SANJEEV AGRAWAL ,BHOPAL V. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL-2, BHOPAL

ITA 38/IND/2024

AI Insights

The case revolves around the reassessment of Sanjeev Agrawal for the assessment year 2017-18, following a survey under section 133A of the Income Tax Act, 1961, where a document was impounded from his iPhone. The AO reopened the assessment under section 147, treating the payments mentioned in the document as unexplained expenditure under section 69C. The Tribunal examined the validity of the reassessment and the merits of the addition made. It was found that the AO did not follow the compulsory scrutiny guidelines post-survey and that the document used for reassessment was not a reliable piece of evidence, leading to the quashing of the reassessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 34582 (ITAT-INDORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Other Referred Cases: Sonal Arpit Doshi Vs. ITO, Commissioner of Income-tax Vs. Ved & Co., Price Waterhouse & Co Vs. Deputy Commissioner of Income Tax, Circle-22, ITA No. 1985/Kol2018, Vaibhav Realty Development Limited versus Income Tax Officer, Ward-2(1)(4), Surat, ACIT Vs. Satyapal Wassan, M M Financiers (P) Ltd Vs. DCIT, Monga Metals (P) Ltd Vs. ACIT, Pooja Bhatt Vs. ACIT, Atual Kumar Jain Vs. DCIT, S K Gupta Vs. DCIT, Jagdamba Rice Mills Vs. ACIT, Common Cause (A Registered Society) Vs. Union of India, Dhakeshwari Cotton Mills Ltd. v/s CIT, LIC of India v/s CIT, Chuharmal vs. CIT, Kaishanchand Chellaram case, PCIT vs Shri Pukhraj Soni, M/s KL Sharma & Sunita Maheshwari
• Laws Referred To: Income-tax Act, 1961, Indian Evidence Act, 1872, Information Technology Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORASSESSEEFIRSTLYDREWUSTOTHE; FORREVENUEFILEDFOLLOWINGWRITTENSUBMISSIONAND; FORREVENUEAPPELLANTSUBMITTEDSTRONGLYSUPPORTEDTHE; FORREVENUEFILEDFOLLOWINGWRITTENSYNOPSISAND; SHRIRAM KUMAR YADAV
• Assessee Lawyers: I FIRSTLY; LD.ARSUBMITTEDTHATTHEPRESENTCASEOFASSESSEEISDIRECTLY; I THATTHEIMPUGNEDDOCUMENTWASIMPOUNDEDDURINGANEARLIERANDSEPARATE; SHRISUMITNEMA; ..WITHSHRIGAGANTIWARI
• Keywords: Business income; Reassessment proceedings; Unexplained expenditure; Unexplained investment; Income from undisclosed sources; Document seized; Onus to prove; Retraction; Loose papers; Reason to believe; Tangible material
• Section: 147; 148; 143(3); 143(2); 119; 250; 143(1); 64; 153; 139(1); 131; 205; 22; 69C; 13; 69A; 73; 133A; 20

Judgement Text

"Page 1 of 33 आयकरअपीलीयअिधकरण, इंदौरɊायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI B.M. BIYANI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER ITA No.38/Ind/2024 Assessment Year:2017-18 Sanjeev Agrawal House No. E-2/134, Arera Colony, Bhopal बनाम/ Vs. ACIT/DCIT, Central-2 Bhopal (Assessee/Appellant) (Revenue/Respondent) PAN: ADHPA8387N Assessee by Shri Sumit Nema, Sr. Adv. with Shri Gagan Tiwari, Adv. Revenue by Shri Ram Kumar Yadav, CIT-DR Date of Hearing 17.12.2024 Date of Pronouncement 21.02.2025 आदेश/ O R D E R Per B.M. Biyani, AM: Feeling aggrieved by order of first-appeal dated 30.11.2023 passed by learned Commissioner of Income-tax (Appeals)-3, Bhopal [“CIT(A)”] which in turn arises out of assessment-order dated 26.09.2021 passed by DCIT, Central-2, Bhopal [“AO”] u/s 147 of the Income-tax Act, 1961 [“the Act”] for assessment-year [“AY”] 2017-18, the assessee has filed this appeal. 2. The background facts leading to present appeal are such that the assessee-individual filed original return of AY 2017-18 u/s 139(1) on 31.10.2017 declaring a total income of Rs. 1,08,34,890/-. Prior to that, a survey u/s 133A was conducted upon assessee on 28.11.2016 falling within Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 2 of 33 the previous year 2016-17 relevant to AY 2017-18 under consideration. During survey, a handwritten document was impounded from i-phone of assessee which is scanned and re-produced by AO on Page 4 of assessment- order as under: The survey authorities interrogated assessee qua this document in the statements recorded u/s 131 during survey. Subsequently, from this very Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 3 of 33 document, the AO inferred that the assessee purchased 30% share in 11 acres of land from “M/s Pramada Estates India Private Limited” for Rs. 16,58,78,160/- and paid Rs. 14,20,00,000/- upto 11.11.2016 and balance Rs. 2,38,78,160/- remained payable. Accordingly, the AO selected case of assessee for re-opening u/s 147 and submitted a proposal dated 17.01.2020 to Addl. CIT, Bhopal and obtained sanction. Thereafter, the AO issued notice dated 19.03.2020 u/s 148 calling the assessee to re-file return. In response, the assessee re-filed return on 27.06.2020 repeating the original total income of Rs. 1,08,34,890/-. The assessee also filed objection dated 21.09.2021 to AO against re-opening of case. Vide letter dated 22.09.2021, the AO rejected assessee’s objection and continued with the proceeding of re-opened assessment. During proceeding of re-opened assessment, the AO asked the assessee to explain source of investment of Rs. 14,20,00,000/- to which the assessee submitted reply. But the AO, being unsatisfied with reply of assessee, ultimately concluded that the assessee made payment of Rs. 14,20,00,000/- which is an unexplained expenditure u/s 69C. Accordingly, the AO made addition of Rs. 14,20,00,000/- while passing order of re-opened assessment and thereby determined total income of assessee at Rs. 15,28,34,890/-. Aggrieved, the assessee carried matter in first-appeal but did not get any success. Now, the assessee has come in next appeal before us. 3. The grounds raised by assessee are as under: Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 4 of 33 “(1) That on the facts and in the circumstances of the case, the decision of the learned lower authorities is contrary to law, materially incorrect, and unsustainable in law as well as facts. And that all the adverse findings recorded therein are opposed to facts, equity, and law. 2.That on the facts and in the circumstances of the case and in law, the initiation of proceedings u/s. 147 of the IT Act is without jurisdiction and the issue of notice do not satisfy the judicial requirements of the law and, therefore, the assessment is bad in law and without jurisdiction hence the same be kindly cancelled. Moreover, since survey u/s 133A was carried out on 28.11.2016, the assessment should have been completed u/s 143(3) of the Act under Compulsory Scrutiny as per CBDT's Guidelines which is binding on AO whereas the Id.AO reopened the case on 19.03.2020 u/s 147 which is against the guidelines of CBDT and therefore the impugned order passed u/s 147 deserves to be quashed. 3.That on the facts and in the circumstances of the case and in law, the learned lower authorities erred in making addition of Rs. 14,20,00,000/- treating it as unexplained expenditure u/s 69C of the Income Tax Act, 1961 based on a print out of a hand written document impounded from the i-phone, such findings are wholly injudicious and opposed to facts and, therefore, be quashed and the addition of Rs. 14,20,00,000/- as per para 8 of the order is wholly unjustified and unlawful and, therefore, the said unlawful and unjustified addition be kindly deleted. 4.That on the facts and in the circumstances of the case and in law, the learned lower authorities erred in making the addition of Rs. 14,20,00,000/- u/s 69C of the Income Tax Act, 1961 without affording opportunity of cross examination of Shri Om Prakash Kriplanai and Pritpal Singh Bindra to whom the alleged on-money was paid. 5.On the facts and in the circumstances of the case. the Id. CIT(A) erred in sustaining the impugned addition relying upon the statement recorded during survey u/s 133A of the Act particularly when the statement recorded during survey has no evidentiary value and the admission made during statement cannot be allowed to be the basis of addition. 6.On the facts and in the circumstances of the case, the Id. CIT(A) erred in sustaining the impugned addition based on a 'dumb' document impounded from the i-phone of the appellant, which has no evidentiary value in the eyes of law also having no mention of any details of on-money for purchase of land and the appellant was not the author of the alleged document which was sent by a third party to his i-phone, without following the guide lines regarding impounding the digital evidence, in absence of which it is impossible to relate the document with the period, to which this document relates and doubts on its integrity also. 7. On the facts and in the circumstances of the case, the Id. CIT(A) erred in sustaining the addition merely relying upon the provisions of section 292C which is a deeming provision and deeming provision cannot be applied Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 5 of 33 mechanically ignoring the facts of the case and the surrounding circumstances and therefore the impugned addition is legally not sustainable. Further, the impugned addition was purely based on assumption and presumption without any corroborative evidence particularly when the appellant had not incurred the alleged expenditure and the lower authorities erred in invoking section 69C of the Act. 8 On the facts and in the circumstances of the case, the Id. CIT(A) erred in ignoring the fact that Whatsapp chats shall have no evidentiary value until a certificate is produced u/s 65B(4) of the Indian Evidence Act, 1872 and it is pertinent to note that the alleged i-phone was not impounded during the course of survey proceedings.” Ground No. 1: 4. This ground is general; covered by other specific grounds and no separate submissions have been made by parties. Therefore, it does not require a separate adjudication from us. Ground No. 2: 5. This is a legal ground in which the assessee claims that the initiation of proceedings u/s 147 by the AO is without jurisdiction being violative of CBDT’s mandatory Instruction, therefore the assessment-order passed by AO u/s 147 is bad in law and deserves to be quashed. 6. Apropos to this ground, Ld. AR for assessee firstly drew us to the reason of re-opening assessee’s case u/s 147 recorded by AO which are re- produced by AO himself in Para 1 of assessment-order reading as under: “1. Shri Sanjeev Agrawal (ADHPA8387N) is an individual mainly engaged with business of the Building and construction. Assessee has filed ITR for the A.Y. 2017 18. 2. A survey was conducted in the premises of Shri Sanjeev Agrawal, 250, Sagar Plaza, Zone II, M.P. Nagar, Bhopal on 28.11.2016. At the time of survey Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 6 of 33 proceedings a hand written document was found from the iphone of the assessee. During verification, it was found that Shri Sanjeev Agrawal has made unaccounted investment in purchase of 11 acres of land of M/s Pramada Estates India Pvt. Ltd., Bhopal. 3. It was further found that Shri Sanjeev Agrawal has purchased 30% of the share of above company from Shri Pritpal Singh Bindra and Shri Omprakash Kriplani and paid Rs. 14,20,00,000/- against the total cost of Rs. 16,58,78,160/- and thus balance of Rs. 2,38,78,160/- was payable upto 11.11.2016. 4. The nature and content of the impounded hand written document reveals that there is concealment of the income and tax evasion on the part of the assessee. Further during statement on oath u/s 131 at the time of survey proceedings, assessee could not explain satisfactorily the nature and content of the hand written document.” Referring to these reasons, Ld. AR demonstrated that the case of assessee was re-opened by AO u/s 147 for the purpose of assessing the income reflected by document impounded during survey u/s 133A conducted on 28.11.2016. 7. Then, Ld. AR referred CBDT’s Instruction No. 5/2017 dated 07.07.2017 reading as under: Instruction No. 5/2017 Government of India Ministry of Finance Department of Revenue (CBOT) North-Block, New Delhi the 7th of July, 2017 To All Pr. Chief-Commissioners of Income-tax/Chief-Commissioners Of Income-tax All Pr. Directors-General of Income-tax/Directors-General of Income-tax Sir/Madam Subject: Compulsory manual selection of cases for scrutiny during the Financial Year 2017-2018 regd:- 1. In supersession of earlier Instructions on the above subject, the Board hereby lays down the following procedure and criteria for compulsory manual selection of returns/cases requiring scrutiny during the financial-year 2017- 2018:- Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 7 of 33 (i) XXX (not reproduced being irrelevant) (ii) All assessments pertaining to Survey under section 133A of the Act excluding those cases where books of accounts, documents etc. were not impounded and returned income (excluding any disclosure made during the Survey) is not less than returned income of preceding assessment year. However, where assessee retracts the disclosure made during the Survey, such cases will not be covered by this exclusion. (iii) to (vi) XXX (not reproduced being irrelevant) 2. Computer Aided Scrutiny Selection (CASS): Cases are also being selected under CASS-2017 on the basis of broad based selection filter and in a non-discretionary manner in two categories vis. Limited Scrutiny & Complete Scrutiny. List of such cases is being separately intimated by the Pr. DGIT(Systems) to the concerned jurisdictional authorities for further action in these cases. 3. These instructions may be brought to the notice of all concerned for necessary compliance. 4. Hindi version to follow. (Rohit Garg) Director – ITA.II, CBDT F.No. 225/180/2017/1TA.II [Emphasis supplied] Referring to Para No. 1(ii) of above Instruction, Ld. AR submitted that the CBDT has mandated that all assessments pertaining to survey u/s 133A of the Act have to be selected for compulsory scrutiny [excluding those cases where books of accounts, documents, etc. were not impounded and returned income (excluding any discourse made during the survey) is not less than returned income of preceding assessment-year. Ld. AR asserted in open court that this exclusion is absent in present case of assessee] Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 8 of 33 8. Having shown thus, Ld. AR contended that in present case of assessee it was incumbent upon the AO to compulsorily select assessee’s case under scrutiny and examine the income alleged to have been reflected by the document impounded during survey. But the AO missed to take up assessee’s case for scrutiny uptill 30.09.2018 [being the last date upto which the assessee’s case could have been taken for scrutiny as per provisions of section 143(2)]. And subsequently, in order to cover up his latch, the AO resorted to section 147 by issuing notice dated 19.03.2020 u/s 148 after lapse of a period of about 1 year and 6 months. Therefore, Ld. AR contended with full force, the AO is grossly wrong in assuming jurisdiction u/s 147. To support his stand, Ld. AR relied upon a decision ITAT, Ahmedabad in Sonal Arpit Doshi Vs. ITO, ITA No. 366/Ahd/2015, order dated 21.10.2015, holding as under: \"4. From the above, it is evident that the Assessing Officer has simply reopened the assessment for the purpose of verification of the certain transactions. In our opinion, when the Revenue wanted to verify the correctness of certain transactions, the proper course is to issue the notice u/s 143(2) within time. If the Revenue failed to issue notice u/s 143(2), it cannot resort to section 148 for the purpose of verification of certain transactions. Notice u/s 148 can be issued only when the Assessing officer records his satisfaction with regard to escapement of income. In the reasons recorded, there is no mention of the escapement of income; therefore, in our opinion, reopening of assessment is not valid and the same is quashed and consequentially, the assessment order passed in pursuance to such notice is also quashed.\" 9. With above submissions, Ld. AR made a strong prayer that in present case, the AO’s action to invoke jurisdiction of re-assessment u/s 147 just to cover up his own failure to select assessee’s case under compulsory scrutiny within the prescribed time, is very much illegal. Hence, the jurisdiction Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 9 of 33 assumed by AO and the consequential assessment framed u/s 147 must be declared as invalid and quashed therefore. 10. Per contra, Ld. DR for revenue filed following written-submission and relied upon same: “8.01 VALIDITY OF REASSESSMENT PROCEEDINGS UNDER SECTION 147 FOLLOWING SURVEY UNDER SECTION 133A OF THE ACT: 8.01.1 Section 147 is an Independent Remedial Provision It is submitted that section 147 of the Act provides an independent mechanism to address cases of income escaping assessment. The Assessing Officer, upon having \"reason to believe\" based on tangible material in his possession that income chargeable to tax has escaped assessment, is empowered to reopen the assessment under section 147, irrespective of whether scrutiny under section 143(3) has been initiated or not. The power under section 147 of the Act is not restricted or overridden by the Guidelines issued for the selection of cases for compulsory scrutiny. Guidelines for compulsory scrutiny, as issued by the CBDT, serve as administrative directions for the efficient functioning of the Department. However, these Guidelines cannot curtail the statutory powers granted to the AO under section 147 of the Act. 8.01.2. Tangible Material from Survey Under Section 133A The survey conducted under section 133A of the Act provided the AO with concrete information and tangible material indicating that the income chargeable to tax had escaped assessment. In such circumstances, the AO is duty-bound to take appropriate action to bring the escaped income to tax. The AO need not have conclusive evidence at the stage of forming \"reason to believe\"; even prima facie material is sufficient. Thus, the material gathered during the survey gave the AO sufficient basis to form a reason to believe that income had escaped assessment. 8.01.3 CBDT Guidelines Are Administrative, Not Statutory While it is acknowledged that the CBDT guidelines for compulsory scrutiny are binding on the department from an administrative standpoint, failure to adhere to these guidelines does not render the reassessment proceedings under Section 147 invalid. Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 10 of 33 (i) The CBDT guidelines are intended to guide the internal functioning of the Department but cannot override or limit the statutory remedies available under the Act. (ii) Statutory powers cannot be curtailed by administrative instructions. 8.01.4 AO's Duty to Tax Escaped Income Prevails It is submitted that in the present case, the AO acted within the framework of law to protect the interest of revenue. The following points are emphasized: (i) The material collected during the survey under Section 133A clearly pointed to unaccounted income, which had escaped assessment. (ii) The AO, therefore, exercised his statutory powers under Section 147 to reopen the assessment and bring the escaped income to tax. (iii) The failure, if any, to initiate compulsory scrutiny does not take away the AO's power or duty to act under Section 147, which is a remedial provision specifically provided for cases where income has escaped assessment. In view of the foregoing submissions, it is respectfully prayed that: (a) The proceedings initiated under section 147 of the Act are valid and within the scope of the AO's statutory powers. (b) The CBDT guidelines for compulsory scrutiny, while mandatory for administrative purposes, do not override the provisions of section 147 of the Act. (c) The AO, having tangible material from the survey under section 133A of the Act, rightly formed \"reason to believe\" and initiated reassessment proceedings under section 147 of the Act to bring the escaped income to tax. It is, therefore, prayed that the contention raised by the appellant may kindly be dismissed, and the reassessment proceedings under section 147 of the Act be upheld as valid.” 11. Further, Ld. DR also attempted to distinguish the decision in Sonal Arpit Doshi (Supra) quoted by Ld. AR. He submitted that the Para 4 of decision referred by Ld. AR clearly mentions that (i) the re-opening was undertaken for verification of transaction, and (ii) the AO failed to record satisfaction in reason. These features are not in present case of assessee. In Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 11 of 33 present case, the AO has not re-opened case for any verification. Further, the AO has recorded satisfaction in present case. 12. In rejoinder, Ld. AR submitted that in Sonal Arpit Doshi (Supra), it is categorically observed “In our opinion, when the Revenue wanted to verify the correctness of certain transactions, the proper course is to issue the notice u/s 143(2) within time. If the Revenue failed to issue notice u/s 143(2), it cannot resort to section 148 …….”. Ld. AR went ahead to submit that there are more decisions of appellate forums wherein it has been loudly accepted that the AO cannot invoke provisions of section 147 when he has missed the bus of compulsory scrutiny mandated by CBDT or in other words, if the AO has not carried compulsory scrutiny, he cannot be given another inning of re-assessment u/s 147. Ld. AR agreed to file a synopsis of such decisions subsequently, which he filed. 13. We have considered rival submissions of both sides and carefully examined the facts of case in the light of legal precedents available qua the controversy. The undisputed facts of the case are such that (i) a survey u/s 133A was conducted upon assessee on 28.11.2016 during the previous year 2016-17 relevant to AY 2017-18, (ii) the assessee filed regular return of AY 2017-18 on 31.10.2017 u/s 139(1), (iii) by virtue of proviso to section 143(2), no notice could be issued to assessee after 30.09.2018 for scrutiny assessment, (iv) the AO did not issue any scrutiny notice till 30.09.2018, accordingly the AO accepted assessee’s returned income in the original Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 12 of 33 assessment framed; (v) subsequently, the AO took up case of assessee for re- assessment u/s 147 vide notice dated 19.03.2020 u/s 148 by recording reason of escaped income having been found during survey. It is submission of assessee, in these facts, that the CBDT Instruction No. 5/1027 dated 07.07.2017 (supra) mandated the AO to select assessee’s case under compulsory scrutiny but the AO failed to comply with CBDT’s Instruction within the stipulated time [i.e. uptill 30.09.2018 as per section 143(2)] and that is why the AO set up a new inning of section 147 which is invalid. On a careful consideration, we find a strong merit in assessee’s claim which is supported by following authoritative pronouncements: (i) Para 1(ii) of CBDT Instruction No. 5/1027 dated 07.07.2017 (supra) clearly prescribes that the assessment of survey case shall be compulsorily made by way of scrutiny. (ii) In Sonal Arpit Doshi (Supra), it is categorically observed “In our opinion, when the Revenue wanted to verify the correctness of certain transactions, the proper course is to issue the notice u/s 143(2) within time. If the Revenue failed to issue notice u/s 143(2), it cannot resort to section 148 …….”. (iii) In Commissioner of Income-tax Vs. Ved & Co. [2007] 162 Taxman 366 (Delhi), it was held thus: “10. We are of the opinion that in view of the decisions that we have mentioned above, for the purposes of initiating reassessment proceedings, the Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 13 of 33 Assessing Officer could not have made up his mind that the income of the assessee has escaped assessment while a valid return was still pending before him. If the Assessing Officer had allowed the time to elapse for taking action under section 143(2) of the Act, it was entirely his own doing. What the Assessing Officer is now trying to do in an indirect (and incorrect) manner is what he could not have done directly. 11. The further contention raised on behalf of the revenue is that even if no assessment order was framed, the Assessing Officer could issue a notice for reassessment. We are of the view that if no assessment had been made, there was no occasion for the Assessing Officer to conclude that income had already escaped assessment. 12. This being the position, we are of the opinion that no substantial question of law that arises for our consideration and we do not find any error in the view that has been taken by the Tribunal in this regard. 13. Consequently, the appeal is dismissed. (iv) In Price Waterhouse & Co Vs. Deputy Commissioner of Income Tax, Circle-22, ITA No. 1985/Kol2018 Order dated 5/2/2020, it was observed:- “11. Therefore, in the light of the aforesaid judicial precedents and other case laws, we note that to initiate reopening of the assessment, the Ld. AO must have 'reason to believe that income chargeable to tax has escaped assessment. Such reason to believe must be based on some material coming to the possession of the Ld. Assessing Officer which may trigger reason to suspect. It must be kept in mind that the \"reason to believe\" must have a rational connection with or relevant bearing on the formation of the belief, i.e, there must be the direct nexus or link between the material and the formation of such belief. Since in the instant case, the issues/items for which the Assessing Officer has reopened the assessment had already been disclosed by the assessee in the return of income filed by him u/s 139(1) of the Act. The Assessing Officer having not carried out the scrutiny assessment within the prescribed statutory limit, cannot be given another innings for no fault of the assessee and therefore in the facts and circumstances of the case, we are of the considered opinion that reason to believe' which is the jurisdictional precondition to reopen the assessment as required by the law has not been met in the reasons recorded in the instant case and therefore the action of the Assessing Officer to reopen the assessment is null in the eyes of law and hence we are inclined to quash the initiation of reassessment proceedings being ab-initio void.” Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 14 of 33 (v) In TANMAC India vs. Deputy Commissioner of Income-tax, Circle I, Pondicherry [2017] 78 taxmann.com 155 (Madras) [19-12-2016], it was held thus: “8. A perusal of the Reasons would indicate that the assessing officer proceeds solely on the basis of the return of income and the enclosures thereto, being the financials and the deed of partnership, to initiate proceedings for re- assessment. The aforesaid documents however are part of record and the basis on which the intimation under section 143(1)(a) has been issued on 1.12.98. Let us bear in mind that the intimation dated 1.2.1998 has been manually issued, being prior to the electronic era which came into force on and with effect from 2003. The assessing officer has thus evidently applied his mind to the return and annexures even at that stage. 12. If the assessing officer, after issuing intimation w/s. section 143(1) does not to issue a notice w/s. 143(2) of the Act to initiate proceedings for scrutiny of the return of income, the obvious conclusion is that he does not consider it necessary or expedient to do so, the inference being that the Return of Income filed in order. It is this opinion that cannot be arbitrarily changed by the assessing officer, to re-assess income on the basis of stale material, already on record. If we thus keep in the mind the above fundamental requirement of section 147, it would be apparent that the exercise undertaken by the Revenue in this case is not one of re-assessment, but of review. The reasons make it abundantly clear that the re-assessment is sought to be initiated on the basis of the return of income and the enclosures which were available with the assessing officer since 2.11.1998 and which ought to have prompted him to issue a notice under section 143(2) of the Act to conduct the proceedings under scrutiny. What is sought to be done by the re-assessment ought to have been achieved by scrutiny assessment proceedings. Having missed the bus earlier, the Department cannot be permitted to avail of the extended time limit in the absence of any new or tangible material, when the time for scrutiny assessment has elapsed on 31.3.2001, prior to issue of notice ws. 148. The notice under section 148 dated 9.12.2002 is thus an arbitrary exercise of power and a review of proceedings impermissible in law. (vi) Further, in Vaibhav Realty Development Limited versus Income Tax Officer, Ward-2(1)(4), Surat 2024 SCC OnLine ITAT 2195, it was held thus - “23. It is abundantly clear from the judgment of Hon'ble, Madras High Court in the case of A. Thangavel Nadar Stores (supra) that a statement recorded in the Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 15 of 33 course of survey cannot be used to reopen the assessment, unless it is supported by tangible material. The materials collected and the statement obtained under Section 133A of the Act would not automatically bind upon the assessee. In the assessee's case as per the statement the director of the company the payments appearing in laptop were confronted to her (Director) and as per her statement, the amount appearing in the laptop are not recorded in the books of accounts. The survey team of the Income Tax department did not find any corroborative evidence or any tangible material that cash appearing in the laptop was belongs 10 the assessee company, and assessee- company had actually received the cash, in fact, during the assessment proceedings, the director has denied, having received such cash. Therefore, reasons recorded by the assessing officer fails. Therefore, in the light of the aforesaid judicial precedents, we note that to initiate reopening of the assessment, the assessing officer must have 'reason to believe that income chargeable to tax has escaped assessment. Such reason to believe must be based on some material coming to the possession of the Assessing Officer which may trigger reason to suspect. It must be kept in mind that the \"reason to believe\" must have a rational connection with or relevant bearing on the formation of the belief, i.e. there must be the direct nexus or link between the material and the formation of such belief. Since in the instant case, the issues/cheque amount, for which the Assessing Officer has reopened the assessment had already been disclosed by the assessee in the books of accounts. The Assessing Officer having not carried out the scrutiny assessment within the prescribed statutory limit, cannot be given another innings, for no fault of the assessee, and therefore in the facts and circumstances of the case, we are of the considered opinion that 'reason to believe' which is the jurisdictional precondition to reopen the assessment as required by the law has not met in the reasons recorded in the instant case and therefore the action of the Assessing Officer to reopen the assessment is null in the eyes of law and hence we are inclined to quash the initiation of reassessment proceedings being ab-initio void. In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the considered view that the reasons recorded by the Assessing Officer, as set out earlier, were not sufficient reasons for reopening the assessment proceedings. We, therefore, quash the reassessment proceedings.” 14. Thus, in the light of judicial rulings cited above, it is clear that the AO’s action of resorting to re-assessment u/s 147 by-passing the compulsory scrutiny mandated by CBDT Instruction, is invalid and hence the assessment framed by AO u/s 147 cannot be sustained. Therefore, we quash the order passed by AO. The assessee succeeds in this ground. Ground No. 3 to 8: Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 16 of 33 15. In these grounds, the assessee has challenged the merit of the addition of Rs. 14,20,00,000/- made by AO and upheld by CIT(A). 16. Ld. AR for assessee raised following contentions: (i) Firstly, Ld. AR submitted that the present case of assessee is directly covered by decision of Co-ordinate Bench of ITAT, Indore in IT(SS)A No. 10/Ind/2024 order dated 31.07.2024 in the case of “M/s Pramada Estates India Private Limited” [“M/s Pramada] to whom the payment of Rs. 14,20,00,000/- is alleged to have been made by assessee. Ld. AR briefly narrated the case of M/s Pramada, according to which an addition of Rs. 10,57,00,000/- was made by assessing authority in the hands of M/s Pramada in the very same AY 2017-18 based on the very same document impounded from assessee’s cell phone (re-produced earlier) but in first appeal of M/s Pramada itself, the addition was deleted by CIT(A). Thereafter, the revenue went in next appeal before ITAT, Indore whereupon the Co-ordinate Bench approved the order passed by CIT(A). The relevant paras of order of ITAT are re-produced below for an immediate reference: Order in IT(SS)A No. 10/Ind/2024 “13. By means of above grounds, the revenue has challenged the CIT(A)’s action in deleting the addition of Rs. 10,57,00,000/- made by AO. 14. The AO has made this addition in Para 7.1 of assessment-order on the basis of a document impounded from i-phone of Shri Sanjeev Agarwal during impugned survey on 28.11.2016 revealing a calculation of 10.80 acres of land alongwith a Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 17 of 33 noting “Advance adjusted from JV Partners – Rs. 10,57,00,000/-”. This document is re-produced here: During assessment-proceeding, when the AO show-caused assessee to explain the transactions noted in document, the assessee filed a reply which is also reproduced by AO in assessment-order. However, the AO rejected assessee’s submission and made addition of Rs. 10,57,00,000/- in assessee’s hands by passing following order: “On perusal of the material available on record as well as submissions made by the assessee, it is noticed that in the seized document as found from the i-phone of Shri Sanjeev Agrawal (one of the directors of the assessee company) during the survey proceeding that an amount of Rs. 10,57,00,000/- is clearly mentioned under the heading “advance adjusted from JV partners” which evidences that the said amount of Rs. 10,57,00,000/- is receipt from the JV partner in the hands of the assessee. As Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 18 of 33 the date of the receipt of impugned amount is not mentioned in the said hand written incriminating document, this is being treated as receipt in the hands of the assessee in the year when the said incriminating document was found from the possession of Sri Sanjeev Agrawal. As the said document was impounded from the i-phone of Sri Sanjeev Agrawal during survey u/s 133A at the office premise of Sri Sanjeev Agrawal at 250, Sagar Plaza, Zone-II MP Nagar, Bhopal, on 28.11.2016. In view of this, it is obvious that the said receipt of Rs. 10,57,00,000/- should have been taken into consideration as business income of the assessee company for the year under consideration but failed to do the same. In view of the above discussion, the reply of the assessee is not tenable. Further, the onus was case upon the assessee company as such document was found and seized from the possession of Shri Sanjeev Agrawal, one of the directors of the company but he failed to furnish any explanation in this regard. Therefore, a sum of Rs. 10,57,00,000/- is treated as assessee’s unexplained money as per the provisions of sec 69A of I.T. Act and the same is added to the returned income of the assessee in A.Y. 2017-18.” 15. During first-appeal, the CIT(A) deleted addition fully by passing following order: “3.2.6(c) The AO erred in making the additions on the basis of deaf and dumb document impounded during survey proceedings of third party and; As discussed hereinabove, the ibid document was found during survey proceedings from i-phone of Shri Sanjeev Agrawal. For better appreciation of facts and jotting made on the said document, the relevant extract of the said document is reproduced hereunder:- XXX (already reproduced in preceding para) The ld AO during assessment proceedings has alleged that the said loose paper contained unexplained transactions qua JV agreement on premise of jotting “Advance adjusted from JV partners” made in the said document. Per contra the appellant has contended that the jotting does not mention any detail of transaction being carried out by appellant, name of the appellant is completely missing, date of transaction is missing, details of beneficiaries, payers/receiver of the consideration are missing. Further, the JV agreement has been executed for 8.71 acres, however, the said document mentions jotting for 10.80 acres. Further, the onus u/s 292C/132(4A) of the Act was applicable qua Shri Sanjeev Agrawal and not the appellant. Shri Sanjeev Agrawal in his statement recorded during survey proceedings stated that he once decided to sell the parcel of land of the appellant admeasuring 10.8 acres @ 1400 sq.ft after getting it developed through JV and on sale of entire land he would received his share of 30% and transfer balance proceeds to Shri Bindra and Shri Kriplani other directors of appellant company. However, due to delay in permission from planning authorities and due to objection filed by one Shri Siddharth Gupta, the said project was dropped. Similar statement was recorded during the course of assessment proceedings. He further stated that the discrete calculations jotted in the said document never materialized. Therefore, the appellant stated that no adverse inference could be drawn from the statement of Shri Sanjeev Agrawal and the document is a ‘deaf and dumb document’ in the case of the appellant company. Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 19 of 33 I have considered the facts of the case, material evidences on record, written submission filed by appellant and the facts and findings of the Ld. AO inter alia material brought on record. After analyzing the entire facts, I reach the conclusion that the addition was made on the basis of assumption and presumption which is neither sustainable on facts nor in law. The Ld. AO has reached the conclusion that appellant has received unaccounted income of Rs. 10.57 crores as mentioned in the document under consideration. The conclusion has been drawn on the basis of jotting made on a hand written document found from i-phone of Shri Sanjeev Agrawal, in capacity as partner in M/s Agrawal Construction, during survey proceedings on 28.11.2016. On a plain examination of the relevant seized loose paper, being reproduced hereinabove, the following has been observed: - (i) The land cost has been determined after taking total area of land at 10.80 acres, however, the JV was entered into for 8.71 acres. (ii) The jotting is made under the heading ‘Advance adjusted from JV partners’. The details of advance and for which account the same has been adjusted are completely missing. Further, if it is presumed that appellant has received advance then the details of same are not mentioned in the JV agreement. (iii) Name of the appellant is not mentioned. (iv) The actual date of receipt of alleged amount is not mentioned. (v) The mode of payment of alleged amount viz. cash, cheque or kind are completely missing. From the above, it cannot be held that the transactions pertained to the appellant. No inference of cash receipt by the appellant can be apparently drawn from the ibid document. Most importantly, no iota of evidence qua ibid document was found and seized during the course of search. The ld AO has also not made any independent enquiry in order to unearth the true facts qua impounded document. It is also worth mentioning that statement of Shri Sanjeev Agrawal was also recorded by the ld AO and he was specifically asked about payment of Rs. 10.57 crores. However, he showed his inability to explain anything about the adjustment of Rs. 10.57 crores. These facts, show that the conclusion drawn with regard to the said documents and abbreviations mentioned therein, is made on guess work and presumption basis. The documents do not even mention the name of the appellant. There is no mention of actual receipt of amount by the appellant. Dates of transactions are completely missing and the only reason for making addition in AY 2017-18 is that the JV agreement was executed in AY 2017-18. Also, the JV was entered into for 8.71 acre, however, the ibid document mentions land area of 10.80 acres. Therefore, no meaningful conclusion can be drawn from this document. The Ld. AO has treated the jottings made on the impounded document as true and determined the quantum of cash received by appellant without establishing a direct nexus with the alleged amounts with supportive independent evidence. Therefore, in absence of any cogent evidence having direct nexus with the said transaction, the said document is nothing but a deaf and dumb document qua the appellant company and cannot be used against it. It must also be kept Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 20 of 33 in mind at all times that the documents in question was not found from the premises of the appellant when a search action was conducted. Hence, the presumption u/s 292C will not come into play and onus does not rest on the appellant to explain the contents of the documents. The onus, instead, is cast upon the AO to establish that the contents of the document are true. It is a settled legal position that any ‘dumb document’ cannot be used as evidence to draw an adverse inference against the assessee. Case laws supporting this proposition are as under: - ACIT Vs. Satyapal Wassan (2007) 295 ITR 9 (AT) 352 (Jabalpur) Held that “the crux of these decisions is that a document found during the course of search must be a speaking one and without any second interpretation, must reflect all the details about the transactions of the assessee in the relevant assessment year. Any gap in the various components as mentioned in section 4 of the Income Tax Act must be filled up by the Assessing Officer through investigations and correlations with the other material found either during the course of the search or on the investigation. As a result, we hold that document No.7 is a non-speaking document.” The important ratio laid down in the said judgment is that “ibid document” must be speaking one and without any second interpretation and must reflect all the details about transactions of the assessee. In the instant case, the ibid document is nothing but a rough jotting. The dumb document does not contain details of recipient of amounts, date of transaction, mode of receipt of amount and the name of appellant. However, even in spite of this, the Ld. AO has presumed that the appellant had received the said amounts qua JV agreement. The presumption drawn by the ld AO was that the appellant had received such sum from JV developer i.e. Shree Signature Developers, however, as evident from assessment order no enquiry was made from M/s Shree Signature Developers. Also, the Ld. AO does not have any independent corroborative evidence establishing a nexus between the loose documents and the alleged unaccounted income of the appellant. Absence of these vital details makes the loose papers under consideration a “deaf & dumb document” qua the appellant company. The onus was solely on the Ld. AO to fill such vital gaps by bringing positive evidence on record and prove the allegation about alleged “undisclosed income” of the assessee, which he utterly failed to do. The said document has not been corroborated with the independent evidences seized qua search proceedings and such document cannot be termed as books of account and thus, cannot be used to assess total income of the appellant. These propositions are also well supported by the following judicial pronouncements: CBI vs VC Shukla 3 SCC 410: The Hon’ble Supreme Court has held that loose sheets of paper cannot be termed as 'book’ within the meaning of s. 34 of Evidence Act. It has also been held therein by the Hon’ble Supreme Court that even correct and authentic entries in books of account cannot, without independent evidence of their trustworthiness, fix a liability upon a person. The Hon’ble Supreme Court also observed that even assuming that the entries in loose sheets are admissible under s. 9 of the Evidence Act to support an Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 21 of 33 inference about correctness of the entries still those entries would not be sufficient without supportive independent evidence. Common Cause (A Registered Society) Vs. Union of India – 30 ITJ 197 (SC).: In this case, the Hon’ble Court held that without any independent evidence or corroborative material, no addition is permissible on the basis of loose paper jottings & notings. The relevant paras of the order are as under :- 16. With respect to the kind of materials which have been placed on record, this Court in V.C. Shukla’s case (supra) has dealt with the matter though at the stage of discharge when investigation had been completed but same is relevant for the purpose of decision of this case also. This Court has considered the entries in Jain Hawala diaries, note books and file containing loose sheets of papers not in the form of “Books of Accounts” and has held that such entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and that only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible 17. It has further been laid down in V.C. Shukla (Supra) as to the value of entries in the books of account, that such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. It has been held even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability. 18. This Court has further laid down in V.C. Shukla (Supra) that meaning of account book would be spiral note book/pad but not loose sheets. The following extract being relevant is quoted hereinbelow :- “14. In setting aside the order of the trial court, the High Court accepted the contention of the respondents that the documents were not admissible in evidence under Section 34 with the following words: \"An account presupposes the existence of two persons such as a seller and a purchaser, creditor and debtor. Admittedly, the alleged diaries in the present case are not records of the entries arising out of a contract. They do not contain the debits and credits. They can at the most be described as a memorandum kept by a person for his own benefit which will enable him to look into the same whenever the need arises to do so for his future purpose. Admittedly the said diaries were not being maintained on day-to-day basis in the course of business. There is no mention of the dates on which the alleged payments were made. In fact the entries there in are on monthly basis. Even the names of the persons whom the alleged payments were made do not find a mention in full. They have been shown in abbreviated form. Only certain 'letters' have been written against Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 22 of 33 their names which are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to.\" 19. With respect to evidentiary value of regular account book, this Court has laid down in V.C. Shukla, thus; “37. In Beni v. Bisan Dayal it was observed that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal v. Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts.” 20. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court.” Further, in numerous other case laws courts have consistently upheld the view that no addition could be made in the hands of the assessee on the basis of the dumb loose papers seized during search, in absence of any corroborative material to show unaccounted/unexplained money etc. Some of the case laws are as under: - (i) M M Financiers (P) Ltd Vs. DCIT (2007) 107 TTJ (Chennai) 2000 Held that “no addition could be made in the hands of assessee on the basis of the dumb loose slips seized from his residence, in the absence of any corroborative material to show payment of any undisclosed consideration by the assessee towards purchase of land”. (ii) Monga Metals (P) Ltd Vs. ACIT 67 TTJ 247 (All. Trib)— Holding that Revenue has to discharge its burden of proof that the figures appearing in the loose papers found from assessee’s possession constitute undisclosed income. [In the present case, loose papers were not even seized from assessee’s possession]. Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 23 of 33 (iii) Pooja Bhatt Vs. ACIT (2000) 73 ITD 205 (Mum. Trib) Held that where document seized during search was merely a rough noting and not any evidence found that actual expenditures were not recorded in books of account, additions not justified. [In the instant case, similarly no other corroborative evidence was found in search to prove that details/figures mentioned in notings on page 117 to 119 of A/1 represent ‘on money’ payments by the assessee]. (iv) Atual Kumar Jain Vs. DCIT (2000) 64 TTJ (Del.Trib) 786 – Held that additions based on chit of paper, surmises, conjectures etc could not be sustained in the absence of any corroborative evidence supporting it. [Similarly in present case, neither either parties have admitted payment/receipt of ‘on money’ nor any corroborative evidence was seized to support the findings of the AO]. (v) S K Gupta Vs. DCIT (1999) 63 TTJ (Del.Trib) 532 Held that “that additions made on the basis of torn papers and loose sheets cannot be sustained as same do not indicate that any transaction ever took place and does not contain any information in relation to the nature and party to the transaction in question.” (vi) Jagdamba Rice Mills Vs. ACIT (2000) 67 TTJ (Chd) 838 Held that “No addition can be made on dumb documents”. It is a settled legal position that onus of proof is on the person who makes any allegation and not on the person who has to defend. As per legal maxim “affairmanti non neganti incumbit probation” means burden of proof lies upon him who affirms and not upon him who denies. Similarly as per doctrine of common law “incumbit probation qui digit non qui negat” i.e. burden lies upon one who alleges and not upon one who denies the existence of the fact. The Ld. AO has failed to discharge his onus of proof especially when addition has been made under a “deeming fiction”. The initial onus u/s 292C was also not on appellant for the reason that the document was not found from his possession or from the premises of appellant during search proceedings. In view of these lacunae in order of the AO, the addition is legally not sustainable. In such facts and circumstances,the Hon'ble jurisdictional MP High Court in the case of PCIT vs Shri Pukhraj Soni (supra), by following the decision of Hon'ble Apex court in the case of Common Cause (supra) has held that “The Apex Court has taken into account in similar circumstances the incriminating materials in form of random sheets, loose papers, computer prints, hard disk and pen drives etc and has held that they are inadmissible in evidence, as they are in the form of loose papers”. A similar view was taken by Hon'ble jurisdictional ITAT Indore bench in the case of Shri Mohanlal Chughand Other (2021) 9 ITJ Online 139 (Trib. - Indore) and in the case of M/s KL Sharma & Sunita Maheshwari(2022) 31 ITJ Online 361 (Trib. - Indore). In absence of any corroborative evidence to prove that the alleged cash component was actually received by the appellant, the Ld. AO has no locus to assume that appellant has earned undisclosed income of Rs. Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 24 of 33 10,57,00,000/- in AY 2017-18. It is settled law that AO cannot make any addition merely on basis of suspicion, however strong it may be. The Ld. AO is not justified in presuming certain facts without corroborating them with evidence. Hon’ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex court in the case of Dhiraj Lal Girdharilal v/s CIT (1954) 26 ITR 736 (SC). In view of the above discussion, the Ld. AO was not justified in making additions simply on guess work and solely on the basis of a dumb document. (d) The AO erred in making additions on suspicion, surmise and conjecture basis and without having any incriminating material on record found from the residential/business premises of the appellant relating to the year in which additions have been made:- The AO has grossly erred in making addition simply on the basis of guess work, assumption and presumption, as discussed above. It is well settled that no addition can be made as a leap in the dark. The AO is not entitled to make a guess without evidence. I have no hesitation to conclude that ld A.O failed to discharge his onus of proving his allegations with concrete evidence. Asking the assessee to prove that he has not received any such alleged unaccounted money is more like asking him to prove the ‘negative’ which is an impossibility. Hon’ble Supreme court in the case of LIC of India v/s CIT (1996) 216 ITR 410 (SC) has held that the law does not compel the doing of impossibilities-act-lex-non cogit as impossibilie means the law does not compel to perform an act which he cannot possibly perform. I have no hesitation to hold that the said addition was not based on any positive/ cogent material but simply based on suspicion & guess work. Hon’ble Supreme Court in case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) has held that suspicion, however, strong cannot take place of proof. Similarly, Hon’ble ITAT Mumbai in the case of ACIT v/s Shailesh S Shah 63 ITD 153 (Bom) has held that no addition can be made purely based on suspicion. Hon’ble SC in Kaishanchand Chellaram case 125 ITR 713(SC) held that positive evidence is required to covert suspicion/presumption into acceptable proof. Similar views have been expressed by Apex court in the case of Dhiraj Lal Girdharilal v/s CIT (1954) 26 ITR 736 (SC). As per law, tax has to be assessed on real income basis and not on income computed as per the whims and fancies of the A.O without having any corroborative evidence in support. In the instant case, the initial onus was solely on the ld AO to establish that the alleged amount was actually received by appellant, which the ld AO has utterly failed to do. It is also important to mention that a search was carried out on the premises of the appellant and during the course of search no evidence was found regarding receipt of alleged unaccounted money by the appellant. Thus, there existed no locus standi with the ld AO to made additions in the hands of appellant dehors without positive, concrete and direct evidence qua the alleged unaccounted money. 3.2.7. In nutshell, firstly, the impugned document was found from possession of Shri Sanjeev Agrawal, in capacity as partner in M/s Agrawal Construction and not from the premises of appellant and therefore, the presumption u/s 292C was not on Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 25 of 33 the appellant to explain the contents of the loose papers. Secondly, since, the document was not found from possession of appellant, the initial onus lay on the AO to explain and establish a nexus between the contents of the loose paper and the alleged undisclosed income of the appellant which he has failed to do. Thirdly, no positive, cogent and independent incriminating material has been brought on record by the ld AO or has been unearthed during the course of the search. Fourthly, the document does not portray all the facts of the transaction viz. name of the appellant, date of transaction, mode of payment, amount paid by whom (either by Shri Sanjeev Agrawal or by JV developer), details of beneficiary etc. Therefore, the document under consideration is deaf and dumb. Fifthly, no addition was made in the hands of JV developer (M/s Shree Signature Developer). In view of the above discussion, the Ld. AO has erred in making addition on a sheer presumption. Thus, the addition made by the Ld. AO amounting to Rs. 10,57,00,000/- in AY 2017-18 is hereby deleted. Therefore, appeal on this ground is partly allowed.” [Emphasis by underline ours] 16. Before us, Ld. DR for revenue/appellant submitted strongly supported the order of AO. He submitted as follows: (i) That, in reply to Q.No. 8 of statements recorded during survey on 28.11.2016, Shri Sanjeev Agarwal clearly admitted that he had 30% shareholding in assessee-company. Therefore, Shri Sanjeev Agarwal is closely related to assessee-company. Further, even if the assessee-company had a separate corporate existence, it is operated by key person/directors only and Shri Sanjeev Agarwal was a key functionary. Therefore, the CIT(A) is wrong in giving benefit to assessee that the presumption u/s 292C is not applicable. (ii) That, the JVA talks of 11 acres which is approximately near to 10.80 acres mentioned in impounded document. Further, the JVA is entered on 05.05.2016 and the dates mentioned in the impounded document are approximately same. Thus, the circumstances are clearly corroborated. (iii) That, there is no explanation qua the transaction of Rs. 10,57,00,000/- noted in the impounded document from assessee’s side. 17. Per contra, Ld. AR for assessee made following contentions: (i) That the impugned document was impounded during an earlier and separate survey conducted u/s 133A by department on Shri Sanjeev Agarwal / M/s Agrawal Construction. The impounded document was not found from assessee or during any proceeding of assessee. Therefore, the presumption u/s 292C is not applicable. (ii) That, during survey action on Shri Sanjeev Agarwal/M/s Agarwal Construction itself, the authorities have confronted Shri Sanjeev Agarwal in Q.No. 9 and 10 of the statements qua the impugned document and in response Shri Sanjeev Agarwal has immediately and categorically made following replies: Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 26 of 33 Ůʲ -: 9 कृपयािनɻ िववरण,जोिकआपकेमोबाईलफोनसेŮाɑ Šआहै,केसंबंधमŐ िवˑारपूवŊक˙ʼीकरणदŐ । उȅर- मुझेयादनहींआरहाहैिकयेcalculations कबकीगईहैपरंतुएकबारमœ ऐसा Decide कररहाथािकPramada Estate कीबाविडयाकलांकीभूिमको1400 Ŝ.Sq.ft.सेJV ȪाराDevelop करनेकेपʮातमेरेȪाराबेचीजाएिजसका%30 िहˣामœ रखूंगाबाकीकाŵीिबंūाएवंŵीकृपलानीकोउनकेिहˣेकेअनुसारपैसेदेदूँगा।परंतुशायद बादमŐ मेरी,ŵीिबंūाएवंŵीकृपलानीकीबैठकमŐ येबातPermission मŐ Delay होनेके कारणअɊ दोपाटŊनसŊ ŵीिबंūाएवंŵीकृपलानीȪाराअˢीकारकरदीगई।उƅ Permission नजूलȪाराTNCP केसंबंधमŐ थीƐोंिकइसजमीनपरिकसीŵीिसȠाथŊ गुɑाȪारापुनःआपिȅ लीगईथी।उƅ आपिȅ केसंबंधमŐ पेपरमœ आपकोशीť Ůˑुतकर दूंगा। Ůʲ -: 10 उपरोƅ Ů.Ţं9 .केउȅरमŐ आपकेȪाराबताईगईबैठक,िजसमŐ आपकेPlan को अˢीकारिकयागयाथा,कबआयोिजतहईथीऔरइसमŐ आपकेplan कोƐोंcancel िकयागयाथाॽ उȅर-: मुझेऐसायादआताहैिकउƅ बैठकमाहजून-जुलाईमŐ आयोिजतŠईथीतथाइस बैठममŐ मेरेɘानकोनजूलतथाTNCP कीpermission मŐ delay होनेकेकारण सामूिहकŝपसेअˢीकारकरिदयागयाथा। Thus, Shri Sanjeev Agarwal has himself explained in the statements that there was some calculation for making a decision but it could not materialise due to technical weakness in land and delay in TNCP permission. Ld. AR further drew our attention to Page No. 94 of Paper-Book where a copy of the Order-Sheet of assessment-proceeding of assessee- company taken from record of department is filed wherein Shri Sanjeev Agarwal personally attended the office of AO. The Order-Sheet shows that Shri Sanjeev Agarwal was again asked by AO to reply qua the impounded document. In reply, he re-confirmed his earlier explanation made in the statements recorded during survey. (iii) That the impounded document does not contain name of assessee. That apart, the assessee’s land was sized 11 acres and the JVA was for 8.71 acres. These vital facts are clearly mentioned in Preliminary portion on Page 11 of JVA and Clause 19 on Page 24 of JVA (Paper-Book Page 17 and 25). However, the impounded document is for 10.80 acres. Thus, the impounded document has no corroboration with assessee/assessee’s JVA and the AO has wrongly attributed the impounded document to assessee/assessee’s JVA on mere surmise or conjecture. (iv) Lastly, he submitted that the CIT(A) has passed a detailed order considering entire position of case. Hence the same must be upheld. Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 27 of 33 18. We have considered rival submission of both sides and perused the documents held on record including the orders of lower-authorities. Admittedly, the AO has made impugned addition solely on the basis of a document impounded from i-phone of Shri Sanjeev Agarwal. Therefore, several questions arise. Firstly, it becomes important to ascertain as to where and how the impugned document was impounded by authorities and whether the presumption u/s 292C would apply? Undisputably, there was an independent survey on Shri Sanjeev Agarwal / M/s Agarwal Construction (a partnership firm in which Shri Sanjeev Agarwal was a partner) on 28.11.2016 and during such survey, the impugned document was impounded from i-phone of Shri Sanjeev Agarwal. Notably, it was not found during search upon assessee. The CIT(A) has also made a clear finding that the impugned document was found from Shri Sanjeev Agarwal in his capacity as partner in M/s Agarwal Construction and not from the premise of assessee or during assessee’s proceeding. Further, as can be seen from impounded document, it nowhere bears the name of assessee. When it is so, we agree with Ld. CIT(A) that the presumption u/s 292C is not available to AO for drawing any conclusion for or against assessee. Secondly, it becomes important to know as to what was the explanation given by Shri Sanjeev Agarwal when he was confronted by survey authorities during survey of Shri Sanjvee Agarwal/M/s Agarwal Construction itself because that explanation would be an instant explanation and credible in absence of any retraction or rebuttal. For this purpose, the Q.No. 9 and 10 as recorded by authorities becomes relevant. We have already re-produced those questions and replies in earlier para of this order. On perusal, one can find that Shri Sanjeev Agarwal instantly replied that the noting in impounded document was some calculation for making a decision but it could not materialise due to technical weakness in land and delay in TNCP permission. Thus, the nature of document is explained by Shri Sanjeev Agarwal himself in the very statements recorded during survey. That apart, the departmental Order-Sheet filed by assessee at Page 94 of Paper-Book also shows that Shri Sanjeev Agarwal personally attended the office of AO during assessment-proceeding of assessee and in reply to question put by AO, he re-confirmed his earlier explanation during survey. Thus, when it is submitted by Sanjeev Agarwal, the person from whose custody and in whose proceeding the document was impounded, that the calculation never materialised, how can the AO assume or treat that the impounded document showed that the assessee received a sum of Rs. 10,57,00,000/-? Admittedly, the AO has no other document or basis to draw or support such a conclusion. Thirdly, the Ld. AR has successfully demonstrated that the assessee’s land was sized 11 acres and the JVA was for 8.71 acres whereas the impounded document shows financial transaction for 10.80 acres. Thus, the impounded document has no corroboration with assessee/assessee’s JVA and the AO has wrongly attributed the impounded document to assessee/assessee’s JVA. Lastly, it is also a question that what action was taken by department against the payer of money (i.e. JV Partner)? The CIT(A) has made a clear finding that the department has not made any addition in the hands of JV Partner. Considering all these vital aspects, the addition made by AO remains an unproved receipt/income of assessee having been inferred by AO on mere surmise and conjecture. Hence, we do not find any justification or strength in the addition made by AO. Consequently, we are inclined to approve the CIT(A)’s action of deleting the addition. The grounds raised by revenue and accordingly the present appeal is rejected.” Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 28 of 33 [Emphasis supplied] Ld. AR submitted that, in Para 18 of order, the Co-ordinate Bench has analysed the instant replies to Q.No. 9 & 10 given by assessee (Shri Sanjeev Agarwal) in the statements recorded u/s 131 during survey itself and accepted that the impounded document contained some calculation for making a decision but it could not materialise due to technical weakness in land and delay in TNCP permission. Thus, the nature of document is explained by assessee (Shri Sanjeev Agarwal) himself in the statements recorded during survey itself. That apart, the departmental Order-Sheet filed in M/s Pramada’s case also showed that the assessee (Shri Sanjeev Agarwal) personally attended the office of AO during assessment-proceeding of M/s Pramada and in reply to question put by AO, the assessee (Shri Sanjeev Agarwal) re- confirmed his earlier explanation made during survey. Accordingly, the Co-ordinate Bench concluded that the jotting in document never materialised. Ld. AR submitted that the AO has wrongly mentioned/ interpretated that when the assessee was asked during survey to explain the nature and contents of document in statements u/s 131 vide Q.No. 9, the assessee failed to give satisfactory explanation about the document. Further, the CIT(A) is also wrong in rejecting assessee’s valid explanation and sustaining the addition made by AO. Therefore, Ld. AR requested, the addition made by AO and sustained by CIT(A) Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 29 of 33 deserves to be deleted in the light of decision of Co-ordinate Bench in M/s Pramada’s case. (ii) Secondly, it is submitted that no opportunity of cross-examination was allowed to assessee despite specific request by assessee. Therefore, as per settled judicial view, the addition made by AO without providing opportunity of cross-examination is not sustainable. (iii) Thirdly, it is submitted that the impounded document is an image of handwritten document taken from i-phone of assessee which is not admissible as evidence in absence of a certificate u/s 65B(4) of the Indian Evidence Act, 1872. To support this proposition, Ld. AR relied upon Para 22 of Anvar P.V. Vs. P.K. Basheer and Others, Civil Appeal No. 4226 of 2012 (SC). Further, in terms of section 79A of Information Technology Act, a digital evidence not supported by a certificate cannot be considered as “document”. Ld. AR went ahead to submit that if the impounded document is not a “document” in the eyes of law due to absence of certificate by authorities, how can the presumption u/s 292C attached to a “document” apply? Therefore, the authorities are wrong in relying upon section 292C to make addition based on so-called document impounded from i-phone of assessee. (iv) Lastly, it is submitted that the assessee only purchased 12,55,250 shares of M/s Pramada on 19.05.2016 & 03.06.2016 for a Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 30 of 33 consideration of Rs. 1,50,63,000/- which was paid through banking channel. The noting of land transaction in impounded document never materialised. The AO has wrongly connected the transaction of purchase of shares with purchase of land. 17. Per contra, Ld. DR for revenue filed following Written-Synopsis and relied upon the same: “8.02 LOOSE PAPER IMPOUNDED IS NOT ADMISSIBLE EVIDENCE AS PER THE INDIAN EVIDENCE ACT, 1872 AS PROVISIONS OF SECTION 65B WERE NOT ADHERED TO: 8.02.1 The appellant has argued that since the document was found on the iPhone of the appellant i.e. Shri Sanjeev Agrawal, and printouts were taken, it constitutes secondary electronic evidence, which, according to the appellant, should have been subject to the provisions of section 65B of the Indian Evidence Act, 1872. Since, the Department has not complied with the provisions of section 65B of the Indian Evidence Act, 1872, the said loose paper should not be considered as an admissible evidence and consequently, the addition so made on the basis of such loose paper should be deleted. 8.02.2 In this regard, it is submitted that the Hon'ble Supreme Court in the case of Chuharmal vs. CIT 172 ITR 250 (SC) has held that the strict application of the rules of the Indian Evidence Act does not necessarily apply in proceedings under the Income Tax Act. Therefore, the plea of the appellant is not tenable in view of the Hon'ble Supreme Court's ruling. 8.03 THE LOOSE PAPER IMPOUNDED IS A DUMB DOCUMENT & THE TRANSACTIONS MENTIONED ON THE SAME NEVER MATERIALISED 8.03.1 The appellant has contended that the document should be termed as a \"dumb document\" containing rough notings and that the transactions mentioned therein never materialized. In this regard, we wish to challenge the said argument in light of the submissions made in the ensuing paras. 8.03.2 DOCUMENT CANNOT BE TREATED AS DUMB DOCUMENT It is submitted that the impugned document cannot be regarded as a \"dumb document\" for the following reasons: (i) The impounded document is dated, which gives it a time reference and links it to a specific period. The presence of a date on the document suggests its relevance to the transactions in question and establishes its authenticity. Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 31 of 33 (ii) The document clearly mentions the name of the appellant. This is significant as it directly ties the document to the appellant and his involvement in the transactions recorded therein. The presence of the appellant's name indicates that the document pertains to him and his business dealings. (iii) The details mentioned in the impugned document are consistent with the statement of the appellant recorded during the survey proceedings. (iv) The CIT(A), in his order at page 38, has provided specific reasoning as to why the document cannot be termed as a \"dumb document.\" The appellant has, in fact, admitted to paying certain amounts to Shri Kriplani and Shri Pritpal Singh for acquiring shares in Pramada Estate India Pvt. Ltd.. This transaction occurred in May and June 2016, and the payments referenced in the impugned loose paper align with these dates. The timing of the payments in the document corresponds directly to the transaction period identified by the appellant, further corroborating the authenticity of the document. 8.03.3 The loose paper impounded by the AO cannot be dismissed as irrelevant or immaterial. The following points further support its relevance: (i) The document is not just a collection of rough notings but a record of transactions that reflect actual financial dealings. It serves as a critical piece of evidence linking the appellant to unreported income and on- money payments. (ii) The appellant's attempt to dismiss the document as a \"dumb document\" fails to negate its materiality, especially when the facts surrounding the payments, their timing, and the corroborative statements made by the appellant and others are taken into account. In light of the above submissions, it is respectfully prayed that the impounded loose paper is not a \"dumb document\" but a valid piece of evidence documenting the on-money payments made by the appellant. Therefore the appellant's contention be dismissed, and the addition made by the AO based on the impounded document be upheld as valid.” 18. Additionally, Ld. DR made following submissions: (i) That the case of M/s Pramada decided by ITAT was different on facts. (ii) That the assessee has himself accepted that the transaction mentioned in impounded document was not executed. Thus, the “ownership” of impounded document is self-admitted by assessee himself. Due to this reason, the cross-examination of parties was not Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 32 of 33 required. Again due to self-admission of ownership by assessee, the assessee’s claim of non-admissibility of impounded document as “evidence” in terms of section 65B(4) of Indian Evidence Act / Section 79A of Information Technology Act, is not a valid claim. Even otherwise, in Chuharmal Vs. CIT 38 Taxman 190 (SC) it was held that the rigour of rules of Evidence contained in Evidence Act are not applicable to income-tax proceedings. 19. We have considered rival submissions of both sides and perused the case-record including the material to which our attention has been drawn. Admittedly, the impugned addition has been made on the basis of document impounded from assessee’s mobile during survey. From this document, it is inferred by authorities that the assessee made payment to M/s Pramada. On the basis of very same document, addition was also made in the hands of counter party M/s Pramada. The said addition in the hands of M/s Pramada was, however, deleted by CIT(A) and the order of CIT(A) was upheld by ITAT as discussed above. In coming to such a conclusion, it was accepted by ITAT that when the document was confronted by survey authorities to the assessee (Shri Sanjeev Agarwal), there was an instant explanation in reply to Q.No. 9 & 10 that the impounded document contained some calculation for making a decision but it could not materialise due to technical weakness in land and delay in TNCP permission. Thus, when the addition made in the hands of counter party M/s Pramada is deleted by CIT(A) and such deletion is upheld by ITAT, we agree that the impugned Sanjeev Agrawal ITA No. 38/Ind/2024 – AY 2017-18 Page 33 of 33 addition made in the hands of assessee is not sustainable. Accordingly, we delete the addition made in present assessee’s hands by AO and upheld the CIT(A). The assessee succeeds in these grounds also. Since we have allowed the assessee’s grounds on this very reason, other pleadings made by both sides are not required to be looked into. 20. Resultantly, this appeal is allowed. Order pronounced by putting up on notice board as per Rule 34 of ITAT Rules, 1963 on 21/02/2025 Sd/- Sd/- (DINESH MOHAN SINHA) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/ Dated : 21/02/2025 Dev/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore "