Income Tax Appellate Tribunal - Chennai
Deputy Commissioner Of Income Tax, ... vs Pinnathevar Palanichamy, Madurai on 29 April, 2025
आयकर अपीलीय अिधकरण, 'ए' यायपीठ, चे ई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH: CHENNAI
ी एबी टी. वक , ाियक सद एवं
ी अिमताभ शु ा, लेखा सद के सम
BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND
SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER
आयकरअपीलसं./ITA No.3015/Chny/2024
&
Cross-Objection No.4/Chny/2025
िनधा रणवष /Assessment Year: 2021-22
The DCIT, v. Mr.Pinnathevar Palanichamy,
Central Circle-1(2), 379,
Chennai. Sarveswarar Kovil Street,
Anna Nagar,
Madurai-625 020.
[PAN: ACYPP 6565 H]
(अपीलाथ /Appellant) ( यथ /Respondent/Cross-
Objector)
Department by : Mr.Shivanand K. Kalakeri, CIT
Assessee by : Mr.G. Baskar, Advocate
सुनवाईक तारीख/Date of Hearing : 26.02.2025
घोषणाक तारीख /Date of Pronouncement : 29.04.2025
आदेश / O R D E R
PER ABY T. VARKEY, JM:
This appeal has been preferred by the Revenue and Cross Objections filed by the assessee are against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter referred to as "the Ld.CIT(A)"), Chennai-18, dated 27.09.2024 for the Assessment Year (hereinafter referred to as "AY") 2021-22.
ITA No.3015
No. /Chny/2024
CO No.4/Chny/2025
(AY 2021-22)
Mr.Pinnathevar
Pinnathevar Palanichamy
::2 ::
2. The main grievance of the Revenue is against the action of the Ld.CIT(A) deleting the addition of Rs.20 Crores, made by AO alleging a on-
money received by the assessee for sale of immovable property at Madurai.
3. The brief facts are that, the assessee is an individual engaged in transport business and sale of granite blocks. A search u/s. 132 of the Income Tax Act, 1961 (hereinafter (hereinafter referred to as 'the Act') was conducted on 01.12.2021 upon M/s. Saravana Stores (Textiles) and its related entities and their Managing Director (MD) of the Group, Shri R. Sabapathy. The AO noted that, during the course of search, a pocket-
pocket book was found ound in the possession of Mr. Antony Francis Julian [Asst. Manager, Purchase Department of M/s.Saravana Stores (Textiles)] which was seized and marked as [ANN/SK/SSSLLP/B&D/S-2].
[ANN/SK/SSSLLP/B&D/S 2]. At Page No. 61 of the said pocket-book, book, certain numbers were jotted down. When Whe enquired about these noting's,, Shri Julian stated that, he had been maintaining the pocket-book book for his MD, Shri R. Sabapathy, to record the loans taken by him from M/s. Swarna Shilipi. The AO observed that, the said statement of Shri Julian along with pocket book was confronted to the MD, Shri R. Sabapathy on 04.12.2021, wherein, he initially explained that, the noting's therein related to the loan of Rs.25 crores which he had received from Mr. Rakesh of M/s. Swarna Shilipi in December, 2020 and, out of ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::3 ::
which, he had paid Rs.20 crs. to the assessee for purchase of land at Madurai which was acquired for a total price of Rs.50 Rs.50 Crs. and further sum of Rs. 5 crores was paid by him to Shri R. Saravanan for the land purchased by his sister at Perambur for a total price of Rs.21 Crs.
4. Thereafter, the AO confronted the assessee on 21.12.2021 with the noting's in the pocket-book pocket as well as the statement of Shri R. Sabapathy; and the assessee, assessee categorically denied having received any on-money money of Rs.20 Cr from Shri R. Sabapathy on sale of the land at Madurai. The assessee further explained that, he along with his two sons & his sister's ter's son [viz., four (4) co-owners] co owners] had sold the property in question admeasuring 249 cents on 22.01.2021 to Shri R. Sabapathy for a sale- consideration of Rs.49,70,04,000/-
Rs.49,70,04,000/ (approximately Rs.50 crores), which in its entirety was paid by him by way of Demand Demand Drafts (details given in sale-deed) deed) and that no portion was paid in cash, and that the entire sale consideration formed part of their books of accounts. The assessee also pointed out that, the guideline value of the property was only Rs.2,010/- per sq.ft.
sq.ft. which works out to Rs.8,76,360/-
Rs.8,76,360/ per cent, whereas, the property was sold for Rs.19,96,000/-
Rs.19,96,000/ per cent viz., more than double the guideline value [i.e. 2.28 times more than the guideline value]; for which the purchaser had also incurred additional charges char by way of stamp duty & registration charges of Rs.5,46,78,440/-
Rs.5,46,78,440/ and that
ITA No.3015
No. /Chny/2024
CO No.4/Chny/2025
(AY 2021-22)
Mr.Pinnathevar
Pinnathevar Palanichamy
::4 ::
the final purchase cost for Shri R. Sabapathy worked out to the tune of Rs.Rs.55,16,82,440/-.. According to him therefore, there could not be any question/allegation allegation of understatement understatement of sale consideration. The assessee also brought to the notice of the AO that, later on, Shri R. Sabapathy on 21.03.2022 (within 3 months of search) has retracted his statement and stated that, the noting's in the pocket book related to the cash sales made by him which were parked with Mr.Rakesh of M/s.Swarna Shilipi, and that he had not paid any further sum to the assessee, apart from the agreed consideration of Rs.49.70 crores plus stamp duty & registration charges. The assessee submitted a second retracted retracted statement of Shri R Sabapathy dated 05.12.2022 which was a sworn affidavit filed before notary public wherein he had affirmed that, he has purchased the property situated at Madurai on 22.01.2021 for a total cost of Rs.55,16,82,440/- which includes registration charges of Rs.5,46,78,440/- and gave the details of the said property at Madurai purchased from assessee & others, and also asserted that he didn't did pay any cash consideration (on-money) (on money) over and above what is mentioned in the registered Sale-Deed.
Deed. Shri R. Sabapathy in his sworn affidavit also explained the reasons for his retraction from his original statement given on 04.12.2021, which according to him, was given under tremendous pressure he was undergoing during search and that, he was not in the right frame of mind when his statement was recorded u/s.132(4) of the ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::5 ::
Act. The assessee accordingly submitted before the AO, that no adverse inference should be drawn against him on the basis of such retracted statement of the MD which was recorded on mistaken fact, particularly when it was not backed by any corroborative evidence in as much as the noting's in the pocket-book book was dumb in nature.
5. The AO however rejected the submissions of the assessee holding it to be an after-thought thought to avoid taxes.
taxes. According to the AO, the original statement given by Shri R. Sabapathy explaining the contents of the noting's in the pocket--diary diary seized during the search proceedings was reliable as the dates mentioned therein correlated with the date of purchase of property at Madurai and therefore according to him, the contents of the seized material supported the original version of Shri R. Sabapathy that, he had availed cash loan of Rs.25 crores from Mr. Rakesh of M/s. Swarna Shilipi and out of which he had paid Rs.20 Rs.20 crores to the assessee as on-money money for the purchase of immovable property. With these observations, the AO added the impugned sum of Rs.20 crores by way of on-monies monies received by the assessee on sale of his property and assessed the same to tax by way of long-term term capital gains. Being aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same by observing as under: -
ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::6 ::
"5. Decision:
I have perused the assessment order, grounds of appeal, written written submissions of the appellant, evidences filed before the Assessing Officer & during appeal proceedings and the case laws relied upon. In the first place, as evidenced from the assessment order, the case of the appellant was taken up for scrutiny as perr prevalent guidelines since certain information relating to the assessee was found during the course of search in Saravana Stores Tex Group cases on 01.12.2021. Now coming to the said information, which are contents of pocket diary seized and marked as ANN/SK/SSSLLP/B&D/S-2, AN 2, are copied hereunder for the sake of ready reference.
5.1 From the above contents, it can be seen that there is reference to some. figures with dates and months (not years) and there is no mention of any names, es, notto speak of the appellant. However, the contents of the said page were explained Initially as cash loans by the person (Sri R. Sabapathy), on whose behalf such entries were made. Therefore, precisely no seized material having any direct reference to the appellant was found in the course of search. However, while explaining the contents, Sri R. Sabapathy, MD of the searched group companies, in a statement recorded u/s 132(4) on 04.12.2021 explained that he had received a total amount of Rs.25 crores asas loan from Sri Rakesh ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::7 ::
Kumar and paid Rs.20 crores in cash to the appellant towards purchase consideration of Madurai lands and balance Rs.5 crores to Sri Rajagopal Saravanan towards purchase of Perambur property.
5.2 Now, the moot for consideration is whether whether the statement given u/s 132(4) by Sri R.Sabapathy on 04.12.2021 making a direct reference to the appellant - that he had given Rs.20 crores in cash in respect of purchase of land - can be considered as seized material and evidentiary value can be attached, attached, so that substantive addition can be made in the hands of a third party. Before venturing into this discussion, it is pertinent to make a distinction between the statement given under oath by a person about his own transactions and making statements which hich will have a bearing on the income determination of other third persons in the case on hand, the statement made by Sri R. Sabapathy u/s 132(4), corffains some disclosure about his income details and also the transactions he made with the appellant. Though Though considerable importance can be attached to the statement recorded u/s 132(4) during search and seizure operations by Sri R. Sabapathy, it is also equally important to note that there is no seized material having direct or even tacit reference to the appellant, pellant, but the searched person had given a statement u/s 132(4), initially admitting that he had paid cash to the appellant. It is settled law that the contents of a statement, though given INCOME TAX DEPARTMEN Such without any further under oath u/s 132(4), 132(4), cannot be considered as corroborative evidence.
5.3 At this stage, it is important to refer to the reliance placed by the appellant on the decision of the Apex Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18, 18, which was brushed aside by the AO in the assessment as not applicable to the facts of the case. In this case, the Apex Court held that though admission is an extremely important piece of evidence, it cannot be said to be conclusive and the maker can show that it was incorrect In this regard, the appellant had done his part in proving the contents of admission of Sri R. Sabapathy as not correct, by providing actual sale details. In the statement given u/s 132(4), Sri R. Sabapathy mentioned that the properties ies from the appellant were purchased for an amount of Rs.50 crores, out of which Rs.20 crores was paid in cash. Relevant portion of the statement recorded from Sri R. Sabapathy on 04.12.2021 is as under:
Q.56 Please give the deals of the immovable properties properties for which this cash loan of Rs.25 Crs. was paid by you. Please also furnish the persons to whom the payments were made by you out of this love of Rs.25 Crores A As already stated by me in my sworn statement, properties at Perambur and Madurai were purchased by me during December 2020 and January 2021. The property at Perambur was purchased for my sister Smt. Selvalkumari for a consideration of Rs.21 Crores out of which Rs. 16 Crowes was the Registered Value which was met out of my father's Rental Income Income and Rs.5 Crores was paid by me is cash to Shri R. Saravanan of Saravana bhavan Hotels group Similarly, the property at Madurai was purchased for a consideration of Rs.50 Crores (appear) of which Rs.30 Crores was paid by me in cash.
5.4 Going by the contents of the above version, during the course of assessment proceedings, the Assessing Officer also questioned the appellant ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::8 ::
vide notice u/s 142(1), dated 10.11.2022 on paying the total accounted consideration at Rs.30 crores and on-money on of Rs.20 crores/However, s/However, as evidenced by the sale deeds furnished, the total sale consideration received by the appellant, along with his relatives, is Rs.49,70,04,000/-
Rs.49,70,04,000/ and the total amount was received through DDs. Therefore, it is clear that the deposition of Sri R. Sabapathy made u/s 132(4) on 04.12.2021 is not totally correct and suffers with certain infirmities, and therefore the same cannot be given full credence. However, on the part of the Assessing Officer, no independent verification was done to ascertain the veracity of the contents of Sri R. Sabapathy, and basing on such deposition alone, the AO proceeded to question the appellant. Even after obtaining the facts contrary to the version of Sri R. Sabapathy, the same were not considered and the retraction of Sri Sri Sabapathy also was brushed aside, quoting obvious reasons:
Now coming to the facts of the case, Sn R. Sabapathy had retracted from his statement recorded on 04.12.2021 vide his retraction letter dated 21.03.2022, i.e., after a period of two months; and stated that the amounts mentioned in the seized material are not loans but the same are parking of funds with Sri Rakesh Kumar, he. has not paid any amount in cash to the appellant. However, the AO had not given any credence to the retraction of Sri R. Sabapathy Sabapathy and proceeded to treat the amount of Rs.20 crores as undisclosed capital gains in the hands of the appellant.
8.5 Keeping the discussion on the present assessment aside for the time being, it is in place to refer to the balance amount of Rs.5 crores, crores, purportedly given to Sri Rajagopal Saravanan by Sri R. Sabapathy towards acquisition of Perambur lands. The contents of the said seized diary were put to scrutiny by the Hon'ble Tribunal in the case of Rajagopal Saravanan, for the Asst. Year 2021-22, in ITA No. 119/CHNY/2024 dt.10.07.2024. The observations and findings of the Tribunal are as under:
"5. From the fact, it emerges that pursuant to search action u/s 132, a notebook was found which, inter-alia, inter alia, contained notings of loans obtained by Shri R.Sabapathy.
R.Sabapathy. No dates were mentioned against these entries. Based on the statement of Shri R.Sabapathy, Ld. AO alleged that Shri R.Sabapathy received loan of Rs.25 Crores from Shri Rakesh of Swarna Shilpi out of which an amount of Rs.5 Crores was utilized as payment to assessee as on-money on money against purchase of impugned property by his sister. However, this statement was retracted within a span of 3 months....... Shri R.Sabapathy has taken contrary stand and his statement could not be held to be credible one......
one...... the statement of Shri R.Sabapathy was modified within a short span of time and therefore, the same could not be accepted as credible one. No concrete reliance could be placed on the same to make impugned addition in the absence of any other evidence on record....".
5.6 As could be seen from the above, the Tribunal had not considered the contents of the seized diary as such, in the absence of any other evidence brought on record by the Assessing Officer. When the contents of the seized diary regarding payment of Rs.5 crores to Sri Rajagopal could not stand the test of appeal, no different view can be taken in respect of the balance amount of Rs.20 crores, purported to have been given to the appellant. 5.7 To conclude, in the first place, there is no seized seized material having any reference to the name of the appellant or the transactions made by the appellant with the searched party. Secondly, the case was taken up for ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::9 ::
scrutiny referring to the statement given by Sri R. Sabapathy u/s 132(4) alone and no independent ependent enquiry was done by the AO to verify the veracity of the contents mentioned therein, inasmuch as the total sale consideration of Rs.50 crores (precisely Rs.49.70 crores) was paid through DDs, against the statement that out of Rs.50 crores, Rs.20 crorescrores was paid in cash. Further, when the appellant had furnished the copies of sale deeds and brought out the actual facts of sale consideration, the AO had not discussed anything on these issues. Furthermore, when the retraction statement of Sri R.Sabapathy, R.Sabapathy, in the form of Notarised Sworn Affidavit was produced before the AO, the same had to be dealt with either by proving the contents of earlier statement given u/s 132(4) are correct or by proving that the retraction statement is on wrong footing. However,r, no such exercise was done by the Assessing Officer but was simply brushed aside metaphorically. Therefore, the addition of Rs.20 crores towards undisclosed capital gains made by the AO cannot be sustained factually, technically or legally. Accordingly, the addition so made is directed to be deleted.
6. In result, the appeal is allowed."
allowed.
6. Aggrieved by the above order of Ld. CIT(A), the Revenue is in appeal before this Tribunal on the following grounds:
1. The order of the learned Commissioner of Income Income Tax (Appeals) is erroneous on facts of the case and in law.
2. The Ld.CIT(A) erred in deleting the addition made of Rs.20,00,00,000/-
Rs.20,00,00,000/ based on the incriminating material seized during the course of search proceeding and the same transaction was admitted by Mr. R.Sabapathy in his statement recorded during the course of search action.
3. The Ld.CIT(A) erred in deleting the addition without considering the incriminating seized material wherein the date of property purchased matched with the date of cash loans loans which was brought out in the assessment order by the A.O.
4. The Ld.CIT(A) erred in not considering that documents seized in the form of small notebook which was found during the course of search which was seized from Saravana Store Jewellery are corroborating corroborating evidence, which provided the details of the cash loans received by Shri. R.Sabapathy during the financial year 2020-2121 to the tune of Rs.25,00,00,000 out of which 20 crores were paid to the assessee.
5. The Ld CIT(A) erred in not considering that the the addition made was supported by the Hon'ble Supreme Court's decision in the case of Pullangode Rubber Produce CI Ltd Vs State of Kerala which states that the statement made voluntarily by the assessee could form the basis of assessment.
6. For these grounds ds 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.
ITA No.3015
No. /Chny/2024
CO No.4/Chny/2025
(AY 2021-22)
Mr.Pinnathevar
Pinnathevar Palanichamy
::10 ::
7. Assailing the action of the Ld. CIT(A), CIT(A), the Ld. DR first took us through the statement of Mr. Antony Francis Julian, Purchase Manager of M/s.Saravana Stores (Jewelers) from whose possession the said pocket-
pocket book was found. He showed us that, he had admitted in his statement that the said dairy was given to him by Shri R. Sabapathy, Managing Director of M/s.Saravana Stores (Textiles) for recording the loan transactions with M/s.Swarna Shilipi. Then, taking us through the statement of Shri R. Sabapathy, he pointed out that, when confronted with the contents of pocket book and statement of Shri Julian, Shri R. Sabapathy had also admitted that the notings denoted the loan of Rs.25 crores obtained by him from M/s.Swarna M/s. Shilipi, which he had stated to have utilized to pay Rs.20 crores to the assessee for purchase of land at Madurai and Rs. 5 crores to Shri R. Sabapathy for purchase of land at Perambur. The Ld. DR argued that, it was a fact that Shri R. Sabapathy had d indeed acquired lands from these persons including the assessee and that, the dates of acquisition of land were co-relatable co relatable to the dates mentioned in the pocket book. It was therefore the Ld. DR's case that, though there was no mention of any name or nature nature of transaction in the pocket book, but due to the co-relation co relation of dates, read along with the original statement of Shri R. Sabapathy, and by applying the test of human probabilities, the AO had rightly inferred that the impugned sum of Rs.20 crores had been received by the assessee over and above the ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::11 ::
sale consideration of Rs.50 crores mentioned in the sale agreement and hence, which had been rightly assessed to tax in the hands of the assessee by way of capital gains.
8. Per contra, the Ld. AR for the assessee supported the order of the Ld. CIT(A). He first invited our attention to relevant Page No. 61 of the seized pocket ID marked Annexure ANN/SK/SSSLLP/B&D/S-2, ANN/SK/SSSLLP/B&D/S basis which the impugned addition was made by the AO. He pointed out that, the notings starts rts with figure of 25.00 and underneath it, is written 2/2 which may be denoting (2nd February) and a noting of +1 and then figure of - 24, and thereafter, a noting of 16/3 [may be 16th March] +1 and -23 and thereafter, on 10/4 [may be 10th April] a noting ting of +1 and then 22 and thereafter, a noting of 22/6 [may be 22nd June]. The figure of -22 Ld. AR submitted that, these notings were clearly dumb scribblings and that no prudent person could have inferred any meaning whatsoever from this Page. According to o him, this page was a dumb document and thus, the contents therein didn't did t have evidentiary value and hence, it had been rightly discarded by the Ld. CIT(A). He further explained that, the purported correlation being stressed upon the AO as well as the Ld. DR was not only far-fetched fetched but also not discernible from this Page. He pointed out that, the said notings at the most only shows dates & months, but not the year and that the AO had imported the year while interpreting ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::12 ::
this page. He also showed us that, there was no mention of any names on this Page but only few numbers, leave alone the name of the assessee and therefore the Ld. AR wondered as to how was the AO able to use these dumb notings and link it to the assessee by merely relying on few numbers like e 25 +1, 24+1, etc. mentioned therein. The Ld. AR thus submitted that, this piece of paper on a stand-alone stand alone basis was of no relevance qua the assessee.
9. The Ld. AR further pointed out that, the case of the Revenue was singularly based on the statement of R. Sabapathy dated 04.12.2021 in which he had stated that, these rough scribblings inter alia included noting of Rs.20 crores paid to the assessee for purchase of property which he had bought for a total value of Rs.50 crores. Controverting the said statement ment of Shri R Sabapathy, the Ld. AR firstly submitted that this statement was contrary to the contemporaneous facts and therefore was unreliable. He showed us that, the property at Madurai was indeed purchased by Shri R. Sabapathy for a value of Rs.49.70 crores (Rs.50 crores approx.), as mentioned in the later part of his answer, but this sum was paid to the assessee and other co-owners co owners through demand drafts and not cash and that the entire sale consideration of Rs.49.70 crores (Rs.50 crores approx.) had been een offered to tax by them. He further brought to our notice that, the said sale consideration of Rs.49.70 crores was more ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::13 ::
than 2.28 times of the guideline value and therefore it was also not a case of understatement of sale consideration. According to him therefore, the statement given by Shri R. Sabapathy that, out of the total value of Rs.50 crores, he had paid Rs.20 crores in cash stood negated by the fact that the entire sale consideration was actually paid in demand drafts. He further submitted that R. R. Sabapathy had also later on retracted his statement on 21.03.2022 and thereafter he had also furnished a sworn affidavit dated 05.12.2022. The Ld. AR contended that, the AO was not able to disprove his retraction and therefore according to him, the AO's action of relying on Shri R. Sabapathy's original statement, which had since been retracted, was unjustified.
10. The Ld.AR further pointed out that, in his answer to the same question no.56 of his original statement, Shri R. Sabapathy had inter alia stated ed that, out of the sum of Rs.25 crores obtained by way of loan, he had advanced Rs.5 crores to Shri R Saravanan for purchase of land at Madurai. He submitted that, like in the case of assessee, similar addition of Rs.5 Cr. was made in the hands of Shri Rajagopal Rajagopal Saravanan who sold property at Perambur on the strength of the statement given by Shri R. Sabapathy. The Ld. AR brought to our notice that, this identical issue had travelled to this Tribunal and that, the Tribunal in their order passed in the case of Shri Rajagopal Saravanan in ITA No. 119/Chny/2024 deleted ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::14 ::
the impugned addition of Rs.5 Crs by holding the contents of the pocket book as well as the statement of Shri R Sabapathy to be unreliable. The Ld. AR accordingly submitted that, the ratio laid down in the said decision would apply with equal force to the assessee's case as well and that the Ld. CIT(A) had rightly relied on the said decision of the Tribunal in Shri Rajagopal Saravanan's case (supra) to delete the impugned addition. Therefore, the e Ld. AR doesn't does t want us to interfere with the action of the Ld.CIT(A).
11. We have heard both the parties and perused the material placed on record before us. We notice that, a search action u/s 132 of the Act was conducted upon M/s Sarvana Stores (Textiles) (Textiles) and in the course of search, a pocket diary was found and seized from the possession of Mr.Mr. Antony Francis Julian who was the Purchases Manager of the said entity. When enquired about the contents of the pocket diary, he is noted to have stated that,, this diary was given to him by the Managing Director, Shri R. Sabapathy to record his loan transactions with M/s Swarna Shilpi.
Thereafter, the contents of the said diary, more particularly Page No. 61, was confronted to Shri R. Sabapathy, who in his statement sta dated 04.12.2021 is noted to have stated as under: -
"Q.56 Please give the deals of the immovable properties for which this cash loan of Rs.25 Crs. was paid by you. Please also furnish the ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::15 ::
persons to whom the payments were made by you out of this love lo of Rs.25 Crores A As already stated by me in my sworn statement, properties at Perambur and Madurai were purchased by me during December 2020 and January 2021. The property at Perambur was purchased for my sister Smt. Selvalkumari for a consideration of Rs.21 Crores out of which Rs. 16 Crowes was the Registered Value which was met out of my father's Rental Income and Rs.5 Crores was paid by me is cash to Shri R. Saravanan of Saravanabhavan Hotels group Similarly, the property at Madurai was purchased for a consideration of Rs.50 Crores (appear) of which Rs.30 Crores was paid by me in cash."
cash.
12. It is observed that, Shri R. Sabapathy had originally stated that, the noting of Rs.25 crores on this Page denoted loan which he had obtained from M/s Swarna Shilpi out of which sum of Rs.20 crores was inter alia used by him to pay consideration for the land land which he acquired from the assessee for Rs.50 crores. In light of the above statement, the AO is noted to have confronted the assessee as to whether he received such sum of Rs.20 crores in cash, to which, the assessee is noted to have categorically denied ed the same. Though the assessee furnished the subsequent retraction filed by Shri R Sabapathy, the AO however treated his original statement to be the important piece of evidence and accordingly drew inference that the notings on the page of pocket diary had link with the assessee and thus added the impugned sum by way of capital gains of the assessee.
13. Now the question that arise for our consideration is, is whether the material found during the course of search at third party premises viz., ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::16 ::
Page No. 61 of the pocket diary ID marked ANN/SK/SSSLLP/B&D/S-2 ANN/SK/SSSLLP/B&D/S and the statement given by Shri R Sabapathy could establish any link with the assessee and whether it supported the case of the Assessing Officer that the notings therein represent on-monies of the assessee.
14. In order to answer the above question, we first consider it prudent to examine the contents of the notings found on Page No. 61 of the pocket diary ID marked ANN/SK/SSSLLP/B&D/S-2 ANN/SK/SSSLLP/B&D/S seized from the premises of the third party and ascertain whether the e same on a stand-
stand alone basis can serve as a link to the assessee and infer that the assessee has received Rs.20 Crs in cash as on-money on money for sale of his property at Madurai. For examining the same, we have to first take a look into the contents of the said d paper, which is being extracted below for ready reference:
ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::17 ::
15. The above page is noted to contain only rough scribblings of certain numbers which have been added & subtracted with dates in day/month format mentioned against some numbers. The said said page bears the stamp of Saravana Stores (Jewel) Super LLP and that there is an abbreviation 'SLP' mentioned on the top left-hand corner and that alphabet 'R' is mentioned against certain numbers. The page starts with figure 25.00 and ends with figure 18 with plus & minus [+ & -] alongside with the figures and initials on the side, [but [but not identified whose initials].
initials It is further noted that, there is no mention of name of the assessee on this entire page. Also, there is no mention of any land transaction or the ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::18 ::
locations viz Madurai or Perambur or the agreed sale consideration or even the mention of word 'cash' on this this Page. The assessee has therefore contended that, the notings on this page at 3rd party premises are dumb and incomprehensible and therefore, can't be used against him for drawing adverse view. After considering the facts of this case, which we will discuss cuss in detail (infra), we are of the view that no prudent person can infer any logical meaning out of these notings unless the person who authored/scribbled it,, is able to assert with corroborative material, the transaction recorded therein.
therein Hence, the contents ntents of this Page appear to lack any evidentiary value, particularly qua the assessee because it has to be kept in mind that, this Page was found and seized from the premises of Shri R. Sabapathy and therefore ordinarily the presumption under Section 292C C is that, the contents of the Page belong to the searched person. Hence, for the AO to rebut this presumption and infer these notings to pertain or relate to the assessee, it is necessary to bring on record some tangible material or corroborative evidence to link the notings on this Page with the assessee, which we find the AO has miserably failed to do.. In absence of the same, the assessee cannot be expected to prove a negative viz., explain the contents of such dumb notings found in a page from the premises premises of third party, more particularly when there is no mention of his name or any of his business transaction on the said Page.
ITA No.3015
No. /Chny/2024
CO No.4/Chny/2025
(AY 2021-22)
Mr.Pinnathevar
Pinnathevar Palanichamy
::19 ::
16. We notice that, the AO has attempted to justify the notings found on this Page by correlating the dates mentioned in the Page Page with the date on which the land was sold by the assessee. According to us, such an attempt was far-fetched fetched and lacked any cogent rationale. As rightly pointed out by the assessee, the first date shown in the page is 2/2 i.e., i.e. may be depicting 2nd February, February however there is no year stated therein.
therein Likewise, the last date is 9/10 i.e. 9th October and the year also is not stated therein. And relevant facts to be co-related co related with the dates, it is noted that the land at Madurai was sold by the assessee to Shri R.Sabapathy & others in January, 2021, 2021 and even the land at Perambur Per was sold by Shri Rajagopl Saravanan to Shri R. Sabapathy in December, 2020, and thus, there is no co-relation co found with the sale-dates sale with the notings on this page. According to us, in absence of any tangible or cogent link between the contents of this Page with the assessee, the alleged linkage of dates being made by the Revenue to suit their purpose, in our considered view, was irrational, whimsical and unjustified. In this context, ontext, we gainfully refer to the decision of the Hon'ble Supreme Court, in the case of Motors & General Stores (P.) Ltd. (66 ITR 692) wherein it was held that "it is, therefore, obvious that it is not open to the income tax authorities to deduce the nature nature of the document from the purported intention, by going behind the document or to consider the ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::20 ::
substance of the matter or to accept it in part and reject it in part or to rewrite the document, merely to suite purpose of revenue".
revenue .
17. We observe that, the entire case of the Revenue hinges on the original statement dated 04.12.2021 of Shri R. Sabapathy to link the contents of the above Page to the assessee, which he had subsequently retracted vide letter/affidavit dated 21.03.2022 & 05.12.2022.
05.12.2022. Before adverting to the veracity of the averments made by Shri R. Sabapathy in his original statement and the tenability of his subsequent retraction, the first question to be answered is whether such statement of Shri R. Sabapathy,, irrespective of his subsequent retraction, had any evidentiary value in the matters of the assessee or not. Ordinarily, the law states that, a statement recorded u/s 132(4) of the Act can be used as evidence in the proceedings against the searched person. This rationale emanates from Section 132(4A) of the Act which states that any material found from the searched premises and the contents therein shall be presumed to be belonging to or pertaining to the searched person. Accordingly, the contents of material seized from the the premises of searched person is presumed to be within the exclusive knowledge of the searched person and therefore any statement given by a searched person u/s 132(4) of the Act explaining the contents of the seized material which has a bearing on determination ination of his total income, can be used against him provided it ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::21 ::
being given voluntarily and not vitiated vitiated by duress, coercion etc. etc However, if in the statement recorded u/s 132(4) of the Act, the searched person accuses a third party of any wrong doing, then then the aforesaid legal principle can't be applied, ied, unless the maker of the statement is able to substantiate his averment against the third party with tangible and corroborative material. In absence of the same, it would be unsafe to make addition or draw adverse inference against a third party solely based on the statement given by the searched person u/s 132(4) of the Act. Reason being, if the requirement placed upon the maker of the statement to substantiate his statement against a third party with tangible material/evidence evidence is dispensed away with, then any searched person can unscrupulously, incriminate any third party at his own sweet will, for no fault of the latter. According to us therefore, any un-tested statement given by a searched person against any third party, party without undergoing cross-examination examination should not be used as evidence against such third party unless such statement is backed by any tangible material or corroborative evidence found in the course of search.
18. In light of the above, we now now advert back to examining the statement of Shri R. Sabapathy, Sabapathy, which has already been extracted earlier above. It is noted by us that, Shri R. Sabapathy had not specifically explained in his statement, the several numbers, additions and ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::22 ::
subtractions found noted on this Page and as to how did the figure of 25.00 ended with figure 18.
18. Rather, he is noted to have given a sweeping explanation that, the noting of Rs.25 crores represented loan which he had obtained from Mr. Rakesh of M/s Swarna Shilpi and then straightaway averred that Rs.20 crores was paid in cash to the assessee towards the agreed cost price of Rs.50 crores for purchase of land at Madurai and the balance Rs. 5 crores was paid to Shri R Saravanan towards agreed cost price of Rs.21 crores for purchase of land at Perambur. This statement given by Shri R. Sabapathy directly incriminating the assessee may give rise to a suspicion against the assessee, but as noted by us above, such statement is required to be supported by some corroborating corroborating evidence seized in the course of search search, which ought to be the sale transaction/sale-deed ed at Madurai, contents of which disproves the on-
on money allegation, which will discuss infra.
infra Having aving regard to our above analysis of the contents of the Page No. 61 of the pocket diary ID marked ANN/SK/SSSLLP/B&D/S ANN/SK/SSSLLP/B&D/S-2 we find that, there was no cogent or reliable re material contained therein which would in any manner suggest any direct or tacit linkage with the assessee. Hence, in our considered view, such bald statement given by Shri R. Sabapathy dated 04.12.2021 cannot be used as reliable evidence to draw any y adverse inference in the hands of the assessee.
ITA No.3015
No. /Chny/2024
CO No.4/Chny/2025
(AY 2021-22)
Mr.Pinnathevar
Pinnathevar Palanichamy
::23 ::
19. Be that as it may, the Ld. AR has also rightly pointed out to us that, the original statement of Shri R. Sabapathy doesn'tt even prime facie co-
co relate with the notings found on the above extracted Page. According to him, if the sums of Rs.20 crores and Rs. 5 crores had been paid by him, then both these figures ought to have been subtracted from Rs. 25 crores and that the page should have ended with figure of NIL or '0', but there were only small numbers added or subtracted and that the page ended with number '18' and thus, he argued that, it clearly didn' didn't suggest that the purported number of '25', which according to Shri R. Sabapathy represented loan taken, had been used up for making payments for purchase se of land. It was further pointed out to us that, though there is a mention of alphabet 'R' which may denote Mr. Rakesh as mentioned by Shri R. Sabapathy in his statement, but there is no abbreviation of the assessee or Shri R Sarvanan mentioned on this Page Page and rather 'SLP' is noted on the top part corresponding to the noting of '25', which as rightly submitted by the Ld. AR, does not suggest any linkage to the assessee or Shri R Sarvanan. Having taken note of these apparent defects pointed out by the Ld. AR in the statement of Shri R. Sabapathy,, in light of the notings found on Page No. 61 of document ID marked ANN/SK/SSSLLP/B&D/S , we find merit in his plea that the original ANN/SK/SSSLLP/B&D/S-2, statement of Shri R. Sabapathy dated 04.12.2021 was otherwise also not reliable in as much as it didn't did t reflect the true and correct facts.
ITA No.3015
No. /Chny/2024
CO No.4/Chny/2025
(AY 2021-22)
Mr.Pinnathevar
Pinnathevar Palanichamy
::24 ::
20. To further buttress his case, the Ld. AR also brought to our notice another piece of corroborative contemporaneous fact to disprove the original statement of Shri R Sabapathy. He particularly stressed on Shri R. Sabapathy's 's averment in his answer to Q No. 59 wherein he had mentioned that, the total cost price of the land purchased by him at Madurai from the assessee was Rs.50 crores, towards which he had allegedly paid Rs.20 crores in cash. Taking Taking us through the actual sale agreement which had been executed between Shri R. Sabapathy and the assessee (along with other co-owners), co owners), it was pointed out to us, that the actual sale consideration agreed was Rs.49.70 crores, which after taking into account unt the stamp duty & registration charges went up to Rs.55 crores. We note that this sale consideration found mentioned in the sale document, correlated with the figure of Rs.50 crores mentioned in Shri R. Sabapathy's 's statement. We note not that, the agreed sale consideration of Rs.50 crores was fully paid by Shri R Sabapathy through demand drafts and not in cash. The entire sale consideration was also accounted for by the assessee & other co-owners co owners and also offered to tax. More importantly, it is noted that this agreed sale consideration was more than 2.28 times of the valuation ascertained by the stamp duty authorities and therefore we find sufficient merit in the assessee's case that, one could not even allege that, the agreed consideration consideration of Rs.50 crores was under-stated.
under Having regard to these facts, if the statement of Shri R. Sabapathy is ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::25 ::
considered at its face value, then there are only two possibilities viz., (a) either the selective portion wherein he stated the figure of total cost price of land acquired at Madurai was Rs.50 crores, is incorrect or (b) that he had erroneously averred a mistaken fact that, he had paid consideration to the extent of Rs.20 crores in cash. Overall, having regard to the facts discussed in the foregoing, and applying the test of human conduct and human probabilities, according to us, the more plausible inference is that, Shri R. Sabapathy had factually erred in stating that, he had paid consideration of Rs.20 crores in cash out of the agreed consideration of Rs.50 crores (particularly particularly since the total cost price of Rs.50 crores has been found to be contemporaneously correct, correct, entire of which is found to be discharged by way of demand drafts).
drafts
21. Moreover, we also note that, Shri R. Sabapathy had also subsequently retracted his statement on 21.03.2022 wherein he clarified that,, the noting of Rs.25 crores actually did not represent loan of Rs.25 Crs from Mr.Rakesh of M/s.Swarna Shilipi,, but instead it represented proceeds of undisclosed sales of Rs.25 crores which was parked with Mr.Rakesh of M/s.Swarna Shilipi to the tune of Rs.17 Crs.;; and Rs.8 Crs.
was out of other undisclosed sales. We further find that,Shri
that, R.
Sabapathy had also filed an Affidavit dated 05.12.2022 categorically ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::26 ::
retracting his statement that he had paid Rs.20 Crs. to the assessee, and the contents of his affidavit are noted to be as under:
Affidavit I, R. SABAPATHY, Son of Thiru.B. Rajarathinam, residing at No. 10/15 Lakshmanan Street, T Nagar, Chennai -600017, 600017, hereby declare and affirm as under:
I am the Managing Director of M/s Rare 98 Properties India Pvt. Ltd, having its registered office at No. 133, G.S.T.Road, Chrompet, Chennai
-600044.
On 22-01-2021, 2021, the said company and my son have purchased vacant land measuring 243 cents and 6 cents,cents, respectively, situated at Uthangudi Village, Madurai East Taluk, Madurai from K.Murugesan, Mr. P R Palanichamy and his two sons, P Senthil Kumar and P Suresh Kumar, residing at No.379, Sarveshwarar Temple Street, Anna Nagar, Madural through 4 documents, documen as tabulated below:
S.No Doc. No. Purchaser Survey No. Extent in Consideration
cents (Rs.)
1 382/2021 Rare SS Old No: 170/24 50 9,98,00,000
Properties New No.
India P. Ltd 170/242 (Part)
2 381/2021 Rare SS Old No: 170/2A 50 9,98,00,000
Properties New No.
India P. Ltd 170/342 (Part)
3 379/2021 Rare SS 170/3 (Part) 28.5 5,68,86,000
Properties 28.5 5,68,85,000
India P. Ltd 28.5 5,68,86,000
57.5 11,47,70,000
4 380/2031 Roshan Sree 170/3(Part) 6 1,19,76,000
Rathnam
TOTAL 249 49,70,04,000
iii. Besides the above, we have incurred stamp duty and registration charges of Rs.5,46,78,440/- The above purchases were made at a total cost of Rs. 55,16,82,440/-
iv. The entire sale consideration was paid through Demand Drafts. I have not paid any consideration over and above what is mentioned in the registered sale deeds.
v. During the search proceedings & while recording my statement on 03/04- 03/04 12-2021, 2021, I was under tremendous pressure and was not in a right frame of mind. Later I came to know that in the statement recorded I had stated that I have paid an amount of Rs.20 crores in cash towards purchase of Madurai property, which were not factually correct.
ITA No.3015
No. /Chny/2024
CO No.4/Chny/2025
(AY 2021-22)
Mr.Pinnathevar
Pinnathevar Palanichamy
::27 ::
22. Before us, the Ld. DR for the Revenue has objected to the validity of the retraction etraction furnished by Shri R. Sabapathy.. According to us, such objection is not tenable on two fronts. The first being that, the original statement had been shown to be given on mistaken fact and also the subsequent retraction was not a bald one. Rather, the maker of the statement i.e., Shri R. Sabapathy had explained the contents of the notings to be pertaining to his undisclosed sales and also justified his retraction by stating that his original statement was given under pressure when he was not in right frame of mind. It is well settled in law l that, though an admission is an extremely important piece of evidence, but it cannot be said to be conclusive where the maker can show that it was incorrect or based on incorrect facts. For this, we gainfully rely on the decision of the Hon'ble Supreme Court rendered in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18.. In the present case, since the original statement was shown to have been based on incorrect facts and the correct & true version was also explained by Shrii R Sabapathy in his retraction, the same cannot be rejected.
23. Secondly, we observe that, it was the Revenue which was relying on the original statement of Shri R. Sabapathy to draw adverse inference ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::28 ::
against the assessee and therefore if the Revenue's witness had subsequently retracted from his original statement, then the onus was on the Revenue to cross-examine examine him and bring the correct facts on record. We find that, though the subsequent retraction of Shri R. Sabapathy was brought on record in the course course of assessment, but the AO did precious little to disprove the same or cross examine Shri R. Sabapathy by summoning him. Rather he is found to have simply brushed the retractions surmising it to be an after-thought.
after thought. According to us, such approach of the e AO was unjustified and therefore we are unable to countenance this argument of the Revenue objecting to the validity of the retraction furnished by Shri R Sabapathy.
24. Further, as noted above, the contents of the Page No.61 of document ID marked ANN/SK/SSSLLP/B&D/S-2 ANN/SK was dumb in nature and as such the contents of these loose notings could have only been possibly explained by the writer of these notings. The assessee clearly could not be expected to explain the same. Shri R. Sabapathy, Sabapathy at whose instructions ons these notings were purportedly made, had in his original statement, incriminated the assessee by stating that, the notings on this Page inter alia suggested that he had paid sum of Rs.20 crores to the assessee, although there was no mention of the figure figure '20' or name of the assessee on this Page. Later on however, in his retraction, Shri R. ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::29 ::
Sabapathy stated that, the original statement was given by him under pressure and wasn'tt in the his right frame of mind, and that these notings related to his undisclosed losed sales which wh proceeds, he had parked with M/s Swarna Shilpi. According to us, on the given facts, the true nature of these bald notings could have only been known to Shri R. Sabapathy and thus when he himself had later on retracted his original statement statem and admitted the notings as his own undisclosed sales, then the assessee cannot be expected to further disprove his original statement, which as already noted above, was also found to be based on mistaken fact and hence was rebuttable.
25. In addition to the above, the Ld. AR pointed out to us that, the explanation given by the assessee in his retracted statement, is somewhat corroborated by the fact that, this pocket diary was found from the possession of the Purchases Manager who ordinarily would have hav been maintaining records of business transactions and not the personal transactions involving land deal of the Managing Director and therefore the notings could have related to undisclosed sales. He also referred to the stamp of Saravana Stores (Jewel) Super S LLP on this Page, which according to him, suggested that, these notings may be relating to the business transactions of the said entity and not to the land deal between Shri R. Sabapathy and the assessee.
ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::30 ::
26. In light of the above retracted statement of Shri R. Sabapathy and also the apparent infirmities pointed out by the assessee in his original statement, we are of the view that, Shri R. Sabapathy was an unreliable witness whose original statement cannot be relied upon and therefore the Ld. CIT(A) had rightly deleted the impugned addition made by the AO based on such unreliable statement.
statement
27. At this stage, we gainfully refer to the decision of the Hon'ble Madras High Court in the case of CIT v. P.V. Kalyanasundaram (282 ITR 259). In the e decided case, case search operations were conducted upon the assessee and it was found that the assessee had purchased a land which was registered for Rs. 4.10 lakhs. The AO recorded the statement of the seller wherein he admitted that he had received consideration consid of Rs. 34.35 lakhs instead of Rs.4.10 lacs. The seller later on retracted from the statement but again subsequently filed an affidavit admitting that total consideration was Rs. 34.85 lakhs out of which Rs. 4.10 lakhs was received in demand draft and and the balance in cash. The seller also revised his return of income and offered the entire sale consideration of Rs.34.85 lacs to tax. The Assessing Officer by relying upon the statement of seller added the alleged undisclosed sale consideration of Rs.30.75 Rs.30. lacs by way of undisclosed income of the purchaser i.e. the assessee.. On appeal this Tribunal affirmed the order of the CIT(A) deleting the addition, by ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::31 ::
observing that, the seller had given conflicting statements and that his action of admitting sale consideration consideration and paying tax was nothing but an obvious effort to save himself from further harassment from the Revenue. The Tribunal noted that, that apart from the statement of the seller, the AO did not conduct any independent inquiry nor discharged the burden of proving that the actual consideration received by the assessee was Rs.34.85 lacs. It was further observed that there was no material brought on record which would suggest that the assessee had under-stated under the purchase consideration. On Revenue's appeal, l, the High Court is noted to have concurred with the findings of the Tribunal by observing as under :-
:
"5. We heard counsel. The seller had initially given conflicting statement about the sale consideration he received. When confronted by the Revenue on 11-12 12-1998, 1998, the seller admitted that he had deposited Rs. 4.10 lakhs received through draft in the bank andand the rest amount was held by him in cash. The Revenue authorities could well have seized the cash invoking section 132 of the Act, but for obvious reasons this was not done. Had the cash been seized from the seller, the matter would have been concluded in in favour of the Revenue. In a subsequent submission, the seller claimed on 20-11-2000 20 2000 that he had paid Rs. 15 lakhs out of the sale proceeds to settle old family debts, Rs. 4.80 lakhs for construction of house in Pullkasi Village and the balance was advanceded to parties for keeping Rs. 2 lakhs and Rs. 3 lakhs in the house for family expenses and educational expenses of his daughter, respectively. It was also noted that the revised return was filed by the seller wherein he had shown approximately Rs. 2.5 lakhs lakhs being available with him in cash. Even after giving the retraction and admitting that he had sold the property for a sale consideration of Rs. 4.10 lakhs, the seller filed his income-tax income return on 28-1-2000, 2000, wherein he did not admit the cash on money consideration consideration for the sale transaction.
Subsequently he revised the income-tax income tax return wherein he admitted the sale consideration and showing Rs. 4.80 lakhs out of the above as utilised for construction of residential house property and consequently claiming exemption xemption under section 54, the seller filed the computation of ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::32 ::
income paying Rs. 1,83,576 as tax, which was quite evident from the conflicting statements given by the seller and the conflicting income-tax income returns filed by him that his action of admitting sale sale consideration and paying tax was nothing but an obvious effort to save from further harassment from the Revenue and escape from the exigibility of tax on undisclosed income of the cash consideration under section 158BD of the Act, which in magnitude would would far exceed the tax paid by him. The burden of proving actual consideration in such transaction was that of the Revenue...
6. We also found that the Assessing Officer did not conduct any independent enquiry relating to the value of the property purchased. He merely relied on the statement given by the seller. If he would have taken independent enquiry by referring the matter with the Valuation Officer, the controversy could have been avoided. Failing to refer the matter was a fatal one.
7. In view of the foregoing foregoing conclusions, we find no error in the order of the Income-tax tax Appellate Tribunal and requires no interference. Hence no substantial questions of law arises for consideration of this Court.
Accordingly, the above tax case is dismissed. No costs."
28. The above findings of the Hon'ble High Court as well as the lower appellate authorities are noted to have been affirmed by the Hon'ble Supreme Court in their order reported in 294 ITR 49.
29. We find that the above decision is applicable with equal force to the case of the assessee. Like in the decided case, Shri R. Sabapathy had originally admitted that he had paid on-monies on monies of Rs.20 crores in cash to the assessee for purchase of land, which he he later on retracted. Further, the contents of Page No. 61 of document ID marked ANN/SK/SSSLLP/B&D/S ANN/SK/SSSLLP/B&D/S-2 on stand-alone alone basis does not prove that the notings pertained to the assessee and/or that it denoted payments made ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::33 ::
to him. According to us therefore, the the above judgment supports the findings rendered by the Ld. CIT(A).
30. We also gainfully refer to the decision of the jurisdictional coordinate Bench of this Tribunal at Chennai in the case of M.M. Financers (P) Ltd Vs Dy CIT (17 SOT 5).
5). In the decided case, cas search action was conducted at business premises of assessee and also at premises of a known business associate, 'KM'. From the premises of 'KM', 'KM' an unsigned MoU between the assessee and five others on one hand and 'KM' and 'KMR' firm on the other, was found wherein transaction for purchase of 95 acres of land for a total consideration of Rs. 2,40,40,000/-
2,40,40,000/ was reflected. The AO however found that the actual purchase consideration of land as disclosed by the assessee was Rs. 91 lakhs as against Rs. 2,40,40,000/ 0,000/- admitted by 'KM' vide the unsigned MoU and therefore added the differential sum as undisclosed income of the assessee. On appeal this th Tribunal noted that, although the sworn statement of 'KM' recorded under section 132(4) is piece of evidence but the he Assessing Officer has to establish the link with other seized documents. It was held that, the the statement recorded from the third party cannot be considered as the conclusive evidence. Further, the Tribunal also held that, the words 'may be presumed' appear appear in section 132(4A) and it only gives an 'option' to the authorities concerned to presume the ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::34 ::
things. The said option however is rebuttable and it does not give definite authority and that the he assessee has every right to rebut the same by producing evidence ence in support of its claim & contentions. It was held that each case depends on the rule of evidence and the Revenue authorities cannot automatically presume things especially when the actual things are contrary to the facts and circumstances of case. The The Tribunal noted that, the AO had blindly relied upon the original statement made by 'KM' and presumed the seized material to be fully true while making the addition. The Tribunal however observed that 'KM' had subsequently retracted his statement and it was also known that there was an existing dispute between the assessee and 'KM'. Further, the he assessee had also pointed out various discrepancies in the seized material relied upon which were contrary to the contemporaneous facts of the case. The Tribunal accordingly held that, since the AO did not bring any corroborative evidence or material in support of the original statement of 'KM' to prove as to why the original statement alone should prevail,, the impugned addition made by the AO was deleted, by holding as under :-
:
"17. Regarding the sworn statement, the sworn statement recorded under section 132(4) is some piece of evidence. The Assessing Officer has to establish the link with other books books of accounts seized. It cannot be considered as the conclusive evidence. The words "may be presumed" appear in section 132(4A) of the Act. Since the words "may be presumed" are incorporated in the section, it gives option to the authorities concerned to presume the things. But, it is rebuttable and it does not give definite authority and not a conclusive one. The assessee has every right to rebut the same by producing evidence in support of its claim. The entire case depends on the rule of evidence. The assessee has ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::35 ::
every right to shift the burden of proof. The revenue authorities cannot automatically presume things. The actual things depend upon facts and circumstances of each case. The presumption under section 132(4A) as to the truth of contents of books books or documents seized was rebuttable and it was in the discretion of the authorities depending upon the facts, to decide whether presumption should be drawn or not. The expression used in this sub-section sub (4A) is "may be presumed" which is also the expression expression used in section 114 of the Evidence Act and it was not a mandate that whenever books of accounts are seized, the authorities concerned shall so presume irrespective of any other factor which may dissuade the authorities from doing so. Therefore, the authorities uthorities concerned should draw the conclusion judicially, depending upon the facts and circumstances of the case. There is no conclusive presumption.
18. In the present case, K. Madhava Reddy retracted his statement even during the cross-examination.
examination. It is already a matter of fact' that there is a dispute among the assessee and K. Madhava Reddy as is evident from the answer to question No. 8 recorded on 26-5-1999, 26 1999, appearing on p. 8 of the assessment order,...
...
19. While determining the undisclosed income in in the block assessment, the Assessing Officer shall be specific in his statement. He cannot draw his reference on the basis of suspicion, conjectures or surmises. Suspicion, howsoever strong, cannot take place of matenal in support of findings of the Assessing Assessing Officer. The Assessing Officer should act in a judicial manner proceed with judicial spirit and should come to judicial conclusion. The Assessing Officer is required to act fairly as a reasonable person and not arbitrarily or capriciously. An assessment assessme made on inadequate material cannot stand on its own leg. The case law relied on by the learned Departmental Representative in the case of V. Kunhambu & Sons (supra) and Surjit Singh Chhabra (supra) and Kutty alias Lakshmi Narasimhan (supra) to support the the retraction of the statement by Shri K. Madhava Ready that it should be ignored and original statement to be relied. In our opinion, these case law are not applicable to the facts of the case on hand. In these cases relied on by the learned Departmental Representative, the original statement and the retracted statement were by the assessee himself. In the present case, both the original statement and the retracted statement were made by a third party i.e. K. Madhava Reddy. Further, on cross-
cross-objection also, K. Madhava Reddy denied his statement and the revenue is net having any corroborative evidence in support of the original statement to say that it should prevail.
....
22. In our opinion, there is no valid seized material representing addition of Rs. 1.49 lakhs towards undisclosed purchase consideration. It is only on surmise basis and statement recorded from third party, K. Madhava Reddy, and M/s. Shilpa Homes (P.) Ltd. This cannot be acted upon. The Circular No. F. No. 286/2/2003/IT(Inv.), dated 10-3-2003 10 clearly refrains the Assessing Officer from recording confessional statement during the course of search and seizure ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::36 ::
and survey operations and also warns the Assessing Officer not to attempt to obtain any confessional statement as to the undisclosed income, income, and any action contrary shall be viewed adversely. It also states that the Assessing Officer should rely upon the evidence and material gathered during the course of search. Here in the present case, the evidence is only agreement which reflects the purchase chase consideration at Rs. 2.40 crores and the recorded statement shows the sale consideration of 22 acres at Rs. 3,62,18.000. The third party statement and unsigned agreement cannot be acted upon. ...
24. ...Further, the loose papers found during the course ofof search at the premises of K. Madhava Ready are a dumb form having no evidential value. No addition can be made on the basis of noting on loose sheets in the absence of corroborative material. The revenue has not found any circumstantial evidence in the form orm of any investments in cash, jewellery or others. They found only Rs.
6,73,610 in cash at the assessee's place. The assessee is not expected to explain the loose papers found at the premises of K. Madhava Reddy. Further, there is no evidence for the payment payment of money to the assessee by any party other than entered in the books of accounts. Similarly, there is no evidence for the payment of money towards purchase consideration by the assessee to M/s. K.M.R. Estates & Builders (P.) Ltd. other than Rs. 91 lakhs.
lakhs. The Assessing Officer failed to establish the payment of Rs. 2.40 crores as purchase consideration for the acquisition of 22 acres of land and he has failed to prove the payment. Hence, we have no other alternative but to rely on the books of accounts maintained by the assessee according to which the purchase consideration was Rs. 91 lakhs and this has properly tallied with the sworn statement of the assessee.
25. The sale consideration of Rs. 3.62 crores for the sale of 22 acres of land vide agreement dated 25-3-1997 25 1997 (Annex. 'D' to assessment order) for which the assessee is not a party and there is a valid agreement dated 1-1- 1 -1997 to which the assessee is a party and the payment in this agreement properly tallies with the books of accounts maintained by the assessee. Therefore, in our opinion, the sale consideration of Rs. 1,12,37,332 is properly disclosed by the assessee and the difference of Rs. 3,14,812 is interest for the delayed payment. This plea of the assessee, in our opinion, is having merit. The valid agreement dated 1-1- 1 1997 cannot be said that it is an afterthough since it is the part of seized material. The assessee is justified in offering the difference between Rs. 1,15,52,148 and Rs. 91,00,000 as undisclosed income at Rs. 24,52,148. Since Sinc we have already held that there is no purchase consideration of Rs. 2,40,40,000 there is no question of computing the short-term short term capital gain on the difference of sale consideration of Rs. 3,62,18,000. Accordingly, we allow the grounds taken by the assessee."
see."
31. We also refer to the decision of the Hon'ble Bombay High Court in the case of Addl. CIT v. Miss Lata Mangeshkar [1974] 97 ITR 696.
696 ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::37 ::
In the said case, the ITO came across a sort of a ledger maintained by the firm known as Vasu Films of Madras containing certain entries, which had been seized by the Income Tax authority from the premises of the above said firm. In the diary, some amount was written as "W" and some amount was written as "B" against the name of the assessee. In the statement recorded ded from Mr. VasudevMenon, Managing partner of Vasu Films and from Mr. C.S. Kumar, Firm's Bombay manager, the above said entries were explained by them as the letter "W" would mean "white" and the letter "B" would mean "Black". The assessee given an opportunity opport to cross-examine examine these persons. Thereafter, the Assessing Officer accepted the entries recorded in the diary and came to the conclusion that the assessee has concealed income. Accordingly, he made additions. Before the Tribunal, it was contended on behalf behalf of the assessee that entire evidences on which lower authorities had relied, merely created suspicion that the assessee might have accepted payments in black but it did not take place of proof. The Tribunal, after appreciating piece of evidence, came to the conclusion that the evidences were not sufficient to prove even a single evidence, where the assessee could be said to have received money in black for which she did not pass a receipt. Accordingly, Accordingly the Tribunal deleted the addition made by the AO. The Hon'ble Bombay High Court has upheld the view taken by the Tribunal. In our view, this decision supports the case of the assessee also.
ITA No.3015
No. /Chny/2024
CO No.4/Chny/2025
(AY 2021-22)
Mr.Pinnathevar
Pinnathevar Palanichamy
::38 ::
32. In the present case, also the entries in the seized document on stand-alone alone basis are found to be dumb in nature, nature, having no linkage with the assessee and therefore it could not have been relied upon. Further, Shri R Sabapathy's original statement incriminating the assessee by stating that these notings inter alia denoted the cash payment of on-
on monies of Rs.20 crores s paid towards purchase of land from the assessee for aggregate cost of Rs.50 crores is found to based on mistaken fact and therefore was unreliable; and the said statement had later on been retracted as well. As noted above, the retraction made by Shri R Sabapathy was found to be justifiable. Further, the assessee had also always denied the original statement of Shri R Sabapathy. We also countenance the finding of the Ld.CIT(A) that, the admission if made by a maker against himself is an important piece of evidence against him; but when it comes to a statement against another person (3rd person), the requirement of corroboration is a must; and in the given facts of the present case, there was no such corroborative evidence. Rather, the contemporaneous facts disproved the theory of the AO as the property in question had been transferred at the value of Rs.50 crores, as mentioned in the original statement, but the entire consideration was actually received in demand drafts and that the sale price was more than 2.28 times the guideline value. On these facts therefore, the original statement of Shri R Sabapathy that he had taken loan from M/s.Swarna Shilpi to pay ITA No.3015 No. /Chny/2024 CO No.4/Chny/2025 (AY 2021-22) Mr.Pinnathevar Pinnathevar Palanichamy ::39 ::
Rs.20 crores in cash by way of on-monies on monies to the assessee is found to be unbelievable and per-se se wrong.
wrong. Consequently, we hold that, the Ld. CIT(A) had rightly deleted the impugned addition of Rs.20 crores made by the AO.
33. Overall therefore, and for the reasons set out above, we see no reason to interfere with the order of the Ld. CIT(A). Accordingly, all the grounds taken by the Revenue are dismissed.
34. Coming to the cross-objections cross objections of the assessee, it is noted that they were raised in support of the order of Ld.CIT(A) and therefore, in the light of our above findings dismissing the appeal of the Revenue, the cross-
cross objection of the assessee is found to have been rendered infructuous and is therefore dismissed.
35. In the result, appeal filed by the Revenue and Cross--Objection filed by the assessee are dismissed.
Order pronounced on the 29th day of April, 2025,, in Chennai.
Sd/- Sd/
Sd/-
(अिमताभ शु ा) (एबी टी.. वक )
(AMITABH SHUKLA) (ABY
ABY T. VARKEY)
VARKEY
लेखासद य/ACCOUNTANT MEMBER याियकसद य/JUDICIAL MEMBER
चे ई/Chennai,
दनांक/Dated: 29th April,, 2025.
20
TLN
ITA No.3015
No. /Chny/2024
CO No.4/Chny/2025
(AY 2021-22)
Mr.Pinnathevar
Pinnathevar Palanichamy
::40 ::
आदेश क ितिलिप अ ेिषत/Copy
Copy to:
to
1. अपीलाथ /Appellant
2. थ /Respondent
3. आयकरआयु /CIT,, Chennai / Madurai / Salem / Coimbatore.
4. िवभागीय ितिनिध/DR
5. गाडफाईल/GF