DEPUTY COMMISSIONER OF INCOME TAX, CHENNAI vs. GNANAGURU LAVANYA, TIRUPUR

In connection with the aforesaid search in the case of Kallal Group, the business premises of one M/s.Sarnith Enterprises India Private Limited were also covered. Further, residential premises of Shri Ganesan Saravanakumar, who is stated to be one of the directors of the said company, were also covered.

During the course of the search, certain materials were found and seized from the business premises of M/s. Sarnith Enterprises India Private Limited situated at 17/173, Karpagam Complex, NSR Road, Saibaba Colony, Coimbatore. The said materials were subsequently relied upon by the AO while making the impugned addition in the hands of the assessee. The seized materials are as under:

The assessee along with her spouse Shri M.V. Gnanaguru sold 13.85½ acres of land situated at Rackiyapalayam Village, Tirupur to Shri V.P. Jayapradeep on 29.11.2019 for a consideration of Rs.1,11,44,800/-. The said consideration was duly received through banking channels and was duly disclosed by the parties in their respective returns of income for the impugned assessment year.

A sworn statement u/s.132(4) of the Act was recorded from Shri G.Saravanakumar on 11.03.2021 in respect of the loose sheets seized vide Annexure ANN/KP/GS/LS/S. In response to Question No. 5, Shri G.Saravanakumar stated that the handwriting in the seized loose sheets

Further, a sworn statement u/s.132(4) of the Act was recorded from Shri G.Saravanakumar on 12.03.2021 with reference to the note pads seized vide Annexures ANN/SJ/GS/B&D/S-2 and ANN/SJ/GS/B&D/S-3. In response to Question Nos.8 and 9, Shri Saravanakumar stated that the entries represented cash receipts towards alleged “on-money” payments in connection with acquiring the Tirupur land. Subsequently, a statement u/s.131(1) of the Act was recorded from Shri G.Saravanakumar on 19.07.2021. In the said deposition, Shri G.Saravanakumar retracted his earlier statements and clarified that he is a real estate broker, the entries in the seized note pad were only personal notings for reference, the transactions were not routed through him, the concerned purchasers/owners were directly transferring money among themselves and only intimated him over phone, and he recorded the same for follow-up action/commission purposes; and he did not receive or pay cash as reflected in the notings.

It is pertinent to state that no further enquiry or investigation was conducted with the assessee in respect of the seized documents and the statements recorded from Shri Saravanakumar either at the time of search or thereafter.

A statement u/s.131 of the Act was recorded from Shri V.P.Jayapradeep on 29.07.2021, being the purchaser of the impugned land. Shri V.P.Jayapradeep categorically denied any knowledge of the contents of the seized loose sheets, denied payment of any on-money, stated that no additional payment other than the consideration recorded in the registered document was :-5-: ITA. Nos.:605 & 610Chny/2025 made; and denied any connection of Shri G.Saravanakumar with the purchase transaction.

On the basis of the seized materials and statements, notice u/s.153C of the Act was issued to the assessee on 03.01.2022. In response thereto, the assessee filed return of income on 28.02.2022 declaring total income of Rs.17,95,560/- as originally returned. Notice u/s.143(2) of the Act was thereafter issued on 18.06.2022 and subsequently notices u/s.142(1) of the Act were issued from time to time.

The AO analysed the seized loose sheets (ANN/KP/GS/LS/S) and note pads (ANN/SJ/GS/B&D/S-2 & S-3) and, relying primarily upon the statements initially recorded from Shri G.Saravanakumar, concluded that the assessee and her spouse had allegedly received on-money amounting to Rs.27,26,55,200/- over and above the registered sale consideration of Rs.1,11,44,800/- from Shri V.P.Jayapradeep.

The AO extracted the figure of Rs.28,38,00,000/- from page 24 of loose sheets ANN/KP/GS/LS/S and, after reducing the registered sale consideration of Rs.1,11,44,800/- (received by demand draft), computed alleged unaccounted cash consideration of Rs.27,26,55,200/-.

The AO further proceeded on the premise that Shri G.Saravanakumar acted as personal assistant of Shri V.P.Jayapradeep and that the note pad entries represent cash payments made by Shri Jayapradeep. The AO compared the note pad entries with loose sheets and held that the assessee and her spouse received the alleged cash component.

The assessee was confronted with the proposed addition. Vide written submission dated 15.03.2023, the assessee denied receipt of any on-money and further submitted that Shri G.Saravanakumar was in no manner connected with the sale transaction between the assessee and Shri V.P.Jayapradeep.

The AO rejected the explanation and proceeded to make an addition by holding that the assessee and her spouse jointly received cash consideration of Rs.27,26,55,200/- over and above the registered sale value. The AO made addition of Rs.13,75,64,540/- on a pro-rata basis in the hands of the assessee u/s.69A r.w.s 115BBE of the Act. The remaining portion of an amount of Rs.13,50,90,660/- u/s.69A r.w.s 115BBE of the Act was added in the hands of the spouse of the assessee.

The AO’s conclusions were primarily based on the reasoning that Shri G.Saravanakumar is cousin of Shri V.P.Jayapradeep and allegedly acted as his personal assistant, that Shri G.Saravanakumar initially accepted alleged on- money payments in statements recorded u/s.132(4) of the Act, that the sale consideration of Rs.1,11,44,800/- paid through demand draft matches entries in the seized papers, that demand draft particulars match Shri V.P.Jayapradeep’s bank statement; and that certain narrations such as “Guru”, “Guru MTP Road”, “Guru cash (PWD)” in note pads correspond with the loose sheets.

Based on the above, the AO applied the principle of preponderance of probabilities and held that the total sale consideration was Rs.28,38,00,000/- including alleged unaccounted cash consideration.

Thus, the AO completed the assessment in the case of the assessee vide order dated 24.03.2023, u/s.143(3) r.w.s 153C of the Act determining the total income at Rs.13,93,60,100/- by making an addition of Rs.13,75,64,540/- u/s.69A r.w.s 115BBE of the Act.

Aggrieved of the addition made by the AO towards on-money receipts u/s.69A r.w.s 115BBE of the Act, the assessee carried the matter in appeal before the Ld.CIT(A), who vide the impugned appellate order dated 31.12.2024 deleted the addition made by the AO by observing as under:-

Considering the facts and circumstances of the case, we would hold that impugned additions are not sustainable in law. The same stand deleted. The Ld. AO is directed to re-compute the income of the assessee. We order so.” 6.3.34 In view of the detailed discussion made supra and the various judicial decision(s) relied upon the undersigned is of the considered view that the AO has proceeded to make the addition primarily based upon the statement of a third party and narrations contained in the loose sheet without bringing cogent and corroborative evidence to substantiate that the appellant and her husband have actually received on money to the extent of Rs.27,26,55,200/- in respect of the land sold at Tirupur. Further, the AO has not established the property sold will actually fetch the value of Rs.28,38,00,000/-. Therefore, the undersigned has considered that the addition of Rs.13,75,64,540/- made by the AO as unexplained money in the hands of the Appellant is unsustainable on merits of the case. Accordingly, all the grounds raised by the Appellant upon this issue are hereby treated as allowed and the AO is directed to delete the addition of Rs.13,75,64,540/- for the A.Y. 2020-21.”

Aggrieved by the deletion of addition of Rs.13,75,64,540/- made by the AO u/s.69A r.w.s 115BBE of the Act, the Revenue is in appeal before us.

The Ld.DR, Ms.E.Pavuna Sundari, CIT, appearing on behalf of the Revenue, vehemently supported the assessment order. The Ld.DR submitted that the receipt of on-money by the assessee stands duly established on the basis of the loose sheets found and seized from the premises of Shri G.Saravanakumar, which are further corroborated by his sworn statement recorded u/s.132(4) of the Act. The Ld.DR thus contended that the AO had rightly made an addition of Rs.13,75,64,540/-, being the amount allegedly receipt over and above the registered sale consideration of the property. Placing strong reliance on the findings recorded by the AO, the Ld.DR argued that the Ld.CIT(A) was not justified in deleting the said addition by relying on the grounds raised by the revenue. The Ld.DR therefore prayed that the order of the Ld.CIT(A) be set aside and the addition made by the AO be restored by allowing the grounds raised by the Revenue.

Per contra, the Ld.AR, Shri R.Venkata Raman, Chartered Accountant, appearing on behalf of the assessee, supported the order passed by the Ld.CIT(A) and submitted that there is no perversity or infirmity in the said order warranting interference by this Tribunal. The Ld.AR submitted that the loose sheets were seized from the premises of one Shri G.Saravanakumar, who was neither the author of the impugned documents nor was he acting as a broker or intermediary in the land transaction between the assessee and the vendors of the property. In such circumstances, the statements made by Shri G.Saravanakumar cannot be accorded any evidentiary value for the purpose of alleging that the assessee had paid any on money over and above the stated consideration.

It was further contended that, even otherwise, the said statements stand vitiated in view of the subsequent retraction made by Shri G.Saravanakumar, thereby rendering the earlier deposition unreliable and devoid of evidentiary

The Ld.AR further contended that the addition has been made solely on the basis of loose sheets recovered from a third party and on the strength of the retracted sworn statement of Shri G.Saravanakumar, in the absence of any corroborative material linking the assessee with the alleged payment of on money. It was asserted that such uncorroborated and unverified documents cannot form the sole basis of addition, particularly when the assessee has categorically denied having made any such payment and when no supporting evidence has been brought on record by the Revenue.

The Ld.AR placed substantial reliance on the detailed findings recorded by the Ld.CIT(A) of the impugned order and submitted that the conclusions arrived at by the Ld.CIT(A) are based on proper appreciation of facts and settled legal principles and therefore cannot be regarded as perverse. Accordingly, the Ld. AR submitted that the Ld.CIT(A) has rightly deleted the addition made by the AO and prayed that the appeal filed by the Revenue be dismissed by upholding the order of the Ld.CIT(A).

We have heard the rival contentions and carefully perused the material available on record. We observe that the impugned addition in the hands of the assessee has been made solely on the allegation that the assessee received cash/on-money as part of sale transaction, based on loose sheets / notings seized from third-party premises. It is an admitted position that the said seized documents were not recovered from the premises of the assessee and the notings were not in the handwriting of the assessee. Further, there is no direct

We observe that the AO has placed reliance upon the noting at Page 23 of ANN/KP/GS/LS/S to infer alleged payment of on-money by the assessee. The relevant entries are reproduced below along with our observations: - Our remarks 1) 24.11.19 - 3,98,000 Mode not 11.00 AM mentioned. 2) 25.11.19 - 2,00,00,000 Mode not 10.15 AM mentioned 3) 28.11.19 - Cheque 47,07,719 Unconnected with 11.00 AM Do - 18,76,771 the land transaction between the assessee and the vendors 9.00 PM - Cash - 2,00,00,000 4) 29.11.19 DD - 56,23,012 Demand drafts DD - 55,21,788 issued by the assessee to the vendors 5) 30.11.19 - Cash - 4,00,00,000 Dates falling after 1.30PM the date of registration of the 6) 8.12.19 - Cash - 10,00,00,000 impugned 7.30 PM property 7) 15.12.19 - Cash - 5,00,00,000 8.00 PM Date and mode 8) - 50,00,000 not mentioned 9) 14.03.2020 - Cash - 2,00,00,000 10.30 AM 27,31,27,290 Compound - 25,00,000 Date and mode wall not mentioned. 27,56,27,290

From the above tabulation, it is evident that the cheque amounts appearing under Serial No.3 are not relatable to the transaction of purchase between the assessee and the vendors. Further, the entries under Serial Nos.5 to 9, aggregating to Rs.21,50,00,000/-, pertain to alleged cash payments subsequent to the date of registration of the impugned property. This constitutes approximately 80% of the total alleged cash component. We concur with the findings of the Ld.CIT(A) that it is wholly improbable and contrary to the normal course of human conduct that title in the property would be transferred first and consideration would be paid thereafter, especially in cash. Such a proposition is beyond the test of preponderance of probability. Further, pages 24 to 26 of the seized loose sheets mention an extent of 15.00 acres, whereas the assessee has, in fact, purchased only 13.85½ acres. This material discrepancy further establishes that the seized papers do not pertain to the assessee’s transaction with the vendors.

Coming to the evidentiary value of the loose sheets, we note that Shri G.Saravanakumar, in his sworn statement recorded on 11.03.2021, has :-18-: ITA. Nos.:605 & 610Chny/2025 clearly admitted in response to Question No. 5 that the loose sheets at pages 23 to 26 in ANN/KP/GS/LS/S were authored by one Shri G.Gnanasekhar. Despite this admission, neither the authorized officer at the time of search nor the AO has conducted any enquiry or verification with the said author. In the absence of such enquiry, the allegations sought to be drawn from the loose sheets, which are admittedly prepared by a third party unconnected with the assessee’s transaction, lack any evidentiary foundation. No adverse inference can, therefore, lawfully be drawn against the assessee.

We further observe from the seized note pads in ANN/SJ/GS/B&D/S-2 & 3, that the impugned sheets do not bear any signature or acknowledgment of the assessee or the vendors. On perusal of the said note pad and sworn statement of Shri G.Saravankumar, the entries are not authored by either the assessee or the vendors. The nature of the entries whether representing receipts or payments is not ascertainable. The entries do not indicate payment of any on-money by the assessee. The page-wise totals do not reconcile with the individual noting, demonstrating incompleteness. Thus, the seized note pads are incomplete, uncorroborated, and constitute “dumb documents” incapable of supporting the addition. Significantly, Shri G.Saravanakumar, in his sworn statement recorded on 19.07.2021, has retracted his earlier assertion and clarified that the entries in ANN/SJ/GS/B&D/S-2 & 3 do not represent cash receipts and are merely notings for reference. He has categorically denied receiving or paying any money based on these notings. Therefore, abbreviated entries such as “Guru”, “Guru MTP Road”, or “Guru Cash (PWD)” cannot, by any stretch, be treated as evidence of on-money payment by the assessee.

In our considered view, the seized documents relied upon by the AO do not contain any complete or cogent information which may legitimately form the basis of drawing an inference regarding alleged on-money payments made by the assessee. The entries merely indicate dates, purported amounts, and abbreviated names without disclosing the identity of the payer, payee, nature of transaction, or purpose thereof. In the absence of such primary and essential details, it is not legally permissible to infer that the entries relate to the assessee or represent income in the hands of the assessee.

It is a well-settled proposition of law that entries appearing in private notings or diaries maintained by third parties, without supporting evidence or linkage to the assessee, constitute “dumb documents” and cannot be relied upon to fasten tax liability. Unless there is independent, credible, and corroborative evidence linking such entries to the assessee, the same are devoid of evidentiary value. In the present case, neither the assessee nor the vendors have acknowledged any such payment. No corroborative evidence has been brought on record to demonstrate actual flow of money. The assessment order does not refer to any independent material supporting the alleged payments.

We draw gainful support from the judgment of the Hon’ble Supreme Court in the case of Common Cause (A Registered Society) v. Union of India [2017] 394 ITR 220 (SC), wherein the Hon’ble Apex Court has categorically held that loose papers, diaries, pen drives, computer printouts and similar material recovered during the course of search and seizure, which are not maintained in the regular course of business, have no evidentiary value in :-19-: ITA. Nos.:605 & 610Chny/2025 the absence of any corroborative material. In the aforesaid decision, the Hon’ble Supreme Court has, inter alia, observed as under: “14. Placing implicit reliance of the decision of this Court in V.C. Shukla (supra), it was submitted that it is open to any unscrupulous person to make any entry any time against anybody's name unilaterally on any sheet of paper or computer excel sheet. There being no further corroborative material with respect to the payment, no case is made out so as to direct an investigation, and that too against large number of persons named in the documents. Such entries have been held to be prima facie not even admissible in V.C. Shukla's case (supra). He urged that in case investigation is ordered on the basis of such documents, it would be very dangerous and no constitutional functionary/officer can function independently, as per the constitutional imperatives. No case is made out on the basis of material which is not cognizable in law, to direct investigation. … 21. We are constrained to observe that the Court has to be on guard while ordering investigation against any important constitutional functionary, officers or any person in the absence of some cogent legally cognizable material. When the material on the basis of which investigation is sought is itself irrelevant to constitute evidence and not admissible in evidence, we have apprehension whether it would be safe to even initiate investigation. In case we do so, the investigation can be ordered as against any person whosoever high in integrity on the basis of irrelevant or inadmissible entry falsely made, by any unscrupulous person or business house that too not kept in regular books of account but on random papers at any given point of time. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily. We find the materials which have been placed on record either in the case of Birla or in the case of Sahara are not maintained in regular course of business and thus lack in required reliability to be made the foundation of a police investigation.”

A plain reading of the foregoing clearly establishes the legal principle that it is always possible for any unscrupulous person to unilaterally record entries against any person in loose sheets, diaries, pen drives, computer excel sheets or similar material, without any underlying transaction. Such material, not being maintained in the regular course of business, lacks evidentiary value in the eyes of law unless supported by cogent

A similar view has been expressed by the Hon’ble Karnataka High Court in the case of Sunil Kumar Sharma v. DCIT [2022] 448 ITR 485 (Karnataka), which pertains to an income-tax matter. In the said decision, the Hon’ble High Court, placing reliance upon the judgment of the Hon’ble Supreme Court in Common Cause (A Registered Society) v. Union of India (supra), held that loose sheets of paper or diaries found during the course of search, which are not established to form part of the books of account regularly maintained by the assessee, do not constitute material evidence and, therefore, cannot be relied upon or used against the assessee. The relevant extract of the judgment is reproduced hereinbelow: “26. It is established in law by the Hon'ble Apex Court that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. Following the law declared by the Hon'ble Apex Court, we are of the view that the action taken by the respondent/Revenue against the Assessee based on the material contained in the diaries/loose sheets, are contrary to the law declared by the Hon'ble Apex Court. In that view of the matter, impugned notices issued under section 153C of the Act, based on the loose sheets/diaries are contrary to law, which require to be set aside in these writ appeals, as the same are void and illegal."

We find that the Ld.CIT(A) by pacing reliance on the judgment of the Hon’ble Delhi High Court in CIT Vs Sant Lal [2020] 118 taxmann com 432 (Del) has rightly held that the impugned loose sheets relied upon by the AO was neither seized from the premises of the assessee nor was the same found to be in the handwriting of the assessee. Such material seized in the case of a third party which is not in the hand writing of the assessee does not constitute adequate evidence to draw any adverse inference against the assessee.

In light of the above facts and judicial precedents we concur with the findings of the Ld.CIT(A) that a narration made in a loose sheet by a third person with scant details cannot be used to fasten tax liability upon the person whose name does not appear at all. In the absence of any corroborative evidence to attribute the entries to such a person. Such seized material is liable to be treated as a dumb document, which does not have any evidentiary value in respect of the entries found therein, unless corroborative evidence is available which can provide necessary reliable basis for deciphering the nature and character of the said entries.

Further, we also find that the Ld.CIT(A) has rightly relied upon the decision of this Tribunal in the case of ACIT Vs Satyapal Wassan [TS-5104 ITAT-2007(Jabalpur)-O] (2008) 5 DTR 0202, wherein the Tribunal stressed the importance of gathering corroborative evidence in support of the :-21-: ITA. Nos.:605 & 610Chny/2025 contents of a document, particularly when the document is bereft of necessary details and is not complete in all respects, by stating as under: "For the sake of argument if we accept the submission of the learned Departmental Representative that the learned CIT(A) erred in accepting fresh evidence then what is left after ignoring those affidavits is the bare document No. 7 with the bare details as referred to above. The moot question now arises is whether any addition can be made on the basis of that document. We have already pointed out above that this document is bereft of necessary details about year of transaction, ownership of transaction, nature of transaction, necessary code for deciphering the figures. It may be possible that a document may not be complete in all respects as the businessmen or tax evaders may choose to record minimum details on a document and keep the rest in their memory. It is the duty of the AO to carry out necessary investigations by correlating the impugned document with other documents seized, with regular books of account, with record kept by outside agencies, such as banks or financial institutions or debtors/creditors and finally, by recording the statements of concerned parties so as to fill up the gaps in confirming the inference arising from the documents for a proper charge of tax. Such correlation is necessary unless the document is capable of speaking giving full details so as to enable any intelligent person to find out the nature of transaction, the year of transaction, the ownership of the transaction and quantum thereof. Even in that situation, it is necessary to give opportunity to the assessee to offer his explanation and investigation be carried out to strengthen the direct inference arising from this document.”

We further draw support from the coordinate bench decision of this Tribunal in the case of Riveria Properties Private Limited Vs ITO in wherein it was held that the AO is required to bring further evidence on record to show that the money was actually exchanged between the parties in a case where there is no other evidence on record to prove that on-money was paid except the loose sheet found in the premise of a third party and admission made by the third party. The relevant part of the said decision is reproduced as under: "In the present case on hand, except loose sheet found in the premises of third party and admission made by the third party in their assessment proceedings, there is no other evidence on record to prove that on money is paid. The assessing officer, without brought on record any evidence to prove that on money is exchanged between the parties, merely harping upon the loose sheet and the third party admission, which cannot be considered as conclusive evidence against the assessee to bring on money to tax as undisclosed income. The AO is required to bring further evidence on record to show that actual on money is exchanged between the parties, but literally failed to do so. The A.O. did not conduct any independent enquiry relating to the value of the property instead, merely relied upon the statement given by the purchasers of the property, which is not correct. Further, there is no proof of origin and destination of :-22-: ITA. Nos.:605 & 610Chny/2025 on money. The A.O failed to prove the source of the purchasers as to how the money was arranged and also failed to prove the deployment of unaccounted money by the seller by any form of evidence. Under these circumstances, based on paper jottings as conclusive evidence on money cannot be brought to tax as income from undisclosed sources."

We further concur with the findings of the Ld. CIT(A) that the Hon’ble Supreme Court in the case of K.P.Varghese v. ITO (1981) 131 ITR 597 has clearly laid down the principle that the onus of establishing that the necessary conditions of taxability are fulfilled rests upon the Revenue. The Hon’ble Apex Court has further observed that to cast the burden upon the assessee to prove a negative fact namely, that no consideration beyond the declared value has been received is to impose an almost impossible obligation. The Hon’ble Court has held that it is incumbent upon the Revenue to adduce cogent evidence to corroborate the contents of any seized material before alleging that the assessee was in receipt of undisclosed consideration.

In the facts of the present case, we find that the AO has failed to discharge such burden. No independent enquiry or corroborative evidence has been brought on record to substantiate that the assessee indeed paid any on-money as purportedly reflected in the impugned seized documents.

We also agree with the Ld.CIT(A) that though the strict provisions of the Indian Evidence Act do not apply to income-tax proceedings, the settled legal position is that the AO cannot make a pure guess or an addition without any supporting material. The addition must be based on reliable and corroborative evidence, particularly when the material relied upon has been recovered from a third party. In the present case, the seized loose sheets and notepads were recovered from a third-party premises and are admittedly not in the handwriting of the assessee or any of the vendors. In the absence of any supporting evidence to demonstrate that the alleged payments actually materialised, such loose papers can only be considered “dumb documents”, incapable of being used as the sole basis for addition. Hence, the conclusion drawn by the AO solely on the basis of the said uncorroborated documents is untenable.

We also find support from various decisions of this Tribunal on identical facts, wherein it has been held that additions cannot be made solely on the basis of loose sheets found from third-party premises. The relevant decisions of the jurisdictional Bench are as under: • DCIT, Central Circle-2(2) v. Shri Karuppagounder Palaniswami and vice-versa, to 127/Chny/2023 and ITA Nos. 214 to 215/Chny/2022, order dated 03.04.2024. • DCIT, Central Circle-2(4) v. Shri Vaithilingam and vice-versa, ITA Nos. 604 to 606/Chny/2023, order dated 03.04.2024. • DCIT, Central Circle-2(4) v. Shri O. Panneerselvam and vice-versa, ITA Nos. 581 & 582/Chny/2023, order dated 05.04.2024.

In view of the foregoing factual matrix, and respectfully following the ratio laid down in the judicial precedents cited supra, we are of the considered view that, in the absence of any substantive, corroborative, or otherwise reliable evidentiary material brought on record by the AO, the seized loose sheets and note pads relied upon by the AO constitute mere ‘dumb documents’. Such documents, being devoid of evidentiary value and lacking any demonstrable nexus with the alleged transactions, are inherently incapable of forming a legally sustainable basis for making an addition on account of the purported on-money payment. Accordingly, the addition of Rs.25,78,98,000/- made by the AO towards unexplained investment u/s.69B r.w.s 115BBE of the Act solely on the basis of the impugned documents is untenable in law and cannot be sustained. We, therefore, find no infirmity in the order passed by the Ld.CIT(A), who has rightly deleted the addition. The order of the Ld.CIT(A) is, therefore, hereby affirmed.

We further note that there is no evidence, direct or circumstantial, to substantiate the assertion of the AO that Shri G.Saravanakumar acted as a broker, intermediary or facilitator in relation to the impugned land transaction between the assessee and the vendors. The allegation is based solely on a statement recorded during the course of investigation without any contemporaneous supporting material such as correspondence, brokerage agreement, financial records, or confirmations from any of the parties involved. It is pertinent to observe that the said individual has subsequently filed a detailed retraction letter clearly stating that the entries in his diary do not represent any receipt of cash pertaining to the assessee’s land purchase and further clarifying that he had no role in negotiating, arranging, or executing the transfer of consideration. This direct contradiction completely erodes the evidentiary value of the earlier statement and undermines the credibility sought to be attached to it by the AO.

It is a settled legal proposition, as upheld in various judicial pronouncements, that a statement recorded during the course of investigation, especially when retracted at the earliest opportunity and not supported by any corroborative evidence, cannot form the sole basis for making an addition in the hands of the assessee. The Hon’ble Supreme Court and various High Courts have repeatedly held that a retracted statement must be corroborated by independent and cogent material to have any evidentiary value. In the absence of such corroboration, the statement is entirely unreliable and cannot be elevated to the status of substantive evidence. 66. Further, the principle that suspicion, however strong, cannot take the place of proof, has been consistently upheld by judicial forums. The addition made in the present case appears to rest solely on unverified assumptions and presumptions rather than on verifiable facts or documentary proof. No documentary trail, bank transaction, or confirmation has been presented to establish that any unaccounted consideration passed through the hands of Shri Ganesan Saravanakumar on behalf of the assessee. Likewise, no efforts have been made by the AO to independently examine the vendors or other third parties to corroborate the alleged role of the said individual in the transaction. 67. We also note that the Revenue has not undertaken any inquiry to establish that the retraction is an afterthought or motivated. In the absence of any finding that the retraction lacks credibility or was made under coercion

In view of the above, the addition made on the strength of an uncorroborated and subsequently retracted statement is unsustainable in law. The Ld.CIT(A) after a detailed examination of the factual matrix and applicable legal principles, has rightly concluded that the addition is devoid of merit and liable to be deleted. We concur with the findings of the Ld.CIT(A) and find no justifiable reason to interfere with the well-reasoned order passed by the Ld.CIT(A).

At this stage, we deem it appropriate to refer to the judgment of the Hon’ble Madras High Court in CIT v. P.V. Kalyanasundaram (282 ITR 259). In the said case, a search operation was conducted on the assessee, during which it was noticed that the assessee had purchased certain land which was registered for a consideration of Rs.4.10 lakhs. The Assessing Officer recorded the statement of the seller, wherein the seller admitted that the actual consideration received was Rs.34.35 lakhs, as against the registered value of Rs.4.10 lakhs. Although the seller initially retracted his statement, he subsequently filed an affidavit affirming that the total consideration was Rs.34.85 lakhs, out of which Rs.4.10 lakhs was received by demand draft and the balance in cash. The seller also revised his return of income and offered the entire amount of Rs.34.85 lakhs to tax. Relying solely upon the statement of the seller, the Assessing Officer treated the difference of Rs.30.75 lakhs as undisclosed income of the assessee-purchaser and made the corresponding addition. On appeal, the CIT(A) deleted the addition. The Tribunal upheld the order of the CIT(A) by observing that the seller had given conflicting statements at different stages, and his subsequent admission of the higher consideration along with payment of tax thereon was an apparent attempt to protect himself from further action by the Department. The Tribunal further held that, apart from the statement of the seller, the Assessing Officer had not conducted any independent inquiry, nor discharged the burden of establishing that the assessee had in fact paid consideration of Rs.34.85 lakhs. It was observed that no material was brought on record to indicate that the assessee had understated the purchase consideration. In the appeal filed by the Revenue, the Hon’ble High Court concurred with the findings of the Tribunal, observing as under: - “5. We heard counsel. The seller had initially given conflicting statement about the sale consideration he received. When confronted by the Revenue on 11-12-1998, the seller admitted that he had deposited Rs. 4.10 lakhs received through draft in the bank and the rest amount was held by him in cash. The Revenue authorities could well have seized the cash invoking section 132 of the Act, but for obvious reasons this was not done. Had the cash been seized from the seller, the matter would have been concluded in favour of the Revenue. In a subsequent submission, the seller claimed on 20-11-2000 that he had paid Rs. 15 lakhs out of the sale proceeds to settle old family debts, Rs. 4.80 lakhs for construction of house in Pullkasi Village and the balance was advanced to parties for keeping Rs. 2 lakhs and Rs. 3 lakhs in the house for family expenses and educational

We also found that the Assessing Officer did not conduct any independent enquiry relating to the value of the property purchased. He merely relied on the statement given by the seller. If he would have taken independent enquiry by referring the matter with the Valuation Officer, the controversy could have been avoided. Failing to refer the matter was a fatal one.

In view of the foregoing conclusions, we find no error in the order of the Income-tax Appellate Tribunal and requires no interference. Hence no substantial questions of law arises for consideration of this Court. Accordingly, the above tax case is dismissed. No costs.”

The above findings of the Hon’ble High Court as well as the lower appellate authorities are noted to have been affirmed by the Hon’ble Supreme Court in their order reported in 294 ITR 49. In our considered view, the ratio laid down in the aforesaid judicial precedent is squarely applicable to the facts of the present case. The factual matrix in the assessee’s case is :-26-: ITA. Nos.:605 & 610Chny/2025 akin to that in the decided matter. In the present case, it is an undisputed fact that the AO has not carried out any independent valuation exercise except relying on unverified public domain data to ascertain the actual value of the property transacted. Further, we note that the seized materials, on a standalone basis, do not establish that the noting therein pertain to the assessee, nor do they prove that any payments were made by him. In the absence of cogent material linking the said document to the assessee or substantiating the alleged payment of on money, the reliance placed by the AO on such noting is misplaced. Accordingly, we are of the considered opinion that the aforesaid judgment of the Hon’ble jurisdictional High Court fully supports the findings recorded by the Ld.CIT(A). Therefore, we find no infirmity in the order of the Ld.CIT(A), and thus uphold the same.

In view of the foregoing discussion, and having regard to the totality of facts and circumstances of the case, we find no infirmity in the well-reasoned order passed by the Ld.CIT(A). The Ld.CIT(A) has, after due appreciation of the material placed on record and in accordance with the applicable legal principles, rightly deleted the addition of Rs.25,78,98,000/- made by the AO u/s.69B r.w.s 115BBE of the Act, on account of alleged unexplained investment. We do not find any justification to depart from the findings recorded by the Ld.CIT(A), which remain uncontroverted by the Revenue with cogent evidence. Accordingly, the grounds of appeal

In the result, the appeal filed by the Revenue is dismissed.

In the present appeal, it is observed that the AO had made an addition of Rs.13,50,90,660/- on account of alleged on-money receipts by invoking the :-28-: ITA. Nos.:605 & 610Chny/2025 provisions of section 69A r.w.s 115BBE of the Act. On appeal the said addition was, however, deleted by the Ld.CIT(A).

Upon careful perusal of the material available on record, we find that the facts and circumstances of the case under consideration are identical / substantially similar to the facts adjudicated by us in (supra). Since the issue involved herein is squarely covered by our decision in the aforesaid appeal, the findings and reasoning adopted therein shall apply mutatis mutandis to the present appeal filed by the Revenue in ITA No.610/Chny/2025. Accordingly, for the reasons recorded in we find no infirmity in the order passed by the Ld.CIT(A) in deleting the addition of Rs.13,50,90,660/- made by the AO u/s.69A r.w.s 115BBE of the Act. Hence, the grounds raised by the Revenue are dismissed.

In the result, the appeal filed by the Revenue is dismissed.

In the result, both the appeals filed by the Revenue in & 610/Chny/2025 are dismissed.