SHRI BHANWAR LAL,JODHPUR vs. DCIT, CENTRAL CIRCLE-1, JODHPUR

3.2 The affidavit of Shri Kanhiyalal Ghandhi filed by appellant was also crossed verified and the statement of Shri Kanhiyalal Ghandhi was recorded in which he had explained the true facts before Ld. AO. The affidavit and statement of Shri Kanhiyalal Ghandhi were neither disproved nor any material or evidence in contrary to same brought on record by Ld. AO. The statement of Shri K.L. Ghnadi was recorded in which he explained the real & true facts before department and also confirmed the facts mentioned in affidavit executed on 13/06/2018 (APB pages 122 to 124) which reads as under: “9. यह है िक हमारे प�रवार का �ी भंवरलाल जी के प�रवार से मतभेद होने के कारण तथा बहकावे म� आने के कारण उ� कागज �ी भंवरलाल जी के यहाँ उनकी िबना जानकारी मे िछपाकर रखा। मेरे �ारा उ� गलत काय� करने का पछतावा होने की वजह से तथा मेरी माताजी एवं मेरी धम�पि� �ारा मुझे उ� गलत काय� के िलए फटकारा था। 10. यह है िक मेरी िव�ीय ��थित तथा मेरे �ापार तथा मेरे रहनसहन की देखते �ए जोई भी �र�ेदार, िम� एवं �ापा�रक लोग मुझे इतनी बड़ी रािश उधार नहीं दे सकते तथा मेरे पास जो भी पैतृक स�ि� है उस पर मेरे पुरे प�रवार का �ािम� है। तथा मेरे �ारा उ� कागज मे 10 बीघा सुरज नगर मे ह�ा, मकान वाली रिज��ी करवाई तथा 10 बीघा खेत क रिज��ी सोनी जी के पास है िलखा गया है व पुण��प से गलत है �ोंिक उपरो� जमीन के कागजात मेरे पास है तथा मैने िकसी भी �कार से उ�� िकसी के भी पास न तो िगरवी रखा है और न घेगी है।“ 3.3 That the finding recorded by Ld. AO in assessment order page-18 paragraph-4.3 which is reproduced as below: - “4.3. In view of the above facts and discussion, it is clear that the retraction filed by the assessee by way of affidavit is nothing but an afterthought. Also, the affidavit and statement of Shri Kanhaiya Lal Gandhi is full of factual inaccuracies and contradictions as enumerated above. Thus, as per the impugned document seized during the course of search proceedings as well as in the light of statement of the assessee recorded u/s 132(4), though the assessee has not given any loan during this year to Shri Kanhaiya Lal Gandhi but charged interest as on 31/03/2019 of Rs.33,47,041/- on accrued credit balance of loan of Rs.2,78,92,011/- , thereby earning unaccounted interest of Rs. 33,47,041/- on the accrued loan amount of Rs.2,78,92,011/- as on 31/03/2018. The assessee did not declare this earning of interest in his return filed u/s 153A for A.Y. 2019-20. Accordingly, in view of the aforesaid facts, the amount of Rs. 33,47,041/- is held as unaccounted income of the assessee as per the provisions of sec. 68 of the Income Tax Act 1961 on account of unaccounted cash loans and added to the total income of the assessee for the A.Y. 2019-20.

Penalty proceedings u/s 271AAB(1A) are also initiated for misreporting of interest income earned on advancement of cash loan. (Addition of Rs. 33,47,041/-)” (Emphasis supplied)

3.4. That on the basis of such retracted statement the Ld. AO cannot be fasten the liabilities as held by Hon’ble Jurisdictional high Court of Rajasthan in the following case: i. Hon’ble Rajasthan High Court in the case of Micro Marbles Private Limited vs ITO Ward-1, Chittorgarh D.B. Civil Writ Petition No. 13719/2021 dated 04/01/2023 held as under: -

"32. It may be noted that the statement recorded under Section 132 (4) of the Act can be used in evidence for making the assessment only if such statement is made in context with other evidence, or material discovered during search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger the assessment." i. Hon’ble Jurisdictional High Court of Rajasthan in the case of PCIT vs. Vishnu Prakash R. Pungalia, D.B. Income Tax Appeal No. 14/2021, dated 04/01/2022. “It would thus emerge that the Assessing Officer had relied solely on a retracted statement, which was recorded under Section 132(4) of the Act. The Tribunal, therefore, correctly deleted the addition and no question of law arises.” ii. CIT v. Jagdish Narayan Ratan Kumar, (2015) 61 taxmann.com 173 (Raj), wherein it was held that when addition of disclosure made by the assessee in statement recorded u/s 132(4), it cannot be sustained despite retraction, when Revenue could not furnish any positive evidence in support of such addition. iii. Hon'ble Rajasthan High Court in the case of CIT vs. Dr. Raj Dhariwal, 63 DTR 83 observed as below: - "The statement made under s. 132(4) making surrender which gives rebuttable presumption, could not have been taken as basis for making addition as unexplained investment in plot by the assessee, particularly when no evidence of payment, in fact has been found even at the time of search. Under these circumstance, the statement alone cannot be made a sole basis for making addition as unaccounted investment..."

3.5. From the statement & affidavit of Shri K.L. Gandhi it is crystal clear that the forged document was prepared by Shri K.L Gandhi due to family dispute and discerption of property and transactions as recorded on such loose paper were false and incorrect. The Ld AO neither found any material or evidence as a result of search to corroborate the same nor brought on record any adverse material in contrary to statement & affidavits of Shri K.L. Gandhi and other evidence furnished by appellant. The Ld. AR argued that it is settled principle of law that the loose paper found on standalone could not be used as a basis for making the addition without the company of any other supportive material and evidence, more so when the contents were not interlinked. The unsubstantiated loose sheets cannot be considered as conclusive evidence to make any addition towards undisclosed income. It was held by the Supreme Court in the case of CBI vs. V.C. Shukla (1998) 3 SCC 410 that “file containing loose sheets of papers are not books” and hence entries therein are not admissible u/s. 34 of the Evidence Act, 1872.

3.6. It is held in PCIT Vs. Delco India (P) Ltd. (2016) 67 taxmann.com 357 (Del), held that "no addition could be made under Section 68 on the basis of loose papers found during search in this case indicating assessee's transaction with a company, when assesse not only denied having any dealing with the said company but also produced all necessary details for AO to make necessary inquiries and a letter from director of that company confirming that the said company did not have any transaction with assesse".

3.7. The Ld. DR argued and stood in support of the orders of the revenue authorities. The relevant paragraph of page 29 of appeal order is reproduced as below:- “On the basis of above facts, it is clear that Shri Kanhaiya Lal Gandhi was telling a lie, Sh. K.L. Gandhi had stated that Page no. 4 was in his handwriting whereas on Page no.3 the name of 'Kanhaiya Lal Ji Gandhi' written on the top was in his own handwriting. In this regard, it is worthwhile to mention that no person will write his own name by applying 'Ji'. Hence it is clear that Shri Kanhaiya Lal Gandhi was telling a lie. The same facts were also established by the AO in the assessment order. Moreover, the story made by Shri Kanhaiya Lal Gandhi that he had kept these written papers Page No.3 & 4 of Exhibit-64 due to enmity with Bhanwar Lal Soni is neither true nor practical and cannot be relied upon. This is only after thought and beyond truth. Shri Bhanwar Lal Soni and Shri Kanhaiya Lal Gandhi were both close relatives and made the fabricated story to refute the evidences seized during the search proceedings and to avoid the tax liability.

(8) The case laws mentioned by the appellant are not relevant to the present case. In the present case, the addition had been made by the AO on the basis of seized material during the search proceedings.

(9) Further, the proceedings u/s153A of the I.T.Act, 1961 had been initiated in the instant case on the basis of search proceedings in the case of the appellant and the assessment order had been passed by the AO on the basis of incriminating documents seized during the search proceedings and order was passed by the AO, after obtaining necessary approval u/s 153D of the I.T.Act, 1961 from the competent authority On the basis of above discussion and the facts of the case, it is clear that the transactions mentioned on the above pages had taken place between Shri Bhanwar Lal Soni and Shri Kanhaiya Lal Gandhi, The relevance of the transactions has proved. the facts of the case described by Shri Bhanwar Lal Soni in his statements u/s132(4) of the I.T.Act, 1961 taken during the course of search proceedings. During the course of assessment proceedings, the appellant had made efforts to hide the true facts of the transactions and made a fabricated story to escape from tax liability only, which is after thought. In this circumstance, I uphold the addition made by the AO of Rs.33,47,041/- considering the unaccounted interest earned on the accrued loan amount of Rs.2,78,92,011/- as on 31.03.2019 as unaccounted income of the assessee, on the basis of seized documents. Thus, grounds of appeal 1 to 4 are hereby dismissed.” 3.8. Upon hearing the rival submissions and perusing the material on record, we note that the Ld. AO has computed unaccounted interest of Rs.33,47,041/- on an alleged loan of Rs.2,78,92,011/-. The Ld. AR contends that this addition rests entirely on conjecture, as neither the seized documents record any interest having accrued or been received by the assessee, nor was any incriminating material unearthed in the course of the search. Contemporaneous documentary evidence establishes that the entries in the loose sheets are sham transactions without any nexus to the assessee; this position was also affirmed in the statement of the counter-party recorded by the department. During the search, no material surfaced indicating that the assessee possessed any source of income other than those already disclosed. It is settled law that the burden lies on the Revenue to prove that income has in fact accrued to an assessee, especially where the assessee disputes such accrual. The Ld. AR therefore submits that no addition can be sustained on the basis of so- called “dumb documents.” Reliance is placed on Delco India (P.) Ltd. (supra), which holds that loose papers recovered during a search cannot, by themselves, justify an addition under section 68 of the Act. Similar support flows from Dr. Raj Dhariwal (supra) & Jagdish Narayan Ratan Kumar (supra), wherein the Tribunal held that a surrender under section 132(4) of the Act raises only a rebuttable presumption and, absent corroborative evidence of actual payment, cannot alone form the foundation for an addition toward unexplained investment. The Ld. DR has cited no contrary authority to rebut these propositions. The impugned addition, being predicated solely on assumption and presumption, therefore cannot stand. Accordingly, we set aside the order of the lower authority and delete the addition of Rs.33,47,041/-. 3.9. In the result the assessee’s ground no-2 is allowed.

4. Assessee’s Ground No 3 relating to addition of Rs. 78,000/-in respect of rental income on the basis of rent agreement found as a result of search. 4.1. The Ld. AR argued that the appellant had given the residential house on rent for five years to Shri Rajendra Karnani as per agreement. After competition of period of five year he vacates the premises. During the year the appellant had utilized for self- purpose and not given on rent to anyone. The rental income of Rs 78,000/- as per agreement was disclosed by appellant while filing of ITR u/s 153A from A.Y. 2015-16 to 2018-19. It is further clearly that due to some railway crossing problem with father of tenant, he shifted after one year from date of agreement therefore, the appellant had charged the rent for four years and accordingly same was disclosed. 4.2. The Ld. DR argued and relied on the orders of revenue authority. 4.3. We heard the rival submission and considered the documents available in records. We find that the assessee had declared the income for preceding years i.e. A.Y. 2015- 16 to 2018-19. The assessee claimed that the said agreement was duly terminated, and no rent was received in impugned financial year. The assessee was unable to substantiate the fact and had not able to file any evidence support to his claim. The asseessee’s plea only to retain on basis of oral submission. In our considered view the said addition amount to Rs. 78,000/- is duly confirmed. 4.4. In the result the assessee’s appeal in ground no-3 is dismissed.

5. Assessee’s Ground No 6 relating to addition of Rs. 71,94,000/- on the basis of loose paper found as a result of search u/s 69 of the Act. 5.1. During the course of search the department had found the loose papers bearing Exhibit 64 Page 2 & 6, the impugned loose papers are undated, have no narration and do not bear the signature of the assessee or any other party, only in the nature of dumb documents and no evidentiary value. However, the Ld. AO without analyzing the submission and judicial decisions in right perspective and judicious manner made arbitrarily addition of Rs. 71,94,000/- merely on assumption and presumption by holding the assessee had made cash transactions as per seized documents which is outside the books of accounts. The relevant finding recorded by Ld. AO at Page 27 & 28 of the order which reads as under: - “(b) From the above, it cannot be said that there is no corelation of the entries reflected in the seized Document No. 2 of Exhibit 64 as alleged by the assessee's AR because it can be seen from the various narrations made therein are corroborated with entries made in Document No. 9 of Exhibit 68 and assessee has duly explained the entries and narration made in the Document No. 9, as per his reply to the query raised vide Question No. 60 of his statement. This squarely proves that the said document is in the handwriting of the assessee and the jottings done by him are for the purpose of memorising the transactions of cash made by him with different persons whose names are stated in these documents, which may be of the nature of receipts of rent or realisation of cash loan advanced, as discussed above. This is a very speaking document and the allegation raised by the assesee's AR of it being a dumped document, is baseless having no substance in it.

8.4. In view of the above discussion, it is concluded that the assessee is not ready to divulge any details in regard to the cash transactions he made, which are definitely out of books of accounts and part of his unaccounted income. Accordingly, the cash transactions aggregating to Rs. 71,94,000/- (Rs. 64,96,000/- + Rs. 6,98,000/-) made by the assessee as per the seized Documents No. 2 & 6 of Exhibit 64 are held to be unaccounted income of the assessee for the year under consideration and an addition of Rs. 71,94,000/- is thus made u/s 69 of the Income Tax Act, 1961.

Penalty proceedings u/s 271AAB(1A) are also initiated being the addition made u/s 69 of the Income Tax Act, 1961 in a search assessment case u/s 153A conducted post 15/12/2016. (Addition of Rs. 71,94,000/-)

5.2. The Ld. AR argued that the noting on the loose papers demonstrates the projection figurative work by Ld. AO in the assessment order which has never been materialized or executed. The loose papers does not indicates that any transactions had ever taken place because it does not contain any information as to what the nature of transactions and that was, when no evidence has been brought on record to corroborate the allegation that assessee has entered into any transaction or had earned any income or whether any relevancy to determination the income in the hand of assessee. He further argued that from the assessment order it is reveals that the Ld. AO had not made any investigation or enquiry during the assessment proceedings in contrary to the explanation and evidence furnished by the assessee but the Ld. AO just made imagination and estimated the alleged unaccounted income which is neither supported any independent material to corroborate the alleged unaccounted income. It is further relevant to mention here that the Ld AO failed to prove as to how the alleged income were earned by assessee. Except the dump documents nothing incriminating material was found and seized by authorized officer at the time of search. As a matter of fact, on such loose papers, unsigned and undated containing noting only and no transaction at all. The Ld. AO has drawn a flimsy view merely totaling the figures and presumed that total is undisclosed/ unexplained income of assessee. It is settled principle that such loose papers are not books of accounts nor the authentic document having any evidentiary value in the eyes of law. Mere seizure of loose or dump papers would not be "ipso facto" treated as books of account or other documents.

5.3. The Ld. AR argued that the loose papers do not speak or reference any debt or loan or investment or expenses. Further also such loose papers are undated, have no narration and do not bear the signature of the assessee or any other party, only in the nature of dumb documents and no evidentiary value and same cannot be taken as a sole basis for determination of undisclosed income of the assessee as alleged by ld AO. Further it, the onus rests on the revenue to collect cogent evidence to corroborate the noting therein. At the time of search, no corroborate material or evidence were found in the case of assessee which correlates with such alleged transaction made in seized documents. Further on the basis of such dumb documents, the Ld. AO made allegation that the transaction recorded in such paper are belonging to the assessee without any basis or material. The allegation made was exclusively on the basis of suspicion and guesswork. Even no corroborative material or evidence as to suggest involvement of the assessee.

5.4. It is well settled legal position is that a non-speaking document without any corroborative material, evidence on record and such documents are referred to as ”Dumb Documents” in the legal perspective and this regards the Ld. AR respectfully relied on the decision of Hon’ble High Court of Delhi in case of Commissioner of Income-tax, Delhi (Central)-II v. D.K. Gupta [2008] 174 TAXMAN 476 (DELHI) upheld the order of the tribunal wherein it was held that Ad-Hoc/ Dumb Documents without any corroborative evidence/finding that the alleged documents have materialized into transactions cannot be deemed to be the income of the assessee. The relevant part of the judgement is reproduced herein under: - “3…………………………………………….. The Tribunal noted that in such a situation, the burden shifted on the revenue to prove that the replies filed by the assessee were not correct and that the notings/jottings had resulted into income which had not been disclosed in the regular books of account. The tribunal returned a finding of fact that there is no corroborative or direct evidence to presume that the notings/jottings had materialised into transactions giving rise to income not disclosed in the regular books of account.

Further also Hon’ble Bombay High Court in case of PCIT, Central-2 vs Umesh Ishrani [2019] 108 taxmann.com 437 (Bombay) held that since the tribunal concluded that entries reflected in loose papers were not corroborated with any other evidence on record, therefore the Tribunal was justified in deleting impugned additions made by revenue.

5.6. It is further relevant to mention here that the Ld. AO had made allegation that "Cash loan mentioned against the name of various persons" amounting to Rs. 64,96,000/- only on the basis of assumption and presumption. It is submitted that an addition in assessments carried out pursuant to search action u/s 132 of the Act has to be related to cogent and positive materials found during search which prove conclusively that the assessee has either earned an income or made an investment which has not been recorded in his regular books of account or that his case is covered under any of the deeming provisions contained in sections 68, 69, 69A to 69D of the Act. However, additions cannot be sustained merely on the basis of rough noting made on loose sheets of papers unless some independent and corroborative materials to prove irrefutably that the said noting reveal either unaccounted income or unaccounted investment or unaccounted expenditure of the assessee. Further the seized documents in the case of assessee were not speaking receipt of money to the assessee as the seized documents were ambiguous and did not contain any narration or description about different figures noted thereon and as such no liability can be fastened on the basis of a mere entry in such documents without there being some further trustworthy/reliable corroborative evidence lending credence to such transaction mentioned in such documents. CIT v. Maulikkumar K. Shah [2008] 307 ITR 137 (Guj.): The decision of Commissioner of Income-tax (Appeals) and the Tribunal were upheld holding that no addition was justified on the basis of these loose papers. In this case, nothings in the seized diary found from the premises were the only material on the basis of which the A.O. had made the impugned additions. The A.O. had not brought any corroborative material on record to prove that such sales were made and ‘on-money’ was received by the assessee outside the books of account. The A.O. had not examined any purchaser to whom the sales of shops were affected. Onus heavily lay on the revenue to prove with corroborative evidence that the entries in the seized diary actually represented the sales made by the assessee. Such onus had not been discharged by the revenue. Mere entries in the seized material were not sufficient to prove that the assessee had indulged in such a transaction. 5.7. The Ld. DR argued and stood in favour of the orders of the revenue authorities. The relevant paragraph 6.2.6 of the impugned appeal order is reproduced as below: - “6.2.6 Decision:

4. It is evident that on the above pages undisclosed cash transactions were mentioned and it is the onus on the appellant to explain all those transactions.

5. The appellant is denying above document only to hide true case and to avoid the tax liability.

6. The description on the above document and possession of the same with the appellant, clearly proves that the appellant had made above transaction in cash.

On the basis of above discussion, I uphold the addition made by the AO of of Rs.71,94,000/- considering the unaccounted income of the assessee for the year under consideration, on the basis of loose papers found and seized as Exhibit 64 Page No.2 & 6 of seized material during the search proceedings.

Thus, grounds of appeal 6 is hereby dismissed.”

5.8. After careful consideration of the rival submissions, perusal of the assessment order, the material placed on record, and the judicial pronouncements cited, we find that the addition of Rs.71,94,000/- made by the Ld. AO under section 69 of the Act is core issue for adjudication. The seized loose papers bearing Exhibit 64, pages 2 and 6, on which the entire addition is based, are undated, unsigned, devoid of any narration, and lack any corroborative evidence. These documents do not carry any evidentiary value and are in the nature of “dumb documents,” which by settled legal precedent cannot form the sole basis for making an addition. The Ld. AO has failed to bring on record any cogent material or independent enquiry to substantiate the nature or source of the alleged cash transactions or to establish that the notings reflect real, concluded, or executed transactions resulting in unaccounted income. The respectfully relied on the order of the Hon’ble Delhi High Court in D.K. Gupta (supra) and the Hon’ble Bombay High Court in Umesh Ishrani (supra) have categorically held that ad hoc additions based merely on loose papers or notings, unsupported by corroborative evidence, cannot be sustained. Similar views have been expressed in Maulikkumar K. Shah (supra), where the Hon’ble Court held that such entries in seized documents must be corroborated by external evidence to establish undisclosed income. In the present case, there is no supporting evidence to prove that any income accrued to or was received by the assessee on account of the transactions allegedly reflected in the impugned documents. The Ld. AO has merely added up the figures and presumed the total to be unexplained income, without discharging the burden of proof that lies on the Revenue in a search assessment. Accordingly, we hold that the addition of Rs.71,94,000/- made under section 69 of the Act is based solely on assumptions and surmises drawn from dumb documents and is devoid of any evidentiary or legal foundation. The addition, therefore, cannot be sustained. 5.9. In the result appeal of the assessee in ground no.4 is allowed.

6. As regards G. A. No 5 relating to addition of Rs. 5,04,06,700/- on the basis diary found as a result of search as unaccounted income u/s 69 of the Act. 6.1. The Ld. AR argued that at the time of search a diary for the period 1993-94 was found in which certain transactions were mentioned in the diary which pertains to period 1993-94. The appellant had also explained the reason for kept the diary with him that due to business dispute between the family of the assessee and the family of Shri Kanhaiyalal Gandhi as both the family had carried out the business together and in the 1993-94 certain dispute in respect of business activities and both the family are separately carried out the business and the business was closed. Due to dispute the accounts have not been settled between both the parties therefore the assessee had kept such diary with him. The appellant had also furnished the affidavit in this regard before Ld. AO. The assessee had also filed the affidavit of Shri Kanhiyalal Ghandhi grandson of Shri Suraj Mal Ghandhi. The Ld. AO had issued the summon for cross verification to of Shri Kanhiyalal Ghandhi. In response to summon Shri K.L. Ghandhi was appeared before Ld. AO and the statement was recorded. The Ld. AO had not found any contrary facts as submitted by appellant.

6.2. The assessee had submitted that transactions as recorded in seized dairy was undated, no narration of transaction, the nature of transactions had not been reflected as any debt or loan or investment or expenses. no evidence has been found as a result of search or brought on record to corroborate the allegation that assessee has entered into any transaction or had earned any income or whether any relevancy to determination the income in the hand of assessee. The assessee had established beyond doubts that the transaction recorded in diary relating to period 1993-94 as in continuation of pages of diary the page 8 of diary there are also transactions were mentioned but there is date in year 1993 was clearly recorded as the diary itself pertains to year 1993-94. Further also in the seized dairy the name of Shri Radha Kishan Soni who is partner of business and father of appellant was mentioned but was expired since long back, similarly various other persons who are not alive the name of same were mentioned in sized dairy as submitted by assessee. The Ld. AO deliberately had not made any efforts to verify the true & actual facts and treated the proceeding just as formalities and game of hide & seek. The transaction as recorded in such loose diary pertaining to year 1993 as evident from the front page and subsequent page of such diary. While deciphering each figure the Ld. AO has not given any basis nor he had brought on record any material in support for adding to the said figures. The Ld. AO has also not considered real & true facts to ascertain real nature & character of transactions, adopted in deciphering the said figures nor is there any clue found during the course of search in the shape of a document or evidence of any person recorded at the time of search to decipher the code figures recorded in the seized paper. Further the nature and character of the transaction and legal & valid evidence furnished by assessee which itself proves the transaction are old one and due to business dispute, the assessee kept such diary and such credible evidence as furnished by the assessee has not been disproved at any stage of the assessment proceedings. 6.3. The Ld. AO has substituted the figures by adding a number of zeros at his whims and caprice. Further he has assumed the transactions to have taken place of certain amounts imaginary without any corroborating evidence in his possession either oral or documentary. No papers in fact were found during the course of search and seizure operation to support his conclusion. The Hon'ble Supreme Court in the case of K. P. Vargese v. Income Tax Officer (1981) 24 CTR (SC) 358 : (1981) 131 1TR 597 (SC) for the proposition that fictional receipt cannot be deemed to be a receipt in the absence of any cogent material to support the factum of actual receipt.

6.4. The Ld. AR argued that the Ld. AO made addition merely on assumption, presumption which is not tenable under the law. No investigation or enquiry during the assessment, contrary to the explanation and the evidence offered by assessee was made but the Assessing Officer just made imagination and estimated the alleged unaccounted income. There is no independent material to corroborate the addition. The Ld. AO has not proved with evidence as to how the alleged income of Rs. 5.04 crores were earned by the assessee. Except the dump documents, nothing incriminating material was found and seized by the authorized officer at the time of search. As a matter of fact, the notings on the loose papers demonstrate the projection figurative work which has never been materialized or executed. There is no reference of any debt or loan or investment or expenses. These facts were ignored by the Assessing Officer 6.5. The Ld. AR explained the issue that the example of assessment, where the Ld. AO has abruptly concluded in his own understanding of the transactions of diary in a most perverse manner as he worked out the total of such diary by converted figure of "2.34" in to 2,34,000/- by adding “000” which resultant the addition of Rs. 4,99,37,898/- at Para 7.1 page 32 & 33 of assessment order. However, in page 6 of seized dairy (AO order Page 32-33) the ld AO treating figure 1.87 as 1,87,00,000/- by adding “00000” similar next figure the Ld AO treated same 57,90,000/- without any supporting or corroborative evidence for substituting the figure by adding a number of zeros at his whims and caprice. The Hon’ble Supreme Court in G. Venkataswami Naidu & Co (G) v. CIT (1959) 35 ITR 594(SC), where it was held that the character of a transaction cannot be determined solely on the application of any abstract rule, principle or test but must depend upon all the facts and circumstances of the case. The addition of Rs. 5,04,06,700/- made by the Ld. AO on the basis of diary found as a result of search. The addition so made by the Ld. AO is apparently unsustainable and also illegal in eye of the law as the Ld. AO had not analyzed the legal & valid documentary evidences and explanation in right prospective and judicious manner. The transaction as recorded in such loose diary pertaining to year 1993 as evident from the front/cover page and subsequent page 8 onwards of such diary. While deciphering each figure the Ld. AO has not given any basis nor he had brought on record any material in support for adding to the said figures. The Ld. AO has also not considered real & true facts to ascertain real nature & character of transactions, adopted in deciphering the said figures nor is there any clue found during the course of search in the shape of a document or evidence of any person recorded at the time of search to decipher the code figures recorded in the seized paper. Further the nature and character of the transaction and legal & valid evidence furnished by assessee which itself proves the transaction are old one and due to business dispute, the assessee kept such diary and such credible evidences as furnished by the assessee has not been disproved at any stage of the assessment proceedings. 6.6. The Ld. AR respectfully relied of the following judgments which are as follows:- i. The Hon'ble Madras High Court in the case of CIT Vs. Smt. S. Jayalakshmi Ammal, 390 ITR 189 (Mad) held that if there is no corroborative documentary evidence, then the statement recorded u/s.132(4) of the Act should not be the basis for arriving at any adverse decision against the assessee. The Hon'ble High Court further held that" we are of the view that mere statement without there being any corroborative evidence should not be treated as conclusive evidence against the maker of the statement. ii. The Hon’ble Punjab and Haryana High Court in case of CIT v. Atam Valves (P.) Ltd. [2009] 184 Taxman 6 (Punj. & Har.) 2. During the pendency of assessment proceedings, a survey was conducted by the Department under section 133A of the Act on 27-9-2005 in the premises of the assessee and certain incriminating documents were found including a 'Slip Pad' containing payment of wages to various persons. The slips were written by Manoj Jain, an employee of the assessee, who was confronted with the slips, apart from questioning of the Director. Manoj Jain as well as Director of the assessee explained the position as to how the slips had been written and the stand of the assessee was that the same did not represent payment of wages during the year in question but were for the earlier year. However, the Assessing Officer did not accept the explanation and made an addition. The CIT(A) as well as the Tribunal partly set aside the addition. It was held that even though explanation of the assessee that the loose papers did not relate to payment of wages during the year in question may not be accepted, in absence of any other material, the loose sheets by itself were not enough to make addition as per estimate of the Assessing Officer. It was observed :— "Now the question is regarding estimating the income on the basis of these loose slips. In our opinion, the Assessing Officer is not justified in estimating the sales on the basis of loose slips without substantiating that the assessee has actually made the sales to that extent of estimation made by the Assessing Officer and having no iota of evidence in the form of sale bills or bank account or movable and immovable property which represent earning of unaccounted income by the assessee. As such, the ld. CIT(A) to that extent is justified in holding that estimation of sales on the basis of loose slips represented payment of wages is not possible."

3. Learned counsel for the revenue submitted that once the explanation of the assessee was found to be unacceptable, the addition made by the Assessing Officer ought to have been upheld.

4. We are unable to accept this submission.

5. No doubt, a false explanation of assessee may be a circumstance to be taken into account for recording a finding of undisclosed income and some degree of guess work is also permissible in such a situation, as held by the Supreme Court in Kachwala Gems v. Jt. CIT [2007] 288 ITR 10, relied upon by the learned counsel for the revenue, it depends upon facts and circumstances of each case as to what is to be fair estimate of undisclosed income. The CIT(A) as well as the Tribunal held that in the circumstances, the estimate of addition, to the extent assessed by the Assessing Officer, was not called for and the same was partly liable to be set aside.

6.7. The Ld. DR argued and stood in favour of the order of the revenue authorities. 6.8. We have carefully considered the rival submissions and perused the documents on record. It is an admitted position that the impugned addition of Rs.5,04,06,700 was made solely on the strength of a loose diary recovered in the course of search. The entries are (i) undated, (ii) bereft of any narration indicating whether they represent loans, investments, expenses or sales, and (iii) pertain to an admittedly closed business dispute of the assessment year 1993-94. Apart from this diary, the Ld. AO has not brought on record a single piece of independent, cogent evidence—documentary or oral—to show that any part of the alleged sum ever accrued to, or was received by, the assessee in the year under appeal. The Ld. AO has substituted figures at will by adding strings of zeroes, and has treated innocuous jottings of “2.34”, “1.87”, “57.90” etc. as Rs. 2.34 crore, Rs.1.87 crore, Rs.57.90 lakh respectively, without demonstrating either the basis for such inflation or the corresponding flow of funds. Such a mechanical escalation, unsupported by corroborative material, is impermissible. The Hon’ble Supreme Court has repeatedly warned against taxing “fictional receipts” divorced from evidence respectfully relying in K.P. Varghese v. ITO (1981) 131 ITR 597 (SC); and that the true character of a transaction must be determined on the totality of facts and circumstances, not on conjecture, G.Venkataswami Naidu & Co (supra). On kindred facts, the Hon’ble Madras High Court in Smt. S. Jayalakshmi Ammal (supra) held that a naked statement or notation, unbacked by corroborative evidence, cannot constitute a sustainable foundation for addition. Likewise, the Hon’ble Punjab & Haryana High Court in Atam Valves (P.) Ltd (supra) ruled that loose slips, standing alone, do not justify an estimate of undisclosed income. Applying the above ratio, we find that the seized diary, read in isolation, is no better than a dumb document. The assessee’s explanation supported by contemporaneous affidavits and cross-verified statements that the diary related to an erstwhile partnership dispute of 1993-94 stands unrebutted. The Department has conducted no investigation to link the diary entries with any bank account, asset acquisition, expenditure or real-time business activity of the assessee in the year under consideration. In these circumstances, the addition of Rs.5,04,06,700/- under section 69 of the Act rests on assumptions and surmises rather than on legally admissible evidence. Respectfully following the binding authority of the Hon’ble Supreme Court in K.P. Varghese (supra), and the persuasive judgments of the Hon’ble Madras High Court and the Punjab & Haryana High Court cited above, we hold that the Ld. AO was not justified in treating the impugned diary notings as unexplained investment or income of the assessee. We therefore delete the addition of Rs. 5,04,06,700/-. 6.9. Ground of Appeal No. 5 succeeds.

7. Assessee’s Ground No 6 & 7 relating to addition of Rs. 2,27,23,474/-on account of unexplained investment in gold jewellery u/s 69 of the Act 7.1. The Ld. AR argued that during the time of search, the gold jewellery of Rs. 3,06,65,897/- were found from the house and bank lockers of family members of assessee. Further in the statement the assessee had explained that gold belonging to the female members of the family and they have obtained such gold on their marriage etc. It is further relevant to mentioned here that as a result of search no evidence or information or incrementing material found which shows the assessee or his family members any investment in gold and the gold jewellary.

7.2. Further also the female members i.e. Smt. Patasi Devi, Smt. Pushpa Devi, Smt. Parwati Devi and Smt. Leela Devi have claimed that such gold found and seized by department belonging to them and also explained the source of acquisition of such gold in their statement recorded u/s 132(4) of the Act. The gold jewellery and silver found at the residence and bank lockers are as under: - Gold net Silver Diamond Total Value Weight Premises (In Rs.) (Gram) (Gram) ¼dSjsV) Locker No. 232 3510.500 0.00 0.00 11022970.00 11022970.00 Locker No. 246 1326.500 0.00 0.00 4165210.00 4165210.00 Your Bed 2287.370 31472.000 75.00 9550485.00 Room 7182341.00 1243144.00 1125000.00 Bed Room of 1503.620 18740.000 11.5 5634095.00 Pradeep & ¼dSjsV) Leela Devi 4721366.00 740230.00 172499.00 on person 36.050 0.00 12 ¼dSjsV) 293137.00 Pushpa Devi 113137.00 180000.00

30665897.00 7.3. That during the assessment proceeding the appellant had explained the source of acquisition of gold jewellery owned by family members with legal & valid documentary evidence: - • Smt. Patasi Devi w/o Late Shri Radha Kishan [Mother of appellant] i. That Smt. Patasi Devi is oldest lady in the family and having age of 83 years. Her marriage almost 55 years ago with Shri Radha Kishan Soni father of the assessee. She was owner of 3500 grams gold jewellery etc and she acquired such gold jewellery at the time of her marriage and also various occasion and functions had received gifts from family members and also her husband in his life time had purchased the gold jewellery etc. ii. That at the time of search the gold jewellery belonging to Smt. Patasi Devi was seized and the gold jewellery belonging to such lady was more than 35 years old jewellery which were inventoried by the Department and same was explained by the Smt. Patasi Devi. Further in the statement such old lady had explained that such gold jewellery owned by her at the time of marriage etc. The copy of the statement is annexed in APB pages 147 to 151. iii. Further it is admitted fact that the father of assessee Shri Radha Kishan Soni is reputed person and start his business since 1976 onwards and he had made investment in gold time to time which was reflected from the seized gold jewellery as most of the gold jewellery were seized are old one.

• Smt. Pushpa Devi W/o Shri Bhanwar Lal Soni i. Smt. Pushpa Devi the wife of assessee and having age of 58 years old. Her marriage almost 40 years ago with assessee and she was owner of 3500 gram gold jewellery which was received as a gift at the time of marriage with her parents, father in law and also various occasion and functions celebrated by her. At the time of search she has explained before the authorized officer that she had obtained the gold jewellery as a gift from her family members and also from the father in law. ii. The affidavit and other relevant documentary evidences in support of claim made by Smt. Pushpa Devi is enclosed in APB Pages 152 to 164.

• Smt. Parvati Soni W/o Shri Jagdish Soni i. Smt. Parvati Devi the wife of son of assessee Shri Jagdish Soni and having age of 40 years old. Her marriage almost 15 years ago with assessee and she was owner of 2000 gram gold jewellery which was received as a gift at the time of marriage with her parents, father- in-law and also various occasion and functions celebrated by her. At the time of search she has explained before the authorized officer that she had obtained the gold jewellery as a gift from her family members and also from the father in law. Further also her husband Shri Jagdish Soni had explained before the authorized officer while recording statement ii. The affidavit and other relevant documentary evidences in support of claim made by Smt. Pushpa Devi is enclosed in APB pages 163 to 168.

• Smt. Leela Soni W/o Shri Pradeep Soni i. That Smt. Leela Soni w/o Shri Pradeep Soni and having age of 35 years. Her marriage almost 10 years ago. She was owner of 3500 grams gold jewellery etc and she acquired such gold jewellery at the time of her marriage and also various occasion and functions had received gifts from family members and also her husband in his life time had purchased the gold jewellery etc. At the time of search she has explained before the authorized officer that she had obtained the gold jewellery as a gift from her family members and also from the father in law. ii. The affidavit and other relevant documentary evidences in support of claim made by Smt. Leela Devi is enclosed in APB pages 169 to 175.

7.4. It is submitted that at the time of search the authorized officer had obtained the surrender in respect of gold jewellery found at the time of search amounting to Rs. 2,50,00,000/- from the assessee. The assessee had retracted the surrender made by him through letter dated 16/08/2018 before DIT (Inv.), Jaipur in which the assessee has submitted the surrender was not voluntary and accordingly he retracted from the same. The gold ornament as found at the time of search and gold ornaments as appeared in marriage photographs and other old photographs are almost verifiable from Pachnama and if your good self will be verified same item to item from sized gold and from explanation no difference will be comes. The details of same is as under:-

Name of persons Weight in Grms Smt Parvati Soni 1800 Jagdish Soni 300 Leela Soni 2100 Pardeep Soni 600 Smt Patashi Devi 2250 Smt Puspa Devi 2450 Shri Bhanwar lal 100 Soni Minor boy 100 Minor girls 1000 Gold belonging to 750 others Investment in gold 1500 out of realization of amount on maturity of RD/FD It is established from the evidence that gold ornament and jewellary measuring 8500Gms were dully verifiable from Panchnama/ inventory of gold with reference to gold as wearing by family members in wedding program of Mr. Jagdis Soni and Mr. Pardeep Soni. The wedding of Mr. Jagdish soni was held on 30/11/2001 and the wedding of Mr. Pradeep Soni was held on 11/05/2005. Further also the marriage of assessee was held on 20/01/1979 and marriage of father of assessee was held more than 65 years. The affidavits and other relevant documentary evidence in support of claim that gold ornamental is old one and had no investment made in the period covered u/s 153A are furnished before department at the time of retraction of surrender and copy of same is enclosed herewith. Looking to status of family and business same may kindly be accepted and oblige. 7.5. The Ld. AR had explained the genuine source of acquisition of gold & silver jewellery along with legal & valid documentary evidences. Further also the female members have explained the nature and source of same in the statement recorded u/s 132(4) at the time of search. The Ld. AO had not brought on record any contrary evidence or material which disproved the explanation and credible evidence furnished by assessee. It is further relevant to mention that the item wise gold jewellery as wearing by female members at the time of her marriage were verified from seized inventories. The assessee had disclosed the additional income in respect of loan given to Kamala & Jitendra Sharma against pledge of gold jewellary weighing 750 Gms which were found and seized at the time of search. Smt. Pushpa Devi wife of assessee had also confirmed such facts in her statement recorded u/s 132(4). The Ld. AO without considering the ITR/Computation of income of assessee in right perspective and judicious manner and made wild & incorrect allegation that the undeclared advancement of loan had not offered for taxation. The additional income disclosed in this regard as under: - a. As per sized paper the cash loan of Rs 4,05,000/- to Smt Kamla Devi against pledged of gold ornament on 15.06.2017 by Smt Pushpa Devi. The income & expenditure account prepared on the basis of seized material was prepared for A.Y. 2013-14 to 2018-19 and the additional income was disclosed in the ITR u/s 153A of the Act. The details of additional income disclosed are enclosed herewith which are also on record of Ld. AO. b. Similarly, in case of Mr. Jitendra the loan of Rs 1,00,000/- given against pledged of gold ornament by appellant prior to block period and the interest income of Rs 12,000/- disclosed as additional income by appellant in the ITR u/s 153A for A.Y. 2013- 14 to 2018-19. The computation of additional income offered for taxation are enclosed herewith. c. The assessee had also claimed of benefit of gold jewellery weighing 1500 gms, while disclosing additional income u/s 153A of the Act. Smt. Leela Devi had made an investment in RD/FDR etc prior to block period and interest earned and maturity value had not been disclosed in ITR. The income & expenditure income in this regard are enclosed herewith which reflecting she had claimed benefit of Rs 15,19,135/- in respect of investment in gold jewellary approx. 575 Gms, gold jewellary. Similarly Smt. Pushpa Devi had made an investment in RD/FDR etc prior to block period and interest earned and maturity value had not been disclosed in ITR. The income & expenditure income in this regard are enclosed herewith which reflecting she had claimed benefit of Rs 19,02,360/- in respect of investment in gold jewellary approx. 790 Gms, gold jewellary. Smt. Parvati Devi had made an investment in RD/FDR etc prior to block period and interest earned and maturity value had not been disclosed in ITR. The income & expenditure income in this regard are enclosed herewith which reflecting she had claimed benefit of Rs 3,05,130/- in respect of investment in gold jewellary approx. 240 Gms, gold jewellary.

7.6. The Ld. AR argued that the documentary evidence in respect of source gold ornaments weighing 2250gms are available on record and same are enclosed herewith.

750.00 gms Obtained as pledged against Smt Puspa Devi w/o appellant had loan given to Kamala & explained in here statement u/s Jitendra Sharma 132(4) that the gold ornaments weighing 750 gms belonging to Kamala & Jitendra Sharma 1500.00 Gms The family members had The ld AO ought to have allowed the disclosed additional income benefit of 1500 gms gold ornaments in respect of the maturity while making addition. value of FD/RD etc in respective return u/s 153A of the Act.

7.7. The Ld. AR stated that remaining gold jewellery weighing 4613.96 gm, it is submitted that the family members of assessee are engaged in the business activities since more than 3 decade and also assessed to tax. Perusal of the returned income speaks volumes about the richness of the family. The assessee belongs to Baniya (Maheshwari) Community of Rajasthan and as per customs of the Community, some of the Gold/Silver Jewellery/articles are passed on to the subsequent generations and some of the jewellery were received on various festivals/ auspicious occasions and ceremonies. In fact, the assessee had furnished photographs of functions and marriages to show that ladies of his family wearing heavy gold jewellery which is a part of STREEDHAN. The jewellery is "streedhan" of the assessee's wife, evidenced in the form of declaration which was finished by father-in-law of the assessee stating that he had given the jewellery in question to her daughter. Similarly evidences of grandmother of appellant that jewellery is "streedhan". The gold jewellery was acquired through gifts made by relatives and other family members over a long period of time, is in keeping with prevailing customs and habits. The obdurate refusal of the Income Tax officer to accept the jewellery constitutes deprivation of property without lawful authority. In support of ownership of gold belonging to married ladies the assessee had furnished the affidavit of her parents along with marriage photographs which proves beyond the doubts that the ornaments were given to her as marriage gifts to them at the time of marriage. The Ld AO had not brought on record any material or evidences which disproved the same as submitted by assessee. 7.8. The Ld. AR relied on the following judgment which are as follows:- The Hon’ble ITAT Jaipur Bench in the case of Shri Gyanendra Singh Shekhawat vs ACIT, CC-2, Jaipur dated 27 /07/2022 held that. “2.8 Therefore, looking into the totality of the facts and circumstances of the case, we are of the considered view that the AO had ignored the factual position as well as failed to verify the fact that the assessee is living with his parents and belonged to a Rajput Family where the fact of having jewellery as Streedhan by the assessee’s mother and wife cannot be ignored. Thus, after considering the overall factual position in this case and keeping in view of high status, family 10 tradition, deduction on account of purity and the deduction towards Streedhan, the excess jewellery found were nominal. In this view of the matter, the addition sustained by the ld. CIT(A) deserves to be deleted and the grounds raised by the assessee are allowed. We order accordingly.” 7.9. The Ld. DR argued vehemently and stood in favour of the orders of revenue authorities. The Ld. DR invited our attention in relevant paragraph of assessment order. So, the relevant paragraph of page no. 43 is reproduced as below:- “On the other hand, the assessee and his family members as mention in the chart above were found possessing the gold jewellery of 8663.89 Gms (Fine Weight) worth Rs.

2,86,82,523/-, whereas, as per the above working they are being allowed the credit of 1800 Gms as per the above cited CBDT Instruction and the balance gold jewellery of 6,863.89 Gms, worth Rs. 2,27,23,474/- was found as unexplained without any justifiable source of procurement/ possession. Hence, the same is treated as unexplained investment u/s 69A of the Income Tax Act, 1961 and an addition to the total income of the assessee of Rs. 2,27,23,474/-.” 7.10. We have heard the rival submissions and carefully perused the material available on record. The addition in question pertains to the unexplained investment in gold jewellery amounting to Rs. 2,27,23,474/-, made under section 69A of the Act. The basis for the addition was the excess quantity of jewellery found during the course of search, which, according to the Ld. AO, exceeded the permissible limits as per CBDT Instruction No. 1916 dated 11.05.1994. It is an admitted fact that gold jewellery aggregating to Rs. 3,06,65,897/- (gross weight of 8663.89 grams) was found from the residence and lockers of the assessee and his family members. The assessee contended that the said jewellery belonged to various female members of the family and had been acquired through gifts received at the time of their marriage and other customary occasions, in line with established social and community traditions. Supporting affidavits, declarations, and marriage photographs have been placed on record to substantiate these claims. The assessee also submitted that the jewellery includes items passed on through generations, and thus, qualifies as streedhan, which forms part of the customary personal belongings of married women in Indian households. The assessee has explained the source of such jewellery through affidavits of family members, their recorded statements under section 132(4), and further corroborated by wedding photographs, family declarations, and computations of additional income filed under section 153A in respect of certain pledged gold. The assessee has also disclosed additional income in respect of jewellery acquired through matured RDs/FDs.

The Ld. AO, however, has not brought on record any contrary material to rebut these documentary evidence or to prove that the jewellery was acquired from undisclosed income during the relevant period. We find merit in the submissions of the Ld. AR that the department has not considered the social status, background, and customary practices of the family, which belongs to the Maheshwari community of Rajasthan, where possession of substantial gold jewellery by married women as streedhan is culturally prevalent. Moreover, the CBDT Instruction No. 1916, though non-binding, recognises permissible holding of gold jewellery by family members which was not appropriately appreciated in the present case. The coordinate bench of ITAT Jaipur Bench in the case of Shri Gyanendra Singh Shekhawat (supra) has held that possession of jewellery by female family members, in line with customary practices and social status, must be viewed liberally, and minor deviations or excess findings should not automatically be treated as unexplained. Considering the overall facts, evidence furnished, family status, long-standing customs, and absence of any incriminating material indicating recent acquisition from undisclosed sources, we are of the considered view that the addition made by the Ld.AO is not sustainable in law. Accordingly, we delete the addition of Rs. 2,27,23,474/- made under section 69A of the Act. 7.11. Grounds No. 6 and 7 raised by the assessee are allowed.