AGRA INFRALAND DEVELOPERS PRIVATE LIMITED,AGRA vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, AGRA, AGRA

That the authorities below, while making and sustaining of addition have relied upon some typed loose paper, having most of the entries written therein are undated. Typed loose papers found in the possession of third person cannot be used against the assessee (searched person), as per provisions of section 234 of the Evidence Act being is not the part of books of account as also held by Supreme Court in the case of CBI Vs V C Shukla, after taking into consideration above, the entries written on loose paper, cannot be used against the assessee (searched person). No addition on this score is called for, addition made by the AO, sustained by the CIT (Appeals) is liable to be deleted.

That while sustaining the addition, CIT(A) has completely ignored the submissions made before the AO, that the loose paper found is not the part of regular books of account of other person or of searched person prepared by and for the broker projecting the sale of shops, showing maximum amount has received against the booking, so as to give the message showing the demand in market for selling of shops so that the assessee could able to sell the shops easily, entries written as cash, in the loose paper are not the part of regular books of account of assessee or of other person, no addition on the basis of such loose paper could be made, addition made by the AO, sustained by CIT(A) is liable to be deleted.

The Ld. AR advanced arguments on legal grounds and also assailed quantum additions on merits. The Ld. CIT-DR also advanced arguments supporting the orders of lower authorities. Having Heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being resident corporate assessee is stated to be engaged in real estate. The assessee e-filed its return of income for this year on 06-09-2014 declaring ‘Nil’ income which was processed u/s 143(1). Pursuant to search action in the case of Saloni Gorup of Cases on 06-02-2019 including at the premises of the assessee, notice u/s 153A was issued to the assessee on 29-02-2020. The assessee e-filed its return of income on 23-03-2020 declaring same income. The same was followed by notices u/s 143(2) and 142(1) calling for various details from the assessee. 3.2 The Ld. AO referred to separate search in the case of Shri Phundi Lal Sharma (one of the directors of the assessee-company) wherein certain incriminating documents were found and seized which were inventorized as Annexure LP-1. The Page Nos. 5 & 6 of this Annexure allegedly contained details of on-money receipts by the assessee from various customers. The Ld. AO alleged that the same were related to shops sold / booked in Corporate Park Project being carried out by the assessee.

The Hon’ble Court, considering all the earlier decisions holding the field, held as under: - 14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.

Approving the decision of Hon’ble Delhi High Court in the case of Kabul Chawla (380 ITR 573) as well as the decision of Hon’ble Gujarat High Court in Saumya Construction (P.) Ltd. (387 ITR 529), it was held that in respect of completed assessments / unabated assessments, no addition could be made by Assessing Officer in the absence of any incriminating material found during course of search under section 132 or requisition made under section 132A. Similar is the decision of Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation [2015; 374 ITR 645] which has been followed in subsequent decision in CIT V/s Gurinder Singh Bawa (79 Taxmann.com 398 05/10/2015) which deals with a situation wherein the original return of income was processed u/s 143(1). The present case before us is on similar fact. It was held by Hon’ble Court that in respect of non-abated assessment, the additions are to be strictly based on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search and undisclosed income or undisclosed property discovered during search.

We find that similar is the view of Hon’ble Delhi High Court in Pr. CIT vs. Meeta Gutgutia (82 Taxmann.com 287) which has primarily followed the decision of Kabul Chawla (supra). We also find that Special Leave Petition (SLP) filed by the revenue against this decision has already been dismissed by Hon’ble Supreme Court on 02.07.2018. The ratio of all these decisions would squarely apply wherein it was held that concluded assessment could not be disturbed in search proceedings u/s 153A and the additions have necessarily to be based on incriminating material found during the course of search. The co-ordinate bench of Ahmadabad Tribunal in the case of ACIT vs. Real Marketing Pvt. Ltd. (ITSS No.128-133/Ahd/2021), relying upon the decision of Hon’ble Gujarat High Court in the case of Soumya Construction (387 ITR 529), confirmed quashing of assessment u/s 153A on the ground that there was no seized material in the case of the assessee. Respectfully following all these binding judicial precedents, we would hold that the assessment is liable to be quashed on this very legal ground. The assessee succeeds on this foremost legal ground. To use third-party material against the assessee, proceedings u/s 153C could be initiated for which recording of satisfaction is a mandatory requirement which is not shown to have been fulfilled.

Another aspect of the matter is that the perusal of loose sheets Annexure LP-1, Page No.5 & 6 (as placed on record) would show that this document is completely undated. It merely specifies Amount ‘A’ and Amount ‘B’ without there being any mention of the dates therein. In document LP-7, there is no date which pertains to AYs 2017-18 to 2019- 20. This document is also unsigned document and contain vague / incomplete details only which has been found from a third-party premises. The director, in recorded statement, denied having any knowledge of this document. None of the purchasers have admitted to have paid any cash to the assessee. There is no corroboration of these entries. In fact, most of the bookings have been cancelled and few of the entries are found to be notional entries only. These notings were vague, incomplete and inaccurate. In few instances, the negative amount as mentioned therein was paid through cheques which have wrongly been considered to be cash entries by Ld. AO. It is very clear that there is no corroboration of entries as mentioned in the loose sheets. In the absence of any such concrete corroborative evidence on record, no allegation of receipt of on- money could be made against the assessee and these documents are liable to be treated as mere dumb documents only having no evidentiary value. These sheets lack sufficient details to form an opinion of actual cash receipt by the assessee. The complete details of the transactions could not be deciphered from the same. Under these circumstances, not much credence could be given to these documents to make impugned additions in the hands of the assessee in the absence of corroboration of entries as contained therein.

The Hon’ble Karnataka High Court in its recent decision titled as CIT vs. Sunil Kumar Sharma (159 Taxmann.com 179; 22.01.2024), rendered in the context of Sec.153C,held 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. The Hon’ble Court referred to the decision of Hon’ble Supreme Court in the case of CBI vs. V.C. Shukla (3 SCC 410) as well as another decision in Common Cause vs. UOI (supra)while arriving at such a conclusion. The Hon’ble Supreme Court in the case of CBI vs. V.C. Shukla (3 SCC 410) held that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon’ble Supreme Court is that independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case. Pertinently, Special Leave Petition (SLP) of revenue against the decision of Hon’ble Karnataka High Court has been dismissed by Hon’ble Supreme Court on 20-08-2024 which is reported as 165 Taxmann.com 846. We are of the opinion that aforesaid principle as laid down by Hon’ble Court would apply to the facts of the present case before us and same strengthens the arguments of Ld. AR. Similarly, Mumbai Tribunal, in the case of ITO vs. Kranti Impex Pvt. Ltd. (ITA No.1229/Mum/2013) held that when the seized papers were undated having no acceptable narration and did not bear the signature of any party, they are in the nature of dumb documents having no evidentiary value and could not be taken to be the sole basis for determination of undisclosed income of the assessee. The onus would be on revenue to collect cogent evidences to corroborate the nothings therein. The ratio of these decisions supports the case of the assessee.

Upon cumulative consideration of aforesaid facts and reasoning, we would hold that impugned additions as made by Ld. AO, merely on the basis of loose sheets without any corroboration thereof, was not adequate enough to draw adverse inference of cash receipts against the assessee. The assessment stand quashed not only on legal ground but also on merits. Delving into other legal ground on limitation has been rendered academic in nature. The assessee succeeds in this appeal.

Facts in AYs 2015-16, 2016-17 & 2017-18 are quite identical. These years are also unabated years. The assessment orders as well as impugned appellate orders are on similar lines. Facts being pari-materia the same, our adjudication as for AY 2014-15 shall mutatis mutandis apply to all these appeals. The assessee succeeds in AYs 2015-16 to 2017-18. The appeals stand disposed-off accordingly.

In AY 2018-19, the assessee filed regular return of income which was processed u/s 143(1). The search has happened on the assessee on 06-02-2019 and this year is abated year since the date to issue notice u/s 143(2) had not expired. However, our adjudication on merits as for AY 2014-15 shall mutatis mutandis apply to this year. We find and conclude that the allegation of receipt of on-money by the assessee is not supported by any corroborative evidence on record. Similar are the facts in AY 2019-20. Therefore, the assessee succeeds on merits in both these years. No substantial arguments have been made on limitation in these years. It could not be demonstrated that the assessment orders were barred by limitation. Both the appeals stand partly allowed.

The appeals listed at serial nos.7 to 10 for AYs 2016-17 to 2019-20 are penalty appeals assailing levy of penalty u/s 271D. These appeals are consequential to quantum assessment as framed by Ld. AO for these years. Since we have deleted quantum additions on merits for all the four years, these penalties would not survive and accordingly, the same stand deleted. The assessee succeeds in all these appeals. 14. The appeals listed at Serial Nos. 1 to 6 stand partly allowed. The appeals listed at Serial Nos. 7 to 10 stand allowed in terms of our above order. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.