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Facts
The Revenue appealed against the CIT(A)'s order deleting additions made by the Assessing Officer for AY 2011-12, 2012-13, and 2014-15. Reassessments were based on a seized coded diary/cash book from a search on a third-party (Venus Group), which the AO correlated with the assessee's transactions, leading to additions under Section 68 and Section 69A. The assessee contended that the seized documents were third-party, had no direct link to them, and all transactions with the Venus Group were recorded in their audited books as genuine loan repayments via banking channels.
Held
The CIT(A) upheld the validity of reopening but deleted the additions, concluding that the seized diary was a "dumb document" lacking corroboration and a direct nexus to the assessee. The CIT(A) noted mismatches between decoded entries and the assessee's books, absence of incriminating material from assessee's premises, and the AO's selective reliance on entries. The ITAT concurred, affirming that additions cannot solely rest on uncorroborated third-party documents when the assessee's comprehensive books reflect a consistent creditor relationship with the Venus Group through banking channels.
Key Issues
Whether additions under Section 68 and Section 69A can be sustained based solely on uncorroborated entries in a third-party seized diary, without establishing a direct link to the assessee or reconciliation with the assessee's regular books of account.
Sections Cited
68, 69A, 147, 143(3), 148, 153C, 132(4A)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI SANJAY GARG & MAKARAND V. MAHADEOKAR
O R D E R PER MAKARAND V. MAHADEOKAR, AM: These appeals by the Revenue arise from the common appellate order passed by the Commissioner of Income Tax (Appeals)-8, Ahmedabad [hereinafter referred to as “CIT(A)”] dated 22.08.2019 for Assessment Years 2011–12, 2012–13and 2014–15. The impugned appellate order has deleted the relevant additions made by the Assessing Officer in the assessments framed under section 143(3) read with section 147 of the Income Tax Act, 1961[hereinafter referred to as “the Act”] vide reassessment orders dated 29-12-2017 for all three years. Since common issues are involved and the additions are founded on the same set of seized documents, the appeals are being disposed of by this consolidated order.
to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 2 2. Facts of the Case 2.1 The Assessing Officer framed reassessments after issuing notices under section 148 and completing proceedings under section 143(3) read with section 147. The basis for reopening in all years was the material seized during a search conducted in the Venus Group on 10.03.2015, particularly the seizure of a diary/cash book from the premises identified as the Terrace of Crystal Arcade/Crystal Plaza, C.G. Road, Ahmedabad. The Assessing Officer recorded that this diary was not a casual jotting but a systematically maintained unaccounted day-to-day cash book of the Venus Group, containing entries of cash receipts and cash payments made by various concerns of the Venus Group to outside parties, including the assessee company. 2.2 The Assessing Officer has recorded the details of the seized diary and supporting vouchers. He noted that the unaccounted cash book contained entries continuously from 01.01.2007 to 07.03.2015. The dates in the diary were written in coded form by preponing the actual dates of transactions by ten years, whereas the day and month remained the same. The amounts recorded were also in coded form by systematically omitting two zeros, such that an entry written as “68=87” actually represented Rs. 6,887/- and entries like “540=00” represented Rs. 54,000/-. The Assessing Officer further noted that each day’s entries were supported by cash vouchers which were kept in green and pink coloured envelopes. The green vouchers represented receipts of cash, while the pink vouchers represented expenditures or payments made. These vouchers were also kept in envelopes marked with the nature of transaction, the broker’s name if related to property, land survey numbers in case of land-related expenses, and in some cases the names of individual persons. 2.3 The Assessing Officer also recorded that one Shri Deepak M. Gajjar, an employee of the Venus Group, admitted that he wrote the entries in the unaccounted cash book till the first week of March 2015 under the direction to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 3 of Shri Ashok S. Vaswani of the Venus Group. He also admitted that receipts and payment entries were verified by Shri Ashok S. Vaswani or by Shri Deepak B. Vaswani through their initials. The Assessing Officer therefore concluded that the seized material reflected the unaccounted cash transactions of the Venus Group which were systematically recorded, authenticated, and preserved and could not be dismissed as random loose papers. 2.4 During assessment proceedings, the Assessing Officer carried out a correlation exercise between the seized cash-book entries, the corresponding seized vouchers, and the bank statements of various concerns of the Venus Group such as Sunderdeep Builders (SDB), Shyam Buildcon (now known as Venus Infrastructure & Developers Pvt. Ltd.) and also the ledger accounts of the assessee. On such correlation, the Assessing Officer concluded that the assessee had engaged in accommodation transactions with Venus Group entities both by giving cash to the Venus Group and receiving equivalent cheque payments from them and also by receiving unaccounted cash against cheque payments made by the assessee to Venus Group concerns. The Assessing Officer treated these transactions as unexplained credits and unexplained money in the hands of the assessee and made additions under section 68 and section 69A of the Act. 2.5 In respect of Assessment Year 2011–12, the Assessing Officer noted that, according to the seized documents in Annexure A-129, pages 161, 166 and 167, the Venus Group had received an amount of Rs. 4,00,00,000/- in cash from one “Kalpesh Patel” appearing in decoded form under the description “Against EC”. These three cash receipts were recorded in the seized cash book on decoded dates 8-06-10, 9-06-10 and 11-06-10 for coded amounts of Rs. 1.75 crore, Rs. 1.25 crore and Rs. 1.00 crore respectively. The Assessing Officer correlated these amounts with the ledger of the assessee and found that Sunderdeep Builders, a Venus Group concern, had made corresponding RTGS payments to the assessee on 09.06.2010, 10.06.2010, 11.06.2010 and 14.06.2010. These payments were of Rs. 1,00,00,000/-, Rs. 90,00,000/-, Rs. to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 4 1,00,00,000/- and Rs. 1,00,00,000/- respectively. Based on this correlation, the Assessing Officer held that the assessee had paid cash of Rs. 4 crore to the Venus Group and received cheque payments in return, which constituted accommodation entries. The amount of Rs. 4 crore was therefore treated as unexplained cash credit under section 68. 2.6 The Assessing Officer thereafter examined further seized vouchers relating to entries classified as “Against EC” in Annexures A-86 and A-129 for various dates in financial year 2010–11, showing cash payments aggregating to Rs. 5,80,00,000/- to the assessee company from concerns of the Venus Group. These included vouchers for coded amounts of Rs. 20,00,000/-, Rs. 60,00,000/-, Rs. 1,50,00,000/-, Rs. 2,00,00,000/- etc. The Assessing Officer correlated these cash receipts with RTGS/cheque payments made by the assessee to Sunderdeep Builders and Shyam Buildcon from the assessee’s bank account on the same or proximate dates. On the basis of this correlation, the Assessing Officer held that the assessee was the owner of unaccounted cash of Rs. 5.80 crore which was utilised to make cheque payments to the Venus Group concerns and the corresponding cash was received back. The Assessing Officer therefore made an addition of Rs. 5,80,00,000/- as unexplained money under section 69A. 2.7 The assessee, in reply before the Assessing Officer, contended that the seized diary and vouchers belonged entirely to the Venus Group and that no entry in the seized material was in the handwriting of the assessee or signed by anyone connected with it. It was contended that the assessee has no obligation to explain entries found in third-party documents and that all cheque transactions between the assessee and Sunderdeep Builders/Shyam Buildcon were recorded in the regular books and were supported by proper sources. It was also submitted that the assessee had a substantial debit balance receivable from Sunderdeep Builders of Rs. 11.05 crore at the beginning of the year and therefore any cheque receipts could only be in the nature of loan repayments and not accommodation entries. The assessee to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 5 denied having given any cash to the Venus Group and submitted that no cash withdrawal or cash deposit was found in its bank statements corresponding to the dates relied upon by the Assessing Officer. The assessee therefore argued that sections 68 and 69A were not applicable. 2.8 The Assessing Officer rejected the above contentions and relied heavily on the seized material, in particular the decoding of dates and amounts and the correlation of seized vouchers with bank entries. The Assessing Officer held that in view of the seized systematic cash book, the explanation of the assessee was unacceptable. He also relied on various judicial precedents referred to in the assessment order and made the total additions of Rs. 4,00,00,000/- under section 68 and Rs. 5,80,00,000/- under section 69A.
The summary of year-wise assessments is given below: Sr. Particulars A.Y. 2011-12 A.Y. 2012-13 A.Y. 2014-15 No. 1 Date of 30.09.2011 29.09.2012 31.12.2015 filing Original Return 2 Returned 1,36,69,866/- 2,82,34,740/- 5,37,42,938/- Income in Rs. 3 Date of 31.03.2017 30.03.2017 30.03.2017 Issuance of notice u/s 148 4 Addition 4,00,00,000/- 7,50,00,000/- 1,00,00,000/- u/s 68 of the Act in Rs. to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 6 4 Addition 5,80,00,000/- Without 2,00,00,000/- u/s 69A of prejudice also the Act in added above Rs. sum u/s 69A of the Act 5 Assessed 11,16,69,870/- 10,32,34,740/- 8,37,42,940/- Income in Rs.
The assessee carried the matter in appeals before the CIT(A), challenging both the validity of the reopening of assessments under section 147 and the additions made under sections 68 and 69A on facts and in law. The CIT(A) upheld the validity of reopening under section 147 for all assessment years. He recorded that the Assessing Officer had initiated reassessment proceedings solely on the basis of seized unaccounted cash book and supporting vouchers found during the search in the Venus Group at the premises known as Terrace of Crystal Arcade/Crystal Plaza, C.G. Road, Ahmedabad. The CIT(A) held that the AO had duly recorded reasons, obtained the requisite approval, and the assessee did not raise any specific or substantive argument in appellate proceedings. Therefore, the grounds challenging reopening were held to be devoid of merit and dismissed. 4.1 Before CIT(A), the assessee submitted that the additions are made on the basis of presumptions, conjectures and surmises. The assessee stated that it was engaged in the business of real estate development and had entered into regular financial transactions with entities of the Venus Group, namely Sunderdeep Builders and Venus Infrastructure & Developers Ltd. These transactions were stated to be genuine business advances, duly accounted for in the books and supported by bank records. The assessee pointed out that it had a substantial debit balance receivable from Sunderdeep Builders amounting to Rs. 10.85 crore at the beginning of the year, and that the amounts received from Sunderdeep Builders during the year represented repayment of loans already advanced. Similarly, the to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 7 assessee had advanced further sums during the year to the Venus Group entities through banking channels. It was emphasised that all transactions were recorded in the audited books and no part represented unaccounted cash receipts. The assessee also placed reliance on some judicial precedents.
4.2 The CIT(A) recorded that the additions made by the Assessing Officer were primarily founded upon presumptions, conjectures, and surmises arising from certain seized diaries and loose sheets recovered during the search on the Venus Group, and not from the premises of the assessee. The seized cash book/diary did not contain the name of the assessee, nor any identifier linking the entries to the assessee. The books were neither written in the handwriting of any person connected with the assessee nor signed by any representative of the assessee. It was noted as a matter of fact that the assessee had a long- standing business relationship with two concerns of Venus Group, namely Sunderdeep Builders and Venus Infrastructure & Developers Ltd., and had been advancing loans to these entities over several years. All such transactions were duly recorded in the regular audited books of account, and no defect had been pointed out by the AO in the maintenance or correctness of such books. No cash, documents, or incriminating material indicating unaccounted dealings with Venus Group were found from the assessee’s premises. The CIT(A) held that the entries recorded in the seized diary do not tally with the entries recorded in the regular books of account of the assessee. Even cumulatively, the decoded figures did not match the actual transactions during any year under appeal. The AO had decoded the seized papers by assuming that the name “Kalpesh Patel” mentioned therein referred to the director of the assessee-company, although such assumption was unsupported and in several places the word “Ganesh” was suffixed to the name “Kalpesh Patel”, further weakening the AO’s inference. The CIT(A) also recorded that no corroborative statement was obtained from the writer of the seized diary or from any person of Venus Group establishing that the seized entries pertained to the assessee. No person had admitted that the cash noted to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 8 in the seized diary related to the assessee. In absence of any statement or other evidentiary link, the seized diary constituted at best a third-party document, and in law, entries in books of a third person without corroboration cannot be used against another assessee. The CIT(A) further recorded that the AO had selectively considered only part of the transactions and ignored the complete loan cycle maintained in the assessee’s books. The assessee had explained the complete debit balances and repayments year-wise, and the AO himself accepted the cheque transactions as genuine. When the cheque receipts and repayments were accepted, it was inconsistent to presume unrecorded cash movement only for certain decoded entries. 4.3 For A.Y. 2011-12, the CIT(A) recorded that the assessee had an opening debit balance of Rs. 11,05,65,260/- receivable from Sunderdeep Builders, and during the year it advanced a further sum of Rs. 90,00,000/-, aggregating to Rs. 11,95,65,260/-, which was fully received back during the same year through proper cheque entries. The closing balance was nil in the books. These transactions were duly reflected in the regular audited books and were not disputed. The AO had added Rs. 4 crore under section 68, based on decoded entries alleging cash receipts from Sunderdeep Builders as “accommodation entries”. The CIT(A) held that the AO had presumed, without evidence, that the assessee received cash of Rs. 4 crore even though the books showed complete cheque receipts. The seized diary did not reflect any entry in the name of the assessee, and the amounts in the decoded entries did not match the cheque transactions in any manner. As regards dealings with Venus Infrastructure & Developers Ltd., the CIT(A) recorded that the assessee had an opening debit balance of Rs. 8.90 crore, advanced Rs. 8.10 crore, and received back Rs. 5 crore through banking channels. The AO added Rs. 5.80 crore under section 69A, alleging that cash of equivalent amount was received by the assessee. The CIT(A) found that these decoded cash amounts did not match the cheque transactions recorded in the books. Even on the AO’s decoding, the total alleged cash movement was only Rs. 4.30 crore, whereas the assessee had cheque transactions totalling Rs. 13.10 crore, clearly to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 9 showing mismatch and absence of nexus. The CIT(A) concluded that the AO’s approach was based on assumptions, that there was no evidence linking the assessee to cash receipts or cash payments, and that no statement, no admission, and no corroborative material existed connecting the seized diary to the assessee. Further, no mismatch in the assessee’s bank accounts or cash book was found, and there was no evidence of cash withdrawal or cash deposits corresponding to the alleged cash transactions. After analysing the entries, statements, seized papers, and legal position, the CIT(A) held that the seized diary constituted a “dumb document”, incapable of supporting additions under section 68 or section 69A. Accordingly, the additions of Rs. 4 crore (s.68) and Rs. 5.80 crore (s.69A) for A.Y. 2011-12 were deleted in full.
4.4 For A.Y. 2012-13 and A.Y. 2014-15, the learned CIT(A) recorded similar findings. It was noted that the assessee had substantial opening debit balances receivable from Sunderdeep Builders and Venus Infrastructure & Developers Ltd., to whom further advances were made during the respective years and from whom repayments were also received through banking channels. The CIT(A) examined the seized diary entries relied upon by the Assessing Officer and found that the decoded cash figures did not tally with the accounted loan transactions as per the assessee’s regular books. As in A.Y. 2011-12, the seized cash book did not contain the name of the assessee, no incriminating document was found from the assessee’s premises, and there was neither any corroborative evidence from the writer of the seized material nor any statement from any person of the Venus Group linking such entries to the assessee. The CIT(A) held that the additions under sections 68 and 69A were made on mere assumptions, surmises and conjectures, without establishing that the alleged cash movements pertained to the assessee. Consequently, following identical reasoning as applied in A.Y. 2011-12, the additions made by the Assessing Officer for A.Y. 2012-13 and A.Y. 2014-15 were also deleted. to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 10 4.5 Aggrieved, the Revenue is now in further appeal before us raising following revised grounds of appeal:
– A.Y. 2011-12 Ground No. 1 Whether the Ld. CIT(A) was correct in deleting the addition made u/s 68 of the Income Tax Act, 1961 on account of unexplained cash credits amounting Rs. 4,00,00,000/- Ground No. 2 Whether the Ld. CIT(A) was correct in deleting the addition made u/s. 69A of the Income Tax Act, 1961 amounting Rs. 5,80,00,000/- on account of unexplained money.
A.Y. 2012-13 Ground No. 1 Whether the Ld. CIT(A) was correct in deleting the addition made u/s 68 of the Income Tax Act, 1961 on account of unexplained cash credits amounting Rs. 7,50,00,000/- – A.Y. 2014-15 Ground No. 1 Whether the Ld. CIT(A) was correct in deleting the addition made u/s 68 of the Income Tax Act, 1961 on account of unexplained cash credits amounting Rs. 1,00,00,000/- Ground No. 2 to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 11 Whether the Ld. CIT(A) was correct in deleting the addition made u/s. 69A of the Income Tax Act, 1961 amounting Rs. 2,00,00,000/- on account of unexplained money.
During the course of hearing before us, the Authorised Representative (AR) of the assessee submitted that the assessee has raised certain legal grounds relating to validity of reopening u/s 148 when 153C is applicable. The AR also submitted that the copy of RTI reply dated 20.08.2024 suggest that the Assessing Officer has not applied independent mind and relied on the borrowed satisfaction. The same grounds are admitted. 5.1 On merits, the Authorised Representative (AR) reiterated the factual matrix as recorded by the lower authorities and invited our attention to the ledger account extracts of Sunderdeep Builders and Venus Infrastructure & Developers Ltd., demonstrating the year-wise opening debit balances, advances made through banking channels, and repayments received during the relevant previous year. It was submitted that the complete loan cycle was duly reflected in the regular books of account of the assessee, that all entries were supported by cheque transactions, and that no cash transactions, as alleged by the Assessing Officer on the basis of the seized diary found from the premises of the Venus Group, were relatable to the assessee. 5.2 The learned Departmental Representative (DR), on the other hand, placed strong reliance on the order of the Assessing Officer. It was submitted that the additions were made on the basis of seized material found during the search on the Venus Group and that the decoded entries clearly indicated cash receipts and payments relatable to the assessee. The DR accordingly contended that the CIT(A) erred in deleting the additions. 5.3 We have carefully considered the rival submissions, the assessment orders, the detailed appellate orders passed by the learned CIT(A), and the material placed in the paper book. The core question arising in all three appeals filed by the Revenue is whether the additions made under section 68 and section 69A based on the decoded entries from the seized diary of the to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 12 Venus Group can be sustained, when the assessee’s audited books of account record regular cheque-based loan transactions with Sunderdeep Builders and Venus Infrastructure and Developers Ltd. 5.4 At the outset, it is noted that the entire seized diary and supporting vouchers were found from the premises of the Venus Group. The seized material does not bear the name of the assessee at any place. It is also an undisputed fact that no incriminating document, cash book, voucher or loose paper was found or seized from the assessee’s premises during any proceedings. Deepak Budharmal Vaswani of the Venus Group, in his letter dated 24.07.2015, has owned the seized diary as belonging to the Venus Group. Therefore, the seized diary is a third-party document. 5.5 The AO has proceeded on the assumption that the name “Kalpesh” mentioned in the seized diary refers to Shri Kalpesh Patel, a director of the assessee. No confirmation from the writer, no handwriting examination, and no statement from any person of the Venus Group has been produced identifying that the entries pertain to the assessee. On the contrary, the assessee has consistently maintained that it had regular recorded dealings with Sunderdeep Builders and Venus Infrastructure and Developers Ltd., and such dealings are fully reflected in the audited books. 5.6 In order to appreciate the issue, we consider it necessary to reproduce the AY-wise correlation between the decoded entries relied upon by the AO and the actual ledger balances in the assessee’s books. The CIT(A) has tabulated these and found significant mismatches. We reproduce the substance of the same below for clarity.
to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 13 11. In case of A.Y. 2011-12 –
(A) Ledger as per Assessee’s Books Sunderdeep Builders Particulars Amount (Rs.) Opening debit balance 11,05,65,260/- Advance given during year 90,00,000/- Total receivable 11,95,65,260/- Receipt through cheque 11,95,65,260/- Closing balance Nil Particulars Amount (Rs.) Opening debit balance 8,90,00,000/- Advance given 8,10,00,000/- Amount received by cheque 5,00,00,000/- Closing balance 12,00,00,000/-
(B) Decoded Entries Relied Upon by AO Alleged Receipts of Rs.4,00,00,000/- treated as unexplained cash credit under section 68 Date Name Amount AO’s Annexure decoded written decoded inference to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 14 A-129 10-Oct-2011 Kalpesh 1,75,00,000 Receipt of p.161 cash A-129 11-Oct-2011 Kalpesh 1,25,00,000 Receipt of p.166 cash A-129 11-Oct-2011 Kalpesh 1,00,00,000 Receipt of p.167 cash Alleged Payments of Rs. 5,80,00,000/- treated as unexplained money under section 69A Date Name Amount AO’s Annexure decoded written decoded inference A-86 p.9 24-Sep-2010 Kalpesh 2,00,00,000 Cash paid A-86 p.110 25-Aug- Kalpesh 60,00,000 Cash paid 2010 A-129 p.21 21-Aug- Kalpesh 1,50,00,000 Cash paid 2010 A-86 p.111 11-Oct-2010 Kalpesh 1,50,00,000 Cash paid
The CIT(A) examined the year-wise loan transactions and noted that the decoded cash receipts of Rs. 4 crore do not match the cheque receipts of Rs. 11.95 crore recorded in books. Further, the decoded cash payments of Rs. 5.80 crore do not match the advances of Rs. 8.10 crore given to Venus Infrastructure and Developers Ltd. The figures do not reconcile in any manner. The seized diary records neither the assessee’s name nor any reference to its ledger balances. More importantly, the seized diary contains the name “Kalpesh” in various contexts, but in some entries the word “Ganesh” is written adjacent to it. There is no corroboration from the writer to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 15 that such “Kalpesh” was the assessee’s director. The AO’s presumption is therefore unsupported. The decoded amounts and the ledger entries do not match even in aggregate. The CIT(A) therefore held that the additions under section 68 of Rs. 4 crore and under section 69A of Rs. 5.80 crore are unsustainable for lack of nexus. In case of A.Y. 2012-13 - The AO relied on decoded entries to allege cash receipts of Rs.7,50,00,000/-. The CIT(A) recorded that the assessee received cheque payments of Rs. 7,50,00,000/- from Sunderdeep Builders on dates near the decoded entries. The AO’s allegation was that the assessee paid cash and received cheque. However, the CIT(A) found: Description Decoded (AO) Recorded in Books Cash allegedly paid by 7.50 crore Not found assessee Cheques received 7.50 crore Fully recorded Opening balance Not considered by Supported by AO ledger Cash nexus Presumed Not established The correlation relied upon by AO was one-sided and ignored all ledger balances and bank summaries. In case of A.Y. 2014-15 – AO relied on decoded receipt of Rs. 1,00,00,000/- CIT(A) found that assessee received cheque of Rs. 1,00,00,000/- on 21.01.2014 from Sunderdeep Builders. The decoded cash payment allegedly occurred on the previous day, which the AO treated as accommodation entry. The CIT(A) found no evidence:
to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 16 Parameter AO CIT(A) Name linking cash to assessee Assumed “Kalpesh” No link Corroboration from Venus Group Not obtained Not available Matching of decoded figures Selective No match Ledger reconciliation Ignored Fully matching 6.1 Having regard to the detailed findings recorded by the learned CIT(A), which are supported by seized material, ledger extracts and bank statements, we find no reason to disturb the conclusion reached by the CIT(A) for any of the years under appeal. The entire basis of the additions is founded upon a third-party seized diary which does not bear the name of the assessee. The AO’s decoding is unsupported by any corroborative statement from the writer or from any person of the Venus Group. The cheque transactions recorded in the assessee’s books are accepted, but the AO has presumed parallel cash movement without evidence. The decoded figures relied on by the AO do not match the assessee’s actual books even in aggregate. For example, in A.Y. 2011-12, the decoded cash receipts of Rs. 4 crore do not reconcile with the cheque receipts of Rs. 11.95 crore; similarly, decoded cash payments of Rs. 5.80 crore do not reconcile with the advances of Rs. 8.10 crore made through banking channels. Similar mismatches exist in all years. The seized diary being a third-party document, in absence of corroboration, cannot form the sole basis of additions under section 68 or section 69A. This principle is well settled by the decisions of the Hon’ble Supreme Court and various High Courts, including the decisions relied upon by the CIT(A).
6.2 In conclusion, it is also pertinent to record that the Assessing Officer has proceeded on a fundamentally incomplete appreciation of the assessee’s books of account. The ledgers placed before the authorities clearly demonstrate substantial opening debit balances running into several crores to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 17 in the names of Sunderdeep Builders and Venus Infrastructure and Developers Ltd., which reflect long-standing running accounts duly supported by audited financial statements. However, the Assessing Officer has completely ignored these opening balances and the continuous flow of advances and repayments recorded through banking channels and has instead isolated a few entries which coincided with the decoded notings from the seized diary of the Venus Group. Such selective extraction of entries, divorced from the full ledger trail, has led to an incorrect inference of unexplained cash credits and unexplained money. The approach of the Assessing Officer in relying only on decoded entries, while omitting the beginning balances, the complete movement of funds and the closing positions in the assessee’s accounts, has in fact distorted the real commercial relationship reflected in the books. When the books are considered in entirety, they reveal that the assessee was consistently a creditor of the Venus Group concerns and, therefore, the hypothesis of unaccounted cash movement is inconsistent with the very financial position recorded in the accounts. The selective reliance on isolated decoded entries, coupled with the disregard of material ledger facts, further reinforces the finding that the additions have been made without a proper appreciation of the totality of the evidence and cannot be sustained. 6.3 We also note that the appellate order of the CIT(A) has placed heavy reliance on a series of binding precedents which delineate the parameters within which such documents can be utilised for making additions. Such decisions are: i. Nishant Construction Pvt. Ltd. Vs. ACIT – upheld by Hon’ble Gujarat High Court reported at101 taxmann.com 179 ii. Prarthana Constructions Pvt. Ltd. – 70 TTJ 122 upheld by Hon’ble Gujarat High in Tax Appeal No. 79 of 2000 to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 18 iii. Common Cause Vs. UOI (Sahara Diaries) in Writ Petition (CIVIL) No. 505 of 2015 iv. Hitesh B. Patel – ITA No. 2778/Ahd/2012 6.4 The cumulative ratio emerging from these authorities is that loose papers, diaries, computer printouts and other third-party documents not forming part of regularly maintained books of account cannot be treated as books of account for the purposes of the Evidence Act. Such loose sheets and notings are inherently irrelevant and inadmissible in the absence of compliance with the statutory requirements governing admissibility, and they possess no independent evidentiary value in income tax proceedings. It is further settled that even where entries occur in a book of account regularly maintained in the ordinary course of business, such entries by themselves do not constitute sufficient evidence to fasten liability unless they are supported by independent corroborative material establishing the truth and the factual nexus of the entry with the person sought to be taxed. The burden always lies on the Revenue to establish that the document is authentic, that it pertains to the assessee, and that the underlying transaction actually took place, resulting in a real flow of funds or benefit to the assessee. These precedents consistently hold that the statutory presumption available under section 132(4A) does not extend to documents found from third parties, and in the absence of examination of the author of the document or any person connected with the entries, no addition can be based on such material. Loose sheets or notings lacking essential particulars are described as “dumb documents”, incapable of supporting an inference of undisclosed income. The unilateral decoding or interpretation of figures by the Assessing Officer, without verification from the author of the document or corroboration through independent evidence, cannot be treated as proof of any cash movement or hidden transaction. The decisions also emphasise that additions cannot rest on conjectures or presumptions drawn from unverified notings, and that the Assessing Officer must undertake proper enquiry with the alleged counter- ITA Nos. 1635 to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 19 parties to establish the existence and nature of the transaction. The authorities relied upon by the CIT(A) reiterate that unless the seized entries are corroborated by real-world transactions reflected in bank statements, audited books, confirmations or other primary evidence, they have no probative value. Judicial discipline mandates that where seized material neither contains the name of the assessee nor matches the assessee’s books and is not supported by statements or inquiries, additions based solely on such third-party loose papers cannot be sustained.
In light of the above precedents, the CIT(A) has correctly concluded that the seized day-cash-book/diary of Venus Group, found from the premises of a third party, is a “dumb document” having no evidentiary value in absence of corroboration. The Assessing Officer has neither examined the writer of the diary nor any connected person from Venus Group, nor established a one-to- one nexus between the entries in the diary and the recorded cheque transactions of the assessee. The judicial authorities cited above uniformly hold that such loose sheets cannot by themselves justify additions under sections 68 or 69A unless supported by concrete evidence.
We therefore hold that the CIT(A) was justified in deleting the additions for all years. The Revenue has not brought any material to controvert the factual findings of the CIT(A). No infirmity is shown in the order of the CIT(A) that would call for interference.
During the course of hearing before us, the AR of the assessee submitted that the assessee had also raised legal grounds challenging the very validity of the reassessment on the footing that, in the facts of the present case, proceedings under section 153C were the only proper course and that initiation of reopening under section 148 was therefore without jurisdiction. It was further submitted that, as evident from the RTI reply dated 20.08.2024 placed on record, the Assessing Officer had not applied his independent mind while recording reasons and had merely acted on borrowed satisfaction. However, in view of our decision on the merits of the additions in favour of the to 1637/Ahd/2019 Asst. Years: 2011-12, 2012-13 and 2014-15 20 assessee, these legal grounds do not call for adjudication at this stage and are accordingly kept open.
All Revenue appeals fail on merits and are dismissed.