Income Tax Appellate Tribunal - Chennai
Dcit Central Circle 2(4), Chennai, ... vs Shri Vaithilingam, Chennai on 3 April, 2024
आयकर अपीलीय अिधकरण "बी" ायपीठ चे ई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, CHENNAI माननीय ी वी. दु गाराव, ाियक सद! एवं माननीय ी मनोज कुमार अ&वाल ,ले खा सद! के सम)।
BEFORE HON'BLE SHRI V. DURGA RAO, JM AND HON'BLE SHRI MANOJ KUMAR AGGARWAL, AM
1. आयकरअपील सं./ ITA No.604/Chny/2023 (िनधारण वष / Assessment Year: 2015-16) &
2. आयकरअपील सं./ ITA No.605/Chny/2023 (िनधारण वष / Assessment Year: 2016-17) &
3. आयकरअपील सं./ ITA No.606/Chny/2023 (िनधारण वष / Assessment Year: 2017-18) DCIT Shri Vaithilingam Central Circle-2(4) बनाम No.3/335, South Street, Chennai. / Vs. Telungankudikadu, Orathanad, Thanjavur-614 625.
थायीले खासं ./जीआइआ रसं ./PAN/GIR No. AEAPV-5323-H
(अपीलाथ /Appellant) : (!"थ / Respondent)
&
4. Cross Objection No.51/Chny/2023
(In ITA No.604/Chny/2023)
(िनधारण वष / Assessment Year: 2015-16)
&
5. Cross Objection No.52/Chny/2023
(In ITA No.605/Chny/2023)
(िनधारण वष / Assessment Year: 2016-17)
&
6. Cross Objection No.53/Chny/2023
(In ITA No.606/Chny/2023)
(िनधारण वष / Assessment Year: 2017-18)
2
Shri Vaithilingam बनाम/ DCIT
No.3/335, South Street, Vs. Central Circle-2(4)
Telungankudikadu, Orathanad, Chennai.
Thanjavur-614 625.
थायीले खासं ./जीआइआरसं ./PAN/GIR No. AEAPV-5323-H
(अपीलाथ /Cross Objector) : (!"थ / Respondent)
अपीलाथ कीओरसे / Revenue by : Shri V. Nandakumar (CIT)- Ld. DR
!"थ कीओरसे / Assessee by : Shri J. Purushotaman (CA)-Ld. AR
सु नवाईकीतारीख/Date of Hearing : 14-02-2024
घोषणाकीतारीख /Date of Pronouncement : 03-04-2024
आदे श / O R D E R
Per Bench
1.1 Aforesaid appeals by Revenue for Assessment Years (AY) 2015-
16, 2016-17 & 2017-18 arise out of a common order of learned Commissioner of Income Tax (Appeals)-19, Chennai [CIT(A)] dated 14- 03-2023 in the matter of separate assessments framed by Ld. Assessing Officer [AO] u/s. 153C of the Act on 28-09-2021. It is admitted position that facts as well as issues are quite identical in all the years. For the purpose of adjudication, facts from case records of AY 2015-16 have been culled out in this order. The assessee has preferred cross- objections against revenue's appeals.
1.2. The Registry has noted delay of 165 days in the cross objections, the condonation of which has been sought by Ld. AR appearing for the assessee on the strength of condonation petition. It has been submitted that the delay was neither intentional nor willful but on account of public commitments of the assessee due to which the assessee could not concentrate on personal affairs. Though Ld. CIT-DR has opposed 3 condonation of delay, however, keeping in mind the principle of natural justice, we condone the delay and admit the cross-objections for adjudication on merits since in the cross-objections, the assessee has merely raised legal grounds only.
1.3 The grounds taken by the Revenue in AY 2015-16 read as under:
1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law.
2. The Ld.CIT(A) erred in deleting the addition of Rs.10,50,00,000 made towards undisclosed income representing the amounts received from M/s. SRS Mining based on the seized materials and Sworn statement of Shri. K. Srinivasulu and Shri. Nagarathinam.
2.1 The Ld.CIT(A) erred in accepting the explanation of the assessee that there is no mention anywhere in the statement of Shri. Srinivasulu that the assessee was recipient of payments shown against the abbreviated names, without considering the fact that the assessing officer has clearly mentioned in the Para 7.12 of the order that Shri. Srinivasulu admitted in his sworn statement dated 10.12.2016 that those note books were maintained by him and the entries found were incidental expenses to various persons. In response to Q.No.4, he has stated that "HM" represents "Housing Minister". The CIT(A) failed to appreciate that the assessee was the Minister for Housing and Urban Development in the Government or Tamil Nadu during the period the payments were made.
2.2 The ld. CIT(A) erred in holding that seized document is "dumb document" and did not have any evidentiary value in respect of entries found therein without any corroborative evidence, without appreciating that the entries found in the seized materials were in the form maintained systematically on daily basis mentioning the dates and amounts and the author of seized material Shri Srinivasulu admitted the nature of payments by explaining the reference of code names.
2.3 The Ld. CIT(A) erred in observing that there was no corroborative evidence in respect of such seized materials with regard to the receipt of incidental charges by the assessee from M/s.SRS Mining. The primary evidence Found during the course of search were notebooks maintained by Sri. Srinivasulu during the ordinary course of business carried on by the firm M/s.SRS mining and the statement recorded from Shri. K. Srinivasulu in which he explained the nature of entries is corroborative evidence. Further, the Matrix note books and cash books maintained by Shri. Nagarathinam contain details of payments made to influential persons, which matched with Oswal Note books maintained by K. Srinivasulu. Three different sets of documents seized from two Premises belonging to M/s.SRS Mining corroborated the entries in one another. 2.4. The Ld.CIT erred in observing that there was no acknowledgement in the seized material by the assessee of receiving the said payments by way of appending his signature/initial against the said payments. As far as question of not writing the name In full but in abbreviated form and not recording acknowledgement for the payments made, the Ld. CIT(A) ought to have appreciated that maintaining clear, unambiguous and formal records of transaction of such nature would not be done for obvious reasons.
42.5. The ld.CIT(A) failed to appreciate that the addition has been made on the basis of sworn statement recorded u/s.132(4) on 10.12.2016 which has evidentiary value. Shri. Srinivasulu retracted his sworn statement after a gap of 106 days, which is only an afterthought. It is held in various decisions that once the statements has been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording the statements under Section 132(4), are true and correct and brings out the correct picture, as at that time the assessee is not influenced by external agencies. Hence, the retraction of statement by Shri. Srinivasulu, after a gap of 106 days was not relied upon by the assessing officer. 2.6. The Ld.CIT(A) failed to appreciate that the assessing officer has correctly arrived presumption u/s.132(4A) and 292C of the Act in respect of the materials seized during the course of search, which was further strengthened by sworn statement recorded from Shri. Srinivasulu.
2.7 The Ld.CIT(A) erred in failing to appreciate that there is no such restrictive interpretation in the Section 132(4A) and Sec.292C that the presumption of correctness are applicable only in respect of the books of accounts/documents seized in the premises of searched person and not from third party. 2.8 The Ld.CIT(A) has sought to cast doubts on the veracity of entries made in the note book seized from the possession of Shri Srinivasulu. The Ld.CIT(A) failed to appreciate that several of the entries in the note book denoting expenses and bank deposits have been verified during post search proceedings. This was maintained by the searched firm to arrive at the profits earned from unaccounted business of sand mining carried out by it.
2.9 The Ld.CIT(A) has stated that Shri. K. Srinivaulu has no firsthand knowledge of information as the entries were made by him as per the instructions of partners of M/s.SRS Mining and the partners of the firm should also have been examined to prove the veracity of the entries. It is to state that the partners also agreed with the statement of Shri Srinivasulu in the sworn statement recorded u/s.132(4). 2.10 The Ld.CIT(A) erred in placing reliance on various case laws with regard to evidentiary value of seized materials. These case laws mainly dealt with loose sheets seized, where as in this case seized record is the day-to-day record of receipts and payments.
2.11 The Ld CIT(A) erred in observing that the statement of Shri. Srinivasulu lost its evidentiary value on his retraction, without appreciating that the retraction of statement by both Shri. Srinivasulu holds no value as they have done so by citing absurd and unfounded reasons like they were subjected to harassment and mental pressure by IT Authorities. They have not brought any evidence to show that they were harassed during search operation through any means.
3.For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.
1.4 The grounds taken by the assessee in its cross-objection read as under: -
1. The order of the Commissioner of Income Tax (Appeals) - 19, Chennai dated 14-03-
2023 in ITA No. 420 /CIT-A(l 9)/21-22 in so far as the legal issue on the assumption of 5 jurisdiction u/s 153C of the Act for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
2. The CIT (Appeals) erred in sustaining the assumption of jurisdiction u/s 153C of the Act and consequently erred in sustaining the validity of the impugned order without appreciating the fact that the seized materials were neither "pertaining to" the respondent as there was no mention of his name on any of the materials seized nor there was any information available in the seized material which "related to" the respondent.
3. The CIT (Appeals) failed to appreciate that the approval accorded by the Range Head was in a mechanical way without application of mind. The respondent objects such approval accorded by the Range Head as he would not have had enough time to study the case and understand the importance of the submissions made and blatantly had accorded approval in a mechanical way without application of mind
4. The Respondent craves leave to-file additional grounds/arguments at the time of hearing.
As is evident, the sole issue that arises for our consideration is additions made by revenue based on search findings. The assessee is challenging the jurisdiction of Ld. AO on various legal grounds.
Arguments before us
2. The Ld. CIT-DR, drawing attention to grounds of appeal, advanced arguments and submitted that the additions are based on search findings coupled with the statements recorded u/s 132(4). The Ld. CIT-DR supported the additions made in the assessment order. The relevant statements recorded u/s 132(4) has also been placed on record. The Ld. AR, on the other hand, while supporting the impugned order on merits, assailed the validity of assessment proceedings on legal grounds. The Ld. AR submitted that assumption of jurisdiction u/s 153C was bad-in- law for want of recording or proper satisfaction. The written submissions as well as various case laws have been filed before us in support of rival submissions.
3. Having heard rival submissions, oral as well as written and upon perusal of case records including various judicial pronouncements as cited before us, our adjudication would be as under. The assessee being 6 resident individual held the office of Minister of Housing and Urban Development in the Tamilnadu Government. An assessment was framed against the assessee for AY 2015-16 u/s 153C of the Act on 28-09-2021 wherein certain additions were made and the same form part of subject matter of present appeal before us.
4. Assessment Proceedings 4.1 The assessment was so framed against the assessee pursuant to search and seizure action by department u/s 132 in the case of M/s SRS Mining, Shri J. Sekar Reddy, Shri M. Premkumar and Shri K. Srinivasulu at T. Nagar on 08-12-2016. During search proceedings books and documents, Matrix notebook, cash book and other incriminating material was found and seized as per Annexure in ANN/KGAR/MPKSSR/LS/S-1. Another search was carried out at the resident of Shri T. Shanmugasundaram (an employee of SRS Mining) at Kodambakkam wherein certain incriminating material was found and seized as per Annexure in ANN/VK/TS/LS-S1 & S2.
4.2 Based on the said material, a satisfaction was arrived that the information contained in the seized document related to the assessee and the same had bearing on determination of total income of the assessee. Therefore, a notice u/s 153C was issued on 06-11-2019 calling for return of income. In response, the assessee filed return of income on 06-11-2019 declaring income of Rs.2.66 Lacs which was the same as filed u/s 139(1). Subsequently notices u/s 143(2) and 142(1) were issued from time to time calling for requisite details from the assessee.
74.3 The Ld. AO proceeded to finalize the assessment after going through the seized material, sworn statements recorded u/s 132(4), u/s 131(1A) and after considering the submissions of the assessee. 4.4 During the course of search on M/s SRS Mining on 08-12-2016, sworn statement u/s 132(4) was recorded from one Shri K. Srinivasulu who was maintaining the seized documents on the instructions of partners of M/s SRS Mining. The statement was also recorded from Shri J. Sekar, Shri S. Ramachandran and Shri K. Rethinam. On the basis of entries found in the seized material coupled with the statement of Shri K. Srinivasulu, Ld. AO alleged that the assessee was one of the persons who had received payments from M/s SRS Mining for facilitating mining and transportation of sand in the state of Tamilnadu. The partners of the firm were controlling the entire gamut of sand mining operations throughout the length and breadth of the state since December, 2013. All the loading contracts and sand yard licenses were awarded to the friends, relatives of friends identified by the partners of the firm. Some of the other persons who were working for M/s SRS Mining and who were close to partners were Shri S. Nagarathinam and Shri K. Srinivasulu. Shri S. Nagarathinam was bank employee and because of his banking experience, he was made in-charge of cash godowns of M/s SRS Mining at Chennai. He was entrusted to keep proper records of all the receipts and payments of the group. Shri K. Srinivasulu was close and trusted aide of Shri J. Sekar and he reported to Shri J. Sekar and looked after the incidental payments to various influential / political persons as advised by him.
84.5 During the course of search operations, various diaries, notebooks, digital evidences and loose sheets were seized which include daily statement of sand yards, matrix note book maintained by Shri S. Nagarathinam, cash book maintained by S. Nagarathinam, Oswal Note books maintained by Shri K. Srinivasulu and monthly statements. The statement was analyzed and it was concluded by Ld. AO that the entries in the daily statements of yard owners matched completely with the daily statement of hire charges maintained by M/s SRS Mining. Similarly, the entries in the daily statement of yard match exactly with the receipts in Matrix notebooks. Further, the expenditure entries in the Matrix Note books match exactly with the cash book of Shri Nagarathinam and Oswal notebooks maintained by Shri K. Srinivasulu. Thus, there was not just one but three levels of corroboration available for the seized material and therefore, these entries would represent actual state of affairs of various financial and business transactions. The said material was not isolated loose sheets and the entries were not random, isolated or irregular in nature. They were systematic records of daily events maintained over a prolonged period of time on regular basis. These were actual books of accounts of the assessee. To bolster its claim, some entries were checked by Ld. AO on sample basis and the same were found to be correct. Therefore, it was concluded by Ld. AO that the seized material was actual books of accounts of M/s SRS Mining which were being maintained by Shri S. Nagarathinam and Shri K. Srinivasulu. 4.6 From Yogambal Street, Matrix brand spiral books as maintained by Shri S. Nagarathinam, in-charge of the premise, written in his own handwriting, was found. The matrix notebooks gave detailed account of 9 cash received during each day from sand yard owners at Chennai and also the amounts paid to various influential persons during the day. 4.7 In this regard, a sworn statement was recorded from Shri S. Nagarathinam who confirmed that the said books belonged to him and maintained by him. It contained the details of receipt from 4 sand mining sites and the expenditure incurred. Apart from expenditure, there were lots of payment to various persons as directed by Shri Srinivasulu. The Ld. AO noted that these books were being maintained meticulously. The left side had opening balance of cash, receipts of the day, and payments of the day and the closing balance. Even the denomination of the closing balance was also mentioned in the bottom half. With the help of meticulous notings, the search team managed to track Rs.24 Crores in new Rs.2000 notes from a TATA Ace vehicle at Vellore. The right side had break up of cash received yard-wise and details of payments made to various influential persons during the day. A heading was given as to payments under the names of various influential persons, officials and politicians involved in the management of sand mining in the state and even others when considered necessary. A peculiar feature was that a set of officials / officers / politicians were paid every month a fixed sum according to their importance ranging from Rs.2 Lacs per month to Rs.2 Crores per month. This regularity in payment of incidental charges highlights the clout and political patronage M/s SRS Mining was enjoying while running the sand mining business. A yard wise breakup of the cash received was also given on the right side. The daily statement of sand yards was compared with the Matrix notebook maintained by Shri S. Nagarathinam and it was found that the amount sent to head office from 10 each sand yards tally exactly with the receipts shown in the matrix notebooks against the respective yard.
4.8 Another set of books of accounts called the cash books were also seized which were maintained by Shri S. Nagarathinam. The same has been tabulated in para 7.9 of the assessment order. These were prepared by Shri S. Nagarathinam in his own handwriting from entries in the matrix notebooks as mentioned earlier but without denominations. In effect, Shri S. Nagarathinam prepared and maintained two parallel sets of records for each and every transaction. As and when the cash is received from the yards, the same is noted down with denominations in the matrix notebooks. The payments of incidental expenses were also noted down. From the entries in the matrix notebooks, Shri S. Nagarathinam once again prepared and maintained a fair copy in the form of parallel cash book of M/s SRS Mining. The cash book contained exactly all the entries in the Matrix notebooks but without denominations. This further adds to the genuineness and veracity of the seized materials. In addition, in the cash books, there is a consolidation statement, at final page of the month giving total receipts and expenses for that particular month. Even the partner of the firm Shri J. Sekar agreed in sworn statement dated 07-08-2017 that entries of cash books matched with that of the matrix notebooks.
4.9 Three small Oswal note books were seized from Bazullah Road T. Nagar, the details whereof have been tabulated in Para 7.10 of the assessment order. This was another set of cash books of M/s SRS Mining as maintained by Shri K Srinivasulu in his own handwriting. Shri K. Srinivasulu was trusted aide of Shri J. Sekar These note books 11 contained only the details of payments made to influential people date- wise. The entries found in these books matched with that of the Matrix notebooks and cash books maintained by Shri S. Nagarathinam. Thus, there were three different evidences, corroborating with each other, for the firm M/s SRS Mining having made regular incidental payments for running its business.
4.10 The Ld. AO further observed that the name of the assessee also appeared as one of the parties to whom the firm had made payments on regular basis. The seized notebooks contained date-wise notings of the amounts paid to persons in public service. The name and designation of the public servants involved were confirmed by the partners / employees of M/s SRS Mining in their sworn statement recorded u/s 132(4). The assessee was mentioned in the notebooks as 'HM'. Shri K. Srinivasulu, in answer to question No.4 of statement recorded u/s 132(4). stated that the 'HM referred to 'Housing Minister'. Since the assessee was Minister of Housing and Urban Development during this period, it was alleged by Ld. AO that these payments were made to the assessee. These payments were also corroborated by notings maintained by Shri Nagarathinam. The details of these payments have been tabulated at Para 7.14 of the assessment order. It was thus evident that the assessee received illegal payments from M/s SRS Mining in lieu of continued political patronage and for enjoying unhindered mining contracts and sand yard licenses. The total of such payments for this year aggregated to Rs.1050 Lacs.
4.11 A statement was also recorded u/s 132(4) on 09-12-2016 from Shri T. Shanmugasundaram who worked as accountant and looking after 12 cash transactions of M/s SRS Mining and making payments to influential persons. He confirmed that loose sheets seized as Annexure ANN/VK/TS/LS/S-1 was written by him during the period of Tamilnadu Assembly Elections, 2016.
4.12 In para 7.17 of assessment order, the fact of retraction of statement by Shri K. Srinivasulu as well as by Shri T. Shanmugasundaram was noted by Ld. AO. Since Shri Shanmugasundaram retracted from his statement and refused to recognize the writings of the seized loose sheets, an independent expert forensic examination was done and the services of independent professional forensic expert was requisitioned. On the basis of all these facts, Ld. AO concluded that the retraction by Shri Shanmugasundaram was nothing but an after-thought and therefore, it was required to be rejected.
4.13 The Ld. AO further noted the retraction made by Shri K. Srinivasulu vide its letters dated 21-03-2017 and 23-03-2017 which was sent by him though Jail Authorities. However, both the retractions were held to be invalid by Ld. AO and it was held that the statement made u/s 132(4) was valid evidence since the same was recorded on the basis of factual and specific with reference to the seized records. Reliance upon such evidence was proper and cogent in all respect.
4.14 The assessee assailed the allegations of Ld. AO and denied having any connection with any of the person. He further submitted that his name was not mentioned in the loose sheets and there was no corroborative evidence. Further section 153C would have no application where no material belonging to the assessee is found and an inference of undisclosed income is drawn during the course of enquiry.
134.15 However, Ld. AO continued with the opinion that M/s SRS Mining was making regular and periodic payment to the assessee and added the impugned amount to the income of the assessee as unexplained income as under: -
7.26 In view of the detailed arguments mentioned in the above para, it is clear that SRS mining was making regular and periodic payments to the assessee. Further the assessee during the scrutiny proceedings has merely denied receiving them though voluminous seized materials / document show that he has received huge amounts regularly. Despite receiving regular payments the assessee has failed to disclose the amount of Rs.10,50,00,000/- in his return of income filed u/s 153C and has not explained the source too. Therefore, this amount represents his unexplained and undisclosed income for AY 2015-16 and the same is taxed in his hands. Penalty proceedings is initiated against the assessee u/s 271(1)(c) of the Act on this issue for concealment of particulars of his income.
4.16 The assessment for AYs 2016-17 as well as for AY 2017-18 has been framed on similar lines. The Ld. AO made addition for alleged payments made by the firm to the assessee in both the years. In addition, in AY 2017-18, Ld. AO made another addition of undisclosed income. The same was on the basis of books and documents and loose sheets as found and seized. It was alleged that huge sum of money was sourced from the assessee which in turn was redistributed by the employees and associates of M/s SRS mining to various party cadres who were contesting the State Elections. The same was on the basis of certain loose sheet as seized from T. Nagar and marked as Annexure ANN/KGAR/MPKSSR/LS/S-1. The page nos. 34 to 42 of the annexure contained details of certain cash as received from the assessee for redistribution to various constituencies in Tamilnadu during elections.
The sum so received aggregated to Rs.155.80 Crores. During the course of search at the residence of Shri T. Shanmugasundaram, similar loose sheets marked as Annexure ABB/VK/TS/LS/S-1 was seized disclosing 14 the details of cash payments to various candidates of Tamilnadu Assembly Elections, 2016. To support the conclusion, some cross verification was made with one Shri R. Sharath Kumar on 10-04-2017 and 09-05-2017 who had received a sum of Rs.2 Crores as per the list. He admitted the receipt of cash from staff of J. Sekar of SRS Mining. 4.17 In this regard, a statement u/s 132(4) was recorded from Shri K. Srinivasulu on 08-12-2016. In answer to Q. No.12, he submitted as under: -
Ans: 12 I confirm that these were the Tamilnadu Legislative Election 2016 related receipts and expenses, which have been written and maintained by me. From Page No-34 to 53 contains the details of various receipts and expenses pertaining TO Housing Minister Shri Vaithilingam (Period 2011 to 2016]. Page Nos. 34 to 44 contains total amount of Rs.155,80,00,000/- received from Shri Vaithilingam, Housing Minister of that period and the amounts were duly distributed to various constituencies. Similarly, Page Nos.43 to 53 contains the details of total amount of Rs.71,44,50,500/- has been received from Shri Vaithilingam, Housing Minister of that period and the amounts were duly distributed to various constituencies.
He thus confirmed that these were Tamilnadu Legislative Election-2016 related receipts and expenses which were written and maintained by him. The page nos. 34 to 53 contains the details of various receipts and expenses pertaining to assessee. The Pages 34 to 44 contains an amount of Rs.155.80 Crores as received from the assessee which was distributed to various constituencies. The Pages 43 to 53 contains an amount of Rs.71.44 Crores as received from the assessee which was distributed to various constituencies. Similar statement was recorded from Shri T. Shanmugasundaram on 09-12-2016. He was working as an accountant in M/s SRS Mining. The Ld. AO thus formed an opinion that this amount was spent by way of unexplained expenditure for political gain to various constituencies over Tamilnadu by the assessee.15
4.18 The Ld. AO, in similar background, rejected the retraction of Shri K. Srinivasulu and of Shri T. Shanmugasundaram on the ground that the statement was based on facts and with reference to the narration specified in the incriminating documents. The retraction was merely an after-thought. Similarly, the retraction of Shri K. Srinivasulu was also rejected with the observation that it would not be fair to believe that a person who was remanded to a prison could submit a letter voluntarily and without coercion. Further, the retraction was after lapse of 103 days without any convincing reply for such a delay. Even if the statements are retracted by both of them, the same would still have evidentiary value in terms of various judicial decisions. Finally, it was held by Ld. AO that though the statements recorded u/s 132(4) were retracted, the same would still be valid evidence since the same was recorded on the basis of factual and specific reference to the seized records. The assessee's request for cross-examination could not be considered since the witnesses had retracted the statement. Finally, the additions were made with the following observations: -
8.20 In this background, in the absence of any satisfactory explanation by the assessee, after examining the seized records and considering the sworn statement recorded u/s 132(4) of the Act and after giving due opportunity of being heard to the assessee, the amount of Rs.227,24,50,500/- (155,80,00,000 + 71,44,50,500) paid by Shri R. Vaithilingam to SRS mining represents his undisclosed income. This amount was paid for distribution in various constituencies in Tamilnadu during the course of Tamilnadu Assembly Election, 2016. On verification and analysis of his return of income it is found that these transactions are not reflected and disclosed in the return of income. The assessee has been unable to explain the nature and source of this money given by him to SRS Mining. Therefore, this amount is treated as unexplained and undisclosed income of the assessee for AY 2017-18 and taxed in his hands. Penalty proceedings are initiated against the assessee u/s 270A on this issue for misreporting of income.16
Aggrieved, the assessee assailed the assessments before first appellate authority which met with partial success vide impugned order dated 14- 03-2023.
Appellate Proceedings 5.1 In first legal ground, the assessee challenged the legal validity of proceedings u/s 153C on the ground that statement recorded u/s 132(4) could not be regarded as an evidence and the material seized at third- party premises had no relevance for initiation of proceedings u/s 153C. Reliance was placed on the decision of Hon'ble Gujarat High Court in the case of Vijaybhai N Chandrani vs ACIT (231 CTR 474) as well as the decision of Jodhpur Tribunal in Chitra Devi vs. CIT (77 TTJ 430). The Ld. CIT(A) rejected the reliance on the decision of Jodhpur Tribunal since in the present case, Ld. AO had relied on material seized during the course of search in the case of M/s SRS Mining and no statement recorded u/s 132(4) was relied upon for the said purpose. The decision of Hon'ble Gujarat High Court was held to be inapplicable in view of amendment made by Finance Act, 2015 to Sec.153C wherein the words 'belongs to' was substituted by the words 'pertains to' and 'relates to'. Considering the same, this legal ground as urged by the assessee was dismissed.
5.2 The assessee raised another legal ground for AY 2017-18 on the ground that the assessment ought to have been completed for this year u/s 143(3) instead of making an assessment u/s 153C. The Ld. CIT(A) noted that as per first proviso to Sec.153C, the reference to the date of search u/s 132 in the second proviso to Sec.153A(1) was required to be construed as reference to date of receiving the seized books of accounts 17 / documents or assets by the AO having jurisdiction over the person other than the searched person. Prior to amendment made to Section 153C(1) by the Finance Act, 2017 with effect from 01-04-2017, there was no specific mention therein regarding the manner of ascertaining the period of six assessment years. The amendment made by the Finance Act, 2017 made it explicit that the period of six assessment years for the purpose of section 153C would be reckoned with reference to the assessment year relevant to the previous year in which search was conducted and that the same will be six assessment years immediately preceding such assessment year. The amended provisions would be applicable for the searches conducted on or after 01.04.2017. Since, in the present case, searches were conducted prior to 01.04.2017, the pre- amended law would be applicable. This issue was decided by Hon'ble Delhi High Court in the case of CIT Vs. RRJ Securities Ltd [2015] 62 Taxmann.com 391 (Delhi) wherein it was held by Hon'ble Court that in terms of first proviso to Sec. 153C, a reference to the date of the search under the second proviso to section 153A has to be construed as the date of handing over of assets / documents belonging to the assessee (being the person other than the one searched) to the Assessing Officer having jurisdiction to assess the said assessee and where the AO of the searched person and the person other than the searched person is the same, the date of search under the second proviso section 153A has to be construed as the date of recording the satisfaction by the AO of the other person. The Hon'ble High Court held that it would follow from the same that the six assessment years for which assessments / reassessments could be made under section 153C would also have to 18 be construed with reference to the date of handing over of assets / documents to the Assessing Officer of the assessee or the date of recording of satisfaction by the AO as the case may be. In a subsequent decision in the case of PCIT Vs. Sarwar Agency (P) Lid [2017] 85 Taxmann.com 269 (Delhi), the Hon'ble Delhi High Court observed that its decision in the case of RRJ Securities Ltd (supra) has not been challenged by the revenue in the Hon'ble Supreme Court and held that the amendment made to Section 153C(1) of the Act by the Finance Act, 2017 has stated for the first time that the period of re-assessment would be six assessment years preceding the year of search for both the searched person and the other person. The Hon'ble High Court also held that the said amendment would be prospective. There are no contrary decisions of other High Courts on this issue. In the case of present assessee, the AO of the searched person and the AO of the assessee were one and the same. Therefore, the date of initiation of search as referred to in the second proviso to section 153A(1) is required to be construed as the date of recording of satisfaction by the AO of the other person, by following the above mentioned decisions of the Hon'ble Delhi High Court. It was noticed from the records that the satisfaction note was recorded by the AO of the assessee on 05-11-2019. Hence, the six assessment years have to be reckoned as the assessment years immediately preceding the AY 2020-21 relevant to the previous year in which the satisfaction has been recorded by the AO. The six assessment years which are required to be assessed u/s 153C would therefore be AYs 2014-15 to 2019-20. Consequently, the assessment for the 19 assessment year 2017-18 has rightly been completed u/s 153C and therefore, this legal ground was also dismissed.
5.3 The assessee also assailed the impugned additions on merits. It was submitted that the seized material was in the nature of dumb documents which could not be the basis for assessment since it does not contain the complete particulars of relevant transaction and the persons involved in the said transactions. The additions made on the basis of such a dumb document would not be sustainable. The assessee contended that the seized material would not have any evidentiary value since the same do not contain the name of the assessee or his acknowledgement or signature. The assessee also pointed out flaws in the statement of Shri K. Srinivasulu as well as in the statement of Shri T. Shanmugasundaram and contended that these statements were not reliable. The assessee also raised plea of violation of natural justice since opportunity of cross-examination was not provided to the assessee. The assessee denied having made any transactions about alleged receipts. The Ld. AO did not conduct any enquiries to gather corroborative evidences to conclusively establish that the assessee was actually involved in the transactions as narrated in the seized material. Reliance was placed on various judicial decisions to support the same. It was further contended that the burden was on revenue to prove that the assessee was in receipt of alleged payments and the assessee could not be expected to discharge a reverse burden of proof as per settled position of law. The elaborate written submissions filed by the assessee has been extracted on page nos. 27 to 43 of impugned order.
205.4 On the issue of undisclosed receipts as allegedly received by the assessee from M/s SRS Mining, Ld. CIT(A) noted that this addition was based on the entries found in the note books seized from the office premises of M/s SRS Mining during the course of search conducted in their cases coupled with statement of Shri K. Srinivasulu u/s 132(4) (from whose possession the material was seized) with regard to the contents of the said seized material. The Ld. CIT(A), upon perusal of the relevant entries in the seized material, concurred that the name of the assessee did not appear in any of the entries so considered by Ld. AO to be pertaining to the assessee. All the entries so considered by AO merely contain the abbreviations 'HM' or 'HM(M)' or different extensions of the same. The Ld. AO relied on the statement of Shri. K. Srinivasulu u/s 132(4) dated 10.12.2016 to conclude that the said abbreviation 'HM' refers to the assessee. The Ld. AO stated in the assessment order that Shri K. Srinivasulu explained in his statement that the name 'HM' in the seized material was used to refer to the Housing Minister and since the assessee was Housing Minister during the relevant period, Ld. AO drew inference that the payments noted in the seized material with the name 'HM' or 'HM(M)' represent the payments made to the assessee. However, there was no mention anywhere in the statement of Shri K. Srinivasulu that the assessee was the actual recipient of the payments shown against the said abbreviated name. The main issue that would arise for determination is that whether such entries found against the abbreviation of the assessee's official position in the material seized from a third-party could be used to draw adverse inference against the 21 assessee, without there being anything more on record in corroboration of the same.
5.5 The Ld. CIT(A) noted that the aforesaid seized material as relied upon by Ld. AO was seized from the premises of a third-party during the course of search conducted in the case of the said third-party. The said material was neither seized from the premises of the assessee nor was the same found to be in the handwriting of the assessee and therefore, the same would not constitute adequate evidence to draw any adverse inference against the assessee, in the absence of any other corroborative evidence. This proposition was laid down by Hon'ble Delhi High Court in the case of CIT Vs Sant Lal (118 Taxmann.com 432) wherein it was held that when a diary is seized in search of the premises of a third patty allegedly containing entries of hundi transactions on behalf of various parties including the assessee, no addition could be made based on the said entries since the diary was neither found from the premises of assessee nor was it in handwriting of assessee and revenue failed to produce any other cogent material to link the assessee to the diary. The ratio of the said decision was squarely applicable to the case of the assessee since Ld. AO had not referred to any cogent material to corroborate the entries made in the material seized from a third-party which are purportedly the transactions made by the said third- party with the assessee. The Ld. CIT(A) also referred to the decision of Jabalpur Bench of Tribunal in the case of ACIT vs Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] and also various other decisions which have been enumerated in paras 47 and 48 of the impugned order. Further, Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. Vs 22 ITO (ITA No.250/Mum/2013) held that AO was required to bring further evidence on record to show that the money was actually exchanged between the parties in case where there was no other evidence on record to prove that on-money was paid except the loose sheets found in the premise of third-party and admission made by the third-party. Also, Hon'ble Supreme Court in the case of Common Cause vs. UOI (supra) held as under: -
We are constrained to observe that the Court has to be on guard while ordering investigation against any important constitutional functionary, officers or any person in the absence of some cogent legally cognizable material. When the material on the basis of which investigation is sought is itself irrelevant to constitute evidence and not admissible in evidence, we have apprehension whether it would be safe to even initiate investigation. In case we do so, the investigation can be ordered as against any person whosoever high in integrity on the basis of irrelevant or inadmissible entry falsely made, by any unscrupulous person or business house that too not kept in regular books of account but on random papers at any given point of time. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily.
The aforesaid decision of Hon'ble Supreme Court stresses the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found in loose sheets and note books regarding the payments allegedly made to important constitutional functionaries so that the process of law is not abused by unscrupulous persons in order to achieve ulterior goals. Therefore, it was important that the corroborative evidence was available on record in 23 support of the entries in the seized material found in the premises of third- party.
5.6 It was further held by Ld. CIT(A) that the said seized material as used against the assessee did not contain complete information to facilitate drawing of such an inference. The information available merely contained the date, amount of payment and the abbreviated name of the recipient. There was absolutely no mention in the seized material regarding the nature of the said transactions of cash payments, the purpose of such payments and the precise identity of the recipient. In the absence of such essential and critical information, it could not be inferred that the payments were made to a person, whose name does not even find a place in the seized material arid that the said amounts represent the income of the said person. It could also not be inferred with a reasonable degree of certainty that the payments were made to such a person based on an abbreviated name appearing in the seized material.
An entry made in a diary or notebook by a third person with scant details cannot be used to fasten tax liability on the person whose name does not appear at all or only an abbreviated name appears in the seized material, in the absence of any corroborative evidence to attribute the entries to such a person. Such seized material is liable to be treated as a dumb document, which would not have any evidentiary value in respect of the entries found therein, unless corroborative evidence is available which can provide necessary reliable basis for deciphering the nature and character of the said entries. Another fact was that the assessee did not acknowledge receipt of any such payment by way of appending his signature/initial against the said payments. If a third party unilaterally 24 makes entries in a diary/note book showing payments to a person to suit his convenience, the payments could not be inferred to have been made to the said person unless there is corroborative evidence to establish the actual making of payments to the said person. There was no reference to such corroborative evidence in the assessment order. 5.7 The Ld. CIT(A) also concurred that the statement of Shri K. Srinivasulu u/s 132(4) would not serve as corroborative evidence in respect of entries in the seized material. That person gave a general statement that the entries represent incidental expenses paid to various persons. When there were numerous pages and entries in the seized material, such a general statement would not inspire confidence for drawing any conclusion in respect of specific entries appearing therein allegedly with the abbreviated name of the assessee to conclude that the entries represent payment made to the assessee only. There was nothing in the statement even to remotely suggest that the entries appearing with the abbreviated name actually represent payment made to the assessee. The statement merely stated that the entries were maintained on the instructions of the partners of M/s SRS mining. It was very clear that Shri K. Srinivasulu had no first-hand knowledge of the payments noted in the seized material and had merely noted whatever was told to him by the partners. In such a situation, the statement would serve a very limited purpose of ascertaining the identity of the person who made the entries and nothing more. Since the entries were made on the instructions of the partners, it is the partners who were required to explain the exact identity of the recipients, the nature of payments, the purpose of payments and the identity of the person who made the 25 payments etc. However, there was no material on record which would show that any of the partners was examined with regard to relevant entries in the seized material. There was no reference to any such statement of the partners in the assessment order. Therefore, the statement of Shri K. Srinivasulu could barely be considered as corroborative evidence against the assessee with regard to the entries in the seized material. This was further fortified by the fact that the said statement was retracted vide letters dated 21-03-2017 and 23-03-2017 addressed to DDIT (Inv.) which was submitted by Shri K. Srinivasulu through the Jail Superintendent when he was lodged in the Jail. In the retraction letters, it was claimed that the earlier statement was given under coercion and duress and in a state of mental shock, depression and physical exhaustion at the relevant point of time due to continuance of search action continuously for more than 3 days without a break and he not being allowed to sleep or to take rest. He further stated that he was not allowed to read the typed statement and his signature was obtained by force. He stated that he never paid any money to various persons as recorded in the typed assessment. He also stated that he signed the statement to end the prolonged ordeal of intimidation, harassment and mental torture. The retraction was rejected by Ld. AO without any valid reasons.
5.8 It was further noted by Ld. CIT(A) that similar additions were made in the case of another assessee by the name Shri P. Ramamohan Rao. That assessee sought cross-examination during the course of assessment proceedings. However, Shri K. Srinivasulu became non- cooperative and hostile during the course of preliminary examination of 26 the said person before Ld. AO on 19-12-2018. Since the witness turned hostile, it was concluded that cross-examination would not serve any useful purpose. That assessee preferred Writ Petition before Hon'ble High Court of Madras praying for issue of directions to the AO to permit the assessee to cross-examine the witness being relied upon by Ld. AO. The writ petition was dismissed vide order dated 27.12.2018. The Hon'ble Court held that there was no infirmity in the order of AO in refusing the request for cross-examination since the witness turned hostile. The Hon'ble Court further observed that if AO was to rely on the statement of Shri K. Srinivasulu which is in favor of the revenue, the AO has to let in other reliable evidence to corroborate the same. Similarly, the Hon'ble Court in the case of M/s SRS mining Vs UOI (141 Taxmann.com 272), at para 9, observed that the statement of Shri K Srinivasulu could not be relied upon as he turned hostile by giving specific retraction statement and there was no need to accord permission to cross-examine him in view of the said reason. Considering these observations, it was to be held that the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. 5.9 In the present case, AO did not rely on any other corroborative evidences except for relying on the statement of Shri K. Srinivasulu since in the sworn statements of three other partners recorded on 08-12-2016, no questions were posed to them at all regarding the seized material allegedly containing the details of incidental charges paid to various persons. It was thus evident that no other corroborative evidence was available in record in respect of notings in the seized material.
275.10 The Ld. CIT(A) also concurred that the assessee denied having any transaction with the groups and therefore, he could not be expected to discharge a reverse burden as per legal principles laid down by Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO (131 ITR
597) holding that onus of establishing that the conditions of taxability are fulfilled would be on revenue and throwing this burden on the assessee would be to cast an almost impossible burden upon him to establish the negative. Therefore, Ld. AO was not correct in stating that the assessee failed to furnish any evidence to that he did not have any financial transactions with M/s SRS Mining or its associates. The burden was on revenue to establish that the assessee was in receipt of payments as noted in the seized material. This burden was not discharged by revenue in the present case. Further, as per settled legal precedents, no addition could be made unless there is corroborative evidence to validate the entries found in the material seized from a third party. 5.11 The Ld. CIT(A), in para 62, referred to the decision of Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla (AIR SC 410) holding that every transaction as recorded in the regular books needs to be independently corroborate and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon'ble Supreme Court is that independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case.
5.12 The Ld. CIT(A) also referred to the decision of Bangalore Tribunal in the case of ACIT vs. Sri B.S. Yediyurappa (ITA No.14/Bang/2019 dated 07.04.2022) holding that the addition made in the hands of the 28 said person who was the Chief Minister of the State of Karnataka during the relevant period, based on the entries of cash payments found recorded with the initials "BSY'' in the material seized during the course of search conducted in the case of a third-party is not sustainable in the absence of any evidence to corroborate the notings in the seized material. The said decision was squarely applicable to the facts of the present case.
5.13 It was finally held by Ld. CIT(A) that seized material was in the nature of dumb document which did not contain complete and unambiguous information to arrive at any conclusion based solely on the said material that the assessee was in receipt of the payments found noted therein against the abbreviated name 'HM'. There was no corroborative evidence to support and supplement the details in the seized material to conclusively establish that the name 'HM' found in the seized material refers to the assessee only. There was no corroborative evidence to prove that the payments noted in the seized material have actually materialized and transfer of money has actually taken place between the concerned parties. In view of all these reasons, it was to be held that Ld. AO had not discharged the onus to prove that the assessee was actually in receipt of the payments reflected in the seized material with reliable and cogent independent evidences to corroborate the entries in the seized material. Therefore, the addition of alleged receipts by the assessee from M/s SRS Mining was deleted for all the three years. Aggrieved, the revenue is in further appeal before us.
296. Addition of undisclosed amount for AY 2017-18 6.1 This issue, more or less, has been adjudicated by Ld. CIT(A) on similar lines. The Ld. CIT(A) observed that this addition was made based on the entries found in the loose sheets seized from the office premises of M/s SRS Mining coupled with statement of Shri K. Srinivasulu u/s 132(4) (from whose possession the material was seized) with regard to the contents of the said seized material, entries found in the loose sheets seized from the residential premises of Shri T. Shanmugasundaram (accountant of M/s. SRS Mining) and the statement of Shri. T. Shanmugasundaram u/s 132(4) dated 09.12.2016 with regard to the contents of the said seized material. The Ld. CIT(A) tabulated the contents of the loose sheets as under: -
Seized material reference Page Contents of the seized loose sheets No. ANN/KGAR/MPKSSR/LS/S-I 34-41 Constituency wise details of amounts distributed aggregating to Rs.155,82,47,250/-
ANN/KGAR/MPKSSR/LS/S-1 42 This page contains scribblings which shows that there is receipt of Rs.155,80,00,000/- against total expenditure of Rs.155,82,47,250/- by way of distribution to various constituencies. This page also contains page-wise breakup (in respect of page nos. 34 to 41) of total expenditure of Rs.155,82,47,250/-. The initials "HM" are found scribbled at the top of the page ANN/KGAR/MPKSSR/LS/S-1 44 List of 18 constituencies and distribution of amounts ranging from Rs.10 lakhs to Rs.50 lakhs to the said constituencies ANN/KGAR/MPKSSR/LS/S-1 45- This page contain lists of various constituencies along with 52 the constituency number and name of the candidate for the respective constituencies ANN/KGAR/MPKSSR/LS/S-1 53 This page shows constituency wise break-up of gross expenditure of Rs.75,70,00,000/- by way of distribution to various constituencies and receipt of Rs.7,00,00,000/- from Sri. S.P.Velumani and Rs.4.25.49,500/- from another person for meeting said expenditure. The initials "HM" are found scribbled at the top of the page ANN/VK/TS/LS/S-1 77 List of 46 constituencies to which amounts ranging from Rs.25 lakhs to Rs.1 crore were distributed ANN/VK/TS/LS/S-2 98- Acknowledgements given by candidates of some of 113 constituencies regarding receipt of money.30
6.2 The Ld. CIT(A) noted that the conclusion of Ld. AO was based on entries made in above loose sheets. The AO inferred that the amount of Rs.227.24 Crores found noted as receipts at page No.42 of the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-I (Rs.155.80 Crores) and page No.53 of the same seized material (Rs.71.44 Crores) represents the amount received by M/s. SRS Mining from the assessee. Further, AO inferred that the expenditure by way of various constituencies as noted found noted on page nos. 34 to 42 and at page nos. 44 to 53 of seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-1 represents expenditure out of the said receipts of Rs.227.24 Crores. However, upon perusal of the contents of the aforesaid seized material, it could be noted that the name of the assessee did not appear in any of the relevant loose sheets taken into consideration by the AO while drawing such an inference. It was noticed that the name 'HM' appears as scribbling at the top of the loose sheets at page nos. 42 and 53 of seized material vide ANN/KGARIMPKSSR/LS/S-1, which contains notings regarding the receipt of amounts aggregating to Rs.227.24 Crores for meeting the expenditure by way of distribution to various constituencies. However, the abbreviated name 'HM' do not appear in any of the remaining seized loose sheets as referred to by Ld. AO. Though the name of the assessee was not found noted in any of the relevant seized loose sheets and the abbreviated name of 'HM' was found noted in two loose sheets only, Ld. AO held that the entries in the said seized material reflected the transactions of the assessee merely by relying on the statement of Shri K. Srinivasulu recorded u/s 132(4) on 08-12-2016 and 10-12-2016 in 31 support of the inference that the notings in the seized material found noted with abbreviated name of 'HM' represent the transactions of the assessee.
6.3 The Ld. AO further noted that Shri K. Srinivasulu was a trusted aide of Shri. J. Sekar Reddy (partner of M/s. SRS Mining). In his reply to Q.No.12 of the statement dated 08.12.2016, Shri. K. Srinivasulu stated that page Nos.34 to 58 of the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-1 contain details of total amount of Rs.227.24 Crores as received from the Housing Minister, Shri Vaithilingam and that the said amount was distributed to various constituencies. However, the name of the assessee was not found noted anywhere in the relevant pages of the seized material and the abbreviated name of 'HM' was found scribbled at the top of page nos. 42 and 53 only of the said seized material which contain bland notings with regard to the receipts of Rs.227.24 Crores. It could be noted that the remaining pages in the seized material as referred to by Ld. AO did not contain either the name of the assessee or the abbreviated name 'HM'.
Therefore, the said statement lacked any credibility and remained unsubstantiated. The deponent did not at all explained as to how the details of receipt of money and its distribution found in page nos. 42 to 53 have been attributed by him to the assessee when there was absolutely no mention of the assessee's name in the said loose sheets and as to how the abbreviated name 'HM' found noted therein as scribbling at the tope could be ascribed to the assessee without any material in the seized loose sheets to substantiate the same. Moreover, in reply to Q. No.14 of statement dated 08-12-2016, Shri K. Srinivasulu 32 himself accepted that he did not know the exact name of the person who handed over monies to him, in respect of the amount stated to have been received from the assessee. The statement of Shri K. Srinivasulu undermines the veracity of his claim that the relevant amounts were received from the assessee. Therefore, the said statement was opposed to the facts evident from the seized material and the same could not be considered to be reliable for drawing any adverse inference against the assessee, in the absence of any other independent corroborative evidence.
6.4 The Ld. AO also relied on the statement of Shri T. Shanmugasundaram (accountant of M/s SRS Mining) recorded u/s 132(4) on 09-12-2016 for the purpose of drawing the inference that the assessee paid Rs.227.24 Crores to M/s. SRS Mining for the purpose of distribution to various constituencies. The AO referred to the relevant parts of his statement at paras 8.9 of the assessment order and reproduced the answers given by the said person to Q.No.12 of the said statement. Upon perusal of the same, it was evident that Shri. T. Shanmugasundaram had merely confirmed that the loose sheet vide ANN/VK/TS/LS/S-1 were in his handwriting and the notings were made- during the period of Tamilnadu Assembly Elections, 2016. However, the said statement would not lend any support to the Ld. AO to hold it against the assessee since said loose sheet did not contain any details of alleged amount of Rs.227.24 Crores paid by the assessee to M/s SRS Mining for the purpose of distribution to various constituencies. In the said answer, there was no reference to the assessee. Therefore, Ld. AO could not have drawn any support from the statement for arriving at any 33 adverse against the assessee that such sum was paid by the assessee to M/s SRS mining. In the light of this significant fact, the entire discussion made by the AO in the assessment order regarding the subsequent retraction of the said statement by Shri T. Shanmugasundaram and the reference made to an independent professional forensic expert for the purpose of establishing that the said retraction is factually incorrect, would have no relevance to the issue under consideration. The statement of Shri T. Shanmugasundaram, therefore, would not lend any assistance to the revenue to draw any adverse inference against the assessee by treating the same as corroborative evidence.
6.5 In the light of all these facts, the issue that would arise for determination is whether the loose sheets found with the acronym 'HM' as noted therein in the material seized from a third-party could be used to draw adverse inference against the assessee merely on the basis of statement of Shri.K. Srinivasulu, without any independent corroborative evidence to establish that the said payments were made by the assessee to M/s. SRS Mining for the purpose of distribution to various constituencies.
6.6 The aforesaid seized material as relied upon by Ld. AO was seized from the premises of a third-party during the course of search conducted in the case of the said third-party. The said material was neither seized from the premises of the assessee nor was the same found to be in the handwriting of the assessee and therefore, the same would not constitute adequate evidence to draw any adverse inference against the assessee, in the absence of any other corroborative evidence. This 34 proposition was laid down by Hon'ble Delhi High Court in the case of CIT Vs Sant Lal (118 Taxmann.com 432) wherein it was held that when a diary is seized in search of the premises of a third patty allegedly containing entries of hundi transactions on behalf of various parties including the assessee, no addition could be made based on the said entries since the diary was neither found from the premises of assessee nor was it in handwriting of assessee and revenue failed to produce any other cogent material to link the assessee to the diary. The ratio of the said decision was squarely applicable to the case of the assessee since Ld. AO had not referred to any cogent material to corroborate the entries made in the material seized from a third-party which are purportedly the transactions made by the said third-party with the assessee. The Ld. CIT(A) also referred to the decision of Jabalpur Bench of Tribunal in the case of ACIT vs Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] and also various other decisions which have been enumerated in paras 78 and 79 of the impugned order. Further, Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. Vs ITO (ITA No.250/Mum/2013) held that AO was required to bring further evidence on record to show that the money was actually exchanged between the parties in case where there was no other evidence on record to prove that on-money was paid except the loose sheets found in the premise of third-party and admission made by the third-party. Also, Hon'ble Supreme Court in the case of Common Cause vs. UOI (supra) held as under: -
We are constrained to observe that the Court has to be on guard while ordering investigation against any important constitutional functionary, officers or any person in the absence of some cogent legally cognizable material. When the material on the basis of which investigation is sought is itself irrelevant to constitute evidence and not admissible in evidence, we have apprehension whether it would be safe to even initiate investigation. In case we do so, the investigation can be ordered as against 35 any person whosoever high in integrity on the basis of irrelevant or inadmissible entry falsely made, by any unscrupulous person or business house that too not kept in regular books of account but on random papers at any given point of time. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily.
The aforesaid decision of Hon'ble Supreme Court stresses the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found in loose sheets and note books regarding the payments allegedly made to important constitutional functionaries so that the process of law is not abused by unscrupulous persons in order to achieve ulterior goals. Therefore, it was important that the corroborative evidence was available on record in support of the entries in the seized material found in the premises of third- party.
6.7 It was further held by Ld. CIT(A) that the said seized material as used against the assessee did not contain complete information to facilitate drawing of such an inference. The information available in the relevant seized material i.e., page nos. 42 and 53 of seized material ANN/KGAR/MPKSSR/LS/S-1 merely contained bland notings regarding the receipts of Rs.227.24 Crores for meeting the expenditure by way of distribution of amounts to various constituencies. It was noted that the name 'HM' was found scribbled at the top of the said two loose sheets and the said acronym was not even found noted against the bland 36 entries of receipts appearing in the loose sheets. The break-up of the amounts received along with the corresponding date of receipts was not available in the said loose sheets. There was absolutely no mention in the seized loose sheet regarding the precise identity of the persons from whom the said amounts were received and the dates of receiving the same. In the absence of such essential and critical information, it could not be inferred that the amounts were received from the assessee whose name does not even appear at all in the seized loose sheets. An entry made in a diary or notebook by a third person with scant details cannot be used to fasten tax liability on the person, in the absence of any corroborative evidence to attribute the entries to such a person. Such seized material was liable to be treated as a dumb document, which would not have any evidentiary value in respect of the entries found therein, unless corroborative evidence is available which can provide necessary reliable basis for deciphering the details of the identity of the person who made the relevant transaction.
6.8 In the light of above stated facts, Ld. CIT(A) concurred that the statement of Shri K. Srinivasulu u/s 132(4) would not serve as corroborative evidence in respect of entries in the seized material. The statement lacked credibility and remain unsubstantiated. The said statement does not emanate clearly from the contents of the seized material as the name of the assessee was not found anywhere in the relevant pages of the seized material and the abbreviated name of 'HM' is found noted only on Page nos. 42 and 53 of the said seized material which contain bland notings with the regard to the receipts of Rs.227.24 Crores. The remaining pages do not contain either the name of the 37 assessee or the acronym 'HM'. Further, the seized material do not contain any other evidence to support the veracity of claim of Shri K. Srinivasulu that the relevant amounts were received from the assessee and the admission made by him in the same statement about the exact names of persons who handed over the monies to him has the effect of diluting the credibility of his statement. Therefore, the statement of Shri K. Srinivasulu could barely be considered as corroborative evidence against the assessee with regard to the entries in the seized material.
This was further fortified by the fact that the said statement was retracted vide letters dated 21-03-2017 and 23-03-2017 addressed to DDIT (Inv.) which was submitted by Shri K. Srinivasulu through the Jail Superintendent when he was lodged in the Jail. In the retraction letters, it was claimed that the earlier statement was given under coercion and duress and in a state of mental shock, depression and physical exhaustion at the relevant point of time due to continuance of search action continuously for more than 3 days without a break and he not being allowed to sleep or to take rest. He further stated that he was not allowed to read the typed statement and his signature was obtained by force. He stated that he never paid any money to various persons as recorded in the typed assessment. He also stated that he signed the statement to end the prolonged ordeal of intimidation, harassment and mental torture. The said retraction was rejected without valid reasons. 6.9 It was further noted by Ld. CIT(A) that similar additions were made in the case of another assessee by the name Shri P. Ramamohan Rao. That assessee sought cross-examination during the course of assessment proceedings. However, Shri K. Srinivasulu became non-
38cooperative and hostile during the course of preliminary examination of the said person before Ld. AO on 19-12-2018. Since the witness turned hostile, it was concluded that cross-examination would not serve any useful purpose. That assessee preferred Writ Petition before Hon'ble High Court of Madras praying for issue of directions to the AO to permit the assessee to cross-examine the witness being relied upon by Ld. AO. The writ petition was dismissed vide order dated 27.12.2018. The Hon'ble Court held that there was no infirmity in the order of AO in refusing the request for cross-examination since the witness turned hostile. The Hon'ble Court further observed that if AO was to rely on the statement of Shri K. Srinivasulu which is in favor of the revenue, the AO has to let in other reliable evidence to corroborate the same. Similarly, the Hon'ble Court in the case of M/s SRS mining Vs UOI (141 Taxmann.com 272), at para 9, observed that the statement of Shri K. Srinivasulu could not be relied upon as he turned hostile by giving specific retraction statement and there was no need to accord permission to cross-examine him in view of the said reason. Considering these observations, it was to be held that the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. 6.10 The Ld. CIT(A), in para 91, referred to the decision of Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla (AIR SC 410) holding that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon'ble Supreme Court is that independent corroborative evidence is 39 required in respect of entries in regular books of accounts and the same would apply in the present case. Finally, the impugned addition was deleted by observing as under: -
95. As already discussed in detail in the preceding paragraphs, the seized material is in the nature of a dumb document which does not contain complete and unambiguous information to arrive at any conclusion based solely on the said material that the appellant was payer-in respect of the amounts found noted therein against the abbreviate name "HM". There is no corroborative evidence to support and supplement the details in the seized material to conclusively establish that the acronym "HM" found in the seized material refers to the appellant only and no other person. There is no corroborative evidence to prove that the payments noted in the seized material have actually materialised and transfer of money has actually taken place. In view of these reasons, it is required to be considered that the AO has not discharged the onus cast on the revenue to prove that the appellant has actually made the payments reflected in the seized material with reliable and cogent independent evidences to corroborate the entries in the seized material.
96.In view of the detailed discussion hereinabove, it is held that the addition of Rs.227,24,50,500/- made in the assessment order for AY 2017-18 towards undisclosed income represented by unaccounted payments made to M/s SRS mining for the purpose of distribution to various constituencies is not sustainable on facts. Hence, the AO is directed to delete the said addition of Rs.227,24,50,500/-. The relevant grounds of appeal are allowed in so far as they relate to the issue mentioned above.
Aggrieved as aforesaid, the revenue is in further appeal before us. Our findings and Adjudication
7. From the detailed facts and discussions as enumerated by us in the preceding paragraphs, it emerges that the impugned additions have been made by Ld. AO in the hands of the assessee pursuant to the search and seizure action by the department u/s 132 in group cases of M/s SRS mining and its partners on 08-12-2016. During the course of search action, certain incriminating material was found from the premises of M/s SRS Mining. The said material allegedly contained details of cash payment / incidental charges paid to several persons including the assessee. During the course of above search, residential premises of Shri T. Shanmugasundaram (an employee of M/s SRS 40 Mining) was also searched wherein some incriminating material was found which also contained the details of receipt and distribution of cash on behalf of the assessee. Since the aforesaid material had bearing on determination of total income of the assessee, a satisfaction was arrived u/s 153C and proceedings u/s 153C were initiated against the assessee which culminated into impugned assessment on 28-09-2021 for AY 2015-16. Similar assessment was framed for AY 2016-17. On the basis of seized material coupled with sworn statements recorded u/s 132(4) from employees of M/s SRS Mining, Ld. AO alleged that the assessee received unaccounted income from the group. Another allegation in AY 2017-18 was that the group received certain amounts from the assessee for distribution to various constituencies during State Election in the year 2016. The material was seized from different places and the contents of the same matched with each other and accordingly, Ld. AO formed an opinion that the assessee was one of the persons who had received payments from M/s SRS Mining for facilitating mining and transportation of sand in the state of Tamilnadu. The partners of the firm were controlling the entire gamut of sand mining operations throughout the length and breadth of the state since December, 2013. All the loading contracts and sand yard licenses were awarded to the friends, relatives of friends identified by the partners of the firm.
8. During the course of search operations, various diaries, notebooks, digital evidences and loose sheets were seized which include daily statement of sand yards, matrix note book maintained by Shri S. Nagarathinam, cash book maintained by S. Nagarathinam, Oswal Note books maintained by K. Srinivasulu and monthly statements. The 41 statement was analyzed and it was concluded by Ld. AO that the entries in the daily statements of yard owners matched completely with the daily statement of hire charges maintained by M/s SRS Mining. Similarly, the entries in the daily statement of yard match exactly with the receipts in Matrix notebooks. Further, the expenditure entries in the Matrix Note books match exactly with the cash book of Nagarathinam and Oswal notebooks maintained by K. Srinivasulu. Thus, there was not just one but three levels of corroboration available for the seized material and therefore, these entries would represent actual state of affairs of various financial and business transactions. The said material was not isolated loose sheets and the entries were not random, isolated or irregular in nature. They were systematic records of daily events maintained over a prolonged period of time on regular basis. These were actual books of accounts of the assessee. To bolster its claim, some entries were checked by Ld. AO on sample basis and the same were found to be correct. Therefore, it was concluded by Ld. AO that the seized material was actual books of accounts of M/s SRS Mining which were being maintained by S. Nagarathinam and K. Srinivasulu.
9. From Yogambal Street, Matrix brand spiral books as maintained by Shri S. Nagarathinam, in-charge of the premise, written in his own handwriting, was found. The matrix notebooks gave detailed account of cash received during each day from sand yard owners at Chennai and also the amounts paid to various influential persons during the day. A sworn statement was also recorded from Shri S. Nagarathinam who confirmed that the said books belonged to him and maintained by him. It contained the details of receipt from 4 sand mining sites and the 42 expenditure incurred. Apart from expenditure, there were lot of payments to various persons as directed by Shri Srinivasulu. The Ld. AO noted that these books were being maintained meticulously and provide detailed accounts of cash receipts and payments. The daily statement of sand yards was compared with the Matrix notebook maintained by Shri S. Nagarathinam and it was found that the amount sent to head office from each sand yards tally exactly with the receipts shown in the matrix notebooks against the respective yard. Not only this, Shri S. Nagarathinam maintained another set of books in his own handwritings which are called as cash books. These were prepared from entries in the matrix notebooks and contained exactly all the entries in the Matrix notebooks but without denominations. There was a consolidation statement, at final page of the month giving total receipts and expenses for that particular month.
10. The firm maintained small Oswal notebooks also which was another set of cash books being maintained by Shri K Srinivasulu in his own handwriting. Shri K. Srinivasulu was trusted aide of Shri J. Sekar These notebooks contained only the details of payments made to influential people date-wise. The entries found in these books matched with that of the Matrix notebooks and cash books maintained by Shri S. Nagarathinam. The Ld. AO, thus held that there were three different evidences, corroborating with each other, for the firm M/s SRS Mining having made regular incidental payments for running its business.
11. In the note books, the assessee was vaguely described as 'HM'. The codes were deciphered by Ld. AO by relying on the statement made by one Shri K. Srinivasulu u/s 132(4) in whose possession those 43 incriminating books and documents were found. Shri K. Srinivasulu is stated to be an employee of M/s SRS Mining who maintained diaries / note-books on the instructions of partners of M/s SRS mining. Shri K. Srinivasulu stated that these codes represent 'Housing Minister'. Since the assessee held that position at the relevant point of time, Ld. AO formed an opinion that this code would refer to the assessee only and no one else. Though the assessee denied having undertaken any transactions with the group, Ld. AO continued to allege that the aforesaid payments were received by the assessee and certain amounts were paid by the assessee to the aforesaid group.
12. Pertinently, Shri K. Srinivasulu retracted from earlier statements vide his letters dated 21-03-2017 and 23-03-2017 which was sent by him through Jail Authorities. Another witness i.e., Shri Shanmugasundaram also retracted from his statement. The Ld. AO held that the retraction was without valid reasons. The Ld. AO continued with the allegations and held that even if the statements were retracted by both of them, the same would have evidentiary value in terms of various judicial decisions. The same would still be valid evidence since the same was recorded on the basis of factual and with specific reference to the seized records.
13. Upon further appeal, Ld. CIT(A), rejected various legal grounds of the assessee assailing assumption of jurisdiction u/s 153C. The Ld. AO formed an opinion that the aforesaid seized material had bearing on determination of total income of the assessee for the relevant assessment year. Therefore, jurisdiction u/s 153C was valid. The findings of Ld. CIT(A) have already been enumerated by us in preceding paras 5.1 and 5.2. In our considered opinion, these legal issues are 44 perfectly been addressed by Ld. CIT(A) and the same do not warrant any interference on our part. The assessee is unable to show any perversity in the same. Therefore, we endorse the adjudication of lega grounds by Ld. CIT(A), in this regard.
14. So far as the merits of quantum addition is concerned, the findings of Ld. CIT(A) have been enumerated by us in detail in preceding paragraphs. The Ld. CIT(A), upon perusal of the relevant entries in the seized material, concurred that the name of the assessee did not appear in any of the entries so considered by Ld. AO to be pertaining to the assessee. All the entries so considered by Ld. AO merely contain the acronym / abbreviate name 'HM' only. The Ld. AO relied on the statement of Shri. K. Srinivasulu u/s 132(4) dated 10.12.2016 to conclude that the said acronym 'HM', in the seized material, refers to the assessee. Shri K. Srinivasulu explained in his statement that the said acronym refers to Housing Minister and since the assessee held that position at the relevant point of time, Ld. AO drew inference that the payments noted in the seized material with the acronym 'HM' represent the payments made to the assessee. However, as rightly noted by Ld. CIT(A), there was no mention anywhere in the statement of Shri K. Srinivasulu that the assessee was the actual recipient of the payments shown against the said acronym 'HM'. Shri K. Srinivasulu did not state anywhere in his statement that the acronym 'HM' was used in the seized material to denote the assessee. Further, the seized material did not contain any evidence to draw the inference that the payments noted with the name 'HM' actually represented amounts received by the assessee. Therefore, it was to be held that the conclusion of Ld. AO was on mere 45 presumption that the abbreviation 'HM' found in the seized material refers to the assessee only and nobody else. However, drawing such a presumption without having any independent corroborative evidence that the acronym 'HM' used in the seized material refers only to the assessee and not to any other person whose name may have the same acronym, could not be sustained. In the absence of any other corroborative evidence supporting the inference drawn by AO, it could be said that the conclusion of Ld. AO was mere conjecture which could not be accepted to fasten huge tax liability on the assessee on account of such inference.
15. Proceeding further, it could also be seen that the impugned additions have been made in the hands of the assessee merely on the basis of vague entries found in the material seized from a third-party premise. The said material was seized from the premises of a third-party during the course of search conducted in the case of the said third-party. The said material was neither seized from the premises of the assessee nor was the same found to be in the handwriting of the assessee. Therefore, such material, unless backed by corroborative evidence, would not constitute adequate evidence to draw any adverse inference against the assessee as held by Hon'ble Delhi High Court in the case of CIT Vs Sant Lal [2020] 118 Taxmann.com 432 (Del). The Hon'ble Court, in similar situation, held no addition could be made merely on the basis of such entries. The ratio of the said decision was squarely applicable to the case of the assessee as the Ld. AO has not referred to any cogent material to corroborate the entries made in the material seized from a third-party which are purportedly the transactions made by the said third-party with the assessee. The other decisions including the 46 decision of Jabalpur Bench of Tribunal in the case of ACIT vs. Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] further supports this proposition. Similarly, Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. Vs ITO (ITA No.250/Mum/2013) held that AO was required to bring further evidence on record to show that the money was actually exchanged between the parties in case where there was no other evidence on record to prove that on-money was paid except the loose sheets found in the premise of third-party and admission made by the third-party. Also, Hon'ble Supreme Court in the case of Common Cause vs. UOI (supra) stressed the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found in loose sheets and note books regarding the payments allegedly made to important constitutional functionaries so that the process of law is not abused by unscrupulous persons in order to achieve ulterior goals. Therefore, it was important that the corroborative evidence was available on record in support of the entries in the seized material found in the premises of third- party. Considering all these facts as well as the ratio of these judicial precedents, we concur with the findings of Ld. CIT(A) that the seized material did not contain complete information to facilitate drawing of such an adverse inference against the assessee. The information was a vague information. In such a situation, it could not be inferred with a reasonable degree of certainty that the payments were made to a person whose name (or code name) appears therein and that the said amounts represent the income of the said person. As rightly held by Ld. CIT(A), an entry made in a diary or notebook by a third person with scant details could not be used to fasten 47 tax liability on the person whose name appears therein, in the absence of corroborative evidence. If a third-party unilaterally makes entries in a diary/note book showing payments to a person to suit his convenience, the payments could not be inferred to have been made to the said person unless there is corroborative evidence to establish the actual making of payments to the said person.
16. So far as the statement of Shri K. Srinivasulu is concerned, as rightly held by Ld. CIT(A), the same would not serve as corroborative evidence in respect of entries in the seized material. That person gave a general statement that the entries represent incidental expenses paid to various persons. When there were numerous pages and entries in the seized material, such a general statement would not inspire confidence for drawing any conclusion in respect of specific entries appearing therein allegedly with the abbreviated name of the assessee to conclude that the entries represent payment made to the assessee only. There was nothing in the statement even to remotely suggest that the entries appearing with the abbreviated name actually represent payment made to the assessee. The statement merely stated that the entries were maintained on the instructions of the partners of M/s SRS mining. It was very clear that Shri K. Srinivasulu had no first-hand knowledge of the payments noted in the seized material and had merely noted whatever was told to him by the partners. In such a situation, the statement would serve a very limited purpose of ascertaining the identity of the person who made the entries and nothing more. Since the entries were made on the instructions of the partners, it is the partners who were required to explain the exact identity of the recipients, the nature of payments, the 48 purpose of payments and the identity of the person who made the payments etc. However, there was no material on record which would show that any of the partners was examined with regard to relevant entries in the seized material. There was no reference to any such statement of the partners in the assessment order. Therefore, the statement of Shri K. Srinivasulu could barely be considered as corroborative evidence against the assessee with regard to the entries in the seized material. This was further fortified by the fact that the said statement was retracted vide letters dated 21-03-2017 and 23-03-2017 addressed to DDIT (Inv.) which was submitted by Shri K. Srinivasulu through the Jail Superintendent when he was lodged in the Jail. In the retraction letters, it was claimed that the earlier statement was given under coercion and duress and in a state of mental shock, depression and physical exhaustion at the relevant point of time due to continuance of search action continuously for more than 3 days without a break and he not being allowed to sleep or to take rest. He further stated that he was not allowed to read the typed statement and his signature was obtained by force. He stated that he never paid any money to various persons as recorded in the typed assessment. He also stated that he signed the statement to end the prolonged ordeal of intimidation, harassment and mental torture. As rightly held by Ld. CIT(A), the retraction has been rejected by Ld. AO without any valid reasons.
17. The said conclusion would be pertinent in the light of the fact that similar additions were made by revenue in the case of another similarly placed assessee by the name Shri P. Ramamohan Rao. That assessee sought cross-examination of Shri K. Srinivasulu during the course of 49 assessment proceedings. However, Shri K. Srinivasulu became non- cooperative and hostile during the course of preliminary examination of the said person before Ld. AO on 19-12-2018. Since the witness turned hostile, it was concluded that cross-examination would not serve any useful purpose. That assessee preferred Writ Petition before Hon'ble High Court of Madras praying for issue of directions to the AO to permit the assessee to cross-examine the witness being relied upon by Ld. AO. The writ petition was dismissed vide order dated 27.12.2018. The Hon'ble Court held that there was no infirmity in the order of AO in refusing the request for cross-examination since the witness turned hostile. The Hon'ble Court further observed that if AO was to rely on the statement of Shri K. Srinivasulu which is in favor of the revenue, the AO has to let in other reliable evidence to corroborate the same. Similarly, the Hon'ble Court in the case of M/s SRS mining Vs UOI (141 Taxmann.com 272), at para 9, observed that the statement of Shri K Srinivasulu could not be relied upon as he turned hostile by giving specific retraction statement and there was no need to accord permission to cross-examine him in view of the said reason. Considering these observations, it was to be held that the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. In the present case, AO did not rely on any other corroborative evidences except for relying on the statement of Shri K. Srinivasulu since in the sworn statements of three other partners recorded on 08-12-2016, no questions were posed to them at all regarding the seized material allegedly containing the details of incidental charges paid to various 50 persons. It was thus evident that no other corroborative evidence was available in record in respect of notings in the seized material. Therefore, the impugned addition could not be sustained merely by relying on this statement only. The conclusions of Ld. CIT(A), in this regard, find our concurrence.
18. Further, the assessee could not be expected to discharge a reverse burden as per legal principles laid down by Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO (131 ITR 597) holding that onus of establishing that the conditions of taxability are fulfilled would be on revenue and throwing this burden on the assessee would be to cast an almost impossible burden upon him to establish the negative. Therefore, it was onus of Ld.AO to establish that the assessee was in receipt of payments as noted in the seized material. This burden was not discharged by revenue in the present case. Further, as per settled legal precedents, no addition could be made unless there is corroborative evidence to validate the entries found in the material seized from a third party. The Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla (AIR SC 410) held that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon'ble Supreme Court is that independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case. The decision of Bangalore Tribunal in the case of ACIT vs. Sri B.S. Yediyurappa (ITA No.14/Bang/2019 dated 07.04.2022) is on similar fact. The bench held that the addition made in the hands of the said person who was the 51 Chief Minister of the State of Karnataka during the relevant period, based on the entries of cash payments found recorded with the initials "BSY'' in the material seized during the course of search conducted in the case of a third party, would not sustainable in the absence of any evidence to corroborate the notings in the seized material. The said decision, in our opinion, is squarely applicable to the facts of the present case.
19. Considering all these facts, the apt conclusion would be that the seized material was in the nature of dumb document which did not contain complete and unambiguous information to arrive at a conclusion that the assessee was in receipt of the payments found noted therein against the name 'HM'. There was no corroborative evidence to support and supplement the details in the seized material to conclusively establish that the name 'HM' found in the seized material refers to the assessee only. There was no corroborative evidence to prove that the payments noted in the seized material have actually materialized and transfer of money had actually taken place between the concerned parties. In view of all these reasons, the addition of alleged receipts by the assessee from M/s SRS Mining has rightly been deleted by Ld. CIT(A). We endorse the view of Ld. CIT(A), in this regard.
20. So far as the addition of alleged receipts from assessee to SRS Mining and distribution thereof to various constituencies is concerned, it could be observed that the impugned addition has been made based on the entries found in the loose sheets seized from the office premises of M/s SRS Mining coupled with statement of Shri K. Srinivasulu u/s 132(4) (from whose possession the material was seized) with regard to the 52 contents of the said seized material, entries found in the loose sheets seized from the residential premises of Shri T. Shanmugasundaram (accountant of M/s. SRS Mining) and the statement of Shri. T. Shanmugasundaram u/s 132(4) dated 09.12.2016 with regard to the contents of the said seized material. The Ld. CIT(A), upon perusal of seized material, rendered factual finding. It was noted by Ld. CIT(A) that Ld. AO inferred that the amount of Rs.227.24 Crores found noted as receipts at page nos. 42 & 53 of the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-I represents the amount received by M/s. SRS Mining from the assessee. Further, AO inferred that the expenditure by way of distribution of amounts to various constituencies as found noted at page Nos.34 to 42 and 44 to 53 of seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-1 represents the expenditure incurred out of the receipt of Rs.227.24 Crores from the assessee. However, upon perusal of the contents of the aforesaid seized material, it was noted that the name of the assessee did not appear in any of the relevant loose sheets taken into consideration by the AO while drawing such an inference. It was also noted that the acronym 'HM' appears as scribbling at the top of the loose sheets at page nos. 42 & 53 only whereas the said acronym 'HM' was not found noted in any of the remaining loose sheets as referred to by Ld. AO. Though the name of the assessee was not found noted in any of the relevant seized loose sheets and the acronym 'HM' was found noted only on top of two sheets, Ld. AO held that entire entries in the said seized loose sheets reflected the transactions of the assessee merely by relying on the statement of Shri K. Srinivasulu.
5321. So far as the statement of Shri. K. Srinivasulu recorded u/s 132(4) is concerned, he merely stated that 'HM' found in the seized notebook denotes 'Housing Minister'. However, Shri K. Srinivasulu did not explain or elaborate in the said statement regarding what the acronym 'HM' stands for. Further, this statement was a retracted statement. Considering the observation of Hon'ble High Court of Madras in Writ Petition of Shri P. Rama Mohan Rao, his statement, on standalone basis, would have no evidentiary value. The Hon'ble Curt held that if Ld. AO was to rely on this statement, he was to let in other reliable evidence to corroborate the same. Similar were the directions of Hon'ble Court in the case of M/s SRS mining Vs UOI (141 Taxmann.com 272). Therefore, the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. In the present case, AO relied on reply of Shri K. Srinivasulu to Q.No.12 wherein he stated that page Nos.34 to 58 of the seized loose sheets vide ANN/KGAR/MPKSSR/LS/S-1 contain details of total amount of Rs.227.24 Crores as received from the Housing Minister Shri Vaithilingam and that the said amount was distributed to various constituencies. However, the name of the assessee was not found noted anywhere in the relevant pages of the seized material and the abbreviated name of 'HM' was found scribbled at the top of page nos. 42 and 53 of the said seized material which contains bland notings with regard to the receipts of Rs.227.24 Crores. It could be noted that the remaining pages in the seized material do not contain either the name of the assessee or the abbreviated name such as 'HM'. In the light of all these crucial facts, the statement of Shri K. Srinivasulu lacks any 54 credibility and the same remains unsubstantiated. The said deponent did not at all explained as to how the details of receipt of money and its distribution found in page Nos. 42 to 53 have been attributed by him to the assessee when there was absolutely no mention of assessee's name in the said loose sheets and the acronym 'HM" found noted as scribbling at the top could be ascribed to the assessee without there being any material in the seized loose sheets to substantiate the same. Therefore, as rightly concluded by Ld. CIT(A), the statement of Shri. K. Srinivasulu was to be held to be opposed to the facts which was evident from the seized material and the same could not be considered to be reliable for drawing any adverse inference against the assessee, in the absence of any other independent corroborative evidence.
22. The Ld. AO also relied on the statement of Shri. T. Shanmugasundaram (accountant of M/s SRS Mining). The same was carefully considered by Ld. CIT(A). Upon perusal of answers given by him, it was noted that Shri. T. Shanmugasundaram did not make any reference to the name of the assessee in his answers. The loose sheets seized from his residence did not contain any details of alleged amount of Rs.227.24 Crores paid by the assessee to M/s SRS Mining for distribution to various constituencies. Therefore, as rightly held by Ld. CIT(A), Ld. AO could not have drawn any support from his statement to arrive at adverse inference against the assessee. Another fact is that this statement has also been retracted and therefore, the same would loose its evidentiary value. In the light of all these facts, we endorse the view of Ld. CIT(A), in this regard.
5523. Another fact is that the material has been seized from a third-party and the presumption of Sec.132(4A) r.w.s. 292C would arise qua the searched person or qua the person who was found in the possession or control of such documents. Such a presumption was not applicable to a person other than the searched persons as held by Hon'ble Bombay High Court in the case of ACIT vs. Latha Mangeshkar (97 ITR 696) and various other decisions including the decision of Hon'ble Gujarat High Court in the case of PCIT vs. Gaurangbhai Pramodchandra Upadhyay (TCA No.98 of 2020) as well as the decision of Pune Tribunal in Vinit Ranawat vs ACIT (88 Taxmann.com 428).
24. The Hon'ble Karnataka High Court in its recent decision titled as CIT vs. Sunil Kumar Sharma (159 Taxmann.com 179; 22.01.2024) held that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. The Hon'ble Court referred to the decision of Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla (3 SCC 410) as well as another decision in Common Cause vs. UOI (supra) while arriving at such a conclusion. The Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla (3 SCC 410) held that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon'ble Supreme Court is that independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case.
5625. Considering all these facts, we are of the considered opinion that the adjudication of Ld. CIT(A), on legal grounds as well as on merits, would not require any interference on our part. We endorse the findings of Ld. CIT(A). In the result, the appeals of the revenue as well as the cross-objections of the assessee, for all the three years, stands dismissed.
Conclusion
26. The appeals of the revenue as well as the cross-objections of the assessee stands dismissed.
Order pronounced on 3rd April, 2024
Sd/- Sd/-
(V. DURGA RAO) (MANOJ KUMAR AGGARWAL)
ाियक सद!/JUDICIAL MEMBER लेखासद! / ACCOUNTANT MEMBER
चे9ई Chennai; िदनां क Dated : 03-04-2024
DS
आदे शकी^ितिलिपअ&े िषत/Copy of the Order forwarded to :
1. अपीलाथ /Appellant
2. !"थ /Respondent
3. आयकरआयुB/CIT
4. िवभागीय!ितिनिध/DR
5. गाडG फाईल/GF