AI Insights
The case revolves around a series of assessments and appeals concerning unexplained cash and investments found during a survey and subsequent search at the business premises of Shri Sanjay Taneja. Initially, a large sum of cash was discovered, leading to further search operations and the discovery of documents that the Assessing Officer interpreted as evidence of unexplained investments and income. The assessee contested these interpretations, arguing that the documents were merely rough notes for potential loans that were never actualized. The Tribunal's decision focused on the evidential value of the documents and the proper application of legal standards in assessing unexplained income.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 704935 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-07-2025
Appeal Filed By
Assessee
Order Result
Partly Allowed
Assessment Year
2010-2011
Judgement Text
"ITA No.1643/Del/2022 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “G” BENCH: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.1643/Del/2022 [Assessment Year : 2010-11] Shri Sanjay Taneja, 198/1, Ramesh Market, East of Kailash, New Delhi-110065. PAN-AAEPT8805A vs ACIT, Central Circle-18, Delhi APPELLANT RESPONDENT Appellant by S/Shri Mohit Chaudhary, CA, Harish, CA, Neetu Jain, CA & Mitika Chaudhary, Adv. Respondent by Shri Mahesh Kumar, CIT DR Date of Hearing 03.06.2025 Date of Pronouncement 04.07.2025 ORDER PER MANISH AGARWAL, AM : The present appeal is filed by the assessee against the order dated 20.05.2022 passed by Ld. Commissioner of Income Tax (A)- 27, New Delhi [CIT(A), in short] in Appeal No. CIT(A), Delhi- 27/10015/2019-20 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 29.03.2019 passed u/s 254/143(3) of the Act pertaining to Assessment Year 2010-11. 2. Brief facts of the case are that a survey operation u/s 133A of the Act was carried out at the business premises of the assessee wherein cash of INR 76,24,000/- was found. As the assessee did not explain the source of such cash, search proceedings were ITA No.1643/Del/2022 Page | 2 initiated u/s 132 of the Act at the business and residential premises of the assessee. Thereafter, the assessee has filed the return of income on 30.09.2010, declaring total income at INR 2,85,18,570/-. The case of the assessee was selected for scrutiny and the order u/s 143(3) was passed on 09.12.2011 at total income of INR 9,92,33,190/- by making various additions/disallowances. 3. Against that order, the assessee preferred appeal before Ld.CIT(A) who vide order dated 15.09.2014 allowed the substantial relief to the assessee. 4. Aggrieved by the order of Ld.CIT(A), the Revenue filed appeal before the Tribunal wherein the Co-ordinate “G” Bench of the Tribunal, New Delhi vide order dated 31.10.2018 in ITA No.6185/Del/2014 partly allowed the appeal of the Revenue and set aside the issue of addition of INR 6,81,55,760/- and INR 16,25,000/- to the file of AO with a direction to the assessee to produce all details and information of the persons whose names are appearing in seized paper Nos. 23 & 24 of Annexure A-2. In compliance to such directions, AO proceeded with the present proceedings wherein after considering the submissions made passed the order on 29.03.2019 u/s 254/143(3) of the Act by making addition of INR 6,81,55,760/- u/s 69A of the Act and of Rs. 16,25,000/- as unaccounted interest income of the assessee. 5. Against this order, the assessee preferred appeal before Ld.CIT(A) who vide impugned order dated 20.05.2022, dismissed ITA No.1643/Del/2022 Page | 3 the appeal of the assessee. Thus, the present appeal is filed by the assessee before the Tribunal. Grounds of appeal taken by the assessee are as under- 1. That On the facts and circumstances of the case, the order passed by the Ld. CIT(A) under section 250 of the Act is bad both in the eyes of law and on facts. 2. On the facts and circumstances of the case, the learned Ld. CIT(A) has erred, both on facts and in law, in sustaining the assessment of the appellant at income of Rs.9,88,03,020/- as against the income of Rs.2,85,18,570/- declared by the appellant. 3. That the Ld. CIT(A) has erred, both on facts and in law, in sustaining the addition of Rs.6,81,55,760/-on account of unexplained investments without appreciating the fact that the addition was made on the basis of dumb documents. 4. That the Ld. CIT(A) has erred, both on facts and in law, in upholding the addition of Rs. 16,25,000/- on account of interest income against the unexplained investments. 5. That the Ld. CIT(A) has erred, both on facts and in law, in upholding the disallowance of expenses of Rs.1,27,664/- made by the Assessing Officer. 6. On the facts and circumstances of the case, the learned Ld. CIT(A) has erred, both on facts and in law in upholding the addition of Rs.3,76,026/- on account of unexplained cash. 7. On the facts and circumstances of the case, Ld. CIT(A) has erred, both on facts and in law, in sustaining the said addition arbitrarily rejecting the explanation and evidences brought on record by the appellant. 8. That the provisions of sections 234B and 234C of the Act are not at all applicable. 9. That the impugned appeal order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence. 10. That the appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of appeal before or at the time of hearing of the appeal.” ITA No.1643/Del/2022 Page | 4 6. Before us, Ld.AR for the assessee submits that during the course of search, one diary was found and seized from the possession of wife of the assessee which was marked as Annexure A-2. In the said diary two pages bearing Nos. 23 & 24 were also seized, for which it was stated by the wife of the assessee that these papers were written by the assessee. Ld. AR for the assessee submits that from the perusal of the said two papers, it could be seen that these papers contained names and in two columns amounts were written. In one column, the amounts were written in lakhs whereas in other column full amounts were written. Ld.AR submits that during the course of search, the assessee explained the entries contained in the said pages as “memoranda entries” written by him where he was identifying the persons from whom loans could be obtained, as the assessee was planning to purchase a property. It was further stated by Ld.AR that when he calculated the interest to be paid on such amounts, he dropped the idea of borrowings and buying of property due the high cost of interest. 6.1. Ld.AR further submits that the paper does not speaks about the nature of entry whether they pertained to the receipt of loan or giving the loan and further it is not clear whether the amount stated in last column is interest and further whether such interest is receivable or payable. Ld. AR submits that in terms of the directions given by Hon’ble ITAT in first round of appeal, the assessee during the course of set aside proceedings before the AO, filed complete details and particulars like names and addresses of ITA No.1643/Del/2022 Page | 5 the persons whose names are appearing in the said loose papers. However, AO asked the assessee to produce them before him for examination without making any direct enquiry at his end. He submits that no effort was made by the AO for issue of summons u/s 133(6)/131 of the Act to these parties directly in order to establish the true nature of transactions recorded in the loose papers. Ld.AR also submits that one of the party Shri Ravi Malhotra who is close relative of the assessee, appeared before the AO and his statements were recorded wherein he categorically denied having any transactions of loan taken or given to the assessee as alleged based on the entry found noted in the said loose papers. It is thus, submitted by Ld.AR that the additions made by AO are merely on conjectures and surmises and without bringing on record any corroborative evidences / material which could lead to the conclusion that the assessee has given loans and advances to the parties whose names are appearing in the said papers out of his unexplained income. He further submits that the action of the Act in holding that the said amounts as investment of assessee is contrary to the explanation given by the assessee during the course of search where it was stated that that these amounts represents proposed loans thus, the AO without any material had changed the nature of entries from loan to be taken to advances given by the assessee and therefore, he requested for the deletion of the additions so made. ITA No.1643/Del/2022 Page | 6 7. Ld.AR also drew our attention the facts that the assessee’s wife in her statement recorded during the search stated that her husband i.e. assessee was planning to buy a property for the company namely M/s. Taneja House P. Ltd. however, the said company was incorporated on 06.03.2010 and therefore, question of taking any loans in the previous year relevant to year under appeal does not arise. Ld.AR further submits that the assessee has purchased one property in the month of July, 2009 for a sum of INR 35 Lakhs and the AO has got valued the market price of the said from DVO who valued the same at INR 1,09,40,700/-. Ld.AR further submitted for the sake of arguments, it is presumed that the entries found noted in the said papers are of loans taken for the purchase of property than it is not understandable that why a person borrow money of INR 6.81 crores on interest when the property has market value of INR 1.10 crores only. 8. Ld.AR further placed reliance on the written submissions filed before us which reads as under:- A) “The Assessing Officer has erred in making addition of Rs.6,81,55,760/-u/s.69A and interest of Rs. 16,25,500/- on it on the basis of dumb documents. 1. Following the directions of the Hon'ble ITAT, the Ld. AO has gone through the procedure of 143(3) of the Act and completed the assessment by making addition of Rs.6,81,55,760/- considering the same as loan/advances by the assessee and Rs. 16,25,500/- as interest income on it. 2. The above additions were made on basis of page 23 & 24 of Annexure-2 of seized documents which were found during the course of search conducted on assessee. Copies of these seized documents are enclosed as page no.10 to 11 of PB. ITA No.1643/Del/2022 Page | 7 3. With regard to the said pages, the assessee in his reply to a question in survey proceedings answered as follows: \"Our showroom is located on a road which is not a commercial street or mix land use street as per MCD norms. Due to recent ceiling drive by MCD we were facing a threat of closure of our shops. I was planning to shift my entire shop to a fully commercial area in the vicinity. It came to my knowledge that a shop in fully commercial location equivalent in area to my present shop will cost 5 to 6 crores. Since, I was not having that much fund and in a very distressed state of mind, I just noted down the names of probable persons who can extend me loan to the extent possible in round figures with the interest burden thereof. Since the interest burden as per my calculation was working out to be very high considering profit of my existing business so I dropped the idea as such and I preferred to continue from the office shop.\" 4. During the assessment and appellate proceedings, about page nos. 23 & 24 of Annexure-2, the assessee has reiterated the above statement. Assessee has a hardware shop near Amar Colony in New Delhi. Due to threat of ceiling, assessee was planning to buy a shop in an approved commercial area in the vicinity and therefore, planning to collect funds from his friends and relatives. However, he dropped the plan as the estimation has gone beyond his capacity. The assessee has confirmed that the figures written on the pages are a rough estimation; these are only a part of his imaginary planning. 5. However, the Assessing Officer has made the above additions by stating as follows: \"During assessment as well as appellate proceedings, the assessee has failed to explain the contents of seized documents and furnish any documentary evidence providing otherwise.\" (para 4.6 of the assessment order) The above observation of the Assessing Officer is not correct as the assessee has given proper explanation about the seized pages. 6. During the current assessment proceedings, the assessee has produced name and addresses of 11 persons out of 13 persons whom names are appeared in the said seized pages. Among these persons some are customers of his regular business. The assessee has produced ledger accounts of these customers, confirming business activity with the assessee. Copy of letter containing details of the persons and ledger accounts of the customers are enclosed at page no. 13 to 21 of PB. 7. Further, Sh. Ravi Malhotra (jijaji), one of the persons in the list, appeared before the Assessing Officer and in his statement, he has denied any cash transaction with the assessee. Copy of statement recorded is enclosed at page no.22 of PB. Further, with respect to other parties in the ITA No.1643/Del/2022 Page | 8 list, it is submitted that the transactions noted as rough jottings in the seized documents never actually took place and was just a rough estimation made by assessee as explained above, and therefore, the other parties were not available/ were reluctant to appear before the Ld. AO and get their statements recorded. 8. The Ld. AO has made the addition on the basis of surmises and conjecture. The AO has assumed that the said figures are loans/advances given by the assessee to the persons named on the seized pages. In the assessment order, the Ld. AO has stated as follows: \"It is also pertinent to mention here that as the figures mentioned in the seized documents represent loan/advances given by the assessee 'in cash' out of his unaccounted income, therefore even on verification, no party would accept its receipt as it will attract penal provision for accepting cash loans in their cases.\" (para 4.3 of the assessment order) 9. Further, assessee has given plausible explanation about the seized documents. Then burden has shifted to revenue to prove that these are loans/advances to the parties by the assessee, However, the Ld. AO has failed to produce any corroborative evidence which can lead to the conclusion that the assessee has given loans/advances in cash to the parties mentioned in page 23 & 24 of Annexure-2 of seized documents. 10. The Ld. AO has made the addition without any investigation and verification of the parties. He has not made any effort to conduct enquiry to establish the allegations against the assessee. He rather stated that \"as the figures mentioned in the seized documents represent loan/advances given by the assessee 'in cash' out of his unaccounted income, therefore even on verification, no party would accept its receipt as it will attract penal provision for accepting cash loans in their cases.\" The statement of the Ld. AO clearly reflects his arbitrary and assuming conclusion with regard to the addition. No addition on the basis of dumb documents: 11. It is pertinent to note that the names written on page 23 & 24 of Annexure-2 of seized documents are nothing but jottings and dumb documents as * It appears that the names were written in a very casual manner against the alleged huge amount of money e.g. 'Jijaji, Nemimama, Guptaji' etc. If really such amounts were taken or given, at least the names would be written properly to avoid any confusion in identity of the parties. * There is no date mentioned in the said seized pages. ITA No.1643/Del/2022 Page | 9 * There is no signature of any of the person or the assessee in the said seized pages. * The alleged amount is only mentioned in pages of a paper and it was not found in the possession of assessee in physical form, during the course of survey or search conducted on the assessee. As said above, these are nothing but a rough estimation for collecting funds to purchase a commercial space in an approved commercial location as elaborately mentioned in point no.2 & 3 of the submission. Therefore, the said pages can only be considered as dumb documents. 12. On perusal of the above said pages it is revealed that the said pages are nothing but loose sheets and not part of books of accounts of the assessee and thus these extracts do not constitute admissible evidences. 13. Dumb documents are the documents which do not speak anything independently. These are the documents which are found during the course of search or survey and do not indicate whether the figures mentioned therein refer to anything meaningful or corroborative with the affairs of the assessee. It means which require evidences in its support to derive any conclusion. The assessee has given plausible explanation about it and the Ld. AO has not been able to rebut this explanation by any material evidence. The Ld. AO has neither brought any material on record nor established any nexus between the figures mentioned in the seized pages and the assessee. The Ld. AO has only cooked an imaginary story about the seized pages and derived an arbitrary conclusion. Such assumptions without corroborative evidences are not sustainable. Thus, no adverse inference can be drawn against the assessee relying on the said loose sheet. 14. Entries in loose papers/ sheets are irrelevant and inadmissible as evidence. Such loose papers are not \"books of account\" and the entries therein are not sufficient to charge a person with liability. Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries to prove that they are in accordance with facts. 15. Assessee wishes to rely on following judgments: a) [Common Cause vs. UOI (Sahara Diaries) (Supreme Court) January 11, 2017 (Date of pronouncement)] It is further submitted that the issue has been examined by the Hon'ble Supreme Court and has observed as under:- The Supreme Court rejected the demand for a probe into bribes allegedly paid to politicians mentioned in the so-called Birla-Sahara diaries, saying it would be dangerous for democracy to order a probe on the basis of loose sheets inadmissible as evidence. ITA No.1643/Del/2022 Page | 10 \"We find the documents seized from Birla and Sahara groups to be random computer entries, diaries, emails and Excel sheets. These are not maintained on a regular basis as books of account,\" said the bench, virtually putting a stamp of approval on the Income Tax Settlement Commission's recent decision, based on a forensic test, to discard the Sahara diary and documents as constituting evidence. The bench relied heavily on the SC judgment in the V C Shukla case in which it had ruled that diary entries alone cannot be treated as evidence unless corroborated by other independent details. \"When we examine this with the findings in the V C Shukla case, we are of the considered opinion that no case is made out against anyone to warrant directing investigation against any person,\" it said. \"We are of the opinion that in the peculiar facts and circumstances of this case, no case is made out to direct investigation against political personalities, officers and others,\" the bench said and dismissed the application filed by Common Cause through Bhushan seeking an independent Supreme Court monitored investigation into the Birla-Sahara diaries. b) Hon'ble Supreme Court in the matter of CBI v V.C. Shukla & Others, 1988 mostly known as JAIN DAIRY HAWALA case where Hon'ble Supreme Court rejected the prosecution's claim justifying counsel for the appellant's contention that the entries in the diary maintained by Jain Brothers were inadmissible and a bundle of sheets/papers which are detachable and replaceable at a moments notice, can hardly be characterized as ground of evidence of some books of accounts. CBI v Shukla [VC] (1998) 3 SCC 410 (SC)]. c) Addition was deleted by the CIT(A) on this basis that the loose- papers on the basis of which the addition are made by the AO are without any particulars or date or name etc. and, therefore, these are dump-papers and cannot be made the basis for addition. This finding of the CIT(A) could not be controverted by the DR of the Revenue by bringing any evidence on record to show that this essential information such as date, name or particulars are available on the seized paper on the basis of which the addition was made by the AO and, hence, on this issue also, there is no reason to interfere with the order of the CIT(A). [DEPUTY COMMISSIONER OF INCOME TAX vs. KAWARJEETSINGH P. CHHABDA (2013) 37 CCH 0368 AhdTrib] That leaves the Court with the addition initially made by the AO for the sum of Rs.3.64 crores. Here too the addition was made only on the basis of some loose papers and a chit. This too would fall in the same category of material which could not have been the sole basis for addition without some surveillance of the substantiation. Consequently, the ITAT's reasoning cannot be faulted. (para 15). d) Addition made on the basis of undated and unsigned document seized during search is not sustainable COMMISSIONER OF INCOME TAX- XIV vs. VIVEKAGGARWAL (2015) 121 DTR 0241 (Del) ITA No.1643/Del/2022 Page | 11 e) In the case of CIT vs. Girish Chaudhary (2008) 296 ITR 619 (Delhi) - Delhi High Court has held as under:- \"That the revenue has to prove the undisclosed income beyond doubt. Further it was held that the document should be a speaking one and it should contain narration in respect of various figures noted therein. Otherwise the same should be considered as dumb document on which reliance could not be placed upon.\" f) It is a matter of experience that in the course of survey & search, large number of loose papers are found and seized by the Department. The assessee is required to explain as to the nature and contents of each and every paper particularly giving reference to the presumption available against the assessee. Many times such loose papers contain nothings, scribbling or rough estimates which may not mean anything. The assessing officer sometimes ventures into decoding, extrapolating and estimating income based upon surmises and conjectures. The courts have held that no addition can be made on the basis of dumb documents. The presumption is that the document belongs to the assessee and its contents are correct. The presumption cannot be extended to mean that whatever figure mentioned in the loose paper found from the possession of assessee, represent his income. No decoding is permissible on suspicion, surmise, conjecture and imagination. Amar Natvarlal Shah v. Asstt.CIT (1997] 60 ITD 560 (Ahd) g) Habitat Royale Projects Pvt. vs Acit, I.Τ.Α. No. 1539/DEL/2015, 08.11.2017: 40. Turning to the case on hand, the document recovered from the file in the computer of Mr. Awasthi, forms the basis of the addition made by the AO, which was further reduced by the CIT (A). This was in the form of a computer print out of three sheets which were unsigned and undated. The first sheet was titled 'Cash-in-flow detail for the revenue', the next was titled 'Revenue details' and the third was titled 'Vatika Triangle, Guargaon.' The notes to the documents are indicative of their being projections. Noting (i) states that \"it is presumed that the building will be completed and fully let out in the month of November 2002.\" Another note states \"Further, the sale of the building will took place over a period of nine months.\" Admittedly, as on the date of the search the construction was still in progress. Flats up to the fourth floor had been sold. The view taken by the ITAT that mere fact that the print out states that the flats on second and third floor have been sold, does not necessarily mean that they were sold at the rates indicated therein is definitely a plausible view to take. 45. As pointed out in Commissioner of Income Tax v. S.M Aggarwal (supra) the said document can at best be termed as a 'dumb' document which in the absence of independent corroboration could not possibly have been relied upon as a substantive piece of evidence to determine the actual rates at which the flats were sold. Further as pointed out in Commissioner ITA No.1643/Del/2022 Page | 12 of Income Tax v. D.K. Gupta (supra) merely because there are notings of figures on slips of paper, it did not mean that those transactions actually took place. Likewise in Commissioner of Income tax vs Girish Chaudhary (supra), the Court termed a loose sheet containing some notings of figures as a 'dumb document' since there was no material to show as to on what basis the AO had reached a conclusion that the figure '48' occurring in one of them was to be read as Rs. 48 lakhs. 46. In the present case, there was again no material on the basis of which the AO could have applied a standard rate of Rs 4,800 per sq ft for all the floors of VT. It was also not open to the AO to draw an inference on the basis of the projection in the document, particularly when the Assessee offered a plausible explanation for the document. The burden shifted to the Revenue to show, on the basis of some reliable and tangible material, how rate at which the flats on the second and third floors of VT was higher than that dictated in the sales register or the sale deeds themselves. 47. In the circumstances, the Court is of the view that the ITAT was justified in coming to the conclusion that the addition of Rs. 5,60,73,380 made by the CIT (A) was not sustainable in law. Addition u/s.69A is not tenable: 16. Section 69A of the Act invokes when 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. In this case, the assessee was found in the possession of loose sheets and not in physical possession of any money, bullion, jewellery or other valuable article. Therefore the above additions u/s. 69A is not tenable. In this regard assessee wishes to rely on the following judgments: In P & H HC in 294 ITR 78, the assessee was found to be in possession of loose slips and not any valuable article or things. Neither the possession nor the ownership of any jewelry mentioned in the slips was proved. Therefore, the Tribunal had rightly held that the provisions of section 69A of the Act were not applicable. The Tribunal also held that if the assessee failed to explain the contents of the slips, it was for the Revenue to prove on the basis of material on record that they represented transactions of sales or stock in trade before making any addition on this score. The assessee had duly explained that these were rough calculations and the assessee's explanation had not been rebutted by any material evidence. DCIT 32(2), Mumbai vs. Karthik Construction Co., ITA no.2292/Mum./2016, order dated 23 February, 2018: \".......the only thing which requires to be examined in the present appeal is whether the addition made under section 69A of the Act can be sustained. A reading of section 69A of the Act makes it clear, ITA No.1643/Del/2022 Page | 13 addition can only be made when the assessee is found to be in possession of money bullion jewellery, etc., not recorded in his books of account. It is not the case of the Department that the loan repayment made during the year was either not recorded in the books of account or the source of fund utilised in repaying the loan is doubtful. That being the case, the addition under section 69A of the Act cannot be made. Therefore, the decision of the learned Commissioner (Appeals) has to be sustained.\" 17. It is pertinent to note that presumption u/s.292C is not a significant matter in the case of the assessee. The assessee has not denied the fact that both the seized pages are not belong to him. He has also has admitted that he has written the figures in the pages however, these are only imaginary figures as he was planning to collect funds from these parties to purchase a property in an approved commercial area. Hence, there is no requirement to emphasis on implication of section 292C of the Act in the case of the assessee. 18. With regard to addition of interest income of Rs. 16,25,000/-, it is submitted that the assessee has denied any transactions written on the seized pages. The assessee has already given plausible explanation on it. Further, the unnatural rate of interest with regard to alleged interest income also does not support the assumption or suspicion of Ld. AO. Since, the original amount of Rs.6,81,55,760/- is not sustainable therefore, the addition on account of interest income on the same amount is also not sustainable. Hence, such addition should be deleted. It is explicit from the above discussion that the additions made by the Assessing Officer are on conjectures-surmises, probabilities, guess work without bringing on record any corroborative evidence or material on record to justify the same. Therefore, the above additions deserve to be deleted. Prayer In view of the above submissions it is explicit that the addition made by the Ld. AO is perverse and invalid and based on irrelevant reason. Therefore, it is prayed that the additions may kindly be deleted and the appeal of the appellant be allowed.” 9. On the other hand, Ld.CIT DR for the Revenue submits that in the present case since beginning of the proceedings, the assessee was specifically asked to file the details of the persons whose names are appearing on the said loose papers however, the assessee has failed to submit these details in first round of proceedings, even ITA No.1643/Del/2022 Page | 14 during the remand proceedings in first round. Ld.CIT DR further submits that the papers were found from the possession of the assessee and admittedly they were in the hand writing of the assessee himself. Thus, the presumption u/s 132(4A) is that the entries contained therein belonged to the assessee unless rebutted by placing on record the contrary material. Ld.CIT DR further submits that during the course of original assessment proceedings as well as in set aside the proceedings, the assessee has not been able to prove that the entries are not pertaining to him and therefore, he requested for the confirmation of the addition made by the lower authorities. 10. Heard both the parties and perused the material available on record. During the course of search, a diary was found which was marked as Annexure A-2 having many pages including two pages bearing No.23 & 24 which are admittedly written by the assessee. The relevant extract of the pages are as under:- ITA No.1643/Del/2022 Page | 15 ITA No.1643/Del/2022 Page | 16 11. For convenience, entries contained in the said pages are tabulated as under:- ITA No.1643/Del/2022 Page | 17 12. Since beginning of proceedings, assessee was stating that these are rough papers thus the entries contained therein deserves to be ignored. The assessee in his statements recorded on 21.04.2010 u/s 131 of the Act before the ADIT clearly stated that these are rough noting recorded for the purpose of obtaining loans from the persons whose names are written therein. However, due to higher interest burden, assessee dropped the idea. Since no amount was borrowed nor any corroborative evidence was found as a result of search or brought on record during post search / assessment proceedings nor any cash to this extent was found thus, these entries cannot be made sole basis for making such a huge addition. The claim of the assessee that in first round before the ld. CIT(A), assessee had explained the nature of the entries noted in these seized papers and a remand report was also obtained by the ld. CIT(A) and after considering the explanation given by the assessee and the facts stated in the remand report, deleted the addition. However, the Hon’ble ITAT has set aside the matter to the file of AO for making verification of the entries. 13. It is seen that in set aside proceedings, complete names and addresses of all the parties were provided to the AO who instead of issuing summons u/s 131/133(6) of the Act to any of the party, insisted the assessee to produce all the persons whose names are appearing in the said two seized papers. Assessee with all efforts was able to produce one Shri Ravi Malhotra before the AO, who happened to be a close relative of the assessee and his statements ITA No.1643/Del/2022 Page | 18 were recorded wherein, he categorically denied having any transactions of loan taken/given by the assessee, copy of such statements are available at page 22 of the paper book filed by the assessee. 14. It is a matter of common knowledge that a normal man always afraid of Income Tax department and avoid appearing before any Income Tax Authority. Due to this fact, none of the other person had appeared before the AO on the request of the assessee. Surprisingly, the AO despite having power to issue summons u/s 131 or 133(6) of the Act, choose not to issue the same and insisted the assessee to produce all these persons before him for examination. The Hon’ble Supreme court in the case of Orrisa Corporation reported in [1986] 159 ITR 78 (SC) held that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee. 15. Further while making the addition the AO himself was not sure whether he is making addition on account of loans given or advance taken or for the payments made or received and has played blow hot and blow cold. The assessee in his preliminary statements stated that these entries represent the list of possible parties from ITA No.1643/Del/2022 Page | 19 whom loans could be taken in future which were never taken due to high interest cost however, the addition is made treating them as loans given by the assessee as unexplained money u/s 69A of the Act and interest thereon as unexplained income of the assessee. The Hon’ble Punjab & Haryana High court in the case CIT vs Ravi Kumar reported in 294 ITR 78, on the application of provisions of section 69A of the Act has held that “the assessee was found to be in possession of loose slips and not any valuable article or things. Neither the possession nor the ownership of any jewelry mentioned in the slips was proved. Therefore, the Tribunal had rightly held that the provisions of section 69A of the Act were not applicable. The Tribunal also held that if the assessee failed to explain the contents of the slips, it was for the Revenue to prove on the basis of material on record that they represented transactions of sales or stock in trade before making any addition on this score. The assessee had duly explained that these were rough calculations and the assessee's explanation had not been rebutted by any material evidence.” 16. It is settled law that while working out the addition, the papers should be read in the manner it is written. If the entries are treated as loans taken then the amounts alleged as interest is payment out of undisclosed sources for which provision of section 69A of the Act cannot be invoked. If these amounts are treated as loans given, the interest is to be treated as undisclosed income and loans should be held as given out of undisclosed sources. However, both the principal and interest cannot treated as undisclosed money of the ITA No.1643/Del/2022 Page | 20 assessee u/s 69A of the Act as has been done in the instant case. From the perusal of these seized two pages, it appears that these papers neither reflects whether the amounts mentioned are receipts or payments and these are the simple memoranda entries made by assessee without having any financial implication. It appears that the entire addition is made on incorrect and improper appreciation of facts and merely on assumption and presumption without having any corroborative material brought on record, more particularly when the AO has not appreciated the statements of the assessee in its true spirit. The Hon’ble Jurisdictional High Court in the case of CIT vs. Girish Chaudhary reported in (2008) 296 ITR 619 (Delhi) has held as under:- \"That the revenue has to prove the undisclosed income beyond doubt. Further it was held that the document should be a speaking one and it should contain narration in respect of various figures noted therein. Otherwise the same should be considered as dumb document on which reliance could not be placed upon.\" 17. Another aspect which needs to be considered is that the AO observed interest @ 2% and 3% is paid on such loans which was never be the prevailing market rate of interest either for borrowing or for funds invested. Further if we calculate the percentage of each individual entry in some cases it would be as high as more than 100% which is an impossibility. In the statement of Smt. Sharda Taneja, wife of the assessee recorded at the time of search, she stated that these loans were taken for purchasing the property for their company M/s Taneja Complete Home Solutions Pvt. Ltd. ITA No.1643/Del/2022 Page | 21 However, the said company was incorporated on 06.03.2010 and the property for which the proposed loans were stated to have been taken, was purchased by the assessee on 14.07.2009 that too for a sum of Rs. 35.00 lakhs only and the DVO has valued the same at Rs. 1,09,40,700/-. If for argument sake, it is presumed that the loans as stated in the seized papers were taken to acquire such property than in such case, the maximum requirement of funds would be of 1.10 crores and not of 6.81 crores as were found noted in the said paper. This aspect is totally ignored by the lower authorities. In this regard the Co-ordinate bench of Tribunal in the case of Habitat Royale Projects Pvt. vs ACIT in I.Τ.Α. No. 1539/DEL/2015 dated 08.11.2017 under identical circumstances where the addition was made on the basis of loose papers containing the projection while deleting the additions has held as under: 40. Turning to the case on hand, the document recovered from the file in the computer of Mr. Awasthi, forms the basis of the addition made by the AO, which was further reduced by the CIT (A). This was in the form of a computer print out of three sheets which were unsigned and undated. The first sheet was titled 'Cash-in-flow detail for the revenue', the next was titled 'Revenue details' and the third was titled 'Vatika Triangle, Guargaon.' The notes to the documents are indicative of their being projections. Noting (i) states that \"it is presumed that the building will be completed and fully let out in the month of November 2002.\" Another note states \"Further, the sale of the building will took place over a period of nine months.\" Admittedly, as on the date of the search the construction was still in progress. Flats up to the fourth floor had been sold. The view taken by the ITAT that mere fact that the print out states that the flats on second and third floor have been sold, does not necessarily mean that they were sold at the rates indicated therein is definitely a plausible view to take. 45. As pointed out in Commissioner of Income Tax v. S.M Aggarwal (supra) the said document can at best be termed as a 'dumb' document which in the absence of independent corroboration could not possibly have ITA No.1643/Del/2022 Page | 22 been relied upon as a substantive piece of evidence to determine the actual rates at which the flats were sold. Further as pointed out in Commissioner of Income Tax v. D.K. Gupta (supra) merely because there are notings of figures on slips of paper, it did not mean that those transactions actually took place. Likewise in Commissioner of Income tax vs Girish Chaudhary (supra), the Court termed a loose sheet containing some notings of figures as a 'dumb document' since there was no material to show as to on what basis the AO had reached a conclusion that the figure '48' occurring in one of them was to be read as Rs. 48 lakhs. 46. In the present case, there was again no material on the basis of which the AO could have applied a standard rate of Rs 4,800 per sq ft for all the floors of VT. It was also not open to the AO to draw an inference on the basis of the projection in the document, particularly when the Assessee offered a plausible explanation for the document. The burden shifted to the Revenue to show, on the basis of some reliable and tangible material, how rate at which the flats on the second and third floors of VT was higher than that dictated in the sales register or the sale deeds themselves. 47. In the circumstances, the Court is of the view that the ITAT was justified in coming to the conclusion that the addition of Rs. 5,60,73,380 made by the CIT (A) was not sustainable in law. 18. It is thus, appears that the scribbling as found noted in the seized pages does not speak about the true nature whether they were in respect of receipt of money or payment of money nor was any effort made by the AO though he had all the whereabouts of the persons whose names are written therein. It appears that the AO was bent upon to make the addition of this amount by any means without bringing any corroborative evidence on record to hold that the amounts noted against these 13 persons is the unexplained money of the assessee. More particularly, when one person, namely Shri Ravi Malhotra, whose identity was written as “Jijaji” in the seized papers had appeared and denied any such transaction. It is also seen that no action is taken in the hands of any of the person whose name is written in the said seized papers even though ITA No.1643/Del/2022 Page | 23 their particulars were available with the AO. The entire addition is based on the suspicion and surmises. 19. In view of these facts, we are left with no option but to delete this entire addition which has been found to have been made based on no corroborative material and based on dumb documents. 20. Reliance is also on the decision of Hon’ble Rajasthan High Court in the case of DT Vs. R.Y. Durlabhji reported in 211-1TR- 178 wherein at page 189, the Hon’ble Court has observed as under: “In Dhekeswari Cotton Mills Ltd. V. CIT (1954) 26 ITR 775 (SC), Omar Salay Mohamed Sait V. CIT (1959) 37 ITR 151 (SC) and Lalchand Bhagat Arnbica Ram V. CIT (1959) 37 ITR 288 (SC), it has clearly been held by the apex court that there must be something more than mere suspicion in support of an assessment and mere suspicion cannot take the place of proof for the purpose of passing an order of assessment.” 21. In the case of D.A. Patel vs. DCIT (Mum) reported in 72 ITD 342 Section 158BC of the Income Tax Act, 1961 — Block assessment in search cases — Computation of undisclosed income — Block period 01.04.1986 to 15.07.1996 in search cases — Computation of undisclosed income — Whether simply because a sheet of paper was found during search at premises of assessee, he could not be saddled with tax liability when there was no evidence connecting appellant to seized paper — Held, Yes. 22. Hon'ble Supreme Court in the case of CBI Vs. V.C. Shukla & Others has quoted certain judgements of the High Courts which have bearing on the issue (page 1418 para 36 — 38) as under: ITA No.1643/Del/2022 Page | 24 \"36. In Yesuvadiyan Vs. Subba Naicker, AIR 1919 Madras 132 one of the Ld. Judges constituting the Bench had this to say: \"S. 34, Evidence Act, lays down that the entries in books of account, regularly kept in the course of business are relevant, but such a statement will not alone be sufficient to charge any person with liability. That merely means that the plaintiff cannot obtain a decree by merely proving the existence of certain entries in his books of account even though those books are shown to be kept in the regular course of business. He will have to show further by some independent evidence that the entries represent real and honest transactions and that the moneys were paid in accordance with those entries. The legislature however does not require any particular form or kind of evidence in addition to entries in books of account, and I take it that any relevant facts which can be treated as evidence within the meaning of the Evidence Act would be sufficient corroboration of the evidence furnished by entries in books of account if true.\" 23. While concurring with the above observations the other Ld. Judge stated as under: \"If no other evidence besides the accounts were given, however strongly those accounts may be supported by the probabilities, and however strong may be the evidence as to the honesty of those who kept them, such consideration could not alone with reference to S. 34, Evidence Act, be the basis of the decree.\" 24. Thus, Hon'ble Apex Court in above judgment has observed that even if certain transactions are found to be recorded in books of accounts, same have to be corroborated with independent documentary evidence before any liability could be fastened upon assessee, whereas in the instant case, loose paper found is mere a rough noting without any date and any details mentioned on the same is nothing more than a dumb document having no legal validity. ITA No.1643/Del/2022 Page | 25 25. The above discussion leads to belief that the documents relied upon by the AO for making additions are dumb documents. A comprehensive discussion on what constitutes a dumb document is made by the coordinate bench of Hon'ble ITAT, Jabalpur decision in the case of ACIT Vs. Satyapal Wassan 295 ITR (AT) 352 as under: “12. Let us now examine how all these transactions are necessary for the purposes of levying tax on the basis of a seized document. 13. Section 4 relates to charge of Income-tax. It reads as under: Section 4(1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income- tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of, this Act in respect of the total income of the previous year of every person: Provided that where by virtue of any provision of this act income- tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under Sub-section (1), income- tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act. From a reading of above section, we find following components which enter into the concept of taxation. The first is the taxable event which attracts the levy, the second is the person on whom the levy is imposed and who is obliged to pay the tax. The third is the assessment year in which charge of income-tax is levied. The fourth is the total income of the previous year and the fifth is the rate or rates at which tax is to be imposed. The rates are prescribed in the annual Finance Act. Therefore, this component has no value in determining total income on the basis of seized document. Our view in this regard is supported by the decision of Hon'ble Supreme Court in Govind Saran Ganga Saran v. CST wherein it was held that for the purpose of charging to tax, there should be four components to be satisfied. For the sake of convenience, we refer to the relevant head notes from that decision: The component which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the ITA No.1643/Del/2022 Page | 26 second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed and he fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislation scheme defining any of those components of the levy will be fatal to its validity. 14. Now let us examine these components in detail and how they are relevant for taxing an item. 15. The first component shows that it is necessary to find out the nature of transaction which is the source of generating income. It has to be clearly spelt out as to whether a particular transaction is of income yielding nature as per Income-tax law. Not all transactions yield taxable income. Firstly it is only the financial transactions which yield taxable income and secondly it is of revenue character. The capital transactions, unless specified in the Income-tax Act will not yield taxable income. It has to be shown either from the rearing of the document or from accompanying investigation that the transaction recorded in a document is of revenue character or is otherwise taxable under Income-tax Act. As a quasi-judicial authority, the AO has to satisfy himself on the basis of cogent material, either found in the search or on post-search enquiries that transaction recorded in in the impugned document is real one and nor imaginary (i.e. an estimate or something which is to take place in future) and it has actually taken place. It has to be shown that the transaction recorded in the impugned document is sale or purchase, advance or loan, of capital or of interest whether it is a statement of existing assets, disclosed or undisclosed; what is the commodity involved; who are the people involved in the transaction; if it is advance, then whether debtors concerned are existing, their identity; whether advance so taken is reflected in their books; whether any interest is paid on such transaction, what are the documents executed for recovery of such advances or what arrangement the assessee has done for recovery of such advances; whether there are any other related document found in the search; whether any person recorded in the impugned documents had, otherwise any other transaction with the assessee recorded in the regular books. In the present case, the AO has simply presumed that the alleged figures are advances without there being any material on record to support such presumption. 16. About the second component the charging section clearly spells out that Income-tax will be levied on the total income of a person. The person must be the one as defined in Section 2(31). It must be clearly established who is that person whether he is the one from whose possession the document is recovered or someone else. Merely because a document is recovered from ITA No.1643/Del/2022 Page | 27 the body of a person, does not automatically lead to the inference that it belonged to him. It is only for certain purposes that presumption under Section 132 (4A) has been enacted and not for all purposes including the assessment. Further this presumption is not conclusive. It is rebuttable. If the assessee has by way of affidavit denied ownership of the document and further Smt. Nirmal Kanta, wife of Sri Dharamvir Wassan admitted that it belonged to her husband, it could not be inferred without rebutting those evidences (filed in the form of affidavits before the AO) that document and transactions recorded therein, in fact, belonged to Sri Satyapal Wassan. Onus under Section 132(4A) is always shifting. This sub-section provides that Section 132 (4A) Where any books of account, other documents, money, bullion jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed. (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped , executed or attested by the person by whom it purports to have been so executed or attested. Thus the Legislature has used the words \"may presume\". A presumption is an inference drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from certain set of facts. This can be disproved by other evidence provided by other party. The words \"may presume\" leave it to the court to make or not to make the presumption according to the circumstances of the case. Such presumption is optional and the court is not bound to make it. Even if such presumption is made, it is only rebuttable one. A rebuttable presumption is, thus, clearly a rule of evidence which has the effect of shifting the burden of proof by leading the evidence. Initially the AO would be justified to make such presumption, if drawn after judicial application of mind to the fact of the case. Thereafter, when the assessee leads the evidence, then theAO has to consider it judicially. What amount of evidence one requires to rebut the evidence depends upon facts of each case. There is no rigid rule in this behalf. Sometimes, mere statement of the assessee may be enough. ITA No.1643/Del/2022 Page | 28 Hon'ble Rajasthan High Court in Addl. CIT v. Thahrayamal Balchan,d 124 ITR 111 (Raj.) observed as under: The evidence which satisfied the Tribunal was the facts and circumstances of the case. As pointed out above what quantum of evidence would rebut a legal presumption in a given set of facts does not admit of any rigid rule. The evidence may be direct or circumstantial or both and a mere statement of the assessee may be enough in some cases. It does not raise a question of law The assesses filed his affidavit and also the affidavit of Smt. Nirmala Kanta Wassan wife of Dharamveer Wassan to the effect that impugned document contained transaction belonging to Shri Dhaamvir Wassan. It could not be said that onus did not shift to the AO. In our considered view, the affidavits, even if regarded as self-serving do not lose their evidentiary value if there is no material contrary to the averments made in the affidavit. When sufficient other material is found in the search which corroborates hat document belonged to the assessee, then denial of such ownership merely by affidavits will be meaningless and they do not carry any weight to rebut the presumption lying on the assessee. In the present case, nothing is shown by the AO that there was other material correlated with the impugned document clearly showing that it belonged to the assessee. Under these circumstances, the assessee has successfully shifted the onus on to the AO by filing the affidavits. They may be self- serving but carry enough weight to shift the burden or rebut the presumption. Once the onus is shifted to the AO, he was dutyboud to collect evidence so as to belie the contents of the affidavit and hold that document and transactions recorded therein, in fact, belonged to Satyapal Wassan. If the AO has not done so, it could not be said that the second component of levy of charge has been properly established by him. 17. The third component in levy of charge is assessment year. The document and/or follow up investigation must establish the period of transaction before charge of income-tax could be levied during the current assessment year. The document is silent on this aspect. It is only post- search investigation and correlation with other documents that could have filled up the gap. Since there is no material on record to indicate in certain terms the period of transaction, it is not possible to inferthat the transactions belonged to this year. 18. The last component is the quantum of income. As stated above, the AO has failed to properly decode the figures mentioned in the document as to whether they are in thousands or in ten thousands or in lakhs and what is the unit of these transactions. The document does not tell anything about this. It could have been done only by way of investigation. It has not been done. Therefore, one cannot infer merely from the face of the document as ITA No.1643/Del/2022 Page | 29 to what is the total of those transactions and whether they are in Rupees or in Kilograms or something else. In the absence of such proper de-coding and clarification of number/quantity involved, no charge of Income-tax can be levied. If the figures in the documents are same these are the quantities then they have to be converted in terms of money. There has to be some basis for conversion. If it is money, then it has to be shown how much it is. The presumption that these figures are in lakhs is simply bald, wild and baseless. We have no option but to infer that the AO has failed to discharge, his duties. He drew inferences, made presumptions, relied on surmises and thus made unsustainable additions. 19. The above discussion also leads us to infer that a charge on the basis of document can be levied only when the document is a speaking one. The document should speak either out of itself or in the company of other material four d on investigation and/or in the search. The speaking from the document should be loud, clear and unambiguous in respect of all the four components as described above. If it is not so, then document is only a dumb document. No charge can be levied on the basis of a dumb document.” 26. Thus, following the above propositions and also looking to the nature of entries we hold the entries contained in the said loose papers does not mention about any transaction and therefore, the same at most could be held as dumb documents based on which no addition could be made. Accordingly, we hereby delete the addition of INR 6,81,55,760/ made by AO alleged as found noted in the seized papers and further delete to addition of INR 16,25,000/- made on account of interest thereon. Thus, the grounds of appeal No. 2 to 4 of the assessee are allowed. 27. With regard to Ground No.5 taken by the assessee with respect to the addition of INR 1,27,664/-. It is seen that this addition was challenged by the assessee in first round of appeal before Ld.CIT(A) who vide its order dated 15.09.2014, has confirmed the disallowance in terms of para 17 of the very same order. This ITA No.1643/Del/2022 Page | 30 fact is also observed by AO in the present order passed u/s 254/143(3) in para 2. Further, the assessee has not challenged the order of Ld.CIT(A) and accepted such disallowance. Therefore, we find no occasion to challenge this disallowance before us in the present appeal accordingly, Ground No.5 raised by the assessee is dismissed. 28. Ground No.6 raised by the assessee is in relation to addition of INR 3,76,026/- made on account of unexplained cash. From the perusal of the order of Ld.CIT(A) dated 15.09.2014 wherein while deciding the appeal of the assessee, Ld.CIT(A) has confirmed the said addition in terms of para 12 of the said order and in the present impugned order, this fact is observed by the AO in para 2 of the order. Accordingly, we find no occasion to challenge this addition before us in the present appeal. Hence, Ground No.6 raised by the assessee is dismissed. 29. Ground No.7 is general in nature, requires no adjudication hence, dismissed. 30. Ground No.8 is with respect to the levy of interest which is mandatory and consequential. Thus, AO is directed to charge levy of interest in terms of income computed after providing the fact to the order of the Tribunal. ITA No.1643/Del/2022 Page | 31 31. During the course of hearing vide letter dated 18.102.023, the assessee has raised two additional grounds. However, the said grounds are not pressed by the assessee therefore, the same are dismissed. 32. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open Court on 04.07.2025. Sd/- Sd/- (ANUBHAV SHARMA) JUDICIAL MEMBER *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI "
Mehul