DCIT CENTRAL CIRCLE 2(1), CHENAI vs. C.VIJAYA BASKAR, PUDUKOTTAI

For these grounds and any other ground including amendment of grounds 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 restored.

Disallowance of quarry expenses 3.1 It transpired that M/s Rasi Blue Metal (‘RBM’ in short) was engaged in production of blue metals of various sizes. The rough stones for production thereof were stated to be supplied from rough stone quarries which were held in the names of two persons i.e., Shri SA Subbaiah and Shri B. Kubendran. The assessee owned 4.92 Hectares of land at Melur Village Kulathur Taluk, Pudukottai which was given on lease to Shri B. Kubendran for the purpose of quarrying by said person. Similarly, the assessee and Shri B. Kubendran owned 3.84 Hectares and 1.06 Hectares of quarry land at Thrivengalaivasal which was given on lease to Shri SA Subbaiah for quarrying by said person. However, Ld. AO, based on recorded statements, concluded that though Shri SA Subbaiah and Shri B. Kubendran were having licenses to carry out quarrying operations, however, they assisted the assessee in quarry business by being mere lessees of the quarries. The operational control of the quarries was with Shri V. Palanisamy (GM of RBM) who was a key person to look after all the business affairs of the assessee and his family members. This inference was on the basis of statements made by Shri SA Subbaiah and Shri B. Kubendran as recorded during the course of search operation. 3.2 Upon perusal of Books of accounts of M/s RBM, it was noted by Ld. AO that quarrying expenses and crushing expenses were debited in the books of the assessee. The quarry expenses represent expenses incurred for excavating rough stones from the quarries whereas crushing expenses represent expenses incurred for crushing rough stone into blue metal. Since quarry operation was not the business activity of RBM as the licenses were obtained in the name of two persons, Ld. AO proceeded to disallow the quarry expenses as claimed by M/s RBM. The assessee stated that M/s RBM had a business arrangement with the quarry license holders as per which the said license holders carried out the quarrying of rough stones by using the infrastructure and facilities of M/s RBM on the quarry land which incidentally belonged to the assessee. It was explained that rough stones were received by M/s RBM from quarry license holders to the extent of value of expenditure incurred by M/s RBM for providing the said infrastructure and other facilities to the quarry license holders. Further, no expenditure was debited in the books of M/s RBM towards purchase of rough stones from the quarry license holders and the value of the said purchases was reflected in the books of M/s RBM in the form of expenditure incurred towards quarrying including provision of facilities. The overall expenditure of M/s RBM would include expenditure incurred on crushing as well as expenditure incurred on quarrying rough stone for and on behalf of quarry license holders. It was also stated that no separate books were maintained in respect of quarrying operations. In the absence of verifiable accounts for purchase of rough stones from quarry license holders, Ld. AO disallowed quarry expenses as claimed by the assessee during AYs 2011-12 to 2018-19. Aggrieved, the assessee preferred first appeal against the same wherein the assessee assailed the said disallowance by way of elaborate written submissions. The assessee also pointed out that the disallowance would result into unreasonable gross profit margins which would not be normal in this line of business. 3.3 The Ld. CIT(A) noted that both the persons were holding quarry licenses issued by the state government and seigniorage fees was paid by both of them to government in respect of material excavated from the quarries. Both the persons filed return of income for AY 2015-16 u/s 139 before the date of search disclosing income from business in respect of the said quarrying activities being carried out by them. They also filed return of income disclosing such business income in the return of income filed in response to notices issued u/s 153C issued to them after search. Therefore, it could not be said that both the persons were not carrying out quarrying activities. At the same time, the business arrangement entered into by the assessee with the quarry license holders was evidenced by their respective statements. The same was also evident by the fact that the assessee did not debit any expenditure towards cost of purchase of rough stones in the Profit & Loss Account. The quarry expenses were incurred by the assessee during the course of business of production of blue metal only in order to procure the raw material for the said business from the quarries. Therefore, the quarry expenses as incurred by the assessee under the said business arrangement with the quarry license holders represent the cost of purchase of rough stones which is used as raw material for the assessee’s business of production of blue metal. Therefore, the said expenditure was to be regarded as expenditure incurred wholly and exclusively for the purpose of assessee’s business. Accordingly, the deduction thereof could not be denied to the assessee. However, the assessee did not furnish evidences to establish the genuineness of the claim of quarry expenses. The assessee failed to prove the correctness of quantum of quarry expenses as debited in the Profit & Loss Account. Considering the same, Ld. CIT(A) estimated disallowance of 30% of quarry expenses and partly allowed the grounds as raised by the assessee. Aggrieved, the revenue is in further appeal before us. Our Adjudication on this issue 4. From the facts, the pertinent facts that emerges are that the though the assessee own the quarry land, the licenses to carry out quarrying operations were held by Shri SA Subbaiah and Shri B. Kubendran. Both these persons paid seigniorage fees to the government in respect of material excavated from the quarries. Both the persons filed return of income for AY 2015-16 u/s 139 before the date of search disclosing income from business in respect of the said quarrying activities being carried out by them. They also filed return of income disclosing such business income in the return of income filed in response to notices issued u/s 153C to them after search. Therefore, the conclusion that both the persons were not carrying out quarrying activities, could not be accepted. It could also be seen that the assessee entered into a business arrangement with these two persons which allow them to use infrastructural facilities of the assessee against supply of raw material to the assessee. It is quite evident that the assessee has not debited any expenditure towards cost of purchase of rough stones in the Profit & Loss Account. Without purchase of basic raw material, no production could have been carried out by the assessee. Therefore, the quarrying expenses would represent cost of purchase of rough stones by the assessee. These rough stones are further converted into blue metal which generate revenue for the assessee. Therefore, the quarry expenses would be nothing but expenditure incurred during the course of assessee’s business to procure raw material. Accordingly, the deduction thereof could not be denied to the assessee. In our considered opinion, this expenditure could not be substantiated fully by the assessee. Therefore, the disallowance of 30% is good enough to take care of the revenue leakage. It is another fact that if quarry expenses are disallowed in toto, the same would result into abnormal profits for the assessee which is not possible in this line of business. Accordingly, the adjudication of Ld. CIT(A) could not be faulted with. We concur with the same. The grounds raised

Adjudication of Ld. CIT(A) 6.1 The Ld. CIT(A) noted that post-search proceedings, the investigating office made a reference to valuation cell of the Income Tax Department for ascertaining the extent of excavation of minerals from the quarries in respect of which the license for quarrying was held by Shri SA Subbaiah and Shri B Kubendran. For the said purpose, the DVO engaged the services of M/s Gridline Surveys and Geospatial Pvt. Ltd for ascertaining the volume of excavation made from the quarries using the Ariel Photogrammetric Methodology using drones. Based on the said methodology, the DVO furnished separate inspection reports in respect of the quarries licensed to Shri SA Subbaiah and Shri B Kubendran wherein the DVO made quantification of the volume of excavation of rough stone and malaimann from the said quarries from the date of commencement of the quarrying by the said persons to the date of inspection on 29.05.2017. Since the entire quantity of rough stone excavated from the said quarries was supplied to M/s RBM, the quantum of production of blue metal of various sizes by crushing the said quantity of rough stone received from the quarries was determined by Ld. AO on the basis of the standard yield from production as stated by the assessee in his sworn statement recorded on 03.08.2017. The actual sales of blue metal by the assessee for various assessment years was worked out by Ld. AO by taking into consideration the quantum of blue metal production so computed and the market value prevailing in the relevant assessment years for various sizes of blue metal. After comparing the year-wise sales of blue metal determined in the said manner with the sales disclosed by the assessee in the returns of income for the relevant assessment years, AO worked out the extent of unaccounted sales of blue metal allegedly made by the assessee. On the basis of such working, Ld. AO arrived at unaccounted sales of blue metal for AYs 2011-12, 2012-13, 2015-16 and 2017-18 and added the same to the income of the assessee for these years. As against this, the main objection of the assessee was regarding the assumption made by the DVO that the entire volume of material excavated from the quarries, determined on the basis of the Ariel Photogrammetric Methodology, was represented only by 'rough stone' which could be suitable for production of blue metal barring the volume of material represented by the waste earth i.e., malaimann. The assessee contended that only the total volume of the material excavated from the quarries could be determined by the methodology used by the DVO, however, the quality and quantity of various materials excavated from the quarries could not be determined by the said methodology as the same would be dependent on the geological composition of the said quarries. The assessee also contended that the material excavated from the quarries consist of weathered stone, soft stone, fractured stone, loose stone, white stone etc apart from rough stone and the materials other than 'rough stone' could not be used as raw material for production of blue metal. The assessee accordingly contended that the excess quantity of rough stone excavated from the quarries and the corresponding excess quantity of production of blue metal and sale of blue metal by the assessee as determined by the AO in the relevant assessment orders on the basis of such inspection report of the DVO was erroneous and unsustainable. 6.2 Upon perusal of relevant inspection reports of the DVO, Ld. CIT(A) concurred that DVO considered that the entire volume of material excavated from the quarries would be represented by 'rough stone' and 'malaimann'. There was no dispute regarding the volume of malaimann excavated from the quarries as determined in the inspection reports. In the inspection reports, Ld. DVO made an erroneous assumption that only 'rough stone' which is suitable for production of blue metal was obtained on excavation of the quarries. The AO adopted the volume of rough stone as determined in the DVO's report for the purpose of working out the excess quantity of excavation of rough stone and corresponding excess quantity of production of blue metal by the assessee, leading to computation of unaccounted sales of blue metal in the hands of the assessee. The AO made reference to the answer given by Shri Ifthikar Ahmed, a Geologist and a qualified Mining Planner, to Q.No.15 of his statement u/s 131 dated 19.06.2017 to infer that there was little possibility of formation of hollow rock at the relevant quarry sites and to conclude that the computation of volume of rough stone excavated from the quarries made by the DVO in the inspection reports was scientific and accurate. However, as rightly contended by the assessee, the inspection reports of the DVO suffer from the erroneous presumption that the entire volume of material excavated from the quarries (other than malaimann) was that of 'rough stone' only which would be suitable for production of blue metal. The fact that the said presumption made by the DVO was erroneous was also apparent from the answers given by the DVO, Shri Ifthikar Ahmed (Geologist) and Shri Manikandan, the Director of M/s Gridlines Survey and Geospatial Pvt. Ltd in the course of their examination / cross-examination by the assessee during the course of the assessment proceedings on 27.11.2020, 24.11.2020 and 24.12.2019 respectively. 6.3 On perusal of the statement of Shri Ifthikar Ahmed dated 24.11.2020 in the course of cross-examination by the assessee, he clarified therein that his answer to Q.No.15 of statement dated 19.06.2017 (quoted by the AO in the assessment order) was merely a rough estimate by correlating the general data available with the Department of Geology and Mining, Chennai with regard to quarry sites situated in Puddukottai district. He clarified that the said data available with the Mining Department was based on random interval sample testing at various places in Puddukottai district and that variations were bound to occur at different quarry sites as the said data was not site- specific. He stated that he never carried out any detailed scientific examination to ascertain different layers of minerals available in the quarry sites of Shri SA Subbaiah and Shri B Kubendran. With regard to the query by the assessee as to whether the Ariel Photogrammetric Method used by the DVO could bring out the quantity and quality of minerals/stones/rocks actually excavated over the years from the quarries, Shri Ifthikar Ahmed stated that the quality of material excavated could not be ascertained unless geochemistry investigation is carried out at the quarry site. As regards the quantity of excavation, he stated that the assessment of the same by digital elevation modeling may be somewhat appropriate only when all the excavated portions are uniform in size and similar in composition. He stated that since rough stone had varied sizes of 2mm to 2m with irregular shapes, there were possibilities of presence of more voids inside the heaps which may not match with the surface relief taken from unmanned Aerial photography, due to which errors of estimation were bound to occur in the said methodology. It was therefore evident from the clarifications furnished by the said technical expert in geological matters that the composition and quality of the stone excavated from the quarries could not be ascertained by the Aerial Photogrammetric Method and that the excavated material could not be considered to be similar in composition and uniform in size. It was also evident that the reliance placed by the AO on the answer to Q. No.15 of his statement dated 19.06.2017 to derive support regarding the scientific nature and correctness of the methodology adopted in the inspection report of the DVO for ascertaining the quantum of rough stone excavated from the quarries was erroneous. 6.4 It was further noted that DVO engaged the services of a private agency M/s Gridline Surveys and Geospatial Pvt. Ltd for the purpose of making survey of the quarry sites using Aerial Photogrammetric Methodology. Shri P Manikandan, Director of the said company, was cross-examined by the representatives of the assessee on 24.12.2019. During cross-examination, in his answer to Q.No.12, he clarified that the methodology adopted by them could only reasonably determine the extent of volume of material excavated in cubic meters and that it could not determine whether the entire material excavated barring the overburden was rough stone. He clarified that the exercise carried out by his company was restricted only to making a fair estimate of the excavated volume from the quarries and that it was not possible to ascertain the quantum and quality of the excavated materials from a quarry which had already been subjected to excavation over the years. It was evident from the replies furnished by him during his cross- examination that the Aerial Photogrammetric Method could be used only for the purpose of ascertaining the overall volume of material excavated from the quarries and the same could not be applied for ascertaining the material-wise composition which was embedded in the said volume of excavation. Therefore, Ld. AO drew an erroneous conclusion based on the said statement that his statement had validated the accuracy of the quantum and quality of the materials excavated as determined in the DVO's report though the replies given by Shri P Manikandan were clearly contrary to the said conclusion. 6.5 Further, upon perusal of the cross-examination statement dated 27.11.2020 of Shri Gopalakrishnan, DVO, it could be seen that he clearly admitted in his answer to Q.No.6 therein that though the assessment of the total volume of material excavated from the quarries made in his report based on the Aerial Photogrammetric Method could be said to be near accurate, the same could not be said regarding the quality of the material excavated. The DVO stated that the quality of material excavated such as blue metal, hard stone, rough stone, weathered rock, broken rock, waste etc. could not be accurately determined in an already excavated mine. It was unambiguously clear from his reply that the methodology adopted by him with the assistance of a private agency could only result in determination of the 'total volume of the material' excavated from the quarries and not the ‘composition of such material'. On the basis of his statement, Ld. AO drew an erroneous conclusion that his statement had validated the accuracy of the quantum and quality of the materials excavated as determined in the DVO's report though the replies given by the DVO were clearly contrary to the said conclusion. 6.6 From the replies of above-mentioned technical experts, it was clear that the material excavated from the quarries was composed of several mineral elements such as weathered rock, soft stone, fractured rock, rough stone, etc., and it was wrong to consider that the entire volume of the material excavated from the quarries was comprised of 'rough stone' (suitable for production of blue metal) only. The inspection reports of the DVO wherein the entire volume of material excavated from the quarries, excluding the volume of malaimann, had been treated as the volume of rough stone were clearly erroneous for the said reasons. The minerals excavated from the quarries other than “rough stone” was not suitable for production of blue metal and consequently, the volume of such minerals (other than rough stone) comprised in the total volume of minerals excavated could not be taken into consideration for the purpose of working out the actual production and sale of blue metal by the assessee. Therefore, it was held that the working of actual production and sales of blue metal as made by Ld. AO was based on the erroneous determination of the volume of rough stone excavated from the quarries in the inspection reports of the DVO. Therefore, the determination of unaccounted sales of blue metal by comparing the actual sales so worked out with the sales disclosed in the returns of income of the assessee was erroneous and unsustainable on facts. 6.7 The Ld. CIT(A) then referred to the order of the RDO, Iluppur dated 16.08.2019 passed in the case of Shri SA Subbaiah which could be considered as appropriate basis for quantification of the excess volume of rough stone excavated and taken out from the quarries for the purpose of production of blue metal by the assessee. The said order was passed u/s 36(A) of Tamil Nadu Minor Minerals Concession Rules, 1959 imposing penalty on Shri SA Subbaiah for taking out minerals from the quarry without prior permission and without payment of seigniorage fee. The relevant proceedings by the RDO were initiated on the basis of the reference made by the Income Tax Department to the Puddukottai District Administration requesting it to take necessary action under the law with regard to the excess quarrying by Shri SA Subbaiah. The Income Tax Department forwarded the Inspection report of the DVO along with the said reference and informed the District Collector that 22,76,306 cubic meter of rough stone and 2,75,562 cubic meter of gravel sand (malaimann) was excavated from the quarry of Shri SA Subbaiah, whereas the said person had paid seigniorage fee in respect of 1,10,100 cubic meter of rough stone only during the period from the commencement of quarry operations in FY 2008-09 to May 2017. It was informed that the excess / undisclosed quantity of rough stone and gravel sand quarried from the mines amounted to 21,66,206 cubic meter and 2,75,562 cubic meters respectively. On the basis of the said information received from the Income Tax Department, the District Collector directed the RDO, Iluppur to take necessary action u/s 36 (A) of Tamil Nadu Minor Mineral Concession Rules after conducting the necessary enquiries and verification. Pursuant to same, the RDO requested the Assistant Director (Land Survey), Puddukottai District to constitute a five-member committee headed by Land Survey Inspector to carry out survey of the quarry land of Shri SA Subbaiah. Based on the land survey conducted by the said committee, the Assistant Director furnished his report dated 18.02.2019. The said report contained the details of the minerals and gravel found stacked in the quarry land. Based on the said report, the RDO requested the Assistant Director (Geology & Mines), Puddukottai to calculate the measurements of the minerals stacked as stones and gravels in the quarry land of Shri SA Subbaiah. In response to it, the Assistant Director (Geology & Mines) furnished his report dated 05.07.2019. After taking into consideration the reports of the Assistant Director (Land Survey) and Assistant Director (Geology & Mines), the RDO arrived at the finding that 20,63,965 cubic meter of stones and 2,03,649 cubic meter of gravel was found stacked / dumped at the quarry site or nearby areas. The RDO compared the availability of the said material at the quarry site with the total volume of excavation of minerals from the quarries as per the report of the Income Tax Department and worked out the excess volume of minerals (Stone and gravel) quarried and taken out without permission, the details of which are as follows: -

The Ld. CIT(A) noted that DVO engaged the services M/s Gridline Surveys and Geospatial Pvt. Ltd for ascertaining the volume of excavation made from the quarries using the Ariel Photogrammetric Methodology using drones. The assessee objected to the same on the ground that entire volume of material allegedly excavated from the quarries was considered to be the rough stone only which was suitable for production of blue metal. However, using this method, only the total volume of the material excavated from the quarries could be determined but not the quality and quantity of various materials since the same would depend on geological composition of the said quarries. The excavated material would consist of weathered stone, soft stone, fractured stone, loose stone, white stone etc. apart from rough stone. Only rough stone could be used as raw material for production of blue metal. Upon perusal of relevant inspection reports of DVO, Ld. CIT(A) concurred with the objection that DVO considered that the entire volume of material as rough stone and malaimann. Therefore, the inspection reports suffer from the erroneous presumption that the entire volume of material excavated from the quarries (other than malaimann) was that of rough stone which would be suitable for production of blue metal. The same was also evident from the replies given by Shri Ifthikar Ahmed (Geologist) and Shri Manikandan, the Director of M/s Gridlines Survey and Geospatial Pvt. Ltd in the course of their examination / cross- examination by the assessee during assessment proceedings. To ascertain the geological formation of layers at the quarry site, the assistance of qualified mining planner Shri Ifthikar Ahmed was taken.

Shri Ifthikar Ahmed clarified that the valuation was merely a rough estimate by correlating the general data available with the Department of Geology and Mining, Chennai with regard to quarry sites situated in Pudukkottai district. He clarified that the said data available with the Mining Department was based on random interval sample testing at various places in Pudukkottai district and that variations were bound to occur at different quarry sites as the said data was not site-specific. He also stated that no detailed scientific examination was carried out to ascertain different layers of minerals available in the actual quarry sites. He further stated that assessment of volume by digital elevation modeling may be somewhat appropriate only when all the excavated portions were uniform in size and similar in composition. Considering the fact that rough stone had varied sizes of 2mm to 2m with irregular shapes, there was possibility of presence of more voids inside the heaps which may not match with the surface relief taken from unmanned Aerial photography and accordingly, errors of estimation were bound to occur in the said methodology. The same clearly weakens the conclusion of Ld. AO. The DVO engaged the services of a private agency M/s Gridline 10. Surveys and Geospatial Pvt. Ltd for the purpose of making survey of the quarry sites using Aerial Photogrammetric Methodology. Shri P Manikandan, Director of the said company, was cross-examined wherein he clarified that the said methodology could only reasonably determine the extent of volume of material excavated in cubic meters but it could not determine whether the entire material excavated was rough stone only. It was not possible to ascertain the quantum and quality of the excavated materials from an already excavated quarry. This further weakens the conclusion of Ld. AO.

Shri Gopalakrishnan, DVO clearly admitted that though the assessment of the total volume of material excavated from the quarries made in his report based on the Aerial Photogrammetric Method could be said to be near accurate, however, the same could not be said regarding the quality of the material excavated. He stated that the quality of material excavated such as blue metal, hard stone, rough stone, weathered rock, broken rock, waste etc. could not be accurately determined in an already excavated mine. It was thus quite clear that the said methodology could only result in determination of the total volume of the material but not the composition of such material. In our opinion, relying on these statements, Ld. AO drew erroneous conclusion and therefore, negation of the same by Ld. CIT(A) could not be faulted with.

The Ld. CIT(A) noted the order of appropriate authority RDO, Iluppur passed in the case of Shri SA Subbaiah imposing penalty for excess excavation. The said order has been passed u/s 36(A) of Tamil Nadu Minor Minerals Concession Rules, 1959 imposing penalty on Shri SA Subbaiah for taking out minerals from the quarry without prior permission and without payment of seigniorage fee. The relevant proceedings by RDO were initiated at the behest of Income Tax Department and inspection report of DVO was forwarded to the said authority. Considering the same, the District Collector directed the RDO, Iluppur to take necessary action u/s 36 (A) of Tamil Nadu Minor Mineral Concession Rules after conducting the necessary enquiries and verification. Pursuant to same, land survey was physically carried out by five-member committee. The Ld. RDO arrived at the finding that 20,63,965 cubic meter of stones and 2,03,649 cubic meter of gravel was found stacked / dumped at the quarry site or nearby areas. The RDO compared the availability of the said material at the quarry site with the total volume of excavation of minerals from the quarries as per the report of the Income Tax Department and worked out the excess volume of minerals (Stone and gravel) quarried and taken out without permission. The excess quantity of black rough stone quarried and taken out without permission amounted to 1,02,241 cubic meters, which was valued at Rs.3.88 Crores at the rate of Rs.380/- per cubic meter. The RDO held that excess quantity of gravel quarried and taken out without permission amounted to 71,912 cubic meters. The penalties were levied accordingly. The Ld. CIT(A) held that this quantity could be construed to be excess quantity of rough stone & malaimann and accordingly, directed Ld. AO to re-work the undisclosed sales in the hands of the assessee. No order was passed in the case of Shri B Kubendran and accordingly, the stand of Ld. AO was confirmed. The Ld. CIT(A) also considered the gross profit reflected by the assessee in these years and directed Ld. AO to apply average gross profit rate to undisclosed sales on the ground that entire sales could not be considered to be the income of the assessee. In our considered opinion, Ld. CIT(A) has clinched this issue in correct perspective. The findings of Ld. CIT(A) have duly considered the statements made by various persons during cross- examination and re-examination. The adjudication is based on available facts and evidences on record. We concur with the adjudication of Ld. CIT(A) and see no reason to interfere in the same. The grounds raised

We have confirmed the stand of Ld. CIT(A) on the issue of disallowance of quarry expenses. The assessee has contended that the stock of malaimann would belong to the quarry license holders since malaimann was waste raw earth which is excavated during the course of the quarrying of mines. Malaimann was nothing but sand / gravel which is excavated along with stone and other minerals during the course of quarrying. Since it is generated in the course of quarrying, the same would belong to the quarry license holders until the same is sold to third parties. The Ld. CIT(A), while adjudicating the issue of deduction of quarry expenses, took a stand that it could not be considered that the assessee was actually carrying out the quarry operations having regard to the facts and circumstances of the case. Applying the said finding in the context of the closing stock of malaimann also, it was held that the closing stock belonged to the quarry license holders only. Since we have confirmed the findings of Ld. CIT(A) on the issue of quarry expenses, this aforesaid conclusion is also to be accepted. Therefore, we see no reason to interfere in the same. The grounds thus raised by the revenue stand dismissed.

Undisclosed receipts from SRS mining 16.1 The addition towards undisclosed receipts from M/s. SRS Mining was made for AYs 2015-16 to 2017-18. The impugned addition stem from search conducted by the department u/s 132 in the case of M/s SRS Mining & Others on 08.12.2016 wherein certain loose sheets were seized vide ANN/KGAR/MPKSSR/LS/S-1 from the business premises of M/s SRS Mining at Bazullah Road, T Nagar, Chennai and certain loose sheets vide ANN/KGA/SRS-YS/LS/S were seized at the business premises at Yogambal Street. The information was received from the Assessing Officer of M/s SRS Mining i.e., DCIT Central Circle- 24, Chennai that seized loose sheets from page Nos. 111 to 124 of ANN/KGAR/MPKSSR/LS/S-1 and seized loose sheets from page Nos. 84 to 104 of ANN/KGA/SRS-YS/LS/S contained the details of payment of 20% of net monthly proceeds of sand mining business to the assessee by M/s SRS Mining. Reference was made to the sworn statement of Shri K Srinivasulu dated 10.12.2016 which was also received from the AO of M/s SRS Mining. In the said statement, Shri K Srinivasulu (an associate of Shri J. Sekar Reddy, partner of M/s SRS Mining) stated in response to Q. No.6 that the profit of M/s SRS Mining was shared in the ratio of 30:30:20:20 amongst Shri J Sekar Reddy, Shri S Ramachandran, Shri K Rathinam and Shri C. Vijayabaskar respectively. Based on the details of month-wise share of profits received by the assessee during the period from June, 2014 to October, 2016 available in the said seized material, the amounts allegedly received by the assessee from M/s SRS Mining was quantified at Rs.49.40 Crores, Rs.4.20 Crores and Rs.31.85 Crores for AYs 2015-16, 2016-17 and 2017-18 respectively. Based on the said information and copies of the seized material as received from the AO of M/s SRS Mining, Ld. AO of present assessee issued notices u/s 153C for AYs 2015-16 to 2017-18 on 19.11.2019 after recording the requisite satisfaction. A show-cause notice was issued to the assessee proposing to treat the alleged profits as undisclosed receipts of the assessee. The assessee denied all these allegations. The assessee also referred to the reply given by him to Q. No.21 of his sworn statement dated 03.08.2017 stating that he had no connection at all with M/s SRS Mining and he did not receive any such amount from the said entity as alleged. It was also pointed out that no evidence or material was found in the course of his search regarding alleged ownership of M/s SRS Mining. 16.2 The Ld. AO observed that the relevant seized material was in the nature of loose sheets containing monthly income-expenditure accounts. The said loose sheets contained the details of the income, expenses and net income from sand business at various places. The loose sheets also contained the details of distribution of the net income in certain ratios. The AO pointed out that Shri K Srinivasulu, in reply to Q.No.6 of his sworn statement dated 10.12.2016 stated that the profit of M/s SRS Mining was shared in the ratio of 30:30:20:20 amongst Shri J Sekar Reddy, Shri S Ramachandran, Shri K Rathinam and Shri C. Vijayabaskar respectively. Shri K Srinivasulu was a close associate of Shri J Sekar Reddy and was looking after the operations of M/s SRS Mining. Though there was subsequent retraction of the statement, the same was without any basis and no credible explanation was offered by him with regard to the entries in the loose sheets supported by credible evidences. Considering the nature of transactions and the nature of personalities involved, maintenance of formal, clear and unambiguous books of account could not be expected in such transactions. The sworn statement given during the course of search only would give the correct picture as the deponent was free to depose the actual facts known to him without being under the compulsive influence of his masters. Subsequently, the deponents come under the influence of concerned persons which led to retraction of statements given during the course of search. Therefore, it was to be concluded that the assessee received 20% of profits / income from M/s SRS Mining from the sand mining business and made impugned additions towards undisclosed receipts from M/s SRS Mining. The impugned additions were made accordingly which were subjected to assessee’s further appeal before Ld. CIT(A). 16.3 The Ld. CIT(A) observed that the impugned addition was based on entries found in loose sheets as found during search on M/s SRS Mining and on the basis of statement of Sri. K. Srinivasulu u/s 132(4) on 10.12.2016. The assessee contended that the seized material as referred to by Ld. AO did not contain any mention of the name of the assessee. It was pointed out that the alleged profit-sharing ratio of 30:30:20:20 with the assessee being the recipient of 20% share of profits from M/s SRS Mining as stated by Sri. K. Srinivasulu in his statement u/s 132(4) dated 10.12.2016 was nowhere found in the seized material. The assessee also pointed out that the seized material did not contain any indication that the assessee was the fourth partner of M/s SRS Mining as alleged in the statement of Shri. K Srinivasulu. Reference was made to the joint affidavit of three partners of M/s SRS Mining (Shri J Sekar Reddy, Shri S Ramachandran and Shri K Rathinam) dated 24.12.2019 wherein they have affirmed that they are the only partners of the said firm. Therefore, no reliance could be placed on the statement of Shri K. Srinivasulu. It was also stated that the statement was retracted and he confirmed his retraction during the course of his cross-examination and re-examination on 26.12.2019. Since there was no evidence, the impugned additions were not justified. 16.4 The Ld. CIT(A) noted that the impugned addition was made on the basis of loose sheets and on the basis of statement made by Shri K. Srinivasulu. In reply to Q.No.15 of statement, he stated that "the said loose sheets contain the details of total unaccounted receipts and expenses pertaining to SRS Mining and distribution of profits to its partners viz., Sri S Ramachandran, Sri Sekar, Sri Rathinam and Sri Vijayabaskar (the silent partner)”. Further, Shri K. Srinivasulu was specifically requested to explain the contents of page No.124 of ANN/KGAR/MPKSSR/LS/S-I at Q.No.6 of his statement u/s 132(4) dated 10.12.2016. In response to the said question, he explained that the said loose sheet reflected total receipts & expenses and profit of SRS Mining and distribution of profit amongst partners. He stated that the profit of Rs.19 crores as shown in the said sheet will be shared in the profit- sharing ratio of 20.30:20:20 amongst Shri S Ramachandran, Shri Sekar, Shri Rathinam and Shri Vijayabaskar. Accordingly, Ld. AO worked out the undisclosed share of profit as received by the assessee and made impugned additions. However, upon careful perusal of the relevant seized material, it was noticed that the name "Vijayabaskar" (the name of assessee) was not found mentioned anywhere in the seized loose sheets at page Nos.111 to 124 of ANN/KGAR/MPKSSR/LS/S-I and at page Nos.84 to 104 of ANN/KGA/SRS-YS/LS/S including page No.124 of ANN/KGAR/MPKSSR/LS/S-1 based on the contents of which Shri K Srinivasulu had specifically mentioned the said name in his statement dated 10.12.2016. It was further noted that the alleged profit-sharing ratio of 30:30:20:20 amongst the four partners of M/s SRS Mining including the assessee as a silent partner with 20% share as mentioned by Shri K Srinivasulu in his statement dated 10.12.2016 was also conspicuous by its absence in the relevant seized loose sheets. On the contrary, it could be seen that the loose sheet at page No.103 of ANN/KGA/SRS-YS/LS/S whose image was pasted by Ld. AO in the assessment order would show that the profit sharing ratio amongst the partners of M/s SRS Mining was 60:20:20. Wherever the profit sharing ratio was found noted in the seized loose sheets, it was mentioned as either 60:20:20 or 40:30:30. The said profit-sharing ratios clearly indicate that there were only 3 partners in M/s SRS Mining and there was no fourth silent partner (Vijayabaskar) as stated by Shri K Srinivasulu. It was thus unambiguously evident that the seized material neither reveals that the assessee was a silent partner in M/s SRS Mining nor reveals payment of 20% share of profit to the assessee by the said firm. The Ld. AO merely relied on the statement of Shri. K. Srinivasulu to arrive at such a conclusion. However, it was evident that the aforesaid statement of Shri K Srinivasulu was contrary to the contents of the seized material and consequently, the same could not be considered as a reliable statement. There was no other material available on record to support the conclusion of Ld. AO. On the contrary, M/s SRS Mining had three partners as per the returns of income filed by it which do not include the assessee. Further, the three partners namely Shri S Ramachandran, Shri J Sekar Reddy and Shri K Rathinam executed a joint sworn affidavit on 24.12.2019 solemnly affirming the fact that they were the only partners of M/s SRS Mining and there was no other partner in the firm apart from them. It was also evident that no evidence or material was found during the search in the case of the assessee regarding him being a silent partner in M/s SRS Mining and receipt of undisclosed share of profit from the said firm which was a very crucial aspect and strongly bring out the unsubstantiated and unreliable nature of the statement of Shri K Srinivasulu in relation to the allegation made against the assessee.

Addition of undisclosed receipts from V. Srinivasa Rao and Ors. (Gutkha Case) 18.1 This addition was made for AYs 2015-16 to 2017-18. This addition stem from a search u/s 132 in the case of V. Srinivasa Rao Polisetty & ors. as carried by department on 08.07.2016 wherein certain loose sheets were seized and marked as ANN/MS/VAY/LS/S-4 containing details of general expenses. The contents of Page No.87 of the loose sheet were explained by Shri V. Srinivasa Rao Polisetty in sworn statement recorded during search. It was stated by him that it contained details of expenditure incurred on monthly basis in respect of cash paid to Health Minister during 01.04.2016 to 15.06.2016. The payments aggregated to Rs.2.40 Crores during the period from November, 2014 to June, 2016 comprising of payment at the rate of Rs.10 Lacs per month from November, 2014 to August, 2015 and at the rate of Rs.14 Lacs per month from September, 2015 to June, 2016. Since the assessee was health minister during this period, the assessee was show-caused proposing this addition in the hands of the assessee. The assessee denied the allegations. The copies of the seized material and sworn statement were provided to the assessee. The cross- examination of Shri V. Srinivasa Rao Polisetty was provided to the assessee on 21.12.2020 wherein that person denied the contents of sworn statements. He submitted that the signature was obtained on a typed statement. The Ld. AO re-examined the said person on same date wherein Shri V. Srinivasa Rao Polisetty reiterated that he was forced to sign without knowing the contents of the statements and forced to write the declaration at the end of the statement. The Ld. AO concluded that the illegality of the business of Gutkha had prevented him from accepting the said business and its associated transactions during the course of cross-examination and re-examination. He had no material in support of assertion that there was threat, coercion in recording of statements. Therefore, rejecting the retraction, Ld. AO made aggregate addition of Rs.240 Lacs for AYs 2015-16 to 2017-18. During first appeal, the assessee contended that there was no evidence with respect to alleged receipt. No reliance could be placed on the retracted statement. There was no corroborative evidence to support the impugned additions. 18.2 The Ld. CIT(A) noted that in answer to Q. No.23, Shri V. Srinivasa Rao Polisetty explained that Page No.87 was a ledger extract of general expenses which show expenditure on monthly basis in respect to cash paid to Health Minister of Tamil Nadu which as paid through Shri Rajendran. He stated that the description therein “GE(HM/R)” indicates general expenses, Health Minister and Rajendran. However, the assessee contended that he had no acquaintance with Shri V. Srinivasa Rao Polisetty and he never met him and never received any amount from him. 18.3 The Ld. CIT(A), upon perusal of seized material, concurred that the name of the assessee did not appear in any of the entries as considered by Ld. AO to be pertaining to the assessee. All the entries contain only the abbreviation / acronym ‘HM’. The Ld. AO relied on the statement of Shri V. Srinivasa Rao Polisetty to conclude that ‘HM’ denotes Health Minister and the assessee was the recipient of the payment as noted in the seized material with the said abbreviation of the assessee’s official position in the material seized from a third-party. This material was seized from third-party premises. The said material was neither seized from the premises of the assessee nor was the same found to be in the handwriting of the assessee. Therefore, the same would not constitute adequate evidence to draw any adverse inference against the assessee in the absence of any other corroborative evidence. The ratio of decision of Hon’ble Delhi High Court in the case of CIT Vs. Sant Lal (2020] 118 Taxmann.com 432 (Del) would apply wherein it was held that where a diary was seized in search of the premises of a third-party allegedly containing entries of hundi transactions on behalf of various parties including the assessee, no addition could be made based on the said entries since the diary was neither found from premises of assessee nor was it in the handwriting of assessee and revenue failed to produce any other cogent material to link the assessee to the diary. In the present case, the seized material did not contain complete information to facilitate drawing of adverse inference against the assessee. The information merely contain dates, the amount of payments and abbreviated names of the recipient. There was absolutely no mention in the seized material regarding the nature of the transactions of cash payments, the purpose of such payments and the precise identity of the recipient. In the absence of such essential and critical information, it could not be inferred that the payments were paid to a person whose name do not even find a place in the seized material and that the said amount represent the income of the said person. It could not be inferred with a reasonable degree of certainty that the payments were made to such a person on an abbreviated name appearing in the seized material. Any entry made in the loose sheet by a third person with scant details could not be used to fasten tax liability on the person whose name does not appear at all or only an abbreviated names appears in the seized material, in the absence of any corroborative evidence to attribute the entries to such a person. Therefore, such a document was liable to the treated as dumb document holding no evidentiary value in respect of the entries found therein unless corroborative evidence is available which could provide a reliable basis for deciphering the nature and character of the said entries. The Ld. CIT(A) referred to various judicial decisions to support the said conclusion. The same include the decision of Jabalpur Bench of Tribunal in the case of ACIT vs Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O], the decision of Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. Vs ITO (ITA No.250/Mum/2013) as well as the decision of Hon’ble Supreme Court in the case of Common Cause vs. UOI (77 Taxmann.com 245).

Undisclosed Receipts as per material seized from J. Srinivasan 20.1 This addition was made for AY 2017-18. In the assessment order, it was stated by Ld. AO that Shri J. Srinivasan (‘JS’ in short), a personal clerk to the director of public health was posted as personal clerk to the assessee in assessee’s capacity as Minister of Health and family welfare. His residence was also searched on 07.04.2017 wherein two files with the names “Remo 21.10.2016 accounts sheets.docx” and “Petty cash expenses November, 2016.docx” was found in the email account of JS. The same were downloaded, printed and seized vide ANN/RR/JS/LS/S dated 07-04-2017 (Page No.20 to 38). The said document allegedly contained date-wise details of funds received and expanded during the period from 23.07.2016 to 09.11.2016. The cash received from various sources during that period aggregated to Rs.20.75 Crores. A statement was recorded from JS on 07.04.2017. In reply to Q. No.5, he stated that his role was to manage visitors and look after transfers and postings of officials pertaining to the Health Department. He further stated that he also carried out instructions given by Health Minister’s family and other works assigned by the Minister. In reply to Q. No.18 with regard to contents of Page No.37 of the seized material as seized vide ANN/RR/JS/LS/S, he explained that first column represent date on which transaction took place, the second column represent the particulars of transactions, the third column represent payments made and the last column represent the amounts received. With regard to entry of Rs.212.09 Lacs shown in the receipt Column against the date 30.07.2017 with the narration as ‘transfer and posting’, he admitted that he received that amount on the said date. He stated that the relevant file downloaded from his email account contained statement of receipts and payments for the year 2016 prepared by him and mailed to himself. In reply to Q. No.19, he stated that he used to collect cash through other Personal Assistants (PAs) from the beneficiaries of transfer and postings and other entities connected to the Ministry of Health and family welfare and handed over the cash so collected to the assessee. 20.2 The said statement was stated to be confirmed by Shri D. Ajay Kumar (another PA of the assessee) in statement u/s 131 on 11.04.2017. The resident of another person Shri A Saravanan was also searched on 07.04.2017 and his statement was also recorded u/s 132(4). He sated that the he was doing jobs assigned to him by the assessee from November, 2013 onwards. He was private PS to the assessee and looking after transfer and posting of all the cadres in the Department of Health and proceedings of tenders with the help of other PAs to the assessee. He stated that they collected money in the process of work assigned to them and handed over the same to the assessee and his representatives. In the background of all these statements and seized material, the assessee was show-caused by Ld. AO proposing to consider the aggregate receipts of Rs.20.75 Crores as income of the assessee as allegedly received from various persons during the period from July, 2016 to November, 2016. 20.3 Upon being confronted, the assessee categorically denied the same and stated that Shri JS was not instructed to handle his financial affairs and his job was restricted to coordinating the patient referrals from various public representations. The attention was drawn to retraction letters filed by JS on 17.04.2017 and 12.12.2018. During cross- examination of JS by assessee’s representative on 18.11.2019, he stated that his role was to forward the representations as presented to the Minister to various officer though proper channel and he would co- ordinate with the patients for better care. He stated that depositions made on 07.04.2017 was totally wrong and job description as stated by him was never carried out by him as the Minister had many PAs. He further stated that he was under stress and pressure and he succumbed to the same and signed the statement as typed by the officials. He stated that he did not receive or paid any money under the directions of the assessee or on the directions of Shri A. Saravanan. On the basis of the same, the assessee opposed any addition on this account. 20.4 Shri JS was re-examined by Ld. AO immediately. The Ld. AO held that vague and unproved allegations of threats, coercion etc. were made by him to justify retraction. Therefore, the retraction was to be ignored. The statement given during the search alone would give the correct picture as the deponent would be free to depose the actual facts known to him without being under compulsive influence of his masters. The retraction was purely an afterthought. The relevant evidences regarding unaccounted receipts were found in the email account. The said email account was used and operated by JS, the printouts of which were seized during the course of the search at his residence. The entries in the seized material represented statement of account of receipts and payments and the same was maintained by JS who acted as PA to the assessee and he carried out the instructions given by the assessee. He had given clear and detailed explanation to the entries / notings in the said seized material in his sworn statement dated 07.04.2017. The said entries pertained to the assessee in his capacity as Health Minister. The Ld. AO also placed reliance on the statement u/s 131 by Shri D Ajay Kumar, another PA to the assessee. In his reply to Q.No.4 of the statement, Shri D Ajay Kumar stated that Shri A Saravanan, PA of the assessee used to fix the amount to be collected from the persons seeking transfer and postings and collected money from the said persons. He stated that he used to collect the money from such persons in the absence of Shri A Saravanan and would hand-over the same to A. Saravanan. Further, Shri D Ajay Kumar confirmed the reply given by Shri A Saravanan to Q.No.5 of the statement recorded at his residence during the course of the search regarding the work assigned to various PAs including Shri D Ajay Kumar. In the said statement, Shri A Saravanan had stated that Shri D Ajay Kumar was assigned the work of collecting commission from beneficiaries of transfer and postings of Directorate of Medical Services and Food Safety. Therefore, having regard to the material seized at the residence of JS, the detailed explanation furnished by JS with regard to the contents of the said seized material in his sworn statement dated 07.04.2017 and the statements of Shri A Saravanan and Shri D Ajay Kumar, other PAs of the assessee which corroborated the statement of JS, Ld. AO inferred that the assessee was in receipt of Rs.20.75 Crores during the period from July, 2016 to November 2016. The same was undisclosed receipt and accordingly, these receipts were added to the income of the assessee for AY 2017-18. 20.5 During appellate proceedings, the assessee vehemently assailed the conclusion of Ld. AO and referred to the retraction of JS. The assessee also assailed the evidentiary value of seized loose sheets which were printouts from the download of email and its two attachments in the email-id of Shri J Srinivasan from his laptop. It was submitted that the said loose sheets being print out of digital / electronic evidence ought to be accompanied by a certificate u/s 65-B (4) of the Indian Evidence Act 1872. The same was a mandatory requirement and the same was not complied with. Reference was made to manual of CBDT as issued in the year 2014. The manual stressed the need to maintain the integrity of electronic record as evidence. In the present case, the procedure laid out in Sec. 65-B was not complied with as regard to authentication and certification of said seized material and therefore, the same could not be relied upon. The source of the two attachments in the email of JS was not known. To support the same, reference was made to the decision of Hon’ble High Court of Madras in M/s Vetrivel Minerals vs. ACIT (129 Taxmann.com 126) as well as the decision of Mumbai Tribunal in the case of Shri Anand Jaikumar Jain (ITA Nos. 3820, 3821, 3822 & 3823/Mum/2019). The assessee thus submitted that impugned addition as based on loose sheets were drawn from the digital evidence and not supported by the authentication and certification as required u/s 65-B of the Indian Evidence Act and therefore, the addition was to be deleted. 20.6 The Ld. CIT(A) noted that the addition was based on seized material which was represented by the seized loose sheets at page nos.72 to 90 of ANN/RR/JS/LS/S. The same was printed from two excel sheets bearing excel file names "Remo 21.10.2016 accounts sheets.docx" and "PETTY CASH EXPENSES NOVEMBER 2016.docx" which was found as attachments in the email account of JS and which was sent to his email-id from the same email-id. The said seized material allegedly contained details of cash receipts and cash payments during the period from 23.07.2016 to 09.11.2016. The aggregate of the cash receipts amounted to Rs.20.75 Crores. The AO held that the said cash receipts as reflected in the seized material represent the unaccounted cash receipts of the assessee by relying on the statement of JS explaining the contents of the seized material and the statements of Shri A Saravanan and Shri D Ajay Kumar, PAs to the assessee stating to be corroborating the same. The assessee assailed the impugned addition on merits and also challenged the admissibility of the seized loose sheets as evidence. On legal ground, it was urged that the seized loose sheets which were printouts taken from the two excel files as downloaded from the email account of JS, were not accompanied by a certificate u/s 65B of Indian Evidence Act 1872. It was contended that this certificate u/s 65B was a condition precedent as to the admissibility of evidence by way of electronic record as reiterated in the judgement of the Hon'ble Apex Court in the case of Arjun Pandit Rao Khotkar vs. Kailash Kushanrao Gorantyal and others (2020 SCC Online SC 571). 20.7 The assessee contended that the loose sheets as relied upon by Ld. AO did not constitute admissible evidence in view of non- compliance of the mandatory requirement that the secondary evidence of an electronic record has to be accompanied by a Certificate u/s 65B(4) of the Indian Evidence Act, 1872. The assessee stated that the email and its two attachments represent the primary evidence which is on a digital platform and the same are in the nature of electronic record and the printouts taken and seized after downloading the said attachments represent secondary evidence of such electronic record. The assessee stated that the source of the aforesaid two attachments in the email of Shri J Srinivasan was not known. It was pointed out that the said attachments were downloaded, printed and seized and the same were sought to be used as evidence without following the procedure prescribed in the Indian Evidence Act as well as the procedure laid down in the Digital Evidence Investigation Manual 2014 of CBDT which was in conformity with the Indian Evidence Act. The assessee also contended that computer output in the form of printouts could be considered as a "document" under the Indian Evidence Act with the pre-requisite that the conditions as prescribed u/s 65B (2) are mandatorily fulfilled. The assessee contended that where a statement in evidence is sought to be given by virtue of Sec.65B, the provisions of Sec.65B (4) require that such statement in evidence is accompanied by a certificate regarding the satisfaction of the conditions laid down in Sec.65B (2). Reliance was placed on the decision of Hon'ble Supreme Court in the case of Arjun Panditrao Khotkar Vs Kailash Kushanrao Gorantyal and Others 2020 SCC Online SC 571 wherein it was held that certificate u/s 65B (4) is mandatory and a condition precedent to the admissibility of evidence by way of electronic record. This decision is stated to be relied upon by Hon'ble Jurisdictional High Court in the case of Vetrivel Minerals (129 Taxmann.com 126). The assessee contended that in the light of these decisions as well as in the light of CBDT Digital Evidence Investigation Manual, the seized loose sheets could not be treated as admissible evidence in the absence of mandatory certification as required u/s 65B of the Indian Evidence Act and the addition made by the AO on the basis of such inadmissible evidence is not sustainable in Law. 20.8 Considering the submissions of the assessee, a remand was sought from Ld. AO on 21.03.2023 requesting for submission of copy of certificate drawn u/s 65B (4) with regard to the said evidence. In remand report dated 29.03.2023, it was submitted by Ld. AO that during the course of search at residence of JS on 07.04.2017, two attachments were found in his email-id which were seized vide Annexure ANN/RR/JS/LS/S. The said documents contained date-wise details of funds received and expended during 23.07.2016 to 09.11.2016. The said email-id was opened by Shri JS as the password was only in his possession and the printouts of the email were seized from JS. These printouts were signed by Shri JS himself and they were seized vide annexure ANN/RR/JS/LS/S as per due procedure of law. These evidences constitute primary evidence. After having taken printouts, the evidence was not in electronic form. The provisions of Section 65B of the Indian Evidence Act would apply only in cases where the evidences were presented in electronic form and the printouts, which are unsigned, are produced as evidences. Therefore, the provisions of Sec.65B of Indian Evidence Act, 1872 would not apply to the circumstances of this case. The integrity and evidentiary value of these evidences could not be questioned during the course of the appeal proceedings. It was also stated that the email service including access and storage of the mails were provided by an independent service provider on a global scale with built-in safety features. It was impossible to manipulate / alter the contents stored in the e-mail provided by an independent service provider known for providing highly secure encrypted e-mail transmissions. The signed printouts of the contents of the e-mail were not electronic evidences and the provisions of Sec.65B would not apply. In the present case, no electronic device was produced as evidence as such. But it was the printouts taken during the course of the search in the presence of the witnesses and signed by Shri JS himself. The email was not a computer-generated output or a document saved in the computer. The Ld. AO also referred to the deposition made by Shri JS on the contents of the documents in his sworn statement dated 07.04.2017 wherein he acknowledged that the email contents were prepared by him. The said deposition constitutes complete evidence for the transactions recorded therein. The email extract constitutes 'document' as per Section 3 of the Indian Evidence Act, 1872 and hence admissible as evidence without reference to Section 65B of the Indian Evidence Act, 1872. The legal presumption under Section 132(4A) of the Income Tax Act, 1961 would also apply.

Proceeding further, so far as the admissibility of printouts of excel sheets are concerned, we concur that the two excel sheets were mere attachments in the email. The source of the files was unknown. The fact that the printouts were signed and authenticated by JS would not alter this material position. The entire basis of addition is two excel sheets which would constitute primary evidence and the same are electronic records. As rightly held by Ld. CIT(A), the provisions of Sec.65B specifically deals with provisions relating to admissibility of electronic records. These provisions have overriding effect over other provisions of the Indian Evidence Act in view of non-obstante clause embedded therein. The provisions of Sec.65B (1) clearly provide that information contained in the electronic records which is printed on paper or stored / recorded / copied in optical / magnetic media produced by a computer (referred to as computer output) shall be deemed to be a document and shall be admissible as evidence in any proceedings without the production of the original, if the conditions mentioned in the said sections are satisfied in relation to the information in the computer in question. The conditions to be satisfied for computer output / secondary evidences to be deemed as a document which is admissible as evidence in any proceedings is laid down in Sec.65B (2). The provisions of Sec.65B (4) mandate furnishing of a prescribed certificate which is absent in the present case. Even during hearing before us, till date, no certificate has been shown to us. In our considered opinion, this certificate was a mandatory requirement for treating the computer output / secondary evidence of an electronic record as evidence to prove the contents of a primary electronic record. The Hon’ble CBDT has also considered this position and instructed field authorities to comply with this special procedure to handle such computer output in Digital Evidence Investigation manual. The case law of Hon’ble Supreme Court in the case of Anvar P.V. vs. P.K. Basheer AIR 2015 SC 180 support the conclusion of Ld. CIT(A). In this decision, it was held that the safeguards as provided in Sec.65A and 65B of the Indian evidence Act were meant to ensure the source and authenticity of an electronic record sought to be used as evidence since source and authenticity are two hallmarks of an electronic record. It was noted that the electronic records would be more susceptible to tampering, alteration, transposition, exclusion etc. In the decision of Arjun Panditrao Khotkar Vs Kailash Kushanrao Gorantyal and Others 2020 SCC Online SC 571, it was held that certificate under Sec.65B (4) was mandatory and a condition precedent to admissibility of evidence by way of electronic record and that the non-obstante clause in 65B (1) makes it clear that when it comes to information contained in an electronic record, its admissibility is possible only if all the conditions as prescribed in such section are fulfilled, irrespective of whatever has been provided in Sec.62 or 65 of the Evidence Act. The decision of Hon’ble High Court of Madras in the case of M/s Vetrivel Minerals vs. ACIT (129 Taxmann.com 126) also support the conclusion of Ld. CIT(A). We note that this decision has subsequently been followed by Hon’ble Court in the case of Saravana Selvarathnam Retails (P.) Ltd. vs. CIT (160 Taxmann.com 287; 23/02/2024). In this decision, Hon’ble Court held that the manual issued by the CBDT would be in the nature of orders, instructions and directions as prescribed u/s 119(1) of the Act and in such case, it is mandatory for the Department to follow it. It was further held that merely gathering electronic evidence was not sufficient rather the efforts have to be made to corroborate the contents therein vis-à-vis other evidences such as material and oral. All these decisions support the case of the assessee.

As rightly considered by Ld. CIT(A), the loose sheets were mere printouts of an electronic record found in the email account of JS. The printouts do not have independent existence and therefore, the provisions of Sec.65B would apply for determining the admissibility of such evidence. Further, these excel sheets are by way of attachments only which would be uploaded either from the internal hard disk of the computer device or from external memory devices such as hard disk, pen drive etc. where the original excel files may have been stored. It would only be such original excel files that could be treated as primary electronic records. The said excel sheets founds as an attachment themselves would represent secondary evidences only. Therefore, mandatory conditions of Sec. 65B have to be fulfilled. It is clear that this requirement has overriding effect on all the other provisions of Indian Evidence Act. In the absence of any such certificate even up-to this point of time, the adjudication of Ld. CIT(A) could not be faulted with. We order so. Even on merits, we find that the seized excel sheets are not supported by any corroborative evidences. The only basis of addition is the statement of Shri J. Srinivasan which stood retracted within a short span of time. The retraction was reiterated by JS during cross- examination and re-examination. In such a case, the whole case of the revenue would fall apart. Accordingly, the corresponding grounds as raised by the revenue stand dismissed.

Addition of Unexplained Expenditure As per material seized from D. Ajay Kumar 24.1 This addition was made for AY 2017-18. This addition stem from search at the residence of Shri D. Ajay Kumar. The official role assigned to that person was to receive and dispatch tapals and maintenance of files. During search on him, two spiral notebooks were seized vide Annexures ANN/MS/DA/B&D/S-1 and S-2. The outer page of the spiral notebook no. 2 contained printed State Government Emblem and the name of Health and family welfare department and ‘Ajay’ written on it. The inner side of the said page contained the name and designation of the assessee at the bottom. The said spiral notebook allegedly contained notings with regard to expenses incurred towards food items, liquor and accommodation etc. during February, 2017. The total expenditure was found to be Rs.30.90 Lacs as noted on Page No.24 of the spiral notebook. 24.2 Shri D. Ajay Kumar, in recorded statement, stated that he merely recorded the details given to him by Shri A. Saravanan and that he had no idea regarding what it was meant for and the source of money. In statement u/s 131 on 04.07.2016, he stated that Page Nos. 18 to 25 of the spiral notebook-2 contained details of expenses incurred for Koovathur MLA camp. The Ld. AO alleged that the said expenditure was sourced from assessee and accordingly, he proceeded to make this addition in the hands of the assessee. The assessee opposed any such addition and stated that the seized material did not relate to him and he was not holding any office as an office bearer or as in-charge of administration or accounts in the political party to which he belonged. It was also stated that Shri Saravanan was not working as his PA and he had not entrusted any responsibility to him. Shri D. Ajay Kumar was working as a PA who was responsible for collecting petitions from the public and he was not connected with any political party matters. The assessee also referred to the retraction made by Shri D. Ajay Kumar. The cross-examination of Shri D. Ajay Kumar was provided to assessee’s representative on 22.11.2019. He stated that he worked at the camp office of the assessee rendering clerical assistance. He was forced and threatened to sign the typed statements on 07.04.2017, 11.04.2017 and 04.07.2017. He also stated that he was not aware of the contents of the sworn statements recorded from him and he was not provided with the copies of the said statements by the department. He stated that he was given the copies of the statement by the assessee on 31.12.2018 and he filed his retraction affidavit immediately on 07.01.2019 once he came to know the contents of the statements. 24.3 During re-examination by Ld. AO on same day, he reiterated the statements given during cross-examination. However, Ld. AO rejected the retraction on the ground that there was nothing on record to suggest that he was not in proper frame of mind or was under any threat, coercion or undue influence during the course of recording of the statements. There was no iota of truth / evidence to indicate that any force, threat, coercion or undue influence was brought on Shri D Ajay Kumar in the course of his various depositions. The AO observed that since the said sworn statements were short, specific to the details and simple to understand, the averment of Shri D Ajay Kumar that he was not aware of the contents of the statements, until he was provided the copies of the same by the assessee, was false and misleading. As regards the role of Shri A Saravanan, the AO observed that several other persons such as Shri J Srinivasan, Shri Nainar Mohammed and Shri J Sadiq Batcha independently confirmed the role of Shri A Saravanan in their respective sworn statements recorded during the course of the search at different premises by different Authorised Officers. The AO pointed out that Shri A Saravanan himself admitted the receipt of money for transfers and posting and regarding the allocation of work to various PAs to the assessee as per the instructions of the assessee in his sworn statement dated 07.04.2017. Considering all these facts, Ld. AO concluded that the said material pointed to the assessee only. The availability of incriminating evidence reflecting the expenditure pertaining to the meeting of the MLAs at Koovathur during February 2017 with one of his PAs and in the light of the ability of the assessee to mobilize funds through transfer and posting etc. in the Department of Health by employing a team of PAs would lead to an inference that the source of the said expenditure was the assessee only and there was no other plausible explanation. The retraction filed by Shri D Ajay Kumar nearly after two years was clearly an afterthought. Accordingly, the amount of Rs.30.90 Lacs was added to the income of the assessee as unexplained expenditure. The assessee assailed the impugned addition by way of elaborate written submissions during first appeal. 24.4 The Ld. CIT(A) duly considered the findings of Ld. AO as well as the assessee’s defense thereto. It was noted that considering the contents of spiral notebooks and by relying upon the statement of Shri D Ajay Kumar explaining the contents of the said seized material coupled with the statements of Shri A Saravanan, Ld. AO made impugned addition in the hands of the assessee. The assessee contended that Shri D Ajay Kumar was not a PA to the assessee as stated by Ld. AO rather he was working as an assistant in the office of Director of Medical services and was posted as an assistant in the assessee’s office. The statement of that person was not reliable since the said person was neither a party functionary nor assigned with any such responsibility so as to know the details of a political camp. The assessee also contended that the said statement of Sri. D Ajay Kumar dated 04.07.2017 was contrary to the statement given by the same person on 07.04.2017 with regard to the same material that he had merely scribbled the said notings as told to him by Shri A Saravanan, PA to the assessee and that he had no knowledge of what the expenses were meant for and the source of money for the said expenses. The assessee pointed out that Shri A Saravanan had also not confirmed that he had given any instructions to Shri D Ajay Kumar to record the said scribblings. The assessee also contended that Shri A Saravanan, who was his friend, was not a PA to him and that no responsibilities were assigned to Shri A Saravanan by him. Reference was also made to sworn affidavit dated 07.01.2019 as filed by Shri D Ajay Kumar stating that earlier statements were obtained under threat, coercion and intimidation and that the contents of the same were incorrect and not stated by him. During cross- examination and re-examination also, the retraction was reiterated. On the corroborative statement of Shri A. Saravanan, it was also stated that the said person had also retracted his statement by sworn affidavits dated 20.04.2017 and 01.12.2018 and reiterated the retraction during the course of his cross-examination and re-examination on 11.11.2019. He clarified therein that he was not the PA of the assessee. It was further stated that the spiral note book was not seized from the premises of the assessee. There was no mention of assessee’s name in the notebook. Shri D Ajay Kumar did not state anywhere in his statement that the assessee was the source of the expenditure as noted in the spiral note book. The assessee maintained that since he was not an office bearer of the political party or in-charge of its administration or accounts, he had no connection with the expenditure incurred for Koovathur MLA camp.

Addition of unexplained cash found during search 26.1 This addition was made for AY 2018-19. During search, cash of Rs.3.59 Lacs was found at the official residence of the assessee at Greenways Road, RA Puram, Chennai. The cash of Rs.3 Lacs was seized. In recorded statement, the assessee explained that the cash belonged to his proprietary concern M/s RBM. However, no evidence thereof could be produced by the assessee at the time of recording of statement. During assessment proceedings, the assessee reiterated that the cash was duly accounted for in the books of accounts of RBM in its return of income filed for AY 2018-19. In the subsequent reply dated 06.06.2019, the assessee stated that he had drawn Rs.3 lakhs in cash from RBM and kept the same at his residence. The attention was drawn to the financial statements of RBM for AY 2018-19. In support, a copy of day book of M/s RBM was furnished for the period from 01.04.2017 to 07.04.2017. The balance cash of Rs.0.59 Lacs was stated to be belonging to other family members. However, Ld. AO rejected the same for want of evidences and treated the same as undisclosed income of the assessee. 26.2 Another cash of Rs.21.49 Lacs was found during search at the residence of the assessee at Illupur, Pudukottai District. The cash to the extent of Rs.12.69 Lacs was found in brown covers with the names of the candidates for jobs in Nutrition Meal program written on the covers. The Ld. AO stated that the interview call letters for the said candidates were also found in some cases which were also seized. The statement of Shri R Chinnathambi (assessee’s father) who was residing at the said premises, was recorded u/s 132(4) during the search on 07.04.2017. In reply to Q.No.13, he stated that cash of Rs.12.96 Lacs was received from various persons for getting jobs for them. He stated that cash of Rs.6 to 7 lakhs belonging to outside persons was also kept at the residence for which he was unable to produce any details and supporting evidences. During assessment proceedings, the assessee explained that the cash of Rs.21.49 Lacs was duly accounted for by his father. In the subsequent reply dated 06.06.2019, it was explained that aforesaid cash belonged to his father and the same had been duly accounted by him. In return of income of the father for AY 2017-18, the cash balance as per books was shown for Rs.28.84 Lacs. In support, the copy of cash book of the father was furnished. 26.3 The Ld. AO noted that the opening cash balance as on 01.04.2017 was shown in the cash book for Rs.28.82 Lacs. There were receipts of Rs.3 Lacs and Rs.1.5 Lacs on 02.04.2017, Rs. 2 Lacs and Rs.1 Lacs on 04.04.2017 and Rs.1.5 Lacs & Rs.9 Lacs on 05.04.2017. The AO stated that no explanation was given for the said receipts in the cash book on the dates prior to the date of search and no bank book was furnished to corroborate the said entries. The AO also observed that an entry was made in the cash book on 07.04.2017 as "R. Chinnathambi Current account (Income tax seizure) - Rs.20 lakhs-Cr" and the closing balance as on 07.04.2017 was arrived at Rs.9.87 Lacs. As per the said entries, the cash on the date of search ought to have been Rs.29.87 Lacs whereas the cash was found only for Rs.21.49 Lacs only. No explanation was furnished for shortfall of Rs.8.38 Lacs. The cash balance as per Balance Sheet as on 31.03.2017 was shown at Rs.28.84 Lacs in the return of income filed by Shri Chinnathambi on 30.10.2017 u/s 139 as well as in the return of income filed on 07.12.2017 in response to notice u/s 153A of the Act. The AO alleged that the availability of the cash found during the search was attempted to be explained by the above-mentioned receipt entries made in the cash book as the books of account were finalized and return was filed u/s 139 after the date of search. However, no other evidence was furnished to establish the availability of the cash-in-hand on the date of search. As against this, the incriminating material indicates that the amount of Rs.12.96 Lacs was received from various candidates for getting jobs in the Nutrition Meal program of the State Government. The Page Nos. 1- 28 of seized loose sheets vide Annexure ANN/VB-CT/DN/LS/S contained brown covers in which the cash was found with names and addresses of the candidates mentioned on the covers and copies of the interview letters in some of the cases. The AO also stated that page Nos.318-322 of the said seizure annexure contained the names, addresses, mobile numbers and the amount received in respect of various candidates. The AO, therefore, concluded that the cash of Rs.12.96 Lacs as found in the brown covers during the search was to be treated as income earned by the assessee since the said requests for jobs in the Nutrition Meal Program were received in view of his political and official position. Regarding balance cash of Rs.8.53 Lacs, Ld. AO stated that Shri Chinnathambi could not furnish the details of sources of the said cash during the search though he claimed that cash to the extent of Rs.6 to 7 Lacs belonged to outside persons. Moreover, Ld. AO observed that the said cash was also attempted to be explained as the cash available in the cash book of Shri Chinnathambi during the assessment proceedings which was merely an afterthought. Therefore, the explanation was found to be not satisfactory and entire cash of Rs.21.49 Lacs was treated as undisclosed income of the assessee. Finally, Ld. AO made addition of cash found for Rs.25.08 Lacs (Rs.3.59 Lacs + Rs.21.49 Lacs) for AY 2018-19. During first appeal, the assessee assailed the addition by way of elaborate written submissions. 26.4 The assessee’s explanation for Rs.3.59 Lacs was accepted by Ld. CIT(A) by considering the fact that the assessee furnished copy of day book of M/s RBM for the period from 01.04.2017 to 07.04.2017. Upon perusal of the same, it was seen that the amount of Rs.3 Lacs was drawn by the assessee on 03.04.2017 from the available cash balance of M/s RBM. The capital account of the assessee was debited. Upon seizure of cash of Rs.3 Lacs, the capital account was debited on 07.04.2017. The necessary entries were also reported in the sundry debtors account. Therefore, the claim was factually correct. The remaining cash could be considered to be belonging to assessee’s wife and minor daughters. Accordingly, the addition of Rs.3.59 Lacs was deleted. 26.5 Regarding cash balance of Rs.21.49 Lacs, it was contended that the residence at Iluppur belonged to his father Shri R Chinnathambi and that the cash found therein during the search could not be considered to be the cash belonging to the assessee. It was also pointed out that the said cash had already been added to the total income of his father in the assessment order dated 30.12.2019 passed u/s 143(3) r.w.s. 153C in the case of his father for AY 2018-19 and it was, therefore, incorrect to make addition of the said amount once again in the hands of the assessee. The said cash could not be considered to be the cash pertaining to the assessee as there was no mention of his name in the seized material and it had not been stated by Shri R Chinnathambi during the course of the search that the cash belonged to the assessee. On the observation of Ld. AO that the cash of Rs.12.59 Lacs was found in brown covers along with the name and address of the candidates for a job in Nutrition Meal Program and the statement given by Shri R Chinnathambi during the search that the said amounts were received for getting a job, the assessee pointed out that the said statement dated 07.04.2017 had already been retracted by Shri Chinnathambi vide his letter dated 06.07.2018. It was stated that the letter dated 03.09.2018 filed by Shri Chinnathambi before Ld. AO clarified that the cash and brown covers were found separately and that the said cash of Rs.12.96 Lacs consisted of cash of Rs.1 Lacs belonging to him, cash of Rs.3 Lacs belonged to Mother Theresa Educational Charitable Trust (of which he was the chairman) and the cash of Rs.9 Lacs was given to him for safe custody by five persons whose names were mentioned in the said letter. 26.6 The Ld. CIT(A) observed that the fact that the residence at Illupur belonged to assessee’s father was correct. In reply to Q.No.4 of statement u/s 132(4), Shri R Chinnathambi confirmed this fact. Therefore, the assessee could not be considered to be the owner of cash found therein unless evidence in that regard was found. On perusal of the seized material, it was noticed that there was no such evidence. Moreover, Shri R Chinnathambi did not state that cash found belonged to the assessee. Further, the cash so found was treated as unexplained cash in the hands of assessee’s father in assessment order dated 30.12.2019 for AY 2018-19. In the assessment order, it was stated that addition was made substantively in the hands of the assessee and protectively in the hands of Shri R Chinnathambi. For the aforesaid reasons, the addition of unaccounted cash was to be considered in the hands of Shri R Chinnathambi only on a substantive basis. The same could not be considered in the hands of the assessee and accordingly, the impugned addition was deleted against which the revenue is in further appeal before us. Our findings on this issue 27. We find that the adjudication of Ld. CIT(A) is based on factual finding. On the issue of addition of cash found for Rs.3.59 Lacs, it could be seen that the amount of Rs.3 Lacs was withdrawn by the assessee from M/s RBM and these entries were duly reflected in the financial statements of M/s RBM. The same was also supported by the copy of day book of M/s RBM for the period from 01.04.2017 to 07.04.2017 as furnished by the assessee. The assessee withdrew cash of Rs.3 Lacs on 03.04.2017 and his capital account was debited. This claim was factually correct. The remaining sum is paltry sum which could be considered to be cash belonging to assessee’ family members. Therefore, the addition, to that extent, has rightly been deleted by Ld. CIT(A).

The remaining cash of Rs.21.49 Lacs has been found from the residence belonging to assessee’s father. The addition has been made on the basis of statement of assessee’s father which stood retracted. Pertinently, this cash has already been added in the hands of assessee’s father for AY 2018-19. In such a case, the cash so found could not be considered to be the cash pertaining to the assessee since there is no evidence on record to support such a conclusion. Therefore, the substantive addition so made in the hands of the assessee has rightly been deleted. We concur the adjudication of Ld. CIT(A) on this issue.

Addition of unexplained cash mobilized for election expenditure 29.1 This addition was made for AY 2018-19. The same stem from incriminating material as found and seized from official residence of the assessee at Chennai which was nothing but a room allotted to the assessee in MLA hostel at Chennai. Some material was also seized from the business premises of Shri Nainar Mohammed and the residential premises of Shri J Srinivasan. The said material allegedly contained details of distribution of cash to the voters of RK Nagar State Assembly Constituency during the Bye-election which was scheduled to be held on 12.04.2017. The Page No.5 of the loose sheet bundle as seized vide annexure ANN/TS/LS/S from the room allotted to the assessee in MLA hostel contained a chart with columns having particulars of the name of the incharge, number of booths under the incharge, total no. of voters in the said booths, 85% of the said voters and the amount for distribution to the said 85% voters. The aggregate amount in respect of all the booths was shown to be Rs.89.65 Crores. The AO observed that the names mentioned therein as incharge persons included the names of several ministers of the State Government. The AO stated that the particulars similar to the particulars available in the said seized loose sheet were also found in some loose sheets seized at the official residence of the assessee vide ANN/MS/CV/LS/S. The Ld. AO also stated that Page No.6 of the bundle as seized from the room allotted to the assessee in MLA Hostel was titled as "Expenses" and it contained 2 sets of entries under two names "Sadique" and "Nainar". 29.2 Shri J Sadique Batcha whose name was mentioned as 'Batcha' in the above-mentioned loose sheet was confronted with the said loose sheet during the course of the search at his residence on 07.04.2017. In response to Q.No.20 of the statement u/s 132(4) dated 07.04.2017, he stated that the loose sheet reflects the transactions which happened between himself and Shri A Saravanan, PA to the assessee. He stated that he used to meet Shri Saravanan two or three times in a month for his business purposes at the residence of the assessee. He stated that Shri Saravanan has given him cash aggregating to Rs.6.55 crores on the dates as mentioned in the loose sheet and the same had been returned to him in full on 01.04.2017. 29.3 The search was also conducted on the same day at the business premises of Shri Nainar Mohammed whose name was mentioned as 'Nainar' in the above-mentioned loose sheet. During search, cash of Rs.3.03 Crores was found out of which cash of Rs.2.94 Crores was seized. In reply to Q.N.9 of statement u/s 132(4), he stated that he used to meet Shri Saravanan two or three times in a month for business purposes at the residence of the assessee. He stated that Shri Saravanan gave him Rs.40 Lacs on 03.04.2017 and told him to put it in covers to the extent of Rs.5 Lacs in each cover. However, the entire amount was returned to him on the same day as Shri Saravanan called him back and asked him to return the money. He stated that when he met Shri Saravanan on 06.04.2017 at the residence of the assessee, Shri Saravanan handed over 3 bags stated to be containing cash of Rs.2.95 Crores and asked him to pack it in denomination of Rs.25000/- in each cover and return it to him on 07.04.2017. He stated that the bags given by Shri Saravanan actually contained cash of Rs.2.94 Crores only on counting the same during the course of the search. Shri Nainar Mohammed was confronted with the loose sheet (page No.6) seized at the room allotted to the assessee in MLA hostel which mentioned his name along with certain amounts, during the course of his statement u/s 132(4) dated 07.04.2017. In his reply to Q.No.16, Shri Nainar Mohammed stated that he had no idea about the notings in the said loose sheet and he reiterated that he had only received Rs.40 Lacs on 03.04.2017 and Rs.2.95 Crores on 06.04.2017. However, Ld. AO pointed out that page No.19 of loose sheets found and seized from the business premises of Shri Nainar Mohammed vide annexure ANN/MKM/NM/LS/S contained entries which matched with the entries found with his name in the loose sheet No.6 seized from the room allotted to the assessee in MLA hostel. The Ld. AO also stated that some of the entries appearing with the name "Nainar" in the loose sheet (page No.6) seized from the room allotted to the assessee in MLA hostel were also found matching with the entries available in the pocket size notebook found and seized at the residence of Shri J Srinivasan (PA of the assessee) vide annexure ANN/RR/JS/B&D/S-2. The AO observed that the said entries have further corroborated that Shri Nainar Mohammed had received the amounts from Shri Saravanan, as mentioned in the loose sheet seized from the room allotted to the assessee in the MLA hostel. The Ld. AO further observed that the loose sheet No.62 seized vide annexure ANN/MS/CV/LS/F&S on 07.04.2017 from the official residence of the assessee also contained details of amounts aggregating to Rs.25 Lacs along with the name “Nainar" and date 01.04.2017 written therein and that the said date and amount matched with the corresponding entry in the loose sheet No.6 seized from the room allotted to the assessee in MLA hostel found noted against the name Nainar. With regard to the entries in the pocket size notebook seized at the residence of Shri J Srinivasan, Sri. J. Srinivasan stated in his sworn statement dated 07.04.2017 that the same were written by Shri A Saravanan, PA to the assessee and that he had no idea of the contents. Further, the AO stated that loose sheet No.7 of ANN/TS/LS/S seized from the room allotted to the assessee in MLA hostel contained various entries under the heading "AbstractExpenses" aggregating to 217.20 and that the same included two major entries namely "RK Nagar cover (30.03.17)- 95.00’ and "RK Nagar (HM) cover (28.03.17)- 33.00". Further, the AO observed that the loose sheet No.10 of ANN/RR/JS/LS/S seized from the residential premises of Shri J Srinivasan contained person-wise breakup of the amount of Rs.95.00 which was found on page no. 7 as seized from the room at MLA hostel mentioned above. With regard to the contents of the said page, Shri J Srinivasan stated in his sworn statement that the relevant notings were made by Shri Saravanan and the same was given to him for safe custody. The AO further stated that the sworn statement of Shri A Saravanan was recorded on 07.04.2017 during the course of search at his residence. With regard to the contents of loose sheet No. 7 of ANN/TS/LS/S seized from the room allotted to the assessee in MLA hostel, Shri Saravanan stated in his answer to Q.No.29 that the said sheet had been prepared by him and the details found therein aggregating to Rs.217.20 Lacs pertain to the day-to-day expenses made in cash in RK Nagar constituency. He stated that the source of the said cash was the amount collected from various persons like contractors, middle men, suppliers, etc. through various departments in Health Ministry and the own funds of the assessee. Shri Saravanan stated in his response to Q.No.22 that the amount fixed by the party high command to the Health Minister (the assessee) for the RK Nagar bye-election was Rs.10 Crores and that he coordinated the mobilization of the said amount as per the instructions of the assessee. He stated that the break- up of amount of Rs.10 Crores mobilized by him was found at page Nos.2 to 4 of the material seized from the room allotted to the assessee at MLA hostel vide ANN/TN/LS/S. Shri Saravanan also stated in his answer to Q.No.8 that the money that was collected by him was given to Shri Sadique Batcha and Shri Nainar Mohammed for temporary custody and the cash was kept in covers by them as per the requirements and was handed over at the residence of the assessee. Subsequently, the covers were handed over to the responsible persons who were assigned as in- charge of cash distribution in RK Nagar constituency. As regards the role played by Shri A Saravanan as a PA to the assessee, AO referred to the replies given by Shri Saravanan to Q. Nos. 3 to 5 of his statement dated 07.04.2017. In his reply to Q.No.3 of the statement, Shri Saravanan stated that he came into contact with the assessee when he studied at Annamalai University during the years 1995-1999. He stated that he was doing the jobs assigned to him by the assessee from November 2013 onwards. In his reply to Q.No.4, he stated that he was a private PA to the Health Minister (assessee) and he was looking after the transfer and posting of all the cadres in the Department of Health of Tamil Nadu and processing of tenders with the help of other PAs to the assessee i.e., Shri Ramachandran, Shri Ajay, Shri Arul, Shri Srinivasan and Shri Abdullah. He stated that they collect money in the process of work assigned to them and would hand over the same either to the assessee or his representatives. It his reply to Q.No.5, Shri Saravanan stated that he was looking after overall supervision of all the PAs to the assessee. He also referred to the role of Shri Ramachandran, Shri Ajay, Shri Arul, Shri Srinivasan and Shri Abdullah. He further explained that all the said PAs would collect money and handover the cash to the Minister either through him or through the Minister's representatives. They used to update the daily accounts in loose sheets and inform the Minister. 29.4 Based on above seized material and relying upon the statements of Shri Saravanan, Shri J Srinivasan, Shri Sadique Batcha and Shri Nainar Mohammed with regard to the contents of the said seized material, Ld. AO drew an inference that the assessee had organised the collection and distribution of money for the RK Nagar Bye- election through his Private PA Shri A Saravanan. As per Ld. AO, Shri Saravanan looked after all the transfer and posting of various cadres in the Health and Family Welfare Department of Tamil Nadu Government as per the instructions of the assessee and he collected money from the beneficiaries of transfer and postings. The AO further observed that Shri Saravanan was being assisted by other PAs to the assessee such as Shri Ramachandran, Shri Ajay, Shri Arul, Shri J Srinivasan, Shri Abdullah and others for this purpose. The work of each PA was stated to be defined by the assessee himself. As per the statement given by Shri Saravanan, all the PAs would collect money from the fields assigned to them and would hand over the cash to the assessee through Shri Saravanan. Based on seized material containing, Ld. AO quantified the amount of such mobilization / expenditure at Rs.15.46 Crores. The said amount was aggregate of Rs.6.55 crores and Rs.3.79 crores found noted on page No.6 of material seized from room allotted to the assessee in MLA hostel, Rs.2.95 Crores as noted in material seized from the premises of Shri Nainar Ahmed and Rs.2.17 crores found noted on page No.7 of material seized from the room allotted to the assessee in MLA hostel. Upon being show-caused, the assessee refuted the allegations of Ld. AO and stated that he was not connected with the expenditure in RK Nagar bye-election since he was neither a candidate in the said election nor he was holding any office in the conduct of elections. The assessee sought cross-examination of various witnesses such as Shri A Saravanan, Shri J Srinivasan, Shri Sadique Batcha and Shri Nainar Mohammed which was granted to the assessee. In cross- examination made by the representatives of the assessee on 11.11.2019, Shri A Saravanan stated that his sworn statement recorded on 07.04.2017 was against the true facts as he was forced to sign on a typed statement. He also stated that he was threatened and coerced to sign a typed statement. Since he was mentally stressed and exhausted, he was compelled to sign the typed statement. This statement was wrong, false and invalid and same could not be treated as his testimony. He clarified that he was not the PA of the Health Minister (assessee) and he did not have any authority to act as the PA to the assessee. In other words, the statement made by him on 07.04.2017 stood retracted. The Ld. AO re-examined him wherein he reiterated the stand taken during cross-examination. However, Ld. AO rejected the retraction on the ground that he could not produce any material evidence which warranted retraction of his sworn statement. The statement was recorded in the presence of two independent witnesses. It was mentioned in Column 6 of the Panchanama that the Authorised Officer recorded the statement of Shri A Saravanan on solemn affirmation / oath and that no coercion, threat, inducement, promise or other influence was brought on the deponent. There was nothing on record to suggest that Shri A Saravanan was not in proper frame of mind or was under any threat, coercion or undue influence during the course of recording of statement. Therefore, the retraction was held to be invalid. The statement as recorded during search only would give correct picture since the deponent would be free to depose the actual facts known to him without being under compulsive influence of his masters. Subsequently, the deponent came under influence of concerned persons which led to retraction of statements given during the course of search. Therefore, the retraction was held to be mere afterthought. Finally, the amount of Rs.15.46 Crores was added as undisclosed income of the assessee with following specific observation: - "The above transactions are in the nature of unexplained receipts undisclosed sources. Hence, in view of the above, in the interests of revenue, based on the documentary evidences seized during the course of search action u/s 132 of the Income Tax Act, 1961, the same are added in the hands of the assessee, subject to the outcome and finality of the investigation by the appropriate anti-corruption agencies."

It could also be seen that Ld. AO made this addition in the hands of the assessee subject to the outcome and finality of the investigation by the appropriate anti-corruption agencies. The Ld. AR stated that the department wrote a letter to Director, DVAC after the search. The DVAC conducted detailed enquiry and finally found no merits in the request of the department. It was specifically found that there was no element of criminality in any manner whatsoever on the part of the assessee and the assessee was not linked to the seized loose sheets in any manner. The copy of the letter was placed before lower authorities and the same has been placed before us. This being the case, the impugned addition would have no legs to stand. It is also pertinent to note that the Hon'ble Madras High Court has also quashed the FIR which has been registered by the State Police on the complaint of ECI vide order dated 13.03.2018 passed in Crl. OP No. 26303 of 2017 (Kept at Pages 36 - 40 of Volume 4). Thus, the caveat expressed in the assessment order has been closed because of the detailed enquiry conducted by DVAC as well as the order of the Hon'ble Madras High Court quashing the FIR on the basis of the complaint of ECI. The Ld. CIT(A) failed to take note of these facts. The statements of all the persons which form the very basis of impugned addition stood retracted and all these persons were subjected to detailed cross examination by the Appellant and re-examination by AO wherein the retraction was reiterated. Under these circumstances, the impugned additions could not be sustained in the hands of the assessee.

Finally, considering the facts and circumstances of the case, the impugned additions as made by Ld. AO are liable to be deleted. We order so. The corresponding grounds raised

We find that similar is the view of Hon’ble Delhi High Court in Pr. CIT vs. Meeta Gutgutia (82 Taxmann.com 287) which has primarily followed the decision of Kabul Chawla (supra). We also find that Special Leave Petition (SLP) filed by the revenue against this decision has already been dismissed by Hon’ble Supreme Court on 02.07.2018. The ratio of all these decisions would squarely apply wherein it was held that concluded assessment could not be disturbed in search proceedings u/s 153A and the additions have necessarily to be based on incriminating material found during the course of search. Considering the same, we concur with the adjudication of Ld. CIT(A).

Other legal grounds before Ld. CIT(A) 36.1 The assessee raised another legal issue and submitted that in the absence of detection of unrecorded assets, no addition could be made for AYs 2011-12 to 2018-19. This ground was dismissed on the ground that the 4th proviso was applicable only in respect of assessment years which fall beyond six assessment years immediately preceding the assessment years relevant to previous year in which search was initiated and not beyond ten years. In the case of the assessee, the only AY which falls beyond the period of six years was AY 2011-12 only. Therefore, this ground was rejected for AYs 2012-13 to 2018-19. 36.2 For AY 2011-12, Ld. CIT(A), after considering the statutory provisions of Sec.153A, observed that the power to issue notice u/s 153A was automatically vested with Ld. AO in the six assessment years immediately preceding the assessment years relevant to previous year in which search was conducted and there was no other condition for issue of notice. However, to travel beyond six years, the conditions as laid down in fourth proviso to Sec. 153A(1) was to be fulfilled. The same was inserted in the Act w.e.f. 01.04.2017 by Finance Act, 2017. One of the conditions was that AO should have been in possession of books of account or other documents / evidence which reveal that the income represented in the form of asset has escaped assessment and such escaped assessment amounts to Rs.50 Lacs or more. The same was also clear from CBDT Circular No.2/2018 dated 15.02.2018. The Ld. CIT(A) then perused the satisfaction note of Ld. AO for AY 2011-12 and noted that this satisfaction was duly arrived at by Ld. AO. Based on information available with Ld. AO at the time of recording of satisfaction note including the inspection reports of the DVO, AO had bona-fide and prima facie belief that the assessee had undisclosed asset by way of undisclosed stock of rough stone and gravel for value exceeding Rs.50 Lacs during previous year relevant to AY 2011-12. Since the mandatory condition was fulfilled, the legal ground for this year was also rejected. 36.3 In year another legal ground, the assessee challenged assumption of jurisdiction u/s 153C for AYs 2015-16 to 2017-18 having regard to material seized during the course of search in the case of M/s SRS Mining and M/s V. Srinivasa Rao Polisetty and others. Since, the related additions, on merits were already deleted, the legal grounds thus raised by the assessee were treated as infructuous and academic in nature. 36.4 Lastly, Ld. CIT(A) made enhancement of income for AYs 2017-18 and 2018-19. The same stem from the fact that the assessee filed a settlement application before ITSC on 30.12.2019 wherein he offered additional income of Rs.1.50 Crores for these two years towards the estimated value of stock of fine dust waste generated out of crushing of rough stones into blue metal. The said application was rejected by ITSC on 09.01.2020. Subsequent applications were also rejected on 24.12.2020 and 27.09.2021. During appellate proceedings, the assessee prayed for considering the same. Accepting the proposal of the assessee, Ld. CIT(A) enhanced the income by Rs.75 Lacs each for AYs 2017-18 and 2018-19. Our findings on legal grounds and enhancement 37. We find that the legal grounds raised by the assessee that in the absence of detection of unrecorded assets, no addition could be made for AYs 2011-12 to 2018-19, has correctly been dealt with by Ld. CIT(A). On the facts of the present case, the 4th proviso would apply only for AY 2011-12 and not for subsequent years. For AY 2011-12, Ld. AO arrived at due satisfaction as required under law. The same was based on inspection reports of the DVO and Ld. AO formed bona-fide and prima facie belief that the assessee had undisclosed asset by way of undisclosed stock of rough stone and gravel for value exceeding Rs.50 Lacs during previous year relevant to AY 2011-12. This mandatory condition has been fulfilled in the present case. The adjudication of legal grounds on assumption of jurisdiction u/s 153C for AYs 2015-16 to 2017- 18 do not require our indulgence since we have confirmed the stand of Ld. CIT(A) on merits. The enhancement has been made as per assessee’s pleadings only. The grounds thus urged in respective appeals stand disposed-off accordingly.

Additional Legal Grounds as raised by the assessee 38.1 For 2018-19, the assessee has raised additional grounds which read as under: -

The Ld. AR has stated that the approval was given within a short span of time and therefore, it was to be held that the same was in mechanical manner. It could be noted that Ld. AO has send proposal and sought requisite approval from appropriate authorities along with various documents to justify its proposal. In our considered opinion, the approval has to be given by the authority after having prima-facie satisfaction only. It was not necessary that detailed findings were to be given on each of the documents as submitted by Ld. AO along with the proposal. Once the approval has been given following due procedure of law, the same has to be considered as a valid approval only. Therefore, this legal ground could not be accepted.

On the issue of DIN, the undisputed position that emerges is that this matter is already sub-judice before Hon’ble Supreme Court and it has been directed therein that the relevant case laws of Hon’ble High Courts holding the field would not be cited as precedent. Therefore, at this stage of proceedings, we refrain from delving into the same. The legal grounds thus raised by the assessee are kept open for appropriate adjudication in the light of final adjudication by Hon’ble Apex Court. Conclusion 42. In AYs 2011-12 & 2012-13, the revenue has raised the issue of quarry expenses and unaccounted sales. In AYs 2013-14 & 2014-15, the only issue in revenue’s appeal is quarry expenses. In AY 2015-16, the revenue has raised the issue of quarry expenses, unaccounted sales and additions of undisclosed receipts. In AY 2016-17, the revenue has raised the issue of quarry expenses and additions of undisclosed receipts. In AY 2017-18, the revenue has raised the issue of quarry expenses, additions of undisclosed receipts, undisclosed closing stock and undisclosed expenses. In AY 2018-19, the revenue has raised the issue of quarry expenses, unexplained cash found and alleged unexplained cash mobilized by the assessee. All these issues have appropriately been dealt with by us at appropriate places. All the appeals of the revenue stand dismissed. 43. In AY 2016-17 & 2017-18, the assessee has raised the issue of quarry expenses besides legal grounds. Both these appeals stand dismissed. In AY 2018-19, the assessee has raised the issue of quarry expenses besides legal ground. The same stand rejected. Another issue is qua unexplained cash mobilized by the assessee which stand allowed. to 702/Chny/2023 stands dismissed. & 590/Chny/23 stand dismissed. ITA No. 591/Chny/2023 stand partly allowed.