Income Tax Appellate Tribunal - Vizag
Venkata Rosaiah Kilari,Guntur vs The Deputy Commissioner Of Income Tax, ... on 30 April, 2026
आयकर अपीलीय अिधकरण, िवशाखापटणम पीठ
IN THE INCOME TAX APPELLATE TRIBUNAL
Visakhapatnam Bench, Visakhapatnam
Before Shri Ravish Sood, Judicial Member
and
Shri Omkareshwar Chidara, Accountant Member
आ.अपी.सं /ITA No.353/Viz/2025
(िनधारण वष/Assessment Year: 2017-18)
Assistant Commissioner of Vs. Venkata Rosaiah Kilari,
Income Tax, Guntur.
Guntur. PAN: ADSPK7598L
(Appellant) (Respondent)
आ.अपी.सं /ITA No.425/Viz/2025
(िनधारण वष/Assessment Year:2017-18)
Venkata Rosaiah Kilari, Vs. Deputy Commissioner of
Guntur. Income Tax,
PAN: ADSPK7598L Central Circle-1,
Guntur.
(Appellant) (Respondent)
िनधा रती ारा/Assessee by: Shri M V Prasad, CA
(Hybrid mode)
राज व ारा/Revenue by: Shri Badicala Yadagiri, CIT-DR
सु न वाई की तारीख/Date of 18/02/2026
Hearing:
घोषणा की तारीख/Date of 30/04/2026
Pronouncement:
आदे श / ORDER
PER. RAVISH SOOD, JM :
The captioned cross-appeals filed by the assessee and the revenue are directed against the order passed by the CIT(Appeals) for 2 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari AY 2017-18, dated 17/03/2025, which in turn arises from the order passed by the AO under Section 153C of the Act, dated 30/03/2022. As the present appeals involve common issues, they are taken up and disposed of together. The revenue has assailed the CIT(A) order on the following grounds of appeal before us:
"1. The order of Ld. CIT(A) is erroneous both on the facts and in Law.
2. The Ld. CIT(A) erred in summarily allowing the appeal of the assessee on sole ground of non-admissible seized material evidence used by the Assessing Officer during the assessment proceedings u/s.153C, consequent to search action conducted in the case of M/s. Polisetty Somasundaram group.
3.. The Ld. CIT(A) erred in giving a finding that the pen drive seized from the business premises of M/s Polisetty Somasundaram group and marked as Annexure A/PSS/CORP/19 was an inadmissible digital evidence as held by Hon'ble ITAT in the case of M/s Polisetty Somasundaram and hence the same can't be considered as a valid digital evidence in the case of the assessee. The Ld. CIT(A) ought to have appreciated the fact that the said decision of Hon'ble ITAT was not accepted by the Department and further appeal to High Court was filed and the same is pending adjudication as on date. The Ld.CIT(A) ought to have appreciated the fact that the finding of Hon'ble ITAT either had not attained any finality or accepted by the Department as on date and thus, relying on the said decision of Hon'ble ITAT would be adverse in the interest of Revenue.
4. The Ld.CIT(A) erred in allowing relief to the assessee by considering the decision of Hon'ble ITAT in the case of M/s Polisetty Somasundaram, by ignoring the fact that the seized pen drive was an independent primary source of evidence u /s 65B of Indian Evidence Act and when the extracts of the said pen drive were confronted to the key persons of M/s Polisetty Somasundaram group, the assessee never raised an objection with regard to the contents of the said seized pen drive.
5. The Ld.CIT(A) erred in not appreciating the fact that the seized material marked as A/PSS/CORP/18 consists hard copies in the form of printouts of excel sheets. The Ld.CIT(А) ought to have appreciated the fact that though the seized material in the form of pen drive marked as A/PSS/CORP/19 was an inadmissible evidence, the seized material marked as A/PSS/CORP/18 was in fact in the form of hard copies and thus it can't be ignored while allowing the relief to the assessee.3
ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari
6. The Ld.CIT(A) erred in allowing relief to the assessee based on the decision of Hon'ble ITAT in the case of M/s. Polisetty Somasundaram group, though the key person of the searched group, i.e. Sri Polisetty Shyam Sundar of Polisetty Somasundaram group, had confirmed the financial transactions done with the assessee in his sworn statement u/s 132(4) dt. 08.06.2020.
7. The Ld.CIT(A) erred in allowing relief to the assessee that it had never questioned the validity of the seized material during the course of scrutiny proceedings, before Assessing Officer and it is only an afterthought. The Ld.CIT(A) ought not to have considered the afterthought claim made by the assessee and it was raised by the assessee only after the relief got by the searched person, M/s. Polisetty Somasundaram, before Hon'ble ITAT on validity of the seized material.
8. The Ld.CIT(A) has erred in not considering the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities in this case, the Pen drive. Reference is invited to the decision of Hon'ble Supreme Court in the case of Ambalal Sarabhai Enterprise Ltd Vs. KS Infra space LLP Limited and Another in Civil Appeal No(s). 9346 of 2019 dated 6th January, 2020. Wherein pertaining to whatsapp evidence, the Hon'ble Supreme Court observed that "The WhatsApp messages, which are virtual verbal communications are matters of evidence with regard to their meaning and its contents to be proved during trial by evidence -in- chief and cross examination. The emails and WhatsApp messages will have to be read and understood cumulatively to decipher whether there was a concluded contract or not". In this case, there is a virtual verbal communication and the same is matter of evidence, as in case of evidence derived from pen drive, and by completion of transaction, a concluded contract and electronic evidences derived from pen drive subsumes the same with conviction.
9. The Ld.CIT(A) has erred in not considering the evidence that was found and seized in the form of Pendrive and print outs of excel sheets as the same has evidentiary value as per the provisions of sec 65A and sec 65B of Indian Evidence Act 1872.
10. The Ld.CIT(A) has erred in not considering the sworn statement of the key person of the searched group i.e. Sri Polisetty Shyam Sundar of Polisetty Soma Sundaram group recorded u/s 132(4) on 08.06.2020, wherein he had confirmed receipt of cash on various dates from the assessees and he also confirmed that all these cash transactions were outside regular books of accounts. Accordingly, he admitted the cash receipts as additional income in the hands of M/s. Polisetty Somasundaram. The Ld.CIT(A) ought to have considered the decision of Hon'ble Apex Court in the case of B Kishore Kumar Vs DCIT 62 Taxmann.com 215 (SC) (2015), wherein the Hon'ble Apex Court dismissed the SLP filed by the assessee thus wholly relying on 132(4) statement as strong piece of evidence.
11. Reliance is placed on the judgment of Hon'ble Supreme Court in the case of Sumati Dayal v CIT(1995) 214 ITR 801 (SC) wherein it was held that 4 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari Surrounding circumstances and test of applying human probabilities "Though an apparent must be considered real until it was shown that there were reasons to believe that the apparent was not real in the case where a party relied on self-serving recitals in document, it was for that party to establish the truth of those recitals. Taxing authorities were entitled to look into the surrounding circumstances to find out the reality of the recitals.
12. Reliance is further placed on the judgment of Hon'ble Supreme Court in the case of CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) (546,547) wherein it was held that "Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or a Tribunal. Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of Human Probabilities. Human minds may differ as to reliability of a piece of evidence, but that sphere decision of the final fact- finding authority is made conclusive by law.
13. The Ld.CIT(A) has erred in not considering the facts that the assessment order as time- barred, is not acceptable. In this case limitation was calculated with reference to drawing up of the last panchnama. However, since there was no seizure on the date of last panchnama.
14. The Ld.CIT(A) has erred in not considering the facts that the decision of Hon'ble Supreme Court, in the case of Anil Minds vs CIT (148 Taxmann.com
407), it is submitted that the last 15. operation of the panchanama should be considered for deciding the time limit as per provisions of Section 153B. The decisions of various High Court relied upon by the assessee and Hon'ble ITAT were prior to the date of pronouncement of above decision.
15. The Ld.CIT(A) has erred in accepting the claim of the assessee that certificate obtained u/s.65B of Indian Evidence Act is not as per law. The Ld.CIT(A) ignored the fact that in the assessment order it was clearly mentioned that several incriminating material alongwith the pendrive was found during the search. Ld.CIT(A) failed to appreciate the fact that pendrive is an independent primary evidence storage devise. Ld.CIT(A) ignored that fact that extracts of said pendrive were confronted during recording of the statement in the search operation and the assessee never raised objection about the contents of the pendrive.
16. Any other ground that may be urged at the time of hearing."
2. The assessee, on the other hand, has challenged the impugned order of the CIT(A) on the following grounds:
"1. The Learned CIT(Appeals) erred in both law and fact.
2. On the facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeals) is not justified in confirming the addition made of Rs.5
ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari 55,00,000/- on account of acceptance of cash loan from M/s. Polisetty Somasundaram.
3. On the facts and circumstances of the case the Learned CIT(A) ought to have appreciated that the receipts were found and seized in the premises of the searched party do not contain any signature of the appellant and these are self made receipts by the searched person.
4. On the facts and circumstances of the case the Learned CIT(A) ought to have appreciated that the Assessing Officer came to conclusion that the appellant has made the cash payments to M/s. Polisetty Somasundaram simply basing on the third party statement which is not having any bearing on the determination of taxable income of the appellant.
5. On the facts and circumstances of the case, the addition made on the unsubstantiated evidences and also without any corroborative evidences in support of self made receipts is unsustainable before law.
6. Any other legal as well as other ground that may be urged at the time of hearing of the appeal."
3. Further, the assessee has raised before us the following additional grounds of appeal:
Ground No.7:
"On the facts and circumstance of the case, the Assessing Officer is not justified in adopting the tax rate at 60% under section 115BBE of the Act instead of charging tax at the rate of 30% since the Finance Act 2017 introduced an amendment to Section 115BBE of the IT Act, which set a higher tax rate of 60% through the Taxation (Second Amendment) Act, 2016 and thus amended rate is applicable only for assessments conducted from 01.04.2017 onwards.
Ground No.8:
"On the facts and circumstances of the case, the Assessing Officer is not justified in levying tax at higher rate of 60% by applying the provisions of Section 115BBE of the Act since it is applicable only prospectively and not retrospectively."
Ground No.9:
On the facts and circumstances of the case, tine Learned Assessing Officer erred in law and acted without jurisdiction in issuing the impugned notice under Section 153C of the Income-tax Act, 1961 dated 06-12-2021, as the provisions 6 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari of Section 153C are inapplicable and barred for searches initiated (or deemed to be initiated) on or after 01-04-2021."
4. As the assessee, by raising the additional grounds of appeal, has assailed before us the validity of the notice issued by the AO under Section 153C of the Act, and the consequential assessment framed by him under Section 153C of the Act, dated 30/03/2022, the adjudication of which would not require looking any further beyond the facts borne on record, we have no hesitation in admitting the same. Our aforesaid view is supported by the judgment of the Hon'ble Supreme Court in CIT vs. National Thermal Power Company Limited (1998) 229 ITR 383 (SC).
5. Shri. MV Prasad, CA, the Ld. Authorized Representative (for short, "Ld. AR") for the assessee, at the threshold of hearing of the appeal submitted that the same involves a delay of 37 days. Elaborating on the reason leading to the delay in filing the appeal, the Ld. AR has drawn our attention to the application filed by the assessee-appellant, wherein he has sought for the condonation of the delay of 37 days in filing the present appeal. The Ld. AR submitted that the delay in filing the appeal had crept in due to the non-availability of the Digital Signature Certificate (DSC) in time, and also due to the fact that the assessee did not notice the communication of the order of the CIT(A) in his email account for some time. The Ld. AR submitted that as the delay involved in the appeal 7 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari is not inordinate and is backed by justifiable reason, the same, in all fairness and interest of justice be condoned.
6. Per Contra, the Ld. Departmental Representative (for short, "DR") objected to the seeking of condonation of delay by the assessee appellant.
7. We have given thoughtful consideration to the contentions advanced by the Ld. Authorized representatives of both parties and the reasons leading to the delay in filing the present appeal. In our view, as no mala fides are alleged for the delay in filing of the present appeal by the assessee appellant, which is neither inordinate nor attributable to any lackadaisical approach of the appellant, but had crept in for certain justifiable reasons, the same in our view merits to be condoned. Our aforesaid view is supported by the judgment of the Hon'ble Supreme Court in the case of Senior Bhosale Estate (HUF) vs. ACIT (Civil Appeal No. 6671-6676 of 2010), wherein a delay of 1754 days was condoned, holding that when the explanation of the assessee is not controverted, the delay deserves to be condoned in the interest of justice. Apart from that, we find that the Hon'ble Supreme Court in its recent order in the case of Vidya Shankar Jaiswal vs. The Income Tax Officer, Ward-2, Ambikapur in Special Leave Petition (Civil) 8 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari Nos. 26310-26311/2024, dated 31st January, 2025, while setting aside the order of the Hon'ble High Court of Chhattisgarh, which had approved the declining of the condonation of the delay of 166 days by the Income Tax Appellate Tribunal, Raipur Bench, had observed that a justice-oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay involved in filing the appeal.
8. Succinctly stated, the assessee is an individual engaged in business and was also elected as a Member of the Legislative Assembly of Andhra Pradesh in the General Elections 2019. Search and seizure proceedings under Section 132 of the Act were conducted in the case of M/s. Polisetty Somasundaram group on 28/01/2020. During the course of the search proceedings, a pen drive marked as Annexure A/PSS/CORP/19 was seized, and the copies of the contents of the pen drive were seized vide Annexure A/PSS/CORP/18, which contained the details of unaccounted cash transactions made by M/s Polisetty Somasundaram. It was gathered during the course of the search proceedings that the firm M/s Polisetty Somasundaram was indulging in cash transactions, i.e., advancing hand loans to persons and receiving interest thereon, thereby evading a huge quantum of taxes. As per the 9 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari seized documents, it transpired that the assessee was also one of the close aides of the partners of M/s Polisetty Somasundaram. As per an incriminating document, i.e., a cash voucher found and seized during the course of the search proceedings, viz., annexure A/PSS/CORP/09 - Page No. 129, the assessee was paid an amount of Rs. 55 lacs on 12/11/2016. For the sake of clarity, we deem it apposite to cull out the seized document, as under:
The AO, based on the aforesaid material, initiated proceedings under Section 153C of the Act in the case of the assessee.10
ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari
9. During the course of the assessment proceedings, the AO confronted the assessee with the contents of the seized material, viz. (i). Annexure A/PSS/CORP/19 (contents of the pen drive); and (ii). Annexure A/PSS/CORP/09 - Page No. 129. In reply, the assessee denied having entered into any cash transactions with M/s Polisetty Somasundaram. The assessee, vide his letter dated 21/03/2022, stated that he had taken a loan of Rs. 3 crore for a period of 10 years from M/s Polisetty Somasundaram (through banking channels during the F.Y. 2013-14), but the said loan, at the insistence of the lender, was repaid by him through banking channels in F.Y. 2015-16. The assessee denied having entered into any cash transactions with M/s Polisetty Somasundaram.
10. However, the AO observed that Sri P. ShyamSundar, the Managing Partner of M/s Polisetty Somasundaram in his statement recorded in the course of the search proceedings u/s 132(4) of the Act, dated 08.06.2020, on being confronted with the contents of the seized material, viz. annexures A/PSS/CORP/18 & A/PSS/CORP/19 seized from his business premises at 8-24-31, Mangalagiri Road, Guntur, had stated that the same were the unrecorded amounts received in cash on repayment of loan by Sr Kilari Rosaiah (i.e., the assessee), and out of the same an amount of Rs. 55 lac was repaid back to the assessee. It 11 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari was further stated by him that the aforesaid cash transaction was recorded in the seized annexure "A-18", but he did not have any documentary evidence to support the aforesaid repayment of loan by the assessee.
11. The AO observed that Sri P. ShyamSundar (supra) had, in his statement recorded under Section 132(4) of the Act, admitted that he had received the above cash payments from the assessee towards squaring up of the earlier loans given by him in cash. The AO, holding a firm conviction that the assessee had failed to discharge the onus that was cast upon him to prove that he, during the subject year, had not given any cash amount to M/s Polisetty Somasundaram (supra), rejected his claim that he had not carried out any cash transactions with the said concern during the year under consideration. Further, the AO observed that one voucher was seized during the course of search proceedings from the premises of M/s Polisetty Somasundaram, viz. A/PSS/CORP/09 - Page no. 129, which revealed a cash payment of Rs. 55,00,000/- made to Sri K. Rosaiah (assessee). The AO, based on the aforesaid facts, observed that the assessee's contention that he had never entered into cash transactions with M/s Polisetty Somasundaram was found to be completely contrary to the facts and evidence borne on the record. Further, the AO observed that the extract of the cash book 12 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari seized during the search proceedings, viz. Annexure-A/PSS/CORP/18 had several references to Sri Kilari Rosaiah (assessee), and revealed regular cash transactions between M/s Polisetty Somasundaram and the assessee. Accordingly, the AO based on the entries in the cash book, viz. Annexure-A/PSS/CORP/18, vouchers, and statement of Sri Polisetty Shyam Sundar (supra) recorded both during search proceedings and in the course of the assessment proceedings, observed that it was conclusively established that the assessee had repaid the loan amount in cash. Thereafter, the AO, in the absence of any explanation of the assessee regarding the source of the cash payments of Rs 1,55,00,000/- to M/s Polisetty Somasundaram, held the same as having been sourced out of the unexplained income of the assessee. Further, the AO observed that the assessee had, during the subject year, received an amount of Rs. 55,00,000/- in cash from M/s Polisetty Somasundaram, as evidenced by the voucher dated 12/11/2016. The AO, observing that Sri P. Shyam Sundar, the Managing Partner of M/s Polisetty Somasundaram, in his statement recorded during assessment proceedings, had stated that the subject amount of Rs. 55 lac pertained to the repayment of a cash loan taken by the assessee, thus made an addition of the said amount to the income of the assessee on a protective basis. Accordingly, the AO, based on his aforesaid deliberations, after 13 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari making the aforementioned additions, viz. (i) unexplained income: Rs 1,55,00,000/-; and (ii). unexplained income on protective basis: Rs. 55,00,000/-, determined the income of the assessee vide his order passed under Section 153C of the Act, dated 30/03/2022, at Rs. 2,18,72,370/-
12. Aggrieved, the assessee carried the matter in appeal before the CIT(A), who found favor with the contention of the assessee/appellant that as the ITAT, Visakhapatnam vide its order passed in the case of M/s Polisetty Somasundaram Vs. DCIT Central Circle-1, Guntur, ITA No. 172 to 180/Viz/2020-23 dated 18.08.2023 had held that in the backdrop of the facts of the case, information contained in the seized pen drive could not be considered as admissible evidence as per the provisions of section 65B of the Indian Evidence Act (since the certificate drawn u/s. 65B was found to be invalid by the Tribunal), thus being guided by the observations of the Tribunal, concluded that the information taken from the same pen drive for making an addition of Rs. 1.55 crore in the case of the assessee could not be sustained. The CIT(A)'s observations are, for the sake of clarity, culled out as under (relevant extract):
"6.3 The main contention of the appellant in the legal ground of appeal(additional ground no.8) is that the Hon'ble Jurisdictional ITAT Visakhapatnam vide its order in ITA No. 172 to 180/Viz/2020-23 dated 18.08.2023 in the case of M/s Polisetty Somasundaram Vs. DCIT Central Circle-1, Guntur held in the facts of the case, that information 14 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari contained in the seized pen drive could not be considered as admissible evidence as per the provision of section 65B of the Indian Evidence Act ( Since Certificate drawn u/s. 65B was found invalid By Honble ITAT ), and as the information taken from the same pendrive was used in the appellant's case for making addition, such addition is not sustainable. The relevant portion of the decision of the Hon'ble Jurisdictional ITAT is reproduced as below:
XXX XXX XXX I have gone through the above submissions of the appellant and the Honble ITAT's decision in the case of M/s Polisetty Somasundaram Vs. DCIT Central Circle1, Guntur (supra). With due respect to the decision of Jurisdictional ITAT, it is to be noted here that any data which has been already held as invalid has no evidentiary value and any addition made solely relying upon the invalid digital data cannot be considered for the assessment purpose. The ITAT had concluded that only the pendrive seized vide annexure A/PSS/CORP/18 is invalid digital evidence as per law. According to the Hon'ble ITAT, the conditions specified in the section 65B(2) and 65B(4) of the Indian Evidence Act was not followed in the case of Shri Polisetty Somasundaram."
13. However, the CIT(A) observed that the AO, while framing the assessment, had also relied upon certain other evidence. The CIT(A) observed that certain incriminating vouchers containing unaccounted transactions were unearthed during the course of the search proceedings. As per one of the voucher seized in the course of the search proceedings, viz., annexure A/PSS/CORP/09, Page 129, the CIT(A) observed that the same referred to a cash payment made by the assessee to Shri Polisetty Somasundaram. Accordingly, the CIT(A), based on his aforesaid observation, upheld the addition of Rs. 55 lacs made by the AO.
15
ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari
14. Both the assessee and the revenue aggrieved with the CIT(A) order has carried the matter in appeal before us.
15. We have heard the Ld. Authorized Representatives of both parties perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements pressed into service by them to drive home their respective contentions.
16. As the assessee, based on his additional grounds of appeal, has challenged the jurisdiction assumed by the AO for issuing notice under Section 153C of the Act dated 06/12/2021, and the consequent assessment framed by him vide his order passed under Section 153C of the Act, dated 30/03/2022, we shall first deal with the same.
17. Apropos the validity of the jurisdiction assumed by the AO for issuing notice under Section 153C of the Act, dated 06/12/2021, and the consequent assessment framed by him, we find that the primary contention of the Ld. AR is that the notice under Section 153C should be treated as the "deemed date of search" in the case of the "other person", i.e., the assessee, and since such notice is dated 06/12/2021 (post 01/04/2021), the amended provisions introduced by the Finance Act, 2021 would apply, thereby rendering the proceedings initiated based on the aforesaid notice as invalid. We find that the assessee, in his attempt 16 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari to drive home his aforesaid contention, had relied on a host of judicial pronouncements, viz. (i). CIT Vs. Jasjit Singh (2023) 304 Taxman 602 (Supreme Court); (ii). Pr. Commissioner of Income Tax vs. Shalimar Town Planners Pvt. Limited (ITA No. 217/2022, dated 22/07/2022 (Delhi); (iii). Hargovind Vs. ACIT, Circle 3(1), Chennai (Writ Petition No. 23019 of 2023, dated 28/10/2025); (iv). Pr. Commissioner of Income-tax, Central Vs. Karina Airlines International Limited, ITA 690/2023, dated 02/08/2024; and (iv) CIT-7 vs. RRJ Securities Limited (2015) 62 taxmann.com 391 (Delhi).
18. Per Contra, the Ld. CIT-DR vehemently objected to the aforesaid contention advanced by the assessee's counsel. Elaborating on his contention, the Ld. CIT-DR submitted that as the search proceedings under Section 132 in the case of the person searched, viz. Shri Polisetty Somasundaram was conducted on 28/01/2020, i.e., prior to 01/04/2021, and the seized material was also handed over by the Investigation Wing to the Jurisdictional AO on 23/03/2021; therefore, the entire assessment proceedings fall under the pre-amended provisions of Sections 153A to 153C of the Act. Carrying his contention further, the Ld. CIT-DR submitted that the triggering point for applicability of the search assessment provisions is the date of initiation of the search, and not the date of issuance of notice under Section 153C of the Act. The Ld. CIT- 17
ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari DR submitted that the "deeming fiction" under Section 153C is only for the purpose of bringing "other persons" within the ambit of assessment and does not alter the original jurisdictional fact of search. The Ld. CIT- DR further submitted that Section 153C(3) contains a sunset clause providing that the section shall not apply where a search is initiated under Section 132 on or after 01/04/2021. It was submitted that, since the present search was initiated on 28/01/2020, the amended law introduced by the Finance Act, 2021, is not applicable. The Ld. DR submitted that if the interpretation suggested by the assessee is accepted, then the income of the assessee that had escaped assessment would neither be assessable under Section 153C nor under Section 147of the Act, which could never have been the intention of the legislature.
19. We have given thoughtful consideration to the contentions advanced by the Ld. Authorized Representatives of both parties. The core issue, based on which the validity of the jurisdiction assumed by the AO for issuing notice under Section 153C of the Act, dated 06/12/2021, has been assailed before us, is whether the assessment in the case of the assessee is governed by the pre-amended provisions of Section 153C or whether it becomes invalid due to the amendments introduced by the Finance Act, 2021.
18
ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari
20. Admittedly, it is an undisputed fact that the search under Section 132 in the case of the person searched, viz. Shri Polisetty Somasundaram was conducted on 28/01/2020, i.e., prior to 01/04/2021. It is also not in dispute that the seized material was handed over to the jurisdictional Assessing Officer on 23/03/2021, i.e., prior to the amendment becoming effective from 01/04/2021. The Ld. AR's contention proceeds on the premise that the date of issuance of notice under Section 153C of the Act, i.e., 06/12/2021, should be treated as the "deemed date of search" for the "other person", i.e., the assessee, and, therefore, the amended provisions as had been made available on the statute vide the Finance Act, 2021 w.e.f 01/04/2021 will be applicable in his case.. However, this interpretation canvassed before us does not find support in law. We say so for the reason that Section 153C(3) contains a sunset clause providing that the section shall not apply where a search is initiated under Section 132 on or after 01/04/2021. In our view, the term "search" referred to in Section 153C(3) of the Act can only be understood in the context of the search conducted under Section 132 of the Act. In fact, the scheme of Sections 153A to 153C of the Act clearly reveals that the foundation of jurisdiction is the search conducted under Section 132 of the Act. Section 153C only extends the jurisdiction to "Other persons" based on incriminating material found during such 19 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari search proceedings. It is a consequential and dependent provision and cannot be treated as an independent trigger, replacing the date of search. We find that the legislative intent behind the Finance Act, 2021 amendments, was to streamline search assessments and introduce a new regime prospectively. In our view, the applicability of the new regime is clearly linked to the date of initiation of the search, not the date of issuance of a notice to other persons. As in the present case before us, since the search was initiated on 28/01/2020, the proceedings are rightly governed by the pre-amended provisions. We are of firm conviction that the notice issued under Section 153C of the Act dated 06/12/2021 is only a procedural step flowing from the original search proceedings. In our view, the Revenue's contention is also supported by the principle that if the assessee's interpretation is accepted, it would lead to an anomalous situation where income escaping assessment would fall outside both Section 147 and Section 153C of the Act, which could not have been the intention of the legislature. We find that it is a settled principle laid down by the Hon'ble Supreme Court that an interpretation of a statutory provision which leads to absurdity must be avoided. Also, an interpretation that renders a statutory provision unworkable or defeats its very purpose cannot be accepted. Our aforesaid view is supported by the judgment of the Hon'ble Supreme Court in CIT v. Hindustan Bulk 20 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari Carriers (2002) 259 ITR 449 (SC), wherein it is held that a construction which leads to manifest absurdity must be avoided and the statute must be interpreted in a manner that gives effect to legislative intent. Applying the aforesaid principle, the interpretation suggested by the Ld. AR, that the date of issuance of notice under Section 153C of the Act should be treated as the "deemed date of search" for determining applicability of the law, we are afraid leads to a legally unsustainable result.
21. Coming to the case laws pressed into service by the Ld. AR, we are of the view that the same, when read in light of the context in which they have been rendered, clearly makes them distinguishable on facts. We shall deal with the respective judicial pronouncements relied upon by the Ld. AR in a chronological order, as under:
(A) CIT Vs. Jasjit Singh (2023) 304 Taxman 602 (Supreme Court):
The issue before the Hon'ble Supreme Court was primarily regarding the scope of satisfaction note and procedural safeguards under Section 153C in a post-amendment context, and not the issue of transitional applicability of Finance Act, 2021, based on the date of initiation of search.
(B). CIT-7 vs. RRJ Securities Limited (2015) 62 taxmann.com 391 (Delhi): The Court dealt with the requirement of satisfaction and the 21 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari assumption of jurisdiction under Section 153C of the Act, but again in the context of pre-amendment law, and not the effect of the Finance Act, 2021, sunset clause.
(C). Pr. Commissioner of Income Tax vs. Shalimar Town Planners Pvt. Limited (2024) 161 taxmann.com 305 (Delhi): The Hon'ble High Court examined the validity of proceedings under Section 153C of the Act where satisfaction was not properly recorded. The question of whether the date of notice under Section 153C can override the date of search under Section 132 did not arise.
(D) Karina Airlines International Limited, ITA 690/2023, dated 02/08/2024.: The issue before the Hon'ble High Court was the procedural lapses and validity of assumption of jurisdiction, and not the legislative transition between pre and post Finance Act, 2021 regimes.
(E). Hargovind Vs. ACIT, Circle 3(1), Chennai (Writ Petition No. 23014 of 2023, dated 28/10/2025): In the said case also, the issue before the Hon'ble High Court was the validity of the jurisdiction assumed by the AO and not the legislative transition between pre and post Finance Act, 2021 regimes.
We, thus, are of firm conviction that as none of the decisions relied upon by the Ld. AR lays down that the date of issuance of notice under Section 22 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari 153C substitutes or overrides the date of search on the searched person for the purpose of determining the applicable statutory regime; therefore, reliance placed upon the same will not carry the case of the assessee any further. Accordingly, the additional grounds of appeal raised by the assessee challenging the validity of the jurisdiction assumed by the AO for issuing notice under Section 153C of the Act, dated 06/12/2021, are rejected.
22. Coming to the merits of the case, we find that the assessee is an individual engaged in business. Search and seizure proceedings under Section 132 of the Act were conducted in the case of M/s. Polisetty Somasundaram group on 28/01/2020. During the course of the search proceedings, a pen drive marked as Annexure A/PSS/CORP/19 was seized, and printouts derived therefrom were marked as Annexure A/PSS/CORP/18. Apart from that, one voucher was seized during the course of search proceedings from the premises of M/s Polisetty Somasundaram, viz. A/PSS/CORP/09, Page no. 129, which revealed a cash payment of Rs. 55,00,000/- made to Sri K. Rosaiah (assessee). As observed by us hereinabove, the AO had, based on the aforesaid material, initiated proceedings in the case of the assessee under Section 153C of the Act. Although the assessee denied the transactions and contended that the entire addition is based only on third-party digital data 23 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari without any corroboration or independent evidence, the AO made additions alleging cash transactions carried out by him outside the books of account, viz. (i) addition of unaccounted cash payments: Rs. 1,55,00,000/-; and (ii). addition of unexplained income on protective basis: Rs. 55,00,000/-. On appeal, the CIT(A), after examining the assessment record and submissions, granted partial relief by deleting certain additions and sustaining others on the basis of independent supporting material such as seized vouchers, while also considering the legal validity of the electronic evidence.
23. We have given thoughtful consideration to the contentions advanced by the Ld. Authorized Representatives of both parties regarding the respective additions made by the AO, which, however, were partly deleted and partly sustained by the CIT(A).
24. As observed by us hereinabove, the entire controversy in the present case primarily revolves around the evidentiary value of digital data retrieved from a pen drive seized from a third party and the extent to which such data can be relied upon for making additions in the case of the assessee. Admittedly, the primary basis for addition is electronic data stored in a pen drive and its printouts in the form of Excel sheets. We find that the assessee had consistently denied any involvement in 24 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari the alleged transactions and has disputed the authenticity and reliability of the seized digital material.
25. We find that the Tribunal, while disposing of the appeal in the case of M/s Polisetty Somasundaram Vs. DCIT Central Circle-1, Guntur, vide its order passed in ITA Nos. 172 to 180/Viz/2023 dated 18.08.2023, while adjudicating the appeals arising out of the same search proceedings, examined the evidentiary value of the identical pen drive data. The Tribunal, after a detailed analysis of Section 65B of the Indian Evidence Act, held that the certificate furnished under that section was not in accordance with the mandatory requirements of law. It was specifically observed that the conditions prescribed under Section 65B(2) and 65B(4) were not satisfied, and, therefore, the electronic record derived from the pen drive could not be treated as admissible evidence. Accordingly, the Tribunal in the case of M/s. Polisetty Somasundaram group deleted the additions made solely on the basis of such electronic data, holding that, in the absence of a valid Section 65B certificate, the printouts of the seized pen drive data had no evidentiary value and could not be relied upon to sustain the additions. For the sake of clarity, the observations of the Tribunal in the case of M/s Polisetty Somasundaram Vs. DCIT (supra), are culled out as under: 25
ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari "39. We have heard both the parties and perused the material available on record and the orders of the Ld. Revenue Authorities on this issue as well as the submissions made by the Ld. AR and the Ld. CIT-DR.
The CBDT has issued an Investigation Manual for the purpose of collecting Digital Evidence in the cases of search and seizure. In para 2.6.3 of the said Manual, the CBDT has advised that the procedure has to be in consonance with the provisions of section 65B of the Indian Evidence Act. For reference sake, we extract below the relevant para 2.6.3 of the Manual:
"2.6.3 Under Indian Evidence Act there are several references to documents and records and entries in books of account and their recognition as evidence. By way of the THE SECOND SCHEDULE to the Information Technology Act Amendments to the Indian Evidence Act have been brought in so as to, incorporate reference to Electronic Records along with the 36 document giving recognition to the electronic records as evidence. Further, special provisions as to evidence relating to electronic record have been inserted in the Indian Evidence Act, 1872 in the form of section 65A & 65B, after section 65. These provisions are very important. They govern the integrity of the electronic record as evidence, as well as, the process for creating electronic record. Importantly, they impart faithful output of computer the same evidentiary value as original without further proof or production of original. Accordingly, while handling any digital evidence, the procedure has to be in consonance of these provisions."
40. Further, we find that section 65B(2) of the Indian Evidence Act clearly specifies the following conditions with respect to obtaining of Digital Evidence both for primary and secondary evidences. The relevant extract of section 65B(2), (3) and (4) are as follows:
"(2) The conditions referred to in sub-section (1) in respect of a computer output shall be the following, namely:
(a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over 181 that period by the person having lawful control over the use of the computer;
(b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities;26
ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari
(c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation 37 during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and
(d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities.
(3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether-
(a) by a combination of computers operating over that period; or
(b) by different computers operating in succession over that period; or
(c) by different combinations of computers operating in succession over that period; or
(d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly. (4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say, -
(a) identifying the electronic record containing the statement and describing the manner in which it was produced;
(b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced by a computer;
(c) dealing with any of the matters to which the conditions mentioned in subsection (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the 27 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it."
41. We find from the written submissions of the Ld. AR that the provisions of section 65B(2)(d) as extracted above was not followed by the Revenue. The Revenue failed to identify the primary system giving particulars of the device involved in the production of the data was produced by a computer.
42. Further, we have also considered the cases referred to by the Ld. AR. In the case of Vetrivel Mineral vs. ACIT, Central Circle-2, Madurai reported in [2021] 129 taxmann.com 126 (Mad.)the Hon'ble Madras High Court has observed as under:
"24. As contended by the writ petitioners, when the entire assessment has been framed only on the basis of the so-called electronic record which are said to be copies of Excel Sheet, Excel work note book etc., non-compliance of section 65(B) of the Indian Evidence Act renders the document inadmissible in the eye of law as held by the Supreme Court in the judgment Anvar P.V. case (supra).
''14. Any documentary evidence by way of an electronic record under the Evidence Act, in view of sections 59 and 65A, can be proved only in accordance with the procedure prescribed under section 65B. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned 39 under sub-section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under section 65B(2). Following are the specified conditions under section 65B(2) of the Evidence Act:28
ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari
(i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer;
(ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity;
(iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and
(iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity.
15. Under section 65B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied:
(a) There must be a certificate which identifies the electronic record containing the statement;
(b). The certificate must describe the manner in which the electronic record was produced;
(c). The certificate must furnish the particulars of the device involved in the production of that record;
(d) The certificate must deal with the applicable conditions mentioned under section 65B(2) of the Evidence Act; and
(e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device.
16. It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate 29 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari must accompany the electronic record like computer printout, Compact Disc (CD), Video Compact Disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice.
17. Only if the electronic record is duly produced in terms of section 65B of the Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to section 45A opinion of examiner of electronic evidence.
18. The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under section 65B of the Evidence Act are not complied with, as the law now stands in India.
43. In the case of Anvar P.V vs. P.K. Basheer and Others [2014] 10 SCC 473 (SC), the Hon'ble Supreme Court held their observations vide Paras 14, 15, 16, 17 & 18 to state that non-compliance of section 65(B) of the Indian Evidence Act renders the document inadmissible in the eye of law. Relying on the same ratio laid down by the Hon'ble Apex 41 Court, the Hon'ble Madras High Court delivered its judgment in the case of Vetrivel Mineral vs. ACIT (supra) vide para 24 of its order which is extracted herein above. Therefore, in our opinion there is no need to repeat the finding of the Hon'ble Supreme Court in the case of Anvar P.V. vs. P.K. Basheer and Others again for reference.
44. Now coming to the decision of the Hon'ble Supreme Court in the case of Arjun Pandit Rao Khotkar vs. Kailash Kushan Rao Gorantyal And Ors reported in [2020] 7 SCC 1 (SC) the Hon'ble Apex Court has observed as under:
"30. Coming back to Section 65B of the Indian Evidence Act, sub-section (1) needs to be analysed. The sub- section begins with a non-obstante clause, and then goes on to mention information contained in an electronic record produced by a computer, which is, by a deeming fiction, then made a "document". This deeming fiction only takes effect if the further conditions mentioned in the 30 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari Section are satisfied in relation to both the information and the computer in question; and if such conditions are met, the "document" shall then be admissible in any proceedings. The words "...without further proof or production of the original..." make it clear that once the deeming fiction is given effect by the fulfilment of the conditions mentioned in the Section, the "deemed document" now becomes admissible in evidence without further proof or production of the original as evidence of any contents of the original, or of any fact stated therein of which direct evidence would be admissible.
31. The non-obstante clause in sub-section (1) makes it clear that when it comes to information contained in an electronic record, admissibility and proof thereof must follow the drill of Section 65B, which is a special provision in this behalf- Sections 62 to 65 being irrelevant for this purpose. However, Section 65B(1) clearly differentiates between the "original" document - which would be the original "electronic record" contained in the "computer" in which the original information is first stored - and the computer output containing such information, which then may be treated as evidence of the contents of the "original" document. All this necessarily shows that Section 65B differentiates between the original information contained in the "computer" itself and copies made therefrom - the former being primary evidence, and the latter being secondary evidence.
32. Quite obviously, the requisite certificate in sub- section (4) is unnecessary if the original document itself is produced. This can be done by the owner of a laptop computer, a computer tablet or even a mobile phone, by stepping into the witness box and proving that the concerned device, on which the original information is first stored, is owned and/or operated by him. In cases where "the computer", as defined, happens to be a part of a "computer system" or "computer network" (as defined in the Information Technology Act, 2000) and it becomes impossible to physically bring such network or system to the Court, then the only means of proving information contained in such electronic record can be in accordance with Section 65B(1), together with the requisite certificate under Section 65B(4).This being the case, it is necessary to clarify what is contained in the last sentence in paragraph 24 of Anvar P.V. (supra) which reads as "...if 31 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari an electronic record as such is used as primary evidence under Section 62 of the Evidence Act...". This may more appropriately be read without the words "under Section 62 of the Evidence Act,...". With this minor clarification, the law stated in paragraph 24 of Anvar P.V. (supra) does not need to be revisited.
45. On careful perusal of the case laws cited above, we are of the considered view that the Revenue Authorities should mandatorily and scrupulously follow the conditions laid down under section 65B(2) and (4) of the Indian Evidence Act to render any documents to be valid in the eyes of law. In the instant case, the investigation agency obtained a Certificate about the details of the pen drive and the person in whose custody it was seized. Except these details nothing was there in the Certificate and also the said Certificate was not completely filled up by the Ld. Revenue Authorities. Further, from the Certificate obtained under Indian Evidence Act which is placed in Page-11 of Paper Book-2, we find force in the arguments of the Ld. AR that it is not as per the conditions laid down U/s. 65B of the Indian Evidence Act. For the sake of reference, the Certificate is reproduced here in below:
46. After considering the decisions of the Hon'ble Supreme Court in the case of Anvar P.V vs. P.K. Basheer and Others (supra); Arjun Pandit Rao Khotkar vs. Kailash Kushan Rao 32 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari Gorantyal and Ors (supra) and the judgment of the Hon'ble Madras High Court in the case of Vetrivel Mineral vs. ACIT (supra) as well as on perusal of the facts and circumstances of the case, we are of the considered we that the four conditions stipulated in section 65B(2) ie., (a) to (d) along with section 65B(4) were not followed while obtaining the Certificate U/s. 65B of the Indian Evidence Act 1872 in the case of the assessee which are to be followed mandatorily. Therefore, we have no hesitation to hold that this Certificate is not a valid Certificate as prescribed under the Indian Evidence Act 1872 and hence cannot be enforced. Therefore, the Certificate obtained in the case of the assessee cannot be regarded as a legally valid certificate U/s. 65B of the Indian Evidence Act and the same has no recognition in the eyes of law. The information contained in the seized pendrive is could not be considered as admissible evidence as per the provisions of section 65B of Indian Evidence Act. Therefore, we are of the considered view that such inadmissible seized material is not sustainable in the eyes of law. Thus, the assessment order passed in the case of the assessee on 31/3/2022 is not a valid assessment order in the eyes of law and it deserves to be set aside."
26. In our view, the ratio laid down by the coordinate bench is directly applicable to the present case, since the very same pen drive and the same set of extracted data form the foundation of the additions made in the case of the assessee before us. We are of firm conviction that once the Tribunal has already held that the electronic evidence originating from the pen drive is not admissible in law due to non-compliance with Section 65B requirements, the natural consequence is that any addition made solely on the basis of such material in the case of the assessee before us cannot be sustained unless independently corroborated by other reliable evidence. In the present case, it is not in dispute that a substantial part of the addition is directly based on the entries contained 33 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari in the said pen drive and its printouts. We find that there is no independent admission by the assessee, no direct confirmation from any counterparty, and no money trail to substantiate the alleged cash transactions. In our view, to the extent the additions are based solely on the impugned electronic data, they cannot survive in view of the binding finding of the Tribunal in the case of the searched group entity, viz. M/s. Polisetty Somasundaram.
27. We, thus, are of the view that the principle that emerges is that electronic data which has been held to be inadmissible in law due to defective Section 65B certification cannot, by itself, form the sole basis of addition. Accordingly, we hold that the addition made by the AO of Rs. 1.55 crore (supra) based solely on the pen drive/Excel sheet printouts is not sustainable in law in light of the binding decision of the coordinate bench in the case of M/s. Polisetty Somasundaram group holding that such electronic evidence is inadmissible for want of a valid Section 65B certification.
28. Coming to the addition of Rs. 55 lacs (supra) made by the AO, which thereafter had been upheld by the CIT(A), we find that it is the Ld. AR's contention that the impugned addition is based on certain vouchers found at the premises of a third party, which do not bear the signature of 34 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari the assessee and are not supported by any corroborative evidence. The Ld. AR had further submitted that no opportunity for cross-examination of the concerned person was provided by the AO.
29. Per Contra, the Ld. DR had supported the orders of the authorities below regarding the aforesaid addition of Rs. 55 lac.
30. We have given thoughtful consideration and perused the material available on record. We find that the addition of Rs. 55 lac is based on a single voucher seized during the course of search proceedings from the premises of M/s Polisetty Somasundaram, viz. A/PSS/CORP/09 - Page no. 129. The said voucher does not bear the assessee's signature, and no independent inquiry or verification has been conducted by the AO to establish the genuineness of the transactions recorded therein. It is a settled position of law that loose papers or third-party documents, without corroboration, cannot form the sole basis for making an addition. In the present case, as the Revenue has failed to establish any nexus between the assessee and the alleged transactions, the addition sustained by the Ld. CIT(A) is not justified. Our view is fortified by the judgment of the Hon'ble High Court of Andhra Pradesh in the case of Commissioner of Income Tax (Central) Vs. A. Mahesh Reddy, I.T.T.A.No.162 of 2014 dated 12.03.2014. The Hon'ble High Court, 35 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari while approving the view taken by the Tribunal, which had vacated the addition made by the A.O. based on loose papers that were found and seized from the assessee's premises, had held that there was no justification for the AO to have made the impugned addition merely based on surmises and conjectures without having any legal proof of the same. Also, we find that the Hon'ble High Court of Bombay in the case of Addl. CIT v. Miss Lata Mangeshkar [1974] 97 ITR 696 (Bom), had come across an addition that was made in the hands of the assessee on the basis of the entries in the books of third persons. The Hon'ble High Court held that such an addition could not have been made only on the basis of the notings in the books of third persons. In support of the foregoing proposition, we gainfully refer to the decision of the Hon'ble High Court of Delhi in the case of CIT v. Sant Lal (2020) 423 ITR 1 (Delhi). In this case, the Department had relied on the hundi notings in the diary seized from the premises of a third party. The said notings allegedly contained entries of hundi transactions on behalf of parties, including the assessee, whose names were written in abbreviated/code words. The Hon'ble High Court relied on its earlier decision in the case of CIT v. Mahabir Prasad Gupta, ITA NO. 814/2015, dated 20.10.2015, and held that no addition can be made in the hands of an assessee on the basis of any diary seized during the course of search proceedings 36 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari conducted on a third party, since such diary was neither found at the assessee's premise and that the department had failed to provide any cogent material or gather any corroborative evidence to substantiate that it pertained to the assessee. The Court observed that the searched person could have written anyone's name on his own sweet will in his diary, and therefore, such noting on a stand-alone basis, along with the biased statement of the searched person, cannot be used as reliable evidence against the assessee. Also, support is drawn from the judgment of the Hon'ble Supreme Court in the case of Common Cause (A Registered Society) v. UOI (2017) 394 ITR 220 (SC), wherein it was observed that the entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. Elaborating further, it was observed that there must be independent evidence of the transaction to which the entries relate, and in the absence of such evidence, no relief can be given to the party who relies upon such entries to support his claim against another
31. Independent of our aforesaid observation, we find that the addition of Rs. 55 lac made by the AO is based on the contents of the aforesaid single voucher seized during the course of search proceedings from the 37 ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari premises of M/s Polisetty Somasundaram, viz. A/PSS/CORP/09 - Page no. 129. We find on a careful perusal of the aforesaid seized document, viz. A/PSS/CORP/09 - Page no. 129, which refers to the receipt of an amount of Rs. 55 lac by the assessee from M/s Polisetty Somasundaram on 12/11/2016. In fact, the said factual position is admitted by the AO, who, while framing the assessment, had at Para 3.2 of his order observed as under:
"3.2 Further, during the course of Search & Seizure proceedings, certain vouchers are seized in the premises of M/s PSS. In such one voucher seized vide A/PSS/CORP/09 Pg no 129, there was a cash payment of Rs. 55,00,000/- made to Sri K. Rosaiah. The copy of the payment voucher, which is signed by Sri P. Shyam Sundar is enclosed herewith :
XXX XXX XXX"
(emphasis supplied by us)
In our view, as the AO had himself admitted that the contents of the seized voucher, viz. A/PSS/CORP/09 - Page no. 129 referred to an amount of Rs. 55 lacs received by the assessee, viz. Sri K. Rosaiah from M/S Polisetty Somasundaram on 12/11/2016; he could not thereafter have made an addition to the impugned transaction, by observing that, as per the said seized document, viz. A/PSS/CORP/09 - Page no. 129, the assessee, viz. Sri K. Rosaiah (supra) had made a cash payment of Rs. 55 lacs (supra) to M/s Polisetty Somasundaram from his unaccounted income.38
ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari
32. Be that as it may, we are of firm conviction that based on our aforesaid deliberations, viz. (i). that based on the contents of the voucher seized during the course of search proceedings from the premises of M/s Polisetty Somasundaram, viz. A/PSS/CORP/09, Page no. 129, i.e., a loose third-party document which neither bears the assessee's signature nor has any independent inquiry or verification been conducted to establish the genuineness of the alleged transactions therein recorded, the AO, without corroborative material, could not have drawn adverse inferences and made the impugned addition in the hands of the assessee; and (ii). that now, when the AO had admitted in the assessment order that the contents of the seized voucher, viz. A/PSS/CORP/09, Page no. 129 referred to an amount of Rs. 55 lacs received by the assessee, viz. Sri K. Rosaiah from M/s Polisetty Somasundaram on 12/11/2016; he could not thereafter have made an addition regarding the impugned transaction, observing that, as per the said seized document, the assessee had, from his unaccounted income, made a cash payment of Rs. 55 lacs (supra) to M/s Polisetty Somasundaram on 12/11/2016. We thus are of firm conviction that there was no justification for the AO, both on law as well as on facts, to make the addition of Rs. 55 lacs (supra) in the hands of the assessee. 39
ITA No.353 and 425/Viz/2025 ACIT vs. Venkata Rosaiah Kilari Accordingly, we set aside the order of the CIT(A), who had sustained the impugned addition, and direct the AO to vacate the same.
33. In the result, the appeal filed by the assessee is partly allowed, and the appeal of the revenue is dismissed.
Order pronounced in the open court on 30th April, 2026.
Sd/- Sd/- (OMKARESHWAR CHIDARA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 30th April, 2026 ***OKK / SPS Copy to: S.No Addresses 1 Assistant Commissioner of Income tax
Central Circle-1, C.R. Buildings, Kannavarithota, Guntur Andhra Pradesh-522003 2 VENKATA ROSAIAH KILARI 3-29-68, 2nd Lane, Krishna Nagar, Guntur Andhra Pradesh-522006 3 The Pr. Commissioner of Income Tax, Visakhapatnam. 4 The DR, ITAT, Visakhapatnam Bench 5 Guard File TRUE COPY KAMALA KUMAR Digitally signed by KAMALA KUMAR ORUGANTI ORUGANTI Date: 2026.04.30 15:46:13 +05'30' SENIOR PRIVATE SECRETARY ITAT, VISAKHAPATNAM