The DCIT, ,Cenral-1, Bhopal V. M/s Vidya Niketan Samiti, Bhopal

ITSSA 186/Ind/2020

AI Insights

The case involves the Income Tax Department's appeals against the order of the Commissioner of Income-tax (Appeals) which had granted relief to M/s. Vidya Niketan Samiti, Bhopal, for the assessment years 2008-09 and 2009-10. The primary issues revolved around the additions made by the AO on account of unexplained investments and the denial of exemption under section 11 of the Income-tax Act, 1961. The Tribunal examined whether the AO was justified in making these additions and whether the assessee was entitled to the exemption claimed. The Tribunal's decision was influenced by the lack of rejection of the books of accounts and the absence of incriminating evidence, leading to the dismissal of the revenue's appeals and the acceptance of the assessee's cross-objections.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136024 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-11-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 30-12-2020
• Other Referred Cases: National Thermal Power Company Ltd. Vs. CIT, National Newsprints Vs. CIT, Sargam Cinema Vs. CIT, Goodluck Automobile Pvt. Ltd, PCIT Vs. Gahoi Dal & Oil Mills, MeetaGutgutia, Prop. Ferns \'N\' Patels and Ors., Signature Builders
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Unexplained investment; Unexplained expenditure; Loose papers; Document seized; Opportunity of cross examination; Question of law; Valuation report; Documents seized; Set aside
• Section: 69; 132; 11; 143(3); 142(1); 133A; 153A; 12A; 205; 69B; 250; 64; 43; 73; 13; 153; 119; 22

Judgement Text

आयकरअपीलीयअिधकरण,इंदौर ायपीठ,इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No.185 &186/Ind/2020 Assessment Year: 2008-09 & 2009-10 DCIT(Central)-1 Bhopal बनाम/ Vs. M/s. Vidya Niketan Samiti, Bhopal (Appellant / Revenue) (Respondent / Assessee) PAN: AAAAV 1381 L CO No.26& 31/Ind/2021 (Arising out of IT(SS)A No.185 & 186/Ind/2020) Assessment Year: 2008-09& 2009-10 M/s. Vidya Niketan Samiti, Bhopal बनाम/ Vs. DCIT(Central)-1 Bhopal (Cross-objector / Assessee) (Respondent / Revenue) PAN: AAAAV 1381 L Assesseeby Shri S.S. Deshpandey, AR Revenue by Shri P.K. Mishra, CIT-DR Date of Hearing 17.11.2022 Date of Pronouncement 09.02.2023 आदेश/O R D E R Per B.M. Biyani, AM: Feeling aggrieved by a consolidated appeal-order dated 29.10.2020 passed by Ld. Commissioner of Income-tax-3, Bhopal [“Ld. CIT(A)”], which in turn arises out of a consolidated assessment-order dated 27.03.2015 passed by Ld. DCIT, Central-1, Bhopal [“Ld. AO”], the revenue has filed the captioned Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 2 of 32 appeals and the assessee has filed captioned cross-objections to the extent concerning the assessment-year [“AY”] 2008-09 and 2009-10,. 2. These appeals and cross-objections arise out of common appeal- order/assessment-order and some of the issues are identical; therefore they were heard together and are being disposed of by this common-order for the sake of brevity. 3. The grounds raised by parties are as under: IT(SS)A No. 185/Ind/2020 – Revenue’s appeal for AY 2008-09: “(1) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,89,52,017/-made by the AO on account of unexplained investment. (2) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in granting the benefit of exemption under section 11 of the Income-tax Act, 1961 to the assessee.” IT(SS)A No. 186/Ind/2020 – Revenue’s appeal for AY 2009-10: “(1) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 98,52,368/- made by the AO on account of unexplained investment. (2) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 82,50,000/- made by the AO on account of unexplained investment. (3) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 19,01,500/- made by the AO on account of unexplained investment. (4) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,00,00,000/- made by the AO on account of unexplained expenditure. (5) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in granting the benefit of exemption under section 11 of the Income-tax Act, 1961 to the assessee.” C.O. No. 26/Ind/2021 – Assessee’s Cross-Objection for AY 2008-09: C.O. No. 31/Ind/2021 – Assessee’s Cross-Objection for AY 2009-10: Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 3 of 32 In both of these Cross-objections, the assesseeinitiallyraised identical ground as under: “(1) The Assessing Officer has not allowed the deduction under section 11 of the Income-tax Act, 1961” Additional grounds: Subsequently, the assessee filed following additional identical grounds with varying figures for AY 2008-09 and 2009-10, vide application dated 31.10.2022 (received in ITAT office vide Inward No. 1136 dated 01.11.2022).The additional grounds for AY 2008-09are as under: (2) The Ld. CIT(A) has erred in maintaining the addition of Rs. 25,21,373/- being the difference in the valuation determined by the Ld. DVO and disclosed by the assessee. (3) Since the books of account were not rejected by the Ld. AO, the reference made by the Ld. AO is bad in law and the additions made on account of the difference of valuation are also bad in law. (4) Since no incriminating material was found, no addition could be made for the difference between the valuation made by the DVO and shown by the assessee. (5) The addition maintained by the Ld. CIT(A) may please be deleted.” 4. At the start of hearing, the Ld. AR representing the assessee submitted that the aforesaid additional grounds taken in Cross-Objections are legal in nature and the related facts are already on record but, however, the assesee could not raise them originally due to mistake; hence they may be allowed in view of National Thermal Power Company Ltd. Vs. CIT 229 ITR 383 (SC) and National Newsprints Vs. CIT 223 ITR 688 (MP). We confronted the Ld. DR who fairly agreed to the submissions of Ld. AR and did not show any objection. Therefore, the additional grounds are admitted and shall be taken up for adjudication. 5. Heard the learned Representatives of both sides at length and case- records perused. 6. Briefly stated the facts are such that the assessee is a society engaged in imparting education and registered u/s 12A of the Income-tax Act, 1961. A search u/s 132 was conducted upon the assessee on 20.03.2016, Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 4 of 32 pursuant to which the assessments for AY 2007-08 to 2012-13 were made u/s 153A/143(3) and for AY 2013-14 was made u/s 143(3) vide a consolidated assessment-order dated 27.03.2015 wherein certain additions/disallowances were made. Being aggrieved, the assessee went in first-appeal and succeeded. Now, aggrieved by the order of first-appellate authority, the revenue/assessee have filed these appeals/cross-objections assailing the orders of Ld. CIT(A) for AY 2008-09 and 2009-10. 7. We would proceed year-wise. Since some of the grounds raised by revenue in appeals and by assessee in cross-objections are identical/inter- related, we would take up those inter-related grounds together for the sake of convenience and smooth adjudication. A.Y. 2008-09: Ground No. 1 of Revenue’s appeal and Ground No. 2 to 5 of Assessee’s C.O.: 8. These grounds relate to the addition of Rs. 1,89,52,017/- made by the AO on account of unexplained investment. 9. Facts apropos to these grounds are such that during assessment- proceeding, the Ld. AO observed that the assessee has made investments in construction of certain colleges. In order to ascertain the exact quantum of investment, the Ld. AO made a reference to Departmental Valuation Officer (DVO) vide letter dated 24.09.2014 u/s 142A whereupon the DVO carried out the exercise of valuation and submitted report dated 04.03.2015. Based on such report, the Ld. AO observed that the valuation shown by DVO was higher than the investment recorded by assessee in its books of account. Accordingly, the Ld. AO confronted the assessee on the difference, in response to which the assessee filed detailed replies on factual as well as legal aspects which are reproduced in Para No. 7.3 and 7.4 of the assessment-order. However, the Ld. AO was not impressed by the Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 5 of 32 submission of assessee and finally treated the difference as undisclosed investment u/s 69 and accordingly made addition of Rs. 2,14,73,390/-. 10. During first-appeal, the assessee again made detailed submissions to Ld. CIT(A) on various factual and legal aspects and claimed that the impugned addition was not sustainable. Finally, the Ld. CIT(A), vide Para No. 4.3.11 of appeal-order, granted a part-relief of Rs. 25,21,373/- giving the benefit of 30% margin on account of difference in CPWD and State PWD rates as well as self-supervision of construction activity and thereby restricted the addition to Rs. 25,21,373/- [Rs. 2,14,73,390 (-) Rs. 1,89,52,017]. Now, the revenue is aggrieved by the relief of Rs. 1,89,52,017/- granted by Ld. CIT(A) and the assessee is aggrieved by the addition of Rs. 25,21,373/- sustained by Ld. CIT(A). 11. Before us, Ld. DR strongly supported the assessment-order and opposed the action of Ld. CIT(A). He submitted that the assessee has constructed huge buildings, not smaller sized buildings and that too commercial buildings, not residential. Ld. DR submitted that self- supervision is not at all possible in such kind of buildings. He submitted that the DVO has correctly worked out valuation after a thorough examination of the facts of assessee and his valuation is rightly accepted by Ld. AO while framing assessment. Thus, Ld. DR argued that the Ld. CIT(A) has wrongly accepted the pleas of assessee and granted relief. Hence the relief granted by Ld. CIT(A) must be reversed. 12. Per contra, the Ld. AR focused his line of arguments on legal objections. His first legal contention is that the Ld. AO made reference u/s 142A dated 24.09.2014 to DVO without rejecting books of accounts of assessee. He submitted that such an action was itself beyond the scheme of section 142A as existing prior to 01.10.2014 and therefore illegal. In this regard, the Ld. AR straightaway carried us to direct decision of Hon’ble Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 6 of 32 Supreme Court in Sargam Cinema Vs. CIT (2010) 328 ITR 513 (SC), wherein it was categorically held thus: “3. In the present case, we find that the Tribunal decided the matter rightly in favour of the Assessee in as much as the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived. 4. For the above reasons, the impugned judgment of the High Court is set aside and the order passed by the Tribunal stands restored to the file. Accordingly, the Assessee succeeds.” Ld. AR also relied upon Goodluck Automobile Pvt. Ltd. 359 ITR 306 (Guj) where it was held that the rejection of books of accounts should precede reference to DVO and, therefore, report of DVO cannot form the foundation for rejection of books of accounts. The Gujarat High Court held that once it was apparent from the records that while making the reference to DVO, the Assessing Officer had not rejected the books of account, then the reference made to DVO was not in consonance with the provisions of law and hence such reference was invalid. With these submissions, Ld. AR argued that since the reference made u/s 142A without rejecting the books of account was invalid. 13. The second line of argument of Ld. AR is such that the impugned addition has been made inan unabated assessment year without having incriminating material, hence the same is not sustainable in view of the decision of Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of PCIT Vs. Gahoi Dal & Oil Mills (2021) 11 ITJ Online 314 (MP), ITA No. 21, 31 & 32 of 2019, order dated 12.07.2019,wherein relying upon the decision of Hon’ble Delhi High Court in CIT Vs. Kabul Chawla (2016) 2 ITJ Online 869 (Trib. – Delhi) : (2016) 380 ITR 573 : (2015) 281 CTR 45 : (2015) 234 Taxman 300, the Hon’ble jurisdictional High Court Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 7 of 32 has dismissed the revenue’s appeal by holding that no addition can be made u/s 153A in a non-abated assessment year in absence of incriminating material found during search. The relevant paras of the decision are reproduced below: “8. Dwelling on the scope of sub-section (1) of Section 153A of the Act, a Division Bench of Delhi High Court in CIT Vs. Kabul Chawla (2016) 2 ITJ Online 869 (Trib. – Delhi) : (2016) 380 ITR 573 : (2015) 281 CTR 45 : (2015) 234 Taxman 300 observed: “37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. In so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 8 of 32 vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.” 9. We are in respectful agreement with the view expressed. 10. In the given facts of present case as no incriminating documents during course of search are found, the order in appeal cannot be said to have suffered the illegality as would give rise to the proposed substantial question of law. 11. Consequently, appeals fail and are dismissed. No costs.” 14. Finally, the Ld. AR also carried us to the decision of ITAT, Indore in IT(SS)A No. 184 to 186/Ind/2018 and others, M/s Signature Builders, order dated 08.01.2021, wherein a case on exactly same facts has been decided in favour of assessee and the departmental appeal was dismissed by holding thus: “48. From perusal of the above detailed finding of Ld. CIT(A) and various case laws referred and relied by the Ld. Counsel for the assessee we are of the considered view that the ratio laid down by the decision referred herein above are squarely applicable to the issue and facts raised before us by the revenue authorities with regard to the addition made for unexplained investment u/s 69B of the Act for the amount incurred for construction of the project and addition made solely on the basis of Departmental Valuation Officer report even though books of accounts of the assessee as well as the book results have not been rejected by the Ld. A.O nor any material evidence was unearthed during the course of search and in the assessment proceedings which could prove that unaccounted investment has been made by the assessee in the residential project Signature Residency. We therefore in the given facts and circumstances of the case, respectfully following judicial pronouncements referred and relied by the Ld. Counsel for the assessee and Ld. CIT(A) and also in the light of the fact that firstly the assessee has maintained regular books of accounts which are not found to be incomplete or unreliable and also have not been rejected by the Ld. A.O and secondly Valuation was done of the incomplete project which has been valued not on the basis of local price but on the basis of Delhi rates which are universally accepted on higher side. Therefore since no defects were pointed out in the books of accounts regularly maintained by the assessee and are duly audited and no incriminating material was found in the search to show that unaccounted investment in the building project has been made, addition made purely on the basis of Departmental Valuation Report, we find no reason to interfere in the Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 9 of 32 finding of Ld. CIT(A) who was rightly deleted the addition for the alleged undisclosed investment u/s 69B of the Act made by the Ld. A.O at Rs.2,73,48,559/-, Rs.5,32,58,155/- and Rs.4,38,32,956/- for Assessment Years 2012-13, 2013-14 and 2014-15 respectively. We accordingly confirm the finding of Ld. CIT(A) on this issue and dismiss Revenue’s common Ground No.1 raised for Assessment Years 2012-13, 2013-14 and 2014-15 in ITA No.174 to 176/Ind/2018.” [Emphasis supplied] 15. With these submissions, Ld. AR argued that the addition made by Ld. AO is not sustainable legally. Hence, the Ld. AR urged to accept dismiss the revenue’s grounds and accept the assessee’s grounds; thus delete the addition fully. 16. We have considered rival submission of both sides and perused the material held on record. Regarding first contention raised by Ld. AR challenging the exercise of power u/s 142A by Ld. AO, we have gone through the legislative history of section 131(1)(d) and 142A of the Income- tax Act, 1961. We find that initially there was no specific provision in Income-tax Act, 1961 to enable the assessing authorities to make a reference to DVO for ascertaining value / cost of investment, etc. However, the Assessing Authorities used to make a referenceu/s 131(1)(d) but such action was held be non-maintainable in Amiya Bala Paul 130 taxmann 511 (SC). Thereafter, the Union Legislature introduced section 142A in Income-tax Act, 1961 by Finance Act, 2004, which again generated a new controversy as to whether the Ld. AO can make a reference to DVO without rejecting books of accounts of assessee or not? The matter travelled upto Hon’ble Supreme Court in Sargam Cinema (supra) wherein, relevant paragraph of decision re-produced earlier, the apex court categorically held that the assessing authority cannot make a reference to DVO without rejecting books of assessee. Thereafter, the Legislature again substituted a new version of section 142A w.e.f. 01.10.2014 whereby sub-section (2) in the section reads as under: Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 10 of 32 “The Assessing Officer may make a reference to the Valuation Officer under sub-section (1) whether or not he is satisfied about the correctness or completeness of the accounts of the assessee” It is also a settled view that the latest version of sub-section (2), as reproduced above, which empowers the assessing authority to make reference to DVO without rejecting books of accounts, is effective from 01.10.2014 and not retrospectively. The effect of this legislative wisdom is such that the Assessing Officer was precluded from referring any matter to the DVO without the books of accounts being rejected by him and it is only after 01.10.2014 that sub-section (2) of section 142A empowers the Assessing Officer to make a reference without rejecting books of account. Now we are in a position to consider the implications in assessee’s case. We observe that the Ld. AO has not rejected books of assessee. We further observe that the Ld. AO made reference to DVO on 24.09.2014 and the DVO submitted report on 04.03.2015. Thus, the event of making reference to DVO had taken place before 01.10.2014 and that too without rejecting books of account. In such a situation, we suffice it to say that the Ld. AO was not justified to make a reference in the light of decision of Hon’ble Supreme Court in Sargam Cinema (supra) and the provision of sub-section (2) of section 142A. 17. Regarding second contention raised by Ld. AR challenging the addition made in an abated year without having incriminating-material in his possession, we observe that the Hon’ble jurisdictional High Court in Gahoi Dal & Oil Mills (supra) has clearly held that in absence of incriminating material, addition cannot be made in an assessment of unabated year u/s 153A. Ld. DR is not able to demonstrate any decision of Hon’ble Supreme Court holding against the decision of Hon’ble jurisdictional High Court. At this stage, we would also like to mention that in their later decision in the case of Pr. CIT and ors. Vs. MeetaGutgutia, Prop. Ferns ‘N’ Patels and Ors. (2017) 395 ITR 526 (Delhi), the Hon’ble Delhi High Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 11 of 32 Court reiterated with approval their observations in Kabul Chawala’s case (supra) that completed assessments could be interfered with by AO while making assessment u/s 153A only on basis of incriminating material unearthed during course of search. If in relation to any assessment year, no incriminating material was found, no addition or disallowance could be made in relation to that assessment year in exercise of powers u/s 153A and earlier assessment should have to be reiterated. This later decision of Hon’ble Delhi High Court has also been affirmed by Hon’ble Supreme Court by dismissing Revenue’s SLP in PCIT vs. MeetaGutgutia (2018) 96 taxmann. Com 468 (SC). That being so, respectfully following the decision of Hon’ble jurisdictional High Court in Gahoi Dal & Oil Mills (supra), we find merit in the submission of Ld. AR that the addition made by Ld. AO without having any kind of incriminating-material is unsustainable. 18. Thus, we find sufficient merit in both of the legal contentions raised by Ld. AR on behalf of assessee. Being so, not only we approve the relief of Rs. 1,89,52,017/- given by Ld. CIT(A) but also delete the addition of Rs. 25,21,373/- confirmed by him. Accordingly, we dismiss ground No. 1 of revenue’s appeal and allow ground No. 2 to 5 of assessee’sCross-Objection. Ground No. 2 of Revenue’s appeal and Ground No. 1 of Assessee’s C.O.: 19. These grounds relate to the exemption u/s 11 of the act. 20. During assessment-proceeding, the Ld. AO made various additions, but did not grant exemption u/s 11 while arriving at the total income. Being aggrieved, the assessee carried matter to Ld. CIT(A). During appellate proceeding, the Ld. CIT(A) accepted assessee’sclaim and directed the Ld. AO to allow exemption u/s 11 by observing and holding thus: “Ground No 9:- Through this ground of appeal, the appellant has taken a plea that the AO has denied benefit of section 11 of the Act and deprecation to the appellant. The appellant has been granted registration u/s 12A of the Act which has not been rebuted by the AO in his remand report and therefore, is Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 12 of 32 entitled for exemption u/s 11 of the Act. The appellant has taken a plea that it has been entitled for exemption u/s 11 which has not been provided by the AO. A remand report was called for on this specific issue and the AO in his remand report remained silent on this very issue which clearly shows that the AO has nothing on record to deny exemption u/s 11 of the Act. In view of the above discussion and remand report of the AO, the AO is directed to allow appropriate exemption u/s 11 of the Act as per prevailing provisions of the Act. Therefore, appeal on this ground is Allowed.” 21. Before us, Ld. DR argued that the assessee was not entitled to exemption u/s 11 as there are additions made by department which shows that the activities of assessee were not genuine. With such short submission, the Ld. DR prayed to uphold the denial of exemption u/s 11 to assessee. 22. Per contra, the Ld. AR submitted that nowhere in the assessment- order, the Ld. AO has made any comment on denial of exemption u/s 11 to the assessee. However, since the Ld. AO had computed the total income of assessee without giving the benefit of exemption u/s 11, the assessee agitated this issue before the Ld. CIT(A) during first-appeal and therefore only the Ld. CIT(A) had occasion to consider this issue. Ld. AR further submitted that neither there is any illegality in the working of society nor any kind of infringement of provisions of section 11 or 13 noted by Ld. AO. As a matter of fact, Ld. AR also submitted that the assessee has fulfilled all conditions as prescribed in Income-tax Act, 1961 for grant of exemption u/s 11, therefore the same must be allowed. During hearing, a liberty was given to Ld. AR to file a written-note, which Ld. AR filed on 18.11.2022. In the written-note also, the Ld. AR has reiterated these submissions. 23. We have considered rival submission of both sides and perused the material held on record. Firstly, we find merit in the submission of Ld. AR that the Ld. AO has not made any comment in the assessment-order for assessee’s ineligibility to exemption. Secondly, on perusal of finding made by Ld. CIT(A) in first-appellate order, we observe that the Ld. CIT(A) has called Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 13 of 32 for a specific remand-report from AO on this issue but the Ld. AO has not made any reporting on this issue, which clearly showed that there was nothing to justify denial of exemption. We also observe weightage in the submission of Ld. AR that there is neither any kind of illegality in the working of society observed by revenue-authorities nor any kind of infringement of section 11 or 13 is available on record. Faced with such situation, we are of the considered view that the assessee was entitled to exemption u/s 11 and the Ld. CIT(A) has rightly directed the Ld. AO to grant the same. Being so, wedismiss ground No. 2 of revenue’s appealbeing devoid of merit and at the same time allow the ground No. 1 of assessee’s Cross- Objection. 24. With this, for AY 2008-09, the Revenue’s appeal is dismissed and Assessee’s Cross-objection is allowed. A.Y. 2009-10: Ground No. 1 of Revenue’s appeal and Ground No. 2 to 5 of Assessee’s C.O.: 25. These grounds relate to the addition of Rs. 98,52,368/- made by AO on account of unexplained investment. 26. Facts apropos to these grounds are identical to ground No. 1 of revenue’s appeal and ground no. 2 to 5 of assessee’s C.O. for AY 2008-09. Hence our conclusion as narrated in foregoing paragraphs while adjudicating those grounds, shall apply mutadis mutandis. Accordingly, we dismiss ground No. 1 of revenue’s appeal and allow ground No. 2 to 5 of assessee’s Cross-Objection. Ground No. 2 of Revenue’s appeal: 27. This ground relates to the addition of Rs. 82,50,000/- made by the AO on account of unexplained investment. Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 14 of 32 28. Facts apropos to this ground are such that during search-proceeding, the authorities seized a document marked as “LPS-A-2/17” which contained a sale-agreement of land executed between Smt. Neetu Sahibani and assessee. This agreement showed the actual consideration of land at Rs. 60,24,000/- as against the consideration of Rs. 75,00,000/- declared in final registry. When the Ld. AO confronted the assessee on this difference, the assessee submitted that the actual consideration paid by assesseeas per registry is Rs. 75,00,000/- which is more than the consideration of Rs. 60,24,000/- revealed by agreement and hence there is nothing adverse against assessee. After such reply, the Ld. AO moved to a different direction and observed that impugned land had been purchased/registered for Rs. 75,00,000/- which was below the “prevailing market price” of land in that area and hence the assessee must have paid on-money @ 110%. The Ld. AO estimated “prevailing market price” at Rs. 1,57,50,000/- and accordingly made an addition of Rs. 82,50,000/- [Rs. 1,57,50,000 (-) 75,00,000] u/s 69B. 29. During first-appeal, the Ld. CIT(A) observed that the addition has been made on pure presumption and conjecture without bringing any material, loose-paper or any evidence whatsoever to establish that the assessee had actually paid the consideration over and above the declared consideration of Rs. 75,00,000/-. Ld. CIT(A) further held that there is no basis even to estimate the “prevailing market price” at Rs. 1,57,50,000/- and this was amereguess-work done by Ld. AO. Based on these findings, the Ld. CIT(A) deleted the entire addition of Rs. 82,50,000/-. 30. Before us, Ld. DR dutifully defended the assessment-order but could not contradict the findings and observations made by Ld. CIT(A). Ld. AR placed a heavy reliance on the order of Ld. CIT(A). 31. We have considered rival submissions of both sides and perused the material held on record. Firstly, we observe that the Ld. AO had no evidence Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 15 of 32 or material to establish the factum of payment of on-money. He has simply framed a view that the assessee must have paid on-money and such view was framed on the basis ofso-called “prevailing market price”. Secondly, we note that the Ld. AO had no basis to estimate the “prevailing market price”. He has simply presumed on-money payment @110% and thereby made a mathematical working of prevailing market price at Rs. 1,57,50,000/-. Thus, we fully agree with the findings made by Ld. CIT(A) that the Ld. AO has made addition on the basis of mere presumption, conjecture and guess- work. Needless to mention that there is no provision in Income-tax Act, 1961 which authorizes the AO to make such hypothetical addition. Being so, we have no hesitation in holding that the Ld. CIT(A) has rightly deleted the addition. We, therefore, dismiss his ground of revenue. Ground No. 3 of Revenue’s appeal: 32. This ground relates to the addition of Rs. 19,01,500/- made by the AO on account of unexplained investment. 33. Facts apropos to this ground are such that during search-proceeding, the authorities seized a document marked as “LPS-A-2/17” which contained a sale-agreement of land executed between Shri Rajeev Chaudhary and assessee. This agreement showed the actual consideration of land at Rs. 3,00,000/- per acre and the area of land was 2.23 acre; accordingly the actual consideration works out to Rs. 6,69,000/-. Ld. AO further found that the assessee declared consideration of Rs. 3,00,000/- in the final registry. The Ld. AO confronted the assessee and ultimately framed a view that the land had been purchased/registered for Rs. 3,00,000/- which was below the “prevailing market price” of land in that area and hence the assessee must have paid on-money. The Ld. AO estimated “prevailing market price” at Rs. 22,01,500/- and accordingly made an addition of Rs. 19,01,500/- (Rs. 22,01,500 (-) Rs. 3,00,000] u/s 69B. Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 16 of 32 34. During first-appeal, the Ld. CIT(A) observed that the addition has been made on pure presumption and conjecture without bringing any material, loose-paper or any evidence whatsoever to establish that the assessee had actually paid the consideration over and above the declared consideration of Rs. 3,00,000/-. Ld. CIT(A) further held that there is no basis even to estimate the “prevailing market price” at Rs. 22,01,500/- and this was a mere guess-work done by Ld. AO. Based on these findings, the Ld. CIT(A) deleted the entire addition of Rs. 19,01,500/-. 35. Before us, Ld. DR dutifully defended the assessment-order. Per contra, the Ld. AR placed a heavy reliance on the order of Ld. CIT(A). 36. We have considered rival submissions of both sides and perused the material held on record. After a careful consideration, we observe that the position of this ground is broadly similar to the ground No. 2 decided in preceding paragraph but there is a substantial difference. In ground No. 2, the actual consideration shown in registry (Rs. 75,00,000/-) was higher than the actual consideration (Rs. 60,24,000/-) revealed by agreement. But in the present ground, the situation is just opposite i.e. the actual consideration shown in registry (Rs. 3,00,000/-) is lesser than the actual consideration (Rs. 6,69,000/-) revealed by agreement. Therefore, the on- money payment to the extent of Rs. 3,39,000/- being the difference of the consideration shown in registry and agreement [Rs. 6,69,000 (-) Rs. 3,00,000] is discernible for which there is no cogent or acceptable explanation from assessee’s side. It is further observed that the lower authorities focused on computing the difference of consideration shown by registry (Rs. 3,00,000/-) and the prevailing market price (Rs. 22,01,500/-) and made/deleted the addition of Rs. 19,01,500/-. Thus, we observe that out of the addition of Rs. 19,01,500/-, the addition to the extent of Rs. 3,39,000/- must be upheld. Being so, we reverse the action of Ld. CIT(A) partially and upheld addition to the extent of Rs. 3,39,000/-. This ground of revenue is, thus, partly allowed. Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 17 of 32 Ground No. 4 of Revenue’s appeal: 37. This ground relates to the addition of Rs. 2,00,00,000/- made by the AO on account of unexplained expenses. 38. Facts apropos to this ground are such that during search-proceeding, the authorities seized one excel sheet named “CFO-MIS”, the relevant extract of which is re-produced by Ld. AO in assessment-order. Thereafter, the Ld. AO made addition of Rs. 2,00,00,000/- in AY 2009-10 by observing and holding thus: “12.1 The heading of the said Excel sheet reads as "Sheet-11 of Excel filed CFO of VNS". The total amount is shown as Rs. 5,80,00,000/-. The excel sheet does not contain the year wise breakup. Therefore, a reasonable estimate of these year wise is as under- A.Y. Payment (In Rs.) 2009-10 2,00,00,000 2010-11 2,00,00,000 2011-12 1,80,00,000 Total 5,80,00,000 12.2 Vide questionnaire u/s 142(1) dated 26/08/2014 the assessee was required to explain and reconcile the above expenditures with its regular books of accounts. The assessee was also requested to show cause why the amount of Rs. 5,80,00,000/- not be treated as unexplained expenditure and added to the income for relevant A. Yrs. The assessee has filed written submission which were placed on record. 12.3 The submission of the assessee has been considered and examined but the same is not acceptable:- A. The assessee has not submitted any material evidence to substantiate his claim. B. As per the sheet it is evident that the assessee has made cash expenditure of Rs. 5,80,00,000/- in AY. AY. 2009-10, 2010-11 and 2011-12. The above cash expenditure has not been entered in the books of accounts of assessee. ] Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 18 of 32 C. This above handwritten note book has been found and seized from the premise of the assessee. Therefore, in view of provisions of section 132(4A) of the Income tax Act, 1961, it is presumed that the transactions recorded in this loose paper pertain to the assessee and the content of these transactions is true. 12.4 Therefore, in view of above facts and circumstances of the case, it is established and held that the above excel sheet records the cash expenditure Rs. 5,80,00,000/- in AY. A. Y. 2009-10, 2010-11 and 2011- 12. These cash expenditure are not recorded in the books of accounts of the assessee. 12.5 In the light of above observations, I am to hold that the source of such expenditure of Rs. 5,80,00,000/- in AY. A.Y. 2009-10, 2010-11 and 2011-12 does not stand explained by the assessee and therefore, deserves to be added as undisclosed income of the assessee. Accordingly sum of Rs. 5,80,00,000/- s hereby added to the total income of the assessee as per below mentioned A.Yrs. A.Y. Payment (in Rs.) 2009-10 2,00,00,000 2010-11 2,00,00,000 2011-12 1,80,00,000 Total 5,80,00,000 39. During first-appeal, the Ld. CIT(A) made an extensive analysis and finally deleted the addition by observing and holding thus: “4.5 Ground No 8(a) to 8(e):- Through this ground of appeal, the appellant has challenged addition of Rs.5,80,00,000/- on account of unexplained expenditure. During the course of search at office premises of the assessee MIS Excel sheets were found and seized. The relevant extract of these excel sheets is also reproduced on page no 34 to 37 of the assessment order. The AO during the course of assessment proceedings observed that no year wise breakup of expenses were given in excel sheet, therefore, it was presumed by the AO that the same belongs to the years AY 2009-10 to 2011-12. Therefore, the AO during the course of assessment proceedings required the assessee to explain the expenditure recorded in excel sheet and reconcile the same with regular books of accounts. The assessee failed to file any written submission before the AO. The AO after considering entire facts made addition to AYS 2009-10 to 2011-12. 4.5.1 The appellant during the course of appellate proceedings has taken a plea that written submission was made before the AO, however, the same was not considered by the AO. Further, statement of Shri Sanjay Pande was recorded oath and no opportunity of cross examination was provided by the Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 19 of 32 AO. The appellant has also contended that the entire addition has been made on presumption basis and on the basis of document. 4.5.2 I have considered the facts of the case, plea raised by the appellant and findings of the AO. The appellantduring the course of appellate proceedings has brought some interesting facts to light which needs to be discussed. The appellant stated that the statement of Shri Sanjay Pande was recorded by the AO on the basis of which a questionnaire was issued to appellant to explain the content of the impunged excel sheet under consideration, however, no reference has been made to any such statement by the AO in the body of assessment order. As culled out from assessment order, the impunged excel sheet was found from premises of the appellant, however, as per AO no year wise/date wise entries were mentioned in the excels sheet, hence it was presumed by the that the pertains to AYS 2009-10 to 2011-12. Therefore, it cannot be said that the impunged expenses represents actual expenditure for AYS 2009-10 to 2011-12. Therefore, the AO has erred in totality in making addition on sheer assumption and guess work. Further, the AO during assessment proceedings has verified books of accounts of the appellant and no adverse comment was pointed out. On plain reading of the contents of the excel sheet it was observed that the AO has made addition on the basis of entry in the name of Shri Sanjay Pandey of 580.00 lakhs as mentioned in bold fonts on page no 34 of the assessment order. However, the addition made by the AO is in three different years and is not in synchronization with contents of the impunged excel sheet. The findings of the AO are based on guess work laced with figment of imagination. No details of beneficiaries, date of payment, details of payment either in cash/cheque/kind, details of payer are completely missing. Most importantly, no independent corroborative evidence was found in possession of appellant having direct nexus with the alleged expenditure. Therefore, in absence of any cogent evidence having direct nexus with the impunged transaction, the said impunged excel sheets cannot be used against the assessee and are to be treated as deaf and dumb documents. 4.5.3 This is settled legal position that any 'dumb document' cannot be used as an evidence to draw an adverse inference against the assessee. Case laws supporting this proposition are as under:- ACIT VS. Satyapal Wassan (2007) 295 ITR (AT) 352 (Jabalpur) Held that "the crux of these decisions is that a document found during the course of search must be a speaking one and without any second interpretation, must reflect all the details about the transactions of the assessee in the relevant assessment year. Any gap in the various components as mentioned in section 4 of the Income Tax Act must be filled up by the Assessing Officer through investigations and correlations with the other. material found either during the course of the search or on the investigation. As a result, we hold that document No.7 is a non-speaking document." Most important ratio laid down in the said judgment is that "impugned document" must be speaking one and without any second interpretation and Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 20 of 32 must reflect all the details about transactions of the assessee. In the instant case, the impunged loose papers are nothing but extract of soe excel sheets. The loose paper does not even bears any detail of beneficiary, details of transction, purpose of transction, details of payer mode of payment etc, however, the AO has presumed that the expenditure have taken place and are not recorded in books of accounts. The impunged excel sheets are undated, unsealed and unsigned. Also, the AO does not have any independent corroborative evidence having nexus that the alleged expenditure. Absence of these vital details is making the impunged excel sheets as "deaf & dumb document". The onus was solely on the AO to fill such vital gaps by bringing positive evidence on record and prove the allegation about alleged unaccounted expenditure by the assessee which he utterly failed to do so. CBI vs VC Shukla 3 SCC 410 The Hon'ble Supreme Court has held that loose sheets of paper cannot be termed as book within the meaning of s. 34 of Evidence Act. It has also been held therein by the Hon'ble Supreme Court that even correct and authentic entries in books of account cannot, without Independent evidence of their trustworthiness, fix a liability upon a person. The Hon'ble Supreme Court also observed that even assuming that the entries in loose sheets are admissible under s. 9 of the Evidence Act to support an inference about correctness of the entries still those entries would not be sufficient without supportive independent evidence. Rakesh Goyal Vs. ACIT (2004) 87 TTJ (Del) 151- The findings of Hon'ble Tribunal was as under- "20.1 After perusing the findings of the CIT(A) and the submissions of both the parties, we do not find any infirmity in these findings. Firstly the finding of the CIT(A) has not been controverted by the learned Departmental Representative by filing any positive evidence. The copies of the pages found from the possession of the assessee are placed in the paper book and after going through these papers, we find that these are simply deaf and dumb documents and they cannot be considered for making any addition. This is a settled principle of law that any document or entry recorded in those documents should be corroborated with positive evidence. Here in the present case nothing has been corroborated or proved that assessee was dealing in money lending business." Mohan Foods Ltd Vs. DCIT (2010) 123 ITD 590 (Del) – Held that- although the contents of the relevant seized documents show that the amounts mentioned therein relate to some expenditure, in the absence of any other evidence found during the course of search or brought on record by the AO to show that the said expenditure was actually incurred by the assessee, the same cannot be added to the undisclosed income of the assessee by invoking the provisions of s. 69C-Assessee explained that the said entries represented Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 21 of 32 estimates made by its employees in respect of proposed expenditure-There is no evidence on record to rebut/controvert the said explanation- Additions not sustainable CIT Vs. S M Agarwal (2007) 293 ITR 43 (Del) - Held that- "In this case the department seized documents "Annexure A-28 p. 15. - gives the details of certain handwritten monetary transactions which shows that the assessee had given a loan of Rs. 22.5 lacs on interest and earned interest income of Rs. 3.55 lacs on it. The Tribunal hold this document as dumb document. The relevant findings of the Tribunal as mentioned in the above order is as under- "We have ourselves examined the contents of the document and are unable to draw any clear and positive conclusion on the basis of figures noted on it. The letters 'H.S. 7.2' and 'D-Shop' cannot be explained and no material has been collected to explain the same. Likewise, the figures too are totally unexplained and on the basis ofnotings and jottings, it cannot be said that these are the transactions carried out by the assessee for advancing money or for taking money. Thus, in our opinion, this is a dumb document." Hon'ble High Court confirmed the findings of the Tribunal and relevant findings was as under "12. It is well settled that the only person competent to give evidence on the truthfulness of the contents of the document is the writer thereof. So, unless and until the contents of the document are proved against a person, the possession of the document or handwriting of that person, on such document by itself cannot prove the contents of the document. These are the findings of fact recorded by both the authorities i.e. CIT(A) and the Tribunal." "15. Similarly, in the present case, as already held above, the documents recovered during the course of search from the assssee are dumb documents and there are concurrent findings of CIT(A) and the Tribunal to this effect. Since the conclusions are essentially factual no substantial question of law arises for consideration". Jayantilal Patel Vs. ACIT &Ors (1998) 233 ITR 588 (Raj) – Held that- "During search at the residence of Dr. Tomar, the Department official found a slip containing some figures. This piece of paper claimed to have been recovered at the time of search contains figures under two columns. In one column, the total of these figures comes to Rs. 17.25,000 from 31st May, 1989, to 8th Dec., 1989, and in the other column, the total of these figures comes to Rs. 22.12.500. An addition of Rs. 22.12.500 on the basis of figures on a small piece of paper in respect of purchase of Plot No. B-4, Govind Marg, Jaipur was Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 22 of 32 made by the AQ. This plot B-4, Govind Marg, Jaipur, has been purchased jointly by Dr. Tomar, Dr. Mrs. Tomar and B.S. Tomar, HUF Held that no addition on account of entries on a piece of paper which is claimed to have been found at the time of search, can be made, treating the figures as Investment for purchase of plot No. B-4, Govind Marg, Jaipur in the hands of Dr. Tomar, Dr. Mrs. Tomar and B.S. Tomar HUF." NK Malhan Vs. DCIT (2004) 91 TTJ (Del) 938 "We have perused the aforesaid explanation and the seized document placed at assessee’s paper book pp. 46 and 50 The document does not state of any date or the year against the entries well therein. It does not show whether the assessee has made or received any payment, it also cannot be deciphered from the sold documents that the entries therein pertain to the block period. The AO also did not bring on record any material to show that any investment has been made by the assesseein any chit fund company or otherwise. The document found and seized might raise strong suspicion, but it could not be held as conclusive evidence without bringing some corroborative material on record. The document contained only the rough calculations and was silent about any Investment. On the basis of such a dumb document it cannot be said that there were investments made in fact by the assessee. Heavy onus lay upon the Revenue to prove that the document gives rise to undisclosed investment by the assessee. This onus has not been discharged. Accordingly no addition of undisclosed income could be made on the basis of such a document. Such a view has also been entertained by the Hon'ble Alahabad High Court in CIT vs Dayachand Jain Vaidya (1975) 98 ITR 280 (All). The addition so made, therefore, is directed to be deleted." Stanamsingh Chhabra vs. Dy. CIT (2002) 74 TTJ (Lucknow) 976: None of the loose papers seized are in the handwriting of the assessee. There is some jotting by pencil in some coded form on the loose papers made by the surveyed person or some other person. Moreover, no entries are supported by any corroborative evidence; such loose paper cannot be called even the documents as they are simply the rough papers to be thrown in the waste paper basket. In this connection, the assessee relies upon the court decisions. CIT Vs. Chandra Chemouse P. Ltd. (2008) 298 ITR 98 (Raj.): it is held that- (i) Additions can be made only when evidence is available as a result ofsearch or a requisition of books of accounts or documents and other material. However additions cannot be made on the basis of inferences. (ii) No facts were available to AO after search and inference of AO did not fail within the scope of Section 15888. (iii) Deletion of additions made by Tribunal of assumed undeclared payments made for purchase of property was on basis of facts. Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 23 of 32 Ashwani Kumar V. ITO (1991) 39 ITD 183 (Del) and Daya Chand V. CIT (2001) 250 ITR 327 (Del) and S.P. Goel V. DCIT (2002) 82 ITD 85 (Mum.) Nine out of 19 slips found were without any name or amount and therefore were dumb documents and no adverse inference could be drawn. Common Cause (A Registered Society) Vs. Union of India - 30 ITJ 197 (SC). In this case, the Hon'ble Court held that without any independent evidence or corroborative material, no addition is permissible on the basis of loose paper jottings ¬ings. The relevant paras of the order are as under :- 16. With respect to the kind of materials which have been placed on record, this Court in V.C. Shukla's case (supra) has dealt with the matter though at the stage of discharge when investigation had been completed but same is relevant for the purpose of decision of this case also. This Court has considered the entries in Jain Hawala diaries, note books and file containing loose sheets of papers not in the form of "Books of Accounts" and has held that such entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and that only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible 17. It has further been laid down in V.C. Shukla (Supra) as to the value of entries in the books of account, that 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. It has been held even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability. 18. This Court has further laid down in V.C. Shukla (Supra) that meaning of account book would be spiral note book/pad but not loose sheets. The following extract being relevant is quoted herein below:- "14. In setting aside the order of the trial court, the High Court accepted thecontention of the respondents that the documents were not admissible in evidenceunder Section 34 with the following words: "An account presupposes the existence of two persons such as a seller and a purchaser, creditor and debtor. Admittedly, the alleged diaries in the present case are not records of the entries arising out of a contract. They do not contain the debits and credits. They can at the most be described as a memorandum kept by a person for his own benefit which will enable him to look into the same whenever the need arises to do so for his future purpose. Admittedly the said diaries were not being maintained on day-to-day basis in the course of business. There is no mention of the dates on which the alleged payments were made. In fact the entries there in are on monthly basis. Even Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 24 of 32 the names of the persons whom the alleged payments were made do not find a mention in full. They have been shown in abbreviated form. Only certain 'letters' have been written against their names which are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to." 19. With respect to evidentiary value of regular account book, this Court has laid down in V.C. Shukla, thus; 37. In Beni v. BisamDayal it was observed that 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 books behind the back of the parties. There must be independent evidence the transaction to which the entries relate and in absence of such en relief can be given to the party who relies upon such entries to support his claim against another In Hira Lal v Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that the entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, 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" 20. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court. 4.5.4 Further, in numerous other case laws courts have consistently upheld the view that no addition could be made in the hands of the assesseeon the basis of the dumb loose papers seized during search, in absence of any corroborative material to show unaccounted expenditure by the appellant. Some of the case laws are as under:- (i) MM Financiers (P) Ltd Vs. DCIT (2007) 107 TTJ (Chennai) 2000 Held that no addition could be mode in the hands of assesseeon the basis of the dumb loose slips seized from his residence, in the absence of any corroborative material to show payment of any undisclosed consideration by the assessee towards purchase of land". (ii) Monga Metals (P) Ltd Vs. ACIT 67 ITJ 247 (All Trib)- Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 25 of 32 Holding that Revenue has to discharge its burden of proof that the figures appearing in the loose papers found from assessee's possession constitute undisclosed income. [In the present case, loose papers were not even seized from assessee's possession). Pooja Bhatt Vs. ACIT (2000) 73 ITD 205 (Mum. Trib) Held that where document seized during search was merely a rough noting and not any evidence found that actual expenditures were not recorded in books of account, additions not justified. In the instant case. similarly no other corroborative evidence was found in search to prove that details/figures mentioned in notings on page 117 to 119 of A/ represent 'on money' payments by the assessee). Atual Kumar Jain Vs. DCIT (2000) 64 TTJ (Del.Trib) 786- Held that additions based on chit of paper, surmises, conjectures etc could not be sustained in the absence of any corroborative evidence supporting it. [Similarly in present case, neither either parties have admitted payment/receipt of 'on money' nor any corroborative evidence was seized to support the findings of the AO. SK Gupta Vs. DCIT (1999) 63 TTJ (Del.Trib) 532 Held that "that additions made on the basis of torn papers and loose sheets cannot be sustained as same do not indicate that any transaction ever took place and does not contain any information in relation to the nature and party to the transaction in question." (vi) Jagdamba Rice Mills Vs. ACIT (2000) 67 TTJ (Chd) 838 Held that "No addition can be made on dump documents". It is settled legal position that onus of proof is on the person who makes any allegation and not on the person who has to defend. As per legal maxim "affairmanti non negantiincumbit probation" means burden of proof lies upon him who affirms and not upon him who denies. Similarly as per doctrine of common law "incumbit probation qui digit non qui negat" i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. Further, it is most important to mention that nowhere in the said impunged excel sheet it has been mentioned that the alleged expenditure was done in AYS 2009-10 to 2011-12. The AO has failed to discharge his onus of proof especially when addition has been made under "deeming fiction". In view of this lacune on the part of AO, impunged addition is legally not sustainable. As held in the case of CIT v/s KP Varghese 131 ITR 574 (SC) by Hon'ble Apex Court in absence of evidence that actually assessee paid more amount than declared in registered deed, no addition can be made. In the case of Bansal Strips (P) Led &Ors Vs. ACTT (2006) 99 ITD 177 (Del) it has been held that: Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 26 of 32 "If an income not admitted by assessee is to be assessed in the hands of the assessee, the burden the such income is chargeable to us is on the AO. In the absence of adequate material as to manure and ownership of the transactions, undisclosed income cor beamed in the hands of assessee merely by arithmetically totally various Porn jotted down on loosed document.” 4.5.5 This is an undisputed fact that neither any incriminating material was found or seized during search proceedings nor any person has ever admitted about these unaccounted expenditure, as per excel sheets, by the appellant company. In absence of any corroborative evidence to prove that there was any expenditure made by the appellant, the AO has no locus to assume that appellant has made expenditure of Rs. 5,80,00,000/-. It is settled law that AO cannot make any addition merely on basis of suspicion, however strong it may be. The AO is not justified in presuming certain facts without having anything to corroborate. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of UmacharanSaha& Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex court in the case of Dhiraj Lal Girdharilal v/s CIT (1954) 26 ITR 736 (SC). 4.5.6 The appellant during the course of appellate proceedings has contended that statement of Shri Sanjay Pande (third party) was recorded, however, no opportunity of cross examination was provided. The AO has solely treated the statement of Shri Sanjay Pande as gospel truth and issued a questionnaire to the assessee to explain the content of the loose paper However, the AO has not mentioned about any such statement in the body of assessment order. Nonetheless, the appellant has contended that the inference drawn by the AO is on the basis of statement of Shri Sanjay Pande which was recorded behind the back of the appellant and no opportunity of cross examination of the concerned third party i.e. Shri Sanjay Pande was provided to the appellant. Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise Kolkata in Civil Appeal No.248 of 2006 has held that in absence of cross-examination of parties, the assessment proceedings to be quashed. Further, the Hon'ble Gujarat High Court in the case of Praful Chunilal Patel Vs. M.J. Makwana [236 ITR 832 (Guj)) and JCIT &Ors. Vs. George Willimson (Assam) Ltd. [258 ITR 126 (Guj)] has held that statement of third party cannot be relied upon without having any corroborative evidence. Similarly, Hon'ble Supreme Court in the case of KishanchandChellaram V/s. CIT 125 ITR 713 (SC) has held that adverse inference cannot be drawn against the assessee from the statement of third parties. Similarly, Ld. AR of the assessee has relied upon the decision of Hon'ble High Court in the case of CIT V/s. Indrajit Singh Suri (2013) 33 Taxmann 281 (Guj.) that where additions were made on the basis of statements of persons who were not allowed to be cross examined by the appellant, additions were not sustainable. It is a serious flaw on principles of natural justice which renders the order a nullity. Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 27 of 32 4.5.7 In view of the above discussion, material evidences on record and case laws cited, firstly, the impunged excel sheets or rather say it as dumb document should be a speaking one having direct nexus with the assessee, which was not in the case of appellant. Secondly, the excel sheets are undated, unsealed and unsigned. Thirdly, no independent incriminating material was found suggesting alleged expenditure by the appellant. My findings on the issue under consideration are based on the various conclusions drawn by me which have been discussed in the above paras. Therefore, the AO was not justified in making additions simply on guess work and solely on the basis of some dumb excel sheets which does not constitutes books of accounts. Thus, the additions made by the AO amounting to Rs. 2,00,00,000/- in AY 2009-10, Rs. 2,00,00,000/- in AY 2010-11 and Rs. 1,80,00,000/- in AY 2011-12 are Deleted. Therefore, appeal on these grounds is Allowed.” 40. Before us, the Ld. DR strongly defended the assessment-order. He submitted that the excel-sheet was seized from the premise of assessee and therefore the presumption u/s 132(4A) is attracted, according to which the said sheet is not only presumed to be owned by the assessee but also contents thereof are also presumed to be correct. Ld. DR submitted that in such circumstances, the addition made by Ld. AO, which is based on seized document, must be upheld. 41. Per contra, Ld. AR supported the order of Ld. CIT(A). He also mentioned some vital aspects, which are also narrated by him in the written-note filed on 18.11.2022 as per liberty given by the Bench; the same is hereby re-produced below: “Ground. No. 3 Addition for unexplained expenditure The Ld. AO has made the addition of Rs. 5,80,00,000/- on the basis of some MIS of Excel File CFO contained in the hard disc allegedly impounded from the office of VNS. This figure appears in the statement on page 34 in the name of Sanjay Pandey and in the summary it appears in the name of VNS at page 36. The assessee contended before the Ld. AO (page 19 of the assessment order) that there is no file by the name CFO MIS in the computer disc seized from the office of the assessee. It was further requested to provide the information w.r.t. the punchnama/seizure memo which mentions the related hard disc/ other storage material from where this file has allegedly been extracted from. It was further requested to kindly let us know the source and the manner in which the aforesaid file has been extracted to enable to submit new response to the same. The same submission was reiterated in further two letters which are reproduced in the assessment order at page 19 and 20. Without any Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 28 of 32 details, the Ld. AO made the addition on the assumption that the payment is made in three year. The CIT(A) has deleted these additions from page 63 to 74 of the order and held that the impugned excel sheet or rather say it as a dumb document should be speaking one, having direct nexus with the assessee. Secondly, the excel sheet are undated, unsealed and unsigned. Thirdly, no independent incriminating material was found suggesting alleged expenditure by the assessee. Relying on number of cases which are quoted from page 65 to 72, the Ld. CIT(A) deleted the addition. Arguments It is humbly submitted that the said excel sheet has not been found in the hard disc of the assessee as alleged by the Ld. AO. In spite of our repeated request, the source of this excel sheet has not been provided by the Ld. AO. As seen from the excel sheet the name of Sanjay Pandey is mentioned (pg. 34 of assessment order). As mentioned in the assessment order Shri Sanjay pandey was no more a member of the Society from 28/07/2009 (page 6 of the assessment order). Thus it is submitted that under no circumstances the assessee could be connected with the said transaction. This is purely a dumb document without mentioning the date. The allegation is that it has been recovered from the premises of the assessee is totally baseless and without any evidence. No corroborative paper has been found to show that any payment is received or paid. The excel sheet does not prove that the assessee has spend any such money. At page 36 VNS name has been mentioned on the outflow side. Thus it is submitted that the addition has been made merely on surmises without any evidence and as such the Ld. CIT(A) was right in deleting the addition.” 42. We have considered rival submissions of both sides and also perused the material held on record. Firstly, we observe that the Ld. AR of assesseestronglyclaims that the impugned excel-sheet was not found from the hard disc of assessee as alleged by Ld. AO. He further claims that despite repeated request of assessee, the source of excel-sheet had not been provided. The Ld. AR also drew our attention to Page No. 19 of the assessment-order wherein the assessee, in reply filed to Ld. AO during assessment-proceeding, raised the same objection. We extract below the assessee’s reply: “Issue:- SHEET-1 OF EXCEL FILE CFO: You have made certain extracts from Excel file CFO sheet "MIS' in Part B-2 and Part B-3 of the Questionnaire. You have not mentioned from which seized/ impounded data source you have extracted this file/ sheet. This file sheet was never confronted with us during the course of Survey proceedings at our Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 29 of 32 premises or at the premises of any other person searched/surveyed along with the assessee. The assessee has only one office at VNS Campus, Vidya Vihar, Neelbud, Tehsil Huzur, Bhopal. All the premises as referred to in the said questionnaire do not belong to the assessee and the assessee has not carried on any business operations nor does it keep any records at any place other than the declared premises. You may please refer to the 'Panchnama drawn under section 1334. It may be mentioned that there is no panchnama drawn under section 132 of the Income Tax Act, 1961 in the case of the assessee. As can be seen from the 'panchnama made u/s 133A only two hard discs have been seized from the office the assessee -one relating to the Accounts section and the other relating to the fees counter. There is no mention of any file by the name of CFO MIS etc as claimed in the referred questionnaire in the said computer discs. As such it is most humbly requested to please provide the assessee the information w.r.t the panchnamal seizure memo which mentions the relatable hard disk other storage material from where this file has allegedly been extracted from You are therefore, requested to kindly let us know the source and the manner in which the aforesaid file has been extracted to enable us to submit due response to the same. Once you let us know the seized/ impounded source from which the aforesaid documents were extracted and provide us the copy of the Panchnama in which the aforesaid extraction from the seized/ impounded evidence was recorded/ evidenced, we will ascertain if this document was prepared by any person looking after the affairs of the society and on what basis the document, if true, was prepared and will file appropriate reply. We also wish to add here that no document whatsoever was seized/ impounded which corroborates the alleged contents of this file. When there is no corroborative evidence to support the transactions allegedly indicated by this file, the same cannot be relied upon.” Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 30 of 32 Thus, the Ld. AR strongly contended that the impugned excel-sheet, relied upon by Ld. AO, is not at all connected with assessee. Ld. DR is not able to contract this very submission of assessee. Going further, we also observe that the Ld. CIT(A) has made an extensive analysis of the facts, which are already reproduced by us in an earlier paragraph and we do not wish to repeat for the sake of brevity. Suffice only to say that the Ld. CIT(A) has rightly observed that the impugned excel-sheet is a dumb-document being non-speaking as well as undated, unsigned and unsealed. On a careful scrutiny of assessment-order, we also observe that the Ld. AO has himself mentioned in Para 12.1 “The excel sheet does not contain the yearwisebreakup. Therefore, a reasonable estimate of these yearwise is as under”. This categorical mention by Ld. AO clearly admits that there was no basis for attributing the transactions to AY 2009-10 under consideration. The Ld. CIT(A) has also held that there is no corroborative evidence qua the alleged transactions noted in the excel-sheet. Thus, there are serious infirmities in the addition made by Ld. AO. We observe that the Ld. CIT(A) has considered those infirmities in the light of decided rulings and thereafter taken a conscious view to delete the addition. We do not find anything wrong in the action of Ld. CIT(A). Therefore, this ground of revenue is also dismissed. Ground No. 5 of Revenue’s appeal and Ground No. 1 of Assessee’s C.O.: 43. These grounds relate to the exemption u/s 11 of the act. 44. Facts apropos to these grounds are identical to ground No. 2 of revenue’s appeal and ground no. 2 to 5 of assessee’s C.O. for AY 2008-09. Hence our conclusion as narrated in foregoing paragraphs while adjudicating those grounds, shall apply mutadis mutandis. Accordingly, we dismiss ground No. 5 of revenue’s appeal and allow ground No. 2 to 5 of assessee’s Cross-Objection. Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 31 of 32 45. With this, for AY 2009-10, the Revenue’s appeal is partly allowed and Assessee’s Cross-objection is allowed. 46. Resultantly, the revenue’s appeal for AY 2008-09 is dismissed and for AY 2009-10 is partly allowed. The assessee’s cross-objections for both years are allowed. Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 09/02/2023. Order pronounced in the open court on ....../....../2023. Sd/- Sd/- (CHANDRA MOHAN GARG) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated :09.02.2023 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench,Indore Vidya Niketan Samiti IT(SS)A No.185 & 186/Ind/2020 and Co No. 26& 31/Ind/2021 Assessment years 2008-09& 2009-10 Page 32 of 32 1. Date of taking dictation 5.1.23 2. Date of typing & draft order placed before the Dictating Member 5.1.23 3. Date on which the approved draft comes to the Sr. P.S./P.S. 5.1.23 4. Date on which the approved draft is placed before other Member 5. Date on which the fair order is placed before the Dictating Member for pronouncement 6. Date on which the file goes to the Bench Clerk 7. Date on which the file goes to the Head Clerk 8. Date on which the file goes to the Assistant Registrar for signature on the order 9. Date of dispatch of the Order