ACIT, CC, AGRA, AGRA V. M/S. UNITED FARM PRODUCT PRIVATE LIMITED, AGRA

ITA 299/AGR/2025

AI Insights

The case revolves around an appeal by the Revenue against the CIT(A)'s decision to delete an addition made by the AO on account of unexplained expenditure incurred by M/s. United Farm Product Pvt. Ltd. for the construction of a plant at Mewat, Haryana. The AO had based his addition on loose papers and WhatsApp chats found during a search operation, which were claimed to be unsigned, undated, and without any clear connection to the assessee or the relevant financial year. The CIT(A) found that these documents did not provide a reliable basis for the addition, a decision which the Tribunal upheld.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 792279 (ITAT-AGRA)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2022-2023
• Appeal Filed On: 29-05-2025
• Other Referred Cases: CIT vs. Bharat Engineering & Construction Company, CIT vs. Lal Mohar & Others, DCIT vs. M/s. Surajmal Cold Storage Pvt. Ltd., Sugandhi Cold Storage (P) Ltd. vs. Dept of Income Tax, Shastri Construction Co. vs Department Of Income Tax, Mitesh Rolling Mills P. Ltd. vs CIT, ITO vs. W.D. Estate (P.) Ltd., Shri Neeraj Goel vs. ACIT, Kranti Impex Pvt. Ltd. vs. ITO, ACIT vs. Layer Exports P. Ltd., PCIT vs. Umesh Ishrani, CBI vs. V.C. Shukla, Common Cause vs. UOI, Nishant Construction Pvt. Ltd. vs. ACIT, Abhay Kumar Bharamgouda Patil vs. ACIT, K.P. Varghese vs. ITO, D.K. Gupta vs. CIT, S.P. Goyal vs. Dy. CIT, Nagarjuna Construction Co. Ltd. vs. DCIT, CIT vs. C.L. Khatri, T. Mudduveerappa Sons vs. ACIT, DCIT vs. Krorilal Aggarwal, M.V. Mathew vs. ITO, Shri Neeraj Goel vs. ACIT, Kranti Impex Pvt. Ltd. vs. ITO, ACIT vs. Layer Exports P. Ltd., PCIT vs. Umesh Ishrani
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KUMAR YADAV
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Corroborative evidences; Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Document seized; Documents seized; Capital receipt; Search and seizure; Loose papers
• Section: 132; 68; 69; 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH ‘DB’: AGRA BEFORE SHRIS.RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER ITA No.299/AGR/2025 (Assessment Year: 2022-23) ACIT, CC, vs. M/s. United Farm Product Pvt. Ltd., Agra. 2/220, 2nd Floor, Glory Plaza, Soor Sadan, M.G. Road, Agra – 282 002 (Agra) (PAN :AACCU2505M) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Sudhir Sehgal, Advocate Shri Deependra Mohan, CA REVENUE BY : Shri Arun Kumar Yadav, CIT DR Date of Hearing : 13.10.2025 Date of Order : 04.12.2025 O R D E R PER S. RIFAUR RAHMAN,AM: 1. This appeal is filed by the Revenue against the order of ld. Commissioner of Income-tax (Appeals), Kanpur – 4 dated 28.03.2025 for Assessment Year2022-23 raising following grounds of appeal :- “l. Whether on facts and circumstances of the case and in law. the Ld. CIT(A)-IV. Kanpur has erred in deleting the addition of Rs.43,71,37,934/- on account of unexplained expenditure u/s 69C of the Act incurred for construction of plant at Mewat, Haryana, without appreciating the fact that the assessee company itself has surrendered amount of Rs.41,40,35,700/- and admitted to take the unexplained expenditure at Rs.43,71,37,934/- incurred in the Printed from counselvise.com 2 ITA No.299/Agr/2025 construction of said plant. Hence, the addition made by the AO is based on admittance by the assessee, which is corroborated by the incriminating material found during the course of search. 2. Whether on facts and circumstances of the case and in law, Ld. CIT(A)-IV. Kanpur has erred in deleting the addition. without appreciating the facts that the Assessing Officer has passed the assessment order after thoroughly examining and analysing the seized material and proper appreciation of facts of unexplained expenditure u/s 69C of the Act.” 2. This is an appeal filed by the revenue and as per the grounds of appeal, the issue raised by the revenue are, the assessee has made unexplained expenditure in construction of its factory at Mewat, Haryana for Rs.43,71,37,934/- during the year under consideration, based on certain loose papers found during the search proceedings. 3. The facts leading to such addition have been discussed by the Assessing Officer at para 7.1/page 1 to 9 of the order. The main thrust of the Ld. AO for making addition in the case of the assessee was loose slips found from the searched premises of HMA Agro Industries. It was submitted before AO that the loose slips found during the search were unsigned, undated, without any description of the unit to which such loose slips related to and most of the slips were related to the next financial year. However, the AO issued SCN, that expenditure to the tune of Rs. 129,15,55,494/- was made up to the yearend dated 31.03.2022, out of which amount of Rs.39,22,83,3,07/- was received from banking channel and balance expenditure of Rs.89,92,72,187/- Printed from counselvise.com 3 ITA No.299/Agr/2025 has been spent in cash being unexplained expenditure. The assessee submitted a reply to the above SCN which has been mentioned at page 9 to 12 of the assessment order. The AO at page 12 of the order rejected the submissions of the assessee, however, the AO after allowing benefit of funds of Rs 85,44,17,560/- (Balance of Rs.44,03,81,860 declared in the audited Balance Sheet of HMA Agro Industries and 41,40,35,700 surrendered by HMA Agro Industries on account of construction in Mewat) as received from its holding company namely HMA Agro Industries Limited, the balance investment of Rs. 43,71,37,934/- has been added as unexplained expenditure of the assessee u/s 69C of the Act. 4. Aggrieved, with the above order, assessee preferred an appeal before Ld CIT(A). The Ld. CIT(A) after considering the detailed submissions and material available on record, he deleted the addition by observing as under: “7.1 I have carefully gone through the assessment order as well as the detailed written submissions and oral arguments of the appellant. It is seen from the assessment order and the submissions of the appellant that during the course of search proceedings on the assessee company, which is establishing a plant at Mewat, Haryana during the year under consideration, the construction of this plant at Mewat was under progress. From the residential premise of Guizar Ahmed in his mobile phone, certain WhatsApp chats, which relate to certain investments in the said construction of plant at Mewat were analyzed. It is seen that• in the assessment order excel sheet has been reproduced which is related to Mr. Wajid Ahmed and certain expenditures are mentioned in the said sheet which relate to Vibhav Nagar plot, Delhi Kitchen, etc., and thus are not related to the investment of appellant company at its new plant at Mewat. Further, the payment slips which have been reproduced in the assessment order where some payments have been mentioned, are related to financial year 2022-23, relevant to assessment year 2023- 24. Hence the same slips are also not related to the year consideration being assessment year 2022-23 relevant to financial year 2021-22. In third excel sheet which has been reproduced in the assessment order, there the \"Entity Name\" is clearly mentioned as \"HMA Agro\", which is for two financial years 2021-22 and 2022-23. Since this sheet clearly relates to HMA Agro, however, name of United Printed from counselvise.com Farm Product Private Limited is being mentioned for payment made to Surya Construction in different months, which are related to A Y 2023 year under construction. The AO has arrived at the figure of Rs. 2,17,48,9761 pertaining to AY 2022 perusal, it is noted that the first and third entry pertain to MIs. HMA Agro and the second entry relates to payment of Rs. 1.5 cr. with respect to HMA Agro and United Farm Product. Since all the above documents produced in the assessment order, either don't pertain to the appellant or don't pertain to the year under consideration being A Y 2022-23 (barring one entry), hence it is not understood as to why the AO has quoted these documents in the assessment order to make a case for undisclosed investment in the construction of the plant at Mewat when no addition has been made on the basis of t mentioned in the assessment order and the appellant has controverted the same to be a dumb document, is being reproduced here under: In respect of the above loose paper, contention of the AO is paper which details the cash investment done by the appellant in construction of its plant at Mewat, and it is stated that the total expenditure till 31 March 2022 is Rs. 129,15,55,4941 Rs.39,22,83,307/ 89,92,72,187/- is unexplained expenditure, for which reliance has been placed on the chats with Miswa Bhulu Unnao. Bu appellant company or are not related to the Assessment year under consideration, 4 Farm Product Private Limited is being mentioned for payment made to Surya Construction in different months, which are related to A Y 2023 year under construction. The AO has arrived at the figure of Rs. 2,17,48,9761 pertaining to AY 2022-23 by including top 3 entries of the sheet. From careful perusal, it is noted that the first and third entry pertain to MIs. HMA Agro and the nd entry relates to payment of Rs. 1.5 cr. with respect to HMA Agro and United Farm Product. Since all the above documents produced in the assessment order, either don't pertain to the appellant or don't pertain to the year under consideration being 23 (barring one entry), hence it is not understood as to why the AO has quoted these documents in the assessment order to make a case for undisclosed investment in the construction of the plant at Mewat when no addition has been made on the basis of these documents. Further, the loose paper which has been mentioned in the assessment order and the appellant has controverted the same to be a dumb document, is being reproduced here under: In respect of the above loose paper, contention of the AO is paper which details the cash investment done by the appellant in construction of its plant at Mewat, and it is stated that the total expenditure till 31 March 2022 is Rs. 129,15,55,4941- and the amount received through banking channel is Rs.39,22,83,307/-. Hence, the AO has inferred that an amount of Rs. being the difference in these two figures, has been spent in cash and is unexplained expenditure, for which reliance has been placed on the chats with Miswa Bhulu Unnao. But since these chats are either not clearly linked to the appellant company or are not related to the Assessment year under consideration, ITA No.299/Agr/2025 Farm Product Private Limited is being mentioned for payment made to Surya Construction in different months, which are related to A Y 2023-24 and not to the year under construction. The AO has arrived at the figure of Rs. 2,17,48,9761- 23 by including top 3 entries of the sheet. From careful perusal, it is noted that the first and third entry pertain to MIs. HMA Agro and the nd entry relates to payment of Rs. 1.5 cr. with respect to HMA Agro and Since all the above documents produced in the assessment order, either don't pertain to the appellant or don't pertain to the year under consideration being 23 (barring one entry), hence it is not understood as to why the AO has quoted these documents in the assessment order to make a case for undisclosed investment in the construction of the plant at Mewat when no addition has been hese documents. Further, the loose paper which has been mentioned in the assessment order and the appellant has controverted the same to In respect of the above loose paper, contention of the AO is that it is a loose paper which details the cash investment done by the appellant in construction of its plant at Mewat, and it is stated that the total expenditure till 31 March 2022 is Rs. and the amount received through banking channel is . Hence, the AO has inferred that an amount of Rs. being the difference in these two figures, has been spent in cash and is unexplained expenditure, for which reliance has been placed on the chats with t since these chats are either not clearly linked to the appellant company or are not related to the Assessment year under consideration, Printed from counselvise.com 5 ITA No.299/Agr/2025 hence are of no evidentiary value, and cannot be said to be evidence in the eyes of law. In the said loose paper, it is not mentioned as to who has made this alleged cash expenditure for the construction of the plant at Mewat, since the appellant company is in the initial stages of setting up of plant and the appellant has contended that since no business revenue has been earned by the appellant company before start of any of its business activity, hence, the amount is not spent by the appellant company. 7.2 However, the appellant in their submissions has stated that the loose paper is a \"dumb document\" and were rough estimates and jotting done which is unsigned and it is also not understood as to in whose handwriting and for what purpose the said piece of paper was made. If the said loose paper is analyzed copy of account, and the bank loan statement which have been produced, it is clearly evident that the assessee has Term Loan from Yes Bank and the balance as of 31st March 2022 is Rs. 61,91,02,337/- and not Rs. 59,73,27,808/= as shown in the loose paper. Also, the disbursement for the month of March 2022 from the Yes Bank statement is Rs.5,80,48,427/- and not Rs. 3,62,63,8991- as shown in this loose paper. It is also stated that the amount invested by HMA Agro as per their ledger account is Rs. 44,03,81,8601-and not Rs. 39,22,83,307/- as stated by the AO. Hence it is evident that in the said loose paper none of the figures are matching even with the figures of the independent party, namely the Yes Bank who have sanctioned the term loan to the company for the construction of the said plant, nor even the ledger balances of HMA is matching. In the sanction letter submitted of Yes Bank, it is clearly mentioned that they are the sole provider of credit facility to the company for the construction of their plant and the bank balance has been duly authenticated from the bank statement of the said term loans granted to the appellant company, where the balance Outstanding as on 31st March 2022 is Rs.61,91,02,337/- and this figure is not matching with the amount mentioned in the loose paper as bank loan of Rs.59,73,27,807/-. It would be worthwhile to mention here that even the disbursement for the month of March 22 as per the bank statement is Rs. 5,80,48,427/- and not Rs. 3,62,63,899/- as mentioned in the paper. This paper is undated and unsigned, and by whom it has been prepared is not mentioned or brought on record by the AO, neither the purpose of this paper has been brought on record in any manner by the AO. On the other hand, the appellant has argued that the said loose paper is just Rough jotting and estimations, where in it has no relevance to the actual figures related to the bank account and hence the paper has to be read in totality, and since it is not matching with any of the figures, is a dumb document on which no reliance should be placed by the AO. 7.3 To sum up the figures as mentioned in the said loose sheet of paper and the AO's and appellants contention, the same have been tabulated as under: Amount in Loose Sheet AO's Contention Appellants contention 12,47,19,850 from HMA Investment by HMA in said plant for the month of March 2022 Amount recd. from HMA for March 2022 is Rs.6,80,00,000/- 3,62,63,899 from Bank Loan Disbursement from bank loan for the month of March 2022 Yes bank disbursement for month of March 22 is Rs.5,80,48,427/- 129,15,55,494 from HMA Total investment by HMA Investment by HMA upto Printed from counselvise.com 6 ITA No.299/Agr/2025 upto 31.3.222 31-3-22 as per their ledger is Rs. 44,03,81,860/- 59,73,27,808 from Loan Total Loan amount taken from Yes bank upto 31.3.2022 Loan outstanding as per Yes Bank statement as on 31.3.22 is Rs.61,91,02,337/- From the above tabulated sheet in respect of the amount mentioned in the loose sheet of paper, it is clearly discernible that the amounts don't tally with the Ledger balances shown by HMA Agro nor of the independent 3rd party bank, namely Yes Bank, which conclusively proves that the figures mentioned in the paper are not actual authentic figures. Since these are not the actual 1 authentic figures, hence reliance of the AO on the said piece of paper is completely unwarranted and uncalled for. 7.4 The AO has not been able to bring on record any cogent material or collaborative evidence to establish a case that the figures mentioned on the piece of paper are related to and explain expenditure in construction of the plant for which the addition has been made in the assessment order by the AO in the search proceedings. For the sake of making the assessment it has been time and again reiterated that the said assessment should be based on documents and evidence found during the search proceedings and should be based on cogent material and collaborative evidences. The CSOT has issued instructions in relation to assessment for search and seizure cases vide F. No. 286/161/2006-IT (Inv. II) dated 22-12-2006, wherein at para 2.4 it is stated as follows: \"2.4 The attempt at this stage should be on marshalling of the facts and putting them in chronological sequence with the primary focus on establishing the preponderance of probability. The Assessing Officer should make diligent efforts to detect the modus operandi and the manner in which the undisclosed income was generated by the assessee. In case it is found that the seized papers, corroborating the fact of generation of undisclosed income, pertain to the period immediately preceding the search action, then logical conclusion of such activity being carried out by an assessee in the balance period of time, for which no documentary evidence is available, should be reached through investigation and not on presumption or muitiplicetion formula. For this purpose, independent enquiries from banks, other financial institutions, independent parties, Govt. Departments etc. should also be carried out simultaneously.\" As per the Boards above referred instruction, it is clear that the AO while framing the assessment should do so by thorough investigation and not on presumptions or applying multiplication formula. 7.5 The AO without appreciating that it is just a simple rough piece of paper having no signatures of any person and also no date, and thus it cannot be called a document in the very first place, and at the most it is' a dumb document from which no adverse inference can be drawn unless it is proved with the help of other supporting evidences. This is an instance where such document is unambiguously non- speaking so far as that such documents cannot not be deciphered with Printed from counselvise.com 7 ITA No.299/Agr/2025 certainty and definitely the following situations are evident from the above referred loose paper:- i. this loose paper does not contain any transaction subjected to tax and consequently liable to bear the tax liability. ii. even if presumed, for the sake of presuming only, that it indicates any tax liability, it does not indicate as to in whose hands this liability is to be ascertained. iii. It does not indicate the year of taxability of such income. It is obvious that a charge of tax can be levied based on such a document only if such document is a speaking one in itself or becomes a speaking one if read in conjunction to some other corroborative evidence found during the course of search proceedings. However, the AO has not indicated as to what clinching corroborative evidence is in the possession of the department to saddle the appellant with the charge of tax, in respect of the same. 7.6 It is the trite law that a nonspeaking document without any corroborative material, evidence on record and finding that such document has materialized into transactions giving rise to income of the assessee which had not been disclosed in regular books of account by such assessee, has to be disregarded for the purposes of assessments to be framed pursuant to search and seizure action. Evidently, from the search and seizure perspective also, such non-speaking seized documents are referred to as \"Dumb Documents\". 7.7 During the course of the appellate proceedings, it has been stated that on this issue for AY 2022-23, the AO has not drawn any adverse inference or has done in addition in the hands of M/s. HMA Agro Industries Limited who were also subjected to the search proceedings and their assessments were framed by the same AO, as the contention of the AO has been that the investment has been made by HMA Agro in cash. 7.8 The appellant has taken an alternative plea, that since the appellants business was not commenced during the year under consideration, hence the same cannot be treated as appellant income which has been utilized for making cash expenditure in construction of the said plant at Mewat. The plant started its commercial production in December 2022 and the APEDA certificate is from 10.02.2023, which proves that no busienss activity was done during the year, hence no business revenue was earned by the appellant company. Reliance has been placed on the case laws : - Hon’ble Supreme Court in the case of CIT vs. Bharat Engineering & Construction Company 83 ITR 187 - Hon’ble Allahabad High Court in the case of CIT vs. Lal Mohar & Others (2018) 252 Taxman 401 (All). Printed from counselvise.com 8 ITA No.299/Agr/2025 - Hon’ble Agra ITAT in case of DCIT vs. M/s. Surajmal Cold Storage Pvt. Ltd. in ITA No.345/Agr/2009 - In Sugandhi Cold Storeage (P) Ltd. vs. Dept of Income Tax in ITA No.368/Agra/ 2010 dated 20.04.2012 - Same view was also endorsed in b) ITAT Agra in Shastri Construction Co., vs Department Of Income Tax on 27 April,2012 c) Mitesh Rolling Mills P. Ltd. vIs CIT 258 IT R 27 8 Guj d) ITANo.134/Hyd/2011 ITO VIs MIs. Divya Fuels, Mahaboob nagar, e) Luck ITAT in 7 SOT 457 Surender. Prasad. Mishra f) Del ITAT in Sai Saba Rupadas ITA 1543/98 g) Del ITAT in Ghaziabad Footwear 142 Taxman 8 Magazine h) All ITAT in 14 SOT 190 Smt Meera Devi 7.9 During the course of the appellate proceedings, the appellant has submitted some case laws to buttress his case, that where the appellant has been able to make a case that on the basis of a non-speaking loose paper, termed as dumb document no addition can be made, as there are no corroborative evidence to place authenticity of the said loose sheet of paper so produced. These case laws are as follows: - Hon'ble Supreme Court in the case of K.P. Varghese v. ITO [1981] 24 CTR (SC) 358/[1981] 131 ITR 597 (SC) - Hon'ble High Court of Delhi in case of Commissioner of Income-tax, Delhi (Central)-II v. D.K. Gupta [2008] 174 TAXMAN 476 (DELHI) - Hon'ble Delhi ITAT in case of Ashwini Kumar v. ITO 39 ITD 183 (Delhi) - The Mumbai ITAT in case of S.P. Goyal v. Dy. CIT [2002J 82 ITD 85 (Mum.) (TM) - Hyderabad bench of ITAT in case of Nagarjuna Construction Co. Ltd. vs. DCIT (2012) 23 taxmann.com 239 - Hon’ble M.P. High Court in case of CIT vs. C.L. Khatri (2005) 147 Taxman 652 - In case of T. Mudduveerappa Sons (1993) 45 ITD 12 (Bang.) - DCIT vs. Krorilal Aggarwal (1994) 50 TTJ (Jab.) 393 - M.V. Mathew vs. ITO (1993) 46 TTJ 353 (Coch.) - ITO vs. W.D. Estate (P.) Ltd. (1993) 46 TTJ (Bom.) 143 - Delhi ITAT in case of Shri Neeraj Goel vs. ACIT in ITA No.5951/.Del/2017 vide order dated 21.03.2018 - Mumabi ITAT in the case of ITO vs. Kranti Impex Pvt. Ltd. in ITA No.1229/Mum/2013 vide order dated 28.02.2018 - Mumbai ITAT in case of ACIT vs. Layer Exports P. Ltd. [2017) 184 TTJ 469 (MUM) - In case of PCIT V. Umesh Ishrani [2019} 108 taxmann.com 437 (Bombay) Printed from counselvise.com 9 ITA No.299/Agr/2025 The aforementioned legal position also gathers support from the judgement of the Hon'ble Supreme Court in case of CBI v. V.C. Shukla 1998 taxmann.com 2155 (SC) popularly known as Jain Hawala Case wherein it was held that any presumption of transaction on some vague, tenuous and dubious entries in a sheet of paper is not rational and hence legal unless there is corroboration by corresponding entry in regular accounts of both the parties to the transaction. The above view further gathers reinforcement from the judgement of the Hon'ble Supreme Court in case of Common Cause v. UOI, [2017] 77 taxmann.com 245 popularly known Sahara dairies and Aditya Birla diaries case. In this case, the Hon'ble Supreme Court, following the judgment rendered in case of V.C. Shukla (supra), laid down the following principles:- (i) Entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act. It is only where the entries are in the books of account regularly kept. depending on the nature of occupation, that those are admissible; (ii) As to the value of entries in the books of account. such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. Even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability; (iii) The meaning of account book would be spiral note book/pad but not loose sheets; (iv) Entries in books of account are not by themselves sufficient to charge any person with liability. the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another; (v) Even if books of account are regularly kept in the ordinary course of business. the entries therein shall not alone be sufficient evidence to charge any person with liability. It is not enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts; (vi) 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 it is not admissible in evidence. It is pertinent to mention that the aforementioned judgments of the apex court have been rendered not in direct context and interpretation of the Income Tax Printed from counselvise.com 10 ITA No.299/Agr/2025 Act 1961 but still holds good for fastening the liability under the Income Tax Act also as far as the dumb documents are concerned. Relying on the judgment of the apex court in case of Common Cause v. UOI(supra), the Hon'ble Bench of ITAT, Ahmedabad in case of Nishant Construction Pvt. Ltd. V ACIT in ITA No. 1502lAHD12015, held that in the absence of any corroborative evidence, loose sheet can at the most be termed as \"dumb document\" which did not contain full details about the dates, and its contents were not corroborated by any material and could not relied upon and made the basis of addition. Reliance can be also placed on the judgment of the Panaji Bench of ITAT in case of Abhay Kumar Bharamgouda Patil V ACIT [2018} 96 taxmann.com 377 (Panaji - Trib.) wherein the judgement of the apex court was relied upon. 7.10 The appellant has submitted that in view of the settled law, based on the predominant judicial view, it would be arbitrary to sustain the addition to the income of the appellant based on the above referred dumb document, containing scribbling, rough/vague notings in the absence of any corroborative material, evidence on record and finding that such dumb documents had materialized into transactions giving rise to income of the assessee which had not been disclosed in regular books of account by the assessee. 7.11 In view of the above discussion and findings, it is evident that the AO has made the addition solely on the basis of loose paper, which is undated and unsigned and it does not mention as to whom this loose paper belongs to and the purpose of the loose paper. The appellant has been able to substantiate with cogent 3rd party evidence that the figures mentioned in the said loose paper are not tallying with the figures of 3rd party namely Yes Bank, which is independent of the appellant. When the figures in the loose paper are not tallying with the loan disbursements and the appellants contention that it is rough working I jottings for estimate purpose, having no evidentiary value, since they are not corroborated with the facts and figures, it seems to be a genuine concern and once the figures on the loose paper are not corroborated with those of the appellant and as has been held in a number of cases, the same is termed as a dumb document having no evidentiary value. Therefore the AO's action of making addition of undisclosed investment based on such a dumb document, is devoid of merits and thus the addition done should be deleted. The appellant has not been able to earn any business revenue prior to setting up of the plant at Mewat, Haryana, so that he could have been in a position to make any unexplained expenditure in the same, hence the source of the alleged expenditure is also not known to the AO nor has been brought on record. It is even not mentioned as to what component of investment has been done in construction of building, setting up of plant and machinery, and other items of fixed assets in the said loose paper. The valuation of the said plant has not been got done from the valuation officer to establish that the amount depicted in the loose sheet could have been the investment in the plant at Mewat. Considering the averments of the appellant, I deem it proper to direct the AO to delete the said addition and thus the grounds 3 to 8 of the appellant are adjudicated in their favour and are allowed.” Printed from counselvise.com 11 ITA No.299/Agr/2025 5. Aggrieved with the above order, Revenue is in appeal before us. 6. At the time of hearing, ld. DR of the Revenue submitted that the certain documents were found during the search, based on the same papers the assessee incurred expenditure for construction of plant at Mewat, Haryana, based on the same documents, the assessee had surrendered Rs. 41.40 crores and admitted taking the unexplained expenditure in the above construction of plant. Therefore, the findings of AO are corroborated with the evidence found during the search. He submitted that the CIT(A) has deleted the addition without appreciating the facts on record and overlooked the thorough examination and analysis of the seized material. Therefore, he prayed that the addition may be sustained based on the detailed findings of AO. 7. At the time of hearing, ld. AR of the assessee submitted as under:- This is an appeal filed by department against the order passed by Ld. CIT(A) on 28.03.2025, wherein addition of Rs. 43,71,37,934/- as made by the Ld. AO u/s 69C of the Act on account of unexplained expenditure has been deleted. In this regard our submission may please be considered as under:-. i. A search and seized operation u/s 132(1) of the Act were carried out on 05.11.2022 at residential and business premises of ‘HMA Group of Agra’. Printed from counselvise.com 12 ITA No.299/Agr/2025 ii. During the course of search, certain loose papers were found, which were alleged as related to establishment of new plant at United Farm Product Pvt. Ltd. at Mewat. iii. Later on, during the course of assessment proceedings, on the basis of these so called loose papers, the Ld. AO issued SCN, that expenditure to the tune of Rs. 129,15,55,494/- was made up to 31.03.2022 out of which amount of Rs. 39,22,83,3,07/- was received from banking channel and balance expenditure of Rs. 89,92,72,187/- has been spent in cash being unexplained expenditure. iv. Thereafter, allowing benefit of funds of Rs 85,44,17,560/- (Balance of 44,03,81,860 in the audited Balance Sheet of HMA + 41,40,35,700 surrendered by HMA on account of construction in Mewat) as received from its holding company namely HMA Agro Industries Limited, balance investment of Rs. 43,71,37,934/- has been added as unexplained expenditure of the assessee u/s 69C of the Act. A summary of order passed by the Ld. AO is as under:- Relevant page and para number of the order passed by the Ld. AO Particulars Para 7.1, page 1 to 9 of assessment order Summary of so called incriminating material along with their sample exhibits Para 7.1, page 9 to 12 of assessment order Reply filed by assessee in response to SCN dated 31.03.2023 Para 7.1, page 12 of assessment order Finding of the Ld. AO Printed from counselvise.com 13 ITA No.299/Agr/2025 v. The main thrust of the Ld. AO for making addition in the case of the assessee was loose slips found from the searched premises of HMA Agro which were unsigned, undated, without any description of the unit to which such loose slips are related to and most of the slips were related to the next financial year. On the basis of these loose slips i.e. dumb documents only, the AO made the addition of Rs. 43,71,37,934 vi. Thereafter, an appeal was made by the assessee before the Ld. CIT(A), the entire addition of Rs. 43,71,37,934/- was deleted by him and a summary of the order passed by the Ld. CIT(A) is as under: Relevant page and para number of the order passed by the Ld. CIT(A) Particulars Para 2, Page 2 Statement of facts filed by the assessee Para 3, Page 2 Grounds of appeal of the assessee Para 5, Page 3 Brief facts of the case Para 6.1-6.5, Page 4-5 Summary of issues appealed by the assessee Para 6.6, Page 6-21 Reproduction of submissions filed by the assessee before the CIT(A) Para 7, Page 21-37 Findings of the Ld. CIT(A) vii. A gist of the findings given by the Ld. CIT(A) are as under:  Para 7.1 page 21-22: Excel sheet reproduced in the assessment order which is related to Mr. Wajid Ahmed in which certain expenditure have been mentioned, it is related to some Vibhav Nagar Plot, Delhi Kitchen etc. and does are not relate to the investment of appellate company at its new Plant at Mewat. (as per page 3 of the assessment order)  Para 7.1 page 21-22: Out of payment slip reproduced in the assessment order, all payments are related to F.Y. 2022-23 i.e. not related to the year under consideration. (as per page 4-5 of the assessment order) Printed from counselvise.com 14 ITA No.299/Agr/2025  Para 7.1 page 21:In third excel sheet reproduced in the assessment order at Page 6, entity name is clearly mentioned as ‘HMA Agro’ for F.Y. 2021-22 and 2022-23 and moreover, the loose slips which are related to the assessee pertain to A.Y. 2023-24 as per Page 4-5 of the assessment order.  Para 7.1 page 23: Since the chat with Miswa, Bhulu Unnao are either not clearly linked to the appellate company or are not related to the year under consideration, hence, are of no evidentiary value, and cannot be said to be evidence in the eyes of law.  Para 7.1 page 23: The appellate company is in the initial stages of setting of plant and since, no business revenue earned by the appellate company before start of any of its business activities, hence the amount would not have been spent by the appellate company.  Para 7.2, 7.3 page 24 to 25: It is evident that in the said loose paper none of the figures are matching, even with the figures of the independent party namely YES Bank who have sectioned the term loan to the company for the construction of the said plant, nor even the ledger balances of HMA is matching, therefore, it is dumb documents and reliance placed by the AO on the said piece of paper is completely unwarranted.  Para 7.2, page 24: This paper is undated, unsigned, by whom it has been prepared and the purpose of this paper is not mentioned or brought on record by the AO.  Para 7.4, page 25: The AO has not been able to bring on record any cogent material or collaborative evidence to correlate the figure mentioned in the so called piece of paper.  Para 7.5, page 26: Is just a sample rough piece of paper having no signatures of any person and also no date, and thus it cannot be called a document in the very first place, and at the most it is a dumb document Printed from counselvise.com 15 ITA No.299/Agr/2025 from which no adverse inference can be drawn unless it is proved with the help of other supporting evidences.  Para 7.6, page 27:No speaking seized document are referred to as dump documents.  Para 7.7, page 27: On the same issue, for the same assessment year, no adverse inference has been drawn by the Ld. AO in the hands of M/s HMA Agro Industries Limited whose assessment was framed by the same Ld. AO despite the contention of the AO that the investment made by HMA Agro in cash.  Para 7.8, page 27: The plant started in commercial production in December, 2022 and the APEDA certificate is from 10.02.2023 which proves that no activities were carried on during the year and no business revenue was generated by the appellate company and therefore, it is not in position to make any unexplained expenditure.  Para 7.10, page 35: In the absence of any corroborating material it would be arbitrary to sustain the addition in the hands of the assessee merely on the basis of dumb documents.  Para 7.11, page 36 : It is not even mentioned by the AO as to what component of investment has been done in construction of building, setting up of plant and machinery and other items of fixed assets in the said loose paper.  Para 7.11, page 36:The valuation of the said plant has not been got done from the Valuation Officer to established that the amount depicted in the loose sheet could have been the investment in the plant at Mewat. viii. From a perusal of the findings of the Ld. CIT(A), your goodself would notice the following: Printed from counselvise.com 16 ITA No.299/Agr/2025  The loose slips were either not related to the assessee or pertains to any other year.  There is no identification on these slips of the unit to which these pertains to.  The Ld. AO has not been able to produce any cogent material to prove the connection of assessee with these so called loose slips and even the figures mentioned by the Ld. AO were not matching with the bank statements and books of HMA Agro.  The assessee has not yet started its business operations and therefore, there is no revenue and accordingly the question of incurring any unaccounted/unexplained expenditure is not possible. Reliance in this regard is placed on the following judgments: M/S KHANNA INFRABUILD PVT. LTD. vs. DCIT in ITA No. 133, 134 & 135/Chandi/2023 “Even otherwise, since the assessee company’s business has not commenced and that the construction of the building was done out of the capital invested by the shareholders and hence, there was no case of earning of any income, what to say of any income from undisclosed sources, therefore, the substantive addition in the hands of the assessee company was not justified. The issue is squarely covered by the various decisions including the decision of the Hon’ble Apex Court in the case of “CIT vs. Bharat Engineering & Construction Co.” (supra) as referred to above by the ld. Counsel for the assessee in the written submissions. The action of the CIT(A) in reversing the view point of the Assessing Officer on this issue, therefore, cannot be held to be justified. In view of this, the additions made in the case of the assessee cannot be held to be justified and the same are accordingly ordered to be deleted.” M/S KUNDLES LOH UDYOG vs. ITO in ITA No. 133/CHD/2010 vide order dated 12.10.2015 Printed from counselvise.com 17 ITA No.299/Agr/2025 “The Tribunal came to the conclusion that cash credit entries totalling to Rs. 2,50,000/- brought to tax by ITO on the ground that they represent the income of the assessee from undisclosed sources, was not correct. It came to the conclusion that though the explanation given by the assessee in respect of those cash credit entries, is not true, yet from the proved circumstances, these cash credits could not be income of the assessee. The matter, ultimately reached to the Hon'ble Supreme Court. The Hon'ble Supreme Court noted the facts of the case that assessee company is an engineering construction company which commenced business in May, 1943. In their books of account, there are several cash credits in the first year of its business. The Hon'ble Court was concerned with only 5 of those cash credit entries. On 01.06.1943, there is a cash credit entry of Rs.1 lac. On July 6, 1943 there is a cash credit entry of Rs. 50,000/-. On 30.08.1943, there is a cash credit entry of Rs. 50,000/-. On 02.12.1943, there is a cash credit entry of Rs. 15,000/- and on 15.03.1944, there is a cash credit entry of Rs. 35,000/-. These cash credit entries totaling upto Rs. 2,50,000/-. The Tribunal felt that these cash credit entries could not represent the income or profit of the assessee company as they were all made very soon after the company commenced its 10 activities. The Hon'ble Supreme Court in the background of these facts, held as under: The assessee, an engineering-construction company, commenced its business In May, 1943. In its accounts there were several cash credit entries in the first year of its business totalling Rs. 2,50,000. Though the explanation regarding the cash credit entries was found to be false, the Appellate Tribunal held that these cash credits could not represent the income or profits of the assessee as they were all made very soon after the company commenced its activities: Held, that the inference drawn from the facts proved was a question of fact and the Tribunal’s finding on that question was final. A construction company took time to earn profits and it could not have earned a huge profit within a few days after the commencement of its business. Hence, it was reasonable to Printed from counselvise.com 18 ITA No.299/Agr/2025 assume that the cash credit entries represented capital receipts though for one reason or another the assessee had not come out with the true story as regards the source of the receipts.” CIT vs. BURMA ELECTRO CORPN. As reported in [2003] 126 TAXMAN 533 (P & H HC) “Section 68, read with section 260A, of the Income-tax Act, 1961 - Cash credits - Assessment year 1989-90 - Assessing Officer made additions to returned income of assessee-firm on account of unexplained cash credits in capital accounts of some partners - Tribunal deleted additions on ground that though there was no evidence on record to show availability of funds with partners at time of investment with assessee-firm, concerned partners admitted to have made those investments and revenue also failed to bring on record any material to indicate that those investments were profits of assessee-firm - Tribunal held that it could not be assessed as income of assessee in terms of section 68 but might be assessed in individual hands of partners, if it is permissible under section 69 - Whether reasons assigned by Tribunal for deleting additions were directly referable to provisions of section 68 and there was no cogent reason to interfere with same merely because on a reappraisal of entire matter, it might have been possible to form a different opinion - Held, yes.” 8. Considered the rival submissions and material placed on record. We observed that the assessee is incorporated on 21.05.2018, in order to manufacture meat and meat products. A search and seizure action u/s 132 was carried out at the residence and business premises of HMA Group of Agra. Certain documents in the form of loose papers were found relating to expenditures in respect of new plant at Mewat. Based on the WhatsApp chats and loose papers found, Printed from counselvise.com 19 ITA No.299/Agr/2025 the AO had observed that this is incriminating material and proceeded to make the addition. It is fact on record that none of the loose papers were signed, dated and without their being any description. 9. The assessee company was establishing a plant at Mewat, relating to this plant certain information was unearthed during search proceedings, which includes the loose sheets, WhatsApp messages containing details of payments relating to the above project. The entity name of the transaction was invariably mentioned as HMA Group, which is for two financial years namely 2021-22 and 2022-23. These payments were made to Surya Construction. We observed that AO had quantified the payments of Rs.2,17,48,976/- pertaining to AY 2022-23, which is relating to 3 entries of the loose sheet. We noticed that first and third entries relate to HMA Agro and the second entry relates to payment of Rs. 1.50 crores relate to both HMA Agro and assessee. Since the AO observed that the loose sheet contains the details of expenditure till 31st March 2022 is Rs. 129,15,55,307, accordingly, he inferred that an amount of Rs. 39,22,83,307/- was received through banking channel, the difference would be incurred in cash to the extent of Rs. 89,92,72,187/-. The AO had not clearly brought on record who had incurred the above-mentioned expenditure, since the assessee had not commenced the commercial production and there was no revenue earned by the assessee. There is no possibility that the assessee would have incurred the Printed from counselvise.com 20 ITA No.299/Agr/2025 above-mentioned expenditure. It is fact on record that the loan was sanctioned by Yes Bank and it is brought to the notice of Ld CIT(A) that outstanding loan balance as on 31.03.2022 is Rs. 61,91,02,337/-. Further, the above figures do not match with the loose paper found. It is also fact that the information found in the loose sheet did not match the information available with the assessee. Since the paper found does not have any signature and is undated, for what purpose the same was prepared also not clear. Ld CIT(A) had listed the chart comparing the figures mentioned in the loose sheet, contention of the AO and assessee’s contention as under: Amount in Loose Sheet AO's Contention Appellants contention 12,47,19,850 from HMA Investment by HMA in said plant for the month of March 2022 Amount recd. from HMA for March 2022 is Rs.6,80,00,000/- 3,62,63,899 from Bank Loan Disbursement from bank loan for the month of March 2022 Yes bank disbursement for month of March 22 is Rs.5,80,48,427/- 129,15,55,494 from HMA Total investment by HMA upto 31.3.222 Investment by HMA upto 31-3- 22 as per their ledger is Rs. 44,03,81,860/- 59,73,27,808 from Loan Total Loan amount taken from Yes bank upto 31.3.2022 Loan outstanding as per Yes Bank statement as on 31.3.22 is Rs.61,91,02,337/- 10. Based on the above comparison, Ld CIT(A) observed that none of the figure’s tally with the ledger shown by HMA Agro nor the balance in the bank statement of Axis Bank. Since the figures are not authentic or matches with the actuals, reliance on the above loose sheet and its information by the AO is uncalled for. AO had not brought on record any cogent material or collaborative evidence to establish a case which matches with the information contained in the loose sheet. Further Ld CIT(A) by relying on the instructions Printed from counselvise.com 21 ITA No.299/Agr/2025 from CBDT, as per which the AO should make diligent efforts to detect the modus operandi and the manner in which the undisclosed income was generated by the assessee. There is no room for presumption or multiplication formula. With the above observations, he came to the conclusion that the paper found is dumb. 11. Further it is brought to our notice that the same AO had completed the assessment of HMA Agro and AO had not drawn any adverse inference or proposed any addition in their hands. Further, it is brought to our notice that the assessee has not generated any revenue, there is no possibility for it to incur such expenditures. We also observed that the AO is not sure of the expenditure incurred by which party or how much the investment was made in this project, particularly none of the figures found in the loose sheet are matching with any of the parties involved in this transaction, he could have at least referred to the valuation, since it was not done, the figures mentioned in the loose sheet cannot be validated. We observed that in the case of Khanna Infrabuild Pvt Ltd (supra), it was held that since the assessee company’s business has not commenced and that the construction of the building was done out of the capital invested by the shareholders and hence, there was no case of earning of any income, what to say of any income from undisclosed sources, therefore, the substantive addition in the hands of the assessee company was not justified. Similarly, in the case of Burma Electro Printed from counselvise.com 22 ITA No.299/Agr/2025 Corporation case, Hon’ble Punjab and Haryana High Court held that Assessing Officer made additions to returned income of assessee-firm on account of unexplained cash credits in capital accounts of some partners - Tribunal deleted additions on ground that though there was no evidence on record to show availability of funds with partners at time of investment with assessee-firm, concerned partners admitted to have made those investments and revenue also failed to bring on record any material to indicate that those investments were profits of assessee-firm - Tribunal held that it could not be assessed as income of assessee in terms of section 68 but might be assessed in individual hands of partners, if it is permissible under section 69. Even in this case, there is no revenue generated by the assessee during the period under consideration, it is not proper to presume that these expenditures are incurred by the assessee. Since the information contained in the loose papers is not corroborated with the assessee, there is absolutely no room for presumption that it is belong to the assessee. With the above observations, we are inclined not to disturb the findings of Ld CIT(A). 12. In the result, appeal preferred by the revenue is dismissed. Order pronounced in the open court on this 4th day of December, 2025 sd/- sd/- (SUNIL KUMAR SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 04.12.2025 TS Printed from counselvise.com 23 ITA No.299/Agr/2025 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "