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Facts
During a search under Section 132 on M/s Bajwa Developers Pvt. Ltd., digital data revealed an entry "Bayana BK 12,43,000" against the assessee for a plot. Despite "BK" indicating bank payment, the AO inferred a cash payment and made an ex-parte assessment under Section 144, adding Rs. 12,43,000. The assessee claimed payment through banking channels from her father's account, which was reimbursed by her husband.
Held
The Tribunal found no incriminating material or corroborating evidence for the alleged cash payment, even after specifically directing the Revenue to produce such proof. The original digital entry itself denoted bank payment, contradicting the AO's conclusion. Citing a High Court judgment, the Tribunal held that additions cannot be sustained without incriminating material, especially when the assessee was not searched and the material belonged to a third party. Thus, the addition was deemed unsustainable.
Key Issues
Whether an ex-parte assessment and addition made under Section 148/147 based on third-party seized data, alleging cash payment, can be sustained without corroborating evidence, particularly when the data itself suggests bank payment and the assessee was not subjected to search.
Sections Cited
132, 144, 147, 148, 153C, 250
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Order PER LALIET KUMAR, J.M The present appeal had been filed against the order dated 04.07.2025 passed by the Ld. CIT, Appeal Addl/JCIT(A)-5, Kolkata pertaining to Assessment Year 2012-13.
In the present appeal Assessee has raised the following grounds: 1. That on the facts, circumstances and legal position of the case, Worthy CIT(A), NFAC in Appeal No. CIT (A), Chandigarh-2/11216/2019-20 has erred in passing order dtd. 04.07.2025 in contravention of provisions of S. 250 of Income Tax Act, 1961 (hereinafter referred to as "Act").
1. 2. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in upholding the action of Ld. AO of initiating, continuing and then concluding the impugned assessment u/s 148 r.w.s 147 and hence the impugned assessment order deserves to be quashed.
3. That on facts, circumstances and legal position of the case, the impugned assessment initiated u/s 148 and continued and concluded u/s 147 deserves to be quashed since the same is based on some material allegedly belonging to the 2 appellant found from the premises of some third party and still the statutory mandatory procedure prescribed u/s 153C was not followed by the Ld. AO.
4. That on the facts, circumstances, and legal position of the case, the Worthy CIT(A) has erred in confirming the impugned addition made by the Ld. AO of Rs.12,43,000/- on account of investment towards the purchase of a residential plot allegedly made from unexplained sources.
5. That on facts, circumstances and legal position of the case, the orders passed by Ld. AO and then by Worthy CIT(A) deserves to be quashed since the same have been framed in extreme haste and without affording reasonable opportunity of being heard to the appellant.
6. That the appellant craves for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same.
3. Briefly, the facts of the case are that during a search u/s 132 conducted in the case of M/s Bajwa Developers Pvt. Ltd., certain digital data and loose entries were found and seized. In that data, the name of the assessee was shown against Plot No. 394 E30, Sunny Enclave, Kharar, where the entry “Bayana BK 12,43,000” had been recorded. The notation “BK” was shown in the database itself, which, as was explained before us, was meant to indicate bank payment. 3.1 The assessee, being a non-resident residing in Australia at the relevant time, was stated to have arranged the payment through banking channels via a pay order issued from the bank account of her father, which had subsequently been reimbursed through her husband’s account. 3.2 The AO had, however, concluded that the assessee must have made cash payment, the conclusion having been drawn from the manner in which several other buyers had allegedly made payments in cash to Bajwa Developers. 3.3 Owing to non-attendance on the part of the assessee during assessment proceedings, the assessment was completed ex parte u/s 144, and the impugned addition was made.
4. Against the order of the AO the assessee went in appeal before the Ld. CIT(A) who upheld the assessment order..
5. Against the order of the Ld. CIT(A) the assessee preferred in appeal before the Tribunal.
During the initial hearing of the appeal, the attention of the Bench was drawn by Ld. AR to the fact that the addition had been made solely on the allegation of cash payment, though no specific documentary material demonstrating receipt of such cash from the assessee had been brought on record. 6.1 It was noticed that the very Excel sheet relied upon by the AO contained a reference to “BK”, denoting banking channel and not cash. 6.2 As it emerged that no primary evidence had been furnished to substantiate the allegation of cash payment, the Bench considered it necessary that the Revenue be asked to produce the same. Tribunal vide its direction dated 10.11.2025 asked the revenue to place on record any primary seized document, receipt, diary entry, builder’s statement, or ledger extract evidencing receipt of Rs. 12,43,000/- from the assessee in cash. The matter was adjourned to 19.11.2025 for the purpose of compliance with this direction.
On 19.11.2025, the Ld. DR appeared along with the Jurisdictional AO, as directed. Both were required to clarify whether any documentary or corroborative material existed indicating that the assessee had indeed made the alleged cash payment. It was categorically stated by the Ld. DR that no such evidence was available with the Department. The JAO present in Court confirmed that no such evidence is available in the record showing that cash was given to Bajwa Developers. In view of it, it thus became evident that no seized material or corroboration existed in support of the allegation of cash payment.
4 8. The Ld. AR pointed out that the case of the assessee was further supported by the judgment of the Hon’ble Punjab & Haryana High Court dated 22.10.2024 in M3M India Holding, of 2023, wherein it had been held that: additions cannot be made in absence of incriminating material relatable to the assessee; where search is not conducted in the case of the assessee, and the material found belongs to a third party, proceedings, if any, must be carried out only under section 153C; if no material implicating the assessee is found, no addition can be sustained. It was also submitted that in the present matter, since no document was found showing payment of cash by the assessee, the addition was liable to be deleted.
I have heard the rival contention of the parties and perused the material available on record. The proceedings dated 19.11.2025 clearly showed that the Revenue was not in possession of any document, record or seized material evidencing cash payment by the assessee.The failure to produce evidence, despite the Tribunal's specific direction, made it abundantly clear that the allegation of a cash payment did not rest on any tangible material.The digital sheet recovered from Bajwa Developers, which constituted the principal basis of reopening, itself contained the word “BK”, which indicated bank payment, and therefore contradicted the AO’s conclusion.When the very material emerging from the search favoured the assessee, and no other material was found to the contrary, the presumption of cash payment stood entirely displaced.Since the assessee had not been subjected to search and since no incriminating document belonging to the assessee was found, the addition made in the reassessment proceedings could not be legally sustained.
5 9.1 The ratio laid down in M3M India Holding squarely covered the facts of the present case, and therefore, the addition was rendered unsustainable in the eyes of the law. 9.2 The entire basis of making the addition as clear from the assessment order is that some purchasers were found to have paid cash; a similar inference was drawn as to the assessee.Such an inference, being wholly presumptive, was incapable of being treated as evidence, particularly when the assessee’s own entry reflected a bank-mode transaction.It is a settled principle of law that suspicion, however strong, cannot take the place of proof. Furthermore, once the Tribunal had specifically directed the Revenue to produce the alleged evidence, and the Revenue itself stated that none existed, the addition automatically lost its legal standing. 9.3 In the light of the above the addition of Rs. 12,43,000/- sustained by the Ld. CIT(A) was rendered wholly unsustainable and the appeal of the assessee is required to be allowed and additions is directed to deleted.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 20/11/2025. ( LALIET KUMAR) JUDICIAL MEMBER AG