M/S. GLOBAL TECH PARK PVT. LTD.,BANGALORE V. DCIT, CENTRAL CIRCLE-1(1), BENGALURU

ITA 2316/BANG/2024

AI Insights

The case involves multiple appeals by Global Tech Park Pvt. Ltd. against the disallowance of depreciation on luxury cars and additions made under section 69 of the Income Tax Act, which were based on findings from a search and seizure operation. The Tribunal examined whether the assessments made for the years in question were justified, given that the search occurred after the relevant assessment years had concluded and the assessments had not abated. The Tribunal concluded that the statements and documents used as a basis for the additions and disallowances did not constitute incriminating material, leading to the partial allowance of the assessee's appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712810 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2013-2014
• Other Referred Cases: Abhisar Build well P. Ltd. vs. PCIT, Best Infrastructure (India) P. Ltd. vs. PCIT, M.S. Aggarwal vs. CIT, Anand Kumar Jain (HUF) vs. CIT, Shri Ramdas Motor Transport vs. CIT, Naresh Kumar Agarwal vs. CIT, V.C. Shukla vs. CIT, Common Cause vs. CIT, Sunil Kumar Sharma vs. DCIT, Ramachandra Shetty and Sons vs. ITO, Arum Plaza Pvt. Ltd. vs. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V. SRINIVASAN
• Keywords: Set aside; Additional evidence; Depreciation; Unexplained investment; Cost of acquisition; Document seized; Documents seized; Tax effect; Search and seizure; Block assessment; Loose papers
• Section: 143(3); 142(1); 132; 153A; 68; 131; 69; 234B; 40A(3); 40(a)(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA Nos.2315 to 2320/Bang/2024 Assessment years: 2012-13 to 2017-18 Global Tech Park Pvt. Ltd., # 11, ‘B’ Wing, Divyashree Chambers, Langford Road, Bangalore – 560 025. PAN: AABCG 5707C Vs. The Deputy Commissioner of Income Tax, Central Circle 1[1], Bengaluru. APPELLANT RESPONDENT ITA No.2363/Bang/2024 Assessment years : 2013-14 The Asst. Commissioner of Income Tax, Central Circle 1[1], Bengaluru. Vs. Global Tech Park Pvt. Ltd., Bangalore – 560 025. PAN: AABCG 5707C Assessee by : Shri V. Srinivasan, Advocate Revenue by : Shri Shivanand Kalakeri, CIT(DR)(ITAT), Bengaluru. Date of hearing : 09.06.2025 Date of Pronouncement : 31.07.2025 O R D E R Per Prashant Maharishi, Vice President 1. This bunch of 7 appeals, 6 appeals filed by Global Tech Park Ltd. (the assessee/appellant) for the AYs 2012-13 to 2017-18 and one appeal Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 2 of 48 filed by the ACIT, Central Circle 1(1), Bangalore [ld. AO] for AY 2013-14 arising out of search & seizure action carried out on 1.12.2018 involving common grounds and issues, therefore these are disposed of by this common order. AY 2012-13 (ITA No.2315/Bang/2024) ( By Assessee) 2. First we take up the appeal of the assessee for AY 2012-13 in ITA No.2315/Bang/2024 which is filed against the consolidated Appellate order passed by the Commissioner of Income Tax -11, Bangalore [ the ld. CIT (A) ] for the AYs 2012-13 to 2017-18 dated 30.9.2024 raising a solitary ground of appeal that the ld. CIT(A) is not justified in upholding the disallowance of 50% of depreciation on luxury car without appreciating the facts that (i) the cars were used wholly & exclusively for the purposes of business and (ii) the assessment for the year under appeal is unabated and therefore no disallowance could have been made in absence of any incriminating material found during the course of search. 3. The brief facts of the case show that for AY 2012-13 assessee filed its return of income on 29.9.2012 declaring total income at Rs. Nil. Subsequently search was carried out on 1.2.2018 and based on that, assessee was issued a notice u/s. 153A of the Act on 10.1.2019. The assessee filed its return of income u/s. 153A on 27.2.2019 at Rs. Nil. Subsequently notice u/s. 143(2) was also issued on 4.3.2019. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 3 of 48 4. During search proceedings, it was found that the assessee is claiming depreciation on luxury cars used for the personal purposes of the directors of the assessee company. A statement was recorded u/s. 132(4) in which the assessee admitted that the cars are used for the personal purposes of the assessee and offered to disallow the depreciation claim on the personal use of luxury cars. The ld. AO relied upon the statement recorded of the Managing Director of the assessee company wherein in response to Q.No.77, it was admitted that the high-end cars have been purchased by the company for business necessities, however, it has been used by the Managing Director and his family members for personal use, therefore he agreed for disallowance of Rs.6.89 crores. He agreed to file the details within 2 days. Subsequently summons was issued u/s. 131 wherein the Managing Director also confirmed the same. Based on this, a show- cause notice was issued on 13.11.2019 asking the assessee to explain why depreciation on personal use of luxury cars should not be disallowed. The assessee submitted a reply stating that the assessee is a private limited company and the vehicles used are for the business purposes of the company. Though company did not maintain any log book, it was also the claim by the assessee that in earlier year also, depreciation is allowed to the assessee company. It was also the claim that on account of employment agreement with the directors, these cars are provided by the assessee to the directors etc., and they are used for the business activities of the company, hence no depreciation should be disallowed. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 4 of 48 5. The ld. AO held that as remuneration paid to directors did not specifically mention the perquisite value of company owned cars to be used for personal purposes, non-maintenance of log book and admission of the Managing Director in the statement recorded u/s. 132(4) and 131 of the Act, depreciation claimed on the luxury cars were disallowed of Rs.5,17,486. Ld AO further held that as no tax is deducted on perquisites, disallowance u/s 40a(ia) is also to be made. 6. Accordingly assessment order was passed u/s. 153C r.w.s. 153D r.w.s. 143(3) of the Act on 31.12.2019 wherein total income of assessee was assessed at Rs. 4,32,00,000. This was because there is another addition u/s. 69 of Rs.4,32,00,000 on account of cash payment to Sajjad Khan. The addition was deleted by CIT(A) vide para 14 & 15 of the appellate order against which there is no appeal filed by the revenue. 7. On the issue of depreciation of motor car, the ld. CIT(A) upheld the finding of the ld. AO regarding disallowance, but restricted the disallowance to 50% of the depreciation as per Para no. 5.4.12. Aggrieved with that, assessee is in appeal before us. 8. The contention of the ld. AR is that :- (i) the addition/disallowance made by the ld. AO is devoid of any merit for the reason that the date of search was 1.2.2018 which was concluded on 29.3.2018. As on the date of search, the assessment for AY 2012-13 was not pending. The return of income was filed for that assessment year on 29.9.2012 and Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 5 of 48 therefore if any addition is required to be made it could only have been made on the basis of incriminating material found during the course of search. His submissions is that the ld. AO has made the disallowance only on the basis of the statement of Managing Director u/s. 132(4) of the Act, which cannot be considered as incriminating material. He submits that as there is absence of incriminating material found during the course of search relating to this disallowance, the issue is covered in favour of assessee by the decision of the Hon’ble Supreme Court in the case of Abhisar Build well P. Ltd.(2023) 454 ITR 212 (sc) [TS-5106-SC-2023-O], (2023) 332 CTR 729 (SC). (ii) Mere statement u/s. 132(4) of the Act cannot be considered as any incriminating material found during search, based on which the concluded assessment for AY 2012-13 could be disturbed. (iii) Perquisite value was taxed in the hands of the director for the use of motor cars. He further stated that the AO further disallowed the above expenditure holding that on such perquisites no tax was deducted. (iv) On the merits also, he submitted that when the perquisite value is taxed in the hands of the director, the addition in the hands of the company is not proper. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 6 of 48 (v) When the recipient of income has already paid tax on the income, then disallowance u/s. 40(a)(ia) could not have been invoked. (vi) Eeven the ld. CIT(A) upholding the disallowance @ 50% is not reasonable. He has rejected the offer of the assessee of 20% disallowance without any reason. (vii) Merely for non-maintenance of log book in the case of company, disallowance could not have been made for personal use. (viii) There is no material available with the ld. AO that cars are not used for the purposes of business of the assessee. 9. The ld. CIT(DR) vehemently submitted that the assessee has been granted relief by the ld. CIT(A) by restricting the disallowance to the extent of 50%, as assessee has already offered for taxation disallowance @ 20%, the assessee could not have any grievance. He further submitted that 132(4) statement of the Managing Director wherein he has confessed that these cars are used for personal purposes, there is no further incriminating material which is required to be found by the AO before making any addition/disallowance. Therefore, according to him, the orders of the ld. lower authorities are in order. 10. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. In this case search took place on Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 7 of 48 1.2.2018. The return of income of income was filed on 29.2.2012. Therefore as on the date of search; the assessment for AY 2012-13 did not abate for the reason that neither notice u/s. 143(2) of the Act was issued nor the return was pending for assessment. Therefore if there is any addition which is required to be made in pursuance of search, it has to be strictly based on incriminating material found during the course of search. This is the mandate of the decision of the Hon’ble Supreme Court in the case of The Principal Commissioner of Income-tax, Central-3 vs. Abhisar Build well (P.) Ltd. [2023] 149 taxmann.com 399 (SC)/ [2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC)[24-04- 2023] [TS-202-SC-2023] . On examination of the assessment order at page 14, we do not find any reference to any incriminating material found during the course of search which could have shown that the vehicles are used by the directors and his family members for personal purposes. 11. It is the claim of the ld. CIT DR that statement made by the Managing Director u/s. 132(4) of the Act is incriminating material. The statement of the Managing Director is reproduced at page 15 of the assessment order. Q.No.77 its starts from the examination of the books of account and did not relate to reference to any material found during the course of search. In any case, statement u/s. 132(4) of the Act is without any incriminating material. The statement u/s. 132(4) also cannot be said to be incriminating material. This is also because of the reason that no person can incriminate himself by making a statement against himself. Honourable Delhi High court in case of PCIT V Best Infrastructure Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 8 of 48 Private limited [ 397 ITR 82 ] (Delhi) PCIT vs Best Infrastructure (India) (P) Ltd [TS-5668-HC-2017(Delhi)-O] where the question was. Whether having regard to the materials seized in the course of search under section 132 and the statements made on behalf of the assessee, additions made by the Assessing Officer under section 153A, were not justified as held by the Income-tax Appellate Tribunal ?\" 12. The Honourable High court held that: - This extract is taken from Pr. CIT v. Best Infrastructure (India) P. Ltd., (2017) 397 ITR 82 : 2017 SCC Online Del 9591 38. Fifthly, statements recorded under section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this court in CIT v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 9 of 48 13. In CIT v. Anand Kumar Jain (HUF), (2021) 432 ITR 384: 2021 SCC Online Del 5706: (2021) 320 CTR 656 Honourable Delhi High court has held as under: - \"9. In CIT v. Harjeev Aggarwal [2016] 6 ITR-OL 504 (Delhi) ; [2016] 290 CTR 263 ; [2016] SCC OnLine 1512** this court had held as follows (page 515 of 6 ITR-OL): \"In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the assessee in its statement, under the provisions of Chapter XIV-B of the Act. In our view, a plain reading of section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words 'evidence found as a result of search' would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the Explanation to section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 10 of 48 operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the assessee during search operation. .. . However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of account, documents, assets, etc. Plainly, the intention of Parliament is to permit such examination only where the books of account, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of section 132(4) of the Act are read in the context of section 158BB(1) read with section 158B(b) of the Act, it is at once clear that a statement recorded under section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an assessee has to be computed on the basis of evidence and material found during search. The statement recorded under section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 11 of 48 statement recorded and the evidence/material found during search in order for an assessment to be based on the statement recorded. In CIT v. Shri Ramdas Motor Transport [1999] 238 ITR 177 (AP), a Division Bench of the Andhra Pradesh High Court, reading the provision of section 132(4) of the Act in the context of discovering undisclosed income, explained that in cases where no unaccounted documents or incriminating material is found, the powers under section 132(4) of the Act cannot be invoked.. .. It is also necessary to mention that the aforesaid interpretation of section 132(4) of the Act must be read with the Explanation to section 132(4) of the Act which expressly provides that the scope of examination under section 132(4) of the Act is not limited only to the books of account or other assets or material found during the search. However, in the context of section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 12 of 48 If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under section 132(4) is accepted, it would result in ignoring an important check on the power of the Assessing Officer and would expose the assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statements, which are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee. In CIT v. Naresh Kumar Agarwal [2014] 369 ITR 171 (T&AP), a Division Bench of the Telangana and Andhra Pradesh High Court held that a statement recorded under section 132(4) of the Act which is retracted cannot constitute a basis for an order under section 158BC of the Act.. . .\" 14. This case was challenged in the Supreme Court and SLP No. 13345 of 2018 was admitted. But subsequently, it was dismissed as withdrawn. Thus, the decision in Best Infrastructure(supra) has not been disturbed. 15. This case was subsequently referred to a larger Bench in the case of CIT v. M.S. Aggarwal(2018) 406 ITR 609 (Delhi) ; (ITA 169/2005), where subsequently the question was not answered as the referral court Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 13 of 48 dismissed the same on account of low tax effect on August9, 2019. Thus, the decision in Harjeev Aggarwal (supra) continues to be the prevailing legal position. 16. Thus, the Decision of Best Infrastructure PCIT vs Best Infrastructure (India) (P) Ltd [TS-5668-HC-2017(Delhi)-O] holding that merely a statement u/s 132 (4) without incriminating material cannot be called incriminating material. 17. In view of this, we hold that the disallowance made by the ld. AO and disallowance restricted by the ld. CIT(A) is not in accordance with law in the absence of any incriminating material found during the course of search with respect to the impugned disallowance. Hence ground No.2 of the appeal of assessee is allowed. 18. In view of our decision in ground No.2, ground No.2.1 is not required to be adjudicated. 19. Ground No.3 with respect to interest u/s. 234B and 234D are consequential in nature, hence dismissed. 20. In the result, the appeal for AY 2012-13 is partly allowed. AY 2013-14 (ITA No.2316/Bang/2024)[ By Assessee] 21. The appeal for AY 2013-14 is filed by the assessee in ITA No.2316/Bang/2024 wherein following grounds have been raised:- Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 14 of 48 “ 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT[A] is not justified in upholding 50% of the disallowance of depreciation on Luxury Cars without appreciating that the cars were used wholly and exclusively for the purposes of the business and at any rate, the assessment for the year under appeal had not abated on the date of search and therefore, no disallowance ought to have been sustained in the absence of any incriminating material found in course of search to warrant any disallowance under the facts and in the circumstances of the appellant's case. 2.1 Without prejudice to the above, the disallowance sustained by the learned CIT[A] at 50% of the depreciation claimed is excessive and liable to be reduced substantially. 3. The learned CIT[A] is not justified in upholding the addition of Rs.84,59,015/- made u/s.69 rws 115BBE of the Act on account of interest accrued on loan given to Century Woods without appreciating that the said addition cannot be made in the unabated assessment proceedings u/s. 153A of the Act in the absence of any incriminating materials found at the time of search under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234B and 234D of the Act, which under the facts and in the circumstances of the appellant's case and the same deserves to be cancelled. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.” 22. Ground No.1 is general in nature. Ground No.3 is not pressed and therefore same is dismissed. Ground No.4 of the appeal is with respect Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 15 of 48 to interest u/s. 234B & 234D of the Act which is consequential in nature and therefore same is also dismissed. 23. This leaves us with ground No.2 of the appeal wherein the ld. CIT(A) has confirmed the disallowance to the extent of 50% of depreciation on luxury cards allegedly used by the family members of director, but the claim of the assessee is that the disallowance has been made without any incriminating material found during the course of search. 24. The facts show that for this AY 2013-14, assessee filed its return of income on 30.9.2013 at a taxable income of Rs.4,29,94,540 which was revised on 1.3.2014 at a total income of Rs.3,50,94,610. This return was not picked up for scrutiny. Search took place on 1.2.2018. Pursuant to that, notice u/s. 153A was issued on 10.1.2019 which was responded to by the assessee by filing return of income on 27.2.2019. The assessment order was passed u/s. 153A r.w.s. 153D r.w.s. 143(3) of the Act on 31.12.2019 wherein the total income was assessed at Rs.8,15,51,420. 25. The ld. AO made disallowance on depreciation on luxury cars of Rs.3,50,735 along with other addition of Rs.2,97,47,130 and Rs.84,59,015. Other additions are deleted by the ld. CIT(A) or if confirmed by the ld. CIT(A), are not pressed before us. 26. The facts of disallowance of depreciation on luxury motor cars is identical to the facts stated for AY 2012-13. The argument of the Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 16 of 48 parties are also same and the decision of the ld. CIT(A) is also identical. 27. On careful perusal of the facts we find that facts are identical to AY 2012-13 wherein disallowance was made on account of depreciation of luxury car without any incriminating material. For the reasons given by us while deleting the disallowance on depreciation in AY 2012-13, for similar reasons we also reverse the order of the ld. lower authorities and direct the ld. AO to delete the disallowance in the absence of any incriminating material found during the course of search in this concluded assessment for AY 2013-14. 28. Accordingly the appeal of the assessee is partly allowed. AY 2013-14 [ITA No.2363/Bang/2024 ][Revenue’s appeal] 29. For the AY 2013-14, the ld. AO is also aggrieved and has filed appeal in ITA No.2363/Bang/2024 raising the following 2 grounds of appeal:- “ (1) Whether on the facts and circumstances of the case, the Id. CIT(A) was correct in admitting the cash book & ledger accounts submitted by the assessee company without providing any opportunity to the AO to verify the same under rule 46 of income Tax Rules. (2) Whether on the facts and circumstances of the case, the ld. CIT(A) was right in accepting assessee's explanation on the issue of cash payment to Sajjad Khan & fand Khan without making detailed enquiries & verifications into transactions shown in order to build up of cash balances in the cash book on dates of impugned payments.” Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 17 of 48 30. The brief facts of the case show that the ld. AO made an addition of Rs.2,97,47,130 as unexplained investment u/s. 69 of the Act. During the course of search proceeding seized material was found marked as Annexure A/GTP/BD1-04 which contains the details of cash payment made by the assessee for purchase of property to one land aggregator, Mr. Sajjad Khan & Mr. Fahd Khan who are partners of the firm, Xotic Ventures. A statement u/s. 132(4) was recorded wherein in Q.No.22 & 74 were asked on this issue. The answer given in response to Q.No.74, it was submitted that cash payment is made for procurement of land for logistic park and cash is paid to the farmers. The amount of cash payment made by the assessee was Rs.64.71 lakhs for FY 2012-13, Rs.97.44 lakhs for FY 2013-14 & Rs.11.35 lakhs for FY 2014-15. Thus aggregate payment of Rs.173.50 lakhs was made in excess of Rs.20,000 in cash. Further the sworn statement of Sajjad Khan was recorded u/s. 131 on 12.9.2018 wherein he admitted that cash is paid to the farmers for procuring land. Based on this, a show cause notice was issued on 13.11.2019 asking the assessee that why cash payment should not be disallowed. The assessee submitted that actual payment made to the respective parties is different. It was further stated that assessee has entered into MoU with one, Indo Space Ventures for establishing a logistic Park at Bhaktipura village, Hosur Road, Bangalore. As per the agreement, the company was to acquire agricultural land and was to hand over the same to Mysore Logistics P. Ltd. for building the logistic park. For this, assessee has appointed Mr. Sajjad Khan & Fahd Khan as aggregator. These aggregators have Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 18 of 48 facilitated the payment to the land owners who are farmers in cash. These payments are shown as loans & advances in the books of account of the company and appearing in the balance sheet. Assessee has not claimed any expenditure on this sum. Therefore, there cannot be any disallowance. 31. The ld. AO held that the above amount not claimed as expenditure is not shown as assessee has not furnished this detail during the course of search proceedings as well as during the post-search proceedings. In the statement recorded u/s. 132(4), assessee accepted that cash payment is made to aggregators and further it was confirmed u/s. 131 by the aggregators also. Accordingly the ld. AO made addition of Rs.2,97,47,130 being Rs.2,10,67,130 paid to Mr. Sajjad Khan and Rs.86,80,000 to Mr. Fahd Khan as income of the assessee as unexplained investment u/s. 69 of the Act. 32. This addition was challenged before the ld. CIT(A), who decided this addition as per para 15 of the order. The ld. CIT(A) extracted the balance sheet and account of the parties from page 76 to 100 of the appellate order. He held that there is no disallowance made u/s. 40A(3), but addition is made u/s. 69 of the Act. The query posed by the ld. AO was with respect to proposed disallowance u/s. 40A(3) of the Act, but ultimately the addition was made u/s. 69 of the Act. The ld. CIT(A) noted that all these payments are recorded in the regular books of account of the assessee under the head ‘loans & advances’ reflected in the audited financial statements of the appellant and are Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 19 of 48 part of regular books of account. Therefore these evidences cannot be considered in the nature of incriminating material found during the course of search. The assessee has also explained the source for cash payment to be from out of the cash balances available in the regular books of account. Further he held that the seized document marked as A/GTP/BD1-04 is nothing but part of the books of account maintained by the assessee in the regular course of carrying on of the business. These payments are shown as loans & advances in the annual accounts which were filed prior to the date of search along with the audit report is not in dispute. Therefore the addition was deleted. 33. The ld. AO aggrieved with the same has preferred this appeal. 34. The ld. CIT(DR) mainly contended that under Rule 46 of the I.T. Rules, the AO should have been granted an opportunity before admitting the evidence by the ld. CIT(A). It was further contended that the ld. First Appellate Authority was not right in accepting the explanation of the assessee without making detailed enquiry that whether the assessee was having cash in hand on that date on which the payments are made. 35. The ld. AR vehemently submitted that the ld. CIT(A) has deleted the addition u/s.69 for the reason that Annexure found during the course of search is part of the regular books of account of the assessee and the amount paid is shown in the annual audited accounts as loans & advances. The balance sheet was already available prior to the date of search before the AO. The assessee has not submitted any additional Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 20 of 48 evidence and therefore the provisions of Rule 46A does not apply and further the cash payment made by the assessee is from the regular books of account which does not need any further verification in absence of any incriminating material. 36. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. Para 15 of the ld. CIT(A)’s order clearly shows that the seized Annexure is part of books of account regularly maintained by the assessee. The cash payments shown therein are recorded in the books of account of assessee as loans & advances. These loans & advances are shown in the audited balance sheet which are audited and available with the AO even prior to the date of search. The annexure referred to by the ld. AO, as it is held to be part of regular books of account, same cannot be said to be incriminating material. The addition u/s. 69 also could not have been made of the same when it is recorded in the books of account of assessee under the head ‘loans & advances’. Further it is true that the ld. AO issued notices for disallowance u/s. 40A(3) of the Act, and without any show cause notice for addition u/s. 69 of the Act. The provisions of section 69 clearly show that if the same is recorded in the books of account and nature and source of such expenditure, if funds available in the books of account of the assessee. The ld. AO did not state that on the date of payments, funds were not available with the assessee. In fact, he wanted to disallow the above sum as expenditure in violation of the provisions of section 40A(3) of the Act. When he found that such expenditure is not claimed, but is shown as loans & Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 21 of 48 advances recorded in the regular books of account, he made addition u/s. 69 of the Act. Further, we do not find admission of any additional evidence by the ld. CIT(A). Therefore, there is no violation of Rule 46A of the I.T. Rules. Further whether the amount can be added u/s. 69 of the Act does require any further verification as it is part of regular books of account which was available before the AO prior to the date of search. Hence we do not find any merit in both the grounds of appeal raised by the ld. AO. 37. Accordingly ITA No.2363/Bang/2024 filed by the ld. AO for AY 2013-14 is dismissed. AY 2014-15 (ITA No.2317/Bang/2024) [ By Assessee] 38. This appeal for AY 2014-15 filed by the assessee is identical to appeal for AY 2012-13 raising the following grounds of appeal:- “ 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT[A] is not justified in upholding 50% of the disallowance of depreciation on Luxury Cars without appreciating that the cars were used wholly and exclusively for the purposes of the business and at any rate, the assessment for the year under appeal had not abated on the date of search and therefore, no disallowance ought to have been sustained in the absence of any incriminating material found in course of search to warrant any disallowance under the facts and in the circumstances of the appellant's case. 2.1 Without prejudice to the above, the disallowance sustained by the learned CIT[A] at 50% of the depreciation claimed is excessive and liable to be reduced substantially. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 22 of 48 3. The learned CIT[A] is not justified in upholding the addition of Rs.1,25,10,000/- made u/s.69 rws 115BBE of the Act on account of interest accrued on loan given to Century Woods without appreciating that the said addition cannot be made in the unabated assessment proceedings u/s. 153A of the Act in the absence of any incriminating materials found at the time of search under the facts and in the circumstances of the appellant's case. 4. The learned CIT[A] is not justified in upholding the addition of Rs.8,36,583/- towards foreign travel expenses under the facts and in the circumstances of the appellant's case. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.” 39. Ground No.1 is general in nature, ground Nos. 3 & 4 are not pressed and therefore these are dismissed. 40. This leaves us with only ground No.2 of the appeal regarding confirmation of disallowance of 50% on depreciation of luxury cars used by directors and family members of the assessee for personal purposes. 41. The facts and circumstances in this appeal are identical to ground No.2 of the appeal for AY 2012-13 wherein we have directed the ld. AO to delete the disallowance. There is no change in the facts and circumstances or arguments of the parties and accordingly we direct the ld. AO for similar reasons to delete the disallowance on depreciation of luxury cars. Accordingly ground No.2 of the appeal for AY 2014-15 is allowed. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 23 of 48 AY 2015-16 (ITA No.2318/Bang/2024)[ By assessee]m 42. This appeal for AY 2015-16 is identical to ground of appeal for AY 2014-15 raising following grounds:- “1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT[A] is not justified in upholding 50% of the disallowance of depreciation on Luxury Cars without appreciating that the cars were used wholly and exclusively for the purposes of the business and at any rate, the assessment for the year under appeal had not abated on the date of search and therefore, no disallowance ought to have been sustained in the absence of any incriminating material found in course of search to warrant any disallowance under the facts and in the circumstances of the appellant's case. 2.1 Without prejudice to the above, the disallowance sustained by the learned CIT[A] at 50% of the depreciation claimed is excessive and liable to be reduced substantially. 3. The learned CIT[A] is not justified in upholding the addition of Rs.1,12,67,172/- made u/s.69 rws 115BBE of the Act on account of interest accrued on loan given to Century Woods without appreciating that the said addition cannot be made in the unabated assessment proceedings u/s. 153A of the Act in the absence of any incriminating materials found at the time of search under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234A and 234B of the Act, which under the facts and in the circumstances of the appellant's case and the same deserves to be cancelled. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 24 of 48 awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.” 43. Ground No.1 is general in nature and ground Nos.3, 4 & 5 are not pressed, hence dismissed. 44. Ground No.2 is with respect to disallowance of depreciation on luxury cars which is identical to ground No.2 of the appeal for AYs 2012-13, 2013-14 & 2014-15 which we have directed the ld. AO to delete the disallowance. For similar reasons stated therein, we also direct the ld. AO to delete the disallowance for this year too. Thus, ground No.2 of the appeal is allowed. 45. Accordingly the appeal for AY 2015-16 is partly allowed. AY 2016-17 (ITA No.2319/Bang/2024)[ By Assessee ] 46. This appeal for AY 2016-17 is filed by the assessee raising the following grounds of appeal:- “1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT[A] is not justified in upholding 50% of the disallowance of depreciation on Luxury Cars without appreciating that the cars were used wholly and exclusively for the purposes of the business under the facts and in the circumstances of the appellant's case. 2.1 Without prejudice to the above, the disallowance sustained by the learned CIT[A] at 50% of the depreciation claimed is excessive and liable to be reduced substantially. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 25 of 48 3. The learned CIT[A] is not justified in upholding the addition of Rs.1,09,97,172/- made u/s.69 rws 115BBE of the Act on account of interest accrued on loan given to Century Woods under the facts and in the circumstances of the appellant's case. 4. The learned CIT[A] is not justified in upholding the addition of Rs.10,00,00,000/- as unexplained investment being the cash paid towards purchase of the land from Divyashree Chambers under the facts and in the circumstances of the appellant's case. 5. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234B and 234D of the Act, which under the facts and in the circumstances of the appellant's case and the same deserves to be cancelled. 6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.” 47. Ground No.1 is general in nature, ground No.3 is not pressed, ground Nos.5 & 6 are consequential in nature and therefore same are dismissed. 48. This leaves us with ground Nos.2 & 4 of the appeal. 49. Ground No.2 of the appeal is against the confirmation of the disallowance of depreciation on luxury cars which is identical to appeal of the assessee for AYs 2012-13 to 2015-16 wherein we have directed the ld. AO to delete the disallowance. For similar reasons, we direct the ld. AO to delete the disallowance for this year too. Accordingly ground No.2 of the appeal is allowed. 50. Ground no 3 is dismissed as not pressed. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 26 of 48 51. Ground No.4 is with respect to upholding the addition of Rs.10 crores by the ld. CIT(A) as unexplained investment being cash paid towards charges of loan from Divyashree Chambers. 52. The facts of the case show that in the impugned assessment year, the assessee has filed return of income on 17.10.2016 at Rs. Nil. The search took place 1.2.2018 and notice u/s. 153A was issued on 10.1.2019. In response to which return of income was filed on 27.2.2019 at Rs. Nil. 53. The facts related to the above addition shows that during the course of search proceedings, the seized material was found as Annexure A/GTP/BD1-03 at page No.155 . According to the ld AO it shows cash payment of Rs.10 crores for purchase of land of the office premises Divyashree Chambers of the assessee over and above the consideration as per the Sale Deed registered on 28.12.2015. A sworn statement of the MD of the assessee company was recorded u/s. 131 wherein it was stated that seized material is a diary written by CFO of the assessee, Mr. B.V. Vijendra, and it is a draft calculation for land purchases. This was confronted to the CFO, who also confirmed that seized material is calculations for purchase of above Chamber for loan purpose. The ld. AO on examination of the seized material noted that the entries in the seized material relates to amount paid for the purchase of property. According to him, there is a consideration of Rs.92 crores by cheque which is verifiable from the Sale Deed found and seized as per Annexure A/GTP/BD1-01. There are other entries of 11 Crores and 13 Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 27 of 48 Croes and further entry of 10 Crores cash totalling to Rs.126 crores. Based on this, notice u/s. 142(1) was issued on 13.11.2019 asking the assessee why cash payment of Rs.10 crores should not be added to total income as unexplained investment. 54. The assessee explained that assessee has acquired the building for total consideration of Rs.92 crores on 28.12.2015. The purchase was made by opting for a term loan from Aditya Birla Finance Ltd. Bank which sanctioned loan of Rs.65 crores. It was stated that Bank offered only 65% of the building acquisition cost as loan and balance to be arranged by the company out of its own funds. The company has obtained loan of Rs.65 crores against the acquisition of the property for Rs.92 crores. It was further stated that – “The pages referred by your good self contains the draft calculation used for discussion purposes with the bank representatives with a view to avail maximum permissible loan from the bank, which would pose lesser strain on the own funds of the Company. At a point during the discussion, the bank representatives were sceptical on the value of the project and refused to fund the project to the desired level - However, to achieve the objectives of negotiation, it was represented before them that the building was acquired by paying additional consideration in cash amounting to Rs 10 Cr plus, a flat in Mumbai was given to the seller in exchange. All these conversations have happened orally with the sole objective to rack up the financial assistance from the bankers - whereas in reality, the building was acquired at the price mentioned in the purchase deed without paying any additional consideration and neither Satish P Chandra nor any of the family members nor the company had any owned a flat in Mumbai. Thus, it is the submission of the Assessee that no addition could be made in relation, based on assumptions and surmises, without any cogent evidence for the same.\" Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 28 of 48 55. The ld. AO rejected the submission of the assessee that seized material is a draft calculation to rake up the purchase consideration for obtaining the loan. The assessee has not explained why the draft calculation included the cash component to be shown to the Bank representative. Therefore, according to him, assessee failed to explain the amount of Rs.10 crores in cash and held that such investment of the assessee for the purchase of land at Divyashree Chambers and added to total income of assessee. Accordingly assessment order was passed u/s. 153A r.ws. 153D r.w.s. 143(3) of the Act on 31.12.2019 determining total income of the assessee at Rs.10,2,29,000. 56. The assessee preferred appeal before the ld. CIT(A) wherein as per para 16, addition of Rs.10 crores was confirmed holding that (i) the perusal of the seized material shows the noting wherefrom it is clearly evident that a sum of ₹ 10 crores has been paid in cash. (ii) The evidence gathered in a search and seizure operation cannot be summarily dismissed by the appellant by a simple denial. The appellant has furnished no other evidence to prove that the property was bought only for ₹ 92 crores as contended by the appellant. (iii) The appellant was neither able to substantiate the explanation provided for the noting found in the seized material nor was the appellant able to explain the nature of the noting is satisfactory. Therefore, the addition of ₹ 10 crores made by the learned assessing officer based on the said seized material as unexplained investment was upheld. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 29 of 48 57. The learned authorised representative vehemently contested before us and stated that that assessee company has acquired the building for a total consideration of ₹ 92 crores on 28 December 2025. This is substantiated by the purchase deed. The purchase was made by obtaining the bank loan from Aditya Birla Finance Ltd Bank which sanctioned a loan of ₹ 65 crores. Prior to obtaining the loan it has a multiple meetings with sales representative of various banks and also to obtain the best terms of finance. The banks normally offers only up to 15% – 65% of the acquisition cost of immovable property as loan and the balance is to be obtained by the company acts its own fund. The company was successful in getting the loan for ₹ 65 crores in relation to acquisition of ₹ 92 crores which is approximately 75% of the project cost. The pages referred to in the assessment order contains the draft calculation is used for discussion purposes with the bank representatives with a view to avail maximum permissible loan from the bank. At point during the discussion the bank representative were sceptical and the value of the project and refused to fund the project to the desired travel. However to achieve the objectives of negotiation it was represented before them that the building was acquired by paying an additional consideration in cash amounting to ₹ 10 crore plus and a flat in Mumbai was given to the seller in exchange. These were all the conversations with the sole objective to rack up the financial assistance from the bank. The building was acquired at the documented price which is mentioned in the purchase deed which is also shown to the assessing officer that there is no such transaction that took place. The Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 30 of 48 purchase of the building was documented by a purchase deed which is accepted by the Stamp authorities. Further during the course of search as well as during the course of assessment proceedings the assessee also stated that these are merely the draft calculation is for obtaining the bank loan. It was stated that the statement of the CF for, statement of the managing director at the time of search also stated the same thing. The learned assessing officer did not have any corroborative material that assessee has paid ₹ 10 crores further to the seller of the above property. It was stated that despite the above addition proposed to be made by the learned that AO, on enquiry was made the seller and there is no corroborative material. Therefore such addition could not have been made on the basis of the seized material. The learned and CIT – A is also not correct in confirming the above addition merely stating that when a search and seizure operation adopted is found which cannot be dismissed by a simple denial. The addition has to be made on the basis of the evidences found during the search and further corroborated by the same. Neither the learned assessing officer enquired from the seller, nor from the stamp duty authorities, not from the bankers who also financed the above property. In view of this the addition could not have been made. The learned authorised representative further our attention to the statement recorded under section 132 (4) of Mr Satheesh and also his statement recorded under section 131 of the act on 3/2/2018 and 6/2/2080. He further relied upon the decision of the Honourable Karnataka High Court in case of DCIT versus Sunil Kumar Sharma 469 ITR 197 (Karnataka) [TS-5158-HC- Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 31 of 48 2024(Karnataka)-O] and decision of the coordinate bench in case of ITO versus Ramachandra Shetty and sons 153 Taxman.com 666 as well as the decision of the coordinate bench in case of Honourable Arum Plaza private limited versus DCIT 152 taxmann.com 85. it was further submitted that the loose papers only are not relevant for making the addition ,the he further referred to the submissions made before the learned CIT – A, is reproduced by the learned CIT – A the appellate order. 58. The learned departmental representative vehemently supported the order of the learned assessing officer and also the order passed by the learned and CIT – A. Was submitted that there was a loose paper found during the course of search clearly demonstrated that assessee has paid fees 10 crores over and above the consideration of 92 crore which has been dealt with by the learned lower authorities properly and made the addition. It was submitted that ld CIT (A) has correctly held that loose papers found during the search proceedings cannot be dismissed by giving vague and unrelated explanation. Therefore, no infirmities found in the orders of the ld Lower authorities. 59. We have carefully considered the rival contentions and perused the order of the ld. Lower Authorities. Brief facts show that during search on 1/02/2018 a loose paper was found as seized as A/ GTP/BD-1-03 page no 155 where some figures are mentioned. This document is diary written by CFO of the assessee company Mr B.V. Vijendra. The Deputy Director of Income tax (investigation), Bengaluru recorded Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 32 of 48 statement of Shri Satish Praphulla Chandra u/s 131 of the Act on 07/09/2018 where in question no. 165 was raised to him as under: - Q. 165 I am showing you page no 155 of the seized material marked as A- GTP-BD1-03 found and seized during search operation. Please go through the same and explain its contents. A. This is the Divyashree draft calculation for loan purposes. 60. It is also important that the statement of Mr. Satish was recorded u/s 132 (4) of The Act on 03/02/2018 by the Deputy Director of Income Tax (investigation) where in sum of Rs 51.665 crores were declared. Not a single question was raised to him on this loose paper. 61. Statement of The CFO of the company Mr. B V Vijendra was recorded u/s 131 of the Act by the Deputy Director of Income tax (investigation) on 7/09/2018 wherein he was asked a question which was replied that it is also draft calculations. 62. Except for this, no questions are asked and not even shown for declaration u/s 132 (4) of the act to Shri Satish. 63. The ld AO in assessment proceedings held that the documents show the cash payment for purchase of Divyashree Building. The ld. AO neither inquired about these facts from the seller, nor once again, from the buyer, assessee. There is no other evidence found during the search that Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 33 of 48 the assessee has made the payment of Rs 10 cr cash for purchase of This Building. 64. The ld CIT (A) has confirmed this addition because the document found during search cannot be explained lightly. That is true but to make an addition, in the search proceedings the assessee should have been asked complete details of the above paper and simultaneously, the buyer should have been examined. Even during assessment proceedings also, the ld Ao did not even summon the assessee, CFO of the Assessee company as well as the buyer also. 65. Now we look at the seized paper which is placed at page no 136 9a) of the paper book and also extracted by the ld AO in his assessment order at last but one page no. Looking at page it is apparent that there is no reference of Divyashree building on the paper. Thus, how the ld AO has linked this paper is statement of the assessee which did not say that it was the purchase details of the Divyashre Building. Assessee has maintained that these are the calculations for the loan on the Divyashree building. The ld Ao also did not make any effort to reconcile the area or the rate shown in the registered Deed for that property by the assessee. 66. There is no date on the paper, though it is found in the diary of the CFO. Even the diary date is not mentioned on the seized documents. The Writer of the seized documents, CFO of the assessee company, as not even asked the basic question about how the calculations are made, even if for the loan purposes. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 34 of 48 67. The document also mentions a sum of Rs 158 Crore. There is not a single question on this sum to the assessee and no reference is made by the ld AO also. In fact, ld. AO should have asked the assessee to explain the difference between sum of Rs. 92 Cr and Rs. 158 Cr. But it is not enquired either by the search party or by the ld. AO. 68. The documents also mentioned details of some flat of Rs 20 crores, there is no whisper in the assessment order, statements about these facts. This part of the documents has not been looked at or enquired by the ld AO. Further the documents also speak “comm. On 122 cr @ 2 %\" how this figure matches with the alleged figures mentioned the loose paper. There is no inquiry what these figures are and to whom they relate. 69. There is no inquiry from the lender who provided a loan to the assessee i.e., Aditya Birla Finance Limited for purchase of this building that whether this proposal was shown to them and on what basis the loans were granted to the assessee of Rs. 65 Crores on purchase price of Property of Rs 92 Crores. It would have given an idea to the ld. AO about the correctness of the claim of the assessee. 70. To prove that assessee has purchased this property for Rs 92 Crs, Assessee has substantiated with the purchase deed, therefore, the observation of the ld. CIT (A) is incoherent that assessee did not show any other evidence showing that purchase consideration is only Rs 92 Crs. The ld. CIT (A) did not consider that there is no other evidence with the ld. AO to make the addition. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 35 of 48 71. Thus , the document found during the course of search , was neither questioned to the assessee, nor to the person who made it i.e., CFO of the company, what is the reason that ld AO linked it to the Divyashree Building, for which year it is to be linked ( AY 2016-17) and on what basis, what is the date of the document, what is the relevance of other figures mentioned in that paper. All this information was not at all enquired, but the addition was made. Thus, the additions are made by the ld. AO is without any evidence corroborating such documents with the alleged transaction of purchase of Divyashree building by the assessee. 72. Now coming to the decision relied up on by the assessee on several decision, we first come to the decision of Honourable Karnataka High court in case of Deputy Commissioner of Income-tax vs. Sunil Kumar Sharma [2024] 159 taxmann.com 179 (Karnataka)/[2024] 469 ITR 197 (Karnataka)[22-01-2024] the first question before the honourable court as per para no 21 of the decision was Whether 'Loose Sheets' and 'Diary' have any evidentiary value?, it was answered as under :- “As regards Question No. 1: Upon reading the material provided and the order of the learned Single Judge delivered on 12-8-2022, it is evident that the income that has escaped assessment and notices under section 153C of the Income-tax Act, 1961, were Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 36 of 48 solely issued based on loose sheets and documents which are termed as 'diaries' found during the search. The applicability of section 69A of the Act arises only when the principles laid down under section 68 of the Act are satisfied. section 68 states that there must be books of accounts or any books with credit entry. The said Act reads thus: \"Section 68: Where any sum is found credited in the books of an assessee maintained for any previous years and the assessee offers no explanations about nature and source thereof or the explanation offered by him is not, in the opinion of the assessing officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year.\" The language of the Law is vague and subjective, thus making us rely on an Apex court decision in the case of V.C. Shukla (supra) TS-5026-SC-1998-O], wherein the relevant portion reads thus: \"Collection of sheet fastened or bound together so as to form material whole. Loose sheets or scraps of paper cannot be termed as books.\" Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 37 of 48 In this regard, it is relevant to extract Section 69A of the Act, which reads thus: \"69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.\" The lack of corroborative evidence to show how the loose sheets found at the house of Sri K Rajandran are connected to the Respondents herein, or their occupation, is evident from the panchanama provided by the Assessing Officer. 22. The entire allegation is made out based on loose sheets of documents, which does not come under the Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 38 of 48 ambit and scope of 'books of entry' or as 'evidence' under the Indian Evidence Act. 23. In view of the aforementioned aspects, we have carefully examined the law declared by the Hon'ble Apex Court with regard to acceptance of diaries/loose sheets by the respondent-Revenue. In the case of V.C. Shukla (supra), at paragraphs 16 to 18 of the judgment, it is observed thus: \"16. To appreciate the contentions raised before us by the learned counsel for the parties it will be necessary at this stage to refer to the material provisions of the Act. Section 3 declares that a fact a relevant to another when it is connected with the other in any of the ways referred to in the provisions of the Act relating to the relevancy of facts; and those provisions are to be found in Section 6 to 55 appearing in Chapter II. Section 5, with which Chapter II opens, expressly provides that evidence may be given in any suit or proceeding of the existence or non-existence of every fact in issue and the facts declared relevant in the aforesaid section, and of no others. Section 34 of the Act reads as under:- Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 39 of 48 \"34. Entries in books of account when relevant - Entries in book of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the court has to inquire but such statements shall not alone be sufficient evidence to charge any person with liability.\" 17. From a plain reading of the Section it is manifest that to make an entry relevant thereunder it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still, the statement made therein shall not alone be sufficient evidence, still, the statement made therein shall not along be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value for charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which we are concerned, fulfil the requirements of the above section so as to be admissible in evidence and if this question is Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 40 of 48 answered in the affirmative then only its probative value need be assessed. 18. \"Book\" ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as 'book' for they can be easily detached and replaced. In dealing with the work 'book' appearing in Section 34 in Mukundram vs. Dayaram [AIR 1914 Nagpur 44], a decision on which both sides have placed reliance, the Court observed:- \" In its ordinary sense it signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book…I think the term \"book\" in S. 34 aforesaid may properly' be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 41 of 48 what is not a book for the purposes of S. 34, and I have no hesitation in holding that unbound sheets of paper in whatever quantity, though filled up with one continuous account, are not a book of account within the purview of S.34.\" 24. The aforesaid approach is in accordance with good reasoning and we are in full agreement with it. Applying the above tests, it must be held that the two spiral note books (MR 68/91 and 71/91) and the two spiral pads (MR 69/91 and MR 70/91) are \"books\" within the meaning of Section 34, but not the loose sheets of papers contained in the two files (MR 72/91 and MR 73/91).\" 25. The Hon'ble Supreme Court in the case of Common Cause (supra) [TS-5012-SC-2017-O] at paragraphs 278 to 282 of the judgment, has observed thus: \"278. With respect to the kind of materials which have been placed on record, this Court in V.C. Shukla case has dealt with the matter though at the stage of discharge when investigation had been completed by 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 Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 42 of 48 and not admissible under section 34 of the Evidence Act, and that only where the entries are made in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible. 279. It has further been laid down in V.C. Shukla case as to value of entries in the books of account, that such statements 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 that even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability. 280. This court has further laid down in V.C. Shukla that meaning of account book would be spiral note book/pad but not loose sheets. The following extract being relevant is quoted herein below: (SCC pp.423-27, paras 14 and 20) \"14. In setting aside the order of the trial court, the High Court accepted the contention of the respondents that the documents were not admissible in evidence under section 34 with the following words: \"70. ….an account presupposes the existence of two persons such as a seller and a purchaser, creditor and debtor. Admittedly, the Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 43 of 48 alleged diaries in the present case are not records of the entries arising out of a contract. They do not contain the debts 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 arised to do 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 payment were made. In fact, the entries there in are on monthly basis. Even the names of the persons whom the alleged payments were made do not find a mention in full. they have been shown in abreviated 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.\" 20. Mr. Sibal, the learned counsel for the Jains, did not dispute that the spiral note books and the small pads are 'books' within the meaning of Section 34. He, however, strongly disputed the admissibility of those books in evidence under the aforesaid section on the ground that they were neither books of account nor they were regularly kept in the course of business. he Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 44 of 48 submitted that at best it could be said that those books were memoranda kept by a person for his own benefit. According to Mr. Sibal, in business parlance 'account' means a formal statement of money transactions between parties arising out of contractual or fiduciary relationship. Since the books in question did not reflect any such relationship and, on the contrary, only contained entries of monies received from one set of persons and payment thereof to another set of persons it could not be said, by any stretch of imagination that they were books of account, argued Mr. Sibal. He next contended that even if it was assumed for argument's sake that the above books were books of account relating to a business still they would not be admissible under section 34 as they were not regularly kept. It was urged by him that the words 'regularly kept' mean that the entries in the books were contemporaneously made at the time the transactions took place but a cursory glance of the books would show that the entries were made therein long after the purported transactions took place. In support of his contentions, he also relied upon the dictionary meanings of the words 'account' and 'regularly kept'. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 45 of 48 281. With respect to evidentiary value of regular account book, this Court has laid down in V.C. Shukla, thus: (SCC p.433, para 37) \"37. In Beni v. Bisan Dayal [AIR 1925 Nagpur 445] it was observed tat entries in book s 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. In Hira Lal v. Ram Rakha [ A. I. R. 1953 Pepsu 113] 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 prove, 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 re relevant whenever they refer to a matter in which the court has to enquire was subject to the salient proviso that such 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 Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 46 of 48 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 the were in accordance with facts. 282. 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.\" 26. It is established in law by the Hon'ble Apex Court that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. Following the law declared by the Hon'ble Apex Court, we are of the view that the action taken by the respondent/Revenue against the Assessee based on the material contained in the diaries/loose sheets, are contrary to the law declared by the Hon'ble Apex Court. In that view of the matter, impugned notices issued under section 153C of the Act, based on the loose sheets/diaries are contrary to law, Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 47 of 48 which require to be set aside in these writ appeals, as the same are void and illegal.” 73. As the ld. AR has cited before us the decision of the Honourable Jurisdictional high court, we do not find any reason to refer to any other decisions cited by the ld. AR, though all of them echoed the same principles, that the loose papers, if uncorroborated, does not lead to any income in the hands of the assessee. 74. Thus, respectfully following the decision of the Honourable Jurisdictional high court, the loose paper is completely uncorroborated, based on which any addition made in the hands of the assessee cannot be sustained. 75. Accordingly Ground no 4 is allowed. 76. Ground no 5 is consequential in nature regarding chargeability of interest u/s 234 B and 234 D of the act, ground no 6 is general in nature and hence, dismissed. 77. In the result appeal no 2319/ Bang/2024 filed by the assessee is partly allowed. 78. Thus, all these seven appeals are disposed of as indicated above. Pronounced in the open court on this 31 day of July, 2025. Printed from counselvise.com ITA Nos.2315 to 2320 & 2363/Bang/2024 Page 48 of 48 Sd/- (KESHAV DUBEY) Sd/- (PRASHANT MAHARISHI) JUDICIAL MEMBER VICE PRESIDENT Bangalore, Dated, the 31st July 2025. /Desai S Murthy / Copy to: 1. Assessee 2. Revenue 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. Printed from counselvise.com "