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Facts
A search action revealed a Tally ledger detailing a land transaction with cheque and cash payments. The AO reopened the assessment to add the unexplained cash component. The assessee argued that the ledger was for educational purposes and sought cross-examination, which was denied. The assessee also contended that the income was already declared under the IDS, 2016 scheme.
Held
The Tribunal held that the reassessment was valid as there was tangible material and a live link. The denial of cross-examination did not cause prejudice as the assessee was given opportunities to rebut. However, the Tribunal agreed with the CIT(A) that taxing the cash payment again would lead to double taxation, as it was already accounted for under the IDS, 2016.
Key Issues
Whether the reassessment proceedings were valid, and whether the cash payment for land, already declared under IDS, 2016, could be taxed again, leading to double taxation.
Sections Cited
143(3), 147, 148, 69, 132, 151
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Shri Narendra Prasad Sinha
Assessee by : Shri Biren Shah, AR Revenue by : Shri Kavan Limbasiya, Sr.DR सुनवाई की तारीख/Date of Hearing : 10/07/2025 घोषणा की तारीख /Date of Pronouncement: 06/08/2025 आदेश/O R D E R
Per Sanjay Garg, Judicial Member:
The captioned is an appeal by the Revenue and corresponding cross objections by the assessee preferred against the order dated 22/08/2024 passed by the Learned Commissioner of Income Tax (by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17)
(Appeals)-11, Ahmedabad (hereinafter referred to as “the Ld.CIT(A)”), arising out of the assessment order dated 30/03/2024 passed by the Assessing Officer (AO) u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") relevant to the Assessment Year (AY) 2016-17. The same were heard together and are being disposed of by this common order for the sake of convenience.
The Revenue has raised the following grounds of appeal:
1) The Ld. CIT(A) has erred in deleting the addition of Rs. 5,30,00,000/-u/s 69 of the Act on account of unexplained cash investment towards purchase of land by accepting the alternate plea of the assessee for telescoping the undisclosed income declared under IDS, 2016, while upholding the addition towards payment of on-money for purchase of land, not appreciating that no such explanation had been given by the assessee before the A.O. and such additional evidence is unverified and also not in accordance with Rule 46A of Income Tax Rules 2) The Revenue craves leave to add/alter/armed and/or substitute any or all of the grounds of appeal"
The assessee in its Cross Objection has raised the following grounds:
“1.In law and facts and circumstances of the case, the Ld. CIT(A) has erred in stating that reassessment proceedings as well as reassessment order is valid in nature despite the fact that notice issued under section 148 of the Act dated 17/11/2022 is invalid, without valid jurisdiction and bad in law.
2. In law and facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the addition of Rs.5,30,00,000/- under section 69 of the Act towards unaccounted investment in land bearing survey no. 752/4 Paiki Makarba when no such addition is warranted.
3. In law and facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the addition of Rs.5,30,00,000/- under section 69 of the Act without providing opportunity of cross-examination of sellers of the land.
(by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17)
4. In law and facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the addition of Rs.5,30,00,000/- under section 69 of the Act merely on the basis of tally data found from premise of third party without any corroborative evidence.
5. In law and in the facts and circumstances of the appellant’s case, appellant craves leave to add, amend and/or alter the ground or grounds of appeal either before or at the time of hearing of the appeal.”
The brief facts of the case are that the assessee, M/s Goyal and Co. (Const.) Pvt. Ltd., is engaged in real estate and construction. It filed its return of income for A.Y. 2016–17 declaring total income of ₹8,70,28,030, which was processed under section 143(1) of the Act.
4.1 A search and seizure action under section 132 of the Act was carried out on 08.09.2021 in the Sambhaav-Nila Group. During the course of the search, systematic records of unaccounted transactions carried out by the assessee group have been found in the form of hand written accounts in the physical seized material as well as tally accounts in the digital data. The transactions mentioned in the handwritten accounts matched with the data recorded in tally. This data included a Tally software ledger file named “Tally Educational Purpose” which contained an account titled “Goyal – Makarba Land S. No. 752/14.” The entries in this account reflected a land transaction for Survey No. 752/14, Makarba, involving both cheque and cash payments aggregating ₹8.50 crores—of which ₹3.20 crores were cheque payments and ₹5.30 crores were alleged to be in cash.
The Assessing Officer noted that the cheque payments corresponded with the assessee’s books, bank statements, and registered sale deed, affirming the connection between the assessee (by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17)
4 and the ledger. However, the ledger also recorded cash payments of ₹5.30 crore, which were not accounted for in the assessee’s books.
5.1. In light of this, the AO reopened the assessment by issuing notice under section 148, after recording reasons and obtaining sanction under section 151.
The AO rejected the assessee’s explanation that the ledger was a third-party document not maintained by it and was allegedly prepared for educational purposes. The assessee’s plea that the data was uncorroborated, and its request for cross-examination of the person who prepared the ledger, were also denied. The Assessing Officer, in this respect, observed that the right of the assessee to cross-examine the parties from whom the evidence relating to the aforesaid unaccounted deal relating to land was recovered, was not absolute. He observed that the principles of natural justice were duly met as the evidences collected, which were to be used against the assessee were duly put and confronted with to the assessee. The Assessing Officer. Further observed that it was a fact on record that the assessee had actually purchased Makarba land 752/4 from Manoj S. Vadodaria by executing purchase-deed on 30/04/2016. That the cheque payment mentioned in the recovered material duly tallied with the Bank statement of the assessee as well as with the Registered purchase- deed of the land in question. Even TDS payments as mentioned in the seized material matched with the ledger account maintained by the assessee. He observed that the assessee could not bring any corroborative evidence on record to prove that cash payment as mentioned in the above referred tally data did not pertain to it. He observed that once the noting made in the loose-papers and tally data (by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17)
5 was found corroborated with the bank account and books of accounts of the assessee, there remained no doubt about the unaccounted transactions of cash payment made by the assessee. The Assessing Officer, accordingly, completed the assessment under section 143(3) r.w.s. 147, wherein, he treated the cash component as unexplained investment under section 69 and added ₹5.30 crore to the returned income.
Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A), NFAC. Before the Ld.CIT(A), the assessee inter alia contested the assessment /additions made by the Assessing Officer on the ground of validity of reopening of the assessment u/s 147 of the Act, on merits as well as contended that source of the cash payments was duly explained as the assessee had already declared its undisclosed income in IDS Scheme, 2016. 7.1. So far as the issue relating to the validity of reopening of under Section 147 was concerned, the assessee contended before the CIT(A) that the material relied upon by the AO was neither credible nor directly relatable to the assessee, being seized from a third party. It was argued that there was no mention of the name of the assessee in the seized documents and that the seized documents were dumb documents and that the reasons recorded lacked the necessary satisfaction and, therefore, the notice issued u/s.148 of the Income Tax Act, was bad in law.
7.2. The CIT(A), however, held that the ledger was found during the search carried under section 132 of the Act from the premises of the Sambhaav-Nila Group, a party directly connected to the land (by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17)
6 transaction. The ledger bore the assessee’s name, transaction particulars, and cheque entries, which matched the sale deed and the assessee’s books. The AO had recorded reasons based on seized material and obtained necessary sanction under section 151. It was held that there was tangible material and live link justifying reopening under section 147. Accordingly, this ground was dismissed by the Ld.CIT(A).
7.3. On merits, the assessee submitted that the alleged cash transactions recorded in the seized material did not relate to the assessee. The assessee denied having paid anything over and above the cheque payments of ₹3.20 crore. It was contended that the Tally ledger was created by a third party for educational or illustrative purposes and had no legal sanctity. The assessee stressed that the AO had not conducted any independent inquiry, nor was there any confirmation from the seller. Further, the AO failed to allow cross- examination of the CFO of the Sambhaav-Nila Group, from whose possession the data was recovered.
7.4. The Ld.CIT(A), however, did not agree with the both the contentions of the assessee. He observed that the ledger in question was not a casual or generic document. That it contained detailed narration of cheque and cash payments, spanning several dates, and the cheque entries were admitted by the assessee and matched with the bank statement and registered deed. The fact that the ledger bore the assessee's name, was maintained in regular Tally format, and was retrieved from the CFO of the searched group, gave it substantial evidentiary value. The Ld. CIT(A), further, noted that the assessee’s argument about educational usage was untenable, as such a detailed (by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17)
7 and specific financial ledger could not reasonably be considered for an academic exercise.
7.5. Regarding the absence of cross-examination, the Ld. CIT(A) held that although the assessee raised the demand, it failed to demonstrate prejudice. The AO had duly confronted the material to the assessee and recorded its submissions, which were duly considered.
7.6. The CIT(A) observed that the AO had successfully discharged the initial burden of proof by bringing credible and corroborated material to establish a case of unexplained investment by the assessee. He observed that the onus then shifted to the assessee to rebut the evidence, which the assessee failed to do with any concrete or verifiable evidence.
7.7. The Ld.CIT(A) concluded that the addition of ₹5.30 crore under section 69 was sustainable on merits.
The assessee, alternatively, contended before the Ld.CIT(A) that the assessee had already declared net income from business of real estate in the form of cash in hand receivable for Rs.32,50,00,000/- for A.Y. 2011-12 to AY 2016-17. That the assessee had also declared and offered total unaccounted income of Rs.7,50,00,000/- upto AY 2015-16 and Rs.25,00,00,000/- in AY 2016-17 under the Income Declaration Scheme (IDS), 2016, which was much higher than the alleged unaccounted cash payment of Rs.5,30,00,000/- towards purchase of land. The assessee produced the relevant Form-1, acknowledgment, and evidence that he had offered the said amount under IDS, 2016 and paid the due taxes.
(by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17)
The Ld.CIT(A) examined the records and took note of CBDT Circular No. 27/2016 dated 14.07.2016, which clarified that once an amount is taxed under IDS, no action should be taken to assess or re-assess the same income to avoid double taxation. Finding the declaration genuine, the Ld.CIT(A) held that through the unaccounted cash payments were made by the assessee for the purchase of land in question, however, the assessee had already suffered tax on such undisclosed income, out of which the alleged cash payments were made. Hence, taxing it again in the assessee’s hands would result in double taxation, contrary to the Board’s binding instructions. Hence, the entire addition was deleted, and the appeal was partly allowed.
Being aggrieved by the said order of the Ld.CIT(A), the Revenue has come in appeal assailing the order of the CIT(A) deleting the additions made by the Assessing Officer observing that the taxes upon the impugned cash payments were already paid by the assessee under IDS-2016, whereas, the assessee has filed cross-objections assailing the action of the CIT(A) in upholding the validity of the reopening of the assessment u/s.147 of the IT Act, and further that the Ld. CIT(A) erred in holding that the unaccounted cash payments were made by the assessee for purchase of land in question.
We have heard the rival contentions of the Ld. Representatives of the parties and gone through the record. First, we take up the Cross-Objections of the assessee.
(by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17)
Cross Objection No.42/Ahd/2024 (in
The first Cross-Objection raised by the assessee is relating to the validity of the reopening of the assessment. So far as the observation of the CIT(A) that the AO had reasonable belief that the income of the assessee for the year under consideration had escaped assessment and, therefore, he was justified in reopening the assessment u/s.,147 rt.w.s.148 of the Act, we do not find any infirmity in the order of the CIT(A)’ on this issue. It is apparent from record that the ledger was recovered during the search action which contained specific, verifiable details relating to the land transaction made by the assessee. The material was not vague or generic. The AO formed his belief based on tangible evidence and followed the prescribed procedure. Accordingly, there is no merit in the aforesaid cross-objection of the assessee and the same is, accordingly, dismissed.
12.1. The assessee vide Cross Objections Nos.2 to 4 has contested CIT(A)’s findings on the merits of the addition as well as on the ground of violation of principles of natural justice on account of denial of opportunity to cross-examine the searched person. After hearing the rival contentions, we do not find any infirmity in the order of the CIT(A) on this issue also. The Ld. CIT(A)’s findings, are based on a sound appreciation of facts and settled law. The ledger was corroborated by admitted cheque entries and it was coming from the record that the corresponding cash entries were also related to the land transaction. The explanation that it was prepared for educational use is wholly unconvincing. The burden of proof shifted to the assessee to prove that the corresponding entries relating to cash transactions did not belong to the assessee, which the assessee failed (by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17)
10 to rebut with credible evidence. The credible material both physical and digital recovered during search action, duly corroborated with the books of accounts of the assessee as well as bank statements, which established that the transaction recorded in the seized material was relating to the purchase of land by the assessee and that the said transaction covered both cheque and cash payments. We, therefore, do not find any infirmity in the order of the CIT(A) in upholding that the assessee made cash payments towards purchase of land which were not recorded in the books of accounts.
12.2. So far as the cross-objection of the assessee regarding violation of principles of natural justice by denial of opportunity to cross- examine the concerned CFO of Sambhaav-Nila Group from whose possession the alleged seized material was recovered, is concerned, it is pertinent to mention here that the assessee was duly supplied with the seized material and was confronted with the specific entries, which included the cheque and alleged cash payments. The assessee was given due opportunity to rebut the aforesaid entries before both the lower authorities. The cheque entries mentioned in the seized documents as well as tally data duly matched with the accounts of the assessee as well as bank statement of the assessee. The ledger was not a testimonial statement but a contemporaneous electronic record retrieved from the system of a person associated with the transaction. The AO did not rely upon any confessional statement or affidavit in isolation. The assessee has not demonstrated, either before the AO, CIT(A), or this Tribunal, as to how the absence of cross- examination of the CFO or author of the ledger caused any prejudice to its defence. There is no specific factual claim or inference of prejudice, other than a bald plea that cross-examination was denied.
(by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17)
11 The Hon’ble Calcutta High Court in Principal Commissioner of Income Tax vs. Swati Bajaj, (2022) 446 ITR 56 (Cal) has extensively dealt with the issue of whether denial of cross-examination per se renders the assessment invalid. After reviewing multiple precedents including the Hon’ble Supreme Court decisions in State Bank of Patiala v. S.K. Sharma [AIR 1966 SC 1669], SBI vs. M.J. James [2021 INSC 732], and State of U.P. vs. Sudhir Kumar Singh, [(2000) SCC Online 842], the Hon’ble High Court held that natural justice is not a rigid, inflexible rule, that and a breach of the audi alteram partem principle does not automatically render an order invalid unless prejudice is demonstrated as a matter of fact. That if the assessee has been given access to the material relied upon and has been given an opportunity to explain or rebut it—either orally or in writing—then the requirement of fair hearing stands satisfied, especially where the burden to prove the transaction lies on the assessee.
In view of the above discussion, we do not find any merit in the cross-objection filed by the assessee and the same, are accordingly, hereby dismissed.
Now coming to the appeal of the Revenue. 14.1 The Revenue through its grounds of appeal has assailed the action of the CIT(A) in deleting the impugned addition by accepting the alternate plea of the assessee for telescoping the cash payments against the undisclosed income declared under IDS, 2016. (by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17)
12 14.2. The Ld.CIT(A) though, held that it was proved that the assessee had made unaccounted cash payments, he, however, deleted the addition made by the AO, by holding that the cash amount paid for purchase of land was covered by the income already declared by the assessee under the Income Declaration Scheme (IDS), 2016. This relief was granted by the Ld. CIT(A) after the assessee furnished documentary evidence including the Form-1 and acknowledgment. The CIT(A) relied upon CBDT Circular No. 27/2016 dated 14.07.2016, which explicitly states that once an amount has been declared under IDS, no further proceedings shall be initiated or reopened and that the said amount cannot be taxed twice. The only grievance of the Revenue in this respect is that the said evidence/documents of declaration of income in the IDS-2016 were not produced before the AO. We note that the said documents were in the nature of official record. It was not an evidence which was an after-thought creation of the assessee. The assessee had duly disclosed much more income from its real estate business, which duly covered and explained the source of the cash payments made by the assessee for purchase of land in question. There is no asset recorded in the books of accounts of the assessee which represent the aforesaid income declared by the assessee in the IDS-2016. The CIT(A) is a higher officer and an Appellate Authority over the AO. It has been time and again held that the powers of the Appellate Commissioner are co-terminous with that of the AO. The documents relied upon by the CIT(A) in the shape of IDS declaration Form and acknowledgement are not such type of documents, which require any further or deep investigation by the Assessing Officer. The said documents are, in fact, a part of the official record of the Income Tax Department. Therefore, the plea of the Department that the AO was not given opportunity to rebut of the (by revenue) and CO No.42/Ahd/2024 (by assessee) DCIT vs. Goyal and Co. (Const.) Pvt. Ltd. (AY 2016-17) same, is misconceived. The principle of avoiding double taxation of the same amount is firmly embedded in the scheme of IDS and supported by binding CBDT circulars. Therefore, the CIT(A) was justified in deleting the addition on this ground. We, therefore, do not find any merit in the appeal of the Revenue and the same is, accordingly, dismissed.
In view of the discussion made above, the order of the CIT(A) is confirmed in toto. The appeal of the Department as well as Cross- Objections of the assessee are hereby dismissed.