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Facts
A search conducted on a partner's premises led to documents suggesting undisclosed cash receipts from land sale. The AO made an addition based on these documents and statements, but the CIT(A) deleted it, finding the evidence insufficient. The revenue appealed this deletion.
Held
The Tribunal held that the seized documents (tally ledgers, manual sheets, digital images) lacked evidentiary value as they were not part of regularly maintained books of account and contained inconsistencies. Statements recorded were also considered unreliable due to retractions and lack of corroboration. The cross-objection regarding the validity of proceedings u/s 153C was also dismissed.
Key Issues
Whether seized loose papers and statements, not supported by regular books of account, constitute sufficient evidence for addition of undisclosed income.
Sections Cited
153C, 139, 132, 143(2), 142(1), 132(4), 131(1A), 69C
AI-generated summary — verify with the full judgment below
Before: SHRI DINESH MOHAN SINHA & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the revenue and Cross Objection (CO) by the assessee emanate from the order passed under section 250 of the Income-tax Act, 1961 (in short, 'the Act’) dated 29.05.2024 by the Commissioner of Income-tax (Appeals) - 4, Surat [in short, ‘the CIT(A)’] for the assessment year (AY) 2018- 19, which in turn arises out of assessment order passed by the Assistant CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP Commissioner of Income-tax, Central Circle – 3, Surat (in short, ‘AO’) u/s 153C of the Act on 24.03.2023.
Grounds of appeal
raised by the revenue are as under:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.2,33,98,41,270/- being undisclosed capital gain as made by the AO despite the facts that addition has been made on the basis of incriminating details/document recovered during the search proceedings.
2. In addition to the ground no.1 above, on the facts and in the circumstances of the case and in law the observation of the Ld.CIT(A) is that the appellant was not allowed cross-examination is totally faulty as the matter of fact is that the assessee did not avail cross-examination and further the assessee LLP was asking for cross-examination of the partner of the LLP which has not legal meaning. Moreover, this could have been provided at the appellate stage or that the matter could have been remanded back to the Assessing Officer.
3. In addition to the ground no. 1 & 2 above, on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs.2,33,98,41,270/- being undisclosed capital gain as made by the AO on the pretext of various ambiguities in accounting entries as pointed out by the appellant and in not appreciating the data unearthed by the Investigation Wing which were totally undisclosed and unaccounted and that the date recovered have not attained finality and were raw data made as stated/dictated by the assessee to its employees.
In addition to the ground no. 1, 2 & 3 above, on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in observing that the undisclosed transaction related to M/s Sumangal Corporation and was found from the premises of M/s Sumangal Corporation and not related to appellant even though the partner of the assessee LLP and the entity M/s Sumungal Corporation are common and that the transaction had bearing effect.
In addition to the ground no. 1, 2, 3 & 4 above, on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in giving relief to the assessee over the amount of Rs.73,70,50,000/- which has been accepted by the assessee in course of the assessment proceedings before the Assessing Office. In this reference, it has been noted by the AO that the assessee has stated that if any addition is required in this case, there should be restricted to Rs.73,70,50,000/- as evidences of on-money receipts of only this amount have been found and seized.
CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP 6. On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs.2,33,98,41,270/- being undisclosed capital gain by giving a biased view over details of cash payment and cheque payment unearthed by the Department relating to the property transaction.
7. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the Assessing Officer ignoring the principles of “Human Probability Test”, i.e., preponderance of probabilities which is applicable for Income Tax proceedings.
8. On the facts and in the circumstances of the case and in law the Ld. CIT(A) ought to have upheld the order of the Assessing Officer.
It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that the AO may be restored to the above extent.
The appellant craves to add, amend, alter, substitute, modify the above ground of appeal
raise any new ground of appeal, if necessary, either before or during the course of the hearing of the appeal on the basis of submissions to be made."
3. Brief facts of the case are that the assessee had filed return of income u/s 139 of the Act, declaring total income at Rs.32,08,45,280/-. A search and seizure operation u/s 132 of the Act was carried out on 19.12.2020 in case of Shri Sunil J. Shah, one of the partners of the assessee LLP, at his office premises at 4th Floor, Union Square, Ghod Dod Road, Surat where several incriminating documents and evidences pertaining to the appellant were found and seized. No separate search was conducted in case of the assessee. Accordingly, a notice u/s 153C of the Act was issued to the assessee on 25.01.2022. In response, the assessee filed its return of income on 30.08.2022, declaring total income of Rs.32,08,45,280/-. Subsequently, various statutory notices u/s 143(2) and 142(1) of the Act were issued by the AO and the assessee was requested to furnish details in relation to the transaction with CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP M/s Rajhans Infracon (India) Pvt. Ltd. in connection with sale of land at village - Lindiyat, Tal – Nagrol, Surat. The assessee was also requested to furnish copy of agreement/registered sale deed of the impugned land. It is pertinent to note that during the search action in case of Shri Sunil J. Shah, various incriminating documents such as loose papers bearing page numbers 59 to 64 as per Annexure A-25. The transactions noted on these pages are related to the sale of the impugned lands by Pipodara Textile Park LLP (respondent assessee) to Rajhans Infracon (India) Pvt. Ltd., bearing Block No.78 and 80 (New Block Nos. 91 & 92). The area of the land at Block No. 78 was admeasured 3,60,907 sq. meters and area of the land at Block No.80 was admeasured 50,896 sq. meters. As per ledger account (Pages 59 & 62), total amount received in cash was Rs.73,70,50,000/- during the period from 2016 to 2019. Apart from this, amount of Rs.20,50,00,000/- was also received by assessee in cheque for the sale of the impugned land. In course of the search proceedings, statement of Shri Sunil K. Patel, accountant of Shri Sunil J. Shah, was recorded u/s 132(4) of the Act, wherein he accepted that pages 59 to 61 of A-25 are related to the cash receipts of the Lindiyat land deal. Subsequently, in the post-search proceedings, the statement of Shri Sunil J. Shah was also recorded, who stated that the said pages are related to the sale of the lands at Lindiyat by the other partners such as Shri Suresh Agrawal, Shri J. P. Agarwal and Shri Rakesh Kansal, for which cash of Rs.73,70,50,000/- was received, which had not been recorded in the books of account. Shri Sunil J. Shah and CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP Shri Sanjay J. Shah, were partners with 31.5% share in profit/loss of the assessee LLP. Based on the seized documents, the AO has prepared a table, in the assessment order, as per which, the total consideration received was Rs.94,20,75,000/- including cash of Rs.73,70,50,000/-. The impugned lands were purchased by M/s Pipodara Textile Pvt. Ltd. on 18.02.2012, whose status was subsequently converted into LLP on 18.03.2016. The lands under reference was sold by the assessee to M/s Rajhans Infracon (supra) vide registered sale deed dated 07.09.2017 (AY 2018-19) for a total consideration of a Rs.65,00,00,000/-. It was submitted by the assessee that all the sale consideration was received through banking channel after deducting the TDS at the applicable rate. The sale consideration in the registered deed was as per the prevailing market rate, which is not in dispute. In the original return of income, the assessee had declared long-term capital gain (LTCG) of Rs.32,08,45,282/- on sale of the impugned land. The same amount has again been declared in the return filed u/s 153C of the Act. After confronting the assessee regarding the content of the seized documents showing unaccounted cash receipt of Rs.73,50,50,000/- and hearing the assessee, who denied having received any cash, the AO observed that M/s Sumangal Corporation where Shri Sunil J. Shah and Shri Sanjay J. Shah were partners, had received cash of Rs.73,70,50,000/- towards their share of 31.5% in the assessee LLP. 3.1 According to AO, page Nos. 59 to 62 are ‘Tally’ ledgers, which contain the details of amounts received in cheques and cash for sale of above land by CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP assessee and page Nos. 63 to 64 are manual sheets, containing the same details received in cheques and cash by hiding three digits, i.e., ‘000’. The AO also mentioned that as the cheques payments noted in these pages are tallying with the payments received by the assessee for sale of the land, the cash payments mentioned therein are also the amounts received in cash for sale of the land, which has not been disclosed. The AO also observed that Shri Sunil J. Shah was not available during the search operation at the business premises. Therefore, statement of his accountant, Shri Sunil K. Patel, was recoded u/s 132(4) of the Act, who accepted that page Nos. 59-61 of Annexure A-25 are related to cash receipts of the said land. Subsequently, in the statement recoded during the post-search proceedings u/s 131(1A) of the Act, Shri Sunil J. Shah also stated that page Nos. 59 to 62 are related to the sale of lands at Lindiyat by him and other partners of assessee LLP and Rs. 73,70,50,000/- was received in cash, which have not been recorded in the books of account. 3.2 After analysing the seized pages and eliciting reply of assessee who denied having received any cash on sale of the land, the AO concluded that these pages contain the details of amounts received in cheques and cash by Shri Sunil J. Shah and Shri Sanjay J. Shah for the sale of the Lindiyat land. The AO has also referred to some other loose papers seized during search, which are in the nature of daily cash book of some of the days of the year 2016 and 2019. In these pages, amounts received for Lindiyat land sale and payments made to partners of assessee LLP are mentioned. The AO also referred to some CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP digital images found from the MI phone of Shri Sunil K. Patel, accountant of Shri Sunil J. Shah, containing entry of some figures and dates with the narration ‘on behalf of Lindiyat’. As per the AO, the figures in these images are in thousands by omitting these digits, i.e., ‘000’ and signatures are of Shri Pramod Gajanand Agarwal, a partner of assessee LLP. The sum total of the amounts found in these digital images has been worked out at Rs. 7.90 Cr. and it was concluded that these amounts are in addition to the amounts noted in seized page Nos. 59 to 62. The AO has also taken the view that because the seized pages have been found from the office of Shri Sunil J. Shah and Sanjay J. Shah and because on top of the tally ledgers, name of their firm ‘Sumangal Corporation’ has been written, the amounts of cheque and cash receipts of Rs. 20,50,00,000/- and Rs. 73,70,50,000/- respectively recorded in these seized pages are the amounts received by Shri Sanjay J. Shah and Sunil J. Shah for their 31.5% share in the assessee LLP. Thereafter, the AO extrapolated the total amount of cash received by assessee LLP (for 100% share) at Rs. 2,33,98,41,270/- (Rs. 73,70,50,000 * 100 / 31.5) and added the same to the total income of assessee as undisclosed capital gain. Contentions of the assessee that impugned tally ledgers on seized page Nos. 59 to 62 are not genuine ledgers but have been created by making sample and imaginary data entries in ‘Tally’ accounting software; that the manual sheets of page Nos. 63- 64 are preparatory pages for making sample data entries in the ‘Tally’ software so as to obtain print outs of page Nos. 59 to 62; that many of the entries of CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP cash receipts are of the year 2018 and 2019, which are much after to the execution of the sale deeds on 07.12.2017 and that statements of Shri Sunil Patel and Shri Sunil J. Shah are not correct statements but appears to have been given under duress etc., were not accepted by the AO and he added Rs. 2,33,98,41,270/- to the total income returned by the assessee. This is the single addition made by the AO in the order passed u/s 153 of the Act on 24.03.2023.
4. Aggrieved by the order of the AO, the assessee preferred appeal before the CIT(A), who deleted the addition by observing as under: (i) Tally ledgers on seized page Nos. 59, 61 and 62 are not part of the books of account maintained in normal course and are not as per the basic accounting method and practice. Entries of receipt of cheque amounts have been made by journal entries by debiting to some imaginary accounts instead of bank account. (ii) Finding of the AO that credits of cheque amount of Rs.20.50 Cr. on page 62 are in respect payments received by Shri Sanjay J. Shah and Shri Sunil J. Shah for their 31.50% share is not correct. (iii) After analysis as per detailed charts prepared on page Nos.38 to 43 of appellate order, the CIT(A) found that out of total payments received through RTGS and cheques of Rs.13.50 Cr. (less TDS) + Rs.51.50 Cr. (less TDS), sums paid to Shri Sanjay J. Shah and Shri Sunil J. Shah were of Rs.12.54 Cr. and not of Rs.20.50 Cr., as has been CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP mentioned in assessment order. Remaining payments were made for repayment of loans and liabilities and to the other partners. Finding of that AO that cheque payments of 20.50 Cr. credited in seized Tally ledgers are amounts received by Shri Sunil J. Shah and Shri Sanjay J. Shah is not correct. (iv) Credits of cheques received of Rs. 20.50 Cr. include the advance tax payments made by the assessee LLP of Rs. 6.00 Cr. Payments of advance tax cannot be said to be amounts received by cheques. It is, thus, not correct to say that credits for cheque payments in seized pages match with actual payments received. (v) Manually prepared sheets of page Nos. 63-64 are not manual ledgers but are sheets containing figures jotted manually with two dates against each entry. There cannot be any logic for two different dates for same amount. Errors pointed out in tally ledgers are also there in these manual sheets. It has been submitted by the assessee that first these manual sheets were prepared in Gujarati language and then the same were data entered in tally software and printouts of tally ledgers of page Nos. 59 to 62 were obtained. In this way, all these seized papers are created papers and not genuine papers. (vi) Many cash receipt entries in tally ledgers as well as in manual ledgers are of dates after the registration date of sale deeds. This is against the doctrine of human probability.
CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP (vii) Loose papers relied by the AO have no evidentiary value as per the judgment in the case of Common Cause v. UOI [2017] 77 taxmann.com 245 (SC). (viii) Entire addition hinges on the loose papers found from premises of Shri Sunil J. Shah and his statement recorded in post search proceeding and statement of his accountant, Shri Sunil K. Patel. Opportunity of cross examination of these persons was not given despite direction given by the CIT(A) during appellate proceeding and despite sufficient time given. (ix) It was also noted by the CIT(A) that both Shri Sunil J. Shah and Shri Sunil Patel have retracted their statements. (x) It has been submitted by the assessee that at the time search proceedings, Shri Sanjay J. Shah, who is senior partner of assessee LLP, was present. However, there is no mention of confronting these seized papers to him but the statement of their accountant, Shri Sunil K. Patel, was taken in respect of seized pages, who is not a relevant person. (xi) In the absence of finding of any corroborative material or evidences of on-money receipt, addition made on the basis of above loose papers and statements cannot be sustained.
5. Aggrieved by the order of the CIT(A), the Revenue has filed appeal before us against the deletion of the addition by the CIT(A). The Ld. CIT-DR CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP strongly supported the assessment order and contended that the seized materials mentioned in the assessment order clearly prove the receipt of on- money in cash. These seized papers have been found from the premises of partners of assessee LLP having 31.50% share in the assessee LLP. He submitted that the CIT(A) has erred in holding the seized tally ledgers as not as per normal accounting method and practice merely on the basis of nomenclatures of account heads. Different account nomenclatures may be used by different persons. Fact that the amounts of cheque and cash receipts as per tally ledgers and amounts written in manual sheets by omitting three digits, i.e., ‘000’, are matching proves that these pages contain the details of amounts actually received. As regard the contention of ld. AR that these are created papers, it was submitted that why anyone will create such papers without any basis. There is no motive behind creating these papers by making sample data entries. Further, credits of cheque payments are matching with such payments received by assessee for sale of the land. Therefore, cash receipts credited are also correct. Other evidences such as cash sheets of some days and digital images found from MI phone of Shri Sunil K. Patel, accountant of Shri Sunil J. Shah, also prove the receipts of amount in cash for Lindiyat land. Further, Shri Sunil K. Patel, in his statement recorded u/s 132(4) of the Act clearly admitted that these papers are related to cash amounts received in respect sale of land at Lindiyad. Partner of assessee LLP, Shri Sunil J. Shah, who along with his brother Shri Sanjay J. Shah, are holding 31.50% share in assessee CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP LLP, had also admitted the receipt of cash of Rs.73,70,50,000/- as per seized papers from sale of the said land at Lindiyat. Subsequent retraction of their statements by these persons is a mere after-thought and should not be accepted. Further, as the statement was of one of the main partners of assessee LLP itself, there is no logic for his cross-examination. It is also contended that opportunity of cross examination was given during assessment proceeding but no one appeared before the AO. It was incumbent on assessee to ensure attendance of its own partner. It was, thus, requested that the order of the CIT(A) may be set aside and the addition made by the AO be restored.
On the other hand, the Ld. AR of assessee reiterated the same arguments as were made before the CIT(A). He has filed a paper book and relied on various decisions of Hon’ble Supreme Court, jurisdictional High Court and ITAT. Main contention of Ld. AR is that seized loose papers are not genuine papers but are created papers by making sample data entries in the Tally software without any supporting accounting records. It was submitted that books of account, records and documents of assessee LLP were never kept as the premises of Shri Sunil J. Shah and that the seized loose papers containing tally ledgers are not output reports of systematically maintained accounting record but are obtained by making sample data entries of imaginary figures of cash receipts. It was pointed out that firstly the manual sheets of page Nos. 63 to 64 were prepared in Gujarati language and some other dates were written with same figures and thereafter, data entries on the CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP basis of these manually jotted figures with second dates were made in ‘tally’ software and printouts of tally ledgers were obtained. By pointing out the abnormalities in tally ledgers such as period of these tally ledgers from 01.04.2011 to 29.09.2019; that separate tally ledgers for same ledger account for same period are there for bank transactions and cash transactions, and even for cash transactions there are two separate ledgers; that the data entries of bank transaction have been made by J.V. and that there has been apparent balance carry forward mistake in third tally ledger of cash receipts on page 59 etc., clearly prove that these tally ledgers are not genuine accounts but are print outs taken by making sample data entries of imaginary cash receipts. It was also pointed out that to make these tally ledgers appear genuine, data entries of some payments received through banking channel were also made by J.V. However, as the person who did so was not fully aware of actual dates and data, J.V. entries have been made on estimated basis. Even the payments of advance tax made by assessee LLP was entered as amounts received in cheques. In this way, as against the payments received of Rs. 13.50 Cr. through RTGS, data entries have been made for receipt of Rs.20.50 Cr. By pointing out these facts and errors, it was submitted that these papers are not genuine but created ones. In respect of other loose papers referred to by the AO, it was submitted that these loose papers are also not reliable as same are also not systematically maintained daily cash-sheets for a particular period. Two of the sheets are of the year 2019 and other two are of the year 2016.
CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP Had there been actual daily cash sheets, then all such sheets for a particular year/period in continuity with opening and closing balances must have been found. In these sheets, either opening balance or closing balance is missing, which shows that these are not actual sheets. In respect of digital images, it is argued that these are images of some rough slips with two different hand writings. There is nothing in these images to infer on-money received for sale of land and also for decoding the same by adding three zeros. The ld. AR also relied on following judgments to contend that merely on the basis of these loose papers and digital images, it cannot be concluded that any such on- money was in fact received: (i) Commoon Cause v. Union of India – (2017) 77 taxmann.com 245 (SC), (ii) CIT v. Vallamji Ravjibhai Patel – T.A. No. 1813 of 2016 (Guj.), (iii) Sunil Kumar Sharma s. DCIT-[2024] 159 taxmann.com 179 (Karnataka), (iv) Sunil Kumar Sharma s. DCIT - [2024] 165 taxmann.com 846 (SC), (v) Smt. Harmohinder Kaur v. DCIT - [2021] 124 taxmann.com 68 (Amritsar – Trib.), (vi) Nishant Construction P. Ltd. v. ACIT, in and (vii) ACIT v. Shanker Nebhumal Uttamchandani, [2024] 161 taxmann.com 536 (Surat - Trib.).
In respect of statement of Shri Sunil K. Patel, the ld. AR argued that his statement is not relevant. It was pointed out that at the time search, Shri Sanjay J. Shah, who was a partner in assessee LLP since beginning, was present. There is no mention about his statement in respect of all these seized papers found from his business premises. It is surprising that the AO has CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP heavily relied on statement of his accountant but there is no mention about statement of partner, who was present. In respect of statement of Shri Sunil J. Shah, it was pointed out that he became partner at a much later stage and was not fully aware about all the affairs of assessee LLP. It was also pointed out that his statement was recorded continuously for five days. In first 99 questions of his statement, there is not even a whisper about assessee LLP. Even while replying to question about concerns in which he was proprietor, partner or director, name of assessee LLP was not mentioned, which shows his lack of knowledge about affairs of assessee LLP. At last, in answer to question 100 recorded on fifth day, his statement about receipt of unaccounted cash from sale of land was recorded and shortly thereafter, his statement was concluded. The ld. AR contended that this manner of recording of his statement shows that his statement was not voluntary and was not based on complete knowledge of correct facts. This is evident from the fact that name of partners and profit ratio stated by him are not correct. This shows his ignorance about affairs of assessee LLP. It was, thus, submitted that his statement was not correct. The ld. AR also submitted that the CIT(A) has also observed that both of above persons have retracted their statements. The ld. AR also placed reliance on the judgment of Kailashben Manharlal Choksi, 174 Taxman 466 (Guj. HC) to contend that such statement has no evidentiary value. It is also pointed out that none of other partners of assessee LLP were ever confronted with above seized papers either during search proceedings or CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP in post search proceedings. Lastly, it was submitted that there has been no finding of any evidence of on-money actually received by the assessee or its partners, and in the absence of such evidence, addition made merely on the basis of above loose papers from premises of third party is not as per law. Reliance in this regard was placed on the judgment of CIT vs. Lavanya Land (P.) Ltd., [2017] 83 taxmann.com 161 (Bombay HC). Accordingly, ld. A.R. contended that the addition made is clearly wrong and unjustified and CIT(A) has rightly deleted the same.
We have considered the rival submission of both parties and perused the materials on record. We have also deliberated on the decisions relied upon by the ld. AR. Though revenue has raised multiple grounds of appeal
, they are inter-related and pertain to the single addition made by the AO towards undisclosed capital gain. Hence, they are considered together for deciding the appeal. We have also carefully perused the seized page Nos. 59 to 62 containing tally ledgers as pasted in the assessment order. There are three ledger accounts in the same name of ‘Lindiyat Sumangal Sale 3’ for the same period of 01-04-2011 to 28/09/2019. In respect of such a long period, it was explained by the ld. CA assisting the ld. CIT-DR that in ‘Tally’ software, there is facility of viewing accounts for the period longer than one year. However, no explanation was given for having three separate ledger accounts in the same account name for same period but with different entries. We also find that in the ledger account on page 62, credit entries of only cheque payments CO 27/SRT/2024 A.Y 18
19. Pipodra Textile Park LLP received are made through journal entries. It has been pointed out by ld. AR that credits in this ledger account also includes the payments made by assessee for advance tax of Rs. 6.00 crores. There is no logic in crediting advance tax payments as receipts. In ledger account on page 61, credit entries of cash receipts have been made for the period 21.01.2016 to 11.10.2016 and 01.11.2016 to 29.07.2017. In ledger account on page 59, credit entries of cash receipts have been made for the period from 10.02.2018 to 19.06.2019. The ld. A.R. pointed out that there is mismatch of balance brought forward in this. Normally, transactions by cheques or cash or journal entries of account of same person for same period are entered in one ledger account only. There is also no finding of the books of account maintained in ‘tally’ software of which these seized pages are part. There is no mention of finding of any cash book, journal book, vouchers and other connected ledger accounts of which these tally ledger accounts are part. In our opinion, in the absence of finding of full and supporting books of account such as cash book, journal book with narrations etc., veracity of impugned seized tally ledgers on loose papers is not proved. It cannot be conclusively said that these tally ledgers contain the details of actual transactions. We also find that crediting advance tax payments as cheques received also creates doubts about the genuineness of these tally ledgers. Why would anyone credit payment of tax as receipt for sale of land. There is also no logic for having three separate ledgers for same account head i.e., one for bank transactions and other two for cash CO 27/SRT/2024 A.Y 18
19. Pipodra Textile Park LLP transactions. On perusal of manual sheets of seized page Nos. 63 to 64, it is noted that the same contain amounts and two dates. It was contended by the ld. AR that originally amounts and dates were written in Gujarati language. Subsequently, other dates have been written in English, apparently in a different hand writing. On adding three digits (000) with amounts jotted on these pages, same are mostly matching with the amounts in tally ledgers except few mismatches as pointed out in the order of CIT(A). The ld. AR contended that first these manual sheets were prepared and some other dates have been subsequently written by some other person in English and by making sample data entries of these notings in manual sheets with dates in English, print outs of tally ledgers of seized page Nos. 59, 61 & 62 were taken. We find that there is no mention of any meaningful narration or details with entries on these manual sheets. We also do not find reason behind two dates with each amount mentioned in these sheets. Considering all these facts, we are of view that these seized pages are not sufficient for concluding receipts of on-money in cash.
9. It has also been noted by the CIT (A) that out of total consideration of Rs.65 crores as per sale deeds, total amounts received by Shri Sunil J. Shah and Shri Sanjay J. Shah were Rs. 12.54 crores only and not Rs. 20.50 crores as has been observed by the AO assessment order Thus, the finding of the AO on this issue is not correct. Moreover, finding of the AO that credits by cheque payments of Rs. 20.50 crores in seized papers are fully matching with the CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP cheque payments actually received by the assessee for sale of the land is also not correct. It is found that these credits of Rs. 20.50 crores in seized papers include sums of Rs. 6.00 crores, which are in fact not receipts but are payments made by the assessee towards advance tax. Therefore, this claim of the AO is also not found to be correct. We also find that other seized loose papers bearing page Nos.36, 76, 78 & 128 referred to by the AO are also not sufficient for holding that any such amounts were actually received by the assessee or its partners. Page Nos. 36 and 76 are cash sheets of the financial year 2019, whereas the sale deeds were already executed on 07.09.2017. Further, these are random papers for some days without finding similar sheets of earlier and subsequent days. There is no finding of any corroborative evidences. Digital images found from MI phone of Shri Sunil Patel are also not sacrosanct in absence of originals of same or other corroborative evidence. Further, it is not clear whether slips in these images are for payments made or received. None of these seized materials are adequate to conclusively establish that money was actually received for sale of the Lindiyat land.
10. It has also been argued by the ld. AR that the sale deeds were executed on 07.09.2017, whereas many of the entries in the seized papers are of the years 2018 and 2019, which is beyond the realm of human probability. The CIT(A) has accepted this argument as convincing. In this regard, the ld. CIT-DR submitted that in big deals between established and reputed parties, it is not uncommon that the sale deeds are registered without receipts of full amounts CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP including on-money, which are paid subsequently after development of the project. However, no evidence in support of this argument could be produced. In the absence of evidence such as reverse Satakhat (agreement) or other evidence showing such mutual understanding between parties about payments after date of registration, it is difficult to accept that payments of on-money were received even after the date of registration. This is against the normal business practice.
11. In respect of statements of Shri Sunil Patel and Shri Sunil J. Shah, the CIT(A) observed that they had subsequently retracted their statements. In our view, retraction of statement is not sufficient for not considering the evidentiary value of the statements, without going into the basis and reasons for retraction. However, we also hold that statements alone cannot be the basis for reaching to conclusion. These statements cannot be considered in isolation in absence of any corroborative evidence, more so when the evidence relied upon was found from premises of a third party. We find merit in the argument of ld. AR that though one of the partners, Shri Sanjay J. Shah, was present during the search proceedings, his statement was not recorded in respect of the seized papers; instead, statement of his accountant was recorded. He was not even made the consenting party to the said statement. The reason for such omission has not been explained by the revenue. We also find that opportunity of cross-examination was not given to any other partners of the assessee LLP. Regarding the statement of Shri Sunil J. Shah recorded CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP after the search proceeding, the ld. AR submitted that he joined the LLP as partner at very late stage and he was not aware about complete facts of the case. He could not even tell correctly names of all the partners and their profit- sharing ratio. Accordingly, his statement is not correct and reliable. The ld. AR also submitted that the manner in which recording of his statement continued for five days also suggests that his statement was not voluntary. Therefore, he retracted his statement. After considering all these facts, we are inclined to agree with the CIT(A) that in above facts of case, the statements of Shri Sunil J. Shah and Shri Sunil K. Patel by themselves are not sufficient for concluding that undisclosed amounts had in fact been received by assessee LLP on sale of the impugned land. As noted earlier, the statements were subsequently retracted by both of them.
The ld. AR has relied on various decision in support of the contention that the seized material in the form of loose papers, computer prints and digital images found from the third-party office are not conclusive evidence, namely, (i) Common Cause (supra), (ii) DCIT vs. Sunil Kumar Sharma, (2024) 168 taxmann.com 77 (SC) and 159 taxmann.com 179 (Kar.), (iii) PCIT vs. Smt. Rashmi Rajiv Mehta, 474 ITR 97 (Del). The CIT(A) has also relied on the decision in case of Common Cause (supra) wherein it was held that loose sheets of papers are irrelevant as evidence with respect to the transaction mentioned therein. In the said case, raids were conducted on two business groups and incriminating materials in form of random sheets and loose papers, computer CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP prints, hard disk, pen-drive etc. were found. Evidence of highly incriminating money transactions were also found. The Hon’ble Supreme Court held that these documents had no evidentiary value. In case of Sunil Kumar Sharma (supra), the Hon’ble Karnataka High Court held that loose sheets of paper/diaries found during the search, containing type entries, not shown to form part of books of account regularly maintained by assessee or his business entities, did not constitute material evidence and thus, notice u/s 153C of the Act was void. The Hon’ble Supreme Court dismissed the SLP against the order of the Hon’ble High Court. The Hon’ble Gujarat High Court in case of CIT vs. Maulikkumar K. Shah, 307 ITR 137 (Guj.) held that mere entries in seized material are not sufficient to prove that assessee has indulged in such a transaction in which on-money has been received. The Hon’ble Bombay High Court in case of CIT vs. Lavanya Lands Pvt. Ltd., 397 ITR 246 (Bom.) held that where seized documents were not in name of the assessee, no action could be taken in case of assessee u/s 153C of the Act and further, the entire decision being based on huge amounts revealed from seized documents not being supported by actual cash passing hands, addition u/s 69C of the Act was not sustainable. The Hon’ble Supreme Court in case of PCIT vs. Krutika Land Pvt. Ltd., 103 taxmann.com 9 (SC) dismissed SLP against Hon’ble High Court ruling that where seized documents were not in the name of the assessee, no action could be undertaken in case of assessee u/s 153C of the Act and further entire decision being based on huge amounts revealed from seized documents not CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP being supported by actual cash passing hands, addition was not sustainable. The Hon’ble Gujarat High Court in case of CIT vs. M. P. Scrap Trader, 372 ITR 507 (Guj.) held that where the AO, while making addition in the hands of the assessee-firm as well as its partners, solely relied upon statement of partner recorded at the time of survey, which was subsequently retracted, additions made by the AO were to be deleted. The Hon’ble jurisdictional High Court in case of Gayatri Enterprises, 420 ITR 15 (Guj.) held that unless it was established on record by Department that as a matter of fact, consideration as alleged by Department did pass to seller from purchaser, it could not be said that the Department had any right to make any addition. In view of these authoritative precedents on the issues involved in the instant appeal, and after considering the facts as discussed above, we are of the considered view that there is no infirmity in the order of CIT(A), which we confirm. Accordingly, the appeal of revenue is dismissed.
The revenue has also raised a ground submitting that the CIT(A) has erred in deleting the addition of the AO ignoring the principles of “human probability test”. The ld. CIT-DR has not argued as to how the above principles would apply to the facts of the present case. The CIT(A) has decided the issue after duly considering the facts of the case and following the precedent on the subject issue. Therefore, we do not find any merit in the above ground and the same is dismissed.
Ground Nos. 8, 9 and 10 are general in nature and do not require CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP adjudication.
In the result, appeal of the revenue is dismissed. CO No. 27/SRT/2024 (AY 2018-19): 16. The grounds of appeal
raised by the assessee are as follows: “1. That on the facts & circumstances of the case as well as in law, the learned CIT(A)has erred in upholding the validity of the assessment proceeding initiated and carried out u/s 153C of the I.T. Act, 1961 (the Act) and consequent assessment order passed u/s 153C of the Act, whereas the proceeding-initiated u/s 153C and consequent assessment order passed are clearly in valid, without authority of law and bad in law. Appellant prays for quashing the same.”
17. Only issue raised in the C.O. of the assessee is that initiation of proceedings u/s 153C of the Act in its case are not valid because copy of satisfaction note was not provided to him. The CIT(A) has dismissed this ground of assessee by observing that the appellant has not furnished any document showing that any request was made by it to the AO for supplying copy of satisfaction note. He also observed that there was sufficient material and basis for initiating proceedings u/s 153C of the Act, which were communicated to assessee in the notice issued during assessment proceedings. He, therefore, did not find any merit in the contention of assessee and dismissed the appeal on this ground.
18. At the time of hearing before us, the ld. AR of the assessee repeated the same contentions but he could not produce any document showing that any request was made to the AO for supplying copy of satisfaction note. Further, nothing was brought to our notice that the basis mentioned in the assessment CO 27/SRT/2024 A.Y 18-19 Pipodra Textile Park LLP order for initiating proceeding u/s 153C was not valid. On the other hand, the ld. CIT-DR has provided the copy of satisfaction note for issue of notice u/s 153C of the Act in case of the assessee LLP. The ld. AR was also given a copy of it but he did not point out any discrepancy or lacunae in the satisfaction note. In these circumstances, we do not find any reason to interfere with order of CIT(A) on this issue, which is hereby upheld. Consequently, the cross objection of the assessee is dismissed.
In the combined result, the appeal of revenue as well as cross objection of the assessee are dismissed. Order pronounced in terms of Rule 34 of ITAT, 1963 on 31/10/2025 in the open court.