DCIT CENTRAL CIRCLE2(4), CHENNAI vs. SHRI O. PANNEERSELVAM, CHENNAI

आदेश / O R D E R Per Bench 1.1 Aforesaid appeals by revenue for Assessment Years (AY) 2016-17 & 2017-18 arises out of a common order passed by learned Commissioner of Income Tax (Appeals)-19, Chennai on 10-03-2023 in the matter of separate assessments framed by Ld. Assessing Officer (AO) u/s 153C of the Act on 28-09-2021. The facts as well as issues, in both the years, are substantially the same. For the purpose of adjudication, the facts from case records of AY 2016-17 have been culled out in this order. 1.2 The grounds raised by the revenue read as under: - 1.The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2.The Ld.CIT(A) erred in deleting the addition of Rs.3,65,16,500/- made towards undisclosed income representing the amounts received from M/s.SRS Mining based on the seized materials and Swornstatement of Shri.K.Srinivasulu and Shri.Nagarathinam. 2.1 The Ld.CIT(A) erred in accepting the explanation of the assessee that there is no mention anywhere in the statement of Shri.Srinivasulu that the assessee was recipient of payments shown against the abbreviated names, without considering the fact that the assessing officer has clearly mentioned in the Para 7.12 of the order that Shri.Srinivasulu admitted in his sworn statement dated 10.12.2016 that those note books were maintained by him and the entries found were incidental expenses to various persons. In response to Q.No.4, he has stated that "OPS Ramesh" represents "PA to OPS". The CIT(A) failed to appreciate that the assessee is commonly referred to as "OPS" and served as the PWD Minister in the Government of Tamil Nadu during the period the payments were made. 2.2 The Ld.CIT(A) erred in holding that seized document is "dumb document" and did not have any evidentiary value in respect of entries found therein without any corroborative evidence, without appreciating that the entries found in the seized materials were in the form maintained systematically on daily basis mentioning the dates and amounts and the author of seized material Shri Srinivasulu admitted the nature of payments by explaining the reference of code names. 2.3 The Ld.CIT(A) erred in observing that there was no corroborative evidence in respect of such seized materials with regard to the receipt of incidental charges by the assessee from M/s.SRS Mining. The primary evidence found during the course of search were notebooks maintained by Shri.K.Srinivasulu during the ordinary course of business carried on by the firm, M/s.SRS mining and the statement recorded from Shri.K.Srinivasulu in which he explained the nature of entries is corroborative evidence. Further, the Matrix note books and cash books maintained by Shri.Nagarathinam contain details of payments made to influential persons, which matched with Oswal Note books maintained by K.Srinivasulu. Three different sets of documents seized from two premises belonging to M/s.SRS Mining corroborated the entries in one another. 2.4. The Ld.CIT erred in observing that there was no acknowledgement in the seized material by the assessee of receiving the said payments by way of appending his signature/initial against the said payments. As far as question of not writing the name in full but in abbreviated form and not recording acknowledgement for the payments made, the Ld.CIT(A) ought to have appreciated that maintaining clear, unambiguous and formal records of transaction of such nature would not be done for obvious reasons. 2.5. The Ld.CIT(A) failed to appreciate that the addition has been made on the basis of sworn statement recorded u/s.132(4) on 10.12.2016 which has evidentiary value. Shri.Srinivasulu retracted his sworn statement after a gap of 106 days, which is only an afterthought. It is held in various decisions that once the statements have been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording the statements under Section132(4), are true and correct and brings out the correct picture, as at that time the assessee is not influenced by external agencies. Hence, the retraction of statement by Shri.Shrinivasulu, after a gap of 106 days was not relied upon by the assessing officer. 2.6. The Ld.CIT(A) failed to appreciate that the assessing officer has correctly arrived presumption u/s.132(4A) and 292C of the Act in respect of the materials seized during the course of search, which was further strengthened by sworn statement recorded from Shri.Srinivasulu. 2.7 The Ld.CIT(A) erred in failing to appreciate that there is no such restrictive interpretation in the Section 132(4A) and Sec.292C that the presumption of correctness are applicable only in respect of the books of accounts/documents seized in the premises of searched person and not from third party. 2.8 The Ld.CIT(A) has sought to cast doubts on the veracity of entries made in the note book seized from the possession of Shri Srinivasulu. The Ld.CIT(A) failed to appreciate that several of the entries in the note book denoting expenses and bank deposits have been verified during post search proceedings and found that the same was maintained by the searched firm to arrive at the profits earned from unaccounted business of sand mining carried out by it. 2.9The Ld.CIT(A) has stated that Shri.K.Srinivasulu had no firsthand knowledge of information as the entries were made by him as per the instructions of partners of M/s.SRS Mining and the partners of the firm should also have been examined to prove the veracity of the entries. It is to state that the partners also agreed with the statement of Shri.Srinivasulu in the sworn statement recorded u/s.132(4). 2.10 The Ld.CIT(A) erred in placing reliance on various case laws with regard to evidentiary value of seized materials. These case laws mainly dealt with loose sheets seized, where as in this case seized record is the day-to-day record of receipts and payments. 2.11 The Ld. CIT(A) erred in observing that the statement of Shri.Srinivasulu lost its evidentiary value on his retraction, without appreciating that the retraction of statement by both Shri.Srinivasulu holds no value as they have done so by citing absurd and unfounded reasons like they were subjected to harassment and mental pressure by IT Authorities. They have not brought any evidence to show that they were harassed during search operation through any means.

, advanced arguments and submitted that the additions are based on search findings coupled with the sworn statements recorded u/s 132(4). The Ld. CIT-DR supported the additions made in the assessment order. In support of its submissions, the Ld. CIT-DR placed on record assessment order of M/s SRS Mining for AY 2017-18 as well as copies of material seized as referred to by Ld. AO in the assessment order. The Ld. AR, on the other hand, while supporting the impugned order on merits, assailed the validity of assessment proceedings on legal grounds. The Ld. AR submitted that initially a notice u/s 153A was issued which was withdrawn later on and another notice u/s 153C was issued. The written submissions have also been filed during the course of hearing which have duly been considered while disposing-off these appeals. Reliance has been placed on various judicial pronouncements, the copies of which have been placed on record.

3. Having heard rival submissions, oral as well as written and upon perusal of case records including various judicial pronouncements as cited before us, our adjudication would be as under. The assessee being a resident individual served as Public Work Department (PWD) Minister and also the Finance Minister in the Tamilnadu Government. An assessment was framed against the assessee for AY 2016-17 u/s 153C of the Act on 28-09-2021 wherein certain addition was made and the same forms part of subject matter of present appeal before us.

Nagarathinam was bank employee and because of his banking experience, he was made in-charge of cash godowns of M/s SRS Mining at Chennai. He was entrusted to keep proper records of all the receipts and payments of the group. Shri K. Srinivasulu was close and trusted aide of Shri J. Sekar and he reported to Shri J.Sekar and looked after the incidental payments to various influential / political persons as advised by him. 4.5 During the course of search operations, various diaries, notebooks, digital evidences and loose sheets were seized which include daily statement of sand yards, matrix note book maintained by Shri S. Nagarathinam, cash book maintained by S. Nagarathinam, Oswal Note books maintained by K. Srinivasulu and monthly statements. The statement was analyzed and it was concluded by Ld. AO that the entries in the daily statements of yard owners matched completely with the daily statement of hire charges maintained by M/s SRS Mining. Similarly, the entries in the daily statement of yard match exactly with the receipts in Matrix notebooks. Further, the expenditure entries in the Matrix Note books match exactly with the cash book of Nagarathinam and Oswal notebooks maintained by K. Srinivasulu. Thus, there was not just one but three levels of corroboration available for the seized material and therefore, these entries would represent actual state of affairs of various financial and business transactions. The said material was not isolated loose sheets and the entries were not random, isolated or irregular in nature. They were systematic records of daily events maintained over a prolonged period of time on regular basis. These were actual books of accounts of the assessee. To bolster its claim, some entries were checked by Ld. AO on sample basis and the same were found to be correct. Therefore, it was concluded by Ld. AO that the seized material was actual books of accounts of M/s SRS Mining which were being maintained by S. Nagarathinam and K. Srinivasulu. 4.6 From Yogambal Street, Matrix brand spiral books as maintained by Shri S. Nagarathinam, in-charge of the premise, written in his own handwriting, was found. The matrix notebooks gave detailed account of cash received during each day from sand yard owners at Chennai and also the amounts paid to various influential persons during the day. 4.7 In this regard, a sworn statement was recorded from Shri S. Nagarathinam who confirmed that the said books belonged to him and maintained by him. It contained the details of receipt from 4 sand mining sites and the expenditure incurred. Apart from expenditure, there was lot of payment to various persons as directed by Shri Srinivasulu. The Ld. AO noted that these books were being maintained meticulously. The left side had opening balance of cash, receipts of the day, and payments of the day and the closing balance. Even the denomination of the closing balance was also mentioned in the bottom half. With the help of meticulous notings, the search team managed to track Rs.24 Crores in new Rs.2000 notes from a TATA Ace vehicle at Vellore. The right side had break up of cash received yard-wise and details of payments made to various influential persons during the day. A heading was given as to payments under the names of various influential persons, officials and politicians involved in the management of sand mining in the state and even others when considered necessary. A peculiar feature was that a set of officials / officers / politicians were paid every month a fixed sum according to their importance ranging from Rs.2 Lacs per month to Rs.2 Crores per month. This regularity in payment of incidental charges highlights the clout and political patronage M/s SRS Mining was enjoying while running the sand mining business. A yard wise breakup of the cash received was also given on the right side. The daily statement of sand yards was compared with the Matrix notebook maintained by Shri S. Nagarathinam and it was found that the amount sent to head office from each sand yards tally exactly with the receipts shown in the matrix notebooks against the respective yard. 4.8 Another set of books of accounts called the cash books were also seized which were maintained by Shri S. Nagarathinam. The same has been tabulated in para 7.9 of the assessment order. These were prepared by Shri S. Nagarathinam in his own writing from entries in the matrix notebooks as mentioned earlier but without denominations. In effect, Shri S.Nagarathinam prepared and maintained two parallel sets of records for each and every transaction. As and when the cash is received from the yards, the same is noted down with denominations in the matrix notebooks. The payments of incidental expenses are also noted down. From the entries in the matrix notebooks, Shri S. Nagarathinam once again prepared and maintained a fair copy in the form of parallel cash book of M/s SRS Mining. The cash book contains exactly all the entries in the Matrix notebooks but without denominations. This further adds to the genuineness and veracity of the seized materials. In addition, in the cash books, there was a consolidation statement, at final page of the month giving total receipts and expenses for that particular month. Even the partner of the firm Shri J. Sekar agreed in sworn statement dated 07-08-2017 that entries of cash books matched with that of the matrix notebooks. 4.9 Three small Oswal notebooks were seized from Bazullah Road T. Nagar, the details whereof have been tabulated in Para 7.10 of the assessment order. This was another set of cash books of M/s SRS Mining as maintained by Shri K Srinivasulu in his own handwriting. Shri K. Srinivasulu was trusted aide of Shri J. Sekar These notebooks contained only the details of payments made to influential people date- wise. The entries found in these books matched with that of the Matrix notebooks and cash books maintained by Shri S.Nagarathinam. Thus, there were three different evidences, corroborating with each other, for the firm M/s SRS Mining having made regular incidental payments for running its business. 4.10 The Ld. AO further observed that the name of the assessee also appeared as one of the parties to whom the firm had made payments on regular basis. The seized notebooks contained date-wise notings of the amounts paid to persons in public service. The name and designation of the public servants involved were confirmed by the partners / employees of M/s SRS Mining in their sworn statement recorded u/s 132(4). The assessee was mentioned in the notebooks as ‘OPS’, ‘OPS Ramesh’. Shri K. Srinivasulu, in answer to question No.4 of statement recorded u/s 132(4), stated that the ‘OPS Ramesh’ referred to ‘PA to OPS’. The assessee being commonly referred to as ‘OPS’ and also that he was PWD Minister for some time, it was alleged by Ld. AO that these payments were made to the assessee. These payments were also corroborated by notings maintained by Shri Nagarathinam. The details of these payments have been tabulated at Para 7.13 of the assessment order. It was thus evident that the assessee received illegal payments from M/s SRS Mining in lieu of continued political patronage and for enjoying unhindered mining contracts and sand yard licenses. The total of such payments for this year aggregated to Rs.365.16 Lacs. 4.11 The assessee assailed the assumption of jurisdiction by Ld. AO and denied having received any such payment. The assessee also alleged that no enquiry was conducted before forming the aforesaid satisfaction. However, Ld. AO rejected the same on the ground that the satisfaction was arrived at after going through the materials seized from the persons covered u/s 153A and the statement recorded during the course of search. The books were thoroughly analyzed and a conclusion was reached that the same had bearing on determination of total income of the assessee. The recordings in loose sheets were chronologically and regularly maintained during the course of business. The incriminating material was seized at two places. Finally, the objections raised by the assessee, in this regard, were rejected. 4.12 The Ld. AO further noted the retraction made by Shri K. Srinivasulu vide its letters dated 21-03-2017 and 23-03-2017 which was sent by him though Jail Authorities. To reconfirm the various issues, a summons u/s 131 was issued to Shri K. Srinivasulu as well as to Shri Shanmugasundaram and statement was recorded from them on 30-03- 2021 and 21-03-2021 respectively. Both of them retracted their statement as given by them during the course of search. Both of them denied the writings made in the seized loose sheets and submitted that their signature was obtained under pressure.

4.13 Since Shri Shanmugasundaram retracted from his statement and refused to recognize the writings of the seized loose sheets, an independent expert forensic examinationwas done and the services of independent professional forensic expert was requisitioned. On the basis of all these facts, Ld. AO concluded that the retraction by Shri Shanmugasundaram was nothing but an after-thought and therefore, it was required to be rejected. 4.14 Similarly, the retraction of Shri K. Srinivasulu was also rejected on the observation that it would not be fair to believe that a person who was remanded to a prison could submit a letter voluntarily and without coercion. Further, the retraction was after lapse of 103 days without any convincing reply for such a delay. Even if the statements are retracted by both of them, the same would have evidentiary value in terms of various judicial decisions. Finally, it was held by Ld. AO that though the statements recorded u/s 132(4) were retracted, the same would still be valid evidence since the same was recorded on the basis of factual and specific with reference to the seized records. The assessee’s request for cross-examination could not be considered since the witnesses had retracted their statement. 4.15 Finally, the alleged payment as noted in the seized material was added by Ld. AO to the income of the assessee with following observations: - 7.28 In view of the detailed arguments mentioned in the above para, it is clear that SRS mining was making regular and periodic payments to the assessee. Further the assessee during the scrutiny proceedings has merely denied receiving huge amounts regularly. Despite receiving regular payments, the assessee has failed to disclose the amount of Rs.3,65,16,500/- in his return of income filed u/s 153C and has not explained the source too. Therefore, this amount represents his unexplained and undisclosed income for AY 2016-17 and the same is taxed in his hands. Penalty proceedings is initiated against the assessee u/s 271(1)(c) of the Act on this issue for concealment of particulars of his income.

4.16 The assessment for AY 2017-18 has been framed on similar lines. The Ld. AO made addition for alleged payments made by the firm to the assessee. The Ld. AO made another addition of undisclosed income. The same was on the basis of loose sheets which were found from Bazullah Road, Yogambal Street as well as from the resident of Shri T. Shanmugasundaram (an employee of M/s SRS Mining). It was noted that seized material from residential premises of Shri T. Shanmugasundaram contained same details of receipts and distribution of cash as mentioned in the material seized from the business premises. As per the incriminating material, the assessee had given a sum of Rs.217 Crores for distribution to various constituencies in Tamilnadu for Election expenditure through M/s SRS Mining. In this regard, a statement u/s 132(4) was recorded from Shri K. Srinivasulu on 08-12- 2016. In answer to Q. No.13, he submitted as under: - Ans: 13 I confirm that these were the Tamilnadu Legislative Election 2016 related receipts and expenses, which have been written and maintained by me. From Page No-65 to 70 contains the details of various receipts and expenses pertains to PWD Minister Sri O. Paneerselvam (Period 2011 to 2016]. Page Nos. 65 to 70 contains total amount of Rs.217,00,00,000/- received from the PWD Minister Sri O. Paneerselvam of that period and the amounts were duly distributed to various constituencies.

He thus confirmed that these were Tamilnadu Legislative Election-2016 related receipts and expenses which were written and maintained by him. The page nos. 65 to 70 contains the details of various receipts and expenses pertaining to assessee. These pages contain an amount of Rs.217 Crores as received from the assessee which was distributed to various constituencies. Similar statement was recorded from Shri T. Shanmugasundaram on 08-12-2016. He was working as an accountant in M/s SRS Mining. The Ld. AO thus formed an opinion that the amount of Rs.217 Corers was spent by way of unexplained expenditure for political gain to various constituencies over Tamilnadu by the assessee. To support this conclusion, some cross verification was made with one Shri R. Sharath Kumar on 10-04-2017 and 09-05-2017 who had received a sum of Rs.2 Crores as per the list. He admitted the receipt of cash from staff of J. Sekar of SRS Mining. 4.17 The Ld. AO, in similar background, rejected the retraction of Shri K. Srinivasulu and of Shri T. Shanmugasundaram on the ground that the statement was based on facts and with reference to the narration specified in the incriminating documents. The retraction was merely an after-thought. Similarly, the retraction of Shri K. Srinivasulu was also rejected with the observation that it would not be fair to believe that a person who was remanded to a prison could submit a letter voluntarily and without coercion. Further, the retraction was after lapse of 103 days without any convincing reply for such a delay. Even if the statements are retracted by both of them, the same would still have evidentiary value in terms of various judicial decisions. Finally, it was held by Ld. AO that though the statements recorded u/s 132(4) were retracted, the same would still be valid evidence since the same was recorded on the basis of factual and specific reference to the seized records. The assessee’s request for cross-examination could not be considered since the witnesses had retracted the statement. Finally, the additions were made with the following observations: -

8.20 In this background, in the absence of any satisfactory explanation by the assessee, after examining the seized records and considering the sworn statement recorded u/s 132(4) of the Act and after giving due opportunity of being heard to the assessee, the amount of paid Rs.217,00,00,000/- by Shri O. Paneerselvam to SRS mining represents his undisclosed income. The amount was paid for distribution in various constituencies in Tamilnadu during the course of Tamilnadu Assembly Election, 2016. On verification and analysis of his return of income it is found that these transactions are not reflected and disclosed in the return of income. The assessee has been unable to explain the nature and source of this money given by him to SRS Mining. Therefore, this amount is treated as unexplained and undisclosed income of the assessee for AY 2017-18 and taxed in his hands. Penalty proceedings are initiated against the assessee u/s 270A on this issue for misreporting of income. Aggrieved, the assessee assailed both the assessments before first appellate authority which met with partial success vide impugned order dated 10-03-2023. Appellate Proceedings 5.1 In first legal ground, the assessee challenged the legal validity of satisfaction note recorded by Ld. AO for initiating proceedings u/s 153C. The assessee contended that the satisfaction was based on ‘reasons to suspect’ rather than on ‘reasons to believe’. The satisfaction was merely on the basis of statement of an employee of M/s SRS mining though the partners of M/s SRS Mining did not depose against the assessee. The assessee also contended that the delay of one year in communication of the reasons for issue of notice u/s 153C was bad-in-law. It was submitted that the satisfaction note was on the basis of suspicion, surmise and false conjectures and there was no mention in the statement of Shri K. Srinivasulu that the assessee had received sum of money from M/s SRS mining or its partners directly or indirectly. Shri K. Srinivasulu merely identified the entries in the seized records carrying initial ‘OPS’ and nowhere stated that he was aware of parting of money to the assessee and the assessee was beneficiary of alleged payments.

5.2 The Ld. CIT(A) perused the satisfaction note of AO and rejected this ground as raised by the assessee. The satisfaction note read as under: - "A search and seizure operation was conducted in the group cases of ShriM. Premkumar, K. Srinivasulu, J Sekhar Reddy and SRS Mining at No. 47,49, VBC Solitaire, 3rd Floor, Bazullah Road, T. Nagar, Chennai-17 on 08.12.2016. During the course of search at this business premises, loose sheets vide Annexure/ANN/KGAR/MPKKSSR/LS/S1,2,3 &11 and Annexure/ANN/MPK/NS/B&D/S-3, 17, 19 &20 from New No. 26, Old No. 14, Yogambal Street, T. Nagar, Chennai-17 was found and seized. As per the loose sheets at Page Nos. 65-70 of Annexure/ANN/KGAR/MPKSSR/LS/S-1, it is noticedthat Rs.217,00,00,000/-had been received from Shri.O.Panneerselvam, the then PWD Minister and the details of its distribution to various constituencies during the Assembly Election at the State of Tamil Nadu, 2016. During the course of the abovementioned search &seizure operations the residential premises of Shri T. Shanmugasundaram, employee, of M/s. SRS Mining was also subjected to action u/s 132 of theAct on the same day i.e., 08.12.2016. During the course of search at this premises, incriminating loose sheets were found and seized. The seized materialsseizedathis residentialpremises vide AnnexureANN/VK/TS/LS-S-1, at page Nos. 81, 78, 7 and 3 contain the same details of receipt and distribution of cash as also mentioned in the seized material vide Annexure/ANN/KGAR/MPKSSR/LS/S-1, as mentioned above are available. In view of the above, the loose sheets seized pertain to and it relates to Shri O Panneerselvam, which has the bearing on the determination of his total income for the A. Y 2017-18. Similarly, the seized materials vide Annexure.ANN/KGAR/MPKSSRIB&D/S-1,2,3 and 11seized from No.47 &49, VBC Solitaire, 3 Floor, Bazullah Road, T.Nagar, Chennai - 600017 andAnnexure ANN/ MPK/NS/B&D/S-3,17;19 and 20 seized from New No.26, Old No.14, Yogambal Street, T.Nagar, Chennai- 600017 contain the details of unaccounted cash receipt to M/s. SRS Mining by Shri.O.Pannerselvam. Therefore, this case squarely falls under the provisions of section 153C of the Income Tax Act, 1961.” 5.3 The Ld. CIT(A) observed that AO duly examined the material seized during the course of the search conducted in the case of M/s. SRS Mining group. It was observed by AO that the said seized material contained notings regarding receipt of Rs.217 Crores from the assessee by M/s SRS Mining and the details of distribution of the said amount to various constituencies during the Assembly elections for the State of Tamilnadu in the year 2016. The seized material also contained details of unaccounted cash receipts by assessee from M/s. SRS Mining. On the basis of the said observations, the AO arrived at the satisfaction that the aforesaid material pertains to or relates to the assessee and the same had bearing on determination of total income of the assessee for the relevant assessment years. Therefore, the contention that the satisfaction note was based on ‘reasons to suspect’ and not on ‘reasons to believe’, was not correct. The satisfaction required to be drawn by the AO for the purpose of assuming jurisdiction u/s. 153C would be in the nature of prima-facie satisfaction only and there is no requirement for such satisfaction to be based on conclusive establishment of the fact that the seized material had a bearing on the determination of total income of the assessee. As long as the inference drawn by the AO flows from the contents of the seized material on a prima-facie basis, it could not be held that the same was founded on mere suspicion or surmise or conjecture. This proposition would be analogous to the well settled position of law with regard to the reasons recorded for reopening of assessment u/s. 147 of the Act. In the present case, AO had reasons to arrive at such a prima-facie belief. The notings was found with the abbreviated name ‘OPS’ followed by the suffix ‘Ramesh’ and the said abbreviation is commonly used to refer to the assessee. Though the use of the said abbreviation in the seized material would not be adequate to conclusively prove that the transactions appearing therein with the said abbreviation pertain to the assessee for the purpose of making assessment of the income embedded in the said transactions without the availability of independent corroborative evidence to link them to the assessee, however, the same is not applicable for arriving at prima-facie satisfaction for the purpose of assuming jurisdiction to issue notice u/s 153C. Therefore, the assumption of jurisdiction was a valid one. The argument that there was delay in communication of satisfaction was also rejected on the ground that no prejudice was caused to the assessee. The case law of Hon’ble High Court of Madras in the case of Cognizant Technologies Solutions Ltd. as referred to by the assessee was held to be distinguishable on fact. 5.4 Another legal ground raised by the assessee was that Finance Act 2021 had substituted the provisions of Sec.153C by the newly amended provisions of Sec.148 for making assessment in respect of searches initiated on or after 01.04.2021 and therefore, the provisions of Sec.153C could not be invoked for completing pending search assessment as on 01.04.2021 in the absence of specific sunset clause in Sec.153C / 153B permitting the same. The Ld. CIT(A) held that prior to the amendment made by the Finance Act, 2021, the search assessments were required to be made u/s 153A / 153C in respect of searched persons and other persons respectively. The Finance Act, 2021 has made amendments to the Income Tax Act in respect of the assessment procedures for search cases in respect of searches initiated on or after 01.04.2021. The said amendments were made by way of substituting the existing provisions of Section 147, 148, 149 and 151 with new Sections 147, 148, 148A, 149 and 151. In view of the said amendments, the assessments in respect of the searches initiated on or after 01.04.2021 would be governed by procedure laid down in the newly substituted Sections 147 to 149 and 151. The contention of the assessee was that no explicit provision was made by the Finance Act 2021 to enable the completion of the search assessment pending as on 01.04.2021 u/s 153A and 153C. The assessee also contended that the AO had no legal jurisdiction to complete the pending assessments as on 01.04.2021 u/s 153A / 153C in respect of searches initiated prior to 01.04.2021 in the absence of such an explicit provision. Accordingly, the assessee contended that the assessments thus completed by Ld. AO were legally unsustainable. The Ld. CIT(A) rejected the same on the ground that while making changes in procedure for search assessments in respect of searches initiated on or after 01.04.2021 by bring them under the scope of the newly substituted sections 147 to 149 and 151, simultaneous amendments have also been made in Section 153A and 153C to make it unambiguously clear that the said provisions would continue to be applicable for search assessments in respect of searches initiated on or before 31.03.2021. The amendments to the said effect were made in sub-section (1) of sec 153A and by way of insertion of sub section (3) in section 153C. Therefore, there was no ambiguity with regard to the applicability of the search procedure prescribed under the said sections to the pending search assessments as on 01.04.2021 in respect of the searches initiated on or before 31.03.2021. It was ambiguously clear from the amended provisions of sections 153A and 153C that the AO had legal Jurisdiction to complete the search assessments pending as on 01.04.2021 in accordance with the procedure laid down in Sections 153A / 153C. 5.5 The assessee also assailed the impugned additions on merits. It was submitted that the seized material was in the nature of dumb documents which could not be the basis for assessment since it do not contain the complete particulars of relevant transaction and the persons involved in the said transactions. The additions made on the basis of such a dumb document would not be sustainable. There was no evidence that the entries in the said documents have actually materialized into real transactions. The presumption of 292C would not apply against the assessee since he was not the searched person. The seized material would have no evidentiary value since it did not contain the acknowledgement of the assessee or his signature. It was also contended by the assessee that the statement of Shri K. Srinivasulu did not directly implicate the assessee in as much as he merely explained the meaning of the name described as ‘OPS Ramesh’ in the seized material and he never stated that the assessee was the actual beneficiary of the transactions noted in the seized material. The assessee pointed that Shri S. Ramesh, in statement recorded on 24-03- 2021, has categorically denied his involvement in any of the monetary transactions alleged against the assessee and the same was omitted to be considered by Ld. AO. It was also contended that during search on M/s SRS Mining, no statement of the partners of the said firm regarding the contents of the seized material was recorded and relied upon. The Ld. AO ignored the retraction made by Shri K. Srinivasulu. The burden was on revenue to prove that the assessee was in receipt of income which was sought to be taxed in his hands and a reverse burden could not be placed on the assessee to establish that he had not received such payments. The impugned additions were not supported by any corroborative evidences. Accordingly, the additions were not justified. The elaborate written submissions made by the assessee, in this regard, have been extracted in the impugned order at paras 37 to 39.

5.6 On the issue of undisclosed receipts as allegedly received by the assessee from M/s SRS Mining, Ld. CIT(A) noted that this addition was based on the entries found in the note books seized from the office premises of M/s SRS Mining during the course of search conducted in their cases coupled with statement of Shri K.Srinivasulu u/s 132(4) (from whose possession the material was seized) with regard to the contents of the said seized material. The Ld. CIT(A), upon perusal of the relevant entries in the seized material, concurred that the name of the assessee did not appear in any of the entries so considered by Ld. AO to be pertaining to the assessee. All the entries so considered by AO merely contain the name as ‘OPS Ramesh’. The Ld. AO relied on the statement of Shri. K. Srinivasulu u/s 132(4) dated 10.12.2016 to conclude that the said name of ‘OPS Ramesh’, in the seized material, refers to the assessee. The Ld. AO stated in the assessment order that Shri K. Srinivasulu explained in his statement that the name ‘OPS Ramesh’ in the seized material was used to denote ‘PA to OPS’ and since the assessee was popularly referred to in the media / press and by the general public as ‘OPS’, Ld. AO drew inference that the payments noted in the seized material with the name ‘OPS Ramesh’ represent the payments made to the assessee. However, there was no mention anywhere in the statement of Shri K. Srinivasulu that the assessee was the actual recipient of the payments shown against the said name of ‘OPS Ramesh’. Shri K.Srinivasulu did not state anywhere in his statement that the acronym ‘OPS’ was used in the seized material to denote the assessee. Further, the seized material did not contain any evidence to draw the inference that the payments noted with the name ‘OPS Ramesh’ actually represented amounts received by the assessee. It was therefore apparent that the AO had merely made a presumption that the abbreviation ‘OPS’ found in the seized material refers to the assessee Shri O. Pannerselvam, based on the short name popularly used in the press and media to refer to the assessee. However, drawing such a presumption without having any independent corroborative evidence that the acronym ‘OPS’ used in the seized material refers only to the assessee and not to any other person whose name may have the same acronym, could not be sustained. In the absence of any corroborative evidence, the inference drawn by AO was, therefore, a mere conjecture which could not be accepted to fasten huge tax liability on the assessee on account of such inference. The main issue that arise for determination is that whether such entries found against the name of ‘OPS Ramesh’ in the material seized from a third-party could be used to draw adverse inference against the assessee, without anything more on record in corroboration of the same. 5.7 The aforesaid seized material as relied upon by Ld. AO was seized from the premises of a third-party during the course of search conducted in the case of the said third-party. The said material was neither seized from the premises of the assessee nor was the same found to be in the handwriting of the assessee and therefore, the same would not constitute adequate evidence to draw any adverse inference against the assessee, in the absence of any other corroborative evidence. This proposition was laid down by Hon'ble Delhi High Court in the case of CIT vs. Sant Lal (118 Taxmann.com 432) wherein it was held that when a diary is seized in search of the premises of a third patty allegedly containing entries of hundi transactions on behalf of various parties including the assessee, no addition could be made based on the said entries since the diary was neither found from the premises of assessee nor was it in handwriting of assessee and revenue failed to produce any other cogent material to link the assessee to the diary. The ratio of the said decision was squarely applicable to the case of the assessee since Ld. AO had not referred to any cogent material to corroborate the entries made in the material seized from a third-party which are purportedly the transactions made by the said third-party with the assessee. The Ld. CIT(A) also referred to the decision of Jabalpur Bench of Tribunal in the case of ACIT vs Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] and also various other decisions which have been enumerated in paras 47 and 48 of the impugned order. Further, Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. Vs ITO (ITA No.250/Mum/2013) held that AO was required to bring further evidence on record to show that the money was actually exchanged between the parties in case where there was no other evidence on record to prove that on-money was paid except the loose sheets found in the premise of third-party and admission made by the third-party. Also, Hon’ble Supreme Court in the case of Common Cause vs. UOI (supra) held as under: - We are constrained to observe that the Court has to be on guard while ordering investigation against any important constitutional functionary, officers or any person in the absence of some cogent legally cognizable material. When the material on the basis of which investigation is sought is itself irrelevant to constitute evidence and not admissible in evidence, we have apprehension whether it would be safe to even initiate investigation. In case we do so, the investigation can be ordered as against any person whosoever high in integrity on the basis of irrelevant or inadmissible entry falsely made, by any unscrupulous person or business house that too not kept in regular books of account but on random papers at any given point of time. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily.

The aforesaid decision of Hon’ble Supreme Court stresses the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found in loose sheets and note books regarding the payments allegedly made to important constitutional functionaries so that the process of law is not abused by unscrupulous persons in order to achieve ulterior goals. Therefore, it was important that the corroborative evidence was available on record in support of the entries in the seized material found in the premises of third-party. 5.8 It was further held by Ld. CIT(A) that the said seized material as used against the assessee did not contain complete information to facilitate drawing of such an inference. The information available merely contained the date, amount of payment and the abbreviated name of the recipient. There was absolutely no mention in the seized material regarding the nature of the said transactions of cash payments, the purpose of such payments and the precise identity of the recipient. In the absence of such essential and critical information, it could not be inferred that the payments were made to a person, whose name does not even find a place in the seized material arid that the said amounts represent the income of the said person. It could also not be inferred with a reasonable degree of certainty that the payments were made to such a person based on an abbreviated name appearing in the seized material. An entry made in a diary or notebook by a third person with scant details cannot be used to fasten tax liability on the person whose name does not appear at all or only an abbreviated name appears in the seized material, in the absence of any corroborative evidence to attribute the entries to such a person. Such seized material is liable to be treated as a dumb document, which would not have any evidentiary value in respect of the entries found therein, unless corroborative evidence is available which can provide necessary reliable basis for deciphering the nature and character of the said entries. Another fact was that the assessee did not acknowledge receipt of any such payment by way of appending his signature / initial against the said payments. If a third party unilaterally makes entries in a diary/note book showing payments to a person to suit his convenience, the payments could not be inferred to have been made to the said person unless there is corroborative evidence to establish the actual making of payments to the said person. There was no reference to such corroborative evidence in the assessment order. 5.9 The Ld. CIT(A) also concurred that the statement of Shri K. Srinivasulu u/s 132(4) would not serve as corroborative evidence in respect of entries in the seized material. That person gave a general statement that the entries represent incidental expenses paid to various persons. When there were numerous pages and entries in the seized material, such a general statement would not inspire confidence for drawing any conclusion in respect of specific entries appearing therein allegedly with the abbreviated name of the assessee to conclude that the entries represent payment made to the assessee only. There was nothing in the statement even to remotely suggest that the entries appearing with the abbreviated name actually represent payment made to the assessee. The statement merely stated that the entries were maintained on the instructions of the partners of M/s SRS mining. It was very clear that Shri K. Srinivasulu had no first-hand knowledge of the payments noted in the seized material and had merely noted whatever was told to him by the partners. In such a situation, the statement would serve a very limited purpose of ascertaining the identity of the person who made the entries and nothing more. Since the entries were made on the instructions of the partners, it is the partners who were required to explain the exact identity of the recipients, the nature of payments, the purpose of payments and the identity of the person who made the payments etc. However, there was no material on record which would show that any of the partners was examined with regard to relevant entries in the seized material. There was no reference to any such statement of the partners in the assessment order. Therefore, the statement of Shri K. Srinivasulu could barely be considered as corroborative evidence against the assessee with regard to the entries in the seized material. This was further fortified by the fact that the said statement was retracted vide letters dated 21-03-2017 and 23-03-2017 addressed to DDIT (Inv.) which was submitted by Shri K. Srinivasulu through the Jail Superintendent when he was lodged in the Jail. In the retraction letters, it was claimed that the earlier statement was given under coercion and duress and in a state of mental shock, depression and physical exhaustion at the relevant point of time due to continuance of search action continuously for more than 3 days without a break and he not being allowed to sleep or to take rest. He further stated that he was not allowed to read the typed statement and his signature was obtained by force. He stated that he never paid any money to various persons as recorded in the typed assessment. He also stated that he signed the statement to end the prolonged ordeal of intimidation, harassment and mental torture. Shri K. Srinivasulu reiterated his retraction in the course of statement u/s 131 as recorded by Ld. AO on 30.03.2021 during the course of assessment proceedings. The retraction was rejected by Ld. AO without any valid reasons. 5.10 It was further noted by Ld. CIT(A) that similar additions were made in the case of another assessee by the name Shri P. Ramamohan Rao. That assessee sought cross-examination during the course of assessment proceedings. However, Shri K. Srinivasulu became non- cooperative and hostile during the course of preliminary examination of the said person before Ld. AO on 19-12-2018. Since the witness turned hostile, it was concluded that cross-examination would not serve any useful purpose. That assessee preferred Writ Petition before Hon’ble High Court of Madras praying for issue of directions to the AO to permit the assessee to cross-examine the witness being relied upon by Ld. AO. The writ petition was dismissed vide order dated 27.12.2018. The Hon’ble Court held that there was no infirmity in the order of AO in refusing the request for cross-examination since the witness turned hostile. The Hon’ble Court further observed that if AO was to rely on the statement of Shri K. Srinivasulu which is in favor of the revenue, the AO has to let in other reliable evidence to corroborate the same. Similarly, the Hon’ble Court in the case of M/s SRS mining Vs UOI (141 Taxmann.com 272), at para 9, observed that the statement of Shri K Srinivasulu could not be relied upon as he turned hostile by giving specific retraction statement and there was no need to accord permission to cross-examine him in view of the said reason. Considering these observations, it was to be held that the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. 5.11 In the present case, AO did not rely on any other corroborative evidences except for relying on the statement of Shri K. Srinivasulu since in the sworn statements of three other partners recorded on 08-12-2016, no questions were posed to them at all regarding the seized material allegedly containing the details of incidental charges paid to various persons. It was thus evident that no other corroborative evidence was available in record in respect of notings in the seized material. 5.12 The Ld. CIT(A) also concurred that the assessee denied having any transaction with the groups and therefore, he could not be expected to discharge a reverse burden as per legal principles laid down by Hon’ble Supreme Court in the case of K.P. Varghese vs. ITO (131 ITR 597) holding that onus of establishing that the conditions of taxability are fulfilled would be on revenue and throwing this burden on the assessee would be to cast an almost impossible burden upon him to establish the negative. Therefore, Ld. AO was not correct in stating that the assessee failed to furnish any evidence to that he did not have any financial transactions with M/s SRS Mining or its associates. The burden was on revenue to establish that the assessee was in receipt of payments as noted in the seized material. This burden was not discharged by revenue in the present case. Further, as per settled legal precedents, no addition could be made unless there is corroborative evidence to validate the entries found in the material seized from a third-party. 5.13 The Ld. CIT(A), in para. 62, referred to the decision of Hon’ble Supreme Court in the case of CBI vs. V.C. Shukla (AIR SC 410) holding that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon’ble Supreme Court is that independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case. 5.14 The Ld. CIT(A) also referred to the decision of Bangalore Tribunal in the case of ACIT vs. Sri B.S. Yediyurappa (ITA No.14/Bang/2019 dated 07.04.2022) holding that the addition made in the hands of the said person who was the Chief Minister of the State of Karnataka during the relevant period, based on the entries of cash payments found recorded with the initials "BSY'' in the material seized during the course of search conducted in the case of a third-party is not sustainable in the absence of any evidence to corroborate the notings in the seized material. The said decision was squarely applicable to the facts of the present case. 5.15 It was finally held by Ld. CIT(A) that seized material was in the nature of dumb document which did not contain complete and unambiguous information to arrive at any conclusion based solely on the said material that the assessee was in receipt of the payments found noted therein against the name ‘OPS Ramesh’. There was no corroborative evidence to support and supplement the details in the seized material to conclusively establish that the name ‘OPS Ramesh’ found in the seized material refers to the assessee only. There was no corroborative evidence to prove that the payments noted in the seized material have actually materialized and transfer of money has actually taken place between the concerned parties. In view of all these reasons, it was to be held that Ld. AO had not discharged the onus to prove that the assessee was actually in receipt of the payments reflected in the seized material with reliable and cogent independent evidences to corroborate the entries in the seized material. Therefore, the addition of alleged receipts by the assessee from M/s SRS Mining was deleted. Aggrieved, the revenue is in further appeal before us.

6.2 The conclusion of Ld. AO was based on entries made in above loose sheets. The AO inferred that the amount of Rs.217 Crores found noted as receipts at page No.70 of the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-I represents the amount received by M/s.SRS Mining from the assessee. Further, AO inferred that the expenditure of Rs.217.65 Crores by way of distribution of amounts to various constituencies as found noted at page Nos.65 to 69 of seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-1 as well as at page Nos.67 to 71 of seized loose sheets vide ANN/VK/TS/LS/S-I represents the expenditure incurred out of the receipt of Rs.217 Crores from the assessee. However, upon perusal of the contents of the aforesaid seized material, it could be noted that the name of the assessee did not appear in any of the relevant loose sheets taken into consideration by the AO while drawing such an inference. It was noticed that the name ‘Ramesh’ appears in the loose sheet at page No.70 of seized material vide ANN/KGAR/MPKSSR/LS/S-1, which contains notings regarding the receipt of amounts aggregating to Rs.217 Crores for meeting the expenditure of Rs.217.65 Crores. It was also noticed that the name ‘OPS Ramesh’ is found in the loose sheets at page Nos.3, 7, 78 and 81 of seized material vide ANN/VK/TS/LS/S-1, which contain the details of amounts ranging from Rs.10 Lacs to Rs.50 Lacs distributed to 18 constituencies. However, it was pertinent to observe that neither the name of the assessee not the names ‘OPS Ramesh’ and ‘Ramesh’ were found noted in page Nos.65 to 69 of seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-I and page Nos.67 to 71 of seized loose sheets vide ANN/VK/TS/LS/S-1 which contain the district wise details and constituency wise distribution of amounts aggregating to Rs.217.65 Crores. The details of various seized loose sheets referred to by Ld. AO in the assessment order in respect of the issue under consideration and the seized loose sheets out of the same where the name ‘OPS Ramesh’ or ‘Ramesh' was found noted was as follows: - Seized material Page Nos. Premises from Page Nos containing the reference which material name OPS Ramesh" or was seized “Ramesh" Business Premises of ANN/KGAR/MPKSSR/LS/S-I 65-70 70 SRS Mining Residence of Shri ANN/VK/TS/LS/S-1 3, 7, 78 & 81 T.Shanmugasundaram 3,7,78 & 81 ANN/VK/TS/LS/S-1 67-71 -do None ANN/VK/TS/LS/S-1 77 -do None ANN/VK/TS/LS/S-2 98-113 -do None Though the name of the assessee was not found noted in any of the relevant seized loose sheets and the names of ‘OPS Ramesh’ or ‘Ramesh’ were found noted in some of the seized loose sheets as shown in the table above, Ld. AO held in the assessment order that the entries in the said seized loose sheets reflected the transactions of the assessee only by giving the reasoning that the assessee was able to earn money on account of his official position as PWD Minister and distribute the same through M/s SRS Mining for political gain on account of the control exercised by the PWD department over sand quarry mining activity in the State of Tamilnadu and since M/s SRS Mining controlled the entire sand mining activities in the state. The reasoning given by the AO only tantamount to a wild allegation and a sweeping statement which was not substantiated by any evidence. There is no place for such surmises and conjectures in making an assessment. 6.3 The Ld. CIT(A) further noted that AO relied on the statement of Shri. K. Srinivasulu recorded u/s 132(4) on 08.12.2016 and 10.12.2016 in support of the inference that the notings in the seized material found in the names of ‘OPS Ramesh’ or ‘Ramesh’ pertain to the transactions of the assessee. Shri K.Srinivasulu was a trusted aide of Shri.J.Sekar Reddy (partner of M/s. SRS Mining) and the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-I were found in his possession and control during the course of the search at the business premises of M/s SRS Mining. In the statement dated 10.12.2016, Shri K. Srinivasulu stated in his answer to Q.No.4 that the name ‘OPS Ramesh’ found in the seized notebook vide ANN/KGAR/MPKSSR/B&D/S-I denotes '’PA to OPS’. However, Shri K.Srinivasulu did not explain or elaborate in the said statement regarding what the acronym ‘OPS’ stands for. It was therefore quite apparent that AO had merely made a presumption that the abbreviation ‘OPS’ found noted in the seized material refer to the assessee Shri O.Pannerselvam, based on the short name popularly used in the press and media to refer to the assessee. However, drawing such a presumption without having any independent corroborative evidence that the abbreviation ‘OPS’ used in the seized material refers only to the assessee and not to any other person whose name may have the same acronym, would not be sustainable. 6.4 Proceeding further, in his reply to Q.No.13 of the statement dated 08.12.2016, Shri.K.Srinivasulu stated that page Nos. 65 to 70 of the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-1 contain details of total amount of Rs.217 Crores as received from the PWD Minister Shri.O.Pannerselvam and that the said amount was distributed to various constituencies. However, the name of the assessee was not found noted anywhere in the relevant pages of the seized material and the name of ‘Ramesh’ was found noted only in page No.70 of the said seized material (as shown in the table in the preceding page), which contains scribblings with regard to the receipts of Rs.217 Crores. It could be noted that the remaining pages from page No. 65 to 69 do not contain either the name of the assessee or the names such as ‘OPS Ramesh’ or ‘Ramesh’. Further, it is seen on careful perusal of the scribbling found on page No.70 that the name ‘Ramesh’ was noted against receipts totaling to Rs.74 Crores only (41+30+3) out of the total receipts of Rs.217 Crores found noted therein. In the light of the said crucial facts emanating from the seized material, the statement of Shri K. Srinivasulu that the said loose sheets pertain to the receipt of Rs.217 Crores from the assessee and the distribution of the same to various constituencies lacks any credibility and remains unsubstantiated. The said deponent did not at all explained as to how the details of receipt of money and its distribution found in page Nos. 65 to 70 have been attributed by him to the assessee when there was absolutely no mention of assessee’s name in the said loose sheets and the name ‘Ramesh’ was found noted against receipts to the extent of Rs.74 Crores only out of the total receipts of Rs.217 Crores. In view of these reasons, the statement of Shri. K. Srinivasulu was to be held to be opposed to the fact which was evident from the seized material and the same could not be considered to be reliable for drawing any adverse inference against the assessee, in the absence of any other independent corroborative evidence. 6.5 Regarding AO’s reliance on the statement u/s. 132(4) recorded on 09.12.2016 from Shri T. Shanmugasundaram (accountant of M/s SRS Mining) for the purpose of drawing the inference that the assessee paid Rs.217 Crores to M/s. SRS Mining for the purpose of distribution to various constituencies, Ld. CIT(A) observed that AO had referred to the relevant parts of his statement at paras 8.3 and 8.9 of the assessment order for AY 2017-18 and reproduced the answers given by the said person to Q. Nos. 27 and 12 of the said statement. Upon perusal of the same, it was evident that Shri. T. Shanmugasundaram had explained the contents of page Nos.67 to 71 of the seized loose sheets vide ANNNK/TS/LS/S-1 by stating that the same contain the details of amount of Rs.217.65 Crores distributed to the candidates of various constituencies. He also confirmed in the said replies that the relevant loose sheets were in his handwriting and that the said notings were made during the period of Tamilnadu Assembly Elections in 2016. On careful examination of the said answers reproduced by the AO in the assessment order, it could be noticed that Shri. T. Shanmugasundaram did not make any reference to the name of the assessee in his answers. In fact, Shri T. Shanmugasundaram did not speak anything about the source of the amount of Rs.217.65 Crores which was distributed to various constituencies. It was thus clear that the AO could not have drawn any support from the statement of Shri. T. Shanmugasundaram for arriving at such an adverse inference against the assessee. In the light of this significant fact, the entire discussion made by the AO in the assessment order regarding the subsequent retraction of the said statement by Shri T. Shanmugasundaram and the reference made to an independent professional forensic expert for the purpose of establishing that the said retraction is factually incorrect, would have no relevance to the issue under consideration. The statement of Shri T. Shanmugasundaram, therefore, would not lend any assistance to the revenue to draw any adverse inference against the assessee by treating the same as corroborative evidence. 6.6 It was further noted that Ld. AO issued summons to Shri. S. Ramesh, the then PA to the assessee and recorded his statement u/s 131 on 24.03.2021. The fact that ‘Ramesh’ as found noted at page No.70 of the seized material ANN/KGAR/MPKSSR/LS/S-1 containing the details of receipts totaling to Rs.217 Crores, was confronted to him. However, Shri Ramesh completely denied having any knowledge of or nexus with the transactions noted in the seized material and stated that he did not know as to why his name had been scribbled in the seized material. He also stated that he had no relation with concerned parties and that he does not know the persons who had written and maintained the seized loose sheets. However, Ld. AO did not make any mention in the assessment order regarding the fact of recording the statement of Shri. Ramesh during the assessment proceedings and the contents of the said statement. In the absence of any attempt to discredit the said statement with cogent evidences in the assessment order, the said statement could not be disregarded in appreciating the evidences on record while adjudicating the issue under consideration. 6.7 In the light of all these facts, the issue that would arise for determination is whether the loose sheets found with the names ‘OPS Ramesh’ or ‘Ramesh’ as noted therein in the material seized from a third-party could be used to draw adverse inference against the assessee merely on the basis of statement of Shri.K.Srinivasulu, without any independent corroborative evidence to establish that the said payments were made by the assessee to M/s. SRS Mining for the purpose of distribution to various constituencies. 6.8 The aforesaid seized material as relied upon by Ld. AO was seized from the premises of a third-party during the course of search conducted in the case of the said third-party. The said material was neither seized from the premises of the assessee nor was the same found to be in the handwriting of the assessee and therefore, the same would not constitute adequate evidence to draw any adverse inference against the assessee, in the absence of any other corroborative evidence. This proposition was laid down by Hon'ble Delhi High Court in the case of CIT vs. Sant Lal (118 Taxmann.com 432) wherein it was held that when a diary is seized in search of the premises of a third patty allegedly containing entries of hundi transactions on behalf of various parties including the assessee, no addition could be made based on the said entries since the diary was neither found from the premises of assessee nor was it in handwriting of assessee and revenue failed to produce any other cogent material to link the assessee to the diary. The ratio of the said decision was squarely applicable to the case of the assessee since Ld. AO had not referred to any cogent material to corroborate the entries made in the material seized from a third-party which are purportedly the transactions made by the said third-party with the assessee. The Ld. CIT(A) also referred to the decision of Jabalpur Bench of Tribunal in the case of ACIT vs Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] and also various other decisions which have been enumerated in paras 80 and 81 of the impugned order. Further, Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. Vs ITO (ITA No.250/Mum/2013) held that AO was required to bring further evidence on record to show that the money was actually exchanged between the parties in case where there was no other evidence on record to prove that on-money was paid except the loose sheets found in the premise of third-party and admission made by the third-party. Also, Hon’ble Supreme Court in the case of Common Cause vs. UOI (supra) held as under: - We are constrained to observe that the Court has to be on guard while ordering investigation against any important constitutional functionary, officers or any person in the absence of some cogent legally cognizable material. When the material on the basis of which investigation is sought is itself irrelevant to constitute evidence and not admissible in evidence, we have apprehension whether it would be safe to even initiate investigation. In case we do so, the investigation can be ordered as against any person whosoever high in integrity on the basis of irrelevant or inadmissible entry falsely made, by any unscrupulous person or business house that too not kept in regular books of account but on random papers at any given point of time. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily.

The aforesaid decision of Hon’ble Supreme Court stresses the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found in loose sheets and note books regarding the payments allegedly made to important constitutional functionaries so that the process of law is not abused by unscrupulous persons in order to achieve ulterior goals. Therefore, it was important that the corroborative evidence was available on record in support of the entries in the seized material found in the premises of third- party. 6.9 It was further held by Ld. CIT(A) that the said seized material as used against the assessee did not contain complete information to facilitate drawing of such an inference. The information available merely contained random scribbling regarding the receipts of Rs.217 Crores as against the total expenditure of Rs.217.65 Crores by way of distribution to various constituencies. It was noted that the name ‘Ramesh’ was noted against 3 entries of receipts totaling to Rs.74 Crores only and the balance entries of receipts were noted against names of other persons. There was absolutely no mention in the seized loose sheet regarding the precise identity of the persons from whom alleged amounts were received and the dates of receiving the same. In the absence of such essential and critical information, it could not be inferred that the amounts were received from the assessee whose name does not even appear at all in the seized loose sheets. It could also not be inferred with a reasonable degree of certainty that the amounts shown as a received from a person whose name was noted in the bland manner as ‘Ramesh’ without any more details regarding his specific identity represent the amount paid by the assessee. An entry made in a diary or notebook by a third-person with scant details cannot be used to fasten tax liability on the person, in the absence of any corroborative evidence to attribute the entries to such a person. Such seized material was liable to be treated as a dumb document, which would not have any evidentiary value in respect of the entries found therein, unless corroborative evidence is available which can provide necessary reliable basis for deciphering the details of the identity of the person who made the relevant transaction. 6.10 In the light of above stated facts, Ld. CIT(A) concurred that the statement of Shri K. Srinivasulu u/s 132(4) would not serve as corroborative evidence in respect of entries in the seized material. The statement lacked credibility and remain unsubstantiated. The statement was silent as to how the entire amount of Rs.217 Crores was stated to be received from the assessee. The statement was opposed to the facts as evident from the seized material. Therefore, the statement of Shri K. Srinivasulu could barely be considered as corroborative evidence against the assessee with regard to the entries in the seized material. This was further fortified by the fact that the said statement was retracted vide letters dated 21-03-2017 and 23-03-2017 addressed to DDIT (Inv.) which was submitted by Shri K. Srinivasulu through the Jail Superintendent when he was lodged in the Jail. In the retraction letters, it was claimed that the earlier statement was given under coercion and duress and in a state of mental shock, depression and physical exhaustion at the relevant point of time due to continuance of search action continuously for more than 3 days without a break and he not being allowed to sleep or to take rest. He further stated that he was not allowed to read the typed statement and his signature was obtained by force. He stated that he never paid any money to various persons as recorded in the typed assessment. He also stated that he signed the statement to end the prolonged ordeal of intimidation, harassment and mental torture. Shri K. Srinivasulu reiterated his retraction in the course of statement u/s 131 as recorded by Ld. AO on 30-03-2021 during the course of assessment proceedings. The retraction was rejected by Ld. AO without any valid reasons. 6.11 It was further noted by Ld. CIT(A) that similar additions were made in the case of another assessee by the name Shri P. Ramamohan Rao. That assessee sought cross-examination during the course of assessment proceedings. However, Shri K. Srinivasulu became non- cooperative and hostile during the course of preliminary examination of the said person before Ld. AO on 19-12-2018. Since the witness turned hostile, it was concluded that cross-examination would not serve any useful purpose. That assessee preferred Writ Petition before Hon’ble High Court of Madras praying for issue of directions to the AO to permit the assessee to cross-examine the witness being relied upon by Ld. AO. The writ petition was dismissed vide order dated 27.12.2018. The Hon’ble Court held that there was no infirmity in the order of AO in refusing the request for cross-examination since the witness turned hostile. The Hon’ble Court further observed that if AO was to rely on the statement of Shri K. Srinivasulu which is in favor of the revenue, the AO has to let in other reliable evidence to corroborate the same. Similarly, the Hon’ble Court in the case of M/s SRS mining Vs UOI (141 Taxmann.com 272), at para 9, observed that the statement of Shri K. Srinivasulu could not be relied upon as he turned hostile by giving specific retraction statement and there was no need to accord permission to cross-examine him in view of the said reason. Considering these observations, it was to be held that the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. 6.12 The Ld. CIT(A), in para 95, referred to the decision of Hon’ble Supreme Court in the case of CBI vs. V.C. Shukla (AIR SC 410) holding that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon’ble Supreme Court is that independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case. Finally, the impugned addition was deleted by observing as under: - 97. As already discussed in detail in the preceding paragraphs, the seized material is in the nature of a dumb document which does not contain complete and unambiguous information to arrive at any conclusion based solely on the said material that the appellant was payer-in respect of the amounts found noted therein against the name Ramesh". There is no corroborative evidence to support and supplement the details in the seized material to conclusively establish that the name "Ramesh" found in the seized material refers to the appellant only. There is no corroborative evidence to prove that the payments noted in the seized material have actually materialised and transfer of money has actually taken place. In view of these reasons, it is required to be considered that the AO has not discharged the onus cast on the revenue to prove that the appellant has actually made the payments reflected in the seized material with reliable and cogent independent evidences to corroborate the entries in the seized material. 98.In view of the detailed discussion hereinabove, it is held that the addition made in the assessment order for AY 2017-18 towards undisclosed income represented by unaccounted payments made to M/s SRS mining for the purpose of distribution to various constituencies is not sustainable on facts. Hence, the AO is directed to delete the said addition of Rs.217 crores. Ground Nos. 3.4 and 6 additional Ground Nos.6.1, 6.2, 8.1, 8.2, 9, 11.1, 11.2, 12.1, 12.2, 13.1, 13.2 and 13.3 are allowed in so far as they relate to the issue mentioned above. Ground No.5 and additional Ground Nos.10.1, 10.2 and 10.3 are dismissed in so far as they relate to the issue mentioned above.

from employees of M/s SRS Mining, Ld. AO alleged that the assessee received unaccounted income from the group. Another allegation in AY 2017-18 was that the group received certain amounts from the assessee for distribution to various constituencies during State Election in the year 2016. The material was seized from different places and the contents of the same matched with each other and accordingly, Ld. AO formed an opinion that the assessee was one of the persons who had received payments from M/s SRS Mining for facilitating mining and transportation of sand in the state of Tamilnadu. The partners of the firm were controlling the entire gamut of sand mining operations throughout the length and breadth of the state since December, 2013. All the loading contracts and sand yard licenses were awarded to the friends, relatives of friends identified by the partners of the firm.

Nagarathinam maintained another set of books in his own handwritings which were called as cash books. These were prepared from entries in the matrix notebooks and contained exactly all the entries in the Matrix notebooks but without denominations. There was a consolidation statement, at final page of the month giving total receipts and expenses for that particular month.

Shanmugasundaram (accountant of M/s. SRS Mining) and the statement of Shri. T. Shanmugasundaram u/s 132(4) dated 09.12.2016 with regard to the contents of the said seized material. The Ld. CIT(A), upon perusal of seized material, rendered factual finding. It was noted by Ld. CIT(A) that Ld. AO inferred that the amount of Rs.217 Crores found noted as receipts at page No.70 of the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-I represents the amount received by M/s.SRS Mining from the assessee. Further, AO inferred that the expenditure of Rs.217.65 Crores by way of distribution of amounts to various constituencies as found noted at page Nos.65 to 69 of seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-1 as well as at page Nos.67 to 71 of seized loose sheets vide ANN/VK/TS/LS/S-I represents the expenditure incurred out of the receipt of Rs.217 Crores from the assessee. However, upon perusal of the contents of the aforesaid seized material, it could be noted that the name of the assessee did not appear in any of the relevant loose sheets taken into consideration by the AO while drawing such an inference. It was also noted that the name ‘Ramesh’ appears in the loose sheet at page No.70 of seized material vide ANN/KGARIMPKSSR/LS/S-1, which contains notings regarding the receipt of amounts aggregating to Rs.217 Crores for meeting the expenditure of Rs.217.65 Crores. It was also noted that the name ‘OPS Ramesh’ is found in the loose sheets at page Nos.3, 7, 78 and 81 of seized material vide ANN/VK/TS/LS/S-1, which contain the details of amounts ranging from Rs.10 Lacs to Rs. 50 Lacs distributed to 18 constituencies. However, neither the name of the assessee nor the abbreviation viz. ‘OPS Ramesh’ and ‘Ramesh’ were found noted on page Nos. 65 to 69 of seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-I and page Nos.67 to 71 of seized loose sheets vide ANN/VK/TS/LS/S-1 which contain the district wise details and constituency wise distribution of amounts aggregating to Rs.217.65 Crores. Though the name of the assessee was not found noted in any of the relevant seized loose sheets and the names of ‘OPS Ramesh’ or ‘Ramesh’ were found noted only in some of the seized loose sheets, Ld. AO held that the entries in the said seized loose sheets reflected the transactions of the assessee only by giving the reasoning that the assessee was able to earn money on account of his official position as PWD Minister and distributed the same through M/s SRS Mining for political gain on account of the control exercised by the PWD department over sand quarry mining activity in the State of Tamilnadu and in view of the fact that M/s SRS Mining controlled the entire sand mining activities in the state. The reasoning given by the AO only tantamount to a wild allegations and a sweeping statement which is not substantiated by any evidence. There is no place for such surmises and conjectures in making an assessment. The above factual findings remain uncontroverted before us and therefore, we concur with aforesaid factual findings of Ld. CIT(A).

8. The AO having failed to provide the satisfaction note till date despite the specific request of the respondent during the assessment proceedings. The CIT(A) ought to have annulled the assessment.

9. The entire assessment having been initiated on mere suspicion and premises, the CIT(A) ought to have held the assessment to be void-ab-initio. 27.3 The assessee has filed gist of submissions, in this regard. It has been submitted that AO failed to provide the actual satisfaction note, if any, recorded till date despite a specific request made by the assessee during assessment proceedings. The Ld. CIT(A) wrongly accepted that there was satisfaction recorded. But the details such as the date on which the satisfaction was recorded, who recorded, whether the signature was appended on the satisfaction note, whether such satisfaction note was made by AO of M/s SRS mining. The detail when satisfaction note was transmitted to the AO of the assessee was not provided. In notice u/s 142(1), AO has recorded the gist of the satisfaction note, which contains three paras wherein the order extracted by CIT(A) has two more paras i.e., para no.4 and 5, which apparently has been inserted subsequent to that. Further, no DIN was generated and the fact that the CIT(A) has not mentioned the date of the satisfaction note would go to show that the reasons recorded never existed in the first place. Further, the department has not placed any record / material to prove that all the conditions relating to recording of satisfaction have been complied with. The Ld. AR submitted that non- supply of reasons recorded by AO before completion of assessment proceedings would vitiate the assessment proceedings. We have gone through the submissions of the assessee. Our findings and Adjudication on Cross-objections 28. From assessee’s paper-book, it could be seen that notice u/s 153C was issued to the assessee on 03.12.2019 and the assessee filed return of income on 11.12.2019. Subsequently, notice u/s 143(2) was issued to the assessee on 09.09.2020 and notice u/s 142(1) was issued to the assessee on 04.12.2020. Along with this notice, Ld. AO had enclosed an Annexure stating the reasons for issuance of notice u/s 153C. The Ld. CIT(A), in para-5 of the impugned order also take note of the fact that AO of the searched person and that of the assessee are one and the same. Upon perusal of seized material, AO recorded his satisfaction u/s 153C for AYs 2015-16 to 2017-18 on 03.12.2019 for the purpose of assuming jurisdiction u/s 153C. The Ld. AO, upon perusal of seized material noted that the said material contained details of unaccounted cash receipts of the assessee from M/s SRS mining during previous years relevant to AYs 2015-16 to 2017-18. The Ld. AO thus recorded the satisfaction that the relevant seized material pertained to and contained information relating to the assessee which had a bearing on determination total income for AYs 2015-16 to 2017-18. In para 13, Ld. CIT(A) has extracted the satisfaction note of Ld. AO. On the basis of all these facts, unless anything contrary is shown to us, we are unable to accept the argument of Ld. AR. From the orders of lower authorities, it would appear that satisfaction note existed at the first place, unless anything to the contrary is placed on record. The assessee is making an assertion and therefore, it would be the onus on assessee to controvert these findings. In the absence any such evidence, the arguments raised by Ld. AR could not be accepted at this stage of proceedings.

Conclusion 31. Finally, the appeals of the revenue as well as cross-objections filed by the assessee stand dismissed in terms of our above order.

Order pronounced on 5th April, 2024