DCIT, CENTRAL CIRCLE-3, SURAT vs. SHRI MAHENDRA CHAMPAKLAL MEHTA, SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND Dr. ARJUN LAL SAINI, ACCOUNTANT MEMBER IT(SS)A No. 06/Srt /2021 (Assessment Year: 2015-16) ITA No. 31/Srt /2021 (Assessment Year: 2016-17) (Physical hearing) D.C.I.T., Shri Mahendra Champaklal Mehta, Central Circle-3, 803, Megh Mayur Apartment, Vs. Surat. Opp. Lourdes Convent School, Athwalines, Surat. PAN No. ABDPM 2709 A Appellant/ Revenue Respondent/ Assessee

Department represented by Shri Ashok B. Koli (CIT-DR) Assessee represented by Shri Rasesh Shah, C.A. Date of hearing 02/08/2023 Date of pronouncement 06/09/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by the revenue are directed against the separate orders of learned Commissioner of Income Tax (Appeals)-4, Surat (in short, the ld. CIT(A) both dated 04/01/2021 for the Assessment years (AY) 2015-16 and 2016-17 respectively. In both these appeals, the certain facts in both years are common, therefore, with the consent of parties both appeals were clubbed, heard together and are being decided by this consolidated order to avoid the conflicting decision. For appreciation of facts, the appeal for the A.Y. 2015-16 is treated as a “lead case”. In this appeal, the revenue has raised following grounds of appeal:

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta

“1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in treating the MOU in question as dumb document and deleting the addition made of Rs.2,25,00,000/- on account of unexplained investment. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating the incriminating documents seized during the search action u/s. 132 of the Act in the case of Param Properties and deleting the addition made of Rs. 20,00,000/- on account of unexplained cash payments treating the documents seized as dumb document. 3. It is, therefore, prayed that the order the Ld. CIT(A)-4, Surat may be set aside and that of the AO may be restored to the above extent. 4. The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 2. Brief facts of the case are that the assessee is individual, engaged in the business of diamond trading, filed his return of income for A.Y. 2015-16 on 28/09/2015 declaring income of Rs. 18,70,610/-. A search action under Section 132 of the Income Tax Act, 1961 (in short, the Act) was carried out on 04/09/2015 in case of Param Properties of Surat. During the course of search action, certain evidences containing details of unaccounted cash transactions of their clients/financers and other brokers and builders were found. Besides that, a copy of Memorandum of Understanding (MOU) was seized as Annexure BS-2. The said MOU was in respect of agricultural land bearing R.S. No. 135 Block No. 168 admeasuring 28325 square meter in village Jothan, Talluka-Olpad, District-Surat. In the said MOU, the name of assessee was mentioned as one of buyer. Statement of partner of Param

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta Properties namely Shri Aagam V. Vadecha was recorded on oath wherein he has admitted that they have made investment in land in village-Jothan of Rs. 25.00 lacs in cash and as per MOU he is having 4% of share in the property. Name of assessee is also mentioned in the MOU having share of 36%. On the basis of such evidence, the Assessing Officer recorded satisfaction under Section 153C of the Act dated 02/01/2017 and issued notice to the assessee for filing return of income. In response to notice under Section 153C, the assessee filed his return of income declaring same income as filed initially under Section 139 of the Act. The Assessing Officer after serving notice under Section 143(2) of the Act, proceeded for assessment. During the assessment, the Assessing Officer noted that as per MOU, the assessee is having share of 36% in the land. The partner of Param Properties as stated that they have made part payment of Rs. 25.00 lacs in cash of their 4% of share. The Assessing Officer on the basis of share of Param Properties worked out actual value of entire property of Rs. 6.25 crores and share of investment in property proportionate to their share would be as under: Name Share Amount Rs. i. Asheshbhai Nanalal Doshi 36% 22500000 ii. Mahendra C Mehta 36% 22500000 iii. Pravinbhai H Shah 24% 15000000 iv. Param Properties 4% 2500000 62500000

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta 3. On the basis of aforesaid observation, the Assessing Officer issued show cause notice to the assessee as to why amount of Rs. 2.25 crores should not be treated as unexplained expenditure. In response to show cause notice, the assessee filed his reply dated 08/12/2017. In the reply, the assessee stated that he never entered into any type of such MOU or dealt with anybody with regard to said agricultural land. The unsigned MOU cannot be relied upon for drawing any inference. The MOU is unsigned and has no evidentiary value. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer held that the MOU in question is correctly and accurately contained the details of property. The land in question is actually registered in the name of one of the partner whose name appears in the MOU and thirdly as per MOU, the partners of property shall carry out development work in the land and if in future, in case the property is sold, they will divide the sale consideration after deducting the expenses. In the statement recorded in search action, partner of Param Properties stated that the assessee was having share of 36%. MOU was seized from the premises of Param Properties. Their partner admitted about the deed for purchase of land and disclosed unaccounted cash investment of Rs. 50.00 lacs, though, he stated that he received back cash in May, 2015. The said amount was surrendered as his disclosure as income for A.Y.

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta 2016-17. On the basis of such observation, the Assessing Officer made addition of Rs. 2.25 crores under Section 69 of the Act. 4. The Assessing Officer further noted that in the search action on Param Properties, certain other loose papers were found, some of which were seized vide Annexure-BS-2. These documents revealed cash payment by one ‘MC’ to Param Properties and also cash payments by Param Property. One of such seized material was scanned by Assessing Officer in assessment order. On the basis of said fact, the Assessing Officer was of the view that such image was taken from cash book of unaccounted transaction seized during the search action. Such unaccounted transaction was undertaken by Param Properties. The cash is written in coded form by ignoring three last digits i.e. Rs. 500 means Rs. 5.00 lacs, Rs. 2831.530 means Rs. 28,31,530/- and so on and so forth. There was reference on such paper ‘MC’. Further on perusal of I-phone backup of Shri Agam V. Vadecha, partner of Param Properties, which was also part of seized documents that one of the transaction has been made in the name of “M.C. Mehta”. On the basis of such reference, the Assessing Officer was of the view that MC stands for Mahendra Champaklal Mehta (assessee). The gist of transaction featuring in the seized document for A.Y. 2015-16 were of Rs. 20.00 lacs. On the basis of such observation, the Assessing Officer issued show cause notice dated 12/12/2017 to explain in respect of seized

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta material and show cause as to why in absence of proper and satisfactory explanation, the transaction reflecting in the seized material should not be treated as unexplained cash transaction and be added in the income of assessee. 5. The assessee filed his reply dated 18/12/2017. The assessee denied his involvement in the transaction. The assessee also stated that MC means not only Mahendra Champaklal Mehta and thousands of name are available with abbreviation of ‘MC’. The reply of assessee was not accepted. The Assessing Officer held that the assessee failed to appreciate that one of the seized document specifically reflects entry in name of Mahendra Champaklal Mehta. Phone number of assessee was also in the back up of i-phone of Shri Agam V. Vadecha. The documents seized in the course of search action has strong evidential value and it was firmly corroborated from the back up of i-phone of Agam V. Vadecha. As per enquiry and evidence gathered by department during the search and post search proceedings, it is established beyond reasonable doubt that the documents seized from Param Properties is related with assessee. The admission of partner of Param Properties cannot be brushed aside. The Assessing Officer on the basis of his aforesaid observation, made addition of Rs. 20.00 lacs in the hands of Param Properties on protective basis and in the hands of assessee on substantive basis.

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta 6. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed his detailed written submissions on all the additions. On the addition, on the basis of MOU of Rs. 2.25 crores, the assessee stated that the documents of MOU is seized from the third party, is unsigned MOU/partnership deed. The same is on plain paper. It does not contain any consideration whatsoever to have been passed/invested by assessee. There is no statement of the said parties that the assessee has executed the said deed or made any investment in the partnership. Further the partnership deed is allegedly for development of farm house on the land owned by one Asheshbhai N. Doshi by contributing the development expenses in equal proportion and the profit on sale thereof, would be distributed amongst the partners as per their profit share in ratio. There is no evidence whatsoever suggesting any investment by the assessee as per the said deed. The land is still in the name of original owner i.e. Asheshbhai N. Doshi. The assesse never owned such land in his name. 7. On the addition of Rs. 20.00 lacs, the assessee submitted that in the seized material, mainly cash book of Param Properties contained cash receipts and cash payment with the abbreviation “MC”. During the course of search proceedings, statement of Agam V. Vadecha, partner of Param Properties was recorded, in reply to question No. 5 while

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta explaining the cash transaction, as reflected in Annexure-BS-1, he stated that Rs. 35.00 lacs paid in cash to Manojbhai, commonly known as ‘M.C.’ towards flat No. 323 of Star Galaxy Project. Manojbhai is a broker and I shall give his details within two details (days). Aagam v. Vadecha further in the statement before the Investigation Wing on 08/12/2015 reiterated that abbreviation ‘M.C.’ is a broker namely Manojbhai, the assessee also filed copy of said statement. The assessee stated that in his statement partner of Param Property clearly stated that ‘M.C.’ is a broker whose name is Manojbhai with whom we had carried out resale deal whose details are already given during earlier statement. Copy of statement of Shri Agam V. Vadecha was filed. The assessee submitted that Assessing Officer completely ignored the statement of partner of Param Properties and assumed the abbreviation “M.C.” is pertaining to assessee. The Assessing Officer on the basis of noting in the name of ‘M.C. Mehta’ from the backup of I-phone of Shri Agam V. Vadecha held that ‘M.C.’ stand for Mahendra Champaklal Mehta i.e. the assessee. The Assessing officer also supported his view by the contact list of i-phone of Shri Agam V. Vadecha. The assessee countered such fact by stating that the Assessing Officer grossly erred in making adverse inference on the basis of loose papers found from the third party. Therefore, presumption under Section 132(4A)/292C is not available against the assessee. Further the said third party clearly in

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta his statement stated that “M.C.” is pertaining to broker Manojbhai. Again the seized paper does not contain full name of assessee nor his signature nor the entry of the seized paper in the assessee’s handwriting and hence no inference whatsoever can be drawn against the assessee. Lastly the Assessing Officer has not brought any corroborative evidence to prove that the assessee has entered into any such transaction with Param Properties. The assessee also stated that the addition was made on the basis of documents seized from third party without providing opportunity of cross examination of said third party which is absolutely illegal, bad in law and required outright annulment. To support all his submission, the assessee relied upon the decision of Hon'ble Apex Court in Andaman Timber Industries V CCE (2015) 281 CTR 0241 (SC), Hon'ble Gujarat High Court in DCIT Vs Mahendra Ambalal Patel (2010) 40 DTR 0243 (Guj), CBI Vs V.C. Shukla AIT 1998 SC 1406, Common Cause & Others Vs UOI & Ors. (2017) 98 CCH 0028 (SC), Hon'ble Bombay High Court in CIT Vs Lavanya Land Pvt. Ltd. (2017) 397 ITR 0246 (Bom). 8. The ld. CIT(A) after considering the submissions of assessee and the contents of assessment order deleted all the additions made by Assessing officer. On the addition of Rs. 2.25 crores, the ld. CIT(A) held that MOU was found at the premises of third party. Such MOU was not signed by the parties. Development work mentioned in the MOU was

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta never undertaken. The property is still in the name of Asheshbhai Bhai Nanalal Doshi. The additions of figure are nowhere mentioned in the MOU. The said figure was worked out by the assessing officer on the basis of statement of Aagam Vadecha, who stated in his statement that he made investment of Rs. 25.00 lakh. No date of payment is ascertained by the assessing officer. On the basis of aforesaid facts and contention, the assessee contended that unsigned MOU has no evidentiary value and cannot be accepted in one sided approach. The Assessing Officer taken the total sale consideration at Rs. 6.25 crores on the basis of statement Shri Aagam V. Vadecha, who is one of the partner, whose name is mentioned in the MOU, having 4% share. Since Shri Aagam V. Vadecha allegedly paid Rs. 25.00 lacs, the value of Rs. 25.00 lacs were taken as 4% and the Assessing Officer extrapolated the figure of sale consideration of entire land at Rs. 6.25 crores. The ld. CIT(A) recorded that it is settled principle that extrapolation on the basis of part period or part value is not permissible. The ld. CIT(A) further noted that no evidence found during the course of search or statement of any person which proved that the assessee had paid Rs. 2.25 crore for purchase of land. The Assessing Officer made addition without having any documentary or oral evidence. The Assessing Officer made addition without any basis of evidence. There is no document found during the course of search which may contain details

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta of payment of Rs. 2.25 crore paid by assessee for purchase of land. On the aforesaid observation, the ld. CIT(A) deleted the entire addition. 9. On the addition of Rs. 20.00 lacs under Section 69, the ld. CIT(A) held that the Assessing Officer made addition on the basis of documents seized from Param Properties reveals cash payment made by one “M.C.” to Param Properties. The Assessing Officer stated that the seized document is basically a cash book keeping the record of unaccounted cash transaction by Param properties has also facilitated it wherein the cash is written in coded form ignoring last three digits applying such three digits coded form. The ld. CIT(A) held that it is undisputed fact that the documents relied by Assessing officer for making addition were found from the premises of Param Properties which is a third party. The document is not in the handwriting of assessee nor signed by assessee. On specific question by Investigating Officer to identify the name of person written on this paper, the partner of Param Properties while replying to question No. 5 stated that abbreviation “M.C.” refers to a broker Manojbhai and not the assessee. Further Shri Agam v. Vadecha while filing written submission dated 08/12/2015 before the Investigation Wing reported that M.C. is a broker whose name is Manojbhai with whom they carried out resale deal transaction. On the aforesaid basis, the ld. CIT(A) concluded that the documents are neither in the handwriting of assessee nor signed by assessee were

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta found from the third party. The third party identified ‘M.C.’ as some other person Manojbhai and not the assessee. The complete name of assessee is not written on such papers. Such fact clearly shows that the documents are dump document as far as assessee is concerned and making addition on relying on such document is not justified. The ld. CIT(A) also held that case is also covered by the binding decision of Hon’ble Apex Court in CBI Vs V.C. Shukla and Common Cause and Ors Vs Union of India (supra). On the observation of Assessing Officer about the backup of i-phone of Agam v. Vadecha, the ld. CIT(A) held that storing of assessee’s telephone number in others phone cannot be the basis of making addition particularly when after taking back up of phone, no communication was found which even remotely indicate that the assessee had undertaken the transactions noted down in the seized material with Param Properties. None of the entries in the regular books of account of assessee match with the entries of seized material. There is no cheque entry tallying with any of the bank account of assessee. On the basis of such finding, the ld. CIT(A) deleted the addition of Rs. 20.00 lacs as well. Further aggrieved, the revenue has filed present appeal before the Tribunal. 10. We have heard the submissions of the learned Commissioner of Income Tax-Departmental Representative (ld. CIT-DR) for the revenue and the ld. AR of the assessee. We have also gone through the orders of the

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta lower authorities carefully. At the outset of hearing, the ld. AR of the assessee submits that ground No. 1 of appeal raised by revenue is covered by the decision of Tribunal in case of DCIT Vs Shri Pravinchandra Hiralal Shah in IT(SS)A No. 33/Srt/2021 dated 13/06/2022 wherein similar addition on the basis of alleged partnership/MOU, wherein his share was shown at 24% and the Assessing Officer made addition of Rs. 1.50 crore. However, on appeal before the ld. CIT(A), the addition was deleted and on further appeal before the Tribunal, order of ld. CIT(A) was upheld. The ld. AR of the assessee filed the copy of decision of Tribunal in IT(SS)A No. 33/Srt/2021 dated 13/06/2022. 11. On the other hand, the ld. CIT-DR for the revenue after going through the decision of Tribunal in DCIT Vs Shri Pravinchandra Hiralal Shah (supra) submits that he strongly relied on the order of Assessing Officer and the statement of fact supporting the Assessing Officer 12. We have considered the submissions of both the parties and perused the record carefully. On careful perusal of order of Tribunal in DCIT Vs Shri Pravinchandra Hiralal Shah in IT(SS)A No. 33/Srt/2021 and we find that on the basis of MOU found at the premises of Param Properties, the Assessing Officer made similar addition of Rs. 1.50 crore on the basis of share allegedly mentioned on MOU which was deleted by ld.

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CIT(A) and on further appeal before the Tribunal, the combination of this bench has passed following order: “9. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. The Assessing Officer made addition by taking a view that as per MOU, the assessee was having 24% share in the land and Param Properties was having 4% share. The partner of param Properties has stated that they made part payment of Rs. 25.00 lacs in cash for 4% of their share. The Assessing officer took his view that 4% share of property is valued at a minimum of Rs. 25.00 lacs then the total actual value of entire property would be of Rs. 6.25 crores. The Assessing Officer noted that the assessee questioned the sanctity of MOU on the ground that it is not signed and has no evidentiary value. The Assessing Officer held that the MOU in question correctly and accurately described the property, the land in question is actually registered in the name of one of the partner. In the statement, partner of Param Properties stated that the firm was 4% share. As purchase deed of property was seized from the premises of Param Properties which was registered on 31/3/2014 and the details of property is identical as mentioned in the MOU. The Assessing Officer on the basis of his aforesaid observation drawn his conclusion that the assessee made payment of Rs.1.50 crore for purchase of land recorded in MOU which is unaccounted in nature against which no plausible explanation is offered by assessee and was added to the income of assessee. 10. We find that before the ld. CIT(A), the assessee not only objected against the validity of order under Section 153C r.w.s. 143(3) of the Act but the additions on merit. The objection of assessee on validity of order under Section 153C was rejected by the ld. CIT(A) by taking a view that the assessee himself admitted that he has paid Rs. 50.00 lacs in cash for purchase of this land which was returned to him as the deal was cancelled. It was held that once the assessee admitted investment in 14

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the aforesaid land, though which was returned to him, then taking stand that the notice under Section 153C is illogical and dismissed. The ld. CIT(A) held that the assessee admitted that he paid Rs. 50.00 lacs for investment in land as recorded in the MOU which was returned back as the deal was not materialized. The assessee has disclosed Rs. 50.00 lacs in A.Y. 2016-17 and paid taxes thereon. On the basis of aforesaid facts and contention, the assessee contended that unsigned MOU has no evidentiary value and cannot be accepted in one sided approach. This contention of assessee was rejected by ld. CIT(A). We find that the ld. CIT(A) agreed with the contention of assessee that the additions are made under Section 153C on the basis of documents found during the course of search. No amount of consideration is recorded on the MOU itself. The Assessing Officer worked out total sale consideration at Rs. 6.25 crores on the basis of statement Shri Aagam V. Vadecha, who is one of the partner, and his name is mentioned in the MOU, having 4% share. Because Aagam V. Vadecha allegedly paid Rs. 25.00 lacs, the value of Rs. 25.00 lacs were taken as 4% and the Assessing Officer extrapolated the figure of sale consideration of entire land at Rs. 6.25 crores. The ld. CIT(A) noted that extrapolation on the basis of part period or part value is not permissible. The ld. CIT(A) further noted that no evidence during the course of search or statement of any person which proved that the assessee had paid Rs. 1.50 crore for purchase of land. The Assessing Officer made addition without having any documentary or oral evidence. The Assessing Officer made addition without any basis of evidence. There is no document found during the course of search which may contain details of payment of Rs. 1.50 crore paid by assessee for purchase of land. On the basis of the said observation, the ld. CIT(A) deleted the entire addition. We find that the Ld. CIT(A) on proper appreciation of fact correctly held that the additions made by the assessing officer is not based on evidence on record. No contrary facts or law is brought to our notice to take other

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta view, hence, we affirm the order of Ld. CIT(A). in the result, the grounds of appeal raised by the revenue are dismissed.” 13. Considering the aforesaid categorical decision of this Bench on the basis of same set of fact with respect to same document, seized from the premises of Param Property, wherein similar addition was deleted by ld CIT(A), which we affirm in our order, therefore following the principle of consistency, we affirm the order of ld CIT(A). We again find that similar addition was made against Asheshbhai Nanalal Doshi in the assessment completed under section 153C, on appeal the ld CIT(A) deleted the said addition, and the order of ld CIT(A) was affirmed by this Tribunal in IT(SS)A No.07/Srt/2021 dated 2108.2023. 14. The Hon’ble Delhi High Court in CIT Vs Gain Chand Gupta (2014) 46 taxmann.com 372 (Delhi) also held that no addition can be made on account of unexplained investment if MOU for purchase of land as well as receipt was given by seller found during the survey was unsigned documents and the transaction was not materialised. Thus in view of the above discussions, we do not find any infirmity in the order passed by ld CIT(A). In the result, ground of No. 1 of appeal is dismissed. 15. Ground No. 2 of appeal relates to deleting the addition of Rs. 20.00 lacs, the ld. CIT-DR for the revenue supported the order of Assessing Officer. The ld. CIT-DR for the revenue submits that from the documents and evidences seized from the premises of Param Properties includes certain loose papers which was seized as Annexure-BS-1 which 16

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta reveals the cash payment by one ‘M.C.’ to Param Properties. Such noting on the loose paper were basically cash book containing record of unaccounted cash transaction by Param Properties. The Assessing Officer made addition on the basis of corroborative evidences found from the details extracted from the I-phone of Agam V. Vadecha wherein Agam V. Vadecha was regularly in touch with the assessee. The ld. CIT(A) deleted the addition by accepting the submission of assessee without appreciating the corroborative and concrete evidence and the findings of Assessing Officer. 16. On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR of the assessee submits that during the course of search proceedings at the premises of Param Properties, statement of its partner was recorded, a specific question vide question No. 5 was asked to him, in response to such question, he disclosed that ‘M.C.’ is a broker namely Manojbhai with whom they had carried out resale deal. The Assessing Officer on his assumption and presumption has inferred that ‘M.C.’ means Mahendra Champaklal Mehta (assessee). The Assessing Officer ignored the statement of Agam V. Vadecha. The ld. AR of the assessee submits that no adverse inference can be drawn against the assessee on the basis of documents seized from the premises of third party in absence of corroborative evidence. Further no independent investigation was carried out to connect the assessee. The

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assessee with the alleged loose papers with regard to unaccounted investment against the assessee. The ld. AR of the assessee relied on similar case laws as relied against ground No. 1 of the appeal as well as the following case laws:  K.P. Varshese Vs ITO 7 Taxman 13 (SC)  Common Cause (A Registered Society) Vs UOI (2017) 394 ITR 220 (SC)  CIT Vs P.V. Kalyanasundaram (2007) 294 ITR 49 (SC)  Umacharan Shaw & Bros Vs CIT (1973) 37 ITR 271 (SC)  Lalchand Bhagat Ambica Ram Vs CIT (1959) 37 ITR 288 (SC)  Dhakeshwari Cotton Mills Ltd. Vs CIT (1954) 26 ITR 775 (SC)  CIT Vs Maulikumar K. Shah 307 ITR 137 (Guj)  Govindbhai N. Patel Vs DCIT 41 taxmann.com 147 (Guj)  CIT Vs Lavanya Land (P) Ltd. (2017) 83 taxmann.com 161 (Bom)  ACIT Vs Miss Lata Mangeshkar (1974) 97 ITR 696 (Bom)  CIT Vs Anil Khandelwal (2015) 93 CCH 0042 (Del)  CIT Vs S.M. Aggarwal 162 Taxman 3 (Del)  CIT Vs Praveen Juneja ITA No. 56/2017 (Delhi HC)  CIT Vs Vineeta Gupta 46 taxmann.com 439 (Del) 17. We have considered the submissions of both the parties and perused the record carefully. We have also deliberated on the case laws relied by the lower authorities as well as by the ld. AR of the assessee. We find that the Assessing Officer made addition of Rs. 20.00 lacs under Section 69C of the Act on account of unexplained cash payment. The Assessing Officer made such addition on the basis of seized document from Param Properties wherein some word ‘M.C.’ was recorded. The Assessing Officer considered such document as a cash book for keeping

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta the record of unaccounted cash transaction by Param Properties which was used by them for making various bookings in each project. The Assessing Officer on the basis of details and the backup of I-Phone of Shri Agam V. Vadecha recorded that one of the transaction in the seized paper is made in the name of Mahendra Champaklal Mehta (assessee). The Assessing Officer concluded that ‘M.C’ stand for Mahendra Champaklal Mehta (assessee) and on the basis of call record/data of Shri Agam V. Vadecha, the assessee was in regular touch with Shri Agam V. Vadecha. The Assessing Officer held that partner of Param Properties admitted to have written the seized document in his own handwriting leads to credibility and assumptions to be a greater value then what it would have been otherwise. The entries on the document cannot be washed away. There is clinching evidence to draw the inference in taxing the amount reflecting in the seized document in the hands of assessee on substantive basis and in the hands of Param Properties on protective basis. 18. We find that the ld. CIT(A) deleted the addition by taking a view that in its undisputed fact that the documents relied by Assessing Officer for making addition were found from the premises of Param Properties which is a third party. The documents are not in the handwriting of assessee nor signed by him. The Investigating Officer while recording statement of partner of Param Properties under Section 134(2) of the

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta Act on 30/09/2015 asked about abbreviation ‘M.C.’ who reply that ‘M.C.’ refers to a broker namely Manojbhai. Again Shri Agam V. Vadecha in his written submission dated 08/12/2015 filed before the Investigation Wing reiterated that ‘M.C.’ is a broker whose name is Manojjbhai with whom they had carried out resale deal transaction. On such observation, the ld. CIT(A) concluded that neither the document is signed nor found from the possession of assessee, the party from whom documents were found, identified ‘M.C.’ as some other person i.e. Manojbhai and not the assessee. On such observation, the ld. CIT(A) held that the Assessing Officer was not justified in relating this document or transaction with the assessee. Complete name of assessee is not mentioned on these papers. Other names are also written on these papers. The ld. CIT(A) treated such paper as dump document and by referring the decision of Hon'ble Supreme Court in CBI Vs V.S. Shukla and Common Cause & Others Vs UOI & Ors. (supra) wherein it was held that when documents were found from third party and entries were not confirmed that those entries belong to assessee, there was no question of any assumption or believe that such entry belongs to assessee and no addition can be made. On the observation of Assessing Officer with regard to back up of I-Phone of Shri Agam V. Vadecha, the ld. CIT(A) held that storing the assessee’s phone number and other persons’ mobile number cannot be the basis for making addition,

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta particularly even after taking backup of I-Phone, no communication was found which remotely indicate that the assessee has undertaken such transaction recorded in the seized material. The Assessing Officer’s finding in treating the abbreviation ‘M.C.’ pertaining to the assessee is not justified and deleted the entire addition. We also find that the Assessing Office has not made any independent investigation nor brought any adverse material on record to connect with the assessee with the seized material. 19. We are also of the considered view that once, the person whose possession, such document, on the basis of which the Assessing Officer has drawn his belief has not taken the name of assessee while explaining ‘M.C.” as Mahendra C. Mehta rather explained it Manojbhai, the Assessing Officer was not justified in drawing conclusion that ‘MC’ means Mahendra C. Mehta. In view of the aforesaid factual discussion, we do not find any justification for making addition. Therefore, we affirm the order of ld. CIT(A) in deleting the addition of Rs. 20.00 lacs. In the result ground No. 2 of the appeal raised by the revenue is dismissed. 20. In the result, this appeal of revenue is dismissed. ITA No. 31/Srt/2021 for AY 2016-17 by Revenue. 21. In this appeal, the revenue has raised following grounds of appeal; (1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 5,21,06,685/- on account of 21

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unexplained cash receipts, based on incriminating evidence gathered in the course of search u/s 132(1) of the Act in the case of M/s Param Properties, Surat. (2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,47,05,045/- on account of unexplained cash payments based on incriminating evidence gathered in the course of search u/s 132(1) of the Act in the case of M/s Param Properties, Surat. (3) It is, therefore, prayed that the order the Ld. CIT(A)-4, Surat may be set aside and that of the AO may be restored to the above extent. (4) The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 22. We find that on the basis of documents seized as BS-1, the Assessing Officer while framing assessment order for AY 2016-17 made addition of Rs. 5.21 crores on account of unexplained cash receipt and Rs. 1.47 crore on account of unexplained cash payment. The ld. CIT(A) deleted the addition of Rs. 1.47 crore with same observation as observed while deleting addition of Rs. 20.00 lacs in appeal for A.Y. 2015-16. The ld. CIT(A) also held that none of the entries in the books of assessee is matches with the seized material. There is no cheque entry dealing with the bank account of assessee. There is no such reference in the assessment order. The assessee or his relative have not made any booking or shown purchases through Param Properties in Star Galaxy, Florence or SNS Interio as featured in the seized document from Param Properties. Thus, addition of unaccounted payment of Rs. 1.47 crore was deleted. So far as deleting the addition of Rs. 5.21 crores on 22

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta accounted receipt, the ld. CIT(A) held that the Assessing Officer has considered duplicate entry to the extent of Rs. 1.52 crore, hence, such total addition needs to be deleted. Further none of the flat, shop as mentioned in the seized document, was purchased or booked by assessee. The ld. CIT(A) by reiterating his conclusion that he has already held that entries do not pertain to ‘M.C.’, therefore, such specific ground has become infructuous and not required any adjudication. 23. Before us, both the parties reiterated their submission as made for addition of Rs. 2.00 lacs in A.Y. 2015-16. We find that there is no independent investigation or corroborative material to make huge addition on the basis of mere assumption by drawing conclusion that ‘M.C.’ means Mahendra Champaklal Mehta (assessee) particularly when the persons at whose premises a search was carried out clearly explained ‘M.C.’ for Manojbhai and not the assessee. The Assessing Officer in absence of bringing adverse material to corroborate his finding, was not justified in making such addition against the assessee. 24. The Hon’ble Supreme Court in Common Cause Vs Union of India (supra) held that the loose sheets of papers are wholly irrelevant as evidence not being admissible under section 34 of Evidence Act, so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. It was also held that there should

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta be some relevant and admissible evidence and some cogent reason, which is prima facia reliable that too, supported by some other circumstances pointing out that particular third person against, whom the allegation has been levelled was in fact involved in the matter or has done some act during that period, which may have correlation with random entries. Further, the Hon’ble Supreme Court in Umacharan Shaw & Bros Vs CIT (1959) 37 ITR 271-SC, held conclusion which is based on suspicious could not take place proof of the matter. The Jurisdictional High Court in CIT Vs Maulik Kumar K Sheth (2008) 307 ITR 137, also held that mere entries in the seized material are not sufficient to prove that the assessee indulged in such transaction. The assessing officer has to bring corroborative evidence that entries in the seized material represented transaction. Delhi High Court in CIT Vs Anil Khandelwal (2015) 93 CCH 42 also held that in absence of any corroborative evidence found during course of search at the premises of assessee, no adverse inference can be drawn against the assessee merely on the basis of seized material from the premises of third party. And that the revenue was not justified in resting its case just on loose papers and documents found from third party if such documents contained narration of transaction with assessee. 25. Thus, in view of aforesaid factual and legal position, we affirm the order of ld. CIT(A), with our additional observation. In the result,

IT(SS)A No. 06 & ITA 31/Srt/2021 DCIT Vs Sh. Mahendra Champaklal Mehta grounds of appeal raised by revenue for A.Y. 2016-17 are also dismissed. 26. In the result, this appeal of revenue is dismissed. Order pronounced in the open court on 06th September, 2023.

Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 06/09/2023 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR 5. Guard File By order

Sr.Private Secretary, ITAT, Surat