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DCIT vs Natesan Sabesan, Chennai | s.132, 153A | ITAT Chennai 2024 | BharatTax

DY. CIT, CENTRAL CIRCLE-2(2), CHENNAI vs. NATESAN SABESAN, CHENNAI

ITA 974/CHNY/2022Status: DisposedITAT Chennai11 December 2024AY 2019-20Bench: SHRI ABY T. VARKEY (Judicial Member), SHRI MANOJ KUMAR AGGARWAL (Accountant Member)1 pages

AI SummaryPartly Allowed

Facts

A search was conducted on the assessee, involved in electrical contract works, on 28.03.2019. Seized documents contained cryptic notings which the AO interpreted as unaccounted cash receipts and payments. The assessee contended that these notings pertained to material supplied and his share of profit from facilitation services.

Held

The Tribunal held that the AO's inference that the seized material represented cash receipts and payments was unsustainable due to lack of corroborative evidence and the retraction of a key witness's statement. The principle of telescoping was applied to allow set-off of disclosed income against unexplained money.

Key Issues

Whether the notings in the seized material represent unaccounted cash receipts or details of material supply and profit sharing from which the assessee earned a share of profit?

Sections Cited

Section 132, Section 153A, Section 139, Section 131, Section 69A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

Anantharam Veerasinghaiah & Co. v. CIT
123 ITR 457 · 1980 · SC
202 citing
CIT v. K. S. M Guruswamy Nadar and Sons.
149 ITR 127 · 1984 · HC
78 citing
CIT v. J.J. Gandhi
39 CTR 127
37 citing
S K. Muralidhar v. CIT
51 ITR 757 · 1964 · HC
22 citing

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI MANOJ KUMAR AGGARWAL

For Respondent: Mr. R. Clement Ramesh

Hearing: 25.09.2024Pronounced: 11.12.2024

आदेश / O R D E R

PER ABY T. VARKEY ABY T. VARKEY, JM: These appeals preferred by the Revenue and the cross objections These appeals preferred by the Revenue and the cross objections These appeals preferred by the Revenue and the cross objections raised by the assessee are against the raised by the assessee are against the orders of the Ld. CIT(A) orders of the Ld. CIT(A)-34, Chennai, [in short, the ‘Ld. CIT(A)’] the ‘Ld. CIT(A)’] dated 27.09.2022 for AYs for AYs 2018-19 & 2019-20. Since the issues involved are common, all the appeals have . Since the issues involved are common, all the appeals have . Since the issues involved are common, all the appeals have been heard together. Both the parties also raised similar arguments on been heard together. Both the parties also raised similar arguments on been heard together. Both the parties also raised similar arguments on these issues. Accordingly, we dispose these issues. Accordingly, we dispose off all these appeals by this all these appeals by this consolidated order for the sake of convenience. consolidated order for the sake of convenience.

Ground No. 1 of both the appeals of the Revenue and Ground No. 1 d No. 1 of both the appeals of the Revenue and Ground No. 1 d No. 1 of both the appeals of the Revenue and Ground No. 1 of the cross objections of the assessee are general in nature and of the cross objections of the assessee are general in nature and of the cross objections of the assessee are general in nature and therefore does not call for any specific adjudication. therefore does not call for any specific adjudication.

Ground No. 2 of the appeals of the Revenue and Ground No. 2 of Ground No. 2 of the appeals of the Revenue and Ground No. 2 of Ground No. 2 of the appeals of the Revenue and Ground No. 2 of the cross objections of the assessee for AYs 2018 s objections of the assessee for AYs 2018-19 & 2019 19 & 2019-20 are against the Ld. CIT(A)’s action of deleting the addition made by the AO against the Ld. CIT(A)’s action of deleting the addition made by the AO against the Ld. CIT(A)’s action of deleting the addition made by the AO treating the noting’s found in the seized material as unaccounted cash found in the seized material as unaccounted cash found in the seized material as unaccounted cash receipts and instead, holding it to be receipts and instead, holding it to be noting’s relating to material supplied ng to material supplied by the assessee and estimating his share of profit thereon. by the assessee and estimating his share of profit thereon. by the assessee and estimating his share of profit thereon.

Brief facts of the case as noted are that, the assessee is involved in Brief facts of the case as noted are that, the assessee is involved in Brief facts of the case as noted are that, the assessee is involved in the business of electrical contract works. A search u/s 132 of the the business of electrical contract works. A search u/s 132 of the the business of electrical contract works. A search u/s 132 of the Income Tax Act [herein after t Tax Act [herein after the Act] was conducted upon the assessee on was conducted upon the assessee on 28.03.2019 pursuant to which, his books of accounts, documents and 28.03.2019 pursuant to which, his books of accounts, documents and 28.03.2019 pursuant to which, his books of accounts, documents and other materials were seized and sworn statements of the assessee and other materials were seized and sworn statements of the assessee and other materials were seized and sworn statements of the assessee and other key persons were recorded. The AO is noted to have issued notice other key persons were recorded. The AO is noted to have issued notice other key persons were recorded. The AO is noted to have issued notice u/s 153A of the Act for AY 2018 3A of the Act for AY 2018-19, in response to which the assessee 19, in response to which the assessee declared the same income as originally returned. For AY 2019 same income as originally returned. For AY 2019 same income as originally returned. For AY 2019-20 i.e. the year of search, the appellant had filed return of income u/s 139 of the Act year of search, the appellant had filed return of income u/s 139 of the Act year of search, the appellant had filed return of income u/s 139 of the Act wherein he is noted to have declared total wherein he is noted to have declared total income of Rs.15,17,22,830/ income of Rs.15,17,22,830/- inter alia comprising of income by way of share of profit under the head comprising of income by way of share of profit under the head comprising of income by way of share of profit under the head ‘Income from Other Sources Income from Other Sources’ of Rs.15,13,92,900/-.

During the course of search, the Investigation authorities had also During the course of search, the Investigation authorities had also During the course of search, the Investigation authorities had also searched the premises of Shri Vin searched the premises of Shri Vinod Kumar and Shri P V Saravanan, who od Kumar and Shri P V Saravanan, who assisted in the business affairs of the assessee. From the premises of Shri assisted in the business affairs of the assessee. From the premises of Shri assisted in the business affairs of the assessee. From the premises of Shri P V Saravanan, several loose sheets and documents in form of pocket P V Saravanan, several loose sheets and documents in form of pocket P V Saravanan, several loose sheets and documents in form of pocket diaries were found and seized which were marked as ANN/DSG/PVS/LS/S diaries were found and seized which were marked as ANN/DSG/PVS/LS/S diaries were found and seized which were marked as ANN/DSG/PVS/LS/S- 1 & 2 and ANN/DSG/PVS/B&D/S nd ANN/DSG/PVS/B&D/S-1 to 11 respectively. It is noted that,Shri 1 to 11 respectively. It is noted that,Shri P V Saravanan in his statement recorded on oath u/s 132(4) of the Act P V Saravanan in his statement recorded on oath u/s 132(4) of the Act P V Saravanan in his statement recorded on oath u/s 132(4) of the Act had admitted that, the noting’s noting’s in these loose sheets & diaries were made in these loose sheets & diaries were made by him on the instructions of Shri Vinod Kumar. by him on the instructions of Shri Vinod Kumar. And Shri P V Saravanan Shri P V Saravanan & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan further elaborated that the figures mentioned in these sheets & diaries further elaborated that the figures mentioned in these sheets & diaries further elaborated that the figures mentioned in these sheets & diaries were in lakhs and that these were in lakhs and that these noting’s denoted cash monies received and denoted cash monies received and paid to various persons. He stated that, cash receipts were mentioned paid to various persons. He stated that, cash receipts were mentioned paid to various persons. He stated that, cash receipts were mentioned under the head ‘collections lections’ and cash payments under ‘ and cash payments under ‘deduction’.

According to the AO therefore, the eleven notebooks found from the According to the AO therefore, the eleven notebooks found from the According to the AO therefore, the eleven notebooks found from the premises of Shri P V Saravanan were daybook of cash receipts & premises of Shri P V Saravanan were daybook of cash receipts & premises of Shri P V Saravanan were daybook of cash receipts & payments of the assessee noted by him on the instructions of Shri Vinod payments of the assessee noted by him on the instructions of Shri Vinod payments of the assessee noted by him on the instructions of Shri Vinod Kumar. The AO is noted to have heavily extracted the statement of Shri P Kumar. The AO is noted to have heavily extracted the statement of Shri P Kumar. The AO is noted to have heavily extracted the statement of Shri P V Saravanan in the assessment order, basis which, he concluded that all V Saravanan in the assessment order, basis which, he concluded that all V Saravanan in the assessment order, basis which, he concluded that all the notings found in these documents & the notings found in these documents & diaries were cash notings which diaries were cash notings which stood corroborated by the fact that some of the notings found on loose stood corroborated by the fact that some of the notings found on loose stood corroborated by the fact that some of the notings found on loose sheets also corroborated with the notings found in the diaries. The AO sheets also corroborated with the notings found in the diaries. The AO sheets also corroborated with the notings found in the diaries. The AO also cited by way of an example, the notings found mentioned in the also cited by way of an example, the notings found mentioned in the also cited by way of an example, the notings found mentioned in the loose sheets against the value of contracts in Theni District, the details of against the value of contracts in Theni District, the details of against the value of contracts in Theni District, the details of the contractor and the cash received in relation to this contract was noted the contractor and the cash received in relation to this contract was noted the contractor and the cash received in relation to this contract was noted in the diaries. Likewise, payments made towards works undertaken for in the diaries. Likewise, payments made towards works undertaken for in the diaries. Likewise, payments made towards works undertaken for these contracts were also found by the AO to c these contracts were also found by the AO to co-relate between the loose relate between the loose sheets and the diaries. The AO also noted that, Shri P V Saravanan had sheets and the diaries. The AO also noted that, Shri P V Saravanan had sheets and the diaries. The AO also noted that, Shri P V Saravanan had stated that, cash would ordinarily be collected by Mr. Vinod Kumar and in stated that, cash would ordinarily be collected by Mr. Vinod Kumar and in stated that, cash would ordinarily be collected by Mr. Vinod Kumar and in absence of the latter, the assessee would collect cash from various absence of the latter, the assessee would collect cash from various absence of the latter, the assessee would collect cash from various persons.

It is however noted that, Shri P V Saravanan had subsequently is however noted that, Shri P V Saravanan had subsequently is however noted that, Shri P V Saravanan had subsequently retracted his statement and had stated that neither he nor Mr. Vinod retracted his statement and had stated that neither he nor Mr. Vinod retracted his statement and had stated that neither he nor Mr. Vinod Kumar would collect cash from any persons. He further stated in his Kumar would collect cash from any persons. He further stated in his Kumar would collect cash from any persons. He further stated in his retraction that, the amounts mentioned in these loose sheets retraction that, the amounts mentioned in these loose sheets retraction that, the amounts mentioned in these loose sheets & pocket diaries related to the details of works performed for the customers and diaries related to the details of works performed for the customers and diaries related to the details of works performed for the customers and the values were written at instructions of the assessee. As a consequence the values were written at instructions of the assessee. As a consequence the values were written at instructions of the assessee. As a consequence of this retraction, it is noted that, summons of this retraction, it is noted that, summons was issued u/s 131 of the Act issued u/s 131 of the Act to Shri P V Saravanan, w to Shri P V Saravanan, who is noted to have attended the same on ho is noted to have attended the same on 22.05.2019 and had stood by his retraction statement. He explained that, 22.05.2019 and had stood by his retraction statement. He explained that, 22.05.2019 and had stood by his retraction statement. He explained that, the notings found in the seized notebooks related to the details of the the notings found in the seized notebooks related to the details of the the notings found in the seized notebooks related to the details of the works performed at various corporations, municipalities etc. and the works performed at various corporations, municipalities etc. and the works performed at various corporations, municipalities etc. and the values in the seized documents were written as per the instructions of alues in the seized documents were written as per the instructions of alues in the seized documents were written as per the instructions of Shri Vinod Kumar.

It is observed that, to verify the retraction of Shri P V Saravanan, It is observed that, to verify the retraction of Shri P V Saravanan, It is observed that, to verify the retraction of Shri P V Saravanan, summons was also issued to Shri Vinod Kumar u/s 131 of the Act, who also issued to Shri Vinod Kumar u/s 131 of the Act, who also issued to Shri Vinod Kumar u/s 131 of the Act, who attended the same on 23.05.2 attended the same on 23.05.2019 and backed the retraction statement of 019 and backed the retraction statement of Shri P V Saravanan. He also explained that, the notings in the seized Shri P V Saravanan. He also explained that, the notings in the seized Shri P V Saravanan. He also explained that, the notings in the seized documents comprised of the contract amounts awarded by various documents comprised of the contract amounts awarded by various documents comprised of the contract amounts awarded by various corporations, municipalities etc. and the figures mentioned on daily basis corporations, municipalities etc. and the figures mentioned on daily basis corporations, municipalities etc. and the figures mentioned on daily basis comprised of the details of works contract completed, pending ised of the details of works contract completed, pending ised of the details of works contract completed, pending completion, pending payments etc. for which the assessee followed up for completion, pending payments etc. for which the assessee followed up for completion, pending payments etc. for which the assessee followed up for & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan payments. He further stated that, since these notings were under the payments. He further stated that, since these notings were under the payments. He further stated that, since these notings were under the instruction of the assessee, it is the assessee alone who instruction of the assessee, it is the assessee alone who will be able to explain the contents thereof. explain the contents thereof.

11.

According to AO, there were numerous slips which contained project According to AO, there were numerous slips which contained project According to AO, there were numerous slips which contained project value in which 7.5% of the value was calculated, but the assessee was value in which 7.5% of the value was calculated, but the assessee was value in which 7.5% of the value was calculated, but the assessee was & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan unable to explain the same. He further noted that Shri P V Saravanan in unable to explain the same. He further noted that Shri P V Saravanan in unable to explain the same. He further noted that Shri P V Saravanan in his original statement recorded u/s 132(4) of the Act had clearly stated ginal statement recorded u/s 132(4) of the Act had clearly stated ginal statement recorded u/s 132(4) of the Act had clearly stated that, the entries under the title ‘collection’ and ‘deduction’ were cash that, the entries under the title ‘collection’ and ‘deduction’ were cash that, the entries under the title ‘collection’ and ‘deduction’ were cash received and paid for and on behalf of the assessee. He observed that, received and paid for and on behalf of the assessee. He observed that, received and paid for and on behalf of the assessee. He observed that, the retraction stating that the entries under the retraction stating that the entries under the title ‘collection’ and the title ‘collection’ and ‘deduction’ were the bills passed for suppliers was an after ‘deduction’ were the bills passed for suppliers was an after ‘deduction’ were the bills passed for suppliers was an after-thought, for which no evidences was furnished by the assessee to show that these which no evidences was furnished by the assessee to show that these which no evidences was furnished by the assessee to show that these were contract amounts/receipts. The AO noted that, the assessee was were contract amounts/receipts. The AO noted that, the assessee was were contract amounts/receipts. The AO noted that, the assessee was unable to provide the details of the contracts performed, names of he details of the contracts performed, names of he details of the contracts performed, names of persons, details of purchase bills, transport bills, delivery challans etc. persons, details of purchase bills, transport bills, delivery challans etc. persons, details of purchase bills, transport bills, delivery challans etc.

ANN/KR/NS/B&D/S4 & S5 contained value of electrical materials supplied ANN/KR/NS/B&D/S4 & S5 contained value of electrical materials supplied ANN/KR/NS/B&D/S4 & S5 contained value of electrical materials supplied by M/s Dowell Associates and the diary marked as ANN/KR/NS/B&D/S by M/s Dowell Associates and the diary marked as ANN/KR/NS/B&D/S by M/s Dowell Associates and the diary marked as ANN/KR/NS/B&D/S-2 contained the details of electrical items delivered. This according to the contained the details of electrical items delivered. This according to the contained the details of electrical items delivered. This according to the AO was an incorrect expla AO was an incorrect explanation. Instead, the AO observed that the nation. Instead, the AO observed that the ‘collection’ & ‘delivery’ mentioned in these diaries represented cash ‘collection’ & ‘delivery’ mentioned in these diaries represented cash ‘collection’ & ‘delivery’ mentioned in these diaries represented cash receipts and cash disbursements because it correlated with the notings receipts and cash disbursements because it correlated with the notings receipts and cash disbursements because it correlated with the notings found in the seized material at the premises of Shri P V Sarvanan. He found in the seized material at the premises of Shri P V Sarvanan. He found in the seized material at the premises of Shri P V Sarvanan. He noted that, against some notings in the Havell notepads, there were ed that, against some notings in the Havell notepads, there were ed that, against some notings in the Havell notepads, there were names of Baskar, Ving and Vinayakar which were also found mentioned in names of Baskar, Ving and Vinayakar which were also found mentioned in names of Baskar, Ving and Vinayakar which were also found mentioned in the diaries seized from the residence of Shri P V Saravanan. The AO the diaries seized from the residence of Shri P V Saravanan. The AO the diaries seized from the residence of Shri P V Saravanan. The AO further observed that Mr. Baskar had also been exami further observed that Mr. Baskar had also been examined in the course of ned in the course of search and in his statement recorded u/s 132(4) of the Act, he had stated search and in his statement recorded u/s 132(4) of the Act, he had stated search and in his statement recorded u/s 132(4) of the Act, he had stated that he was in charge of collecting cash from different persons, packing it that he was in charge of collecting cash from different persons, packing it that he was in charge of collecting cash from different persons, packing it in boxes and delivering it to different persons. The AO thus inferred that in boxes and delivering it to different persons. The AO thus inferred that in boxes and delivering it to different persons. The AO thus inferred that the notings made by the assessee in Havells notepads were not for supply s made by the assessee in Havells notepads were not for supply s made by the assessee in Havells notepads were not for supply of electrical items but were for delivery and disbursement of cash. The AO of electrical items but were for delivery and disbursement of cash. The AO of electrical items but were for delivery and disbursement of cash. The AO in the impugned order also cited three particular instances where the in the impugned order also cited three particular instances where the in the impugned order also cited three particular instances where the dates & figures found mentioned in diaries of Sh dates & figures found mentioned in diaries of Shri P V Saravanan was ri P V Saravanan was cross-verifiable with the notings found in the notepads seized from the verifiable with the notings found in the notepads seized from the verifiable with the notings found in the notepads seized from the premises of the assessee. The AO accordingly concluded that, the notings premises of the assessee. The AO accordingly concluded that, the notings premises of the assessee. The AO accordingly concluded that, the notings related to collection and disbursement of cash and not electrical items as related to collection and disbursement of cash and not electrical items as related to collection and disbursement of cash and not electrical items as claimed by the assessee. For this, the AO reiterated his reliance on the assessee. For this, the AO reiterated his reliance on the assessee. For this, the AO reiterated his reliance on the & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan statement of Mr. Baskar and observed that the assessee was in the statement of Mr. Baskar and observed that the assessee was in the statement of Mr. Baskar and observed that the assessee was in the practice of routinely collecting cash from various persons, packing them practice of routinely collecting cash from various persons, packing them practice of routinely collecting cash from various persons, packing them and then disbursing it to different persons. and then disbursing it to different persons.

16.

In light of the above observations, the AO is noted to have inferred In light of the above observations, the AO is noted to have inferred In light of the above observations, the AO is noted to have inferred that the notebooks maintained by Shri P V Saravanan and also the that the notebooks maintained by Shri P V Saravanan and also the that the notebooks maintained by Shri P V Saravanan and also the notepads of the assessee taken together were the books and documents notepads of the assessee taken together were the books and documents notepads of the assessee taken together were the books and documents for the unaccounted cash receipts of the assessee. Th for the unaccounted cash receipts of the assessee. The AO observed that, e AO observed that, the assessee had not denied the ownership of the contents of the the assessee had not denied the ownership of the contents of the the assessee had not denied the ownership of the contents of the notebooks found from the premises of Shri P V Saravanan but had only notebooks found from the premises of Shri P V Saravanan but had only notebooks found from the premises of Shri P V Saravanan but had only disputed the notings to be relating to electrical items and not cash disputed the notings to be relating to electrical items and not cash disputed the notings to be relating to electrical items and not cash receipts, but no evidence was fur receipts, but no evidence was furnished in support of the same. According nished in support of the same. According to AO, even in relation to ‘deduction’ viz., cash payments, the assessee to AO, even in relation to ‘deduction’ viz., cash payments, the assessee to AO, even in relation to ‘deduction’ viz., cash payments, the assessee could not furnish any supporting materials supporting materials and accordingly held that only and accordingly held that only the cash receipt notings are to be considered as undisclosed and the cash receipt notings are to be considered as undisclosed and the cash receipt notings are to be considered as undisclosed and unaccounted income of the assessee. The AO accordingly added the ccounted income of the assessee. The AO accordingly added the ccounted income of the assessee. The AO accordingly added the aggregate receipts found noted in these documents & diaries to the tune aggregate receipts found noted in these documents & diaries to the tune aggregate receipts found noted in these documents & diaries to the tune of Rs.273.97 lacs in FY 2017 of Rs.273.97 lacs in FY 2017-18 and Rs. 42108.82 lacs in FY 2018 18 and Rs. 42108.82 lacs in FY 2018-19 by way of unaccounted income of the assessee in the re way of unaccounted income of the assessee in the respective AYs 2018 spective AYs 2018- 19 & 2019-20.

17.

Being aggrieved by the order of the AO, the assessee preferred Being aggrieved by the order of the AO, the assessee preferred Being aggrieved by the order of the AO, the assessee preferred appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A) found merit in the appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A) found merit in the appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A) found merit in the & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan assessee’s submissions and held that, the notings found in the seized assessee’s submissions and held that, the notings found in the seized assessee’s submissions and held that, the notings found in the seized material were to be inferred as value of material supplied through re to be inferred as value of material supplied through re to be inferred as value of material supplied through facilitation services and not cash receipts. The Ld. CIT(A) estimated the facilitation services and not cash receipts. The Ld. CIT(A) estimated the facilitation services and not cash receipts. The Ld. CIT(A) estimated the assessee’s share of profit therein at 6% of the value of materials supplied assessee’s share of profit therein at 6% of the value of materials supplied assessee’s share of profit therein at 6% of the value of materials supplied which worked out to Rs.16,43,280/ which worked out to Rs.16,43,280/- and Rs.25,26,52,920/- - for AYs 2018- 19 & 2019-20 respectively. Having regard to the fact that the assessee 20 respectively. Having regard to the fact that the assessee 20 respectively. Having regard to the fact that the assessee had already offered share of profit of Rs.15,13,92,900/ had already offered share of profit of Rs.15,13,92,900/- in the return of in the return of income filed for AY 2019 income filed for AY 2019-20, the Ld. CIT(A) confirmed addition to the 20, the Ld. CIT(A) confirmed addition to the extent of Rs.10,12,60,020/ ,020/- [Rs.25,26,52,920 - Rs.15,13,92,900] in AY Rs.15,13,92,900] in AY 2019-20 and made the addition of entire profit of Rs.16,43,280/ 20 and made the addition of entire profit of Rs.16,43,280/ 20 and made the addition of entire profit of Rs.16,43,280/- estimated in AY 2018-19. Aggrieved by this order of the Ld. CIT(A), both 19. Aggrieved by this order of the Ld. CIT(A), both 19. Aggrieved by this order of the Ld. CIT(A), both the parties are now before us. the parties are now before us.

18. Assailing the action of the Ld. C Assailing the action of the Ld. CIT(A), the Ld. CIT, DR appearing IT(A), the Ld. CIT, DR appearing before us heavily relied on the observations and inferences drawn by the before us heavily relied on the observations and inferences drawn by the before us heavily relied on the observations and inferences drawn by the AO from the scribblings found in the diaries & notepads basis which he AO from the scribblings found in the diaries & notepads basis which he AO from the scribblings found in the diaries & notepads basis which he had concluded that the notings were relating to unaccounted cash had concluded that the notings were relating to unaccounted cash had concluded that the notings were relating to unaccounted cash receipts of the assessee. The Ld. CIT, DR also furnished written e assessee. The Ld. CIT, DR also furnished written e assessee. The Ld. CIT, DR also furnished written submissions in support thereof. Perusal of the same reveals that, the Ld. submissions in support thereof. Perusal of the same reveals that, the Ld. submissions in support thereof. Perusal of the same reveals that, the Ld. CIT, DR has summarized the findings of the AO which were recorded in CIT, DR has summarized the findings of the AO which were recorded in CIT, DR has summarized the findings of the AO which were recorded in the assessment order. In respect of the findings recorded by L the assessment order. In respect of the findings recorded by L the assessment order. In respect of the findings recorded by Ld. CIT(A), & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan the Ld. CIT, DR argued that it was based on wrong appreciation of facts the Ld. CIT, DR argued that it was based on wrong appreciation of facts the Ld. CIT, DR argued that it was based on wrong appreciation of facts and therefore urged that the order of the AO be restored. and therefore urged that the order of the AO be restored.

20.

We have heard both th We have heard both the parties, gone through the relevant seized e parties, gone through the relevant seized material, statements of the key persons and the observations and findings material, statements of the key persons and the observations and findings material, statements of the key persons and the observations and findings recorded by the lower authorities. The addition impugned before us recorded by the lower authorities. The addition impugned before us recorded by the lower authorities. The addition impugned before us relates to the noting’s found in the material seized from the premises found in the material seized from the premises found in the material seized from the premises of Shri P V Saravanan. The AO is noted to have inferred these Shri P V Saravanan. The AO is noted to have inferred these Shri P V Saravanan. The AO is noted to have inferred these noting’s to be relating to unaccounted cash receipts of the assessee for which he has set relating to unaccounted cash receipts of the assessee for which he has set relating to unaccounted cash receipts of the assessee for which he has set out his reasoning in the assessment order and also relied on the original out his reasoning in the assessment order and also relied on the original out his reasoning in the assessment order and also relied on the original statement given by Shri P V Saravanan in the course of search conducted statement given by Shri P V Saravanan in the course of search conducted statement given by Shri P V Saravanan in the course of search conducted u/s 132(4) of the Act. On th u/s 132(4) of the Act. On the other hand, it is assessee’s case that, these e other hand, it is assessee’s case that, these notings were relating to the value of the material supplied by lorry notings were relating to the value of the material supplied by lorry notings were relating to the value of the material supplied by lorry owners/suppliers to contractors in relation to the contractual works owners/suppliers to contractors in relation to the contractual works owners/suppliers to contractors in relation to the contractual works conducted at the sites mentioned in the diaries, which had been facili conducted at the sites mentioned in the diaries, which had been facili conducted at the sites mentioned in the diaries, which had been facilitated by the assessee, for which he received a share of the profits as a by the assessee, for which he received a share of the profits as a by the assessee, for which he received a share of the profits as a percentage of the value of materials supplied. According to assessee, Shri percentage of the value of materials supplied. According to assessee, Shri percentage of the value of materials supplied. According to assessee, Shri & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan :: 15 ::

21.

The seized material in dispute is noted to comprise of loose sheets The seized material in dispute is noted to comprise of loose sheets The seized material in dispute is noted to comprise of loose sheets ID marked ANN/DSG/PVS/LS/S ID marked ANN/DSG/PVS/LS/S-1 & 2 & pocket diaries ID marked 1 & 2 & pocket diaries ID marked ANN/DSG/PVS/B&D/S-1 to 11 which was found and seized from the 1 to 11 which was found and seized from the 1 to 11 which was found and seized from the premises of one, Shri P V Saravanan. Upon perusal of the contents of premises of one, Shri P V Saravanan. Upon perusal of the contents of premises of one, Shri P V Saravanan. Upon perusal of the contents of these material, it is noted that they comprise of cryptic these material, it is noted that they comprise of cryptic noting’s noting’s of various figures against either names of persons or names of figures against either names of persons or names of contract works or contract works or names of municipalities or corporations. If one reads these names of municipalities or corporations. If one reads these names of municipalities or corporations. If one reads these noting’s on a stand-alone basis, we find that there is no noting or indication in the alone basis, we find that there is no noting or indication in the alone basis, we find that there is no noting or indication in the seized material regarding the nature of transactions. It is observed that seized material regarding the nature of transactions. It is observed that seized material regarding the nature of transactions. It is observed that the AO in the impugned order had referred to the amounts mentioned in gned order had referred to the amounts mentioned in gned order had referred to the amounts mentioned in & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan these seized material as ‘ these seized material as ‘collections’. We find merit in the Ld. CIT(A)’s . We find merit in the Ld. CIT(A)’s findings that the word ‘collections’ does not appear in these seized findings that the word ‘collections’ does not appear in these seized findings that the word ‘collections’ does not appear in these seized documents. Hence, we countenance the Ld. CIT(A)’s observation documents. Hence, we countenance the Ld. CIT(A)’s observation documents. Hence, we countenance the Ld. CIT(A)’s observation that the AO has wrongly stated the AO has wrongly stated the noting’s found to be ‘collections’, which is not found to be ‘collections’, which is not found to be in accordance with the contents of the seized material. found to be in accordance with the contents of the seized material. found to be in accordance with the contents of the seized material.

22.

We at the same time agree with the Ld. CIT, DR that, ordinarily same time agree with the Ld. CIT, DR that, ordinarily same time agree with the Ld. CIT, DR that, ordinarily noting’s relating to unaccounted business or cash transactions are made relating to unaccounted business or cash transactions are made relating to unaccounted business or cash transactions are made cryptically or in a coded manner by the person searched. However, in cryptically or in a coded manner by the person searched. However, in cryptically or in a coded manner by the person searched. However, in such a scenario, when the notings found are cryptic or not p such a scenario, when the notings found are cryptic or not p such a scenario, when the notings found are cryptic or not properly discernible, the onus is on the Investigating Officer to make requisite discernible, the onus is on the Investigating Officer to make requisite discernible, the onus is on the Investigating Officer to make requisite enquiries from the searched person or other sources and corroborate the enquiries from the searched person or other sources and corroborate the enquiries from the searched person or other sources and corroborate the said notings with tangible material in order to justify the adverse said notings with tangible material in order to justify the adverse said notings with tangible material in order to justify the adverse & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan inference, if any, he intends to dra inference, if any, he intends to draw from these notings, which he is w from these notings, which he is considering to be incriminating in nature. Without doing so, the Revenue considering to be incriminating in nature. Without doing so, the Revenue considering to be incriminating in nature. Without doing so, the Revenue cannot act on mere surmises and assumptions and interpret these notings cannot act on mere surmises and assumptions and interpret these notings cannot act on mere surmises and assumptions and interpret these notings in the manner they consider fit, without bringing any corroborative in the manner they consider fit, without bringing any corroborative in the manner they consider fit, without bringing any corroborative evidence to back such an interpretation. to back such an interpretation.

23.

In the present case, it is noted that the Investigating Officer had In the present case, it is noted that the Investigating Officer had In the present case, it is noted that the Investigating Officer had not conducted any post search enquiries from the persons, entities etc. not conducted any post search enquiries from the persons, entities etc. not conducted any post search enquiries from the persons, entities etc. mentioned in these notings nor had the AO conducted any verifications in mentioned in these notings nor had the AO conducted any verifications in mentioned in these notings nor had the AO conducted any verifications in assessment proceedings to corroborate their theory that, these notings ment proceedings to corroborate their theory that, these notings ment proceedings to corroborate their theory that, these notings found in the seized material related to notings of unaccounted cash found in the seized material related to notings of unaccounted cash found in the seized material related to notings of unaccounted cash receipts. We find that the case of the Revenue primarily hinges on the receipts. We find that the case of the Revenue primarily hinges on the receipts. We find that the case of the Revenue primarily hinges on the statement of Shri P V Saravanan recorded u/s 132(4) statement of Shri P V Saravanan recorded u/s 132(4) statement of Shri P V Saravanan recorded u/s 132(4) of the Act on 28.03.2019 wherein he had admitted that these notings were ‘ 28.03.2019 wherein he had admitted that these notings were ‘ 28.03.2019 wherein he had admitted that these notings were ‘cash collections’ which he had jotted down on the instructions of Shri Vinod ’ which he had jotted down on the instructions of Shri Vinod ’ which he had jotted down on the instructions of Shri Vinod Kumar at the behest of the assessee. The AO is noted to have extracted Kumar at the behest of the assessee. The AO is noted to have extracted Kumar at the behest of the assessee. The AO is noted to have extracted the contents of his statement wher the contents of his statement wherein he had admitted that these notings ein he had admitted that these notings were in his hand writing and that the figures noted were suppressed by were in his hand writing and that the figures noted were suppressed by were in his hand writing and that the figures noted were suppressed by five decimals and that it related to cash collected by Shri Vinod Kumar. five decimals and that it related to cash collected by Shri Vinod Kumar. five decimals and that it related to cash collected by Shri Vinod Kumar.

He is noted to have specifically stated that, he was not the employee of specifically stated that, he was not the employee of specifically stated that, he was not the employee of the assessee and therefore he was not competent to describe the exact the assessee and therefore he was not competent to describe the exact the assessee and therefore he was not competent to describe the exact nature of these notings as he is not aware of the transactions. The Ld. AR nature of these notings as he is not aware of the transactions. The Ld. AR nature of these notings as he is not aware of the transactions. The Ld. AR therefore pointed out that, it was evident from this answe therefore pointed out that, it was evident from this answer that, Shri P V r that, Shri P V Saravanan did not have first Saravanan did not have first-hand knowledge of the transactions or the hand knowledge of the transactions or the details which were being noted by him in the seized material and that he details which were being noted by him in the seized material and that he details which were being noted by him in the seized material and that he had merely made the notings based on what was told to him by Shri had merely made the notings based on what was told to him by Shri had merely made the notings based on what was told to him by Shri Vinod Kumar on hearsay basis. Vinod Kumar on hearsay basis. According to him therefore, such a According to him therefore, such a statement could not be taken at face value to draw adverse inference statement could not be taken at face value to draw adverse inference statement could not be taken at face value to draw adverse inference against the assessee. The Ld. AR then showed us that leading questions against the assessee. The Ld. AR then showed us that leading questions against the assessee. The Ld. AR then showed us that leading questions had been put to Shri P V Saravanan wherein the Authorized Officer would had been put to Shri P V Saravanan wherein the Authorized Officer would had been put to Shri P V Saravanan wherein the Authorized Officer would himself state in the question that state in the question that ‘it seems you are receiving cash from ‘it seems you are receiving cash from & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan various persons and the same is maintained in the notebooks’ various persons and the same is maintained in the notebooks’ various persons and the same is maintained in the notebooks’, to which Shri P V Saravanan would agree and state that the notings in the seized Shri P V Saravanan would agree and state that the notings in the seized Shri P V Saravanan would agree and state that the notings in the seized material was ‘cash collections’. According to th material was ‘cash collections’. According to the Ld. AR, these leading e Ld. AR, these leading questions showed that the Authorized Officer had been unduly influencing questions showed that the Authorized Officer had been unduly influencing questions showed that the Authorized Officer had been unduly influencing Shri P V Saravanan to adhere to his version that these notings were Shri P V Saravanan to adhere to his version that these notings were Shri P V Saravanan to adhere to his version that these notings were notings of cash receipts. The Ld. AR brought to our notice that, apart from notings of cash receipts. The Ld. AR brought to our notice that, apart from notings of cash receipts. The Ld. AR brought to our notice that, apart from stating general modus operandi, Shri P V Saravanan did not elaborate or modus operandi, Shri P V Saravanan did not elaborate or modus operandi, Shri P V Saravanan did not elaborate or explain as to the nature and source of these so explain as to the nature and source of these so-called cash collections or called cash collections or cash payments. According to the Ld. AR, if Shri P V Sarvanan was aware cash payments. According to the Ld. AR, if Shri P V Sarvanan was aware cash payments. According to the Ld. AR, if Shri P V Sarvanan was aware that these notings were of cash receipts, particularl that these notings were of cash receipts, particularly when he had also y when he had also collected cash in absence of Shri Vinod Kumar, then he ought to have collected cash in absence of Shri Vinod Kumar, then he ought to have collected cash in absence of Shri Vinod Kumar, then he ought to have known and divulged atleast atleast specific details of some persons from whom specific details of some persons from whom cash was received, locations from where cash was collected, etc. cash was received, locations from where cash was collected, etc. cash was received, locations from where cash was collected, etc.

Sarvanan did not even contain a whisper of any specific details or specific Sarvanan did not even contain a whisper of any specific details or specific Sarvanan did not even contain a whisper of any specific details or specific projects for which such huge cash collections were being made. Instead, projects for which such huge cash collections were being made. Instead, projects for which such huge cash collections were being made. Instead, he showed us that, the statement of Shri P V t, the statement of Shri P V Saravanan conveniently Saravanan conveniently avoided providing these details and avoided providing these details and instead, he hadstated instead, he hadstated that, he would make these notings at the directions received orally from Shri Vinod make these notings at the directions received orally from Shri Vinod make these notings at the directions received orally from Shri Vinod Kumar and that, he had no knowledge about the notings but he w umar and that, he had no knowledge about the notings but he w umar and that, he had no knowledge about the notings but he was jotting it down on the basis of whatever was being communicated by Shri jotting it down on the basis of whatever was being communicated by Shri jotting it down on the basis of whatever was being communicated by Shri Vinod Kumar. According to Ld. AR therefore, this statement relied upon Vinod Kumar. According to Ld. AR therefore, this statement relied upon Vinod Kumar. According to Ld. AR therefore, this statement relied upon by the AO to justify the additions impugned before us was not only by the AO to justify the additions impugned before us was not only by the AO to justify the additions impugned before us was not only general and vague but factually unreliable general and vague but factually unreliable as well. Having gone through as well. Having gone through ibid statement ourselves, we agree with the Ld. AR that this statement statement ourselves, we agree with the Ld. AR that this statement statement ourselves, we agree with the Ld. AR that this statement alone does not inspire confidence to justify the addition, for the reason alone does not inspire confidence to justify the addition, for the reason alone does not inspire confidence to justify the addition, for the reason that not only was this subsequently retracted but also the averments that not only was this subsequently retracted but also the averments that not only was this subsequently retracted but also the averments made therein was general in nature without divulging any specific details was general in nature without divulging any specific details was general in nature without divulging any specific details regarding the nature and source of the so regarding the nature and source of the so-called cash receipts. Even the called cash receipts. Even the Ld. CIT, DR. was unable to rebut these inconsistencies pointed out by the Ld. CIT, DR. was unable to rebut these inconsistencies pointed out by the Ld. CIT, DR. was unable to rebut these inconsistencies pointed out by the Ld. AR, as outlined in the foregoing, in the sta Ld. AR, as outlined in the foregoing, in the statement of Shri P V tement of Shri P V Sarvanan.

statement was no longer reliable. It is not in dispute that, the statement was no longer reliable. It is not in dispute that, the statement was no longer reliable. It is not in dispute that, the Investigating Officer had subsequently re Investigating Officer had subsequently re-examined Shri P V Saravanan examined Shri P V Saravanan u/s 131 of the Act on 22.05.2019, in which he had backed his retraction u/s 131 of the Act on 22.05.2019, in which he had backed his retraction u/s 131 of the Act on 22.05.2019, in which he had backed his retraction statement. In this subsequent statement, he expla statement. In this subsequent statement, he explained that these notings ined that these notings did not relate to any cash collections by Mr. Vinod Kumar or him and did not relate to any cash collections by Mr. Vinod Kumar or him and did not relate to any cash collections by Mr. Vinod Kumar or him and rather these were relating to contract / tender amounts, which had been rather these were relating to contract / tender amounts, which had been rather these were relating to contract / tender amounts, which had been written by him as dictated by Shri Vinod Kumar. He had confirmed in his written by him as dictated by Shri Vinod Kumar. He had confirmed in his written by him as dictated by Shri Vinod Kumar. He had confirmed in his retraction before the Investigating Officer that the original statement was he Investigating Officer that the original statement was he Investigating Officer that the original statement was given by him under stress. He is noted to have pointed out that, he had given by him under stress. He is noted to have pointed out that, he had given by him under stress. He is noted to have pointed out that, he had serious problem in his eye sight for which he had underwent a surgery serious problem in his eye sight for which he had underwent a surgery serious problem in his eye sight for which he had underwent a surgery subsequent to the search and therefore he could not prope subsequent to the search and therefore he could not prope subsequent to the search and therefore he could not properly see the words ‘cash collections’ which had been used by the Authorized Officer in words ‘cash collections’ which had been used by the Authorized Officer in words ‘cash collections’ which had been used by the Authorized Officer in his replies to the various questions. It is noted that this retraction made his replies to the various questions. It is noted that this retraction made his replies to the various questions. It is noted that this retraction made by Shri P V Saravanan to his original statement before the Investigating by Shri P V Saravanan to his original statement before the Investigating by Shri P V Saravanan to his original statement before the Investigating Officer cannot be discarded or ignored. Once the original statement stood carded or ignored. Once the original statement stood carded or ignored. Once the original statement stood retracted before the Investigating Officer and the statement giver also retracted before the Investigating Officer and the statement giver also retracted before the Investigating Officer and the statement giver also withstood cross-examination u/s 131 of the Act, in our considered view, examination u/s 131 of the Act, in our considered view, examination u/s 131 of the Act, in our considered view, it is not safe to rely on the original the original statement, since it had lost its sanctity had lost its sanctity and relevance and could no longer be used as a valid evidence and relevance and could no longer be used as a valid evidence and relevance and could no longer be used as a valid evidence/material by the Assessing Officer. We therefore uphold the following findings of the by the Assessing Officer. We therefore uphold the following findings of the by the Assessing Officer. We therefore uphold the following findings of the Ld. CIT(A) holding that the original statement having been properly Ld. CIT(A) holding that the original statement having been properly Ld. CIT(A) holding that the original statement having been properly & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan retracted was unreliable and therefore, it was unsafe to rely on it and that iable and therefore, it was unsafe to rely on it and that iable and therefore, it was unsafe to rely on it and that such original statement cannot be used as a basis to justify any addition. such original statement cannot be used as a basis to justify any addition. such original statement cannot be used as a basis to justify any addition.

“29. In the said factual situation regarding the incompleteness of the 29. In the said factual situation regarding the incompleteness of the 29. In the said factual situation regarding the incompleteness of the seized material to ascertain the exact nature of th seized material to ascertain the exact nature of the transactions noted e transactions noted therein, it is important that any inference with regard to the nature of therein, it is important that any inference with regard to the nature of therein, it is important that any inference with regard to the nature of the said transactions can be drawn based only on the basis of any other the said transactions can be drawn based only on the basis of any other the said transactions can be drawn based only on the basis of any other corroborative material or evidences gathered during the post search corroborative material or evidences gathered during the post search corroborative material or evidences gathered during the post search enquiries or the asses enquiries or the assessment proceedings. In this connection, it is seen sment proceedings. In this connection, it is seen that no corroborative material has been gathered either during the post that no corroborative material has been gathered either during the post that no corroborative material has been gathered either during the post search enquiries or the assessment proceedings in order to ascertain the search enquiries or the assessment proceedings in order to ascertain the search enquiries or the assessment proceedings in order to ascertain the exact nature of the amounts noted in the seized material eith exact nature of the amounts noted in the seized material eith exact nature of the amounts noted in the seized material either as collections or deductions. The AO relied on the statement of Shri. P V collections or deductions. The AO relied on the statement of Shri. P V collections or deductions. The AO relied on the statement of Shri. P V Saravanan recorded u/s 132(4) on 28.03.2019 in order to arrive at the Saravanan recorded u/s 132(4) on 28.03.2019 in order to arrive at the Saravanan recorded u/s 132(4) on 28.03.2019 in order to arrive at the inference that the notings in the seized material represent cash receipts inference that the notings in the seized material represent cash receipts inference that the notings in the seized material represent cash receipts of the appellant and cash payments of the appellant and cash payments by the appellant. However, it is by the appellant. However, it is noticed that Shri. P V Saravanan was not competent to describe the noticed that Shri. P V Saravanan was not competent to describe the noticed that Shri. P V Saravanan was not competent to describe the exact nature of the notings in the seized material as he was not an exact nature of the notings in the seized material as he was not an exact nature of the notings in the seized material as he was not an employee of the appellant who is aware of the transactions of the employee of the appellant who is aware of the transactions of the employee of the appellant who is aware of the transactions of the appellant. Shri. P V S appellant. Shri. P V Sarvanan is a friend of Shri. Vinoth Kumar and he arvanan is a friend of Shri. Vinoth Kumar and he merely noted down the transactions in the seized material as per the merely noted down the transactions in the seized material as per the merely noted down the transactions in the seized material as per the details orally communicated to him by Shri. Vinoth Kumar. It is evident details orally communicated to him by Shri. Vinoth Kumar. It is evident details orally communicated to him by Shri. Vinoth Kumar. It is evident from the statement of Shri PV Saravanan that he did not have first from the statement of Shri PV Saravanan that he did not have first from the statement of Shri PV Saravanan that he did not have first-hand knowledge of the transactions that were noted down by him in the knowledge of the transactions that were noted down by him in the knowledge of the transactions that were noted down by him in the seized material and he had merely made the notings based on what has seized material and he had merely made the notings based on what has seized material and he had merely made the notings based on what has been told to him by Shri Vinoth Kumar. In the said circumstances, it been told to him by Shri Vinoth Kumar. In the said circumstances, it been told to him by Shri Vinoth Kumar. In the said circumstances, it cannot be considered that the statement given b cannot be considered that the statement given by him on 28.03.2019 y him on 28.03.2019 that the notings in the seized material are in the nature of cash receipts that the notings in the seized material are in the nature of cash receipts that the notings in the seized material are in the nature of cash receipts and cash payments is based on reliable and accurate knowledge of the and cash payments is based on reliable and accurate knowledge of the and cash payments is based on reliable and accurate knowledge of the actual nature of the said transactions. Further, it is also noticed that actual nature of the said transactions. Further, it is also noticed that actual nature of the said transactions. Further, it is also noticed that Shri. PV Saravanan Shri. PV Saravanan has nowhere mentioned in the said statement that has nowhere mentioned in the said statement that the transactions noted by him in the seized material pertain to Shri. the transactions noted by him in the seized material pertain to Shri. the transactions noted by him in the seized material pertain to Shri. Sabesan, the appellant, which also goes to show that he was unaware of Sabesan, the appellant, which also goes to show that he was unaware of Sabesan, the appellant, which also goes to show that he was unaware of the complete details of the said transactions. The only reference the complete details of the said transactions. The only reference the complete details of the said transactions. The only reference made by Shri. P V Saravanan to the name of the appellant in the statement is by Shri. P V Saravanan to the name of the appellant in the statement is by Shri. P V Saravanan to the name of the appellant in the statement is with regard to the notings found at page nos. 22 to 31 of the seized with regard to the notings found at page nos. 22 to 31 of the seized with regard to the notings found at page nos. 22 to 31 of the seized note book vide ANN/DSG/PVS/B&D/S note book vide ANN/DSG/PVS/B&D/S-7, which are in the handwriting of 7, which are in the handwriting of the appellant.

seized material are relating to the contracts/ tender amounts awarded terial are relating to the contracts/ tender amounts awarded terial are relating to the contracts/ tender amounts awarded by various municipalities, corporations, DRDA and TWAD which have by various municipalities, corporations, DRDA and TWAD which have by various municipalities, corporations, DRDA and TWAD which have been written by him as stated by Shri. Vinoth Kumar. Shri. P V been written by him as stated by Shri. Vinoth Kumar. Shri. P V been written by him as stated by Shri. Vinoth Kumar. Shri. P V Saravanan further stated that no cash was either collected by him Saravanan further stated that no cash was either collected by him Saravanan further stated that no cash was either collected by him or by Shri. Vinoth Kumar. As regards the reasons for retraction, he stated that Shri. Vinoth Kumar. As regards the reasons for retraction, he stated that Shri. Vinoth Kumar. As regards the reasons for retraction, he stated that he was under stress and the answers given by him in the statement u/s he was under stress and the answers given by him in the statement u/s he was under stress and the answers given by him in the statement u/s 132(4) on 28.03.2019 were actually meant otherwise. He stated that he 132(4) on 28.03.2019 were actually meant otherwise. He stated that he 132(4) on 28.03.2019 were actually meant otherwise. He stated that he had a problem in his left eye for wh had a problem in his left eye for which he underwent a surgery ich he underwent a surgery subsequent to the search and that he could not see the word "cash subsequent to the search and that he could not see the word "cash subsequent to the search and that he could not see the word "cash collections" in the replies to various questions recorded at the time of collections" in the replies to various questions recorded at the time of collections" in the replies to various questions recorded at the time of search due to the said problem as well as due to fatigue. In view of this search due to the said problem as well as due to fatigue. In view of this search due to the said problem as well as due to fatigue. In view of this reason and the r reason and the reasons mentioned in the preceding paragraph, the easons mentioned in the preceding paragraph, the statement of Shri. P V Saravanan given on 28.03.2019 cannot be statement of Shri. P V Saravanan given on 28.03.2019 cannot be statement of Shri. P V Saravanan given on 28.03.2019 cannot be considered to be a reliable statement and consequently, no adverse considered to be a reliable statement and consequently, no adverse considered to be a reliable statement and consequently, no adverse inference can be drawn against the appellant based on the said inference can be drawn against the appellant based on the said inference can be drawn against the appellant based on the said statement.”

26.

It is noted that, consequent to the original statement of Shri P V It is noted that, consequent to the original statement of Shri P V It is noted that, consequent to the original statement of Shri P V Saravanan, the Investigating Officer had also recorded the statement Saravanan, the Investigating Officer had also recorded the statement Saravanan, the Investigating Officer had also recorded the statement from Shri Vinod Kumar on the same date, since Shri P V Saravanan had from Shri Vinod Kumar on the same date, since Shri P V Saravanan had from Shri Vinod Kumar on the same date, since Shri P V Saravanan had stated that, he was maintaining these pocket diar stated that, he was maintaining these pocket diaries at the behest of Shri ies at the behest of Shri Vinod Kumar. Having perused this original statement of Shri Vinod Vinod Kumar. Having perused this original statement of Shri Vinod Vinod Kumar. Having perused this original statement of Shri Vinod Kumar, it is noted that no questions were posed to him with regard to the Kumar, it is noted that no questions were posed to him with regard to the Kumar, it is noted that no questions were posed to him with regard to the material seized from the residence of Shri P V Saravanan and the nature material seized from the residence of Shri P V Saravanan and the nature material seized from the residence of Shri P V Saravanan and the nature of notings contained therein. The Ld. CIT(A) is noted to have observed ed therein. The Ld. CIT(A) is noted to have observed ed therein. The Ld. CIT(A) is noted to have observed that Shri Vinod Kumar was confronted with the relevant material for the that Shri Vinod Kumar was confronted with the relevant material for the that Shri Vinod Kumar was confronted with the relevant material for the first time only on 23.05.2019 and in his statement which was recorded first time only on 23.05.2019 and in his statement which was recorded first time only on 23.05.2019 and in his statement which was recorded u/s 131 of the Act on the said date, he had agreed with the s u/s 131 of the Act on the said date, he had agreed with the s u/s 131 of the Act on the said date, he had agreed with the second statement of Shri P V Saravanan dated 22.05.2019 affirming that statement of Shri P V Saravanan dated 22.05.2019 affirming that statement of Shri P V Saravanan dated 22.05.2019 affirming that the notings in the seized material pertained to the seized material pertained to the contracts/works awarded the contracts/works awarded & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan :: 24 ::

by municipalities/corporations/DRDA/TWAD and that by municipalities/corporations/DRDA/TWAD and that, the said works are the said works are pertaining pertaining to to the the contracts contracts completed completed on on daily daily basis/pending basis/pending completion/pending payments, for which the completion/pending payments, for which the assessee does follow up of does follow up of payments and other documentation to be submitted payments and other documentation to be submitted to the concerned to the concerned departments. Shri Vinod Kumar is noted to have also affirmed departments. Shri Vinod Kumar is noted to have also affirmed departments. Shri Vinod Kumar is noted to have also affirmedthat, he would give the information to the information to Shri. P V Saravanan for making notings in Shri. P V Saravanan for making notings in the seized material and that such and that such information was received by was received by him from the assessee. He is noted to have also clarified the assessee. He is noted to have also clarified that neither he nor Shri. P that neither he nor Shri. P V Saravanan received cash from any persons. V Saravanan received cash from any persons. Having regard to the Having regard to the foregoing, we find merit in the Ld. CIT(A)’s findings that this statement of oregoing, we find merit in the Ld. CIT(A)’s findings that this statement of oregoing, we find merit in the Ld. CIT(A)’s findings that this statement of Shri Vinod Kumar further disproved the original statement of Shri P V Shri Vinod Kumar further disproved the original statement of Shri P V Shri Vinod Kumar further disproved the original statement of Shri P V Sarvanan dated 28.03.2019 basis which the AO had inferred that these Sarvanan dated 28.03.2019 basis which the AO had inferred that these Sarvanan dated 28.03.2019 basis which the AO had inferred that these notings related to cash receipts. Rather, notings related to cash receipts. Rather, from this statement of Shri Vinod from this statement of Shri Vinod Kumar and the subsequent statement of Shri P V Sarvanan dated Kumar and the subsequent statement of Shri P V Sarvanan dated Kumar and the subsequent statement of Shri P V Sarvanan dated 22.05.2019, it is seen that, the figures noted by him in the pocket diaries 22.05.2019, it is seen that, the figures noted by him in the pocket diaries 22.05.2019, it is seen that, the figures noted by him in the pocket diaries and loose sheets pertain to the contract amounts for the materials and loose sheets pertain to the contract amounts for the materials and loose sheets pertain to the contract amounts for the materials supplied for which the assessee was providing facilitation services. ch the assessee was providing facilitation services. ch the assessee was providing facilitation services.

“41. Further, it is noticed that though a statement u/s 132(4) of the . Further, it is noticed that though a statement u/s 132(4) of the . Further, it is noticed that though a statement u/s 132(4) of the appellant was recorded on 28.03.2019, no questions were posed to him appellant was recorded on 28.03.2019, no questions were posed to him appellant was recorded on 28.03.2019, no questions were posed to him with regard to the material seized from the residence of Shri. P V with regard to the material seized from the residence of Shri. P V with regard to the material seized from the residence of Shri. P V Saravanan on 28.03.2019 in Saravanan on 28.03.2019 in the said statement. The said seized the said statement. The said seized material was confronted to the appellant for the first time in the course material was confronted to the appellant for the first time in the course material was confronted to the appellant for the first time in the course of statement recorded u/s 131 only on 24.05.2019. In the said of statement recorded u/s 131 only on 24.05.2019. In the said of statement recorded u/s 131 only on 24.05.2019. In the said statement, the appellant explained that the notings made in the material statement, the appellant explained that the notings made in the material statement, the appellant explained that the notings made in the material seized from the residence of Shri. P V Saravanan, which were based on the residence of Shri. P V Saravanan, which were based on the residence of Shri. P V Saravanan, which were based on the information given by the appellant to Shri. Vinoth Kumar and the the information given by the appellant to Shri. Vinoth Kumar and the the information given by the appellant to Shri. Vinoth Kumar and the information in turn given by Shri. Vinoth Kumar to Shri. PV Saravanan, information in turn given by Shri. Vinoth Kumar to Shri. PV Saravanan, information in turn given by Shri. Vinoth Kumar to Shri. PV Saravanan, pertained to the supply of material by the local lorry ow pertained to the supply of material by the local lorry ow pertained to the supply of material by the local lorry owners and suppliers suppliers suppliers to to to the the the contractors contractors contractors carrying carrying carrying out out out works works works in in in various various various corporations/municipalities/DRDA/TWAD based on the facilitation done corporations/municipalities/DRDA/TWAD based on the facilitation done corporations/municipalities/DRDA/TWAD based on the facilitation done by the appellant. The appellant also explained that the payments by the appellant. The appellant also explained that the payments by the appellant. The appellant also explained that the payments received by the said suppliers were also noted in the received by the said suppliers were also noted in the seized material, as seized material, as per the information received from his employees. He explained that the per the information received from his employees. He explained that the per the information received from his employees. He explained that the said notings are made to enable him to collect his share of profit from said notings are made to enable him to collect his share of profit from said notings are made to enable him to collect his share of profit from the local lorry owners and the suppliers. He stated that the share of the local lorry owners and the suppliers. He stated that the share of the local lorry owners and the suppliers. He stated that the share of profit received by him profit received by him varies between 5% to 7% of the amounts varies between 5% to 7% of the amounts received by the local lorry owners and suppliers.” received by the local lorry owners and suppliers.”

28.

The Ld. CIT, DR appearing before us was unable to disprove the The Ld. CIT, DR appearing before us was unable to disprove the The Ld. CIT, DR appearing before us was unable to disprove the above factual observations of the Ld. CIT(A). He was unable to show us above factual observations of the Ld. CIT(A). He was unable to show us above factual observations of the Ld. CIT(A). He was unable to show us that, either the assessee or that, either the assessee or his employee Shri Vinod Kumar had ever his employee Shri Vinod Kumar had ever stated that the transactions noted in the seized material represented cash stated that the transactions noted in the seized material represented cash stated that the transactions noted in the seized material represented cash receipts and cash payments of the assessee. Accordingly, we find that receipts and cash payments of the assessee. Accordingly, we find that receipts and cash payments of the assessee. Accordingly, we find that there was no corroborative material by way of statements of the relevan there was no corroborative material by way of statements of the relevan there was no corroborative material by way of statements of the relevant persons which would support the AO’s case that the transactions found persons which would support the AO’s case that the transactions found persons which would support the AO’s case that the transactions found noted in the seized material was cash receipts of the assessee. In fact, noted in the seized material was cash receipts of the assessee. In fact, noted in the seized material was cash receipts of the assessee. In fact, & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan the only person who had stated so, i.e. Shri P V Saravanan had averred the only person who had stated so, i.e. Shri P V Saravanan had averred the only person who had stated so, i.e. Shri P V Saravanan had averred that he was only making notings based on that he was only making notings based on information given by Shri information given by Shri Vinod Kumar and that he did not have first Vinod Kumar and that he did not have first-hand knowledge regarding the hand knowledge regarding the nature of the said transactions and later on had retracted this statement nature of the said transactions and later on had retracted this statement nature of the said transactions and later on had retracted this statement as well subsequently before the Investigating Officer. as well subsequently before the Investigating Officer.

“43. It is also pertinent to observe that the AO has not gathered any “43. It is also pertinent to observe that the AO has not gathered any “43. It is also pertinent to observe that the AO has not gathered any other corroborative materials/ evidence in order to assist him in drawing other corroborative materials/ evidence in order to assist him in drawing other corroborative materials/ evidence in order to assist him in drawing proper and correct inference regarding the exact nature of the proper and correct inference regarding the exact nature of the proper and correct inference regarding the exact nature of the transactions found noted in the seized ma transactions found noted in the seized material. It is noticed that the AO terial. It is noticed that the AO did did did not not not make make make any any any enquiries enquiries enquiries with with with the the the municipal municipal municipal corporations/municipalities/DRDA/TWAD corporations/municipalities/DRDA/TWAD corporations/municipalities/DRDA/TWAD against against against whose whose whose names names names the the the relevant amounts have been found noted in the seized material in order relevant amounts have been found noted in the seized material in order relevant amounts have been found noted in the seized material in order to ascertain whether the appellant has been to ascertain whether the appellant has been awarded any contracts by awarded any contracts by the said bodies/organisations and any payments have been made to him the said bodies/organisations and any payments have been made to him the said bodies/organisations and any payments have been made to him in pursuance of such contracts. Further, it is noticed that the AO has not in pursuance of such contracts. Further, it is noticed that the AO has not in pursuance of such contracts. Further, it is noticed that the AO has not made any attempt to make enquiries with the said bodies/organisations made any attempt to make enquiries with the said bodies/organisations made any attempt to make enquiries with the said bodies/organisations regarding the na regarding the names of the persons who had carried out various mes of the persons who had carried out various contract works during the relevant period and thereby make enquiries contract works during the relevant period and thereby make enquiries contract works during the relevant period and thereby make enquiries with the said contractors to ascertain whether any payments were made with the said contractors to ascertain whether any payments were made with the said contractors to ascertain whether any payments were made by them to the appellant either by way of sub by them to the appellant either by way of sub-contract payments or contract payments or commission payments or any other nature of payments.” mission payments or any other nature of payments.”

30. According to us, when the AO was aware that Shri P V Sarvanan According to us, when the AO was aware that Shri P V Sarvanan According to us, when the AO was aware that Shri P V Sarvanan had already retracted his original statement, basis which, the Revenue had already retracted his original statement, basis which, the Revenue had already retracted his original statement, basis which, the Revenue was inferring that the notings found in the seized material was cash was inferring that the notings found in the seized material was cash was inferring that the notings found in the seized material was cash & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan receipts, then rather than placing reliance on such unreliable and unsafe receipts, then rather than placing reliance on such unreliable and unsafe receipts, then rather than placing reliance on such unreliable and unsafe statement, he ought to have corroborated his theory by making enquiries statement, he ought to have corroborated his theory by making enquiries statement, he ought to have corroborated his theory by making enquiries from the persons found named in the seized material, which admittedly from the persons found named in the seized material, which admittedly from the persons found named in the seized material, which admittedly he did not do. Hence, without corrobora he did not do. Hence, without corroborating these cryptic notings with ting these cryptic notings with proper tangible material, according to us, the AO could not have proper tangible material, according to us, the AO could not have proper tangible material, according to us, the AO could not have straightaway presumed that all these notings represented cash receipts, straightaway presumed that all these notings represented cash receipts, straightaway presumed that all these notings represented cash receipts, aggregate of which, denoted the unaccounted income of the assessee. aggregate of which, denoted the unaccounted income of the assessee. aggregate of which, denoted the unaccounted income of the assessee.

31.

On the other hand, we find that the assessee had in fact furnished and, we find that the assessee had in fact furnished and, we find that the assessee had in fact furnished evidences both before the Investigating Officer and the Assessing Officer evidences both before the Investigating Officer and the Assessing Officer evidences both before the Investigating Officer and the Assessing Officer to corroborate his explanation that the notings related to the value of to corroborate his explanation that the notings related to the value of to corroborate his explanation that the notings related to the value of material supplied through the facilitation services rende material supplied through the facilitation services rendered by him, for red by him, for which he derived share of profit. The assessee is noted to have explained which he derived share of profit. The assessee is noted to have explained which he derived share of profit. The assessee is noted to have explained the meaning of 7.5% appearing in numerous slips seized from the the meaning of 7.5% appearing in numerous slips seized from the the meaning of 7.5% appearing in numerous slips seized from the premises of Shri P V Saravanan. He explained that, under the different premises of Shri P V Saravanan. He explained that, under the different premises of Shri P V Saravanan. He explained that, under the different schemes undertaken in various t schemes undertaken in various town panchayats, for which the assessee own panchayats, for which the assessee provides facilitation services, the retention money involved in various provides facilitation services, the retention money involved in various provides facilitation services, the retention money involved in various projects is 7.5%. On the AO’s query as to how the notings are in rounded projects is 7.5%. On the AO’s query as to how the notings are in rounded projects is 7.5%. On the AO’s query as to how the notings are in rounded numbers as it is impossible for such figures to relate to the material numbers as it is impossible for such figures to relate to the material numbers as it is impossible for such figures to relate to the material supplied by contractors, the assessee had explained that, these were upplied by contractors, the assessee had explained that, these were upplied by contractors, the assessee had explained that, these were values per unit of the relevant materials, which were facilitated by him, values per unit of the relevant materials, which were facilitated by him, values per unit of the relevant materials, which were facilitated by him, which are generally in round numbers. which are generally in round numbers.

list of 102 suppliers, out of which, he had made enquiries from seventeen list of 102 suppliers, out of which, he had made enquiries from seventeen list of 102 suppliers, out of which, he had made enquiries from seventeen (17) suppliers, out of which, only five (5) suppliers had admitted that (17) suppliers, out of which, only five (5) suppliers had admitted that (17) suppliers, out of which, only five (5) suppliers had admitted that they had conducted business they had conducted business transactions with the assessee and paid transactions with the assessee and paid cash for his facilitation services but seven suppliers had denied having cash for his facilitation services but seven suppliers had denied having cash for his facilitation services but seven suppliers had denied having business with the assessee. It is noted that, these names provided by the business with the assessee. It is noted that, these names provided by the business with the assessee. It is noted that, these names provided by the assessee were not of the suppliers but of the contractors and theref assessee were not of the suppliers but of the contractors and theref assessee were not of the suppliers but of the contractors and therefore the fundamental premise of the AO is found to be erroneous. The Ld. AR the fundamental premise of the AO is found to be erroneous. The Ld. AR the fundamental premise of the AO is found to be erroneous. The Ld. AR showed us that, the materials / supplies were arranged from locals to the showed us that, the materials / supplies were arranged from locals to the showed us that, the materials / supplies were arranged from locals to the contractors, which was facilitated by the assessee and that it was the contractors, which was facilitated by the assessee and that it was the contractors, which was facilitated by the assessee and that it was the contractors who shared profit as a p contractors who shared profit as a percentage of the material supplied to ercentage of the material supplied to it. It is noted that, three (3) contractors had confirmed on oath, before it. It is noted that, three (3) contractors had confirmed on oath, before it. It is noted that, three (3) contractors had confirmed on oath, before the DDIT (Inv.), that the assessee was providing them facilitation services the DDIT (Inv.), that the assessee was providing them facilitation services the DDIT (Inv.), that the assessee was providing them facilitation services for which they were paying profits and five (5) of the contractors h for which they were paying profits and five (5) of the contractors h for which they were paying profits and five (5) of the contractors had confirmed the same before the AO as well. Only because, some of the confirmed the same before the AO as well. Only because, some of the confirmed the same before the AO as well. Only because, some of the contractors did not confirm having transactions with the assessee cannot contractors did not confirm having transactions with the assessee cannot contractors did not confirm having transactions with the assessee cannot be said to be sufficient reason to disprove the assessee’s explanation, be said to be sufficient reason to disprove the assessee’s explanation, be said to be sufficient reason to disprove the assessee’s explanation, particularly when, other contractors had particularly when, other contractors had confirmed the same. The Ld. AR confirmed the same. The Ld. AR for the assessee pointed out that, these contractors had paid the for the assessee pointed out that, these contractors had paid the for the assessee pointed out that, these contractors had paid the assessee’s share of profit in cash and therefore understandably, some of assessee’s share of profit in cash and therefore understandably, some of assessee’s share of profit in cash and therefore understandably, some of them may not have admitted to this fact due to fear of consequential tax them may not have admitted to this fact due to fear of consequential tax them may not have admitted to this fact due to fear of consequential tax proceedings against them. He also pointed out that, the Revenue was against them. He also pointed out that, the Revenue was against them. He also pointed out that, the Revenue was unable to bring on record any other positive evidence to disprove the unable to bring on record any other positive evidence to disprove the unable to bring on record any other positive evidence to disprove the & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan assessee’s explanation. We find merit in the Ld. AR’s contention that, if assessee’s explanation. We find merit in the Ld. AR’s contention that, if assessee’s explanation. We find merit in the Ld. AR’s contention that, if the assessee’s explanation was not acceptable to the Rev the assessee’s explanation was not acceptable to the Rev the assessee’s explanation was not acceptable to the Revenue, then the onus was on the Revenue to bring on record some positive material as to onus was on the Revenue to bring on record some positive material as to onus was on the Revenue to bring on record some positive material as to the source or business activity from which the assessee was receiving the source or business activity from which the assessee was receiving the source or business activity from which the assessee was receiving these so-called cash receipts. As noted above, there were names of called cash receipts. As noted above, there were names of called cash receipts. As noted above, there were names of persons, municipalities, corpora persons, municipalities, corporations and locations mentioned in the tions and locations mentioned in the seized material. If it was the Revenue’s case that the figures noted seized material. If it was the Revenue’s case that the figures noted seized material. If it was the Revenue’s case that the figures noted against them represented cash receipts, then it was for the Revenue to against them represented cash receipts, then it was for the Revenue to against them represented cash receipts, then it was for the Revenue to show as to why and how were these persons, municipalities, corporations, show as to why and how were these persons, municipalities, corporations, show as to why and how were these persons, municipalities, corporations, paying such cash receipts to the assessee and for what. No person would such cash receipts to the assessee and for what. No person would such cash receipts to the assessee and for what. No person would pay such huge sums to any individual without any reason or purpose. We pay such huge sums to any individual without any reason or purpose. We pay such huge sums to any individual without any reason or purpose. We therefore find ourselves in agreement with the assessee that the case therefore find ourselves in agreement with the assessee that the case therefore find ourselves in agreement with the assessee that the case made out by the AO was far made out by the AO was far-fetched and on conjectures.

Having perused the notepads seized from the residence of the assessee, it Having perused the notepads seized from the residence of the assessee, it Having perused the notepads seized from the residence of the assessee, it is noted that, the words ‘delivery’, ‘ is noted that, the words ‘delivery’, ‘boxes’ and ‘collection’ are mentioned and ‘collection’ are mentioned against some of the figures. There is no mention of any ‘cash’ or ‘ against some of the figures. There is no mention of any ‘cash’ or ‘ against some of the figures. There is no mention of any ‘cash’ or ‘Rs.’ & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan against any of these figures. Hence, one cannot prudently infer these against any of these figures. Hence, one cannot prudently infer these against any of these figures. Hence, one cannot prudently infer these notings to represent cash receipts. The assessee is noted to have notings to represent cash receipts. The assessee is noted to have notings to represent cash receipts. The assessee is noted to have explained that these notings were in relation to the electrical materials hese notings were in relation to the electrical materials hese notings were in relation to the electrical materials collected and delivered in the course of his business and that, the names collected and delivered in the course of his business and that, the names collected and delivered in the course of his business and that, the names Baskar / Ving / Vinayakar mentioned against some notings referred to his Baskar / Ving / Vinayakar mentioned against some notings referred to his Baskar / Ving / Vinayakar mentioned against some notings referred to his driver, Shri Baskar who would collect and deliver t driver, Shri Baskar who would collect and deliver t driver, Shri Baskar who would collect and deliver these electrical materials. The AO however is noted to have disagreed with this materials. The AO however is noted to have disagreed with this materials. The AO however is noted to have disagreed with this explanation. According to AO, Mr. Baskar had admitted to receiving cash explanation. According to AO, Mr. Baskar had admitted to receiving cash explanation. According to AO, Mr. Baskar had admitted to receiving cash and taking it to a location ‘Lakshmi Flats’ and therefore, his inference was and taking it to a location ‘Lakshmi Flats’ and therefore, his inference was and taking it to a location ‘Lakshmi Flats’ and therefore, his inference was that the notings made in the that the notings made in the Havells notepads also represented cash Havells notepads also represented cash receipts. We however are unable to convince ourselves with this receipts. We however are unable to convince ourselves with this receipts. We however are unable to convince ourselves with this reasoning of the AO. Reading of the statement recorded from Shri Baskar reasoning of the AO. Reading of the statement recorded from Shri Baskar reasoning of the AO. Reading of the statement recorded from Shri Baskar shows that he was the driver of the assessee. He only admitted to shows that he was the driver of the assessee. He only admitted to shows that he was the driver of the assessee. He only admitted to collecting cash on behalf of the assessee and did not offer any explanation h on behalf of the assessee and did not offer any explanation h on behalf of the assessee and did not offer any explanation regarding the notings in the notepads as the same was maintained by the regarding the notings in the notepads as the same was maintained by the regarding the notings in the notepads as the same was maintained by the assessee and it was not within his knowledge. Hence, only because the assessee and it was not within his knowledge. Hence, only because the assessee and it was not within his knowledge. Hence, only because the driver was involved in collecting cash, the AO’s ass driver was involved in collecting cash, the AO’s assumption that the umption that the notings in the notepads denotes cash receipts, cannot be countenanced. notings in the notepads denotes cash receipts, cannot be countenanced. notings in the notepads denotes cash receipts, cannot be countenanced.

Baskar cannot be said to be of relevance to render context of these Baskar cannot be said to be of relevance to render context of these Baskar cannot be said to be of relevance to render context of these notings. The assessee is noted to have been examined qua these no notings. The assessee is noted to have been examined qua these no notings. The assessee is noted to have been examined qua these notings by the DDIT (Inv.) wherein he had categorically averred that, these by the DDIT (Inv.) wherein he had categorically averred that, these by the DDIT (Inv.) wherein he had categorically averred that, these related to collection and delivery of electrical items. The assessee is also related to collection and delivery of electrical items. The assessee is also related to collection and delivery of electrical items. The assessee is also noted to have explained that, his driver was collecting these electrical noted to have explained that, his driver was collecting these electrical noted to have explained that, his driver was collecting these electrical items noted in his notepads and items noted in his notepads and also collecting cash, which was also collecting cash, which was represented by his share of profit qua the notings found in the material represented by his share of profit qua the notings found in the material represented by his share of profit qua the notings found in the material seized from Shri P V Saravanan. According to the Ld. AR, the AO took the seized from Shri P V Saravanan. According to the Ld. AR, the AO took the seized from Shri P V Saravanan. According to the Ld. AR, the AO took the statement of Mr. Baskar out of context and had drawn incorrect statement of Mr. Baskar out of context and had drawn incorrect statement of Mr. Baskar out of context and had drawn incorrect inferences based solely on d solely on assumptions. Having considered the foregoing, sumptions. Having considered the foregoing, we agree with the Ld. AR of the assessee that, the notings found in the we agree with the Ld. AR of the assessee that, the notings found in the we agree with the Ld. AR of the assessee that, the notings found in the material which was seized from the premises of the assessee cannot be material which was seized from the premises of the assessee cannot be material which was seized from the premises of the assessee cannot be said to represent ‘cash receipts’ receipts’.

“17. As regards the observations made by the AO at pag 17. As regards the observations made by the AO at page No.23 of the e No.23 of the assessment order in respect of matching of some entries in the loose assessment order in respect of matching of some entries in the loose assessment order in respect of matching of some entries in the loose sheets seized from Shri. P. V Saravanan vide ANN/DSG/PVS/LS/S sheets seized from Shri. P. V Saravanan vide ANN/DSG/PVS/LS/S sheets seized from Shri. P. V Saravanan vide ANN/DSG/PVS/LS/S-2 and the Havell notepad seized from the appellant vide ANN/KR/NS/B&D/S the Havell notepad seized from the appellant vide ANN/KR/NS/B&D/S the Havell notepad seized from the appellant vide ANN/KR/NS/B&D/S-5 for drawing the inference that the s for drawing the inference that the said entries shown as 'deduction' in aid entries shown as 'deduction' in ANN/DSG/PVS/LS/S ANN/DSG/PVS/LS/S-2 are in the nature of cash payments only, the 2 are in the nature of cash payments only, the appellant pointed out that the observations of the AO are not factually appellant pointed out that the observations of the AO are not factually appellant pointed out that the observations of the AO are not factually correct. He stated that names are mentioned against the relevant correct. He stated that names are mentioned against the relevant correct. He stated that names are mentioned against the relevant amounts in the seiz amounts in the seized material ANN/DSG/PVS/LS/S-2, whereas no 2, whereas no names are mentioned in the relevant entries of the seized material names are mentioned in the relevant entries of the seized material names are mentioned in the relevant entries of the seized material ANN/KR/NS/B&D/S ANN/KR/NS/B&D/S-5. He stated that the AO has selectively taken only 5. He stated that the AO has selectively taken only those figures which are matching for a particular date and assumed that those figures which are matching for a particular date and assumed that those figures which are matching for a particular date and assumed that they represent cash delivered. He pointed out that while there are two epresent cash delivered. He pointed out that while there are two epresent cash delivered. He pointed out that while there are two entries of 500.00 and 30.00 on 26.12.2018 at page No. 11 of entries of 500.00 and 30.00 on 26.12.2018 at page No. 11 of entries of 500.00 and 30.00 on 26.12.2018 at page No. 11 of ANN/KR/NS/B&D/S ANN/KR/NS/B&D/S-5, only one entry of 500.00 is reflected at page 5, only one entry of 500.00 is reflected at page No.67 of the seized material ANN/DSG/PVS/LS/S No.67 of the seized material ANN/DSG/PVS/LS/S-2. Similarly, while 2. Similarly, while there are two entries of 1500.00 and 130.84 on 27.12.2018 at page No. there are two entries of 1500.00 and 130.84 on 27.12.2018 at page No. there are two entries of 1500.00 and 130.84 on 27.12.2018 at page No. 11 of ANN/KR/NS/B&D/S 11 of ANN/KR/NS/B&D/S-5, only one entry of 1500.00 is reflected at 5, only one entry of 1500.00 is reflected at page No.67 of the seized material ANN/DSG/PVS/L.S/S page No.67 of the seized material ANN/DSG/PVS/L.S/S-2. In the same 2. In the same manner, while there are two entries of 500.00 and 22 manner, while there are two entries of 500.00 and 22 manner, while there are two entries of 500.00 and 225.70 on 04.01.2019 at page No.13 of ANN/KR/NS/B&D/S 04.01.2019 at page No.13 of ANN/KR/NS/B&D/S-5, only one entry of 5, only one entry of 500.00 500.00 500.00 is is is reflected reflected reflected at at at page page page No.68 No.68 No.68 of of of the the the seized seized seized material material material ANN/DSG/PVS/LS/S ANN/DSG/PVS/LS/S-2. He also pointed out that the entries for the date 2. He also pointed out that the entries for the date 07.01.2019 are completely different in the two sets of s 07.01.2019 are completely different in the two sets of seized material. eized material. He stated that it only shows that the AO has conveniently ignored the He stated that it only shows that the AO has conveniently ignored the He stated that it only shows that the AO has conveniently ignored the entries which are not matching on the same date and the dates on entries which are not matching on the same date and the dates on entries which are not matching on the same date and the dates on which the entries are not at all matching with each other. which the entries are not at all matching with each other.

18.

With regard to similar observations made by the AO at page No.24 18. With regard to similar observations made by the AO at page No.24 18. With regard to similar observations made by the AO at page No.24 of the assessment order by comparing two entries found at page No.68 of the assessment order by comparing two entries found at page No.68 of the assessment order by comparing two entries found at page No.68 of the seized material ANN/DSG/PVS/LS/S of the seized material ANN/DSG/PVS/LS/S-2 and the entries found in 2 and the entries found in the pages of the seized material ANN/KR/NS/B&D/S the pages of the seized material ANN/KR/NS/B&D/S-2 bearing the date bearing the date 04.01.2019 and 08.01.2019, the appellant stated that the AO has 04.01.2019 and 08.01.2019, the appellant stated that the AO has 04.01.2019 and 08.01.2019, the appellant stated that the AO has wrongly co-related the said entries in order to conclude that the same related the said entries in order to conclude that the same related the said entries in order to conclude that the same represent delivery of boxes containing cash. The appellant stated that if represent delivery of boxes containing cash. The appellant stated that if represent delivery of boxes containing cash. The appellant stated that if the entire contents of the pag the entire contents of the page bearing the date 04.01.2019 in the e bearing the date 04.01.2019 in the seized material ANN/KR/NS/B&D/S seized material ANN/KR/NS/B&D/S-2 are taken into account, it can be 2 are taken into account, it can be seen that it is clearly mentioned therein regarding counting of 3 cases of seen that it is clearly mentioned therein regarding counting of 3 cases of seen that it is clearly mentioned therein regarding counting of 3 cases of ballasts and 2 cases of lamps and Basker taking the said 5 boxes for ballasts and 2 cases of lamps and Basker taking the said 5 boxes for ballasts and 2 cases of lamps and Basker taking the said 5 boxes for delivery. In the case of page bearing the date 08.01.2019 in the seized y. In the case of page bearing the date 08.01.2019 in the seized y. In the case of page bearing the date 08.01.2019 in the seized material ANN/KR/NS/B&D/S material ANN/KR/NS/B&D/S-2, it can be seen that it mentions that 2, it can be seen that it mentions that Basker has taken 2 books whereas the AO has wrongly mentioned the Basker has taken 2 books whereas the AO has wrongly mentioned the Basker has taken 2 books whereas the AO has wrongly mentioned the same as 2 boxes being taken by Basker. The appellant also po same as 2 boxes being taken by Basker. The appellant also po same as 2 boxes being taken by Basker. The appellant also pointed out that Basker had not at all mentioned in his statement recorded during that Basker had not at all mentioned in his statement recorded during that Basker had not at all mentioned in his statement recorded during the search that he delivers cash. The appellant therefore contended that the search that he delivers cash. The appellant therefore contended that the search that he delivers cash. The appellant therefore contended that & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan :: 34 ::

“28. Though the AO made an attempt to co 28. Though the AO made an attempt to co-relate the entries found in relate the entries found in the material seized from the residence of Shri. P.V. Saravana the material seized from the residence of Shri. P.V. Saravana the material seized from the residence of Shri. P.V. Saravanan with the entries found in the material seized from the residence of the appellant entries found in the material seized from the residence of the appellant entries found in the material seized from the residence of the appellant in the discussion made at page Nos 23 and 24 of the assessment order in the discussion made at page Nos 23 and 24 of the assessment order in the discussion made at page Nos 23 and 24 of the assessment order and draw the inference that the entries in the seized material represent and draw the inference that the entries in the seized material represent and draw the inference that the entries in the seized material represent cash receipts and cash disburs cash receipts and cash disbursements of the appellant, it is seen on ements of the appellant, it is seen on careful examination of the relevant entries in the seized material and careful examination of the relevant entries in the seized material and careful examination of the relevant entries in the seized material and the rebuttal furnished by the appellant with regard to the discussion the rebuttal furnished by the appellant with regard to the discussion the rebuttal furnished by the appellant with regard to the discussion made in the assessment order that the analysis made by the AO is not made in the assessment order that the analysis made by the AO is not made in the assessment order that the analysis made by the AO is not convincing and justified. In the discussion made at page No.23 of the ing and justified. In the discussion made at page No.23 of the ing and justified. In the discussion made at page No.23 of the assessment order, the AO has selectively taken very few entries where assessment order, the AO has selectively taken very few entries where assessment order, the AO has selectively taken very few entries where is there is matching of the amount and date for drawing his conclusions, is there is matching of the amount and date for drawing his conclusions, is there is matching of the amount and date for drawing his conclusions, though there are large number of other entries on though there are large number of other entries on various other dates in various other dates in the seized material where there is no such matching at all. Even in the seized material where there is no such matching at all. Even in the seized material where there is no such matching at all. Even in respect of the said few entries where the AO has observed matching of respect of the said few entries where the AO has observed matching of respect of the said few entries where the AO has observed matching of date and amount, it is noticed that the other details/description found in date and amount, it is noticed that the other details/description found in date and amount, it is noticed that the other details/description found in the seized material the seized material against the said entries are not matching. No valid against the said entries are not matching. No valid inference can be drawn based on such selective and incomplete inference can be drawn based on such selective and incomplete inference can be drawn based on such selective and incomplete matching of the entries Further, in the discussion made at page No.24 of matching of the entries Further, in the discussion made at page No.24 of matching of the entries Further, in the discussion made at page No.24 of the assessment order, the AO has taken only one sentence into the assessment order, the AO has taken only one sentence into the assessment order, the AO has taken only one sentence into consideration and quoted it out of context in respect of the contents of ration and quoted it out of context in respect of the contents of ration and quoted it out of context in respect of the contents of page page page bearing bearing bearing the the the date date date 04.01.2019 04.01.2019 04.01.2019 in in in the the the seized seized seized material material material ANN/KR/NS/B&D/S ANN/KR/NS/B&D/S-2. Though the full contents of the said page clearly 2. Though the full contents of the said page clearly show that the 5 boxes taken for delivery by Basker pertain to the show that the 5 boxes taken for delivery by Basker pertain to the show that the 5 boxes taken for delivery by Basker pertain to the electrical items as referred to in the preceding sentences mentioned electrical items as referred to in the preceding sentences mentioned electrical items as referred to in the preceding sentences mentioned therein, the AO has made an erroneous analysis by ignoring the same therein, the AO has made an erroneous analysis by ignoring the same therein, the AO has made an erroneous analysis by ignoring the same and by wrongly interpreting it as delivery of boxes containing cash. The and by wrongly interpreting it as delivery of boxes containing cash. The and by wrongly interpreting it as delivery of boxes containing cash. The AO also made an erroneous observation with re AO also made an erroneous observation with regard to the contents of gard to the contents of the page bearing the date 08.01.2019 that Bhasker has taken delivery the page bearing the date 08.01.2019 that Bhasker has taken delivery the page bearing the date 08.01.2019 that Bhasker has taken delivery of 2 boxes, whereas the seized material clearly shows that Basker has of 2 boxes, whereas the seized material clearly shows that Basker has of 2 boxes, whereas the seized material clearly shows that Basker has taken 2 books and not 2 boxes. Hence, it is held that the discussion taken 2 books and not 2 boxes. Hence, it is held that the discussion taken 2 books and not 2 boxes. Hence, it is held that the discussion & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan made at page No.23 and 2 made at page No.23 and 24 of the assessment order is factually 4 of the assessment order is factually erroneous and the conclusion reached by the AO based on the said erroneous and the conclusion reached by the AO based on the said erroneous and the conclusion reached by the AO based on the said analysis that the entries in the seized material represent cash receipts analysis that the entries in the seized material represent cash receipts analysis that the entries in the seized material represent cash receipts and cash payments of the appellant is clearly unsustainable. and cash payments of the appellant is clearly unsustainable. and cash payments of the appellant is clearly unsustainable.

“47. The amount of Rs.2.73,97,000/ The amount of Rs.2.73,97,000/- and Rs. 421,08.82,000/ 421,08.82,000/- quantified by the AO as unaccounted income for AYs 2018 quantified by the AO as unaccounted income for AYs 2018-19 & 2019 19 & 2019-20 respectively by considering the entries in the seized material as respectively by considering the entries in the seized material as respectively by considering the entries in the seized material as unaccounted cash receipts is therefore required to be correctly inferred unaccounted cash receipts is therefore required to be correctly inferred unaccounted cash receipts is therefore required to be correctly inferred as the value of the material supp as the value of the material supplied through the facilitation services lied through the facilitation services rendered by the appellant. In respect of such value of the material rendered by the appellant. In respect of such value of the material rendered by the appellant. In respect of such value of the material supplied, the appellant stated that he has received share of profit supplied, the appellant stated that he has received share of profit supplied, the appellant stated that he has received share of profit ranging between 5 to 7% of the value of the material supplied, after ranging between 5 to 7% of the value of the material supplied, after ranging between 5 to 7% of the value of the material supplied, after receipt of the payment by the contractors/suppliers in respect of such he payment by the contractors/suppliers in respect of such he payment by the contractors/suppliers in respect of such supplies. The share of profit of the appellant constitutes the income of supplies. The share of profit of the appellant constitutes the income of supplies. The share of profit of the appellant constitutes the income of the appellant from the said activity of facilitation services rendered by the appellant from the said activity of facilitation services rendered by the appellant from the said activity of facilitation services rendered by him. Having regard to the statement of the appella him. Having regard to the statement of the appellant during the post nt during the post search enquiries that he earned shar search enquiries that he earned share of profit varying between 5 to e of profit varying between 5 to 7% for his services, it is considered that the share of profit can be for his services, it is considered that the share of profit can be for his services, it is considered that the share of profit can be reasonably adopted at 6% of the value of the material supplied through reasonably adopted at 6% of the value of the material supplied through reasonably adopted at 6% of the value of the material supplied through the facilitation services o the facilitation services of the appellant, net off all expenses incurred for f the appellant, net off all expenses incurred for providing such services. Accordingly, the share of profit of the appellant providing such services. Accordingly, the share of profit of the appellant providing such services. Accordingly, the share of profit of the appellant is worked out at Rs. 16,43,820/ is worked out at Rs. 16,43,820/- for AY 18-19 and Rs. 25,26,52,920/ 19 and Rs. 25,26,52,920/- for AY 2019-20. On perusal of the returns of income filed by 20. On perusal of the returns of income filed by 20. On perusal of the returns of income filed by the appellant for the said assessment years, it is noticed that the appellant appellant for the said assessment years, it is noticed that the appellant appellant for the said assessment years, it is noticed that the appellant did not disclose any income by way of share of profit for AY 2018 did not disclose any income by way of share of profit for AY 2018 did not disclose any income by way of share of profit for AY 2018-19.

40.

Ground No. 3 of the Revenue’s appeal and Ground N Ground No. 3 of the Revenue’s appeal and Ground N Ground No. 3 of the Revenue’s appeal and Ground No. 3 of assessee’s cross objections for AY 2019 assessee’s cross objections for AY 2019-20 relates to the addition of 20 relates to the addition of Rs.15,14,57,100/- made u/s 69A of the Act. The facts as noted are that, made u/s 69A of the Act. The facts as noted are that, made u/s 69A of the Act. The facts as noted are that, cash aggregating to Rs.15,14,57,100/ cash aggregating to Rs.15,14,57,100/- was seized from different was seized from different premises of the assessee and his key perso premises of the assessee and his key persons. The AO in the course of ns. The AO in the course of assessment required the assessee to explain the source of this cash found assessment required the assessee to explain the source of this cash found assessment required the assessee to explain the source of this cash found in the course of search. In response, the assessee is noted to have in the course of search. In response, the assessee is noted to have in the course of search. In response, the assessee is noted to have claimed that, he had already quantified and offered the share of profit of claimed that, he had already quantified and offered the share of profit of claimed that, he had already quantified and offered the share of profit of Rs.15,13,92,900/- received by him from the activity of providing received by him from the activity of providing received by him from the activity of providing facilitation services, as found noted in the material seized in the course of facilitation services, as found noted in the material seized in the course of facilitation services, as found noted in the material seized in the course of search. According to the assessee, the cash found in the course of search search. According to the assessee, the cash found in the course of search search. According to the assessee, the cash found in the course of search stood explained by this share of profit offered in stood explained by this share of profit offered in the return of income and the return of income and therefore he urged that, no separate addition be made u/s 69A of the Act. therefore he urged that, no separate addition be made u/s 69A of the Act. therefore he urged that, no separate addition be made u/s 69A of the Act.

41.

Heard both the parties. Before adverting to the facts of the case, we Heard both the parties. Before adverting to the facts of the case, we Heard both the parties. Before adverting to the facts of the case, we first take note of the principle of telescoping which has since been first take note of the principle of telescoping which has since been first take note of the principle of telescoping which has since been judicially approved by the Hon'ble Supreme Court in the case of ved by the Hon'ble Supreme Court in the case of ved by the Hon'ble Supreme Court in the case of AnantharamVeerasinghaiah& Co. Vs CIT (123 ITR 457) AnantharamVeerasinghaiah& Co. Vs CIT (123 ITR 457) AnantharamVeerasinghaiah& Co. Vs CIT (123 ITR 457). In the decided case, it was held that where the assessee offers any income on decided case, it was held that where the assessee offers any income on decided case, it was held that where the assessee offers any income on ad hoc basis, then such income is commonly described as intangible ad hoc basis, then such income is commonly described as intangible ad hoc basis, then such income is commonly described as intangible addition; but it is very much a part of assessee's real income as disclosed addition; but it is very much a part of assessee's real income as disclosed addition; but it is very much a part of assessee's real income as disclosed in his account books and has the in his account books and has the same concrete existence. The Hon'ble same concrete existence. The Hon'ble Court held that the secret profits or undisclosed income of an assessee Court held that the secret profits or undisclosed income of an assessee Court held that the secret profits or undisclosed income of an assessee earned in the same or an earlier assessment year may constitute a secret earned in the same or an earlier assessment year may constitute a secret earned in the same or an earlier assessment year may constitute a secret & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan :: 39 ::

42.

Gainful reference in this regard Gainful reference in this regard may be made to the decision of the may be made to the decision of the jurisdictional Hon'ble Madras High Court in the case of jurisdictional Hon'ble Madras High Court in the case of S K. Muralidhar S K. Muralidhar Vs CIT (51 ITR 757). In the decided case . In the decided case, the AO had initially made an the AO had initially made an addition by way of inflation of purchases in the hands of the assessee addition by way of inflation of purchases in the hands of the assessee addition by way of inflation of purchases in the hands of the assessee across AYs 1947-48 to 1950 48 to 1950-51. Thereafter, the AO came in possession of 51. Thereafter, the AO came in possession of information that the assessee had lent certain amounts in mortgage in the information that the assessee had lent certain amounts in mortgage in the information that the assessee had lent certain amounts in mortgage in the name of his brother and also made investment in name of his wife and name of his brother and also made investment in name of his wife and name of his brother and also made investment in name of his wife and daughter in an entity 'S', for which separate ad daughter in an entity 'S', for which separate additions were made in AYs ditions were made in AYs 1949-50 & 1950-51. On appeal, the AAC is noted to have held that there 51. On appeal, the AAC is noted to have held that there 51. On appeal, the AAC is noted to have held that there was no justification in making the subsequent addition as it stood justified was no justification in making the subsequent addition as it stood justified was no justification in making the subsequent addition as it stood justified out of the addition made on account out of the addition made on account of inflated purchases in AYs 1947 inflated purchases in AYs 1947-48 to 1950-51. On further appeal, the Tribunal upheld the action of AO. On . On further appeal, the Tribunal upheld the action of AO. On . On further appeal, the Tribunal upheld the action of AO. On appeal by the assessee, the Hon'ble High Court is noted to have appeal by the assessee, the Hon'ble High Court is noted to have appeal by the assessee, the Hon'ble High Court is noted to have & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan elaborately discussed the theory of telescoping of income against elaborately discussed the theory of telescoping of income against elaborately discussed the theory of telescoping of income against investment / expenditure and allowed the assessee's claim by hol investment / expenditure and allowed the assessee's claim by hol investment / expenditure and allowed the assessee's claim by holding as under:-

“The question in issue is quite simple and yet the Tribunal misdirected “The question in issue is quite simple and yet the Tribunal misdirected “The question in issue is quite simple and yet the Tribunal misdirected itself and went wrong. It is a hard fact that for the two years 1947 itself and went wrong. It is a hard fact that for the two years 1947 itself and went wrong. It is a hard fact that for the two years 1947-48 and 1948-49 a total addition of Rs. 52,230 was made by the department 49 a total addition of Rs. 52,230 was made by the department 49 a total addition of Rs. 52,230 was made by the department in computing the assessabl in computing the assessable income. This was, therefore, treated as the e income. This was, therefore, treated as the real income of the assessee for the years in question. There was nothing real income of the assessee for the years in question. There was nothing real income of the assessee for the years in question. There was nothing notional or fictional about it. Howeverconvenient it might be to describe notional or fictional about it. Howeverconvenient it might be to describe notional or fictional about it. Howeverconvenient it might be to describe the addition as "intangible" as has been done by the department the addition as "intangible" as has been done by the department the addition as "intangible" as has been done by the department and the Tribunal, the fact is that it was found to have accrued to the assessee Tribunal, the fact is that it was found to have accrued to the assessee Tribunal, the fact is that it was found to have accrued to the assessee and was not merely supposed to have been earned by him. Once the and was not merely supposed to have been earned by him. Once the and was not merely supposed to have been earned by him. Once the addition is made the department is fixed to the position that the addition is made the department is fixed to the position that the addition is made the department is fixed to the position that the assessee earned the amount in the relevant y assessee earned the amount in the relevant year. There can be no ear. There can be no relaxation from that position and we have no doubt that the department relaxation from that position and we have no doubt that the department relaxation from that position and we have no doubt that the department cannot deviate from or wriggle out of it without departing from ordinary cannot deviate from or wriggle out of it without departing from ordinary cannot deviate from or wriggle out of it without departing from ordinary standards of justice and fairplay. If in such a case the assessee points to standards of justice and fairplay. If in such a case the assessee points to standards of justice and fairplay. If in such a case the assessee points to that addition as the source from which he got a particular amount which s the source from which he got a particular amount which s the source from which he got a particular amount which he is called upon to explain, the department is bound to accept it as he is called upon to explain, the department is bound to accept it as he is called upon to explain, the department is bound to accept it as exceedingly likely and probable, consistent with its previous act in exceedingly likely and probable, consistent with its previous act in exceedingly likely and probable, consistent with its previous act in treating the addition as income, unless it be that it is pos treating the addition as income, unless it be that it is pos treating the addition as income, unless it be that it is possible to say that the source was not available to the assessee. The onus of proving that the source was not available to the assessee. The onus of proving that the source was not available to the assessee. The onus of proving this would be on the department. Otherwise, it would amount to the this would be on the department. Otherwise, it would amount to the this would be on the department. Otherwise, it would amount to the department saying, "heads I win, tails you lose". department saying, "heads I win, tails you lose".

The decision of the Andhra High Court in Lagadapati Sub The decision of the Andhra High Court in Lagadapati Subba Ramaiah v. ba Ramaiah v. Commissioner of Income Commissioner of Income-tax [1956] 30 ITR 593is a case in point. In tax [1956] 30 ITR 593is a case in point. In that case the assessee was a shareholder of a private limited company that case the assessee was a shareholder of a private limited company that case the assessee was a shareholder of a private limited company styled the Nellore Bus Transport Co. Ltd. According to the books of the styled the Nellore Bus Transport Co. Ltd. According to the books of the styled the Nellore Bus Transport Co. Ltd. According to the books of the company its profits for its entir company its profits for its entire period of existence, that is to say, for e period of existence, that is to say, for the years of account ending with 31st December, 1946, 31st December, the years of account ending with 31st December, 1946, 31st December, the years of account ending with 31st December, 1946, 31st December, 1947, 31st December, 1948, nth May, 1949, amounted in all to Rs. 1947, 31st December, 1948, nth May, 1949, amounted in all to Rs. 1947, 31st December, 1948, nth May, 1949, amounted in all to Rs. 34,352. The revenue declined to accept the books of the company and 34,352. The revenue declined to accept the books of the company and 34,352. The revenue declined to accept the books of the company and estimated its income at a higher sum on which tax to the tune of Rs. ts income at a higher sum on which tax to the tune of Rs. ts income at a higher sum on which tax to the tune of Rs. 62,000 was assessed and paid. The company purported to issue the 62,000 was assessed and paid. The company purported to issue the 62,000 was assessed and paid. The company purported to issue the dividend warrants to its shareholders aggregating to a sum of Rs. dividend warrants to its shareholders aggregating to a sum of Rs. dividend warrants to its shareholders aggregating to a sum of Rs. 1,16,280. The assessee stated that he got the dividends of Rs. 6,80 1,16,280. The assessee stated that he got the dividends of Rs. 6,80 1,16,280. The assessee stated that he got the dividends of Rs. 6,800 and Rs. 4,800 for the account years ending with 31st December, 1946, and Rs. 4,800 for the account years ending with 31st December, 1946, and Rs. 4,800 for the account years ending with 31st December, 1946, and 31st December, 1947, respectively, the dividends having been and 31st December, 1947, respectively, the dividends having been and 31st December, 1947, respectively, the dividends having been declared by the company on 2nd March, 1949. The assessee, however, declared by the company on 2nd March, 1949. The assessee, however, declared by the company on 2nd March, 1949. The assessee, however, claimed a refund on the basis of only one dividend wa claimed a refund on the basis of only one dividend warrant dated June rrant dated June & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan :: 41 ::

"In the present case, it is somewhat difficult to say that there were "In the present case, it is somewhat difficult to say that there were "In the present case, it is somewhat difficult to say that there were no profits of the company out of which a dividend could have been no profits of the company out of which a dividend could have been no profits of the company out of which a dividend could have been paid. When the revenue authority levied a tax of Rs. 62,000 on the paid. When the revenue authority levied a tax of Rs. 62,000 on the paid. When the revenue authority levied a tax of Rs. 62,000 on the company, it proceeded on the basis that the bo company, it proceeded on the basis that the books of the company oks of the company which showed a total income of only Rs. 34,532 for all the four which showed a total income of only Rs. 34,532 for all the four which showed a total income of only Rs. 34,532 for all the four years of its existence were unreliable and that the bulk of the years of its existence were unreliable and that the bulk of the years of its existence were unreliable and that the bulk of the company's profits had been kept outside its books. Now those company's profits had been kept outside its books. Now those company's profits had been kept outside its books. Now those secret profits less the income secret profits less the income-tax paid, therefore, would be re, would be available with the company for distribution as dividends. Once the available with the company for distribution as dividends. Once the available with the company for distribution as dividends. Once the secret profits had been assessed to tax, it would have been open secret profits had been assessed to tax, it would have been open secret profits had been assessed to tax, it would have been open to the company to bring those profits into the books and distribute to the company to bring those profits into the books and distribute to the company to bring those profits into the books and distribute them, or what remained after payment of tax them, or what remained after payment of tax, as dividends.... , as dividends.... Having assessed the company on a large sum as its undisclosed Having assessed the company on a large sum as its undisclosed Having assessed the company on a large sum as its undisclosed income, it cannot, at the same breath, say that these profits did income, it cannot, at the same breath, say that these profits did income, it cannot, at the same breath, say that these profits did not in fact exist because they did not appear from the company's not in fact exist because they did not appear from the company's not in fact exist because they did not appear from the company's books and could not, therefore, have been av books and could not, therefore, have been available for the ailable for the payment of dividends.Among common men, such an attitude payment of dividends.Among common men, such an attitude payment of dividends.Among common men, such an attitude would be regarded as blowing hot and cold or playing fast and would be regarded as blowing hot and cold or playing fast and would be regarded as blowing hot and cold or playing fast and loose."

The order of the Tribunal shows that it has missed the real point for The order of the Tribunal shows that it has missed the real point for The order of the Tribunal shows that it has missed the real point for decision. The only question that the Tribuna decision. The only question that the Tribunal had to decide was whether l had to decide was whether the assessee could have derived the amount of Rs. 52,230 from the the assessee could have derived the amount of Rs. 52,230 from the the assessee could have derived the amount of Rs. 52,230 from the prior years which according to the department the assessee did earn. prior years which according to the department the assessee did earn. prior years which according to the department the assessee did earn. The Tribunal does not say, nor would the materials on record enable it The Tribunal does not say, nor would the materials on record enable it The Tribunal does not say, nor would the materials on record enable it to say, that the sum w to say, that the sum was not available to the assessee either to advance as not available to the assessee either to advance the mortgage loan in the name of Murugesa Mudaliar or for the other the mortgage loan in the name of Murugesa Mudaliar or for the other the mortgage loan in the name of Murugesa Mudaliar or for the other advances. If there had been any evidence to show that the assessee advances. If there had been any evidence to show that the assessee advances. If there had been any evidence to show that the assessee devoted that amount for other purposes it may well be that the devoted that amount for other purposes it may well be that the devoted that amount for other purposes it may well be that the mortgage loan and other advances were made from an unexplained or e loan and other advances were made from an unexplained or e loan and other advances were made from an unexplained or undisclosed source. But that is not so in the present case. The Tribunal's undisclosed source. But that is not so in the present case. The Tribunal's undisclosed source. But that is not so in the present case. The Tribunal's conception of "intangible additions" is somewhat queer and we confess conception of "intangible additions" is somewhat queer and we confess conception of "intangible additions" is somewhat queer and we confess our inability to appreciate it. The Tribunal observe our inability to appreciate it. The Tribunal observes in its order : s in its order : "Intangible additions, as the name itself suggests, are purely matters of "Intangible additions, as the name itself suggests, are purely matters of "Intangible additions, as the name itself suggests, are purely matters of estimate which may err on the wrong side for the department. For want estimate which may err on the wrong side for the department. For want estimate which may err on the wrong side for the department. For want of proper evidence, additions on account of deficiency of gross profit or of proper evidence, additions on account of deficiency of gross profit or of proper evidence, additions on account of deficiency of gross profit or & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan other defects may be other defects may be made but this would not mean putting in made but this would not mean putting in possession of the assessee their equivalent in hard cash available for possession of the assessee their equivalent in hard cash available for possession of the assessee their equivalent in hard cash available for expenditure or investment. It may be said that having suffered a harsh expenditure or investment. It may be said that having suffered a harsh expenditure or investment. It may be said that having suffered a harsh assessment in a particular year, the assessee's case should be assessment in a particular year, the assessee's case should be assessment in a particular year, the assessee's case should be considered sympathetically in the subsequent year when an investment sympathetically in the subsequent year when an investment sympathetically in the subsequent year when an investment of the nature we are discussing is brought to light." Additions are no of the nature we are discussing is brought to light." Additions are no of the nature we are discussing is brought to light." Additions are no doubt made very often on estimate basis. But it can never be said, or at doubt made very often on estimate basis. But it can never be said, or at doubt made very often on estimate basis. But it can never be said, or at any rate the department cannot contend, that the amoun any rate the department cannot contend, that the amoun any rate the department cannot contend, that the amount of the addition is not the real income but something which the assessee may addition is not the real income but something which the assessee may addition is not the real income but something which the assessee may not have earned. It is wholly illogical for the department to contend that not have earned. It is wholly illogical for the department to contend that not have earned. It is wholly illogical for the department to contend that the addition was only for purposes of taxation and that it should never the addition was only for purposes of taxation and that it should never the addition was only for purposes of taxation and that it should never be taken as true income of the be taken as true income of the assessee. We must point out that the assessee. We must point out that the Tribunal is wrong in thinking that an assessee suffers a "harsh Tribunal is wrong in thinking that an assessee suffers a "harsh Tribunal is wrong in thinking that an assessee suffers a "harsh assessment" when his income is computed by making additions. Such an assessment" when his income is computed by making additions. Such an assessment" when his income is computed by making additions. Such an assessment is perfectly within the four corners of the Act and there is no assessment is perfectly within the four corners of the Act and there is no assessment is perfectly within the four corners of the Act and there is no reason to suppose that it is in any way inequitable or unjust. We are uppose that it is in any way inequitable or unjust. We are uppose that it is in any way inequitable or unjust. We are also unable to understand the real scope of a sympathetic treatment of also unable to understand the real scope of a sympathetic treatment of also unable to understand the real scope of a sympathetic treatment of the assessee in the matter of assessment to tax. The assessee is either the assessee in the matter of assessment to tax. The assessee is either the assessee in the matter of assessment to tax. The assessee is either liable to tax or not, and if he is really liable to ta liable to tax or not, and if he is really liable to tax he cannot get rid of it x he cannot get rid of it by pleading equity or by invoking the sympathy of the assessing by pleading equity or by invoking the sympathy of the assessing by pleading equity or by invoking the sympathy of the assessing authority. The faulty reasoning of the Tribunal was certainly not authority. The faulty reasoning of the Tribunal was certainly not authority. The faulty reasoning of the Tribunal was certainly not conducive to a correct conclusion in the matter. In our opinion, there are conducive to a correct conclusion in the matter. In our opinion, there are conducive to a correct conclusion in the matter. In our opinion, there are no materials for the addi no materials for the addition of Rs. 40,000 and Rs. 12,230 in respect of tion of Rs. 40,000 and Rs. 12,230 in respect of the two assessment years 1949 the two assessment years 1949-50 and 1950-51 respectively, and that 51 respectively, and that the order of the Tribunal cannot be sustained." the order of the Tribunal cannot be sustained."

45.

The principle which emerges from the above is that, the same The principle which emerges from the above is that, the same The principle which emerges from the above is that, the same income should not be taxed twice i.e. once at the time of generation and income should not be taxed twice i.e. once at the time of generation and income should not be taxed twice i.e. once at the time of generation and thereafter at the time of application for making investment or any thereafter at the time of application for making investment or any thereafter at the time of application for making investment or any undisclosed asset. Having regard to this settled legal position, we now osed asset. Having regard to this settled legal position, we now osed asset. Having regard to this settled legal position, we now come back to the facts of the case. It is noted by us that, in the course come back to the facts of the case. It is noted by us that, in the course come back to the facts of the case. It is noted by us that, in the course ofsearch conducted upon ofsearch conducted upon the assessee, several diaries and loose sheets the assessee, several diaries and loose sheets were found, which as held above, contained were found, which as held above, contained notings regarding the ings regarding the material supplies facilitated by him, for which he had derived share of material supplies facilitated by him, for which he had derived share of material supplies facilitated by him, for which he had derived share of profit from the contractors. profit from the contractors. Thesenotingswere admitted by the assessee admitted by the assessee and he is noted to have offered income of Rs.15,13,92,900/ he is noted to have offered income of Rs.15,13,92,900/ he is noted to have offered income of Rs.15,13,92,900/- derived from facilitation business earned outside the books of accounts in the from facilitation business earned outside the books of accounts in the from facilitation business earned outside the books of accounts in the return of income filed for AY 2019 return of income filed for AY 2019-20 and the same was reflected in the 20 and the same was reflected in the balance sheet as ‘amount lying with revenue auth ‘amount lying with revenue authorities’. Apart from the . Apart from the & 974 973 & 974/Chny/2022 C.O Nos.16 &17/Chny/2022 C.O Nos.16 &17/Chny/2022 (AYs– 2018 2018-19 & 2019-20) Natesan Sabesan :: 44 ::