Case Law Details
ACIT Vs Rohan Corporation India Pvt. Ltd. (ITAT Bangalore)
Dumb Documents Can’t Tax Real Estate Deals – Loose Sheets Are Dumb Documents – ITAT Bangalore Deletes ₹2.52 Cr Additions
Assessee company, a Mangalore-based real estate developer, faced additions of ₹2.52 crore for AY 2014-15 on the allegation that it made cash payments to Global Star Realtors Pvt. Ltd. AO relied on loose excel sheets impounded during a survey at SCDCC Bank in 2016, which purportedly reflected unrecorded payments. Similar additions were also made for AY 2015-16.
CIT(A), Panaji deleted the additions, observing that AO acted only on third-party loose sheets without any corroborative evidence. No enquiry was conducted to establish ownership or linkage of such papers with the Assessee. There was no proof of any inflow/outflow of cash. Reliance was placed on the Supreme Court rulings in Common Cause v. Union of India (394 ITR 220) & Pr. CIT v. Krutika Land (P) Ltd. (103 taxmann.com 9), where it was categorically held that loose papers have no evidentiary value. Jurisdictional ITAT & CIT(A) had already deleted similar additions in Assessee’s own case for AY 2016-17 & in the case of Shri M.N. Rajendra Kumar.
Revenue contended before ITAT that Loose sheets were supported by statements recorded u/s 132(4) & 133A. Assessee was not offered cross-examination, hence matter should be remanded back to AO.
Assessee opposed remand, relying on ITAT’s own ruling in Global Star Realtors Pvt. Ltd. (ITA Nos. 40–44/Bang/2024, AYs 2013-14 to 2017-18), where identical loose sheet-based additions were deleted.
Tribunal relied heavily on its coordinate Bench decision in Global Star Realtors Pvt. Ltd., where it was categorically held that such loose sheets/printouts are “dumb documents” with no evidentiary value. Reference was again made to SC in Common Cause & V.C. Shukla’s case, reiterating that entries in loose sheets not forming part of regular books are inadmissible u/s 34 of the Evidence Act. Since the same set of documents had already been held unreliable in the case of Global Star (the alleged recipient of cash), no addition could survive in the hands of Rohan Corporation (the alleged payer). The facts being identical, CIT(A)’s order deleting additions was correct.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These appeals filed by the revenue are against the order passed by the ld. CIT(A)-2, Panaji both dated 28/02/2023 for the assessment years 2014-15 and 2015-16.
ITA 2329/Bang/2024 for the AY 2014-15
2. The interconnected issue raised by the revenue is that the ld. CIT(A) erred in deleting the addition made by the AO for Rs. 2,52,00,000/- after ignoring the supporting evidences as well as statement recorded of various persons for the impugned cash payment.
2.1 The necessary facts are that the assessee in the present case is a private limited company and engaged in the business of construction of residential and commercial complex. The AO during the assessment proceeding, based on documents impounded, bearing No. A/S/SCDCC/ 2016-17, during survey conducted at SCDCC Bank dated 27/12/2016 held that the assessee has made cash payment to the company viz. Global Star Realtors Private Limited in connection with the development of various projects. This cash payment was made without recording in the books of account. Such cash payment was spreading over various years. As per the AO, the element of cash payment of Rs. 2,52,00,000/-pertains to the year in dispute and, therefore, the AO added the same to the total income of the assessee.
3. Aggrieved assessee preferred an appeal to the ld. CIT(A) who deleted the addition made by the AO by observing as under:
“4.15 1 have gone through the assessment order, and the submissions made by the appellant during the appellate proceedings. On perusal of the assessment order it is seen that the AU had not made any enquiry to corroborate the seized material, The AO made addition solely on the basis of the printed material containing an excel sheet found in the premise of the third party during the course of survey/search.
4.16 I hus, the AO could not make any head way in establishing that the loose sheets, found in the premise of the third party belonged to the appellant. Therefore, the transactions mentioned in the said loose sheets could not be established to be made by the appellant. As there was no corroborative or circumstantial evidence gathered relating to the ownership of the loose sheets and the expenditure incurred therein during search, assessment and post assessment proceedings, the presumption made by the AO in making the addition in the hands of the appellant cannot be held to be on sound tooting. As the transactions mentioned in the loose sheets is not distantly related to the appellant, the said transactions cannot be held to be made by the appellant. The AO has failed to prove any inflow/outflow of the on money mentioned in the loose sheets.
4.17 The appellant relies on the decision of the Hon’’ble Apex Court in the case of Common Cause (A Registered Society) VS Union of India ITS-5012SC-2017-n}, (2017) 245 Taxman 214 (SC), (2017) 394 ITR 220 (SC) wherein it was held that:
Loose paper-sheets “irrelevant, inadmissible” evidence; Rejects investigation plea in Sahara/Birla case – SC dismisses petition filed by Shanti Bhushan & Prashant Bhushan, seeking constitution of Special Investigation Team, directing investigation of ` the allegedly incriminating material seized in CBI/tax department raids conducted on Birla & Sahara group of companies; M. Bhushan argued that during the raids, e-mails and excel sheets were found that showed payment of cash to several important ‘public’ figures; Apex Court cites ratio in V. C. Shukla/jain Hawala diaries case, wherein the court held that entries in loose papers/sheets are irrelevant and not admissible under Sec. 34 of Evidence Act and on/v where entries are in books of accounts/regularly kept, those are admissible: Further cites V. C. Shukla ratio to drive home the point that entries in books’ of account alone shall not constitute sufficient evidence to implicate a person since the same is only “corroborative” evidence; SC observes that the _judiciary ought to be cautious while ordering investigation against any important constitutional functionary/officers in the absence of “prima facie reliable/legally cognizable material” which are not supported by ‘other circumstances’; bolds that ” In case we do so, the investigation can be Ordered as against any person whosoever high in integrity on the basis of irrelevance or inadmissible entry false/y made, by any unscrupulous person or business house that too not kept in regular books of accounts but on random papers at any given point of ‘tine. “; As, for Sahara raids, SC refers to Settlement Commission order dated November 11, 2016 wherein the Commission recorded a finding that transactions noted in the documents were not genuine and did not attach any evidentiary value to the pen drive, hard disk, computer loose papers, computer printouts; SC concludes “… it would not be legally justified, safe, just and proper to direct investigation, keeping in view principles laid down in the cases of Bhajan Lal and V. C. Shukla. ” 4.18 The appellant also placed reliance on the decision of the Hon’ble Apex Court in the case of Principal CIT,Central III Vs. Krutika Land (P) Ltd. 103 taxmann.corn 9 (SC) wherein it was held that:
Where seized documents were not in the name of the assessee, no action could be undertaken in case of assessee under sec. 153C and further entire decision being based on huge amounts revealed from seized documents, not being supported by actual cash passing hands, additions under sec.69C were not sustainable.
4.19 The appellant also placed reliance on the following decisions and argued that, these decisions are squarely applicable to appellant’s case:
1. CIT Vs. P.V. Kalyansundaram (164 Taxman 78) (SC)
2. Deputy CIT Vs. Bhumala Uma Rani (2019) Taxpub(DT) 2432 (ITAT Vishakhapatnam)
3. Principal CIT, Central Vs. Krutika Land (P) Ld. (2019) 103 Taxmann.com 9 (SC)
4. CIT, Bangalore Vs. 1I3C Knowledge Park (P) Ltd. (69 Taxmann.com 108 (Kar)
6. CIT, Central — III Vs. Lavanya Land (P) Ltd. (83 Taxmann.com 161) (Bombay)
6. CIT, Central — III Vs. Arpit Land (P) Ltd. (78 Taxniaun.com 300)(Bombay)
4.20 1 have considered the facts of the case and case laws relied on by the AR of the appellant the ratio laid down in the said cases are applicable to the appellant’s case. Further, AO’s conclusion that the decision of the CIT(A) for the AX. 1016-20)1’7 in its own case relied upon by the appellant has not been accepted since further appeal has been preferred before the ITAT not tenable since, the Hon’ble ITAT has decided the issue in favour of the appellant and copy of the salve is produced before me. I have gone through the copies of the appellate orders produced by the AR i.e. the order the Hon’ble CIT (Appeals) as well as the Hon’ble jurisdictional Income tax Appellate Tribunal, Bangalore in appellant’s own case for the assessment year 2016-2017 as well as in the case of Mr. M.N. Rajendra Kumar, wherein I found that, both the appellate authorities have deleted the similar additions made and allowed the appeal in favour of the appellants, which are binding on me. Therefore, after going through the assessment order and facts of the case and the decisions of Hon’ble Apex Court and jurisdictional I’1’AT Bench the addition made by the AO cannot be sustained. Hence, in view of the above discussions the addition made by the AO under Section 69C of the Act amounting to Rs.2,52,00,000/- is hereby deleted. Ground no. I to 4 are accordingly allowed.”
4. Being aggrieved by the order of ld. CIT(A), the Revenue is in appeal before us.
5. The ld. DR before us contended that the loose sheets based on which, the addition was made, was found from the 3rd party premises. It was also supported by the statement of various persons. However, the opportunity of cross examination was not offered by the revenue on the loose sheet as well as the statement recorded u/s 132(4) and 133A of the Act. Accordingly, the ld. DR prayed to set aside the matter to the file of AO for providing cross examination to the assessee.
6. On the other hand, the ld. Counsel for the assessee objected to restore the matter to the file of the AO for fresh adjudication as the issue has been settled by the ITAT in the case of Global Star Realtors Private Limited in ITA Nos. 40 to 44/Bang/2024 pertaining to assessment years 2013-14 to 2017-18 which was also not disputed by the ld. DR of the Revenue.
7. Both the ld. DR and the ld. AR before us vehemently supported the order of the authorities below to the extent favorable to them.
8. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that this Tribunal in the case of Global Star Realtors Private Limited (supra) being the vendor has given a finding that there was no element of cash received from the assessee requiring any addition. The relevant finding of the order of the ITAT cited supra is extracted as under:
“11.29 Further, Hon’ble Supreme Court in the case of Common Cause (A registered Society) Vs. Union of India in Writ Petition (Civil) No.505 of 2015 dated 2.7.2018 [2017] 394 ITR 220 (SC) wherein it observed that “the entries in the loose papers/sheets are not “books of accounts” and has no evidentiary value u/s 34 of the Indian Evidence Act. The Hon’ble Supreme Court dismissing the writ petition filed by Common Cause, a registered society, refused to give nod to investigate against the Sahara and Birla Groups in the alleged payoff scandal. The factual setting of the case are that, a search was conducted by the CBI in the premises of Birla Groups, as a result of which, certain incriminating materials and an amount of Rs.25 crores were recovered. CBI referred the matter to Income Tax Department. In another search, the IT department recovered certain incriminating materials and unaccounted money of Rs.135 crores from Sahara Group of Companies. Allegedly the department recovered certain print out of excel sheets showing that Rs.115 crores were paid to several public figures. The settlement commission granted immunity to the Sahara Group of Companies on ground that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives, etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disks and pen drives, etc. do not comply with the requirement of the Indian Evidence Act and are not admissible evidence. The Income Tax Settlement Commission has also observed that department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents. The petitioner, Common Cause, impugned the orders before the Hon’ble Supreme Court which dismissed the petition. Supreme Court clarified that the evidence that had surfaced was not credible and cogent. The Attorney General contended that documents which have been filed by the Birla as well as Sahara Group are not in the form of Account books maintained in the regular course of business. They are random sheets and loose papers and their correctness and authenticity even for the purpose of income mentioned therein have been found to be unreliable having no evidentiary value, by the concerned authorities of Income Tax. Analysing the veracity of the evidences procured from the companies, the Supreme Court, relied upon the ratio laid in V.C. Shukla case and observed that the entries in loose sheets of papers are not in the form of “Books of Accounts” and has held that such entries in loose papers/sheets are irrelevant and not admissible u/s 34 of Indian Evidence Act, and that only where the entries are in the Books of Accounts regularly kept depending on the nature of the occupation, those are admissible. Being so, the addition towards the unaccounted cash payment is not based on any positive materials, hence the addition is deleted in all these assessment years. Accordingly, addition made in these AYs towards earning of alleged unaccounted cash payments on alleged is deleted.”
11.30 Accordingly, in view of the above discussion, we delete the addition made in all these assessment years towards cash payments based on the uncorroborated loose slips. This ground of appeal of the assessee is allowed”
8.1 Once, the ITAT in the case cited above has concluded that the document based on which the addition was made by the Revenue, is dumb document. There cannot be any addition in the hands of the assessee based on the same set of documents. The facts of the case on hand are identical to the facts of the case discussed above, therefore, respectfully following the order of this Tribunal as stated above, we hereby hold that there is no infirmity in the order of the ld. CIT(A) requiring any inference. Accordingly, we uphold the finding of the ld. CIT(A) and direct the AO to delete the addition made by him. Hence the appeal filed by the revenue is hereby dismissed.
9. In the result, the appeal filed by the revenue is hereby dismissed
Now coming to ITA No. 2330/Bang/2024 for the asst. year 2015-16
10. The facts of the case on hand are identical to the facts of the case as discussed above, therefore, respectfully following the same, we uphold the finding of the ld. CIT(A) and direct the AO to delete the addition made by him. Hence, the appeal filed by the revenue is hereby dismissed.
11. In the result, the appeal filed by the revenue is hereby dismissed.
12. In the combined result, both the appeals filed by the revenue are hereby dismissed.
Order pronounced in court on 15th day of May, 2025
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