BANGAR RAJU PENMETSA,BHIMAVARAM vs. ACIT., CENTRAL CIRCLE -1(4), HYDERABAD

The Ld. CIT(A) erred in considering the fact that there is no hand loan to M/s Opus Holdings Private Limited which can be properly seen from the financial statements of M/s Opus Holdings Private Limited. 12. The Ld. CIT(A) ought to have considered that there is no addition of hand loan of Rs. 4,00,00,000/- to M/s Opus Holdings Private Limited for the A.Y. 2016-17. 13. The Ld. CIT(A) failed to consider the affidavit filed by Rajesh Gandhi stating that there is no hand loan to M/s Opus Holdings Private Limited. 14. The Ld. CIT(A) ought to have appreciated that the assessee has never accepted in his sworn statement that he has given hand loan of Rs. 4,00,00,000/- to M/s Opus Holdings Private Limited. 15. The Ld. CIT(A) failed to consider that the additional evidences filed by the assessee by rejecting the objections to remand report and sustain the addition made by the AO. 16. The Ld. CIT(A) ought to have considered the evidences submitted by the assessee without upholding the decision of the Assessing Officer without due examination. 17. The appellant may add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

The brief facts of the case are that, the assessee is a Managing Director of M/s KVR Consultancy Pvt. Ltd., filed his original return of income for the assessment year 2016-17 on 25.11.2016 declaring a total income of Rs. 9,63,670/-. A search and seizure operation under Section 132 of the Income-tax Act, 1961 (for short “the Act”) was conducted in the case of M/s. Sumeru Infrastructure Park along with connected concerns/individuals on 08.02.2019. During the course of search and seizure operation under Section 132 of the Income-tax Act on 08.02.2019, certain

03.2021 declaring a total income of Rs. 9,63,670/-. During the course of assessment proceedings, the A.O. called upon the assessee to explain the contents of seized documents A/PBR/01 from page numbers 1 to 71. The assessee has not explained the transactions by filing relevant evidences. Therefore, the A.O. made additions of Rs. 43,50,000/- and Rs. 4,00,00,000/- under Section 69 of the Income-tax Act, 1961, and added back to the total income of the assessee. 5. Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has filed detailed written submissions on the issue which has been reproduced at Para 5 on pages 5 to 44 of the Ld. CIT(A) order. The sum and substance of the arguments of the assessee before the Ld. CIT(A) was that, the document found during the course of search in the form of a loan confirmation letter is a dumb document without there being any details as to when the loan was given by the assessee so as to say that other party has confirmed the loan. The assessee further contended that the letter does not contain any details how the loan has been paid either by cash or cheque. And also, when the said loan has been paid by the 6 Bangar Raju Penmetsa assessee. In the absence of any specific details, the said documents can be considered as a dumb document and based on the said dumb document, the addition cannot be made. The assessee further contended that the other documents found relating to additions made by the A.O. for Rs. 43,50,000/- is in respect of one letter addressed by Mohsin Khan to the assessee with regard to the financial transaction of Rs. 40,00,000/- given by Mohsin Khan to the assessee through proper banking channel and the net amount has been directed to be paid by the assessee to S.V. Ramana Rao on behalf of Mohsin Khan. However, the A.O. has made additions of Rs. 43,50,000/- including some of Rs. 3,50,000/- repaid by the assessee through proper banking channel. 6. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of the relevant seized material found during the course of search, rejected the explanation of the assessee and sustained the additions made by the A.O. towards unexplained money of Rs. 4,00,00,000/- on the ground that the documents found during the course of search being loan confirmation letter clearly shows it is a hand loan given by the 7 Bangar Raju Penmetsa assessee to M/s. Opus Holdings Pvt. Ltd. and the same has been confirmed by the company by filing a confirmation letter. Further, the assessee failed to explain the above documents with relevant evidences. In the absence of any explanation from the assessee, the A.O. has rightly assessed sum of Rs. 4,00,00,000/- towards hand loan given by the assessee to M/s. Opus Holdings Pvt. Ltd. as unexplained investment under Section 69 of the Income-tax Act, 1961. The Ld. CIT(A) further noted that, in respect of additions made by the A.O. for Rs. 43,50,000/-, the assessee had failed to explain the nature of credits received from Mr. Mohsin Khan, no verifiable documentary evidence was produced by the assessee. The assessee only submitted an affidavit, which is not sufficient to rebut the presumption arising from the seized signed confirmation letter. The source of such huge hand loan was not explained. Therefore, held that there is no error in the additions made by the A.O. towards loan transactions with Mr. Mohsin Khan and accordingly, rejected the explanation of the assessee and sustained the additions made by the A.O. The relevant findings of the Ld. CIT(A) are as under :

2.3 In the instant case, the additions are based on documents seized i.e. Annexure A/PBR/01 during search proceedings conducted on 08.02.2019, which contained a confirmation letter addressed to the assessee reflecting Rs. 4 crore received as loan by M/s. Opus Holdings Pvt. Ltd., and an undated letter being receipt of Rs. 43.50 lakhs from Mr. Mohsin Khan. These documents were seized from the assessee's premises during search. In the statement recorded u/s. 132(4) of the I.T. Act, appellant acknowledged the seized documents as belonging to him. Since the documents contained names, quantum, and transactions reference with appellant, they are treated as incriminating material for the purposes of Section 153A. Hence, the additions made are within the permissible scope of a valid search assessment. Accordingly, these grounds are dismissed. 6.3 In ground No. 6, the appellant contested that the assessment was erroneously treated as ex parte under Section 144 despite submissions filed. However, it is seen from the assessment record that the assessee was given multiple opportunities to explain the transactions and file relevant documents. But the appellant failed to produce conclusive evidence. Therefore, the A.O. was justified in framing the assessment based on available material and documents found during search. Therefore, this ground of appeal is dismissed. 6.4 In Ground No. 7, the appellant contested that no addition under Section 68 or 69 can be made in the absence of books of account. 6.4.1 I have considered the submission of the appellant on this ground. In this regard, it is submitted that a statement recorded under Section 132(4) of the Act from the assessee during the course of search further confirms that the seized documents vide serial no. 1 to 71 of Annexure A/PBR/01 belong to him. This voluntary admission, read together with the seized document, strengthens the case of the Department that the assessee was fully aware of the transaction, and no fabricated or third party inference is being drawn. The confirmation letter forms part of the physical records seized during the search and hence qualifies as "books or books of account" under Section 2(12A) of the Act, which includes: "...ledgers, day-books, cash books, account-books and other books, whether kept in written form or in electronic form or in digital form or as print-outs..." 6.4.2 Thus, the seized confirmation letter, being a document stored or maintained as part of the assessee's financial dealings, qualifies under this broad and inclusive definition. Hence, the seized document is certainly part of books of account of the appellant and hence, this ground of appeal is dismissed.

5 In ground Nos. 8 and 9, the appellant argued that the additions of Rs. 43.50 lakhs and Rs. 4 crore were made on the basis of dumb and fabricated documents. 6.5.1 The initial burden lying on the appellant to explain the transactions can be discharged either from the statement recorded under Section 132(4) or from other documents found and seized in the search. A document may be speaking or dumb. It all depends on whether all the ingredients/components for levying taxation are clearly decipherable from the document either on standalone basis or in association with other documents or investigation. The components which enter into the concept of taxation are first, the transaction / events which attract the levy, second, the person on whom the levy is imposed and who is obliged to pay the tax, third, the assessment year in which charge of income tax is levied, fourth, whether any taxable income arises from the transaction recorded in the document. 6.5.2 A charge can be levied on the basis of document only when the document is a speaking one. The document should speak either out of itself or in the company of other material found on investigation and/or in the search. The document should be clear and unambiguous in respect of all the four components of the charge of tax. If it is not so, the document is only a dumb document. 6.5.3 In the instant case, no further details except very primary documents have been submitted by the appellant. The objection of the appellant that A.O. has not attempted to make a cross examination regarding the genuineness of the document found in the course of search and cross examination was not provided is not acceptable. The right of cross examination is not an absolute right. Further, it is the primary duty of the appellant to explain the seized document. The appellant was repeatedly, at the time of seizure of the document, as well as during assessment proceedings, provided opportunity to prove the nature of transactions in the seized document with sufficient documentary evidence and the same were out of disclosed sources of income. However, the appellant failed to do so. Even in the appellate proceedings, the appellant failed to avail opportunity. The seized Annexure A/PBR/01 clearly mentioned the name of the appellant and an amount of Rs. 43,50,000/- is received by him. Further, the seized Annexure also indicated extending hand loan of Rs. 4,00,00,000/- to M/s. Opus Holdings Pvt. Ltd. and by way of confirmation letter dated 29.10.2015 addressed to the appellant by M/s. Opus Holdings Pvt. Ltd. And all the components that, the transaction / events which attract the levy, second, the person on whom the levy is imposed and who is obliged to pay the tax, third, the assessment year in which charge of income tax is levied, fourth, whether any taxable income arises from the transaction recorded in the document, is clearly evident from the seized document.

5.4 Both documents were seized from the assessee's premises, and the name of assessee is mentioned therein. The seized document has been acknowledged by appellant in the sworn statement under Section 132(4) of the I.T. Act. The confirmation letter from Opus Holdings was dated and signed, and was accompanied by blank signed cheques. These documents meet the threshold of credible evidence and cannot be dismissed as dumb. Therefore, the A.O. was justified in relying upon them. These grounds are dismissed. 6.6 Ground Nos. 10, 11 & 12, the appellant contested that the addition of Rs. 43.50 lakhs as unexplained receipt from Mr. Mohsin Khan is not justified. And the addition of Rs. 4,00,00,000/- is made without considering the relevant evidence to identity, genuineness and creditworthiness of the party. 6.6.1 In this regard, the appellant argued that both additions were unsustainable as they were based solely on unauthenticated and dumb documents lacking date, signature, and clear nexus with the assessee. Regarding the Rs. 43.5 lakh addition, the assessee submitted complete documentation, including the PAN of the creditor, confirmation letters, and bank statements showing receipt of Rs. 40 lakhs by cheque and partial repayment, thereby establishing identity, creditworthiness, and genuineness of the transaction, and further stated that the remaining Rs. 3.5 lakhs was settled partly by repayment and partly through adjustment against business expenditure. As for the 4 crore alleged investment, it was clarified that although a cheque was issued to M/s. Opus Holdings Pvt. Ltd., the business understanding failed, and the cheque was never presented or cleared; bank statements substantiate that no amount was actually transferred, and hence, no real investment occurred. The assessee emphasized that both documents relied upon by the A.O. were seized from third-party premises, lacked evidentiary value under Section 132(1), and did not constitute incriminating material capable of sustaining additions in a concluded assessment. 6.6.2 Further, the assessee contended that since the original return was filed prior to search and no notice u/s 143(2) was issued within the limitation period, the assessment stood concluded and no addition could be made under Section 153A in the absence of incriminating material, relying on decisions such as All Cargo Global Logistics Ltd., Midwest Gold Ltd., and Mridul Commodities (P) Ltd. The assessee also objected to the assessment being completed ex parte in violation of natural justice, without adequate opportunity being provided or submissions being duly considered. On the issue of penalty initiated u/s 271(1)(c), it was asserted that the additions themselves were unsubstantiated and disclosure had been duly made, thereby negating any allegation of concealment or furnishing inaccurate particulars. Hence, the assessee