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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR
Captioned appeals have been filed by the Revenue and two different Assessees arise from separate orders passed by the Commissioner of Income Tax (Appeals)-8, Ahmedabad [hereinafter referred to as “CIT(A)”], deleting the additions made by the Assessing Officer [hereinafter referred to as “AO”] under section 69A of the Income Tax Act, 1961 [hereinafter referred to as “the Act”]. The assessees have also filed Cross Objections. Since the facts and issues in the cases are identical, all these appeals and COs are disposed of by way of this consolidated order.
Facts of the case:
2. A search operation was conducted in the case of Venus Group on 10-03-2015, during which certain loose papers and an unaccounted cash book were seized. Based on these documents, the Assessing Officer reopened the assessments under section 147 of the Act by issuing notices under section 148 of the Act, alleging that the assessees had received unaccounted cash through accommodation entries. In response to the reassessment notices, the assessees reiterated their originally declared income and denied any involvement in unaccounted cash transactions. The AO, relying on the seized material, made additions under section 69A of the Act, treating the amounts as unexplained money. The CIT(A), upon appeal, deleted the additions. Details of the facts are tabulated as follows:
, 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13
Particulars Shri Vighnaharta Shiv Ganga Properties Realty Pvt. Ltd. Pvt. Ltd. Return Filing Date Original return was not 22/08/2012 (Original Return) filed as mentioned by the AO in his order Total Income Declared Rs. Nil Rs. Nil in Original Return Date of Search Action 10/03/2015 10/03/2015 Unaccounted Cash Rs. 12.35 crore Rs. 1.80 crore Allegedly Received Date of Notice u/s 148 30/03/2017 30/03/2017 for Reassessment Return Filing Date in 05/12/2017 On 03/04/2017 Response to Notice u/s Assessee requested to 148 treat the original return as return filed in response to notice u/s 148 Total Income Declared Rs. Nil Rs. Nil in Return Filed in Response to Notice u/s 148 Date of AO’s Order 30/12/2017 29/12/2017 Section Under Which 143(3) r.w.s. 147 of the 143(3) r.w.s. 147 of the Assessment Was Made Act Act Addition Made by AO Rs. 12.35 crore Rs. 1.80 crore u/s 69A Date of CIT(A) Order 07/09/2018 31/08/2018 Relief Granted by Addition of Rs.12.35 Addition of Rs.1.80 CIT(A) crore deleted crore deleted
3. Aggrieved by the deletion of additions, the Revenue filed appeals before us, while the assessees filed cross-objections supporting the CIT(A)’s order and cross appeals challenging the validity of reassessment proceedings. The detailed grounds are as follows:
, 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 – ITO vs. Shri Vighnaharta Reality Pvt.Ltd.
1) “that the Ld.CIT(A) has erred in law and on the facts in deleting the addition made on account of undisclosed income u/s.69A of the Act amounting to Rs.12,35,00,000/-.” Revenue’s appeal in – ITO vs. Shivganga Property Holders Pvt.Ltd.
1) “that the ld.CIT(A) has erred in law on the facts in deleting the addition made on account of undisclosed income u/s.69A of the Act amounting to Rs.1,80,00,000/-.” Assessee’s CO No.137/Ahd/2019 (in – AY 2012-13 – Shri Vighnaharta Reality Pvt.Ltd. vs. ITO
“All the grounds in this Cross Objections are mutually exclusive and without prejudice to each other.-
1. The Ld.CIT (A) after carefully considering the Assessment Order, facts of the case, submission of the Respondent, various details and evidences placed on record. as well as the various judicial pronouncements relied upon by the Respondent particularly the decision of Hon'ble Income Tax Appellate Tribunal, Ahmedabad "C" Bench in the case of Nishant Construction Pvt.Ltd vs. ACIT, Circle 5, Ahmedabad, (A.Y. 2011-12) dated 14.02.2017 held that In view of above discussion, it is clear that loose paper found during the course of search and relied upon by the AO for making addition in appellant's case are dumb documents as they do not contain the name or address of the appellant, they do not contain initials of the appellant, they are not in the handwriting of the concerned persons of the appellant company, they state that they are estimate' and AO has not brought anything on record that persons in whose premises search is conducted have stated that the documents are related to the appellant. No statement of any concerned person or any other corroborate evidences regarding payment in cash have been referred while making impugned addition. It is abundantly clear from the facts narrated hereinabove that the documents relied upon by the AO do not lead us to the conclusion reached by the AO" and the Ld. CIT(A) has rightly deleted the addition of Rs.12,35,00,000/- made by the AO on account of undisclosed income u/s. 69A of the Act.
2. Your Respondent craves right to add, amend, alter, modify, substitute, delete or modify all or any of the above grounds of cross objection.”
, 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 Assessee’s CO No.108/Ahd/2019 (in – AY 2012-13 – Shivganga Property Holders Pvt.Ltd. vs. ITO
“All the grounds in this Cross Objections are mutually exclusive and without prejudice to each other:-
The Ld.CIT (A) after carefully considering the facts of the case, submission of the appellant as well as the various judicial pronouncements relied upon by the appellant particularly the decision of Hon'ble Income Tax Appellate Tribunal, Ahmedabad "C" Bench in the case of Nishant Construction Pvt.Ltd vs. ACIT, Circle 5, Ahmedabad, (Α.Υ. 2011-12) dated 14.02.2017, has correctly held that the loose papers found during the course of search and relied upon by the AO for making the addition in appellant's case are dumb documents and the Ld. CIT(A) has rightly deleted the addition made by the AO of Rs. 1,80,00,000/- on account of undisclosed income u/s. 69A of the Act.
Your Respondent craves right to add, amend, alter, modify, substitute, delete or modify all or any of the above grounds of cross objection.”
“1. The Ld. CIT (A) has grossly erred in law and on facts in allowing the appeal partly. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him. I. LACK OF JURISDCITION:- The entire proceedings are invalid and ex facie bad in law as the same are not supported by ingredients of the statutory provisions under which initiation of proceedings is done. Hence all subsequent proceedings in furtherance to illegal initiation of proceedings are mere continuation of illegality in perpetuity.
II. CHALLENING THE VALIDITY OF ISSUANCE OF NOTICE U/S. 148 OF THE ACT AND REOPENING THE ASSESSMENT U/S. 147 OF THE ACT AS WELL AS PASSING THE ORDER U/S. 143(3) R.W.S. 147 OF THE ACT.
1. The Ld. CIT (A) has erred in law and on facts while upholding the issue of notice under section 148 and sustaining the assessment made under section , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13
143 read with 147 of the I.T. Act, 1961 is unsustainable both on facts and in law. The Appellant submits that the impugned re-assessment proceedings u/s 148 and the Order passed u/s. 143(3) r.w.s. 147 of the Act in pursuance thereof was not in accordance with law and consequently ought to be held as void ab-initio.
2. The Ld. CIT (A) has erred in law and on facts in failing to properly appreciating the written submission of the appellant company and various judicial pronouncements relied upon by the appellant company thereto.
3. Such and further relief as the nature and circumstances of the case may justify.
The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.”
– Shivganga Property Holders Pvt.Ltd. vs. ITO.
“1. The Ld. CIT (A) has grossly erred in law and on facts in allowing the appeal partly. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him.
I. LACK OF JURISDCITION:- The entire proceedings are invalid and ex facie bad in law as the same are not supported by ingredients of the statutory provisions under which initiation of proceedings is done. Hence all subsequent proceedings in furtherance to illegal initiation of proceedings are mere continuation of illegality in perpetuity.
II. CHALLENING THE VALIDITY OF ISSUANCE OF NOTICE U/S, 148 OF THE ACT AND REOPENING THE ASSESSMENT U/S. 147 OF THE ACT AS WELL AS PASSING THE ORDER U/S. 143(3) R.W.S. 147 OF THE ACT
1. The Ld. CIT (A) has erred in law and on facts while upholding the issue of notice under section 148 and sustaining the assessment made under section 143 read with 147 of the I.T. Act, 1961 is unsustainable both on facts and in law. The Appellant submits that the impugned re-assessment proceedings u/s , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13
7 148 and the Order passed u/s. 143(3) r.w.s. 147 of the Act in pursuance thereof was not in accordance with law and consequently ought to be held as void ab-initio
2. The Ld. CIT (A) has erred in law and on facts in failing to properly appreciating the written submission of the appellant company and various judicial pronouncements relied upon by the appellant company thereto
Such and further relief as the nature and circumstances of the case may justify.
The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.”
We first address the legal challenge to the reassessment proceedings raised by the assessees in their appeals and cross-objections. Since the facts and the basis of additions are identical in both cases, except for the quantum, we proceed to examine the issues in Shri Vighnaharta Realty Pvt. Ltd. vs. ITO as the lead case.
As per the grounds of cross objection and assessee’s appeal, the assessee challenges the validity of the reassessment proceedings, contending that they are void ab initio due to a lack of jurisdiction. It is argued that the proceedings were initiated without fulfilling the statutory requirements, rendering all subsequent actions, including the reassessment order, illegal and unsustainable in law. The assessee further disputes the issuance of notice under section 148 and the reopening under section 147 of the Act, asserting that the reassessment was based solely on third-party information from the Venus Group search, without any independent application of mind by the Assessing Officer. It is contended that the notice under section 148 was issued mechanically, without recording valid reasons to believe that income had , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 escaped assessment, which is a mandatory requirement under section 147. The assessee also argues that the reassessment proceedings were based on borrowed satisfaction, as the AO failed to conduct any independent verification or obtain corroborative evidence linking the alleged transactions to the assessee. Additionally, the assessee asserts that its written submissions and judicial precedents were not properly considered, leading to an incorrect legal conclusion.
During the hearing before us, the Authorized Representative (AR) of the assessee contended that the AO has wrongly invoked reassessment proceedings under section 147 of the Act by issuing a notice under section 148 of the Act, instead of initiating proceedings under section 153C of the Act, which specifically governs cases where incriminating material is found during a search on a third party. The AR argued that the AO’s reliance on entries related to Greenstone Agro Product and Infrastructure Pvt. Ltd. (Greenstone) and Sanjeet Motor Finance Ltd. (SMFL), as recorded in the reasons for reopening, does not justify the invocation of section 147 of the Act and renders the reassessment proceedings void ab initio. The AR stated that the AO relied on handwritten notations and loose papers found at the premises of Venus Group, which allegedly reflected unaccounted cash transactions. The AR further stated that the seized documents contained codified references to transactions involving Greenstone and SMFL, which the AO interpreted as accommodation entries for routing undisclosed income. The AR of the assessee argued that the entire reassessment proceedings are legally unsustainable, as the material relied upon by the AO originated from a search conducted on a third party (Venus Group) and the , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 correct legal recourse in such cases is to initiate proceedings under section 153C of the Act, as per the provisions of the Act.
6.1. The AR placed reliance on the Hon’ble Supreme Court's decision in the case of ITO vs. Vikram Sujitkumar Bhatia [2023] 149 taxmann.com 123 (SC), wherein it was categorically held that if documents “pertain” to a person other than the searched person, then section 153C of the Act is the only appropriate provision for assessment, even if the search was conducted before the Finance Act, 2015 amendments. The AR also relied on the decision of this Bench in the case of Sai Krupa Developers vs. ACIT (ITA No. 248/Ahd/2023), wherein the tribunal quashed reassessment proceedings initiated under section 147 of the Act, holding that when the seized material directly relates to another assessee, the AO must follow section 153C of the Act and cannot bypass it by invoking section 147 of the Act. Additionally, reliance was placed on Shyam Sunder Khandelwal vs. ACIT (Rajasthan High Court), where it was held that when an AO has access to specific material found during a search, it is mandatory to conduct assessment under section 153C of the Act and invoking section 147 of the Act amounts to jurisdictional overreach.
The Departmental Representative (DR) on the other hand, relied on the order of AO and CIT(A) in this regard and stated that the documents relied upon by the AO are neither belonging to the assessee nor pertaining to the assessee. The DR stated that the seized documents were belonging to Venus Group and the entries which were correlated were pertaining to Greenstone and SMFL. The DR argued that such correlation of the seized documents was , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 an information in the possession of the AO which contain information relating to unaccounted income of the assessee. The DR pointed out that this conclusion is recorded by the CIT(A) in his order, therefore, the AO has assumed his jurisdiction correctly. The DR relied on the decision of Hon’ble Madras High Court in the case of Saloni Prakash Kumar vs. Income-tax Officer reported at [2023] 458 ITR 452, which deals with the applicability of Section 153C vs. Section 148A of the Act in reassessment cases.
We have carefully considered the grounds raised
by the assessee, the arguments advanced by both parties, and the judicial precedents relied upon. The primary contention of the assessee is that proceedings should have been initiated under section 153C of the Act instead of section 147 of the Act, as the material relied upon by the AO originated from a search on a third party. The assessee has placed reliance on the decision of the Hon’ble Supreme Court in the case of ITO vs. Vikram Sujitkumar Bhatia (supra), which held that when documents "pertain" to a person other than the searched person, proceedings must be initiated under Section 153C of the act and not under Section 147 of the Act. Further, reliance was placed on the decision of this Bench in the case of Sai Krupa Developers vs. ACIT (ITA No. 248/Ahd/2023), where the Tribunal quashed reassessment proceedings under Section 147 of the Act, holding that when seized material directly relates to another assessee, Section 153C of the Act must be followed. However, it is evident that the AO, after analyzing the seized documents, established a correlation between the entries found in the Venus Group search and the assessee's financial dealings. This satisfies the condition of the AO forming an independent belief that income had escaped assessment. The reliance placed by the assessee on ITO vs. , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012
13. Vikram Sujitkumar Bhatia [2023] 149 taxmann.com 123 (SC) and Sai Krupa Developers vs. ACIT (ITA No. 248/Ahd/2023) is distinguishable, as those cases involved situations where section 153C of the Act was the only viable course of action. In contrast, the present case involves corroborated information linking the seized material to the assessee, making the invocation of section 147 legally sustainable.
8.1. In our opinion, the scope of section 147 of the Act is wider than section 153C of the Act. Section 153C of the Act is restrictive as it requires the seized documents to “belong to” or “pertain to” the assessee. Section 147 of the Act, on the other hand, is a broader provision that allows reassessment based on "reason to believe" that income has escaped assessment. We find that the AO recorded detailed reasons for reopening the assessment, wherein the seized material from Venus Group contained notations of alleged unaccounted cash transactions, which were correlated with Greenstone and SMFL. The AO conducted further analysis and found that the transactions allegedly represented accommodation entries, leading to unaccounted income of the assessee. The CIT(A) also, after considering the material, held that the AO had independent reasons to believe that income had escaped assessment, and therefore, proceedings under Section 147 of the Act were legally sustainable. The Hon’ble Supreme Court of India in the case of Abhisar Buildwell (P) Ltd. (2023) 149 taxmann.com 399(SC) examined the scope of Section 153A of the Act and its interplay with Section 147 of the Act in cases of search assessments. The key issue before the Court was whether Section 147 of the Act (reassessment) can be invoked if conditions under Section 153A of the Act are not met. The Apex Court ruled that Section 153A is a special provision , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 applicable to search cases. However, it does not automatically bar the application of Section 147 of the Act. Applying the same rationale to Section 153C of the Act, the existence of a special provision does not override the power of reassessment under Section 147, provided the AO has independently applied his mind and formed a reason to believe that income has escaped assessment.
8.2. The Hon'ble Madras High Court in the case of Saloni Prakash Kumar (supra) held that Section 153C of the Act is merely an enabling provision that allows the issuance of notice notwithstanding the provisions of Sections 139, 147, 148 of the Act, etc. However, it does not preclude the department from reopening an assessment under Section 148A(b) of the Act for the purpose of completing the assessment under Section 147. The Revenue relied on this ruling to support the validity of reassessment proceedings under Section 147 of the Act, asserting that even if third-party material is involved, the AO is not restricted to using only Section 153C of the Act and can proceed under Section 147 of the Act if independent satisfaction is recorded. The judicial principle laid down by the Hon’ble court directly supports the view taken by the CIT(A) and the AO, affirming that the notice under Section 148 was validly issued.
8.3. We are of the opinion that the presence of a specific provision governing search assessments does not automatically exclude the applicability of reassessment provisions. The reassessment framework operates independently, provided the conditions prescribed under the law are satisfied. The essential requirement for invoking reassessment in such , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 cases is the existence of material/information based on another person’s search that provides the AO with reason to believe that income chargeable to tax has escaped assessment. The procedural aspect of invoking jurisdiction under one provision does not restrict the AO from exercising powers under another provision, as long as the statutory conditions are met. In the present case, the AO, upon analyzing the seized documents found at Venus Group, which refers to Greenstone and SMFL, independently examined their contents and correlated them with the financial dealings of the assessee. The reassessment proceedings were not initiated merely on borrowed satisfaction but on the AO’s independent analysis of the material/information at hand. The distinction drawn by the assessee between different provisions does not invalidate the reassessment proceedings, as the key factor is the AO’s application of independent reasoning to establish escapement of income. The correlation between the seized documents and the financial transactions of the assessee supports the AO’s conclusion that income had escaped assessment, thereby justifying the assumption of jurisdiction. Reassessment remains justified when the AO, based on seized material, establishes a clear and reasonable nexus between the material/information and the income that has escaped assessment. The mere fact that the material was found at a third party’s premises does not preclude reassessment when the AO demonstrates independent application of mind and correlates the transactions to the assessee. In the present case, the AO has independently verified and linked the transactions, thereby satisfying the jurisdictional requirement for invoking reassessment.
, 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 8.4. Accordingly, we uphold the order of CIT(A) and dismiss the legal grounds raised by the assessee. The AO had sufficient grounds to reopen the assessment, and the CIT(A) correctly sustained the jurisdiction assumed by the AO. The legal grounds raised by the assessee are, therefore, dismissed. After deciding on the legal grounds, we now proceed to examine the merits of the case. The Revenue has challenged the deletion of the addition under Section 69A by the CIT(A), arguing that the seized documents clearly indicate unaccounted cash transactions linked to the assessee. It is contended that the AO had valid grounds to treat the documents as evidence of undisclosed income, as they correlated with entities connected to the assessee. The Revenue further asserts that the CIT(A) erred in treating the seized documents as 'dumb documents' despite their references to financial dealings. On the other hand, the assessee, in its cross-objection, supports the deletion of the addition, arguing that the seized documents neither bore its name nor were corroborated with independent evidence.
8.5. The seized documents, as detailed in the AO's order, primarily consist of handwritten notations and loose sheets found during the search conducted at the premises of Venus Group. These documents contained coded references to financial transactions allegedly representing unaccounted cash dealings. The AO observed that these notations correlated with transactions involving Greenstone and SMFL. The AO's analysis linked the entries in the seized documents to financial activities attributed to the assessee. The notations included references to amounts, names, and certain coded indicators, which, according to the AO, represented cash transactions routed through the said entities. The AO identified patterns in these documents , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 suggesting undisclosed income. The assessee, on the other hand, argued that these documents were "dumb documents" with no clear evidentiary value. The contention was that the documents neither bore the assessee’s name nor any direct authentication linking them to the assessee. The assessee also pointed out that there were no corroborative statements or evidence to substantiate the AO’s inference that the transactions reflected unaccounted income. The AO, however, rejected the contention of the assessee and made additions under Section 69A of the Act.
8.6. During the appellate proceedings before CIT(A), the assessee contended that it had obtained a loan of Rs.1,50,00,000/- on 19.08.2011 through “account payee cheque” from Green Stone Agro Product and Infrastructure Pvt. Ltd., which was duly recorded in its bank account and books of accounts. The said loan was repaid on 24.02.2012, along with interest of Rs.9,45,000/-, and TDS of Rs.94,500/- was deducted thereon. After deducting TDS, a net interest payment of Rs.8,50,500/- was made on 31.03.2012. Further, the assessee submitted that it had received an unsecured loan of Rs.8,85,00,000/- from Sanjeet Motor Finance Pvt. Ltd. between 11.08.2011 and 24.02.2012, on which it had paid interest of Rs.37,90,726/- and TDS of Rs.3,79,073/- on 31.03.2012. The assessee placed on record copies of ledger accounts and bank statements to substantiate these transactions. The assessee argued that the aggregate loan amount stood at Rs.10,35,00,000/-, whereas the AO had made an addition of Rs.12,35,00,000/-. The assessee contended that the AO had merely relied on loose sheets and third-party documents seized during the search in the case of Venus Group, which neither bore the assessee’s name nor had been corroborated by any , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 independent evidence. The assessee further emphasized that no statement had been recorded from the directors of the lender companies or other concerned parties to establish the alleged accommodation entries. Therefore, the addition made by the AO was based on mere surmises and conjectures, without any tangible evidence. The assessee further argued that despite its repeated demand, it was not granted the opportunity to cross-examine the directors of the lender companies or the key persons of Venus Group, whose statements, if any, had been relied upon by the AO. In support of this contention, the assessee placed reliance on the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata – II [(2015) 62 taxmann.com 3 (SC)] and some other judicial precedents including the decisions of the Hon’ble Gujarat High Court in the case of CIT vs. Ramanbhai B. Patel (Tax Appeal No. 207 to 210 of 2008), wherein it was held that any addition made without affording the assessee the right to cross-examine the persons whose statements have been relied upon violates the principles of natural justice and is unsustainable in law. It was also held that failure to provide cross- examination renders any addition legally unsustainable.
8.7. The CIT(A), after considering the submissions of the assessee, deleted the addition. The CIT(A) found that the seized documents did not bear the assessee’s name, signature, or any direct linkage to the assessee. CIT(A) also found that the entries relied upon by the AO were handwritten notations, and there was no corroborative evidence to establish that these represented actual transactions of unaccounted cash. The CIT(A) concluded that the AO did not bring any independent evidence on record apart from the notings on the , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 seized documents. The CIT(A) also concluded that the documents were found at the premises of Venus Group, and there was no statement or evidence to indicate that they pertained to the assessee.
During the course of hearing before us, the DR relied on the order of AO and contented that the addition made under Section 69A of the Act was based on credible evidence gathered during the course of search. The DR pointed out the details of loose sheets, cash books, and incriminating documents were found and seized from the premises of Venus Group. The DR argued that entries of cash payments were linked to the assessee, and the AO had correlated these entries with the bank statements and financial records.
The AR on the other hand, stated that the CIT(A) has dealt with the facts and has decided on the merits of the case relying on the judicial precedents.
We have carefully considered the rival submissions, the orders of the lower authorities, and the material available on record. The core issue in the present appeal is whether the addition made under Section 69A of the Act was justified based on the seized documents found during the search in the case of Venus Group.
11.1. The AO primarily relied upon loose sheets and handwritten notations seized from the premises of Venus Group, which, according to him, represented unaccounted cash transactions linked to the assessee. On the , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 other hand, CIT(A) examined the seized documents and the reasoning of the AO in detail. The CIT(A) noted that the AO had not demonstrated how the seized documents pertained to the assessee. It was observed that mere notings on loose papers, without independent corroboration, could not be the basis for making an addition. The CIT(A) further found that the AO had not conducted any inquiries to establish the authenticity of the alleged cash transactions. The CIT(A) recorded that the AO had not produced any evidence to show that the alleged entries on the loose sheets represented actual transactions of the assessee. There was no confirmation from any party, including Venus Group, that the notings pertained to the assessee. The CIT(A) highlighted that the AO had incorrectly linked the figures in the seized documents with the assessee’s transactions. The CIT(A) observed that no effort was made by the AO to explain how the handwritten entries were decoded to establish their linkage with the assessee. The CIT(A) also highlighted that the AO had incorrectly linked the figures in the seized documents with the assessee’s transactions. The CIT(A) observed that no effort was made by the AO to explain how the handwritten entries were decoded to establish their linkage with the assessee. The CIT(A) also found that no independent statement or submission from Venus Group or any other concerned party confirmed the authenticity of the notations and the AO failed to establish that these were actual cash transactions undertaken by the assessee.
11.2. The CIT(A) held that loose sheets found in third-party premises, without further corroboration, could not be relied upon for making additions under Section 69A of the Act. Reliance was placed on various judicial , 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13 precedents including that of jurisdictional high court where it was held that loose sheets and unverified documents, without independent corroboration, could not form the sole basis of an addition. It was categorically observed that unless the Revenue could establish a clear nexus between the seized material and the assessee, no addition could be sustained under Section 69A of the Act. It was also held that mere entries in seized documents without substantive evidence could not justify additions. Similarly, it is settled principle that loose documents with handwritten notings do not constitute conclusive evidence in the absence of independent corroboration.
11.3. In view of the detailed findings of the CIT(A) and applying the principles laid down in judicial precedents relied on, we find no reason to interfere with the decision of the CIT(A). The addition made by the AO lacks independent corroboration and is based solely on unverified, third-party notations, which have been rightly disregarded by the CIT(A). Accordingly, the appeal of the Revenue is dismissed.
Considering the identical nature of facts and contentions in both cases, except for the quantum involved, we apply the same reasoning as in the case of Shivganga Property Holders Pvt. Ltd. (ITA No. 2112/Ahd/2018, and CO No. 108/Ahd/2019). Accordingly, the legal ground raised by the assessee regarding jurisdiction is dismissed. On merits, since the CIT(A) has given a well-reasoned order, and no independent corroborative evidence has been brought on record by the Revenue to justify the addition, we do not find any reason to interfere with the order of the CIT(A). The appeal of the Revenue is dismissed.
, 2112, 2205 and 2206/Ahd/2018 & CO Nos.108 & 137/Ahd/2019 Shri Vighnaharta Reality Pvt.Ltd. & Shivganga Property Holders P.Ltd. vs. ITO Asst. Year : 2012-13
Furthermore, as the grounds raised in both the Cross Objections (COs) by the assessee have already been decided in its favor, the COs are rendered infructuous and are dismissed accordingly.
In the combined result, revenue’s appeals and assessees’ appeals allongwith COs are dismissed. Order pronounced in the Open Court on 18th February, 2025 at Ahmedabad.