Addition, based on uncorroborated entries, without appropriate evidence is unsustainable

ACIT Vs. Shri B.S. Yediyurappa Vs  (ITAT Bangalore)

Facts- The assessee is an individual and the former Chief Minister of the State of Karnataka. The appellant derives income from Salary, House Property and Other Sources and for the year under appeal the assessee had filed his ROI for AY 2009-10 on 31.07.2009 reporting a total income of Rs. 30,70,370/-, ROI for AY 2010-11 on 30.07.2010 reporting a total income of Rs. 26,53,320/- & ROI for AY 2011-12 on 30.07.2011 reporting a total income of Rs. 57,74,420/-. No further proceedings for the assessment of income for the year under appeal were taken up after filing the aforesaid return of income.

The assessee received notices u/s. 148 of the Act dated 13.03.2015, from the A.O. calling upon the assessee to file his ROI for the years under appeal. In response to the aforesaid notices issued by the A.O., the assessee vide letter dated 02.04.2015 filed on 05.04.2015 complied with the aforesaid notices and filed the returns of income reporting the same income that was disclosed in the original returns of income filed earlier for the years under appeal.

Thereafter, the A.O. took up the cases of the assessee for scrutiny and issued a notice u/s 143(2) of the Act, dated 11.08.2015 and along with the aforesaid notices, separate notices u/s 142(1) of the Act, also dated 11.08.2015 were issued calling for certain information contained in the annexure to the aforesaid notices.

However, the impugned orders was passed stating that there was no compliance by the assessee to the aforesaid notice dated 11.08.2015, which finding is patently erroneous. Thereafter, the assessee received the letter of the A.O. dated 24.02.2016 in which, the extract of the reasons recorded for re-opening the assessment were furnished as an Annexure. It is submitted that upon receipt of the reasons recorded, as aforesaid, the assessee filed objections for reopening the assessment vide letter dated 14.03.2016 filed on 15.03.2016.

Be that as it may, before the assessee could file the aforesaid objections for the re-opening of the assessment, the A.O. issued a pre-assessment notice dated 08.03.2016, calling for an explanation from the assessee in respect of certain alleged payments made to the assessee by one M/s. RNS Infrastructure Ltd., purportedly found in course of search conducted by the Department in the aforesaid case.

After various communication between assessee and the department, AO concluded the concluded the assessment proceedings by passing the impugned order u/s.143(3) r.w.s.147 of the Act dated 28.03.2016, determining the total income of the assessee at Rs.2,68,64,252/- by making a solitary addition of Rs.2,11,13,832/- in respect of the alleged payments made to the assessee by M/s.RNS Infrastructure Ltd., during the year under appeal.

Conclusion- In the present case, the whole addition is made by the A.O. on the basis of the seized material procured from corporate office of M/s.RNS Infrastructure Ltd. This seized material shows certain sundry payments grouped under GE SUN 01 and GE SUN 03 and the sundry payments were made by cash. In these sundry payments, certain entries mentioned the name of the assessee and the corresponding payment to him. From this, the A.O. came to conclusion that the assessee being a Chief Minister, and Chairperson of the Karnataka Neeravari Nigam Ltd (KNNL) that had awarded the Upper Bhadra Project (UBP) contract to Murudeshwar Power Corporation Ltd. in 2008-09 to the tune of Rs.1033 Crores and KNNL is the subsidiary of RNSIL, in which case search was took placed and that payment was out of the book payment in connection with awarding of tender of UBP to KNNL by assessee being a Chief Minister of Karnataka and Chairperson of KNNL and made addition on this count to the tune of Rs.2,11,13,832/-.

However, on examining the witness and cross-examination of parties, who denied such payment to the assessee, on that basis, the CIT(A) deleted the addition. The entire case of the department is based on the un-corroborated entries found in the computer server which were retrieved by using the forensic tools. These alleged documents collected by the department from the computers of M/s.RNS Infrastructure Ltd., cannot be described as evidence so as to fasten the tax liability on the present assessee. These are not maintained on day-to-day basis and not the part of the books of accounts maintained by M/s.RNS Infrastructure Ltd., there is no mention of the date on which the alleged payments were made.
The seized document collected by the department did not raise a reasonable ground to believe that there is a valid payment to the present assessee so as to award contract to the KNNL and the payment is relating to for awarding the contract of UBP. The seized material itself would not furnished evidences of the truth of their contents and that was not corroborated by any further evidence so as to hold that the assessee has actually received the said payment.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

This is an appeal filed by the Revenue and the Cross Objection filed by the assessee against the order of the learned CIT(A), 1, Bengaluru dated 04.09.2018 for AY 2011-12.

2. Revenue has raised the following ground of appeal: –

“(1) The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case.

(2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has ignored the fact that the assessee was the Chief Minister of Karnataka from May 2008 – July 2011 and was also the Chairperson of Karnataka Neeravari Nigam Ltd (KNNL) that had awarded the Upper Bhadra Project contract to Murudeshwar Power Corporation Ltd, which is a subsidiary of RNSIL, in 2008­09. Therefore, the assessee is in an influential position and has direct connection with the RNSlL. Thus, there is a reason to believe that the assessee is one recipient of sundry payments from RNSIL to the tune of Rs. 1,00,00,000/-, Rs. 1,00,00,000, and Rs. 2,11,13,832/- for A.Yrs. 2009-10, 2010-11 and 2011-12 respectively.

(3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made by the AO without appreciating the fact the diary jottings and the deleted data containing the details of all the transactions that was retrieved using the forensic tools during the course of search proceedings has not been disputed by VP(Finance) in RNSIL in his sworn statement u/s 132 (4) of the Act on the date of search.

(4) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not taking into account that the evidence mentioned above contains details of sundry payments that were made in cash were not made part of accounts. The evidence is substantial and is backed up by other corroboration and that they are not mere scribbling/jottings.

(5) For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the Ld. CIT (A) be reversed and that of the Assessing Officer be restored.

(6) The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of appeal.”

3. Assessee raised the following grounds in the Cross Objection: -]

“1. The orders of the authorities below in so far as they are against the Cross-objector/respondent are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.

2. The order of re-assessment is bad in law and void-ab-initio for want of requisite jurisdiction especially, the mandatory requirements to assume jurisdiction u/s 148 of the Act did not exist and have not been complied with and consequently, the re-assessment requires to be cancelled.

3. Without prejudice to the above, the impugned order passed by the learned A.O. without following the procedure laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts reported in 259 ITR 19 [SC] is bad in law and therefore, the impugned order passed deserves to be annulled.

4. Without prejudice to the above, the impugned order passed by the learned A.O. in gross violation of the principles of natural justice in as much as the learned A.O. has not furnished the copies of the materials relied upon for making the impugned addition and thus, the addition made stands vitiated and the order passed is a nullity and deserves to be cancelled.

5. For the above and other grounds that my be urged at the time of hearing of the Cross-Objection, your Respondent/Cross-Objector humbly prays that the appeal filed by the appellant A.O. in respect of the relief granted by the CIT [Appeals] may be dismissed and ground of the Cross-Objection may be allowed and justice rendered.”

4. At the time of hearing the learned A.R. made an endorsement that the CO is not pressed. According the CO filed by the assessee is dismissed as not pressed.

5. Now we will consider the appeal of the Revenue. There was a delay of 2 days in filing the appeal before the Tribunal. The AO filed a condonation petition explain the delay of two days wherein it is explained that the delay was due to administrative reasons. In our opinion there is a good and sufficient reason for the short delay of two days in filing the appeal before this Tribunal. Accordingly the delay of two days in filing the appeal before this Tribunal is condoned and appeal is admitted for adjudication.

6. The facts of the case are that the assessee is an individual and the former Chief Minister of the State of Karnataka. The appellant derives income from Salary, House Property and Other Sources and for the year under appeal the assessee had filed his Return of income for AY 2009-10 on 31.07.2009 reporting a total income of Rs. 30,70,370/-, return of income for AY 2010-11 on 30.07.2010 reporting a total income of Rs. 26,53,320/- & Return of income for AY 2011-12 on 30.07.2011 reporting a total income of Rs. 57,74,420/-. No further proceedings for the assessment of income for the year under appeal were taken up after filing the aforesaid return of income. The assessee received notices under Section 148 of the Act dated 13.03.2015, from the A.O. calling upon the assessee to file his return of income for the years under appeal. In response to the aforesaid notices issued by the A.O., the assessee vide letter dated 02.04.2015 filed on 05.04.2015 complied with the aforesaid notices and filed the returns of income reporting the same income that was disclosed in the original returns of income filed earlier for the years under appeal. Thereafter, the A.O. took up the cases of the assessee for scrutiny and issued a notice under Sections 143(2) of the Act, dated 11.08.2015 and along with the aforesaid notices, separate notices under Section 142(1) of the Act, also dated 11.08.2015 were issued calling for certain information contained in the annexure to the aforesaid notices. The cases were fixed for hearing on 20.08.2015. In response to the aforesaid notices issued, the assessee’s Authorised Representative Mr. P G Ananthnaryanan appeared before the A.O. on 20.08.2015 and furnished the details called for vide letter dated 20.08.2015. It. is submitted that certain further documents were called for in course of the hearing on 20.08.2015 and the same were duly furnished under the cover of the letter dated 24.08.2015 filed on 25.08.2015. However, in the impugned orders passed, the A.O. has stated in the tabular chart on Page [3] of the assessment orders that there was no compliance by the assessee to the aforesaid notice dated 11.08.2015, which finding is patently erroneous. Thereafter, the assessee received the letter of the A.O. dated 24.02.2016 in which, the extract of the reasons recorded for re-opening the assessment were furnished as an Annexure. It is submitted that upon receipt of the reasons recorded, as aforesaid, the assessee filed objections for reopening the assessment vide letter dated 14.03.2016 filed on 15.03.2016. It is submitted that the assessee had contended that the re­opening of the assessments were unjustified. However, these objections of the assessee were, not considered or disposed off by the A.O., who has once again, stated in the tabular chart on ‘page No. 3 impugned orders that there was no compliance from the assessee, which finding is patently erroneous. Be that as it may, before the assessee could file the aforesaid objections for the re-opening of the assessment, the A.O. issued a pre-assessment notice dated 08.03.2016, calling for an explanation from the assessee in respect of certain alleged payments made to the assessee by one M/s. RNS Infrastructure Ltd., purportedly found in course of search conducted by the Department in the aforesaid case. From the pre- assessment notice, the assessee came to know of the A.O’s intent to rely upon the seized materials and statements recorded from the employees of M/s. RNS Infrastructure Ltd., at the time of search. In response to the aforesaid pre-assessment notices, the assessee vide separate letter also dated 14.03.2016 and filed on 15.03.2016 sought for the copies of the seized materials and statements recorded that were referred to by the A.O. in the pre-assessment notices dated 08.03.2016. This is because after the assessment was re-opened on 13.03.2015 and case selected for scrutiny on 11.08.2015, the assessee was informed of the aforesaid issue only when he received the reasons recorded vide letter dated 24.02.2016 followed by the pre-assessment notice dated 08.03.2016. When the aforesaid issue was not put to the assessee at any stage before, there is no question of the assessee being served with the copies of the seized materials and statements recorded that were stated in the said notice much before. Thus, the assessee made a bonafide prayer for the copies of the aforesaid materials that were being relied upon by the A.O. in the pre-assessment notice dated 08.03.2016. This request of the assessee has not been noticed or considered by the A.O. in the impugned order. However, it may be mentioned here that the A.O. has observed that the assessee has complied with the aforesaid notice by the letter dated 14.03.2016 in the assessment order at Para [3] on Page [6]. It is submitted that the request of the assessee for the copies of the seized materials and statement recorded were not acceded to by the learned A.O. and the assessee was not given the copies of these seized materials and statements before the completion of the assessment proceedings. Instead, the assessee received a letter of the learned A.O. dt.22.03.2016 on 26.02.2016 stating that all copies of the materials were already given to the assessee. It was further stated by the learned A.O. that the reply filed by the assessee vide letter dated 14.03.2016 did not address the issue raised in the pre-assessment notice dated 08.03.2016. Hence, a final opportunity to file submissions was afforded to the assessee within the next 5 days.

Upon receipt of the aforesaid letter of the learned A.O., dated 22.03.2016, the assessee submitted vide letter dated 28.03.2016 filed on 29.03.2016 that he was not given the copies of the seized materials and that the letter dated 14.03.2016 was addressed by him only on the aspect of re­opening of the assessment. The assessee once again prayed for the copies of the documents to be furnished and requested the learned A.O. to take note of the fact that the so-called payments made were being denied. In respect of this final opportunity also, the learned A.O. has recorded that the assessee did not comply with the notice issued by the assessee in the tabular chart on page [3] of the assessment order, which is unjustified. It is submitted that the learned A.O. has passed the assessment order on 28.03.2016 and the letter giving final opportunity dated 22.03.2016 was served on the assessee only on 26.03.2016. It is submitted that there was a declared holiday on 25.03.2015 on account of Good Friday and the first available working day was 28.03.2016 and the assessee prepared the reply dated 28.03.2016 and filed it the very next day.

Thereafter, the learned A.O. concluded the assessment proceedings by passing the impugned order u/s.143(3) r.w.s.147 of the Act dated 28.03.2016, determining the total income of the assessee at Rs.2,68,64,252/- by making a solitary addition of Rs.2,11,13,832/- in respect of the alleged payments made to the assessee by M/s.RNS Infrastructure Ltd., during the year under appeal.

7. Against the assessment order the assessee carried appeal before the learned CIT(A). The learned CIT(A) observed with regard to reopening of assessment that the AO recorded reasons to believe based on information received consequent to search and seizure carried in the case of M/s. RNS Infrastructure Pvt. Ltd.. It has been mentioned in the reasons recorded that the assessee has deleted data in the seized computer server, which have been retrieved by using forensic tools. The deleted data represents day-to-day transactions made in cash outside the regular books of account. As per the said information found in the course of search, the assessee is one of the recipients of the said payment and hence, there was a reason to believe that income chargeable to tax has escaped assessment. The assessee’s objection on the said reasons is that the same do not bring out any belief that there is escapement of income. However, at the sage of recording the reasons the AO is not required to give any final conclusions and it is sufficient if there are prima facie materials to support the belief that income has escaped assessment, which is the said settled principles of law. Hence he confirmed the reopening of assessment in this case. Regarding the merit of the contention the learned CIT(A) observed that the main objection of the assessee is that the assessment was framed without giving the assessee copy of the seized material and statements relied upon. The learned CIT(A) directed AO to furnish copies of the seized material and statement relied upon by him and the AO was also directed to furnish the relevant seized material and statements a per letter dated 04.04.2018. Thereafter the AO has also allowed the assessee to cross examine Shri Sunil Sahasrabhudhe and Shri Naveen R. Shetty and reported that a copy of the statements recorded at the time of cross examination were also given to the assessee. Later the assessee filed statements as on 03.07.2018 as under: –

“2. Without prejudice to the above, it is submitted that even the perusal of the seized materials relied upon by the learned A.O. read together with the sworn statements of Sri Sunil Sahasrabudhe, Vice President, RNS Infrastructure Limited and Sri Naveen R. Shetty, Managing Director of RNS Infrastructure Limited that was furnished in course of appellate proceedings, by the learned A.0. vide letter dated 04/04/2018, does not support the case of the Department that there were any cash payments made to the appellant as alleged in the assessment order. In this regard, it is submitted that the appellant has already made a detailed submission vide letter dated 17/04/2018 addressed to the learned A.0. upon receipt of the copies of the seized materials and sworn statements vide letter dated 04/04/2018, It is submitted that the copy of the appellant’s submissions vide letter dated 17/04/2018 has also been marked and filed before your Honour on 20/04/2018 in which the appellant has set-out the prima-facie observations on the seized materials and the statements recorded by the Department in course of the search conducted in the case of RNS Infrastructure Limited. The appellant prays that the submissions made therein may kindly be adverted and considered as part and parcel of these submissions as well to avoid the risk of repetition.

3. Coming now to the facts elicited in course of the cross-examination of Sri Sunil Sahasrabudhi, Vice President, RNS Infrastructure Limited and Sri Naveen R. Shetty, Managing Director of RNS Infrastructure Limited, it is submitted that the cross-examination of the aforesaid two witnesses has shown that the seized materials relied upon by the department to suspect that there were cash payments made to the appellant is totally unreliable and unworthy of placing any credence.

3.1 In course of the cross-examination Sri Sunil Sahasrabudhi, Vice President, had submitted that he had given a statement u/s. 132(4) of the Act on 16/02/2012, which was obtained by force. In this regard, he has furnished copy of the letter dated 07/03/2012 addressed by him to the learned Deputy Director of Income-tax (Inv.). Unit-1(3) Bangalore in course of the search action in the case of RNS Infrastructure Limited. In the aforesaid letter Sri Sunil Sahasrabudhi has categorically mentioned that his initial statement recorded on 16/02/2012 was under force and he was threatened to give statement as per the wishes of the Departmental Officials and therefore, he has given certain statements and Signed certain statements under pressure without understanding the contents of the statements and documents. A copy of the letter furnished by Sri Sunil Sahasrabudhi dated 07/03/2012, which is self-explanatory is enclosed herewith as Annexure-2.

3.2 Proceeding further it may be mentioned here that in course of the cross-examination of Sri Sunil Sahasrabudhi, it was elicited from him that he was never examined at the time of search by being shown the seized materials that has now been furnished by the learned A.0. under the cover of the letter dated 04/04/2018 (Answer to Q.No.5 & 6). Further, the aforesaid witness has categorically affirmed that he has never made any statement before the Income-tax Department that cash payments were made to the appellant in connection with the business of RNS Infrastructure Limited (Answer to Q.No.7). He has also categorically maintained that the statement dated 16/02/2012 was taken by force and that he has immediately brought to the notice of the department these facts and that his statement on16/02/2012 was completely disowned (Answer to Q.No.1, 2 & 3).

3.3 Upon conclusion of the cross examination, Sri Sunil Sahasrabudhi was re-examined and nothing has been elicited from him in course of his re-examination by the learned A. 0. to discredit his statements made in course of the cross-examination. In fact, Sri Sunil Sahasrabudhi has stated in Course of his re-examination that the seized documents relied upon by the department are not part of the books of accounts of M/s. RNS Infrastructure Limited. Thus, there is no material on record to support the allegation that evidence was found in course of search of M/s. RNS Infrastructure Limited that revealed that cash payments were made to the appellant in connection with the Upper Bhadra Canal Project launched by the Karnataka Niravari Nigam Limited based on either the sworn statement of Sri Sunil Sahasrabudhi that was made at the time of search or in these remand proceedings.

3.4 Coming now to the initial sworn statements recorded by the Department from Sri Naveen R Sttetty, Managing Director of RNS Infrastructure Limited, it is submitted that the learned A. 0. has not actually relied upon any part of these statements made by him in the assessment order. However, his statements furnished in course of the appellate proceedings under the cover of the letter dated 04/04/2018 show that he has maintained a consistent stand that the seized.

documents that were recovered by the department from the computer systems of M/s. RNS Infrastructure Limited were not reliable. Infact, he has gone to the extent of stating that these documents may have been planted by vested interest to damage the business reputation of M/s. RNS Infrastructure Limited and other group entities. No statement has been made by Sri Naveen R. Shetty that the appellant was in receipt of any cash payments from M/s. RNS Infrastructure Limited and this aspect of the matter is not in dispute since no such statement has been pointed out or relied upon.

3.5 Even in course of the cross-examination, he has maintained the same stand and has clarified in answer to Q.No.3 that he had not made any statement about any cash payment made to the appellant. Even the re-examination of Sri Naveen R. Shetty by the learned A.0. has not thrown any light on the materials to support the allegation that there were cash payments made by M/s. RNS Infrastructure, Limited to the appellant. Thus, nothing turns much on the statement of Sri Naveen R. Shetty, which far from supporting the case of the department actually substantiates and drives home the stand taken by the appellant in his submissions made by the learned A.O. vide letter dated 14/03/2016 and 28/03/2016.

3.6 In view of the above, it is submitted that no material has been pointed out by the learned A.O. to substantiate the averments/ findings recorded in the assessment order which are purely on suspicion and surmise, assumptions and presumptions and intact contrary to the materials on records. Accordingly, the addition made for all the years under appeal deserves to be deleted. It is prayed accordingly”.

8. Further the CIT(A) gone through the entire statement of Shri Sunil Sahasrabudhe recorded on 16.02.2012 at the time of search which are reproduced as follows: –

“Q.01 Please identify yourself?

Ans. I am Sunil D. Sahasrabudhe s/o, Dattatreya, aged 51 years, residing at Flat No. C. 1005, RNS Shanti Nivas, Behind RNS Motors Showroom, Yeshwanthpur, Tumkur Road, Bangalore 560022. I am associated with the RNS group since 22 years. I am’ Vice President (Finance) RNS Infrastructure Ltd., since the last 5 years.

Q.02 Please confirm that you have been administered oath and have been made aware of the consequences of giving false statement(s} on oath?

Ans, I confirm that I have been administered oath and have been made aware of the consequences of giving false statement(s) on oath.

Q.03 From the records and documents available in the premise it is noted that receipt payments are available where project wise receipt and payment are mentioned as on a particular date. I am showing you one such document. Please explain the same.

Ans. It is a receipt payment sheet of RNS Infrastructure Ltd., pertaining to Upper Bhadravathi Project as on 30.10.2011 and has been received from the Branch. The gross contract receipt upto RA Bill 11 is mentioned at Rs.205.62 crores and the total receipt is mentioned at Rs.280.82 crores. The payments pertaining to the project are mentioned below these receipts and are supposedly for the purposes mentioned against them.

Q.04 Please explain the payment head ‘sundry’ at Branch and sundry at R., It may please be noted that an amount of Rs.3.19 crores has been booked as sundry at Branch and Rs.51.32 crores has been booked as sundry at HO, Please explain these heads.

Ans. These are amounts sent to the Branches for, their overheads including wages, sub-contract payments and other miscellaneous expenses.

Q.05 It is noted that the wages have already been booked. Hence, please explain as to why they have to be book again under the head ‘sundry’?

Ans. The sundry expenses are all cash expenses for which there are no vouchers. These are not entered in the ledger on account of the fact that there are no receipts for these expenses. These payments are made outside the books and are not part of regular books of account.

Q.06 Do you mean to say that whatever expenditure is mentioned under the head ‘sundry’ is unaccounted cash expenditure without voucher and is outside the regular books of accounts?

Ans. Yes

Q.07 Does that mean the amount of approximately Rs.54 crores as per the documents shown to you and several others that are corresponding for different periods and appearing under the had ‘sundry’ are unaccounted cash payments made outside the books of accounts.

Ans. Yes

Q.08 What is the purpose for making such cash payments?

Ans. These cash payments are made on the decision taken by the Management. I do not know the purpose for which these cash payments were made. As stated by me earlier these payments are made outside the books.

The statement has been temporally concluded. To be resumed later.

Q.09 I am showing you a seized document A/RNSIL/17 DT.16-02-2012 which is a dairy seized from your chamber. Please explain the entries made in page 9 of the said document.

A. This is the information received from the Kudal Maharashtra branch over phone.

Q.10 Who made the phone call and when?

A. I cannot recall the each and every person who had informed me about the above payment.

Q.11 Cash you recall some of the names?

A. our accountant and some time project manager informed the same.

Q.12 Please give the name of your accountant and project manager who informed you of the payments made.

A: I cannot remember the name of the accountants since it is 12 years old project and lot of staff has changed in between. However, sometime Mr. Suresh Shetty use to inform me over phone.

Q.13 Why was the information was given to you by these persons? A. To know the branch income and expenditure he used to inform me.

Q.14 Please explain the noting “Rene – CM”

A. The information received from the branch was noted.

Q.15 What was the information related to this notings ?

A. The amounts paid on the instruction of a particular person. Rane is shown under this head.

0.16. What does the noting initial 5,00,000 means?

A. Initial means date of release of payment is not known and 5,00,000 means rules 5 lakhs.

Q.17 What does the noting “20-1-200050,00,000 mumbai – Naveen mean?

A. Information received over phone to note the date and amount as noted in the dairy.

Q.18 There is no name mentioned against the entry 1-2-12 of Rs.50,00,000 payment. Please state to whom the payment was asked to be noted or made ?

A. Some body from the branch called me and told to write Rs.50,00,000 and I noted it without asking the details.

Q.19 Please explain the entries noted in page 8 of seized document A/RNSIL/17 DT.16-02-2012

A. These are same kind of notings as in page 9 explained earlier.

Q.20 Does that imply that payments have been made to these persons from the branch for the amounts mentioned below them in rupees. E.D.[Gokhale], E.D.[Bigare], new E.D.[Shine], Ex. Director [Bebbar], Chief Eng.[B.8.Patilj, lawer, Mumbay, lawyer, Delhi, S.E. [H.O], EE [Shinde], Thakare Bal, S.E.Gaikwad, S.E. [G. T.Gaikwadj, Irriganation Minister E.E. [Wadagavi], Ravi [PA-C.M], Sharad pawar, Ajit power. PA to Ajit Pawar, Paloke [5.E.], Irrigation Minister, new irrigation minister, suni! , tatkare, PA to min.

A. Payments is not made to these persons, but is made on their behalf and the details are not known to me and amount mentioned is in rupees.

Q.21 Why has this information been given to you over phone by the branch?

A. To prepare income and expenditure account of the branch the above information is given.

Q.22 Are all the details income and expenditure account of the branch informed to you over phone or these were the only payments that were informed over phone?

A. Only these payments have been informed over the phone.

Q.23 Why so ?

A. Other information on monthly basis they used to submit to us.

Q.24 Please be specific as to why only these payments were informed over phone or rather these were not included in the monthly details submitted?

A. Other information is also submitted over phone but I do not note the whole transaction since it consumes lot of time to make a note.

Q.25 Why were these persons referred were not made a part of monthly details?

A. Even in monthly statements the said information is incorporated.

Q.26 Where are the monthly details maintained?

A. After incorporating the data in the books the monthly data will be automatically merged and hence, no separate statement are available thereout.,

Q. 27 Please produce the vouchers pertaining to these payments.

A. All the vouchers are not immediately traceable since the data pertaining to last 12 years.

Q.28 Please produce the most recent voucher dated 1-2-2012 pertaining to the payment of Rs.50,00,000.

A. Details of the vouchers are not yet received from the branch for above payment.

Q.29 Please produce the voucher dated 8-7-2010; 18-4-2010 and 8­10-2009 pertaining to Naveen Mumbai, cash Mumbai and Sanjeev shetty respectively.

A. There are number of vouchers for the above three payments and hence, I have to verify and submit the same which may take some time.

Q.30 Were you have asked to produce the said vouchers and you have failed to produce the same? Do you have anything to say about that?

A. Presently I do not have the vouchers.

Q.31 Since you have failed to produce the vouchers it is to be inferred that you were unable to produce the same and there is no voucher existing corresponding to the stated payment. Please aware of this as the last opportunity to produce the voucher or else it is to be assumed that there is non compliance to the directions to the authorized officers of the premise and all possible legal action including the prosecution is to be initiated against you for non-compliance.

A. I am not in a position to produce the vouchers for the exact amount.

Q.32 Please explain the notings in page 6 of seized document A/RNSIL/17DT 16-0202012.

These pertains to a settlement with FA construction and the transaction mentioned are as per settlement deed. As regards RN Naik, Mustaq, Master construction the entries below them may pertain to certain payments for supplies etc., which needs to be verified.

Q.33 The books of accounts and documents, identified as A/RNSIL/1 to 22 including one hard disk, [A/RNSIL/201 and two imaged copies [A/RNSIL/21-221 have been found and seized from this premise during the course of search. Please certify that the

Q.34 Do you have anything to say?

A. Nothing”

9. Further the CIT(A) observed that there is nothing to show that Shri Shri Sunil D. Sahasrabhudhe any statement whether M/s. RNS Infrastructure Pvt. Ltd. had made any cash payment to the assessee in all the 3 years as per the seized material relied upon by the AO. He also recorded the cross examination of Shri Sunil D. Sahasrabhudhe as below: –

Q1. Do you recollect a statement on oath recorded from you u/s.132(4) in course of search proceedings in the case of M/s. RNS Infrastructure Ltd., on 16.02.2012 ?

Ans. Yes, I recollect having made the statement and the said statement was taken under force during midnight.

Q2. Have you informed income tax department about this statement which you claim was token at midnight under force?

Ans. Yes, on the date of search itself I have brought this to the notice of IT Officer who was recording the statement of the Managing Director that the statement was taken under force. In continuation to this on 07.03.2012, I have written a letter giving an elaborate explanation to the department which is self explanatory. Copy of this letter is being submitted herewith.

Q.3. I am now referring to your letter dated 07.03.2012 which you have just given. It is filed in the O/o The Addl. Director of Income Tax (Inv.), Unit-1, on the same day 07.03.2012. On the basis of this letter, it is accurate for me to state that you have completely disowned your statement /s.132(4) of 16.02.2012 on the ground that it was taken by force?

Ans. Yes, I have fully disowned my statement recorded u/s.132(4) on 16.02.2012, since it was taken by force. The same has been mentioned in this letter.

Q4. I am showing you the two pages extracts of certain data retrieved from “TRNSMAIN, TRNSBKP,TRANSOLD Data, TRNSX, files found in 40 GB, 500 GB and 80 GB hard disk of the server system at office of M/s. RNSIL at 7^th Floor, Naveen Complex, MG Road, Bangalore”, which has been furnished to me by the learned ACIT, under the cover of the letter dated 04.04.2018. Kindly state if you have given any statement on the basis of this material in course of your deposition before the income tax department?

Ans. I have not seen this material before and I am seeing it for the first time. This is not a part of our books of accounts. I have not been examined with reference to this material in course of my earlier depositions.

q6. Is it accurate to state that you have not made any statement with reference to this material earlier?

Ans. Yes, I have not been examined with reference to this material earlier. I have not made any statement on the same.

Q7. Have you in course of any of your statements before income-tax department ever stated that certain cash payments were made to Sri B.S. Yediyurappa in connection with the business of M/s. RNS Infrastructure Ltd., in the capacity of Vice President (Finance) of this company?

Ans. No”.

10. From the above statement of Shri Sunil D. Sahasrabhudhe in the course of cross examination the learned CIT(A) came to the conclusion that Shri Sunil D. Sahasrabhudhe has retracted in his statement under Section 132(4) of the Act dated 16.02.2012. In the course of the search proceedings of M/s. RNS Infrastructure Pvt. Ltd. on 07.03.2012 before the DDIT (Inv.), Unit-1(3), Bangalore, by filing a written letter dated 07.03.2012, on the ground that his statement dated 16.02.2012 was taken by force. Thereafter, the DDIT (Inv.) has neither done any cross examination of Shri Sunil D. Sahasrabhudhe, nor carried out any investigation to establish and corroborate the said statement. Going by the version of DDIT, the Investigating Office should have examined the source of generation of huge cash needed for such cash payment outside the books to establish and link the cash payment. By not doing any such linkage without there being any other corroborative evidence, leaving the facts as it is in the face of retraction by the witness, proves the contrary. Further, Sh. Sahasrabhudhe has also admitted in course of his cross-examination that he was not shown at all the relevant seized material, based on which the addition has been made by the A.O. in the case of the assessee. He has also stated that he has not made any statement to the effect that assessee was paid any amounts in cash, in course of the search proceedings conducted by come-tax Department. The Witness Sri Sunil Sahasrabhudhe has also been re­examined by the A.O. after cross-examination by the assessee and nothing has been elicited from him, which brings out any materials to support the additions made by the A.O. for these years. The following is the statement of Sri Sunil D. Sahasrabhudhe in course of re-examination by the A.O:

Re-examination by the Asst. Commissioner of Income Tax

Q1. With regard to the letter which has been filed before me today, which has been mentioned in your reply to Question No.3 in the cross examination, do you have an acknowledgement of the date of filing of the letter to Addl. DIT (Inv.) ?

Ans. A copy of the letter has been submitted to you, which bears the date-stamp of the concerned office.

Q2. Do you have the original document for verification of the same?

Ans. No, I do not have that currently, But, I can produce it in front of you, if required.

Q3. What is being booked under the head “Sundry-expenses” in the books of accounts of Mis. RNS Infrastructure Ltd. ?

Ans. We do not have the head “Sundry-expenses” in the books of accounts of Mis. RNS Infrastructure Ltd.

Q4. How were the books of accounts of M/s. RNS Infrastructure Ltd. maintained in the relevant A.Y.?

Ans. The books of accounts of Mis. RNS Infrastructure Ltd. were maintained using a software called BTW package in the computer systems of the company.

Q5. Were there any major expenses, of over Rs.1,00,000/- of M/s. RNS Infrastructure Ltd. which were made by cash, in the relevant A. Y.?

Ans. No.

Q6. I am showing you the records of two pages extract of certain data received from “TRNSMAIN, TRNSBKP, TRANSOLD Data, TRNSX, files found in 40 GB,500 GB and 80 GB hard disk of the server system at the office of Mis. RNSIL at 7^th Floor, Naveen Complex, MG Road, Bangalore”, which as per our records has been retrieved from the office computer systems of M/s. RNS Infrastructure Ltd. Can you explain the contents of the same?

Ans. This is the first time I am seeing these sheets and they are not a part of our books of accounts.

Q7. Can you explain why the name of ‘Naveen R Shetty’ is appearing in these extracts?

Ans. As I have stated earlier, this is the first time I am seeing these sheets.

Q8. Are you aware of the business transactions of M/s. RNS Infrastructure Ltd. with the following concerns – Crystalline Rocks, Sangam Granites and Harisharanam and Granite City, in the relevant A.Y. ?

Ans. As of now, I do not recall any business transactions. As I have stated earlier, I am seeing these documents for the first time.

Q9. Was Mr. Prashant Shetty working for M/s. RNS Infrastructure Ltd. in relevant AY ?

Ans. As there are more than 700 employees in our organization, I do not recall any employee named Mr. Prashant Shetty.

Q10. Who was the chairman of M/s. RNS Infrastructure Ltd. in the relevant A. Y. ?

Ans. Dr. R.N. Shetty was the chairman of M/s. RNS Infrastructure Ltd. in the relevant A. Y.

Q.11 Do you have anything else to say?

Ans. No.”

11. From the above re-examination of Sri Sunil Sahasrabhudhe in course of the remand proceedings, it is seen that the seized materials relied upon by the A.O. were not shown to Sunil Sahasrabhudhe at the time of search and that he has taken a stand that the said seized materials is not: part of the books of account of M/s. RNS Infrastructure Limited. He has maintained the same stand about his statement being taken by force and nothing has been elicited from him to substantiate the case of the Department that the appellant was paid cash as per the seized materials. At this stage, it is relevant to consider the cross-examination and re­examination of Sri Naveen R.Shetty, Managing Director of M/s RNS Infrastructure Limited. His statement in cross-examination reads as follows:

Q1. Mr. Sunil Shasrabuddhe, Vice President (Finance) of M/s. RNS Infrastructure Ltd. has stated that he had informed you that his statement uls.132(4) on 16.02.2012 was recorded under force and at late hours, on the very same day. Is it a fact?

Ans. Yes, it is a fact. In fact in my statement recorded by the department on 27.02.2012 (as given in answer to Que No.12, 22 and 30), I had informed that the statement of Mr. Sunil Shasrabuddhe was taken by force. Even 017 the date of the search itself I have informed the IT official who was recording my statement, whereupon he had called Mr. Sunil Shasrabuddhe who also confirmed the same in my presence. At this point, the recording of my statement was stopped and I was issued summons u/s. 131to appear on the next day.

Q2. I am showing you certain data retrieved from “TRNSMAIN, TRNsBKP, TRANsOLDData, TRNSX, files found in 40 GB, 500 GB and 80 GB hard disk of the server system at the office of M/s. RNSIL at 7th Floor, Naveen Complex, MG Road, Bangalore” which has been furnished to me by the learned ACIT, under the cover of the letter dated 04.04.2018. Kindly state if you have given any statement on the basis of this material in course of your deposition before the income tax department?

Ans. I have been shown many documents and I don’t remember particularly whether this document was shown to me. However, I can add that all this data is fabricated and it does not relate to the accounts of M/s. RNS Infrastructure Ltd., I have stated this previously in my recorded statements which can be referred to and I stand by the statements made earlier.

Q3. Have you in course of any of your statements before Income tax department ever stated that certain cash payments were made to Sri B.S.Yediyurappa in connection with the business of M/s. RNS Infrastructure Ltd., in capacity of Managing Director of this company?

Ans. I have never stated that any cash payments were made to Sri B.S. Yediyurappa in connection with the business of M/s. RNs Infrastructure Ltd., nor any such cash payments have – been made.”

12. From the above statement, it is seen that Sri Naveen R.Shetty has taken a categorical stand that the data retrieved from the computer server of M/s. RNS Infrastructure Limited was a fabricated data and does not relate to the accounts of Mis. RNS Infrastructure Limited. Sri Naveen R.Shetty has also confirmed that the statement of Sri Sunil Sahasrabhudhe, dated 16.02.2012 was taken by force and he had been informed of the same at the time of search itself. He has also stated that Sri Sunil D.Sahasrabhude was called by the Income-tax Officials, who was recording the statement of Sri Naveen R.Shetty at the time of search and he had confirmed the same to him. Thereafter, the recoding of the statement of Sri Naveen R.Shetty was stopped. Sri Naveen R.Shetty has also categorically stated that no cash payments were made to the appellant in Limited. This is the consistent stand taken by him before the department.

13. Sri Naveen R.Shetty was also re-examined by the A.O. and the following statement of Sri Naveen R.Shetty on re-examination is recorded:

“Re-examination by the Assistant Commissioner of Income Tax

Q1 What expenses were being booked under the head “Sundry-expenses” in the books of accounts of M/s. RNS Infrastructure Ltd., in the A Y relevant to the search? Ans. We did not have any head “Sundry-expenses” in the books of accounts of M/s. RNS Infrastructure Ltd.,

Q2. How were the books of accounts of M /s. RNS Infrastructure Ltd., maintained in the relevant A.Y. ?

Ans. All books of accounts were being maintained in a computerized manner.

Q3. Were there any major expenses, of over Rs.1,00,000/- of M/s. RNS Infrastructure Ltd., which were made in cash, in the relevant A.Y. ?

Ans. No.

Q4. I am showing you an extract of two pages pertaining to certain data retrieved from “TRNSMAIN, TRNSBKP, TRANSOLD Data, TRNSX, files found in 40 GB, 500 GB and 80 GB hard disk of the server system at the office of M/s. RNSIL at 7th Floor, Naveen Complex, MG Road, Bangalore”, which as per our records has been retrieved from the office computer systems of M/s. RNS Infrastructure Ltd., during the course of search. Can you explain the contents of the same?

Ans. These documents are not a part of our books of accounts, hence I cannot explain the contents, Also I want to state that these documents seems fabricated to me.

Q5. Were you the chairman of M/s. RNS Infrastructure Ltd., in the relevant A. Y. ?

Ans. No. Dr. R.N.Shetty was the chairman of Mis, RNSInfrastructure Ltd., in the relevant A. Y.

Q6. Is Dr. R.N.Shetty related to you? IF yes, how?

Ans Dr. R.N.Shetty is my father.

Q.7 The name ‘Naveen R.5hetty’, appears on the documents I have shown to you. Can you explain why your name is appearing in these extracts?

Ans. As I have stated earlier, these are fabricated data which are implanted in our systems which have no relevance to our books of accounts. Therefore, question of explaining my name does not arise.

Q.8 Is an individual named ‘Mr. Prashant Shetty’ related to you, If yes, how?

Ans, I do have a relative by name of Mr. Prashant Shetty, He is my mother’ sister’s son. He is my cousin.

Q9. Is your cousin by name Mr, Prashant Shetty working for you in M/s. RNS Infrastructure Ltd. ?

Ans. No, He is working for M/s. Murudeshwar Ceramics Ltd., which is a company under the same group,

Q.10 Is the management of M/s. Murudeshwar Ceramics Ltd., same as M/s. RNS Infrastructure Ltd., ?

Ans. There are common directors across both the concerns.

Q.11 Do you occupy a position of responsibility in M/s. Murudeshwar Ceramics Ltd. ?

Ans. I am a director of the company M/s. Murudeshwar Ceramics Ltd.

Q.12 Are you aware of the business transactions of M/s. RNS Infrastructure Ltd., with the following concerns – Cstystalline Rocks, Sangam Granites and Harishranam and Granite City, in the relevant A. Y.?

Ans. As of now, I do not recollect any of these names.

Q.13 Are you aware of any expenses that had been made out of the books of M/s. RNS Infrastructure Ltd., in case of Upper Bhadra Project, for the relevant A. Y.s ?

Ans. No such expenses have been made in case of Upper Bhadra Project or any other projects.

Q.14 Are you aware of any ‘sundry-expenses’ being made in case of Upper Bhadra Project or related work?

Ans. We do not have any head “Sundry-expenses’ in the books of accounts of M/s. RNS Infrastructure Ltd., for this project or any other project.

Q.15 Do you have anything else to say ?.

Ans. No.”

14. From a combined reading of the statements recorded of the aforesaid two witnesses both in course of their original examination by the Department and the cross examination and re-examination by the A.O., it is seen that they have not stated anywhere that the appellant was in receipt of any cash payments as alleged by the A.O. Further, the relevant seized documents based on which the inference, of, cash payments being made to the appellant, that has been drawn by the A.O, also does not reveal anything to show that the same is a speaking document. The name of the appellant does not figure in the seized documents and only the initials ‘BSY’ are found recorded. No evidence has been adduced or let in, to decipher and ascertain the meaning of the initial ‘BSY’ and therefore, holding that the appellant has received cash payments ‘based on the~ same are purely a surmise. The veracity of the seized documents has also been questioned by the Managing Director of M/s. RNS Infrastructure Limited, in whose, premises the same has been found and serious doubts arise about whether such a document can be considered as reliable at least so far as the appellant, a third party, is concerned, considering the consistent stand taken by the Managing Director of M/s. RNS Infrastructure Limited in course of his search and seizure operations. At any rate, the appellant being a third party in whose case the addition has been made, based on documents found in course of the search- of the third party, does not suffer from the burden of the presumptions under Section 132(4) read with section 292C of the Act. It is well settled position of. law that this burden does not extend to the documents found in third party premises and cannot operate against the appellant herein

15. Accordingly, considering the various case law cited by the parties he deleted the addition by further observing as under: –

“4.4.18 Considering the facts discussed supra, it is seen that the AO ha just relied on an extract said to have been a deleted digital file, retrieved from the Computer, using the forensic tools, without there being any other corroborative evidence. The statement of Shri Sahasrabhudhe relied on by the AO in the impugned order, has no incriminating evidence again the appellant as it does not mention the name of the appellant. The cross examination and the re-examination of Shri Sahasrabhudhe, carried on by the AO during the remand proceedings, has not established any payout alleged. The Dy DIT (Inv), who conducted search in the case of M/s. RNS Infrastructure Pvt. Ltd. has not brought out any corroborative evidence to support the alleged cash payouts. The Dy DIT has not carried out any hot pursuit investigation even after the filing of the retraction letter by Shri Sahasrabhudhe even well before the conclusion of the search proceedings in the case of M/s. RNS Infrastructure Pvt. Ltd. The managing Director Sri RN Shetty, had denied consistently any such payout, from the inception of the search proceedings.”

15.1. Again the Revenue is in appeal before us.

16. We have heard the rival submissions. Similar issue came for consideration in the case of Shri D.S. Suresh in ITA No. 462 & 463/Bang/ 2020 for assessment years 2009-10 and 2011-12. The Tribunal vide order dated 22.02.2021 held as under: –

13. We have heard the rival contentions, perused and carefully considered the material on record. In the present case, the addition is based on the diary jottings found during the course of search action in the case of RNSIL on 16.02.2012. We have carefully gone through the diary jottings recorded earlier part of this order. It contains the entry No.5 – MLA Tarikere Rs.27lakhs upto 31.07.20. However, it does not specify date on which it was paid or who has paid. It is not possible to any person to say conclusively that it is relating to these assessment years being the absence of date of payment. Further it is only diary jottings not supported by corroborated material or any independent evidence. In other words there should be a material on record to show that there is an undisclosed income on the basis of material on hand with the Assessing Officer and guess work is not possible. The Assessing Officer shall have the basis for assuming that there was a payment by RNSIL to the assessee which was not disclosed to the Department. The unsubstantiated diary jottings cannot be considered as a conclusive evidence to make any evidence towards undisclosed escaped income. It was held by the Hon’ble Supreme Court in the case of CBI Vs. V.C. Shukla 3 SCC 410 that “file containing loose sheets or papers are not books” and hence entry therein are not admissible u/s. 34 of the Evidence Act, 1872. In the present case, the seized material having certain entries are found, regarding amount which was presumed thus are illegal payments to the persons mentioned therein. These entries are unsubstantiated. On that basis 0ne cannot reach to the conclusion that figures mentioned therein are the undisclosed payments in these assessment years under consideration to the present assessee. In our opinion, the documents relied on by the Assessing Officer for making addition in these assessment years was dumb document and lead nowhere since these diary jottings are not supported by any corroborative material or evidence to show that the information made by lower authorities is correct. Further unsigned document in the form of diary jottings cannot be relied upon for making or sustaining the addition. In the present case, more so, the Managing Director of RNSIL made a categoric statement in his letter that no payments were made to the assessee in the F.Y. 2008-09 to F.Y. 2010-11. Further even if the Assessing Officer wants to rely on the diary jottings to make an assessment or relying on the statement of any third party, the same is required to be furnished to the assessee and if the assessee wants to cross examine any of the parties whose statements were relied on by the Assessing Officer, the same is to be provided to the assessee. In, the present case, the assessee is having grievance for not furnishing the seized material to the assessee and there was no question of providing an opportunity of cross examining of the parties whose statements are relied on by the Assessing Officer while completing the assessment. In these circumstances, we are not in a position to uphold the addition sustained by the CIT(Appeals). The circumstances surrounding the case are not strong enough to justify the rejection of the assessee’s plea of asking the copies of the seized material and providing an opportunity of cross examination of the parties concerned. In view of the above, we set aside the order of the lower authorities and allow the ground taken by the assessee in their appeals for both the assessment years under consideration.

14. In the result, the appeals of the assessee are partly allowed.”

17. Further in the case of Shri D.V. Sadananda Gowda in ITA No. 895/Bang/2019 the issue is considered by the Tribunal in order dated 30.03.2021 wherein it is held as under: –

“7. I have heard rival submissions and perused the material on record. Admittedly, the addition of Rs.5 lakh has been made in the case of the assessee only on the basis of diary noting, statement of VP (Finance), RNSIL, and data retrieved by using forensic tools from seized computer server (data was deleted and the same was retrieved by using forensic tools). The assessee had contended that the details of seizure and the harsh value report were not available with the A.O. at the time of assessment. It was stated that the same was not made available to the assessee nor his representative. It was further submitted that the A.O. has not brought out any nexus between the payment of Rs.5 lakh with that of the assessee. One of the evidences which is purported against the assessee is an electronic record and the same is not collected in compliance with section 65-B of Indian Evidence Act r.w.s. 2(1)(t) of Information Technology Act and section 132(iib) of the I.T.Act. Any electronic record can only be considered as a piece of evidence which shall be as per section 65-B of the Indian Evidence Act and on complying the conditions enumerated u/s 65B(4) of the Indian Evidence Act. The above said principle has been settled by the Hon’ble Supreme Court in the case of (Anver P.V. v. P.K.Basheer and Ors. reported in (2014) 10 SCC 473. The diary noting, the statement of VP (Finance), RNSIL has not pointed out any payment to the assessee. The statement recorded on 16.02.2012 (date of search) was retracted by the VP (Finance) RNSIL on 07.03.2012 itself. The CIT(A) during the course of appellate proceedings had directed the A.O. to grant an opportunity of cross examination of VP (Finance) RNSIL and inspect the incriminating material. The VP (Finance) RNSIL during the course of cross examination had outrightly denied making any payment by him or RNSIL to the assessee. It was further submitted by him that the statement recorded on 16.02.2012 was under duress and he had taken up the matter with the DDIT (Investigation) Bangalore in his letter dated 07.03.2012. This fact is also admitted by the JCIT in her covering letter to the CIT(A) dated 25.10.2018, which is extracted below:-

“The AO’s report which is self explanatory is forwarded herewith. It is also submitted that in the statement recorded on 16/02/2012 during search, Sh. Sunil Sahasrabudhe has only explained / given details about some material found during search and has not made any specific admission. As such the claim that the same is obtained by force is not tenable. In that statement, what he had deposed is the fact that the expenditure under the head “sundry” is unaccounted and as no question on the break up details of sundry expenditure was asked, the possibility of the name of the appellant appearing in any of the answers does not arise.

(emphasis supplied)

PADMAMEENAKSHI

Joint.Commissioner of Income-tax
Range-1(3), Bengaluru.”

7.1 From the aforesaid facts, it is very clear that there is no nexus between any payment made by RNSIL to that of the assessee. There is no mentioned anywhere that the assessee was the recipient of the payment, the alleged quantum of payment, the date, the month or the year of the alleged payment. There were two sets of reasons for reopening the assessment, one with Rs.15 lakh and another with Rs.5 lakh. In the impugned assessment order, the A.O. at page 2 had stated that there is reason to believe that the amount of Rs.1 crore chargeable to tax for assessment year 2009-2010 have escaped assessment, while the impugned order relates to the assessment year 2011-2012. All these facts point to a situation that the addition has been made merely on surmises, conjectures and without any valid evidences.

7.2 On identical facts arising out of the same search case, the Tribunal in the case of D.S. Suresh v. ACIT (supra) had held that the addition of Rs.10 lakh for assessment year 2009-2010 and Rs.49 for the assessment year 2011-2012 is to be deleted. The Tribunal held that there is no material / evidence for making such addition. The relevant finding of the Tribunal reads as follow:-

“13. We have heard the rival contentions, perused and carefully considered the material on record. In the present case, the addition is based on the diary jottings found during the course of search action in the case of RNSIL on 16.02.2012. We have carefully gone through the diary jottings recorded earlier part of this order. It contains the entry No.5 – MLA Tarikere Rs.27 lakhs upto 31.07.2010. However, it does not specify date on which it was paid or who has paid. It is not possible to any person to say conclusively that it is relating to these assessment years being the absence of date of payment. Further it is only diary jottings not supported by corroborated material or any independent evidence. In other words, there should be a material on record to show that there is an undisclosed income on the basis of material on hand with the Assessing Officer and guess work is not possible. The Assessing Officer shall have the basis for assuming that there was a payment by RNSIL to the assessee which was not disclosed to the Department. The unsubstantiated diary jottings cannot be considered as a conclusive evidence to make any evidence towards undisclosed escaped income. It was held by the Hon’ble Supreme Court in the case of CBI Vs. V.C. Shukla 3 SCC 410 that “file containing loose sheets or papers are not books” and hence entry therein are not admissible u/s. 34 of the Evidence Act, 1872. In the present case, the seized material having certain entries are found, regarding amount which was presumed thus are illegal payments to the persons mentioned therein. These entries are unsubstantiated. On that basis one cannot reach to the conclusion that figures mentioned therein are the undisclosed payments in these assessment years under consideration to the present assessee. In our opinion, the documents relied on by the Assessing Officer for making addition in these assessment years was dumb document and lead nowhere since these diary jottings are not supported by any corroborative material or evidence to show that the information made by lower authorities is correct. Further unsigned document in the form of diary jottings cannot be relied upon for making or sustaining the addition. In the present case, more so, the Managing Director of RNSIL made a categoric statement in his letter that no payments were made to the assessee in the F.Y. 2008-09 to F.Y. 2010-11. Further even if the Assessing Officer wants to rely on the diary jottings to make an assessment or relying on the statement of any third party, the same is required to be furnished to the assessee and if the assessee wants to cross examine any of the parties whose statements were relied on by the Assessing Officer, the same is to be provided to the assessee In the present case, the assessee is having grievance for not furnishing the seized material to the assessee and there was no question of providing an opportunity of cross examining of the parties whose statements are relied on by the Assessing Officer while completing the assessment. In these circumstances, we are not in a position to uphold the addition sustained by the CIT(Appeals). The circumstances surrounding the case are not strong enough to justify the rejection of the assessee’s plea of asking the copies of seized material and providing an opportunity of cross examination of the parties concerned. In view of above, we set aside the order of the lower authorities and allow the ground taken by the assessee in their appeals for both the assessment years under consideration.”

7.3 In view of the aforesaid facts and the order of the Tribunal in the case of D.S. Suresh v. ACIT (supra), which is identical to the facts of the instant case, I delete the addition of Rs.5 lakh made by the Income Tax Authorities. It is ordered accordingly.”

18. In the present case, the whole addition is made by the A.O. on the basis of the seized material procured from corporate office of M/s.RNS Infrastructure Ltd., at Naveen Complex, 7^th Floor, 14 MG Road and at Murudeshwar Bhawan, 604-B, Gokul Road, Hubli marked as 22/A/RNSIL/2, dt.16.02.2012. This seized material shows certain sundry payments grouped under GE SUN 01 and GE SUN 03 and the sundry payments were made by cash. In these sundry payments, certain entries mentioned the name of the assessee and the corresponding payment to him. From this, the A.O. came to conclusion that the assessee being a Chief Minister, and Chairperson of the Karnataka Neeravari Nigam Ltd (KNNL) that had awarded the Upper Bhadra Project (UBP) contract to Murudeshwar Power Corporation Ltd. in 2008-09 to the tune of Rs.1033 Crores and KNNL is the subsidiary of RNSIL, in which case search was took placed and that payment was out of the book payment in connection with awarding of tender of UBP to KNNL by assessee being a Chief Minister of Karnataka and Chairperson of KNNL and made addition on this count to the tune of Rs.2,11,13,832/-. However, on examining the witness and cross-examination of parties, who denied such payment to the assessee, on that basis, the CIT(A) deleted the addition. The entire case of the department is based on the un-corroborated entries found in the computer server which were retrieved by using the forensic tools. These alleged documents collected by the department from the computers of M/s.RNS Infrastructure Ltd., cannot be described as evidence so as to fasten the tax liability on the present assessee. These are not maintained on day-to-day basis and not the part of the books of accounts maintained by M/s.RNS Infrastructure Ltd., there is no mention of the date on which the alleged payments were made. Even the A.O. not brought on record the dates of such payment, he presumed in wholesome manner that amount of Rs.2,11,13,832/- was the payment made to the present assessee during this assessment year. The payments are within the knowledge of the person, who written it. However, the said person denied the payment in the cross-examination and finally there is no evidence to suggest as to what they stand for and whom they referred to. Since the seized material is neither the regular books of account nor kept in the regular course of business of the assessee. They were not sufficient enough to fasten the liability on the present assessee, against whom they were sought to be used. The seized document collected by the department did not raise a reasonable ground to believe that there is a valid payment to the present assessee so as to award contract to the KNNL and the payment is relating to for awarding the contract of UBP. The seized material itself would not furnished evidences of the truth of their contents and that was not corroborated by any further evidence so as to hold that the assessee has actually received the said payment. In view of this, we are of the opinion that the order of the earlier Bench in the cases of Shri D.S.Suresh Vs. ACIT in ITA Nos.462 & 463/Bang/2020 (AYs. 2009-10 & 2011-12), dt. 22.02.2021 and Shri D.V.Sadananda Gowda Vs. ACIT in ITA No.895/Bang/2019 (AY.2011-12), dt.30.03.2021, are squarely applicable to the present facts of the case and accordingly in view of the above discussion, we confirm the deletion of the addition made by the CIT(A). Hence, the grounds raised by the Revenue are dismissed.

19. Being so, taking the consistent view on the issue as considered by this Tribunal, we dismiss all the grounds taken by the Revenue.

20. In the result, Appeal of the Revenue is dismissed and CO filed by the assessee is dismissed, as not pressed.

Order pronounced in the open Court on 7^th April, 2022.