from the assessment order, the case of the appellant was taken up for scrutiny from the assessment order, the case of the appellant was taken up for scrutiny from the assessment order, the case of the appellant was taken up for scrutiny as per prevalent guidelines since certain information relating to the assessee r prevalent guidelines since certain information relating to the assessee r prevalent guidelines since certain information relating to the assessee was found during the course of search in Saravana Stores Tex Group cases on was found during the course of search in Saravana Stores Tex Group cases on was found during the course of search in Saravana Stores Tex Group cases on 01.12.2021. Now coming to the said information, which are contents of pocket 01.12.2021. Now coming to the said information, which are contents of pocket 01.12.2021. Now coming to the said information, which are contents of pocket diary seized and marked as AN diary seized and marked as ANN/SK/SSSLLP/B&D/S-2, are copied hereunder 2, are copied hereunder for the sake of ready reference. for the sake of ready reference.

5.1 From the above contents, it can be seen that there is reference to some. 5.1 From the above contents, it can be seen that there is reference to some. 5.1 From the above contents, it can be seen that there is reference to some. figures with dates and months (not years) and there is no mention of any figures with dates and months (not years) and there is no mention of any figures with dates and months (not years) and there is no mention of any names, notto speak of the appellant. However, the contents of the said page es, notto speak of the appellant. However, the contents of the said page es, notto speak of the appellant. However, the contents of the said page were explained Initially as cash loans by the person (Sri R. Sabapathy), on were explained Initially as cash loans by the person (Sri R. Sabapathy), on were explained Initially as cash loans by the person (Sri R. Sabapathy), on whose behalf such entries were made. Therefore, precisely no seized material whose behalf such entries were made. Therefore, precisely no seized material whose behalf such entries were made. Therefore, precisely no seized material having any direct reference to having any direct reference to the appellant was found in the course of search. the appellant was found in the course of search. However, while explaining the contents, Sri R. Sabapathy, MD of the searched However, while explaining the contents, Sri R. Sabapathy, MD of the searched However, while explaining the contents, Sri R. Sabapathy, MD of the searched group companies, in a statement recorded u/s 132(4) on 04.12.2021 explained group companies, in a statement recorded u/s 132(4) on 04.12.2021 explained group companies, in a statement recorded u/s 132(4) on 04.12.2021 explained that he had received a total amount of Rs.25 crores a that he had received a total amount of Rs.25 crores as loan from Sri Rakesh s loan from Sri Rakesh /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::7 ::

Kumar and paid Rs.20 crores in cash to the appellant towards purchase Kumar and paid Rs.20 crores in cash to the appellant towards purchase Kumar and paid Rs.20 crores in cash to the appellant towards purchase consideration of Madurai lands and balance Rs.5 crores to Sri Rajagopal consideration of Madurai lands and balance Rs.5 crores to Sri Rajagopal consideration of Madurai lands and balance Rs.5 crores to Sri Rajagopal Saravanan towards purchase of Perambur property. Saravanan towards purchase of Perambur property.

5.2 Now, the moot for consideration is whe 5.2 Now, the moot for consideration is whether the statement given u/s 132(4) ther the statement given u/s 132(4) by Sri R.Sabapathy on 04.12.2021 making a direct reference to the appellant by Sri R.Sabapathy on 04.12.2021 making a direct reference to the appellant by Sri R.Sabapathy on 04.12.2021 making a direct reference to the appellant - that he had given Rs.20 crores in cash in respect of purchase of land that he had given Rs.20 crores in cash in respect of purchase of land that he had given Rs.20 crores in cash in respect of purchase of land - can be considered as seized material and evidentiary value can be atta considered as seized material and evidentiary value can be attached, so that ched, so that substantive addition can be made in the hands of a third party. Before substantive addition can be made in the hands of a third party. Before substantive addition can be made in the hands of a third party. Before venturing into this discussion, it is pertinent to make a distinction between the venturing into this discussion, it is pertinent to make a distinction between the venturing into this discussion, it is pertinent to make a distinction between the statement given under oath by a person about his own transactions and statement given under oath by a person about his own transactions and statement given under oath by a person about his own transactions and making statements which will have a bearing on the income determination of hich will have a bearing on the income determination of hich will have a bearing on the income determination of other third persons in the case on hand, the statement made by Sri R. other third persons in the case on hand, the statement made by Sri R. other third persons in the case on hand, the statement made by Sri R. Sabapathy u/s 132(4), corffains some disclosure about his income details and Sabapathy u/s 132(4), corffains some disclosure about his income details and Sabapathy u/s 132(4), corffains some disclosure about his income details and also the transactions he made with the appellant. Tho also the transactions he made with the appellant. Though considerable ugh considerable importance can be attached to the statement recorded u/s 132(4) during importance can be attached to the statement recorded u/s 132(4) during importance can be attached to the statement recorded u/s 132(4) during search and seizure operations by Sri R. Sabapathy, it is also equally important search and seizure operations by Sri R. Sabapathy, it is also equally important search and seizure operations by Sri R. Sabapathy, it is also equally important to note that there is no seized material having direct or even tacit reference to to note that there is no seized material having direct or even tacit reference to to note that there is no seized material having direct or even tacit reference to the appellant, but the searched person had given a statement u/s 132(4), pellant, but the searched person had given a statement u/s 132(4), pellant, but the searched person had given a statement u/s 132(4), initially admitting that he had paid cash to the appellant. It is settled law that initially admitting that he had paid cash to the appellant. It is settled law that initially admitting that he had paid cash to the appellant. It is settled law that the contents of a statement, though given INCOME TAX DEPARTMEN Such the contents of a statement, though given INCOME TAX DEPARTMEN Such the contents of a statement, though given INCOME TAX DEPARTMEN Such without any further under oath u/s 132 without any further under oath u/s 132(4), cannot be considered as (4), cannot be considered as corroborative evidence.

5.3 At this stage, it is important to refer to the reliance placed by the appellant 5.3 At this stage, it is important to refer to the reliance placed by the appellant 5.3 At this stage, it is important to refer to the reliance placed by the appellant on the decision of the Apex Court in the case of Pullangode Rubber Produce on the decision of the Apex Court in the case of Pullangode Rubber Produce on the decision of the Apex Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 Co. Ltd. v. State of Kerala [1973] 91 ITR 18, which was brushed aside by the , which was brushed aside by the AO in the assessment as not applicable to the facts of the case. In this case, AO in the assessment as not applicable to the facts of the case. In this case, AO in the assessment as not applicable to the facts of the case. In this case, the Apex Court held that though admission is an extremely important piece of the Apex Court held that though admission is an extremely important piece of the Apex Court held that though admission is an extremely important piece of evidence, it cannot be said to be conclusive and the maker can show evidence, it cannot be said to be conclusive and the maker can show evidence, it cannot be said to be conclusive and the maker can show that it was incorrect In this regard, the appellant had done his part in proving the was incorrect In this regard, the appellant had done his part in proving the was incorrect In this regard, the appellant had done his part in proving the contents of admission of Sri R. Sabapathy as not correct, by providing actual contents of admission of Sri R. Sabapathy as not correct, by providing actual contents of admission of Sri R. Sabapathy as not correct, by providing actual sale details. In the statement given u/s 132(4), Sri R. Sabapathy mentioned sale details. In the statement given u/s 132(4), Sri R. Sabapathy mentioned sale details. In the statement given u/s 132(4), Sri R. Sabapathy mentioned that the properties from the appellant were purchased for an amount of Rs.50 ies from the appellant were purchased for an amount of Rs.50 ies from the appellant were purchased for an amount of Rs.50 crores, out of which Rs.20 crores was paid in cash. Relevant portion of the crores, out of which Rs.20 crores was paid in cash. Relevant portion of the crores, out of which Rs.20 crores was paid in cash. Relevant portion of the statement recorded from Sri R. Sabapathy on 04.12.2021 is as under: statement recorded from Sri R. Sabapathy on 04.12.2021 is as under:

Q.56 Please give the deals of the immovable proper Please give the deals of the immovable properties for which this ties for which this cash loan of Rs.25 Crs. was paid by you. Please also furnish the cash loan of Rs.25 Crs. was paid by you. Please also furnish the cash loan of Rs.25 Crs. was paid by you. Please also furnish the persons to whom the payments were made by you out of this love persons to whom the payments were made by you out of this love persons to whom the payments were made by you out of this love of Rs.25 Crores of Rs.25 Crores A As already stated by me in my sworn statement, properties at As already stated by me in my sworn statement, properties at As already stated by me in my sworn statement, properties at Perambur and Madurai were Perambur and Madurai were purchased by me during December purchased by me during December 2020 and January 2021. The property at Perambur was purchased 2020 and January 2021. The property at Perambur was purchased 2020 and January 2021. The property at Perambur was purchased for my sister Smt. Selvalkumari for a consideration of Rs.21 for my sister Smt. Selvalkumari for a consideration of Rs.21 for my sister Smt. Selvalkumari for a consideration of Rs.21 Crores out of which Rs. 16 Crowes was the Registered Value which Crores out of which Rs. 16 Crowes was the Registered Value which Crores out of which Rs. 16 Crowes was the Registered Value which was met out of my father's Rental In was met out of my father's Rental Income and Rs.5 Crores was come and Rs.5 Crores was paid by me is cash to Shri R. Saravanan of Saravana paid by me is cash to Shri R. Saravanan of Saravana bhavan Hotels group Similarly, the property at Madurai was purchased for Hotels group Similarly, the property at Madurai was purchased for Hotels group Similarly, the property at Madurai was purchased for a consideration of Rs.50 Crores (appear) of which Rs.30 Crores a consideration of Rs.50 Crores (appear) of which Rs.30 Crores a consideration of Rs.50 Crores (appear) of which Rs.30 Crores was paid by me in cash. was paid by me in cash.

5.4 Going by the contents of the above version, during the course of contents of the above version, during the course of contents of the above version, during the course of assessment proceedings, the Assessing Officer also questioned the appellant assessment proceedings, the Assessing Officer also questioned the appellant assessment proceedings, the Assessing Officer also questioned the appellant /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy vide notice u/s 142(1), dated 10.11.2022 on paying the total accounted vide notice u/s 142(1), dated 10.11.2022 on paying the total accounted vide notice u/s 142(1), dated 10.11.2022 on paying the total accounted consideration at Rs.30 crores and on consideration at Rs.30 crores and on-money of Rs.20 crores/However, as s/However, as evidenced by the sale deeds furnished, the total sale consideration received by evidenced by the sale deeds furnished, the total sale consideration received by evidenced by the sale deeds furnished, the total sale consideration received by the appellant, along with his relatives, is Rs.49,70,04,000/ the appellant, along with his relatives, is Rs.49,70,04,000/- and the total and the total amount was received through DDs. Therefore, it is clear that the deposition of amount was received through DDs. Therefore, it is clear that the deposition of amount was received through DDs. Therefore, it is clear that the deposition of Sri R. Sabapathy made u/s 132(4) on 04.12.2021 is not totally correct and Sabapathy made u/s 132(4) on 04.12.2021 is not totally correct and Sabapathy made u/s 132(4) on 04.12.2021 is not totally correct and suffers with certain infirmities, and therefore the same cannot be given full suffers with certain infirmities, and therefore the same cannot be given full suffers with certain infirmities, and therefore the same cannot be given full credence. However, on the part of the Assessing Officer, no independent credence. However, on the part of the Assessing Officer, no independent credence. However, on the part of the Assessing Officer, no independent verification was done to ascertain the verification was done to ascertain the veracity of the contents of Sri R. veracity of the contents of Sri R. Sabapathy, and basing on such deposition alone, the AO proceeded to question Sabapathy, and basing on such deposition alone, the AO proceeded to question Sabapathy, and basing on such deposition alone, the AO proceeded to question the appellant. Even after obtaining the facts contrary to the version of Sri R. the appellant. Even after obtaining the facts contrary to the version of Sri R. the appellant. Even after obtaining the facts contrary to the version of Sri R. Sabapathy, the same were not considered and the retraction of Sr Sabapathy, the same were not considered and the retraction of Sri Sabapathy i Sabapathy also was brushed aside, quoting obvious reasons: also was brushed aside, quoting obvious reasons:

Now coming to the facts of the case, Sn R. Sabapathy had retracted Now coming to the facts of the case, Sn R. Sabapathy had retracted Now coming to the facts of the case, Sn R. Sabapathy had retracted from his statement recorded on 04.12.2021 vide his retraction letter from his statement recorded on 04.12.2021 vide his retraction letter from his statement recorded on 04.12.2021 vide his retraction letter dated 21.03.2022, i.e., after a period of two months; and dated 21.03.2022, i.e., after a period of two months; and stated that stated that the amounts mentioned in the seized material are not loans but the the amounts mentioned in the seized material are not loans but the the amounts mentioned in the seized material are not loans but the same are parking of funds with Sri Rakesh Kumar, he. has not paid same are parking of funds with Sri Rakesh Kumar, he. has not paid same are parking of funds with Sri Rakesh Kumar, he. has not paid any amount in cash to the appellant. However, the AO had not given any amount in cash to the appellant. However, the AO had not given any amount in cash to the appellant. However, the AO had not given any credence to the retraction of Sri R. Sab any credence to the retraction of Sri R. Sabapathy and proceeded to apathy and proceeded to treat the amount of Rs.20 crores as undisclosed capital gains in the treat the amount of Rs.20 crores as undisclosed capital gains in the treat the amount of Rs.20 crores as undisclosed capital gains in the hands of the appellant. hands of the appellant.

8.5 Keeping the discussion on the present assessment aside for the time 8.5 Keeping the discussion on the present assessment aside for the time 8.5 Keeping the discussion on the present assessment aside for the time being, it is in place to refer to the balance amount of Rs.5 crore being, it is in place to refer to the balance amount of Rs.5 crores, purportedly s, purportedly given to Sri Rajagopal Saravanan by Sri R. Sabapathy towards acquisition of given to Sri Rajagopal Saravanan by Sri R. Sabapathy towards acquisition of given to Sri Rajagopal Saravanan by Sri R. Sabapathy towards acquisition of Perambur lands. The contents of the said seized diary were put to scrutiny by Perambur lands. The contents of the said seized diary were put to scrutiny by Perambur lands. The contents of the said seized diary were put to scrutiny by the Hon'ble Tribunal in the case of Rajagopal Saravanan, for the Asst. Year the Hon'ble Tribunal in the case of Rajagopal Saravanan, for the Asst. Year the Hon'ble Tribunal in the case of Rajagopal Saravanan, for the Asst. Year 2021-22, in dt.10.07.2024. The observations and dt.10.07.2024. The observations and ITA No. 119/CHNY/2024 dt.10.07.2024. The observations and findings of the Tribunal are as under: findings of the Tribunal are as under:

"5. From the fact, it emerges that pursuant to search action u/s 132, a "5. From the fact, it emerges that pursuant to search action u/s 132, a "5. From the fact, it emerges that pursuant to search action u/s 132, a notebook was found which, inter notebook was found which, inter-alia, contained notings of loans alia, contained notings of loans obtained by Shri R.S obtained by Shri R.Sabapathy. No dates were mentioned against these abapathy. No dates were mentioned against these entries. Based on the statement of Shri R.Sabapathy, Ld. AO alleged entries. Based on the statement of Shri R.Sabapathy, Ld. AO alleged entries. Based on the statement of Shri R.Sabapathy, Ld. AO alleged that Shri R.Sabapathy received loan of Rs.25 Crores from Shri Rakesh that Shri R.Sabapathy received loan of Rs.25 Crores from Shri Rakesh that Shri R.Sabapathy received loan of Rs.25 Crores from Shri Rakesh of Swarna Shilpi out of which an amount of Rs.5 Crores was utilized as of Swarna Shilpi out of which an amount of Rs.5 Crores was utilized as of Swarna Shilpi out of which an amount of Rs.5 Crores was utilized as payment to assessee as on payment to assessee as on-money against purchase of impugned money against purchase of impugned property by his sister. However, this statement was retracted within a property by his sister. However, this statement was retracted within a property by his sister. However, this statement was retracted within a span of 3 months....... Shri R.Sabapathy has taken contrary stand and span of 3 months....... Shri R.Sabapathy has taken contrary stand and span of 3 months....... Shri R.Sabapathy has taken contrary stand and his statement could not be held to be credible one.... his statement could not be held to be credible one...... the statement .. the statement of Shri R.Sabapathy was modified within a short span of time and of Shri R.Sabapathy was modified within a short span of time and of Shri R.Sabapathy was modified within a short span of time and therefore, the same could not be accepted as credible one. No concrete therefore, the same could not be accepted as credible one. No concrete therefore, the same could not be accepted as credible one. No concrete reliance could be placed on the same to make impugned addition in reliance could be placed on the same to make impugned addition in reliance could be placed on the same to make impugned addition in the absence of any other evidence on the absence of any other evidence on record....".

5.6 As could be seen from the above, the Tribunal had not considered the 5.6 As could be seen from the above, the Tribunal had not considered the 5.6 As could be seen from the above, the Tribunal had not considered the contents of the seized diary as such, in the absence of any other evidence contents of the seized diary as such, in the absence of any other evidence contents of the seized diary as such, in the absence of any other evidence brought on record by the Assessing Officer. When the contents of the seized brought on record by the Assessing Officer. When the contents of the seized brought on record by the Assessing Officer. When the contents of the seized diary regarding payment of Rs.5 crores to Sri Rajagopal could not stand the payment of Rs.5 crores to Sri Rajagopal could not stand the payment of Rs.5 crores to Sri Rajagopal could not stand the test of appeal, no different view can be taken in respect of the balance amount test of appeal, no different view can be taken in respect of the balance amount test of appeal, no different view can be taken in respect of the balance amount of Rs.20 crores, purported to have been given to the appellant. of Rs.20 crores, purported to have been given to the appellant.

5.7 To conclude, in the first place, there is no se 5.7 To conclude, in the first place, there is no seized material having any ized material having any reference to the name of the appellant or the transactions made by the reference to the name of the appellant or the transactions made by the reference to the name of the appellant or the transactions made by the appellant with the searched party. Secondly, the case was taken up for appellant with the searched party. Secondly, the case was taken up for appellant with the searched party. Secondly, the case was taken up for /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy scrutiny referring to the statement given by Sri R. Sabapathy u/s 132(4) alone scrutiny referring to the statement given by Sri R. Sabapathy u/s 132(4) alone scrutiny referring to the statement given by Sri R. Sabapathy u/s 132(4) alone and no independent enquiry was done by the AO to verify the veracity of the ependent enquiry was done by the AO to verify the veracity of the ependent enquiry was done by the AO to verify the veracity of the contents mentioned therein, inasmuch as the total sale consideration of Rs.50 contents mentioned therein, inasmuch as the total sale consideration of Rs.50 contents mentioned therein, inasmuch as the total sale consideration of Rs.50 crores (precisely Rs.49.70 crores) was paid through DDs, against the crores (precisely Rs.49.70 crores) was paid through DDs, against the crores (precisely Rs.49.70 crores) was paid through DDs, against the statement that out of Rs.50 crores, Rs.20 c statement that out of Rs.50 crores, Rs.20 crores was paid in cash. Further, rores was paid in cash. Further, when the appellant had furnished the copies of sale deeds and brought out the when the appellant had furnished the copies of sale deeds and brought out the when the appellant had furnished the copies of sale deeds and brought out the actual facts of sale consideration, the AO had not discussed anything on these actual facts of sale consideration, the AO had not discussed anything on these actual facts of sale consideration, the AO had not discussed anything on these issues. Furthermore, when the retraction statement of Sri R.Sabapa issues. Furthermore, when the retraction statement of Sri R.Sabapathy, in the thy, in the form of Notarised Sworn Affidavit was produced before the AO, the same had form of Notarised Sworn Affidavit was produced before the AO, the same had form of Notarised Sworn Affidavit was produced before the AO, the same had to be dealt with either by proving the contents of earlier statement given u/s to be dealt with either by proving the contents of earlier statement given u/s to be dealt with either by proving the contents of earlier statement given u/s 132(4) are correct or by proving that the retraction statement is on wrong 132(4) are correct or by proving that the retraction statement is on wrong 132(4) are correct or by proving that the retraction statement is on wrong footing. However, no such exercise was done by the Assessing Officer but was r, no such exercise was done by the Assessing Officer but was r, no such exercise was done by the Assessing Officer but was simply brushed aside metaphorically. Therefore, the addition of Rs.20 crores simply brushed aside metaphorically. Therefore, the addition of Rs.20 crores simply brushed aside metaphorically. Therefore, the addition of Rs.20 crores towards undisclosed capital gains made by the AO cannot be sustained towards undisclosed capital gains made by the AO cannot be sustained towards undisclosed capital gains made by the AO cannot be sustained factually, technically or legally. Accordingly, factually, technically or legally. Accordingly, the addition so made is directed to the addition so made is directed to be deleted.

6. In result, the appeal is allowed. 6. In result, the appeal is allowed.”

6. Aggrieved by the above order of Ld. CIT(A), the Revenue is in Aggrieved by the above order of Ld. CIT(A), the Revenue is in Aggrieved by the above order of Ld. CIT(A), the Revenue is in appeal before this Tribunal on the appeal before this Tribunal on the following grounds:

3. The Ld.CIT(A) erred in deleting the addition without considering the 3. The Ld.CIT(A) erred in deleting the addition without considering the 3. The Ld.CIT(A) erred in deleting the addition without considering the incriminating seized material wherein the date of property purchased matched incriminating seized material wherein the date of property purchased matched incriminating seized material wherein the date of property purchased matched with the date of cash loan with the date of cash loans which was brought out in the assessment order by s which was brought out in the assessment order by the A.O.

4. The Ld.CIT(A) erred in not considering that documents seized in the form of 4. The Ld.CIT(A) erred in not considering that documents seized in the form of 4. The Ld.CIT(A) erred in not considering that documents seized in the form of small notebook which was found during the course of search which was seized small notebook which was found during the course of search which was seized small notebook which was found during the course of search which was seized from Saravana Store Jewellery are corrobo from Saravana Store Jewellery are corroborating evidence, which provided the rating evidence, which provided the details of the cash loans received by Shri. R.Sabapathy during the financial details of the cash loans received by Shri. R.Sabapathy during the financial details of the cash loans received by Shri. R.Sabapathy during the financial year 2020-21 to the tune of Rs.25,00,00,000 out of which 20 crores were paid 21 to the tune of Rs.25,00,00,000 out of which 20 crores were paid 21 to the tune of Rs.25,00,00,000 out of which 20 crores were paid to the assessee.

5. The Ld CIT(A) erred in not considering that th 5. The Ld CIT(A) erred in not considering that the addition made was e addition made was supported by the Hon'ble Supreme Court's decision in the case of Pullangode supported by the Hon'ble Supreme Court's decision in the case of Pullangode supported by the Hon'ble Supreme Court's decision in the case of Pullangode Rubber Produce CI Ltd Vs State of Kerala which states that the statement Rubber Produce CI Ltd Vs State of Kerala which states that the statement Rubber Produce CI Ltd Vs State of Kerala which states that the statement made voluntarily by the assessee could form the basis of assessment. made voluntarily by the assessee could form the basis of assessment.

6. For these grounds and any other ground including amendment of grounds ds and any other ground including amendment of grounds ds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of that may be raised during the course of the appeal proceedings, the order of that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be learned CIT(Appeals) may be set aside and that of the Assessing Officer be learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.

/Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::10 ::

7. Assailing the action of the Ld. CIT( Assailing the action of the Ld. CIT(A), the Ld. DR first took us A), the Ld. DR first took us through the statement of Mr. Antony Francis Julian, Purchase Manager of through the statement of Mr. Antony Francis Julian, Purchase Manager of through the statement of Mr. Antony Francis Julian, Purchase Manager of M/s.Saravana Stores (Jewelers) from whose possession the said pocket M/s.Saravana Stores (Jewelers) from whose possession the said pocket M/s.Saravana Stores (Jewelers) from whose possession the said pocket- book was found. He showed us that, he had admitted in his statement book was found. He showed us that, he had admitted in his statement book was found. He showed us that, he had admitted in his statement that the said dairy was given to him by Shri R. Sabapathy, Managing that the said dairy was given to him by Shri R. Sabapathy, Managing that the said dairy was given to him by Shri R. Sabapathy, Managing Director of M/s.Saravana Stores (Textiles) for recording the loan Director of M/s.Saravana Stores (Textiles) for recording the loan Director of M/s.Saravana Stores (Textiles) for recording the loan transactions with M/s.Swarna transactions with M/s.Swarna Shilipi. Then, taking us Shilipi. Then, taking us through the statement of Shri R. Sabapathy, he pointed out that, when confronted statement of Shri R. Sabapathy, he pointed out that, when confronted statement of Shri R. Sabapathy, he pointed out that, when confronted with the contents of pocket book and statement of Shri Julian, Shri R. with the contents of pocket book and statement of Shri Julian, Shri R. with the contents of pocket book and statement of Shri Julian, Shri R.

Sabapathy had also admitted that the notings denoted the loan of Rs.25 Sabapathy had also admitted that the notings denoted the loan of Rs.25 Sabapathy had also admitted that the notings denoted the loan of Rs.25 crores obtained by him from M/s. crores obtained by him from M/s.Swarna Shilipi, which he had stated to Shilipi, which he had stated to have utilized to pay Rs.20 crores to the assessee for purchase of land at have utilized to pay Rs.20 crores to the assessee for purchase of land at have utilized to pay Rs.20 crores to the assessee for purchase of land at Madurai and Rs. 5 crores to Shri R. Sabapathy for purchase of land at Madurai and Rs. 5 crores to Shri R. Sabapathy for purchase of land at Madurai and Rs. 5 crores to Shri R. Sabapathy for purchase of land at Perambur. The Ld. DR argued that, it was a fact that Shri R. Sabapathy Perambur. The Ld. DR argued that, it was a fact that Shri R. Sabapathy Perambur. The Ld. DR argued that, it was a fact that Shri R. Sabapathy had indeed acquired lands from these persons including the assessee and d indeed acquired lands from these persons including the assessee and d indeed acquired lands from these persons including the assessee and that, the dates of acquisition of land were co that, the dates of acquisition of land were co-relatable to the dates relatable to the dates mentioned in the pocket book. It was therefore the Ld. DR’s case that, mentioned in the pocket book. It was therefore the Ld. DR’s case that, mentioned in the pocket book. It was therefore the Ld. DR’s case that, though there was no mention of any name or na though there was no mention of any name or nature of transaction in the ture of transaction in the pocket book, but due to the co pocket book, but due to the co-relation of dates, read along with the relation of dates, read along with the original statement of Shri R. Sabapathy, and by applying the test of original statement of Shri R. Sabapathy, and by applying the test of original statement of Shri R. Sabapathy, and by applying the test of human probabilities, the AO had rightly inferred that the impugned sum human probabilities, the AO had rightly inferred that the impugned sum human probabilities, the AO had rightly inferred that the impugned sum of Rs.20 crores had been received by the assessee over and above the been received by the assessee over and above the been received by the assessee over and above the /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy sale consideration of Rs.50 crores mentioned in the sale agreement and sale consideration of Rs.50 crores mentioned in the sale agreement and sale consideration of Rs.50 crores mentioned in the sale agreement and hence, which had been rightly assessed to tax in the hands of the hence, which had been rightly assessed to tax in the hands of the hence, which had been rightly assessed to tax in the hands of the assessee by way of capital gains. assessee by way of capital gains.

this page. He also showed us that, this page. He also showed us that, there was no mention of any names on there was no mention of any names on this Page but only few numbers, leave alone the name of the assessee this Page but only few numbers, leave alone the name of the assessee this Page but only few numbers, leave alone the name of the assessee and therefore the Ld. AR wondered as to how was the AO able to use and therefore the Ld. AR wondered as to how was the AO able to use and therefore the Ld. AR wondered as to how was the AO able to use these dumb notings and link it to the assessee by merely relying on few these dumb notings and link it to the assessee by merely relying on few these dumb notings and link it to the assessee by merely relying on few numbers like 25 +1, 24+1, etc. mentioned therein. The Ld. AR thus e 25 +1, 24+1, etc. mentioned therein. The Ld. AR thus e 25 +1, 24+1, etc. mentioned therein. The Ld. AR thus submitted that, this piece of paper on a stand submitted that, this piece of paper on a stand-alone basis was of no alone basis was of no relevance qua the assessee. relevance qua the assessee.

than 2.28 times of the guideline value and therefore it was also not a case than 2.28 times of the guideline value and therefore it was also not a case than 2.28 times of the guideline value and therefore it was also not a case of understatement of sale consideration. According to him of understatement of sale consideration. According to him of understatement of sale consideration. According to him therefore, the statement given by Shri Shri R. Sabapathy that, out of the total value of Rs.50 R. Sabapathy that, out of the total value of Rs.50 crores, he had paid Rs.20 crores in cash stood negated by the fact that crores, he had paid Rs.20 crores in cash stood negated by the fact that crores, he had paid Rs.20 crores in cash stood negated by the fact that the entire sale consideration was actually paid in demand drafts. He the entire sale consideration was actually paid in demand drafts. He the entire sale consideration was actually paid in demand drafts. He further submitted that R further submitted that R. Sabapathy had also later on retracted his . Sabapathy had also later on retracted his statement on 21.03.2022 and thereafter he had also furnished a sworn statement on 21.03.2022 and thereafter he had also furnished a sworn statement on 21.03.2022 and thereafter he had also furnished a sworn affidavit dated 05.12.2022. The Ld. AR contended that, the AO was not affidavit dated 05.12.2022. The Ld. AR contended that, the AO was not affidavit dated 05.12.2022. The Ld. AR contended that, the AO was not able to disprove his retraction and therefore according to him, the AO’s able to disprove his retraction and therefore according to him, the AO’s able to disprove his retraction and therefore according to him, the AO’s action of relying on Shri Shri R. Sabapathy’s original statement, which had R. Sabapathy’s original statement, which had since been retracted, was unjustified. since been retracted, was unjustified.

Sabapathy. The Ld. AR brought to our notice that, this identical issue had Sabapathy. The Ld. AR brought to our notice that, this identical issue had Sabapathy. The Ld. AR brought to our notice that, this identical issue had travelled to this Tribunal and that, the Tribunal in their order passed in travelled to this Tribunal and that, the Tribunal in their order passed in travelled to this Tribunal and that, the Tribunal in their order passed in the case of Shri Rajagopal Saravanan in deleted of Shri Rajagopal Saravanan in deleted of Shri Rajagopal Saravanan in ITA No. 119/Chny/2024 deleted /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy the impugned addition of Rs.5 Crs by holding the contents of the pocket the impugned addition of Rs.5 Crs by holding the contents of the pocket the impugned addition of Rs.5 Crs by holding the contents of the pocket book as well as the statement of Shri R Sabapathy to be unreliable. The book as well as the statement of Shri R Sabapathy to be unreliable. The book as well as the statement of Shri R Sabapathy to be unreliable. The Ld. AR accordingly submitted that, the ratio laid Ld. AR accordingly submitted that, the ratio laid down in the said decision down in the said decision would apply with equal force to the assessee’s case as well and that the would apply with equal force to the assessee’s case as well and that the would apply with equal force to the assessee’s case as well and that the Ld. CIT(A) had rightly relied on the said decision of the Tribunal in Shri Ld. CIT(A) had rightly relied on the said decision of the Tribunal in Shri Ld. CIT(A) had rightly relied on the said decision of the Tribunal in Shri Rajagopal Saravanan’s case (supra) to delete the impugned addition. Rajagopal Saravanan’s case (supra) to delete the impugned addition. Rajagopal Saravanan’s case (supra) to delete the impugned addition.

Therefore, the Ld. AR does e Ld. AR doesn’t want us to interfere with the action of the t want us to interfere with the action of the Ld.CIT(A).

Thereafter, the contents of the said diary, more particularly Page No. 61, Thereafter, the contents of the said diary, more particularly Page No. 61, Thereafter, the contents of the said diary, more particularly Page No. 61, was confronted to Shri R. Sabapathy, who in his sta was confronted to Shri R. Sabapathy, who in his sta was confronted to Shri R. Sabapathy, who in his statement dated 04.12.2021 is noted to have stated as 04.12.2021 is noted to have stated as under: -

“Q.56 Please give the deals of the immovable properties for which Please give the deals of the immovable properties for which Please give the deals of the immovable properties for which this cash loan of Rs.25 Crs. was paid by you. Please also furnish the this cash loan of Rs.25 Crs. was paid by you. Please also furnish the this cash loan of Rs.25 Crs. was paid by you. Please also furnish the /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy persons to whom the payments were made by you out of this lo persons to whom the payments were made by you out of this lo persons to whom the payments were made by you out of this love of Rs.25 Crores

A As already stated by me in my sworn statement, properties at As already stated by me in my sworn statement, properties at As already stated by me in my sworn statement, properties at Perambur and Madurai were purchased by me during December 2020 Perambur and Madurai were purchased by me during December 2020 Perambur and Madurai were purchased by me during December 2020 and January 2021. The property at Perambur was purchased for my and January 2021. The property at Perambur was purchased for my and January 2021. The property at Perambur was purchased for my sister Smt. Selvalkumari for a consideration of sister Smt. Selvalkumari for a consideration of Rs.21 Crores out of which Rs.21 Crores out of which Rs. 16 Crowes was the Registered Value which was met out of my Rs. 16 Crowes was the Registered Value which was met out of my Rs. 16 Crowes was the Registered Value which was met out of my father's Rental Income and Rs.5 Crores was paid by me is cash to Shri father's Rental Income and Rs.5 Crores was paid by me is cash to Shri father's Rental Income and Rs.5 Crores was paid by me is cash to Shri R. Saravanan of Saravanabhavan Hotels group Similarly, the property at R. Saravanan of Saravanabhavan Hotels group Similarly, the property at R. Saravanan of Saravanabhavan Hotels group Similarly, the property at Madurai was purchased for Madurai was purchased for a consideration of Rs.50 Crores (appear) of a consideration of Rs.50 Crores (appear) of which Rs.30 Crores was paid by me in cash. which Rs.30 Crores was paid by me in cash.”

Page No. 61 of the pocket diary ID marked ANN/SK/SSSLLP/B&D/S of the pocket diary ID marked ANN/SK/SSSLLP/B&D/S of the pocket diary ID marked ANN/SK/SSSLLP/B&D/S-2 and the statement given by Shri given by Shri R Sabapathy could establish any link could establish any link with the assessee and whether it whether it supported the case of the Assessing the case of the Assessing Officer that the notings therein represent represent on-monies of the assessee.

/Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::17 ::

locations viz Madurai or Perambur or the agreed sale consideration or Madurai or Perambur or the agreed sale consideration or Madurai or Perambur or the agreed sale consideration or even the mention of word ‘cash’ on th even the mention of word ‘cash’ on this Page. The assessee has therefore is Page. The assessee has therefore contended that, the notings on this page at 3rd party premises contended that, the notings on this page party premises are dumb and incomprehensible and therefore, can’t be used against him for and therefore, can’t be used against him for drawing adverse view. After drawing adverse view. After considering the facts of this case, which we considering the facts of this case, which we will discuss in detail (infra), we are of the view that cuss in detail (infra), we are of the view that no prudent person no prudent person can infer any logical meaning out of these notings can infer any logical meaning out of these notings unless the person who unless the person who authored/scribbled it, is able to assert , is able to assert with corroborative material, the with corroborative material, the transaction recorded therein transaction recorded therein. Hence, the contents of this Page ntents of this Page appear to lack any evidentiary value, lack any evidentiary value, particularly qua the assessee because it has particularly qua the assessee because it has to be kept in mind that, this Page was found and seized from the premises be kept in mind that, this Page was found and seized from the premises be kept in mind that, this Page was found and seized from the premises of Shri R. Sabapathy and therefore ordinarily the presumption under of Shri R. Sabapathy and therefore ordinarily the presumption under of Shri R. Sabapathy and therefore ordinarily the presumption under Section 292C is that, the contents of the Page belong to the searched C is that, the contents of the Page belong to the searched C is that, the contents of the Page belong to the searched person. Hence, for the AO to rebut this presumption and infer these person. Hence, for the AO to rebut this presumption and infer these person. Hence, for the AO to rebut this presumption and infer these notings to pertain or relate to the assessee, it is necessary to bring on notings to pertain or relate to the assessee, it is necessary to bring on notings to pertain or relate to the assessee, it is necessary to bring on record some tangible material or corroborative evidence record some tangible material or corroborative evidence record some tangible material or corroborative evidence to link the notings on this Page with the assessee, which we find the notings on this Page with the assessee, which we find the notings on this Page with the assessee, which we find the AO has miserably failed to do. In absence of the same, the assessee cannot be . In absence of the same, the assessee cannot be . In absence of the same, the assessee cannot be expected to prove a negative viz., explain the contents of such dumb expected to prove a negative viz., explain the contents of such dumb expected to prove a negative viz., explain the contents of such dumb notings found in a page from the premi notings found in a page from the premises of third party, more ses of third party, more particularly when there is no mention of his name or any of his business particularly when there is no mention of his name or any of his business particularly when there is no mention of his name or any of his business transaction on the said Page. transaction on the said Page.

/Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::19 ::

wherein it was held that held that "it is, therefore, obvious that it is not open to the "it is, therefore, obvious that it is not open to the income tax authorities to deduce the natur income tax authorities to deduce the nature of the document from the e of the document from the purported intention, by going behind the document or to consider the purported intention, by going behind the document or to consider the purported intention, by going behind the document or to consider the /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy substance of the matter or to accept it in part and reject it in part or to substance of the matter or to accept it in part and reject it in part or to substance of the matter or to accept it in part and reject it in part or to rewrite the document, merely to suite purpose of revenue rewrite the document, merely to suite purpose of revenue”. .

Sabapathy, irrespective of , irrespective of his subsequent retraction, had any evidentiary his subsequent retraction, had any evidentiary value in the matters of the assessee or not. Ordinarily, the law states value in the matters of the assessee or not. Ordinarily, the law states value in the matters of the assessee or not. Ordinarily, the law states that, a statement recorded u/s 132(4) of the Act can be used as that, a statement recorded u/s 132(4) of the Act can be used as that, a statement recorded u/s 132(4) of the Act can be used as evidence in the proceedings against the searched person. This rationale in the proceedings against the searched person. This rationale in the proceedings against the searched person. This rationale emanates from Section 132(4A) of the Act which states that any material found from Section 132(4A) of the Act which states that any material found from Section 132(4A) of the Act which states that any material found from the searched premises and the contents therein shall be presumed from the searched premises and the contents therein shall be presumed from the searched premises and the contents therein shall be presumed to be belonging to or pertaining to the searched person. Accordingly, the to be belonging to or pertaining to the searched person. Accordingly, the to be belonging to or pertaining to the searched person. Accordingly, the contents of material seized from t contents of material seized from the premises of searched person is he premises of searched person is presumed to be within the exclusive knowledge of the searched person presumed to be within the exclusive knowledge of the searched person presumed to be within the exclusive knowledge of the searched person and therefore any statement given by a searched person u/s 132(4) of and therefore any statement given by a searched person u/s 132(4) of and therefore any statement given by a searched person u/s 132(4) of the Act explaining the contents of the seized the Act explaining the contents of the seized material which has a bearing material which has a bearing on determination of his total income, can be used against him ination of his total income, can be used against him ination of his total income, can be used against him provided it /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy being given voluntarily and not v being given voluntarily and not vitiated by duress, coercion etc itiated by duress, coercion etc. However, if in the statement recorded u/s 132(4) of the Act, the searched person if in the statement recorded u/s 132(4) of the Act, the searched person if in the statement recorded u/s 132(4) of the Act, the searched person accuses a third party of any wrong doing, th accuses a third party of any wrong doing, then the aforesaid en the aforesaid legal principle can’t be applied, ied, unless the maker of the statement the maker of the statement is able to substantiate his averment against the third party with tangible and substantiate his averment against the third party with tangible and substantiate his averment against the third party with tangible and corroborative material. In absence of the same, corroborative material. In absence of the same, it would be unsafe to it would be unsafe to make addition or draw draw adverse inference against a third party solely inference against a third party solely based on the statement given by the searched person u/s 132(4) of the based on the statement given by the searched person u/s 132(4) of the based on the statement given by the searched person u/s 132(4) of the Act. Reason being, if the requirement placed upon the maker of the Act. Reason being, if the requirement placed upon the maker of the Act. Reason being, if the requirement placed upon the maker of the statement to substantiate his statement against a third party with statement to substantiate his statement against a third party with statement to substantiate his statement against a third party with tangible material/evidence is dispensed away with, then any searched evidence is dispensed away with, then any searched evidence is dispensed away with, then any searched person can unscrupulously, incriminate any third party at his own sweet person can unscrupulously, incriminate any third party at his own sweet person can unscrupulously, incriminate any third party at his own sweet will, for no fault of the latter. According to us therefore, any will, for no fault of the latter. According to us therefore, any will, for no fault of the latter. According to us therefore, any un-tested statement given by a searched person against statement given by a searched person against any third party any third party, without undergoing cross-examination examination should not be used as evidence against be used as evidence against such third party unless such statement is backed by any tangible material such third party unless such statement is backed by any tangible material such third party unless such statement is backed by any tangible material or corroborative evidence found in the course of search. evidence found in the course of search.

18. In light of the above, we n In light of the above, we now advert back to examining the ow advert back to examining the statement of Shri R. Sabapathy R. Sabapathy, which has already been extracted earlier , which has already been extracted earlier above. It is noted by us that, Shri above. It is noted by us that, Shri R. Sabapathy had not specifically had not specifically explained in his statement, the several numbers, additions and explained in his statement, the several numbers, additions and explained in his statement, the several numbers, additions and /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::22 ::

subtractions found noted on this Page and as to how did the figure of noted on this Page and as to how did the figure of noted on this Page and as to how did the figure of 25.00 ended with figure 18 with figure 18. Rather, he is noted to have given a sweeping . Rather, he is noted to have given a sweeping explanation that, the noting of Rs.25 crores represented loan which he explanation that, the noting of Rs.25 crores represented loan which he explanation that, the noting of Rs.25 crores represented loan which he had obtained from Mr. Rakesh of M/s Swarna Shilpi and then straightaway had obtained from Mr. Rakesh of M/s Swarna Shilpi and then straightaway had obtained from Mr. Rakesh of M/s Swarna Shilpi and then straightaway averred that Rs.20 crores was paid in cash to the assessee towards averred that Rs.20 crores was paid in cash to the assessee towards averred that Rs.20 crores was paid in cash to the assessee towards the agreed cost price of Rs.50 crores for purchase of land at Madurai and the agreed cost price of Rs.50 crores for purchase of land at Madurai and the agreed cost price of Rs.50 crores for purchase of land at Madurai and the balance Rs. 5 crores was paid to Shri balance Rs. 5 crores was paid to Shri R Saravanan towards agreed cost towards agreed cost price of Rs.21 crores for purchase of land at Perambur. This statement price of Rs.21 crores for purchase of land at Perambur. This statement price of Rs.21 crores for purchase of land at Perambur. This statement given by Shri R. Sabapathy R. Sabapathy directly incriminating the assessee may give incriminating the assessee may give rise to a suspicion against the assessee, but as noted by us above, such rise to a suspicion against the assessee, but as noted by us above, such rise to a suspicion against the assessee, but as noted by us above, such statement is required to be supported by some c statement is required to be supported by some corroborating orroborating evidence seized in the course of search seized in the course of search, which ought to be the sale which ought to be the sale transaction/sale-deed at Madurai, contents of which disproves the on ed at Madurai, contents of which disproves the on ed at Madurai, contents of which disproves the on- money allegation, which will discuss infra money allegation, which will discuss infra. Having regard to our above aving regard to our above analysis of the contents of the Page No. 61 of the pocket diary ID marked analysis of the contents of the Page No. 61 of the pocket diary ID marked analysis of the contents of the Page No. 61 of the pocket diary ID marked ANN/SK/SSSLLP/B&D/S ANN/SK/SSSLLP/B&D/S-2 we find that, there was no cogent or re find that, there was no cogent or reliable material contained therein which would in any manner suggest any direct material contained therein which would in any manner suggest any direct material contained therein which would in any manner suggest any direct or tacit linkage with the assessee. Hence, in our considered view, such or tacit linkage with the assessee. Hence, in our considered view, such or tacit linkage with the assessee. Hence, in our considered view, such bald statement given by Shri bald statement given by Shri R. Sabapathy dated 04.12.2021 cannot be dated 04.12.2021 cannot be used as reliable evidence reliable evidence to draw any adverse inference in the hands of y adverse inference in the hands of the assessee.

/Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::23 ::

19. Be that as it may, the Ld. AR has also rightly pointed out to us that, Be that as it may, the Ld. AR has also rightly pointed out to us that, Be that as it may, the Ld. AR has also rightly pointed out to us that, the original statement of Shri the original statement of Shri R. Sabapathy doesn’t even prime facie co t even prime facie co- relate with the notings found on the above extracted Page. relate with the notings found on the above extracted Page. relate with the notings found on the above extracted Page. According to him, if the sums of Rs.20 crores and Rs. 5 crores had been paid by him, him, if the sums of Rs.20 crores and Rs. 5 crores had been paid by him, him, if the sums of Rs.20 crores and Rs. 5 crores had been paid by him, then both these figures ought to have been subtracted from Rs. 25 crores then both these figures ought to have been subtracted from Rs. 25 crores then both these figures ought to have been subtracted from Rs. 25 crores and that the page should have ended with figure of NIL or ‘0’, but there and that the page should have ended with figure of NIL or ‘0’, but there and that the page should have ended with figure of NIL or ‘0’, but there were only small numbers were only small numbers added or subtracted and that the page ended added or subtracted and that the page ended with number ‘18’ and thus, he argued that, it clearly did with number ‘18’ and thus, he argued that, it clearly didn’ n’t suggest that the purported number of ‘25’, which according to Shri the purported number of ‘25’, which according to Shri the purported number of ‘25’, which according to Shri R. Sabapathy represented loan taken, had been used up for making payments for represented loan taken, had been used up for making payments for represented loan taken, had been used up for making payments for purchase of land. It was further pointed out to us that, though there is a se of land. It was further pointed out to us that, though there is a se of land. It was further pointed out to us that, though there is a mention of alphabet ‘R’ which may denote Mr. Rakesh as mentioned by mention of alphabet ‘R’ which may denote Mr. Rakesh as mentioned by mention of alphabet ‘R’ which may denote Mr. Rakesh as mentioned by Shri R. Sabapathy in his statement, but there is no abbreviation of the in his statement, but there is no abbreviation of the in his statement, but there is no abbreviation of the assessee or Shri R Sarvanan mentioned on this P assessee or Shri R Sarvanan mentioned on this Page and rather ‘SLP’ is age and rather ‘SLP’ is noted on the top part corresponding to the noting of ‘25’, which as rightly noted on the top part corresponding to the noting of ‘25’, which as rightly noted on the top part corresponding to the noting of ‘25’, which as rightly submitted by the Ld. AR, does not suggest any linkage to the assessee or submitted by the Ld. AR, does not suggest any linkage to the assessee or submitted by the Ld. AR, does not suggest any linkage to the assessee or Shri R Sarvanan. Having taken note of these apparent defects pointed out Shri R Sarvanan. Having taken note of these apparent defects pointed out Shri R Sarvanan. Having taken note of these apparent defects pointed out by the Ld. AR in the statement of Shri AR in the statement of Shri R. Sabapathy, in light of the , in light of the notings notings notings found found found on on on Page Page Page No. No. No. 61 61 61 of of of document document document ID ID ID marked marked marked ANN/SK/SSSLLP/B&D/S ANN/SK/SSSLLP/B&D/S-2, we find merit in his plea that the original , we find merit in his plea that the original statement of Shri R. Sabapathy R. Sabapathy dated 04.12.2021 was otherwise also not dated 04.12.2021 was otherwise also not reliable in as much as it did in as much as it didn’t reflect the true and correct facts. t reflect the true and correct facts.

/Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::24 ::

Sabapathy’s averment in his answer to Q No. 59 wherein he had ’s averment in his answer to Q No. 59 wherein he had ’s averment in his answer to Q No. 59 wherein he had mentioned that, the total cost price of the land purchased by him at mentioned that, the total cost price of the land purchased by him at mentioned that, the total cost price of the land purchased by him at Madurai from the assessee was Rs.50 crores, towards which he had Madurai from the assessee was Rs.50 crores, towards which he had Madurai from the assessee was Rs.50 crores, towards which he had allegedly paid Rs.20 crores in cash. Ta allegedly paid Rs.20 crores in cash. Taking us through the actual sale king us through the actual sale agreement which had been executed between Shri agreement which had been executed between Shri R. Sabapathy R. Sabapathy and the assessee (along with other co assessee (along with other co-owners), it was pointed out to us, that the owners), it was pointed out to us, that the actual sale consideration agreed was Rs.49.70 crores, which after taking actual sale consideration agreed was Rs.49.70 crores, which after taking actual sale consideration agreed was Rs.49.70 crores, which after taking into account the stamp duty & registration charges went up to Rs.55 unt the stamp duty & registration charges went up to Rs.55 unt the stamp duty & registration charges went up to Rs.55 crores. We note that this sale consideration found mentioned in the sale crores. We note that this sale consideration found mentioned in the sale crores. We note that this sale consideration found mentioned in the sale document, correlated with the figure of Rs.50 crores mentioned in Shri document, correlated with the figure of Rs.50 crores mentioned in Shri document, correlated with the figure of Rs.50 crores mentioned in Shri R.

Sabapathy’s statement. We not ’s statement. We note that, the agreed sale consideration of that, the agreed sale consideration of Rs.50 crores was fully paid by Shri R Sabapathy through demand drafts Rs.50 crores was fully paid by Shri R Sabapathy through demand drafts Rs.50 crores was fully paid by Shri R Sabapathy through demand drafts and not in cash. The entire sale consideration was also accounted for by and not in cash. The entire sale consideration was also accounted for by and not in cash. The entire sale consideration was also accounted for by the assessee & other co other co-owners and also offered to tax. More importantly, owners and also offered to tax. More importantly, it is noted that this agreed sale consideration was more than 2.28 times it is noted that this agreed sale consideration was more than 2.28 times it is noted that this agreed sale consideration was more than 2.28 times of the valuation ascertained by the stamp duty authorities and therefore of the valuation ascertained by the stamp duty authorities and therefore of the valuation ascertained by the stamp duty authorities and therefore we find sufficient merit in the assessee’s case that, one could not even we find sufficient merit in the assessee’s case that, one could not even we find sufficient merit in the assessee’s case that, one could not even allege that, the agreed consideratio allege that, the agreed consideration of Rs.50 crores was under n of Rs.50 crores was under-stated.

Having regard to these facts, if the statement of Shri Having regard to these facts, if the statement of Shri R. Sabapathy R. Sabapathy is /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy considered at its face value, then there are only two possibilities viz., (a) considered at its face value, then there are only two possibilities viz., (a) considered at its face value, then there are only two possibilities viz., (a) either the selective portion wherein he stated the figure of total cost either the selective portion wherein he stated the figure of total cost either the selective portion wherein he stated the figure of total cost price of land acquired at Madurai was Rs.50 crores, is incorrect or (b) that he of land acquired at Madurai was Rs.50 crores, is incorrect or (b) that he of land acquired at Madurai was Rs.50 crores, is incorrect or (b) that he had erroneously averred a mistaken fact that, he had paid consideration had erroneously averred a mistaken fact that, he had paid consideration had erroneously averred a mistaken fact that, he had paid consideration to the extent of Rs.20 crores in cash. Overall, having regard to the facts to the extent of Rs.20 crores in cash. Overall, having regard to the facts to the extent of Rs.20 crores in cash. Overall, having regard to the facts discussed in the foregoing, discussed in the foregoing, and applying the test of human conduct and and applying the test of human conduct and human probabilities, according to us, the more plausible inference is that, human probabilities, according to us, the more plausible inference is that, human probabilities, according to us, the more plausible inference is that, Shri R. Sabapathy had factually erred in stating that, he had paid had factually erred in stating that, he had paid had factually erred in stating that, he had paid consideration of Rs.20 crores in cash out of the agreed consideration consideration of Rs.20 crores in cash out of the agreed consideration consideration of Rs.20 crores in cash out of the agreed consideration of Rs.50 crores (particularly since the total cost price of Rs.50 crores has particularly since the total cost price of Rs.50 crores has particularly since the total cost price of Rs.50 crores has been found to be contemporaneously correct contemporaneously correct, entire of which is found to , entire of which is found to be discharged by way of demand drafts be discharged by way of demand drafts).

Sabapathy had also filed an Affidavit dated 05.12.2022 filed an Affidavit dated 05.12.2022 filed an Affidavit dated 05.12.2022 categorically /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy retracting his statement retracting his statement that he had paid Rs.20 Crs. to the assessee, paid Rs.20 Crs. to the assessee, and the contents of his affidavit are the contents of his affidavit are noted to be as under:

Affidavit

I, R. SABAPATHY, Son of Thiru.B. Rajarathinam, residing at No. 10/15 I, R. SABAPATHY, Son of Thiru.B. Rajarathinam, residing at No. 10/15 I, R. SABAPATHY, Son of Thiru.B. Rajarathinam, residing at No. 10/15 Lakshmanan Street, T Nagar, Chennai Lakshmanan Street, T Nagar, Chennai -600017, hereby declare and affirm 600017, hereby declare and affirm as under:

I am the Managing Director of M/s Rare 98 Properties India Pvt. Ltd, I am the Managing Director of M/s Rare 98 Properties India Pvt. Ltd, I am the Managing Director of M/s Rare 98 Properties India Pvt. Ltd, having its registered office at No. 133, G.S.T.Road, Chrompet, Chennai having its registered office at No. 133, G.S.T.Road, Chrompet, Chennai having its registered office at No. 133, G.S.T.Road, Chrompet, Chennai -600044.

On 22-01-2021, the said company and my son have purchased vacant 2021, the said company and my son have purchased vacant 2021, the said company and my son have purchased vacant land measuring 243 cents and 6 c land measuring 243 cents and 6 cents, respectively, situated at ents, respectively, situated at Uthangudi Village, Madurai East Taluk, Madurai from K.Murugesan, Mr. Uthangudi Village, Madurai East Taluk, Madurai from K.Murugesan, Mr. Uthangudi Village, Madurai East Taluk, Madurai from K.Murugesan, Mr. P R Palanichamy and his two sons, P Senthil Kumar and P Suresh P R Palanichamy and his two sons, P Senthil Kumar and P Suresh P R Palanichamy and his two sons, P Senthil Kumar and P Suresh Kumar, residing at No.379, Sarveshwarar Temple Street, Anna Nagar, Kumar, residing at No.379, Sarveshwarar Temple Street, Anna Nagar, Kumar, residing at No.379, Sarveshwarar Temple Street, Anna Nagar, Madural through 4 documen Madural through 4 documents, as tabulated below:

S.No Doc. No. Purchaser Purchaser Survey No. Extent in Consideration Consideration cents (Rs.) (Rs.) 1 382/2021 Rare Rare SS SS Old No: 170/24 50 9,98,00,000 Properties Properties New No. India P. Ltd India P. Ltd 170/242 (Part) 2 381/2021 Rare Rare SS SS Old No: 170/2A 50 9,98,00,000 Properties Properties New No. India P. Ltd India P. Ltd 170/342 (Part) 3 379/2021 Rare Rare SS SS 170/3 (Part) 28.5 5,68,86,000 Properties Properties 28.5 5,68,85,000 India P. Ltd India P. Ltd 28.5 5,68,86,000 57.5 11,47,70,000 4 380/2031 Roshan Roshan Sree Sree 170/3(Part) 6 1,19,76,000 Rathnam Rathnam TOTAL TOTAL 249 49,70,04,000 iii. Besides the above, we have incurred stamp duty and registration charges of iii. Besides the above, we have incurred stamp duty and registration charges of iii. Besides the above, we have incurred stamp duty and registration charges of Rs.5,46,78,440/- The above purchases were made at a total cost of Rs. The above purchases were made at a total cost of Rs. The above purchases were made at a total cost of Rs. 55,16,82,440/- iv. The entire sale consideration was paid through Demand Drafts. I have iv. The entire sale consideration was paid through Demand Drafts. I have iv. The entire sale consideration was paid through Demand Drafts. I have not paid any consideration over and above what is mentioned in the registered paid any consideration over and above what is mentioned in the registered paid any consideration over and above what is mentioned in the registered sale deeds. v. During the search proceedings & while recording my statement on 03/04 v. During the search proceedings & while recording my statement on 03/04 v. During the search proceedings & while recording my statement on 03/04- 12-2021, I was under tremendous pressure and was not in a right frame of 2021, I was under tremendous pressure and was not in a right frame of 2021, I was under tremendous pressure and was not in a right frame of mind. Later I came to know that in the statement recorded I had stated that I to know that in the statement recorded I had stated that I to know that in the statement recorded I had stated that I have paid an amount of Rs.20 crores in cash towards purchase of Madurai have paid an amount of Rs.20 crores in cash towards purchase of Madurai have paid an amount of Rs.20 crores in cash towards purchase of Madurai property, which were not factually correct. property, which were not factually correct.

/Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::27 ::

We find that, though the subsequent retraction of Shri We find that, though the subsequent retraction of Shri R. Sabapathy R. Sabapathy was brought on record in the co brought on record in the course of assessment, but the AO did precious urse of assessment, but the AO did precious little to disprove the same or cross examine Shri little to disprove the same or cross examine Shri R. Sabapathy R. Sabapathy by summoning him. Rather he is found to have simply brushed the summoning him. Rather he is found to have simply brushed the summoning him. Rather he is found to have simply brushed the retractions surmising it to be an after retractions surmising it to be an after-thought. According to us, such thought. According to us, such approach of the AO was unjustified and therefore we are unable to e AO was unjustified and therefore we are unable to e AO was unjustified and therefore we are unable to countenance this argument of the Revenue objecting to the validity of the countenance this argument of the Revenue objecting to the validity of the countenance this argument of the Revenue objecting to the validity of the retraction furnished by Shri R Sabapathy. retraction furnished by Shri R Sabapathy.

24. Further, as noted above, the contents of the Page No.61 of Further, as noted above, the contents of the Page No.61 of Further, as noted above, the contents of the Page No.61 of document ID marked ANN/SK ANN/SK/SSSLLP/B&D/S-2 was dumb in nature and was dumb in nature and as such the contents of these loose notings could have only been possibly as such the contents of these loose notings could have only been possibly as such the contents of these loose notings could have only been possibly explained by the writer of these notings. The assessee clearly could not explained by the writer of these notings. The assessee clearly could not explained by the writer of these notings. The assessee clearly could not be expected to explain the same. Shri be expected to explain the same. Shri R. Sabapathy R. Sabapathy, at whose instructions these notings were purportedly made, had in his original ons these notings were purportedly made, had in his original ons these notings were purportedly made, had in his original statement, incriminated the assessee by stating that, the notings on this statement, incriminated the assessee by stating that, the notings on this statement, incriminated the assessee by stating that, the notings on this Page inter alia suggested that he had paid sum of Rs.20 crores to the suggested that he had paid sum of Rs.20 crores to the suggested that he had paid sum of Rs.20 crores to the assessee, although there was no mention of the figu assessee, although there was no mention of the figure ‘20’ or name of the re ‘20’ or name of the assessee on this Page. Later on however, in his retraction, Shri assessee on this Page. Later on however, in his retraction, Shri assessee on this Page. Later on however, in his retraction, Shri R.

/Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::29 ::

Sabapathy stated that, the original statement was given by him under stated that, the original statement was given by him under stated that, the original statement was given by him under pressure and wasn’t in the t in the his right frame of mind, and that these notings and that these notings related to his undisclosed sales wh losed sales which proceeds, he had parked with M/s he had parked with M/s Swarna Shilpi. According to us, on the given facts, the true nature of Swarna Shilpi. According to us, on the given facts, the true nature of Swarna Shilpi. According to us, on the given facts, the true nature of these bald notings could have only been known to Shri these bald notings could have only been known to Shri R. Sabapathy R. Sabapathy and thus when he himself had later on retracted his original statem thus when he himself had later on retracted his original statem thus when he himself had later on retracted his original statement and admitted the notings as his own undisclosed sales, then the assessee admitted the notings as his own undisclosed sales, then the assessee admitted the notings as his own undisclosed sales, then the assessee cannot be expected to further disprove his original statement, which as cannot be expected to further disprove his original statement, which as cannot be expected to further disprove his original statement, which as already noted above, was also found to be based on mistaken fact and already noted above, was also found to be based on mistaken fact and already noted above, was also found to be based on mistaken fact and hence was rebuttable.

25. In addition to the above, the Ld. AR pointed out to us that, the to the above, the Ld. AR pointed out to us that, the to the above, the Ld. AR pointed out to us that, the explanation given by the assessee in his retracted statement, is explanation given by the assessee in his retracted statement, is explanation given by the assessee in his retracted statement, is somewhat corroborated by the fact that, this pocket diary was found from somewhat corroborated by the fact that, this pocket diary was found from somewhat corroborated by the fact that, this pocket diary was found from the possession of the Purchases Manager who ordinarily would hav the possession of the Purchases Manager who ordinarily would hav the possession of the Purchases Manager who ordinarily would have been maintaining records of business transactions and not the personal maintaining records of business transactions and not the personal maintaining records of business transactions and not the personal transactions involving land deal of the Managing Director and therefore transactions involving land deal of the Managing Director and therefore transactions involving land deal of the Managing Director and therefore the notings could have related to undisclosed sales. He also referred to the notings could have related to undisclosed sales. He also referred to the notings could have related to undisclosed sales. He also referred to the stamp of Saravana Stores (Jewel) S Saravana Stores (Jewel) Super LLP on this Page, which on this Page, which according to him, suggested that, these notings may be relating to the according to him, suggested that, these notings may be relating to the according to him, suggested that, these notings may be relating to the business transactions of the said entity and not to the land deal between business transactions of the said entity and not to the land deal between business transactions of the said entity and not to the land deal between Shri R. Sabapathy and the assessee. and the assessee.

/Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::30 ::

The Tribunal noted that The Tribunal noted that, apart from the statement of the seller, the AO apart from the statement of the seller, the AO did not conduct any independent inquiry nor discharged the burden did not conduct any independent inquiry nor discharged the burden did not conduct any independent inquiry nor discharged the burden of proving that the actual consideration received by the assessee was proving that the actual consideration received by the assessee was proving that the actual consideration received by the assessee was Rs.34.85 lacs. It was further observed that there was no material brought It was further observed that there was no material brought It was further observed that there was no material brought on record which would suggest that the assessee had under on record which would suggest that the assessee had under on record which would suggest that the assessee had under-stated the purchase consideration. purchase consideration. On Revenue’s appeal, the High Court l, the High Court is noted to have concurred with the findings of the Tribunal concurred with the findings of the Tribunal by observing as under : by observing as under :-

“5. We heard counsel. The seller had initially given conflicting statement “5. We heard counsel. The seller had initially given conflicting statement “5. We heard counsel. The seller had initially given conflicting statement about the sale consideration he received. When confronted by the about the sale consideration he received. When confronted by the about the sale consideration he received. When confronted by the Revenue on 11-12 12-1998, the seller admitted that he had deposited Rs. 1998, the seller admitted that he had deposited Rs. 4.10 lakhs received through draft in the bank a 4.10 lakhs received through draft in the bank and the rest amount was nd the rest amount was held by him in cash. The Revenue authorities could well have seized the held by him in cash. The Revenue authorities could well have seized the held by him in cash. The Revenue authorities could well have seized the cash invoking section 132 of the Act, but for obvious reasons this was cash invoking section 132 of the Act, but for obvious reasons this was cash invoking section 132 of the Act, but for obvious reasons this was not done. Had the cash been seized from the seller, the matter would not done. Had the cash been seized from the seller, the matter would not done. Had the cash been seized from the seller, the matter would have been concluded i have been concluded in favour of the Revenue. In a subsequent n favour of the Revenue. In a subsequent submission, the seller claimed on 20 submission, the seller claimed on 20-11-2000 that he had paid Rs. 15 2000 that he had paid Rs. 15 lakhs out of the sale proceeds to settle old family debts, Rs. 4.80 lakhs lakhs out of the sale proceeds to settle old family debts, Rs. 4.80 lakhs lakhs out of the sale proceeds to settle old family debts, Rs. 4.80 lakhs for construction of house in Pullkasi Village and the balance was for construction of house in Pullkasi Village and the balance was for construction of house in Pullkasi Village and the balance was advanced to parties for keeping Rs. 2 lakhs and Rs. 3 lakhs in the house ed to parties for keeping Rs. 2 lakhs and Rs. 3 lakhs in the house ed to parties for keeping Rs. 2 lakhs and Rs. 3 lakhs in the house for family expenses and educational expenses of his daughter, for family expenses and educational expenses of his daughter, for family expenses and educational expenses of his daughter, respectively. It was also noted that the revised return was filed by the respectively. It was also noted that the revised return was filed by the respectively. It was also noted that the revised return was filed by the seller wherein he had shown approximately Rs. 2.5 lakh seller wherein he had shown approximately Rs. 2.5 lakhs being available s being available with him in cash. Even after giving the retraction and admitting that he with him in cash. Even after giving the retraction and admitting that he with him in cash. Even after giving the retraction and admitting that he had sold the property for a sale consideration of Rs. 4.10 lakhs, the had sold the property for a sale consideration of Rs. 4.10 lakhs, the had sold the property for a sale consideration of Rs. 4.10 lakhs, the seller filed his income seller filed his income-tax return on 28-1-2000, wherein he did not 2000, wherein he did not admit the cash on money con admit the cash on money consideration for the sale transaction. sideration for the sale transaction. Subsequently he revised the income Subsequently he revised the income-tax return wherein he admitted the tax return wherein he admitted the sale consideration and showing Rs. 4.80 lakhs out of the above as sale consideration and showing Rs. 4.80 lakhs out of the above as sale consideration and showing Rs. 4.80 lakhs out of the above as utilised for construction of residential house property and consequently utilised for construction of residential house property and consequently utilised for construction of residential house property and consequently claiming exemption under section 54, the seller filed the computation of xemption under section 54, the seller filed the computation of xemption under section 54, the seller filed the computation of /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy income paying Rs. 1,83,576 as tax, which was quite evident from the income paying Rs. 1,83,576 as tax, which was quite evident from the income paying Rs. 1,83,576 as tax, which was quite evident from the conflicting statements given by the seller and the conflicting income conflicting statements given by the seller and the conflicting income conflicting statements given by the seller and the conflicting income-tax returns filed by him that his action of admitting s returns filed by him that his action of admitting sale consideration and ale consideration and paying tax was nothing but an obvious effort to save from further paying tax was nothing but an obvious effort to save from further paying tax was nothing but an obvious effort to save from further harassment from the Revenue and escape from the exigibility of tax on harassment from the Revenue and escape from the exigibility of tax on harassment from the Revenue and escape from the exigibility of tax on undisclosed income of the cash consideration under section 158BD of undisclosed income of the cash consideration under section 158BD of undisclosed income of the cash consideration under section 158BD of the Act, which in magnitude wo the Act, which in magnitude would far exceed the tax paid by him. The uld far exceed the tax paid by him. The burden of proving actual consideration in such transaction was that of burden of proving actual consideration in such transaction was that of burden of proving actual consideration in such transaction was that of the Revenue…

Financers (P) Ltd Vs Dy CIT (17 SOT 5) Financers (P) Ltd Vs Dy CIT (17 SOT 5). In the decided cas . In the decided case, search action was conducted at business premises of assessee and also at conducted at business premises of assessee and also at conducted at business premises of assessee and also at premises of a known business associate, ‘KM’. From the premises of ‘KM’ premises of a known business associate, ‘KM’. From the premises of ‘KM’ premises of a known business associate, ‘KM’. From the premises of ‘KM’, an unsigned MoU between the assessee and five others on one hand and an unsigned MoU between the assessee and five others on one hand and an unsigned MoU between the assessee and five others on one hand and ‘KM’ and ‘KMR’ firm on the other, was ‘KM’ and ‘KMR’ firm on the other, was found wherein transaction for found wherein transaction for purchase of 95 acres of land for a total consideration of Rs. 2,40,40,000/ purchase of 95 acres of land for a total consideration of Rs. 2,40,40,000/ purchase of 95 acres of land for a total consideration of Rs. 2,40,40,000/- was reflected. The AO however found that the actual AO however found that the actual AO however found that the actual purchase consideration of land as disclosed by the assessee was Rs. 91 lakhs as consideration of land as disclosed by the assessee was Rs. 91 lakhs as consideration of land as disclosed by the assessee was Rs. 91 lakhs as against Rs. 2,40,40,000/ 0,000/- admitted by ‘KM’ vide the unsigned MoU admitted by ‘KM’ vide the unsigned MoU and therefore added the differential sum as undisclosed income of the therefore added the differential sum as undisclosed income of the therefore added the differential sum as undisclosed income of the assessee. On appeal th On appeal this Tribunal noted that, although the sworn although the sworn statement of ‘KM’ recorded under section 132(4) is piece of evidence but recorded under section 132(4) is piece of evidence but recorded under section 132(4) is piece of evidence but the Assessing Officer has to establish the link with other seized he Assessing Officer has to establish the link with other seized he Assessing Officer has to establish the link with other seized documents. It was held that, t It was held that, the statement recorded from the third party he statement recorded from the third party cannot be considered as the conclusive evidence. cannot be considered as the conclusive evidence. Further, the Tribunal Further, the Tribunal also held that, the words ‘may be presumed’ app the words ‘may be presumed’ appear in section 132(4A) ear in section 132(4A) and it only gives an ‘option’ to the authorities concerned to presume the and it only gives an ‘option’ to the authorities concerned to presume the and it only gives an ‘option’ to the authorities concerned to presume the /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy things. The said option however is rebuttable and it does not give definite things. The said option however is rebuttable and it does not give definite things. The said option however is rebuttable and it does not give definite authority and that the assessee has every right to rebut the same by he assessee has every right to rebut the same by he assessee has every right to rebut the same by producing evidence in support of its claim & contentions. It was held that ence in support of its claim & contentions. It was held that ence in support of its claim & contentions. It was held that each case depends on the rule of evidence and the Revenue authorities each case depends on the rule of evidence and the Revenue authorities each case depends on the rule of evidence and the Revenue authorities cannot automatically presume things especially when the actual things cannot automatically presume things especially when the actual things cannot automatically presume things especially when the actual things are contrary to the facts and circumstances of case. Th are contrary to the facts and circumstances of case. The Tribunal noted e Tribunal noted that, the AO had blindly relied upon the original statement made by ‘KM’ blindly relied upon the original statement made by ‘KM’ blindly relied upon the original statement made by ‘KM’ and presumed the seized material to be fully true while making the and presumed the seized material to be fully true while making the and presumed the seized material to be fully true while making the addition. The Tribunal addition. The Tribunal however observed that ‘KM’ had subsequently observed that ‘KM’ had subsequently retracted his statement and it was also known that there was an existing retracted his statement and it was also known that there was an existing retracted his statement and it was also known that there was an existing dispute between the assessee and ‘KM’. dispute between the assessee and ‘KM’. Further, the assessee he assessee had also pointed out various discrepancies in the seized material relied upon which pointed out various discrepancies in the seized material relied upon which pointed out various discrepancies in the seized material relied upon which were contrary to the contemporaneous contemporaneous facts of the case. facts of the case. The Tribunal accordingly held that, since accordingly held that, since the AO did not bring any corroborative the AO did not bring any corroborative evidence or material in support of the original statement evidence or material in support of the original statement of ‘KM’ of ‘KM’ to prove as to why the original statement alone should as to why the original statement alone should prevail, the impugned , the impugned addition made by the AO was deleted, by holding as under : addition made by the AO was deleted, by holding as under : addition made by the AO was deleted, by holding as under :-

“17. Regarding the sworn statement, the sworn statement recorded under Regarding the sworn statement, the sworn statement recorded under Regarding the sworn statement, the sworn statement recorded under section 132(4) is some piece of evidence. The Assessing Officer has to establish section 132(4) is some piece of evidence. The Assessing Officer has to establish section 132(4) is some piece of evidence. The Assessing Officer has to establish the link with other bo the link with other books of accounts seized. It cannot be considered as the oks of accounts seized. It cannot be considered as the conclusive evidence. The words "may be presumed" appear in section 132(4A) conclusive evidence. The words "may be presumed" appear in section 132(4A) conclusive evidence. The words "may be presumed" appear in section 132(4A) of the Act. Since the words "may be presumed" are incorporated in the section, of the Act. Since the words "may be presumed" are incorporated in the section, of the Act. Since the words "may be presumed" are incorporated in the section, it gives option to the authorities concerned to it gives option to the authorities concerned to presume the things. But, it is presume the things. But, it is rebuttable and it does not give definite authority and not a conclusive one. The rebuttable and it does not give definite authority and not a conclusive one. The rebuttable and it does not give definite authority and not a conclusive one. The assessee has every right to rebut the same by producing evidence in support of assessee has every right to rebut the same by producing evidence in support of assessee has every right to rebut the same by producing evidence in support of its claim. The entire case depends on the rule of evidence. The its claim. The entire case depends on the rule of evidence. The its claim. The entire case depends on the rule of evidence. The assessee has /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy every right to shift the burden of proof. The revenue authorities cannot every right to shift the burden of proof. The revenue authorities cannot every right to shift the burden of proof. The revenue authorities cannot automatically presume things. The actual things depend upon facts and automatically presume things. The actual things depend upon facts and automatically presume things. The actual things depend upon facts and circumstances of each case. The presumption under section 132(4A) as to the circumstances of each case. The presumption under section 132(4A) as to the circumstances of each case. The presumption under section 132(4A) as to the truth of contents of boo truth of contents of books or documents seized was rebuttable and it was in the ks or documents seized was rebuttable and it was in the discretion of the authorities depending upon the facts, to decide whether discretion of the authorities depending upon the facts, to decide whether discretion of the authorities depending upon the facts, to decide whether presumption should be drawn or not. The expression used in this sub presumption should be drawn or not. The expression used in this sub presumption should be drawn or not. The expression used in this sub-section (4A) is "may be presumed" which is also the expres (4A) is "may be presumed" which is also the expression used in section 114 of sion used in section 114 of the Evidence Act and it was not a mandate that whenever books of accounts are the Evidence Act and it was not a mandate that whenever books of accounts are the Evidence Act and it was not a mandate that whenever books of accounts are seized, the authorities concerned shall so presume irrespective of any other seized, the authorities concerned shall so presume irrespective of any other seized, the authorities concerned shall so presume irrespective of any other factor which may dissuade the authorities from doing so. Therefore, the factor which may dissuade the authorities from doing so. Therefore, the factor which may dissuade the authorities from doing so. Therefore, the authorities concerned should draw the conclusion judicially, depending upon the uthorities concerned should draw the conclusion judicially, depending upon the uthorities concerned should draw the conclusion judicially, depending upon the facts and circumstances of the case. There is no conclusive presumption. facts and circumstances of the case. There is no conclusive presumption. facts and circumstances of the case. There is no conclusive presumption.

…

….

22. In our opinion, there is no valid seized material representing addition of Rs. 22. In our opinion, there is no valid seized material representing addition of Rs. 22. In our opinion, there is no valid seized material representing addition of Rs. 1.49 lakhs towards undisclosed purchase consideration. It is only on surmise lakhs towards undisclosed purchase consideration. It is only on surmise lakhs towards undisclosed purchase consideration. It is only on surmise basis and statement recorded from third party, K. Madhava Reddy, and M/s. basis and statement recorded from third party, K. Madhava Reddy, and M/s. basis and statement recorded from third party, K. Madhava Reddy, and M/s. Shilpa Homes (P.) Ltd. This cannot be acted upon. The Circular No. F. No. Shilpa Homes (P.) Ltd. This cannot be acted upon. The Circular No. F. No. Shilpa Homes (P.) Ltd. This cannot be acted upon. The Circular No. F. No. 286/2/2003/IT(Inv.), dated 10 286/2/2003/IT(Inv.), dated 10-3-2003 clearly refrains the Assessing Officer clearly refrains the Assessing Officer from recording confessional statement during the course of search and seizure from recording confessional statement during the course of search and seizure from recording confessional statement during the course of search and seizure /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::36 ::

and survey operations and also warns the Assessing Officer not to attempt to and survey operations and also warns the Assessing Officer not to attempt to and survey operations and also warns the Assessing Officer not to attempt to obtain any confessional statement as to the undisclosed incom obtain any confessional statement as to the undisclosed income, and any action e, and any action contrary shall be viewed adversely. It also states that the Assessing Officer contrary shall be viewed adversely. It also states that the Assessing Officer contrary shall be viewed adversely. It also states that the Assessing Officer should rely upon the evidence and material gathered during the course of should rely upon the evidence and material gathered during the course of should rely upon the evidence and material gathered during the course of search. Here in the present case, the evidence is only agreement which reflects search. Here in the present case, the evidence is only agreement which reflects search. Here in the present case, the evidence is only agreement which reflects the purchase consideration at Rs. 2.40 crores and the recorded statement shows chase consideration at Rs. 2.40 crores and the recorded statement shows chase consideration at Rs. 2.40 crores and the recorded statement shows the sale consideration of 22 acres at Rs. 3,62,18.000. The third party statement the sale consideration of 22 acres at Rs. 3,62,18.000. The third party statement the sale consideration of 22 acres at Rs. 3,62,18.000. The third party statement and unsigned agreement cannot be acted upon. and unsigned agreement cannot be acted upon.

…

/Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::37 ::

In the said case, the ITO came across a sort of a ledger maintained by In the said case, the ITO came across a sort of a ledger maintained by In the said case, the ITO came across a sort of a ledger maintained by the firm known as Vasu Films of Madras firm known as Vasu Films of Madras containing certain entries, which had containing certain entries, which had been seized by the Income Tax been seized by the Income Tax authority from the premises of the above authority from the premises of the above said firm. In the diary, some amount was written as "W" and some said firm. In the diary, some amount was written as "W" and some said firm. In the diary, some amount was written as "W" and some amount was written as "B" against the name of the assessee. In the amount was written as "B" against the name of the assessee. In the amount was written as "B" against the name of the assessee. In the statement recorded from Mr. VasudevMenon, Managing partner of Vasu ded from Mr. VasudevMenon, Managing partner of Vasu ded from Mr. VasudevMenon, Managing partner of Vasu Films and from Mr. C.S. Kumar, Firm's Bombay manager, the above said Films and from Mr. C.S. Kumar, Firm's Bombay manager, the above said Films and from Mr. C.S. Kumar, Firm's Bombay manager, the above said entries were explained by them as the letter "W" would mean "white" and entries were explained by them as the letter "W" would mean "white" and entries were explained by them as the letter "W" would mean "white" and the letter "B" would mean "Black". the letter "B" would mean "Black". The assessee given an opport The assessee given an opportunity to cross-examine these persons. Thereafter, the Assessing Officer accepted examine these persons. Thereafter, the Assessing Officer accepted examine these persons. Thereafter, the Assessing Officer accepted the entries recorded in the diary and came to the conclusion that the the entries recorded in the diary and came to the conclusion that the the entries recorded in the diary and came to the conclusion that the assessee has concealed income. Accordingly, he made additions. Before assessee has concealed income. Accordingly, he made additions. Before assessee has concealed income. Accordingly, he made additions. Before the Tribunal, it was contended on b the Tribunal, it was contended on behalf of the assessee that entire ehalf of the assessee that entire evidences on which lower authorities had relied, merely created suspicion evidences on which lower authorities had relied, merely created suspicion evidences on which lower authorities had relied, merely created suspicion that the assessee might have that the assessee might have accepted payments in black but it did not accepted payments in black but it did not take place of proof. The Tribunal, after appreciating piece of take place of proof. The Tribunal, after appreciating piece of take place of proof. The Tribunal, after appreciating piece of evidence, came to the conclusion that the evidences were not sufficient to prove to the conclusion that the evidences were not sufficient to prove to the conclusion that the evidences were not sufficient to prove even a single evidence, where even a single evidence, where the assessee could be said to have the assessee could be said to have received money in black for which she did not pass a receipt. Accordingly received money in black for which she did not pass a receipt. Accordingly received money in black for which she did not pass a receipt. Accordingly, the Tribunal deleted the addition made by the AO. the Tribunal deleted the addition made by the AO. The Hon'ble Bombay The Hon'ble Bombay High Court has upheld the view High Court has upheld the view taken by the Tribunal. In our view, this taken by the Tribunal. In our view, this decision supports the case of the assessee also. decision supports the case of the assessee also.

/Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Pinnathevar Palanichamy Mr.Pinnathevar Palanichamy ::38 ::

Rs.20 crores in cash by way of on Rs.20 crores in cash by way of on-monies to the assessee is found to be monies to the assessee is found to be unbelievable and per-se wrong se wrong. Consequently, we hold that, the Ld. . Consequently, we hold that, the Ld. CIT(A) had rightly deleted the impugned addition of Rs.20 crores made by CIT(A) had rightly deleted the impugned addition of Rs.20 crores made by CIT(A) had rightly deleted the impugned addition of Rs.20 crores made by the AO.

Order pronounced on the 29th day of April, 2025, in Chennai. Order pronounced on the , in Chennai.