Case Law Details
Venkata Satyanarayana Vs ACIT (ITAT Hyderabad)
The assessee appealed against the order of the CIT(A) confirming an addition of ₹1,20,06,000 made under Section 69 of the Income Tax Act in proceedings initiated under Section 153C for AY 2019-20. The addition arose from a loose sheet seized during a search under Section 132 at the premises of a third party, M/s MSR India Limited. The Assessing Officer treated the figures recorded in the loose sheet as representing the actual consideration paid for the purchase of certain plots and, after reducing the amount disclosed in the registered transaction, added the balance as unexplained investment under Section 69.
The assessee contended that the entire addition was based only on an unsigned loose sheet seized from a third party that was neither the purchaser nor the seller of the property. It was submitted that the property had been purchased through a registered sale deed, the consideration was fully supported by banking records and TDS deductions, and the particulars in the loose sheet did not match the actual transaction. The assessee also argued that the document contained no signature, date, authentication or identifiable author, did not reflect the cheque numbers or sale consideration recorded in the registered documents, and that no enquiry had been conducted with the vendors to establish receipt of any amount over and above the registered consideration. It was further submitted that no satisfaction note was supplied and no opportunity for cross-examination was granted.
The Revenue supported the orders of the lower authorities, submitting that the loose sheet contained the assessee’s name and details of the plots purchased, establishing a nexus with the transaction.
The ITAT observed that the registered sale deed, banking records and TDS deductions supported the consideration disclosed by the assessee. The Tribunal noted that the loose sheet forming the sole basis of the addition was not found in the possession of the assessee or the vendors but at the premises of a third party. The Assessing Officer had not explained how such a document could be treated as conclusive evidence without independent verification.
The Tribunal further found that the seized document lacked credibility. It was unsigned, did not identify its author, was not part of regularly maintained books of account, and contained material inconsistencies. The registered sale consideration did not appear in the loose sheet, the cheque numbers differed from the banking records, and several figures were not reconcilable with the actual transaction. The Tribunal also held that the Assessing Officer had merely assumed that the disclosed consideration formed part of another figure appearing in the loose sheet without any supporting material or independent enquiry.
The Tribunal observed that no corroborative evidence had been produced to establish payment of any on-money. The Assessing Officer had not recorded statements from the sellers or representatives of the developer, nor identified any cash trail. It reiterated that additions cannot be sustained merely on the basis of loose sheets or dumb documents unless supported by independent and cogent evidence, and that suspicion cannot replace proof.
According to the Tribunal, the case stood on an even stronger footing since the loose sheet had been seized from an unrelated third party and the Revenue failed to establish any direct nexus between the entries in the document and any receipt of money by the vendors. The burden to prove understatement of consideration rested on the Revenue, which remained undischarged. Except for the loose sheet, there was no evidence demonstrating payment beyond the consideration reflected in the registered documents.
The ITAT held that the loose sheet did not conclusively establish payment of additional consideration and that the Section 69 addition was founded on assumptions and presumptions without corroborative evidence. It therefore deleted the addition of ₹1,20,06,000. Having allowed the appeal on merits, the Tribunal left open the other legal grounds relating to the validity of proceedings under Section 153C, non-supply of the satisfaction note and denial of cross-examination. The order of the CIT(A) was set aside and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals)-12, Hyderabad (for short, “CIT(A”), dated 13/10/2025, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under Section 153C of the Income Tax Act, 1961 (for short, “Act”) for the assessment year 2019-20. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. The Hon. CIT(A)-12, Hyderabad has erred in upheld the addition made in the Assessment order is bad on facts and in law in as much as it suffers from the vice of violation of the principles of natural justice.
2. The Hon. CIT(A)-12, Hyderabad has erred in upholding the assessment made by the Ld. AO U/s 153C of the Income Tax Act, even though the Ld. AO wrongly presumed that the contents in the loose sheets found during a search operation at the premises of M/s. MSR India Ltd. (a third party) “pertains” to the assessee.
3. The Hon. CIT(A)-12, Hyderabad has erred in upholding the addition made by the AO as unexplained investment under sec. 69 of the Income Tax Act without considering the fact that the details like name, extent, payment details, TDS etc. mentioned in the dumb document do not match with the actual transaction (as per the sale deed) that was happened between the appellant and the land lord.
4. The Hon. CIT(A)-12, Hyderabad has failed to appreciate the fact that the addition of Rs. 1,20,06,000/- made by the Assessing officer as unexplained investment is wholly unjustified and based only on presumptions drawn from loose sheet that was seized from the premises of third party. M/s. MSR India Ltd. and the said document (A/MSR/OFF/1, page 125) is a dumb document, containing no signature or authentication and the figures mentioned therein do not match with the actual transaction or payments made by the appellant.
5. The Hon. CIT(A)-12, Hyderabad has erred in accepting the decision of the AO in making an addition of Rs. 1,20,06,000/- on account unexplained investment in purchase of aforesaid plots, as the Id. AO has not provided any corroborative evidence that prove the appellant has made the payment to the tune of Rs. 1,20,06,000/- to the developer in addition to the sale consideration mentioned in the sale deed.
6. The Hon. CIT(A)-12, Hyderabad failed to appreciate the fact that the total consideration for the purchase of plots Nos. 6, 7, 40 and 41 was Rs. 1,00,11,000/-, which was fully paid through banking channels viz. Rs. 25,00,000/- to M/s. Mirchi Developers Pvt. Ltd. on 23.5.2018 vide Ch. No. 536341 towards development charges and Rs. 74,35,890/- to the land lord, Mr. Anil Kumar Verma on 22.06.2018 vide Ch. No. 536342 after deduction of TDS amount of Rs. 75,110. These payments are duly reflected in the registered sale deed and none of these payment details are available in the loose sheet.
7. The Id. CIT(A) -12, Hyderabad has failed to compare the particulars contained in the loose sheet (name, total area of the plots, date of registration, cheque number, cheque payment amount, TDS etc.) with the sale deed and bank statement and upheld the order made by the Ld. AO mechanically without application of mind.
8. The Id. CIT(A)-12, Hyderabad has appreciated the failure of the Ld. AO for not providing the satisfaction report and not giving an opportunity for cross examination even at the time of remand report also.
9. The appellant craves leave to add, amend or delete any of the above ground on or before the final date of hearing.”
2. Succinctly stated, the assessee had filed his return of income for the assessment year 2019-20 on 26.09.2019, declaring an income of Rs. 28,16,640/-.
3. Search and seizure operation under section 132 of the Act was conducted on 07.01.2021 in the case of M/s MSR India Limited and Shri M. Srinivasa Reddy, Director of M/s Mirchi Developers Private Limited. During the course of the search proceedings, certain loose sheets were stated to have been found and seized vide Annexure A/MSR/OFF/1, Page No. 125, which allegedly contained notings relating to the purchase of plots bearing Nos. 6, 7, 40, and 41, admeasuring 1074 square yards.
4. Based on the aforesaid loose sheet, the AO of the searched person recorded his satisfaction under section 153C of the Act and handed over the incriminating material to the AO having jurisdiction over the assessee. Consequently, the AO of the assessee issued a notice under section 153C of the Act and initiated assessment proceedings.
5. During the assessment proceedings, the AO observed that the assessee had purchased plots bearing Nos. 6, 7, 40 and 41 situated at Dommarapochampally Village, Dundigal-Gandimaisamma Mandal, Medchal-Malkajgiri District through registered Sale Deed No.7932/2018 dated 22.06.2018. It was further observed that the seized loose sheet, viz. Annexure A/MSR/OFF/1- Page No.125 reflected total consideration of Rs.2,20,17,000/-, whereas the registered document disclosed consideration of Rs.75,11,000/-. The AO further observed that the assessee had admittedly paid Rs.25,00,000/- to M/s Mirchi Developers Private Limited and Rs.75,11,000/- towards acquisition of the property and therefore concluded that the total payment made by the assessee was Rs.1,00,11,000/-. Accordingly, the AO treating the amount of Rs. 2,20,17,000/- appearing in the loose sheet as the actual consideration paid by the assessee for purchasing the subject property reduced the amount of the disclosed investment of Rs. 1,00,11,000/-, and made an addition of Rs.1,20,06,000/- under section 69 of the Act by treating the same as an unexplained investment.
6. Aggrieved, the assessee carried the matter in appeal before the CIT(A), who confirmed the addition by holding that the seized document contained the assessee’s name and plot numbers and therefore had evidentiary value.
7. The assessee, aggrieved with the CIT(A) order has carried the matter in appeal before us.
8. We have heard the Ld. Authorised Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
9. Shri. C Srinivasa Rao, CA, the Learned Authorised Representative (for short, “Ld. AR”) of the assessee, at the threshold of hearing of the appeal, submitted that the entire addition is based solely upon the contents of a “loose sheet”, viz. Annexure A/MSR/OFF/1-Page No.125 seized from the premises of M/s MSR India Limited, which is neither the vendor of the property nor a party to the transaction. The Ld. AR submitted that the assessee had purchased the property from Shri Anil Kumar Verma and M/s Mirchi Developers Private Limited, and no incriminating material whatsoever was found from either the assessee or from the vendors to establish payment of any amount over and above the registered consideration. Elaborating further on his contention, the Ld. AR submitted that the impugned “loose sheet” does not contain any signature, initials, authentication, date of preparation or identification of the author, and the same, being a rough sheet containing certain figures and notings, was nothing better than a “dumb document” having no evidentiary value in the absence of corroborative evidence. The Ld. AR invited our attention to the contents of the seized “loose sheet”, viz. Annexure A/MSR/OFF/1- Page No.125, and submitted that the particulars recorded therein do not match with the actual transaction. It was pointed out that the cheque number mentioned in the loose sheet does not tally with the cheque numbers reflected in the registered document and bank statement. Likewise, the amount of Rs.75,11,000/- appearing in the registered sale deed is not reflected anywhere in the seized document. The Ld. AR submitted that the assessee had paid Rs.25,00,000/- on 23.05.2018 through cheque No.536341 to M/s Mirchi Developers Private Limited and Rs. 74,35,890/- through cheque No.536342 on 22.06.2018 after deduction of TDS of Rs. 75,110/- to Shri Anil Kumar Verma, and the said payments are fully supported by bank statements, sale deed and TDS records. Carrying his contention further, the Ld. AR submitted that the AO has merely presumed that the amount of Rs.75,11,000/- forms part of the figure of Rs.1,30,17,000/- appearing in the seized “loose sheet”, viz. Annexure A/MSR/OFF/1- Page No.125, without referring to or placing on record any supporting evidence. It was submitted that the AO had also failed to conduct any enquiry either from Shri Anil Kumar Verma or from M/s Mirchi Developers Private Limited to ascertain whether any amount over and above the consideration disclosed in the registered sale deed had actually been received by them. The Ld. AR further submitted that no statement of the vendors was recorded, alleging receipt of any on-money. Also, the Ld. AR submitted that neither a copy of the satisfaction note relied upon for initiating proceedings under section 153C was supplied to the assessee, nor any opportunity of cross-examination was afforded to him.
10. Per Contra, the Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) supported the orders of the lower authorities and submitted that the seized document specifically contained the assessee’s name and details of the plots purchased by him. According to the Ld. Sr. DR, the matching particulars in the seized document viz. Annexure A/MSR/OFF/1, Page No.125, established a clear nexus between the document and the purchase transaction carried out by the assessee.
11. We have given thoughtful consideration to the contentions advanced by the Learned Authorised Representatives of both parties in the backdrop of the orders of the authorities below.
12. Admittedly, it is a matter of fact borne from the record that the property in question was purchased by the assessee from Shri Anil Kumar Verma and M/s Mirchi Developers Private Limited through a registered sale deed dated 22.06.2018. Also, it is a fact discernible from the record that the entire consideration disclosed by the assessee is supported by registered conveyance deeds, banking records and TDS deductions.
13. As observed by us hereinabove, the foundation of the impugned addition of Rs.1,20,06,000/- made in the hands of the assessee under Section 69 of the Act is the contents of the document, viz. Page No.125 of Annexure A/MSR/OFF/1 seized from the premises of M/s MSR India Limited (supra). Admittedly, the said document was not found in the assessee’s possession. Also, it was not found from the premises of Shri Anil Kumar Verma or M/S Mirchi Developers Private Limited, i.e., either of the seller. On the contrary, the document was seized during the search proceedings conducted at the premises of M/S MSR India Limited. We find that the AO has not explained how a document obtained from M/S MSR India Limited, which is neither the purchaser nor the seller of the property, can be summarily treated as conclusive evidence against the assessee without any independent verification.
14. Apart from the aforesaid, we find substance in the contention of the Ld. AR that the seized document, viz. Page No.125 of Annexure A/MSR/OFF/1 itself does not inspire any confidence for more than one reason, viz. (i) the document does not bear the signature of either the assessee, i.e., the purchase or the sellers; (ii) there is nothing available on record which would irrefutably establish as to who is the author of the subject seized document and no evidence has been brought on record to establish when and by whom it was prepared; and (iii) the seized document is not part of any regularly maintained books of account. Also, we find that the contents of the seized document suffer from material inconsistencies, viz. (i) the registered sale deed records sale consideration of Rs.75,11,000/-, but the same does not find place anywhere in the seized document; (ii) the cheque numbers appearing in the seized document do not tally with the actual cheque numbers reflected in the banking records of the assessee; and (iii) the seized document also contains figures which are admittedly not reconcilable with the actual transactions.
15. We find that the AO has proceeded on the assumption that the amount of Rs.75,11,000/- paid by the assessee forms part of the figure of Rs.1,30,17,000/- appearing in the seized “loose sheet”, viz. Page 125 of Annexure A/MSR/OFF/1. However, we find absolutely no material to support such an assumption. It transpires from a perusal of the record that the figure of Rs.1,30,17,000/- is itself unexplained, and the Revenue has not established the nature of the said entry through any independent enquiry.
16. Apart from that, we find that no corroborative evidence has been brought on record by the revenue to substantiate its view that the assessee has parted with any on-money for purchasing the subject property. In fact, on a perusal of the record, we find that the bare minimum expected of the AO has not been done, i.e., the AO had not even recorded the statements of the sellers, viz. Shri Anil Kumar Vermaor, or that of any representative of M/s Mirchi Developers Private Limited, in order to substantiate his conviction that they were in receipt of on-money from the assessee. Also, no cash trial has been identified.
17. We are of firm conviction that, as per the settled position of law, additions cannot be sustained merely on the basis of loose sheets or dumb documents unless supported by independent and cogent evidence. In fact, a suspicion, however strong, cannot take the place of proof. We find that the Hon’ble Supreme Court in the case of CBI vs. V.C. Shukla [(1998) 3 SCC 410], has held that loose sheets of paper are not books of account and entries contained therein do not constitute substantive evidence unless independently corroborated. Also, the Hon’ble Supreme Court in Common Cause vs. Union of India (2017) 11 SCC 731 reiterated that loose sheets and private papers by themselves do not constitute admissible evidence for fastening liability in the absence of supporting material. We further find that the Hon’ble High Court of Delhi, in CIT vs D.K. Gupta (2009) 308 ITR 230 (Del.), has held that mere notings in loose papers do not establish actual transactions unless corroborated by independent evidence. Also, the Hon’ble High Court of Delhi in CIT vs Sant Lal (2020) 423 ITR 1 (Del), held that where no further enquiry or investigation is conducted to corroborate the information contained in the seized material, additions based solely on such material cannot be sustained. Further, we find that the coordinate bench of the Tribunal in Gavireddygari Aparna Kalyani Vs. ACIT, Central Circle 2(3), Hyderabad, ITA Nos 3 to 40//Hyd/2023, dated 28/02/2023, has also held that no addition can be made merely on the basis of a dumb document without confronting the concerned parties and without gathering corroborative evidence.
18. We find that the present case before us stands on an even stronger footing because the seized document, viz. Page No. 125 of Annexure A/MSR/OFF/1 was not found with the assessee or the vendors, but was found with an entirely different entity, viz. M/s MSR India Limited. Apart from that, the Revenue has failed to establish any direct nexus between the alleged entries and the vendors’ actual receipt of money. In our view, the burden to prove understatement of consideration was squarely upon the Revenue, which we find it had miserably failed to discharge. We say so, for the reason that, except for the impugned loose sheet, viz. Page No.125 of Annexure A/MSR/OFF/1 there is no evidence whatsoever demonstrating that the assessee paid any amount over and above the consideration reflected in the registered documents. At this stage, we are reminded of the judgment of the Hon’ble High Court of Punjab & Haryana in the case of Paramjit Singh vs. ITO [2010] 195 Taxman 273 (Punjab & Haryana), wherein it has been held that the contents of a registered sale deed cannot be dislodged on the basis of oral or hearsay evidence. The Hon’ble High Court had observed that no oral evidence is admissible once the document contains all the terms and conditions. It was observed that Sections 91 and 92 of the Indian Evidence Act, 1872 (for brevity, the 1872 Act) incorporate the aforesaid principle. According to Section 91 of the Act, when the terms of a contract, grant, or other disposition of property have been reduced to the form of a document, then no evidence is permissible to be given in proof of any such terms of such grant or disposition of the property except the document itself or the secondary evidence thereof. It was further observed that, as per Section 92 of the 1872 Act, once the document is tendered in evidence and proved as per the requirements of Section 91, then no evidence of any oral agreement or statement would be admissible as between the parties to any such instrument for the purposes of contradicting, varying, adding to or subtracting from its terms.
19. We, thus, in terms of our aforesaid deliberations, are therefore unable to sustain the finding of the CIT(A) that the impugned “loose sheet” viz. Page No.125 of Annexure A/MSR/OFF/1 seized in the course of the search proceedings from the premises of M/s MSR India Limited (supra) conclusively establishes payment of additional consideration by the assessee for the purchase of the subject property. In the backdrop of our aforesaid observation that a suspicion, however strong, cannot take the place of proof, we are of the firm conviction that the impugned addition made by the AO based on the contents of the seized “loose sheets”, viz. Page No.125 of Annexure A/MSR/OFF/1 cannot be sustained in the absence of any corroborative material which would irrefutably establish payment of on money by the assessee for purchasing the subject property.
20. Considering the totality of facts and circumstances, we are of the view that as the addition of Rs.1,20,06,000/- made by the AO under section 69 of the Act is based on assumptions and presumptions and is unsupported by any corroborative evidence, the same cannot be sustained and is liable to be deleted.
21. As we have vacated the impugned addition made by the AO on merits, the other legal contentions raised by the Ld. AR regarding the validity of proceedings initiated under section 153C of the Act, the non-supply of the satisfaction note, and the denial of cross-examination are being left open.
22. Accordingly, the order of the CIT(A) is set aside, and the addition of Rs.1,20,06,000/- made by the AO under section 69 of the Act is vacated.
23. In the result, the appeal of the assessee is allowed in terms of our aforesaid observations.
Order pronounced in the open court on this 17th day of June, 2026
Author Bio
