VEMULURI NAGA BHUSHANAM,HYDERABAD vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(1), GUNTUR

Consequently, the Learned CIT(A) ought to have deleted the addition made by the Assessing Officer since he has purely relied upon the material in Anexure A/PSS/CORP/18 which is inadmissible evidence.

On the facts and circumstances of the case the Learned CIT(A) ought to have appreciated that the Assessing Officer came to conclusion that the appellant has made the cash payments to M/s. Polisetty Somasundaram simply basing on the third party statement which is not having any bearing on the determination of taxable income of the appellant.

Any other legal as well as other ground that may be urged at the time of hearing of the appeal.”

Per contra, Ld. Department Representative [in short “Ld.DR] fully supported the orders of the revenue authorities.

We have heard both the sides and perused the material available on record. It is an admitted fact that the Ld. AO has made an addition of Rs.16,47,945/- based on the digital evidence obtained in the form of pendrive Vide Annexure A/PSS/CORP/18. The Revenue has not brought any cogent evidence

The Ld. AR also produced a copy of Certification issued U/s. 65B of the Indian Evidence Act in another case wherein the primary and secondary device details including the owner / user of the device has been clearly mentioned. The Ld. AR submitted that in the instant case, no evidence was produced by the Revenue stating that the data copied to the pendrive was from the system identified in this regard, and used by the Cashier Sri A. Srinivasa Rao. The Ld. AR therefore pleaded that on this ground also, the assessment order is not a valid assessment order. The Ld. AR relied on the following case laws: (i) Vetrivel Mineral vs. ACIT, Central Circle-2, Madurai [2021] 129 taxmann.com 126 (Madras) (ii) Judgment of the Hon’ble Supreme Court in the case of Arjun PanditraoKhotkar vs. Kailash KushanraoGorantyal and Ors in Civil Appeal Nos. 20825-20826 of 2017. (iii) Anvar P.V. vs. P.K. Basheer and others [2014] 10 SCC 473 (SC).

Further, we find that section 65B(2) of the Indian Evidence Act clearly specifies the following conditions with respect to obtaining of Digital Evidence both for primary and secondary evidences. The relevant extract of section 65B(2), (3) and (4) are as follows: “(2) The conditions referred to in sub-section (1) in respect of a computer output shall be the following, namely: (a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over 181 that period by the person having lawful control over the use of the computer; (b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities; (c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and (d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities.

We find from the written submissions of the Ld. AR that the provisions of section 65B(2)(d) as extracted above was not followed by the Revenue. The Revenue failed to identify the primary system giving particulars of the device involved in the production of the data was produced by a computer. 42 Further, we have also considered the cases referred to by the Ld. AR. In the case of Vetrivel Mineral vs. ACIT, Central Circle-2, Madurai reported in [2021] 129 taxmann.com 126 (Mad.)the Hon’ble Madras High Court has observed as under: “24. As contended by the writ petitioners, when the entire assessment has been framed only on the basis of the so-called electronic record which are said to be Page. No 9 I.T.A.No.496, 497, 498, 499 & 500/VIZ/2024 Vemuluri Naga Bhushanam copies of Excel Sheet, Excel work note book etc., non-compliance of section 65(B)of the Indian Evidence Act renders the documentinadmissible in the eye of law as held by the SupremeCourt in the judgment Anvar P.V. case (supra). ''14.Any documentary evidence by way of an electronic record under the Evidence Act, in view of sections 59 and 65A, can be proved only in accordance with the procedure prescribed under section 65B. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub-section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under section 65B(2). Following are the specified conditions under section 65B(2) of the Evidence Act: (i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer; (ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity; (iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and (iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity.

Under section 65B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied: (a) There must be a certificate which identifies the electronic record containing the statement;

It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, Compact Disc (CD), Video Compact Disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice.

Only if the electronic record is duly produced in terms of section 65B of the Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to section 45A opinion of examiner of electronic evidence.

The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under section 65B of the Evidence Act are not complied with, as the law now stands in India.'' 43. In the case of Anvar P.V vs. P.K. Basheer and Others [2014] 10 SCC 473 (SC), the Hon’ble Supreme Court held their observations vide Paras 14, 15, 16, 17 & 18 to state that non-compliance of section 65(B)of the Indian Evidence Act renders the document inadmissible inthe eye of law. Relying on the same ratio laid down by the Hon’ble Apex Court, the Hon’ble Madras High Court delivered its judgment in the case of Vetrivel Mineral vs. ACIT (supra) vide para 24 of its order which is extracted herein above. Therefore, in our opinion there is no need to repeat the finding of the Hon’ble Supreme Court in the case of Anvar P.V. vs. P.K. Basheer and Others again for reference.

Now coming to the decision of the Hon’ble Supreme Court in the case of Arjun Pandit Rao Khotkar vs. Kailash Kushan Rao Gorantyal And Ors reported in [2020] 7 SCC 1 (SC) the Hon’ble Apex Court has observed as under: “30. Coming back to Section 65B of the Indian Evidence Act, sub-section (1) needs to be analysed. The sub-section begins with a non-obstante clause, and Page. No 11 I.T.A.No.496, 497, 498, 499 & 500/VIZ/2024 Vemuluri Naga Bhushanam then goes on to mention information contained in an electronic record produced by a computer, which is, by a deeming fiction, then made a “document”. This deeming fiction only takes effect if the further conditions mentioned in the Section are satisfied in relation to both the information and the computer in question; and if such conditions are met, the “document” shall then be admissible in any proceedings. The words “…without further proof or production of the original…” make it clear that once the deeming fiction is given effect by the fulfilment of the conditions mentioned in the Section, the “deemed document” now becomes admissible in evidence without further proof or production of the original as evidence of any contents of the original, or of any fact stated therein of which direct evidence would be admissible.

The non-obstante clause in sub-section (1) makes itclear that when it comes to information contained in anelectronic record, admissibility and proof thereof mustfollow the drill of Section 65B, which is a specialprovision in this behalf - Sections 62 to 65 being irrelevant for this purpose. However, Section 65B(1) clearlydifferentiates between the “original” document - whichwould be the original “electronic record” contained inthe “computer” in which the original information is firststored - and the computer output containing suchinformation, which then may be treated as evidence ofthe contents of the “original” document. All thisnecessarily shows that Section 65B differentiatesbetween the original information contained in the“computer” itself and copies made therefrom – theformer being primary evidence, and the latter beingsecondary evidence.

Quite obviously, the requisite certificate in sub-section (4) is unnecessary if the original document itself is produced. This can be done by the owner of a laptop computer, a computer tablet or even a mobile phone, by stepping into the witness box and proving that the concerned device, on which the original information is first stored, is owned and/or operated by him. In cases where “the computer”, as defined, happens to be a part of a “computer system” or “computer network” (as defined in the Information Technology Act, 2000) and it becomes impossible to physically bring such network or system to the Court, then the only means of proving information contained in such electronic record can be in accordance with Section 65B(1), together with the requisite certificate under Section 65B(4).This being the case, it is necessary to clarify what is contained in the last sentence in paragraph 24 of Anvar P.V. (supra) which reads as “…if an electronic record as such is used as primary evidence under Section 62 of the Evidence Act…”. This may more appropriately be read without the words “under Section 62 of the Evidence Act,…”. With this minor clarification, the law stated in paragraph 24 of Anvar P.V. (supra) does not need to be revisited.

On careful perusal of the case laws cited above, we are of the considered view that the Revenue Authorities should mandatorily and scrupulously follow the conditions laid down under section 65B(2) and (4) of the Indian Evidence Act to render any documents to be Page. No 12 I.T.A.No.496, 497, 498, 499 & 500/VIZ/2024 Vemuluri Naga Bhushanam valid in the eyes of law. In the instant case, the investigation agency obtained a Certificate about the details of the pen drive and the person in whose custody it was seized. Except these details nothing was there in the Certificate and also the said Certificate was not completely filled up by the Ld. Revenue Authorities. Further, from the Certificate obtained under Indian Evidence Act which is placed in Page-11 of Paper Book-2, we find force in the arguments of the Ld. AR that it is not as per the conditions laid down U/s. 65B of the Indian Evidence Act. For the sake of reference, the Certificate is reproduced here in below:

After considering the decisions of the Hon’ble Supreme Court in the case of Anvar P.V vs. P.K. Basheer and Others (supra); Arjun Pandit Rao Khotkar vs. Kailash Kushan Rao Gorantyal and Ors (supra) and the judgment of the Hon’ble Madras High Court in the case of Vetrivel Mineral vs. ACIT (supra) as well as on perusal of the facts and circumstances of the case, we are of the considered we that the four conditions stipulated in section 65B(2) ie., (a) to (d) along with section 65B(4) were not followed while obtaining the Certificate U/s. 65B of the Indian Evidence Act 1872 in the case of the assessee which are to be followed mandatorily. Therefore, we have no hesitation to hold that this Certificate is not a valid Certificate as prescribed under the Indian Evidence Act 1872 and hence cannot be enforced. Therefore, the Certificate obtained in the case of the assessee cannot be regarded as a legally valid certificate U/s. 65B of the Indian Evidence Act and the same has no recognition in the eyes of law. The information contained in the seized pendrive is could not be considered as admissible evidence as per the provisions of section 65B of Indian Evidence Act. Therefore, we are of the considered view that such inadmissible seized material is not sustainable in the eyes of law. Thus, the assessment order passed in the case of the assessee on 31/3/2022 is not a valid assessment order in the eyes of law and it deserves to be set aside.”

So, it is quite obvious from the above observations of the Ld. AO that he has relied upon the unaccounted cash book of M/s. Polisetty Somasundaram seized A/PSS/CORP/18 for making the addition of interest payment by cash which was held as inadmissible evidence by the Tribunal in the case of M/s. Polisetty Somasundaram v. DCIT (supra). We therefore have no hesitation to delete the addition of Rs. 16,47,645/- in the absence of any corroborating material brought on record thereby allowing the grounds raised by the assessee.

In the result appeal of the assessee is allowed.

Coming to the appeal relating to A.Ys. 2017-18 to A.Y. 2020-21, since the issues and facts in these appeals are identical, the decision taken in assessee’s case for the A.Y.2016-17 as in preceding paras shall mutatis mutandis, applicable to 498, 499 & 500/VIZ/2024. Accordingly, appeals filed by the assessee are allowed.

To sum-up, appeals filed by the assessee are allowed.