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Income Tax Appellate Tribunal, “B” BENCH, CHENNAI
Before: HON’BLE SHRI V. DURGA RAO, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकर अपीलीय अिधकरण “बी” "ायपीठ चे"ई म"। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI माननीय "ी वी. दुगा" राव, "ाियक सद! एवं माननीय "ी मनोज कुमार अ&वाल ,लेखा सद! के सम)। BEFORE HON’BLE SHRI V. DURGA RAO, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM 1. आयकरअपील सं./ (िनधा"रण वष" / Assessment Year: 2015-16) DCIT Shri Vivek Papisetty बनाम Central Circle-2(4) No.17/184, Y Block, First Street, 6th Main Road, Anna Nagar, Chennai. / Vs. Chennai-600 040. "थायीलेखासं./जीआइआरसं./PAN/GIR No. BRCPP-6180-N (अपीलाथ"/Appellant) : (!"थ" / Respondent) & 2. Cross Objection No.19/Chny/2023 (In (िनधा"रण वष" / Assessment Year: 2015-16) बनाम/ Shri Vivek Papisetty DCIT No.17/184, Y Block, First Street, Vs. Central Circle-1(4) 6th Main Road, Anna Nagar, Chennai. Chennai-600 040. "थायीलेखासं./जीआइआरसं./PAN/GIR No. BRCPP-6180-N (अपीलाथ"/Cross Objector) : (!"थ" / Respondent) अपीलाथ"कीओरसे/ Revenue by : Shri V. Nandakumar (CIT)- Ld. DR !"थ"कीओरसे/ Assessee by : Shri Y. Sridhar (FCA)-Ld. AR सुनवाईकीतारीख/Date of Hearing : 10-01-2024 घोषणाकीतारीख /Date of Pronouncement : 02-04-2024 आदेश / O R D E R Per Bench 1.1 Aforesaid appeal by revenue for Assessment Year (AY) 2015-16 arises out of an order passed by learned Commissioner of Income Tax (Appeals)-19, Chennai [CIT(A)] on 31-01-2023 in the matter of an assessment framed by Ld. AO u/s 143(3) r.w.s. 153A of the Act on 03- 02-2020. 1.2 The Registry has noted delay of 45 days in assessee’s cross- objection, the condonation of which has been sought by Ld. AR. Though Ld. CIT-DR has opposed condonation of delay, however, considering the period of delay, we condone the delay and admit the cross-objections for adjudication on merits. 1.3 The grounds taken by the revenue read as under:
1. 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.5,49,45,783/- made towards cash payment made by the assessee in respect of the purchase of property at Madha Nagar in the name of his wife and connected expenses amounting to Rs.9,60,514 holding that the AO failed to prove that unexplained investment was made by the assessee during the previous year relevant to the assessment year 2015- 16 only. 2.1 Having confirmed the nature of transaction, identity of payer and payee, modes of payment and evidentiary value of loose sheet, the Ld. CIT(A) erred in deleting the addition on the ground that there are no dates mentioned in the loose sheet, to infer those transactions happened during FY 2014-15 (AY 2015-16), without appreciating that the assessee himself admitted in his sworn statement dated 21/12/2016 offered as undisclosed income for FY 2014-15 (AY 2015-16). In the absence of dates in the seized document, the AO has made addition in the assessment year 2015-16 relying on admission made by the assessee in the sworn statement. 2.2 The Ld.CIT(A) erred in observing that it would be reasonable that cash payment towards sale consideration have been made on or before the date of registration (ie) 04.04.2013, unless there is documentary evidence to show that the cash portion was made subsequent to the date of registration, without appreciating that the assessee himself admitted that the source for the same was out of his consultancy business and agreed to offer in the FY 2014-15 (AY 2015-16) in his sworn statement, though later retracted without backing up any evidence. 2.3 The Ld. CIT(A) erred in deleting the addition in contrary to his own observations with regard to the genuineness of seized materials and transactions mentioned therein. In the interest of justice, the CIT(A) should have directed the AO to consider the addition in the assessment year 2014-15, instead of deleting the entire addition. Even after confirming the genuineness of contents of seized materials, the Ld.CIT(A) erred in not giving a clear finding/direction that the addition to be made in the assessment year 2014-15 since DD payments has been made 03.04.2013 and registration was made on 04.04.2013. The CIT(A) failed to appreciate that failure to give such direction will result in escapement of income, which is otherwise liable to be taxed in the hands of assessee as per CIT(A)'s observations.
3. The Ld.CIT(A) failed to appreciate that the assessing officer has made addition in the assessment year 2015-16 based on the admission made by the assessee in the sworn statement. The CIT(A) erred in holding that the retraction of statement is valid in law, without appreciating that the retraction of statement holds no value as it was done so by citing absurd and unfounded reasons like he was subjected to harassment and mental pressure by IT Authorities. He had not brought any evidence to show that they were harassed during search operation through any means. Hence, in the absence of any dates mentioned in the seized document, the AO's action of assessing the cash payment in the assessment year 2015-16 based on the assessee's admission in the sworn statement is legally correct. The Ld.CIT(A) erred in observing that the AO had impliedly held that cash payments were made to the seller during the financial year 2014-15, which is one year subsequent to the registration of sale deeds.
4. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.
1.4 The grounds of assessee’s cross-objection read as under:
1. 1. The order of the learned Commissioner of income-tax (Appeals)-19, Chennai dated: 31.1.2023 in so far as it is prejudicial to the interest of the Respondent is opposed to law, facts and circumstances of the case.
2. The learned CIT(Appeals) erred in holding that there is no defect in the notice u/s 153A and thus vague, even when the Appellant-Assessing Officer has not mentioned in the notice whether he would like to "assess" or "reassess" the Respondent-assessee for the assessment year in question, leaving him to only guess, which is contrary to judicial pronouncements.
3. The learned CIT(Appeals) having observed that the property has been purchased by Smt. Harshini, (wife) under a valid deed of registration standing in her name, should not have upheld the addition in the hands of the appellant, on the basis of the findings of the Appellant-Assessing Officer, only because the entries in the unreliable loose sheet suggests payment of cash by the Respondent - assessee.
4. The learned CIT(Appeals) should have observed that the loose sheet which is undated and unsigned, thus becoming a dumb document, cannot be relied upon and no adverse inference can be drawn on such a document, as it has no evidentiary value.
5. The learned CIT(Appeals) ought to have appreciated that the addition cannot be sustained only on the basis of a dumb document (i.e., undated and unsigned) without there being any independent corroborative evidence to establish the veracity of the contents of the document.
6. The learned CIT(Appeals) erred in observing that the loose sheet cannot be construed as a wholly dumb document in view of the presence of clear and unambiguous narration of the transactions and the interconnection and continuity in the transactions noted therein. Admittedly, the document is partially dumb as observed by CIT(Appeals) himself that it does not reveal complete details of all other aspects such as the nature of transaction, the identity of the payer and the payee and the mode of payments etc. Therefore, the CIT(Appeals) ought to have held that the loose sheet has no evidentiary value.
7. The learned CIT(Appeals) ought to have held that the Appellant-Assessing Officer has not brought in any evidence to prove that the Respondent-assesses has paid any on- money by cash, the possible source for generating such huge cash and passing on of the on-money to the sellers of the property.
8. The learned CIT(Appeals) having analysed the contents of the document should not have drawn inferences which are only suspicions, conjectures and surmises without any valid proof.
9. The learned CIT(Appeals) himself has observed that the particulars regarding the dates of making cash payment to the seller are not available. That being the case, the disputed entry of cash component in the slip should have been proved beyond reasonable doubt by the AO.
10. The learned CIT(Appeals) erred in holding that the appellant ought to have discharged the onus of disproving the contents of the loose sheet as provided u/s 132(4A) and 292C. The learned CIT(Appeals) should have observed that only after irrefutable corroborative evidence has been brought in by the Appellant-Assessing Officer, can the appellant be called upon the disprove the contents of a dumb document and not before.
11. The learned CIT(Appeals) failed to observe that except finding a loose sheet in the premises of the appellant, no corroborative and independent evidence has been brought in, when the appellant denied the contents of the loose sheet. The AO ought to have proved every entry in the loose sheet, the most vital of which is the payment of cash. Having not done so, the CIT(Appeals) could not have expected the Respondent - assessee to discharge the onus.
12. The learned CIT(Appeals) having got the remand report from the AO to the effect that the sellers of the property Sri Peter or Mrs. Rosali and also of Sri K. Srinivas, have not been examined about the payment of cash, should have held that the lapse on the part of the AO is fatal and the addition cannot be sustained at any cost. The presumption u/s 132(4A) or 292C automatically stands discharged as there is nothing to prove by the Respondent-assessee.
13. The learned CIT(Appeals) having rightly observed that the loose sheet is silent with regard to the dates of payment of cash portion of the sale consideration, and further that the presumption laid down u/s 132(4A) and 292C cannot be pressed into service to place the onus of establishing the dates on the Respondent-assesses, could not have upheld the observation of the AO that the Respondent-assesses has made payment of cash.
14. The learned CIT(Appeals) having rightly observed that the burden is on the revenue to establish with cogent evidence that the unexplained investment was made by the Respondent-assessee in the previous year relevant to the assessment year in question, contradicted himself by stating in the earlier part of the order that the burden of disproving the contents of the loose sheet, particularly the payment of cash lies on Respondent- assessee.
15. The learned CIT(Appeals) having agreed that the AO has invoked the provisions of Section 69C by an inadvertent error, and further having agreed that the provisions of section 69 is applicable, should not have held that it does not invalidate the assessment order itself because of Sec. 292B.
16. The grounds of cross-objection may be read as without prejudice to each other.
17. The Respondent-assessee supports the order of CIT(Appeals) except with regard to the issues on which grounds of cross-objection are taken.
1.5 As is evident, the sole issue that arises for our consideration is additions made by revenue based on search findings. The assessee is challenging the jurisdiction of Ld. AO as well as certain findings of Ld. CIT(A) as rendered in the impugned order. Arguments before us 2. The Ld. CIT-DR advanced arguments and submitted that the additions are based on search findings coupled with statements recorded u/s 132(4). The Ld. CIT-DR supported the additions made 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. To support the submissions, reliance has been placed on various judicial decisions, the copies of which have been placed on record. The written submissions have also been filed during the course of hearing which have duly been considered while disposing- off these appeals. The Ld. CIT-DR submitted that assessee’s cross- objections have already been considered in the impugned order.
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 was subjected to an assessment for AY 2015-16 u/s 143(3) r.w.s. 153A of the Act on 03-02-2020 wherein certain addition was made and the same form part of subject matter of present appeal before us. Assessment Proceedings 4.1 The assessment was so framed pursuant to search and seizure action u/s 132 in the case of M/s SRS mining, Shri K. Srinivasulu, Shri M. Prem Kumar & ors. at various places on 08-12-2016. During search proceedings in the case of M/s SRS mining, certain incriminating material was seized. 4.2 Subsequently, another search was carried out in the case of the assessee as well as his father Shri P. Rama Mohan Rao on 21-12-2016. The search was conducted at the residence as well as office premise of the assessee. Subsequently, the case was centralized vide order dated 17-07-2017. Since warrant was issued in the name of the assessee, a notice u/s 153A was issued to the assessee on 21-08-2017. The assessee filed return of income declaring income of Rs.55.04 Lacs. During the course of assessment proceedings, notices u/s 143(2) and 142(1) were issued to the assessee calling for certain details. 4.3 During the course of search at office premise of the assessee situated at Nandnam, some loose sheets were found which were seized vide ABB/RR/VP/LS/S, ANN/CM/TEL/LS, ANN/CM/VT/LS/S and ANN/CM/BOPAS/LS. One of the loose sheets contained the details of on-money paid to one Shri Peter for purchase of a land. The contents of loose sheet have been extracted on Page No.5 of the assessment order. The assessee admitted to have paid sum of Rs.549.45 Lacs in cash outside his regular books of accounts. In reply to question no.11, the assessee stated as under: - I am not related to Mr. Peter. The transaction was to purchase the land which was owned by Mr. Peter and Mrs. Rosali. The total value of the property is Rs.9,57,43,127/-. The amount given through Cheque is Rs.4,21,05,250/-/. For the remaining portion, since the seller wanted to get paid in cash, I have paid Rs.5,49,45,783/- in cash.
When asked about the source of cash, the reply of the assessee was as under: - The source for cash payment of Rs.5,49,45,783/- was out of my undisclosed income earned from my consultancy services. The said payment was not recorded in the books of accounts and I wish to disclose the same as my undisclosed income for the F.Y.2014-15 4.4 However, vide reply dated 28-11-2018, the assessee denied having made any such payments. It was submitted that the property was registered in the name of assessee’s wife Mrs. Harshini. The seized material would show that the payment was made for the property at Madhanagar. However, Ld. AO held that the aforesaid document would show that the on-money and cash transactions were paid by the assessee and whose name was clearly written leaving no ambiguity. The document not only gives the details of cash payment of Rs.5.49 Crores but also gives the details as to where this amount was paid. It clearly stated that the amount was received from KS and Vivek and some places, it was mentioned that the amount was received from Vivek through KS. KS refer to Shri K.S. Srinivasulu whose name was clearly written on the paper. Therefore, the seized document clearly explains the transaction. Further, the cash paid was for Rs.602.09 Lacs as against the sworn statement of the assessee that the cash paid was for Rs.549.95 Lacs. The differential amount of Rs.52.63 Lacs relates to other misc. expenses like commission, lawyer fees etc. The Ld. AO also noted that the statement was retracted by the assessee on the contention that the assessee was under tension during deposition u/s 132(4). However, the unaccounted income was worked out not only basis of the statement but also on the basis of seized documents. The document was very precise and it pointed out each item with description. The retraction was merely an after-thought without any valid reason. Accordingly, alleged cash payment of Rs.602.09 Lacs was treated as unexplained investment u/s 69C and added to the income of the assessee. In the concluding part of assessment order, Ld. AO noted that the application filed by the assessee before Hon’ble Income Tax Settlement Commission were rejected. Finally, the assessment was completed after making impugned addition of Rs.602.09 Lacs. Aggrieved as aforesaid, the assessee assailed the impugned addition on merits and also raised various legal grounds before learned first appellate authority. Appellate Proceedings 5.1 The Ld. CIT(A) rejected the first legal ground of the assessee that the search was not on the basis of any prior information or material considering the Explanation inserted in Sec.132(1) by Finance Act, 2017. Another legal ground raised by the assessee was that notice issued u/s 153A was not valid one since AO failed to record satisfaction for inference of liability which was sine qua non for initiating proceedings u/s 153A. This ground was also rejected by Ld. CIT(A) by observing that warrant was issued in the name of the assessee and the assessee was searched on 21-12-2016. The condition precedent for assuming jurisdiction u/s 153A was thus duly satisfied. There was no condition of prior satisfaction to assume jurisdiction u/s 153A. The third legal issue urged by the assessee was that no notice was served on the assessee u/s 143(2) of the Act in relation to assessment proceedings u/s 153A. However, Ld. CIT(A) noted that notice u/s 153A was issued on 21-08- 2017 against which the assessee filed return of income on 29-09-2018. Subsequently, notice u/s 143(2) was issued on 12-12-2018. This notice was served on Authorised representative of the assessee on that date itself which was evident from acknowledgement of the receipt of notice. Even otherwise, in the decision of Hon’ble High Court of Madras in the case of B. Kubendran vs. DCIT (WP Nos.3023 & ors. of 2020 dated 09.04.2021), it was held that there was no requirement for issue of notice u/s 143(2) for completion of assessment u/s 153A. This decision relied on the decision of Hon’ble Delhi High Court in the case of Ashok Chaddha vs. ITO (337 ITR 399) and various other decisions. Therefore, this legal ground was also rejected. 5.2 The assessee assailed the impugned addition on merits by way of elaborate written submissions which have been extracted on para no. 28 of impugned order. The assessee’s main contention was that the seized documents had no evidentiary value since it was unsigned and undated. The assessee also contended that there was no corroborative evidence to establish the veracity of contents of the document and payment of on- money in cash and that too by the assessee, when the property stood in the name of his wife. The assessee submitted that the statement was retracted by him immediately on the next day of recording of the statement. The assessee also specified the circumstances in which the statement was given by him. The assessee also relied on various judicial decisions which held that no addition could be made merely on the basis of a sworn statement. Those decisions include the decision of Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. vs State of Kerala (91 ITR 18); the decision in Satinder Kumar (HUF) vs. CIT (106 ITR 64); the decision of Mumbai Tribunal in M/s Riveria Properties Pvt. Ltd. vs. ITO (ITA No.250/Mum/2013 dated 27-10- 2017). The assessee also referred to CBDT Instruction No.286/2/2003 dated 23-03-2003 reiterated on 18-12-2014 to the effect that any confession should be based on credible evidence and collection of evidence should be concentrated upon and not mere obtaining of confession of undisclosed income. Another pertinent fact brought to the notice of Ld. AO was that the property was registered during FY 2013-14 relevant to AY 2014-15 and therefore, the addition made, in this regard, during AY 2015-16 was without any basis. 5.3 The Ld. CIT(A) observed that the impugned additions were made on the basis of unaccounted cash payments found recorded in a loose sheet as found during the course of search at the office premises of the assessee on 21-12-2016. Though the property was purchased in the name of assessee’s wife Smt. Harshini, the additions were made in the hands of the assessee on the ground that notings in the seized loose sheet revealed that the cash payments were made by the assessee. Upon perusal of loose sheet as extracted by Ld. AO in the assessment order, Ld. CIT(A) concurred that the same was primarily a computer print-out except for the last two lines at the bottom right-hand corner of the sheet which were hand-written. However, no dates were mentioned in the loose sheet in respect of the financial transaction noted therein. There was no signature or initial of any person on the said loose sheet as rightly pointed out by the assessee. However, it could not be held to be wholly dumb document in view of presence of clear and unambiguous narration of the transactions and the interconnection and continuity in the transactions noted therein. Though the sheet does not reveal anything by itself with regard to the period to which the transaction noted therein pertain to and there was absence of any dates in the said document, however, this sheet reveal compete details of all other aspects such as the nature of transaction, the identity of the payer and the payee and the mode of payment. The narration of transaction in the seized document was very clear throughout the document without leaving any scope of ambiguity on these aspects. As against total payment paid to Shri Peter for Rs.904.79 Lacs, the payment of Rs.549.45 Lacs was paid through cash. The document also contained details of other expenditure in connection with the transaction of purchase of the said property such as stamp duty, commission on stamp paper, expenditure incurred at registration office, brokerage and lawyer fee etc. The brokerage of 1% matches with the total consideration payable for Rs.904.79 Lacs. Therefore, the notings constitute a noting of a transaction that has actually taken place and the said amount represents the total consideration for purchase of immoveable property at Madha Nagar. 5.4 The Ld. CIT(A), after analyzing other parts of the document observed as under: - 40.Thus, it is evident from the contents of the seized loose sheet that the transactions noted therein are pertaining to the purchase of Madha Nagar property and that all the transactions noted therein have actually taken place. The said property has been purchased by Smt. Harshini, wife of the appellant through two registered sale deeds dated 04.04.2013 and the consideration shown in the said sale deeds aggregated to Rs.3,55,33,800/-. The said consideration as per the sale deeds exactly matches with the aggregate of the payments shown to have been made to Peter through cheques and DD in the first part of the table found in the seized document (Rs. 2,00,00,000/- + Rs.1,55,33,800/-). Having regard to the details available in the seized document as discussed in the preceding paragraphs, the said document cannot be considered as a dumb document as there is no necessity to take any aid from any external source or material for ascertaining the full particulars of the transaction of the purchase of immovable property at Madha Nagar. The only exception is the absence of particulars regarding the dates of making cash payment of Rs.5,49,45,783/- to Peter towards the cash component of the consideration. Further discussion with regard to the said aspect is made later in this order.
The Ld. CIT(A) thus observed that loose sheet evidently pertained to purchase of a Madha Nagar Property that had actually taken place. The said property was purchased by the wife of the assessee through two registered sale deeds dated 04-04-2013. The consideration shown in the sale deeds aggregated to Rs.355.33 Lacs which exactly matched with the aggregate of payments shown to have been made to Peter through cheques and DDs in the first part of the table found in the seized document. Therefore, this document could not be termed as dumb document. 5.5 On the issue of retraction of statement, the Ld. CIT(A) noted that the statement was recorded from the assessee u/s 132(4) on 21-12- 2016 wherein he admitted that the payment was made in cash at the request of the seller and the source for the same was out of his undisclosed income from consultancy services. The said payment was not recorded in his books of accounts. However, the said statement was retracted by the assessee on 23-12-2016 vide a letter addressed to the DDIT (Inv.), Chennai. The assessee, inert-alia, submitted that he was completed drained out and dizzy by that time and he was put under extreme mental duress, pressure and harassment to sign the statement prepared by the officer. The assessee also drew attention to the fact that he was also worried about his wife at the time as she was admitted in hospital on 20-12-2016 due to advance stage of pregnancy complication and she was alone in the hospital. However, the said retraction was held by Ld. AO to be an afterthought without any valid reasons and without elaborating as to how the retraction was without any valid reasons. The retraction was within two days. The fact regarding hospitalization of assessee’s wife at the time of search was not disputed by Ld. AO. The mental stress and anxiety suffered by the assessee on account of hospitalization was therefore required to be taken into cognizance in evaluating the genuineness of the retraction made by him. The relevant observations, in this regard, were as under: - 41. The second issue raised by the appellant is regarding the reliance placed by the AO on the retracted statement of the appellant. As regards payment of the cash component of the consideration of Rs.5,49,45,783/- as per the seized document, the appellant admitted in his statement u/s 132(4) dated 21.12.2016 that the said payment was made in cash at the request of the seller and that the source for the same was out of his undisclosed income from consultancy services. The appellant admitted that the said payment is not recorded in the books of account. However, the appellant has retracted his statement dated 21.12.2016 vide his letter dated 23.12.2016 addressed to the DDIT (Inv), Unit- 3(1), Chennai. In the said letter, the appellant stated that his statement was recorded from 9.00 pm to 11.30 pm on 21.12.2016 and from 2.00 am to 5.00 am on 22.12.2016 (though signed as 21.12.2016) and that he was completely drained out and dizzy by that time and he was put under extreme mental duress, pressure and harassment to sign the statement prepared by the officer. He stated that he was also worried about. his wife at that time, as she was admitted in hospital on 20.12.2016 due to 9th month pregnancy complication and she was alone in the hospital.
In the assessment order, the AO stated that the retraction of the appellant is not valid and acceptable since such retraction is an afterthought and it has been made without valid reasons. However, the AO did not elaborate as to why he considers the reasons cited by the appellant for his retraction to be in the nature of invalid reasons. The retraction was made by the appellant within two days of the recording of statement from him. The fact regarding hospitalisation of the wife of the appellant at the time of search has not been disputed by the AO in the assessment order. The mental stress and anxiety suffered by the appellant on account of such hospitalisation is therefore required to be taken in to cognizance in evaluating the genuineness of the retraction made by him.
Further, the entries appearing with the code name "Temple son" in the material seized from the office premises of M/s SRS Mining during the course of search in the case of M/s SRS Mining & others on 08.12.2016 which were stated to be representing the payments made to the appellant as per the statement u/s 132(4) of Shri K. Srinivasulu were shown to the appellant during the course of his statement u/ s 132(4) on 21.12.2016 and he was requested to explain the said transactions. In his answer to Question No. 13, the appellant agreed that he has received Rs.10 crores in total from Shri Sekar Reddy of SRS mining towards facilitation charges, out of which Rs.4 crores were received during FY 2015-16 and Rs.6 crores were received during FY 2016-17. He stated that the said amounts have not been disclosed in his books of account. Further, in his answer to Question No.15 regarding the manner in which the said unaccounted income has been utilised by him, the appellant stated that he invested the said unaccounted income towards making unaccounted payments for purchasing immovable properties in Ennore, where he is doing a project. In this connection, it is noticed that though the appellant retracted his statement, no evidence has been brought on record by the AO in the course of the assessment proceedings for the relevant AY 2016-17 and AY 2017-18 with regard to the purchase of properties at Ennore by the appellant by way of utilisation of his unaccounted receipts from M/s SRS mining as stated by him in the statement u/s 132(4) dated 21.12.2016, in order to discredit the subsequent retraction of the said statement. No evidence of any business association with SRS Mining or rendering of any services to SRS Mining by the appellant has been brought on record by the AO, which necessitated the payment of incidental charges to the appellant. Thus, it is seen that the AO was unable to prove the factual correctness of the admission made by the appellant in his statement u/s 132(4), so as to establish that the retraction of the said statement is invalid. This aspect pertaining to the AY s 2016-17 and 2017-18 which has brought out the validity of the retraction of the appellant would have application for the instant AY 2015-16 also, as the statement u/s 132(4) sought to be relied on by the AO is the same statement which was relied on in the assessment orders for AYs 2016-17 and 2017-18.
Though the retraction of the appellant constitutes as a valid retraction in view of the reasons stated above, the same does not provide any relief to the appellant in as much as the appellant is bound to furnish necessary explanation regarding the contents of the seized document even after the statement u/s 132(4) is disregarded on account of such valid retraction. It is pertinent to point out that the provisions of sections 132(4A) and 292C of the Act lay down a rebuttable presumption that the document seized during the course of the search belongs to the person searched from whose possession the document was recovered and that the contents of such document are true. In view of the said rebuttable presumption, the primary onus is strictly on the appellant to lead necessary evidence to rebut the presumption laid down by the statute, notwithstanding the retraction of the sworn statement u/s 132(4). However, it is noticed that no attempt has been made by the appellant to discharge the said onus of rebutting the presumption u/s 132(4A). It is noticed that the appellant has merely denied making the relevant cash payment to Shri Peter towards purchase of immovable property at Madha Nagar and did not furnish any evidence in support of such denial either during the assessment proceedings or the appellate proceedings. The Ld. CIT(A) thus observed that though the retraction was a valid retraction, however, the assessee did not make any attempt to rebut the presumption u/s 132(4A) r.w.s 292C. 5.6 The assessee also submitted that Ld. AO failed to gather evidences to corroborate the contents of the seized loose sheet. It was also submitted that the opportunity to cross-examine Shri Peter was not provided to the assessee despite a specific request. Considering the same, a remand report was sought from Ld. AO. The Ld. AO furnished remand report on 18-11-2022 and submitted that no summons was issued to Shri Peter or Shri K. Srinivasulu and no statement was recorded from them, in this regard. The assessee assailed the findings of Ld. AO in the remand report on the ground that AO was duty bound to examine the said persons and corroborate the alleged notings. However, Ld. CIT(A) held that the burden of proof was on assessee to rebut the presumption laid down by Sec. 132(4A) and 292C that the contents of the seized document found in the possession of the assessee during the search are true. Since the appellant has not discharged the said burden, the question of shifting of the burden to the AO would not arise. 5.7 The Ld. CIT(A), having held that the seized document could not be construed as a dumb document and considering the presumption laid down by the provisions of sec 132(4A) and 292C, further observed that the assessee had paid alleged cash consideration over and above the consideration stated in the registered sale deeds to Shri Peter in respect of the immovable property purchased by his wife. Therefore, the findings of AO that the assessee made unaccounted cash payment to Shri Peter as found noted in the seized document and that the same represents unexplained investment of the appellant was held to be tenable on facts. 5.8 Proceeding further, Ld. CIT(A) examined whether such payment could be brought to tax in AY 2015-16 as sought to be done by the AO. In this regard, it was observed that though the seized document contained all relevant particulars with regard to the transaction of purchase of immovable property at Madha Nagar including the nature of transaction, the identity of the payer and payee and the mode of payments, however, the particulars relating to the dates of making cash payment to the seller Shri Peter were conspicuous by their absence in the seized document. No dates were found mentioned anywhere in the seized document. Though the dates of registering the purchase of the said property and dates of making payments to the seller through cheques and DDs were ascertainable from other documents such as the registered sale deeds and the bank account statement, the dates of making cash payment of the consideration to Shri Peter was not ascertainable from any other document either available in the seized material or otherwise. 5.9 In the assessment order, Ld. AO relied on the statement u/s 132(4) as recorded from the assessee on 21-12-2016 to conclude that the unexplained investment represented by the cash payment made by the assessee to Shri Peter was made during FY 2014-15 relevant to the instant AY 2015-16. In his answer to Question No. 12 of the said statement, the assessee had stated that the alleged cash payment was made out of his undisclosed income from consultancy services and that he agreed to disclose the same as his undisclosed income for the FY 2014-15. However, since the retraction by the assessee was held to be a valid retraction, the same could not be relied upon for the purpose of concluding that the relevant unexplained investment was liable to tax in this AY. The said statement of the assessee did not contain the reasoning for the assessee’s offer to disclose the undisclosed income for FY 2014-15, when the relevant transaction of purchase of immovable property had already taken place during the earlier FY 2013-14. Pertinently, the assessee, vide letter dated 29-03-2019, had submitted in para no. 4 that he had not purchased any property in FY 2014-15 corresponding to AY 2015-16 and clarified in para no 8 that the property was purchased on 04-04-2013, falling in FY 2013-14 relevant to AY 2014-15. The same was also evident from the fact that the sale deeds of the property were registered on 04-04-2013 and the cheque payments towards the sale consideration as stated in the relevant registered sale deeds were made through cheques dated 05-02-2013, 08-02-2013, 27- 02-2013, 28-02-2013 and 18-03-2013. The Demand Draft payments towards the sale consideration were made vide DDs dated 03-04-2013. The registration of the sale deeds had taken place during FY 2013-14 whereas the payments towards the sale consideration through cheques and DDs had taken place during FYs 2012-13 and 2013-14. By seeking to tax the unexplained investment by way of cash payments towards the sale consideration in the assessment for AY 2015-16, AO has impliedly held that the said cash payments were made to the seller during FY 2014-15, which is one year subsequent to the registration of the sale deeds of the immovable property. In the normal course, registration of sale of immovable property is made only after receipt of the entire agreed sale consideration including the cash component, if any. Such a normal incident is understandable since the seller would not part with his rights and title over the property unless he is in receipt of the entire agreed sale consideration and he may not have any recourse to recovering the unpaid cash portion of the consideration from the buyer once the registration of sale deed is completed. Therefore, it would be reasonable to infer in the case of the assessee that the cash payments towards the sale consideration have been made on or before the date of registration of the sale deeds of the immovable property i.e., 04-04-2013, unless there is any documentary evidence on record to show that the cash portion of the sale consideration was made subsequent to the date of registration and that too nearly one year after the date of registration during the FY 2014-15. 5.10 Proceeding further, Ld. CIT(A) held that since the seized document was silent with regard to the dates of making payments of cash portion of the sale consideration, the rebuttable presumption laid down u/s 132(4A) and 292C could not be pressed in to service to place the onus of establishing the said dates of cash payments on the assessee. In view of this, the primary onus was on Ld. AO to bring evidence on record to establish that the alleged cash payments were made by the assessee during FY 2014-15. Further, when an addition is sought to be made towards unexplained investment in the assessment order for a particular assessment year, the burden would be on the revenue to establish with cogent evidence that the said unexplained investment was made by the assessee in the previous year relevant to the said assessment year only. In the case of the assessee, the AO failed to discharge the said burden that was placed on him to gather cogent evidence to prove that the unexplained investment was made by the appellant during the previous year relevant to AY 2015-16 only. 5.11 In the light of these facts, the Ld. CIT(A) held that in the absence of evidence on record to establish that the said unexplained investment was made by the assessee during FY 2014-15. the impugned addition was not sustainable. Accordingly, the impugned addition was deleted against which the revenue is in further appeal before us. 5.12 During the course of appellate proceedings, the assessee contended that the addition made u/s 69C would not be sustainable. The Ld. CIT(A) rejected the same on the ground that the correct section as applicable to unexplained investment would be Sec.69 and not Sec.69C as mentioned by the AO in the assessment order. The addition sought to be made by Ld. AO was on account of cash consideration paid towards purchase of immovable property, the source of which remained unexplained. The same would fall under the scope of Sec.69 of the Act. The mentioning of incorrect Section was merely an inadvertent error which would not invalidate the assessment order itself in view of the provisions of Sec 292B. 5.13 The Ld. CIT(A) also concurred with another without prejudice ground of the assessee and held that the amount of Rs.43.03 Lacs incurred towards registration charges were paid through DDs from the Bank accounts of the wife of the assessee and therefore, addition to that extent could not be sustained. The assessee raised few more legal grounds which were also rejected. The same are not relevant here since the same have not been disputed by either of the side before us. Our findings and Adjudication 6. From the detailed facts and discussions as enumerated by us in the preceding paragraphs, it emerges that the impugned additions have been made by Ld. AO in the hands of the assessee pursuant to the search and seizure action by the department u/s 132 in group cases of M/s SRS mining and its partners on 08-12-2016. Subsequently, the assessee was searched on 21-12-2016 which led to seizure of certain documents and the impugned assessment was framed against the assessee u/s 153A of the Act. The sole addition made in the assessment order is addition of unexplained investment allegedly paid in cash by the assessee towards purchase of certain immovable property which was registered in the name of the assessee’s wife. The undisputed fact that emerges is that sale (to which the impugned transaction pertains) was concluded by execution of Sale Deeds on 04-04-2013.
The action of Ld. AO stem from certain noting in the computerized loose sheet which has been extracted on Page No.5 of the assessment order. As per this document, a part of the payment was made though banking channels whereas a part of the payment was made in cash and the same was separately mentioned in the said documents along with the details of incidental charges paid by the assessee towards purchase of the property. The payment made through banking channels as stated in the loose sheet matched with such payments as mentioned in the registered sale deeds. When the same was confronted to the assessee, the assessee admitted to have paid cash component outside his regular books of accounts and also agreed to offer the same as undisclosed income. Considering all these aspects and considering the presumption raised by statute u/s 132(4A) r.w.s. 292C, Ld. CIT(A) held that this document could not be held to be a completely dumb document. The assessee could not rebut such a presumption and the primary onus as casted on the assessee could not be discharged. Under these circumstances, putting burden on Ld. AO to bring corroborative evidence on record was held to be untenable.
Regarding loose sheet which form the basis of impugned addition, Ld. CIT(A) observed that the same was primarily a computer print-out except for the last two lines at the bottom right-hand corner of the sheet which were hand-written. No dates were mentioned in the loose sheet in respect of the financial transaction noted therein. There was no signature or initial of any person on the said loose sheet. Still this document could not be held to be wholly dumb document in view of presence of clear and unambiguous narration of the transactions and the interconnection and continuity in the transactions noted therein. Though the sheet would not reveal anything by itself with regard to the period to which the transaction noted therein pertain to and there was absence of any dates in the said document, however, this sheet reveal complete details of all other aspects such as the nature of transaction, the identity of the payer and the payee and the mode of payment. The narration of transaction in the seized document was very clear throughout the document without leaving any scope of ambiguity on these aspects. The document also contained details of other expenditure in connection with the transaction of purchase of the said property such as stamp duty, commission on stamp paper, expenditure incurred at registration office, brokerage and lawyer fee etc. The brokerage of 1% matches with the total consideration payable for Rs.904.79 Lacs. Therefore, the notings constitute a noting of a transaction that has actually taken place and the said amount represents the total consideration for purchase of immoveable property at Madha Nagar. We are of the considered opinion that considering the facts of the case, Ld. CIT(A) has clinched this issue in correct perspective. This document could not be held to be mere dumb document since it contained all the relevant information and the information contained therein matched with the registered sale deeds and other documents. We concur with these findings of Ld. CIT(A).
Proceeding further, we find that the aforesaid statement has been retracted by the assessee within 2 days of making thereof. The assessee specified the circumstances under which the statement was made by him. The findings of Ld. CIT(A) have been enumerated in preceding para 5.5. After going through the same, we concur with the conclusion of Ld. CIT(A) that the aforesaid retraction was within 2 days. The mental stress and anxiety suffered by the assessee on account of hospitalization of his wife was required to be taken in to cognizance in evaluating the genuineness of the retraction made by him. These findings also find our concurrence and the conclusions drawn by Ld. CIT(A) could not be faulted with. We find no reason to interfere in the same.
The last aspect of the matter is to examine the findings of Ld. CIT(A) that such payment could not be brought to tax in this AY. It is undisputed fact that though the seized document contains all relevant particulars with regard to impugned transaction, it do not contain any date of making cash payment to the seller Shri Peter. No dates have been found mentioned anywhere in the seized document. The dates of making cash consideration were not ascertainable from any other document either available in the seized material or otherwise. In such a situation, Ld. CIT(A) would have no option but to evaluate the same as per normal business practices.
Undisputedly, the impugned sale transaction has been concluded vide sale deeds which are registered on 04-04-2013. The payments in cheques towards the sale consideration as stated in the relevant registered sale deeds were made through cheques dated 05-02-2013, 08-02-2013, 27-02-2013, 28-02-2013 and 18-03-2013. The Demand Draft payments towards the sale consideration were made vide DDs dated 03-04-2013. Clearly, the payment through banking channels have taken placed before registration of sale deeds. The registration of the sale deeds had taken place during FY 2013-14 whereas the payments towards the sale consideration through cheques and DDs had taken place during FYs 2012-13 and 2013-14. Therefore, it would be reasonable to conclude that the cash payments have also happened well before registration of sale deeds which fall in financial year 2013-14. As rightly held by Ld. CIT(A), in the normal course, registration of sale of immovable property is made only after receipt of the entire agreed sale consideration including the cash component, if any. Such a normal incident is understandable since the seller would not part with his rights and title over the property unless he is in receipt of the entire agreed sale consideration and he may not have any recourse to recovering the unpaid cash portion of the consideration from the buyer once the registration of sale deed is completed. Therefore, it would be reasonable to infer in the case of the assessee that the cash payments towards the sale consideration have been made on or before the date of registration of the sale deeds of the immovable property i.e., 04-04-2013, unless there is any documentary evidence on record to show that the cash portion of the sale consideration was made subsequent to the date of registration and that too nearly one year after the date of registration during the FY 2014-15. Therefore, we concur with the findings of Ld. CIT(A), in this regard and endorse the same.
On the given facts and circumstances, the adjudication of Ld. CIT(A), on merits, could not be faulted with. We endorse the same. In other words, the appeal of the revenue stand dismissed. Assessee’s Cross-objection 13. Ground No.1 is general in nature. Ground No.2 assails the validity of notice issued u/s 153A. No defect whatsoever has been shown to us while issuing notice u/s 153A. Ground Nos.3 to 13 stands dismissed. Ground No.14 is supportive in nature. Ground No. 15 is dismissed. We concur the adjudication of Ld. CIT(A) that the mentioning of incorrect Section was merely an inadvertent error. Ground Nos.16 & 17 is general in nature. The cross-objection sands dismissed. Conclusion 14. The appeal as well as cross-objection stand dismissed in terms of our above order.
Order pronounced on 2nd April, 2024 (V. DURGA RAO) (MANOJ KUMAR AGGARWAL) "ाियक सद!/JUDICIAL MEMBER लेखासद! / ACCOUNTANT MEMBER चे8ई Chennai; िदनांक Dated :02-04-2024 DS आदेशकी_ितिलिपअ&ेिषत/Copy of the Order forwarded to : 1. अपीलाथ"/Appellant 2. !"थ"/Respondent 3. आयकरआयुA/CIT 4. िवभागीय!ितिनिध/DR 5. गाडFफाईल/GF