PURUSHTTAM LAL SONI,DELHI vs. ACIT, CENTRAL CIRCLE-14, DELHI

We take up the assessee’s first and foremost appeal ITA No. 3509/Del/2025 in assessment years 2011-12 as the “lead” case raising the following substantive grounds: “1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the assessment order passed under section 153A read with section 143(3) of the Income Tax Act, 1961, without there being any incriminating material found during the search pertaining to AY 2011-12, which is a non-abated assessment year.

That the Ld. CIT(A) failed to appreciate that the entire assessment was bad in law and void ab initio in the absence of incriminating material found during the course of the search, thereby contravening the binding precedent laid down in CIT v. Kabul Chawla (61 taxmann.com 412) by the Hon'ble Delhi High Court.

That the Ld. CIT(A) grossly erred in sustaining the addition of Rs. 84,91,24,660/- as unexplained cash payments and Rs. 167,95,74,275/-as unexplained cash receipts made by Ld. AO, merely based on unverified electronic data allegedly extracted from seized devices, without proper certification under Section 65B of the Indian Evidence Act.

That the Ld. CIT(A) erred in upholding the addition of Rs. 2,13,40,250/- on account of alleged unsecured loans and Rs. 4,26,805/- on account of commission thereon, without any supporting evidence, ignoring the appellant's explanation and request to provide the underlying seized data and its computation methodology.

That the Ld. CIT(A) failed to appreciate that the entire assessment proceedings were conducted in violation of principles of natural justice, as the final show cause notice was issued at the end of limitation, without providing adequate time or access to seized material for rebuttal.

That the Ld. CIT(A) erred in law and on facts in not quashing the assessment order which was passed beyond the statutory time limit under section 153B of the Act and was antedated to circumvent the limitation period.

That the appellant reserves the right to add, amend, modify or withdraw any of the grounds of appeal at the time of hearing.”

We next note that the learned CIT(A)’s detailed discussion rejecting the assessee’s lower appeal on all these issues reads as under: “6. Ground no. 2 to 5: These grounds of appeal have been raised against the addition of Rs. 84,91,24,660/-, Rs. 167,95,74,275/-, Rs. 2,13,40,250/- and Rs. 4,26,805/- made by the assessing officer on account of unexplained cash payments, cash receipts, unsecured loan and commission on unsecured loans respectively. I have considered the facts and relevant legal provisions, submissions of the appellant, the contention of the AO and accordingly, have decided the appeal as under. The grounds are broadly technical as well as substantive. The technical grounds are summarized as ITA No.3509 to 3515/Del/2025 4 | P a g e under. First, the assumption of juri iction by the AO is bad in law in the absence of any incriminating material found during search in view of the decision of CIT Vs Kabul Chawla (61 taxmann.com 412(Del). Second, the use of electronic evidences is non-est because of its contravention to the provisions under section 65B of the India Evidence Act.

1 The appellant contended that the alleged addition of undisclosed income is not based on any incriminating document found during the course of search action. Further, the appellant stated that the assessment u/s 153A of the I.T. Act is a specialized proceeding for the purpose of assessing the normal income of the assessee along with any undisclosed income pursuant to the search action. The normal income already assessed cannot be disturbed in the absence of any incriminating material found during search. In the case of CIT vs. Kabul Chawla 61 Taxmann.com 412, the juri ictional high court has clearly held that completed assessment can be interfered by the Assessing Officer while making assessment u/s 153A, only on the basis of some incriminating material that has unearthed during the course of search pertaining to the period under consideration and which were not produced or not already disclosed or made known in the course of original assessment. Since in the case of the assessee no incriminating document in relation to the impugned addition found during the course of search, nor the Assessing Officer had pointed out any incriminating document in relation to the impugned addition in the assessment order, the decision made in the case of CIT Vs. Kabul Chawla is squarely applicable and thus the addition is required to be deleted.

2 During the search proceedings u/s 132(4) of the IT Act, 1961 at the residential premise of the appellant i.e. 4/14, WEA Saraswati Marg, Karol Bagh, New Delhi on 16.12.2016, data has been seized in form of hard disk from Anshu Desktop, Radhika PC, Anshu Old, Vikram PCand Tally old server, and the same was cloned by the assessing officer in presence of the appellant along with two witnesses. From the seized data the Assessing Officer has gathered that the assessee was maintaining records in "tally" in more than one computer and entries in all these computers were found different on a particular date. Assessing Officer after verification of the seized data has found that there are payments and receipts in cash which are different from your books of account. During the assessment proceedings, the assessing officer has issued various notices and show cause after analysing the seized data. The relevant portion of show cause notice dated 23-12-2019 is reproduced as underfor the sake of brevity:

3 Therefore, the contention of the appellant is that there were no incriminating documents seized during the search action is incorrect and is completely misleading. Hence, the ground taken in this regard is dismissed.

4 Further, the appellant contended that any data seized in electronic media cannot be used as evidence by taking mere printouts as per the provisions of section 65B of the Indian Evidence Act 1872 unless the conditions prescribed in sub-section (2) of the section 65B are satisfied in relation to the information and computer in question. The appellant has objected to use of electronic evidences gathered during the course of search and seizure proceedings because of non-compliance of procedure as per sub- section (4) of section 65B of the Indian Evidence Act. Section 65 B deals with the admissibility of electronic records. Section 65B (1) defines computer output as any electronic device capable of storing, processing, or transmitting information, such as a computer, mobile phone, tape recorder, or video recorder. When this section is read in conjunction with section 2 of the Information Technology Act 2000, it can be assumed that electronic evidence is also involved. The requirements that must be met if certain parts or statements of the electronic record are offered at the hearing of a case are set out in section 65B(4). This clause stipulates that all electronic records provided as evidence must be accompanied by a certificate certifying their authenticity. The certificate should be attached to an electronic record such as a CD or USB stick. Finally, the certificate must be signed by a person who holds an official position and is responsible for operating the electronic device in question.

5 Section 658 stipulates he has two scenarios. First, the creation of electronic records that are printed, stored, recorded, etc. on paper are treated as primary evidence and are directly admissible in legal proceedings. Second, in electronic evidence production cases where it is physically impossible to bring a computer system into court, records should be treated as secondary evidence. Such secondary evidence must be signed by personnel responsible for supervising the use of the device or related operations. Only then will it serve as evidence based on the information it contains. Essentially, all of these measures are taken to ensure the legitimacy and provenance of all electronic records used as evidence.

6 It is a settle position of law that the rigours of rules of Indian Evidence Act do not apply to Income-tax Proceedings. The Hon'ble supreme court in the case of Chuharmal v. CIT (1988)172ITR250(SC)has held that the Evidence Act does not apply to proceedings under the Income-tax Act. The Supreme Court pointed out that the rigours of rule of evidence contained in the Evidence Act were not applicable to the Income-tax Act, but the principles of Evidence Act can be applied to proceedings under the Income-tax Act.

7 Additionally, one has to appreciate that the assessment proceeding in this case was initiated subsequent to a search action u/s 132 of the Act carried out on the appellant on 16.12.2016. During the course of such search action, data has been seized in form of hard disk from Anshu Desktop, Radhika PC, Anshu Old, Vikram PC and Tally old server and the same was cloned by the assessing officer in presence of the appellant along with two witnesses.It has been ascertained from the assessment record that the appellant has not asked for such certificate during the assessment proceedings. In fact, as per the mazharnama dated 13.12.2018, the seized data in form of hard drive has been opened and cloned in front of the appellant along with two witnesses which was duly signed by the concerned DDIT (Inv)/ the Authorised Officer and the appellant. There is no dispute to this fact. Further, statements under the oath under section 132(4) of the Act were also taken during the course of search action from the appellant and all relevant personnel responsible for supervising the use of the device in respect of the aforesaid seized documents. Accordingly, the procedural requirement under section 65B of the Indian Evidence Act has already been complied with by obtaining the signature of all relevant personnel responsible for supervising the use of the device. Hence, the contention of the appellant is devoid of any merit.

8 Admissibility of Electronic evidence has evolved over time through a number of landmark decisions. State (NCT of Delhi) v. Navjot Sandhu (State vs Navjot Sandhu [2005] 11 SCC 600 was the first of its kind by the Hon'ble Supreme Court decision on the admissibility of electronic records in 2005, introducing secondary evidence of electronic records under Sections 63 and 65. There is no limit regardless of whether it meets the requirements of Section 65B. The Supreme Court ruled in Shafi Mohammed v. State of Himachal Pradesh 2018 SCC 705 that the certification requirements of Section 65B (4) are procedural in nature and not necessarily mandatory. In view of the aforesaid discussions, the contention of the appellant is not accepted and the ground on this issue is dismissed.

9 AO had made additions of INR 84,91,24,660/-, INR 167,95,74,275/-, INR 2,13,40,250/- and INR 4,26,805/- on account of unexplained cash payments, cash receipts, unsecured loan and commission on unsecured loans respectively. During the assessment proceedings, the assessing officer has issued various notices and show cause after analysing the seized data. During the assessment proceedings, no plausible explanation has been offered by you along with supporting documents. From the perusal of the assessment order, it is evident from the order that large number of incriminating data/ documents were found during search and it was conclusively proved that the appellant was maintaining different data in ITA No.3509 to 3515/Del/2025 8 | P a g e different computers on a particular date. Further the assessment order has meticulously discussed all the evidences gathered and marshalled all the facts regarding incriminating documents seized during search and their implication from the taxation point of view in the hands of the appellant. It appears that the appellant has nothing concrete to rebut the findings made in the assessment order, so he has been raising legal issues which is futile considering the voluminous amounts of evidences found during search and also got corroborated. The appellant has failed to submit any plausible explanation of the documents seized during search from him and by doing so he has not discharged his onus to explain these documents as provided in the Section 132(4A)/ 292C of the Income Tax Act. During the assessment proceedings, the assessing officer has held that the appellant has made payments of INR 84,91,24,660/- in cash and in receipt of cash amounting to INR 167,95,74,275/-. During the appellate proceeding also, the appellant has not filed any cogent evidence in support of its position.

10 Further, the appellant submitted that he had not received any fresh unsecured loans and the alleged amount of INR 2,13,40,250/- pointed out by the Assessing Officer on the basis of a group summary of loans liability reproduced in the assessment order for the first time is in the nature of securities and advance received from customers. The appellant further contended that hehas been directed to file its response to absolute figures against each assessment year without providing the copy of specific seized material and the manner, method and mode of computing the single figure of alleged unsecured loans mentioned in the said SCN and proposed for addition. During the whole assessment proceedings, the AR of the assessee had requested to the assessing officer to provide the copy of specific seized material on the basis of which the alleged absolute figures have been worked out but the assessing officer had not acceded to the request of the assessee. Therefore, any addition made without providing the copy of seized material and the manner, method and mode of computing these figures and thereafter reasonable opportunity of being heard is not in the interest of principal of natural justice, therefore the liable to deleted on this ground of appeal alone.

11 Now, during the appellate proceedings despite several opportunities being offered to the appellant, no response has been filed till date. This shows that the appellant is either deliberately not filing any the explanation in this regard or it has nothing more to submit in support of its claimbefore the undersigned.

12 At this juncture, it is important to bring on record the importance of statement recorded under oath and its evidentiary value. The primary thrust of the Search and Seizure action is to collect evidences of tax evasion which otherwise could not have surfaced and brought to tax. Section 132(4) of the act has been put in place by the legislature consciously so as to enable the authorized officer to collect such evidences by recording statements during the course of search. Section 132(4) of the act empowers the Authorized Officer, to examine and record a statement under oath of any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under the Income Tax Act 1961. Direct Tax Law (Amendment) Act 1987 w.e.f. 01-4-1989, inserted an explanation to Section132(4), which reads as under-

13 However, it is further most pertinent to mention here is that the words 'may be used in evidence in any proceedings' appearing in section 132(4) are of great significance. The Legislature seems to be aware that some admissions may be made at the time of search which may be true, but for which sufficient corroborative evidence may not be found. The word 'statement' is defined neither in the Income-tax Act nor in the Indian Evidence Act, and, hence, it assumes its dictionary meaning of 'something that is stated'. The Division Bench of the Kerala High Court in CIT v. Hotel Meriya [2011] 332 ITR 537 /[2010] 195 Taxman 459 (Ker.) considered the ITA No.3509 to 3515/Del/2025 10 | P a g e scope of a statement recorded under Section 132(4) and found that such statement recorded by the officer as well as the documents seized would come within the purview of evidence under the Income-tax Act read with Section 3 of the Evidence Act. The necessary corollary is that such evidence should be admissible for the purpose of search assessments too. The Explanation to Section 132(4) of the Income Tax Act was also noticed by the Division Bench to further emphasize that the evidence so collected would be relevant in all purposes connected with any proceedings of the Income Tax Act. Having said so, it is further pertinent to mention that statement recorded on oath u/s 132(4) of the act is significant both from the point of view department as well as the assessee who is subjected to search.

14 From the departmental point of view, such a statement enables the department to bring on surface the tax evasion, to examine the nature of incriminating documents, assets etc. found during the course of search and record the assessee's version with the regard to the contents of such incriminating documents and assets, its source, mode and manner of earning/application and its accountability in the books of accounts whether disclosed or not. Such a statement recorded on oath carries a significant evidentiary value which may be used by the Assessing Officer during the course of assessment proceedings as corroborative evidence along with documentary evidences material unearthed during the course of search and seizure action.

15 On the other hand, the assessee subjected to such a search and seizure action, by making a valid disclosure of its undisclosed income in the statement recorded u/s 132(4) gets benefitted from less or no levy of penalty for the specified previous year u/s 271AAA or 271AAB, as the case may be, though on fulfilment of conditions mandated in Section 271AAA and/or 271AAB. Therefore, the assessee's must be cautious enough about his or her disclosures, manner of disclosures of unaccounted income and it's substantiation thereof as the manner and way in which assessee makes the declarations decides the fate of the assessee as regards the penal provisions are concerned.

16 Therefore, needless to say, the statements recorded from the key persons during the course of search proceeding had significant evidentiary value. The Hon'ble Supreme Court in the case of Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi [1960] AIR 1960 SC 100, it was held that an admission is the best evidence that an opposite party can rely upon and though not conclusive, yet could be decisive of the matter unless successfully withdrawn or proved erroneous. Further, in the case of Avadh Kishore Das v. Ram Gopal [1979] AIR 1979 SC 861, the Apex Court has held that evidentiary admissions are not conclusive proof of the facts admitted and may be explained or shown to be wrong, but they do raise an estoppel and shift the burden of proof on to the person making them. Apparently, in the instant case, the burden has not been discharged by the appellant. Further, the ITAT, Pune, in the case of Hotel Kiran v ACIT [2002] 82 ITD 453 (Pune), has held that the statement under section 132(4) was voluntarily made and there was no coercion or threat whatsoever, and if the contents

17 Income tax proceedings are civil proceedings and therefore, are required to follow the principle of preponderance of probability. The preponderance of probability refers to the greater likelihood of one event or fact over another. It is not about certainty or eliminating all doubts but rather about weighing evidence to see which side presents a more probable scenario. Under this principle, the party bearing the burden of proof needs to show that their version of events is more plausible than the opposing party's. This standard contrasts sharply with the criminal law standard of "beyond a reasonable doubt, where the prosecution must prove the defendant's guilt to a much higher level of certainty. In civil cases, by contrast, the balance of probabilities leans toward the more convincing narrative.

18 The central principle is that the fact in dispute must be proven to be more likely true than not. It is not necessary to prove a claim with absolute certainty but rather to convince the court that one side's argument is more probable. The court weighs the evidence presented by both parties. The evidence that has greater weight or credibility will tilt the balance in favour of that party. This evaluation is not purely mathematical but involves assessing the reliability and persuasiveness of the evidence.

19 In Narayan Ganesh Dastane v. Sucheta Narayan Dastane (1975), the Supreme Court stated that under Section 3 of the Indian Evidence Act, a fact is said to be proved when the court believes in its existence based on a "preponderance of probability. The court applies this test by evaluating conflicting probabilities and choosing the most probable scenario. The Court had further held that in civil matters, facts must be established on a balance of probabilities. The Court further explained that this standard involves weighing conflicting probabilities and deciding in favour of the party whose case seems more likely to be true.

20 In Sumati Dayal v. CIT (1995 AIR 1534), the Supreme Court reiterated that tax authorities are not required to accept the apparent truth of documents or transactions. Instead, they may rely on surrounding circumstances and the test of probabilities to determine the reality behind certain financial transactions. The judiciary has consistently applied the principle of preponderance of probability in civil cases. Courts use this standard to resolve disputes where direct evidence may not always be available, and judgments must be made based on circumstantial evidence or the credibility of witnesses. In the realm of tax law, the concept of preponderance of probability is also crucial.

21 Under the principle of preponderance of probability, the belief about the existence of a proven fact is founded on a balance of probabilities. That means a prudent man faced with conflicting probabilities concerning a fact-

22 Further, Section 132(4A) of the Act provides the presumptions of ownership of books of accounts, documents, assets found during the course of search. The provision is reproduced as under.

23 Further, The Juri ictional High Court in the case of CIT Vs Naresh Kumar Agrawal dated 8th February, 2011 has reinforced the strict applicability of Section 132(4A), signalling to taxpayers the importance of maintaining accurate and consistent documentation. It underscores that mere assertions or questionable documents attempting to negate presumptions without solid backing are insufficient. For tax practitioners and assessors, this case serves as a precedent to confidently rely on seized documents while ensuring that any rebuttals by the assessee are critically examined for authenticity and reliability. Moreover, the case delineates the boundaries within which circumstantial evidence can be challenged, emphasizing the role of the court in scrutinizing the genuineness of documents presented as counter-evidence.In the instant case, the appellant has failed to rebut the presumption and accordingly, the evidences gathered during the search conducted u/s 132 of the Act is to be acted against the appellant.

In view of the above, and in absence of any explanation, I find no reason to interfere with the order of the AO making addition of Rs. 84,91,24,660/-, Rs. A.Y. 2011-12, Appeal No. 10446/2019-20

Ground no. 6: This ground of appeal has been raised on the legality of the assessment framed by the assessing officer. The appellant contended that the assessment order was barred by limitation. The appellant submitted that upto 31.12.2019, no valid service of the assessment order and demand notice was being made by the Assessing officer either in the income tax portal of the assessee or through speed post or by personally handing over the assessment order to the assessee. The assessment orders are being personally received by the AR of the assessee on 13.01.2020 on a request being made through email of the AR of the assessee le much after the expiry of the period on which the assessment order was liable to passed as per section 153B of the IT Act. On perusal of the assessment record, it has been found that the assessing officer has passed the assessment order on 31.12.2019 that is within the stipulated time under the provisions of the Act. There is no dispute to this fact. Further, Section 153B of the Act provides the time limits for the completion of assessment. This section lays down specific time limits within which assessment proceedings must be completed, failing which the tax authorities are barred from completing them. This section does not deal in service of order.

1 The relevant part of section 153B of the IT Act, 1961 is reproduced as under: "Time limit for completion of assessment under section 153A.

(1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment,

2 In the instant case, the Assessing Officer has passed the assessment order u/s 153A r.w.s. 143(3) on 31.12.2019. The appellant has raised issue of service of order which is irrelevant. Further, the appellant stated that no proper and effective opportunity of being heard have been provided before passing of assessment order. On perusal of the assessment record, it has been found that the assessing officer has provided ample opportunities to the appellant before finalization of the assessment proceedings by way of issuing notice u/s 142(1) and show cause notice dated 23.12.2019. Therefore, the issues raised by the appellant are hereby dismissed.

In result the appeal is "dismissed."

Learned counsel lastly contends that the impugned assessment is barred by limitation as prescribed in section 153B of the Act. 11. We make it clear that the learned CIT(A)’s detailed discussion in paras 8 to 8.2 has already discussed the entire factual matrix at length that the impugned assessments had indeed been framed within the statutory limitation period. Rejected accordingly. 12. Lastly comes the equally important aspect of quantification of the impugned additions. Learned CIT(DR) could hardly dispute that what all the assessee appears to have done is to carry out accommodation entry business by receiving and paying cash amounts at some commission rate only. There is further no denial to the fact that the assessee himself has nowhere find any evidence indicating a specified commission income along with comparable instances in the very segment. Faced with these situations, in the larger interest of justice, we are of the considered view that all these impugned additions of unexplained cash payments, unexplained receipts, unsecured loans as well as commission component therein deserve to be assessed at a lumpsum rate of 8% only with a ITA No.3509 to 3515/Del/2025 18 | P a g e rider that the same shall not be treated as a precedent. We order accordingly. Necessary computation shall follow as per law. 13. We further make it clear before parting as a matter of abundant caution that the learned Assessing Officer(s)’ consequential computation shall ensure that only section 68 additions etc. shall be assessed @ 8%. All remaining additions in this entire batch of appeals made under other specific heads are hereby confirmed; and, at the same time, the assessee is directed to be assessed afresh after granting “telescopic” benefit to be considered as per law so as to avoid any double addition(s).