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DEPUTY COMMISSIONER OF INCOME TAX, CHENNAI vs MUTHULAKSHMI VELLAISAMY, TIRUPUR | BharatTax

DEPUTY COMMISSIONER OF INCOME TAX, CHENNAI vs. MUTHULAKSHMI VELLAISAMY, TIRUPUR

ITA 610/CHNY/2025Status: DisposedITAT Chennai20 January 2026AY 2020-2129 pages

AI SummaryDismissed

Facts

The Revenue appealed against the deletion of additions made by the Assessing Officer (AO) concerning alleged on-money payments in a real estate transaction. The AO's addition was based on loose sheets and notings seized from a third party's premises, and initial statements from an individual who later retracted them.

Held

The Tribunal held that additions based solely on uncorroborated loose sheets and retracted statements, without independent verification or documentary evidence linking them to the assessee, were unsustainable. The Tribunal emphasized the need for cogent material to establish the actual flow of unaccounted money.

Key Issues

Whether additions based on seized loose sheets and retracted statements, without independent corroboration and a clear nexus to the assessee, are valid.

Sections Cited

132, 139, 131, 153C, 143, 69A, 115BBE, 69B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, A BENCH, CHENNAI

Before: SHRI S.S. VISWANETHRA RAVI & SHRI S. R. RAGHUNATHA

For Respondent: Shri. R. Venkata Raman, C.A

Hearing: 12.11.2025Pronounced: 20.01.2026

आदेश /O R D E R

PER BENCH:

These appeals of the Revenue are directed against separate orders dated 31.12.2024 passed by the Learned Commissioner of Income Tax (Appeals)-19, Chennai (hereinafter referred to as “the Ld.CIT(A)”), arising out of separate assessment orders dated 24.03.2023 passed by the Deputy Commissioner of Income Tax, Central Circle-2(4), Chennai (hereinafter referred to as “the AO”), pertaining to the Assessment Year 2020-21.

Since the issues involved in both the aforesaid appeals are common and interconnected, the same were heard together and are being disposed of by way of this consolidated order, for the sake of convenience and brevity.

With the consent of both the parties, the appeal of the Revenue in the case of Smt.Gnanaguru Lavanya in ITA No. 605/Chny/2025 is taken up as the lead case. Accordingly, the facts noted, as well as our observations, reasoning, findings and conclusions recorded in the said appeal shall apply mutatis mutandis and with equal force to the appeal of the Revenue in the case of Shri Muthulakshmi Vellaisamy Gnanaguru in ITA No.610/Chny/2025.

ITA No.605/Chny/2025

The brief facts of the case are that the assessee is an individual engaged in the business of real estate. The assessee filed her return of income for the impugned assessment year u/s.139(4) of the Act on 29.03.2021 declaring total income of Rs.17,95,560/-.

between Shri V P Jaya Pradeep and the Appellant along with her husband for a consideration of Rs.1,11,44,800/-. In addition, in the loose sheet there existed certain narrations about the cash payment made including the various payments made by way of DD and Cheque. The AO in the assessment order has brought out the details which contained in the loose sheet. During the course of search, two statements were recorded from G. Saravanakumar. In the statement recorded G. Saravanakumar has narrated about the sale of property at Tirupur by the Appellant and her husband to one Shri Jaya Pradeep and in the other has admitted about the on money payment by way of cash amounting Rs.28,38,00,000/- 6.3.15 The AO, in the assessment order, referred to the narrations in the loose sheet and concluded that the sale consideration of Rs. 1,11,44,800/-, paid through demand draft, aligns with the entries in the loose sheet and notepad. Furthermore, the details of the demand draft issued by Shri V.P. Jaya Pradeep match his bank statement. Further the AO brought out the entries noted in the note-pad (ANN/SJ/GS/B&D/S 2&3) with a narration Guru, guru mtp road and guru cash (PWD) matches with page 23 of loose sheet (ANN/KP/GS/LS/S). The AO on the basis of the statement recorded from Shri G Saravanakumar has extrapolated the event and arrived at a conclusion, that the Appellant has received on money payment towards the sale of property as excess consideration over and above the Sale Consideration narrated in the Sale Deed by way of cash amounting Rs.27,26,55,200/-. 6.3.16 The AO in the Assessment Order has omitted to consider the statement recorded u/s 132(4) of the Act from G. Saravanakumar on 11.03.2021 wherein he has clearly stated that “the hand writing found in these seized loose sheets belongs to Shri G Gnanasekhar, who is retired PWD Executive Engineer who helps us in land registration works”. From this statement it is very clear that the author of the loose sheet is not Shri G. Saravanakumar from whose premise the loose sheet was seized. The Authorised Officer and the Assessing Officer have not made any attempt to cross-verify the issue with the author of the document seized. 6.3.17 The AO in the Assessment Order has conveniently omitted to bring it on record the statement recorded u/s 131(1) of the Act during the course of post search proceedings on 19.07.2021. In this statement he categorically stated the following: Sir, as I have already stated that I am a real estate broker, I had recorded my personal expenses along with various land transactions in these pages. Sir, I reiterate that these entries were not cash receipts. Whenever a land deal happened I noted down complete receipts and payment, month wise, for future reference. Actually these transactions were not routed through me. The concerned land owners and purchasers transferred money among them and informed me over telephone about the completion of payment. I noted down these payments in this diary for my follow-up action. 6.3.18 The undersigned is of the view that the AO in the Assessment Order has not made any findings upon this answer, and no enquiry was conducted to substantiate the narrations contained in the loose sheet. Further, Shri G. Saravanakumar has retracted the statement u/s 132(4) of the Act on

6.3.23 At this juncture it is appropriate to rely upon the proposition laid down by the Hon'ble Delhi High Court in the case of CIT Vs Sant Lal [2020] 118 taxmann com 432 (Del) , wherein it was held therein that where a diary was seized in search of the premises of a third party allegedly containing entries of hundi transactions on behalf of various parties including the assessee, no addition could be made based on the said entries since the diary was neither found from premises of assessee nor was it in handwriting of assessee and revenue failed to produce any other cogent material to link the assessee to the diary. The ratio of the said decision is squarely applicable to the case of the Appellant as the AO has not referred to any cogent evidence applicable to the case of the Appellant. As the AO has not referred to any cogent material to corroborate that the entries made in the loose sheet seized from a third party which are purportedly the transactions made by the Appellant. There is absolutely no mention in the seized material regarding the nature of the said transactions of cash payments, the purpose of such payments and the precise identity of such transaction. 6.3.24 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 ineffective 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. 6.3.25 At this juncture, it would be relevant to refer to the decision of Hon'ble ITAT, Jabalpur in the case of ACIT Vs Satyapal Wassan [TS-5104-ITAT 2007(Jabalpur)-O] (2008) 5 DTR 0202, wherein the Hon'ble ITAT stressed the importance of gathering corroborative evidence in support of the 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.” 6.3.26 The proposition that addition cannot be made merely on the basis of entries in loose sheets found in the premises of a third party without bringing on record independent evidence to corroborate such entries has been reiterated in several decisions. Some of the decisions to this effect are MM Financiers (P) Ltd Vs. DCIT (2007) 107 TTJ (Chennai) 200, Regency Mahavir Properties Vs ACIT [2018] 169 ITD 35 (ITAT-Mumbai), ACIT Vs. Katrina Rosemary Turcotte [2017] 190 TTJ 681 (ITAT-Mumbai), DCIT Vs. Vipin Aggarwal [2017] 83 taxmann.com 6 (ITAT Chandigarh), S.P Goyal Vs DCIT [2002] 82 ITD 85 (TM) IΠΑΤ, T.S Venkatesan Vs ACIT [2000] 74 ITD 298 (Cal) and Monga Metals (P) Ltd Vs ACTT [2000] 67 TTJ 247 (All). 6.3.27 In particular, it is of critical importance that the evidence to corroborate the entries indicating payments in the seized material found with a third party is available with specific reference to the fact regarding actual transfer of money from the said third party to the recipient named in the said entries in the seized material. The Hon'ble ITAT, Mumbai held in the case of Riveria Properties Private Limited Vs ITO in ITA No.250/MUM/2013 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 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." 6.3.28 Further in the case of K.P Varghese Vs. ITO (1981) 131 ITR 597, the Hon'ble Apex Court held that “the onus of establishing that the conditions of taxability are fulfilled is always on the revenue and that throwing the burden of showing that there is no under-statement of consideration on the assesse

would be to cast an almost impossible burden upon him to establish the negative, namely, that he did not receive any consideration beyond what has been declared by him. It needs to be held that the burden is on the revenue to adduce proper evidence to corroborate the contents of the seized material for the purpose of establishing that the Appellant was in fact in receipt of the payments as noted in the seized material”. It is evident that such a burden has not been discharged by the revenue in the case of the Appellant. 6.3.29 As per the decisions of the Hon'ble Apex Court in the cases of CBI Vs. VC Shukla & Others (1998) 3 SCC 410, Common Cause (A Registered Society) Vs. Union of India (2017) 77 taxmann.com 254 (SC) and Dhakeshwari Cotton Mills Lids. CIT (1954) 26 ITR 775 (SC) corroborative evidence is essential to support the evidence found in third party premise. In order to properly appreciate the issue, it is useful to refer to the following extract from the decision of Hon'ble Apex Court in the case of Dakeswari Cotton Mills Ltd Vs. CIT (1954) 26 ITR 775 (SC): "As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income- tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence, a court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of Section 23 of the Act, the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh (supra)". 6.3.30 As evident from the decisions cited above, though it is true that the provisions of Evidence Act do not apply with the same rigor to the Income Tax proceedings, but the AO is not entitled to make a pure guess and make an assessment without reference to any evidence/material. It follows there from that addition cannot be made unless there is corroborative evidence to validate the entries found in the material seized from a third party. 6.3.31 As discussed supra, the seized material relied upon by the AO, more particularly the loose sheet which was found and seized at third party premise when the same was not in the handwriting of the Appellant as well as the sellers of the land, obviously such loose sheets can only be in the nature of ineffective document. The AO cannot arrive at any conclusion based solely on the said material that the Appellant and her spouse have actually paid on-money payment for purchase of property. There is no corroborative evidence to prove that the payments noted in the seized material have actually materialised and transfer of money has actually taken place between the concerned parties. 6.3.32 In addition, the Jurisdictional Tribunal, in cases involving identical facts, dismissed the appeals preferred by the Revenue and upheld the decision of this office. It held that additions cannot be made solely based on entries found in a loose sheet recovered from a third-party premise in the following cases:

i. DCIT Central Circle – 2(2) v. Shri Karuppagounder Palaniswami and vice versa in ITA Nos. 125 to 127 / Chny / 2023 and ITA Nos. 214 to 215 / Chny / 2022 dated 03.04.2024. ii. DCIT Central Circle – 2(4) v. Shri Vaithilingam and vice versa in ITA Nos. 604 to 606 / Chny / 2023 dated 03.04.2024. iii. DCIT Central Circle – 2(4) v. Shri O. Panneerselvam and vice versa in ITA Nos. 581 & 582 / Chny / 2023 dated 05.04.2024. 6.3.33 Further, the AO in the Assessment Order has not brought out whether the property sold can fetch the value of Rs.28,38,00,000/- as visualized by the AO in the Assessment Order. The Registering Authority has not questioned the value of property while registering the property for such a sum of Rs.1,11,44,800/-, there is no record to indicate the Registering Authority has demanded additional stamp duty upon the property registered. Further, the AO has not chosen to made a reference to the valuation cell of the department to determine the correct value of the property sold. In the absence of the any such exercise(s) on the part of the AO, considering the value of the property to be at Rs.28,38,00,000/- can only be illusionary. At this juncture it is appropriate to bring it on record, the decision of the Jurisdictional ITAT in the case of Shri Rajagopal Saravanan v. ACIT in ITA No.119 / Chny / 2024 dated 10.07.2024, wherein the Hon’ble ITAT has held as under: “7. We find that on given facts, the ratio of case law of Hon’ble High Court of Madras in the case of P.V.Kalyanasundaram (155 Taxman 454) would apply. In this decision, Hon’ble Court held that where Ld. AO did not conduct any independent enquiry relating to the value of the property purchased or did not refer the valuation to valuation officer and merely relied on the statement given by the seller, the same would be fatal to additions. 8. 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.”

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. 49. 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. 50. 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. 51. 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. 52. 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

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.” 53. 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

corroborative evidence. Accordingly, in the present case also, the notings contained in loose sheets and diaries seized during the course of search, being uncorroborated and not forming part of the regular books of account, do not have any evidentiary value, and therefore, no addition can be sustained solely on the basis of such material without correlating to the property transaction held by the assessee. 54. 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." 55. 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. 56. 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. 57. 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

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.” 58. We further draw support from the coordinate bench decision of this Tribunal in the case of Riveria Properties Private Limited Vs ITO in ITA No.250/MUM/2013, 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

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." 59. 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. 60. 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. 61. 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. 62. 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, ITA Nos. 125 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.

63.

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. 64. 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. 65. 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

or pressure, the benefit of doubt must necessarily accrue to the assessee. Moreover, without any independent verification of the facts stated in the retraction letter, the reliance placed on the earlier untested statement is misplaced. It is incumbent upon the AO to establish, through positive evidence, that the original statement represented the true factual position. 68. 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). 69. 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

expenses of his daughter, respectively. It was also noted that the revised return was filed by the seller wherein he had shown approximately Rs. 2.5 lakhs being available with him in cash. Even after giving the retraction and admitting that he had sold the property for a sale consideration of Rs. 4.10 lakhs, the seller filed his income-tax return on 28-1-2000, wherein he did not admit the cash on money consideration for the sale transaction. Subsequently he revised the income-tax return wherein he admitted the sale consideration and showing Rs. 4.80 lakhs out of the above as utilised for construction of residential house property and consequently claiming exemption under section 54, the seller filed the computation of income paying Rs. 1,83,576 as tax, which was quite evident from the conflicting statements given by the seller and the conflicting income-tax returns filed by him that his action of admitting sale consideration and paying tax was nothing but an obvious effort to save from further harassment from the Revenue and escape from the exigibility of tax on undisclosed income of the cash consideration under section 158BD of the Act, which in magnitude would far exceed the tax paid by him. The burden of proving actual consideration in such transaction was that of the Revenue. The Tribunal had given factual finding and held as follows : "We find that it is the uniform view of the courts and also held by the Court as reported in K.P. Varghese v. ITO [1981] 131 ITR 597 the burden of proving actual consideration in such transaction is that of the Reve-nue. Considering the entire gamut of the case, we find that the Revenue has failed to discharge its duties and as held by the learned Commissioner of Income-tax (Appeals) instead made up a case on surmises and conjectures which cannot be allowed. Under the circumstances, we do not find any infirmity in the order of the learned Commissioner of Income- tax (Appeals) and we uphold the appellate order in this regard." 6. 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. 7. 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.” 70. 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