SHRI SURESH KUMAR NAMDEO,BILASPUR(CG) vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, BILASPUR(CG)

आयकर अऩीऱीय अधधकरण, रायऩुर न्यायऩीठ, रायऩुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR श्री रविश सूद, न्याययक सदस्य एवं श्री अरुण खोड़वऩया, ऱेखा सदस्य के समक्ष । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM आयकर अऩीऱ सं./ITA No.84/RPR/2016 (ननधाारण वषा / Assessment Year :2004-2005) Suresh Kumar Namdeo, Vs ACIT, Circle-2(1), Bilaspur A-9, Green Garden Colony, Mungeli Road, Bilaspur (C.G.) PAN No. : ABLPN 0899 A (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) ..

ननधााररती की ओर से /Assessee by : Shri G.S.Agrawal,CA राजस्व की ओर से /Revenue by : Shri P.K.Mishra, CIT-DR सुनिाई की तारीख / Date of Hearing : 03/08/2022 घोषणा की तारीख/Date of Pronouncement : 17/10/2022 आदेश / O R D E R Per Arun Khodpia, AM : This appeal is filed by the assessee against the order passed by the CIT(A), Bilaspur, dated 15.01.2016 for the assessment year 2004-2005. 1. That under the facts & the law, the provisions of Sec. 153C are not applicable, therefore, the Assessment Order be annulled. 2. That under the facts & the law the provisions of Sec. 153C are not applicable in as much as no satisfaction was recorded by the learned Assessing Officer before issue of Notice U/S 153C. Prayed to annul the Assessment Order. 3. That under the facts & the law, the provisions of Sec. 153 are not applicable as no money, bullion, jewellery or other valuable articles or things or books of accounts or documents were seized belonging to the assessee. Prayed to annul the Assessment Order. 4. That under the facts & the law, the learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 10,00,000/- made by the learned Assessing Officer rejecting the explanations and supporting filed. Prayed that Rs. 10,00,000/- added by the learned Assessing Officer is not income of the appellant and the same has been added under presumption & surmises and be deleted. 2. Brief facts stated are that the assessee, Shri Suresh Kumar Namdeo, an individual was an employee of Chhattisgarh Government as

2 ITA No.84/RPR/2016 Engineer in Irrigation Department. Assessee has originally filed his ITR on 10.08.2004 declaring a taxable income of Rs.1,81,638/-. Subsequently, on 30th & 31st May 2008, a search operation was carried on the residential premises of Shri Shyam Choudah, Jabalpur. In the said search operation out of the seized material, as per Annexure A/4/2/13 page no 64 & 65 wherein the name of assessee Suresh Kumar Namdev, Bilaspur and Shri S.K. Behere were found with a hand written noting of Rs. 8 + Rs. 2 Lakh. On the basis of above Ld AO has issued notice under section 153C/148 which was duly served on the assessee. Explanations were given before the AO, but AO had rejected the claim and explanations of the assessee and framed the assessment with an addition of Rs. 10Lac. 3. To challenge the findings of the AO, assessee preferred an appeal before the Ld CIT(A), but again failed to substantiate its defense. Now, the assessee is before us with this appeal to dispute the order of the Ld CIT(A) on this issue. 4. At the outset, Ld AR of the assessee submitted that the order of the AO was on the basis of presumptions, surmises and arbitrary, thus deserves to be annulled. It is further submitted that the Ld AO while rejecting the explanation offered by the assessee mentioned that “Moreover, in income-tax proceedings, pre-preponderance of possibilities prevails rather than fool proof evidence construed as for Evidence Act. This liberty is granted in Income Tax proceedings because of very nature of white collar crimes.”, thus the very basis of addition is presumption and surmise. On this aspect Ld AR had placed a

3 ITA No.84/RPR/2016 case law Uma Charan Shan & Bros – 37 ITR 2171 SC, wherein it was held that suspicion, however grave, cannot take place of proof. Ld AR further contented that section 153C is not applicable in the present case since no money, bullion, jewellery or other valuable article, books of account or documents belonging to the assessee was sized. Only jotting on loose paper wherein name of assessee was mentioned, thus provisions of section 153C are not applicable. It is submitted that the order of the AO was an arbitrary order, since information sought by the assessee regarding who have made the jotting, from whom the documents were seized, there were cuttings in the loose paper, it appears to be rough jottings and thus it was a dumb document, there were arithmetical errors and the jotting was illegible at various placed. Ld AO on this aspect have not given any reply and proceeded ex-parte to make the addition, without allowing any further opportunity to the assessee. It is submitted that the assessee has purchased a plot at Gram: Lamti, Jabalpur, Kh. No 35/24 and 35/33, H. No. 34, Later, the assessee was approached by Chhaya Builder through its partner Mr Ajay Tiwari for an scheme to offer exchange of its existing plot with another plot at Laxmipur measuring 2000 to 2500 sq. Ft with construction of a house about 1300 sq ft. Assesse found the said offer attractive thus accepted the same and to give effect to the said transaction an Exchange Agreement was executed on 06.04.2003. It is further submitted that, since the assessee was a government employee, all due intimations under government rules required in this regard were submitted to the Employer much prior to the

4 ITA No.84/RPR/2016 date of search in the premises of Shri Choudhah. It is submitted without prejudice that the impugned loose paper page no 64 & 65 shall be treated as Dumb Documents in terms of submissions of assessee herein before. In this respect following cases were relied by the AR- (1) CBI Vs. V.C. Shukla (1998) 3 STC 410 SC, (2) CIT Vs. Girish Chaudhary (2008) 296 ITR 619 (Delhi). Thus, it was the prayer of the assessee that the order of AO was bad in law, void ab initio, only on presumptions, arbitrary, ignoring the fact of the case, deserves to be annulled. It is submitted that the provisions of the sections 153C are not applicable in the present case since no satisfaction was recorded by the Ld AO before issuance of notice u/s 153C. It is submitted that, the assessee had requested to the Ld AO for supply of reasons on 28.01.2019, 12.02.2019 and 20.04.2019 but no reasons for satisfaction were provided by the Ld AO, on the issue of satisfaction has placed in its paper book various judicial pronouncements listed as under: i) CIT Vs. Mechmem 11-C (2016) 380 ITR 0591 (MP), wherein it is held as under :- IT: Where pursuant to search proceedings carried out at premises of partners, assessment proceedings were completed in case of assessee-firm under section 153C, read with section 143(3), since no satisfaction had been recorded prior to issuance of notice under section 153C, impugned assessment proceedings deserved to be quashed. ii) Avalanche Reality Pvt. Ltd. Vs. ACIT(2018) 54 CCH 0295 Indore Trib dated 04.12.2018, wherein it is held as under :- 9. Admittedly, in the present case, no satisfaction note by the A.O. of the searched person is furnished by revenue, despite categorical directions dated 21.6.2017 & 17.5.2018 given by this Tribunal. However, a satisfaction note in the case of assessee has been furnished by the revenue vide letter dated 24.4.2017. Ld. CIT(DR) fairly conceded the fact that despite

5 ITA No.84/RPR/2016 various reminders, the satisfaction note by A.O. of searched person i.e. M/s. Phoenix Devcons Pvt. Ltd., 434, Orbit Mall, Indore is not made available. 10. The Hon'ble jurisdictional High Court in the case of CIT Vs. Mechmen 11-C (supra) has held as under: 11. The revenue has not brought to our notice any other binding precedent by the Hon'ble Supreme Court or the Hon'ble jurisdictional High Court. We therefore, respectfully following the Hon'ble High Court of Madhya Pradesh in the case of CIT Vs. Mechmen 11-C (supra) hold that the proceedings u/s 153C of the Act is not validly initiated and is contrary to settled position of law and the same is therefore hereby quashed. iii) Kranti Impex P. Ltd. Mumbai Vs. ITO, ITA No.1229/Mum/2013 dated 28.02.2018, wherein it is held as under :- 38. In view of the aforesaid judgments, it is submitted that since the impugned seized papers are undated, have no acceptable narration and do not bear the signature of the assessee or any other party, they are in the nature of dumb documents having no evidentiary value and cannot be taken as a sole basis for determination of undisclosed income of the assessee. When dumb documents like the present loose sheets of papers are recovered and the Revenue wants to make use of it, the onus rests on the Revenue to collect cogent evidence to corroborate the noting therein. The Revenue has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the seized papers reveal the unaccounted on-money receipts of the assessee. Further, no circumstantial evidence in the form of any unaccounted cash, jewellery or investments outside the books of account was found in course of search in the case of assessee. Thus, the impugned addition was made by the AO on grossly inadequate material or rather no material at all and as such, deserves to be deleted. Hence, we are of the view that an assessment carried out in pursuance of search, no addition can be made simply on the basis of uncorroborated noting in loose papers found during search because the addition on account of alleged on-money receipts made simply on the basis of uncorroborated noting and scribbling on loose sheets of papers made by some unidentified person and having no evidentiary value, is unsustainable and bad-in-law. As such, the same is deleted. This issue of the assessee‟s appeal is allowed and that of the Revenue is dismissed." 7. In view of the above facts and circumstances, which are exactly identical to the facts in the case of Layer Exports Pvt. Ltd. (supra) and Mangalam Gems Pvt. Ltd (supra), wherein Tribunal has taken exactly identical view confirming quashing of the assessment. Respectfully following the Tribunal order, we

6 ITA No.84/RPR/2016 confirm the order of CIT(A) quashing the proceedings under section 153C of the Act. The appeal of Revenue is dismissed. Consequently, CO of the assessee which has raised the issue on merits need not to be adjudicated because it has become academic, accordingly dismissed. The appeals of Revenue and CO of the assessee, both are dismissed. iv) Pepsico India Holdings Private Limited Vs. ACIT & Anr (2015) 370 ITR 0295 (Delhi), wherein it is held as under :- Section 153C of the Income-tax Act, 1961 - Search and seizure, assessment in case of - Assessment of income in case of any other person - Assessment years 2006-07 to 2011-12 - Whether before provisions of section 153C can be invoked, Assessing Officer of searched person must be satisfied that seized material (which includes documents) does not belong to person referred to in section 153A - Held, yes - Whether finding of photocopies in possession of a searched person does not necessarily mean and imply that they 'belong' to person who holds originals; unless it is established that documents in question, whether they be photocopies or originals, do not belong to searched person, question of invoking section 153C does not arise - Held, yes [Paras 14 and 15] [In favour of assessee] v) Zaidun Leeng SDN BHD Artefact Projects Ltd.(JV) Vs. DCIT (2017) 186 TTJ 0091 (Nag), wherein it is held as under :- Section 153C of the Income-tax Act, 1961 - Search and seizure - Assessment of income of any other person (Recording of satisfaction)- Assessment years 2008-09 & 2009-10 - Recording of satisfaction by AO of person searched is a condition precedent for AO of 'other person' to acquire jurisdiction; unless such jurisdictional fact is satisfied, there can be no question of making assessment or reassessment of 'other person' [In favour of assessee] vi) Canyon Financial Services Ltd. & Ors. Vs. ITO & Ors. (2017) 399 ITR 0202(Delhi), wherein it is held as under :- Section 153C of the Income-tax Act, 1961 - Search and seizure - Assessment of any other person (Recording of satisfaction) - Assessment years 2006-07 to 2011-12 - On search of third party, certain documents were seized - Assessing Officer of assessee had not proved that seized documents belonged to assessee and not to searched person - Further, satisfaction notes recorded by Assessing Officer of assessee and Assessing Officer of searched person were identically worded - No reason was recorded how satisfaction note of Assessing Officer of assessee was a carbon copy of satisfaction note of Assessing Officer of searched person - Whether proceeding initiated against assessee under section 153C was unjustified - Held, yes [Paras 18 & 19][In favour of assessee]

7 ITA No.84/RPR/2016 5. Ld AR has submitted assessement and appellate orders in the case of Shri Shail Kumar Behre, whose name was also written in the seized document with the assessee and a similar addition of Rs. 10 lac was made by the AO, ACIT,Circle 1(1), Jabalpur, which subsequently deleted by the CIT(A)-1, Jabalpur, thus the same is an instance that the addition made by the Ld AO ion the case of assessee and sustained by the learned CIT(A) was arbitrary, unjustified, has not legs to stand, thus deserve to be set aside. Observations of Ld CIT(A) in the case of Shri Shail Kumar Behre were as under:- On a careful consideration of the above said undisputed factual conspectus of the case, it is clear that the order is both bad in law and on fact. The issue stood concluded prior to making the instant assessment and the alleged incriminating material is weak and substantially nonspeaking. Notwithstanding this, it is crystal clear that the transaction stands duly disclosed in various accounts as well as by the appellant before his employer. Probably what aroused the suspicion of the AO was the fact that the registry of the Saket Nagar property was done prior and the construction thereon was done in honour of the exchange agreement later. Be that as it may, it is clear from the assessment order that the only basis for the addition is the so-called document labelled page no.65 of Annexure A/4/1/13. The replies gave by the appellant have not been controverted in the assessment proceedings and no investigation whatsoever has been carried out to establish the inference drawn by the AO against the appellant. Accordingly, it is held that the assessment is both bad in law and in fact and hence, the addition made is directed to be deleted. 6. Ld DR on the contrary has supported the orders of the authorities below and submitted that the Ld CIT(A) has passed a reasoned speaking order after considering facts of the case in its entirety, thus the same deserves to be upheld. Ld DR drew our attention to the findings of Ld CIT(A)’s observations on this issue, which reads as under:- Decision - The Ld. AO has discussed the issue in Para-3 & 4 of his assessment order which inter alia states that assessee purchased a

8 ITA No.84/RPR/2016 plot of land at Lamti, Jabalpur, Khasra No. 35/24 measuring 4360 sq.ft. and 35/33 measuring 4796 sq.ft. on 19/03/1991. The total sq.ft. is 9156 sq.ft.. As per the assessee in the F.Y. 2003-04 an exchange d_eal_was made between the assessee and Shri Ajay Tiwari of Shri Chaya'Construction, Wright Town, Jabalpur, regarding the above stated plot with a plot at Laxmipur, Jabalpur measuring about 2000 to 2500 sq.ft. with construction of a house (1300 sq.ft. super buildup area). No money transaction was done, only exchange of plots was made, the Ld. AR had taken up the arguments before the Ld. AO which were not found favour by the AO. The Ld. AR submitted before me the general power of attorney by Suresh Kumar Namdeo and Smt. Sashikanta Namdeo, W/o. Shri Suresh Kumar Namdeo in favour of Shyam Choudaha, S/o. Shri B.D. Choudaha. Regarding Bandobast No. 642, measuring 0.53 hectares or 19714 sq.ft.. This is important to note that reply of the assessee is contradictory as power of Attorney of 19714 sq.ft. whereas the assessee agreed for exchange of total area of ]56sqlf) thus there is difference of 10558 sq.ft. with the property purchased by the assessee on 19/03/1991. Secondly, the assessee exchange with Shri Constructions partner Shri Ajay Tiwari. the property in Bandobast No. 643, the power of attorney dated 07/11/2003 mentions Bandobast No. 642 whereas registered deed of purchase mentions Bandobast No. 643. Thus, the exchange dated 25/03/2004 and power of attorney dated 07/11/2003 are at variance. The original property for which power of attorney was executed was sed by the assessee on 19/03/1991 through allotment by Nihal Property Deal in favour of the assessee arioHiTs" wife Smt. Sashikanta Namdeo by paying Rs.25,000/- specifying the Plot No. 66 and 67 on 02/02/1991. These two plots are adjoining plots and one Shri S.K. Behara, S/o. S.R. Behara with the assessee and his wife purchased and Shri S.K. Behara was allotted Plot No. 68 & 69 as layout of Kanchan Vihar shows available with the AO's record. It is also important to mention that in the east side of the total 19714 sq.ft. the land of Neeta Choudaha was present on the date of registered sale deed and it is also important to mention that said 4 plots had been demarcated by the State Authorities. The property in Bandobast No. 642 was allowed to be developed to one Shri Chanda Bai Shukla, Dixitpura, Jabalpur vide m. 1816/^mft/M. /^/3(l/240487/vji«ld^ f^TTcP 16.04.1987 from widif ^CRT mrnfi wherein Khasra No. 35/3 was allowed as market and gardening whereas, only Khasra No. 35/2 was allowed as housing and gardening and in the sale deed dated 19/03/1991 it has been mentioned on the 1st Page of sale deed. The exchange deal on simple paper by Shri Suresh Kumar Namdeo and Smt. Shashikanta Namdeo mentions Khasra No. 35/24, House No. 34, measuring plot 4360 sq.tt. and Smt. Shashikanta in Khasra No. 35/33 measuring plot 4796 sq.ft. The discrepancy was not brought to the knowledge of the AO and the value in power of attorney dated 07/11/2003 has been mentioned Rs. 7,32,500/- whereas, plot in exchange sold by

9 ITA No.84/RPR/2016 Shri Constructions to the assessee has been mentioned to have been sold at Rs. 3,54,000/- on 25/03/2004. At no place in general power of attorney or registered deed there is undertaking that there will be constructed house in the so called exchange plot measuring 2360 sq.ft.. In the seized paper Rs. 80/- per sq.ft. is also mentioned and in the name of Namdeo 9200 sq.ft. is mention whereas for the S.K. Behara 10500 sq.ft. is mentioned and @ 80/- 8L+2L B each is mentioned. This entry has been made on 09/04/2003 as mentioned above that land of Neeta Choudaha was also situated in the eastern side of allotted plot 66 & 67 to the assessee and his wife and 68 & 69 to Shri S.K. Behara, the name of same Neeta is also mentioned against whom 6L is written. Thus, this is not a dumb document but the assessee is not coming out with clarification because he has received some amount on 22/12/2004. Thus, after considering all the facts and circumstances I agree with the addition made by the AO on the basis of the seized documents as it is highly improbable that well developed plots demarcated for market and gardening intended to be used for commercial purpose showing value of Rs. 7,32,500/- in power of attorney should be exchanged with a smaller plot at Rs. 3,54,000/- just in the vicinity. The Rs. 8 lacs + 2 lacs value each is clearly speaking that assessee has received consideration over and above the exchange of plots. The agreement which appears in the record dated 06/04/2003 is an unregistered documents which cannot be considered enforceable in the eyes of law. This paper is out of diary which is meant for the jdistribution of profit from the project of Kanchan Vihar. The addition made by the AO is hereby confirmed. 7. We have heard the rival contentions, perused the material available and considered the case laws relied upon by the assessee. The core issues challenged by the assessee in the present appeal was that whether provisions of section 153C are applicable in the present case while the document seized and used against the assessee was alleged to be a dumb document. To understand this aspect first it would be better to under what should be a dumb document. The well settled legal position on this respect is that a non speaking document without any corroborative material, evidence on record and finding that such document has materialized into transactions giving rise to income of the assessee which

10 ITA No.84/RPR/2016 had not been disclosed in regular books of account by such assessee, has to disregarded for the purposes of assessments to be framed pursuant to search and seizure action. From the search and seizure perspective, such non speaking seized documents are referred to as ”Dumb Documents”. In the present case the rough jotting on a page identified from the seized documents as Annexure A/4/2/13 page no 65 on which name of the assessee and some figures were found written and the same were further connected with the exchange agreement executed between the firm “Chhaya Construction” and the assessee Shri Suresh Kumar Namdeo. Since the person on whom the search was conducted Shri Shyam Chodaha is also a partner in the said Chhaya Constructions, a nexus between the alleged documents has been established, based on which the addition was imposed, no other reason for mention of the name of the assessee on impugned seized document could be otherwise established by the assessee, thus the impugned document cannot be said to be a dumb document. However, the AO was on mistake while he had received response/explanation from the assessee but have not controvert on the same in the assessement order. No enquiry from the person from whom money as alleged was received by the assessee was made or brought on the records by revenue, which can be used against the assessee. Assessee’s request to provide copy of satisfaction recorded for proceedings u/s 153C, was also time and again disregarded by AO, this was a clear violation of principle of natural justice and an indication that no satisfaction was recorded. No cogent evidence to establish that

11 ITA No.84/RPR/2016 the money has changed hands and the assessee has received the same could be brought on record; in order to reach the conclusion that assessee had earned undisclosed income. 8. In backdrop of above observations and respectfully following the judgments of the Apex Court and various hon’ble high courts as well as coordinate benches of the ITAT (referred to supra), we are of the considered view that the addition made by the AO was not on the basis of convincing evidences that could establish the contention of the revenue. No recording of satisfaction which is basic requirement for initiating an assessment U/s 153C, as apparent from the conduct of the AO, that no reasons of satisfaction were provided to the assessee, much less no whisper of the same in assessment order. Information sought by the assessee like who have made the jotting, from whom the documents were seized, there were cuttings in the loose paper, it appears to be rough jottings and thus it was a dumb document, there were arithmetical errors and the jotting was illegible at various placed, were disregarded by the AO. In totality the order passed by AO was not justified. Besides relying on the findings of the AO, Ld CIT(A) has anticipated that the assessee has received some amount on 22/12/2004, surprisingly, on a date in the subsequent assessment year 2005-06 and confirmed an addition made in the AY 2004-05, which is not permissible under the income tax law. To strengthen the belief that there was an unexplained transaction, Ld CIT(A) had alleged that the hand written document seized during the search should be trusted as a valid document meant for distribution of profit and

12 ITA No.84/RPR/2016 the agreement dated 06/04/2003 which was duly signed by the parties was disregarded since the same was unregistered and unenforceable in the eyes of law. 9. On perusal of all the aforesaid findings of the revenue authorities which are not in line with the ratio of law laid down by the hon’ble courts, as much as that, if no satisfaction had been recorded prior to issuance of notice under section 153C, impugned assessment proceedings deserved to be quashed, contentions of the assessee were also not controverted in the assessment order, No investigation was conducted to establish that the impugned unexplained money was received by the assessee and no cogent evidence against the assessee for receipt of such undisclosed money was brought on records, thus, we are of the considered view that the decision of Ld CIT(A) to sustain the addition without any cogent basis, deserves to be quashed and the addition of Rs.10,00,000/- is directed to be deleted. 10. In the result appeal of the assessee is allowed. Order pronounced in pursuance to Rule 34(4) of ITAT Rules, 1963 on 17/10/ 2022. Sd/- Sd/- (RAVISH SOOD) (ARUN KHODPIA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER रायऩुर/Raipur; ददनाांक Dated 17/10/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतलऱपऩ अग्रेपषत/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- 1. प्रत्यथी / The Respondent- 2. 3. आयकर आयुक्त(अऩीऱ) / The CIT(A), आयकर आयुक्त / CIT 4.

13 ITA No.84/RPR/2016 विभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, रायऩुर/ DR, ITAT, 5. Raipur गार्ड पाईऱ / Guard file. 6. आदेशानुसार/ BY ORDER, सत्यावऩत प्रयत //True Copy// (Assistant Registrar) आयकर अऩीऱीय अधधकरण, रायऩुर/ITAT, Raipur