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आयकर अपीलीय अधिकरण, चण्डीगढ़ न्यायपीठ “ए”, चण्डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE श्री ललित कुमार, न्यायिक सदस्य एवं श्री कृणवन्त सहाय, लेखा सदस्य BEFORE: SHRI. LALIET KUMAR, JM & SHRI. KRINWANT SAHAY, AM आयकर अपील सं. / ITA No. 351/Chd/2025 निर्धारण वर्ष / Assessment Year : 2020-21 The DCIT Central Circle-1, Ludhiana बनाम M/s Home Construction Co. Opp. PNB Barewal Road, Ludhiana Punjab-141001 स्थायी लेखा सं./ PAN NO: AAIFH6220M अपीलार्थी/Appellant प्रत्यर्थी/Respondent निर्धारिती की ओर से / Assessee by : Shri Sudhir Sehgal, Adocate राजस्व की ओर से / Revenue by : Smt. Tarundeep Kaur, CIT, DR सुनवाई की तारीख / Date of Hearing : 09/10/2025 उदघोषणा की तारीख / Date of Pronouncement : 14/10/2024 आदेश/Order PER LALIET KUMAR, J.M: This appeal of the Revenue is directed against the order of the Ld. CIT(A) - 5, Ludhiana dated 27.12.2024 for the assessment year 2020-21. 2. Briefly, the facts of the case are that the assessee, a partnership firm engaged in the business of construction and sale of flats, developed a housing project named “Sun Apartments” comprising 27 flats. Out of these, 7 flats were sold during the year under consideration. The assessee filed its return declaring an income of Rs.10,02,640/-.
1 A search under Section 147 was conducted on 16.11.2021 in the case of M/s Home Life Buildcon Pvt. Ltd. group. During the search, certain loose papers and digital data were found from the mobile phone of one Shri Ravi Kapoor. Based on this, the AO reopened the case under Section 147 and made an addition of Rs 3,50,08,000/- by re-determining the average price of flats, holding that the assessee had received unaccounted “on-money”.
2 The assessee contended that no incriminating material was found from its premises, all sales were recorded through registered deeds, and reliance on third-party digital data was misplaced. It was also submitted that Shri Ravi Kapoor was merely a broker, not connected with the assessee, and the documents relied upon did not pertain to the relevant assessment year.
Against the order of the AO the Revenue went in appeal before the Ld. CIT(A). The CIT(A) observed that the AO had relied entirely on general statements of Shri Jagjit Singh and digital data allegedly belonging to Shri Ravi Kapoor. No independent enquiry was conducted from buyers of flats, nor was any corroborative evidence produced to show actual receipt of cash by the assessee.
1 The CIT(A) held that the registered sale deeds represented the best evidence of consideration. Suspicion, however strong, cannot substitute proof. Reliance was placed on judicial precedents including: • CIT v. Lal Chand Bhagat Ambica Ram (37 ITR 288, SC), • Umacharan Shaw & Bros. v. CIT (37 ITR 271, SC), • CIT v. Mantri Share Brokers (96 taxmann.com 280, SC), • Maple Destinations and Dreambuild Pvt. Ltd. (162 taxmann.com 157, Delhi ITAT).
2 The CIT(A) concluded that the addition was based merely on conjectures and surmises, and in absence of incriminating material belonging to the assessee, the addition was unsustainable. Accordingly, the entire addition of Rs.3,50,08,000/- was deleted.
Against the order of the Ld. CIT(A) the Revenue preferred an appeal before the Tribunal wherein Revenue has raised two grounds: (i) That the CIT(A) erred in deleting the addition despite incriminating material being seized from Shri Ravi Kapoor, who was allegedly a key person of the group. (ii) That in such cases, extrapolation from seized material was permissible to determine suppressed sales.
During the course of hearing the Ld. DR for the Revenue supported the assessment order. He contended that the seized digital data clearly indicated receipt of on-money, and the theory of human probabilities, as laid down by the Hon'ble Supreme Court in Sumati Dayal v. CIT (214 ITR 801, SC), must be applied.
The Ld. AR for the assessee reiterated that no incriminating material was found during the search from the assessee's premises, nor was any material relatable to the year under appeal. The reliance on uncorroborated third-party digital evidence without certificate under Section 65B of the Evidence Act is inadmissible. Reliance was placed on the judgment of the Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (149 taxmann.com 399, SC) to contend that in unabated assessments, no addition can be made in absence of incriminating material. 7 The assessee furnished a comparative chart showing that all the transactions relied upon by the AO actually related to later/ prior assessment years and not for the AY 2020-21. The comparative chart is reproduced below: Nature of Flat No. Relevant page number of the assessment order Our Explanation Date of Sale Amount of Consideration (Amount in Rs.) Incriminating material found in digital form found from Sh. Ravi Kapoor in digital form Unsigned paper between Sh. Ravi Kapoor (Seller) and Smt. Piya Vig and Sh. Karan Kochar (Purchaser) related to flat A-1 A-1 Page 4 to 5 > (exhibit A) It does not bear any date and signature of any party or the assessee i.e. it has been entered between to independent third parties. The registration of deed of this flat was affected on 12.04.2021 i.e. it does not pertain to the year under consideration. 12.04.2021 78,00,000 Document related to flat No. B-4 in the favour of Sh. Babbar Kalley B-4 Page 6 to 7 > (exhibit B) Letter of allotment in the name of Babbar Kalley is dated 20.06.2020. 20.03.2023 49,00,000 > Registration of this flat was effected on 20.03.2023 for a sum of Rs.51,45,000/-. Therefore, date of sale as well as date of allotment letter does not fall in the year under consideration. Digital information with regard to flat D-1 D-1 Page 8 (exhibit C) > Date of registration of this flat is 20.01.2022 which is wrongly mentioned in the assessment order as 23.08.2021. 20.01.2022 56,00,000 Digital information related to Flat No. B-5 B-5 Page 8 (exhibit D) > It does not bear any signatures of the any key person of assessee company. It does not belong to the year under consideration. Ν.Α. Ν.Α. Digital information related to Flat No. B-1 B-1 Page 8 to 9 > It does not bear any date and (exhibit E) signature of any party or the assessee. > Therefore, it does not belong to the assessee. 09.01.2024 49,00,000
We have carefully considered rival submissions, the orders of the authorities below, and material on record. The admitted position is that no incriminating document or evidence pertaining to the assessee or the assessment year under consideration was found during the search. The entire addition is based on extrapolation from loose papers and digital data seized from one Shri Ravi Kapoor, who was admittedly not a partner or related person of the assessee firm.
1 From the above comparative table filed by the assessee and the evidence relied upon by the Assessing Officer, it is evident that none of the seized papers or digital documents pertain to the year under consideration. All of them relate to subsequent assessment years. Therefore, the basis adopted by the AO to extrapolate “on-money" receipts to AY 2020-21 is wholly misconceived. We do not find any justification by the Assessing Officer to make the addition for the year under consideration without having any iota of evidence evidencing payment of “on money” by the assessee.
2 The Hon'ble Supreme Court in Abhisar Buildwell (supra) has categorically held that in the absence of incriminating material unearthed during search, relating to the assessment year under consideration, no addition can be made in respect of completed/unabated assessments.
3 Further, the evidentiary value of statements or third-party documents without corroboration has consistently been disapproved by Courts. The Hon'ble Supreme Court in Lal Chand Bhagat Ambica Ram (37 ITR 288) and Umacharan Shaw (37 ITR 271) has held that suspicion, however strong, cannot take the place of evidence.
4 In our considered opinion, the case law of Sumati Dayal (supra) cited by the Revenue has no application in the absence of incriminating evidence; the theory of human probabilities cannot override binding legal principles requiring proof and existence of incriminating material for the year under consideration. In view of the above, we find no infirmity in the well-reasoned order of the CIT(A) deleting the addition. The remaining issue raised by the assessee with respect to non-compliance of the statutory requirement in case of digital evidence / lack of certificate under Section 65B of the Evidence Act and violation of SOP issued by the Board for dealing with the digital evidence is left open to be decided in an appropriate case.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 14/10/2025 कृणवन्त सहाय (KRINWANT SAHAY) लेखा सदस्य / ACCOUNTANT MEMBER ललित कुमार (LALIET KUMAR) न्यायिक सदस्य / JUDICIAL MEMBER AG आदेश की प्रतिलिपि अग्रेषित /