RUCHA CONSULTANCY LLP,PUNE V. DCIT CC 6(1), MUMBAI, MUMBAI

ITA 4996/MUM/2024

AI Insights

The case involves cross appeals by M/s. Rucha Consultancy LLP and the Income Tax Department against the order of the CIT(A)-54, Mumbai, concerning the assessment year 2021-22. The primary issues revolved around the validity of notices issued under sections 143(2) and 148 of the Income Tax Act, the admissibility of electronic documents as evidence, and the additions made under sections 69A and 69C of the Act based on alleged unaccounted transactions. The Tribunal found that the additions were not substantiated by credible evidence and were based on retracted statements and uncorroborated documents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46962 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Other Referred Cases: Common Cause vs. UOI, Naren Premchand Nagda vs. ITO, Jawaharbhai Atmaram Hathiwala vs. ITO, ACIT vs. Shankar Nebhumal Uttamchandani
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANYOGITA NAGPAL
• Assessee Lawyers: NISHIT GANDHI
• Keywords: Set aside; Question of law; Unexplained expenditure; Income from undisclosed sources; Retraction; Third party statement; Search and seizure; Source of fund; Loose papers; Opportunity of cross examination
• Section: 148; 143(2); 132; 22; 133(6); 69C; 13; 69A; 139(4); 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “D” BENCH : MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No. A.Y. Appellant Respondent 4996/Mum/2024 2021-22 M/s. Rucha Consultancy LLP, 103-104, 1st Floor, Ramsukh House, Shivaji Nagar, Near Sancheti Hospital, Pune-411005. PAN : AARFR5880Q DCIT, Central Circle-6(1), 4th Floor, Kautilya Bhavan, BKC, Mumbai-400051. 5706/Mum/2024 2021-22 ACIT, Central Circle-6(1), 4th Floor, BKC, Mumbai-400051. M/s. Rucha Consultancy LLP, 103-104, 1st Floor, Ramsukh House, Shivaji Nagar, Near Sancheti Hospital, Pune-411005. PAN : AARFR5880Q For Assessee : Shri Nishit Gandhi Ms. Aadnya Bhandari For Revenue : Smt. Sanyogita Nagpal, CIT-DR Date of Hearing : 27-03-2025 Date of Pronouncement : 07-04-2025 O R D E R PER B.R. BASKARAN, A.M : These cross appeals are directed against the order dated 02-08-2024 passed by Ld CIT(A)-54, Mumbai and they relate to the Assessment Year (AY.) 2021-22. The appeal filed by the assessee before the Ld CIT(A), 2 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 having been partly allowed, both the parties are in appeal before the Tribunal. 2. The assessee herein is a limited liability partnership and it is engaged in the business of providing management consultancy services. It filed its return of income for the year under consideration u/s 139(4) of the Act declaring a total income of Rs.24,87,58,840/-. A search and seizure action under sec. 132 of the Act was undertaken in the hands of the assessee and its group concerns on 23-09-2021. During the course of search operations, certain incriminating materials were found and statements were also recorded from the partner Shri Prashant Nilawar, its employees and other persons. However, the statements were retracted later and the said retractions were not accepted by the AO. Based on the materials and statements, the AO completed the assessment of the assessee for the year under consideration determining total income at Rs.47,75,54,040/-. The Ld CIT(A) granted partial relief and hence both the parties have filed these appeals. 3. We shall first take up the appeals filed by both the parties, since certain additions confirmed by Ld CIT(A) and relief granted by him are based on the very same material. Those grounds of both the parties are adjudicated together. 4. We shall take up the appeal of the assessee as lead case. In the first ground, it is contended that the assessee should have issued notice u/s 148 of the Act for this year and hence, in the absence of said notice, the notice issued u/s 143(2) is invalid. We notice that the search has taken place on 23-09-2021 relating to AY 2022-23. The time period for completing regular assessment for AY 2021-22 was very much available at 3 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 that point of time. Hence, we are of the view that there was no requirement for the AO to have recourse to the provisions of sec.148 of the Act for initiating the assessment proceedings for AY 2021-22. Accordingly, we reject this ground of the assessee. 5. In the second ground, it is contended that the AO has not followed the procedures prescribed u/s 65B of the Indian Evidence Act, while placing reliance on electronic documents. At the time of hearing, the Ld D.R produced certain documents relating to certificates obtained in terms of sec.65B of the Indian Evidence Act and contended that the AO has duly followed the procedures prescribed in that Act. The Ld A.R submitted that he would require time to go through the documents furnished by the Ld D.R and further submitted that this legal issue may be kept open. Accordingly, we do not adjudicate this ground and leave the same open. 6. In the third ground, the assessee is contesting the addition of Rs.2.10 crores made by the AO u/s 69A of the Act. The revenue is contesting the relief of Rs.1.99 crores granted by Ld CIT(A) in ground no.1. 6.1. The Revenue carried out search action at the residential premises of Shri Ashish Chhangani, who is a personal assistant of Shri Prashant Nilawar, the promoter of Rucha group. At that time, the smart phone of Shri Ashish Chahangani was examined. From the photo gallery, an image containing certain entries shown as “in” and “out” was found. When questioned about the same, Shri Ashish Chhangani stated that this image was received from either Pawan Mishra or Sonu Mishra, the employees working in the office of Shri Prashant Nilawar. He also submitted that the numbers mentioned in the document should be understood as “lakhs of rupees”. When the statement so given by Shri Ashish Chhangani was 4 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 confronted with Shri Prashant Nilawar, he did not give any answer and submitted that the details will be furnished in a week’s time. 6.2. During the course of assessment proceedings, the assessee submitted that Shri Ashish Chhangani is assigned the task of answering calls, taking & giving messages and making appointments on behalf and on instructions of Shri Prashant Nilawar. Accordingly, it was submitted that he is not involved in any other activity relating to business/financial transactions. Accordingly, the assessee disowned the image found in the phone of Shri Ashish Chhangani. It was also submitted that the above said person has retracted his statement by filing an affidavit along with letter dated 18-10-2022. 6.3. The AO did not accept the explanations so given by the assessee. He held that the image was found in the possession of employee Shri Ashish Chhangani and he has also explained it to be the unaccounted transactions. The AO also noticed that the assessee has, in the alternative, submitted that the addition, if any, should be restricted to the difference of alleged receipts and payments amounting to Rs.11.32 lakhs. Since the assessee did not furnish any detail relating to the transactions, the AO rejected the alternative contentions of the assessee. Accordingly, the AO assessed the alleged receipt of Rs.2.10 crores as income u/s 69A of the Act as unexplained money. The alleged payment of Rs.1.99 crores was assessed as unexplained expenditure u/s 69C of the Act. 6.4. In the appellate proceedings, the Ld CIT(A) confirmed the addition of Rs.2.10 crores. In respect of Rs.1.99 crores, the first appellate authority held that the sources of payments are explained by the addition of Rs.2.10 crores. Accordingly, he deleted the addition of Rs.1.99 crores. 5 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 6.5. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the addition of Rs.2.10 crores and the revenue is aggrieved by the decision of Ld CIT(A) in deleting the addition of Rs.1.99 crores. 6.6. We heard the parties and perused the record. We noticed earlier that the AO has made these additions on the basis of an image found from the smart phone of Shri Ahish Chhangani, who was working as personal assistant of Shri Prashant Nilawar. The said image is extracted below for the sake of convenience:- A perusal of the above said image would show that it does not contain the name of the assessee. The entries in “figures” are noted as “Kg”, which was 6 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 deciphered as “Lakhs of rupees”. Shri Ashish Chhangani has stated that this image was received from some other employees, meaning thereby, he has neither created this document nor it was a document sent by the partners. Hence, the explanation given by him with regard to the contents of the document, in our view, cannot be relied upon unless it is corroborated with some other credible evidence. In the absence of such corroboration, this image has only to be considered as “dumb document”. 6.7. We noticed that Shri Ashish Chhangani has retracted his statement. Though the AO has rejected the said retraction, in our view, the statement given by him alone cannot be the basis for making the addition. We notice that the assessee has totally disowned the document as well as the statement given by him. The Ld A.R submitted that the presumption u/s 292C/ 132(4A) of the Act may be invoked in the hands of Shri Ashish Chhangani only and not against the assessee. However, we noticed that the above said image was not prepared by Shri Ashish Chhangani and it was received by him from some other person. Hence the presumption u/s 292C/132(4A) cannot be invoked in his hands of also and in that case, the AO was not right in law in presuming that the alleged transactions mentioned in the image belong to the assessee. We find merit in the said contentions. 6.8. The Ld A.R submitted that the AO had made similar addition in the hands of Shri Prashant Nilawar on the basis of image found in his whatsapp. The co-ordinate bench, vide its order dated 12-02-2025 passed in ITA No.5689 and 5073/Mum/2024 passed in the hands of Shri Prashant Nilawar, has deleted the addition holding that the AO did not bring any other corroborative material to support the entries found in 7 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 whatsapp message. Identical view has been taken by Visakhapatnam bench of ITAT in the case of Shri Manchukonda Shyam (ITA 87 (Viz) 2020 dated 23-09-2020). The Surat bench of ITAT has also expressed identical view in the case of ACIT vs.Shankar Nebhumal Uttamchandani (ITA 321/Surat/2022). 6.9. It is well settled proposition of law that abstract documents, which could not be corroborated with any other credible evidences, should be considered as dumb documents only. In that case, the AO could not have made addition on the basis of dumb documents. In the case of Common Cause vs. UOI (2017) (77 taxmann.com 245) (SC), it was held that the entries in loose papers/sheets are irrelevant and inadmissible as evidence. It was further held that \"such loose papers\" are not books of account and the entries therein are not sufficient to charge a person with liability. 6.10. We noticed earlier that the AO has made the addition of Rs.2.10 crores u/s 69A of the Act as unexplained money. We shall examine as to the provisions of sec.69A can be invoked in the facts of the present case. Section 69A of the Act reads as under:- “69A. Unexplained money, etc. 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 Assessing 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.” 8 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 A careful perusal of the above said provision would show that this provision could be invoked only if the assessee is “found to be the owner of any money, bullion, jewellery or other valuable article.” Thus, for invoking the provisions of sec.69A of the Act, it is required to be shown that the above said assets were physically available and further, the assessee was found to be the owner thereof. In the instant case, no physical money was found either with the assessee or with any other person and hence the question of the assessee, being owner of the same does not arise. Hence, the provisions of sec.69A are not applicable to the facts of the present case. 6.11. If the assessee was not found with any money, then the provisions of sec.69A cannot be invoked. In that case, then what could be taxed under the Act is the profit element involved in those transactions, if the said document is clearly established as belonging to the assessee. However, we have noticed that the impugned whatsapp image is a dumb document and the AO could not have made addition on the basis of that image without bringing any credible material on record. Accordingly, we hold that the Ld CIT(A) was not justified in confirming the addition of Rs.2.10 crores made by the AO on the basis of image found in the phone of an employee. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of Rs.2.10 crores. 7. In the appeal filed by the revenue, the relief granted in respect of addition of Rs.1.99 crores is being challenged. The AO added the above said amount as unexplained expenditure u/s 69C of the Act. The Ld 9 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 CIT(A) noticed that the alleged disbursements noticed in the whatsapp image was out of the alleged receipt of Rs.2.10 crores. Hence he held that the source of disbursements of Rs.1.99 crores stand explained and accordingly deleted the addition. The Revenue is aggrieved. 7.1. We heard the parties on this issue. We have held in the earlier paragraphs that the AO was not justified in relying upon whatsapp image taken from the phone of Shri Ashish Chhangani for making the addition of Rs.2.10 crores and Rs.1.99 crores. Hence we confirm the relief granted by Ld CIT(A) on the above said reasoning. Even otherwise, as rightly held by Ld CIT(A), the sources of alleged disbursements would stand explained from the same document and hence no addition is warranted. Accordingly, this ground of revenue is rejected. 8. The next issue urged by the assessee in Ground no.4 relates to the addition of Rs.1,40,500/- made by the as unexplained expenditure u/s 69C of the Act. 8.1. From the smart phone of Shri Ashish Chhangani, an image depicting the certain cash disbursements was found. The aggregate amount mentioned therein was Rs.1,40,500/-. Shri Ashish Chhangani stated in his sworn statement that the same represented unaccounted cash expenses. Before the AO, the assessee disowned the said document and also placed its reliance on the retraction statement filed by Shri Ashish chhangani. The AO did not accept the same and accordingly assessed the above said amount of Rs.1,40,500/- and the Ld CIT(A) also confirmed the same. 10 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 8.2. We heard the parties and perused the record. We notice that the document containing the details of alleged cash expenses was found in the smart phone of Shri Ashish Chhangani. It is stated that the said document did not contain the name of the assessee. Further, the assessee has disowned the document and also did not accept the statement given by Shri Ashish Chhangani. We noticed earlier that Shri Ashish chhangani has also retracted his statement. Hence, the said image cannot be considered as a credible evidence that could be related to the assessee. In our view, it should be considered as a dumb document only. It is a fact that the AO has not brought any corroborating material to support the image found in the smart phone of above said employee. Accordingly, we are of the view that the AO could not have made addition of Rs.1,40,500/- based on uncorroborated material. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO delete this addition. 9. The next issue urged by the assessee in its ground no.5 relates to the addition of alleged unaccounted bonus payment of Rs.14,87,200/-. 9.1. During the course of search operation, certain papers were found in the drawer of Ms. Manjusha Bhagwat Patil, who was an HR employee. She explained that those papers represent bonus payments made to the employees in cash by the Account section. At the time of search, the payment of bonus was confirmed by Shri Mundada, Accounts Manager. Shri Prashant Nilawar, Director also confirmed payment and also stated that the same was paid out of his personal cash. However, during the course of assessment proceedings, the assessee claimed that it did not pay any unaccounted bonus by way of cash. It was submitted that they were 11 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 only proposals and was not actually paid. It was also contended that the statements given by all the three persons have been retracted. 9.2. The AO, however, did not accept the explanations of the assessee and made the addition of Rs.14,87,200/- and the Ld CIT(A) also confirmed the same. 9.3. We heard the parties on this issue and perused the record. The impugned document depicting the bonus details were found in the drawer of an HR employee. According to the assessee, the bonus disbursements are made from Accounts department and not by her. Hence her statement should not be relied upon. Even though the accounts manager and the director of the assessee had confirmed the details of bonus payment, yet during the course of assessment proceedings, the assessee has stated that it was only a proposal and it was not acted upon. It was also submitted that the statements given all the three people have been retracted. The Ld A.R submitted that the statement contained the names and amount, but cash was mentioned against only few persons. Hence, it cannot be presumed that the cash disbursement, if any, was made to all employees. The Ld A.R submitted that the assessee did not pay bonus due to covid-19 pandemic. We also notice that the assessing officer did not conduct any enquiry with any of the employees in order to find out the veracity of explanation given by the assessee. Hence, the AO could not have made the addition on the basis of retracted statements and also without conducting any enquiry with the employees whose names were found in the document. 9.4. We notice that an identical addition was made in the hands of a group concern named M/s Rucha Promoters & Developers P Ltd on the 12 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 basis of documents found from Ms Manjusha Bhawat Patil. The co- ordinate bench of Tribunal has deleted the addition, vide its order dated 17-02-2025 passed in ITA No.5024/Mum/2024 with the following observations:- “10. In this regard, after having evaluating the facts of the present case and series of circumstances put together I noticed that he who has not brought on record any other evidence to show that the person making the statement i.e Ms. Manjusha Bhagwat Patil had herself made payment of bonus in cash or cash was paid in her presence. As on the bare perusal of the page 81 of paper book, based on which additions have been made, it is clearly evident from the face of it that there is no mention of cash paid in the said paper sheet rather respective employees codes mentioned there for payment of cash, can you be assumed in respect of the employees against whose names, employees code are mentioned . 11. Even otherwise, since AO performs the job of investigator, therefore it was incumbent upon the AO to first as certain that if any bonus at all has been paid or not. More particularly when assessee has been consistently saying that no bonus payment was made to employees for the relevant period, since it was covered under the grip of Covid-19 pandemic. 12. In my view, no addition can be made unless there irrebuttable evidence as regards the payment of bonus in cash and addition cannot be made merely because of the failure on the part of AO to conduct necessary enquiries and to bring on record cogent, convincing and admissible evidence. 13. Even otherwise, the AO has made addition u/s 69C of the Act in the present case. In my view, in order to make additions under the said section the initial burden is upon the revenue/AO to prove that expenditure was actually incurred only thereafter assessee can be put to prove the source with regard to such expenditure. In the facts of the present case, AO has miserably failed to discharge its burden and nothing has been brought on record to prove the actual incurring of any expenditure. Therefore, on this reason also no addition could have been made u/s 69C of the Act. 14. Hence considering the totality of the facts and circumstances and legal proposition as discussed by me above, in my considered view, the AO has failed to discharge its burden and to bring on record the cogent, 13 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 convincing and relevant documentary evidences to make addition u/s 69C of the Act. Therefore I direct the AO to delete the same. It is ordered accordingly.” 9.5. The facts prevailing in the instant case in identical with the case decided by the Co-ordinate Bench. Accordingly, we follow the decision rendered in the above said group case by the co-ordinate bench and direct the AO to delete this addition. The order passed by Ld CIT(A) on this issue is set aside. 10. The next issue urged by the assessee in Ground no.6 relates to the addition of Rs.59.00 lakhs. The revenue, in ground no.2, is contesting the relief granted by the Ld CIT(A). 10.1. During the course of search operations, certain loose sheets with yellow sticky notes were found, wherein the details of receipts aggregating to Rs.59.00 lakhs and payments aggregating to Rs.24.00 lakhs were found. Before the AO, the assessee submitted that the AO had placed reliance on the statement given by Shri Pawan Mishra, who is only an office boy serving tea/coffee. It was also stated that the statement given by Shri Pawan Mishra has been retracted. It was also contended that the sticky notes are dumb document. 10.2. The AO did not accept the above said contentions of the assessee. Accordingly, he assessed the receipts aggregating to Rs.59.00 lakhs as unexplained money u/s 69A of the Act and also assessed the payments aggregating to Rs.24.00 lakhs as unexplained expenditure u/s 69C of the Act. 10.3. The Ld CIT(A) confirmed the addition of Rs.59.00 lakhs made u/s 69A of the Act and deleted the addition of Rs.24.00 lakhs u/s 69C of the 14 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 Act holding that the expenditure is explained by the receipts. Hence both the parties are aggrieved. 10.4. We heard the parties and perused the record. The fact would remain that the details of payments and receipts were noted down in a sticky note paper. The search team has conducted enquiry about this document with Shri Pawan Mishra, who was stated to be an office boy. Hence, the AO should not have placed his reliance on the said statement alone to make additions. Since the sticky notes contained abstract entries and since it did not contain the name of the assessee, it has to be considered as dumb document only. In general, the sticky notes are used for temporary purpose and it cannot be relied upon unless the entries found therein are corroborated with any other credible evidence. Further, the Ld A.R submitted that the names mentioned in the sticky notes, viz., Shri Vinayak Chavan and Shri Gohil Sir are unknown persons not connected with the assessee. Hence, in our view, the AO should have conducted further enquiries in order to find out the truth, which he has failed to do. It is also stated that the statement given by the above said person has been retracted. Hence, we are of the view that the impugned addition has been made by the AO on the basis of a dumb document, which remained uncorroborated. In the earlier paragraphs, while adjudicating the issue no.1 urged by the assessee, we have held that the provisions of sec.69A could be invoked only if money is physically found in the hands of the assessee, which is not the case. Accordingly, we are of the view that the impugned additions of Rs.59.00 lakhs made u/s 69A of the Act and Rs.24.00 lakhs made u/s 69C of the Act are liable to be deleted. 15 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 10.5. Accordingly we set aside the order passed by Ld CIT(A) in respect of addition of Rs.59.00 lakhs and direct the AO to delete this addition. We noticed earlier that the Ld CIT(A) has deleted the addition of Rs.24.00 lakhs made u/s 69C of the Act on the reasoning that the sources of those expenses would stand explained. In the preceding paragraphs, we have held that the AO could not have placed reliance on the sticky notes, since they are uncorroborated and hence dumb documents. Accordingly, we confirm the relief of Rs.24.00 lakhs granted by Ld CIT(A) for the reasons discussed above. 11. We shall now take up the appeal filed by the revenue. Ground no.1 and 2 urged by the revenue has already been adjudicated in the earlier paragraphs. In ground no.3, the revenue is aggrieved by the decision of Ld CIT(A) in granting relief of Rs.17.00 crores. 11.1. The facts relating to this addition are stated in brief. The revenue carried out search and seizure operations in the case of Hiranandani group on 22-03-2022 and at that time, a statement u/s 132(4) of the Act was taken from Shri Prabhakar Dalvi, who was GM of a group company. In the statement taken from him, he had stated to have paid cash of Rs.17.00 crores to the assessee and its partners in relation to some “EP” work. Based on this statement, the AO asked the assessee to explain the receipt and also show cause why the addition of Rs.17.00 crores should not be made in the hands of the assessee. In response thereto, the assessee submitted that he has not received the above said amount and hence no addition could be made on the basis of uncorroborated statement. The AO did not accept the explanations of the assessee and accordingly added Rs.17.00 crores as unexplained money in the hands of the assessee. 16 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 11.2. The Ld CIT(A) deleted the addition and hence the revenue is in appeal. 11.3. We heard the parties and perused the record. We notice that the Ld CIT(A) has deleted the addition with the following observations:- “12.3 I have perused the observations made by the AO in the assessment order based on which the impugned addition was made. I have also gone through the submission made by the appellant rebutting the allegations made against it based on the statement of Shri Prabhakar Dalvi. 12.4 The issue under consideration here is whether the AO was justified in making addition of Rs. 17 Crores u/s 69A of the Act based on the statement given by Shri Prabhakar Dalvi. In this regard, I have gone through the material available on record and the submission made by the appellant. It is observed that Shri Prabhakar Dalvi in his statement recorded u/s 132(4) of the Act stated that the appellant was paid Rs. 17 Crores for some „EP‟ work. 12.5 The appellant contends that it had not received any such amount and not provided any such service to Hiranandani Group as alleged by the AO. That his statement was baseless and was not supported by any corroborative evidence and thus not addition could be made in his hands. It is trite law that addition cannot be made simply on the basis of statement given by third party without referring to corroborative evidence. This proposition is substantiated by the decisions of various Hon‟ble High Courts referred by the appellant in his submission. 12.6 From the facts of the case and the material available on record it is observed that the AO had simply placed reliance on the statement of Shri Prabhakar Dalvi for making addition of Rs. 17 Crore in the hands of the appellant and he did not refer to any evidence. No evidence was placed on record to show any connection between the appellant and Shri Prabhakar Dalvi. No evidence was referred by the AO to show that the appellant had provided any service of „EP Work‟ to Hiranandani Group based on which the addition was made. On the contrary, in response to notice issued u/s 133(6) of the Act by the AO, Shri Niranjan Hiranandani and Hiranandani Construction Pvt. Ltd had denied entering into any such alleged transaction with the appellant and also denied making any such payment to the appellant. 12.7 It is also pertinent to mention that the Shri Prabhakar Dalvi had already retracted his statement. The affidavit retracting the statement of Shri Prabhakar Dalvi was filed by the appellant before the AO and also 17 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 before this office. However, while passing the assessment order the AO has completely ignored this affidavit and simply relied on the uncorroborated statement given by him which was subsequently retracted. 12.8 The addition made by the A.O. suffers from serious flaws i.e. there was no evidence found by the department in support of the statement made by Shri Prabhakar Dalvi, no connection was established or any transaction was found to have been made between these two parties and the AO failed to consider the reply filed by Hiranandani Group and the affidavit retracting the statement of Shri Prabhakar Dalvi. 12.9 In this regard it is seen that in the case of Naren Premchand Nagda v. ITO [ITA No. 3265 (Mum.) of 2015, dated 8.7.2016], a search was conducted at the premises of a builder. The statement of key person of the group was recorded who stated that the assessee had paid cash to the group. When the statement of the key person was put to the assessee, he denied of making any payment in cash. However, the department made addition by relying on the statement of key person of the group. The Hon'ble Mumbai ITAT relying on series of judicial pronouncements held in the case of Naren Premchand Nagda v. ITO (supra) that in the absence of any evidence found against the assessee, no addition can be made on the basis of documents found from the premises of third party and the statements recorded during the course of search conducted in third party premises. In this case the transaction of purchase of property by the assessee from the builder had not been denied by the assessee. Further, the cheque payment was also reflected in the seized notings. Inspite of this, the addition made on the basis of notings in respect of cash transaction was not confirmed by the Hon‟ble Mumbai ITAT. 12.10 In the case of Jawaharbhai Atmaram Hathiwala v. ITO [2010] 128 TTJ 36 (Ahd.), addition was made by relying on seized material and statement of a third party without bringing any other evidence on record. The Hon'ble Ahmedabad Tribunal deleted the addition by observing that no evidence could be brought on record by the Revenue to show that in fact the assessee had paid 'on money' to the developers. No document containing signature of the assessee or handwriting of the assessee to corroborate the above making of payment by the assessee was found during the course of the search. Merely recording made by a third party or statement of a third party could not be treated as so sacrosanct so as to read as a positive material against the assessee. Therefore, addition in the hands of the assessee on account of 'on-money' was held to be not justified. The relevant extracts are as under: 5.The learned CIT(A) after considering the above submission of the assessee held that the addition made by the learned AO with regard to the payment of 'on money' by the assessee out of undisclosed sources of income of Rs. 18 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 3,81,414 (Rs. 4,83,101-Rs. 1,01,687) was justified on the ground that Shri Ketan O. Der during the course of cross examination by the assessee has stated that 'on money' was paid by the assessee and that nowadays, in property transactions part payment in cash is a custom. 6. The learned Authorised Representative of the assessee during the course of the hearing, submitted that besides the statement of Shri Ketan O. Der partner of Ohm Developers, there was no other evidence to show that assessee had in fact paid any 'on money' for purchase of flat. He relied upon the decision of Hon'ble Bombay High Court in the case of Addl CIT v. Miss Lata Mangeshkar [1974] 97 ITR 696 (Bom) wherein it was held as under: \"3. In our view, the question has been framed by the Department so as to give it a colour of a question of law, for, in our view, having regard to the manner in which the Tribunal has dealt with the said entries, it cannot be said that the Tribunal has ignored the entries in the ledger of Vasu Films relating to the so called payments made by the firm to the assessee. In fact, the Tribunal has discussed these entries appearing in the ledger of Vasu Films and has given substantial reasons as to why it was not inclined to accept the entries as reliable entries for accepting the case of the Department. Inter alia, it pointed out that the ledger containing the said entries had not been produced before it, that no corresponding entries were there in the day-book of the relevant period and that Vasu Films did not rely on this ledger in the course of its own assessment proceedings but for its own assessment proceedings different set of books had been relied upon as genuine set of books. As regards the evidence of the two witnesses on which reliance was placed by the Department, the Tribunal has pointed out that so far as N. Vasudev Menon was concerned, he had no personal knowledge of the actual payments made to the assessee and, therefore, his evidence could not carry the case of the Department any further and so far as the Bombay manager, C.S. Kumar, was concerned it came to the conclusion that though he purported to say that he had made the payments in 'black' to the assessee-payments corresponding to the entries to be found in the ledger-his evidence suffered from serious infirmities, which have been pointed out by the Tribunal in its reasons. It pointed out that as the Bombay manager he used to receive amounts from Madras from out of which he used to make disbursements in Bombay but he maintained no account in respect of the same which made it difficult to rely on his evidence. The other serious infirmities in his evidence are to be found in 19 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 para 7 of the Tribunal's order. Mr. Joshi for the Department had also mainly relied upon this evidence and did not press the other evidence which was of a general character. However, having regard to the reasons which have been given by the Tribunal for disbelieving the two witnesses and for rejecting the entries that were found in the ledger of Vasu films, we feel that the conclusion reached by the Tribunal purely rests on the appreciation of evidence and no questions of law arise 4. Mr. Joshi tried to urge before us that in para 5 of its order the Tribunal has found fault with the entries appearing in the ledger on the ground that there were no corresponding entries in the day-book of the firm covering the same period and the Tribunal further observed that no attempt was made to explain the absence of relevant entries in the daybook and for that reason the Tribunal rejected the entries in the ledger on which reliance was placed. Mr. Joshi tried to urge that, after all, the entries in the ledger were the entries in a book which was not meant for being disclosed to the IT authorities because it contained the entries pertaining to the payment in 'black' and the day-book for the relevant period that was available was a day-book meant for being produced before the taxing authorities as it contained entries pertaining to all legal and white payments and naturally in such day-book no corresponding entries would be found. So no importance should have been attached by the Tribunal to the absence of a day-book containing the corresponding entries. In the first place it must be pointed out that this is not the only reason for rejecting the entries but the Tribunal has given other sufficient reasons for rejecting the same. But even with regard to this reason which has been given by the Tribunal, though it may be contended that since the entries in the ledger pertained to the payments in 'black' no corresponding entries could be found in the daybook which was meant to be produced before the IT authorities, still the fact remained that the day-book from out of the other set of books (not intended to be produced) which must have contained the corresponding entries was not available and, in the absence of that, mere production of ledger entries would be of no avail, as there would be no guarantee about the truthfulness or genuineness of the entries in the ledger. Moreover, entries in books of account-whether in day-book or in the ledger-are merely corroborative evidence and in the absence of proper corroborative evidence the primary direct evidence would alone be required to be scrutinized and that evidence in this case consisted of the testimony of C.S. Kumar and the evidence of that witness was found to be thoroughly unreliable by the Tribunal. After all 20 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 the entries in the day-book or the ledger would be a corroborative piece of evidence and once the direct evidence of the person who is said to have made payments in 'black' to the assessee is disbelieved, we do not think that any value could be attached to the entries in the ledger or to the entries in the day-book even if one had been produced. In the circumstances, we feel that the questions which are sought to be referred arise out of a finding of fact recorded by the Tribunal on pure appreciation of evidence.\" 7. He also relied on the decision of Ahmedabad Bench of the Tribunal in the case of Asstt CIT v. Prabhat Oil Mills [1995] 52 TTJ (Ahd.) 533, wherein it was held as under : \"The average yield in the case of P was 13.33 per cent in case of cottonseed oil and 78.31 per cent in the case of cottonseed oil cake. Whereas in the case of the assessee P the average yield is 13.37 per cent in case of cottonseed oil and in the case of cottonseed oil cake 80.61 per cent which is higher than that reflected by P. As regards the addition on the basis of certain notings in the seized diary, it is noted that except relying on the entries in the said seized book the AO has not brought any corroborative material on record to prove that such sales were made to H outside the books of account. When the assessee categorically denied of having made any sales to H except those recorded in its books of accounts, the onus was on the AO to prove with corroborative evidence that the entries in the said seized book actually represented the sales made by the assessee-firm to II. Mere entries in the accounts of a third party was not sufficient to prove that the assessee had indulged in such transactions as there was no guarantee that the entries were genuine Decision of the Tribunal in the case of Patel Oil Mills & Ginning Factory (ITA No. 803/Ahd/1999) followed; Addl CIT v. Miss Lata Mangeshkar [1974] 97 ITR 696 (Bom.) relied on: decision, of the Tribunal in the case of Rajdeep Sales Agency (ITA No. 1837/Ahd/1990) distinguished.\" 8. Hence, it was submitted that only on the basis of the statement of Shri Ketan O. Der partner of M/s Ohm Developers, no addition on account of 'on money' can be made in the hands of the assessee. 12.11 Thus it is seen that the Hon‟ble Courts have clearly held that a statement of a third party cannot be relied upon to make additions in the hands of the assessee, unless such statement is corroborated by independent evidence linking such material to the assessee. In the present case it is seen that the addition of Rs. 17,00,00,000/- has been made by the 21 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 AO relying on the statement of a third party, which in any case has been retracted. It is seen that while such statement could have been a reason for starting an investigation, the AO has simply relied on such third party statement to make the addition without corroborating it with any kind of independent evidence linking such material with the assessee. As per the plethora of Court judgments discussed above, such an act is not permitted under the law. The Hon‟ble Supreme Court in the case of Umacharan Shaw and Bros v CIT (1959) 37 ITR 271 held that suspicion, however strong, cannot take the place of evidence. Similarly, raising presumption itself does not amount to proof. Presumption, however strong, cannot take the place of evidence as held in the case of Pooja Bhatt 66 TTJ (Mum) 817 and in the case of D.M Kamani HUF 65 TTJ (Pat) 504. Thus, in the absence of any independent evidence linking the assessee with the third party statement, the addition made by the AO on the basis of such third party statement cannot be sustained. 12.12 Based on the facts stated above, I find that in view of the contentions placed by the appellant and the relevant judicial pronouncements and the facts of the present case, the addition made by the AO cannot be sustained. Accordingly, it is held that the AO erred in making the impugned addition of Rs. 17,00,00,000/- u/s 69A of the Act and thus it is hereby deleted. Ground No. 8 of the appeal is accordingly allowed.” 11.4. We notice that the impugned addition has been made on the basis of a third party statement, which has been denied by the assessee. It is also stated that the said statement has been retracted by the third party. No other corroborative material has been brought on record by the AO to support his case that the assessee has, indeed, received the amount of Rs.17.00 crores. It is noticed that the assessee had requested the AO to supply to it the copy of statements recorded from Shri Prabhkar Dalvi, since the impugned addition has been made by the AO on the basis of that statement only. However, the AO did not supply the copy of statement to the assessee. It is well established proposition of law that the AO could not have made addition on the basis of material collected behind the back of the assessee, unless those materials were confronted with the assessee. The Ld A.R submitted that the assessee had specifically requested the AO 22 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 to allow cross examination of Shri Prabhakar Dalvi and the AO did not provide such an opportunity. Hence, the AO could not have made any addition on the basis of third party statement which is not corroborated, and not confronted with the assessee. We notice that the Ld CIT(A) has relied upon various case laws in support of the decision reached by him. Before us, no contrary decision was placed reliance by the revenue. We noticed earlier that the assessing officer has made the addition u/s 69A of the Act, but the assessee was not found to be the owner of any cash. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting the addition of Rs.17.00 crores made u/s 69A as unexplained money. 12. The ground no.5 urged by the revenue relates to the addition of Rs.80.00 lakhs made on the basis of statement given by Shri Shailendra Rathi. 12.1. During the course of search operations, the revenue searched the premises of Shri Shailendra Rathi in Pune. His whatsapp chat was examined and data back up was taken. In the statement, Shri Shailendra Rathi had accepted that he has received Rs.80.00 lakhs through Angadiayas in Mumbai. Though the assessee disowned this transaction, yet the AO took the view that the above said amount was received by Shri Shailendra Rathi in the capacity of consultant to the Rucha Group. Accordingly, the AO assessed the above said amount of Rs.80.00 lakhs as unexplained money u/s 69A of the Act. The Ld CIT(A) deleted the addition and hence the revenue is contesting the said decision. 12.2. We heard the parties on this issue and perused the record. We noticed that the AO has made this addition on the basis of whatsapp chat and also on the basis of statement given by Shri Shailendra Rathi. The Ld 23 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 CIT(A) has noticed that the presumption of the assessing officer that Shri Shailendra Rathi is the consultant (employee) of the assessee is not correct. He has stated that Shri Shailendra Rathi is an independent consultant and not an employee. Hence the basis foundation on which the addition has been made by the AO fails here. Further, the Ld CIT(A) has stated that the whatsapp chat did not contain any reference to the assessee. The Ld CIT(A) has also stated that the Shri Shailendra Rathi also did not refer to the name of the assessee. Accordingly, he held that the whatsapp chat did not have any bearing in the hands of the assessee and hence no addition could be made. Thus, we notice that the AO has made the impugned addition on the basis of a third party statement without bringing any corroborative material to support of his view that the impugned amount of Rs.80 lakhs was received on behalf of the assessee. In support of the above decision, the Ld CIT(A) has referred to following case laws:- (a) PCIT (Central) vs. Dwarka Prasad Aggarwal (161 taxmann.com 813)(SC); (b) Kailashben Manharlal Chokshi vs. CIT (328 ITR 411)(Gij); (c) DCIT vs. Narendra Garg & Ashok Garg (72 taxmann.com 355)(Guj); (d) Naren Premchand Nagda vs. ITO (ITA No.3265 (Mum) of 2015.); (e) CIT vs. Sant Lal (2020)(118 taxmann.com 432)(Delhi); 24 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 (f) Jawaharbhai Atmaram Hathiwala vs. ITO (2010)(128 TTJ 36)(Ahd); (g) ACIT vs. Prabhat Oil Mills (1995)(52 TTJ 533)(Ahd Trib); (h) ACIT vs. Anand Kumar Jain (2023)(147 taxmann.com 124)(Mum Trib); (i) Pramod Pandey vs. ACIT (ITA No.4295 (Delhi) of 2012); (j) Atul Tantia vs.DCIT (ITA No.492/Kol/2021 dated 28-03-2023); 12.3. From the facts discussed above, we notice that the Ld CIT(A) has deleted this addition of Rs.80.00 lakhs for justifiable reasons. In the earlier paragraphs, while adjudicating the issue No.1 urged by the assessee, we have held that the provisions of sec.69A could be invoked only if money is physically found in the hands of the assessee, which is not the case. The Ld A.R further submitted that the AO had also made the addition in the hands of Shri Prashant Prakash Nilawar on the basis of whatsapp chat found in the phone of Shri Shailendra Rathi. The said addition has been deleted by the Tribunal, vide its order dated 12-02-2025 passed in the hands of Shri Prashant Prakash Nilawar in ITA No.5689 & 5073/Mum/2024. The Tribunal held as under:- “…..the assessee cannot be saddled with the responsibility to explain the image/sheet found from the mobile of a third person, more particularly in the present situation where the owner of the said document Shri Shailendra Rathi himself could not clearly explain the contents therein as is evident from his statement recorded.” 25 ITA Nos. 4996/Mum/2024 & 5706/Mum/2024 12.4. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting the addition of Rs.80.00 lakhs. 13. In the result, the appeal filed by the assessee is allowed and the appeal of the Revenue is dismissed. Order pronounced in the open court on 07-04-2025 Sd/- Sd/- [ANIKESH BANERJEE] [B.R. BASKARAN] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 07-04-2025 TNMM Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file By Order Dy./Asst. Registrar I.T.A.T, Mumbai "