No Addition Based on mere Loose Papers, WhatsApp Chats: ITAT Pune

Ganraj Homes LLP Vs ACIT (ITAT Pune)

No addition based on mere loose papers, WhatsApp chats found during search/survey

Summary: In Ganraj Homes LLP vs ACIT (ITAT Pune), the Assessing Officer (AO) alleged that Ganraj Homes LLP accepted on-money for flat sales, extrapolating Rs. 2.42 crore for AY 2017-18, Rs. 17.36 lakh and Rs. 5.14 crore for AY 2018-19, and Rs. 1.50 crore and Rs. 8.92 crore for AY 2019-20. The AO’s conclusions were based on statements from sales managers and loose papers found during a search, but no corroborative evidence or buyer testimonies supported the claims. The ITAT observed that the AO relied on vague notations and guesswork without examining the buyers or substantiating the extrapolated amounts. It noted that the alleged incriminating documents referred to unsold penthouses and transactions with unrelated buyers. Citing precedents, the ITAT reiterated that additions based on rough documents or arbitrary assumptions lack validity. The tribunal referred to CIT vs Khader Khan Son and other cases where uncorroborated statements and rough documents were deemed inadmissible. It also emphasized that no on-money could be added without credible evidence or profit analysis. Considering these factors, the ITAT deleted the additions for all assessment years. This decision underscores the importance of robust evidence and avoiding arbitrary assumptions in income tax assessments involving on-money allegations.

Facts of the case :

The Assessing Officer noted that during the course of search action it was seen that the assessee is involved in selling the units of the project at less than the prevailing market price which is more than the Ready Reckoner/Circle rate. Thus, the assessee was involved in receiving differential amount as on-money in sale consideration. He noted that during the course of survey proceedings at the project site office of the assessee, various incriminating documents were found. When these documents were correlated with entries found in other documents and Whats App chats, it becomes evident that the assessee firm is involved in accepting on-money in cash. After analyzing the various incriminating documents as well as evidences collected during the course of search and survey action, the Assessing Officer noted that the receipt of such on-money is clearly evident. He referred to the statements recorded of Shri Deepak Tugave, Smt. Anajana Domkavale and Vinit Singh who all are Sr. Sales Managers who have stated in their statements that the assessee has received on-money on account of sale of flats to different persons. However, the Assessing Officer noted that the assessee has not offered any on-money received in the ITRs filed.

The Assessing Officer further noted that the assessee has sold other flats in the current year as well as in earlier years. Since the evidences of on-money taken by the assessee were found related to 15 flats, therefore, he held that the probability of acceptance of on-money in other flats cannot be ruled out. Therefore, he asked the assessee to explain as to why such on-money should not be added in other years on the basis of extrapolation. Rejecting the various explanations given by the assessee and relying on various decisions, the Assessing Officer proceeded to calculate such on-money for various other flats evidences of which have not been found during the course of search / survey.

He noted that the on-money component varies from 1% to 45%. This variation, according to the Assessing Officer, is mainly on account of floor rise, location of building, etc. Considering all the above facts, he held that the adoption of 20% of total consideration as mentioned in registered sale deed towards on-money is appropriate. He calculated 20% of such total consideration as mentioned in the registered sale deeds which works out to Rs. 4,35,79,737/- which is required to be taxed. Since, as per the joint venture agreement, the assessee and M/s. Kalyanee Fortune Construction are having profit sharing ratio as 55.36% and 44.64% respectively, therefore, he computed the share of the assessee at Rs. 2,42,12,902/-. Thus, he made addition of Rs. 2,42,12,902/- in the hands of the assessee for the impugned assessment year on account of on-money. Similar additions were made for assessment year 2018-19 at Rs. 17,36,250/- on account of on-money and Rs. 5,14,34,496/- due to extrapolation being the share of the assessee in the joint venture towards on-money which is not recorded in the books of account. So far as the assessment year 2019-20 is concerned, the Assessing Officer made addition of Rs. 1,50,63,093/- on account of on-money received which is not recorded in the books of account and Rs. 8,92,53,040/- on account of extrapolation being the share of the assessee in the project.

In appeal, the Ld. CIT(A) upheld the action of the Assessing Officer

Observation :

We find some force in the above arguments of the Ld. Counsel for the assessee. A perusal of the statement recorded of Shri Subhash Goel u/s 132(4) shows that not a single question has been asked by the search party on account of receipt of any on-money on the basis of the statements recorded u/s 131 of the senior sales managers. We further find none of the persons to whom the flats have been sold have ever been examined either by the search party during the course of search or post-search enquiries or by the Assessing Officer during the course of assessment proceedings. Further, a perusal of the details furnished by the assessee shows that most of the flats were sold to the persons other than the persons whose names are appearing in the seized documents. It is also an admitted fact that nothing is brought on record to show that any of the buyer to whom the flats have been sold are related to the assessee and the entire addition, in our opinion, has been made on certain guesswork on the basis of statements of the sales managers and some rough notings. Even the incriminating documents which relate to the penth house has not been sold. We, therefore, are of the considered opinion that the entire addition made by the Assessing Officer and sustained by the Ld. CIT(A) being on guesswork and surmises cannot be upheld.

We find in the case of CIT Vs. Naresh Kumar Aggarwala (supra), the Hon’ble Delhi High Court has held that, there was a presumption raised under section 132(4A) on seizure of fax message and it was upon assessee to rebut that presumption by offering a plausible explanation. However, as mentioned earlier, the statements of the employees in the instant case were recorded u/s 131 of the Act and not u/s 132(4A) of the Act. Further, the managing partner of the assessee firm has completely denied to have received any on-money and neither he was confronted subsequently nor any of the customers who are identifiable were examined either by the Investigation Wing during the course of search or post-search enquiries or by the Assessing Officer at the time of assessment proceedings. So far as the decision of Hon’ble Bombay High Court in the case of Harish Textile Engrs. Ltd. vs. DCIT (supra) relied on by the Ld. CIT-DR is concerned, we find in that case the extrapolation on the basis of loose papers found during the course of search was upheld by the Hon’ble Bombay High Court. However, it is seen that the assessee in that case has accepted that it has received on-money whereas in the instant case the director / partner of the assessee firm has completely denied to have received any such on-money. Further, neither he was confronted subsequently nor any of the buyers / customers who are identifiable were examined/confronted either by the Investigation Wing during the course of search or post-search enquiries or by the Assessing Officer at the time of assessment proceedings. So far as the decision of Hon’ble Supreme Court in the case of Pooran Mal vs. Director of Inspection (supra) is concerned, there is absolutely no dispute to the fact that evidences can be used but the same has to be corroborated.

41. In view of the above discussion and in view of the decisions cited (supra), we are of the considered opinion that extrapolation cannot be made on account of receipt of on-money for sale of shops in respect of which no evidence was found during the course of search and no enquiry or investigation was conducted either by the search party during the course of search or post-search enquiries or by the Assessing Officer during the course of assessment proceedings.

42. Since in the instant case, admittedly, not a single question was put to Mr. Subhash Goel about the statements of the employees and the incriminating documents which relate to the sale of penth house has actually not been sold, most of the flats were sold to the persons other than the persons whose names were appearing in the loose sheets towards sale of the said very flats and the buyers are unrelated parties and since the Ld. CIT(A) in the case of other partner of the joint venture has already deleted the addition on account of such on-money received on sale of flats in the project Ganga Acropolis, we are of the considered opinion that no addition is called for in the hands of the assessee. Accordingly, the addition of Rs. 2,42,12,902/- made by the Assessing Officer for assessment year 2017-18 being share of the assessee on account of extrapolation is deleted. The grounds raised by the assessee are accordingly allowed.

43. Since the grounds raised by the assessee in the other two years are identical to grounds of appeal in assessment year 2017-18, therefore, following similar reasonings, we hold that neither any addition on account of any on-money received nor on account of extrapolation can be added. The grounds raised by the assessee are accordingly allowed.

44. In the result, all the three appeals filed by the assessee are allowed.

Cases discussed-

1. statement recorded 133A of the Act has no evidentiary value:

i) CIT vs. Khader Khan Son (2008) 300 ITR 157 (Mad)

ii) Paul Mathews & Sons vs. CIT (2003) 129 Taxman 416 (Ker)

iii) CIT vs. P. Balasubramaniam (2013) 33 taxmann.com 130 (Mad)

2. no arbitrary addition to the income can be made based on dumb documents, loose papers containing scribbling, rough / vague notings:

i) PCIT vs. Umesh Israni (2019) 108 com437 (Bom)

ii) CIT vs. Vatika Landbase (P.) Ltd. (2016) 67 com372 (Del)

iii) CIT vs. Vivek Aggarwal (2015) 56 taxmann.com 7 (Del)

iv) PCIT vs. Ajanta Footcare (India) (P.) Ltd. (2017) 84 com109 (Cal)

v) CIT vs. Atam Valves (P.) Ltd. (2009) 184 Taxman 6 (P&H)

vi) CIT vs. D.K. Gupta (2008) 174 Taxman 476 (Del)

vii) Saaras Agro Industries vs. ACIT (2022) 143 taxmann.com 319 (Indore-Trib)

viii) Ms. Priyanka Chopra vs. DCIT (2018) 94 taxmann.com 122 (Mumbai-Trib)

ix) Nagarjuna Construction Co. Ltd. vs. DCIT (2012) 23 com239 (Hyd.)

x) S.P. Goyal vs. DCIT (2002) 82 ITD 85 (MUM.) (TM)

3. addition on the alleged on-money being accepted by the assessee should be restricted to the profit element embedded in the alleged on-money received by the assessee.

i) CIT vs. President Industries (2002) 124 TAXMAN 654 (Guj)

ii) CIT vs. Gurubachhan Singh J. Juneja (2008) 171 Taxman 406 (Guj)

iii) Jyotichand Bhaichand Saraf & Sons (P.) Ltd. vs. DCIT (2012) 26 taxmann.com 239 (Pune)

iv) Kush Corporation vs. ACIT vide ITA No.357/Srt/2022

v) CIT vs. Balchand Ajit Kumar (2004) 135 Taxman 180 (MP)

vi) Madanlal Narendrakumar (HUF) vs. ACIT (2003) 131 TAXMAN 41 (Indore)(Mag.)

FULL TEXT OF THE ORDER OF ITAT PUNE

The above three appeals filed by the assessee are directed against the common order dated 26.02.2024 of the Ld. CIT(A), Pune-12 relating to assessment years 2017-18, 2018-19 and 2019-20, respectively. Since identical grounds have been raised by the assessee in all these appeals, therefore, for the sake of convenience, these were heard together and are being disposed of by this common order.

2. First we take up ITA No.878/PUN/2024 for assessment year 2017-18 as the lead case. Facts of the case, in brief, are that the assessee is a firm engaged in business of real estate. It filed its return of income on 07.11.2017 declaring total loss of Rs.47,650/-. A search and seizure action u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as ^„the Act‟) was conducted on 10.01.2019 in the case of the assessee. In response to notice u/s 153A(a) of the Act issued and served on 10.10.2019, the assessee filed its return of income on 24.10.2019 declaring total income at Nil. Statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the assessee filed the requisite details from time to time.

3. During the course of assessment proceedings, the Assessing Officer noted that the assessee LLP is a partnership firm (on conversion from Ganraj Homes Pvt. Ltd. w.e.f. 03.06.2016) wherein Smt. Kavita Goel, Pinky Garg, Sulochana Garg, Mahavir Agarwal and Agrim Goel are the partners. The assessee firm is engaged in construction of residential and commercial projects and has executed a development agreement dated 10.10.2013 with M/s. Kalyanee Fortune Constructions, a partnership firm having its registered office at 3 AA, Edena Building, 97 Mk Road, Marine Lines, Mumbai on principal to principal basis for development of a piece of land at S.No.41, village-Sus, Mulshi, Pune, on revenue sharing basis. The share of gross sales proceeds of the project on the said land are to be apportioned between M/s. Kalyani Fortune Construction and M/s. Ganraj Homes in profit sharing ratio of 44.64% and 55.36% respectively. The assessee firm developed the said land with the project named as “Ganga Acropolis”. Ganga Acropolis is one of the premium residential projects under M/s. Ganraj Homes LLP, which is a concern of Subhash Goel Group, whose office was covered u/s 132 of the Act. The site office of the Ganga Acropolis was covered under survey action u/s 133A of the Act at 41/1, 41,2/14, Vill-Sus, Tal-Mulshi, Pune.

4. The Assessing Officer noted that during the course of search action it was seen that the assessee is involved in selling the units of the project at less than the prevailing market price which is more than the Ready Reckoner/Circle rate. Thus, the assessee was involved in receiving differential amount as on-money in sale consideration. He noted that during the course of survey proceedings at the project site office of the assessee, various incriminating documents were found. When these documents were correlated with entries found in other documents and WhatsApp chats, it becomes evident that the assessee firm is involved in accepting on-money in cash. After analyzing the various incriminating documents as well as evidences collected during the course of search and survey action, the Assessing Officer noted that the receipt of such on-money is clearly evident. He referred to the statements recorded of Shri Deepak Tugave, Smt. Anajana Domkavale and Vinit Singh who all are Sr. Sales Managers who have stated in their statements that the assessee has received on-money on account of sale of flats to different persons. However, the Assessing Officer noted that the assessee has not offered any on-money received in the ITRs filed. He, therefore, asked the assessee to file reply as to why the addition should not be made on account of receipt of on-money.

5. The assessee in response to the same filed a detailed reply which reads as under:

“1. It is respectfully submitted that the noting found during the course of survey at the site office are rough noting made by sales representatives. These do not have any finality, as all the details are finalized only after receiving approval from the designated partners of the Assessee.

2. The bundles impounded are diaries of the sales representative, in which any and every kind of details are noted down by them. These noting may represent anything like, communications with sales representatives of other projects, negotiations with the customer wherein rates for standing units and units with higher specifications are specified, negotiations with the customer, wherein discounts may have been discussed, etc.

3. Affirmation on the part of the sales manager regarding acceptance of cash is merely rough notings made by the sales representatives in their personal capacity.

4. The sales representatives do not understand the intricacies of the various taxation laws and hence the words written by them do not have the same meaning as may be inferred for taxation purpose.”

6. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He noted that the notings on the diary are not just any random notings but a comprehensive break down/calculation of the consideration along with the name of customers and flat numbers. Further the method of calculation of cash could not be said as conversation with sales representative or with any other person. Therefore, the arguments of the assessee that the details in the diary are mere negotiations are not correct.

7. So far as the argument of the assessee that the senior sales managers have given the statements in their personal capacity is concerned, he noted that the agreements to sell have also been executed by the assessee with the customers appearing on the noting on the page seized during the search. Further, the sales managers belong to the most important step in the activities of any real estate company and they would be knowing all the details regarding the project which helps them in pitching the sale of flats to the customers.

8. So far as the argument of the assessee that the sales representatives do not understand the intricacies of the various taxation laws and thus the words written by them do not have the same meaning is concerned, the Assessing Officer noted that these people have nothing to do with the taxation laws but is only concern about selling the flats and the noting in the diary contains the final selling price of the flat sold. He accordingly concluded that the documents seized clearly established beyond doubt of receipt of on-money by the assessee firm which also corroborated with the statement of the employees of the assessee. Thus, the authenticity of incriminating document as well as its contents could not be doubted. After holding so, the Assessing Officer analyzed the number of flats sold in various years and accordingly calculated the year-wise receipt of on-money as per the impounded material which is as under:

Sr No	AY	Amount of on money	Infrastructure charges	Total
1	2018-19	25,00,000	6,25,000	31,25,000
2	2019-20	2,64,64,000	6,50,000	2,71,11,400

9. The Assessing Officer further noted that the assessee has sold other flats in the current year as well as in earlier years. Since the evidences of on-money taken by the assessee were found related to 15 flats, therefore, he held that the probability of acceptance of on-money in other flats cannot be ruled out. Therefore, he asked the assessee to explain as to why such on-money should not be added in other years on the basis of extrapolation. Rejecting the various explanations given by the assessee and relying on various decisions, the Assessing Officer proceeded to calculate such on-money for various other flats evidences of which have not been found during the course of search / survey. He noted that the evidences of on-money were found with respect to the following shops, the details of which are as under:

Sr No	Flat details	Cash amount accepted including infrastructure charges	Date of registry	Consideration as per registered deed	AY	% of  on money with resp.  to registered deed
		(in Rs. in lakhs)
1	D-1603	17	15/10/2018	4918503	2019-20	34.56
2	D-803	18.64	20/11/2018	4710510	2019-20	39.57
3	D-802	4	14/12/2018	62,88,260	2019-20	6.36
4	E-601	0.75	04/01/2019	7438691	2019-20	1
5	D-1405	17.25	21/09/2018	5150459	2019-20	33.49
6	E-1501	25	02/02/2019	7819000	2019-20	31.97
7	E-601	27.25	04/01/2019	7438691	2019-20	36.63
8	D-202	20	03/01/2019	4606492	2019-20	43.41
9	E-1003	25	27/05/2019	Not submitted by Assessee	2019-20	NA
10	C-1103	31.25	27/04/2017	6805300	2019-20	45.92
11	B-602	40	01/11/2018	10468259	2019-20	38.21
12	A-502	37	26/11/2018	10522665	2019-20	35.16
13	B-501	15	17/10/2018	12542090	2019-20	11.95
14	D-902	14.25	30/11/2018	5319398	2019-20	26.68
15	D-404	10	18/01/2019	6755425	2019-20	14.80
		2,89,64,000

10. From the above, he noted that the on-money component varies from 1% to 45%. This variation, according to the Assessing Officer, is mainly on account of floor rise, location of building, etc. Considering all the above facts, he held that the adoption of 20% of total consideration as mentioned in registered sale deed towards on-money is appropriate. He calculated 20% of such total consideration as mentioned in the registered sale deeds which works out to Rs.4,35,79,737/- which is required to be taxed. Since, as per the joint venture agreement, the assessee and M/s. Kalyanee Fortune Construction are having profit sharing ratio as 55.36% and 44.64% respectively, therefore, he computed the share of the assessee at Rs.2,42,12,902/-. Thus, he made addition of Rs.2,42,12,902/- in the hands of the assessee for the impugned assessment year on account of on-money. Similar additions were made for assessment year 2018-19 at Rs.17,36,250/- on account of on-money and Rs.5,14,34,496/- due to extrapolation being the share of the assessee in the joint venture towards on-money which is not recorded in the books of account. So far as the assessment year 2019-20 is concerned, the Assessing Officer made addition of Rs.1,50,63,093/- on account of on-money received which is not recorded in the books of account and Rs.8,92,53,040/- on account of extrapolation being the share of the assessee in the project.

11. In appeal, the Ld. CIT(A) upheld the action of the Assessing Officer by observing as under:

“6.8 I have considered the facts of the case, assessment order, the submissions made by the appellant along with the judicial pronouncements relied upon by the appellant. During the course of search/survey proceedings, the search/survey team had collected the evidence and impounded various incriminating documents/diaries as under.

i) As per scanned copy of page no. 32 of bundle no. 4, the said page enumerates the methods for calculating prices for sale of flat with on-money and without cash component. Here, Rs.5600/- is the quote price and 4400 is the rate on which the flat is to be registered. The difference amount of Rs. 1200/- is the amount that will be charged on each square feet area of property sold for the consideration to be received as cash component. The same is reproduced hereunder for ready reference.

ii) As per scanned copy of page no.9 of diary no.3, the said page indicated that the calculation of agreement value and cash component. The value 58,61,968 is the amount in Rupee at the rate of 5600 for the area of 1046.78 Square Feet and 7,50,000 is the infrastructure charges. 66,11,968 is the surm of above figures (5600*1046.78+7,50,000). 10,00,000 to 12,00,000 is the cash component which may range from 10-12 Lakh. It is important to note that these calculations are given for two different situations, one when the cash component is Rs. 10 Lakh and another for amount of Rs. 12 Lakh. The copy of the relevant page is reproduced below.

iii) As per scanned copy of page no.9 of diary no.3, the said page indicated that the calculation of agreement value and cash component. The value 58,61,968 is the amount in Rupee at the rate of 5600 for the area of 1046.78 Square Feet and 7,50,000 is the infrastructure charges. 66,11,968 is the surm of above figures (5600*1046.78+7,50,000). 10,00,000 to 12,00,000 is the cash component which may range from 10-12 Lakh. It is important to note that these calculations are given for two different situations, one when the cash component is Rs. 10 Lakh and another for amount of Rs. 12 Lakh. The copy of the relevant page is reproduced below.

Furthermore, during the course of survey proceedings at the site office of the said project the statement of some of the important and responsible employees of the appellant firm viz. i) Shri Deepak Tugave, Sr. Sales Manager, ii) Smt. Anjana Domkavale, Sr. Sales Manager & iii) Shri Vinit Singh, Sr. Sales Manager was recorded on oath u/s 131 of the Act. In their statements they have admitted that on-money is taken in the sale of some of the flats of the projects.

iv) As per hand noting on page no. 41 and 42 of the diary as bundle no. 3, which mentions the name of some of the customers and against their name certain amount is written. Further, it has been mentioned by the AO that on verification of these noting from the sale details submitted by the appellant during post survey proceedings, it was observed that the payments mentioned in the respective ledger of the customers were not matching with the noting jotted down on these pages. The AO has tabulated the details of the said noting and calculated an amount of Rs. 279.64 Lakhs which has been received by the appellant in cash, which is reproduced hereunder for ready reference.

Sr. No.	Customer name	Flat details	Other charges (Infrastructure charges)	Cash amount accepted (In Rs. in lakhs)	Amount shown in ledger up to date of survey (In Rs.)
1	Nishikant kale	D-1603	Not paid	17	10,36,960/-
2	Yash Khandelwal	D-803	Not paid	18.64	9,75,000/-
3	Mayank Agarwal	D-802	Paid	4	24,92,700/- (1 lakh at the time of booking and 23,92,700/-subsequently)
4	Hingmire	E-601	Not paid	0.75	25,000/-
5	Ashish Modi	D-1405	2,25,000/-	15	16,00,000/-
6	Akash jawle	E-1501	Not paid	25	1,00,000/-
7	Hingmire (pg-42)	E-601	Not paid	27.25	25,000/-
8	Anil Desai	D-202	Not paid	20	1,00,000/-
9	Aditya Patil	E-1003	–	25	1,00,000/-
10	Ketan Chabilal Rahangdale	C-1103	6,25,000/-	25	Ledger N/A
11	Maulik Shah	B-602	Paid	40	Ledger N/A
12	Imran Khan	A-502	Paid	37	Ledger N/A
13	Shobhit Joshi	B-501	Not paid	15	4,05,790/-
14	Venkat Charan	D-902	4,25,000/-	10	1,00,000/-
Total				279.64

Furthermore, the AO has mentioned that most of the flats mentioned in the said table are sold below the Quoting rates and in some cases “Other Charges” have also not been taken. On this basis, the AO has concluded that these are taken in cash but not shown in the books of account. The AO has attempted to corroborate the above noting from the noting found on the page no. 2 of Loose paper Bundle no.1 impounded from the same premises, wherein at sr. no. 2, there is mention of customer name as Venkat Charan A and in the column “involved” “10 lacs” is written and in column “received “it is written as “yes” The AO has held that that on verification from ledger extract of the Shri Venkat Charan it is found that the appellant has received a payment of Rs. 1 lakh only on 15/10/2018 and no payment is reflected in it till the date of Survey action i.e. 10/01/2019. Next payments shown in ledger are on 02/03/2019 for Rs. 1,60,000/- and on 06/03/2019 for Rs. 30,38,027/- all these payments through cheques. There is no mention of Rs. 10 Lacs in ledger. Therefore, the Ld. AO has concluded that cash has been received from the customers mentioned in the above-mentioned table.

6.9 Thus, the addition made by the AO on account of on-money received, which is not recorded in books of accounts, on the basis of impounded materials like documents/note book/loose paper/diary etc. is found to be corroborated by evidence. Further as regard extrapolation of on-money, the probability of acceptance of on-money on other flats sold by appellant could not be ruled out as it was not possible that appellant would accept the on-money in one flat and would not accept in another flat. This proposition of the AO is supported by the decision of jurisdictional Hon’ble ITAT, Pune Bench in the case of Golani Brothers (supra), wherein the Hon’ble Tribunal has upheld the action of the AO in assuming that assessee must have also received the ‘on-money’ in respect of the balance 67 shops sold during these years, when the material found and seized in search contained only a list of 201 shops in respect of which ‘on-money’ was received by the assessee. The appellant has tried to distinguish the case laws relied upon by the AO. However, the contention of the Appellant that during the case of the appellant the partners of the appellate have denied having received on money is nothing more than a feeble alibi. Also the contention of the appellant that and the statements of sales executives relied upon by the AO do not point out any modus operandi of accepting cash, is not found to be true. The sales executives have explained the modus operandi of accepting on money in depth. Accordingly, the view taken by the AO that the appellant has accepted on-money, which was not recorded in the books of accounts is found to be correct and the action of the AO in determining proportionate share of the appellant of Rs. 2.42,12,902/­(4,35,79,737 x 55.36%) in its hands is hereby upheld for the year under consideration. Similarly, for AYs 2018-19 and 2019-20, the addition of ‘on-money’ income of Rs 5,31,70,746/- and Rs. 10,43,16,133/-, respectively made in the hands of the appellant is s also upheld vide the foregoing paras. This ground of appeal is, therefore, dismissed.

6.10 Since the quantum addition has been upheld in respect of ground no. 1 of the appeal, grounds No. 2 to 5 raised do not require separate adjudication.”

12. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:

1. On facts and circumstances prevailing in the case and as provisions and scheme of the Act it be held that the First Appellate Authority erred in upholding the addition Rs.2,42,12,902/- made by the Learned Assessing Officer (‘Ld. AO’) as on-money received by the Appellant. The addition sustained is unwarranted, unjustified, and contrary to the provisions and scheme of the Act. The addition so made be deleted. The Appellant be granted just and proper relief in this respect.

2. Without prejudice to Ground No. 1 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that if any addition needs to be sustained then that should only be restricted to the incriminating material found during the course of search proceedings. The addition made over and above such incriminating material, being merely on the basis of estimations is unwarranted, unjustified and contrary to the provisions of the Act and therefore deserves to be deleted. It be held that the Appellant be granted just and proper relief in this respect.

3. Without prejudice to Ground No. 1 and 2 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that in case additions are sustained on estimation basis, then the addition should be restricted only to the Gross Profit that might have been earned by the Appellant on such on-money. The addition made by the First Appellant Authority be reduced. The Appellant be granted just and proper relief in this respect.

4. Without prejudice to Ground No. 1, 2 and 3 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that the addition made by the Ld. AO and sustained by the First Appellate Authority is on a very high side. The same should be substantially reduced. The Appellant be granted just and proper relief in this respect.

5. The Appellant craves leave to alter, delete, modify, add or amend any ground of appeal.

13. Similar grounds have been raised by the assessee for the other years which are as under:

ITA No.879/PUN/2024 (A.Y. 2018-19)

1. On facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that, the first Appellate Authority erred in upholding addition of Rs.5,31,70,746/- made by the Learned Assessing officer (Ld. AO) as on-money received by the Appellant. The addition sustained is unwarranted, unjustified, and contrary to the provisions and scheme of the Act. The addition so made be deleted. The Appellant be granted just and proper relief in this respect.

2. Without prejudice to Ground No. 1 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that if any addition needs to be sustained then that should only be restricted to the incriminating material found during the course of search proceedings. The addition made over and above such incriminating material, being merely on the basis of estimations is unwarranted, unjustified and contrary to the provisions of the Act and therefore deserves to be deleted. It be held that the Appellant be granted just and proper relief in this respect.

3. Without prejudice to Ground No. 1 and 2 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that in case additions are sustained on estimation basis, then the addition should be restricted only to the Gross Profit that might have been earned by the Appellant on such on-money. The addition made by the First Appellate Authority be reduced. The Appellant be granted just and proper relief in this respect.

4. Without prejudice to Ground No. 1, 2 and 3 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that the addition made by the Ld. AO and sustained by the First Appellate Authority is on a very high side. The same should be substantially reduced. The Appellant be granted just and proper relief in this respect.

5. The Appellant craves leave to alter, delete, modify, add or amend any ground of appeal.

ITA No.874/PUN/2024 (A.Y. 2019-20)

1. On facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that, the First Appellate Authority erred in upholding the addition of Rs.10,43,16,133/- made by the Learned Assessing Officer (‘Ld. AO’) as on-money received by the Appellant. The addition sustained is unwarranted, unjustified, and contrary to the provisions and scheme of the Act. The addition so made be deleted. The Appellant be granted just and proper relief in this respect.

2. Without prejudice to Ground No. 1 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that if any addition needs to be sustained then that should only be restricted to the incriminating material found during the course of search proceedings. The addition made over and above such incriminating material, being merely on the basis of estimations is unwarranted, unjustified and contrary to the provisions of the Act and therefore deserves to be deleted. It be held that the Appellant be granted just and proper relief in this respect.

3. Without prejudice to Ground No. 1 and 2 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that in case additions are sustained on estimation basis, then the addition should be restricted only to the Gross Profit that might have been earned by the Appellant on such on-money. The addition made by the First Appellate Authority be reduced. The Appellant be granted just and proper relief in this respect.

4. Without prejudice to Ground No. 1, 2 and 3 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that the addition made by the Ld. AO and sustained by the First Appellate Authority is on a very high side. The same should be substantially reduced. The Appellant be granted just and proper relief in this respect.

5. The Appellant craves leave to alter, delete, modify, add or amend any ground of appeal.

15. The Ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A) in confirming the various additions made by the Assessing Officer. Referring to pages 127 and 128 of the paper book, he submitted that some rough notings were found on pages 41 and 42 of diary-3 seized during the course of search which were made by Shri Vinit Singh who is an employee of M/s. Kalyanee Fortune Constructions. Referring to the order of the Ld. CIT(A) in the case of M/s. Kalyanee Fortune Constructions, he drew the attention of the Bench to the same and submitted that the Ld. CIT(A) has deleted the addition made on account of on-money received on sale of flats / units in their project Ganga Acropolis. He submitted that not a single question was asked to Mr. Subhash Goel about the statement of any of the employees which were recorded u/s 131. So far as the incriminating documents are concerned, he submitted that it relates to one penth house which has not been sold. Further, the employee whose statement was recorded joined the service in 2018 and no statement of any old employee has been recorded. He submitted that when the employee was not employed during the period under consideration, it is not understood as to how the additions can be made for earlier years prior to his joining the service when he was not aware of the affairs of the assessee firm at the time of sale. Further, none of the old employees whose handwritings in the diary were found was questioned / examined / called.

16. Referring to the details as per Annexure-4 placed in the paper book, Ld. Counsel for the assessee drew the attention of the Bench to the same and submitted that most of the flats were actually sold to the persons other than the name of the persons as per the incriminating documents, the details of which are as under:

Sr. No.	Flat No. as per incriminatin g document	Name of the person as per incriminating document	Name of the person to whom actually sold	Booking amount	Entry in Tally	Agreement status as per incriminatin g document	Date of entry in tally	Actual date of registration
1	D 1004	Amar Nath Muraw	Amar Nath Muraw	1,00,000	1,00,000	05-01-2019	12-09-2018	16-02-2019
2	D 902	Venkat Charana	Venkat Charana	1,00,000	1,00,000	22-11-2018	15-10-2018	30-11-2018
3	D 1202	Swapnil Patil	Swapnil Patil	1,00,000	1,00,000	25-11-2018	17-10-2018	21-02-2019
4	E 1003	Aditya Patil	Kishore Krishna Panda	1,00,000	2,00,000	25-11-2018	17-10-2018	Flat cancelled entry on 25­6-19
5	D 1302	Sajeev Raghavan	Sanjeev Raghavan	1,00,000	1,00,000	DONE	15-10-2018	28-11-2018
6	B 201	Triveni Harsh Mohta	Abhijeet Patil	1,00,000	1,00,000	15-12-2018	17-10-2018	Flat cancelled entry on 25­3-2019
7	E 403	H.A Patil	Sandip Budhia	1,00,000	1,00,000	25-11-2018	31-10-2018	Flat cancelled entry on 4­5-19
8	E 702	Ashish Meshram	Sujeet Kumar Pandey	1,00,000	1,00,000	15-11-2018	10-11-2018	Flat cancelled and exchanged for Flat A 102 on 16.9.20
9	D 1501	Ratnesh Kumar	Mohit Chandan Puraswa	1,00,000	50,000	05-12-2018	14-11-2018	Flat cancelled entry on 22­5-19
10	E 1502	Aditya Mokashi	Richa Sisodia	1,00,000	1,00,000	01-12-2018	05-12-2018	Flat cancelled
11	D 1503	Krishna Menghani	Chaitali Srivastava	1,00,000	1,00,000	30-12-2018	05-12-2018	Flat cancelled entry on 20­9-19
12	D 1502	Jeetu Menghani	Harshit Kaithwas	1,00,000	1,00,000	30-12-2018	03-12-2018	Flat cancelled entry on 10­10-19
13	D 806	Amit Shekhar	Amit Shekhar	1,00,000	1,00,000	20-12-2018	18-12-2018	24-12-2018
14	D 905	Nitesh Rathore	Milind Gautamrav Jiwan	1,00,000	–	15-01-2019	NA	Sold to Milind Jawane
15	E 1803	Sneha Desai	Vikram Tandon	1,00,000	–	25-02-2018	No entry in tally	Sold to Vikram Tandon
16	D 404	Anibrata Routh	Anibrata Routh	1,00,000	1,00,000	25-02-2019	04-01-2019	18-01-2019
17	D 606	Neelam Shrivastava	Neelam Shrivastava	1,00,000	1,00,000	20-01-2019	01-01-2019	01-02-2019

(emphasis supplied)

16. He submitted that a perusal of the same shows that most of the sales have not been made to those persons whose names are appearing in the seized documents. The Assessing Officer has not called a single buyer to find the truth by recording his statement. He submitted that none of the buyers are related to the assessee and the entire addition made by the Assessing Officer is on the basis of surmises and guesswork.

17. Referring to the following decisions, he submitted that the statement recorded u/s 133A of the Act has no evidentiary value:

i) CIT vs. Khader Khan Son (2008) 300 ITR 157 (Mad)

ii) Paul Mathews & Sons vs. CIT (2003) 129 Taxman 416 (Ker)

iii) CIT vs. P. Balasubramaniam (2013) 33 com 130 (Mad)

18. Referring to the following decisions, he submitted that no arbitrary addition to the income can be made based on dumb documents, loose papers containing scribbling, rough / vague notings:

i) PCIT vs. Umesh Israni (2019) 108 com 437 (Bom)

ii) CIT vs. Vatika Landbase (P.) Ltd. (2016) 67 com 372 (Del)

iii) CIT vs. Vivek Aggarwal (2015) 56 com 7 (Del)

iv) PCIT vs. Ajanta Footcare (India) (P.) Ltd. (2017) 84 com 109 (Cal)

v) CIT vs. Atam Valves (P.) Ltd. (2009) 184 Taxman 6 (P&H)

vi) CIT vs. D.K. Gupta (2008) 174 Taxman 476 (Del)

vii) Saaras Agro Industries vs. ACIT (2022) 143 com 319 (Indore-Trib)

viii) Priyanka Chopra vs. DCIT (2018) 94 taxmann.com 122 (Mumbai-Trib)

ix) Nagarjuna Construction Co. Ltd. vs. DCIT (2012) 23 com 239 (Hyd.)

x) P. Goyal vs. DCIT (2002) 82 ITD 85 (MUM.) (TM)

19. Referring to the following decisions, he submitted that where the Assessing Officer relies upon the statements or documents to corroborate the additions made, the said statement has to be read in totality and cannot be read in piece-meal:

i) Chander Mohan Mehta vs. ACIT (1999) 71 ITD 245 (Pune)

ii) DCIT vs. Kanakia Hospitality (P.) Ltd. (2019) 110 com 4 (Mumbai – Trib.)

20.Referring to the decision of the Mumbai Bench of the Tribunal in the case of Smt. Madhu Gupta vs. DCIT (2006) 8 SOT 691 (Mum), he submitted that the statements of employees which are not confronted to any of the partners of the assessee should not be considered as the basis for making addition.

21. Referring to the following decisions, he submitted that extrapolation has to be done on the basis of some cogent material found during the course of search action:

i) CIT vs. C.J. Shah & Co. (2001) 117 TAXMAN 577 (BOM)

ii) Accord Properties vs. ACIT vide ITA No.741/PN/2012

iii) Fort Projects (P.) Ltd. vs. DCIT (2013) 29 com 84 (Kolkata-Trib.)

iv) ACIT vs. M/s. Layer Exports Pvt. Ltd. vide ITA No.2986/Mum/2011

v) DCIT vs. Royal Marwar Tobacco Product (P.) Ltd. (2009) 29 SOT 53 (Ahmedabad) (URO)

vi) N. Kamani (HUF) vs. DCIT (1999) 70 ITD 77 (PAT.) (TM)

vii) Samrat Beer Bar vs. ACIT (2000) 75 ITD 19 (Pune) (TM)

22. Referring to the decision of the Chandigarh Bench of the Tribunal in the case of Gurdip Cycle Industries vs. DCIT (2024) 165 taxmann.com 299, he submitted that in cases where addition is proposed to be made on account of What’s App messages retrieved from the employees of the assessee, the same could be restricted only to the transactions related to the said What’s App messages and no extrapolation could be made with respect to other transactions having no relation to the said What’s App messages whatsoever.

23. Referring to the following decisions, he submitted that the addition on the alleged on-money being accepted by the assessee should be restricted to the profit element embedded in the alleged on-money received by the assessee.

i) CIT vs. President Industries (2002) 124 TAXMAN 654 (Guj)

ii) CIT vs. Gurubachhan Singh J. Juneja (2008) 171 Taxman 406 (Guj)

iii) Jyotichand Bhaichand Saraf & Sons (P.) Ltd. vs. DCIT (2012) 26 com 239 (Pune)

iv) Kush Corporation vs. ACIT vide ITA No.357/Srt/2022

v) CIT vs. Balchand Ajit Kumar (2004) 135 Taxman 180 (MP)

vi) Madanlal Narendrakumar (HUF) vs. ACIT (2003) 131 TAXMAN 41 (Indore)(Mag.)

24. He accordingly submitted that no addition should be made in the hands of the assessee on account of on-money received by the assessee.

25. In his alternate argument, the Ld. Counsel for the assessee submitted that in case it is held that some addition needs to be sustained, then the addition should be restricted to the gross profit embedded in such on-money received.

26. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A). He submitted that during the course of survey action the statements of the key personnel of the assessee firm were recorded and they have categorically stated the modus operandi adopted by the assessee regarding receipt of on-money on account of sale of flats and the full details were given on account of flats sold by the assessee. Further, the Assessing Officer has taken only 20% of the total consideration as mentioned in the registered sale deeds as on-money received by the assessee firm and its partner and has apportioned the same to the profit sharing ratio of the assessee firm along with M/s. Kalyanee Fortune Constructions. Since the assessee has sold most of the flats below the prevailing market rates and in certain cases other charges have also not been taken into account and the assessee has not recorded the on-money in its books of account, the Assessing Officer was fully justified in bringing to tax the amount of on-money received by the assessee, the details of which were found and extrapolating the on-money for other flats which were sold but the details of which were not found.

27. Referring to the decision of the Hon‟ble Bombay High Court in the case of Harish Textile Engrs. Ltd. vs. DCIT (2015) 379 ITR 160 (Bom) he submitted that the extrapolation on the basis of loose papers found during the course of search was upheld by the Hon’ble Bombay High Court.

28. Referring to the decision of the Hon’ble Supreme Court in the case of Pooran Mal vs. Director of Inspection (1974) 93 ITR 505 (SC) he submitted that the Hon’ble Supreme Court in the said decision has held that even if the search is invalid, the evidences found during the course of search can be utilized for making addition. He also relied on the decision of Hon’ble Delhi High Court in the case of Balwant Singh vs. Director of Inspection (1969) 71 ITR 550 (Del), according to which information gathered as a result of illegal search and seizure can be used subject to the value to be attached to it or its admissibility in accordance with law relating to evidence. He accordingly submitted that the order of the Ld. CIT(A) being in accordance with law should be upheld and the grounds raised by the assessee be dismissed.

29. The Ld. Counsel for the assessee in his rejoinder submitted that in the case of Harish Textile Engrs. Ltd. vs. DCIT (supra) it was accepted by the assessee that it has received on-money, whereas in the instant case the director / partner of the assessee firm has completely denied the receipt of any on-money. He submitted that when the statements of the senior sales managers were recorded u/s 131 of the Act and they have made certain statements, the same were not corroborated with any evidence or any further enquiry from the buyers. Since nothing has been done, therefore, the said decision is not applicable.

30. So far as the decision of the Hon’ble Supreme Court in the case of Pooran Mal vs. Director of Inspection (supra) is concerned, he submitted that there is no dispute to the fact that the evidences can be used but the same has to be corroborated. When the assessee has stated that the negotiations were going on and the final price is as per the form signed by the director and the brokerage has also been given on the final price, the lower authorities could not have brushed aside all these submissions and made the addition of on-money as well as extrapolation of the same, which is not justified.

31. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of both sides. We have also considered the various decisions cited before us by both sides. We find the Assessing Officer in the instant case made addition of Rs.2,42,12,902/- as on-money received by the assessee being 20% of the total consideration as mentioned in the registered deeds which works out to Rs.4,34,79,737/- for assessment year 2017-18 as per extrapolation since no evidence of receipt of any on-money was found but flats / shops have been sold during the year. Since as per the joint venture agreement the share of the assessee and M/s. Kalyanee Fortune Constructions having profit sharing ratio as 55.36% and 44.64%, respectively, he determined the share of the assessee at Rs.2,42,12,902/- which has been upheld by the Ld. CIT(A). The reasoning of the Ld. CIT(A) has already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the entire addition was made on the basis of certain loose papers found and the statements of some of the employees. However, not a single question was asked to Mr. Subhash Goel in the statement recorded u/s 132(4) either on 12.01.2019 or 01.03.2019 when the prohibitory order was lifted. Further, the incriminating documents so found relate to one penth house which has not been sold. It is also his submission that the employee whose statement was recorded joined the service in 2018 whereas the addition has been made for a period prior to his joining the services. None of the employees in whose handwriting the diary maintained was found was either questioned or examined. It is also his submission that most of the sales have not been made to the persons whose names are appearing in the loose sheets, all the buyers are unrelated parties and no cash or other valuables were found or any entry or document relating to any expenditure out of such on-money received was found and the entire addition is made on the basis of surmises and guesswork.

32. We find some force in the above arguments of the Ld. Counsel for the assessee. A perusal of the statement recorded of Shri Subhash Goel u/s 132(4) shows that not a single question has been asked by the search party on account of receipt of any on-money on the basis of the statements recorded u/s 131 of the senior sales managers. We further find none of the persons to whom the flats have been sold have ever been examined either by the search party during the course of search or post-search enquiries or by the Assessing Officer during the course of assessment proceedings. Further, a perusal of the details furnished by the assessee shows that most of the flats were sold to the persons other than the persons whose names are appearing in the seized documents. It is also an admitted fact that nothing is brought on record to show that any of the buyer to whom the flats have been sold are related to the assessee and the entire addition, in our opinion, has been made on certain guesswork on the basis of statements of the sales managers and some rough notings. Even the incriminating documents which relate to the penth house has not been sold. We, therefore, are of the considered opinion that the entire addition made by the Assessing Officer and sustained by the Ld. CIT(A) being on guesswork and surmises cannot be upheld.

33. We further find the Ld. CIT(A) in the case of the other partner of the joint venture M/s. Kalyanee Fortune Constructions having profit share of 44.64% in the project has deleted the addition on account of on-money received in the project Ganga Acropolis for assessment year 2019-20 by observing as under:

“8.1 Decision on ground no 5 & 6: These grounds are on the issue of addition of Rs.7,17,10,866/- on account of alleged on-money received. As both the grounds are inter-related, the decision on both is taken combined.

8.2 The AO, vide assessment order has mentioned that information was flagged on the insight portal regarding on-money receipt by the appellant and its partner on sale of flats/units in their project “Ganga Acropolis”, and during the survey on site office of the said project, evidences of on-money received by the appellant and its partner were found. Further, average 20% of stamp duty value was taken for estimating additions of on money in those flats where extrapolation was applied.

8.3  Moreover, the AO found out that 20% of total consideration as mentioned in registered deed made during AY 2019-20 i.e. Rs.16,06,42,620/- is on-money received by appellant firm and its partner during AY 2019-20 and the same had escaped assessment and was required to be taxed. Since, appellant and its partner i.e. & M/s. Ganraj Homes LLP is having profit sharing ratio of 44.64% and 55.36% respectively; appellant’s share came to Rs.7,17,10,866/-. In view of the same, a show-cause notice was issued to the appellant asking it as to why the amount received on account of on-money should not be added to its total income. In response, the appellant furnished its reply and the same was duly considered by AO however not found acceptable. Consequently, the assessment was completed u/s. 147 on 02.03.2024 making an addition of Rs.7,17,10,866/- on account of on-money receipt.

8.4 I have carefully considered the facts of the case, submissions of the appellant, the observations of the AO contained in the assessment order and the other materials on record on this issue. It is pertinent to mention here that vide this office order dated 03.06.2024 having appeal no. CIT (A)-47, Mumbai/10247/2017-18, 10757/2015-16, 13034/2016-17, 10409/2019-20 for A.Y. 2018-19, 2016-17, 2017-18 & 2020-21 respectively, the appeals on the identical issue, i.e. addition on account of on-money receipt, in the appellant own case for A.Y. 2016-17, 2017-18, 2018-19 & 2020-21 have already been decided in favour of appellant. The relevant portion of the order is reproduced hereunder:

“I find that the view taken by Hon’ble Apex Court in the case of Common Cause (A Registered Society) v. UOI 245 taxman 214 (SC) that the entries in loose papers and electronic data from the premise of a third party which were not regularly kept during the course of business has no evidentiary value is also affirmed by the Hon’ble Karnataka High Court in the case of DC IT v. Sunil Kumar Sharma – [2024] 159 taxmann.com 179 (Karnataka). I find merit in the contention that on the basis of decision of the Hon’ble Apex Court (supra), entries in loose papers recovered at premise of third party have no evidentiary value. The alleged transactions mentioned in the rough notings of a third party were not recorded by the appellant. The alleged transaction vi/as not corroborated from the material found at survey in the appellant own case. It is well settled in law that the loose papers and documents cannot possibly be construed as books of account regularly kept in the course of business. Therefore, the AO would not be justified in resting its case on the loose papers, diary and documents found from third party if such documents contained narrations of transactions with the assessee as decided by the Hon’ble Supreme Court in the case of Central Bureau of Investigation Vs VC Shukla.

19. I find that a survey action was conducted in the appellant’s own case on 31.01.2020 i.e. one year after the survey on M/s Ganraj Homes LLP. However, there is no mention in the order of assessment of any incriminating evidence having being found at the premise of the appellant. It is also imperative that the presumption u/s. 132(4A) of the Act is applicable to the person from whose possession or control the incriminating material is found & seized. Based on the incriminating material found from, third party search but not belonging to the appellant, this presumption will not be applicable unless corroborated by other evidence. Presumption available under section 132(4A) can be drawn against the person in whose case search is authorized and from whose possession or control books of account, diary or documents are found in the course of search. Presumptions regarding correctness of contents of books of account etc, cannot be raised against the third party.

20. Further, even if the loose sheets are considered to be admissible as evidence, the AO has failed to bring on record that the proceeds of on- money was shared with the appellant. In absence of any such evidence, the addition of on-money in the hands of the appellant cannot be accepted. It is a settled law that the impounded documents have to be considered as it is and nothing can be altered or supplied therein. In the present case, the impounded documents by itself are incapable of testifying the stand of the AO that the appellant had received any on-money.

21. In view of the facts, I find that the AO has erred in appreciating the material on record correctly. Firstly, the validity of loose papers / diary notings found in the course of search as well as the statement recorded in survey cannot be accepted. The vital link between the material whatsoever found during the survey on M/s Ganraj Homes LLP and the appellant was missing. It has resulted in the addition being made on the basis of the suspicion that the appellant might have received his share of on-money without there being any single piece of evidence for the same. In this regard, I find that the Hon’ble Apex Court has, in plethora of cases, advised against the use of suspicion however strong, for the purpose of making addition as under:

• Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC)

Whether though ITO is not fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence on account of law, but in making assessment under section 23(3) of 1922 Act he is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all – Held, yes.

• Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC)

In this case, Hon’ble Supreme Court observed that both ITO and ITAT arriving in their conclusions had indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be entertained or finding was perverse which could not be sustained and therefore Supreme Court was entitled to interfere with such finding and the addition made was liable to be deleted.

• Umacharan Shaw & Bros. v. CIT [1959] 37 ITR 271 (SC)

“Taking into consideration the entire circumstances of the case, we are satisfied that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof in these matters.

• Omar Salay Mohamed Salt v. CIT [1959] 37 ITR 151 (SC)

“…On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this court.”

22. Therefore, I am of considered view that addition made of Rs.13,95,000/-cannot be sustained hence deleted.”

8.5 In view of the above, the AO is directed to delete the addition of Rs.7,17,10,866/- made on account of on-money receipt. Accordingly, the grounds of appeal no. 5 & 6 raised by the appellant are allowed.”

34. Thus, a perusal of the order of the Ld. CIT(A) in case of other partner in the joint venture namely M/s Kalyanee Fortune Constructions shows that the Ld. CIT(A) has deleted the additions for assessment years 2016-17, 2017-18, 2018-19, 2019-20 and 2020-21. However, it was not brought to our notice by either side as to what has happened before the Tribunal in the case of M/s. Kalyanee Fortunate Constructions.

35. We find the Hon’ble Madras High Court in the case of CIT vs. S. Khader Khan Son (supra) has held that section 133A of the Act does not empower any ITO to examine any person on oath. Therefore, the statement recorded u/s 133A of the Act has no evidentiary value and any admission made in such statement cannot be made the basis for admission.

36. We find the Hon’ble Kerala High Court in the case of Paul Mathews & Son vs. CIT (2003) 263 ITR 101 (Kar) has held that the provisions of section 133A of the Act does not empower any ITO to examine any person on oath and the statement recorded u/s 133A of the Act has no evidentiary value.

37. We find the Hon’ble Madras High Court in the case of CIT vs. P. Balasubramanian (2013) 354 ITR 116 (Mad) has held that the addition can be made on the basis of assessee’s statement in survey only if it is supported by the relevant material to substantiate the same.

38. We find the Mumbai Bench of the Tribunal in the case of Smt. Madhu Gupta vs. DCIT (2006) 8 SOT 691 (Mum), has held that the statements which are not confronted to any of the partners of the assessee should not be considered as the basis for making addition.

39. So far as various decisions relied on by the Assessing Officer as well as the Ld. CIT(A) are concerned, the same, in our opinion, are not applicable to the facts of the present case. In the case of Surendra M. Khandhar (supra), the Hon’ble Bombay High Court has held that where Xerox copy of document seized from the assessee was not denied the same showed advancement of certain sums to one ‘C’ and two signatories of said document were also not denied by the assessee and as the document was seized from assessee’s control, presumption under section 132(4A) and 292C was clearly applicable. However, in the present case, the managing partner of the assessee firm has denied to have received any such on-money and no further questions were asked either to the managing partner or to any of the customers to whom the flats / shops have been sold and who were identifiable.

40. We find in the case of CIT Vs. Naresh Kumar Aggarwala (supra), the Hon’ble Delhi High Court has held that, there was a presumption raised under section 132(4A) on seizure of fax message and it was upon assessee to rebut that presumption by offering a plausible explanation. However, as mentioned earlier, the statements of the employees in the instant case were recorded u/s 131 of the Act and not u/s 132(4A) of the Act. Further, the managing partner of the assessee firm has completely denied to have received any on-money and neither he was confronted subsequently nor any of the customers who are identifiable were examined either by the Investigation Wing during the course of search or post-search enquiries or by the Assessing Officer at the time of assessment proceedings. So far as the decision of Hon’ble Bombay High Court in the case of Harish Textile Engrs. Ltd. vs. DCIT (supra) relied on by the Ld. CIT-DR is concerned, we find in that case the extrapolation on the basis of loose papers found during the course of search was upheld by the Hon’ble Bombay High Court. However, it is seen that the assessee in that case has accepted that it has received on-money whereas in the instant case the director / partner of the assessee firm has completely denied to have received any such on-money. Further, neither he was confronted subsequently nor any of the buyers / customers who are identifiable were examined/confronted either by the Investigation Wing during the course of search or post-search enquiries or by the Assessing Officer at the time of assessment proceedings. So far as the decision of Hon’ble Supreme Court in the case of Pooran Mal vs. Director of Inspection (supra) is concerned, there is absolutely no dispute to the fact that evidences can be used but the same has to be corroborated.

41. In view of the above discussion and in view of the decisions cited (supra),
we are of the considered opinion that extrapolation cannot be made on account of receipt of on-money for sale of shops in respect of which no evidence was found during the course of search and no enquiry or investigation was conducted either by the search party during the course of search or post-search enquiries or by the Assessing Officer during the course of assessment proceedings.

42. Since in the instant case, admittedly, not a single question was put to Mr. Subhash Goel about the statements of the employees and the incriminating documents which relate to the sale of penth house has actually not been sold, most of the flats were sold to the persons other than the persons whose names were appearing in the loose sheets towards sale of the said very flats and the buyers are unrelated parties and since the Ld. CIT(A) in the case of other partner of the joint venture has already deleted the addition on account of such on-money received on sale of flats in the project Ganga Acropolis, we are of the considered opinion that no addition is called for in the hands of the assessee. Accordingly, the addition of Rs.2,42,12,902/- made by the Assessing Officer for assessment year 2017-18 being share of the assessee on account of extrapolation is deleted. The grounds raised by the assessee are accordingly allowed.

43. Since the grounds raised by the assessee in the other two years are identical to grounds of appeal in assessment year 2017-18, therefore, following similar reasonings, we hold that neither any addition on account of any on-money received nor on account of extrapolation can be added. The grounds raised by the assessee are accordingly allowed.

44. In the result, all the three appeals filed by the assessee are allowed.

Order pronounced in the open Court on 7^th February, 2025.