Loose Papers Found with Third Party Cannot Justify Addition Without Corroborative Evidence: ITAT Nagpur

ACIT Vs Sanjay Gaurishankar Agrawal (ITAT Nagpur)

Assessee categorically denied any financial transactions with Shri Bajoria & demanded a cross-examination of Bajoria, which was granted. During the cross-examination, Shri Bajoria retracted his earlier statement, clarified that the loose papers did not belong to the assessee & admitted that the original statement was made under a “perturbed mind”. He also mentioned that the name “Chhotubhai” could refer to anyone & not necessarily the assessee.

Assessee argued that no corroborative evidence was produced linking him to the papers. The mere mention of a common nickname (“Chhotubhai”) could not be the basis for such a huge addition. Extrapolation of ₹5.33 lakh into ₹5.33 crore was arbitrary & without basis. Citing several judicial precedents including Common Cause v. Union of India, CBI v. V.C. Shukla & Pradeep Runwal v. TRO,   assessee contended that loose sheets found with a third party & unsupported by other evidence are inadmissible as legal proof.

CIT(A)   deleted the addition, noting that there was no documentary evidence linking the seized papers to the assessee. The statement relied upon by the AO was subsequently retracted. The papers were seized from a third party’s premises & hence, the presumption u/s 132(4A) could not be invoked against the assessee. AO’s method of extrapolating numbers lacked any rational basis or supporting evidence.

On further appeal by the Dept,  Tribunal held that it is an undisputed fact the loose papers on the basis of which the impugned addition has been made by AO were found in the premises of a third person Shri Bajoria, which neither bears name of assessee nor Shri Bajoria, from whose possession the paper was found, states that the document/transaction therein is belonging to the assessee. AO has not brought on record any corroborative evidence to show that the transaction mentioned in the document pertains to the assessee. There is no evidence on record to suggest that the assessee has any previous business relations with Shri Suresh Bajoria. Further the name mentioned in the impugned document is that of  “Chhotubhai” & which has been assumed by AO to be the assessee herein. There is no corroborative evidence whatsoever to prove that the transaction mentioned in the impugned document pertains to the assessee. In the absence of any documentary evidence to suggest that the assessee has any previous business relations with Bajoria, it cannot be presumed that the amount reflected in the loose papers were income of the assessee or it pertained to the assessee. What is very important to mention here that the name mentioned in the impugned document is “chhotubhai” & not that of the assessee & it is only on the basis of certain assumptions made by AO that he has assumed that this so-called “chhotubhai” is assessee himself without there being any evidence corroborative or otherwise to prove that the name of the person mentioned in the impugned document i.e., “chhotubhai” is in fact the assessee.  The onus to prove authenticity of a transaction is on the person affirming such a transaction. Person denying such a transaction has no means to prove that such a transaction has not taken place &, therefore, it becomes very difficult for a person to prove absence of something which is not the. The law does not expect a person to prove the negative or prove something which has never happened. The responsibility to justify the happening of an event is on the person who is claiming that such an event has actually happened which in this case is AO. It would be very wrong to expect the assessee to prove that he is not undertaken a transaction which would amount to asking the assessee to prove something which has never happened which is contrary to the settled  principles of law. It is the responsibility of AO to bring on record concrete evidence to suggest that the impugned transaction has actually been undertaken by the assessee failing which the assessee cannot be saddled with the burden of a transaction which he has denied right from the beginning & which further is duly supported by the statement of Shri Bajoria, during the cross examination. The loose papers found at the premises of a third person on basis of which the whole addition has made are prima facie inadmissible as evidence. Supreme Court in Common Cause case rejected the admissibility of loose papers as evidence holding that it is open to any unscrupulous person to unilaterally record any transaction in his books with respect to any person without the knowledge of the said person & as such the notings so found in the possession of a person would have absolutely no evidentiary value under law & cannot be used against the person in whose name such noting have been unilaterally made. The statement of Shri Suresh Bajoria, which has subsequently been retracted cannot be relied upon for the purpose of making any addition in hands of the assessee without any corroborative evidence in support & which finds support in the judgement rendered by the Hon’ble Jurisdictional High Court in Sir Mohd. Yosuf AIR 1968 Bom. 112. AO was not justified in simply disregarding the fact that the statement has been retracted saying that it is an afterthought without further exercising his right to re-examine Shri Bajoria, & prove that the statement originally made by him was in fact the correct statement &  disprove the statement recorded during cross examination. AO cannot sit with folded hands & simply disregard the statement recorded during cross examination which would in fact defeated the entire purpose of cross examination & make it otiose which is impermissible under law. Supreme Court in Andaman Timber Industries v/s CCE [2015] 281 CTR 241 (SC) held that failure to give the assessee the right to cross-examine witnesses whose statements are relied up results in breach of principles of natural justice. The assessee thus had every right to cross-examine Shri Bajoria. Once law has granted the right of cross examination the same has to be adhered to including its final results which in the present case is a statement denying any transaction with the assessee. In case AO was of the view that this is an afterthought or for any reason he had reason to believe that such statement recorded during cross examination cannot be admissible then he had every right to re-examine Shri Bajoria, & prove that the content of the original statement were in fact true which has not been done by AO. As such the statement of Shri Bajori,a recorded during cross examination does have evidentiary value & cannot be ignored as has illegally been done by AO. This in itself is a ground valid unto itself to delete the entire addition apart from the other findings mentioned herein. Presumption of document found during search u/s 132(4A)   is only confined to the person on whose premises search is conducted. No presumption much less presumption u/s 132(4A) can be applied on the assessee as the document found was not found in possession of the assessee but found in the premises of searched person i.e., Shri Bajoria. The amounts so mentioned in the documents so referred to & relied upon by AO is only ` 5,33,550 which has been extrapolated for no valid reason by AO to ` 5,33,55,000. There is no justification in this extrapolation as made by AO & the entire addition made is simply based on assumptions, presumptions, surmises & conjectures on part of AO which cannot be sustained under law. On a conspectus of the facts & judicial precedents mentioned herein appeal with the fact that the whole addition is based on the statement recorded by Shri Bajoria, which has subsequently been retracted during cross examination & that there being absolutely no corroborative evidence to support presumption of AO, the impugned document can, by no stretch of imagination, be deemed to be a document having evidentiary value & by all means it has to be considered to be a “dumb document” which cannot form the basis of making any addition.

FULL TEXT OF THE ORDER OF ITAT NAGPUR

Captioned appeal by the Revenue is directed against the impugned order dated 26/03/2018, passed by the learned Commissioner of Income Tax (Appeals)–3, Nagpur, [“learned CIT(A)”], for the assessment year 2015–16.

2. Following grounds have been raised by the Revenue:–

“1. On the facts and in the circumstances of the case and in law, the CIT (A) has erred in deleting the addition of income from undisclosed sources of Rs.5,33,55,000/-.

2. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.5,33,55,000/ holding that the name of the assessee was not mentioned in the loose papers and Suresh Bajoria had also retracted his statement without appreciating the fact that the entries in the loose papers found and seized from the residential premises of Shri Suresh Bajoria were matching with the entries in the loose papers seized from the residential premises of Shri Ritesh M Agrawal (accountant of Shri Suresh Bajoria) which were actually ledger accounts of the assessee.

3. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.5,33,55,000/- holding that the AO had also not brought out any corroborative evidence to show that the transactions pertained to the assessee without appreciating the fact that during the course of the search Shri Suresh Bajoria at whose premises the loose papers were found tried to destroy the papers and in his statement u/s 132(4) stated that the papers reflected the transactions with the assessee which is enough evidence.

4. On the facts and circumstances, the LD. CIT (A) erred in not appreciation that the statement recorded on oath u/s 132(4) has evidentiary value and need no further corroboration.

5. Any other question to be raised at the time of appeal.

6. It is humbly prayed that the Order of CIT (A) be set aside and Order of the Assessing Officer be restored.

3. The sole issue that we need to adjudicate in this Revenue’s appeal is, whether or not the learned CIT(A) was justified in deleting the addition of ` 5,33,55,000, which is said to be assessee’s income from undisclosed sources.

4. Facts in Brief:– A search was conducted in the Banoria Agrawal group on 02/12/2014, and the assessee was also covered in the search action. The assessee filed return of income declaring income of ` 46,76,270. The assessment was finalized u/s 143(3) of the Income Tax Act, 1961 (“the Act”) determining total income of ` 5,83,98,501. As alleged by the Revenue, during the course of search, incriminating documents were found from the premises of Shri Suresh Shreemohan Bajoria, which included transactions with the assessee. It is the case of the revenue that in the statement recorded under section 132(4) of the Act during the search, Shri Suresh Shreemohan Bajoria, admitted that he tried to destroy the impugned papers and the papers were related to him and his friend Shri Alias Sanjay Agrawal. The amounts reflected in the documents were not reflected in the books of accounts and, therefore, Shri Suresh Shreemohan Bajoria, declared an amount of ` 5,33,550, which was the total of credits on the seized documents. The Assessing Officer noticed that comparison of the entries in the impugned papers and the regular books of accounts, the entries in the balance sheet seized and the corresponding ledger accounts shows the figures reduced by two decimals and as such the amount of the credits was not ` 5,33,550, but in fact it was ` 5,33,55,000. The Assessing Officer compared the entries on these papers with regular books of account and noted that the entries in these papers showed that the figures have been reduced by two decimals i.e., ` 1,00,000, has been shown as ` 1,000. On this basis, the Assessing Officer concluded that the total of these papers comes to ` 5,33,55,000. The Assessing Officer sought explanation from the assessee for the details of the transactions and the sources of funds of the said transaction. The assessee submitted that he did not have any financial transactions with Suresh Shreemohan Bajoria, and submitted that the alleged transaction does not pertain nor belong to him. The Assessing Officer, disregarding the submission of the assessee, treated the amount of ` 5,33,55,000, as income from undisclosed sources and added it to the total income of the assessee.

5. On appeal, the learned CIT(A) deleted the addition holding that the name of the assessee was not mentioned in the loose papers and Suresh Shreemohan Bajoria, had also retracted his statement. The Assessing Officer had also not brought out any corroborative evidence to show that the transactions pertained to the assessee. For better appreciation of facts, it is pertinent to extract the detailed findings of the learned CIT(A), vide Para–3 to 5.2 of its order, wherein the learned CIT(A) deleted the addition made by the Assessing Officer:–

”3. Aggrieved by the order of the AO, the appellant has filed this appeal with the following grounds of appeal:-

”1 That on the facts of the case assessment order passed u/s 143(3) making addition of Rs. 5,33,55,000/- is bad in law.

2. That on the facts and in the circumstances of the case the learned AO has erred in making addition of Rs. 5,33,55,000/-on the basis of document found from the premises of third person. The addition is unjustified, arbitrary and deserves to be deleted.

3. That the addition of Rs. 5,33,55,000/- made by the AO is purely guesswork without bringing any credible evidence on record and therefore it need to be deleted.

4. That any other ground that may be raised at the time of hearing of the case.”

4. In support of the grounds of appeal, the appellant has made the following submission:

“The Appellant named above most respectfully submit as under:-

1. Assessee is an individual and for the Assessment Year 2015-16, Assessee derived income from Salary, House Property and Other Sources. The Return of Income u/s 139 (1) of the Income Tax Act, 1961 was filed on 30/03/2016 declaring total income of Rs. 46,76,270/-.

2. Search and Seizure operation under Sec. 132 of the Income Tax Act, 1961 (the Act) was carried out on the premises of the Assessee on 02/12/2014. During the course of Search, jewellery was found and seized from the residential premises of the Assessee. During assessment proceedings, Assessee disclosed the amount of Rs. 40,00,000/- as other income being the value of jewellery found and seized. Upon explanation sought by Assessing Officer (AO) for sources of funds for investment in jewellery, Assessee could not explain the sources of funds to the tune of Rs. 3,67,231/. Thus, the amount of Rs. 3,67,231/- was added to the total income of Assessee and the same is not being disputed in this Appeal.

3. On the date of Search, ie., 02/12/2014, Search action u/s 132 of the Act was also carried out at the premises of one Mr. Suresh Srimohan Bajoria. In the course of Search at Mr. Bajoria, two pages identified as Pg. No. 54 and 55 of Annexure B-3 were found and seized which were a ledger account of some transaction with title “Chotubhai”. The pages showed a total credit of Rs. 5,33,550/- which could not be explained by Mr. Bajoria and therefore in the statement recorded at the time of search he admitted it as his income. However, by applying some magical hypothesis which is not explained in the Assessment Order, AO concluded that these figures as declared by Mr. Bajoria are reduced by two decimals, i.e., Rs. 5,33,550/ – was in fact Rs. 5,33,55,000/-. It is alleged by the AO that statement of Mr. Bajoria was recorded during search in which he accepted that the document pertained to transaction between himself and Chhotu Agrawal, also known as Sanjay Agrawal, i.e. Assessee in the present case.

4. Based on statement of Sh. Suresh Bajoria taken during the time of search, Assessing Officer sought details of transactions from assessee between himself and Mr. Suresh Bajoria vide Notice dated 17/10/2016. In the Notice AO show caused as follows:-

“The amounts reflected in these two papers are not reflected in the books of accounts of Sh. Suresh Bajoria. The total credit on Pg. No. 54 & 55 is Rs. 5,33,550/- (117650+415900). On verification this figure is found to be Rs. 5,33,55,000/-.

Thus you are being show caused why Rs. 5,33,55,000/-should not be added to your income on account of undisclosed income.”

To this, Assessee vide reply dated 07/11/2016 stated as follows:-

“2) In this regard, it is submitted that the Assessee has no financial transaction with Sh. Suresh Bajoria. The Assessee has no knowledge about the transactions recorded on Page 54 and 55 found and seized from the residential premises of Sh. Suresh Bajoria. The Assessee would like to know whether Sh. Suresh Bajoria, from whose residence the paper was foundand seized has given any statement that this paper is pertaining to transactions made by him with the Assessee, Le., Sanjay Gaurishankar Agrawal. If there is any such statement by SH. Suresh Bajoria then the copy of such statement should be provided to the Assessee and an opportunity to cross-examine him should be allowed to the Assessee.

3) The Assessee once again completely denies that the transactions noted on page 54 and 55 found and seized from SH. Suresh Bajoria are belonging to him. It is therefore requested not to make any addition in the hands of Assessee without there being any corroborative evidence.”

5. The assessee was provided opportunity to cross examine Mr Suresh Bajoria. In the cross examination, Mr. Bajoria stated that the document B-3/54-55 did not belong to him but his accountant Mr. Ritesh Agrawal had inadvertently left this paper with him, which could be belonging to any of his clients. In the cross examination he asserted that he has no financial transaction with the assessee and he knew assessee only socially. Mr. Bajoria also stated that the said statement on the date of search was given under perturbed mind and he had no transaction with the assessee.

6. However, the AO stated that the statement of Mr. Suresh Bajoria in pursuance to cross- examination by Assessee was just an afterthought. Thus, an amount of Rs. 5,33,55,000/- was added to the total income of the Assessee, against which the Assessee has preferred this present Appeal.

APPELLANT’S SUBMISSION

7. The whole case revolves around the admissibility of some loose papers found in the premises of a third person which neither bears name of assessee nor the person from whose possession the paper was found states that the document/transaction therein is belonging to the assessee nor there is any corroborative evidence to show that the transaction mentioned in the document pertains to the assessee.

It is categorically stated that during the course of search at the premises of Mr. Suresh Bajoria, the only document found on the basis of which addition is made in the case of Assessee are in form of two loose papers wherein amounts of Rs. 1,17,650/- and Rs. 4,15,900/- were noted and the title of the document was of some “chhotubhai”. Apart from this, no evidence has been found to suggest that the Assessee had actually paid the said amount or the Assessee had entered into any transaction with Sh. Suresh Bajoria. There is no evidence on record to suggest that Assessee has any previous business relations with Sh. Suresh Bajoria. In absence of any documentary evidence to suggest the same, it could not be presumed that the amounts reflected in the loose papers were income of the Assessee.

It is further submitted that there may be many persons by the name “chhotu bhai” and there was no specific evidence to suggest that the said noting pertained to the assessee.

The onus to prove authenticity of a transaction is on the Tax transaction has not taken place, and therefore it becomes very person affirming such a transaction. However, a person denying such a transaction has no means to prove that such a difficult for a person to prove absence something which is not there.

8. ADMISSIBILITY OF LOOSE PAPERS AS EVIDENCE

The loose papers found at the premises of a third person on basis of which the whole addition is made in assessee’s case are prima facie inadmissible as evidence. Assessee has repeatedly stated that he has no financial transaction with Mr. Suresh Bajoria still, AO concluded that the loose papers found at premises of Mr. Suresh Bajoria belonged to assessee just because the name “chhotubhai” appeared on those papers, and according a news paper article dated 12/12/2013, the assessee Shri Sanjay Gaurishankar Agrawal is also known as “Chhotubhai”. Such presumptions based on news paper article should not be paid any heed, in absence of any corroborative evidence.

Assessee relies on Hon’ble Supreme Court judgement in this regard in case of Common Cause v/s Union of India (WP (Civil) No. 505/15), wherein while rejecting the admissibility of loosepapers as evidence, Hon’ble SC while affirming its earlier decision in CBI v/s V.C. Shukla held that it is open to. any unscrupulous person to make any entry any time against anybody’s name unilaterally on any sheet of paper or computer excel sheet. There being no further corroborative material with respect to the payment, no case is made out so as to direct an investigation, and that too against large number of persons named in the documents. Such entries have been held to be prima facie not even admissible in V.C. Shukla’s case. Placing further reliance on V.C. Shukla’s case Hon’ble SC held that such entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and that only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible.

Hon’ble SC further held vide para 21

“There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have corelations with the random entries.”

Thus, as the whole addition is solely based on some entries on loose paper, the addition without any corroborative evidence is bad in law and deserves to be deleted.

9. COMMON NAME APPEARING ON SEIZED DOCUMENTS IS NO EVIDENCE

The only reason addition is made in the case of Assessee is because he is known as “chhotu bhai” and the documents seized from the residential premises of Mr. Suresh Bajoria also had the title “chhotubhai” written on it. It is strongly contended that there maybe hundreds of people named chhotubhai which is a fairly common name. In absence of any evidence to prove that chhotubhai appearing on the documents is the Assessee and the transactions noted therein actually pertains to him, addition in case of Assessee is completely arbitrary and deserves to be deleted. Hon’ble Pune bench of ITAT in case of Pradeep Runwal v/s TRO [ITA 334/PN/2013 dt. 30/05/2014] has held as follows:-

“According to us, the additions made by the Assessing Officer were not justified in the facts and circumstances vis-a-vis of the assessee. As discussed earlier, during the course of search in the case of Dhariwal Group, the only documents found on the basis of which the addition u/s 69A has been made in the case of the assessee are in the form of two loose papers wherein amounts of Rs. 4.80 Crores and f 30 lacs were noted against the name “Mr. Pradeep Runwal”. Apart from this, no evidence has been found to-suggest that the assessee had actually received the said amount or that the assessee had entered into any transaction with Dhariwal Group. There is no evidence on record to suggest that the assessee has previous business relations with the Dhariwal Group. In the absence of any documentary evidence to suggest the same, it could not be presumed that the amounts reflected in the loose papers were the income of the assessee received from Dhariwal Group. It has been the consistent stand of the assessee that there may be many persons of the name Pradeep Runwal in Pune and there was no specific evidence to suggest that the said notings pertained to the assessee. Hence, it was not justified as to how, in the absence of any other corroborative details, the Assessing Officer has assumed that the amounts reflected the income of the assessee himself, while the assessee has no business dealings of his with Dhariwal Group

Facts of assessee’s case are identical with above case.

10. ONUS TO PROVE SANCTITY OF DOCUMENTS FOUND AT RESIDENCE OF THIRD PERSON

It is a fact that documents in respect of which addition is made in the case of Assessee were found in the residential premises of Mr. Suresh Bajoria. Admittedly Assessee and Mr. Bajoria know each other socially and there is no business transaction between the two.

Addition in case of Assessee is based on a statement of Mr. Suresh Bajoria taken at the time of search at his place which was retracted by him in cross examination by assessee. Such retracted statement cannot form basis of addition without any corroborative evidence in support. Assessee relies on jurisdictional High Court in case of Sir Mohd. Yosuf v/s D reported in AIR 1968 Bom 112, wherein Hon’ble Court held:-

“Even if the entire document is held formally proved, that does not amount to a proof of the truth of the contents of the document. The only person competent to give evidence on the truthfulness of the contents of the document is the writer thereof.

11. EXTRAPOLATION OF FIGURES WITHOUT ANY JUSTIFICATION

The loose papers seized from the premises of Mr. Bajoria were in full figures. Even in the initial statement recorded by Authorised Officer u/s 132 of the Act, Mr Bajoria stated that he accepts Rs. 1,17,650+ Rs. 4,15,900 Rs. 5,33,550 as unaccounted income. There is no material on record placed by AO for justifying the arbitrary action of extrapolation of figures and adding two “zeros” by adding Rs. 5,33,55,000/- to the total income of Assessee. Assessee relies on Delhi High Court decision in CIT v/s Girish chaudhary (296 ITR 619], where in the Hon’ble Court held as follows:-

‘Before an addition of an undisclosed income can be made, the AO has to bring on record the material found as a result of search to show that there is an undisclosed income- AO treated Rs.48 lakhs as Assessee’s undisclosed income on the basis of seizure of a document which showed certain unexplained entries totalling to “48”-not justified- There is no material on record to show as to what basis the AO has reached the conclusion that the figure “48” is to be read as Rs. 48 lakhs- Said document is a dumb document and leads to nowhere- Addition rightly deleted by the Tribunal There is no error in the order of the Tribunal and it does not give rise to a question of law, much less a substantial question of law.”

12. NO CORROBORATIVE EVIDENCE TO PRESUMPTION OF AO SUPPORT

One aspect of the case must be given due acknowledgement that on the same date of search at residence of Mr. Suresh Bajoria, search was also conducted in the premises of Assessee. Had there been any business/financial dealing between Mr. Bajoria and Assessee, some traces of the samecould have been found at the premises of the Assessee also. In absence of any document or any other corroborative evidence, the presumption of AO to believe the document found at Mr. Suresh Bajoria’s residence belonged to Assessee is ill founded and therefore not maintainable.

13: TECHNICAL INADMISSIBILITY

Apart from the above contentions on merit, it is humbly submitted that the document in question was seized from the residence of Mr. Suresh Bajoria. Presumption of document found during search u/s 132 (4A) of the Act is only confined to the person on whose premises search is conducted. AO was not at liberty to presume that the document belonged to a third person. Assessee again relies on Pune IT AT in case of Pradeep Runwal v/s TRO [ITA 334/PN/2013 dt. 30/05/2014] wherein it was held as follows:- “In this case, the addition has been made on the basis of the documents found with Dhariwal Group and thus, the presumption u/s. 132(4A) could not be used against the assessee since no incriminating documents were found with it. In the case of ACIT Vs. Lata Mangeshkar (Miss) (1974) 97ITR 696 (Bom), the addition was made in the hands of the assessee on the basis of the entries in the books of third persons. Hon’ble Bombay High Court held that such addition could not be made only on the basis of the notings in the books of third persons. The facts of the present case are covered by the decision of Lata Mangeshkar (supra). It is a settled legal position that the decision of jurisdictional High Court is binding on all authorities below it. Thus, the reliance placed by the Assessing Officer on the loose papers is not justified at all. Therefore, the question of making any addition is not justified in the absence of other corroborative evidence to that effect.”

Assessee further relies on following judgements to substantiate his contentions:-

i. Embee Clearing & Shipping Services P. L. v/s ACIT [(2006) 25 CCH 676]

“In order to bring the case within the ambit of S. 69, the AO must bring sufficient materials on record to establish that (i)the assessee has made investments and, if so, the form of investments and the amount of money that has gone into making investments; (ii) identify the financial year in which the investments have been made; (Hi) the fact the investments so made are not recorded in the books of account maintained by him for any source of income; and (iv) there is a failure on part of the assessee in satisfactorily explaining the nature and source of such investments. Mere jottings in codified from on a sheet of paper do not lead to the presumption that such entries or jottings are investments hit by s. 69 of the IT Act.”

ii. Thakkar Developers v/s ACIT [ITA No. 581/ PN/08)

“The presumption u/s. 132(4A) is applicable only against the person from whose possession the books of accounts or other documents were found and not against any other person.”

iii. ACIT v/s Lata Mangeshkar ((Bom.) 97 ITR 696]

“Mere entries in the accounts regarding payment to the assessee was not sufficient as there was no guarantee that the entries were genuine in absence of any corroborative evidence.”

PRAYER:

In view of above submissions, it is humbly requested before Your Honour to kindly delete the addition made in the Assessment Order of Rs. 5,33,55,000/-in the interest of justice.”

5. I have gone through the assessment order, the grounds of appeal and admission made by the appellant. From perusal of facts of the case, lowing point emerges:

i) During the course of search proceedings in the case of Bajoria-Agrawal group on 02/12/2014, certain documents were found from the residential premises of Shri Suresh Bajoria. These documents were seized as page nos. 54 and 55 of Annexure B-3 and further these documents tallied with entry no. 4 and 34 of B/1 seized from residential premises of Shri Ritesh Agrawal, accountant of Shri Suresh Bajoria.

ii) These documents contain the name “Chotu Bhai” and some financial transactions are mentioned against that name.

iii) Statement of Shri Suresh Bajoria was recorded during the course of search on 02/12/2014. During the course of search, in his statement, Shri Suresh Bajoria admitted that these papers were related to him and his friend “Chotu Bhai” alias Shri Sanjay Agrawal. The addition has been made by the AO in case of Shri Sanjay Agrawal only on basis of this statement as there is nothing on record to link these documents to Shri Sanjay Agrawal.

iv) During the course of assessment proceedings, Shri Sanjay Agrawal denied that any of these entries or these documents belongs to the appellant. Further Shri Sanjay Agrawal also stated that he only knew Shn Suresh Barojia socially and there was no financial transaction between them. Shri Sanjay Agrawal also desired to cross examine Shri Suresh Bajoria.

v) As per the assessment order, this cross examination was provided by the AO. However, Shri Suresh Bajoria retracted the statement made by him during the course of search and stated that he only new Shri Sanjay Agrawal socially and denied having any financial transaction with Shri Sanjay Agrawal. Shri Suresh Bajoria also stated that the statement given by him during the course of search was given under perturbed mind and that he had no financial transaction with the appellant.

vi) Shri Suresh Bajoria owned the entries on basis of the documents and further disclosed an amount of Rs. 5,33,550/- as the total of all the credits of these documents.

vii) The AO for reasons recorded in detail in the assessment has concluded that the total of these documents is Rs. 5,33,55,000/- and not Rs. 5,33,550/-.

viii) The AO in spite of retraction of statement by Shri Suresh Bajoria, owning of the document by Shri Suresh Bajoria and in spite of appellant’s name not being there in the document, added an amount of Rs. 5,33,55,000/- to the income of the appellant. Further there is no corroborative evidence on record to link the appellant to this document.

ix) The AO has taken into account the retraction of statement by Shri Suresh Bajoria and surrender of an amount of Rs 5,33,550/- in the hands of Shri Suresh Bajoria. Based on these fact, the AO substantively also added sum of Rs. 5,33,55,000/- in the hands of Shri Suresh Bajoria.

x) The appellant has relied on various judicial pronouncements to demonstrate that in similar circumstances without any further corroborative material no addition can be made in the hands of the appellant. The appellant has relied on the following judgments:

• • • Common cause Vs. Union of India [WP (Civil) No. 505/15];
    • CBI Vs. V.C. Shukla [Hon’ble Supreme Court];
    • Pradeep Runwal Vs. TRO [ITA 334/PN/2013 dt. 30/05/2014];
    • Embee Clearing & Shipping Services P.L. Vs. ACIT [(2006) 25 CCH 676];
    • Thakkar Developers Vs. ACIT [ITA No. 581/PN/08];
    • ACIT Vs. Lata Mangeshkar [(Bom.) 97 ITR 696].

5.1 The detailed submission made by the appellant are already reproduced earlier. After going through the facts of the case, the submission made by the appellant and contents of the documents, I am of the opinion that there is nothing on record in the assessment order to link these documents to the Shri Sanjay Agrawal (the appellant). The entire addition was made on the basis of statement given during the course of search by Shri Suresh Bajoria. It is seen that this statement has been retracted duringthe course of cross examination by Shri Suresh Bajoria. Once during the course of cross examination a retraction has been made thereafter there remains nothing to link these documents to the appellant. Further, Shri Suresh Bajoria has owned the contents of the documents and has made surrender on the basis of these documents. It is seen that the undisclosed income worked out on the basis of these document has already been added in the hands of Shri Suresh Bajoria. There is also no corroborative evidence to link these documents to any of the appellant’s transaction. Based on these facts, I am of the considered view that the concealed income, if any. worked out on the basis of these documents seized from the premises of Shri Suresh Bajoria on account of documents containing page nos. 54 and 55 of Annexure B-3 needs to be considered in the hands of Shri Suresh Bajoria while finalizing the assessment of Shri Suresh Bajoria. After retraction of statement by Shri Suresh Bajoria, there is nothing in the assessment order to link these documents to the appellant. Further, as the documents have been seized from the premises of Shri Suresh Bajoria, therefore, the presumption of provision u/s 132(4A) will be available in the hands of Shri Suresh Bajoria and not in the hands of the appellant. The document in question has been seized from the premises of Shri Suresh Bajoria and not the appellant.

5.2 The whole case revolves around the admissibility of some loose papers found in the premises of a third person which neither bears name of the appellant nor the person from whose possession, the paper was found states that the document/transaction therein is belonging to the appellant nor there is any corroborative evidence to show that the transaction mentioned in the document pertains to the appellant. Therefore, considering the facts of the case in totality and after considering the assessment order in case of the appellant and the submission made by the appellant, I am of the considered view that there is no basis for making this addition in the hands of Shri Sanjay Agrawal. The AO is accordingly directed to delete the addition of Rs. 5,33,55,000/-. The grounds of appeal are accordingly allowed.”

6. Before us, the learned Departmental Representative, Shri Sandipkumar Salunke, submitted that there is enough evidence on record to suggest that the impugned addition made by the AO is justified and submitted that the statement of Mr. Suresh Bajoria in pursuance to cross-examination by assessee was just an afterthought and he strongly supported the order of Assessing Officer.

7. The learned Counsel for the assessee, Shri Kapil Hirani, appearing on behalf of the assessee reiterated the fact of the case that during the course of Search at Mr. Bajoria, two pages identified as Page no.54 and 55 of Annexure B–3 were found and seized which were a ledger account of some transaction with title “Chotubhai”. The pages showed a total credit of Rs. 5,33,550, which could not be explained by Shri Bajoria, and therefore in the statement recorded at the time of search he admitted it as his income. However, by applying some magical hypothesis which is not explained in the assessment order, the Assessing Officer concluded that these figures as declared by Shri Bajoria, are reduced by two decimals, i.e., Rs. 5,33,550, was in fact Rs. 5,33,55,000. It is alleged by the Assessing Officer that statement of Shri Bajoria, was recorded during search in which he accepted that the document pertained to transaction between himself and Chhotubhai, also known as Sanjay Agrawal, i.e., the assessee in the present case.

8. The learned Counsel for the assessee further submitted that during the course of assessment proceedings the assessee sought an opportunity to cross examine Shri Suresh Bajoria which was granted and during the cross examination, Shri Bajoria stated he has no financial transaction with the assessee and he knew the assessee only socially. Shri Bajoria also stated that the said statement on the date of search was given under perturbed mind and that he had no transaction with the assessee.

9. The learned Counsel for the assessee further emphasized that the whole basis for the Assessing Officer to make the impugned addition was by holding that the statement of Shri Suresh Bajoria, in pursuance to cross-examination by the assessee was just an afterthought and refused to accept the same.

10. The learned counsel for the assessee submitted that relief granted by the learned CIT(A) can be summarised as being primarily on the following grounds:-

i) The loose papers found in the premises of a third person which neither bears name of assessee nor the person from whose possession the paper was found states that the document/transaction therein is belonging to the assessee nor there is any corroborative evidence to show that the transaction mentioned in the document pertains to the assessee.

ii) There is no evidence on record to suggest that assessee has any previous business relations with Shri Suresh Bajoria. In absence of any documentary evidence to suggest the same, it could not be presumed that the amounts reflected in the loose papers were income of the assessee.

iii) It is further submitted that there may be many persons by the name “chhotubhai” and there was no specific evidence to suggest that the said noting pertained to the assessee.

iv) The onus to prove authenticity of a transaction is on the person affirming such a transaction. However, a person denying such a transaction has no means to prove that such a transaction has not taken place, and, therefore, it becomes very difficult for a person to prove absence something which is not there.

v) The loose papers found at the premises of a third person on basis of which the whole addition is made in assessee’s case are prima facie inadmissible as evidence. Reliance placed on judgment of the Hon’ble Supreme Court in Common Cause v/s Union of India [WP (Civil) No. 505/15], wherein the Hon’ble Supreme Court rejected the admissibility of loose papers as evidence.

vi) Reliance is further placed on the decision of the Co–ordinate Bench of the Tribunal, Pune Bency, in Pradeep Runwal v/s TRO, ITA 334/Pn./2013, order dated 30/05/2014.

viii) Statement retracted by Shri Suresh Bajoria cannot be relied upon for the purpose of making any addition in hands of the assessee without any corroborative evidence in support. Reliance placed on the judgment of the Hon’ble Jurisdictional High Court in Sir Mohd. Yosuf reported in AIR 1968 Bom. 112.

viii) No corroborative evidence to support presumption of Assessing Officer.

ix) Presumption of document found during search under section 132(4A) of the Act is only confined to the person on whose premises search is conducted. Reliance placed on Pradeep Runwal v/s TRO, ITA 334/Pn./2013, order dated 30/05/2014.

11. The learned Counsel for the assessee emphasized the fact that there is no iota of evidence to suggest that the assessee has any financial transactions with Shri Suresh Bajoria. The learned Counsel for the assessee further submitted that on a conspectus of the facts of the case the documents found can at best be termed as a “dumb document” having no legal sanctity whatsoever and in no circumstances can be used against the assessee as has illegally been done in the present case by the Assessing Officer.

12. The learned Counsel for the assessee further strongly relied on the order of the learned CIT(A) and submitted that no fault can be found with the findings of the learned CIT(A) and consequently prayed that the appeal of the Revenue be dismissed.

13. We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below and are inclined to agree with the findings of the learned CIT(A). It is an undisputed fact the loose papers on the basis of which the impugned addition has been made by the Assessing Officer were found in the premises of a third person Shri Bajoria, which neither bears name of assessee nor Shri Bajoria, from whose possession the paper was found, states that the document/transaction therein is belonging to the assessee. The Assessing Officer has not brought on record any corroborative evidence to show that the transaction mentioned in the document pertains to the assessee. There is no evidence on record to suggest that the assessee has any previous business relations with Shri Suresh Bajoria. Further the name mentioned in the impugned document is that of “Chhotubhai” and which has been assumed by the Assessing Officer to be the assessee herein. We further find that there is no corroborative evidence whatsoever to prove that the transaction mentioned in the impugned document pertains to the assessee. We further agree to the fact that in the absence of any documentary evidence to suggest that the assessee has any previous business relations with Bajoria, it cannot be presumed that the amount reflected in the loose papers were income of the assessee or it pertained to the assessee. What is very important to mention here that the name mentioned in the impugned document is “chhotubhai” and not that of the assessee and it is only on the basis of certain assumptions made by the Assessing Officer that he has assumed that this so-called “chhotubhai” is assessee himself without there being any evidence corroborative or otherwise to prove that the name of the person mentioned in the impugned document i.e., “chhotubhai” is in fact the assessee. We are further in agreement with the arguments made that the onus to prove authenticity of a transaction is on the person affirming such a transaction. We agree that person denying such a transaction has no means to prove that such a transaction has not taken place and, therefore, it becomes very difficult for a person to prove absence of something which is not the. The law does not expect a person to prove the negative or prove something which has never happened. The responsibility to justify the happening of an event is on the person who is claiming that such an event has actually happened which in this case is the Assessing Officer. It would be very wrong to expect the assessee to prove that he is not undertaken a transaction which would amount to asking the assessee to prove something which has never happened which is contrary to the settledprinciples of law. It is the responsibility of the Assessing Officer to bring on record concrete evidence to suggest that the impugned transaction has actually been undertaken by the assessee failing which the assessee cannot be saddled with the burden of a transaction which he has denied right from the beginning and which further is duly supported by the statement of Shri Bajoria, during the cross examination. We are further in agreement with the arguments made that the loose papers found at the premises of a third person on basis of which the whole addition has made are prima facie inadmissible as evidence. It is important to invite attention to the findings of the Hon’ble Supreme Court in Common Cause (supra), wherein the Hon’ble Supreme Court rejected the admissibility of loose papers as evidence holding that it is open to any unscrupulous person to unilaterally record any transaction in his books with respect to any person without the knowledge of the said person and as such the notings so found in the possession of a person would have absolutely no evidentiary value under law and cannot be used against the person in whose name such noting have been unilaterally made. We further agree with the arguments made that the statement of Shri Suresh Bajoria, which has subsequently been retracted cannot be relied upon for the purpose of making any addition in hands of the assessee without any corroborative evidence in support and which finds support in the judgement rendered by the Hon’ble Jurisdictional High Court in Sir Mohd. Yosuf (supra). We find that the Assessing Officer was not justified in simply disregarding the fact that the statement has been retracted saying that it is an afterthought without further exercising his right to re-examine Shri Bajoria, and prove that the statement originally made by him was in fact the correct statement and disprove the statement recorded during cross examination. The Assessing Officer cannot sit with folded hands and simply disregard the statement recorded during cross examination which would in fact defeated the entire purpose of cross examination and make it otiose which is impermissible under law. Attention is invited to the judgement of the Hon’ble Supreme Court in Andaman Timber Industries v/s CCE 2015] 281 CTR 241 (SC) wherein it has been head that failure to give the assessee the right to cross-examine witnesses whose statements are relied up results in breach of principles of natural justice. The assessee thus had every right to cross-examine Shri Bajoria. Once law has granted the right of cross examination the same has to be adhered to including its final results which in the present case is a statement denying any transaction with the assessee. In case the Assessing Officer was of the view that this is an afterthought or for any reason he had reason to believe that such statement recorded during cross examination cannot be admissible then he had every right to re-examine Shri Bajoria, and prove that the content of the original statement were in fact true which has not been done by the Assessing Officer. As such the statement of Shri Bajori,a recorded during cross examination does have evidentiary value and cannot be ignored as has illegally been done by the Assessing Officer. This in itself is a ground valid unto itself to delete the entire addition apart from the other findings mentioned herein. We find force in the argument of the assessee that the presumption of document found during search under section 132(4A) of the Act is only confined to the person on whose premises search is conducted and which finds support in the judgement of the Hon’ble ITAT Pune in the case of Pradeep Runwal (supra). Similar view has also been held in Embee Clearing & Shipping Services Pvt. Ltd. (supra), Thakkar Developers v/s ACIT (ITA No. 581/Pn./08 and ACIT Vs. Lata Mangeshkar, 97 ITR 696 (Bom). Applying the ratio of the said decision of the Co-ordinate Bench of the Tribunal, no presumption much less presumption under section 132(4A) can be applied on the assessee as the document found was not found in possession of the assessee but found in the premises of searched person i.e., Shri Bajoria. It is further very important to mention here that the amounts so mentioned in the documents so referred to and relied upon by the Assessing Officer is only Rs. 5,33,550 which has been extrapolated for no valid reason by the Assessing Officer to Rs. 5,33,55,000. We find absolutely no justification in this extrapolation as made by the Assessing Officer and the entire addition made is simply based on assumptions, presumptions, surmises and conjectures on part of the Assessing Officer which cannot be sustained under law. On a conspectus of the facts and judicial precedents mentioned herein appeal with the fact that the whole addition is based on the statement recorded by Shri Bajoria, which has subsequently been retracted during cross examination and that there being absolutely no corroborative evidence to support presumption of the Assessing Officer, the impugned document can, by no stretch of imagination, be deemed to be a document having evidentiary value and by all means it has to be considered to be a “dumb document” which cannot form the basis of making any addition much less the addition made in the present case on the assessee. Accordingly, we hold that no interference is warranted in the impugned order passed by the learned CIT(A) which is hereby upheld by dismissing the grounds raised by the Revenue.

14. In the result, appeal by the Revenue stands dismissed.

Order pronounced in the open Court on 10/02/2025